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Published in 27 Uniform Commercial Code Law Journal (1995) 331-370 (Part I); 29 Uniform Commercial Code Law Journal (1996) 99-167 (Part II). Reproduced with permission of the authors.

Practice Under the Convention on International Sale of Goods (CISG)
A Primer for Attorneys and International Traders

Louis F. Del Duca [*] and Patrick Del Duca [**]

PART I.
[A] The CISG May Govern Most U.S. International Trade

[1] Overview of the CISG and recent case law
[2] Consequences of failure to know about the CISG
[3] History, ratification and organization of the CISG
[B] What Triggers Application of the CISG?
[1] Four bases for applying the CISG
[2] Place of business
[3] Private international law: Conflict of laws
[4] Opt-in
[5] Lex mercatoria
[6] Individual parties with places of business in more than one state
[7] Declaration by ratifying State not to be bound by the "Private international law:
      Conflict of laws" applicability rule
[8] Freedom of contract preserved: Parties' right to "opt-out" of the CISG
[9] Applicability to "contracts for sale of goods"
     [a] "Contract of sale" and "goods" not defined
     [b] Exclusion of "consumer" and other enumerated transactions
     [c] Special provisions
               [i] Sale of made-to-order goods
               [ii] Mixed transactions involving labor or services
               [iii] Comparisons with UCC provisions
[10] Exclusion of matters pertaining to the "validity" of the contract and "property" issues
[11] Exclusion of death and personal injury cases
[C] Rules of Construction
[1] Interpreting the Convention
[2] Ascertaining the intent of the parties
     [a] Consideration to be given to "all relevant circumstances: Including the negotiations:
           Parol evidence consequences
     [b] Usages and practices

PART II.
[D] More Courts Confront the CISG
[E] What to Do About Significant Issues That the CISG Does Not Address?

[1] What interest rate on late payments?
[2] Other issues that the CISG does not address
[F] Update on Recent Applicability and Scope Cases
[1] More on the "four bases for applying the CISG"
[2] What is a "contract for sale of goods"? Transactions included or excluded by CISG
[G] When the CISG Creates a Contract; Oral Contracts Are Binding: No Statute of Frauds
[H] Offer and Acceptance Rules
[1] Status of the "mailbox" acceptance rule
[2] Unintentionally irrevocable offers
[3] Battle of the forms lives on
[I] Selected Performance Issues
[1] Open price term
[2] Warranties
[3] Risk of loss
     [a] Sales of goods involving carriage
     [b] Sales of goods in transit
     [c] Sales of goods not involving carriage and not in transit
     [d] Effect of seller's breach on risk of loss
     [e] Overview
[4] Excuse for changed circumstances (exemptions)
[J] New Concepts in Breach and Remedies
[1] The preferred remedy: Specific performance or damages remedies:
      How to choose by "selective opt-out" or choice-of-forum clause
[2] Buyer's duty to discover and give notice of defects: Estoppel
     [a] Duty to examine within a reasonable time
     [b] Duty to give notice of non-conformity within a reasonable time
     [c] Ineffective cure: New notice required
     [d] Advantage of clause providing for explicit time for giving notice
[3] Seller's right to cure
[4] Fundamental breach
[5] "Nachfrist"
[6] "Adequate grounds for insecurity" and "anticipatory repudiation"
[7] Buyer's damages and reduction of price
[K] Conclusion: Learn the CISG, Whether You Like It or Not


[PART I: 27 Uniform Commercial Code Law Journal (1995) 331-370]

Ratified in 1987 by the United States and ten other countries, the Convention on the International Sale of Goods (CISG) has grown to include thirty-eight states as parties to the Convention. In addition, forty-four CISG cases involving ten countries and two international tribunals have been reported.

The authors, in the first of a two-part discussion of the CISG, trace the beginnings of the international convention and its current impact on U.S. and foreign traders and lawyers. Highlighting and analyzing recent and significant case decisions along the way, the authors focus their discussion (in Part I) on the importance of the CISG to U. S. international trade, what factors activate application of the CISG, and the rules interpreting the CISG. An Appendix to the article offers important facts and notes on ratification, acceptance, declarations, and other aspects of the international participants in the Convention.

[...]

[A] The CISG May Govern Most U.S. International Trade

[1] Overview of the CISG and Recent Case Law

U.S. attorneys and traders can think of the Convention on the International Sale of Goods (hereafter the CISG) as an alternative to [page 331] Article 2 of the Uniform Commercial Code. The United States is part of the first group of nations for which the CISG has come into force, and U.S. lawyers and traders, as well as lawyers and traders throughout the commercial world, need to understand the impact of the CISG. This article reviews the major provisions of the CISG in light of the forty-four cases from around the world involving the CISG that have thus far been reported.[1] Courts in ten countries, plus International Chamber of Commerce (ICC) arbitral panels and the Iran-United States Claims Tribunal, have issued written opinions in these forty-four cases thus far reported. The cases are distributed as follows:

Country Number of Cases
Argentina
2
Austria
1
France
5
Germany
17
Hungary
3
Italy
2
Mexico
1
Netherlands
5
Switzerland
2
United States
2
International Tribunals
International Chamber of Commerce     
6
Iran-United States Claims Tribunals
1

The CISG has just begun to be construed by the courts. The number of reported cases during the first several years following adoption of a new body of statutory or code law is generally small because of the time involved in getting the first generation of cases under the new law into and through the trial courts and then through the appellate process. An initial six-year gestation period of CISG litigation has now transpired. The first generation of cases litigated on a global basis has been introduced into the system. The number [page 332] of reported CISG cases will undoubtedly significantly increase during the next few years as international traders and their counsel become more familiar with the CISG's content and more states ratify it. An analysis of the initial body of forty-four reported cases at this early stage in the litigation history of the CISG nevertheless provides some preliminary insights about the CISG in practice.

The distribution of these forty-four cases reported to date among tribunals in ten countries and in the International Chamber of Commerce and the Iran-United States Tribunals illustrates the practical needs that the CISG is fulfilling. Traders from many jurisdictions are finding that the CISG provides a source of rules for the resolution of their contract disputes. Although these decisions come from many diverse countries and tribunals, the results reached are generally in accord with what one would anticipate from a reading of its text. The cases also are beginning to provide rules for specific application of the general principles the CISG enunciates. The relevance of the CISG and its reported cases to international traders and their counsel obviously extends far beyond the litigation that occurs within the borders of their own countries. For example, although only two CISG cases [2] have been thus far reported in the United States, U .S. entities have already been parties in an additional six cases litigated outside the United States.[3] [page 333]

One of the difficulties of the CISG as a source of rules governing the formation and performance of contracts for the sale of goods is that there is no supreme body for its interpretation.[4] The goal of achieving harmonization not only by agreement on the uniform text of a convention but also by developing a reasonably consistent body of case law and practice in the application of the uniform text is patently more difficult in the international arena than within the limited geographic area of a single country. This is not only because of the absence of a supreme body for its interpretation, but also because of a divergence in legal traditions, culture, and language that generates differences in national approaches to commercial law as well as to law in general. For example, the two U .S. decisions involving the CISG contain the usual common-law style recitation and analysis of the facts underlying the contract dispute. All of the other reported judicial decisions are from civil-law countries, and the recitation and analysis of factual background is in general much sketchier, consistent with the civil-law view that judges should simply apply the law rather than elaborate or discover it in the common-law tradition of reasoning by analogy to prior cases.[5] The institution of mechanisms for collecting reported cases, such as the reporting systems upon which this article relies,[6] provides an avenue [page 334] for continuing worldwide communication regarding the evolving case law. This can be helpful in developing a well-reasoned, harmonized body of law to be used in applying and interpreting the CISG, as well as in promoting future constructive debates about the CISG and its application.

The CISG has governed the formation of certain international contracts for goods by U.S. international traders and the rights and obligations of the parties to such contracts since January 1, 1988.[7] [page 335] Despite efforts to educate traders about the CISG, many have undoubtedly entered into contracts governed by the CISG without any awareness of its existence, content, and how it has affected their transactions. The CISG has now been ratified and is positive law in thirty-eight countries, including all three of the North American Free Trade area countries (i.e., Canada, Mexico, and the United States) and most of the European Community member states as well as China and Russia. It covers much of the same ground as Article 2 of the Uniform Commercial Code. The work of Professors Allan Farnsworth and John Honnold, in their capacity as official U.S. representatives during the CISG drafting process, is reflected by some similarities between the CISG and the Uniform Commercial Code. However, as this article illustrates, the CISG handles many important issues in ways different from the UCC.

[2] Consequences of Failure to Know About the CISG

International traders and their counsel should carefully review the CISG to determine circumstances under which it would or would not be desirable to have it made applicable to their transactions. Increased coverage in continuing legal education courses and in the curriculum offerings of law schools around the world is needed to sensitize lawyers and their clients to the contents and importance of the CISG.

The serious consequences of failure to know about the CISG are illustrated by the case of Filanto, S.p.A v. Chilewich International Corp.[8] In that case, much to the chagrin of the plaintiff Filanto and much to the elation of the defendant Chilewich, both parties unexpectedly discovered they were subject to the CISG at the litigation stage of their relationship rather than having knowingly [page 336] negotiated their contract with an awareness of the impact of the CISG. Plaintiff Filanto found that application of the CISG by the federal district court resulted in the incorporation, from a separate but related contract, of an arbitration clause requiring disputes to be settled by arbitration in Moscow. Filanto was therefore barred from initiating a breach of contract suit against Chilewich in the U.S. Federal District Court of New York. The case dramatically indicates the need for lawyers and traders involved in international transactions to be informed of the circumstances in which it would be advantageous to make the Convention applicable to their transactions or, alternatively, to use the opt-out procedure of CISG Article 6 when application of the CISG would not be in the party's best interest.

For the unwary international lawyer or trader, failure to understand the CISG can lead to catastrophic business results. The CISG reflects compromises between common-law and civil-law traditions as well as between developing and developed and controlled economy and free-economy countries. It incorporates these compromises in order to facilitate subsequent adoptions of the Convention throughout the world and to make it more useful in meeting varying needs of ratifying states. The fundamental compromises mean that the CISG corresponds to the pre-CISG law of no country in the world. Thus, any party potentially subject to the CISG must learn its principles -- or at least enough of them to understand how to elect a preexisting body of national law to govern an international contract for the sale of goods.

Unless the parties expressly waive the application of the CISG either totally or in part (as Article 6 of the CISG permits them to do),[9] it applies to certain contracts for the international sale of goods. Accordingly, those involved in international trade should be aware of the CISG even if they prefer not to adapt their practices to the new law. It is also important to be aware of the CISG because parties to contracts may find that it is desirable to rely on it.

In the United States, the CISG is important because it overrides the applicability of the Uniform Commercial Code in certain international sale of goods transactions unless the parties opt out. In other countries, domestic law can similarly be overridden. Lawyers [page 337] negotiating contracts concerning U .S. international trade will have to recognize that, while there are similarities between the CISG and the Uniform Commercial Code, important differences also exist. Judgment will have to be exercised as to whether parties to the contract should avail themselves of the opportunity the CISG gives them to opt out of its coverage.

[3] History, Ratification, and Organization of the CISG

For over fifty years countries tried to formulate a uniform law on the international sale of goods.[10] The CISG was ratified as of January 1987 by the United States and ten other countries and became effective on January 1, 1988. As of June 20, 1994, the following thirty-eight states are parties to the Convention: Argentina, Australia, Austria, Belarus, Bosnia and Herzegovina, Bulgaria, Canada, Chile, China, the Czech Republic, Denmark, Ecuador, Egypt, Estonia, Finland, France, Germany, Guinea, Hungary, Iraq, Italy, Lesotho, Mexico, the Netherlands, Norway, Romania, the Russian Federation, Slovakia, Slovenia, Spain, Sweden, Switzerland, the Syrian Arab Republic, Uganda, the United States of America, Ukraine, and Zambia.[11]

The CISG is divided into four parts. Part I (Articles 1-13) [page 338] addresses the sphere of application of the Convention. It also contains general rules pertaining to statutory interpretation and the filling of gaps regarding situations not covered by the specific text of the Convention. Part II (Articles 14-24) addresses issues regarding formation of the contract. Part III (Articles 25-88) concerns itself with substantive rules regarding the sales contract. Part IV (Articles 89-101) addresses issues regarding obligations or parties to the Convention.

[B] What Triggers Application of the CISG

[1] Four Bases for Applying the CISG

The CISG is applicable if:

(1) The parties to the contract have their places of business in different states and such states are Contracting States (hereafter referred to as the "place of business" basis for applying the CISG);[12]

(2) The rules of private international law lead to the application of the law of a state that has ratified the Convention (hereafter referred to as the "private international law-conflict of laws" basis for applying the CISG);[13]

(3) The parties to the contract include a choice of law clause making the CISG applicable; or

(4) The CISG can be applied because it is part of the "lex mercatoria."[14]

[2] Place of Business

Seven of the forty-four cases currently reported applied the CISG under the place of business basis of Article 1(1)(a).[15] This [page 339] basis for application of the CISG is illustrated by the previously mentioned Filanto case,[16] in which the Italian seller had its place of business in Italy and the U.S. buyer had its place of business in the United States. It appears that in some cases, the courts, without specifically citing Article 1(1)(a), have merely assumed the applicability of the CISG where the parties to the contract had their places of business in different contracting states.

To avoid situations in which parties find themselves unexpectedly bound to the CISG, Article 1 further provides that the fact that the other party's place of business is in a different state must be recognizable no later than at the time of the making of the contract by being apparent (1) from the face of the contract; (2) from the dealings between the parties; or (3) from the information they have disclosed to each other.[17]

[3] Private International Law: Conflict of Laws

Twenty-three of the forty-four cases thus far decided under the CISG have applied the Convention on the basis of the "private international law-conflict of laws" standard of Article 1(1)(b).[18] Under this provision, if one of the parties to the international sales [page 340] transaction has its place of business in a Contracting State and the other does not, the CISG will be applicable if the conflicts of law rule (i.e., the private international law-conflict of laws rule) applied by the forum court makes the law of the state that has ratified the CISG applicable. Of the seventeen court decisions rendered by German courts involving the CISG, nine were decided on the basis of the private international law- conflict of laws standard for application of the CISG.

[4] Opt-In

The CISG may also be applied where the parties in their agreement have so provided, even though it would not otherwise be applicable under the "place of business" or "private international law-conflict of laws" bases discussed above. For example, if the parties include in their contract a provision to make the CISG applicable,[19] it will be applied if such a provision is permitted under domestic law.[20] [page 341]

A caveat is in order at this point. Unlike the 1964 Uniform Law on International Sales (ULIS), the CISG does not have a specific clause permitting election of its application even when the CISG would not by its terms apply.[21] However, private international law principles ordinarily allow the parties to select the law by which they desire to be governed. An additional caveat is warranted here for U.S. traders. Under U.S. private international law (i.e., conflicts of law), the parties' right to choose applicable law may require the parties' choice to be "reasonable."[22] That is, the parties' choice of applicable law may not be totally unrelated to the transaction, nor may it be too obscure for the court.[23]

[5] Lex Mercatoria

A fourth method for application of the CISG has been established by the early reported litigation in those cases in which neither the "place of business," the "private international law-conflicts of law," or the "opt-in" bases are applicable. The Court of Arbitration of the International Chamber of Commerce and the Iran-United States Claims Tribunal have applied the CISG as a part of lex mercatoria (i.e., the customs and practices governing commercial law).[24] [page 342]

In one case, the buyer and the seller (neither of which were located in Contracting States) entered into three separate contracts for the sale of goods. The goods delivered under the second contract did not conform to the contract specifications, and the buyer did not pay the seller the entire purchase price. The seller brought the dispute to the Court of Arbitration of the International Chamber of Commerce pursuant to an arbitration clause, seeking payment of the balance due. The buyer counterclaimed for its direct losses, costs, lost profits, and interest. Because the contract contained no choice of law clause, the Court of Arbitration determined the applicable law governing non-conformity of goods by looking to the ICC rules. Article 13(5) of those rules required the court to consider the relevant trade usages in making its decision. The court found that

"There is no better source to determine the prevailing trade usages than the terms of the United Nations Convention on the International Sale of goods of 11 April 1980, usually called the 'Vienna Convention.' This is so even though neither the [country of the Buyer] not the [country of the Seller] are parties to that Convention."[25]

The potential for expanded use of the Convention on International Sale of Goods on the "lex mercatoria" basis is potently conveyed by this language of the arbitration panel of the International Chamber of Commerce.

In another case,[26] the Islamic Republic of Iran entered into a contract with a U.S. company for the sale of electronic communications equipment and related services. When the buyer did not pay the seller the entire purchase price, the seller notified the buyer of its intention to sell the equipment not yet delivered; it then sold that equipment. This dispute reached the Iran-United States Claims Tribunal, which applied the CISG as part of the "lex mercatoria" and held that the seller had the right to mitigate its damages by selling the undelivered equipment, noting that this right was "consistent with recognized international law of commercial contracts." The Tribunal found for the seller, because the conditions of [page 343] CISG Article 88(1) [27] were satisfied since the buyer had unreasonably delayed its payment of the purchase price without giving any assurances that payment would be made and the seller had notified the buyer of its intention: to sell the undelivered equipment.

A line of cases holding that the CISG is inapplicable to operative facts that occurred before the effective date of the Convention in the countries involved is also worth noting.[28]

[6] Individual Parties With Places of Business in More Than One State

Where individual parties to the sales transaction have places of business in more than one state, selection of the states to be used in determining whether the parties' places of business are in different Contracting States is made under Article 10's "place of business" definition. This provides that for purposes of the CISG, the "place of business" shall be the one "which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract." The term "conclusion of the contract" is used in this context to refer to the time of formation of the contract.[29]

No multiple "place of business" case had yet been reported at the time this article was written. However, this provision may become relevant in the future. For example, assume that an Argentine buyer by telephone orders for its dealership "Swedco" cars from the Swedish manufacturer in Sweden. Since both Sweden and Argentina are contracting parties to the Convention, the Article l(l)(a) [page 344] "Place of Business" basis for its application clearly controls. However, if the same buyer by telephone orders "Swedco" for its inventory from a division of the "Swedco" company based in Belgium (we are assuming that "Swedco" also has a plant and offices in Belgium for purposes of this hypothetical), the question then arises as to whether the place of business for the "Swedco" company should be Sweden, where its home offices and plants are located, or Belgium, where facilities are also in existence and where the order was accepted. The Article 10 "place of business" definition [30] would make the place of business in Belgium controlling, and the Article l(l)(a) "place of business" basis for applying the Convention would not come into play because Belgium is not a contracting party.

The "place of business" definition in Article 10 may also become relevant in a case involving the "conflict of laws" basis of application of the Convention. For example, assume an Argentine buyer orders "Swedco" cars for its inventory by telephone from the Belgium branch of the "Swedco" company, and the Argentine buyer has a place of business not only in Argentina (a Contracting State) but also in Brazil (a non-Contracting State). In such a situation, it becomes crucial to determine whether or not the place of business of the buyer for purposes of the CISG should be Brazil or Argentina. If it is Brazil, there would be a contract between two parties neither one of which has a place of business in a Contracting State. However, if the court determines that the law of Argentina is applicable and that, under the Article 10 definition of "place of business," Argentina is the place of business, there would be a contract between a seller in a non-Contracting State (Belgium) and a buyer in a Contracting State (Argentina) whose law has been found to be the applicable one. In this latter case, the Article l(l)(b) "private international law-conflict of laws" basis for jurisdiction would make the Convention applicable. [page 345]

[7] Declaration by Ratifying State Not to Be Bound by the "Private International Law-Conflict of Laws" Applicability Rule

As noted previously, the CISG is applicable if the rules of private international law lead to the law of a state that has ratified the CISG.[31] The United States chose to exercise the right given to ratifying states under Article 95 [32] of the CISG to declare at the time of the deposit of its instrument of ratification that it would not be so bound. As part of the ratification process, it was apparently decided that because of the availability of the sophisticated body of sales law provided by Article 2 of the UCC, that body of law would be preferable to the more general provisions of the Convention in cases in which U.S. law would otherwise be applicable under private international conflict of law rules. For reasons not explicitly articulated, the Peoples Republic of China and Czechoslovakia (now the Czech Republic and Slovakia) have also made such an Article 95 declaration in connection with their ratification of the Convention.[33]

[8] Freedom of Contract Preserved; Parties' Right to "Opt Out" of the CISG

If the parties so choose, they may waive (i.e., opt out of) the applicability of the CISG under the terms of Article 6, which provides that the "parties may exclude the application of this Convention or ... derogate from or vary the effect of any of its provisions." This provision gives the parties the option to "opt out" of the application of the Convention in its entirety, or to exclude the application of designated articles of the Convention.

While the opt-out choice may be inferred from the circumstances surrounding the transaction, because of uncertainties on how the courts would rule, this is not the preferable procedure. If opting out is desired, the cleanest way to accomplish it is to waive explicitly the application of the Convention or to waive designated articles and provide alternative terms. This also avoids the need for discussion or litigation of nebulous conflict of laws issues. Reference merely to the law of a state that is a Contracting State leaves ambiguous the [page 346] question of whether such a reference is to that state's law, including the CISG, or to the domestic law of the state, not including the CISG. This ambiguity should be avoided by use of appropriate explicit language indicating, for example, that the choice of' "the law of the State of New York, excluding (or including if such is the case) the Convention on Contracts for the International Sale of Goods," is to be applicable.

The importance of explicitly excluding or including the CISG is illustrated by Nuova Fucinati S.p.A. v. Fondmetal International A.B.,[34] in which the Italian Court: (1) held the CISG inapplicable to a contract between an Italian seller and a Swedish buyer under the Article 1(1)(a) "place of business" standard where the contract between the parties was entered into after the effective date of the CISG in Italy but prior to entering in force in Sweden; and (2) also ruled that even though the parties had chosen Italian law as the law governing the contract, the CISG was inapplicable under the Article 1(1)(b) "private international law-conflict of laws" standard, because Article 1(1)(b) operates only in the absence of a choice of the applicable law by the parties. In addition, the parties had chosen "Italian law," not "Italian law including the CISG." It is entirely possible that another court could construe the phrase "Italian law" to mean the opposite (i.e., Italian law including the CISG).

[9] Applicability to "Contracts for Sale of Goods"

[a] "Contract of Sale" and "Goods" Not Defined

Although the text of the CISG does not contain any definition of "contract of sale" or "goods," it does refer in various provisions to "contracts for sale of goods." For example, in setting forth the geographical application rules, Article 1 states that the Convention applies "to contracts of sales of goods between parties whose places of business are in different states. ..." (emphasis supplied).

The underlying assumption would appear to be that there is a general consensus in the international community that a contract for "sale of goods" involves a contract for transfer of ownership from [page 347] a seller to a buyer for a price [35] and that "goods" generally refers to items that are movable.[36] Such references in Article 1 and in other articles of the CISG lack the specificity of definitions provided by Sections 2-106(1) [37] and 2-105(1) [38] of the UCC. Nevertheless, this is the framework within which the CISG operates.

Despite its lack of explicit definitions of "contract for sale of goods,"[page 348] the CISG does exclude specified types of transactions from "contracts for the sale of goods." These explicit exclusions are discussed immediately following this part of this essay. Note however, that questions of the exclusion or inclusion of particular types of transactions have arisen and will continue to arise independently of the specific exclusion provisions contained in the CISG. For example, a Dutch court [39] recently decided that a distribution contract did not by itself constitute a "contract for the sale of goods," where an Italian manufacturer and Dutch buyer entered into an agreement for distribution of cabinets. The agreement prohibited the Dutch buyer from reselling the cabinets in France and Italy. Although Italy and the Netherlands were both Contracting States and the Article l(l)(a) "place of business" basis for applying the CISG generally subjected the transaction to the CISG, the court concluded that the subject matter of the transaction was not so covered because the agreement was not a contract for sale, but rather a distribution agreement. The court did note, however, that the CISG would have been applicable had the parties entered into any contracts of sale under the distribution agreement.

United States courts have reached conflicting results on the question of whether distribution agreements are subject to the UCC's Article 2 on "Sales" and its Section 2-201 Statute of Frauds. This divergence is illustrated by Lorenz Supply Co. v. American Standard, Inc. [40] In Lorenz, a plurality of the Michigan Supreme Court ruled that a distributorship agreement was not a "contract for the sale of goods" within the meaning of the Section 2-201 Statute of Frauds provision of the UCC where the distributorship agreement did not explicitly state the quantity of goods to be purchased. The oral distributorship agreement was therefore enforceable because no writing was required. The concurring opinion in Lorenz on different grounds also ruled that the oral distributorship agreement was enforceable. However, contrary to the plurality opinion, it concluded that (1) distributorship agreements are within the scope of Article 2, which applies not only to contracts for sale of goods but [page 349] also to "transactions in goods";[41] and (2) a letter that the supplier wrote to the distributor containing language intimating that a distributorship agreement had been created met the writing and quantity requirements of the UCC Section 2-201 Statute of Frauds, which requires "a writing evidencing the contract" also to contain a quantity term.[42]

In another CISG case, the German buyer and the Italian seller had places of business in different Contracting States and met the place of business requirements for application of the CISG. However, finding no applicable rule in the CISG, the German court applied German law to enforce liability on the German entrepreneur who had acted under the name of a company that did not exist in entering into a contract with the Italian seller. Since the company named as the buyer did not actually exist, the seller was allowed to pursue the entrepreneur to recover the purchase price and interest under German law.[43]

In determining whether a particular transaction qualifies as a "sale of goods" and is therefore subject to the CISG, the general understanding within the international community of what constitutes a "contract for the sale of goods" (subject to any specific provisions in the CISG to the contrary) would therefore appear to be applicable. Such an approach would be consistent with the [page 350] rule of construction set forth in Article 7, which specifies that in interpreting the Convention, "regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade. ..."[44] CISG Article 7 further provides that questions concerning matters governed [by the CISG] "which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law."[45] Having discussed the lack of definition of "contract for the sale of goods" and whether certain transactions not covered by the specific exclusions in the CISG are subject or are not subject to the CISG under the undefined "contract for sale of goods" references in the CISG, we now turn to the specific exclusions provided in the CISG.

[b] Exclusion of "Consumer" and Other Enumerated Transactions

The Convention provides that it does not apply to sales of goods for "personal, family or household" use unless the seller at any time prior to the formation of the contract did not know or should not have known that the goods were bought for any such use.[46] No such limitation is found in Article 2 of the UCC which is therefore applicable to consumer and commercial transactions.[47]

Also included from the CISG are:

(1) Sales by auction;
(2) Sales by execution or otherwise by authority of law;
(3) Sales of stocks, shares, investment securities, negotiable instruments, or money;
(4) Sales of ships, vessels, hovercraft, or aircraft; and
(5) Sales of electricity.[48] [page 351]

The Supreme Court of Hungary has ruled that, although the CISG does not apply to the sale of aircraft because of the Article 2(d) exclusion of "aircraft," it does apply to transactions involving an attempted sale of component parts of aircraft. Applying Article 14(1), the court concluded that no contract for sale of such component parts was formed because the offer of the U.S. vendor to the Hungarian offeree did not adequately specify the price and was not sufficiently definite as to quantity to meet the definiteness requirements of the CISG.[49]

The UCC does not exclude the transactions listed above, but it does provide for coverage of sales of stocks, shares, and investment securities primarily by Article 8 rather than by Article 2. It also covers transfer of negotiable instruments in Articles 3 and 4. Case law is split on the applicability of Article 2 to sales of electricity.[50]

[c] Special Provisions

[i] Sale of made-to-order goods

The CISG specifies that it is applicable to contracts for the supply of goods to be manufactured unless the party who orders the goods "undertakes to supply a substantial part of the materials necessary for such manufacturing production."[51] The French Cour d'appel de Chambry has held the CISG inapplicable where a French seller was to manufacture goods according to the Italian buyer's specifications and was not to sell the goods to third parties or use them for other purposes. The CISG was held inapplicable because the buyer had provided a "substantial [page 352] part of the materials necessary ... for production."[52] Regrettably, the case as reported does not indicate what percentage of the materials constituted a "substantial part."

[ii] Mixed transactions involving labor or services

The CISG also does not apply to contracts in which "the preponderant part of the obligation of the party who furnishes the goods consists in the supply of labor or other services."[53] The International Chamber of Commerce's Court of Arbitration recently ruled that the CISG was applicable to a contract between a Yugoslavian buyer and an Austrian seller, which called for the provision and installation of materials used in hotel construction. The court held that the seller's provision of services did not put the contract beyond the scope of the CISG, because the contract was primarily a contract for the sale of construction materials. The specific factors that the court relied on to reach this result are not contained in the report of this decision.[54]

[iii] Comparisons with UCC provisions

Questions of whether Article 2 of the UCC applies to transactions in which one party provides a "substantial part of the materials" necessary for the manufacture or production of goods by another, or in which the "preponderant part" of the obligation of the party who furnishes the goods consists in the supply of labor or other services, essentially must be resolved (1) under Section 2-102, which provides in part that Article 2 applies to "transactions in goods"; or (2) by applying UCC provisions by analogy for policy reasons to nonsale of goods or mixed transactions. U.S. court decisions have not been consistent in treatment of these "scope" issues.[55] While some of the UCC cases have adopted the [page 353] "predominant" purpose standard in refusing to apply Article 2 in certain "mixed" or "hybrid" transactions, others have emphasized the Section 2-102 "transactions in goods" provision or extended application by analogy as the basis for using Article 2 to resolve applicability issues in "mixed" or "hybrid" transaction cases. A substantial body of case law has extended the applicability of Article 2 beyond the area of "sale of goods" or "transactions in which the sale of goods predominates" to a broader area of transactions in which the sale of goods does not predominate.

For example, in Providence Hospital v. Truly,[56] the plaintiff patient recovered for breach of an implied warranty of merchantability under the "transactions in goods" provision of Section 2-102, where application of a defective cleansing solution to her eye after a cataract operation caused serious injury. The court allowed recovery even though the bulk of the amount paid to the hospital and surgeon was for services rendered in connection with the cataract operation and the cost of the cleansing solution was only a few dollars. Similarly, in New Mart v. Gimbel's, Inc.,[57] the court held that the plaintiff was entitled to recovery for breach of an implied warranty of merchantability, where a defective cleansing solution and hair dye was applied to her scalp as part of a beauty treatment by a beauty parlor. The New Mart court so ruled essentially by a process of analogy without even specifically mentioning the extended "transaction in goods" applicability provision of Section 2-102. However, in a comparable case involving washing and dyeing of a customer's hair in a beauty parlor, the court, in Epstein v. Giannattasio,[58] ruled that the "predominant" nature of the transaction was a service rather than a sale of goods and denied implied warranty of merchantability recovery to the customer whose scalp was burned by the application of the cleansing and dyeing materials.

Interests of injured plaintiffs in such cases would not be adversely impacted by the "predominant part" standard for application of the CISG, because consumer transactions are explicitly excluded from its coverage by Article 2 of the CISG and non-CISG law would accordingly be applicable to these cases.

The relevant proposed revisions to UCC Article 2 appear to [page 354] recognize the broad applicability of the Code to consumer as well as to commercial transactions. While these revisions to UCC Article 2 recommend elimination of the "transactions in goods" provisions of Section 2-102, a new Section 2-103 is proposed that would inter alia provide:

"(a) Unless the context otherwise requires, this Article applies to: (1) Any transaction regardless of form that creates a contract for the sale of goods, including a transaction in which a sale of goods predominates; (2) Any dispute relating to goods supplied under a transaction in which the sale of goods does not predominate. ..."[59]

It should also be noted that the applicability of this new Section 2-103 approach under the UCC would not be limited to consumer transactions. For example, it would apply to sales of businesses involving transfer of realty, good will, accounts, and the like, as well as of "goods" and would adopt the position of some of these cases that carve out the "goods" portion of the "mixed" or "hybrid" contract and subject only that part of the transaction to the provisions of UCC Article 2.[60]

The CISG also does not address questions of its applicability to lease transactions that are now addressed by the new UCC Article 2A (Leases).[61] Many other types of "mixed" or "hybrid" transactions will have to be addressed within the framework of both the [page 355] CISG and the UCC. One such subject currently receiving substantial attention is the treatment of software contracts.[62]

[10] Exclusion of Matters Pertaining to the "Validity of the Contract" and "Property" Issues

The CISG further provides in Article 4 that:

"This Convention governs only the formation of the contract of sale and the rights and obligations of the seller and buyer arising from such a contract.

"In particular, except as otherwise expressly provided, the Convention is not concerned with: (a) the validity of the contract or any of its provisions or any usage; and (b) the effect which the contract may have on the property in the goods sold."[63]

Questions of contract validity and transfer of title are therefore not governed by the Convention. In a recent German case, a Dutch buyer and a German seller entered into a contract for the sale of a cruiser. The seller delivered the cruiser, but the buyer was declared bankrupt. The seller claimed it had a right to repossess the cruiser under the contract's "retention of title clause." When the buyer challenged the validity of that clause, the court found that the CISG was inapplicable as to the validity of the "retention of title clause" [64] because of the Article 4 exclusion.

Another recent German case illustrates the need to resolve a specific problem by domestic law rather than by the CISG, even though the CISG is found generally applicable under the Article l(l)(a) "place of business" standard. In that case, a German seller and an Italian buyer entered into a settlement agreement after the buyer informed the seller that it was not going to perform. When the buyer failed to abide by the settlement agreement, the seller brought suit. The German court held that, although the CISG was applicable to the basic contract, it was inapplicable on the question of the validity of the settlement agreement since the CISG excludes [page 356] contract validity questions.[65] This case further highlights the need to include a choice of law clause to cover issues not otherwise covered by the CISG, even if the CISG is applicable to the contract.

Validity and passage of title issues are addressed by various provisions of the UCC. However, to the extent that issues are not addressed by the UCC, Section 1-103 provides that "the general rules of law and equity" shall be applicable. Explicit "validity" or "passage of title-property" provisions of Article 2 include sections pertaining to passage of title;[66] rights of seller's creditors against sold goods;[67] third party rights as "good faith purchasers for value" or "buyers in ordinary course of business;"[68] procedures for excluding or modifying express, and implied merchantability and fitness warranties;[69] liquidation or limitation of damages;[70] and contractual modification or limitation of remedies.[71] Depending on the circumstances, U.S. parties to such contracts subject to the CISG may want to use a conflict of laws clause to incorporate U.S. law to cover issues not governed by the CISG.

[11] Exclusion of Death and Personal Injury Cases

Article 5 of the CISG provides that it does not apply' 'to the liability of the seller for death or personal injury caused by the goods to any person." The consequential damages provisions of Article 2 of the UCC do allow recovery for death and personal injury claims resulting from breach of the sales contract.[72]

[C] Rules of Construction

[1] Interpreting the Convention

Under the innocuous caption of "General Provisions," the CISG sets forth important rules of construction that already have [page 357] and will continue to have substantial impact in interpreting the Convention and ascertaining the intent of the parties to sales agreements. Article 7 provides that in interpreting the CISG, the international character of the Convention, the need for uniformity, the observance of good faith, the general principles on which the Convention is based, and the rules of private international law (i.e., conflict of laws) are to be considered. It states that "regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade."[73] In addition, questions concerning matters governed by the Convention that are not expressly settled in it are to be settled in conformity with the "general principles on which it is based or in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law."[74]

Three recent decisions have applied this latter rule of construction. In a recent German case between a German entrepreneur and an Italian seller, the entrepreneur acted under the name of one company when ordering the goods and under the name of another company when authorizing payment. The former company actually did not exist, and the seller sued the entrepreneur to recover the purchase price and interest. Since matters of agency law are not covered by the CISG, the court ruled that German law would determine whether the entrepreneur was acting as an agent and was personally liable when he authorized payment.[75]

In another case, an Argentine court held that, absent a CISG rule, the time for which interest should accrue should be determined by a usage widely known and regularly observed in international trade.[76] In a third case applying Article 7, the court of arbitration of the International Chamber of Commerce ruled that Austrian law should be applicable in determining the validity of a liquidated damages clause (referred to as a "penalty" clause in the decision) [page 358] and the rate of interest payable where no provision of the CISG covered these matters.[77]

[2] Ascertaining the Intent of the Parties

[a] Consideration to be Given to "All Relevant Circumstances-Including the Negotiations"-Parol Evidence Consequences

Article 8 of the CISG provides that for purposes of the Convention, statements made by, and other conduct of a party are to be interpreted according to that party's intent where the other party knew or could not have been unaware what the intent was.[78] However, if such is not the case, statements made by, and other conduct of a party are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances.[79] This provision concludes by specifying that, in determining the intent of a party or the understanding a reasonable person would have had, due consideration is to be given "to all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties."[80]

In the previously discussed case of Filanto S.p.A. v. Chilewich International Corp.,[81] the New York District Court had to determine whether the parties had intended a clause in a master contract between Chilewich and the U.S.S.R. for the sale of shoes that required arbitration of disputes before the arbitration court in Moscow to be included in the subcontract that Chilewich had entered into with the Italian manufacturer Filanto for the purchase of shoes to be shipped to the U.S.S.R. in fulfillment of the master contract. Applying CISG Article 8(3), the court found relevant circumstances in the form of prior practices that the parties had established between themselves, as well as subsequent conduct of the parties, to support its conclusion that the arbitration clause from the master contract [page 359] was included in the subcontract. So ruling, it noted that a five-month delay on the part of Filanto (the seller) in notifying Chilewich of its objection to the incorporation of the arbitration clause into the subcontract was untimely in light of the practice the parties had followed in their prior dealings. The court also noted that the seller (Filanto) had attempted to rely on portions of the master contract in asserting claims against the buyer (Chilewich) after execution of the subcontract and after it had claimed that the arbitration clause was excluded from the subcontract.

In the previously discussed case involving the German entrepreneur who claimed he was buying goods for a principal who subsequently was shown not to exist, the German court looked to the precontract statements and conduct of the Italian seller and German entrepreneur to determine whether a contractual relationship existed between the two or whether the entrepreneur had been acting as an agent at the time the contract was formed. Applying Article 8(3), the court held that the entrepreneur was liable to the seller for the purchase price of the goods because the seller did not know and could not have known that the entrepreneur intended to obligate any other party.[82]

The language in Article 8(3) of the CISG, which inter alia states that in determining the intent of the parties or the understanding of a reasonable person "due consideration is to be given to all relevant circumstances of the case including the negotiations ..." may significantly alter the common-law and U.C.C. parol evidence rule.[83] Attention should therefore be given to drafting merger clauses to counteract these provisions of the CISG. [page 360] The parol evidence issue was avoided in the recent case of Beijing Metals & Minerals Import/Export Corp. v. American Business Center, Inc.[84] In Beijing, the court somewhat cavalierly stated that "we need not resolve the choice of law question of whether Texas or the CISG is applicable because our discussion is limited to application of the parol evidence rule" (which applies regardless).[85] In that case, a Chinese seller contracted with a U.S. buyer for the sale of weight-lifting equipment. After a dispute as to the performance of the contract, the parties entered into a modified written assignment for payment. The buyer refused to pay the amount claimed by the seller, alleging that at the time of the modified written agreement two contemporaneous oral agreements relating to the seller's obligation to deliver the goods had been concluded. Erroneously concluding that the CISG and the Texas law of parol evidence were the same and would both require exclusion of parol evidence, the court ruled in favor of the seller. Since both China and the United States are contracting parties to the CISG and the seller had a place of business in China and the buyer had a place of business in the United States, the CISG was applicable under the "place of business" standard of Article l(l)(a). The provision of Article 8(3) requiring consideration of all relevant circumstances including negotiations would therefore appear to have required the court to permit the introduction of the oral evidence regarding the two contemporaneous oral agreements.

[b] Usages and Practices

Socialist states resisted inclusion of the notion that usages should be binding in the CISG. This, in part, may have been due to their almost exclusive use of standard form contracts and also in part because of their suspicions that international law, and particularly customary public international law, is essentially a bourgeois Western phenomenon. However, they ultimately agreed to a compromise that effectively makes applicable any usage to which the parties have agreed and any practices established between the parties, unless they expressly provide otherwise.[86] The relevant CISG provision further provides that: [page 361]

"[t]he parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned."[87]

This rule of construction was applied in the previously mentioned case of Elastar Sacifia v. Bettcher Industries, Inc.,[88] in which the court held that, since the CISG does not contain a rule determining when interest should accrue, the accrual of interest should be determined under CISG Article 9 by a usage widely known and regularly observed in international trade. These CISG provisions on usages and practices are substantially similar to the usage of trade,[89] course of dealing,[90] and course of performance [91] provisions of the UCC.[page 362]

[...]


[PART II: 29 Uniform Commercial Code Law Journal (1996) 99-167]

Part One of this article discussed when and how the CISG applies to an international sale of goods contract. It addressed the four bases for application of the CISG (i.e., "Place of Business," "Private International Law-Conflicts of Law," "Opt-In," and "Lex Mercatoria"). It also discussed the scope of applicability of the CISG to contracts for the sale of goods, including specific exclusions and standards for determining CISG applicability to sales of "made-to-order" goods and to "mixed transactions involving labor or services." Part One closed with a discussion of (1) rules of construction for interpreting the CISG, (2) ascertaining the intent of the parties to the contract, and (3) the incorporation of usages and practice into the parties' contract.

Part Two of this article takes account of the increase in the number of reported CISG cases from around the world and discusses what to do about significant issues that the CISG does not address; the issue of when the CISG creates a contract is also discussed as well as selected performance issues and new concepts in breach and remedies.[page 99]

[…]

[D] More Courts Confront the CISG

Since the 1995 installment of our review [1] of "Practice Under the Convention on International Sale of Goods,"[2] the number of reported [page 101] cases involving the CISG has increased from 44 to 142 and the number of states which have ratified the CISG has grown from 38 to 47.[3] [page 102] In this installment, we address developments pertaining to contract formation, performance, and remedies in connection with contracts for international sales of goods. We also amplify in light of recent cases our earlier discussion of the "applicability" provisions of the CISG to suggest the desirability of including a supplementary choice of law clause in the sales contract to cover issues which the CISG does not address. Our goal is to address issues raised by practice under the CISG, with particular emphasis on issues raised by reported cases.

As of January 1, 1996, 142 CISG cases (mostly from courts of first instance) have been reported as noted in the following chart.

Reported CISG Decisions
Country
Number of Cases
Argentina
3
Australia
1
Austria
4
France
9
Germany
62
Hungary
3
Italy
4
Mexico
1
Netherlands
22
Switzerland
9
United States of America                     
9

Arbitral Tribunals
International Chamber of Commerce
11
Iran-United States Claims Tribunal
1
Hungarian Chamber of Commerce
Court of Arbitration
1
Italian arbitration panel, Florence
1
Internationales Schiedsgericht der
Bundeskammer der gewerblichen
Wirtschaft (International Arbitration of the
Federal Chambers of Business in Germany)
2
Total Number of Reported Cases
142
[page 103]

There is an especially high number of cases from the Netherlands and Germany. In the case of the Netherlands, the high number can be attributed to the general openness of the Dutch legal system to international law rules and to the use of the CISG as a model for many of the provisions governing domestic commercial law under the new 1992 Dutch Civil Code. In the case of Germany, it can be attributed at least in part to the early preparation of a translation of the CISG from its five official languages into German, and the significant role of German speaking jurists in the drafting of the CISG.

[E] What to Do About Significant Issues That the CISG Does Not Address

Fifty-two of the 142 cases of disputes thus far reported arising from contracts to which the CISG applies in fact involve disputed issues of law that the CISG does not address. In some instances, the parties wisely specified in a contractual choice-of-law clause that the law of a given nation should govern the issues to which the CISG does not speak. In the case of the United States, the preferred way to do this would be to choose the law of a specific state with particular reference to the UCC. In some instances, the parties included specific contractual provisions to cover the disputed issues to which the CISG does not speak. The risk, of course, with reliance on specific contractual provisions to address issues to which the CISG does not speak as an alternative to a general choice-of-law clause, is that the parties may not be able to anticipate all of the issues that they may eventually dispute with each other. The reported cases discussed in this article in which the parties failed to agree to a contractual choice-of-law clause or to a contract clause pertaining specifically to the disputed issues illustrate the uncertainties that the parties face when the judge of their dispute must apply conflict of laws, (that is, private international law,[page 104] rules of the forum state to determine what provisions of positive law govern the disputed point.[4]

The CISG specifically provides that it does not cover "validity" and "passage of title" issues.[5] The cases discussed in the balance of this heading illustrate other legal issues that have substantial practical significance and to which the CISG does not speak. Of the issues in this category, it is not surprising that issues related to the payment of money have to date been the most frequently litigated.

[1] What Interest Rate on Late Payments?

Forty-two of the 142 CISG cases reported thus far deal with the determination of the rate of interest applicable to late payment by the buyer or to refund of a purchase price payment due to the seller.[6] This [page 105] group of cases illustrates the importance of using a choice-of-law clause that specifies what law will govern questions to which the CISG does not speak, or in the absence of the ability to agree to such a clause, at least including a provision that specifies the rate of interest to be applied to late payments and refunds. Although the CISG contains specific provisions awarding interest for late payment to buyers [7] and reimbursement of the purchase price by sellers required to refund the price,[8] it does not specify which country's law should be applied in determining the applicable rate of interest.[page 106]

Thus far the reported cases have generally ruled that the law of the country of the creditor's place of business applies, an unsurprising result given that creditors are likely to bring their actions in their home country. The implicit reasoning behind this kind of holding appears to be based on the hypothesis that in the absence of timely payment, the creditor will cover its need for funds by borrowing in the credit markets of the country in which it has its place of business. In simple cases this reasoning appears plausible. However, it does not address the realities of currency exchange risks, differing national inflation rates, multinational corporate creditors and debtors, the availability of hedging instruments, and the international character of financial markets. Because of these realities, both parties to a contract are well advised to address the issue at the time of contracting rather than rely on a judge or arbitrator attempting to identify a private international law criteria to determine what interest rate should apply.

If the parties fail to address the issue at the time of contracting, the judge of their dispute may be forced to select an interest rate that will hopefully approximate the creditor's loss.[9] The general principles of the CISG are that damages for breach of contract are to consist of a sum equal to the loss suffered by the aggrieved party as a consequence of the breach.[10] The common-sense approach of the reported cases in selecting the interest rate indicated by the law of the creditor's country is generally consistent with this notion; however, as the CISG comes to be used for larger and more complex contracts, the parties to such contracts may wish to avoid arguments about what kind of risk as to the cost of money a debtor contracting party assumed by simply specifying the applicable interest rate, and of course currency in which overdue funds are to be paid. [page 107]

At least one reported case makes the further point that, in addition to specifying the country whose law should be applied to govern issues to which the CISG does not speak, it is also desirable to specify a specific interest rate because national law as to the applicable interest rate may itself be unclear. In that case, the German court, after deciding that Swedish law governed the question, wrestled with whether Swedish law made applicable a Swedish statutory or a Swedish discount banking rate, which at the time differed by 8 percent.[11] Thus, the well-drafted contract will specify a governing law to address questions to which the CISG does not speak, and it will also specify the parties' contractual agreement as to the specific interest rate payable by either party in the event of a late payment or a refund.

[2] Other Issues That the CISG Does Not Address

Other recent CISG cases that have required courts to use private international law (i.e., conflicts of law rules of the forum state) to determine which state's law should apply in resolving non-CISG issues pertain to:

1. Burden of proof of non-conformity of goods;[12]
2. Validity of penalty clauses;[13]
3. Prescription (i.e., statute of limitations);[14] [page 108]
4. Selection of forum for dispute resolution;[15]
5. The existence of a "company";[16]
6. Existence of an agency relationship;[17]
7. The right of a party to offset claims;[18] and
8. The currency in which payment should be made.[19]

If international traders become more sophisticated in explicitly resolving in their contracts the issues not covered by the CISG, or at least sophisticated enough to realize that the choice of the CISG to [page 109] govern their contracts does not obviate the need to select a national law to govern issues to which the CISG does not speak, they will achieve greater predictability in their contractual relations.

[F] Update on Recent Applicability and Scope Cases

[1] More on the "Four Bases For Applying The CISG"

Part One [20] of this article notes that the CISG is applicable if:

(1) The parties to the contract have their places of business in different states and such states are Contracting States (hereafter referred to as the "place of business" basis for applying the CISG);

(2) The rules of private international law lead to the application of the law of a state that has ratified the CISG (hereafter referred to as the "private international law-conflict of laws" basis for applying the CISG);

(3) The parties to the contract include a choice-of-law clause making the CISG applicable (hereafter referred to as the "opt-in" basis for applying the CISG); or

(4) The CISG can be applied because it is part of the "lex mercatoria."

A recent International Chamber of Commerce arbitration award involves an interesting interplay between the "opt-in" and Article 1 "conflicts of law" basis for applying the CISG. In that case, an Italian seller and Czech buyer agreed to a contract that provided that Austrian law governed, without, however, specifying "including" or, "excluding" the CISG.[21] The arbitral court reached the right result by holding that Austria's ratification of the CISG made the CISG part of Austrian law, and that therefore Austrian law "including" the CISG should be applied. Although the logic of the arbitral court's ruling is so clear that it is hard to understand how the parties could litigate the point in good faith, drafting a choice-of-law clause to specify a governing national law "including" the CISG would seem to obviate any basis for such a claim. [page 110]

A recent German case reached the same result.[22] In response to a party's claim that contractual reference to German law as the law governing the contract impliedly excluded application of the CISG, the German court concluded that in the absence of explicit exclusion, a clause choosing the law of a Contracting State as applicable law will not constitute an "opt-out" under Article 6 of the CISG.[23] Similar reasoning was applied by another German court in a case between a Swiss buyer and a German seller in which the CISG was applicable under the Article 1(1)(a) "places of business" rule. The court there ruled that reference by the parties in their pleadings to provisions of the German Civil Code was not sufficient to exclude application of the CISG even though the reference to German law was a valid choice of law under German conflicts of law.[24]

In all three of these cases, the court reached the right result by holding that a reference to the law of a Contracting State, that is, a state that has ratified the CISG, included application of the CISG as well as the other law of the Contracting State. Other courts in the absence of compelling circumstances requiring a contrary ruling should reach the same result because the CISG becomes part of the law of a Contracting State, and also because CISG Article 7(1) calls upon all courts to attempt to interpret the CISG in a uniform manner. However, there is no "Supreme" Court to provide authoritative rulings as to CISG issues. Parties to contracts would therefore be well advised to more firmly close the door to unfounded litigation claims by clearly "including" or excluding" the CISG as the law to be applied in such situations.

[2] What Is a "Contract For Sale of Goods"?-Transactions Included or Excluded by CISG

Article 1 of the CISG states that the CISG applies "to contracts of sales of goods between parties whose places of business are in [page 111] different Contracting States."[25] The CISG does not contain any definition of "contract of sale of goods."[26] However, Article 2 inter alia excludes from CISG coverage sales of goods for "personal, family or household" use and other sales such as sales by auction, execution, or otherwise by authority of law.[27]

Questions regarding what types of transactions qualify as a "sale of goods" subject to the CISG will have to be resolved without the availability of a UCC § 2-106 definition of "contract of sale"[28] or a Section 2-105 definition of "goods."[29]

In a recent case, a German company ordered market research from a Swiss company.[30] The German court held that the CISG was not applicable because the contract was neither a contract for the sale of "goods" as required by CISG Article 1(1) nor a contract for the "supply of goods to be manufactured or produced" governed by CISG Article 3(1). Instead, the court found the contract to be one for performance of work rather than for sale of goods.[31]

On the matter of sale of "made to order" goods, the CISG specifies that it is applicable to contracts for the sale of goods to be manufactured unless the party who orders the goods "undertakes to supply a substantial part of the materials necessary for such manufacturing production."[32]

Exclusion of contracts in which the party who orders the goods undertakes to supply a "substantial part of the materials necessary [page 112] for such manufacture or production" under CISG Article 3(1) has been litigated in several cases. For example, where a German buyer and a French seller entered into a contract ordering textiles to be produced by seller, the German court found the contract to be one for "supply of goods to be manufactured or produced," because the buyer had not undertaken to supply a substantial part of the materials necessary to manufacture or produce the textiles.[33] However, in a 1994 Austrian case,[34] the court ruled the CISG inapplicable where an Austrian company had entered into an agreement with a Yugoslav company to deliver to the Yugoslav company the necessary raw materials for processing finished goods thereafter to be delivered back to the Austrian company.

With reference to mixed transactions involving labor or services, the CISG also does not apply to contracts in which "the preponderant part of the obligation of a party who furnishes the goods consists in the supply of labor or services."[35]

Where the charge for the services of dismantling a second-hand airplane hangar that a French seller sold to a Portuguese buyer was approximately only 25 percent of the total purchase price, a French court applied the "preponderant part" provision of Article 3(2) to the hybrid "sale-service" transaction and held the contract subject to the CISG.[36]

[G] When the CISG Creates a Contract; Oral Contracts Are Binding: No Statute of Frauds

Article 11 of the CISG [37] abolishes the statute of frauds for contracts to which it applies. Unlike the statute of frauds requirement of [page 113] UCC [38] § 2-201,[39] a contract for the sale of goods can be concluded under the CISG without any written agreement.

However, the CISG provides a compromise between nations that utilize a statute-of-frauds requirement as a prerequisite for enforcing an oral contract for the sale of goods and those that permit enforcement [page 114] of oral contracts for sale of goods. CISG Article 96 permits a ratifying country to make a reservation [40] that has the effect of nullifying the CISG Article 11 abolition of the statute-of-frauds requirement.

The United States has not filed an Article 96 reservation to the abolition of the writing requirement. (...) Accordingly, while United States domestic contracts for the sale of goods are subject to the UCC § 2-201 [41] statute of frauds, United States international sale of goods contracts to which the CISG applies are not normally subject to the statute-of-frauds writing requirements.

A recent Mexican case [42] illustrates this difference in handling statute-of-frauds issues in transactions subject to the UCC as distinguished from transactions subject to the CISG. In that case, the Mexican Commission for the Protection of Foreign Trade (COMPROMEX) held enforceable an oral contract for the sale of twenty-four tons of garlic between a Mexican seller and California buyer. The seller delivered the goods and an invoice with the purchase price to the buyer, who then refused to pay the balance due. In the arbitration proceeding, COMPROMEX found that because of the CISG's applicability, the contract need not be in writing. In addition, the invoice and documents of carriage were deemed sufficient proof of the contract's existence. It also found that buyer had breached its obligations under the contract and ruled that the purchase price be paid.[43]

In another interesting case,[44] a German court applying the CISG held enforceable an oral contract between a German buyer and a [page 115] French seller noting that, "a contract of sale ... may be proved by any means, including witnesses."[45] The court utilized order forms that contained the signatures of the parties and the testimony of two witnesses to conclude that a valid contract had been entered into.[46] Although different legal routes would have to be followed, the result in this case probably would be the same under the UCC or the CISG. Under the UCC § 2-201 statute of frauds,[47] the order forms would probably qualify as a writing sufficient to indicate that a contract of sale was made and therefore enable the plaintiff to then attempt to actually prove the existence of the oral contract.

One United States case suggests that many international traders and perhaps some judges are as yet unaware of the CISG and in particular of how it changes the substantive law otherwise applicable to statutes-of-fraud issues. In GPL Treatment, Ltd. v. Louisiana-Pacific Corp.,[48] the Oregon state court appellate judges adhering to the majority opinion appear to have overlooked the applicability of the CISG. As a result of not focusing on the applicability of the CISG, they undertook a complicated application of the UCC statute-of-frauds requirement. The decision that they reached, as the dissenting opinion makes clear, is consistent with the result provided by the CISG; however, had they relied on the CISG as the dissenting opinion required, their reasoning would have been better founded. The responsibility for overlooking the applicability of the CISG cannot, however, be squarely assigned to the appellate judges authoring the majority opinion; the reported opinions of the appellate court suggest that the plaintiff failed to timely raise the applicability of the CISG in the trial court. [page 116]

In GPL Treatment, Ltd., a Canadian Seller of wood products sued a U.S. Buyer for breach of an oral contract in the Oregon trial courts. The majority opinion of the Oregon state appellate court ruled that Buyer's silence in response to confirming communications sent by Seller to Buyer constituted confirmation of the oral agreement. In the absence of a response by Buyer objecting to its contents, Seller's confirming communication was deemed to satisfy the UCC § 2-201 statute-of-frauds writing requirement against the nonobjecting Buyer and therefore could be used as a basis for enforcing the oral agreement against Buyer.[49]

The dissenting appellate opinion in GPL Treatment, Ltd. concluded that the communication sent by Seller to Buyer after the alleged oral contract was entered into did not qualify as confirmation of an oral contract. Accordingly, Seller would be barred by the U.C.C. statute of frauds from enforcing the oral agreement. However, the dissent noted that application of the CISG would enable Seller to enforce the oral agreement. The CISG's treatment in the court's opinions is limited to a footnote in the dissenting opinion, which states:

"I would, however, address plaintiffs' cross-assignment that the trial court erred in refusing to apply the United Nations Convention on Contracts for the International Sale of Goods (CISG) ... instead of the U.C.C. Article 11 of the CISG does not require a contract to be "evidenced by writing" and, thus, would defeat [appellee's] statute of fraud defense if the trial court abused its discretion ... in ruling that plaintiffs' attempt to raise the CISG was untimely and that they had waived reliance on that theory."[50]

This footnote reference recalls the kind of "surprise" reflected in Part I's discussion of the Southern District of New York's Filanto decision. That is, at the time of contracting, just as the Italian and the U .S. parties to the contract for the sale of shoes at issue in the Filanto case had no clue what law really governed their contractual relationship, so the Canadian and U.S. parties to this contract had no clue at [page 117] the time of their dialog about what law governed when that dialog gave rise to the formation of a contract. And, just as the plaintiff's failure in the Filanto case at the time of trial court proceedings to understand the applicability of the CISG and the implications of the applicability led the trial court to reject its effort to bring suit in the United States, so the Canadian plaintiff's apparent failure in the instant case to raise in timely fashion the CISG's applicability led to the case's resolution on principles of law other than the CISG. The Filanto and GPL Treatment, Ltd. cases just discussed suggest several lessons for U.S. international traders in respect of the statute of frauds. First, the CISG elimination of the statute-of-frauds provision requires additional caution on the part of sales and procurement personnel in the negotiation of contracts for the international sale of goods in order to avoid unintentionally becoming contractually bound. At the very beginning of the negotiation process, the U.S. participants would be well advised to state in writing that no agreement will be concluded until a formal writing is executed and that all negotiations are simply to be considered negotiations on which the other party has no right whatsoever to rely until the formal writing is executed. Once a contract is made, it is generally advisable to also provide that contractual modifications are to be in writing because the CISG provides that a contract in writing that contains a provision requiring any modification or termination by agreement to be in writing may not be otherwise modified or terminated by agreement.[51] The UCC contains a comparable provision.[52]

It is prudent to include as part of any written offer a requirement that any acceptance must be in writing. In addition, the offeree may wish to include in a written acceptance the terms of the original offer and further specify that the acceptance contains all the terms and conditions of the parties' agreement, which are not subject to variation except in writing. [page 118]

[H] Offer and Acceptance Rules

Articles 14 through 24 of the CISG contain special rules pertaining to offer and acceptance. Comparison of these rules with the UCC "mailbox," "firm offer," and "battle of the forms" rules illustrates some of these provisions.

[1] Status of the "Mailbox" Acceptance Rule

Under the CISG, acceptances are effective when received.[53] Under the U.S. common-law "mailbox" rule, acceptances are effective on dispatch. On its face, this is an important difference between the UCC and the CISG. Although no cases directly on point on this issue have yet been reported, it should, however, be noted that the impact of the CISG "receipt rule" may be softened by Article 16(1),[54] which on the important issue of timeliness of revocation of offers provides:

"Until a contract is concluded, an offer may be revoked if revocation reaches the offeree before it has dispatched an acceptance."

For the limited purpose of determining the timeliness of a revocation of an offer, this CISG provision in substance arguably makes the acceptance effective on dispatch rather than on receipt.

[2] Unintentionally Irrevocable Offers

Both the UCC and the CISG permit irrevocable offers to be made without consideration. However, the CISG broadens enforceability of such offers beyond the scope of the UCC rule.

The UCC provides that "an offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it [page 119] will be held open is not revocable for lack of consideration…."[55] (emphasis supplied). The CISG instead provides that an offer is irrevocable if:

"it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable, or if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer.",[56]

Unlike the UCC, this CISG provision does not require a "signed writing which by its terms gives assurance that it will be held open" as a condition for making the offer irrevocable. In addition, under the CISG, an offer is irrevocable merely because it was reasonable for the offeree to rely on the offer as being irrevocable and its offeree acts in reliance on the offer. To avoid accidentally making an irrevocable offer under the CISG as a result of stating a fixed time for acceptance, such offers should state something like, "[t]his offer expires after thirty days, but can be revoked at any time."

[3] Battle of the Forms Lives On

The CISG initially makes most "acceptances" with different or additional terms a counter-offer rather than an acceptance.[57] It does not explicitly contain the UCC concept of an "expression of acceptance," which has the same effect as an acceptance.[58] However, the CISG compromises between the old common-law "mirror image" approach and the UCC approach to contract formation, which merely looks to agreement on essential terms.

Under the CISG [59] a reply to an offer that purports to be an acceptance but which contains additions, limitations, or other modifications is initially classified as a rejection of the offer and constitutes a counter-offer. However, the rigidity of this counter-offer approach is softened by the language immediately following it, which by [page 120] implication adopts an "expression of acceptance" type approach. This language states that a reply to an offer that purports to be an acceptance but contains additional or different terms that do not "materially" alter the terms of the offer constitutes an acceptance, unless the offeror, without undue delay, objects orally to the discrepancy or dispatches a notice to that effect.[60] If the offeror does not so object, the terms of the contract are the terms of the offer with the modifications contained in the acceptance.[61] This movement in the direction of permitting a contract to be created on the basis of agreement on essential terms is in turn altered by the immediately following provision, which states:

"[a]dditional or different terms relating among other things to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party's liability to the other or the settlement of disputes are considered to alter the terms of the offer materially."[62]

Despite this broad coverage of what constitutes a "material term" making the response to an offer a counter-offer under the CISG, some cases involving "non-material" additional or different terms have already been reported. An example of a non-material modification is found in a recent German case in which a German buyer had ordered goods from an Italian seller.[63] Seller replied in a writing that included a provision calling for all claims of defect to be made within thirty days. When buyer alleged that the goods were non-conforming and refused to pay the entire purchase price, the court held that the additional term in seller's acceptance requiring notification of defect within thirty days had become a part of the contract because the offer had not been materially altered.[64]

Even the addition or alteration of those terms that under CISG Article 19(3) are stated to materially alter the terms of an offer and therefore create a counter-offer may not necessarily be held to do so. Recall that CISG Article 19(3) inter alia provides that: "The settlement of disputes are considered to alter the terms of the offer [page 121] materially."[65] In Filanto v. Chilewich,[66] seller (offeree) claimed that its response to buyer's offer, which contained an objection to the incorporation of an arbitration clause in the buyer's offer, constituted a counter-offer. The Southern District of New York Court held otherwise. Citing CISG Articles 18(1) and 18(3),[67] it found that seller's conduct and delay of five months in replying to buyer's offer indicated its intention to accept it. The court held that seller was under a duty to notify buyer in a timely fashion of its objections to the arbitration terms due to the parties' extensive prior dealings. The court also noted that the seller had begun its performance under the contract by shipping part of the goods, and buyer had issued a letter of credit naming seller as beneficiary to cover part payment of the goods during the five-month delay period.

Unlike the UCC, the CISG does not address the question of what happens when conflicting offers and acceptances are exchanged, performance nonetheless begins, and problems then arise.[68] Because the CISG does not provide an answer in such cases, recourse will have to be to general principles of the CISG and private international law to resolve such questions.[69]

[I] Selected Performance Issues

[1] Open Price Term

The CISG permits a contract to be formed even if the parties have not specified the price by providing that a proposal is sufficiently definite if it indicates the goods and expressly or implicitly [page 122] fixes or makes provision for determining the quantity and the price.[70] In addition, where a contract has been validly concluded but does not expressly or implicitly fix or make provisions for determining the price, in the absence of any indication to the contrary, the market price charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade is applicable.[71] The open price term provision of the UCC [72] produces essentially comparable results. However, the UCC provision provides that in such a case the price is a reasonable price at the time for delivery rather than the market price at the time of the conclusion of the contract. Because of the currency exchange risks associated with international contracting, the establishment of the CISG rule as the market price at the time of contracting was an essentially foregone conclusion.

[2] Warranties

The CISG warranty provisions [73] produce seller warranty accountability substantially similar to the express and implied merchantability [page 123] and fitness quality warranties of the UCC. However, the CISG does not contain any provisions comparable to the disclaimer procedures [page 124] sellers are authorized to use under the UCC.[74] This omission may result from the fact that such disclaimer provisions may be considered to address issues pertaining to the validity of the contract and therefore would be excluded from CISG coverage under Article 4 [75] of the Convention. The CISG also contains provisions that are substantially in accord with the implied warranty of title provided for by the UCC.[76] [page 125] These provisions require the seller to deliver goods that are free from any right or claim of a third party, including claims based on industrial property or other intellectual property, unless the buyer agreed to take the goods subject to such rights or claims.[77] In the case of claims based on industrial property or other intellectual property, the CISG explicitly specifies that the obligation of the seller does not extend to cases where, at the time of the conclusion of the contract, the buyer knew or could not have been unaware of the right of claim, or the right of claim results from the seller's compliance with technical drawings, designs, formulae, or other such specifications furnished by the buyer.[78]

[3] Risk of Loss

Risk-of-loss rules are based on the premise that a buyer's obligation to pay arises when the seller has performed its obligations. Once the seller has performed, because the risk of loss has passed to the buyer, the buyer is required to pay, even if the goods are subsequently destroyed or damaged.

The CISG provides that once the risk has passed to the buyer, buyer must pay the full price, even if the goods have been accidentally damaged or destroyed. However, the buyer is not required to pay the price if the loss or damage was "due to an act or omission of the seller."[79] In this latter situation, the loss or damage is not an accidental [page 126] loss, but rather a loss for which the seller is responsible. The seller's action releases the buyer from its obligation to pay and also gives the buyer a claim for damages for breach of contract.

The CISG sets forth three sets of risk of loss rules for:

1. Contracts for sale of goods involving carriage of the goods;[80]
2. Contracts for sale of goods sold in transit;[81] and
3. Contracts for sale of goods that are neither "carriage" of goods contracts or "in transit" contracts.[82]

The third category involves pickup of the goods by the buyer at the seller's place of business or at some third location, as for example when the goods are in the hands of a third-party bailee.

[a] Sales of Goods Involving Carriage

If the contract of sale involves carriage of the goods and the seller is not bound to hand them over at a particular place, the risk passes to the buyer when the goods are handed over to the first carrier for transmission to the buyer in accordance with the contract of sale.[83] If the seller is bound to hand the goods over to a carrier at a particular place (i.e., a destination contract), the risk does not pass to the buyer until the goods are handed over to the carrier at that place.[84] These provisions do not split the risk in cases of multimodal transportation involving a combination of road, sea, or air transportation unless special provisions of the contract specify otherwise.

While the language of the CISG differs from the analogous UCC provisions, these risk-of-loss rules applicable to sales of goods involving carriage appear to be essentially similar to the rules applicable to shipment and destination contracts under the UCC.[85] [page 127]

[b] Sales of Goods in Transit

Under the CISG, the risk of loss of goods sold in transit passes from the seller to the buyer at the time of the making of the contract.[86] Professor John Honnold, who was intimately involved in the drafting of the CISG, has advised:

"If you are drafting a contract for the purchase of goods that are already afloat at the time of the contract, one would want a clear provision on whether the buyer bears the risk for damage (such as seeping sea-water) that occurs throughout the voyage. The Convention 's rules on this awkward problem are probably no better than you find in domestic law."[87]

[c] Sales of Goods Not Requiring Carriage and Not in Transit

Where the sales contract does not require carriage of the goods and the buyer is to pick up the goods at the seller's place of business, the CISG provides that the risk passes to the buyer when it takes over the goods. If the buyer does not do so at the time specified by the contract, risk of loss then passes at the time when the goods are placed at buyer's disposal, and buyer commits a breach of contract by failing to take delivery.[88] If the goods are in the hands of a third-party bailee and the buyer is bound to take over the goods at a designated place, the risk passes when delivery is due and the buyer is aware that the goods are at his disposal at that place. This latter situation requires that the buyer have a receipt or notice that the goods are ready for delivery.[89] If the contract relates to goods not then identified [page 128] the goods are considered not to be placed at the disposal of the buyer until they are clearly identified to the contract.[90]

The UCC risk-of-loss rules where the goods are held by a bailee to be delivered without being moved, or where delivery is to be at the seller's place of business, are set forth in Sections 2-509(2) and 2- 509(3).[91] They are substantially similar to the CISG rules.

[d] Effect of Seller's Breach on Risk of Loss

Both the CISG and the UCC have provisions pertaining to the effect of a seller's breach on the risk of loss. The CISG provides that the normally applicable risk-of-loss rules discussed previously do not impair the buyer's remedies if the seller has committed a fundamental breach.[92] The UCC provides that where a tender of delivery of goods so fails to conform to the contract as to give a right of rejection, the risk of their loss remains on the seller until cure or acceptance.[93]

[e] Overview

Like the UCC, the CISG's rules on risk of loss have abandoned the approach of making risk of loss turn on the question of whether "property" (i.e., title) has passed from the seller to the buyer. Both the CISG and UCC risk-of-loss rules are applicable on the basis of concrete commercial events such as handing over the goods to the carrier or the buyer taking over physical possession from the seller. To the extent that these physical events rather than metaphysical concepts [page 129] of passage of title determine the substantive rights of the parties, a great improvement in achieving predictability and certainty of results has been made. However, the CISG risk-of-loss rules are stated in language yet to be interpreted by courts. In addition, no definitions of transportation terms are contained in the CISG. Accordingly, where negotiation postures permit, the parties may wish to insert their own specific risk of loss clauses into their contract utilizing the authorization granted by Article 6 of the CISG.

[4] Excuse for Changed Circumstances (Exemptions)

The CISG addresses under the heading of "Exemptions" the common-law concepts of "force majeure" or "excuse by failure of presupposed conditions." The CISG provides that a party is not liable in damages for failure to perform if the failure was due to an "impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences."[94]

If a party's failure is due to the failure by a third person whom it has engaged to perform the whole or a part of the contract, such party is exempt from liability only if the party is exempt under the immediately previously stated exemption rules, and the person whom it has so engaged would be so exempt if the exemption rule were applied to that person.[95]

Like the term "impracticability" used by the UCC in its statement of excuse for non-performance,[96] there is considerable ambiguity [page 130] as to whether the term "impediment" includes cases of frustration of purpose of the contract as well as cases of physical impossibility. It is also important to note that excuse for non-performance under the CISG only exempts the non-performing party from liability for damages,[97] thereby entitling the aggrieved party to an action for interest, reduction of the price, and, in cases where the delay in performance amounts to a fundamental breach, also a right to avoid the contract. In addition, the aggrieved party would continue to have a right to specific performance after the extinction or termination of the event on which the exemption was based, even though for a period of time failure to perform was due to an unforeseen "impediment beyond its control."

The CISG makes its exemption provisions applicable to both sellers and buyers by stating that "a party is not liable for failure to perform" if the required conditions are met.[98] This avoids the problems created by the manner in which UCC § 2-615 is drafted, which, if read literally, would make the excuse for non-performance provisions applicable only to sellers and not to buyers. Fortunately, case law interpreting Section 2-615 has not read these provisions literally.[99]

The ambiguities indicated in the CISG "exemption" provisions are further aggravated by the fact that common- and civil-law lawyers come from systems in which the basis for imposing liability depends on differing strict or fault liability theories. Where the negotiation posture of the parties is such that agreement may be reached on a "force majeure-excusable delay" clause, inclusion of such a clause would therefore appear to be desirable in order to avoid uncertainties left unresolved by the CISG provisions.[page 131]

[J] New Concepts in Breach and Remedies

[1] The Preferred Remedy: Specific Performance or Damages Remedies-How to Choose by "Selective Opt-Out" or Choice-of-Forum Clause

A basic assumption of the remedies provisions of the Convention is that the contract of the parties should normally be specifically performed.[100] This is unlike the UCC, pursuant to which damages rather than specific performance is the preferred remedy.[101] However, by providing that in a case involving application of the CISG a court is not bound to enter an order for specific performance if it would not be required to do so under the law of the forum state in which litigation is initiated, the CISG makes it possible to bypass its normally applicable specific performance remedy.[102] Thus, if a U.S. court is selected as the forum for resolution of disputes, award of damages rather than specific performance will be the remedy. However, this approach would require litigation to take place in a U.S. court, involving probable trial by jury, liberal discovery, contingent fees, generally substantially higher levels of liability, and so forth. Because of such considerations, a U.S. seller's counsel may decide that the appropriate approach might be to use the "opt out" procedure of Article 6 [103] by including a clause that excludes application of the [page 132] CISG specific performance provisions [104] and, if necessary, litigate in a non-U.S. forum.

It is interesting to note that no cases reported to date raise the issue of specific performance. While the CISG gives the parties the right to choose between specific performance and damages, the limitations placed on the exercise of the specific performance remedy, as well as the infrequency in which aggrieved sellers and buyers opt to exercise it, suggests that this difference in civil and common-law systems may not be as substantial as it initially appears. The CISG specific performance provisions are further softened by their inclusion in a mixed traditional and sometimes innovative set of breach and performance rules addressed in the remainder of this article. These provisions pertain to: (1) requiring buyers to give timely notice of lack of conformity;[105] (2) giving sellers opportunity to cure defects;[106] and (3) utilizing innovative concepts like "fundamental breach,"[107] "Nachfrist,"[108] and "avoidance,"[109] and "reduction in purchase price to the extent of the defect."[110]

[2] Buyer's Duty to Discover and Give Notice of Defects- Estoppel

The CISG requires the buyer to examine the goods, or cause them to be examined within as short a period as is practicable in the circumstances.[111] The buyer loses the right to rely on a lack of conformity of the goods if notice is not given to the seller specifying the [page 133] nature of the lack of conformity within a reasonable time after buyer has discovered it or ought to have discovered it.[112] Said time in any event is not to exceed two years from the date on which the goods were actually handed over to the buyer, unless this time limit is inconsistent with a contractual period of guarantee.[113] The difficulty of determining whether a buyer has complied with this "reasonable time" requirement for examining the goods and giving notice of any non-conformities has led to considerable litigation and is responsible for twenty seven [114] of the 142 CISG cases reported to date.[page 134] This difficulty is primarily due to the factual sensitivity of determining whether the buyer has examined the goods within a "reasonable time" and has given timely notice of any non-conformity to the seller. In reaching these determinations, the court must take into account the circumstances of the case and the opportunities of the parties to the contract to examine the goods.[115] CISG Article 40 limits the extent to which a seller can rely on the provisions of Article 38 and 39 "if the lack of conformity relates to facts which he knew or could not have been unaware and which he did not disclose to the buyer."[116] Thus, this section allows the buyer in certain cases to avoid the application of Articles 38 or 39 by showing that the seller was aware of the defect and did not disclose it to the buyer.

A Netherlands court [117] recently held that a Dutch buyer could not rely on a lack of conformity, where the cheese that the Italian seller delivered to the buyer was later discovered to contain maggots, because buyer had failed to comply with the examination and notice requirements of Articles 38 and 39. However, the court noted that, should buyer succeed in proving that the maggots were in the cheese before carriage, seller would be prevented by Article 40 from relying on Articles 38 and 39.[118] In another case,[119] an arbitrator held that an Austrian seller was estopped from alleging that the German buyer's notice of non-conformity was untimely. Noting that the question of estoppel is not expressly settled under the CISG, the arbitrator applied Articles 7(2), 16(2)(b), and 29(2) [120] and held, nonetheless, that [page 135] estoppel (venire contra factum proprium) is a general principle underlying the CISG. In this instance, seller's behavior [121] had led the buyer into believing that the untimely notice defense would not be raised.

[a] Duty to Examine Within a Reasonable Time

The Article 38 requirement for discovering a defect within a reasonable time has been litigated in a number of cases. In Fallini Stefano & Co. S.n.c. v. Foodic BV, the Dutch court held that the buyer bears the burden of proving that the goods were inspected within a reasonable time.[122] Although the cheese ordered by buyer had been delivered frozen, buyer was not exempt from the duty to make timely examination. According to the court, buyer could have defrosted a portion of the cheese and discovered the non-conformity.[123]

A German court has recently held in a similar case [124] that a German buyer lost the right to rely on lack of conformity by failing to promptly inspect ham delivered by the seller. Because the alleged defect (inadequate seasoning) was easily recognizable, buyer should have examined the goods within three days. It should be noted that the time period in which to examine goods is very fact specific. For example, even where a buyer had to install seller's engines in order [page 136] to discover possible defects, a German court [125] has held that the duty to examine promptly imposes a duty on the buyer to examine the goods as soon as practicable. In that case, waiting to examine the engines "a full four months" after delivery could not be considered ''as short as is practicable under the circumstances."[126] In transactions between merchants, courts have held that the duty to inspect is an immediate one. For example, a Swiss court held that because both parties were merchants, buyer should have examined the goods upon delivery.[127] In that case, a Swiss buyer of furniture discovered a defect in the seller's couches only when an unsatisfied consumer complained about the upholstery. The court held that buyer should have inspected the couches upon delivery instead of doing so only following customer complaints.

In a third case, a German court held that a German buyer had not properly examined the goods received from an Italian seller. Because customers who had purchased shoes under a former order from the same Italian seller had complained of imperfect sewing and discoloration, buyer had notice of possible defect. The court found that because buyer had been forewarned by complaints concerning the first delivery, buyer should have examined all of the shoes from the second order, as opposed to just a few pairs.[128]

[b] Duty to Give Notice of Non-Conformity Within a Reasonable Time

Many cases deal with the issue of what constitutes a reasonable time for giving notice of non-conformity under Article 39. For example, the Court of Arbitration of the International Chamber of Commerce [page 137] has held that notice given within eight days after publication of a report by buyer's inspector who had examined seller's goods prior to shipment satisfied the Article 39 requirement. Similarly, a German court [129] recently stated that under normal circumstances in a sale of durable nonseason-dependent goods, eight days is a reasonable time for giving notice. In that case, however, the Austrian buyer who had entered into a contract with a German seller to deliver goods to a Danish company supplied by buyer waited two months after the Danish company received delivery before notifying seller of the non-conformity. It is important to note that the buyer bears the burden to show that notice of non-conformity has been given within a reasonable time.[130]

In another recent case,[131] a German court held that the reasonable time for giving notice started to run at the latest at the moment when buyer had concluded its own examination. Instead of giving notice to the seller of non-conformity following its own inspection of seller's engines, the buyer sent the engines to a university for further examination.

Courts have also held that one of the elements to be taken into account in determining whether notice has been given in a timely manner is the nature of the goods. For example, in the Fallini case [132] a Netherlands court found that the period within which the buyer should have given notice was necessarily short because cheese is a perishable good.[133] [page 138]

As between merchants, under CISG Article 39, if the defect is apparent, buyer should give immediate notice of the non-conformity rather than waiting until after customer complaints are received.[134] Recall the case where the buyer failed to notify the seller of non-conformity until after receiving customer complaints about the upholstery of seller's couches.

Under Article 39, a buyer's notice of non-conformity must also "specify the nature of the lack of conformity."[135] Failure to do so can result in a buyer losing the right to rely on timely notice of non-conformity. For example, under a contract for the sale of shoes between a German buyer and Italian seller,[136] the buyer refused to pay after notifying seller of a non-conformity via telephone. While the German court noted that notice via telephone is not inherently insufficient, buyer had not introduced evidence demonstrating that the notice had specified the nature of the non-conformity. Accordingly, buyer lost the right to rely on Article 39 and was obliged to pay the price of the shoes.

[c] Ineffective Cure-New Notice Required

When receiving goods that are offered as a cure for non-conforming goods, buyer must give new notice of any defects should the new goods also be non-conforming. For example, in one case,[137] a German court held that a German buyer that had claimed that the Italian seller's cure was ineffective lost the right to claim a lack of conformity by failing to renew notice of non-conformity upon discovery that the cure, was also ineffective. Because the court held that a failed repair represents another non-performance of the contract, buyer's exercise of remedies for breach of contract by seller requires another notice.[138] [page 139]

[d] Advantage of Clause Providing for Explicit Time for Giving Notice

In order to avoid litigation over whether examination and notice were performed within a reasonable time, parties may wish to place a clause in their contract to govern the time period when examination and notice should occur. In one case,[139] the parties' agreement provided that any complaints concerning defects in the goods could only be raised within eight days after receipt of the goods. After receiving complaints from its customers about the goods the Italian seller had delivered, the German buyer gave seller notice of the lack of conformity and refused to pay. The German court held that pursuant to CISG Article 6, parties can derogate from CISG Article 39 regarding time of notice. Because buyer did not give notice within the agreed period of eight days, the court held that buyer had lost the right to rely on a non-conformity under CISG Article 39.[140] In another case [141] involving a contract for the sale of tiles, an Italian seller and a German buyer had been in an ongoing business relationship. In its acceptance of buyer's most recent order, seller had referred to its long-standing general condition that notice of defects would be valid only if given "within 30 days after the date of the invoice." The German court held that, since the thirty-day time limit could not be considered a material modification of the terms of the offer under CISG Article 19(2), the time limit for notice of defects as established in seller's general conditions had become part of the contract.[142]

The degree of specificity required for proper notice has also been considered in at least one instance.[143] In that case, a German buyer and Italian seller entered into a contract for the sale of fashion goods. Buyer, claiming that the goods were non-conforming and that its inspection and notice of non-conformity were timely, refused to pay the [page 140] purchase price. The German court held that despite buyer's timely notice, buyer had failed to comply with the CISG's notice provisions because notice of "poor workmanship and improper fitting" was not sufficiently specific. Buyer thus lost its right to rely on non-conformity.[144]

Unlike the notice requirements imposed by the UCC on a buyer who has accepted goods,[145] the CISG imposes the notice-giving requirements on the buyer irrespective of whether the goods have been accepted.[146]

Overall, a buyer who fails to give notice of a defect loses his rights under the CISG. However, a buyer who has a reasonable excuse for failure to give notice may still exercise the remedy of reducing the price to the extent of the defect or alternatively may claim damages, except for loss of profit.[147]

[3] Seller's Right to Cure

A seller's right under the CISG to cure defective performance is substantially similar to that of a seller under the UCC.[148] Under the [page 141] CISG, where the seller has delivered goods before the date for delivery, any defective delivery up to the delivery date may be cured by the seller, provided that the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense.[149] The buyer nevertheless retains any right to claim damages provided elsewhere by the Convention.[150] The seller may, even after the date for delivery,[151] remedy a defective tender if this can be done without unreasonable delay and without causing the buyer unreasonable inconvenience or "uncertainty of reimbursement by the seller of expenses advanced by the buyer."[152] Again, the buyer retains any right to claim damages as provided elsewhere in the Convention.

A recent Swiss case, discussed previously, illustrates this right of the seller. Recall the case where the Swiss buyer notified the Italian seller of defects in upholstery after receiving consumer complaints. Seller offered to cure the defect by replacing the upholstery, but buyer refused. The Swiss court held that buyer erred in refusing to allow seller to cure.[153]

In another previously discussed case, where a French seller and a Portuguese buyer contracted for the sale and dismantlement of a second-hand airplane hangar,[154] seller had delivered non-conforming metallic elements. The court held that although the seller had effectively cured the lack of conformity by repair of the elements, the [page 142] buyer was entitled nonetheless to claim damages because seller had delayed in delivering the conforming goods requiring buyer to arrange for transportation of the goods twice.

In another case,[155] the arbitrator for an International Chamber of Commerce arbitration ruled that where the breach by the seller was of such a substantial character as to constitute a fundamental breach under Article 25,[156] the buyer was entitled to avoid [157] the contract. Furthermore, the seller was not entitled to exercise a right of cure under CISG Article 48(1), apparently because the defect was of such a serious nature in the sole arbitrator's view that seller only had a right to cure after the due date for delivery if the buyer so consented.

[4] Fundamental Breach

If the seller's failure to cure a defective delivery results in such a detriment to the buyer so as to substantially deprive the buyer of what buyer was entitled to expect according to the contract, such a breach is deemed to be "fundamental" unless the party in breach did not foresee the result, and a reasonable person of the same kind in the same circumstances would not have foreseen such a result.[158] Such a breach gives the buyer the right to avoid (i.e., cancel) the contract.[159]

The concept of fundamental breach has been examined in a number of cases. For example, in one recent case involving a German [page 143] buyer and Italian seller,[160] buyer had ordered 120 pairs of shoes from seller through a commercial agent. The contract included a clause that granted buyer the exclusive right to distribute the shoes in a certain geographical district. After selling twenty pairs of shoes, buyer learned that seller had supplied the identical shoe to a competing local retailer who was offering the shoe at a considerably lower price. Buyer attempted to cancel the remainder of the order and avoid the contract. The German court found no fundamental breach of the exclusive contract by seller because seller had no way of knowing that the competing retailer had a branch within buyer's district and that, in the judgment of the court, seller could not reasonably have foreseen.[161] In another case, a German buyer ordered shoes from an Italian seller and provided specifications.[162] Seller produced the shoes, which bore buyer's trademark, and subsequently displayed them at a trade fair. When buyer gave notice of its intention to avoid the contract because of seller's refusal to remove the shoes from the trade fair, seller sued to recover the price of the shoes. The German court found that seller's display of the shoes at the trade fair was a fundamental breach of the contract. It was foreseeable to the seller that its conduct would endanger buyer's interest in controlling all sales of that shoe, under its trademark to such an extent that buyer's interest would be virtually nonexistent.

The issue of fundamental breach also arose in the previously discussed airplane hangar case.[163] There, the court ruled that because the non-conformity related only to a part of the hangar and seller had been able to repair the defective parts, the lack of conformity did not constitute a fundamental breach of contract. So ruling, the court reasoned that buyer had not been substantially deprived of what it was entitled to under the contract and that, therefore, avoidance was not a proper remedy.

Partial delivery of goods as a basis for establishing fundamental breach of contract was recently litigated.[164] In that case, a German [page 144] buyer had ordered eleven computer component parts from an American seller in order to fulfill its contract with an Austrian company. Buyer faxed its order to seller and included the price of only five of the parts. Seller, in turn, delivered only five parts and buyer was forced to obtain substitute goods to cover the remaining six component parts that it needed. Buyer subsequently refused to pay the purchase price of the goods, claiming that seller's partial delivery constituted a fundamental breach of the contract. The court, however, held for seller because seller's partial delivery had not substantially deprived buyer of what it was entitled to expect under the contract because buyer had been able to obtain substitute goods.[165]

Another recent decision [166] also addressed non-conformity of goods as a basis for establishing fundamental breach in a case where a German buyer and Italian seller entered into a contract for the sale of women's shoes. Buyer refused to pay the purchase price, claiming it that delivery had been late and that the goods were non-conforming. The German court held that a contract may be avoided on the basis of non-conforming goods only when that non-conformity constitutes a fundamental breach. Because buyer failed to establish that the goods could not be reasonably used for their original purpose, the non-conformity of the goods under the contract did not amount to a fundamental breach.

A German court has recently found no fundamental breach of a contract involving a Swiss seller and a German buyer in a contract for the sale of New Zealand mussels.[167] Buyer was not entitled to avoid the contract and refuse to pay the purchase price on the grounds that the mussels were not completely safe [168] because of the quantity of cadmium they contained. The cadmium concentration admittedly exceeded the threshold level published by the German Federal Health Department. However, the court concluded that the mussels were nonetheless conforming to the contract because they were fit for the purpose for which goods of the same description would ordinarily be [page 145] used.[169] So ruling, the court reasoned that sellers normally cannot be expected to observe public law, that is, regulatory, requirements of the buyer's state. A seller could only be expected to do so where the same rules exist in both the seller's and buyer's countries or where the buyer draws the seller's attention to their existence.

The Cour d'appel de Grenoble Chambre Commerciale in France has held that the buyer's breach of a contract by reselling to a Spanish buyer rather than to a South American buyer constituted a fundamental breach that entitled the seller to declare the contract avoided.[170] The court found that the parties clearly understood that resale was to be in South America and that seller's expectations under the contract, were substantially impaired because sale of its products in Spain had been seriously hampered by the parallel distribution caused when buyer resold the goods in Spain rather than in South America.

Deviations from the quality and quantity of the goods originally ordered under a contract have also been litigated as constituting fundamental breaches of contract. For example, a German court has held that a German buyer of coal could not avoid the contract where the quality of the coal actually deviated from the contract but not sufficiently enough to amount to a fundamental breach.[171] An Italian court has held that delay of seller in delivering goods two months after conclusion of the contract and delivery of only one-third of the goods amounted to a fundamental breach that entitled the buyer to avoid the contract.[172] So ruling, the court noted that the parties had specified in their agreement that the seller was bound to dispatch all of the goods within one week after the contract was concluded.[page 146]

[5] "Nachfrist"

"Nachfrist" is a procedure [173] taken from German law and incorporated into the CISG.[174] It can be utilized by either a buyer or seller. We first discuss the buyer's Nachfrist right.[page 147]

Under the Nachfrist concept incorporated into the CISG, a buyer may avoid a contract where performance by the seller has been delayed even though such delay does not rise to the level of a fundamental breach if:

(1) The buyer gives the seller an additional reasonable period of time for performance, fixing a new deadline beyond the contract delivery date by which the seller must perform; and

(2) seller does not perform within the additional reasonable period of time.[175]

While the CISG does not provide that expiration of the additional period of time without performance by the seller creates a fundamental breach, it does provide that the buyer may nevertheless avoid the contract after the expiration of such period of time.[176]

Applying the relevant CISG Nachfrist provisions, a German court [177] recently held that an Egyptian buyer was entitled to avoid the contract where the German seller failed to deliver goods within an eleven-day additional period fixed by the buyer for performance of the remainder of an installment contract that seller had only partially performed. So holding, the court found the additional eleven-day period of time was not unreasonable in the context of the particular transaction. It accordingly awarded buyer the amount by which prepayment exceeded the amount due for the limited amount of goods actually delivered.[178]

Another German case [179] illustrates the consequences of failure to utilize the Nachfrist procedure. In this case, a German buyer and [page 148] Italian seller of fashion goods entered into a contract that explicitly specified that the goods were "to be delivered July, August, September + -."[180] Seller made the first delivery in September, but buyer refused the goods claiming the quoted language required that one-third of the goods should have been delivered in July, a third in August, and a third in September. The court held that seller was entitled to full purchase price, even if the goods had been delivered late, because buyer had not established fundamental breach by seller or offered seller an additional reasonable period of time to perform.

The court reached the same result where a German buyer and Italian seller entered a contract for the sale of womens' shoes and buyer refused to pay the entire purchase price, claiming in part that delivery of the goods had been untimely.[181] The court held that buyer, in the absence of fundamental breach by seller, had not validly avoided the contract because it had failed to provide an additional time period for seller to perform.

Avoidance of the contract, either for reasons of fundamental breach or because of compliance with the Nachfrist procedure, releases both parties from their obligations under the contract, subject to any damages that may be due.[182]

The CISG also provides Nachfrist rights for sellers. Under Article 63,[183] the seller may fix an additional period of time of reasonable length for performance by the buyer of his obligations. Under Article 64,[184] a seller is empowered to avoid a contract because of [page 149] fundamental breach by the buyer or failure of the buyer within the additional period of time fixed by the seller to perform his obligation to pay the contract price or to take delivery of the goods, or if buyer declares that he will not do so within the period so fixed.

Sellers' Nachfrist right was recently litigated in a German case [185] where a German seller had given an Italian buyer an additional time period within which to take delivery of acoustic prostheses at the seller's place of business. The court held that seller was entitled to recover damages for failure of the buyer to perform within the additional period of time which seller had granted.

A decision of an International Chamber of Commerce arbitration panel [186] awarded damages to an Austrian seller where a Bulgarian buyer had failed to perform its obligation of opening a document of credit for payment within the additional period of time fixed for such performance by seller. So ruling, the court held that the suspension of payment of foreign debts ordered by the Bulgarian government did not constitute a "force-majeure" that prevented buyer from opening the documentary credit.

In another arbitral award by the International Chamber of Commerce Court of Arbitration,[187] while a delay in opening a documentary credit by itself did not amount to a fundamental breach, the Italian seller was nevertheless entitled to avoid the contract. According to the arbitration award, the fact that seller waited several months before [page 150] declaring the contract avoided was "equivalent to the fixing of an 'additional period of time' for performance pursuant to Art. 63 CISG" with the result that failure by the Finnish buyer to perform within that period of time entitled seller to avoid the contract under CISG Article 64(1)(b).[188]

[6] "Adequate Grounds for Insecurity" and "Anticipatory Repudiation"

Under the CISG, a party may suspend performance of its obligations if it becomes apparent that the other party will not perform a substantial part of its obligations as a result of:

(1) Serious deficiency in its ability to perform or in its credit worthiness; or

(2) Because of its conduct in preparing to perform or in performing the contract.

A party suspending performance must immediately give notice of suspension to the other party and must continue with performance if the other party provides adequate assurance of performance.[189] Although this is similar to the UCC provision [190] pertaining to a party's [page 151] right to adequate assurance where reasonable grounds for insecurity arise indicating that the other party will not be able to perform the contract, it is not identical as illustrated by the following cases.

The CISG further provides that where the seller has already dispatched the goods before the grounds for insecurity have become evident, the seller may prevent the handing over of the goods to the buyer even though the buyer holds a document that entitles the buyer to obtain them.[191]

The CISG grants the aggrieved party the right to avoid the contract if prior to the date of performance of the contract it is clear that one of the parties will commit a fundamental breach of contract,[192] or if one of the parties has declared that it will not perform its obligations under the contract.[193] This latter provision in effect explicitly makes anticipatory repudiation a basis for avoidance under the CISG.[194] [page 152]

A German court [195] found that a German shoe retailer would not be able to pay the purchase price of the shoes ordered and thereby would commit a fundamental breach of contract. The court held that the probability of a future breach of contract was very high and obvious, and that complete certainty or inability of the retailer to pay for the shoes was not necessary. It found that there was reason to believe that buyer would breach the later contract based in part on the fact that buyer had not paid for shoes delivered under two prior contracts.[196] The court rejected buyer's claim that it had a right to suspend payment on grounds that the goods delivered under the earlier contract were non-conforming. It refused to accept this argument because buyer had not given notice of such non-conformity within a reasonable time as required by Article 39 [197] of the CISG and held buyer accountable for the purchase price.

The possible loss of remedies by an aggrieved party with reasonable grounds for insecurity who fails to give the other party an opportunity to provide adequate assurance of his performance is illustrated by a recent German case.[198] A German buyer and an Italian seller entered into a contract for the sale of shoes agreeing that the goods should be delivered to the buyer's place of business by the carrier after buyer had paid 40 percent of the balance due within sixty days of delivery. Seller ordered the carrier to suspend delivery, which [page 153] was subsequently resumed five months later after buyer had paid 40 percent of the agreed price. Following delivery of the goods buyer paid only one-sixth of the balance due and seller sued to recover the balance of the purchase price. Applying CISG Article 71(3) [199] literally the court dismissed seller's claim for the balance of the purchase price on grounds that the CISG requires a party suspending performance based on an assumption that the other party will not be able to perform its contract obligations to immediately give notice of suspension to the other party and must continue with performance if the other party provides adequate assurance of its performance. Having failed to give the buyer notice of its suspension of performance, the Italian seller not only lost its right to an action for the balance of the purchase price due but the German court also held that because seller had failed to perform its obligation of giving notice of suspension of performance to buyer, buyer was entitled to recover damages under CISG Articles 74-77.[200] [page 154]

[7] Buyer's Damages and Reduction of Price

The buyer may claim damages if the seller fails to perform any of the obligations imposed by the Convention.[201] Breach of contract damages consist of a sum equal to the loss, including the loss of profit, suffered as a consequence of the breach.[202] These provisions resemble the direct, incidental, and consequential damages provisions of the UCC.[203] The CISG provides a novel "reduction of price" remedy.[page 155] If the goods do not conform with the contract, the buyer may reduce the price in the same proportion as the value that the goods actually delivered had at the time of delivery bears to the value that conforming goods would have had at that time.[204]

This remedy was utilized where a German buyer and Italian seller entered a contract for the sale of shoes.[205] When buyer paid only half the purchase price, claiming that the goods were non-conforming under the contract, seller sued for the entire purchase price. The court found that because buyer had satisfied its obligations to timely inspect the goods and notify seller of defects, it was entitled to a reduction in price of the goods.[206] However, the court noted that buyer could not arbitrarily reduce the price. The price reduction must reflect the difference between the value of the goods as delivered and the value the goods would have had if they had been in conformity with the contract. Thus, seller was entitled to recover the difference between the price reduction buyer actually took and the price reduction buyer was entitled to take.[207]

In a similar case,[208] an Italian seller and Swiss buyer entered into a contract for the sale of furniture. Buyer claimed that one set of furniture was defective and when seller refused to repair the defect, buyer asked to be reimbursed for its repairs. When seller sued to collect the entire purchase price, the court found buyer was entitled to a reduction in price, although the reduction would not necessarily be the equivalent of buyer's repair expenses. The court held that the price reduction was to reflect the proportion the value of the goods as delivered bore to the value the goods would have had they been free from defect. The court further held that the latter value was to be [page 156] determined by the price stated in the contract, unless seller produced evidence to the contrary.[209]

[K] Conclusion: Learn the CISG, Whether You Like It or Not

The CISG litigation since the CISG entered into effect in January 1988 has generally not produced any unexpected results in terms of the substantive meaning of CISG provisions, although it most certainly has on various occasions surprised parties unaware of the CISG's existence. The CISG litigation appears by and large to be producing results that would be broadly consistent with a lex mercatoria, a law that traders would wish to have applied to dealings among themselves. The CISG appears to be functioning as its drafters intended, but it remains a serious pitfall for those who have not invested the effort to learn about it.

Those who embrace the CISG to govern their international contracts need to remember that by its terms it does not resolve all issues. The initial body of CISG case law demonstrates this point. Two such areas in particular have already been heavily litigated. Forty-two of the 142 cases reported thus far involve issues as to what interest rate should be applicable to overdue payments or refunds. Twenty-seven of these 142 cases involve issues of what constitutes a reasonable time for a buyer to discover and give notice to the seller of defects in the goods. Such frequently litigated specific issues are perhaps best anticipated by inclusion of special provisions in the contract to resolve them. General use of a supplementary choice-of-law clause applicable to issues not covered by the CISG may also provide a general umbrella of protection regarding the many unanticipated questions that may become the basis of controversy between contract parties.

When enough states, including the United States, ratified the CISG so that it became operative in 1988, many in the international trading community were hesitant to embrace the CISG and concentrated primarily on acquiring understanding of how effectively to opt out of the CISG. The still small, but growing number of reported CISG cases suggests that this hesitant attitude towards the CISG is evolving. The minimal need of understanding enough about the CISG to avoid being surprised by its applicability remains. However, the reported cases suggest that especially those who would embrace the CISG must [page 157] understand how it works and also its self-defined limitations. It is no longer enough to simply learn how to opt out of the CISG. Any international trader is well advised to understand exactly how the CISG functions as an analog of the UCC's Article 2 and of any other domestic law potentially applicable to international commercial sales of goods.

In our review of the reported cases we have not been able to identify significant conflicts between different fora as to the meaning of the CISG. It thus appears that at least preliminarily the CISG's direction to national courts and arbitral bodies to attempt to interpret it uniformly is being respected. As the number of cases grows and as parties to more sophisticated contracts gain sufficient confidence to permit their contracts to be governed by application of the CISG, the nature of the issues litigated may change. Hence, the question of uniform interpretation remains one worthy of monitoring.

Comprehensive legal and management review of procurement and sales procedures to be followed under the new regime by international persons and their legal advisors is desirable as increasing numbers of countries ratify and increasing use is made of the CISG. Such traders need to identify clients and circumstances in which use of the CISG is preferable over use of domestic law. Moreover, the opportunities accidentally and unknowingly to become subject to the CISG remain very real. Failure to think clearly about choice of governing law issues at the time of contracting is quite likely to lead to unpleasant surprises in the event of a dispute. Many similarities between the CISG and the UCC are readily observable, and the litigation involving the CISG thus far reported suggests that the CISG is functioning well. Nonetheless, serious pitfalls await those who assume that the differences between the CISG and otherwise applicable law, such as the United States' UCC, are of no moment. [page 158]

[…]


FOOTNOTES

[PART I: 27 Uniform Commercial Code Law Journal (1995) 331-370]

* Associate Dean and Professor of Law at Dickinson School of Law, Carlisle, Pa. The research assistance of Lisa J. Whipkey and James C. Tecce, third-year law students at the Dickinson School of Law, and Robert R. Stephenson, a second-year law student at Dickinson School of Law is greatly appreciated.

** Partner, Kelley, Drye & Warren, Los Angeles.

1. This was the number of reported cases as of October 15, 1994, when the text of this article was submitted for publication.

2. Beijing Metals & Minerals Import/Export Corp. v. American Business Ctr., Inc., 993 F.2d 1178 (5th Cir. 1993); 92/2171 UNILEX; CLOUT (Case 24); Fi1anto, S.p.A. v. Chilewich Int'l Corp., 789 F. Supp 1229 (S.D.N.Y. 1992); 91 Civ. 3253 UNILEX; CLOUT (Case 23).

3. The 44 cases discussed in this article have been decided by tribunals outside the United States except for the two cases cited in footnote 2 supra. Systematic reporting of these cases as well as of the cases decided by U.S. courts has been undertaken by the UNILEX and CLOUT systems, which are described in footnote 6, infra. UNILEX is a CD-ROM system that provides the case name, the case number, the date of the decision, the country, and the court for each reported case. CLOUT is a hard-copy reporting system that provides the same type of identification and also assigns a sequential number to each case as it is reported. Our footnotes in this article use this identification for each of the cases reported by tribunals outside the United States. The six cases referred to in the text are:

Elastar Sacifia v. Bettcher Indus. Inc., 7 May 20, 1991 (Argentina, Juzgado Nacional de Primera Instancia en lo Commercial) UNILEX; (Parties Unknown) O 42/92 July 3, 1992 (Germany, Landgericht Heidelburg) UNILEX; CLOUT (Case 21); MALEV Hungarian Airlines v. United Technologies Int'l Inc. Pratt & Whitney Commercial Engine Business, 3.G.50.289/1991/32 Jan. 10, 1992 (Hungary, Metropolitan Court of Budapest) UNILEX aff'd, Gf.I.31 349/1992/9 Sept. 25, 1992 (Hungary, Supreme Court of the Republic of Hungary) UNILEX; Watkins-Johnson Co. & Watkins-Johnson Ltd. v. The Islamic Republic of Iran & Bank Saderat Iran, 370 (429-370-1) July 28, 1989 (Iran-U.S., Iran-United States Claims Tribunal) UNILEX; Jose Luis Morales y/o Son Export, S.A. de C.V., de Hermosillo Sonora, Mexico v. Nez Marketing de Los Angeles Cal., E.U.A., M/66/92 May 4, 1993 (Mexico, COMPROMEX, Comision para la Proteccion del Comercio Exterior) UNILEX.

4. See Unidroit, International Uniform Law in Practice 13-27 (1988) (Acts and Proceedings of the 3d Congress on Private Law held by the International Institute for the Unification of Private Law) (Remarks given by Professor Frederico Mancini, now Judge for the European Court of Justice) (Remarks given by Professor Louis F. Del Duca at 141, 143- 144).

5. See Zweigert & Kotz, Law Finding and Procedure in Common Law and Civil Law, in An Introduction to Comparative Law 264 (1992); Cappelletti, The Doctrine of Stare Decisis and the Civil Law: A Fundamental Difference-Or No Difference at All? 381 (1981) (Festschrift Zweigert, Tübingen).

6. The "UNILEX" data base was originally conceived as a research project of the Centre for Comparative and Foreign Studies (a joint venture of the Italian National Research Council, the University of Rome, and the International Institute for the Unification of Private Law-UNIDROIT). The data base was created and is updated by a team of experts under the supervision of Professor M.J. Bonell, Director of the Centre and an internationally recognized expert in the field of uniform sales law. It is published by Transnational Juris Publications, Inc., One Bridge Street, Irvington, N. Y. 10533 Telephone: (914) 591-4288. Order Line: (800) 914-8186. Fax: (914) 591-2688.

UNILEX is a comprehensive data base that contains, inter alia, the text of the Convention. It also includes all the cases so far reported in the different countries and is scheduled to be updated every six months to provide a complete collection of the existing international case law. The cases are reported both in the form of an abstract in English summarizing the essential elements of the decision along with the complete decision of the tribunal in the language in which it was originally rendered.

CLOUT ("Case Law on UNCITRAL Texts") is a system for collecting and disseminating information on court decisions and arbitral awards relating to Conventions and Model Laws that have emanated from the work of the United Nations Commission on International Trade Law. The purpose of the system is to promote international awareness of such legal texts elaborated or adopted by the Commission, to enable judges, arbitrators, lawyers, parties to commercial transactions, and other interested persons to take decisions and awards relating to those texts into account in dealing with matters within their responsibilities and to promote the uniform interpretation and application of those texts.

The national correspondents collect court decisions and arbitral awards and prepare abstracts of them in one of the official languages of the United Nations (i.e., Arabic, Chinese, English, French, Russian, or Spanish). The Secretariat stores the decisions and awards. The abstracts are then translated by the Secretariat into the other five United Nations languages and published in all six languages as part of the regular documentation of UNCITRAL (under the identifying symbol: A/CN.9/SER.C/ABSTRACTS/...). Documents containing abstracts are published whenever a sufficient number of abstracts has been received to justify the cost of publication. Thus, the abstracts are published at irregular intervals.

Each abstract bears a case number based on the order in which the abstracts are published, irrespective of the legal text to which the decision or award relates or of the country of its origin.

The CLOUT system was established by the Secretariat of the United Nations Commission on International Trade Law (UNCITRAL) pursuant to a decision by UNCITRAL at its twenty-first session in 1993 (A/43/17, paras. 98-109). Copies of decisions and arbitral awards available to the public will be sent to interested persons upon request addressed to UNCITRAL Secretariat, Vienna International Center, P.O. Box 500, A-1400 Vienna, Austria for a fee covering copying and mailing. Additional charges will be made for any requested fax transmission or use of courier service. The UNCITRAL Secretariat prefers not to levy such fees or charges for each individual request. Therefore, it suggests that users of the system, when making their first request for copies, make a down payment of $30.00, and once that amount is exhausted, an additional down payment, and so forth. All requests by others for permission to reproduce or translate copyrighted publications or parts thereof should be referred to the Secretary of the United Nations Publications Board, United Nations Headquarters, New York, N.Y. 10017.

7. Article 99 of the CISG provides in part that "This Convention enters into force ... on the first day of the month following the expiration of twelve months after the date of deposit of the tenth instrument of ratification...." CISG, art. 99 (1).

A significant body of analytical materials relating to the Convention on Contracts for the International Sale of Goods ("CISG") has been developed by legal scholars. See generally A. Kritzer, Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods (1988); Farnsworth, "Review of Standard Forms or Terms under the Vienna Convention," 21 Cornell Int'l L.J. 439 (1988); C.M. Bianca & M.J. Bonell, Commentary on the International Sales Law: The 1980 Vienna Sales Convention (1987) (including commentaries by eighteen authors, most of whom were involved in the drafting of the CISG, and containing official texts of the Convention in Arabic, Chinese, French, English, Russian, and Spanish, and unofficial translations in Italian and German); P. Schlechtriem, Uniform Sales Law: The UN Convention on Contracts for the International Sale of Goods (1986) [hereinafter P. Schlechtriem]; International Sales: The United Nations Convention on Contracts for the International Sale of Goods (Galston & Smit eds. 1984); Honnold, "The New Uniform Law for International Sales and the Uniform Commercial Code: A Comparison," 18 Int'l Law. 21 (1984); Winship, "International Sales Contracts Under the 1980 Vienna Convention," 17 UCC L.J. 55 (1984); J. Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention (1982) [hereinafter Uniform Law]; and United Nations Conference on Contracts for the International Sale of Goods-Official Records (1981). See also J. Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention (2d ed. 1992).

The CISG can be found in 52 Fed. Reg. 6262, 6264-6280 (1986); and see 15 U.S.C. App. (1994 Cumulative Annual Pocket Part at page 52) (Public Notice 1004).

8. Filanto, S.p.A v. Chilewich Int'l Corp., 789 F. Supp. 1229 (S.D.N.Y. 1992); 91 Civ. 3253 UNILEX; CLOUT (Case 23).

9. Article 6 of the CISG provides that "The parties may exclude the applications of this Convention, or ... derogate from or vary the effect of any of its provisions." CISG, art. 6.

10. In April 1980, a diplomatic conference of sixty-two states met in Vienna, Austria and unanimously approved the CISG, prepared by the United Nations Commission on International Trade Law (UNCITRAL), providing uniform law for international sales of goods. The preparatory work leading to the 1980 CISG was initiated in the early 1930s when the International Institute for the Unification for Private Law (UNIDROIT) requested European representatives to prepare a draft of a uniform law for the international sale of goods. The first draft was circulated in 1935, and after World War II, work on the project resumed. Twenty-one nations participating in a 1951 conference encouraged continuation of the project, and revised drafts were circulated in 1956 and in 1963. A uniform law on formation of the contract was circulated in 1958. Thereafter, a 1964 diplomatic conference of twenty-eight states at The Hague finalized two conventions. One was a Uniform Law for the International Sale of Goods (ULIS), and the other was a Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF). After ratification by five states, both Conventions went into effect in 1972. The desire to develop an international sale of goods treaty acceptable to capitalist and socialist countries, common-law and civil-law countries, and developed and developing countries led to negotiations within UNCITRAL starting in 1968 which culminated in the 1990 diplomatic conference.

11. Current information relating to countries that have ratified the CISG and to any reservations they have made can be had by contacting the Treaty Section of the Office of Legal Affairs of the United Nations, (212) 963-5047 or contacting the UNCITRAL Secretariat, Vienna International Center, P.O. Box 500, A-1400 Vienna, Austria. The United Nations and UNCITRAL periodically release reports regarding the status of conventions. The November 1994 United Nations report of the CISG is attached to this article as Appendix A.

12. CISG, art. 1(1)(a). "This Convention applies to contracts of sale of goods between parties whose places of business are in different States: when the States are Contracting States." ("Contracting States" refers to States that have ratified the CISG.) Id.

13. Id. art. 1(1)(b). "This Convention applies to contracts of sale of goods between parties whose places of business are in different States: when the rules of private international law lead to the application of the law of a Contracting State." Id.

14. The "lex mercatoria" is sometimes referred to with respect to commercial law as part of the "general principles of international law," and is applied by arbitral panels and courts in the absence of applicable national law. For a discussion of the historical development of the lex mercatoria, see H.J. Berman and C. Kaufman, "The Law of International Commercial Transactions (Lex Mercatoria)," 19 Harv. Int'l L.J. 221 (1978).

15. See note 12 supra. See, Elastar Sacifia v. Bettcher Indus. Inc., 7 May 20, 1991 (Argentina, Juzgado Nacional de Primera Instancia en 10 Commercial) UNILEX; CLOUT (Case 21); (Parties Unknown) AZ 12.G.41.471/1991 March 24, 1992 (Hungary, Court of the Capital City of Budapest) UNILEX; CLOUT (Case 52); (Parties Unknown) O 42/92 July 3, 1992 (Germany, Landgericht Heidelberg) UNILEX; (Parties Unknown) 7153/1992 1992 (ICC, Court of Arbitration of the International Chamber of Commerce) UNILEX; CLOUT (Case 26); Jose Luis Morales y/o Son Export, S.A. de C.V., de Hermosillo Sonora, Mexico v. Nez Marketing de Los Angeles Cal., E.U.A., M/66/92 May 4, 1993 (Mexico, COMPROMEX Comision para la Proteccion del Comercio Exterior de Mexico) UNILEX; (Parties Unknown), 43 O 136/92 May 14,1993 (Germany, Landgericht Aachen) UNILEX; CLOUT (Case 47); (Parties Unknown), 5 U 15/93 Jan. 18, 1994 (Germany, Oberlandesgericht Frankfurt am Main) UNILEX.

16. See note 8, supra, and accompanying text. In Filanto, even though the buyer (Chilewich) had places of business in the United States and England, the court did not address the issue of determining whether the United States or England was the buyer's "place of business" for CISG purposes. In determining the party's place of business for CISG purposes in situations in which the party has a place of business in more than one country, CISG Article 10 provides that for purposes of the Convention, "the place of business is that which has the closest relationship to the contract and its performance...." For further discussion of this issue see note 29, infra, and accompanying text.

17. CISG, art. 1(2); "The fact that the parties have their places of business in different States is to be disregarded whenever this fact does not appear either from the contract or from any dealings between, or from information disclosed by, the parties at any time before or at the conclusion of the contract." See note 7, supra, and accompanying text (P. Schlechtriem).

18. See note 13, supra, and accompanying text. See (Parties Unknown), 17 HKO 3726/89 July 3, 1989 (Germany, Landgericht Munchen 1) UNILEX; CLOUT (Case 3); (Parties Unknown), 3 KfH O 97/89 Aug. 31, 1989 (Germany, Landgericht Stuttgart) UNILEX; CLOUT (Case 4); Societe Nouvelle Bandou S.S. v. Import- en Exportmaatschappij Renza BV, 674/1989 Nov. 30, 1989 (Netherlands, Arrondissementsrechtbank Alkmaar) UNILEX; Cofacrdit S.A. v. Import- en Exportmaatschappij Renza BV, 350/1988 Feb. 8, 1990 (Netherlands, Arrondissementsrechtbank Alkmaar) UNILEX; (Parties Unknown), 2 U 1795/89 Feb. 23, 1990 (Germany, Oberlandesgericht Koblenz) UNILEX; (Parties Un- known), 41 O 198/89 April 3, 1990 (Germany, Landgericht Aacen) UNILEX; CLOUT (Case 46); (Parties Unknown), 5 C 73/89 April 24, 1990 (Germany, Amtsgericht Oldenburg in Holstein) UNILEX; CLOUT (Case 7); (Parties Unknown), 5 O 543/88 Sep. 26, 1990 (Germany, Landgericht Hamburg) UNILEX; CLOUT (Case 5); E.I.F. S.A. v. Factron BV, 2762/1989 Nov. 21, 1990 (Netherlands, Arrondissementsrechtbank Dordrecht) UNILEX; (Parties Not identified) 17 U 82/93 Jan. 8, 1993 (Germany, Oberlandesgericht Dusseldorf) UNILEX; CLOUT (Case 48); (Parties Unknown) 32 C 1074/90-41 Jan. 31,1991 (Germany, Amtsgericht Frankfurt am Main) UNILEX; CLOUT (Case 51); (Parties Unknown) 5 U 261/90 June 13,1991 (Germany, Oberlandesgericht Frankfurt am Main) UNILEX; CLOUT (Case 2); (Parties Unknown) 4 O 113/90 Aug. 14, 1991 (Germany, Landgericht Baden-Baden) UNILEX; CLOUT (Case 50); (Parties Unknown) 3/11 O 3/91 Sept. 16, 1991 (Germany, Landgericht Frankfurt am Main) UNILEX; CLOUT (Case 6); (Parties Unknown), 5 U 164/90 Sept. 17, 1991 (Germany, Oberlandesgericht Frankfurt am Main) UNILEX; CLOUT (Case 2); (Parties Unknown), 15/91 Dec. 16, 1991 (Switzerland, Pretura della giurisdizione di Locarno-Compagna) UNILEX; Fallini Stefano & Co. s.n.c. v. Foodic BV, 900336 Dec. 19,1991 (Netherlands, Arrondissementsrechtbank Roermond) UNILEX; (Parties Unknown), 9 C3486/9Ow Feb. 20,1992 (Austria, Bundesgericht fur Handelssachen-Wien) UNILEX; (Parties Unknown), 6252 April 27, 1992 (Switzerland, Pretura della giurisdizione di Locarno-Compagna) UNILEX; (Parties Unknown), 7197/1992 1992 (ICC, Court of Arbitration of the International Chamber of Commerce) UNILEX; Nuova Fucinati S.p.A. v. Fondametal International A.B., (no number assigned) Jan. 14, 1993 (Italy, Tribunale Civile di Monza) UNILEX; S.A.R.L. YTONG v. Angel LASAOSA, 92/4223 June 16, 1993 (France, Cour d'appel de Grenoble, Chambre des Urgences R.G.) UNILEX; (Parties Unknown), 17 U 73/93 July 2, 1993 (Germany, Oberlandesgericht Düsseldorf) UNILEX.

19. 18 MALEV Hungarian Airlines v. United Technologies Int'l Inc. Pratt & Whitney Commercial Engine Business, 3.G.50.289/1991/32 Jan. 10, 1992 (Hungary, Metropolitan Court of Budapest) UNILEX, aff'd, Gf.I.31 349/1992/9 Sept. 25, 1992 (Hungary, Supreme Court of the Republic of Hungary) UNILEX.

20. Some of the current cases, without specifically citing Article 1(1)(a), have merely assumed applicability of the CISG where parties to a contract have a place of business in different Contracting States. See MALEV Hungarian Airlines v. United Technologies Int'l Inc. Pratt & Whitney Commercial Engine Business, 3.G.50.289/1991/32 Jan. 10, 1992 (Hungary, Metropolitan Court of Budapest) UNILEX, aff'd, Gf.I.31 349/1992/9 Sept. 25, 1992 (Hungary, Supreme Court of the Republic of Hungary) UNILEX; apparently assuming application of the CISO on the Article l(l)(a) "Place of Business" standard.

21. See note 7, supra (P. Schlechtriem at 27).

22. See Restatement (2d), Conflicts of Laws §§ 38(2), 10 comments a-d; U.C.C. Section 1-105(1).

23. Professor Honnold has argued that choice by the parties of the CISG in cases where by its term it would not otherwise apply should be found to meet this "reasonable choice" requirement on the sole ground that the parties have referred to a set of rules approved, without dissent, by an international legislative body representing each region of the world; moreover, these rules were approved, again without dissent, by a diplomatic conference attended by all the significant trading nations of the world. The rules are readily available in the six official languages of the United Nations and will be the subject of substantial international commentary. The burden on the tribunal that would result from the Convention would be much less than that involved in most cases where rules of private international law call for the application of foreign domestic law. See note 7, supra (Uniform Law at 83).

24. (Parties Unknown), 5713/1989 1989 (ICC, Court of Arbitration of the International Chamber of Commerce) UNILEX; CLOUT (Case 45); Watkins-Johnson Co. & Watkins-Johnson Ltd. v. The Islamic Republic of Iran & Bank Saderat Iran, 370 (429-370-1) July 28, 1989 (Iran-U.S., Iran-United States Claims Tribunal) UNILEX.

25. (Parties Unknown), 5713/1989 1989 (ICC, Court of Arbitration of the International Chamber of Commerce) UNILEX; CLOUT (Case 45).

26. Watkins-Johnson Co. & Watkins-Johnson Ltd., v. The Islamic Republic of Iran & Bank Saderat Iran, 370 (429-370-1) July 28, 1989 (Iran-U.S., Iran-United States Claims Tribunal) UNILEX.

27. CISG, art. 88(1). "A party who is bound to preserve the goods in accordance with article 85 or 86 may sell them by any appropriate means if there has been an unreasonable delay by the other party in taking possession of the goods or in taking them back or in paying the price or the cost of preservation, provided that reasonable notice of the intention has been given to the other party." Id.

28. Quilmes Combustibles S.A. v. Vigan S.A. S/ Ordinario, (no number assigned) March 15, 1991 (Argentina, Camara Nacional de Apelaciones en lo Commercial, Sala C) UNILEX; CLOUT (Case 22) (CISG not applicable when contract concluded on a date preceding the entry into force of the CISG, cf. CISG, art. 100); (Parties Unknown), 6281/1989 Aug. 26, 1989 (ICC, Court of Arbitration of the International Chamber of Commerce) UNILEX (CISG not applicable when contract concluded on a date preceding the entry into force of the CISG, cf. CISG, arts. 99, 100); Kretschmer GmbH & Co. KG v. Muratori Enzo, 5739 Oct.24, 1988 (Italy, Corte Suprema Di Cassazione) UNILEX; CLOUT (Case 8) (Italy's ratification of the CISG can be effective only after it renounces its adherence to the 1964 Hague Convention relating to Uniform Law on the International Sale of Goods; cf. CISG, art. 99(6)).

29. See note 7, supra (Schlechtriem at 27).

30. CISG, art. 10 provides that: "For purposes of this Convention: (a) if a party has more than one place of business, the place of business is that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract...." Id.

Article 10 could have been, but was not, utilized by the court in Filanto. See note 16, supra, and accompanying text.

31. CISG, art. 1(1)(b).

32. CISG, art. 95 states, "Any State may declare at the time of the deposit of its instrument of ratification, acceptance, approval or accession that it will not be bound by subparagraph (1)(b) of article 1 of this Convention." Id.

33. See Appendix A, June 1994 UNCITRAL Status of the Convention Report.

34. (no number assigned) Jan. 14, 1993 (Italy, Tribunate Civile di Monza) UNILEX.

35. The French Civil Code at Article 52 provides that "a sale is an agreement by which one party binds himself to deliver a thing and the other to pay for it." Article 433 of the German Civil Code provides that "(1) by the contract of sale the seller of a thing is bound to deliver the thing to the purchase and to transfer ownership of the thing ... (2) the purchaser is bound to pay to the seller the purchase price agreed upon and to take delivery of the thing purchased." Article 1470 of the Italian Civil Code provides that a "sale is the contract having as its object the transfer of the ownership of a thing or the transfer of other rights for a price."

36. Consider a representative sample of civil-law countries. None of their codes uses the term "goods."

The Austrian civil code instead refers to "property" and classifies it by its nature. Thus, Article 291 provides that Austrian property may be "corporeal" or "incorporeal" (i.e. tangible); "movable" or "immovable"; "consumable" or "unconsumable"; and "assessable" or "non-assessable."

The French code also uses the term "property" in general, and Article 516 provides that "[a]ll property is either movable or immovable." "Movable property" may be classified in one of two ways, either by its nature or by its legal definition. Art. 527. Property movable by its nature includes animate objects capable of moving themselves and inanimate objects which may be moved by third parties. (Art. 528) Property movable by legal definition includes obligations and causes of action involving money or property movable by nature and "shares of interest in financial, commercial and industrial companies." Art. 529. "Immovable property" may be classified in one of three ways: by its nature, by its purpose or by its attachment. (Art. 517) Examples of these methods include land and buildings that are immovable by nature (Art 518), animals and equipment used in farming that are immovable by purpose (Art. 524), and easements that are immovable by attachment (Art. 526)

The Italian Civil Code also uses the term "property." Article 812 provides that: "The soil, water sources and water courses, buildings and other constructions, even if joined to the soil for a temporary purpose, and in general everything that is artificially or naturally annexed to the soil are immovable property. "Mills; baths, and other floating buildings are also considered immovables when they are securely attached to the bank or the bed and are destined to remain so permanently for their utilization. "All other property is movable."

The German Civil Code does not refer to "property" but to "things." See Arts. 90 to 103. Only "corporeal" (i.e., tangible) objects may be "things," (Art. 90), and the code makes a distinction between "movable things" and "essential component parts of land or buildings." Art. 94. Movable things include those that are fungible and those that are "consumable" in the form of inventory (see Art. 92(2)) or movable things that are used completely in the course of normal use). Arts. 91, 92.

37. U.C.C. § 2-106(1), which states, in pertinent part: "A 'sale' consists in the passing of title from the seller to the buyer for a price." Id.

38. Id. § 2-105(1), which states, in pertinent part: " 'Goods' means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Article 8) and things in action." Id.

39. Box Doccia Megius v. Wilux Int'l BY, 550/92 SKG July 16, 1992 (Netherlands, Gerechtshof Amsterdam) UNILEX.

40. Lorenz Supply Co. v. American Standard, Inc., 419 Mich. 610, 358 N.W. 2d 845 (1984).

41. U.C.C. § 2-102 provides that "[u]nless the context requires otherwise, this Article applies to transactions in goods." Id. See Zapatha v. Dairy Man, Inc., 381 Mass. 284, 408 N.E. 2d 1370 (1980); Division of Triple Serv., Inc. v. Mobile Oil Corp., 60 Misc. 2d 720, 304 N.Y.S. 2d 191 (1969). DeFilippo v. Ford Motor Co., 516 F.2d 1313 (3rd Cir. 1975), cert. denied, 423 U.S. 912 (1975); Artman v. International Harvester Co., 355 F. Supp. 482 (W.D. Pa. 1973); Cavalier Mobile Homes, Inc. v. Liberty Homes, Inc., 53 Md. App. 379, 454 A.2d 367 (1983). Contra, Tile-Craft & Prods. Co. , Inc. v. Exxon Corp. 581 S.W.2d 886 (Mo. App. 1979); Viganov. Wylain, Inc., 633 F.2d 522 (8th Cir. 1980).

42. Section 2-201(1) provides that in order to make an oral contract for the sale of goods enforceable there must be "some writing sufficient to indicate that a contract of sale has been made" and that the writing is not enforceable beyond the quantity of goods shown in such writing. Id

The concurring opinion concluded that the letter clearly established that Lorenz was to be a distributor of American Standard products in the Detroit area. It also concluded that distributor contracts impliedly require the supplier to in good faith supply the distributor with a quantity of goods sufficient in quality and quantity to allow for a profit. Although no explicit quantity term was stated, the court found that the drafters of the UCC had not intended the term "quantity" to be strictly interpreted, especially in light of UCC § 2-306 which provides that "[a] term which measures the quantity by the output of the seller or the requirements of the buyer means such output or requirements as may occur in good faith...." See U.C.C. § 2-306.

43. (Parties Unknown), 5 O 543/88 Sept. 26, 1990 (Germany, Landgericht Hamburg) UNILEX; CLOUT (Case 5).

44. CISG, art. 7 (1).

45. Id.

46. CISG, art. 2.

47. The UCC contains a definition of "merchant" in Section 2-104(1) which is used in various sections of the UCC to impose higher standards of conduct on persons who qualify as merchants. See UCC §§ 2-103(1)(b), 2-201(2), 2-205, 2-207, 2-209, 2-314, 2-327(1)(c), 2-603, 2-605, 2-509, and 2-609.

48. CISG, art. 2(b), (c), (d), (e), and (t).

49. CISG Article 14 provides that: "A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance. A proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price." CISG, art. 14(1). See MALEV Hungarian Airlines v. United Technologies Int'l Inc. Pratt & Whitney Commercial Engine Business, 3.G.50.289/1991/3210-Jan. 10,1992 (Hungary, Metropolitan Court of Budapest) UNILEX, aff'd, Gf.I.31 349/1992/9 Sept. 25, 1992 (Hungary , Supreme Court of the Republic of Hungary) UNlLEX.

50. See Cincinnati Gas & Elec. Co. v. Goebel, 28 Ohio Misc. 2d 4 .( 1986) (metered electricity is "goods"); Pierce v. Pacific Gas &Elec. Co., 166 Cal. App. 3d 68, 212 Cal. Rptr. 283 (1985) (electricity is "goods"). But see Buckeye Union Ins. Co. v. Detroit Edison Co., 38 Mich. App. 325, 196 N. W. 2d (1972) (sale of electricity is service not "goods"); Farina v. Niagara Mohawk Power Corp., 81 A.D.2d 700, 438 N.Y.S.2d 645 (1981) (unable to conclude electricity is "goods" as defined by the Uniform Commercial Code).

51. CISG, art. 3(1) (emphasis supplied).

52. Societe A.M.D. Electronique v. Rosenberger SIAM S.p.A., 93-648 May 25, 1993 (France, Courd' Appe1 de Chambery (Ch. Civ.)) UNILEX.

53. Id. art. 3(2). (emphasis supplied).

54. (Parties Unknown), 7153/1992 1992 (ICC, Court of Arbitration of the International Chamber of Commerce) UNILEX; CLOUT (Case 26).

55. See Charles E. Cantu, "A New Look at an Old Conundrum: The Determinative Test for the Hybrid Sales/Service Transaction Under Section 402A of the Restatement 2nd of Torts," 45 Ark. L. Rev. 913 (1992); A.C. Schlinsog, Jr., "Advent Systems, Ltd. v. Unisys Corp. [925 F.2d 670] U.C.C. Governs Software Transactions, "4 Software L.J .611 (1991); A. Lousin, "Cases on the Scope of Article 2, "46 Bus. Law 1855 (1991); C.L. Miller, "The Goods/Services Dichotomy and the U.C.C.: Unweaving the Tangled Web," 59 Notre Dame L. Rev. 717 (1984); J.B. Sales, "Service-Sales Transaction: A Citadel Under Assault, 10 St. Mary's L.J. 13 (1978); Del Duca, "Constitutionality of Expanded Application of Article 2 Provisions," 8 U.C.C. L.J. 5 (1975); M.J. Shumaker, "U.C.C. Commentary- Blood Transfusions and the Warranty Provisions of the U.C.C.," 9 B.C. Ind. & Comm. L. Rev. 943 (1968).

56. 611 S.W.2d 127, 30 U.C.C. Rep. Serv. 785 (Tex. Civ. App. 1980).

57. 102 N.J. Super. 279, 246 A.2d 11, 5 U.C.C. Rep. Serv. 686 (1968).

58. 25 Conn. Supp. 109, 197 A.2d 342, 1 U.C.C. Rep. Serv.114 (Conn. C.P. 1963).

59. Uniform Commercial Code Revised Article 2-Sales, Section 2-103 (National Conference of Commissioners on Uniform State Laws & The American Law Institute; Tentative Draft 1994).

60. See Foster v. Colorado Radio Corp., 381 F.2d 222, 4 U.C.C. Rep. Serv. 446 (10th Cir. 1967); Dravo Corp. v. White Consol. Indus., 602 F. Supp. 1136, 40 U.C.C. Rep. Serv. 362 (W.D. Pa. 1985); and Field v. Golden Triangle Broadcasting, Inc., 451 Pa. 410, 305 A.2d 689 (1973). These types of questions and others such as those raised by software contracts would also require case law to determine whether or not the CISG should be applicable. See A.H. Boss and J.B. Ritter, "A Legislative Response to the Issues of Software Contracting," Comm. L. Anot. 1993 27; R. Nimmer and P.A. Krauthaus, "Copyright and Software Technology Infringement: Defining Third Party Development Rights," 62 Ind. L.J. 13 (Winter 1986).

Another interesting problem not specifically answered by the CISG or the UCC is raised by distribution contracts. See Lorenz Supply Co. v. American Standard, Inc., 419 Mich. 610, 358 N. W.2d 845, 39 U.C.C. Rep. Serv. 1169 (Callaghan) (1984).

61. See U.C.C. Article 2A-Leases (1990). Treatment of leases prior to the adoption of the new Article 2A is discussed in the case of Cucchi v. Rollins Protective Servs. Co., 524 Pa. 514, 574 A.2d 565, 11 U.C.C. Rep. Serv. 737 (1990).

62. See A.H. Boss and J.B. Ritter, "A Legislative Response to the Issues of Software Contracting," Comm. L. Annual. 27 (Louis F. & Patrick Del Duca, eds.) (1993); R.T. Nimmer, "Intangibles Contracts: Thoughts of Hubs, Spokes, and Reinvigorating Article 2," 35 Wm. & Mary L. Rev. 1337 (1994); M.W. Benfield, Jr. and P.A. Alces, "Reinventing the Wheel," 35 Wm. & Mary L. Rev. 1405 (1994).

63. CISG, art. 4.

64. (Parties Unknown), 5 U 534/91 Jan. 16, 1992 (Germany, Oberlandesgericht Koblenz) UNILEX.

65. (Parties Unknown), 43 O 136/92 May 14, 1993 (Gennany, Landgericht Aachen) UNILEX; CLOUT (Case 47). See also (Parties Unknown), 5 O 543/88 Sept. 26, 1990 (Germany, Langericht Hamburg) UNILEX; CLOUT (Case 5) (applying German law to the question of whether a tradesman was acting as an agent); (Parties Unknown), 7197/1992 1992 (ICC, Court of Arbitration of the International Chamber of Commerce) UNILEX (applying Austrian law to questions surrounding the contract's penalty clause).

66. U.C.C. § 2-401.

67. Id. § 2-402.

68. Id. § 2-403.

69. Id. § 2-316.

70. Id. § 2-718.

71. Id. § 2-719.

72. U.C.C. §§ 2-714(3), 2-715(2).

73. CISG, art. 7(1).

74. CISG, art. 7(2).

75. (Parties Unknown), 5 O 543/88 Sept. 26, 1990 (Germany, Landgericht Hamburg) UNILEX; CLOUT (Case 5).

76. E1astar Sacifia v. Bettcher Indus., Inc., 7 May 20, 1991 (Argentina, Juzgado Naciona1 de Primera Instancia en lo Comercial) UNILEX.

77. (Parties Unknown) 7197/1992 1992 (ICC, Court of Arbitration of the International Chamber of Commerce) UNILEX .

78. CISG, art. 8 (1).

79 CISG, arts. 8 (1), (2).

80. Id. art. 8(3) (emphasis supplied).

81. See notes 8, 16 and accompanying text, supra. Filanto S.p.A. v. Chilewich Int'l Corp., 789 F. Supp. 1229 (S.D.N.Y. 1992); 92 Civ. 3253 UNILEX; CLOUT (Case 23).

82. See note 75, supra and accompanying text. (Parties Unknown) 5 O 543/88 Sept. 26, 1990 (Landgericht Hamburg, Germany) UNILEX; CLOUT (Case 5).

83. Section 2-202 of the Uniform Commercial Code provides that: "Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented: (a) by course of dealing or usage of trade (Section 1-205) or by course of performance (Section 2-208); and (b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement." U.C.C. § 2-202 (1990).

84. 993 F.2d 1178 (5th Cir. 1993); 92/2171 UNILEX; CLOUT (Case 24).

85. Id. (emphasis supplied).

86. CISG, art. 69(1).

87. CISG, art. 92.

88. 7 May 20, 1991 (Argentina, Juzgado Nacional de Primera Instancia en lo Commercial) UNILEX.

89. U.C.C. § 1-205(2).

90 Id. § 1-205(1).

91. Id. § 2-208.


FOOTNOTES

[PART II: 29 Uniform Commercial Code Law Journal (1996) 99-167]

* Associate Dean and Professor of Law at Dickinson School of Law, Carlisle, Pennsylvania.

** Partner, Kelley, Drye & Warren, Los Angeles, California.

The authors gratefully acknowledge the research assistance of Laura J.N. Failing, third-year law student, and Julia M. Glencer, second-year law student, at the Dickinson School of Law, in the preparation of Part Two of this article.

1. Del Duca and Del Duca, Practice Under the Convention on International Sale of Goods (CISG): A Primer for Attorneys and International Traders (Part 1), 27 UCC LJ 331 (1995).

2. The United Nations Convention on Contracts for the International Sale of Goods, Official Records of the United Nations Conference on Contracts for the International Sale of Goods, U.N. Doc. A/Conf. 97/19 (1981); 19 I.L.M. 668 (1980). The U.N. English language text is reproduced in 52 Fed. Reg. 6264 (1987).

3. Systematic reporting of CISG cases has been undertaken by the UNILEX and CLOUT systems. UNILEX is a CD-ROM system that provides the case name, the case number, the date of the decision, the country, and the court for each reported case. CLOUT is a hard-copy reporting system that provides the same type of identification and also assigns a sequential number to each case as it is reported. The footnotes in this article use this identification for each of the cases reported from tribunals outside the United States.

The "UNILEX" data base was originally conceived as a research project of the Centre for Comparative and Foreign Studies (a joint venture of the Italian National Research Council, the University of Rome, and the International Institute for the Unification of Private Law- UNIDROIT). The database was created and is updated by a team of experts under the supervision of Professor M.J. Bonell, Director of the Centre. It is published by Transnational Juris Publications, Inc., One Bridge Street. Irvington, NY 10533 Telephone: (914) 591- 4288. Order Line: (800) 914-8186. A hard-copy loose-leaf edition of the UNILEX data- base has also recently become available.

UNILEX is a comprehensive database that contains, inter alia, the text of the Convention. It also includes summaries in English of all the cases so far reported and is scheduled to be updated every six months to provide a complete collection of the existing international case law. The cases are reported both in the form of an abstract in English summarizing the essential elements of the decision along with the complete decision of the tribunal in the language in which it was originally rendered.

CLOUT (Case Law on UNCITRAL Texts) is a system for collecting and disseminating information on court decisions and arbitral awards relating to Conventions and Model Laws that have emanated from the work of the United Nations Commission on International Trade Law. The purpose of the system is to promote international awareness of such legal texts elaborated or adopted by the Commission, and to enable judges, arbitrators, lawyers, parties to commercial transactions and other interested persons to make decisions and awards relating to those texts.

The national correspondents collect court decisions and arbitral awards and prepare abstracts of them in one of the official languages of the United Nations (i.e., Arabic, Chinese, English, French, Russian, or Spanish). The Secretariat stores the decisions and awards. The abstracts are then translated by the Secretariat into the other five United Nations languages and published in all six languages as part of the regular documentation of UNCITRAL (under the identifying symbol: A/CN.9/SER.C/ABSTRACTS/…). Documents containing abstracts are published whenever a sufficient number of abstracts has been received to justify the cost of publication. Thus, the abstracts are published at irregular intervals.

Each abstract bears a case number based on the order in which the abstracts are published, irrespective of the legal text to which the decision or award relates or of the country of its origin.

The CLOUT system was established by the Secretariat of the United Nations Commission on International Trade Law (UNCITRAL) pursuant to a decision by UNCITRAL at its twenty-first session in 1993 (A/43/17, ¶¶ 98-109). Copies of decisions and arbitral awards available to the public will be sent to interested persons upon request addressed to UNCITRAL Secretariat, Vienna International Center, P.O. Box 500, A-l400 Vienna, Austria for a fee covering copying and mailing. Additional charges will be made for any requested fax transmission or use of courier service. The UNCITRAL Secretariat prefers not to levy such fees or charges for each individual request. Therefore, it suggests that users of the system, when making their first request for copies, make a down payment of $30.00, and once that amount is exhausted, an additional down payment, and so forth. All requests by others for permission to reproduce or translate copyrighted publications or parts thereof should be referred to the Secretary of the United Nations Publications Board, United Nations Headquarters, New York, NY 10017.

As of May 8, 1996, the following states have ratified the CISG: Argentina, Australia, Austria, Belarus, Bosnia & Herzegovina, Bulgaria, Canada, Chile, China, Cuba, Czech Republic, Denmark, Ecuador, Egypt, Estonia, Finland, France, Georgia, Germany, Ghana, Guinea, Hungry, Iraq, Italy, Lesotho, Lithuania, Mexico, Moldova, Netherlands, New Zealand, Norway, Poland, Romania, Russian Federation, Singapore, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Syrian Arab Republic, Uganda, Ukraine, United States of America, Venezuela, Yugoslavia, Zambia.

4. CISG, supra note 2, art. 7(2).

5. CISG, supra note 2, art. 4 provides: "[T]his Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. In particular, except as otherwise expressly provided in this Convention, it is not concerned with: (a) the validity of the contract or of any of its provisions or of any usage; (b) the effect which the contract may have on the property in the goods sold." See also Del Duca and Del Duca, supra note 1 at notes 63-71 and accompanying text.

6. (Parties not reported), 3 KfH 0 97/89 Aug. 31, 1989 (Germany, Landgericht Stuttgart) UNILEX, CLOUT (Case 4); (Parties not reported), 410 O 198/89 Apr. 3, 1990 (Germany, Landgericht Aachen) UNILEX; (Parties not reported), 5C 73/89 Apr. 24, 1990 (Germany, Amtsgericht Oldenburg in Holstein) UNILEX, CLOUT (Case 7); (Parties not reported), 5 O 543/88 Sept. 26, 1990 (Germany, Landgericht Hamburg) UNILEX, CLOUT (Case 5); (parties not reported), 5 U 261/90 June 13, 1991 (Germany, Oberlandesgericht Frankfurt am Main) UNILEX, CLOUT (Case 1 ); (Parties not reported), 3/11 O 3/91 Sept. 16, 1991 (Germany, Landgericht Frankfurt am Main) UNILEX; CLOUT (Case 6); (Parties not reported), 15/91 Dec. 16, 1991 (Switzerland, Pretura of Locarno-Campagna) UNILEX, CLOUT (Case 55); (Parties not reported), 7153/19921992 (ICC, Court of Arbitration of the International Chamber of Commerce UNILEX, CLOUT (Case 26); Parties not reported), 7197/1992 1992 (ICC, Court of Arbitration of the International Chamber of Commerce (Paris)) UNILEX, CLOUT (Case 104); (Parties notreported), AZ 12.G.41.471/1991 Mar. 24, 1992 (Hungary, Court of the Capital City of Budapest) UNILEX; (Parties not reported), O 42/92 July 3, 1992 (Germany, Landgericht Heidelberg) UNILEX; (Parties not reported), 19 U 97/91 Sept. 22, 1992 (Germany, Oberlandesgericht Hamm) UNILEX; (parties not reported), 1 C 216/92 Oct. 14,1992 (Germany, Amtsgericht Zweibrücken) UNILEX; H. v. K., 12 O 153/92 Nov. 24, 1992 (Germany, Landgericht Krefeld) UNILEX; (Parties not reported) (no number assigned) Dec. 21, 1992 (Switzerland, Zivilgericht Kanton Basel-Stadt) UNILEX, CLOUT (Case 95); (Parties not reported), 6653/1993 1993 (ICC, International Chamber of Commerce (Paris)) UNILEX, CLOUT Case (103); (Parties not reported), 9 O 85/92 Feb. 8,1993 (Germany, Landgericht Verden) UNILEX; Gruppo IMAR S.p.A. v. Protech Horst 920159, May 6,1993 (Netherlands,Arrondissementsrechtbank Roermond) UNILEX; (Parties not reported), 2 U 1230/91 Sept. 17, 1993 (Germany, Oberlandesgericht Koblenz) UNILEX; Nieuwenhoven Viehandel GmbH v. Diepeveen-Dirkson BY, 1992/ 1251 Dec. 30, 1993 (Netherlands, Arrondissementsrechtbank Arnhem) UNILEX, CLOUT (Case 100); (Parties unknown), 17 U 146193 Jan. 14, 1994 (Germany, Oberlandesgericht Düsseldorf) UNILEX; (Parties not reported), 5 U 15/93 Jan. 18, 1994 (Germany, Oberlandesgericht Frankfurt am Main) UNILEX, CLOUT (Case 79); (Parties not reported), 2 U 7418192 Jan. 24, 1994 (Germany, Kammergericht Berlin) UNILEX, CLOUT (Case 80); (Parties not reported), 7 U 4419/93 Mar. 2, 1994 (Germany, Oberlandesgericht München) UNILEX, CLOUT (Case 83); (Parties not reported), 6 U 119/93 Feb. 10, 1994 (Germany, Oberlandesgericht Düsseldorf) UNILEX, CLOUT (Case 82); (Parties not reported), SCH-4318 June 15, 1994 (Arbitral Award, Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft) UNILEX; (Parties not reported), SCH-4366 June 15, 1994 (Arbitral Award, Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft) UNILEX; (Parties not reported), 6 O 85/93 July 5, 1994 (Germany, Landgericht Giessen) UNILEX: (parties not reported), 7660/JK Aug. 23, 1994 (ICC, Court of Arbitration of the International Chamber of Commerce) UNILEX; (Parties not reported), G O 85/93 Aug. 26, 1994 (Germany, Landgericht Giessen) UNILEX; Delchi Carrier S.p.A. v. Rotorex Corp., 88-CV-1078 Sept. 9, 1994 (USA, US Dist. Ct., NDNY) UNILEX; CLOUT (case 85); (Parties not reported), 2 C 395/93 Oct. 21, 1994 (Germany, Amtsgericht Riedlingen) UNILEX; (parties not reported), 12 O 674/93 Nov. 9, 1994 (Germany, Landgericht Oldenburg) UNILEX; R. Motor S.n.c. v. M. Auto Vertriebs GmbH, 7 U 1720/94 Feb. 8, 1995 (Germany, Oberlandesgericht München) UNILEX; (Parties not reported), 11 U 206/93 Feb. 8, 1995 (Germany, Oberlandesgericht Hamm) UNILEX; (parties not reported), 12 O 2028/93 Feb. 15, 1995 (Germany Landgericht Oldenburg) UNILEX; (Parties not reported), 2 C 600/94 Mar. 8, 1995 (Germany, Amtsgericht Wangen) UNILEX; Societe Camara Agraria Provincial de Guipuzcoa v. Andre Margaron, 156 Mar. 29, 1995 (France, Cour d'appel de Grenoble Chambre Commerciale) UNILEX; (Parties not reported), 54 O 644/94 Apr. 5, 1995 (Germany, Landgericht Landshut) UNILEX; Marques Roque Joachim v. La SarI Holding Manin Riviere, RG 93/4879 Apr. 26, 1995 (France, Cour d'appel de Grenoble Chambre Commerciale) UNILEX, CLOUT Case 85; (Parties not reported), 20 U 76/94 May 24, 1995 (Germany, Oberlandesgericht Celle) UNILEX; (Parties not reported), 41 O 111/95 July 20, 1995 (Germany, Landgericht Aachen) UNILEX. See also Franco Ferrari, "Uniform Application and Interest Rates Under the 1980 Vienna Sales Convention," 24 Ga. J . Int'l & Comp. L. 467 (1995).

7. CISG, supra note 2, art. 78 provides: "[i]f a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it, without prejudice to any claim for damages recoverable under article 74."

8. CISG, supra note 2, art. 84(1) provides: "[i]f the seller is bound to refund the price, the must also pay interest on it, from the date on which the price was paid." See also (Parties not reported), 7660/JK Aug. 23, 1994 (Arbitral Award, ICC Court of Arbitration (Paris)) UNILEX.

9. (Parties not reported), 3KfH 0 97/89 Aug. 31, 1989 (Germany, Landgericht Stuttgart) UNILEX, CLOUT (Case 4); (Parties not reported), SCH-4366 June 15, 1994 (Arbitral Award, Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft) UNILEX.

10. CISG, supra note 2, art. 61(1)(b) provides: [i]f the buyer fails to perform any of his obligations under the contract of this convention, the seller may… (b) claim damages as provided by in articles 74-77."

CISG, supra note 2, art. 74 provides: "[d]amages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract."

11. (Parties not reported), 7 U 4419/93 Mar. 2, 1994 (Germany, Oberlandesgericht München) UNILEX, CLOUT (Case 83).

12. (Parties not reported), 6653/1993 1993 (ICC, Court of Arbitration of the International Chamber of Commerce (Paris) UNILEX, CLOUT (Case 103).

13. A Bulgarian buyer and an Austrian seller who had contracted for the sale of goods submitted this case for arbitration before the Court of Arbitration of the International Chamber of Commerce. Seller (1) alleged that buyer had not performed its obligations under the contract and (2) challenged the validity of the contract's penalty clause limiting the amount of damages. Noting the absence in the CISG of any provision governing penalty clauses, the court applied Austrian law in holding that seller was entitled to full damages despite the limitations of the penalty clause in the contract. (Parties not reported), 7197/1992 1992 (ICC, Court of Arbitration of the International Chamber of Commerce (Paris)) UNILEX, CLOUT (Case 104).

14. An Italian seller and a Czech buyer agreed that their contract would be governed by Austrian law and that any disputes would be submitted to the ICC Court of Arbitration. The buyer submitted the case for arbitration when a piece of assembly line machinery (which the seller had guaranteed for up to eighteen months) was found to be defective. Buyer claimed partial avoidance of the contract, reimbursement of the purchase price for the equipment that had not yet been delivered, and damages for breach of contract by seller. Seller in turn alleged that buyer had commenced the arbitral proceeding after the expiration of a contractually fixed period of eighteen months within which buyer was to exercise its right to give notice of non-conformity. The court concluded that by inserting this eighteen-month clause in their contract the parties had used CISG Article 6 to derogate from Article 39(2) which inter alia sets forth a two-year maximum time limit for the buyer to give notice of non-conformity. It ruled that buyer's claim was time barred by this contractual eighteen-month warranty period. It also noted that because the CISG does not mention the prescription period within which buyer who has given timely notice of non-conformity has to commence legal action, the prescription period is a question outside the CISG and is therefore governed by applicable domestic law. Because the parties had chosen Austrian law, the contract was governed by the CISG under the conflicts of law basis for its application. (Parties not reported), 7660/JK Aug. 23, 1994 (ICC, Court of Arbitration of the International Chamber of Commerce (Paris) ) UNILEX. See also (Parties not reported), 11 U 191/94 June 9, 1995 (Germany, Oberlandesgericht Hamm) UNILEX.

15. An Argentine court held that the issue of the validity of the forum selection clause did not fall within the scope of the CISG and was to be decided according to the applicable domestic law. Applying Argentine law, the court found that the Argentine buyer had implicitly accepted the forum selection clause in favor of an Italian forum by failing to object to it when signing an invoice containing the clause in question. Inta S.A. v. MCS Officina Meccanica S.p.A. 45626, Oct. 14, 1993 (Argentina, Camara Nacional en Lo Commercial, sala E) UNILEX.

16. (Parties not reported), 50543/88 Sept. 26, 1990 (Germany, Landgericht Hamburg) UNILEX, CLOUT (Case 5).

17. Two German courts have held that the issue of agency is excluded from the scope of the CISG. In one case, an Italian seller and a German buyer contracted for the sale of wine. The seller assigned its right to payment arising from the contracts to an Italian company. The assignee brought an action to recover the price when the buyer did not pay. The court held that because the CISG does not contain any rule on agency, Italian law was applicable to agency issues relating to the assignment of the contract price. (Parties not reported), 2 U 7418/92 Jan. 24, 1994 (Germany, Kammergericht Berlin) UNILEX, CLOUT (Case 80).

The second case also involved an Italian seller and a German buyer. However, upon holding that the CISG did not apply, the court in this case applied German rather than Italian law to determine the question of whether the buyer was acting as an agent. (Parties not reported), 5 0 543/88 Sept. 26, 1990 (Germany, Landgericht Hamburg) UNILEX, CLOUT (Case 5).

18. One court in Germany and two in the Netherlands have held that the question of a party's right to offset another party's claim for damages falls outside the scope of the CISG and must be determined by domestic law. (Parties not reported), 1992/182 Feb. 25, 1993 (Netherlands, Arrondissementsrechtbank Arnhem) UNILEX, CLOUT (Case 99); Gruppo IMAR S.p.A. v. Protech Horst, 920159 May 6, 1993 (Netherlands, Arrondissementsrechtbank Roermond) UNILEX; (Parties not reported), 2 U 1230/91 Sept. 17, 1993 (Germany, Oberlandesgericht Koblenz) UNILEX.

19. (Parties not reported), 13 U 51/93 Apr. 20, 1994 (Germany, Oberlandesgericht Frankfurt am Main) UNILEX; CLOUT (Case 84).

20. See Del Duca and Del Duca, supra note 1, at 339 et seq.

21. (Parties not reported), 7660/JK Aug. 23, 1994 (International Chamber of Commerce Court of Arbitration (Paris)) UNILEX.

22. (Parties not reported), 7 U 3758/94 Feb. 8, 1995 (Germany, Oberlandesgericht München) UNILEX.

23. CISG, supra note 2, art. 6 provides: "[t]he parties may exclude the application of this Convention or, subject to Article 12, derogate from or vary the effect of any of its provisions."

24. (Parties not reported), 54 O 644/94 Apr. 5, 1995 (Germany, Landgericht Landshut) UNILEX.

25. CISG, supra note 2, art. 1.

26. Del Duca and Del Duca, supra note 1, at 347 et seq.

27. Del Duca and Del Duca, supra note 1, at 351 et seq.

28. UCC § 2-106 provides: "[c]ontract of sale" includes both a present sale of goods and a contract to sell goods at a future time.

29. UCC § 2-105 provides: "[g]oods" means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Article 8) and things in action. "Goods" also includes the unborn young of animals and growing crops and other identifiable things attached to realty as described iI) the section on goods to be severed from realty (Article 2-107).

30. (Parties not reported), 19 U 282193 Aug. 26, 1994 (Germany, Oberlandesgericht Köln) UNILEX.

31. Id. The German court, referencing the French and English versions of the CISG, defined "goods" as "tangible, corporeal things which are typically sold in a commercial setting." Id.

32. CISG, supra note 2, art. 3(1). See also Del Duca and Del Duca, supra note 1, at 352 et seq.

33. (Parties not reported), 12 O 2028/93 Feb. 15, 1995 (Germany, Landgericht Oldenburg) UNILEX. See also Marques Roque Joachim v. La Sari Holding Manin Riviere, RG 93/ 4879 Apr. 26, 1995 (France, Cour d'appel de Grenoble Chambre Commerciale) UNILEX; Fa. N. GmbH v. Fa. N. GmbH & Co KG, 8 Ob 509/93 Oct. 27,1994 (Austria, Oberster Gerichtshof) UNILEX.

34. (Parties not reported), 8 Ob 509/93 Oct. 27, 1994 (Austria, Oberster Gerichtshof) UNILEX.

35. CISG, supra note 2, art. 3(2) (emphasis added). See also Del Duca and Del Duca, supra note 1, at 353 et seq.

36. Marques Roque Joachim v. La Sarl Holding Manin Riviere, RG 93/ 4879 Apr. 26, f 1995 (France, Cour d'appel de Grenoble Chambre Commerciale) UNILEX.

37. CISG, supra note 2, art. 11 provides: "[a] contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirements as to form. It may be proved by any means, including witnesses."

38. Uniform Commercial Code (hereafter UCC).

39. UCC § 2-201 provides:

"(1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against who enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in each writing.

"(2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirement of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received.

"(3) A contract which does not specify the requirements of subsection (1) but which is valid in other respects is enforceable(a) if the goods are to be specially manufactured by the buyer and are not suitable for sale to others in the ordinary course of the seller's business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments to their procurement; or(b) if the party against who enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not I enforceable under this provision beyond the quantity of goods admitted; or (c) with respect to goods for which payment has been made and accepted or which have been received and accepted (Sec. 2-206)."

But see UCC Revised Article 2. Sales § 2-201 (The American Law Institute Proposed Council Draft No.1, 1995) which would revise § 2-201 to provide: "[a] contract or modification thereof is enforceable, whether or not there is a record signed by a party against whom enforcement is sought, even if the contract or modification is not capable of performance within one year after its making." Id. at 15.

Comment three (3) to this proposed revision of Article 2 suggests: "[t]he original statute of frauds reduced the risk that perjured evidence of the existence or the terms of the alleged contract for sale would confuse the 17th Century finder of fact. The Drafting Committee concluded that this risk is neutralized by the modem fact finding process and that current § 2-201 was frequently used to avoid liability in cases where there was credible evidence of an agreement and no evidence of perjury. Moreover, there is no persuasive evidence that the valuable habit of reducing agreements to a signed record will be adversely affected by the repeal." Id. at 15-16.

Those for retention of the provision cite evidentiary functions of the statute of frauds deemed desirable, particularly in a litigation system as in the United States where the right to a jury trial is broadly guaranteed.

40. CISG, supra note 2, art. 96 provides: "[a] Contracting State whose legislation requires contracts of sale to be concluded in or evidenced by writing may at any time make a declaration in accordance with article 12 that any provision of article 11, article 29, or Part II of this Convention, that allows a contract of sale or its modification or termination by agreement or any offer, acceptance, or other indication of intention to be made in any form other than in writing, does not apply where any party has his place of business in that State."

CISG, supra note 2, art. 12 provides: "[a]ny provision of article 11, article 29, or Part II of this Convention that allows a contract of sale or its modification or termination by agreement, or any offer, acceptance, or other indication of intention to be made in any form other than in writing does not apply where any party has his place of business in a Contracting State which has made a declaration under article 96 of this Convention. The parties may not derogate from or vary the effect of this article."

41. See supra note 130.

42. Jose Luis Morales y/o Son Export, S.A. de C. V., de Hermosillo Sonora, Mexico v. Nez Marketing de Los Angeles California, E.U.A., M/66/92 May 4, 1993 (Mexico COMPROMEX, Comision para la Proteccion del Commercio Exterior de Mexico) UNILEX.

43. Id.

44. (Parties not reported), 2HO 1434/92 Dec. 1, 1993 (Germany Landgericht Memmingen) UNILEX.

45. Id. See also supra note 116; V. Russian German joint venture v. Fa. Va. Gesellschaft für Wirtschaftskooperation GmbH, 7 U 5460/ 94 Mar. 8, 1995 (Germany, Oberlandesgericht München) UNILEX.

46. (Parties not reported), 2HO 1434192 Dec. 1, 1993 (Germany Landgericht Memmingen) UNILEX.

47. UCC § 2-201(1) provides: "Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action of defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against who enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in each writing."

48. 894 P2d 470 (Or. App. 1995); GPL Treatment, Ltd. v. Louisiana-Pacific Corp., 9209-06143 CA A81171 Apr. 4, 1995 (USA, Ct. of Appeals of Or.) UNILEX.

49. UCC § 2-201(2) provides: "Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to is contents is given within 10 days after it is received."

50. Id. at 477. In both the Filanto and GPL Treatment Ltd. cases, the parties to the contract had their places of business in different contracting states thereby making the CISG applicable under Article l(l)(a). The countries involved in the cases (i.e., Canada, Italy and the United States) have all ratified the CISG.

51. CISG, supra note 93, art. 29(2) provides: "[a] contract in writing which contains a provision requiring any modification or termination by agreement to be in writing may not be otherwise modified or terminated by agreement. However, a party may be precluded by his conduct from asserting such a provision to the extent that the other party has relied on that contract."

52. UCC § 2-209 provides: "[a] signed agreement which excludes modification or recision except by a signed writing cannot be otherwise modified or rescinded, but except as between merchant such a requirement on a form supplied by the merchant must be separately signed by the other party."

53. CISG, supra note 93, art. 18(2) provides: "[a]n acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror. An acceptance is not effective if the indication of assent does not reach the offeror within the time he has fixed or, if no time is fixed, within a reasonable time, due account being taken of the circumstances of the transaction, including the rapidity of the means of communication employed by the offeror. An oral offer may be accepted immediately unless the circumstances indicate otherwise."

54. CISG, supra note 2, art. 16(1). The United States "mailbox" rule, which generally makes an acceptance effective on dispatch, is incorporated into the UCC under § 1-103, which provides that: "Unless displaced by the particular provisions [of the UCC), the principles of law and equity ... shall supplement its provisions." There is no provision in the UCC as to whether the acceptance is effective on dispatch or on receipt.

55. UCC § 2-205 (emphasis supplied).

56. CISG, supra note 2, art. 16(2).

57. CISG, supra note 2, art. 19(1).

58. UCC § 2-207(1) provides: "[a] definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms."

59. CISG, supra note 2, art. 19(1).

60. CISG, supra note 2, art. 19(2).

61. Id.

62. CISG, supra note 2, art. 19(3).

63. (Parties not reported), 4 O 113/90 Aug. 14, 1991 (Gennany, Landericht Baden-Baden) UNILEX, CLOUT (case 50).

64. Id.

65. See discussion supra page 20.

66. Filanto v. Chilewich, 789 F. Supp. 1229 (SDNY 1992), 91 Civ. 3253 (CLB) Apr. 14, 1992 (USA US Dist. Court, SDNY) UNILEX, CLOUT (Case 23).

67. CISG, supra note 2, art. 18(1) provides: "A statement made by or other conduct of the offeree indicating assent to an offer is an acceptance. Silence or inactivity does not in itself amount to acceptance."

CISG, supra note 2, art. 18(3) provides: "However, if by virtue of the offer or as a result of practices which the parties have established between themselves or of usage, the offeree may indicate assent by performing an act, such as one relating to the dispatch of the goods or payment of the price, without notice to the offeror, the acceptance is effective at the moment that act is performed, provided that the act is performed within the period of time laid down in the preceding paragraph."

68. UCC § 2-207(3).

69. CISG, supra note 2, art. 7(2).

70. CISG, supra note 2, art. 14(1) provides: "[a] proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance. A proposal is sufficiently definite if it indicates the goods and expressly or impliedly fixes or makes provision for determining the quantity and the price."

71. CISG, supra note 93, art. 55 provides: "[w]here a contract has been validly concluded but does not expressly or implicitly fix or make provision for determining the price, the parties are considered, in the absence of any indication to the contrary, to have impliedly made reference to the price generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade concerned."

72. UCC § 2-305(1) provides: "The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if: (a) nothing is said as to price; or (b ) the price is left to be agreed by the parties and they fail to agree; or (c) The price is to be fixed in terms of some agreed market price or other standard as set or recorded by a third person or agency and it is not so set or recorded."

73. CISG, supra note 2, art. 35 provides:

"(1) The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract.

"(2) Except where the parties have agreed otherwise, the goods do not conform with the contract unless they: (a) are fit for the purposes for which goods of the same description would ordinarily be used; (b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller's skill and judgment; (c) possess the qualities of goods which the seller has held out to the buyer as a sample or model; (d) are contained in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods.

"(3) The seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for any lack of conformity of the goods if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity."

Compare CISG article 35 with the analogous UCC provisions §§ 2-313,2-314, and § 2- 315 reproduced below:

UCC § 2-313 provides:

"(1) Express warranties by the seller are created as follows: (a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise. (b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description. (c) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.

"(2) It is not necessary to the creation of an express warranty that the seller use formal words such as "warrant" or "guarantee" or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty."

UCC § 2-314 provides:

"(1) Unless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.

"(2) Goods to be merchantable must be at least such as (a) pass without objection in the trade under the contract description; and (b) in the case of fungible goods, are of fair average quality within the description; and (c) are fit for the ordinary purpose for which such goods are used; and (d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and (e) are adequately contained, packaged, and labeled as the agreement may require; and (f) conform to the promise or affirmation of fact made on the container or label if any.

"(3) Unless excluded or modified (Section 2-316) other implied warranties may arise from the course of dealing or usage of trade.

UCC § 2-315 provides: "[w]here the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded an implied warranty that the goods shall be fit for such purpose."

74. UCC § 2-316 provides:

"(1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed whenever reasonable as consistent with each other; but subject to the provisions of this Article on parole or extrinsic evidence (Section 2-202) negation or limitation is inoperative to the extent that such construction is unreasonable.

"(2) Subject to subsection (3), to exclude or modify the implied warranty or merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fit- ness the exclusion must be in writing and conspicuous. Language to exclude a11 implied warranties of fitness is sufficient if it states, for example, that 'There are no warranties which extend beyond the description on the face hereof."

"(3) Notwithstanding subsection (2) (a) Unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like 'as is,' 'with all faults' or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty; and (b) when the buyer before entering the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and (c) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.

"(4) Remedies for breach of warranty can be limited in accordance with the provisions of the Article on liquidation or limitation of damages and contractual modifications of remedy (Sections 2-718 and 2-719).

75. CISG, supra note 2, art. 4 provides: "[t]his Convention governs only the formation of the contract of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. In particular, except as otherwise expressly provided in this Convention, it is not concerned with: (a) the validity of the contract or any of its provisions or of any usage; (b) the effect which the contract may have on the property in the goods sold." The CISG also does not contain any provision pertaining to the privity of contract issues addressed by UCC Section 2-318. The CISG apparently leaves to other law the question of whether privity of contract is a prerequisite for recovery for breach of warranty.

76. UCC § 2-312 provides:

"(1) Subject to subsection (2) there is in a contract for sale a warranty by the seller that: (a) the title conveyed shall be good, and its transfer rightful; and (b) the goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge.

"(2) A warranty under subsection (1) will be excluded or modified only by specific language or by circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third party may have.

"(3) Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to the seller must hold the seller harmless against any such claims which arise out of compliance with the specifications.

77. CISG, supra note 2, art. 41 provides: "[t]he seller must deliver goods which are free from any right or claim of a third party, unless the buyer agreed to take the goods subject to that right or claim. However, if such right or claim is based on industrial property or other intellectual property, the seller's obligation is governed by article 42."

78. Id.

79. CISG, supra note 2, art. 66 provides: "[l]oss of or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation to pay the price, unless loss or damage is due to an act or omission of the seller."

80. CISG, supra note 2, art. 67.

81. CISG, supra note 2, art. 68.

82. CISG, supra note 2, art. 69.

83. CISG, supra note 2, art. 67.

84. Id.

85. UCC § 2-509(1) provides: "[w]here the contract requires or authorizes the seller to ship the goods by carrier (a) if it does not require him to deliver them at a particular destination, the risk of loss passes to the buyer when the goods are duly delivered to the carrier even though the shipment is under reservation (Section 2-505); but (b) if it does require him to deliver them at a particular destination and the goods are there duly tendered while in the possession of the carrier, the risk of loss passes to the buyer when the goods are there duly so tendered as to enable the buyer to take delivery."

86. CISG, supra note 2, art. 68.

87. John Honnold, "The New Uniform Law for International Sales and the Uniform Commercial Code: A Comparison," 18 Int'l L. 21, 27 (1984).

88. CISG, supra note 2, art. 69(1) provides: "[i]n cases not within articles 67 and 68, the risk passes to the buyer when he takes over the goods or, if he does not do so in due time, from the time when the goods are placed at his disposal and he commits a breach of contract by failing to take delivery."

89. CISG, supra note 2, art. 69(2) provides: "[h]owever, if the buyer is bound to take over the goods at a place other than a place of business of the seller, the risk passes when delivery is due and the buyer is aware of the fact that the goods are placed at his disposal at the place."

90. CISG, supra note 2, art. 69(3) provides: "[i]f the contract relates to goods not then identified, the goods are considered not to be placed at the disposal of the buyer until they are clearly identified to the contract."

91. UCC § 2-509 (2) and (3) provide:

"(2) Where the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the buyer (a) on his receipt of a negotiable document of title covering the goods; or (b) on acknowledgment by the bailee of the buyer's right to possession of the goods; or (c) after his receipt of a non-negotiable document of title or other written direction to deliver, as provided in subsection (4)(b) of Section 2-503.

"(3) In any case not within subsection (1) or (2), the risk of loss passes to the buyer on his receipt of the goods if the seller is a merchant; otherwise the risk passes to the buyer on tender of delivery."

92. CISG, supra note 2, art. 70.

93. UCC § 2-510.

94. CISG, supra note 2, art. 79(1).

95. CISG, supra note 2, art. 79(2).

96. UCC § 2-615 provides:

"[e]xcept so far as a seller may have assumed a greater obligation and subject to the preceding section on substituted performance:

(a) Delay in delivery or non-delivery in whole or in part by a seller who complies with paragraphs (b) and (c) is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.

(b) Where the causes mentioned in paragraph (a) affect only a part of the seller's capacity to perform, he must allocate production and deliveries among his customers buy may at his option include regular customers not then under contract as well as his own requirements for further manufacture. He may so allocate in any manner which is fair and reasonable.

(c) The seller must notify the buyer seasonably that there will be delay or non-delivery and, when allocation is required under paragraph (b), of the estimated quota thus made available for the buyer."

97. CISG, supra note 2, art. 79(5).

98. CISG, supra note 2, art. 79(1).

99. Tallackson Potato Co., Inc. v. MTK Potato Co., 278 NW2d 417 (NO 1979); International Minerals & Chem. Corp. v. Llano, Inc., 770 F2d 879 (10th Cir. 1985); Northern Ind. Pub. Serv. Co. v. Carbon County Coal Co., 799 F2d 265 (7th Cir. 1986); Scullin Steel Co. v. Paccar, Inc., 708 SW2d 756 (Mo. App. Ct. 1986); Golsen v. ONG Western, Inc., 756 P2d 1209 (Okla. 1988); Resources Inv. Corp. v. Enron Co., 669 F. Supp. 1038 (Colo. 1987). See also text of UCC § 2-615, supra note 96.

10.0 CISG, supra note 2, arts. 28, 46(1)(i.e., specific performance for buyers), 62 (i.e., specific performance for sellers). Compare UCC § 2-716, infra note 101.

101. "The goods are unique or in other proper circumstances.

"(1) The decree for specific performance may include such terms and conditions as to payment of the price, damages, or other relief as the court may deem just.

"(2) The buyer has a right of replevin for goods identified to the contract if after reasonable effort he is unable to effect cover for such goods or the circumstances reasonably indicate that such effort will be unavailing or if the goods have been shipped under reservation and satisfaction of the security interest in them has been made or tendered."

102. The major concession in the form of a compromise on the applicability of the specific performance doctrine was agreed to by the civil-law countries in favor of the common-law countries. It was accomplished by inclusion of Article 28 in the Convention, which provides: "[i]f in accordance with the provisions of this Convention, one party is entitled to require performance of any obligations by the other party, a court is not bound to enter a judgment for specific performance unless the court would do so under its own law in respect of similar contracts of sale not governed by this Convention."

103. See Del Duca and Del Duca, supra note 1 at 346.

104. See CISG, supra note 2, arts. 46(1) and 62.

105. CISG, supra note 2, art. 38; see discussion infra at 137.

106. CISG, supra note 2, art. 48; see discussion infra at 141.

107. CISG, supra note 2, art. 25; see discussion infra at 143.

108. CISG, supra note 2, arts. 47, 49(1) (i.e., buyer's Nachfrist) and 63(1)-64(l)(b) (i.e., seller's Nachfrist); see discussion infra at 147.

109. CISG, supra note 2, art. 49; see discussion infra at 151.

110. CISG, supra note 2, art. 50; see discussion infra at 155.

111. CISG, supra note 2, art. 38 provides:

"(1) The buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances.

"(2) If the contract involves carriage of the goods, examination may be deferred until after the goods have arrived at their destination.

"(3) If the goods are redirected in transit or redispatched by the buyer without a reasonable opportunity for examination by him and at the time of the conclusion of the contract the seller knew or ought to have known of the possibility of such redirection or redispatch, examination may be deferred until after the goods have arrived at the new destination."

112. CISG, supra note 2, art. 39 provides:

"(1) The buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it.

"(2) In any event, the buyer loses the right to rely on a lack of conformity of the goods if he does not give the seller notice thereof at the latest within a period of two years from the date on which the goods were actually handed over to the buyer, unless that time limit is inconsistent with a contractual period of guarantee."

Although the CISG does not define what constitutes a "reasonable" time, the court in one case held that this requirement meant that notice must be given ''as soon as possible." Gruppo IMAR S.p.A. v. Protech Horst, 920159 May 6, 1993 (Netherlands, Arrondissementsrechtbank Roermond) UNILEX.

113. CISG, supra note 2, art. 39. See also supra note 105.

114. (Parties not reported), 5713/1989-1989 (ICC, International Chamber of Commerce Court of Arbitration (Paris) UNILEX; CLOUT (Case 45); (Parties not reported), 17 HKO 3726/89 July 3, 1989 (Germany, Landgericht München I) UNILEX; CLOUT (Case 3); (parties not reported), 3 KfH 0 97/89 Aug. 31, 1989 (Germany, Landgericht Stuttgart) UNILEX; CLOUT (Case 4); (Parties not reported), 41 O 198/89 Apr. 3, 1990 (Germany, Landgericht Aachen) UNILEX; E.I.F. S.A. v. Factron BV, 2762/1989 (Netherlands, Arrondissementsrechtbank Dordrecht) UNILEX; (Parties not reported), 4 O 113/90 Aug. 14, 1991 (Germany, Landgericht Baden-Baden) UNILEX; CLOUT (Case 50); Fallini Stefano & Co. S.n.c. v. Foodic BV, 900336 Dec. 19, 1991 (Netherlands, Arrondissementsrechtbank Roermond) UNILEX; CLOUT (Case 98); (Parties not reported), 6252 Apr. 27, 1992 (Switzerland, Pretura di Locamo Campagna) UNILEX; CLOUT (Case 56); (Parties not reported), 99 O 29/93 Sept. 16,1992 (Germany, Landgericht Berlin) UNILEX; (Parties not reported), 3/3 O 37/92 Dec. 9,1992 (Germany, Landgericht Frankfurt am Main) UNILEX; (Parties not reported), 99 O 123/92 Sept. 30,1992 (Germany, Landgericht Berlin) UNILEX; (Parties not reported), 17 U 82/92 Jan. 8, 1993 (Germany, Oberlandesgericht Dusseldorf) UNILEX, CLOUT (Case 48); (Parties not reported) HG 930138U/H93 Sept. 9, 1993 (Switzerland, Handelsgericht Zurich) UNILEX; Gruppo IMAR S.p.A v. Protech Horst, 920159 May 6, 1993 (Netherlands, Arrondissementsrechtbank Roermond) UNILEX; (Parties not reported), 7660 JK Aug. 23, 1994 (ICC, International Chamber of Commerce Court of Arbitration (Paris) UNILEX; (Parties not reported), 6 U 32/93 Feb. 10, 1994 (Germany, Oberlandesgericht Düsseldorf) UNILEX, CLOUT (Case 81); (Parties not reported), SCH-4318 (Arbitral Award, Intemationales Schiedgericht der Bundeskammer der gewerblichen Wirtschaft-Wein) UNILEX; (Parties not reported), 31 O 231//94 June 23, 1994 (Germany, Landgericht Dusseldorf) UNILEX; (Parties not reported), 6 O 85/93 July 5, 1994 (Germany, Landgericht Giessen) UNILEX; (Parties not reported), 13/15 O 3/94 July 13, 1994 (Germany, Landgericht Frankfurt am Main) UNILEX, (Parties not reported), 7660/JK Aug. 23, 1994 (ICC, International Chamber of Commerce Court of Arbitration (Paris) UNILEX; (Parties not reported), 2 C 395/93 Oct. 21, 1994 (Germany, Amtsgericht Riedlingen) UNILEX; (parties not reported, 120 674/93 Nov. 9, 1994 (Germany, Landgericht Oldenburg) UNILEX; (Parties not reported), 7 U 3758/94 Feb. 8, 1995 (Germany, Oberlandesgericht München) UNILEX; (Parties not reported), 54 O 644194 Apr. 5, 1995 (Germany, Landgericht Landshut) UNILEX.

115. (Parties not reported), 6 U 32/93 Feb. 10, 1994 (Germany, Oberlandesgericht Düsseldorf) UNILEX, CLOUT (Case 81).

116. CISG, supra note 2, Art. 40 provides: "[t]he seller is not entitled to rely on the provisions of article 38 and 39 if the lack of conformity relates to the facts of which he knew or could not have been unaware and which he did not disclose to the buyer."

117. Fallini Stefano & Co. S.n.c. v. Foodic BV, 900336 Dec. 19, 1991 (Netherlands, Arrondissementsrechtbank Roermond) UNILEX, CLOUT (Case 98).

118. Id.

119. (Parties not reported), SCH-4318 June 15, 1994 (Arbitral Award, Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft) UNILEX.

120. CISG, supra note 2, art. 7(2) provides:

"(2) [q]uestions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.

CISG, supra note 2, art. 16(2)(b) provides: (2) [h]owever an offer cannot be revoked: (b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree acted in reliance on the offer.

CISG, supra note 2, art. 29(2) provides: (2) [a] contract in writing which contains a provision requiring any modification or termination by agreement to be in writing may not be otherwise modified or terminated by agreement. However, a party may be precluded by his conduct from asserting such a provision to the extent that the other party has relied on the conduct.

121. The arbitrator noted that "after receiving the notice [of the buyer], the seller had continued to ask the buyer information on the status of the complaints and had pursued negotiations with a view to reach a settlement agreement." (Parties not reported), SCH-4318 June 15, 1994 (Arbitral Award, Internationales Schiedsgerucht der Bundeskammer der gewerblichen) UNILEX.

122. Fallini Stefano & Co. s.n.c. v. Foodic BV, 90036 Dec. 19, 1991 (Netherlands, Arrondissementsrechtbank Roermond) UNILEX, CLOUT (Case 98).

123. Id.

124. (Parties not reported), 2 C 395/93 Oct. 21, 1994 (Germany, Amtsgericht Riedlingen) UNILEX.

125. (Parties not reported), 31 O 231/94 June 23, 1994 (Germany, Landgericht Düsseldort) UNILEX.

126. Id., citing CISG, art. 38. In a recent case dealing with insufficient quantity as a defect, a German court held that the duty to examine the quantity must be immediately complied with at the place of performance of the obligation. According to the court, the Swiss buyer of German clothing should have examined or caused the goods to be examined as soon as they arrived at the agreed destination. Based on witness testimony, the court found that examination of the quantity more than a week after delivery was unreasonable under the circumstances. (Parties not reported), 54 O 644/94 Apr. 5, 1995 (Germany, Landgericht Landshut) UNILEX.

127. (Parties not reported), 6252 Apr. 27, 1992 (Switzerland, Pretura della giurisdizione di Locarno-Campagna) UNILEX, CLOUT (Case 56).

128. (Parties not reported), 3 KfH 097/89 Aug. 31, 1989 (Germany, Landgericht Stuttgart) UNILEX, CLOUT (Case 4).

129. (parties not reported), 7 U 3758/94 Feb. 8, 1995 (Germany, Oberlandesgericht München) UNILEX.

130. (Parties not reported), 3/15 O 3/94 July 13, 1994 (Germany, Landgericht Frankfurt am Main) UNILEX.

131. (Parties not reported), 31 O 231/94 June 23, 1994 (Germany, Landgericht Düsseldorf) UNILEX.

132. Fallini Stefano & Co. s.n.c v. Foodic BV 900336 Dec. 19, 1993 (Netherlands, Arrondissementsrechtbank Roermond) UNILEX; CLOUT (Case 98).

133. Id. See also (Parties not reported), 17 U 82/92 Jan. 8, 1993 (Germany, Oberlandesgericht Düsseldort) UNILEX; CLOUT (Case 48) (Buyer who failed to examine goods before shipment failed to make timely inspection of goods because the parties had excluded the CISG provision allowing deferred inspection of goods involved in carriage); E.I.F. S.A. v. Factron BV, 2762/1989 Nov. 21, 1990 (Netherlands, Arrondissementsrechtbank Dordrecht) UNILEX (court granted buyer opportunity to establish that it had notified seller of non-conformity immediately and not fifteen months after receipt of the goods as alleged by seller); (Parties not reported), 6252 Apr. 27,1992 (Switzerland, Pretura di Locarno-Campagna) UNILEX; CLOUT .(Case 56) (buyer failed to make timely inspection where both parties were merchants and inspection performed only after customer complaints, not upon delivery). Cf. (Parties not reported), 41 O 198/89 Apr. 3,1990 (Germany, Landgericht Aachen) UNILEX (inspection immediately upon delivery and notice given immediately thereafter satisfactory); (Parties not reported), 5713/1989 -1989 (ICC, International Chamber of Commerce Court of Arbitration (Paris)) UNILEX; CLOUT (Case 45) (inspection and notice satisfactory where buyer examined goods before shipment and notified seller of defect eight days after publication of inspector's report).

134. (Parties not reported), 6252 Apr. 27, 1992 (Switzerland, Preturea della giurisdizione di Locarno-Campagna) UNILEX.

135. CISG, supra note 93, art. 39(1).

136. (Parties not reported), 3/15 O 3/94 July 13, 1994 (Germany, Landgericht Frankfurt am Main) UNILEX.

137. (Parties not reported), 12 O 674/93 Nov. 9, 1994 (Germany, Landgericht Oldenburg) UNILEX.

138. Id.

139. (Parties not reported), 6 O 85/93 July 5, 1994 (Germany, Landgericht Giessen) UNILEX.

140. Id. See also (Parties not reported), 7660/JK Aug. 23, 1994 (Arbitral Award, International Chamber of Commerce Court of Arbitration (Paris)) UNILEX (parties fixing of maximum time limit of eighteen months for buyer to notify seller of non-conformity validly derogated for art. 39(2)).

141. (Parties not reported), 4 O 113/90 Aug. 14, 1991 (Germany, Landgericht Baden-Baden) UNILEX; CLOUT (Case 50).

142. Id. See also discussion supra at 20.

143. (Parties not reported), 17 HKO 3726/89 July 3, 1989 (Germany, Landgericht München I) UNILEX; CLOUT (Case 3).

144. Id.

145. UCC § 2-607(3)(a) provides: "(3) where tender had been accepted (a) the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy…."

146. CISG, supra note 2, art. 39.

147. CISG, supra note 2, art. 44 provides: "[n]otwithstanding 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."

CISG, supra note 2, art. 50 provides: "[i]f the goods do not conform with the contract and whether or not the price has already been paid, the buyer may reduce the price in the same proportion as the value that the goods actually delivered had at the time of the delivery bears to the value that conforming goods would have had at that time. However, if the seller remedies any failure to perform his obligations in accordance with article 37 or article 48 of if the buyer refuses to accept performance by the seller in accordance with those articles, the buyer may not reduce the price."

148. UCC § 2-508 provides:

"(1) Where any tender or delivery by the seller is rejected because non-conforming and the time for performance has not yet expired, the seller may seasonably notify the buyer of his intention to cure and may then within the contract time make a conforming delivery.

"(2) Where the buyer rejects a non-conforming tender which the seller has reasonable grounds to believe would be acceptable with or without money allowance the seller may if he seasonably notifies the buyer have a further reasonable time to substitute a conforming tender."

149. CISG, supra note 2, art. 37 provides: "[i]f the seller has delivered goods before the date for delivery, he may, up to that date, deliver any missing part or make up any deficiency in the quantity of the goods delivered, or deliver goods in replacement of any non-conforming goods delivered or remedy any lack of conformity in the goods delivered provided that the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. How- ever, the buyer retains any right to claim damages as provided for in this Convention."

150. Id.

151. CISG, supra note 2, art. 48(1) provides: "Subject to article 49, the seller may, even after the date for delivery, remedy at his own expense any failure to perform his obligations, if he can do so without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the buyer. However, the buyer retains any right to claim damages as provided for in this Convention."

152. Id.

153. (Parties not reported), 6252 Apr. 27, 1992 (Switzerland, Pretura della giurisdizione di Locarno-Campagna) UNILEX.

154. Marques Roque Joachim v. La Sarl Holding Manin Riviere, RG 93/4879 Apr. 26, 1995 (France, Cour d'appel de Grenoble Chambre Commerciale) UNILEX.

155. (Parties not reported), 7531/1994 -1994 (Court of Arbitration of the International Chamber of Commerce (Paris)) UNILEX.

156. CISG, supra note 2, art. 25 provides: "[a] breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as to substantially deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result."

157. CISG, supra note 2, art. 49(1) provides: "The buyer may declare the contract avoided: (a) if the failure by the seller to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract; or (b) in case of non-delivery, if the seller does not deliver the goods within the additional period of time fixed by the buyer in accordance with paragraph (1) of article 47 or declares that he will not deliver within the period so fixed.

158. CISG, supra note 2, art. 25; see supra note 155.

159. CISG, supra note 2, art. 49(1)(a) provides: "(1) The buyer may declare the contract avoided: (a) if the failure by the seller to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract…."

160. (Parties not reported), 3/11 O 3/91 Sept. 16, 1991 (Germany, Landgericht Frankfurt am Main) UNILEX; CLOUT (Case 6).

161. Id.

162. (parties not reported), 5 U 164/90 Sept. 17, 1991 (Germany, Oberlandesgericht Frankfurt am Main) 12 J.L. & Com. 261 (1993); CLOUT (Case 2).

163. Marques Roque Joachim v. La Sarl Holding Manin Riviere, RG 93/4879 Apr. 26, 1995 (France, Cour d'appel de Grenoble Chambre Commerciale) UNILEX.

164. (Parties not reported), 0 42/92 July 3, 1992 (Germany, Landgericht Heidelberg) UNILEX. See also (Parties not reported), 19 U 97/91 Sept. 22, 1992 (Germany, Oberlandesgericht Hamm) UNILEX (buyer's failure to take delivery of more than half of the goods constituted fundamental breach).

165. Id.

166. (Parties not reported), 5 U 15/93 Jan. 18, 1994 (Germany, Oberlandesgericht Frankfurt am Main) UNILEX; CLOUT (Case 79).

167. (Parties not reported), VIII ZR 159/94 Mar. 8,1995 (Germany, Bundesgerichtshof) UNILEX.

168. Id.

169. CISG, supra note 2, art. 35(2)(a) provides: "(2) Except where the parties have agreed otherwise, the goods do not conform with the contract unless they: (a) are fit for the purposes for which goods of the same description would ordinarily be used."

170. SARL Bri Production "Bonaventure" v. Societe Pan African Export, 53 Feb. 22, 1995 (France, Cour d'appel de Grenoble Chambre Commerciale), UNILEX.

171. (Parties not reported), 7 U 4419/93 Mar. 2, 1994 (Germany, Oberlandesgericht Munchen) UNILEX; CLOUT (Case 83).

172. Foliopack AG v. Daniplast S.p.A., 77/89 Nov. 24, 1989 (Italy, Pretura di Parma-Fidenza) UNILEX; CLOUT (Case 90).

173. The Nachfrist procedure is incorporated into the CISG for the buyer in Articles 47 and 49. CISG art. 47 provides:

"(1) The buyer may fix an additional period of time of reasonable length for performance by the seller of his obligations.

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

CISG, art. 49(1) provides: "[t]he buyer may declare the contract avoided: (a) if the failure by the seller to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract; or (b) in the case of non-delivery, if the seller does not deliver the goods within the additional period of time fixed by the buyer in accordance with paragraph (1) of article 47 or declares that he will not deliver within the period so fixed."

The Nachfrist procedure that applies to the seller is incorporated into the CISG in articles 63(1) and 64. CISG, art. 63(1) provides: "(1) The seller may fix an additional period of time of reasonable length for performance by the buyer of his obligations."

CISG, art. 64 provides:

"(1) The seller may declare the contract avoided:

(a) if the failure by the buyer to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract; or

(b) if the buyer does not, within the additional period of time fixed by the seller in accordance with paragraph (1) of article 63, perform his obligation to pay the price or take delivery of the goods, or if he declares that he will not do so within the period so fixed.

"(2) However, in cases where the buyer has paid the price, the seller loses the right to declare the contract avoided unless he does so:

(a) in respect of late performance by the buyer, before the seller has become aware that performance has been rendered; or

(b) in respect of any breach other than late performance by the buyer, within a reasonable time: (i) the seller knew or ought to have known of the breach; or (ii) after the expiration of any additional period of time fixed by the seller in accordance with paragraph (1) of article 63, or after the buyer has declared that he will not perform his obligation within such an additional period."

174. The German Civil Code II § 326 provides:

"(1) If, in the case of a mutual contract, one party is in default in performing, the other party may give him a reasonable period within which to perform his part with a declaration that he will refuse to accept the performance after the expiration of the period. After the expiration of the period he is entitled to demand compensation for non-performance, or to withdraw from the contract, if the performance has not been made in due time; the claim for performance is barred. If the performance is only partly made before the expiration of the period, the provision of § 325(1) sent. 2, applies mutatis mutandis.

"(2) If, in consequence of the default, the performance of the contract is of no use to the other party, such other party has the rights specified in (1) without giving any period." Ian S. Forrester, Simon L Goren & Hans-Michael Ilgen, The German Civil Code (Fred B.Rothman & Co. 1975).

175. CISG, supra note 2, art. 47. For full text of the provision, see supra note 173.

176. CISG, supra note 2, art. 49(1). For full text of the provision, see supra note 173.

177. (Parties not reported), 20 U 76/94 May 24, 1995 (Germany, Oberlandesgericht Celle), UNILEX.

178. See CISG, supra note 2, art. 81(2), which provides: "A party who has performed the contract either wholly or in part may claim restitution from the other party of whatever the first party has supplied or paid under the contract. If both parties are bound to make restitution, they must do so concurrently."

See also CISG, art. 84(1) which provides: "If the seller is bound to refund the price, he must also pay interest on it, from the date on which the price was paid."

179. Parties not reported), 5 C. 73/89 Apr. 24, 1990 (Germany, Amtsgericht Oldenburg in Holstein) UNILEX; CLOUT (Case 7).

180. Id. the "+ or -" is the actual content of the contract clause specifying time for performance.

181. (Parties not reported), 5 U 15/93 Jan. 18, 1994 (Germany, Oberlandesgericht Frankfurt am Main) UNILEX; CLOUT (Case 79).

182. See CISG, art. 81(1), which provides: "Avoidance of the contract releases both parties from their obligations under it, subject to any damages which may be due. Avoidance does not affect any provision of the contract for the settlement of disputes or any other provision of the contract governing the rights and obligations of the parties consequent upon the avoidance of the contract."

183. CISG, supra note 2, art. 63 provides:

"(1) The seller may fix an additional period of time of reasonable length for performance by the buyer of his obligations.

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

184. CISG, supra note 2, art. 64 provides:

"(1) The seller may declare the contract avoided: (a) if the failure by the buyer to perform any of his obligation under the contract or this Convention amounts to a fundamental breach of contract; or (b) if the buyer does not, within the additional period of time fixed by the seller in accordance with paragraph (1) of article 63, perform his obligation to pay the price or take delivery of the goods, or if he declares that he will not do so within the period so fixed.

"(2) However, in cases where the buyer has paid the price, the seller loses the right to declare the contract avoided unless he does so: (a) in respect of late performance by the buyer, before the seller has become aware that performance has been rendered; or (b) in respect of any breach other than late performance by the buyer, within a reasonable time: (i) after the seller knew or ought to have known of the breach; or (ii) after the expiration of any additional period of time fixed by the seller in accordance with paragraph (1) of article 63, or after the buyer has declared that he will not perform his obligations within such an additional period."

185. (Parties not reported), 43 O 136/92 May 4, 1993 (Germany, Landgericht Aachen) UNILEX; CLOUT (Case 47).

186. (Parties not reported), 7197/1992-1992 (ICC International Chamber of Commerce Court of Arbitration (Paris)) UNILEX; CLOUT (Case 104).

187. (Parties not reported, 7585/1992-1992 (ICC International Chamber of Commerce Court of Arbitration (Paris)) UNILEX.

188. CISG, supra note 93, art. 61(1)(b) provides: "(1) The seller may declare the contract avoided: (b) if the buyer does not, within the additional period of time fixed by the seller in accordance with paragraph (1) of article 63, perform his obligation to pay the price of take delivery of the goods, or if he declares that he will not do so within the period so fixed."

189. CISG, supra note 2, art. 71(1) provides: "(1) A party may suspend the performance of his obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of his obligation as a result of: (a) a serious deficiency in his ability to perform or in his creditworthiness; or (b) his conduct in preparing to perform or in performing the contract."

CISG, supra note 2, art. 71(3) provides: "A party suspending performance, whether before or after dispatch of the goods, must immediately give notice of the suspension to the other party and must continue with performance if the other party provides adequate assurance of his performance."

190. UCC § 2-609 provides:

"(1) A contract for sale imposes an obligation on each party that the other's expectation of receiving due performance will not be impaired. When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return.

"(2) Between merchants the reasonableness of grounds for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards.

"(3) Acceptance of any improper delivery or payment does not prejudice the aggrieved party's right to demand adequate assurance of future performance.

"(4) After receipt of a justified demand failure to provide within a reasonable time not exceeding thirty days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract."

191. CISG, supra note 2, art. 71(2) provides: "If time allows, the party intending to declare the contract avoided must give reasonable notice to the other party in order to permit him to provide adequate assurance of his performance.

192. CISG, supra note 2, art. 72(1) provides: "If prior to the date for performance of the commit is clear that one of the parties will commit a fundamental breach of contract, the other party may declare the contract avoided."

CISG, supra note 2, art. 72 provides: "If time allows, the party intending to declare the contract avoided must give reasonable notice to the other party in order to permit him to provide adequate assurance of his performance.

193. CISG, supra note 2, art. 72(3) provides: "(3) The requirements of the preceding paragraph do not apply if the other party has declared that he will not perform his obligations."

194. Id. The anticipatory repudiation provisions of the UCC are Sections 2-610 and 2- 611. Section 2-610 provides:

"[w]hen either party repudiates the contract with respect to a performance not yet due the loss of which will substantially impair the value of the contract to the other, the aggrieved party may

(a) for a commercially reasonable time await performance by the repudiating party; or

(b) resort to any remedy for breach (Section 2-703 or Section 2-711), even though he has notified the repudiating party that he would await the latter's performance and has urged retraction; and

(c) in either case suspend his performance or proceed in accordance with the provisions of this Article on the seller's right to identify goods to the contract notwithstanding breach or to salvage unfinished goods (Section 2-704)."

UCC § 2-611 provides:

"(1) Until the repudiating party's performance is due he can retract his repudiation the aggrieved party has since the repudiation canceled or materially changed his position or otherwise indicated that he considers the repudiation final.

"(2) Retraction may be by any method which clearly indicates to the aggrieved party that the repudiating party intends to perform, but must include any assurance justifiably demanded under the provisions of this Article (Section 2-609).

"(3) Retraction reinstates the repudiating party's rights under the contract with due excuse and allowance to the aggrieved party for any delay occasioned by the repudiation."

195. (Parties not reported), 99 O 123/92 Sept. 30, 1992 (Germany, Landgericht Berlin) UNILEX. Accord (Parties not reported), 17 U 146/93 Jan. 14, 1994 (Germany, Oberlandesgericht Dusseldort) UNILEX.

196. Id.

197. Supra note 2.

198. (Parties not reported), 32C 1074/90-91 Jan. 31,1991 (Germany,Amtsgericht Frankfurt am Main) UNILEX; CLOUT (Case 52).

199. CISG, supra note 2, art. 71(3) provides: "A party suspending performance, whether before or after dispatch of the goods, must immediately give notice of the suspension to the other party and must continue with performance if the other party provides adequate assurance of his performance."

200. CISG, supra note 2, art. 74 provides: "[d]amages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract."

CISG, supra note 2, art. 75 provides: "[i]f the contract is avoided and if, in a reasonable manner and within a reasonable time after avoidance, the buyer has bought goods in replacement or the seller has resold the goods, the party claiming damages may recover the difference between the contract price and the price in the substitute transaction as well as any further damages recoverable under article 74."

CISG, supra note 2, art. 76 provides:

"(1) If the contract is avoided and there is a current price for the goods, the party claiming damages may, if he has not made a purchase or resale under article 75, recover the difference between the price fixed by the contract and the current price at the time of avoidance as well as any further damages recoverable under article 74. If, however, the party claiming damages has avoided the contract after taking over the goods, the current price at the time of such taking over shall be applied instead of the current price at the time of avoidance.

"(2) For the purpose of the preceding paragraph, the current price is the price prevailing at the place where delivery of the goods should have been made or, if there is no current price at that place, the price of such other place as serves as a reasonable substitute, making due allowance for differences in the cost of transporting the goods."

CISG, supra note 2, art. 77 provides: "[a] party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss, including loss of profit, resulting from the breach. If he fails to take such measures, the party in breach may claim a reduction in the damages in the amount by which the loss could have been mitigated."

201. CISG, supra note 2, art. 45 provides:

"(1) If the seller fails to perform any of his obligations under the contract or this Convention, the buyer may: (a) exercise the rights provided in articles 46-52; (b) claim damages as provided in articles 74- 77.

"(2) The buyer is not deprived of any right he may have to claim damages by exercising his right to other remedies.

"(3) No period of grace may be granted to the seller by a court or arbitral tribunal when the buyer resorts to a remedy for breach of contract."

202. CISG, supra note 2, art. 74 provides: "[d]amages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract."

203. UCC § 2-714 provides:

"(1) Where the buyer has accepted goods and given notification (subsection (3) of Section 2-607) he may recover as damages for any non-conformity of tender the loss resulting in the ordinary course of events from the seller's breach as determined in any manner which is reasonable.

"(2) The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount.

"(3) In a proper case any incidental and consequential damages under the next section may also be recovered."

UCC § 2-715 provides:

"(1) Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.

"(2) Consequential damages resulting from the seller's breach include (a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and (b) injury to person or property proximately resulting from any breach of warranty."

204. CISG, supra note 2, art. 50 provides: "[i]f the goods do not conform with the contract and whether or not the price has already been paid, the buyer may reduce the price the same proportion as the value that the goods actually delivered had at the time of the delivery bears to the value that conforming goods would have had at that time. However, if the seller remedies any failure to perform his obligations in accordance with article 37 or article 48 or if the 111 buyer refuses to accept performance by the seller in accordance with those articles, the buyer may not reduce the price."

205. (Parties not reported), 41 O 198/89 Apr. 3, 1990 (Germany, Landgericht Aachen) UNILEX.

206. Id.

207. Id.

208. (Parties not reported), 6252 Apr.27, 1992 (Switzerland, Pretura di Locarno-Campagna) UNILEX.

209. Id.


Pace Law School Institute of International Commercial Law - Last updated July 24, 2001
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