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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 8 [Interpretation of conduct of a party] [1]

[TEXT OF THE UNIFORM LAW]

(1) For the purposes of this Convention statements made by and other conduct of a party [2] are to be interpreted according to his intent where the other party knew or could not have been unaware [3] what that intent was.

(2) If the preceding paragraph is not applicable [4], 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 I would have had in the same circumstances [5].

(3) In determining the intent of a party or the understanding a reasonable person would have had [6], due consideration is to be given to all relevant circumstances [7] of the case including the negotiations [8], any practices [9] which the parties have established between themselves, usages [10] and any subsequent conduct of the parties [11].

[WORDS AND PHRASES, CONCEPTS

1. scope of this article
2. statements made by and other conduct of a party
3. subjective theory / theory of intent
4. individual intent / common intent that cannot be determined
5. understanding of a reasonable person
6. intent of a party
7. relevant circumstances
8. intent expressed during the negotiations
9. intent expressed by established practices
10. intent expressed by subsequent conduct ]

[COMMENTARY]

[1] [scope of this article]

While Article 7 deals with the interpretation of the Convention, which, however, has its effect on the interpretation of the agreements between the parties (Article 7, note 2), Article 8 governs the interpretation of statements and the otherwise legally relevant conduct of the parties. It does not refer only to offer and acceptance (Articles 14 and/or 18) and other acts done before the conclusion of the contract, withdrawal or revocation of an offer (Article 15, paragraph 2; Article 16, paragraph 1) and rejection of an offer (Article 17), but also to acts which are committed during the realization and with the objective of terminating the contract, e.g. notice of defects (Article 39, paragraph 1), notice of third party rights or claims (Article 43, paragraph 1), assertion of claims because of breach of contract [page 61] and related claims, including the right to performance (e.g. Article 46, paragraph 1; Article 62), damages and claims for compensation of expenses incurred (Article. 45, paragraph 1, subpara. (b); Article 61, paragraph 1, subpara. (b) in relation to Article 74 fol; Article 85; Article 86, paragraph 1)), mitigation of loss (Article 52), suspension of performance of obligations (Article 71, paragraph 1), avoidance of contract (Article 49, paragraph 1; Article 64, paragraph 1; Article 72, paragraph 1; Article 73), and restitution of supplies and expenses in the case of avoidance of contract (Article 81, paragraph 2). In specific cases (Article 52), even acceptance is an act which is to be interpreted under Article 8. And finally, the setting of an additional period for delivery (Article 47, paragraph 1; Article 63, paragraph 1) has to be mentioned. Apart from these most important examples, under the CISG numerous such acts, provided for in the contract or not, can emerge in connection with a possible modification or avoidance of the contract when claims for breach of contract are asserted. Their interpretation is also governed by Article 8.

[2] [statements made by and other conduct of a party]

      [2.1] The statements or other conduct - as can be seen from the further text of the Article - are such acts by which the intent of the respective party is to be expressed ("according to his intent"). This condition is given in general when the statement is made, unless the latter is of a purely informational character (e.g. communication that the goods have been dispatched). In this context there can be problems of interpretation, e.g. where the communication is considered to be an obligation and opinions diverge on whether this obligation was fulfilled through a specific act. Article 8, by analogy, would also apply to such a case.

      [2.2] Above all, in the context of the other conduct of a party, a distinction can be made between such conduct which is to express a legal intent (examples in Article 18, note 2) and mere acts of performance where this is not so. The rules of interpretation of Article 8 refer to the first-mentioned case, are however, applicable analogously to the mere acts of performance insofar as there is a need for interpretation. A party may in any case express his intent by a statement which is forwarded to the other party. There are cases where this is expressly prescribed (Article 26). Where this is not the case and/or where it is expressly permitted that a party can express his intent also by other conduct (Article 18, paragraph 1), a statement is not necessary but recommendable because it is as a rule clearer and can, therefore, be interpreted more easily.

In some cases, above all in the event of information which at the same time expresses an intent, the need for a statement is in the nature of things (non-conformity claim). [page 62]

      [2.3] Article 8 relates directly only to the acts (legal acts - referred to below also as acts) of a party and contains no provision for the interpretation of contracts. Insofar as contracts are based on corresponding unilateral acts by the parties, there will be no problems. This also holds true where a party accepts the contract offer made by the other party, for instance, by signing it. When the contract, however, is contained in a joint document of the parties, it cannot be generally determined which party made a specific statement becoming part of the document. Basically, each party has then made a statement relating to the entire, substance of the contract document so that the general rule can be applied, as in the case of corresponding individual statements of intent, i.e. the relevant clause is interpreted first as the statement of the one party and then as the statement of the second party (so already in the Secretariat's Commentary, O.R., 18; Farnsworth/BB, 101), their identity resulting in a common intent. Honnold (137) wants to apply here only paragraph 3, which seems inconsistent to us.

[3] [subjective theory / theory of intent]

      [3.1] Hereby, the subjective theory or theory of intent of the conclusion of a contract has found its way into the Convention. It is the intent of the party undertaking the legal act which is decisive. Such intent has an effect only when the other party is actually or supposedly aware of it. At the conclusion of the contract it becomes the common intent of both parties, if the other party accepts it. The fact that acceptance refers to the offer has, of course, an influence on its interpretation (because, e.g. an offer provides a substantive frame). The unequivocal cases are covered here, while otherwise paragraph 2 applies. When one party clearly expresses his intent through a legal act, the addressee cannot pretend to have insufficient knowledge of that intent. The same applies when the acting party has not clearly expressed his intent, or even disguised it, but the addressee knew of the real intent. It would, however, be up to the acting party to prove this. In this context, the factors mentioned in [paragraph 3 of Article 8] will be of particular relevance. Such proof is made easier for him by a certain objectiveness in regard to the knowledge of the other party which is based on the fact that it suffices that the other party "could not have been unaware". This notion is supposed to objectivize even more than "ought to have known" (O.R., 260). It follows from paragraph 1 that in the case of fictitious transactions the real substance is decisive. This does, however, not say anything about the validity of such transactions for it is the prohibitive norms of national law declaring contracts void which can be invoked here (Article 4, subpara. (a)). [page 63]

The decisive time is, in our view, the moment when the conduct is displayed and/or taken note of. According to Farnsworth (BB, 98) this should be the moment when the conduct has its effect. That opinion, as we believe, is concurrent with ours, but is less clear and gives, therefore, might cause difficulties of interpretation.

      [3.2] Of particular importance are statements which are legal acts. To recognize the intent expressed by them, the language in which they are formulated is of considerable relevance. Without being able to discuss this issue in detail (for a detailed explanation see Reinhart/Dölle, 97 fol), we hold that one should proceed from the following principles:

- When a party reacts in substance to a statement it has to be generally assumed that he has understood it, unless the contrary can be deduced from the content of his reaction.

- When the reply to a statement is formulated in the same language as the statement itself or in the language of the country of the statement's recipient or in a language which is customary in the relations between the countries where the parties have their places of business, it has to be assumed that the statement has been understood by the other party.

- Similar principles apply to statements made in the process of the performance of contracts, the language of the contract being of particular importance.

- Statements which are not made in a language which has possibly been agreed in the contract or which are made in a language which is not customary at all in the country of the recipient, even as business language, do not attain legal effect.

      [3.3] In some cases, the CISG makes assumptions on the interpretation of statements (Article 9, paragraph 2; Article 48, paragraph 3; Article 55 fol). Since in such cases neither the party making the statement can refer to having meant the statement differently nor the statement's addressee can refer to having interpreted it differently, these assumptions practically have the effect of dispositive rules, although they are in part the result of lack of agreement. The parties, therefore, have to clearly show that through their action they wish to express an intent other than that assumed by law. This will regularly require a statement. [page 64]

      [3.4] Since the CISG ignores problems of validity (Article 4, subpara. (a)) and the problems of rescission touch upon the validity, the rescission because of a defect in intent, notably a mistake, lies as a matter of principle outside the scope of application of the CISG (Honnold, 141; Farnsworth/BB, 102). The CISG does, however, apply if it contains rules which are functionally equivalent to the rescission pursuant to domestic laws (c. note 6 of Article 4). Cases of slips, transference and faulty transmission are also covered by the legal institute of rescission and are outside the Convention's sphere of application. Insofar as the addressee of the statement knew of the intent of the party making the statement, or could not have been unaware of it, the statement is effective according to the intent of the party making the statement (e.g. the price is to be indicated as amounting to Swiss francs 50,000 instead of Swiss francs 500,000, Secretariat's Commentary, O.R., 18). A special problem of faulty transmission is covered by Article 27.

[4] [individual intent / common intent that cannot be determined]

This refers to a situation where the intent of the acting party cannot be recognized from his action according to the relevant criteria or where the addressee of the action did not know the intent of the acting party and cannot be purported to have been aware of it, i.e. the individual intent or also the common individual intent cannot be determined.

[5] [understanding of a reasonable person]

5. The criteria mentioned here link subjective with objective elements in a way that one can speak of a type-related objectivization.

The subjective element relates to a person of the same type as the other party, hence the addressee of the action. The same type can be defined by different criteria whose cumulative application can amount to a relatively strong individualization. Such criteria include the kind of work done by the party's enterprise (e.g. a factory or a trading firm); the country in which he has his decisive place of business (including the language spoken there); the business forms customary in that country; and also (Farnsworth/BB, 99) the knowledge and experience of prior dealings between the parties. Another subjective element is added by the reference to the same circumstances, which is described in an exemplary way in precise terms under paragraph 3 (notes 7-11). Such circumstances can be a certain situation of the market; but they can also express that more simplified forms of business transactions are applied (e.g. sales contracts in the framework of an agency contract on a dealer basis); that statements are given under special conditions (trade fair transactions); or that specific links have been established between the parties' interests (e.g. counter-transactions). [page 65]

The objective element refers to a situation where the conduct of a reasonable person is made the yardstick (note 6). But in assessing how such person would behave, the subjective and objective elements of each case have to be taken into account. Only an unreasonable, e.g. professionally incompetent conduct or such conduct that is contrary to good faith of the addressee of the legal act would have to be left out of consideration.

As a result, according to Farnsworth (BB, 99), more reasonable solutions will prevail. An objectivized interpretation can, therefore, very well result in an act producing a legal effect which does not correspond to the intent of the acting person (Schlechtriem, 26, in our view unjustly considers this case as not provided for). The latter will then have to rely on rescission (note 3.4.).

[6] [intent of a party]

The criteria mentioned below serve, first, to determine the intent of a party. The mere subjective element is thus left, and the intent of a party is in a way objectivized. But from this it follows that a secret reservation of a party is irrelevant, at least when the other party is not aware of it. Secondly, these criteria are supposed to help determine the view of a reasonable person. Those criteria also play a role in determining whether the other party could not have been unaware of the intent of the acting party, because in this context the measure of a reasonable person is to be applied.

[7] [relevant circumstances]

The relevant circumstances are described below in an exemplary fashion, but they also include the kind of circumstances mentioned in note 5. To give due consideration to these circumstances means to determine their specific influence on the issue to be decided.

[8] [intent expressed during the negotiations]

This refers in particular to documents and oral statements which have been exchanged by the parties in the process of preparing the contract, but are not expressed in the documents which brought about the contract. Unlike Honnold (142 fol) and an agreement with Farnsworth (ibid.), we believe that possible national rules, which exclude the negotiations on the contract from the interpretation, are superseded by the CISG because the latter contains a specific rule to this (Article 4, second sentence).

[9] [intent expressed by established practices]

Established practices are practices or exercises which have developed between specific, in general two, parties over a longer period of time in similar business relations (Article 19, note 11). They refer to individual, not expressly regulated aspects of the contract; like for instance, to the way in which documents are presented and include the tendering of account, the notification of consignments, the regulation of non-conformity and other claims. [page 66]

[10] [intent expressed by usages]

Compare Article 9, note 1.

By contrast to Article 9, note 2, national practices can also, according to the certainly correct view of Schlechtriem (26), be related to as they attain relevance in international transactions.

[11] [intent expressed by subsequent conduct]

This serves - even if in a very cautious way - to express a prohibition of the venire contra factum proprium (prohibition to contradict one's own conduct) (similarly Huber, 430). If a party thus expresses through his conduct that he interprets the contract in a specific way, he can later not rely on the opposite interpretation. [page 67]

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Pace Law School Institute of International Commercial Law - Last updated August 5, 2002
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