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Text
ABSTRACT
The United Nations Convention on Contracts for the International Sale of Goods, 1980
(CISG) creates a uniform law for the international sale of goods. However, textual uniformity
is a necessary but insufficient step towards achieving substantive legal uniformity, since the
formulation and enactment of a uniform legal text carries no guarantee of its subsequent
uniform application in practice. This thesis therefore considers different approaches to the
interpretation of CISG and evaluates their appropriateness for uniform international trade law,
before advancing an interpretative approach based on the concept of internationality and
generally acknowledged principles of commercial law, such as the UNIDROIT Principles.
The analysis offered by the present writer is based on the examination of the nature, scope and
function of Article 7 CISG, which expressly prescribes the direction that CISG's interpretation
and application should follow and whose own interpretation will determine, to a large degree,
the ultimate fate of CISG as a truly uniform code.
Owing to its unique nature and limitations, it is necessary that CISG exist on top of a legal
order that can provide doctrinal support and solutions to practical problems - such as
resolving issues that are governed but not expressly settled by the Convention - in order to
guarantee CISG's functional continuity and development without offending its values of
internationality, uniformity and good faith, as expressed in Article 7(1) CISG and analysed in
this thesis.
It is the opinion of the present writer that CISG is a self-contained body of rules, independent
of and distinct from the different domestic laws. The recourse to rules of private international
law in the interpretation of CISG hinders the search for the elusive goal of uniformity by
producing divergent results. Supported by analysis of the existing doctrine, as well as by case
law, this thesis argues that the necessary legal backdrop for CISG's existence and application
can be provided by general principles of international commercial law, such as those
exemplified by the UNIDROIT Principles. Such a development would in many instances aid in
rendering the textual reference in Article 7(2) CISG to private international law unnecessary; a
positive step towards uniformity.
This thesis also examines certain practical, theoretical and methodological issues concerning
the proper construction and application of CISG as the uniform international sales law.
CHAPTER 1: UNIFORM INTERNATIONAL SALES LAW:
FROM LEX MERCATORIA TO CISG
1. Introduction
1. INTRODUCTION
The United Nations Convention on Contracts for the International Sale of Goods 1980
(CISG)[2] and the process by which it was created has set the standard for the unification of
commercial law in the post-war era.[3] The development of the CISG by the United Nations
Commission on International Trade Law (UNCITRAL), and its formal adoption, during a
Diplomatic Conference in Vienna attended by experts from all parts of the world, managed to
survive the regional and political divisions common in U.N. bodies. The Convention prescribes
a uniform law for the international sale of goods - an area of long standing domestic law in all
countries - seeking to substitute one law for the many legal systems that govern this area.
The CISG came into force in 1988 when eleven States deposited their instruments of
ratification.[4] It has not only drawn an impressively large number of States to join its regime,[5]
but also inspired the creation of the important CLOUT system of standardised reporting of
national decisions through the U.N. This development has set the groundwork in the search
for the elusive goal of uniform legal results on a truly global scale.
The existence of CISG and the concomitant interest generated in its proper
interpretation and application evidence that the international process could indeed produce
uniform rules of substantive law, notwithstanding the limited reach of both of the CISG's
treaty predecessors in the European community and the Bustamente Code in the Americas.
This achievement set in motion a number of efforts in various international fora, and will
probably continue to do so if the efforts of UNCITRAL are any indication. Because of its
nature, uniform international commercial law presents special challenges to those who
interpret it. As stated in its Preamble, the CISG was created "to remove legal barriers in
international trade and promote the development of international trade."
The CISG is an important document, since it establishes a comprehensive code of legal
rules governing the formation of contracts for the international sale of goods, the obligations
of the buyer and seller, remedies for breach of contract and other aspects of the contract. To
accomplish its objectives, it is essential to interpret it properly. The unification of the law on
international sales calls for its common interpretation by different legal systems. Article 7 is the
provision that sets the standards and whose interpretation will determine, to a large degree,
the ultimate fate of the CISG as a truly uniform code. The development and meaning of
Article 7, the article entrusted with providing the direction that CISG's interpretation and
application should follow, is the subject of this work.
In order to obtain a deeper understanding of the nature and scope of CISG, it is
essential to understand the nature and purpose of its founding body, UNCITRAL. Such an
analysis will provide the relevant context of CISG's birth and development in a brave new
world of uniform international trade laws, and the proper direction for its interpretation and
application.
Origin, mandate and composition of UNCITRAL
The United Nations Commission on International Trade Law (UNCITRAL or
Commission) was established by the General Assembly of the United Nations in 1966.[6] In
establishing the Commission, the General Assembly recognised that disparities in national laws
governing international trade created obstacles to the flow of trade, and it regarded
UNCITRAL as the vehicle by which the United Nations could play a more active role in
reducing or removing these obstacles.[7]
The General Assembly gave the Commission the general mandate to further the
progressive harmonisation and unification of the law of international trade. UNCITRAL has
since come to be the core legal body of the United Nations system in the field of international
trade law,[8] with truly universal membership specialising in law reform worldwide for over 30
years. Its creation is seen as the legal response to the globalisation of international trade and its
goal is the progressive harmonisation of the law of international trade.[9] The Commission is
composed of thirty-six member States elected by the General Assembly. Membership is
structured so as to be representative of the world's various geographic regions and its principal
economic and legal systems. Members of the Commission are elected for terms of six years,
with the terms of half the members expiring every three years.[10]
UNCITRAL's projects include the drafting of conventions acceptable world-wide, the
drafting of model laws and rules, the publishing of legal and legislative guides and
recommendations, the procurement of updated information on case law and enactments of
uniform commercial law, the provision of technical assistance in law reform projects, and the
sponsoring of regional and national seminars on uniform commercial law. The fields of
UNCITRAL's operation include Sale of Goods, Arbitration, Electronic Commerce,
Procurement, Negotiable Instruments, Project Finance, Insolvency, Countertrade,
Construction Contracts, Guarantees, Receivables Financing, Letters of Credit and Maritime
Transport.
The methods and work of UNCITRAL
The Commission has established three working groups to perform the substantive
preparatory work on topics within the Commission's programme of work. Each of the working
groups is composed of all member States of the Commission. The Commission carries out its
work at annual sessions, which are held in alternate years at United Nations Headquarters in
New York and at the Vienna International Centre. Each working group of the Commission
typically holds one or two sessions a year, depending on the subject matter to be covered;
these sessions also alternate between New York and Vienna. In addition to member States, all
States that are not members of the Commission, as well as interested international
organisations, are invited to attend sessions of the Commission and of its working groups as
observers. Observers are permitted to participate in discussions at sessions of UNCITRAL and
its working groups to the same extent as members.[11]
The areas in which the Commission has worked or is working and the major results of that
work are:
A. International sale of goods and related transactions
B. International transport of goods
C. International commercial arbitration and conciliation
D. Public procurement
E. Construction contracts
F. International payments
G. Electronic commerce
H. Cross-border insolvency
I. Other UNCITRAL products
The UNCITRAL Secretariat has established a system for collecting and disseminating
information on court decisions and arbitral awards relating to the Conventions and Model
Laws that have emanated from the work of the Commission. The purpose of the system is to
promote international awareness of the legal texts formulated by the Commission and to
facilitate uniform interpretation and application of those texts.[31] The importance of the system
to the CISG's interpretation is highlighted in subsequent chapters of this work.[32]
Final remarks
Even a cursory examination of UNCITRAL's efforts, such as the one above, reveals
the renewed vigour with which the problem of unification of international trade law is being
tackled and the importance that is placed upon that task. Although the task is not new, it
probably has its best chance of success today, due to its temporal and contextual placement
within the recent burst of unifying legislative activity at the international level. More
specifically, international sales law has been around longer than any of the bodies now
attempting to codify it.
Today, information technology and Internet services are changing the face not only of
consumer practices, but also that of commercial ones. The dynamic growth of business-to-business electronic commerce has opened wide the road to a single, truly global market like
never before. Merchants can now buy and sell in a bigger market and with greater speed. It is
arguable that the volume of business-to-business electronic commerce conducted today will
only grow in such an environment. Uniform international sales law has a vital role to play in
creating the legal net for commercial practices in this new context and in accomodating
smoother, less expensive amd more expedient transactions and dispute resolution. The new
element to this legal recipe is the widespread participation in its drafting, which gives the
CISG its legitimacy and importance.
The idea of a unified international trade law is not novel. In fact, it is a revival of an
ancient trend towards unification that can be traced to the Middle Ages and which had given
rise to the "law merchant." Modern unifying attempts in the field of international sales also
pre-date the CISG, which is the latest modern endeavour in this field to gain the approval of a
United Nations Diplomatic Conference. In effect, although the CISG represents the new face
of international sales law, its genealogy is a particularly long and informative one. Long
because it dates to ancient times of flourishing trade in the then known world, and informative
because it reveals the intrinsic legal problems of international trade. In order to understand the
need for modern uniform law and, further, to evaluate its prospects for success or failure, it is
necessary to outline the evolution of this trend from its ancient predecessors to its modern
shape and form.
As such, a historical account of the development of international trade law, from the
time of the old lex mercatoria through to the new lex mercatoria and the evolution of CISG is
not only unavoidable but also necessary.
2. UNIFICATION OF INTERNATIONAL SALES LAW
Commercial law is largely concerned with international trade. The existence of
different legal systems around the world acts as a hindrance to the smooth operation of
international trade, as the diversity of national laws produces conflict and legal uncertainty.
Consistency and certainty in the law are not merely an indulgence for the benefit of lawyers;
they are essential elements to parties attempting to enter into a contractual agreement.
There is little empirical research into the extent to which contract law plays a role in the
commercial decision making process. What evidence there is suggests that business people
were prone to make contracts and to solve contractual disputes without reference or with
minimal reference to the applicable legal principles.[33] There were various reasons for this:
There is no suggestion that contract law should be abandoned because some - but
probably not all - business people would prefer not to engage in meticulous legal planning of
their dealings. A strong argument can, however, be made for making commercial law simpler
and more accessible - and its application less expensive once a dispute between contracting
parties has arisen. Choice of law clauses are usually inserted in most contracts, but they can
only act as a "partial conflict avoidance device."[34] From a businessman's point of view, conflict avoidance is far better than conflict solution. It is by adopting an autonomous and uniform
legal regime for all international transactions, irrespective of the locus in quo, that legal
predictability and security can be achieved and the problems created by diverse national laws
can be overcome with a greater degree of certainty.[35] Professor Schmitthoff long ago declared
that only a uniform law could act as "total conflict avoidance device."[36]
Since the beginning of this century [37] efforts have been made to overcome the nationality of
commercial law, which originated from the emergence of national States in Europe and from
the enactment of the first codes.[38] Lord Justice Kennedy wrote extra-judicially in 1909:
"The certainty of enormous gain to civilised mankind from the unification of
law needs no exposition. Conceive the security and the peace of mind of the
ship-owner, the banker, or the merchant who knows that in regard to his
transactions in a foreign country the law of contract, of movable property,
and of civil wrongs is practically identical with that of his own country. ...
But I do not think that the advocate of the unification of law is obligated to
rely solely upon such material considerations, important as they are. The
resulting moral gain would be considerable. A common forum is an
instrument for the peaceful settlement of disputes which might otherwise
breed animosity and violence
[i]f the individuals who compose each
civilised nation were by the unification of law provided, in regard to their
private differences or disputes abroad with individuals of any other nation,
not indeed with a common forum (for that is an impossibility), but with a
common system of justice in every forum, administered upon practically
identical principles, a neighbourly feeling, a sincere sentiment of human
solidarity (if I may be allowed the phrase) would thereby gradually be
engendered amongst us all - a step onward to the far-off fulfilment of the
divine message, 'On earth peace, goodwill toward men'."[39]
The Industrial Revolution had brought about industrial growth and this, in turn,
created the need for a new economic policy amongst States in order to maximise the utilisation
of resources and take advantage of the new capabilities of production.[40] This new economic
policy required "a correspondent legislative policy able to regulate the economic relationships:
this policy, not unlike the economic policy, had to cross national borders."[41] It is due to these
economic needs that unification or harmonisation of commercial law has acquired such central
importance. It is not sufficient, however, to obtain uniformity of laws. It is equally important
for the long-term success of those laws to achieve uniformity of their interpretation by the
national courts or tribunals applying them.
The history of the efforts to unify international trade law has revealed not only the
widespread desire of the participants in those efforts to successfully complete this project -
evidenced by their continual discussion of the goals and methods of the project - but also the
fact that any successful unification would both require and facilitate the formation of an
international community through the use of a common legal language. The dual goals of
promoting international commerce and promoting one uniform legal context that can facilitate
it have often been articulated.[42] What became apparent among commentators was not only that
a successful unification of the international commercial law would necessarily entail the
promotion of an international community,[43] but also that a sense of commonality was helpful in
order to achieve further development of the law of international trade. R.H. Graveson's
poignant remark, discussing the preconditions for unification, is on target:
"Unification is likely to be most successful among countries that share a desire for
unification of their legal systems for political, racial or other reasons, or even without
such conscious desire if there exists a real social or economic need for unification."[44] It is serendipitous, but also quite logical, that the needs of international commerce
would also promote a widespread sense of shared purpose and understanding. This became
evident quite early, during the modern times of the unification work taking place in the late
nineteenth and early twentieth centuries. This realisation assisted the unification movement in
Western Europe in the late nineteenth and early twentieth centuries by emphasising the goal of
international harmony. The World Wars intensified this goal.[45] Unification of law is political in
nature and requires an atmosphere of conciliation to foster it. It is not accidental that
unification efforts in other parts of the world also accelerated after the wars.[46] In the United
Nations, arguments for unification initially tended to focus on economic indicators and
emphasised the economic benefits to be gained by the unification of trade law,[47] especially for
the developing nations. The central idea of such arguments was the removal of obstacles,
including legal obstacles, to international trade. This was seen as benefiting developing
countries, whose economies depended largely on their foreign trade and would, with freer
trade, move faster towards economic development. Developed countries would benefit as
well, since their trade would expand proportionately.[48]
However, the idea that the activity of international trade could itself provide a basis for
friendly relations between nations, if it were structured by a common set of rules of equality,
soon took the main stage during the debates of the General Assembly.[49] The statement of the
delegate for Romania, during the discussion of the proposal to create UNCITRAL, is imbued
with such feeling and is indicative of the tone prevailing in discussions relating to the
unification of trade law thereafter:
"The development of international trade, therefore, would meet real needs of the
international community; it would be an essential contribution to the efforts to create
... conditions of stability and well-being, which were necessary for peaceful and
friendly relations among nations based on respect for the principle of equal rights and
self-determination of peoples. Accordingly, it was necessary to establish rules that
would facilitate commercial transactions on the basis of respect for sovereignty and
national independence, non-intervention in the domestic affairs of States and mutual
benefit ..."[50] It had now become apparent to those delegates active in the United Nations that the dual goals
of developing international trade and promoting world harmony corresponded well with the
mission of that organisation.[51]
3. THE OLD LEX MERCATORIA
It has been noted earlier in this chapter that the idea of a unified international trade law
is not novel. Indeed it is the revival of an ancient [52] trend towards unification that can be traced
to the Middle Ages and which had given rise to the "law merchant."[53] In order to understand
the need for modern uniform law [54] and, further, to evaluate its prospects for success or failure,
it is necessary to outline the evolution of this trend from its ancient predecessors to its modern
shape and form.
Historically, international trade law developed in three stages: the old "law merchant," its
integration into municipal systems of law and the emergence of the new "law merchant."[55]
In the Middle Ages, commercial law appeared in the form of the "law merchant"-- "a
body of truly international customary rules governing the cosmopolitan community of
international merchants who travelled through the civilised world, from port to port and fair to
fair,"[56] wherever business offered itself. There were five elements, which characterised the old lex mercatoria [57] and helped preserve its uniformity:
4. THE NATIONALISATION OF COMMERCIAL LAW
The second stage of the development of international trade law is marked by the
incorporation of the "law merchant" into municipal systems of law in the eighteenth and
nineteenth centuries, as the idea of national sovereignty acquired prominence. It is interesting
to note, however, that this process of incorporation differed in motives and methods of
implementation.
In France, the Code de Commerce, one of the five Napoleonic codes,[64] was enacted in
1807 underlining the concept of freedom of contract and asserting the notion of ownership as
an absolute right. It has been said that the French codification is a result of a victorious
political movement, since the merchants and other professionals were prominent, and aligned
with the winners, in the political events of the time.[65]
In Germany, on the other hand, the publication of a Uniform Commercial Code in 1861,
adopted by most members of the German Confederation, has been described as "the legal
reflection of the struggle for political unity."[66] The creation of uniform law here being seen as
an act that could give impetus to the efforts for political unification.[67]
Finally, it has been suggested that the motives for the incorporation of the "law
merchant" into the English common law in the middle of the eighteenth century, which was
achieved through the simplification of commercial procedure and the harmonisation of
commercial custom and the common law, were economic rather than political.[68]
This integration of the "law merchant" into national systems of law initially may have benefited
the nations which effected it, but it has been said that it also brought about the significant and
negative consequences of nationalism [69] and intellectual isolation [70] in legal thought.
Despite the integration of commercial law into national systems of law, the origins of this
branch of the law in the old "law merchant" and the universality of some of its fundamental
elements were still visible to some jurists, like Lord Mansfield: "The mercantile law, in this
respect is the same all over the world. For from the same premises, the same conclusions of
reason and justice must universally be the same."[71] It is arguable that the modern development
of international trade law has justified this statement.[72]
5. THE NEW LEX MERCATORIA
The third stage of the evolution is characterised by the increased involvement of the United
Nations and the activities of specialised international organisations (such as UNCITRAL,
UNIDROIT and the International Chamber of Commerce) which signal a return to a universal
concept of trade law that characterised the old "law merchant." The new general trend of
commercial law is to move away from the restrictions of national law and towards the creation
of an autonomous body of "international conception of commercial law which represents a
common platform for the jurists of the East and West
[thus] facilitating co-operation
between capitalist and socialist countries."[73]
This development has been welcomed and hailed as
The United Nations Convention on Contracts for the International Sale of Goods (Vienna)
is a case in point and the subject of the analysis that will follow. Fundamental differences may
still exist between State-planned and market economies, but there are also some similarities in
the legal technique of international trade transactions.[75] As it has been succinctly put:
And it seems to be a truism to state that:
"the law governing trade transactions is neither capitalist, nor socialist; it is a means to
an end, and therefore the fact that the beneficiaries of such transactions are different in
this or that country is no obstacle to the development of international trade. The law of
international trade is based on the general principles accepted in the entire world."[77] There is a distinct flavour reminiscent of Lord Mansfield's views in the above statement.
The new "law merchant", common to both capitalist and socialist economies, is being
established with the participation of all sides, thus giving international commercial law its best
chance ever to achieve uniformity. There have long been many loud calls for the creation of a
"new law merchant"[78] in order to overcome the "anarchy upon which international relationships
are based."[79] At the end of the 1920's, Ernst Rabel [80] suggested to the Governing Council of the
International Institute for the Unification of Private Law (UNIDROIT) that it start the work
for the unification of the law of international sales of goods.[81] It has to be noted, however, that
while the old "law merchant" had developed from usage and practice, the new "law merchant"
is the result of careful and, at times, political deliberations and compromises by large
international organisations and diplomats. The repercussions of such action, which are not
always benign, are examined in some detail in this thesis.
UNIDROIT decided to appoint a commission with the task of working towards that goal and,
in 1935, the first draft of a uniform law on the sale of goods was produced.[82] The events of
World War II interrupted the development of this work, but in 1951, a new draft uniform law
was presented in a conference at The Hague.[83] Work toward a unified sales law picked up
momentum and more drafts followed.[84] Eventually, on April 1964, twenty-eight States took
part in a Diplomatic Conference held at The Hague and approved two Conventions, creating
the Uniform Law on the International Sale of Goods (ULIS),[85] and the Uniform Law on the
Formation of Contracts for the International Sale of Goods (ULF).[86]
Those two Hague Conventions did not achieve the desired result of unification of sales
law.[87] This failure has been largely attributed to the limited role played by Third World and
Socialist countries in the contributions towards the Conventions.[88] The efforts for unification
of the substantive law of sales on an international level continued; however, and, in 1966, the
United Nations established the United Nations Commission on International Trade Law
(UNCITRAL), giving it the task of promoting the progressive harmonisation and unification
of international trade law. Thus, signalling a new approach to the formulation of modern
international trade law.[89]
"The [CISG] resulted from work instituted in 1968 by the United Nations Commission on
International Trade Law. Ten years of work in UNCITRAL produced the 1978 UNCITRAL
Draft Convention."[90] This draft (with a Commentary on it by the UNCITRAL Secretariat) was laid before a Diplomatic Conference held in Vienna in 1980, which unanimously approved the
current uniform rules."[91] 6. THE U.N. CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS (1980) - CISG
(a) Summary of UNCITRAL's Legislative History of the CISG
The legislative history of the CISG is of great importance; not merely as the starting point
of reference to the law it promotes, but also as a crucial tool of understanding the meaning of
that law. In determining the meaning of an international treaty, one of the rules of the U.N.
Convention on the Law of Treaties (1969) is that recourse may be had to supplementary
means of interpretation, including the preparatory work of the treaty.[92] The principal
commentator of the CISG has correctly observed that "[w]hen important and difficult issues of
interpretation are at stake, diligent counsel and courts will need to consult the [CISG's]
legislative history. In some cases this can be decisive."[93]
The most recent segment of the legislative history of the CISG is reported in The United
Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March-11
April 1980.[94] UNCITRAL Yearbooks report earlier stages of the legislative history of the
Convention.[95]
(b) The Background to the UNCITRAL Development of the CISG [96]
The uniform rules in existence prior to the CISG were rooted in the 1964 Hague
Conventions sponsored by the International Institute for the Unification of Private Law
(UNIDROIT),[97] which, "in spite of their fundamental importance, failed to receive substantial
acceptance outside Western Europe."[98]
The CISG was made in three stages:
The records of stages (1) and (2) are reported in nine UNCITRAL Yearbooks (Yearbooks I
(1968-1970) through IX (1978)). However, the content of these Yearbooks can be difficult to
access: none is adequately indexed; nor does their sequence of presentation of information
necessarily follow the sequence of work by UNCITRAL and its Working Groups.[102] In addition,
during the decade of UNCITRAL's preparation of the 1978 draft for a Sales Convention
consensus was reached on each provision without ever taking a formal vote. Summaries of the
discussions were faithfully recorded, but the lack of votes on proposals that were not explicitly
accepted or rejected in reaching consensus could "blur contours of the decision."[103]
Upon completion of the 1978 Draft, the Secretariat prepared a Commentary on it that
summarised the thinking that led to this text.[105] The 1978 Draft was the working document
presented to the delegates who attended the 1980 Vienna Diplomatic Conference.[106] The
Vienna Diplomatic Conference made a large number of minor changes to the 1978 Draft but
"very few of substance."[107] This Commentary is the closest counterpart to an Official
Commentary on this Convention.[108]
(c) Introduction to the CISG
The end product of the activity outlined above is, in its complete name, the United
Nations Convention on Contracts for the International Sale of Goods, Vienna (1980).[109] The
reason for its conception and preparation by the United Nations Commission on International
Trade Law and eventual adoption by a diplomatic conference on 11 April 1980, was the
provision of a uniform text of law for international sales of goods. The CISG combines the
subject matter of the two 1964 Hague Conventions. They had failed to receive substantial
acceptance outside Western Europe and had received widespread criticism of their provisions
as reflecting primarily the legal traditions and economic realities of continental Western
Europe,[110] the region that had most actively contributed to their preparation.
UNCITRAL's success in preparing a Convention with wider acceptability is evidenced
by the fact that the original eleven States for which the Convention came into force on 1
January 1988 included States from every geographical region, every stage of economic
development and every major legal, social and economic system.
The original eleven States were: Argentina, China, Egypt, France, Hungary, Italy, Lesotho,
Syria, United States, Yugoslavia and Zambia. As of 1 February 2001, the UN Treaty Section
reports that 58 States have adopted the CISG.[111]
The text of CISG is divided into four parts:
Following is a quick overview of the structure and scope of the CISG's provisions that
can equip the reader with the minimum requisite information of the CISG's substantive
content, before the main issue of its interpretation can be discussed in detail. The basic
knowledge of the CISG's provisions will be useful to the reader not only in providing an
overall picture of the CISG as a whole but, more importantly, in enabling the reader to follow
some of the arguments that the present writer develops using certain CISG provisions to
support his thesis.
PART I. Sphere of application and general provisions
(i) Sphere of application
The articles on its scope of application state both what is included in the coverage of
CISG and what is excluded from it. The CISG applies to contracts of sale of goods between
parties whose places of business are in different States and either both of those States are
Contracting States,[112] or the rules of private international law lead to the law of a Contracting
State.[113] The CISG governs contracts for international sales only, and Article 3 distinguishes
such contracts of sale from contracts for services in two respects. "Contracts for the supply of
goods to be manufactured or produced" are considered to be sales "unless the party who
orders the goods undertakes to supply a substantial part of the materials necessary for their
manufacture or production."[114] In addition, when the "preponderant part of the obligations of
the party who furnishes the goods consists in the supply of labour or other services," the CISG
does not apply.[115] The CISG contains a list of types of sales that are excluded from its
application, either because of the purpose of the sale,[116] the nature of the sale,[117] or the nature of
the goods.[118] In many States, some or all of such sales are governed by special rules reflecting
their special nature.
It is made clear by Article 4 that the subject matter of CISG is restricted to "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 provided in this Convention,
it is not concerned with the validity of the contract,[119] or the effect which the contract may have
on the property in the goods sold.[120] Nor is the CISG concerned with the liability of the seller
for death or personal injury caused by the goods to any person.[121]
(ii) The principle of "party autonomy"
The CISG contains an express recognition of the basic principle of contractual freedom
in the international sale of goods. Article 6 states that the parties to a contract "may exclude
the application of this Convention or ... derogate from or vary the effect of any of its
provisions."[122] The principle of party autonomy is central to the philosophy adopted in CISG
and emphasises the institutional equality between buyers and sellers of different Contracting
States that it attempts to establish in its text. The exact boundaries of this principle are,
however, sometimes difficult to define. On point, one commentator has noted that the
statement "unless otherwise expressly provided in this Convention, it is not concerned with ...
the validity of the contract," in Article 4 CISG may provide a restriction on the freedom of
contract granted under Article 6 CISG.[123] The same commentator has called attention to an
important cross-reference between CISG Articles 4 and 6:
"Article 6 purports to give the parties an unqualified power to vary the effect of the
Convention by agreement. On the other hand, article 4 makes it clear that, absent a
contrary provision, the Convention does not affect any rule of domestic law dealing
with the 'validity' of a contract provision. Taken together, articles 6 and 4 create a
tripartite hierarchy, with domestic law on validity at the top, the agreement of the
parties in the middle, and the Convention at the bottom. The domestic law on validity
continues to control the agreement of the parties, and both control the Convention."[124]
There may be additional restrictions on the freedom of contract of the parties,
notwithstanding the sweeping language of Article 6. For instance, it is doubtful whether the
autonomy conferred upon the parties could be used by them to trump the clear instruction
given to courts by Art. 28 CISG. Article 28 considers the extent to which a national court is
required to enter a judgment for specific performance of an obligation arising under this
Convention. It provides that a court is not bound to enter a judgment providing for specific
performance unless the court could do so under its own law in respect of similar contracts of
sale not governed by this Convention, e.g., domestic contracts of sale.
(iii) Interpretation of CISG
The adoption of the CISG is only the preliminary step towards the ultimate goal of
unification of the law governing the international sale of goods. The area where the battle for
international unification will be fought and won, or lost, is the interpretation of the CISG's
provisions. Only if the CISG is interpreted in a consistent manner in all legal systems that have
adopted it, will the effort put into its drafting be worth anything.
It is natural that disputes will arise as to the meaning and application of the CISG's provisions.
The CISG comes, however, with its own, in-built interpretation rules. Article 7, the article of
the greatest interest to us, directs all users that in the interpretation of CISG "regard is to be
had to its international character and to the need to promote uniformity in its application and
the observance of good faith in international trade." Further, users of CISG are told that
questions concerning matters governed by the CISG which are not expressly settled in it, "are
to be settled in conformity with the general principles" on which the CISG is based, or in the
absence of such principles, "in conformity with the law applicable by virtue of the rules of
private international law."[125]
Matters "governed by the CISG which are not expressly settled in it" are issues to
which CISG applies but which it does not expressly resolve; i.e., they are gaps praeter legem,
as opposed to gaps intra legem. Thus, they are matters that are excluded from the scope of
CISG (such as the matters discussed in CISG Arts. 2, 3, 4 and 5). This thesis deals with the
proper application of the gap-filling procedure outlined in Art. 7(2) CISG vis-à-vis gaps
praeter legem, as it is only with this type of gap that Art. 7(2) CISG is concerned.
It is arguable that the principle of party autonomy can impact on the proper function of
the interpretation provisions in Article 7. According to Article 6, the parties may exclude the
application of CISG or, subject to Article 12, derogate from or vary the effect of any of its
provisions. Does this mean that the parties to a contract of sale governed by CISG may
exclude the application of the interpretative provisions of the Convention, which are
embedded in Article 7? The question is not merely a theoretical one, and the answer to it could
have an important impact on the application of the CISG.
The present writer argues throughout this thesis that the CISG, even after its
incorporation into the various domestic legal systems, remains an autonomous body of law,
intended to replace all the rules previously governing matters within its scope, whether
deriving from statute or from case law. It is clear in the text of the Convention, however, that
Article 6 expressly permits the contracting parties to derogate from or vary the effect of "any
of its provisions." Since Article 7 is one of the Convention's provisions, it is arguable that the
parties could actually derogate from, or exclude the application of, Article 7 by agreeing on a
different set of rules of interpretation. It must be noted that such action jeopardises uniformity
in the CISG's application, but in this instance Article 6 does that with respect to provisions of
the Convention the parties are authorised to derogate from or vary. The principle of party
autonomy is the paramount principle in the CISG. If Article 7 is also addressed to the parties,
as some commentators have argued that it is,[126] then that provision may be excluded by the
contracting parties under Article 6. This would be an unwelcome result because, in practice, it
would hinder the uniformity of interpretation.
The main theoretical difficulty with the above argument is that, in effect, it implies that the
interpreters of CISG are not only the judges, or arbitrators, but the contracting parties as well.
This point is controversial, and there are practical and theoretical objections to it. The
theoretical objection is that the statement seems to obliterate the distinction between
interpretation by the court and performance of the contract by the parties. For instance, it is
arguable that the parties could not use Article 6 to derogate from or do away with provisions
that are not addressed to them, such as the provisions in Part IV of CISG, which are addressed
to States and concern certain declarations and reservations that can only be made by States
vis-à-vis CISG's ratification and application.
Another argument against allowing parties to do away with Article 7 via the autonomy
given to them in Article 6 also carries some merit. The essence of this argument is that "any
legislation has to be interpreted in accordance with the criteria specifically laid down in it or
generally adopted within the legal system from which it emanates."[127] This approach accepts
that the parties to an international sales contract are free to choose between the application of
CISG and the application of a particular domestic law. Once the contracting parties have
accepted that their contract of sale is to be governed by CISG, however, it is said that the
provisions of CISG must be applied in accordance with the interpretation established in Article
7.
(iv) Interpretation of the contract; usages
The CISG contains provisions for the interpretation of statements and conduct of a
party in the context of the formation of the contract or its implementation.[128] The parties to a
contract governed by the CISG are "bound by any usage to which they have agreed and by any
practices which they have established between themselves."[129] Any usage of which the parties
"knew or ought to have known and which in international trade is widely known to, and
regularly observed by, parties to contracts of the type involved in the particular trade
concerned" may also be binding on the parties to a contract of sale governed by CISG.[130]
(v) Form of the contract
The CISG does not subject the contract of sale to any requirement as to form, such as
writing.[131] If the contract is in writing and it contains a provision requiring any modification or
termination by agreement to be in writing, however, Article 29 provides that the contract may
not be otherwise modified or terminated by agreement. The only exception is that "a party may
be precluded by his conduct from asserting such a provision to the extent that the other person
has relied on that conduct."[132]
PART II. Formation of the contract
Part II of the CISG deals with a number of questions that arise in the formation of the
contract by the exchange of an offer and an acceptance. When the formation of the contract
takes place in this manner, the contract is concluded when the acceptance of the offer becomes
effective.[133]
In order for a proposal for concluding a contract to constitute an offer, it must be
addressed to one or more specific persons and it must be sufficiently definite.[134] A proposal is
deemed to be "sufficiently definite, if it indicates the goods and expressly or implicitly fixes or
makes provision for determining the quantity and the price."[135] The CISG takes a middle
position between the doctrine of the revocability of the offer until acceptance and its general
irrevocability for some period of time. The general rule in CISG is that an offer may be
revoked; however, the revocation must reach the offeree before he has dispatched an
acceptance.[136] Moreover, an offer cannot be revoked if it indicates that it is irrevocable, which
it may do by stating a fixed time for acceptance or otherwise.[137] Furthermore, an offer may not
be revoked if it was reasonable for the offeree to rely on the offer as being irrevocable and the
offeree has acted in reliance on the offer.[138]
Acceptance of an offer may be made by means of a statement or other conduct of the
offeree indicating assent to the offer that is communicated to the offeror; however, in some
cases, the acceptance may consist of performing an act, such as dispatch of the goods or
payment of the price; such an act would normally be effective as an acceptance the moment
the act was performed.[139]
In the frequently problematic situation in contract formation, where the offeree's reply
to an offer purports to be an acceptance but contains additional or different terms, the CISG
provides that, if the additional or different terms "do not materially alter the terms of the
offer,"[140] the reply constitutes an acceptance, unless the offeror "without undue delay, objects
orally to the discrepancy or dispatches a notice to that effect."[141] If the offeror does not object,
the terms of the contract are the terms of the offer with the modifications contained in the
acceptance. If the additional or different terms do materially alter the terms of the contract,
the reply constitutes a counter.[142]
PART III. Sale of goods
(i) Obligations of the seller
The general obligations of the seller are "to deliver the goods, hand over any
documents relating to them and transfer the property in the goods, as required by the contract
and this Convention."[143] The CISG provides supplementary rules for use in the absence of
contractual agreement as to when, where and how the seller must perform these obligations.[144]
The CISG provides a number of rules that implement the seller's obligations in respect
of the quality of the goods. In general, the seller must deliver goods that are "of the quantity,
quality and description required by the contract and which are contained or packaged in the
manner required by the contract."[145] One set of rules of particular importance in international
sales of goods involves the seller's obligation to deliver goods that are "free from any right or
claim of a third party,"[146] including rights based on industrial property or other intellectual
property.[147]
In connection with the seller's obligations in regard to the quality of the goods, CISG contains
provisions on the buyer's obligation to inspect the goods "within as short a period as is
practicable in the circumstances."[148] He must give a sufficiently specific notice of any lack of
conformity with the contract "within a reasonable time after he has discovered it or ought to
have discovered it;"[149] at the latest, "within a period of two years from the date on which the
goods were actually handed over to the buyer, unless this time limit is inconsistent with a
contractual period of guarantee."[150]
(ii) Obligations of the buyer
Compared to the obligations of the seller, the general obligations of the buyer are less
extensive and relatively simple. Article 53 of the CISG states that the buyer must simply "pay
the price for the goods and take delivery of them as required by the contract and this
Convention." The CISG provides supplementary rules for use in the absence of contractual
agreement as to how the price is to be determined and where and when the buyer should
perform his obligations to pay the price,[151] as well as defining the obligation to take delivery.[152]
(iii) Remedies for breach of contract
The remedies for breach of contract are similar for both buyer and seller. If all the
required conditions are fulfilled, the aggrieved party may require performance of the other
party's obligations, claim damages or avoid the contract. The remedies of the buyer for breach
of contract by the seller are set forth in connection with the obligations of the seller[153] and the
remedies of the seller are set forth in connection with the obligations of the buyer.[154] The buyer
also has the right to reduce the price where the goods delivered do not conform to the
contract.[155] Other remedial provisions are provided in Chapter V of Part III of the CISG,
"Provisions Common to the Obligations of the Seller and of the Buyer," several of which are
discussed below.
Among the more important limitations on the right of an aggrieved party to avoid the
contract is the concept of "fundamental breach." For a breach of contract to be fundamental, it
must result "in such detriment to the other party as substantially to deprive him of what he is
entitled to expect under the contract, unless the party in breach did not foresee and a
reasonable person of the same kind in the same circumstances would not have foreseen such a
result."[156] For example, the buyer can require the delivery of substitute goods only if the goods
delivered were not in conformity with the contract and the lack of conformity constituted a
fundamental breach of contract.[157] The existence of a fundamental breach is one of the two
circumstances that justify a declaration of avoidance of a contract by the aggrieved party.[158]
The contract of sale can be avoided in one other situation only; in the case of non-delivery of the goods by the seller, or non-payment of the price or failure to take delivery by
the buyer.[159]
Other remedies may be restricted by special circumstances. For example, if the goods
do not conform to the contract, the buyer may require the seller to "remedy the lack of
conformity by repair, unless this is unreasonable having regard to all the circumstances."[160] A
party cannot recover damages that he could have mitigated by taking the proper measures.[161] A
party may be exempted from paying damages by virtue of "an impediment beyond his
control."[162]
(iv) Passing of risk
The CISG contains rules for contracts of sale that do not contain a relevant provision
and involve either carriage of the goods[163] or goods sold while in transit.[164] In all other cases, the
risk passes to the buyer when "he takes over the goods or ... from the time when the goods
are placed at his disposal and he commits a breach of contract by failing to take delivery,"
whichever comes first.[165] If the contract relates to goods that are not then identified, they must
be identified to the contract before they can be considered to be placed at "the disposal of the
buyer" and the risk of their loss can be considered to have passed to him.[166]
Parties to an international sales contract usually regulate the issue of the passing of the
risk in their contract either by an express provision or by the use of a trade term. The
provisions of the CISG on delivery obligations "only appl[y] in the absence of contrary
agreement between the parties. In practice, the agreement will spell out the seller's delivery
obligations quite precisely by adopting an established shipment term (e.g., FOB, CIF) and less
frequently by incorporating the INCOTERMS of the International Chamber of Commerce
...".[167] The Vienna Convention does not purport to define such terms. Professor Honnold has
explained that one difficulty is "the need to modernize and revise detailed trade terms more
frequently than the life-span one may expect from a basic international convention."[168]
It is common international practice for international contracts for sale to contain
standard shipping and delivery terms to denote the extent of the parties' contractual obligations
under the agreement as well as denoting the allocation of risk of loss between the parties.
Even the most common terms, such as FOB or CIF, do not, however, necessarily have the
same meaning in different ports or centres of trade. In an attempt to end this confusion, the
International Chamber of Commerce has, over the years, published lists of International
Commercial Terms, known as INCOTERMS. INCOTERMS were first published in 1936 and
have been amended and adjusted on several occasions to suit the development of technology
with subsequent revisions and additions made in 1953, 1967, 1980 and 1990. The most recent
edition is INCOTERMS (2000).[169] Incoterms are easily incorporated into trade agreements by
including a clause to the effect that the contract is governed by the provisions of
INCOTERMS. It has been stated that the main advantage of using INCOTERMS is
Note, however, that the question of the underlying substantive law may also influence
the choice of shipping terms. For example, although the CISG does not set out shipping terms,
and therefore, the parties are free to designate their own terms, the domestic law of the United
States defines shipping terms. In the case where the United States law would apply, the parties
would have to carefully draft the agreements to avoid conflicts between the substantive law
and the INCOTERMS.
Having been drafted "as a set of rules independent of a particular area of trade, the
INCOTERMS only deal with [part of the] primary obligations imposed on a seller and buyer
in the context of international contracts for the sale of goods."[171] The INCOTERMS do not
contain any detailed provisions on delivery times or on the buyer's obligation to pay the price.
The INCOTERMS do not regulate the conclusion of the contract of sale either, nor the issue
of title, the exemption from a party's obligation to perform and the consequences of failures of
performance. In the past, these aspects always had to be dealt with by applying the law which
the governing Private International Law referred to. This resulted in a combination of the
INCOTERMS having been drafted for internationally uniform interpretation and national sales
law. "Although the INCOTERMS have been applied for decades, there is still no generally
acknowledged legal opinion as to their legal [nature] and [the] basis for their operation."[172]
Starting points have been and are still being sought among customary law, usages, objective
rules for interpretation, standard business conditions, soft law and lex mercatoria.[173] The
function of a uniform law that prescribes a statutory norm is not the same as that of standard
definitions which the parties may voluntarily adopt. In practice, however, the INCOTERMS as
well as the CISG are of fundamental significance for international transactions. The
combination of both sets of rules raises numerous issues concerning their co-existence and
proper application. Geared towards dealing with these issues is a "Roadmap" containing
typical elements of export transportation and responsibilities under INCOTERMS (1990),
presented on the Pace Law website and edited by Professor Albert Kritzer, to help parties who
wish to apply the CISG in tandem with INCOTERMS.[174]
Since its adoption by an ever-increasing number of States, the CISG has continued to
replace national sales laws. As far as the CISG is applicable, the INCOTERMS are now no
longer embedded in a national sales law. Instead, their application has to take consideration of
the CISG which according to Article 7 equally pursues uniform application.[175] The
INCOTERMS alter and supplement the provisions of the CISG. The possibility to alter and
supplement the provisions of the CISG is principally provided for by Articles 6 and 9.
Therefore, within the scope of application of the CISG, these articles should form the starting
point for interpretation of the operation of the INCOTERMS.
(v) Suspension of performance and anticipatory breach
The CISG provides the parties with the right to suspend the performance of their own
obligations if, prior to the date on which performance is due, it becomes apparent that one of
the parties "will not perform a substantial part of his obligations."[176] It also provides the right to
avoid the contract if "it is clear that one of the parties will commit a fundamental breach of
contract."[177]
(vi) Exemption from liability to pay damages
A party is exempted from paying damages for failure to perform any of his obligations
if he proves that "the failure was due to an impediment beyond his control and that he could
not reasonably be expected to have taken the impediment into account at the time of the
conclusion of the contract or to have avoided or overcome it or its consequences."[178] This
exemption may also apply if the failure is due to the failure of a third person whom he has
engaged to perform the whole or a part of the contract.[179] However, the party invoking this
provision is subject to any other remedy available in CISG, including reduction of the price, if
the goods were defective in some way.[180]
(vii) Preservation of the goods
The CISG imposes on both parties the duty to preserve any goods in their possession
belonging to the other party, with an entitlement to reimbursement by the other party for their
reasonable expenses in performing such duty.[181] Under certain circumstances, the party in
possession of the goods may sell them,[182] or may even be required to sell them.[183] A party selling
the goods has the right to "retain out of the proceeds of sale an amount equal to the
reasonable expenses of preserving the goods and of selling them and must account to the other
party for the balance."[184]
PART IV. Final provisions
The final provisions of the CISG contain the usual clauses relating to the Secretary-General as depositary and providing that CISG is subject to ratification, acceptance or
approval by those States that signed it by 30 September 1981.[185] In addition, it is open to
accession by all States that are not signatory States and that the text is equally authentic in
Arabic, Chinese, English, French, Russian and Spanish.
The CISG permits a certain number of declarations. Those provisions relative to scope
of application and the requirement as to a written contract have been mentioned earlier.[186]
There is a special declaration for States that have different systems of law governing contracts
of sale in different parts of their territory to the effect that the Contracting State may declare
that the CISG does not extend to all of that State's territories.[187] Finally, a State may declare
that it will not be bound by Part II on formation of contracts or Part III on the rights and
obligations of the buyer and seller.[188] This latter declaration was included as part of the decision
to combine into one Convention the subject matter of the two 1964 Hague Conventions.
7. FINAL REMARKS
UNCITRAL, trying to produce a more widely acceptable and successful uniform law
on international sale of goods, revised the 1964 Hague Conventions. The outcome of these
revision efforts was the drafting of a uniform sales law, officially known as the "United
Nations Convention on Contracts for the International Sale of Goods, (1980)" that has been
adopted by more than fifty States, among which are some of the major commercial countries
of the world. It remains to be seen to what degree, if at all, this relatively recent Convention
on Uniform International Sales Law will achieve its objective of unifying the law of
international sales between countries of different legal, social and economic order.
The unification of law, in general, is desirable and is not based solely on material
considerations. The unification of international commercial law is even more desirable since it
can act as a total conflict avoidance device that, from a trader's point of view, is far better
than conflict solution devices. Unification of the law, however, inevitably entails changes in
the legal outlook of courts, scholars, practitioners and traders throughout the world. In the
place of national commercial laws, the CISG represents the new way of addressing the
complex relationships of international trade. As will be argued in Chapter 2 of this work, the
CISG has created and defined an international community of sellers and buyers, in order to
achieve such an ambitious goal. The input to the creation of the new unified legal construct
has been wider than ever before because it was crucial for the development of that community
that its members considered themselves governed by this new common legal system that they
themselves have helped create.
In the following Chapter, it will be argued that in order to facilitate the activities of that
community, and to keep it united, the CISG has attempted to introduce and establish a
rhetorical system where its members can communicate, deliberate, and co-operate with each
other using a new common language. Our initial treatment of the nature of international sales
law and the aspirations of the CISG has revealed a number of further factors significant to its
success and development. The wide participation in the drafting of CISG and its wide
adoption rate are not sufficient elements for the achievement of uniformity in international
sales. The decision of sellers and buyers to carry out their business under the provisions of
CISG is necessary but also not sufficient. It is equally important for the long-term success of
CISG to achieve uniformity of interpretation of its provisions by the national courts or
tribunals applying them.
Should domestic tribunals introduce divergent textual interpretations, this new unified
law will be short-lived. The success of CISG depends in large part on the coherence and the
quality of the treatment it receives from courts, arbiters, lawyers, and scholars interpreting
some individual provisions that lack clarity or contain ambiguous language. The present writer
will argue that the CISG is and must be seen as a text that contains a comprehensive set of
significant topics and terms and a set of values underpinning these terms. If domestic law is
invited and used in CISG's domain (whether in interpretation, or in gap-filling), the CISG's
language will probably lose its integrity and the whole structure may collapse. Individual
problematic provisions can and must be construed with regard to the CISG's underlying
values if the overall structure is to be reinforced and enriched. This is the mandate expressed in
Articles 7(1) and 7(2) of the CISG. The direction taken on this issue will determine whether
the members of the CISG's community form a true community of entities that abide by a
uniform law, or simply a collective of independent entities who, at times, co-operate with each
other via a harmonisation of sorts on specific topics.
The focal point throughout this work will be the issue of interpretation of the CISG.
This article will argue that uniformity in the international sales law cannot be achieved merely
by the universal adoption of uniform rules, but by the establishment of a uniform interpretation
of these rules universally. The central component of this argument will be the interpretative
analysis of the nature and scope of Article 7. The interpretation of Article 7 directly influences
the fulfilment of the CISG's purpose as stated in its Preamble: "The parties to the CISG have
agreed upon the Convention, being of the opinion that the adoption of uniform rules which
would govern contracts for the international sale of goods and take into account the different
social, economic and legal systems, would contribute to the removal of legal barriers in
international trade and promote its development."
There are three prerequisites to the fulfilment of the CISG's purpose. The first is
ratification and promulgation of the Convention. This ratification is made on the public law
level. The second is the awareness of the existence of the CISG and its incorporation into
international trade. It is brought to life by business people and lawyers when entering
transactions covered by the CISG. The third prerequisite is the proper application of the CISG
in proceedings before courts and arbitral institutions of different countries, which is the subject
matter of this thesis. The last two prerequisites belong to the private law field and deal with
the application of CISG in practice. This article will argue that to maintain its uniform
application in different States, it is important to interpret and apply its provisions in a uniform
manner. In this thesis, it will be argued that Article 7 demands that the interpretation and the
filling of gaps praeter legem in CISG be based on international general principles and
methods, in order to achieve the underlying purpose of CISG shown by its structure and its
legislative history.
During the formative stages of CISG itself, numerous difficulties arose and were
resolved through debate and compromise among the diplomatic delegates to the Vienna
Convention - itself a rhetorical process.[189] The adoption of the CISG being essentially a
political act by the governments of member States made it inevitable that the final version of
CISG contains several textual compromises, which, in fact, are unresolved substantive
difficulties. The most significant of these difficulties relates to the CISG's gap-filling
procedures and its use of Western legal concepts; an issue that highlights the precariousness of
the community contemplated by the CISG. These problems have now been introduced and
underlined and will be discussed in detail in the following chapters of this work.
CHAPTER 2: ISSUES OF INTERPRETATION
1. Introduction
1. INTRODUCTION
The United Nations Convention on Contracts for the International Sale of Goods
attempts to unify the law governing international commerce, seeking to substitute one law for
the many legal systems that now govern this area. Bearing this in mind, one should evaluate
how well the text of the Convention articulates a single legal system, and whether the
Convention will be widely accepted. Several important analyses have evaluated the CISG from
this perspective, and the authors have disagreed on how successful CISG will be in reaching
this unifying goal.[190] Leaving aside, for the time being, the merits of the opposing opinions on
the success, or failure, of CISG to unify the law of sale of goods on an international scale, the
context of the Convention's drafting and ratification must be more closely examined. Such an
examination is necessary in order to bring to the foreground the forces that give the CISG its
intrinsic qualities and to highlight the nature of the problems associated with such a legal
instrument.
The CISG is a legal instrument that is meant to subject people from different legal
cultures to its set of rules and principles. In turn, all these different legal cultures have to
comprehend and conform to these rules and principles since the CISG will become part of
their own set of laws. Uniformity, as has been stated before in this thesis, is not guaranteed by
the mere adoption of the uniform laws contained in the CISG. Other fundamental conditions -
perhaps more important, but, probably, also more difficult ones - to achieving uniformity on
an international scale are, first, that the relevant set of laws is interpreted similarly in the
different legal systems. Second, that the uniform law has an innate ability to develop in a
uniform fashion according to the needs of the parties whose relationships it governs or in
response to future changes of world trade dynamics.[191] As has been said more eloquently
elsewhere, the success of a uniform law code which intends to bind parties transacting world-wide depends on the creation of
"an international community of people who perceive themselves as bound together and
governed by a common legal system and who have some way to deliberate together
over matters of continuing verification and development."[192] It is this achievement of establishing an "international community," a kind of international
legal consensus, that is regarded by some as the true underlying purpose of CISG and as the
key to its eventual triumph or demise.[193] This is also the focus of the most forceful criticism of
CISG, as it has been argued that international consensus on significant legal issues is
impossible.[194]
2. THE VIENNA CONVENTION'S "RHETORICAL COMMUNITY"
The above overview of the task facing a set of laws purporting to unify the field on an
international scale, just as the CISG is purporting to achieve, sets the background for a closer
examination and analysis of the context of the Convention's drafting and ratification.
In order to satisfy the fundamental conditions stated above, i.e., uniform interpretation
and uniform development, and thus go a long way towards achieving its goal, the text of CISG
had to bring, and keep, together a "rhetorical community in which its readers first assent to the
language and values of the text itself, and then use the language and values to inform their
relations with one another."[195] The term "rhetorical community," as first used by Professor
Kastely to describe the coming together of States and parties interested in international sales,
is problematic and prone to criticism on the grounds of definitional ambivalence, at best, or of
opaqueness and vagueness, if not contextual inappropriateness, at worst.[196] The present writer
believes, however, that the term could be functional if it were used to denote the existence of
an established system of discourse, a continuing dialogue and discussion among the members
of that community on the meaning and application of CISG to their dealings, which, according
to the present writer, represents the quintessence of the United Nations unifying effort. The
drafters of the CISG managed to create such a community by establishing a sense of shared
interest, responsibility and participation among its readers, including making the forum for the
drafting of CISG as broad as possible and including representatives from all major legal
systems in the deliberations for the creation of this uniform law code. The dynamic of this
discourse that created the CISG was also meant to carry through to the Convention's
interpretation and application in action, thus materialising what would have otherwise been a
mere theoretical unification with no real function or pragmatic significance.
It was, however, unavoidable that the CISG would have to be a political and rhetorical
deed, if only in order to come into existence. Political, since it had to be signed during a
diplomatic conference - a fact that explains the existence of, or even the necessity for, many
glaring compromises in the drafting of CISG's provisions, in order to get the approval of
delegates from different socio-legal systems. Rhetorical, since it had to establish a "textual
community;" the text of CISG had to address an international community of people engaged in
a specific activity, that of international sale of goods, via a new common language - a new
lingua franca,[197] and to provide the regulatory background for their activity. In this context,
"rhetoric" has been described as the art of rendering an indeterminate situation determinate for
the purpose of action, the "art of discourse and deliberation."[198] The importance of language in
the relationship of discourse that the CISG attempts to establish, between parties with diverse
geopolitical origins and socio-legal traditions, cannot be stressed enough. Indeed, it is this
linguistic element of the Convention that gives the text its coherence, as well as its
vulnerability. This point acquires added significance since our treatment of the CISG is
focused on the issue of its interpretation via an analysis of the nature, scope and function of
Article 7, the Convention's interpretation provision.
This Chapter will examine in some detail the nature and constitution of the community
established by the CISG, and some of the basic problems and controversial issues associated
with the acceptance of a uniform law for the sale of goods on an international scale.
3. THE NATURE OF THE COMMUNITY ESTABLISHED BY CISG
According to Professor Kastely, the CISG is a "rhetorical text," contemplating and
creating an "international rhetorical community."[199] In essence, the CISG, by inviting its
ratification by government leaders throughout the world, offers the world community a new,
uniform language in which to conduct and discuss international trade. The CISG deals with
significant issues affecting international trade and offers to the members of the "community"
that embrace its text a set of terms in which these issues can be discussed and deliberated
upon. The CISG implicitly recognises a set of roles (e.g., buyer, seller), shared expectations
(e.g., the fulfilment of the respective obligations of the buyer and the seller to a contract that
the CISG governs), and occasions for dispute and deliberation (e.g., where there are gaps in
the law). What follows is an examination of the nature of the community that the CISG
attempts to establish and bind and the relationship of that community with the text of the
CISG.
(a) The Community and its Members
The Preamble to the CISG reveals its author: "The States Parties to this Convention ...
have agreed as follows ..." The text that follows this passage is framed as a statement by the
States that are united as a single author of the international instrument in question. The
Preamble is addressed to an audience, which is composed of all States who may consider
joining the Convention and all traders, lawyers, courts, and arbiters concerned with the activity
of international trade.
It has been correctly noted, however, that the line between author and audience in this
text is doubly blurred.[200] At the time of the approval of the final draft of the CISG, no State
could yet ratify it and thus, technically, there were no States parties to the Convention; all
States were among the audience. At the same time, however, the ratification process was
established as a way for nations to become parties to the Convention. Thus the mechanism
existed for members of the audience to join as authors of CISG's text. Kastely has argued that
this blurring of author and audience is significant to the rhetorical character of the CISG, as it
Although Kastely's de-constructive linguistic analysis of the Preamble seems too technical,
it highlights an important point; due to this linguistic "sleight of hand" performed by the
Preamble, all the existing and potential members to the Convention are seen as equals and the
"feel good" factor is firmly entrenched amongst them. The goal was to make the CISG
attractive to all potential signatories. With a long history of unsuccessful attempts in creating
uniform international trade laws,[202] mainly because minimal membership in the drafting of such
laws led to minimal membership in the community adopting them, the atmosphere created by
the CISG had to be one of equality and openness. Of course, the Convention will ultimately be
judged on the substance of its provisions by the use its provisions receive in regulating the
affairs of the trading community. But it is clear from the outset that the CISG represents a
serious, major attempt to unite international trade, down to the last detail.
(b) The Preamble
The Preamble to the CISG seems to describe the character of the union among the
States who have authored the text with those who read it. The words of the Preamble seem to
emphasise the conscious act of agreement by the member States (i.e., "The States ..., Bearing
in Mind ..., Considering ..., Being of the Opinion ..., Have Agreed ....").
The wording used in the Preamble indicates that the union of nations by the CISG is
the result of careful consideration and express agreement. Joining the international community
of the CISG is - and is seen to be - a positive act by its members, thus making all member
States part of a wide, thoroughly consensual and deliberative community. The fact that most
of this is in standard treaty language, however, clearly undercuts the strength of any proposal
to attach greater meaning or importance to the CISG Preamble, which states the following:
THE STATES PARTIES TO THIS CONVENTION
The purpose of the CISG, as set forth in this passage of the Preamble, is to contribute towards
a new international economic order based on harmony and equality, to promote friendly
relations among the member States, and to encourage the development of international trade.
The relationship among the States that have joined, or that will join, in this Convention exists
not merely in the writing and reading of the CISG but also in the world beyond the text, as an
actual political and economic community. The international communality that characterised the
drafting of CISG (although not its predecessors) is highlighted in this opening statement in
order to remind all users of the CISG of the benefits (psychological and material) that their
membership entails despite their different social and legal domestic traditions.
On this point, Kastely argues that the community formed by the Preamble is "both consensual
and motivated by self-interest," as she states that "its main focus is on the possibility of
encouraging international trade, to the benefit of both industrialised and the developing
nations."[204] There are, however, some valid objections to this argument. Professor Winship's
reading of the same text stresses the altruism implicit in it rather than any self-interest.[205] This
alternative reading focuses on several new phrases found in the CISG's Preamble that have
also been added to the preambles of prior treaties and which respond for the first time to
certain concerns of developing countries.
The present writer is of the opinion that it is more sound and appropriate to view the
act of joining the community formed by CISG as an apt recognition of the equal status of less
developed countries. There is, however, an inherent danger in analysing such admirable
projects of "unification on equal terms." The wishful thinking that accompanied the lengthy
preparation of the CISG (and is reflected in the formal language of the Preamble) and the
corresponding relief and euphoria generated after its official introduction to the world, may
blind the faithful and obscure the real benefits conferred upon the developing States. There lies
the danger that the CISG may prove to be a symbolic gesture only, unless we are able to
ascertain in real terms the benefits to be gained by the developing States from the CISG. Only
the correct interpretation and uniform application of the text can safeguard the benefits
conferred to both developing States and developed States by the CISG's principles of equality
and fairness.
It has been correctly noted that a rhetorical analysis of the CISG becomes stronger
when we compare its text to that of other similar documents.[206] A comparison of the
documents can identify what is new, what is old and what is omitted, or added.
In accordance with United Nations practice, the Preamble provisions were prepared at the
Diplomatic Conference that adopted the Convention, in Vienna. Professor Bonell has stated
that the purpose of the Preamble to an international agreement is "to indicate the aim of the
agreement and any specific considerations underlying it" and has concluded that the Preamble
to CISG is much more developed than those of other Conventions already prepared within
UNCITRAL.[207] The Preamble to the United Nations Convention on the Limitation Period in the
International Sale of Goods (1975) (1975 Limitation Convention) was restricted to two
clauses:
"Considering that international trade is an important factor in the promotion of
friendly relations among States,
"Believing that the adoption of uniform rules governing the limitation period in the
international sale of goods would facilitate the development of world trade ..." The United Nations Convention on the Carriage of Goods by Sea (1978) was even more
frugal:
"Having recognised the desirability of determining by agreement certain rules relating
to the carriage of goods by sea ..." Subsequent to its drafting, the Preamble to the CISG has strongly influenced the
wording of the Preamble to the Convention on Agency in the International Sale of Goods
(1983).
The examination of the relationship between the above Preamble provisions reveals
that the references that can be found in the CISG Preamble (to "the development of
international trade" as "an important element in promoting friendly relations among States"
and "the adoption of uniform rules which govern contracts for the international sale of
goods" as contributing to the promotion of "the development of international trade") bear
striking similarities to the Preamble to the 1975 Limitation Convention.
On the issue of the similarity of the wording in the CISG Preamble with the wording of
other instruments, it can be said that repetition of clauses from prior documents in the CISG
Preamble raises the question of whether the repetition is a reaffirmation of the ideas and
principles contained therein, or merely a stylistic formula and nothing more. The latter idea
represents the orthodox position. The new references made in the CISG Preamble, on the
other hand, obviously highlight topics on the minds of the drafters of the CISG at the time of
drafting.
The lack of dispute, objection, or controversial debate about the Preamble has been interpreted
by one academic as reflecting the broad acceptance of the principles underlying the Preamble.[208]
The better position on this point, however, is that this is not necessarily so. It has been
proposed that the language in paragraphs two and three of the Preamble to the CISG, which is
also found in prior treaties, could reflect indifference to the use of language that has become
familiar and considered innocuous.[209] The present writer also agrees that the standard form of
the language used in the CISG's Preamble limits any importance or intrinsic significance that
can be attached to it. The CISG Preamble is, however, unique in that it incorporates certain
ideas that reflect the concerns of a number of States, which had not been expressed before. In
particular, concerns of the Third World countries are addressed, such as:
(i) the reference, in the first paragraph, to the New International Economic Order;
(ii) the development, in the second paragraph, of the corresponding provisions in the 1975
Limitation Convention (cited above) so as to refer to "equality and mutual benefit;" and
(iii) the reference, in the third paragraph, to "different social, economic and legal systems" and
to "the removal of legal barriers in international trade."
The Preamble provisions in the CISG are also more developed than those of the 1964
Convention Relating to a Uniform Law on the International Sale of Goods (ULIS), which
speak of the States signatory to the Convention as "[d]esiring to establish a uniform law on the
international sale of goods."
The importance of the wording of the CISG's Preamble and the weight to be placed on
it cannot be fixed precisely. We can get some guidance from Article 31(2) of the United
Nations Convention on the Law of Treaties (1969), which specifically mentions the Preamble
of a treaty as being part of the context for the purpose of the interpretation of the treaty; i.e.,
the Preamble can be relevant to the interpretation of a treaty. Academic opinions, however,
differ as to the legal importance of this Preamble. Some commentators believe that the
language of the Preamble, for various reasons, counts for virtually nought, while others argue
that the Preamble "informs" other provisions of the Convention, most particularly Article 7.[210]
The present writer believes that the presence of a clearly marked, specially prepared
interpretation section in a Convention does not justify an expansive role for its Preamble. This
would entail that the value of the CISG's Preamble as an interpretative tool must be
diminished. The CISG represents a major development in international law, in the wider
context of the history (political, as well as legislative) of the unifying efforts; its Preamble
merely reflects this in formal language and structure.
The CISG Preamble cannot and should not solve interpetative issues directly; it formally
mentions the main principles that imbue the Convention and which are so vital to its identity
and faithful application. Some of its main principles (e.g., internationality, uniformity) are also
found in the interpretative provisions in Article 7(1), proving only an ideological connection
between the Preamble and Article. Introducing and accompanying a Convention marked by
important diplomatic and textual compomises, the value of this Preamble should not, however,
be lost completely, albeit as a beacon or an outer-marker of the general direction that CISG's
interpretation should follow.
(c) The 1964 Uniform Law Conventions
A second example of the insight that the juxtaposition of texts can provide arises from
a comparison between the 1964 Hague Sales Conventions [211] and the CISG. Two main points can be made here. First, the drafters of the Hague Conventions distinguished between the law
of contract formation and the substantive rights of contract parties. Second, the drafters
addressed these Conventions to Contracting States, while the uniform laws addressed to
sellers and buyers were set out in separate "uniform laws" appended to the Conventions. The
CISG eliminates both distinctions. In the CISG, formation provisions are combined with
substantive contract provisions,[212] and the formal provisions of the old Conventions are
combined with the text of the uniform laws that had been appended to the Conventions.
The consequences of eliminating such distinctions are the subject of some academic interest.
Could it be that contract formation provisions should be treated separately because they are
addressed, directly or by analogy, to a broader audience (i.e., all parties who contract with
each other, irrespective of the object of the contract) than the audience of sellers and buyers
interested in their rights and obligations under a sales contract? Even the question of whether
treaty provisions addressed to States in their sovereign capacity should be clearly separated
from those provisions addressed to parties to a sales contract has interested some
commentators.[213] It is the view of the present writer that these innovations found in the CISG
have stylistic consequences only, by affecting its presentation. There is a substantial shortening
of the overall text and the finished product (the text of the Convention) looks more compact
and complete.
A third example of how the comparison between the CISG and prior, related
instruments may enrich an analysis of the CISG and foster a better understanding of its
provisions, involves an omission from the CISG of a provision found in an earlier text. The
point being made here is that textual silence on an issue may itself have important implications
in the interpretation of a document that has been drafted through a revision of its
predecessors. The issue we are concerned with here is whether parties may exclude the
application of the CISG by implication, or whether they may only do so effectively by express
agreement. Article 3 of the Convention Relating to a Uniform Law on the International Sale of
Goods (1964) stated that exclusion could be either express or implied. The UNCITRAL
Working Group omitted this formula when drafting the CISG. Several delegates to the 1980
Conference attempted to resolve this issue by amendment but failed. Two proposals - one to
go back to the language of ULIS Article 3 ("such exclusion may be express or implied") and
the other to restrict Article 6 ("The parties may expressly exclude the application of this
Convention ...") - were both put to vote but were subsequently voted down. The UNCITRAL
legislative history contains the following elaboration:
"Some representatives were concerned lest the special reference to 'implied' exclusion
might encourage courts to conclude, on insufficient grounds, that the Law had been
wholly excluded. Other representatives were of the opinion that there was no ground
for such concern, but agreed to the deletion of the second sentence since the Law does
not ordinarily attempt to establish special rules for construing agreements."[214]
The Diplomatic Conference Records also include the assessment of developments there
provided by the Chairman of the First Committee. Mr. Loewe stated that "exclusions of the
application of the Convention could be either express or implied" and that this "was also the
conclusion which had emerged from the preparatory work."[215] Professor Schlechtriem has
concluded that Article 6 guarantees party autonomy over both the conflict rules and the
substantive law:
"The Convention can be excluded by choice of law if the parties choose to apply a
different local domestic law. It is also possible simply to reject CISG without choosing
an applicable law. Substantively, any rule of the Convention can be altered or rejected
by the parties, even by standard contract terms, as long as the requirements for their
validity in domestic law are fulfilled. In contrast to Article 3 sentence 2 of ULIS, the
Convention does not mention the possibility of an 'implied' exclusion, but this does not
mean that a tacit exclusion is impossible. The intent of deleting the word 'implied' was
to prevent the courts from being too quick to impute exclusion of the Convention.
Therefore, the fact that the parties have agreed on an arbitral tribunal in a specified
country or on standard contract terms enacted before the Convention takes effect and
based on the background of a particular domestic substantive law does not by itself
imply that the parties wished to exclude the application of the Convention."[216]
Thus was avoided the possibility that an exclusion of the Convention could be "implied
by law." When analysing this question, however, some attention must be paid to explaining the
omission of the clause in the 1964 text.
A narrow reading of the permission to opt out of the Convention would be required in
order to keep the community together. Such a reading would, however, probably offend a
general principle of the CISG - the autonomy of the contracting parties, as is provided in
Article 6. It is evident that in the creation and interpretation (let alone in the potential
application) of uniform laws carrying ambitious goals there are many points of friction and
antithesis. As will be argued later in this thesis, such difficult points can be overcome only with
a healthy dose of good will (to avoid the loaded term "good faith") and with certain inevitable
compromises. The achievement of establishing an "international community," a kind of
international legal and linguistic consensus, is the underlying purpose of the CISG and the key
to its eventual triumph or demise.
(d) The Audience of the 1980 Vienna Convention
The CISG endeavours to be the medium for a specific message of international
unification in the area of sales law. But what about the recipients of this message? Who are
they? What is the audience of the CISG? On the theoretical level, there is debate as to the
identity of the CISG's audience. One scholar groups together the readers of the CISG as "the
States which would ratify and the traders, lawyers, courts, and arbiters who would use the
Convention to structure and guide future transactions and deliberations."[217] Another scholar, on
the other hand, argues that different parts of CISG address different audience groups: (a)
certain CISG provisions are addressed primarily to States (the Preamble and Part IV), and (b)
other parts of the CISG are addressed primarily to trading enterprises (Parts I, II and III).[218]
It is the view of the present writer that the latter analysis is the better one. The
differences in scholarly opinion as to the identification of CISG's audience and other similar
academic distinctions are, however, ultimately irrelevant since they affect neither the reality of
the CISG's need to exist as a useful body of law internationally, nor its actual application and
interpretation.[219] In practice, it is the traders using, or choosing not to use, the CISG that will
predominantly decide the fate of the CISG in attaining, or failing to attain, the requisite level
of use which will justify the long effort for its creation. This statement is not an attempt to
oversimplify the issue of the success or failure of the CISG. Rather, it is a reminder that
irrespective of infinite academic diatribes about fine distinctions and theoretical analyses of the
CISG, the future of the CISG depends on its daily, practical use by merchants. This thesis
notes the importance of the group of CISG users entrusted with the responsibility of
interpreting the CISG in a uniform manner and figures of authority who may wish to intervene
in order to preserve the community or to hand out justice (e.g., judges, arbiters, etc.). Indeed,
the present work is itself an endeavour to contribute in a positive manner to such efforts to
interpret and apply the CISG in the real world of merchants. It is, however, the belief of the
present writer that a closer study of the audience group comprised of traders carrying out their
transactions under the umbrella of CISG ("the audience of trading enterprises," if you prefer)
would produce more significant insights into the CISG's substantive sales law provisions.
Leaving aside the question of whether there presently exists a distinct community of
international traders,[220] Professor Winship has divided the audience of trading enterprises as
follows:[221]
(1) enterprises that have not yet entered into an international sales contract;
Different parts of the CISG are addressed to each of these groups:
(1) Enterprises that have not yet entered into an international sales agreement will be interested primarily in the Convention's sphere of application (Part I, especially Chapter 1
CISG). If it is to reap the fruits of uniformity, the text of the CISG must persuade these
enterprises (a rather large and diverse community) to become a participating enterprise by
entering into contracts governed by the CISG. To achieve this goal, the CISG employs
two devices:
(a) the relative simplicity of the scope provisions (Articles 1-5 CISG, notwithstanding
the complexity of Art. 1(1)), and
Implicit in the straightforward statement of the CISG's sphere of application is the
suggestion that enterprises that opt to have the CISG apply to their contract will benefit
from the decreased legal transaction costs that they would otherwise incur without the
CISG. These transactional costs would include difficulties in
(i) reaching agreement on applicable law,
Traders who choose to use CISG are taking part in a more efficient "community," which is
in their interest.
(2) Enterprises that decide to enter into a contract governed by CISG form a separate
audience group. The main questions concerning members of this group are
(a) whether they have concluded enforceable contracts, and
This audience group will be most interested in the contract formation rules of Part II and
the supplementary provisions in Part III of the CISG. A comparison between the CISG's
provisions and the Uniform Commercial Code (UCC) of the United States, with respect to
contract formation and the contract terms supplied in the absence of agreement by the
parties, provides a further insight into this issue. The CISG does not have a provision
similar to U.C.C. § 2-204;[222] and its supplementary provisions are less comprehensive than those found in U.C.C. Article 2, Part III. Academic opinion on this point is not settled. It
is said that "one can only speculate on what these enterprises would make of the formal
'offer' and 'acceptance' provisions in Part II, or of the skeletal suppletory rules
of Part III. They might conclude
that they are protected by the formalism of
the formation process and by the need to spell out most details of their
agreement."[223]
(3) Enterprises faced with contract disputes. This audience group will be primarily concerned
with the remedies available under the regime of the CISG (e.g., cure). The CISG's
alternative remedy provisions can be found in Part III of the Convention and are designed
to preserve the community formed and to avoid threats of dissolution "by encouraging
dialogue and reconsideration."[224]
The basic theme in Part III of the CISG is that the contract should only be avoided as a
last resort.
The above schema of the different potential audience groups to which the CISG has to
address its message of a unified international sales law completes the analysis into the nature
of the community that is established by the CISG. It remains to be seen whether the CISG,
through audience participation (i.e., actual use, as opposed to mere ratification) can address
satisfactorily the legal issues that concern its community with its substantive law provisions.
The interpretation of the CISG and its handling of these issues, through the proper operation
of Article 7, is the key to answering the vital question of whether the CISG will bring, and
keep, together its international community - the international legal consensus that its drafters
hoped it would establish.
4. THE CONCEPT OF GOOD FAITH
Principles and rules commanding the observance of good faith and fair dealing in
relationships governed by the law of obligations, in particular those created by contract, are
common stock of most legal systems. The existence and use of general provisions and rules on
good faith and fair dealing can also be found in legal texts aimed at the unification of certain
sectors of private law for purposes of international transactions. Indeed, Article 7 of the CISG
states:
"(1) In the interpretation of this Convention, regard is to be had to its international
character and to the need to promote uniformity in its application and in the
observance of good faith in international trade.
"(2) Questions concerning matters governed by this Convention which are not expressly
settled in it are to be settled in conformity with the general principles on which it is
based or, in the absence of such principles, in conformity with the law applicable by
virtue of the rules of private international law."
For the purposes of this thesis, the element of good faith in Article 7 is analysed in
Chapters 3 and 4 of this work, infra, dealing with the concept's operation in the CISG's
interpretation (in the context of Article 7(1)) and in the CISG's gap-filling mechanism (in the
context of Article 7(2)), respectively. Bearing in mind good faith's double-role in the CISG, as
well as the concept's innate definitional difficulties, the present writer attempts in the current
chapter an independent analysis of the concept which can yield results that can be used in the
later analyses of the nature of all the functional elements in Articles 7(1) and 7(2) CISG, in
Chapters 3 and 4 of this work, respectively. The present writer believes that this compact
treatment of good faith is not only a more efficient, but also an easier way of analysing a
concept whose overlapping reach into both Article 7(1) and 7(2) is further complicated by
certain important theoretical distinctions which the present writer needs to make and maintain
clearly in the remaining chapters of this work in order to advance his thesis on the
interperetation of the CISG.
The text of Article 7(1) covers only the application of the Convention, rather than the
parties' rights and obligations and their exercise and performance directly. The wording was
agreed upon only after lengthy discussions in the UNCITRAL Working Group and the plenary
session of the Vienna Conference that adopted the text of the CISG, and it was meant as a
final rejection of more far-reaching proposals to apply the principle of "good faith and fair
dealing" to the obligations and the behaviour of the parties themselves.[225] There is, however, a
strong body of academic opinion holding that the evaluation of the relations, rights and
remedies of the parties, could also be subject to the principle of good faith and fair dealing. It
is asserted that the principle of good faith, in addition to its interpretative role on the CISG
provisions, has also found its way into the CISG as one of its important general principles
under Article 7(2).[226]
The concept of "good faith" is one of the most controversial ones for the users of the
CISG. The controversy relates not only to the exact function of the concept, but also extends
to its qualitative definition. In order to understand the complexity and the variety of
connotations that the notion of "good faith" carries in different legal systems and the degree of
difficulty that its definition can create, as well as learn from the experience of dealing with
such a general yet important concept, we will examine the position of the concept in English
common law and American law, with German law providing the civil law perspective via the
principle of "Treu und Glauben" from the German Civil Code.
The benefits of this examination, apart from the comparative analysis that it will
produce on the point, include a better comprehension of the tension that is created among
different schools of legal thought when one attempts to unify the definition of important legal
terms and prescribe new roles to them. This exercise can act as a paradigm for one's approach
to the CISG, since "good faith" is arguably the most disputed concept that the Convention
contains and interpreting it cannot only influence greatly the scope the CISG's operation, but
it can also shape the CISG's core character.
Despite the common existence and use of the concept of "good faith" in many
developed legal systems there seems to be not one monograph that would report and compare
in detail the various manifestations of the principle and their applications and understanding in
the legal systems. Although there is a huge body of scholarship on certain aspects or
applications of the principle in one or more legal systems, there seems to be not one
comprehensive and exhaustive treatment.[227] The recognition of this has led Professor
Schlechtriem to conclude that the importance of the general principle of "good faith and fair
dealing" and the details developed out of it depend on the structure and content of the specific
legal system in which they are implemented, and on the concrete and specific contract in
question.[228] In other words, as a domestic legal concept, the principle of "good faith" is used
and developed according to the specific needs of a national legal system or of a particular
contract. This observation entails the consequence that in defining "good faith" in the CISG,
the domestic experience of the concept is of limited practical value. This realisation should not
cast undue doubt on the purposes of our comparative analysis of the concept of "good faith."
The purpose of the exercise remains valid because the experience gained by the domestic use
of the concept of "good faith" and its distinctive - albeit diverse - development in different
legal systems can throw light on the multi-faceted nature of the term and its potential to
acquire different roles, although it should not prescribe its international journey.
(a) The concept of "Good Faith" in English Law
The starting point of any discussion of the notion of "good faith" in English law must
be the declaration that there is no general doctrine of good faith in English contract law.[229] As
has been explained more eloquently elsewhere, this is not because English law rejects the good
faith ethic; rather, English law prefers to work out solutions to contractual problems at a more
detailed level of legal rules.[230]
This position is in stark contrast with the trend of the clear emergence, if not dominant
presence, of the principle in modern international legal instruments. Perhaps the best example
of this development is provided by the UNIDROIT Principles, where the principle of good
faith and fair dealing arises "in international trade" and not just in the performance and
enforcement of contracts.[231] Another clear demonstration of the ever-increasing importance
attributed to good faith can be found in the current draft of the Lando Principles, where the
duty extends also to negotiations between the parties.[232] Such a development has not been
followed in English law. In fact, the House of Lords, fairly recently, reinforced the absence of
good faith in contractual negotiations. Specifically, in the case of Walford v. Miles,[233] the House
of Lords refused to impose a duty to negotiate in good faith on the parties engaged in the
complex, protracted, and inherently adversarial process of negotiating towards the sale of a
business.
Notwithstanding this clear rejection of the general principle of good faith, good faith in
the negotiating process is advanced by indirect means in English law. For example, the tort of
breach of confidence protects confidential information acquired by the parties during their
negotiations from exploitation after the breakdown of negotiations.[234] Another instance where
English law offers specific protection, without resorting to the general principle of good faith,
is found in the observance of fairness and equality in the tendering process leading to the
award of a major construction contract. The system of bidding may give rise to a pre-contract
embodying these principles and a remedy for their infringement.[235]
It can be deduced from the above illustrations of English law that lawyers brought up
in the tradition of English law, the present writer included, find it difficult to adopt a general
concept of good faith. To explain the reasons for the resistance of English law towards the
adoption of a general concept of good faith, as well as the modern emergence of qualifications
to such resistance, we need to make a quick historical sojourn in the development of the
English common law itself. It is a truism to say that the better one's grasp of the historical
development of an area of law, the better one's understanding of the modern law. Certainly
this is true of the law of contract. Yet no attempt at a full historical introduction is made here.
Detailed accounts of the development of the modern law of contract in English law exist
aplenty.[236]
The old lex mercatoria
In the days of the old lex mercatoria, that accumulation of mercantile customary law
administered by the merchant courts where the merchants themselves were judges, there
existed a general concept of good faith.[237] As was described in the first chapter of this work,
merchants would travel across Europe to the international fairs and they themselves would
resolve in a rapid, businesslike fashion any commercial disputes. In those days there existed to
some extent a relatively uniform, albeit uncodified, commercial law based on commercial
custom and practice - quite separate from the ordinary common law administered by the
King's courts - and one of these customs was good faith. With the gradual disappearance of
the merchant courts, their jurisdiction was incorporated into the royal courts, and the
principles of the law that had been applied by the merchant courts for centuries became
absorbed into the common law. Since the English common law does not have a civil code or a
commercial code, when the common law courts took over the jurisdiction of the old merchant
courts, the principle of good faith disappeared for a while. This does not, of course, represent
modern English law, but it gives an indication that English law used to take a fairly extreme
position on the duties of parties to look after themselves in the tough world of business.[238]
Assumptions of the modern common law of contract
The modern English law of contract assumes freedom of contract; it assumes
It must be recognised, though, that in many situations these assumptions are frequently
contradicted or qualified and adjustments made in the application of the principle based on
these assumptions. A qualification to the paradigm situation that is of interest to our
discussion is the proposition that "will" and "intention" form the substratum of every contract.
This proposition is heavily attenuated by inequality of bargaining power between the
contracting parties.
Leading Australian scholars Professors Carter and Harland have encapsulated the
essence of the common law contract origins - and modern problems - in one sentence:
"The basic principles of contract law were laid down in an economic, social, political
and intellectual context different from to-day's. They were developed under the
influence of the forces of individualism, competitiveness, laissez-faire, an intellectual
climate characterised by a high regard for general principle, and economic dominance
of a free market economy."[240] This common law theory of contract has attracted ever-growing criticism. Atiyah has observed
that "although freedom of contract is by no means dead in the law courts, even among lawyers the decline has been evident."[241]
Professor Gilmore, in what he describes as a "study in what
might be called the process of doctrinal disintegration,"[242] has argued that the general theory of
contract in the common law is an artificial construct derived by nineteenth century law
teachers and judges rather than something truly to be found in the reasons for decision in the
major contract cases from which they drew support.[243]
Most of the above criticisms leveled against the rigidity of the common law theory of
contract and the reluctance to incorporate a clearly defined concept of good faith, stem from
the original "objective theory of contract,"[244] that has been the foundation of all contract theory
in the common law; and the concomitant resistance shown by the common law to interfere
with the operation of the bargain struck between the parties. The incorporation of a general
concept of good faith has been resisted by English law because it would unsettle the certainty
of the contractually agreed terms by introducing new and abstract conditions absent from the
objectively struck bargain. The primary emphasis of the law of contract in English common
law is on the objective interpretation of a party's words and conduct, rather than the party's
subjective state of mind, intention or motive. Justice Blackburn, in Smith v. Hughes, produced a well-known formulation of that theory:
"If, whatever a man's real intention may be, he so conducts himself that a reasonable
man would believe that he was assenting to the terms proposed by the other party, and
that other party upon that belief enters into a contract with him, the man thus
conducting himself would be equally bound as if he had intended to agree to the other
party's terms."[245]
Today there is undoubtedly a tension between classical contract theory and the reality
of contract bargaining. Indeed, a requirement of good faith in contract negotiation has begun
to emerge [246] due to the realisation that contract law today is more complex than in the
nineteenth century. As a reflection of the change in society's perception of the strength of the
moral presumptions that dominated the classical theory of contract law in the common law
jurisprudence, courts have become more pragmatic in their decisions. As English law
develops, courts abandon their former strict, non-interventionist stance in contractual disputes
by reducing the rigour of the caveat emptor rule in the sale of goods and impose certain duties
of good faith in a range of situations. It must be noted here that the present writer does not
treat the diminution of the caveat emptor rule and good faith as the same thing, nor does he
advance a causal connection between the two developments. Simply, the point is made that as
strict compliance to the former is being relaxed, heavier reliance to the latter seems to be
gaining momentum. The question of whether this ascertainment is the result of a mere
historical coincidence, or belies a closer relationship between the two trends, is outside the
scope of this thesis. What is certain is that today English law does have a concept of good
faith, albeit a limited and fragmented one, or, at least, a series of exceptions and qualifications
to its orthodox contract doctrine that resembles good faith. For example, English law treats a
person as acting in good faith if he acts honestly, even if he is negligent or even unreasonable.
Thus, section 61(3) of the Sale of Goods Act 1979 provides: "A thing is deemed to be done in
good faith within the meaning of this Act when it is in fact done honestly, whether it is done
negligently or not." English law does not, however, have anything equivalent to the general
concept of good faith found in the civil law; what is required is good faith (or, if you prefer, a
concept that bears many attributes similar to those of good faith) in particular situations.
Silence and concealment of facts
For example, a party who opens negotiations leading to a contract has a duty not to deceive
the other party by false statements or by any concealment of facts. Being silent on some issues
is allowed,[247] but if a misrepresentation is established, the representee may rescind the contract
ab initio, subject to certain limitations. At common law this right was only available in the case
of fraudulent misrepresentation or cases involving total failure of consideration,[248] but Equity
extended the right to all cases. Damages for breach of contract are necessarily excluded, unless
the false statement is also a term of the contract. A remedy for damages may, however, be
conferred by the law of tort or by statute.
Fiduciary relationships and bad faith performance
Perhaps it is more important to note that English law imposes a general duty of good
faith in particular types of contractual relationships. In certain contracts, performance that is in
not in good faith may constitute a breach.[249] An agent owes a duty to subordinate his own
interests to those of his principal. He must not accept secret commissions, nor promote his
own interest over that of his principal, and he must keep his principal informed of all facts that
are relevant to the relationship. Likewise, a company director owes a duty of good faith to the
company that employs him and a trustee a duty of good faith to his beneficiary.[250]
Duties of good faith are also required if the court is asked to grant "equitable
remedies." The subject matter of this thesis does not allow extensive digressions into the
peculiar distinction that the English law system draws between law and equity.[251] It is sufficient
to say that the rules of Equity - originally administered in the King's Court by the Chancellor
- evolved in order to undo the injustices frequently caused by the rigidity of the old common
law, either by restraining common law remedies, or by giving remedies which were not given
by the old common law, such as specific performance or rescission of a contract for a non-
fraudulent misrepresentation. In order to invoke these remedies an applicant must come to the
court "with clean hands," which requires among other things that the plaintiff shall have acted
in good faith.
Contractual negotiations
In some cases, good faith is not relevant in English law where it is probably relevant in
other continental legal systems. One such instance is the case of precontractual negotiations
between parties. English law has never adopted Jhering's principle of culpa in contrahendo.
English law does not recognize that the opening of negotiations for a contract by itself creates
any sort of duty relationship. The view taken is that both parties are at risk until a contract is
actually formed. Therefore, English law sees no culpability in a party who is conducting
negotiations arbitrarily breaking them off, even if he has brought the other party to the brink of
formation of the contract, or in a party conducting negotiations in parallel with several parties,
without telling any party that he is negotiating with the others.
The reason English law takes this view is that when parties are invited to enter into
negotiations, they do so with the knowledge that this involves a measure of competitive risk.
Of course, it is different if one party invites another to enter into negotiations when the first
party has no intention of ever concluding a contract with the other at all. That is dishonesty
and even English law would give a remedy, but not under the heading of good faith.
One reason for the rigorous approach adopted by English law towards the observance
of contractual undertakings is the view that the legal certainty and predictability of the legal
outcome of a case are paramount values in common law. The prevailing concern in English
law is that if courts become too ready to disturb contractual transactions, then merchants will
not know how to plan their business life. The position of English courts is that vague concepts
of fairness can make judicial decisions unpredictable. If that means that the outcome of
disputes is sometimes hard on a party, then it is regarded as an acceptable price to pay in the
interest of the great majority of business litigants. The prevalent view of scholars upholding
the orthodoxy of English contract law is epitomised by Professor Bridge, who argues that a
general doctrine of good faith is unnecessary and liable to cause trouble because it is too
vague and gives too much power to the individual judge freed from the disciplined traditions
of contract law.[252] Professor Bridge is of the opinion that it is better to confront particular
problems, as English law has done so far, than to adopt a general ethical imperative, as the
purpose of legislation should not be to make a moral demonstration.[253]
This view gains strength from the fact that in many cases English law arrives at the
same answers as continental law systems, but by a different route. There are numerous
situations in which English law does not find it necessary to require good faith because it
imposes a duty that does not depend on good faith. For example, if a party is induced by a
wrong statement to enter into a contract, in some cases he can rescind the contract even if the
other party made the statement entirely honestly and unaware of the falsity.[254]
Again, if a party suffers loss through a breach of contract, and fails to take reasonable
steps that would operate to mitigate his loss, he cannot recover damages to the extent that he
could have avoided his loss.[255] This is not a rule of good faith, it is simply a strict rule, which
states that to the extent that the plaintiff has brought his misfortune on himself he cannot look
to the defendant for compensation.
Also, a seller of goods which are defective, or otherwise not in conformity with the
contract, can face liability not because he did not disclose the defects, nor because he acted in
bad faith, but simply because he did not supply what he contracted to supply.[256] Just how
different the goods supplied must be to the goods ordered can be debated, but it is sufficient
for present purposes merely to state the issue. Finally, a person who negligently fails to
disclose dangerous defects in a product he is supplying is liable in tort for injury caused by the
product to the person to whom it is supplied. Again, the question of good faith does not
matter in establishing liability in tort for negligence.
Professor Bridge has shifted the focus of the theoretical debate on good faith from the
question of whether contract law needs a general standard of good faith to the question of
whether there are deficiencies in the existing law that cannot be adequately resolved without
the introduction of good faith.[257] The above notes are evidence of the fact that certain problems
can be solved in English law without necessarily resorting to a general principle of good faith.
The present writer believes that this argument has the strength of jurisprudential rationality in
a difficult theoretical debate with potentially drastic effects on English contract law as we
know it. There is, however, no denial that good faith, rightly or wrongly, is not only in the air,
but also in new legislation. It is explicitly present in the language of the Unfair Terms in
Consumer Contracts Regulations (1999), implementing the European Community Directive on
Unfair Contract terms in Consumer Contracts,[258] although it is likely to be translated into the
language of "reasonableness", which is familiar to English lawyers due to its inclusion in the
Unfair Contract Terms Act (1977).
(b) The concept of "Good Faith" in American Law
There is a need to point out some important differences between the American and the
English common law systems regarding good faith. In the American common law there has
been a generally accepted concept of good faith for decades.[259] Americans have not only a
widely adopted Uniform Commercial Code, but also have a Restatement (now a Second
Restatement) of Contracts. Both the Uniform Commercial Code and the Second Restatement
impose on parties to a contract an obligation of good faith. Section 1-203 of the Code [260]
provides that And Section 205 of the Restatement, which was drafted later
than the Code and was inspired by the Code, declares that We should note two things about the scope of these provisions. First, neither one says
anything about a doctrine of good faith purchase as opposed to good faith performance.[261]
Second, these provisions omit any reference to good faith in negotiation as opposed to good
faith in performance. That is because, like most of the common law world, American lawyers
do not recognize a duty of good faith in precontractual negotiations.[262] American lawyers,
unlike English lawyers, however, are not lacking in definitions of good faith. Even the Uniform
Commercial Code has not one but two definitions of good faith that apply to contracts for the
sale of goods. Under the general definition in Section 1-201(19) This is the definition traditionally used for
good faith purchase, which the Code makes applicable to good faith performance as well.
Under the special definition in Section 2-103 applicable to merchants in sales transactions
Professor Farnsworth has argued that the duty described by the Restatement
encompasses not only "good faith," but also "fair dealing." According to his view, the addition
of fair dealing makes this definition particularly suitable for good faith performance since he
argues that while good faith - in the sense of honesty - is entirely suitable for good faith
purchase, fair dealing is a term better suited to performance.[263]
Good Faith: Implied Terms, Excluders and Foregone Opportunities
The fact that American law has statutory definitions of "good faith" does not mean that
American lawyers are in complete agreement as to what "good faith" means in the context of
good faith performance. Three scholars who have written on the subject stress three
different aspects of good faith performance.
"in cases of doubt, a lawyer will determine more accurately what the judge means by
using the phrase 'good faith' if he does not ask what good faith itself means, but rather
asks: What, in the ... situation, does the judge intend to rule out by this use of this
phrase.[266]"
Professor Summers listed, as excluded by the phrase "good faith", the following situations:
"evasion of the spirit of the deal, lack of diligence and slacking off, willful rendering of
only substantial performance, abuse of power to specify terms, abuse of a power to
determine compliance, and interference with or failure to cooperate in the other party's
performance."[267] This kind of definition by exclusion has not only found favor with a number of courts,[268] but is also reflected in the comments to the Second Restatement's section on the duty of good faith performance.[269]
Professors Summers and Burton have engaged in a lively debate in which each
criticizes the other's views. Summers argues that Burton's "foregone opportunities" analysis is
not necessarily any more focused than the excluder analysis in a novel good faith performance
case.[273] On the other hand, Burton faults the Summers "excluder" analysis as implying that
courts "typically use the doctrine to render agreed terms unenforceable or to impose
obligations that are incompatible with the agreement reached at formation," rather than to
"effectuate the intentions of the parties."[274]
Adding to the debate, although not clarifying it, American courts have often cited all
three views - Farnsworth's, Summers' and Burton's - indiscriminately, as if they were entirely
consistent with each other.[275] Professor Farnsworth, analysing some recent American cases
involving satisfaction clauses, has attempted to reconcile these three views and concluded that
courts have been right to regard all three views as cumulative and consistent and to avoid
taking sides in the scholarly debate between Professor Summers and Burton.[276]
From this American debate about the role of the duty of good faith performance, we
can deduce the following. First, in accordance with Farnsworth's view in his early article,[277] the
duty of good faith performance can be the source of what common law lawyers would call an
implied term - a duty that would be supplied by a court to specify the grounds for a party's
dissatisfaction in the contract. Second, in accordance with Professor Summers' view, the duty
of good faith performance is a basis for holding a party in breach, if that party's claim of
dissatisfaction is a subterfuge or pretext to avoid performance of the contract for some other
reason. Finally, in accordance with Professor Burton's view, the duty of good faith
performance can provide the grounds for controlling the parties' exercise of discretion they
have under the contract. But this is a theoretical debate that has mainly attracted scholarly
interest and has not greatly troubled judges and lawyers.
It is, however, a debate that has assumed more practical importance when confronting
concerns about whether good faith is purely subjective - requiring only that a party "honestly"
believe that it is acting properly - or objective - requiring that a party in addition act in a
"reasonable" manner.
The definitions of good faith endorsed by some American courts are abstract and often
so sweeping as to be of little help in determining the proper standard. For example, it has been
said that the duty of good faith performance compels each party It is not clear whether this is an
objective or subjective standard of good faith. It is certain that the standard is not as
demanding as the standard of good faith imposed on agents and other fiduciaries. Thus, it has
been said that But even this formulation does not help clarify whether good faith is to be
judged solely by the traditional subjective standard of honesty or by an objective standard of
reasonableness.
If the duty of good faith were taken to include a component of fair dealing, as judged
by those in similar activities, this would incorporate an objective standard. This seems to be in
line with Article 2 of the Uniform Commercial Code, which imposes on a merchant a duty of
good faith that includes "
the observance of reasonable commercial standards of fair dealing
in the trade."[280]
Under this provision, courts may consider the testimony of witnesses familiar
with the behaviour of others in the trade in order to determine whether a party has passed the
objective test of "reasonable commercial standards of fair dealing" in that trade. In a case
involving a merchant buyer of goods (plane fuel) and a major oil corporation, the federal
district court noted the established industry practice that had long been part of the established
courses of performance and dealing between the parties, and held that the buyer had not
breached its duty of good faith under the contract, applying on the buyer the Code's definition
of good faith stating: "honesty in fact and the observance of reasonable commercial standards
of fair dealing in the trade."[281] The buyer had behaved fairly according to the understanding of
the parties based on their longtime relationship and on the understanding of others in the trade.
The above discussion of the concept of good faith in English and in American law hints
that English law may also be more receptive to the principle of good faith performance in the
future. The acceptance of the doctrine by common law jurisdictions in the United States and
the ratification by many common law countries of the CISG are evidence that such a
development is not as unlikely as it initially sounds. The development of the concept of good
faith in the common law world has proven the vitality and potential energy of the doctrine. Our
discussion of English and American jurisprudence has shown that even among related common
law systems the concept of good faith does not enjoy uniformity in interpretation or application. It is hoped that this examination of good faith in the above common law systems [282]
highlighted the non-uniform development of the concept even among different jurisdictions of
the same legal tradition. Trying to unify the content and scope of good faith at the
international level poses even greater difficulties, since the principle of good faith has endured
an equally distinctive, albeit very different, development in civil law systems.
(c) The concept of "Good Faith" in German Law
In the German Civil Code (BGB), which came into force on January 1, 1900, the
observance of "Treu und Glauben mit Rcksicht auf die Verkehrssitte" ("good faith and fair
dealing") - embodied in such general provisions as §§ 157, 242 BGB, but also repeated
throughout the code in more specific contexts - has become a legal principle of pervasive
influence in German civil law.[283]
Professor Schlechtriem notes the abundance of cases, theories, detailed rules and sub-rules that have emerged from § 242 BGB, since court decisions and scholarly theory have
applied the principle of Treu und Glauben under German law to almost every situation
governed by the Civil Code, in addition to the interpretation of particular contracts under §
157 BGB. Thus, very often overriding the text and the meaning of special provisions.[284]
The present writer believes that Professor Schlechtriem's statement appears to be
indicative of the reductionist impact that good faith can have on the law. A similar result for
the CISG would surely be unwanted and the German experience with a general clause like this
clearly points to the need to develop barriers to the unmanageable or anarchic use of Article 7.
Many German scholars, in an effort to define the meaning and function of § 242 BGB
more clearly, make a distinction between the functions and the values of the provision.[285] This
distinction can also be helpful in understanding how principles of good faith might work in the
context of a legal text like CISG.[286]
The Functions of Treu und Glauben
To understand the functions of such a principle, one must ask what was the legislator's
intention originally and where and with what intent was the principle employed by courts
subsequently.
The German courts have also based contractual duties of care on § 242 BGB. These are duties
of care to protect the life, personal property and economic assets of the parties and bear a
close resemblance to duties of care under tort law in common law. They were developed as
implied obligations in contracts in order to cure deficiencies of German tort law (e.g., in
regard to the burden of proof of negligence and vicarious liability).[288] It is unlikely that the
concept of good faith in Article 7 has such far-reaching ambit.
The Values and Standards of Treu und Glauben
The discussion of the function of good faith in German law only covered one part of
the bipartite distinction that German scholars have drawn in their analysis of Treu und
Glauben. To complete our discussion of the principle, we must now focus on the issue of the
values and standards that are used in the principle's application in a specific situation. During
this discussion, we must again keep in mind the distinction between interpretations and results
within a national context on the one hand and the international setting of the CISG on the
other, as well as the distinctions among the various national values and attitudes regarding the
principle of good faith.[289]
In Germany, the values and standards used in such general principles as Treu und
Glauben (or: contra bonos mores, sittenwidrig) are derived from three distinct sources within
the German legal order.[290] The highest level and the most important set of values are found in
the German Constitution. Constitutional rights are afforded protection even in private dealings
and contracts; and this is achieved technically through the means of a general clause such as §
242 BGB and the principle of Treu und Glauben. There is nothing comparable to this in the
legal order surrounding the CISG. In fact, the CISG seems, from one angle, to be floating in a
legal vacuum and without any "hard law" structures around it to provide support.
Unfortunately, but unavoidably, the CISG cannot enjoy the support of a general contract law,
as there is none at the international level. The relationship of the CISG to the UNIDROIT
Principles and other international legal instruments or pronouncements certainly cannot be
compared with the respective relationship of the German Civil Code to the German
Constitution.
The values of the good faith principle in Germany may also be derived from other parts
of the legal order, including the Civil Code itself. The structure and substance of the
provisions of the Code depict the methodology and values used by the legislator to solve
specific problems and the general principles upon which such a solution is based. These
evaluations allow inferences as to more general values and standards, which can be used to
interpret Treu und Glauben itself. A similar process can exist to define the value or standard
of good faith in the CISG and is in fact promoted in the wording of Articles 7(1) and 7(2).
Finally, another important level of values and standards of Treu und Glauben is not
attributable to a specific legal act or theory but can be described as collective conviction;
standards that every reasonable human being would regard as fair and decent. It is difficult to
define the mores of a whole community, and although the courts claim they express the
community standards, it cannot be denied that there is a real danger that a general clause like
Treu und Glauben may be abused by judges to exercise personal prejudices and biases. On the
other hand, the community of the CISG is a specific one - that of international merchants.
This fact works in its favour since it focuses the question of "community standards" on a
specific group of people engaged in a specific activity. Furthermore, Article 7(1) contains an
important limitation in that it expressly directs the search for the standards for good faith and
fair dealing to "international trade." This provision rejects values based on national
constitutions or derived from a national code of obligations, and renders most national
judgements based on domestic convictions of what constitutes good faith and fair dealing
almost useless. Domestic standards may be taken into account only to the extent that they are
shown to be generally accepted among the various legal systems and therefore can be regarded
as international.
Some further assistance on this issue is provided by the definition of international
usages in Article 9(2) CISG, which restricts the implication of an agreement of the parties to
those usages, which "in international trade are widely known to, and regularly observed by,
parties to contracts of the type involved in the particular trade concerned." Essentially, what
Article 9(2) CISG states on usage standards - and what one must look at when defining the
standard of good faith in CISG - is that such standards must be explored in a given case and
have to take account of the particular relationship of the parties.[291]
The definition of the standard of good faith in the CISG - as with the application of
Treu und Glauben in German law - will be developed incrementally as various courts and
tribunals decide the issue, until a generally held conviction is eventually formed among the
members of the CISG community. In forming such a generally accepted definition of good
faith, domestic convictions as to what good faith and fair dealing means and national views of
what good faith and fair dealing in international trade is will have to be overcome.
As stated earlier in this chapter, the concept of good faith is arguably one of the most
important and difficult notions in the CISG and its definition will go a long way towards
settling the fate of the CISG itself. The problem of the definition of good faith in international
trade as provided in the CISG is set. Knowledge of the potentially grave dangers hidden in the
problem must make everybody involved in the development of CISG (i.e., merchants, lawyers,
judges, arbiters) wary of the difficult but important parameters required for its solution. The
solution will involve a transitional period - hopefully not an indeterminate or fatally long one -
of overcoming the natural tendency of homeward interpretations.
5. GOOD FAITH AND THE CISG
As was highlighted above, "good faith" is a concept that plays an important role in the
interpretation and the application of the CISG. It is a legal notion loaded with meaning and it
has provided much of the debate surrounding the CISG in general, as well as Article 7 in more
depth.[292] Having examined the function and standard of the concept of good faith in some
national legal systems, let us now examine the operation of the concept within CISG. The
textual reference to the concept of "good faith" in Article 7(1) reads as follows:
"In the interpretation of this Convention, regard is to be had to its international
character and to the need to promote uniformity in its application and the
observance of good faith in international trade."[293] The starting point of our analysis must be the textual acknowledgement that the
reference to "good faith" in the interpretation provision of Article 7(1) is limited to
interpreting the Convention. In the CISG, there is no explicit general obligation - as there is in
the Uniform Commercial Code [294] - imposed on the contracting parties to act in good faith when
performing or enforcing contractual or statutory duties. This limited reading of the role of
"good faith" in the CISG is clearly the one supported by the legislative history of the
Convention.[295] It is worth noting that the 1964 Hague Uniform Laws do not refer explicitly to
good faith and that in the CISG the reference to good faith is deliberately limited to questions
of interpretation in Article 7(1).
Despite what can be seen as an explicit rejection of a direct good faith obligation placed
generally upon the contracting parties, a consequential narrow reading of Article 7(1) has not
attracted total acceptance and has not remained unchallenged. Some scholars have suggested
that, in fact, Article 7(1) does impose a general obligation upon the contracting parties to act
in good faith,[296] notwithstanding the language of the article and the legislative history of the
Convention.
Perhaps the highest degree of confusion is generated by the completely legitimate recognition
of good faith as a "general principle" of the CISG [297] for gap-filling purposes.[298] What is less, if at
all, legitimate is the subsequent catapulting of the concept of good faith as a "general
principle" of the CISG under Article 7(2), into the interpretative mechanism of the CISG
under Article 7(1), through the reference to "good faith in international trade." The
interpretative scope and function of the reference in Article 7(1) are altered by such a
definitional distortion - an illegitimate expansion of the concept in Art. 7(1), according to the
legislative history of the CISG - which, if accepted, would entail a direct and positive duty of
good faith upon the contracting parties. This interchangeable, or rather indiscriminate, use of
the concept of good faith between the two distinct, albeit related, provisions of the CISG is
responsible for much of the confusion surrounding the exact nature of the concept - a fact
evidenced by the divergence of academic opinion. This divergence of opinion is important
since the answer to the question posed - whether the reference to "good faith" in Article 7(1)
is to be read narrowly or not - carries many implicit complexities, which make the question of
how "good faith" relates to the Convention more intricate. The resulting intricacies are
evidenced by the following treatment of at least three different classes of cases [299] that a user of
the CISG could face.
(i) Cases that involve interpretation of the CISG (i.e., other CISG provisions) to promote
good faith in international trade.
The application of the concept of good faith, as this is expressed in Article 7(1), in
instances where such application would facilitate the reasonable interpretation of another
CISG provision. This point is illustrated by the following example of a case to which Article
7(1) would apply is a generally accepted idea. According to Article 24 CISG, a declaration of
acceptance "reaches" the addressee when "it is ... delivered ... to his place of business or
mailing address." If a party knows that the other party, who has a place of business, is away
from his home for a considerable period of time, and he nevertheless sends the declaration to
the mailing address, he may violate the requirement of good faith.[300] Thus, the concept of good
faith is used to act as a limitation on the literal meaning of the requirement that a declaration
"reaches the addressee;" it acts as an implied proviso.
(ii) Cases where neither the CISG nor the contract provide an answer (i.e., where there is a gap praeter legem in the CISG).
In this class of cases, the concept of "good faith" can acquire a role different and more
expanded than the one in the preceding class. There is academic opinion in support of such a
development. For instance, Professor Kastely makes a persuasive case that implicit in many of
the Convention's provisions is an obligation to act in good faith.[301] From these provisions can be
distilled a general principle of good faith performance, which under Article 7(2)[302] should be
used to fill gaps praeter legem in the CISG.[303] As a logical consequence of this argument, the
concept of good faith should not only be considered when interpreting the Convention text
(i.e., in the class of cases considered above), but also when filling gaps in the CISG.[304] The
following is an example of how this view on the expanded good faith concept might operate in
filling a gap in the CISG's provisions.[305]
In a hypothetical contract for the sale of goods governed by the CISG, the seller's
contractual obligations require that the seller performs by handing over to the buyer
documents relating to the goods for sale, without, however, specifying the place where the
delivery of the documents can take place. Turning to the CISG, we note that Article 34 CISG
states: "[i]f the seller is bound to hand over documents
he must hand them over at the time
and place and in the form required by the contract." In this instance, both the contract and
CISG are silent on the place of delivery. A general obligation to act in good faith would
require the seller to deliver the documents at a place that is convenient to the buyer, and the
buyer not to arbitrarily refuse delivery of the documents.
(iii) Cases where the contracting parties have agreed on a contract term, whether or not there is a relevant CISG provision.
The agreement by the parties of a contractual term, in a contract governed by the
CISG, will derogate from any relevant provision of the CISG. There is no opposing view to
this, as Article 6 clearly states.[306] In such a case, can it be said that there is an obligation to act
in good faith when interpreting the rights and obligations that arise from the specific
contractual term?
A narrow reading of Article 7 would suggest that these cases would not be covered by an
obligation of good faith. An example of this can be the hypothetical case of a declaration of
acceptance to an offer. In a sales contract stating that notices are to be mailed to a specified
address, is the requirement of good faith violated by a party which, while it knows of the
absence of the other party from the mailing address agreed upon, nevertheless sends a notice
to that address? At least one author has suggested that there is an obligation of good faith in
such a case because he sees no distinction between interpreting the CISG and interpreting the
contract. In that author's opinion, If the concept of good faith is excessively expanded to apply to contract terms that derogate
from the CISG, but are agreed by the parties, and that expansion is justified on the ground that
where the good faith concept is correct, it can extend this expanded obligation to all possible
cases, this should give rise to concern. Particularly as this result is expressly disapproved by
UNCITRAL and the Vienna Conference.[308]
Since the fate of most theoretical subtleties is sealed in the arena of practice, the
application of the good faith concept in the CISG will take some time to crystalise. Professor
Winship is of the opinion that whether or not the logic of the above view - i.e., the expanded
operation of the concept of good faith - wins the current academic debate, eventually a
general obligation on contracting parties to act in good faith is more likely to be accepted.[309]
The relationship between the CISG and the UNIDROIT Principles[310] might provide some
theoretical support to such a development. This relationship and the respective role of "good
faith" in both instruments are examined in the following section of this chapter.
6. UNIDROIT PRINCIPLES, GOOD FAITH AND THE CISG
It is arguable that the UNIDROIT Principles can aid in clarifying the actual object of the
good faith principle contained in the CISG. As was mentioned earlier in this chapter, the CISG
includes the good faith principle in Article 7(1), which provides the rules on the interpretation
of the Convention as a uniform international law. This Article provides that the CISG is to be
interpreted and applied in a manner that promotes "the observance of good faith in
international trade". As many commentators have observed, however, the Convention "does
not contain an express provision that the individual contract has to obey the maxim of good
faith".[311]
In sharp contrast, there is no reference to good faith in Art. 1.6 UNIDROIT Principles,
which provides for the proper interpretation of the Principles. However, Art. 1.7 UNIDROIT
Principles, clearly states that the parties to a contract not only must act "in accordance with
good faith and fair dealing in international trade" but also that they cannot exclude or limit
this duty.
In addition to the above differences, Professor Magnus has observed further important
differences between the two instruments, by pointing to Art. 4.8(2)(c) UNIDROIT Principles,
which lists "good faith and fair dealing" as an element to be considered when supplying an
ommited term into a contract, as well as to the UNIDROIT Commentary to the Principles,
which also acknowledges that the good faith principle "may also be seen as an expression of
the underlying purpose of the Principles" and may be used in interpreting the Principles.[312]
Commentators who support the view that the concept of good faith in the CISG also
applies to the interpretation of the individual contract and to the parties' contractual
relationship, believe that "despite these obvious differences of wording both texts accord in
their essence."[313] It must be noted that the good faith concept under examination has the same
unique feature in both cases; it is international in character. As such, good faith in the context
of both CISG and UNIDROIT, must acquire and retain its own unique supra-national identity
and avoid existing national connotations or loadings.[314] This conclusion demands an
autonomous interpretation of the concept in question and it is in accordance with the present
writer's thesis on the proper interpretation of CISG.
Although it is expressly clear that the concept of "good faith and fair dealing in
international trade" circumscribes the conduct of the parties under the UNIDROIT Principles,
it is less clear what the object of the maxim is in the CISG. The initial point of the enquiry
must be a contextual analysis of the definition and the operation of good faith. Professor
Magnus has juxtaposed the application of certain rules relating to good faith in the CISG and
the UNIDROIT Principles.[315] For instance, while CISG and UNIDROIT both have almost
identical rules on what constitues an irrevocable offer,[316] the Principles impose liability on a
party who "negotiates or breaks off negotiations in bad faith"[317] and therefore demand from the
parties higher standards of good faith, than does CISG, concerning precontractual
obligations.[318]
Despite these differences, Magnus believes that the Principles can yet be helpful "for
cases where the parties negotiate on a modification or termination of an existing CISG
contract",[319] and points to almost identical provisions in CISG and UNIDROIT, concerning oral
modification clauses, where the conduct of parties creates "a situation of reliance and acting
on it overrides rules of strict formality".[320]
There is, however, no room for comparative analysis between the CISG and the
UNIDROIT Principles on issues of contractual validity.[321] The Principles contain provisions that
deal with the issue with the question of material validity of contracts[322] and apply the good faith
principle here as well,[323] while CISG does not deal with such issues.[324]
On the other hand, Professor Magnus has pointed to certain provisions in CISG, not
found in UNIDROIT Principles, that concern express contractual obligations of the parties and
arguably contain good faith elements and notions - such as that of reasonableness.[325] Although
contractual obligations cannot be implied by good faith in a contract governed by CISG, in
contrast to the position in the UNIDROIT Principles,[326] Magnus has argued that
"[n]evertheless, it is widely accepted that also under the CISG additional obligations can be
implied
a general duty to co-operate",[327] and according to him this rule "can be understood as
expression of the general principle - based on good faith - that neither party must hinder
performance through the other nor otherwise militate against the contractual purpose."[328]
Professor Magnus has highlighted further instances where provisions of the
UNIDROIT Principles could aid the interpretation and application of CISG provisions which
are either not explicitly regulated due to the similarities of the two instruments in letter and in
spirit.[329]
Despite some textual and other minor differences, is it plausible to argue that the CISG
and the UNIDROIT Principles treat the general concept of good faith in international
contracts in similar fashion, and with similar attitude? The answer is not simple, but very
important, since it could entail significant ramifications for the interpretative nature of Article
7 of the CISG. Magnus has concluded that: [330]
"Both the CISG and the Principles acknowledge that good faith plays an important role
for international contracts. Furthermore, both texts do not exclusively rely on one
abstract and general rule of good faith but try to specify the concept by more specific
rules that elaborate on the principle in some detail. In a number of situations, the
Principles prove to be of helpful assistance for the good faith interpretation in the
CISG Combining the CISG and the Principles one gets a good impression what good
faith in international commercial relations should and could mean."
Although the argument offered by Professor Magnus in his commentary on Article 7
CISG is quite forceful, the present writer believes that there are certain important issues that
counter its strength and need to be highlighted.
Unlike the Principles, the CISG contains neither an express provision about good faith
in individual contracts, nor one governing the precontractual phase. In addition, the legislative
history of the CISG should also not be overlooked, especially when it concerns complex
concepts - such as good faith - that are laden with socio-legal and political significance. The
concept of good faith is called upon in the CISG to guide the interpretation of the unified law
text itself, and in the Principles in order to prescribe the behaviour of the parties in every
specific contract. According to the present writer, the expansive view supported by some
scholars, who attribute a double-role to good faith in the CISG, is not be sufficiently
convincing. Although it will be argued in this thesis that the UNIDROIT Principles indeed
have an important helping role in the uniform interpretation of the CISG, the present writer
maintains that the solution to the definitional and functional parameters of the concept of good
faith in the CISG cannot be provided by a simple synthesis of the relevant provisions in these
two instruments.
The alternative view, as expounded by Magnus in his commentary and analysed by the
present writer above, that under both instruments the concept of good faith could fulfill a
twofold function - i.e., that it could govern, together with other decisive factors, "the meaning
of the abstract law rules, as well as the individual contract" - arguably carries a great deal of
appeal. Particularly so because it could solve many of the present interpretative difficulties in
the CISG. The general affinity between the CISG and the UNIDROIT Principles adds some
merit to such a proposal. But, on the existing evidence, this view is not entirely convincing.
The present writer agrees, however, with Magnus that an "international standard of
good faith may already exist and may clearly be revealed and defined" (e.g., in business sectors
with a long-standing tradition, or as part of the old lex mercatoria). Indeed there is plenty of
potential for a modern standard of the principle of good faith that may not exist yet as a fully-fledged principle of the modern and (potentially) unified law of international sales. But it
remains to be developed by traders, lawyers, arbitrators and courts, while interpreting the
CISG. It is the view of the present writer that the concept of good faith in the CISG, as it
stands presently, is circumscribed to the interpretation of the law - including the filling of any
gaps in it - and should not be allowed to impose additional duties of a positive nature to the
parties, as it does in the UNIDROIT Principles. As was argued in the previous section, the
present writer believes that the concept of good faith in the CISG, along with the direction of
the CISG and its interpretation, will become clearer with the further development of relevant
case law.
7. ULIS PRINCIPLES AND CISG
A comparative look at the equivalent provisions in CISG's predecessor, ULIS, may
also be informative in our search for CISG's proper interpretation and application.
Herber has noted that although ULIS Arts. 2 and 17, which provide the principles for the interpretation and application of ULIS, "were
not adopted in the same form in the CISG",[331] he is of the opinion that "the principles to be applied in order to fill gaps do not materially differ from those in ULIS. Reference may therefore by made to the case law and literature on Art. 17 ULIS."[332]
If Herber's view is correct, then ULIS case precedents could be validly used
to aid in the interpretation and application of Article 7 CISG. One such ULIS case precedent
can be found in a German appellate court decision which has been described as a "precedent
for having the Convention itself accomplish that which is customarily accomplished by
domestic unconscionability statutes" - an issue that seems to involve a notion of good faith:[333]
Professor Schlechtriem has relied on this precedent to argue that:
"Thus the [Vienna] Convention is not just a gap-filler. It may under certain
circumstances also be a yardstick for the validity of clauses that the parties have not
really agreed upon but that one has imposed upon the other through the use of
standard terms or other means."[334]
While the above ULIS case was decided correctly and can provide a helpful precedent,
Professor Schlechtriem has, with respect, stretched its importance beyond its legitimate reach.
It is clear that "except as otherwise expressly provided in this Convention", the CISG is not
concerned with the validity of the contract or of any its provisions.[335]
Van der Velden has brought to our attention a further ULIS precedent - that of
"reasonableness" being a general principle of the Convention - which may also apply in the
interpretation and application of CISG, if Herber's view above is accepted. In his survey of the
interpretation of the CISG by Dutch courts, Van der Velden refers to an Amsterdam Court of
Appeals decision, where the principle of "reasonableness" was discussed in the context of
ULIS Art. 62(2) - dealing with the length of the period of time set for payment - and it was
said that:
"The Uniform Law on International Sales ... uses in its Articles 10, 11, 18, 22, 26(1),
26(4), 37, 42(2), 61(2), 66(2), 74, 88 and 91 the words 'reasonable', 'unreasonable'
and 'reasonably'; 'reasonableness' is therefore one of the general principles by which,
in accordance with Article 17 ULIS, questions not expressly settled in the uniform
sales law shall be answered."[336] Herber has also provided further instances of case law,[337] where courts have held either
that Article 7(1) CISG "confirms that principles may be based on the notion of good faith",[338] or
that other principles can be derived from the need to observe good faith in international trade;
one such as principle being "the prohibition of the misuse of rights".[339]
However, it must be noted that not all general principles established by ULIS case law [340] can be
readily adopted in the interpretation and application of CISG. The main obstacle to their
incorporation into the CISG is the reference in Article 7(2) CISG that, in the absence of any
general principles upon which the Convention is based, "[q]uestions
are to be settled
in
conformity with the law applicable by virtue of the rules of private law."[341] It is the opinion of
the present writer that CISG is a self-contained body of rules, independent of and distinct from
the different domestic laws. The recourse to rules of private international law in the
interpretation of CISG hinders the search for the elusive goal of uniformity by producing
divergent results. Supported by analysis of the existing doctrine, as well as by case law, this
thesis argues that the necessary legal backdrop for CISG's existence and application can be
provided by general principles of international commercial law, such as those exemplified by
the UNIDROIT Principles and the PECL. Such a development would in many instances aid in
rendering the textual reference in Article 7(2) CISG to private international law unnecessary; a
positive step towards uniformity.
8. GAPS IN THE LAW: ISSUES OF VALIDITY
Commentators have expressed concern that common law judges are less familiar than
their civil law counterparts with the process of drawing out general principles from particular
statutory rules.[342] It is hoped that judges hailing from the common law jurisprudential tradition
will make the effort to elaborate such general principles from the provisions of the CISG. It is,
however, just as crucial for the longevity of the CISG that judges - whatever legal tradition
they represent - will refrain from unnecessarily finding gaps in the CISG. Because of the broad
language used in much of the text of the CISG, a judge so inclined will not find it difficult to
find gaps.
It has been correctly, as well as imaginatively, said that the issue of validity represents a
"potential 'black hole' removing issues from the Convention's universe."[343] Due to this
obviously serious threat to the CISG's well-being, attention must be paid to it. (This is also the
case with the latent problems in Article 7(2) and the potential threat to the CISG's uniformity
posed by recourse to the rules of private international law).[344]
The CISG deals with issues of validity in Article 4. This article states that
The real concern in the
interpretation of the CISG is that a judge so inclined may find issues of validity much more
readily than anticipated by the drafters of the CISG and thereby turn to national law solutions,
side-stepping the application of the CISG and thus rendering it virtually obsolete.
A brief look at the legislative history of Article 4(a) of the CISG reveals many
differences from the quite elaborate drafting history of Article 7(1).[345] This can be the starting
point in the examination of the danger posed to the CISG's interpretation by issues of validity
in a contract.
A similar exclusion of issues relating to the validity of contracts as is present with the CISG,
appears in the 1964 Conventions on uniform sales law. More specifically, Article 8 of the
Uniform Law on the International Sale of Goods provided that
Upon consultation of the unofficial commentary to the Uniform Law, prepared by Professor
Tunc, we note the difficulty that the issues of validity presented in those efforts to produce the
ULIS.[346] Although the Bulgarian delegate suggested that the Uniform Law should include
references to validity,[347] there was no protest to the exclusion of the issue of validity and
virtually no discussion of the provision at the 1964 Hague conference. As far as the meaning
of "validity" is concerned, the records of the 1964 uniform laws provide little guidance. What
we find is an inclusive definition of sorts, rather than one of clarity. It is suggested by
Professor Tunc, in his commentary, that the issues of validity included questions of "the
capacity of the parties or the exchange of their consents or in regard to vitiating factors," as
well as "[municipal] regulations of a police character or for the protection of persons."[348] In
addition, a French comment on a draft text gives the examples of rulemaking agreements
unenforceable for lack of writing or for lack of a specified price.[349] This is all that can be found
on point.
It can be deduced from the above observations that the topic of exclusion of issues of validity
was not seen as controversial, or at least was not treated as such, during the UNCITRAL
deliberations of the Uniform Sales Law (1964). In similar tone, in 1977, when the text was
placed before the UNCITRAL session revising the uniform sales law, in preparation for the
launching of the CISG, it was suggested that the provision relating to issues of validity (Article
8 ULIS) be deleted because it was merely declaratory. The argument ultimately prevailed that
such a provision was useful in preventing "overruling [of] domestic law on validity of
contracts."[350]
Researching further the work of UNCITRAL's Working Group on International Sales
on the inclusion or exclusion of validity issues in the CISG, it is only noted that the topic was
studied at the Working Groups at the eighth and ninth sessions, and it was ultimately
concluded that there should not be any rules on validity.[351] The 1980 diplomatic conference in
Vienna approved the final draft text of Article 4 with very little debate.[352]
There is academic support for the belief that despite this apparent lack of controversy
surrounding it, Article 4(a) has the "potential for mischief."[353] This concern stems from the
realisation that the rationale for excluding issues of validity from the realm of the CISG's
concerns is linked to the differences in approach to the issue by the divergent legal traditions.
It is, however, the same reason that could tempt the interpreters of the CISG to enforce
domestic rules on validity issues of contracts governed by the CISG, either those of the forum
or of the state whose laws would apply by reference to the rules of private international law.
Such a development is to be avoided since it could prove a back-door introduction of
divergent national laws and ethnocentric interpretations to CISG contracts. This would further
attack the idea of international uniformity that the CISG is trying to inspire. It has been
suggested that some steps must be taken to guard against this danger.[354] The solution can come
from within the CISG and its in-built mechanism of interpretation and application: Article 7. It
is expressly directed by Article 7(1) that the text of the Convention is to be read in a manner
that respects its international character and promotes its uniform application. Article 4(a) is
part of the CISG text, so it must also be read according to these rules. Accordingly,
interpretation of "validity" is not initially a question of domestic law. As Professor Honnold
has written, If the same operative facts are involved, then the CISG will provide the answer and there can
be no exclusion of issues of validity in a sales contract. This will be the case, for example, with
some aspects of the civilian concept of "error".[356]
It is possible that a common code of meaning could be given to "validity" as used in
the CISG. As Professor Winship notes, most countries will not enforce agreements on the
grounds of illegality, capacity, fraud, mistake and duress.[357] Less definite concepts, such as
unconscionability, could, however, provide instances for divergent interpretations. On this
point, Professor Schlechtriem suggests that the contractual clause should be governed by the
CISG, rather than by domestic law. Schlechtriem is of the opinion that a contract clause that
limits recoverable damages for foreseeable losses should be valid because of the damage
principles of the CISG (as per Articles 74, 76) even if domestic law would declare such
clauses unconscionable.[358] However, such a use for Article 74 CISG is unlikely, as it is arguable
that while the said article provides for the general recovery of consequential damages, it says
nothing about the surrender of this right.
Professor Winship has examined instances where the CISG might not be able to
overrule a domestic law on an issue of the validity of a contractual clause. Such a case arises
with a contract clause that purports to liquidate damages, but which would be unenforceable
in an Anglo-American jurisdiction as a penalty clause.[359] This issue is not addressed in the
CISG's current damage provisions, and while the contracting parties are free to exclude or
derogate from the CISG, under the expressly enunciated principle of freedom of contract (Art.
6 CISG), that principle is subject to the express exclusion of validity issues.
In conclusion, we have a division of academic opinion on the dangers that issues of validity
pose to the growth of the CISG. While Honnold is of the opinion that Article 4(a) does not
provide a large door for escape from the Convention,[360] Winship is concerned that the Article
4(a) exclusion can be a "potent force" undercutting the effort to unify - or at least, harmonise
- uniform law, and thus, must be interpretated narrowly.[361] What is common to both views -
and is also shared by the present writer - is the desire that interpreters of the CISG avoid
strained ethnocentric interpretations of any of its provisions that could lead to its practical
isolation from the world trade place where it deserves to be. Issues of validity will provide a
big test of the strength of that same desire among other participants in the world trade.
9. A COMMON LANGUAGE
It has been noted earlier in this work that, throughout the many years of efforts
towards the unification of international trade law, the participants engaged in an ongoing
discussion of the goals and methods of the project.[362] A central theme in these unification efforts
was the formation and facilitation of an international community, whose members can
conceive relationships and resolve conflicts through the use of a new and common legal
language. The artificial nature of such a new linguistic construct is prescribed by the intrinsic
difficulties embedded at the core of the unification process itself. The parameters of the
definition and composition of the international community created by the CISG (as discussed
in Chapter 1 of this work) also permeate the issue of a new lingua franca.
As it was necessary for the drafters of the CISG to articulate a set of issues or topics
(and a set of terms in which to discuss these topics) when delineating its field of operation, it
was also necessary that the language used to express these issues reflect the values that
operate throughout the CISG. Thus, the terms of the CISG remain coherent and persuasive in
the eyes of the members of that community. Only the process that gave the CISG its
communality could give the CISG's language the requisite legitimacy for the present and the
potential for growth in the future. Only the principles underlying the community of CISG
could provide the basis for the new language found in CISG, because they suggest a common
origin for both the substance and form of the CISG community.
The drafters of the Convention, by drawing upon a general conception of contractual
relationships that is well recognised in many national legal systems, have organised the
discussion of international sales relationships according to the two general topics of formation,
obligations of the parties, and remedies for breach. The innovative part of the exercise is that,
in discussing these general topics, the CISG frequently uses words that refer to specific events
that are typical of international transactions. The rules on risk of loss provide good examples
of the use of event-oriented words. Article 67 CISG provides that:
"(1) ... the risk passes to the buyer when the goods are handed over to the first carrier
for transmission to the buyer in accordance with the contract of sale. ...
"(2) Nevertheless, the risk does not pass to the buyer until the goods are clearly
identified to the contract, whether by markings on the goods, by shipping documents,
by notice given to the buyer or otherwise."
In similar tone, Article 69 CISG states that "... the risk passes to the buyer when he takes over
the goods."
It becomes apparent that the drafters opted for the use of plain language, which refers
to things and events for which there are words of common content in the various languages of
the members that form the community created by the CISG. The decision to draft rules based
on overt commercial events is in line with the earlier analysis of the need to rid the new
language of words associated with specific domestic legal nuances.[363]
A remaining problem for CISG is the fact that there is no single international language.
In the diplomatic conference that adopted the CISG, the Convention was approved in six
official languages: Arabic, Chinese, English, French, Russian and Spanish.[364] The preparation of
the official versions was a co-ordinated effort of the United Nations language specialists, the
UNCITRAL Working Groups, and the Drafting Committee of the 1980 Vienna Conference.[365]
The solution of approving multilingual versions of the uniform law text is not a panacea, since
it does not solve certain practical problems. The first of such problems relates to the
production of adequate translations without error. The difficulty of translation and
reproduction of multilingual texts is illustrated, for example, by a typographical error in the
Argentinean copy of the CISG that resulted from the omission of a negative from the opening
passage of Article 2.[366] This would have resulted in the inclusion of consumer sales and other
transactions, which are explicitly excluded by the official versions of the Convention.
A second practical difficulty that arises under the regime of multilingual versions of the
CISG relates to the precision that each translation can achieve. In other words, it is nigh
impossible to expect each version of multilingual treaties to correspond to each other with
exact precision. The potential danger is that the words used in one language will carry
implications different from those in another.[367] This point is best illustrated when we consider
the terms "offer" and "acceptance". These two words are well known legal terms of the
common law jurisprudence and carry special weight of legal doctrine in that legal system. The
same is true of their equivalents in the Western European languages.[368] When these words are
translated in the other official versions, such as Chinese and Arabic, however, their translation
only operates on the linguistic level and misses the doctrinal depth of their legal heritage.[369]
It has to be conceded that, despite the wide composition of the drafting team and the attention
given to all official language versions of the CISG, the drafting debate tended to focus on legal
concepts drawn from either the civil law or common law traditions.[370] The problem facing the
drafters was how to bring under-developed legal systems, which are sometimes bereft of
specialist terms that have been developed in more developed systems, into an international
community of trading. As a result, most of the words and concepts used in the CISG are
Anglo-American or Western European in origin. This solution was one of necessity and its
ramifications must not be overestimated. It may be that certain words, albeit important ones,
were taken straight out of developed legal systems, but they do not (and should not) bring
with them to the CISG the special depth of meaning that they have in their original context.
Any interpretation of the CISG's terms that relies on specific national connotations will
be calamitous because what is wanted is an interpretation of the CISG that is not only uniform,
but truly international as well. Interpreters of the text must not violate the spirit of the law that
is embodied in the Preamble and the interpretation provisions of the Convention. The meaning
of the words imported from other legal systems must be circumscribed by their new context.
Their importation into the text of the CISG can only be seen as a means of assisting, rather
than dominating, the discourse between members of the community.
An important decision that the drafters of the CISG had to make regarding this issue was
whether to include in the CISG detailed definitions of significant terms.[371] The eventual choice
was to include some definitions as needed within the text of particular provisions,[372] but not to
have separate definitions of key terms as a separate part of the CISG.[373] This decision on
drafting style is a further indication of the wishes of the drafters to produce a law that
promotes international co-operation in its application. Kastely argues that this choice of
drafting style has rhetorical significance, since "detailed definitional sections On the other hand, Kastely notes that The drafting style of the CISG
promotes discussion of the meaning of the language found in it. Its interpretation cannot be
given to users of the CISG (i.e., the international trading community) in advance and pre-determined; rather, it will be the result of deliberation, discourse and co-operation among the
users. To facilitate an intelligible interpretation of its text, the drafters of the CISG
incorporated in it a set of values that define the community formed by the CISG and underpin
the principles that this community is built upon. The most fundamental value in the conception
of the CISG is the diversity of its members and the respect and equality that they are to receive
in that community. The Preamble is the first, but not the only, place where this value is
expressed:
"Considering that the development of international trade on the basis of equality and
mutual benefit is an important element in promoting friendly relations among States,
"Being of the opinion that the adoption of uniform rules which govern contracts for the
international sale of goods and take into account the different social, economic and
legal systems would contribute to the removal of legal barriers in international trade
and promote the development of international trade
"
The remedial provisions of the CISG are also structured to reflect the commitment to
equality in its formal parallelism between buyer and seller. Professor Hellner has observed that
The Convention expressly acknowledges the cultural, social and legal diversity that
characterises its member States, and provides that these differences must be treated with
sensitivity and sensibility. An example of this spirit is found in Article 8(2), which states that During the negotiation of a contract, each party should attempt to learn the
circumstances of the other. This will facilitate better understanding of the contract and
decrease the possibility of a fall-out. Similar language appears in Article 25, in the discussion
of "fundamental breach":
"A breach of contract committed by one of the parties is fundamental if it results in such
a detriment to the other party as substantially to deprive him of what he is entitled to
expect under the contract, unless the party in breach did not foresee and a reasonable
person of the same kind in the same circumstances would not have foreseen such a
result."[378]
Under this provision, the court or arbiter evaluating whether a breach is fundamental must
consider the particular background and circumstances of the party in breach. The commitment
to equal treatment and respect for the different cultural, social, and legal backgrounds of its
international members is consistent with other important values underlying the CISG, such as
commitment to keep the contract alive, forthright communication between parties, good faith,
etc.[379] The interpretation of the CISG must be guided by these enunciated principles.
10. DELIBERATION AND DECISION MAKING IN CISG
Our analysis of the structural issues presented by the conception of the CISG will now
shift to the means that provide for future deliberation and decision making within CISG's
community. Some commentators had hoped for the establishment of an international court
with jurisdiction over disputes arising under the CISG. The main advantage of such a
development would probably be the uniformity that a centralised judicial system can produce
on disputes arising within its jurisdiction. Although the internal correlation of decisions handed
down by a central judicial authority has superficial attraction, the idea has never been a
realistic possibility for the CISG.[380] The enormity of the financial task and the administrative
structures necessary for the establishment of such a closed circuit system are prohibitive for
the creation of a international commercial court. The long and laborious drafting history of the
CISG, coupled with the intrinsic diplomatic (i.e., quintessentially political) nature of such a
task, place any designs for the creation of a widely accepted international court almost into the
realm of the untenable.
The risk that inconsistent interpretation could frustrate the goal of uniformity in the
law was well understood by those working on the CISG.[381] This problem is not, however,
exclusive to the present structures administering justice under the CISG. All centralised
judicial systems are also prone to this danger (although there is ultimately a final appellate
level to provide redress). The nature of the CISG's subject matter (i.e., trade) is in itself
unsuitable to the time consuming, delay laden mechanism of a single judicial authority. As
such, the implicit assumption is that the CISG will be applied by domestic courts and arbitral
tribunals.[382]
The essence of the problem of the CISG's divergent interpretation lies with the interpreters
themselves; its nature is substantive and not structural. All the attention has been focused on
the necessity, for the various courts and arbiters applying the CISG, to understand and respect
the commitment to uniformity and to interpret the text in light of its international character.[383]
The only feasible solution to the problems associated with decision making under the CISG is
the "development of a jurisprudence of international trade."[384] Many commentators are of the
opinion that "the success of the Convention directly depends on the achievement of this goal."[385]
A useful common source of discussion is the Draft Commentary to the 1978 draft,
prepared by the Secretariat, even though it was not officially adopted by the 1980 Vienna
Convention.[386] The dynamic for developing a jurisprudence of international trade is established
in Articles 7(1) and 7(2). These are arguably the most important articles in the CISG, not only
because their central location and stated purpose demand detailed treatment, but also because
their success, or failure, will be determinative of the CISG's eventual fate. The debate
regarding the application of the CISG generally, as well as in individual cases necessarily
involves Article 7. Article 7(1) directs tribunals to discuss and interpret the detailed provisions
of the text with regard to its international character and the need for uniformity in its
application.[387]
Should interpreters of the CISG pay heed to the drafters' directions in Article 7 and to the
spirit of equality and loyalty with which the CISG is imbued, then Article 7 will have
contributed to the coherence of the precariously fragile international community. Article 7(2)
provides the important mechanism for filling any gaps praeter legem in the CISG and thus
complements Article 7(1) by laying the course for the text's deliberation and future
development. Thus, the CISG acquires the flexibility necessary to any instrument that attempts
to deal with a subject matter as fluid and dynamic as international trade.
The spirit of international co-operation extends to the treatment that tribunals will
afford to decisions of other national courts that are as significant as their own interpretation of
the Convention.[388] Article 7(1), by directing an interpreter's attention to the CISG's
international character and stressing the goal of uniformity, emphasises the need for an
international discussion among different national courts. Although the CISG, once ratified,
becomes part of the domestic law of each member State, it does not lose its international and
independent character. The thoughts, decisions and reasoning of domestic courts are property
of the international community that the Convention serves.
Of course, this international discussion and co-operation is not limited to the activity of
courts and tribunals. It also extends to the deliberations of individual traders and their
representatives. A study of the remedial provisions found in the CISG reinforces this point.
Forthright communication between the parties regarding their rights and obligations following
a breach is not only expected but also required. Articles 46 and 62 provide both the buyer and
the seller with the right to performance.[389] The drafters thought that explicit recognition of such
a right was important, even if it was not eventually enforced by injunctive order.[390] The
existence of the right should be a factor in the negotiations between the contracting parties
after a breach of contract has occurred. Although the foreseeability of a development (such as
the one anticipated above - i.e., that contracting parties will engage in discussion) is not
always equivalent to planning for, or achieving, that development, the contracting parties are
urged to notice and follow the suggested course of action. The CISG makes this clear with its
numerous references to this modus operandi. The seller's right to cure,[391] the duty to mitigate
loss,[392] and the obligation to preserve goods[393] are clear indications of the need for discussion,
negotiation and co-operation at all levels within the CISG. The CISG provides both the
manner and the form in which such a development can occur. The manner is prescribed by the
principles enunciated and accepted in the text and the form is provided by the new lingua
franca used to express these principles.
All this activity is accommodated using the language of the CISG and as sellers and
buyers discuss and define their mutual rights and obligations, not only do they directly strive to
make their specific contracts workable but they indirectly enrich the international language of
the CISG as well. Opportunities for deliberation and decision making are required by, and
provided for, in the CISG in a way that can ensure not only the CISG's coherence but its
future development as well.
11. CONCLUSIONS
International trade has always been subject to numerous domestic legal systems,
whether by the express choice of the contracting parties, or by virtue of the rules of private
international law. The disputes arising out of international sales contracts have been settled at
times according to the lex loci contractus, or the lex loci solutionis, or the lex fori. This diversity of the various legal systems applied has hindered the evolution of a strong, distinct
and uniform modern lex mercatoria. The jurisprudential heritage of the applicable law each
time has represented the different political and cultural context responsible for that law and has
created legal uncertainty and imposed additional transactional costs to the contracting parties.
The burden has usually been carried by the weaker party, thus initially creating (and
subsequently maintaining) an imbalance of power in favour of the party with the greater
bargaining strength. The unification of law is generally desirable and its appeal is not based
solely on material considerations since it also promotes and fosters international peace and co-operation among States. The unification of international commercial law is even more
desirable from a trader's point of view since it can reduce legal conflict and transactional
costs, which is preferable to conflict solution devices, such as choice of law clauses.[394]
Unification of the law inevitably entails changes in the legal outlook of courts,
scholars, practitioners and traders throughout the world. In the place of national commercial
laws, the CISG represents the new way of addressing the complex relationships of
international trade. In order to achieve such an ambitious goal, the CISG has created and
defined an international community of sellers and buyers. The input to the creation of the new
unified legal construct has been wider than ever before, because it was crucial for the
development of that community that its members consider themselves governed by this new
common legal system that they themselves have helped create.
To facilitate the activities of that community, and to keep it united, the CISG has
attempted to introduce and establish a community where its members can communicate,
deliberate and co-operate with each other using a new common language. What appears
initially as a textual community (composed of the CISG's authors and the States, courts,
lawyers and others who make up its audience) can eventually evolve into a fully-fledged
community of people engaged in deliberation and transactions beyond the text of the CISG
itself. This activity will improve the CISG's established system of discourse and deliberation
by enriching its language and strengthening the coherence and persuasive force of its
underlying values. On the other hand, this textual community will remain lifeless without the
activity of States ratifying CISG and people discussing it and using it in their daily
transactions.
Our initial treatment of the nature of international sales law and the aspirations of the CISG
has, however, revealed a number of further factors significant to its success and development.
The wide participation in the drafting of the CISG and its wide adoption rate are not sufficient
elements for the achievement of uniformity in international sales. The decision of sellers and
buyers to carry out their business under the provisions of the CISG is necessary, but also not
sufficient. It is equally important for the long-term success of the CISG to achieve uniformity
in the interpretation of its provisions by the national courts or tribunals applying them. Should
domestic tribunals introduce divergent textual interpretations, this new unified law will be
short-lived.
The success of the CISG depends, in large part, on the coherence and the quality of the
treatment it receives from courts, arbiters, lawyers, and scholars interpreting some individual
provisions that lack clarity or contain ambiguous language. The CISG is, and must be treated
as a text that contains a comprehensive set of significant provisions and a set of values
underpinning these provisions. If domestic law is invited and used in the CISG's domain -
whether in interpretation, or gap-filling - the CISG's language will lose its integrity and the
whole structure will probably collapse. Individual problematic provisions can and must be
construed with regard to the CISG's underlying values, if the overall structure is to be
reinforced and enriched. This is the mandate expressed in Articles 7(1) and 7(2). The direction
taken on this issue will determine whether the members of the CISG's community form a true
community of entities that abide to a uniform law, or simply a collective of independent
entities who at times co-operate with each other via a harmonisation of sorts on specific
topics.
During the formative stages of the CISG itself, numerous difficulties arose and were resolved
through debate and compromise among the diplomatic delegates to the Vienna Convention -
itself a rhetorical process.[395] The adoption of the CISG, being essentially a political act by the
governments of member States, made it inevitable that the final version of the CISG contain
several textual compromises, which, in fact, are unresolved substantive difficulties. The most
significant of these difficulties relate to the CISG's gap-filling procedures and its use of
Western legal concepts; they are issues that highlight the precariousness of the community
contemplated by the Convention. These problems have already been introduced and underlined
and will be discussed in more detail in the following chapters of this work.
CHAPTER 3: ARTICLE 7(1) OF THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS
1. Introduction
1. INTRODUCTION
Article 7 of the CISG states:
"(1) In the interpretation of this Convention, regard is to be had to its international
character and to the need to promote uniformity in its application and the observance
of good faith in international trade.
"(2) Questions concerning matters governed by this Convention which are not expressly
settled in it are to be settled in conformity with the general principles on which it is
based or, in the absence of such principles, in conformity with the law applicable by
virtue of the rules of private international law."
From a systematic viewpoint, Article 7 can be divided into three parts:[396]
This chapter will attempt to highlight, and then analyse, the main issues that arise in relation to
Article 7(1), in order to help understand the structure, scope and function of the article.
Article 7(2) demands separate treatment and is analysed in the following chapter of this work,
although certain unavoidable (and at times necessary) cross-references, or overlapping
discussion, between the two paragraphs of the article are made in the current chapter.
The first part in the triadic classification of Article 7, above, is probably the most
important one since it not only stresses the character of the Convention and its all-important
goal of uniform application, but it also describes "the process by which those called upon to
apply the Convention to a particular case ascertain the meaning and legal effect to be given to
its individual articles."[397] In effect, the first part of Article 7(1) is the tool that determines the
precise scope of the other two parts of Article 7, as well.[398]
It could be argued that the second part's concern for "good faith" might be used, in the
facts of a particular case, to persuade a court to depart from a settled interpretation of the
Convention and thus run contrary to uniformity, if only because its meaning and scope are so
unclear.[399] If such an argument were successful, some discordance could be created between
parts (a) and (b) of the above classification.
It is the opinion of the present writer, however, that the possibility for such discordance
between parts (a) and (b) of the triadic classification is negligible because the concept of good
faith does not stand alone in the CISG; rather it carries the "international trade" qualification
that circumscribes its scope in a manner consistent with part (a).
Article 7(1) CISG
Paragraph (1) of Article 7 emphasises that in the interpretation of the CISG, one must
pay close attention to three points:
It is the opinion of many scholars that the first two of these points are not independent of each
other [400] but that, in fact, the second "is a logical consequence of the first." [401] The third point is of
a rather special nature, and its placement in the main interpretation provision of the CISG has
caused a lot of argument as to its precise meaning and scope.
In this chapter, following an examination of the legislative history of Article 7(1), a
necessary preliminary step in the treatment of any product of an international unification
process, the main issues that arise in relation to this Article will be highlighted and analysed in
order to draw the proper meaning, scope and function of the article.
2. LEGISLATIVE HISTORY OF ARTICLE 7(1) CISG
(a) The "international character" of the CISG
The CISG directs interpreters to have regard to the "international character" of the
provisions of the CISG and requires, aside from the international experience that will be
developed through jurisprudence and doctrine, that the Convention be placed in the proper
international setting of its legislative history.[402]
In drafting the Vienna Sales Convention, UNCITRAL built on the work that had produced the
1964 Hague Conventions (ULIS and ULF). It was mostly by revising the Hague Conventions
that the CISG was constructed, and it is by studying the deliberations that took place in
UNCITRAL during this process that we can arrive at a better, more complete, understanding
of the provisions of the CISG. As the UNCITRAL Draft was being developed and refined, the
documented proposals of the delegates to delete, or amend, the Convention's provisions, and
the views that finally prevailed in those debates, form an important part of the finished product
known as the United Nations Convention on Contracts for the International Sale of Goods,
1980. The material found in the CISG's legislative history adds depth to the international
understanding that underlies the Convention's text.
Commencing with an analysis of the treatment of the issues at hand in the 1964 Hague
Conventions, UNCITRAL, in some instances, retained the solutions found in the Hague
Conventions.[403] The discussions of these analyses not only shed light on the common
understanding of the particular Hague solutions and the reasons for their retention, but also
provide a clear statement of the intended meaning of these solutions in the context of the
CISG. Similarly, in the instances where the Hague approach was modified or rejected, the
reasons for the alterations shed light on the intended purpose of the new provisions inserted in
the CISG.
The documents that embody this legislative history are reproduced in Volumes I-X of the
UNCITRAL Yearbooks and in the Official Records of the 1980 Diplomatic Conference. In
such an extended legislative process, the article numbers of the drafts under discussion kept
changing as provisions were added and deleted and as the draft's structure was reorganised.
Professor Honnold prepared a Documentary History that reproduces the relevant documents
and provides references to the repeated renumbering of the articles making it easier to trace
the legislative history and development of the CISG's provisions.[404]
(b) The "need to promote uniformity" in the Convention's application
The predecessor to the CISG, the ULIS, had addressed the problem of interpretation
of the Convention in the following statement in Article 2 of the ULIS:
"Rules of private international law shall be excluded for the purpose of the
application of the present Law, subject to any provision to the contrary in the said
Law." [405] When this provision is read together with Article 17 of the ULIS,[406] which deals with the issue
of gap-filling by referring to the use of the Convention's "general principles," one recognises a
strong indication that the ULIS was "intended to constitute a self-contained law of sales, to be
construed and applied autonomously, i.e., without any reference to or interference from the
different national laws."[407] This approach of independence and self-sufficiency strengthens the
position of the uniform law as an international instrument that should be interpreted and
applied in a uniform manner. It was, however, strongly argued in UNCITRAL that the uniform
law could not be considered as totally separate from the various national laws, and that it
would be unrealistic and impractical to construe many undefined terms contained in the
Convention without having recourse to national law.[408]
At the first session of the Working Group in 1970, several proposals were submitted
for the revision of Article 17 of the ULIS. One suggestion was to redraft the text as follows:
"The present Law shall be interpreted and applied so as to further its underlying principles and
purposes, including the promotion of uniformity in the law of international sales."[409] Another
suggestion was to delete the provision in its entirety, or to modify it so that it states expressly
that "[p]rivate international law shall apply to questions not settled by ULIS."[410] Neither of
these proposals was supported by a majority of the Working Group.[411] At the request of the
Commission, which at its third session, in 1970, was equally unable to reach an agreement,[412]
the Working Group discussed the matter again at its second session, in 1971, and on that
occasion decided to recommend the adoption of the following new version of Article 17: "In
interpreting and applying the provisions of this Law, regard shall be had to its international
character and to the need to promote uniformity in its interpretation and application."[413] The
report of the Working Group stated that the proposed revision would clearly express two
considerations not mentioned in the original Article 17: (i) the international character of the
law, and (ii) the need for its uniform interpretation and application. It was added that the
omission from the original text of the reference to "the general principles on which the present
Law is based" was due to the fact that such a reference was considered to be too vague.[414]
At its fourth session, in 1971, the Commission approved the new provision as
proposed by the Working Group. At the same time, it was suggested that the provision be
supplemented by an additional paragraph dealing with gaps in the uniform law. Opinions were
equally divided between those who insisted on a "general principles" solution, along the lines
of Article 17 of ULIS. There are also those who, on the contrary, favoured the approach
according to which possible gaps in the uniform law should be filled in by the domestic law
indicated by the rules of private international law. The Commission decided not to take any
final decision on this matter and to refer it to the Working Group for its consideration at an
appropriate time.[415] At subsequent sessions, devoted to the revision of the ULIS, the Working
Group did not discuss the matter further. The only change introduced to the original proposal
was to delete the words "in its interpretation and application," since they were considered to
be redundant. Consequently, when the Sales Draft was adopted by the Working Group at its
seventh session, in 1976, it contained Article 13 which read as follows: (c) The "observance of good faith in international trade"
In the course of the revision of the 1964 Hague Conventions, the Working Group
adopted at its ninth session, in 1978, a new provision (Article 5) not previously contained in
the ULF: This article was the subject of a lengthy discussion at the eleventh session of the Commission
in 1978.[418] The debate related to the retention, or deletion, of this new provision. Those who
favoured the deletion of the provision acknowledged that good faith and fair dealing are highly
desirable principles in international commerce, but emphasised that the way in which these
principles were formulated was too vague. They argued that national courts applying the
provision of "fair dealing and good faith" would necessarily be influenced by their own legal
and social traditions with the result that different interpretations would be given to the
provision in different countries. It was also argued that the draft uniform law did not specify
the consequences of failure to observe the principles which were made binding on the parties.
This meant that the consequences of a violation of the principles of good faith and fair dealing
would be left to national law, with the result that no uniformity of sanctions would be achieved
either.
The arguments in support of the article's retention were equally forceful. First, it was argued
that because of the world-wide recognition of the principle of good faith, there would be little
harm in including it in the Convention. Countering the objection that the proposed provision
did not set out the consequences of a violation of the principles of good faith and fair dealing,
it was argued that sanctions should be determined by the courts in a flexible manner and
according to the particular circumstances of each case. It was further added that, even without
sanctions, the existence of the provision would be of benefit because it would draw the
attention of the parties and the court to the fact that high standards of behaviour were
expected in international trade transactions.
Some possible compromise solutions were suggested to resolve the difference of
opinion on the inclusion of the good faith provision. One suggestion was to include the
substance of the proposed Article 5 in a preamble to the Vienna Sales Convention. The
supporters of the good faith principle objected that this would deprive it of any effect. Another
compromise proposal was to incorporate the requirement of the observance of good faith into
the rules for interpreting the statements and conduct of the parties. The argument against this
suggestion was based on the point that the proposed Article 5 was not concerned with the
intent of the parties, but sought to establish a standard of behaviour to which the parties were
obliged to conform. A third suggestion was to incorporate the principle of observance of good
faith into the article on the interpretation and application of the provisions of the Convention.
The Commission eventually accepted this last suggestion as a realistic compromise solution.
Hence, Part II of the new consolidated text of the UNCITRAL Convention, as adopted
by the Commission at the same session,[419] no longer contained a provision corresponding to
Article 5 of the original Formation Draft. Instead, Article 6, which corresponded to Article 13
of the former Sales Draft, and now appears as Article 7 of the CISG, was revised so as to read
as follows: Several amendments to Article 6 of the UNCITRAL Draft Convention were submitted
at the Vienna Conference. Some of these amendments were merely of a drafting character and
led to the small grammatical changes that now appear in the wording of Article 7(1). But there
were also some amendments of substance submitted and they related to the addition of a new
paragraph to the provision dealing with the problem of gaps in the CISG.[420]
The appropriateness of referring to the principle of good faith in this article on the
Convention's interpretation and application was questioned again at the Vienna Conference.
Two amendments were submitted, both suggesting the deletion of the last part of Article 7,
paragraph 1 (i.e., "the observance of good faith in international trade") and to transfer it to
another context. The first proposal was to add at the end of Article 7(3) of the UNCITRAL
Draft Convention (now Article 8) the words "having regard to the need to ensure the
observance of good faith in international trade."[421] The second proposed amendment suggested
that a new article be included after Article 6 of the UNCITRAL Draft Convention (now
Article 7) stating that: Although the two proposals did receive some support, the prevailing view was against
reopening discussion on an issue that had already been the subject of extensive debate within
UNCITRAL leading to the present compromise solution. Thus, Article 7(1) was adopted
without further changes.
3. THE INTERNATIONAL CHARACTER OF THE CONVENTION
The creation of a uniform law is only the first step towards uniformity. It is the
interpretation - and the uniform application - of the uniform law that will complete the
process, and it is at these latter stages that the success, or failure, of the unifying effort can be
judged.[423] Every legislative instrument raises issues of interpretation as to the precise meaning of
its provisions, even within the confines of a national legal system. Such problems are more
prevalent when the subject has been drafted at an international level. In the interpretation of
domestic legislation, reliance can be placed on methods of interpretation and established
principles within a particular legal system - the legal culture, or infrastructure, upon which the
particular legislation is seated. When dealing with a piece of legislation such as the CISG,
however, that has been prepared and agreed upon at international level and has been
incorporated into many diverse national legal systems, interpretation becomes far more
uncertain and problematic because there is no equivalent international legal infrastructure.
Does that mean that the CISG is seated on a legal vacuum? The answer is yes and no. The
CISG was given an autonomous, free-standing nature by its drafters and it is true that there
are no clearly defined international foundations (equivalent to those in a domestic legal setting)
upon which the CISG is placed. As will be argued throughout this work, there are, however,
general principles of international law (e.g., the UNIDROIT Principles) that can provide a part
of the platform upon which the CISG, like any other piece of domestic or international piece
of legislation, must be based.
Accepting that interpretative problems naturally arise in relation to any international
convention, there is a further point that needs to be made. That these problems are
accentuated when the international legislative instrument is in the field of commercial law
because of the proportional relationship that generally exists between the number of issues of
interpretation of a convention and the number of legal systems represented by the various
Contracting States to that convention.[424] Principles of interpretation could be borrowed from
the law of the forum, or the law which according the rules of private international law would
have been applicable in the absence of the uniform law. Either approach would result in a
diverse construction and implementation of the same piece of legislation by different
Contracting States. According to some commentators, the result would not only be a lack of
uniformity, but also the promotion of forum shopping.[425] Such a result would undermine the
purpose of the uniform legislation and defeat the reasons for its existence.
On the other hand, an autonomous and uniform interpretation, if this could be achieved
in practice, would go a long way towards completing the process of unification and achieving
the aims of the drafters of the uniform international instrument. Article 7(1) declares that such
an autonomous approach must be followed in interpretation, befitting the special character and
purpose of the Convention. To have regard to the "international character" of the Convention
means that its interpreter [426] must understand that, although the CISG has been formally incorporated into many different national legal systems, the special nature of the CISG as a
piece of legislation prepared and agreed upon at an international level helps it retain its
independence from any domestic legal system. It is essential for the long-term success of the
CISG that the rules and techniques traditionally followed in interpreting ordinary domestic
legislation are avoided. For instance, "in most common law countries domestic legislative
instruments are traditionally interpreted narrowly so as to limit their interference with the law
developed through jurisprudence."[427] The CISG is, however, a law intended to cover the field of
international contracts of sale and, in doing so, to replace all national statutes and case law
previously governing matters within that field. The autonomy of this international sales law
depends not only on the drafting of the respective rules into a separate body of rules, but also
on the emancipation of this body of rules from other branches of the law in the international
and domestic legal systems.[428]
Even though the CISG is incorporated into municipal law, international sales law
should not be regarded as a part of various national legal systems because this would inhibit its
development as an autonomous branch of law and distort its interpretation and application.
Instead, it is suggested that international sales law rules should be seen as part of international
law in the broad sense and should be entitled to an international, rather than national,
interpretation. The consequence of realising the essence of the Convention's international
character and autonomy is that there should be no reason to adopt a narrow interpretation of
the CISG. Expressing support for this point is Professor Bonell:
"Instead of sticking to its literal and grammatical meaning, courts are expected to take a
much more liberal and flexible attitude and to look, wherever appropriate, to the
underlying purposes and policies of individual provisions as well as of the Convention
as a whole."[429] Such an attitude has been adopted in the United States in the interpretation of the Uniform
Commercial Code.[430] Also, in a number of cases, American [431] and English [432] Courts have shown a
willingness to take a similar liberal approach when called to deal with other international
conventions.
It is the view of the present writer that Article 7 represents an implied provision in the
Convention for the undertaking of such a liberal approach to the interpretation of the body of
law in question. It must be acknowledged, however, that the danger with adopting a broad
view of the CISG is that it might open the way to diverse national interpretations, if "broad"
and "liberal" were equated with notions of theoretical diversity and practical relaxation of the
rules of the CISG's interpretation. This realisation reveals the possible existence of a paradox;
that internationalism might be better served by a narrow interpretation. This is merely an
aberration, or rather an illusion, since the nature of the CISG and the intentions of its drafters
point unequivocally to its broad and liberal interpretation. If its interpreters realise the true
spirit of the CISG and enforce it in practice, then a liberal approach, far from diversifying the
results, will achieve uniform results. This is so because the broad and liberal approach, in this
case, does not mean the endorsement of many different national views, but the adoption of a
single, uniform, a-national approach. Such an approach is broad and liberal by definition, since
it operates outside and above the restrictions, limitations and narrowness of established
national approaches to interpretation. The broad global scope of the CISG requires that its
interpretation be of a similar nature. For the "legal barriers in international trade"[433] to be
successfully removed, a broad and liberal approach to the interpretation of the CISG is
required. Only such an approach can successfully "take into account the different social,
economic and legal systems"[434] that the CISG is aiming to unite, at least in the field of sale of
goods. The proper interpretation of the CISG must be broad and liberal, but not lax or
abstract.
Neutral language - a new lingua franca
The quality of the "international character" attributed to the CISG has yet a further
dimension. Such a characterisation denotes that the terms and concepts of the CISG must be
interpreted autonomously of meanings that might traditionally be attached to them within
national legal systems. To have regard to the CISG's international character must mean that
the interpreter should not apply domestic law to solve the interpretative problems raised in the
CISG. The reading of the CISG in light of the concepts of the interpreter's domestic legal
system would be a "violation" of the requirement that the CISG be interpreted with regard to
its "international character."[435] The terms of the CISG must be interpreted "in the context of the
Convention itself."[436] Such a conclusion becomes necessary when one looks at the background
of the CISG.
The form and content of the CISG is the outcome of prolonged deliberations between lawyers
representing a multitude of diverse legal and social systems and cultural backgrounds. The
provisions of the CISG had to be formulated in sufficiently neutral language in order to reach a
consensus not vitiated by misunderstanding amongst its drafters. The choice of one word
rather than another represents the process of a compromise, rather than the acceptance of a
concept peculiar to a specific domestic legal system. The drafters attempted to avoid terms
that have been endorsed and shaped by diverse historical, social, economic and cultural
structures in the various legal systems. Any such terms would be abstract and disembodied in
the context of the CISG.
A good example of this effort can be found in the wording of Chapter IV of the CISG.
Chapter IV refers to the passing of the risk of loss to the buyer. Article 67(1) states that in a
contract of sale that involves carriage of the goods, the risk passes to the buyer when the
goods "are handed over" to the first carrier. In similar tone, Article 69(1) states that in
contracts that do not involve carriage, the risk passes when the buyer "takes over" the goods.
Words such as "delivery" and concepts such as "property" and "title", loaded with peculiar
domestic importance, have been intentionally avoided. As it has been put by one of the
drafting fathers of the CISG: In the instances where terms, or concepts, from a particular legal system were used, it
was not intended that the traditional meanings of these terms be adopted.[438] If concepts in the
CISG were taken from national law, there would be a danger of interpreting these concepts in
accordance with the law of their origin instead of interpreting them autonomously. It is
authors, as well as judges, that are susceptible to such a distorted interpretation of the CISG's
provisions. This alarming observation has been made by Sevón, who notes:
'Most authors (in the literature of the Vienna Sales Convention) seem to stress that the
Convention closely resembles the national law of sales of the author's country. ...
There is thus a considerable risk that concepts used in the Convention will be believed
to correspond to identical or even to similar concepts in national law."[439] The drafters of the CISG employed neutral, "a-national" language to avoid such distortions.
The neutrality of the words chosen for the CISG promotes the CISG's autonomy and
advances UNCITRAL's objectives of internationality and uniformity of interpretation and
application. Any perceived proximity of the CISG to various national laws is not disturbing
and should be seen as a mark of its success, since it illustrates the outcome of multiple
participation in its drafting.
The fact that the CISG has been published in the six official languages of the United
Nations, with each version being equally authentic, enhances the notion of its internationality
and strengthens the case for an autonomous interpretation of its provisions. It is arguable that,
to a certain extent, the publishing of the CISG in all six official languages of the United
Nations makes interpretation easier because it is possible for a court to apply the method of
comparative interpretation and find the exact meaning and content of a provision by
comparison.[440] It must be noted, however, that it would be unrealistic to expect every court to
compare every language version.
Of course, these actions do not guarantee success because the legal viewpoint of the
users of the CISG is usually shaped by their particular national, educational and vocational
background. Most of the difficulties in the interpretation of international uniform law arise
because there is no common heritage of judicial techniques and substantive law among the
Contracting States. This lack of common ground inevitably creates difficulties that result in
divergence in the outcome of the process of interpretation and impede uniformity. Domestic
civil procedure, plus differences in the way that the division between law and fact is drawn in
different legal systems, are major obstacles to uniformity. Universities have a role to play in
overcoming some of these obstacles, by encouraging and developing programs of comparative
law studies that can promote further substantive awareness of foreign law and procedure.[441]
4. UNIFORMITY OF APPLICATION
At this point, the inter-relation between the first two parts of Article 7(1) becomes
more apparent. The autonomous interpretation of the CISG is not simply a consequence of the
"international" characterisation of the CISG, but also a necessity, if "the need to promote
uniformity in its application" is to be taken seriously. In the CISG, the elements of
"internationality" and "uniformity" are inter-related thematically and structurally because of
their position in the same Part and Article of the Convention, functionally because an
autonomous approach to interpretation is necessary for the functioning of both, and inter-dependently because the existence of one is a necessary prerequisite for the existence of the
other. The international, rather than national, interpretation is necessary in order for uniformity
in the application of the CISG to be achieved, and uniformity of application is vital if the CISG
is to maintain its international character.
The ultimate aim of the CISG, and arguably the reason for its existence, is to achieve the
broadest degree of uniformity in the law for international sales transactions.[442] Its adoption by
the Contracting States is a necessary but insufficient step towards this aim. What is also
necessary is that the CISG, once incorporated into the various domestic legal systems, is read,
interpreted, and understood in the same uniform way by all its users, in any of the Contracting
States.[443] It is part of the present writer's thesis that this cannot be achieved if national
principles, or concepts, taken from the law of the forum, or from the law that in the absence of
the CISG would have been applicable according to the rules of private international law, are
allowed to be used in the interpretation of the CISG. In fact, a "nationalistic" approach to the
interpretation of the CISG would achieve results that are contrary to what was intended to be
achieved by the creation of the uniform law and would foster the emergence of divergent
national interpretations.[444] The "nationalisation" of the uniform rules deprives the instrument of
its unifying effect.
The negative consequences of a "nationalistic" interpretation have also been pointed
out by courts. The House of Lords, in Scruttons Ltd. v.Midland Silicones Ltd., stated that:
"it would be deplorable if the nations, after protracted negotiations, reach
agreement ... and that their several courts should then disagree as to the meaning of
what they appeared to agree upon."[445] The dangers concerning the interpretation of the CISG have been attributed to "a
natural tendency to read the international text through the lenses of domestic law."[446] This can
be the result of a conscious, or unconscious, inclination of judges to place the uniform law
against the background of their own municipal law (lex fori) and to interpret the uniform law
on the basis of principles with which they are already familiar, thus threatening the goal of
international uniformity in interpretation.
Among other causes that can give rise to diverging interpretations of a uniform law are
problems which are "internal" to the uniform law, since they have their source in the uniform
law itself. Such divergences in interpretation are "normal" results of defects in the drafting of
the uniform rules. These include mistakes in grammar and translation, lack of clarity, or gaps
in the law. In this regard, it has been pointed out that the existence of different official versions
of the same uniform law is a circumstance which can, by itself, give rise to interpretative
doubts because "textual differences ... impede uniformity."[447]
Other reasons that can lead to divergent interpretations are "external", since they are
independent from the uniform law itself. On this aspect, it has been said that some
interpretative differences can result from various national interests that the different
interpreters want to prevail over the national interests of other States. In relation to the CISG,
it has been asserted that "the disparity of economic, political, and legal structure of the
countries represented at the Vienna Conference suggests the difficulty of achieving legal
uniformity."[448]
Summarising the conclusions of the above analysis of the first two elements of Article
7(1), it may be said that the recognition of the autonomy of international sales law and its
international characterisation are interconnected, and that they both serve the uniformity of
interpretation and application of the Convention. The recognition of the autonomy of the
CISG contributes to the accomplishment of UNCITRAL's directives for the interpretation of
the Convention as stated in the wording of Article 7(1).
5. THE OBSERVANCE OF GOOD FAITH IN INTERNATIONAL TRADE
According to the third element of Article 7(1), in interpreting the provisions of the
Convention one must have regard to the need of promoting the "observance of good faith in
international trade." The legislative history of the provision shows that the final inclusion of
the good faith principle represented a compromise solution between those delegates to the
Vienna Convention who supported its inclusion stating that, at least in the formation of the
contract, the parties should observe the principles of "fair dealing" and act in "good faith;" and
those who were opposed to any explicit reference to the principle in the Convention, on the
ground that it had no fixed meaning and would lead to uncertainty and non-conformity.[449]
The concept of good faith and its scope and function in different legal systems was discussed
earlier.[450] There are, however, some issues concerning the final inclusion of the principle of
good faith in the CISG that need to be explored further, in order to determine the nature,
scope, and meaning of this much-debated principle in the application and interpretation of the
CISG.
(a) "Good faith" as a mere instrument of interpretation
The placement of the good faith principle in the context of an operative provision
dealing with the interpretation of the CISG creates uncertainties as to the principle's exact
nature, scope, and function within the CISG.[451] Scholarly opinion on the issue is divided. Some
commentators insist on the literal meaning of the provision and conclude that the principle of
good faith is nothing more than an additional criterion to be used by judges and arbitrators in
the interpretation of the CISG.[452] Under this approach, good faith is merely a tool of
interpretation at the disposal of the judges to neutralise the danger of reaching inequitable
results.
Even if included in the CISG as a mere instrument of interpretation, good faith can pose
problems in achieving the ultimate goal of the CISG - uniformity in its application - because
the concept of good faith has not only different meanings between different legal systems but
also multiple connotations within legal systems.[453] Consequently, it will be difficult for a uniform
definition of the concept to be developed. This can lead to differing interpretations of the
CISG.[454]
(b) "Good faith" in the relations between the parties
There is academic opinion favouring a broader interpretation of the reference to good
faith as contained in Article 7(1), pointing out that the duty to observe "good faith in
international trade is also necessarily directed to the parties to each individual contract of
sale."[455] The main theoretical difficulty with this suggestion is that, in effect, it implies that the
interpreters of the CISG are not only the judges, or arbitrators, but the contracting parties as
well.[456] This point is controversial and there are practical and theoretical objections to it. If
Article 7 is addressed to the parties, then that provision might be excluded by them under
Article 6. This would be an unwelcome result because, in practice, this would hinder the
uniformity of interpretation. The theoretical objection is that the statement seems to obliterate
the distinction between interpretation by the court and performance of the contract by the
parties. One of the main practical objections to the inclusion in the CISG of a provision
imposing on the parties a general obligation to act in good faith was that this concept was too
vague and would inevitably lead to divergent interpretations of the CISG by national courts.
The principle of good faith operates differently within different national legal systems.[457]
For example, in the United States its relevance is formally limited to performance and
enforcement of the contract.[458] On the other hand, in most of the civil law systems, as well as in
socialist systems, the principle of good faith is not limited to performance but also extends to
the formation and interpretation of contracts.[459] Moreover, even between civil law systems the
specific application of the principle of good faith in practice may differ considerably.[460]
Bonell, one of the principal exponents of the thesis that attributes wider importance to the
inclusion of the principle of good faith in the CISG, explains that, even as a simple aid to the
interpretation of the CISG's specific provisions, the principle of good faith may have some
impact on the behaviour of the parties - for instance, in cases where a party is prevented from
invoking rights and remedies normally granted to him under the CISG.[461] Such a view is
supported by Honnold's argument that a party to an international contract of sale governed by
the CISG, who demands specific "performance within an additional period [according to
Articles 47 or 63] may not, in good faith, refuse to accept the performance that he requested."
[462] It is further suggested that compelling specific performance, or avoiding a contract after a
market change [463] that permits a party to speculate at the other's expense, "may well be
inconsistent with the Conventions provisions governing these remedies, when they are
construed in the light of good faith."[464]
Further support for the argument that the relevance of the principle of good faith is not
limited to the interpretation of the CISG is offered by the observation that there can be found
within the CISG a number of provisions which constitute a particular application of the
principle of good faith, thus confirming that good faith is also one of the "general principles"
underlying the CISG as a whole, for purposes of gap-filling (as per Article 7(2)).[465] A distinction
must, however, be drawn between good faith in the interpretation of the CISG (Art. 7(1)) and
good faith as a general principle upon which the CISG is based. The argument in favour of
extending the scope of good faith to the behaviour of the parties and attributing to it the
quality of a "general principle" of the CISG [466] runs the risk of being driven to the conclusion
that, as such, the principle of good faith in Article 7(2) may even impose on the parties
"additional obligations of a positive character."[467]
(c) Arguments against the imposition on the parties of a positive duty of good faith imposing further obligations of a positive character on the parties
The possibility of imposing additional obligations on the parties is clearly not
supported by the legislative history of the CISG. Article 7(1), as it now stands in the CISG's
text, is the result of a drafting compromise between two diverging views, which reflects the
political and diplomatic maneuvering necessary for the creation of an international Convention.
It cannot now be given the meaning originally suggested by those advocating the imposition of
a positive duty of good faith on the parties, as this would be reversing the intent of the
compromise. On the other hand, this does not mean that the opposite view (i.e., that good
faith represents merely an instrument of interpretation) should be adopted instead. This
interpretation would unnecessarily deny the value of good faith and its potential function
within the CISG.
It is part of the present writer's thesis that what is needed is a balanced approach to the
doctrine of good faith, so that it is neither condemned to do too little nor allowed to do too
much. The parties' behaviour must be measured on a standard of good faith, limited by the
Convention's scope of application ratione materiae.[468] Good faith, like all the other terms in the
CISG, must be approached afresh and be given a new definition which will describe its scope
and meaning within the CISG, separate from the peculiar loads that it carries in different, and
often within, legal systems. It may take some time for the principle of good faith to be
developed naturally and to crystalise in the case law, in the spirit of continuing deliberation and discourse that characterises the community of the CISG members. Until then, perhaps the most balanced position to adopt is that uttered by Maskow: "
the most objective criterion for what the principle of good faith in international trade means is the Convention itself."[469]
(d) The "international trade" qualification to the principle of "good faith"
Attention must be paid to the functional value of the qualification to the "observance of
good faith," made by the additional words "in international trade," as inserted in Article 7(1).
There are two points that can be made about the reference to "good faith in international
trade".
The first point is that the principle of good faith may not be applied according to the standards
ordinarily adopted within the different national systems.[470] This point can be illustrated by the
following example. Under German law, when a party to a sales contract becomes the recipient
of a written communication, claiming to constitute a simple confirmation of the prior oral
agreement between the parties to the contract, but in fact containing additional or different
terms, the recipient is under a duty to immediately object to these terms if he does not want to
be bound by them.[471] In other legal systems such a rule is, however, either entirely unknown,[472] or
limited to the case in which the additional or different terms do not materially alter the content
of the earlier agreement.[473] Therefore, it is not very likely that such a rule could be applied to a
contract of sale governed by the CISG.[474]
The second point is that the principle of good faith as expressed in the CISG must be
construed in light of the special conditions and requirements of international trade. There are
two things to be said on this second point.
This statement may well be too sweeping, and it runs the risk of oversimplifying the
differences between national and international trade. It attempts to establish that the distinction
generally made within domestic laws between consumer transactions and contracts of a
commercial nature can be used in order to determine the precise meaning of "good faith in
international trade." This implies that the interpretation of the CISG could be used to protect
the weaker party.[479] It is doubtful that this would work at the international level. Although it is
generally accepted that differences in the bargaining power of parties to an international
contract exist, and that these differences are usually related to the parties' role in the contract
(i.e., importing, or exporting) and to their technological sophistication and/or economic
environment (i.e., coming from industrialised, or developing countries), to equate such an
international commercial relationship to a domestic consumer transaction may be stretching
any comparative value of such an analogy beyond its legitimate limits. In contractual relations
between industrialised and developing countries, it may not always be the party from the
developing country who is the weaker party.[480] Further, it is not easy to identify the interest of
all developing countries unequivocally, because they do not constitute an undifferentiated mass
of countries with the same economic interest.[481] Therefore, without completely discounting the
generic imbalance that frequently exists between developed and developing countries,
problems arising out of the unification of international sales law and affecting developing, or
third world, countries cannot always be determined in advance.
A further element that discounts the value of such an analogy is the diversity exhibited
in the standards of business in different parts of the world. As has been correctly remarked,
this lack of uniformity in the domestic or regional standards of business around the world
entails that It is arguable that though there may
be some value in the comparative use of the distinction made within domestic laws between
commercial and consumer transactions, in an effort to determine the precise meaning of "good
faith in international trade," such an analogy has inherent limitations that should not be
forgotten, or underestimated. International trade is characterised by intense competition and
arm's length dealings and it is in that context that the Convention operates and must be
interpreted. Observance of good faith in international trade should not be equated with the
establishment of material justice between the parties. Rather, it should imply the "observance
of such a conduct as is normal among [international] tradesmen."[483] It is part of the present
writer's thesis that the reference in Article 7(1) to the "observance of good faith in
international trade" carries only descriptive and not normative value. It is addressed to the
interpretation of the CISG's provisions and seeks to describe good faith in international trade
as it is used, rather than state what it should be. It is not (and cannot) be concerned with
establishing a norm regarded as a standard of correctness in international trade for the reasons
discussed in preceding sections of this thesis.[484]
Further indications as to the precise meaning of the third part of Article 7(1) may be found
within the CISG itself. One such reference is provided by the wording of the CISG Preamble,
which expressly states that and
that It is the view of the present writer that this
reference reinforces the point made above. The observance of good faith in international trade
is delineated by the parameters of international commercial transactions. Thus, the principle of
good faith may not be applied according to the standards ordinarily adopted within the
different national systems and must be construed in light of the special conditions and
requirements of international trade. The reference to "equality" should not be equated with the
imposition of positive duties upon the parties, as this would be incompatible with the
quintessential nature of commercial transactions and the legislative history of the CISG.
Rather, it implies the observance of such a conduct as is acceptable among international
tradesmen contracting freely with each other.
6. REMEDIES AGAINST DIVERGENT INTERPRETATIONS
International trade law is subject to the tension between two forces - "the divisive
impact of nationalism and our unwillingness to confine our activities within national borders."[485]
Even if there are universal principles of right and justice, national laws responding to these
principles are expressed in words and concepts that have developed from diverse human
experiences and in diverse socio-legal contexts.
The CISG attempts to establish uniform international rules for the international sale of goods,
in order to minimise the uncertainties and misunderstandings in commercial relationships that
result from two basic problems:
(1) uncertainty over which domestic law applies in case of a dispute; and
(2) uncertainty over the proper application of a wide range of foreign legal systems by a
domestic tribunal, or court.
It has been maintained throughout this thesis that the idea that the CISG's international
origin and character demand that it be interpreted differently from domestic legislation is only
a pre-condition for its uniform application in practice. Uniformity does not result automatically
from an agreement on the wording of the uniform rules. The objectives of that agreement can
be undermined by different domestic approaches to interpreting and applying the uniform
international rules. For a uniform application of the CISG to be attained, it does not suffice
that the CISG is considered an autonomous body of law, since it could still be interpreted in
different autonomous ways in various States. If such an unfortunate scenario were to develop,
uniformity would be attained only as a "very unlikely coincidence."[486] In theory there exists a
wide range of remedies against such a risk,[487] but in practice it will be up to the national judges
and arbitrators interpreting the CISG to attain, and then maintain, its uniform application to
the highest degree possible.
There are some interpretative aids at the disposal of the interpreters of the CISG that may
assist in the maintenance of its uniform application and may act as a hindrance to the
development of divergent interpretations. For example, in case of ambiguities or obscurities in
language, the existence of several equally authentic language versions of the Convention
permits the interpreter to consult another official version of the CISG for assistance.[488] What
follows is an examination of different means that can be utilised in the battle against divergent
interpretations of the CISG.
(a) Jurisprudence (case law)
Arguably the most effective means of achieving uniformity in the application of the
CISG consists in having regard to the way it is interpreted in other countries.[489]
The development of a body of case law based on the provisions of the CISG and the careful
consideration of this jurisprudence by later courts are very important steps in the process of
interpretation of the CISG. A judge, or arbitrator, faced with a particular question of
interpretation of the CISG's provisions, which may have already been brought to the attention
of a court in another Contracting State, should take into consideration the solutions so far
elaborated in the foreign courts. Given also the lack of machinery for legislative amendment in
the CISG, the importance of case law in understanding international sales law will be all the
greater. Thus, it is arguable that as a matter of principle and common sense, courts should, at
least, consider the jurisprudence developed by foreign courts applying the CISG.[490] The
difficulty lies in the importance (e.g., binding force, or merely persuasive value) that a court
should place on a decision of a foreign court and the reasoning behind that decision, and the
degree to which any such precedent may be followed and adopted by other foreign courts.[491]
This approach may encounter difficulties in practice, due to the relatively small number
of judicial decisions relating to the CISG and the effectiveness of the distribution of any such
decisions internationally. On the first issue, it can only be hoped that, as the number of States
adopting the CISG grows even further and the use of the CISG becomes even more
widespread, more cases seeking solution will reach judges and arbitrators.
In 1988, UNCITRAL, in its twenty-first working session, decided to establish a
procedure in which the decisions rendered in the application of the uniform law in the various
Contracting States are gathered by so called "national correspondents," who then send to the
UNCITRAL Secretariat the full text of the decisions in their original languages so that the
Secretariat could make these decisions accessible to any interested persons.[492] The Commission
also adopted a procedure for the distribution of information about the decisions, whereby the
national correspondents prepare abstracts of the decisions emanating from their country, that
could then be translated by the U.N. into the six official languages and published as part of the
regular documentation of the Commission.[493] These abstracts are released regularly by the
UNCITRAL Secretariat as part of the CLOUT system of standardised reporting of national
decisions through the U.N.[494]
The Centre for Comparative and Foreign Law Studies in Rome maintains the UNILEX
database.[495] UNILEX,[496] a "reasoned collection of case law and an international bibliography on
the CISG",[497] presents, both on disk and on paper, features similar to those found on the
internet under the foregoing site. Also, the Pace Law website, which has been utilised
extensively in this thesis, offers an excellent and updated source of CISG-related information.[498]
This site provides the most up-to-date bibliography on the CISG, extensive commentary on all
of the CISG's articles and related materials, as well as case law from all over the world.[499]
Similar web-sites have been created in many countries,[500] based mainly at various
universities.[501] In recognition of the importance of foreign decisions to the uniform
interpretation of the CISG, many efforts have been made to collect, translate and provide
commentary to relevant decisions.[502] The growing size of CISG scholarship has prompted
Professor Honnold to conclude, at the Symposium for the ten years of the CISG, that "
this
massive outpouring of writing about the Convention [is a] testimonial to the world-wide
interest in international legal unification."[503]
Focusing on the substantive issue of consideration and evaluation of existing case law
on the interpretation of the CISG's provisions, the basic question that needs answering regards
the reaction of a judge or arbitrator, who, faced with an issue of interpretation in the CISG,
discovers that divergent solutions have been adopted in regards to that same issue by different
national courts. The prevailing view is that, as long as the divergences are rather isolated and
rendered by lower courts, or the divergences are to be found even within one and the same
jurisdiction, "it is still possible either to choose the most appropriate solution among the
different ones so far proposed or to disregard them altogether and attempt to find a new
solution."[504]
The treatment that the CISG will receive from common law and civil law jurisdictions alike
and the resolution of conflicting the CISG precedent, are issues of catalytic importance for the
emerging the CISG jurisprudence and for its role in achieving and maintaining the desired
uniformity of interpretation and application of the CISG.[505]
Common law jurisdictions and international precedent
The United Kingdom applies the notion of "stare decisis" (binding precedent). Trial
courts are bound by decisions of the House of Lords and the Court of Appeal, but not by their
own decisions. The House of Lords usually follows its own previous decisions, although it is
not bound to do so and can distinguish a previous decision it disapproves of. Traditionally,
courts in the United Kingdom have given relatively little weight to the interpretation of
uniform laws by courts in other adhering States,[506] while the decisions of the House of Lords,
the English Court of Appeal and the Privy Council have always carried persuasive authority in
Australia,[507] Canada,[508] New Zealand,[509] and Singapore[510] - especially in relation to commercial
matters having an international impact, where it has been recognised that uniformity is highly
desirable. At the Twelfth International Congress of Comparative Law, in 1986, Professor
Sutton stated that although Australian courts would seek to follow "a body of case law" from
civil law courts interpreting the CISG, if the decisions were in conflict, the courts would tend
to follow the view prevailing in the common law English speaking jurisdictions.[511]
The use of civil law experience in dealing with uniform international rules would be
further encouraged by a line of United Kingdom decisions, culminating at the House of Lords
with Fothergill v. Monarch Airlines,[512] which will probably be followed in the other
jurisdictions of the Commonwealth, and the U.S decision in the case of Air France v. Saks.[513]
The doctrine of stare decisis has always been part of Canadian common law as well,
although provincial courts of appeal are starting to break down the tradition of being bound by
their own decisions.[514] Canadian courts were expected to be receptive of case law in civil law
jurisdictions. Common law jurisdictions in Canada have been introduced to the civil law by
contact with the law of Quebec,[515] and the theoretical differences between common law and
civil law jurisdictions concerning the binding nature of precedent seem to have little practical
significance. In Quebec, "the doctrine and practice of precedent is remarkably close to that of
the common law."[516]
A civil law commentator has noted that government legislation sets in place uniform
law, but "[i]n reality, uniform law is not the work of governmental legislation. It is a creation
of jurists, a kind of respublica jurisconsultorium communicating amongst themselves by
widely diffused means of information."[517] Lord Scarman's earlier statement in the Fothergill
case, that "courts
have to develop their jurisprudence in company with the courts of other
countries from case to case,"[518] was imbued with the same spirit of international juridical co-operation. The words of Lord Scarman still compose the simple message that has to be heeded
by common law and civil law jurists alike in order to respond successfully to the requirements
of uniform law. In essence, "[u]niform law requires
a new common law" in which "[f]oreign
precedents would not be precedents of a foreign law but of uniform law." [519]
Civil law jurisdictions and international precedent
In some civil law jurisdictions, court decisions have less binding effect than in common
law countries, at least in theory.[520] In France, Article 5 of the Code Civil forbids courts from
pronouncing for the future in a general, rule-making way. Thus, not even the Cour de
Cassation can lay down precedent. The Cour de Cassation can quash lower courts' judgments
in appropriate cases and, after a second reference, it can substitute its own decision if the
lower court refuses to follow its direction. A stream of case law ("jurisprudence constante")
has a persuasive effect, but no more than this. The French distinguish between sources of law
(statute, custom) and legal authorities (case law, doctrine).
In the Netherlands, de jure Dutch law denies binding authority to court decisions. De
facto the courts accept binding authority of decisions of superior courts, especially decisions
of the Hoge Raad. According to Professor van der Velden, "there is no reason to expect a
different attitude towards decisions of uniform law courts."[521] In the Netherlands, there have
been no instances in which Dutch courts stated that they relied on foreign courts in
interpreting uniform law, even in cases where it seemed that foreign decisions were applicable.
Professor van der Velden has concluded that, on this point, Dutch courts could learn from
recent English decisions like the Fothergill case.[522]
The utility of comparative law research in interpreting uniform laws has been widely accepted
in Polish legal writing.[523] A "generally accepted" approach to foreign courts' decisions and
doctrine was illustrated by a 1975 decision of the Supreme Court interpreting the Guadalajara
protocol to the Warsaw Convention on Air Carriage.[524] Similarly, Bulgarian courts and the
court of Arbitration for International Commerce in Sofia take account of the interpretation of
international conventions in other Contracting States to clarify the provisions of the
conventions and to achieve uniformity of interpretation.[525]
Even though no mention is made in Article 7 of the authority of decided cases, the exhortation
in Article 7(1) to treat the CISG as an international text and to promote uniformity in its
interpretation will require deference to judicial opinions from other countries. This may not
quite develop as a system of precedent, in the common law sense, but as common law courts
must follow the wind of change in affording consideration to foreign precedent, so must civil
law courts adjust their style as well. For example, the decisions of the Cour de Cassation are
noted for their extreme brevity, explainable by the fact that they are not designed to persuade,
or influence. In a new and unique jurisprudential system like the CISG's, where case law will
be at a premium, civil law courts have an obligation to expand their reasoning process if they
are to transmit relevant persuasion to courts of other legal systems. Interpretations of an
international Convention by sister signatories should be taken into account "in a comparative
manner"[526] and with the "integrative force of a judgment
based on the persuasive reasoning
which the decisions of the Court bring to bear on the problem at hand."[527] A judge ought to be
"obliged to search for an to take into consideration foreign judgments ... at least the
judgments from other Contracting States, when he is faced with a problem of interpretation of
an international convention."[528]
CISG and conflicting interpretations
The difficult questions facing national courts are whether they should defer even to
earlier bad decisions of foreign courts and how to deal with precedent which is unsound. A
possible dilemma to be faced is whether the cause of internationalism is more important than
the suppression of bad precedent. Courts may be tempted to manipulate the line between law
and fact in order to distinguish unsound decisions.
A more difficult state of affairs exists when the existing precedents consist of divergent
interpretations that are part of a distinct set pattern between certain jurisdictions. In this
scenario, some States favour a certain interpretation of a given provision of the CISG,
whereas other States constantly adopt a different interpretation of the same provision. The
predicament that arises for an interpreter of the CISG in this instance is a serious one, and its
solution involves a re-evaluation of the basic principles of interpretation set out in Article 7(1).
The interpretative dilemma facing the interpreter consists of, on the one hand, the doctrinal
necessity of interpreting the CISG "autonomously" and, on the other hand, the realistic
compromise of making a choice between the different "national" interpretations.
This not so uncommon possibility of systematical divergence reveals the complexities
of the issues concerning the application of an ambitious piece of international legislation that
wishes to replace all existing law in its area of application and acquire its own autonomous
interpretation. Bonell [529] tries to analyse this issue by referring to a similar predicament that arose in relation to the Geneva Uniform Law on Bills of Exchange and Promissory Notes
(1930). Article 31(4) of the 1930 Geneva Uniform Law gave rise to a difference of
interpretation between various national jurisdictions. French and German courts applying the
provision to bills of exchange drawn in their own country but payable in a foreign State,
rejected the idea of an "autonomous" solution and referred to the interpretation usually given
to the provision by the legal system designated according to the rules of private international
law of the forum.
The decisions that relied on the application of the rules of private international law
have been appropriately criticised on the ground that This criticism has been
questioned itself. Bonell,[531] although recognising the necessity to interpret uniform laws
"autonomously" in general, is of the opinion that an exception must be made if an insuperable
divergence of interpretation of a particular provision of the CISG exists between Contracting
States:
"To insist even in such an hypothesis on an 'autonomous' approach seems to be
unrealistic, and in practice the result could easily be the opposite of what was desired,
that is to say that courts in each country could feel free to apply their own 'national'
interpretations irrespectively of the circumstances of the single case. It is much better
to acknowledge that with respect to the specific issue the uniform law failed, at least
for the time being, to bring about uniformity in the laws of the Contracting States, and
to accept as the only possible remedy the recourse to the traditional conflict of laws
approach. After all, by applying the interpretation prevailing within the State the law of
which would govern the transaction in the absence of the uniform law, it may be hoped
that the solution will be the same irrespective of the forum chosen by the parties."[532] Bonell's alternative should be read with caution because it puts the rules of private
international law back into the domain that the CISG is trying to cover.
It is the present writer's opinion that resorting to private international law, either
directly (i.e., Article 7(2)), or indirectly (i.e., Bonell's alternative on divergent interpretations),
should be avoided by anyone who believes that uniformity is a goal that is worth pursuing
seriously. Should the resort to private international law receive further support and legitimacy,
it is doubtful whether any domestic tribunal will approach the CISG in the "a-national" frame
of mind that it commands. In any case, the analogy used by Professor Bonell between the
CISG and the Geneva Uniform Law (1930) may not be entirely appropriate, since the latter -
unlike the former - governs not only international transactions, but domestic ones as well.
Conflicting interpretations under Conventions like the Geneva Uniform Law, pose greater
difficulties than divergent interpretations of the CISG, which is confined to international
transactions.
The belief that careful consideration of foreign experience may be helpful has become widely
diffused, not only in legal writings,[533] but also in judicial practice. There is an increasing number
of references made by judges from one country to decisions of municipal courts of another
Contracting State, with a view to avoiding "judicial diversification of uniform private law."[534]
Even in England, there is a tendency to adapt traditional rules of construction of statutes to
meet the particular ends of uniform law.[535]
Having examined the attitudes of different legal systems to foreign precedent and
having noted the modern trends in that area, we must address another real problem that affects
a municipal judge's efforts to cope with foreign decisions. The issue at hand is not one of
access to foreign decisions - because UNCITRAL has taken many steps to ameliorate any
practical difficulties relating to access, including the establishment of CLOUT, whereby the
original texts of decisions and other materials may be obtained from the UNCITRAL
Secretariat on payment of the cost of copying and mailing.[536] Of more concern is the issue of the
ability of law students, practitioners and judges to understand foreign decisions. The
unwillingness of some judges to consider foreign jurisprudence is often due to mistrust and an
uneasy awareness of their lack of familiarity with foreign systems of law.[537]
It has long been suggested that the common preference of judges for the law of their own
country - a phenomenon known as "chauvinisme judiciaire"[538] - might be explained by a
sincere recognition of their not having been trained to cope with foreign law.[539] The risk with
respect to foreign decisions in the field of uniform law is that judges may find it easier to
follow the interpretation of a uniform international law provision given by the courts of their
own State, than that prevailing in another Contracting State.[540] Law schools should take on the
task of education in this area. The difficulties associated with understanding foreign
jurisprudence should not be exclusively attributable on actual differences between the rules of
substantive law because there are not that many. Rather, it is mainly the different
classifications and general notions of each legal system that make it unique. Universities
should educate students to deal with foreign legal concepts and classifications, stressing more
the operative side of these, rather than dramatising differences by expressing foreign legal rules
through rigid conceptual tools.[541] As the modern lawyer needs to understand and deal with
foreign precedent, the modern student (who may be the future judge) needs to be educated
with an international perspective. Only then may judges be able to exorcise their suspicion of
foreign decisions, which at times is quite outspoken and fallacious. One such instance of a
judgment riddled with suspicion towards foreign case law was provided by Lord Diplock in
the Fothergill case.[542] This example is indicative of the problem discussed above, not so much
because of the stress Lord Diplock laid on the caution to be used when dealing with a foreign
judgment, but because of his rather approximate representation of the French legal system.[543]
(b) Doctrine (scholarly writings; commentaries)
Another "antidote"[544] to the danger of divergent interpretations of the CISG is the use of
"doctrine", academic writings. The bibliography concerning the literature on the CISG is
voluminous.[545] The value of scholarly writings and international commentaries in the promotion
of an autonomous, international interpretation of the CISG and its uniform application cannot
be overlooked.[546]
The role played by doctrine in the interpretation of legislation varies in different legal systems.
In civil law countries, recourse to doctrine as an instrument of interpretation for domestic and
foreign law has never been doubted.[547] On the other hand, common law jurisdictions have
traditionally given little effect to scholarly writings. But even in common law countries, such
as England and America, where judges traditionally have been reluctant to have recourse to
scholarly writing, the need for uniformity in interpreting international Conventions has led to a
more liberal approach and the use of doctrine has become increasingly common.[548] In the United
States, academic writing is cited freely in judicial opinions, while there was similar reliance in
England, in Fothergill v. Monarch Airlines Ltd.[549] In that case, at the House of Lords, the issue
was an article of the Warsaw Convention on Carriage by Air. Several foreign precedents were
quoted, but their example was dismissed and it was stressed that caution to be used when
dealing with foreign judgment.[550] The result, which might seem paradoxical for a common law
system, was that more weight was attached to foreign literature than to its case law.[551]
The sharpest divergence from traditional common law practice is reported in Canada, where
courts long ago shed reluctance to use scholarly writing and regularly cite textbooks, law
reviews and other scholarly literature. This development is explained "by the wide
geographical dispersal of Canadian courts, a less cohesive bar, less specialisation among
judges and the greater influence exercised by Canadian law schools."[552] It is interesting to note
that some of the factors responsible for the Canadian development could also be true,
structurally at least, in the context of the CISG and its application world-wide.
It is the view of the present writer that in considering the interpretation given to the
CISG by foreign courts, all national courts should consider the doctrinal writings that
influenced such interpretation in those foreign courts. This practice gains its legitimacy by the
recognition of the vital role that doctrine can have in avoiding interpretative diversity in the
CISG. This is achieved by the introduction, through the use of doctrine, of international, rather
than domestic lenses to view the CISG.
(c) Travaux préparatoires (legislative history)
Another useful guide for resolving doubts about the exact meaning, scope and effect of
the CISG's provisions is the legislative history of the CISG. The study of the travaux
préparatoires - which include not only the acts and proceedings of the Vienna Conference,
but also the summary records of the previous deliberations within UNCITRAL. The use of
such material is generally advocated by most commentators.[553] The relationship between the old
and the new law can often be found in the "travaux préparatoires". The same commentators
have, however, also stressed that the value of the legislative history should not be
overestimated.[554] There are a few reasons for this caution.
First, it should not be forgotten that the CISG, once adopted by the Contracting
States, "has a life of its own"[555] and its meaning can change with time and use. It becomes
apparent that the original intention of the drafters, documented in the travaux préparatoires, is
only one of the elements to be taken into account for the purpose of the CISG's current
interpretation.
It should also be borne in mind that not all countries' rules on the interpretation of
treaties are the same. In civil law countries, courts often resolve legislative problems of
interpretation by referring to the legislative history of the particular legislation.[556] In contrast,
courts in common law countries such as England, traditionally, have not accepted the
legitimacy of legislative history so readily, sticking to narrow traditions of literal
interpretation.[557] More recently, however, the use of travaux préparatoires has been permitted
in certain cases.[558] This is a welcome development because an international uniform law, being
the product of an international uniformity process, may not be treated just like any other
domestic law enacted by an adopting State. In Fothergill v. Monarch Airlines, the House of
Lords first recognised that restrictive canons of statutory interpretation ought not to be
brought to bear upon an international uniform text. In Fothergill, the House of Lords was
unanimous in holding that the legislative history of the Warsaw Convention should be
examined for assistance in interpreting the word "avarie" (or "damage").[559]
Another reason for a cautious treatment of the legislative history of the CISG is that
the travaux préparatoires sometimes reveal a difference of opinion among the drafters
themselves. Also, even when the arguments put forward in favour of the adoption of a given
provision were not controversial, they are not always, or necessarily, decisive for the final
product. In other instances, the difference in opinion documented is of a political rather than
legal nature. It should always be kept in mind that the provisions of the CISG were adopted in
a diplomatic conference.
(d) Other Proposals
(i) International Tribunal
Other proposed methods to counter divergence in the interpretation of the CISG and
to ensure that any tendencies towards divergence shall be corrected, include the establishment
of an international tribunal with ultimate jurisdiction - similar to the International Court of
Justice - to make preliminary rulings on questions arising out of the interpretation of the
provisions of the Convention.[560] In one version of such a possible arrangement, it has been
suggested that during the sittings of the international tribunal, national courts be required to
suspend their decisions until after the judgement of this tribunal and then decide in accordance
with that judgement.[561] A similar procedure already exists within the framework of the
European Community. Under that scheme, the European Court of Justice has been given the
competence to act at the request of national courts of the European Member States on
questions relating to the interpretation of European Community Law[562] and other international
Conventions concluded between the Member States,[563] and to deliver binding decisions on such
questions.
The main hindrance to the conception of a similar solution with respect to the CISG
has to do with the special nature and origins of the Convention itself. The theoretical and
practical difficulties that arise in a discussion of the establishment of a world court to deal with
matters of the CISG can be attributed to the following factors:
(a) Geographical distance between the Contracting States. Like other international Conventions elaborated under the auspices of the United Nations, the
CISG is not restricted to a particular regional area, but is intended to receive world-wide
acceptance. This factor can create problems regarding the choice for the tribunal's sittings, a
decision that can have a negative psychological impact on certain geographically remote
Contracting States, as well as being excessively time consuming and financially taxing.
(b) Social, political, economical, legal and cultural difference among the Contracting States. It has been observed that to expect all Contracting States - incorporating a huge cultural
diversity of social, political, economical and legal structures - to agree on conferring upon an
international tribunal the exclusive competence to resolve divergences between the national
jurisdiction on the interpretation of the uniform international trade law, would be "entirely
unrealistic."[564]
(c) Diversity of commercial disputes resolution. Since disputes arising in connection with international sale contracts are frequently referred to
arbitration for settlement, there exists the problem of ensuring that private arbitrators, when
faced with a question of the CISG's interpretation, would submit the case to such a
hypothetical international tribunal.
(d) Financial-logistical support for such an expensive operation. The creation of such a hypothetical international tribunal and the establishment of the
necessary supporting infrastructure (human and financial resources) require complex and
expensive arrangements within UNCITRAL, as well as high costs to litigants in money and
delay. Although the model of an International Court of Justice has worked with issues of
public international law, it is extremely unlikely that it could also work with private
international law themes, such as the CISG, for the reasons highlighted above.
(ii) Advisory Body
A modified and less ambitious proposal is to entrust an international organ, Under the second proposal, the tribunal would also operate in a general and abstract context.
For instance, national authorities, desiring to ensure a correct application of the CISG within
their State, could request from the tribunal clarification on a particular CISG provision.[566]
Precedents for such a procedure exist and at the eighteenth session of UNCITRAL, the
Secretariat submitted a note discussing the possibility of establishing a similar procedure for
current UNCITRAL legal texts.[567]
The number of objections that can be raised even against such a proposal is, however high,
and the substance of these objections still serious.[568] These objections regard:
(a) The proper authorization of the tribunal. The biggest problem relates to the proper source of authorisation for UNCITRAL to give its
opinion on an instrument which has been adopted in final form not by the Commission itself,
but by a diplomatic conference to which all Member States of the United Nations have been
invited.
(b) The structural organisation of such a body. There are many questions as to whether the decisions would be rendered by UNCITRAL as a
whole at its annual sessions, or whether a permanent committee, composed of a restricted
number of UNCITRAL members, should be set up for this purpose.
(c) The legitimacy of the body's consultative function. The main issue here is whether it would be appropriate to entrust an organ composed of
representatives of States with such an important and politically controversial task. In
comparison with the prior proposal involving an international tribunal, the Advisory Body
option seems more feasible. It is arguable that a similar proposal for the establishment of an
Advisory Body or Council could materialise as a result of a private initiative. For instance,
such a Body could be composed of international participants or members who are not political
representatives of - and have no mandate from - national governments; a kind of "scientific"
representatives of legal cultures with comparative law sensibility. Their task would be to
confer interpretative opinions or commentary on the application and interpretation of the
CISG. Although the degree of authority that different national courts or tribunals would attach
to interpretative opinions of such a Body remains anybody's guess, one hopes that such an
initiative can establish the requisite parameters for the CISG's healthy and uniform
development.
7. CONCLUSIONS
The legislative history of Article 7(1) was examined in this chapter. It provided an
insightful look at the provision's drafting and revealed some of the compromises made in
producing its text. The creation and adoption of the CISG are only the preliminary steps
towards uniformity in international sales law. It is the interpretation - and the uniform
application - of the uniform law that will complete the process. It is at these latter stages that
the success, or failure, of the unifying effort can be judged. This chapter analysed the main
issues that arise in relation to Article 7(1) - the CISG's international character, the need to
promote uniformity in the CISG's application and the observance of good faith in international
trade - in order to help understand the structure, scope and function of the article.
The present writer also argued that an autonomous interpretation of the CISG is not
simply a consequence of the international characterisation of the CISG but that it is also
necessary for uniformity in the CISG's application to be achieved. This is because the elements
of "internationality" and "uniformity" are not only inter-related, but inter-dependent as well. It
was further argued that, in interpreting the CISG, the rules and techniques traditionally
followed in interpreting ordinary domestic legislation should be avoided and that Article 7
represents an implied provision in the body of the law for the undertaking of a liberal approach
to the Convention's interpretation.
The ultimate aim of the CISG - to achieve the broadest degree of uniformity in the law
for international sale transactions - cannot be achieved properly if national principles or
concepts - taken from the law of the forum, or from the law which in the absence of the
Convention would have been applicable according to the rules of private international law -
are used in the interpretation of the CISG. The "nationalisation" of the uniform rules would
deprive the instrument of its unifying effect.
The concept of good faith and its scope and function in different legal systems was
discussed in the previous chapter. Some issues concerning the final inclusion of the principle of
good faith in the CISG were explored in this chapter, in order to determine the nature, scope
and meaning of the concept in the application and interpretation of the CISG. Whether to
endorse the literal meaning of the provision and conclude that the principle of good faith is
vague and nothing more than a tool of interpretation, or to adopt a broader interpretation of
good faith, stating that the duty to observe good faith is also directed to the conduct of the
parties - was examined. The present writer argued that the broad, liberal approach is
preferable, with the important qualification that the principle should not be stretched to impose
on the parties additional obligations of a positive character.
Different interpretative aids - ranging from the use of case law, travaux préparatoires
and doctrine, to the establishment of institutional structures - that may assist in the
maintenance of the uniform application of the CISG and act as a hindrance to the development
of divergent interpretations were also discussed in this chapter.
It was argued that as a matter of principle, common sense and effectiveness, courts should at
least consider the jurisprudence developed by foreign courts applying the CISG. Such
deference would require certain concessions to be made in legal techique and attitude by both
common and civil law jurisdictions and the establishment of a relaxed system of precedent,
whereas resorting to private international law should be avoided. Recent developments in the
case law have provided some optimism that the activity around the CISG is focused towards
the right direction.
CHAPTER 4: ARTICLE 7(2) OF THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 1980
1. Introduction
1. INTRODUCTION
Questions concerning matters governed by this Convention which are not expressly
settled in it are to be settled in conformity with the general principles on which it is
based or, in the absence of such principles, in conformity with the law applicable by
virtue of the rules of private international law.[569]
The CISG represents an attempt to provide a uniform body of law applicable to
international sale transactions. It does not constitute an exhaustive body of rules, however,
and thus does not provide solutions for all the problems that can originate from an
international sale transaction. Indeed, the issues governed by the 1980 Uniform Sales Law are
limited to the formation of the contract and the rights and obligations of the parties resulting
from such a contract.[570] This limitation gives rise to problems relating to the necessity of filling
gaps that exist in any type of incomplete body of rules.[571] It is to comply with such necessity
that Article 7(2), designating the rules for filling any gaps in the CISG, was drafted. The
justification for such a provision lies in the fact that "it is hardly possible for an international
group to draft a voluminous and complicated piece of legislation without leaving gaps
behind,"[572] especially in the field of contract, as contracts have infinite variety. The aim of this
provision is not very different from that which the interpretation rules found in Article 7(1) are
pursuing, i.e., uniformity in the CISG's interpretation and application.
Article 7(2) and gap-filling are directly connected to Article 7(1) and interpretation,
not only due to the proximity of their location in the text but, more importantly, because of
their substantive relationship with each other.[573] Gaps in the law constitute a danger to the
uniformity and autonomy of the CISG's interpretation, because "one way to follow the
homeward trend is to find gaps in the law."[574] Further, interpretation must be the means
whereby gaps in the CISG are filled, because when a gap praeter legem is detected the
problem arising thereby should be solved by way of interpretation of the CISG. In accordance
with the basic criteria established in Article 7(1) and discussed in the previous chapter of the
current work, uniformity in the CISG's application is the ultimate goal. It follows that for the
interpretation of the CISG in general - not only in the case of ambiguities or obscurities in the
text, but also in the case of gaps praeter legem - "courts should to the largest possible extent
refrain from resorting to the different domestic laws and try to find a solution within the
Convention itself."[575]
The relevant textual reference in Article 7(2) leaves the CISG prone to divergent gap-filling (i.e., in conformity with the relevant law applicable according to the rules of private
international law). This thesis argues that the use of the rules of private international law to
resolve questions concerning matters governed but unresolved by the CISG will harm the
Convention's uniform application by producing divergent results. An alternative approach to
gap-filling - one based on the concept of internationality and on generally acknowledged
principles upon which the CISG is based - would serve and promote the purpose of the new
law (i.e., uniformity in its application) rather than hinder it.
This chapter examines the functional elements of Article 7(2). This is done by tracing the
legislative background and the drafting compromises that led to the wording of the provision,
in order to reveal the true character of the provision. Its potential to undertake a dominant and
expanded role in the interpretation of the CISG as a uniform international code is noted and
supported through a discussion of gap-filling methodology. It will be argued in this chapter
that this gap-filling provision of the CISG not only has a vital role in promoting the uniformity
and internationality of the CISG, but also that it contains a potential threat to uniformity, in its
reference to the use of private international law rules. It is part of the present writer's thesis
that this reference in Article 7(2) - which was the result of another diplomatic drafting
compromise between delegates at the Vienna Conference - should remain a dead letter, or that
it should only be used with full concept of the diversity that it will produce.
Resorting to the rules of private international law would not only represent regression
into the uncertainty of choice of law rules and the escalation of transactional costs for litigants,
but it would also endanger the CISG's success by undermining the uniformity of its
application. Article 7(2) clearly directs the use of the rules of private international law in the
absence of any general principles. The present writer notes that any court or tribunal entrusted
with the interpretation of the CISG should be acutely aware of the adverse consequences that
the use of private international rules entails. The healthy development of the CISG will
depend, to a large extent, on the enthusiasm that the goal of uniformity can inspire in every
judge or arbiter applying the Convention. Such enthusiasm, or the lack of it, will be reflected
in the vigor with which each court or tribunal searches for general principles on which the
Convention is based, or in the ease with which the court turns to rules of private international
for gaps praeter legem. It is part of the present writer's thesis that in filling any gaps
concerning matters governed by the CISG, the elusive goal of uniformity is promoted through
the use of general principles; whereas resorting to the rules of private international law
detracts from that goal.
2. LEGISLATIVE HISTORY OF ARTICLE 7(2) CISG
As has been discussed in the previous chapter of this work,[576] the ULIS, predecessor to
the CISG, contained two provisions addressed to the problem of its interpretation. The first
provision stated: When these two
provisions are read together, one realises the strong indication that ULIS was "intended to
constitute a self-contained law of sales, to be construed and applied autonomously, i.e.,
without any reference to or interference from the different national laws."[579] This approach of
independence and self-sufficiency strengthens the position of the uniform law as an
international instrument that should be interpreted and applied in a uniform manner. As has
been correctly pointed out, A further argument in favor of a gap-filling provision excluding the use of the rules of private
international law (i.e., in terms similar to those in Article 17 ULIS), is that reversion to
national laws would involve It was, however, strongly argued, in UNCITRAL, that
the uniform law could not be considered as totally separated from the various national laws -
as the uniform law did not deal with a number of important questions related to contracts of
sale - and that it would be unrealistic and impractical to construe many undefined terms
contained in the CISG without having recourse to national law.[582]
At the first session of the Working Group, in 1970, several proposals were submitted
for the revision of Article 17 of the ULIS.[583] One of the suggestions put forward was the
deletion of the provision in its entirety, or the modification so that it stated expressly that
"private international law shall apply to questions governed but not settled by ULIS." None of
the proposed suggestions was supported by a majority of the Working Group.[584] At the request
of the Commission, which at its third session, in 1970, was equally unable to reach an
agreement,[585] the Working Group discussed the matter again at its second session, in 1971, and
on that occasion it decided to recommend the adoption of the following new version of Article
17: The report of the Working Group stated that the proposed revision would clearly
express two considerations not mentioned in the original Article 17:
(i) the international character of the law, and
It was added, by the Working Group, that the omission of the reference to "the general
principles on which the present Law is based" from the original text was due to the fact that
such a reference was considered to be too vague.[586] Article 7(1) CISG was slowly taking shape
during this process of revising Article 17 of the ULIS, while the reference to the "general
principles" of the uniform law was to find a way back into the CISG in what, eventually, was
to become Article 7(2) of the CISG.
At its fourth session, in 1971, the Commission approved the new provision as
proposed by the Working Group. At the same time it was suggested that the provision be
supplemented by an additional paragraph dealing with gaps in the uniform law. Opinions were
equally divided between those who insisted on a "general principles" solution along the lines of
Article 17 of the ULIS and those who, on the contrary, favored the approach according to
which possible gaps in the uniform law should be filled in by the domestic law indicated by the
rules of private international law. The Commission decided not to take any final decision on
this matter and to refer it to the Working Group for its consideration at an appropriate time.[587]
At subsequent sessions devoted to the revision of the ULIS, the Working Group did not
discuss the matter further. Subsequent sessions dealt with the revision of the Uniform Law on
Formation of Contracts and with the eventual insertion of the notion of "good faith in
international trade" in what was, by now, Article 6 of the new consolidated UNCITRAL Draft
Convention: During the discussion of Article 6 of the UNCITRAL Draft Convention that took
place at the Vienna Conference, there were two types of amendments submitted. The first type
was of a drafting nature and led to some changes in the wording of the article that today is
known as Article 7(1) of the CISG. The second type of amendment was of a substantive
nature and greater importance, since it led to the addition of a new paragraph to the provision
dealing with gap-filling in the CISG.
The substantive amendments proposed for the gap-filling mechanism of the CISG can be
divided into two different groups. In the first group belong amendments which proposed that
gaps in the CISG should be filled according to a certain set of legal rules already in existence.
Examples of this type are provided by Bulgaria's proposal that gaps should always be filled in
conformity with "the law of the seller's place of business"[589] and by Czechoslovakia's proposal
that "the law applicable by nature of the rules of private international law"[590] should determine
unsettled matters. There was, however, also a different type of solution offered, one that
called for the utilisation of the "general principles" of the Convention as a primary mode of
filling any gaps in the CISG. Such was the amendment proposed by Italy, which read as
follows:
"Questions concerning matters governed by this Convention which are not expressly
settled therein shall be settled in conformity with the general principles on which this
Convention is based or, in the absence of such principles, by taking account of the
national law of each of the parties."[591]
For a variety of reasons, none of the proposed amendments gained sufficient support.
Bulgaria's proposal was resisted on the basis that it was biased in favor of the seller too much,
because
"
even if one intended to accept its underlying idea according to which gaps in the
Convention should always be filled on the basis of domestic law, it was not advisable
to refer in every single case for this purpose to the law of the seller's place of
business."[592] The Italian amendment failed to convince the delegates because its reference to "the national
law of each of the parties" was thought to be unclear and unable to cope with a situation
where the national laws of the parties provided irreconcilable solutions on a particular issue of
dispute.[593]
The solution was in the form of a compromise, by combining the two groups of
amendments. The first part of the Italian proposal was kept, but its troublesome last part was
replaced with the Czechoslovakian proposal. The resulting paragraph was added as a second
paragraph to Article 6 of the UNCITRAL Draft Convention - thus creating what is now
Article 7(2):
"Questions concerning matters governed by this Convention which are not expressly
settled in it are to be settled in conformity with the general principles on which it is
based or, in the absence of such principles, in conformity with the law applicable by
virtue of the rules of private international law." Although some delegations opposed the addition of this new paragraph to the uniform law and
maintained their preference for the original text of Article 6 of the UNCITRAL Draft
Convention, the compromise proposal was adopted on a count of 17 votes, in favour, to 14
votes, against, with 11 abstentions.[594]
The compromise that is Article 7 makes clear the following:
(i) for the purposes of interpretation of the Convention in general, "regard is to be had to
its international character and the need for uniformity in its application;"[595]
It is evident from the above observations that courts, or other tribunals, interpreting the CISG should, to the "largest possible extent,"[598] refrain from resorting to domestic laws and try to find a solution within the CISG itself.
Although Article 7(2) represents a drafting compromise, it is a compromise more
favourable to the supporters of Article 17 ULIS, than to its opponents. As noted earlier, the
CISG represents an attempt to codify the law on international sale of goods contracts and it
was intended to replace existing domestic statutes and case law. It was not meant to be
complementary to national laws; rather, it was intended to be an exhaustive regulation.[599] If the
compromise struck to draft Article 7(2) had instead favored the approach proposed by the
opponents of Article 17 ULIS, effectively making recourse to domestic law more readily
available, the CISG's goal of uniformity would have been severely undermined.[600] Under
different domestic laws, deemed to apply according to the rules of private international law,
the parties to a contract would have been faced with the uncertainty that accompanies such a
determination.[601]
In the manner that Article 7(2) is drafted, the risk of diversity in the Convention's gap-filling
from one jurisdiction to another is minimised, since recourse to domestic laws is to be had
only when it is not possible to fill a gap by applying the general principles on which the
Convention is based. In the opinion of the present writer, when dealing with a matter governed
by the CISG, it should be a rare, or non-existent, case where there are no relevant general
principles to which a court might have recourse under Art. 7(2). In this chapter, the present
writer will argue for an expanded definition of "the general principles" on which the CISG is
based. In applicable instances, this includes the UNIDROIT Principles, which because of their
general character may be, in suitable cases, should be applied on a much wider scale, so that there
will be less of a need to have recourse to conflict of laws rules.
3. ARTICLE 7(2) CISG AND GAP-FILLING METHODOLOGY
(a) Gaps "praeter legem"
Before the gap-filling rule in Article 7(2) can be put into operation, the matters to
which the rule applies must first be identified.
The starting point of the gap-filling analysis is the observation that the gaps [602] to which the rule refers, are not gaps "intra legem" (i.e., matters that are excluded from the scope or the application of the Convention - such as the matters discussed in CISG Articles 2,[603] 3,[604] 4 [605] and 5 [606]); they must be gaps "praeter legem"[607] (i.e., matters that are governed but are not expressly resolved by the CISG). Professor Bonell has noted that the "first condition" for the existence of a gap, in the sense of Article 7(2), is that the issue concerns matters "governed by the Convention," and that issues which are not within the scope of the Convention "have been deliberately left to the competence of the non-unified national laws."[608] It has also been correctly stated that the absence of a uniform law provision dealing with such issues cannot be regarded as a gap, "but is a logical consequence of that preliminary decision"[609] to be left outside the scope of the CISG's domain.
(b) Gap-filling methodology
In general gap-filling methodology, three different approaches exist to fill gaps praeter
legem.
The drafters of the 1964 Hague Conventions chose the first approach.[615] Therefore,
Article 2 ULIS "excludes the application of rules of private international law, except in a few
instances"[616] and Article 17 ULIS provides that the general principles underlying the 1964
Uniform Law are to be used to fill any gaps. It has been correctly concluded that "[t]his has
the intended negative implication that courts may not refer to the domestic law of the country
whose law would otherwise apply under the rules of private international law."[617] ULIS's pursuit of absolute independence from domestic law failed the test of acceptance. The solution
adopted in ULIS has been criticised and has been considered by some commentators as one of
the reasons for its failure to win wide acceptance.[618]
However, a solution different from the one that had been adopted in ULIS was
endorsed for the Vienna Convention. It is an approach that combines recourse to general
principles with an eventual recourse to the rules of private international law. When a matter is
governed by the CISG but is not expressly settled in it, Article 7(2) offers a solution by:
(i) internal analogy, where the CISG's other provisions contain an applicable general
principle; or
(ii) reference to external legal principles (the rules of private international law) when the
CISG does not contain an applicable general principle.[619]
Having recourse to general principles in filling gaps constitutes a method well-known
in civil law systems. It has been observed that the approach endorsed for the settlement of
questions in conformity with the general principles of the Convention, in Article 7(2), "reflects
the approach established for civil law codes."[620] Bonell sheds some more light into the nature of
this approach when he notes that even
"in countries such as France or the Federal Republic of Germany, where the approach is
not formally imposed by statute, it is taken for granted that a Code or any other
legislation of a more general character must be considered as more that the mere sum
of its individual provisions. In fact, it must be interpreted and, if necessary,
supplemented on the basis of the general principles which underlie its specific
provisions."[621] Although the notion of general principles also exists in common law, it is quite
different from that in civil law since it derives from different sources[622] and has a different
function. Commenting on the origin and function of general principles, Bonell has stated that,
in common law,
"statutory law is seen as only fixing rules for defined situations, not as a possible source of general principles. As such, not only are the statutes traditionally interpreted in a very strict sense, but if there is no provision specifically regulating the case at hand, the gap will immediately be filled by principles and rules of the judge-made law."[623] (c) Article 7(2) CISG and gap-filling
The approach to gap-filling adopted in Article 7(2) is influenced by similar solutions to
gap-filling that can be found in the codes of continental Europe.[624] Any gaps must be filled,
whenever possible, within the Convention itself; a solution that complies with the aim of
Article 7(1), i.e., the promotion of the Convention's uniform application.[625] As has been noted
above, there are various types of logical reasoning that can be employed in order to find a
solution to a gap within the CISG itself, and recourse to the CISG's general principles
constitutes only one method of gap-filling. This observation leads to a further interpretation
issue, the interpretation of Article 7(2) itself. One must determine whether Article 7(2) should
be interpreted broadly, i.e., whether it includes other methods of legal reasoning as well, such
as analogical application,[626] or whether it is to be interpreted restrictively.
It is the view of the present writer that Article 7(2) must be interpreted broadly and
that there are two complementary methods of gap-filling allowed under this provision (with a
fine distinction within the latter method - between principles extrapolated from within specific
CISG provisions and general principles of international commercial law on which the CISG as
a whole is founded [627] - to be expounded later):
(a) an analogical application of specific provisions of the CISG; and
(b) a consideration of the general principles underlying the CISG as a whole, when the gap can
not be filled by analogical application of specific provisions.
The difference between the two gap-filling methods is explained well by Professor Bonell, as
follows:
"Recourse to 'general principles' as a means of gap-filling differs from reasoning by
analogy insofar as it constitutes an attempt to find a solution for the case at hand not
by mere extension of specific provisions dealing with analogous cases, but on the basis
of principles and rules which because of their general character may be applied on a
much wider scale."[628]
Analogical application has also been accepted as a method of gap-filling by many other
scholars in this area. An explanation of this method is provided by Enderlein and Maskow,
who, in endorsing a broad interpretation of Article 7(2), state that There is strong academic opinion in favor of the view that not only does the CISG
permit both methods of gap-filling, but also that, in the case of a gap in the CISG, "the first
attempt to be made is to settle the unsolved question by means of an analogical application of
specific provisions."[630]
4. GAP-FILLING BY ANALOGY
One of the elements necessary for gap-filling by analogy is the discovery of a specific
provision dealing with similar issues to the ones present in the gap. The method of analogical
application requires examination of the provisions of the CISG, because the rule laid down in
an analogous provision may be restricted to its particular context and, thus, its extension to
other situations would be arbitrary and contrary to the intention of the drafters or the purpose
of the rule itself.[631] Where there are no special reasons for limiting the analogical application of a
specific rule to another CISG provision, the interpreter must consider whether the case
regulated by this rule and the gap at hand are "so analogous 'that it would be inherently unjust
not to adopt the same solution' ..."[632] If the answer to this question is affirmative, then the gap
should be filled by an application of that rule by analogy.
There is some diversity in academic opinion on the exact test to be applied in such cases.
Ferrari uses a criterion similar to that offered by Bonell, stating that when the matters
expressly settled in the Convention and the matters in question are so closely related that it
would be "unjustified to adopt a different solution,"[633] one can fill the gap by analogy. Honnold
offers a different test, placing the focus of the inquiry on whether the cases were so analogous
that the drafters "would not have deliberately chosen discordant results". Only in such
circumstances, according to Honnold, it would be reasonable to conclude that the rule
embracing the analogous situation is authorised by Article 7(2) CISG.[634]
It is important to note that gap-filling by analogy is concerned with the application of
certain rules, or solutions, taken from specific CISG provisions to be applied in analogous
cases in order to resolve legislative gaps. This method should not be confused with the
application of general principles that are expressed in the CISG, or upon which the CISG is
founded. It is the present writer's contention that gap-filling by analogy is primary gap-filling.
Only when no analogous solutions can be found in the CISG's provisions should the
interpreter resort to the application of the CISG's general principles - internal and external -
which is secondary gap-filling. This is a fine, but clear, distinction. It deserves to be
maintained, although there may ultimately not be a lot of practical importance attached to
maintaining it, due to the tendency of commentators to blur the distinction by focusing on the
use of general principles in gap-filling and the potential of general principles to dominate the
CISG's gap-filling function. However, the value of recognising its existence lies in the
theoretical clarity and legitimacy that it adds to the consistent and systematic examination of
the interpretative structure embedded in the CISG.
5. "GENERAL PRINCIPLES" AND CISG
When the solution to a gap-filling problem cannot be achieved by analogical
application of a rule found in a specific CISG provision, gap-filling can be performed by the
application of the "general principles" on which the CISG is based.[635] This procedure differs
from the analogical application method,[636] in that it does not solve the case in question solely by
extending specific provisions dealing with analogous cases, but on the basis of rules which
may be applied on a much wider scale, due to their general character. At this point it is
appropriate to note another fine - but valid, distinction in the types of general principles that
concern the CISG and its interpretation. The distinction must be drawn between principles
extrapolated from within specific CISG provisions and general principles of comparative law -
namely, those rules of private law that command broad adherence throughout various
countries, or general principles of law of civilised nations - on which the CISG is generally
based. This distinction is important in the present writer's thesis on the methodology of the
CISG's interpretation, in that it will assist in the reduction of the need to resort to rules of
private international law for gap-filling and thus maintain the integrity of the CISG's uniform
and international application and interpretation.
(a) Principles in CISG's provisions
Despite the clear provision for the use of the CISG principles in gap-filling by Article
7(2), there is no other textual reference as to the identification of such principles and the
manner of their application, once identified, in order to fill a gap in the CISG. While some
principles will be expressly stated in the CISG,[637] most of them will usually be extracted from
provisions dealing with specific issues. General principles that are capable of being applied to
matters governed by, but not expressly regulated by the CISG, may be inferred from specific
rules established by specific CISG provisions.[638]
Some general principles can be easily identified since they are expressly stated in the
provisions of the CISG itself. One such principle is the principle of good faith,[639] which had
already been considered a general principle under the regime of ULIS.[640]
The principle of autonomy [641] is another general principle expressly outlined in the CISG.
Party autonomy has been described as the most important principle of the CISG.[642] Some
commentators have inferred from this principle that the CISG plays solely a subsidiary role as
it provides only for those cases which the parties neither contemplated, nor foresaw.[643]
According to this premise, it is logical to conclude that in case of conflict between the parties'
autonomy and any other general principle of the CISG, the former always prevails.[644]
Many commentators have offered the following as examples of principles expressly
enunciated in the CISG, which implies that they can perform the gap-filling function that such
a characterisation allows them:
The present writer holds reservations - based on theoretical objections - regarding the
characterisation of the above provisions as "general principles", and is of the opinion that they
are no more than rules set out in the CISG. A general principle stands at a higher level of
abstraction than a rule, or might be said to underpin more than one such rule. For example, the
principle of party autonomy, also recognised in Article 6, mandates that effect be given to the
intentions of the parties, no matter in what form those intentions may be expressed. This
principle of party autonomy can be said to underpin the rules set out in Articles 11 and 29(1).
Most general principles have not been expressly provided by the CISG. Therefore, they must
be deduced from its specific provisions by the means of an analysis of the contents of such
provisions. If it can be concluded that they express a more general principle, capable of being
applied also to cases different from those specifically regulated, then they could also be used
for the purposes of Article 7(2).
There is a notable divergence of opinion as to the exact nature of such an analysis of
specific CISG provisions. Bonell states that
"just as in interpreting specific terms and concepts adopted in the text of the
Convention, also in specifying 'general principles' courts should, in accordance with
the basic criteria of Article 7(1), avoid resorting to standards developed under their
own domestic law and try to find the particular solution 'autonomously', i.e., within
the Convention itself, or, should this not be possible, by using standards which are
generally accepted at a comparative level."[649] Bonell's argument relies on the premise that, although there are principles, such as that
of party autonomy and the dispatch rule, which can be directly applied, others, such as the
principle of good faith and the concept of "reasonableness", need further specification in order
to offer a solution for a particular case. The question that arises here relates to the standards
to be used for the purpose of the identification of the principles that belong to the latter
category of principles. For example, how could a judge of a highly industrialised country apply
the "reasonableness" test in order to determine which party in a particular circumstance has
been acting with due diligence? Surely, the judge should not automatically refer to the
standards of care and professional skill normally required from national business people in
domestic affairs. Bonell is of the opinion that the answer should be found "either in the
Convention itself or at least on the basis of standards which are currently adopted in other
legal systems."[650]
On the other hand, there is strong academic opinion that comparative law should not
be used to identify such general principles. Enderlein and Maskow are of the opinion that it is:
"not possible to obtain the Convention's general principles from an analysis prepared
by comparison of the laws of the most important legal systems of the Contracting
States ... as it was supported, in some cases, in regard to Article 17 [of] ULIS. ... The
wording of the Convention does in no way support the application of this method."[651]
In addressing this issue, tribunals must be conscious of the mandate in Article 7(1),
that regard is to be had to the CISG's international character and the need to promote
uniformity in its application. Although Bonell's model is not the same as resorting to rules of
private international law, the temptation to adopt a domestic law analysis of the problem
should be resisted. Tribunals must recognise the uniquely international nature of the CISG and
its proper function as uniform law. Bearing in mind what has already been said about the
potential dangers to the autonomy and uniformity of the CISG's interpretation and application
that the use of different domestic concepts and laws carry, it seems that the latter, rather than
the former, opinion is better. It is hoped that the difficulties that can arise, let us say, in a dispute
between a German seller and a Zambian buyer, relating to a notice of non-conformity "within a
reasonable time" under Article 39, can be solved in a way that respects the CISG's character
and objectives - bearing in mind the different perceptions that may exist in these two countries
as to time. The suggestion of the present writer on this hypothetical dispute is that the concept
of reasonableness might be allied with the Article 8(2) reference to "the understanding that a
reasonable person of the same kind as the other party would have had in the same
circumstances", or even with the provision on usage (under Article 9) to permit regional
variation of due diligence.
Irrespective of the result in the debate as to the theoretical justification of the method
of extracting general principles by analysing the contents of specific provisions of the CISG, in
practice, several general principles can be deduced by this method and then applied to cases
not specifically regulated by any of the CISG's provisions. The following is a list of such
general principles:[652]
In Article 74, the Convention also contains a rule with civil law origins,[667] which limits
recoverable damages to those that are foreseeable.[668] There are other rules that are considered
to be general principles as well, by some commentators, but generally there is no universal
agreement as far as their legitimate qualification is concerned.[669]
(b) Principles of comparative law on which CISG is based
As was argued earlier in this chapter, a distinction must be drawn between those
principles extrapolated from within specific CISG provisions and the general principles of
comparative law on which the CISG as a whole is founded. This distinction is important in the
present writer's thesis on the methodology of the CISG's interpretation, because it provides
the theoretical framework for the introduction of elements of the UNIDROIT Principles (and
arguably the Principles of European Contract Law, too) - as part of the "general principles"
on which the CISG is based - into the gap-filling function of Article 7(2).
The CISG is the world's uniform international sales law. Two more recent documents
can be regarded as companions to the CISG: the UNIDROIT Principles of International
Commercial Contracts (promulgated in 1994; discussed in more detail in the following section
of this work), and the Principles of European Contract Law (PECL) (complete and revised
version 1998; discussed only briefly in this chapter).
Unlike the CISG, which is a uniform sales law adopted by countries that account for
over two-thirds of all world trade in goods, the PECL are a set of principles whose objective is
to provide general rules of contract law in the European Union, and will apply when the
parties have agreed to incorporate them into their contract or that their contract is to be
governed by them.[670]
The UNIDROIT Principles and the PECL were written by persons learned in this field
of law, who had been associated with the drafting of the uniform law. Although both
instruments are broader than the CISG in scope, each in different ways, these are
"Restatements" that include provisions derived from the CISG (as well as other sources). Both
"Restatements" take cognisance of insights derived from the text of the CISG, from scholarly
commentaries on the CISG, from cases that have interpreted the CISG, and from other
sources.
Restatements can help interpret a law. For instance, the Uniform Commercial Code is
the U.S. uniform domestic law and a Restatement has served as its companion also. The U.S.
Restatement of Contracts (Second) has a broader scope than the U.C.C.; it takes cognisance
of insights derived from the text of the U.C.C., from scholarly commentaries on the U.C.C.,
from cases that have interpreted the U.C.C., and from other sources. In the United States,
when a tribunal is ruling on sales provisions of the U.S. Uniform Commercial Code, references
to the Restatement of Contracts are frequently encountered. Its examples and explanations of
the meaning of terms and concepts are useful. In U.C.C. proceedings, courts and arbitrators
refer to the Restatement of Contracts as it helps them reason through the applicable law.
The main issue here is whether - and to what degree - the UNIDROIT Principles and
the PECL can aid in the interpretation of the CISG's provisions. There are instances where
Restatements can be regarded as "fleshing out bones already present in the skeletal structure
of the uniform law;"[671] and where the Restatements have bones and accompanying flesh that
cannot be readily affixed to the uniform law they accompany. For example, a recent survey of
the PECL has revealed:[672]
Where provisions of the CISG are skeletal and those of the PECL more full-bodied, for the
CISG researcher the utility of PECL comparatives ranges from most relevant to least relevant.
It is arguable that where either set of the Principles (UNIDROIT, or PECL) can be regarded
as fleshing out bones already present in the skeletal structure of the uniform law, they can be
utilised in interpreting problematic CISG provisions. It is doubtful whether the same can
happen where the Restatements have "bones and accompanying flesh" that cannot be readily
affixed to the uniform law they accompany. Where, as is often the case, the PECL dovetails
with or approximates the CISG, PECL comparatives can be helpful to the CISG researchers
and interpreters. For example, the PECL "Restatement" offers enlightenment (a) with
comments that explain provisions and illustrations that apply them to case law environments,
and (b) with notes that identify domestic antecedents and analogs, that match provisions with
Continental and Common Law doctrine and jurisprudence.
In a similar vein, examples of cases exist in which tribunals have referred to the
UNIDROIT Principles as it helped them reason through the CISG.[674] One can anticipate many
such references to the UNIDROIT Principles in the CISG proceedings. The general affinity of
the CISG to its companion Restatements demands such a comparative approach, especially
where it can be shown that their respective provisions share a common intent. Although the
CISG preceded the UNIDROIT Principles (and the PECL), the present writer argues that the
CISG can be said to be "based" on certain of the UNIDROIT Principles (and the PECL)
because the latter also form part of the new international legal order to which the CISG
belongs. The temporal discordance of the instruments should not be used to hide their
similarities in origin and substance, or to impede their common purpose, which is the
unification of international commercial law. In essence, the word "based", in Article 7(2),
should be given a substantive and thematic nuance, which is broader than the one merely
signifying a strict temporal correlation.
It is asserted by the present writer that the UNIDROIT Principles (and arguably the
PECL) could and should assist in the reduction of the need to resort to rules of private
international law for gap-filling, and thus help maintain the integrity of the CISG's uniform and
international application and interpretation. Even in cases where the international sales
contract is governed by the CISG, the UNIDROIT Principles may serve an important purpose.
The principles and criteria for the proper interpretation of the CISG are laid out in Article
7(1), and for gap-filling in Article 7(2). Particularly, in Article 7(2) reference is made to:
The pervasive influence of the UNIDROIT Principles in international trade law
includes the use of the UNIDROIT Principles as a guide in contract negotiations. Although
not expressly mentioned in its Preamble as one of its purposes, this has also turned out to be
one of the most important ways in which they are being used in practice.[675]
The use of the UNIDROIT Principles as lex contractus is also significant. A
UNIDROIT Secretariat's survey has revealed that among those who chose the UNIDROIT
Principles as the law governing the contract, half did so by expressly referring to the Principles
in the contract and the other half by considering the UNIDROIT Principles as an expression of
"general principles of law," the lex mercatoria, or the like (almost a third specifying they had
done so on more than one occasion).[676] This last point offers direct support to the present
writer's thesis that the UNIDROIT Principles can play an important role in the CISG's
interpretation under Article 7(2). Where it can be shown that a relevant Restatement provision
shares a common intent with a CISG provision under examination, then the former can help
interpret the latter by being utilised as an expression of the "general principles" upon which the
CISG is based. This would reduce, if not eliminate, the need for recourse to conflict of laws
rules in that context.[677]
Further evidence of the wide acknowledgement that the UNIDROIT Principles reflect
general principles of private law is provided by a survey of arbitral awards rendered by the
Court of Arbitration of Berlin in 1992, the Court of Arbitration of the International Chamber
of Commerce in 1995 and 1996 [678] and an unpublished decision of the Court of Appeal of
Grenoble.[679] In those instances, the UNIDROIT Principles were applied as a means of
interpreting the applicable domestic law to demonstrate that a particular solution provided by
the applicable domestic law corresponds to the general principles of law as reflected in the
UNIDROIT Principles.[680]
There are also awards in which the UNIDROIT Principles were chosen as the law governing
the contract, implicitly considering the UNIDROIT Principles as a source of the lex
mercatoria and a reflection of wide international consensus. Three of these awards have been
rendered by the Court of Arbitration of the International Chamber of Commerce.[681] Another
award of this kind was rendered by the National and International Court of Arbitration of
Milan.[682]
The wide recognition of the UNIDROIT Principles as a clear expression of "general
principles" of private law adds legitimacy to the present writer's thesis for their inclusion in the
gap-filling mechanism laid out in Article 7(2). From such post, and assuming that they satisfy
the formal requirements for their use in conjunction with the CISG, the Principles could offer
considerable assistance in the uniform interpretation and application of the Convention that the
drafters of the CISG had intended. The following section of this work examines in more detail
the nature of this proposed role of the UNIDROIT Principles.
6. THE UNIDROIT PRINCIPLES AND CISG
(a) The UNIDROIT Principles - an introduction
In producing the CISG, UNCITRAL drew heavily on earlier work by the International
Institute for the Unification of Private Law (UNIDROIT), under whose auspices the
predecessors to the CISG had been drafted.[683] The UNIDROIT Principles of International
Commercial Contracts[684] was produced under the auspices of UNIDROIT, with the
participation of many legal scholars from a considerable number of countries, and it is the
result of the efforts put in by many of the same individuals who had been involved for a
considerable number of years in the drafting of the CISG.[685] To the extent that the UNIDROIT
Principles address issues also covered by the CISG, they [often] follow the solutions found in that
Convention, with such adaptations as were considered appropriate.[686]
In a similar vein, one of the principal architects of the Principles has stated:
"To the extent that the two instruments address the same issues, the rules laid down in
the UNIDROIT Principles are normally taken either literally or at least in substance
from the corresponding provisions of CISG; cases where the former depart from the
latter are exceptional."[687] It has been said that where the Principles address issues also covered by the CISG and follow
solutions found in that Convention, the supranational committee of experts constituted to
devise the UNIDROIT Principles can be regarded as a council of "wise men [and women]"
whose views can help us interpret the CISG.[688]
The UNIDROIT Principles have been greeted as "a significant step forward in the
globalisation of legal thinking."[689] Even a scant examination of the UNIDROIT Principles
reveals that they bear a significant degree of similarity to the provisions of the CISG. Despite
the general affinity that exists between the two instruments, there are also three significant
differences.[690] The first difference is one of scope; the Convention is limited to contracts for the
sale of goods and, furthermore, it avoids many issues relevant to sales contracts. For example,
the CISG generally avoids the question of contractual validity.[691] On the other hand, the
UNIDROIT Principles are far broader in scope, since they deal not only with the broad range
of commercial contracts, but also with some questions of validity.[692]
A second variance between the UNIDROIT Principles and the CISG is the degree of
maturity that each instrument has reached. A parameter that has to do with the quality of the
solution that their respective provisions afford to certain inveterately difficult issues in
international contracts, such as the notorious problem of the "battle of the forms." This issue
has caused some debate. The fact that the Convention does not have a specific rule addressing
the battle of the forms issue, whereas the UNIDROIT Principles do, may suggest that the
Convention does not provide an answer to this problem. Some commentators believe that the
battle of the forms problem is not solved by the rules of the Convention and, therefore, the
regulation of the battle of the forms must be found by applying a solution, such as the one
stated in UNIDROIT Principles Article 2.22, in supplementation of the CISG.[693] Some other
commentators have strongly countered that this situation could occur "if the tribunal is
unaware of the objectives of the Convention and the legislative history of the CISG Article 19
and thereby permit themselves to be influenced by the aversion to applying the last-shot-rule
by some Convention scholars."[694] The latter believe that the Convention rules are thorough
enough to solve the battle of the forms conflict; that the legislative history of Article 19
indicates that the battle of the forms is regulated under the offer and acceptance norms recited
in the CISG text.
Some other scholars have argued that the way in which the Principles deals with the
"battle of the forms" represents a considerable improvement over the timorous draftsmanship
found in the respective provision of the CISG and have concluded that "the Principles is a
better, more mature product."[695]
Irrespective of the outcome of the debate on the merits of the competing approaches to
the issue of the battle of the forms adopted by the Principles and the CISG respectively, it is
clear the two instruments are not in accord on the issue. This is an example of a case in which
one could not use the UNIDROIT Principles as an aid to the proper interpretation of the
CISG, since the UNIDROIT provisions are substantively different from their CISG
counterparts; i.e., the "Restatement" provisions contain "flesh and bones" that cannot be
readily affixed to the uniform law they accompany.[696]
The third distinction between the UNIDROIT Principles and the CISG relates to
characterisation. The instrument of the UNIDROIT Principles, contrary to the CISG, is not
intended for adoption as a treaty, or as a uniform law. Rather, the document is in the nature of
a non-binding "Restatement" of the existing international commercial contract law. The nature
and the potential function of such a "Restatement" are highlighted in the Preamble of the
UNIDROIT Principles, which reads as follows:
"These Principles set forth general rules for international commercial contracts.
They shall be applied when the parties have agreed that their contract be governed by
them.
They may be applied when the parties have agreed that their contract be governed by
"general principles of law", the 'lex mercatoria' or the like.
They may provide a solution to an issue raised when it proves impossible to establish
the relevant rule of the applicable law.
They may be used to interpret or supplement international uniform law instruments.
They may serve as a model for national and international legislators."
Professor Bonell, who is also a legal consultant with UNIDROIT, informs us that
"[w]hen deciding in 1994 the publication of the UNIDROIT Principles the Governing Council
of UNIDROIT recommended their widest possible distribution and stressed the need '... to
monitor their use with a view to a possible reconsideration of them at some time in the
future'."[697] We are further informed by Bonell of the "more than favourable reception in the
international business and legal community" that the UNIDROIT Principles have enjoyed since
their introduction.[698]
The UNIDROIT Principles have also created great interest in academic and
professional circles. Over the years the Principles have been not only the subject of numerous
international seminars and colloquia,[699] but also the subject of discussion in an ever-growing
number of international legal journal writings,[700] in a tone that has generally been very positive.[701]
In addition, the UNIDROIT Principles have been included in the teaching materials of many
Law Schools around the worid.[702] The UNIDROIT Principles have also played an important
role in some recent codifications, in the sense that they have served as a model for national and
international legislation. This can be said of the new Dutch Civil Code, the new Civil Code of
Quebec and the new Civil Code of the Russian Federation.[703]
References to individual provisions of the UNIDROIT Principles may also be found in the
Final Report of the Commission for the Revision of the German Law of Obligations.[704] After the
publication of the UNIDROIT Principles, the Estonian Government officially declared that it
considered them one of the most important and authoritative sources of inspiration in the
drafting of the new law on obligations.[705] Professor Bonell has also noted that most of the
provisions of the draft Civil Code of the Republic of Lithuania, dealing with contracts in
general, follow very closely the UNIDROIT Principles,[706] and the same is expected to occur
regarding the new Czech Civil Code, currently under preparation.[707] Also, the Scottish Law
Commission, in its proposals for the reform of the rules on interpretation of legal acts,
expressly refers to specific provisions contained in Chapter 4 of the UNIDROIT Principles.[708]
Professor Bonell has also noted similar developments outside Europe, such as the recent drafts for the revision of Article 2 of the Uniform Commercial Code, concerning sales contracts,[709] the draft of a new Commercial Code of Tunisia [710] and the draft Uniform Law on General Commercial Law which is currently being prepared by the 15 member States of the Organization for the Harmonization of Business Law in Africa.[711] Specific provisions of the UNIDROIT Principles have also been chosen as the basis for a tentative draft code prepared by a member of the New Zealand Law Commission and intended to lay down the basic principles of the New Zealand law of contracts.[712]
It is evident that the UNIDROIT Principles have already had a significant influence on national
and international codifications of private law world-wide, among countries of divergent social,
legal and cultural modes. It is, however, the interpretative and supplementary function of the
UNIDROIT Principles that is of special interest to us. Even in cases where the international
sales contract is governed by the CISG, the UNIDROIT Principle may serve an important
purpose by being utilised as a means of interpreting and supplementing the CISG.[713]
(b) Clarifying CISG language
The UNIDROIT Principles (and arguably the PECL) can be utilised to help clarify the
often opaque, or vague language found in the provisions of the CISG.
According to Article 7(1):
"In the interpretation of this Convention regard is to be had to its international
character and to the need to promote uniformity in its application and the observance
of good faith in international trade." It is arguable that the UNIDROIT Principles could considerably facilitate the task of finding
the principles and criteria for the proper interpretation of the CISG. For example, one of the
most important concepts in the CISG is the "fundamental breach" of a contract. The term
"fundamental breach" is used in various remedial provisions of the Convention. Its most
important role is that it constitutes the usual precondition for the contract to be avoided.[714] In
addition, where the goods do not conform to the contract, a fundamental breach can give rise
to a requirement to deliver substitute goods.[715] Furthermore, a fundamental breach of contract
by the seller leaves the buyer with all of his remedies intact, despite the risk having passed to
him.[716]
The Convention deals with the concept of fundamental breach in the following convoluted
provision of Article 25 CISG:
"A breach of contract committed by one of the parties is fundamental if it results in such
detriment to the other party as substantially to deprive him of what he is entitled to
expect under the contract, unless the party in breach did not foresee and a reasonable
person of the same kind in the same circumstances would not have foreseen such a
result." Article 25 attempts to define "fundamental breach" in terms of (foreseeable) "substantial
detriment."[717] The CISG does not define the term "detriment". The present writer argued in the
previous chapter that an autonomous interpretation of the CISG is not simply a consequence
of the international characterisation of the CISG but that it is also necessary for uniformity in
the CISG's application to be achieved.[718] It was also argued that, in interpreting the CISG, the
rules and techniques traditionally followed in interpreting ordinary domestic legislation should
be avoided and that Article 7 represents an implied provision in the body of the law for the
undertaking of a liberal approach to the Convention's interpretation.
It is part of the present writer's thesis that the ultimate aim of the CISG (i.e., to
achieve the broadest degree of uniformity in the law for international sale transactions) cannot
be achieved properly if national principles or concepts - taken from the law of the forum, or
from the law which in the absence of the Convention would have been applicable according to
the rules of private international law - are used in the interpretation of the CISG. The
"nationalisation" of the uniform rules would deprive the instrument of its unifying effect. This
means, above all, not to proceed to interpret it from national juridical constructions and
terms.[719] Therefore, the term detriment should be autonomously interpreted in the light of the
Convention's legislative history, as well as its intended purpose.[720]
Reliance upon the Secretariat Commentary on the 1978 Draft Article 23 (which
became Article 25) as an aid to interpretation appears questionable because the Commentary
was written prior to a number of significant changes made to the official text. A CISG
researcher can turn to the UNIDROIT Principles and the PECL for a comparative look at
similar provisions that may aid in clarifying the CISG text, if it is shown that the relevant
provisions are the expression of a general principle underlying the CISG. This limitation is
necessary to prevent the arbitrary use of general principles that would undermine a uniform
interpretation of the Convention.
Article 7.3.1(2) of the UNIDROIT Principles also provides for termination of the
contract for fundamental non-performance. It provides a list of factors relevant to deciding
whether the non-performance was fundamental. The criteria laid down in Article 7.3.1 of the
UNIDROIT Principles may be used for a better understanding its counterpart CISG provision.
In addition to the general criterion laid down in Article 25 (i.e., the fact that the non-performance must substantially deprive the aggrieved party of what it was entitled to expect
under the contract, provided the other party could not reasonably have foreseen such a result),
paragraph 2 of Article 7.3.1 of the UNIDROIT Principles indicates as further factors to be
taken into account in each single case, whether:
"[...]
(b) strict compliance with the obligation which has not been performed is of essence
under the contract;
(c) the non-performance is intentional or reckless;
(d) the non-performance gives the aggrieved party reason to believe that it cannot rely
on the other party's future performance;
(e) the non-performing party will suffer disproportionate loss as a result of the
preparation or performance if the contract is terminated."
In similar tone, the corresponding Article 8:103 [Fundamental Non-Performance] of the PECL
(complete and revised version 1998) provides:
"A non-performance of an obligation is fundamental to the contract if:
(a) strict compliance with the obligation is of the essence of the contract; or
(b) the non-performance substantially deprives the aggrieved party of what it was
entitled to expect under the contract, unless the other party did not foresee and
could not reasonably have foreseen that result; or
(c) the non-performance is intentional and gives the aggrieved party reason to believe
that it cannot rely on the other party's future performance."
There are obvious textual similarities in the CISG, UNIDROIT Principles and the PECL. The
term "non-performance" in the UNIDROIT and PECL is analogous to "breach" as used in the
CISG. The PECL and UNIDROIT, as well as the CISG, distinguish between fundamental
non-performance of the contract and non-performance which is not of a serious nature. It is
arguable that the concept of fundamental non-performance referred to in UNIDROIT Article
7.3.1 and PECL Article 8:103 corresponds generally to the concept of fundamental breach
referred to in the CISG Article 25. In all three instruments the main significance of the
fundamental non-performance is to empower the aggrieved party to terminate the contract.
Despite their similarity, the relevant provisions have certain differences between them.
Article 25 has no express provision like Article 7.3.1 (2)(b) UNIDROIT, or Article 8:103(a)
PECL. However, it is arguable that the expectation interests in all three Articles are tied
entirely to the terms of the contract. Therefore, if a contract governed by the CISG requires
strict compliance with an obligation, a minor deviation from the defined standard of
performance would amount to a fundamental breach of contract. In all three systems, the
fundamentality of a non-performance is made dependent on its consequences (substantial
deprivation), as well as its foreseeability by the breaching party. However, note that only
Article 7.3.1 (2)(e) UNIDROIT includes as a factor the "disproportionate loss [to be suffered
by the non-performing party] as a result of the preparation or performance if the contract is
terminated."
Also, the CISG has no provision similar to Article 8:103(c) PECL, which is confined
to intentional non-performance. Under this provision, even if the non-performance in itself is
minor and its consequences do not substantially deprive the aggrieved party of what he is
entitled to expect under the contract, it might be treated as fundamental if there is indication of
intentionality that gives the aggrieved party reason to believe that he cannot rely on the other
party's future performance. Article 7.3.1 (2)(c) UIDROIT goes even further by including
reckless non-performance. Unlike UNIDROIT and the PECL, the CISG does not interfere
with special rights and remedies that domestic law gives to persons who have been induced to
enter into contract by fraud.[721]
All three instruments distinguish between fundamental breach and breach which is not
of a serious nature. The distinction is of great importance, because the concept of fundamental
breach or non-performance plays a central role in the remedial provisions of all three systems.
According to the present writer it is arguable that Article 7.3.1 of the UNIDROIT, Article
8:103 of the PECL and Article 25 of the CISG adopt a similar approach, although the terms
and content sometimes differ. For the CISG researcher, the utility of these comparatives
ranges from most relevant to least relevant, as per the "skeletal" theory adopted in the
previous section of this chapter.
A continental commentator, who generally agrees that most factors applied by the
UNIDROIT Principles in determining fundamental non-performance do not differ substantially
from those employed by scholars and practitioners in defining fundamental breach under the
Convention, points to a significant difference between those two instruments:[722]
"Unlike under the Convention, the relationship between the seller's right to cure and the
buyer's right to terminate is clear under the UNIDROIT Principles. The buyer's right
to terminate is suspended provided that the seller's offer to cure is appropriate and the
buyer has no "legitimate interest" in refusing an offer to cure [see UNIDROIT
Principles 7.1.4 (1)]. Moreover, the seller's right to cure is not precluded by notice of
termination [see UNIDROIT Principles 7.1.4 (2)] In other words, the buyer cannot
exercise his right of termination for the purpose of denying the seller an opportunity to
cure. Under the UNIDROIT Principles, therefore, curability is, de facto, a relevant
factor in determining whether or not non-performance is fundamental."
According to Koch, the nature of the Convention's remedial system supports an interpretative
approach that focuses on the nature of the contractual obligation and a remedy-oriented
approach.[723] Koch introduces a new methodology to determine fundamental breach, which
further elaborates an approach that has recently been employed by the German Supreme
Court.[724] He has concluded that:
"[I]t is necessary not only for both practical and theoretical reasons, but also on grounds
of certainty and predictability, to rethink the existing approaches in determining
fundamental breach and to replace them by a more coherent unified concept. The new
methodology incorporates a test that asks whether the purpose of the contract has
been frustrated due to the breach, and whether the aggrieved party needs the remedy
of avoidance or substitute delivery -- as opposed to damages -- in determining
fundamental breach. In case of a breach and in the absence of any contractual provision
providing for fundamental breach, with the help of this new methodology, it should not
be difficult for the aggrieved party to determine whether this breach is fundamental."[725] On the broader issue concerning the practice of comparing different international uniform
laws in order to systematically interpret their provisions, the same commentator cites academic
support for the view that such practice is arbitrary and contrary to the purpose of unification
because:
"[A]t the international level there exists no international legislator and thus no legal
order, which requires consideration of one statute's relationship to other statutes and
interpretation of similar provisions in such a way to avoid contradiction.
Only
when a convention expressly refers to another convention should reference to the latter
be permissible. Under the Convention, however, there is no such reference and,
therefore, other international conventions should not generally act as a source for its
systematic interpretation."[726]
Koch argues that the very existence of the PECL provides an additional theoretical objection
to the specific suggestion that the UNIDROIT Principles should be used as a means of
interpreting the Convention. He is of the opinion that although the PECL address basically the
same issues of general contract law and are very similar to the UNIDROIT Principles in terms
of formal presentation, the existence of competing instruments to interpret the Convention per
se contradicts the purpose of the Convention to unify international sales law. Ultimately, Koch
is concerned that the difference in the geopolitical structure for membership to each of these
two Restatements (since the territorial scope of the PECL is formally limited to the Member
States of the European Union, while the UNIDROIT Principles are universal) will produce in
practice more divergence in the interpretation and application of the Convention:
"[I]t is to be expected that the courts and tribunals outside of Europe or in commercial
transactions involving non-Europeans would apply the UNIDROIT Principles to
interpret the Convention, while within the European Union or in purely intra-European
contracts, the European Principles would be applied."[727] A simpler example of the potential utilisation of the UNIDROIT Principles in clarifying
the language of the CISG's provisions may be found in paragraph 1 of Article 7.4.9 of the
UNIDROIT which, by expressly stating that the right to interest is independent of whether or
not the non-payment of the sum of money due is excused, provides an answer to a question
which Article 78 of the CISG leaves open.[728]
(c) Filling gaps praeter legem in the CISG
It is the opinion of the present writer that the UNIDROIT Principles, in many
instances, may also be used to fill gaps praeter legem found in the CISG. On the question of
whether the UNIDROIT Principles can serve as a means of interpreting and supplementing
existing international uniform law instruments, and if so to what extent, the answers given are
sharply divided. Professor Bonell has categorised the existing opinions into two groups.[729]
"The correct solution would appear to lie between these two extreme positions. In other
words, there can be little doubt that in general the UNIDROIT Principles may well be
used to interpret or supplement even pre-existing international instruments such as the
CISG; on the other hand in order for individual provisions to be used to fill gaps in the
CISG, they must be the expression of general principles also underlying the CISG."[730] The present writer supports the use of the UNIDROIT Principles in CISG's gap-filling, as
long as the important caveat pointed out by Bonell - the need to show that the relevant
provisions of the UNIDROIT Principles are the expression of a general principle underlying
the CISG - is satisfied.[731] This caveat is not satisfied where the Principles and the CISG adopt
different solutions; for example, in their approach to the battle of the forms (discussed earlier
in this chapter).
The gap-filling mechanism of the CISG is set out in Article 7(2):
It is each judge's, or
arbitrator's, task to determine these general principles, and from these general principles, to
derive the solution for the specific question to be settled, on a case-by-case basis. It is the
thesis of the present writer that the latter task often could be facilitated by resorting to the
UNIDROIT Principles. The only condition that needs to be satisfied is to show that the
relevant provisions of the UNIDROIT Principles are the expression of a general principle
underlying the CISG. This point seems to have been missed by a section of scholarly opinion.
For instance, Drobnig has rejected the idea of resorting to the UNIDROIT Principles in the
context of Article 7, arguing that
"Article 7 para 2 refers for matters governed by the Convention to the general principles
on which the Convention is based ... And if there are no such principles, the provision
refers to the law applicable by virtue of the rules of private international law ... Thus
there does not seem to be any room for recourse to the UNIDROIT Principles [in
interpreting and supplementing CISG]."[733] It seems that Drobnig is treating the UNIDROIT Principles as a formal source of law which, since not listed in Article 7(2), may not be invoked. The Principles are actually more like a useful summary of what might be obtained via a comparative legal survey.
The balance of academic opinion, however, seems to be that Article 7(2) legitimises
resorting to the UNIDROIT Principles as a means of interpreting and supplementing the
CISG, as long as there is a gap on a matter governed by the CISG and the relevant provisions
of the UNIDROIT Principles are the expression of a general principle underlying the CISG
and not inconsistent with the CISG provision in question.[734] Professor Magnus provides the
conceptual framework for resort to the UNIDROIT Principles as expressions of general
principles underlying the CISG. He states:
"The 'Principles' are nevertheless to be considered as additional general principles in the
context of the CISG. The most important reason for this is that they vastly correspond
both to the respective provisions of the CISG as well as to the general principles which
have been derived from the CISG.
In light of the fact that the CISG basically was the
force behind the 'Principles', this correspondence is not surprising.
"Further, the approach in developing the 'Principles' appears appropriate with respect
to the current state of attempts to unify law. The CISG provides a basic set of rules
which has resulted from an intensive comparison of legal systems and politically
supported compromises between these legal systems. Therefore, the CISG can and
should constitute the basis for the creation of a general law of contracts. Its provisons
are to be generalized only to supplement new issues and solutions and align these
issues and solutions with the needs of the industry. The UNIDROIT working group
has proceeded with this concept in mind. Thus, its results, to the extent that they
formulate general principles which cannot be derived directly from the CISG, can be
utilized for filling gaps in the Convention. ..."[735]
The manner in which the UNIDROIT Principles formulate general principles which
cannot be derived directly from the CISG, but which can be utilized for filing gaps in the
Convention, has already been illustrated by many commentators. For example, Articles 6.1.7,
6.1.8 and 6.1.9 of the UNIDROIT Principles may provide an answer to the questions not
expressly settled in the CISG, of whether - and if so, under what conditions - the buyer is
entitled to pay by cheque, or by other similar instruments, or by a fund transfer, and in which
currency payment is to be made. As explained earlier, one of the general principles on which
the CISG is based is that of reasonableness.[736] The duty of the parties to act in a reasonable
manner clearly underlies the rule laid down in Article 6.1.7 of the UNIDROIT Principles,
according to which the obligor may pay:
The duty of the parties to act in a reasonable manner is also evident in Article 6.1.8(1) of the
Principles, which deals with payment by funds transfer. It states that "[u]nless the obligee has
indicated a particular account, payment may be made by a transfer to any of the financial
institutions in which the obligee has made it known that it has an account."
In a similar "reasonable" tone, Article 6.1.9 states that, even if a monetary obligation is
expressed in a currency other than that of the place for payment, payment may be made in that
latter currency unless, apart from an agreement to the contrary between the parties, that
currency is not freely convertible.
Further instances, where provisions of the UNIDROIT Principles may be used to fill
gaps in the CISG, are paragraphs 1 and 2 of Article 7.4.9 on interest and Article 7.4.12 on the
currency in which damages are assessed. The questions of the time from which the right to
interest accrues, or of the rate of interest to be applied, and that of the currency in which to
assess damages, are not expressly settled in any of the CISG's provisions. Since the principle
of full compensation can be considered to be a general principle underlying the CISG,[737] however, these gaps may well be filled by the above mentioned articles of the UNIDROIT Principles which are inspired by the same principle.[738] Article 7.4.9 of the UNIDROIT Principles states that the aggrieved party is entitled to interest "from the time payment is due" (paragraph 1) and that the applicable interest rate shall be From the above, it can be concluded that the UNIDROIT Principles clearly intended to make
sure that the interest to be paid covers to the greatest possible extent the loss actually suffered
by the aggrieved party as a consequence of the non-payment of the sum of money due.[740] The
same idea is present in Article 7.4.12, according to which: It must be noted that the weight of all current judicial authority is to the effect that it is
inappropriate to use the UNIDROIT Principles as an aid to the determination of rate of
interest under Article 78. There is, however, arbitral authority to the effect that it is
appropriate to use the UNIDROIT Principles in this fashion. Three awards - two rendered by
the International Court of Arbitration of the Federal Chamber of Commerce of Vienna, [741] and
one by the Court of Arbitration of the International Chamber of Commerce [742] - refer to the
UNIDROIT Principles in order to fill a gap in the CISG.
The first two cases related to disputes arising from contracts between an Austrian
seller and a German buyer for the supply of steel. As the CISG, which governed the two
contracts, does not determine the rate of interest to be applied, the arbitrator filled this gap in
accordance with Article 7(2). In view of the fact that one of the general principles underlying
the CISG is full compensation for the damage suffered, the arbitrator, in both cases, granted
the average bank short-term lending rate applied with respect to the money of payment in the
country of the creditor - as the payment had to be made there - and in support of this solution
expressly referred to Article 7.4.9(2) of the UNIDROIT Principles.
The third case concerns a sales contract between an Austrian and a Swiss company.
The contract was governed by the CISG, and the sole arbitrator filled the gap to be found in
the CISG, as to the applicable rate of interest, by applying the annual London International
Bank Offered Rate (LIBOR) plus 2%. In doing so, the arbitrator expressly referred to the rule
laid down in Article 7.4.9(2) of the UNIDROIT Principles - as well as to the same rule
contained in Article 4.507(1) of the Principles of European Contract Law - which he defined
as "one of the general principles according to Article 7(2) CISG."
The question of whether the UNIDROIT Principles may also be used in order to settle
important issues of precontractual liability not covered in the CISG is a difficult one to answer.
The body of law on precontractual liability in civil law and common law regimes is rich,
diverse and always evolving. So far the prevailing view in legal writing is that precontractual
liability is outside the scope of the Convention.[743]
In the deliberations that led to the Convention, there is no record of any effort to array
the different domestic approaches to precontractual liability and from that develop for
international traders a common denominator. There were, however, specific proposals that
would have impacted upon precontractual liability (they were rebuffed), and general proposals
- primarily dealing with "good faith" - which, depending on the interpretation given to the
compromise language that emerged, may or may not have an impact upon precontractual
liability.
(d) Working with the CISG in an expanded role
A final, but definitely very important use for the UNIDROIT Principles is to apply
them to an international contract in conjunction with the CISG. As noted earlier, the
UNIDROIT Principles have a broader scope and a more comprehensive nature than the CISG.
The parties to a contract may well wish to apply them in addition to the CISG for matters not
covered therein. To effect this, a clause could be included in the contract which might read as
follows:
"This contract shall be governed by CISG, and with respect to matters not covered by
this Convention, by the UNIDROIT Principles".[744]
There is a great difference between the role attributed to the UNIDROIT Principles under
such a clause and the role that they may play under Article 7(2), as has been argued by the
present writer in this thesis.
Under Article 7(2), the UNIDROIT Principles merely serve to fill in any lacunae to be
found in the CISG, i.e., to provide a solution for questions "concerning matters governed by
[CISG] which are not expressly settled in it" and with respect to which recourse to domestic
law is permitted only as a last resort. By contrast, if the parties incorporated a clause in their
contract which expressly allowed reference to the UNIDROIT Principles, the latter would
apply to matters actually outside the scope of the CISG and which otherwise would fall
directly within the sphere of the applicable domestic law. This is a very important development
because it would go a long way towards achieving a more harmonious, if not unified,
international commercial law of sales.
Nevertheless, a considerable amount of caution accompanies the above thoughts on the
proposed expanded role of the UNIDROIT Principles, due to their special nature as a non-binding "Restatement". It should also be noted that the impact of such an incorporated
reference is likely to vary according to whether a State court or an arbitral tribunal is called
upon to interpret such a contract. State courts will tend to consider the parties' reference to
the UNIDROIT Principles as a mere agreement to incorporate them into the contract and to
determine the law governing the contract on the basis of their own conflict-of-law rules.[745] As a
result, they will apply the UNIDROIT Principles only to the extent that the latter do not affect
the provisions of the proper law from which the parties may not derogate.[746]
The outcome could be different if the parties agree to submit the disputes arising from the
contract to arbitration, since arbitrators are not necessarily bound to base their decision on a
particular domestic law.[747] In arbitral proceedings, the UNIDROIT Principles may be applied
not merely as terms incorporated into the contract, but as "'rules of law' governing the
contract together with the CISG, irrespective of whether or not they are consistent with the
particular domestic law otherwise applicable."[748]
There is a court decision, rendered by the Cour d'appel de Grenoble, which used the
UNIDROIT Principles as a means to supplementing the CISG.[749] The case concerns a sales
contract between a German and a French company. In order to determine its own jurisdiction,
in conformity with Article 5(1) of the Brussels Convention on Jurisdiction and the
Enforcement of Judgements in Civil and Commercial Matters (1968), the court had to
determine the place of performance of the seller's obligation to return part of the price unduly
paid by the buyer. The CISG, which governed the contract, is silent on this point. The court,
while openly rejecting the opposite solution adopted by both French and German domestic
law, decided in favor of the buyer's place of business. In doing so, it based the decision on the
general principle that monetary obligations are to be performed at the obligee's place of
business, which could be extracted not only from Article 57(1), but also from Article 6.1.6 of
the UNIDROIT Principles.
An argument against the utilisation of the UNIDROIT Principles is that they do not support
the goal of reducing unpredictability in trade,[750] and that the Principles indeed have the potential
to increase the uncertainty surrounding a business transaction because several of their
provisions "appear to depart from normal trading practices".[751] It has also been argued that
arbitrators should not feel free to use the UNIDROIT Principles in conjunction with the CISG
unless the parties to the contract have explicitly agreed to them, because the Principles are not
law and they often diverge from the equivalent provisions of the CISG.[752]
The significant success encountered by both the CISG and the UNIDROIT Principles, as
evidenced by their warm reception by many different socio-political cultures, demonstrates
that they each have their own raison d'être. In addition, the valuable assistance that the
UNIDROIT Principles can offer in clarifying the language of the CISG and in settling matters
governed but not expressly settled by the CISG, highlights the fact that the two instruments
can work together harmoniously. With respect to international commercial transactions
different to sales contracts, there is virtually no risk of a clash between the two instruments,
given the restricted scope of the CISG. Even within the ambit of international contracts of
sale, there is, at least at this point, no real competition between the UNIDROIT Principles and
the CISG. In view of the important function which the UNIDROIT Principles may fulfil side
by side with the CISG, in the expanded role outlined above, it is arguable that they not only do
not threaten the CISG's role or success, but indeed seem likely to enhance its effectiveness
and practical value.
7. THE RULES OF PRIVATE INTERNATIONAL LAW
Unresolved issues concerning matters governed by the Convention constitute a danger
to the uniformity and autonomy of the CISG's interpretation because one way to follow the
"homeward trend" is to find such gaps in the law. Further, interpretation ought to be the
means whereby such gaps in the CISG are filled because when a gap is detected the problem
arising thereby should be solved by way of interpretation of the CISG. In accordance with the
basic criteria established in Article 7(1) and discussed in the previous chapter of the current
work, uniformity in the CISG's application is the ultimate goal. Therefore, for the
interpretation of the CISG in general - not only in the case of ambiguities or obscurities in the
text, but also in the case of gaps praeter legem - courts should to the largest possible extent
refrain from resorting to the different domestic laws and try to find a solution within the
Convention itself.
The first part of Article 7(2) states that gaps in the Convention are to be filled in conformity
with the Convention's general principles. After lengthy deliberations,[753] a rule was laid down in the second part of Article 7(2) according to which, in the absence of general principles, gaps must be filled "... in conformity with the law applicable by virtue of the rules of private international law."
The first important conclusion that can be drawn from this provision is that it qualifies considerably the idea of the CISG being an autonomous and self-contained body of rules, independent of and distinct from the different domestic laws. This "subsidiary method"[754] of gap-filling, embedded in Article 7(2), found support under the 1964 Hague Conventions,[755] even though the prevalent opinion was to the contrary.[756] There was strong academic opinion in favour of the idea that, absent general principles of the Convention with which to fill the gaps, such gaps should be filled not by making recourse to the rules of private international law, but by resorting to the general principles of the law,[757] i.e., to the so-called allgemeine Rechtsgrundsatze.[758] It has been argued by exponents of this idea that gap-filling in such instances should be performed by application of "principles and rules which are most commonly adopted within the different Contracting States and/or particularly suited for the case at hand."[759]
This approach based on "general principles of law" has, however, received its own
share of criticism. The main argument against this approach is that the identification of such
principles by interpreters trying to settle a particular dispute would be difficult, if not
impossible, considering that not even specialists have been able to identify such principles
despite prolonged deliberations during the preparation of the uniform law.[760] Moreover, the
result would in any event be great uncertainty concerning the final decisions in each case.[761]
There is strong academic support for the view that in interpreting the CISG, in the
absence of general principles of the Convention - i.e., as ultima ratio[762] - "one not only is
allowed to make recourse to the rules of private international law; one obliged to do so."[763] The
present writer contends that although this conclusion is strictly valid, as Article 7(2) refers to
it, the search for relevant general principles should be expanded so as to avert recourse to the
rules of private international law as much as possible. It is part of this thesis that avoiding the
use of private international law rules is essential for the creation and promotion of uniformity
in the CISG's interpretation and application. Despite its relevant textual inclusion in the gap-filling mechanism of the CISG, recourse to the rules of private international law offers nothing
to "the development of international trade on the basis of equality and mutual benefit" that is
mandated in the Convention's Preamble. Moreover, it fosters the creation of divergent
interpretations of the CISG, thus endangering the CISG's long-term success and survival.
A more conservative position on this issue is that recourse to the rules of private international
law represents "
a last resort to be used only if and to the extent that a solution cannot be
found either by analogical application of specific provisions or by the application of 'general
principles' underlying the uniform law as such."[764]
An initial observation that can be made about this position is that lawyers from civil law systems can cope with such a structure, since they are accustomed to the idea that every attempt must be made to find a solution within the code itself before turning to an external source to fill in a gap of a code. Courts in countries
without this tradition may, however, have to try hard to grasp the fact that every effort to fill a
gap must first be made on the basis of the other criteria in Article 7(2), before turning to
domestic law via the rules of private international law.[765] The domestic law "applicable by virtue of the rules of private international law," will be the law which would have governed the
contract in the absence of the CISG, or some other law referred to by the competent conflict
of law rules. Stern warnings have been issued against the danger of an abuse of the recourse to
the rules of private international law during gap-filling in the CISG, since the gaps can too
easily be filled by virtue of the rules of private international law. As one commentator has
noted: "
it is enough to state that no general principles can be found and therefore the only
way out is to resort to private international law."[766]
It is the opinion of the present writer that the CISG is, and must remain, a self-contained body of rules independent of, and distinct from, the different domestic laws. The
nature of the effort that created the Convention indicates that the CISG should stand on its
own feet, supported by the general principles that underlie it. Due to its unique nature and
limitations, it is necessary that the CISG exist on top of a legal order that can provide doctrinal
support and solutions to practical problems - such as gap-filling - in order to guarantee the
CISG's functional continuity and development without offending its values of internationality
and uniformity. The necessary legal backdrop for the CISG's existence and application can be
provided by general principles of international commercial law consistent with the intent of the
CISG legislators, such as those exemplified by many of the provisions of the UNIDROIT
Principles and the PECL.
Against this background, the recourse to rules of private international law represents
regression into doctrinal fragmentation and practical uncertainty. The relevant reference to
such a method in Article 7(2) is unfortunate, as it does not assist the goal of uniformity.
Recourse to the rules of private international law impedes and frustrates the unification
movement and can reverse the progress achieved by the world-wide adoption of the CISG as a
uniform body of international sales law by producing divergent results in the application of the
Convention.
On the other hand, minimising the need to invoke the rules of private international law
in the context of Article 7(2) goes a long way towards strengthening the unification effort.
This approach requires reliance upon and aggressive search for general principles that underlie
the Convention. The present writer has argued that such principles can [often] be found in
international Restatements, such as the UNIDROIT Principles and the PECL. The latter
instruments belong together with the CISG to a new international legal order that their
respective drafters had envisaged. The interpretative and supplementary function of these
instruments concerning the proper application of the CISG, best reflect the objectives of the
United Nations - as these are were stated in CISG's Preamble - to remove "legal barriers in
international trade and promote the development of international trade." As was argued in
Chapter 2 of this thesis, the CISG represents an attempt to create ab initio an international
community of members that can communicate and arrange their commercial affairs using the
text as their common language. Providing answers to unresolved matters governed by the
CISG affects the uniformity of the Convention's application. It is arguable that in such cases
international uniformity is promoted if the answer can be given by reference to any of the
CISG's general principles that may provide elsewhere (e.g., in the UNIDROIT Principles, or
the PECL answers to such unresolved matters). Conversely, recourse to the rules of private
international law for the same purpose hinders and harms uniformity.
A strong argument in favor of the "general principles" approach is provided by Professor
Kritzer.[767] This argument relies on the concept of "reasonableness"; a fundamental general
principle of the Convention which receives numerous mentions in the text of the CISG.[768]
Kritzer points out that although reasonableness is not specifically defined in the CISG, the
concept is defined in the PECL and that this definition also fits the manner in which the
concept is used in the CISG.[769] This definition can help researchers apply reasonableness to the
CISG provisions in which it is specifically mentioned and as a general principle of the CISG. It
is the latter function of reasonableness, as a general principle of the CISG, that is important to
this argument because in that capacity, reasonableness has a strong bearing on the proper
interpretation of all provisions of the CISG, as per Article 7(2). Kritzer states that there is
much doctrine in support of gap-filling in the CISG with reference to general principles, in lieu
of the recourse to the rules of private international law, wherever it is reasonable to do so:
"
regarding reasonableness as a fundamental principle of the CISG and reading
reasonableness into every article of the CISG, whether specifically mentioned in the
article or not, helps tilt the scales in favor of Part One rather than Part Two
applications of Article 7(2) - a tilting of scales that
is required by virtue of the good-faith and uniform-law mandate recited in Article 7(1) of the CISG."[770] According to the above, the proper interpretation of the Convention is to rely on general
principles rather than on the rules of private international law, where it is reasonable to do so.
Thus, since it is also reasonable to read into Article 7(2) the good faith and uniform law
mandates recited in Article 7(1), it would also be reasonable to make such election in the
operation of Article 7(2) when these mandates (i.e., the promotion of uniformity in the
Convention's application and the observance of good faith in international trade) are at stake.
The present writer has argued, as did many delegates present at the 1980 Vienna Diplomatic
Conference, that recourse to rules of private international law should not have been made a
part of Article 7(2). Nonetheless, the text is there for all to peruse. The various academic and
theoretical objections to this inclusion have been recorded and have been themselves discussed
further, but the main question remains essentially the same: ultimately, can the CISG unite the
law of international sales?
The answer to this question is two-fold. The CISG indeed has the potential to achieve
the vision of its drafters and satisfy the needs of international buyers and sellers for certainty
and uniformity. But its potential is endangered by the specific reference to conflict of laws for
purposes of gap-filling in Article 7(2). The overwhelming preponderance of the evidence (i.e.,
the text and its legislative history) points to a strong, common desire in favor of uniformity,
despite evidence of compromise in the final form of the CISG (e.g., the relevant compromise
in Art. 7(2)). The traces of the political differences that remain in the text are, however,
important ones in terms of the CISG's goal of achieving uniformity in the law of international
sales. This is because they are arguably capable of turning the CISG into little more than an
improved - but ultimately disappointing - revision of its predecessors, the 1964 Hague
Conventions that failed to achieve the same goal.
The drafters and the diplomatic delegates completed their respective tasks in 1980,
with varying degrees of success. The interpreter called upon to apply the CISG now (and in
the future) has a clearly defined, albeit difficult task - to apply the provisions of the Convention
according to the specific rules of interpretation contained in Article 7. The present writer has
shown the existence of a danger to the the uniformity of the Convention's interpretation and
application during this process, regarding the diverse results produced when the conflict of
laws approach is implemented for gap-filling purposes. The relevant textual reference in
Article 7(2) leaves the CISG prone to divergent gap-filling; i.e., in the absence of general
principles, the solution is to be provided in conformity with the relevant law applicable
according to the rules of private international law.
The present thesis has provided a theoretical framework for the introduction of
elements of the UNIDROIT Principles (and arguably the Principles of European Contract
Law, too) into the Convention's intepretation, as the CISG's companion. It has been argued
that relevant portions of the Principles can be regarded as part of the "general principles" on
which the CISG is based. Thus, when they satisfy the formal requirements for their use in
conjunction with the CISG, they can aid in the Convention's interpretation and gap-filling as
per Article 7(2). This development will promote uniformity and reduce the need to resort to
the conflict of laws approach that produces divergent results.
8. A GAP-FILLING EXERCISE
The inability of any statute to address and solve all circumstances and problems that
arise under its provisions is well recognised.[771] Bearing in mind the enormity of the task
undertaken by the drafters of the CISG, the complexity and duration of the consensus-style
drafting process,[772] and the difficulty of revising an international convention,[773] it is inevitable that
gaps will be identified in the CISG.[774]
In this section, the present writer examines what he believes to be a gap praeter legem
in Article 16. In dealing with the suggested gap, the gap-filling procedure set out in Article
7(2) is analysed. This analysis is accompanied by a practical demonstration of its function, in
order to evaluate its success or failure, in maintaining and promoting the goal of the CISG -
i.e., uniformity in interpretation and application of the Convention.
(a) Article 16 CISG
Article 16 sets out the law in relation to revocability of offers. It provides that:
"(1) Until a contract is concluded an offer may be revoked if the revocation reaches the
offeree before he has dispatched an acceptance.
(2) However, an offer cannot be revoked: (a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or (b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer."
According to the discussion contained in the previous chapter dealing with Article 7(1), in
interpreting the CISG, one should always study the legislative history of the articles of the
CISG in order to understand better their nature, scope, and function.[775] An examination of its
legislative history reveals that Article 16 was one of the most controversial articles discussed
by the Convention's drafters in the eleven-year period that elapsed between the establishment
of the Working Group and the approval of the Convention at the Diplomatic Conference in
1980.[776] Article 16 of the CISG owed most of its controversy to the apparent lack of agreement
among the drafters as to how the article was meant to be interpreted,[777] although it was meant
to lay down the uniform international sales law on the issue of revocability of offers.
On this preliminary point, it is evident that there is a considerable risk that the
provision in question could be interpreted differently, depending on whether a civil law or
common law tribunal is hearing the matter.[778] Clearly, this is a serious threat to the CISG's
objective of achieving uniformity in interpretation and application. The main issue here,
however, is the threat to a uniform law of international sale of goods due to the failure to
adopt a common approach to gap-filling in the CISG.
Article 16 appears to contain a gap in the situation where an irrevocable offer has
clearly been made. Professor Honnold has specified the existence of the gap in the following
situation:
"Buyer offered to purchase complex machinery from Seller which Seller would
manufacture according to designs supplied by Buyer. The offer included a stated price
and stated that the offer would be open for two months to enable Seller to determine
whether he could make the machinery at that price. Seller immediately started the
process of designing manufacturing procedures and computing costs of production.
Two weeks later, when Seller had spent substantial sums in computing costs but had
not completed this work, Buyer notified Seller that he could no longer use the
machinery and withdrew the offer. Seller thereupon stopped work on the cost
estimates since it would be uneconomical to invest further funds in preparing to make
machinery that Buyer would not accept and perhaps could not pay for."[779] In the above hypothetical case suggested by Honnold, S has relied on B's irrevocable offer for
the creation of an international contract for the purchase of goods and incurred considerable
expense to determine whether it can accept B's offer. When B notified S that the offer was
being withdrawn, S had not yet reached the point where it would be able to accept the offer,
since it had not yet completed the process of calculating the costs of production of the relevant
goods. The issue that has to be resolved is whether, under the CISG's provisions, S could
recover the expenditure incurred in reliance on B's initial offer.[780]
Article 74 CISG provides that damages for a loss suffered by one party may be
obtained when the other party has committed a "breach of contract." Since S has not accepted
the irrevocable offer of B, however, Article 23 CISG would suggest that a contract had not
been concluded between B and S. Where there is no "concluded contract" there can be no
"breach of contract", since there is no contract that can be breached. It follows that Article 74
cannot operate and that, consequently, damages will not be available to the Seller. In this
situation, the inability of the S to recover damages suggests that there is a gap in the CISG,
since the CISG intended to provide parties with effective remedies.[781]
(b) Identifying the gap in Article 16 CISG
The gap-filling mechanism of the CISG is laid down in Article 7(2). Procedurally, there
is a specific method of analysis when considering whether there is a gap in the provisions of
the CISG. Before the gap-filling rule in Article 7(2) can be put into operation, the matters to
which the rule applies must first be identified.
The starting point is the observation that the gaps to which the rule refers are gaps
"praeter legem", i.e., issues to which the CISG applies, but which it does not expressly
resolve. The first condition for the existence of a gap in the sense of Article 7(2) is that the
issue concerns matters "governed by the Convention". Specifically, Article 7(2) requires the
determination of two questions:
Where such an intention is evident there cannot be a gap. If the answer to the second question
is negative, it must be concluded that there is a gap in the CISG and according to Article 7(2)
it must be settled: (a) in conformity with the general principles on which the CISG is based, or
(b) in the absence of such principles, in conformity with the law applicable by virtue of the
rules of private international law.
The theoretical framework of gap-filling having been established, it can be put into practice for
the problem at hand.
Is the matter of revocation of offers governed by the CISG? It can be debated whether the CISG is concerned with precontractual negotiations in
situations where an irrevocable offer has not been made. While there is no express provision
governing precontractual negotiations generally,[785] a principle that underlies the CISG is that
the Convention is indeed concerned with precontractual negotiations where a party has acted
in reliance on a representation made by the other.[786] Article 16(2) protects a party who has
"acted in reliance" on an offer in the reasonable belief that it was irrevocable. While Article
29(2) provides that a party may be precluded by its conduct from asserting that a modification
to a contract must be in writing "to the extent that the other party has relied on that conduct."[787] From the above it can be concluded that the CISG governs revocation of offers.
Article 16 was intended to govern the field as to when an offer can, or cannot, be revoked.
This is plain from the express language of the provision, its legislative history and the
academic opinion on point.[788]
Is the matter of revocation of offers "expressly settled" by the CISG? It appears that the CISG allows an offeree to recover damages if it has accepted an
irrevocable offer that is unlawfully withdrawn, but does not allow damages in the absence of
acceptance.[789] The crucial question, for our purposes, is whether the drafters of the CISG
intended not to provide damages in the absence of acceptance - in which case there would be
no gap in the CISG - or whether there is a gap in the remedial provisions of the CISG. The
gap-filling procedure can only take place if one concludes that the absence of the remedy
resulted from the failure of the drafters of the CISG to foresee the situation and resolve it.[790] In
order to determine whether the absence of remedial provision for the specific case is a gap or,
alternatively, was intended by the drafters, one must examine the legislative history of the
provision, similar cases regulated by specific provisions of the CISG, and the principles which
underlie the CISG.[791]
(i) Examination of the legislative history of the provision
The examination of the legislative history of the provision takes place in order to
investigate whether the drafting debates reveal an express intention that no remedy be
available in the particular case, or whether the absence of the remedy resulted from the failure
of the drafters to foresee the situation and resolve it. Upon examination of the legislative
history of Article 16 and Article 74 of the CISG, there is no evidence to suggest that the
hypothetical case posed by Honnold had been envisaged by the drafters, nor that they had
intended that damages ought not to be available to S.
(ii) Examination of similar cases regulated by CISG provisions
Examining similar cases regulated by specific provisions of the CISG can assist in
considering whether they can be of any assistance.[792] If it appears that no remedy is provided
under the CISG for the particular case, but that a remedy is available in analogous situations, it
will usually be reasonable to conclude that a gap exists.[793] Alternatively, if a remedy is not
available in analogous situations either, it will be reasonable to conclude that that the drafters
of the CISG did not intend it to be available in the case in question.
To perform such an examination of other cases governed by Article 16, we can change the
facts in Professor Honnold's hypothetical to create slightly different questions to the ones at
hand in order to see how Article 16 deals with them.[794]
Variation A - Seller accepts the offer prior to its withdrawal by the Buyer
Suppose that S carried out all its research and notified B that it had accepted the offer
prior to its withdrawal by B. B subsequently informs S that it can no longer use the machinery
and will not go through with the sale. In this variation of the facts, could S recover damages
from B for the expenditure incurred in reliance of the offer?
Solution A
This is a clear case where the offer cannot be withdrawn; thus B has repudiated. It is
important, however, for the complete treatment of our case problem to analyse the mechanics
of the solution to Variation A.
According to Article 18 "[a]n acceptance of an offer becomes effective at the moment the
indication of assent reaches the offeror. ..." Therefore, the communication by S to B of its
acceptance becomes effective at the moment that it reaches the offeror, i.e., prior to the
withdrawal of the offer. Under Article 23, a contract is concluded at that time.
Upon conclusion of a valid contract, B takes on certain obligations that are stated in Chapter III of
the CISG. Article 53 provides that: [t]he buyer must pay the price for the goods and take
delivery of them as required by the Contract and the Convention." (emphasis added). Faced
with B's subsequent withdrawal of the offer, S must look at the remedies that are available
under the provisions of the CISG.
(i) avoidance of the contract
Under Article 72(1), S may declare the contract avoided "[i]f prior to the date for performance
of the contract it is clear that one of the parties will commit a fundamental breach of contract
..." (emphasis added).
The facts in Variation A constitute an example of anticipatory breach.
According to Article 25: "A breach of contract committed by one of the parties is fundamental
if it results in such detriment to the other party as substantially to deprive him of what he is
entitled to expect under the contract ..."
B's stated intention that it will not go through with the
contract and will not pay the contract price clearly constitute a "fundamental breach", under
Art. 25, for the purposes of the case in Variation A. Article 72(2) requires that "... the party
intending to declare the contract avoided (the Seller) must give reasonable notice to the other
party (the Buyer) that it intends to avoid the contract to permit him to provide adequate
assurance of his performance."
In a case like Variation A, where B declares that it will not
perform its obligation to pay, S would be able to avoid the contract for anticipatory breach of
contract, without any major difficulty.
(ii) damages
In addition to avoiding the contract under Article 72, S can exercise its right to claim damages
under the CISG, pursuant to Article 61 and 74. Article 61 directs that: "(1) If the buyer fails to
perform any of his obligations under the contract or this Convention, the seller may: ... claim damages as provided in Articles 74 and 77."
According to Article 74, damages for breach of contract by one party "consists of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach."
Article 74 provides the general rule for a calculation of damages for losses suffered by the
buyer, or seller, as a result of a breach and seeks to place the injured party in the position it
would have been had the other party properly performed the contract.[795] Article 74 provides
both an objective and subjective test for foreseeability. The consequence of the breach need
only be possible [796] and the consequences of the breach need only be contemplated by the
breaching party. It follows that S would be able to recover the costs it incurred in reliance on
B's offer.
Variation B - Buyer withdraws the offer prior to Seller's notification of acceptance
In this variation of Professor Honnold's hypothetical case problem, let us suppose that B
informs S that it is withdrawing its offer before S has notified B of its acceptance and before
the initial period within which it was stated that the offer would remain open has expired.
Could S recover damages for the expenditure incurred in reliance on the offer, if it ignored B's
notice and notified B that it accepted the offer?
Solution B
According to Article 16 CISG: "(2) ... an offer cannot be revoked: (a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or
(b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer.
Applying the wording of the above provision to the facts of Variation B, it can be seen that
that the offer cannot be revoked prior to the expiration of the two month period during which
it was represented that it would be held open. Therefore, it appears that, for the purposes of
the CISG, B's revocation of the offer in Variation B would have no legal effect.
Consequently, since S notified B that it has accepted the offer which was to remain open, the
preceding analysis on the breach of contract in Variation A would also apply in Variation B.
The result would also be the same.
Professor Honnold's hypothetical case and Variations A & B
From the above analysis of S's remedies in Variations A and B, it can be seen that the
CISG makes provision for the recovery of damages by S for the expenditure incurred in
reliance on B's offer. Variations A and B are clearly analogous to Honnold's hypothetical
Problem Case. The factual similarities of the three cases centre on the point that in all three
cases S has relied on B's irrevocable offer and suffered a loss of expenditure in reliance on the
offer. The factual variations between the three cases are based on the distinction that in
Variations A and B, but not in Professor Honnold's hypothetical, S has:
(i) completed its research of designing and manufacturing procedures and computing costs of
production and decided to accept the offer within the two month period within which the offer
was to remain open; and
(ii) notified B that it accepts the offer before the expiration of the relevant period.
Answering the question of whether, or not, a gap in the CISG exists in relation to
revocability of offers, depends on the answer to the following question: Do the factual
differences in the three cases outlined above lead to the conclusion that damages were not
intended to be available in Professor Honnold's hypothetical Problem Case?
Argument that there is no gap in Article 16 CISG
The argument that there is no gap in Article 16 would have to be based on the
conclusion that the differences between Variation B and Professor Honnold's hypothetical
lead to the conclusion that damages were not intended to apply to the latter case. This
conclusion could be supported on the premise that before CISG's remedial provisions are
brought into effect there must be an acceptance of an offer, so as to create a contract that can
be governed by the CISG.
If this argument were valid, it would mean that Article 16 was intended to enable a
party relying on an irrevocable offer to accept the offer and recover damages if the other party
failed to perform its obligations. A natural conclusion, then, would be that Article 16 was not
intended to operate to enable a party to recover damages if it did not accept the offer, as in
such circumstances there would be no contract. Thus, it would follow that, as there was no
acceptance in the Problem Case, there is no remedy and, consequently, no gap.
Argument that a gap exists in Article 16 CISG
The above argument that no gap exists in the CISG on the specific point of contention
seems to be defective. The main criticism is that it creates an absurdity by supporting that the
CISG makes provisions for the recovery of damages by the Seller in Variation B but not in
Professor Honnold's hypothetical Problem Case.[797] The charge of inanity attributed to this
argument is supported by the fact that on such an interpretation of the CISG's provisions, S is
not entitled to damages in Professor Honnold's hypothetical, but may become entitled to
damages by incurring additional expenditures (which it would subsequently recover if it can
establish a breach) and notifying B (within the relevant period that the offer was to remain
open) that the offer was accepted. To conduct itself in this manner, in order to be allowed to
recover damages, however, S would have to act in defiance of, and direct opposition to, one
of the expressly stated general principles of the CISG, the principle of mitigation, as this is
expressed in Article 77:
"A party who relies on a breach of contract must take such measures as are reasonable
in the circumstances to mitigate the loss of profit, including loss of profit, resulting
from the breach. If he fails to take such measures, the party in breach may claim a
reduction in the damages in the amount by which the loss should have been mitigated." It makes better sense to conclude that the drafters of the CISG did not intend to force a party
to act in an exaggerated and economically inefficient manner, by incurring additional loss, in
order to qualify for a remedy. This conclusion can be supported further by Article 61(1),
which provides that damages will be available to the seller "[i]f the buyer fails to perform any of his obligations under the contract or this Convention..." (emphasis added).
Relying on the wording of this provision, it can be argued that the drafters in fact
intended that the CISG's remedial provisions be available in cases where, while there is no
breach of contract, there was a failure to perform an obligation created under the CISG. This
argument, if accepted, would mean the existence of a "general principle" that could be used to
fill the relevant gap.
From the above analysis, it would follow that damages were intended to be available in
Honnold's hypothetical Problem Case, given that the Seller has suffered a loss as a
consequence of the Buyer's breach of its obligation (as stated in Article 16(2)) to hold the
offer open. The absence of a specific legislative intent to exclude the remedy, the availability of
the remedy in closely analogous situations, the conflict with the principle of mitigation, and the
provision of Article 61, compel the conclusion that the drafters simply failed to foresee the
Problem Case arising. In other words, the matter has not been expressly settled and a gap
exists in Article 16.
(iii) Examination of the principles that underlie the CISG
An examination of the principles that underlie the CISG is necessary to clarify the
drafter's intentions. It has been correctly noted that
From the above analysis of the case in favour of the existence of a gap, it can be seen that
there is a strong argument for the CISG's remedial provisions to be available in cases where,
there is no breach of contract, but there was a failure to perform an obligation created under
the CISG. While the Convention's provisions on damages are written in terms of providing
remedies for breach of contract, these provisions must be read in light of Article 61. There is a
strong argument that the principle underlying Article 74 is that damages should be available
for both a breach of contract and a breach of obligation under the CISG. If this argument is
correct, parties may be exposed to actions for damages in a variety of situations where
obligations are created by the Convention.[799] The fact that Section III of the CISG is headed
"Remedies for Breach of Contract by the Buyer" should not overshadow the fact that headings
ought not to be given greater weight than the provisions themselves.
Conclusion on the existence of a gap in Article 16 CISG. The present writer, having examined (i) the legislative history of the provision in question (Article 16), (ii) similar cases regulated by specific provisions of the CISG (to consider whether they can be of any assistance), and (iii) the principles that underlie the CISG
(to clarify the drafter's intention), is of the opinion that the matter of revocation of offers is
governed by the CISG, but is not expressly settled in it, i.e., a gap does exist in Article 16.
(c) Application of the gap-filling analysis to Article 16 CISG
Once it has been concluded that a gap exists in a CISG provision, it is necessary to
determine how it should be filled. As explained earlier in this chapter, Article 7(2) the CISG
provides two alternative methods to perform the gap-filling operation. The gap is filled either
by applying the general principles on which the CISG is based, or, in the absence of applicable
principles, by recourse to domestic law via the rules of private international law. Of course, in
considering these alternatives, regard must be had to the CISG's international character and
the need to promote uniformity in its application, as prescribed in Article 7(1).
It is submitted that in Professor Honnold's hypothetical Problem Case, the gap can and
should be filled by applying the general principle underlying Article 74 that damages are
available to an innocent party where the other party has breached its obligation under the
contract or the CISG. This result flows from the argument outlined earlier in this chapter,
according to which the Seller can exercise its right to claim damages under the CISG pursuant
to Articles 61 and 74. Article 61 directs that "[i]f the buyer fails to perform any of his
obligations under the contract or this Convention, the seller may: .... claim damages as
provided in Articles 74 and 77."
According to Article 74: "Damages for breach of contract by
one party consists of a sum equal to the loss, including loss of profit, suffered by the other
party as a consequence of the breach. ..."
Following what is stated in Article 74, the Seller
would be able to recover the costs it incurred in reliance on the offer, as well as damages for
any reasonably foreseeable loss of profit that flowed from the breach of contract by the Buyer.
Honnold's hypothetical Problem and Variation B were found to be analogous: In both
cases: (i) an irrevocable offer was made; (ii) S reasonably relied on the offer and incurred
considerable expenditure to determine whether to accept the offer; (iii) B unlawfully withdrew
the offer, with the result that S's reliance expenditure is wasted. The similarity of the two
cases is so great that the Seller in the Problem Case can, by its unilateral action, place itself in
the same situation as S in Variation B and obtain damages under Article 74. The similarity
between the two cases, together with the effect of Article 61, which makes provision for the
recovery of damages where a buyer breaches its obligation under the CISG, leads to the
conclusion that damages should be available to the Seller in the hypothetical Problem Case.
The drafters "would not have deliberately chosen discordant results" for the two cases.[800]
Consequently, it is submitted that Article 7(2) requires that the gap in Article 16 be filled by
applying the principle underlying Article 74. Nevertheless, should a tribunal decide that there
was no general principle under the CISG that could be applied to fill the gap, recourse would
be had to the domestic law applicable by virtue of the rules of private international law.[801]
It is part of the present writer's thesis that recourse to the rules of private international law
should not be made easily, because this would destabilise the unifying effort that the CISG
represents. Instead, it is suggested that the proper interpretation of the CISG is to rely on a
"general principles" solution, as this would enhance uniformity. An examination of certain
domestic legal systems in relation to this point supports this thesis. As the law stands in certain
civil law states, the Seller is likely to be allowed to recover reliance damages. In Italy, the
Codice Civile would allow the Seller to recover damages for the loss suffered in preparing to
perform.[802] Similarly, in Germany, Brazil, Greece and Switzerland, an offeror In France, while an offer stated to be open for a set period can be withdrawn by the offeror
before the expiry of that period, the law provides that such a withdrawal will render the
offeror liable to the offeree in damages.[804] Although there is some dispute in French law as to
the legal basis for the offeror's liability in damages, it seems likely that the Seller in the
hypothetical Problem Case could obtain damages equivalent to the expenses it incurred in
reliance on the Buyer's offer remaining open.[805]
Courts in some common law countries are also likely to allow the Seller damages
under the doctrines of equitable or promissory estoppel. In the United States, the Uniform
Commercial Code Article 2-205 may not be of assistance in the Problem Case, as the offer is
not in writing. However, U.C.C. Article 1-103 provides that, unless displaced by particular
provisions of the Act, the principles of law and equity, including estoppel, shall supplement the
provisions of the Act. United States courts have consistently shown a willingness to apply the
principles of promissory estoppel to enable plaintiffs to recover reliance damages in cases
where UCC Article 2-205 does not apply.[806] The law of promissory estoppel in the United
States is derived from section 90 of the Restatement (Second) of Contracts, which states:
"A promise which the promisor should reasonably expect to induce action or
forbearance on the part of the promisee or a third person and which does induce such
action or forbearance is binding if injustice can be avoided only by enforcement of the
promise. The remedy granted for breach may be limited as justice requires."[807]
Consequently, it is likely that the Seller in the Problem Case would recover reliance damages if
United States domestic law applied.
The Australian High Court, in the case of Waltons Stores (Interstate) Ltd. v. Maher,[808]
endorsed the use of equitable estoppel as a cause of action. In Australia the law stands as it
was pronounced by the Supreme Court of New South Wales in the following terms:
"For equitable estoppel to operate ... there must be the creation or encouragement by
the defendant in the plaintiff of an assumption that a contract will come into existence
or a promise be performed, and the reliance on that by the plaintiff, in circumstances
where the departure from the assumption by the defendant would be unconscionable."[809] Thus, it is likely that an Australian court would also uphold an action by the Seller in the
Problem Case, this time on the basis of equitable estoppel. The remedy granted to satisfy the
equity would be whatever is necessary to prevent detriment resulting from the unconscionable
conduct.[810]
However, English courts, unlike their Australian counterparts, would probably not
allow the Seller to recover damages because the use of the doctrine of promissory estoppel in
England is still limited to providing the equitable defence to an action, rather than giving rise
to a cause of action.[811] It follows that the Seller in the Problem Case would be unable to recover
reliance damages in England.
The above analysis reveals that while most domestic law systems will enable the Seller
in the hypothetical Problem Case to institute proceedings to recover damages for its reliance
loss, this will not always be the case. As a result, if the gap in Article 16 is filled by recourse to
domestic laws applicable by virtue of the rules of private international law, non-uniform results
may follow. Therefore, it is submitted that the provision in Article 7(2) for recourse to
domestic solutions, even as a last resort, should not be activated, as its activation will produce
divergent results in the CISG's interpretation and application.
9. CONCLUSIONS
The benefits of a uniform law for the international sale of goods are substantial. A
uniform law would provide parties with greater certainty as to their potential rights and
obligations. This is to be compared with the results brought about by the amorphous principles
of private international law and the possible application of an unfamiliar system of foreign
domestic law.
Another advantage of a uniform law of international sales of goods is that it would
serve to simplify international sales transactions and thus "contribute to the removal of legal
barriers in international trade and promote the development of international trade." The CISG
seeks to achieve such uniformity. Whether or not it is successful will largely depend on two
things: first, whether domestic tribunals interpret its provisions in a uniform manner and,
secondly, whether those same tribunals adopt a uniform approach to the filling of gaps.
From what has been said so far, one main conclusion can be drawn: ultimately, it is the
interpreter's task to decide whether the CISG can really become a uniform law; i.e., whether
universalism prevails over nationalism, and whether any progress has been made since the
enactment of the national codes that overturned what could have been a basis for a new ius
commune. Unlike the 1964 Hague Conventions, the 1980 Vienna Convention provides an
ideal framework that should permit a positive answer to the foregoing question.
A survey of a number of common law and civil law domestic legal systems reveals that if
recourse were made to domestic law to fill in a specific gap praeter legem in the CISG, non-uniform results will follow. This demonstrates that such recourse may provide an answer in the
absence of relevant general principles; but this answer does not promote uniformity in the
Convention's application. It is evident that for the proper construction and application of the
CISG, domestic tribunals should comply with the general mandate in Article 7(1) for
internationality and uniformity. These concepts arguably should imbue all of the CISG's
provisions. Recourse to domestic law does not promote uniformity, but is allowed (in the
absence of relevant general principles) for gap-filling purposes under Article 7(2). A liberal but
principled approach to the CISG's interpretation - one that makes informed choices when
confronting textual problems or contradictions - can prevent the diversity of results produced
by a literal interpretation of Article 7(2).
One such approach is suggested by the present writer; it is an approach that involves the
utilisation of UNIDROIT Principles (and the PECL) in the interpretation of the Convention,
when it can be shown that the former are part of the general principles that underlie the latter.
The Principles can and should assist in the reduction of the need to resort to rules of private
international law for gap-filling; a positive step toward maintaining the integrity of the CISG's
uniform and international application and interpretation. The UNIDROIT Principles, being the
result of the work of a group of experts acting under the auspices of an inter-governmental
organisation with no legislative power, may have appeared to a sceptical observer, at first
sight, to be little more than an academic exercise of no practical utility.[812] The experience gained
by their use and usefulness since their publication has, however, shown that this is not the
case. Their success in practice has already been significant.[813] The reception of the UNIDROIT
Principles in academic and professional circles has been very warm and widespread, as they
have been used as teaching materials, as a model for national and international legislation, as a
guide in contract negotiations, as the law chosen by the parties to govern their contract, and as
rules of law referred to in judicial proceedings. As pointed out by an eminent Swiss arbitrator:
"[The UNIDROIT Principles], are likely to find a quite universal acceptance, since they
have been worked out ... with the contribution of over seventy well known specialists
from all major areas and legal systems of the world, including formerly socialist
countries, Latin America countries and countries of the Far East."[814] Yet, there might also be more practical reasons for the success of the UNIDROIT Principles.
As one experienced American lawyer has commented
"The great importance of the [UNIDROIT] Principles is that the volume exists. It can
be taken to court, it can be referred to page and article number, and persons who are
referred to its provisions can locate and review them without difficulty. This alone is a
great contribution towards making lex mercatoria definitive and provable."[815]
Closer to our concerns though, cases involving the application of the UNIDROIT
Principles have indicated that they can indeed provide valuable assistance in filling gaps in the
CISG. The UNIDROIT Principles, and arguably the PECL, can and should be utilised in
interpreting problematic CISG provisions. As international Restatements, both instruments can
help interpret the Convention. Certain provisions in the Principles and the PECL bear a
striking similarity to their CISG counterparts and can be regarded as "fleshing out bones"
already present in the skeletal structure of the uniform law. It is doubtful whether the same can
happen where the Restatement provisions have "bones and accompanying flesh" that cannot be
readily affixed to the uniform law they accompany. Where, as is often the case, either the
UNIDROIT Principles or the PECL dovetail with or approximate the CISG, the relevant
comparatives can be helpful to the CISG researcher. The general affinity of the CISG to its
companion Restatements demands such a comparative approach, especially where it can be
shown that their respective provisions share a common intent. The proper introduction of the
UNIDROIT Principles and the PECL into the gap-filling mechanism of the CISG aids in
reducing the need to turn to the rules of private international law; this is a positive step
towards uniformity.
CHAPTER 5: CISG CASE LAW - THE FINAL STEP TOWARDS UNIFICATION OF THE LAW ON THE INTERNATIONAL SALE OF GOODS
1. CISG in Practice - Case Law Results and Patterns
1. THE CISG IN PRACTICE - CASE LAW RESULTS AND PATTERNS
Uniform international law, due to its nature, presents special challenges to those who
interpret it. As stated in its Preamble, the CISG was created to "contribute to the removal of
legal barriers in international trade and promote the development of international trade." It has
been argued throughout this work that the CISG is an important document whose objectives
can be accomplished only if it is interpreted properly. The CISG's rules for international trade
are now part of the living law of more than fifty countries that embrace a heavy majority of the
world population and trade.[816] Yet the number of international commercial transactions that may
be affected by the CISG is even greater. The Convention is applicable not only when both
parties have their places of business in (different) Contracting States (Art. 1 (1)(a)), but also
when the rules of private international law lead to the application of the law of a Contracting
State (Art. 1(1)(b)), including the case where the forum is that of a non-Contracting State;[817] a number of cases will involve the CISG.
The continuous and steady increase in the number of CISG decisions is clear when one
compares the 550 or so CISG decisions published by Will in 1999,[818] to over 820 cases listed on
the Pace Law website in January 2001.[819] The great majority of cases are in central Europe - in
countries that had over a decade of satisfactory experience with the predecessor to the CISG,
the 1964 Hague Convention that provided uniform rules for international sales.[820]
On the other hand, the United States, one of the earliest adherents to the CISG, with its
massive volume of international trade, has surprisingly produced very few cases. The desire in
some trade sectors to exclude the Convention's application altogether, the use of alternative
means of dispute resolution, and the non-publication of relevant awards are the main reasons
why in some countries, such as Italy and the United States, the case law relating to the CISG
is still rather limited.[821]
A further reason for this development is the apparent reluctance of the result-oriented
international business community and international legal practitioners to embrace the CISG
because of the unpredictability of its law in international sales transactions.[822] It is arguable that
the establishment of a record of all litigation that involves CISG related issues could increase
predictability.[823]
Notwithstanding these negative practices, the number of national court decisions and arbitral
awards applying the CISG is constantly growing.[824] Although German and Dutch case law
continues to be the most copious, Austrian, French, Swiss and Hungarian judgments are
increasing in number while judgments handed down by courts in Denmark, Belgium and China
have been reported for the first time. In addition to the awards of the I.C.C. Court of
Arbitration in Paris and the International Court of Arbitration of the Federal Chamber of
Commerce of Vienna, some interesting arbitral awards have also been rendered under the
Rules of the Hungarian and Russian Federation Chambers of International Commerce.[825]
In this formative stage of jurisprudence, courts must pay particular attention to
developing a method of interpretation that takes into account the CISG's international
character. Legal scholars and commentators have long recognised the enormous potential of
the CISG as a historic milestone towards unification of international law.[826] It is, however, the
business community and legal practitioners that will cast the final decisive votes by either
embracing the CISG, or by opting out of it, based upon their perception of whether the courts
are able to implement it as a unifying tool in international sales transactions.
The disappointing element that emerges from a survey of the existing CISG case law is
that very rarely do decisions take into account the solutions adopted on the same point by
courts in other countries. A treaty is only as good as its implementation and interpretation.
Since the goal of the CISG is the unification of the law pertaining to international sales,
predictability and certainty of interpretation is desirable. Unfortunately, there is no single
judicial body charged with applying the Convention. Instead, domestic fora - whether they are
national courts, or arbitration panels - will interpret its provisions. The decisions concerning
the CISG are not subject to central review; there is no central world court for that purpose.
Until now, it would appear that there are only a few decisions rendered by national
judges in which express reference is made to foreign precedents. Even though hundreds of
cases concerning CISG are already in existence, these appear to be the only ones in which a
court has referred to decisions from foreign jurisdictions to validate their argument. The first
of these judgments was handed down by the Tribunale Civile di Cuneo and the second by the
Cour d'appel de Grenoble.
In the first case, the Italian court had to apply the CISG provisions that require the
buyer to examine the goods and give notice of any lack of conformity. For the purpose of
interpreting the rather vague formulae "within as short a period as is practicable in the
circumstances" and "within a reasonable time," contained in the relevant CISG Articles 38 and
39, the court did not hesitate to refer to two judgments handed down in similar cases in
Switzerland by the Pretore of Locarno-Campagna and in Germany by the Landgericht of
Stuttgart.[827]
The second judgment was rendered by the French Cour d'appel of Grenoble.[828] In this
instance, the Court of Appeal expressly referred to a decision of the Oberlandesgericht of
Düsseldorf [829] to hold that the Vienna Convention established the place of payment of the price
as the seller's place of business (Art. 57(1)); and that the usual interpretation of this provision
was that it expressed the general principle that payment should be made at the place of
domicile of the creditor.
The next relevant case comes from the Obergericht des Kantons Luzern in
Switzerland.[830] The plaintiff was an Italian seller of medical supplies, and the defendant was a
Swiss buyer. After reviewing the international case law, the court stated that there were
serious gaps in the construction of the terms "examination of the goods" and "notice of lack of
conformity," with the extremely restrictive German case law, on the one hand, and the more
liberal American and Dutch case law, on the other. The court observed that the gap between
these two positions had to be narrowed. Then the court found a period of ten days after
delivery to be appropriate (Art. 38), as regards examination of the goods by the buyer for the
purpose of determining their conformity with the contract. As to the notice requirement for
lack of conformity, the court held that a "rough average" of one month was also appropriate
(Art. 39 CISG).
The next case of interest is MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova
D'Agostino S.p.A.[831] This case involved the sale of ceramic tiles by an Italian manufacturer to a
U.S. retailer. The key issue before the court was whether the parol evidence rule of domestic
law applies to the interpretation of a contract governed by the CISG. The U.S. federal
appellate court held that Article 8(3) precludes the application of the U.S. parol evidence rule.
The court expressly rejected an indication to the contrary in Beijing Metals & Minerals
Import/Export Corp. v. American Business Center, Inc.[832] The court also rejected the seller's
argument that the parol evidence rule was a procedural rule outside the scope of the CISG.
The court paid attention to the CISG doctrine, citing a number of commentators, and to the
CISG jurisprudence as well. While not citing foreign precedents, as there were none on the
issue considered, it pointed out the need to consider such precedents and discussed U.S.
decisions that drew distinctions between this ruling and a prior ruling of another U.S. Circuit
Court of Appeals.[833] It is also noteworthy that the court provided guidance to counsel by calling
attention to the Pace Law website as "a promising source" for "persuasive authority from
courts of other States Party to the CISG."[834]
In Medical Marketing International, Inc. v. Internazionale Medico Scientifica, S.r.l.,[835]
a U.S federal court of first instance also cited the ruling of a court of a foreign jurisdiction.
The defendant, an Italian seller of medical equipment, sought to have an arbitral ruling
overturned on the grounds that the arbitrators misapplied the CISG, and that they refused to
follow a German Supreme Court case [836] interpreting the Convention. The buyer was a Louisiana
marketing corporation that had entered into a business licensing agreement in which the seller
granted exclusive sales rights for certain medical equipment to the buyer. Although the federal
court was unwilling to accept this argument, the significance of the case lies in the U.S.
judicial reference to an interpretation of the CISG by a court of another Contracting State.
This was also the case in Tribunale di Pavia, which too cited the ruling of a court of a foreign
jurisdiction.[837]
The most recent case that cites and comments on rulings of courts of foreign
jurisdictions comes from Tribunale di Vigevano in Italy.[838] In this case, a German insurance
company (the buyer's assignee) brought suit against an Italian seller of rubber used in the
manufacture of shoe soles by the buyer. The buyer made the material into shoe soles
subsequently purchased and used in the manufacture of footwear by an Austrian company,
which then sold the finished product to a Russian company. The Russian company returned
the shoes to the Austrian manufacturer, stating that once the soles were placed on the market
and subject to use, they wore out in a short time, and were consequently not fit for the
purpose for which they were produced. In turn, the Austrian manufacturer returned the shoes
to the buyer and was reimbursed through the buyer's assignee. The plaintiff arranged for the
redistribution of the defective footwear at below cost price and sued the seller, pursuant to
Italian Civil Code art. 1201, standing in all the contractual and extra-contractual rights of the
buyer, its insured. The plaintiff argued that the seller should be held to pay actual damages of
more than 80,000 Marks, which resulted from the re-sale of the finished product at a lower
price due to non-comformity.
The court held that the plaintiff failed to meet its burden of proof under the procedural
law of Italy, as well as under the CISG. The court held that under the circumstances, given the
kind and nature of the goods, the buyer did not provide the seller with a timely or sufficiently
specific notice of any non-conformities, as per CISG Articles 35(1), 35(2), 38(1) and 39(1).
The most important aspect of this case, for our purposes, is the court's willingness to cite
foreign CISG jurisprudence (American, Austrian, Dutch, French, German, Italian, and Swiss
court cases contained in national reporters, ICC arbitral awards, as well as two CISG websites
and UNILEX) and to mostly follow the prevalent views expressed therein. What must be
regretted, however, is the lack of any reference by the court to doctrine or the legislative
history of the Convention. With respect to foreign jurisprudence the court stated that, even if
it is not binding, it should be taken into consideration with "regard" to promoting uniform
application of the Convention and the observance of good faith, as mandated by Article 7(1).
Although this case was decided on the threshold question as to the allocation and the
content of the burden of proof, it is hoped that the court's approach to CISG issues,
(involving extensive analysis of the application of the Convention and the foreign
jurisprudence; e.g., on the meaning of "reasonable" and "within as short a period as is
practicable in the circumstances," on the specificity requirement recited in Art. 39(1), and on
reasoning by analogy to arrive at a tenable identification and application of "general
principles") influences the way other tribunals interpret and apply the CISG. There are also
some tribunal decisions in which the CISG has been interpreted by express reference to the
UNIDROIT Principles.[839] In particular, mention may be made of an award by the I.C.C. Court
of Arbitration in Paris [840] which, following a precedent set by the International Court of
Arbitration of the Federal Chamber of Commerce of Vienna,[841] applied the UNIDROIT
Principles in order to determine the rate of interest.
Commentators around the world have already published critical analyses of the CISG
case law, in which they discuss various court decisions and arbitral awards on a large number
of the CISG's provisions.[842] For example, there are many cases dealing with matters implicitly
excluded from the ambit of the CISG. Since the list provided in Article 4 is not an exhaustive
one, problems arise in determining what other matters are excluded from the scope of the
CISG - and are thus governed by the applicable domestic law - and in distinguishing them
from matters which, though not expressly settled in the CISG, fall within its scope and must
therefore be settled in conformity with the general principles underlying the CISG.[843] There are
decisions which confirm that the CISG does not cover issues relating to the capacity of the
parties,[844] the existence of an agency relationship,[845] the right to set-off against the other party's
claim,[846] the validity of the assignment of one party's right to third parties,[847] prescription (i.e.,
limitation period),[848] the validity of a penalty clause,[849] the recovery of damages arising from
mandating an agent to collect debts,[850] the validity of a settlement agreement,[851] and defects in
consent.[852]
In this chapter, closer attention is paid to the case law concerning the interpretative
issues in Articles 7(1) and 7(2) that were raised in the previous chapters of this work and
relate to the thesis advanced herein. As such, mention must be made of an award rendered by
the I.C.C. Court of Arbitration affirming the applicability of the CISG as an expression of the
new lex mercatoria.[853] As the contract did not indicate the applicable law, the arbitral tribunal,
pursuant to Article 13(3) of the I.C.C. Rules, held that the contract was governed by the
general principles of international commercial practice and accepted trade usages, and as such
by the CISG which reflects these principles and usages.
Mention may also be made of a decision by an Italian State court concerning a contract
for the sale of raw oil and contained a FOB clause as well as a reference to NIOC standard
terms. Although the contract was not governed by the CISG, the Corte d'Appello of Genova
made an express reference to the CISG in support of its ruling that the FOB clause's scheme
was binding as an international trade usage (under Article 9 the CISG).[854]
The marked contrast between the CISG's increasing world-wide acceptance, on the
one hand, and its insignificant practical use in the United States, on the other, is cause for
great concern for those of us who believe that the U.S., being one of the earliest adherents to
the CISG and entertaining a massive volume of international trade, has an important role to
play in the development and establishment of the CISG as the uniform code on the
international sale of goods. This phenomenon must be examined further, since it involves a
wide range of key theoretical and practical interpretative issues that affect the CISG, such as
the treatment of the CISG's international character by the courts of a major Contracting State
and the methodology that will actually promote uniformity in the CISG's application. The fact
that the American case law has not fulfilled the expectations of the present writer (as these are
expressed through the thesis advanced in this work), but demonstrates a fallacious approach to
the CISG instead, makes its analysis more important since it can act as a paradigm of the
pitfalls that current and future interpreters of the CISG must avoid.
2. CRITICAL ANALYSIS OF THE U.S. CASE LAW ON CISG - AN
INTERPRETATION OF CISG BASED ON DOMESTIC LAWS AND PRACTICES
Very few cases interpreting the Convention have been reported in the courts of the
United States to date,[855] despite the broad scope of the CISG.[856] Unfortunately, the first major
U.S. Circuit Court decision interpreting the CISG is disappointing.[857] The court recognised
superficially its additional charge, under Article 7(1), to interpret the CISG in light of its
"international character and the need to promote uniformity" in its application, but ultimately
failed to articulate a method of interpretation that took into account the CISG's international
character and the stated goal of uniformity in its application.[858]
Unfortunately, the next case decided by a U.S. District Court was equally
dissapointing. In Delchi Carrier, SpA v. Rotorex Corporation, the court applied the
Convention's gap-filling mechanism to resolve certain matters in Articles 74-78 of the
Convention.[859] In Delchi, an Italian manufacturer of air conditioners sued successfully its
American supplier for breach of a contract to supply compressors necessary for the
manufacture of its air conditioners and was awarded consequential damages from the breach
and lost profits from the reduced sales of air conditioners.[860]
The Delchi decision has received extensive and strong, but valid criticism regarding the
court's failure to grasp the Convention's spirit of internationalism.[861] This is evident in the
methodology it followed in resolving most of the issues at hand,[862] from the applicability of CISG [863] and its discussion of the concepts of "fundamental breach" and "foreseeability",[864] to its
damages [865] and pre-judgment interest award.[866]
The thesis that has been advanced by the present writer is that a domestic law
resolution of a matter governed by CISG does not promote the creation of a uniform law
because decisions based on domestic law are less likely to be adopted by foreign courts.[867] The
court in the Delchi case set the stage in its decision by pointing out that the case "is governed
by the CISG" - an international agreement which requires "
that its interpretation be
informed by its 'international character and ... the need to promote uniformity in its
application and the observance of good faith in international trade'."[868] However, the decision
displays a clear lack of substantive adherence to the court's noble introductory statements. It
is regrettable that no international sources or methods of analysis can be found anywhere in
the judgment.[869]
The present writer argued in Chapter 3 of this work that in the CISG the elements of
"internationality" and "uniformity" are not only inter-related but also inter-dependent.
International - rather than national - interpretation is necessary in order for uniformity in the
application of the CISG to be achieved; and uniformity of application is vital if the CISG is to
maintain its international character. This goal is supported by the lingua franca found in the
provisions of the Convention. An autonomous and uniform interpretation would go a long
way towards completing the process of unification and achieving the aims of the drafters of
the international instrument. However, the Delchi decision did not follow the general
consensus concerning the appropriate method of analysis to be employed when interpreting
the provisions of the CISG.[870] Article 7(1) directs that the language of the CISG must be
carefully interpreted in accordance with the Convention's "international character," the need to
promote uniformity in the CISG's application and the observance of "good faith in
international trade."
It was also argued in Chapter 3 that in interpreting the CISG, the rules and techniques
traditionally followed in interpreting ordinary domestic legislation should be avoided and that
Article 7 represents an implied provision for the undertaking of a liberal approach to the
CISG's interpretation. The Delchi case provides a perfect example of the shortcomings that a
rigid and narrow approach entails.
It is part of the present writer's thesis that the ultimate aim of the CISG (i.e., the
broadest degree of uniformity in the law of international sales) cannot be achieved if national
principles or concepts - taken from the law of the forum, or from the law which in the absence
of the CISG would have been applicable according to the rules of private international law -
are allowed to be used in the interpretation of the CISG. The court in the Delchi case failed
totally in these respects and by paying complete disregard to the legislative history of the
Convention,[871] to international jurisprudence [872] and doctrine [873] it missed an important "opportunity
to contribute to the international jurisprudence of CISG."[874]
It is submitted that the court in Delchi failed completely in its attempt to apply the
CISG, in both form and substance. The method of interpretation employed in the Delchi
decision was completely off the track designed for CISG's interpretation and application. The
court showed good intentions superficially, but ultimately failed to rise to the occasion, which
demanded a more thorough and accurate analysis of CISG's application than the one actually
offered. The court missed an important opportunity to engage in an international dialogue with
references to foreign decisions and commentaries, civil law principles, and the international
legislative history of the CISG itself. According to an American commentator, the court "
understood its special mandate to be mindful of 'the international character' in the
interpretation of the Convention and 'the need to promote uniformity in its application,' but
was clearly unable to overcome its own ethnocentric bias."[875]
Note, however, that more recently, there have been encouraging U.S. reports of judicial
attention to rulings on the CISG by tribunals and scholars of other jurisdictions.
In MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D'Agostino S.p.A., the key
issue of the case was whether CISG Article 8 overrides the U.S. parol evidence rule.[876] The
U.S. Circuit Court of Appeals ruled that it does. In its decision, the court paid close attention
to CISG doctrine, citing a number of commentators, as well as U.S. case law, in marked
contrast to the methodology of the Delchi court. In support of its holding that the CISG
rejects the parol evidence rule, the court cited "the great weight of academic commentary on
the issue."[877]
This is significant not only because it incorporates an aspect of civil law methodology,
but also because it brings an international perspective to the analysis of the Convention, the
authors cited by the court are prominent scholars trained in the legal traditions of continental
Europe.[878] The court also searched vigorously for guidance from foreign case law applying the
Convention, even venturing onto the Internet in hopes of finding relevant decisions from other
jurisdictions, lamenting the fact that it could locate no relevant foreign CISG case law on the
parol evidence issue. This action taken by the court is noteworthy not only because its search
for guidance from foreign CISG decisions serves as a precedent, but also because its opinion
will alert lawyers to a very valuable research resource mentioned by the court - the Pace Law
website devoted to the CISG.[879]
While not citing foreign precedents, as there was none on the issue considered, the
court pointed out the need to consider such precedents and discussed relevant U.S. decisions.
Compared to the approach taken by the court in Delchi, the methodology employed in
MMC-Marble represents real progress. The latter represents a reasonably successful attempt
to implement the mandate of CISG Article 7(1) to interpret the Convention with regard for its
international character, and these need to promote uniformity in the Convention's application.
It is thus a positive development for the CISG jurisprudence in the United States.
The MCC-Marble decision has been welcomed by the academic community [880] and has
generated justifiable optimism that the U.S. courts are starting to approach the task of
interpeting the CISG with the requisite attitude and methodology that respects the CISG's
international character and promotes uniformity in the Convention's application.[881]
It is hoped that the above critical analysis of the U.S. case law has highlighted the
practical dimensions of the theoretical difficulties associated with the interpretation of the
CISG, thus putting the issue of the CISG's interpretation and application in its functional
context, over and above the academic one. At the end of the day, the litmus test of the CISG's
function as the uniform law of international sale of goods will take place at the practical level -
in courts and arbitral centres.
3. AN APPROACH TO THE CISG'S INTERPRETATION BASED ON
INTERNATIONALITY AND GENERAL PRINCIPLES OF LAW
The importance and feasibility of uniform law for international trade have been
established in the early chapters of this work. Almost two decades have passed since the
"birth" of the CISG, and it has already been implemented by more than fifty countries world-wide, representing different legal, social and cultural systems. Textual uniformity, achieved by
enacting uniform laws, is a necessary but insufficient step towards creating substantive legal
uniformity.[882] The subsequent uniform application of the agreed rules is not guaranteed, as in
practice different countries, almost inevitably, come to put different interpretations upon the
same enacted words.[883]
This thesis has considered certain issues that the present writer considers important for
the healthy growth of the CISG into a Convention of uniform law not only in words but,
especially, in its interpretation and application. The analysis offered has been based on an
examination of the nature, scope, and function of, arguably, the most important provision of
the Convention; Article 7 CISG. With the unifying law in force world-wide, jurists and
scholars face the following problem: What approaches to interpretation will best promote
uniform application of this law? In sum, this work has tried to answer the following questions:
Which approaches to interpretation are most appropriate for uniform laws for international
sales? Do existing national practices fit the problem at hand? If not, how can one develop
more appropriate responses to the special needs of this young and promising member of the
international legal order? The job at hand is to consider and evaluate different approaches to
the interpretation of the CISG.
(a) The language of the CISG: Plain meaning and full context
The first hurdle to uniformity is intrinsic to the scope of the legislation under
examination. In Chapter 2 of this work, the CISG was analysed as an attempt to create ab
initio an international community of members that can communicate and arrange their
commercial affairs using the text as their common language. The basic premise for such an
endeavour is the obligation of fidelity to the words of the statute; departures from this
principle would necessarily undermine the stated goal.[884] The size of the task matches its importance, since "[l]egal terms can have an elusive, chameleon-quality even in domestic
legislation; in international legislation that must be translated into many other languages, the
use of domestic legal terminology can produce chaos."[885]
In Chapter 1 it was noted that throughout the many years of efforts for unification of
international sales law, the participants engaged in an ongoing discussion of the goals and
methods of the project. A central theme in these unification efforts was the formation and
facilitation of an international community whose members can conceive relationships and
resolve conflicts through the use of a new, common legal language. The artificial nature of
such a new linguistic construct is prescribed by the intrinsic difficulties embedded in the core
of the unification process itself. The parameters of the definition and composition of the
international community created by the CISG, as discussed in Chapter 1 of this work, also
permeate the issue of a new lingua franca. As it was necessary for the drafters of the CISG to
articulate a set of issues or topics (and a set of terms in which to discuss these topics) when
delineating its field of operation, it was also necessary that the language used to express these
issues reflected the values that operate throughout the CISG, so that the text of the
Convention remains coherent and persuasive in the eyes of the members of that community.[886]
Essentially, only the process that gave the CISG its communality could give the CISG's
language the requisite legitimacy for the present and the future. And only the principles
underlying the community of the CISG could provide the basis for the new language found in
the CISG, because these principles suggest a common origin for both the substance and the
form of the CISG community. Therefore, the drafters of the CISG took the unprecedented
step of "rooting out words with domestic legal connotations in favour of non-legal 'earthy'
words that refer to physical acts."[887] It is the position of the present writer that this policy
adopted by CISG's drafting fathers is indicative of the need for a corresponding a-national, or
supra-national, methodology for the application of the CISG.
The drafting style of the CISG promotes discussion among the members of the CISG
community of the meaning of the language found in it. The members are placed on an equal
footing in their attempts to interpret the CISG. In interpreting the text, applying the CISG's
provisions and resolving any ambiguities therein, it is paramount that one approaches the
CISG as a whole and grasps the power of its full context. The CISG must not be seen as
piecemeal legislation. Its language provides not only formal, but importantly, substantive
coherence. Such coherence is necessary to safeguard homeward tendencies when attempting
to resolve any ambiguities in the CISG. For instance, according to Article 1 CISG, the
Convention applies to a contractual relationship between parties whose relevant "places of
business" are in different Contracting States. The ambiguity that could arise regarding the
definition of "place of business", could also determine whether the CISG can be applied to a
particular contract. Professor Honnold has argued that the full context of the Convention's
provisions can resolve many instances of ambiguity, including the one above.[888] Article 10(a)
CISG provides that the relevant place of business is the one "with the closest relationship to
the contract and its performance". Further assistance is provided by CISG Articles 31(c),
42(1)(b) and 69(2), which make reference to the parties' place of business in the context of
certain acts of performance.
It is submitted that the interpretation of the Convention's language must be guided by the
principles of true internationality and autonomy. These principles enanciated in the CISG can
also contribute to the linguistic coherency and independence upon which the CISG itself
stands. Fidelity to the language of the CISG requires adherence to the plain meaning of the
text and comprehension of the full context of the Convention's provisions.
(b) Legislative history: Its nature and scope
An interpretative methodology that adopts a literal approach in construing the
language and is also sensitive to the contextual issues discussed above, may still be
unsuccessful in settling all problems of uniform interpretation and application.[889] Legal scholars
have advocated the consultation of the CISG's legislative history by judicial bodies.[890] Such a
proposal makes good sense, since it places at the hands of CISG's interpreter the only one
other common international point of reference for the Convention - its legislative history.
The legislative history of Article 7(1)(2) was examined in Chapters 3 and 4, in order to
gain a better understanding of the nature, content and operation of the interpretative
provisions of the Convention. This enlightening process revealed not only the truly
international composition of the drafting body, but also the political nature of the drafting
compromises made in Article 7 CISG.
Common law courts have traditionally refused to consult or even refer to the legislative
history of statutes - a "necessary step for multi-lingual instruments."[891] However, since the 1981
House of Lords decision in Fothergill v. Monarch Airlines, more courts in England and the
Commonwealth have adopted a more relaxed and productive appoach when it comes to
considering such material. It is fortunate that common law courts have finally recognised the
broader outlook mandated by multi-lingual international Conventions.
The CISG stands to benefit from this new relaxed attitude of common law courts. This
favourable development should contribute to a better understanding of the CISG, further
promoting uniformity in the Convention's interpretation and application. Article 7(1) CISG
itself directs that interpretation should have regard to the CISG's "international character and
the need to promote uniformity in its application." It is submitted that the proper interpretation
of the CISG requires consultation of its legislative history.
A note of caution has, however, been sounded on the use of travaux préparatoires.[892]
Once it is enacted, the CISG acquires its own life and should not be unnecessarily
circumscribed by its preparatory material. Furthermore, it must be noted that in UNCITRAL's
preparation of the 1978 draft for a Sales Convention, "consensus was reached on each
provision without ever taking a formal vote."[893]
It is submitted that the Convention's legislative history can provide a valuable insight
into its drafters' intentions but it cannot hold the CISG its life-long prisoner. As such, it can be
used as an interpretative aid in the CISG's interpretation, but not as the ultimate tool. This last
function should be reserved for the Convention's case law.
(c) Statutory "gaps" and international uniformity
Domestic approaches to statutory gap-filling differ. This thesis analysed the gap-filling
mechanism of the Convention provided in Article 7(2) CISG and the different approaches to
its operation. For the purposes of the CISG's interpretation and application, it is important to
consider which approach best serves the objectives of international unification. This thesis
does not pretend to examine in detail the features of the world's legal systems, since such a
study "would require a multi-volume treatise prepared by a substantial team of comparative
law scholars."[894]
In this thesis, different approaches to interpretation that ameliorate the danger of
divergining interpretations were considered and evaluated. In civil law systems, judges are
required to base their decisions in a specific article of a particular code - an approach requiring
"creative extensions by analogy of the code's provisions to meet the multitude of new
problems of interpretation and application"[895] that arise during the life of that code. In the
common law world, on the other hand, the application of codified law relies heavily on judge-made common law.
As far as gaps praeter legem in the CISG are concerned, the approach to be adopted is
prescribed by Article 7(2). The main dilemma posed for interpreters is whether they should
carry out the gap-filling contemplated according to "the general principles on which [the
Convention] is based," or find a solution based on the domestic law "applicable by virtue of
the rules of private international law." Although the two methods are not phrased as
alternatives in the CISG - since Article 7(2) states that recourse to the second may take place
only "in the absence of [general] principles" - the present writer has argued that, in the overall
context of the CISG as uniform law, the two approaches are incompatible with each other.[896]
The differences between these methodological approaches could produce conflicting
results in the interpretation of the CISG. For instance, if common law judges prove unable to
avoid the old ways of their common law tradition, uniformity in the Convention's
interpretation and application will suffer irrepairably. Additionally and irrespective of
jurisprudential heritage, familiar domestic law may be easier to apply - for reasons mentioned
in previous chapters of this work - ultimately leading the CISG into the chaotic old world of
private international law conflicts, not into the brave new world of uniform laws. The solution
to the problem is beguilingly simple and is to be found in the answer to the question that all
interpreters of the CISG should ask themselves: Which course is more consistent with the
Convention's main goal of promoting international uniformity in international sale of goods?
The present writer has argued that a solution that applies analogous principles underlying
express provisions of the CISG and is based on general principles of international commercial
law on which the CISG is founded (such as portions of the UNIDROIT Principles and the
PECL) is preferable, since it pays proper regard to the Convention's international character
and promotes uniformity in its application.
Tribunals around the world dealing with CISG related issues should be faithful to the true
character of the Convention, by adopting a similar interpretative approach and by considering
relevant foreign jurisprudence. Thus they will contribute to the growing body of applicable
international case law. On the other hand, a decision based on domestic law invoked by
reference to the rules of private international law, hinders the development of uniformity.
Thus, such a decision does not constitute a proper interpretation of the CISG, as it does not
follow the international mandate embedded in Article 7(1) and need not be respected in other
jurisdictions because it is theoretically unsound and practically counter-productive. As has
been argued throughout this work, domestic law does not provide solutions that are
compatible either with the nature, or with the structure of the CISG, or even with the special
needs of international trade.[897]
The problems relating to the uneasy co-existence betwen "general principles" and the
rules of private international law are due to the compromise inclusion, in Article 7(2), of the
reference to domestic law, albeit as a last resort. The fact that the CISG does not explicitly
state those general principles [898] has compounded the problem. Some members of the Working
Group drafting the CISG objected to the general principles approach because "it is difficult or
impossible to identify those general principles."[899] Supporters of the retention of the reference to
general principles argued that one of the sources for these principles would be the
generalisations that could be made from the various specific provisions of the text;[900] another
source would be the "course of evolution of the Law."[901] The purpose was to provide the judge
with guidance, rather than "to leave the matter in complete uncertainty," which could result in
judges being "free to apply national law whenever a question [was] not expressly settled by the
Uniform Law."[902] Otherwise, it would be "an invitation to disregard [the Convention] for those
who would wish to avoid its application."[903]
While the CISG does not list the general principles on which it is based, it is possible to
extract a number of those principles from the text of the CISG and from its legislative history.[904]
In identifying these general principles, it should be kept in mind that the CISG's overall
objective, as stated in its Preamble, is to promote international trade by removing legal barriers
that arise from different social, economic, and legal systems of the world. The presence (and
search) of general principles can reduce the need to revert to domestic law and nationally
divergent legal concepts in construing specific CISG provisions.
While many general principles of the Convention can be extracted from the text alone, several
courts have failed to provide adequate analysis on this issue and proceeded erroneously to
apply domestic law solutions to matters governed but not expressly settled by CISG. Also, at
least one commentator has argued that Article 7(2) Both of these readings take an unjustifiably narrow view of the nature and
role of the CISG. The Convention was drafted in an atmosphere of compromise. The drafters
were seeking to find a reasonably workable solution. The CISG is not meant to be an
exhaustive codification of international commercial behaviour. Such codification would have
been unrealistic and would make the CISG too inflexible to adapt to changing circumstances in
international trade.
It has been suggested that one should exercise restraint in extracting the general principles.
Professor Honnold recommends that such findings of general principles should be limited to
situations where the general principles are "moored to premises that underlie specific
provisions of the Convention."[906] He further suggests that finding general principles to solve a
specific problem is valid only when the lack of a specific provision governing the issue is due
to deliberate rejection by the delegates to the Convention or due to the Convention's "failure
to anticipate and resolve [the] issue."[907] If the CISG failed to anticipate a specific solution to an
issue, an analogical extension from the existing provisions to the new situation would be
appropriate.[908] Thus, any issue that has not been expressly excluded by the CISG,[909] and which
can be resolved by applying the general principles of the CISG, should be solved accordingly.
A faithful application of Article 7 requires this interpretative approach. In this sense, the
general principles provide a safety net, without which domestic law will be applied whenever the
CISG has not expressly provided for the resolution of an issue,[910] thus critically undermining
the effectiveness of the CISG as a living uniform law by limiting its potential for development.
A review of the recent international case law indicates that many tribunals have failed to
follow the advocated approach and have thus contributed to inconsistent results. A German
tribunal rejected outright the approach based on general principles and argued that even when
the CISG was still only in the preparatory stages, the delegates could not agree on a uniform
solution.[911] Some courts display the intent to follow Article 7, but do not pay sufficient attention
to the general principles. For instance, they simply state that the CISG has no general
principles that are applicable.[912] This approach of following domestic law has led to lack of
uniformity on the issue of the interest rate to be paid to the wronged party. For example, in
Delchi Carrier S.p.A. v. Rotorex Corp.,[913] the United States District court stated that since
Article 78 of the CISG does not specify the interest rate, the rate should be fixed in the court's
"discretion" and granted the rate of the United States Treasury Bill. A German court
determined that the interest rate is the average bank lending rate at the creditor's place of
business.[914]
There have also been instances though where the concept of internationality and the function
of general principles in Article 7, received proper treatment by the courts. For example, in
Arbitral Award SCH-4318 between parties from Germany and Austria,[915] the arbitrator stated
that merchants resort to bank credit when payment from the other party is delayed. Thus the
buyer was compensated for the interest rate in his place of business with respect to the
currency of payment, which was agreed upon as U.S. dollars. The arbitrator also noted that
the UNIDROIT Principles of International Commercial Contracts suggest the same solution.[916]
This reasoning was also followed in another arbitral award from Austria.[917]
Finally, it must be noted that if a specific search failed to extract an applicable general
principle, the CISG still provides an important alternative to domestic law. Article 9 provides
that parties are bound not only "by practices they have established between themselves," but
also by international trade usages. The combined effect of the ultimate principle of party
autonomy in Article 6 with Article 9, is that established practices between the contracting
parties and international trade usages "
not only supplement the Convention but also, in case
of conflict, supersede the Convention's provisions
".[918]
(d) International case law and uniformity
(i) General remarks
There is strong academic support for the present writer's thesis [919] that the reference in
Article 7(1) to the obligation to have regard to the CISG's international character, demands
that one should have recourse neither to domestic concepts,[920] nor to domestic interpretive
techniques [921] in interpreting the CISG.[922] Similar affirmations can now be found in several recent
European court decisions.[923] In a Swiss case, the court expressly stated that a uniform
interpretation of the CISG required one to take into account its international character and
interpret it autonomously and not in light of any domestic law.[924] The German Supreme Court
has concurred in this approach, by stating that generally it did not matter whether there were
differences between the domestic law and the CISG, since one was not allowed to interpret
the CISG in light of domestic law anyway.[925] This affirms the position that the CISG, in view of
its international character and in line with its goal of uniformity, has to be interpreted
autonomously.
There is also strong academic support for the present writer's opinion [926] that even where
the expressions employed by the CISG are textually the same as expressions [927] that have a
specific meaning within a particular legal system, they must be interpreted autonomously.[928]
Such expressions have to be considered to be independent of [929] and different [930] from domestic concepts,[931] since the expressions employed by uniform law conventions, such as the CISG, are
intended to be neutral in order to receive wider acceptance.[932] Indeed, it has been maintained
throughout this work that any choice of one expression rather than another is the result of a
compromise [933] and does not correspond to the reception of a concept peculiar to a specific
domestic law.[934]
(ii) Theoretical issues
The last step towards uniformity can only be taken at the stage of actual interpretation
and application of the CISG's provisions by the courts. The importance of international case
law is two-fold. First, the existence (and the volume) of case law will provide the definitive
indication as to whether the CISG has been accepted by traders as the law that governs
international sales. Second, the quality of the case law will determine whether the call for
interpretation "to promote uniformity in [the Convention's] application" - a mandate that
clearly calls for due regard for interpretations in other countries - is paid the reverence it
demands.
In order to reduce the danger of divergent interpretations by courts of different
countries,[935] the drafters of the CISG [936] inserted the provisions of Article 7(1) in the Convention's
text. This article states that when interpreting the CISG "regard is to be had to its international
character and to the need to promote uniformity in its application." Drafters of other uniform
law Conventions have taken a similar approach to the concern about conflicting
interpretations.[937] It was argued in Chapter 3 that this entails that one should not read the
provisions of the CISG through the lenses of domestic law,[938] but in an autonomous manner.[939]
Thus, when interpreting the CISG, one should not resort to the meaning generally attached to
certain expressions within the ambit of a particular legal system.[940]
However, it has often been stated in legal writing that in view of the directive to promote
uniformity in the Convention's application, it is insufficient to consider the CISG an
"autonomous body of rules,"[941] and therefore, it is necessary to consider the practice of other
jurisdictions.[942] In effect, recourse to decisions rendered by foreign judicial bodies has been
advocated [943] as an extra measure aimed at achieving the CISG's ultimate goal of uniform
application.[944]
The present writer wants to dispel any impression that may have been created by these
comments - i.e., that the practice of consulting foreign jurisprudence is independent from, or
additional to, an autonomous approach to the CISG's interpretation. An argument to the
effect that an autonomous interpretation of the CISG and the practice of consulting foreign
jurisprudence are separate from each other, or even mutually exclusive, lacks validity. It is
submitted that any ostensible difference between the two practices is based on a misguided
appreciation of the "autonomy" with which the CISG must be interpreted.
It is further submitted that an autonomous approach, in the context of the present discussion
on the CISG's interpretation and application, cannot be conceived separately from the practice
of referring to foreign case law; in fact, it demands such a practice and relies on it. The CISG
is an autonomous body of law, in the sense that it is not derived from a specific, pre-existent
legal system. Therefore, the interpretation of the Convetion must be autonomous, i.e., it must
not be based on any established domestic approach. This point is vital for the CISG's
legitimacy as a truly international (or supra-national) instrument.
On the other hand, the reference to the CISG's foreign jurisprudence by domestic
courts has been advocated in Chapter 4 by the present writer as a necessary element in
maintaining the uniformity of the CISG's autonomy and internationality. In this sense, the
CISG's interpretation will remain autonomous only as long as foreign jurisprudence is
considered and followed by different national courts. Far from being distinct, or even
irreconcilable, the two approaches are complementary and form two indispensable parts of the
same whole. In the context of the CISG's internationality, the two concepts are merely two
elements of the same approach and should not be treated as separate practices.
Moving on from the above theoretical digression, it is noted that a number of legal
writers [945] have suggested recourse to the aforementioned guidelines to avoid divergent
interpretations and applications of the CISG.[946] According to the present writer, uniformity can
only be achieved if one also considers foreign case law.[947] The interpreter must consider
decisions rendered by judicial bodies of foreign jurisdictions [948] because it is possible that the
same, or similar, questions have already been examined by other States' courts.[949]
(iii) Practical, substantive and methodological issues
Requiring interpreters to consider foreign decisions creates practical difficulties for two main reasons. First, there is the issue of access to foreign case law and, second, the fact that case law is often written in a language unknown to the interpreter. [950]
These reasons must be partly responsible for the fact that, while many decisions exist
which refer to decisions from judicial bodies of the same country,[951] there are only a small
number of decisions in which detailed reference is made to decisions rendered by foreign
judicial bodies. Initially there were very few reported cases that cited rulings of courts of
foreign jurisdictions. In one of these cases, an Italian court [952] had to decide whether a notice of
non-conformity, given to the seller after delivery of non-conforming goods, was timely or not.
In deciding this issue, the court referred to a Swiss case,[953] rendered in Italian (which may have
been the reason why this case was quoted), and to a German case [954] that had decided an
analogous matter.
There has since been further progress illustrated by MCC-Marble v. Ceramica Nuova,
a case that, while not citing foreign precedents pointed out the need to consider such
precedents. There is also Medical Marketing International, Inc. v. Internazionale Medico
Scientifica, S.r.l., a case citing the ruling of a court of a foreign jurisdiction. An Italian court,
Tribunale di Pavia (29 December 1999), also cited the ruling of a court of a foreign
jurisdiction. The most recent such case also comes from an Italian court, Tribunale di
Vigevano (12 July 2000), and it cites and comments on a lot of foreign CISG jurisprudence
(American, Austrian, Dutch, French, German, Italian, and Swiss court cases contained in
national reporters, ICC arbitral awards, as well as two CISG websites and UNILEX). Even
though there are hundreds of cases on the CISG, these appear to be the only ones in which a
court has referred to decisions from foreign jurisdictions to validate their argument.
This state of affairs demonstrates the effect of these practical difficulties on the uniform
application of the CISG. This cannot, however, be said to be entirely attributable to a lack of
supporting structures. The world-wide efforts to create easily accessible channels of
information on the CISG and its case law are documented in Chapter 3, where the creation of
CLOUT, UNILEX and relevant university databases is discussed.
Although no international tribunal exists with jurisdiction to review the case law
generated by the CISG decisions uniformity need not necessarily suffer.[955] The existence of a
hierarchically structured international judicial system dealing with the CISG could not on its
own guarantee uniformity. The general experience from our own legal systems supports this
point. On the other hand, the lack of such an international structure does not necessarily spell
the end of uniformity. For example, it has been also been noted that the United States
Supreme Court's lack of jurisdiction to correct conflicting interpretations of the many uniform
laws of that country's 50 States - e.g., the U.C.C. - has seriously impeded the application of
those laws.[956]
It is submitted that the key to achieving uniformity in the CISG's case law is a
strongly-shared conviction among national courts of the need to preserve the CISG's
uniformity by giving weight to decisions in other States, not the existence of an international
CISG Supreme Court. Indeed, a carefully considered decision to differ from decisions in other
States probably provides a healthy opportunity for reconsideration of doubtful decisions - an
integral service in the CISG's long-term development. Especially so if one bears in mind that
CISG can be amended only by agreement between the Contracting States in an another
diplomatic conference, which is a rare event in itself. Therefore, what must be advocated in
tribunals interpreting and applying the CISG is the idea that all involved in this task are
colleagues of a world-wide body of jurists with a common goal. To this end, a lot of effort has
been invested in providing world-wide access to decisions applying the CISG.
A problem that remains unresolved, however, is a municipal judge's ability to
understand and deal with international case law. The risk with respect to foreign decisions in
the field of uniform law is that judges may find it easier to follow the interpretation of a
uniform international law provision given by the courts of their own State, than that prevailing
in another Contracting State. The present writer is of the opinion that the main problem here is
associated not with the access to foreign case law, but with the interpreters' unwillingness,
conscious and subconscious, to apply it.
The unwillingness of some judges to consider foreign jurisprudence is often due to mistrust
and an uneasy awareness of their lack of familiarity with foreign systems of law. The common
preference of judges for the law of their own country might be explained by a sincere
recognition of their not having been trained to cope with foreign law. Since the relevant access
structures have been established, the conclusion must be drawn that it is the interpreters' state
of mind that must change.
In assessing interpretations of uniform laws in other countries, courts could receive further
valuable assistance from the principle espoused in some civil law countries that the writings of
leading scholars (doctrine) have more weight than court decisions. The extent to which this
principle reflects current practice may vary, but in many situations interpreters should not
neglect available writings of scholars familiar with other legal systems.[957] Confronting
international uniform law may seem strange and daunting to national courts, but it need not be.
The work done world-wide on producing guides that assist in finding and classifying the ever-increasing number of doctrinal writings on the CISG should prove extremely helpful in this
respect. The happy confluence of the CISG's information needs with the emergence of the
Information Age can widen and speed up the access of interested parties to CISG-related
material and thus aid in the establishment of a global CISG jurisconsultorium that will
promote the Convention's mandate for uniformity.[958] An interpreter of the CISG must,
however, first overcome his own inhibitions and then focus sincerely on the international
character of the instrument to be interpreted, if uniformity is to be achieved.
The knowledge of foreign case law, however, does not solve all of the CISG's
substantive and interpretive problems. Notwithstanding the present writer's argument in favor
of considering foreign jurisprudence, it must be noted that, although the knowledge of foreign
case law is necessary, it is not sufficient to solve all the substantive issues that can arise in the
CISG's interpretation.[959] The knowledge of foreign case law cannot per se suffice to avoid
divergent interpretations of the CISG and, thus, guarantee uniformity.[960] Applying the analogy
of a domestic legal system that does not espouse the doctrine of stare decisis supports this
point. Knowledge of domestic case law in that situation does not exclude divergent
interpretations in the courts of that system.
Furthermore, if the knowledge of foreign case law were actually sufficient to create uniformity
in the interpretation and application of the CISG, this would mean, taken to an extreme, that
the first position taken on a specific issue by any court would be the one shaping all the
subsequent CISG case law. This can hardly be true because, at best, it would deprive the
CISG's interpretation of any future development and, at worst, it could foster the perpetuation
of precedents on account of temporal, rather than, juridical merit.
The main methodological problem created by the practice of considering foreign case
law concerns the degree of authority to be attached to it. In essence, the question here is
whether foreign case law should be treated as having binding force, or merely persuasive
value.
There is a difference in academic opinion on this issue. According to Professor Bonell,
foreign case law should have the value of precedent "[i]f there is already a body of
international case law."[961] Another author even speaks of a "supranational stare decisis"[962] which
can be achieved if "common law and civil law judges ... alter their approaches in a number of
ways."[963] This last proposal entails that civil law judges start to "search other cases throughout
the world and follow precedent in much the same way the common law judge does within her
national system."[964] Both of these opinions have been criticised on the following two grounds.[965]
The present writer argues that although the first criticism is strictly true, it fails to take into
account the fact that the proper interpretation of the CISG necessarily involves the elements of
autonomy and internationality, which the relevant body of uniform law cited to support the
criticism had itself failed to take into account. In other words, although uniformity is not
sufficient, nevertheless, it remains a necessary element in the proper interpretation of the
CISG.
As far as the second criticism is concerned, the present writer has already argued that
the lack of a rigid hierarchical international court structure cannot, by itself, be blamed for lack
of uniformity in the CISG's interpretation and application. That is not to say that there are no
methodological difficulties in considering and applying foreign case law, but to magnify, or
even exaggerate, their importance is counter-productive amidst the current of well-documented international efforts to overcome them.
Without placing unnecessary, strict, and minimalist labels on different legal systems, it is
necessary that civil law judges start to "approximate their common law counterparts in
increasing their reliance on [case law],"[967] as common law judges increasingly take into account
legal writing as well as legislative history. Only such a concerted effort can successfully
undertake the admittedly Herculean task of unifying international sales law and obtaining
uniformity in the interpretation and application of the supra-national animal that is the CISG.
The importance of the task should arouse the interpreters, not send them into hiding behind
the safety borders of the familiar. For these reasons, the present writer believes that, if a
domestic court took its international duties and responsibilities seriously when interpreting the
CISG (as these have been expounded throughout this work), we would not need to struggle
with the difficulties of formally establishing a strict doctrine of stare decisis.
Precedent, in its orthodox sense, cannot exist without a unifying court structure.
There is no doubt that foreign case law should have, at least, influential or persuasive
value. This result is, in essence, what Article 7(1) imposes when it provides that "regard is to
be had ... to the need to promote uniformity in its application." Foreign case law should be
used, at least, as a source from which to draw either arguments or counter-arguments in
interpreting the CISG. Thus, it can be helpful in solving a specific problem.[968] It is hoped that
once courts shed their national limitations and immerse themselves into the spirit of the CISG,
common sense will be able to guide the degree of compliance to foreign case law and draw the
parameters for the exact extent of its use. After all, it was common sense and optimism that
drove the CISG's drafters, and these are values that everybody's CISG education should
contain. What matters most, in the short term, is that domestic courts are initiated in the
engagement of the international discourse that the CISG envisages and do so in the liberal
fashion that characterises the interpretation process itself. This should not be seen as
undercutting uniformity and predictability of outcomes, but as implementing the interpretation
of the CISG on its proper basis. This is a necessary step for the establishment, in the long
term, of substantive predictability and uniformity. Of course, it remains to be seen how well
the CISG can survive this necessary period of grace.
(e) General principles of international law: UNIDROIT Principles
(i) Introduction to gap-filling issues
The present writer argues in this thesis that Article 7(2) legitimises resorting to the
UNIDROIT Principles (and arguably the PECL) as a means of interpreting and supplementing
the CISG - so long as there is a gap praeter legem in the CISG, and the relevant provisions of
the UNIDROIT Principles are the expression of a general principle underlying the CISG.
They cannot be inconsistent with the CISG provision in question.
It is asserted that when the solution to a gap-filling problem cannot be achieved by
analogical application of a rule found in a specific CISG provision, gap-filling can be
performed by the application of the "general principles" on which the CISG is based. This
procedure differs from the analogical application method, in that it does not solve the case in
question solely by extending specific provisions dealing with analogous cases, but on the basis
of rules which because of their general character may be applied on a much wider scale.
It was argued in Chapter 4 that some of the UNIDROIT Principles (and arguably
portions of the PECL, too) can be regarded as part of the "general principles" on which the
CISG is based, when their comparative provisions are substantially similar and not
inconsistent.[969]
There are two important questions that need to be answered in connection with this
proposal. First, can the UNIDROIT Principles be regarded as a genuine expression of "general
principles" of international trade law upon which the CISG is based? Second, even if the
answer to the first question were positive, is it legitimate to use the UNIDROIT Principles in
the proposed way, when, in many instances, it would render the express textual reference by
the CISG to the rules of private international law in Article 7(2) redundant and superfluous?
The present writer will explain in the following section why both questions should be
answered in the affirmative.
(ii) The UNIDROIT Principles as "general principles"
The UNIDROIT Principles, unlike the CISG, is not a document intended for adoption
as a treaty, or as a uniform law; its nature is that of a non-binding "Restatement" of the
international commercial contract law. It was argued in this thesis that being a Restatement,
the UNIDROIT Principles (and arguably the PECL, too) can aid in the interpretation of the
CISG.
Certain provisions in the Principles bear a striking similarity to their CISG counterparts
and can be regarded as "fleshing out bones" already present in the skeletal structure of the
uniform law. It is doubtful whether the same can happen where the Restatement provisions are
not substantially similar to a CISG provision being interpreted, or where they are clearly
inconsistent with a CISG provision. Where, as is often the case, the Principles dovetails with
or approximates the CISG, UNIDROIT comparatives can be helpful to CISG researchers and
interpreters. The general affinity of the CISG to its companion Restatements demands such a
comparative approach, especially where it can be shown that their respective provisions share
a common intent. In this case, the UNIDROIT Principles should be regarded as a genuine
expression of the "general principles" that Article 7(2) mentions as an interpretative aid. Thus,
the Principles could offer considerable assistance in the interpretation of the CISG by
clarifying the language of the CISG, by filling gaps in the CISG, and by working with the
CISG in an expanded role in order to achieve the uniformity of interpretation and application
that the drafters of the CISG intended.[970] The proper introduction of the Principles into the gap-filling mechanism of the CISG goes a long way toward eliminating the need to turn to the rules
of private international law, and thus, toward uniformity.
(iii) The legitimacy of their use in Article 7(2) CISG
On the second question, concerning the legitimacy of the proposed use of the
UNIDROIT Principles, which would in many instances render the textual reference in Article
7(2) to private international law superfluous, the following must be noted.
The present writer has argued, as did many delegates present at the 1980 Vienna
Diplomatic Conference, that recourse to rules of private international law should not have
been made a part of Article 7(2). Nonetheless, the text is there for all to peruse. The drafters
and the diplomatic delegates completed their respective tasks in 1980, with varying degrees of
success. Now the courts have a clearly defined, albeit difficult task. To apply the provisions of
the Convention according to the specific rules of interpretation contained in Article 7(1). The
present writer has argued that resorting to domestic law solutions for filling gaps praeter
legem, as per Article 7(2), hinders the uniform application of the Convention by producing
diverse results.
It was further argued in this thesis that an autonomous interpretative approach based
on the concept of internationality and the promotion of uniformity (as per Article 7(1)) and on
general principles of the international legal order to which the CISG belongs, can produce
results that comply with the spirit and the aims of the new uniform law, thus promoting the
Convention's desired goal of uniformity. In practice, it will be each judge's, or arbitrator's
task to determine the applicable general principles and to derive the solution for the specific
question to be settled from these principles, on a case by case basis. The latter task could be
facilitated by resorting to Restatements, such as the UNIDROIT Principles and the PECL. The
condition that needs to be satisfied is to show that the relevant provisions of the UNIDROIT
Principles (or the PECL) are the expression of a general principle underlying the CISG. This
point seems to have been missed by a section of scholarly opinion.[971]
The balance of academic opinion, however, seems to be that Article 7(2) legitimises resorting
to the UNIDROIT Principles as a means of interpreting and supplementing the CISG - so long
as there is a gap praeter legem in the CISG and the relevant provisions of the UNIDROIT
Principles are the expression of a general principle underlying the CISG and are not
inconsistent with the CISG provision in question.[972]
An argument against the utilisation of the UNIDROIT Principles is that they do not support
the goal of reducing unpredictability in trade,[973] and that they indeed have the potential to
increase the uncertainty surrounding a business transaction because several of their provisions
"appear to depart from normal trading practices."[974] It has also been argued that arbitrators
should not feel free to use the UNIDROIT Principles in conjunction with the CISG unless the
parties to the contract have explicitly agreed to them because the Principles are not law, and
they often diverge from the equivalent provisions of the CISG.[975]
The significant success encountered by both the CISG and the UNIDROIT Principles, as
evidenced by their warm reception by many different socio-political cultures and legal systems,
demonstrates that they each have their own raison d'être. In addition, the valuable assistance
that the UNIDROIT Principles can offer to uniformity, by clarifying the language of the CISG
and settling matters governed but not expressly settled by the CISG, highlights the fact that
the two instruments can work together harmoniously. With respect to international
commercial transactions different from sales contracts, there is virtually no risk of a clash
between the two instruments, given the restricted scope of the CISG. Even within the ambit of
international contracts of sale, there is, at least at this point, no real competition between the
UNIDROIT Principles and the CISG. In view of the important function that the UNIDROIT
Principles may fulfil in collaboration with the CISG, in the roles analysed in Chapter 4 of this
thesis, it is arguable that they not only do not threaten the CISG's role, or success, but, on the
contrary, they seem likely to enhance the CISG's value and prestige.
As far as the reference to the rules of private international law in Article 7(2) is concerned,
two things must be said. First, it is incorporated into the text of the CISG. Second, the
strength of this textual reference is clearly undermined by an examination of its legislative
history and an analysis of its effect on the overall scheme of the Convention. There is strong
academic support for the view that in interpreting the CISG, in the absence of general
principles of the Convention (i.e., as ultima ratio [976]) one not only is allowed to make recourse
to the rules of private international law, one is obliged to do so.[977] This conclusion is strictly
valid, and it stems from the text of Article 7(2). Fulfilling this obligation, however, not only
offers nothing to "the development of international trade on the basis of equality and mutual
benefit," but it fosters the creation of divergent interpretations of the CISG as well, thus
endangering the CISG's long-term success and survival. Courts, especially in countries
without an established tradition in extrapolating general principles from a codified instrument,
can fatally injure the CISG's credibility as uniform transnational law by abusing the "last
resort" option.
Any court applying the CISG should not miss the importance of the mandate in Article 7(1)
that, in interpreting the provisions of the Convention (including Article 7(2) itself), "regard is
to be had to its international character and to the need to promote uniformity in its application
and the observance of good faith in international trade." The present writer argued for an
expansive and sustained search of general principles - of the same legal order to which the
CISG belongs - that can aid in the Convention's interpetation. This argument was supported
by doctrine and jurisprudence and was further illustrated through the use of parts of the
UNIDROIT Principles. It is submitted that such an interpretative approach not only respects
the mandate of the new law (as expressed in article 7(1)), but it also helps in many instances to
render the reference to the rules of private international law superfluous; a positive step
towards the realisation of substantive legal uniformity. For these reasons, the second question
as to whether it is legitimate to use the UNIDROIT Principles in the proposed way, should
also be answered in the affirmative.
(f) Final remarks
The United Nations Convention on Contracts for the International Sale of Goods,
1980, creates a uniform law for the international sale of goods. The Convention represents an
attempt to create ab initio an international community of members that can communicate and
arrange their commercial affairs using the specific text as their common language. However,
textual uniformity is a necessary but insufficient step towards achieving substantive legal
uniformity, since the formulation and enactment of a uniform legal text carries no guarantee of
its subsequent uniform application in practice. This thesis considered different approaches to
the interpretation of the CISG and evaluated their appropriateness for uniform international
trade law, before advancing an interpretative approach based on the concept of internationality
and generally acknowledged principles of commercial law, such as the UNIDROIT Principles.
This thesis also examined certain practical, theoretical and methodological issues concerning
the proper construction and application of the CISG as the uniform international sales law.
Supported by analysis of the existing doctrine, as well as by case law, this thesis argued that
the necessary legal backdrop for the CISG's existence and application could be provided by
general principles of international commercial law, such as those exemplified by the
UNIDROIT Principles and the PECL. Such a development would, in many instances, aid in
rendering the textual reference of Article 7(2) to private international law unnecessary; a
positive step towards uniformity.
Article 7 provides that the CISG's provisions should be interpreted, and any gaps
praeter legem in the CISG be filled, in accordance with the general principles that bind the
individual member States into a community. As a result of either a political reality (see the
debates in the legislative history of Article 7), or a legal reality (i.e., the acknowledgement that
no provision of any law can purport to expressly settle all questions concerning matters
governed by it), or both, however, the rules of private international law have been placed in
the gap-filling mechanism of the Convention. It is made clear in the text of Article 7(2) that, in
the absence of any relevant general principles, a court applying the CISG is obliged to turn to
domestic law. Obviously, such development would hinder the search for the CISG's elusive
goal of uniformity.
The present writer argued that an expansive comparative search for general principles
upon which the CISG is based can yield results that go a long way towards reducing (if they
do not eliminate completely) the need to turn to the conflict of laws solution for gaps praeter
legem. The necessary legal backdrop for the CISG's existence and proper application should
be provided by general principles of the new legal order to which the CISG also belongs. The
UNIDROIT Principles and the CISG both belong to the "New International Economic Order"
that the United Nations has envisaged, and working in tandem, they best reflect the objectives
of that body to remove "legal barriers in international trade and promote the development of
international trade" in the spirit of equality and friendly co-operation among its member States.
This affinity between the two distinct instruments legitimises resorting to the UNIDROIT
Principles as a means of interpreting and supplementing the CISG - so long as there is a gap
praeter legem in the CISG and the relevant provisions of the UNIDROIT Principles are the
expression of a general principle underlying the CISG, and are not inconsistent with the CISG
provision in question.
On the other hand, the recourse to rules of private international law, in the context of
the CISG's gap-filling, represents regression into doctrinal fragmentation and practical
uncertainty. The relevant textual reference in Article 7(2) leaves the CISG prone to divergent
gap-filling (i.e., in conformity with the relevant domestic law applicable according to the rules
of private international law). In resolving gaps praeter legem, the proper interpretation of the
Convention requires preference to be given to a comprehensive search for a solution provided
by the general principles underlying the CISG, rather than the ready application of a domestic
law applicable by virtue of the rules of private international law. Only such an approach pays
proper regard to the international character of the CISG and can promote uniformity in the
Convention's application.
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FOOTNOTES
1. In 1997 the author was admitted to the degree of Master of Laws from the University of
Sydney for his research and thesis on the equitable remedy of constructive trusteeship. In October 2000
he was awarded a Ph.D. from the University of Nottingham for his thesis on the interpretative provisions
of the United Nations Convention on Contracts for the International Sale of Goods (1980). The author
also holds degrees in Arts and Law from the University of Sydney and has served as a research assistant
to the Hon. Mr. Justice P.E. Powell, in the N.S.W. Court of Appeal and as a part-time teacher in Trusts
at the University of Nottingham. Currently, the author is an Associate of the Pace Institute of
International Commercial Law. The author is the winner of the 2000 Essay Contest sponsored by the
Institute of International Commercial Law of the Pace University School of Law.
2. United Nations Convention on Contracts for the International Sale of Goods, April 11, 1980, S.
Treaty Doc. No. 98-9 (1984), 1489 U.N.T.S. 3, reprinted as United Nations: Conference on Contracts for
the International Sale of Goods, 19 I.L.M. 668 (1980) [hereinafter CISG or Vienna Sales Convention], also
available at http://www.uncitral.org.
3. In the period from 1945 to 1970, harmonisation of private law was primarily effective in the areas of
international transportation and dispute resolution (see e.g., the Hague Conventions on service of process and
evidence and the New York Convention on foreign arbitral awards).
4. The original eleven States were: Argentina, China, Egypt, France, Hungary, Italy, Lesotho, Syria,
United States, Yugoslavia and Zambia.
5. For the updated list of membership, see the Institute of International Commercial Law: Pace
University School of Law [hereinafter Pace Law Website], at http://www.cisg.law.pace.edu.cisg.
6. G.A. Res. 2205 (XXI), U.N. GAOR, 21st Sess., Annex II, at 41, 42, U.N. Doc. A/6394/Add.1/ Add.2
(1966).
7. For the official website, visit UNCITRAL, at http://www.uncitral.org.
8. The Secretariat of UNCITRAL is the International Trade Law Branch of the United Nations Office
of Legal Affairs. It is located in Vienna and can be contacted at: UNCITRAL Secretariat, P.O. Box 500,
Vienna International Centre, A-1400 Vienna, Austria; Telephone: (43-1) 26060-4060 or 4061; Telefax: (43-1)
26060-5813; Internet home page: http://www.un.or.at/uncitral; E-mail address: uncitral@unvienna.un.or.at.
9. The motto "ONE WORLD OF COMMERCE: towards ONE COMMERCIAL LAW" occupies a
prime position in UNCITRAL's official website, supra note 6.
10. As from 1 June 1998, the members of UNCITRAL, and the years when their memberships expire,
are: Algeria (2001), Argentina (2004 - alternating annually with Uruguay, starting in 1998), Australia (2001),
Austria (2004), Botswana (2001), Brazil (2001), Bulgaria (2001), Burkina Faso (2004), Cameroon (2001),
China (2001), Colombia (2004), Egypt (2001), Fiji (2004), Finland (2001), France (2001), Germany (2001),
Honduras (2004), Hungary (2004), India (2004), Iran (Islamic Republic of) (2004), Italy (2004), Japan (2001),
Kenya (2004), Lithuania (2004), Mexico (2001), Nigeria (2001), Paraguay (2004), Romania (2004), Russian
Federation (2001), Singapore (2001), Spain (2004), Sudan (2004), Thailand (2004), Uganda (2004), United
Kingdom of Great Britain and Northern Ireland (2001), United States of America (2004), and Uruguay (2004 -
alternating annually with Argentina, starting in 1999).
11. Documents submitted to the Commission and its working groups are published in the six official
languages of the United Nations (Arabic, Chinese, English, French, Russian and Spanish). They bear the
symbol A/CN.9/
The more recent documents, which have not yet been reproduced in a UNCITRAL
Yearbook, are available on request from the UNCITRAL Secretariat in Vienna. The Yearbook is published
with a delay of one or two years and is a compilation of all substantive documents related to the work of the
Commission and its working groups. It also reproduces the Annual Report of the Commission, which is
published as Supplement No. 17 of the Official Records of the General Assembly. The Yearbook is published
in English, French, Russian and Spanish and is available in the libraries that function as the United Nations
Depository Libraries. Such libraries exist in national capitals and in a number of other major or university
cities.
12. This Convention establishes uniform rules governing the period of time within which legal
proceedings arising from an international sale contract must be commenced. It has been amended by a Protocol
adopted in 1980 when the United Nations Sales Convention was adopted. Both the original Convention and the
Convention as amended entered into force on 1 August 1988.
13. This Convention, which is the subject matter of the present writer's thesis, establishes a
comprehensive code of legal rules governing the formation of contracts for the international sale of goods, the
obligations of the buyer and seller, remedies for breach of contract and other aspects of the contract. The
Convention entered into force on 1 January 1988.
14. The purpose of the Legal Guide, adopted in 1992, is to assist parties negotiating international
countertrade transactions. It identifies legal issues involved in such transactions and discusses possible
contractual solutions.
15. This Convention establishes a uniform legal regime governing the rights and obligations of shippers,
carriers and consignees under a contract of carriage of goods by sea. It was prepared at the request of
developing countries and its adoption by States has been endorsed by such intergovernmental organizations as
UNCTAD, Asian-African Legal Consultative Committee and the Organisation of American States. The
Convention entered into force on 1 November 1992.
16. This Convention sets forth uniform legal rules governing the liability of a terminal operator for loss
of and damage to goods involved in international transport while they are in a transport terminal, and for delay
by the terminal operator in delivering the goods. The draft Convention was adopted by a diplomatic conference
and opened for signature, ratification and accession on 19 April 1991. The Convention will enter into force
upon the deposit of 5 instruments of ratification, acceptance, approval or accession.
17. Adopted in 1976, the UNCITRAL Arbitration Rules provide a comprehensive set of procedural rules
upon which parties may agree for the conduct of arbitral proceedings arising out of their commercial
relationship. The Rules are widely used in ad hoc arbitrations, as well as in administered arbitrations.
18. When parties to a commercial dispute wish to settle their disputes amicably through conciliation,
they may agree upon this set of procedural rules to govern the conciliation proceedings.
19. The UNCITRAL Model Law is designed to assist States in reforming and modernising their laws on
arbitral procedure so as to take into account the particular features and needs of international commercial
arbitration. It was adopted by UNCITRAL in 1985 and has been enacted into law by a large number of
jurisdictions from both developed and developing countries.
20. The Notes are designed to assist arbitration practitioners by providing an annotated list of matters on
which the arbitral tribunal may wish to formulate decisions during the course of arbitral proceedings. The text,
which is in no way binding, may be used whether or not the arbitration is administered by an arbitral
institution.
21. Although the Convention was prepared by the United Nations prior to the existence of UNCITRAL,
promotion of the Convention is an integral part of the Commission's programme of work. As its name
indicates, it provides for the recognition and enforcement of arbitral awards rendered in foreign countries.
22. The UNCITRAL Model Law, adopted by the Commission in 1994, is designed to assist States in
reforming and modernising their laws on procurement procedures. The Model Law contains procedures aimed
at achieving the objectives of competition, transparency, fairness and objectivity in the procurement process,
and thereby increasing economy and efficiency in procurement. In order to assist executive branches of
Governments, parliaments and legislatures using the Model Law, the Commission has produced a Guide to
Enactment of the UNCITRAL Model Law on Procurement of Goods, Construction and Services.
23. This Model Law is available for use by States who wish to enact procurement legislation with a
scope limited to procurement of goods and construction.
24. The Legal Guide was published in February 1988 and is available in all six United Nations official
languages. It discusses the many legal issues that arise in connection with the construction of industrial works,
covering the pre-contractual, construction and post-construction phases, and suggests possible ways in which
the parties may deal with these issues in their contracts. It was prepared with the special problems of buyers
from developing countries in mind.
25. This Convention provides a comprehensive code of legal rules governing new international
instruments for optional use by parties to international commercial transactions. It is designed to overcome the
major disparities and uncertainties that currently exist in relation to instruments used for international
payments. The Convention applies if the parties use a particular form of a negotiable instrument indicating
that the instrument is subject to the UNCITRAL Convention. The Convention was adopted and opened for
signature by the General Assembly at its 43rd session in December 1988. A minimum of 10 ratifications or
accessions are necessary for the Convention to come into force.
26. The Legal Guide, which was published in 1987, identifies the legal issues arising from the transfer
of funds by electronic means and discusses possible approaches for dealing with those issues.
27. The Model Law, adopted in 1992, deals with operations beginning with an instruction by an
originator to a bank to place at the disposal of a beneficiary a specified amount of money. It covers such
matters as the obligations of a sender of the instruction and of a receiving bank, time of payment of a receiving
bank and liability of a bank to its sender or to the originator when the transfer is delayed or other error occurs.
28. The Convention was adopted by the General Assembly on 11 December 1995. It is designed to facilitate the use of independent guarantees and stand-by letters of credit, in particular where only one or the
other of those instruments may be traditionally in use. The Convention also solidifies recognition of common
basic principles and characteristics shared by the independent guarantee and the stand-by letter of credit. The
Convention has been adhered to by the requisite 5 States and will therefore enter into force on 1 January 2000.
29. The Model Law, adopted in 1996, is intended to facilitate the use of modern means of
communications and storage of information, such as electronic data interchange (EDI), electronic mail and
telecopy, with or without the use of such support as the Internet. It is based on the establishment of a functional
equivalent for paper-based concepts such as "writing", "signature" and "original". By providing standards by
which the legal value of electronic messages can be assessed, the Model Law should play a significant role in
enhancing the use of paperless communication. In addition to general norms, the Model Law also contains
rules for electronic commerce in specific areas, such as carriage of goods. With a view to assisting executive
branches of Governments, legislative bodies and courts in enacting and interpreting the Model Law, the
Commission has produced a Guide to Enactment of the UNCITRAL Model Law on Electronic Commerce.
2. Unification of International Sales Law
3. The Old Lex Mercatoria
4. The Nationalisation of Commercial Law
5. The New Lex Mercatoria
6. The U.N. Convention on Contracts for the International Sale of Goods (1980) - CISG
7. Final Remarks
"the emergence of a new lex
mercatoria ... a law of universal character that, though applied by authority of the national
sovereign, attempts to shed the national peculiarities of municipal laws."[74]
"international trade law specialists of all countries have found without difficulty that they
speak a 'common language'."[76]
"
to provide a short form of a contractual term which has a known meaning. They also
bring consistency and certainty to international transactions. It is important to note,
however, that as influential as the Incoterms are, there is still quite a diversity of
different national
and customary usages of shipping terms, and the Incoterms are
not considered part of international customary law
For this reason, one cannot rely
blindly on the Incoterm defined usages with impunity. It is therefore best, as a drafting
matter, to put in the contract that the shipping terms are to be given meaning as
defined by the [most current] Incoterms."[170]
2. The Vienna Convention's "Rhetorical Community"
3. The Nature of the Community Established by CISG
4. The concept of good faith
5. Good Faith and CISG
6. UNIDROIT Principles, Good Faith and CISG
7. ULIS Principles and CISG
8. Gaps in the Law: Issues of Validity
9. A Common Language
10. Deliberation and Decision-making in CISG
11. Conclusions
"emphasises the potentially creative role for the members of the community it seeks to
create. By highlighting the fluid character of the document's author and audience, the
text offers to its readers the possibility of joining the community on an equal footing
with other member States."[201]
(2) enterprises that enter into a contract with another enterprise governed by CISG;
(3) enterprises involved in a dispute.
(b) the affirmation of the principle of freedom of contract (Article 6 CISG).
(ii) determining which State's domestic law is applicable if agreement is not
reached, and
(iii) proving what the foreign domestic law is.
(b) what the terms of the contract are.
"a paradigm situation of one-to-one negotiation of all the terms of the agreement by
parties of equal bargaining strength concerned to maximise their individual positions."[239]
"every contract or duty within this Act imposes an obligation of good faith in its
performance or enforcement."
"Every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement."
" 'Good Faith' means honesty
in fact in the conduct or transaction concerned."
" 'Good Faith' ... means honesty in fact and the observance of reasonable commercial
standards of fair dealing in the trade."
"to do nothing destructive of
the other party's right to enjoy the fruits of the contract and to do everything that the contract
presupposes they will do to accomplish its purpose."[278]
"A duty of good faith does not mean that a party vested with a clear right is
obligated to exercise that right to its own detriment for the purpose of benefiting another party
to the contract."[279]
"interpretation of the two cannot be separated since the
Convention is necessarily interpreted by the parties also; after all, the Convention constitutes
the law of the parties insofar as they do not make use of Article 6 on freedom of contract."[307]
An Italian seller had sold textiles for the manufacture of trousers to a German buyer.
The seller's Conditions of Sale stated that all remedies were excluded after processing
of the delivered goods. After delivery, the buyer examined the goods without
discovering any defects, but when the finished trousers were ironed it turned out that
the material was unfit. As a bar to the buyer's damage claim, the seller asserted his
exemption clause. The Court rejected this defence, referring to Articles 79 and 80
ULIS (which basically correspond to Articles 82 and 83 of CISG) and ruled that the
clause violated basic principles of ULIS and was therefore ineffective.
"
except as otherwise expressly provided in this Convention, [CISG] is not concerned with: (a) the validity
of the contract or of any of its provisions or of any usage."
"
the present law shall not,
except as otherwise expressly provided therein, be concerned with ... the validity of the
contract or of any of its provisions or of any usage."
" the substance rather than the label or characterisation of the competing rule of
domestic law determines whether it is displaced by the Convention; the crucial
question is whether the domestic rule is invoked by the same operative facts that
invoke a rule of the Convention."[355]
"
encourage the
reader to understand the words in a technical and limited way, and to perceive the text as self-contained. The reader is led to interpret such a text as limited to its specifically defined terms
and to disregard its broader implications or implicit significance."[374]
"informal, contextual definitions
encourage a
broad and conversational interpretation of the words of the text, leading to greater depth and
complexity in the interpretation of individual provisions."[375]
"the symmetry in the rules on the remedies for the seller's and the buyer's breach of contract is probably prompted by a desire of being impartial to the seller's and the buyer's sides."[376]
"
statements made by and other conduct of a party are to be interpreted according to the
understanding that a reasonable person of the same kind as the other party would have had in
the circumstances."[377]
2. Legislative History of Article 7(1) CISG
3. The International Character of the Convention
4. Uniformity of Application
5. The Observance of Good Faith in International Trade
6. Remedies Against Divergent Interpretations
7. Conclusions
CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS
"In the interpretation
and application of the provisions of this Convention, regard is to be had to its international
character and to the need to promote uniformity."[416]
"In the course of the formation of the contract the parties must observe the
principles of fair dealing and act in good faith."[417]
"In the interpretation and application of this Convention regard is to be had to its
international character and to the need to promote uniformity and the observance of good faith
in international trade."
"In the formation, interpretation and performance of a contract of sale
the parties shall observe the principles of good faith and international cooperation."[422]
"The ideal is to use plain language that refers to things and
events for which there are words of common content in the various languages."[437]
"a particular line of conduct, which may reasonably be expected from merchants
operating in the same country or region, could hardly be imposed on a party belonging to a
country with a different economic and social structure."[482]
"
the development of international trade on the basis of equality
and mutual benefit is an important element in promoting friendly relations among States
"
"
the adoption of uniform rules which ... take into account the different social, economic
and legal systems would contribute to the removal of legal barriers in international trade and
promote the development of international trade
"
"
[I]n fields where uniform laws exist,
and in dealings between States which have adopted these uniform laws, there is no longer a
place for the application of the conflict of laws approach ..."[530]
"
whether
a court or a particularly qualified international organisation, with the limited task of rendering
advisory opinions concerning the proper interpretation to be given to the Convention."[565]
One
innovation contained in this proposal, when compared to the previous one, is that while it is up
to the judge, the arbitrator, or the parties themselves to instigate the proceedings in the
international tribunal, this organ's consultative role would not be limited to disputes that have
already arisen.
2. Legislative History of Article 7(2) CISG
3. Article 7(2) CISG and GAP-Filling Methodology
4. Gap-filling by Analogy
5. "General Principles" and CISG
6. The UNIDROIT Principles and CISG
7. The Rules of Private International Law
8. A Gap-filling Exercise
9. Conclusions
CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 1980"Rules of private international law shall be excluded for the purpose of the
application of the present Law, subject to any provision to the contrary in the said Law."[577]
The
second provision made a special reference to the problem of gap-filling: "Questions concerning matters governed by this Law which are not expressly settled in it are to be settled in
conformity with the general principles on which the present Law is based."[578]
"
if courts were permitted to turn to their domestic law, this
would preclude the application of the uniform law in many cases that the drafters and the
parties themselves had wanted to be covered by the uniform law."[580]
"a great amount of uncertainty because the relevant rules of
private international law for the determination of which national law should be applied in each
case are neither clear nor uniform."[581]
"In interpreting and applying the provisions of this Law, regard shall be had to its
international character and to the need to promote uniformity in its interpretation and
application."
(ii) the need for its uniform interpretation and application.
"In the interpretation and application of this Convention regard is to be had to its
international character and to the need to promote uniformity and the observance of good faith
in international trade."[588]
(ii) questions arising in connection with an international contract of sale and falling within
the scope of the CISG, but not specifically regulated by any of its provisions, are to be
filled, where possible, by applying the "general principles on which it is based;"[596]
(iii) only in the absence of such "general principles" is recourse to be had to solutions
provided by the domestic law applicable by virtue of the rules of private international
law.[597]
"gap-filling can be done, as we believe, by applying such interpretation methods as
extensive interpretation and analogy. The admissibility of analogy is directly addressed
in the wording contained in the CISG because it is aimed at obtaining, from several
comparable rules, one rule for a not expressly covered fact and/or a general rule under
which the fact can be subsumed."[629]
"Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based ..."
"Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based ..." [732]
"... in any form used in the ordinary course of business at the place for payment," but the obligee who accepts a cheque or other similar instrument ... "is presumed to do so only on condition that it will be honoured."
"... the average bank short-term lending rate to prime borrowers prevailing for the currency of payment at the place for payment or, where no such rate exists at that place, the same rate in the State of the currency of payment. In the absence of such a
rate at either place the appropriate rate fixed by the law of the State of the currency of
payment."[739]
"Damages are to be assessed either in the currency in which the monetary obligation was expressed or in the currency in which the
harm was suffered, whichever is more appropriate."
"
if the availability of the remedy conflicts with any of the principles which underlie the
provisions of the Convention, it is unlikely that a gap exists. Conversely, if the absence
of a remedy conflicts with any of the Convention's general principles, it is likely that a
gap exists."[798]
"
is not simply
under a duty not to withdraw the offer but actually has no power to do so ... an attempted
withdrawal simply has no legal effect at all."[803]
2. Critical Analysis of the U.S. Case Law on CISG - An Interpretation
of CISG Based on Domestic Laws and Practices
3. An Approach to CISG's Interpetation based on Internationality and General Principles of Law
THE LAW ON THE INTERNATIONAL SALE OF GOODS"
admits the possibility that there actually are [no] general principles underlying the Convention, or at least that the principles are not
comprehensive."[905]
and Context (R.Brownsword & G.Howells, eds.) (Dartmouth, 1999) 139.
and Context (R. Brownsword and G. Howells eds.) (Dartmouth 1999) 139.
Ambromovage v. United Mine Workers, 726 F.2d 972 (3d Cir. 1984).
Arkwright v. Newbold (1881) 17 Ch.D. 301.
Baltic Insurance Corpn v. Jordan Grand Prix Ltd (House of Lords 16 December 1998, available on
the web under House of Lords).
Beijing Metals & Minerals Import/Export Corp. v. American Business Center. Inc. (15 June 1993,
U.S. Cir. Ct.) CLOUT no. 24.
Best v. United States National Bank, 739 P.2d 554 (Or. 1987).
Blackpool and Fylde Aero Club Ltd. v. Blackpool Borough Council [1990] 1 W.L.R. 1195.
Board of County Comm'rs of Jackson v. United States, 308 U.S. 343 (1939).
British Westinghouse Electric and Manufacturing Co. Ltd v. Underground Electric Railways Co. of London Ltd [1912] AC 673.
Buchanan v. Babco Forwarding & Shipping Ltd. [1976] 2 W.L.R. 107; [1977] 1 All ER 518.
Calzaturificio Claudia S.n.c. v. Olivieri Footwear Ltd. (6 April 1998, U.S. Dist. Ct.).
Chanter v. Hopkins (1838) 4 M & W 399; 150 ER 1484.
Conoco v. Inman Oil Co., 774 F.2d 895 (8th Cir. 1985).
Corocraft Ltd. v. Pan American World Airways Inc. [1969] 1 All ER 82.
E.A.Coronis Associates v. M. Gordon Construction Co. 90 N.J. Super. 69, 216 A. 2nd 246 (1966).
Crabb v. Arun Dist. Council [1976] Ch. 179.
Day v. Trans World Airlines Inc., 528 Federal Reporter, Second Series (U.S.) 31 (1975).
Delchi Carrier, SpA v. Rotorex Corp., 71 F.3d 1024 (2d Cir. 1995).
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<http://cisgw3.law.pace.edu/cases/001117a2.html>.
Eastern Air Lines, Inc. v. Gulf Oil Corp., 415 F. Supp. 429 (S.D. Fla. 1975).
Faccenda Chicken Ltd. v. Fowler [1987] Ch 177.
Filanto, S.p.A. v. Chilewich Int'l Corp., 789 F. Supp. 1229 (S.D.N.Y. 1992); appeal dismissed, 984
F.2d, 58 (2d Cir. 1993).
Foley v. Interactive Data Corp., 765 P.2d 373 (Cal. 1988).
Fothergill v. Monarch Airlines [1980] 2 All E.R. 696; [1980] 3 W.L.R. 209.
Furness Wilrhy (Australia) Pty Ltd v. Metal Distributors (UK) Ltd (The Amazonia) [1990] 1 Lloyd's
Rep. 236.
Hadley v. Baxendale1(1854) 56 Eng. Rep. 145.
Harry Harris v. Quality Constr. Co. 598 S.W. 2nd 872 (Ky. App. 1979).
In re Vic Bernacchi & Sons, Inc., 170 B.R. 647 (Bkrtcy. N.D. Ind. 1994).
Interfoto Picture Library Ltd. v. Stiletto Visual Programmes Ltd. [1989] QB 433.
C. Itoh & Co Ltd v. Cia de Navegacao Lloyd Brasilieiro [1999] 1 Lloyd's Rep 115.
Khoury v. Government Insurance Office of NSW (1984) 165 CLR 622.
Lisi v. Alitalia S.p.a., 370 Federal Reporter, Second Series (U.S.) 508 (1966).
MCC-Marble v. Ceramica Nuova, (29 June 1998, U.S. Cir. Ct.).
Medical Marketing International, Inc. v. Internazionale Medico Scientifica, S.r.l. (17 May 1999,
U.S. Dist. Ct.).
Middle East Banking v. State Street Bank Int'l, 821 F.2d 897 (2d Cir. 1987).
Mitsui & Co. Ltd. et Ataka & Co. Ltd. v. American Export Lines Inc., 628 Federal Reporter, Second
Series, 802 (1981).
Oil Spill, 954 F.2d, at 1333.
Orbisphere Corp. v. United States, 13 C.I.T. 866, 726 F. Supp. 1344.
Pelly v. Royal Exchange Assurance Co. (1757) Burr.341.
Pepper v. Hart [1993] AC 593.
Renard Constructions v. Minister for Public Works, 26 N.S.W.L.R. 234 (1992).
Richard Short Oil v. Texaco, 799 F. 2d 415 (8th Cir. 1986).
Rio Algom Corp. v. Jimco Ltd., 618 P.2d 497 (Utah 1980).
Rothmans of Pall Mall v. Saudi Arabian Airlines Co [1981] 1 Q.B. 368.
Scruttons Ltd. v. Midland Silicones Ltd. [1962] A.C. 446.
Seager v. Copydex Ltd. (No. 2) [1969] 1 W.L.R. 809.
Silovi Pty. Ltd. v. Barbaro (1988) 13 NSWLR 466.
Smith v. Hughes (1871) LR 6 QB 597.
Stag Line v. Foscolo Mango & Co. [1932] A.C. 328.
Taylor v. Johnson (1983) 151 CLR 422.
The Hollandia [1982] 3 W.L.R. 1111; [1983] A.C. 465.
Thermo Engineers Ltd. and Anhydro A/S v. Ferrymaster Ltd. [1981] 1 All ER 1142.
Tymshare v. Covell, 727 F.2d 1145 (D.C. Cir. 1984).
Waltons Stores (Interstate) Ltd. v. Maher (1988) 164 C.L.R. 387.
n. 155/1994 of 16 March 1995 (CLOUT Case 140),
n. 200/1994 of 25 April 1995 (CLOUT Case 141), and
n. 123/1992 of 17 October 1995 (CLOUT Case 142).