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Reproduced with permission from 23 International Lawyer (1989) 443-483

excerpt from

Reconciliation of Legal Traditions in the U.N. Convention on Contracts for the International Sale of Goods

Alejandro M. Garro [*]


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[Tensions that led to the manner in which good faith is referred to in Article 7(1)]

It is widely acknowledged that "good faith" has multiple connotations within a single domestic legal system and various meanings in different legal systems,[97] so it was feared that there could be no general agreement on what "good faith" might mean in international transactions.[98] The requirement of "good faith" turns up not only in the civil codes of civil law systems but also in statutory and case law of common law systems. Under the Uniform Commercial Code, good faith is only required in the performance and enforcement of contracts,[99] whereas in many civil law systems the principle as such is expressly stated with respect not only to performance of obligations, but also to pre-contractual bargaining, the formation and interpretation of contracts.[100] Not surprisingly, the inclusion in the Convention of a provision creating an obligation of good faith was the occasion for extensive and at times obscure disputes not only between socialist and capitalistic representatives, but also between common law and civil law delegates and even among representatives who shared a common cultural and legal background. Opinions on the role to be played by good faith ranged from the idea that it should be viewed as an obligation present at all stages of the contracting process to the view that good faith should not be explicitly mentioned in any provision.

As early as the Hague Diplomatic Conference in 1964, explicit reference to good faith as a general principle was opposed by the French delegate. Professor Tunc asserted that the principle of good faith might lead to divergent and even arbitrary interpretations by national courts, and thus would impair uniformity.[101] At the 8th session of the UNCITRAL Working Group, the Hungarian delegate proposed the insertion of a "good-faith clause" directing the parties to act in good faith in the formation of international sales contracts.[102] Some delegates opposed the insertion of the "good faith" provision on grounds that it was vague and unnecessary.[103] Especially unacceptable to the common law delegates was that the principle of good faith should also cover the formation of contracts.[104] The principle of good faith gained acceptance in the text of the Draft Convention and even survived the 9th session of UNCITRAL,[105] but a counterattack was launched at the 10th session in 1978.[106]

In view of these sharply divided opinions, a compromise was finally reached in article 7(1) providing that the Convention must be interpreted taking into account the "observance of good faith in international trade."[107] By relegating the relevance of good faith to the interpretation of the Convention, a hard-won settlement was reached between those who would have preferred a provision imposing directly on the parties the duty to act in good faith during the formation, performance, and termination of the contract of sale, and those who were opposed to any explicit reference to the principle of good faith. This peculiar compromise, actually burying the principle of good faith, has been characterized as "uneasy,"[108] "strange,"[109] and as a "statesmanlike compromise."[110] Almost everybody disagrees as to the impact, if any, that the principle of good faith may have on the behavior of the parties to an international contract for the sale of goods.[111]

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FOOTNOTES

* Alejandro M. Garro, Lecturer in Law, Columbia University. This paper was submitted to the 81st Annual Meeting of the American Association of Law Libraries, June 26-29, 1988.

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97. See Rosett, supra note 25, at 290, who characterizes the wide connotation of the principle of good faith thus:

"At the very least, good faith is an interpretative tool that precludes a party from unduly rigorous insistence on the right to terminate after a minor deviation in performance by the other. Viewed somewhat more expansively, it imports affirmative obligations on the parties to communicate during performance and to cooperate in the cure of defects and the modification of obligations in unforeseen circumstances. It precludes a perfect tender approach to interpretation of the seller's obligations of delivery and does not treat minor deviations by either side as an event that terminates the contract."

In continental and socialist systems, the concept may have broader connotations. In particular, the notion of good faith is not limited to the performance of completed agreements, but extends to the process of formation (footnote omitted).

98. Eörsi, supra note 4, at 349 ("[I]t was widely thought that the rule was vague, or at least would remain vague for a long time and, because of the laconic language [of the Convention], would never become unambiguous.").

99. U.C.C. 1-203 ("Every contract or duty within this Act imposes an obligation of good faith in its performance or enforcement"). See also Restatement Contracts, supra note 53 231.

100. Italian Civil Code arts. 1137, 1366, 1375; German Civil Code arts. 157, 242; Argentine Civil Code art. 1198 (as amended by Law No. 17711 of 1968).

101. 1 The Hague Records and Documents of the Diplomatic Conference on The Unification of Law Governing the International Sale of Goods 100 (April 2-25, 1964), cited by Eörsi, supra note 4, at 348. As recalled by Eörsi, the ULF requires good faith in the setting of revocation of an offer. Art. 5(2) of the ULF provides that an offer "can be revoked unless the revocation is not made in good faith or in conformity with fair dealing." Eörsi, supra note 30, at 314 n.13.

102. The Hungarian proposal read: "In the course of the formation of the contract the parties must observe the principles of fair dealing and act in good faith." Report of the Working Group on the International Sale of Goods on the Work of Its Ninth Session, 70, U.N. Doc. A/CN.9/142 (1977), reprinted in [1978] Y.B. U.N. Comm'n on Int'l Trade L. 61, 66.

103. Proponents of the "good faith" principle replied that such general clauses were of necessity vague and yet were indispensable in modern law. They added that, in most cases, one knew what conduct was inconsistent with good faith, and that if the experience with such rule in a domestic setting had shown that even vague provisions may be clarified by judicial development, a similar development could be expected at the international level. In reply, the opposition noted that judicial development at the international level, by a variety of forums, was incomparably more difficult than within the framework of a single national jurisdiction. A third group of delegates thought that the duty to act in good faith went without saying, hence it was unnecessary to include it. A fourth group suggested that a duty of good faith made no sense unless accompanied by sanctions for breach of the duty. See Report of the Secretary-General: Analytical Compilation of Comments by Governments and International Organizations on the Draft Convention on the Formation of Contracts for the International Sale of Goods as Adopted by the Working Group on the International Sale of Goods. 64-79, U.N. Doc. A/CN.9/146 and addenda 1-4 (19878), reprinted in [1978] 9 Y.B. U.N. Comm'n on Int'l Trade L. 127, 132-33. See also Eörsi, supra note 30, at 314; Winship, Commentary, supra note 19, at 631-32.

104. See E. Farnsworth, Problems of the Unification of Sales Law from the Standpoint of the Common Law Countries 20 (noting the hesitations of common-law lawyers to derive too much out of the principle of good faith). Report submitted to the Colloquium on Problems of the Unification of International Sales Law held in Potsdam-Babelsberg, August 21-24, 1979, sponsored by the International Association of Legal Science (IALS).

105. Art. 5 of the UNCITRAL Working Group's 1977 Draft Convention provided: "In the course of the formation of the contract the parties must observe the principles of fair dealing and act in good faith." The delegate from the Federal Republic of Germany thought that the appearance of the principle of good faith in the UNCITRAL draft was a clear step forward. Huber, Der Uncitral-Entwurg eines Ubereinkommens uber internationale Warenkaufverage, 43 Rabels Zeitschrift fur Auslandisches und Internationales Privatrecht [RabelsZ] 413, 430 (1979).

106. The motion to introduce the principle of good faith in the formation of contracts was approved by a slight majority of the Working Group, but it was rejected (again by a slight majority) by UNCITRAL. See Eörsi, supra note 30, at 314. After extensive debate UNCITRAL decided to refer the provision to a small working group to draft a compromise. Report of the United Nations Commission on International Trade Law on the Work of Its Eleventh Session, 32 U.N. GAOR Supp. Annex 1 (No. 17) 42-60, U.N. Doc. A/33/17 (1978), reprinted in [1978] 9 Y.B. U.N. Comm'n on Int'l Trade L. 11, 35-36; J. Honnold, Uniform Law, supra note 13, at 123-24; Winship, Commentary, supra note 19, at 631-32.

107. Convention, supra note 3, art. 7(1), second paragraph ("In the interpretation of this Convention regard is to be had . . . to the need to promote . . . the observance of good faith in international trade"). Professor Eörsi reports that at the 1980 Vienna Conference the principle of good faith was subject to a "restricted counterattack" by the delegates from Norway, Italy, and the Republic of Korea. They proposed that the principle of good faith should be moved from interpretation of the Convention to interpretation of the contract. The motion was not carried. Italy proposed unsuccessfully the introduction of a separate article providing that "[I]n the formation [interpretation] and performance of a contract of sale the parties shall observe the principles of good faith and international cooperation." Report of the First Committee, U.N. Doc. A/CONF.97/11 (1980), reprinted in Official Records, supra note 24, at 82, 87; see also Eörsi, supra note 4, at 348-49; Winship, Commentary, supra note 19, at 632.

108. See Bonell, Methodology in Applying Uniform Law for International Sales Under the U.N. Convention (Wien 1980), in Italian National Reports to the XII International Congress of Comparative Law 43, 62 (1986).

109. Eörsi, supra note 4, at 348-349 ("The result was strange but gained for the principle of good faith a foothold in an international convention for unification of law. It is hoped that this meager result represents a modest start.").

110. Farnsworth, Problems of Unification of Sales Law from the Standpoint of the Common Law Countries, in 2 Problems of Unification of International Sales Law 19 (1980).

111. Professor Farnsworth is of the opinion that references to good faith in art. 7(1) are "seemingly harmless words." See Farnsworth, The Convention on the International Sale of Goods from the Perspective of the Common Law Countries, in La Vendita Internazionale, supra note 79, at 3, 18; see also Winship, Sales Contracts, supra note 13, at 67; Winship, Commentary, supra note 9, at 631 (arguing that the drafting history of art. 7 clearly supports a limited reading of the role of good faith). Professor Bonell, in contrast, thinks that good faith "may even impose on the parties additional obligations of a positive character." Bonell, Methodology in Applying Uniform Law, supra note 108, at 63; Bonell, Article 7, in Commentary, supra note 13, 2.4.1, at 85. Accord J. Honnold, Uniform Law, supra note 13, at 94; Uniform Sales Law, supra note 13, at 39; Eörsi, supra note 30, at 314-15; Kastely, Unification and Community; supra note 74, at 597-98. See also Eörsi, General Provisions, in International Sales, supra note 13, 2.03, at 2-9 (hoping that "the good faith clause may play an active role in spite of its location in the Convention.").

112. See Hearings on Treaty Doc. No. 9, supra note 9, at 39 (statement of Frank A. Orban III) "Common sense indicates that developed countries will discover the technical anomalies first and will be the parties seeking amendments from the Third World and socialist bloc states." See also R. Brooks, Why Congress Should Be Wary of the U.N. Convention on the International Sale of Goods 4-5 (Heritage Foundation Background No. 361, June 15, 1984) (cited by Patterson, United Nations Convention on Contracts for the International Sale of Goods, Unification and the Tension Between Compromise and Domination, 22 Stan. J. Int'l L. 263, 276 n.62 (1986) (modification of the Convention "would probably require that the industrialized countries ask significant concessions from the radicalized Group of 77 of the less-developed countries and from the Communist bloc, who undoubtedly would expect a significant quid pro quo").

113. See Ghestin, Les obligations du vendeur, supra note 42, at 6.

114. It is unfortunate, however, that UNCITRAL failed to provide for some formal mechanism for amendment of the Convention. See Rosett, Critical Reflections, supra note 25, at 294; Winship, The Scope of the Vienna Convention, in International Sales, supra note 13, at 1-1, 1-49.

115. Eörsi, supra note 4, at 350; see also Rosett, supra note 25, at 285, pointing out the impact of those policy differences on the rules on performance on breach of contract, stating: Attitudes toward performance and rules governing breach also will differ significantly depending on whether one comes from an industrialized society with a balanced number of buyers and sellers of finished goods or from a have-not economy which must buy most manufactured and complex goods from outsiders who are believed to be selling shoddy goods, whose flaws become apparent only long after delivery, to unsophisticated buyers.

116. It should be noted at the outset that the confrontation between developed and developing countries is simply a rough generalization, because at times, on this issue as well as in others, representatives of developed countries sided with the opinion of the representatives of developing countries, and vice versa. See Farnsworth, Developing International Trade Law, 9 Calif. W. Int'l L. J. 460, 465 (1979) ("[W]hile there are differences between the common law and civil law countries, among the developed nations, it has been somewhat surprising to me that the developing nations are primarily 'developing' and only very secondarily by tradition divided into common law or civil law.").

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Pace Law School Institute of International Commercial Law - Last updated August 16, 1999
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