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Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods

Professor Jacob S. Ziegel, University of Toronto
July 1981

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Article 42

(1) The seller must deliver goods which are free from any right or claim of a third party based on industrial property or other intellectual property, of which at the time of the conclusion of the contract the seller knew or could not have been unaware, provided that the right or claim is based on industrial property or other intellectual property:

(a) under the law of the State where the goods will be resold or otherwise used, if it was contemplated by the parties at the time of the conclusion of the contract that the goods would be resold or otherwise used in that State; or

(b) in any other case, under the law of the State where the buyer has his place of business.

(2) The obligation of the seller under the preceding paragraph does not extend to cases where:

(a) at the time of the conclusion of the contract the buyer knew or could not have been unaware of the right or claim; or

(b) the right or claim results from the seller's compliance with technical drawings, designs, formulae or other such specifications furnished by the buyer.

COMMENT

1. The provincial Acts contain no separate provisions corresponding to art. 42. However, it is well established that OSGA 13 is broad enough to capture patent infringements and other infringements of intellectual property rights. Niblett's case, supra, and Microbeads' case supra. Cf. UCC 2-312(3), which does contain some separate provisions on the subject.

An important difference between art. 42 and OSGA 13 is that, under the convention, the seller is only liable for third party claims and rights of which he knew or could not have been unaware at the time of the conclusion of the contract. This important restriction on his liability is apparently justified in the [Secretariat] Commentary (pp. 108-109) on the grounds of the difficulty of establishing intellectual property rights outside the seller's country and the hardship to the seller of making him responsible for claims of which he was not aware. There is a surprising paucity of cases under OSGA 13 involving intellectual property claims and it is difficult to know what difference the restricted wording of art. 42 will make in practice.

3. Art. 42(1)(a) and (b) perhaps go further than existing Canadian law. I am not aware of any direct authority but, based on analogous cases, it would seem that our law will not require the goods to be free of patent claims under the law of the place of delivery unless it is also the proper law of the contract or unless there has been a breach of the implied condition of fitness. Cf. Sumner Permain & Co. v. Webb & Co. (1922) 7 K.B. 55; Teheran-Europe Co. Ltd. v. S.T. Belton (Tractors) Ltd., (1968) 2 Q.B. 545. However, given the fact that art. 42(1)(a) and (b) only apply where the seller knew or is deemed to have known of the claim, the added burden imposed on the seller under the CISG provisions is only a modest one.

4. Art. 42(2)(a) speaks for itself and is patterned on the rationale of art. 35(3); art. 42(2)(b) is equally unobjectionable and finds a precedent in UCC 2-312(3).

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Pace Law School Institute of International Commercial Law - Last updated April 23, 1999
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