Reproduced with permission from the author and 15 Journal of Law and Commerce (1995) 1-126

For each of the last ten years, the Dutch Association of Civil Law has invited two scholars to write reports on the status of a particular branch of the civil law. These reports are submitted to the Dutch Supreme Court, where they are discussed by members of the Court, lawyers, and law professors. The topic of the 1995 reports was the 1980 Vienna Sales Convention (CISG). One of the scholars selected to write on this topic was Professor Franco Ferrari, Professor of Comparative Law at Tilburg University in the Netherlands. His report, in English, was submitted on December 4, 1995 and discussed at the Dutch Supreme Court on December 15, 1995. The Journal of Law and Commerce is pleased to publish Professor Ferrari's report. It is here reprinted as submitted to the Dutch Supreme Court, with only minor technical changes (e.g., to reflect capitalization and citation-form practices in the United States).

[Table of Contents omitted]

I. Introduction

If it is true, as it has been suggested not only by legal writers, [1] but, at least impliedly, also by the drafters of international conventions, [2] that the unification of the law governing transnational commerce promotes certainty of law and, thus, the flow of international trade, [3] then it cannot surprise that efforts have long been under way to unify the law [4] of what is considered as being the "mercantile contract par excellence" [5] and therefore "the pillar of the entire system of commercial relations," [6] i.e., the sales contract. The idea was to create a uniform sales law which would overcome the merchants' worst enemy, i.e., national borders [7] which constituted (and still constitute) "an obstacle to economic relationships which constantly increases among citizens of different countries; an obstacle above all for the enterprises that are involved in international commerce and that acquire primary resources or distribute goods in different countries which all have different law."[8] [page 4]

As far as the sales law is concerned, the need to "create an internationally uniform discipline for cases linked to a plurality of countries" [9] designed to "transcend national borders in order to maximize the utilization of resources" [10] was recognized as early as in the 1920s, [11] when it was suggested by Ernst Rabel to start with the work for the unification of the law of international sales of goods. [12] Upon this suggestion, the International Institute for the Unification of Private Law, UNIDROIT, [13] one of the international bodies promoting the unification of (commercial) law, [14] decided to undertake extensive studies in this field which led, in 1935, to the [page 5] first draft of a uniform law on the international sale of goods. [15] After World War II, which had interrupted the aforementioned efforts, [16] work resumed with a conference at The Hague in 1951. [17] Thereafter, other drafts followed, [18] the last of which was discussed at the Diplomatic Conference held at The Hague in April 1964. The twenty-eight participating States approved two conventions, creating the Uniform Law on the International Sale of Goods [hereinafter: ULIS] [19] and the Uniform Law on the Formation of Contracts for the International Sale of Goods [hereinafter: ULF]. [20] [page 6]

These laws not being as successful as expected [21] -- they came into force only in nine Countries [22] -- led the United Nations Commission on International Trade Law, UNCITRAL, [23] constituted in 1966 with the task of promoting the progressive harmonization and unification of the law of international trade, [24] to attempt the revision of the Hague Uniform Laws. But when it became apparent that a revision would not be successful without substantial modifications, a Working Group was [page 7] established with the task of drafting a new text. [25] Several drafts were proposed, the last of which -- dating back to 1978 [26] -- was the one upon which the General Assembly of the United Nations authorized the convening of a diplomatic conference, held from March 10 to April 11, 1980 in Vienna. [27] On that occasion, the convention which is officially known [28] as the "United Nations Convention on Contracts for the International Sale of Goods" [hereinafter: CISG] was approved. [29] It entered into force on January 1, 1988.

In order to create uniformity, it is, however, not sufficient to create and enact uniform laws, [30] such as the aforementioned CISG, since the [page 8] same uniform law can still be interpreted and, thus, applied differently by the judges of different countries. [31] The first step to be taken to minimize the danger of diverging interpretations and, thus, non-uniformity in the application of uniform law, is to reject the thesis according to which "by virtue of national proceedings, the [uniform law] conventions transform themselves into domestic law and therefore their interpretation and integration must take place according to the interpretive techniques ... of the domestic legal system in which they are transplanted and will be applied." [32] This means, above all, that one should not have recourse to domestic interpretive techniques to solve interpretive problems, [33] and that one should not read international uniform law through the lenses of domestic law. [34] On the contrary, in the interpretation of international uniform law, as expressly stated in Article 7(1) CISG, [35] as well as in many other recent international uniform law [page 9] conventions, [36] "regard is to be had to its international character and to the need to promote uniformity in its application." [37]

On the one hand, this means that one must interpret international uniform law "in an autonomous manner," [38] i.e., in its interpretation one should not resort to the meaning one generally attaches to certain expressions within the ambit of a particular system, [39] since this "nationalistic approach" [40] would not only lead to non-uniformity, but, ultimately, to the promotion of forum shopping. [41] Thus, even where the expressions employed in the uniform sales law (or in other uniform law conventions) [42] are literally the same as expressions which within a particular domestic legal system have a specific meaning -- such as "avoidance," "reasonable," "good faith," etc. -- they are independent from the latter, [43] since the expressions employed in uniform law conventions are [page 10] intended to be neutral. [44] Nowadays, this appears to be a basic principle of international uniform law [45] resulting, among others, from the assumption that international uniform law "does not want to identify itself with any legal system, because it wants to conjugate with all." [46] Indeed, any choice of one expression rather than another is the result of a compromise [47] and does not correspond to the reception of a concept peculiar to a specific domestic law: [48] the interpreter has therefore to be aware of what have been called faux-amis. [49]

But in view of "the need to promote uniformity in [the CISG's] application"[50] and for the reasons mentioned supra, [51] it does not suffice to consider the international uniform laws as being "autonomous bodies of rules." [52] This is why, on the other hand, regard is to be had to the practice established by other (Contracting) States in applying the uniform law.[53] The interpreter must consider "what others have already done,'' i.e., he must consider the decisions rendered by judicial bodies [page 11] of other Contracting States,[55] since it is possible that the same -- or analogous -- issues have already been examined by other States' courts, [56] in which case such decisions should have either the value of precedent -- "[i]f there is already a body of international case law," [57] or a persuasive value. [58] Apart from the recourse to foreign judicial applications of uniform law, the danger of differing interpretations can also be neutralized by resorting to the travaux préparatoires [59] as well as to doctrinal writing, [60] which in civil law countries has always been considered an instrument for interpretation of (uniform) law, [61] whereas in common law countries such as England and America, where judges have historically been reluctant to make recourse to scholarly writing, [62] this tendency appears only recently. [63] [page 12]

It is because of these considerations, as well as because of the fact that in practice taking foreign decisions -- or scholarly opinions -- into account can generate some difficulties (based upon language problems), that this paper will examine specific issues of the 1980 Uniform Sales Law in the light of both recent court decisions as well as scholarly writings, thus providing the tools for a possible uniform interpretation and application of the CISG.

Although only seven years have passed since the CISG's coming into force on January 1, 1988, [64] it is already possible to assert that, unlike its predecessor, the Hague Uniform Sales Law(s), it is not a failure. On the contrary, it can be considered as being one of the most successful efforts towards the creation of a uniform (international) commercial law, [65] as evidenced not only by the large number of Contracting States -- nearly fifty already [66] -- and the long list of scholarly [page 13] publications devoted to it, [67] but also by the attention paid to the CISG by courts [68] as well as by arbitral tribunals: [69] in 1994, one hundred applications of the CISG were counted, [70] a large number to which one must add several more recent court decisions [71] -- among others, [72] several Dutch decisions, [73] a French, [74] two German [75] and two Austrian [76] [page 14] Supreme Court decisions -- as well as various arbitral awards, [77] dealing with the most diverse businesses. [78]

Despite the fact that the aforementioned applications of the CISG dealt with the most diverse topics -- from the formation of contract [79] to [page 15] the foreseeability of damages [80] -- it is possible to identify three issues which have, more than others, drawn the courts' and arbitral tribunals' attention: the CISG's sphere of application (II-VI), the issue of the notification of non-uniformity of goods (VII), and the issue of interest rates (VIII).

II. The Internationality of Sales Contracts under CISG

As it is known, the 1980 Vienna Sales Convention differs from the 1964 Hague Conventions in respect to various issues, [81] such as their [page 16] compilation techniques [82] -- which resulted in a shorter and simpler text of the 1980 Sales Convention, [83] because "UNCITRAL provided for the marriage of two sets of rules [ULIS and ULF] that had lived separately for over four decades." [84] The aforementioned Conventions also differ from a public international point of view: [85] whereas the Vienna Sales Convention is considered (in most countries) [86] to represent a so-called self-executing treaty, [87] that is, a "treaty where legal rules arising from the treaty are open for immediate application by the national judge and all living persons in a Contracting State are entitled to assert their rights or demand fulfillment of another person's duty by referring directly to the legal rules of the treaty," [88] the Hague Conventions were not-self-executing. [89] Thus, they "did not contain any rules on contracts. All they did was to oblige the Contracting States to incorporate the Uniform Law on the International Sale of Goods (ULIS) or the [page 17] Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF) into their own domestic legislation." [90] It must also be pointed out, that the foregoing conventions differ -- although not entirely, since there are, indeed, some substantial issues which are dealt with in a analogous way, [91] such as the formation of contracts [92] -- from a substantive point of view as well, [93] as, for example, in respect to the role of trade usages and course of dealing, [94] the issue of the "battle of the forms," [95] etc. [page 18]

However, according to some authors, the most important difference between the conventions de quo "is that the [1980] Convention represents a truly global effort, with balanced representation of all the regions and economic and legal systems of the world." [96] Indeed, the 1980 Uniform Sales Law "escapes the ethnocentric perspectives and biases of any legal system," [97] unlike the Hague Conventions, "accused" of being modeled on the sole exigencies of the industrialized nations. [98]

At first sight, the most important common feature of the 1980 and the 1964 Conventions appears to be their sphere of application, since the foregoing Conventions all apply to "international" sales contracts. [99] A closer look shows, however, that their spheres of application are [page 19] fundamentally different. [100] This is due, among others, to the very different criteria adopted by these Conventions in order to determine the internationality of a sales contract [101] (as well as to their relation with the Convention's criteria of applicability). Indeed, the Hague Conventions (as opposed to the Vienna Convention) considered as international sales [102] only those sales which presented two [103] elements of internationality: [104] a subjective and an objective one. [105] This signifies that under the Hague Conventions, unlike under the CISG, [106] the criteria employed to determine the internationality of a contract "were not only subjective, i.e., referred to the parties, but also objective, that is to say, related to specific aspects of the contractual relationship." [107] As far as the first element is concerned, the 1964 Conventions required the [page 20] parties' place of business (or, absent a place of business, their residence) [108] to be located in different States, independent from the parties’ citizenship. [109] As for the second element, Article 1(1) ULIS [110] required that "either [the] acts constituting offer and acceptance are effected in different States, or that the goods are sold during international transport or are to be transported internationally, or that the act of offer and acceptance are made in a State other than the State of the place of delivery." [111] Unlike the 1980 Sales Convention, [112] the Hague Conventions did not require any further element in order to be applicable.

But this approach has been criticized [113] for "having caused the adoption of the so-called erga omnes approach," [114] an approach [115] according to which the provisions of the 1964 Conventions had to be applied whenever the contract was considered international, [116] and even in those cases where the contractual relationships developed outside [page 21] from the territory of the Contracting States, [117] independently from the application of private international law rules [118] (which Article 2 ULIS expressly excluded). [119] To most Contracting States this approach, also defined as "universal" [120] or "universalist,"' appeared to be excessive. [122] This is why most Contracting States [123] made reservations [124] in order to limit the scope of application of the Hague Conventions. [page 22]

The aforementioned tendency to restrict the Convention's applicability by making reservations [125] along with the aforementioned criticism undoubtedly influenced the decision of the drafters of the CISG [126] to decide against the adoption of the objective criterion of internationality [127] and the erga omnes approach, [128] and, thus simplifying the CISG's approach. [129] Indeed, according to the CISG, the sole criterion on the grounds of which to determine the internationality of a sales contract corresponds to the subjective one of the 1964 Conventions. [130] Thus, under the CISG the internationality of a contract depends merely [131] on the parties having their places of business (or habitual residences) [132] in different States, as pointed out not only in legal writing [133] but also in court decisions [OLG Köln (Germany) 26 August 1994]. [134] But since the CISG did not adopt [page 23] the approach of the ULIS and ULF according to which the criteria of internationality constituted, at the same time, the criteria of applicability, [135] the internationality of a sales contract does not suffice to make the CISG applicable. [136] Furthermore, it cannot be argued [137] that the different States in which the parties have to have their places of business in order for a sales contract to be international under CISG must also be Contracting States, [138] this being rather a criterion of applicability of the CISG rather than one of internationality. [139]

From what has been said thus far in respect of the CISG's criterion of internationality, it also results that where the "subjective international prerequisite" is missing, for example, "where the parties have their places of business in different legal units of the same Contracting State,'' [140] the Vienna Sales Convention will not be applicable per se [141] even if the contract's execution involves different States. [142] On the other hand, the CISG can be applicable even in those cases where the [page 24] goods do not cross any border [143] and where the parties have the same citizenship, [144] as long as the contract can be considered, from a subjective point of view, as being an international one. [145]

Considering that ex Article 1(1) CISG the internationality of a sales contract depends on the location of the parties' places of business, [146] the importance of the definition of "place of business" is evident, and this is why it will be examined in greater detail.

A closer look at this concept is necessary, since -- unfortunately [147] -- the CISG, not unlike its predecessor, [148] has [page 25] not defined it, [149] apparently because of the lack of a uniform concept acceptable to all the delegates to the Vienna Diplomatic Conference, who suggested the most disparate definitions. [150] But despite the apparent differences in conceiving a definition of the "place of business," it is here suggested that it is possible to identify some elements which allow for a better determination of its essence, even though one must not forget that there is no general abstract definition: the "place of business" has to be defined on a case-by-case basis. [l5l]

Nevertheless, as a general rule it can be asserted that there is a place of business where there is a stable business organization [152] (or, as stated by the German Supreme Court in respect of the ULIS, where "the center of the business activity directed to the participation in commerce" is located) [153] which links the contracting party to the State where the business is conducted, [154] as long as the party has autonomous power. [155] If it is true, as it is here suggested, [156] that the [page 26] aforementioned elements characterize the concept of "place of business," it follows that places of temporary sojourn cannot be considered "places of business.'' [157] This is why one cannot consider conference centers of exhibitions [158] or hotels [159] or rented offices at exhibitions [160] as being places of business under the CISG. [161]

Although the concept of "place of business" will not cause too many problems, the exact determination [162] of the relevant place of business does, at least in those cases where a party to the contract has more than one place of business.

The Hague Conventions did not answer the question of which among several places of business was to be considered the relevant one, [163] despite the fact that it was an old dilemma. [164] This is why a dispute arose among legal scholars as to what criteria had to be used in order to solve the problem. [165] While several legal scholars favored the view according to which the relevant place of business had to be the [page 27] one where the main seat was located, [166] others suggested that the solution depended on which place of business had the closest relationship with the contract. [167]

The dispute was finally solved in 1982 by the German Supreme Court, [168] which stated that the preferred solution was the second one. Indeed, "one must not share ... the point of view according to which the decisive place of business is always the principal one." [169]

Under the 1980 Vienna Sales Convention, the dispute does not have any reason to exist, since the Convention expressly provides for a solution of the foregoing problem. According to this solution, laid down in Article l0(a) CISG, [170] the place of business relevant for the [page 28] determination of the internationality of a sales contract is the one having the closest relationship with the contract. [171] The 1980 Uniform Sales Law has, in other words, expressly rejected the so-called "theory of the principal place of business,'' [172] although the initial intent of the drafters was to the contrary. [173]

However, although Article l0(a) prevents a dispute among legal scholars as to which thesis to apply ("principal place of business theory" or "closest relationship theory"), it does not solve all the problems. [174] Indeed, quid iuris where the contract is concluded at one place of business and has to be executed at another one? [175] Of course, where the parties have agreed upon which place of business must be considered relevant, the problem will not arise, since that agreement is to be taken into account in determining the relevant place of business. [176] But where there is no agreement concerning the relevant place of business, Article l0(a) CISG creates a new problem: how to define [page 29] the "closest relationship with the contract and its execution''? [l77] In order to facilitate this task, Article l0(a) lists some elements to be taken into account in determining the relevant place of business. [178] Up to now, these elements have not yet been employed by courts, although some courts might have had reason to do so. [179] Thus, one must take into account all the circumstances known to or contemplated by the parties at any time before (or contemporaneous to) the conclusion of the contract. [180] Consequently, one is not allowed to take into consideration the circumstances which become apparent only after the contract is concluded. [181] Thus, it does not matter whether the places of business change after the conclusion of the contract. [182] Sometimes, however, the circumstances are insufficient to unequivocally determine the relevant place of business. In this line of cases it is here suggested that the international character of a sales contract be determined by resorting to the places of business involved in the conclusion of the contract, [183] since [page 30] these places of business will always be known to both parties. [184] However, where the buyer knows that the contract is performed at a place of business of the seller different than the one involved in the conclusion of the contract, the text of Article l0(a) suggests that the seller's relevant place of business is the one where the performance takes place. [185]

However, since the parties do not always have a place of business, Article l0(b) CISG provides that in such cases one has to resort to the parties' habitual residence [186] in order to determine whether a sales contract is international; [187] that is, one has to look at a situation of fact, [188] and, more precisely, the real place of sojourn for a long period of time. [189]

For the applicability of the CISG it is, however, not sufficient that parties have their places of business in different States, i.e., that the sales contract be an international one. Even though it is not required that the parties be conscious of the applicability -- or existence -- of the CISG, [190] its Article 1(2) [191] requires that the internationality be apparent [page 31] to both parties, [192] i.e., that the contract does not appear to be a merely domestic one. [193] In order to determine whether this prerequisite -- apparent internationality of the contract -- exists, the following objective [194] elements exhaustively [195] listed in Article 1(2) must be taken into account: the contract itself, [196] the dealings [197] between, or the information [198] disclosed by, the parties before or at the conclusion of the contract. [199] Although this "apparent internationality" requirement undoubtedly limits the sphere of application of the CISG, [200] it is essential, since it protects the parties' reliance upon the applicability of "domestic" law. [201] From what has been said thus far, it follows, for instance, that the Convention is not applicable "... where the parties [page 32] appeared to have their place of business in the same State but one of the parties was acting as the agent for an undisclosed foreign principal." [202] As far as the burden of proof is concerned, the party invoking the impossibility of recognizing the international character of the sales contract (and, thus, the inapplicability of the CISG), carries it. [203]

III. The Criteria of Applicability of the Vienna Sales Convention

As already mentioned, [204] in order for the CISG to be applicable, it is not per se sufficient that the sales contract be an international one. [205] Indeed, Article 1(1) CISG [206] also provides for two alternative [207] criteria of applicability the existence of either of which is sufficient for the Convention to be applicable [208] (provided the contract is an international one).

According to the criterion set forth in Article l(l)(a), the CISG is "directly" [209] applicable when the parties have their places of business in different Contracting States, [210] and this is true even where the parties [page 33] are unaware that the States where their places of business are located are Contracting States. [211] Thus, whenever this requirement is met and whenever the lex fori is the law of a Contracting State and the parties have not excluded the CISG, [212] it will be applicable, [213] independently from a different solution provided for by the rules of private international law. [214] On the contrary, where the parties have their places of business in different Contracting States, but the forum is one of a non-Contracting State and its rules of private international law lead to the application of either the law of the forum or the law of a non-Contracting State, the CISG will not be applicable [215] per se. [216]

Even though the CISG has not yet been applied too often by virtue of this criterion, [217] this is very likely to change in the future, with the list of Contracting States still growing. [218] [page 34]

Unlike the criterion which will be mentioned infra, [219] this criterion of applicability generally causes no problems. [220] Problems may, however, arise in respect to whether a State must be considered a Contracting State or not. [221] It is commonly understood that all States can be deemed Contracting States once they have either ratified, approved or accepted [222] or acceded [223] to the Convention [224] and once a specific period of time -- fixed by the CISG itself -- has elapsed. [225] However, as far as the applicability of Part II (Formation of Contracts) of the Convention is concerned, it presupposes that a State be a Contracting one before the offer is made, [226] i.e., "it is not sufficient that a sales contract be concluded after the Convention enters into force for the Contracting [page 35] States concerned," [227] as recently pointed out by an Italian Supreme Court decision [Kretschmer GmbH & Co. KG v. Muratori Enzo, Corte di Cassazione 24 October 1988]. [228] [citing as well other judicial affirmations of CISG Article 100(1)]

For the applicability of Part III (Rights and Obligations of Buyer and Seller), it is sufficient that either the Contracting States referred to in Article l(l)(a) or the Contracting State referred to in Article l(l)(b) entered the CISG into force at a date not later than that of the conclusion of the contract. [229] This does not mean, however, that "it will suffice that the statement of acceptance has reached the offeror after the entry into force of the Convention." [230] A similar statement would be correct only in respect of cases where the law governing the formation of contracts is governed by the so-called "theory of reception,'' [231] according to which "[t]he contract is not concluded until the declaration of acceptance has reached the offeror in such a way as to enable him to take cognizance of it." [232] Where, however, the law applicable to the formation of contracts is based upon the "mail-box-rule," [233] the CISG must already be in effect at the moment the acceptance is mailed in order for Part III of the Convention to be applicable. [234]

With reference to the concept of "Contracting State," it must also be pointed out that where a State declares itself not bound by Part II [page 36] or Part III of the CISG, it cannot be considered a Contracting State in respect to the Part which has been excluded. [235] Consequently, it is possible that a sales contract concluded between two parties having their places of business in two Contracting States one of which has made a declaration according to Article 92 is governed partly by the rules of the CISG and partly by the rules of domestic law, even in respect to issues normally all governed by the CISG, [236] a situation which certainly does not favor uniformity, but, on the contrary, dépeçage and its negative consequence. [237]

The applicability of the CISG is, however, not necessarily excluded where the parties do not have their places of business in different Contracting States. [238] By virtue of what has been defined as a [page 37] "classical solution," [239] provided for by Article l(l)(b) CISG, [240] the CISG can be applicable even where one or both parties do not have their places of business in Contracting States, [241] provided that the rules of private international law lead to the application of the law [242] of a Contracting State. [243] Consequently, where the lex fori is the law of a [page 38] Contracting State in which the rules of private international law of sales contracts are based upon the 1980 EEC Convention on the Law Applicable to Contractual Obligations, [244] as in the Netherlands [245] and other European countries, [246] the CISG will generally be applicable when the law either chosen by the parties or, absent choice of law, that [page 39] having the closest connection with the contract, [247] is the law of a Contracting State. [248]

As far as the EEC Convention's recognition of party autonomy (in the sense of choice of law) is concerned, [249] its employment should not raise any problems, it being a concept universally recognized throughout domestic private international law codifications long before the EEC Convention's coming into force. [250] This is why its application to international sales contracts does not cause too many difficulties, [251] as evidenced by the fact that several courts have already relied upon the parties' choice of law to make the CISG applicable ex Art. l(l)(b) [See for example, OLG Düsseldorf (Germany) 8 January 1993]. [252] [page 40]

Absent choice of law, [253] the EEC Convention makes applicable the law of the country with which the contract is most closely connected, [254] as pointed out by several court decisions [See most recently, Rb Amsterdam (Netherlands) 5 October 1994]. [255] And since it is presumed that the contract is most closely connected with the country where the party who is to effect the contract's characteristic performance [256] has its place of business [257] -- and since "the obligation to pay money ... is not the characteristic performance" [258] -- the law applicable to international [page 41] sales contracts is generally [259] the law of the seller, who has to execute the characteristic performance consisting of the delivery of the goods [many judicial citations provided], [260] as emphasized not only by legal scholars, [261] but also by various court decisions [many judicial citations provided], [262] among others, several Dutch ones [See most recently, Rb Amsterdam 5 October 1994], [263] as well as by various arbitral awards [See, e.g., ICC Arbitral Award 7197 of 1992]. [264]

From what has been said thus far, one general rule can be set forth: provided that the parties have not excluded the CISG and that no electio iuris occurred, the CISG should be applied in the courts of [page 42] Contracting States -- which did not limit the scope of Article l(l)(b) by means of an Article 95 reservation [265] -- at least to all international sales contracts involving a seller who has its place of business in a Contracting (non reservatory) [266] State. [267]

Thus, Article l(l)(b) (which some authors consider to be superfluous [268] as well as open to criticism [269]) extends the CISG's sphere of application which otherwise would have been too restrictive, [270] but without going as far as its predecessor, the 1964 Hague Conventions. [271] Furthermore, the CISG's approach has another advantage: it coordinates the rules of the CISG with those of private international law, [272] a coordination which had not been provided for by the Hague Conventions which expressly excluded the applicability of the conflict of laws rules [OLG Köln (Germany) 2 October 1992]. [273] [page 43]

As already mentioned, the CISG's "indirect" application has been criticized, [274] mainly so, by so-called Socialist countries, [275] which "wanted to avoid the excessive restriction of the applicability of their domestic statutes governing the relationships with foreign parties," [276] and by the United States. As a consequence of such criticism, [277] the drafters of the CISG provided for a reservation clause, Article 95 CISG, [278] which gives the Contracting States the option not to enforce Article l(l)(b). [279] But what impact does this reservation have on the "indirect" applicability of the CISG? [280] Several lines of cases must be distinguished.

(A) It has been argued, that where the forum is located in a reservatory State the rules of private international law of which lead to the applicability of the law of a Contracting State (whether independently [page 44] reservatory or not), the CISG will not apply, [281] since the Contracting reservatory States are bound to apply the CISG only where both parties have their places of business in Contracting States [282] (reservatory or not). [283] It is certainly true, that in this line of cases the courts of reservatory States do not have to apply the CISG by virtue of Article l(l)(b). This does not mean, however, that the CISG cannot apply. Indeed, it is here suggested [284] that even the courts of a reservatory State should apply the CISG in the aforementioned line of cases—of course not by virtue of Article l(l)(b), but as part of the law of the Contracting State to which the conflict of law rules lead. [285] There is, however, a limit: if it is true, as it has been suggested, [286] that the rationale behind the possibility of the Article 95 reservation is to promote the application of domestic statutes, it must be concluded that in cases where the forum is located in a Contracting reservatory State whose private leads to the law of the forum, the CISG shall be inapplicable. [287]

(B) There is a dispute in another line of cases, as well: quid iuris where the forum is located in a Contracting non-reservatory State the rules of private international law of which lead to the applicability of [page 45] the law of a Contracting reservatory State? According to some authors, the CISG should not be applicable in this line of cases, [288] because the reservatory State would not apply the CISG. Consequently, "... in the situation where State A has not taken the reservation under Article 95 and State B has done so, and where the parties have their places of business in State B and in non-Contracting State C, consistency would appear to require that a court in State A should, if it finds the law of State B to be applicable, select the domestic law of that State as the law governing the contract rather than the Convention." [289] The preferable view, however, seems to be to the contrary, [290] not only because generally a reservation of the kind at hand made by one State cannot bind another State, [291] but also because, from the point of view of the Contracting (forum) State, all the applicability's preconditions laid down in Article l(l)(b) are met. [292] And this view is preferable despite some German court decisions [LG Hamburg 26 September 1990; OLG Frankfurt 13 June 1991; OLG Frankfurt 17 September 1991] [293] which have applied the domestic rather than the Uniform Sales Law in cases where the rules of private international [page 46] law lead to the law of a reservatory State. [294] But these German court decisions cannot be decisive in guiding the interpreter, since the courts did not have the possibility of deciding differently, a statute having been passed in Germany according to which German judges are bound to apply domestic sales law, [295] i.e., not the CISG, [296] when their rules of private international law lead to the applicability of the law of a Contracting reservatory State. [297] There are, however, other German court decisions which should be taken into account and which support the solution here suggested. Indeed, under the Hague Conventions, German courts have stated that the reservations declared by other Contracting States were to be disregarded, i.e., the German courts applied the Conventions even where the Contracting State the law of which was to be applied would not have done so by virtue of a reservation.[298]

(C) There is disagreement also as to the solution of those cases where the forum is located in a non-Contracting State the rules of private international law of which lead to the law of a Contracting reservatory State. Despite some statements according to which in this line of cases the CISG should not apply, [299] it is here suggested [300] that [page 47] the CISG be applied, of course not by virtue of Article l(l)(b), as wrongly stated by several courts [Rb Amsterdam (Netherlands) 5 October 1994; Rb Amsterdam 7 December 1994], [301] as well as by some arbitral tribunals [ICC Arbitration Award No. 7197 of 1992], [302] but by virtue of its being part of the applicable law. [303] One should, in other words, adopt the same solution employed in the cases where the rules of private international law of the non-Contracting forum State lead to the applicability of the law of a Contracting non reservatory State. In this line of cases, the courts have to apply the CISG for the very same reasons, [304] i.e., by virtue of their rules of private international law. This view is not only held by legal scholars, [305] but, most importantly, it has already found judicial application in several instances. [306]

[Note 306 citations. Germany: LG München 3 July 1989; LG Stuttgart 31 August 1989; LG Aachen 3 April 1990; AG Oldenburg 24 April 1990; LG Hamburg 26 September 1990; OLG Frankfurt 13 June 1991; LG Baden-Baden 14 August 1991. Netherlands: Rb Amsterdam 5 October 1994; Rb Amsterdam 7 December 1994.]

In order for the CISG to be applicable in the courts of Contracting States, either the requirements set forth in its Article l(l)(a) or those laid down in Article l(l)(b) must be met. In order for it to be applicable in the courts of non-Contracting States, the rules of private [page 48] international law must lead to the law of a Contracting State (reservatory or not). There appears to be little doubt as to the applicability of these rules to arbitral tribunals. [307] Indeed, there are several arbitral awards which have stated that where the criteria of internationality and applicability of the CISG are met [ICC Arbitral Award 7153 of 1992], [308] the 1980 Uniform Sales Law is to be applied [ICC Arbitral Award 7197 of 1992]. [309]

At this point it is, however, worth mentioning that some arbitral tribunals have applied the CISG even where the contract was outside the Convention's stated sphere of application. In one case, the ICC Arbitral Tribunal [ICC Arbitral Award 5713 of 1989] [310] applied the CISG to a series of contracts concluded in 1979, on the ground that "[t]here is no better source to determine the prevailing trade usages than the terms of the United Nations Convention on the International Sale of Goods of 11 April 1980 ... . This is so even though neither the [country of the Buyer] nor the [country of the Seller] are parties to that Convention." [311] In another case, the Iran-United States Claims Tribunal [Award of 28 July 1989] [312] applied the CISG as part of the so-called "lex mercatoria" or as relevant trade usages to a contract concluded before the drafting of the CISG. This line of cases, which opens the door to the applicability of the CISG even to cases not falling under its scope, [313] has been criticized [314] for several reasons. It has been said, for instance, that the CISG's provisions do not reflect uniform commercial practices, [315] but are rather the result of a careful [page 49] political compromise. [316] Most importantly, however, the application of the CISG to contracts concluded before its coming into force violates a principle which appears to be recognized by most developed legal systems according to which the law in force at the moment a contract is concluded governs the contract even if that law is modified. [317] Therefore, it is preferable that the arbitral tribunals, not unlike State courts, [318] hold that the CISG is inapplicable to operative facts that occurred before the CISG’s coming into force in the countries involved [ICC Arbitral Award 6281 of 1989], [319] in order not to disappoint the parties' reliance on the applicability of a specific law in force at the moment of the conclusion of the contract.

IV. The Sphere of Application Ratione Materiae

For a contract to be governed by the CISG, it is not sufficient that it falls under its spatial and personal sphere of application, but it must also be inside its sphere of application ratione materiae, [320] i.e., it must be a contract for the sale of goods.

The CISG states that it applies to contracts which in the official English and French versions are respectively called contracts of sale of [page 50] goods and contracts de vente de marchandises. [321] The first question to answer is what constitutes a sale or vente. To this end, it must be noted that the CISG, not unlike the Hague Conventions, [322] does not define the sales contract. [323] According to some legal writers, this lack of definition is due to the circumstance that there are no relevant differences amongst the definitions of a sales contract in the various legal systems; [324] according to others, the contrary is true: the exclusion of any definition is to be regarded as the only way to cope with the differences in the legal systems. [325]

Despite the lack of an express definition, a more precise concept of the "sales contract" falling within the scope of the CISG can be inferred from the different rights and obligations of the parties, [326] as well [page 51] as from "the economic function of exchange which constitutes a valid reference in order to unify without contrasts the concept of sale, as opposed to other contractual schemes." [327] Thus, independently from the civil or commercial character of the parties or of the contract itself, [328] the sales contract can be defined [329] as the contract by virtue of which the seller has to deliver the goods, hand over any documents relating to them and transfer the property in the goods, whereas the buyer is bound to pay the price for the goods, and take delivery of them. [330]

The aforementioned seller's obligation to transfer the property in the goods seems to exclude the applicability of the 1980 Vienna Sales Convention to contracts that transfer the property in the goods at the moment the contract is concluded and that, therefore, do not create any obligation to transfer the property in the goods. [331] This is true, for [page 52] instance, in both the Italian and French legal systems: [332] in these systems, the property passes generally solo consensu, that is, at the moment the sales contract is concluded [333] -- whenever the goods are specified, existing and belonging to the seller —- as opposed to the transfer of property by means of the delivery of the goods, a rule applicable, for instance, in the Germanic legal systems. [334] However, a similar exclusion cannot be justified: [335] not only because otherwise the sphere of application of the CISG would become too restricted, but primarily because the effects which an international sales contract may have on the property in the goods sold have, unfortunately, [336] been expressly excluded by Article 4(b) CISG [337] from the matters with which the CISG is concerned. [338] [page 53]

But is the sales contract as defined above the only contract governed by the Vienna Sales Convention? It has been held both in legal writing and in judicial applications [LG Hamburg 26 September 1990], [339] that contracts modifying an international sales contract are governed by the Uniform Sales Law as well, [340] since they directly affect the rights and obligations of the parties to the international sales contract. [341] Furthermore, by virtue of Article 73(1) CISG, [342] contracts for the delivery of goods by installments are also governed by the CISG, [343] not unlike under the 1964 Hague Conventions. [344]

However, not unlike under the 1964 Hague Conventions, [345] barter transactions (or countertrade transactions) where all of the price is to be paid in something other than money do not fall under the Vienna [page 54] Sales Convention. [346] This is the preferable view, even though the contrary has been argued. [347] Some authors even assert that there are many arguments in favor of applying the Convention also to barter transactions. [348] It has been argued, for instance, that "[a]ny partner is to be considered here both as buyer and seller, though with regard to different performances -- in respect of the obligations to deliver, to hand over documents, to acquire title in the goods and to take delivery." [349] This view apparently does not give due consideration to Article 53 CISG [350] which expressly mentions the buyer's obligation to pay the price, [351] i.e., an element the lack of which characterizes the barter transaction.

Leasing contracts as well, do not fall within the sphere of application of the CISG, [352] not even where they contain a purchase option, [353] since their economic function is different from that of a sales contract. [354] The same appears to be true as far as consignment contracts [page 55] are concerned, which are considered as being excluded from the sphere of application of the CISG as well, [355] although they fell within the scope of the 1964 Hague Convention. [356] Furthermore, a Dutch court [Hof Amsterdam 16 July 1992] [357] recently decided, [358] in conformity with court decisions rendered under the 1964 Hague Conventions, [359] that a distribution contract did not by itself constitute a sale of goods. [360] In doing so, the court pointed out, however, that had the parties entered into any contract for the sale of goods under that distribution contract, this could have been subject to the CISG. [361] And this should be so, independently from whether the distribution agreement was concluded before the CISG's coming into force, as long as the individual sales contracts meet all the temporal requirements laid down in Art. 100 CISG. [362] [page 56]

Even though the sales contract as defined above still constitutes the "commercial contract par excellence" [363] and, consequently, the "pillar of the entire system of commercial relations," [364] it is undergoing a change. [365] This change is due to the fact that modern trade not only calls for ready-made-goods, but also for goods to be manufactured and, therefore, for the "sale" of labor and services as well. [366] This is why it is fair to state that the sales contract tends to become more and more a service contract. [367]

The tendency to consider sales contracts also those contracts "which require further activities besides the traditional exchange of goods with money'' [368] has been evident for years not only in the various legal systems, [369] but also in regard to the efforts made in order to unify the international sales law. [370] Indeed, the Draft Conventions of 1935 [371] and 1939, [372] as well as that of 1956 [373] and finally the ULIS of 1964 [374] included a provision dealing with the relation between sales contracts and transactions which call for the manufacture or production of goods. That is why it is not surprising that the draftsmen of the CISG extended its applicability [375] to the point that the CISG also governs contracts [page 57] which are considered to be work contracts: [376] Article 3(1) CISG deals with the Convention's applicability to contracts for the supply of goods to be manufactured or produced, whereas Article 3(2) CISG deals with contracts that include the supply of labor or other services amongst the obligations of the "seller."

As pointed out, the CISG contains some provisions which "confront the scholar with contractual schemes which have uncertain functional characteristics" [377] and "which therefore raise the problem of whether such contracts fall under the sphere of application of the Uniform Sales Law." [378] This is true, above all, in the cases where the seller is liable not only for the delivery of the goods, that is, for a dare, but also for providing labor or services. [379] But it is also true for those cases in which the buyer has to deliver parts of the materials needed for the production of the goods.

Among the contracts falling under the latter category are those contemplated by Article 3(1) CISG, [380] i.e., the contracts for the supply of goods to be manufactured or produced. [381] But there is a limit to the CISG's applicability to these contracts. Indeed, Article 3(1) CISG itself excludes that the contracts where the party who "buys" the goods to be manufactured or produced supplies a "substantial part" of the materials necessary for the manufacture or production can be considered sales. [382] Even though this provision extends the CISG’s applicability [page 58] to other than "classical" sales contracts, [383] it raises some problems as well, [384] since it does not provide for specific criteria to be used in determining whether the materials supplied by the buyer constitute a "substantial part" of the goods necessary to manufacture or produce the goods. [385] Despite this lack of definiteness, it is commonly understood that the supply of accessories does not exclude the CISG's applicability. [386] Conversely, where all the materials are supplied by the buyer, there is no doubt that the CISG is inapplicable. [387]

In order to overcome the difficulties due to the indefiniteness of the concept of "substantial part," [388] legal scholars have tried to identify its main characteristics. In this respect, some authors stated that the "substantial part" is to be looked upon merely from a quantitative point of view." [389] It is here suggested, however, that when one has to determine whether the materials provided by the buyer constitute a "substantial [page 59] part," a qualitative criterion should be used as well, [390] not unlike under the 1964 Hague Conventions. [391] Consequently, "the materials to be provided by the buyer may constitute a substantial part of the goods sold even where their value represents less than 50 per cent of the value of the goods." [392] This does not mean, however, that 15 per cent is sufficient to be considered "substantial," [393] as suggested by Professor Honnold. [394]

Although several courts have already applied Article 3(1) CISG [BGH (Germany) 15 February 1995; ICC Arbitral Award 7660 of 1994; OLG Frankfurt (Germany) 17 September 1991], [395] they have not yet elaborated on the concept of "substantial part." In one case, for instance, the CISG was held inapplicable to a contract according to which the French seller had to manufacture [page 60] goods according to the Italian buyer's specifications [Cour d'appel Chambèry (France) 25 May 1993]. [396] The court held the CISG inapplicable on the grounds that the buyer had provided a "substantial part" of the materials necessary for the manufacture, [397] but in doing so, it did not define what percentage of the materials constituted a substantial part. [398] It appears, however, that the court considered the plans and instructions handed to the "seller" by the "buyer" as being a "substantial part" of the materials necessary for the production of the goods, an analogization which has been rightly criticized. [399]

The applicability of the Vienna Sales Convention extends not only to contracts for the sale of made-to-order goods. Article 3(2) CISG [400] extends it also to contracts where the "seller" is also obliged to supply services or labor. [401] This provision, which is innovative in respect to the ULIS, [402] was introduced in order to solve the problems arisen under the 1964 Hague Conventions concerning their applicability to contracts for the supply and installation of goods, [403] such as turn-key contracts [404] [page 61] and Lieferverträge mit Montageverpflichtung [405] known in German law. [406]

The criterion to be employed in deciding whether the CISG is applicable to contracts for the supply of goods and labor or services is the "preponderance" of the obligations regarding the supply of services or labor. [407] This criterion seems to generate less difficulties than the "substantial part" criterion laid down in Article 3(1) CISG. [408] Indeed, it seems merely to refer to the comparison between the economic value of the obligations regarding the supply of labor and services and the economic value of the obligations regarding the delivery of the goods. [409] "The sale price of the goods to be delivered must [in other words] be compared with the fee for labor and services, as if two separate contracts have been made," [410] a principle which has already found support in case law [ICC Arbitral Award 7153 of 1992]. [411] Thus, where the economic value of the obligation [page 62] regarding the supply of labor or services is "preponderant," i.e., where it is more than 50 per cent [412] -- this is usually the case in the turn-key contracts [413] and Lieferverträge mit Montageverbindung [414]Cthe CISG is inapplicable. [415]

An issue closely related to the one just examined is whether a contract for the supply of both goods and services or labor is entirely governed by (or excluded from) the CISG or whether the CISG always governs at least the part concerning the supply of goods. [416] Even though both legal scholars [417] and the Official Records of the United [page 63] Nations Conference [418] assert that this question should be answered by resorting to the relevant rules of domestic law, the better view seems to be to the contrary, i.e., the question of severability should be answered by resorting to the principles of the CISG. [419] Otherwise, the mandate (set forth in Article 7(1) of the CISG) to promote uniformity in the Convention's application would not be sufficiently honored. [420] However, since the Vienna Sales Convention as well as most domestic laws resort to party autonomy as the principal criterion in order to solve the problem de quo, [421] the differing views will hardly lead to different results, [422] at least from a practical point of view. [423]

The Vienna Sales Convention governs only international sales contracts (or other international contracts which the CISG considers sales contracts) [424] concerning moveable goods. [425] As far as the concept of "moveable goods" under the CISG is concerned, it essentially corresponds to the one of the ULIS and the ULF, [426] even though the expressions used by the different laws partially differ from each other. [427] Indeed, while all the English texts use the expression "goods," the official [page 64] French version of the CISG uses the expression "marchandises" as opposed to the expression "objets mobiliers corporels" employed by the 1964 Hague Conventions. [428] However, this innovation is considered to be merely a terminological innovation, not a substantial one. [429] Therefore, only corporeal moveable goods are considered goods under the CISG, [430] as recently confirmed by a German court decision [OLG Köln 26 August 1994]. [431] Consequently, the sale of immovable property, [432] or of intangible goods, [433] such as industrial property rights, [434] is excluded from the sphere of [page 65] application of the CISG, [435] and this is why it surprises that a court has decided that the sale of a logo is governed by the CISG [OLG Koblenz (Germany) 17 September 1993]. [436]

By virtue of this definition of "goods," the sale of "know how," as well, is to be excluded from the sphere of application, [437] even though it has been argued otherwise. [438] On the contrary, the sale of software different from custom-made software and standard software that is extensively modified to fit the purposes of the buyer is governed by the CISG, [439] however, not on the grounds that in several legal systems the sale of software is considered a sale, [440] but because in this line of cases (not unlike cases where books or discs are to be sold) the result of the intellectual activity is generally incorporated in corporeal goods. [441] This view was recently confirmed in an obiter dictum of a German court, which expressly stated that the sale of standard software can be considered a sale of goods in the sense of the CISG [OLG Köln 26 August 1994], [442] whereas the sale of custom-made software cannot be considered a sale of "goods" under the CISG. [443] The same court decision pointed out, however, that [page 66] although it is intended to be incorporated in a document, a market study does not constitute a "good" in the sense of the CISG. [444]

Furthermore, even though the sale of immovable property is excluded from the sphere of application of the CISG, [445] the sale of a mobile building, even where it is intended to be permanently affixed to immovable property, falls within the CISG's field of application. [446] The same is true for the sale of corporeal goods to be extracted or severed from land. [447]

Furthermore, a Hungarian court recently stated that a contract for the acquisition of part of an enterprise cannot be considered a sale of goods under the CISG [Arbitral Award of Hungarian Chamber of Commerce 20 December 1993]. [448]

From what has been said thus far, one conclusion can be drawn: a uniform definition of the concept of "goods" does not yet exist. [449] However, this should not lead to resorting to domestic definitions in order to solve interpretive problems concerning the concept of "goods" in the sense of the CISG: [450] in order to achieve uniformity in the CISG's application, one must, as pointed out earlier, interpret the expressions "goods," "marchandises," "mercaderias" (not unlike all the other expressions used in the CISG) in an autonomous way, that is, not in light of the concept of one's own domestic legal system. [page 67]

V. Exclusions from the Convention’s Sphere of Application by Virtue of Article 2

For the applicability of the United Nations Sales Convention it is not sufficient that all the above mentioned prerequisites set down in Articles 1 and 3 of the CISG exist. [451] The Convention's sphere of application, as it results from these Articles, is restricted by several provisions, among others, by Article 2 of the CISG. [452]

The importance of Article 2 CISG results from its excluding certain categories of international sales contracts from the CISG's sphere of application. [453] These exclusions, which are analogous, but not identical to the ones contemplated by the ULIS, [454] can be divided into three categories [455] (and not into two, as it has been argued) [456] depending on the reasons for the exclusions from the CISG's field of application. The [page 68] exclusions are based either on the purpose of the acquisition of the goods (Article 2(a)), or on the type of sales contract (Article 2(b) and (c)), or on the kind of goods sold (Article 2(d), (e) and (f)). [457]

Even though there is dispute among legal scholars as to the number of categories of sales contracts excluded from the sphere of application of the CISG, most legal scholars agree upon the importance of the restrictions contained in Article 2. [458] Indeed, it is commonly understood that the exclusions of Article 2 are further reaching than those contained in the ULIS. [459] This is evidenced, for example, by the exclusion of auction sales from the sphere of application of the 1980 Uniform Sales Law, [460] an exclusion not contained in the ULIS. [461] According to the Official Records of the United Nations Conference , this was due to [page 69] the draftsmen's intent to avoid a conflict between CISG rules and special rules to which auction sales are often subject under national law. [462]

In addition to this type of sale, Article 2 of the CISG also excludes the sale of goods bought for personal use from the Sales Convention's sphere of application. [463] Even though it has been argued that this exclusion has no antecedent in the 1964 Hague Conventions, [464] its rationale inspired the Article 5(2) ULIS exclusion, [465] although the latter has a more restrictive scope of application. [466]

This exclusion, [467] which, despite the proclaimed irrelevance of the civil or commercial nature of the contract [468] leads de facto to a limitation [page 70] of the CISG's sphere of application to commercial contracts, [469] has been justified, on the one hand, on the ground that the CISG should not be applicable to contracts having only local relevance, [470] and on the other hand, on the ground that there are only a few cases where the consumer contract is international. [471] However, a more convincing justification for the exclusion of sales of goods bought for personal use, i.e., for the exclusion of consumer contracts, [472] seems to be the intent of the draftsmen to avoid a conflict between CISG rules and domestic laws aimed at consumer protection. [473] [page 71]

Having recognized that the Article 2(a) exclusion "intends to ensure that the domestic consumer-protection laws are not affected by the Uniform Law for International Sales," [474] we must now focus on the prerequisites an international sales contract must meet in order to be excluded by virtue of Article 2(a) from the CISG's sphere of application. The criterion by which sales contracts are excluded ex Article 2(a) from the Convention's sphere of application is represented by the purpose for which the goods are bought: [475] the goods must be bought for a non commercial purpose, [476] i.e., for "personal" use. [477] However, this does not necessarily mean that the contract must be concluded for either commercial or industrial purposes [478] in order to be governed by the Vienna Sales Convention. Indeed, the CISG also applies where the goods are bought for professional use; [479] consequently, where a professional photographer buys a camera to use it in his business, the application of the Uniform Sales Law is not excluded. [480] The same is true [page 72] where a lawyer buys an office machine in order to use it in his law firm. [481]

In order to determine whether a sales contract falls within the Article 2(a) exclusion, only the purpose at the time of purchase is relevant, [482] that is, it is irrelevant that the real use the buyer makes of the good is different than the intended one. [483] Consequently, the Sales Convention will not apply where the goods are bought for an intended personal use, [484] even though the buyer later changes his mind and uses them for commercial purposes. [485] For the determination of the applicability of the Article 2(a) exclusion it is also relevant to determine whether the intended personal use is an exclusive one or not: [486] where the goods are bought exclusively for personal use, the CISG is not applicable, [487] while, conversely, it is applicable where the purpose is not an exclusively personal one, [488] even though the personal use might be the primary purpose of the purchase. [489]

The problem of determining whether a specific sale falls within the Article 2(a) exclusion (and therefore is not governed by the Vienna Sales Convention) is accentuated by Article 2(a) requiring for the inapplicability of the Convention that the (non commercial) purpose of [page 73] the purchase be known [490] (or could have been known) [491] to the seller at the time of the conclusion of the contract. [492] Consequently, it is irrelevant whether the seller knows of the non commercial purpose of the purchase after the conclusion of the contract. [493] The rationale for this exclusion is the need for certainty of law: the seller has to know whether the Uniform Sales Law or his domestic sales law is applicable. [494]

One of the interesting problems concerning this "prerequisite" relates to its burden of proof. [495] Indeed, there has been (and still is) dispute among legal scholars as to its allocation. Some authors assert that the Convention does not deal with any procedural questions [496] and, consequently, that this question should be left to domestic procedural law. [497] The better view seems to be to the contrary, [498] that is, the allocation [page 74] of the burden of proof is governed by the Uniform Sales Law, at least in some cases. [499]

In respect of the issue de quo, the burden of proof is not always placed on the seller, as has been suggested. [500] Since the buyer, as well, might be interested in the CISG's application, [501] the best solution is to adopt a more flexible rule, according to which the burden of proving the seller's impossibility of knowing (or being able to know) the buyer's purpose is placed on the party claiming the applicability of the Vienna Sales Convention. [502]

In addition to the question of the burden of proof, many authors have also dealt with the issue as to the criteria to be used in deciding whether the "personal use" purpose is recognizable. [503] In this regard, various indicia have been identified from which to infer the non commercial purpose of a sales contract [504] and, therefore, the inapplicability of the Sales Convention. [505] It has been stated, [506] for example, that the goods' destination to a non commercial use can be inferred from their being generally destined to personal use, [507] as in the case of the [page 75] purchase of clothing [508] or food. [509] On the other hand, the purchase of several pieces of the same type of goods, even where they are generally destined for personal use, might lead to the opposite presumption, [510] that is, that they are bought for something other than a personal use. [511]

There are other indicia that do not relate to the nature of the goods, but to the "buyer." [512] Where, for instance, the buyer concludes a contract acting as an agent for an enterprise or providing an enterprise's address, then his intent to eventually use the goods for non commercial purposes does not seem to be recognizable. [513] The same is true where the buyer concludes a sales contract using an enterprise's letter head, or where he uses an enterprise's office during the bargaining process. [514]

However, Article 2(a) CISG provides that the international sale of goods need not necessarily occur for personal use [515] in order to be excluded from the CISG's scope of application. [516] Indeed, Article 2(a) compares family and household use to personal use. [517] However, it is doubtful whether the express contemplation of "family [page 76] and household use" adds anything to the sphere of application of the exclusion of the sale of goods bought for personal use, since the former exclusions merely represent examples of "personal uses.'' [518] However, those who argue that "family or household use" have a meaning different and independent from "personal use," must not define these terms (family and household) by resorting to domestic law, [519] but by resorting to an interpretation which has regard to the Convention's international character and to the promotion of uniformity in its application. [520] This is why it has also been suggested that these concepts be interpreted with a sociological basis, [521] rather than with a legal one. [522] Thus, the purchase of goods for a god-child [523] or a cohabiting partner [524] will fall within the Article 2(a) exclusion.

As already pointed out, [525] the Article 2 exclusions are not only based on the purpose behind the acquisition of the goods [526] or on the type of sales contract (such as the auction sales [527] or the sales on [page 77] execution or otherwise by authority of law mentioned in Article 2(c) [528]), but also on the kind of goods sold (Article 2(d), (e) and (f)). [529]

Article 2(d), not unlike Article 5(1)(a) of the ULIS [530] as well as older Draft Conventions, [531] excludes the sales of stocks, shares, investment securities, negotiable instruments, and money from the Convention's sphere of application [532] in order to avoid a conflict between CISG rules and domestic rules which are often compulsory. [533] The view which held that the exclusion was necessary to avoid differences in the Convention's application which could arise from the excluded commercial papers not being considered "goods" in some legal systems, [534] is not tenable, since the Convention could have easily adopted a different concept of "goods" which could have included commercial papers as well. [535] [page 78]

The commercial paper referred to in Article 2(d) (which some authors consider to be a superfluous provision, because the concept of "goods," which can be deduced from the Convention, is sufficient to exclude the commercial papers listed in the provision de quo) [536] includes bills of exchange, cheques, [537] as well as other "instruments calling for the payment of money." [538] The sales of documents controlling the delivery of goods, such as warehouse receipts and bills of lading, [539] are, on the contrary, governed by the CISG rules, [540] for the real subject of those sales are the goods, rather than the documents. [541]

Article 2(d) expressly excludes the sale of money from the sphere of application of the Vienna Sales Convention. [542] If it is true, as has been suggested, [543] that in the sense of the Vienna Sales Convention [page 79] "money" means "money which is legal tender in a country," [544] then there is no reason why the CISG should not apply to the sale of money which is no longer in use. Consequently, the purchase of vintage coins from the last century by a store owner made with the intention of reselling them should be subject to the Uniform Sales Law. [545] And the same appears to be true with reference to the aforementioned negotiable instruments: if a museum, for example, intends to buy a number of shares which only have historical or artistical value, there is no reason why this sale should not be governed by the CISG.

The exclusions of the sale of ships, vessels, hovercraft and aircraft fall within the same category as the exclusion of commercial paper and money, [546] that is, sales excluded on the basis of the nature of the goods sold. [547] These exclusions, [548] which according to the Official Records of the United Nations Conference are due to the existence, in some legal systems, of rules according to which the excluded "goods" are treated as immovables, [549] have, at least partially, been provided for by the ULIS. [550] Indeed, Article 5(1)(b) of the ULIS [551] excluded the sale of ships, vessels and aircraft from the sphere of application of the 1964 Uniform Sales Law. [552] However, it did not mention the sale of hovercraft. [553] The CISG's innovation (which goes back to a proposal of the [page 80] Indian delegation at the Vienna Conference [554]) has been introduced in order to make sure that the regime of the ships and vessels apply to hovercraft as well, [555] independently from whether hovercraft are to be considered ships, vessels or aircraft. [556]

The sphere of application of the CISG's Article 2(e) exclusion is broader than the ULIS' Article 5(1)(b) exclusion for another reason, as well. [557] Whereas the ULIS merely excluded the ships, vessels and aircrafts which were subject to registration by virtue of national law, [558] the CISG, by canceling this criterion for exclusion, broadened the sphere of application of the exclusion of the sale of the foregoing "goods." [559]

The cancellation of the registration requirement has some advantages. It avoids, for instance, the examination of the difficult question as to what which ships, vessels or aircrafts are subject to the registration requirement and, therefore, fall within the scope of the exclusion. [560] However, it raises the question as to whether sales of smaller boats fall within the scope of the Article 2(e) exclusion. [561] The view, [page 81] held by several authors, [562] according to which the concept of "ship" (or "vessel") is limited to larger ships (or vessels) only, does not seem to be grounded in the text of the Vienna Sales Convention. [563] The better view is that the size of a watercraft is not a relevant criterion for the exclusion of a sale from the sphere of application of the Convention. [564] But this does not mean that all purchases of small watercraft are excluded from the CISG's sphere of application. [565] It only means that the exclusion from the Article 2(e) exception must be based upon a criterion different from the size of the watercraft, such as the functional characteristics of the watercraft. [566] Consequently, the sale of a watercraft which does not have the function ships or vessels have, i.e., the sale of a watercraft which is not permanently destined for the transport of goods or persons, does not fall within the exclusion de quo (independently from its size). [567] This is why the sale of a row boat [568] or sailing boat [569] should be governed by the Convention. [570] Indeed, these watercraft must be considered sporting goods [571] rather than means of transport. [572]

This problem is not the only one leading to doctrinal dispute. There is also disagreement among scholars as to whether the sale of [page 82] components of the goods excluded by Article 2(e) is subject to the exclusion. Some authors argue that such a sale falls within the sphere of the exclusion, at least where the components are essential elements of the good excluded ex Article 2(e). [573] Although this view is held by a learned author, [574] the better view is to the contrary, [575] as evidenced by a Hungarian Supreme Court decision [United Technologies (Pratt & Whitney) v. Malev Hungarian Airlines, Legfalsobb Biróság 25 September 1992] [576] applying the Vienna Sales Convention to a sales contract concerning aircraft engines, which certainly constitute an "essential element" of the aircraft. [577]

Finally, one has to mention the exclusion from the Convention's sphere of application of sales contracts regarding electricity. [578] According to some authors, the exclusion de quo can be justified on the ground of electricity's "unique" nature [579] or "on the ground that in many legal systems electricity is not considered to be goods." [580] Neither justification appears to be convincing. Indeed, the first one overlooks the fact that there are other goods the sale of which can create "unique" problems, [581] such as the sale of gas [582] and crude oil [583] [page 83] which, on the contrary, are governed by the Sales Convention. [584] The second one is not convincing, "because the Convention may create its own definition of goods." [585] Indeed, the exclusion of electricity sales from the sphere of application of the Vienna Sales Convention cannot be justified.

VI. CISG and Party Autonomy

Notwithstanding the presence of all the requirements for the application of the Convention, the CISG does not necessarily have to apply. [586] Indeed, by virtue of Article 6 of CISG, [587] the parties may exclude the Convention's application. [588]

By providing for this possibility, the draftsmen of the Convention de quo reaffirmed one of the general principles [589] embodied in the 1964 Hague Conventions, [590] that is, the principle according to which the primary source of the rules governing international sales contracts is party autonomy. [591] Thus, the drafters clearly acknowledged the Convention's [page 84] dispositive nature [592] and the "central role which party autonomy plays in international commerce and, particularly, in international sales." [593]

As far as party autonomy is concerned, [594] it must be pointed out that Article 6 of the Vienna Sales Convention refers to two different lines of cases: [595] one where the Convention's application is excluded in its entirety (by means of the application of a principle of private international law), [596] the other where the parties derogate from the substantive rules [597] of the Convention. [598] These two situations differ from each other in that the former does, according to the CISG, not encounter [page 85] any restrictions, [599] whereas the latter is limited in the cases where at least one of the parties has its place of business in a Contracting State whose legislation requires a contract of sale to be concluded in or evidenced by writing and therefore has made an Article 96 reservation. [600] This reservation prevents the application of the principle of "informality," that is, the parties are not allowed to derogate from the writing requirement. [601]

Party autonomy also played a very important role under the ULIS. [602] A comparison of Article 6 CISG and its "direct predecessor," [603] Article 3 ULIS, could even lead to the conclusion that under ULIS party autonomy was more widely recognized, [604] since the ULIS expressly stated that its exclusion could also be made implicitly. [605] However, this provision was later criticized. [606] Therefore, the express reference to the possibility of an implicit exclusion was not retained by the CISG, [607] even though at the Vienna Conference a proposal to reintroduce that express reference was made. [608] However, this does not mean that under the CISG the exclusion always has to be made expressly. [609] This is evidenced, inter alia, [610] by the fact that "the majority [page 86] of delegations was ... opposed to the proposal according to which a total or partial exclusion of the Convention could only be made 'expressly.'" [611] Consequently, the lack of express reference to the possibility of an implicit exclusion must not be regarded as precluding such possibility. Rather it has a different meaning: "to discourage courts from too easily inferring an 'implied' exclusion or derogation.'' [613] Therefore, an implicit exclusion must be regarded as possible, but there [page 87] must be clear indications that such an exclusion is really wanted, [614] that is, there must be a real -- as opposed to a theoretical, fictitious or hypothetical -- agreement of exclusion, [615] not unlike under the ULIS. [616]

This is not a merely theoretical problem, as evidenced by the variety of implicit exclusions used in international commerce. A typical [617] form of implicit exclusion is represented by the parties' choice of the applicable national law. [618] There is no doubt that such a choice must be considered as being an effective exclusion of the CISG, at least where the applicable law chosen by the parties is the law of a non-Contracting State. [619] This was true under the ULIS as well. [620] [page 88]

The choice of the law of a Contracting State as the law to govern the contract poses more difficult problems. [621] For instance, is the Vienna Sales Convention applicable when the parties agree upon American law being the proper law of their contract? In similar situations, it has been suggested by legal writers as well as in a recent Italian arbitral award [Ad hoc Arbitral Tribunal, Florence 19 April 1994], [622] that the indication of the law of a Contracting State ought to amount to an (implicit) exclusion of the Convention's application, because otherwise the indication of the parties would have no practical meaning. [623] However, under the CISG, not unlike under the ULIS, [624] this solution is not tenable. [625] The indication of the law of a Contracting State, if made without particular reference to the domestic law of that State, [626] does not exclude the Convention's application, [627] [page 89] as recently confirmed by several German court decisions [OLG Köln 22 February 1994; OLG Koblenz 17 September 1993; OLG Düsseldorf 8 January 1993]. [628] And this is true even where the law of a Contracting reservatory State is chosen as the applicable law. [629]

The application of the Convention does not make the national law irrelevant, as suggested; the indication of the law of a Contracting State must be interpreted as both making the CISG applicable (as part of the chosen law) and as determining the law applicable to the issues not governed by the Convention itself, such as the validity issues, [630] thus avoiding resort to the complex rules of private international law in order to determine the law applicable to the issues not governed by the CISG. [631]

Nevertheless, if under the 1964 Hague Conventions the parties have established practices between themselves according to which the [page 90] reference to the law of a Contracting State had to be interpreted as an exclusion of the Uniform Sales Law, the parties' reference to a Contracting State of the 1980 Vienna Sales Convention can also be interpreted as an implicit exclusion of the foregoing Convention. [632]

The choice of the law of a non-Contracting State does not constitute the sole kind of implicit exclusion which can be used to bar the Convention's application. [633] Indeed, in certain situations, and this was also true under the 1964 Hague Conventions, [634] the use of standard contract forms can exclude the Convention's application, [635] as long as (a) their contents are so profoundly influenced by the rules and the concepts of a specific legal system that their use is incompatible with the rules of the Convention and implicitly manifests the parties' intention to have the contract governed by that legal system [636] and (b) their use tends at the same time to exclude the application of the CISG as a whole. [637] Where, on the contrary, standard contract forms are intended [page 91] to merely regulate specific issues in contrast with the Convention, one must presume that only a partial exclusion of the CISG is wanted. [638]

Furthermore, the choice of a forum as well can lead to the exclusion of the Convention's application, [639] and the same is true with reference to the choice of an arbitration tribunal, [640] provided that two requirements are met: (a) one must be able to infer from the parties' choice their clear intention to have the domestic law of the State where the forum or arbitral tribunal is located govern their contract, [641] and (b) the forum or arbitral tribunal must not be located in a Contracting State, [642] otherwise the Vienna Sales Convention is applicable. [643]

Finally, the parties can exclude the Convention's application by agreeing that specific issues of their contract be subject to specific provisions of a law different than the Uniform Sales Law, provided, however, that those issue are fundamental ones [644] and that from the subjection of those issues to a domestic sales law one can infer the parties' clear intention to have the contract governed by a law different from [page 92] the uniform one, as pointed out by various court decisions rendered in respect of the Hague Conventions. [645]

It is, however, not always necessary that the parties agree upon the exclusion of the CISG for it to be inapplicable. [646] Indeed, the buyer can exclude the CISG unilaterally: by declaring that the goods are bought for personal use. According to Article 2(a) CISG, a similar statement will lead to the exclusion of the CISG's applicability.

In addition to problems concerning the implicit exclusion of the Vienna Sales Convention, problems can also arise with respect to its explicit exclusion. In this respect, two lines of cases have to be distinguished: the exclusion with and the exclusion without indication of the law applicable to the contract between the parties. [647]

Nulla quaestio in the case in which the Convention's application is excluded with the indication of the applicable law, an indication which can, not unlike under the Hague Conventions, [648] also be made in the course of a legal proceeding, at least where this is admissible by virtue of the applicable rules of civil procedure, [649] even though the parties will normally make their choice before the conclusion of the contract. [650] In [page 93] this case, the judge has to apply the law chosen by the parties, [651] and it is this law on the basis of which he has to decide upon the validity of the choice of law, at least where the applicable rules of private international law correspond to those laid down in the 1980 Rome Convention. [652] Where the parties' choice of law is invalid, the contract should be governed by the law to be determined on the basis of the rules of private international law of the forum, [653] rather than by the Vienna Sales Convention. [654]

Quid iuris, however, in the case of an express exclusion without indication of the applicable law? [655] In this case, the preferable view, held by most legal scholars, [656] is the one according to which "if the parties merely agree that the Convention does not apply, rules of private international law would determine the applicable domestic law." [657] [page 94] And whenever these rules refer to the law of a Contracting State, its domestic sales law, not the uniform one, should apply. [658]

Undoubtedly, this rule applies in the cases in which the Convention is excluded in toto. [659] However, its application to the cases in which the Convention's application is excluded only partially created disagreement among legal scholars. Some authors favor the view according to which the issues dealt with in the excluded provisions must be settled, according to Article 7(2) of the CISG, [660] in conformity with the Convention's general principles. [661] The better view seems to the contrary: the rules to substitute the excluded CISG provisions are to be determined, not unlike the case of an exclusion in toto of the Convention, by applying the rules of private international law (of the forum State) [662] -- without resorting to the general principles of the CISG -- otherwise the exclusion would have no practical meaning. Indeed, it would make little sense to substitute specific solutions provided for by the Convention and which, therefore, are necessarily in conformity with its general principles, with solutions "in conformity with the general principles on which [the Convention] is based." [663]

As stated, the Vienna Sales Convention expressly provides for the parties' possibility of excluding its application. [664] On the contrary, the Convention does not address the issue of whether the party may make [page 95] the Convention applicable when it would otherwise not apply, [665] that is, where the prerequisites for its application are not met. [666]

This gap did not exist in the ULIS which contained a provision, Article 4, [667]that expressly provided for the parties' possibility of "opting-in." [668] However, this omission should not be interpreted as preventing the parties from being entitled to do so. [669] This is evidenced by the fact that the proposal (made by the German Democratic Republic), [670] [page 96] according to which the Convention should apply even where the preconditions for its application are not met, was rejected on the sole ground that to get to the admission of such possibility, an express provision was not necessary, [671] because of the already existing principle of party autonomy. [672]

As far as the significance of the parties' "opting-in" is concerned, it must be emphasized that by virtue of the "opting-in," the Convention becomes part of the contract not unlike any other contractual clause, [673] consequently, it must be presumed, that "[t]he mandatory rules of the applicable law are ... not affected by this [opting-in]." [674]

In order to decide whether the Vienna Sales Convention is applicable, it is not sufficient, unlike under the 1964 Hague Conventions, [675] to consider the internationality of the sales contract. [676] Indeed, in order [page 97] for the CISG to be applicable, a substantial relation between the contract and a State which has ratified or acceded to it is required (Article l). [677] Furthermore, the Convention governs the contract only where its application is not excluded either by virtue of party autonomy (Article 6) [678] or by virtue of the Convention itself (Article 2). [679]

However, the existence of all preconditions for application does not mean that all the issues arising from an international sales contract are governed by the Convention. There are, indeed, issues expressly excluded from the sphere of application of the Convention. In that regard, Article 4 of CISG [680] states that both the validity of the contract [681] and the transfer of property [682] are not governed by the Convention. [683] Moreover, Article 5 of the CISG [684] states that the Convention does not deal with the liability of the seller for death or personal injury caused by the goods to any person. [685] [page 98]

Thus, a first conclusion can be drawn: the most important issue is the one of the Convention's applicability. This is why the knowledge of the rules dealing with its sphere of application are (and always will be) essential to the Convention's application.

VII. The Examination and Notification in Case of Non-Conformity of the Goods

One of the most important issues of the CISG -- apart, of course, from its applicability -- appears to be the issue of the examination of the goods bought and the notice to be given to the seller in case of non-conformity of the goods, [686] for which the CISG provides an exhaustive set of rules [687] derived from its predecessor, the ULIS. [688]

The complexity as well as the importance of this issue [689] becomes apparent, if one considers the consequences of the lack of a proper notification, an issue which was very much debated during the 1980 Diplomatic Conference, [690] as evidenced by the Official Records of the United Nations Conference. [691] According to the wording of Article 39 CISG, [692] it appears that the failure to give proper notice not only [page 99] "would bar the full range of remedies: a claim for damages (Art. 45(1)(b) and 74-77), requiring performance by the seller (Art. 46), avoidance of the contract (Art. 49) and reduction of the price (Art. 50)," [693] but also that it would exclude all claims after two years, independently from whether the non-conformity was discoverable during that time. [694] However, Article 39 cannot be considered alone. [695] Indeed, the CISG contains two provisions, Articles 40 [696] and 44, [697] which mitigate the rigor of the foregoing provision and which were introduced upon the insistence of the developing countries, [698] which considered the loss of all rights and the absolute exclusion of all claims after two years as being too harsh a solution. [699] This is why one will focus not only on Article 39, but also on the articles with which it is interrelated, such as the aforementioned ones, as well as Article 38, which stresses the importance of a timely examination of the goods, which, however, is relevant "only for the preparation of the notification that Article 39 requires." [700]

At this point, it is important to examine when the buyer is required to notify sellers of the lack of conformity. In this regard, it has [page 100] been said that the concept of "lack of conformity" [701] relevant under Article 39 CISG is to be derived from Article 35 CISG. [702] According to this provision, [703] there is lack of conformity, [704] for example, when there is a defect in quality, as in cases [705] where shoes bought do not have the color agreed upon in the contract [OLG Frankfurt (Germany) 18 January 1994], [706] or where their front part has an ornament the parties had not agreed upon [LG Aachen (Germany) 3 April 1990]. [707] However, according to a very recent German Supreme Court decision [BGH 8 March 1995], there is no lack [page 101] of quality where mussels bought contain a quantity of a dangerous substance higher than that indicated as a limit by the government of the country where the buyer has its place of business. [708]

Furthermore, there is lack of conformity, not unlike under the ULIS, [709] where there is a defect in respect of the quantity, the description and the packaging of the goods, [710] independently from the circumstances originating the defects. [711] And even though Article 39 CISG merely refers to the "lack of conformity of the goods," it is here suggested that the notice requirement also applies where the defect relates to the documents rather than to the goods themselves, [712] not unlike under the ULIS, on the grounds not only that "the Convention is drafted on the assumption that goods will often be delivered by way of documents," [713] but also because otherwise Article 34 CISG, [714] which allows for the seller's right to cure any lack of conformity in the documents, would have only scarce value. [715]

Quid iuris where the seller delivers an aliud, i.e., goods quite different from those specified in the contract? Does the buyer in this case [page 102] have to notify the seller in order not to lose the right to rely on the lack of conformity? Under the ULIS, this question did not cause any difficulties, since Article 33(b) ULIS [716] expressly stated that the delivery of an aliud could be analogized to the delivery of non-conforming goods. [717] Even though the CISG does not expressly provide for a similar solution, it must not be doubted that the notification requirement applies in this line of cases as well. [718] Thus, "[n]otification must also be given where entirely different goods are delivered." [719] A different solution would contrast with the ratio of Article 39 CISG: the seller has to be put in a position where he can examine the goods to ascertain whether a claim is justified and, if so, cure any lack of conformity. [720] [page 103]

[Note that several recent court decisions have stated that the ratio behind Article 39 CISG is the need for the seller to be put in a position to know whether his claim for the payment of the price can be barred by any counterclaim, see, e.g., [BGH (Germany) 8 March 1995; OLG Düsseldorf (Germany) 8 January 1993.]

Before discussing the time requirement for a proper notice as laid down in Article 39 CISG, it is useful to focus, at least briefly, on Article 38 CISG, this Article being prefatory to Article 39. [721] Indeed, it is Article 38 [722] which, by laying down the rule according to which the buyer must examine the goods, or cause them to be examined, within as short a period of time as is practicable under the circumstances of the case, sets forth the time when the buyer ought to have discovered the defect [OLG Düsseldorf (Germany) 8 January 1993], [723] i.e., the time after the lapse of which the buyer has only a reasonable period of time within which to notify the seller of the lack of conformity in order not to lose his rights. [724] It must be pointed out, however, that even though the examination of the goods generally constitutes a prerequisite for the application of the notice requirement, the [page 104] lack thereof does not per se [725] lead to the loss of the buyer's rights, [726] not unlike under the ULIS. [727] This is true, for instance, where the buyer does not inspect the goods and the lack of conformity cannot be discovered by examining the goods. [728] The contrary is true, too: "[i]f the buyer discovers a non-conformity without examining the goods, he ... has to notify the seller." [729]

As far as the period of time is concerned within which the inspection must occur, it must be pointed out that Article 38 CISG, not unlike its predecessor, Article 38 ULIS, does not fix a specific time limit. [730] However, the CISG's period of time differs from that provided for by Article 38 ULIS according to which the examination had to be made "promptly," [731] since it requires that the inspection be made within a "short period." [732] Contrary to what statements made by various commentators have suggested, [733] an immediate examination is not necessary, [734] although it surely would avoid all doubts [LG Aachen (Germany) 3 April 1990]. [735] [page 105]

From what has just been said, it follows that one should refrain from applying solutions elaborated in respect of the time requirement set forth in Article 38 ULIS to that laid down in Article 38 CISG. [736] Indeed, whereas the ULIS formula gave the same (very short and rigid) [737] indication for every case and, thus, lacked flexibility, [738] "the [1980] Convention has adopted a more flexible criterion than ULIS, because it allows an appropriate reference to different situations." [739] This does not mean, however, that all circumstances must be taken into consideration, but only the objective ones. [740] Therefore, "[i]mpediments relating personally to the buyer or to those in charge of examining the goods are not relevant," [741] unlike a general strike which, for instance, must be considered as being relevant under Article 38 CISG. [742] In respect of the goods bought, the aforementioned rule results not only in the "short period" for inspection being longer where the goods to be examined are -- from a technological point of view -- more sophisticated, [743] but also in its being shorter where the goods bought are perishable. [744] [page 106]

As far as the inspection itself is concerned, the period for which commences generally [745] after the receipt of the goods, [746] Article 38 CISG does not specify what criteria should be used. However, from the legislative history as well as from the text of Article 38 itself, it can be derived that, unlike under the ULIS, [747] the criteria for inspection cannot be based upon "the law or usage of the place where the examination takes place,'' [748] mainly because of the international nature of the contract. [749] As far as the standard for inspection is concerned, it has also been suggested that the buyer (or someone of his staff or even a third person authorized to do so) [750] does not have to make extraordinary efforts; [751] it is sufficient that in inspecting the goods he employs the skills of a reasonable person of the same kind, [752] i.e., of a reasonable person involved in a contract of the same type in the particular trade concerned. [753] Indeed, "a party would not be expected to discover a lack of conformity of the goods if he neither had nor had available the necessary technical facilities and expertise, even though other buyers [page 107] in a different situation might be expected to discover [the] lack of conformity." [754] However, where previous deliveries of the same goods by the same seller lacked conformity, the standard in inspecting the goods has to be higher, as pointed out by a German court [LG Stuttgart 31 August 1989]. [755]

As mentioned above, [756] from the time he discovers or ought to have discovered the lack of conformity, the buyer must send [757] notice of it to the seller "within a reasonable time.'' [758] But what is a "reasonable time" under Article 39 CISG? It is here suggested that the "reasonable time" cannot be analogized to the period of time required under Article 39(1) ULIS, [759] which asked for a "prompt" notification. Indeed, the time requirement of ULIS was shorter. [760] This is why one must be careful in using case decisions rendered in applying the ULIS. [761] In this respect, two basic rules can be established: (a) a notice which under the ULIS was considered late, does not necessarily have to be considered as being late under the CISG; (b) a notice considered to be given in time under the ULIS is to be considered in time under the CISG as well.

However, the CISG time requirement is not only more generous from a temporal point of view, but it is also more flexible than that of the ULIS. [762] Indeed, in determining the "reasonable time" one must [page 108] have regard to the circumstances of the case, [763] for instance whether the buyer intends to reject the goods or keep them and claim damages. [764] In determining the period of time de quo, other circumstances have to be taken into account as well, [765] such as the perishability of the goods. [766] Indeed, where the goods are perishable, the "reasonable time" period must be shorter, [767] and this is why it is not surprising that a German court has recently decided that a notice given 7 days after the delivery of gherkins is unreasonable, i.e., too late [OLG Düsseldorf 8 January 1993; see, however, BGH 8 March 1995, also involving perishable goods (mussels) in which the German Supreme Court stated that a one month period would have been "reasonable"]. [768] Where the goods are not perishable, the period for notice may be longer. However, [page 109] stating, as two very recent arbitral awards have done, that two months are "reasonable," [Austrian Arbitral Award 4318 and Austrian Arbitral Award 4366 (both dated 15 June 1994] [769] appears to be exaggerated.

Furthermore, the terms of the contract are to be taken into consideration as well. [770] And since Article 39 is dispositive, [771] the parties may agree upon a specific time period within which the notice of lack of conformity has to occur, [772] as pointed out by several court decisions [LG Giessen (Germany) 5 July 1994; LG Baden-Baden (Germany) 14 August 1991; OLG Saarbrücken (Germany) 13 January 1993]. [773]

Apart from the relative [774] time period for notice required by Article 39(1), the CISG also contains an absolute, [775] inflexible "outer time limit" [776] beyond which no notice, not even one that would satisfy the Article 39(1) requirements, can avoid the loss of the buyer's right to rely on the lack of conformity. [777] This latter period -- which, compared to some domestic law rules, has been considered as being pro-buyer [778] -- differs from the former one not only on the grounds of its [page 110] inflexibility, but also because it starts to run from the time the goods are actually handed over to the buyer, [779] without it being possible to interrupt its running. [780] Even though in some instances this rule may lead to harsh results, as in the case where "an importer has to meet domestic claims for a latent nonconformity which becomes apparent more than two years after delivery but is unable to claim against the seller because the importing contract is governed by the convention," [781] this provision was considered as being necessary in order to protect the seller against claims which may arise long after the delivery of the goods. [782]

In order to bar the loss of the right to rely on the lack of conformity, it is not sufficient, however, that the buyer notifies the seller in time. In effect, according to Article 39(1) CISG, the buyer must also "specify the lack of conformity" in order to give the seller the possibility to decide how to react to the buyers claim [783] (by examining the goods himself, by remedying the lack of conformity by repair or by delivering substitute goods). [784] Thus, the lack of conformity must be so [page 111] specific as to enable the seller to take that decision. [785] Not unlike under the ULIS, [786] a notice that merely states that the goods are defective cannot be considered a proper notice in the sense of Article 39(1). [787] The same is true in respect of a notice concerning defective fashion goods which says no more than "poor workmanship and improper fitting" [LG München (Germany) 3 July 1989] [788] or a notice regarding defective shoes which just states that "the goods are defective in all makings" [OLG Frankfurt (Germany) 18 January 1994]. [789] A notice which merely states that the shoes bought "are partially very badly stitched" [790] does not fulfill the Article 39(1) requirement either. [791] This does not mean, however, that the buyer must specify the defects in all details, since that would signify to locate the risk of the breach of contract with the buyer. [792] However, the notice must contain the indication of the defective goods, [793] their approximate quantity [794] as well as the result of the inspection of the goods. [795] As far as the form of the notice is concerned, Article 39 does not require any specific form; thus, it can be given both in writing or orally, [796] and also via phone [LG Stuttgart (Germany) 31 August 1989]. [797] [page 112]

As mentioned above, [798] according to Article 39 CISG an improper notice by the buyer leads to the loss of his right to rely on the lack of conformity, i.e., an improper notice bars the full range of the buyer's remedies, from the avoidance of the contract [799] to the reduction of the price. [800]

However, according to Article 40 CISG, [801] an improper notice by the buyer does not lead to the loss of his right to rely on the lack of conformity, if this lack of conformity relates to facts which the seller knew or coul