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Article 10. Place of Business

TEXT OF ARTICLE 10

For the purposes of this Convention:

(a) if a party has more than one place of business, the place of business is that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract;

(b) if a party does not have a place of business, reference is to be made to his habitual residence.


OUTLINE OF ISSUES

Reproduced with permission of UNCITRAL

["Place of Business" appears in arts. 1, 12, 20(2), 24, 31(c), 42(1)(b), 57(1)(a), 69(2), 96]

10A Which of multiple places of business is relevant (art. 10(a))

10A1 Closest relationship to contract and performance

10A2 Knowledge by parties before or at conclusion of contract

10B No place of business: habitual residence (art. 10(b))


DESCRIPTORS

Business, place of


CASE ANNOTATIONS: UNCITRAL DIGEST CASES PLUS ADDED CASES

UNCITRAL has identified relevant cases in Digests containing case annotations for each article of the CISG. UNCITRAL cites seven cases in its Digest of Art. 10 case law:

Austria      1           Germany      1           Switzerland        1
Belgium 1 Russian Federation      1 United States       1
France      1       TOTAL:    7

Presented below is a composite list of Art. 10 cases reporting UNCITRAL Digest cases and other Art. 10 cases. All cases are listed in chronological sequence, commencing with the most recent. Asterisks identify the UNCITRAL Digest cases, commencing with the 27 July 2001 citation reported below. Cases are coded to the UNCITRAL Thesaurus.

English texts and full-text English translations of cases are provided as indicated. In most instances researchers can also access UNCITRAL abstracts and link to Unilex abstracts and full-text original-language case texts sourced from Internet websites and other data, including commentaries by scholars to the extent available.

There are scholars who believe that there are circumstances in which the UNIDROIT Principles of International Commercial Contracts may be used to interpret or supplement this Article of the CISG. See match-up of this Article with counterpart provisions of the Principles and commentary on this subject. To the extent this reasoning fits, cases on the counterpart provisions of the UNIDROIT Principles may be relevant. To the extent available, such cases may be found on the Unilex website.
 

Netherlands 17 February 2009 Gerechtshof [Appellate Court] 's-Gravenhage (U.S. party v. Restauratiebedrijf B.V.)
 

Serbia 15 July 2008 Foreign Trade Court of Arbitration, Serbian Chamber of Commerce (Milk packaging equipment case) 10A [translation available]

Switzerland 19 May 2008 Cour supreme du canton [Appellate Court] Berne
 

Switzerland 23 May 2006 Tribunal cantonal [Higher Cantonal Court] Valais (Suits case) 10A [translation available]

United States 6 January 2006 Federal District Court [Pennsylvania] (American Mint LLC v. GOSoftware, Inc.) 10A
 

United States 2 November 2005 Federal District Court [California] (McDowell Valley Vineyards, Inc. v. Sabaté USA Inc. et al.) 10A

United States 16 August 2005 Federal District Court [Pennsylvania] (American Mint LLC v. GOSoftware, Inc.)

United States 28 February 2005 Superior Court of Massachusetts (Vision Systems, Inc. v. EMC Corporation) 10A

Austria 26 January 2005 Oberster Gerichtshof [Supreme Court] 10A [translation available]
 

Switzerland 3 November 2004 Tribunal Cantonal [Appellate Court] 10A [translation available]

Austria 29 July 2004 Oberlandesgericht [Appellate Court] Graz (Construction equipment case) 10A1 [translation available]

Russia 24 February 2004 Arbitration Award 136/2003 10A [translation available]
 

Switzerland 19 August 2003 Tribunal Cantonal [Appellate Court] Valais 10A [translation available]

Germany 11 June 2003 Landgericht [District Court] Hamburg [translation available]

Spain 7 June 2003 Audiencia Provincial [Appellate Court] Valencia [translation available]

Belgium 13 May 2003 Rechtbank van Koophandel [Commercial Court] Hasselt (Vandenbrand v.BVBA Textura Trading Company)
 

Switzerland 2 December 2002 Tribunal Cantonal [Appellate Court] Valais [translation available]
 

Italy 28 September 2001 Milan Arbitration proceeding (Steel wire case) 10A [English text]

* United States 27 July 2001 U.S. District Court [California] (Asante v. PMC-Sierra) 10A
 

Germany 13 November 2000 Oberlandesgericht [Appellate Court] Köln 10A [translation available]

* France 24 October 2000 Cour d'appel [Appellate Court] Colmar 10A [translation available]

Germany 13 April 2000 Amtsgericht [Lower Court] Duisburg [translation available]

* Germany 28 February 2000 Oberlandesgericht [Appellate Court] Stuttgart 10A [translation available]

ICC 2000 International Court of Arbitration, Case 9781 10A [English text]
 

* Belgium 2 June 1999 Rechtbank van Koophandel [District Court] Hasselt
 

* Russia 11 May 1997 Arbitration award 2/1995 10A1 [translation available]

* Switzerland 20 February 1997 Bezirksgericht [District Court] Saane 10A [translation available]
 

Germany 21 August 1995 Landgericht [District Court] Ellwangen 10A [translation available]

France 4 January 1995 Cour de Cassation [Supreme Court] 10A [translation available]
 

* Austria 10 November 1994 Oberster Gerichtshof [Supreme Court] [translation available]

ICC 1994 International Court of Arbitration, Case 7531 10A [English text]
 

France 22 April 1992 Cour d'appel [Appellate Court] Paris 10A
 

Germany 26 September 1990 Landgericht [District Court] Hamburg


UNCITRAL CASE DIGEST

The UNCITRAL Digest of case law on the United
Nations Convention on the International Sale of Goods
[*]

A/CN.9/SER.C/DIGEST/CISG/10 [8 June 2004]. Reproduced with the permission of UNCITRAL.

ARTICLE 10

     For the purposes of this Convention:

     (a) if a party has more than one place of business, the place of business is that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract;.

     (b) if a party does not have a place of business, reference is to be made to his habitual residence.

DIGESTOFARTICLE 10 CASE LAW

1. Article 10 provides two rules: the rule laid down in article 10(a) is to be used to identify which place of business, out of several ones, is to be taken into account to determine whether the Convention is applicable; article 10(b), one the other hand, states that where a party does not have a place of business, that party's habitual residence is to be taken into account.[1] This rule is helpful, as the determination of the relevant place of business is necessary for various purposes, ranging from the determination of the internationality of the contract to the applicability of the Convention by virtue of article 1(1)(a) as well as other purposes.[2]

2. As for article 10(a), although it may have been referred to on various occasions,[3] it was relevant for the purposes of determining the relevant place of business only in few cases. In one case, for instance, it was resorted to in order to decide whether a contract concluded between a party with place of business in France and a party with a place of business both in the United States of America and in Belgium was governed by the Convention.[4] The court stated that since the invoice was sent to the Belgian place of business and since it was in Dutch, a language known only at the buyer's Belgian place of business, the place of business most closely connected to the contract and its performance was the Belgian one and, therefore, the Convention applied. The court also noted that since the Convention had entered into force also in the United States of America, the Convention would apply even if the buyer were considered to have its relevant place of business in that country.

3. In another case,[5] a court had recourse to article 10(a) to determine whether the sales contract was international under the Convention; the issue arose since the purchase order was sent by a buyer that had its place of business in France, to the representative of the seller that had its place of business in that same country. In deciding the issue, the court stated that "[t]he evidence produced by the parties does not allow one to decide whether this person of whom we ignore moreover under which form it exercises its activity can be considered as the defendant seller's French place of business. It is, however, established that the order confirmations emanating from the seller, the invoices, and the deliveries of the goods were made from the seat of seller in Germany. Thus, even supposing that [the representative] was responsible for managing in France one of seller's places of business, the place of business 'which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract' and which must for this reason be taken 'into consideration' is indeed the place of business whose seat is in [Germany]. The international character of the disputed contract is as a consequence established."

4. In yet another case,[6] a different court had to decide whether the Convention applied to the claim of a German manufacturer of floor covering, the plaintiff, who demanded that the Spanish buyer pay for several deliveries of floor coverings. The buyer objected, claiming that it had always contracted only with an independent company governed by Spanish law, which, as was known to the Spanish defendant, had links with the German plaintiff, as the Spanish company's board members were partially identical with those of the German plaintiff. The court held that the contract was an international one subject to the Convention. The court left open whether the Spanish company was a trade representative or a place of business of the German plaintiff. It stated that the Spanish company might have acted as though it were a "place of business", but legally it was not as it did not possess power to bind the German manufacturer. Moreover, even if one were to assume that the Spanish company in fact was a place of business of the German plaintiff, the German place of business had the closest relationship to the contract and its performance, and, thus, was the only one to be taken into account pursuant to article 10(a).

5. Article 10(a) was referred to in another decision as well.[7] In that decision, the court held that where a party has multiple places of the business it is not always the principal one that is to be taken into account to determine whether a contract is international or whether the Convention applies.

6. Article 10(b) has been referred to only once; in that case, the court merely recalled the text of the provision.[8]


FOOTNOTES

* The present text was prepared using the full text of the decisions cited in the Case Law on UNCITRAL Texts (CLOUT) abstracts and other citations listed in the footnotes. The abstracts are intended to serve only as summaries of the underlying decisions and may not reflect all the points made in the digest. Readers are advised to consult the full texts of the listed court and arbitral decisions rather than relying solely on the CLOUT abstracts.

[Citations to cisgw3 case presentations have been substituted [in brackets] for the case citations provided in the UNCITRAL Digest. This substitution has been made to facilitate online access to CLOUT abstracts, original texts of court and arbitral decisions, and full text English translations of these texts (available in most but not all cases). For citations UNCITRAL had used, go to <http://www.uncitral.org/english/clout/digest_cisg_e.htm>.]

1. United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March - 11 April 1980, Official Records, Documents of the Conference and Summary Records of the Plenary Meetings and of the Meetings of the Main Committee, 1981, 19.

2. For provisions referring to the "place of business", see articles 1(1), 12, 20(2), 24, 31(c), 42(1)(b), 57(1)(a) and (2), 69(2), 90, 93(3), 94(1) and (2), 96.

3. See [UNITED STATES Asante Technologies v. PMC-Sierra Federal District Court [California] 27 July 2001, available online at <http://cisgw3.law.pace.edu/cases/010727u1.html>] simply quoting the text of article 10(a); [RUSSIA Arbitration Award case No. 2/1995 of 11 May 1997, available online at <http://cisgw3.law.pace.edu/cases/970511r1.html>], referring to article 10(a) when deciding that one company's place of business was located in Switzerland rather than in England, without, however, specifying any reason for its decision.

4. [BELGIUM Rechtbank [District Court] Hasselt 2 June 1999 12 Month 2000, available online at <http://cisgw3.law.pace.edu/cases/990602b1.html>].

5. CLOUT case No. 400 [FRANCE Cour d'appel [Appellate Court] Colmar 24 October 2000, available online at <http://cisgw3.law.pace.edu/cases/001024f1.html>] (see full text of the decision).

6. [GERMANY Oberlandesgericht [Court] Stuttgart 28 February 2001, available online at <http://cisgw3.law.pace.edu/cases/000228g1.html>].

7. CLOUT case No. 261 [SWITZERLAND Berzirksgericht [Court] Sanne 20 February 1997, available online at <http://cisgw3.law.pace.edu/cases/970220s1.html>].

8. CLOUT case No. 106 [AUSTRIA Oberster Gerichtshof [Supreme Court] 10 November 1994, available online at <http://cisgw3.law.pace.edu/cases/941110a3.html>] (see full text of the decision).


CASE ANNOTATED COMPARATIVES
-  UNIDROIT Principles
-  
PECL comparative

"Place of Business": Comparison between Provisions of the CISG
(Article 10) and Counterpart Provisions of UNIDROIT (Article 1.10)

Allison E. Butler [*]
August 2004

  1. General interpretation and application in the CISG and UNIDROIT Principles
  2. Scope of the term "Place of Business"
  3. Definition of "Place of Business"
  4. Party with More than One Place of Business
    [a] General
    [b] Habitual
  5. Conclusion

1. General interpretation and application in the CISG and UNIDROIT Principles

UNIDROIT Principles Art. 1.10 is similar in substance and form to its counterpart provision contained in Art. 10 CISG. Both provisions exemplify the drafters' intent to adopt the "closest connection" principle in contract interpretation and supplementation when determining the relevant "place of business."[2] Additionally, each has application beyond the scope of its respective provision.[3] Case law under Article 10 CISG provides judicial application of this principle thereby providing additional supplemental authority.

2. Scope of the Term "Place of Business"

Application of Article 1.10 illustrates that a party's place of business is of relevance in a number of contexts throughout the UNIDROIT Principles. For example, place of business is relevant for the place for the delivery of notices (Art. 1.9(3)); a possible extension of the time of acceptance because of a holiday falling on the last day (Art. 2.8(2)); the place of performance (Art. 6.1.6); and the determination of the party who should apply for a public permission (Art. 6.1.14(a)). Hence, the term has applicability outside the realm of Article 1.10.

Similarly, the issue of determining the relevant place of business of a party is an issue that frequently arises in a number of different provisions under the CISG.[3] However, the primary and most common usage of "place of business" as facilitated under Article 10 CISG is its interpretive part in the unilateral conflict rule contained in Article 1(1)(a) CISG.[4]

3. Definition of Place of Business

The concept of "place of business" is not defined under the UNIDROIT Principles. The relevant place of business is however that which has the closest relationship to the contract and to its performance.[5] Under Article 10 CISG, there is an overwhelming cognizance that the place of business is where "the center of the business activity directed to the participation is located," which links the contracting party to the State where the business is conducted, provided the party has autonomous power.[6] Notably, a business' "autonomous power" appears to be the key component when courts have scrutinized this term.[7]

Consequently, this assumption has led many commentators and courts to conclude that a place of business such as the location of an agent, representative or distributor,[8] liaison office,[9] conference center or exhibition or a rented office(s) at an exhibition, fails to constitute a place of business for the purposes of Article 10 CISG, absent facts to the contrary. At least one court did find that a corporate branch was the place of business under Article 10 CISG and not the company's headquarters located in a different country. This finding was based on the fact that the branch had the closest relationship to the contract and its performance.[10]

4. Several places of business under the CISG and the UNIDROIT Principles

[a] General

Article 1.10 of the UNIDROIT Principles provides that when a party has multiple places of business (normally a central office and various branch offices), the relevant place of business should be considered to be that which has the closest relationship to the contract and to its performance.[11]

Absent from this provision is what place of business controls when the place of the conclusion of the contract and that of performance differ. The Official Comments to the UNIDROIT Principles provide that the place of performance would be more relevant.[12]

However, in determining the place of business which has the closest relationship to a given contract and to its performance, attention should be given to the circumstances known to or contemplated by both parties at any time before or at the conclusion of the contract.[13] Consequently, facts that are known only to one of the parties or of which the parties became aware only after the conclusion of the contract cannot be taken into consideration.

Article 10(a) CISG also establishes similar criteria to resolve this issue. Notably, when reference is made to the performance of the contract, it is referring to the performance that the parties knew or contemplated when they were entering into the contract. For example, if it was contemplated by a party that performance of the contract would be in State A, a determination that the party's place of business was in State A would not be altered by the party's subsequent decision to perform the contract at the party's place of business in State B.

In judicial application of Article 10 CISG, however, the courts have routinely looked not only to the intent of the parties but also to the "totality of the contract."

This term is used as an examination of the contract as a whole. Hence, the fact that a third party negotiated a contract has had little significance to the courts when determining the "place of business." However, certain factors that are not known or contemplated by both parties at the time of entering into the contract may not be taken into consideration. Such factors include, but are not limited to, supervision over the making to the contract by a head office located in another State, or the foreign origin or final destination of the goods.[14] As with Article 1.10 of the UNIDROIT Principles, these matters are reviewed subjectively.

[b] Habitual residence

UNIDROIT Principles Article 1.10 fails to specifically deal with the case where one of the parties does not have business but is still subject to the Principles. However, logic concludes that the test used for place of business would be applicable. In contrast, Article 10(b) CISG specifically sets forth that a factual determination is to be made as to the party's habitual residence. Upon such finding, performance is to be effected at the party's habitual residence. "Habitual residence" is where the party actually lives. Notably, it is irrelevant as to whether he or she has a permit to live in the country or as to whether the party frequents another country, provided he or she normally returns to the first place. This holds true provided that the contract is for sale of goods intended for commercial purposes and not simply for "personal, family or household use" within the meaning of article 2(a) CISG.[15]

5. Conclusion

A comparison of the two provisions illustrates that both the respective articles of the CISG and the UNIDROIT adopt the "closest relationship" theory to determine the relevant "place of business." Moreover, in application, it is apparent that both provisions extend beyond the scope of their provisions by having further application and reference throughout their respective documents. Judicial review under the CISG has further refined the definition by expressly excluding those places that do not contribute to the totality of the sale, which the parties had intended. Therefore, CISG case law provides a valuable insight into the terms and application of the "closest connection" principle. This is also evident in the CISG's inclusion of the habitual residence provision.


FOOTNOTES

* The author received her J.D. from Loyola University School of Law, New Orleans, Louisiana, USA (Common Law Program) and her B.A. in International Relations, with honors, from the University of South Florida, Tampa, Florida, USA. She is a published author and a private practitioner in Martin County, Florida, USA.

1. See Art. 10 CISG; Art. 1.10 UNIDROIT. The "closest relationship theory" is the place of business having the closest relationship with the contract. In contrast, there is the "theory of the principal place of business," which is the relevant place of business is where the main seat is located.See generally, Franco Ferrari,Specific Topics of the CISG in the Light of Judicial Application and Scholarly Writing, 15 Journal of Law and Commerce (1995), Section II. 4. "The 'Place of Business' under CISG," available at <http://cisgw3.law.pace.edu/cisg/biblio/2ferrari.html>. The original intent of the drafters of the CISG to adopt the theory of "principal place of business" as evidenced by the proposal reprinted in UNCITRAL Yearbook, vol. II (1971) 52, available at <http://www.uncitral.org/english/yearbooks/yearbook-index-e.htm>; however, this was later rejected.

2. There are numerous applications of the place of business, in particular provisions of both documents; see the examples offered in the Secretariat Commentary to the Draft Convention as manifestations of the concept CISG Articles 12, 20(2), 24, 31(c), 42(1)(b), 57(1)(a) and 96; Text of Secretariat Commentary on Article 9 of the 1978 Draft [draft counterpart of Article 10 CISG], available at <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-10.html>; See also, UNIDROIT Articles. 1.9(3); Arts. 2.8(2); 6.1.6 and Art. 6.1.14(a).See, Official Comments on Article of the UNIDROIT Principles, available at <http://cisgw3.law.pace.edu/cisg/principles/uni10.html>.

3. See CISG discussion,supra note 2.

4. When both articles are read in conjunction they "form the lex specialis of conflicts of laws in contract applicable to contracts of sale of goods between parties whose places of business are in different Contracting States to the Convention." Carolina Saf, A Study of Interplay between the Conventions Governing International Contracts of Sale, available at <http://cisgw3.law.pace.edu/cisg/biblio/saf.html>. See illustrative case, Germany 13 April 2000 Amtsgericht [Lower Court] Duisburg [English translation available online at <http://cisgw3.law.pace.edu/cases/000413g1.html>.

5. See Official Comments on Articles of the UNIDROIT, Article 1.10, Comment 2, available at <http://cisgw3.law.pace.edu.cisg/principles/uni 10.html>.

6. See, Ferrari, supra note 1, referencing BGH, 2 June 1982, VIII ZR 43/81, Neue Juristische Wochenschrift (NJW) 1982, 2730-2732 (German Federal Supreme Court's interpretation of "place of business" in ULIS Article 1).

7. See the relevant case law:

- Germany 28 February 2000,Oberlandesgericht [Appellate Court] Stuttgart [English translation] available at <http://cisgw3.law.pace.edu/cases/000228g1.html>] (holding location of Spanish representative of German manufacturer-seller in Spain was not a place of business absent legal authority to bind the German manufacturer to Spanish buyer);

- Germany 13 November 2000,Landgericht [District Court] Köln, available at <http://cisgw3.law.pace.edu/cases/001113g1.html> (holding Italian agent in Germany did not have authority to bind Italian company in German-Italian contract dispute);

- United States 27 July 2001, Federal District Court,Asante Technologies, Inc. v. MC-Sierra, Inc., available at <http://cisgw3.law.pace.edu/cases/010727u1.html> (holding U.S. nonexclusive distributor not acting as agent absent authority to bind U.S. company in contract with Canadian company);

- France 4 January 1995,Cour de Cassation [Supreme Court],Fauba France FDIS GC Electronique v. Fujitsu Mikroelectronik GmbH [English translation] available at <http://cisgw3.law.pace.edu/cases/950104f1.html>] (holding liaison office of German company in France was not principal place of business absent corporate status in action against French buyer);

- ICC Arbitration Case No. 7531 of 1994, available at <http://cisgw3.law.pace.edu/cases/947531i1.html> (holding Austrian-buyer liaison located in China was not place of business in Chinese-Austrian dispute, notwithstanding that the liaison office in China may have been involved in the negotiating process).

8. See, Germany 28 February 2000,Oberlandesgericht [Appellate Court] Stuttgart,supra note 7; Germany 13 November 2000, District Court Köln, available at <http://cisgw3.law.pace.edu/cases/001113g1.html>; U.S. 27 July 2001, Federal District Court, Asante Technologies, Inc. v. MC-Sierra, Inc.,supra note 7.

9. See France 4 January 1995, Cour de Cassation [Supreme Court], Fauba France FDIS GC Electronique v. Fujitsu Mikroelectronik GmbH, supra note 7; ICC Arbitration Case No. 7531 of 1994, supra note 7.

10. Switzerland 20 February 1997, Zivilgericht [District Court] Saane, available at <http://cisgw3.law.pace.edu/cases/970220s1.html>. This is a very interesting case as it illustrates the flexibility and subjectivity in the judicial application of Article 10 CISG. In this case, an Austrian company entered into a contract with the Swiss branch of a company with headquarters in Liechtenstein for the purchase and transport of spirits to Russia. Notably, Liechtenstein is not a Contracting State to the CISG. A contractual dispute arose between the parties and the contract was never performed. The court found that the CISG was applicable because the Swiss branch, not the Liechtenstein headquarters, was the place of business that had the closest relationship to the contract and its performance (Articles 1(1)(a) and 10(a) CISG).

11. See UNIDROIT Comments, supra, note 5.

12. Id.

13. Id.

14. Secretariat Commentary, supra, note 2, Comment 8.

15. Id., Comment 9. See also, e.g., Austria 10 Oberster Gerichtshof [Supreme Court], 10 November 1994 [English translation] available at <http://cisgw3.law.pace.edu/cases/941110a3.html> (finding that an international sale occurred under CISG in a contract of sale of Chinchilla furs between breeder and buyer).


PECL COMPARATIVE

Interpretation of "place of business": Comparison between provisions of the CISG
(Article 10) and counterpart provisions of the Principles of European Contract Law

Allison E. Butler [*]
June 2002

1. General interpretation and application in the CISG and the PECL
2. "Place of Business" in the interpretation of the contract
3. Several places of business under the CISG and the PECL
4. Habitual residence
5. Conclusion

1. General interpretation and application in the CISG and the PECL

The content and function of article 7:101(2) and (3) PECL are similar in substance and form to the counterpart provision contained in article 10 CISG. Both provisions exemplify the drafters' intent to adopt the "closest connection" principle in contract interpretation and supplementation when determining the relevant "place of business" of a party absent an express provision.[1]

The PECL Notes to article 7:101(2) and (3) confirm that the basic elements are based on article 10 CISG.[2]

However, although the provisions apply the same theory, its application is limited in scope under 7:101(2) PECL as compared to article 10 CISG.[3] [page 275]

2. "Place of Business" in the interpretation of the contract

Subsection (1) of 7:101 PECL prescribes the place of performance in the event where the location for performance of the contract "is not fixed or determinable from the contract."[4] The PECL expressly addresses the situation where a creditor or debtor has two places of business or does not have a place of business. As such, the concept of place of business as set forth in subsections (2) and (3) operates as a supplementation for determining the location for the performance of a contract, as well as an interpretive guide for defining the location of performance. Thus, the scope of the principle as adapted by the PECL is used to determine the performance of a contract.

In contrast, the issue of determining the relevant place of business of a party is an issue that frequently arises in a number of different provisions under the CISG.[5] However, the primary and most common usage of "place of business" as facilitated under Article 10 CISG is its interpretive part in the unilateral conflict rule contained in Article 1(1)(a) CISG. Hence, when both articles are read in conjunction they "form the lex specialis of conflicts of laws in contract applicable to contracts of sale of goods between parties whose places of business are in different Contracting States to the Convention."[6]

The concept of "place of business" is not defined under the PECL. In the majority of the cases, however, "place of business" refers to a party's permanent and regular place for the transaction of general business and is not a temporary place of sojourn during sales negotiations.[7] Hence, if a corporation conducts business temporarily at a [page 276] location, the PECL would not consider this location a place of business.

Under article 10 CISG, there is an overwhelming cognizance that the place of business is where "the center of the business activity directed to the participation is located," which links the contracting party to the State where the business is conducted, provided the party has autonomous power.[8] Notably, a business's "autonomous power" appears to be the key component when courts have scrutinized this term.[9] Consequently, this assumption, as with the PECL, has led many commentators and courts to conclude that a place of business such as the location of an agent, representative or distributor,[10] liaison office,[11] conference center or exhibition or a rented office(s) at an exhibition, fail to constitute a place of business for the purposes of article 10 CISG, absent facts to the contrary. [page 277] Notably, however, one court did find that a corporate branch was the place of business under article 10 CISG and not the company's headquarters located in a different country. This finding was based on the fact that the branch had the closest relationship to the contract and its performance.[12]

3. Several places of business under the CISG and the PECL

Article 7.101(2) PECL provides for the determination of place of performance when a party has more than one place of business: the place of business that has the closest relationship with the contract and its performance having regard to the circumstances known to or contemplated by the parties at the conclusion of the contract. Thus, the PECL will look to the knowledge and intent of the parties when determining the place of business.

Article 10(a) CISG also establishes similar criteria to resolve this issue. Notably, when reference is made to the performance of the contract, it is referring to the performance that the parties knew or contemplated when they were entering into the contract. For example, if it was contemplated by a party that performance of the contract would be in State A, a determination that her or his place of business was in State A would not be altered by his or her subsequent decision to perform the contract at his or her place of business in State B.

In judicial application of Article 10 CISG, however, the courts have routinely looked not only to the intent of the parties but also to the "totality of the contract."[13]

This term is used as an examination of the contract as a whole. Hence, the fact that a third party negotiated a contract has had little significance to the courts when determining the [page 278] "place of business." However, certain factors that are not known or contemplated by both parties at the time of entering into the contract may not be taken into consideration. Such factors include, but are not limited to, supervision over the making to the contract by a head office located in another State, or the foreign origin or final destination of the goods.[14] As with Article 7:101(2) and (3) PECL, these matters are reviewed subjectively.

4. Habitual residence

Article 7:101(3) PECL specifically deals with the case where one of the parties does not have a place of business. In such circumstances, a factual determination is to be made as to the party's habitual residence. Upon such finding, performance is to be effected at the party's habitual residence. "Habitual residence" is where the party actually lives.[15] Notably, it is irrelevant as to whether he or she has a permit to live in the country or as to whether the party frequents another country, provided he or she normally returns to the first place.

Article 10(b) CISG provides for a similar situation, so long as the contract is for sale of goods intended for commercial purposes and not simply for "personal, family or household use" within the meaning of article 2(a) CISG.[16]

5. Conclusion

A comparison of the two documents illustrates that both the CISG and the PECL adopt the "closest relationship" theory to determine the relevant "place of business." However, in application, it is apparent that article 10 CISG is broader than Article 7:101(2) and (3) PECL; the latter relies solely on the place of performance of the contract. In contrast, article 10 CISG, not only extends beyond its jurisdictional application in conjunction with article 1(1)(a) CISG but also has further application and reference throughout the CISG. [page 279]

Moreover, judicial review has further refined the definition by expressly excluding those places that do not contribute to the totality of the sale, which the parties had intended. CISG case law has thus provided a valuable insight into the terms and application of the "closest connection" principle. [page 280]


FOOTNOTES

* The author received her JD from Loyola University School of Law, New Orleans, Louisiana, USA (Common Law Program) and her B.A. in International Relations, with honors, from the University of South Florida, Tampa, Florida, USA. She is a published author and a private practitioner in Martin County, Florida, USA.

This comparative is also published at 6 Vindobona Journal of International Commercial Law and Arbitration (2002-2) 275-280. Pagination to that publication is provided to facilitate citation to the Vindobona text.

A match-up is available setting CISG Article 10 alongside PECL Article 7:101(2) and (3) [Place of business] <http://cisgw3.law.pace.edu/cisg/text/peclcomp51.html>. The match-up is accompanied by:

-   Comments on these PECL provisions authored by the European Commission describing and illustrating the manner in which they are to be applied; and
-   Notes that compare them with continental and common law domestic rules, doctrine and jurisprudence.

1. See art. 10 CISG; Art. 7:101(2) PECL. The "closest relationship theory" is the place of business having the closest relationship with the contract. In contrast, there is the "theory of the principal place of business," which is the relevant place of business is where the main seat is located. See generally, Franco Ferrari, Specific Topics of the CISG in the Light of Judicial Application and Scholarly Writing, 15 Journal of Law and Commerce (1995), Section II. 4. "The 'Place of Business' under CISG", available at <http://cisgw3.law.pace.edu/cisg/biblio/2ferrari.html>. The original intent of the drafters of the CISG to adopt the theory of "principal place of business" as evidenced by the proposal reprinted in UNCITRAL Yearbook, vol. II (1971) 52, available at: <http://www.uncitral.org/english/yearbooks/yearbook-index-e.htm>; however, this was later rejected.

2. Ole Lando and Hugh Beale, eds., Principles of European Contract Law: Part I and II, Kluwer Law International (2000) 330-330, 332.

3. Under 7:101(2) PECL the principle is applied to determine the place of business relevant for place of performance when the term is absent from a contract and there is more than one place of business. In contrast, however, the theory of "closest connection" is not limited to its content under the CISG. For example, the closest relationship theory as set forth in article 10 is used to determine the place of business relevant for the determination of choice of law under an international sales contract when there is more than one place of business as well as other applications throughout the CISG. See infra, note 5. Both 7:101(3) PECL and Article 10 CISG are identical in their treatment of parties without a place of business.

4. See Article 7:101(1) PECL.

5. There are numerous applications of the place of business, in particular provisions of the Convention; see the examples offered in the Secretariat Commentary to the Draft Convention as manifestations of the concept (e.g. Arts. 12, 20(2), 24, 31(c), 42(1)(b0, 57(1)(a) and 96) CISG; Text of Secretariat Commentary on article 9 of the 1978 Draft [draft counterpart of Art. 10 CISG], available at: <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-10.html>.

6. Carolina Saf, A Study of Interplay between the Conventions Governing International Contracts of Sale, available at: <http://cisgw3.law.pace.edu/cisg/biblio/saf.html>. See illustrative case, Germany 13 April 2000 Amtsgericht [Lower Court] Duisburg [English translation available online at http://cisgw3.law.pace.edu/cases/000413g1.html].

7. See Comments and Notes to Article 7.101(2) PECL, Comment E. Precisely the same approach applies to the CISG. In corroboration, Honnold states: "During the preparation of the Convention, some delegates were concerned lest 'place of business' be construed to extend to a hotel room or other temporary place where a traveling agent might conduct negotiations. Referring to a 'permanent' place of business presented drafting difficulties, and most delegates concluded that temporary sojourns would not establish a 'place of business'. The term that corresponds to 'place of business in the official French text is établissement and in the official Spanish text is establecimiento - words that seem to be inconsistent with a temporary stopping place." John O. Honnold, Uniform Law for International Sales, 3rd ed., Kluwer (1999) 132 [citations omitted].

8. See, Ferrari, supra note 1, referencing German Federal Supreme Court's interpretation of "place of business" in ULIS Article 1. Judgment of June 2, 1982, BGH WM 846 = 83 IPRax 212.

9. See the relevant case law:

- Germany 28 February 2000, Oberlandesgericht [Appellate Court] Stuttgart [English translation available at http://cisgw3.law.pace.edu/cases/000228g1.html] (holding Spanish representative of German manufacturer-seller in Spain was not a place of business absent legal authority to bind the German manufacturer to Spanish buyer);

- Germany 13 November 2000, Landgericht [District Court] Köln, <http://cisgw3.law.pace.edu/cases/001113g1.html> (holding Italian agent in Germany had not authority to bind Italian company in German-Italian contract dispute);

- United States 27 July 2001, Federal District Court, Asante Technologies, Inc. v. MC-Sierra, Inc., <http://cisgw3.law.pace.edu/cases/010727u1.html> (holding U.S. nonexclusive distributor not acting as agent absent authority to bind U.S. company in contract with Canadian company);

- France 4 January 1995, Cour de Cassation [Supreme Court], Fauba France FDIS GC Electronique v. Fujitsu Mikroelectronik GmbH [English translation available online at http://cisgw3.law.pace.edu/cases/950104f1.html] (holding liaison office of German company in France was not principal place of business absent corporate status in action against French buyer);

- ICC Arbitration Case No. 7531 of 1994, <http://cisgw3.law.pace.edu/cases/947531i1.html> (holding Austrian-buyer liaison located in China was not place of business in Chinese-Austrian dispute, notwithstanding that the liaison office in China may have been involved in the negotiating process.

10. See, Germany 28 February 2000, Oberlandesgericht [Appellate Court] Stuttgart, supra note 9; Germany 13 November 2000, District Court Köln, <http://cisgw3.law.pace.edu/cases/001113g1.html>; U.S. 27 July 2001, Federal District Court, Asante Technologies, Inc. v. MC-Sierra, Inc., supra note 9.

11. See France 4 January 1995, Cour de Cassation [Supreme Court], Fauba France FDIS GC Electronique v. Fujitsu Mikroelectronik GmbH, supra note 9; ICC Arbitration Case No. 7531 of 1994, supra note 9.

12. Switzerland 20 February 1997, Zivilgericht [District Court] Saane, <http://cisgw3.law.pace.edu/cases/970220s1.html>. This is a very interesting case as it illustrates the flexibility and subjectivity in the judicial application of Article 10 CISG. In this case, an Austrian company entered into a contract with the Swiss branch of a company with headquarters in Liechtenstein for the purchase and transport of spirits to Russia. Notably, Liechtenstein is not a Contracting State to the CISG. A contractual dispute arose between the parties and the contract was never performed. The court found that the CISG was applicable because the Swiss branch, not the Liechtenstein headquarters, was the place of business that had the closest relationship to the contract and its performance (Articles 1(1)(a) and 10(a) CISG).

13. See also Secretariat Commentary on article 9 of the 1978 Draft Convention [draft counterpart of CISG article 10], Comment 6, which states: "Subparagraph (a) lays down the criterion for determining the relevant place of business: it is the place of business "which has the closest relationship to the contract and its performance." The phrase "the contract and its performance" refers to the transaction as a whole, including factors relating to the offer and the acceptance as well as the performance of the contract." Secretariat Commentary, supra note 5.

14. Secretariat Commentary, op. cit., Comment 8.

15. See Comments and Notes to PECL Article 7.101(3), Comment G: "This is a 'factual' not a 'legal' concept."

16. See Secretariat Commentary, op. cit., Comment 9. See also, e.g., Austria 10 Oberster Gerichtshof [Supreme Court], 10 November 1994 [English translation available online at <http://cisgw3.law.pace.edu/cases/941110a3.html>] finding that an international sale occurred under CISG in a contract of sale of Chinchilla furs between breeder and buyer.


Pace Law School Institute of International Commercial Law - Last updated April 15, 2009
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