Reproduced with permission of the author
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
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6.1 Appropriate Regime
The principle of party autonomy is now well settled among the legal systems of the world. There is, however, a part of this area of law where its appropriateness as a conflict of laws rule can be questioned: the very formation of an international contract, or to be more specific, by which law is it to be decided whether the negotiating parties, or even the alleged negotiating parties, have reached an agreement which qualifies as a legally binding contract?
The reasons for the law of any country not to hold an agreement as a validly concluded contract could be that there has not been sufficient communication of agreement; some legal element of contract is missing; or that the contract is vitiated due to e.g. mistake or fraud. It is unquestionable that the lex contractus cannot resolve all these questions of formation.
The schoolbook example of lack of consent is the situation in which the Vendor in Ruritania, a country, the law of which recognises passivity to constitute a valid acceptance, sends an offer to sell goods to the putative Purchaser in Sweden. Vendor stipulates that if Purchaser does not reject the offer within a week's time, she will consider him to have accepted the offer. The offer also contains a choice of Ruritanian law as the applicable law. By the principle of party autonomy, the Purchaser will be contractually bound unless he rejects the offer, despite the fact that Swedish law does not recognise passivity to constitute a valid acceptance.
The very same results could also be achieved where the applicable law is determined objectively, both under Article 3 of the Hague Convention and Article 4 of the Rome Convention: the Vendor has her place of business in Ruritania, she is the seller and so her performance is the characteristic one.
Consequently, where the very fact of agreement itself is denied by one of the parties, the lex contractus is not the appropriate rule. However, as regards contracts invalid, or voidable, due to defences to their enforcement, rather than being void ab initio, these concerns do not apply and thus the lex contractus should be applied.
6.2 Material Validity under the Conflict of Laws Rules in Contract
6.2.1 The Hague Convention
Article 2 (paragraph 3)
Les conditions, relatives au consentement des parties quant à la loi déclarée applicable, sont déterminées par cette loi.
According to the provision, the validity of the parties' agreement on the applicable law should be governed by that chosen law, i.e. the lex contractus. This is also the case regarding the questions of validity, including formation, of the actual contract of sale. In the Swedish case NJA 1987 p. 885 högsta domstolen [the Supreme Court] held that: "[a]s far as the conflict of laws is concerned the basis must be that the question of validity of each [contract] shall in its entirety be governed by one and the same legal system. Different elements of importance for solving this question shall thus in principle be governed by the same law. To apply in a certain respect, e.g. regarding duress, another law than that determined as applicable to the contract in other respects is out of the question unless there is any particular reason in addition to it." Accordingly, the contracts were held to be voidable due to duress, since the defendants' actions were unlawful by the applicable law of the contract. The fact that their actions were lawful according to the lex loci actus, i.e. Swedish law, did not constitute reason enough to make that law applicable in any respect to the question of validity of the contract.
Whether the provision covers the questions of consent and in particular consent by passivity is not quite clear. It is clear though, that in the situation where a contractual provision, or even the entire contract, was unilaterally introduced by one party and the other party did not consent according to his own law but according to the applicable law he did, the solution provided will not, at least not in all situations, be satisfactory. However, since there is no other specific provision dealing with this issue, it will be left to the discretion of the court to decide whether Article 6, i.e. ordre public, should apply.
Paragraph 3 is concerned with the substantive validity of a choice of law. That is to say, validity and consensus in their traditional sense as matters of national substantive [contract] law. Whether a choice of law will be recognised by a court so as to lead to its application and thus be upheld as "valid" in that respect, is a matter of the private international law of the forum. Under the Convention, this latter aspect of the validity of the choice of law will be governed by paragraphs 1 and 2 of Article 2.
6.2.2 The Rome Convention
Article 8 - Material Validity.
1. The existence and validity of a contract, or of any term of a contract, shall be determined by the law which would govern it under this Convention if the contract or term were valid.
2. Nevertheless a party may rely upon the law of the country in which he has his habitual residence to establish that he did not consent if it appears from the circumstances that it would not be reasonable to determine the effect of his conduct in accordance with the law specified in the preceding paragraph.
There is not yet any case law directly concerned with the application and interpretation of this Article. However, apart from the Report, it has been dealt with in the legal doctrine by several European scholars.
The Report explains that Article 8(1) is intended to cover all aspects of formation of the contract other than general validity. It is explicitly stated that the existence and validity of the parties' consent as to the choice of applicable law is covered.
Giardina, an Italian scholar, has suggested that the Convention introduces an exception to the general conflict of laws rule that classification is a question for the lex fori. In the field of contractual obligations the general rule will now be classification lege contractus modified with the safeguard rule in Article 8(2).
The reasoning for Giardina's suggestion is as follows: The Italian system of conflict of laws has long recognised the principle of party autonomy. The parties' choice of governing law would be given judicial effect and the validity of that choice governed by the chosen law. However, as all connecting factors were interpreted according to Italian law, i.e. classification lege fori, the existence of a valid choice would be determined according to substantive Italian law. The Convention on the other hand, explicitly states that the existence as well as the validity are to be determined according to the governing law, that is to say that the legal dispute has to be classified in accordance with the lex contractus.
However, it is not appropriate to apply a term of the Convention in order to determine its applicability. It would also be contradictive to the principle of uniformity in Article 18. The classification of an obligation as contractual is a matter for application of a uniform and autonomous law derived from the Convention itself. Thus, for the purpose of classification, `a contractual obligation´ is defined as `a voluntary agreement giving rise to obligations capable of being enforced by law´.
The assumption that there is an existing valid contract will take care of the circular argument that where there is a choice of the applicable law no law can be said to be applicable until the contract is found to be valid.
Lagarde explains this assumption made in Article 8(1) that the contract is valid, is not the same as a prima facie rule of validity. In fact, the latter was not accepted by the Convention. This should mean that the assumption only provides a take-off for the court's analysis of the alleged contract, comparable with the number `x` in algebra. A prima facie rule of validity on the other hand means that the court should try to validate an otherwise void contract by splitting the proper law, i.e. by depeçage. Such a practice would have affected the predictability of the solution and was therefore rejected.
Article 8(2) relates only to the existence and not to the validity of consent. Either party can rely on the so called safeguard rule as the paragraph simply refers to `a party´. It is wide enough to cover any issue of offer and acceptance, not only the problem of implications by silence, as the word `conduct´ ought to cover both action and failure to act by the party in question. The paragraph is designed to protect a party from being contractually bound against his intentions only because of ignorance of the differences between the law of his social and legal environment and the applicable law.
In this context it is important to appreciate that the concept of silent acceptance contains two aspects. Firstly, acceptance by silence alone, and secondly acceptance by conduct of which an eloquent silence may form part. In most, if not all, systems of law, only the latter will construe a valid acceptance. Since the legal requisites for such a valid acceptance will differ considerably in the different systems of law, it is only logical, and fair, that the significance of silence coupled with conduct should be assessed by the law of the place where the actor was habitually resident.
In order for the safeguard rule to apply it must appear from the circumstances that the result derived from the application of paragraph 1, i.e. the applicable law of the contract, would not be reasonable. The Report emphasises that all circumstances should be taken into account and particularly the parties' previous practices inter se and their previous business relationships. This is meant to provide sufficient protection from abuse of the rule. Whether it will and what weight different circumstances will have remains to be seen.
In regard of a legal entity or a party acting within her trade or profession, the law as identified by the rule of presumption in Article 4(2) may be considered as the law of the country in which a party has her habitual residence, for the purpose of Article 8(2).
The application of Article 8(2) can only result in a decision releasing a party from a contract. It cannot produce the opposite result, that is to say, it can never transform an alleged contract into an existing one where it by its proper law would be non-existent. This suggests that the basic policy in relation to consent is that of invalidating the contract.
The reason for the cumulative application in Article 8 in order to establish whether there is consent, is that neither the proper law of the alleged contract, nor the law of the country in which the party whose conduct is in question has her habitual residence, would on their own provide a sufficient solution. Provided that the concept of silent acceptance is recognised by one system of law and not by the other, application of the proper law of the contract alone could sometimes impose a contractual obligation on a party not rejecting an offer, and application of the latter alone could sometimes impose a contractual obligation on an offeror convinced that an offer, silently accepted, was rejected.
The German scholar Von Hoffmann is strongly in favour of the solution in Article 8. He is opposed to the new trend in German case law which generally submitted the effect of a party's silence to the law of her habitual residence. In Von Hoffmann's opinion "he who derives profit from participation in international business also should bear its risks. He who enters into negotiations for contracts with an international character should be aware that his behaviour may be scrutinized according to foreign law, and he should not be allowed always to fall back on his local law whenever foreign law is more burdensome to him." Only exceptionally should a party be able to rely on the law of her habitual residence. The unreasonability test will provide for such an exceptional application of the safeguard rule. A uniform standard based on the test and in conformity with the Brussels Convention will develop.
The unreasonability test in Article 8(2) gives the courts significant discretionary powers, which are only limited by the aim of the Convention to develop a uniform European case law. The onus of establishing the unreasonableness is apparently borne by the party relying on the law of her habitual residence.
The rules in Article 8 are applicable to such acts referred to in Article 9(4), by way of analogy. This is important to remember as Article 9(4) may be applicable to acts already performed by the parties in a situation, in which by virtue of Article 8(2), it has been held that there is no contract.
Regarding the issues of material validity, including formation, of the choice of applicable law as well as the rest of the contract, the Hague and Rome Conventions contain similar, if not identical, rules. That is to say, these issues will be governed by the applicable law of the contract, regardless of whether that law was chosen by the parties or determined by the court itself.
However, the Hague Convention does not contain any rule corresponding to the safeguard rule in Article 8(2) of the Rome Convention. Instead, the only possible recourse as far as questions of consent are concerned is ordre public under Article 6. Unlike Article 8(2), which only requires that it would not be reasonable to determine the effect of a party's conduct in accordance with the governing law of the contract, the requisites of ordre public are that the application of the relevant rules of the governing law would be manifestly incompatible and distinctly inconsistent with the legal foundations of lex fori. Accordingly, there is a rather deep discrepancy between the two as to their respective scope of application.
The actual effect of the rules is on the other hand similar: the court will refrain from application of particular rules of the governing law due to the unreasonable and manifestly incompatible result, respectively, which their application would otherwise produce.
According to Article 21 of the Rome Convention, the Hague Convention will prevail. However, under the combined application of Plender's "evasive interpretation" and the principle of lex specialis the safeguard rule would prevail over the Hague Convention, or complete it rather. In relation to other Contracting States to the Rome Convention and to States parties to neither of the Conventions this seems like an appropriate solution. In relation to States parties to the Hague Convention but not to the Rome Convention, the Hague Convention must prevail according to Article 30(4)(b) of the 1969 Vienna Convention on the Law of Treaties. On the facts only, this is also the most appropriate solution, since an application of the safeguard rule would harm the uniformity of the conflict rules between the Contracting States to the Hague Convention, thus making forum-shopping between fora in these Contracting States possible again.
6.3 Validity and Formation under the Substantive Rules of the Vienna Convention
6.3.1 Scope of the Vienna Convention Regarding Validity and Formation
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.
According to Article 4, `formation´ of international sales contracts falls within the scope of the Convention. As regards `validity´, on the other hand, this is true only insofar as it is `expressly provided´ in the Convention. Apart from Article 29, which is concerned with the formation of an agreement to modify or terminate a pre-existing contract, in the context of validity and formation there appear to be no such provisions and consequently most, if not all, issues of validity will be governed by the lex fori including its conflict rules.
That is to say, the Convention is only concerned with the mechanics of consent and not with any defences to enforcement of the agreement, such as mistake, fraud, threat or abuse of unequal bargaining power, and nor with the validity of its substantive contents, such as invalidation of a sales contract where specified products are being sold, e.g. absinthe, Cuban cigars or elephant tusks.
It is true that, notwithstanding the well-established distinction made between formation and validity in Article 4, the two concepts are in one respect overlapping: there will not be a [prima facie] valid contract, unless the rules governing formation are fulfilled. In other words, the concept of validity in this respect will include not only substantial validity and defences to enforcement, but also the need for fulfilment of all the mechanics of consent in order to create a [prima facie] legally binding agreement. Since rules governing the formation are expressly provided in the Convention, this particular part of validity is within the scope of the Convention. However, it is important to remember that this particular part of validity does not correspond to the concept of validity of consent.
Under Article 7(1) the Contracting States are under an obligation to consider the international character of the Convention and the need to promote its uniform interpretation. That is to say, since the Convention is an autonomous body of law it should be interpreted in accordance with the criteria specifically laid down within it, rather than with domestic criteria. Arguably, this should also include the process of classification. This would mean that classification of a domestic rule of law as concerned with a matter governed by the rules of the Convention, and thus barring its application, should be performed in accordance with the Convention rather than the domestic rules of the lex fori, at least where the Convention forms part of both the governing law and the lex fori.
Accordingly, any additional [domestic] mechanics of consent to those provided in the Convention cannot be invoked where the Convention rules governing formation are applicable, regardless of whether they are classified as rules of formation or rules concerning validity under the domestic lex fori. Likewise, since a defective consent is not strictly the same as a non-fulfilment of these mechanics, rules governing this matter will not be classified as rules of formation under the Convention, but of validity and thus governed by the lex fori including its conflict rules, since there are no express Convention rules on this matter.
By virtue of Article 4, this would result in the non-application of the common law doctrine of consideration where the Convention, i.e. Part II and Article 29, is applicable, since it consitutes an additional domestic mechanic of consent. Whereas full application of the concept of mistake in this context would be achieved, even though part of it in the common law jurisdictions is classified as a rule of formation, since the Convention is not concerned with that issue of validity.
6.3.2 The Vienna Convention, Part II, Formation of Contract
Just as any national substantive law on contracts, the Convention contains rules on the formation of the contract. Part II of the Convention governs these mechanics of consent or, as put under the Rome Convention, the very existence of consent.
Without a detailed comparative study, it is clear that most, if not all, legal systems contain rules by which an acceptance by conduct of which an eloquent silence may form part is recognised as a valid one. Such rules have as their purpose to impede disloyal proceedings between the negotiating parties. Accordingly, there are situations in which a party actively has to reject an offer in order not be held bound to it; or where a party will find herself bound by contractual provisions she did not in her mind actually consent to. This is also the case under the Convention: see Articles 18(3); 19 in conjunction with 9; and 21.
Where Article 8(2) of the Rome Convention identifies Part II of the Vienna Convention as the law of the country in which a party has her place of business , her being contractually bound by an eloquent silence in accordance with the rules in Part II cannot be unreasonable.
Unlike the existence of consent, which is governed by Part II of the Vienna Convention, substantive validity and validity of consent [as classified under the Vienna Convention where it forms part of the lex fori], i.e. both defects of consent and defences to enforcement, are excluded from its scope by virtue of Article 4 of the Vienna Convention. Hence these issues will be governed by the applicable domestic law of the contract as identified by the conflict rules of the lex fori.
Part II of the Vienna Convention will be applied in order to establish whether there is any existence of consent in the situations where:
(i) the Vienna Convention is "directly" applicable under Article 1(1)(a), since the Convention rules then replace the traditional [domestic] applicable law;
(ii) the Vienna Convention is applicable under Article 1(1)(b) and, subject to Article 8(2) of the Rome Convention, the law of a Contracting State to the Vienna Convention is identified as the applicable law; and
(iii) as a defence under Article 8(2) of the Rome Convention, where the law of a non-Contracting State to the Vienna Convention is identified as the applicable law, since Article 1(1)(b) renders the Vienna Convention applicable for this purpose, and the existence of consent is within the scope of the latter.
In situation (i), Article 8(2) of the Rome Convention is not applicable due to Article 1(1)(a) of the Vienna Convention, since the existence of consent is within the scope of the latter. However, a practical consequence of the uniform sales law in this situation is that the protection offered to a party by Article 8(2) of the Rome Convention already exists ipso iure under the Vienna Convention, since Part II forms part of the national substantive law of the different Contracting States in which each party have her place of business. That is to say, the existence of each parties' consent will be determined under Part II. In situations (ii) and (iii) it is presupposed that the Contracting State to the Vienna Convention has not made a declaration under Article 95. In all situations it is presupposed that there is no declaration under Article 92, or in situations (ii) and (iii), only one such declaration.
Since Article 8(2) of the Rome Convention simply refers to `the law of the country´ and not specifically to its domestic law, an international sale which falls within the scope of the Vienna Convention would be governed by the Convention rules and not the domestic ones, where the law of a Contracting State to the Vienna Convention is identified as the relevant law for the purpose of that Article. That is to say, Article 8(2) includes the application of the internal rules of the private international law of the applicable law, such as Article 1(1)(b) of the Vienna Convention.
Note that the Nordic countries have made reservations under Article 92 of the Vienna Convention and therefore they will not be considered Contracting States within Article 1(1) in respect of matters governed by Part II. Consequently, a party having her place of business in e.g. Sweden may always, when reasonable, rely on Swedish domestic law in order to establish that she did not consent.
6.4 Validity and Formation When Contracting Out of the Vienna Convention
The parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions.
The validity of an agreement to contract out of the Convention either in its entirety or out of any of its provisions will, by virtue of Article 4, be governed by the lex fori in accordance with its universal conflict rules. However, where the agreement to contract out of the Convention in its entirety is in the form of a [valid] choice of [domestic] law, the situation is slightly different, since a [valid] choice of law will bring the contract outside the scope of the Convention. That is to say, the validity, and the other contractual aspects, of the agreement will be governed by the lex fori including its conflict rules, because the Convention is no longer directly applicable under Article 1(1)(a), and not by virtue of Article 4.
The formation of an agreement to contract out of the Convention will be governed by its applicable law as identified by the conflict rules of the lex fori, whereas formation, as defined under the Convention, of an agreement to contract out of particular Convention provisions will be governed by either Part II of the Convention, as "default rules", or its new version as previously agreed upon, but most likely unilaterally introduced by the offeror and later accepted and thus agreed upon by the offeree. However, she is not allowed to unilaterally derogate from the rule in Article 18(1), which states that "[s]ilence or inactivity does not in itself amount to acceptance."
In regard of existence and validity of consent of an exclusion or derogation under Article 6, there are additional consequences in finding an exclusion or derogation invalid due to either an invalid consent or lack of it: either there is no contract at all, or there is no exclusion or derogation in which case the Convention rules will apply to the contract.
The substantive validity of an exclusion of the Convention, i.e. a choice of law, will be governed by the conflict rules of the lex fori, e.g. Articles 2(1) - (2), 3 and 4 of the Hague Convention and Articles 3 and 4 of the Rome Convention. Where both parties have consented to a substantively invalid exclusion of the Convention, i.e. an invalid choice of law clause referring to a national [domestic] law, their intention of excluding the application of the Convention should nevertheless be respected. Accordingly, the applicable [domestic] law, as identified by the universal conflict rules in the absence of choice, i.e. the objective governing law, would be applied.
Likewise, where a contractual term in derogation of the Convention is substantively invalid according to the mandatory rules of the governing law, the parties' intention of derogating from the Convention should be respected. Accordingly, the relevant issue should be governed by the mandatory rules of that domestic law rather than by the Convention.
6.5 Formal Validity
6.5.1 The Hague Convention
Article 5 (subparagraph 2)
La présente Convention ne s'applique pas:
2. à la forme du contrat;
Formal validity is excluded from the scope of the Convention, which means that the issue will be governed by the applicable law as identified by other conflict rules in contract of the lex fori, e.g. the uniform rules of the Rome Convention. The explicit exclusion of formal validity would mean that all other questions of validity are within the scope of the Convention and thus governed by the lex contractus.
6.5.2 The Rome Convention
Article 9 (1) - (4) - Formal Validity.
1. A contract concluded between persons who are in the same country is formally valid if it satisfies the formal requirements of the law which governs it under this Convention or of the law of the country where it is concluded.
2. A contract concluded between persons who are in different countries is formally valid if it satisfies the formal requirements of the law which governs it under this Convention or of the law of one of those countries.
3. Where a contract is concluded by an agent, the country in which the agent acts is the relevant country for the purposes of paragraphs 1 and 2.
4. An act intended to have legal effect relating to an existing or contemplated contract is formally valid if it satiesfies the formal requirements of the law which under this Convention governs or would govern the contract or of the law of the country where the act was done.
When the existence of a materially valid contract has been established by virtue of Article 8, the next step will be to establish whether the contract is formally valid. Paragraphs 1 - 3 will then be applicable. Paragraph 4 is applicable to acts related to either of the situations in Article 8, i.e. non-existing contracts as well as existing ones. Paragraphs 5 - 6 will not be dealt with in this paper, since they are concerned with consumer contracts and contracts related to immovable property.
The Report  explains that acts falling within the scope of Article 9 can be extremely varied, but they must be connected with a contract and the contract as such must be one falling within the scope of the Convention. There is no definition of `formal validity´, but nevertheless `form´ ought to include "every external manifestation required on the part of a person expressing the will to be legally bound, and in the absence of which such expression of will would not be regarded as fully effective."
The applicable laws are the lex contractus and the lex loci actus alternatively. There is no priority between the two. Validity of the act under one of them is enough to prevent defects of form under the other from affording grounds for nullity. This solution is a compromise between the more liberal favor negotii and the due observance of formalities.
In the doctrine it is said that, here too, there is no prima facie rule of formal validity , though the system laid down in the Convention is flexible and on the extreme limit of favor validitatis. This can be illustrated by the following example: "if a person, in country A, concludes a contract with another person in country B, and if the law of country C is first chosen by the parties, then replaced by the law of country D, the contract is formally valid if it complies with the formal requirements of the laws A, B, C or D."
Article 9(4) ought to, on principle, be applicable to an act relating to contemplated contracts in general. It should not have to be related to some specific contract. This means that a salesman's invitation to treat is within the scope of the provision.
6.5.3 The Vienna Convention
A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirements as to form. It may be proved by any means, including witnesses.
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. This principle is widely accepted in the international commercial trade. Under Article 11 an international contract of sale governed by the Convention is not subjected to any requirements as to form, and consequently any such requirements under the domestic law of the Contracting States will not apply to these contracts irrespective of the nature or purpose served. In order to enhance uniformity and prevent abuse of the provision through characterisation, such a requirement should, in accordance with Article 7(1), be characterised according to its function, i.e. if non-compliance with the rule renders the contract invalid, it is a formal requirement.
The provision is non-mandatory, so the parties are perfectly able to agree on their own requirements as to form, e.g. a stipulation that the acceptance should be in writing, or that the conclusion of the contract is conditioned on written confirmation. Such an agreement can be express or implied, the result of a usage or practice under Article 9, or a term in a standard contract. A unilateral demand will not be efficient, though, and an implied agreement should be a rare exception. However, in accordance with the principle of informality of transactions, such a provision for contractual formality may lose its effect due to subsequent waiver. Neither is a subsequent agreement by the parties subject to any formal requirements and it may be proved by any means.
Any provision of article 11, article 29, or Part II of this Convention that allows a contract of sale or its modification or termination by agreement or any offer, acceptance or other indication of intention to be made in any form other than writing does not apply where any party has his place of business in a Contracting State which has made a declaration under article 96 of this Convention. The parties may not derogate from or vary the effect of this article.
Article 12 accommodates the special demands of some Contracting States in regard of requirements of written form for contract of international sales for the purposes of validity, evidence and administrative control. It does not concern any requirement other than writing and its operation is confined to Articles 11, 29 and Part II of the Convention. That is to say, those provisions related to formation of the contract and its modification and termination by agreement. Any other notices provided for by the Convention are not within the scope of Article 12 and may thus be delivered by any means appropriate in the given circumstances. The provision is mandatory, i.e. the parties cannot contract out of it.
It must be emphasised that Article 12 determines only the effect of a declaration made by a Contracting State under Article 96, i.e. that the principle of informality in Article 11 is not to apply. It is not concerned with the actual requirements as to form which are to be observed. The question as to which requirements, if any, are to be observed is dealt with below in the context of Article 96.
A Contracting State whose legislation requires contracts of sale to be concluded in or evidenced by writing may at any time make a declaration in accordance with article 12 that any provision of article 11, article 29, or Part II of this Convention, that allows a contract of sale or its modification or termination by agreement or any offer, acceptance, or other indication of intention to be made in any form other than in writing, does not apply where any party has his place of business in that State.
In the negotiation of the Convention it was proposed that the effect of a declaration under Article 96 would be that the formal requirement of the law of the declaring Contracting State should be applied to the contract. However, this proposal was rejected, since it would make the formal requirements of that law too widely applicable.
Despite this rejection, the true effect of an Article 96 declaration remains a matter of controversy. In fact, there are two school on the effect of an Article 96 reservation: the minority , which argues that the true effect is the preservation of the formal requirements of the declaring Contracting State, because the Convention should respect the underlying purposes of such legislation, e.g. protection against claims unsupported by a written agreement. However, where there are two competing sets of formal requirements, it is not clear whether only one should be applied exclusively, or both cumulatively.
The majority, on the other hand, argues that the issue should be solved under the conflict rules of the lex fori, because these formal requirements would otherwise not only be made internationally applicable mandatory law, but they would also exclude the conflict rules of the other Contracting States. Ziegel, who belongs to neither of the schools, suggests that "obviously … a writing will be required", but is not sure of which law should be complied with, and therefore concludes that such a reservation is better avoided.
Arguably, the majority view is the more appropriate one, since it better respects the sovereignty of both declaring and non-declaring Contracting States. That is to say, the principle of informality is not imposed on the declaring Contracting States, and nor is any writing requirements imposed on the non-declaring Contracting States. The issue, as prior to the Convention, is simply solved under the [traditional] conflict rules of the lex fori.
Accordingly, the effect of such a declaration is that any of the enumerated provisions will not apply to contracts where at least one of the parties has her relevant place of business in a declaring Contracting State. That is to say, in these situations formal validity, or the lack of it rather, is excluded from the Convention and thus an Article 96 reservation reduces the scope of the Convention. This means that even where the law of a non-declaring Contracting State is identified as the applicable law, its domestic law, rather than the Convention rules, should be applied, i.e. the reservation is universal and should therefore be respected by any court, not just a court in a declaring Contracting State.
Consequently, whether any formal requirements will be applied to the contract in question depends entirely on the applicable [domestic] law as identified by the conflict rules of the lex fori, e.g. Article 9 of the Rome Convention. This approach was also followed in a Hungarian case, where the Hungarian court held that the governing law in matters of form was German domestic law and thus the contract concluded by telephone was valid, even though Hungary is a declaring Contracting State.
Schlechtriem, on the other hand, is of the opinion that where the applicable law is the law of a non-declaring Contracting State, the relevant provisions of the Convention should apply rather than its domestic rules. "Otherwise, rules as to form would be applicable which would not apply at all unless that Contracting State had made a reservation. That is not unfair towards the reservation state, since it would also have to accept freedom as to form if the forum state's conflict rules required the application of domestic `freedom of form´ rules."
However, it is argued that this suggestion does not take into account that the effect of an Article 96 reservation as towards the parties to a contract is declared mandatory in Article 12. It would be both contradictory and contrary to this mandatory rule if the parties are not allowed to contract into the relevant provisions, but they will still apply indirectly where the applicable law as to form is the law of a non-declaring Contracting State. In addition, Articles 12 and 96 aim at the full exclusion of the principle of informality, whereas Article 94 only aims at a regional restriction of the application of the Convention rules in favour of a regional uniform law. Therefore, it is argued that there are no similar justifications for an exception to the universal application of an Article 96 reservation, as there are in regard of one under Article 94.
A different matter is that commercial prudence dictates that where one of the parties has her relevant place of business in a declaring Contracting State, its requirements for writing should be observed, at least where it cannot be ruled out that the matter may be decided by a court in that declaring Contracting State.
Argentina, Belarus, Chile, China, Estonia, Hungary, Lithuania, the Russian Federation and Ukraine have taken the reservation under Article 96.
Formal validity is excluded from the scope of the Hague Convention, which leaves the issue as a matter of conflict of laws to be settled exclusively under Article 9 of the Rome Convention. This would mean that either the lex contractus or the lex loci actus will govern the formal validity of the contract.
Where the Vienna Convention is applicable, at least where it also forms part of the lex fori , formal validity, or the lack of it rather, is a matter governed exclusively by the Vienna Convention and thus the imposition of further [domestic] requirements is not allowed.
However, where at least one of the parties has her relevant place of business in a Contracting State to the Vienna Convention which has taken the Article 96 reservation, the principle of informality will no longer apply, since formal validity [arguably] will be excluded from the Convention scope. Accordingly, formal validity will in such a case be governed by the applicable [domestic] law as identified by the conflict rules of the lex fori, e.g. Article 9 of the Rome Convention. A reservation under Article 96 would be regarded as universal, and thus the excluded provisions should not be allowed to govern the mater indirectly as part of the applicable law, i.e. where that law is determined to be the law of a non-declaring Contracting State to the Vienna Convention.
7.1 "Classification" of the Rules of the Applicable Law
After the applicable law of the contract has been identified, the court will interpret and apply it. However, exactly which rules of the governing law and to what extent they will be applied depend not on the governing law, but on the lex fori. That is to say, just as the application of each Convention depends on whether the transaction is classified as a contractual obligation and ultimately as an international sales contract, application of the lex contractus depends on whether a legal issue disputed by parties to a contract is considered to be, or classified as, a contractual issue by the lex fori.
Accordingly, where an issue forming part of the parties' contractual dispute is classified by the lex fori as a non-contractual issue, it will not be governed by the lex contractus, but by its proper law, as identified by conflict rules other than those in contract of the lex fori, regardless of whether it is considered contractual under the lex contractus. Similarly, where the issue is classified by the lex fori as contractual, the court will apply all lex contractus rules corresponding to its own contract law, regardless of whether that would mean including non-contractual rules of the lex contractus, according to a "classification" by the latter.
Traditionally, this "classification" too is a matter strictly for the lex fori, though a Convention on the conflict of laws, e.g. the Hague and Rome Conventions, may provide further guidelines in order to secure uniformity between its Contracting States and avoid this conflict of characterisation.
A different matter, in this context of conflict of laws, is that the actual contents and structure of the lex fori, which is the blue-print for this "classification", may emanate from an international Convention on substantive law, e.g. the Vienna Convention. Consequently, where the Vienna Convention forms part of the lex fori, it will be used as part of such a blue-print for this "classification". This means that all substantive issues regulated in the Vienna Convention and interpreted in accordance with its Article 7(1), are contractual in the sense that where "gap-filling" under Article 7(2) renders recourse to the governing [domestic] law necessary, a court in a Contracting State to the Vienna Convention, i.e. where the rules of the Vienna Convention form part of the lex fori, should apply all rules of this domestic law corresponding to those of the Vienna Convention.
7.2 Guidelines for Determining the Scope of the Applicable Law
7.2.1 The Hague Convention
According to the Convention the effects of a contract of sale as between the parties, i.e. their reciprocal rights and obligations including the passing of risk, and the examination of the goods are to be governed by the applicable law. However, it does not provide any guidelines for which rules of the applicable law should be applied on the contract, such as whether all relevant substantive rules in contract should be applied or simply those specifically concerned with sales of tangible goods. This issue too has been left to the lex fori to decide. It is implied that the general rules of at least formation of contract of the applicable law will be applied, since validity and formation of the contract is not explicitly excluded from the scope of the Convention. The public rules of the applicable law will not be applied, at least not under the Convention rules, as the Convention is concerned with rules of private law.
7.2.2 The Rome Convention
Article 10 - Scope of the Applicable Law.
1. The law applicable to a contract by virtue of Articles 3 to 6 and 12 of this Convention shall govern in particular:
(c) within the limits of the powers conferred on the court by its procedural law, the consequences of breach, including the assessment of damages in so far as it is governed by rules of law;
(d) the various ways of extinguishing obligations, and prescription and limitation of actions;
(e) the consequences of nullity of the contract.
2. In relation to the manner of performance and the steps to be taken in the event of defective performance regard shall be had to the law of the country in which performance takes place.
Article 10 regulates which matters are to be governed by the applicable law. The list in paragraph 1 is not exhaustive, `in particular´, which means that any additional matters will depend on the lex fori.
According to subparagraphs 1(a) and 1(b) the applicable law governs the `interpretation´ and `performance´ of the contract. Interpretation encompasses determination of the parties' intention as well as of the matters which may be taken into account in interpreting the contract. Performance of the obligations arising from the contract refers to "the totality of the conditions, resulting from the law or from the contract, in accordance with which the act is essential for the fulfilment of an obligation must be performed." This is however modified by the rule in paragraph 2, which submits that in relation to `manner of performance´ regard may be had to the lex loci solutionis. The distinction between the two has been left to the lex fori. Examples of the former are the diligence with which the obligation has to be performed; conditions relating to the place and time of performance; and of the latter are rules governing public holidays; the manner of which goods are to be examined; and the steps to be taken if they are refused.
Subparagraph 1(c) states that the consequences of breach will be governed by the applicable law. There are two limitations, one general referring to the limits of the court's powers according to the procedural law of the lex fori. The other limitation is that the assessment of damages only will be governed by the applicable law insofar as it is regulated by rules of law.
By subparagraph 1(d) the applicable law is to govern "the various ways of extinguishing obligations, and prescriptions and limitations of actions". According to the Report  it must be applied with due regard to the limited admission of depeçage in Article 3 and 4.
It is explained in the Report  that the principal objective of the provision was to make the refunds which the parties have to pay each other subsequent to a finding of nullity of the contract subject to the applicable law. However, since in some legal systems the consequences of nullity of a contract are considered to be non-contractual in nature the provision in Article 22(1)(b) allowing Contracting States to enter a reservation on this matter was introduced. The only Contracting State which has entered such a reservation is the United Kingdom.
Conclusively, it is clear that most issues will be governed by the lex contractus. The only exceptions are issues of formal validity, incapacity and the existence of consent.
Article 14 - Burden of proof, etc.
1. The law governing the contract under this Convention applies to the extent that it contains, in the law of contract, rules which raise presumptions of law or determine the burden of proof.
2. A contract or an act intended to have legal effect may be proved by any mode of proof recognised by the law of the forum or by any of the laws referred to in Article 9 under which that contract or act is formally valid, provided that such mode of proof can be administered by the forum.
Article 14 is the exception to the rule in Article 1(2)(h) which excludes matters of evidence from the scope of the Convention. Accordingly only two questions of evidence are governed by the applicable law: the burden of proof and the admissibility of any mode of proof, to the extent that the applicable law raises presumptions of law or establishes the onus of proving any fact. The admissibility of such mode of proof depends on, in the alternative, the lex fori and the laws referred to in Article 9, as long as it can be administered by the forum.
However, the applicable law will be applied to these issues only to the extent that those rules form part of the law of contract. The reason for their application is that these rules of substance contribute, in the law of contract, to making clear the obligations of the parties and therefore cannot be separated from the law which governs the contract. It is for the applicable law, and not the lex fori or for any autonomous principle derived from the Convention to determine whether the rule is characterised as contractual. The evidential value of a mode of proof will be governed by the procedural law of the lex fori.
Article 7 - Mandatory rules
1. When applying under this Convention the law of a country, effect may be given to the mandatory rules of the law of another country with which the situation has a close connection, if and in so far as, under the law of the latter country, those rules must be applied whatever the law applicable to the contract. In considering whether to give effect to these mandatory rules, regard shall be had to their nature and purpose and to the consequences of their application or non-application.
2. Nothing in this Convention shall restrict the application of the rules of the law of the forum in a situation where they are mandatory irrespective of the law otherwise applicable to the contract.
Article 7 concerns the application of mandatory rules, not any mandatory rules though. They have to be "internationally mandatory", i.e. mandatory irrespective of the applicable law. Here too, under paragraph 1, it is for the applicable law, and not the lex fori, or for any autonomous principle derived from the Convention to determine whether the rule is characterised as internationally mandatory. Under the second paragraph, naturally, the relevant rule is characterised under the lex fori. The concept includes rules of both public and private law and it is not static. That is to say, the same rule could be considered as internationally mandatory in some situations but not in others. According to Philip, an example of these internationally mandatory rules is Article 1(1)(a) of the Vienna Convention. However, since that provision is a [unilateral] conflict rule, its application under Article 7 is barred by virtue of Article 15, i.e. the doctrine of exclusion of renvoi.
According to paragraph 1 the court may, regardless of the applicable law of the contract, apply these internationally mandatory rules of any other law to which the contract has a close connection. However, their application must be justified by `their nature and purpose and to the consequences of their application or non-application´. The provision is optional. This means that the delicate task of determining whether to apply these rules is a plain exercise of discretion.
Paragraph 2 concerns the application of the internationally mandatory rules of the lex fori. Thus it merely restates the rule in paragraph 1, though in a different way. The distinction between these internationally mandatory rules and the rules of ordre public is that "[t]he former preserves, in extreme language, the rules of the law of the forum in a situation in which they are mandatory irrespective of the law otherwise applicable to the contract. The latter uses guarded and restricted language authorising the forum to refuse to apply the law of a country specified by the Convention where such application is manifestly incompatible with the public policy of the forum."
Due to the novelty of the provision in Article 7(1) the fear of the uncertainty to which it could give rise; the risk of ex officio application of depeçage; and its complicated application in general, a reservation may be entered against the provision under Article 22(1)(a). Austria, Germany, Ireland; Luxembourg, Portugal and the United Kingdom have entered such reservations.
7.2.3 The Vienna Convention
Where the Convention is applicable to an international sale of goods, its rules will be applied to it as the applicable law of such a sale. Accordingly, the scope of the Convention and the applicable law are per definition the same, at least in regard of matters governed by the Convention. This means that in order to establish the scope of the Convention in this respect, its substantial rules must be examined.
The following issues are within the scope of the applicable law when the Vienna Convention is identified as the applicable law: interpretation of the contract (Article 8), usages and practices (Article 9), formation (Part II), performance, the parties' reciprocal obligations, remedies, passing of risk, damages, interest, etc. (Part III). The exact scope of these rules and their interpretation are governed by Article 7.
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319. Arguably, this Ruritanian rule could still be applicable even where Ruritania is a Contracting State to the Vienna Convention. In that case, by virtue of Article 9(2), provided this Ruritanian rule constitutes such a usage as referred to in that provision. However, the existence of such an, in international trade widely known and regularly observed, usage is quite unlikely. In addition, it would probably be contrary to the good faith provision in Article 7 and the mandatory rule in Article 18 which states that "[s]ilence or inactivity does not in itself amount to acceptance". Finally, a court could always refrain from applying such a usage under the doctrine of ordre public. For further discussion, see e.g. Bout, Trade Usages: Article 9 of the Convention on Contracts for the International Sale of Goods, Pace essay submission (1998), www.cisg.law.pace.edu/cisg/biblio/bout.html; and Esser, 18 Georgia Journal of International and Comparative Law (1988) 427.
320. NJA 1987 p. 885 (Sweden); The strict wording of the provision might suggest that it is not, but the provision is to be read in conjunction with Article 5 subparagraph 2 interpreted e contrario, Prop. 1964:149, pp. 15 and 20; SvJT 1955 p. 81, p. 87; Gihl, p. 175; and Bogdan, p. 226.
321. NJA 1987 p. 885, p. 906, translation by the author.
322. Prop. 1964:149, p. 20.
323. Bogdan, p. 233; and supra, section 5.2.
324. Supra, section 5.2.1.
325. At p. 28.
326. Giardina, Contract Conflicts, pp. 239 - 240.
327. Ibid., p. 239.
328. Supra, section 4.2.2; and Plender, p. 162 and pp. 49 et seq.
329. The Report, p. 30.
330. Lagarde, Contract Conflicts, p. 50.
331. The Report, p. 28.
332. Plender, p. 163.
333. The Report, p. 28.
334. Prop. 1997/98:14, p. 47.
335. Cheshire & North, p. 507.
336. Lagarde, Contract Conflicts, p. 51.
337. Von Hoffmann, Contract Conflicts, p. 228.
338. Ibid., p. 229.
339. Plender, p. 164.
340. The Report, p. 28.
341. Supra, section 2.4.4.
342. May 23, 1969, 1155 UNTS 331, SÖ 1975:1, Prop. 1974:158.
343. `Material validity´ consists of three parts: (i) `substantive validity´, i.e. validity of the substantive contents of a contract and its terms; (ii) `validity of consent´, i.e. defects of consent and defences to enforcement of a contract and its terms; and (iii) `existence of consent´, i.e. the mechanics of consent that must be fulfilled in order to create a [prima facie] valid contract, which may be invalidated by rules under either (i) or (ii), or both. Where `material validity´ is referred to as `validity and formation´, the former consists of (i) and (ii), and the latter of (iii).
344. Naturally, the extent of this statement will depend on what issues are classified as issues of validity under the [domestic] lex fori in comparison with their classification under the Vienna Convention.
345. Roder v. Rosedown, Federal Court, South Australia District Adelaide, April 28, 1995, 57 FCR (1995) 216 (whether retention of title clause actually agreed upon was within the scope of the Convention, its effects were not); Handelsgericht St. Gallen, August 24, 1995, n. HG48/1994 (defects in consent); Bonell, in Bianca & Bonell, pp. 59 - 60; Honnold, §§ 64, et seq.; JT 1991/92 p. 1, pp. 11 - 12; Bonell & Liguori, paras. 2.2(a) - (b); Bernstein, p. 46; and Herber, in Schlechtriem, Art. 4, para. 13.
346. Honnold, § 64. See also, supra, section 4.1; and infra, section 7.1.
347. Date-Bah, in Bianca & Bonell, pp. 241 - 242; Honnold, §§ 204.1 et seq.; and supra, section 4.3.3.
348. In the context of interpretating the parties' statements and conduct, [part of] the concept of mistake may be relevant under Article 8, but that is a different matter in this context of validity and formation. Honnold, § 108, including f.n. 16.
349. Appendix VII.
350. Articles 4(2) and 8(2) of the Rome Convention in conjunction; Prop. 1997/98:14, p. 47.
351. Oberlandsgericht Koblenz, January 16, 1992, n. 5 U 534/91 (validity of retention of title clause); Cámara Nacional de Apelaciones en lo Comercial, October 14, 1993, 45.626 (validity of forum selection clause in standard form contract)(Argentina); Amtsgericht Nordhorn, June 14, 1994, n. 3 C 75/94 (validity of standard terms); Roder v. Rosedown Federal Court, South Australia District Adelaide, April 28, 1995, 57 FCR (1995) 216 (effect of retention of title clause); Prop. 1986/87:128, p. 99; Bonell, in Bianca & Bonell, pp. 59 - 60; Honnold, §§ 64 et seq.; JT 1991/92 p. 1, p. 10; Winship, pp. 532 and 536 - 537; Bonell & Liguori, para. 2.2; Bernstein, p. 46; and Herber, in Schlechtriem, Art. 4, paras. 7 and 18.
352. Supra, section 4.4.3.
353. Supra, sections 2.2 and 5.4; and supra, section 6.3.1, respectively.
354. Bonell, in Bianca & Bonell, pp. 57 - 58.
355. Bonell, in Bianca & Bonell, p. 61; and Herber, Art. 6, para. 14.
356. Bonell, in Bianca & Bonell, pp. 60 - 61. Herber agrees with the mechanics, but states that the parties' invalid choice will not render the Vienna Convention inapplicable, in Schlechtriem, Art. 6, para. 14.
358. NJA 1987 s 885 (Sweden); Prop. 1964:149, pp. 15 and 20; SvJT 1955 p. 81, p. 87; Gihl, p. 175; and Bogdan, p. 226.
359. At pp. 28 et seq.
360. The Report, p. 29.
361. Lagarde, Contract Conflicts, p.52.
362. Ibid., p. 53.
363. Plender, pp. 165 - 166.
364. Rajski, in Bianca & Bonell, pp. 121 et seq.; JT 1991/92, p.1, at p. 17; and Schlechtriem, Art. 11, paras. 3 et seq.
366. Rajski, in Bianca & Bonell, pp. 125 et seq.; and Schlechtriem, Art. 12, paras. 1 - 6.
367. Rajski, in Bianca & Bonell, pp. 127 and 658.
368. E.g. Ferrari; Reinhart; Rehbinder; Stoffel; and Medwedew / Rosenberg, cited by Schlechtriem, cited by Schlechtgriem, Art. 12, para. 2, f.n. 5. See also Honnold in his 3rd edition.
369. Rajski, in Bianca & Bonell, pp. 127 and 658; Flechtner, para. II.A.2; and Schlechtriem, Art. 12, para. 2
370. Ziegel, Article 12, para. 2.
371. Rajski, in Bianca & Bonell, pp. 127 and 659; Flechtner, para. II.A.2; Herber, in Schlechtriem, Art.96, paras. 1 et seq.; and Schlechtriem, Art. 12, paras. 1 et seq. See also supra, section 4.4.3.
372. Fovárosi Biróság [Metropolitan Court] Budapest, March 24, 1992, 12.G.41.471/1991/21.
373. Schlechtriem, Art. 12, para. 3.
374. Supra, section 4.4.3.
375. Supra, section 6.5.2.
376. Where the lex fori is the law of a non-Contracting State to the Vienna Convention, it is quite possible that its conflict rules may require e.g. a cumulative compliance with formal requirements of both the lex contractus and the lex loci actus.
377. Supra, section 6.5.3.
378. For instance, prior to the English Foreign Limitation Periods Act 1984, which provides that all limitation periods are to be classified as substantive, most limitation periods were classified by the English courts as procedural and thus limitation periods were governed by English law as the lex fori. In Sweden, on the other hand, together with many other countries, this issue has been considered one of substance and thus governed by the lex contractus. Accordingly, whether an action regarding a contract governed by French law should be dismissed on the ground that a limitation period has expired, would prior to the English Act, before an English court be decided under English law, whereas a Swedish court would apply the French limitation rule.
379. For instance, the Vienna Convention contains rules governing the time period during which the buyer has to notify non-conformity of the goods to the seller, i.e. limitation period rules (Articles 39 - 44). Consequently, where "gap-filling" of these rules is necessary, the corresponding rules of the governing [domestic] law will be applied, regardless of their "classification" under that law. Naturally, their traditional "classification" under the domestic part of the lex fori will also be disregarded in this context.
380. Articles 4 and 5 of the Hague Convention, infra Appendix II.
381. Prop. 1964:149, p. 20; and SvJT 1955 p. 81, p. 86.
382. The Report, p. 32; Prop. 1997/98:14, p. 48; and Philip EU-IP, p. 166.
383. Plender, pp. 171 - 172.
384. The Report, p. 32.
385. The Report, pp. 32 - 33; and Plender, p. 173.
386. The Report, p. 33; and Prop. 1997/98:14, p. 49.
387. At p. 33.
389. In English law, the obligation to restore the benefit of an enrichment at another's expense is governed by the proper law of the obligation. This proper law will very often coincide with that of any contract in connection of which the obligation arises, but not always.
390. Cheshire & North, p. 513.
391. The Report, pp. 36 - 37; Prop. 1997/98:14, pp. 51 - 52; Plender, pp. 166; and Philip, EU-IP, pp. 175 - 176.
392. Plender, p. 167.
393. Prop. 1997/98:14, p. 52.
394. Prop. 1997/98:14, p. 46; and Plender, p. 154.
395. Philip EU-IP, p. 181.
396 Supra, section 2.3.
397. The Report, p. 27; Prop. 1997/98:14, p. 46; Plender, p. 155; and Philip EU-IP, p. 181.
398. The Report, p. 28; and Prop. 1997/98:14, p. 46.
399. Plender, p. 157.
400. The Report, p. 28; and Prop.1997/98:14, pp. 16 - 17. It is interesting to note that in the English case Regazzoni v. Sethia  A.C. 301, the court held that a contract was invalid since it was in violation of the law of a friendly foreign country [India], even though this law was neither the governing law nor the lex fori. However, this rule is now considered an internationally mandatory rule of English [contract] law and thus applicable under Article 7(2).
401. For analyses of these rules, see e.g. Bianca & Bonell; JT 1991/92 p. 1; Ferrari; Winship; Bonell & Liguori; Bernstein; Honnold; Ramberg; and Schlechtriem.
402. Supra, section 3.1.3.
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