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Reproduced with permission from Lex Mundi World Reports, Suppl. No. 30 (December 1993) 32-51

The United Nations Convention on Contracts for the International Sale of Goods (1980) and Norway's Ratification Process

Thor Thingbø

Preface

The objective of this essay is to explain the ratification process and the implications involved when Norway ratified the UN Convention on Contracts for the International Sale of Goods (CISG), commonly known as the Vienna Convention.

This presentation is meant to give information to those who are familiar with legal terms and know the basics of international law, laws of conflicts and contracts for sale of goods. Terms and phrases will not be defined unless they are rather uncommon or it is needed for the context.

In such a brief essay as this, there have to be quite a few areas which I just have to browse over in order to have mentioned them, and in these places I will try to give bibliographic references where the interested reader can obtain further information. However, since even space is restricted, I feel it is important to give an introduction of the events eventually leading to CISG, and due to the connection the Nordic countries have to CISG, it is important to understand the Nordic Collaboration within this area. I have chosen a broad approach to the different issues which arose during Norway's ratification, and I have also tried to keep the reader who is not familiar with the Norwegian and Nordic laws in mind.

It will be far beyond this essay's objective to give comments on all the articles in CISG and all their various implications. I will only cover the Acts where Norway took reservations and the articles in Norwegian law in which content differs from the Convention or where changes had to be made in the established rules due to the ratification of CISG.

I. The Problem

"In conflicts of law, the wilderness grows wilder and faster than the axes of discriminating men can keep it under control. The demolition of obsolete theories makes the judge's task harder, as he works his way out of the wreckage. He has a better chance to arrive at the least erroneous answer if the scholars have labored in advance to break ground for new paths" (Justice Trainor cited in Ehrensweigs: Conflicts of Law, 1959 p. 8).

The above statement is maybe more valid today as a variety of transactions is rapidly growing all over the world. And of course many more people besides the judges need to know which rules are valid for various transactions; if more of the participants in the international trade knew this, it would hopefully relieve some of the strain on our courts today.

When it comes to international sales, there are special problems occurring, and the main reason for this is the considerable amount of time which lapses between the dispatch of the goods and their arrival to the other party. In this period of time, the parties are exposed to three risks: physical, financial and legal. The physical risk is the possibility that the goods may be damaged, or disappear (stolen, lost), or just rot (bananas) while in transit. Looking at the financial risk, the seller will want to obtain payment as early as possible and retain some interest in the goods until he has received payment. The other party, the buyer, does not want to pay for goods which he has not yet received, until he has acquired a interest in the goods on which he can rely in the event of seller's insolvency before actual delivery of the goods. To a large extent, these conflicting desires have been solved by the law relating to documents of title to goods, to the passing of property of goods in transit, and to the unpaid seller's rights against the goods. The actual risks will still be there, whatever we do in the area of legislation and treaties, but the most important fact is that the parties involved in international trade who, up to this day, have faced great difficulties in finding and understanding the actual Act in another country, now eventually can see light at the end of the tunnel. When the different laws in different countries are unified, it is easier to see the actual risks involved in the transaction and take the necessary precautions like insurance and contract terms.

Dealing with the above mentioned problems is very much what CISG is all about.

II. History

The last one hundred years may be described by a rapid growth of international trade. And with the increase in methods of production, the range of products has expanded. An optimum production volume by means of modern technique calls for business opportunities far beyond those in the domestic markets. The market changes towards multinational enterprises who, in many cases, have a hand in the product all the way from production to retail sale.

The increasing production which takes place in former colonial territories and other economically backwards countries, together with the growing import of these, contribute to the growth of world trade.

Parallel with this development, is the recognition that the extension of commercial relations and the guarantee of conditions for an unhampered transaction of business are of major economic and political interest. In the various forums of the world economy like UN, UNCTAD, EEC, GATT, etc., widespread activities are conducted in order to remove public law and administrative barriers from the runway of international trade. It has been recognized that the differences in the norms of private law, civil law and commercial law governing these matters are interfering with the smooth flow of international business transactions. Resolution 2102 of the General Assembly of the UN states that: "conflicts and divergences arising from the law of different states in matters relating to international trade constitute an obstacle to the development of trade".

The Latin American countries were, as Szasz put it: "the champions of the struggle for the unification of private law already in the past century". At the treaties of Montevideo in 1889, the Latin American states agreed to uniform provisions of private international law in the fields of both private and commercial law. For further information, see Szasz p. 6.

The events leading to CISG span a period of 50 years. During that time, there has been an effort towards the unification of the national laws regulating the sale of goods.

The Rome International Institute for the Unification of Private Law, known as UNIDROIT, is an intergovernmental organization which was created in 1926 and was placed under the aegis of the League of Nations. At that time, there were several organizations which were working towards the unification of laws in various fields such as conflicts of law, copyright, transportation and more. But nobody had so far attempted to unify the law of the sale of goods, despite the fact that contracts for the sale of goods are "in the middle" of other contracts. By this, I mean that other types of contracts, like agency and carriage, are in use to fulfil the actual sale. It seems right to regard the contract for sale of goods as fundamental to the law of obligations. In 1930, a UNIDROIT committee was designated to draft an international law on sale of goods. In 1935, the draft was sent to all states, requesting them to give comments on the issue. As a result of this, a new draft was approved by UNIDROIT in 1939.

In 1951, the draft on the unification of the sale of goods was taken up again. There was an international conference at the Hague to consider the possibilities of reaching agreement on this subject. The conference approved the 1939 draft in principle, but suggested various amendments, and in 1956 a new draft was widely circulated by the Netherlands government.

1) The Hague Diplomatic conference

A diplomatic conference was held at The Hague in 1964 resulting in two Conventions: one consists of 15 articles (ULIS 1964). Annexed to the Convention is the text of a Uniform Law on the International Sale of Goods with 101 articles. ULIS deals only with the content of the contract, it sets out the obligations of buyer and seller once a contract for the international sale of goods has been made, and it sets out the remedies for non-performance and defective performance of such obligations. The same conference adopted a second convention: the Convention relating to a uniform law on the Formation of Contracts for the International Sale of Goods (ULFC 1964).

Both ULIS and ULFC were considered by the authors as the keystones of a new system of commercial law. In countries which have accepted them, the Hague Uniform laws exclude the application of the conflict rules in all matters subject to them. In a country which has ratified the Convention, the judge no longer has to ask himself whether the contract relied upon him is governed by Norwegian, French or American law, he only has to decide whether he is dealing with an international sale as understood in the conventions. If the answer is yes, the Uniform Law becomes applicable irrespective of any factors connecting it with one of the signatory countries of the Hague Conventions.

The above mentioned was really a revolutionary way of looking at the regulation of international relations. For further information, refer to Professor Tunc: Commentary.

Another thing to keep in mind is the long period of time already spent on this process and the different generations of jurists involved. As Graves put it: "To read the conventions against the background and theories of the jurists who have contributed to them is rather like making an archaeological cut, in which one can see successive strata of civilization" (Graves p. 42). And since then the work has already been passed on to a new generation of lawyers.

The Uniform Laws agreed upon at the Hague were far from perfect. It was a compromise where nobody was completely satisfied. However, it is beyond doubt that ULIS and ULFC were significant breakthroughs in international collaboration. Only seven states ratified the 1964 Convention, and some of these also made reservations on important issues.

2) CISG

Even though ULIS and ULFC were great achievements, it soon became obvious that, in order to make a convention that would prove successful worldwide, further developments were needed. The United Nations established in 1966 a worldwide body to promote "the progressive harmonization and unification of the law of international trade". This body, the United Nations Commission on International Trade Law (UNCITRAL), had its first session in 1968.

Much attention was paid to the fact that UNCITRAL should have worldwide representation and this was achieved (Honnold p. 51). Although there has been criticism over the strong influence from Western Europe, like Szasz's: "What may in the first place be brought up against the Convention is that the interests of the regions outside Western Europe, mainly those in the developing countries, have not been respected because of the composition of the committee in charge of drafting" (Szasz p. 13), it is obvious that the agreement made is outstanding, which also shows in the number of ratifications made worldwide.

Based on ULIS and ULFC, the Commission finished its work in 1978 and this resulted in the 1978 Draft Convention on Contracts for the International Sale of Goods.

In March 1980, representatives of 62 states and 8 international organizations met in Vienna to finalize the UNCITRAL Draft Convention. Nearly all the provisions in the Draft were approved (for reservations see ap. C). The Convention was finalized in six official languages: Arabic, Chinese, English, French, Russian & Spanish.

Norway agreed to CISG on April 11, 1980 and ratified it on July 20, 1988, to be effective starting August 1, 1989, but it was actually in force through the Sale of Goods Act (1988 Act) as of January 1, 1989. This replaced the Sale of Goods Act of May 24, 1907 (Lov, Mai 13, 1988 nr. 28 Om Samtykke til Ratifikasjon av FN-konvensjonen Om Kontrakter for Internasjonale Losorekjop, Vedtatt April 11, 1980).

By March 1991, 30 states had adhered and further adoptions were nearing completion.

III. Nordic Collaboration

In order to understand Norway's ratification process, it will be useful to know something about the close cooperation between the Nordic countries (Denmark, Finland, Iceland, Sweden and Norway) in the field of legislation. This was started by Denmark, Sweden and Norway more than 100 years ago. In this way, the Nordic countries have enacted similar, at times almost uniform rules covering important areas of the law of contracts and copyright, patent and trademarks. Family law has been harmonized and good results have been reached in the field of conflict of laws. Mutual influences can also be found in criminal law and procedure. This legislative collaboration and the close relations in the field of legal science are among the reasons why it has become natural to regard the Nordic legal systems as a cohesive group.

Nordic Rules on the Sale of Goods

The former Act on Sales of Goods in Denmark, Norway and Sweden was drafted by a Nordic Committee set up in 1902. The significant result of this was that the laws for all major issues were similar. Finland did not participate and just got a new Sale of Goods Act in 1992 similar to the ones of the other Nordic countries. [Iceland's] Act on the Sale of Goods [was] enacted in 1922 and [is] closely related in content to the above mentioned. The later modifications and updating, especially in the area of consumer-related issues, are also to a large extent a result of Nordic cooperation.

In the 1970's, there were national and Nordic committees working on a new Sale of Goods Act. The drafts where presented in 1976-78, but due to the work of United Nations Commission on International Trade Law (UNCITRAL), all the Nordic governments decided to wait for the result of this work.

After the CISG was agreed to on April 11, 1980, the Nordic Ministers of Justice appointed a group whose goal was to explore the opportunities to reach unification of The Nordic Acts on Sale of Goods, and to analyze CISG and the Nordic community's relations to this.

The drafts of that work were presented in 1984 (NU1984:5).

The result is based on CISG and the proposals from the seventies, and even though much effort was put into it, it wasn't possible to reach total unification in various areas. But a parallelism was achieved.

After a Nordic Ministers of Justice meeting in November 1985, an even higher degree of unification was reached, both in principal matters as well as editorial layout, which resulted in very similar drafts for the Nordic countries.

Within the Nordic community, there has also been a wish to make the CISG ratification process as smooth as possible. As a result, the Nordic countries have adjusted their domestic Sale of Goods Act to enable it to be in as close an accordance with CISG as possible.

IV. Norwegian Private International Law

Norwegian Private International Law is mainly based on two sources: case law and customary law. The rules are considered to be a part of the private law of the country and not an "International" law. The basis is formed of two elements: 1) The primary criterion of personal status is the domicile; 2) The so-called Irma-Mignon formula penetrates the case law from a larger number of different fields of law. This formula -- related to Savigny's theories -- was first used in a ship collision case (Gaarder p. 39). Irma-Mignon is the name of one of the vessels involved.

The Supreme Court stated that, when neither customary nor statutary law offers any solution, it is natural to take as starting point the idea that a case should primarily be governed by the law of the country with which it has its strongest connection or to which it is most related. The courts pay much attention to the more fundamental principles of the Norwegian law, and Norwegian law will be applied to override the Irma-Mignon formula where those principles would be affected by application of a foreign law. Attention is also paid to the extent to which the Norwegian decision will be accepted by countries to which the dispute has a relevant connection.

The autonomy of the parties involved in a contractual relationship is widely accepted.

Several Acts implement International Conventions into Norwegian Law, such as:

Geneva Conventions 1931 on Cheques
Geneva Conventions 1930, Bills of Exchange
The Bill of Lading Convention 1924
The Limitation of the Liability of Owners of Sea-going Ships Convention 1957
The Maritime Lien Convention 1957
The Railway Convention 1957
The Warsaw Convention 1929 as amended by The Hague Protocol 1955
Carriage by Air; The Guadalajara Convention 1961 and Tokyo Convention 1933
The Convention of the Contracts in International Carriage of Goods by Road is implemented by an Act of January 31, 1969.

Norwegian Private & Commercial Law

In Norway, there is no formal distinction between civil law and commercial law. As a concept, private law is usually described as the set of rules which governs the relation between individuals, while public law deals with the authorities which are, in one way or the other, executing the power of the state.

Private law is, for systematical purposes, split into family law, law of succession, law of persons and property law.

The 1918 Norwegian Contracts Act is the base in Norwegian Contract Law. This Act prescribes rules regarding the formation of contracts, agency, and the validity of a declaration. The scope of the Act is limited to property law, but most of the rules will, by analogy, have a general application. The rules of the Act concerning the formation of contracts are not mandatory: customs and/or commercial practice, as well as the parties' agreements, will be decisive in each case.

I must also mention the Price Act and especially p. 18 which abandons the use of unreasonable prices and terms of contracts that are not in accordance with "good and fair trade customs".

Contemporary contract law has a social element, the freedom of contract has thus been restricted in many ways through statutes of a mandatory character. There is also a principle of mutual loyalty between the contracting parties.

Hence revision of a contract due to changed conditions is excepted to a certain extent. P. 36 of the Contracts Act is one of the most used by the courts. This states that a contract can be revised fully and partly if it will be unreasonable or against good customs of trade to fulfil the contract. To make such a decision, one has to consider the content of the contract, the parties' relative strength and also the [later] conditions that occurred. Also, when it will be unfair and/or unreasonable to use customary law and trade customs, the contract may be revised. The American UCC 2-302 is something similar, and gives the court the right to refuse to enforce the contract.

CISG does not allow the parties to change the Contract as a result of changing conditions. Art. 79(5) and Art. 7(2).

P. 33 of the 1918 Contract Act contains a general provision that a party cannot claim his rights if this would be against "honesty and good faith". This has been a major article, often used by the courts, but after the introduction of p. 36 (above) in 1983 it lost much of its practical use.

The Contract Act is based upon the system by which unilateral declarations are binding for the declaring -- so-called promises.

The Anglo-American doctrine of consideration is unknown in Norwegian law. Whether a contract is bilateral or unilateral is however of little importance, since the applicable rules are basically the same. There are two distinctions of principle between gratuitous and onerous contracts. An offer is a promise and is binding, the other party must however accept it within a reasonable time. The promise and the acceptance are the two elements of the contract.

Norwegian Contract Law contains very few requirements of form. Oral declarations are as binding as written ones, and even the conduct of the parties may constitute a contract.

V. The Implications

In order to deal with the actual implications involved in the ratification, I will go through the Convention's main scopes.

When I state "p." below, it will be the actual Article in the Norwegian Act (N:Paragraf), and when I state "Art.", I refer to CISG.

1. International Sale.

It would be impossible to reach an agreement containing a provision that CISG would be applicable on domestic contracts. Even the different Sales of Goods Acts in many countries have a certain degree of similarity because they are influenced by the same sources -- Roman, German and French law. CISG is drafted and designed for universal adoption, and to help the parties in different countries find the actual articles which rule their contract. In a domestic sale, the parties will quite easily be able to find and to understand the rules applicable to their particular contract. For this reason, it has been UNCITRAL's objective that CISG will only be applicable to international sales.

2) Where is CISG Applicable?

When both parties' places of business are in Contracting States, the Contracting States are obliged to apply the Convention (Art.1(1)(a)), or when the rules of the actual private international law lead to the application of the law of a Contracting State (Art.1(1)(b)). The latter ground may be excluded by reservation.

Interpretation of the Convention

The most outstanding principle is this: interpretation must be in accordance with the Convention's international character and the need to promote uniformity in its application (Art.7).

This may sound simple, but in practice it might be the hardest problem to deal with. It is very easy to get various interpretations in different countries, especially between those from different law systems, like Arab and Nordic countries.

When writing the Convention's text, a great deal of concern had to be taken into the fact it could be read and applied in a manner that permits it to adapt to changing times and conditions. Much of the reason for this is, of course, the fact that it is difficult and demands a lot of recourses to perform international legislative work. The text must therefore provide for flexibility in various ways. This has been achieved to a large extent, but not without sacrifices. As pointed out in Benjamin: "The lack of precision with which the Convention is drafted causes considerable uncertainty in areas in which the present rules of English law lead to clear and easily predictable results" (Benjamin, 18-004).

The different means of interpretation considering the international character of CISG are quite a few. We have the scopes and the general principles on which it is based. The Convention's Preamble and the considerable amount of documents produced during the work of UNCITRAL might also give valuable information in the interpretation prose which is bound to come in the future.

Declarations

Along with the other Nordic countries, and according to Art. 92, Norway declared that it is not bound by Part II of the Convention governing Formation of the Contract. And according to Art. 94(1), it declared that the Convention shall not apply when one of the parties has its place of business in Denmark, Finland, Norway or Sweden and the other party has its place of business in another of these states, and when one of the parties has its place of business in one of the above states and the other party has its place of business in Iceland. Ref. App.C, R2,R3.

The reasons for this regarding the Formation of the Contract is that the rules set out in CISG's Chapter II do not fit in with the Norwegian system. It will not be desirable for Norway to have these amendments in the Sale of Goods Act, but in the Contract Act 1918. There is also Art. 14, which does not comply with Norwegian Contract Law.

When it comes to Art. 94, the reason is that the Nordic countries maybe have the most similar Acts on Sale of Goods throughout the world and the major trade of these countries are Inter-Nordic. For this reason, it will be much more convenient for the parties involved to use the domestic rules. The countries Norway does business with most are by far Sweden and Denmark, and between these three even the language is very similar and this makes it of course even easier to apply the various domestic rules to contracts between parties in each of these countries.

None of the two Declarations mentioned above were controversial.

The Ratification

I will now describe the actual ratification process and its implication. But it is important to keep the above mentioned in mind, especially the fact that Norway, along with the other Nordic countries, had a significant impact on CISG, and that this is in most aspects conforming with Norwegian Acts regulating the Sale of Goods. Many of the differences which might have been between CISG and the Draft on the new Sale of Goods Act have been "ironed" out during the process, and the way CISG is written, (refer: Interpretation) gives room for minor adjustments.

As a result of this, there are only a few implications of significance which occurred during the ratification process. There was of course a great number of articles in the 1907 Act which had to be altered and rewritten in order to get the 1988 Act to conform to CISG, but many of these would certainly have taken place anyway, just in order to update the legislation (ref: Nordic Collaboration.)

The Convention itself is not setting out any special demands when it comes to the ratification. But it is of course necessary that its full content should actually be put into effect as a part of the country's law. Ref. Art. 7.

Traditionally, Norway has had a dual system which means that international law will not automatically be a part of domestic law. There is a demand for a separate Act from the Government, like transformation or through direct incorporation. The transformation calls for a translation and rewriting of the Convention into the domestic rules which are meant to have the same content. When it comes to incorporation, the Government is issuing an Act stating that the Convention will be applied and regarded as domestic law.

Just a few words on conflicts of laws. Norway has agreed to The Hague Convention of 1955, which was put into force by Act. 3, April 1964, No.1. According to it, the starting point is that it is the law of the seller's country which is applicable, with important exceptions. When the problem arises in Sale of Goods, the first thing to do is to decide which country's law is applicable. This will depend on the private international law in the country in which the case is taken to court. In Norway, Norwegian Private International Law sets out the Norwegian law, and in cases related to the sale of goods it will be the Sale of Goods Act 1988 (Act 1988).

Since Norwegian Private International Law leads to the fact that it is Norwegian law which is applicable in International Sales, it is the Convention in the translated edition that should be used. This is due to the fact that CISG is transformed into Norwegian law and is applicable whether the case is judged by a Norwegian or a foreign court.

The parties are free to choose which law will be applicable. There are three options:

1) Only national laws;

2) National law + international rules;

3) The authentic text in CISG.

The 1986 Hague Convention on The Law Applicable to Contracts for the International Sale of Goods was finalized by fifty-four states of which Norway is one. It provides, in Art. 7(1): "A Contract of Sale is governed by the law chosen by the parties".

In those cases where the parties did not agree on the choice of law or have just agreed to one domestic law, it is the rules in the actual country which set out the laws applicable -- either domestic or the Convention. In Norway, this is regulated in the 1988 Act, which points out this law's international part in p. 5. In other countries, the result will remain similar within the framework of Arts. 1 and 95 of the Convention.

Transformation or Incorporation?

Norway has chosen to bring CISG into effect by transformation, which means that the rules in CISG are applicable by using the Norwegian Sale of Goods Act 1988 (Act 1988).

What can the reasons for this be, when it seems just as convenient to incorporate CISG just by issuing an Act of Enforcement?

There are good reasons for both, and below I will try to mention the most significant which occurred during the drafting period.

Con Transformation

It is impossible to just consolidate CISG into domestic law without doing alterations of any kind. This means that it could easily turn out as a "patchwork" law, in which it might be difficult to spot the various differences between domestic and international sales clearly.

CISG is also designed to make a Uniform Law and set of norms which hopefully will be similar throughout the world. This might be endangered if each country is using CISG as a basis, and then adds various articles to make it suitable to their domestic use. There will be a risk that the CISG rules will be influenced by the domestic rules and not the other way around, so-called the "contagious" effect.

Denmark, Sweden and Finland have decided to use incorporation to get CISG into their laws. This means that the large extent of uniformity achieved by the Nordic countries in this area is endangered.

Against consolidation of CISG is also that it seems more complicated, both to use and to understand, when two different sets of rules are combined into one Act. This can be even more so if the user is an ordinary private person or small businessman, no matter whether he is seeking information on domestic or international sale.

Pro Transformation

By using a consolidated law, it is easier to compare the different sets of rules and spot the differences between them. CISG will hopefully influence the domestic norms and legal standards which eventually will give a great deal of uniformity worldwide. There is of course danger of a contagious effect from the CISG rules to the domestic ones, but this seems limited.

From a practical point of view, it is easier when the rules for international and domestic sales are as similar as possible. With all sorts of international cooperation emerging, it will be of great significance that uniformity is achieved. The 1988 Act is, as mentioned, similar to CISG and this means that the system is quite easy to follow and the rather few articles which are only dealing with international sales are clearly marked.

It is also a great advantage that, by getting the CISG rules into the domestic Act, they will no doubt attract a lot more attention from scholars and organizations normally dealing with domestic problems. This will lead to more and better information which eventually will benefit the users, particular those who don't have access to legal advice.

There is also the fact that, when using the domestic set of rules in a transformed Act, the user will become familiar not only with the domestic rules, but also with the rules that regulate international sales. It will therefore be quite easy to find and understand the rather few rules which are applicable to international sales only. This is a great advantage, especially when considering what the Norwegian Export Council stated: "Unfortunately, it is a fact that only a few of the Exporters in Norway know very much about the rules governing International Sale of Goods" (Ot.prp.80 p. 17).

There is a danger that disagreement will occur as to whether the 1988 Act is similar to the authentic text of the Convention. However, this seems to be marginal and in many contracts the parties will have agreed on which law to apply; if there is doubt, and if they desire, they can agree on the English text.

In a great number of transactions, the parties involved are relatively small and unfamiliar with legal problems, and I agree with the Department's statement that it will be a great advantage for all these to have only one Norwegian set of rules to think about. After all, Norway has several rules which might have to be considered in Contracts of Sale of Goods, i.e. Contracts Act 1918, Price Act 1953. These are complicated already, and I doubt that it would be wise to add another separate Act on top of them. We also have the 1992 Governing Sale of Property Act and, in the near future, we will get an Act regarding product liability and possibly an Act on consumer rights.

Transformation has also been the traditional way to put conventions into force in Norway, especially those which will affect a large number of people.

Summary Pros and Cons

When considering the above mentioned arguments, it is important to remember that the Norwegian domestic law concerning Sale of Goods is very similar to CISG, as it has been a basis for the drafting of the new law and Norway has contributed significantly to the drafting of CISG by being the Nordic member of UNCITRAL.

For this reason, it is obvious that Norway could make use of Transformation without complicating the domestic rules too much. It was considered important that the domestic rule was similar to CISG. In this way, the major part of the rules will be applied to domestic sales and will, therefore, be familiar to the most users within a relatively short period. If CISG were to be put as a separate law, the risk would be that it would not get much attention, except from those who are dealing with international sales on such a large scale that they can afford legal advice on the issue.

The issue that caused most problems was the fact that Sweden, Denmark and Finland decided to incorporate CISG. The Inter-Nordic trade is of vital importance to Norway, and this has been helped through the similarity of the Nordic laws. In 1983, 16% of the total exports and 29% of the total imports in Norway came from Inter-Nordic trade. But this time, it was not possible to agree on all issues, and some of this is due to the fact that there are different legislative traditions. In Norway, there has been a need to clarify some articles, but these changes are not significant. The only real disagreement between the Nordic countries occurred on the issue of how to make CISG part of the domestic system.

A few of the trade organizations expressed concern about the Nordic unification being disturbed and the Nordic collaboration endangered, and asked the government to join the other Nordic Countries' view on the issue (Ot.prp.80 p. 21).

But as a whole, it seems like the majority of the organizations consulted in the matter are of the opinion that even though it would have been preferable to maintain the Nordic unification throughout the whole ratification process, the differences are not bigger than could be expected and are quite easy to cope with. The minor differences are not considered to be significant and might be regarded as an excellent basis for further Inter-Nordic collaboration in the Sale of Goods field.

After a complete consideration of the aspects mentioned here, with the greatest concern to CISG, the Norwegian Government decided to let the 1988 Act be applicable to international sale.

In p. 5 (1) it is stated that the Act is applicable to international sales with those special amendments mentioned within the Act, particularly in chapter XV.

P. 5 (2) sets out that the rules regarding international sales are not applicable to Inter-Nordic sales (Ref:Art 94).

P. 5 (3) is similar to Art. 2, and states that the rules regarding international sales do not apply to sales:

A. of goods bought for family or household use, or sales between private parties;

B. by auction;

C. on execution or otherwise by authority of law;

D. of stocks, shares, investment securities, negotiable instruments or money;

E. of ships, vessels, hovercrafts or aircraft.

Considering that electricity was mentioned in CISG, this was not found necessary in the 1988 Act since it was not considered goods under the 1907 Act. (Ref: Statement from Dept. of Justice 1976-1985 p. 72 and Ot.prp.80 p. 48).

Consumer Sales in p. 3 (3) is not set out in the same way as in CISG, but there is a reference to p. 4, which defines consumer sales. When drafting CISG, a great deal of concern was paid not to interfere with domestic rules designed to protect consumers. The best way to solve this was simply to exclude these sales from CISG.

Due to this, Norway put the definition of Consumer Sales in p. 4, and there are several articles throughout the 1988 Act which set out special rules governing Consumer sales. These are p. no.: 7(4), 11(2), 13(2), 15(2), 16, 17(3), 22(2), 30(2), 32(3), 35(2), 41(4), 45(2), 67(4), 79, 84(2) and 85(2). All these do not apply to international sales.

In order to be able to maintain the desired law for domestic sales, there are some paragraphs which apply only to international sales. These are p. no.: 27(4), 40(2), 54(4) and 70(3). There are also a few amendments which apply only to domestic sales (and Inter-Nordic, ref. above), these are No: 26 and 66(2). In chapter XV, there are also some rules for international sales. Below I will go through these in order to clarify the implications which made these articles necessary.

It seemed obvious that the rules following the 1907 Act were not satisfactory. The liability was based on a sort of "impossibility rule" which was very restrictive. None of the old rules were applicable to those sales which could neither be described as specificus or genuses sale. Due to this, the Nordic committee proposed a "Beyond Control Liability" conforming to Art 79.

During the approval process in Parliament, the Committee of Justice altered p. 27(2) and p. 40 (below). The reason for this was that there was a certain dispute regarding the liability for the seller based on a failure by a third person whose performance was necessary to fulfil the contract.

The Ministry of Justice believed that it was not obvious that the seller should have the same liability for failures of remote subcontractors and/or suppliers as for failures of closer ones. On the other side, the Committee of Justice believed that it did not seem fair that the buyer should not get his damages paid, only because the damage was due to the failure of a remote contractor. This view was also shared by Denmark, Sweden and Finland, and the altered p. 27(2) is now similar to that of other Nordic countries.

The change is applicable to International Sales, but if the parties involved in the transaction want other rules governing the liability, they are free to do so (p. 3) (Art 6 and 9).

P. 27. Liability for the Non-Performing Seller.

This conforms to Art. 79. and sets out when the non-performing party is liable to the disappointed party for breach of contract.

(1) sets out the rule that the seller is liable for the buyer's losses, but if the non-performing party proves that four elements are the reason for the breach of the contract, it will not be liable. These four are:

1) there must be an impediment preventing the performance;

2) this impediment must be beyond its control;

3) and this impediment is of such a kind that the seller could not reasonable be expected to have taken it into account at the time of the conclusion of the contract;

4) the impediment is such that it would be unreasonable to expect the seller to avoid or overcome its consequences.

P. 27(3). is similar to Art. 79(2).

P. 27(4) sets out that the rules in (1), (2) and (3) do not cover indirect losses mentioned in p. 67(2) in domestic sales. In international sales the rules also cover indirect losses unless it is stated otherwise in p. 70(3) (below).

The liability is based on objective criteria and does not depend on whether or not the party is to blame.

The "new" 27(2) is not in complete harmony with Art. 79, as it sets out a further liability. After the alteration, it is not only the third person who is engaged by the seller that is covered by the amendment, but in principle all kinds of suppliers used by former trading links.

On domestic sales, it seems reasonable to limit the number of suppliers who have liability. Those who do not have any connection with the specific sale other than just supplying some minor parts would not be liable. This is however up to the courts to decide, and at present the solution is open.

This last part of p. 27(2) is in contradiction to Art 79(2) which clearly sets out the third person's failure in order to decide whether the seller is exempt from liability. I am in doubt if this implicates that this amendment cannot be applicable to international sales, despite the above mentioned statement from The Committee and the Minister of Justice. The issue is open for the courts to decide, but I think that, unless the courts of other countries are "stretching" the liability beyond the first supplier set out in Art. 79, which they are not likely to do, it will be difficult to let p. 27(2) be applicable to international sales. This is stated by Bergem (p. 166) and I agree with him. (Forh.O. p. 469 and Innst.0.1988 nr 51 p. 15).

P. 27(4)

Indirect losses - losses which do not relate strictly to the amount spent directly because of the contract.

No. (4) states that the rules given in 27 (1,2,3) regarding the seller's liability only cover direct losses on domestic sales. In international sales, they also cover indirect losses as mentioned in p. 67(2) (below) unless otherwise set out in p. 70(3) (below).

P. 40

This paragraph sets out seller's liability if he presents defective goods. It corresponds to Art. 79 and Art. 45(1B and 2).

It only sets out the rules regarding liability. The size of compensation is set out in p. 66 - 70.

P. 40(1)

This sets out the rule regarding "Control liability" which is in p. 27 and Art 79. If the presented goods are defective and the reason is due to an event beyond the seller's (and his supplier's) control, he is not liable.

This question may give rise to different problems, like: when is the cause outside of seller's control? Different kinds of goods may give different solutions. When did the damage occur, before or after the conclusion of the contract, are the goods new or second hand, etc.

P. 40(2) sets out the rule that "Control Liability" does not cover indirect losses as defined in p. 67(2). But in international sales the indirect losses are covered unless otherwise stated in p. 70(3) (below). As mentioned above, this is the same as in p. 27(4).

P. 54

The seller's right to avoid the contract when buyer is not paying.

This is corresponding with Art 64.

P. 54(1)

This sets out the rule that seller is entitled to declare the contract avoided if payment is delayed, and this may be regarded as a fundamental breach of contract.

The definition of "fundamental breach" is in P. 94 and Art 25.

P. 54(2) gives seller the right to declare the contract avoided if buyer does not pay within an additional period of time set by seller. The so-called "Nachfrist".

P. 54(3) declares that, within this additional period of time, seller is not entitled to avoid the contract unless buyer has declared that he will not buy within the period (Ref.Art 64(1b)).

P. 54(4)

This limits seller's right to avoid the contract in those cases where the goods have already been delivered to the buyer. In these circumstances, seller is only entitled to do so when he has announced this prior to delivery or if the buyer does not take delivery. In addition, the conditions set out in (1), (2) and (3) must be fulfilled.

The second part of p. 54(4) states that, in an international sale, seller can declare the avoidance of the contract even without prior announcement, as long as this does not affect the rights a third party may have to the goods. A bankruptcy trustee is also regarded as a third party.

This amendment was necessary to correspond with Art. 64 and Art. 4. In Art. 4, it is stated that CISG is not concerned with the effect the contract may have on the property in the goods sold. It is however stated in Art. 41 that seller must deliver goods which are free from any right or claim of a third party, unless otherwise agreed. It is left to the domestic law to govern these problems and, in addition to the Act of 1988, this is regulated in the following Acts: Panteloven 8 Februar 1980 nr 2 og Kredittkjopsloven 21 Juni 1985 nr 85.

Whether the seller's rights under Art. 81(2) to reclaim the goods from the buyer is effective against third persons will be determined by domestic law.

P. 70

Mitigation of Damages.

P. 70(1)

This is corresponding to Art. 77.

P. 70(2) sets out that the amount one party is liable to pay due to its breach of contract may be reduced if it is unreasonable compared to the size of losses which normally occur in similar circumstances.

P. 70(3)

This contains special rules for international sales. It is corresponding with Art. 74 which states in sec. sent. "such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract."

At the end of p. 70(3), it is stated that (2) is not applicable for international sales . This is because CISG doesn't have a similar amendment.

As mentioned above, there are also two of the paragraphs in the 1988 Act which apply to domestic (and Inter-Nordic) sales only. These are p. 26 and p. 66(2).

P. 26

Avoidance of contract regarding "special made" goods when delivery is delayed.

This rule sets out that if the goods are made especially for the buyer and based on his demands or measurements and, because of this, will expose the seller to a high loss, buyer is only entitled to declare the contract avoided if the delay means that the purpose of the buy is spoiled.

This has no similar amendment in CISG and is therefore only applicable to domestic and Inter-Nordic sales.

The reason for this amendment is the recognition of the fact that the seller who produces something made to the buyer's exact specifications might face great difficulties in selling this item to another customer and, if he can, he will often be forced to accept a lower price.

When applying this rule, the factor of how far the actual production has come will of course have an effect. If it has just started, there is not the same need to protect the seller.

In international sales and also in domestic and Inter-Nordic sales where the goods are not made especially according to the buyer's specifications, it is p. 25 which is applicable. This is corresponding with Art 49(1).

P. 66

This is corresponding with Art 82. It sets out the main rule that buyer can only declare the contract avoided or require the seller to deliver substitute goods if he is able to restitute the goods in substantially the same condition in which he received them.

The exceptions for this rule are mentioned in A, B, and C which correspond with Art 82 A, B, and C.

P. 66(2). This set out a wider right for the buyer to declare the contract avoided or to require the seller to deliver substitute goods even if he is not able to return the goods in substantially the same condition as that in which he received them.

This amendment has no parallel in CISG and is not applicable to International Sales.

The rule sets out that the buyer does not lose his right to declare the contract avoided if he pays the equivalent of the loss of value on the goods due to his usage.

As in p. 66(1), it is necessary that the usual conditions for avoiding the contract be present. These are: p. 25 (Art. 49(1)), p. 34 (Art. 46(2) and (3)) and p. 39 (Art. 49(1) and Art. 25). Due to this, it is not possible to "buy" rights to declare the contract avoided.

This rule was first proposed in the 1976 draft (NOU76:34) and the reason was that it seemed unreasonable for seller to go free from an otherwise justified claim to avoid the contract just because buyer had to use the item for a certain period of time before the restitution could take place. There is a possibility that the buyer, despite the lack of conformity, needs to use the item because it is better than nothing. In these circumstances, it might be reasonable to grant the buyer a right to declare avoidance of the contract so long as he restitutes the loss of value on the item due to his usage.

When it comes to use before the lack of conformity is discovered, this is covered in p. 66(c), Art. 82(c).

CHAPTER XV. Special Rules Concerning International Sales.

As a result of the decision to put CISG into force by Transformation, there was a call for some more precise and special rules to be applicable in international sales than those that apply to both domestic (and Inter-Nordic) sales and international sales.

It was decided to place all the various rules which seemed necessary to bring the 1988 Act into coherence with CISG. Quite a few of these are just translations of the various Articles in CISG and some are just codifications of customary law which would be applied whether the sale is international or domestic, or rules which were followed by other Acts and therefore it was considered not necessary to mention them in the rules governing domestic sale. Some of the paragraphs below were not deemed necessary to be included in the Danish and the Swedish Acts.

None of the paragraphs below created any particularly big problems, but I find it necessary to mention them in order to make it possible for the reader to understand the layout of the 1988 Act and to be able to spot the differences between CISG and the 1988 Act.

P. 87

International Sales.

Similar to Art. 1.

P. 88

Interpretation of the Act. Edited version of Art. 7 (Refer above: Interpretation).

P. 89

Interpretation of statements or other conduct of a party. Similar to Art. 8.

P. 90

Usages and practices. A supplement to p. 3. Is similar to Art. 29.

P. 91

Oral or written contract. (1) is similar to Art. 11. (2) and (3) are similar to Art. 29.

P. 92

Declaration by Contracting State Preserving its Domestic Requirements as to Form. Is in the main part similar to Art. 12.

P. 93

Telegram and Telex as a "writing". This is similar to Art. 13.

P. 94 Fundamental Breach.

This is similar to Art. 25. All good reasons point to give this application by analogy in Domestic and Inter-Nordic sales.

The 1907 Act and the practice by the courts have normally taken quite a few different issues into consideration when deciding if a party should be allowed to avoid the contract. These have been like:

- the consequences for the parties to fulfil their part of the contract,

- the parties' different messages

- the value of the alternative remedies available.

The definition in p. 94 does not include that these may not be considered, but the definition is more precise than earlier.

P. 95

Hand over and cure of documents relating to the goods. This is similar to Art. 34.

P. 96

Third-Party Claims based on a patent or other intellectual property.

This paragraph is similar to Art. 42, which is a new rule in the sale of goods, worked out by UNCITRAL and altered during the Vienna conference.

The Article is designed to deal with those rather complex problems which may arise from claims based on patents, copyrights and trademarks.

In domestic sales it is very rare that the problem occurs, and since Art. 42 is designed for international sales it was not found necessary to make the rule applicable to domestic sales. However it might be possible that this rule will be applied to a domestic or Inter-Nordic sale by analogy if the problem arises for the courts.

P. 97

Notice Requirements. (1) is similar to Art. 40, and is just setting out the obvious.

(2) is similar to Art. 43(2).

(3) is similar to Art. 44, and give rules when there is an excuse for failure to notify. This was made by the end of the Vienna Conference after pressure from some developing countries, and it bear the marks of being hastily drafted, and does not conform too well with the notice provisions developed in UNCITRAL.

It is important to note that this does not overrule the two-year rule given in Art. 39.

The purpose of the rule was to protect buyers, especially in developing countries, who might be unaware of how to use and of the effects of Notice Requirements, and does not apply to domestic or Inter-Nordic sales.

P. 98

This is similar to Art. 52 and is to a certain extent obvious, and it has not been found desirable to take it into the rules governing domestic and Inter-Nordic sales. The reason for bringing it within the 1988 Act was just to clarify that there is no disagreement with CISG.

BIBLIOGRAPHICAL REFERENCES

Szasz: A Uniform law on International Sales of Goods, 1976

Benjamin: Sale of Goods, 4 ed. 1991

Honnold: John Honnold: Uniform Laws for International Sales Act under the 1980 UN Convention

Graveson: Graveson, Cohn & Graveson: Uniform laws on International Sales Act 1967

Schmitthoff: Export Trade, 9th Edition

Gaarder: Karsten Gaarder: Innforing i International Privatrett 2.utg.1990

Ot.prp. 80 1986-1987

Bergem: Bergem C. Rognlien: Kjøpsloven, Komm Utg. 1991


Pace Law School Institute of International Commercial Law - Last updated October 23, 1998
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