(A/CONF.97/C.1/L.6, L.24, L.34, L.40, L.44, L.64)
1. The CHAIRMAN, inviting the Committee to consider the United States proposal (A/CONF.97/C.1/L.6), pointed out that there was a considerable discrepancy between the existing English and French texts of article 8(2) [became CISG article 9(2) ]. Whereas the English text referred specifically to usage being made applicable to the contract, the French text merely mentioned usage without reference either to the contract or to its formation. The French representative had asked the United States representative whether he could agree to bring his proposal into line with the French text by deleting the reference to the contract.
2. Mr. FARNSWORTH (United States of America) confirmed that his proposal was now to bring the English text into line with the French. It might be envisaged that there would eventually be one law on formation, one on sales and one covering both; the new text would be applicable to all three possibilities.
3. Mr. KHOO (Singapore) could not agree to the United States proposal. The question was not merely one of aligning two texts, but involved an issue of substance, namely, whether or not the principle established in article 8(2) [became CISG article 9(2) ] should apply to the formation of the contract as well as to the contract itself. Article 8 [became CISG article 9 ] was designed to cover a situation in which a contract had already come into existence. It was the fruit of extensive discussions in the UNCITRAL Working Group and represented a compromise solution. To extend it to cover also the formation of a contract would have very serious implications and would introduce an element of uncertainty, since it would mean that parties to an international sales contract could never be certain whether a contract had in fact come into existence. He was therefore strongly opposed to the extension of article 8(2) [became CISG article 9(2) ] proposed by the United States.
4. Mr. MANTILLA-MOLINA (Mexico) said his position was the opposite to that of the previous speaker. The existing French version appeared to him to give rise to uncertainty since it mentioned only parties but no contract, and if no contract existed there could be no parties. He favoured the original United States proposal, which made it clear that the provision was to be applicable also to formation.
5. Mr. KUCHIBHOTLA (India) said that the history of the provision showed that it was a compromise solution designed to apply solely to the contract. He could not support either the United States or the Mexican arguments.
6. Mr. ROGNLIEN (Norway) shared the views of the Mexican representative. It was necessary to refer to the contract, since it had already been decided that usage could derogate from the provisions of the Convention without adopting an express provision to that effect. If the reference to the contract was not included, that important point would not be made clear in article 5 [became CISG article 6 ].
7. The CHAIRMAN invited the Committee to vote on whether article 8(2) [became CISG article 9(2) ] should be applicable both to the contract and to its formation. A vote against would be equivalent to a vote in favour of the view that it should be applicable only to contract.
8. The result of the vote was 19 in favour and 17 against, with 3 abstentions.
9. The CHAIRMAN said that text based on the first formulation would accordingly be forwarded to the Drafting Committee.
10. Mr. DABIN (Belgium) pointed out that in the French text as it stood, the equivalent of the words "unless otherwise agreed" now made little sense.
11. The CHAIRMAN said that that point could be taken up in the plenary.
12. Mr. KUCHIBHOTLA (India), introducing his delegation's amendment (A/CONF.97/C.1/L.34), said that as it stood article 8(2) [became CISG article 9(2) ] contained two criteria for the implied application of usage to a contract; first, the knowledge of the usage on the part of the parties, and secondly, the fact that the usage was widely known and regularly observed. In his view, the second criterion was contradictory; if a usage was widely known but nevertheless not regularly observed, it would not be binding. The words "or ought to have known" already covered the phrase "which in international trade is widely known . . . etc.", and that phrase could accordingly be deleted.
13. Mr. BENNETT (Australia) could not agree to the Indian proposal. It was true that to some extent the words which it was proposed to delete performed the same task as "ought to have known", but he felt that without them the provision did not adequately indicate the nature of the usage that was impliedly made applicable. He preferred to keep the existing wording.
14. Mr. HERBER (Federal Republic of Germany) supported the Indian proposal, which had the merit of simplicity and would avoid misunderstandings.
15. Mr. MANTILLA-MOLINA (Mexico) also supported the Indian proposal. The existing text seemed to him excessive in requiring that usage should both be known to the parties and regularly observed; it implied that a usage which was known, but not necessarily observed, would be invalid.
16. Mr. ROGNLIEN (Norway) thought, on the contrary, that mere knowledge of a usage was not enough to make it applicable. He preferred the existing text.
17. Mr. BONELL (Italy) also found the proposal unacceptable. If the intent was to simplify the text, it would be better to adopt the formula agreed in ULIS, which had been more precise. Furthermore, it did not seem appropriate to adopt the proposed wording in view of what had already been decided in regard to the United States proposal. Finally, the phrase "at the time of the contract" seemed to him too vague and liable to cause misunderstandings. He preferred the existing text.
18. Mr. SZÁSZ (Hungary) was also opposed to the proposal. The existing text was more specific and would thus avoid possible misunderstandings.
19. Mr. LEBEDEV (Union of Soviet Socialist Republics) noted that during the preparatory discussions the question of usage had been one of the issues that had been most fiercely debated. The present formulation of article 8(2) [became CISG article 9(2) ] represented a hard-won compromise which it would be undesirable to change at this stage. However, the Indian proposal was useful in that it used as a point of reference the time of conclusion of the contract, and that was perhaps an element which could be taken into account in drafting the final version.
20. Mr. HJERNER (Sweden) and Mr. PONTOPPIDAN (Denmark) supported the Indian proposal.
21. Miss O'FLYNN (United Kingdom) said she could agree to the Indian proposal to the extent that if parties knew of a usage, it was not necessary that that usage should also be generally known. However, she had some hesitation when it came to parties who were not aware of a usage but ought to have known of it; in such a case, it would be better if usage were to be defined as widely known and regularly observed. The article was therefore clearer as it stood.
22. Mr. WAGNER (German Democratic Republic) could support the extension of the scope of article 8(2) [became CISG article 9(2) ] on the understanding that it was qualified along the lines of the present text. It was important, particularly for the developing countries, that usage should be of the kind observed in the same regional area and in the same trade as that of the parties.
23. Mr. MINAMI (Japan) could not support the Indian proposal, considering that the last phrase of article 8(2) [became CISG article 9(2) ] constituted an important protection for parties who did not actually know the usage concerned.
24. The CHAIRMAN, noting that there seemed to be a substantial majority against the Indian proposal (A/CONF.97/C.1/L.34), said that if there were no objection he would consider it rejected.
25. It was so decided.
26. Mr. MEHDI (Pakistan), introducing his delegation's amendment (A/CONF.97/C.1/L.64), pointed out a drafting error: the phrase proposed was in fact to be added to the existing text, not to be substituted for the words "unless otherwise agreed". His aim in attempting to widen the scope of the clause had been to take into account the need to protect the interests of new entrants into international trade who might not be fully aware of existing trade practices.
27. Mr. ADAL (Turkey) and Mr. MATHANJUKI (Kenya) supported the Pakistan proposal.
28. Mr. HJERNER (Sweden) said that the Pakistan amendment (A/CONF.97/C.1/L.64) seemed attractive at first sight but raised the question of what conduct was relevant for purposes of interpretation, especially in regard to implied acceptance. Doubts came immediately to mind regarding the relevant time: was the conduct in question the conduct at the time of conclusion of the contract or that of a later time, when a reluctant party failed to comply with the custom in question? He accordingly urged that the text should be left as it stood.
29. Mr. WAGNER (German Democratic Republic) said that the Pakistan amendment was unnecessary; the problem with which it attempted to deal was already settled by article 7 [became CISG article 8 ], paragraph (3).
30. Mr. MEHDI (Pakistan), replying to the Swedish representative, explained that in his amendment "conduct" meant conduct at the time when the contract came into being, i.e., on its formation or conclusion. Conduct at a time when the contract was already in existence could no longer be taken as implying acceptance of a usage.
31. As for the comment by the representative of the German Democratic Republic, he felt that the inclusion of the reference in article 7 [became CISG article 8 ], paragraph (3) was all the more reason for reiterating the point in article 8 [became CISG article 9 ], paragraph (2).
32. Mr. WANG Tian ming (China) said that, for the reasons stated by other speakers during the discussion, his delegation supported the amendment by Pakistan (A/CONF.97/C.1/L.64).
33. The Pakistan amendment (A/CONF.97/C.1/L.64) was rejected by 18 votes to 15.
34. The CHAIRMAN invited the Committee to consider together the amendments to article 8 [became CISG article 9 ] submitted by Egypt (A/CONF.97/C.1/L.44) and Sweden (A/CONF.97/C.1/L.19), since they had the same purpose.
35. Mr. HJERNER (Sweden) said that he would support the Egyptian proposal (A/CONF.97/C.1/L.44) in preference to his own delegation's proposal (A/CONF.91/C.1/L.19); the latter should therefore be treated as an alternative to fall back on if the Egyptian proposal was rejected.
36. The aim of the sponsors of those two proposals had been to cover the question of the interpretation of trade terms, such as "FOB", "CIF", "landed" and "net weight". The 1964 ULIS -- and also the first draft of the present Convention -- had contained a provision such as the one in the Egyptian proposal, which had been dropped in the present draft, not because it was controversial but merely because the point was felt to be already covered by other provisions, especially those on usage. But in fact that reason was not a good one. The interpretation of a trade term could well lead to its being assigned a particular meaning without reference to any usage. For those reasons, he urged the Committee to adopt the Egyptian proposal (A/CONF.97/C.1/L.44), or failing that, the proposal of his own delegation (A/CONF.97/C.1/L.19).
37. Mr. DABIN (Belgium) shared the views of the representative of Sweden. He saw no reason why the draft should make no reference to INCOTERMS; those terms did not really come under the heading of "usages". He therefore supported the Egyptian proposal to include in the draft the excellent ULIS provision on trade terms. Failure to incorporate such a provision would involve the risk that the Convention might serve to change the customary manner of interpreting INCOTERMS.
38. Mr. SHAFIK (Egypt) said that his delegation's amendment (A/CONF.97/C.1/L.44) was likewise intended to reintroduce the reference to trade terms. The wording had been taken literally from article 9, paragraph 3, of ULIS in order to avoid all drafting problems. The problems connected with the interpretation of trade terms were not necessarily the same as those involved in the interpretation of usage. The former problems should therefore have their special place in the draft; they could not be considered to be covered by the provisions on usage.
39. Mr. BONELL (Italy) expressed his warm support for the Egyptian and Swedish proposals. Considering the great frequency with which trade terms were used in international transactions and the difficulties which daily arose because of the differences in the meanings attached to them by the various national legislations, it was obvious that much of the litigation arising out of sales contracts was bound to be concerned precisely with the interpretation of trade terms. Accordingly, in order to avoid differing interpretations of those terms by judges (and especially arbitrators) in different countries, it was essential for the future Convention to deal with the problem in the manner proposed by the Egyptian delegation.
40. Mr. GOLDSTAJN (Yugoslavia) said that he would support the Egyptian amendment (A/CONF.97/C.1/L.44), or, if it was not adopted, the Swedish amendment (A/CONF.97/C.1/L.19), both of which were identical in purpose with the proposal made by the Yugoslav Government in its comments (A/CONF.97/8/Add.3, p. 20, para. 11). In the various countries, trade terms were not always treated as a matter of usage.
41. Mr. BENNETT (Australia) said that, while he sympathized with the Swedish proposal (A/CONF.97/C.1/L.19), he feared it would involve drafting difficulties, especially with regard to the interrelationship between paragraphs (1) and (2). As he read it, paragraph (2) was subsidiary to paragraph (1), which referred to agreed usage and to established practice. Paragraph (2) dealt with a situation in which the parties to a contract implicitly made a usage applicable to their contract. That immediately raised the question whether the interpretation of a trade term was a matter of usage or of practice. Since it could not be a usage, it would have to be deemed to be a practice.
42. As for the Egyptian proposal (A/CONF.97/C.1/L.44), its disadvantages were even more serious. Unlike the Swedish proposal, the Egyptian text did not require that the parties should necessarily have knowledge of the trade terms.
43. Mr. SZÁSZ (Hungary) pointed out that there was a difference in approach in the two proposals under consideration. The Swedish amendment was concerned with implied applicability, the Egyptian one with interpretation.
44. Mr. PLANTARD (France) said that while he had great respect for the INCOTERMS, which were widely used in trade practice, it did not follow that the Convention should deal with them. The inclusion of the proposed reference in article 8 [became CISG article 9 ], at any rate, would be a source of confusion, since the article dealt with usages to which the parties expressly referred and the Swedish and Egyptian proposals dealt with a rule of interpretation for trade terms. It should be remembered that there was already a provision on interpretation, namely, article 7 [became CISG article 8 ]. In the amended form in which it had been adopted, that article afforded ample basis for the interpretation of trade terms.
The meeting was suspended at 4.30 p.m. and resumed at 4.50 p.m.
45. Mr. EYZACUIRRE (Chile) said that his delegation enthusiastically supported the Egyptian proposal, which would introduce a very useful provision to supplement the system of interpretation of the will of the parties to a contract. It would provide a very effective tool of interpretation and thereby contribute materially to uniformity in the application of the Convention.
46. Mr. FARNSWORTH (United States of America) said that he shared many of the misgivings which had been expressed regarding the Egyptian proposal. The decision to drop the provision in article 9, paragraph 3, of ULIS had been taken after a long and thorough discussion, and not purely because it had been felt to be superfluous. There was a well-justified fear that, with a provision of that kind, a party to a contract could be caught by an interpretation unknown to it. Paragraph (2), when it spoke of usage, required that it should be known to the parties -- or that the parties "ought to have known it" -- and that in international trade it must be widely known to, and regularly observed by, the parties to contracts of the type concerned. The new paragraph (3) proposed by Egypt, however, contained none of those safeguards. He could not, therefore, support it.
47. His delegation might be prepared, however, to accept the Swedish proposal to insert a reference to trade terms in article 8(2) [became CISG article 9(2) ]. Nevertheless, since the proposed addition dealt with interpretation, it should preferably be inserted in article 7(2) [became CISG article 8(2) ].
48. Mr. HJERNER (Sweden), replying to a question by the CHAIRMAN, said that he could not agree to his proposed insertion being made in article 7 [became CISG article 8 ] instead of in its proper place in article 8 [became CISG article 9 ]; that would result in a text much too vague to be voted upon.
49. Mr. SHAFIK (Egypt) noted that work on the unification of trade terms had been under way in the competent international bodies over a period of many years. The introduction of an appropriate reference in the present draft would serve to emphasize the importance of those terms, which were now in constant daily use throughout the world. It was essential to specify that trade terms must be interpreted "according to the meaning usually given to them in the trade concerned", as his delegation proposed (A/CONF.97/C.1/L.44). His proposal did not relate exclusively to INCOTERMS. It covered all terms currently used in trade, INCOTERMS, United States commercial terms etc.
50. Miss O'FLYNN (United Kingdom) supported the Egyptian proposal. The omission of a reference to the interpretation of trade terms could not but lead to disputes and foster unnecessary litigation. Article 7 [became CISG article 8 ] could of course be modified to cover the interpretation of trade terms, but her delegation preferred a separate provision -- as proposed by the Egyptian delegation -- in view of the importance of the matter.
51. Mr. KIM (Republic of Korea) said that he opposed the Egyptian proposal, not on grounds of substance, but on grounds of simplicity. It would be a source of complication to introduce a reference to trade terms in article 8 [became CISG article 9 ]: the amendment would make it difficult to distinguish between questions of usage and questions of trade terms.
52. Mr. LEBEDEV (Union of Soviet Socialist Republics) opposed the Egyptian proposal. He found the proposed new paragraph (3) objectionable in that it departed completely from the subject of article 8 [became CISG article 9 ], which was concerned with the binding character of usage in the relations between the parties to the contract. It would be incongruous to add to it a provision on the interpretation of trade terms. He feared that the adoption of the Egyptian proposal would make the future Convention less attractive to Governments and deprive it of the wide acceptance desired by all.
53. Furthermore, the language of the proposed provision was unduly vague. He failed to see the precise meaning of the expression "commonly used". The term "FOB", for example, was very differently interpreted in the common-law countries and in INCOTERM practice. The question would immediately arise of which of the two meanings should be attached to the term.
54. The problem of the interpretation of INCOTERMS was a separate question and one with which UNCITRAL would be dealing. Accordingly, it was highly preferable to leave the subject outside the present Convention. After all, it must be remembered that the decision to omit the subject from the draft had been taken by UNCITRAL after long and careful consideration.
55. Mr. MICHIDA (Japan) agreed with the representatives of France and the Union of Soviet Socialist Republics. To illustrate the dangers of the Egyptian proposal, he pointed out that the term "shipment" meant different things in the United States of America and the United Kingdom. The INCOTERMS were not well known everywhere. In Japan, they had been translated with considerable difficulty: the Japanese version had, for example, two pages of explanations on the term "FOB" alone. The problem should be dealt with in article 7 [became CISG article 8 ], which concerned interpretation.
56. Mr. FOKKEMA (Netherlands) said that initially he had had much sympathy for the Swedish and Egyptian proposals but that the statement by the United States representative had convinced him of their dangers.57. To take the example of FOB, one would be tempted to interpret it as was done in INCOTERMS. It could happen, however, that one of the parties to the contract was not aware of that INCOTERM meaning and that the other party knew of that ignorance. The Egyptian proposal would not provide a satisfactory solution in a case of that kind.
58. He felt that the rule in article 7 [became CISG article 8 ] would provide a better solution. In the form in which it had been adopted, the language of that article would ensure that INCOTERMS were interpreted in accordance with their own definitions.
59. Mr. SHAFIK (Egypt), replying to a question by Mr. FARNSWORTH (United States of America), said that he could agree that his proposed new paragraph, if adopted, should be added to article 7 [became CISG article 8 ] as a new paragraph (4) instead of to article 8 [became CISG article 9 ] as paragraph (3).
60. The CHAIRMAN put to the vote the text of the new paragraph proposed by Egypt (A/CONF.97/C.1/L.44), the question of its place being left to the Drafting Committee.
61. The Egyptian amendment to article 8 [became CISG article 9 ] (A/CONF.97/C.1/L.44) was rejected by 21 votes to 16.
62. The CHAIRMAN put to the vote the Swedish proposal (A/CONF.97/C.1/L.19).
63. The Swedish amendment (A/CONF.97/C.1/L.19)was rejected by 23 votes to 13.
64. The CHAIRMAN reminded the Committee that only one amendment to article 8 [became CISG article 9 ] had been adopted, to the effect that the provisions of paragraph (2) should be extended to the formation of the contract. Solely for purposes of that amendment, the article would be referred to the Drafting Committee. If there were no further comments, he would consider that the Committee agreed to adopt that course of action.
65. It was so agreed.
66. Mr. DABIN (Belgium) observed that the draft Convention nowhere defined the term "place of business". If the place of habitual residence of a party was not a criterion of his place of business, was it to be defined with reference to a material factor, such as the location of a factory, an economic factor, such as investment, or a legal factor, such as powers of proxy? The term appeared in many articles other than article 9 [became CISG article 10 ]. It would be desirable to define it in view of its practical importance, as experience in the European Economic Community had shown. For guidance, reference might have been had to the definitions appearing in other conventions, such as those relating to double taxation. Short of submitting an amendment in that connection, he would like the delegates present, who had made a substantial contribution to the scientific preparation of the Conference and had repeatedly declared that every aspect had been discussed at length, to explain why article 9 [became CISG article 10 ] went no further than to provide for the choice of the place of business when there were several, without first specifying what that concept meant.
67. The CHAIRMAN said that at the committee stage of discussion on the draft Convention, delegations should submit their observations in the form of specific proposals.
68. Mr. INAAMULLAH (Pakistan), introducing his proposal (A/CONF.97/C.1/L.67), said that it was in the nature of a suggestion. There was no definition in the draft Convention of the term "party" and in view of the increasing part played by State agencies in international trade, it would be relevant to ascertain how it was understood by the Committee. It was his understanding that in the work of UNCITRAL the term "party" was considered to include State organs when they were engaged in commercial transactions.
69. Mr. SEVÓN (Finland) suggested that the point raised would be met if the summary record recorded the Pakistan representative's view that he understood the term "party" to include State agencies and that no delegation had opposed it.
70. It was so agreed.
71. Mr. KLINGSPORN (Federal Republic of Germany), introducing his delegation's amendment (A/CONF.97/C.1/L.18), said that a definition of the term "writing" was of importance [became CISG article 13 ] in the application of some provisions of the draft Convention, such as article 27 [became CISG article 29 ], paragraph 2. It would avoid dispute if it was made clear in that instance that if one party submitted a proposal for modification of a contract by a telegram which the other accepted by the same means, the requirement for any modification to be in writing had been complied with. His delegation's amendment followed the definition of "writing" which appeared in article 1, paragraph 3(g), of the Convention on the Limitation Period in the International Sale of Goods (A/CONF.63/15).
72. Mr. SAMSON (Canada) supported the amendment.
73. Mr. LEBEDEV (Union of Soviet Socialist Republics), supporting the amendment, said that a new domestic law adopted by his country in 1977, whereby written agreements had become mandatory for foreign trade transactions, included telegrams or telex under the definition of "written".
74. Mr. FOKKEMA (Netherlands), said that he supported the amendment but wondered whether it was most appropriately placed in article 9 [became CISG article 10 ]. Perhaps the Drafting Committee should consider that matter.
75. Mr. KHOO (Singapore) said he had sympathy with the amendment but wondered whether a more general formulation should be devised to include notices and other communications.
76. The CHAIRMAN said that if the form of communication was not specified, subject to articles 11 [became CISG article 12 ] and (X) [became CISG article 96 ], any form, including oral communication, could be used. The amendment referred only to cases in which communication in writing was compulsory.
77. The amendment of the Federal Republic of Germany (A/CONF.97/C.1/L.18) was adopted.
78. Mr. SHAFIK (Egypt) inquired what the exact significance of the conjunction "and" was in the third line of article 9 [became CISG article 10 ]. If a party had several places of business in a country, which one would be taken into consideration for the purposes of that article?
79. The CHAIRMAN pointed out that the UNCITRAL Working Group had appreciated that a number of operations were involved in the conclusion and performance of a contract and had decided that they should be considered as a whole in determining the relationship to the place of business. The term "closest relationship" always admitted of a certain degree of doubt.
80. He took it that the Committee wished to send article 9 [became CISG article 10 ] to the Drafting Committee, with a request to consider the most appropriate place for the amendment by the Federal Republic of Germany.
81. It was so agreed.
82. Mr. SAMSON (Canada), introducing his delegation's amendment (A/CONF.97/C.1/L.54/Rev.1), said that the aim was to introduce a limitation on admissible evidence in cases where contracting parties had freely chosen to have a written contract. In the international context, it was important to ensure a minimum of protection for parties who had made such a choice. The amendment sought to exclude evidence by witnesses unless it was supported by other evidence resulting from a written document from the opposing party or circumstantial evidence. The amendment called for some degree of certainty as to facts which could be used to establish a prima facie case: for example, a clearly established material fact could be adduced as evidence of the existence of an agreement.
83. Mr. REISHOFER (Austria) said that the proposal was aimed at limiting the free appreciation of evidence. His delegation could not accept such a strict rule, which was in contradiction to a fundamental principle of Austrian law, namely, the free appreciation of evidence by the judge.
84. Mr. MICHIDA (Japan) said that the principle was a restatement of the rule on extrinsic evidence which prevailed in English-speaking common law countries. It should be noted that the amendment referred to a contract of sale evidenced only by a written document, not by a final and formal written agreement. It was a rigid rule and its application had not been found to be easy in many common-law countries, where the relevant case law was confused. Representatives of those countries who had participated in previous discussions had never hitherto made such a proposal, which he was unable to support.
85. Mr. SAMI (Iraq) supported the Canadian proposal as providing a minimum protection with regard to admissibility of evidence.
86. The CHAIRMAN said that the Canadian proposal did not seem to command wide support. In the absence of further comment, he would take it that the Committee wished to adopt the original text of article 10 [became CISG article 11 ].
87. It was so agreed.
The meeting rose at 6 p.m.