CISG Article 11
PECL Article 2:101(2) [No Formal Requirements]|
(complete and revised version 1998)
A contract need not be concluded or evidenced in writing nor it is subject to any other requirement as to form. The contract may be proved by any means, including witnesses.
Article 11 CISG and PECL article 2:101(2)
Allison E. Butler [*]
[22 February 2003]
1. General Interpretation and Application: No Formal Requirements
2. "Formal Requirements" for the Validity of the Contract
1. General Interpretation and Application: No Formal Requirements
Article 11 CISG and its counterpart PECL Article 2:101(2) are similar in substance and form. Both provisions adopt the principle of "freedom of formalities," which upholds the validity of a contract absent writing or other formalities. Verbal and written evidence is permitted under both provisions to prove the formation of a contract.
2. "Formal Requirements" for the Validity of the Contract
Although PECL article 2:101(2) and CISG article 11 contain the same basic elements, implicit in Article 2:101(2) is its broad application to modification and termination by agreement as well as unilateral promises. Article 2:101(2) also provides that parties to a contract can stipulate to preclude application of this provision, however, this option is highly unlikely, as this principle is widely accepted among the legal systems within the European community.
In contrast, Article 11 is limited to the formation of a contract; Article 29 explicitly sets forth the applicable principle in the event of modification or termination. Due to the international sphere of application and certain members states preference for writing, Article 96 permits States that require contracts of sale to evidenced by writing the option to declare Article 11 inapplicable.
In various European member states, laws mandate commercial contracts to be in writing. However, multiple exceptions are noted based in part to legal systems perception of proving contracts. Hence, oral testimony is often permitted even in the absence of a written document.
Similarly, the CISG also provides means for mandating that a contract be in writing. Notably, CISG article 11 does not apply if a Contracting State has made a Declaration under Article 96. However, this does not mean that the transaction is subject to a writing requirement. The resolution of that issue may depend on a choice of law analysis.
The notes to PECL 2:101(2) acknowledge that specific contracts must be in writing or in a notarial document in order to be valid.
Unlike the PECL, exclusion from the freedom of formalities of specific types of contracts is expressly stated in article 2.  As such, the CISG only applies to commercial contracts. Although different in subject matter, PECL 2:1010(2) may be of assistance in these circumstances.
The PECL supports the same principle of freedom of formalities as outlined in the CISG. However, the PECL is apparently more flexible even when a written contract is mandated by law due in part to its acceptance by its members states of proving a contract by other means. Although a Contracting State to the CISG can exempt itself from Article 11 via Article 96, a written document may still be mandated under a country's private law. Notably, such a Declaration may not fully exempt one from Article 11 's application. Although different in subject matter, PECL 2:101(2) may be of assistance in interpreting Article 11 CISG when the law mandates that specific contracts be evidenced in writing.
[See also commentary by the author on this subject in: John Felemegas ed., An International Approach to the Interpretation of the United Nations Convention on Contracts for the International Sale of Goods (1980) as Uniform Sales Law, Cambridge University Press (2006) 286-288.]
* 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.
1. See CISG article 11; PECL article 2:101(2). Article 11 is one of the many articles whose legislative history illustrates the Conventions broad uniformity provision, CISG article 7, in which the delegates of the CISG intended to achieve the Convention's uniformity mentioned in Article 7(1)"by removing artificial impediments to commerce caused by differences in national legal systems that govern international sales of goods." Marian Nash (Leich), "Contemporary Practice of the United States Relating to International Law", 88 Am. J. Int'l L. 89, 103 (1994); see also, Anthony S. Winer, "The CISG Convention and Thomas Franck's Theory of Legitimacy", 19 NW. J. Int'l L. & Bus. 1, 1-3 (1998); see also, Carolina Saf [Sweden], excerpt from 1999 thesis available at <http://cisgw3.law.pace.edu/cisg/text/saf96.html>, stating that Article 11 establishes one of the basic rules of the Convention: the theory of consensualism, i.e. that a contract is not subject to any specific formal requirements.
For example, the absence of a writing requirement directly conflicts with the common-law Statute of Frauds. This issue is not as obvious under the PECL as most of the countries of the European community are civil law jurisdictions and do not mandate written contracts unless prescribed by law (and even then there are exceptions).
The legislative history of the CISG further reveals that a Canadian Representative proposed to adopt language that would provide "a limitation on admissible evidence in cases where the contracting parties had freely chosen to have a written contract." Several delegates opposed such an amendment as conflicting with principles of civil law where a judge is permitted to review all evidence. Notably, in certain common-law jurisdiction the parol evidence rule or similar type of preclusion prohibits certain evidence. One delegation refused to accept such a rigid rule that is difficult to apply and lacked a uniform body of jurisprudence even in common-law countries. See John O. Honnold, Documentary History of the Uniform Law for International Sales 662, also available online at <http://cisgw3.law.pace.edu/cisg/1stcommittee/summaries11.html> and <http://cisgw3.law.pace.edu/cisg/2dcommittee/summaries96.html>. The Committee rejected the amendment and adopted Article 11 in its current form.
See e.g,, Switzerland 5 December 1995, Commercial Court, St. Gallen, available at <http://cisgw3.law.pace.edu/cases/951205s1.html>, holding a sales contract need not be concluded in or evidenced by writing and can be proved by any means including witnesses, an unsigned offer can be valid. See also, United States 14 April 1992 Federal District Court [New York] Filanto S.p.A. v. Chilewich International Corp., available at <http://cisgw3.law.pace.edu/cases/920414u1.html>; Mexico 4 May 1993 Compromex Arbitration proceeding M/66/92, Jose Luis Morales v. Nez Marketing, available at <http://cisgw3.law.pace.edu/cases/930504m1.html>; United States 29 June 1998 Federal Appellate Court [11th Circuit], MCC-Marble Ceramic Center v. Ceramica Nuova D'Agostino , available at <http://cisgw3.law.pace.edu/cases/980629u1.html>; United States 8 August 2000 Federal District Court [New York], Fercus v. Mario Palazzo et al., available at <http://cisgw3.law.pace.edu/cases/000808u1.html>: United States 10 May 2002 Federal District Court [New York], Geneva Pharmaceuticals Tech. Corp. v. Barr Labs. Inc., available at <http://cisgw3.law.pace.edu/cases/020510u1.html>.
2. The CISG and the PECL therefore are based on the same principle of freedom of formalities as a starting point. See generally, Sieg Eiselen, "Remarks on the manner in which the Principles of European Contract Law may be used to interpret or supplement Article 29 of the CISG", available online at <http://cisgw3.law.pace.edu/cisg/text/peclcomp29.html#er>.
3. Ole Lando & Hugh Beale eds., Principles of European Contract Law: Parts I and Part II, Kluwer Law International (1\2000) 137, 138, 142-143.
4. Ten countries -- Argentina, Belarus, Chile, China, Estonia, Hungary, Latvia, Lithuania, the Russian Federation and the Ukraine -- have opted for it. The representative of the Soviet Union argued in particular that the preservation of domestic law requiring written documentation in international sales contracts was critical to protect established practices within the Soviet government for the approval and completion of foreign trade agreements. See Analysis of Replies and Comments by Government inHague Conventions of 1964: Report of the Secretary-General, U.N. Doc. A/CN.9/31, reprinted in (1970) 1 Y.B.U.N. Comm'n on Int'l Trade L. 159, 170. It has also been reported that the Soviet representatives were more interested in the reservation as to the written requirement than the delegates from other socialist countries.
5. See e.g. , Danske Lov art. 5.1.1, SWEDEN, see Adlercreutz I 147; FINLAND, see Hoppu, 36; GREECE, CC art. 158; GERMANY, BGB § 125 (impliedly); AUSTRIA, AGBG § 883; PORTUGAL, CC 219 ff
6. See generally, CISG articles 12 and 96.
7. To illustrate, assume a party located in the United States and a party located in Argentina orally agreed to a sales contract. Because Argentina has made the Article 96 reservation, the provisions of Articles 11 and 29 dispensing with any writing requirement are called off by Article 12. That does not, however, mean that the transaction is subject to a writing requirement. The resolution of that issue will depend on a choice of law analysis. If private international law principles lead to the application of Argentinian law, the writing requirements of Argentinian domestic sales law will apply. If the rules of private international law designate U.S. law, then the writing requirements of U.S. domestic sales law will apply. The result in the latter situation is rather ironic. Because one party to the sale is from Argentina and Argentina has made an Article 96 reservation, the transaction becomes subject to the domestic U.S. Statute of Frauds requirements (most likely § 2-201 of the Uniform Commercial Code as enacted in the jurisdiction whose law governs the transaction). And this is the case, even though the United States, by failing to make an Article 96 declaration, in effect declared its willingness to forego its Statute of Frauds rules and accept oral international sales contracts.
As such, the reservation permitted by Article 96 changes the text of the Convention by eliminating those aspects of Articles 11 and 29 (as well as anything in Part II of the CISG) that dispense with writing requirements. The Article 96 reservation has this effect, not just in countries making the reservation, but also in non-reserving countries, on a transaction-by-transaction basis. In other words, whether the text of the Convention includes provisions eliminating writing requirements varies, even in a State that has not made the Article 96 reservation, depending on whether one of the parties is located in another State that made the reservation.
See generally, Harry M. Flechtner, The Several Texts of the CISG in a Decentralized System: Observations on Translations, Reservations and other Challenges to the Uniformity Principle in Article 7(1), 17 Journal of Law and Commerce (1998) 187-217, also available online at <http://cisgw3.law.pace.edu/cisg/biblio/flecht1.html>.
See, e.g., Demark 23 April 1998 Østre Landsret [Appellate Court], Elinette Konfektion v. Elodie S.A. <http://cisgw3.law.pace.edu/cases/980423d1.html>; but see, Mexico 29 April 1996 Compromex Arbitration proceeding, Conservas La Costeña v. Lanín, available at <http://cisgw3.law.pace.edu/cases/960429m1.html>, finding that "the essential terms of the contractual relationship" had been sufficiently established in writing despite Argentina's declaration. The writing requirement does not call for a formal or solemn contract (contrato formal) and a different interpretation, in the opinion of Compromex, "would be in conflict with the general principles of the CISG."
8. In particular, Article 2 of the Convention expressly states that the Convention does not apply to the sale of goods for personal family or household uses unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for such use. Also excluded from the Convention is the sale of watercraft, aircraft, natural gas or electricity, letters of credit, auctions and securities. In the event of a mixed contract, the Convention would apply unless the "preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services." The CISG can apply to the sale of goods aspect of a distributorship; however, it does not apply to exclusivity or other non-sale aspect of distributorship agreements.
Like the commentary to the UNIDROIT Principles and the U.S. Restatements, the comments to the PECL help explain the text. The PECL notes identify civil law and common law antecedents and related domestic provisions. With the permission of the Commission on European Contract Law, these comments and notes are presented below. The source of this material is Ole Lando & Hugh Beale eds., Principles of European Contract Law: Parts I and II, Kluwer Law International (2000) 137, 138, 142-143.
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No formal requirement
Article 2:101(2) lays down the principle that, unless the parties otherwise agree, the conclusion as well as the modification and the termination by agreement of a contract are valid without any form, be it writing, sealing, authentication by a notary, filing in a public registry etc. This principle is widely accepted among the legal systems at least as far as commercial contracts are concerned. For international contracts it is particularly important since many such contracts have to be concluded or modified without the delays which the observance of formalities will cause.
This provision also applies to unilateral promises, see Article 2:107. [page 138]
Notes [Match-ups with Continental and Common Law domestic rules, doctrine and jurisprudence]
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In the majority of countries of the European Union, writing or other formalities are not required for the validity of contracts in general. This holds true of DENMARK, see Danske Lov art. 5.1.1, SWEDEN, see Adlercreutz I 147; FINLAND, see Hoppu, 36; GREECE, CC art. 158; GERMANY, BGB § 125 (impliedly); AUSTRIA, AGBG § 883; PORTUGAL, CC 219 ff.; and of the UK. The DUTCH BW art. 3:37 lays down that unless otherwise provided declarations, including communications, may be made in any form. The same rule applies in SPAIN, see CC art. 1258, Commercial Code art. 5l and art. 11 of the Retail Trading Act (l996). The GREEK CC provides that contracts and other juridical acts have to be made in a certain form when the law so provides (CC art. 158) or the parties have agreed on it (art. 159(1)) and this holds true of the other laws which do not require form. On merger- and no oral modification clauses, see notes to Articles 2:105 and 2:106 below.
CISG art. 11 provides that a contract for the sale of goods need not be concluded in writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses. Under art. 29(1) a contract may be modified or terminated by the mere agreement of the parties. A State which is party to the Convention may, however, make a declaration to the effect that articles 11 and 29 do not apply where any party has his place of business in that State. None of the Members of the European Union has made such a declaration.
Art. 1.2 of the UNIDROIT Principles provides that nothing in the Principles requires a contract to be concluded in any form. It may be proved by any means, including witnesses.
Unless the defendant is a merchant, the FRENCH courts will not admit proof of contracts for the value of FF 5000 or more unless it is in writing, see CC art. 1341. But the requirements of writing are not great. A "commencement de preuve par écrit" (a first step towards evidence in writing) is sufficient, see CC art. 1347, and in special cases where it was not possible for a party to provide a written document, oral testimony is allowed, see art. 1348. Under art. 109 of the Commercial Code, oral testimony of contracts made between merchants is allowed. BELGIUM and LUXEMBOURG have similar rules. In BELGIUM writing is needed for contracts for a value of 15000 francs or more.
In ITALY proof will not be allowed for contracts above the value of 5000 lire unless they are in writing, see CC art. 2721(1), but there are a number of exceptions from this rule. Thus art. 2721(2) provides that the court can admit proof by witness even beyond that limit, taking into account the character of the parties, the nature of the contract and any other circumstances.
In FRANCE, BELGIUM, LUXEMBOURG and ITALY, where CISG is in force, an international contract of sale which is governed by the Convention is not subject to any requirement as to form, see CISG art. 11.
In all the countries, specific contracts need to be in writing or in a notarial document in order to be valid.
(aa) Formal requirements for special agreements are found in some conventions. For arbitration clauses, the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, art. II requires writing. Art. 17 of the Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters puts formal requirements on a jurisdiction clause. See also arts. 12 and 96 of CISG. [page 142]
(bb) In IRISH law informality is the rule but a considerable number of contracts must be evidenced in writing: contracts of guarantee, contracts for which the consideration is marriage, contracts for the sale of land or an interest therein, contracts that will not be performed within one year (see Statute of Frauds (Ireland) 1964, s. 2), contracts for the sale of goods in excess of £10 (Sale of Goods Act 1893, s. 4) and hire purchase contracts (Consumer Credit Act, 1995, s. 30)
In ITALY writing is required for the sale of land, see CC art. 1350, which includes a number of other contracts regarding land. In GERMANY, BGB § 313 requires a notarial document, as do PORTUGUESE CC art. 875 and SPANISH CC art. 1280. In the U.K., contracts for the sale of land must be in writing and signed by both parties (not by deed - that is required for the conveyance), see Requirements of Writing (SCOTLAND) Act 1995 s. 1 and ENGLISH Law of Property (Miscellaneous Provisions) Act 1989, s. 2. (replacing the earlier requirement that the contract be evidenced in writing; the Statute of Frauds 1664 still requires that guarantees be evidenced in writing). In SWEDEN writing and in FINLAND writing and the signature of an official sales witness are required, see SWEDISH Land Code ch. 4, 1§ and FINNISH Land Code ch. 2, 1§.
In several systems a contract for the sale of land will not transfer the property to the buyer; further formalities are necessary to achieve this.
(cc) Also a promise for a gift, but not a perfected gift, requires form in a number of countries. In FRANCE, BELGIUM and LUXEMBOURG it must be made before a notary, see CCs art. 931; for ITALY, see CC art. 782; for the NETHERLANDS, see BW art. 7A:1719; for GERMANY, see BGB § 518, for AUSTRIA, see the Law on Compulsory Notarial Acts of 1871; for SPAIN see CC arts. 632 and 633; and for PORTUGAL see CC art. 947. In the COMMON LAW gratuitous promises are enforceable only if made in the form of a deed or for a nominal consideration.
In SCOTLAND gratuitous promises not undertaken in the course of business must be in writing, see s. 1 of the Requirements of Writing Act 1995. In the NETHERLANDS a draft for a title on gifts in the BW purports to strike out the present requirement of the old code for a notarial document for a promise to make a gift. Writing will then suffice. In FINLAND and SWEDEN a promise for a gift must be made in writing or made public, for instance in the press , see Finnish Act on Gift Promises § 1 and Swedish Act on Gifts § 1. DENMARK is, as far as is known, the only Union country where a promise to make a gift is valid without any formality.
This enumeration is not exhaustive. In some legal systems mandatory rules require form for some specific contracts such as consumer contracts, for the establishment of companies, loans, guarantees, sales of motor vehicles, employment contracts and tenancies. [page 143]
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