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Cite as Rajski, in Bianca-Bonell Commentary on the International Sales Law, Giuffrè: Milan (1987) 116-120. Reproduced with permission of Dott. A Giuffrè Editore, S.p.A.

Article 10

Jerzi Rajski

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

ARTICLE 10

For the purpose of this Convention:

(a) if a party has more than one place of business, the place of business is that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract;
(b) if a party does not have a place of business, reference is to be made to his habitual residence.

1. History of the provision.

     1.1. - Article 10 deals with the determination of the relevant «place of business» of a party who has more than one such place (paragraph (a)) and establishes a substitute reference rule where a party has no place of business (paragraph (b)).

     1.2. - The first of these rules has no antecedent in either ULIS or ULFC, but an analogous provision is to be found in the 1974 Limitation Convention. Article 2(c) of that Convention states:

Where a party to a contract of sale of goods has places of business in more than one State, the place of business shall be that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at the time of the conclusion of the contract.

The antecedents of Article 10(b) may be found in Article 1(2) of ULIS and of ULFC. These articles read:

Where a party to the contract does not have a place of business, reference shall be made to his habitual residence.

An analogous provision was contained in Article 2(d) of the 1974 Limitation Convention. [page 116]

2. Meaning and purpose of the provision.

     2.1. - The purpose of Article 10(a) is to determine the relevant «place of business» if a party has more than one such place. As to the meaning of «place of business» which has not been defined in the Convention, see commentary on Article 1 supra, § 2.3. Many big enterprises, particularly multinational ones, maintain various «places of business» (e.g., branch offices) in different countries. The determination of the relevant place of business is necessary not only to define the scope of application of the Convention (see Article 1(2)), but also for the purpose of application of the following of its provisions: Articles 12; 20(2); 24; 31(c); 4.4(1)(b); 57(1)(a), (2); 9.6.

     2.2. - The criterion laid down for determining the relevant place of business is the place with the «closest relationship to the contract and its performance». Doubt remains as to the required proximity of the place of business to «the contract and its performance». In order to limit this uncertainty, Article 10 provides that regard is to be given to «the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract». The order of application of these criteria should be reversed. First the circumstances taking place at the time of the conclusion of the contract are to be taken into account (it is noteworthy that this is the only criterion adopted in Article 2(c) of the 1974 Limitation Convention). Factors not known to or contemplated by both parties before or at the conclusion of the contract, such as supervision of the contract performance by a head office located in another State, or the foreign origin or final destination of the goods, are not to be taken into consideration in this respect.

The reference to the performance of the contract in Article 10 is to be understood as concerning the performance as a whole, as contemplated by the parties when entering into a contract. Therefore, a subsequent change in place of performance would be disregarded for the purpose of this article.

     2.3. - The majority of international sales contracts are entered into by businessmen with established places of business. Occasionally, however, this may not be the case. Article 10(b) lays [page 117] down a rule for such instances. Reference is then to be made to the habitual residence of the party who does not have any place of business. The concept of habitual residence is used in a number of other international conventions (see, e.g., EHRENZWEIG-JAYME, Private International Law, A comparative treatise on American International Conflicts Law, including the Law of Admiralty, II, Special Part, Leyden (Sijthoff)-New York (Oceana Publications Inc.), 1973, 96). The concept of «habitual residence» was adopted in the Hague Convention on Civil Procedure of 14 November, 1896. It has been introduced subsequently at a number of international conventions in various domains of private international law , to complement or supplant the traditional connecting factor of domicile (see, e.g., RAAPE-STURN, Internationales Privatrecht 6th ed., München, 1978, 119). It was also adopted in the 1980 Rome Convention, but was replaced, with respect to companies, associations and juristic persons, by a new connecting factor, that of «center office». The essential reason for its success is attributable largely to the difficulties in any attempt to define a general concept of domicile, which varies greatly in the law of different States (see, e.g., DE WINTER, Nationality or Domicile? The present State of Affairs. Recueil des cours of the Academy of International Law, CXXVIII (1969) chaps. V and VI). Because the concept of habitual residence refers to a situation of fact, the possibility of its different interpretation according to the domestic rules of law appears to be substantially limited.

3. Problems concerning the provision.

     3.1. - One of the problems that may arise in connection with the interpretation of Article 10 concerns the meaning of the concept «closest relationship» of the place of business to the «contract and its performance». UNCITRAL as well as the Vienna Conference have avoided clarifying the meaning of «closest relationship». This posture seems to be justified by the need for a certain degree of flexibility in the article's application in practice. The reference to both «the contract and its performance» may, however, create ambiguity. It seems to contrast the relationship as a whole (the contract) with its performance. It might have [page 118] been better to refer to the conclusion of the contract and its performance or the contract only. As a matter of fact, in determining which of several places of business has «the closest relationship to the contract and its performance», a conflict may arise between the place where the contract is concluded and the place of its performance, when the two are situated in different countries. For example, the parties may know that the contract being negotiated and concluded in State A is to be performed in State B, where the seller has another place of business. Article 10 does not give any indication as to which of these criteria should prevail. Here again a certain degree of flexibility may be helpful to enable the judge or the arbitrator to adapt this provision to the particular requirements of different international contractual relations.

Finally, the part of Article 10(a) which states that in establishing «the closest relationship» regard is to be paid to the circumstances known or contemplated by the parties at «any time» before the conclusion of the contract, appears to be too wide. Hopefully it will be interpreted in a reasonable way.

     3.2. - The meaning of «habitual residence» as used in Article 10(b) may be another controversial issue. The Convention does not define it, although it refers to it in another of its provisions (i.e., Article 24).

Since «habitual residence» is a situation of fact, it cannot be a purely legal concept. There are, however, divergent views about the factual situations which it is supposed to denote. While certain authors are of the opinion that the sole criterion for determining «habitual residence» should be the objective fact of physical presence for a considerable period of time (the «objective test»), others maintain that «habitual residence» comprises both objective and subjective elements, i.e., the «factum» or physical presence in a given place and the «animus» to continue to stay there (see, e.g., DE WINTER, op. cit., 429). It appears that The Hague Diplomatic Private International Law Conferences deliberately avoided defining «habitual residence» to retain the ability to adapt the notion to practical requirements. The meaning of «habitual residence» was not discussed in the UNCITRAL preparatory works or during the Vienna Conference. The concept of «habitual residence» may not be given the same meaning in [page 119] all spheres of internationally unified law; it should, however, be interpreted by arbitration tribunals and courts of law in an internationally uniform way (see commentary on Article 6, supra).

As far as Article 10 is concerned, «habitual residence» should obviously be understood to mean generally a long-term stay, a factual situation capable of objective ascertainment, involving high degree of stability. In ascertaining the degree of stability, weight should be given to other circumstances of a personal or professional character which evidence the continuity of the connection between a person and the person's place of residence. Accordingly some importance may be attached to the intention of the person concerned, in so far as it is recognizable or inferrable from certain circumstances of fact. [page 120]


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