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Reproduced with permission from 17 Journal of Law and Commerce (1998) 181-186

Symposium -- Ten Years of the United Nations Sales Convention

The Sales Convention: From Idea to Practice

John 0. Honnold [*]

What a pleasure again to take part in a program organized by the University of Pittsburgh School of Law. Professors Brand and Flechtner are trail-blazers -- among the first to see the importance of uniform law for international trade, and the values latent in the 1980 U.N. Sales Convention (CISG).[1]

When we met here a decade ago many wondered: Will this child grow? Will it be accepted? How will it act? Now we know the answer: the Convention's rules for international trade are now part of the living law of 51 countries that embrace a heavy majority of the population and trade of this shrinking planet.[2]

Today we have a chance to get better acquainted with this husky adolescent. As we proceed, in the historic pattern for a symposium, during my remarks you are invited to question, challenge and, most important, give us your experience in this new and growing field.

I. What Does the CISG Look Like?

As a start, let us take a hard look at this recent arrival in the world of commerce. Does it look odd or alien? Does it, perchance, resemble [page 181] anything you have seen before? Could it possibly resemble our domestic Uniform Commercial Code (U.C.C.)?

For your challenge or comment, I submit to you: the jobs of the U.C.C. the CISG are substantially the same. Both were designed to reduce the misunderstandings and controversies that can arise when one law governs the seller and a different law the buyer. They do this job in different areas: The U.C.C. is designed to avoid the modest differences among the domestic laws of our fifty states, while the CISG is designed to overcome differences among the laws of the countries of the world. In international trade there is still another river to cross -- differences in language. You may be a master of French, German, Spanish and Italian. How is your Hungarian or Arabic?

Our domestic U.C.C. and the international Sales Convention have a second kinship: they were created in similar ways. Neither was dictated by a central government. The U.C.C. was made by private initiative and cooperation -- for example, the American Law Institute (ALI). Similarly, the Sales Convention was prepared by delegates designated by the countries of the world. Incidentally, both were promoted by leaders of the bar, who know all too well the difficulties that can arise when two or more parties to a transaction are governed by different rules.

A third similarity between our domestic U.C.C. and the international Sales Convention just might surprise many American lawyers: The decisions under both the U.C.C. and the CISG are not subject to central review. Our Supreme Court and federal courts do not assert jurisdiction to review decisions interpreting the U.C.C. Similarly, there is no central world court that reviews the decisions in the various countries applying the CISG.

II. Has the CISG Produced Uniformity?

From this background we move now to questions that are difficult and important. If you have a different view, in the historic spirit of symposia, break in and help!

Have the decisions in our 50 states interpreting the U.C.C. maintained an acceptable degree of uniformity? Do you share my impression that the answer is yes? Why? Because our courts appreciate the importance of uniformity and predictability. To protect these values, most courts consider and give weight to patterns of decisions in other states.

Let's take our discussion a step further. How does our experience with domestic case-law under the U.C.C. apply to interpretation of the Sales Convention? Already, hundreds of decisions applying and interpreting [page 182] the CISG have been made by courts and arbitration tribunals around the world. Two years ago, Professor Michael Will published a list of over 150 CISG decisions.[3] Each year brings a larger number, as additional countries come "on-line" and as disputes ripen into decisions. The total by now is surely in the neighborhood of 250.

In addition to mentioning these numbers I have to report something peculiar about the pattern of reported cases. Leading the pack, by far, is Germany, with well over one hundred CISG decisions. Distant runners-up, in the 20s to 30s, are the Netherlands, Switzerland and France. Close behind are a dozen or so cases taken to the I.C.C. Arbitration Tribunal in Paris, and a smaller number to the International Arbitration Tribunal in the Russian Federation. At the tail of the pack, with between 2 and 6 reported cases, are Argentina, Australia, China, Denmark, Hungary, and our United States.

Why has the U.S., one of the earliest adherents to the Convention, with its massive volume of international trade, produced so few cases? Surely, some of you can help with this puzzle. Consider these alternatives: (1) Our lawyers are not litigious; [laughter] (2) Our court dockets are so overcrowded that protracted delays discourage suit and encourage settlement; and (3) The great majority of cases are in central Europe -- countries that had a decade or so of satisfactory experience with the predecessor to the CISG, the 1964 Hague Convention that provided uniform rules for international sales. [Discussion from the floor by the European scholars supported the third alternative.]

A short digression: You may wonder why the 1964 Hague Convention was superseded. As a U.S. representative to the 1964 Hague Conference, and a supporter of its objectives, let me share my observation that this important step towards unification was hampered by two closely related problems: (1) In spite of efforts by the sponsor -- the Rome Institute (UNIDROIT) -- only a few countries, primarily from central Europe, took part in the preparatory work; and (2) as a result, the drafting in some areas was too closely tied to the legal idioms and approaches of one region. It soon became clear that a broader outlook, based upon wider participation, was required. The happy ending: The countries that had adhered to the 1964 Convention realized that the broader approach was needed for world-wide trade, and have transferred their allegiance to the CISG.[page 183]

Should lawyers facing a dispute involving an international sale be interested in judicial decisions interpreting the Convention? A very keen interest has been evidenced by telephone calls and other inquiries directed to me. True, a few academics in some civil law countries have felt that only academic commentary is significant. On the other hand, practicing attorneys and scholars in civil law, as well as common law countries, appreciate the significance of the interpretations of an international convention by courts and arbitrators.

III. How Can We Find Decisions That Bear on a Problem We Face?

The UNCITRAL Secretariat regularly releases and circulates abstracts of decisions, under the name CLOUT, prepared by National Reporters of countries that have adopted the Convention.[4] A special feature of these abstracts is their translation from difficult languages (e.g., Hungarian) into one of the six U.N. languages -- for example, English. Another exceedingly helpful source for decisions, and related information, is the UNILEX database, prepared in Rome by a team organized by Professor Joachim Bonell.[5] Still another valuable collection prepared at Pace University by Albert Kritzer and colleagues, is available on the Internet.[6] Already there are also CISG websites in France, Germany, Finland and Brazil.

A wealth of information about the decisions can be found in the remarkable articles and volumes of thoughtful writing that the Convention has inspired. As I mentioned at the outset, those who work in this field are indebted to the regular CISG issues in this School's Journal of Law and Commerce. UNCITRAL has provided a bibliography of recent publications that includes sixty-one recent books and articles on the CISG.[7] I could never have anticipated this massive outpouring of writing about the Convention -- testimonial to the world-wide interest in international legal unification.[page 184]

IV. Should There Be an International Body To Review CISG Decisions?

Intriguing proposals have been advanced for creating an international body to review CISG decisions. These proposals do not call for an appellate court that could affirm or reverse decisions but, instead, a group or council whose conclusions would influence further cases. These proposals call for our careful attention. How, and by whom, would the members of this reviewing group be chosen? How could their selection avoid the impression of a local or regional outlook? (Fortunately, in developing the Convention, it was possible to respond to regional concerns.) If the group has world-wide membership, could arrangements be made for adequate consultation before reaching a decision? Would their conclusions have greater depth and wisdom than some of the existing and future writing about the Convention? (This observer has not yet found adequate answers to these questions.)

V. You May Wonder: What Issues Have Produced the Most Decisions?

Let's look first at one active area, that parallels domestic problems: Has a buyer lost its claim based on defective goods by failing to notify the seller within "a reasonable time?"[8] Not all domestic legal systems have such a rule, and some commentators suggest that one important European jurisdiction has been too strict in cutting off buyers' claims based on delay in notifying the seller of defects.[9] And yet, some courts seem to sense that a buyer's late claim of non-conformity of the goods may be a tactical move designed to reduce or delay a seller's rightful claim for payment.[10] (Surely that "can't happen here!?")

One may be surprised that the most frequently litigated issue (usually in the setting of various other issues) involves the calculation of [page 185] interest on sums "in arrears." Here UNCITRAL and the Sales Convention met their most serious impasse. The CISG, in Article 78, provides that interest is due on sums "in arrears," but was not able to agree on a formula for calculating the rate.[11] Many of the earlier decisions chose the domestic rate selected by private international law ("conflicts"), while later decisions and arbitral awards have tended to consider the loss incurred by the party whose right to receive payment was delayed.[12] Most significantly, decisions of the Vienna Arbitral Centre have supported the latter view and have fortified their decisions by invoking an important gap-filling provision (Article 7.4.9) of the UNIDROlT Principles of International Commercial Contracts.[13] For this observer, this seems a healthy way for law to grow. Do you agree?

Finally, we meet litigation in a delicate area that haunts both domestic commercial law and the Convention: Has a breach of contract been sufficiently serious to warrant avoidance of the contract? One senses that in international trade the result is (and should be) influenced by the distance that the goods have traveled and the relative facility of the buyer and seller to dispose of the goods. Interestingly, the jurisdiction, mentioned above, that has been strict in requiring prompt notice of defects, has been reluctant to support avoidance that destroys the contract.[14] Perhaps there is harmony between these two approaches -- but that, as Kipling would say, is "another story."

In closing, let me express my gratitude for this opportunity to discuss the Sales Convention with you. Best wishes for your further contacts with this important development in international law![page 186]


FOOTNOTES

* Professor John Honnold introduced the Symposium with the following comments. The remarks were informal by design and meant to stimulate discussion.

1. United Nations Convention on Contracts for the International Sale of Goods, Apr. 11, 1980, S. Treaty Doc. No. 98-9 (1983), 19 I.L.M. 668 (1980) [hereinafter "CISG" or "Convention"] (entered into force on Jan. 1, 1988), available in 15 U.S.C.A. app. at 49 (West Supp. 1996), 52 Fed. Reg. 6262-80, 7737 (1987), U.N. Doc. A/Conf. 97/18 (1980).

2. See CISG Contracting States and Declarations Table, 17 J.L. & Com. 449 (1998).

3. See Michael R. Will, CISG: International Bibliography, 1980-1995; The First 150 or so Decisions (3d ed. 1995).

4. The U.N. identification for this is: A/CN.9/SER.C/ABSTRACTS/1-13. This and other UNCITRAL material may be obtained from its website: http://www.un.or.at/uncitral

5. For information on procuring this service, contact [Transnational Publishers, Inc., One Bridge Street, Irvington-on-Hudson, NY 10533; fax (914) 591-2688].

6. This website can be found at http://www.cisg.law.pace.edu

7. See A/CN/441, 4 March 1997. See also Will, supra note 3. Professor Will’s 1995 report on decisions included references to 1,500 "or so" articles on the Sales Convention.

8. Compare CISG Arts. 38, 39, 44, with U.C.C. § 2-607(3)(a).

9. See Michael Joachim Bonell & Fabio Liguori, The U.N. Convention on the International Sale of Goods: A Critical Analysis of Current International Case Law (Part II), 1 (new series) Uniform L. Rev. (Unidroit) 359, 360 (1996) (citing five German cases in support, the authors assert that "the case law seems to be moving in the direction of a rather strict interpretation of the criteria of time set out in Articles 38 and 39 [of the CISG], requiring the buyer to conform to generally brief terms").

10. See OLG Düsseldorf, No. 17 U 136/92 (Mar. 12, 1993), UNILEX, (holding that buyer’s refusal to pay full price for delivered textiles was improper; buyer’s notice of non-conformity 25 days after delivery was not within a reasonable time given the obvious defects in the goods); LG Berlin, No. 99 O 29/93 (Sept. 16, 1992), UNILEX, (holding that buyer, who had stopped payment on checks covering part of the price, had failed to give timely notice; buyer admitted discovering the defect more than two months before giving notice).

11. See CISG, supra note 1, art. 78.

12. For discussion of the method for determining the applicable interest rate and decisions dealing with this issue, see Franco Ferrari, Specific Topics of the CISG in the Light of Judicial Application and Scholarly Writing, 15 J.L. & Com. 1, 116-25 (1995); see also Dr. Volker Behr, The Sales Convention in Europe: From Problems in Drafting to Problems in Practice, 17 J.L. & Com. 263 (1998).

13. See Michael J. Bonell, An International Restatement of Contract Law (The UNIDROIT Principles) (2d enlarged ed. 1997).

14. See OLG Frankfurt, No. 5 U 15/93 (Jan. 18, 1994), UNILEX, (holding that buyer had not validly declared the contract avoided because it had not fixed an additional period of time for seller to perform pursuant to Articles 47(1) and 49(1)(b)); AG Nordhorn, No. 3 C 75/94 (June 14, 1994), UNILEX, (holding that buyer’s attempted declaration of avoidance was invalid).


Pace Law School Institute of International Commercial Law - Last updated July 28, 2000
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