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A Study of the Interplay between the Conventions Governing International Contracts of Sale

Analysis of the 1955 Hague Convention on the Law Applicable to Contracts of International Sales of Movable Goods; the 1980 Rome Convention on the Law Applicable to Contractual Obligations; and the 1980 United Nations Convention on Contracts for the International Sale of Goods

Carolina Saf
Queen Mary and Westfield College
September 1999


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4.2.3 The Vienna Convention

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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.

Some difficulties may occur when determining which one of a party's places of business should be the one with the closest relationship to the contract, if the contract is entered into and concluded by one of the party's places of business and the contract stipulates that its performance is to be executed by another of her places of business located in another State, i.e. the conclusion and the performance of the contract are separated. Which one of these places of business should be considered to have the closest relationship to the contract and thus be the relevant one? Unfortunately, there is no indication given in Article 10 as to which of its criteria should prevail,[141] even though the factors on the scales may be reduced by the rule in Article 10(a).[142]

Where one of the party's two places of business is located in the same Contracting State as that of the other party, it has been suggested that a principle of in dubio pro conventione should be invoked so as to give preference to the place that leads to an application of the Convention, since the Convention is becoming the global law of international sales. That is to say, that party's place of business which is situated in the other Contracting State should prima facie be regarded as the relevant place of business, regardless of whether it was the place of conclusion or performance of the contract.[143] Whether this is appropriate can be discussed.

Provided that both the States, in which the party's two places of business are situated are Contracting States, the issue will not cause any substantive differences: the rules and principles of the Convention will apply (subject to Article 7(2)). However, if one of these States has not ratified the Convention, and given that - after taken all relevant factors under Article 10 into account - there is a total equilibrium between these two places of business, this preliminary question must be solved.

In order to do this, it is vital to understand the proper function and nature of Article 10. This provision is concerned with the singling out the relevant place of business from a number of possible ones, for the purpose of determining whether the Vienna Convention, primarily under Article 1(1)(a), is applicable. Hence, it forms an interpretative part of the unilateral conflict rule contained in that provision. That is to say, Article 10 together with Article 1(1)(a), constitute 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 Vienna Convention.

Therefore, in such an unusual case of total equilibrium [144], where neither Article 10 nor its case law will provide an answer, this preliminary question, it is suggested, should be solved under the traditional, universal conflicts rules in contract of the lex fori. This seems to be the logical conclusion to follow from the principle of lex specialis derogat generalis, as applied e contrario. The reason for this is that, whereas it is true that a rule of lex specialis will prevail over lex generalis, it is equally true that where the specific rule in question cannot provide the answer, recourse must be had to more general principles. Accordingly, recourse should be had to the universal conflict rules of the lex fori, e.g. Article 4(2) of the Rome Convention [145], when Article 10 cannot provide the answer to the preliminary question of which one of a party's equally connected places of business is the one relevant for determining whether the Convention is applicable or not.[146]

Honnold gives the following piece of advice: "However, where the balance seems close the parties would be well advised to settle the point by contract - by stating whether the Convention or specific domestic law is applicable."[147]

The second paragraph of Article 1 contains a requirement that the parties must have knowledge ab initio of their places of business, or habitual residences, being in different States, or at least that this fact is not concealed. Note that the provision does not refer to different Contracting States, nor is it necessary that the application of the Convention was foreseeable. If not, the location of their places of business will be disregarded and consequently the Convention will not apply. This is to protect an unknowing party from a surprise application of the Convention rules, such as in the situation of an undisclosed principal.[148]

Paragraph (3) of Article 1 clarifies the rule in the first paragraph of Article 1. It emphasises the importance given to the location of the parties' places of business as the sole requisite. Thus it will not matter that a party is a national of a non-Contracting State for the purpose of whether the Convention is applicable, nor will a party's civil or commercial character.[149]

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FOOTNOTES

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141. Rajski, in Bianca & Bonell, pp. 118 - 119; and Herber, in Schlechtriem, Art. 10, paras. 3 et seq.

142. Honnold, 42; and Herber, in Schlechtriem, Art. 10, paras. 5 et seq..

143. Bernstein, p. 11 including footnotes.

144.

144 An example could be where one party, the other party fully aware, carefully distributes the involvement of her business equally between her two places of business in order to anticipate/circumvene changes in e.g. export legislation. The contract contains no choice of law clause as that would disturb the equilibrium. A dispute arises and its outcome will depend on whether the Vienna Convention is applicable, i.e. one party is arguing for and the other against its application.

145. Infra, section 5.3.2.

146. Note that Article 7(2) of the Vienna Convention would not apply, since this case does not concern an interpretation of its rules of substantive law.

147. Honnold, 42.

148. Réczei, pp. 520 - 521; Bianca & Bonell, p. 31; Ferrari, paras. II.6 and III.1; and Herber, in Schlechtriem, Art. 1, paras. 48 et seq. For a discussion regarding the burden of proof under this provision, see Herber, ibid., paras. 49 et seq.

149. Jayme, in Bianca & Bonell, p. 32; Ferrari, II.4; and Herber, in Schlechtriem, Art. 1, paras. 59 et seq.

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Pace Law School Institute of International Commercial Law - Last updated January 18, 2000
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