[Article 37(3)/Article 40 ter] [became CISG article 44]
(A/CONF.97/C.1/L.75, L.111, L.125, L.131, L.137, L.204)
1. Mr. DATE-BAH (Ghana), introducing the joint proposal by Finland, Ghana, Kenya, Nigeria, Pakistan and Sweden (A/CONF.97/C.1/L.204), said that following the previous discussion on article 37 [became CISG article 39 ] (A/CONF.97/C.1/SR.17), the sponsors had endeavoured to draft a compromise under which a buyer who had a reasonable excuse for failure to give notice did not lose all his rights to rely on a lack of conformity, but which at the same time recognized that the requirement for due notice by the buyer was an important aspect of the seller's right to cure.
2. Reference had been made in the discussion to the possibility of such a proposal leading to speculation on the part of the buyer and to the exclusion of the seller's right of avoidance. There had never been an intention to exclude that right. The basic rule, as stated in the original text of paragraph 1 of the article, was retained: notice must be given. The only remedies left to the buyer, with a reasonable excuse for failure to give notice were financial remedies -- damages or limited costs, against which could be offset foreseeable financial loss on the part of the seller caused by the buyer's failure to give notice. It was further provided, in order to discourage fictitious claims, that the buyer's claim for damages could not include loss of profit. It had been argued that the seller would have difficulty in assembling evidence in the case of very tardy claims. That problem could be tackled under the provision about foreseeable financial loss. Under the joint proposal [became CISG article 44 ], the buyer was given every incentive to give notice in due time since his failure to do so resulted in a loss of rights; however, if he had reasonable excuse, he could retain certain residual rights.
3. Mr. WIDMER (Switzerland) inquired whether the reference in the last sentence of the new paragraph 3 [became CISG article 44 ] to the buyer's failure to give notice meant that he had given no notice at all or he had given late notice.
4. The CHAIRMAN said that it was his understanding that both possibilities were covered. By the word "notice", the reader should understand not the formal communication referred to in paragraph 1 but rather an intimation by the buyer that there was some defect in the goods delivered. That might well take the form of the institution of legal proceedings or a refusal to pay the price fixed in the contract.
5. Mr. BONELL (Italy) said that the phrase might lead to doubts about the merits of the proposal.
6. Mr. INAAMULLAH (Pakistan) said that his delegation was one of the sponsors of the joint proposal because the original text of article 37 [became CISG article 39 ] which was one of the most controversial in the draft Convention, was highly detrimental to the interests of the buyer. After discussion by the Trade Law Sub-Committee, the Asian-African Legal Consultative Committee, at its twentieth session in 1979, had reached the conclusion that the article should establish the presumption that if the seller did not receive notice that the goods were defective within a reasonable time, he was entitled to assume that the goods had been handed over to the buyer in conformity with the contract and had referred to a similar provision in article 19, paragraph 1, of the United Nations Convention on the Carriage of Goods by Sea adopted in Hamburg in 1978. (A/CONF.97/8/Add.5, page 2). The joint proposal was not intended to disadvantage the seller but rather to improve the position of the buyer.
7. Mrs. KAMARUL (Australia) said that the joint proposal was a satisfactory compromise. Most cases would still fall under the two-year time-limit but a greater degree of flexibility had been introduced. While supporting the joint proposal in principle, she wondered why loss of profit was to be excluded from claims for damages and also whether the term "damages" included a reduction in the price. In paragraph 3 of the joint proposal [became CISG article 44 ], she would prefer the use of a word less associated with the law of procedures than "set off".
8. Mr. KOPAC (Czechoslovakia) expressed doubts about the joint proposal. Paragraphs 1 and 3 seemed somewhat uncoordinated. Paragraph 1 referred to a loss of right whereas paragraph 3 [became CISG article 44 ] asserted that under some circumstances there might be no loss of right. The relationship between the two paragraphs required clarification. Furthermore, it was not certain how loss of right on the part of the buyer would apply in practice. Under some circumstances, the seller might well for commercial reasons remedy a lack of conformity in the goods delivered even when the time-limit for notice had expired. The relationship to article 44 [became CISG article 48 ] should be borne in mind. In that connection he noted that his delegation's amendment to article 37 [became CISG article 39 ] (A/CONF.97/C.1/L.111), referred not to loss of right but to the buyer not being "entitled to exercise his right" after a specific period.
9. Mr. REISHOFER (Austria) said that his delegation would be prepared to accept the joint proposal in principle but thought that some improvements of detail were needed. He regretted the omission from paragraph 1 of the provision in the original text that the buyer should be obliged to specify the nature of the lack of conformity. That provision would be useful in cases where there was an intermediate buyer who would be obliged to provide such information under the national law concerned. In paragraph 2, which the joint proposal left unaltered, he would have preferred a shorter time limit for notification, for instance, the period of one year specified in the Czechoslovak amendment. He had doubts about the usefulness of the reference to "foreseeable financial loss" in the new paragraph 3 and considered that the expression was lacking in clarity. He supported the suggestion that paragraph 3 should constitute a separate article [became CISG article 44 ].
10. Mr. SAMI (Iraq) observed that the joint proposal represented a commendable balance between the interests of the buyer and the seller and in general he supported it. Paragraph 3 should become a separate article [became CISG article 44 ].
11. Mr. FARNSWORTH (United States of America) agreed that the joint proposal constituted a praiseworthy attempt to strike a balance but doubted its usefulness in practice because it left too many issues unresolved. It would be difficult to interpret "reasonable" as applied to "time" in paragraph 1 [became CISG article 39(1) ] and "excuse" in paragraph 3 [became CISG article 44 ]. There was a reference to loss of profit -- a term which had not been used in a technical sense elsewhere in the Convention. It would be difficult to define what was foreseeable in the way of loss, and even more difficult to define how it was caused. For example there would be the problem of deciding whether the goods were defective when delivered or became defective later through use. If there was considerable delay in giving notice of lack of conformity, the seller might legitimately complain that evidence with regard to testing and testimony of relevant witnesses was no longer available for his defence in a suit brought against him by the buyer. Furthermore, the last sentence of paragraph 3 [became CISG article 44 ] put on the seller the burden of proof of financial loss which once again he might not have the evidence to sustain. It would be better to delete the sentence altogether.
12. Mr. FELTHAM (United Kingdom) supported the joint proposal. In particular, he supported paragraph 3 [became CISG article 44 ] which would be useful in a case such as the sale of a complicated machine under a series of contracts containing detailed specifications. In such cases article 38 [became CISG article 40 ] would not apply. The machine might appear to work, although one part had not been constructed strictly in accordance with specifications, but six months later malfunctioning might cause a fire which destroyed the buyer's factory. In such a case the buyer should have a claim for damages. The United States representative had mentioned difficulties of providing evidence to show that the goods delivered had been in conformity with the contract. That problem could be safely left to the courts to decide. Although he supported the joint proposal, he was maintaining the United Kingdom proposal to delete paragraph 2 of article 37 [became CISG article 39 ] (A/CONF.97/C.1/L.137).
13. Mr. OLIVENCIA RUIZ (Spain) said that in its attempt to find a balanced compromise between the interests of the seller and the buyer, the joint proposal seemed to have sacrificed clarity. The article would have been clearer if it had first stated the duty to notify and had then set out the juridical consequences of failure to give notice within the required time. In that connection he had difficulty in interpreting the expression "reasonable time" in paragraph 1 [became CISG article 39(1) ] and the expression "reasonable excuse" in the new paragraph 3 [became CISG article 44 ]. He wondered if the maximum of two years referred to in the original paragraph 2 [became CISG article 39(2) ], which had been retained, might not be taken as the "reasonable time" referred to in paragraph 1 [became CISG article 39(1) ]. His delegation considered that the wording should be clarified even if the central ideas were retained.
14. Mr. ROGNLIEN (Norway) wondered how the provisions set forth in the joint draft proposal would work in practice. Since evidence would have to be furnished that the defect did really exist at the time of delivery it was essential that the article should contain some reference to the burden of proof. The assessment of the financial loss caused to the seller by the buyer's failure to give notice depended on the possibility of establishing original conformity where evidence was lacking or unavailable, and would be a difficult task. Another point that needed clarification was the definition of a reasonable excuse. It was further regrettable that the amended paragraph 1 would not provide that the notice to the seller should specify the nature of the lack of conformity.
15. Mr. GHESTIN (France) said that the compromise solution put forward in the joint proposal unfortunately lacked the precision necessary in the Convention. The joint proposal also contained terms which would be difficult to interpret in practice. For instance, a reasonable time might take into account the possibility of a reasonable excuse. He was afraid that the text would be a fruitful source of litigation. Like other delegations, he would regret the disappearance from paragraph 1 of the requirement that the nature of the lack of conformity should be specified. For those reasons, he would have difficulty in accepting the proposal.
16. Mr. KRISPIS (Greece) said that his delegation could accept only one excuse for failure to notify the lack of conformity within a reasonable time, namely that of force majeure, which was a generally accepted legal principle and need not be specified in the Convention. The last sentence of paragraph 3 [became CISG article 44 ] which referred to an exception to an exception would greatly complicate matters and lead to litigation. His delegation therefore opposed the proposal.
17. Mr. LEBEDEV (Union of Soviet Socialist Republics) considered that the joint proposal would do little to promote the interests of either buyer or seller because of the likelihood of disputes concerning the interpretation of the various elements of the new paragraph 3 [became CISG article 44 ]. A compromise, although laudable, should not introduce an element of uncertainty which would make it unworkable in practice.
18. Mr. HERBER (Federal Republic of Germany) noted that the existing text of article 37(1) [became CISG article 39(1) ] was in itself a compromise and said that the discussion of the draft article seemed to show that there was no possible common basis for a further compromise. Although a compromise nearly always complicated the legal situation, it might be acceptable if it enjoyed virtually unanimous support. That seemed not to be the case with the joint draft proposal and he thought it preferable to keep the existing text in the draft Convention.
19. Mr. WANG Tian ming (China) remarked that the joint proposal would greatly improve article 37 [became CISG article 39 ] and offered a better balance between the interests of buyer and seller. He recognized that no compromise proposal could be perfect and agreed that the word "reasonable" might lead to uncertainty. Nevertheless, it had been used in other text adopted by the Committee and its meaning would no doubt be settled by the courts in the light of the circumstances. His delegation supported the joint proposal in principle.
20. Mr. VINDING KRUSE (Denmark) said that his delegation, like others, found it difficult to foresee the consequences of the proposed compromise, especially when applied to specific cases. He still considered that the original wording of articles 37 and 38 [became CISG article 38 and CISG article 39 ] gave the buyer the same protection as the joint draft proposal. He agreed with the representative of the Federal Republic of Germany that the compromise would be acceptable only if it commanded virtually unanimous support.
21. Mr. EYZAGUIRRE (Chile) preferred the original text of article 37(1) [became CISG article 39(1) ] and particularly regretted the deletion of the requirement that the nature of the lack of conformity should be specified. In the new paragraph 3 [became CISG article 44 ], he had difficulty with the exclusion from damages of loss of profit. Despite those and other ambiguities, his delegation would, however, vote in favour of the joint proposal.
22. Mr. SEVÓN (Finland) conceded that the proposal, like many compromise texts, was not as clear as the original article.
23. With regard to paragraph 1, the sponsors would, in deference to the wishes of a number of representatives agree to keep the existing text. In the case of the proposed new paragraph 3, various representatives had expressed objections to the last sentence and the sponsors would, if the Committee wished, regretfully agree to its deletion. He noted that reference was made to loss of profit in articles 70 and 73 of the Convention [became CISG article 74 and CISG article 77 ], although with a different connotation. He suggested that the Spanish representative's comments on the structure of the article should be referred to the Drafting Committee.
24. He asked that a vote should be taken on the new paragraph 3, as a whole, and also on the new paragraph omitting the last sentence.
25. The CHAIRMAN said that he understood that the existing paragraphs 1 and 2 of article 37 [became CISG article 39 ] would remain unchanged and that the new paragraph 3 would, if adopted, be inserted in the Convention as a separate article after article 40 [the new draft paragraph became CISG article 44 ]. He invited the Committee to vote on the new draft paragraph 3 as a whole.
26. The new draft paragraph 3 as a whole was rejected.
27. The CHAIRMAN invited the Committee to vote on the new draft paragraph 3 without the last sentence.
28. The new draft paragraph 3, without the last sentence, was adopted, on the understanding that it should be inserted as a separate article after article 40 [the new draft paragraph became CISG article 44 ].
29. Mr. KOPAC (Czechoslovakia), introducing his delegation's proposal (A/CONF.97/C.1/L.111), said that the amendment constituted a compromise. It proposed that the time-limit for notification should be reduced from two years to one year, and also that failure to give notice within that period should not mean that the buyer forfeited his right, but only the exercise of that right. His proposal thus maintained a balance between buyer and seller.
30. Mr. HERBER Federal Republic of Germany) observed that the joint proposal just adopted by the Committee maintained the two-year time-limit. In the circumstances, he did not see how the Czechoslovak proposal could constitute a compromise. His delegation was not prepared to dilute the right of the seller any further, and therefore could not accept the Czechoslovak proposal.
31. Mr. KRISPIS (Greece) said that he did not understand the significance of the formulation "the buyer is not entitled to exercise his right", and would be unable to support the proposal.
32. The CHAIRMAN said that in view of the lack of support for the Czechoslovak proposal, he would, if there was no objection, consider it rejected.
33. It was so agreed.
34. Mr. ADAL (Turkey), introducing his delegation's amendment to paragraph 1 (A/CONF.97/C.1/L.125), said his proposal was intended to provide for the possibility that parties might wish to agree between themselves the conditions under which the buyer's rights and obligations were to be exercised. In the absence of such agreement the provisions of article 37(1) [became CISG article 39(1) ] would operate automatically. His proposal was related to the Canadian amendment to article 36 [became CISG article 38 ] in connection with the possible loss of rights by the buyer, an amendment which he had supported.
35. Mr. KRISPIS (Greece) had no objections to the Turkish proposal but believed it to be redundant since the words "unless otherwise provided in the contract of sale" were already covered by article 5 [became CISG article 6 ] .
36. Mr. SZÁSZ (Hungary) supported that view.
37. The CHAIRMAN said that in view of the lack of support for the Turkish proposal, he would, if there was no objection, consider it rejected.
38. It was so agreed.
39. Mr. FELTHAM (United Kingdom), introducing his delegation's proposal (A/CONF.97/C.1/L.137), said that article 37(2) [became CISG article 39(2) ] was in effect a limitation or prescription provision and was out of place in the Convention, which was essentially concerned with contracts of sale. There was already in existence a Convention which made provision for dealing with the complex and difficult cases that might arise in relation to the issue of limitation, namely the Convention on the Limitation period in the International Sale of Goods. In his view the matter was too complicated to deal with in a provision such as article 37(2) [became CISG article 39(2) ] , which in effect laid down a two year cut-off period. Such a period would not be appropriate in cases where, for example, latent defects in machinery were only discovered after a period of two years. Such issues were best dealt with under national law.
40. Mr. HERBER (Federal Republic of Germany) said that the matter raised by the United Kingdom representative had been discussed at length. He himself was in favour of keeping article 37(2) [became CISG article 39(2) ] because there was need to have a clear rule on who bore the risk of undiscovered non-conformity. He noted that the Czechoslovak proposal had been rejected because it was inconsistent with the compromise solution just adopted by the Committee and did not see how the United Kingdom proposal, which proposed the deletion of a provision adopted as part of the compromise solution, could be accepted.
41. Mr. HJERNER (Sweden) said that for his delegation the retention of the two-year time-limit has been an important element in the compromise proposal adopted. If the United Kingdom proposal were adopted and no period were specified many countries might have great difficulty in adhering to the Convention.
42. Mr. GHESTIN (France) supported the United Kingdom proposal. He considered it essential to bring the time period referred to under article 37(2) [became CISG article 39(2) ] within the general context of the time periods referred to in related articles of the Convention, all of which ran from the moment at which the defect in the goods was discovered. Article 37(2) [became CISG article 39(2) ] provided for a different kind of time period, which ran from the date of delivery of the goods. That approach was much less favourable to the buyer, since it did not allow for the possibility that defects might remain hidden until long after the time of delivery. Such a provision did not exist under French law. A time-limit might be necessary, but the period indicated was too arbitrary. Two years was too long in the case of perishable goods and too short in the case of items such as machinery. The proviso "unless such time-limit is inconsistent with a contractual period of guarantee" did not seem to him sufficient to modify the severity of the provision.
43. If the United Kingdom proposal were not accepted, he proposed that the phrase "or with the nature of the goods or of the defect" should be added at the end of the existing text of paragraph 2.
44. Mr. ROGNLIEN (Norway) felt that the time-limit specified in article 37(2) [became CISG article 39(2) ] was important and should be retained. The period of two years was already a compromise; in some countries the period was six months, in others one year. In regard to the question of whether the period might be too short in some cases, he pointed out that the buyer might in fact be a consumer, and as such outside the scope of the Convention; in that connection, he drew attention to his delegation's proposal (A/CONF.97/C.1/L.75). Such goods as machinery were normally accompanied by a guarantee and an agreement as to servicing, which would solve the problem of defects coming to light after the stipulated two-year period.
45. Mr. REISHOFER (Austria) agreed that the existing article 37(2) [became CISG article 39(2) ] was a necessary part of the compromise solution just agreed. There was need for a time-limit on which parties to a transaction could rely. Without such a provision it would be difficult for many countries to accept the compromise solution.
46. The CHAIRMAN said that as a majority appeared not to favour either the United Kingdom proposal (A/CONF.97/C.1/L.137) or the French proposal for an addition to the existing text he would, if there was no objection, consider both proposals rejected.
It was so agreed.
47. The CHAIRMAN invited the Committee to consider the Turkish amendment to article 37(2) [became CISG article 39(2) ] (A/CONF.97/C.1/L.125).
48. Mr. ADAL (Turkey), introducing his delegation's amendment (A/CONF.97/C.1/L.125) explained that a period of two years was too long and should be reduced to one year.
49. Mr. DATE-BAH (Ghana) said that the compromise proposal adopted earlier in the meeting was a package and that it was part of that arrangement that paragraph 2, with its two-year limit, should remain unchanged. The point was of great importance to developing countries, which frequently bought complex machinery. It would be unreasonable to expect a buyer of machinery in a developing country to notify the seller of a defect within one year when machinery not infrequently waited for more than a year before it could be installed.
50. Mr. REISHOFER (Austria) supported the Turkish proposal.
5l. The CHAIRMAN said that as a majority appeared to oppose the proposal, he would, if there was no objection, consider it rejected.
52. It was so agreed.
53. The CHAIRMAN drew attention to the amendment to article 37(2) [became CISG article 39(2) ] by the German Democratic Republic (A/CONF.97/C.1/L.131). He asked whether the sponsor considered the proposal to be of a drafting character.
54. Mr. WAGNER (German Democratic Republic), introducing his proposal (A/CONF.97/C.1/L.131), said that the amendment proposed that the two-year period should run from the date of delivery rather than the date the goods were handed over because the delivery date specified in the contract was known to both parties whereas the date of handing over of the goods was known with certainty only to the buyer. Moreover, taking the delivery date as a starting point would make the two-year period somewhat shorter and his proposal would thus go some way to meeting the concern of the Czechoslovak and Turkish delegations who had suggested a reduction in the two-year period. Finally, the specified delivery date was chosen by agreement of the parties whereas the date the goods were handed over depended on factors outside the control of the seller. It would be unfair to make the seller suffer as a result of a delay in the handing over of the goods to the buyer.
55. Mr. KRISPIS (Greece) said that he would be prepared to support the proposal if it could be taken as a purely drafting amendment. He believed that it would be an improvement to replace the cumbersome expression "the date on which the goods were actually handed over" by a reference to "delivery", which was the term used throughout the draft.
56. Mr. SAMI (Iraq) said that the proposal under discussion was a substantive amendment. The effect of the proposal would be to curtail the two-year period which his delegation like many others favoured. He therefore strongly opposed it.
57. Mr. SCHLECHTRIEM (Federal Republic of Germany) supported the proposal. He noted that the existing text of article 37(2) [became CISG article 39(2) ] did not cover cases in which the contract of sale provided for delivery to a third party.
58. Mr. SEVÓN (Finland) agreed. He could only accept the existing text of article 37(2) [became CISG article 39(2) ] on the understanding that the term "buyer" was to be construed as meaning "original buyer" and anyone to whom his rights had been transferred.
59. Mr. HJERNER (Sweden) said that although a point of substance might be involved, he believed the proposal would make the paragraph more precise. The date of delivery was the decisive date for the passing of risk and for a number of other purposes. It would therefore be natural to attach the two-year period to that date. The date of actual handing over of the goods might in contrast not be known to both parties. He favoured the proposal largely for technical reasons but would be prepared to reconsider his position if many delegations had serious objections to it.
60. Mr. DATE-BAH (Ghana) said that the general trend was to move away from the somewhat rigid and purely legal concept of "delivery" and towards a less formal approach that would refer to the handing over of the goods. It was for that reason that the adverb "actually" had been introduced before the words "handed over" in article 37(2) [became CISG article 39(2) ] .
61. Mr. ROGNLIEN (Norway) pointed out that the term "delivery" was nowhere defined in the draft Convention. The passing of risk took place not upon delivery but on the actual handing over of the goods to the carrier or the buyer.
62. Mr. ZIEGEL (Canada) asked for clarification of the meaning of the terms "delivery" and "handing over". If a buyer received documents of title relating to the goods, or was given warehouse receipts for the goods, would the operation constitute a "handing over" of the goods? If not, the term "handing over" would be construed as meaning a physical handing over of the goods. There could clearly be a difference in time between the handing over of legal title and the physical handing over of goods.
63. Mr. WAGNER (German Democratic Republic) considered that the expression "handing over" in article 37(2) [became CISG article 39(2) ] must be construed as the physical handing over to the buyer of the goods.
64. The CHAIRMAN said that as a majority appeared to oppose the proposal he would, if there were no objection, consider it rejected.
65. It was so agreed.
66. The CHAIRMAN invited the Committee to consider the last remaining amendment to article 37 [became CISG article 39(2) ] , proposed by Norway (A/CONF.97/C.1/L.75).
67. Mr. ROGNLIEN (Norway), introducing his delegation's amendment (A/CONF.97/C.1/L.75), said that it was intended to deal with the problem of recourse actions in cases where a commercial buyer had sold the goods to a sub-purchaser. As the text now stood, the two-year period would run from the time of handing over of the goods to the original buyer. That rule would be unfair to such a buyer, who might be left with no time at all in which to make a claim of recourse when notified by the sub-purchaser of a lack of conformity.
68. A solution was suggested by paragraphs 2 and 3 of article 18 of the New York Prescription Convention, 1974, which specified that the relevant period ran from the moment the first buyer received notice from the sub-purchaser, or for a reasonable period of time thereafter. His delegation's proposal was based on that provision and specified that the two-year period should not expire before a reasonable time after the buyer had received notice from the sub-purchaser. He would not press for a vote if the proposal was not enthusiastically supported within a short period.
69. The CHAIRMAN noted that there appeared to be little support for the proposal.
70. Mr. ROGNLIEN (Norway) accordingly withdrew his proposal (A/CONF.97/C.1/L.75).
71. The CHAIRMAN said that the Committee had completed its consideration of the various amendments to article 37 [became CISG article 39 ] . He took it that the Committee agreed to adopt the article and the new paragraph 3 [became CISG article 44 ] proposed in document A/CONF.97/C.1/L.204.
72. It was so agreed.
73. The CHAIRMAN invited the Committee to take up article 38 [became CISG article 40 ] and the amendment by the German Democratic Republic (A/CONF.97/C.1/L.132).
74. Mr. WAGNER (German Democratic Republic) withdrew his delegation's amendment.
75. The CHAIRMAN said that, if there were no objection, he would take it that the Committee agreed to adopt article 38 [became CISG article 40 ].
76. It was so agreed.
77. The CHAIRMAN invited the Committee to consider the proposal for a new article 40 bis [became CISG article 43(2) ].
78. Mr. KLINGSPORN (Federal Republic of Germany), introducing his delegation's proposal for a new article 40 bis [became CISG article 43(2) ] (A/CONF.97/C.1/L.129), said that the buyer lost the benefit of articles 39 and 40 [became CISG article 41 and CISG article 42 ] if he did not give notice to the seller specifying the nature of the claim of the third party within a reasonable time. In the absence of such notice to the seller, it was appropriate for the buyer no longer to be able to rely on the provisions of articles 39 and 40 [became CISG article 41 and CISG article 42 ].
79. Those considerations were not valid if the seller was aware of the existence of the right or claim of the third party concerned. In that case, it would be unfair to deprive the buyer of his remedy on grounds of non-notification within a reasonable time.
80. Comparison might be made with the situation covered by article 38 [became CISG article 40 ], which specified that the seller was not entitled to rely on the provisions of articles 36 and 37 [became CISG article 38 and CISG article 39 ] if the lack of conformity related to facts of which he knew or could not have been unaware.
81. Mr. HJERNER (Sweden) considered that the analogy with article 38 [became CISG article 40 ] was not valid. There was a great difference between claims based on intellectual or industrial property and mere non-conformity or defects in the goods.
82. Mr. BOGGIANO (Argentina) supported the proposed new article 40 bis [became CISG article 43(2) ] but suggested that the formula "knew of the right or claim . . ." should be expanded to read "knew or could not have been unaware . . .".
83. Mr. FOKKEMA (Netherlands) said that as he understood it the Swedish representative's objections related to questions of intellectual or industrial property and to the matters covered by article 40 [became CISG article 42 ] rather than to the obligations referred to in article 39 [became CISG article 41 ]. Since article 40(1) [became CISG article 42(1) ] already made reference to the seller's knowledge of the right or claim in question, it might be possible for the sponsor to link the proposed new article 40 bis [became CISG article 43(2) ] with article 39 [became CISG article 41 ] alone.
84. Mr. KLINGSPORN (Federal Republic of Germany) explained that his proposal was intended to apply to articles 39 and 40 [became CISG article 41 and CISG article 42 ]. Article 40(1) [became CISG article 42(1) ] referred to knowledge of the right or claim as such, but did not speak of the nature of the claim or right. His proposal was needed to introduce that necessary idea.
85. He stressed that a distinction should be drawn between two types of obligations. The first was the obligation of the buyer to notify the seller of the right or claim by a third party within a reasonable time of becoming aware of the existence of such right or claim. The second type of obligation was that of informing the seller of all steps taken by the third party concerned. That second obligation was not covered by the existing text of article 40(3) [became CISG article 43 ] because under the terms of that provision the notice mentioned had to be given within a reasonable time "after" the buyer became aware or ought to have become aware of the right or claim of the third party. That provision did not cover the situation where a suit was brought by the third party against the buyer at a later stage.
86. The obligation in question flowed not from the provisions of article 40(3) [became CISG article 43 ] but from the general obligation under article 73 [became CISG article 77 ] to mitigate damages. That obligation would not be affected by his delegation's proposal for a new article 40 bis [became CISG article 43(2) ].