Excerpt from John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed. (1999), pages 138-140. Reproduced with permission of the publisher, Kluwer Law International, The Hague.
§ 128 A. The Conflict
Laws of the U.S.S.R. imposed strict formal requirements for the making of foreign trade contracts. In the UNCITRAL proceedings representatives of the U.S.S.R. indicated that preserving these requirements was of great importance to protect established patterns for the making of foreign trade contracts. Most delegates, however, felt strongly that formal requirements were inconsistent with modern commercial practice—particularly in view of the speed and informality that characterized many transactions in a market economy.
§ 129 B. The Resolution: A Reservation Under Article 96
The result was a compromise. In Part IV (Final Provisions), Article 96 authorizes a Contracting State "whose legislation requires contracts of sale to be concluded in or evidenced by writing" to make a "declaration" that Article 11 (and certain other provisions of the Convention affecting formal requirements) "does not apply where any party has his place of business in that State." Article 12 articulates the effect of a declaration under Article 96.
"Any provision of article 11, article 29 or Part II of this Convention that allows a contract of sale or its modification or termination by agreement or any offer, acceptance or other indication of intention to [page 138] be made in any form other than in writing does not apply where any party has his place of business in a Contracting State which has made a declaration under article 96 of this Convention. The parties may not derogate from or vary the effect of this article."
The final text, above, followed rejection of a proposal that the formalities of one "declaring" State (including matters such as registration, etc.) would govern both parties to the contract. This proposal was rejected on the ground that it would extend formal requirements beyond prevailing law, which depended on agreement of the parties, or conflicts (PIL) rules of the forum.
The crucial language of the compromise (which admittedly is difficult to parse) provides that any provision of Articles 11, 29 or Part II of the Convention that allows a transaction "in a form other than in writing does not apply where any party has his place of business in a Contracting State which has made a declaration under article 96 of this Convention".
The following States have made declarations under Articles 12 and 96: Argentina, Belarus, Chile, China, Estonia, Hungary, Russian Federation and Ukraine. The language of Articles 12 and 96 has led to uncertainty; perhaps concrete examples will help:
Example 12A. Seller (S), in State S, claims that S and Buyer (B), in State B agreed on a sale of a tractor by S to B. The agreement was not embodied in a writing. State B requires a signed writing, and has made a declaration under Articles 12 and 96 rejecting Article 11, supra, that dispenses with such formalities. State S does not require a writing or other formalities. The above basic, but incomplete, facts need to be considered in different situations.
Case A. Seller (S) shipped the tractor to B, whose place of business was in State B, a "reservation" State requiring a written agreement. B refused to receive or accept the tractor or to pay, on the ground that the alleged agreement was not in writing. S sued B in State B; witnesses testified that S and B had agreed on the sale. In the absence of further facts (e.g.: a request by B for shipment, or B’s acceptance of delivery of the tractor that would create an estoppel) it seems that the tribunal in B would dismiss S’s suit. This is the typical case envisaged by Articles 12 and 96.
Case B. The facts are the same as in Case A, except that S sued B in State S, which does not require contracts to be in writing. As in Case A, there are no further facts (e.g.: a request for shipment or acceptance of the tractor that would create an estoppel). Even though conflicts rules point to State S, which does not require a writing, this writer now (contrary to his earlier opinion) suggests that State S should dismiss S’s [page 139] suit—the same result as in Case A. This about-face results from this combination: (1) "any party" could refer to the application of Article 12 to both parties to the transaction, and (2) the acceptance by the Convention of the need, felt by some States, for protection against claims unsupported by a written agreement. Compare alleged oral modification (Arts. 12 & 29): BELG. Rechtbank v. Kh. A.R. 1894/94, Vital Verry . . . v. Dira-Frost, 2 May 1995. B refused to open a letter of credit, claiming an oral agreement for reduction of the price. S’s country (Chile) had made an Art. 12—96 reservation. Held: The alleged oral agreement was not effective. UNILEX D. 1995-15:1.2.
Case C. A deviation from the facts of Example 12A, above: State S (unlike State S in the above example) enforces agreements only if they have been reduced to writing; State S has made no declaration under Articles 12 and 96. State B has made an Article 12–96 declaration. In addition, the law of State B requires not only a written agreement but also additional formalities such as registration in a specified public office in State B. Should State S refuse to enforce a written agreement because it has not been filed in a public office in State B? This added formality is not protected under Articles 12 and 96 which require only an agreement "in writing". In this setting, it may be necessary to depend on the conflicts (PIL) rules of the forum. (This approach seems also necessary in agreements between States that, in addition to requiring a written agreement, have additional but different formal requirements.)
Are the above views consistent with the following decision?
An agreement was concluded, by telephone, by a German seller (S) and a Hungarian buyer (B). The goods were delivered to B, who refused to pay. In an action brought in a Hungarian court, B argued that, under Hungarian law, sales contracts must be evidenced by a writing, and that Hungary had made a declaration under Article 96 preserving Hungary’s formal requirements. The court rejected this view. In this case, under Hungarian conflicts (PIL) rules, German law was applicable. German domestic law did not require a writing; judgment for the price was awarded to the German seller. HUNG. Met. Ct.: Budapest, AZ12.G.41.471/1991, 24 March 1992. UNILEX D. 1992-8. See Witz, p. 74; Schlechtriem, Com. (1998) 92–93.
Note that the result in this decision differs from that suggested above in Case B. Queries: (1) Is the writer wrong about the solution to Case B? Or: (2) Is the Hungarian tribunal’s decision applying German law supported by the fact that the goods had been delivered to the Hungarian buyer? Note the qualification in Case B that rules on formalities may be affected by conduct demonstrating that a contract had been made. (In some jurisdiction this would be called an estoppel.)[page 140]
FOOTNOTES: Chapter on Article 12
1. Early discussion in UNCITRAL leading to Articles 11 and 12; II YB 48–49, 60–61, VI YB 96, 111–112, 53–54, VIII YB 94–95, 76; Docy. Hist. 53–54; 66–67, 221, 236–237, 244–245, 258–259, 277.
2. This article is substantially the same as Art. 11 of the 1978 Draft. Art. 12, in substance a repetition of Art. 96, was inserted immediately following Art. 11 to draw attention to the fact that Art. 11 might be affected by a reservation. Discussion in UNCITRAL leading to Arts. 12 and 96: IX YB 70–71, VIII YB 33–34, Docy. Hist. 302–303, 366–367, 326–327. The 1980 Conference: O.R. 74, 20, 271–275, 90–92, Docy. Hist. 395, 410, 492–496, 662–664.