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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

Article 8
Interpretation of Statements by Parties

A. Subject Matter of Article 8: Statements and Conduct
B. Subjective and Objective Tests
C. Due Consideration to All Relevant Circumstances
D. Common Law Parol Evidence Rule and Article 8

81. Article 8 of the CISG is concerned not with the interpretation of the Convention itself, but rather with the interpretation of 'statements' made (and conduct exhibited) by the parties, the buyer and seller in an international contract of sale. Article 8 provides as follows:

'1. For the purposes of this Convention statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what that intent was.

2. If the preceding paragraph is not applicable, statements made by and other conduct of a party are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances.'

3. In determining the intent of a party or the understanding a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties.'

A. Subject Matter of Article 8: Statements and Conduct

82. The subject matter to be interpreted in accordance with Article 8 is the 'statements' (and conduct) of the parties, inter alia, the kind of statements made by the offeror and the offeree during the contract formation process as regulated by CISG Part II; indeed, Article.8 was originally drafted with sales contract formation in mind.[1] However, Article 8 came ultimately to be placed in CISG Part I, Chapter II, and its relevance as a General (part I) Provision therefore extends to Part III of the Convention as well.

1. See Honnold J., op. cit. (1999) at 115 with note 1.

83. Without straining the clear meaning of words, Article 8 would seem to govern the interpretation of an agreement containing 'statements' drafted ('made') by one party and then signed by the other.[1]

Moreover, although the terms of a document prepared with the full participation of both parties would seem difficult to subsume within the same ('statements ... of a [single] party') category, it might well be argued that the interpretation of such 'joint statements' is a matter governed by the Convention but not expressly settled in it; if so, this particular interpretation question should be similarly settled in conformity with the general interpretation principles laid down in Article 8.[2] [page 55]

1. Compare, e.g. the decision of LG Oldenburg (Germany), 28 February 1996, No. 12 O 2943/94, reported [at <http://cisgw3.law.pace.edu/cases/960228g1.html> and] in UNILEX (Dutch buyer ordered three 'truck loads' of eggs from German seller; reasonable seller should have understood buyer's statement/order to mean 3 full truck-loads).
2. Regarding Article 7(2) see supra No. 78 et seq. According to Professor Honnold (id. at 116 with note 3), paragraph (2) of Article 8 applies when a jointly executed instrument contains 'statements' prepared (and thus 'made') by one party and signed ('accepted') by the other. But when both parties 'participate fully' in preparing the instrument, he argues that only paragraph (3) would apply.

B. Subjective and Objective Tests

84. Depending on the circumstances, the statements of the parties are to be interpreted pursuant to either a subjective or an objective test. One party's statements and conduct are to be interpreted subjectively, according to his intent under paragraph (1), where the other party knew or could not have been unaware what that intent was. Where, however, such other party neither knew nor could have been so aware, the first party's statements are to be interpreted objectively under paragraph (2), according to the understanding that a reasonable person in the same circumstances would have had.

C. Due Consideration to All Relevant Circumstances

85. Paragraph (3) is a qualification of the objective interpretation test set forth in paragraph (2). In determining the intent of a party or the understanding a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case, including the negotiations, etc.

D. Common Law Parol Evidence Rule and Article 8

86. In those cases where the parties to a contract have memorialized their understanding in a written 'statement', courts in most Civil law jurisdictions, applying their domestic procedural law, will at least have the option to consider evidence (offered by one party) that a perhaps contradictory oral statement relating to the same contractual subject was also made.[l]

And because CISG Article 8 expressly requires that 'due consideration' be given to all (potentially) relevant circumstances, including the negotiations, most Convention commentators have argued that the 'parol evidence' rule (which, in reality, is a rule of substantive Common law)[2] is not compatible with the CISG.[3] Indeed, the parol rule seems so formalistic that it has even been seen as a source of 'embarrassment' to commentators residing in the Common law realm.[4]

In any case, the decisions of most American courts which thus far have addressed the issue are in agreement with the views previously set forth by the commentators: Article 8 is incompatible with - and precludes the application of - the (domestic) parol evidence rule in cases otherwise governed by the CISG.[5] [page 56]

On the other hand, Article 8 cannot - in and of itself (i.e., absent an express 'merger clause') - solve the hard problem of whether a given parol statement should be treated as 'part' of the contract;[6] i.e., as Common lawyers sometimes put it, the problem is whether the statement-maker 'intended' his statement to bind.[7] Within the CISG context, parol evidence type problems are likely to arise as regards the definition of conforming goods under Article 35, the question being whether a given oral statement made by the seller should be interpreted as a supplement and/or modification of the seller's written description of the goods.[8]

1. For a Swedish precedent (NJA 1980 p. 398) see Lookofsky, Consequential Damages in Comparative Context (Copenhagen 1989) at p. 56 (Buyer held entitled to rescind land purchase contract; Seller's prior oral assurances rendered written 'caveat emptor' zoning provision ineffective).
2. According to Arthur Corbin's classic, yet still viable definition (Contracts 573), the parol evidence 'rule' is as follows:
'When two parties have made a contract and have expressed it in a writing to which they have both assented as the complete and accurate integration of that contract, evidence, whether parol [oral] or otherwise, of antecedent understandings and negotiations will not be admitted for the purpose of varying or contradicting the writing ...'
3. See Lookofsky, id. at 55.
4. See Honnold, J., op. cit. at p. 121. Some time ago, the English Law Commission concluded that the so-called 'rule' does not exclude evidence which. in the interests of justice, ought to be admitted): see Halsburry's Monthly Review, March 1986 at 12-13.
5. See CLOUT Case 222: MCC-Marble Ceramic Center Inc. v. Ceramica Nuova D'Agostino S.p.A., 144 F.3d 1384 (11th Cir. 1998) [reported at <http://www.cisg.law.pace.edu/cisg/text/casecit.html>], citing, inter alia, the views of Bernstein & Lookofsky, Understanding the CISG in Europe p. 29 (1997). See also Mitchell Aircraft Spares Inc. v. European Aircraft Service AB, 23 F.Supp. 2d 915 (ND.lll. 1998) [reported at <http://www.cisg.law.pace.edu/cisg/text/casecit.html>]. But see Beijing Metals & Minerals Import/Export Corp. v. American Business Ctr., Inc., 993 F.2d 1178 (5th Cir. 1993) [reported at <http://www.cisg.law.pace.edu/cisg/text/casecit.html>].
6. Parties wishing to avoid parol evidence problems under Art. 8 may include in their contract a so-called merger clause that extinguishes the effect of all prior agreements and understandings not expressed in the writing: see MCC-Marble Ceramic Center Inc. v. Ceramica Nuova D'Agostino S.p.A., supra preceding note.
7. Regarding intent and reliance under English law see, e.g. Dick Bentley Productions Ltd. v. Harold Smith (Motors) Ltd. [1965] 2 All E.R 65 (Lord Denning: representation is warranty if 'intended to be acted on and ... in fact acted on').
8. For a concrete illustration of this particular problem, see Lookofsky, 'Loose Ends and Contorts ...', 39 Am. J. Comp. L (1991), pp. 407-410 [available at <http://www.cisg.law.pace.edu/cisg/biblio/lookofsky6.html>].


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