Reproduced with permission from 18 Yale Journal of International Law (1993) 1-93

I. Introduction

Since January 1, 1988, any contract for the sale of goods between a U.S. trader and a buyer or seller from one of a growing list of foreign countries may be subject to an international legal regime founded on the U.N. Convention on Contracts for the International Sale of Goods [CISG or Convention].[1] The CISG automatically governs all contracts falling within its scope unless the parties have agreed that another set of rules, such as the law of a domestic [2] jurisdiction, shall govern their relationship instead of the CISG.[3] Therefore, the provisions of the Convention generally displace article 2 of the Uniform Commercial Code in contracts for the international sale of goods. However, domestic rules remain applicable to some issues arising in such contracts. The rules of contractual validity, for example, are excluded from the CISG's scope, and thus subject to the laws of the applicable domestic jurisdiction.

Enormous tension exists between the international legal order, on the one hand, and the various domestic legal systems, on the other. Generations of international commercial traders have exercised their contractual freedom [4] in hopes of creating an autonomous international commercial law (lex mercatoria) free from those "awesome relics from the dead pasts" [5] that are embedded in domestic legal systems.[6] Although the CISG arose from that tradition, it is not entirely autonomous.[7] Indeed, the Convention must occasionally yield to "important domestic policies that outweigh common international interests." [8] This article explores the tension between domestic public policy and the needs of international commerce in the context of the international sale of goods. The fundamental rules of contractual validity -- including capacity, mistake, open-price terms, and substantive or procedural unfairness -- provide an ideal vehicle for examining the interplay between domestic rules rooted in the traditions of each legal system or in the desire to protect some class of persons, on the one hand, and the need for streamlined, standardized rules to govern international traders, on the other.

The U.S. government recognized early on that the needs of international commerce were at odds with the "traditions and concepts of domestic legal systems." [9] The grandfather of the CISG, Ernst Rabel, had gone even further by asserting that the utility of an international uniform sales law depends on the extent to which it could remove important contractual issues from the domestic to the international realm. In particular, Rabel believed that an international sales law should "[embrace] the maximum possible number of matters which fall outside the autonomous intentions of parties, including basic issues of contractual validity.[10] However, the potential for conflict between the domestic and international legal orders is especially great where the domestic rules in question concern issues, such as validity, so vital to the domestic legal order that they are excepted from the realm of contractual freedom.

The conflict between the international and domestic legal orders is played out each time a judge or arbitrator has to decide whether an issue falls within the scope of the Convention. This article analyzes one parameter of the CISG's substantive scope, namely "validity." Article 4(a) of the Convention provides that

"[t]his Convention governs only the formation of the contract of sale and the rights and obligations of the seller and buyer arising from such a contract. In particular,except as otherwise expressly provided in this Convention, it is not concerned withthe validity of the contract or of any of its provisions or of any usage."[11]

Any issue of validity thus falls outside the scope of the Convention and is governed by the rules of the domestic jurisdiction whose law is otherwise applicable.[12] The exclusion of validity issues from the scope of the Convention raises difficult questions, such as how a tribunal is to ascertain which issues are validity issues and to what extent applying non-uniform domestic rules of validity to contracts for the international sale of goods seriously handicaps the CISG's potential for achieving its goals.

The success of the uniform law for international sales will depend largely on how well it suits the needs of modern international commerce. These needs were of central concern to the drafters of the CISG and its predecessors.[13] The drafters undeniably sought to replace some of the obsolete domestic rules with a "modern law . . . appropriate for transactions of an international character." [14] They also wished to promote fairness in international commerce, because they saw that the law chosen by parties would,

"for one of the parties at least, . . . be a foreign law. Even though all municipal laws may on the whole be satisfactory, they also involve a variety of difficulties for foreigners. In the first place, many are difficult to ascertain. . . . Moreover, even if these laws are on the whole satisfactory, they always involve peculiarities to be explained by history, but which have little rational justification. The application of these peculiar rules to a foreign party often results in snares and traps."[15]

In their view, the unification of the law of sale was especially important for economically weaker traders who could not manage the risks and expenses of doing business under a foreign law as well as larger companies who had access to legal advice.[16] Thus, the uniform sales law was meant to serve as a "guide to the drafting of standard contracts, general conditions and trade forms, supplying a recognised legal basis for them and facilitating their interpretation." [17]

The primary motive for the drafters' toil, however, was their belief that the "diversity of municipal laws" applicable to contracts for the international sale of goods posed a "serious obstacle to the free exchange of goods." [18]

Unless parties agree which law is to govern their contract in case of a dispute, they cannot be sure which law a tribunal will actually apply.[19] The drafters believed that the unpredictability spawned by the conflict of laws was the key problem. An important function of the CISG is thus to eliminate, or at least to reduce, the need to resort to conflict of laws rules.[20] In sum, the goals of the Convention are to provide a "better law" for international commercial transactions, and thereby achieve greater fairness in international trade, and to increase the predictability of international commerce and thereby facilitate the process of negotiation and alleviate the complexities of transnational dispute resolution.[21]

The key to the Convention's success in achieving its preeminent goal -- predictability -- is the emergence of a "jurisprudence of international trade." [22] Achieving this end requires not only world-wide adoption of the Convention, but also the development of a uniform body of case law interpreting its provisions.[23] The main tool provided in the CISG for achieving a uniform jurisprudence is article 7(1), discussed in part III.C, which instructs adjudicators to uphold the "international character" of the uniform law and to respect "the need to promote uniformity in its application." [24] Divergent interpretations of the Convention would lead back to the fiery uncertainties the Convention's drafters intended to eliminate [25] and would thereby increase the costs of international commerce.[26] The rule of interpretation found in CISG, article 7(1) requires at the very least that tribunals in one Contracting State consider the opinions of tribunals in other Contracting States. As a result, international norms will evolve as tribunals applying the CISG follow each other's precedents. However, the Convention does not provide a framework for the development of international norms to govern issues, such as validity, that fall outside the Convention's scope. The extent to which the exclusion of validity issues impairs the CISG's ability to fulfill its promise ultimately depends on the commercial significance of the issues thereby excluded from the international legal order.

The exclusion of validity issues from the Convention's scope significantly limits the development of an international body of case law to guide adjudicators, traders, and their counsel. Article 4(a) poses a particular danger to the development of a coherent jurisprudence of international trade,[27] because it gives adjudicators wide discretion to determine when to apply domestic law rather than the CISG to contracts for the international sale of goods.[28] Therefore, how adjudicators distinguish uniform, autonomous Convention issues from issues of validity is critical to the success of the CISG.

The exclusion of validity issues from the scope of the CISG embodies the tension between the domestic and the international legal orders. Yet this fundamental tension is often left to slumber through scholarly discussions of the proper interpretation of the validity exclusion, like a dog that, it is feared, would disturb the peace if roused. This article undertakes to analyze various methods of interpreting CISG, article 4(a) in the full glare of the underlying policy issues, and proposes a balanced approach that has the potential to relieve the tension in some important cases.

As part III will discuss, adjudicators can approach the task of interpreting article 4(a) in a variety of ways. Each of these approaches requires the adjudicator to determine which law to apply to an issue that has arisen in a contractual dispute. Viewed in its simplest light, then, the article 4(a) inquiry calls for a conflict of laws analysis.

One extreme approach to this task is for the adjudicator to decide that any applicable domestic law considered "mandatory" by a Contracting State raises an issue of validity. This approach to validity would leave the article 4(a) exception wide open, thereby excluding many issues from the Convention and limiting the area in which international norms can evolve. By equating all mandatory law with issues of validity, this broad approach to article 4(a) unduly limits the potential development of a uniform body of law that can adapt to changing custom and practice. This broad reading responds to the protective interests of the Contracting States but neglects their common goal of achieving workable, uniform substantive law. Moreover, the CISG's drafting history indicates that the drafters did not intend to equate validity with mandatory law and thereby provide an open-ended public policy exception to the uniform law. Though the two categories overlap, not every issue of mandatory law raises an issue of validity. Further, even though rules of contractual validity may be mandatory in connection with domestic contracts, different considerations obtain when the transaction is international.

At the other extreme, adjudicators might adopt an approach that would narrowly circumscribe the validity exception. Such a reading of article 4(a) would serve to "retain for international discourse as many significant issues as possible" [29] and thus foster the development of an "autonomous law of international trade." [30] One such narrow approach is for the adjudicator to adopt a uniform definition of validity, perhaps by designating an issue as one of validity only if a wide majority of Contracting States agreed. This approach is referred to as autonomous interpretation of article 4(a). A second such narrow approach is for adjudicators to rely on the clause in article 4(a) stating that validity of the contract is excluded from the scope of the CISG "except as otherwise expressly provided in this Convention." Read loosely, that proviso could displace a wide range of domestic validity rules by international norms based on the uniform law. This approach is referred to as the displacement reading of article 4(a). However, both of these approaches are flawed. If the broad reading of the validity exception neglects the uniformity goal, the narrow autonomous and displacement readings neglect the parochial interests that also concerned the drafters.

This article argues that adjudicators should adopt a course that treads a path between the overly-broad and overly-narrow approaches to validity. As part III.B will show, many of the CISG drafters intended to preserve the role for domestic laws designed to address protective interests in their respective jurisdictions. Adjudicators must take those parochial concerns into account in interpreting article 4(a). As a practical matter, this means that an adjudicator should look to the law of the forum in order to characterize an issue as one of validity or not. At the same time, however, the adjudicator must take into account the internationalist aspirations embodied in the Convention's interpretation clause, article 7(1), discussed in part III.C.

Adjudicators should approach the validity exclusion with a view to achieving a balance between the protectionist and internationalist concerns that article 4(a) regulates. On a case-by-case basis, adjudicators ought to consider whether an issue that has traditionally been considered one of validity and thus preserved to the parochial realm of domestic law should instead now be controlled by the goal of uniformity. This article refers to this type of analysis as the balanced approach to article 4(a). In striving to honor the internationalist goals of the Convention, tribunals must not disregard the limits of the unification process. By the same token, however, they should recognize that the purpose of reserving particular validity issues to the realm of domestic law may be less than compelling, or even inappropriate, in certain cases.

Great care is warranted in balancing the claims asserted by domestic jurisdictions against the claims of the international trading community. That balance may shift over time, as parties gain familiarity with the CISG and with the jurisprudence that develops under it. As that happens, even the notion of public policy may become less parochial and more internationalist. To facilitate such a development, adjudicators should take a flexible approach to the validity exception and pay heed to the spirit as well as the letter of article 4(a).

Part IV examines, in light of the proposed balanced approach to the validity exception, a number of issues that may trigger analysis under article 4(a). The balanced approach is applied by way of illustration to the issue of exculpatory clauses (disclaimers), i.e., contractual clauses that modify, limit, or exclude the warranty otherwise provided by law, or that limit or exclude available remedies.[31] Such clauses frequently appear in contracts for the international sale of goods, and tend to be of commercial significance.[32]

The success of the CISG should be measured "at least in part according to how well it solves questions of liability . . . [including] its position on the validity of contractual risk limitation by way of exculpatory clauses." [33] In this context, more than in any other, the Convention falls short. In this area of contract practice -- where unpredictability poses a real hindrance to traders and their counsel -- a modern, fair set of international norms would be welcome. Because the CISG excludes exculpatory clauses from its scope, it regrettably does not call for the development of such a set of norms. However, if, as this article proposes, adjudicators approach the validity exception to the CISG with an eye to balancing the diverse goals of its drafters, and if scholars continue the search for unifying principles, then together they may be able to generate such norms.

II. Sphere of Application of the Convention

The call for a balanced approach to CISG, article 4(a) must be preceded by a preliminary examination of the scope of the Convention [34] and its conflict of laws implications.[35] The discussion of these issues provides the necessary background against which the contours of the validity loophole can be projected.

The preliminary task facing a judge or arbitrator called upon to resolve a sales contract dispute is to determine which legal rules apply to the various questions presented.[36] This task requires the adjudicator to undertake a complex conflict of laws analysis. As a first step, the tribunal must determine whether the contract triggers the application of the Convention. Article 1 is a conflict of laws rule that separates "international" sales of goods [37] from domestic ones.[38] If the particular transaction is for the international sale of goods, then the substantive provisions of the uniform law automatically apply in lieu of the parallel provisions of domestic law.[39] This first step actually substitutes the CISG's conflict of laws rule for the domestic conflict of laws rule that the tribunal would otherwise have applied to determine the applicable substantive law.[40]

Having established that the contract is for an international sale of goods, the tribunal must next ascertain whether the substantive provisions of the uniform law actually govern the contract or issue in dispute. The Convention provides two kinds of exceptions. First, the CISG explicitly permits the parties to "exclude the application of this Convention or . . . derogate from or vary the effect of any of its provisions," [41] subject to certain limitations.[42] Parties often exercise this freedom to specify the body of law to govern their contract for the international sale of goods.

However, even though the parties to a contract for the international sale of goods are permitted to displace the CISG entirely -- and may be expected to do so frequently in practice -- this article assumes that the CISG will nevertheless govern many international sales transactions either by design or default.[43] In many cases, parties may incorrectly believe that they have excluded the CISG from their contract. For example, a contract containing a clause stating that the "laws of Kansas" or the "laws of Germany" shall govern would not displace the CISG, since the Convention is part of the laws of Kansas and Germany.

Particularly in cases of contracts governed by the rules of the battle of the forms,[44] there is a chance that the parties' attempt to exclude the application of the CISG will be ineffective. Forms used by buyers and sellers in international commerce are likely to contain provisions stating that the substantive law of a domestic jurisdiction -- usually their own -- shall govern any sales contract that may be concluded. The Convention's rule governing the battle of the forms, article 19 marks a partial return to the mirror-image rule, under which a purported acceptance that does not match the offer constitutes a rejection and counteroffer. Under this rule, the different choice of law clauses in the buyer's and seller's forms alone should be sufficient to prevent a contract from being formed on the basis of the parties' exchange of forms, since it is probable that differences in applicable law "materially alter the terms of the offer." [45] If the parties nevertheless perform before a dispute arises, and a contract comes into being under the Convention's other formation rules,[46] the question then arises whether the effect of article 19 is to bind either the offeror to the terms contained in the offeree's form, or vice versa ("last shot" or "first shot" doctrines). Scholarly opinion on this question is divided.[47] As a policy matter, the CISG should be applied in battle of the forms cases, absent clear agreement by the parties to apply another law or to avoid the rules of the CISG, because the Convention is designed to avoid uncertainties about the applicable law and to provide an equitable set of rules for international traders.

The second kind of exception from the application of the Convention's uniform rules is the outright exclusion of certain disputes from its scope. The CISG excludes numerous types of contracts from its scope,[48] in particular contracts historically covered by specialized local rules that did not "lend themselves to unification." [49] The drafters of the CISG avoided a complex area of potential disagreement by excluding from the Convention's scope the question of "the liability of the seller for death or personal injury caused by the goods." [50] They also attempted to preserve the effect of domestic consumer protection legislation by excluding certain transactions with consumers from the Convention's scope,[51] although it remains possible that a case falling within the scope of the CISG will also be subject to consumer protection legislation.[52] Finally, the drafters excluded questions of property [53] and validity [54] from the Convention's scope.

The present article focuses on this last exclusion from the Convention's scope. Although validity issues implicate an important category of cases, the Convention does not provide guidance on how to determine whether or not a question is one of validity. Article 4(a) thus creates a methodological quagmire that tribunals must carefully negotiate.

The central goal of the CISG is to avoid the confusion and uncertainty engendered by the conflict of laws. Yet conflict of laws rules still play an important role in disputes to which the Convention applies.

In each case in which the CISG excludes a contract or issue from its scope, the adjudicator must engage in a traditional conflict of laws analysis to determine which substantive law then governs.[55] A great variety of conflict of laws rules are available at both the international [56] and the domestic [57] levels. While the law of the seller's place of business frequently governs contracts of sale absent agreement of the parties,[58] a tribunal could conceivably apply domestic (buyer's) law rather than foreign (seller's) law when a local buyer brings suit in a local tribunal against a foreign seller.[59] Thus, a seller in the international market may be surprised by the law ultimately applied to govern the seller's rights and liabilities.

Even if the tribunal concludes that the contract itself and the various issues it raises all fall within the substantive scope of the CISG, the case is not entirely immune from conflict of laws problems. On the contrary, the conflict of laws continues to play a role in cases that fall squarely within the scope of the CISG.[60] Article 7(2) provides that

"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."[61]

This guideline for interpreting the Convention demonstrates the tension between those drafters who wished to create an entirely autonomous legal order for international sales,[62] and those who believed that domestic legal orders should continue to play a role in such transactions.[63] The solution embodied in article 7(2) represents an important -- if awkward -- compromise between those different camps.[64] Article 7(2) presents tribunals with two exceptionally difficult tasks: first, they must determine what matters are "governed by" the CISG but "not expressly settled in it," and second, where such a matter exists, they must fill the "gap" [65] in the Convention by resorting to the "general principles upon which it is based."[66] Only if the judge or arbitrator fails to discover such general principles is it appropriate to engage in a conflict of laws analysis to determine the proper law to resolve the matter.

Article 7(2) thus permits the development of an international jurisprudence of trade with respect to matters governed by the Convention, but only within the limits set by the general principles upon which the CISG is based. In other words, the international legal regime founded upon the CISG is autonomous only within the unclear confines of its scope and its general principles. This limited autonomy denies the Convention the full flexibility it needs to adapt to the changing needs of international commerce, and thus diminishes its chances for success.[67]

The validity exception provides an example of how a tribunal that ends up resorting to conflict of laws analysis in lieu of uniform substantive law thereby limits the chances for the Convention's success. Since questions of validity are excluded from the scope of the Convention, they do not present "gaps" which can be filled by resorting to "general principles" under article 7(2).[68] Whenever a matter of validity arises, therefore, it must be resolved under the domestic law that the tribunal is bound to apply by virtue of the relevant rules of private international law. The judge or arbitrator who concludes that an issue is one of validity simultaneously precludes that issue from debate and discussion within the framework of the "international rhetorical community" [69] created by the CISG. Article 4(a) thus blocks the development of a "jurisprudence of validity" and hampers the evolution of an effective international sales law. This is especially troubling where non-uniform treatment of validity issues under domestic law conflicts with the reasonable expectations of international traders.

The Convention accords a high priority to domestic rules of validity. Viewed as a whole, the CISG establishes a "tripartite hierarchy" [70] of norms to apply to contracts for the international sale of goods. The Convention accords highest priority to domestic rules in those areas that are excluded from the Convention's scope, followed next in priority by the parties' contractual autonomy. For example, when validity is at issue, the applicable domestic rules trump the parties' autonomy and thus override any conflicting terms contained in their agreement.[71] At the bottom of the hierarchy are the dispositive provisions (i.e., the provisions from which the parties may derogate) of the Convention itself and the "general principles upon which it is based." [72] The privileged status bestowed upon domestic rules of validity -- together with the threat to the Convention's overall success posed by an overly-broad interpretation of the validity exception -- is troubling, because it limits the extent to which the CISG can fulfill the internationalist dreams of its drafters. This limitation compels careful study of the contours of article 4(a), which are defined by the drafting history of the Convention and the Convention's own internal rules of interpretation. It is to these two interpretive tools that this article now turns.

III. Interpretation of Article 4(a) of the Convention

What does it mean to speak of the validity of a contract for the international sale of goods? This question is not new,[73] but has yet to be fully answered. It is easier to compile a list of issues or contracts that raise questions of "validity" and therefore fall outside the scope of the Convention than it is to explain how a tribunal faced with a concrete problem should decide whether the particular issue or contract is governed by domestic law or by the CISG (including the general principles upon which it is based). Although the applicable domestic law may assign the label "validity" to an issue, the issue may warrant different consideration in the international context than it does in the domestic context. Defining validity simply by compiling a list of issues traditionally classified under that heading would not be sensitive to the need to balance competing domestic and international policies. It is crucial to fashion a balanced approach to the validity question, since article 4(a) delimits a substantive boundary of the international legal regime.

"Validity" is an ambiguous term that hardly lends itself to precise definition within the confines of a single country, much less within the diverse international community in which the CISG has force. According to Professor Corbin, validity "is a term with a shifting content; but it is often used with the notion that the 'living thought' within its 'skin' is unchangeable and certain. A contract is 'valid' insofar as it has legal operation and 'invalid' insofar as it has not."[74] Lawyers trained in the United States tend to think of different degrees of validity,[75] that is, all matters which make an agreement void, voidable, or unenforceable.[76] The term "validity" -- understood as an "end" rather than as a "means" to an end -- "covers a lot of territory." [77] Under article 4(a), all the means that lead to that end also lead a question out of the scope of the Convention's uniform law and back -- via traditional conflict of laws analysis -- to domestic substantive law. The legal complexity inherent in the exclusion of validity issues is multiplied by the number of jurisdictions in which the CISG is in force, since the term "validity" has a different meaning in each national legal system.[78] The potential plethora of meanings of the term "validity" hardly seems consistent with the Convention's call for uniformity and predictability. This apparent inconsistency cautions a balanced approach to the validity exception.

Article 4(a) mediates the tension between the international and domestic legal orders. On the one hand, it makes the CISG politically tenable by acknowledging that diversity sets limits to the goal of unification. This is the major idea that emerges from the CISG's negotiating history, as will be discussed in part III.B. On the other hand, precisely because article 4(a) is an elastic exception, it should be able to accomodate changes in international commercial practice which further the goals of uniformity and predictability.

The drafters of the CISG never defined the term "validity," [79] although they did exchange views on whether a particular issue fell within the scope of the exclusion, and occasionally suggested issues that were excluded.[80] The lack of debate as to the meaning of the term "validity" indicates that the drafters preferred to keep this term ambiguous in order to allow each reader to ascribe a satisfactory meaning to it. However, the term's ambiguity does not mean that the validity exception provides an unlimited opportunity for parochial interests to creep into contracts for the international sale of goods. The drafters did not intend to equate validity with all mandatory domestic law, for to do so would have endangered the Convention's aim of introducing a degree of uniformity into the international commercial order.

To assert that the ambiguous term "validity" fosters confusion is simultaneously to oversimplify and to identify one of the key features of the problem under scrutiny. The drafting history undeniably suggests that the drafters intended article 4(a) to serve as a loophole which could stretch to fit the needs of each domestic legal system. "Validity" is an ideal parameter of the Convention's scope, because it means something -- albeit not the same thing -- to everyone. The drafters viewed "validity" as an umbrella to shelter residual issues which they preferred not to discuss at the time, since they feared that they could not reach agreement or that, at the very least, discussing such topics would result in substantial delays.[81] Professor Winship has remarked that, "[d]espite [the] lack of controversy, Article 4(a) has the potential for mischief." [82] But in fact, this "potential for mischief" has always been at the root of the lack of debate. Ambiguity, it seems, was intended, and in this the drafters succeeded. By resorting to ambiguity, the drafters postponed but did not eliminate the validity debate. They simply deferred to those who would later interpret the Convention.

The starting point for interpreting article 4(a) is the text of the Convention. However, since the text itself is ambiguous, the tribunal must look beyond it to determine when application of domestic law is warranted.

The Convention is both a private international law treaty and a uniform body of substantive law that may be applied to determine the rights and obligations of parties to a contract.[83] Each aspect of the Convention's dual nature includes an interpretive technique that must be taken into account when examining article 4(a). First, because the Convention is a treaty, the Convention's drafting history (travaux préparatoires) provides clues to its interpretation. As the discussion in part III.B will show, the travaux clearly indicate that the drafters intended to preserve the role of domestic law in protecting parochial interests. However, the travaux also indicate that the drafters of the CISG did not intend for the validity exception to provide an unlimited opportunity for domestic laws implicating public policy to apply to international sales transactions. Second, because the CISG is a uniform law, the Convention's own interpretive provisions -- in particular article 7(1) -- also provide clues to its meaning.[84] Article 7(1) embodies the drafters' internationalist aspirations and will be examined in part III.C.

In contrast to the drafting history and article 7(1) approaches to interpreting article 4(a), a third interpretive approach to the validity exception must be considered. This approach arises from the erroneous equation of "validity" and "mandatory law." Tribunals should avoid this oversimplified approach to article 4(a), whose roots lie in the debates preceding the CISG, because it accords undue emphasis to the role of domestic public policy in international trade. If adjudicators automatically exclude from the scope of the Convention all questions implicating so-called "mandatory" domestic laws, they will subvert the internationalist purpose of the Convention by overemphasizing parochial interests. This would allow the validity exception tail to wag the unification dog.

The proper interpretation of article 4(a) must steer a path between the desire to preserve the effect of parochial interests evidenced by the travaux préparatoires, and the desire to develop internationalist norms for international sales transactions, embodied in article 7(1). Adjudicators should heed the lessons of the drafting history and avoid the trap of reflexively applying any domestic law that claims to be mandatory. In addition, the tribunal should take care not to push every question through the validity loophole in a way that would undermine the purpose of the Convention. Although tribunals must consider domestic law when deeming validity under article 4(a), as a general proposition they should go one step further and consider the internationalist purpose of the CISG, as set out in article 7(1), when deciding whether a contract or issue is "governed by" the Convention or excluded from its scope. A tribunal called upon to decide whether a contract, provision, or usage is "governed by" the Convention or excluded from its scope by article 4(a) must strive to interpret "validity" in a manner that upholds the integrity of the Convention and respects the political compromises made during the drafting process. After analyzing articles 4(a) and 7(1), in parts III.B and III.C respectively, the discussion will focus in part III.D on the problems that arise in connection with overly-broad conflict of laws rule (i.e., a rule that equates validity with mandatory law) to determine whether a particular issue is governed by domestic or uniform international law.

The 1969 Vienna Convention on the Law of Treaties [85] governs the interpretation of promises that states make to one another. Although the 1969 Vienna Convention does not apply directly to the relationship of private parties under the CISG, Professor Honnold has argued persuasively that the interpretive rules contained in the 1969 Vienna Convention "would be pertinent to a question concerning the construction of [CISG, article 7, because that article] embodies mutual obligations of the Contracting States as to how their tribunals will construe the Convention." [86] By the same logic, these interpretive rules should also apply to article 4(a), since this provision implies mutual obligations of the Contracting States to apply the provisions of the Convention only to cases which properly fall within its scope.

The general interpretive rule of the 1969 Vienna Convention, as stated in article 31, is that a "treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose." [87] Article 32 of the Vienna Convention, provides that

"[r]ecourse may be had to supplementary means of interpretation including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of Article 31, or to determine the meaning when the interpretation according to Article 31: (a) leaves the meaning ambiguous or obscure; or (b) leads to a result which is manifestly absurd or unreasonable."[88]

Thus, adjudicators should consult the travaux préparatoires of the CISG in order to determine the meaning of article 4(a), since the key term "validity" may fairly be described as "ambiguous or obscure."

Substantial scholarly support exists for resolving "[p]ossible doubts about the precise meaning and effect of a single provision [of the CISG] . . . by reference to the travaux préparatoires." [89] Fortunately for scholars, judges, and arbitrators, there is a wealth of material generally available on the preparation of the uniform law for international sales.[90] While travaux préparatoires are not always accepted as being as authoritative as, for instance, national ratification histories,[91] travaux can play an important role in ensuring the uniform interpretation of uniform law in different countries. A judge or arbitrator might be expected to attach more weight to travaux préparatoires when interpreting a treaty that is also a uniform law than when interpreting other types of treaties.[92]

At first blush, the prevailing understanding that emerges from the CISG negotiations appears to support a broad reading of the validity loophole. Clearly, the negotiators were concerned with preserving the diverse parochial interests of each state. However, they also struggled with an important distinction between validity and mandatory law, and while the exclusion of the former survived earlier iterations of uniform trade law, the exclusion of the latter did not. Moreover, the negotiators' simultaneous desire to avoid the unpredictability spawned by the conflict of laws impelled them to include article 7(1), which defines the Convention's internationalist purpose. An overly-broad reading of the validity exception would undermine that purpose. Therefore, a more complete understanding of article 4(a) requires an appreciation for both the parochial and internationalist interests reflected in the Convention.

When interpreting article 4(a), it is necessary -- but not sufficient -- to examine the various drafts and reports prepared by the U.N. Commission on International Trade Law (UNCITRAL) in connection with the Convention itself. Since the CISG represents the pinnacle of a half century of unification initiative, it must be viewed in the context of previous efforts to create a uniform law for international sales. In particular, the CISG should be viewed against the backdrop of related harmonization efforts of the International Institute for the Unification of Private Law (UNIDROIT) [93] -- i.e., the Uniform Law on the International Sale of Goods (ULIS) [94] and the UNIDROIT Draft Law for the Unification of Certain Rules Relating to the Validity of Contracts of International Sale of Goods (LUV).[95]

Like the authors of the ULIS, the CISG drafters wished to preserve the application in international commerce of certain domestic laws. The ULIS drafters accomplished this goal by excluding from the scope of the uniform law both validity (article 8) and other provisions of mandatory law (articles 4 and 5(2)). The latter exclusion amounted to a straightforward conflict of laws rule. The CISG drafters excluded only validity. However, the CISG drafters provided no guidance to interpreters of the Convention as to the definition of validity. They produced no list of validity issues, and indeed even rejected the list prepared by the drafters of the LUV. These two facts suggest that the definition of validity in article 4(a) cannot be reduced to a simple, static set of criteria.

These nuances in the CISG's history, as well as the overriding concern for preserving some domestic law, will be highlighted in part III.B.1 by examining ULIS, article 8, the predecessor of CISG, article 4(a). This will be followed in part III.B.2 by an analysis of ULIS, articles 4 and 5(2), which serves to illustrate the difference between the overly-broad "mandatory law" approach and the more balanced interpretation that article 4(a) requires. With this background established, the analysis will turn in part III.B.3 to the CISG itself and will focus on how the CISG differs from the ULIS.

1. ULIS, Article 8

On April 29, 1930, the UNIDROIT Governing Council resolved to appoint a Special Committee for the purpose of preparing a draft Uniform Law on the International Sale of Goods (Corporeal Moveables).[96] The very first draft of a uniform law for the international sale of goods was ready in 1935.[91] From the start, the matter of formation of contracts was treated separately from the rights and obligations of the parties to a contract. The 1935 Draft Uniform Law on the International Sale of Goods contained no reference to validity. However, predecessors to CISG, article 4(a) appeared soon afterwards, and evolved during the decades of drafting [98] that culminated in the 1964 conventions relating to a Uniform Law on the International Sale of Goods (ULIS) and to a Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF).[99]

The exclusion of validity issues from the scope of the uniform law for international sales dates back to 1937. The Government of the Netherlands raised for the first time the question of the relationship between the uniform law and issues "derived from the general theory of obligations (such as mistake)." [100] Professor Rabel, taking the Dutch comments to heart, agreed that it was desirable that the uniform law specify "les matières qu'il traite," and stated unequivocally that the uniform law governed only the obligations between buyer and seller, and that "it [did] not treat mistake, nor the other vices of consent, nor the impossibility of the promise existing at the time of the conclusion of the sale; thus the draft presupposes conclusion of a valid contract" [101] This is consistent with the fact that formation issues were not covered. Consequently, the 1939 Draft ULIS contained the first forerunner to CISG, article 4(a). It provided that the Uniform Law

"governs the obligations of the seller and the buyer arising from a contract which is valid according to the principles of private international law . . . [and] excludes the application of any municipal law on the matters which it governs, except where it expressly provides to the contrary. Where, in the field of this law, problems arise which have not been expressly solved by this law the court shall apply the general principles which are the basis of this law."[102]

This provision indicates that the function of the validity exclusion was to preserve the role of conflict of laws analysis. The express direction to apply conflict of laws analysis in order to determine the validity of a contract was especially important under the ULIS, because the ULIS drastically curbed the adjudicator's ability to engage in such analysis. Article 11 of the 1939 Draft ULIS prohibited tribunals from resorting to domestic law to fill a gap in the Uniform Law. The excluded areas were clearly meant to fall outside the autonomous realm in which the ULIS would lead to development of a jurisprudence of international trade. The CISG, on the other hand, provides more opportunities for tribunals to resort to conflict of laws analysis, such as under article 7(2), discussed below, and thus limits the extent of the uniform law's autonomy.

The 1956 Draft ULIS contained a provision resembling CISG, article 4(a) in both structure and content.[103] The final (1964) version of the ULIS provides in article 8 that

"the present Law shall not, except as otherwise expressly provided therein, be concerned with the formation of the contract, nor with the effect which the contract may have on the property in the goods sold, nor with the validity of the contract or of any of its provisions or of any usage."[104]

This provision found its way into CISG, article 4(a) almost verbatim. Because of the nexus between the exclusion of matters of validity from the scopes of both the ULIS and the CISG, the analysis of "validity" under the CISG is incomplete unless the legislative history of the 1964 Uniform Sales Law is also taken into account.[105]

Many regretted the exclusion of important issues, such as formation, validity, and property, from the scope of the ULIS.[106] One government noted that the uniform law failed to live up to its name inasmuch as "its authors do not propose to achieve complete unification of the law" and left "questions of great importance, such as the validity of the contract" to the realm of domestic law.[107] Nevertheless, that delegation believed that the limitation was inevitable "because of the difficulty of unification of law," and it was "ready to accept [the limitation] because if this unification is to be achieved, it will only be by stages." [108] Only one delegate requested that the "validity of the contract and its necessary effects . . . be dealt with in the Uniform Law." [109]

While the exclusion of validity issues troubled internationalists, other delegates -- including some who wished to preserve as much as possible to domestic law -- objected to the apparent contradiction between the general exclusion of validity issues by article 8 and the inclusion of specific issues that bore on validity. At the 1964 Hague Conference, vigorous debates surrounded the provisions of the ULIS dealing with matters of form,[110] open price terms,[111] and mistake.[112] The lengthy discussion on how to reconcile the provision stating that no particular form was required for a contract of sale with the provision excluding matters concerning formation and validity from the scope of the ULIS typefies the disputes surrounding validity.[113] Delegates proposed numerous ways to eliminate the perceived inconsistency, including amending [114] or deleting [115] the provision stating that no particular form was required, or transferring it to the ULF.[116] Many delegates supported the idea of amending the validity exclusion itself. [117] The Hungarian government even proposed deleting the provision which excluded validity issues from the scope of the uniform law.[118] In the end, however, the Conference retained the provisions on form and validity, and struck a compromise to resolve the internal contradictions in the uniform law.[119] As per the compromise, the final version of ULIS, article 8 states that, "except as otherwise expressly provided," issues of validity are excluded from the scope of the ULIS.[120] This compromise demonstrates the drafters' belief that the provisions of the ULIS dealing with form, mistake, and open price terms raised questions of validity (or of formation) which would have been governed by domestic law had they not been allocated to the autonomous realm of the ULIS.

During their debates on the apparent contradictions in the text of the uniform law, the drafters rarely indicated why they believed that a particular issue constituted one of validity, nor did they explore the difference between issues of validity and issues of formation in great detail.[121] In a few cases, however, they gave clues to the principles guiding their judgment. For example, early discussions about the role of trade usages under the uniform law evoked clear statements that the exclusion of validity issues was closely tied to "public policy and morality," as well as the need to protect certain categories of persons.[122] An authoritative report states that validity concerns

"very delicate matters where the traditions of different States would have rendered difficult either the adoption of a uniform law, or, at the least, its uniforminterpretation. It follows from this restriction that the [ULIS] does not in any way [affect] the imperative rules of municipal law; if municipal law has established certain police regulations concerning the sale of goods, for example poisons or pharmaceutical substances, these rules will be applicable in accordance with the law in force; similarly it will be for municipal law to provide the legal rules; concerning the validity of certain clauses, as for instance exemption or partial exemption clauses which can be found especially in standard form contracts."[123]

This early passage does more than just mention two types of issues that are reserved to domestic law. It suggests the emergence of a functional view of validity, under which "validity" issues are those with respect to which different national traditions would have rendered difficult either the adoption of a uniform law, or uniform interpretation of such a law.

The validity exception may be seen, therefore, as an acknowledgment of the practical limitations of unification. That point of view invites an expansive reading of the validity loophole. On the other hand, not every issue which raises questions of validity in domestic transactions implicates traditions which, in an international context, would render adoption or uniform interpretation of a uniform law difficult. Thus, a functional view of validity suggests a method for staking out the outer limit of this exception from the Convention's scope.

2. ULIS, Articles 4 and 5(2)

CISG, article 4(a) is based not only on ULIS, article 8, but also on ULIS, articles 4 and 5(2).[124] Both articles 4 and 5(2) concern the relationship between the uniform law and so-called "mandatory" or "imperative" rules of national law and reflect a preoccupation with private international law methodology. Although the CISG itself does not contain any direct references to "mandatory" or "imperative" provisions of domestic law the issues they raise are central to a complete understanding of CISG, article 4(a).[125] Because ULIS, articles 4 and 5(2) illustrate the methodological "road not taken" by the drafters of the CISG, they provide valuable guidance for mapping out the correct approach to interpretation of the CISG's validity exception.

Although the 1956 ULIS Report prepared by the UNIDROlT Special Commission evidences the drafters' concern for "imperative rules of municipal law," the 1956 Draft ULIS itself did not contain any provision expressly addressing the relationship between the uniform law and mandatory rules of domestic law. Once again, the Government of the Netherlands started the ball rolling. In commenting on a provision of the 1956 Draft ULIS that permitted parties from non-Contracting States to opt into the uniform law,[126] the Dutch Government asked whether the "parties in declaring the [ULIS] applicable to their relationship could derogate from the imperative rules of their municipal law." [127] A proposal was made to delete the opt-in provision on the ground that

"[i]t is obvious that the parties may select a law other than the law applicable according to the rules of conflict to govern their contract. But they may never prejudice the provisions of public order, and can set aside the rules of imperative law only where there is a sufficient connection with the law selected." [128]

During the debate on this proposal at the 1964 Hague Diplomatic Conference, one observer perceptively "saw no reason for deleting [the opt-in provision], since [ULIS, article 8] could be interpreted as preserving rules of public policy." [129] The proposal to delete the opt-in provision failed.[130] In order to allay residual concerns that the ULIS might be interpreted to "allow parties . . . to contract out of the rules of public policy" of a state,[131] the Conference adopted an amended version of the opt-in provision which provided that parties who exercise their autonomy and choose the ULIS as the applicable law may not thereby displace "any mandatory provisions of law which would have been applicable if the parties had not chosen the Uniform Law." [132] Thus the precedent was set for using mandatory law analysis to restrict the scope of international uniform law.

The debate on ULIS, article 4 dealt abstractly with the relationship between the uniform law and mandatory domestic law. As during their discussions on "validity," the (largely Continental) drafters seem tacitly to have understood the meaning of "mandatory" or "imperative" law. Professor Tunc contributed a modicum of clarity by observing that "mandatory provisions [protected] each party against the potential abuse by the other of his power." [133] However, the meaning of "mandatory" remained ambiguous.

Fortunately, the debates surrounding special rules for installment sales (i.e., credit-sale or hire-purchase transactions) which, like the opt-in provision, implicate mandatory laws, provide tools that lead to a more concrete understanding of this issue. Prior to the opening of the Diplomatic Conference, the Dutch government observed that "[s]everal national legislations contain imperative provisions" pertaining to installment sales that exist "both to protect the buyer and . . . the interests of the national economy." [134] It proposed including in the uniform law a provision expressly honoring such municipal enactments, lest

"internationally conducted hire-purchase and credit-sale transactions . . . leave the buyer without any protection. Such a situation hardly seems desirable in view of the development of commerce in frontier areas and of mail-order transactions. It is also possible that unscrupulous sellers may arrange their transactions in such a way as to avoid the requirements of municipal laws by way of application of the uniform law, which, being purely adoptive, gives them complete liberty to stipulate whatever they consider expedient."[135]

Delegates from various other countries were quick to agree with the Dutch government's view that the ULIS should not disturb the application of special (often statutory) rules designed to "protect the buyers" and to guarantee "the equality of conditions of competition in a given market," [136] although some preferred to exclude such transactions entirely from the scope of the uniform law rather than introduce a conflict of laws rule into the ULIS.[137] In the end, however, a conflict of laws provision expressly preserving the superior role of domestic rules protecting consumers in certain credit transactions was incorporated in ULIS, article 5(2), in lieu of a provision excluding such special transactions entirely from the scope of the ULIS.[138] The final text of ULIS, article 5(2) provides that the provisions of the uniform law "shall not affect the application of any mandatory provision of national law for the protection of a party to a contract which contemplates the purchase of goods by that party by payment of the price by instalments." [139] Thus, the debates surrounding ULIS, article 5(2) anchor the preoccupation with mandatory rules of domestic law in the historical development of consumer protection statues.

Both articles 4 and 5(2) of the ULIS restate apparently obvious and overriding limits on the parties' freedom to choose the law which will govern their contract. They affirm that the uniform international law must yield to the national legal order on those issues where domestic public policy curbs the parties' contractual autonomy. It was especially important to ensure the continuing applicability of national mandatory laws under the ULIS, since ULIS, article 17 -- unlike CISG, article 7(2) -- envisioned the creation of antonomous code whose gaps would be filled by resort to general principles rather than to domestic law. Thus, as to issues not otherwise excluded from the scope of the ULIS, adjudicators were not permitted to engage in conflict of laws analysis after making the initial determination as to whether or not the contract triggered the application of the Uniform Law. Viewed in this context, the mandatory law methodology employed by the drafters of the ULIS was an appropriate method of preserving the effect of domestic rules embodying important public policies concerning matters within the substantive scope of the uniform law. CISG, article 7(2), in contrast to ULIS, article 17, preserves a greater role for private international law (conflict of laws) analysis, which suggests that the effect of important domestic policies can be preserved without resorting to the broad brush of the mandatory law methodology embodied in ULIS, articles 4 and 5(2).

"Validity" and "mandatory law" are related, but not identical concepts. Both the validity exclusion and the mandatory law provisions found in the ULIS reflect tensions between domestic public policy, on the one hand, and the movement towards unification and internationalization of legal norms, on the other. Both also concern state-imposed limits on party autonomy. However, these two types of provisions embody distinct methodologies for resolving this tension within the framework of a uniform law, and reflect changing attitudes about the most effective way to solve some of the common problems that arise in international trade.

ULIS, article 8 (which excludes validity from the substantive scope of the uniform law) calls upon a tribunal to analyze the relevant domestic law of contact to determine whether the question raised is one of validity, whereas ULIS, articles 4 and 5(2) simply direct the tribunal to ask whether there is any important domestic rule which overrides the provisions of the uniform law. The former inquiry imposes a substantive constraint upon the adjudicator's ability to opt out of the international legal realm, while the latter inquiry leaves a more discretionary avenue of escape, since it expressly permits an adjudicator freer rein to examine the universe of domestic, parochial policies.

The juxtapositioning in the ULIS of these two types of provisions raises questions which are important for the proper interpretation of their successor provision, CISG, article 4(a). Notably, while the drafters of the CISG retained the validity exclusion, they failed to provide expressly for the continuing applicability of mandatory law. This dichotomy suggests that validity and mandatory law should not be equated, as some have done in applying the CISG. By retaining the validity exception only, the CISG drafters closed off the broader avenue of escape from uniformity formerly offered by the mandatory law provisions.

3. Drafting History of the CISG

In 1969, even before the ULIS and ULF entered into force,[140] the U.N. Commission on International Trade Law (UNCITRAL) resolved to create a Working Group on the International Sale of Goods and instructed it to determine "which modifications of the existing texts [of the ULIS and ULF] might render them capable of wider acceptance by countries of different legal, social and economic systems, or whether it will be necessary to elaborate a new text for the same purpose." [141] The Working Group's efforts between 1970 and 1977 resulted in draft conventions on sale of goods and formation,[142] which were then combined into the 1978 Draft Convention on Contracts for the International Sale of Goods. UNCITRAL unanimously approved this draft and recommended "that the U.N. General Assembly convene an international conference of plenipotentiaries to conclude a final Convention." [143] In 1980, the Vienna Diplomatic Conference unanimously approved the CISG.[144]

The treatment of validity in the final version of CISG, article 4(a) is practically identical to its treatment in ULIS, article 8, except that the language excluding matters of formation from the scope of the uniform law was dropped after the 1977 Draft Sales and Formation Conventions were combined. As discussed below, the studies and reports generated by the UNCITRAL Working Group and the records from the 1980 Vienna Conference aid further understanding of CISG, article 4(a).

Numerous proposals were made during the Working Group deliberations to delete article 8 from the Uniform Law for International Sales.[145] One delegate argued that "it was not necessary to say what was not covered" since what was covered by the Convention was obvious.[146] It was also noted that there would be less need for such a provision in the CISG, since its interpretive rules would provide adjudicators more flexibility and opportunity to apply domestic law than ULIS, article 17 had provided.[147] The provision excluding validity from the scope of the uniform law was nevertheless retained,[148] because the delegates recognized that it "served the purpose of preventing the Convention from overruling domestic law relating to the validity of contracts." [149] In addition, the delegates feared that deleting ULIS, article 8 might be seen as a rejection of article 8's rule, rather than as the simple elimination of a redundancy.[150] Overall, the travaux préparatoires indicate that CISG, article 4(a) plays a pivotal role in defining the relationship of the Convention to other international harmonization efforts relating to validity of contract, as well as to mandatory rules of domestic law.

The discussions of validity in the framework of the UNCITRAL debates on the CISG were substantially more sophisticated than they had been in the UNIDROIT debates on the ULIS, in part because the drafters of the CISG benefited from the early work that led to the 1964 Hague Diplomatic Conference. However, an even greater factor responsible for focusing the validity debate was the work of UNIDROIT in the field.[151] Indeed, the interaction between UNCITRAL and UNIDROIT provides some clear guidelines to the drafters' understanding of CISG, article 4(a).

Prior to the first session of the UNCITRAL Working Group, the Secretariat acknowledged the UNIDROIT Draft Law for the Unification of Certain Rules Relating to the Validity of Contracts of International Sate of Goods (LUV).[152] The Secretariat stated that [t]he subject of validity of contracts is . . . complex and touches sensitive issues of domestic policy. The Working Group might consider whether including this subject would also impede completion and acceptance of the final products." [153] The Working Group requested the Secretary-General's assistance in analyzing the LUV [154] and in examining "the feasibility and desirability of dealing with questions of both formation and validity in a single instrument." [155]

The Secretary-General recommended that the uniform law limit its coverage to the formation issues of offer and acceptance, and not include any provisions concerning validity of contracts based on the LUV. [156] The Secretary-General first observed that a uniform law should "offer solutions to practical problems caused by . . . differences in the law in various legal systems," rather than try to "codify every aspect of the subject in a text of a uniform law," [157] and proposed that the uniform law address issues that caused genuine problems in international trade (such as offer and acceptance).[158] Moreover, the Secretary-General doubted as a practical matter whether the subjects covered by the LUV posed significant problems in contracts for the international sale of goods. He noted that

"the problems of validity covered by LUV rarely arise in contracts for the international sale of goods [since] such contracts are concluded between merchants who are, at least as compared to the average person, relatively sophisticated in matters of contracting. The problems of mistake, fraud and duress -- which are the heart of the LUV -- are less likely to occur between merchants than they are in transactions between merchants and consumers or between two non-merchants."[159]

Even if such problems did arise, the Secretary-General argued that unification of the rules of validity was unnecessary, since problems such as "mistake, fraud or duress" could "usually be handled as well under non-uniform national law as under any proposed text of uniform law." [160] In short, he perceived no need to escape the application of conflict of laws rules in this field, where the issues tend to fall outside the range in which the parties are free to exercise their contractual autonomy.

The Secretary-General also believed that issues of validity did not lend themselves to successful unification.[161] His pessimistic view was premised on practical considerations. In the first place, validity issues are vague and require extensive interpretation by the adjudicator.[162] In the second place,

"the law governing the validity of contracts [like the rules on duress, or similar rules on usury, unconscionable contracts, good faith in performance and the like] is . . . an important vehicle by which the political, social and economic philosophy of the particular society is made effective in respect of contracts. . . . Statutory prohibitions and public policy vary to such an extent from country to country that it is impossible to achieve the goal of unification, namely the development of a uniform body of case law. . . . It is by the extensive or the restrictive interpretation of such rules that many legal systems have effected the balance between a philosophy of sanctity of contract with the security of transactions which that affords and a philosophy of protecting the weaker party to a transaction at the cost of rendering contracts less secure."[163]

Finally, the Secretary-General recognized that considering such complex matters would unduly delay the progress of the Working Group on the Formation of Contracts for the International Sale of Goods.

In light of the Secretary-General's arguments that unification of validity issues was unnecessary, practically impossible, and time-consuming, the Working Group decided not to include any of the LUV validity rules in the uniform law,[164] and left these issues to UNIDROIT, which has continued its work in the field.[165] The division of competence between UNCITRAL and UNIDROIT provides a handy reference list of validity issues. It would be oversimplifying, however, to equate the issues excluded by CISG, article 4(a) with the issues treated in chapter 3 of the Draft UNIDROIT Principles on substantive validity. Although the Draft UNIDROIT Principles provide a fairly comprehensive list of validity issues common to many legal systems, such an approach would constitute an analytical short-cut, which, in an unusual case might frustrate the main purpose of article 4(a), which is to admit of national divergences regarding sensitive issues.[166] The exclusion of validity issues from the scope of the CISG represents more than just a truce line between two harmonization projects. CISG, article 4(a) must be viewed in terms of its role in regulating the tension between the domestic and international legal orders. To fulfill this role, it must be flexible enough to acommodate changes in states' notions of public policy.

Just as article 4(a) should not be interpreted as referring implicitly to the list of validity issues enumerated by UNIDROIT, it also should not be read as an exemption of all issues considered mandatory under domestic law. The latter pitfall turns the validity exception into an overly-broad conflict of laws inquiry which, if carried too far, could vastly diminish the scope of the Convention. Although validity is an elastic term, the contrast with ULIS, articles 4 and 5(2) indicates that CISG, article 4(a) is meant to provide a less sweeping escape from the provisions of uniform law than those mandatory law provisions enabled. Nevertheless, it is true that some drafters favored equating validity with mandatory law. This dilemma was never adequately resolved.

The UNCITRAL Working Group addressed this exceedingly difficult problem at its first session, when it considered whether to retain either ULIS, article 4 or ULIS, article 5(2). It recognized that the problem of the relationship between mandatory domestic law and the uniform law was not limited to the situations addressed in ULIS, articles 4 [164] and 5(2),[168] but rather that mandatory law was a general problem requiring a general solution.[169] However, the Working Group noted that

"[d]ifferent legal systems follow differing approaches in deciding what rules are mandatory or imperative, and these concepts have no generally understood meaning. A general exception for local mandatory rules would undermine the uniformity of the law. On the other hand, it was recalled that at the Hague Conference many felt that the present solution was not wholly satisfactory."[170]

Since the "provisions touching this problem in [the] ULIS were . . . incomplete," [171] the Working Group considered including a general provision on the relationship between the CISG and mandatory rules of national law.[172] In the end, however, the CISG incorporated clauses excluding specific types transactions and issues from its scope rather than a general provision on mandatory law. Instead of resolving the general mandatory law problem, the drafters buried it in CISG, article 4(a). This solution was at best a partial one because issues mandatory law and issues of validity overlap only part of the time.

The debates on the relationship between the uniform sales law and domestic consumer protection legislation show how the issues of validity and of mandatory law intertwine and may become confused with one another.[173] The recognition that ULIS, article 5(2) was broad enough to preserve the application of some, but not all, domestic consumer protection legislation [174] prompted debate as to how to ensure the continued application of domestic rules not covered by that provision. One way to preserve the effect of mandatory domestic consumer protection rules would have been simply to broaden the scope of article 5(2) by adding to the list of consumer protection laws actually preserved therein.[175] The other, more sweeping alternative, and the one that ultimately prevailed, was to exclude all sales "of goods bought for personal, family or household use" from the scope of the CISG.[176] However, even excluding most consumer transactions from the scope of the CISG was at best a partial solution to the mandatory law problem, because conflicts could still arise in which domestic consumer protection laws will apply to contracts which also fall within the scope of the CISG.[177]

In response to those who demanded further assurance that such national legislation "should nevertheless take precedence over" the CISG, some drafters argued that the "Convention did not relate to matters of validity and that the question of whether the types of sales contract to which the proposal referred were valid would be left to national law." [178] In other words, some drafters believed that by excluding issues of validity CISG, article 4(a) could serve as a loophole to preserve the effect of those mandatory rules of national law, not otherwise expressly excluded. However, not everyone agreed that article 4(a) could live up to this task.

The drafters identified two problems with relying on article 4(a) to resolve the mandatory law issue. First, some feared that excluding issues of validity from the scope of the CISG would not suffice to "guarantee the effect of the national policies embodied in the mandatory laws" because the CISG would simply override such laws unless their effect was expressly preserved.[179] Second, the Working Group expressed doubt as to whether "regulatory provisions restricting or supplementing provisions of a contract" would be preserved since they might not be "deemed to constitute matters of 'validity.' " [180] Thus, the drafters recognized that some -- but not all -- questions of mandatory law were also questions of validity.

So long as the two categories of rules overlapped, there was no need to decide whether the mandatory laws would continue to have effect after the uniform law came into force. The simple argument that a matter of validity was at stake would suffice to protect national interests. Since validity issues and mandatory law are not identical, however, cases will arise in which article 4(a) will not necessarily uphold a domestic mandatory rule, such as where the "national rule afforded a party (such as a consumer) rights or privileges supplementing (rather than invalidating) the contract." [181] The relationship between the CISG and mandatory rules of domestic law vexed the drafters, who feared that the uniform law would deprive such national rules of their effect. At one point during the long drafting process, the drafters seemed to agree that the effect of mandatory rules of domestic law would automatically be preserved under the CISG,[182] and thus that no special provision was required to guarantee this effect. However, even this reassuring conclusion was later called into doubt.[183]

The drafters never fully decided whether all mandatory rules of national law would remain applicable to contracts to which the CISG applied. Nor did they succeed in articulating a common understanding of what they meant by mandatory rules of national law. Instead, they hoped to avoid the possibility of conflict between the domestic legal order and the CISG by specifically excluding consumer sales and other special types of contracts (article 2), validity and property issues (article 4), and liability for death and personal injury (article 5) from the Convention's scope. Instead of resolving the underlying issue, the drafters largely avoided it by restricting the Convention's scope "to transactions and issues which, within the various domestic laws, are traditionally governed by provisions of a non-mandatory character." [184]

The fact that validity issues frequently are equated with mandatory rules of national law complicates the task of ascertaining the meaning of article 4(a).[185] The role ascribed to article 4(a) as "residual defender" of national public policy is broader than the role indicated by Professor Rabel's early concern with valid formation of contracts.[186] The drafters' preoccupation with ensuring the continued application of rules based on domestic public policy permeated their discussion of validity and cannot be omitted from the calculus for interpreting article 4(a). However, neither can their concern with preserving the goal of unification be neglected, as it would be if national public policy were the only factor a tribunal considered.

On balance, then, the drafting history of CISG, article 4(a) demonstrates a clear concern for preserving the applicability of certain domestic laws. Any reading of the validity exception cannot neglect the parochial interests that inspired it. However, adjudicators should also bear in mind the more subtle point that emerges from the drafting history regarding the different methodologies applied to validity analysis and mandatory law analysis. While the mandatory law exception allows the adjudicator to examine domestic public policy broadly, the validity exception directs him to characterize an issue as one of validity only if a domestic law would render the contract void, voidable, or unenforceable. The contrasting methodologies were illustrated by ULIS, articles 4 and 5(2) and ULIS, article 8 respectively. The absence in the CISG of any provision resembling ULIS, articles 4 and 5(2) should counsel against applying the mandatory law methodology to CISG, article 4(a), especially given the inconclusive debate on equation of the validity exclusion and mandatory law provisions. Moreover, as discussed below, the adjudicator ought to move beyond the preliminary step of limiting the definition of validity according to whether a domestic law would render the contract void, voidable, or unenforceable and adopt a more balanced approach to the matter of validity in order to preserve the internationalist goals articulated in CISG, article 7(1).

Determining whether a particular issue is one of validity, and therefore governed by domestic law, is not simply a choice of law question to be resolved using traditional characterization or mandatory law techniques. CISG, article 7(1) complicates a tribunal's inquiry by requiring that "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." [187] Accordingly, article 4(a) should be interpreted as narrowly as possible, keeping in mind the limits discussed above, to allow the Convention to have the "widest possible application consistent with its aim as a unifier of legal rules governing the relationship between parties to an international sale."[188] On closer examination, this simple formulation proves quite complex in practice.

1. Regard to ClSG's International Character and to the Need to Promote Uniformity

Two means of achieving a narrow interpretation of article 4(a) have received attention among scholars and practitioners. The first is to adopt an autonomous interpretation of validity, that is, to set uniform parameters for the exception within the CISG instead of defining the term by reference to the many national laws. Under this approach, divergent substantive rules of validity could still exist within the various Contracting States, but there would be a single definition of what issues constitute validity and thus may be governed by those national rules. The second means of achieving a narrow interpretation of article 4(a) is to address the validity inquiry after considering express provisions in the CISG that might resolve a dispute. To the extent other CISG provisions can resolve the dispute, they displace national validity rules which might otherwise apply. This displacement theory may be justified by the language of article 4(a) which excludes validity from the scope of the Convention "except as otherwise expressly provided."

Although the autonomous method and the displacement method of interpreting article 4(a) both honor the internationalist goals of the CISG, neither of these approaches gives sufficient weight to the drafters' desire to use article 4(a) to protect domestic public policy concerns. Consequently, interpreters must find another approach which reconciles the internationalist goals of article 7(1) with the parochial concerns of article 4(a). A balanced approach to article 4(a) would examine domestic validity law in the light of evolving international practice, without threatening extant national public policy concerns. This method of incorporating article 7(1) into the article 4(a) analysis does not suggest a generic methodology, such as an autonomous or displacement approach to the validity exception. Rather, the balanced approach suggests a case-by-case examination of issues in light of evolving concepts of public policy and the development of jurisprudence under the CISG. Before turning to the balanced approach, the following sections examine the weaknesses in the autonomous and displacement approaches.

International uniform law differs significantly from domestic law, which tends to be "interpreted against a background of institutions and rules well known" to the tribunal.[189] In order to facilitate uniform interpretation of the CISG, the drafters attempted to avoid "as far as possible the use of what may be called legal shorthand, that is, the use of terms of art peculiar to the system of law prevailing in one group of countries signing a convention." [190] Thus, drafters of the CISG searched for "sufficiently neutral language" [191] and endeavored to "replace local legal idioms with references to facts of commercial life." [192]

The choice of the term "validity" as a parameter of the CISG reflects the drafters' effort to employ terminology that was not laden with legal meaning in any one State. In this sense, "validity" appears to be an ideal choice. Most jurists are comfortable with this functional term and are satisfied that it bears some ascertainable meaning in their respective legal systems. Yet it is dfficult to conceive of "validity" as "plain language that refers to things and events for which there are words of common content in the various languages." [193] At most, "validity" refers to common, or at least comparable, effects in different legal systems. As far as its content is concerned, however, it is an elastic term that permits some national differences.

CISG, article 7(1) urges tribunals to reach beyond the domestic legal system with which they are intimately familiar and to resist their "natural tendency to read the international rules in light of the legal ideas that have been imbedded at the core of their intellectual formation." [194] Many view this "homeward trend" problem as the main impediment to achieving uniform interpretation of uniform law.[195] Article 7(1) generally requires that provisions of the CISG be interpreted "autonomously, i.e., in the context of the Convention itself and not by referring to the meaning which might traditionally be attached to them within a particular domestic law." [196]

Some scholars argue that this interpretive maxim should be applied to scope provisions of the Convention, such as article 4(a), as well as to its substantive provisions. According to this view, ascertaining the meaning of the term "validity" is "not . . . initially a question of domestic law." [197] Rather, "[w]hether a given issue is [governed by the CISG] or not should be decided on the basis of a characterization detached from any particular national law and committed to the goals formulated in art. 7(1) CISG." [198] Professor Schlechtriem, who espouses interpreting article 4(a) in a manner "independent from all national laws," suggests that in order to preserve uniformity, an issue should only be reserved to national law if it is treated as a question of validity everywhere, that is, in all or at least in the majority of the world's legal systems.[199] In his view, the Convention, including its article 4(a), must be interpreted "teleologically," i.e., in accordance with its policies, having regard to its "principal and preponderant purpose . . . to reach unification." [200]

While autonomous interpretation of CISG, article 4(a) appeals to the internationalist spirit, it is fraught with problems. Autonomous interpretation would ideally yield a list of discernable validity issues that states could regulate in respect of contracts for the international sale of goods, if they desired to do so. This approach would add an extra measure of predictability to the contracting process, since the validity "loophole" would be of uniform dimension and could not be stretched to fit the peculiarities of a particular legal system. However, while it is an appropriate task for comparative lawyers to strive to compile such a list, it is questionable whether confining article 4(a) only to those issues which are treated as valid "in all or at least in the majority of the world's legal systems" is consistent with the spirit of the Convention as a whole, or article 4(a) in particular.

Article 4(a) itself presents a paradox. The drafting history demonstrates that this provision fulfills a peculiar role which is fundamentally at odds with the unification goals of the Convention. The purpose of article 4(a) is precisely to admit of national divergences regarding sensitive issues. The tension between the international and domestic legal regimes reaches its peak in article 4(a).[201] The drafters did their utmost to avoid sensitive matters that involved a measure of public policy, and excluded such matters from their deliberations so as to prevent the harmonization efforts from stumbling over insurmountable political hurdles. For the drafters, article 4(a) did more than address the traditional issues of substantive validity of contract. Article 4(a) also allowed the drafters to wink at the problem of how to accommodate domestic public policies within the international uniform law. Thus, imposing a majority rule to define validity would do violence to the political compromise embodied in article 4(a).

Autonomous interpretation of article 4(a) would subvert the purpose of that provision and cannot be strictly observed. Tribunals must have the power to characterize an issue as one of validity in accordance with domestic concepts and cannot be limited to a uniform meaning of validity ascertained through the process of comparative law. By the same token, however, tribunals would violate the internationalist spirit of the CISG if they were to take too cavalier an attitude towards the integrity of the uniform law and too broad a view of domestic public policy. The need to walk a middle ground between public policy concerns and internationalist goals thus supports a balanced approach to article 4(a). Such an approach would necessarily preclude the precise definition of article 4(a)'s parameters sought by proponents of an autonomous interpretation.

A second possible way of achieving a narrow interpretation of article 4(a) arises from the issue of whether article 4(a) "excludes domestic validity issues from the scope of Convention or whether the exclusion is only warranted after the remainder of the Convention has been examined and found not to offer a response of its own to the fact pattern that would invoke the domestic law."[202] The text of the Convention itself states that it is not concerned with the validity of the contract "except as otherwise expressly provided in this Convention." [203] As such, the fundamental question is how strictly to interpret the phrase "expressly provided."

A number of distinguished scholars argue that the Convention displaces domestic rules of validity insofar as it contains provisions invoked by the same "operative facts" that invoke the domestic validity rule.[204] In other words, "[i]f the same operative facts are involved, then the [CISG] does expressly provide otherwise and there is no exclusion for issues of validity." [205] This view finds partial support in the UNCITRAL Secretariat Commentary on the 1978 Draft, which recognized that

"[a]lthough there are no provisions in this Convention which expressly govern the validity of the contract or of any usage, some provisions may provide a rule which would contradict the rules on validity of contracts in a national legal system. In case of conflict the rule in this Convention would apply."[206]

Scholars favoring a loose interpretation of the "expressly provided" language in article 4(a) justify it by claiming that any other interpretation would permit the Convention's "unifying role" to be "crippled by domestic rules that govern the same situations as those governed by the Convention." [207]

This displacement argument fails to recognize that article 4(a) is a general scope provision which states that issues of validity are preserved to domestic systems, and thus not governed by the CISG. The argument that article 4(a) only applies to issues not governed by the CISG is tautological and contrary to the drafters' sentiment on the validity issue at and prior to the 1980 Vienna Diplomatic Conference. A loose reading of the language "except as otherwise expressly provided" also disregards the strict interpretation indicated by the Secretariat Commentary on the 1978 Draft, which stated that "[t]he only article in which the possibility of such a conflict [i.e., between express provisions and domestic law] is apparent is [the article providing] that a contract of sale of goods need not be concluded in or by writing and is not subject to any other requirements as to form." [208]

Professor Honnold emphasizes that "the substance rather than the label" of the domestic rule of validity is relevant.[209] A domestic label of validity is certainly irrelevant to the task of determining whether article 4(a) permitsa tribunal to apply a particular domestic rule to a contract to which the CISG otherwise applies. The term "validity" is a functional term that refers to an effect -- i.e., void, voidable, and perhaps also unenforceable -- rather than to the various domestic labels that may lead to such an effect. The key issue is not the label used by domestic law but the concept of displacement.

The limiting language in article 4(a) should have regard to its historical roots in the ULIS, where the concern was to avoid logical inconsistencies between ULIS, article 8 and other provisions on open price terms, mistake and form. The provisions dealing with open price terms [210] and mistake [211] in the 1963 Draft ULIS expressly prohibited parties from having recourse to local law on those topics, while the draft provision stating that no form requirements were applicable to contracts for the international sale of goods was clearly contrary to the rules of formal validity in numerous states.[212] In this historical context, the language "except as otherwise expressly provided" in ULIS, article 8 may be taken literally. Its inclusion in the text of the ULIS appears to have derived not from a mere "abundance of caution," [213] but rather from a desire to avoid outright contradictions in the text of the uniform law. The addition of the word "expressly" suggests that the drafters of ULIS were cautiously trying to avoid any inference that provisions of uniform law implicitly displaced national laws on validity.

In the CISG, the reference in article 4(a) to "express" displacement appears to be a historical accident. Except for the articles stating that the Convention does not require a writing or any other form for formation or modification of a contract,[214] the CISG contains no provision which "expressly" governs a matter of validity. But this does not resolve the underlying issue, i.e., whether the CISG displaces domestic rules of validity -- or, for that matter, mandatory rules of domestic law [215] -- by implication.

In connection with his observation that displacement of inconsistent domestic law is "the essence of . . . uniform law," Professor Honnold recognized that the Convention "carved out exceptions" in those areas including validity -- "where appeals for domestic law were persuasive to the international legislative body." [216] This recognition points up the difficulty of reconciling the "implied displacement" theory with article 4(a).

Issues of validity are exceptions to the displacing effect of the Convention. Article 4(a) drew the line between consensus and dissent among the drafters. This line cannot be disregarded in the greater service of uniformity. In some cases, therefore, a tribunal may apply a domestic rule of validity which competes with a remedy provided by the Convention. Although undesirable from the standpoint of the Convention's goal of achieving unification, this choice of law is not prohibited.

The displacement argument, like the autonomous interpretation argument discussed above, appeals to the internationalist spirit. An expansive reading of the substantive provisions of the Convention would cut off many claims to apply national rules of validity and would thereby facilitate the development of a jurisprudence of international trade. However, this interpretation strikes at the heart of article 4(a).

Tribunals should interpret the substantive provisions of the Convention broadly, in order to serve the overriding goal of developing an international body of case law, but they may not deny recourse to domestic rules of validity in the process. Competent counsel will raise domestic law validity arguments on behalf of a client alongside Convention-based arguments, and this will occasionally place tribunals in the awkward position of having to choose between inconsistent remedies available under the various bodies of potentially applicable law. It is lamentable that article 4(a) opens such a breach in the international legal order for sales. At the same time, however, it is important that tribunals respect the limitations inherent in the unification process. To do otherwise would tend to make states mistrust the process and thereby endanger the success of future unification efforts.

Like rejection of an autonomous interpretation of validity, rejection of a displacement theory leads back to the argument that article 4(a) calls for a balanced approach. Neither an autonomous approach, nor a displacement approach, nor even the mandatory law approach, examined below, fully captures the many factors bound up in the validity exception. The problems with the displacement theory reconfirm the argument that the only way to be sensitive to both the parochial interests reflected in the ClSG's drafting history and the internationalist object and purpose embodied in article 7(1) is to consider domestic validity law in light of evolving concepts of public policy and the development of jurisprudence under the CISG.

2. Observance of Good Faith in International Trade

CISG, article 7(1) further requires that in the interpretion of the Convention, "regard is to be had . . . to the need to promote . . . the observance of good faith in international trade." Considerable disagreement exists over the meaning of this directive,[217] with some commentators arguing that it should be narrowly construed,[218] and others preferring a broader reading.[219] Despite this dispute, commentators seem to agree that the concept of good faith should be interpreted in the international context of the Convention and without resorting to domestic definitions, except to the extent that domestic definitions reflect universal understanding.[220] This view is more tenable in the case of good faith than in the case of validity, since article 7(1) is a pure interpretation provision which, unlike article 4(a), does not itself mark the boundary between the domestic and international legal orders. Good faith, therefore, should be interpreted autonomously.

Whether the requirement to interpret the Convention so as to promote the observance of good faith in international trade can assist in the interpretation of article 4(a) itself is another question. The good faith requirement does not provide much assistance for the general interpretation of article 4(a). This requirement could, however, have a bearing on the treatment of one category of validity issues which is currently excluded from the Conventions scope, i.e., exculpatory clauses, discussed below in part IV.A.

The above analysis has referred frequently to mandatory law and to the problems of equating it with validity. The analysis suggested that equating the two would lead adjudicators to apply an overly-broad conflict of laws inquiry when interpreting article 4(a). Such an inquiry threatens to undermine the article 7(1) instruction to interpret the CISG in light of its internationalist object and purpose. This section brings together the arguments against an oversimplified conflicts approach to article 4(a) and in favor of a more balanced approach to the validity exception.

Throughout the drafting history of the CISG, delegates equated validity with mandatory law.[221] For example, one delegate noted that "fraud and contract validity were matters of public policy regulated by mandatory provisions of national law." [222] More recently, domestic rules relating to validity of contract and warranty disclaimers have been described as mandatory domestic laws that embody public policies.[223] While there is some justification for equating validity with mandatory law, doing so is confusing at best and imperils the success of the CISG at worst. Therefore, the mandatory law interpretive approach to article 4(a) should be abandoned.

Unlike the ULIS, the CISG contains no provision expressly referring to mandatory domestic rules, in part because the drafters wanted to avoid the discord engendered by such rules.[224] The purposeful deletion from the CISG of the mandatory law approach found in ULIS, articles 4 and 5(2) speaks in favor of abandoning the mandatory law approach to the CISG. Several other factors also support this conclusion.

First, use of the term "mandatory" law in the context of CISG, article 4(a) is inherently confusing, since the term can refer either to special protective or other market regulatory legislation (economic dirigisme),[225] or to any rule of law which restricts the parties's autonomy,[226] or to both. In its broadest sense, the term "mandatory" law encompasses general issues relating to the formation and validity of contract, as well as the "secondary problems identical with what is properly called ordre public [i.e., public policy] . . . [such as] wagering, usury, smuggling, or social protection." [227]

Second, even if it is technically correct to describe issues of validity as mandatory in the broad sense, it is inaccurate to assert that mandatory law is the measure of article 4(a). In fact, the category of mandatory rules is broader than article 4(a), because not all mandatory laws raise questions of validity of contract.[228]

Third, use of the term "mandatory" law is not analytically useful in the context of article 4(a), since no agreement exists as to which laws are mandatory. At best, the term "mandatory" law is a label which refers to the underlying tension between party autonomy and the State's interest in regulation of the market -- thus implicating the tension between the international and the domestic legal orders -- without providing any useful criteria for resolving it.

Fourth, it is misleading to use the term "mandatory" law to suggest that general rules of contract formation and validity (i.e., rules that are mandatory in the broad sense) are legally equivalent to special rules of public policy and rules of "economic dirigisme" embodying state regulation of the market (i.e., rules that are mandatory in the narrow sense).[229] While it may be technically correct to say that all questions of validity constitute questions of mandatory law,[230] this generalization creates more problems than it solves in the context of the Convention.

In fact, the private international legal implications of rules which are mandatory in the broad sense differ significantly from those of rules which are mandatory in the narrow sense. The difference is one of degree, and it has important consequences in a case in which a tribunal is called upon to determine whether a particular mandatory rule of domestic law must [231] be applied to a contract for the international sale of goods. Some rules which are mandatory for domestic transactions are not necessarily mandatory with respect to an interstate or international contract, while other rules are mandatory in both domestic and international transactions.

The general rule of party autonomy holds that parties are free to select the law which will govern their contract.[232] However, the choice of law rules pertaining to validity issues such as capacity, form, consideration, vices of consent, and illegality, are more complicated. In a purely domestic transaction, these issues lie beyond the parties' freedom of contract.[233] However, parties to an interstate or international contract may designate the law which will govern the issues of validity raised by their contract, subject to certain exceptions described below, and thereby avoid the application of the validity rules of the jurisdiction whose law they do not chose.[234] Therefore, the fact that domestic rules of contract formation and validity are mandatory in domestic contracts, does not compel the tribunal to apply such rules to a contract for the international sale of goods when the contract is governed by a different body of law.

The situation of mandatory rules as more narrowly defined above -- i.e., regulatory rules inspired by considerations of public policy [235] or economic dirigisme -- is rather different. This sort of domestic rule, such as a rule regulating contracts between parties of unequal bargaining power, has a more compelling effect in a conflict of laws analysis.[236] A forum may be obliged to apply such a domestic rule, despite the fact that the contract is governed by a different body of law.[237] Such mandatory (usually statutory) rules override the law that would normally apply [238] and limit the parties' autonomy in international cases as well as in purely domestic cases. Such rules are internationally mandatory, that is, the parties may not derogate from them by selecting another law to govern their contract.

Most of the current debate on mandatory rules of domestic law concerns the question of where to draw the line between rules which are mandatory only domestically and rules which are mandatory internationally as well as domestically. A second important issue in the current debate is whether a tribunal should apply mandatory rules of a third state other than the forum state or the state whose law governs the contract.[239] Rather than plunge into the details of these issues, it is important to notice here the existence of a spectrum of mandatory laws restricting party autonomy. Where a domestic validity rule falls on this scale will determine whether a tribunal must apply that rule, because it is mandatory internationally as well as domestically, to a contract otherwise governed by a different body of law.[240]

In the context of article 4(a), the term "mandatory" law should be restricted to those limitations on party autonomy inspired by ordre public (public policy) which international traders cannot contract out of with a choice of law clause. Thus, even if it is true to say that all validity issues raise mandatory questions of domestic law, it is misleading to analyze article 4(a) in terms of mandatory law, because this approach fails to distinguish rules which are mandatory only in domestic transactions from those which may also be mandatory in an interstate or international transaction. Contracts governed by the Convention inevitably involve more than one legal system, so the private international law effect of rules which are mandatory only in domestic transactions, such as most general rules of validity, is practically irrelevant. Equating validity with mandatory rules of law thus engenders considerable confusion.

The final problem suggested by mandatory law analysis is methodological. Equating article 4(a) with mandatory law incorrectly suggests that determining the scope of article 4(a) is an ordinary choice of law task to be resolved through traditional conflict of laws analysis. Such a mandatory law approach to article 4(a) suggests that the tribunal need ask only one question: Is there an overriding domestic rule that "must apply" to the contract or issue in question? If the key to determining the scope of the Convention is for the judge or arbitrator to ascertain whether any mandatory law is applicable, then article 4(a) is nothing more than a conflict of laws rule that allows the tail of domestic public policy to wag the transnational dog.

This mandatory law approach to article 4(a) is incompatible with the goals of the Convention and poses the danger that tribunals will place undue emphasis on domestic public policy at the expense of the internationalist goals of the uniform law. Such an emphasis is misplaced, since the Convention admits of no general exception for public policy or ordre public and specifically instructs interpreters to take into account the Convention's "international character and . . . [the] need to promote uniformity in its application."[241] Mandatory rules of domestic law do not apply to contracts for the international sale of goods unless and to the extent that they involve issues excluded from the Convention's scope.[242] The mandatory law approach improperly places public policy concerns in the front line of article 4(a) analysis. These concerns must be subsumed under the Convention's scope and substantive provisions.

Rejection of the mandatory law approach to article 4(a) should sway tribunals away from an overly-broad interpretation of the validity exception to the CISG. At the same time, tribunals should avoid the overly-narrow autonomy and displacement theories, which pay too little heed to parochial interests. All three of these approaches endanger the integrity of the unification process. Instead, tribunals should choose an approach at some point between the overly-broad and overly-narrow extremes. If tribunals adopt a balanced view of the validity exception, that point may shift over time as common rules become increasingly accepted within the international commercial community. Entrenchment of those common rules in CISG jurisprudence, in turn, would greatly facilitate trade.

Abstract theories aside, tribunals must devise a method to determine when article 4(a) requires the application of a domestic law to a contract to which the Convention applies. Taken by itself, the Convention's uniformity goal, embodied in article 7(1), would be served if courts interpreted the Convention's provisions autonomously, by developing (through comparative analysis) a uniform definition of the term validity. In most cases arising under article 4(a), this methodology can be applied de facto with satisfactory results, since it is possible to compile a fairly comprehensive set of validity issues that is recognized in practically all Contracting States. However, the autonomous interpretation approach is insufficient to resolve the exceptional case involving an issue not included in the uniform definition of validity, but which raises a question of validity in one or a few Contracting States. In principle, article 4(a) permits a tribunal to apply the domestic rule of validity in such cases.

In determining whether the particular issue is one of validity that is preserved to the domestic sphere, however, a tribunal must do more than simply look to its conflict of laws rules or accept unquestioningly the label attached to the issue by a particular legal system. Such a methodological short-cut ignores the unification principles of the Convention. Rather, the tribunal must ascertain whether the issue is one of validity in the sense of article 4(a). The judge or arbitrator should ask whether a particular domestic rule of validity meets the spirit as well as the letter of article 4(a) before applying it to a contract for the international sale of goods. This requires an examination of the domestic validity rule in light of the evolving international commercial context in which the issue arises. A balanced approach to article 4(a) can honor both its unification goals and the protective conditions that make it politically tenable. Overall, the validity exception to the Convention should be invoked with caution.

The drafters took a practical approach to issues involving different national traditions or public policies. They excluded validity issues from the Convention's scope in order to prevent the unification process from bogging down in issues that could not be successfully unified. A tribunal faced with the question of whether to apply a domestic rule of validity to a contract for the international sale of goods should therefore look to see whether subsequent unification efforts might address the particular issue, or whether case law developments pursuant to the Convention indicate the potential for development of a uniform interpretation of that issue. Looking at validity issues through this functionalist lens, the tribunal may find it possible to reconcile the political compromise enshrined in article 4(a) with the Convention's goal of uniformity.

At the very least, article 7(1) requires courts to read their states' public policies narrowly in cases to which the Convention applies.[243] It is realistic to expect that courts will do so. A similar requirement is familiar to tribunals accustomed to deciding claims brought under the public policy exception to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.[244] In that context, the U.S. Supreme Court has demonstrated on several occasions its willingness to read domestic public policy narrowly when the dispute involves international commerce.[245] It would not be surprising, therefore, to see the same reasoning applied to the validity exception where a contract is governed by the CISG.

The international community should strive to find a common approach to the interpretive problems posed by article 4(a). Tribunals are best advised to steer clear of unexamined statements which, at one extreme, call for autonomous interpretation of the Convention or displacement of domestic law by the Convention, or which, at the other extreme, endorse the application of mandatory rules of domestic law to contracts for the international sale of goods. Rather, tribunals should be aware of the history of the Convention, including the validity exclusion, and the purposes it was designed to serve, in order to recognize the delicate nature of the conflict of laws analysis they are required to undertake, and to balance carefully the tension between domestic public policy and the needs of the international legal order.

IV. Applying Article 4(a) to Contracts for the International Sale of Goods

In many cases, a clear consensus exists that a specific issue, such as contractual capacity or duress, is indeed one of validity, and that domestic law will govern. However, these issues arise infrequently in international commerce. By contrast, issues that do arise frequently among international trading partners, such as mistake and exculpatory clauses, are more difficult to resolve. In addressing this latter set of issues adjudicators should avoid an oversimplified conflict of laws approach to the validity exception and balance the negotiating history of the CISG with the internationalist directive of article 7(1). Failure to approach these issues in a way that narrowly reads domestic public policy and that incorporates evolving norms of custom and practice in international commerce will undermine the object and purpose of the CISG. It is especially appropriate that tribunals take the balanced approach to article 4(a) proposed in part III to issues such as mistake and exculpatory clauses that can be expected to arise frequently in international commerce.

Most of the validity issues that are excluded from the scope of the Convention -- such as fraud, mistake, initial impossibility, and illegality -- are issues that do not figure largely in the process of planning contracts for the international sale of goods. Their exclusion, therefore, poses less of a danger to the goal of promoting predictability through unification than does the exclusion of rules governing the treatment of exculpatory clauses, which diminishes predictability in a significant area of contractual practice. The importance of this area suggests that uniform rules are needed to guide international traders. Accordingly, scholars should study the feasibility of achieving unification of the rules governing exculpatory clauses. In the mean time, taking a balanced approach to the treatment of exculpatory clauses in contracts for the international sale of goods can contribute towards the goal of achieving predictability in this field.

The drafting history of the ULIS and the CISG reveals numerous instances of unification with respect to issues that were once considered "too hot to handle." This historical perspective should guide tribunals faced with the contention that a domestic rule of validity governs an issue arising in a contract for the international sale of goods. Adjudicators should always proceed beyond the first step of ascertaining whether an issue of validity is presented by examining subsequent developments to see whether in fact international consensus has begun to emerge with respect to traditional issues of validity. In any case, adjudicators are cautioned to read domestic public policy narrowly in such cases.

Three themes from the preceding discussion assist in delineating validity issues. First, the origins of the validity exclusion can be traced to the ULIS drafters' early decision to exclude all issues of formation and validity from the scope of the Uniform Law. Second, the harmonization efforts of the UNIDROIT in preparing the LUV and the UNIDROIT General Principles provide valuable (though not conclusive) evidence of the drafters' -- as well as of the general -- understanding of validity. Third, CISG, article 4(a) must be viewed in the context of the growing body of regulatory legislation (i.e., mandatory law in the narrow sense) that affects contracts for the international sale of goods. This part will examine briefly the validity issues about which there is relative consensus and then focus on issues, such as mistake and exculpatory clauses, that lend themselves to the analysis set forth in part III.

Validity of contract relates not only to the form of a contract but also to a variety of its substantive aspects.[246] A clear systematization of the various rules of validity is difficult to achieve, not least because this field involves concepts that are fundamental to the different legal systems in which the Convention is in force.[247] The M.P.I. Validity Report prepared under the auspices of UNIDROIT dealt only with the substantive validity (materielle Gültigkeit) of contracts of sale.[248] It covered lack of capacity; defects (vices) of consent (Willensmängel); illegality, immorality and initial impossibility; and the requirement of consideration (or its civil law analogues). The category of defects (or vices) which vitiate the consent of one of the parties is familiar to jurists from different legal systems.[249] Under the common law, for example, contracts based on agreement presuppose real (as opposed to apparent) consent.[250] "Since mutual consent is essential to every agreement, and agreement is generally essential to contract, there can, as a rule, be no binding contract where there is no real consent. Apparent consent may be unreal because of mistake, misrepresentation, fraud, duress, undue influence, or mental incapacity." [251] These validity issues, and others, will be considered individually.

1. Capacity and Agency Authority

Issues of contractual capacity are clearly excluded from the scope of the Convention.[252] However, this exclusion is of little practical concern, since "questions of capacity rarely occur in international transactions." [253] Issues of agency authority are also excluded from the scope of the Convention,[254] although these issues are often important in contracts for the international sale of goods. Fortunately, this topic has been partially covered in the Convention on Agency in the International Sale of Goods, although this uniform law has not yet entered into effect.[255]

2. Formal Validity

CISG, article 4(a) does not permit tribunals to apply domestic writing requirements or other formalities, since the Convention contains an express provision which contradicts any domestic rule requiring a written or other form for validity or enforceability of a contract.[256] A similar provision included in the ULIS evoked heated debate among drafters of the CISG.[257] The compromise embodied in CISG, articles 12 and 96 (permitting Contracting States to make a declaration preserving the effect of domestic writing and other formal requirements) evidences a victory for those who thought that formalities should be excluded from the scope of the uniform law.[258]

As clear-cut as the Convention may appear to be on the question of formalities, however, difficult questions still arise. Professor Farnsworth has raised the question whether the provision of U.C.C. § 2-205, requiring that language making an offer irrevocable "on a form supplied by the offeree" be "separately signed by the offeror," is a question of validity preserved to national law under article 4(a).[259] A similar question arises in connection with domestic laws requiring contracts with some holders of public office to be in writing.[260] Such requirements directly pose the fundamental question of the scope of article 4(a), and of the relationship between the Convention and mandatory domestic law. In this situation, a domestic rule which may be characterized a rule of validity -- and perhaps also as mandatory in the narrow sense -- contradicts an express term of the Convention (article 11). In these cases, the provisions of the Convention control, rather than the provisions of domestic law, because the Convention "expressly provides otherwise" and thus displaces the domestic rules.[261] Even domestic rules of formal validity which are mandatory in the narrow sense must yield to the international legal regime, absent a Contracting State's declaration preserving the effect of such rules. The option of making such a declaration softens the blow to domestic mandatory law. Among states that decline to make such a declaration -- thus far all but seven -- article 11 advances the goal of facilitating international commerce and evidences the drafters' success in partially unifying commercially significant rules as to which deep-seated national differences made unification difficult.

3. Open Price Terms

The applicability to international sales contracts of domestic validity rules requiring that a contract expressly or implicitly fix or make provision for determining the price has been disputed for decades. Under the Convention, such domestic rules are not applied, but their effect is preserved because the CISG itself requires the contract to fix a price either expressly or implicitly. In this instance, the CISG actually harmonized a set of protective concerns, rather than relegate them to adjudication under domestic law.

Different groups of countries objected to open price term contracts during the drafting of the CISG and the ULIS. Socialist countries "objected to the conclusion of contracts with open price terms," because open price terms would frustrate the principle that parties should "conform their contracts to a predetermined macroeconomic governmental plan." [262] Others argued that contracts with open price terms placed developing countries trading in raw materials at a disadvantage by subjecting them to unpredictable swings in commodities markets.[263] Finally, some civil law countries, such as France,[264] view open price terms "with hostility, particularly where the unilateral fixing of the price works to the disadvantage of the weaker party." [265]

During the drafting of the ULIS, various delegations launched an attack against domestic rules invalidating contracts with open price terms. An early draft provided a rule for determining the price in a case where the contract did not state (or make provision for determining) the price and expressly prohibited the parties from pleading any rule of municipal law which renders invalid a contract that does not stipulate a price.[266] The French led the protest against this provision, arguing that it clearly related to the validity of the sale, and therefore conflicted with the provision excluding validity issues from the scope of the Uniform Law.[267] The final version of the ULIS provided a rule for determining the price in a case where the contract did not state (or make provision for determining) price, but deleted the language expressly prohibiting recourse to domestic law.[268] However, the dispute between those delegates who favored a measure of unification in this important area,[269] and those who vigilantly fought to preserve the applicability of domestic rules was not laid to rest.[270] On the contrary, the battle to preserve the role of domestic rules prohibiting open price terms continued.

CISG, article 55 essentially upholds the role of domestic rules prohibiting open price terms. During the drafting of the Convention, many argued that the ULIS provision fixing a price for an open term contract should be deleted from the CISG, since that provision governed issues pertaining to validity which were excluded from the scope of the uniform law.[271] The delegates came to agree that the uniform law's mechanism for filling an open price term would apply only if the applicable domestic law recognized that the contract was validly concluded.[272] This understanding is clearly reflected in the text of the Convention, which provides that

"[w]here a contract has been validly concluded but does not expressly or implicitly fix or make provision for determining the price, the parties are considered, in the absence of any indication to the contrary, to have impliedly made reference to the price generally charged at the time of conclusion of the contract for such goods sold under comparable circumstances in the trade concerned."[273]