Reproduced with permission from 6 Minnesota Journal of Global Trade (1997) 105-152

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[Comments on the Validity Issues]

The Convention, in Article 4(a), states that it is not concerned with the validity of the contract or of any of its provisions. However, the Convention does not define the term "validity." The "validity" exception has been described as "a potential 'black hole' [that removes] the issues from the Convention's universe."[179] It was recognized long ago that the term "validity" has at least two connotations: the formation aspect referring to whether the contract has met all of the requirements for formation and the enforcement aspects referring to such issues as whether the contract has an illegal objective or was accomplished through fraud.[180] Unfortunately, the Con vention does not specify which of these two types of validity it addresses.

Many authorities conclude that the validity exception should be construed as narrowly as possible "to allow the Convention to have the 'widest possible application consistent with its aim as a unifier of legal rules governing the relationship between the parties to an international sale.'"[181] Professor Honnold states that it is "the substance rather than the label or characterization of the competing rule of domestic law that determines whether it is displaced by the Convention. "[182] Moreover, it is critical to ask "whether the Convention addresses the situation in question; if so, the Uniform international rules should not be displaced merely because of the labels attached to various doctrines of domestic law."[183] This consideration is especially important because the "issues of validity are difficult matters which the differing national traditions made difficult to unify in the Uniform Law"[184] and thus can produce divergent results. It is possible to limit the meaning of the term "validity" to a "common core of meaning" because "[m]ost (if not all) countries will not enforce agreements on the grounds of illegality, capacity, fraud, mistake and duress."[185] Because Article 4(a) is part of the Convention and its interpretation is subject to Article 7 mandates of internationality, uniformity, and good faith, this narrow interpretation is appropriate.

Additionally, Article 4(a) should be interpreted against the backdrop of the general principle of parties' contractual freedom as stated in Article 6. If the parties are allowed to derogate, and if they do, should the subject matter of their derogation become an issue of validity to be analyzed under domestic law? A negative answer is preferable because Article 6 is not meant to be such an easy es cape clause from the Convention. Both the legislative history and the purpose behind Article 6 strongly support this conclusion.[186] Otherwise, the breaching party could argue, when it is advantageous, that the Convention should not apply each time there is a derogation under Article 6.

A case decided in Germany is illustrative. The parties agreed to derogate from the Convention and provided that the buyer could avoid the contract only following a notice demand to the seller to comply with the contract and only after fifteen working days from the date that the seller received the notice to comply.[AG Nordhorn 14 June 1994].[187] The court chose to refer to domestic law because the validity of the contract clause is beyond the scope of the CISG according to Article 4(a). In its haste to refer to domestic law, the court failed to analyze an applicable provision under the Convention. This clause in the contract was not very different from the explicit provisions and the general principles underlying Article 47. Article 47(1) allows the buyer to fix an additional period of time of reasonable length for the seller to perform.[188] Article 47(2) prevents the buyer from resorting to any remedy prematurely, i.e., before the expiration of the time fixed under 47(1).[189] The inquiry should not have been whether such clause was "valid," but rather whether the time fixed was a reasonable time. Under the facts of the case, fifteen days appears to have been reasonable.

By embarking on the validity inquiry, the court misunderstood the role of Article 4(a) and its interaction with Article 6, as well as the general principle of good-faith communication between the parties. Article 4(a) probably is not meant to cover this situation because there is nothing illegal or fraudulent in agreeing to notification with a reasonable time of a party's intention to avoid the contract. To the contrary, by expressly agreeing in advance to notify, the parties demonstrated their intentions to follow the Convention's general principles. The court should have actively tried to resolve the issue of validity under the general principles of the Convention. Only if an answer could not be found, or if the issue raised is one of the issues that come under the "common core" of enforcement-related validity issues, should the court refer to domestic law. Faithful adherence to Article 7 requires this approach.

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FOOTNOTES

* J.D., University of San Diego School of Law, 1996; Ph.D., University of Southern California, 1992. . . .

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179. Winship, supra note 150, at 636.

180. Professor Hartnell states that the question of validity giving rise to these connotations in meaning "is not new, but has yet to be fully answered." Helen E. Hartnell, Rousing the Sleeping Dog: The Validity Exception to the Convention on Contracts for the International Sale of Goods, 18 Yale J. Int'l L. 1, 19 (1993). The question has been posed by an Italian delegate elsewhere in 1964 as following: "[W]hat [is] the meaning of the expression le contrat n'est pas valable. [Does] it mean: that the contract is not concluded; that the contract is not valid; [or] that the contract is valid, but it is not enforceable?" Id. n.73 (alterations in original) (citation omitted).

181. Id. at 45 (citations omitted).

182. Honnold, Uniform Law, supra note 3, § 65.

183. Id. 240.

184. Winship, supra note 150, at 636 (citation omitted).

185. "[M]ost commentators agree that [the common core of the term "vailidity"] includes issues regarding fraud (dol), duress, unconscionability, legal capacity of the parties to enter into a contract, and error." Alejandro M. Garro, Reconciliation of Legal Traditions in the U.N. Convention on Contracts for the International Sale of Goods, 23 Int'l Law. 443, 464 (Summer 1989); see also Winship, supra note 150, at 638.

186. Article 6 in its earlier drafts was amended to prevent an "implied exclusion" of the Convention. The purpose was to discourage courts from excluding the application of the Convention on "insufficient grounds." See Honnold, Documentary History, supra note 3, at 61, 407. Later, the Working Group suggested that the Convention should not be displaced unless the parties specified which law would be applicable. Id. at 277. Such exclusion requires an express or implied agreement between the parties and cannot be imposed unilaterally by one party. Id. at 302. The raison d'être of the Convention is that it would apply automatically unless the parties expressly or impliedly derogated from it. Id. at 322.

187. Case 3 C 75/94 (Italy v. F.R.G.), Amtsgericht Nordhorn (June 14, 1994) (unpublished), available in UNILEX, supra note 3.

188. "The buyer may fix an additional period of time of reasonable length for performance by the seller of his obligations." CISG, supra note 1, art. 47(1).

189. The Convention provides:

Unless the buyer has received notice from the seller that he will not perform within the period so fixed, the buyer may not, during that period, resort to any remedy for breach of contract. However, the buyer is not deprived thereby of any right he may have to claim damages for delay in performance.

CISG, supra note 1, art. 47(2).

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