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Reproduced with permission of 9 Vindobona Journal of International Commercial Law & Arbitration (2005) 17-42.

Exceptions to the Notification Rule -- Are They Uniformly Interpreted?

Camilla Baasch Andersen [a1]

  1. Introduction to the provisions
  2. Introductions to the problems of the provisions
  3. Problems of uniformity in the provisions
  4. Conclusion


The notification requirements in Art. 39 of the CISG have, by many scholars, been considered drastically sanctioned rules in the Convention, and their consequences are indeed dramatic: if sufficient and timely notice has not been given, the buyer cannot rely on any non-conformity of the goods, and has no remedies available to him.[1] There are, however, two exceptions to this rule, in Arts. 40 and 44 of the CISG, which act as 'safety-valves' in cases where notice is not given within the time periods prescribed by Art. 39. The first exception is found in Art. 40 CISG.

Article 40 provides:

"The seller is not entitled to rely on the provisions of articles 38 and 39 if the lack of conformity relates to facts of which he knew or could not have been unaware and which he did not disclose to the buyer."

In other words, the seller in a particular degree of bad faith is not protected by his right to a proper examination and consequent notification. It applies to Arts. 38 and 39 -- the extension to encompass Art. 38 seeming peculiar when considering that this provision is sanctioned only via Art. 39. However, this extension is not significant, as it merely reflects the entity of Arts. 38 and 39 as one commitment of which the buyer is relieved from if seller 'knew or could not have been unaware'. The effect of the application of Art. 40 is a complete retention of remedies, as the sanction of Art. 39 is effectively knocked out. [page 17]

A very different exception to the notification duty is found in Art. 44., which provides a possibility for the buyer to retain certain remedies despite not having given notice in accordance with Art. 39, but while still being obligated to do so. In this case, only a right to a reduction of price or claim of damages is retained, and only if there is a reasonable excuse for the notice not having been given. Article 44 provides:

"Notwithstanding the provisions of paragraph (1) of article 39 and paragraph (1) of article 43, the buyer may reduce the price in accordance with article 50 or claim damages, except for loss of profit, if he has a reasonable excuse for his failure to give the required notice."

The wording of Art. 44 extends only to an excuse for the notice giving itself, and it should be noted that unlike where Art. 40 applies, a notice is still technically 'required', an excuse will merely mitigate the consequences of a failure to fulfil this requirement. Furthermore no excuse can extend beyond the two year cut-off period in Art. 39(2) which is explicitly omitted from the scope of the provision. The two provisions are diverse in nature. Although the concept of a 'reasonable excuse' in Art. 44 is vague and flexible, it has not given rise to nearly as much discussion or case law as Art. 40, which is where the main interpretational challenges to uniformity lie. An overview of the issue of uniformity raised by the provisions will demonstrate this.


Article 40 gives rise to several types of problems concerning interpretation and uniformity. Without overstepping the boundaries of rigid legal pigeon-holing, there are three different groups of problems of uniformity as reflected by case law:

2.1 Sphere of application and domestic gap-filling

The first group of problems concerns the question of sphere of application and the surrounding domestic laws which may complement the seller's bad faith. This question contains three different sub-issues:

2.1.1 Convention hierarchy

Like all provisions of the CISG, Art. 40 is subject to a hierarchy of Arts. 6 and 9, but the question is: What is needed for a derogation of this provision -- which is solely meant for the protection of a buyer? Do the international courts and tribunals agree on a standard for derogation? Is it even possible? A Swedish arbitration case from 1998 seems to find that derogation is -- on the whole -- not possible.[2] However, a Swiss case from 1998 also carefully considered this question, and the Court concluded that an examination of the goods by the seller on request of the buyer (which did not disclose any non-conformities) did not cut off the seller from relying on late notification by [page 18] automatically invoking Art. 40.[3] This decision seems surprising, as one might assume such a circumstance would -- at least -- qualify the application of Art. 40 to be more strict for the seller.

2.1.2 The role of Art. 40 in context of CISG Part III

Moreover, not all Courts and Tribunals agree as to when Art. 40 should be cited: in a (much discussed) case from the ICC from 1989,[4] the tribunal mentions the seller's awareness of the non-conformity as an unfortunate obiter dictum in a case where notice was found to be timely. Such a reference seems to imply that Art. 40 is part of the assessment of the reasonableness of the notice given, and may be seen to upset the careful balance of the CISG. So may the rather worrying way Art. 40 is examined ex officio by many tribunals. This may cause ripples in the uniformity, since Art. 40 is seemingly not conceived in the same context before all tribunals and Courts.

2.1.3 Articles 39(1) and 39(2)

Finally, there is the question of whether Art. 40 applies to Art. 39 in its entirety, i.e. to Art. 39(2) as well as to Art. 39(1). According to the wording of the provision -- especially when contrasted with Art. 44, which exclusively mentions Art. 39(1) -- Art. 40 would seem to supersede the cut-off rule in Art. 39(2). Which then means, of course, that the absolute cut-off rule is not so absolute after all. This question has been examined in full in an arbitration case from 1998, but there is no other case law to complement this decision.[5]

2.2 Determining 'could not have been unaware'

The second group of problems concerning uniformity within Art. 40 is the determination of the degree of awareness required by the provision in order for it to be applicable. The term 'could not have been unaware' has caused many problems in case law, and setting a standard has proven difficult. This same standard of awareness applies to the question of whether the seller was aware of the existence of a non-conformity, and also to the question of whether the seller was aware that the non-conformity in question constituted a non-conformity for the buyer. This aspect of interpretation of Art. 40 is the most central to the uniform application of the provision, and the one that raises the most problems of uniformity in practice and in theory.

2.3 Determining 'disclosed to the buyer'

Another problem tied to the application of this provision is the question of whether the problem in question can be said to have been disclosed to the buyer. An arbitration [page 19] case from Bulgaria in 1996 seems to hinge its decision on the fact that it could not be proven that the seller had not disclosed the lack of conformity to the buyer.[6] Article 40 was not applied as the letters to which the buyer referred did not prove that the seller did not disclose the non-conformity to the buyer. This placing of the burden of evidence would seem reversed in the light of the principles of the CISG. Another case examining the issue is a Swedish Arbitration case in 1998, whose decision is in stark contrast to the case above. The Swiss decision places a stricter duty to disclose on the seller, requiring not only that the non-conformity be disclosed but also the risks involved with the non-conformity, all provable by the seller.

2.4 Determining 'reasonable excuse'

Article 44 only gives rise to one significant problem in terms of uniformity, namely that of determining what can be deemed a reasonable excuse. This problem is daunting enough in itself.

The following will frame the understanding of the provisions in the light of scholarly doctrinal writing and the drafting of the provisions before analysing the above uniformity issues in the light of the case law which applies them.


3.1 Sphere of application of the provision

3.1.1 Article 40 and convention hierarchy -- Arts. 6 & 9

Article 40 is, as all provisions in the CISG, subject to Arts. 6 and 9, which means that it may be superseded by the contract between the parties (according to Art. 6) or by acknowledged trade customs (according to Art. 9). With regard to this Convention hierarchy and the superseding of the contract over convention provisions, it is true that the CISG gives the contract precedence over the convention regulations and thus also over Art. 40. In other words, parties to a contract can agree to disregard Art. 40 in their dealings. However, it must be noted that any agreement between the parties to disregard Art. 40 would be susceptible to scrutiny from the otherwise applicable (domestic) law of the contract with regard to validity.[7]

Depending on the nature of the agreement and the manner in which Art. 40 is waived, such an agreement would in all likelihood fail such a scrutiny under most domestic regulation, as the protection of the victim of a fraudulent buyer is at the core of most protective regulations within the area of private law. If, however, the parties substitute Art. 40 for another rule which is conscionable under the applicable domestic law then this rule will take precedent over Art. 40 and discount it and its theory and practice. Since the standards of conscionability differ between the various member States, the [page 20] options for contracting out of Art. 40 might vary, but since the area of validity is one which the CISG does not concern itself with (Art. 4(a)), this is not a problem of uniformity under the sphere of the Convention.

Another aspect of contracting out of Art. 40 is the required degree of specificity in the agreement to do so. This issue was deliberated in a Swedish arbitration case from 1998,[8] along with the question of whether Article 40 can be derogated from at all. The seller contended that Art. 40 was derogated from since he considered that the parties had derogated from Arts. 35, 38 and 39. The tribunal carefully considered this matter, and commented on Art. 40 at length, concluding that even if there had been a derogation from Arts. 38 and 39 (which the tribunal, in fact, considered that there had not), a derogation of Art. 40 would not follow impliedly.

Article 40 was deemed a 'safety valve' for preserving the buyer's remedies, and thought to express the principle of fair trading. The tribunal even considered Art. 40 a codification of a general principle (and would thus -- interestingly -- see no problems in applying the provision to examination and notification notices outside the CISG). Consequently, there could be no implied derogation from Art. 40, and the Court in obiter dictum mentioned the fact that an explicit derogation from the provision might not be upheld by domestic law. The tribunal stated:

"It should be noted that the provision of Article 40 is intended to be a 'safety valve' for preserving the buyer's remedies for non-conformity in cases where the seller has himself forfeited the right of protection, granted by provisions on the buyer's timely examination and notice, against claims for such remedies. Such "safety valves" exist in the domestic laws of many countries, triggered as a result of instances of fraud, bad faith, gross negligence, etc. on the part of the seller. Thus, the Article 40 is an expression of the principles of fair trading that underlie also many other provisions of CISG, and it is by its very nature a codification of a general principle. A derogation from such a general principle can hardly be inferred from the contractual provisions cited by [seller]. For that matter, even if an explicit derogation was made -- a result of drafting efforts and discussions that stretch the imagination -- it is highly questionable whether such derogation would be valid or enforceable under various domestic laws or any general principles for international trade practices."

It is interesting to note that the Tribunal does not attempt to determine the applicable national sales law under which the derogation of Art. 40 would be considered invalid, in accordance with Article 4. Instead, it assumes that no domestic sales law would permit such a derogation. With this statement, the Tribunal would seem to make derogations from Art. 40 CISG generally impossible, making it a compulsory rule in spite of Art. 6 which gives the parties the right to derogate from any of the [page 21] conventions provisions.[9] This notion of mandatory morality is upsetting to the balance of the CISG, and not in keeping with the Convention hierarchy upon which the convention is based: the CISG is recognised as a convention which always yields to the contract and this freedom of contract implicit therein is at the core of its being. However, a compulsory rule of morality may seem reasonable when considering the aim of the provision, and the aim of the Convention itself in its preamble to promote 'good faith and fair dealings'. Moreover, it is interesting to note that other Rules, such as the Principles of European Contract Law, edited by the Lando Commission, and the UNIDROIT Principles for International Commercial Contracts allow any stipulated derogation of their prescriptions except the principle of good faith.[10]

The question is certainly an interesting one, and one which is highly relevant for practitioners. Proclaiming a rule of the CISG compulsory is, perhaps, overreaching a little, despite the good intentions of good faith behind the reasoning. It must, after all, be relevant which domestic law would apply to the validity of the derogation in question in accordance with Art. 4. It is conceivable that Art. 40 could be derogated from in a fashion as to be substituted with a similar rule which is conscionable under the applicable domestic rules, or perhaps even derogated from slightly (for instance with regard to rules of evidence of the sellers awareness, or exclusions of specific items from this rule -- a sort of 'buy at your own risk, the seller will not be held liable' which is reflected reasonably in the purchase price. The CISG is a non-compulsory Convention in its entirety, and the flexibility of this contractual freedom should not be cut off completely for any of its provisions. Although this conclusion will create differences in application which will reflect national laws, since they will apply in the determination of whether Art. 40 derogations are valid, the possibility should not be excluded. And these differences will not -- technically -- pose any threat to the uniformity of the CISG since they occur outside the sphere of the Convention by way of Art. 4. It is solely the notion of possible inconsistencies in the possibilities to derogate which will create uncertainty and a lack of uniform application.

The possibility of derogating from Article 40 was not -- apparently -- excluded in a Swiss case from 1998 concerning the sale of lambskin coats. On the issue of Art. 40, the Clout abstract no. 251 states:

"Furthermore, the court found that the facts did not support the buyer's argument that the seller had known of and had not disclosed the lack of conformity. It held that if a seller examines the goods at the request of the buyer, the seller does not thereby waive its right to rely on late notification (article 40 CISG). The fact that the seller had invoked late notification after having examined the goods was not contrary to the principle of good faith (article 8 CISG) [(sic) article 7 CISG]." [page 22]

The Court concluded that an examination of the goods by the seller on request of the buyer (which did not disclose any non-conformity) did not prevent the seller from relying on late notification by automatically invoking Art. 40.[11] This decision seems surprising, as one might assume such a circumstance would -- at least -- qualify the application of Art. 40 to be more strict for the seller.

Concerning Convention hierarchy and Art. 9 CISG, it is highly unlikely that Art. 40 could be discounted due to customs in trade, although the theoretical possibility exists. If a seller can prove that it is a firm tradition in a particular trade that the seller will knowingly try to sell faulty goods to a buyer, and that it is a trade of particularly severe caveat emptor tradition where the buyer has bought the goods as seen and including defects, then Art. 9 can -- in theory -- knock out the application of Art. 40 and a buyer 'in bad faith' will be protected by the provisions of Arts. 38 and 39. But this is -- unsurprisingly -- a somewhat contrived issue with no case law and no writing from various jurisdictions, to the author's knowledge.

3.1.2 Article 40 and its context in CISG Part III

As noted above in Section 2.1.2, not all Courts and Tribunals agree as to when Art. 40 should be cited. In a (much discussed) case from the ICC from 1989,[12] the tribunal mentions the seller's awareness of the non-conformity as an unfortunate obiter dictum in a case where notice was found to be timely.

The case is ICC Arbitration Case No. 5713 of 1989 (CLOUT 45) concerning a sale of goods f.o.b. from Turkey to Switzerland, wherein the tribunal decided to take into account the CISG as a source of prevailing trade usages:[13]

"The tribunal found that the buyer had complied with the requirements of CISG to examine the goods properly (art. 38(1) CISG) and to notify the seller accordingly (art. 39(1) CISG). It was held that, according to article 40 CISG, at any rate the seller would not be entitled to rely on non-compliance by the buyer with article 38 and 39 of CISG for the reason that the seller knew or could not have been unaware of the non-conformity of the goods with contract specifications. The tribunal awarded the seller the full amount of its claim and set it off against part of the buyer's counterclaim."

It is this examination of Art. 40 that is very worrying. As commented by Richard Hyland [14]:

"What is mystifying is why this paragraph is placed at the end of the award. If the seller truly knew of the defects and did not disclose them, there would have been no need for a close examination of the provisions on inspection and [page 23] notice. Once a finding is made that the seller had knowledge of the defects, the timing issues vanishes. In other words, the tribunal's discussion of the CISG's inspection and notice provisions is dictum -- and totally irrelevant dictum at that."

"The tribunal's method of analysis subverts the careful balance achieved at Vienna. By invoking the seller's knowledge of the defects merely in order to shore up the reasoning, the award creates the impression that such knowledge may be presumed, or that complete proof on the issue is not required, or that the seller's knowledge is simply another factor to be considered in the reasonableness calculus. [...] It is devoutly to be hoped that arbitrators and courts will not seize on the CISG provision concerning the seller's knowledge of nonconformity as a way of eliminating the carefully worded restrictions on the buyer's remedies." [emphasis added]

Indeed, such a reference seems to imply that Art. 40 is part of the assessment of the reasonableness of the notice given, and may be seen to upset the careful balance of the CISG. This is very unfortunate, especially in the light of the French domestic regulations which presume the seller's knowledge of defect -- such interpretation may well open up the unfortunate can of worms of a French domestic law influence on Art. 40, which would be a major problem of uniformity.

Although this problem of context may seem to be an unimportant detail, since a seemingly correct result was reached in this case in any event, the question is nonetheless a vital one when it comes to uniformity. On the whole, regardless of whether a decision or judgment reaches the seemingly correct conclusion, it is still crucial that this conclusion is reached by the correct application of the provisions. The science of law is not one based upon mathematical results, but rather one which centres on the way in which the various additions and subtractions are made: it is the middle equation which interests us the most, because it is this which is applied in other cases -- it is the plusses and minuses which are of interest, not the numbers punched into the equation. When practitioners look to another case for guidance in the case before them, they are not too concerned with the actual facts of the case or the result reached, but much more influenced by the logical approach or the interpretation of the provisions applied, it is this which they can use in their own case. For this reason, it poses a threat to the uniform application of the provision when misapplication of a provision occurs, even if the misapplication does not influence the case at hand. It is fortunate that scholars such as Richard Hyland are there to 'catch' the mistakes before they influence practitioners and lead to 'wrong' results.

There is a curious lack of case-law concerning Art. 40. Although Art. 40 often represents the buyers 'last chance' to escape the harsh consequences of an untimely notification of non-conformity, relatively few of the reported 39 cases contain any citations to Art. 40. And much of the case law which is available merely examines Art. 40 issues ex officio without the buyer actually claiming it. See, for example, a [page 24] German judgment from 1993 which is typical of some courts examination of Art. 40, in that it mentions that Art. 40 does not apply in passing:[15]

"Die Berufung auf die Nichtbeachtung der Untersuchungs- und Rüge- bzw. Anzeigepflicht ist der Beklagten auch nicht etwa wegen Bösglaubigkeit der Zedentin gemaß aRt. 40 cISG verwehrt. Es ist nämlich nicht erkennbar und wird von der Beklagten nicht behauptet, daß die Verkäuferin die von der Beklagten behauptete Vertragswidrigkeit bzw. die die vertragswidrigkeit begründenden Umstände kannte oder darüber nicht in Unkenntnis sein konnte. [The reliance on the duty to examine and notify is not precluded by way of any bad faith according to Article 40. It is not seen in the fact, nor is it claimed by the buyer, that the seller knew or could not be unaware of the non-conformity." Author's translation, emphasis added]

This is worrying, since Art. 40 is a provision for the buyer to claim and prove where relevant, and since the burden of evidence is for the buyer to lift (at least initially). It is not a provision which courts and tribunals must perfunctorily ex officio determine. The issue at the core of the provision is one of bad faith, and that is not something which can be addressed so lightly.

It is difficult to say why there are so relatively few buyers who wish to claim that the seller was in bad faith, but the answer is most assuredly not to attempt to roll Art. 40 into the assessment of reasonableness as a whole, which is what it resembles when perfunctory Art. 40 summations are made in such a fashion without any claims of bad faith being made by the buyer.

3.1.3 Applying Art. 40 to Art. 39(1) as well as Art. 39(2)

The question of whether Art. 40 applies to 39(2) as well as 39(1) has been discussed in theory.[16]

Unlike Art. 44, Art. 40 is worded to apply to 'Articles 38 and 39' and not to specific paragraphs, and although the cut-off period in Article 39(2) is considered absolute by many, it seems to be subject to Art. 40. This issue was recently considered in a case from Swedish Commercial Arbitration, concerning a press in China.[17] The tribunal heard a case concerning a truck frame rails press, where the seller had replaced a part with a substitute part without informing the buyer hereof, and without making the buyer aware of consequent necessary installation differences due to this substitute part. Notice was not given until three years after delivery of the machine, when the machine had failed and damaged itself. The buyer was not, however, barred from [page 25] notifying of the non-conformity despite Art. 39(2), as the Tribunal deemed that the seller knew of the replacement part, knew that it would be significant to the buyer, and did not inform the buyer thereof. Consequently, since the seller had consciously disregarded facts which were of relevance to the non-conformity, Art. 40 could prevent the seller's reliance on Art. 39(2). There are no other cases reported to confirm or challenge the application of Art. 40 to Art. 39(2).

Although there is nothing in the travaux to indicate that Art. 40 should not be applied identically to Art. 39 in its entirety, consideration of this issue is still required. It may be argued that if Art. 40 always applies to Art. 39(2), then it is not, as deemed by many, an absolute cut-off rule. This, in itself, would support a view that applications of Art 40 be, if not hindered, then limited to cases of evident or flagrant breaches of good faith by the seller. This is one of those situations where the consideration of two provisions clash. On one hand, there is the idea behind 39(2): the need for resolving and finalising business matters within a foreseeable future, the need for a party to be able to reach a point in time where he/she knows with certainty that all worries or considerations concerning a transaction can safely rest in peace, that business may move on. On the other hand there is the consideration behind Art. 40: the idea that a fraudulent party under no circumstance be permitted to 'get away with' anything. But is mandatory morality part of the CISG?

When comparing these two considerations, it is easy to see how a seller might get caught by Art. 40 claims made, for example, five years after a transaction, long after he has considered himself safe from all claims and has discarded any documents or other evidence which may prove that there was no knowledge of any lack of conformity on his part. For this reason, it would certainly seem advisable to require an even more rigorously lifted burden of evidence [18] from the buyer, allowing for the fact that the seller was in his right to consider the case concluded.

3.2 The determination of 'could not have been unaware' and its burden of evidence

The contrasts in case law are well illustrated by two German cases that reach very different results: The first, from 1995, automatically assumes the seller's awareness of the fact that the wine is watered down is a classic case of fraud.[19] The seller was not regarded to have been able to be unaware of the fact that the wine he produced was not 100 % wine. However, in a more recent case from 1998 regarding sweaters that were sold as '100 % Cashmere', the sellers awareness of the fact that the sweaters were not 100% cashmere was -- surprisingly -- not presumed.[20] It is still a problem that there is no set way to examine the standard of awareness. [page 26]

There are many difficult questions connected with this standard of awareness: Whom is to benefit in the case of doubt; the suspected seller, or the buyer whom the provision intends to protect? What is a reasonable margin of doubt for establishing whether a seller could have been unaware? There is also the question of the different manners in which domestic law influences the highly sensitive matter of a fraudulent seller.

3.2.1 A standard of awareness as a rule of good faith

This question is at the very core of the provision. At first glance, Art. 40 looks like a rule of not protecting the seller in bad faith, and it reflects a principle in the CISG which has been taken to be a general one (in accordance with Art. 7(2)), namely that of good faith and not protecting the fraudulent or ill-faithed party.[21] The basic concept of awareness and bad faith is well-known from most domestic sales regulations. German law and Austrian law contain a somewhat similar provision which limits excuses for late notification to instances where the seller wilfully deceives the buyer (comp. BGB 377 (German Civil Code Art. 77)), and is thus much more seller friendly in this case (also). Under Swiss law the buyer must also prove that the seller has cunningly misled him.[22] It is interesting to note that the traditionally more buyer-friendly French domestic law automatically assumes that a commercial seller is in bad faith.[23] This assumption has not been seen to have had any undue influence on the interpretation of Art. 40. As there are no reported cases from French courts interpreting the provision despite several cases on Art. 39, it might be argued that the lack of its use is a reflection of French domestic assumption, but there are no grounds to substantiate such a view.

The particular definition of awareness in Art. 40 must be defined independently and irrespective of domestic regulations for it to achieve uniformity, and gain status as an autonomous term of the CISG. This is not easily done. It can be deduced from the wording of the provision that Art. 40 encompasses more than the seller in bad faith, not only the seller who 'knew' but he who 'could not have been unaware' of a lack of conformity.

The awareness concerns two different aspects of non-conformity: (a) the seller is aware of the non-conformity; and (b) the seller is aware that the alleged non-conformity constituted a non-conformity to the buyer. But the level of awareness is interpreted very similarly. And it is this interpretation of awareness which gives rise to one of the most crucial problems of uniformity concerning this provision, both in theory and in practice. Scholars are not in agreement on the subject. Some believe the [page 27] term 'could not have been unaware' must be defined as that which goes beyond gross negligence and must be something very obvious,[24] whereas others believe the phrase to encompass simple negligence and the failure to comply with the precautions and care which may be expected.[25]

Generally speaking, if the sphere of Art. 40 is envisioned as a speedometer, with maximum speed representing the sellers proven knowledge, then the question is: how low can the needle go before it leaves the scope of the provision? With the wording of the provision being what it is, then it is certainly safe to assume that once the degree of awareness slows down to a 'should have known' or bonus pater-assessment, then Art. 40 has lost its relevance. Linguistically, the concept of reasonableness -- and what the seller could or should have been required to know -- does not encompass the same situation as that where the seller could not have been unaware. Courts and tribunals do not, on the face of things, seem to be able to rightfully invoke Art. 40 where knowledge reasonably should have been present, but only where knowledge reasonably can be inferred (if not proven), and it is at inference that the line should be drawn. Such a strict linguistic definition of the term may seem to restrict the actual use of Art. 40 to cases where the seller's knowledge can be proven, but there are examples from practise where the limits of Art. 40 have been tentatively explored outside of the seller's actual knowledge. This awareness on the seller's part is not always easily established, as the burden of proof is carried by the buyer.[26] (Note that if actual knowledge is presumed, then the seller is decidedly fraudulent, and may be subject to the laws on fraud in the otherwise applicable law.)

When launching a comparison of different Art. 40 cases to attempt to establish any problems of uniformity, one of the first startling facts is the relative lack of reported case law, in the light of the many Art. 39-cases. The next spoke in the wheel is the fact that many of the cases where the buyer has relied on Art. 40, merely summarily state that there is insufficient (or no) evidence to prove such a claim, without the Court or [page 28] tribunal detailing its findings for why this is so.[27] This makes it difficult to conduct any research into the provision since comparisons of method and interpretation are impossible. But there are still a handful of judgments which make some comparisons possible.

One of the first cases where the CISG was ever applied was an ICC case from 1989 (ICC (5713), 1989 (UNILEX)), where the arbitrators -- interestingly enough -- apply the CISG as a reflection of trade usage despite the fact that neither the buyer's nor the seller's country were contracting States and that the CISG had not been finally drawn up when the contract at issue was drawn up. The case concerned goods which had been treated and resold, and the question of Art. 40 was not a great problem, as the arbitrators stated that, '[...] it clearly transpired from the files and the evidence that the seller knew [...]' of the non-conformity and knew it constituted a non-conformity. The seller was consequently cut off from relying on either Arts. 38 and 39. Sadly, the Court does not state how it considered knowledge decidedly proven without any admission from the seller,[28] but it must be assumed that evidence was extremely clear and beyond any doubt.

In such cases there will -- of course -- be little cause for interpretational problems, nor are such cases of clear-cut guilt likely to present any problems of uniformity: in cases where actual knowledge is proven in this fashion, the could not have been unaware-term in Art. 40 poses no problem, as the seller obviously could not have been unaware of the non-conformity or defect where he -- in fact -- did know, and clearly realised that the defect constituted a non-conformity. However, positively identifying the sellers knowledge of a non-conformity may be impossible, or at least very difficult, to prove in some cases. The burden for proving this rests on the buyer, in accordance with a general principle of the CISG that the party benefiting from a claim must lift the burden of evidence to prove it. A recent case which confirms this is a Supreme Court case from Germany, which in the assessment of burden of proof and Art. 40, looks to international case law and numerous scholars in support of the fact that the burden is the buyer's.[29]

Since the burden of proof rests with the buyer's, the buyer may have a difficult time proving what the seller subjectively knew. But Art. 40 is not limited to the cases where the buyer can prove the seller knew of the non-conformity, and knew that it [page 29] constituted a non-conformity. Article 40 has a broader application than that. It can be applied where the buyer can prove that the seller must have known, or, in other words, where the seller's knowledge on both counts can reasonable be inferred by the proof presented by the buyer. It is this inferring of knowledge which presents problems, since this requires interpretations of fact and provision alike, and this is where outcomes may differ. To ease the presentation of the existing categories, the two different types of awareness (i.e. awareness that the defect is a non-conformity and that it constituted such for the buyer) will be presented separately below, but it should be kept in mind that the inference of the level of awareness and the question of burden of evidence are closely linked, if not identical.

3.2.2 Proving 'could not have been unaware' that the non-conformity existed

This problem occurs in cases where the goods suffer from a defect which the seller claims to have been unaware of, and which constitutes a non-conformity. The question revolves around lifting the burden of evidence.

This is illustrated by one of the more infamous CISG cases available, namely a Dutch case concerning maggots in mozzarella. [30] This is one of the few judgments of its kind to apply Art. 40 in the light of the problems of the burden of proof which the buyer must lift to prove that the seller 'could not have been unaware'. The Court allowed the buyer time to prove that the maggots were in the cheese at the time of shipment, and added in obiter dictum that if they succeeded the seller's knowledge would be presumed. This partial reversal of the burden of proof -- and a presumption of the seller's awareness under Art. 40 standards where bad faith is proven likely -- would certainly seem very fair and in keeping with the idea that Art. 40 encompasses more than the cases where the seller's actual knowledge can be proven. But it is, of course, a fine line to walk if a reversal of the burden of proof is to be introduced to a certain extent; it would not do to reverse the burden of evidence to the extent that all sellers must prove their good faith in order to avoid Art. 40 -- liability for non-conformity can not be reversed.

Some cases concern facts and goods which, on the face of the defect, infer the seller's actual knowledge. In a case from the Austrian Supreme Court from 2003,[31] it was held that the buyer need only prove that the frozen fish sold to him was from the last year's catch, and since the seller has sold it without specifying that it was over a year old (and thus unfit for human consumption) Art. 40 applied without the buyer having to prove knowledge of the age of the fish. The knowledge was inferred. Similarly in a German case from Trieste concerning the sale of wine with added water,[32] the court [page 30] seems to have reversed the burden. The Court concluded that the addition of water in wine could not happen without the seller's knowledge:

"The court found that the [buyer] had not lost its right to rely on the non-conformity of the wine even though the [buyer] did not examine the wine for water after delivery (articles 35, 38 and 39 CISG). In this case the [seller] could not have been unaware of the non-conformity (article 40 CISG)."

Interestingly, although creative and imaginative arguments might conceivably be put forwards that it might be possible to attribute the diluted wine to a defect in bottle-cleaning mechanisms or a faulty tubing in the bottle-filler, the Court assumed that the seller was fraudulent, thus inferring knowledge of the non-conformity. The buyer did not have to prove anything in the way of the seller's knowledge, he needed only to prove that the wine contained water. And since the German authorities had seized and destroyed the wine on those grounds, this was not hard to prove.

A similar case concerning the sale of cashmere sweaters that were not 100% cashmere despite having been sold as such, reached a very different conclusion. The Court did not allow reliance on Art. 40 since the buyer had distributed the goods and since the seller had not overlooked obvious flaws in the goods:[33] 'Moreover, the court stated that application of article 39(1) CISG could not be excluded by operation of article 40 of the CISG, which would have been applicable only if the seller had overlooked obvious defects in the goods that could have been detected through the exercise of ordinary care. [emphasis added]' [34]

This wording is surprising. Limiting the use of Art. 40 in such a fashion makes its application somewhat illusory, and is certainly not in keeping with other Art. 40 cases. Article 40 is not merely intended for cases where the buyer can prove that obvious defects have been overlooked by the seller, but also to cases where the buyer can prove it likely that the seller knew there was something wrong with the goods from the buyer's perspective. Why should the seller in this case be excused for selling cashmere sweaters that are not 100% cashmere when a wine-seller is objectively responsible for selling wine that is not 100% wine?

The courts reasoning for concluding that saleable goods cannot be encompassed by Art. 40 are unclear in the CLOUT abstract, but the German case text explains that the seller was not the manufacturer, and so is excused for not identifying the flaw. But it may seem inconsistent with the aim of Art. 40 to punish a buyer for not dealing directly with the manufacturer where, as in this case, the distributor is excused from a liability which would certainly have befallen a manufacturer who would have known that the sweaters he produced were not 100% cashmere despite being labelled as such. But Art. 40 is subjective in this respect - the objective knowledge is only calculated on the basis of the subjective circumstances of the seller in question. [page 31]

In a recent case from Celle on the sale of truck wagons,[35] the Art. 40 criteria was stated as:

"It is not presented that the defects [...] had remained unknown to the [Seller] by at least gross negligence."[36]

This criteria makes a subjective concept of knowledge objective in a realistic way by introducing a reasonable level of knowledge based on a minimum level of conduct. The buyer need only substantiate objectively that the seller would have to be grossly negligent to not know of the defect, very similar to the Cashmere case, wherein it is relevant what the seller overlooked.

As evidenced in the judgments above, the question of burden of evidence is central to the level of awareness needed under Art. 40, since it is the amount of blameworthiness that the buyer can prove that determines the court or tribunals determination of whether the seller could or could not have been unaware in their opinion. There is, however, no set level of 'blameworthiness' in these cases, and the outcomes are often seen to be influenced by outside factors which are not necessarily relevant to Art. 40.

3.2.3 Proving 'could not be unaware' that the non-conformity was such to the buyer

This type of awareness is slightly different from the one above, insomuch as it concerns cases where the seller was obviously aware of the non-conformity in question (typically a different type of spare part or a specific brand of item), but claims unawareness that this would constitute a non-conformity for the buyer. In other words, the buyer must substantiate the seller's knowledge of the buyer's subjective perspective on the defect in question.

The first hurdle to clear in such cases is the determination of whether there even is non-conformity. A judgment from Germany concerned the sale of a chemical substance to be used in the production of plastic tubing.[37] The seller delivered a standard blend which would not have caused any problems in standard machinery, but the buyer was processing the tubes on an unusually old machine which was incompatible with the chemical substance, and the produced tubes continually caught fire. Not surprisingly, the Court found that Art. 40 was not relevant to this case, since this could not be considered a non-conformity where the buyer had not informed the seller that it would be using unusually old machinery. A more surprising aspect of this judgment is the need to bring Art. 40 into the question at all. Logically, if the Court decided that there was no non-conformity in accordance with Art. 35, then Arts. 38 and 39 would not seem relevant, as there is no need to give notice for a [page 32] non-conformity which is not there, nor is there a need to discover it by examination. By this avenue of thinking, there would not seem to be any need to bring Art. 40 into the issue at all. Similarly, in a case from Switzerland in 1998 concerning Lambskin Coats, the fact that some of the jackets were not the models ordered was not found to be a non-conformity under Art. 35, but nevertheless prompted the court to say that the seller could not have been unaware of this.[38] Article 40 will not apply where the defect or alteration in question is not considered a 'lack of conformity' under the Convention, regardless of what the buyer considers it. The buyer's perception is, however, important in the evaluation under Art. 35, especially when its perception has been communicated to the seller at the time of conclusion of the contract.

In the event that the Court or Tribunal considers the defect or change a non-conformity, the question is then whether the seller 'could not be unaware' that this non-conformity would constitute a non-conformity to the buyer, or whether the seller innocently assumed that the non-conformity would be 'OK'. This opens the issue of burden of evidence, and the question of how a buyer proves what the seller assumed is a tricky one.

An arbitration case from Sweden has examined the question closely, and also presents an excellent in depth analysis of the question of the seller's awareness.[39] The case concerns the sale of a press for truck frame rails, the same case mentioned above under the subject of the scope of Article 40, and the tribunal had the opportunity to deliberate several aspects of Art. 40. It not only confirmed that the scope of the provision is not limited to the Art. 39(1) time period, but also can cut off reliance on Art. 39(2). In addition, it deliberated the options for derogating from Art. 40 and found them excessively narrow, if at all existing. And, finally, the tribunal considered the scope of the seller's awareness as represented by the could not have been unaware-term and the burden of evidence contained therein, before assessing the term 'disclosed to the buyer'. In other words, it examines all central issues of Art. 40 in depth. The tribunal stated, at length, on the general subject of Art. 40 and 'could not have been unaware':

"[...] Article 40 of CISG should only be applied in special circumstances. A seller is normally (through his employees) aware of the actual state of goods delivered from his plant, but the fact that he also may be aware that some part of the goods may fail to meet the standard set by CISG cannot automatically lead to Article 40 being applicable. In such case the time limits for claims under many contracts governed by CISG would become illusory."

"The doctrine on the issue of the seller's awareness according to Article 40 also reflects the difficulty in reaching a common denominator for the qualification [page 33] of the necessary 'awareness'. There is, not unexpectedly, general consensus that fraud and similar cases of bad faith will make Article 40 applicable. But some authors are of the opinion that also what can be described as gross negligence or even ordinary negligence suffices, while others indicate that slightly more than gross negligence (approaching deliberate negligence) is required. As a clear case of the requisite awareness has been mentioned a situation where the non-conformity has already resulted in accidents in similar or identical goods sold by the seller and been made known to him or to the relevant branch of the industry. But also in the absence of such relatively clear cases awareness may be considered to be at hand if the facts relating to the non-conformity are easily apparent or detected. Some authors indicate that the seller is not under an obligation to investigate possible instances of non-conformity but others say that he must not ignore clues and some go so far as to suggest that the seller, at least in certain cases, has an obligation to examine the goods to ascertain their conformity." [Emphasis added]

Interestingly, the dissenting opinion objects to the word 'special' in the first line of the quote above, and suggests instead that the application of Art. 40 be limited to 'exceptional' circumstances.[40] With this verbal change, the dissenting arbitrator hopes to illustrate that he considers the seller's right to rely on the notice periods more important than his colleagues. This is also reflected in his conclusions on the case (see below).

The Tribunal did not advocate any one of the above scholarly opinions for itself, however, but evolved a view of its own:

"The absence of any document or witness showing Danly's internal deliberations when replacing the A-5750 with the P-52 lockplate does not prevent the application of Article 40. The article as phrased is intended to alleviate the burden of proof on the buyer in respect of the seller's awareness, a burden that otherwise often would be impossible. If the evidence and the undisputed facts show that it is more likely than not that the seller is conscious of the facts that relate to the nonconformity, it must be up to the seller to show that he did not reach the requisite state of awareness. It is in the nature of things when applying Article 40 that considerable time may have passed since manufacture or delivery of the goods and that the evidentiary situation may be difficult. But once the buyer has suffciently established the basis for his claim under Article 40, it is the seller that must assume the risk of not being able to counterbalance this with evidence on his own design and manufacturing [page 34] process that, after all, he is in a better position to secure than the buyer." [Emphasis added]

Admittedly, this conception is somewhat reminiscent of the 'slightly more than negligence'[41] theory, and certainly very reminiscent of Schwenzer in Schlechtriem's Commentary.[42] However, it is infinitely more useful since it outlines the tribunal's actual approach by focusing on the question of burden of proof. In other words, a buyer need only prove it likely that the seller was fraudulent. Once this goal is reached, the seller must be able to defend himself from the claim if wishing to avoid the consequences of Art. 40. Although this approach may not be revolutionary in any way, since it certainly seems to be the same approach used in some other cases before in other jurisdictions prior to this case (especially the Maggots-in-Mozzarella case mentioned above), it is novel insomuch as it provides a logical way of understanding how the tribunal determines the awareness of the seller, and allows insight into the logical path traversed to reach the conclusions. (Something which is lacking in many judgments, and which makes comparisons almost impossible.)

The tribunal goes on to conclude, on the case at hand:

"In this matter, the Tribunal can draw no other conclusion from the available facts than that Danly, when substituting the P-52 for the A-5750 arrangement, was aware that the positioning of the P-52 lockplate was critical (as indeed also is stated by Connell in its briefs). Yet there is no evidence or even claim from Connell that Danly either intended or made any effort to ascertain that the P-52 was in fact properly installed. It must therefore be assumed that Danly did not have any such intention. It is not for the Tribunal to speculate on the reason for this. What is relevant is that Danly cannot have been unaware of the fact that proper installation was critical, the fact that the possibility of improper installation by BLAC could not be ruled out, the fact that there was a clear risk that this could lead to serious failure of the Press within a period of time that certainly differed from what BLAC was entitled to expect under the Contract, and that Danly did not do anything to eliminate this risk. The Tribunal therefore concludes that Danly must be assumed to have consciously disregarded apparent facts which were of evident relevance to the nonconformity and which, in fact, caused the failure of the Press."

It is difficult to comment on the appropriateness of the considered evidence. The dissenting opinion considers the conclusion too strict on the seller, and favours a reservation of Art. 40 to cases where more blame can be proven. In the words of the dissenting arbitrator: [page 35]

"Based upon common sense and particularly upon the technical skills that could be expected from a professional buyer like [buyer] it is, however, my opinion that [seller] -- for the purpose of application of Article 40 -- was entitled to expect [buyer] to understand that a device intended to prevent a tightly secured large nut from unscrewing shall be mounted so as to prevent that nut from unscrewing, i.e., from turning at all in a counter-clockwise direction ... My reading of the requirement for the seller's awareness is therefore more restrictive. The test of awareness or "conscious disregard" on the part of the seller requires in my opinion a higher degree of subjective blameworthiness than the one demonstrated by [seller] in this instance by their not supplying installation instructions for the P-52 lockplate."

A case commentary to the judgment [43] rightly states that it would have been helpful for the reader if the Tribunal had compared its conclusion with the conclusion of the Oberlandesgericht of Karlsruhe, Germany which, in a similar case, stated that a seller's simple knowledge of the facts that lead to a non-conformity of goods did not necessarily imply the knowledge of the non-conformity itself.[44] A look at this case is certainly interesting. It was subsequently reversed by BGH, but for reasons of implied derogation of Arts. 38 and 39,[45] but the OLG's consideration on Art. 40 is still relevant, since the BGH remained silent on the issue. The case is similar to the Danly case insomuch as the non-conformity concerns the wrong type of product Court stated:

"Further, the court held that it was insufficient that the seller had knowledge of the glue glazing. The buyer had to prove that the seller knew this would constitute a lack of conformity (article 40 CISG)."

This decision does not tell us much, except seemingly placing an extreme burden on the buyer to prove actual knowledge. In the German full text version of the judgment, the Court states [46]:

"Die Beklagte wußte zwar, daß die von ihr vertriebene Schutzfolie mit Acrylatkleber beschichtet war. Streitig ist jedoch, ob sie auch wußte bzw. "nicht in Unkenntnis darüber sein konnte", daß diese Kleberbeschichtung die Folie vertragswidrig machte. Diese Kenntnis hat der Käufer zu beweisen; die Klägerin hat dafür keine Beweise angeboten. Im übrigen bezeichnet das Parteigutachten des Österreichischen Kunststoffinstitutes nur den eingesetzten [page 36] Acrylat-Kaschierkleber, nicht solche Kleber schlechthin als offensichtlich nicht geeignet. Die Beklagte behauptet auch, solche Kleber schon mehrmals auf ihre Folien aufgebracht zu haben, ohne daß sich beim Abziehen Kleberückstände gebildet hätten. Diese Erklärung kann die Klägerin nicht widerlegen; sie deutet auf einen fehlerhaften Kleber, nicht aber auf die generelle Ungeeignetheit dieses Klebertyps hin."[47]

Here the court assessed that the seller did not know that this sort of glue would constitute a non-conformity for the buyer, since the buyer could not prove that the seller 'could not have been unaware' of this. Even though this may seem like an unfairly heavy burden of evidence on the buyer, especially in the light of the logical solution of proving likelihood from the Danly case above, it is backed up by two other factors. First of all, a statement from the Austrian Institute of Plastics deems this type of glue "not obviously inappropriate." Secondly, the seller could prove previously having used this particular glue with no ill effects. The Court does not here impose such an unreasonably heavy burden of proof on the buyer after all -- the seller has presented two strong pieces of evidence to prove that he had not acted in bad faith, and the buyer has been unable to counter them, rendering Art. 40 inapplicable.

3.3 The determination of 'disclosed to the buyer'

The final interpretational challenge to Art. 40 is that of determining when the seller can be said to have satisfactorily disclosed the non-conformity in question to the buyer. It stands to reason that a seller cannot circumvent the protection of Art. 40 by cryptically hinting at a non-conformity, nor should the buyer informed of a non-conformity be permitted to manipulate the contract and speculate at the sellers expense by being exempt from a duty to communicate. But it is hard to discern the minimum standards for disclosure from the provision, and very little help is available in theory or practice.

An arbitration case from Bulgaria from 1996 concerning the sale of coal hinges based its decision on the fact that it could not be proven that the seller had not disclosed the lack of conformity to the buyer.[48] Article 40 was not applied as the letters to which the buyer referred did not prove that the seller had not disclosed the non-conformity to the buyer. This placing of the burden of evidence on the buyer is contrary to the principles [page 37] of the CISG. Surely, if a seller relies on the fact that he has disclosed a non-conformity to the buyer to protect himself from an otherwise applicable Art. 40, then it is up to him to prove that he has satisfactorily done so.[49] The CISG is very logical throughout the entire convention: he or she who benefits from proving something has the burden of evidence (onus probandi incumbit ei qui dicit)., This is a general principles of the CISG. [50] Reversals of burdens of proof are extremely rare, and so it should be. This case sets an unfortunate standard for future similar cases, and is on the whole a danger to the logical system of burden of proof inherent in the CISG.

Another case examining the issue is the Swedish Arbitration case from 1998 [51], which is -- fortunately -- contrary to the case above and places a stricter duty to disclose on the seller, requiring not only the non-conformity be disclosed but also the risks involved with the non-conformity, all provable by the seller. The decision states:

"In order to avoid liability for non-conformities of which the seller cannot be unaware, he must disclose them to the buyer. It is not sufficient that the buyer should be able, from documents available to him, to deduce that some alteration has been made in the design of a machine or such like. The fact that 'A 5750' was indicated in the service manual and that the actual locking device in the same place was stamped 'P-52' does not amount to a disclosure by [seller] to [buyer] of the non-conformity in this case. As already stated in the foregoing, the non-conformity of the P-52 relates to the installation, and it is thus the failure by [seller] to instruct on or supervise installation that has resulted in the non-conformity being permitted to cause the failure of the Press. In other words, even if [seller] had informed [buyer] of the exchange as such (and without any further information on proper installation or the risks involved in the arrangement, etc.) this would not be enough; to disclose in the sense of Article 40 is to inform the buyer of the risks resulting from the nonconformity."[52]

From this very specific pin-pointing of the duty to disclose, one would seem to be able to deduce the following:

Moreover, based on the principles of the CISG and the inherent protection from bad faith in the provision, it must be concluded that disclosure must be addressed to the buyer in a way to ensure the buyer receives the information.

Other reported Art. 40 cases have not investigated this matter closely, but impliedly assume that no non-conformity is disclosed where the seller does not claim that it has been. Potentially, the lack of specificity concerning disclosure could lead to problems of uniformity, although none have yet surfaced. The problem is closely tied to the general problem of specificity of notices in the CISG, most notably the specificity of notices of non-conformity (see Section 2.2 above).

3.4 Determining 'reasonable excuse'

The concept of a reasonable excuse is one which can certainly be deemed vague and flexible -- it is a term which may theoretically appear to be interpreted to encompass almost anything. But it is a very narrow exception. The drafting history of the CISG shows that the term was not in ULIS, and it is not to the author's knowledge a provision which exists in any other civil codes or sales laws in any major legal systems. It was introduced to the CISG as a safety-valve for Art. 39, which certain delegates were worried was too strict.[53] These were especially delegates from developing countries who feared (perhaps rightly so) that buyers from their countries would lack the necessary specialist knowledge, professional expediency or familiarity with notice requirements to give proper notification of non-conformity.[54]

However Art. 44 would not seem to contribute anything to the CISG regime, as these concerns were already addressed by the flexibility of Arts. 38 and 39, rendering the separate provision of Art. 44 somewhat superfluous in nature. An excuse in accordance with Art. 44 -- that could stave off consequences of a belated 39 notice -- would render expectations of an earlier notice unreasonable; this concern is already incorporated in the notion of reasonableness in Art. 39(1). All the more so as no Art. 44 excuse can extend the notice beyond the two-year cut off period in Art. 39(2), according to the specific wording of the provision. This mirrors the way in which no notice can be reasonable if given two years after delivery. In the search for arguments in justification of the independent existence of Art. 44, Professor Fritz Enderlein [page 39] suggests that one possible excuse might be force majeure,[55] but if this were the excuse then Art. 79 would already excuse performance of obligations under Art. 39(1), since it excuses a party for 'failure to perform any of his obligations'. As Art. 44 does mean the loss of some remedies, in effect anything but damages and price reduction, then an excuse under Art. 79 would be preferable to a buyer failing to give notice as this would mean the retention of all remedies.

Available case law is surprisingly quite scarce,[56] and many of these only examine Art. 44 fleetingly ex officio. The scope of Art. 44 has been the cause of some divergences in the application of the provision, in particular its application to the examination in Art. 38. It was specifically drafted to exclude such application, as Schlechtriem states:

"[...] even in cases where the buyer has a 'reasonable excuse' in the sense of Article 44, the failure to examine the goods (which is not excusable on the basis of Article 44) might be the cause of increased damages."[57]

This is in full harmony with the text of the provision, and a German case from 1997 from Karlsruhe:[58] 'Moreover, although under article 44 CISG the buyer could raise a reasonable excuse for failure to give the required notice in accordance with article 39(1) CISG, the former article did not apply to a failure to examine in keeping with article 38(1) CISG.'[59]

Although the findings were subsequently reversed by the higher instance on other grounds, the obiter was not commented on. The conclusion that Art. 38 does not apply to Art. 44 is undoubtedly correct, for the mitigation reasons mentioned by Schlechtriem above. If the failure to notify has incurred damages which are increased due to the inadequate examination, then the buyer is liable for this increase regardless of any excuse which may relieve him of liability for the notice itself.

Nevertheless, in an ICC Arbitration case from 1999,[60] the arbitrator did apply Art. 44 to the examination:

"Taking into account that both parties had agreed on a neutral inspection body -- thereby relieving Claimant from bearing the consequences of an incorrect examination alone -- the Arbitral Tribunal concludes that Claimant's lack of due notice is to be reasonably excused in the sense of Art. 44 CISG."

A similar application of 'reasonable excuse' was found in a United States case from 2001. Here the goods sold were thermoforming line equipment, and the Court found [page 40] that for complicated and unique equipment the strict precedents from simple goods are not applicable and notice is a matter of weeks. The Court may use the term 'notice' to qualify the excuse, but on the reasoning it is clearly the examination which forms the basis. The main problem in this context is, that the likely excuses for failure to notify will often pertain to the trigger for the examination duty as excuses for failure to give the notice in itself will be related to breakdowns in communication which will rarely have an excuse at all.

In these case, however, the application of Art. 44 to the examination is of very limited significance in terms of uniformity, as the flexibility of Art. 38 will encompass the considerations which the excuse extended under Art. 44. Since Art. 44 is, in the author's view, an unnecessary provision in any event, its application to a provision which has the same consideration built into its wording does not -- to use Flechtner's standard of uniformity as presented in Part One -- produce un-uniform results.

The main potential problem for uniformity which arises in connection with Art. 44, is the determination of what a 'reasonable excuse' can said to comprise. The problem arises where the acceptable standard for excuses vary between different Courts and Tribunals, or where the interpretation of the provision seems to be in contrast with the CISG like the OLG Koblenz of 11 September 1998 [61] mentioned below. Perhaps not surprisingly, with the exception of the case mentioned above where the excuse was acceptable but pertained to Art. 38 and hence did not apply or should not have applied, there is no reported cases where an excuse was adequate.

One of the more frustrating aspects of an analysis of Art. 44 cases is the fact that most judges do not give a reason for why there is no excuse. They simply state that there is no evidence of any excuse, and leave it at that, without delving deeper into the question of what the excuse is, or if it would have been satisfactory if proven. This is usually because the subject of Art. 44 only comes up as an ex officio issue in the determination of Art. 39, and has not been claimed by the buyer. Examples of such judgments are numerous.[62] They do, however, serve to establish clearly (if there was ever any doubt) that the burden of evidence for an excuse is the buyer's to lift.

One of the most interesting cases on Art. 44 is OLG Koblenz of 11 September 1998 from Germany,[63] because it seems to challenge the very foundations of Art. 44 and its reason for being. A German seller and a Moroccan buyer concluded a contract for a standard chemical substance for the production of PVC. It was, however, unknown to the seller, used in a machine which was not of a sufficiently modern standard to be compatible with the substance, and the buyer's production failed due to this [page 41] incompatibility (the PVC tubes produced kept catching fire). The buyer's notification of non-conformity was not timely due to the fact that the equipment was not installed until a month after delivery of the substance, delaying the options for testing it. However, this delay was no excuse. The Court clearly stated that the fact that the buyer's deficient organisation caused delay in the installation and testing did not constitute a reasonable excuse, but was well within the buyer's sphere of control.

This case raises two major points concerning Art. 44. First of all, by applying the term 'sphere of control' as an element in the determination of a reasonable excuse, there is a strong insinuation of ties to the concept of force majeure. Secondly, if disorganisation in a developing country is not a reasonable excuse in itself, then the very reason for being of the provision seems challenged. The real reason why Art. 44 should not apply to the case is that it does not extend to examination and Art. 38. The criteria which the judge introduces are doubtful.

Some cases give very understandable and clear factually based grounds for excluding an excuse.[64] In a Maritime Commercial Court case from Denmark on the sale of live mackerel [65], the fact that the buyer was labouring under a misapprehension that the contract was nullified on the grounds of aliud pro alio as the fish were the wrong type, was not an excuse to not give notice.


As a whole, Art. 44 presents very little difficulty in its (limited) application in terms of uniformity. The sole issue relating to a reasonable excuse is the question 'excused from what', as Art. 44 comes to be examined in more and more cases.

An interesting paradox may arise where the preponderance of case law favours the application of Art. 44 to Art. 38, whereas scholars and the drafters demonstrate the error in this. Since the CISG is no longer the property of the scholars, but the practitioners, who then gets the last word? And if there is a uniform application for a provision -- albeit one contrary to the intention of the drafters -- then it is surely uniform law; just not as the drafters intended. [page 42]


a1. Camilla Baasch Andersen, Lecturer in International Commercial Law, Queen Mary University of London; Fellow of the Institute of International Commercial Law Pace University School of Law, New York.

1. For more information on Art. 39 and its uniformity, see Andersen, C., "Reasonable Time in Article 39(1) of the CISG -- Is Article 39(1) Truly a Uniform Provision?", Review of the Convention on Contracts for the International Sale of Goods (CISG) 1998 (Kluwer Law International, 1999), at pp. 63-176, available online at: <http://www.cisg.law.pace.edu/cisg/biblio/andersen.html>.

2. Arbitration Institute of the Stockholm Chamber of Commerce of 05.06.1998 (Beijing Light Automobile Co. Ltd v. Conell Limited Partnership), mentioned in Section 3.1.1 below.

3. See Handelsgericht Zürich of 30 November 1998 (T.SA v. R. Établissement), mentioned in Section 3.1.1 below.

4. See ICC Arbitration case 5713 of 1989, mentioned in Section 3.1.1 below.

5. Arbitration Institute of the Stockholm Chamber of Commerce of 5 June 1998, supra fn. 2, mentioned in depth in Section 3.1.1 below.

6. Bulgarian Arbitration Case 56/1995 of 24 April 1996.

7. The CISG does not directly concern itself with validity, except as where otherwise provided, see Art. 4(a).

8. Arbitration Institute of the Stockholm Chamber of Commerce of 5 June 1998, supra fn 2, mentioned in depth in Section 3.1.1 below.

9. This interpretation is shared by some scholars, asserting that 'no-one may exempt himself from the consequences of his own deceit or even his gross negligence' See Schwenzer, I., in Schlechtriem, P., Commentary on the UN Convention on the International Sale of Goods (Oxford University Press, 1998), at p. 323.

10. See Art. 1.106(2) for the prior and Art. 1.7(2) for the latter.

11. See Handelsgericht Zürich of 30 November 1998, supra fn. 3.

12. See ICC Arbitration case 5713 of 1989, supra fn. 4.

13. In accordance with Art. 13(5) of the ICC Arbitration Rules.

14. 'Commentary on ICC arbitration case no. 5713 of 1989'; available at: <http://cisgw3.law.pace.edu/cisg/biblio/hyland.html>.

15. See Landgericht Aachen of 28 July 1993, available at: <http://cisgw3.law.pace.edu/cases/930728g1.html>.

16. See, for example, Lookofsky in Understanding the CISG in Scandinavia (Copenhagen, 1996), at p. 64, and Schwenzer, supra fn 9, at p. 319.

17. See the decision of the Arbitration Institute of the Stockholm Chamber of Commerce of 5 June 1998, supra fn. 2.

18. Cf. the seller's burden of evidence in proving himself unaware following the buyers proof that awareness was likely in the Swedish Arbitration case referred to supra fn. 2.

19. See LG Trier of 12 October 1995, available at: <http://cisgw3.law.pace.edu/cases/951012g1.html>.

20. See OLG München of 11 March 1998, available at: <http://cisgw3.law.pace.edu/cases/980311g1.html>.

21. See Herber, R. in Schlechtriem, supra fn 9, at p. 65: 'In particular, the principle of the protection of good faith is of practical importance, because legal principles not expressly laid down in the Convention can be derived from it.'

22. See Widmer/Lausanne p. 106 (cited in Enderlein, F and Maskow, D., International Sales Law (Oceana Publications, 1992), at p. 163; extract available at: <http://www.cisg.law.pace.edu/cisg/biblio/enderlein-art40.html>).

23. Audit, B., La Vente Internationale De Marchandises (Paris, 1990), at fn 112.

24. One scholar defines the awareness as more than gross negligence (Schwenzer, in Schlechtriem, supra fn. 9, at p. 322) while simultaneously naming guidelines for when knowledge can be presumed:

i) aliud goods;
ii) defective goods resold;
iii) selling goods with defect that the seller should have been aware of on account of his duty to keep his product under observation;
iv) defects discernible from superficial check or standard test IF seller is manufacturer (maggots in mozarella).

Another scholar (see Huber at p. 482, cited in Enderlein and Maskow, supra fn 22, at p. 164) defines 'could not have been unaware' as: 'a little bit less than cunning and a little bit more than gross negligence', which would seem to narrow the spectre, at least with regard to the assumptions made by Schwenzer, supra fn. 24, in connection with the sellers duty to monitor his product.

25. See Enderlein and Maskow, supra fn 22: 'The wording of the CISG itself would, in our view, include simple negligence, which could also be described as a violation of customary care in trade.', at p. 164.

26. See Schwenzer, I, in v. Caemmerere and Schlechtriem, P. (eds), Kommentar Zum Einheitlichen UN-Kaufrecht (C. H. Beck, Munich, 1995), at p. 370: 'Kenntnis oder nicht in unkenntnis sein können des Verkäufers hat der Käufer zu beweisen.' [The seller's awareness or inability to be unaware is for the buyer to prove. Author's translation]

27. See, for example, the Ontario Superior Court of Justice 31 August 1999 (La San Giuseppe v. Forti Moulding Ltd) available at <http://cisgw3.law.pace.edu/cases/990831c4.html>. In the U.S. Circuit Court of Appeals on 11 June 2003, the Court even remands the case for pleadings on Art. 40 without explaining the grounds for doing so: see BP Oil International v. Empresa Estatal Petroleos de Ecuador available at: <http://cisgw3.law.pace.edu/cases/030611u1.html>.

28. Article 40 was also applied in LG Landshut, 5 April 1995 (available at: <http://cisgw3.law.pace.edu/cases/950405g1.html>) concerning the sale of sports clothes. In this case, the seller had admitted knowledge of the non-conformity, freeing the buyer from any burden of proof in that respect.

29. Bundesgerichtshof (Germany) (BGH), 30 June 2004, available at: <http://cisgw3.law.pace.edu/cases/040630g1.html>, referring to cases from Stockholm Arbitration, ICC, Canada and the Netherlands

30. See judgment from Arrondissementrechtbank Roermond of 19 December 1991, available at: <http://cisgw3.law.pace.edu/cases/911219n1.html>.

31. Austria Supreme Court 27 February 2003, available at: <http://cisgw3.law.pace.edu/cases/030227a3.html>.

32. See LG Trier, 12 October 1995, supra fn. 19.

33. See OLG München 11 March 1998, supra fn. 20 and the discussion at Section 3.2.

34. <http://www.uncitral.org/english/clout/abstract/abstr20.htm>.

35. LG Celle 10 March 2004, available at: <http://cisgw3.law.pace.edu/cases/040310g1.html>

36. Translation by Tobias Kippitz, available ibid. Note that the Court refers to Schlechtriem, Schwenzer, Kommentar zum einheitlichen UN-Kaufrecht [Commentary on the Uniform UN-Sales Law], 3d ed., 2000, Art. 40 No. 4 in this deliberation.

37. See OLG Koblenz 11 September 1998, available at: <http://cisgw3.law.pace.edu/cases/980911g1.html>

38. Commercial Court Zürich 30 November 1998, available at: <http://cisgw3.law.pace.edu/cases/981130s1.html>.

39. See the decision of the Arbitration Institute of the Stockholm Chamber of Commerce of 5 June 1998, supra fn. 2.

40. See the dissenting opinion of Arbitrator Romlöv: 'The arbitrators agree [ ] that Article 40 shall only be applied in special circumstances. I would be inclined to use the words "exceptional circumstances" as I consider it a principle of fundamental importance from the point of view of predictability that a manufacturer shall normally be able to rely upon the expiry of an agreed guarantee time to represent the end point of his liability for defects (non-conformity).'

41. This view seems to be shared by Honnold, J., Uniform Law for International Sales under the 1980 United Nations Convention (2nd ed., Kluwer Law and Taxation Publishers, 1991), at paras. 260 and 229 and by Schwenzer in Schlechtriem, supra fn. 9, at pp. 321-322.

42. Schwenzer in Schlechtriem, supra fn. 9, at p. 322: 'In that regard the wording represents an easing of the burden of proof with regard to knowledge which would otherwise be difficult to prove'.

43. See Limbach, F. and Ahearn, B., 'Conformity of goods, derogation from Article 40 by the parties and conditions of Art. 40 CISG', available at: <http://cisgw3.law.pace.edu/cases/980605s5.html>.

44. OLG Karlsruhe 25 June 1997, available at: <http://cisgw3.law.pace.edu/cases/970625g1.html>.

45. Interestingly, the OLG considers this, but concludes that: 'By negotiating over the lack of conformity, the seller did not forfeit its right to plead that notice was given out of time. Taking into consideration the principle of good faith, such forfeiture could only be recognised if special circumstances so indicate (Arts. 7(1) and 80 CISG).' (CLOUT 230, available at: <http://www.uncitral.org/english/clout/abstract/abstr20.htm>).

46. Supra, fn. 44.

47. "The defendant was aware that the distributed protection foil was coated with an acrylate glue. However, it is disputed as to whether she knew or whether she could not have been unaware that the glue coating caused the foil to be adverse to what was required under the contract. The buyer has the burden of proof in regards to the Defendants actual knowledge; the claimant, however, did not offer any evidence in this regard. Further, the expert evidence provided by the claimant in the form of a report from the Austrian Institute for Synthetic Materials only states that the particular acrylate glue was not adequate, but it did not state that any sort of acrylate glue would be inappropriate. The respondent further argues that it had previously used such glue as a coating for foils and that in those circumstances had not been any residues of glue. The claimant did not oppose this explanation; this indicates that only this particular glue is defective, but not that this type of glue is inappropriate in general."

48. See Bulgarian Arbitration Case 56/1995 of 24 April 1996, available at: <http://cisgw3.law.pace.edu/cases/960424bu.html>.

49. See Schwenzer in Schlechtriem, supra fn. 9, at p. 324.

50. See UNILEX abstract for District Court Rimini 26 November 2002 (Al Palazzo S.r.l. v. Bernardaud di Limoges S.A.), available at: <http://www.unilex.info/case.cfm?pid=1&do=case&id=823&step=Abstract>: '[...]the Court stated that the principle according to which it is up to the party asserting certain facts to prove them ("onus probandi incumbit ei qui dicit") was one of the general principles underlying the Convention by virtue of which the gap could be filled according to Article 7(2).'

51. Arbitration Institute of the Stockholm Chamber of Commerce of 5 June 1998, supra fn. 2.

52. Ibid.

53. Regarding North-South tensions over Articles 38/39 and the development of a compromise Article 44 'safety net', see Garro, A.M., 'Reconciliation of Legal Traditions in the U.N. Convention on Contracts for the International Sale of Goods', 23 International Lawyer (1989), at pp. 443-483, available online at: <http://www.cisg.law.pace.edu/cisg/text/garro38,39,44.html>.

54. Schlechtriem, P., 'Uniform Sales Law -- The Experience with Uniform Sales Laws in the Federal Republic of Germany' in Juridisk Tidskrift (1991/92), at pp. 1-28: 'By way of compromise, Art. 44 of the CISG [...] allows for an excuse for the failure to give timely notice and as such leaves the buyer with the remedy of price reduction and a restricted remedy for damages. This was a concession to certain states who said that their merchants could not live with the provisions on notice and the loss of all remedies in case of failure to give timely notice ..." available online at: <http://www.cisg.law.pace.edu/cisg/text/schlechtriem44.html>.

55. Enderlein, F., 'Rights and Obligations of the Seller under the UN Convention on Contracts for the International Sale of Goods' [General obligations: Art. 30], in Sarcevic, P. and Volken P. (eds), International Sale of Goods: Dubrovnik Lectures (Oceana, 1996), at pp. 185-186.

56. UNILEX reports only 12 Article 44 cases, see <http://www.unilex.info>.

57. Peter Schlechtriem Uniform Sales Law -- The UN-Convention on Contracts for the International Sale of Goods (Manz, Vienna, 1986), at p. 70.

58. OLG Karlsruhe of 25 June 1997, supra fn. 44.

59. CLOUT 232; available at: <http://www.uncitral.org/english/clout/abstract/abstr20.htm>.

60. ICC International Court of Arbitration 9187 of June 1999, available at: <http://cisgw3.law.pace.edu/cases/999187i1.html>.

61. Available at: <http://cisgw3.law.pace.edu/cases/980911g1.html>.

62. See for instance: Germany 9 November 1994 Landgericht Oldenburg, ICC Arbitration Case No. 7331 of 1994, Germany 10 February 1994 Oberlandesgericht Düsseldorf [6 U 32/93], Germany 25 November 1998 Bundesgerichtshof, ICC Arbitration Case No. 8611 of 1997, Hungary 5 December 1995 Budapest Arbitration proceeding Vb 94131, Germany 9 July 1997 Oberlandesgericht München [7U 2070/97] and Germany 13 January 1994 Oberlandesgericht Saarbrücken.

63. Available at: <http://cisgw3.law.pace.edu/cases/980911g1.html>.

64. Appellate Court München 13 November 2002, available at: <http://cisgw3.law.pace.edu/cases/021113g1.html>, where the lack of a official document was not an excuse for failing to give the notice required under the CISG, as the lack of the document was a non-conformity itself.

65. Denmark 31 January 2002 Maritime Commercial Court, available at: <http://cisgw3.law.pace.edu/cases/020131d1.html>.

Pace Law School Institute of International Commercial Law - Last updated August 18, 2006
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