Go to Database Directory || Go to Bibliography


Problems of Unification of International Sales Law, Working papers submitted to the Colloquium of the International Association of Legal Science, Potsdam: August 1979, Oceana Publications (1980) 26-38. Reproduced with the permission of Oceana.

[Context of this commentary is the 1978 Draft of the CISG, not the final text of the CISG.]

Problems of the Unification of Sales Law
from the Standpoint of the Socialist Countries

Fritz Enderlein [*]

First of all I should like to change the subject of my report slightly in adding the words "Taking the German Democratic Republic as example". I am quite sure that the standpoint of the German Democratic Republic in many aspects is more or less the same as of other socialist States, at least as far as the unification of sales law between socialist and capitalist States is concerned. There are other aspects of sales law, especially affecting internal economic relations and their regulation where there are similarities of views and of regulations between for instance the German Democratic Republic and the Czechoslovakian Socialist Republic whereas other socialist States don't share the same views and therefore have different regulations.

The socialist States have common aims in general and also in the field of the unification of sales law. This of course does not exclude different approaches in particular cases. If one looks only at the member States of the Council for Mutual Economic Assistance (CMEA): These include [page 26] not only central and east European States, but also Asian States like the Mongolian Peoples Republic and the Socialist Republic of Viet-Nam, and an American State -- Cuba, that means the member States of the CMEA belong to three different continents, and they belonged before the socialist revolution to quite different legal families with different legal traditions which still have a certain impact on various questions.

What all socialist States have in common is their approach to State and law in general. In socialist States the law is regarded as a reflexion of the social and economic relations, the social and economic circumstances, in short a reflexion of the reality but moreover law is regarded as an instrument of the State for the regulation and development of the society in general and the economic relations in particular. Thus the socialist States have in common general views on the function of the law.

For the German Democratic Republic, and if I say German Democratic Republic I mean legal doctrine as well as State legislation, the unification of sales law is not the most important thing to be done. What is of primary importance -- be it sales law or any other field -- is a legal regulation which is adequate to the economic or social sphere to be regulated. In our view legal regulation should come as closely as possible to the needs and requirements of a given area of the economic and social reality. This of course implies a precondition before legislative work can start, that is an analysis of reality, a distinction between the various kinds of relations, a determination of the economic forces and economic laws behind those relations, etc.

This sounds like legal philosophy and in fact it is legal philosophy but not without practical consequence. In analyzing various sales we found one sale in a given set of circumstances not equaling another sale in another surrounding. So we came to distinguish four different types of sale, whereas the distinctive factor is not the kind of goods to be bought and sold and not the quantity or the [page 27] price neither the amount nor the value of the goods, but the nature of the parties involved.

The four different types of sale are:

  1. Sales between citizens and sales where one party is a citizen (the other party being a legal person, usually a retail shop);

  2. Sales between enterprises within our national economy;

  3. Sales between foreign trade enterprises of various socialist countries;

  4. Sales between a foreign trade enterprise of a socialist country and a party from a capitalist country.

Of course the amounts involved may also differ and certainly there are items to be found which may be the subject of a sale of the first category and will usually never be found as the subject of a sale in foreign trade (e.g. foodstuffs for immediate consumption like rolls), and vice versa capital goods which very often are the subject of an international sale will never be the subject of a sale where a citizen of the German Democratic Republic is a party.

What are the reasons which justify the distinction between the above mentioned four categories of sales? Each of these categories has its own economic peculiarities which require a proper legal reflection, and not only a mere reflection but also a differentiated legal response.

Without trying to go too much into the details here I should like to mention some of the most important distinguishing factors. Within our national economy the production in its broadest sense including distribution and consumption is conducted according to State plans. Thus for all nationally-owned (or State) enterprises the plan is their fundamental law. There is broadly speaking no sale which is not provided for in the plan. On the other hand, the citizens are not governed by the plan. It is up to them whether or not to conclude a sales [page 28] contract with a State shop certain conditions or clauses of the contract are already fixed, the most important of them being the price, thus precluding any economic pressure from the economical stronger party.

While in contracts between two State enterprises both have to act according to their plans and both are in every respect on equal footing, in contracts with a citizen as one party there is no equality of rights but the citizen as a matter of consumer protection has some unilateral rights vis-a-vis the State enterprise.

Compared with national sales where both parties are subject to national regulations of the national economy with all its interior laws, in international sales a foreign element comes into the picture. Not only is one party subject to regulations of another State, but the economic relations belong to different national economies and economic laws of the international division of labour apply.

As far as the distinction between inter-socialist relations and relations where one party belongs to a capitalist State - inter-systemary relations as we call them -- is concerned the most important factors here are the differences in determining and in the payment of the price. Trade between socialist countries is conducted according to plans which are coordinated by means of inter-State long-term economic and trade agreements and on the basis of firm prices which are fixed by mutual agreement between the governments for a certain period of time according to their plans. Another closely related aspect is the payment of the price. There is in general only one payment condition in all sales contracts between socialist foreign trade enterprises, that is the so-called collection with subsequent acceptance, or collection with immediate settlement, a procedure of payment which is an expression of mutual confidence.

These differences in the economic bases of the various categories of sales not only justify but also necessitate in our view a differentiated legal regulation in principle, which does not preclude accords on details. [page 30] According to this sketchy outlined basic approach in our view we can't have a unification of sales law regarding all sales but we can have only a unification of sales law regarding international sales and there again we can't have a unification independent of the fact whether only enterprises from socialist countries or also from capitalist ones are participating in the transactions to be governed.

Thus we have distinguished between complete (including internal relations) and partial unification (only for the international relations). Whereas originally, when the first ideas of sales law unification were born, many lawyers in western countries were thinking in terms of complete unification and only gradually because of practical difficulties encountered the aim was changed and only partial unification was sought for, in our country for practical and for theoretical reasons unification of sales law never includes internal economic relations.

The German Democratic Republic does not believe in the unification of law as an aim in itself, but has in mind two aims to be accomplished: firstly to have a common or joint regulation by all the States concerned and secondly to have a specific regulation for specific economic relations.

In our view international economic relations should not be regulated unilaterally by single States but the nature or the character of the relations should be mirrored by the nature or character of the regulation. As long as international relations are governed by national law there is a contradiction between the character of the relations to be regulated and the character of the regulation itself. Only with common regulation by the States does this contradiction disappear. Only a common or joint regulation by the States concerned secures the sovereign equality of States, one of the fundamental principles of international relations. A joint regulation by the States also secures equality between the enterprises to whose relations the unified law is to be applied. [page 30] Both parties then have the same possibilities to find out in advance what the applicable law is, both parties through their respective governments have the same chances to influence the law making process by democratic means.

As far as specific regulation is concerned specific means adequate to the relations to be governed, specific means to take into account all the peculiarities of international relations, where the parties are situated in different countries, very often speak different languages, where the goods sold have to pass frontiers and the monetary systems differ to mention only some of the peculiarities.

This general aim of unification of sales law -- to have a joint and a specific regulation -- has been achieved within the Council for Mutual Economic Assistance already in 1958. Sales relations between the CMEA member countries are governed nearly exclusively by their so-called General conditions for Delivery. In spite of their somewhat misleading name these General Conditions are law, commonly agreed law within the CMEA, in essence a socialist sales convention. The General conditions have been improved and amended several times since 1958 and they were preceded by several bilaterally agreed General Conditions between the various socialist States. Thus, after the socialist States had gained experience with bilateral regulations they were able to succeed in multilateral unification of sales law. It might be mentioned in this connection, that between the German Democratic Republic and socialist non-member-States of the CMEA like the Peoples Democratic Republic of Korea, there are still bilaterally agreed legal norms in form of General Conditions for Delivery in force.

A specific regulation of international sales elaborated jointly by the international community of States is the declared aim of the socialist States also in regard to the inter-systemary relations. In our opinion only in this way the function of the law -- to be an effective, useful and appropriate regulation of social relations by means of generally obligatory rules -- can be accomplished. [page 31]

In approaching this aim Hungary took the initiative in 1964 and proposed -- supported by other socialist States -- the creation of a special body within the United Nations system to deal with questions of the progressive harmonization and unification of the international trade law. In 1966 the General Assembly of the United Nations with its resolution 2205 (XXI) established the UN Commission on International Trade Law in which the socialist States have now participated actively for twelve years.

The German Democratic Republic which has only become a member of UNCITRAL in 1977, had as an observer actively participated in the work of several working groups and in the Commission itself already before. The importance which has been attached to the work of UNCITRAL in the German Democratic Republic is shown also by the fact, that all UNCITRAL sessions have been fully reported in German Democratic Republic legal literature.

It should be mentioned here that several socialist States, among them the German Democratic Republic, are also actively engaged in another international organization dealing with a subject similar to UNCITRAL, the International Institute for the Unification of Private Law (UNIDROIT) in Rome. The membership and active participation of socialist States in various international organizations pursuing the international unification of law demonstrate their willingness and determination to achieve progress in the field of a common legal regulation of international economic relations.

To regulate international sales in a manner adequate to the requirements of international economic relations, taking into account all peculiarities of economic laws and trends means that unification of law cannot be carried out simply by comparison of national rules and trying to find a common denominator. Therefore national laws should not be taken as models for an international regulation, if those national laws were intended to govern internal national relations without regard to the requirements of international commerce.

Thus in our view the starting point for the unification of sales law should not be the various [page 32] national laws on sales but internationally developed, accepted and approved usages and customs provided they reflect correctly objective economic laws and tendencies and provided further they are not an expression of an abuse of the position of stronger party. This is, unification of law must not sanction customs developed by capitalist monopolies vis-a-vis weaker parties, especially in developing countries. On the other hand, unification of sales law can take into account, as its corner-stone such international usages and customs which can rightly be considered as democratic and equitable.

While it is our firm belief that international commercial relations should be governed by internationally elaborated and agreed rules there is in the same moment our experience that the unification of law is a very slow and complicated process. No wonder therefore that in the absence of internationally created law for the international economic relations the German Democratic Republic has enacted a special code on international commercial contracts of February 5th, 1976, following the Czechoslovakian Socialist Republic which has enacted a special Code on International Trade as early as 1964.

As I said in the beginning, the legal regulation of international trade should be undertaken jointly and should be adequate. For the common legislation the intentions of one State do not sufficient whereas every State is able to comply with the second requirement: a special legislation for international relations.

In the preparation of our International Commercial Contracts Act (ICCA) the concerned group of experts analyzed first of all the practical experiences, and the practical needs and requirements of the foreign trade organizations of the German Democratic Republic. The internationally acknowledged usages and customs were another aspect of the analysis. Thirdly, the group of experts studied foreign and, international legislation to find -- in comparison with existing national law of the German Democratic Republic -- which legal solution national trade. [page 33] The result was, that the regulation of international sales in the German Democratic Republic's new act in many instances is very similar or even identical with the rules contained in the draft Convention on Contracts for the International Sale of Goods. This demonstrates that there are for certain circumstances also certain unavoidable solutions if the objective laws and tendencies and the requirements for an international regulation are taken into account.

If it is agreed that international trade relations need a special regulation and if this special regulation cannot or cannot yet be achieved internationally then in our view national legislators have not only the possibility but the obligation to create the required special regulation for the international economic relations. Such a special regulation furthers the expansion of international trade, assists in the securing of stable, equitable and mutually advantageous relations.

This national special regulation, in our view, is a direct support for the international process of unification of law. In elaborating a special act the German Democratic Republic was able to intensify the collaboration and participation in the drafting of international conventions. The enactment of a special act by the German Democratic Republic does not mean that we consider a national regulation of international relations as the best solution, but as inevitable as long as there is no international regulation in force.

Article one of our ICCA provides that this act is to be applied if there is a different rule in an international convention to which the German Democratic Republic is a party.

From the comparison between the sales provisions contained in the ICCA of the G.D.R. and the draft Convention on contracts for the international sale of goods it follows that for G.D.R. lawyers the draft Convention appears as a suitable basis for further discussion at a diplomatic conference. The G.D.R. could approve most of the provisions of the draft as they stand now. There are, in my view certain shortcomings and deficiencies which need further improvement. [page 34] To mention only a few of them, in part II of the draft Convention -- formation of contract -- there should be a provision on general conditions used by the contracting parties, along the lines of 33 of our ICCA. General Business conditions. Sales conditions or purchase conditions are in very wide use among participants of international transactions. Usually each party attaches its own conditions to its offer with respect to its acceptance. How can we solve this problem? Whose conditions become part of the contract? Or will there be no contract at all because the general conditions of the parties contradict each other? In our ICCA we have -- in short -- the following rules:

-   If only one party refers to its business terms and conditions and the other party knew or ought to have known of them and did not forthwith contest their application these business terms become part of the contract.
-   If both parties refer to their business terms or conditions, the business terms or condition applicable shall be those last sent which have remained uncontested.
-   If both parties refer to their business terms or conditions and both parties also contest the application of the other parties' terms contract comes into existence without any business conditions provided no party contests the formation of the contract as such.

Whether the draft follows the same lines or not is not important. But the Convention should deal with the problem. Another proposal:

In part III of the draft there should be the inclusion of a provision on the parties' obligation to perform or fulfill the contract in good faith. Here 259 of the ICCA could serve as a model. 259 ICCA contains one of the leading principle of the whole act, the obligation of the parties to cooperate in performing the contract and the manner of this cooperation. Each party must perform his duties under the contract in such a manner as to attain the purpose of the contract in the best possible way and to the other party to perform its duties. [page 35]

There are other gaps in the draft which are also regrettable. I should prefer very much to see provisions on the validity of sales contracts in the Convention. There was a lengthy discussion on rules of validity in UNCITRAL and unfortunately all proposals concerning validity did not get sufficient support.

If one compares the structure of the draft Convention and the structure of our ICCA it is very interesting to note that out of 82 articles of the draft only seven or eight articles find their counterpart in the chapter on sales of the ICCA. All the other rules have their place in more general provisions of the act, applicable not only to sales but also to the other 15 types of contracts which are regulated by the ICCA. In our view, therefore, the draft Convention should also form the basis for further work on the regulation of international commercial contracts.

Apart from the unification of sales law the socialist States support the unification of law for all international commercial transactions. In the course of the preparation of the eleventh session of UNCITRAL a meeting took place between several member States of the CMEA and the Secretary of UNCITRAL. There, all participating socialist representatives expressed their desire to see included in the programme of work of UNCITRAL for the next decade the elaboration of rules for other commercial contracts beside sales, for various contractual clauses, and if possible to start with the elaboration of a code of international trade law. Such a code was envisaged also as a worthwhile subject for the work of UNCITRAL in the debate of the General Assembly's Sixth Committee during its 33rd session.

It would certainly be an illusion to see such a code as a short-term project, but work could be commenced with a general part of this code. When UNCITRAL elaborated a draft convention on the formation of sales contracts it became apparent [page 36] that most of the rules on formation of sales contracts could be applied as well to the formation of other commercial contracts. The same is true of rules on validity of contracts, interpretation of contracts and so on.

There is already -- with active participation and support of socialist countries -- work going on in UNIDROIT for the elaboration of a general part of an international code for commercial contracts. The following subjects and problems will be included in the general part of the future code: (a) formation of contracts, (b) interpretation of contracts, with special reference to contracts concluded on the basis of general conditions and standard forms, (c) conditions of validity, (d) performance of contracts, (e) non-performance of contracts, (f) damages awarded for non-performance, (g) unjust enrichment and restitution, (h) proof.

UNIDROIT has not yet determined what binding force the future code will have when elaborated, but sees theoretically three possibilities: the code could be the subject of an international Convention, the code could be approved in the form of a model law, or the code could assume a purely private character which, simply because of the authority of the institution which elaborated it, would be used by arbitrators when called upon to decide on disputes concerning international trade relationships. We fully share the view that whatever form the code will ultimately take, the uniform rules would in any event serve a useful purpose, even if adopted as simple rules for the guidance of judges and arbitrators.

If one looks through the draft Convention under the point of view whether the rules contained could form part of such a code of international trade one easily finds out, that most of part I and II of the draft could be applied not only to international sales contracts but to any other international commercial contract as well. The same holds true of a good number of the provision on remedies and for most of the provisions contained in chapter IV, dealing with anticipatory breach, exemptions, effects of avoidance and damages. [page 37]

With this remark I am however, already somewhat beyond the subject of our colloquium which is only the unification of sales law. And in this respect I should like to express my confidence and my expectation that the forthcoming diplomatic conference will be able to adopt a convention which will be suitable and acceptable for all States and regions of the world, a convention which will serve the international trade and by this also the peaceful co-existence of all peoples of the world. [page 38]


FOOTNOTE

* Professor for International Economic Law and former Director of the Institute for Foreign and Comparative Law at the Academy for Political and Legal Science of the German Democratic Republic, Potsdam-Babelsberg. At present Senior Legal Officer, International Trade Law Branch, Office of Legal Affairs, United Nations. The views expressed herein are personal and do not necessarily reflect the views of the United Nations.


Pace Law School Institute of International Commercial Law - Last updated June 17, 2003
Go to Database Directory || Go to Bibliography
Comments/Contributions