1. The CHAIRMAN recalled that the Committee had decided to reopen its discussion on article 17 [became CISG article 19 ] and invited the representative of the Federal Republic of Germany to introduce his amendment to paragraph 2 of that article.
2. Mr. LANDFERMANN (Federal Republic of Germany) said that the purpose of his amendment was to replace in the first sentence of paragraph 2 the words "unless the offeror objects to the discrepancy without undue delay" by the words: "unless the offerer, without undue delay, objects to the discrepancy orally or dispatches a notice to that effect."
3. As his delegation saw it, the existing text of the paragraph was not clear on at least one point. The first sentence stated that a reply to an offer which purported to be an acceptance but which contained additional or different terms that did not materially alter the terms of the offer, constituted an acceptance "unless the offeror objects to the discrepancy without undue delay". Under that provision, it was not clear whether the objection had to reach the other party in order to be effective. In all other places in the Convention where a similar situation arose, it was specified whether the objection or declaration must reach the other party. In article 16(2) [became CISG article 18(2) ], the first sentence spoke of "the moment the indication of assent reaches the offeror". That provision thus required the objection to reach the other party. In article 19(2) [became CISG article 21(2) ], on the other hand, the concluding words made it clear that the notice took effect regardless of whether it had reached the other party or not.
4. Of those two systems, his delegation had chosen the former (i.e. that of article 16 [became CISG article 18 ]) for the purposes of its amendment to article 17(2) [became CISG article 19(2) ]. The reason was that, in both cases, the offeror needed protection against an acceptance which was made too late or with reservations.
5. Mr. FELTHAM (United Kingdom) said he supported the amendment.
6. Mr. ROGNLIEN (Norway) also supported the amendment. It was very important that no party should be deemed to be bound by a contract if he objected to something stated by the other party, regardless of whether the protest reached that other party or not.
7. Mr. WAITITU (Kenya) said he too supported the amendment.
8. Mr. POPESCU (Romania) said that he supported the amendment in the interests of the security of contractual transactions.
9. Mr. KRISPIS (Greece) supported the amendment, particularly because it was in accord with the provisions of article 19(2) [became CISG article 21(2) ].
10. The CHAIRMAN noted that there was widespread support for the draft amendment proposed by the delegation of the Federal Republic of Germany. If there were no further comments, he would take it that the Committee wished to adopt that amendment.
11. It was so agreed.
12. The CHAIRMAN invited the representative of Pakistan to introduce the report of the ad hoc working group (A/CONF.97/C.1/L.176). In that connection, he drew attention to a mistake in the list of members of the group appearing in document A/CONF.97/C.1/L.176: "China" should be replaced by "Ghana".
13. Mr. INAAMULLAH (Pakistan), introducing the report (A/CONF.97/C.1/L.176), said that the concluding proviso of the text given in the second paragraph of the report should be corrected, the words "unless the party in breach did not foresee and had no reason to foresee such a result" being replaced by: "unless the party in breach proves that he could not foresee such a result and that a reasonable person of the same kind in the same circumstances could not have foreseen it". The purpose of that change was, of course, to incorporate the text of the Egyptian amendment to article 23 [became CISG article 25 ] which had been adopted at the 12th meeting.
14. The text currently being proposed took into account the previous proposals for the improvement of the text of article 23 [became CISG article 25 ], and in particular, the amendments submitted by the Federal Republic of Germany (A/CONF.97/C.1/L.63) and Pakistan (A/CONF.97/C.1/L.99). The text had been accepted by all the members of the working group except the representative of Hungary.
15. Mr. FELTHAM (United Kingdom) said that the working group's proposal was basically acceptable. He suggested, however, that the words "substantially impair his expectations" be replaced by "substantially disappoint his expectations".
16. Mr. STALEV (Bulgaria) said that his delegation was able to support the proposal, but felt that the language could be simplified.
17. Mr. REISHOFER (Austria) also supported the proposal.
18. Mr. SZÁSZ (Hungary) said that he had been obliged to dissent from the text approved by his colleagues in the working group. The mandate of the group had been to produce a more precise text than that appearing in article 23 [became CISG article 25 ]. It must be admitted, however, that the result had not been successful and that the formula "substantially impair his expectations under the contract" was in no way clearer than the existing formula "substantial detriment to the other party".
19. Mr. KRISPIS (Greece) fully agreed with the previous speaker. The original formula of article 23 [became CISG article 25 ] and the text proposed by the working group were identical in meaning, the only difference being that the new text contained more complicated phraseology and that the old text was, on the whole, more flexible.
20. Mr. WAGNER (German Democratic Republic) said he supported the drafting improvement submitted by the United Kingdom delegation.
21. Mr. GHESTIN (France) said that he preferred the original text. The one produced by the working group was long and would give rise to difficulties of interpretation. Moreover, it introduced an element of subjectivity which suggested an absence of consensus. Reference to "substantial detriment" was preferable since it was more flexible and more objective.
22. Mr. SAMI (Iraq) said that he too felt that the original text of article 23 [became CISG article 25 ] was clearer than the complex new text, which was bound to create difficulties.
23. Mr. SCHLECHTRIEM (Federal Republic of Germany) said that the purpose of his delegation's original proposal (A/CONF.97/C.1/L.63) had been to make it clear that the yardstick for breach of contract was to be found in the terms of the contract itself. As he saw it, the expectations of the party under the contract constituted an objective test.
24. Mr. BONELL (Italy) associated himself with those speakers who had commended the working group, and fully agreed with the comments by the representative of the Federal Republic of Germany. The original vagueness of article 23 [became CISG article 25 ] had been eliminated and an element of objectivity had been introduced.
25. Mr. ROGNLIEN (Norway) said that he agreed with the remark of the representative of the Federal Republic of Germany that it was necessary to have as objective a criterion as possible.
26. Mr. LEBEDEV (Union of Soviet Socialist Republics) said that the working group had not succeeded in producing an improved text for article 23 [became CISG article 25 ] and that the proposed formulation did not constitute a more acceptable version of the provision under discussion. By introducing the concept of "expectations", the new text detracted from the objectivity of the original one.
27. Furthermore, he pointed out that the word used in the Russian version to render the term "breach" was not correct.
28. In short, he did not favour the working group's proposal and urged that the text of article 23 [became CISG article 25 ] should be retained as it stood.
29. Mr. LI Chih-min (China) said that the original text of article 23 [became CISG article 25 ] was better than the proposed redraft by the working group, which was more subjective.
30. There were also some imperfections in the Chinese version of the document in question.
31. Mr. OLIVENCIA RUIZ (Spain) said that he supported the working group's proposal, which avoided the basic problem of article 23 [became CISG article 25 ], namely the imprecision of the expression "substantial detriment". The text proposed by the working group had the advantage of establishing a direct relationship with the contract by referring to the "expectations under the contract".
32. Mr. KOPAC (Czechoslovakia) said he supported the working group's proposal. The main shortcoming of the existing text of article 23 [became CISG article 25 ] was that the fundamental breach of contract was defined by reference to what was basically a subjective concept and one that could be interpreted in many different ways.
33. The definition in the working group's report had the advantage of stressing that the term "detriment" had to be interpreted in a broader sense and set against the objective test of the contents of the contract itself.
34. As his delegation saw it, the working group's report constituted a compromise formula and the ideas that it contained should be accepted and referred to the Drafting Committee.
35. Mr. SAM (Ghana) said that, in all cases of breach, recourse must be had to the contract itself. That was the approach adopted by the working group, and his delegation thus supported its proposal.
36. Mr. BOGGIANO (Argentina) said that, although its drafting could be improved, the text proposed by the working group had the advantage of referring to the expectations under the contract -- a fact which was sufficient for his delegation to support it in principle.
37. Mr. PLUNKETT (Ireland) said that he too had criticized the existing text of article 23 [became CISG article 25 ] and particularly its use of the words "substantial detriment". The working group's redraft represented a great improvement and the reference to "expectations under the contract" provided an essentially objective criterion on which a trial judge could rely.
38. The CHAIRMAN put to the vote the working group's proposal for article 23 [became CISG article 25 ] (A/CONF.97/C.1/L.176).
39. The proposal was adopted by 22 votes to 18.
40. The CHAIRMAN noted that the proposal by the United Kingdom (see para. 15) was of a drafting character. If there were no comment, he would take it that the Committee wished to refer it to the Drafting Committee.
41. It was so agreed.
42. Article 23 [became CISG article 25 ], as amended, was adopted.
(A/CONF.97/C.1/L.79, L.135, L.138, L.139, L.161, L.173 and L.180)
43. The CHAIRMAN invited the Committee to consider article 42 [became CISG article 46 ] and the amendments thereto proposed by Denmark (A/CONF.97/C.1/L.138), the Federal Republic of Germany (A/CONF.97/C.1/L.135), Finland (A/CONF.97/C.1/L.139), Japan (A/CONF.97/C.1/L.161), Norway (A/CONF.97/C.1/L.79), Sweden (A/CONF.97/C.1/L.173) and the United States of America (A/CONF.97/C.1/L.180).
44. Mr. TRÖNNING (Denmark) withdrew his delegation's amendment (A/CONF.97/C.1/L.138) in favour of that submitted by Finland (A/CONF.97/C.1/L.139) which had the same purport but was better drafted.
45. Mr. FARNSWORTH (United States of America), introducing his proposal to insert a new paragraph (1 bis) in article 42 [became CISG article 46 ] (A/CONF.97/C.1/L.180), drew attention to his Government's written comments on that point (A/CONF.97/8, pp. 28-29) which gave the background of and the reasons for that proposal.
46. The matter was one of some importance to his Government. It was connected with the problem of specific performance and concerned largely jurisdictions of the common law system.
47. The purpose of the proposed new paragraph (1 bis) was to rule out the remedy of specific performance in cases where the buyer could "purchase substitute goods without unreasonable additional expense or inconvenience". In that connection the replacement of the adjective "substantial" by "unreasonable" in document A/CONF.97/C.1/L.180 should he noted.
48. Unless that limitation was introduced, the buyer would be entitled to compel specific performance by the seller, although the position as to sanctions would vary according to the legal system involved. In the common law system, the sanction was both severe and effective, since specific performance was enforced by penalties such as fines (or, in some jurisdictions, even by imprisonment for contempt of court).
49. It was in view of the undue harshness of that remedy (particularly in the context of international sales) that the drafters of the 1964 ULIS had rightly limited the role of specific performance in the operation of the Convention by stating in article 25 of ULIS: "The buyer shall not be entitled to require performance of the contract by the seller if it is in conformity with usage and reasonably possible for the buyer to purchase goods to replace those to which the contract relates . . .".
50. The United States draft amendment was similar in intent but left out the reference to "conformity with usage" which had given rise to objections. The principle put forward was thus that, if the buyer had substitute goods available, the sensible thing was to expect replacement and not to compel specific performance.
51. Mr. FOKKEMA (Netherlands) said that his delegation did not favour the United States proposal, particularly since the adoption of article 8 of the draft [became CISG article 9 ] whereby any relevant usage (e.g. on substitute goods) would apply and would govern the provisions of article 42 [became CISG article 46 ].
52. The only effect of the United States proposal would thus seem to be that the buyer could not require performance where no performance was possible.
53. Mr. ROGNLIEN (Norway) said that he favoured the United States proposed new paragraph (1 bis) which would lead to a practical result in the dealings between the parties, especially when they were great distances apart in different continents of the world. In that connection, he approved of the use of the term "unreasonable" in preference to "substantial" which would have been too extreme.
54. The buying of substitute goods was a good solution. He questioned whether existing "usages" were in themselves sufficient to be of assistance in that connection since the question was not so much one of the buyer having the right to buy such goods, which was usual, but rather of his duty to do so rather than make an unreasonable demand for specific performance.
55. In reply to a question by the CHAIRMAN, Mr. FARNSWORTH (United States of America) referred the Committee to the explanations given in the comments by his Government (A/CONF.97/8, p.29) and to the fact that his delegation was making a proposal -- in connection with article 58 [became CISG article 62 ] -- to restrict the seller's right to demand specific performance in a parallel manner, as announced in his Government's comments (A/CONF.97/8, p.30).
56. Mr. BONELL (Italy) said he welcomed the many amendments put forward to article 42 [became CISG article 46 ] which afforded an opportunity of improving the text of that important provision. His delegation was not in favour of the text as it stood and found the corresponding ULIS provision much more convincing. Accordingly, he considered the United States amendment affecting the general principle of specific performances to be an extremely useful one which his delegation warmly supported.
The meeting was suspended at 4.30 and resumed at 4.50 p.m.
57. Mr. FELTHAM (United Kingdom) said he supported the United States proposal. He found it difficult to see what interest a buyer could have in forcing a seller to perform when it was possible for he himself to purchase substitute goods, without substantial additional expense or inconvenience, and obtain compensation for any additional costs incurred.
58. Mr. MASKOW (German Democratic Republic) said that, while he understood the concern of the United States delegation, he did not find the proposal acceptable. As he saw it, the amendment would decisively reduce the buyer's freedom to limit the legal consequences of defects, a freedom which was widespread in commercial life and which should be extended rather than restricted. The proposed amendment would oblige the buyer to avoid the contract even in cases where he ought not to be empowered to avoid it but should have recourse to other remedies.
59. Mr. HERBER (Federal Republic of Germany) was also opposed to the proposal, which would amount in practice to a reintroduction of the concept of ipso facto avoidance, originally contained in ULIS, that had already been discussed at length and rejected. The proposed amendment would, in effect, do away with the right of the buyer to require specific performance and thus went further than article 25 of ULIS, which had permitted such a practice only in cases where it was in keeping with established usage. To introduce into the Convention a general rule of that kind covering all types of international sales would mean in practice that no provision was made under any legislation for any right of specific performance.
60. Mr. HOSOKAWA (Japan) said that he too was opposed to the United States proposal. It seemed obvious to him that, once a buyer had concluded a contract which bound the seller to perform his obligation, that buyer should have the right to demand performance. If he did not require performance, he should declare the contract void, since otherwise the seller would not know whether or not he was bound under the contract to perform his obligation.
61. Mr. SAMI (Iraq) supported that view. The proposal laid down a requirement for a specific course of action to be followed by the buyer in the event that the seller did not meet his obligations, namely that he should himself purchase substitute goods. That principle was a dangerous one which he found unacceptable.
62. Mrs. KAMARUL (Australia) supported the United States proposal. Her delegation, which had welcomed the earlier amendment to article 26 [became CISG article 28 ], felt that it was desirable that the Convention should itself indicate how its provisions were to be interpreted, rather than leave the interpretation to the applicable domestic law.
63. Mr. HJERNER (Sweden) said he was unable to accept the United States proposal. The difficulties encountered by the common law countries had already been met to a certain extent by replacing the word "could" by the word "would" in article 26 [became CISG article 28 ], but that amendment was not designed to release the party from his promise. The United States amendment, on the other hand, not only removed the enforceability of the promise, but also relieved the seller of his obligations under it, a very serious and far-reaching change. Even if the buyer was able to purchase substitute commodities elsewhere on the market, he should still have the right to hold to the contract and to expect that the seller's promise would be honoured. For his own part, he did not think that article 42(1) [became CISG article 46(1) ] could be extended to cover in addition the right to remedy defects by repair.
64. Mr. GHESTIN (France) said he too found the United States proposal inadmissible. The result of such an amendment would be to encourage the seller to dishonour his obligations if the product he was selling was available on the market. Recourse to damage did not seem to him a satisfactory solution; the essential remedy was to secure performance of the contract.
65. Mr. KRISPIS (Greece) said he agreed with the previous speakers in opposing the proposal. The rule it sought to introduce was too sweeping and would mean that no contract of sale would be safe in practice since, in normal circumstances, goods could be bought at approximately the same price and within the same period of time as specified under the terms of a contract. The proposal would encourage the avoidance of contractual obligations, and would throw open the door to disputes on the interpretation of such terms as "inconvenience" and "additional expense".
66. Mr. DABIN (Belgium) said he shared the misgivings already expressed regarding the United States proposal. The question at issue was not so much the specific one of enforcing performance, but rather the general principle of honouring obligations under a contract, one of the cornerstones of the Convention. The proposal would encourage sellers to evade their obligations on the pretext that the buyer had the option of securing his goods elsewhere.
67. Mr. LEBEDEV (Union of Soviet Socialist Republics) said that the basic problem was how to reconcile two radically different approaches to the question of the performance of obligations. In many countries, specific performance was accepted as a general principle whereas, in a number of common law countries, real performance was limited by a number of conditions. In his view, that problem had been satisfactorily settled by the amendment that had been adopted to article 26 [became CISG article 28 ], but the United States proposal went further in limiting the right to real performance. If it were adopted, the common law approach would have to be introduced even in those countries where the requirement of performance was not the exception but the rule. To include such a provision in the Convention would be contrary to one of its basic principles, that of pacta sunt servanda, and would encourage parties to avoid meeting their obligations in cases where the buyer was in a position to secure substitute goods.
68. Mr. SZÁSZ (Hungary) also found the proposal unacceptable. An adequate solution to the problem of striking a balance between the two approaches to this question was already to be found in the existing texts of articles 26 and 42 [became CISG article 28 and CISG article 46 ].
69. Mr. EYZAGUIRRE (Chile) said that he too preferred the existing text. The United States amendment would introduce ambiguity into article 42(l) [became CISG article 46(1) ] and would give rise to disputes. The term "additional expense or inconvenience" was one that was not in keeping with legal usage on the subject in his country.
70. Mr. OLIVENCIA RUIZ (Spain) said he supported the arguments put forward against the draft amendment. The proposed text would give rise to difficulties of proof, since a buyer demanding performance would be obliged to demonstrate that he had been unable to make a substitute purchase.
71. The CHAIRMAN said that, as the majority of the Committee appeared not to be in favour of the United States proposal (A/CONF.97/C.1/L.180), he assumed he was to consider it rejected.
72. It was so agreed.
Article 42(2) [became CISG article 46(2) ] (A/CONF.97/C.1/L.135, L.138, L.139 and L.173)
73. The CHAIRMAN pointed out that there was a certain similarity between the proposals by Norway, Sweden and Finland. He asked whether those delegations would agree to their draft amendments being considered simultaneously.
74. Mr. SEVÓN (Finland) said there was indeed a common element in the amendments submitted by the Scandinavian delegations. They all proposed that the buyer should have the right to require the seller to bring non-conforming goods into conformity by repair. Such a remedy was in the interests of the buyer in cases where no substitute goods could be obtained, and was generally in the interests of both parties in that it offered the fairly lenient remedy which would remove obstacles to a contract.
75. Mr. KLINGSPORN (Federal Republic of Germany) said that his delegation's draft amendment (A/CONF.97/C.1/L.135) was to a large extent identical with the Scandinavian proposals as far as the right of the buyer to require the seller to repair the goods was concerned. There was a difference, however, in that, under his delegation's proposal, the seller should not be required to remedy defects by repair if it was not reasonably practicable for him to do so.
76. Furthermore, he did not think that the buyer's right to require delivery of substitute goods should be dependent on whether or not the lack of conformity constituted a fundamental breach of contract, as was the case under the existing text of article 42(2) [became CISG article 46(2) ]. That right should be excluded only if it was not reasonably practicable for the seller to deliver the substitute goods. In that respect also his amendment deviated from those of the Scandinavian delegations.
77. Mr. ROGNLIEN (Norway) said that a specific provision on the buyer's right to repair was required because otherwise, according to the interpretation of specific performance, the buyer might not have that right, and would have to be satisfied with damages. There should be no uncertainty as to the buyer's right to repairs under certain conditions. But paragraph 1 of article 42 [became CISG article 46 ] did not specify the nature or means of performance as regards the buyer's right to repairs, and as the text stood the seller could choose the manner of performance within the framework of the contract.
78. Turning to the various amendments on the point, he said that the Norwegian proposal (A/CONF.97/C.1/L.79) used the same language as that of the Federal Republic of Germany (A/CONF.97/C.1/L.135), namely "unless it is not reasonably practicable for the seller". The Finnish draft amendment (A/CONF.97/C.1/L.139) referred to "unreasonable costs or harm" and that of Sweden (A/CONF.97/C.1/L.173) to "unreasonable inconvenience or unreasonable expense". None of the Scandinavian proposals wished to change the remedy of substitute goods, but it would seem preferable to put the two remedies into separate sentences, as proposed by the Finnish draft amendment.
79. The condition for requiring repair should be appropriate notice under article 37 [became CISG article 39 ] or within a reasonable time thereafter, as stated in the original text of paragraph 2.
80. The CHAIRMAN pointed out that, whereas the English texts of the different proposals were very similar, the French text of the Norwegian amendment stated the reasonable practicability requirement in the affirmative form, and that that made a difference to the meaning. He suggested that the four delegations might produce a joint draft amendment on the subject.
81. Mr. HJERNER (Sweden) said that his delegation had reintroduced the text agreed upon in an UNCITRAL Working Group composed of a large number of delegations. His Government was particularly interested in the matter because, as it understood the existing text, repair was not part of performance. Under Scandinavian law, the buyer was unable to request repair unless the possibility had been specifically included in the contract. He did not believe, for that matter, that there was such a provision under any national law once the goods had been delivered. Consequently, the buyer's right to cure by repair had to be expressly stated but, at the same time, it must be restricted, as proposed in his delegation's amendment.
82. The other amendments on the subject did not seem to take sufficient account of the fact that the type of remedy depended on the nature of the goods concerned: some goods were capable of repair while, in the case of others such as commodities, the remedy lay in substitution. The two remedies could not both be applied to one and the same sale transaction. That aspect had been fully discussed by the UNCITRAL Working Group.
83. He thought that the four delegations concerned would be able to agree upon a joint proposal but it would be useful to have some initial reactions from other delegations first.
84. Mr. BONELL (Italy) said he welcomed the underlying idea of the amendments. Repair was a well-known remedy in practice. However, the original ULIS text of article 42 was better than the proposed amendments because it allowed for the fact that specific performance could take on various aspects according to the nature of the goods.
85. With regard to restriction on the buyer's right to repair, he preferred the formulation of the Federal Republic of Germany -- "unless it is reasonably not practicable" which covered the practical issue. The buyer's right to require repair depended not only on the position of the seller but also on the nature of the goods.
86. Mr. FOKKEMA (Netherlands) said he welcomed the Scandinavian proposals regarding a point on which the draft Convention was silent. He pointed out that the provisions of ULIS article 42 were in force between the Contracting States to that Convention. The Scandinavian delegations and that of the Federal Republic of Germany should submit a joint draft amendment. He personally preferred the Swedish formulation. The rule should be that the buyer had normally the right to require repair unless the cost to the seller would be unreasonable.
87. Mr. SAM (Ghana) supported the submission of a joint proposal.
88. Mr. GHESTIN (France) said that the right to repair was sometimes the only effective remedy for the buyer. He took the example of a French firm which had ordered from the United States a specially constructed machine, forming part of a complex chain, for a new factory. The buyer would be faced with considerable losses if he were obliged to hold up production until a new machine could be built.
89. The amendments differed as to the limits on the right to repair. He tended to prefer the formulation of the Federal Republic of Germany, which struck a balance between the interests of buyer and seller. However, he supported the submission of a joint proposal.
90. Mr. SZÁSZ (Hungary) said that domestic legislation in a number of countries gave buyers the right to require repair. He was not sure whether the amendments extended or restricted that right as compared with the original text. He had previously been of the opinion that where there was no fundamental breach, the buyer had a right to repair. The amendments appeared to propose that that right should be subject to conditions and that, if they were not met, the buyer should lose his right to specific performance.
91. Consideration should be given not only to the position of the seller but also to the interests of the buyer. For example, the buyer had a right to expect that machinery which had been installed would be rendered operational, even if it was not particularly convenient for the seller to do so.
92. Mr. KRISPIS (Greece) said that the Scandinavian delegations should reconcile their views as to whether or not the buyer had a right to require repair in the case of non-conformity of goods not amounting to a fundamental breach. The amendments did not distinguish between simple non-conformity and fundamental breach.
93. Mr. LEBEDEV (Union of Soviet Socialist Republics) inquired what were the views of the sponsors of the amendments as to the rights of the buyer in cases where repair would lead to unreasonable cost and thus the remedy was not of interest to the seller. It should not be forgotten that the buyer might also have to face considerable inconvenience and higher costs.
94. Mr. EYZAGUIRRE (Chile) said he agreed with the idea that the buyer should be able to require either repair or the offer of substitute goods. The Finish proposal was perhaps the clearest, but that of the Federal Republic of Germany was simpler. A joint proposal should be submitted.
95. Mr. STALEV (Bulgaria) inquired why the sponsors of the amendments were anxious to introduce restrictions on the right of the buyer to require repair, as contained in the existing text of the draft Convention.