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Reproduced with permission from 27 American Journal of Comparative Law (1979) 223-231

The Draft Convention on Contracts for the International Sale of Goods:
An Overview

John Honnold

[INTRODUCTION]

On 16 June 1978 the U.N. Commission on International Trade Law (UNCITRAL) unanimously approved the text of the Draft Convention on Contracts for the International Sale of Goods; on 16 December 1978 the U.N. General Assembly convened an international conference of plenipotentiaries for 1980 to adopt the final text.[1] In view of the overwhelming international support for this project one may predict that the new Convention will be widely adopted and, at long last, will establish a unified world-wide legal structure for international sales.

How did a legal development of this significance come to pass? What are the salient features of the new legal rules for international sales?

Origins

In the 1930s, as central Europe was moving towards the madness that soon would destroy much of the world, a few idealistic and scholarly minds were looking in a different direction. In 1935, under the sponsorship of the International Institute for the Unification of Private Law (UNDROIT ), a distinguished group of European scholars produced a preliminary draft of a uniform law for the international sale of goods.[2] Even while the war-rubble was being removed, the scholars returned to their task, and in 1951 an international conference of 21 nations encouraged further development of the [page 223] project.[3] In 1956 and in 1963 revised drafts were sent to governments for comments; in the meantime a draft of a uniform law on the formation of contracts for the international sale of goods was prepared and circulated for comments.[4] A diplomatic conference to finalize these two laws was convoked for April 1964 at the Hague.

On the eve of this conference, the United States roused from its lethargy. In December 1963 Congress authorized the United States to join the Rome Institute,[5] and the State Department hastily organized a delegation to represent the U.S. at the diplomatic conference. This conference of 28 States, after three intense and hectic weeks, finalized two Conventions; one included a Uniform Law on the International Sale of Goods (ULIS) and the other a Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF).[6] In 1972, both Conventions went into effect, following ratification by 5 States; adherents, for the most part, are European.[7] [page 224]

UNCITRAL and the Sales Unification

In 1968, when UNCITRAL began to organize its program for the unification of law for international trade, by common consent priority was given to work on international sales.[8] The more difficult question was whether UNCITRAL should promote widespread adoption of the two 1964 Conventions (as it did with respect to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards) or whether it should prepare new legal texts.

The crucial question was whether efforts to secure widespread adoption of the 1964 conventions would be fruitful. Consequently, the Commission requested the Secretary-General to transmit the text of the two 1964 conventions, with Professor Tunc's commentary, to governments, and to ask whether they intended to adhere to these Conventions, with the reasons for their position.[9]

The replies laid the foundation for the Commission's decisions at its second (1969) session.[10] It there became evident that the 1964 Conventions, despite the valuable work they reflected, would not receive adequate adherence. To many States and delegates in UNCITRAL, the conventions were unacceptable because of serious technical flaws with respect to policy and clarity; some of these will be discussed in connection with UNCITRAL's revision of these texts.[11] Lack of clarity resulted, in part, from inadequate participaton in the drafting process by representatives of different legal backgrounds; despite efforts by UNIDROIT to encourage wider participation, the 1964 Conventions were essentially the product of the Civil law tradition of Western Europe.[12]

To deal with these problems, UNCITRAL established a Working Group of 14 States, comprising a cross-section of UNCITRAL's world-wide representation, and authorized it to prepare revisions of [page 225] the 1964 texts or prepare a new text that would facilitate "wider acceptance by countries of different legal, social and economic systems."[13] The Working Group completed this task in 9 annual sessions under the effective chairmanship of Professor Jorge Barrera Graf of Mexico. In 1976 the Working Group issued a thorough revision of the 1964 ULIS, embodied in a Draft Convention on the International Sale of Goods.[14] In 1978 the Working Group also completed its revision of the 1964 Uniform Law on Formation, embodied in a Draft Convention on the Formation of Contracts for the International Sale of Goods.[15] In June 1978 the full Commission completed its review of these two drafts, and combined them in a Draft Convention that dealt both with the formation of the sales contract and with the substantive rights of the contractual parties. As noted earlier, the full Commission then gave unanimous approval to this 1978 Draft Convention on Contracts for the International Sale of Goods. One of the missions of this part of the Symposium is to contribute to the review of the 1978 Draft in advance of its finalization in 1980 by the diplomatic conference, which is now scheduled to convene in Vienna on 10 March 1980.

The full text of the 1978 Draft Convention appears infra at II-H.[16]

Salient Features

Scope: The International Sale; Conflicts Rules

The typical law for domestic unification, like the Uniform Commercial Code (UCC), and even some measures for international unification, like the Geneva Conventions of 1930 and 1931 on [page 226] negotiable instruments, extend to local transactions.[17] This approach is not however feasible for the sales of goods; the Hague unifications and the UNCITRAL Draft Convention apply only to international sales.

What is an "international sale"? The 1964 rules were complex; the course of redrafting, the test of internationality has been simplified: the test is met when the places of business of the seller and buyer "are in different States."[18]

Certain types of commodities and transactions are excluded from the Draft Convention. The most significant change from ULIS was the exclusion of sales of goods "bought for personal, family or household use." This modification did not greatly reduce the Convention's scope since most international sales are for commercial purposes. But this step enormously simplified drafting by avoiding fears of collision between the Convention and various types of legislation designed to protect consumers.[19]

A more dramatic change involved the following question: what contact between an international sale and a State that has adopted the Convention (a "Contracting State") will invoke the international rules? Under ULIS, there need be no contact: for example, ULIS directs Germany, as a ratifying state, to apply ULIS to a sale between Canada and the U.S. even though neither had ratified the 1964 Hague Convention and the transaction had no contact with Germany or any other Contracting State.[20]

This enthusiastic rule excluding all rules of private international law was offered to give the world the greatest possible benefits of the new international rules. But this view, like similar justifications for a slightly less greedy rule in the 1952 draft of the UCC, failed to [page 227] satisfy specialists in conflicts law or the representatives of many States. The 1978 Draft Convention therefore follows a much more conservative path, the Convention being applicable only (a) when the States of both the seller and buyer "are Contracting States" or (b) "when the rules of private international law lead to the application of the law of a Contracting State."[21] Of course, this inability to escape from the vagaries of conflicts rules should add impetus to measures for achieving effective international unification also in that area.[22]

Structural Changes for Clarity, Simplicity and Practicality

"Ipso facto" Avoidance and the Need to Know. When may a buyer refuse to accept defective performance tendered by the seller? Under the UCC, the buyer may in some circumstances reject the goods or, after acceptance, may revoke his acceptance; in any case, the buyer must notify the seller.[23] Such notification is a normal aspect of decent commercial relations, since the trading partner needs to know where he stands so he can avoid wasted expense in further performance and take steps to salvage and redispose of abandoned goods.

Under ULIS and the Draft Convention the buyer's remedy in all these circumstances is called "avoidance of the contract." The problem was that under ULIS "avoidance" came in two varieties: (1) a declaration of avoidance (which gave the other party the needed information) and (2) an automatic "avoidance" that occurred without any communication between the parties. The latter type, in the, French text, was called résolution de plein droit; the translators, in desperation, rendered this into "English" as "ipso facto" avoidance. The difficulty is not primarily one of language -- although one would scarcely recommend such mystical terms for an international draft in view of the problems of translation and of construction in the setting of widely diverse legal idioms. The principal difficulty was that ipso facto avoidance, occurring only in the mind of an omniscient legal deity, kept mortal merchants from knowing where they stood and what they needed to do next.[24] [page 228]

Fortunately, the remedy was easy and prompt. One of the first decisions of the UNCITRAL Working Group was to jettison ipso facto avoidance; under the Draft Convention "avoidance" occurs only by "declaration" and "is effective only if made to the other party."[25]

Another Elegant, Untranslatable and Mischievous Concept: "Délivrance." Students of the development of sales law will recall the ambiguity and artificiality that flowed from the Common law use of "property" as a solvent for a wide range of problems -- a difficulty happily laid to rest by the UCC. ULIS avoided the use of "property," but generated similar problems with the key concept of délivrance (in the original French text) for a series of disparate problems, such as risk of loss and the time for payment of the price.

The problem is discussed in terms of the French word délivrance, for this term is too elegant and idiomatic for translation into any simple word or phrase in English and in other languages.[26] Worse, the complexity of the concept led ULIS into unintended and unfortunate results with respect to risk of loss and the fixing of the time for payment of the price.[27]

The problems are complex and subtle; fortunately we can foreshorten the discussion by noting that the UNCITRAL Convention abjures délivrance as a general criterion, and directly addresses important problems, such as risk and the time for payment, in terms of standard commercial events in the performance of the contract.[28] The result is a significant gain in clarity and also in practicality of result. Readers of this Symposium will have the opportunity to test this hypothesis in the settings of the Draft Convention's rules on risk of loss.[29] [page 229]

Envoi

Books have already been written about uniform law for international sales; countless articles and many books lie in the future. The most that can be done here is to suggest the processes of work and growth that occurred in the early development of the topic and in the recent work by the United Nations. It remains for the balance of this Part of the Symposium to explore some of the most challenging problems under the Draft Convention: Force Majeure and Frustration; The Remedy of Reduction of Price; Damages and Specific Relief; Cancellation of Contract; Risk of Loss; and Formation of Contracts. [page 230]


FOOTNOTES

1. The text of the 1978 UNCITRAL Draft Convention on Contracts for the International Sale of Goods (herein "Draft Convention"), appears in UNCITRAL, Report on Eleventh Session (1978) at 10-30. The text is also set forth in this Part, infra at II-H. The resolution of the U.N. General Assembly is A/Res./33/93, 16 December 1978.

2. The International Institute for the Unification of Private Law is an intergovernmental organization with headquarters in Rome. References to fuller accounts of the background of the early work on sales may be found in Honnold, "A Uniform Law for International Sales," 107 U. Pa. L. Rev. 209, at 302 n. 5 (1959). The basic scholarly underpinning was provided by a comparative study of the law of sales, Rabel, Das Recht des Warenkaufs (I: 1930, II: 1958).

3. Rabel, "The Hague Conference on the Unification of Sales Law," 1 Am. J. Comp. L. 59 (1952) UNIDROIT, Unification of Law 31 (1954). The U.S. did not participate, but was registered as an "observer" based on attendance by a staff member of the local embassy.

4. The U.S. was invited to comment on these drafts but failed to respond.

5. The legislation of December 1963 authorized membership in both the International Institute for the Unification of Private Law and the Hague Conference on Private International Law, a permanent organization at the Hague devoted to problems of conflict of laws. 77 Stat. 775 (1963), 22 U.S.C. § 269. To help guide the Government’s new relationship with UNIDROIT and the Hague Conference, in February 1964 the Secretary of State established an Advisory Committee on Private International Law; this Committee continues to function as the focal point for advice on U.S. participation in a growing area of international law-making, including the work of UNCITRAL. See Nadelmann, "American Private International Law in the Institute of International Law: A Plea," 20 Am. J. Comp. L. 331-32 (1972).

6. The law-making processes were examined and ULIS was analyzed in Honnold, "The Uniform Law for the International Sale of Goods: The Hague Convention of 1964," 30 Law & C.P. 326 (1965). The writer, a member of the U.S. delegation, was also a member of the Conference Drafting Committee.

The proceedings and documents are fully reproduced in Diplomatic Conference on the Unification of Law Governing the International Sale of Goods, The Hague, 2-25 April (1964) Vol. I: Records; Vol. II: Documents (1966). These two conventions are also set forth in I U.N. Register of Trade Law Texts 39 (ULIS), 64 (ULF). Volume I of this Register sets forth Conventions and Uniform Trade Terms for Sales and for International Payments. Volume II of the Register embraces Arbitration and Shipping. The text of ULIS may also be found in 13 Am. J. Comp. L. 453-72 (1964); that of ULF, id. 472-77. See also Bibliography: International Sale of Goods, Part II-I infra.

7. The Sales Convention has been ratified or acceded to by Belgium, Federal Republic of Germany, United Kingdom, Gambia, Israel, Italy, Netherlands and San Marino. Ratification by the United Kingdom was subject to a reservation (permitted under Art. V) making the Uniform Law applicable only when the parties have "chosen that law as the law of the contract." The Formation Convention has been ratified or acceded to by the above States, with the exception of Israel. See Dölle, Kommentar Zum Einheitlichen Kaufrecht 2, 668 (1976). Current authoritative information on ratification must be obtained from the Ministry of Justice of the Netherlands, the depositary.

8. On the establishment of UNCITRAL, see the General Introduction to this Symposium, I-A supra. At its first session, UNCITRAL decided that the international sale of goods would be one of the three priority topics. UNCITRAL, Report on First Session (1968) A/7216, reprinted in I Yearbook 71, 77-78.

9. Id. 79. The commentary by Professor Tunc, a draftsman of ULIS, was included at the end of Volume I (pp. 355-391) of the proceedings of the 1964 Conference, supra n. 6. The inquiry concerning the 1964 Conventions was sent to all States that were members of the U.N. and any of its specialized agencies.

10. The text of the replies was set forth in document A/CN.9/11 and Addenda 1-4. An analyses of these replies, organized by articles of the Conventions (A/CN.9/17 and A/CN.9/31) is reprinted in I Yearbook 159-176.

11. See infra text at n. 17-29. For problems revealed by analysis of the Conventions see also: Nadelmann, "The Uniform Law on the International Sale of Goods: A Conflict of Laws Imbroglio," 74 Yale L.J. 449 (1965); Honnold, supra n. 6.

12. Of the 28 states at the 1964 Hague Conference, 19 were from Western Europe. From Eastern Europe -- Bulgaria, Hungary and Yugoslavia (the absence of the USSR proved to be significant); from Latin America -- only Colombia (a representative from the local embassy); from Asia -- only Japan (the absence of India and Pakistan is significant); from Africa -- only the U.A.R.

13. UNCITRAL, Report on Second Session (1969) para. 38, I Yearbook 99-100. The members of the Working Group were Brazil, France, Ghana, Hungary, India, Iran, Japan, Kenya, Mexico, Norway, Tunisia, U.S.S.R., U.K. and U.S.A. Later the membership was increased to 15; new members (some as replacements for States that failed to gain reelection to the Commission) were Austria, Czechoslovakia, the Philippines and Sierra Leone. The Working Group also profited from the participation, as observers, of several international organizations, including UNIDROIT, the Hague Conference on Private International Law, ICC, ECE, COMECON and OAS.

14. The text of the 1976 Draft Convention on Formation, as prepared by the Working Group, appears in VII Yearbook 89-96. For a Commentary on this draft by the Secretariat, see id. 96-142.

15. The text of the separate Draft Convention on Formation, as prepared by the Working Group, appears in Working Group, Report on Ninth Session (1977) A/CN.9/142, Addendum 1, and will be reproduced in IX Yearbook: 1978.

16. See supra n. 1. Although the 1978 Draft Convention includes both provisions on formation (Part II) and on the rights of the parties to the contract (Part III), the final clauses of the Convention will permit States to adhere to only one of these two parts. (Part 1, Sphere of Application and General Provisions, would also be adopted along with Part II or Part III.) UNCITRAL, Report on Eleventh Session (1978) paras. 21, 27 (sub-para.2(b)), pp. 8-9.

17. Convention Providing a Uniform Law for Bills of Exchange and Promissory Notes, Signed at Geneva, 7 June 1930, I U.N. Register of Trade Law Texts 154; Convention Providing a Uniform Law for Cheques, Signed at Geneva, 19 March 1931, id. 192. The same pervasive scope has been characteristic of measures to unify Scandinavian law.

18. Draft Convention, art. 1(1); ULIS (1964), art. 1(1). ULIS however did not face the common problem where a party has two places of business; the Draft Convention deals with this in art. 9. ULIS, in addition, required an international aspect based on whether contract "involved" interstate movement of goods or whether the offer and acceptance had an international character. Analysis showed that these additional tests of ULIS were difficult to apply to concrete situations. See Report of Secretary-General, VI Yearbook 88 (paras. 6-8).

19. Draft Convention, art. 2(a). Other exclusions appear in art. 2(b)-(f).

20. ULIS art. 2: "Rules of private international law shall be excluded for the purposes of the application of the present Law, subject to any provision to the contrary in the said Law." At the 1964 Conference, an attempt led by the U.K. and the U.S.A. to eliminate this provision failed by an equally divided vote. The most that these opponents could achieve were provisions in arts. III, IV, and V of the Convention permitting ratification subject to various types of reservations limiting the Convention’s rules on scope. Such limits, of course, give no protection against application of the Convention by fora of States that ratify without such a reservation.

21. Draft Convention, art. 1(1).

22. One of the conventions prepared by the Hagues Conference on Private International Law, The Convention on the Law Applicable to International Sale of Goods, 15 June 1955 has been ratified by several European states, and entered into force on 3 May 1964. I U.N. Register of Trade Law Texts 5; 510 U.N.T.S. 149, No. 7411 (1964).

23. UCC 2-602(1) (notification in event of rejection); 2-608(2) (notification on revocation of acceptance). Cf. 2-309(3) (notice of termination), 2-503(1) (notice of tender), 2-616(1) notice of termination; 2-703(f), 2-711(1), and 2-720 ("cancellation," which also implies notification).

24. See Honnold, supra n. 6 at 326, 347-348. The writer, some years after expressing the above concerns with respect to the unsuitability of this (and similar) terms for international drafting, had the point driven home when a U.N. translator telephoned to beg for help about how to translate "ipso facto avoidance" into Chinese. And, since we were not face to face, I could not use Edna St. Vincent Millay’s comment that one who is asked to translate "Home Sweet Home" into French "will be pardoned if he does a little gesticulating." (International draftsmen could profit from Millay’s introduction to the Dillon & Millay translation of Baudelaire, Les Fleurs du Mal (1962) at xxiii.)

25. Draft Convention, arts. 45 (declaration by buyer), 60 (declaration by seller), 24 (necessity for notice). On the proceedings in UNCITRAL see Report of Secretary-General, "Ipso Facto Avoidance in ULIS," III Yearbook 41-54; Working Group, Report on First Session (1972), I Yearbook 177, 184-185.

26. Honnold, supra n. 2 at 318, n. 51. The English text, for lack of an alternative, translated délivrance as "delivery" although under ULIS délivrance may not occur even after goods have been handed over to and used (or even consumed) by the buyer. See id. 317-318.

27. Id. 324-326.

28. Report of the Secretary-General, "Delivery in ULIS," III Yearbook 31-41; Working Group, Report on Fourth Session (1972) paras. 16-21, IV Yearbook 36, 62-63; Report of Secretary-General, "Pending Questions with respect to the Revised Text of ULIS," VI Yearbook 88, 97 (para. 82).

29. See the article by Roth infra at II-F.


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