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Published in J. Herbots editor / R. Blanpain general editor, International Encyclopaedia of Laws - Contracts, Suppl. 29 (December 2000) 1-192. Reproduced with permission of the publisher Kluwer Law International, The Hague.

[For more current case annotated texts by this author, see Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed. (2003) and Lookofsky, Understanding the CISG in the USA, 2d ed. (2004).]

excerpt from

The 1980 United Nations Convention on Contracts
for the International Sale of Goods

Joseph Lookofsky

Sphere of Application
Article 1

  1. Internationality under Article 1
    A. Parties' Places of Business in Different Contracting States
    B. Convention Application by Private International Law
    C. Article 95 Declaration
    D. Parties in Different States: Disregarded in Exceptional Cases
    E. Irrelevant Factors: Nationality, Civil-Commercial
  2. Transaction Must be a 'Sale' of 'Goods' Within Articles 1-3
    A. Article 1: Sales, Goods (e.g., Computer Software) etc.

I. Internationality under Article 1

52. As a starting point, the Convention applies in cases falling within one of the two categories set forth in Article 1, paragraph 1, subparagraphs (a) and (b):

'1. This Convention applies to contracts of sale of goods between parties whose places of business are in different States:
a) when the States are Contracting States; or
b) when the rules of private international law lead to the application of the law of a Contracting State.'

A. Parties' Places of Business in Different Contracting States

53. Common to subparagraphs (1)(a) and (1)(b) is the requirement that the sales contract in question be 'international', i.e., a sale between parties whose places of business are in 'different States'. This is the (always) necessary - but in itself insufficient - condition for the application of the Convention by virtue of the main Article 1(1) rule.[1] If a party has more than one 'place of business', reference should be made to Article 10 (infra No. 91).

If, in a given situation, the different States in which the parties reside happen to be CISG Contracting States (States which have acceded to the Convention), then the Convention applies by virtue of subparagraph (1)(a). For example, if a contract for the sale of wine is entered into in January 2000 between a seller in France and a buyer in California (France and the United States being different Contracting States), both French and American courts are bound by Article 1(1)(a) of the treaty to apply the CISG as the gap-filling regime. In this situation, the Convention [page 33] applies without any recourse to rules of private international law; indeed, in this situation there is no conflict between the domestic sales laws of the US and France.[2]

It should be noted in this context that the Scandinavian States (Denmark, Finland, Norway and Sweden) have all made Article 92 declarations; the limited effect of these declarations is that - in respect to matters governed by CISG Part II (Formation of Contract) - the Scandinavian States are not Contracting States within Article 1(1)(a).[3]

1. The situation in Norway with respect to the CISG field of application is unique, in that the 'transformed' version of Article 1 in 87 of the Norwegian SGA defines an 'international sale' as any sale where the parties have their places of business in different States (provided that the fact that parties' respective places of business are in different States is recognizable to both parties at the time of contracting). Although the Norwegian draftsmen intended that the SGA version of the CISG should apply to international sales whenever the applicable private international law rules point to Norway (see the Norwegian Ot prp nr 80 s. 18 and Bergem & Rognlien, Kjøpsloven at 441-442), this procedure seems in conflict with the basic principle underlying CISG Article l(l)(a) and might even mislead Norwegian courts as to the proper application of Article l(l)(b). On the other hand, a court or arbitral tribunal outside Norway would only in rare situations decide a CISG case on the basis of the transformed SGA rules. See generally Lookofsky, J., Understanding the CISG in Scandinavia (1996) 2-2 and 2-4.
2. See para. 6 of the Secretariat's Commentary to Article l(l)(a) of the 1978 UNCITRAL Draft Convention, A/CONF./97/5 (Article 1(1)(a) applies 'even if the rules of private international law of the forum would normally designate the law of a third country'). See also P. Winship, 'Private International Law and the U.N. Sales Convention,' 21 Cornell International Law Journal 487, pp. 519-520 (1988).
3. The declarations do not, however, affect the possible application of Part II by virtue of Article 1(1)(b): see also infra No. 54. For a more complete discussion of the effect of the Article 92 declarations see Lookofsky, J., in 18 Journal of Law & Commerce 289-299 (1999); see also infra No. 328.

B. Convention Application by Private International Law

54. Subparagraph (l)(b) of Article 1 becomes relevant when the subparagraph (l)(a) criterion is not met, i.e. when one or both parties to the contract do not reside in CISG Contracting States.

For example, if a contract for the sale of wine is made in January 2000 between a seller in France and a buyer in England, French courts would not be bound by Article l(l)(a) to apply the CISG as the gap-filling regime: the contract is of course between parties residing in different States, but because England (as of January 2000) is still not a CISG Contracting State, the different States concerned are not different 'Contracting States'. (Of course, English courts are not bound to apply the Convention either.) But the Convention becomes applicable nonetheless - at least in a French court - if the applicable rules of private international law (i.e., the choice of law or conflict of laws rules of the forum court) lead to the application of the law of a (single) Contracting State.

(Note that although Article l(l)(b) functions on the basis of such private international law (PIL) rules, the l(l)(b) rule is not itself a conflict of laws rule. Rather, Article 1(1)(b) corresponds to a domestic rule which, e.g. might help a French court decide whether to apply the rules which apply to domestic consumer sales or those which apply to domestic sales between merchants.)[l] [page 34]

To continue with the example set forth above (a year-2000 contract for the sale of wine between a seller in France and a buyer in England), French courts are bound to apply the CISG Convention if the applicable French PIL rule leads to the application of 'French law' (the law of 'a' Contracting State). And indeed, this would seem to be the likely result, since France is a party to the 1955 Hague Convention on the Law Applicable to International Sales of Goods,[2] and since the main choice-of-law default rule under this 1955 Convention is that the 'seller's law' (in this case: the law of France) applies;[3] therefore, we would expect a French court to conclude that the Convention applies by virtue of subparagraph (1)(b) of Article 1.

As previously noted, the Scandinavian States (Denmark, Finland, Norway and Sweden) have all made Article 92 declarations with respect to CISG Part II, but these declarations do not affect the obligation of the Scandinavian States to apply the rule in CISG Article 1(1)(b), and this can lead to the application of CISG Part II, even in cases where one party resides in a Scandinavian State.[4]

1. Accord: Schlechtriem, P., 'Uniform Sales Law - The Experience with Uniform Sales Laws in the Federal Republic of Germany,' Juridisk Tidsskrift vid Stockholms Universitet (1992) p. 6. [available at <http://www.cisg.law.pace.edu/cisg/biblio/schlechtriem.html>]
2. See supra No. 14.
3. Absent express agreement regarding the applicable law, a sale (generally) shall be governed by the domestic law of the country in which the vendor has his habitual residence at the time when he receives the order: see Article 3(1) of the 1955 Hague Convention. For an exception see Article 3(2).
4. For a more complete discussion of the effect of the Article 92 declarations see Lookofsky, J., 'Alive and Well in Scandinavia: CISG Part II,' 18 Journal of Law & Commerce 289-299 (1999) [available at <http://www.cisg.law.pace.edu/cisg/biblio/lookofsky1.html>]; see also infra No. 328.

C. Article 95 Declaration

55. The 'private international law' rule in Article 1(1)(b) was not embraced by all those involved in the drafting of the CISG. This led to the declaration set forth in Article 95, whereby a Contracting State may declare that it will not be bound by subparagraph (1)(b) of Article 1 of the Convention.[1] Thus far (as of December 1999), China, Czechoslovakia, Singapore and the United States have availed themselves of this declaration.[2]

In cases where only one party resides in a Contracting State, the courts in these Article 95 countries will apply (not Article 1(1)(b), but) the forum state's rules of private international law to select the applicable sales law, although it is still possible that this process will lead to the application of the CISG.[3]

It should also be noted that a Contracting State which has not made an Article 95 declaration should not apply Article 1(1)(b) in respect of any Contracting State that has made an Article 95 declaration.[4]

1. See infra No. 328.
2. The United States reservation was motivated by the allegedly unsettled and unpredictable status of private international law - a situation which, from an American point of view, might be rectified by the widespread adoption of the 1986 Hague Convention on the Law Applicable to Contracts for the International Sale of Goods. See Gabor, E, 'Stepchild of the New Lex Mercatoria: Private International Law from the United States Perspective,' 8 Northwestern Journal of International Law & Business 538 (1988) [available at <http://www.cisg.law.pace.edu/cisg/biblio/gabor.html>]. Regarding this intended successor to the [page 35] 1955 Hague Convention see Lando, O., 'The 1985 Hague Convention on the Law Applicable to Sales,' 51 Rabels Zeitschrift 60 (1987).
3. See P. Winship 'The Scope of the Vienna Convention on International Sales Contracts,' in International Sales (Galston & Smit ed. 1984) at pp. 1-32 [available at <http://www.cisg.law.pace.edu/cisg/biblio/winship5.html>].
4. See Schlechtriem, op. cit. No. 54 at id. and infra No. 331.

D. Parties in Different States: Disregarded in Exceptional Cases

56. The 'internationality' element, common to both subparagraph (l)(a) and (l)(b) situations, is that the parties to the contract have their places of business in different States.[1] However, paragraph 2 of Article 1 creates an exception to the general rule:

'(2) The fact that the parties have their places of business in different States is to be disregarded whenever this fact does not appear either from the contract or from any dealings between, or from information disclosed by, the parties at any time before or at the conclusion of the contract.'

If the parties concerned neither know nor ought to know that they reside in different States, they have no reason to know that the contract which they enter is 'international;' in such event they should hardly expect the CISG to be the applicable law. So in this case, it will be appropriate to 'disregard' the fact that the parties actually do reside in different States. By disregarding this fact, and thus the criterion common to the application of subparagraphs (l)(a) and (l)(b), a court would reach the result that the Convention does not apply to the transaction concerned.

1. See supra No. 53.

E. Irrelevant Factors: Nationality, Civil-Commercial

57. Whereas paragraph 2 of Article 1 may be said to narrow the application of the Convention, paragraph 3 was designed to function as a non-restricting kind of rule. This provision provides:

'(3) Neither the nationality of the parties nor the civil or commercial character of the parties or of the contract is to be taken into consideration in determining the application of this Convention.'

Because the Convention applies in international situations, i.e. where the parties have their places of business in different States, the contracts in question will usually be 'commercial' in nature, in that both parties to the contract are likely to be 'merchants' in the usual sense. But this need not be the case for the Convention to apply, and the fact that the civil-commercial distinction is relevant in some domestic systems is of no significance as regards the applicability of the CISG. What is relevant in this connection, and as developed more fully below, is that most 'consumer'-type transactions are excluded from the Convention sphere by virtue of Article 2(a). [page 36]

II. Transaction Must Be a 'Sale' of 'Goods' Within Articles 1-3

A. Article 1: Sales, Goods (e.g., Computer Software) etc.

58. Article 1 makes it clear that the Convention rules apply only to 'sales of goods' (contrats de vente de marchandises). Apart from the fact that Articles 2 and 3 expressly exclude some transactions which might otherwise fall within this category,[1] the CISG text does not contain any definition of the term 'sale' or of the term 'goods'.

Clearly, both these key Convention terms must be given an 'autonomous' interpretation,[2] but we need not blind ourselves to a few basic notions widely accepted under domestic law, for example, the fact that a contract for the distribution of goods is not a contract of 'sale'.[3]

By the same token, the term 'goods' (marchandises) is usually equated with 'things' (or - somewhat less appropriately - 'objects'),[4] and it would seem that the subject of an international sale must be a moveable thing,[5] i.e., a thing which can be transferred (from one place to another) by a carrier or other medium, although not necessarily by a 'physical' medium. Clearly, (immovable) real property lies outside the concept of a moveable thing, just as 'know-how' and 'goodwill' have little or no link with the generally accepted notion of goods.[6]

Looking beyond these inherent restrictions, however, there is good reason to understand the CISG notion as broadly as possible, so as to cover all moveable and not just 'corporeal' - things.[7] For this and other reasons, most commentators argue that the Convention should at least apply to sales of standard computer programs (software), even though the intangible content of a tangible (compact or floppy) disk is protected by an intangible property right.[8] Indeed, even when computer programs are sold/downloaded over the Internet (i.e., when the programs are not even embodied in a tangible medium), the CISG default rules seem well-suited to regulate the parties' obligations and remedies for breach.[9] And although some have maintained that contracts for the delivery of non-standard programs should be held to lie outside the CISG scope, the arguments presented for such a distinction do not appear convincing,[10] in that the CISG expressly equates contracts for the supply of goods to be manufactured or produced with contracts for the sale of finished goods, and since the relationship between the value of the physical elements embodied in the particular good (e.g., the floppy disk which carries the program) and the value of the technology or information needed to manufacture or process the good seems irrelevant.[11] If, on the other hand, the service element in a given mixed (sales/service) transaction - e.g., the supplier's post-delivery obligation to perform maintenance on the computer system sold under the same contract - is found to predominate the transaction (taken as a whole), then Article 3(2) will ensure that the (whole) contract is removed from the CISG scope.[12] [page 37]

1. See infra No. 59 et seq.
2. Re. Article 7(1), see infra No. 75 et seq.
3. See, e.g., OLG Koblenz (Germany), 17 September 1993, No. 2 U 1230/91, RIW 1993, 934-938, also reported in UNILEX. Regarding the distinction between CISG sales and services, see generally infra No. 61.
4. This is, for example, true under American and Scandinavian sales law. Re. Scandinavian law see, e.g., Lookofsky, J., Køb (Sales: Copenhagen 1996) Ch. 2.3. Compare Herber in Schlechtriem, op. cit. p. 23 (arguing that goods should be understood as 'moveable, tangible objects', notwithstanding the fact that the French ULIS term objets mobiliers has been replaced with the term marchandises).
5. Compare, e.g. as regards American domestic sales law, UCC 1-105(1) which defines goods as 'all things. . . which are movable at the time of identification to the contract for sale ... '
6. See Herber in Schlechtriem, op. cit. p. 23.
7. Accord: Herber at id. and Diedrich, F., 'Maintaining Uniformity in International Uniform Law Via Autonomous Interpretation: Software Contracts and the CISG', in Pace U. International L Rev. 303, 306 (1996) [available at <http://www.cisg.law.pace.edu/cisg/biblio/Diedrich.html>]. A similarly broad view prevails in many domestic sales systems. See, e.g. (re. the Danish Sales Act) Lookofsky, Kpb (Copenhagen 1996) 2.3 and Nørager & Theilgaard, Købeloven (Copenhagen 1993) p. 37. But compare Ferarri 'Specific Topics of the CISG,' 15 J.L & Com. 1, 66-67 (1995) [available at <http://www.cisg.law.pace.edu/cisg/biblio/2ferrari.html>], emphasizing the fact that (standard) programs are usually embodied in a corporeal medium (disks).
8. Sales of books and compact disks are clearly governed by the CISG, even though the intangible content of the book (story) or disk (music, video image) is protected by an intangible property right. Although shares of stock and other securities are specifically excluded from the Convention scope (see infra, No. 60), there is no good reason to extend these Article 2(d) exceptions by analogy. Accord Piltz, Internationales Kaufrecht, 2 Rd.Nrn. 47-48, Herber in von Caemmerer & Schlechtriem, Kommentar, Art.1 Rd.Nr.21. A German court has held that a contract for the sale of standard software is governed by the CISG: see the decision of LG München, 8 February 1995, No. 8 HKO 24667/93, CLOUT Case 131, also reported in UNILEX. This view also finds support in a German case decided under German law: see BGH, 14 July 1993, MDR 1993, 950, applying German domestic sales law to a transaction involving the delivery and installation of standard computer software. American (U.C.C.) precedents on the software issue include RXX Industries, Inc. v. TEKA, 722 F.2d 543 (9th Cir. 1985) (operational software system classified as moveable goods and the essence of supplier's total obligation) and Advent Systems LId v. Unisys Corp., 925 F.2d 670 (3d Cir. 1991).
9. Accord: Bernstein, H. & Lookofsky, J., Understanding the CISG in Europe, 2-5 (The Hague 1997) and Schlechtriem, P., Commentary on the UN Convention on the International Sale of Goods (CISG), p. 23 (Oxford 1998), both sources supporting the view that the CISG should be applied to standard and specialized software sales contracts, even if the programs are transferred electronically.
10. Accord Diedrich, supra note 7.
11. Accord Honnold, J. & Reitz, C., Sales Transactions: Domestic and International Law (1992) p. l0 with n. 22.
12. See infra, No. 61.


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