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2008 UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods

Digest of Article 4 case law [reproduced with permission of UNCITRAL] [*]

[Text of article
Overview
Issues dealt with by the Convention
Validity of the contract and of usages
Effect on the property in the goods sold
Other issues not dealt with in the Convention]

Article 4

This Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. In particular, except as otherwise expressly provided in this Convention, it is not concerned with:
(a) the validity of the contract or of any of its provisions or of any usage;
(b) the effect which the contract may have on the property in the goods sold.

OVERVIEW

1. The first sentence of article 4 lists matters as to which the Convention's provisions prevail over those of domestic law -- i.e. the formation of contract and the rights and obligations of the parties;[1] the second sentence contains a non-exhaustive list of issues with which, except where the Convention expressly provides otherwise, it is not concerned -- namely the validity of the contract or any of its provisions or any usage, as well as the effect which the contract may have on the property in the goods sold. The issues referred to in the second part of article 4 were excluded from the Convention because dealing with them would have delayed the conclusion of the Convention.[2]

2. Matters not governed by the Convention are to be settled either in conformity with the applicable uniform rules [3] or the applicable domestic law.[4]

Issues dealt with by the Convention

3. As far as formation of the contract is concerned, the Convention merely governs the objective requirements for concluding the contract.[5] The issue of whether a contract is validly formed, however, is subject to the applicable national rules, except for those issues for which the Convention provides exhaustive rules.[6] Thus issues such as capacity to contract [7] and the consequences of mistake, duress and fraud are left to the applicable domestic law.[8] Where, however, one party errs concerning the quality of the goods to be delivered or the solvency of the other party, the rules of the otherwise-applicable law give way to those of the Convention, since the Convention exhaustively deals with those matters.

4. Although article 4 does not mention the issue as one governed by the Convention, some courts [9] (albeit not all) [10] have concluded that burden of proof questions come within the scope of the Convention.[11] This view is based on the fact that the Convention includes at least one provision, article 79, that expressly deals with the burden of proof.[12] The issue is therefore governed by the Convention, albeit -- outside of situations governed by article 79 or any other provision that expressly addresses the issue -- not expressly settled in it; thus article 7(2) requires the question to be resolved in conformity with the general principles on which the Convention is based.[13] The following general principles for allocating the burden of proof have been identified: the party that wants to derive beneficial legal consequences from a legal provision has to prove the existence of the factual prerequisites of the provision;[14] the party claiming an exception has to prove the factual prerequisites of that exception.[15]

5. These principles have led courts to conclude that a buyer who asserts that goods are non-conforming has the burden of proving the non-conformity as well as the existence of a proper notice of non-conformity.[16] Similarly, two courts decided that the buyer had to pay the price and was not entitled to damages or to avoidance of the contract for non-conformity of the goods under article 35 because the buyer had not proved the non-conformity.[17] In one case, a court decided that the buyer had lost the right to rely upon a non-conformity because it did not prove that it gave timely notice thereof to the seller.[18]

6. The aforementioned general principles have been used to allocate the burden of proof under article 42 of the CISG. Article 42 provides that the seller must deliver goods which are free from any third-party right or claim based on industrial property or other intellectual property, of which the seller knew or could not have been unaware. In two cases courts held that the buyer had the burden of proving that the seller knew or could not have been unaware of the third-party industrial or intellectual property rights.[19]

7. The Convention's general principles on burden of proof were also the basis for several decisions dealing with damages issues. One court stated that "according to the Convention the damaged buyer has the burden of proving the objective prerequisites of his claim for damages. Thus, he has to prove the damage, the causal link between the breach of contract and the damage as well as the foreseeability of the loss."[20] Other cases have stated more generally that the party claiming damages has to prove the losses suffered.[21]

Validity of the contract and of usages

8. Although the Convention generally leaves issues concerning the validity of the contract to the applicable national law,[22] in at least one respect the Conventions provisions may contradict domestic validity rules.[23] Article 11 provides that a contract for the international sale of goods need not be concluded in or evidenced by writing and is not subject to any other requirement of form; in some legal systems form requirements for a contract for the sale of goods are considered to be a matter of contractual validity. For the question whether domestic law requirements of "consideration" or "causa" are matters of "validity" beyond the scope of the Convention, see paragraph 10 of the Digest for Part II of the Convention.

9. The issue of whether a contract was validly concluded by a third person acting on behalf of one of the parties is left to the applicable national law, since agency is not governed by the Convention.[24] The same is true for the validity of standard contract terms.[25]

10. The validity of usages which is not dealt with by the Convention,[26] but is left to the applicable domestic law [27] -- must be distinguished from the question of how usages are defined, under what circumstances they bind the parties, and what their relationship is with the rules set forth in the Convention. The latter issues are dealt with in article 9.[28]

Effect on the property in the goods sold

11. The Convention makes clear that it does not govern the passing of the property in the goods sold.[29] During the drafting process, it was deemed impossible to unify the rules on this point.[30] Thus the effect of a sales contract on the property in the goods is left to the applicable national law, to be determined by the rules of private international law of the forum.

12. The Convention does not govern the validity of a retention of title clause.[31]

Other issues not dealt with by the Convention

13. The Convention itself expressly lists several examples of issues with which it is not concerned.[32] There are many other issues not governed by the Convention. Courts have identified the following additional issues as beyond the Convention's scope of application: the validity of a choice of forum clause,[33] the validity of a penalty clause,[34] the validity of a settlement agreement,[35] an assignment of receivables,[36] assignment of a contract,[37] set-off [38] (at least where the receivables do not all arise from contracts governed by the Convention),[39] the statute of limitations,[40] the issue of whether a court has jurisdiction [41] and, generally, any other issue of procedural law,[42] an assumption of debts,[43] an acknowledgement of debts,[44] the effects of the contract on third parties [45] as well as the issue of whether one is jointly liable.[46] According to some courts, the Convention does not deal with tort claims.[47]

14. One court has found that estoppel issues are not governed by the Convention,[48] but other courts have concluded that estoppel should be regarded as a general principle of the Convention.[49] A court has also ruled that the question of priority rights in the goods as between the seller and a third party creditor of the buyer was, under CISG article 4, beyond the scope of the Convention and was governed instead by applicable national law, under which the third party creditor prevailed.[50]

15. According to some courts, the issue of the currency of payment is not governed by the Convention and, in the absence of a choice by the parties,[51] is left to applicable domestic law.[52] One court found that, absent an agreement of the parties on the matter, the currency of payment is the currency of the place of payment as determined on the basis of article 57.[53]


NOTES

* This presentation of the UNCITRAL Digest is a slightly modified version of the original UNCITRAL text at <http://www.UNCITRAL.org/pdf/english/clout/CISG_second_edition.pdf>. The following modifications were made by the Institute of International Commercial Law of the Pace University School of Law:

   -    To enhance access to contents by computer search engines, we present in html rather than pdf;
 
   -    To facilitate direct focus on aspects of the Digests of most immediate interest, we inserted linked tables of contents at the outset of most presentations;
 
   -    To support UNCITRAL's recommendation to read more on the cases reported in the Digests, we provide mouse-click access to (i) CLOUT abstracts published by UNCITRAL (and to UNILEX case abstracts and other case abstracts); and also (ii) to full-text English translations of cases with links to original texts of cases, where available, in [bracketed citations] that we have added to UNCITRAL's footnotes; and
 
   -    To enable researchers to themselves keep the case citations provided in the Digests constantly current, we have created a series of tandem documents, UNCITRAL Digest Cases + Added Cases. The new cases and other cases that are cited in these updates are coded in accordance with UNCITRAL's Thesaurus.

In addition, this presentation introduces each section of the UNCITRAL Digest with a Google search button. This is to help you access doctrine (relevant material from the over 1,200 commentaries, monographs and books on the CISG and related subjects that we present on this database) as well as the texts of the cases that UNCITRAL cites in its Digests and that we present in our updates to UNCITRAL's Digests.

1. [FRANCE Cour de cassation 5 January 1999 (Refrigeration equipment for transportation of produce, etc. case)].

2. See Report of the Working Group on the International Sale of Goods on the work of its ninth session (Geneva, 19-30 September 1977) (A/CN.9/142), reproduced in the UNCITRAL yearbook, 1978, at p. 65, paras. 48-51, 66, 69.

3. See [FRANCE Cour d'appel Grenoble, France, 13 September 1995 (Cheese case)], stating that the assignment of receivables is not governed by the Convention and applying the 1988 UNIDROIT Convention on International Factoring as the assignment fell under its sphere of application (see full text of the decision).

4. See [SWITZERLAND Handelsgericht des Kantons Zürich 9 September 1993 (Furniture case)].

5. See [SWITZERLAND Zivilgericht Basel-Stadt 21 December 1992 (Textiles case)] (see full text of the decision).

6. See [GERMANY Landgericht Aachen 14 May 1993 (Electronic hearing aid case)] (see full text of the decision). See also paragraph 8 of the Digest for Part II of the Convention.

7. See [AUSTRIA Oberster Gerichtshof 22 October 2001 (Gasoline and gas oil case)]; [GERMANY Landgericht Hamburg 26 September 1990 (Textiles case)].

8. See [SWITZERLAND Schiedsgericht der Handelskammer Zürich, Arbitration Award 273/95 of 31 May 1996 (Aluminum case)].

9. See [ITALY Tribunale di Vigevano 12 July 2000 (Sheets of vulcanized rubber used in manufacture of shoe soles case)]; [ITALY Tribunale di Pavia 29 December 1999 (High fashion textiles case)]; [SWITZERLAND Handelsgericht des Kantons Zürich 10 February 1999 (Art books case)]; [SWITZERLAND Handelsgericht des Kantons Zürich 26 April 1995 (Saltwater isolation tank case)]; [SWITZERLAND Handelsgericht des Kantons Zürich 9 September 1993 (Furniture case)].

10. See [SWITZERLAND Berzirksgericht der Sanne 20 February 1997 (Spirits case)]; [ICC International Court of Arbitration, Case 6653 of 26 March 1993 (Steel bars case)].

11. For a decision which refers to the issue of what law governs burden of proof without resolving the matter, see [SWITZERLAND Cantone del Ticino Tribunale d'appello 15 January 1998 (Cocoa beans case)].

12. For this line of argument, see [GERMANY Bundesgerichtshof 9 January 2002 (Powdered milk case)]; [ITALY Tribunale di Vigevano 12 July 2000 (Sheets of vulcanized rubber used in manufacture of shoe soles case)]; [ITALY Tribunale di Pavia 29 December 1999 (High fashion textiles casse)].

13. See [SWITZERLAND Handelsgericht des Kantons Zürich 9 September 1993 (Furniture case)].

14. For references to this principle, see [ITALY Tribunale di Vigevano 12 July 2000 (Sheets of vulcanized rubber used in manufacture of shoe soles case)]; [GERMANY Landgericht Frankfurt 6 July 1994 (Chocolate products case)]; [AUSTRIA Oberlandesgericht Innsbruck 1 July 1994 (Garden flowers case)] (see full text of the decision); [ITALY Tribunale di Rimini 26 November 2002 (Porcelain tableware case)].

15. [ITALY Tribunale di Rimini 26 November 2002 (Porcelain tableware case)].

16. See [SWITZERLAND Handelsgericht des Kantons Zürich 30 November 1998 (Lambskin coat case)]; [SWITZERLAND Handelsgericht des Kantons Zürich 26 April 1995 (Saltwater isolation tank case)] (see full text of the decision).

17. See [GERMANY Landgericht Düsseldorf 25 August 1994 (Fashion goods case)]; [AUSTRIA Oberlandesgericht Innsbruck 1 July 1994 (Garden flowers case)].

18. See [BELGIUM Rechtbank Koophandel Hasselt 21 January 1997 (Neon advertising signs case)].

19. See [NETHERLANDS Rechtbank Zwolle 1 March 1995 (Beaten eggs case)]; [NETHERLANDS Hof Arnhem 21 May 1996 (Knitwear case)].

20. [SWITZERLAND Handelsgericht des Kantons Zürich 26 April 1995 (Saltwater isolation tank case)] (see full text of the decision); for another case dealing with the issues of damages and burden of proof, see [SWITZERLAND Handelsgericht des Kantons Zürich 5 February 1997 (Sunflower oil case)], stating that a buyer is generally entitled to interest on the loss of profit, but that in the case at hand the buyer lost his right to interest as he did not prove the time in which the profit would have been made (see full text of the decision).

21. See [ITALY Tribunale di Pavia 29 December 1999 (High fashion textiles case)]; [SPAIN Audienca Provincial Barcelona 20 June 1997 (Dye for clothes case)]; [GERMANY Landgericht Düsseldorf 25 August 1994 (Fashion goods case)].

22. See [UNITED STATES Federal Southern District Court for New York 10 May 2002 (Geneva Pharmaceuticals Tech. Corp. v. Barr Labs. Inc.)]; [UNITED STATES Federal Northern District Court for California 27 July 2001 (Asante Technologies, Inc. v. PMC-Sierra, Inc.)]; [AUSTRIA Oberster Gerichtshof 7 September 2000 (Tombstones case)]; [BELGIUM Hof van Bereop Antwerpen 18 June 1996 (Clothes case)].

23. See 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, 17.

24. See [ITALY Tribunale di Vigevano 12 July 2000 (Sheets of vulcanized rubber used in manufacture of shoe soles case)] (see full text of the decision); [SWITZERLAND Handelsgericht des Kantons Aargau 11 June 1999 (Granular plastic case)] (see full text of the decision); [GERMANY Landgericht Berlin, 24 March 1999 (Vine wax case)]; [SWITZERLAND Handelsgericht des Kantons Zürich 30 November 1998 (Lambskin coat case)] (see full text of the decision); [AUSTRIA Oberster Gerichtshof 20 March 1997 (Mono ammonium phosphate case)] (see full text of the decision); [SWITZERLAND Tribunal d'appello Lugano 12 February 1996 (Copy paper case)], [SWITZERLAND Obergericht des Kantons Thurgau 19 December 1995 (Cloth case)]; [GERMANY Kammergericht Berlin 24 January 1994 (Wine case)] (see full text of the decision).

25. See [AUSTRIA Oberster Gerichtshof 7 September 2000 (Tombstones case)]; [NETHERLANDS Rechtbank Zutphen 29 May 1997 (Petunia cuttings case)]; [GERMANY Amtsgericht Nordhorn 14 June 1994 (Shoes case)].

26. See [AUSTRIA Oberster Gerichtshof 21 March 2000 (Wood case)].

27. Id.

28. See [AUSTRIA Oberster Gerichtshof 15 October 1998 (Timber case)].

29. See [UNITED STATES Federal Northern District for Illinois 28 March 2002 (Usinor Industeel v. Leeco Steel Products, Inc.)]. But see [UNITED STATES Federal Bankruptcy Court 10 April 2001 (Victoria Alloys v. Fortis Bank)] (citing CISG article 53 in support of the proposition that payment or non-payment of the price was significant in determining whether title to goods had passed to the buyer).

30. See 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, 17.

31. See [AUSTRALIA Federal District Court of Adelaide 28 April 1995 (Tent hall structures case)]; [GERMANY Oberlandesgericht Koblenz 16 January 1992 (Motor yacht case)].

32. In addition to the issues listed in art. 4, art. 5 provides that the Convention does not apply to the liability of the seller for death or personal injury caused by the goods to any person. See Digest art. 5.

33. See [ARGENTINA Camara Nacional de los Apelaciones en lo Comercial 14 October 1993 (Machinery case)].

34. See [BELGIUM Rechtbank van Koophandel Hasselt, 17 June 1998 (Koning & Hartman and Klaasing Electronics v. Beerten)]; [BELGIUM Hof van Beroep Antwerpen 18 June 1996 (Clothes case)]; [NETHERLANDS Hof Arnhem 22 August 1995 (Live lambs case)] [ICC International Court of Arbitration, Case 7197 of 1992 (Failure to open letter of credit and penalty clause case)].

35. See [GERMANY Landgericht Aachen 14 May 1993 (Electronic hearing aid case)] (see full text of the decision).

36. See [AUSTRIA Oberster Gerichtshof 7 September 2000 (Tombstones case)]; [AUSTRIA Oberster Gerichtshof 25 June 1998] [GERMANY Bundesgerichtshof 12 February 1998 (Air cleaning installation case)] (see full text of the decision); [SWITZERLAND Obergericht des Kantons Thurgau 19 December 1995 (Cloth case)]; [BELGIUM Tribunal de commerce Nivelles 19 September 1995 (Industrial machinery / vulcanization machinery case) ]; [GERMANY Oberlandesgericht Hamm 8 February 1995 (Socks case)]; [SWITZERLAND Bezirksgericht Arbon 9 December 1994 (Cloth case)]

37. See [GERMANY Bundesgerichtshof 15 February 1995 (Key press stamping machine case)] (see full text of the decision).

38. See [AUSTRIA Oberster Gerichtshof 22 October 2001 (Gasoline and gas oil case)]; [ITALY Tribunale di Vigevano 12 July 2000 (Sheets of vulcanized rubber used in manufacture of shoe soles case)] (see full text of the decision); [GERMANY Amtsgericht Duisburg 13 April 2000 (Pizza cartons case)] [GERMANY Oberlandesgericht München 11 March 1998 (Cashmere sweaters case)]; [SWITZERLAND Kantonsgericht Freiburg 23 January 1998 (Commercial laundry machine case)]; [GERMANY Landgericht Hagen 15 October 1997 (Socks case)]; [GERMANY München 6 May 1997]; [GERMANY Oberlandesgericht München 9 July 1997 (Leather goods case)] (see full text of the decision); [GERMANY Oberlandesgericht Düsseldorf 24 April 1997 (Shoes case)] (see full text of the decision); [GERMANY Oberlandesgericht Düsseldorf 11 July 1996 (Lawn mower engines case)]; [GERMANY Landgericht Duisburg 17 April 1996 (Textiles case)]; [GERMANY Oberlandesgericht Stuttgart 21 August 1995 (Machinery case)]; [GERMANY Landgericht München 20 March 1995 (Rancid bacon case)]; [NETHERLANDS Rechtbank Middelburg 25 January 1995 (Beef case)]; [GERMANY Amtsgericht Mayen 6 September 1994 (Artificial stone slabs case)]; [GERMANY Oberlandesgericht Koblenz 17 September 1993 (Computer chip case)]; [GERMANY Oberlandesgericht Hamm 9 June 1995 (Window elements case)]; [NETHERLANDS Rechtbank Roermond 6 May 1993 (Electric kettles case)], [NETHERLANDS Rechtbank Arnhem 25 February 1993 (Clothes case)].

39. For the application of the Convention to set-off in respect of receivables arising out of contracts governed by the Convention, see [GERMANY Amtsgericht Duisburg 13 April 2000 (Pizza cartons case)], [GERMANY Oberlandesgericht München 9 July 1997 (Leather goods case)] (see full text of the decision).

40. See [BELGIUM Rechtbank van Koophandel Ieper 29 January 2001 (Cooling installations case)]; [AUSTRIA Oberster Gerichtshof 7 September 2000 (Tombstones case)]; [ITALY Tribunale di Vigevano 12 July 2000 (Sheets of vulcanized rubber used in manufacture of shoe soles case)] (see full text of the decision); [GERMANY Oberlandesgericht München 21 January 1998 (Insulating materials case)] (see full text of the decision); [AUSTRIA Oberster Gerichtshof 25 June 1998], [GERMANY Landgericht Heilbronn 15 September 1997 (Film coating machine case)]; [SWITZERLAND Cour de Justice Genève 10 October 1997 (Acrylic cotton case)]; [GERMANY Landgericht Düsseldorf 11 October 1995 (Generator case)], [GERMANY Oberlandesgericht Hamm 9 June 1995 (Window elements case)]; [ICC Court of Arbitration, Award 7660/KJ of 23 August 1994 (Battery machinery case)], But see [FRANCE Cour d'appel de Paris 6 November 2001 (Cables case)] (stating that the limitations period was a matter governed by but not expressly settled in the Convention, but resolving the issue by reference to applicable domestic law).

41. See [SWITZERLAND Handelsgericht des Kantons Zürich 26 April 1995 (Saltwater isolation tank case)] (see full text of the decision).

42. [SWITZERLAND Bundesgericht 11 July 2000 (Building materials case)].

43. See [AUSTRIA Oberster Gerichtshof 24 April 1997 (Processing plant case)].

44. See [GERMANY Oberlandesgericht Hamm 23 June 1998 (Furniture case)].

45. See [UNITED STATES Federal Northern District for Illinois 28 March 2002 (Usinor Industeel v. Leeco Steel Products, Inc.)]; [GERMANY Bundesgerichtshof 12 February 1998 (Air cleaning installation case)].

46. See [GERMANY Landgericht München 25 January 1996 (Vodka case)]

47. [UNITED STATES Federal Southern District Court for New York, 10 May 2002 (Geneva Pharmaceuticals Tech. Corp. v. Barr Labs. Inc.)]; [UNITED STATES Federal District Court, Eastern District of Pennsylvania, 29 August 2000 (Viva Vino v. Farnese Vini)].

48. [NETHERLANDS Rechtbank Amsterdam 5 October 1994 (Textiles case)].

49. See [GERMANY Oberlandesgericht Karlsruhe 25 June 1997 (Surface protective film case)] (see full text of the decision); [AUSTRIA Arbitration-Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft - Wien, 15 June 1994 (SCH-4318) (Rolled metal sheets case)]; [AUSTRIA Arbitration-Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft - Wien, 15 June 1994 (SCH-4336) (Rolled metal sheets case)] (see full text of the decision); [NETHERLANDS Hof s'Hertogenbosch, 26 February 1992 (Shoes case)].

50. [UNITED STATES Federal Northern District for Illinois 28 March 2002 (Usinor Industeel v. Leeco Steel Products, Inc.)].

51. For a case expressly referring to the fact that the parties are free to choose the currency, since the Convention does not deal with the issue, see [GERMANY Oberlandesgericht Frankfurt am Main 20 April 1994 (New Zealand mussels case)] (see full text of the decision).

52. See [AUSTRIA Oberster Gerichtshof 22 October 2001 (Gasoline and gas oil case)], [SWITZERLAND Tribunal Cantonal du Valais 30 June 1998 (Granite stones case)]; [SWITZERLAND Handelsgericht des Kantons Zürich, 30 November 1998 (Lambskin coat case)] (see full text of the decision).

53. [GERMANY Kammergericht Berlin 24 January 1994 (Wine case)]; see, however, [GERMANY Landgericht Berlin 24 March 1998 (Knitwear case)] expressly stating that only a minority view holds that the Convention deals with the issue by resorting implicitly, i.e. by referring to the currency of the place of payment of the price.


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