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CISG and Mistake: Uniform Law vs. Domestic Law

The Interpretative Challenge of Mistake and the Validity Loophole

Patrick C. Leyens [*]
October 2003

Abstract
I.   Introduction
II.  The Doctrine of Mistake
      A. The Conceptual Issues
      B. The Search for an Internationalist Doctrine of Mistake
      C. The Doctrine of Mistake under the UNIDROIT Principles
III. Mistake under the CISG
      A. The Validity Exception

1. The Interpretative Challenge
2. Methods of Interpretation
      B. The Drafting History of the CISG
1. Introduction
2. ULIS
3. LUV
4. Summary
      C. The CISG's Autonomous Rules of Interpretation
1. Domestic Law Approach
2. Autonomous Interpretation
3. Displacement Theory
4. Balanced Approach
      D. Conclusion
IV. Selected Types of Mistake
      A. Mistake in Expression
      B. Mistake in Motive
1. Mistake in regard to the Identity of the Goods or the Other Party
      a. Mistake in regard to the Identity of the Other Party
      b. Mistake in regard to the Identity of the Goods
2. Mistake in regard to the Existence of the Goods
3. Mistake in regard to the Quality of the Goods
      a. Conflict Rule for the Parallel Applicability of Domestic and Uniform Remedies
      b. Notice Period and Cut-off Period of CISG article 39
      c. Summary
4. Mistake in regard to Characteristics of the Other Party
      a. Remedies under the CISG
      b. Conflict Rule for the Parallel Applicability of Domestic and Uniform Remedies
      C. Summary
V.   Conclusion

ABSTRACT

The ratification of the United Nations Convention on Contracts for the International Sale of Goods (CISG) by 62 states, as of August 2003, constitutes an important success in harmonizing international sales transactions. The increased legal certainty established by the CISG, however, is compromised by its provision in article 4(a). It is provided therein that a party can seek recourse to domestic law where a case concerns the validity of the contract. This so-called validity exception reveals a number of ambiguities and irregularities in the CISG.

A case of mistake is one of the challenges for the interpretation of CISG article 4(a). Under a number of domestic laws a case of mistake raises a question of validity. Does this indicate that we should apply CISG article 4(a) and open the way for domestic remedies? The tension between the uniform law of the CISG and domestic laws can be illustrated by a case that involves a lack of conformity. The harmonization of the law of warranty is one of in the very central concerns of the CISG. Articles 35 et seq. provide a damage-based remedial scheme for cases where the goods do not conform. Should a buyer, based on a mistake in regard to the quality of the goods, be entitled to challenge the validity of the contract by recourse to a domestic concept of nullity? Does he have the choice whether to rely on the damage-based remedial scheme of the CISG or to claim that the contract is void or voidable under domestic law?

The core question that is involved in a case of mistake is how to determine "validity" under CISG article 4(a). It seems that in the struggle for a correct understanding of the validity exception today an internationalist view prevails that restricts the application of domestic remedies to the very minimum. Are those pleas for wide exclusion of domestic law convincing? Does such an internationalist view on the validity exception provide a consistent theory for cases of mistake? Further, is there one single rule for all types of mistake or do we have to ask "mistake as to what"?

This paper seeks to contribute to the interpretation of CISG article 4(a) - a dispute that is nearly half a century old, and still raging in particular as it regards different situations of mistake. For a functional understanding of mistake, the analysis will first turn to the conceptual issues (section II). It will then turn to the CISG's drafting history and to the conclusions scholars draw from it for the interpretation of the validity exception (section III). On that basis. selected cases of mistake will be analysed (section IV). To what extent are the interpretative problems settled by case precedent? To what extent does scholarly writing guide the decision-making by a court where case precedent has not yet settled the question?

I. INTRODUCTION

Scholars have enthusiastically proclaimed the success of the United Nations Convention on Contracts for the International Sale of Goods, Vienna 1980 (CISG).[1] Some have gone so far as to divide the world of international trade into "Vienna and Non-Vienna" legal structures, speaking of a "bifocal world"[2] of international trade.[3] As of September 2003, 62 States have ratified CISG - including the United States and Germany.[4] The impressive development of the CISG has, at least for the time being, left behind the question whether harmonization of the law of contracts for the international sale of goods is politically desirable or economically useful.[5]

According to Ernst Rabel, the "grandfather" of the CISG, the merits of an international uniform sales law must be measured by the extent to which it removes important contractual issues from the domestic and into the international realm.[6] Even today Rabel's monograph of 1936, "Das Recht des Warenkaufs"[7] [The law of the sale of goods],[8] is seen as the basis of today's CISG. Rabel was the founding director of the Max-Planck-Institute for Foreign Private and Private International Law in Hamburg, Germany. One of his successors, Hein Kötz, questioned his ambitious claim - as well as the enthusiasm on the part of some scholars about the ostensible success of the CISG - and suggested that on closer inspection:

"The question appears justified (to ask) whether uniform law, in as far as it intends to simplify law, does not find itself in the position of Heracles who cut off Hydra's snake head only to be confronted with three new ones instead."[9]

This statement indicates that the development of the CISG and the preservation of its internationalist goals is an important task for courts [10] and also for commentators [11] and scholars.[12] The doctrine of mistake is one of the issues Kötz may have had in mind when making this statement.[13] It will be shown that a case of mistake reveals a number of uncertainties, ambiguities and irregularities of the CISG.[14] The CISG is silent on the question of mistake but its article 4(a) excludes matters of the validity of the contract from its scope. Thus the interpretative challenge is to ascertain whether a case of mistake raises a question of validity that comes under CISG article 4(a).

Unfortunately, there is little case law on the doctrine of mistake. This is due to several reasons. First, businessmen will often be willing and able to find a friendly settlement within their contractual relationship if a mistake becomes apparent. Secondly, modern contract drafting often provides for confidential dispute resolution.[15] Thirdly, amicable settlements are often reached during the proceedings - be it in litigation or arbitration.

The core question for a tribunal that is confronted with a case that involves a mistake is whether domestic remedies which allow a contract to be avoided are applicable. Some have argued, perhaps simplistically, that the CISG does not govern questions of mistake, fraud, duress and hence find that domestic remedies are applicable.[16] It is true that all three issues involve a defect of intention. But does this indicate that mistake should receive the same treatment as fraud and duress? The tension between the CISG and avoidance [17] under domestic law becomes abundantly clear in cases that involve a mistake in regard to the quality of the goods. The CISG provides a damage-based remedial scheme for cases where the seller delivers goods that do not conform to the terms of the contract. Therefore, it has been argued, it would be an undue circumvention of the CISG if the buyer could avoid the contract on the basis of a domestic remedy. In recognition of this tension between the CISG and domestic laws the discussion about mistake has partly shifted. Today, the prevailing view seems to be that mistake, fraud and duress cannot be treated equally. A number of scholars argue that cases involving a mistake in regard to a quality of the goods do not raise issues of validity; hence, they conclude that domestic remedies are precluded.

As for a theoretical basis, the view has been put forth that we should distinguish according to the specific facts that provoked the mistake.[18] It was suggested that we ask: "mistake about what?"[19] The rule to be derived from this question would be to exclude domestic law for all those cases whose facts are addressed by the CISG. This would suggest applying the CISG exclusively to questions of non-conformity of the goods, thus denying the right of the buyer in such cases to avoid the contract by claiming mistake. Such a rule would be a step forward on the way to an internationalist interpretation of the CISG. It does, however, lead back to the question of how to correctly interpret the validity exception of CISG article 4(a). This question will be a major focus of the paper.

This paper seeks to ascertain whether the different approaches to the validity exception provide a theory consistent for cases of mistake. Section II will try to highlight the conceptual issues in the doctrine of mistake. Section III will turn to the CISG's rules of interpretation and discuss the approaches to mistake presented so far. On that basis, section IV analyses selected cases of mistake. To what extent are the questions settled by case precedent? To what extent does scholarly writing guide the decision-making by a court where case precedent has not yet settled the question? The final conclusion under section IV will evaluate whether Kötz' provoking picture of Heracles' fight against the snake-headed Hydra is justified.

II. THE DOCTRINE OF MISTAKE

The drafting history of the CISG impressively demonstrates a progressive attempt to achieve a meaningful unification of the law on international sales transactions.[20] The need and willingness to develop a body of universally acceptable rules involved a complicated struggle for compromise between different legal systems from all over the world. It has been argued that the finally adopted text contains a number of ambiguities and, to some extent, embodies an illusory compromise.[21] Does the fact that the CISG does not explicitly deal with the doctrine of mistake present an example of such an illusory compromise? The discussion of selected cases of mistake (below section IV) will show that some remedies of the CISG operate on the same facts as those domestic remedies that allow avoidance of the contract on the basis of a mistake.[22] In order to provide a basis for further analysis we should examine the conceptual issues raised by a case of mistake.

A. The Conceptual Issues

Two different approaches can be taken to the doctrine of mistake. First, it can be argued that a key element of the contractual agreement is missing if the decision is induced by a mistake. A case of mistake therefore raises a validity question. Secondly, if the mistaken party can nullify the contract he is freed from his obligations. Hence a case of mistake also raises a question of defences for non-performance.[23] From these introductory remarks it can be concluded that mistake is either a question that concerns the stage of contract formation (is the contract valid?) or that concerns the stage of contract performance (is non-performance excused?).

B. The Search for an Internationalist Doctrine of Mistake

Lawyers from different countries each have their own understanding of the doctrine of mistake.[24] What is generally accepted is that mistake is a defect of intention (error in motive) or a defective expression of a correctly formed intention (error in expression).[25] The consequences, however, differ from country to country.

An objective of the CISG is to provide rules that are functionally equivalent to the domestic sales laws of member states from all over the world. For an internationalist understanding of the doctrine of mistake it appears most promising to follow this line and to look into the rules that are widely agreed upon and practiced within the international commercial community: the "law merchant" or the "lex mercatoria".[26]

It has been argued that the UNIDROIT Principles of International Commercial Contracts 1994 [27] provide a restatement of the lex mercatoria.[28] It must be noted that the UNIDROIT Principles do not directly govern a contract as does the CISG unless they are incorporated into a particular contract as a body of rules supplementing the terms of the contract and supplementing the CISG as the law applicable to the contract.[29] CISG article 7(2), however, provides that matters not expressly governed by CISG are to be settled in conformity with the principles on which it is based.[30] In cases in which both the CISG and the UNIDROIT Principles follow the same idea, where appropriate the UNIDROIT Principles can be referred to as an interpretative source under CISG article 7(2).

C. The Doctrine of Mistake under the UNIDROIT Principles

Article 3.4 of the UNIDROIT Principles defines mistake as "an erroneous assumption relating to facts or to law existing when the contract was concluded." This definition contains three elements. The first and very basic element is "erroneous assumption" that, by virtue of article 3.6, is explicitly broadened to include "an error occurring in the expression or transmission of a declaration." It thus covers both a mistake in motive and a mistake in expression. Secondly, the erroneous assumption may be related "to fact or to law". Thirdly, the element of time ("when the contract was concluded") renders irrelevant a mistake which arose before the intention is expressed. The same applies to a mistake that arises subsequent to the conclusion of the contract.[31]

Article 3.5(1) of the UNIDROIT Principles provides that a mistake has material effect only where it is "of such importance that a reasonable person in the same situation as the party would not have concluded the contract if the true state of affairs had been known."[32] As a consequence of a mistake that is of such importance, the mistaken party may nullify the contract by declaring it void.

The UNIDROIT Principles thus clearly reflect the approach which classifies mistake as a validity question. It is an approach reinforced by UNIDROIT Principles article 3.7. It explicitly provides that the remedy of avoidance on grounds of mistake must not be used as an alternative remedy where the other party fails to perform.[33] By according primacy to the remedies for breach of contract in cases of conflict the UNIDROIT Principles prevent mistake being used as a defence to non-performance.[34]

The rule in UNIDROIT Principles article 3.3 gives further support.[35] This states that the validity of the contract is not affected if the performance of the obligation was impossible from the outset or if the party was not entitled to dispose of the assets to which the contract relates.[36] Thus, these typical cases of initial impossibility are expressly classified as non-validity issues. This implies that they are also removed from the scope of the provisions on mistake. A party cannot, therefore, claim avoidance on the grounds that he was mistaken as to the ability of either party to perform.

The UNIDROIT Principles further suggest a distinct treatment of the different types of defects in intention. According to UNIDROIT Principles article 3.19, the rules on fraud and threats are mandatory whilst those on mistake (and initial impossibility) are not. This distinction illustrates the hierarchical order of the different defects of intention.[37] Mistake is on the bottom, fraud in the middle and duress on the top for the simple reason that way up this hierarchy more detailed rules are required to protect the fundamental principle of freedom of intention.[38]

In conclusion, it can be stated that the approach suggested under the UNIDROIT Principles does not rely on a single classification applicable to all cases of defective intention. Hence, support is given to those who ask "mistake as to what?"[39]

III. MISTAKE UNDER THE CISG

The discussion of a case of mistake under CISG focuses on the so-called validity exception as set out by CISG article 4(a).

A. The Validity Exception

The provision of CISG article 4(a) gives a negative and a positive rule. The negative rule is that the CISG is not concerned with "the validity of the contract or of any of its provisions or of any usage". The positive rule states that this applies "except as otherwise expressly provided in this Convention." Hence, the scope of the negative rule is limited by the positive one. According to this structure, we have to apply a twofold test if we want to find out whether the CISG applies to a case that involves a mistake: first, it has to be decided whether mistake is classified as a validity issue. If so, it secondly has to be examined whether it is governed by "expressly provided" rules of the CISG. This seems to be a simple rule. Alas, as we will see in the following sections, the simplicity is deceptive.[40]

1. The Interpretative Challenge

A case that involves a mistake is a challenge for the interpretation of the CISG. The core problem concerns the question of how to determine "validity" under CISG article 4(a) or - in other words - whether the CISG treats mistake as a validity issue.

It has correctly been argued that it would be an "analytical short-cut" to simply equate the meaning of validity with the issues listed in Chapter 3 of the UNIDROIT Principles.[41] CISG article 4(a) is a provision that promotes elasticity. As we will see in more detail below, the CISG drafters did not have in mind a fixed set of validity issues. It should also be noted that the CISG was developed by UNCITRAL and not by UNIDROIT. Further, the UNIDROIT Principles were drafted long after the CISG had been adopted.

As we cannot simply look into the UNIDROIT Principles or into any other set of principles for the scope of the "validity" exception we have only two options left: we can either argue that domestic law is responsible for the determination of validity; or we can argue for an internationalist understanding that would be based on the rules of the CISG.

If we look exclusively to domestic law for the answer of this question we will face a problem that perhaps is best illustrated by mistake in regard to the conformity of goods. For example, Austrian law would allow avoidance of the contract if such a mistake can be proven; whilst, under German law, a damage-based remedial scheme comparable to that of the CISG is applicable. Under Austrian law, we therefore could argue that a mistake in regard to the conformity of goods is a validity issue, whilst under German law we could not. The consequence would be that a mistaken party in one country, for example in Austria, could nullify the contract whilst in another country, for example Germany, the party would be restricted to the remedies provided under the CISG. With regard to the goal of the CISG to provide a uniform remedial scheme for all Contracting States, particularly in the field of breach of warranty, this result looks strange.

If we therefore look to the CISG for the determination of whether the case is one of validity we will find that under its articles the CISG provides a damage-based remedial scheme for cases where the goods do not conform. From this, we could conclude that the issue is not one of validity. Recourse to a domestic remedy that operates on the facts of a mistake in regard to a quality of the goods would thus be precluded.

To sum up, the first interpretative challenge is to decide how to determine whether a case involves a validity issue: should this be characterised according to domestic law or according to an internationalist understanding? This challenge must be faced; otherwise, it will be unclear whether domestic remedies are preempted by the operation of the remedies of the CISG or whether they compete.[42] The question, "preemption or competition of uniform and domestic remedies?", is one of the core issues in the struggle for a correct understanding of the interplay between the CISG and domestic laws. The problem does not only arise in regard to mistake and validity issues. It also comes up in cases where the claimant tries to employ, for example, national tort remedies that go beyond what he can claim under the CISG.[43]

It should be noted that the whole problem only arises where there is a conflict between domestic law and the CISG: e.g., where domestic law provides for nullity in a case which the CISG would treat in terms of its uniform remedial scheme. The issue can be further articulated against the background of time limits set by the CISG: if one party has lost his damage based remedies under the CISG due to a failure to give timely notice (CISG article 39), he will likely try to rely on a domestic remedy whose time limits go beyond that of the CISG. As the examples show, the conflict between the uniform remedial scheme of the CISG and domestic nullification remedies can easily arise in an area very central for the harmonization effect of the CISG. Other types of mistake where a conflict rule is needed will be discussed below under the heading "selected types of mistake".

From this brief introduction into the issues of the interpretation of CISG article 4(a) in cases of mistake it is not surprising that two diametrically opposed approaches to CISG article 4(a) have developed.[44] According to the first, domestic law is exclusively responsible for the determination of validity.[45] This approach emphasizes the negative rule of CISG article 4(a) ("not concerned with"). According to the second approach, the CISG has an autonomous - if admittedly incomplete - concept of validity. The rules of CISG are seen as leges speciales as far as they provide functionally adequate solutions. This approach focuses on the positive rule of CISG article 4(a) ("expressly provided").[46]

2. Methods of Interpretation

Before I turn to a detailed analysis of the different approaches to CISG article 4(a), the methods of interpretation must be further explored. The CISG is a treaty that provides substantive law. In a country that adopted the CISG, a national court must apply the uniform law to all cases the state parties intended to submit to the scope of the CISG when ratifying it. Accordingly, as a first step we must interpret CISG article 4(a) in light of the drafting history.[47] This rule of interpretation is taken up by articles 31 and 32 of the Convention on the Law of Treaties (Vienna 1969)[48] but as matter of principle also applies to the interpretation of the CISG where the Convention on the Law of Treaties has not been ratified.[49] As a second step the autonomous rules of interpretation that are embodied in CISG article 7 apply.[50]

The hierarchy between both strands of interpretation is apparent. If the analysis of the drafting history leads to the result that the state parties intended to exclude cases of mistake from the CISG there would be no room for the autonomous rules of interpretation of the CISG.[51]

B. The Drafting History of the CISG

According to the hierarchy of the two strands of interpretation, the drafting history has to be examined first.

1. Introduction

The drafting history of the CISG dates back to 1935 when a preliminary draft for a uniform law on international sales was issued by UNIDROIT.[52] Work was suspended during the Second World War. Parallel efforts were made to develop a uniform law exclusively on issues relating to the formation of contract. In 1964, the Diplomatic Conference finalized two conventions, the Uniform Law for the International Sales of Goods (ULIS) and the Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF).[53] In 1972, both conventions came into force but were ratified by only a small number of states, mainly from Europe. Shortly after it became clear that due to their strong orientation on Western legal culture ULIS and ULF would not be attractive to countries in other parts of the world and that they would not lead to level of harmonisation that would facilitate international sales transactions.

Already in 1968, the first session of the United Nations Commission on International Trade Law (UNCITRAL) was held. In contrast to the drafting of the two conventions of 1964, the focus was not restricted to Western European legal culture. The, now established, Working Group was a cross-section of UNCITRAL's world-wide representation. Its task was to prepare a text that would facilitate "acceptance by countries of different legal, social and economic systems".[54] The decision was made to formulate a single convention governing both, sales and contract formation which were until then divided by ULIS (sales) and by ULF (contract formation). The 1978 draft of the Convention on Contracts for the International Sale of Goods (CISG) was approved by the UNCITRAL. Part Two of the CISG on the "Formation of the Contract" is inspired by ULF. Part Three of the CISG on the "Sale of Goods" - governing the rights and obligations of the parties to the contract - is based on the ULIS. In 1980 a Diplomatic Conference now representing 62 states met in Vienna and finalized the text of CISG. The subsequent ratification pace was fast and today 62 states, i.e., a number identical to the number of member states at the Diplomatic Conference, have ratified the CISG.

It has been argued that for the interpretation of CISG according to its drafting history, we should not only look to the actual forerunners ULIS and the ULF but also to a harmonization project called Draft Law for the Harmonization of Certain Rules Relating to the Validity of Contracts of International Sale of Goods (LUV).[55] The LUV was developed by UNIDROIT parallel to the drafting of the CISG by UNCITRAL. Issues of mistake, fraud and duress were a central focus of its rules.[56] The drafters of the CISG discussed the rules of the LUV but finally decided not to include them. After the analysis of the role that ULIS and ULF played for the CISG we will see what the rejection of the rules of LUV means for the interpretation of the CISG.

2. ULIS

The 1956 and 1963 ULIS drafts gave an explicit conflict rule for the application of the uniform remedial scheme where a domestic mistake-based remedy operates on the same facts: ULIS article 41 provided that if the seller does not deliver goods in conformity with the contract "the rights conferred upon the buyer (...) exclude all other remedies upon which he might otherwise have relied, and in particular those based on mistake" (emphasis added). The ongoing debate between internationalists and delegates who sought to preserve domestic rules finally led to a compromise. Under the 1964 ULIS, the exclusion of domestic remedies was modified and restricted to cases involving non-conforming goods. ULIS article 34 (renumbered) provided that "the rights conferred upon the buyer (...) exclude all other remedies based on lack of conformity of the goods". The view prevailed that although the specific reference to mistake was deleted domestic remedies that are applicable to cases of mistake would be precluded under the ULIS.[57] During the deliberations on the CISG the adoption of a provision resembling ULIS article 34 was discussed but finally rejected. Some argue that the mere fact of non-adoption of ULIS article 34 is sufficient to draw the conclusion that, in a case of mistake, domestic remedies are applicable alongside the CISG.[58]

This conclusion seems somewhat simplistic. This is evident from a close inspection of the drafting process of CISG. One of the main reasons for not adopting ULIS article 34 was that the Working Group found that its rule went too far. The drafters feared that the exclusion would also apply to remedies for mistake that are explicitly or implicitly agreed by the parties.[59] Thus, the underlying idea of the non-inclusion of ULIS article 34 was to honor party autonomy and leave open the issue of a conflict between domestic and uniform remedies. Even more importantly, perhaps, the CISG differs from ULIS insofar as it was sought to formulate a convention reflecting a much wider range of legal systems. Further, the drafters adopted, in CISG article 7, an explicit reference to the unification purposes. The intention was to formulate a body of law that, contrary to ULIS, would be attractive to countries from all over the world and would encourage an evolution of the harmonization process.[60] The request of a Dutch delegate must also be mentioned. He explicitly addressed the issue of the parallel application of uniform and domestic remedies.[61] It is a reflection of the intentions of the drafters, to formulate a law as flexibly as possible, that his question was left open.[62] So far, the drafting history does not provide a compulsory rule on the applicability of domestic remedies based on mistake alongside the CISG.[63]

However, in the specific forerunner of CISG article 4(a) we find article 11 of the 1939 ULIS draft (finally renumbered article 8).[64] It provided that ULIS "governs the obligations (...) arising from a contract which is valid according to the principles of international private law". From a later draft of 1956 until the version finally adopted in 1964 the text closely resembled the current CISG article 4(a) both in structure and in wording. It stated that "the present law shall not, except as otherwise expressly provided therein, be concerned with the formation of the contract, nor with the effect that the contract may have on property in the goods sold, nor with the validity of the contract or of any of its provisions or of any usage" (emphasis added). Since Part Two of the CISG governs formation issues, the final version of CISG article 4(a), of course, omits such matters. Otherwise, ULIS article 11 was adopted almost verbatim.[65] During the negotiations prior to adoption, it was agreed not to deal with validity issues. The fear prevailed that such expansion of the discussion could endanger the harmonization project as a whole.[66]

What can we extrapolate from this lack of agreement on the complex field of validity? We have already seen that a mistake - in particular if it relates to the conformity of goods - does not necessarily imply a question of validity. The most convincing conclusion, therefore, is that as a result of a fear on the part of the drafters that since a failure to reach agreement on validity issues could endanger the entire project, it was desirable to simply refrain from providing a comprehensive set of rules on validity issues. It is perhaps not surprising, then, that there is no provision for cases of mistake where domestic and uniform remedies are sought to be invoked at the same time.

Numerous proposals were made to exclude ULIS article 8 (draft article 11) from the text of the CISG. One Delegate argued that "it was not necessary to [negatively] state what was not covered". He took the view that CISG - unlike ULIS - contained interpretative rules which he thought would give sufficient guidance to adjudicators.[67] The drafters finally did not follow his opinion and they adopted the rule of ULIS article 8 for today's CISG article 4. It seems, however, that the main reason for the adoption was the fear that not adopting it would indicate a departure from the rule of ULIS article 8.

Further, there was a lack of debate in regard to the meaning of "validity" in CISG article 4(a). The delegates did not explore in great detail the difference between issues of validity and contract formation. When we read the authoritative report there is a strong argument that the drafters mainly had in mind mandatory rules that involve an element of public policy. The authoritative report gives the example of unfair terms in a standard form contract. This example is an indication that the drafters had in mind domestic mandatory rules that try to preserve an equality of bargaining positions between the parties.[68] The protection of parties with inferior bargaining power is only one example of a public policy matter and a recent decision of a U.S. Federal Court illustrates that it can raise validity issues.[69] Legal concepts might well differ from country to country although the aim of the domestic rules might be identical. Due to the differences in approach to matters of public policy, such issues are seldom included in a harmonisation instrument and are often explicitly excluded from it. A prominent example of an explicit exclusion would be article 16 of the Rome Convention of 1980. It provides that the application of a foreign law can be denied if it is "manifestly incompatible with the public policy of the forum."

The strong interrelation between the validity exception and public policy issues has been described as follows: "indeed, the purpose of [keeping] the validity exception was to preserve those national rules that embody important social values and which under national law could not be waived by the agreement of private parties", i.e., mandatory law.[70] (It should be noted, however, that the concepts of public policy and mandatory law are interrelated but not identical concepts.)[71]

What does all this add to the discussion of cases of mistake under the CISG? A first observation would be that public policy concerns are less important in cases of ordinary defects of intention than in cases involving fraud or duress. In cases of fraud and duress it does not need further explanation that public policy requires the legislator to protect the defrauded party by way of mandatory law. The case of mistake is different, as the UNIDROIT Principles illustrate. Article 3.19 states "(t)he provisions of this Chapter [on the validity of the contract] are mandatory, except insofar as they relate to the binding force of (...) mistake."

It is not indicated in the drafting history that the drafters intended to exclude a case from the scope of the CISG simply because it could also be addressed by domestic mistake-based remedies. Further, the comparison with the UNIDROIT Principles illustrates that cases of mistake do not necessarily come under a mandatory law concept. In sum, the analysis of the history of the CISG in light of its predecessor ULIS is of little assistance in understanding the interrelation between the CISG and domestic laws in cases of mistake. The only conclusion that can be drawn from the lack of debate is that the drafting history is ambiguous on mistake.

3. LUV

I will now turn to the LUV developed by UNIDROIT. The LUV included a comprehensive set of validity rules, in particular on mistake, fraud and duress. Like the situation under ULIS, recourse to domestic law was precluded where the case involved a lack of conformity.[72] The CISG's Working Group decided not to include the rules of LUV on mistake, fraud and duress. It has been argued that this decision forces us to draw the conclusion that a case of mistake raises a validity issue that is outside the scope of the CISG so that tribunal may apply the domestic law of mistake.[73]

It is argued here that the non-adoption of the provisions of LUV is not particularly relevant to the question of how to treat a case of mistake under the CISG. The drafters thought that the attempt to unify the law on mistake, fraud and duress could endanger the harmonization project and, in any case, would unduly delay it. Most importantly, they thought that the unification of the validity issues covered by the LUV was not necessary for the success of the CISG. The Secretariat General expressed this view: "problems of validity covered by LUV rarely arise in 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 - issues at the heart of LUV - are less likely to occur between merchants than they are in transactions between merchants and consumers or between two non-merchants". Even if problems of such kind do occur, they "usually [would] be handled as well under non-uniform national law as under any proposed text of uniform law".[74]

This only tells us what we already know from the analysis of the drafter's discussion of the ULIS and the ULF: they did not want to adopt a comprehensive set of rules on the validity issues of mistake, fraud and duress. The decision not to adopt the LUV's comprehensive set of rules, however, does not tell us how to analyse a case of mistake, i.e., a case that involves the lowest level (see above) of defective intention and which invokes the least public policy considerations.

4. Summary

The drafting history is ambiguous. The conflict between a domestic and a uniform remedy, that both operate on the same facts - although the subject of much discussion - was ultimately left unresolved.[75] The determination of validity was not explored in great detail. A clear tendency towards preserving the applicability of some domestic rules is apparent; for example, the rules on fraud and duress. The exclusion of validity issues from the unification project was mainly due to the fear that the harmonization process would be endangered or unduly delayed. The adoption of the ambiguous term "validity" and the strong internationalist wording of CISG article 7 point towards the assumption that the drafters sought to balance parochial interests and internationalist unification goals by adopting a flexible and elastic concept. As regrettable as it may be, the drafting history does not tell us whether all cases of mistake come under CISG article 4(a) or whether they are subject to domestic law.

C. The CISG's Autonomous Rules of Interpretation

As the analysis of the drafting history does not provide a compulsory answer to the question whether mistake is a validity issue, we can apply the interpretative system of the CISG. The autonomous rules of interpretation of the CISG are set out under its article 7 and I will start with a brief overview of the three rules contained therein: firstly, according to CISG article 7(1) in the interpretation of a provision of the CISG, regard is to be had to the unification purposes, the intentions underlying the CISG and to the observance of good faith.[76] Secondly, if a matter is governed by the CISG, but not explicitly addressed by it, the gap-filling rule of CISG article 7(2) applies. Gap-filling means that the issue is to be resolved on the basis of the general principles underlying the provisions of CISG thus bridging the missing rule.[77] Thirdly, in cases where the preceding steps do not provide an answer, CISG article 7(2) opens the door for the rules of private international law and allows recourse to domestic law.[78]

The interpretative system strongly indicates that it was sought to give as much power to the CISG as possible and it is widely agreed that recourse to domestic law can only be sought as an ultima ratio. How does this go together with the validity exception of CISG article 4(a)? Scholars from all over the world have contributed to improving the understanding of the interpretative system of CISG article 7 and its interplay with CISG article 4(a).[79] The following sections will examine the most prominent theories. It will be shown that all of them can be criticised. The important question for this paper, however, will be whether the criticism is pertinent regarding the treatment of mistake under CISG.

1. Domestic Law Approach

Those few who conclude from the drafting history that validity is determined exclusively by domestic law find that CISG article 7 is inapplicable from the outset.[80] This so-called "domestic law approach" mainly relies on the lack of debate concerning the distinction between validity and contract formation issues.

As has been shown above, the analysis of the drafting history does not support the assumption that CISG article 7 is inapplicable. Therefore the domestic law approach only delivers an incomplete picture. It falls short of the interpretation of CISG article 4(a) in light of the unification goals embodied in CISG article 7.

It cannot be denied that, in fact, the drafters intended to provide a loophole for domestic law by including article 4(a) to the text of CISG.[81] The problem caused by the domestic law approach, however, is that it does not provide a rule that solves the conflict between domestic and uniform remedies. It thus allows parallel availability of the two remedial schemes in cases that under domestic law raise issues of validity but are also addressed by the CISG. This paper argues that such result is undesirable as it leads to unpredictability and deprives the parties of the certainty they expected from (directly or indirectly) subscribing to the uniform rules of the CISG.

The following analysis of the internationalist approaches to CISG article 4(a) will further elaborate on this finding.

2. Autonomous Interpretation

The majority of scholars favors an internationalist approach. Amongst them it is agreed that the rules of interpretation embodied by CISG article 7 do not only apply to the provisions on the formation of contract and on the sale of goods but also to those on the sphere of application of the CISG and in particular to article 4(a).[82]

The mode of application differs. In essence, three different approaches can be discerned.[83] The first method has been described as an "autonomous interpretation" of the CISG.[84] The core thesis being that validity is not by itself a question of domestic law and that CISG article 7(1) calls for a detached characterisation of validity that is committed to the unification purposes of the CISG. This means that one looks first at the CISG in order to see whether it addresses the facts of the case. If the CISG provides a functionally adequate solution, the issue is a non-validity one and domestic remedies are displaced.

Critics argue that the autonomous approach is based on a circular conclusion. If all issues addressed by CISG were to be classified as non-validity issues a question of validity would never arise under the CISG.[85] Further, if all issues addressed by the CISG were non-validity issues the "expressly provided"-exception of CISG article 4 would be redundant as not any of the express provisions of the CISG would classify as an "expressly provided" rule of validity.[86]

Clearly, the most difficult task for the autonomous approach concerns the question of how to autonomously ascertain the meaning of "expressly provided" under CISG article 4(a). There is only one provision that uses the term "validity". Under CISG article 55 it is provided that a "validly" concluded contract is not void for the reason that the price has not been fixed by the parties. The drafters further discussed CISG article 11 under the label of (formal) validity.[87] CISG article 11 provides that a contract does not require any formal requirements; in particular the contract need not be in writing. The finally adopted text of the CISG comprehends a number of provisions that - at least in the countries of some delegates - were and still are discussed as validity questions.[88] The interpretation of "expressly provided" as an exclusive reference to those issues, however, seems a bit odd. If the drafters had intended to exclusively refer to specific provisions they could have explicitly listed them.

It could be argued that "expressly" should be interpreted as a reference to the text of the CISG as a whole.[89] The problem with this interpretation is that CISG article 4 already gives a positive rule on the sphere of its application: "This Convention governs only the formation of the contract of sale ...". A reference to the whole text within the same article would not seem illogical but would be redundant. The most convincing reading emphasises the words "in particular ... not concerned".[90] It leaves the exceptions of CISG article 4 in a comparable position to regular examples of issues not included.[91]

The difficulties of the autonomous reading in defining the meaning of "expressly provided" cannot be ignored. Nevertheless, it seems somewhat technical to base the criticism of the autonomous approach on these difficulties alone. In concordance with the autonomous approach, this paper argues not to analyze the provision word by word but to understand CISG article 4 according to the underlying intentions of the drafters. On one hand, they intended not to override domestic public policy and, on the other, they tried to achieve a compromise.[92]

There are further problems with the autonomous interpretation. The view taken by the autonomous approach is that an issue should be reserved to national law only if it is treated as a question of validity everywhere, i.e. in all or at least in the majority of the world's legal systems. It must be acknowledged that such comparative approach would create certainty and predictability in an ambiguous area of the CISG. The weakness of this method is that the comparative work would lead to a more or less stable list of excluded issues. Such a fixation of the issues would not be consistent with drafters' intention to achieve flexibility that accommodates the issues of evolving public policy.[93]

The majority view approach, however, appears consistent with the unification purposes illustrated by CISG article 7(1).[94] Moreover, it corresponds to the composition of the Working Group which was a cross section of representatives from legal systems all over the world. It also accords to the internationalist approach of the Diplomatic Conference that manifests itself in a plenary majority voting rule. Notwithstanding such consistency, it is apparent that adjudicators in practice will have difficulties to comply with the time consuming task of comparative work.[95] Particularly in complex cases that involve public policy issues, a comprehensive comparative analysis will take too much time if it is not impossible; although, the ongoing development in informational technologies renders some of the relevant information more accessible. However, more work remains to be done.[96]

An even more important criticism against the autonomous interpretation is that its method of interpreting validity can only lead to majority views. The reliance on majority views is not in line with the idea underlying the validity exception, i.e., to preserve singular national interests particularly in regard to issues that involve public policy. According to the comparative law approach employed by the autonomous interpretation, matters of public policy can only be taken into account if all or at least a majority of domestic laws take a similar view on them. As the autonomous interpretation does not allow recognition of such singular views - which are subject to a constant process of evolution - it lacks a methodically correct tool for reconciling the public policy changes arising only in one or a few states.[97]

To sum up, the autonomous approach is highly valuable in light of the unification goals of the CISG. The suggestion of a comparative determination of validity, however, poses major practical problems. Further, the autonomous approach is not adequate where matters of public policy are treated differently in the majority of countries.

3. Displacement Theory

According to the so-called displacement theory, domestic remedies are always excluded if the CISG provides a solution that operates on the same facts. Proponents speak of "cross-references" of the CISG.[98] Very much like the autonomous approach, the displacement theory employs a functional view. The test is whether the CISG addresses the operative facts that invoke the domestic validity rule. In contrast to the autonomous approach, the displacement reading determines validity from the outside of the CISG, i.e., by domestic law. The theory mainly relies on a wide interpretation of "expressly provided".

Support for the displacement reading derives from the drafting history.[99] Akin to the autonomous theory, the displacement reading does not stop the analysis where the label of validity is attached to a case by a domestic law. Instead, it emphasises that in drafting the CISG it was sought not to use technical terms but to provide "substance rather than label(s) of law".[100] According to the displacement reading, the adjudicating forum applies its own conflict of laws rules for the classification of validity issues. If it is found that that under domestic law the case is one of validity, the adjudicator has to reconsider whether the domestic validity rule is displaced by a rule under the CISG that operates on the same facts. Hence, the starting point is a classification under domestic law.

The fact that the determination of validity is left to domestic law, however, "does not open a large door to escape from the uniform rules." Proponents of the displacement reading argue for an extensive interpretation of the text of the CISG.[101] Compared to the autonomous approach, it is apparent that the interpretative results will be similar. The method of the displacement reading, however, is much more likely to find support from practitioners than the more complex and costly comparative approach that was suggested by the autonomous reading.[102]

Opponents argue that if validity is determined by domestic law it is outside of the CISG. In consequence, they argue that CISG article 7(1) is not applicable and that it cannot be employed to underpin an expansive reading of "expressly provided".[103] This criticism, of course, also applies to the autonomous approach. Proponents of both readings argue that the idea of the "expressly provided" criterion was to close the door for any implicit displacement of national law. Under both the displacement theory and the autonomous approach there remains a difficulty in differentiating between implicit and explicit displacement.[104] This is mainly due to the fact that the text of CISG does not contain any rules that expressly use the term "validity". The autonomous and the displacement reading solve conflicts between the reservation embodied in CISG article 4(a) and the unification goals by privileging the latter. It is argued here that from the wording of CISG article 7(1), this internationalist approach is justified.

Like the autonomous approach, the displacement reading, however, embodies a difficult extreme as it requests tribunals to always replace domestic remedies where the operative facts are also addressed by the CISG.[105] Therefore, it can also be argued that the displacement reading does not fully resemble the intentions to preserve singular state interests in regard to evolving public policy.[106]

To sum up, the displacement theory accords with the internationalist approach of the CISG. In contrast to the autonomous interpretation it provides a method for the interpretation of validity that is suitable for legal practice. Unfortunately, like the autonomous approach it lacks the flexibility necessary to accommodate the interests of an individual state.

4. Balanced Approach

Some have argued that "the command in Article 7 - to have regard to the need to promote uniform Convention interpretation - does not warrant the conclusion that domestic remedies invariably are preempted (trumped), i.e., whenever the operative facts of the case seem covered by a given CISG rule."[107] This implies that we need a certain flexibility in the interpretation of the validity exception. The problem is to find a rule that gives sufficient legal certainty.

One scholar has suggested a "balanced reading" of the validity exception. [108] The main objective is to duly capture "the many factors bound up in the validity exception".[109] It promises to consider "domestic validity in light of evolving concepts of public policy and the development of jurisprudence under CISG".[110] Hence, it is sought to avoid the main criticism raised against the approaches presented above.

The balanced approach suggests that the adjudicator should on a case-by-case basis ask whether a "particular domestic rule of validity meets the spirit as well as the black letter" of CISG article 4(a), on one hand; and, on the other, that the domestic rule should be examined "in light of the evolving international commercial context".[111] The course of decision finding can be summarised as a two-step process: first, the issue is classified under domestic conflict rules. Secondly, where a conflict arises between domestic and uniform remedies, the domestic rule [112] is re-examined in light of the unification purposes of CISG. If the domestic rule conflicts with the internationalist concept it must step back unless the issue is one of those that is left open by the CISG and that cannot be bridged by gap-filling under CISG article 7(2).

The second step raises doubts.[113] It seeks to give effect to the CISG beyond its scope. In contrast to those uniform laws which seek to harmonise rules of private international law, as, for instance, the already cited Rome Convention of 1980, the concept of CISG was to unify substantive law. Apart from setting its sphere of application, the CISG does not touch private international law or modify the domestic doctrines of characterisation of the case. It is therefore difficult to see how the CISG could provide a basis for the suggested method.[114]

D. Conclusion

To conclude, it can be stated that none of the theories is immune from criticism. It is clear that the validity exception requires adjudicators to steer a difficult path between the reservation made by CISG article 4(a) and the unification goals that are emphasised by CISG article 7(1). The complete removal of "validity" issues from the realm of the CISG by those who advocate a domestic law approach is an extreme solution. It leads to legal uncertainty and does not sufficiently consider the unification goals. Doubts have also been expressed in regard to the methodological consistency of the balanced approach. Methodically sound concepts are presented by the autonomous approach and the displacement reading. The main criticism against these internationalist approaches is due to their lack of flexibility in regard to matters of evolving public policy.

It is, however, highly doubtful whether public policy concerns are relevant in cases of mistake. Amongst the cases of defective intention it is mainly fraud and duress which evoke public policy concerns. The paramount issue in cases of mistake rather points towards fairness in international trade.[115] From the viewpoint of fairness, recourse to domestic remedies would lead to a negative result. The drafters agreed on the CISG as they thought it provided a fair remedial scheme for the case it addresses. Recourse to domestic law would deprive one party of the legal certainty he expected from the CISG. Had he known about the duality of remedies he might have preferred a choice of law.

Proponents of the autonomous or displacement reading do not argue that cases of aggravated defect of intention as those of fraud or duress are addressed by CISG. With regard to a case involving a mistake in regard to the quality of goods, one scholar pointed out that, contrary to cases of simple non-conformity, fraud involves "special circumstances above and beyond a mere lack of conformity of goods".[116] Only on this ground recourse to domestic remedies is allowed in cases of fraud and also of duress. This paper advocates that if in interpreting the CISG the hierarchy of defects of intention - mistake on the bottom, fraud in the middle and duress on the top [117] - is thoroughly observed both internationalist approaches will lead to adequate results.

To conclude, it can be stated that both the autonomous and the displacement reading in principle meet the interpretative challenge of mistake. The "uneasy and inconclusive truce line, along which skirmishes continue" [118] will be examined with regard to specific situations of mistake in the following sections.

IV. SELECTED TYPES OF MISTAKE

In 1989 it was stated, that the "determination of the degree to which domestic doctrines of mistake can be invoked to invalidate a contract [that is governed by CISG] appears to be a matter whose resolution will most likely have to await the assertion of case law precedent".[119] The following sections are committed to selected situations of mistake and to the treatment by courts, arbitration tribunals and scholars.[120] A basic distinction will be made between cases of mistake that involve an unintended expression (infra, section A) and those that involve a defective motive (infra, section B).

A. Mistake in Expression

A mistake in expression can simply involve an incorrect statement, for example, a slip of the tongue.[121] Further, a mistake in expression can occur if the statement is correctly spelled out but is subject to a misunderstanding of what would reasonably be attributed to it by the other party.[122] In both cases the mistake is due to a subjective defect. It is therefore symptomatic that a third party will not identify it.

The CISG is only concerned with the formation of contract, i.e., with the question of whether "objective agreement" was reached (external consensus). That is to say, the CISG does not provide rules on subjective defects of intention (internal consensus). Independent of whether one argues for a domestic law approach or for an internationalist interpretation, it must be concluded that domestic law determines the consequences of such internal defects of intention.[123] Domestic legal concepts either consider the contract as invalid from the beginning, i.e., there is no contract (void ab initio), or they provide a remedy for the nullification of the contract, i.e., the contract is voidable.[124]

The decision of a German court of first instance is in line with the finding that domestic law applies to a case that involves a mistake in expression.[125] The case concerned an application for the enforcement of an arbitral award. The defendant sought to prove the lack of a valid arbitration agreement and argued that he had not intended to bind himself. The court denied that the CISG deals with the internal elements required for material validity of offer or acceptance and held that domestic law governs.

B. Mistake in Motive

A mistake in motive concerns a defective intention on at least on side of the contract. That is to say, one of the declarations contains or lacks an element that had been intended to be included or to be excluded had the mistaken party known the real state of affairs.[126] The consequence is a lack of internal consensus.

A mistake in motive can have a number of reasons. Therefore, in examining the rules of the CISG as to the facts on which they operate due regard must be had to the question, "mistake about what?"[127] In a mistake in regard to the identity of the goods or in regard to the identity of the contractual partner, the rules on contract formation can be used as a cross-reference. The concept of initial impossibility and its treatment under the CISG can be employed as a cross-reference for a mistake in regard to the existence of goods. Further, the classic example of a mistake in regard to a quality of the goods finds its cross reference in the CISG's rules on breach of contract for non-conformity of goods. Finally, a mistake in regard to characteristics of the contractual partner will be analyzed in light of the CISG's rules on anticipatory breach that concern a lack of the creditworthiness of the other party.

1. Mistake in regard to the Identity of the Goods or the Other Party

Amongst businessmen, cases of a mistake in regard to the identity of the other party or in regard to the goods "(like ghosts and flying saucers)" are said to be "more discussed than seen." John Honnold.[128]

a. Mistake in regard to the Identity of the Other Party

A mistake in regard to the identity of the person contracted with might, for example, occur if negotiations are conducted through agents. There might be the situation that an agent who in the past ordered goods for the one company starts to work for another company. Assuming that the change of position is not expressly dealt with during negotiations, the seller might mistakenly believe that he is dealing once again with his partner of former transactions.

A case like this involves issues of contract formation. Those are governed by the CISG. In addition, it involves questions of agency that, for the purpose of this paper, will be excluded from the following analysis. According to the rules of the CISG a valid contract is formed if "objective agreement" is reached between the parties.[129] Hence, it can be argued that there will simply be no contract in cases where no agreement can be found between the parties that made the declarations.[130] It has been argued that the rules provided by CISG should be carefully explored before an "objective agreement" can be denied.[131] Under CISG article 8(2) the law provides a reasonableness-test and under article 18(1) it addresses cases where assent is given by conduct.[132]

Only where an agreement cannot be proven does the question come up whether the formation rules of the CISG preclude recourse to domestic nullity rules or nullification concepts. Scholarly writing is focused on cases where the mistake regards the characteristics of the other party, in particular the creditworthiness of the buyer. It is also in line with the statement of Honnold, cited at the beginning of this section, to assume that national courts will be reluctant to find that a mistake in regard to the identity of the other party is relevant.[133] This is due to the fact that in commercial reality, businessmen seldom focus on the identity of the other party: a buyer wants to buy and a seller wants to sell. Hence, the mistake is apt to be termed relevant only in those cases where the identity of the other party was important for the decision to buy or to sell. In most of the cases, it is not the identity of the other person but his ability to perform that is important. Those cases of mistake in regard to the characteristics of the other party will be discussed below (section IV B 4).

The issue of an identity-based mistake has not yet been subject to detailed analysis. One scholar states that "other types of representation by the seller (such as his identity and similar statements by the buyer) may not be addressed by the Convention".[134] It is true, the objective-agreement test that applies according to the rules of the CISG has as an implied condition that the party who made the declaration intended to bind himself towards the addressee of the declaration and not towards a third person. A mistake in regard to the identity of the other party therefore is outside the scope of the rules of CISG and is a question for domestic law.

b. Mistake in regard to the Identity of the Goods

With regard to the identity of the goods the same argument applies as in cases of mistake as to the identity of the other party,: there cannot be an objective agreement according to the rules of the CISG if, from the viewpoint of a reasonable man, one party refers to goods X and the other party to goods Y.[135]

2. Mistake in regard to the Existence of the Goods

Where the goods did not exist at the time of the conclusion of the contract, or have perished before this time, it could be argued that the intention to buy or to sell the goods always involves a defect, namely a mistake about the existence of the goods. On this basis, recourse to domestic nullification concepts could be had. It should be noted for clarification that if the classification of the case according to domestic law leads to a concept of initial impossibility that nullifies the contract, it would be a "mistake in itself" to try to nullify the contract by the application of a mistake-based remedy.

Cases where the goods do not exist at the time of contract conclusion are mainly discussed not with a focus on mistake but with regard to the more specific domestic concepts of initial impossibility (doctrine of res extincta).[136] According to a number of domestic laws, a case where the goods do not exist at the time of contract conclusion is classified as a validity issue.[137] In contrast, under the CISG it is addressed as an issue of risk allocation or as an excuse for non-performance. Under CISG article 68, it is provided that if the goods are sold in transit the risk passes "from the time of the conclusion of the contract" (emphasis added). Under CISG article 79(1), a party is excused from liability for non-performance "if he proves that the failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract (...)". Both rules can be interpreted as cross-references to domestic concepts that are labelled "initial impossibility".

The drafting history is ambiguous on the applicability of domestic concepts of initial impossibility alongside the CISG.[138] It seems, however, to be almost settled - at least in scholarly writing - that domestic doctrines of res extincta (that invalidate the contract when goods have been perished before the time of contract conclusion) are overruled by the CISG.[139] Only a few authors argue in favour of domestic law.[140] The majority of scholars argue for the exclusive applicability of the CISG. Their internationalist approach is in line with the view adopted by the UNIDROIT Principles. Article 3.3 provides that typical cases of impossibility (performance impossible from the outset and lack of legal title or power) are excluded from the concept of validity.[141]

To sum up, the CISG overrules domestic remedies on initial impossibility and mistake-based concepts of nullification irrespective of the classification that applies under that domestic law.

3. Mistake in regard the Quality of the Goods

A mistake in regard to the quality of goods has been mentioned above as a classical example of the problem of parallel applicability of the remedies provided under domestic law and by the CISG.

In practice, a mistaken party will prefer to rely on the damage-based remedial scheme of the CISG rather than having to endure the uncertainties caused by avoidance of the contract to the status quo ante.[142] The question whether a domestic concept of nullification is applicable has, however, evoked extensive discussion during the drafting process and also in subsequent scholarly writing.[143] The pivotal question is whether nullification under domestic law is precluded by the CISG's rules on breach of contract. A consequential question concerns the issue of whether uniform time-limitations as provided by CISG article 39 should apply to domestic remedies that are employed alongside the CISG.[144]

a. Conflict Rule for the Parallel Applicability of Domestic and Uniform Remedies

The need for a conflict rule arises only where the domestic sales law that is applicable according to the rules of private international law provides a choice between damage based remedies for breach of warranty and those that allow nullification for the reason of a mistake.[145] Under, for example, German law, a buyer cannot nullify the contract on the basis of a mistake in regard to a quality of the goods but is restricted to the remedies provided for non-conformity of goods. The problem, therefore, cannot arise in Germany.[146] In contrast, the law in the United States, Switzerland and Austria, for instance, provide in principle for the remedy of rescission for mistake concurrently with claims for breach of warranty.

Concerning the CISG, scholarly writing is divided.[147] Although, the position under United States domestic law would suggest concurrent application, the preponderant view seems to be that the rules of the CISG are exhaustive.[148] The same is true for Switzerland.[149] Also, in France the majority argues for an exclusion of domestic law.[150] It has already been mentioned above that the UNIDROIT Principles give precedence to the remedies for non-performance. Article 3.7 of the Principles states: "A party is not entitled to avoid the contract on the ground of mistake if the circumstances on which that party relies afford, or could have afforded, a remedy for non-performance".

For an illustration of two diametrically opposed positions, we can turn to German law, on one hand, and Austrian law, on the other.[151] Amongst German scholars, the view is predominant that domestic remedies are displaced by the CISG as far as "they relate to the seller's actual (typical or atypical) obligations, in particular as it regards the quality of goods and their freedom from legal effects".[152] In contrast, Austrian scholars argue for parallel applicability of domestic and uniform remedies.[153]

In German and Austrian court practice, similar divisions are evident. A recent Austrian decision dealt with issues of contract conclusion.[154] The case concerned the question whether the buyer was entitled to avoid the contract after he had become aware that the goods did not conform to what he had (mistakenly) expected from the negotiations. The court delivered extensive reasoning on the issue of contract conclusion and held the rules of the CISG applicable. With regard to mistake, it was held - without any detailed discussion of CISG article 35 - that the buyer was entitled to nullify the contract according to Austrian law.

In contrast, a German court held that the applicability of CISG precluded recourse to domestic law regarding a mistake in regard to the quality of the goods as the matter was exhaustively covered by CISG.[155] The facts of another German decision should be noted to support the need for the distinction between the three levels of defective intention.[156] The seller sought to annul a price reduction agreement that had been concluded between the parties after the buyer had claimed that the goods were worthless and could not be sold. It transpired that the goods could be sold and that the buyer had made a fraudulent statement in regard to their non-conformity. Although the facts of the case involved issues addressed by the CISG, based on the fraudulent statement, the court held domestic doctrines of nullification applicable.

Finally, there is an award made by a Hungarian court. It states that questions of error (and disproportionate value of the obligations) in principle are not covered by CISG.[157] Issues involving a lack of conformity were nevertheless decided according to CISG article 36.

b. Notice Period and Cut-off Period of CISG article 39

Those who argue in favour of the parallel applicability of domestic remedies alongside the CISG must further consider situations in which a lack of notice in due time in accordance with CISG article 39 precludes avoidance of the contract.[158] Under CISG article 39(1), notice of the "lack of conformity [must be given] within a reasonable time after [the buyer] has discovered it or ought to have discovered it" (notice period) [159] and article 39(2) provides that "in any event, the buyer loses the right to rely on a lack of conformity of the goods if he does not give the seller notice thereof at the latest within a period of two years (...)"(cut-off period). It is evident that "a competing mistake-based remedy under domestic law will be most attractive to the buyer who has failed to give timely notice pursuant to [CISG] article 39 and is thus precluded from seeking the remedies provided by the Convention".[160]

The discussion of the applicability of the notice period and cut-off period ranges along traditional lines. On the basis of the unification purposes of the CISG, internationalists argue that domestic remedies - if available at all - are subject to the time-limitations imposed by CISG article 39.[161] In contrast, those who argue that validity-based remedies are outside the CISG conclude that the uniform rules on time-limitations are irrelevant for the exercise of domestic remedies.[162] They highlight that the issue was explicitly addressed by the Dutch Delegation during the deliberations of the Diplomatic Conference when the Delegation requested to insert a new article 48a that would have submitted domestic remedies to the uniform time-limitations of CISG article 39. The request was rejected by the majority of the delegates.[163]

This paper argues that the internationalist approach towards CISG article 39 has the better arguments. To start with, it is clear that the notice period and the cut-off period of CISG article 39 do not apply to domestic remedies that are based on facts not addressed by the CISG.[164] Cases of non-conformity of goods however are addressed by it and it has been argued above that accordingly the CISG's also covers cases of mistake about the quality of the goods. If we would allow a buyer who has lost his remedies by operation of CISG article 39 to avoid the contract on the basis of a domestic remedy we would deprive the seller of the certainty he reasonably expected from the expiration of the period set out by CISG article 39.[165] This leads to the conclusion that domestic remedies - if we allow applicability at all - must be subject to the notice period and cut-off period of CISG article 39.

Against this background we can also explain the denial of the request to insert a new article 48a: the drafters wanted the CISG to exclusively apply to the cases whose facts are addressed. The explicit imposition of a time limit on domestic remedies that operate on the same facts must have seemed redundant.

c. Summary

There is some evidence from scholarly writing of a tendency to exclude domestic mistake-based remedies that allow avoidance of the contract. It is difficult to determine the state of international practice as there are very few court decisions and tribunal awards on the issue.

The position in Austria that argues for parallel application of domestic and uniform remedies is a logical continuation of the position under Austrian domestic law. The examples of France, Switzerland, and the United States show that an internationalist view on the CISG is possible although the position under national law in principle would allow parallel application of a domestic nullification remedy. This paper advocates the exclusion of domestic remedies in cases that involve a lack of conformity.[166]

4. Mistake in Regard to Characteristics of the Other Party

The term characteristics is used to describe those elements of a person that are important for the one party when forming the intention to enter into a transaction with the other party (i.e. delectus personae). As far as the buyer's intentions are concerned, this means his reliance on the seller's ability to perform. From the view of the seller, this is apt to be his reliance on the creditworthiness of the buyer.

a. Remedies under the CISG

To begin with I will summarise the approach of the CISG. The basic principle of the CISG is to view avoidance of the contract as an ultima ratio.[167] According to the CISG's remedial scheme, embodied in CISG article 64, the contract can be avoided only in cases of fundamental breach or non-performance, the latter being subject to the expiration of an additional period of time.[168] In such cases the CISG envisages the finality of the contractual relation so that no recourse to domestic concepts of nullification will be sought. Should the inability of the other party, however, become apparent prior to the date of performance but after the time of contract conclusion the remedy of avoidance is only available according to the rules of anticipatory breach under CISG article 72, i.e., if the anticipated breach is fundamental in the sense of CISG article 71(1).[169] If the anticipated breach is not fundamental, only a right of suspension will be granted. The suspension can be rebutted according to CISG article 71(3) by an adequate assurance of performance. It follows that recourse to a domestic nullification remedy is attractive in cases where the breach is not fundamental. If domestic law is applicable, and a relevant mistake in regard to characteristics of the other party can be proven, the party can nullify the contract and thus evade the favor contractus scheme of the CISG.[170]

b. Conflict Rule for the Parallel Applicability of Domestic and Uniform Remedies

CISG article 71 addresses deficiencies in the ability to perform a substantial part of the obligations.[171] The question whether domestic remedies based on mistake are applicable, in principle, raises the same issues as discussed above for a mistake in regard to the quality of goods.[172] Again the drafting history is ambiguous.[173] Those who see the issue outside the CISG argue in favour of the availability of domestic nullification concepts.[174] In contrast, internationalists who advocate an autonomous or displacement interpretation of CISG article 4(a) find that the CISG's rules are exhaustive.[175] The tension between the finality of avoidance and the merely temporary effect of a right to suspend performance is apparent;[176] yet, case law on this point is non-existent.

This paper advocates that the favor contractus principle, as embodied in the rules of anticipatory breach, strikes for the internationalist approach and that it should be understood as an exclusion of domestic laws.

C. Summary

To sum up, avoidance of the contract according to domestic law is possible in the following two cases: The first case is a mistake in the expression of a correctly formed intention. The second case is a mistake in regard to the identity of the other party or of the goods. The CISG does not provide a cross-reference for these cases. In contrast, recourse to domestic remedies is not open in cases where the mistake relates to the existence of the goods. This type of mistake is addressed by the CISG.

As to the remaining two cases of a mistake in motive, the positions are divided along traditional lines. It has been argued that the rules of CISG should exclusively apply in regard to a mistake that concerns the quality of the goods. The damage-based scheme for breach of contract in cases of non-conformity of the goods provides a functionally adequate solution that operates on the same facts domestic remedies do.

In respect of a mistake concerning characteristics of the other party it has been argued above that the rules on anticipatory breach strike for the exclusion of domestic remedies.

V. CONCLUSION

The analysis has shown that the issue of mistake remains unsettled in a number of respects. Throughout the above analysis it has become apparent that the process of harmonization is challenged by the tension between the unification spirit embodied in CISG article 7 and the parochial national interests embodied in CISG article 4. A remarkable level of unification has been achieved under the CISG. This gives cause for optimism.

Tendencies towards an internationalist interpretation of the CISG can be observed in scholarly writing and has recently also been approved by U.S. courts [177] Significant conflicts in the interpretation of the validity exception, however, has prevented a single doctrine of mistake accepted by all countries that have ratified the CISG. Much depends on the correct approach towards the issue. It is important to distinguish between the different levels of defect of intention. Mistake involves a simple defect of intention and does not necessarily come under the validity exception. It is, furthermore, important to look into the specific reason for mistake. The cases discussed above illustrate that there are only few reasons for a mistake that are not addressed under the CISG and that allow the application of a domestic remedy.

In sum, it can be said that the tenor of the picture drawn by Kötz that I cited at the outset of this paper applies: the CISG solves a number of problems but also creates new problems. For cases that involve a mistake, however, the analysis of the selected types of mistake has shown that the problems can be solved and it seems that the position of an adjudicator is not as difficult as that of Heracles in his fight against the snake headed Hydra.


FOOTNOTES

* LL.M. (University of London); Assistant, Max-Planck-Institute for Foreign Private and Private International Law, Hamburg, Germany; Phd Student University of Hamburg; <leyens@mpipriv-hh.mpg.de>.

This paper was awarded a third place in the Clive M. Schmitthoff Essay Competition 2002, an annual competition jointly announced by the Institute of International Commercial Law, Pace University School of Law, and the Centre for Commercial Law Studies, Queen Mary University of London; <http://www.cisg.law.pace.edu>. The paper has been revised and slightly changed for publication.

I would like to express my special thanks to Albert H. Kritzer, Michael Halberstam and Ross G. Anderson for their valuable comments. I am also indebted to Loukas A. Mistelis for valuable discussions and encouragement. Errors of fact or law are of course mine.

1. United Nations Convention on Contracts for the International Sale of Goods, April 11, 1980, S. Treaty Doc. No. 98-9 (1984), 1489 U.N.T.S. 3, reprinted: United Nations Conference on Contracts for the International Sale of Goods, 19 I.L.M. 668 (1980). The text of the CISG is available in several languages at <http://www.cisg.law.pace.edu> and at <http://www.unidrot.org>.

The encomium that was lavished on the CISG ("quantum leap", "new legal lingua franca", "a milestone", "a triumph of co-operative legal work", "arguably the greatest legal achievement aimed at harmonizing private commercial law") is summarized by Bell, The Sphere of Application of the Vienna Convention on Contracts for the International Sale of Goods Pace Int'l L. Rev. 237 (1996), also <http://www.cisg.law.pace.edu>, at 237 et seq.

2. Bridge, The Bifocal World of International Sales: Vienna and Non-Vienna, in Making Commercial Law - Essays in Honor of Roy Goode, in: Cranston (ed.): Making Commercial Law, Oxford 1997, at 277-296 [cited: Bifocal World].

3. On current trends in international trade cf. the contributions by scholars from all over the world to the three-day Clive M. Schmitthoff Symposium held in London, June 2000, in: Fletcher/Mistelis/Cremona (eds.), Foundations and Perspectives on International Trade Law, London 2001 [cited: Foundations]. Cf. further Cranston/Goode (eds.), Commercial and Consumer Law - National and International Dimensions, Oxford 1993 [cited: Commercial and Consumer Law]; Ferrari (ed.), The Unification of International Commercial Law, Tilburg Lectures, Baden-Baden 1998; Ziegel/Lerner (eds.), New Developments in International Commercial and Consumer Law, London 1998 [cited: New Developments]. For earlier contributions see the Symposium, "United Nations Convention on Contracts for the International Sale of Goods", 21 Cornell Int'l L. J. 1988, 419-574 and Sarcevic/Volken (eds.), Dubrovnik Lectures 1985, New York 1986.

4. United States since 1988; Germany since 1991. For the status of UNCITRAL Conventions and Model Laws cf. <http://www.jus.uio.no>.

5. On harmonization cf. Mistelis, Is Harmonisation a Necessary Evil, The Future of Harmonisation and New Sources of International Trade Law, in: Foundations, supra n. 10, 3-42, in particular at 12 (para. 1-025 "concepts and pitfalls"). For further critical remarks cf. Bonell, Do We Need a Global Commercial Code?, Uniform Law Review/Revue de Droit Uniforme (2000-3) 469-481, also <http://www.cisg.law.pace.edu> (at 480 et seq. he argues for an interplay between an "integrated body of rules" and "more flexible instruments"), printed also in 106 Dickinson L. Rev. (2001) 87-100; Goode, Reflections on the Harmonisation of Commercial Law, in: Commercial and Consumer Law, supra n. 3, 3-27 (at 25: "good conventions and bad conventions"); Rosett, Unification, Harmonization, Restatement, Codification, and Reform in International Commercial Law, Am. J. Comp. L. (1992) 683-730 (at 687: "limits of codification"); Stephan, The Futility of Unification and Harmonization in International Commercial Law, Working Paper No. 99-10, June 1999, <http://www.ssrn.com>, 1-40 (at 4 et seq. he makes the distinction between the issues of harmonization: "Managing Legal Risk", "Improving the Law", "Developing intermediaries". At 39 he doubts that past unifications have improved the law).

6. The MPI started work on April 1, 1926 in Berlin, Germany. Since 1956 it is seated in Hamburg. See <http://www.mpipriv-hh.mpg.de>. Prof. Rabel was director from 1926 to 1937.

7. Das Recht des Warenkaufs, Vol I: Berlin/Leipzig 1936, reprint 1957, Vol. II: Berlin/Tübingen 1988.

8. Translation by the author.

9. Prof. Kötz was director at the MPI (supra n.6) from 1979 to 2000. The statement is cited from Kötz, Rechtsvereinheitlichung - Nutzen, Kosten, Methoden, Ziele, RabelsZ 50 (1986) 1 et seq., at 7. For some further critical remarks on harmonization by Prof. Kötz, see the compilation by Magnus, Die Allgemeinen Grundstze im UN-Kaufrecht, RabelsZ 59 (1995) 469-494; in English: General Principles of UN-Sales Law, 3 International Trade and Business Law Annual (Australia 1997) 33-56, also <http://www.cisg.law.pace.edu>. For example: "The person looking at the currently effective Uniform Law from a certain distance will be surprised by its selective and fragmentary nature", and "(i)ndeed it's a scary thought that the countless current undertakings of unifying and adjusting laws develop into completed texts and that the stream of these texts could then be directed to the already overburdened mills of national legislators".

10. Cf. Will (ed.), Twenty Years of International Sales Law Under the CISG: the UN Convention on Contracts for the International Sale of Goods: International Bibliography and Case Law Digest (1980-2000), The Hague 2000.

11. A "commentary on the commentaries" is provided by Kritzer, Guide to Practical Applications of the UN Convention on Contracts for the International Sale of Goods, Deventer/Boston 1989. The leading commentaries are in English and German:
     -   In English: Bianca/Bonell (eds.), Commentary on the International Sales Law - The 1980 Vienna Sales Convention, Giuffrè/Milan 1987; Enderlein/Maskow, International Sales Law, New York et al. 1992, also <http://www.cisg.law.pace.edu>; Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed., Deventer/Boston 1999 [cited: Uniform Law]; same, Documentary History of the Uniform Law for International Sales, Deventer/Netherlands 1989 [cited: Documentary History]; Schlechtriem (ed.), Commentary on the UN Convention on the International Sale of Goods (CISG), 2nd ed., Oxford 1998 (3rd ed. in German, infra this note), and
     -   In German: Herber/Czerwenka, Internationales Kaufrecht, Munich 1991; Honsell (ed.), Kommentar zum UN-Kaufrecht, Berlin et al. 1997, [cited: Honsell-Kommentar]; Magnus, in: Martinek (ed.), Staudinger Kommentar um Bürgerlichen Gesetzbuch mit Einführungsgesetzen und Nebengesetzen: Wiener UN-Kaufrecht (CISG), Berlin 1999 [cited: Staudinger-Kommentar]; Schlechtriem (ed.), Kommentar zum Einheitlichen UN-Kaufrecht - CISG, 3rd ed., Munich 2000 [cited: Schlechtriem-Kommentar] (translation of 2nd ed. supra this note); Witz/Salger/Lorenz, International Einheitliches Kaufrecht, Heidelberg 2000 [cited: Kaufrecht].

12. References to scholarly writings from all over the world are provided online by the Pace Law School Institute of International Commercial Law, New York/United States, <http://www.cisg.law.pace.edu>. For a selection in alphabetical order of countries see:
     -   Africa: South Africa (not contracting): Eiselen, Adoption of the Vienna Convention for the International Sale of Goods (the CISG) in South Africa, 116 South African Law Journal, Part II (1996) 323-370, also <http://www.cisg.law.pace.edu>. OHADA-States: Schroeter, Das einheitliche Kaufrecht der afrikanischen OHADA-Staaten im Vergleich zum UN-Kaufrecht, Recht in Africa (2001) 163-176 (comparison to uniform sales law of the African OHADA-States).
     -   Austria: Karollus, Judicial Interpretation and Application of the CISG in Germany 1988-1994, Cornell Review of the Convention of on Contracts for the International Sales of Goods (1995) 51-94, also <http://www.cisg.law.pace.edu>.
     -   Germany: Schlechtriem, Uniform Sales Law - The Experience with Uniform Sales Laws in the Federal Republic of Germany, Juridisk Tidskrift (1991/92) 1-28, also <http://www.cisg.law.pace.edu> [cited: The Experience].
     -   Italy: Ferrari, Applying the CISG in a Truly Uniform Manner: Tribunale di Vigevano (Italy), 12 July 2000, Uniform Law Review/Revue de Droit Uniforme (2001-1) 203-215, also <http://www.cisg.law.pace.edu>.
     -   United Kingdom (not contracting): All authors cited here with critical remarks on the reluctance of the United Kingdom in not ratifying the CISG: Bridge, Bifocal World, supra n. 2, 277 et seq.; Grtner, International Britain and the CISG: The Case for Ratification - A Comparative Analysis with Special Reference to German Law, in: Pace Review of the Convention on Contracts for the International Sale of Goods (CISG), The Hague 2001, also <http://www.cisg.law.pace.edu>; Maniruzzaman, Formation of International Sales Contracts: a Comparative Perspective, 29 Int.'l Bus. L. 11 (2001) 489 et seq., also <http://www.ibanet.org>; Nicholas, The United Kingdom and the Vienna Convention: Another Case of Splendid Isolation? Rome: Centro di Studi e Richerche di Diritto Comparato e Straniero (1993), also <http://www.cnr.it>; Williams, Forecasting the Potential Impact of the Vienna Sales Convention on International Sales Law in the United Kingdom, Pace Review of the Convention on Contracts for the International Sale of Goods (CISG), The Hague 2001, also <http://www.cisg.law.pace.edu>.
     -   United States: Cook, The U.N. Convention on Contracts for the International Sale of Goods: A Mandate to Abandon Legal Ethnocentricity, 16 J. L. & Com. (1997) 257-263, also <http://www.cisg.law.pace.edu>.

13. On mistake and CISG: Hartnell (US), Rousing the Sleeping Dog: The Validity Exception to the Convention on Contracts for the International Sale of Goods, 18 Yale J. Int'l L. 1 (1993), 1-93, at 72 et seq., also <www.cisg.law.pace.edu>; Heiz (Switzerland), Validity of Contracts Under the United Nations Convention on Contracts for the International Sale of Goods, April 11, 1980, also Swiss Contract Law, 20 Vand. J. Transnat'l L., 640-663, at 642 et seq.; P. Huber (Germany), UN-Kaufrecht und Irrtumsanfechtung, ZEuP, 585-602; Lessiak (Austria), UNCITRAL-Kaufrechtsabkommen und Irrtumsanfechtung, Österreichische Juristische Bltter 1989, 487-496; Niggemann (France), Error about a Substantial Quality of the Goods and Application of the CISG, Int'l. Bus. L. J., (1988) 27-43; Weitzmann, Validity and Excuse in the U.N. Sales Convention, (1997), also <http://www.cisg.law.pace.edu>, para. III.

A comprehensive comparative analysis of the implications of mistake is provided by Hoff, Error in the Formation of Contracts in Lousiana: A Comparative Analysis, Tul. L. Rev. 53 (1978-1979) 329-379. For an introduction see Zweigert/Kötz, Introduction to Comparative Law, 3rd ed., Oxford 1998, at 410 et seq. with further references.

14. Garro, Reconciliation of Legal Traditions in the U.N. Convention on Contracts for the International Sale of Goods, 23 Int'l L. 443-483, <www/cisg.law.pace.edu>, explores the irregularities and compromises between the legal systems. Cf. also Weitzmann, supra n. 13, para. III.

15. M. Will, UN-Kaufrecht und internationale Schiedsgerichtsbarkeit, in: M. Will (ed.), Rudolf Meyer zum Abschied: Dialog Deutschland-Schweiz VII, Facult de droit, Université de Genève (1999) 145-163, at 148, estimates that only one seventh of the disputes are settled by arbitration. He highlights that arbitrations regularly involve much higher amounts than cases brought before a state court.

16. See for example Lookofsky, In Dubio Pro Conventione? Some Thoughts About Opt-Outs, Computer Programs and Premption Under the 1980 Vienna Sales Convention (CISG), 13 Duke Journal of Comparative & International Law 263 (2003), at 280 (also at <http://www.law.duke.edu/>) who states "Since the CISG is generally not concerned with validity, most problems which fall under this heading - like, e.g., fraud, duress, mistake or the reasonableness of contract terms - must be resolved in accordance with domestic rules of law".

17. Avoidance means "subject to nullification".

18. Bonell/Liguori, The U.N. Convention on the International Sale of Goods: A Critical Analysis of Current International Case Law 1997 (Part 1), also <http://www.cisg.law.pace.edu>, give an overview of case law that illustrates that the label "validity" is vague as it allows a number of different classifications. Cf. also Honnold, Uniform Law, supra n. 11, article 35, supra n. 11, para. 240.

19. Kritzer, supra n. 11, at 90 with reference to Honnold, Uniform Law, supra n. 12, at 97. The differentiating approach of Honnold was followed by Heiz, supra n. 13.

20. The drafting history will be examined in more detail infra, section III B.

21. Eörsi has described a hierarchy of compromises embodied in the text of CISG, with "clear and recognizable compromises" on the top and a compromise which "mask(s) continuing disagreement" on the bottom; for further discussion of Eörsi's view see Garro, supra n. 14, at 450.

22. Garro, supra n. 14; Baron, Do the UNIDROIT Principles of International Commercial Contracts Form a New Lex Mercatoria?", also <http://www.cisg.law.pace.edu>, para. IV.

23. Weitzmann, supra n. 13, para III; Heiz, supra n. 13, at 661.

24. Zweigert/Kötz, supra n. 13, at 413 et seq. provide an introduction to the different legal families and undertake to state a few common principles for the resolution of cases of mistake (at 423 et seq.).

25. Zweigert/Kötz, supra n. 13, at 411.

26. Procaccia, "The Case Against Lex Mercatoria", in: New Developments, supra n. 3, 87 et seq., at 88, tries to "rationalise ancient ancestor's rebellion" against lex merctoria". Cf. further Baron, supra n. 22, para. II 3 and 4; Berger, The relationship between the UNIDROIT Principles of International Commercial Contracts and the new lex mercatoria, Uniform Law Review/Revue de Droit Uniforme (2000-1) 153-170; van Houtte, The Law of International Trade, London 1995, para. 1.33; Goode, Usage and its Reception in Transnational Commercial Law, in: New Developments, supra n. 3, 3-36.

27. Cf. <http://www.unidroit.org>. Hereinafter referred to as "UNIDROIT Principles".

28. Basedow, Uniform law Conventions and the UNIDROIT Principles of International Commercial Contracts, Uniform Law Review/Revue de Droit Uniforme (2000-1) 129-139, at 137 et seq., highlights the UNIDROIT Principles as a supplementing force. Bridge, The International Sale of Goods, Oxford 1999, para. 2.25, suggests that "(i)n determining the meaning of validity, it may be of some assistance to turn to the UNIDROIT Principles". Cf. further Baron, supra n. 22, para. III 3; Bonell, The UNIDROIT Principles of International Commercial Contracts and the Harmonisation of International Sales Law, in: Foundations, supra n. 10, 299-319, at 309 (para. 21-005 et seq.). For a very detailed analysis cf. Burkart, Interpretatives Zusammenwirken von CISG und UNIDROIT Principles, Baden-Baden 2002.

29. UNIDROIT Principles, Preamble; cf. also Baron, supra n. 22, para. III 1 a) and Bonell, supra n. 28, para. IV 3, for the indirect application as a restatement of trade usages under CISG article 9(2).

30. Burkart, supra n. 28, at 209 et seq.

31. In some civil law countries the irrelevance of a mistake that arises at the stage when a person forms his intention goes back to Savigny and is laid down, for example, in the German Civil Code (Bürgerliches Gesetzbuch) § 119(1). It should be remarked, that German law makes an exception under § 119(2) for cases where the mistake relates to a material quality of the goods or to a material characteristic of a person involved into the contract. Cf. Zweigert/Kötz, supra n. 13, at 413, for a comparative analysis.

32. Further requirements are set out in subparagraphs (a) and (b); but these are not relevant to the present discussion.

33. It should be noted that the UNIDROIT Principles and the CISG each have their own terminology. Whilst the UNIDROIT Principles regard any failure to perform as "non-performance" (article 7.1.1), under the CISG the general term is "breach of contract" (heading to Section III). Further, CISG article 49 distinguishes between "non-performance" and "any other form of breach".

34. UNIDROIT Principles, Commentary, <http://www.unidroit.org>, article 3.7, para. 1, states "(t)his article is intended to resolve the conflict which may arise between the remedy of avoidance for mistake and the remedies for non-performance. In the event of such a conflict, preference is given to the remedies for non-performance since they seem to be better suited and are more flexible than the radical solution of avoidance" (emphasis added).

36. UNIDROIT Principles article 3.3 (initial impossibility) reads as follows: (1) The mere fact that at the time of the conclusion of the contract the performance of the obligation assumed was impossible does not affect the validity of the contract. (2) The mere fact that at the time of the conclusion of the contract a party was not entitled to dispose of the assets to which the contract relates does not affect the validity of the contract.

37. Zweigert/Kötz, supra n. 13, at 429, note that the issues of mistake, fraud and duress are classified as defects of intention by all continental legal systems. This does not, however, imply an equal treatment nor does it imply that all cases come under the validity exception of CISG article 4(a).

38. Flechtner, More U.S. Decisions on the U.N. Sales Convention: Scope, Parol Evidence, "Validity" and Reduction of Price Under article 50, <http://www.cisg.law.pace.edu>, para. I D; Heiz, supra n. 13, at 654; Weitzmann, supra n. 13, para. III; Zweigert/Kötz, supra n. 13, at 424 et seq.

39. Cf. the references supra n. 19.

40. Hartnell, supra n. 13, speaks of the "rousing [a] sleeping dog".

41. Hartnell, supra n. 13, at 40.

42. On preemption/competition see Lookofsky, supra n. 16, at 279 et seq.; U. Huber, in: Schlechtriem-Kommentar, supra n. 12, article 45, para. 46 et seq.

43. Domestic claims in tort were held applicable by the United States Federal District Court New York in (Geneva Pharmaceuticals Tech. Corp. v. Barr Labs. Inc.), 10 May 2002, with subsequent motion proceeding of 21 August 2002, <http://www.cisg.law.pace.edu>. On the issues of the case see Lookofsky, CISG Case Commentary on Preemption in Geneva Pharmaceuticals, October 2003, <http://www.cisg.law.pace.edu>.

44. Kritzer, supra n. 11, at 87, has compiled the different scholarly responses in an explaining table.

45. Bydlinski, Das allgemeine Vertragsrecht, in: Doralt (ed.), Das UNCITRAL-Kaurecht im Vergleich zum österreichischen Recht, 57-90, at 85 et seq.; Hartnell, supra n. 13, at 72 et seq.; Lessiak, supra n. 13, at 491 et seq. It should be noted that Hartnell and Lessiak - although consistent in their findings about mistake - come to different conclusions on other validity issues.

46. Honnold, Uniform Law, supra n. 7, para. 65, 240; Enderlein/Maskow, supra n. 12, article 4, para. 3.1 et seq.; Ferrari, in: Schlechtriem-Kommentar, supra n. 12, article 4 para. 22 et seq.; Enderlein/Maskow, supra n. 12, article 4, para. 3.1 et seq.; Heiz, supra n. 13, at 661.; Kritzer, supra n. 11, at 87 et seq.; Magnus, in: Staudinger-Kommentar, supra n. 11, article 4. para. 27; Schlechtriem, Uniform Sales Law: The UN-Convention on Contracts for the International Sale of Goods, Vienna: Manz (1986), also <http://www.cisg.law.pace.edu> [cited: The UN-Convention], at 32; same, Internationales UN-Kaufrecht, Tübingen 1996, para. 36, 42.

47. For minor doubts cf. Andersen, Reasonable Time in article 39(1) of the CISG - Is article 39(1) Truly a Uniform Provision?, Review of the Convention on Contracts for the International Sale of Goods (CISG), The Hague 1999, 63-176 also <http://www.cisg.law.pace.edu>, para. I 2.1.2. She finds that the importance of the drafting history is "uncertain" as some of the ratifying countries have legal systems which do not prioritize a historical interpretation.

48. Cf. 1155 U.N.T.S. 331, 8 I.L.M. 679 (1969). Honnold, Uniform Law, supra n. 11, para. 103, alludes to the interpretative rules of the Convention on the Law of Treaties (Vienna 1969) which support the suggested consultation of the travaux préparatoires. In article 31 the general interpretative rule 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". Further, article 32 provides that "recourse 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." Hartnell, supra n. 13, para. III B, concludes that "by the same logic [as employed by Honnold the] interpretative 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". Similarly Ferrari, in: Schlechtriem-Kommentar, supra n. 12, Intro to Arts 1-6, para 29.

49. Cf. Ferrari, in: Schlechtriem-Kommentar, supra n. 12, article 7, para. 6 and 11.

50. Honnold, Uniform Law, supra n. 11, para. 103.1.

51. Hartnell, supra n. 13, at 76 puts it so: "simple logic suggests that where there is no consensus to unify, there is no unification".

52. For details cf. Honnold, Documentary History, supra n. 12; documents of the drafting history available at <http://www.cisg.law.pace.edu>. For brief introductions cf. the commentaries supra n. 12. Cf. also Hartnell, supra n. 13. A detailed analysis is provided by U. Huber, Der UNCITRAL-Entwurf eines Übereinkommens über internationale Warenkaufverträge, RabelsZ 43 (1979) 413-526.

53. Convention Relating to a Uniform Law on the International Sale of Goods, July 1, 1964, 834 U.N.T.S. 107 (1972) [cited: ULIS], and Convention Relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods, July 1, 1964, 834 U.N.T.S. 169 (1972) [cited: ULF]. The texts of ULIS and ULF are available at <http://www.lexmercatoria.org>.

54. Honnold, Uniform Law, supra n. 11, para 9.

55. Text available at <http://www.lexmercatoria.org>. Cf. Hartnell, supra n. 13, at 37 et seq.

56. Report of the Working Group on the International Sale of Goods, 9th Session, reprinted in Honnold, Documentary History, supra n. 12, at 292, 297.

57. Hartnell, supra n. 13, at 73 et seq. with further references.

58. Lessiak, supra n. 13, at 490; Hartnell, supra n. 13, at 73. For opposition cf. Heiz, supra n. 13, at 649 et seq.

59. Report of the Working Group on the International Sale of Goods, 3rd Session: "those remedies [would be excluded] that the parties might have agreed upon in the contract"; reprinted in Honnold, Documentary History, supra n. 12, at 97.

60. Cf. CISG article 7 (1) which will be discussed in detail infra, section II B 3 a.

61. Text of Proposed Amendments, Action by First Committee, reprinted in Honnold, Documentary History, supra n. 12, at 691. For the request of the Dutch Delegate see 24th Meeting of the First Committee, reprinted ibid., at 361, 362.

62. Cf. Honnold, Documentary History, supra n. 12, at 691.

63. On one hand Heiz, supra n. 13, at 649 et seq. on the other Hartnell, supra n. 13, at 75 et seq.

64. Hartnell, supra n. 13, at 25 et seq., notes that the validity exception dates back to 1937 when the Government of The Netherlands raised the question of the relationship between the uniform law and issues "derived from the general theory of obligations (such as mistake)." The answer was delivered by Rabel. He emphasised the need for specification of the scope of the uniform law in this field and denied that mistake was governed. As also Hartnell, supra this note, remarks his statement has to be considered in the light of the fact that ULIS did not cover formation issues at all. Given that a relevant mistake arises at the time of the conclusion of the contract, i.e., at a stage left out by ULIS, Rabel's statement can be understood as a mere clarification of the scope of ULIS.

65. Ferrari, in: Schlechtriem-Kommentar, supra n. 12, article 4 para 1.

66. Hartnell, supra n. 13, para. 25 et seq.

67. Report of the Working Group on the International Sale of Goods, 6th Session, reprinted in Honnold, Documentary History, supra n. 12, at 243. Cf. also Report of the Secretary General: Pending Questions with Respect to the Revised Text of a Uniform Law on the International Sale of Goods, reprinted in Honnold, ibid., at 218: "(I)n the absence of [ULIS] article 8 there seems little likelihood that a reader would suppose that the law dealt with the formation of the contract, or the effect of the contract on the property in the goods sold".

68. The authoritative report refers to "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 uniform interpretation. It follows from this restriction that the [ULIS] does not in any way [affect] the imperative rules of municipal law (...) [I]t 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." (emphasis added); cf. 1956 Special Commission Report on Draft Uniform Law on the International Sale of Goods, U.N. Doc. V/Prep./1, reprinted in: 2 Diplomatic Conference on the Unification of Law Governing the International Sale of Goods (Documents), The Hague, 2-25 April 1964, at 235 (1966). On standard forms under CISG Farnsworth, Review of Standard Forms or Terms under the Vienna Convention, 21 Cornell Int.'l L. J. (1988) 439-447, 440 et seq., also <www.cisg.law.pace.edu>.

69. In Stawski Distributing Co., Inc. v. Zywiec Breweries PLC, U.S. District Court (N.D. Illinois), 6 October 2003, 2003 WL 22290412 (N.D.Ill.), also at <www.cisg.law.pace.edu>, the court held that the provisions of the Illinois Beer Industry Fair Dealing Act (IBIFDA) were not preempted (trumped) by the arguably "conflicting" (avoidance) provisions of the CISG. The IBIFDA limits the right of foreign brewers to terminate contracts with their American buyers. According to Lookofsky, supra n. 43, one possible ratio is that the court characterized the IBIFDA as a validity-related regime designed to protect wholesalers with arguably inferior bargaining power.

70. Flechtner, excerpt from: The Several Texts of the CISG in a Decentralized System: Observations on Translations, Reservations and other Challenges to the Uniformity Principle in article 7(1), also <http://www.cisg.law.pace.edu>, para. B, with reference to Hartnell, supra n. 13, at 54 et seq. Further support is given by Schlechtriem, The Experience, supra n. 12, at 11, also <http://www.cisg.law.pace.edu>, who states that "(d)omestic law prevails especially when contracts are considered invalid because the underlying sale is immoral or illegal and void according to domestic law".

71. Hartnell, supra n. 13, at 54 et seq.

72. LUV article 9 provided that "(t)he buyer shall not be entitled to avoid the contract on the ground of mistake if the circumstances on which he relies entitle him a remedy based on the non-conformity of the goods with the contract".

73. Hartnell, supra n. 13, at 75.

74. U.N. Doc. A/CN.9/128/Annex II (1977), reprinted: 8 UNCITRAL Y.B. (1977) 90, 91, U.N. Doc. A/CN.9/SER.A/1977, and in Honnold, Documentary History, supra n. 11, 254 et seq. For further analysis cf. Hartnell, supra n. 13, at 37 et seq.

75. Similarly Lookofsky, supra n. 43 (in particular footnote 8).

76. Ferrari, in: Schlechtriem-Kommentar, supra n. 12, article 7, paras. 6 et seq, states that insofar as the CISG claims observance of the origin of its rules ("international character") and the need to promote uniformity it only resembles a principle common to all international conventions. Concerning, the observance of good faith, however, it sets up a feature particular for CISG to be developed in common by the Contracting States.

77. The determination of such general principles can prove to be difficult in practice. Cf. Ferrari, in: Schlechtriem-Kommentar, supra n. 12, article 7, para. 34, states that analogous application of one provision to another is indisputably allowed. The tension which derives from the limited harmonization intentions of the drafters must be regarded when applying analogies in borderline issues like mistake. On analogy under CISG cf. Brandner, Admissibility of Analogy in Gap-filling under the CISG, LL.M. thesis, University of Aberdeen, (1999) <http://www.cisg.law.pace.edu>.

78. Ferrari, in: Schlechtriem-Kommentar, supra n. 12, article 7, para. 31.

79. Scholars in alphabetical order of countries: Felemegas (Australia), The United Nations Convention on Contracts for the International Sale of Goods: article 7 and Uniform Interpretation, Pace University Essay (February 2001), <http://www.cisg.law.pace.edu>; Oviedo Albán (Colombia), Campo de applicación y criterios de interpretacion de la Convencion de Viena para la Compraventa Internacional de Mercaderias (Comparación la legislación privada colombiana), Facultad de Ciencias Juridicas de la Pontifica Universidad Javeriana (2001) 54 p, also <http://www.cisg.law.pace.edu>; Povrzenic (Croatia), Interpretation and Gap-Filling under the United Nations Convention on Contracts for the International Sale of Goods, <http://www.cisg.law.pace.edu>; Burkart (Germany), supra n. 28; Brandner (Germany), supra n. 77; Viscasillas (Spain), Una aproximación al artculo 7 de la Convención de Viena de 1980 sobre Compraventa Internacional de Mercaderas (Aplicaciones concretas en la parte II de la Convención), in: Cuadernos de Derecho y Comercio 16 (1995) 55-88, also <http://www.cisg.law.pace.edu>; Volken (Switzerland), The Vienna Convention: Scope, Interpretation and Gap-filling, in: Dubrovnik Lectures, supra n. 3, 19-53, also <http://www.cisg.law.pace.edu>; Cook (U.S.), The Need for Uniform Interpretation of the 1980 United Nations Convention on Contracts for the International Sale of Goods, 50 Univ. Pitt. L. Rev. (1988) 197-226, also <http://www.cisg.law.pace.edu>; Kritzer (U.S.), The Convention on Contracts for the International Sale of Goods: Scope, Interpretation and Resources, Cornell Review of the Convention on Contracts for the International Sale of Goods (1995) 147-187, also <http://www.cisg.law.pace.edu>.

80. Bydlinski, supra n. 45, at 85 et seq.; Farnsworth, in: Bianca/Bonell, supra n. 12, at 102; Eörsi, in: Bianca/Bonell, supra n. 12, at 140; Lessiak, supra n. 13, at 491 et seq.; Niggemann, supra n. 13, at 408 et seq.

81. Hartnell, supra n. 13, at 21, states that "(t)he 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."

82. Main proponents: Schlechtriem, The UN-Convention, supra n. 46, at 32; same, Internationales UN-Kaufrecht, supra n. 46, para. 36, 42; Honnold, Uniform Law, supra n. 11, para. 240. Cf. further Enderlein/Maskow, supra n. 12, article 4, para. 3.1 et seq.; Magnus, in: Staudinger-Kommentar, supra n. 11, article 4. para. 27.

83. For a detailed overview cf. Hartnell, supra n. 13, at 46 et seq., and Heiz, supra n. 13, at 647 et seq.

84. Schlechtriem, The UN-Convention, supra n. 46, at 38.

85. Lessiak, supra n. 13, at 492.

86. Lessiak, supra n. 13, at 493.

87. The Secretariat Commentary on the 1978 Draft, <http://www.cisg.law.pace.edu>, states that the "expressly provided"-exception has apparent relevance only for CISG article 12 (now article 11). This article provides that writing requirements that exist under national laws are insignificant for the (formal) validity of a contract governed by CISG.

88. In his editorial analysis of CISG Art. 4 (see Annotated Text of CISG <http://www.cisg.law.pace.edu>) Kritzer identifies a minimum of six cross-references: (1) written contract requirement in some states conflicts with CISG article 11 (no form required); (2) validity rules on exclusion or modification of warranties under UCC s. 2-316 conflict with CISG article 8; (3) prohibition of interest in some Islamic states conflicts with CISG article 78 (interest allowed); (4) determinate price requirement in some states conflict with CISG article 55; (5) position of UNIDROIT Principles towards validity questions under CISG and quality of those principles as a cross-reference. (6) The perhaps most prominent example is the common law doctrine of consideration. According to it a contract cannot be changed without consideration. As laid down in article 29(1), the CISG takes the position of civil law and allows contract modification by the mere agreement of the parties.

89. Also the Secretariat Commentary on article 4, <http://www.cisg.law.pace.edu>, suggests a loose interpretation of "expressly provided" and argues for privileging the uniform law should a contradiction between a domestic validity rule and the uniform law come up.

90. Emphasis added.

91. Ferrari, in: Schlechtriem-Kommentar, supra n. 12, article 4. para. 3; Magnus, in: Staudinger-Kommentar, supra n. 12, article 4, para. 4.

92. Khoo, in: Bianca/Bonell, supra n. 12, at 45, rates the inclusion of "expressly provided" to be an "abundance of caution". With scepticism Hartnell, supra n. 13, at 52, who speaks of a "historical accident".

93. Hartnell, supra n. 13, at 49, cf. also 367.

94. For criticism cf. Hartnell, supra n. 13, at 49: "However, while it is an appropriate task for comparative lawyers to strive to compile such a list [of validity issues], 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 CISG as a whole, or article 4(a) in particular."

95. Cf. P. Huber, supra n. 13, at 595. On divergences in the application of the CISG by courts see De Lukowicz, Divergenzen in der Rechtssprechung zum CISG, Frankfurt on the Main 2001. At 36 et seq. she provides empirical data from interviews of judges of the appellate court of Hamburg, Germany. For a detailed theoretical analyzis cf. Naumann, Der Regelungsbereich des UN-Kaufrechts im Spannungsfeld zwischen Einheitsrecht und Kollisionsrecht, Frankfurt on the Main 2000, at 186 et seq.

96. Andersen, supra n. 47, para. 2.1.3. gives a brief overview about the accessibility to case law. She acknowledges the progress that was achieved through the availability of databases on the Internet and case law collections provided by CLOUT and UNILEX. She remarks, however, that the progress is of benefit primarily for the legal systems of the United States and Central Europe.

97. Hartnell, supra n. 13, at 72 et seq. Similarly Lookofsky, supra n. 43.

98. Honnold, Uniform Law, supra n. 11, para. 69. Ibid. at article 35, para. 240, he states that if the CISG addresses the situation in question "the uniform rules should not be displaced merely because of the labels attached to various doctrines of domestic law". Cf. further Kritzer, supra n. 11, at 91; Magnus, in: Staudinger-Kommentar, supra n. 12, article 4, para. 4.

99. The drafting history supports this statement. Cf. Secretariat Commentary, Guide to CISG article 4, <http://www.cisg.law.pace.edu>, para. 2, where it is stated: "Although 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".

100. Bonell, in: Bianca/Bonell, supra n. 12, at 74 states: "(e)ven in the exceptional cases where terms or concepts were employed which are peculiar to a given national law, it was never intended to use them in their traditional meaning". Cf. further Honnold, Uniform Law, supra n. 11, para. 65 and 240; Kritzer, supra n. 11, at 88.

101. Honnold, Uniform Law, supra n. 11, article 4, para. 67.

102. Andersen, supra n. 47, para. 2.1.3, states that due to the fact that a centre for research and documentation in all branches of the CISG is not yet available "practitioners will be more prone to refer to international scholars of their own nationality in their own language" to which they will find better access. She continues "even the judge complying with his duty to apply international precedents will inadvertently apply precedents and theories which are more focused on domestic or similar practice in his interpretation of the terms of the CISG". Cf. also supra n. 96.

103. Lessiak, supra n. 13, at 493.

104. Hartnell, supra n. 13, at 52 ("implied displacement").

105. See the references supra n. 97.

106. Hartnell, supra n. 13, at 53.

107. Lookofsky, supra n. 43.

108. Hartnell, supra n. 13, at 60 et seq.

109. Hartnell, supra n. 13, at 50.

110. Hartnell, supra n. 13, at 46, 53.

111. Hartnell, supra n. 13, at 61.

112. Not the uniform rule!

113. Some support for such extensive interpretation of the unification impact of CISG can be found in scholarly writing; cf. for example Curran, The Interpretative Challenge to Uniformity (review of Witz, Les Premières applications jurisprudentielles du droit uniforme de la vente internationale, Paris 1995), <http://www.cisg.law.pace.edu> paraphrases Witz statement: "He foresees a day when the CISG will not only be well established, but will take its place as a source of juridical principles to which judges and commentators may look increasingly for instruction and inspiration on matters not limited to the international sales of goods." He further thinks that CISG will be metamorphosed "into a glowing, hue-shifting, impalpable, yet permeating source of illumination." (emphasis added). Cf. further Brand/Flechtner, Arbitration and Contract Formation in International Trade: First Interpretations of the U.N. Sales Convention, <http://www.cisg.law.pace.edu>, para. II, comment on Filanto v. Chilewich, 1992 US Dist., 789 F. Supp 1229: Although the court strictly speaking did not apply CISG, it "referred to CISG article 18 as an afterthought" and held that the rules of contract formation are satisfied by the correspondence of the parties.

114. Siehr, in: Honsell-Kommentar, supra n. 11, article 4, para. 6, argues that similar results in different countries are not due to the Convention's rules but those of domestic law., at n. 13.

115. Cf. supra III B 2.

116. Schwenzer, in: Schlechtriem-Kommentar, supra n. 12, article 35, para. 48.

117. For references cf. supra, n. 38.

118. Hartnell, supra n. 13, at 74 et seq.

119. Kritzer, supra n. 11, at 79.

120. For a very detailed comparative analysis cf. Hoff, supra n. 13, at 329-379. Shorter Zweigert/Kötz, supra n. 13, 410 et seq. A comparison with Swiss law is provided by Heiz, supra. n. 13, at 651 et seq.

121. Zweigert/Kötz, supra n. 13, at 412 et seq.

122. Ibid.

123. Scholars are not divided on this. Cf. for example Ferrari, in: Schlechtriem-Kommentar, supra n. 11, article 4, para. 22; P. Huber, supra n. 13, at 593, 601 et seq.; Lorenz, in: Kaufrecht, supra n. 12, article 4, para 24.

124. Zweigert/Kötz, supra n. 13, at 412.

125. Germany, Landgericht [District Court] Hamburg, 19 June 1997, <http://www.cisg.law.pace.edu>.

126. Zweigert/Kötz, supra n. 13, at 412.

127. For references cf. supra n. 19.

128. Honnold, Uniform Law, supra n. 11, para. 108.

129. On contract formation under CISG Brand/Flechtner, supra n. 113; Perales, Recent Development Relating to CISG: Contract Conclusion under CISG, 16 J. L. & Com. (1997) 35-344, also <http://www.cisg.law.pace.edu>; Winship, Formation of International Sales Contracts under the 1980 Vienna Convention, 17 Int.'l Law (1983) 1-12, also <http://www.cisg.law.pace.edu>, discusses a few model cases.

130. In practice, it seems that the system provided by the CISG is not always duly applied. Cf. Curran, supra n. 113. She is in line with Witz' critical remarks on a decision of a German court of first instance (Landgericht Hamburg, 26 September 1990, Recht der Internationalen Wirtschaft 1990, 1015, also <http://www.cisg.law.pace.edu>). A German company contested the existence of a contract and argued that it had not intended to contract with the other company. The argument was that its agent had mistakenly assumed that he was dealing with another company. Witz emphasises that contract formation is governed by the CISG and criticizes the judges for not applying article 8. Cf. also Karollus, Judicial Interpretation and Application of the CISG in Germany 1988-1994, <http://www.cisg.law.pace.edu>, para. article 4.

131. Austria, Oberster Gerichtshof [Supreme Court], 20 March 1997, <http://www.cisg.law.pace.edu>, provides a very explaining example.

132. In this context see further Esser, Commercial Letters of Confirmation in International Trade: Austrian, French, German and Swiss Law and Uniform Law under the 1980 Sales Convention, 18 Georgia Journal of International and Comparative Law (1988) 427-460, also <http://www.cisg.law.pace.edu>.

133. Similar in cases of non-conformity: Siehr, supra n. 114.

134. Honnold, Uniform Law, supra n. 11, para. 240.

135. This was the rule in Raffles v Wichelhaus ("The Peerless"), (1864) 159 ER 375. This nineteenth century English case involved a mistake of the buyer concerning the identity of the goods which was caused by the fact that goods of the same kind where stored on two different ships that both had the name Peerless. As the contract only stipulated cotton "to arrive ex Peerless from Bombay" it could not be made out to which of the two ships the parties had referred. Most scholars find that the rule of "The Peerless" is applicable under the CISG. Cf. for example Farnsworth, in: Bianca/Bonell, supra n. 12, article 8, para. 3.2; Hoff, supra n. 13, at 348; Honnold, Uniform Law, supra n. 11, para. 108.

136. On initial impossibility Magnus, in: Staudinger-Kommentar, supra n. 12, article 4, para 48; Hartnell, supra n. 13, at 78 et seq.

137. Preceeding note and Schlechtriem, The Experience, supra n. 12, at 11, alludes to domestic concepts of objective impossibility: "Under German law, as in many other legal systems stemming from Roman law and contrary to Common Law and Swedish law, a contract is void if it requires performance of something which was objectively impossible at the time of the conclusion of the contract (impossibilium nulla est obligatio)". Reischauer, Leistungsstörungsrecht des ABGB im Vergleich zu dem des BGB mit einem Blick auf das UN-Kaufrecht, in: Hohloch/Frank/Schlechtriem (eds.), Festschrift für Hans Stoll, Tübingen 2001, 344-360, at 350 et seq., alludes to the important distinction between those legal systems that see the question as one of validity (Germany, e.g.) and those that see it as one of enforceability (Austria, e.g.).

138. Hartnell, supra n. 13, at 78 et seq., is of the opinion that the drafters of article 79 simply did not make a clear decision on the applicability of domestic validity rules in the case of this kind of mistake. On the other hand:
     -   Article 79(1) states: "A party is not liable for a failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have overcome it or its consequences" (emphasis added).
     -   When commenting on an earlier version of article 79(1) which limited the impediment to an occurrence after the conclusion of the contract, the Secretariat Commentary stated that "if at the time of the conclusion of the contract there was an existing impediment to performance, the national law applicable to the (...) validity of the contract may provide either that no contract was concluded or that it was invalid by reason of the mistake (...) of the parties (...)", UNCITRAL Yearbook VII, A/CN.9/SER.A/1976, at 130.
     -   However, when the words at the time of the conclusion of the contract were added to article 79(1), the Secretariat Commentary was amended to state: "The impediment may have existed at the time of the conclusion of the contract. For example, goods which were unique and which were the subject of the contract may have already perished at the time of the conclusion of the contract. However, the seller would not be exempted from liability if he reasonably could have been expected to take the destruction of the goods into account at the time of the conclusion of the contract." Honnold, Documentary History, supra n. 11, at 445, para. 4.

139. Schlechtriem, supra n. 12, at 11, concludes that "under Uniform Sales Law, a contract to deliver goods that have already perished at the time of the conclusion is to be regarded as valid. The impossibility of the seller to deliver is a breach of his obligation which gives the buyer the appropriate remedies, but does not make the contract void as under an applicable domestic law". Cf. further Enderlein/Maskow, supra n. 12, article 79, para. 5.2; Honnold, Uniform Law, supra n. 11, article 79, para. 425; U. Huber, in: Schlechtriem-Kommentar, supra n. 12, article 49, para. 7; Lorenz, in: Kaufrecht, supra n. 12, article 4, para. 19; Magnus, in: Staudinger-Kommentar, supra n. 12, article 4, para. 44; Nicholas, in: Bianca/Bonell, supra n. 12, article 68, para. 3.1; Stoll, in: Schlechtriem-Kommentar, supra n. 12, article 79, para. 18 et seq.

140. For minor doubts cf. Hartnell, supra n. 13, at 78 et seq. Cf. further Tallon, in: Bianca/Bonell, supra n. 12, article 79, para. 2.4, who finds that the rules of CISG are not exhaustive. Weitzmann, supra n. 13, para. III., criticizes Tallon in that he "does not explain why a domestic law's own characterization of a 'validity' issue should be sufficient to supplant a rule contained in the Convention."

141. Cf. supra, section II A 2. UNIDROIT Principles, Commentary, supra n. 32, article 3.3, para. 1: "Contrary to a number of legal systems that consider a contract of sale void if the specific goods sold have already perished at the time of conclusion of the contract, para. (1) of this article, in conformity with the most modern trends, states in general terms that the mere fact that at the time of the conclusion of the contract the performance of the obligation assumed was impossible does not affect the validity of the contract." (emphasis added).

142. Hartnell, supra n. 13, at 77.

143. Ferrari, in: Schlechtriem-Kommentar, supra n. 12, article 4, para. 23; Kritzer, supra n. 11, article 4, at 87 et seq.; Lessiak, supra n. 13, at 487 et seq.; Lorenz, in: Kaufrecht supra n. 12, article 4, para. 20 et seq.; Schwenzer, in: Schlechtriem-Kommentar, supra n. 12, article 35, para. 45; Zweigert/Kötz, supra n. 13, at 413; Magnus, in: Staudinger-Kommentar, supra n. 12, paras. 48 et seq.

144. Cf. infra, section III C 3.

145. Schwenzer, in: Schlechtriem-Kommentar, supra n. 12, article 35, para. 45, provides an overview of the rules applicable under several domestic laws. For a comparative analysis cf. P. Huber, supra n. 13, at 585 et seq. and Zweigert/Kötz, supra n. 13, at 411 et seq.

146. Schwenzer, in: Schlechtriem-Kommentar, supra n. 12, article 35, para. 45.

147. Kritzer, supra n. 11, article 35, at 87, compiles the views of most of the commentators in a table.

148. Honnold, Uniform Law, supra n. 11, article 35, para. 240, but cf. Hartnell, supra n. 13, at n. 294, who advocates a balanced approach towards CISG article 4(a) (supra, sevtion III C 5). She states that on application of the balanced approach "Tribunals in or applying the law of U.S. states that have adopted the provisions of the Uniform Commercial Code should consider the policies articulated by that state in cases arising under U.C.C. § 1-103, which permits state rules on mistake to supplement the U.C.C."

149. Heiz, supra n. 12, at 651 et seq.

150. Civ. 1, 14.5.1996, J.C.P. 1997, I, 4009 with a case note by Rad. Cf. further Curran, supra n. 113, explains Witz' view: He finds that CISG deals exhaustively with the consequences of non-conformity. Its system would be undermined if the buyer would be entitled to avoid the contract based on domestic law. According to Witz this rule should also prevail in cases where the goods are not amenable to resale, even if the obstacle lies in a regulation or administrative ordinance. Curran is critical of this point. Cf. further Niggemann, supra n. 13, at 409.

151. Niggemann, supra n. 13, at 398 et seq.; Hartnell, supra n. 13, at 72 et seq.

152. Ferrari, in: Schlechtriem-Kommentar, supra n. 12, article 4, para. 46; P. Huber, supra n. 13, at 597 et seq.; U. Huber, in: Schlechtriem-Kommentar, supra n. 12, article 45, para. 51; Lorenz, in: Kaufrecht, supra n. 12, article 4, para. 21; Magnus, in: Staudinger-Kommentar, supra n. 12, para. 49; Schlechtriem, Internationales UN-Kaufrecht, supra n. 46, para. 261; Schwenzer, in: Schlechtriem-Kommentar, supra n. 12, article 35, para. 45; Siehr, in: Honsell-Kommentar, supra n. 11, article 4, para. 6.

153. Lessiak, supra n. 13, at 487 et seq., provides a detailed analysis. Cf. further Ebenroth, Internationale Vertragsgestaltung im Spannungsverhltnis zwischen ABGB, IPR-Gesetz und UN-Kaufrecht, Österreichische Juristische Bltter 1986, 681-695, at 688; Karollus, UN-Kaufrecht, Wien/New York 1991, at 41 et seq.; same, UN-Kaufrecht: Hinweise fr die Vertragspraxis, Österreichische Juristische Bltter 1993, 22-33, at 31, n. 49. Cf. P. Huber, supra n. 13, at 599 et seq., who undertakes to rebut the domestic law approach specifically for Austria.

154. Austria, Oberster Gerichtshof, 20 March 1997, <http://www.cisg.law.pace.edu> with a case note by Kritzer.

155. Germany, Landgericht [District Court] Aachen, 14 May 1993, English abstract: <http://www.cisg.law.pace.edu>, original language: RIW 1993, 760, also <http://www.jura.uni-freiburg.de>. On this decision cf. Kazimierska, The Remedy of Avoidance under the Vienna Convention on the International Sale of Goods, 1999, at n. 326 <http://www.cisg.law.pace.edu>.

156. Germany, Oberlandesgericht [Appellate Court] Hamburg, 5 October 1998, TranspR-IHR 1999, 37-40, also <http://www.cisg.law.pace.edu>. Cf. Schwenzer, in: Schlechtriem-Kommentar, supra n. 12, article 35, para. 48.

157. Hungary, 1 July 1997, Fovárosi Birsóság [Metropolitan Court], <http://www.cisg.law.pace.edu>. The case involved a sales contract between a Hungarian seller (claimant) and an Italian buyer (defendant) who contested the sellers claim on three grounds: error, lack of conformity of the goods to the contract terms and disproportionate value of the obligations between the opposing parties.

158. Karollus, supra n. 153, at 41 et seq.

159. For a comprehensive analysis of the interpretation of "reasonable time" in theory and practice cf. Andersen, supra n. 47.

160. Hartnell, supra n. 13, at 77.

161. Zweigert/Kötz, supra n. 13, at 413; Heiz, supra n. 13, at 661 et seq.; U. Huber, in: Schlechtriem-Kommentar, supra n. 12, article 45, para. 52.

162. Lessiak, supra n. 13, at 495 et seq. Hartnell, supra n. 13, at 77.

163. Official Records, at 362.

164. Cf. the doubts raised against the balanced approach supra, section III C 5.

165. Zweigert/Kötz, supra n. 13, at 413 state that "a buyer, who by the operation of CISG article 39, has lost his remedies (...) certainly cannot invoke national rules on avoidance for mistake for the rules of CISG as to the rights of the buyer when defective goods have been delivered are to be seen as a lex specialis" (emphasis added).

166. Cf. also supra section III D.

167. In fact, it has been stated that a fundamental breach will be proven scarcely as it is subject to strict requirements; cf. Honnold, Uniform Law, supra n. 11, article 25, para. 186: "last resort".

168. In cases of (final) non-delivery CISG article 49(1)(b) avoidance is subject to the expiration of an additional period of time (Nachfrist).

169. CISG articles 72, 25. A failure to perform ancillary obligations does not fulfill this criterion. Cf. Leser/Hornung, in: Schlechtriem-Kommentar, supra n. 12, article 71, para. 8 and article 25, para. 24.

170. The implications of the favor contractus principle for the right to avoid are explained by Magnus, supra n. 9, para. 9. He states "(s)everal provisions show that the CISG will allow contract avoidance only under narrow conditions and as a last resort (cf. articles 25, 34, 37, 47, 48, 49, 63, 64). If possible, an economically not feasible winding up of the sale should be avoided. Only if the gravity of the breach of contract is unacceptable, the aggrieved party has to be able to get out of the contract. This principle also applies in situations of a breach of obligations which are either not expressly regulated by the CISG or to which the parties have made the CISG applicable".

171. Leser/Hornung, in: Schlechtriem-Kommentar, supra n. 12, article 71, para. 9, states that "(w)hat constitutes a substantial part of the obligations must be decided by considering the contract as a whole".

172. In the context of anticipatory breach, the question was raised whether the CISG provides a general right of suspension aside from the remedy of CISG article 71 or whether recourse to domestic law should be allowed. Kern, Leistungsverweigerungsrechte im UN-Kaufrecht, <http://www.cisg.law.pace.edu>, argues for a careful analogy to the rules of CISG. According to Leser/Hornung, in: Schlechtriem-Kommentar, supra n. 12, article 71 para. 25a any national concept of suspension is precluded.

173. Schlechtriem, The Experience, supra n. 12, para. (a), at note 37.

174. Cf. for example Lessiak, supra n. 13, at 488.

175. U. Huber, in: Schlechtriem-Kommentar, supra n. 12, article 45, para. 54; Honnold, Uniform Law, supra n. 11, article 35, para. 240;

176. Leser/Hornung, in: Schlechtriem-Kommentar, supra n. 12, article 71, para. 17.

177. For example see a recent decision of a U.S. court: Federal Appellate Court [11th Circuit] (MCC-Marble Ceramic Center v. Ceramica Nuova D'Agostino), 144 F.3d 1384, cert. denied, 67 U.S.L.W. 3652 (U.S. Apr. 26, 1999) (No. 98-1253). It was held: "Courts applying the CISG cannot, therefore, upset the parties' reliance on the Convention by substituting familiar principles of domestic law when the Convention requires a different result". For comments on this decision cf. Andreason, MCC-Marble Ceramic Center: The parol evidence rule and other domestic law under the Convention on Contracts for the International Sale of Goods, 1999 Brigham Young University Law Review 351-379; Flechtner, The U.N. Sales Convention (CISG) and MCC-Marble Ceramic Center Inc. v. Ceramica Nuova D'Agostino, S.p.A.: The Eleventh Circuit Weighs in on Interpretation, Subjective Intent, Procedural Limits to the Convention's Scope, and the Parol Evidence Rule, 18 Journal of Law and Commerce (1999) 259-287; Torzillo, The Aftermath of MCC-Marble: Is this the Death Knell for the Parol Evidence Rule, 74 St. John's Law Review (2000) 843-873; all available at <http://www.cisg.law.pace.edu>.


Pace Law School Institute of International Commercial Law - Last updated October 27, 2003
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