The Rules on Communication of Defects in the CISG: Static Rules and Dynamic Environments. Different Scenarios for a Single Player 
David Ramos Muñoz 
The law constitutes a body of rules to regulate the society. As such, law and society are called to closely interact and evolve together. A slow pace of evolution of the law creates mismatches with the reality it is supposed to regulate, and the law becomes too obsolete. Though not infrequent, this defect is not desired. The present work intends to illustrate a possible mismatch between law and reality. The piece of law studied is the regime on notification of defects in the 1980 United Nations Convention on Contracts for the International Sale of Goods, signed in Vienna the 11th April 1980 (hereinafter: CISG). It is submitted that such regime is suited for certain types of economic transactions that comply with particular features. What is more, in this work it is suggested that, in a classical context, where all contracts were assumed to comply with such pattern, the drafting and interpretation of the rule could not be otherwise. However, in a context of an ever-changing business setting, it is suggested that a re-assessment of the issue of communication of defects is needed in order to adapt it to other kinds of contractual relationships. It is concluded that such re-interpretation of the communication of defects regime is needed in order to avoid the obsolescence of the CISG rules. The process to reach those conclusions is explained as follows.
Section II addresses the business perspective. It is obvious that patterns of social interactions have experienced great changes. When that process of change is examined in the business context, the conclusion is that such changes have occurred at even a faster pace. This process of change, with an assessment on how the needs of business agents have been studied by economic and business theory is addressed in that Section.
Section III contemplates the legal changes or, in other words, how the process of change in the business arena has affected the legal environment. Numerous scholars have started to rethink old foundations of contract law, and to wonder whether they adapt to the new needs of society. Without the aim of ascertaining which of the approaches is the most adequate, Section III intends to deliver an overview of the different proposals (classical, neoclassical and relational).
With Section IV, I begin to analyze the particular piece of law involved. This Section contains an explanation on why does the CISG and, in particular, the regime on communication of defects, constitute an adequate legal instrument to test the challenges posed by new economic and legal conceptions. Section IV has to be complemented with Section V, which addresses the legal regime on notification of defects. The examination of the law is made from the perspective of the policies and ideas underlying the legislative process in the past, and which are the challenges posed by the new types of commercial relationships and the new theories. The conclusion is that although the current regime as such is very adequate for a certain type of commercial contracts, it is misconceived for others, and thus, needs to be complemented by other provisions on the CISG.
The effort of finding the legal instruments to adapt such regime to the new needs of international trade is made in Sections VI to VIII. In Section VI, I address the issue of the reasonable excuse as an attempt to temper the demands of the regime on defects notification, and conclude that it does not serve that purpose. In Section VII, I make a strong case for the need to take a provision like Article 40 CISG from oblivion and bring it to the front scene, as it is concluded that it could constitute a good instrument to balance the rigidities of the regime on communication of defects. In Section VIII, I propose the need of a new perspective on the role played by the exercise of party autonomy. In that Section, I submit that an increased importance of party autonomy together with the new role of Article 40 CISG argued in the previous Section could help to turn originally rigid rules (i.e. those of notification of defects) into a flexible regime better suited for commercial practice. Section IX analyzes a different proposal. If complex relationships involve constant dealings between the parties, a way to introduce flexibility in the regime on communication of defects could be through usages and practices. The analysis will conclude that those constitute a good element to complement the proposals formulated under Sections VII and VIII, but not an alternative to them.
Section X contemplates a different scenario. Flexibility is important in international transactions. However, there are many cases where the parties simply prefer to tailor their own devices to solve the potential problems. In such a case, the parties should be permitted to do so, and thus, a strong case is also made for the explicit exercise of party autonomy, as an alternative to tackle the problems on notification of defects. Finally, an appraisal of all the findings is made under Section X, labeled "Conclusions".
II. MARKETS, FIRMS AND MIXED STRUCTURES. THE BUSINESS PERSPECTIVE
Reality of commercial transactions is complex. Economic agents find numerous ways to interact among themselves in the context of business transactions. Nowadays this complexity is somehow acknowledged by business and economic theory. However, that has not ever been the state of the art. In its beginnings, classical economic theory tended to explain all types of contractual settings on the basis of simplified models that assumed the existence of purely commoditized goods, and spot contracts subscribed between perfect strangers, absent any sophistication or degree of commitment between the parties. How economic and business theory has evolved to introduce complexity in the old models constitutes a long process, where the development of the theory has been helped by the evolution of a business arena that, by increasing its own intricacy, obliged the classical economic theory to progress in order not to become obsolete. Before I proceed to analyze how the needs of the new environment have affected contract law, I think it is worth to have an overview on which have been the processes of change in the economy and business, as well as in economic and business theory.
1. Classical view of transactions. The market
For classical economic theory, men are rich or poor according to the degree in which they can afford their necessities, conveniences or amusements of human life. However, once the division of labor has been operated, a man's own labor can supply very few of them. Thus, a social mechanism of exchange is needed in order for individuals to be able to exchange labor for goods and services necessary for subsistence, comfort and amusement. That social mechanism is the market, through which parties organize their transactions in order to obtain the necessary product in exchange for the effort displayed to get them. Therefore, in the classical foundations of capitalist economics, the first idea that has to be kept in mind is that the market constitutes the paradigm of any kind of economic interaction. However, how this whole setting managed to work with so different types of individual willing to exchange their goods and services? The answer would be, the rules on private property (a legacy from the Romans ), and the price mechanism. It would be really hard for individuals to exchange their work for goods and services. For that reason, the easier way is to exchange that work for money, and the money for goods and services. The relevant elements of the choice of a commodity to act as a currency would lead us outside the scope of our work. However, the price mechanism is important for setting the basis of classical economic thought in a relevant sense for our study. The market, with its price mechanism, appears as the capitalist alternative to planned economies where the control of the transactions is effected by a central authority.
This price mechanism is formed, according to the rules of classical economics, by the meeting of demand and supply. For that purpose, some simplifications need to be made, which are the ones that characterize classical economic thought. Those simplifications consist, first, in the commoditization of all the goods sold. Indeed, classical economists like Adam Smith or Alfred Marshall talk about the price of "commodities." In particular, Marshall stated that:
Thus, classical economic theory simplifies the reality, assuming that all transactions are for standardized goods. In such contracts, it was not necessary that parties knew each other for accomplishing the transaction. What was simply necessary is that the description of the goods transacted was clear (something easy, provided the simple nature of the goods). That way, individuals could go to the market like perfect strangers, contract with perfect strangers, and, once the transaction was accomplished (in few steps, since it only consisted on a matter of quantity, minimal quality standards, and money), the parties could be kept as perfect strangers again.
That simplification of classical economic theory left all the relational aspect of trade outside every economic model. However, this fact was never considered as a serious problem by economic theory. Instead, what caused the postulates of the theory to be revised was a different simplification made by the model, i.e. to leave outside the economic model all transactions celebrated inside firms.
2. Coase and transaction costs economics. Contractual theory of the firm
The above described was the view of markets and businesses in the early stages of economic theory. The economic system was not operated by anybody, but simply, operated by itself. Society was, thus, not an organization, but an organism. In such environment, where everything was led by the price mechanism, there was no room for any relational aspect of transactions, as said before, but, what is more, there was no room for any sort of organization and planning. In other words, classical economic theory did not have room for firms.
In this sense, for classical economic theory firms were kind of "black boxes" and the view assumed was that of spot transactions in the market with no ongoing relationship between the parties. A wide range of transactions was organized within the firms, though. When an employee was sent from one department to another, he did not do that because the price had changed and his work was better paid there, but because he was ordered to do that by his manager. The lack of interest about business organizations, though, had led to discard any attempt to explain the reasons why the economic agents, resorted either to markets or to firms (thereby organizing the transactions themselves) in order to obtain their resources.
This constituted the departing point for Ronald H. Coase to formulate, mainly in two articles, his theory of transaction costs. From the perspective of classical economists, markets were always efficient, and mutual exchange was the best way to achieve the most efficient result. Therefore, concluded Coase, absent any other consideration, all the production of goods and services should be carried on a completely decentralized basis, through contracts with other parties. Then, why do firms exist, if that does not lead to an efficient result? Coase concluded that, in order to complete a market transaction there are costs derived from ascertaining the person with whom it is convenient to contract, as opposed to those with whom it is not; costs arising from the need to communicate to those persons the intention to contract; costs derived from the necessary negotiations to achieve a satisfactory result; costs of drafting a contract and, finally, costs of inspection and enforcement to make sure the performance of the contract is the adequate. These are grouped as a whole within the definition of transaction costs. Therefore, following this line of thought, firms would flourish to organize what otherwise would be market transactions, when the costs of carrying on those transactions within the firm were less expensive and burdensome than to do it through the market.
This theory supposed an earthquake to economic thought. Firms were not mere "black boxes" that transformed inputs in outputs with the inside process lacking of any interest at all. Suddenly, a new view had come up: that of the firm as a nexus of contracts. However, what is more important, this new theory highlighted the flaws and threw some uncertainties over the idea that purely spot market exchanges were the most efficient kind of transactions. In the presence of high transaction costs, it could be preferable to organize those transactions within a firm. Thus, the decision on whether to make or buy had to be taken with the aim of reducing all costs (now including transaction costs) to the maximum extent possible.
The introduction of transaction costs constituted the departing point to address the complexity of certain transactions through economic and business theory. However, in the beginning it only constituted a way to dichotomize it over either markets or firms. Aspects of "mixed" contractual relationships were still excluded from the lens of economic theory.
3. Neither firms nor markets. Towards cooperative relationships
Coase supposed a revolution on classical economic thought. Suddenly, markets and firms (or hierarchies) constituted alternatives to achieve a same result, the production of goods and services. However, using the transaction cost approach did not only contribute to understand the nature of firms as alternative to markets, but also to blur the boundaries of the firm. Indeed, it would not be proper anymore to talk, in economic terms, of contracts and firms, but to define the relationships in terms of 'market-like' or 'firm-like' contracts, being the latter those that govern long term relationships. The main aim has been to combine the flexibility and incentives of market transactions with the close collaboration typical of transactions within a firm (i.e. vertical integration). As a result, the new approaches encompass a view of companies embedded in networks of exchange relationships, either vertical (supplier or customers) or horizontal (competitors). As a result, rather than factors purely internal or external to the company, it is the kind of relationships that the company has what becomes increasingly important in understanding its success. It is easy to find multiple examples of the quality and management of close relationships as a source of competitive advantage in the automotive industry, biotechnology industry, R&D consortia of companies of computers, energy, raw materials and telecommunications, textiles or packaging machine industry. In any event, a source of advantage or not,
Therefore, the current trends point to a closer relationship within parties, where markets or corporations only constitute the edges of a whole range of mixed relationships, where price mechanism and hierarchical mechanism are combined. The aim is to encompass the flexibility of the market mechanism as well as the coordination of the hierarchical mechanism. In order to set up such device, it is necessary that parties renounce to specify all the possible contingencies in the contract they draft, since those costs may turn the transaction impracticable. In this scenario, organizational theory suggests that the best arrangement may be to define ex ante a set of essential terms, rules and bodies that facilitate the way to take decisions in the future, thereby creating what is called a "relational contract".
4. A different approach. The deterministic contracts approach
In previous Sections it has been examined a classical scenario with spot transactions guided by the price mechanism. Then, Coase and those who followed his path, brought to the analysis the concept of transaction costs as an explanation to the dichotomy between firms and markets. Later business theory added to the analysis other types of liaisons in an intermediate way between markets and firms, depending on the degree of commitment between the parties.
However, to explain everything in terms of degree of commitment still gives an incomplete picture. Thus, the problems and uncertainties can be solved by the parties through a high degree of formalism rather than a high degree of commitment. By formalism it is understood the degree of detail and specification ex ante (i.e. in a contract document). There can be arrangements with a high degree of commitment between the parties as well as a high formalism (i.e. in cases where transactions are organized within a firm and all the proceedings are set up ex ante), but others where a high commitment does not encompass a high formalism (i.e. think about certain long-term relational contracts, or some joint ventures). Similarly, there can be some transactions where a low degree of commitment does not come together with a high degree of formalism (i.e. purely spot market transactions), though in others a similar or slightly higher degree of commitment may encompass a disproportionately higher degree of formalism (i.e. case of deterministic contracts.).
Extensive planning is utilized when that planning, together with the threat of legal sanction, is more advantageous. Nevertheless, it seems that the solution in an uncertain environment is a higher degree of commitment. What can lead to use such formalistic contracts with an extraordinary degree of detail?
Some reasons for this extensive planning have been offered by Professor Macaulay. The first reason is that a detailed contract may serve as a communication device within a large corporation. This arguments stems from the fact that contracts are devices crafted to organize transactions that are subscribed by some agents on behalf of the firm (for example, sales management and house counsel), but whose performance has to be implemented by different agents within the firm (for example, production managers). That agent wants to know which parameters must he stick to. Moreover, even among the agents who negotiate the contract, there are some aspects that the management may want to keep its salesmen from negotiating. Finally, having the specifications present in the contract is useful for the agents who subscribed it in order to fight with the production and finance departments if the latter resist to comply with certain requirements.
The second reason to use detailed contracts is the likelihood that problems may arise, this being related to the complexity of the contract performance and its length. The use of formal contracts rather than "mixed" relationships (neither markets nor firms) may turn a cooperative business into an antagonistic one. However, this problem may be offset by gains in predictability in cases where, say, the degree of prejudice in case of breach may be great. Examples refer mainly to cases where consequential losses may be great and either the buyer is interested in carefully defining the obligations and standards of performance of the seller, or the seller is interested in inserting clauses on limitation of damages.
In conclusion, business theory and practice has significantly evolved, making the analysis of business relationships more and more complex. While in previous sections it has been shown that a wide degree of trust and flexibility constitutes a solution to adapt to an ever-changing environment, under this heading some concerns have been expressed that that may not always be the only option. Formalistic relationships, with or without a high degree of commitment may introduce more rigidity, but constitute a valid alternative in some scenarios.
5. Conclusions from the perspective of business theory and practice
Along the previous sections an attempt has been made to explain the evolution of business theory in its aim to explain the evolution of business relationships in order to adapt to an ever-changing environment. From the foundations of classical markets economics, where price mechanism was the only organizational tool, a concept like that of transaction costs was introduced in order to explain the dichotomy between markets and firms. Further business theory explained that markets and firms were just poles of a scale where many kinds of relationships were possible to carry out transactions, depending on the degree of trust and commitment between the parties. Finally, further analysis showed that, in order to deal with uncertainty, as an alternative to commitment it was possible to introduce more formality in the relationship.
In consequence, a proper analysis should classify the different kinds of liaisons according to their degree of commitment and formality. Usually business theory tends to include vertical integration, partnerships, joint ventures, agency agreements or franchises. However, the aim of this work is to focus on a pure example of contract, like the contract of sale. Therefore, all the previous types will be excluded. Nevertheless, still within the scope of sales contracts we may find three different types of transactions.
Spot transactions. In this first category a transaction exists at only one point in time and there is no ongoing relationship between the parties. Moreover, since the product or service provided is of standard nature, the only benefit is upon the price, and the transaction is completely driven by the price mechanism. Not much attention may be paid to negotiate the contract and the parties either stick to a form or base their agreement in an exchange of e-mails or a telephone call. In the absence of a carefully negotiated contract, contract law, as a "default" rule, must necessarily provide for certainty and predictability.
Flexible and interactive relationships. In this case, there is an ongoing relationship between the parties. Consequently, the basis should be placed in the trust and confidence between them. Furthermore, it is hardly possible to anticipate all the possible contingencies that may happen in the performance of the contract. Therefore, the parties solve the problems on an ongoing basis through cooperation. In such a case, the law has to become a flexible instrument to evaluate the diligence of both parties to enhance the duty to cooperate to the maximum extent possible.
Formal and planned relationships. In this case, although the contractual relationship may be of complex nature and lack the simplicity of the spot transactions, confidence is not a strong element. For that reason, rather than introducing flexibility through framework agreements and constant communication, the parties try to anticipate all possible contingencies in the contract, with stipulated consequences for every possible event. For this type, the law has to allow the parties to derogate from or vary the applicable legal rules and set their own contract rules.
III. INFLUENCE OF THE NEW BUSINESS THEORY AND ENVIRONMENT IN CONTRACT THEORY AND PRACTICE
The previous Sections traced a timeline that reflects the evolution of industry practice and theory. Contract law needs to provide an answer to different contractual realities. This heading serves the purpose of studying whether and to what extent has the theory of contract law adapted to the needs of the new environment.
1. Traditional view of contracts
New theories surge as a response to new problems, and it is tempting to adopt them without further discussion. However, before adopting new theories, the first step should be to evaluate the features of traditional thought, in order to see whether it is robust enough to face the defiance posed by changes. The following lines will briefly display the archetypical perspectives of contract law. Firstly, classical theory of contract law will be examined. Then, a scrutiny will be made of neoclassical contract law, which has attempted to conciliate the new challenges with the traditional bases of contract theory.
A. Classical contract law
Classical contract law focused on the role of a contract as a promise. According to the Restatement Second:
Moreover, the classicists gave paramount importance not to the actual intent of the parties, but to the external expression of such intent, thereby arguing that it was the reasonable observer's interpretation controlled, not the actual parties' will. Therefore, classical contract law stood for formal promises (interpreted in the light of the declarations and not the actual intent) that determined what the parties compromised at the moment the promise was made. This concept of contract as a promise emphasizes two facts: first, that the law of contract is concerned with future exchanges, since a promise is a commitment to future behavior  and, second, that the contents of the promise are determined since the beginning. This contract theory thus enhanced two elements: discreteness and presentation. By enhancing presentation is simply meant to consider the course of the future inalterably bound by present conditions.
Increasing discreteness, though, is a more complex work for contract law, since it takes several tasks. A purely discrete transaction occurs between strangers brought together by market mechanisms. It is entirely driven by price mechanism and separate from other past, present or future relations so that the parties can be assumed not to have dealt in the past, or to deal in the future. Therefore, in the words of Professor Macneil:
Classical theory, thus, fits perfectly an environment of spot transactions, or even planned transactions. Relevant risks can be assigned either by legal rule or through agreement, as future contingencies are known, understood, and addressed at the time the conclusion of the contract takes place. However, as seen before, the tendency of business practice is, in many cases, towards interactive and closely intertwined relationships, which can be problematic for this background. First, it is hard to plan every single contingency. Second, in a planned transaction the parties' main efforts are placed in the process of drafting the agreement. At that stage both parties do not have any project in common, and their interest is more to get the best deal than to make the thing work, since in case it fails they may contact another party. The environment is confrontational rather than cooperative. On the other hand, in an intertwined relationship the emphasis is placed on the performance stage. That means, first, that the parties have a common project, and thus are more likely to be loyal. Second, it means that they have invested time and money. Thus, the interest to make it work is prior to the interest of getting the best for their side. In consequence, the parties have more incentives to share both benefits and burdens; the environment is more cooperative, and this element might not be enhanced enough through classical rules.
B. Evolution. Neoclassical contract law
Classical contract law enhances presentiation and discreteness. However, considering these two features as the basis of a contract law only reveals a compromise of the legal system, since they are never going to be complied with in their entirety. Indeed, business and practice contract practice reveals that, first, it is hard to foresee all the possible consequences in the framework of a contractual relationship. Second, practice also reveals that numerous transactions fit rather more comfortably under that label of "contractual relationship", than that of pure "contracts", understood as a spot transaction. Many contractual arrangements are not mere casual contacts that exist at a very specific point in time, but stem from previous contacts between the parties, and will be the source of further contacts, that are themselves placed within a whole network of connections between the parties, which in itself is located and interrelated within a larger network of connections with other economic agents, which defines the structure of the industry.
For this reason, given the lack of adaptability of the old conceptions to the new patterns of business relationships, classical contract law evolved into what has been called "neoclassical contract law". In order to cope with the presentiation problem, neoclassical contract theory developed a less formalistic approach. Neoclassical theorists held the belief "in bargain and consent as the basis of contract, provided the contract is cleansed of the bargaining improprieties and the archaic and formalistic rules that were accepted by the classical approach". For this reason, from the original concept of contract as a "promise" theory evolves to consider the contract as an "agreement" enforceable at law. This perspective, thus, fictions about the original intention of the parties, but allows to introduce some dynamic elements in contract interpretation.
The way to adapt a system based on discreteness to long-term relationships that require adjustment is to insert rules that prevent disruption of the parties' performance, often through gap-filling techniques  and incentives to the variation of the parties conduct.
The criticism to this evolution of contract law argues that the switch has come only in the details, not in the overall structure of the system. The new perception of contracts is better adapted to change. However, it still has the rigidities of a system that was born on the basis of discrete spot transactions. Therefore, argue its detractors, it is not a valid tool to cope with the burgeoning types of new types of business relationships that constantly mushroom in business practice. As a result, more and more parcels are taken from contract law and regulated separately under specific legislation that adapts to their needs, since "traditional" contract law is not anymore a valid tool to address the new challenges.
2. New perspectives of contract theory
New theories of contract law allege that old conceptions hardly adapt to the new types of relationships. However, a first point that needs to be made is that, although this criticism has important grounds, much of the business traffic is still carried on through spot transactions (i.e. think about the commodity markets). For those cases, the old rules that enhance certainty and predictability through discreteness and presentiation still seem to be an adequate solution. Moreover, in other types of transactions, though the new elements are present, the archetypical factors are there as well, and many aspects of classical contract law should be present. Once this has been precised, the new elements put forward by the relational theory of contract will be described under the following sub-sections.
A. Relational contracts from a contract formation perspective. Agreements to agree
A contract that stipulates ex ante all possible contingencies will contain multiple clauses of the kind "If situation X occurs, the parties undertake to do Y". Foreseeing and providing for every single eventuality may prove to be a nearly impracticable solution in certain cases, especially if the relationship is a long-term relationship, which may change and need redefinition with the time. Although typical examples of these relationships may be found in labor contracts or in the agreements that govern the relationship of a corporation/partnership with its shareholders/partners, most of the long-term contractual relationships enjoy some of the same characters. That implies to change the concept of a contract. From the classical notion of contract as a promise, through the neoclassical definition of contract as agreement, relational theory characterizes contract as "the relations among parties to the process of projecting exchange into the future". This concept considers the relationship between the parties broader than the traditional "promise" or "agreement". The parties' relationship is thus a complex environment influenced not only by the exchange of promises, but also by practices, custom, the parties' roles, notions of good faith, and assumptions made by the parties albeit not spoken. This view enjoys a comprehensive and forward-looking view of the contract.
On this basis, the long-term contracts subscribed by the parties should be concluded on the basis of framework agreements, which, rather than providing for the solution to all possible events, regulates the formulae that permits the parties to provide such solution. There are many different possibilities, including the determination of such solutions through negotiation, unilaterally by one of the parties (i.e. the typical example is that of labor contracts or those where one of the parties is subordinated to the other), or by a third party. However, obligations may also arise from interdependence, custom, previous transactions or the developing relationship between the parties.
Consequently, the relational perspective calls for a more open view on contract formation. According to relational contract theory, the contents of the contract are not all determined at the moment when the parties sign a document or express their will to be bound. Those contents are determined on an ongoing basis through the interaction of the parties. Therefore, relational theory assumes a view of "alive contracts".
B. Relational contracts from the enforcement perspective
Traditional theory tends to liquidate the business relationship rather than to maintain it alive. In relational contract theory, the enforcement is more flexible and proactive.
In the traditional view, litigation is arranged as a contest between two enemies, where the aim is, by a backward-looking examination of the facts, determine which of the parties was aggrieved or whose right was violated and, as a result, provide for an adequate remedy to compensate for the loss of that right or the existence of such prejudice. As opposed to that, under this new system dispute resolution should be organized as a cooperative system where the fact examination is also prospective and forward-looking, and the remedy sought is negotiated and its purpose is not to compensate for the grievance, but to set the best burden distribution in order to maintain the ongoing contractual relationship.
Although this approach may seem way ahead of the existing contract law, its use is widespread, yet not legally sanctioned, among business partners. Exchanges may be adjusted informally during the life of the contractual relationship. If the buyer under a long-term contract that includes delivery of goods in installments requests the seller to cancel the delivery of part of the goods and the seller agrees, they adjust the relationship without recourse to any formal mechanism. If the problem is more complicated, like one of untimely or defective performance, the solution encompasses requesting the other party for negotiations to negotiate a solution, in order to continue the business relationship. Often that solution will be reached without referring to the original contract. Only in cases where the proposal by one of the parties is unreasonable may the other party refer to the terms of the agreement.
This understanding of relational contracts considers them as agreements that provide necessary mechanisms to settle the existence of a disagreement over how to tackle the problems arising out of unforeseen events. In relational transactions, when problems arise the main aim is not to terminate the contract, but to re-arrange it as to make continuation of performance feasible. First, companies are organized to comply with contracts. Sales personnel have to face complaints of angry customers in case of late or defective performance, which incentives them to press on personnel in charge of implementing the transaction (through delivery of goods or rendering of services). Second, personal or business boundaries across the levels of organizations make desirable that the contractual relationship continues or comes to a satisfactory end. Finally, companies are, above all, interested in continuing doing business. Therefore, they will strongly try to avoid dissatisfying any counterpart. The first reason is that they will obviously lose the transaction with that party. The second, and even more important, is that their reputation will be damaged if a contract comes to an abrupt end, which may cause them to lose other contracts with other parties. In this sense, reputation acts as a powerful means of contract enforcement. As a consequence, most times these mechanisms are successful, yet not having legal ways of enforcement. It would thus be desirable that the law acknowledged this prospective and forward-looking view of contract enforcement. Hence, the law should have in mind the importance of maintaining a relationship and, therefore, take into consideration the attitude of the parties towards that end.
In conclusion, relational contract theory provides a new outlook of contract law. From the emphasis on discreteness and presentiation of the classical and neoclassical contract law, relational contract theory highlights the importance of a flexible and forward-looking view of contracts. This conclusion can be extracted from either the perspective of relational contracts as framework agreements (or "agreements to agree"), or the characterization of them as agreements encompassing flexible and prospective means of enforcement. Furthermore, this view seems to shape better some of the new business trends, where trust and higher degree of commitment are increasingly common, and, although not addressed by legal theory, it seems to be quite common among private companies, although on an informal basis. Both features contribute to a great extent to the importance of these new trends, which is the reason why their potential influence should be examined under the following section.
C. The potential influence of the new approaches into contract law
It has been said that relational contracts suppose a challenge to the old conceptions about contract law. There are some particular fields of contract law where new trends may influence the conventional wisdom. First, relational contract theory would imply a more flexible view on the determination of contract contents than those of classical or neoclassical theory. Under this approach the contents of the contract could be determined on an ongoing basis through the interaction of the parties, rather than in a preliminary moment, where the parties have not yet faced all the difficulties of the performance. Some changes have been experienced in this direction on the issue of formation of contracts (i.e. the admission of open price contracts is just an example of this), although there will always be the difficulties derived from ascertaining the parties' real intention.
Secondly, on performance (and non-performance) of the contract a more flexible setting should be considered as well. The traditional role of law and courts has been a backward-looking one where the purpose is to properly liquidate the relationship. An approach is demanded of a more forward looking examination of the facts and needs. Some of this effort has been accomplished through private dispute resolution, either in informal (negotiation between the parties) or formal way (mediation or arbitration). Nevertheless, it would also be desired that the law, as interpreted by courts, gave more importance to the parties' behavior towards cooperating and maintaining the contractual relationship. In this sense, if the natural behavior in a relational context is to cooperate and maintain the relationship alive, it should be rewarded by the law.
It is acknowledged, though, that relational theory, though introducing more flexibility, poses additional challenges. The most important of them is that, as stated before, business practice does not divide into relational and non-relational transactions, but the majority have some of both. Therefore, together with interpreting legal rules, courts should discern where and when to apply relational principles. Relational contract theory thereby implies a trade-off in the law between fitness to commercial practice and higher complexity.
D. The duty to communicate
The scope, contents and meaning of the duty to communicate are highly influenced by the kind of relationship between the parties. In a traditional spot transaction the parties are supposed to be perfect strangers. In case something goes wrong, the parties should be able to go to the market again to contract with a different party. Therefore, since they come to contract together in the marketplace simply by reason of the price mechanism, they have no reason to trust each other.
In this scenario, the parties have no incentive to communicate and cooperate. Therefore, legal rules on communication should oblige the parties to do so to a minimal extent. Moreover, the rules on communication and cooperation in this scenario need to be clear and discrete, so to provide the party who respects them a safe harbor. Consequently, the best suited rules in this setting are those that encompass a simple and straightforward proceeding, in the way "When contingency X happens a communication stating Y should be made". The conclusion we may draw from this is that, in spot transactions, the distrust between the parties, who are, indeed, perfect strangers, is compensated by a higher degree of formalism in order to enhance a minimal degree of cooperation.
The context is different if the contractual relationship is complex or long-term, or both. In that case the parties have all incentives to cooperate, and will do so by the means chosen by them as the most adequate for their particular relationship. Therefore, the law should acknowledge the parties' own means of cooperation rather than imposing formal proceedings that may be different from those expected by the parties, and reward the parties' cooperative behavior exercised through communication. Hence, the duty to communicate is purpose-oriented towards enhancing the parties' own cooperation means, and not compelling the use of the laws' own proceedings. In second place, an emphasis should be placed in informal means of communication. In a cooperative environment, communications are usually not formal. For that reason, informal communications should be given the same importance than formal ones.
The previous sections have showed the general basis of economic, business and legal theory where the following analysis will be developed. From an initial simple assumptions of a world of spot transactions business theory has evolved to classify numerous types of business relationships on the basis of commitment and formalism. Many of those have been purposefully excluded from this work, since the aim is to focus in contracts of sale, to analyze whether the most classical form of contractual liaisons may also be affected by the challenges posed by the new environment.
With that purpose, the preliminary conclusions reflect that the new contract practice entails the need to look at the rules on the determination of contract contents from a different, more dynamic perspective. They also require to appraise the parties' conduct from a singular, purpose-oriented perspective, with the importance placed in the preservation of the contractual relationship, and evaluate the behavior of the parties on that basis. If spot transactions enjoy a higher need for certainty and predictability, complex transactions with a higher degree of commitment imply a superior degree of cooperation, and the duty to communicate has to empower that. In the same way, transactions where the parties derogate from the regime set by the law, the latter has to respect that, by emphasizing the parties' autonomy. In the end, it is party autonomy what is best served by these differentiations. As stated by Professor Arthur Rosset,
Consequently, different types of relationships call for different solutions, and for a different role of the law, the contract, the environment, and the duty to communicate. In the following Sections I will try to address which are those differences and propose some new approaches in relation to the duty to notify defects in the 1980 Vienna Conventions on Contracts for the International Sale of Goods.
IV. THE DUTY TO NOTIFY IN THE CISG AS THE SUBJECT OF STUDY
Once the framework of the different approaches has been set, it is appropriate to proceed to apply this framework to concrete legal provisions. There are multiple texts on contract law that could have been chosen to test the above-described setting. So, this heading should begin by responding to a very simple question, why the CISG? At least five arguments could justify that choice. The first is that the CISG is a contract law instrument, which suits it for an analysis based on contract theory. Secondly, as a statute of pure classical contract law, the CISG is well suited for an analysis of the influence of the new business environment in traditional law. In third place, the CISG rules only on the private interests of the parties, without regard to other elements more influenced by public policy issues. In fourth place, the CISG is the result of a global consensus on contract law matters. If the intention of this work is to address general problems of contract law, the CISG is the most adequate instrument, since it encompasses the legal rules on which the different legal traditions coincide. Finally, the CISG is an international instrument specifically tailored to solve problems arising out of international transactions. The new perspectives of business theory are equally addressed to cope with the problems of a global environment (with global competition).
Hence, the CISG is contract law, is "pure contract law", is not biased by public policy issues, constitutes an instrument to respond to general contract law problems, and, finally, is specifically tailored to resolve the problems of international transactions. For all those reasons, it constitutes an adequate subject of study.
Once the CISG has been selected, the next question would be, why select the regime on notification of defects? I must confess that the selection of that field of study came from my initial puzzle on how such an apparently simple regime could give rise to so much litigation. The reason could be that the regime could somehow be misconceived for the transactions to which it was applied. I came to conclude that even the simplest underlying assumptions supporting a legal regime can be unfit if they do not adapt to commercial practice. The present work suggests a new approach on how to deal with the problems of the notification of defects regime in the current environment. Finally, the other purpose of this study is to raise the debate about whether the rules of the CISG should be re-interpreted to adapt to existing business practices.
V. DUTY TO COMMUNICATE NON-CONFORMITY IN THE CISG. A RULE FOR DISCRETE / STATIC AND NON-FORMAL SPOT MARKET TRANSACTIONS
Once the general bases have been settled, and the subject to test the theory has been chosen, what is left is to analyze the concrete provisions. In this Section, the study is referred to Article 39 CISG. This provision has been subject of much debate, especially in courts, since it is designed to constitute a threshold to the exercise of actions by the buyer. Many courts have denied such actions on the basis of the absence of a proper communication of defects pursuant to Article 39 CISG, as will be seen below. The position held in this work is that Article 39 CISG perfectly suits a scenario of spot transactions, where traders are in search of transactions with the only aim of getting the best price. Article 39 CISG suits that environment. However, in a context where parties enjoy a close and non-formalistic relationship, characterized by constant informal dealing, Article 39 CISG may introduce undesired distortions and be an unexpected rule for commercial parties.
1. Meaning and importance of Article 39 CISG
The text of Article 39 CISG reads as follows:
"(2) In any event, the buyer loses the right to rely on a lack of conformity of the goods if he does not give the seller notice thereof at the latest within a period of two years from the date on which the goods were actually handed over to the buyer, unless this time-limit is inconsistent with a contractual period of guarantee."
This provision regulates the duty of the buyer to communicate to the seller the lack of conformity of the goods, as a conditio sine qua non to exercise the rights and duties contemplated under the Convention in case of lack of conformity  (Part III, Chapter II, Section III). This provision was, together with Article 44, one of the most debated in the drafting of the Convention. In an extremely high number of cases, one of the highest number of cases referring to a single provision, Article 39 constituted the major issue in dispute. Scholars could not ignore this controversy. In this sense, it is remarkable that the CISG Advisory Council, a body composed by some of the major experts in the Sales Convention, has acknowledged this importance, and the second of the Opinions issued by this body concerns the problems of Article 39.
Article 39 CISG obliges the buyer to notify the existence of lack of conformity in the goods. That communication serves different purposes: In the first place, it provides the seller the basis to accomplish its own examination of the goods. That examination will have mainly the purpose of determining whether the buyer's claim is justified. Secondly, if it is justified, the communication allows the seller to substitute for the defective goods or to repair the defect. Moreover, the seller itself will be able to file a timely claim against the carrier or the person in charge of putting the goods at the buyer's disposal. In third place, if the seller considers that the claim lacks sufficient grounds or can be objected, the notification permits the seller to preserve the necessary evidence to prepare for further litigation with the buyer. If there is a delay in the acknowledgement by the seller of the lack of conformity, it will be more difficult to assess whether the buyer's claim was justified. Thus, the duty to communicate contemplated under Article 39 CISG puts the seller on equal footing with respect to the buyer in relation to the information about the state of the goods. Therefore, it has the purpose to avoid that a negligent buyer may take advantage from its negligence.
2. Notify. What and how? Specificity and form of communications
A logical question that may arise after reading the text of Article 39 CISG is what are the requirements a notice of defects must comply with. A buyer who faces the situation of having received defective goods often ignores whether that communication has to comply with any requirements as to contents (specificity of defects, which will be analyzed under letter A) or form (form of the communication, which will be analyzed under letter B).
A. Contents of communication. Duty to specify the lack of conformity
Article 39(1) CISG establishes that the notice must specify the nature of the non-conformity. In order to know which are the requirements of specificity the notice must comply with we should take into consideration the purposes served by the notice. They are: allowing the seller to carry on its own inspection of the goods in order to detect the source of the problem, to assess whether there are grounds for the claim and to secure evidence. Therefore, scholars and case law have held that the notice has to be specific enough to permit all those tasks. A notice with the words "defective goods" is insufficient. Again, it will be necessary to analyze the requirement of specificity in the light of the circumstances of the case. In general terms, the contents of the notice should be sufficient to allow seller to take the appropriate measures: send an expert to examine the goods, take evidence for future disputes, send additional or substitute goods, etc.
That implies, in the first place, to identify the goods in a precise way and, once this is done, to communicate whether an aliud has been delivered, whether there are quantity or quality defects, and to identify their importance, although the concreteness of the specification of defects will depend upon the information available to the buyer, or that the buyer should have obtained. Nevertheless, there will be cases where the buyer will not be able to obtain much information (i.e., cases of machinery or technical equipment). In that case, the notice must state the symptoms, not necessarily to indicate their cause and, if the ascertainment of the defects is preceded by a proper examination of the goods, it will be sufficient to communicate the results of the examination.
Taking that into account, some authors like Professor John Honnold have maintained that the specificity requirement must not be overemphasized, since nowadays, with electronic communications, a seller who wants to know more must be expected to inquire after receiving the notice. Nevertheless, the numerous case law seems to contradict this thoughtful remark. At least, the abundant cases where the buyer lost its rights by not specifying in a sufficient manner evidences the fact that the requirement can constitute a burdensome threshold, and that, for ordinary buyer, it is not always logical that, besides communicating the existence of defects, they have to specify them. It is true that the rule serves the purpose of avoiding the inefficiencies resulting from the moment the defect is discovered until the moment it is preliminary specified, so as to assess what to do next. However, the CISG does so by placing on the buyer the burden of providing the preliminary specification , which may be very well be adequate in some scenarios, but may fit badly on others. This rule obviously seems adequate in cases of spot transactions, where the contacts between the parties are scarce, and thus the buyer's communication should put the seller in a position to have a preliminary idea of what is happening with the goods. Indeed, it makes sense that the buyer communicates all the information it knows, in order to help the seller avoid costs in planning the inspection, selecting the experts, etc. However, in contexts where the relationship between the parties is more fluid it could be reasonable that a brief communication stating the existence of defects could be enough to make the seller take the next step, or at least inquire about the nature of defects.
B. Form of notification
Article 39 CISG, consistent with the "informality principle" of Article 11 CISG, does not impose a determined form on the communication of defects, and thus it is necessary to resort to Article 27 CISG. This provision states that the party who effectuates a communication does not lose the right to resort to it although there may be communication delays or errors, if the communication is made by "means appropriate to the circumstances".
A simple oral communication may suffice, generally by telephone, although there would be problems of proof. In these cases, the general rule adopted by German courts is that, in order to accept the notice, the court should be able to know when the buyer talked to whom about what. For that reason, it is recommended to choose a means that leaves record of the date and contents of the communication.
The parties, by virtue of party autonomy contemplated under Article 6 CISG, may agree in the contract which will be the means of communication adopted. In that case, regard should be had to the agreement of the parties to assess whether or not the communication was by a means appropriate for the circumstances.
3. Notify. When? The period of time for notification
The language of Article 39 CISG that has raised more debate is that referring to the period of time to notify the existence of defects. As will be seen later, the period of time set in Article 39 CISG acts as a deadline, and the provision precludes the buyer from asserting any rights under the CISG if the notice of defects has been given after the prescribed period. The references of Article 39 CISG to a "reasonable time" are very flexible, and thus, have been subject to much debate. However, it makes a big difference to send a notice within or outside the time prescribed. Hence, the dies a quo, i.e., the time when the period to notify begins, and the dies ad quem, i.e., the time when that period ends, will be examined as thoroughly as possible in the following lines.
A. Beginning of the period
As indicated by Article 39 CISG, the period to notify begins at the moment when the buyer discovers the lack of conformity or should have discovered it. Therefore, we should distinguish two scenarios:
a) The buyer discovers the lack of conformity
If the lack of conformity is manifest and visible to the buyer at the moment of delivery, the period of Article 39 CISG starts to run, without the need to give any additional time. The same rule applies to cases where, although not evident, the lack of conformity is known by the buyer at the time of delivery. Thus it will not be necessary to wait until the end of the period to examine the goods, and the time to notify will start at the moment the defect is known. In cases where the buyer knows the lack of conformity in at a time prior to delivery, the period to communicate defects begins at that time, that is, before delivery takes place.
b) The buyer ought to have discovered the lack of conformity
The time discovery of defects is not the only time from which the period to communicate begins to run, since the period to communicate defects will also run from the time the buyer "ought to have discovered" the lack of conformity. In this sense, there is merit to a brief analysis of Article 38 CISG, which contains the obligation of the buyer to examine the goods. This provision will be useful to determine since when the buyer "ought to have known" the defects and, therefore, when the period of communication starts:
"(1). The buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances".
Some remarks should be made about this provision. Article 38 CISG indicates the moment from which the period of Article 39 CISG begins, if, and only if, the defects may be ascertained by an adequate examination of the goods. In that case, the two periods of Articles 38 (examination) and 39 (notice) CISG will be one followed by the other. The reference under Article 38 is made to a "as short a period as is practicable" as opposed to a "reasonable time", in the wording of Article 39 CISG. The aim is to emphasize the importance of a prompt examination as preceding a timely communication. Consequently, the compliance or non-compliance of the duty to examine only makes sense when there are defects in the goods. There is no negative consequence for not-complying with the prompt examination as such. The non-compliance of the duty to examine will only have the consequence that the period to communicate will start to run before and, consequently, it will be shorter. Nevertheless, that may be cured, if the buyer who has unduly deferred examination compensates that leniency with a particularly prompt communication of defects.
Example: B (buyer) receives from S (seller) machinery with defects not evident from visual inspection, but easily ascertainable through the proper tests made by operating the machinery. These tests are customarily done during the first three days after delivery, and a reasonable time to communicate is one month (30 days). B may decide to postpone the tests until ten days later (i.e., 7 days more than what would have been considered a proper time for a prompt examination), but if B communicates the defects within the 23 next days after ascertaining the defect, it would have communicated on time.
However, there would still be a second scenario in cases where defects could not have been discovered, not even through a careful examination the goods. This is the case of "hidden defects" in the goods. Consequently, within the category of cases where the buyer ought to have discovered the lack of conformity, we should distinguish a sub-category of cases where the buyer, not even through the exercise of a diligent examination of the goods, could have been conscious of the defects. In this case, the fact that the moment where defects "ought to have been known" by the buyer will be longer or shorter will depend on the nature of the defects, in the first place, and of the kind of economic activity carried on by the buyer  (i.e., whether it is supposed to have some kind of expertise in the goods involved), in the second place. Therefore, it will depend upon both factors that the period to communicate will begin to run. For this reason, according to the regime set in the CISG it is advisable to the buyer to maintain the goods in observation, even after examining them, although this does not create a duty on the buyer to constantly examine the goods.
In any event, it is easily noticeable that the regime established by the CISG is quite rigid. It presumes a time sequence with delivery (as a first step), a brief period to examine the goods (second step) and another period to communicate defects (third step). This regime is necessary in cases where the parties have a formalistic relationship, particularly if trust and commitment are missing. In that case, there is a need to subject the relationship to proceedings. On the other hand, there may be cases where the contractual relationship is characterized by closer ties, informal communication. It may also be that the process is not so "linear" (delivery-examination-notice). In complex transactions, there may be delivery, assembly, again delivery, assembly, correction, and technical assistance being present the entire time. In summary, there are multiple examples where the process is too complex to fit into the simple proceedings set by the CISG. In those situations, the buyer may not accomplish immediately the examination of the goods (it may not proceed to examine the goods at all) not as a matter of leniency, but as a matter of trust in the seller. Although the defects might have been discovered through examination, the buyer's conduct might be reasonable as well (e.g., the trust in the other party helps to save costs in the relationship). As an example, let us think about a supplier of spare parts to a car manufacturer in a "network kind" of relationship: both parties may agree upon different proceedings for quality control: close cooperation between engineers of both companies, inspections by the buyer of the supplier's facilities, joint task forces ... All to save costs of inspection of parts supplied. Although in a case like this, it is predictable that the seller would accept the defective goods no matter whether the communication is late for CISG standards, the law should not protect it in case it suddenly decided not to accept them. In this sense, the mechanism of the CISG is adequate for spot transactions where there is not an ongoing relationship between the parties, but not when trust and confidence lead the parties to alter the CISG proceedings after delivery of goods.
B. Time for notification. The reference to a "reasonable time"
Article 39 CISG has its predecessor in Article 39 of the 1964 of the Uniform Law for International Sales (ULIS). The particularity of the CISG is in the substitution of the ULIS expression "notice [...] promptly" by "notice [...] within a reasonable time." There are no hints in the Convention that allow to generally set a concrete period, which may apparently create uncertainty. Nevertheless, there have been numerous attempts in this sense. Unfortunately, it has been frequent for scholars and case law to be influenced by their own domestic law on the issue. Thus, authority from countries with laws that contemplate short periods of time tend to assume that the "reasonable time" of the CISG calls for a brief period of time as well. On the opposite side, it is expected that authority from countries whose legislations call for wider periods, or no period at all, will also be influenced by the latter in their interpretation of the CISG. Last but not least, there are interpretations that advocate a convergence of views. Those who propose that a compromise should be reached by the different authorities have suggested that a period of one month could be taken as a compromise solution that settled a first guideline to those who have to decide on issues of the CISG.
Nevertheless, the existence of a fixed period of time that could be moved forward or backwards, still seems a too rigid solution. Different situations with different goods, skills and relationships call for different solutions. This is the opinion of the CISG Advisory Council which, in its "Opinion no. 2" states that it is not adequate to appreciate the existence of a reasonable time in abstract terms, of a day, fourteen days or a month, without taking into account the circumstances of each particular case. For this reason, in order to finally appreciate the reasonable time, it is necessary to decide on a case-by-case basis, taking into account the relevant circumstances. In the first place, it will depend on the nature of the goods, that is, whether the goods are perishable or not since, for the former "reasonable" means "immediate" (hours or, as maximum, a few days). Were the lack of conformity communicated later, it could not be remedied, or the seller could not take the necessary evidence. Moreover, it should be taken into account whether or not the goods are seasonal goods  (the period to communicate will be shorter in case they are ). Secondly, account must be taken of the necessary acts to ascertain the lack of conformity. If it is necessary an immediate examination by an expert the period of time will be shortened. In third place, consideration must be given to what steps are to be taken with the goods. If the buyer has to manipulate the goods so that it will be difficult to discern whether the defects were the buyer's responsibility, this also shortens the notification period. In fourth place, it should be taken into account the remedy exercised by the buyer: if the buyer intends to keep the goods and, simply, claim damages or a price reduction, the period ought to be longer than if the buyer intends to reject the goods in order to claim substitute goods or avoid the contract. The reason is that, in the latter case, the seller should be given the opportunity to send substitute goods or to dispose of the ones rejected by the buyer to avoid further losses. All these circumstances should be tempered by usages or practices established between the parties, as well as by the degree of experience of the buyer  or other surrounding circumstances in each case.
In summary, the "reasonable time" of Article 39 CISG will depend on the aforementioned circumstances (although case law may suggest others). More often, the period will be shorter in case of goods that require immediate examination or bear risk of loss, whereas for goods that do not pose those problems the period will be longer.
C. Cut-off rule. Reference to the rule of Article 39(2) CISG
The text of Article 39(2) CISG reads as follows:
"(2) In any event, the buyer loses the right to rely on a lack of conformity of the goods if he does not give the seller notice thereof at the latest within a period of two years from the date on which the goods were actually handed over to the buyer, unless this time-limit is inconsistent with a contractual period of guarantee."
In the notification of defects regime there is a disparity among the different domestic laws with respect to the need to set a fixed period. The Uniform Commercial Code, for example, requires notice of lack of conformity, but does not set a maximum fixed period, while other systems establish periods of one year or less. ULIS, forerunner of the CISG, set a period of one year. Finally, the two-year period of Article 39(2) CISG is the result of a compromise among the States that participated in the drafting of the Convention. The period has to be calculated "from the date on which the goods were actually handed over to the buyer". That implies not to take into account the moment where the seller should have performed its obligation to put the goods at the buyer's disposal, or the effective date of performance, but the date in which the buyer enters into effective possession of the goods; that is, when the buyer performs the taking of delivery. This solution avoids counting the time during which goods are in transit to shorten the two years period.
The period will be applied unless it is incompatible with a guarantee period agreed by the parties. The guarantee may enlarge or shorten the two-year period, since it constitutes an application of the party autonomy principle (Article 6 CISG ). Nor will the two-year period of Article 39(2) CISG be applied in cases where the seller knew or could not have been unaware of the lack of conformity (Article 40 CISG). However, it will be applied where the buyer had a reasonable excuse to not communicate the lack of conformity (Article 44 CISG).
4. Notify. To whom? The addressee of the notification
Once having determined the requirements of the notification itself, in substance and form, we may question about to whom should the communication be addressed. Commercial relations are, nowadays, carried on among companies that may employ hundreds or thousands of persons, thereby giving sense to the issue about the addressee of the communication. That leads us to the problem of notifications made to employees, collaborators and, generally, agents or intermediaries of the seller, which will be dealt with in a first sub-heading.
On the other hand, the complexity of commercial relationships comes, very often, from the existence of third parties implicated either in the delivery of goods or rendering of the service (outsourced companies, carriers, etc.), or in the financing of the transaction (i.e., assignees of the contract or of the receivables). This problem will be dealt with in the second sub-section.
A. Notification to employees, agents or intermediaries
The addressee of the notification is the seller. Article 39 CISG only refers to the seller when dealing with the duty to communicate. Nevertheless, the Vienna Convention does not determine which are the persons to whom the communication may be made, persons who may be considered authorized to receive the communication "in the name of the seller" or "as the seller itself". Therefore, the law applicable to the agency relationship (according to the Conflict of Laws Rules) should determine these issues. In case that the applicable law determined that a person has acted as an agent of the other, the communication to the agent is adequate according to case law.
A different case is that when persons not authorized to receive a communication on behalf of the seller are used as messengers by the buyer to forward the notice to the adequate persons. In that case, those persons are used as means of communication, and thus their adequacy as such should be assessed in light of Article 27 CISG. As a general rule it should be understood that they do not constitute "adequate means" according to the circumstances. Article 27 CISG substitutes the expression "usual means" of ULIS and ULF by that of "adequate means". That is so in order to allow more flexibility, since, in exceptional circumstances, like a strike in postal services, or a breakdown in telecommunications may turn an unusual mean into an adequate one. Nevertheless, in a normal situation, attending to criteria  like the time employed, the need to avoid losses or the possibility of alteration of the communication, the adequate means will presumably be the usual means. In conclusion, the aim is to facilitate for the seller the activity it has to carry on (to repair, to decide whether the claim is justified, take evidence for further litigation, etc.) and, although Article 27 CISG is more flexible than its predecessor of ULIS and ULF, it seems that usual means comply better with the aim in a normal situation.
In general terms, when the notice is given to a third person not employed by the seller, the buyer needs to make sure that the notice reaches the former. In case of notices given to the seller's personnel it will depend upon each case. In the case decided by the Landgericht Bochum (Germany), the court had to decide on these issues. The buyer communicated to "X", an employee of the seller, the existence of defects in the goods. The employee declared that he was not the adequate person to receive the notice on behalf of the seller but that he would forward the communication to the seller although, in the end, it seems he did not do it. The court decided against the buyer stating that the notice had not been sent by adequate means.
In summary, as a general rule, in case the buyer utilizes persons not authorized to receive the communication on behalf of the seller as messengers, it should make sure that the notice reaches the seller. In case the buyer does not make sure of this, the buyer would bear the risks in case the communication did not arrive to the seller or arrived too late. As can be seen, although the legal provision allows a certain degree of flexibility, it seems that the case law has opted for the most restrictive way to the buyer. Therefore, even in case of leniency of the seller's own employees, it would be the buyer who could bear the risk. This interpretation of the norm may not be adequate in cases where communication with the seller's personnel is fluent and the buyer's reasonable expectation is that complies with the duty to communicate by an informal communication to the seller's employee. A typical example would be that where employees of the seller stay in the buyer's facilities to install a machine or to train the buyer's personnel about its functioning. In that case, in business terms it could be reasonable to assume that an informal communication to the seller's personnel or foreman may suffice (if it complies with other requirements). However, we have examined that the interpretation made by the case law of this issue may complicate the problem, and oblige a party to depart from normal business practice to a process that could be quite bureaucratic.
B. Notification to third parties affected
The issue of the addressee is also related with the problem of third parties affected by the contractual relationship. With this mention we refer, on the one hand, to assignees of the seller and, on the other hand, to its sub-contractors. The questions are mainly twofold. In the first place, whether the buyer may comply with the duty to communicate by notifying those parties. In second place, whether there exists the obligation of the buyer to communicate the existence of defects to those parties. In summary, whether the communication to these parties may be made in lieu of the communication to the seller, or in addition to the communication to the seller, or none of them.
Although this issue has not been extensively discussed, my interpretation is that the answer must be negative in both cases. As to whether the communication to the third party may serve to comply with the duty to notify the seller, we have already studied the restrictive interpretation made by the courts about the possibility of the buyer to notify third parties. The criterion is that the communication to third parties does not free the buyer from its duty to notify. Therefore the same rule should apply to the case of the assignee of the seller's receivables, arising out of the contract, or the carrier of the goods.
In relation to the second issue, of whether the existence of a third party implies an additional obligation to the buyer, it is hard to enunciate a general rule, since not only the CISG comes into play, but also the rules that regulate the relationship between the third party and the buyer. Nevertheless, as a basic argument, my view is that the existence of a third party should not generally imply an additional duty for the buyer. Article 39 CISG only speaks about the need to notify the "seller", not to any other party. Given that Article 39 sets a duty, it is not reasonable to make an extensive interpretation of the rule that may include other parties, turning the duty to communicate into an excessive burden. For that reason if, in a certain situation, the buyer has to notify a third party (besides the seller), I understand that that duty will arise from the specific rules that regulate the relationship between the buyer and the third party (even by assimilation of the figure of the third party to that of the seller), but not from the CISG, which regulates the relationship between the buyer and the seller. For example, in the case of carriage or assignment of receivables, we should examine the rules that regulate the relationship between debtor and assignee (or buyer and carrier). In case of assignment, though, what the rules state is that, as a matter of principle, the assignment of the receivable should affect the debtor's situation to the lesser extent possible.
The answer should be the same in a case where what operates is a substitution in the position of the seller. That would happen in a case of novation of the contract or assignment of the contract, where the seller is substituted by a third party. Again, what should be examined are the rules on assignment or novation, since this is an issue that belongs to that field of law. The Vienna Convention regulates the relationship between the buyer and the seller, without entering into the relationships of the two with third parties, since those follow their own specific rules. In this sense, the problem of the duty to communicate to third parties is not to ascertain the existence of a duty, but to determine the scope of the CISG. Article 39 CISG only talks about communication to the "seller". What I want to emphasize is that, when the CISG says "seller" it means "seller", not anyone else, and thus, in order to discuss other possibilities we should resort to specific rules in order to avoid extensive interpretations of the Convention that may cause problems rather than solve them. In any case, Article 6 of the CISG contemplates the principle of party autonomy, and thus, if that is their desire, they may set a duty to communicate more or less burdensome for the buyer, in order to adapt to the needs of each case.
5. Notify. Why? Consequences of non-compliance
Article 39(1) CISG reads "The buyer loses the right to rely on a lack of conformity of the goods". This should be understood in the sense that, as a consequence of non-compliance, the buyer will lose the right to exercise the remedies provided by Article 45 CISG. Therefore, the buyer cannot resort to the remedies contemplated in Articles 46 to 52 (specific performance, Nachfrist notice, avoidance  or price reduction ) or to claim damages according to Articles 74 to 77 CISG. The lack of communication, thus, protects the position of the seller against the buyer's claims.
6. Burden of proof
It has been discussed whether the burden of proof is an issue regulated by the Vienna Convention or falls outside its scope by virtue of its Article 4. There are views that advocate the application of domestic law. Nevertheless, the majority of the scholars understands that that solution would be impracticable  since domestic laws differ in that issue. Thus, according to that view, the Vienna Convention contemplates implicit rules to determine the burden of proof. Such rules would follow the principle "ei incumbit probatio, qui dicit, non qui negat." That is, the proof of the fact corresponds to the party who affirms the application of a certain provision, and the proof of the exception, to the party who resorts to it.
In the case of communication of defects, according to the above stated, the buyer must prove that communication was properly made. Article 27 CISG is the provision applicable to the communication. According to this article, it is not necessary to demonstrate that the notification has been received by the seller, but, for example, in case of postal communication, it will suffice with the certificate from the post office.
7. Delivery of an aliud
In case the goods handed over are different from those specified in the contract, would it be necessary to notify specifying the lack of conformity? This issue could constitute a source of uncertainty for any scholar coming from a legal system that distinguishes "non-conforming goods" from "different goods." However, this is not the case of the Vienna Convention, whose Article 35 characterizes the lack of conformity of the goods in terms so wide that include the delivery of a peius (goods with defects or, literally, "worse" than those agreed by in the contract) as well as an aliud (different goods from those agreed upon). This way, the Convention does away with the problems inherent to this distinction in rules from civil law systems.
Therefore, in case of delivery of an aliud, it will be equally necessary to effect a communication pursuant to Article 39 CISG. Nevertheless, as will be seen, it will be frequent that Article 40 CISG will apply in such a case.
8. Conclusions. Article 39 CISG as a proper rule for spot transactions
The previous lines contain a study of the different aspects of the duty of the buyer to notify of the existence of defects. The first conclusion is that it constitutes an expression of the duty to communicate and cooperate between the parties, and sets certain rules necessary to enhance security and certainty. This is manifest in case of spot transactions. In these cases, the parties have not much incentive to communicate and cooperate. For that reason, it was necessary that the law imposed certain procedures (i.e., 1st delivery, 2nd immediate examination, 3rd notification of defects, 4th seller's inspection). Such procedures oblige the buyer to cooperate in a context where it has no incentives. Therefore, the preclusion of its claim in case of no proper notification constitutes a strong incentive to enhance communication.
However, Article 39 CISG may not respond to the needs of closer and more interactive commercial relationships. In those cases, the parties may have their own procedures for cooperation, and to shape them into the CISG rules may lead to inadequate results.
The third point is that, as a consequence, there may be negative consequences of three kinds. First, a party that behaves reasonably according to the commercial context may be deprived from its rights if those are challenged in courts. Second, Article 39 CISG (as well as Article 38 CISG) as imposing a unilateral duty on the buyer, does not induce the seller to cooperate in the same way. The seller has no incentive to accomplish inspection within a reasonable time (no prejudice is derived from that) and has no incentive to inquire about defects if notification is not specific. It only has to wait until the reasonable time elapses, and then claim that the notice was not specific. In third place, Article 39's unilateralism only allows to examine the buyer's behavior. In complex transactions, the legal regime should rather allow one to address the behavior of both parties to see which was more diligent, cooperative, and tried to maintain the relationship alive; Article 39 CISG is not fit for that purpose.
The previous conclusions could be criticized on two grounds. First, it could be said that, in close and interactive relationships it is less likely that problems will be taken to court. However, the probability of an issue to be taken to court does not constitute a solid legal argument. Approaching the law in the context of the real world is good, not bad. Secondly, it could be argued that in interactive relationships, the parties implicitly modify the CISG rules, and that suffices. However, the requirements for a tacit derogation of the applicable law are strict, and buyers who acted reasonably on their commercial setting could be left unprotected. Second, a more flexible approach to tacit modification should operate as a complement, not a substitute, of a flexibilization of the notification of defects regime itself. Third, to admit that an implicit derogation of the CISG is the best solution indicates that the CISG is an inadequate instrument to rule transactions to which it is applicable. The view held in this work is that such surrender is always a last resort, and that a purpose-oriented interpretation of the Convention provides a very powerful tool to rule the transactions involved, and help the courts analyze the parties' behavior in the light of the standard of reasonableness.
VI. REASONABLE EXCUSE AS AN ATTEMPT TO MAKE THE RULE FLEXIBLE. A FAILURE
The loss by the buyer of any possibility to resort to remedies under the CISG for breach of contract is a very drastic consequence. For this reason, the Convention establishes two exceptions to the general rule. Those two exceptions totally or partially nullify the effects of Article 39 CISG. One of the exceptions refers to cases where there is a reasonable excuse for not communicating the lack of conformity, and tempers the consequences of Article 39 CISG (Article 44 CISG). That provision will be analyzed under this heading. The other exception refers to cases where the seller knows defects. This exception, Article 40 CISG, can completely eliminate the effects of Article 39 CISG. Article 40 will be analyzed under the next heading.
1. Meaning and purpose of the provision
The exception contemplated under Article 44 CISG reads as follows:
"Notwithstanding the provisions of paragraph (1) of article 39 and paragraph (1) of article 43, the buyer may reduce the price in accordance with article 50 or claim damages, except for loss of profit, if he has a reasonable excuse for his failure to give the required notice."
This provision was added to the Vienna Convention as a compromise solution for those delegates who considered the rules of Article 39 CISG too harsh to buyers. After all, it could be said, it is the seller who has committed a breach of contract through a lack of conformity and the communication requirements cannot be so severe as to swap positions, and turn the buyer in the "guilty party". On the other hand, the truth is that the seller could be in a very uncertain position if the buyer did not comply with the duty to communicate according to Article 39 CISG, and thus, Article 44 should take into account both circumstances. Therefore, always that the buyer has a reasonable excuse, it will be able to reduce the price according to Article 50 CISG or to claim damages, except for loss of profit, pursuant to Article 74, as it would be unfair to let the seller to receive the whole price. Nevertheless, the buyer will not be able to request specific performance, to avoid the contract or to request damages for loss of profit.
Finally, Article 44 CISG restricts its application to cases falling under Article 39(1) CISG. Thus, the buyer will be precluded from making its claim when the notice is made beyond the time limit of Article 39(2), that is, two years after actual handing over of the goods. It seems that the provision assumes that there is no event that may impede a party from communicating the defects within two years after handing over the goods.
2. The concept of "reasonableness"
During the negotiations of the Diplomatic Conferences that led to the drafting of the Vienna Convention, commentators like Professor Farnsworth questioned the utility of Article 44 CISG due to the difficulty of defining concepts like "reasonable" and "excuse" together. The scholars have tried to develop some interpretative criteria to this respect. Before proceeding to their analysis, it is worth mentioning two things. First, although Article 44 CISG applies to cases where what has not been complied with is the duty to communicate pursuant to Article 39 CISG, the scholars have also included cases where the conduct excused is a lack of prompt examination pursuant to Article 38 CISG. Nevertheless, as stated before, Article 38 CISG only has sense when it works together with Article 39 CISG, which is the provision that establishes a drastic consequence for non-compliance. Consequently, it can be argued that Article 44 CISG may excuse non-compliances with Article 38 CISG, as well as non-compliance with Article 39 CISG, as the former is so closely related to the latter. In addition, what matters in such a case is that the duty to notify has not been complied with, regardless of whether the cause is a non-compliance with the duty to notify itself under Article 39 CISG or that non-compliance stems from a prior non-compliance with the duty to examine the goods pursuant to Article 38 CISG.
In the second place, this provision was introduced in the Convention as a compromise in response to desires of developing countries. Therefore, some of the "reasonable excuses" analyzed by some authors respond to situations proper to buyers from those countries. Those reasons may not operate in case of buyers from industrialized countries.
Once the two previous points have been made, I should detail some of the facts that, according to some authority, have been considered as giving rise to a reasonable excuse under Article 44 CISG. In the first place, a reasonable excuse would be constituted by an impediment beyond the buyer's control, i.e., a force majeure case. This would include cases of problems with communications or the existence of non-working days or where the conditions under which the trade concerned is carried on are different than usual (only if that affects the ability to examine the goods or to effect the notification). Another example could be cases where a general scarcity of experts may make a prompt inspection and notification not viable, or those where transport and communications are not properly developed.
In addition, there are scholars who consider that an insufficient knowledge by the seller may act as a reasonable excuse. This would excuse a lack of specificity in the notification. For example, in case of the purchase of complex machinery, were the buyer conscious that it did not work properly but incapable to describe the symptoms, Article 44 CISG would apply and excuse the buyer from the duty to specify the defects, but not from the duty to timely communicate the defects. It is hard to justify a non-compliance of the duty to communicate within a reasonable time if the buyer knew of the lack of conformity. This problem is closely related to that where the buyer is only conscious of the gravity of the defect after a certain period of time. In that case, according to some authority, a similar criterion would apply, i.e., the buyer should communicate the existence of defects (although not being able to specify the symptoms) and, afterwards, it should accomplish a more elaborated assessment in order to better specify the defects.
It will be harder to justify the application of Article 44 in a situation in which the insufficient knowledge was of the rules of the CISG on the duty to communicate. Some scholars maintain that Article 44 should apply to cases of buyers from developing countries whose laws do not contemplate the duty to communicate defects, and thus the buyer would only know the existence of the duty to communicate after requesting the services of a lawyer in relation to the seller's breach of contract. Nevertheless, ignorance of the contents of the law does not excuse non-compliance with it. For this reason, it is unlikely that case law will support the inclusion of these cases under the "reasonable excuse" label.
When examining the existence of a reasonable excuse, regard should be had to aspects of the situation of the buyer, as stated by Professor Huber: importance of the non-compliance with Article 39 CISG (a lack of specificity is not as serious as a considerable delay), the kind of business of the buyer (less burden should be placed on a small business than on a large corporation), the nature of the goods (in case of perishable goods the non-compliance with Article 39 CISG will be less likely to be excusable) or the experience and knowledge by the buyer.
A special case that may raise some debate is where, at the moment of discovery of the lack of conformity, the seller is immersed in insolvency proceedings. In such a case, the buyer might be tempted not to communicate the defects, on the basis that the seller is incapable of accomplishing the repair task. Would this situation fall within the scope of the reasonable excuse pursuant to Article 44 CISG? The answer must be negative for several reasons: First, the purpose of notification of lacks of conformity is not only to enable the repair of goods or the sending of substitute ones. The notification allows the seller to take the necessary evidence in case there is further litigation. The buyer cannot hindered this right. It could be that it was impossible to the seller to secure evidence, and the notification were pointless. However, Article 39 CISG formulates the duty to communicate in strict terms, and it does not correspond to the buyer to judge whether the notice is futile. the conclusion would change if the wording of Article 39 CISG included a reference to the finality of the communication like "in order to allow the seller to carry on its own examination of the goods the buyer should notify...", but it is definitely not the case. In addition, the ability of the seller to decide whether to repair/examine the goods corresponds to the seller itself, not to the buyer. The buyer cannot step into the shoes of the seller and decide for him.
Finally, the essence of the "reasonable excuse" relates to situations within the scope of the buyer, not that of the seller. The reasonable excuse refers to cases where, for different reasons, the buyer cannot notify the defects. Thus, Article 44 CISG cannot excuse cases where, the buyer being able to notify, it simply decides not to do so.
A final precision I would like to make is that, in order to qualify for a reasonable excuse, the absence of any negligence on the side of the buyer is not necessary. That would render Article 44 CISG virtually inapplicable. However, it is also true that, in order to apply Article 44 CISG, it is necessary to complete an equitable assessment that takes into account the interests of both parties. Thus, together with the buyer's interests in preserving its remedies, account must be taken of the interest of the seller to secure the necessary evidence. The more time passes, the harder to establish the cause and moment of the lack of conformity. For this reason, in cases where circumstances exist that would give rise to a reasonable excuse, an undue delay in communicating defects would go against the credibility of the claim. In consequence, the reasonable excuse under Article 44 CISG is seldom applied in practice.
3. The case law on reasonable excuse
The records of court and arbitral practice concerning Article 44 CISG are quite hopeless for those who may think that this provision may act as an "escape clause" or "safety valve" to the rigidities of Article 39 CISG. Cases in which Article 44 CISG has been alleged are scarce. In general, the courts have held the provision not applicable to the case. Few cases have admitted the existence of a reasonable excuse. In one of these cases, the holding of the court was due to the fact that the defective examination of the goods (the ultimate cause of the delay) was effected by experts appointed by both parties, and thus, the examination (and consequently the notification) could not be considered as an exclusive responsibility of the buyer.
In another case, the reasoning of the arbitral tribunal was based on the fact that the examination of the goods in the loading port involved many technical problems, and thus to postpone examination to the destination port was reasonable. Nevertheless, again, in order to reach this conclusion it would not have been necessary to apply Article 44 CISG, since Article 38(2) CISG provides that "If the contract involves carriage of goods, examination may be deferred until after the goods have arrived at their destination". Since Article 38(2) CISG permits the buyer to defer examination until the destination port, there was no delay in the examination of the goods and, as a result, no delay in the notice of non-conformity that could be subject to excuse under Article 44 CISG.
Among the cases that deny the application of the reasonable excuse it is worth mentioning that decided before the Oberlandesgericht Koblenz (Germany) of 11 September 1998. In this case, the court held that, given the circumstances, a period of one week for the examination and another one for communicating would have sufficed. The buyer alleged that, in order to carry on the proper examination of the goods, a "trial-and-error" process was appropriate for which it needed to make the machinery work. The latter was not possible, since the facilities of the buyer were still under construction, which constituted a reasonable excuse. The court disregarded this argument. In the first place, it stated that, in order to appreciate the "reasonable excuse" under Article 44 CISG it would have been necessary that the buyer had acted with reasonable care so to avail itself of adequate machinery in order to make the tests, something that the buyer did not prove. In second place, the court held that the lack of organization of the buyer is not something to be taken into account in order to appreciate the period for examination of the goods pursuant to Article 38 CISG.
In other cases, the courts simply discarded the applicability of Article 44 CISG without further explanations. Given this scarce authority, it is hard to compare the theory developed in the previous sub-heading with the test of the practice. However, there are some preliminary conclusions that may be put forward.
It has been observed that Article 44 CISG is not a very "popular" provision, as it has not been applied in numerous occasions. Moreover, the criteria with which it has been interpreted by case law are quite rigid, something that goes against the use of the "reasonable excuse" as an apt concept to balance the requirements under Article 39 CISG. Although the introduction of Article 44 CISG was the result of a brave effort by delegates from developing countries, it seems that the practice has turned that effort into something futile. The reasons may be in the vagueness and indefiniteness of the language of Article 44 CISG, as well as the fact that the majority of decisions taken on the issue have been by courts of western countries, whose criteria tend to be more rigid, even more if the contracting parties are located also in those states.
For all these reasons, Article 44 CISG is not commonly resorted in practice, and thus, does not qualify as a valid tool to balance the strict requirements of Article 39 CISG. The same rigidities examined earlier remain, and thus, further efforts are needed to find an equilibrium that allows adapting the static rules of the CISG (i.e., Article 39 CISG) to a dynamic environment.
VII. ARTICLE 40 AND THE KNOWLEDGE OF THE SELLER. A TOOL TO BALANCE A TOO FORMALISTIC APPROACH. PROPOSAL FOR COMPLEX RELATIONSHIPS (I)
Following the pattern I traced before, a study of the provisions on notification of defects was made under Section IV. A conclusion was reached that such provision, and the interpretation it has been subject to by case law, though perfectly suited for spot transactions, could introduce rigidities in cases where the parties engaged in an interactive relationship with usual informal contacts. For this reason, a need to balance that rigidity is needed. Under Section V, Article 44 CISG was examined as an alternative for such task, which was its purpose when it was introduced in the late times of the diplomatic conference. However, despite the efforts made to introduce it, its practical effect has been disappointing. For that reason, it is necessary to turn a glance to other possible solutions. As stated before, the other provision addressed to alleviate the burden of the notification of defects is Article 40 CISG. The position in this work is that this Article constitutes a valid alternative to pump flexibility in the interpretation of the CISG provisions on notification of defects. This new approach cannot be sustained unless certain changes in the perspective from which Article 40 CISG is perceived are accomplished. Those changes, as well as the proposed new role of Article 40 CISG in helping the courts to make an overall assessment on the diligence of both parties will be carefully dealt with in the following sub-sections.
1. Meaning and purpose of the provision
The second of the exceptions to the general rule of Article 39 CISG is contemplated under Article 40 CISG, which reads as follows:
"The seller is not entitled to rely on the provisions of articles 38 and 39 if the lack of conformity relates to facts of which he knew or could not have been unaware and which he did not disclose to the buyer"
In the case contemplated under Article 40 CISG, the seller does not have a reasonable basis to demand the buyer to notify the lack of conformity. This provision was drafted in order to limit the rights of the seller when it delivered defective goods to the buyer, knowing about those defects. Indeed, the context assumed for the whole regime of communication of defects was that of spot market transactions. In those transactions, the parties go to the market led only by the search of the best price, sign a contract, goods are delivered in exchange for a price, and there ends the contractual relationship. In that context, Article 40 CISG would only punish cases of bad faith, where the seller knew of the defects before sending the goods to the buyer. Consequently, in such a scenario the scope of application of Article 40 CISG would be quite narrow, which justifies the lack of analysis of this provision by scholars, who placed more emphasis on the "reasonable excuse" of Article 44 CISG.
However, taken to a context of more dynamic relationships, Article 40 CISG may serve the purpose of tempering the rigidities of Article 39 CISG. Along the following lines I will try to demonstrate this hypothesis. There are, nevertheless, some obstacles to widening the scope of Article 40 CISG. However, I think they can be reasonable tackled, leaving Article 40 CISG a more predominant role in the CISG.
In the following sections I will try to demonstrate the efficacy of that provision as a tool to balance Article 39 CISG and provide judges and arbitrators a more flexible and less mechanistic device to examine the conduct of the parties under the reasonableness principle embodied in Article 8 (2) CISG.
2. Knowledge. Of what? The facts that the seller knew or could not be unaware of
Knowledge is subjective and, thus, it is a mental state very difficult to prove by the party alleging Article 40 CISG. For that reason, the Convention, attending to an objective criterion, gives equal weight to knowledge and the situation in which the seller could not be unaware of the lack of conformity.
The facts of which a party "could not be unaware" are those that are on the face of the party in question. Thus, this language has the purpose to alleviate the burden of proof of the fact that certain facts that were before the eyes of the seller, reached its mind and knowledge.
A. The degree of laxity demanded
Once the previous precision has been made, it is necessary to set the degree of laxity demanded from the seller in order to determine the facts it could not ignore. Among the scholars, the lines of thought are diverse. Some scholars, trying to protect the seller, restrict the application of Article 40 CISG, considering that "could not be unaware" means less than cunning and more than gross negligence. Others, who plead for an application less protective to the seller consider that simple negligence suffices, that being understood as an overlook of the reasonable care in the trade concerned. The position that seems to enjoy more support is the one that equalizes "facts that cannot be ignored" with gross negligence or, in other words, a conscious disregard. In this sense, the scholars have said that they should be obvious defects for the seller.
Though this assessment of the seller's leniency has been widely debated by the scholars, its importance should be tempered for two reasons. First, because the standard of negligence constitutes an abstract term that, in the end, has to be evaluated on a case-by-case basis. In this sense, the elements to be taken into account will be addressed in the following sub-heading in order to complete the picture of the contents of the knowledge of the seller necessary to exclude Article 39 CISG. In the second place, the issue of the seller's leniency has traditionally been addressed by the scholars on the basis of a knowledge prior to delivery or handing over, i.e., from the point of view of a spot transaction. However, one of the submissions of this work is to demonstrate that Article 40 CISG may also serve to balance Article 39 CISG in cases of complex transactions where, after delivery itself has been effected, the seller is put on notice of defects through the performance of the contract, even by informal communications that may not qualify as a notice of defects in the sense of Article 39 CISG. For that reason, the laxity of the seller should not be assessed with respect to the defects in the goods, but also in relation to the later conduct of the parties.
B. Elements to take into consideration
The scholars have devoted their best efforts to assess the factual criteria to be taken into consideration when assessing the seller's negligence as a result of an overlook of obvious defects. In this sense, the conclusion that a defect was too obvious to be overlooked by the seller is something that depends upon the circumstances of the case. Those circumstances encompass the lack of conformity in itself, the position of the seller in the distribution chain (as a manufacturer or a mere intermediary) and the nature of the goods.
In the first place, the lack of conformity as such; in order to qualify under Article 40 CISG, it has to be apparent. This way, either in quantity defects or in case of delivery of an aliud it should normally be assumed that the seller could not ignore the defects  (element of lack of conformity), unless the seller were a mere intermediary (i.e., distributor) who operated under the manufacturer's instructions  (situation in the distribution chain).
In case of quality defects (e.g., a case where the goods are not fit for their ordinary purpose, or are different from those presented as a sample or model ), it depends upon factors like the existence of contract specifications. Thus, the Arbitration Court of the International Chamber of Commerce held that the seller could not be unaware of defects in goods subject to contract specifications. In another case, the Landgericht Trier (Germany) stated that the buyer would not lose its remedies for lack of conformity, through application of Article 40 CISG, in case of non-compliance with internal regulations. The goods (wine) were not apt for commercial trade as a consequence of the lack of conformity (addition of 9% of water) and were destroyed by the German authorities. The court considered this circumstance as sufficient not to be ignored by the seller.
In the second place, attending to the position of the seller in the distribution channel, an important factor to take into account is whether the seller was the manufacturer of the goods or a mere intermediary. In case of the manufacturer, it could not ignore defects easily ascertainable through a preliminary check or routine tests to which the goods are subject to during the production process. Nor could defects be ignored if there is available information from products already placed in the market or through specialized press or, more generally, those that the seller could not be unaware of by exercising its duty to have the products under observation. On the other hand, in case of the intermediary, it will be more difficult to establish the knowledge of hidden defects. In a case decided by the Oberlandesgericht München (Germany), the court decided that Article 40 CISG could not be applied since, the goods (sweaters) having been manufactured by other companies, the requirements of the provision would have only been met had the seller not disclosed serious and very obvious defects. In a similar way, the Handelsgericht des Kantons Zürich (Switzerland) decided not to apply Article 40 CISG in a case where the seller did not get to see the goods and, simply, accepted to examine them at the buyer's request, without accepting for that reason its knowledge of the lack of conformity.
Likewise, it is necessary to take into consideration the experience of the seller and the information it disposed of. In a case decided before the Oberlandesgericht Köln (Germany) of 21 of May 1996, Article 40 was applied in a dispute arising out of the sale of a car, the seller being a car distributor. It happened that the license year as well as the odometer of the car were falsified, something of which the seller could not have been unaware. In the opposite sense, in a case by the Oberlandesgericht Koblenz (Germany) Article 40 CISG was not applied  since, although the goods sold to the buyer  were not fit to be manufactured, that was due to the type of equipment utilized by the buyer, who had not informed the seller about the technical features.
In a case decided before the Austrian Supreme Court, the court emphasized the importance of usages of trade. The goods were frozen fish. The buyer (Austrian) made an order to the seller (Dutch) for a client in Latvia, after testing the goods. Once the fish was delivered, the buyer as well as its client realized that the fish corresponded to the previous year's catch, a circumstance known to the seller. The fish was not allowed to enter Latvia since, as older than six months, it was not considered fit for human consumption. The court held that, if it was possible to demonstrate the existence of a usage of trade (applicable by virtue of Article 9(2) CISG) according to which the frozen fish could be presumed to be from the previous year's catch unless otherwise specified, the case would fall within the scope of Article 40 CISG, since the seller would have known or could not have been unaware of the lack of conformity.
As stated before, the efforts allocated to assess the seller's negligence have been devoted to the analysis of the kind of defects involved, and the situation of the seller in relation to them. In other words, this assessment of extreme importance is still based upon the seller's knowledge of defects before delivering the goods. However, since my intention is to demonstrate the usefulness of Article 40 CISG as a tool to balance Article 39 CISG in cases of complex transactions, regard should be had to other elements that may help to assess the seller's diligence (or lack of it) in these situations. In that scenario, I consider that the closeness of the relationship between buyer and seller would be influential. As explained before, it is not the same as a duty to communicate in a context in which the seller has no other means save the buyer's notice to know of the existence of defects, than in a context where both parties have a contractual relationship where they have to work together to achieve a satisfactory outcome, thereby leaving the seller in a position where it should be aware of how the contract is being performed. In that context, also influential would be the degree of exposure of the seller to the information of performance as well as the existence of defects, as opposed to the reasonableness of the communication of defects by the buyer in the commercial context. If the parties are involved in a contractual relationship where they have to work together to achieve a satisfactory outcome, it would not be reasonable that the buyer assumed a whole burden of communication. In this way, a seller who is in continuous dealings with the buyer will find harder to oppose the formalism of Article 39 CISG if the seller has been working together with the buyer. Also, in a scenario of close business relationships, with a continuous flow of communication between the parties, regard should be had to whether the buyer's conduct, as opposed to the seller's, was reasonable.
Indeed, although not mentioned by authorities, I consider that the argument of the close business relationship underlies some of the reasoning of the case law. A first example would be the case decided by the Arbitral Court of the International Chamber of Commerce, as mentioned before, where it was assumed that the seller could not ignore the existence of defects in goods subject to contract specifications. The tribunal in this case decided to some extent on criteria of fairness, since it states that "it clearly transpires from the file and the evidence that the Seller knew and could not be unaware [of the non-conformity of the consignment to] contract specifications." Nevertheless, given that the parties had already concluded three contracts, that there had been communications between themselves, that they had subscribed to a series of contract specifications, it seems that those elements were (consciously or unconsciously) taken into consideration by the tribunal.
Something similar could be said about a case decided by the Arbitration Court of the Stockholm Chamber of Commerce. In a contract for the sale of a press, the tribunal held that the seller had consciously disregarded the substitution of a lock plate for another of inferior quality (which determined the bad functioning of the press), and that supposed the application of Article 40 CISG, which excluded for the seller the possibility to allege that the notification had not been made on time. In any event, the tribunal also places emphasis in the fact that the seller did not comply with its duty to inspect and supervise the installation of the press in the buyer's premises. That reasoning certainly acknowledges the importance of the duty to cooperate and the need to balance the conduct of the parties in a complex relationship, where further activity to the mere exchange of goods for price (in this case, some technical advice and assistance would have been desired) and further exchange of information is needed.
A similar situation arose in a case by the ICC Court of Arbitration. The National Bank of a country (claimant) entered into a contract with the defendant for the printing of bank notes. Defendant made a first delivery of bank notes that did not meet quality standards. The parties then entered into a second agreement ("executory agreement") according to which the printer would manufacture another batch of bank notes and, if they met the quality standards, the claimant would place an order. The bank notes were still non-conforming. The defendant alleged that the notice by the claimant was not timely and that it only stated that the defendant had delivered many bad quality banknotes. The tribunal held that the buyer could not rely on Article 39 CISG, since the seller "knew that there had been flaws among the previous deliveries ... and especially as to the paper that had been delivered ... It had therefore committed itself to new deliveries of quality and to double check all banknotes." However, what is more, the tribunal explicitly stated that one of the elements to be taken into account was:
"the particular nature of the relationship between the parties. The 1993 Agreement was concluded in a spirit of conciliation. It meant to put an end to past disputes. [Defendant] committed itself to print new series and deliver banknotes that complied with the contractual requirements. The Bank renounced its past claims and even agreed to future contracts with [Defendant]. As to the general spirit of the agreement, it intended to compromise in order to reach a mutual agreement."
These references are sufficient to imply that the context (and closeness) of the relationship between the parties matters in the evaluation of whether the buyer may exercise its actions. In that occasion, the tribunal decided on a broader basis than the CISG since the agreement reached by the parties, besides a sales contract, involved elements of a settlement agreement as well. In any event, the overall assessment by the tribunal of the parties' behavior, taking into account the type of relationship they have, all in the light of the principle of cooperation is the adequate approach to the issue of notification of defects. More approaches like that would be desirable.
In cases where the applicability of Article 40 CISG was denied, the importance of the type of relationship can also be observed in relation to the need of exchange of information between the parties. In a case decided before the Oberlandesgericht Karlsruhe  (Germany), the court understood that the knowledge of the seller extended not only to the elements determining the lack of conformity, but also to whether those elements did or did not constitute a lack of conformity. In this case, it is interesting to look deeply into the reasoning of the court in reaching this conclusion. The goods consisted of a surface-protective film to high-grade steel products. When the film was removed from polished high-grade steel products, it left glue residues on the surface. The buyer paid the expenses of removing the glue residue and brought a claim for reimbursement of these expenses against the seller. The appellate court held that, in order to apply Article 40 CISG, the seller should have known that certain features of the film constituted a lack of conformity.
It is interesting to note that the court held that although there had been long-standing business relations between the parties, spot-checks and test treatments were required in a situation in which the lack of conformity would have become evident only upon use. It is interesting to note that the court understood that spot-checks were needed, but the fact that a long business relationship existed constituted an element against that presumption. Indeed, the court explained that during that long-standing relationship, the buyer had not objected to the delivery of the same film in other occasions, thus giving rise to a duty of spot-checks and prompt notification by the buyer. I here do not share the view of the court for being too rigid (the rigidity of the court's reasoning is also visible when examining the extremely short period of time considered adequate to notify defects), but the reasoning is useful in the sense that the fact of a long standing business relationship may modify the parameters of the notification of defects regime of the CISG that is better suited for spot transactions. A close or long-standing business relationship requests a less formalistic approach and the court, though finally deciding on a rigid basis, considered the element of the long-standing relationship as important enough to be specifically addressed. The case was later brought to the Bundesgerichtshof (German Supreme Court), which left this issue unresolved, since it held that the later behavior of the seller indicated that it had renounced resort to Article 39 CISG, thereby leaving the issue of Article 40 pointless. However, the court still takes the business relationship of the parties into account when, in the preliminary statement of facts, it emphasizes in the second paragraph that the parties had had a long business relationship and that the buyer had never complained.
In the same way, in the case decided by the Oberlandesgericht Koblenz (Germany), on 11 September 1998, in a contract for the sale of materials to manufacture PVC, the said materials could not be processed correctly by the buyer. The court deemed Article 40 CISG inapplicable, since the buyer had not informed the seller of the fact that the machinery it operated was unusually old. In this case, the court placed the burden to make specifications on the buyer (following the tendency of many German courts to decide favorably to the seller). However, it is submitted that the reasoning could be made the other way around, thereby, placing the seller in a position where it is obliged to communicate every relevant circumstance, and to be aware of all the relevant circumstances happening in the development of the contractual relationship.
In the previous lines, a case has been made to avoid placing the whole burden on the buyer, something that incentives the seller's leniency. However, it cannot be presumed that the seller always knows the existence of defects. Therefore, account must be taken of all relevant factors related to the defects and the seller when assessing what it knew or could not have been unaware of. My position here is that the analysis of the compliance with the duty to communicate should be made together with the assessment of the compliance with the duty of diligence embodied in Article 40 CISG, and that for two reasons.
First, the case law has taken into account the importance of the type of relationship of the parties when assessing the applicability of Article 40 CISG. Second, this element (i.e., the type of relationship) should account as a crucial criterion to evaluate the parties' behavior under Article 40 CISG. Once this element has been taken into account, it does not make sense anymore to analyze on the one hand whether the buyer has complied with the duty to notify and, on the other hand, whether the seller has been negligent as to qualify for Article 40 CISG. Rather, the reasoning should involve two steps: first, the court should discern whether the relationship is one to be judged on the basis of a spot transaction or whether it has elements of a complex/close/interactive relationship. In the case of a pure spot transaction, the second step would be an assessment under Article 39 CISG (with Article 40 only for cases of bad faith or gross negligence). In the second scenario, the court should make an overall assessment on the basis of both Article 39 and 40 CISG to determine which of the parties acted more reasonably.
C. The "specificity" or contents of the knowledge. Which details should the seller know or could not be unaware to qualify for Article 40 CISG?
Another relevant aspect in the analysis of Article 40 CISG refers to the facts that should be known or of which the seller could not have been unaware in order to qualify for that provision. In other words: should the seller know all the details of the lack of conformity, or does it suffice with a fair approach to the nature or causes of the lack of conformity?
There are not many scholars who analyze this aspect. Nevertheless, those who deal with it coincide in asserting that the circumstances that should be known include not only the lack of conformity, but also those factors that, ordinarily, would influence or alter the goods once they have abandoned the scope of control of the seller so to cause a non-conformity. Thus, if the seller has knowledge of certain circumstances that may lead the goods to be non-conforming with the contract, a "knowledge" in the sense of Article 40 CISG is presumed. Therefore, here operates an extension of the presumption of knowledge, from the initial irregularities to the final lack of conformity.
The case law goes even further in this respect, through the leading case of Article 40 CISG. It is the aforementioned award of the Arbitration Institute of the Stockholm Chamber of Commerce. The goods consisted of a press. The lock plate finally installed was different from that needed. Consequently, the change of the lock plate, together with a defective installation of the machine, could cause defects in the machine. The seller did not disclose that circumstance to the buyer and did not give a detailed explanation about how to install the machine. The defects were finally notified more than two years after the delivery of the press (beyond the limit of Article 39(2) CISG). Nevertheless, the arbitral tribunal held that the buyer had not lost its right to resort to the lack of conformity, as Article 40 CISG was applied. The tribunal considered that the combined effect of the absence of detailed instructions and the possibility of an inadequate installation turned the change of the lock plate in a potentially dangerous substitution in an important part of the press, which made it of inferior quality when compared with the original design.
In this case, the court evaluated the circumstances to find out the existence of knowledge by the seller prior to actual delivery. Since it is one of the aims of this work to demonstrate the appropriateness of Article 40 CISG as a balance for Article 39 CISG in complex/close relationships, the reasoning should be brought to that context. As a result, when both parties engage in a complex/close transaction, this duty implies the need of the seller to disclose to the buyer every aspect that may turn the performance into a defective one, thereby enhancing the duty to cooperate between the parties. Moreover, the context of such relationship would admit that an informal call of attention by the buyer to the seller on some problematic element of performance, though not complying with the duty to specify, may put the seller in a position where it could not have been unaware of the existence of elements that would lead to the defect.
This leads to an apparent contradiction between Article 39 and 40 of the CISG. Article 39 CISG requested the buyer to give notice specifying the defects as well as to notify all the defects as soon as it gained knowledge of them. On the contrary, in order to appreciate the existence of a "knowledge" under Article 40 CISG, it is only necessary that the seller be conscious of factors that may cause the lack of conformity. Therefore, imagine that, in the previous example, where both parties have a close business relationship, and the seller's staff is at the buyer's premises, helping with the installation and delivering technical assistance to the buyer's staff. The staff of the buyer communicates to the staff of the seller its concerns about certain flaws in the goods, the installation or the technical assistance, though not specifying any lack of conformity since the lack of conformity does not yet exist as such. That communication would hardly be held to be a "notice" pursuant to Article 39 CISG, and would require a later communication specifying the lack of conformity. However, it would suffice to presume that the seller knew or could not have been unaware of the existence of defects. This apparent contradiction would be saved if, as stated before, the court analyzes the facts and both, Article 39 and 40 CISG, on the basis of an overall assessment, reviewing which of the parties was more diligent.
After all this scrutiny, it remains unsolved what would happen if it is not clear whether the elements known by the seller were the cause of the lack of conformity. In the case of complex machinery, the determination of the cause may not be straightforward, particularly if the time passed until the lack of conformity becomes manifest has been long. In such cases, there would also be doubts about whether it was the irregularities known by the seller or a wrongful manipulation by the buyer what caused the defects. How would Article 40 CISG operate in this context?.
The Stockholm Chamber of Commerce employed an adequate solution, although it did not made it explicitly. First, presumptions should not lead to forget the first source to distribute the burden: a thorough analysis of the different elements, made through an extremely meticulous revision of the evidence to determine which were the causes of the lack of conformity. Then, as a last resort, it seems that the arbitral tribunal is inclined to protect the buyer once the existence of certain irregularities that the seller could not have been unaware of has been established with sufficient certainty. Hence, once a certain negligence on the side of the seller has been demonstrated, it would be its task to prove that the cause of the non-conformity fell within the buyer's scope of responsibility.
3. Knowledge. When? Relevant time to appraise the facts that the seller knew or could not have been unaware of
One of the most important factors (probably the most important) to understand to re-classify Article 40 CISG from a simple provision to tackle issues of bad faith to a useful tool to balance the rigidities of Article 39 CISG and help the judge or arbitrator accomplish an overall assessment is that of the relevant time when the facts that the seller knew or could not have been unaware of may be appraised.
A position that would maintain Article 40 CISG in its traditional role is that of Professors Fritz Enderlein and Dietrich Maskow. Their criterion is to set the decisive time at the moment when delivery takes place. According to this position, knowledge acquired by the seller after that moment would not be relevant for the purposes of Article 40 CISG. Therefore, it assumes that, once the goods are handed over, there is no other means by which the seller may gain (or should have gained) knowledge of the defects than through a communication that complies with all the requirements of a notice under Article 39 CISG. Thus, the stricter criteria of Article 39 CISG would apply.
However, in order to modify the nature of Article 40 CISG to make the entire regime of the Convention suit better to all kind of transactions, it is appropriate to expand the relevant time. Article 40 CISG's rule states that, although a defective or delayed communication has been made, Article 39 CISG will not apply where the seller already knew of the existence of defects. In a context of spot transactions, the relationship is quite mechanistic (delivery-examination-notice-inspection), and once the seller has complied with delivery, it does not care anymore for the contract unless seller receives notice that obliges it to focus on it. Therefore, the moment when the seller should have known of the existence of defects is prior to sending the goods to the buyer, since it is hard to assume that the seller could or should gain knowledge of defects at a later moment. However, in a context of more complex and dynamic contractual relationships, the seller has contact with the buyer and the goods for a longer period of time. Hence, the period during which the knowledge of the seller ought to be assessed should be enlarged until the moment when the reasonable period to notify defects expires. To do otherwise would subject a flexible relationship to a mechanistic approach, which would lead to unfair results.
Furthermore, there is still another argument in favor of expanding the relevant time in which the seller may gain knowledge. Article 40 CISG's purpose is to constitute an exception to the general regime of notification under Article 39 CISG. Therefore, the scope of application of Article 40 CISG should adapt to the parameters of the provision it offsets. For that reason, the author is more inclined to agree with the criterion put forward by Professor Ingeborg Schwenzer, who understands that the relevant moment until which the seller may gain knowledge is when the reasonable time to give notice of defects under Article 39 CISG expires. That is to say, until the moment when it is considered that the reasonable time of Article 39 CISG has expired, the seller may gain knowledge by other means than those of a formal "notice" under Article 39 CISG.
4. Knowledge. By whom? By means of whom may it be concluded that the seller knows or should have known the defecsts?
Although not addressed in the provision, it is fundamental to determine which persons are relevant to establish that the seller knew or could not have been unaware of the defects. In other words, which persons within the seller's organization should know or could not have been unaware of the lack of conformity in order to state that the seller itself knew or could not have been unaware? Or else, which persons may incur negligence to conclude that the seller itself is negligent? In the Diplomatic Conference in Vienna it was stated (although in a different context, that of Article 79 CISG) that acts and omissions of one party include acts or omissions of its employees, including within this definition those persons employed by the seller for the execution of the contract.
This rule, formulated on the basis of Articles 79  and 80  CISG, can be applied to the context of Article 40. That way, it is reasonable to affirm that the knowledge of the seller comprehends that of its employees, which may include not only the seller's own staff, but also third persons hired to perform the contract. This definition does not include suppliers.
Hence, the scope of adequate persons to appraise the knowledge of the lack of conformity includes all the of seller's employees as well as sub-contractors. The conclusions reached here are contradictory with what was stated before about the relevant persons to whom to address the notice of the lack of conformity pursuant to Article 39 CISG. In that context, whether a person is adequate to receive a notice of lack of conformity should be appraised in accordance with the applicable law to the agency relationship. Furthermore, the general rule seems that persons not employed by the seller are not adequate addressees and that, in case of the seller's employees, it depends upon each case. Nevertheless, a communication to an employee  may place the seller in a situation where it knew or could not have been unaware of the defects, thereby qualifying under Article 40 CISG.
Let us put an example where, say, the seller has to perform a task of technical assistance in the buyer's premises as part of the contract of sale. The seller's performance is quite poor, something of which the buyer's staff realizes, as well as the seller's staff, either because they acknowledge they are not doing a good job, or because the buyer's staff let them know that. In such a case, if the persons in charge of performing the technical assistance are not employees of the seller or, being employees, declare themselves not to be authorized to receive the communication, the repeated words of warning given by the buyer's staff would not qualify as a valid notice under Article 39 CISG. Nevertheless, it would be more reasonable to warn those employees than to notify the purchase manager of the buyer company, who would send a formal notice to the purchasing manager in the seller company, who would himself warn the employees. After that formal process, the employees would have been gone. In such a case, were Article 39 CISG taken as the only element to consider, the buyer, after having acted reasonably, would face the situation of being precluded to resort to any remedy. For that reason Article 40 CISG constitutes a good counterbalance to Article 39 CISG. In the example, the buyer's attempts to fix the problem would not qualify as a notice, but they would place the seller in a position where it knew or could not have been unaware of the defects. That way the judge or arbitrator would be able to make an overall assessment of the parties conduct without being subject to the formalities that are an inherent part of Article 39 CISG.
In a case decided by the Landgericht Bochum (Germany), Article 40 CISG would have been of help. The court held that a notification made to an employee of the seller who declared himself not entitled to receive the notice was not made to the appropriate person. The court did not considered the possibility of applying Article 40 CISG. Had it done so, there would have been a basis to affirm that the seller knew or could not have been unaware of the lack of conformity, since one of its employees, related to the transaction, knew of it. The fact that the employee denied being entitled to receive any notification on behalf of the seller would not have been sufficient to exclude Article 40 CISG. In principle, the basis to apply Article 40 CISG should depend on objective circumstances (whether the person was relevant to know the defects, something that, being an employee, in principle it is presumed that was relevant), not just on subjective declarations. 
It seems that many aspects of Articles 39 and 40 CISG are incongruous. Nevertheless, such incongruence only exists if we keep observing both provisions as separate entities. When examined together in a flexible way, the two articles are complementary. Article 39 CISG is the general rule and, in cases of spot-like transactions an element absolutely necessary to secure certainty in the contract. Article 40 CISG introduces flexibility in more interactive transactions, where it constitutes a useful element to impede a negligent seller from leniently sitting back on its chair, while relying on a mere formality like that of Article 39 CISG, when the requirements of the latter may be unreasonable in the context of the parties' relationship.
5. Burden of proof
According to the rules on burden of proof stated before, it will be the buyer who bears the burden of proving that the seller knew or could not have been unaware of the existence of defects. Consequently, provided that Article 40 CISG talks about facts of which the seller "could not have been unaware" the buyer does not need to prove the actual knowledge of the seller. This position is also maintained by the case law. In the case decided before the Arbitration Court of the Stockholm Chamber of Commerce it was held that, once the buyer established with a reasonable certainty that it was more probable that the seller knew the facts than that it ignored them, it corresponds to the seller to demonstrate that it could have perfectly been unaware of the lack of conformity. In that case the conclusion was also supported by the fact that the seller was in a better position to demonstrate its innocence, the goods being complex equipment.
6. Facts that the seller did not disclose to the buyer
The absence of disclosure of defects by the seller to the buyer is something required by Article 40 CISG in addition to the seller's knowledge of the defects. In the following sub-sections (A and B) a conclusion will be reached that, in order to enhance the role of Article 40 CISG as a balance to Article 39 CISG, this requirement should be relaxed, or at least interpreted in the light of reasonableness. Moreover, it will be suggested that the language of Article 40 suggests that the draftsman of the CISG was not thinking of a requirement that, if not complied with, obliged the buyer to notify. It is argued that, rather, the draftsman was considering a condition that, in case of being complied with, completely exempted the seller from defects on the basis of the parties' presumed agreement. For that purpose, a parallel will be traced with the case of Article 35(3) CISG.
A. Facts that the seller did not disclose to the buyer
In addition to its knowledge of the defects, Article 40 CISG demands that the seller does not disclose the lack of conformity to the buyer. The way the non-disclosure requirement operates is still unclear.
First, if the seller reveals the lack of conformity before or at the moment of the conclusion of the contract and, despite this information, the buyer signs the contract, there would not be any responsibility for the seller, even under Article 35, since the lack of conformity would have been accepted by the buyer.
Second, if the defects are disclosed after the conclusion of the contract, but before delivery, the buyer may reject the goods or accept them with defects, and thus, in case of rejection, there would be an avoidance of the contract while, in case of acceptance, the buyer still accepts them with defects, unless it states that it intends to reduce the price, request damages, repair or substitute goods, or it states that it intends to reserve its rights to do so once it examines the goods.
The rationale of the requirement of Article 40 CISG is that a seller who discloses the existence of defects to the buyer should not be responsible of them, since the buyer accepts the goods with defects. The OLG Rostock, in a case decided 25 September 2002, did not apply Article 40 CISG although the seller had disclosed the existence of an excess in the quantity of goods delivered since the court assumed that the buyer had accepted the goods as conforming.
Thus, what this rule addresses is a problem of implicit modification of the contract and therefore regard must be had to Article 29 and Articles 14 to 24 CISG. The rule under Article 40 CISG differentiates cases where defects are hidden from cases where defects are accepted by the buyer. However, what happens if defects are disclosed but there are no signs of acceptance? Article 40 CISG only contemplates the disclosure by the seller, which constitutes an implicit offer. However, it would be unfair if the buyer were not allowed to exercise its remedies only because there is an implicit offer by the seller. For that reason, some acts by the buyer indicating assent should be present. In that case, though, would the buyer still be obliged to notify defects? The answer should be negative, since the buyer learned about the lack of conformity from the seller.
However, some courts have held that the buyer should perform such notification in certain cases. The OLG Rostock, in its decision of 23 January 2004 held that, although the seller had disclosed the facts that constituted the non-conformity, it ignored that they effectively constituted a defect, and thus the buyer had to notify. This is coherent with the position of this work, since its purpose is to show that the duty to communicate and cooperate is not formal and static, but dynamic and ongoing. In any event, a seller should not be able to avoid responsibility under Article 40 CISG by demonstrating that it revealed a lot of technical details and alleging that it did not know that there was a defect.
In another case, the Bulgarian Chamber of Commerce and Industry concluded that notification is needed when it may provide the seller with useful information. In a contract for the sale of coal, the buyer observed that the goods were not of the quality required, and communicated this to the seller. The parties agreed upon aq reduction of the price accordingly, taking as a basis the examination by an independent company. The buyer then refused payment, without presenting the certificated issued by that independent company. The tribunal held that communication was necessary (although the seller already knew of the existence of defects) in order to evaluate the amount of the price reduction.
However, what would happen in a case where the seller reveals the risk of defects, or the existence of minor defects, but the risks materialize or the minor defects lead to more serious defects. In that case, the information provided by the buyer is useful, and thus it should communicate it. However, regard should be had to the circumstances, since it should not be so easy for the seller to free itself by sitting back on its chair expecting the buyer to patiently notify each new manifestation of defects.
In this sense, the judge or arbitrator should assess whether the seller was honest enough, and revealed all the circumstances it knew that might affect the goods sold. Since Article 40 CISG constitutes a particular application of the good faith principle, the overall assessment ought to be made in accordance with that principle. Were that so, the seller would have deserved a noticed that clarified that, and which, defects finally materialized and, if the buyer did not accomplish that task, it could be concluded that it was lenient and, thus, that Article 39 CISG should preclude the buyer from resorting to any remedy.
B. The special case of Article 35(3) CISG
Article 35(3) CISG is related to the problems discussed before since it contemplates a case where the seller is exempted from any responsibility as a result of the defects being known by the buyer. Thus, according to that provision, the seller is not liable for any lack of conformity of the goods "if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity". The language of Article 35(3) CISG addresses a problem very similar to that described some lines above under Article 40 CISG. If defects are very evident, the seller is not responsible, since it is assumed that the buyer, by accepting the goods, is implicitly accepting the existence of defects. However, what would happen if the defects were evident, and thus known by the buyer, but also by the seller?
The Oberlandesgericht Köln  addressed this problem in a case concerning the sale of a used car, both parties being car dealers. The documents showed that the car was first licensed in 1992 and the mileage on the odometer was low. The sales contract included the exclusion of any warranty. The buyer later sold the car to a customer, who discovered that the car had been first licensed in 1990 and that the actual mileage on the odometer was much higher. The court held that even a very negligent buyer deserves more protection than a fraudulent seller.
Again, the problem is that Article 35(3) presumes that if the buyer takes delivery of goods with very evident defects, it accepts the defects and the seller is not responsible. However, in order to presume acceptance some conduct leading to assent is necessary, and not only the evidence of defects, or their disclosure by the seller (as seen in the previous sub-heading). If there are no sufficient hints that show assent, the problem should be solved by an overall assessment of the parties' behavior. Indeed, that is what the court did in the previous case. Since there was no clear manifestation of assent, it did not employ the rule of Article 35(3) CISG, but proceeded to analyze both parties' conduct, to conclude that a negligent buyer deserves more protection than a fraudulent seller.
VIII. PARTIES' DYNAMIC DETERMINATION OF THE CONTRACT'S CONTENT. PROPOSAL FOR COMPLEX RELATIONSHIPS (II)
It is submitted under this heading that some of the ideas put forward in previous sections in relation to Article 35(3) and 40 CISG, support the need to include in the process of flexibilization of the Convention's rules on notification of defects a very important element like party autonomy. In the context of complex relationships, the contents of the contract may evolve over time. Consequently, the rules of the Convention need to be adapted to this reality. The case for complementing a more flexible regime of notification of defects with a stronger presence of the party autonomy principle will be explained in sub-heading 1. Those two mechanisms should not be confused. Therefore, sub-heading 2 will attempt to call attention to cases where the parties' conduct may be misleading, and to differentiate one mechanism from the other. Finally, under sub-heading 3, I will put forward practical situations where both elements interplay a role together, and the problems that need to be tackled in order to achieve the aim to introduce flexibility in the CISG rules to give a more predominant role to the parties' implicit will.
1. The case for more party autonomy in complex relationships
As analyzed before, Article 35(3) CISG states that defects that were before the eyes of the buyer may preclude it from claiming breach of contract. Article 40 CISG expresses that, in case of defects, the seller can free itself by disclosing them if the buyer's conduct shows assent. In summary, a buyer who does not object to certain defects expressly communicated or easily ascertainable cannot later complain about their existence. Hence, both provisions contemplate cases of implicit modifications of the contract, and their rationale makes an interesting case for the need of introducing more dynamic rules in the context of sales law.
Classical contract law is characterized by presentiation, that being the tendency to regard all the relevant circumstances at the moment of the conclusion of the contract as the only relevant moment for contract determination. Under spot transactions that may be true. The contract contents are relatively simple, and can be precisely determined at an early stage of the relationship. On the other hand, in case of complex transactions that involve interaction between the parties, agreements are set on more flexible basis, and the content of the performance is sometimes determined during the performance stage.
The balance of the parties' conduct through an overall assessment on the basis of Articles 39 and 40 CISG has been addressed in previous sections. Nevertheless, together with that, an effort is needed to give the party autonomy principle its corresponding importance in the process of shaping and re-shaping the rules on notification of defects (as well as in the non-conformity regime itself), in order to adapt the CISG to a more dynamic environment.
2. The two mechanisms to flexibilize the regime on communication of defects. Differences
The two mechanisms (i.e., overall assessment through Articles 39 and 40 CISG; and implicit modifications) are necessary in the process of turning the CISG into a useful tool to solve the problems of complex contractual relationships. However, the two devices should not be confused. This sub-heading concentrates on that problem.
At first sight it may seem that Articles 40 and 6 CISG provide completely different mechanisms. The first provision relates to cases of negligence by the seller, while the second speaks about a joint agreement by the parties to exclude or modify Article 39 CISG. The language of Article 6 reads:
"The parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions."
However, the parties may also modify the effects of any of the CISG provisions in an implicit way. This may happen through the drafting of contract clauses that establish a different regime than that of the CISG  (which will be addressed under the next section) or, even, through the parties' own conduct. Therefore, the parties' conduct may lead one to think that they intended to modify the contract. However, in order to ascertain the existence of a contract modification, importance is placed on consent by both parties. In previous sections with Articles 40 and 35(3) CISG, we concluded that the mere evidence of defects or their disclosure by the seller did not suffice if the conduct of the buyer did not show acceptance of the goods. Consequently, without mutual assent it cannot be assumed that the parties intend to modify the contract. Indeed, the drafters of the Convention omitted the reference to the possibility of implicit exclusion of the CISG in order to avoid courts holding the existence of declarations of exclusion without a reasonable basis.
However, rather than modifying the contract, the parties may unilaterally waive their rights. Waiver is related to principles like the non venire contra factum proprium and theories like that of estoppel. In practice, in a context of complex commercial relationships with much exchange of information, it may not be easy to differentiate a communication by the seller where it acknowledges receipt of the notification of defects, or one where it inquires about their nature, or offers itself to negotiate, or to repair, from one where it waives its rights under Article 39 CISG, or one that, interpreted together with the communications from the buyer, shows assent to an implicit modification of the right to resort to Article 39 CISG. Again, careful regard should be made of the existence of consent by both parties. However, when making the overall assessment under Articles 39 and 40 CISG, regard should be had to whether the parties cooperated properly. In a realistic business environment, the exercise of cooperation may lead parties to waive some of their rights or to implicitly modify the contract. In that case, the borders blur between cooperation and communication due under Articles 39 and 40 and modification or waiver. This would not be so serious, since either way, the assessment would be appropriate as based upon the commercial setting and the parties' conduct.
In any event, given the interpretation of courts, it is hard that this point will be reached soon. Case law has been extremely restrictive when appreciating the existence of a waiver or implicit modification. For that reason, my worry is not so much over the fact that Article 40 may be applied in a case where a waiver occurred, but on the likeliness that a party's reasonable expectations may be left unprotected. For that reason, a strong case is made for the need to flexibilize the rules on implicit modification of waiver. I think that to confuse the existence of a modification or waiver with an application of Articles 39 and 40 together is less serious than to leave unprotected a party who acted reasonably in the commercial setting.
3. Practical applications of the interplay between a more flexible regime for communication of defects and exercise of party autonomy
Once the distinction has been drawn between the two different devices to introduce flexibility into the regime of notification of defects, an analysis should be carried out on their possible interplay.
A first example could be a requirements contract, where the parties may agree that the seller should supply the amount of goods needed on each occasion by the buyer, on request of the latter. The buyer may request an amount of goods different from that agreed at the first stage when signing the contract, or different from that expected by the seller. In the same way, the seller may send a larger quantity of goods than requested by the buyer. In both cases, neither of the parties says anything. Another normal situation would be one in which, during a meeting of a joint task force, the buyer's staff may tell the seller's staff that new quality control procedures are needed, since the rate of defects in the goods has worryingly increased. The seller's staff may promise to do that, and introduce the proceedings, informing that some defects may still persist. During the next months, the buyer may keep receiving the same rate of defective goods, but waits to see whether it improves. After six months, the buyer says that it either intends to start contracting more units from a different supplier (though still placing some orders on the seller). The seller may then offer to negotiate a reduction on the price of the goods sold during the last six months in exchange for maintaining the orders and, besides, to introduce in collaboration with the buyer more quality control mechanisms. If this case is analyzed, we may find elements to apply both Article 39 CISG (lack of specificity in the first communication and lack of timeliness in the second) and Article 40 CISG (knowledge by the seller of the existence of defects and of the fact that those defects may continue). However, what is more, there are elements to appreciate that both parties have waived their rights to resort to their rights and seek an alternative solution. Firstly, with regard to Article 40 CISG, the seller accepts the goods though being defective, and after being informed by the buyer that some defects may persist. Secondly, with regard to Article 39 CISG, the seller, although receiving a non-specific notice in the first place, and a non-timely notice in second place, offers the seller to negotiate a price reduction and other measures in exchange for the buyer maintaining the orders.
A second example involves a contract for the sale of a complex pool of machinery, like an assembly line. The seller is a usual supplier of the buyer, and the buyer trusts the seller to deliver the best product to its interests. The parties agree in writing on the different elements to be assembled. Later, the seller realizes that some of the pieces do not fit (or work) well with others and simply changes them. The buyer then realizes that some of the pieces do not fit into its premises and requests others from the seller. The specific parts selected to integrate the assembly line are changed from the beginning once and once again as either party realizes that size, power or other technical features make the piece not adequate in any party's opinion. The whole line is installed and the staff of the seller stays in the buyer's premises to instruct its staff on how to operate the machinery. The buyer's staff lets the seller's staff know of certain aspects that seemed irregular in the goods and in the instructions received. However, the seller's staff believes that it is nothing irregular, and lets it known to the buyer's staff. The buyer's staff are happy with the explanations given by the seller's staff (they are much more acquainted on how the machinery works). However, once the buyer's staff starts to operate the machinery, it does not work properly. It performs its task, but does not do it properly. The employees decide to wait and see whether the defective performance is solved through the passage of time. After several months with the problem unsolved, the buyer's manager calls the seller's to tell the situation. Both parties agree on a joint task force to examine the machinery, tackle the problems and share the costs of the process. Again, elements to apply both Article 39 and 40 CISG are present. However, the parties seem to prefer to jointly solve the problem rather than to resort to their rights under the law.
The situations described are normal in business. However, a strict interpretation under the provisions of the CISG may conclude that there existed several breaches of contract by both parties, while the parties considered (no matter what their lawyers later say during the trial) that there never existed any. In both examples, the parties preferred to negotiate. However, let us imagine that negotiations did not come to a satisfactory end and they resort to litigation. How should the court decide? Applying Article 39 CISG strictly so that, the buyer would be precluded from exercising any remedy? Applying Article 39 CISG, and then, Article 40 CISG, so that the buyer's cause should win? Making an overall assessment of the situation taking into account both provisions? Considering that, besides the role of Articles 39 and 40 CISG both parties have waived their rights? Or going further, considering that the contents of the contractual relationship were progressively determined by the parties' behavior?
The solutions exposed vary from the most rigid to the most flexible ones. The current assessment of the problem is closer to the first edge, since Article 39 CISG has an extremely predominant role, the requirements to appreciate a waiver by the seller are very strict. The case law (mainly German) has stated that a waiver has been made if the seller acknowledges the lack of conformity and states it is willing to cooperate with the buyer in the exercise of some remedy. On the other hand, waiver has never been held to exist when the parties negotiated a solution for the problem.
The proposal of this study considers it necessary to consider a more flexible approach to the regime on notification of defects, as well as to give due importance to the parties' waiver and implicit modification of the contract. That way, the law would be more predictable and the parties could adapt more easily to it. Within this proposal, there are different degrees that vary from a simple overall assessment of both Articles 39 and 40 CISG to an extensive application of relational contract theory. Whatever way is chosen, it is necessary to adapt the rules of the CISG from a static environment where contracts are "photographs" taken at the moment of conclusion, to dynamic situations, where contracts are "movies" that capture the evolution of the parties' expectations through the time. That view seems more realistic in the present environment, where transactions tend to be more complex and "alive", in the sense that they evolve over time. That evolution, pushed forward by the parties implicit will, should be given due consideration by the law applicable to the contractual relationship, i.e., the CISG.
IX. ACHIEVING FLEXIBILITY BY MEANS OF ARTICLE 9 CISG. ALTERNATIVE OR COMPLEMENTARY PROPOSAL FOR COMPLEX RELATIONSHIPS?
In previous lines I have argued the need to achieve a more flexible approach to the duty to communicate defects in the Vienna Convention. The rules, as they have been formulated are suitable for spot transactions, but do not fit in a more complex business environment. In the two previous Sections it has been suggested that a way to accomplish such adaptation of the CISG rules is by using, on the one hand, Article 40 CISG and, on the other hand, the rules on implicit modification and waiver of the Convention. That way the courts could adapt the duty to notify defects to the context where that duty is exercised.
The point of departure for making the proposal was the admission that, in cases of complex relationships, there are practical limitations on the ability of the parties to envisage and answer every possible question, taking into consideration the parties' circumstances. Thus, if what matters for the sake of flexibility and suitability is the context of the exercise of the duty to communicate, this context could also be taken into account in an alternative way to that proposed in the previous two Sections. That consists in the use of usages of trade and practices between the parties pursuant to Article 9 CISG to situate the duty to communicate defects in its context within the trade concerned and the relationship between the parties.
Article 9 CISG reads as follows:
"(1) The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves.
"(2) The parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned."
This provision distinguishes three different categories that must be accounted for. First, under number (1), Article 9 CISG distinguishes between conventional usages and practices. Under its number (2), the article refers to international usages or customs. In the next sub-section, I will analyze the role of trade usages as rules that situate the parties' duties in the context of the trade concerned. In Section 2 I will appraise the features of the practices of the parties, as rules adequate to place the parties' duties in the context of their own business relationship. Once the "ruling" aspect of usages and practices has been dealt with, in sub-section 3, I will emphasize the role of usages and practices to shape and interpret the parties' intention, and their influence in cases of modification of legal or contract rules. The intention is to study the normative aspect of usages and practices as rules, combined with their interpretative aspect as proof of the parties' will. In sub-section 4, I will assess whether usages and practices provide courts and tribunals with a tool powerful enough to constitute a valid alternative proposal to flexibilize the duty to notify defects, and the differences in perspective between the two proposals (i.e., the one formulated under this section, and the one formulated under Sections VII and VIII).
1. Usages as means to take into consideration the context of the business environment in the trade concerned
In order to set a proper framework, I should begin by defining the subject matter of analysis. The term "usages", is attractive to pull inside the CISG definitions and distinctions proper of domestic law. However, this is contrary to the principle of uniformity embodied under Article 7(1) CISG. Consequently, a uniform approach to the definition of usages should be adopted. A satisfactory definition is that stated by Professor Bonnell:
"This article clearly refers to 'usages' in the widest possible sense, i.e., to any practice or line of conduct regularly observed within a particular trade sector or at a particular market place."
Therefore, the definition of "usage" as such, is the most ample possible. The rules of the CISG will narrow the scope of usages with regard to their applicability, but not to their definition. In this sense, to broaden even more the definition, Professor Bonnell adds that, in order to appreciate the existence of a usage, it is irrelevant whether it has been registered or published, or whether it has originated from spontaneous conduct or it has its source in a written set of rules.
Once the subject matter of analysis has been clarified, it is worth mentioning the problems that were faced in the drafting of the provision in the Diplomatic Conference that led to the adoption of the Vienna Sales Convention. The adoption of Article 9 CISG was the result of a compromise among the delegates from different countries. Basically, two different positions on the role of usages were at stake in the drafting of the Convention:
Subjective theory: usages may be applicable only if the parties have agreed to them. Therefore, if the parties do not know a certain usage, this cannot be applied to them.
Objective theory: usages are applicable on objective grounds, either if they are so widely known that their observance is taken for granted  or if the law refers to them as means to interpret the contract. In case that happens, they enjoy binding force regardless of the parties' will or knowledge.
On this basis, a strong discussion was held inside the Working Group, since developing countries and socialist countries were suspicious, as they saw Article 9 as a means to impose the usages of western countries on the rest of the world. The contrary view was that a provision allowing the application of usages generally observed would promote their use and standardization, and would avoid that a newcomer would allege its ignorance as a defense.
These differing views had the result of contemplating two different ways of applying usages under Article 9 CISG: through the parties' will, or through the implicit assumption that the parties have made those usages applicable to their contract when they knew or could not have been unaware of them, and they are widely observed in the trade concerned. In any event, the differences may not be so wide in practice, since in legal systems where the applicability of usages depends upon the parties' intention, it is possible to presume such intention when the usage is regularly observed in the trade sector of both parties, and if the objective approach prevails, the parties' intention or at least knowledge will still be required if the usage is not so evident as to justify the expectation of its automatic application.
B. Usages agreed by the parties (conventional usages)
Usages that are agreed by the parties are ruled by Article 9(1) CISG. This provision has its forerunner in Article 9(1) of ULIS, which stated "The parties shall be bound by any usage which they expressly or impliedly made applicable to their contract". Article 9(1) CISG deletes the reference to "expressly or impliedly" in order to avoid misconstructions of the contract. However, the essence of the provision is still the same, i.e., the application of usages as a result of the parties' will. This derives from the general principle of party autonomy. The provision would be typically applicable to cases where a reference is made to the application of trade terms, like Incoterms or UCP. When a usage is not so widely known or regularly observed as to fall within the scope of Article 9(2) CISG, Article 9(1) CISG constitutes the tool to attribute those usages binding force. Thus, the parties may apply to their relationship a usage belonging to a different country, trade sector, or type of contract than that of the parties.
Such application, although the reference in ULIS was deleted, may be express or implied. An implied application of a usage will be held where a party deliberately acts in accordance with such usage or where the statement of one party can be interpreted as an implied reference to such usage. In any event, if the usage is neither widely known nor regularly observed, it will be presumably hard to make such usage applicable impliedly.
Consequently, although the applicability of usages must serve to make the rules better suited to parties' context, it seems that the rules are still too formal to suit the needs of more flexible business relationships that have been described in previous Sections. Furthermore, the conclusion under this sub-section is that implicit application of a usage not so widely known or not so regularly observed will be rare, and thus that it will be hard to find an application of such usages otherwise than through express agreement by the parties. Consequently, the role of these conventional usages will be more related to the proposal made under Section X for cases where parties opt for a deterministic contract formula. In this case, rather than drafting the contract provisions themselves, the parties simply introduce a pre-drafted set of standard clauses. In any event, the solution is the same: modification of the rules through express choice, or specification of responses to contingencies or eventualities ex ante, rather than ex post. Consequently, conventional usages hardly seem a suitable device for flexible and "alive" contractual relationships.
C. Usages widely known in the trade concerned (normative usages)
The language of ULIS (forerunner of the CISG) indicates that the parties were bound by "usages which reasonable persons in the same situation as the parties usually consider to be applicable to their contract". That could be acceptable in the context of transactions between parties situated in Western European States. As stated by Professor Bergsten, "The reasonable persons mentioned in the provisions were the same Western European businessmen and lawyers who had created most of the usages in question." However, the CISG was conceived from a global perspective. Therefore, such an autonomous application of usages, that could lead to a wide acceptance of usages of Western countries in transactions with developing or Socialist countries was not acceptable anymore. For this reason, the solution adopted concluded that there were only two types of rules: the contract and the Convention. Consequently, usages were not an autonomous source of obligations. Their role was to be considered an implicit part of the contract.
Thus, usages were to be considered as part of the contract. In the previous sub-section it was examined that one way was for the parties to expressly or impliedly incorporate them into the contract under Article 9(1) CISG. However, number (2) of that provision also offers the possibility for usages to be part of the contract if the usage is known or ought to have been known by the parties, and "which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned".
Thus, number (2) assumes that there are certain usages so widely known and regularly observed that they should be implicitly incorporated into the contract unless the parties state otherwise. Hence, what Article 9(2) CISG does with respect to Article 9(1) is to simplify the rules on incorporation of terms to the contract. While Article 9(1) CISG demanded a positive act from the parties (i.e., a statement or conduct) in order to make the usage applicable, Article 9(2) CISG makes the usage applicable, and demands an act from the parties (i.e., again, a statement or conduct) in order to exclude its application, thereby shifting the burden.
In order to shift the burden (from acts of inclusion to acts of exclusion) it is necessary that usages pass a certain test, since otherwise the result would be quite uncertain. The test under Article 9(2) demands that usages must be "widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned." In such a case, it may be held that the parties "ought to have known" of the usage. Nevertheless, the references under Article 9(2) are quite vague, and do not allow to depict the types of usages that could be applied. There are two elements of the definition: first the usages must be "widely known and regularly observed"; second, that must happen with respect to "parties to contracts of the type involved in the particular trade concerned". The first provides for a test on the established character of the usages (time test). The second provides a test on the scope of influence of the usages (territorial and economic test).
The first element allows us to discard old definition of usages like "custom" of "ancient" nature, or "long standing." The CISG does not require a test so focused on the time during which the usage has displayed its effects. Of course a certain period will be necessary to settle the usage as such, but only to justify the conclusion that the parties "knew or ought to have known" of it.
The second element poses the question of whether or not the usage must be international. Article 9(2) CISG states that "in international trade" the usage must be widely known and regularly observed. That would give an argument to state that, in order to be given importance under the CISG, usages must be international. However, in that case there would be scarce cases of usages regularly observed internationally along the different branches of trade. For that reason, the usage must be regularly observed within the particular trade to which the parties belong (e.g., wheat trade, trade with industrial machinery, etc.) and for contracts of the type involved (e.g., different stages of distribution; trade with soft wheat and hard wheat, etc.). In that context, usages would be generally applied in transactions of the trade sector to which they belong, and the reference to observance "in international trade" is there to avoid that usages, restricted to domestic sales, will be applied to transactions with foreign parties. Does that mean that local usages lose all relevance under the Convention? The answer must be negative. A usage may have a local origin, but will be applied if it is "widely known to, and regularly observed by" parties to international transactions involving these situations. Again, the relevant test is that of whether the parties knew or ought to have known it.
Once the scope of application of Article 9(2) CISG has been clarified, it would be interesting to see to what extent may this provision serve the purpose of introducing flexibility in the Convention regime on notification of defects. In other words, to examine which aspects of the usages of trade may help to avoid the stiffness of Articles 38 and 39 CISG from a normative perspective. Apparently the notification of defects constitutes a quite specific matter, and the role of usages may not be as useful as in other fields of sales law. However, there are still some elements of the notification process where usages may still play an important role. One of them is the issue of examination of the goods, as a prior step to send the notification. In that issue, the role of local usages may be important. For that matter, it is interesting to quote Professor Réczei, who states that:
"It is hard to imagine that for the examination of goods supplied to buyer 'international' usages should have come to be established. This is possible for goods which are traded and sold on the exchange (grain, wool, cotton, metals, etc.) where the quality standards have been defined and are controlled in conformity with exchange usages. In the majority of sales contracts, however, the method of control is tied to the locality and may not only be of as many kinds as goods or commodities may be objects of the transaction, but depends on the package, quantity and many other circumstances. Unless the parties have agreed on the method of control, the application of local usages can hardly be avoided."
It can be seen that Professor Réczei makes a strong case for the application of local usages on examination of the goods. However, there are several reasons not to show an over-enthusiastic praise about the role of usages in the purpose of introducing flexibility in the notification of defects regime. First reason, Professor Réczei talks about examination of the goods, but he does so with reference to "quality standards". He does not make any mention on how usages may affect the process following delivery of the goods (i.e., time for examination, procedure of examination, or whether examination should be carried on at all), which is what would be somehow useful for our purposes. Second reason, although there may be usages on issues related to notification of defects, those are more likely to be related to the time for examination, time for notification, or specificity. It is more likely that those usages have developed for stating clear and sharp rules on the procedure, rather than flexible guidelines on how to interpret the parties' conduct in the light of a quality problem. And that for a third reason. Usages of trade are more likely to develop in trade sectors where transactions carried on can be characterized as spot contracts. Although Article 9(2) CISG does not require that the usages to be "ancient", a continuous repetition of them would seem necessary for them to be "widely known and regularly observed", and thereby implicitly incorporated into the contract. Transactions are much more likely to repeat if they are quite simple. For that reason, spot transactions constitute a much more favorable environment to develop usages than complex transactions, each having its own special features and requiring a different type of interaction between the parties.
However, usages of trade may still play a significant role in some of the aspects of the communication of defects. First, if the existence of a usage of trade is demonstrated, its knowledge is presumed, and that may set the basis for the application of Article 40 CISG (i.e. imagine a usage that helps to determine the quality of the goods ). Secondly, spot markets may give rise to complex transactions as well. Think about installment or supply contracts that involve delivery of standardized goods during a long period of time and you will have the some features of spot transactions, but within the framework of a complex long-standing relationship. In that case usages of trade (e.g. commodity trade) may be relevant to interpret the parties' rights and duties. However although such cases contain spot transactions in a relational framework, usages of trade are still more likely to develop in the "spot" side of the transaction than in the "relational" side. Thus, the relevance of such usages to introduce flexibility in the regime of communication of defects should be tempered. In previous Sections, I proposed to recognize the influence of the relational elements in the relational framework (e.g., the supply agreement) as well as in each of the spot transactions. To take the elements (including usages) proper of the spot transactions to interpret the relational agreements, would mean to operate the other way around.
2. Parties' practices as means to take into consideration the context of the parties' relationship
A. Practices defined
According to Article 9(1) CISG, "the parties are bound [...] by any practices which they have established between themselves". Since commercial practices constitute a source of obligations for the parties it is adequate to begin with a definition of what should be understood by "practices". Those is conduct established by the parties to the transaction in the compliance with their respective obligations and that, considering the frequency in which it has been followed during prior contracts, is considered binding for those parties as part of the contract contents. In this sense, practices are established by a course of conduct that creates an expectation that this conduct will be continued.
However, it is still doubtful what effective conditions are required in order to appreciate the existence of a usage. The Uniform Commercial Code contains a reference to usages and practices under § 1-303, which states:
"§ 1-303. Course of Performance, Course of Dealing, and Usage of Trade.
(b) A "course of dealing" is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding..."
Consequently, a practice obviously requires a previous relationship, as well as the same behavior of the parties to be repeated in several occasions. The first condition (i.e.. the existence of a prior relationship) is complied with when the parties have contracted in several occasions in the past. For that purpose, two contracts do not constitute a basis to ascertain the existence of a long-standing business relationship. Secondly, besides a prior relationship, in order to establish a practice it is necessary that the parties have behaved in the same way several times, with respect to the issue where the practice is alleged to exist. However, the immediate question is how many? The answer would be, at least two. Thus, there will be some cases where, provided there is a long-standing relationship, the same behavior of the parties repeated two times will suffice to establish a binding practice. However, the party who alleges the existence of the parties' practice should prove with sufficient certainty that the parties had a mutual understanding that the conduct amounting to the practice constituted the rule in their relationship, or at least that the behavior of one party had always been tacitly accepted by the other.
In consequence, in order to appreciate the existence of parties' practices it is necessary that a business relationship existed, in the framework of which the parties must have behaved in the same way with respect to a certain issue of the contractual relationship several times, provided that the consent (explicit or implicit) of both parties is sufficiently demonstrated. With this standard, it is not hard to presume that the cases where a practice will be held to exist will not be extraordinarily numerous.
B. Effect of parties' practices
Once the practices have been defined, the next step should consist in ascertaining their effect in commercial transactions. In many cases, a practice will relate to a minor point. Examples of those practices may relate to the time for delivery and payment, the usual acceptance of postponements in payment, discount for prompt payment, the quality of the goods, the communication means used to make the orders, a certain tolerance in qualitative or quantitative deficiencies, etc. In a case decided by the ICC Court of Arbitration, a German seller and a Spanish buyer had concluded an agreement for exclusive distribution in Spain of industrial equipment produced in Germany, and thus individual sales contracts were concluded. At a certain point in time, the German company intended to terminate the contract. Upon the buyer's refusal to pay for some of the deliveries, the seller filed arbitral proceedings. Among other issues, the sole arbitrator found that since there was a practice between the parties of delivering spare parts, there was an expectation of that happening, and thus the seller was obliged to do so.
In some cases, though, the practices may affect the whole contract (e.g., if the parties are used to adopt a certain set of terms, those terms may be supposed to apply in posterior contracts. An example related to the subject matter of study is the case decided before the Court of Appeal of Turku. A German buyer and a Finnish seller had entered into a contract for the sale of various components to be attached to the buyer's forestry vehicles. The equipment sold by the seller turned out to be defective, and the buyer sued for damages. The seller objected that according to its standard terms notice of defects of the goods had to be given within one month after discovery. The buyer argued that the seller's warranty term contained in its standard terms was not binding because too harsh and surprising. The Court found that the warranty term in question had validly become part of the contract since, in the light of the practices established between the parties (Art.9 CISG), it could not be regarded as too harsh for or surprising to the buyer.
These examples show that the potential influence of the parties' practices in the rules that govern the contractual relationship is very important. However, given the demanding test to appreciate the existence of a practice this potential impact should be tempered.
3. Interaction of contract law, usages and practices
In the previous sub-sections the function of usages and practices as rules governing the contractual relationship has been examined. However, their interaction with the parties' will and the law has not yet been studied. Within this matter, there are at least two issues that deserve attention for our purposes. The first is how to prioritize the different sources of obligations in case of conflict. In other words, the hierarchy rules. This issue will be dealt with under letter A. However, the treatment of the problem as one of conflict between usages and practices on one side, and law or, specially, the parties' will should be the last resort. For this reason, there is a second issue that needs to be explored. That is the role of usages and practices in helping to ascertain the parties' intention, which helps to avoid situations of pure conflict, and may help to adapt the static sources of obligations (law and contract) to a more dynamic environment.
A. Hierarchy of the different sources of obligations
Up to this point we acknowledge the existence of four different sources of obligations for the parties in a sales contract, namely: law, contract, usages and practices. Those different rules are expected to be coordinated in a web of norms and patterns that the parties are expected to follow. That will be the general rule, and thus all the normative elements will be subject to joint interpretation. However, there may be cases where the different instruments may not be coordinated, since they each call for different solutions. Therefore, some hierarchy rules must be set as a basis in order to know how to operate in case there are irreconcilable differences among the different sources of obligations.
Firstly, it is easy to ascertain the hierarchy rules between law and contract. Article 6 CISG provides:
"The parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions".
This provision explicitly states the non-mandatory character of the Convention. Thus, if the parties adopt provisions in their contract providing solutions different from those in the Convention, they are implicitly excluding its application in part or derogating its provisions. Therefore, in case of conflict between those two, the contract prevails over the CISG. Once this straightforward conclusion has been reached, it is time to deal with what would happen in case of conflict of those two elements with usages and practices.
First we should analyze the case of conflict between usages and practices, on one side and the CISG in the other. In previous Sections it was concluded that usages and practices become a source of binding obligations since they are considered to be explicitly or implicitly incorporated into the contract by the parties. Therefore, with respect to the CISG, the reasoning made about usages and practices is the same than that made above about the contract. Under Article 9(1) CISG practices, and usages made applicable to the contract become part of the contract. Under Article 9(2) the parties are considered "unless otherwise agreed, to have impliedly made applicable to their contract or its formation" the usages that qualify under that provision. Thus, in case of conflict, usages and practices prevail over the CISG. This is confirmed by the fact that a proposal from the Czechoslovakian delegation that the rules of the Convention should have priority over trade usages did not find support. Does that mean that usages and practices will always prevail over the law? The answer must be negative. In some cases usages and practices may violate some rule and thus should be rendered invalid. However, such rule must be of domestic character, since the CISG is not concerned with validity issues.
In second place, we should analyze the hierarchy rules in case of conflict between usages and practices on one side, and the contract on the other. Usages and practices are applied on the basis that it is the will of the parties that they are applicable. Indeed, Article 9(1) CISG states that the parties are bound to a usage to which "they have agreed". On the other hand, usages widely known and regularly observed are deemed to be applicable "unless otherwise agreed". Therefore, under the CISG, if the parties stipulate otherwise in the contract, the implicit supposition of the applicability of the usages and practices is no longer valid. If the parties provide for a different solution to that set in the usages or practices, they cannot be assumed to have made those usages or practices applicable. Therefore, contract stipulations prevail over usages.
Consequently, the rules on hierarchy are set as follows: In the first place, the parties' will, then, usages and practices, and finally, the CISG. Finally, there should be some norm of hierarchy between usages and practices. Although this issue has not been dealt with in the context of the CISG, the inclusion of usages and practices has an antecedent in the Uniform Commercial Code. § 1-303 (e) of the Code states that "course of dealing prevails over usage of trade". That seems a reasonable conclusion with respect to those usages that are so widely known and regularly observed that the parties are supposed to have made them applicable to their contract. However, with respect to the usages expressly (or impliedly provided there is sufficient certainty about that) made applicable to the contract by the parties, I would still have some hesitations. In that case, the usages would have become part of the contract, against a practice developed by the parties along previous transactions.
In such a case, the parties conduct may seem contradictory. Therefore, I consider that mere hierarchy rules are not sufficiently accurate and should be left as a last resort. In the first place, what should be made is to use the rules on interpretation to ascertain which was the parties' real intention. In that context, usages and practices are also very relevant not as sources of obligations, but as elements to establish what the parties intended. The next sub-section will be devoted to that task of examining the role of usages and practices as interpretative tools, and their interaction with other elements like subsequent conduct or course of performance.
B. Usages and practices and parties' intention. Interpretation, modification and waiver
In previous lines I have expressed the main views about usages and practices as sources of obligations for the parties, i.e., their normative perspective. However, there is still another side of the coin. That is the perspective of usages and practices as elements to interpret the parties' intention. In this sense, Article 8(3) CISG reads:
In prior sub-sections it was examined how usages and practices could constitute sources of obligations, had they been incorporated into the contract, thereby being an element influenced and dependent upon the parties' will. Under this other perspective, the relationship is inverted and usages and practices reveal themselves as elements to influence the parties' will, or the appraisal of it made by the courts. Indeed, the interpretative side has been emphasized by instruments like the Uniform Commercial Code. Usages and practices may thus act not only as sources of obligation, but also as factors that create an interpretative basis of understanding. I next proceed to examine the ways in which usages and practices may influence the interpretation of the parties' intention, and whether they crystallize in useful techniques for the purposes of this work.
In the first place, usages and practices may influence the parties' declarations as elements to interpret trade terms. Article 9(3) ULIS expressly provided that:
"Where expressions, provisions or forms of contract commonly used in commercial practice are employed, they shall be interpreted according to the meaning usually give to them in the trade concerned."
This provision was eliminated in the works that led to the CISG, and all attempts to introduce it, or another similar provision, did not prosper. However, the reason for that was that delegates from developing countries understood that the reference to "meaning usually given" could be the gate through which all trade terms of industrialized countries invaded developing countries' commercial practice. However, once the usages qualify under the test of Article 9(2) CISG since they are "widely known and regularly observed", they serve to interpret the parties' statements. However, this role as tools to interpret trade terms corresponds more to usages, and their relation to contractual terms, not to notices of non-conformity. Indeed, few examples can be given on this respect. In the case decided before the Landgericht Bochum, 24 January 1996 the buyer sent notice that the truffles sold by the seller were "soft", meaning that they were infested with maggots. The buyer argued that most professional truffle-vendors would know that softness implied a probable worm-infestation. However, that argument did not go through, the notice was found to be not-specific, and the buyer was deprived of exercising any remedy under the CISG.
Another relevant aspect is the weight of usages in the rules on formation (and thus modification) of contracts. Under Section VIII, I called for a more flexible approach to the issue of modification of contract and waiver of rights, in order to adapt the CISG rules to so-called "alive" relationships. Usages and practices may help in that task. The existence of a usage or prior practice between the parties relating to the rules on formation of contracts constitutes a useful element in determining when or whether the parties have concluded an agreement, or modified the existing one.
Does this mean that all the necessary flexibility will be achieved through usages and practices? The answer must be negative. First, it has been previously shown that the requirements to appreciate the existence of a usage or practice are somewhat stringent. Thus, it will not be so common that a usage or practice interferes with a plain interpretation of what the contract and law said. Indeed, in much of the case law quoted, what the courts and tribunals held was not so much that usages and practices effectively influenced the formation process, but that they might have influenced it had they been present. In second place, although there have been cases where usages and practices affect the issue of formation of the contract, the courts are still reluctant to appreciate their influence when no writing is involved. In the case law quoted, though usages and practices were present, there was usually some writing (e.g., a confirmation letter) involved as well. In third place, we should not forget the hierarchy rules examined under the previous sub-section. Thus, usages and practices cannot prevail over the contract if there is not a further manifestation of the parties' will that supports the same conclusion.
For this reason, in order to modify the parties' expectations, another element must be present together with usages or practices, i.e., the parties' subsequent course of conduct. This is also considered an important ingredient to interpret the parties' intent pursuant to Article 8(3) CISG. The Uniform Commercial Code, specifically addresses the issue of the parties' conduct subsequent to the conclusion of the contract under the label of "course of performance", when such conduct has been repeated in several occasions. Although we move in the environment of uniform law, it is interesting to observe how other legal systems have attempted to tackle the problems arising out of the issue of ascertaining the parties' intent. Thus, Article 1-303 (a) UCC provides:
"§ 1-303. Course of Performance, Course of Dealing, and Usage of Trade.
(a) A 'course of performance' is a sequence of conduct between the parties to a particular transaction that exists if: (1) the agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and (2) the other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection."
In case of discrepancy, course of performance is given more weight than usages or practices, thereby being an element of outmost importance. However, it is interesting to observe its relationship with the contractual agreement. The Uniform Commercial Code provides that, in case of conflict, the written agreement prevails over course of performance, usages and practices. However, conduct that does not amount to "course of performance" because is held in a single occasion, may amount to a modification or waiver, which changes the parties' expectations with regard to the original contract. Thus, it is logical that subsequent conduct, although is hierarchically inferior to the contract agreement, serves to show modification or waiver. Therefore, there is an uncertain borderline between interpretation according to the parties' usages, practices and subsequent conduct, and the modification of the contract pursuant to Article 29 CISG.
All these difficulties stem from the fact that usages, practices and course of conduct constitute dynamic elements, thereby strange for traditional views of contract law. Traditional contract theory, which has the "promise" or "agreement" as the center of gravity, does have problems when concepts like usages, practices or subsequent conduct are taken to scene. It is not hard to understand why. Classical or neoclassical contract law focuses on "contract" as a static image, like a picture. To solve any problem regard must be had to what the parties originally agreed. Meanwhile, more modern theories focus more on the "contractual relationship", like a dynamic succession of images, like a movie, and assume that parties' expectations may vary along that relationship. For that reason, to understand what the parties say to or expect from each other, the "promise" or "agreement" constitutes one point in time, but a look backwards (to examine usages and practices) and forward (to examine subsequent conduct) must be taken as well.
4. The two proposals to achieve flexibility compared. Two different ways to accomplish a same result?
In previous sub-sections, I have examined the role of usages and practices in introducing flexibility in the contractual setting. Although some references have already been made, it corresponds now to make a global assessment of those elements as an alternative to introduce flexibility in the regime of notification of defects. I consider that they do not constitute such alternative, for several reasons.
First, in relation to the "normative" role of usages and practices, or that of usages and practices as sources of obligations, it was above concluded that the requirements to appreciate the existence of usages or practices are quite severe. There must be a sufficiently repeated conduct in the past that may be easily proven, in order to appreciate that certain things "go without saying." That would narrow the scope of cases where the stringent requirements of the regime on examination-notification of defects could be loosened.
Second, this scope would be narrowed even more by the fact that usages or practices on the issue of examination or notification are scarce. Consequently, that would mean very scant possibilities of introducing flexibility into the referred provisions.
Third, in relation to the role of usages and practices as means of interpreting the parties' intent it was observed that their usefulness increased. A departure from the expectations contemplated under the contract and law is easier to appreciate if it is preceded by usages or practices that are either consistent with the modified expectations, or that flexibilize the rules on formation of contracts. In that sense, usages or practices may help in those two grounds. However, in order to be useful, usages and practices need to be accompanied by a subsequent conduct of the parties to indicate that the expectations have varied. Thus, in relation to the proposal expressed under Section VIII, consisting in the need to introduce flexibility in the rules on modification and waiver, the role of usages and practices is not that of a substitute, but that of a complement to reinforce more elastic rules on modification and waiver.
Fourth, usages and practices cannot constitute a substitute proposal of that made in previous sections because the point is completely different. While usages and practices imply a "backwards-looking" view of the contractual relationship, the proposal formulated under Section VIII places more emphasis on a "forward-looking", or prospective view, of the relationship, that really accounted for the changes in the parties' expectations after the agreement was held to exist. It is clear in that sense that usages and practices may constitute a useful complementary element to have a full picture of the parties' relationship, but never a substitute.
Finally, usages and practices have been found useful (though their use is limited by the severe requirements to hold their existence) as a complement to the proposal made under Section VII. However, what of the proposal made under Section VII? Under that section, basically, Article 40 CISG was introduced as an element to pump flexibility into the regime of communications of defects. However, the reasons for that were that Article 39 CISG was too unilateral (imposing duties only on the buyer), and not oriented to enhance the parties' cooperation. Under the rules on waiver and implicit modification, we attempt to sanction the parties behavior when they effectively cooperate, and change their expectations with that aim. However, what if they do not, or one party does not cooperate? In that case, unless a legal mechanism that helps to evaluate the parties' behavior and balance whether they respected the duty to cooperate and communicate exists, the scheme is incomplete. My proposal is to use Articles 39 and 40 CISG for that purpose. Other mechanisms could be proposed, of course. However, it appears to me that the rules on waiver or modification cannot constitute such mechanism.
To the question of whether usages and practices may constitute such mechanism, I would answer in scant cases. An example of what I mean can be found in the case decided by the Zürich Handelskammer, 31 May 1996. A Russian seller had been entering into contracts for the sale of raw aluminium with Argentinian and Hungarian buyers. The seller declared its unwillingness to make further deliveries and the buyers sued for damages. Among other things, the tribunal held that the seller's refusal to enter into renegotiations with the buyers ran counter to the parties' previous course of dealing, according to which the parties were used to renegotiate to solve their problems. In that case, thus, the parties' prior practices incentivated a problem-solving approach, rather than a confrontational, or even lenient, approach. How could this affect our problem? In case of complex and interactive relationships, the parties should have incentives to cooperate, communicate, and renegotiate. If in this case the problem had been the existence of defects in the goods and the buyer had not notified according to Article 39 CISG, it should not have been so easy for the seller to adopt a position of neglect, and sit back in its chair, arguing that the notice was not adequate. Other elements like the willingness to cooperate of both parties should have been taken into account.
However, making this flexible interpretation depend upon the existence of usages and practices implies reducing its potential scope. Before I stated that the proposal to introduce flexibility in the notification of defects regime by way of usages and practices was backward-looking, rather than forward-looking, like the one made under Section VIII. Now, if we compare the proposal concerning usages and practices with that made under Section VII (i.e., interplay between Articles 39 and 40 CISG), we conclude that usages and practices are "value-neutral" or "principle-neutral", while under Section VII we argued that the purpose of the proposal was to enhance principles of international trade law like the principle of cooperation.
In other words, a proposal to introduce flexibility by way of usages and practices would compare what the parties did with what they, or other parties in the trade sector had done in the past. Meanwhile, the proposal formulated under Section VII consisted in comparing what the parties did with what they should have done in order to respect the general duties to communicate and cooperate with the aim to preserve the contractual relationship.
In this sense, the respect for the duty to cooperate, communicate, or even renegotiate should not depend upon whether there existed prior usages or practices, but should constitute a normal expectation of the parties, at least in scenarios of collaborative relationships, like long-term contracts. In the end, what is proposed is that, if Article 39 CISG constitutes a manifestation of the duty to communicate, it should be supplemented by an interpretation oriented to the duty to cooperate, in order to avoid rigidities and unilateralism.
In conclusion, an approach based upon usages and practices may be useful in order to introduce some flexibility in the regime of communication of defects. However, usages and practices could be helpful as a complement of a more elastic approach to the issue of implicit modification and waiver, and of the issue of an overall assessment of the parties' behavior by means of a purposive interpretation of Articles 39 and 40 CISG. Nevertheless, it can never be a substitute of the other elements proposed as necessary to pump flexibility in the regulation of the notification of defects in the CISG.
5. Exmples of interaction between the elements of the previous sections
As well as done under sub-section VIII.3, it could be useful to illustrate how the elements described in Sections VII to IX could interact together. Since the examples brought in sub-section VIII.3 were not real, it could be useful to bring under this sub-section an example from real cases to show that truth is sometimes more complex than fiction.
A good example is present in the aforementioned case no. 9474 decided by the ICC Court of Arbitration. The claimant, National Bank of Country X entered a contract with the defendant for the supply of bank notes. Some deliveries had been defective, and both parties had entered into an agreement ("executory agreement"), under which the seller undertook at its own expense to manufacture another batch of bank notes that were conforming. The new bank notes were allegedly non-conforming, and the Bank sued for damages. At issue were the following problems: whether the Bank had an affirmative duty to inspect the banknotes for conformity, whether its silence implied an acceptance, whether there was a duty to give notice, the extent of the notice period, and the content of the notice.
The defendant alleged that the duty to inspect the goods could be derived from the previous course of conduct and customary relationship between the parties, as derived from prior tenders, where the seller had developed meticulous inspections on prior occasions, while after 1993 did not accomplish any inspection. With regard to the duty to give notice, the buyer based the need to give notice not only on Article 39 CISG, but also on the parties' prior course of dealing. At issue was also whether a Memorandum of Agreement subscribed in 1992, that contained specific rules on inspection and notification, waived the applicability of international contract rules. Furthermore, the defendant alleged that, by keeping silent, the seller had implicitly accepted the goods tendered, or waived its right to claim non-conformity.
The tribunal held that, in order for a waiver or estoppel to be held to exist there must be unequivocal evidence in that respect. This evidence did not exist in that case, and thus the issue of the waiver would be closely related to the issue of whether there existed a duty to inspect and give timely and precise notice. The tribunal considered the following elements.
First, the tribunal held that the seller could not rely on the non-existence of a prompt examination and notice if Article 40 CISG applies. It is interesting to note that the tribunal states that "a vendor cannot rely on a buyer's failure to inspect the goods and to give timely notice of defects, if the vendor has adopted a conduct which is not in conformity with his own duties." That statement goes with the spirit of the proposals made in this work. What is more, the tribunal based the "knowledge" of defects by the seller in "the flaws among the previous deliveries". Thus, the tribunal used the prior course of dealing between the parties, and the context of their relationship to ascertain the seller's leniency.
Second, the tribunal took into account the nature of the parties' relationship, which had a spirit of conciliation. Therefore, it was admitted that the Bank had renounced past claims (waiver) and agreed to future contracts with the defendant. This created a context of compromise and mutual understanding between the parties, that constituted the context in which to interpret the parties' conduct.
Finally, the tribunal held that this spirit had been betrayed by the defendant. Although the Bank may not have complied with the inspection and notification, the defendant had waited more than two years to pay the amount it owed (a deposit by the Bank). Thus, the Bank's reluctance to give notice of defects was due to its fear that in case it gave notice, the defendant might refuse to reimburse the sums due.
In that case, an overall assessment of the parties' behavior was made. Such assessment was made in the light of both Articles 39 and 40 CISG, taking into account many elements. The elements taken into consideration were the context of the parties' relationship, their prior course of dealing, and their subsequent conduct. In the end, the whole analysis (though not explicitly stated) was targeted at enhancing the parties' duty to cooperate. Regardless of the result achieved, the scrutiny made by the tribunal in this case constitutes an example of what is being proposed in this work. Making a simplistic analysis is not adequate, and the complexities of the business relationships should be taken into account. However, it is in some way paradoxical that, in order to make such analysis, the arbitral tribunal considered it necessary to state that, in its appraisal, it did not considered itself bound by a concrete Convention, but the case would be decided on a broader basis. Were the CISG (or CISG current interpretation) adequate to assess properly the complexities of the current business environment, such statement would not have been necessary.
X. SHAPING THE DUTY TO COMMUNICATE BY MEANS OF ARTICLE 6 CISG. PROPOSAL FOR A SCENARIO OF DETERMINISTIC CONTRACTS
The previous Sections embody a proposal to improve the fitness of the CISG for certain types of commercial contracts. However, there are different solutions to the problem of complex relationships. One is to enhance the flexibility and degree of commitment (already examined). Another consists in anticipating the possible contingencies in a detailed contract. In relation to the issue dealt with in this work, the parties could decide to regulate the regime of communication of defects in a different way than that provided for in the CISG.
The next sub-sections will be dedicated to analyze the problems concerned with the parties' modification of the notification of defects regime. In the first sub-heading, sub-heading the modification of Article 39 CISG will be addressed. The second sub-heading will argue the problems concerning the exclusion/modification of Article 40 CISG. Finally, it will be argued that this solution does not preclude the need for a more flexible approach addressed in previous Sections.
1. Problems concerned with the modification of Article 39
The exclusion or modification of Article 39 CISG (or Article 44) should not pose excessive technical problems. In principle, it is possible to exclude or modify the provision by the parties' choice. According to case law and scholarly writing, it is possible to exclude the provision, to regulate formalities like form and content, or the notification period. However, in this context, there are still some courts that are reluctant to apply such agreements and keep applying Article 39 CISG. Moreover, the interpretation of other courts suggest that contract clauses will be applied only to the extent that they are reasonable in the light of Article 39 CISG.
In any event, the problems in some cases are more related to the interpretation of courts than to the fact that Article 39 CISG (or Article 44 CISG) may not be disposable by the parties. Consequently, modification or exclusion of Article 39 CISG should not pose any problems.
2. Problems arising out of the modification / exclusion of Article 40 CISG
In second place, we should ascertain whether Article 40 CISG can be subject to derogation by the parties. In principle, Article 6 CISG establishes the possibility to exclude or modify the effects of the Convention or any of its provisions. Thus, there should not be any problem in excluding Article 40 CISG, since if Article 6 does not make any distinction nor should we do any.
Nevertheless, in the case decided by the Arbitration Institute of the Stockholm Chamber of Commerce, the tribunal states that, by inserting warranty clauses that derogated from Articles 35, 38 or 39 CISG the parties did not exclude the application of Article 40 CISG. The reasoning of the tribunal is based upon the argument that "Article 40 is an expression of the principles of fair trading that underlie also many other provisions of CISG, and it is by its very nature a codification of a general principle." For this reason, the tribunal considered that, even without applying Article 40 CISG, the solution would be the same through the application of Article 7(1) CISG, since the general principle embodied within the former would be, in any event, applied. On this basis, the tribunal expressed its doubts that an exclusion (even an express exclusion) of Article 40 CISG could be valid either in relation to domestic laws, or in relation to the general principles applicable to the practice of international trade.
Although in terms of fairness or justice criteria the holding of the tribunal seems very accurate, it poses certain formal problems as to its fitness within the scope of the CISG. Article 6 CISG is very clear in its language, and allows the exclusion of all or part of the Convention (which includes Article 40 CISG). This position is confirmed by the Secretariat's Commentary. In fact, the latter states that the parties have the freedom to exclude or modify the provisions of the CISG through the inclusion in the contract of clauses that set different solutions than those of the Convention. Moreover, although it is true that there may be limits to party autonomy within the framework of the CISG, those limits are expressly contemplated within the text of the Convention. That is the case of Article 12, which, in the end, establishes that "The parties may not derogate from or vary the effect of this article." The same could be said of the provisions of Public International Law contained in Articles 89 to 101 of the Convention.
Other international texts are more restrictive with party autonomy. For example, the UNIDROIT Principles, in Article 1.5 state that the parties should be able to exclude or modify the provisions contained in the Principles unless the Principles state otherwise. Within the Principles there are some rules that expressly state not being subject to derogation by the parties. That is the case of substantive validity, of the need to adjust the amount of damages agreed by the parties when it is unreasonable, or of the good faith principle. The Commentary to the Principles states that, in case of certain rules, their non-derogability implicitly results from their content.
The European Principles of Contract Law also establish similar provisions. In this sense, Article 1:102 says that the parties are free to conclude contracts and to determine their content, subject to good faith and to the mandatory provisions of the Principles. In the same way, the same Article states, in its number (2), that the parties are free to exclude or modify the provisions of the Principles, unless otherwise stated in the Principles. Consequently, there are provisions that may not be modified by the parties' agreement, like the case of remedies in case of fraud, the correction of an unilateral determination of the price or another contract clause  the limitation of modifications to remedies in case of breach when those limitations are contrary to good faith, or the principle of good faith.
Some precisions must be made, though. In the first place, the UNIDROIT Principles, like the Principles of European Contract Law, are not mandatory rules, but subject to optional application by the parties (opting-in). For this reason, although some limits exist in theory within the text of the Principles, no limits exist in practice, since the Principles are not supported by the authority of any states, but by the will of the parties.
In any event, such concrete limits do not exist within the CISG, so that it seems that Article 40 CISG could be subject to exclusion or modification. Nevertheless, both sets of principles pose an interesting question in relation to this problem. Both UNIDROIT Principles and PECL contemplate the good faith principle as a limit to party autonomy. The consequences are twofold. First, in a negative way, the good faith principle "resists" party autonomy, since the provision that contains that principle cannot be subject to derogation by the parties. In second place, although this is only contemplated under the PECL, good faith acts as a limit to party autonomy in some a "positive" way, thereby limiting the parties' choice when the agreed by the parties is contrary to good faith. In consequence, could this conclusion be transferred to the scope of the CISG? If so, would it only apply as a negative limit (being its only consequence the impossibility for the parties to derogate Article 7(1) CISG), or also as a positive limit (thereby impeding the parties from derogating or varying any CISG provision where that would be contrary to good faith? Were the the latter the case, could such limit operate in relation to Article 40 CISG?
In relation to the first question, we should wonder whether good faith is an interpretative rule of the CISG provisions, or it is also a principle that rules the parties' behavior. Although the CISG text gives the impression of favoring the first position, it seems that scholars are more inclined for the second. In relation to the next questions, the Secretariat's Commentary establishes that Article 40 CISG is a concrete application of the principle of good faith. Thus, taking into account that Article 40 CISG is one of the provisions that concretely embody the good faith principle, and that such principle constitutes a duty for the parties, and not only as a guideline to interpret the Convention, it seems to have the qualities to limit the parties' will. For that reason, this line of thought would lead to confront the good faith principle with the party autonomy principle.
Nevertheless, if "brought to earth" with concrete examples, I think this problem turns out to be not so serious. In this way, it is my view that the exclusion-modification of an actual provision, considered generally as embodying the good faith principle (like Article 40 CISG) is not the same as a total exclusion of the good faith principle. For that reason, more than assessing on a theoretical basis which of both principles (party autonomy or good faith) should prevail, we should analyze the different cases that may occur. In the first place, the parties' desire may not be to exclude Article 40 CISG, but to substitute the CISG regime on notification of defects (of which Article 40 is part) by a different system that still respects the balance of rights between the parties. In such case, it is the view of the present work that the parties should generally able to do so, since the principle of good faith would be respected. In second place, if the parties' choice were only to limit the scope of Article 40 CISG to cases of negligence or deceit prior to delivery, or otherwise limit its scope in such a way, that should be allowed, provided that the agreement would not allow cases of fraud or deceit.
Therefore, the only case where the modification or exclusion would be problematic is that where the exclusion/modification may protect fraudulent sellers. Those cases should be fought, since the law should not protect fraudulent behavior. However, they should be fought by the proper means. In this case, two layers of protection seem to be adequate.
The first layer would take the provisions of the CISG as a reference. In this sense, the solution would not call for a theoretical and conceptual clash between party autonomy and good faith. Rather, both principles should work together in order to determine whether the parties really concluded an agreement that pretended to turn legitimate cases of fraud. For that purpose, attention must be paid to the contract clauses, the parties' declarations and, in general, to all the elements referred to under Article 8 CISG. All those elements should be interpreted in accordance to the good faith principle, which constitutes an interpretative tool for other provisions (including Article 6 CISG). Consequently, as a basis it should not be assumed that the intention of the parties was to exempt cases of deceit or gross negligence unless that it is clear from the circumstances of the case.
Once all of this has been made, it may be clear from the facts that what the parties agreed was an exemption of deceit or negligence. In such a case, the second layer of protection should come into play, i.e., that of domestic law on fraud or deceit.
This is so because, once all the interpretative efforts do not help to reach a conclusion that states otherwise, we should be careful not to take the role of Article 7 CISG beyond its borders, and the borders of the CISG. Indeed, Article 4 CISG states the following:
"This Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. In particular, except as otherwise expressly provided in this Convention, it is not concerned with:
(a) the validity of the contract or of any of its provisions or of any usage;"
The CISG does not deal with the validity of the contract or of any of its provisions. According to Professor Hartnell, the concept of validity in this sense should not be "imported" from domestic law but needs to be one interpreted in the light of the provisions covered by the CISG (thereby, "validity" is not the same than "mandatory rules" of domestic law ). However, the concept of validity cannot either be one where all possible issues are ruled by the CISG. In the case dealt with in these lines, there seems to be a consensus that cases of fraud and deceit, together with those of duress, would belong to the "validity" concept contemplated under Article 4(a) of the CISG, thereby falling outside the scope of the Convention. Consequently, in case that the parties' agreement clearly contemplated cases of fraud or deceit, a glance must be turned to domestic law, and thus the problem tackled in accordance with it. I support this conclusion not only as a matter of what the CISG says, but also as a matter of which instrument is the most adequate.
The tendency somewhat present when analyzing the scope of the CISG is to widen its reach. The underlying rationale is that the international instrument is better suited for international transactions than are domestic laws. This may sometimes be useful. However, in this case it is the opposite. The good faith principle is a very broad provision and is not sufficient to address problems of fraud or deceit. Domestic laws are better suited for that purpose, since they have a specific piece of law specifically designed for those problems. Moreover, domestic law generally agrees in that a party "cannot exempt himself from the consequences of his own deceit or even from gross negligence." Therefore, if the intention of the parties is clear to contract out Article 40 CISG (thus, being the first layer insufficient), domestic law comes into play (second layer) and avoids the exclusion of Article 40 CISG on the basis of fraud and deceit. As a result, Article 40 CISG and its underlying policy cannot be excluded. The conclusion would be that the first argument of the Arbitration Institute of the Stockholm Chamber of Commerce (i.e., that Article 40 CISG cannot be excluded as a consequence of the application of the good faith principle) is not entirely true, although the good faith principle is relevant, as analyzed before. Nevertheless, the second argument (i.e. that Article 40 CISG may not be excluded as not allowed by domestic law) turns to be perfectly in accordance with domestic law and the CISG.
3. Does the possibility for the parties to anticipate all the terms make the flexibilization of the CISG rules unnecessary?
The previous sub-sections have demonstrated that the regime of the CISG on modification of defects may be expressly modified by the parties. Thus, a question could be formulated: if the parties may do so, would it not make sense to leave these adaptations to the parties' will, and avoid the problems suggested in Sections VII and VIII? After all, the parties are the ones who may best shape the necessary rules to their kind of contractual relationship. I still maintain the proposal for three reasons. First, because, as examined early in this work, there are two ways that business parties face the problems of a complex environment. One way is to enhance formality, thereby trying to anticipate a solution for every possible contingency. However, another way consists in injecting more flexibility in the relationship through a higher degree of commitment. That obliges the parties to work together and agree upon the mechanisms to solve the problems. That second way should also be given recognition within the law. Therefore, commercial law should serve as an instrument to sanction the parties' agreements rather than to structure their relationships by external rules. Moreover, the first proposal to tackle the problems of complex business relationships includes a great deal of party autonomy as well. We have examined that the courts have reluctant to approve implied modifications or waivers. However, the solution for that is more flexibility, not less flexibility. The solution is not to abandon the proposal to introduce flexibility in the CISG regime, but to insist in the fact that this solution is useful to adapt the Convention to new business patterns. If a contract law statute is inadequate for a great deal of contractual relationships the solution is not to leave the parties to modify it, with all the costs of drafting, but to reinterpret the text to adapt it.
In third place, there are some cases where the parties may be able to stipulate the procedures to follow when a lack of conformity arises, thereby shaping the regime of notification to their needs. Issues like the period for examination, period for notification, addressee, or even level of specificity may be expressly agreed upon. However, in long-term relationships it may be really hard to anticipate all the possible contingencies affecting examination, notification etc. Furthermore, in cases where the elements of the contract are not clear since the beginning and both parties work together to determine them the task may be a not-viable one.
In conclusion, for all these reasons I consider that the two possibilities should be left open: one with a more flexible approach of the CISG, and a more formal one that allows the parties to agree all the terms since the beginning.
4. Case illustration of the deterministic context
In prior sections I have attempted not to remain in merely conceptual models, but to descend to showing how courts could make use of the proposed framework in assessing the issue of communication of non-conformity. In this way, the numerous case law (specially German) helped me in illustrating how the duty to communicate applies to a context of spot transactions. Cases like that decided by the Stockholm Chamber of Commerce assisted in describing the aspects of Article 40 CISG. Through some realistic examples I explained how the overall assessment on the parties' behavior and a more flexible approach to the issue of modification and waiver could interact together. Finally, Case No. 9474 decided by the ICC Arbitration Court  facilitated the clarification of how usages and practices could work together with the previous elements in a framework where the past, present, future and purpose of a commercial relationship are taken into account when ascertain whether or not the parties complied with their duty to communicate and cooperate.
I chose the next case to illustrate the context of deterministic relationships acknowledging that there may be some relational elements present. However, the underlying sensitivity of the tribunal towards the facts led me to select it. The example concerns a case decided by the China International Economic & Trade Arbitration Commission (CIETAC) on 30 March 1999. In that case, a US company [Buyer] entered into several contracts  with a Chinese company [Seller] for the purchase of flanges. The Seller had to provide a so-called "Mill Test Report", containing data on the composition and treatment of the goods before being delivered to the Buyer. Besides, the contract signed in 1988 contained clauses concerning the duty of the buyer to examine the first batch of goods before they were packed, and the duty of the buyer to propose objections to quality within 15 days after the arrival of goods to the port. In further contracts, the first duty was omitted and the period for quality objections provided in article 15 was changed from "90 days after the arrival of goods at the destination port" to "within 30 days after the arrival of goods at the destination port". The Buyer supplied the flanges to TEAM Industrial Company who sold them to EBASCO, who intended to use them for a contract with Exxon. After EBASCO ascertained some defects, TEAM Industrial Company accomplished some investigations and discovered that some flanges had not been through normalizing heat treatment. As a result of the defects, the Buyer's client returned a large batch of flanges, and the Buyer started negotiations with the Seller. Those negotiations did not reach a satisfactory end, and the parties resorted to arbitration.
Several problems were at stake in the case. The first was issue of examination of the goods. The Buyer alleged that, by including in the first contract the clause providing for examination of the goods before they were packed, the parties were implicitly derogating the duty to examine the goods after delivery contemplated under Article 38 CISG, and thus, all defects discovered in a later stage should be considered "hidden defects", and the time to communicate should begin to run after they were discovered. The Buyer also argued that the inclusion of the duty to examine before packing, and the exclusion of examination after arrival in port made the clause on presentation of objections (in 15, 90 or 30 days after delivery, depending on the contract) purposeless, and thus rendered it inapplicable. However, the tribunal held that the "claims" clause was consistent with the CISG, and thus, the duty to inspect the goods upon arrival was not excluded by the contract.
In second place, the Buyer further submitted that the duty to inspect was excluded by "trade custom", holding that "the usual practice of the trade in US and other places in the world was that if flanges imported had been tested as corresponding to established industrial standard, examinations were often given up." However, the arbitral tribunal held that, since the terms of the contract were clear, those terms prevailed over the parties' practices. Examination had to be carried on, and notice of defects given afterwards. The tribunal decided that the time period to communicate defects (30/90 days in the controverted contracts) was reasonable according to the standards of Article 39 CISG. In third place, the Seller argued that, along the negotiations, the Seller's representatives did not deny the Seller's responsibility, and that the parties never cited the "90 days time limit for claims" in treating quality problems and never thought it had binding force, thereby implicitly modifying the terms of the contract. The tribunal did not accept that argument either, stating that written alteration had not happened.
In fourth place, the Buyer alleged that there were certain lacks of conformity that could only be discovered by destructive sampling test. These deficiencies could be regarded as latent deficiencies, and thus the time for objections should be longer. The tribunal accepted that argument, stating that, in such case, absent any specific clause from the parties, the period should be that of Article 39(2) CISG, i.e., two years.
In fifth place, the Buyer alleged that information provided by the Seller in the Mill Test Report (MTR) was binding upon it, and constituted a solemn promise that the goods would conform to that document, with no time limit to raise discrepancies between the goods and the data stated in the MTR. The arbitral tribunal held that the MTR could be considered as a quality certificate, but since no period of warranty was present, the time to raise objections should be determined in accordance with the contract (i.e., 90/30 days from delivery) or Article 39(2) CISG (i.e., two years from delivery) at the longest.
In fifth place, the Buyer alleged that the Seller had concealed certain defects, which were too evident to be ignored, and that constituted an act of fraud. The arbitral tribunal held that "fraud" should be determined in accordance with domestic law and could not find hints of fraud. However, analyzing Article 40 CISG, the tribunal stated that, as opposed to cases where the seller was a mere intermediary, in this case the Seller was the manufacturer, and its name was in the MTR. Thus, in case of defects consisting in discrepancies between the quality of the goods and the stated in the MTR the Seller should be held liable.
In summary, arguments from a deterministic approach were present as well as those from a more flexible view. The tribunal, I think correctly, opted for a more deterministic view since, although both parties contracted in several occasions, quality procedures, duties of inspection and notification were all agreed beforehand. The element of cooperation was absent, and the context was not that of a contractual relationship, but rather a succession of deterministic transactions. Thus, the element to determine the parties' obligations and expectations was the contract and, alternatively, Articles 38 and 39 CISG. Even the interpretation of Article 40 CISG was made in a classical way.
5. Reflections on new problems of the framework proposed
The case previously analyzed reflects a problem that comes up if we decide to adopt this "multi-face" approach to the issue of notification of defects. Once we have exposed the need to face the problems with the interpretative elements of each contractual scenario the question that remains in the air is how to distinguish the different scenarios. By acknowledging the intricacy of the business practice in our analysis we improve its accuracy, but we gain in complexity. However, it is my contention that the courts and tribunals are quite capable of ascertaining the context where the commercial transactions develop, since this constitutes another issue of fact. Moreover, courts that dared to dive into the elements of the transactions showed that common sense usually works well, as opposed to a strict application of the law as it stands for. The aim of this work is not to solve all the problems, but to provide some elements to avoid that courts and tribunals need to depart from the CISG and resort to vague standards in order to adopt the right decision.
Furthermore, it is possible to apply criteria from both the deterministic approach or the flexible approach. In the parties' relationship there may be aspects that are determined in a flexible "not stated" way, but others may be too risky to be left to future adjustment and are carefully contemplated in the contract. The proposed framework should not stiffen the decision-making process, but the opposite.
Contract law is one of the most venerable legal disciplines, but also one of the most practical, since the effort developed by legal theory is focused on gathering rules to tackle the problems of commercial transactions. Thus, commercial practice and commercial law must evolve together. Mismatches between what the law says and what is made in practice hinders the process of development.
In this study it was shown that commercial practice has evolved from spot transactions to a more dynamic environment where many types of contractual liaisons exist differentiated by their degree of formality or commitment between the parties. Traditional contract law suited well spot transactions, as well as to formalistic contracts where parties dealt with complexity through detailed clauses. The problem persisted, however, with the so-called "interactive", "relational" or "alive" transactions. Some authority maintained that traditional views were adequate, while others considered that some changes in the mindset of contract theory were necessary. Notwithstanding what position is taken, current legal provisions of contract law have to adapt to very different types of relationships, which always constitutes a hard task. Three transaction types have to be distinguished: spot transactions, where the contract is simple and rules should be clear and certain, interactive contracts, where rules should be flexible to contemplate the relationship's evolution, and formalistic contracts, where party autonomy enjoys a wide role.
For various reasons, the CISG regime on notification of defects constitutes an adequate field to test the three different types of contractual relationships. The study made leads to conclude that the duty to notify, under Article 39 CISG, enhances certainty, and fits perfectly the needs of spot transactions where parties need to be compelled by the law to cooperate. However, in cases where the parties have their own means of cooperation, the CISG rules  may hinder this process, and leave unprotected behaviors that might seem perfectly reasonable in the commercial context. For this reason, it is necessary to introduce flexibility in Article 39 CISG. Article 44 CISG is not very useful in that task. However, Article 40 CISG seems to be a better balance. One proposal made in this study consists in using Article 39 and 40 together in the context of complex relationships, and making an overall assessment on the parties' behavior. For that purpose, the traditional role of Article 40 CISG should be expanded.
The second proposal consists in increasing the role of party autonomy, and introducing flexibility in the rules on implicit modifications or waivers of rights. In a commercial context, this happens all the time, and it is simply concluded that the law should sanction it. Having too burdensome rules on contract modification and waiver may leave unprotected a party that acted reasonably upon the expectations created through the dynamics of the contractual relationship. Both proposals should be combined with a third, consisting in taking into account usages and practices of the parties. That way the appraisal will not be made in a vacuum, but in the context of a prior business relationship in a certain branch of trade (backward-looking perspective), and ever-changing expectations (forward-looking perspective) where facts are analyzed in the light of the cooperation principle (Article 39 vs. 40 CISG).
An alternative way of contracting is through detailed and planned contracts. In some cases the parties tackle the problems of uncertainty through extensive planning. The law allows the parties to expressly derogate from or vary the CISG regime on defects notification. Some problems may arise if the derogation or modification gives rise to unfair results. However, in that case the problem is one of domestic law, which may not permit a party to exempt itself from deceit or negligence. It is submitted that the two approaches (flexibility and formality) should be admitted within the CISG, since that only means to sanction to what is made in practice. Although this poses problems of where to apply some principles or others, evidence and common sense help in that task, as has been shown along the previous sections.
In summary, the purpose of this study is to show that legal rules that are very adequate for a certain type of transactions may be ill-suited for others. Therefore, together with the legal perspective, elements like the business perspective, the type of transaction and the parties' expectations have to be taken into account to produce an accurate result. Good faith and the standard of a reasonable person are general underlying policies of the Convention, and the aim of CISG rules is to evaluate the parties' behavior on the basis of such policies. My contention is that this process should be accomplished with a proper assessment of the contractual scenario.
1. I am fully indebted to Professor Mª Pilar Perales Viscasillas. Without her guidelines this work may not have been possible. I am also extremely grateful to Professor Albert Kritzer for his really useful insights in an earlier version of this article. Needless to say, every mistake or inaccuracy remains exclusive responsibility of the author.
2. PhD student of Law. Universidad Carlos III de Madrid.
3. SMITH, Adam. The Wealth of Nations. Books I - III. England: Penguin Books, 1999, p. 133.
5. FRIEDMAN, Milton; FRIEDMAN, Rose. Libertad a Elegir. Barcelona: RBE, 2004. Translated from the original book Free to Choose, p. 27.
6. GALBRAITH, John Kenneth. A History of Economics. England: Penguin Books, 1987, p. 20.
7. SMITH, Adam. The Wealth of Nations. op. cit. p. 134.
8. HAYEK, F.A. The Road to Serfdom. London and New York: Rutledge Classics, 1944, p. 24 - 75.
9. SMITH, Adam. The Wealth of Nations. op. cit. p. 157; MARSHALL, Alfred. Principles of Economics. New York: Prometheus Books, 1997, p. 141.
10. MARSHALL, Alfred. Principles of Economics, op. cit., p. 142.
11. COASE, Ronald. La naturaleza de la empresa.In "La Naturaleza de la Empresa. Orígenes, evolución y desarrollo. Mexico: Fondo de Cultura Económica, p. 30. Translation from the original article by Ronald Coase The Nature of the Firm. Published in Economica. Vid infra.
12. Ibidem. Taken from F.A. Hayek. The Trend of Economic Thinking. Economica, no. 13 (1933), p. 121.137.
13. HART, Oliver D. "Los Contratos Incompletos y la teoría de la Empresa". In WILLIAMSON, Oliver E.; WINTER, Sidney G. (eds.) La Naturaleza de la Empresa. Orígenes, evolución y desarrollo. Mexico D.F: Fondo de cultura económica, 1996. Translated from English. Original title: The Nature of the Firm. Origins, Evolution and Development.
14. Namely, The Nature of the Firm. Economica, no. 4, n.s. pp. 386-405; and The Problem of Social Cost. Journal of Law and Economics, no. 3 (1960).
15. COASE, Ronald. La empresa, el mercado y la ley. Madrid: Alianza Editorial, 1994. Translation from The Firm, the Market and the Law. p. 13.
16. COASE, Ronald, The Problem of Social Cost, Journal of Law and Economics, no. 3 (1960). Also available at <http://www.sfu.ca/~allen/CoaseJLE1960.pdf>, Section VI.
17. Another definition, provided by Carl and Dahlman characterizes transaction costs as costs of search and information, costs of arrangement and decision, costs of action and policing. CARL; DAHLMAN. "The Problem of Externality". The Journal of Law and Economics. 22, no. 1. (1979) April, p. 148.
18. COASE, Ronald. La empresa, ,el mercado y la ley ,op. cit. p. 13.
19. RICKETTS, Martin. The Economics of Business Enterprise. An Introduction to Economic Organisation and the Theory of the Firm. Cheltenham: Edward Elgar, 2002, p. 226.
20. GRANT, Robert M. Contemporary Strategy Analysis. Fifth edition. United Kingdom: Blackwell Publishing, 2005, p. 404.
21. GULATI, Ranjay; NOHRIA, Nitin; ZAHEER, Akbar. "Strategic Networks". Strategic Management Journal. Volume 21, issue no. 3. March 2000, p. 203.
22. See for example BAUM, ,Joel A.; CALABRESE, Tony; SILVERMAN, Brian. "Don't go it alone: alliance network composition and startups' performance in Canadian Biotechnology". Strategic Management Journal. Volume 21, issue no. 3. March 2000, p. 267-293; ANAND, Bharat N.; KHANNA, Tarun. "Do firms learn to create value? The case of alliances", Strategic Management Journal. Volume 21, issue no. 3. March 2000, p. 295-315; AHUJA, Gautam. "The Duality of Collaboration: inducements and Opportunities in the Formation of Interfirm Linkages". Strategic Management Journal. Volume 21, issue no. 3. March 2000, p. 317-343; DYER, Jeffrey H. "Specialized Supplier Networks as a Source of Competitive Advantage: Evidence from the Auto Industry". Strategic Management Journal. Volume 17, issue no. 4 April 1996, p. 271-291; LORENZONI, Gianni; LIPPARINI, Andrea. "The Leveraging of Interfirm relationships as a Distinctive Organizational Capability: a Longitudinal Study". Strategic Management Journal. Volume 20, issue no. 4. April 1999, p. 317-338.
23. DYER Jeffrey H; NOBEOKA Kentaro. "Creating and Managing a High-Performance Knowledge-Sharing Network: the Toyota Case" Strategic Management Journal. Volume 21, issue no. 3. March 2000, p. 345-367; DYER, Jeffrey H. "Specialized Supplier Networks as a Source of Competitive Advantage: Evidence from the Auto Industry", op. cit.; KOGUT, Bruce. "The Network as Knowledge: generative Rules and the Emergence of Structure" Strategic Management Journal. Volume 21, issue no. 3. March 2000, p. 405-425.
24. BAUM, ,Joel A.; CALABRESE, Tony; SILVERMAN, Brian. "Don't go it alone: alliance network composition and startups' performance in Canadian Biotechnology", op. cit.
25. DOZ, Yves; OLK, Paul; RING, Peter Smith. "Formation Processes of R&D Consortia: Which Path to Take? Where Does it Lead? Strategic Management Journal. Volume 21, issue no. 3. March 2000, p. 239-266.
26. LORENZONI, Gianni. "Benetton" ,in BADEN FULLER, C.; PITT, M. (eds.). Strategic Innovation. London: Routledge, 1996.
27. LORENZONI, Gianni; LIPPARINI, Andrea. "The Leveraging of Interfirm relationships as a Distinctive Organizational Capability: a Longitudinal Study", p. 317-338.
28. GULATI, Ranjay; NOHRIA, Nitin; ZAHEER, Akbar. "Strategic Networks", op. cit., p. 204.
29. ARRUÑADA, Benito. Teoría Contractual de la Empresa. Madrid: Marcial Pons, 1998, p. 165.
30. Ibidem. The author states that, in the case of a sales contract, where no clear specification of the quality involved has been made, the trust is placed in the reputation of the seller, who may low the quality. In that case, though, the buyer may cancel all future purchases or communicate his non-satisfaction to potential future buyers.
31. RICKETTS, Martin. The Economics of Business Enterprise. Op. cit., p. 45.
32. See MACAULAY, Stewart. "Non-Contractual Relations in Business: A Preliminary Study". American Sociological Review. Volume 28. Number 1. February 1963, p. 65-66.
33. Ibid, p. 65.
35. GRANT, ,Robert M. "Contemporary Strategy Analysis", op. cit., p. 523.
36. MACAULAY, Stewart. "Non-Contractual Relations in Business...", op. cit. p. 64.
37. Ibid, p. 65.
38. Ibidem. Think about the airlines when providing for the clauses in contracts with airframe manufacturers.
39. Ibid. An example given is that of the air-conditioning manufacturers when subscribing contracts with motels in warm areas. The manufacturer will have all interest in excluding the damages arising from the loss of clients by the motels due to failures in air conditioning.
40. Restatement Second § 1. See also WILLISTON. Contracts. 4th ed. Lord 1990. § 1:1; CORBIN, Arthur L. Corbin on Contracts One Volume Edition. St. Paul Minn: West Publishing Co. 1952, § 3; Wald's Pollock. Contracts 3rd ed., p. 1-2.
41. LINZER, Peter. Uncontracts: Context, Contorts and the Relational Approach. Annual Survey of American Law 139 (1988), p. 145. This constituted the so-called "objective" approach. In the words of Linzer, although classical contract law was initially influenced by ideas of economic liberalism and individualistic ideas, they undermined these ideas by "replacing the will theory with a theory that a speaker was responsible for the reasonable societal reaction to his words or acts".
42. FARNSWORTH, Alan. Contracts. Third edition. New York: Aspen Law & Business, 1999, § 1.1. See also Restatement Second § 2(1), which states that a promise is "a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made". See CORBIN, Arthur L. Corbin on Contracts, op. cit., § 3.
43. MACNEIL, Ian R The Many Futures of Contracts. South California Law Review. 47 (1974), p. 800; MACNEIL, Ian R. Contracts: Adjustment of Long-Term Economic Relations under Classical, Neoclassical, and Relational Contract Law. In Northwestern University Law Review, 72 (1977-1978), p. 862; LINZER, Peter. Uncontracts: Context, Contorts and the Relational Approach, op. cit. p. 156.
44. According to Professor Macneil "the presentiation of a transaction involves restricting its expected future effects to those defined in the present, i.e. at the inception of the transaction". SeeMACNEIL, Ian R. Contracts: Adjustment of Long-Term Economic Relations under Classical, Neoclassical, and Relational Contract Law, op. cit., p. 862.
45. Ibid, p. 856.
46. Ibid, p. 864.
47. GOETZ, Charles J; SCOTT, Robert. Principles of Relational Contracts. Virginia Law Review. 67 (1981), p. 1090.
48. MACNEIL, Ian R The Many Futures of Contracts, op. cit. p. 780-783; LINZER, Peter. LINZER, Peter. Uncontracts: Context, Contorts and the Relational Approach, op. cit. p. 157.
49. MACNEIL, Ian R The Many Futures of Contracts, op. cit. p. 785.
50. Ibid, p. 865.
51. LINZER, Peter. Uncontracts: Context, Contorts and the relational Approach, op. cit. p. 197. The author refers to authorities like Corbin, Lon Fuller, Friedrich Kessler or Karl Llewellyn to support this statement.
52. CORBIN, Arthur L. Corbin on Contracts, op. cit., § 3; PERILLO, Joseph. Calamari and Perillo on Contracts. Fifth Edition. St. Paul, Minn: Thomson, Hornbook series, § 1.1; Restatement Second § 3 is "An agreement is a manifestation of mutual assent on the part of two or more persons".
53. Examples of techniques used to introduce flexibility into the necessary initial planning that leads to the presentiation of the contractual relationship are the use of standards of performance uncontrolled by any of the parties, the determination of performance by a third party, the control by one party of the terms, or the setting up of "agreements to agree", under which, in cases where parties are not yet prepared to agree on details that have to be agreed upon, but both parties want to reinforce their commitment to the contractual relationship. See MACNEIL, Ian R. Contracts: Adjustment of Long-Term Economic Relations under Classical, Neoclassical, and relational Contract Law, op., cit., p. 866 - 873.
54. For example, see the case Seaman's Direct Buying service v. Standard Oil Co. 36 Cal. 3d 752, 686 P.2d 1158 ,206 Cal. Rptr. 354 (1984), which involved a marine dealership at a proposed marina, basically a floating gas station deal. However, the financing of the dealer's business was dependent upon the existence of the contract. During the 1973 oil crisis Standard Oil denied that the contract was binding and acted against the dealer. The California Supreme Court stated that "it is well settled that, in California, the law implies in every contract a covenant of good faith and fair dealing" and added "that covenant requires that neither party do anything which will deprive the other of the benefits of the agreement". However, Chief Justice Bird dissented, since she put more weight in the expectations of the parties. Moreover, she combined this neoclassic reasoning with an inquiry into "special relationships". She argued that special relationships (referring to that of insurance) differed from ordinary relationships in that normal relationships implied the assumption that parties could breach at will, by only paying damages. On the other hand, in the context of special relationships the injury that will flow from breach by the dominant party may be so catastrophic that the parties simply do not accept the possibility of a permissible breach. Then, in that setting, "a voluntary breach by that party could well constitute a violation of the duty to deal fairly and in good faith". The excellent analysis of this case is made by Professor Peter Linzer. See LINZER, Peter. Uncontracts: Context, Contorts and the relational Approach, op. cit. p. 172.
55. An example would be provided by Sections 292 and 230 of the Restatement (Second) of Contracts, which offer the court the possibility of supplying a term which is reasonable in the circumstances. See MACNEIL, Ian R. Contracts: Adjustment of Long-Term Economic Relations under Classical, Neoclassical, and relational Contract Law, op., cit, p. 875-876.
56. Examples of this would be the increasing availability of specific performance as a remedy, to make harder the thresholds to contract avoidance, or the introduction of the duty to mitigate damages, as a means to prevent avoidance when to continue with the contract would constitute a less onerous solution. See MACNEIL, Ian R. Contracts: Adjustment of Long-Term Economic Relations under Classical, Neoclassical, and relational Contract Law, op., cit. p. 878 - 883.
57. See MACNEIL, Ian R. Contracts: Adjustment of Long-Term Economic Relations under Classical, Neoclassical, and relational Contract Law, op., cit. p. 884 - 885.
58. Examples of this would be all relationships covered by labor law or those regulated by the law of corporations. See MACNEIL, Ian R. Contracts: Adjustment of Long-Term Economic Relations under Classical, Neoclassical, and relational Contract Law, op., cit. p. 887. The author seems to suggest that, were the new relationship patterns taken into account, they could be to some extent covered by the "new contract law".
59. As stated by Professor Macaulay, "Bargaining power may shift as an exchange relationship is first created and then continues. A powerful party which has dictated the use of a restrictive contract may choose not to press its theoretical rights because the less powerful party has become indispensable during the course of dealings". See MACAULAY, Stewart. Non-Contractual Relationships in Business, a Preliminary Study, op. cit. p. 28; LINZER, Peter. Uncontracts: Context, Contorts and the Relational Approach, op. cit. p. 153.
60. Indeed, there has been a tendency to equate the term "relational contract" with long-term contractual relationships. However, in the words of Professors Goetz and Scott, this is due to the fact that a contract is relational "to the extent that the parties are incapable of reducing important terms of the arrangement to well-defined obligations". Long-term contracts are more likely than short-term to fit this conceptualization. See GOETZ, Charles J; SCOTT, Robert. Principles of Relational Contracts. Op. cit., p. 1091. Nevertheless, although Professors Goetz and Scott make this definition, their main aim is to restrict relational contract theory to a number of contractual figures, like distributorships, franchises, joint ventures or employment. As opposed to that, the purpose of the illustration about the different contract theories is to show the existence of relational characteristics in numerous types of contracts (including certain contracts of sale) that should be acknowledged, not to classify contracts between relational and non-relational.
61. PERILLO, Joseph M. Calamari and Perillo on Contracts. Fifth edition. Saint Paul Minnesota: Thomson, Hornbook Series, 2003, p. 2. See MACNEIL, Ian R. The New Social Contract, 1980, p. 4
62. MACNEIL, Ian R. The New Social Contract, 1980, p. 4. Moreover, as stated by Lightsey, "The discreteness of the promise model hides the fact that trust, expectations, and accompanying obligations may arise from a variety of sources other than the parties' promises, such as the general interdependence between members of a developed society, the customs and norms of the particular business or social community, similar or previous transactions, or the developing relationship between the parties". See LIGHTSEY, Wallace K. A Critique of the Promise Model of Contract. Wm. & Mary Law Review 45 (1984-1985), p. 50-51. We also recall here the thesis of Suzanna Sherry who ,as a feminist writer, stated that the feminine view considered more the individuals as connected members of a community, as opposed to a more masculine view, which call for a more individualistic system. She states that "The feminine perspective views individuals primarily as interconnected members of community [...] women tend to have a more intersubjective sense of self than men and that the feminine perspective is therefore more other directed. See SHERRY, Suzanna. Civic Virtue and the Feminine Voice in Constitutional Adjudication. Vancouver Law Review 72 (1986), p. 584-585. The association of both ideas is taken from Professor Linzer. See LINZER, Peter. Uncontracts: Context, Contorts and the Relational Approach, op. cit. p. 162.
63. In cases of multilateral contracts it would also be possible to set collective bodies to decide the solution to the problems (taking as a basis the shareholders' meeting in case of corporations). See ARRUÑADA, Benito. Teoría Contractual de la Empresa Madrid: Marcial Pons, 1998, p. 166.
64. LIGHTSEY, Wallace K. A Critique of the Promise Model of Contract. Wm. & Mary Law Review 45 (1984-1985), p. 50-51.
65. CHAYES, Abram. The Role of the Judge in Public Law Litigation. In Harvard Law Review. Vol. 89, Number 7. May 1976, p. 1282-1283.
66. CHAYES, Abram. The Role of the Judge in Public Law Litigation, op. cit., p. 1302. Although the context of that article is that of public law litigation, the need for such methods of dispute resolution is increasingly evident in the private law sector. See MACNEIL, Ian R. Contracts: Adjustment of Long-Term Economic Relations under Classical, Neoclassical, and relational Contract Law, op., cit. p. 891-892.
67. MACAULAY, Stewart. Non-Contractual Relations in Business: A Preliminary Study. American Sociological Review. Volume 28, Number 1. February 1963, p. 61. In that article the author recalls the declaration of a lawyer with many large industrial clients, who said "Often businessmen do not feel they have "a contract"-rather they have "an order." They speak of "canceling the order" rather than "breaching our contract". When I began practice I referred to order cancellations as breaches of contract, but my clients objected since they do not think of cancellation as wrong. Most clients, in heavy industry at least, believe that there is a right to cancel as part of the buyer-seller relationship. There is a widespread attitude that one can back out of any deal within some very vague limits. Lawyers are often surprised by this attitude."
68. Ibid, p. 62.
69. ARRUÑADA, Benito. Teoría Contractual de la Empresa, op., cit., p. 166.
70. This aspect of breach as a solution to problems in contractual relations was overemphasized by a view, elaborated by the theorists of the law-and economics movement, called the theory of efficient breach, that stemmed from Oliver Wendell Holmes' article The Path of the Law. This theory consists in saying that, in a normal contractual setting, when a party finds a better deal for itself, it simply "buys itself out" of the contract by paying the other party its expectation damages. However, as stated by Professor Mc Neil, this theory constitutes an oversimplification of reality. See MACNEIL, Ian R. Efficient Breach: Circles in the Sky. Vancouver Law Review 68 (1982). Regular economists have also acknowledged that it is dangerous to oversimplify by generalizing from one kind of transaction to another. Okun suggests that we must distinguish "auction markets" (case of spot transactions) such as commodities exchanges or other sales of fungible goods, from "customer markets" where relational ideas fit much better. See OKUN, Arthur M. Prices and Quantities: A Macroeconomic Analysis (1981), p. 134-178. The adaptation of the economic ideas is made by Professor Macaulay. See MACAULAY, Stewart. Relational Contracts Floating on a sea of Custom? Thoughts About the Ideas of Ian Macneil and Lisa Bernstein. Northwestern University Law Review. 94 (1999-2000), p. 782-783.
71. MACAULAY, Stewart. Non-Contractual Relations in Business: A Preliminary Study, op. cit., p. 63.
72. Different examples are provided by Professor Macaulay. At the level of sales and purchasing agents, ones may provide the others with information about competitors, greater orders or price discounts. At the production/implementation level, it is desirable that staff of one firm work together with the staff or the other in order to solve the problems. Moreover, the top managers may know each other and meet in advisory bodies, trade committees or even social clubs. Finally, both firms may be formally linked through mutual stock holding. See MACAULAY, Stewart. Non-Contractual Relations in Business: A Preliminary Study, op. cit., p. 63. This is confirmed by the business practice, since firms like Toyota resort to stock holding in supplier companies, consulting by its engineers to help suppliers ameliorate their production process, task forces for performance assessment etc. See DYER Jeffrey H; NOBEOKA Kentaro. "Creating and Managing a High-Performance Knowledge-Sharing Network: the Toyota Case" Strategic Management Journal. Volume 21, issue no. 3. March 2000, p. 345-367; DYER, Jeffrey H. "Specialized Supplier Networks as a Source of Competitive Advantage: Evidence from the Auto Industry", op. cit.; KOGUT, Bruce. "The Network as Knowledge: generative Rules and the Emergence of Structure" Strategic Management Journal. Volume 21, issue no. 3. March 2000, p. 405-425.
73. The formulation of a more relational context would demand to base in certain core propositions. First, that every transaction is embedded in complex transactions; second understanding any transaction requires understanding all essential elements of its enveloping relations; third, effective analysis of any transaction requires recognition and consideration of all essential elements of its enveloping relations that might affect the transaction significantly; fourth, combined contextual analysis of relations and transactions is more efficient and produces a more complete and sure final analytical product than does commencing with non-contextual analysis of transactions. See MACNEIL, Ian R. Relational Contract Theory: Challenges and Queries. Northwestern University Law Review. 94 (1999-2000), p. 881.
74. Even more, whenever they deal, business people risk that a court will find they made a contract that they did not intend to make. Attempting communication involves risking being misunderstood. However, with a system that emphasizes flexibility communication and cooperation, the sanctions would not be as high as to make this risk non-bearable. See MACAULAY, Stewart. Relational Contracts Floating on a sea of Custom?, op. cit. p. 789.
75. I do not wish to confuse a case where the relationship has turned non-profitable for the parties with one where the relationship is profitable but one of the parties is lenient and does not cooperate as it should. In the first case it is legitimate that they intend to put an end and liquidate it. In the second case, though, the law should value which of the parties behaved in a generous way to preserve the relationship, as opposed to that who did not.
76. A very common source of contract termination is that of the so-called "bad contract marriages", resembling family disputes. Many times, the problem faced by the parties can be resolved by an effort on both sides. In such case, the parties are in better position to solve the problem than the law or the courts. Therefore, this solution process should be enhanced as far as possible. If that is not made satisfactorily, breaches and failures become material in part because they are treated that way rather than promptly adjusted. Generally, the law does not help since little emphasis is placed on whether the parties have tried to communicate to adjust the difficulties. No duty to communicate candidly is imposed, nor are the parties bound by what they say if they do communicate. See ROSSET, Arthur I. Contract Performance: Promises, Conditions and the Obligation to Communicate. UCLA Law Review. 22 1974-1975, p. 1096.
77. Indeed, Professor Macneil states that a way of enhancing discreteness is through the emphasis given to the different types of communications: "For example, formal communication (e.g. writings) controls informal communication (e.g. oral statements); linguistic communication controls nonlinguistic communication; and communicated circumstances (to the limited extent that any circumstances outside of "agreements" are taken into account at all) control non-communicated circumstances (e.g. status)". Moreover, on some flaws of classical and neoclassical contract theories, he states "In implementing their premises both classical and neoclassical contract law establish hierarchies for determining content (as noted earlier). Formal communications such as writings control informal communications; linguistic communications control nonlinguistic communications; communicated circumstances control non-communicated circumstances; and finally utilization of non-communicated circumstances is always suspect". See MACNEIL, Ian R. Contracts: Adjustment of Long-Term Economic Relations under Classical, Neoclassical, and Relational Contract Law, op. cit., p. 862.
78. ROSSET, Arthur I. Contract Performance: Promises, Conditions and the Obligation to Communicate. Op. cit. p. 1101.
79. The CISG is not like other types of legislation where the principles of relational contract theory are manifest, like the law applicable to joint ventures, labor law, or marriage law.
80. It constitutes the international sales law for 65 states which account for two thirds of international trade. See <http://www.uncitral.org/uncitral/es/uncitral_texts/sale_goods/1980CISG_status.html>. See ENDERLEIN, Fritz; MASKOW, Dietrich. International Sales Law: United Nations Convention on Contracts for the International Sale of Goods; Convention on the Limitation Period in the International Sale of Goods:Ccommentary. New York, Oceana Publications, cop. 1992, p. 2
81. MORALES MORENO Antonio. M. In DÍEZ-PICAZO, Luis, La compraventa internacional, ... op. cit., Art. 39 I. Significado.
82. SONO In BIANCA, Cessare Massimo, BONELL, Michael Joachim; Commentary, ... op cit, p. 324.
83. More than 300.
84. The total number of cases exceeds 1,400, and the increase is accelerating.
85. This board was set up as an initiative to foster uniformity, inspired by Professor Albert Kritzer, Professor and Secretariat of the Institute of Commercial Law, Pace University, and supported by experts throughout the world. It was created to provide guidelines on aspects of particularly controversial nature, with the aim to promote uniformity in the interpretation of the Convention, which is a purpose contemplated in its Article 7. See CISG-AC Publishes First Opinions. Available in <http://www.cisg.law.pace.edu/cisg/CISG-AC.html>
86. The first Opinion concerns electronic commerce issues in relation to the CISG. The interest, thus, was not so much in the problems of the Convention itself, but in the new perspective given by the surge of electronic communications. Therefore, Article 39 CISG has been the concrete provision enjoying more priority in the CISG-AC agenda. See "CISG-AC Opinion no 2, Examination of the Goods and Notice of Non-Conformity: Articles 38 and 39, 7 June 2004. Rapporteur: Professor Eric E. Bergsten, Emeritus, Pace University School of Law, New Cork". Available at <http://www.cisg.law.pace.edu/cisg/CISG-AC-op2.html>.
87. Secretariat's Commentary, UN Doc. A/CONF. 97/5 Yearbook, IV (1973), 48; Official Records, I, 35. Available at <http://www.cisg.law.pace.edu/cisg/text/e-text-39.html>
88. Case decided by the Oberster Gerichtshof (Austrian Supreme Court), 27 August 1999; CLOUT case no. 48; Oberlandesgericht Düsseldorf (Germany), 8 January 1993; CLOUT case no. 284, Oberlandesgericht Köln, 21 August 1997; CLOUT case no. 3; Landgericht Manchen (Germany), 3 July 1989.
89. CLOUT case no. 337, Landgericht Erfurt (Germany), 29 July 1998; CLOUT case no. 282, Oberlandesgericht Koblenz (Germany), 31 January 1997. See also ENDERLEIN, Fritz; MASKOW, Dietrich International sales law, ... op. cit., p. 159. Other cases state that the purpose is to give the seller sufficient information as to know how to behave with respect to the buyer's claim.
90. HEUZÉ, Vincent, La vente internationale de marchandises: droit uniforme. Paris: GLN Joly , 1992 p. 229.
91. Landgericht Kassel (Germany), 15 February 1996; Oberster Gerichtshof (Austrian Supreme Court), 27 August 1999; Secretariat's Commentary para. 4. KRITZER, Albert H. Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods, Deventer, Netherlands: Kluwer Law and Taxation , 1989, p. 306.
92. HONNOLD, John, Uniform Law for International Sales under the 1980 United Nations Convention. Deventer, Boston: Kluwer Law International, 1991 2th ed., pp. 333-334.
93. Vid supra V. 1.
95. Secretariat's Commentary Article 37 of the 1978 draft, O.R. 35 Docy. Hist. 425; HONNOLD, John. Documentary History of the Uniform Law for International Sales: The studies, deliberations, and decisions that led to the 1980 United Nations Convention with introductions and explanations, Deventer: Kluwer Law and Taxation, 1989. In a similar way: PILTZ, Burghard, Compraventa internacional, ... op. cit., p. 87 and ANDERSEN, Camilla Reasonable time in Article 39 (1) of the CISG. Is Article 39 (1) Truly a Uniform provision?. Pace ed., Review of the Convention on Contracts for the International Sale of Goods (CISG) 1998, The Hague, Kluwer Law International (1999) 63-176. Available at <http://www.cisg.law.pace.edu/cisg/biblio/bib2.html>, p. 8
96. In case law, holding that the specificity requirement was not complied with: LG München (Germany), 3 July 1989: "poor workmanship" (referring to fashion clothes); LG Hannover (Germany), 1 December 1993: "defective shoes"; Landgericht München (Germany) 20 March 1995: "the goods are rancid" (this case offers an interesting point, since the first notification was non-specific, and the subsequent communications were specific though beyond the reasonable time. That would lead to conclude that the requirements of reasonable time (studied later) and specificity cannot be complied with through separate notices. Nevertheless, the particular circumstances of the case should be taken into account. Thus, vid infra V.2. for cases of reasonable excuse for insufficient knowledge by the buyer; LG Bochum (Germany), 24 January 1996: "soft truffles" (to indicate that the truffles were infested with maggots. The buyer's argument that "soft" had that meaning in the commercial jargon of the trade concerned did not succeed). On the other hand, cases where the requirement of specificity was complied with: Cour de cassation 26 May 1999 (France): "the metallic plaques were not conforming to the quality, size and quantity agreed upon". For a detailed analysis, see ILLESCAS ORTIZ, Rafael/PERALES VISCASILLAS, Pilar; "Derecho Mercantil Internacional, op. cit., p. 192.
97. SCHWENZER, Ingeborg In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 39 para. 6, p. 311.
98. LG Marburg (Germany), 12 December 1995: the notification had to include the serial number and date of delivery of the machinery, thus allowing the seller to identify it.
99. Something different from that agreed upon in the contract. Vid infra IV.6.
100. MORALES MORENO Antonio. M. In DÍEZ-PICAZO, Luis, La compraventa internacional, ... op. cit., p. 339. In a similar way, see the case of the Oberster Gerichtshof (Austrian Supreme Court) 15 October 1998.
101. See the case of the Bundesgerichtshof (German Supreme Court) 3 November 1999; Opinion N. 2. Examination of the Goods and Notice of Non-Conformity. Articles 38 and 39, op. cit.. p. 6; SCHWENZER, Ingeborg In SCHLECHTRIEM, Peter. Commentary ..., op. cit., Art. 39 para. 8, p. 312.
102. HERBER, Rolf/CZERWENKA, Beate, Internationales Kaufrecht, ... op. cit. Art. 39, para. 6.
103. HONNOLD, John, Uniform law, ... op. cit., p. 279.
104. Indeed case law shows that, in many cases, courts may be very demanding with the requirement of specificity. It should be noted, though, that the majority of the case law dealing with the issue of specificity has its origin in Germany or in germanic countries (Austria, Switzerland), where the courts are quite strict with the requirements imposed to the buyer. Indeed, in the German version of the CISG, the language states (genau zu bezeichnen) referring to a need to specify "with precision". Although it is acknowledged that the CISG uses a more liberal standard, there has been a tendency for courts of these countries to be stringent with this issue.Perhaps the clearest example is the case decided by the Bundesgeright (Swiss Supreme Court) on 13 November 2003. In that case, the product sold was a used laundry machine. In its notification, the Buyer had used the heading "Unusable Machine Delivery" and had stated in this letter that the "machine was unusable", the "machine distillation system did not function" and "the delivered machine components did not function". The court first clarifies that the decisive original texts of the CISG, particularly the English and French version, formulate Art. 39(1) more generously than the German translation ; they require a general, but not a "precise" description of the lack of conformity. However, in its approach to the case the court completely contradicts itself, since it comes to the conclusion that, despite the precise notifications from the buyer, the court held that the Buyer viewed the machine as "defective but generally functional". What is more, since the Buyer listed five defects, but forgot two others, this was sufficient for it to lose the proceedings, as the court assessed its incomplete list as "exhaustive". Case available at <http://cisgw3.law.pace.edu/cisg/cases/031113s1.html> together with a very useful comment by Florian Mohs and Mariel Dimsey (translation). There were other constructions made by the court in the case that rendered it even more unacceptable. Unfortunately, this not the only example of a general trend in case law from Germanic countries to misconstrue the requirement of specificity under Art. 39 (1) CISG. Seecase decided by the Landgericht Köln (Germany), 30 November 1999, CLOUT case no. 364, where the buyer had notified that the stones for a facade were not properly labeled, that some stones and pieces had not the adequate size and that the supplied glue was defective, but the court held that this was not sufficiently specific, since the buyer had not specified which stones were wrongfully labeled, the quantity and concrete goods that were of wrong size and the exact amount of stones treated with the defective glue. In a similar way, the case before the Oberlandesgericht Saarbrücken, (Germany), 3 June 1998, CLOUT case no. 290, where the notice that stated that the delivered plants in bloom were in pitiful conditions and their evolution was bad was considered insufficient since, according to the court, the latter could refer to the size as well as to the appearance of the plants. Another example is Landgericht Regensburg (Germany), 24 September 1998, CLOUT case no. 339, where the buyer gave notice that the quality of the tissue was non-conforming and the size of the piece delivered impeded to cut it in an economical way, but the court held that there was no specification of the kind of quality problems, nor had the buyer indicated the size that could have permitted an economical cutting. For a detailed study, see CISG Digest, op. cit., p. 9-11. However, other case law shows that the requirement of specificity may be problematic outside Germanic countries as well. In the case decided by the Rechtbank van Koophandel, Kortrijk (Belgium), 16 December 1996, Namur Kredietverzekering v. Wesco the buyer's counterclaim for avoidance and damages was dismissed since the complaints about the "bad quality" of the goods (cotton fabrics) were considered as not enough to specify the defects. See alsoTribunale di Vigevano (Italy) 12 July 2000, where the statements of the buyer that the goods (vulcanized rubber) caused problems or present defects were not admitted as a valid notice (in this case, the court stated that the statements dis not enable the seller to determine its conduct regarding the alleged lack of conformity). In a case before the Hoge Raad (Netherlands), 20 February 1998, W.M.J.M. Bronneberg v. Ceramica Belvedere, where the issue concerned a sale of floor tiles, the court held that the notice did not sufficiently specify the defects (early serious wearing down and altered coloration of the tiles). However, it is not clear how a further specification of the defects in the case could have changed the seller's course of action. On the other hand, in a case decided by the Tribunale di Busto Arsizio (Italy), 13 December 2001, the court held that the notice was sufficiently specific. In this case, though, the notice contained a description of the defects as they appeared, and not even the seller could provide the necessary information. The list of the cases where the specificity requirement turned a really high threshold for the buyer can be very extensive, thus giving evidence that the statements by Professor Honnold about the flexibility of the specificity requirement may be adequate in theory, but are not so widely supported by the practice of the courts.
105. HEUZÉ, Vincent, La vente internationale... , op. cit., p. 230.
106. KUOPPALA, Sanna, Examination of the Goods Under the CISG and the Finnish Sale of Goods Act, Faculty of Law of the University of Turku, Private law publication series B:53. Available at <http://www.cisg.law.pace.edu/cisg/biblio/kuoppala.html>, p.23; MORALES MORENO Antonio.M. In DÍEZ-PICAZO, Luis, La compraventa internacional, ... op. cit., p. 340. A telephone call made on time and where the lack of conformity is detailed satisfies the standard of Article 39(1) CISG, at least in theory. Nevertheless, it will be much more frequent in practice that the buyer will not be able to prove that the call actually took place and that the conversation was held with the adequate person. See ANDERSEN, Camilla. Reasonable time, ... op. cit, p. 8. Moreover, it will be even harder to prove that the communication of defects was specific enough.
107. The case of Landgericht Frankfurt am Main (Germany) 13 July 1994 is the first that sets this criterion, adopted since then by German courts: see cases of Oberlandesgericht Frankfurt am Main 23 May 1995, Landgericht Kassel (Germany) 22 June 1995 or Amtsgericht Kehl 6 October 1995. In practice, the communication made by telephone has been seldom taken into consideration by the courts. An example is constituted by the case of Landgericht Frankfurt am Main (Germany) 9 December 1992, where a communication made by phone was held to exist, but for the simple reason that the seller did not dispute the existence of such telephone call, nor did it argue that the lack of conformity was specified.
108. The experience shows that notices given orally are very problematic since, besides having problems of proof, they also pose problems of specificity, or the adequacy of the addressee is questioned as well. See cases like that of Rb Kortrijk (Belgium) 16 December 1996, Landgericht Stendal (Germany) 12 October 2000, Landgericht Kassel (Germany) 15 February and 22 June 1996, Oberlandesgericht Frankfurt am Main (Germany) 23 May 1995, Landgericht Frankfurt (Germany) 13 July 1994. Against, there are cases like that of Landgericht Frankfurt (Germany) 9 December 1992, which admitted the communication of defects through a telephone call made 19 days after the delivery of the goods.
109. KUOPPALA, Sanna, Examination of the Goods, ... op. cit., p. 23; MORALES MORENO Antonio M. In DÍEZ-PICAZO, Luis, La compraventa internacional, ... op. cit., p. 340.
110. ENDERLEIN, Fritz; MASKOW, Dietrich International sales law, ... op. cit., p. 120. See also MCC-Marble Ceramic Center v. Ceramica Nuova, Federal Court of Appeals for the Eleventh Circuit (United States) 29 June 1998, CLOUT, case no. 222. The buyer had signed a petition form with a clause according to which the complaints arising out of defects in the goods had to be made in writing and by post. The court bases its reasoning in that, if the clause was included in the contract by the parties, the oral communication of defects by the buyer would not be valid. The court gave back the case to the lower instance in order to determine whether the clause had been effectively incorporated into the agreement. See UNCITRAL Digest. Article 39 ,op. cit., note 18.
111. Vid infra IV. 4.
112. ENDERLEIN, Fritz; MASKOW, Dietrich International sales law, ... op. cit., p. 160.
113. PILTZ, Burghard, Compraventa internacional, ... op. cit., p. 84.
114. SCHWENZER, Ingeborg In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 39 para. 20, p. 316.
115. ENDERLEIN, Fritz; MASKOW, Dietrich International sales law, ... op. cit. p.160.
116. HONNOLD, John, Uniform law..., op. cit., p. 280.
117. SCHWENZER Ingeborg In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 39 para. 20, p. 316.
118. HONNOLD, John, Uniform law, ... op. cit., p. 272.
119. MORALES MORENO Antonio M. en DÍEZ-PICAZO, Luis, La compraventa internacional, ... op. cit, p. 331.
120. SCHWENZER, Ingeborg In SCHLECHTRIEM Peter. Commentary, ... op. cit., Art. 39 para. 20, p. 316.
121. PILTZ, Burghard, Compraventa internacional, ... op. cit., p. 85.
122. HEUZÉ, Vincent, La vente internationale, ... op. cit.,p. 229.
123. In case the buyer discovers the hidden defects within this hypothetical period where it should have discovered them, the period to communicate starts to run at the moment that the defects are discovered, not when the hypothetical period comes to an end. See PERALES VISCASILLAS, Pilar, El Contrato de Compraventa Internacional de Mercancías (Convención de Viena de 1980), para. 164. Available at <http://www.cisg.law.pace.edu/cisg/biblio/perales1-38.html>, p. 2.
124. PILTZ, Burghard, Compraventa internacional, ... op. cit., p. 85.
125. SCHWENZER, Ingeborg In SCHLECHTRIEM, Peter. Commentary, ... op. cit., p. 316.
126. It could be argued that, in such a case, the parties would have agreed upon a derogation from the CISG regime. However, in close relationships, it is not so common that such proceedings are drafted and expressly agreed upon a document, but they constitute more a practice developed on an ongoing basis. It could be argued that this would constitute an implicit derogation of the CISG regime. Waiver and implicit derogation are considered in this study as valid means to introduce flexibility in the CISG regime. However, it is also argued that the CISG regime should be flexible in itself without the need to leave it to the parties' will.
127. MORALES MORENO Antonio.M. In DÍEZ-PICAZO, Luis, La compraventa internacional, ... op. cit., p. 336. The word 'promptly', as used in ULIS is defined in the following way:
Where under the present Law an act is required to be performed "promptly", it shall be performed within as short a period as possible, in the circumstances, from the moment when the act could reasonably be performed".
128. PILTZ, Burghard, Compraventa internacional, op. cit., p. 85.
129. It is though the opinion of the author that to set a concrete period of time, even as a guidelines, and not as a rigid rule, would be worse as a source of uncertainty. I hope that the next lines help to illustrate this point. I simply preferred to start with the criticism.
130. Vid, SCHLECHTRIEM, Peter. Internationales UN-Kaufrecht : ein studien- und erläuterungsbuch zum übereinkommen der vereinten nationen über verträge über den internationalen warenkauf (CISG). Tübingen: J.C.B. Mohr (Paul Siebeck) , 1996, para. 154, STAUDINGER/MAGNUS, Art. 39 para. 49: 14 days, HERBER, Rolf/CZERWENKA, Beate, Internationales Kaufrecht: Kommentar zu dem Übereinkommen der Vereinten Nationen vom 11. April 1980 über Verträge über den internationalen Warenkauf, München : Beck , 1991, Art. 39 para. 9, PILTZ, Burghard. Compraventa internacional, ... op. cit., p. 85: 4-7 días. With respect to the case law, reference could be made to some examples: OLG Karlsruhe (Germany) 25 June 1997: 8 days for non-perishable goods and mere hours for perishable goods; OLG Saarbrücken (Germany) 3 June 1998: same day of the delivery in case of perishable goods; OLG Koblenz (Germany) 11 September 1998: 7 days.
131. For example, American ,French or Dutch. See ILLESCAS ORTIZ, Rafael; PERALES VISCASILLAS, Pilar; Derecho Mercantil Internacional, op. cit., p. 190 and SCHWENZER, Ingeborg In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 39 para. 17, p. 315.
132. ILLESCAS ORTIZ, Rafael; PERALES VISCASILLAS, Pilar; "Derecho Mercantil Internacional, op. cit., p. 190.
133. The "noble month". This was held to be a reasonable starting point, modified by the particular circumstances of the case. See SCHWENZER, Ingeborg In SCHLECHTRIEM , Peter. Commentary, ... op. cit., Art. 39 para. 17, p. 315; ANDERSEN, Camilla. Reasonable time, op. cit., p.13.
134. Case law has sometimes taken this approach. Thus: Bundesgerichtshof (German Supreme Court) 3 November 1999, that sets the period of approximately 4 weeks (roughly a month) to notify (as well as one to examine the goods and two for obtaining an expert report. Total: 7 weeks; Oberster Gerichtshof (Austrian Supreme Court) 15 October 1995: one month; Obergericht Kanton Luzern (Switzerland) 8 January 1997: a month. Nevertheless, there are discrepancies about the point where to start counting the period. While the German and Austrian Supreme Courts set the dies a quo at the moment where the defect was discovered or ought to be discovered, the Swiss court interpreted that the month should be counted from the delivery of the goods. Moreover, there is also a tendency in some German case law to hold that the period of one month is for the examination of the goods as well as for the notification of the lack of conformity, thus merging the periods contained in Articles 38 and 39 CISG. Example: OLG München 11 March 1998. For further detail see ILLESCAS ORTIZ, Rafael/PERALES VISCASILLAS, Pilar; Derecho Mercantil Internacional, op. cit., p. 190.
135. In its Commentary 3 to Article 39 CISG, the Opinion states that "The reasonable time for giving notice after the buyer discovered or ought to have discovered the lack of conformity varies depending on the circumstances. In some cases notice should be given the same day. In other cases a longer period might be appropriate. No fixed period, whether 14 days, one month or otherwise, should be considered as reasonable in the abstract without taking into account the circumstances of the case. Among the circumstances to be taken into account are such matters as the nature of the goods, the nature of the defect, the situation of the parties and relevant trade usages". Vid CISG-AC Publisher First Opinions, op. cit.
136. Case law: CLOUT case no. 98, Rechtbank Roermond (Netherlands), 19 December 1991; CLOUT case no. 290, Oberlandesgericht Saarbrücken (Germany), 3 June 1998. For scholarly writing, see also ENDERLEIN, Fritz; MASKOW, Dietrich "International sales law...", op. cit., p. 159.
137. Cases of the Oberster Gerichtshof (Austrian Supreme Court), 27 August 1999; Amtsgericht Augsburg (Germany), 29 January 1996; SCHWENZER, Ingeborg In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 39 para. 16, p. 314-315.
138. Amtsgericht Augsburg (Germany) 29 January 1996: states that a month would be the maximum. This seems a long period in view of other case law, since other cases where the seasonal goods were the same (shoes) held much shorter periods: LG Stuttgart (Germany) 31 August 1989: 16 days as an unreasonable period.
139. HONNOLD, John. Uniform law, ... op. cit., p. 280.
140. Cases of the Arrondissementsrechtsbank's Hertogenbosch (Netherlands), 15 December 1997; Rechtbank van Koophandel Kortrojk (Belgium), 16 December 1996; Rechtbank Zwolle (Netherlands), 5 March 1997, as well as CLOUT case no. 284, of the Oberlandesgericht Köln (Germany), 21 August 1997.
141. SONO In BIANCA, Cessare Massimo; BONELL, Michael Joachim; Commentary, ... op. cit.,Art. 39 Sect. 2.4., p. 309.
143. Cases of the Rechtbank van Koophandel Kortrijk (Belgium), 16 December 1996, Rechtbank Zwolle (Netherlands), 5 March 1997, or of the Arbitration Court of the Hungarian Chamber of Commerce and Industry, 5 December 1995.
144. Cases of the Gerechtshof's Arnem (Netherlands), 17 June 1997, or CLOUT case no. 232, Oberlandesgericht Manchen (Germany), 11 March 1998.
145. In a case where the seller was acting under strict deadlines a more promptly notice would have been necessary. Case of the Landgericht Köln (Germany), 11 November 1993.
146. HONNOLD, John, Uniform law, ... op. cit., p. 281.
147. The most common among the different legal systems is that some provision provides for the need to notify the existence of defects, like Article 39(1) CISG. Examples of this are the German HGB § 377, the Austrian HGB § 377, 378, the Swiss OR Art. 201, the American UCC § 2-607 (3), the Italian Cc Art. 1495 (1), the Dutch BW Art. 7:23.1, or the Portuguese C de comercio Art. 471. Exceptions can be found in the French Cc Art. 1648 or Belgian Cc Art 1648, where the deadline is set only for the exercise of an action. See SCHWENZER Ingeborg In SCHLECHTRIEM, Peter. Commentary... 2005 Art. 39 para. 4. The majority of legal systems have a rule like that of Article 39(1) CISG or similar. However, it is not so common to find a provision like Article 39(2) CISG, setting a cut-off rule to secure the position of the seller even against those defects that may be hidden.
148. Uniform Commercial Code § 2-607 (3) provides that:
"Where a tender has been accepted
(a) the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy".
This provision is the equivalent to Article 39(1) CISG. Further references to the "notification" are found in Sections 2-602 (1), 2-603 (1) or 2-605 (1). However, there is no equivalent to the cut-off rule of Article 39(2) CISG, since there is no reference in the UCC to a maximum period of time to notify that acts as a guarantee period.
151. HEUZÉ, Vincent, La vente internationale, ... op. cit., p. 232.
152. HONNOLD, John. Uniform law..., op. cit., p. 281.
153. Ibidem, together with the corresponding note, where it is explained that the proposals to refer the beginning of the two year period to the moment of delivery were rejected.
154. AUDIT, Bernard. La vente internationale de marchandises: Convention des Nations-Unies du 11 avril 1980, Paris : LGDJ, cop. 1990 pp. 106-107.
155. SCHWENZER, Ingeborg. In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 39 para. 22, p. 316; Arbitral Award of the Arbitration Court of the Stockholm Chamber of Commerce, 11 September 1998. Available on the Internet at <http://cisgw3.law.pace.edu/cases/980911s5.html>. However, the contrary view has been expressed in a case decided by the China International Economic & Trade Arbitration Commission (CIETAC) on 30 March 1999. Available on the Internet at <http://cisgw3.law.pace.edu/cases/990330c2.html>. The author holds to the first interpretation, since article 40 CISG reads "The seller is not entitled to rely on the provisions of articles 38 and 39" without making any distinction between Article 39 (1) and 39 (2). For a detailed analysis of Article 40, see infra VII. In that Section, it is submitted that Article 40 CISG should enjoy a more important role in balancing the too formalistic approach of Article 39 CISG in more dynamic environments, and the case by the Stockholm Chamber of Commerce is used to illustrate several points. On the other hand, while the CIETAC case provides a good illustration of the role of the communication of defects regime in a formalistic environment, see infra X.4, nevertheless, stating, as does this CIETAC tribunal, that Article 40 CISG does not preclude the seller from relying on Article 39(2) CISG, perhaps goes too far. Regardless of whether the parties' relationship is flexible and dynamic or rigid and formalistic, Article 40 CISG still covers those cases where the seller willfully hides the defects from the buyer, and Article 39(2) CISG should not protect the seller in such a situation.
156. Article 39 CISG states that "The buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller..."
157. SCHWENZER Ingeborg. In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 39, para. 14, p. 313.
158. MORALES MORENO Antonio M. en DÍEZ-PICAZO, Luis, La compraventa internacional, ... op. cit., p. 338. In case of Spain, according to Article 10.11 of the Spanish Civil Code the law deemed applicable would be that of the country where the faculties conferred are exercised "ley del país en donde se ejerciten las facultades conferidas".
159. SeeLandgericht Köln (Germany) 30 November 1999 CLOUT case no. 364. In this case, a German buyer concluded a contract of sale of stones for facades with "X", who acts as an agent for an Italian seller. Due to certain defects in the goods, of which the buyer informs "X" ,the buyer refuses to pay the price. The court held that the CISG does not contain rules on the addressee of the notification. Applying German law, the court reaches the conclusion that "X" acted as an agent of the seller and, thus, the communication is addressed to the proper person. Nevertheless, the communication is made beyond the reasonable time and the buyer thus loses its right to rely on the lack of conformity of the goods.
161. SCHWENZER, Ingeborg In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 39 para. 14, pp. 313-314.
162. SCHLECHTRIEM, Peter In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 27 para. 7, p. 194.
163. These criteria have been taken from the commentary of SCHLECHTRIEM to Article 27. SeeSCHLECHTRIEM, Peter In SCHLECHTRIEM , Peter. Commentary, ... op. cit., Art. 27 para. 7, p. 194.
164. Vid supra p. 7.
165. Unless the third party is in an agency relationship with the seller.
166. ANDERSEN Reasonable time, ... op. cit, p. 8.
167. Case of 24 January 1996, CLOUT case no. 411. In this case, an Italian wholesaler (claimant) delivered an order of truffles to a German buyer.
168. The court held that, in case that the lack of conformity is notified to a seller's employee, the buyer needs to make sure that the notice reaches the seller. SeeUNCITRAL Digest Article 39, op. cit., p. 17. This is quite burdensome for the seller, who may be in an uncertain situation with respect to the validity of the notice, although it addressed the notice to a seller's employee. We should not forget that the seller as such is not a tangible subject, and thus, the notice will in any event be addressed to a seller's employee. To state that, in such a case, the buyer has to make sure that the notice reaches the seller is something similar than to change the rule of the "adequate means" (or mailbox rule) under Article 27 CISG for the "receipt rule". As another example of the stringent interpretation made by courts, the case decided by the Bundesgeright (Switzerland), 13 November 2003, the court held that the notice given by the buyer was not specific enough, although, besides being extremely specific (the Buyer had used the heading "Unusable Machine Delivery" and had stated in this letter that the "machine was unusable", the "machine distillation system did not function" and "the delivered machine components did not function"), the notification resulted from a joint examination of the representatives of the buyer and the seller. In this sense, even if the purpose of the notification were to provide the seller with the greatest extent of information possible, that would have been fulfilled by allowing the seller to examine the machinery. See Case commentary by Florian Mohs, and Mariel Dimsey (translation), available at <http://cisgw3.law.pace.edu/cases/031113s1.html#cc*>.
169. ANDERSEN Reasonable time, ... op. cit, p. 8.
170. In other words, whether the entrance of third parties in the relationship implies a right of the buyer to communicate the existence of defects to the party it wishes, and thus, whether what the third party represents is an additional right to the buyer.
171. In other words, whether the entrance of third parties implies a double duty to notify, and thus, whether what the third party represents is an additional duty to the buyer.
172. In addition to the case law quoted in the previous sub-heading, see case of the Landgericht Kassel (Germany) 15 February 1996, where a notice of defects communicated by the buyer to an independent third party that had acted as an intermediary in the formation of the contract, but had no other relationship with the seller was held as notice not given by the adequate means in the sense of Article 27 CISG, and thus the buyer bore the risk when the seller did not receive the notice.
173. Principle of debtor protection, expressed with clarity in Article 15 of the United Nations Convention on Assignment of Receivables on International Trade. Available at <http://www.uncitral.org/pdf/spanish/texts/payments/receivables/ctc-assignment-convention-s.pdf>.
174. MORALES MORENO Antonio. M. In DÍEZ-PICAZO, Luis, La compraventa internacional, ... op. cit., pp. 343-344.
175. Article 46 CISG.
176. Article 47 CISG.
177. Article 49 CISG.
178. Article 50 CISG.
179. IGLESIA MONJE, María Isabel de la. El principio de conformidad del contrato en la compraventa internacional de mercaderías : conexiones con la obligación de saneamiento, y, con el deber legal de garantía tanto en nuestro ordenamiento como en los sistemas de nuestro entorno. Madrid: Centro de Estudios Registrales, 2002, p. 323.
180. "This Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract".
181. ICC Award no. 6653/1993.
182. HERBER, Fritz In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 4 para. 22, p. 47.
183. Which would be contrary to the uniformity principle pursuant to Article 7 (1) CISG.
184. FERRARI, Franco. Burden of Proof under the United Nations Convention on Contracts for the International Sale of Goods (Charge de law preuve dans la Convention des Nations Unies sur le contrat de vente internationale de merchandises) (CVIM), Revue de droit des affaires internationales / International Business Law Journal, No. 5 (2000) 665-670. Available at <http://www.cisg.law.pace.edu/cisg/biblio/bib2.html>, p.2.
186. This is also the approach of the case law. See case decided by the Tribunal di Vigevano (Italy) 12 July 2000, or that by the Bundesgericht (Swiss Supreme Court) 13 November 2003. Nevertheless, seeHandelsgericht des Kantons Zurich (Switzerland) 30 November 1998, where the court held that the Vienna Convention does not rule on matters of burden of proof. Nevertheless, there are certain general principles that may be inferred. In that case the court held that the responsibility for defects in the goods is a critical aspect of the obligations of the seller, and thus it corresponds to the latter to prove the absence of defects at the moment of passing of the risk. On the other hand, the buyer has the burden of proving the examination of the goods and notice of lack of conformity within a reasonable time. Hence, the court reached the same conclusion as if it had held that the CISG ruled on burden of proof aspects, since, although the denies the role of CISG on issues of burden of proof, it sets the rules on that issue on the basis of the CISG principles. I prefer the approach of the Tribunale di Vigevano, and the scholarly writing defending the ruling of the CISG on burden of proof, thereby providing a uniform solution, more in accordance with Article 7 (2) CISG.
187. This view is supported by case law. See cases of the Handelsgericht Zürich (Switzerland) 9 September 1993 and 30 November 1998. It also corresponds to the buyer the burden of proving that the notification was made on time, as held by the Oberster Gerichtshof (Austrian Supreme Court) 30 June 1998. See ILLESCAS ORTIZ, Rafael; PERALES VISCASILLAS, Pilar; Derecho Mercantil Internacional, op. cit., p. 191.
188. SCHWENZER, Ingeborg In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 39 para. 37, p. 320.
189. HONNOLD, John, Uniform law, ... op. cit., p. 279.
190. Ibidem. The case law has recognized this conclusion. See Handelsgericht Zurich (Switzerland), 30 November 1998.
191. Vid infra VII.2.B.
192. The cooperation principle is contemplated expressly on Article 5.3 of the UNIDROIT Principles for International Contracts (UPIC).
193. Or, what is also frequent, being the notice beyond the (short) time to notify, it may accept to negotiate a solution with the buyer, and then, if it does not like how negotiations develop, withdraw from the table and allege that the notice was untimely.
194. Vid infra VIII.
195. Indeed, complex contracts that, besides delivery of goods, require other services are increasingly common. For that reason, legislation has evolved in its concept of "contract of sale" so as to include these new "animals" the 'mixed contracts'. For an analysis of this evolution, vid PERALES VISCASILLAS, Pilar Hacia un nuevo concepto del contrato de compraventa: desde la Convención de Viena de 1980 sobre compraventa internacional de mercancías hasta y después de la Directiva 1999/44/CE sobre garantías en la venta de bienes de consumo, Actualidad Civil, nos. 47-48, 2003, pp. 1199-1224. However, to include these contracts within the scope of sales law is not enough, since that sales law must adequate itself to the needs of the new categories. In this sense, although the old rules may adequate to an old concept of "contract" they may not adequate sometimes to that of "contractual relationship".
196. Exception made of those sales excluded by virtue of Articles 2 or 3 of the CISG.
197. In particular, the analysis should be made in the context of Article 8(2) CISG, which is the provision used to interpret the parties' conduct. For further study, see BERLINGIERI, Francesco, Lo Standard del "reasonable man", In La Vendita Internazionale. La Convenzione di Viena dell'Aprile 1980. Quaderni di Giurisprudenza Commerciale. Casa Editrice Giuffré, Milán, 1981. See also WEISZBERG, Guillaume Le "Raisonnable" en Droit du Commerce International. Doctoral thesis. University Panteón Assas (París II) 7 November 2003. Available at <http://www.cisg.law.pace.edu/cisg/text/e-text-08.html>.
198. AUDIT, Bernard La vente internationale... , op. cit.,p. 107.
199. Mainly African countries. See GARRO, Alejandro, Reconciliation of Legal Traditions in the U.N. Convention on Contracts for the International Sale of Goods. Available at <http://www.cisg.law.pace.edu/cisg/text/garro38,39,44.html>; SONO In BIANCA, Cessare Massimo, BONELL, Michael Joachim; Commentary... , op. cit., p. 324.
200. SONO In BIANCA, Cessare Massimo; BONELL, Michael Joachim; Commentary, ... op. cit. p. 326.
201. HONNOLD, John, Uniform law, ... op. cit., p. 283.
202. Unless a longer period is agreed upon.
203. Indeed, it recommends to regulate this issue in the contract, by exercising the party autonomy contemplated under Article 6 CISG. Official Records, p. 346. SeeKRITZER, Albert H., Guide to practical applications..., op. cit., p. 316; SCHLECHTRIEM, Uniform Sales Law - The UN-Convention on Contracts for the Internacional Sale of Goods. Available at www.cisg.law.pace.edu/cisg/bilbio/schlechtriem-39.html>, p. 2. Moreover, it has been questioned whether Article 44 CISG adds anything to the regime on notification of defects, considering that Articles 38 and 39 CISG are drafted in such a language that permits the same result as Article 44 (since both state that the circumstances of the particular case will determine the periods of examination and notification). See CISG Advisory Council. Opinion Nº. 2. Examination, ... op. cit., p. 4.
204. Vid supra V.4.
205. Nevertheless, regard should be had to the case decided by the Oberlandesgericht Karlsruhe (Germany) 25 June 1997, where the court states, with an extremely rigid line of thought, that the reasonable excuse under Article 44 CISG may not be applied to enlarge the examination period under Article 38 CISG. The author thinks that the position is not correct, and that what the court finally supports is the inexistence of reasonable excuse in that case. However, that conclusion should have been reached through an analysis of Article 44 CISG in the light of the circumstances of the case, but not through an undue restriction of the scope of the provision. The bias of the court towards a position favorable to the seller is manifest, since it states that the period to notify should be of around 8 days (in case of non-perishable goods) and of mere hours in case of perishable goods.
206. LOOKOFSKY, Joseph, Cross references and editorial analysis. Article 44. Available at www.cisg.law.pace.edu/cisg/text/lookofsky-44.html>, p. 2. This does not suppose interpreting the whole Convention in a different way when the parties are situated in developing countries, but it is true that a party situated in a country with defective means of transport and communication will more easily deserve to fall within the scope of the reasonable excuse.
207. ENDERLEIN, Fritz; MASKOW, Dietrich International sales law, ... op. cit., p. 172.
208. For example, in Christmas. SeeHUBER In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 44 para. 8, p. 351.
209. S.K. DATE-BAH The Convention of the International Sale of Goods from the perspective of the developing countries. In La Vendita Internazionale. La Convenzione di Vienna Dell'11 Aprile 1980, Giuffré, Milán, 1981, p. 32.
210. KUOPPALA, Sanna, Examination of the Goods, ... op. cit, p. 31.
211. SONO en BIANCA, Cessare Massimo, BONELL, Michael Joachim; Commentary, ... op. cit., p. 326; ENDERLEIN, Fritz; MASKOW, Dietrich International sales law, ... op. cit., p. 172.
212. S.K. DATE-BAH Perspective of developing countries, ... op. cit., p. 32.
214. ENDERLEIN, Fritz; MASKOW, Dietrich International sales law, ... op. cit., p. 172.
215. AUDIT, Bernard La vente internationale de marchandises, op. cit., p. 108.
216. ENDERLEIN, Fritz; MASKOW, Dietrich International sales law, ... op. cit., p. 172. Nevertheless, in the case decided by the Landgericht München (Germany) 20 March 1995 the court excluded the exercise of remedies by the buyer, although there was a first notification, which was timely but unspecific ("The goods are rancid") and other posterior notifications, which were specific enough, but were untimely. Nevertheless, I still believe this case law does not suppose an obstacle for the position explained since, probably, the holding of the court was based on the fact that the buyer was since the beginning in a position to specify the nature of the lack of conformity (moreover, the goods were not complex technical devices, but pieces of bacon).
217. SONO In BIANCA, Cessare Massimo; BONELL, Michael Joachim; Commentary, ... op. cit., p. 326, quoting DATE-BAH. Also AUDIT, Bernard La vente internationale de marchandises..., op. cit., p. 108.
218. HUBER In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 44 paras. 6-9ª, pp. 350-351.
219. Where the buyer is the one in insolvency proceedings, the analysis would exceed the scope of this work, since a study should be made of insolvency law to see whether and to what extent the buyer's duties are maintained or not by the insolvency, which is an issue for insolvency law, not for contract law. The only aim in these lines is that of analyzing whether the fact that the seller is insolvent turns it into a subject incapable of receiving the communication, so that the latter becomes pointless. Furthermore, what is to be studied is whether in such a case a situation of reasonable excuse would exist or the duty under Article 39 CISG would persist.
220. Vid supra V.1.
221. Vid supra V.2.
222. MIQUEL GONZÁLEZ J.M In DÍEZ-PICAZO, Luis, La compraventa internacional, ... op. cit., p. 401.
223. AUDIT, Bernard La vente internationale de marchandises, ... op. cit., p.107.
224. Official Records p. 321 nº 53 (declarations from the Swedish delegate, Mr. Hjerner), p. 322nº 62 (declarations of the German delegate, Mr. Herber), referred by HUBER In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 44 para. 5, p. 350. It is very interesting that the scholars who interpreted Article 44 CISG considered the need to balance the interests of both parties. Perhaps they identified the fact that Article 39 CISG is too unilateral and does not provide with enough elements to make an overall assessment of the conduct of both parties. The study of case law on Article 44 CISG is disappointing. However, I will later show that the study of Article 40 CISG gives some grounds for hope. My proposal precisely states the need to use that provision to make an overall assessment of both parties' conduct on the basis of Articles 39 and 40.
225. HONNOLD, John, Uniform law, ... op. cit., p. 285.
226. SONO en BIANCA, Cessare Massimo, BONELL, Michael Joachim; Commentary, ... op. cit., p. 328.
227. Case by the Oberlandesgericht München (Germany) 8 February 1995, CLOUT case no. 167; Oberlandesgericht Karlsruhe (Germany) 25 June 1997, CLOUT case no. 230; Oberlandesgericht München (Germany) 9 July 1997, CLOUT case no. 273; Oberlandesgericht Koblenz (Germany) 11 September 1998, CLOUT case no. 285; ICC Award no. 7331/1994, CLOUT case no. 303; Audiencia Provincial de Pamplona (Spain), división 3ª, CLOUT case no. 397.
228. ICC Award June 1996. Available at <http://www.unilex.info>. It is easily ascertainable what was previously explained about Article 44 CISG. Despite being referred the reasonable excuse to the notification under Article 39 CISG, it is possible to use the reasonable excuse in cases where the problem is related to a delay in the examination of the goods, contemplated under Article 38 CISG, if that has been the source of the delay in the notification. In any event, the same conclusion could have been reached by applying the general principle embodied in Article 80 CISG, by which "A party may not rely on a failure of the other party to perform, to the extent that such failure was caused by the first party's act or omission".
229. Case before the Arbitration Court of the Russian Chamber of Commerce and Industry 24 January 2000. See <http://www.unilex.info>. The abstract reads as follows: "recalling the principle of reasonableness set out in Art. 8 CISG, the Tribunal stated that, although the contract provided that the buyer would inspect the goods at the port of shipment or on loading on board, the postponement of the inspection of the first installment till the arrival at the port of destination was reasonable, due to the technical difficulties incurred by the buyer. As a result, the Tribunal found that the buyer had a reasonable excuse for not having made the claim for lack of conformity within the time-limit agreed in the contract (Art. 44 CISG)".
230. CLOUT case no. 285. It concerned a German seller and a Moroccan buyer.
231. The goods consisted of the raw materials necessary to the manufacture of PVC tubes, hence not complicated technical apparatus. In any event, the period appears as very short. This again is due to the influence of domestic law in the interpretation of the CISG.
232. The court, although being very restrictive in its reasoning, interprets Article 44 CISG as related not only to the notice under Article 39 CISG, but also to the examination period under Article 38 CISG explained before.
233. Moreover, there is again the argument that the reference to such a vague term as "reasonable excuse" is pointless since the same factual circumstances used to appreciate the existence of a reasonable excuse could also be taken into account to consider the "reasonable time" to be longer or the notice to be less specific. Vid CISG Advisory Council. Opinion Nº. 2. Examination, ... op. cit., p. 4.
234. The German courts tend to be particularly strict on this issue.
235. What leads to assume that, among them, commercial rules are stricter. Nevertheless, the Oberlandesgericht Koblenz in its decision addressed before applied these same strict criteria to a party that did not belong to a western country.
236. SONO In BIANCA, Cessare Massimo; BONELL, Michael Joachim; Commentary, ... op. cit., p. 314
237. The typical case would be that of commodities transactions, although capricious practice should warn against any presumption of this kind.
238. AUDIT, Bernard La vente internationale de marchandises, ... op. cit., p. 108.
239. Article 44 CISG tempers the duty to notify, and its practical scope is extremely scarce. On the other hand, Article 40 CISG completely exempts the buyer. See IGLESIA MONJE, María Isabel de la El principio de conformidad, ... op. cit. pp. 346-351.
240. SCHWENZER, Ingeborg In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 40 para. 4, pp. 321-322.
241. MORALES MORENO Antonio.M. In DÍEZ-PICAZO, Luis, La compraventa internacional, ... op. cit., p. 348
242. HONNOLD, John, Uniform law, ... op. cit., p. 308.
244. ENDERLEIN, Fritz; MASKOW, Dietrich International sales law, ... op. cit., p. 164.
246. SCHLECHTRIEM, Peter Uniform Sales Law, ... op. cit., p. 2. See Oberlandesgericht München (Germany) 11 March 1998. CLOUT case no. 232; MORALES MORENO Antonio.M. In DÍEZ-PICAZO, Luis, La compraventa internacional, ... op. cit., p. 349.
247. ILLESCAS ORTIZ, Rafael; PERALES VISCASILLAS, Pilar; Derecho Mercantil Internacional, op. cit., , p.184. Award of the Arbitration Institute of the Stockholm Chamber of Commerce 5 June 1998.
248. A court demanded not only that the seller knew the existence of the elements of the lack of conformity, but also that such elements turned the products into non-conforming goods. See Oberlandesgericht Karlsruhe (Germany) 25 June 1997, CLOUT case no. 230 and Bundesgerichtshof (German Supreme Court) 25 November 1998, CLOUT case no. 270.
249. SCHWENZER, Ingeborg In SCHLECHTRIEM, Peter. Commentary, ... op. cit., p. 322; AUDIT, Bernard La vente internationale de marchandises, ... op. cit. pp.108-109; HEUZÉ, Vincent, La vente internationale, ... op. cit., p. 237.
250. HEUZÉ, Vincent, La vente internationale, ... op. cit., p. 237; AUDIT, Bernard La vente internationale..., p. 109.
251. MORALES MORENO Antonio.M. In DÍEZ-PICAZO, Luis, La compraventa internacional, ... op. cit., p. 349.
252. IGLESIA MONJE, María Isabel de la El principio de conformidad, ... op. cit., p. 346.
253. Award no. 5713/1989, CLOUT case no. 45. This case offers in addition the peculiarity that the Arbitral Tribunal does not apply the Vienna Convention as a law, but as usages of trade, taking as a basis Article 13 (5) of the Arbitration Rules of the International Chamber of Commerce in their version of 1988.
254. 12 October 1995, CLOUT case no 170.
255. It would not be a defect apparent at first sight. However, what is more probable is that the court understood that the seller had added the water, and that the circumstance it could not ignore was that such addition turned the goods as not apt to be traded in Germany.
256. HEUZÉ, Vincent, La vente internationale, ... op. cit., p. 237.
257. MORALES MORENO Antonio.M. In DÍEZ-PICAZO, Luis, La compraventa internacional, ... op. cit., p. 349. Nevertheless, the case of the Oberlandesgericht Karlsruhe (Germany) 25 June 1997 establishes that, in a sale of surface protective film for metal sheets, where the acrylic used was different from the usual one and thus the film left glue residues, Article 40 CISG cannot be applied because the seller, although utilizing an acrylic different from usual, did not have to know that this constituted a lack of conformity. However, this case effectuates an interpretation totally against the buyer, and thus, should be taken more as an example of how CISG should not be interpreted. See THOMPSON, Daniel Alexis. "Buyer beware: German interpretation of the CISG has led to results unfavorable to buyers". Available at <http://cisg3.law.pace.edu/cases/970625gl.html>. See also LIMBACH, Francis; AHEARN "Conformity of goods, derogation from Article 40 by the parties and conditions of Art. 40 CISG. Arbitration Institute of the Stockholm Chamber of Commerce Arbitration award, June 5th, 1998. Available at <http://cisg3.law.pace.edu/cisg/biblio/limbach.html>, p. 2, note 5.
258. SCHWENZER, Ingeborg In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 40 para. 5, p. 322. In the same way, the case law has held that, unless the seller is a mere intermediary not familiarized with the trade sector, it is necessary to make sure whether the seller was in a position to know the usages and practices. An example is the case decided by the Austrian Supreme Court the 27 February 2003. Buyer and seller agreed in 1997 on a sale of frozen fish. The buyer alleged that the goods were non-conforming to the contract, since the fish sold corresponded to the fishing quota of 1996, rather than that of 1997. The buyer also submitted that there was a commercial usage in the trade sector by which the fish sold one year had to correspond to the capture of that same year. The Supreme Court sent the case back to the lower court in order for it to ascertain whether such usage existed, as well as to ensure whether the commercial manager of the seller was in a position to know it.
259. MORALES MORENO Antonio.M. In DÍEZ-PICAZO, Luis, La compraventa internacional, ... op. cit., p. 349.
260. Case of 11 March 1998, CLOUT case no. 232. It is curious that the court dismissed the submissions of the buyer referring to a meeting between a seller's representative with the buyer, where the former stated that they had already received complaints from third parties' customers (apparently the seller was a wholesaler who sold to retailers who sold to the public) concerning the quality of the goods. First, those submissions were not proven. Nevertheless, states the court, in case they were proven, customer complaints do not constitute sufficient proof of the bad quality of the goods. Although the court adds that this does not prove that the seller had received complaints before delivery, the reasoning seems contradictory to that stated by scholars. Although it is true that the existence of complaints that came to the seller's knowledge does not suppose the existence of bad quality in the goods, it is also true that those complaints impose upon the seller a superior duty to be diligent in future deliveries, either through a previous examination of the goods, or through a communication to the buyer of the complaints received.
261. 30 November 1998, CLOUT case no. 251.
262. CLOUT case no. 168.
263. 11 September 1998, CLOUT case no. 285.
264. The goods were raw materials to manufacture PVC tubes.
265. Oberster Gerichtshof 27 February 2003, CLOUT case no. 477. Available at <http://cisgw3.law.pace.edu/cases/030227a3.html>.
266. The court held that the determination of the existence of a commercial usage constituted an issue of fact, and thus sent the proceedings to the lower court for such determination.
267. This scenario is where Article 40 CISG may develop a very good task by balancing Article 39's rigidity. Think of installment contracts, contracts that encompass installation or technical assistance, contracts where the parties have to work together to achieve the final result... These transactions will have a higher degree of complexity, which forces the parties to work on a more flexible basis and enhance commitment and interaction.
268. On the opposite side, in a contract where the parties have not been in close contact, it is harder to demonstrate that the seller knew or could not have been unaware of the existence of defects.
269. Nevertheless, with the aim of avoiding turning the reasoning into a circular argument, it is submitted that Article 40 CISG would impose upon the seller at least the duty to inquire about the lack of conformity if it has notices of the possible existence of irregularities in its side of the contract (although it reaches knowledge through means that do not qualify as a notice under Article 39 CISG).
270. Award no. 5713/1989, CLOUT case no. 45.
272. In any event, the case is not very clear in its Internet version. See <http://cisgw3.law.pace.edu/cases/895713i1.html>. The case is accompanied by useful comments by Professor Richard Hyland of Rutgers Law School.
273. Award from the Arbitration Institute of the Stockholm Chamber of Commerce, 5 June 1998. Available at <http://cisgw3.law.pace.edu/cases/980605s5.html>.
274. Case no. 9474, February 1999. See UNILEX.
275. Ibid, para , letter (b). See UNILEX.
276. Ibid para. , letter (c).
277. Section (d) of the reasoning of the tribunal could also be quoted. It is stated there: "Thirdly, the general attitude of [Defendant] in this matter is a further argument. The Tribunal regards as far-fetched that [Defendant] invokes the Bank's delay in order to free itself from a part of its obligation under the 1993 Agreement. [Defendant]'s reluctance to promptly settle the outstanding sums, especially the Bank's advance payment, meant that the Bank was reluctant to give notice of defects in a straightforward manner, as the Bank feared that [Defendant] might then refuse to reimburse the sums due... To use the wording of the Bank, it was treated as a hostage and not as a business client.
278. 25 June 1997. Available at <http://cisgw3.law.pace.edu/cases/970625g1.html>.
279. Ibidem. See abstract
280. Basically, the court held that the fact of having negotiated during 15 months the amount of damages implied that it had waived its right to allege that notification was not timely.
281. See <http://cisgw3.law.pace.edu/cases/981125g1.html>. "Facts of the case".
282. Available at <http://www.unilex.info>.
283. As the French case law does when applying its domestic law. See HEUZÉ, Vincent, La vente internationale, ... op. cit., p. 237; AUDIT, Bernard La vente internationale de marchandises, ... op. cit., p. 109.
284. I support that, in this context, the statement of Professor John Honnold that "in the age of electronic communications, a seller who wants to know more must be expected to inquire" acquires its full importance. See HONNOLD, John O. Uniform law..., op. cit., p. 279.
285. SONO In BIANCA, Cessare Massimo; BONELL, Michael Joachim; Commentary, ... op. cit., pp. 314-315; V.G. CURRAN Cross-references..., op. cit., p. 2.
286. Award 5 June 1998, CLOUT case no. 237.
287. Moreover, the installation of the original lock plate was much easier and susceptible of causing less problems than the one that was finally sent.
288. Vid supra V.2.A.
289. This position is pointed out by Vivian Grosswald Curran, in the cross-reference analysis of Article 40 CISG. See CURRAN, Vivian Grosswald. Cross-references and editorial analysis. Article 40. Available at <http://www.cisg.law.pace.edu/cisg/text/cross/cross-40.html>.
290. What seems a potentially frequent case in case of sale of equipment goods whose installation is of complex nature.
291. ENDERLEIN, Fritz; MASKOW, Dietrich International sales law, ... op. cit., p. 164.
292. This line of thought has been followed by some case law of first instance courts. See Landgericht Landshut (Germany) 5 April 1995.
293. SCHWENZER, Ingeborg in SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 40 para. 8, p.323. In the same sense, NEUMAYER, Karl H./ MING, Catherine, Convention de Vienne, ... op. cit., p. 309. Note that this approach is based upon the "reasonable time" set by Article 39 (1) CISG, and not much focused on Article 39 (2)'s cut-off rule of two years. The reason is that Article 40 CISG should be a tool to balance the parties' behavior on the basis of the principle of cooperation. This depicts a scenario where the parties can still cooperate to reduce the losses and save the contractual relationship. However, in principle in cases where Article 39 (2) CISG is applied, the "interactive" period of the relationship has passed by, and thus Article 40 CISG only performs its traditional role in cases where the seller willfully or negligently hides the existing defects. It could be argued that, in some relationships, the "interactive" period may be long, and thus the assessment should be made with Articles 39 (1), 39 (2) and 40 altogether. A case-by-case analysis will always be necessary, but Articles 39 (1) and 40 interpreted together should provide a tool flexible enough to tackle cases of complex relationships (together with other elements, as seen in Sections VIII and IX) without the need of a rule proper of static environments like Article 39 (2) CISG.
294. Official Records p. 430. Vid CURRAN, Vivian Grosswald Cross-reference and Editorial Analysis of CISG Article 40, CISG Database, Pace University School of Law (<http://www.cisg.law.pace.edu>) June 1997, pp. 1-5
295. SCHLECHTRIEM, op. cit., p. 98; STOLL en SCHLECHTRIEM Peter. Commentary, ... op. cit., Art. 79 para. 33, p. 314; NEUMAYER, Karl H./MING, Catherine, Convention de Vienne sur les contracts de vente internationale de merchandises: commentaire; Lausanne: édité par François Dessemontet CEDICAC, 1993, p. 523-524; HERBER, Rolf; CZERWENKA, Beate, Internationales Kaufrecht..., op. cit., Art. 79, para. 6; Summary Records of Meetings of the First Committee, 33rd meeting. Available at <http://www.cisg.law.pace.edu/cisg/firstcommittee/Meeting33.html>.
296. AUDIT, Bernard La vente internationale de marchandises, ... op. cit., p. 179; HERBER, Rolf; CZERWENKA, Beate, Internationales Kaufrecht, ... op. cit., Art. 80, para. 5; NEUMAYER, Karl H./MING, Catherine, Convention de Vienne, ... op. cit., pp., 540-541; Summary Records of Meetings of the First Committee, 37th meeting. Available at <http://www.cisg.law.pace.edu/cisg/firstcommittee/Meeting37.html>
297. ENDERLEIN, Fritz; MASKOW, Dietrich International sales law, ... op. cit., p.164; SCHWENZER, Ingeborg In SCHLECHTRIEM, Peter Commentary, ... op. cit., Art. 40, para. 6, p. 322.
298. STOLL In SCHLECHTRIEM, Peter. "Commentary...", op. cit., Art. 79 para. 33, p. 314; HERBER, Rolf; CZERWENKA, Beate, Internationales Kaufrecht, ... op. cit., Art. 79 para. 15; NEUMAYER, Karl H./MING, Catherine, Convention de Vienne, ... p. 523-524. This is a typical case of seller's responsibility. It is not necessary to demonstrate that the seller committed negligence when selecting them, but it suffices that the employees themselves are negligent, since they are "part of the seller". In this sense, ,it does not matter that the employees acted against the seller's instructions. SeeHEUZÉ, Vincent, La vente internationale, ... op. cit., pp. 237-238.
299. HONNOLD, John, Uniform law, ... op. cit., pp. 487-488; V.G. CURRAN Cross-references, ... op. cit.; STOLL In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 79 para. 35, P. 615. In case of third parties specifically hired for the contract performance there should be, in words of Professor John Honnold an "organic nexus" between both contracts (the sales contracts and the contract signed with the third party).
300. ENDERLEIN, Fritz; MASKOW, Dietrich International sales law, ... op. cit. p. 164; SCHWENZER, Ingeborg In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 40 para. 6, p. 322. Professors Enderlein and Maskow state, in addition, that the knowledge of sub-contractors could not be attributable to the seller. See ENDERLEIN, Fritz; MASKOW, Dietrich International sales law, ... op. cit., p. 165 With that view, thus, they differ from the general view.
301. Vid supra V.3.A. It was also observed that case law tends to be restrictive in those cases.
302. Even an employee who declares himself not authorized to receive communications on behalf of the seller.
303. 24 January 1996.
304. Unless those are very rare cases, where the employee to whom the notification is made does not have any relevance with the contractual relationship (e.g. a janitor).
305. In the same way, in the case decided by the Bundesgericht (Swiss Supreme Court), 13 November 2003, where the court held that the notice was not sufficiently specific, although it resulted from a joint examination by buyer and representatives of the seller. The perspective could have changed, had the analysis been made from a joint perspective of Articles 39 and 40 CISG. If the role of those two provisions is to promote cooperation between the parties, it seems straightforward that the buyer cooperated much more than the seller since, after accomplishing a joint examination, it communicated that the "machine was unusable", the "machine distillation system did not function" and "the delivered machine components did not function", whereas the seller, after the examination took place, did not bother itself making inquiries, or accomplishing a second examination, or offering itself to fix the problem.
306. Vid supra V. 5.
307. AUDIT, Bernard La vente internationale de marchandises, ... op. cit., pp.108-109; HEUZÉ, Vincent, La vente internationale, ... op. cit., p. 237.
308. It is thus held that Article 40 CISG alleviates the heavy burden of proof for the buyer with respect to the knowledge by the seller about the lack of conformity. If the facts demonstrate that it was more probable that the seller knew the existence of defects than that it ignored them, it corresponds to the seller to prove that it did not reach the knowledge of those defects, in order for Article 40 CISG not to be applied. See Stockholm Chamber of Commerce Arbitration Award of 5 June 1998. Anna Kazimierska. Editorial remarks.
309. For a detailed analysis, seeILLESCAS ORTIZ, Rafael; PERALES VISCASILLAS, Pilar; Derecho Mercantil Internacional, op. cit., pp.183-184.
310. HEUZÉ, Vincent, La vente internationale, ... op. cit., p. 237; HERBER, Rolf; CZERWENKA, Beate, Internationales Kaufrecht, ... Art. 40, para. 3.
311. SCHWENZER, Ingeborg In SCHLECHTRIEM, Peter. Commentary, ... op. cit., Art. 40 para. 7, p. 323.
313. Available at <http://www.cisg.law.pace.edu/cisg/wais/db/cases2/020925g1.html>.
314. SCHWENZER, Ingeborg In SCHLECHTRIEM, Peter. Commentary... 2005. Art. 40 para. 7, p. 479.
315. The understanding is that the seller may disclose certain details, but may not know that those details constitute defects for the purposes the buyer may need the goods. This case is available in <http://www.cisg-online.ch/cisg/urteile/918.pdf>, and its explanation has been obtained from SCHWENZER, Ingeborg en SCHLECHTRIEM, Peter. Commentary... 2005. Art. 40 para. 7, note 14a, p. 479.
316. Case 56/1995, 24 April 1996. Ucranian seller and Bulgarian buyer. Available at <http://www.unilex.info>.
317. A different interpretation of the case could be argued, though. In that case, neither Article 39 nor Article 40 CISG operated, since the buyer effectively notified the existence of defects to the seller. Once this notification was made, the parties agreed upon the buyer's exercise of the remedy of reduction of the price. However, the agreement made this exercise depend upon the results by the independent expert examination and certificates. What the buyer violated was the duty to disclose the result of such examinations pursuant to the parties' agreement, not the duty to communicate pursuant to Article 39, interpreted jointly with Article 40 CISG.
318. HERBER, Rolf; CZERWENKA, Beate, Internationales Kaufrecht, ... op. cit., Art. 40 para. 3; HEUZÉ, Vincent, La vente internationale, ... op. cit., p. 237.
319. KUOPPALA, Sanna, Examination of the Goods, ... op. cit., p. 12; ZIEGEL, Jacob S., Report to the Uniform Law Conference of Canada on Convention on Contracts for the internacional Sale of Goods. Available at www.cisg.law.pace.edu/cisg/text/ziegel40.html>, p. 1; ENDERLEIN/MASKOW "International sales law...", op. cit., p. 163; HEUZÉ, Vincent, La vente internationale, ... op. cit.,, p. 237; Antwerp Court of Appeal (Belgium) 27 June 2001.
320. KUOPPALA, Sanna, Examination of the Goods, ... op. cit., p. 33.
321. The difference between Article 35(3) and 40 CISG is that the former refers to a case of evident defects the buyer could not have been unaware of, while the latter refers to defects disclosed by the seller. It could be argued, though, that an evident defect accounts for an implicit disclosure of it by the seller, which would lead to conclude that Article 35(3) CISG is not necessary since its purpose is complied with by Article 40 CISG's requirement of disclosure. Moreover, the application of Article 35(3) CISG lasts until the moment when the contract is concluded, while Article 40 CISG comprehends both, the time until the contract is concluded, and the time until the period for notification has elapsed. For that reason, the scope of Article 35 (3) CISG is covered by Article's 40 requirement of disclosure. In any event, both provisions are considered separately in the CISG.
322. For that reason, the problems addressed by both Article 35(3) CISG and the disclosure requirement of Article 40 CISG could be solved by a more flexible application of the rules on formation (and modification) of contracts.
323. 21 May 1996.
324. As stated before, Article 40 CISG is a concrete application of the good faith principle.
325. Former Article 3 of ULIS, expressly established that the exclusion of the Convention could be effected in either an express or implied way. In the drafting of the CISG such reference was omitted, since the representatives of some states considered that it could empower the courts to exclude the CISG without there being enough arguments to do so. See Secretariat's Commentary, op. cit., Article 6, para. 2. Hence, the fact that this reference was omitted does not mean that implicit exclusion of the Convention is not possible. See WINSHIP, Peter. The Scope of the Vienna Convention on International Sales Contracts. In GALSTON & SMIT (eds.), International Sales: The United Nations Convention on Contracts for the International Sale of Goods. Juris Publishing, 1984, p. 1-35. Available at <http://www.cisg.law.pace.edu/cisg/biblio/winship5.html#103>; SCHLECHTRIEM, Peter. Uniform Sales Law - The UN-Convention on Contracts for the International Sale of Goods, op. cit., p. 35; HONNOLD, John. Uniform Law for Internacional Sales, op. cit., p. 78.
326. HONNOLD, John. O. Uniform Law for Internacional Sales, op. cit., p. 78; SCHLECHTRIEM, Peter. Uniform Sales Law - The UN-Convention on Contracts for the International Sale of Goods, op. cit., p. 35.
327. In relation to the modification of the CISG provisions through the parties' behavior, one example is constituted by the conclusion of an open price contract. See KAROLLUS, Martin. Judicial Interpretation and Application of the CISG in Germany 1988-1994. In Cornell Review of the Convention on Contracts for the International Sale of Goods (1995), p. 51-94. Available at <http://www.cisg.law.pace.edu/cisg/text/karollus14,55.html>; FLECHTNER, Harry M. Transcript of a Workshop on the Sales Convention: Leading CISG scholars discuss Contract Formation, Validity, Excuse for Hardship, Avoidance, Nachfrist, Contract Interpretation, Parol Evidence, Analogical Application, and much more. 18 Journal of Law & Commerce (1999), p. 201-203. Available at <http://www.cisg.law.pace.edu/cisg/biblio/workshop-14,55,18.html>. In these cases, in order to conciliate Article 14 and 55 CISG it is held that the parties, through their conduct directed towards the conclusion of the contract, intended to exclude the rule under Article 14 CISG, which does not admit offers without determined or determinable price. That would imply to assume that the parties do not intend to conclude a contract with no price. If the parties, through their conduct, show the opposite, it will be possible to conclude an open price contract, whose price will be determined in accordance with Article 55 CISG. This constitutes an example of an implicit exclusion/modification of the CISG provisions through the parties' conduct.
328. Secretariat's Commentary, op. cit., Article 6, para. 2. The same could be said about the possibility to implicitly modify the CISG.
329. See UNCITRAL Digest Article 39, op. cit., p. 7. In the same way, the buyer may also lose protection under Article 40 CISG by inducing the buyer that it is giving up its rights.
330. It is a general principle of the Convention and, in particular, as a manifestation of the principle of good faith. See Arbitration Court of the Chamber of Commerce and Industry of the Russian Federation, award no. 302/1996. Available at: <http://cisgw3.law.pace.edu/cases/990727r1.html>; Oberlandesgericht Karlsruhe (Germany) 25 June 1997, CLOUT case no. 230; Award from the Arbitration-Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft - Vienna, 15 June 1994, CLOUT case no. 94; award of the Arbitration-Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft Viena, 15 June 1994, CLOUT case no. 93; Hof s'Hertogenbosch (Netherlands), 26 February 1992. See UNCITRAL Digest, op. cit., p. 6 and note 23. Nevertheless, see against Rechtbank Amsterdam (Netherlands), 5 October 1994.
331. Imagine that the notification is not very specific. A similar language may lead to think that the seller considers that it has received a proper notification (thereby waiving its rights under Article 39 CISG) or that it is requesting additional information since the notice is not specific (therefore, the only mechanism to allege would be that of Article 40 CISG interpreted together with Article 6 CISG.
332. Case law has been demanding with this requirement. For example, in the case of the Oberlandesgericht Düsseldorf (Germany), 12 March 1993, CLOUT case no. 310, the court held that the seller had not waived its right to allege the notice was untimely by accepting to have the goods back in order to examine them and concede a pro-forma credit to the buyer for the price. The court further held that a waiver by the seller of its rights according to Article 39 CISG could only be presumed in clear circumstances, for example if the seller accepted the return of the goods by the seller without putting any conditions. In the case decided by the Handelsgericht des Kantons Zürich (Switzerland) the 30 November 1998, CLOUT case no. 251, the court concluded that the mere fact that the seller examined the goods at the buyer's request, after receiving its complaints for lack of conformity, did not constitute a waiver to the right to allege that the notice was untimely. The cases that hold the existence of a waiver confirms how demanding are those requirements. In this sense, in the case decided by the Bundesgerichtshof (German Supreme Court) 25 November 1998, CLOUT case no. 270, the court held that a seller may waive its rights arising out of Article 39 CISG expressly or implicitly, but that the implicit waiver requires specific indications that make the buyer understand that the seller's acts constitute a waiver. The court concluded that, although the seller had not waived its right by accepting to negotiate with the buyer, that inclination to negotiate was a fact to be taken into account, and that such fact, combined with the long period of negotiations (15 months), the fact that the seller did not reserve its rights derived from Article 39 CISG, and the availability of the seller to pay an expert to examine the goods at the buyer's request, as well as its offer to pay the buyer damages in an amount seven times the price of the goods, supported the conclusion that the seller had waived its right to allege delay in the notification. In the award of the Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft Wien, 15 June 1994, CLOUT case no. 94, the arbitrator held that the intention of a party to waive this right must be clearly established, which was not the case. However, it was held that the seller was estopped from raising that defense, since the seller had behaved in such a way that the buyer was led to believe that the seller would not raise the defence (e.g., after receiving the notice the seller had continued to ask the buyer to provide information on the status of the complaints and had pursued negotiations with a view to reach a settlement). The arbitrator held that, while estoppel was not expressly settled by CISG, it formed a general principle underlying CISG ("venire contra factum proprium"; articles 7(2)), 16(2)(b) and 29(2) CISG).
333. SCHWENZER, Ingeborg. In SCHLECHTRIEM, Peter. Commentary... 2005, op. cit., Art. 39, para 33, p. 475.
334. Ibidem. Examples have been provided of the seller's willingness to repair, deliver substitute goods, send an expert... See cases of the Bundesgerichtshof: 25 June 1997 or 25 November 1998.
335. SCHWENZER, Ingeborg. In SCHLECHTRIEM, Peter. Commentary... 2005, op. cit., Art. 39, para 33, p. 475. See OLG Oldenburg, 5 December 2000. Waiver has also been denied in cases where the seller has agreed to repair the goods but claimed the price in full. See (on ULIS) LG Heidelberg, 21st April 1981.
336. J.O. HONNOLD Uniform Law for International Sales... op. cit. § 112. Professor Honnold adds that "Even when there is time to prepare detailed documents, an attempt to anticipate and solve all conceivable problems may generate disagreements and prevent the making of a contract; moreover, the most basic patterns may not be mentioned because, for experienced parties, they "go without saying." (In the course of collaborating with an exporter in writing out the understandings that underlay a standard export transactions we both were amazed at the number and scope of basic assumptions that were not mentioned in the detailed documents.)".
337. ILLESCAS ORTIZ, Rafael; PERALES VISCASILLAS, Pilar. Derecho Mercantil Internacional... op., cit., p. 126-127; PERALES VISCASILLAS, Pilar. El Contrato de Compraventa Internacional de Mercancias (Convención de Viena de 1980), op. cit., § 145 Usos y prácticas (artículo 9). Available at <http://www.cisg.law.pace.edu/cisg/biblio/perales1-09.html>.
339. Examples are the distinctions between "custom", "proved trade usages" and "usages", "uso interpretativo" and "uso normativo", "Gewohnheitsrecht" and "Handelsbräuche", "usages de droit" and "usages conventionnels", "usi" and "clausole d'uso". See BONELL, Michael Joachim In BIANCA Cessare Massimo; BONELL, Michael Joachim. Commentary to Article 9. Commentary on the International Sales Law, op. cit., § 3.2., p. 111.
340. Article 7 (1) CISG reads as follows:
"(1) In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade."
341. BONELL, Michael Joachim In BIANCA Cessare Massimo; BONELL, Michael Joachim. Commentary to Article 9. Commentary on the International Sales Law, op. cit., § 3.2., p. 111. See also ZIEGEL, Jacob. "Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods". July 1981. Comment to Article 9, para. 1. Available at <http://www.cisg.law.pace.edu/cisg/text/ziegel9.html>. Professor Ziegel states that 1. "Article 9 is broadly in accord with Anglo-Canadian law. However, the definition in art. 9(2) of what constitutes a binding usage [frequently, but misleadingly, referred to in English case law as "custom"] goes beyond generally stated Anglo-Canadian law but is agreeable with UCC 1-205(2)".
343. Official Records, II, 266. See BONELL, Michael Joachim In BIANCA Cessare Massimo; BONELL, Michael Joachim. Commentary to Article 9. Commentary on the International Sales Law, op. cit., § 2.3. p. 109.
344. BONELL, Michael Joachim In BIANCA Cessare Massimo; BONELL, Michael Joachim. Commentary to Article 9. Commentary on the International Sales Law, op. cit., § 2.3. p. 110. BOUT, Patrick X. Trade Usages: Article 9 of the Convention on Contracts for the International Sale of Goods. Pace essay submission. 1998. Available at <http://www.cisg.law.pace.edu/cisg/biblio/bout.html>. § II. A.
346. That view is contemplated under the Uniform Commercial Code, which states:
§ 1-303. Course of Performance, Course of Dealing, and Usage of Trade.
(c) A "usage of trade" is any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question."
347. In that case their binding force stems directly from the law itself, not the parties' agreement. See BONELL, Michael Joachim In BIANCA Cessare Massimo; BONELL, Michael Joachim. Commentary to Article 9. Commentary on the International Sales Law, op. cit., § 2.3. p. 110.
348. BONELL, Michael Joachim In BIANCA Cessare Massimo; BONELL, Michael Joachim. Commentary to Article 9. Commentary on the International Sales Law, op. cit., § 2.3. p. 110; BOUT, Patrick X. Trade Usages: Article 9 of the Convention on Contracts for the International Sale of Goods... op. cit. § II.A.
349. EÖRSI, Gyula. "General Provisions". In GALSTON & SMIT (eds.), International Sales: The United Nations Convention on Contracts for the International Sale of Goods, Matthew Bender (1984), Ch. 2, p. 2-21. See also footnote 42: "Developed countries have tended to be suspicious of settled customs and usages at the international level ... . The basis of this suspicion ... by developing countries is the feeling that such usages and customs usually crystallize from practice dominated by actors from the developed countries, particularly those in the West." Date-Bah, Problems of Unification of Sales Law from the Standpoint of Developing Countries, in Problems of Unification of International Sales Law 39, 46 (1980). See also BONELL, Michael Joachim. In BIANCA, Cessare Massimo; BONELL, Michael Joachim. Commentary to Article 9. Commentary on the International Sales Law, op. cit., § 1.4.1, p. 104-105. "From a legal perspective it has been pointed out that the reference to «reasonable persons» was too vague, since usages relating to the same type of contract might differ from one region to another so that «reasonable persons» from different parts of the world might very well consider different usages as applicable to the contract" (see Yearbook, II (1971), 58). From an economic and political perspective the excessive effect given to usages by Article 9(2) of ULIS has been also criticized because in practice it would almost certainly be detrimental to contracting parties from developing countries. Indeed, since most of the usages nowadays existing in international trade developed at the commodity markets and exchanges situated in the major industrialized nations, not only are they often one-sided as to their content, but are also to a large extent entirely unknown to merchants from other countries (see Yearbook, I (1968-1970), 169; Yearbook, VI (1975), 52)".
350. Representative from the ICC. See EÖRSI, Gyula. "General Provisions", op. cit., p. 2-22.
351. Under Article 9 (1) CISG.
352. Under Article 9 (2) CISG.
353. BONELL, Michael Joachim In BIANCA Cessare Massimo; BONELL, Michael Joachim. Commentary to Article 9. Commentary on the International Sales Law, op. cit., § 2.3. p. 110.
355. HONNOLD, J.O. Uniform Law for International Sales..., op. cit. § 114, p. 125.
356. BONELL, Michael Joachim In BIANCA Cessare Massimo; BONELL, Michael Joachim. Commentary to Article 9. Commentary on the International Sales Law, op. cit., § 2.1.2. p. 107.
357. See ILLESCAS ORTIZ, Rafael; PERALES VISCASILLAS, Pilar. Derecho Mercantil Internacional... op., cit., p. 127; PERALES VISCASILLAS, Pilar. El Contrato de Compraventa Internacional de Mercancias (Convención de Viena de 1980), op. cit., § 145 Usos y prácticas (artículo 9). Available at <http://www.cisg.law.pace.edu/cisg/biblio/perales1-09.html>; HONNOLD, J.O. Uniform Law for International Sales..., op. cit. § 114, p. 125.
358. HONNOLD, J.O. Uniform Law for International Sales..., op. cit. § 114, p. 125.
359. BONELL, Michael Joachim In BIANCA Cessare Massimo; BONELL, Michael Joachim. Commentary to Article 9. Commentary on the International Sales Law, op. cit., § 2.1.2. p. 107.
361. See case decided by the Oberster Gerichtshof (Austrian Supreme Court), 6 February 1996. The plaintiff, a German buyer, and the defendant, an Austrian seller, entered into an agreement for the FOB delivery of a certain quantity of propane gas. The parties had initially intended to enter into a "basic agreement", which would contain the general conditions of the seller and would constitute the trade usages that would govern the transactions between the parties, but could not reach an agreement. The draft of the "basic agreement" stated that all orders should be in writing. However, the seller could not prove that the "basic agreement" nor the general conditions had been made known to the buyer. The court held that the buyer could not have been aware of the fact that the seller intended to conclude the contract on the basis of the seller's standard terms. See also LOOKOFSKY, Joseph. "The 1980 United Nations Convention on Contracts for the International Sale of Goods". In HERBOTS, J. (ed.); BLANPAIN, R. (gral. Ed.), International Encyclopaedia of Laws - Contracts, Suppl. 29 December 2000. The Hague: Kluwer Law International, p. 58.
362. BERGSTEN, Eric E. "Basic Concepts of the UN Convention on the International Sale of Goods". In DORALT P., (ed.), Das UNCITRAL-Kaufrecht zum Vergleich zum Österreichischen Recht. Vienna: Manzsche Verlags und Universitätsbuchhandlung, 1985, pp. 20-21. Available at <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-09.html>
364. Ibid. Professor Bergsten also argues that such changes were more cosmetic than substantive, but were useful to eliminate certain criticism.
365. ILLESCAS ORTIZ, Rafael; PERALES VISCASILLAS, Pilar. Derecho Mercantil Internacional... op., cit., p. 127; PERALES VISCASILLAS, Pilar. El Contrato de Compraventa Internacional de Mercancias (Convención de Viena de 1980), op. cit., § 145 Usos y prácticas (artículo 9), op. cit.
366. Secretariat Commentary on article 8 of the 1978 Draft [draft counterpart of CISG article 9], para. 4; J.O. HONNOLD. Uniform Law for International Sales... op. cit. § 119, p. 128.
367. J.O. HONNOLD. Uniform Law for International Sales... op. cit. § 120.1, p. 129.
369. Moreover, that would seem in accordance with Article 7 (1) CISG, which states that "In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade".
370. SCHLECHTRIEM, Peter. Uniform Sales Law - The UN-Convention on Contracts for the International Sale of Goods. Manz: Vienna, 1986, p. 41. That would exclude all relevant usages applicable in a certain trade sector. Consequently, the CISG, in the words of Professor Schlechtriem, must show "respect for usages existing, for example, in the international grain trade and followed by the parties who buy and sell grain on the international market. It is irrelevant, on the other hand, whether the practice is known "internationally" outside grain-trade circles".
371. BONELL, Michael Joachim In BIANCA Cessare Massimo; BONELL, Michael Joachim. Commentary to Article 9. Commentary on the International Sales Law, op. cit., § 2.2.2, p. 109-110.
372. Ibid ,p. 110.
373. See the case decided by the Oberster Gerichtshof (Austrian Supreme Court), 6 February 1996; where a usage in natural gas trade to quote approximate amounts was enforced. See also the GH Hertogenbosch (Germany), 24 April 1996; where the court held that the standard terms of Association of Yarn Traders were binding although not included in contract, since both the seller (German) and the buyer (Netherlands) were familiar with the above Association practices.
374. SCHLECHTRIEM, Peter. Uniform Sales Law... op. cit. p. 41. See also BONELL, Michael Joachim In BIANCA Cessare Massimo; BONELL, Michael Joachim. Commentary to Article 9. Commentary on the International Sales Law, op. cit., § 2.2.2, p. 110. Professor Bonell states, as an example, that "British machine exporters therefore can no longer rely on usages of the domestic British machine trade when dealing with an Indian or Nigerian importer, even if such usages are within the United Kingdom so widely known that the foreign party either knew or at least should have been aware of them."
375. See J.O. HONNOLD. Uniform Law for International Sales... op. cit. § 120.1, p. 129. Professor Honnold puts examples like "the local practices for packing copra or jute, or the delivery dates imposed by arctic climate". For this view, see also ILLESCAS ORTIZ, Rafael; PERALES VISCASILLAS, Pilar. Derecho Mercantil Internacional... op., cit., p. 128; PERALES VISCASILLAS, Pilar. El Contrato de Compraventa Internacional de Mercancias (Convención de Viena de 1980), op. cit., § 145 Usos y prácticas (artículo 9), op. cit.; BONELL, Michael Joachim In BIANCA Cessare Massimo; BONELL, Michael Joachim. Commentary to Article 9. Commentary on the International Sales Law, op. cit., § 2.2.3, p. 109; JOKELA, Heikki. "The Role of Usages in the Uniform Law on International Sales", Scandinavian Studies no. 10 (1966), p. 93-94. See also Secretariat Commentary on article 8 of the 1978 Draft [draft counterpart of CISG article 9], para. 3. The Secretariat's commentary includes a quotation of the commentaries of the International Chamber of Commerce: "[In its commentary on the language developed by the UNCITRAL Working Group, the International Chamber of Commerce stated: "It is regrettable that [this article] does not deal with local usages. It notes, however, that it is its understanding that even under, the present text so-called local usages are to be taken into consideration in some situations, e.g.where they are internationally known...." (UNCITRAL Yearbook VIII (1977), A/CN.9/SER.A., p. 148". However, see BERMAN and KAUFMAN, "The Law of International Commercial Transactions". Harvard International Law Journal, no. 19 (1978) p. 221.
376. . See case decided by the OLG Frankfurt am Main (Germany), 5 July 1995. The German party submitted that there was a local usage by which a letter of confirmation was binding if the recipient did not object. This usage could not be given effect since the usage was not international. See also the case by the OLG Graz (Austria), 9 November 1995 where the court stated that a local or national usage could be applicable. See also J.O. HONNOLD Uniform Law for International Sales... op. cit. § 120. 1, p. 129.
377. RÉCZEI, Lásló. "The Rules of the Convention Relating to Its Field of Application and to its Interpretation", Potsdam Colloquium, August 1979 Oceana Publications, 1980, p. 84. See also Secretariat Commentary on article 8 of the 1978 Draft [draft counterpart of CISG article 9], para. 3.
378. See also LOOKOFSKY, Joseph. The 1980 United Nations Convention on Contracts for the International Sale of Goods... op. cit. para. 90 ,p. 58.Professor Lookofsky states that: "whether a buyer who fails initially to discover a non-conformity can later allege breach may well depend on an established practice between the parties or a (well known) trade usage regarding the nature of a buyer's duty to inspect within the area of trade concerned (caveat emptor)"
379. For example, see supra the quotation of Professor Réczei, who only refers to usages developed in commodity markets. See also J.O. HONNOLD. Uniform Law for International Sales... op. cit. § 120.1, p. 129, who puts as an example the usages "for packing copra or jute". Professor Schlechtriem puts the example of usages in the grain trade. See SCHLECHTRIEM, Peter. Uniform Sales Law... op. cit. p. 41.
380. In Section VII.2.B it was stated that usages may constitute an element to appraise the seller's leniency about the knowledge of defects. In the case decided by the Oberster Gerichtshof (Austrian Supreme Court) 27 February 2003, buyer and seller concluded a contract for the sale of fish. The lack of conformity consisted in being the fish from the catch several years prior to the conclusion of the contract. At issue was also whether the notice of defects given was adequate. However, the buyer alleged the existence of a usage of trade by which the fish sold had to belong to the previous year catch. The court held that, being that true, the seller should have been aware of that, and could not rely on the existence of an improper notice of defects. The case was sent to the lower court to ascertain whether there was such a usage. In any event, this is an example about usages on quality of goods. The purpose of the proposal made under Section VII to use Article 40 CISG together with Article 39 CISG to make an overall assessment on the parties' conduct after the breach occurred. Therefore, to replicate that process what should be found are usages related to how the parties behave in the event of a breach to keep the relationship. I presume that the evidence of such usages will be much more scarce.
381. On this issue I would like to make a clarification. In the type of transactions described we have a relational framework that may consist in a distribution or supply agreement, inside of which there are different spot transactions, consisting in contracts of sales. The CISG may be applicable to the relational agreements in certain cases (where the contract is shaped in the way of a sale agreement), but will be applicable to the particular spot sales. In the first case it is the view of this essay that more flexibility should be expected in the interpretation of the CISG provisions, in order to appraise the parties' conduct on the basis of the duty to cooperate. However, regardless of whether the CISG is applicable to the relational agreements, the perspective of this essay is also to recognize the influence of the relational framework when interpreting the parties' conduct in relation with the particular spot contracts.
382. ILLESCAS ORTIZ, Rafael; PERALES VISCASILLAS, Pilar. Derecho Mercantil Internacional... op., cit., p. 126; PERALES VISCASILLAS, Pilar. El Contrato de Compraventa Internacional de Mercancias (Convención de Viena de 1980), op. cit., § 145 Usos y prácticas (artículo 9), op. cit.
383. J.O. HONNOLD. Uniform Law for International Sales... op. cit. § 116, p. 126. Moreover, as Professor Honnold states, "the reference in Article 9(1) to practices established by the parties is one example of many situations in which binding expectations may be based on conduct. See Articles 19(2), 21(2), 35(2)(b), 47(2), 73(2)".
384. Se the case decided by the Zivilgericht Kanton Basel-Stadt (Switzerland), 3 December 1997. A Swiss seller and an Italian buyer concluded a contract for the sale of two ship cargoes of urea. The parties agreed upon payment within 30 days after the issue of the bill of lading. The seller issued an invoice containing the note that payment had to be made by bank transfer to the seller's bank account which it held with a Swiss bank in a certain region. Since the payment was not accomplished the seller filed suit. The buyer submitted that the court had no jurisdiction, since, alleged the buyer, the indication on the invoice of the seller's bank account established a practice between the parties under which the buyer was bound to pay at the seller's bank, therefore the bank's place being the place of performance. In the Court's opinion, under Art. 9(1) CISG two contractual relationships were not sufficient to establish a practice between the parties. According to the Court, in order for a practice between the parties to be established, long lasting contractual relationships involving more sale contracts between the parties is required.
385. See the case decided by the Handelsgericht Aargau (Switzerland), 26 September 1997. A Swiss buyer ordered from the seller two sets of cutlery. The seller delivered the goods but the buyer refused to take delivery and to pay the purchase price, and alleged that it had cancelled the orders pursuant to the practice established between the parties according to which the buyer was allowed to unilaterally cancel or change its orders even after such orders had been received by the seller. The court stressed that for a practice to be established under Art. 9(1) CISG, it is necessary that the parties be in a long-lasting business relationship, involving a number of sale agreements. To provide evidence of the practice, it is sufficient to prove that the parties have adopted the same behavior in comparable situations. The court noted that within the business relationships between the parties, the buyer had in two occasions cancelled or modified orders, which the court recognized as a valid practice established between the parties under Art. 9(1) CISG. In the case at hand, however, the court found that the buyer could not invoke such a practice since it was not able to prove that the seller had agreed to the modification of the order.
386. See the case decided by the District Court, S.D., New York (USA), 6 April 1998, Calzaturificio Claudia s.n.c. v. Olivieri Footwear Ltd. In the framework of an ongoing contractual relationship between a US buyer and an Italian seller in the course of which the seller had usually delivered the goods making them available at its own factory ("ex works") - the buyer failed to pay four invoices issued by the seller and marked "ex works". The seller commenced an action to recover payment. The buyer contested that there was a contractual relationship with the seller; that it agreed to delivery "ex works"; that it had received the goods; and that any delivery was either late or non-conforming. In the case at hand it was not possible to conclude that the delivery "ex works" amounted to a course of dealing, binding on the parties according to Art. 9(1) CISG, since the seller had failed to submit sufficient evidence with regard to the terms of the other transactions successfully concluded with the buyer. The court statement is included:
"Plaintiff also asserts that it had an ongoing contractual relationship with defendant whereby Claudia would deliver goods "ex works" and defendant would pick them up at Claudia's factory. Plaintiff contends that between August 1993 and March 1994, Olivieri placed thirteen orders with Claudia, only four of which are in dispute in this action. (Zamboni Decl. 1 at P 4.) In each of the non-disputed transactions between Claudia and Olivieri, Claudia asserts that "Olivieri contracted for [shipping] services separately and paid Claudia only to manufacture the shoes." (Zamboni Decl. 1 at P 7.)
In support of its assertion, plaintiff submitted invoice no. 236, which reflected the first order Olivieri placed with Claudia. Invoice no. 236, which was paid in full and is not contested in this action, contained the term "ex works." Plaintiff notes that defendant performed without objection according to this term, i.e., defendant picked up the goods at Claudia's factory and paid the invoice price in full. Plaintiff points out that all of the subsequent sales invoices, with the exception of one invoice which was silent as to delivery, contained the same delivery term: merchandise delivery ex works (or ex factory). Id. Claudia argues that this delivery term, which was established at the time of Olivieri's initial order and was explicitly contained in the invoices thereafter, continued to govern the parties' future dealings. Id.; Pl. Mem. at 1. Thus, plaintiff argues that Olivieri should be bound by the terms established in the parties' successful transactions. (Pl. Reply at 8.)
Although Claudia alleges that it engaged in nine successful transactions with Olivieri, where goods were delivered "ex works," plaintiff has provided virtually no documentation with regard to the terms of these other transactions and defendant disputes that these transactions occurred. See Litvin Aff. at P 6. The only evidence submitted by Claudia in support of its course of dealing argument is invoice no. 236. Plaintiff failed to submit evidence as to the other "successful" transactions that Olivieri and Claudia allegedly engaged in between August 1993 and March 1994. Thus, even if defendant accepted the terms of invoice no. 236, it is questionable whether this one transaction is enough to establish a course of dealing. Plaintiff has simply not submitted sufficient evidence to demonstrate conclusively the parties' prior practices, and questions of fact remain as to the agreed upon terms of their earlier transactions".
387. BONELL, Michael Joachim In BIANCA Cessare Massimo; BONELL, Michael Joachim. Commentary to Article 9. Commentary on the International Sales Law, op. cit., § 2.1.1, p. 106.
388. ILLESCAS ORTIZ, Rafael; PERALES VISCASILLAS, Pilar. Derecho Mercantil Internacional... op., cit., p. 126; PERALES VISCASILLAS, Pilar. El Contrato de Compraventa Internacional de Mercancias (Convención de Viena de 1980), op. cit., § 145 Usos y prácticas (artículo 9), op. cit.
389. ICC Court of Arbitration (Paris). 23 January 1997, no. 8611/HV/JK. See UNILEX.
390. In a similar way, see the case decided by the Cour d'Appel de Grenoble, Chambre Commerciale (France), 13 September 1995, Roger Caiato v. Societe Francaise de Factoring International Factor France 'S.F.F.'. A French buyer had a commercial relationship with an Italian seller where the former ordered cheese from the latter. The seller assigned its foreign receivables to an Italian factoring company, and thus, alleged that, in order to comply with the buyer's order, it had to wait for the factor's agreement. Since the buyer could not respect its own orders with its clients, it refused to pay part of the price. The Italian factoring company assigned the right to payment to a French factoring company, who sued the buyer asking for payment of the remainder of the price. The court found took into account that the prior parties' practice was that the seller complied with the buyer's orders without asking for its solvency. Therefore, there was an expectation that this conduct would continue, and before deciding to suspend its business relationship with the buyer, the seller should have taken into account the buyer's interest. See also the case before the Metropolitan Court of Budapest (Hungary), 24 March 1992. A German seller and a Hungarian buyer, who had had a commercial relationship for a long time, agreed on a sale of goods over the telephone. After the delivery of the goods, the buyer refused to pay the price alleging that no contract had been concluded as it was made over the telephone. The Court held that the offer was sufficiently definite (Art. 14(1) CISG), as the quality, quantity and price of the goods were impliedly fixed by the practices established between the parties (Art. 9(1) CISG), whereby the German seller had repeatedly delivered the same type of goods ordered by the buyer who had paid the price after delivery. See UNILEX.
391. See BONELL, Michael Joachim In BIANCA Cessare Massimo; BONELL, Michael Joachim. Commentary to Article 9. Commentary on the International Sales Law, op. cit., § 2.1.1, p. 106.
392. Court of Appeal of Turku (Finland). 12 April 2002. See UNILEX.
393. Secretariat Commentary on article 5 of the 1978 Draft [draft counterpart of CISG article 6], para. 1
395. Vid supra IX.1.A
396. For this view, see J.O. HONNOLD. Uniform Law for International Sales... op. cit. § 122, p. 130-131.
399. See SCHLECHTRIEM, Peter. Uniform Sales Law... op. cit. p. 42. Professor Schlechtriem states that the fact that the predominance of usages over the CISG was based on the principle of party autonomy helped to make the solution more acceptable.
400. "This Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. In particular, except as otherwise expressly provided in this Convention, it is not concerned with:
(a) the validity of the contract or of any of its provisions or of any usage". For further support, see J.O. HONNOLD. Uniform Law for International Sales... op. cit. § 122, p. 130-131; BONELL, Michael Joachim In BIANCA Cessare Massimo; BONELL, Michael Joachim. Commentary to Article 9. Commentary on the International Sales Law, op. cit., § 3.3-3.4, p. 111-112; SCHLECHTRIEM, Peter. Uniform Sales Law... op. cit. p. 41-42. Indeed, the Chinese proposal that only reasonable usages should be recognized, which would have given courts control over the contents of usages on the basis of the CISG, was rejected.
401. J.O. HONNOLD. Uniform Law for International Sales... op. cit. § 121 p. 130.
402. See case decided by the OLG Saarbrücken (Germany), 13 January 1993. Contract provisions specifying limited period for notification prevailed. However, it is also true that, in the case at hand, the usage was held to be non-existent.
403. ILLESCAS ORTIZ, Rafael; PERALES VISCASILLAS, Pilar. Derecho Mercantil Internacional... op., cit., p. 126; PERALES VISCASILLAS, Pilar. El Contrato de Compraventa Internacional de Mercancias (Convención de Viena de 1980), op. cit., § 145 Usos y prácticas (artículo 9), op. cit.
404. See for example Article 1-303.
§ 1-303. Course of Performance, Course of Dealing, and Usage of Trade.
(b) A "course of dealing" is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.
(d) A course of performance or course of dealing between the parties or usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware is relevant in ascertaining the meaning of the parties' agreement, may give particular meaning to specific terms of the agreement, and may supplement or qualify the terms of the agreement. A usage of trade applicable in the place in which part of the performance under the agreement is to occur may be so utilized as to that part of the performance.
Even provisions contemplating the parol evidence rule attribute importance to the role of usages and practices. See Article 2-202.
§ 2-202. Final Written Expression: Parol or Extrinsic Evidence.
Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented
(a) by course of performance, course of dealing, or usage of trade (Section 1-303);
405. J.O. HONNOLD. Uniform Law for International Sales... op. cit. § 118 ,p. 128.
406. See EÖRSI, Gyula. "General Provisions", op. cit., p. 2-24 - 2-25.
407. Ibid § 118 ,p. 127.
408. Professor Honnold argues that "tribunals construe general provisions of the contract in the light of applicable usage since words commonly used in commerce ("draft," "order," "bill," "average") carry a heavy and complex burden of meaning based on the practices with which these words have been associated". See J.O. HONNOLD. Uniform Law for International Sales... op. cit. § 118 ,p. 127-128.
409. Available at <http://cisgw3.law.pace.edu/cases/960124g1.html>.
410. See ANDERSEN Camilla Baasch. Reasonable time in Article 39 (1) CISG... op. cit. p. 104-105. See also the case abstract available at <http://cisgw3.law.pace.edu/cases/960124g1.html>
411. See case decided by the Handelsgericht des Kantons Zürich, 10 July 1996. A German seller and a Swiss buyer concluded a contract for the supply of chips to be manufactured according to a particular printing procedure. After the conclusion of the contract, the seller modified its acceptance and informed the buyer that the requested printing procedure would increase the manufacturing. Moreover, the goods were delivered to a third party but the quantity was higher than that agreed upon in the contract. The Court found that the buyer's taking delivery through a third party could not be considered as a conduct indicating assent to the modified acceptance (Art. 18(1) CISG) in absence of a particular usage or practice established between the parties.
See also the case decided by the Bundesgericht (Swiss Supreme Court), 4 August 2003. Two Swiss companies ("seller" and "buyer") concluded a contract for sale of Italian wines to be delivered in gift packs of 3 pieces. The seller on its turn concluded a contract with an Italian producer of wine ("sub-contractor"), who would deliver the ordered wine directly to the buyer. The business idea did not return the expected profits, and seller and buyer, in order to avoid the full cancellation of the sale, agreed that the seller would deliver only one type of Italian wine in a gift pack of 6 pieces. The costs deriving from the new arrangement would be set-off with payment for the new delivery. Such an agreement was part of a written order that the seller forwarded to the sub-contractor, with the specification that the latter had to ask the buyer directly for payment. After delivery of 150,000 bottles the sub-contractor requested the outstanding purchase price, to which the buyer replied declaring set-off with the costs deriving from the changes in the agreement. The sub-contractor commenced an action against the buyer claiming payment of price. It claimed that it had concluded an implied contract for sale of 150,000 bottles of wine with the buyer and according to it had a right to full payment. The buyer alleged that the contract had been concluded with the seller and not with the sub-contractor, who therefore did not have any autonomous right to payment. In order to determine if the sub-contractor and the buyer had concluded a contract, the Court interpreted the statements and conduct of the parties according to Art. 8 CISG. It denied that a contract had been concluded between the parties. The delivery of wine by the sub-contractor to the buyer could not be reasonably considered as an offer to conclude a contract under Art. 14 CISG, nor could the receiving of the delivery by the buyer be interpreted as an acceptance of an offer. In particular, the buyer could not be expected to understand the submission of invoices as a proposal for a contract, thus its failure to react to it could not be understood as an implied acceptance in the absence of other elements like usages or practices between the parties. On the contrary, the fact that the buyer used to order the goods from the seller had to be understood as an indication that the sub-contractor was only a vicarious agent for the seller.
In the case decided by the Oberlandesgericht Frankfurt (Germany), 5 July 1995, a French producer of chocolates, plaintiff, and a German buyer, defendant, negotiated over the delivery of chocolate. The seller sent a letter of confirmation to which the buyer failed to reply. After delivery, the seller sued for the outstanding purchase price, arguing that a contract had been concluded because the buyer had failed to reject the letter of confirmation. When the court of first instance dismissed the claim, the seller appealed. The appellate court held that no contract had been concluded by means of a letter of confirmation followed by silence. Although there is an established trade usage which recognizes such a conclusion of contract by silence in the jurisdiction of the recipient's place of business, due to the international character of the CISG, regard is to be given only to trade usages that are known to the law both in the jurisdiction of the offeror and in the jurisdiction of the recipient (article 9(2) CISG). Moreover, the legal effects of the trade usage have to be known to both parties. Despite that ruling, the court allowed the seller's appeal. It found that a contract already had been concluded between the parties prior to the letter of confirmation.
In the case decided by the Cour d'Appel de Grenoble (France), 21 October 1999, a French customer (buyer) ordered from a Spanish supplier (seller) the manufacture of a certain quantity of shoes, with a view to reselling them to its own retailers. In view of the manufacturer's refusal to deliver the goods, the buyer concluded a replacement transaction. After its own retailers returned part of the goods, complaining about delays in deliveries, the buyer brought an action claiming damages for breach of contract by the seller and loss of commercial reputation. The seller raised the defense that it had never received the buyer's orders and that its silence or inactivity could not be understood as acceptance. The Court of Appeal, after pointing out that the seller had not proved that it had not received the orders from the buyer, held that the seller could not invoke the rule laid down in Art. 18 CISG (providing that silence does not in itself amount to acceptance) because, according to the practices previously established between the parties, the seller was used to performing the orders without expressly accepting them.
In the case decided by the District Court, S.D., New York (USA), 14 April 1992, Filanto S.p.A. v. Chilewich International Corp., a New York buyer entered into multiple contracts with an Italian seller in order to fulfill a master agreement that the buyer had concluded with a Russian firm ('the Russian master agreement'). The Russian master agreement contained a clause that required disputes to be arbitrated in Moscow. The buyer partly performed one of the contracts and the seller commenced action in New York claiming breach of contract. The buyer sought a stay of the action and arbitration in Moscow pursuant to the arbitration clause in the Russian master agreement. The issue in this case was whether the arbitration clause in the Russian master agreement had been incorporated into the contract between the buyer and the seller. The Court found that the seller was bound by the arbitration agreement. The agreement was part of the buyer's original offer that the seller was deemed to have accepted. In reaching its conclusion, the court took into account the previous practices of the parties (Art. 8(3) CISG) and held that due to the extensive course of prior dealing the seller was under a duty to alert the buyer in a timely fashion of its objection to incorporating the arbitration clause (an objection made only 5 months after the offer was not timely).
The principle of acceptance by silence provided there is a prior course of communication between the parties finds support as a general principle. See Transnational Law Database. Available at <http://www.tldb.de>. "List of Principles".
"No. IV.2.2 - Silence by offeree
Silence by the offeree does not in and of itself amount to acceptance unless the offeree begins with the performance of his contractual obligations or is required to reject the offer due to a long-standing business relationship with the offeror or is subject to a practice which the parties have established between themselves or a trade usage requiring rejection of the offer ("qui tacet consentire videtur")".
In support of this general principle, see also ICC award no. 543, 10 March 1934 "Si dans le commerce et l'industrie les parties entretiennent une correspondance sur leurs rapports mutuels et la marche de leurs affaires, celle d'entre elles qui reçoit de l'autre une lettre contenant des communications importantes, contre lesquelles elle ne proteste pas, doit être supposée d'accord. Ce principe indispensable est généralement admis dans les cercles commerciaux et doit être aussi reconnu comme juste en droit". This case is quoted by Professor Fouchard, who also states that "La formation du contrat est subordonnée, dans tous les droits nationaux, à l'existence d'un consentement, et d'un consentement exempt de vices. L'existence du consentement soulève le problème classique de l'acceptation tacite d'un contrat, ou des conditions générales qui l'accompagnent. Les, arbitres ont toujours estimé que l'acceptation tacite, par silence, d'un contrat est valable". See FOUCHARD, Philippe, L'Arbitrage Commercial International, Paris, 1965. See also MUSTILL, Michael, The New Lex Mercatoria: The First Twenty-five Years, Arbitration International, 1988, p. 114, fn. 106 and authorities cited; MARRELLA, Fabrizio. La nuova lex mercatoria, Principi Unidroit ed usi di contratti des comercio internazionale. In Tratto di dritto commerciale e di dritto publico dell'economia, Volume 30, Padova: CEDAM, 2003, p. 714, fn. 247 and authorities cited. All sources available at <http://www.tldb.de>.
412. As an example of the analysis of these issues by scholarly writing, Professor Schlechtriem states that, although usages may also be applicable to the formation of the contract, it remains unclear whether usages such as those developed in Germany concerning the "commercial letter of confirmation" will be respected. He argues that, given that the United States delegation, in presenting arguments for its proposal to include as usages those concerning contract formation, mentioned cases in which silence operates as the acceptance of an offer, it seems possible, in principle, to recognize usages in which silence means approval, if they meet the requirements of Article 9(2). However, he admits that the requirements for according legal consequence to the silence of a party receiving a letter of confirmation would be considerably narrower in international commercial transactions than for internal dealings (e.g., the substantive requirements for an effective letter of confirmation, i.e., that silence may be regarded as consent, would not be met if the foreign party were uninformed). See SCHLECHTRIEM, Peter. Uniform Sales Law... op. cit. p. 42.
413. Indeed, in the issue of usages, practices, etc. authors like Professor Bonell have made reference to the UCC as another source to interpret which are the problems concerned with these elements. See BONELL, Michael Joachim In BIANCA Cessare Massimo; BONELL, Michael Joachim. Commentary to Article 9. Commentary on the International Sales Law, op. cit., § 2.1.1, p. 106. It is also true that Professor Bonell does not make reference to the provisions on course of performance, but on practices-course of dealing.
414. See Article 1-303 of the Uniform Commercial Code:
§ 1-303. Course of Performance, Course of Dealing, and Usage of Trade.
(e) Except as otherwise provided in subsection (f), the express terms of an agreement and any applicable course of performance, course of dealing, or usage of trade must be construed whenever reasonable as consistent with each other. If such a construction is unreasonable: (1) express terms prevail over course of performance, course of dealing, and usage of trade; (2) course of performance prevails over course of dealing and usage of trade; and (3) course of dealing prevails over usage of trade.
415. See supra note. See also FARNSWORTH, E. Allan. Unification of Sales Law: Usage and Course of Dealing. Unification and Comparative Law in Theory and Practice: Liber amicorum Jean Georges Sauveplanne, Deventer: Kluwer Law and Taxation, 1984, p. 89, fn. 30. See also V-M Corp. v. Bernard Distrib. Co., 447 F.2d 864 (7th Cir. 1971). The court stated that "where the express terms [...] cannot be harmonized with the course of dealings and performance by the parties, the express terms shall control". In re Chicago & E.I. Ry., 94 F.2d 296 (7th Cir. 1938), the court said "If by mistake the parties follow a practice in violation of the terms of the agreement, the court should not perpetuate the error".
416. Uniform Commercial Code. Article 2-208, Comment 4. "A single occassion of conduct does not fall within the language of this section but other sections such as the ones on silence after acceptance and failure to specify particular defects can affect the parties' rights on a single occassion". See FARNSWORTH, E. Allan. Unification of Sales Law: Usage and Course of Dealing., op. cit. p. 89, fn. 29.
417. See FARNSWORTH, E. Allan. Unification of Sales Law: Usage and Course of Dealing, op. cit. p. 89, fn. 29.
418. Indeed, it would be absurd to construct the provisions of the UCC to indicate that a single act by the parties may supersede the contract rules, as a modification or waiver, but if that act is repeated several times it cannot do it, since it amounts to a course of performance, which is dominated by the contract agreement. For that reason, Article 1-303 states that:
§ 1-303. Course of Performance, Course of Dealing, and Usage of Trade.
(f) Subject to Section 2-209, a course of performance is relevant to show a waiver or modification of any term inconsistent with the course of performance.
419. SCHMIDT/KESSEL In SCHLECHTRIEM, Peter. Commentary... 2005, op. cit. Art. 8, para. 50, p. 134-135, and authorities cited. The admission of usages and practices that might not be consistent with the written agreement is controversial in the United States. See cases Columbia Nitrogen Corp. v. Royster Co. 451 F. 2d 3 (4th Cir. 1971); Division of Triple T Service, Inc. v. Mobil Oil Corp., 60 Misc. 2d 720, 304 N.Y.S.2d 191 (1969), 37 App. Div. 169, 311 N.Y.S.2d 961 (1970). See Admissibility of Evidence of Course of Dealing and Usage of Trade under Uniform Commercial Code § 2-202 (a). Washington & Lee Law Review. 1973, no. 30, Notes and Comments p. 117-123.
420. Professor Honnold, to emphasize the importance of usages and practices, describes well the sense of uneasiness of using merely the contractual agreement when he states that "A contract provision (like a fish out of water) loses its life when it is removed from its setting". See J.O. HONNOLD. Uniform Law for International Sales... op. cit. § 120, p. 130.
421. Borrowing the expression from Professor Honnold. See J.O. HONNOLD. Uniform Law for International Sales... op. cit. § 128, p. 130.
422. No. ZHK 273/95. See <http://www.unilex.info>.
423. The Russian seller was a governmental agency and deliveries were duly performed until the seller was taken over by a Russian private company, which immediately declared its unwillingness to make any further delivery. In several communications, the buyers had warned that they would suffer substantial prejudices. The seller, rather than renegotiating to solve the problem, confirmed its stop and issued a bill for a certain amount of US dollars and urged the buyers to pay accordingly. Buyers claimed delivery of the quantity of aluminum provided for in the contracts and damages arising out of late shipment.
424. That view is increasingly shared among the legal community. See UNIDROIT Principles:
"5.3. Co-operation between the Parties
Each party shall co-operate with the other party when such co-operation may reasonably be expected for the performance of that party's obligations".
See also Principles of European Contract Law:
"Article 1:202: Duty to Co-operate
Each party owes to the other a duty to co-operate in order to give full effect to the contract".
See also International Principles in "Transnational Law Database". Available at <http://www.tldb.de>
"No. IV.5.7 - Duty to renegotiate
Each party has a good faith obligation to renegotiate the contract if there is a need to adapt the contract to changed circumstances and the continuation of performance can reasonably be expected from the parties".
"No. IV.5.8 - Duty to cooperate / duty to notify
Each party is under a good faith obligation to notify the other party of any problems that occur in the performance of the contract and to cooperate with the other party when such cooperation can reasonably be expected for the performance of that party's obligations".
See also BERGER, Klaus Peter. The Creeping Codification of the Lex Mercatoria, The Hague, London, Boston 1999, p. 105. "The mere fact that the 'societas mercatorum' has an interest in achieving commercial profits through cross border trade, does not suffice to justify the law-making power of the international community of merchants". Also in NASSAR, Nagla. Sanctity of Contracts Revisited, Dordrecht, Boston, London, 1995, p. 146 "The duty to inform obligates a party to disclose information available to him but not to the other party. The crux of the issue is whether contracting parties are under an obligation to share their knowledge. A distinction should be drawn between two contractual stages-those arising before, and those arising after, the conclusion of the contract". Professor Nassar suggest an idea very similar to the one suggested in this work when I differentiated cases of interactive and "alive" relationships to deterministic contracts. In the latter a lower level of cooperation should be demanded since the main efforts are placed in the stage of negotiation of the contract, not in the stage of performance. This is an element that should be acknowledged by those in charge of interpreting the law. In a similar way, OSMAN, Filali. Les Principes Généraux de la Lex Mercatoria, Paris 1992 p. 162. "Il s'agit donc dune obligation d'assistance mutuelle des contractants dans l'exécution du contrat. Ce faisant, parallelement À l'obligation de renseignement assumée par le débiteur, le créancier n'a pas un droit acquis à la passivité. Il est tenu de se renseigner";BERNARDINI, Piero, Is the Duty to Cooperate in Long-term Contracts a Substantive Transnational Rule in International Commercial Arbitration?. In: GAILLARD (ed.). Transnational Rules in International Commercial Arbitration. Paris: ICC Publ. Nr. 480,4, 1993, p. 140 "The principle that each party to a contract owes a duty not to cause prejudice but rather to cooperate with its partner in order to solve the numerous and complex problems which arise in long-term contractual relationships has been repeatedly affirmed by international arbitral tribunals"; FOUCHARD/GAILLARD/ GOLDMAN on International Commercial Arbitration The Hague, 1999 p. 829 "It is in the context of these long-term contracts that the obligation to keep one's co-contractor fully informed, which was expressed in the Klöckner award as "the duty of full disclosure," is at its strongest". For some examples in case law, see ICC case No. 2443, 1975, where the tribunal held that "the parties. . . must be aware that only a loyal, complete and continuing cooperation between them may assist in resolving, beyond the difficulties inherent to the performance of each contract, the many problems arising from the extreme complexity and entanglement of the litigious obligations... [T]his obligation to cooperate, which the modern doctrine rightly found on the good faith which has to govern the performance of any obligation, must be complied with . . "., cited by BERNARDINI, Piero, Is the Duty to Cooperate in Long-term Contracts a Substantive Transnational Rule, op. cit. p. 140; ICC Award No. 5030, 1993 at 1011, which quotes Klöckner v. Republic of Cameroon: "Appartenant au fond commun des droits nationaux, l'obligation de se comporter loyalement dans les relations contractuelles constitue naturellement un principe essentiel des rapports économiques internationaux. Elle a en particulier été sanctionnée par la jurisprudence arbitrale dans des relations comparables à celles qui font l'objet du présent litige". In that leading case, ICSID Award of October 21, 1983, Klöckner Industrie-Anlagen Gmbh c. Cameroun the tribunal also pointed that "Nous présumons que le principe suivant lequel une personne qui s'engage dans des rapports contractuels intimes fondés sur la confiance, doit traiter avec son collègue de façon franche, loyale et candide, est un principe de base du droit civil français, comme il l'est en fait des codes des nations dont nous avons connaissance. C'est là le critère qui s'applique dans les rapports entre partenaires dans de simples t associations n'importe où". Also ICC Award No. 9593, 1999, the tribunal held that "One consequence of the principle recalled by Artide 1134 para. 3 of the Ivorian Civil Code, according to which contracts must be performed in good faith, is that the parties must cooperate in good faith to reach the common goals contractually agreed upon. It is an the basis of the identical text of Article 1134 para. 3 of the French Civil Code that French courts have decided that good faith and loyalty oblige a party to a contract to facilitate the performance of its obligation by the other party . . . Indeed, as written years ago by the French lawyer Demogue: "les contrats forment une sorte de microcosme (...) une petite société où chacun doit travailler dans un but commun, qui est la somme des buts individuels, poursuivis par chacun, absolument comme dans la société civile ou commerciale" (R. Demogue, Traité des Obligations, 1927, [Vol.] IV p. 191). Such obligation ' to cooperate in good faith in the performance of the contract has also become a fundamental element of the usages of international trade applicable to this case through Article 1135 of the Ivorian Civil Code and Article 13(5) of the ICC Rules. Such usage was pointed out by several awards rendered under the aegis of the International Court of Arbitration of the ICC . . . .
Further to a comparative study, Unidroit came to the conclusion that the obligation to cooperate in good faith in the performance of a contract amounted to a general principle applicable to international trade. Accordingly, this principle was reflected under Article 5.3 of the Unidroit Principles of International Commercial Contracts: "Each party shall cooperate with the other party when such cooperation may reasonably be expected for the performance of that party's obligations."
In conclusion, the Arbitral Tribunal will make its decision an the validity of the termination of the Agreement on the basis of the text thereof, in the light of the law of the Ivory Coast which requires good faith in the performance of contracts, such requirement also deriving from the usages of international trade". All sources obtained from Transnational Law Database. Available at www.tldb.de.
425. February 1999. UNILEX. Vid supra VII.2.B.
426. Together with the problems listed here there was another one, of nullity of the contract, since the claimant alleged that the defendant had not disclosed that Mister X, a former employee of the claimant, who promoted the agreement, was actually paid by the defendant.
427. See case 9474 ICC Court of Arbitration. February 1999, para. .
428. Ibid para. , letter (b).
429. Ibid para. , letter (a)
430. Ibid para. , letter (b)
431. Ibid para. , letter (c)
432. Ibid para. , letter (d). The tribunal stated "To use the wording of the Bank, it was treated as a hostage and not as a business client"
433. Ibid para .
434. See SCHWENZER, Ingeborg In SCHLECHTRIEM, Peter. Commentary...2005, op., cit., Art. 39, para.34, 35.
435. ANDERSEN, Camilla Baasch. Reasonable Time... ,op. cit. III.1.3.1; SCHWENZER, Ingeborg in SCHLECHTRIEM, Peter. Commentary...2005, op., cit., Art. 39, para.34, 35.
436. ICC Award (1995). International Court of Arbitration Bulletin 73. Oberster Gerichtshof 30th June 1998. Available at <http://www.cisg.law.pace.edu/cisg/wais/db/cases2/980630a3.html>. See also SCHWENZER, Ingeborg in SCHLECHTRIEM, Peter. Commentary...2005, op., cit., Art. 39, para.34, 35.
437. ICC Award 7565/1994; SCH-4318, Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft - Wien (Vienna), Austria. See <http://www.unilex.info>. Moreover, in certain cases it is likely that the buyer disclaims any obligation to examine the goods. This is the case of 'just in time' transactions, where all the responsibility may be transferred to the seller through a warranty of quality. The validity of such agreements is likely to be governed by the domestic rules applicable. However, in the words of Professor Schwenzer, since the CISG does not impose strict rules on examination or notification, it is likely that domestic rules allow such exclusion of the duty to examine or notify. See SCHWENZER, Ingeborg In SCHLECHTRIEM Peter. Commentary... 2005 Art. 38, para. 29, p. 458. The problem, though, would persist in cases where the parties implement their agreement on an ongoing basis, and the contract signed for the supply is merely a framework. In such case, the more flexible approach is still preferred.
438. See Oberlandesgericht München (Germany) 11 March 1998, CLOUT case no. 232; Oberlandesgericht Saarbrücken, (Germany), 13 January 1993, CLOUT case no. 292.
439. See Oberlandesgericht München, (Germany) 11 March 1998, CLOUT case no. 232; ICC award no. 7331 1994, CLOUT case no. 303.
440. See UNCITRAL Digest Article 40 CISG, op. cit., para. 10, p. 7.
441. Arbitral award from the Arbitration Institute of the Stockholm Chamber of Commerce, 5 June 1998. Available at <http://cisgw3.law.pace.edu/cases/980605s5.html>.
442. Ibid. See UNCITRAL Digest Article 40 CISG, op. cit., para. 11, p. 8.
443. Arbitral award from the Arbitration Institute of the Stockholm Chamber of Commerce, 5 June 1998. Available at <http://cisgw3.law.pace.edu/cases/980605s5.html>. See "The time bar issue".
444. Secretariat's Commentary. Article 5 of the 1978 draft (draft counterpart of CISG article 6). Para. 1. Available at <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-06.html>.
445. In favor of considering this provision as the only limit to party autonomy, see BORISOVA, Bojidara. Editorial remarks. Remarks on the Manner in which the UNIDROIT Principles May Be Used to Interpret or Supplement Article 6 of the CISG. Available at <http://www.cisg.law.pace.edu/cisg/principles/uni6.html#bbv>
446. See UNCITRAL Digest. Article 6, op. cit., p. 3.
447. UNIDROIT Principles. 2004 version. Available at <http://www.unidroit.org/english/principles/contracts/principles2004/blackletter2004.pdf>
448. Provisions contained in Chapter 3. See Article 3.19 of the UNIDROIT Principles: "The provisions of this Chapter are mandatory, except insofar as they relate to the binding force of mere agreement, initial impossibility or mistake".
449. Article 7.4.13 (2) of the UNIDROIT Principles.
450. Article 1.7 of the UNIDROIT Principles.
451. Thus, article 7.1.6, which impedes to rely on a clause which limits or excludes one party's liability for non-performance or which permits one party to render performance substantially different from what the other party reasonably expected may not be invoked if it would be grossly unfair to do so, having regard to the purpose of the contract.
452. Article 4:118. "Remedies for fraud, threats and excessive benefit or unfair advantage-taking, and the right to avoid an unfair term which has not been individually negotiated, cannot be excluded or restricted".
453. Article 6:105. "Where the price or any other contractual term is to be determined by one party and that party's determination is grossly unreasonable, then notwithstanding any provision to the contrary, a reasonable price or other term shall be substituted".
454. Article 8:109. "Remedies for non-performance may be excluded or restricted unless it would be contrary to good faith and fair dealing to invoke the exclusion or restriction".
455. Article 1:201:
(1) Each party must act in accordance with good faith and fair dealing.
(2) The parties may not exclude or limit this duty.
456. The text of Article 7(1) CISG reads as follows "In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade". This language seems to indicate that good faith constitutes an interpretative rule of the CISG provisions, not a rule of behavior for the parties.
457. See MAGNUS, Ulrich. Editorial remarks on article 7. Remarks on good faith. Note 1 and authorities cited; FELEMEGAS, John. Editorial remarks. Remarks on good faith and fair dealing. Available at <http://www.cisg.law.pace.edu/cisg/text/peclcomp7.html#5>; AUDIT, Bernard, La Vente Internationale de Marchandises, op. cit., p.51; ENDERLEIN, Fritz; MASKOW, Dietrich International Sales Law, op. cit. p. 59.
458. Secretariat's Commentary compiles a number of provisions of the Convention considered as concrete applications of the good faith principle, stating the following: "article 38 [draft counterpart of CISG article 40] which precludes the seller from relying on the fact that notice of non-conformity has not been given by the buyer in accordance with articles 36 and 37 [draft counterpart of CISG articles 38 and 39] if the lack of conformity relates to facts of which the seller knew or could not have been unaware and which he did not disclose to the buyer". See Secretariat's Commentary. Article 5 of the 1978 draft [draft counterpart of CISG Article 6], op. cit. Available at <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-07.html>
459. Article 8 CISG, which regulates the parties' intention, states that:
(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 that a reasonable person of the same kind as the other party would have had in the same circumstances.
(3) In determining the intent of a party or the understanding a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties.
460. HARTNELL, Helen Elizabeth. Rousing the Sleeping Dog: The Validity Exception to the Convention on Contracts for the Internacional Sale of Goods. Yale Journal of International Law, 18, 1993, p. 1-93. Available at <http://www.cisg.law.pace.edu/cisg/biblio/hartnell.html>
463. HARTNELL, Helen Elizabeth. Rousing the Sleeping Dog:, op. cit., note 280 and authorities cited.
464. SCHWENZER, Ingeborg. In SCHLECHTRIEM, Peter. Commentary... 2005, op. cit., Art. 40, para. 11, p. 481, and authorities cited in notes 24 and 24a.
465. ROSSET, Arthur. Contract Performance: Promises, Conditions and the Obligation to Communicate... op. cit., p. 1.101.
466. The modification agreement falls within the scope of the rules on formation of contracts under the CISG. Hence, although the parties may exclude the applicability of Article 39 CISG, they would not have been held to do so if the clause stating that the buyer should give notice in eight days after delivery was illegible and appeared in documents generated unilaterally by the seller after the conclusion of the contract. See Tribunale di Vigevano (Italy) 12 July 2000, CLOUT case no. 378. In MCC-Marble Ceramic Center v. Ceramica Nuova, a case decided by the Federal Court of Appeals for the Eleventh Circuit, (United States) 29 June 1998, CLOUT case no. 222, the court held that, even where both parties had signed a form with a clause according to which the buyer should give notice of defects within 10 days after delivery. The buyer presented affidavits from its president and two employees of the seller stating that the parties did not intend to be bound by the standard terms on the order form. The lower court had excluded this evidence on the basis of the domestic parol evidence rule, and gave effect to the standard terms and granted summary judgment to the seller. However, the appellate court found that the affidavits of the subjective intent of both parties raised sufficient factual question as to the terms of the parties' contract under article 8(1) CISG that summary judgment was inappropriate. Another court held that a clause that obliged the buyer to give notice of defects within 30 days after delivery was binding for the buyer since it had been incorporated to the contract pursuant to Article 19 CISG. See Landgericht Baden-Baden (Germany) 14 August 1991, CLOUT case no. 50. Another court concluded that, according to no. (1) of Article 18 CISG, the buyer, by accepting the goods, had also accepted the clauses set in the seller's confirmation of order, including the clause that required the notice of defects to be given before 8 days after delivery. SeeOberlandesgericht Saarbrücken (Germany) 13 January 1993, CLOUT case no. 292. It was also held that the parties had not excluded Article 39 CISG simply by agreeing on a contractual warranty of 18 months. Seeaward from the Arbitration Institute of the Stockholm Chamber of Commerce, 5 June 1998, CLOUT case no. 237. It has also been held that a commercial usage related to notification of defects may prevail over Article 39 CISG if that usage is binding on the parties by virtue of Article 9 CISG. See Oberlandesgericht Saarbrücken (Germany) 13 January 1993, CLOUT case no. 292. According to the particular circumstances of the case, the court concluded that the agreement of the parties on a clause that set the period to notify in 8 days after delivery excluded the applicability of such commercial usage.
467. Vid supra Section V.
468. 11 September 1998.
469. Vid supra Sections VII.2-VII.5.
470. Vid supra Section VIII.3.
471. February 1999.
472. Vid supra IX.5.
473. Translation by Mingde Cao & Sengli Wang. Available at <http://cisgw3.law.pace.edu/cases/990330c2.html>.
474. In 24 January 1987, 25 July 1988, 20 October 1989, and in early 1991.
475. Article 10 of the contract. See "I. Details of the Case".
476. Article 10 of the contract. See "I. Details of the Case".
477. See "II. The Arbitral Tribunal's Opinion. (III). Rulings on [Buyer]'s right to claim damages or other relief. (ii) Concerning quality issues and contract provisions on claims. (1) The effectiveness of the "Claims" article in the contract".
479. Ibidem. This constitutes a curious reasoning. Article 6 CISG allows the parties to derogate from or vary any of the CISG provisions. Therefore, in order to set a specific time period for communication, thereby derogating or varying Article 39 CISG, the agreement of the parties does not need to appear reasonable pursuant to Article 39 CISG.
480. "I.Details of the Case.(II)The [Buyer]'s reasoning and arbitration application. i.The quality problem as it appeared, step by step".
481. See "II. The Arbitral Tribunal's Opinion. (III). Rulings on [Buyer]'s right to claim damages or other relief. (ii) Concerning quality issues and contract provisions on claims".
483. For example, flanges that had not gone through normalizing heat treatment were qualified as if they had.
485. We should not forget that the interpretation of this duty to communicate has been influenced by the courts' domestic legal systems. This influence has been subject to criticism, and calls for a process of revision in future case law. See CISG Advisory Council, Opinion no. 2, ... op. cit., p. 4.
486. Indeed, in a commercial context, it is possible to "settle any dispute if you keep the lawyers and accountants out of it. They just do not understand the give-and-take needed in business". See MACAULAY, Stewart. Non-Contractual Relations in Business: A Preliminary Study, op. cit. p. 61. The author quotes a businessman surveyed for his study. The law should, thus, be a valuable instrument to solve problems, rather than a peril to hide from.
487. An issue related to this is how the rules of the CISG should encourage the parties' behavior consisting in attempting to solve the problems themselves. Accepting more flexible rules on implied modification or waiver seems to be a good solution. However, a party may not be inclined to concede and engage in this "take-and-give" process if that may only act in that party's prejudice. Therefore, on the one hand, attention must be paid to the dynamics of the development of the contract and the rules on implicit modification and waiver should be relaxed. However, on the other hand, mechanisms should be found so that parties that act generously waiving their rights in order to preserve the contractual relationship may be rewarded, over those who simply give the minimum and stick to their rights under the contract and the law. See ROSSETT, Arthur. Contract Performance: Promises, Conditions and the Obligation to Communicate,..., op. cit., p. 1098.