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Cite as Khoo, in Bianca-Bonell Commentary on the International Sales Law, Giuffrè: Milan (1987) 44-48. Reproduced with permission of Dott. A Giuffrè Editore, S.p.A.

Article 4

Warren Khoo

1. History of the provision
2. Meaning and purpose of the provision
3. Problems concerning the provision

ARTICLE 4

This Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. In particular, except as otherwise expressly provided in this Convention, it is not concerned with:
(a) the validity of the contract or of any of its provisions or of any usage;
(b) the effect which the contract may have on the property in the goods sold.

1. History of the provision.

     1.1. - Article 4 has its antecedent in Article 8 of ULIS. Whereas Article 8 of ULIS stated that the law was not to be concerned with the formation of contracts, such a statement would, of course, be inappropriate in the context of this Convention, which, unlike ULIS, does deal with the subject.

     1.2. - Throughout the legislative history of this article there were criticisms levelled against it and attempts made to delete it from the draft (Yearbook, III (1972), 74; Yearbook, VI (1975), 52). However the view prevailed that the article served a useful purpose, and it was retained.

     1.3. - In the 1976 Draft, there was also a tentative addition by the Working Group of the following provision for the consideration of the Commission:

This Convention does not govern the rights and obligations which might arise between the seller and the buyer because of the existence in any person of rights or claims which relate to industrial or intellectual property or the like (Yearbook, VII (1976), 90).

The Commission did not accept this addition, taking the view that the matter of rights and claims relating to industrial or [page 44] intellectual property should be dealt with in the article of the Convention dealing with that subject (i.e., now Article 42) (Yearbook, VIII (1977), 30).

2. Meaning and purpose of the provision.

     2.1. - At first sight, this article states the obvious. Possible justification for its existence lies in the intention that the Convention be applied world-wide, and by lawyers, judges, arbitrators as well as by businessmen who are not all acquainted with the legislative history of the Convention. It was believed better to err on the side of stating the obvious than to risk that provisions of the Convention be given unintended effect.

     2.2. - The risk is perhaps a real one in cases raising the specific issues mentioned in the sub-paragraphs of this article -- issues of validity and property in the goods sold. By specifically enumerating these matters, the article places it beyond doubt that they are entirely outside the ambit of the Convention.

     2.3. - The two parts of the article (stating what the Convention deals with and what it does not) reinforce each other; together they help to elucidate the meaning and intent of the article as a whole.

     2.4. - The words «in particular» make it clear that the matters set out in (a) and (b) are not the only matters which fall outside the realm of concern of the Convention. Other legal issues not specified herein and not concerned with the rights and obligations of the buyer and seller arising from a contract of sale are, of necessity, to be dealt with by rules of the applicable domestic law, unless they could be dealt with by application of the gap-filling provisions of Article 7.

     2.5. - The words «except as otherwise expressly provided in this Convention» appear to have been included out of an abundance of caution, certainly as far as validity is concerned, since none of the provisions of the Convention expressly deal with the question. Questions concerning passing of property are involved only indirectly in Articles 41 and 42. [page 45]

     2.6. - The principle enunciated in this article, that the Convention does not deal with questions of validity, finds an echo in Article 55 which deals with cases in which a contract has apparently been concluded but without any agreement or provision as to price. In these instances, Article 55 makes it clear that its provision takes effect subject to the contract having been validly concluded by the criteria of the applicable domestic law (see commentary on Article 55, infra).

     2.7. - As well as with the validity of a contract, the article disclaims all concern with the validity of any provision of a contract and the validity of any usage. All such questions are therefore to be dealt with by recourse to the applicable domestic law.

     2.8. - Nor is the Convention intended to deal with the complex problem of the passing of the property in the goods sold. There is such a diversity of rules in municipal law on this point that unification was considered to be impossible.

3. Problems concerning the provision.

     3.1. - Although cast in the form of a statement of fact, this article serves as a guide-post to the interpretation and application of the Convention and is likely in practice to acquire a normative force of its own. The emphatic statement that the Convention is concerned only with rights and obligations of the buyer and seller arising from a contract of sale, is surely a directive to the users of the Convention to look elsewhere for solutions to other questions.

     3.2. The article is a reminder of the existence of the difficult problem of the interplay between the Convention and domestic law and delineating their respective spheres of application. What are rights and obligations «arising from» a contract of sale is a question not susceptible of easy answers in any but the simplest of cases.

     3.3. - Let us take an example. Seller in Contracting State A enters into a contract to set up a plant for Buyer in Contracting [page 46] State B on a turnkey project to produce industrial drums capable of holding chemical solvents. The process involves a technology that is not readily available. Buyer in State B has no experience, and relies on the skill and judgment of Seller to a) recommend the machinery needed for the production, and b) supply, install and commission the plant. Seller carelessly recommends a line of equipment which turns out to be incapable of producing drums suitable for the purpose. The machine, however, can produce drums suitable for holding other liquids, and Buyer decides to keep it and claim damages. During negotiations, Seller also misrepresented to Buyer that Seller had special expertise in producing this kind of machinery. If it had not been for this misrepresentation, Buyer would not have entered into the contract. Buyer now claims against the Seller for: a) making the recommendation without due care; b) misrepresentation; c) non-conformity of the machinery.

          3.3.1. - No provision in the Convention deals with a claim based on lack of due care. It is debatable whether the court may resort to rules of the applicable domestic law to decide this issue, while resorting to the Convention to deal with the claim for non-conformity. In favour of a positive answer to the question is the lack of express provision to the contrary in the Convention and the general proposition that it is not the intention of the Convention to take away rights which parties otherwise have under the law.

          3.3.2. - It has been suggested (HONNOLD, Uniform Law, 103), however, that in a case of a claim for non-conformity of goods where one of the elements of the claim is lack of due care in the manufacture of the goods, this element does not alter the «essential character» of the claim for non-conformity, and should be subsumed under the claim for non-conformity and the Convention should not be excluded.

          3.3.3. - If this solution is right, the principle could be extended to cover the problem at hand, so that although the claim is presented on the basis of lack of due care in the recommendation of the machinery, it is part and parcel of a case of non-conformity under Article 35(2)(b), and the Convention should apply.[page 47]

          3.3.4. - The problem, however, takes on a different shape in regard to the claim for misrepresentation inducing the Buyer to enter into a contract and resulting in loss to him. Since Buyer does not seek to annul the contract, this question is not one of validity and cannot be excluded from the Convention on that ground. On the other hand, it is highly doubtful whether it is a question of the rights and obligations «arising from» the contract. A claim based on what transpired before the contract is entered into could scarcely give rise to a liability «arising from» the contract, unless the meaning of that expression is stretched to unacceptable limits. In any event, it would be clear from the Convention itself that none of its provisions deals with such a claim. The issue having been raised, the tribunal is duty-bound to adjudicate on it. Thus, it should look to rules of the applicable domestic law for a solution.

          3.3.5. - If the misrepresentation were incorporated as a provision of the contract of sale, the issue would no doubt be governed by the Convention. Failure to live up to the obligation created by such a provision in the contract would be a breach, and attract remedies provided in the Convention.

Problems of nomenclature could also present themselves, as in cases raising questions of validity. There is strong opinion in favour of the view that the' label given by domestic law is not conclusive as to whether a particular matter (e.g., validity of contract) falls within the Convention (HONNOLD, Uniform Law, 97). The substance rather than the label or characterization of competing rule of domestic law determines whether it is displayed by the Convention. In determining such questions, the tribunal, it is submitted, should be guided by the provisions of Article 7, and give to the Convention the widest possible application consistent with its aim as a unifier of legal rules governing the relationship between parties to an international sale (see commentary on Article 7, infra). [page 48]


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