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Use of the UNIDROIT Principles to help interpret CISG Article 6


Match-up of CISG Article 6 with counterpart provisions of UNIDROIT Principles


UNIDROIT Principles
Article 1.1 - Freedom of Contract

CISG
Article 6

The parties are free to enter into a contract and determine its content. The parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions.

Article 1.5 - Exclusion or Modification by the Parties

The parties may exclude the application of these Principles or derogate from or vary the effect of any of their provisions, except as otherwise provided in the Principles.

[The UNIDROIT articles displayed above are to be read in conjunction with the Official Comments on them as "the comments on the articles are to be seen as an integral part of the Principles" (UNIDROIT).]


To examine CISG provisions displayed above in their context, go to the full text of the CISG || To examine UNIDROIT Principles displayed above in their context, go to the full text of the UNIDROIT Principles


Editorial remarks

Remarks on the Manner in which the UNIDROIT Principles
May Be Used to Interpret or Supplement Article 6 of the CISG

Bojidara Borisova [*]
December 2004

  1. Introduction
  2. CISG's dispositive character
  3. Manner in which party autonomy might be exercised
  4. Scope of party autonomy
  5. Party autonomy limitations

I. Introduction

The principle of party autonomy entrenched in CISG Art. 6 represents an important guarantee for the effective functioning of international trade and accommodates the fulfillment of the principle of freedom of contract, which is a basic tenet of international commercial relations.[1] The inclusion of this principle in the provisions of the CISG reflects the strong conviction of the international community that specific warranties must be created for the establishment of a freely operating, market-oriented international economy within the framework of which the contracting parties have the freedom to act in conformity with their business interests. Similar provisions were also incorporated in other international uniform laws adopted prior to the CISG.[2]

The UNIDROIT Principles, which were promulgated almost fifteen years after the adoption of the CISG, contain two articles that correspond in substance with CISG Art. 6. UNIDROIT Principles arts 1.1 and 1.5, though similar in essence to CISG Art. 6, better illustrate the concept of party autonomy and can be used for the interpretation and application of CISG Art. 6.[3] This concept was regulated in two other important conventions on international commercial relations -- one adopted the same year as the CISG and the other a few years later.[4] The solid interest that the international community showed in the importance of party autonomy once again underlines its significance. Although today it seems unthinkable to have a uniform act that regulates international commercial relations that does not explicitly emphasize party autonomy, there was a strong opposition against the inclusion of this concept during the draft process of the Convention.[5]

When discussing the provisions of CISG Art. 6, one must take into consideration the following basic problems.

II. CISG's dispositive character

Although the principle of freedom of contract is generally recognized as one of the basic principles that ensures establishment and application of fair and competitive international economic rules, it might not be automatically enforced. Hence, as far as the prescriptions of one particular international act are concerned, an explicit text providing the possibility for the contracting parties to choose the applicable law and thus to define the exact terms of their contract must be included.[6] An additional requirement that makes the principle of party autonomy workable is the character of the Convention's prescriptions. If the Convention contains mandatory rules, i.e., rules from which the parties may not derogate, party autonomy cannot be applied and the contracting parties must define the exact terms of their contract in conformity with the corresponding provisions of the Convention.

This is for the most part not the case with the CISG and the UNIDROIT Principles. Both international instruments are of primarily non-mandatory character and this is unambiguously stated both in scholarly writing [7] and in the Official Comments on the UNIDROIT Principles.

III. Manner in which party autonomy might be exercised

Both CISG Art. 6 and its counterpart UNIDROIT Principles arts. 1.1 and 1.5 do not explicitly stipulate the manner in which the contracting parties may define the law applicable to their contractual relations. This was a long debated issue during the drafting period of the CISG, which attempts to balance the concept of party autonomy with the need for protection of the weaker party to the contract.[8]

Because of the unclear wording of CISG Art. 6, a controversy exists whether the application of the CISG might be explicitly or impliedly excluded. In general, there are two contrary opinions.

According to one school of thought, the CISG as a uniform set of rules allows only express exclusion.[9] The first argument of the proponents of this opinion is that only express exclusion can guarantee the uniform application of the CISG and, consequently, can ensure the success of the Convention.

The second argument in favor of express exclusion is derived from the provision of CISG under Art. 7, which includes the interpretation and gap-filling mechanism that the Convention must apply, providing that both operations must be fulfilled in conformity with the general principles underlying the Convention. One of the general principles of the international trade practice that CISG has been said to proclaim is the principle of fairness, to protect the weaker party from the dominant's party behavior and thus to guarantee the equality of both contracting parties.[10] There are authors who support only the express exclusion for purely pragmatic reasons.[11] According to them, requiring only express exclusion of the Convention will give more certainty to the contracting parties and will overcome the scholarly discrepancies.

Over the years of the CISG's application, it appears that the opinion stating that Art. 6 provides also for the implied opting-out of the Convention has received increasing support not only in commentary [12] but also in the case law.[13] This option is clearly stated also in the Official Comments as regards the interpretation and application of the UNIDROIT Principles.

Two basic arguments in favor of implied exclusion of the CISG can be stated.[14] The first is derived from the strict interpretation of the prescription of CISG Art. 6 and is based on the inference that if the drafters of the Convention wanted to allow only the express exclusion they would have formulated the text of this article differently, including in it an indisputable indication about the manner in which the exemption and the choice of law must be made. In view of the fact that such specification was not made, it is argued that implied exclusion is possible.

In this respect, it might be arguable that the Official Comments to the UNIDROIT Principles contributes to the deduction of the assertion that CISG Art. 6 provides the possibility that not only an express but also an implied exclusion of the Convention to be achieved by the contracting parties. Consequently, since CISG Art. 6 and its counterpart UNIDROIT Principles Arts. 1.1 and 1.5 do not stipulate the exact manner for the opting-out of the uniform law, both methods are possible.

The second argument in favor of implied exclusion is based on the currently existing practice of the international trade, which also confirms the possibility to exclude the application of the uniform law expressly or impliedly.[15]

When discussing party autonomy, the next important question that needs to be clarified is how to determine whether there is or is not an implied exclusion. In this respect, the UNIDROIT Principles Official Comment on Art. 1.5. provides certain indications in what circumstances would be considered to cause one to conclude that the contracting parties have impliedly excluded the application of the uniform law.

The first and probably most obvious occasion, which can also be applicable to the exclusion of the CISG, is when the contracting parties have negotiated contract terms that are totally inconsistent with the regulations of the uniform law. Thus the contracting parties, with one action, managed to achieve the exclusion of the Convention and also to determine the applicable law. The Official Comments to the UNIDROIT Principles do not differentiate between contract terms that are individually negotiated or form part of standard terms.[16]

In scholarly writings, it is unanimously accepted that the choice of the law of a non-Contracting State constitutes an implied exclusion.[17] Such definite conclusion cannot be made when the contracting parties had chosen the law of a Contracting State without explicitly referring to the domestic law of that State.[18] When a State adopts the CISG, the Convention becomes part of its law and only direct indication that the contracting parties have chosen the domestic rules of a Contracting State may lead to the conclusion that an implied opting-out of the Convention is made.

Finally, some authors[19] support the opinion that the choice of a forum or of an arbitral tribunal can be regarded as an implied exclusion if two requirements are met. The first condition is to deduce from the contracting parties' choice their intention to subject the contractual relation to the domestic law of the State where the forum or the arbitral tribunal is located. The second requirement is that the forum or the arbitral tribunal be located in a non-Contracting State. Both conditions concurrently are said to amount to an implied exclusion of the CISG.

IV. Scope of party autonomy

The basic objective of party autonomy is not the exclusion of the Uniform Law but the exercise of the freedom of the contracting parties to choose the law applicable to their contractual relationship. In this connection, what is important to be discussed is the extent of the contracting parties' freedom of choice.

Both CISG Art. 6 and its counterpart UNIDROIT Principles art. 1.5 indicate in similar manner the scope of the party autonomy. Both generally stipulate that contracting parties may exclude the application of the Uniform law in whole or they may choose to derogate only from the effect of any of its provisions.[20] Such inference can be easily drawn from the interpretation of CISG Art. 6 and is confirmed also in the Official Comments to the UNIDROIT Principles and in scholarly writings.[21]

With respect to this, several questions must be discussed. What must be considered first is the effect of the full or partial exclusion of the Convention when the contracting parties have chosen the applicable law. Secondly, both hypotheses must be discussed in the context of lack of designation of applicable law.

When contracting parties opt-out of the Convention entirely when choosing the applicable law, it must be noted once again that if the choice refers to the law of a Contracting State it is best to specifically state that the domestic law of that State is chosen. In cases of total exclusion without indication of the applicable law, both legal scholars and international case practice unanimously state that the rules of private international law should determine the applicable law.[22]

Basically, that also applies in the same manner when the contracting parties derogate only part of the CISG's provisions. With respect to the scope of a partial derogation of the CISG's articles, the following question arises: Is it necessary to apply the General provisions of the Convention (Part I, Chapter II) along with the prescriptions of the law chosen by the contracting parties or the law determined by the rules of the private international law, i.e., can we use the approach stated in the Official Comments on UNIDROIT Principles art. 1.5? [23] The answer of this question is negative and requires that the different nature of the two set of rules - CISG and UNIDROIT Principles - be taken into consideration. The former is part of the substantive law regulating the international sale of goods and is automatically applicable if the conditions of CISG Art. 1(1) are fulfilled, while the later requires the parties' consent.[24]

On the other hand, the Final Provisions of the CISG also regulate some general questions concerning the ratification and acceptance process of the Convention, its entrance into force and its denouncement,[25] the rights of the Contracting States to make reservations[26] and some other technical issues regarding the application of the Convention[27]. The opinion that the contracting parties cannot modify these provisions of the CISG, being a Contracting States' obligations under public international law, is more or less unanimously accepted. However, some authors accept the possibility that the contracting parties in their contract may modify even the effect of the CISG Final Provisions.[28]

V. Party autonomy limitations

Party autonomy is not unlimited. Both CISG Art. 6 and its counterpart UNIDROIT Principles art. 1.5 impose certain restrictions on the contracting parties freedom of choice.

In the case of partial exclusion of the Convention, the contracting parties may not derogate the application of two groups of prescriptions. Firstly, these are the mandatory provisions of the CISG itself and secondly these are the mandatory provisions of the law that should regulate the contractual relation in case when the party autonomy concept was not applied.[29] CISG Art. 6 indicates only one prescription of the Convention that has mandatory character and therefore the contracting parties may not derogate from its application - CISG Article 12.[30] The mandatory prescriptions in the second hypothesis should be determined in each separate case.

The limitation of CISG Art. 12 does not apply in the case of total exclusion of the Convention.[31] In that case the contracting parties should act only in conformity with the mandatory provisions of the domestic law that normally would regulate the contractual relation.[32]

Finally, it must be mentioned that some scholars express the opinion that except for CISG Art. 12 there are also other mandatory provisions of the Convention that impose a limitation on the contracting parties freedom of choice under the provision of CISG Art. 6.[33] To this effect the UNIDROIT Principles Official Comment provides little assistance towards the clarification of this problem, because it uses a more general and definition type approach. Still the issue is very controversial and must be carefully approached by the contracting parties.

[See also commentary by the author on this subject in: John Felemegas ed., An International Approach to the Interpretation of the United Nations Convention on Contracts for the International Sale of Goods (1980) as Uniform Sales Law, Cambridge University Press (2006) 39-44]


FOOTNOTES

* Bojidara Borisova received her law degree from Sofia University St.Kl.Ohridsky, Bulgaria, in 2001. Currently, she is a Ph.D. candidate at the same university, working on her research project on international investment law. Since July 2003 she is working as a part time legal advisor at the InvestBulgaria Agency.

1. See the Official Comments on Art. 1.1 of the UNIDROIT Principles, available online at <http://cisgw3.law.pace.edu/cisg/principles/uni6.html#official>.

2. See the Uniform Law on the International Sale of Goods and the Uniform Law on the Formation of Contracts for the International Sale of Goods. For detailed historical analysis of the party autonomy concept see Murphy, United Nations Convention for the International Sale of Goods: Creating Uniformity in International Sales Law, 12 Fordham Int'l L.J., (1998), pp.727-750, also available online <http://cisgw3.law.pace.edu/cisg/biblio/murphy.html>.

3. See General Observations on use of the UNIDROIT Principles to Help Interpret the CISG, available online at <http://cisgw3.law.pace.edu/cisg/text/matchup/general-observations.html>.

4. See The Convention on the Law Applicable to Contractual Obligations the so-called Rome Convention of 1980 and The 1986 Hague Convention on the Law Applicable to Contracts for the International Sale of Goods the so-called 1986 Choice of Law Convention.

5. For the positions of the different CISG Contracting States, see Murphy, op. cit.

6. For confirmation that CISG Art. 6 provides the opportunity for the exclusion of the Convention, see the following illustrative case decisions:

    -     Italy 10 March 2000 Suprema Corte di Cassazione [Supreme Court], case presentation including English translation available at <http://cisgw3.law.pace.edu/cases/000310i3.html>;
    -     Germany 12 October 2000 Landgericht [District Court] Stendal, case presentation including English translation available at <http://cisgw3.law.pace.edu/cases/001012g1.html>;
    -     France 6 November 2001 Cour d'appel [Appellate Court] Paris, <http://cisgw3.law.pace.edu/cases/011106f1.html>;
    -     United States 29 January 2003 Federal District Court [Illinois], Ajax Tool Works, Inc. v. Can-Eng Manufacturing Ltd., <http://cisgw3.law.pace.edu/cases/030129u1.html>.

7. See Leete, Contract Formtion Under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfall for the Unwary, 6 Temple International and Comparative Law Journal (1992), pp. 193-215, also available online at <http://cisgw3.law.pace.edu/cisg/text/leete6.html>; Ferrari, Specific Topics of the CISG in the Light of Judicial Application and Scholarly Writing, 15 Journal of Law and Commerce (1995), pp. 1-126, also available online at <http://cisgw3.law.pace.edu/cisg/text/franco6.html>; Schlechtriem, Uniform Sales Law in the Decisions of the Bundesgerichtshof [Federal Supreme Court of Germany], available online at <http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem3.html>.

8. For the legislative history of the CISG Art. 6, see Murphy, op. cit.

9. See Murphy, op. cit.; Winship, Changing Contract Practices in the Light of the United Nations Convention: A Guide for Practitioners, 29 International Lawyers (1995), pp. 525-554, also available online at <http://cisgw3.law.pace.edu/cisg/text/winship6.html>.

10. See Murphy, op. cit.

11. See Winship, op. cit.

12. See Enderlein & Maskow, International Sales Law, Oceana Publications, (1992) also available online at <http://cisgw3.law.pace.edu/cisg/biblio/enderlein-art06.html>; Schlechtriem, Uniform Sales Law-The Experience w with Uniform Sales Laws in the Federal Republic of Germany, Juridikrift Tidskrift (1991/92), pp. 1-28, also available online at <http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem3.html>; Ferrari, op. cit.

13. See the following case decisions:

    -     Italy 12 July 2000 Tribunale [District Court] Vigevano, Rheinland Versicherungen v. Atlarex, case presentation including English translation available at <http://cisgw3.law.pace.edu/cases/000712i3.html>;
    -     Austria 22 October 2001 Oberster Gerichtshof [Supreme Court], case presentation including English translation available at <http://cisgw3.law.pace.edu/cases/011022a3.html>;
    -     Switzerland 3 December 2002 Handelsgericht [Commercial Court] St. Gallen, case presentation including English translation available at <http://cisgw3.law.pace.edu/cases/021203s1.html>.

14. See Murphy, op. cit.

15. See Murphy, op. cit.

16. For confirmation that the use of standard terms can exclude the Convention's application see Ferrari, op. cit., Schlechtriem, Uniform Sales Law - The UN Convention on Contracts for the International Sale of Goods, Manz, Viena, (1986), also available online at <http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem-06.html>.

17. See Ferrari, op. cit., Bonell & Liguori, The UN Convention on the International Sale of Goods: A Critical Analysis of Current International Case Law, Uniform Law Review (1997), pp. 385-395, also available online at <http://cisgw3.law.pace.edu/cisg/text/libo6.html>.

18. See Leete, op. cit., Ferrari, op. cit., Bonell & Liguori, op. cit., Enderlein & Maskow, op. cit.; See also the following case decisions:

    -     United States 27 July 2001 Federal District Court [California], Asante Technologies v. PMC-Sierra, at <http://cisgw3.law.pace.edu/cases/010727u1.html>;
    -     Austria 22 October 2001 Oberster Gerichtshof [Supreme Court], case presentation including English translation available at <http://cisgw3.law.pace.edu/cases/011022a3.html>;
    -     Belgium 15 January 2002 Tribunal de commerce [District Court] Namur, case presentation including English translation available at <http://cisgw3.law.pace.edu/cases/020115b1.html>;
    -     United States 11 June 2003 Federal Appellate Court [5th Circuit], BP Oil International v. Empresa Estatal Petroleos de Ecuador, case presentation available at <http://cisgw3.law.pace.edu/cases/030611u1.html>.

19. See Ferrari, op. cit.

20. CISG Art. 6 states: "The parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions." UNIDROIT Principles art. 1.5 states: "The parties may exclude the application of these Principles or derogate from or vary the effect of any of their provisions, except as otherwise provided in the Principles."

21. See Schlechtriem, Uniform Sales Law - The UN Convention on Contracts for the International Sale of Goods, Manz: Vienna, (1986), also available online at <http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem-06.html>.

See also the following case decisions:

    -     Spain 16 November 2000 Audiencia Provincial [Appellate Court] Alicante, case presentation including English translation available at <http://cisgw3.law.pace.edu/cases/001116s4.html>;
    -     Austria 14 January 2002 Oberster Gerichtshof [Supreme Court], case presentation including English translation available at <http://cisgw3.law.pace.edu/cases/020114a3.html>;
    -     Belgium 15 January 2002 Tribunal de commerce [District Court], case presentation including English translation available at <http://cisgw3.law.pace.edu/cases/020115b1.html>;
    -     Switzerland 3 December 2002 Handelsgericht [Commercial Court] St. Gallen, case presentation including English translation available at <http://cisgw3.law.pace.edu/cases/021203s1.html>;
    -     Austria 15 June 1994 Vienna Arbitration proceeding SCH-4318, case presentation including English translation available at <http://cisgw3.law.pace.edu/cases/940615a4.html>.

22. See Ferrari, op. cit.

23. See Official Comments of the UNIDROIT Principles on Art. 1.5, available online at <http://cisgw3.law.pace.edu/cisg/principles/uni6.html#official>. Comment 2: Exclusion or modification may be express or implied. Ibid.

24. See UNIDROIT Principles, Preamble, second sentence.

25. See CISG Arts. 89, 91, 99, 100 and 101.

26. See CISG Arts. 92, 95, 96, 97, 98.

27. See CISG Arts. 90, 93 and 94.

28. See Ulrich G. Schroeter, Freedom of Contract: Comparison between Provisions of the CISG (Article 6) and Counterpart Provisions of the Principle of European Contract Law, note 14, also available online at <http://cisgw3.law.pace.edu/cisg/text/peclcomp6.html>.

29. See Schlechtriem, Uniform Sales Law - The UN Convention on Contracts for the International Sale of Goods, Manz, Vienna, (1986), also available online at <http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem-06.html>.

30. See Enderlein & Maskow, op. cit. citing and discussing the opinion of Bonell that CISG except Art. 12 contains other prescriptions that may not be derogated by the contracting parties;

31. See Ferrari, op. cit.

32. See Schlechtriem, Uniform Sales Law - The UN Convention on Contracts for the International Sale of Goods, Manz, Vienna, (1986), also available online at <http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem-06.html>.

33. For example, CISG Arts. 4, 7, 28, etc. See also Ulrich G. Schroeter, Freedom of Contract: Comparison between Provisions of the CISG (Article 6) and Counterpart Provisions of the Principle of European Contract Law, notes 10, 11, 12, 13 and 14, available online at <http://cisgw3.law.pace.edu/cisg/text/peclcomp6.html>.


Official Comments on Articles of the UNIDROIT Principles cited

Comments reprinted with permission from UNIDROIT

 

ARTICLE 1.1

(Freedom of contract)

The parties are free to enter into a contract and to determine its content.

COMMENT

1. Freedom of contract as a basic principle in the context of international trade

The principle of freedom of contract is of paramount importance in the context of international trade. The right of business people to decide freely to whom they will offer their goods or services and by whom they wish to be supplied, as well as the possibility for them freely to agree on the terms of individual transactions, are the cornerstones of an open, market-oriented and competitive international economic order.

2. Economic sectors where there is no competition

There are of course a number of possible exceptions to the principle laid down in the present article.

As concerns the freedom to conclude contracts with any other person, there are economic sectors which States may decide in the public interest to exclude from open competition. In such cases the goods or services in question can only be requested from the one available supplier, which will usually be a public body, and which may or may not be under a duty to conclude a contract with whoever makes a request, within the limits of the availability of the goods or services.

3. Limitation of party autonomy by mandatory rules

With respect to the freedom to determine the content of the contract, in the first instance the Principles themselves contain provisions from which the parties may not derogate. See Art. 1.5. [presented below].

Moreover, there are both public and private law rules of mandatory character enacted by States (e.g. anti-trust, exchange control or price laws; laws imposing special liability regimes or prohibiting grossly unfair contract terms, etc.), which may prevail over the rules contained in the Principles. See Art. 1.4.


ARTICLE 1.5

(Exclusion or modification by the parties)

The parties may exclude the application of these Principles or derogate from or vary the effect of any of their provisions, except as otherwise provided in the Principles.

COMMENT

1. The non-mandatory character of the Principles

The rules laid down in the Principles are in general of a non-mandatory character, i.e. the parties may in each individual case either simply exclude their application in whole or in part or modify their content so as to adapt them to the specific needs of the kind of transaction involved.

2. Exclusion or modification may be express or implied

The exclusion or modification of the Principles by the parties may be either express or implied. There is an implied exclusion or modification when the parties expressly agree on contract terms which are inconsistent with provisions of the Principles and it is in this context irrelevant whether the terms in question have been negotiated individually or form part of standard terms incorporated by the parties in their contract.

If the parties expressly agree to the application of some only of the chapters of the Principles (e.g. "As far as the performance and non-performance of this contract is concerned, the UNIDROIT Principles shall apply"), it is presumed that the chapters concerned will be applied together with the general provisions of Chapter 1.

3. Mandatory provisions to be found in the Principles

A few provisions of the Principles are of a mandatory character, i.e. their importance in the system of the Principles is such that parties should not be permitted to exclude or to derogate from them as they wish. It is true that given the particular nature of the Principles the non-observance of this precept may have no consequences. On the other hand, it should be noted that the provisions in question reflect standards of behaviour and rules which are of a mandatory character under most domestic laws also.

Those provisions of the Principles which are mandatory are normally expressly indicated as such. This is the case with Art. 1.7 on good faith and fair dealing, with the provisions of Chapter 3 on substantive validity, except in so far as they relate or apply to mistake and to initial impossibility (see Art. 3.19), with Art. 5.7(2) on price determination and with Art. 7.4.13(2) on agreed payment for nonperformance. Exceptionally, the mandatory character of a provision is only implicit and follows from the content and purpose of the provision itself (see Art. 7.1.6).


Pace Law School Institute of International Commercial Law - Last updated January 5, 2007
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