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Presented in "Celebrating Success: 25 Years United Nations Convention on Contracts for the International Sale of Goods" (Collation of Papers at UNCITRAL -- SIAC Conference 22-23 September 2005, Singapore), published and copyright by the Singapore International Arbitration Centre at 39-53. Reproduced with permission of the SIAC.

A Commentary on Issues Arising under Articles 1 to 6 of the CISG (with special reference to the position in Australia)

David Fairlie [*]

  1. Introduction
    1. Australian legislation implementing the CISG
    2. Is the CISG used in Australia?
  2. Commentary on issues arising under articles 1, 2 and 3
    1. Goods
         (a)    Electricity
         (b)    Software
    2. Sale of goods
         (a)    Counter-trade agreements
         (b)    Auction contracts
    3. CISG Advisory Opinion No 4
         (a)    Know-how
         (b)    Turnkey contracts
  3. Commentary on issues arising under articles 4 and 6
    1. Retention of title clauses
    2. Alternative dispute resolution clauses
  4. Conclusion

I. INTRODUCTION

Australia adopted the United Nations Convention on Contracts for the International Sale of Goods ('CISG' or 'the Convention') with effect from 1 April 1989.

The adoption was largely unqualified, containing no declarations or reservations under Articles 92, 93 (save in relation to certain outlying island territories), 94, 95 or 96. Before adoption, there was debate as to whether the Australia-New Zealand Closer Economic Relations Trade Agreement ('CER'), entered into between the two countries in 1983, provided a basis for Australia declaring under Article 94(2), that the Convention would not apply to contracts with parties in New Zealand. It was suggested that because an objective of the CER was to promote business law harmonisation, a special regime should apply between Australia and New Zealand, as it did in the Scandinavian countries.

The government ultimately decided that even between close neighbours, international uniformity should be encouraged, and no declaration was made.[1]

1. Australian legislation implementing the CISG

Australia's adoption of the CISG became fully effective only after the Australian states and territories passed complementary enabling legislation. Under the Australian Constitution, as is the position in Canada, the Federal Government has the power to sign treaties but cannot bind the states and territories in areas [page 39] where state or territory law applies. Laws relating to the sale of goods in Australia are largely found in state and territory legislation.[2]

As a consequence, the Sale of Goods (Vienna Convention) Acts were passed in each Australian state and territory. These Acts are identical and contain only two substantive provisions. The first provides that the Convention has the force of law in the relevant state or territory. The second provides that in the case of any inconsistency, the Convention will prevail over any law of the state or territory.

Australian federal legislation also needs to be considered in one area. The Commonwealth Trade Practices Act contains certain non-excludable conditions and warranties, which are implied in all consumer contracts. As a consequence, the Trade Practices Act has also been amended to provide that the provisions of the CISG prevail over the relevant consumer protection provisions of the Act, to the extent of any inconsistency.[3]

The definition of 'consumer' in the Trade Practices Act is wide, with the result that the expression 'consumer contracts' does not have the same meaning as the expression 'sales ...' of goods bought for personal, family or household use', which is excluded from the operation of the CISG, by Article 2(a). Thus, there may have been situations where the CISG would not have applied in Australia, contrary to the intent of its unqualified adoption, were it not for this provision inserted into the Trade Practices Act.

2. Is the CISG used in Australia?

The majority of Australia's major trading partners, including China, Korea and the USA, have also adopted the CISG, so that it should apply to most international sales contracts involving Australian parties.

It is therefore perhaps surprising that there are so few decisions by Australian courts on the CISG.[4] One explanation may be that parties are expressly excluding the application of the Convention, as is permissible under Article 6. [page 40]

The alternative explanation for the lack of case law is that the CISG is working well in Australia. In other words, relevant international commercial transactions are governed by the CISG, and where disputes arise, they are able to be resolved according to well-settled principles, without recourse to litigation, or, at least, without the litigation proceeding to trial.[5]

The absence of recent case law in relation to Australian sale of goods legislation, where the principles are also well settled, may provide further support for this theory.

However, contrary to this view, there is one Australian decision, Perry Engineering Australia Pty Ltd v Bernold AG,[6] where it is apparent that neither the parties to the contract nor their lawyers were aware that the CISG applied.

The contract was for the supply of tunnelling machinery - the seller was Swiss and the buyer Australian. The buyer alleged that the goods were not fit for their purpose under the South Australian Sale of Goods Act. The seller did not enter a defence and default judgment was to be given in favour of the buyer, when the judge became aware that the claim should have been based on the CISG and not the domestic legislation.

The court gave the buyer leave to replead its case, but this required it, in effect, to start again by serving the amended claim on the seller in Switzerland. In some jurisdictions in Australia and in other legal systems, a significant amendment of this kind, and at a late stage, may not be allowed at all.[7]

Furthermore, although the court file does not enable us to ascertain what happened thereafter, the delayed service of a claim in proper form under the CISG, without the seller having given prior notice under Article 39 as to lack of conformity of the goods within two years, may have given the seller a defence otherwise not available to it. [page 41]

II. COMMENTARY ON ISSUES ARISING UNDER ARTICLES 1, 2 AND 3

This commentary will discuss the following issues:

(1) what is included within the concept of goods under Articles 1(1) and 2 and what is excluded;
(2) what is included within the concept of contracts of sale (of goods) under Articles 1(1) and 2 and what is excluded;
(3) the recent CISG Advisory Opinion No 4 in relation to Articles 3(1) and 3(2).

It is therefore convenient to deal with Article 1(1), Article (2) and Article (3) together. Article 1(1) and Articles 2 and 3 are set out below:

Article 1

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

Article 2

This Convention does not apply to sales:

(a) of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use;
(b) by auction;
(c) on execution or otherwise by authority of law;
(d) of stocks, shares, investment securities, negotiable instruments or money;
(e) of ships, vessels, hovercraft or aircraft;
(f) of electricity.

Article 3

(1) Contracts for the supply of goods to be manufactured or produced are to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production.
(2) This Convention does not apply to contracts in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services.' [page 42]

1. Goods

As a number of commentators have noted, there is no definition of goods in the CISG. This is unlike the position in the domestic legislation of most participating countries. The definition in the Australian legislation, for example, where goods include all chattels personal other than things in action and money, is well settled in its meaning, at least to common law lawyers.

The absence of a definition in the CISG, may, arguably, lead to a broader position. The only clear cut exemptions are those classes of goods or contracts specifically excluded by the operation of Article 2.

However, the exclusion of (the sale of) stocks, investment securities, negotiable interests or money (Article 2(d)) does appear to follow the common law position, in that these transactions would also be excluded under the Australian definition, either expressly in the case of money, or more generally, because they are intangibles and not considered to be chattels.

(a) Electricity

Perhaps more significant is the exclusion of the sale of electricity under Article 2(f). It is doubtful that electricity would be classed as goods under the Australian definition, as electricity is considered to be an intangible.[8] Thus, whilst care must be taken in interpreting the CISG by reference to the position in the domestic legislation of participating countries, the exclusion in Article 2(f) might also suggest a broader meaning of goods under the CISG.

This view is supported in at least one decision where the court found that the concept of goods in the CISG was to be interpreted extensively.[9]

The exclusion of electricity from the 1978 Draft of the Convention, according to the Secretariat Commentary, was due in part to the special problems arising in the international sale of electricity. These were said to be different from those arising in the usual course of international sales. One difference at that time was that the majority of electricity transactions then involved state enterprises. That is not the case today. No doubt there are many other features specific to the drafting of contracts for the sale of electricity, but that applies to contracts for the sale of many goods, such as oil and gas transactions, to which the CISG applies. Thus there may be a case for reconsidering the exclusion of electricity. [page 43]

(b) Software

In the IT area, there are differing views as to whether computer software should be classified as goods under the CISG. The same applies to domestic legislation. No domestic sale of goods legislation, to the author's knowledge, nor the CISG, refers to software expressly. In relation to the CISG, this is not surprising as at the time of the drafting of the Convention, the significance of software was recognised by only a few farsighted individuals.

There are a range of different types of transactions to be considered. The first is the sale of computer hardware alone. Next there is the sale of off-the-shelf or proprietary software, either alone or in conjunction with hardware. Finally there is custom-made or bespoke software, sold alone or in conjunction with proprietary software or hardware or both.

Australia was one of the first countries where these issues were considered judicially. In Toby Constructions Products Pty Ltd v Computer Bar (Sales) Pty Ltd,[10] Rogers J had to consider the sale of a computer system, comprising hardware and proprietary software. The judge held that the package so sold did constitute a sale of goods under the relevant domestic legislation. He noted that it was less clear whether software alone would constitute goods.

There have been two subsequent English decisions which have addressed that issue. In St Albans City and District Council v International Computers Ltd,[11] the dispute concerned the installation of bespoke software. Sir Iain Gladwell in the Court of Appeal took the view that if the software was contained in a computer disk, it was to be considered goods under the English legislation. He drew the analogy with an instruction manual on the maintenance and repair of a car. However, if the software was installed directly on the user's computer system without the supply of any disks or other products, it was unlikely to be goods. This decision would be likely to be persuasive in Australia.

In Watford Electronics Ltd v Sanderson CFL Ltd,[12] the court was again concerned with a bespoke integrated software system, downloaded directly to the user by the supplier. There, Thornton J questioned Sir Iain Gladwell's distinction between computer software, which included something tangible such as a disk or chip for storage, and a computer programme alone. He said that no programme could exist in a vacuum and it must be contained in a physical medium even if the medium were no more than the 'electrons or other physical means by which the programme is carried and then transferred'. [page 44]

As a consequence, Thornton J apparently would have been prepared to accept all forms of software as goods. Nevertheless, he still held that the English Sale of Goods legislation did not apply to the transaction before him because, as in the St Albans case, the relevant contract was only a licence to use the software, and not a sale contract.

There are only two decisions listed in CLOUT which have considered whether software is goods under the CISG. One case held that standard software came within the ambit of goods and the CISG applied to its sale.[13]

However, the earlier decision of the Koblenz court which held that goods generally should be interpreted widely under the CISG, appears also to have held that any form of software, whether off-the-shelf or customised, and whether delivered on disk or directly by modem, could constitute goods.[14]

Therefore, the position under the CISG appears not to be settled in that there is both a narrow view, as well as a broad view that all forms of software, however transferred, are to be categorised as goods.

In Australia, the position is also not settled, except to the extent that the sale of a computer package comprising hardware, proprietary software and even customised software would be considered goods. Likewise, the sale of any form of software if delivered on a disk or the like would also be likely to be considered goods. Further, if one accepts Thornton J's reasoning in Watford Electronics that the transfer of software always involves the transfer of tangible property (which if correct, would have the anomalous result that electricity would also be considered goods), then the field is covered.

In contrast, if the software transaction is effected as a licence only, none of these issues will arise as neither under the CISG nor the domestic legislation, will there be a sale of goods.

One Australian commentator[15] has questioned whether proprietary software transactions, particularly consumer transactions, should be be treated as licences rather than sales. From the user's standpoint, a payment is made and a disk together with some form of user manual is acquired. In these circumstances the user would assume there had been a sale and not just a right to use the software. [page 45] The intellectual property rights issues arising are no more complicated than those that arise on the sale of books, DVDs and the like, where a simple sale transaction is considered to be adequate to protect relevant interests.

This reasoning could apply equally to an acquisition of bespoke software for a commercial user, similar to the position in the St Albans and Watford Electronics cases. If such a transaction were between parties in Member States, it would benefit at least the acquirer of the software, if the CISG were to apply to the transaction, and for it to be treated as a buyer and not a licensee. However, consumer sales of proprietary software are unlikely to be governed by the CISG, because of the exclusion in Article 2(a), for the sales of goods for personal, family or household use.

The publication of an Advisory Opinion would help clarify whether and to what extent software is to be classified as goods under the CISG.

2. Sale of goods

The CISG again does not provide any definition, although the UNCITRAL commentary makes the point that Articles 30 and 53 provide a basis for arguing that the essence of contracts to which the CISG applies, are those where goods are exchanged for money.[16]

The result is that gifts, bailments, leases and franchise agreements are not covered by the CISG. Likewise, contracts collateral to sale contracts, such as contracts of insurance or carriage, are also excluded. Article 3(1), however, extends the scope of the Convention to contracts of manufacture or production, not just to sales of ready-made goods.

(a) Counter-trade agreements

What of counter-trade or barter transactions? Sale of goods legislation in some Member States, including Australia, define price in terms of money consideration, so that contracts, where goods are exchanged even as only part consideration, are excluded. There is no similar limitation in the meaning of price in the CISG in Article 53 and Articles 55-59. Thus, notwithstanding the view that the payment of money in exchange for goods is the essence of the contract, it is arguable that price in the CISG has a wider meaning. However, Professor Schlechtriem, in his 1986 Commentary, came to the opposite view.[17] [page 46]

(b) Auction contracts

These are excluded under Article 2(b). The rationale was that sales by auction are often subject to special rules under the applicable national law, and it was considered desirable that they remain subject to these rules even where the successful bidder was from a different State.[18] Another factor was that these sales present a special problem with respect to formation of the contract because the seller will not know that the buyer is from a different State and, therefore, whether the CISG applies or not, until after the contract has been entered into with the fall of the hammer.[19]

Also relevant may be that when the Convention was drafted, international auctions were comparatively rare. The advent of the internet has meant that this is no longer so.

A case can now be made in favour of bringing international auctions within the CISG. To ensure bidders are aware that the CISG will apply, sellers could make that explicit in their contractual terms. Because of the diversity in the laws relating to auction sales, the application of the CISG would bring the benefit of uniformity.[20]

3. CISG Advisory Opinion No 4

The recent CISG Advisory Council Opinion No 4, published in October 2004, will do much to clarify the meaning of Articles 3(1) and 3(2). The case law and legal commentaries have revealed considerable disagreement about the interpretation of these Articles.

(a) Know-how

Two of the issues clarified by the Opinion will be discussed. The first, in Article 3(1), is in relation to drawings, technical specifications, technology or formulas (collectively 'know-how') provided by the party who orders the goods and not provided by the manufacturer. The issue is whether this know-how is covered by the phrase materials necessary for such manufacture so that if it forms a substantial part [page 47] of the materials required, the transaction will not be considered a sales contract under the CISG. The Opinion states:

5. The words 'materials necessary for such manufacture' in Article 3(1) CISG do not cover drawings, technical specifications, technology or formulas, unless they enhance the value of the materials supplied by the parties.

This Opinion is helpful because it has confirmed, firstly, that know-how in all its forms is not per se to be considered to be materials. This means that the decision reached in the French court in 1993, cited in paragraph 2.12 of the Opinion, that because designs were provided by the buyer to the manufacturer, the CISG did not apply, should not be followed in subsequent cases. Manufacture of goods according to the buyer's general requirements or specifications is common practice and it would be unfortunate if the CISG did not apply generally to transactions of this nature.

The status of know-how as an ingredient of the manufacturing process, where it enhances the value of the materials supplied by the parties is also preserved. The commentary to the Opinion gives, as examples, know-how which contributes originality, speciality or exclusivity to the goods - usually in the form of industrial or intellectual property rights - such as a patent.

Thus, there are three categories of transactions that may arise. First, there are those where the know-how supplied by a buyer is general in nature or accessory only, in which case the CISG will apply. Secondly, where the know-how does enhance the value of the materials but not substantially, the CISG will still apply. Finally, where the technology supplied is a substantial part of the manufacturing process and it enhances the value of the product, Article 3(1) will operate to exclude the CISG.

No doubt there will still be instances where it will be difficult to determine how the transaction should be categorised.[21] In most cases, however, the Opinion will assist lawyers and their clients to ascertain whether the CISG could or should apply, when entering into and drafting manufacturing or production contracts. The process is also assisted by the clarification of the meaning of substantial part in the Opinion. [page 48]

(b) Turnkey contracts

In relation to Article 3(2), the Opinion states that:

7. Article 3(2) CISG governs mixed contracts. Whether the different obligations as to goods and services are agreed upon in one mixed contract or in several contracts is a matter of contract interpretation.

8. In the interpretation of the parties' agreements relevant factors include, inter alia, the denomination and entire content of the contract, the structure of the price, and the weight given by the parties to the different obligations under the contract.

9. In interpreting the words 'preponderant part' under Article 3(2) CISG, primarily an 'economic value' criterion should be used. An 'essential' criterion should only be considered where the 'economic value' is impossible or inappropriate to apply taking into account the circumstances of the case.

10. 'Preponderant' should not be quantified by predetermined percentages of value; it should be determined on the basis of an overall assessment.

One of the more complex forms of contract that lawyers are asked to negotiate or draft, is the turnkey contract. These can take many forms but they all involve considerable input of labour by the seller, both in the design and manufacture of the product or process as well as in the assembly and installation.[22] Nevertheless, there usually remains an identifiable product which could be categorised as goods.

The commentary to the Opinion says that it remains controversial whether such contracts are covered by the CISG or are excluded because of the operation of Article 3(2) and that a case-by-case analysis for each contract needs to be undertaken. That may be correct. However, the author's experience in dealing with contracts of this kind, is that the labour and other services component has always been predominant, so that an application of paragraphs 7-10 of the Opinion will result in the CISG not applying.

Also, almost universally, such contracts are drafted for the particular transaction and have few standard terms. Specific provisions are usually inserted dealing with matters such as the passing of risk, which would otherwise be covered by the substantive provisions in the CISG. [page 49]

III. COMMENTARY ON ISSUES ARISING UNDER ARTICLES 4 AND 6

The issues that will be covered are:

(1) retention of title clauses and Article 4(2); and
(2) alternative dispute resolution clauses and Article 6.

Article 5, which provides that the Convention does not apply to death or personal injury claims, is well settled and this commentary will not address it.

Articles 4 and 6 are set out below.

Article 4

This 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.

Article 6

The parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions.

1. Retention of title clauses

Article 4(1) says that the Convention is not concerned with matters concerning the validity of the contract or any of its provisions or of usage unless these matters are expressly provided for in the Convention. This makes it plain that issues such as the capacity of the parties, illegality, mistake and the like are not covered by it. Article 4(2) also states that the CISG is not concerned with the effect the contract may have on the property in the goods.

Retention of title clauses or Romalpa clauses, as they are often described in common law countries, are now commonplace in commercial contracts. The essence of these clauses is that property in the goods does not pass to the buyer until payment in full has been received.

A case which has discussed the interplay between Article 4(2) and retention of title clauses most fully is the Australian decision, Roder v Rosedown.[23] There the [page 50] contract between a German seller and an Australian buyer contained a clause to the effect that notwithstanding delivery and the passing of risk, property would not pass until the price for the goods (and for all other goods sold by the seller to the buyer) was paid in full. Until that time, the buyer held the goods as the seller's agent and bailee.

The judge, Van Doussa J, found that the CISG applied to the contract and proceeded to analyse the contractual terms, including the remedies available to the seller as a consequence of the buyer's failure to pay, in accordance with the relevant CISG provisions. In relation to the retention of title clause, the judge held that because of Article 4(2), the Convention is not concerned with the effect a contract may have on the property in the goods sold, and, therefore, that issue would need to be settled under either German or Australian law.

After receiving expert evidence on the law in relation to retention of title clauses in Germany, the judge came to the view that Australian law applied because the goods sold had already been delivered to the buyer in Australia.

Applying German law rather than Australian law may have given rise to a different outcome. Under German law, it is well settled that a retention of title clause results in property not passing until payment, whereas in Australia the position is less certain. In Australia, broadly drafted retention of title clauses have been found not to be effective because they amount to a security interest or a charge on the goods and require registration with the Australian Companies Regulator.

However, in this instance Van Doussa J was able to uphold the validity of the clause under Australian law and, as a consequence, make further findings that the seller was entitled to avoid the contract under Articles 61 and 64 of the CISG.

This decision appears to be an orthodox application of the provisions of the Convention, particularly Article 4(2), and the relevant domestic law. The case was also noted with approval in the more recent US Federal Court decision Usinor Industeel v Leeco Steel Products, Inc (Federal District Court [Northern District Illinois] 28 March 2002). Lindberg J there applied the CISG but looked to US domestic law to determine the validity of the clause retaining title until payment.

However, the Roder decision has been the subject of comment by Professor Ziegal.[24] He has argued that the judge accepted too readily that the CISG would apply at all to a contract where property does not pass until payment in full, although the buyer has possession of the goods. [page 51]

According to Professor Ziegal, the North American position is that default under a retention of title clause is dealt with under personal property security legislation, so that if there is a default in payment, the matter is dealt with as the enforcement of a security and not as a breach of contract. Thus, the CISG would apply only to the sales component of the contract but not to the remedies provisions.

There is much to be said for this, at least where US or Canadian law applies, although Lindberg J did not refer to this approach in his judgment in Usinor. In other countries, where there is a payment default under a retention of title clause, difficulties will remain if there is uncertainty as to how the domestic law will resolve the issue.

2. Alternative dispute resolution clauses

These can take many forms but in the most elaborate form, commercial contracts will contain provisions obliging the parties, when a dispute first arises, to nominate responsible persons to participate in negotiations which, if not successful, are followed by face-to-face meetings between chief executives. If the dispute is still not resolved, there will be provision for mediation and thereafter provision for a formal arbitration.

The parties will have also agreed not to enforce any legal rights they have or might have under the contract, until the dispute resolution process has been exhausted. The mere allegation of a breach by one of the parties is usually sufficient to trigger the operation of the clause.

Some clauses may even provide that the arbitrator determine the matter ex aequo et bono, and not strictly according to law. Alternatively, there may be provision for the dispute to be resolved by expert determination (with no opportunity for review) and not by arbitration.

Are clauses of this kind to be regarded as a partial derogation or variation of the CISG under Article 6? For example, a failure by the seller to perform its obligations would, under Article 49, entitle the buyer to declare the contract avoided. However, a broadly drawn alternative resolution clause may prevent the buyer from so acting, at least until the processes agreed between the parties had been concluded.

The ancillary question is whether Article 6 will be triggered simply by including an alternative resolution clause in the contract, or is an express derogation or variation required? [page 52]

The mere adoption of the law of a Member State as the law of the contract, has not generally been accepted as sufficient to support the implication. However, the majority of the cases cited in the UNCITRAL Digest of Cases on Article 6, where this question has been considered, have concluded that it is possible for the Convention to be excluded, in its entirety, by implication.[25]

Whether the CISG can, by implication, be derogated from or varied in part, as distinct from excluded in full, has not, as far as the author is aware, been the subject of any judicial decision. Where a contracting party has its place of business in a Member State which has made a declaration under Article 96, implication will be insufficient because in that instance Article 6 is subject to the provisions of Article 12. Even where that is not the case, it is doubtful that it is possible to derogate or vary by implication. Therefore, the inclusion of an alternative dispute resolution clause alone would not make it clear which Articles were to be modified and to what extent. These matters would need to be dealt with expressly in the contract.

The only instance where this might not be necessary to expressly vary the CISG is where the parties have agreed to arbitration ex aequo et bono or to expert determination. Then it might be assumed that all of the articles which provide remedies to the parties in the CISG have been excluded.

IV. CONCLUSION

From the standpoint of the Australian lawyer drafting or advising on contracts for the international sale of goods, the principles of international uniformity found in the CISG, are a real benefit. The position is the same when advising clients in relation to disputes that may arise under such contracts.

When it was drafted, a conservative approach was taken as to the areas to be covered by the CISG - essentially only the formation of the contract and the rights and obligations of the parties arising thereunder. That was prudent at that time. However, now that international uniformity has been generally accepted, a case can be made for broadening the scope of the CISG, to embrace some or all of the issues in subparagraphs (a) and (b) of Article 4, which until now have been reserved for the domestic law of Member States. [page 53]


FOOTNOTES

* David Fairlie is a senior dispute resolution partner in the Sydney office of Mallesons Stephen Jaques. He acts for many of the major banks and financial institutions in Australia. He has extensive experience in litigation, both in running large cases and in achieving negotiated solutions. He has also acted in many arbitrations, both domestic and international, for the firm's clients, including its mining and resources clients. Mr Fairlie has been President of the Law Society of New South Wales. He is also a qualified mediator and is currently a Vice-President of the Australian Centre for International Commercial Arbitration.

I would also like to thank Bree Farrugia, a solicitor in our Sydney office, who provided research assistance in relation to some of the topics covered in this paper.

1. Report to the New Zealand Government on New Zealand's proposed acceptance of the CISG (1992), 25.

2. The Australian states enacted uniform Sale of Goods legislation in 1923 modelled on the English Sale of Goods Acts of 1893. The Sale of Goods Acts do not, however, codify the law in this area, and the common law, including equitable principles, continues to apply to the sale of goods. The common law is also state and territory based.

3. Trade Practices Act, section 66A.

4. Bruno Zeller from the School of Law at the Victorian University of Technology, Melbourne has identified 10 Australian cases where the Convention has been referred to in judgments. Only one, the Federal Court decision of Roder Zelt und Hallenkonstruktionen GmBH v Rosedown Park Pty Ltd 13 ACLC 776, appears to contain any detailed analysis of the substantive provisions of the Convention.

5. Generally in Australia, courts do not give advisory opinions, or detailed interlocutory decisions, so that judgments are given only where there has been a full hearing. Court statistics indicate that only 20%-30% of all civil cases are ultimately determined after a full trial. The balance are discontinued, or settled through direct negotiation, mediation and the like.

6. [2001] SASC 15.

7. For example, in GPL Treatment Ltd v Louisiana Pacific Corp 894 P2d 470, the Circuit Court in Oregon apparently refused to allow the plaintiffs to raise the CISG at the last minute on the basis that they had waived their right to rely on it.

8. See the discussion in AGL Victoria Pty Ltd v Lockwood [2003] VSC 453.

9. CLOUT Case No 281 (Koblenz, Germany - 17 September 1993) referred to in UNCITRAL Digest of Case Law on the CISG.

10. [1983] 2 NSW LR 48.

11. [1996] 4 All ER 481.

12. [2000] 2 All ER (Comm) 984.

13. CLOUT Case No 131 Munich, Germany - 8 February 1995.

14. CLOUT Case No 281 Koblenz, Germany - 17 September 1993.

15. J W Carter (1999) 14 Journal of Contract Law 54-71.

16. UNCITRAL Digest of Care Law on the CISG para 3 and CLOUT Case No 328 C2ug, Switzerland - 21 October 1999.

17. Schlechtriem, 1986 Commentary 24.

18. Guide to CISG Article 2 Secretariat Commentary - para 5.

19. John O Honnold, Uniform Law for International Sales under the United Nations Convention (1999, 3rd ed), 46-48.

20. Evidence of that diversity is found in a recent Australian case Seivewright v Brennan [2005] NSWSC 216 where the judge held that the auctioneer was not obliged to sell a property to the highest bidder. Although the auctioneer had accepted the bid, the contract was not concluded until the hammer had fallen.

21. The cases cited at footnote 25 to the Opinion highlight the difficulties of categorisation.

22. Note, for example, the case cited at footnote 40 to the Opinion where there was planning, delivery, assembly, supervision and installation of a cardboard packaging plant.

23. 13 ACLC 776. There is one earlier decision, CLOUT Case No 226 (Koblenz, Germany - 16 January 1992) where the court held that the CISG did not apply to a retention of title clause.

24. Jacob S Ziegel, Review of the Convention on Contracts for the International Sale of Goods (1998), 53-62.

25. The adoption of the law of an Australian state or territory would not be sufficient to exclude the operation of the CISG. By virtue of the Sale of Goods (Vienna Convention) Acts, the Convention has become part of the domestic law and prevails in the case of any inconsistency.


Pace Law School Institute of International Commercial Law - Last updated May 31, 2006
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