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Reproduced with the permission of Oceana Publications

excerpt from

INTERNATIONAL SALES LAW

United Nations Convention on Contracts for the International Sale of Goods

Convention on the Limitation Period in the International Sale of Goods

Commentary by
Prof. Dr. jur. Dr. sc. oec. Fritz Enderlein
Prof. Dr. jur. Dr. sc. oec. Dietrich Maskow

Oceana Publications, 1992

Article 1 [Sphere of application]

[TEXT OF THE UNIFORM LAW]

(1) This Convention applies to contracts of sale [1] of goods [2] between parties whose places of business [3] are in different States [4]:

(a) when the States are Contracting States [5]; or
(b) when the rules of private international law lead to the application of the law of a Contracting State [6].

(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 [7].

(3) Neither the nationality of the parties [8] nor the civil or commercial character of the parties or of the contract [9] is to be taken into consideration in determining the application of this Convention.

[WORDS AND PHRASES, CONCEPTS

1. contract of sale
2. sale of goods
3. places of business
4. in different States
5. Art. 90, 94 restrictions; territorial restrictions
6. rules of private international law lead to the application of the law of a Contracting State
7. Art. 1(1)(b) reservation; undisclosed principal or agent
8. nationality of parties or other criteria irrelevant
9. civil or commercial character of the parties or of the contract irrelevant ]

[COMMENTARY]

[1] [contract of sale]

The description of what is a contract of sale, whose existence is the first decisive criterion for the application of the Convention, follows in particular from the provisions on the obligations of the seller (Article 30) and of the buyer (Article 53). Both taken together could be conceived as a definition of the contract of sale. Article 3 extends the scope of application of the Convention to some contracts which are not purely sales contracts. [page 27]

Whether the so-called linked operations are also covered by the Convention's scope of application is not expressly clarified. At present those operations, above all in East-West economic relations, to which, however, they are not limited, include the following main forms of contracts: counter-purchase, buyback and barter, of which exists no uniform definition at all. It is widely held (Documents of the ECE TRADE/WP.5/R.4/Rev.1, Ziff. 8 fol for counter-purchase and TRADE/WP.5/R.5 for buyback) that at least the two first mentioned forms of bound transactions are understood to be such where separate contracts are often concluded in both directions; provided that further prerequisites are met those are no doubt governed by the Convention.

There are problems in regard to genuine barter which, in present day world trade, is relatively seldom. An overwhelming number of arguments in our view speaks in favour of applying the Convention also in this case (Loewe, 27, seems to have a different view). Any partner is to be considered here both as buyer and seller, though with regard to different performances - in respect of the obligations to deliver, to hand over documents, to acquire title in the goods and to take delivery.

It has to be admitted, however, that Article 53 expressly mentions the obligation to pay the price and that also the following provisions require payment of money. Difficulties could arise in regard to the provisions concerning the synallagmatic connection between performance and counter-performance (Article 58); and to that extent it is understandable that Huber (419) holds a different opinion. Those difficulties should be overcome in shaping the contract; and, according to our experience, this is actually done. The opinion substantiated in the genesis of ULIS, namely that the uniform law is not to be applied to barter (Herber/Dolle, 9) does not, as we believe, have to be applied in regard to the CISG.

The Convention cannot be applied to leasing contracts even if they contain a purchase option (Volken/Freiburg, 113 holds a different view). For such contracts there is a specific convention in the form of UCIF, even if it has not yet entered into force. This does not, however, exclude that in the case of financial leasing in regard to the sales contract between the seller and the lessor, the CISG is applied if the required conditions are met. Then the CISG is applied to the relations between the lessor and the lessee to the extent to which the conditions of the delivery contract affect the former (e.g. Articles 10 to 12, Factoring Convention). [page 28]

Neither does the Convention apply, as a matter of principle, to agency agreements with commercial dealers (Herber/Freiburg, 103). We believe, however, that it is valid for those sales contracts which are concluded on the basis of the dealer contract (e.g. through delivery on call).

As to investment contracts compare Article 3, note 7.

[2] [sale of goods]

The goods referred to are conceived as movable assets; and the common-law tradition sets great store by noting that they have to be corporeal as well (Honnold, 88). A reflection of this position was the exclusion of electricity from the Convention's scope of application. Hence sales of immovable property and legal assets (e.g. sales of industrial property rights) are not covered by the Convention's field of application. The results of scientific and technological research (e.g. projects, construction documents etc.), however, can well be the substance of sales contracts in the meaning of the Convention (Article 3, note 7). The term "goods" in the sense of the Convention is limited by Article 2, subparas. (d), (e) and (f); but then again extended in Article 3.

[3] [places of business]

Concerning the notion "place of business" compare Article 10, note 2.

[4] ["in different States"]

Reference is made here to the second decisive criterion for the Convention's application: the internationality of the contract. The inclusion of the requirement of transboundary transportation following the ULIS model, as was requested by Volken (Freiburg, 92 fol) citing examples which would cause problems, would have produced legal complications and lack of clarity in terms of substance.

[5] [Article 90, 94 restrictions; territorial restrictions]

      [5.1] Restrictions follow from Article 90 and, insofar as the States concerned have made relevant declarations, also from Article 94.

      [5.2] The Convention does not apply; per se, to the relations between parties from different territorial units of States having several relevant legal systems (Jayme/BB, 30).

[6] [rules of private international law lead to the application of the law of a Contracting State]

      [6.1] This rule enables the Convention to be applied also to contracts between parties of whom one, or in exceptional cases even two, does not have his place of business in a Contracting State. This is valid where the decisive rules of private international law refer to the law of a Contracting State. [page 29]

We hold that in the event of such reference the CISG should be applied at once without checking the private international law of the State to whose law reference is made (so convincingly Winship, 521 fol with reference to views contradicting one another; in favour of reference back or forth Loewe/Lausanne, 15).

      [6.2] What matters here are the rules of private international law which determine the law to be applied to sales contracts. In many instances this applies to arbitral tribunals. The national conflict-of-law rules in most cases permit a broad party autonomy in terms of conflicts of law (Lando, International Encyclopedia, 24 fol) of which the parties to international economic contracts make use frequently. As a consequence, the further connecting factors like the right of the seller's country and, having the same result, the right to characteristic performance are diminished in their practical significance.

Important arbitration rules, like those thought for ad hoc arbitration courts, e.g. the UNCITRAL arbitration rules (Article 33, paragraph 1) or the ECE arbitration rules (Article 38) or even those for international arbitral tribunals (ICC Rules of Conciliation and Arbitration, Publication of the International Chamber of Commerce No. 447, Paris 1987, Article 13, paragraph 3), while giving absolute priority to the choice of law by the parties, in the absence of it concede to the arbitrators the right to decide for themselves which are to be the decisive conflict-of-law rules and thus which is the substantive law.

The main cases to which this rule could apply will be those where the parties have chosen the law of one Contracting State, if only one or even none of them belongs to a Contracting State, and where because of the conflict-of-law rules of one Contracting State that State's own law is applied to a contract in which at least one of the parties is from a non-contracting State.

      [6.3] This rule may also place an obligation on courts and arbitral tribunals in non-contracting States to apply the Convention if they invoke the law of a Contracting State on the basis of the conflict-of-law rules that are decisive for them (see also Siehr, 610 , fol). That State, in acceding to the Convention, has expressed that the provisions of the Convention are the decisive norms of its law in regard to international sales contracts. Since foreign law is to apply in the same way as in the State where it is in force, foreign arbitral institutions have to accept that decision. Concerning modifications in the context of a reservation (note 6.4.) compare Article 95, notes 1 and 2. [page 30]

      [6.4] At the diplomatic conference the FRG voiced reservations against this rule, inter alia, because according to the decisive private international law the conclusion and the content of the contract could be connected differently (O.R., 236 fol). Huber (423) declared a special way of connecting the formation of a contract as incompatible with the meaning of Article 1, paragraph 1, subpara. (b). This is incomprehensible since even a participation in the Convention can be limited to the conclusion of a contract or to the purchase of goods. We could well imagine the Convention to be applied only to the extent to which the decisive private international law refers to it: e.g. only in regard to the formation of the contract (there we are in agreement with the Norwegian delegate; O.R. 237).

Czechoslovakia and the former GDR, referring to their special legislation concerning international economic contracts, were in favour of deleting this rule (O.R., 237 fol).

Such interest in having the rule deleted was finally taken into consideration insofar as Article 95 provides for a reservation in respect of Article 1, paragraph 1, subpara. (b).

[7] [Article 1(1)(b) reservation; undisclosed principal or agent]

      [7.1] [in respect of Art. 1(1)(b)] In that case the Convention does not apply for either party Loewe/Doralt, 14). This rule is to prevent that a party who, because of the facts known to him believed the contract to be a domestic one, all of a sudden is confronted with the fact that it is an international contract to which the CISG applies.

      [7.1] [undisclosed principal or agent] Under the common law view, one of the essential applications of this paragraph is the case of agency of an i.e. indirectly acting as an agent which under continental European law is expressed through the legal institute of the commission (Secretariat's Commentary, O.R., 15; Honnold, 78; but also Jayme/BB, 31). A condition for this situation is that the applicability of the CISG in the case of a sales contract between an agent and a third party is derived from the status of the principal and the third party and, therefore, does not apply if the foreign capacity of the principal in the sense of the rule is not obvious to the third party. This is certainly true of the common law and may also be true in respect of the Member States of the Agency Convention which in Article 2, paragraph 2, provides for indirectly acting as an agent. Continental European laws would in this case regularly assume that the sales contract between the agent and the third party is valid and judge by their status whether the CISG is the applicable law.

[8] [nationality of parties or other criteria irrelevant]

Hence, what matters is the place of business (Article 10). In the case of legal persons neither the nationality of the actual owner nor the law on which they are based, nor other criteria are relevant. [page 31]

[9] [civil or commercial character of the contract irrelevant]

The notion of international sales contract had to be freed from the possible influence of different national differentiation which already, in regard to the scope of application, could prevent the uniform application of law. The criteria cited can only be examples by which it is to be generally expressed that the term "international sales contract" can only be interpreted on the basis of the Convention. The latter, however, gives a differentiation which is comparable to some of the national rules that have been rejected (Article 2, subpara. (a) and note 2 to that Article).

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Pace Law School Institute of International Commercial Law - Last updated August 6, 2002
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