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Reproduced with permission from the author and 15 Journal of Law and Commerce (1995) 1-126

excerpts from

Specific Topics of the CISG in the Light of Judicial Application and Scholarly Writing

Franco Ferrari [*]

(. . .)

[The "place of business under the CISG; Multiple places of business; and The location of the place of business and knowledge of it]
[Articles 1(1), 1(2) and 10]

Considering that ex Article 1(1) CISG the internationality of a sales contract depends on the location of the parties' places of business, [146] the importance of the definition of "place of business" is evident, and this is why it will be examined in greater detail.

A closer look at this concept is necessary, since -- unfortunately [147] -- the CISG, not unlike its predecessor, [148] has not defined it, [149] apparently because of the lack of a uniform concept acceptable to all the delegates to the Vienna Diplomatic Conference, who suggested the most disparate definitions. [150] But despite the apparent differences in conceiving a definition of the "place of business," it is here suggested that it is possible to identify some elements which allow for a better determination of its essence, even though one must not forget that there is no general abstract definition: the "place of business" has to be defined on a case-by-case basis. [l5l]

Nevertheless, as a general rule it can be asserted that there is a place of business where there is a stable business organization [152] (or, as stated by the German Supreme Court in respect of the ULIS, where "the center of the business activity directed to the participation in commerce" is located) [153] which links the contracting party to the State where the business is conducted, [154] as long as the party has autonomous power. [155] If it is true, as it is here suggested, [156] that the aforementioned elements characterize the concept of "place of business," it follows that places of temporary sojourn cannot be considered "places of business.'' [157] This is why one cannot consider conference centers of exhibitions [158] or hotels [159] or rented offices at exhibitions [160] as being places of business under the CISG. [161]

(. . .)

Although the concept of "place of business" will not cause too many problems, the exact determination [162] of the relevant place of business does, at least in those cases where a party to the contract has more than one place of business.

The Hague Conventions did not answer the question of which among several places of business was to be considered the relevant one, [163] despite the fact that it was an old dilemma. [164] This is why a dispute arose among legal scholars as to what criteria had to be used in order to solve the problem. [165] While several legal scholars favored the view according to which the relevant place of business had to be the one where the main seat was located, [166] others suggested that the solution depended on which place of business had the closest relationship with the contract. [167]

The dispute was finally solved in 1982 by the German Supreme Court, [168] which stated that the preferred solution was the second one. Indeed, "one must not share . . . the point of view according to which the decisive place of business is always the principal one." [169]

Under the 1980 Vienna Sales Convention, the dispute does not have any reason to exist, since the Convention expressly provides for a solution of the foregoing problem. According to this solution, laid down in Article l0(a) CISG, [170] the place of business relevant for the determination of the internationality of a sales contract is the one having the closest relationship with the contract. [171] The 1980 Uniform Sales Law has, in other words, expressly rejected the so-called "theory of the principal place of business,'' [172] although the initial intent of the drafters was to the contrary. [173]

However, although Article l0(a) prevents a dispute among legal scholars as to which thesis to apply ("principal place of business theory" or "closest relationship theory"), it does not solve all the problems. [174] Indeed, quid iuris where the contract is concluded at one place of business and has to be executed at another one? [175] Of course, where the parties have agreed upon which place of business must be considered relevant, the problem will not arise, since that agreement is to be taken into account in determining the relevant place of business. [176] But where there is no agreement concerning the relevant place of business, Article l0(a) CISG creates a new problem: how to define the "closest relationship with the contract and its execution''? [l77] In order to facilitate this task, Article l0(a) lists some elements to be taken into account in determining the relevant place of business. [178] Up to now, these elements have not yet been employed by courts, although some courts might have had reason to do so. [179] Thus, one must take into account all the circumstances known to or contemplated by the parties at any time before (or contemporaneous to) the conclusion of the contract. [180] Consequently, one is not allowed to take into consideration the circumstances which become apparent only after the contract is concluded. [181] Thus, it does not matter whether the places of business change after the conclusion of the contract. [182] Sometimes, however, the circumstances are insufficient to unequivocally determine the relevant place of business. In this line of cases it is here suggested that the international character of a sales contract be determined by resorting to the places of business involved in the conclusion of the contract, [183] since these places of business will always be known to both parties. [184] However, where the buyer knows that the contract is performed at a place of business of the seller different than the one involved in the conclusion of the contract, the text of Article l0(a) suggests that the seller's relevant place of business is the one where the performance takes place. [185]

However, since the parties do not always have a place of business, Article l0(b) CISG provides that in such cases one has to resort to the parties' habitual residence [186] in order to determine whether a sales contract is international; [187] that is, one has to look at a situation of fact, [188] and, more precisely, the real place of sojourn for a long period of time. [189]

(. . .)

For the applicability of the CISG it is, however, not sufficient that parties have their places of business in different States, i.e., that the sales contract be an international one. Even though it is not required that the parties be conscious of the applicability -- or existence -- of the CISG, [190] its Article 1(2) [191] requires that the internationality be apparent to both parties, [192] i.e., that the contract does not appear to be a merely domestic one. [193] In order to determine whether this prerequisite -- apparent internationality of the contract -- exists, the following objective [194] elements exhaustively [195] listed in Article 1(2) must be taken into account: the contract itself, [196] the dealings [197] between, or the information [198] disclosed by, the parties before or at the conclusion of the contract. [199] Although this "apparent internationality" requirement undoubtedly limits the sphere of application of the CISG, [200] it is essential, since it protects the parties' reliance upon the applicability of "domestic" law. [201] From what has been said thus far, it follows, for instance, that the Convention is not applicable ". . . where the parties appeared to have their place of business in the same State but one of the parties was acting as the agent for an undisclosed foreign principal." [202] As far as the burden of proof is concerned, the party invoking the impossibility of recognizing the international character of the sales contract (and, thus, the inapplicability of the CISG), carries it. [203]

Go to entire text of Ferrari commentary


FOOTNOTES

* Professor of Comparative Private Law, Katholieke Universiteit Brabant, Tilburg, the Netherlands; J.D. (Honors), University of Bologna, Italy; LL.M., University of Augsburg, Germany. Copyright, Franco Ferrari.

(. . .)

146. Generally it is stated that the parties have to have their places of business in different States at the moment the contract is concluded in order for the sales contract to be an international one (see, e.g., Luigi Rovelli, Conflitti tra norme della Convenzione e norme di diritto internazionale privato, in LA VENDITA INTERNAZIONALE, supra note 32, 89 at 93-94). However, whereas this is certainly true as far as the applicability of Part III of the CISG is concerned, it can be doubted whether the same rule applies to Part II on the Formation of Contract. Indeed, in this respect the better rule appears to be that the parties must have their places of business in different countries at the moment the offer is made, a rule which can be derived by analogy from Art. 100(1), according to which Part II of the CISG applies only when the offer for concluding the contract is made on or after the date when the Convention enters into force.

Furthermore, it must be noted that the change of the place of business in respect to the one relevant for the applicability of Part II and III of the CISG has no influence on the applicability of Part II or III respectively.

147. For a criticism of the draftsmen's omission to define the "place of business," see, e.g., Grigera Naon, The UN Convention on Contracts for the International Sale of Goods, in THE TRANSNATIONAL LAW OF INTERNATIONAL COMMERCIAL CONTRACTS, supra note 14, 89 at 97 (listing the dangers to which the lack of definition leads); Bradley J. Richards, Note, Contracts for the International Sale of Goods: Applicability of the United Nations Convention, 69 IOWA L. REV. 209, 219 (1983).

148. This affirmation can also be found in judicial applications of the ULIS; see, e.g., BGH, June 2, 1982, reprinted in NEUE JURISTISCHE WOCHENSCHRIFT 2730, 2731 (1982); in legal writing, see, for this affirmation, also Ferrari, supra note 85, at 913.

149. See Frignani, supra note 105, at 262 & 307.

150. The Argentinian and Belgian delegates, for example, suggested that a place of business is "a stable place where the entire (or part of) the contract is performed and which has an autonomous power to conduct the bargaining and to conclude the contract" (Carbone, supra note 32, at 69-70). In contrast, the Norwegian delegation, even though it agreed upon the stability requirement, stated that there can be a place of business even without power to conclude the contract, as long as there is power to bargain.

151. For this conclusion, see also Gian Alberto Ferretti, Art. 10, NUOVE LEGGI CIVILI COMMENTATE 43, 43 (1989) (asserting that the place of business is a concept to be determined on a case-by-case basis and to define it requires an examination of the business activities as well as its organization).

152. For this requirement of stability, see, e.g., Schlechtriem, supra note 92, at 42, stating that it can be assumed that the place of business is an establishment of some duration and with certain authorized powers.

153. BGH, June 2, 1982, published in NEUE JURISTISCHE WOCHENSCHRIFT 2730, 3731 (1982).

154. See, for this criticism, Ferretti, supra note 151, at 43.

155. See also Carbone & Lopez de Gonzalo, supra note 9, at 5, arguing that even though it is necessary that there be an autonomous power, it is doubtful whether the power must relate to the possibility of concluding the contract or whether it is sufficient that it relate to the possibility of conducting the bargaining. For an author favoring the former solution, see Reinhart, supra note 139, at 38.

According to Bernardini, supra note 21, at 89, in order to decide whether there is a place of business, it is irrelevant where the conclusion of the contract or its execution takes place. The author suggests that the relevant criterion is represented by the place where the headquarters are established.

156. For these suggestions, see also Ulrich Magnus, WIENER UN-KAUFRECHT (CISG), in J. VON STAUDINGERS KOMMENTAR ZUM BÜRGERLICHEN GESETZBUCH MIT EINFÜHRUNGSGESETZ UND NEBENGESETZEN 39 (Heinrich Honsell ed., 12th ed., Berlin 1994).

157. For this conclusion, see also Honnold, supra note 25, at 79, stating that the concept of "place of business" "as used in Art. 1, should be construed to mean a permanent and regular place of transacting of general business, and would not include a temporary place of sojourn during ad hoc negotiations."

158. For this conclusion, see also Honnold, supra note 25, at 79; Siehr, supra note 145, at 590 n.1.

159. See Franco Ferrari, VENDITA INTERNAZIONALE DI BENI MOBILI. ART. 1-13. AMBITO DI APPLICAZIONE. DISPOSIZIONI GENERALI 30 (1994).

160. See Rosett, supra note 99, at 279, stating that in order to be able to consider a place as being a "place of business," "[n]either having a hotel room or a rented office in a city nor engaging in sales transactions on repeated occasions in the nation appear to suffice."

161. For a basically similar statement, see Honnold, supra note 25, at 181, arguing that "[t]he term '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."

162. Note, that the exact determination of the places of business of the party is not only important for the applicability of the Sales Convention, but for other purposes as well; see, e.g., Arts. 12, 20(2), 24, 31(c), 42(1), 57, 69(2), 90, 93(3), 94, 96. For a similar affirmation in legal writings, see Enderlein & Maskow, supra note 58, at 71; Magnus, supra note 156, at 39; OFFICIAL RECORDS OF THE UNITED NATIONS CONFERENCE, supra note 27, at 19; Jerzi Rajski, Art. 10, in COMMENTARY ON THE INTERNATIONAL SALES LAW, supra note 12, 116 at 117.

163. See also Herber & Czerwenka, supra note 43, at 63, stating that the Hague Uniform Laws did not provide for any solution of the dilemma mentioned in the text.

164. Note, that already 1 Ernst Rabel, 1 DAS RECHT DES WARENKAUFS 51 (Berlin 1936), considered this issue. See also Art. 7(1) of the Draft Uniform Sales Law of 1935, reprinted in RABELS ZEITSCHRIFT FÜR AUSLÄNDISCHES UND INTERNATIONALES PRIVATRECHT 3, 10 (1935).

165. For a very detailed discussion of the issue de quo, see, e.g., Gerold Herrmann, Anwendbarkeit des Einheitskaufrechts auf Kaufvertrag mit Zweigniederlasung (Art. 1 Abs. 1 EKG), PRAXIS DES INTERNATIONALEN PRIVAT- UND VERFAHRENSRECHTS 212, 214 (1983).

166. This view was favored, for instance, by Ulrich Huber, Das Einheitliche Gesetz über den internationalen Kauf, DER BETRIEB 1205, 1205 (1975); Landfermann, supra note 19, at 388.

This thesis has been mostly justified by making reference to the certainty of law: see, e.g., Rolf Herber, Art. I in KOMMENTAR ZUM EINHEITLICHEN KAUFRECHT 7, 10 (Hans Dölle ed., Munich 1976), stating that "[t]he silence of the law [as to the determination of the relevant place of business] leads to the conclusion that the principal place of business is always the decisive one. This solution allows a very clear limitation of the sphere of application of the [uniform] law. The parties thus acquire certainty as to the applicability of the uniform law from the beginning of bargaining process."

167. See Volker Stötter, INTERNATIONALES EINHEITS-KAUFRECHT 132 (Munich 1975).

A third solution has been suggested, which, however, has not been followed by the courts; according to Graveson et al., supra note 19, at 49, the question as to which place of business is to be taken into account in order to determine the internationality of a sales contract in cases where one party has more than one place of business is irrelevant, provided that at least one of the multiple places of business of one party is located in a State different than that in which the other party's place of business is located. In this respect the authors make the following example:

"[W]here the seller has its place of business in States A, B, and C and the buyer has places of business in States C, D and E, would a contract between the parties made entirely at their places of business in State C fall within the Uniform Law? It is suggested that such a contract would satisfy this particular requirement for two reasons: (a) Article 1(1) does not exclude parties who have places of business in the same State: it merely requires that they have places of business in different States and if this condition is satisfied (as in our example), there seems no reason in the text for exclusion of the Uniform Law; (b) the three alternative further conditions set out in Article 1(1) effectively ensure the international character of the contract, so that no questions arises of the application of the Law to purely local contracts."

168. See BGH, June 1, 1982, reprinted in Peter Schlechtriem & Ulrich Magnus, INTERNATIONALE RECHTSPRECHUNG ZU EKG UND EAG. EINE SAMMLUNG BELGISCHER, DEUTSCHER, ITALIENISCHER UND NIEDERLÄNDISCHER ENTSCHEIDUNGEN ZU DEN HAAGER EINHEITLICHEN KAUFGESETZEN 89 (Baden-Baden 1987); for a comment on this decision, see, among others, Daniela Memmo, La "sede d'affari" secondo la disciplina uniforme sulla vendita internazionale nella più recente giurisprudenza della Corte federale tedesca, RIVISTA TRIMESTRALE DI DIRITTO E PROCEDURA CIVILE 755 (1983).

169. Memmo, supra note 168, at 759 n.10.

170. Note, that Article 10(a) CISG solves the question of which of several places of business of one party is relevant in order to establish whether a contract is international; it does not, however, define the "place of business"; for similar conclusions, see Herber & Czerwenka, supra note 43, at 63.

Contra, in the sense that it is possible to derive a definition of the "place of business" from Article 10(a) CISG, Honnold, supra note 25, at 79. This thesis has been criticized, see, e.g., Richards, Note, supra note 147, at 220.

171. See Article 10(a) CISG: "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."

172. For this expression, see Rolf Herber, Art. 10, in KOMMENTAR ZUM EINHEITLICHEN UN-KAUFRECHT, supra note 48, 113 at 114; Herrmann, supra note 165, at 215.

Note, however, that it is wrong to state that the solution adopted by the CISG has been influenced by the solution given under the Hague Conventions, and this not only because the aforementioned decision of the German Supreme Court is dated 1982, whereas the CISG was approved in 1980, but because it was the CISG [which] actually influenced the German court decision, as evidenced by the fact that the German Supreme Court, in deciding the case, expressly made reference to Art. 10(a) adopted by the Vienna Sales Convention, even though it was not yet in force. For a similar evaluation of the CISG's influence on the German court's solution, see Memmo, supra note 168, at 760.

173. Indeed, the problem of which of several places of businesses was to be relevant in determining the internationality of a sales contract was intended to be solved by making recourse to the "principal place of business theory," as evidenced by the proposal reprinted in 2 UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW YEARBOOK 52 (1971), according to which an article should have been introduced to read as follows: "Where a party has places of business in more than one State, his place of business shall be his principle place of business. . . ." This proposal has been rejected in favor of Article 10(a); for a brief historical account of Article 10(a), see Rajski, supra note 162, at 116.

174. For this affirmation, see also Ferretti, supra note 151, at 44.

175. For this example, see Ferrari, supra note 159, at 208; Herber & Czerwenka, supra note 43, at 64; Schlechtriem, supra note 92, at 43.

176. For this affirmation, see also Kritzer, supra note 56, at 75-76, listing examples of clauses able to unequivocally determine the relevant place of business.

This solution corresponds to that suggested by courts under the Hague Conventions; see, e.g., BGH, June 2, 1982, reprinted in Schlechtriem & Magnus, supra note 168, 89 at 91, where it is stated that the applicability of the [1964] Uniform Sales Law depends [among others] on the location of the places of business to which the parties wanted the contract to be linked. See also OLG Hamburg, December 19, 1980, partially reprinted in Schlechtriem & Magnus, supra note 168, at 113.

177. For this criticism of Article 10(a), see, for instance, Rajski, supra note 162, at 118, stating that "[o]ne of the problems that may arise in connection with the interpretation of Article 10 concerns the meaning of the 'closest relationship' of the place of business to the contract and its performance."

Similar statements have been made by other authors as well; see Herber, supra note 172, at 133; Vincent Heuzé, LA VENTE INTERNATIONALE DE MARCHANDISES 37 & 86 (Paris 1992).

178. See also Ferrari, supra note 159, at 208.

179. In Filanto S.p.A. v. Chilewich International Corporation, 789 F. Supp. 1229 (S.D.N.Y. 1992), the court did not address the issue of which of several places of business was the "relevant" one, although the buyer had places of business in the United States and England.

180. See also Ferrari, supra note 159, at 208.

181. See also Ferretti, supra note 151, at 44, stating that "Article 10 does not provide for an initial time limit fixing the period of time in which the elements to be taken into account may become apparent; it provides, instead, for a deadline after the expiration of which no new elements can be considered. By doing so, [Article 10(a)] clarifies that those elements must have influenced the formation of the contract."

182. See, for this conclusion, OFFICIAL RECORDS OF THE UNITED NATIONS CONFERENCE, supra note 27, at 19: "If it was contemplated that the seller would perform the contract at his place of business in State A, a determination that his "place of business" under Article 10(a) was in State A would not be altered by his subsequent decision to perform the contract at his place of business in State B."

183. For this solution, see also Enderlein & Maskow, supra note 58, at 72; Herber, supra note 172, at 114; Magnus, supra note 156, at 145; Dieter Martiny, Kommentar zum UN-Kaufrecht, in 7 MÜNCHENER KOMMENTAR ZUM BÜRGERLICHEN GESETZBUCH 1658 (Hans-Jürgen Sonnenberger ed., 2d ed., Munich, 1989); Piltz, supra note 21, at 39.

Contra, suggesting having recourse to the place of business where the performance takes place, Herrmann, supra note 165, at 214.

184. For this conclusion, see already Ferrari, supra note 100, at 11.

185. For the text of Article 10(a), see supra note 171.

186. The concept of "habitual residence" has often been used in private international conventions; for a list of such conventions, see, e.g., Rajski, supra note 162, at 118 ("The concept of habitual residence is used in a number of other international conventions. . . .The concept of 'habitual residence' was adopted in the Hague Convention on Civil Procedure of 14 November, 1896. It has been introduced subsequently at a number of international conventions in various domains of private international law, to complement or supplant the traditional connecting factor of domicile. . . .The essential reason for its success is attributable largely to the difficulties in any attempt to define a general concept of domicile, which varies greatly in the law of different States").

For a discussion of the concept de quo in private international law, see F.A. Mann, Der "gewöhnliche Aufenthalt" im internationalen Privatrecht, JURISTENZEITUNG 466 (1956).

187. Note, that since consumer sales are excluded from the sphere of application of the Vienna Sales Convention (see infra the text accompanying notes 463-89), Article 10(b) will not be applicable very often. For a similar statement, see Peter Schlechtriem, EINHEITLICHES UN-KAUFRECHT 30 (Tübingen, 1981) (the use of habitual residence of a party as an alternative to 'place of business' will rarely be applied to legal transactions governed by the Convention").

188. Note that Rajski, supra note 162, at 118, states that "[since] the concept of habitual residence refers to a situation of fact, the possibility of its different interpretation according to the domestic rules of law appears to be substantially limited."

189. For this definition of habitual residence, see Ferretti, supra note 151, at 44; Herber & Czerwenka, supra note 43, at 64; Piltz, supra note 21, at 39-40.

190. It is here suggested that for the applicability of the CISG it is irrelevant whether the parties know that it is applicable or that it even exists. Similar affirmations can be found, in respect, however, to the 1964 Hague Conventions, in several court decisions; see, e.g., OLG Frankfurt, February 9, 1977, partially reprinted in Schlechtriem & Magnus, supra note 168, 110 at 110.

191. See Article 1(2): "The fact that the parties have their places of business in different States is to be disregarded whenever this fact does not appear either from the contract or from any dealings between, or from information disclosed by, the parties at any time before or at the conclusion of the contract."

192. It is not sufficient that the internationality be apparent to one sole party; see, e.g., Magnus, supra note 156, at 41-42.

193. For this conclusion, see Magnus, supra note 156, at 41.

Since the rationale behind Article 1(2) CISG is to avoid applying the Uniform Law to a contract which to the parties appears to be merely a domestic one (for this affirmation, see also Karollus, supra note 59, at 29), it is not necessary, as, however, suggested by Volken, supra note 90, at 24, that "the parties must consciously have entered into an international contract" in order for the Vienna Sales Convention to be applicable. It is possible that the internationality is evident, but that the parties do not consciously enter into an international contract.

194. It is often stated that the elements on the basis of which to decide whether the internationality of a contract is apparent are objective; see, e.g., Beate Czerwenka, RECHTSANWENDUNGSPROBLEME IM INTERNATIONALEN KAUFRECHT 136 (Berlin/Munich, 1988); Herber, supra note 120, at 57; Karollus, supra note 59, at 29. This means that it is indeed irrelevant whether the parties know about the internationality of the contract (for this conclusion, see also Magnus, supra note 156, at 41).

Contra, Audit, supra note 38, at 19, stating that the parties must know that they have concluded a contract which is to be considered an international one under the CISG.

195. For this conclusion, see Herber, supra note 120, at 57.

196. The internationality is apparent, for instance, when the contract is written in a language other than the one used in the State where the contract is concluded.

197. In cases, for example, where the parties have during the bargaining process exchanged their business cards listing their foreign addresses, the internationality must be considered as being apparent.

198. For some examples of information which makes a contract "appear" to be international, see Magnus, supra note 156, at 42.

199. For similar affirmations, see Hans Hoyer, Der Anwendungsbereich des Einheitlichen Wiener Kaufrechts in DAS EINHEITLICHE WIENER KAUFRECHT. NEUES RECHT FÜR DEN INTERNATIONALEN WARENKAUF 31, 35 (Hans Hoyer & Willibald Posch eds., Vienna 1992); Reinhart, supra note 139, at 17.

200. For this conclusion, see Ferrari, supra note 85, at 915.

201. For this conclusion, see Herber, supra note 119, at 35.

202. OFFICIAL RECORDS OF THE UNITED NATIONS CONFERENCE, supra note 27, at 15.

203. For the same solution, see also Czerwenka, supra note 194, at 136; Herber & Czerwenka, supra note 43, at 21.


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