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Reproduced with permission of 37 Loyola Law Review (1991-1992) 43-92

Domesticating International Commercial Law:
Revising U.C.C. Article 2 in Light of the United Nations Sales Convention


        Peter Winship [*]

  1. General Considerations
  2. Systematic Comparison
    -     Article 1
            U.C.C. Section 1-103: Recommendation A.1
            U.C.C. Section 1-105: Recommendation A.1(2)
    -     Article 2: Part 1
            U.C.C. Section 2-102: Recommendation A2.1(1)(E)
            U.C.C. Section 2-103: Recommendation A2.1)2)©
            U.C.C. Section 2-107
    -     Article 2: Part 2
            U.C.C. Section 2-201
            U.C.C. Section 2-202
            U.C.C. Section 2-204
            U.C.C. Section 2-207
    -     Article 2: Part 3
            U.C.C. Section 2-302: Recommendation A2.3(1)
            U.C.C. Section 2-304: Recommendation A2.3(2)
            U.C.C. Section 2-305
            U.C.C. Section 2-309: Recommendation A2.3(4)(A)
            U.C.C. Section 2-312
            U.C.C. Sections 2-313 through 2-318
            U.C.C. Sections 2-319 through 2-324
    -     Article 2: Part 4
    -     Article 2: Part 5
            U.C.C. Section 2-502: Recommendation A2.5(2)(A)
            U.C.C. Section 2-504
            U.C.C. Section 2-507: Recommendation A2.5(4)(A)
            U.C.C. Section 2-508(1): Recommendation A2.5(5)(A)
            U.C.C. Section 2-508(2): Recommendation A2.5(5)(B)
            U.C.C. Section 2-509: Recommendation A2.5(6)
            U.C.C. Section 2-510: Recommendation A2.5(6)
            U.C.C. Section 2-511
    -     Article 2: Part 6
            U.C.C. Sections 2-601 through 2-608: Recommendation A2.6(1)
            U.C.C. Sections 2-602 through 2-605: Recommendation Ad.6(2)©
            U.C.C. Section 2-607: Recommendation A2.6(5)(A)
            U.C.C. Section 2-612: Recommendation A2.6(8)
            U.C.C. Sections 2-613 through 2-616: Recommendations A.26(9) and (10)
    -     Article 2: Part 7
            U.C.C. Section 2-701: Recommendation A2.7(1)(B)
            U.C.C. Section 2-701: Recommendation A2.7(C)
            U.C.C. Section 2-702: Recommendation A2.7(2)(B)
            U.C.C. Section 2-705: Recommendation A2.7(4)(A)
            U.C.C. Section 2-706
            U.C.C. Section 2-706: Recommendation A2.7(5)(B)
            U.C.C. Section 2-708(1)
            U.C.C. Section 2-708(2)
            U.C.C. Section 2-709
            U.C.C. Section 2-710: Recommendation A2.7(8)
            U.C.C. Section 2-712: Recommendation A2.7(10)
            U.C.C. Section 2-715: Recommendation A2.7(13)
            U.C.C. Section 2-716: Recommendation A2.7(14)(A)
            U.C.C. Section 2-716: Recommendation A2.7(14)(B)
            U.C.C. Section 2-718
            U.C.C. Section 2-718: Recommendation A2.7(15)(B), (C)
            U.C.C. Section 2-719
            U.C.C. Section 2-725
  3. Conclusion

[INTRODUCTION]

The United Nations Convention on Contracts for the International Sale of Goods (Convention) came into force in the United States on January 1, 1988.[1] Since that date, therefore, there have been two general sales laws in force in the United States: the Convention and Article 2 of the Uniform Commercial Code.[2] The two laws coexist comfortably because the Convention applies only to "international" sales contracts and there will therefore be little overlap between the sphere of application of the two laws. As a treaty made under the authority of the United States, the Convention is the "supreme Law" of the United States and would prevail over conflicting state law.[3] The Convention, however, will rarely [page 43] displace the Code. Only international sales contracts fall within the scope of the Convention and the parties to such contracts may exclude application of the Convention altogether.[4] Perhaps as a result of this limited application, the Convention is still not well known in the United States despite the growing number of published commentaries.[5]

At the same time the United States became a party to the Sales Convention, the sponsors of the Uniform Commercial Code began to reexamine Article 2 of the Code. In November 1987, Professors Richard E. Speidel and Charles W. Mooney, Jr. submitted to the Permanent Editorial Board for the Uniform Commercial Code a proposal for a preliminary study of Article 2.[6] Acting on this proposal in the spring of 1988, the Board appointed a study group under the chairmanship of Professor Speidel "to consider whether Article 2 should be revised and, if so, to report on what revisions might be required."[7] The Study Group published a preliminary report on March 1, 1990,[8] and, after reviewing comments on the report, submitted an executive summary to the Permanent Editorial Board on March 5, 1991 recommending the appointment of a drafting committee to revise Article 2.[9] It is assumed that the Permanent Editorial Board will adopt this recommendation. [page 44]

What role should the Convention play in the review of Article 2? The 1987 proposal for a study does not mention the Convention,[10] The Study Group's preliminary report, on the other hand, makes several specific references to the Convention.[11] Some references cite the Convention in support of the Study Group's recommendations; some reject Convention solutions; some are neutral. suggesting, for example, that the drafting committee consider a particular Convention article. There is, however, no way for the reader of the preliminary report to determine whether these references are the result of a systematic study of the Convention.

This article explores how the Permanent Editorial Board's Study Group might amplify its treatment of the Convention in the group's final report. Part I explores alternative general approaches to the use of the Convention in the revision of Article 2. Having concluded in this first part that the Study Group should develop a strategy for a systematic comparison of the Convention and Article 2, Part II turns to such a brief but systematic comparison.

I. GENERAL CONSIDERATIONS [12]

The absence of a universally-adopted uniform national sales law creates "transaction costs" for transnational trade. An attorney advising a Texas enterprise about a proposed sales contract with a [page 45] Mexican enterprise must consider whether U.S. (Texas or federal) or Mexican (state or federal) law will -- or should -- govern the contract. If it is likely that Mexican law will apply, the attorney must be sufficiently familiar with Mexican law to ensure that there is an enforceable agreement that will not surprise the client if there is a later dispute. Agreeing to make one or the other law applicable provides certainty, but for one of the parties, of course, the applicable law will be foreign law. Adoption of the U.N. Sales Convention by the United States and Mexico means that the Texas-Mexican sales contract will be governed by the Convention unless the parties agree otherwise. The adoption of the Convention avoids some of the costs of non-uniformity: its text, for example, will be more accessible to both parties and over time the accretion of case law and commentary will provide more certainty. With widespread adoption, in other words, the Convention will provide long-term savings.

In the short-run, however, an attorney advising the Texas or Mexican enterprise has an added burden. To be professionally responsible, not only must the attorney know enough about U.S. or Mexican law to advise the client on the best course of action, but she or he must now also know enough about the Convention to decide whether the contract should exclude its application or derogate from one or more of its provisions. To the extent that the domestic sales laws are similar in concept and language to the Convention, of course, this additional burden is reduced, if not eliminated.

If, for example, a country were to substitute the Convention text for its existing domestic sales law, attorneys in that country would need to be familiar with only one text. The solution is not implausible. Indeed, with slight modifications to cope with consumer sales, Norway has enacted the Convention text as its domestic law. Finland and Sweden have also revised their domestic sales law in the light of the Convention.[13] [page 46]

It is highly unlikely, however, that the sponsors of the Uniform Commercial Code would follow the Norwegian example. To do so might ultimately save "drafting" costs: there would be no need to appoint a drafting committee to wrestle with legislative language if the English-language version of the Convention were adopted without amendment. These savings would, however, be more than offset by political and other costs. There would undoubtedly be political costs to overcome resistance to adoption of "foreign" law. Uncertainty, with attendant costs, will inevitably follow the displacement of well-established sales law with rules that have not been tested in domestic courts or analyzed in depth by commentators. New terminology, if not new concepts, would have to be assimilated. Not even all drafting costs would be saved. The sponsors would have to decide whether a new Article 2 should cover transactions (e.g., sales to consumers) or issues (e.g., some products liability issues) excluded by the Convention. And, as a final irony, enactment of the English-language version of the Convention is to ignore the other five equally-authentic language versions (Arabic, Chinese, French, Russian, and Spanish).

At the same time, the Code sponsors should not ignore the Convention. Unlike foreign national sales laws that may be relevant in individual sales transactions, the Convention is already the law of the United States and, as such, is familiar to more and more attorneys and law students. As more United States enterprises engage in international trade, the attorneys representing these enterprises will invest time and effort studying the Convention. Even if a client's trading partner has its place of business in a country that has not become a party to the Convention, an attorney will want to consider whether the Convention is an appropriate alternative to national sales laws. References to the Convention are becoming standard fare in law school contract, commercial law, and international business transactions courses. To the extent that unnecessary differences between Article 2 and the Convention can be eliminated, attorneys and law students will expend less time and effort.[14] [page 47]

Between the extremes of ignoring the Convention and adopting it wholesale lie several possible intermediate positions. Indeed, the Permanent Editorial Board's Study Group implicitly adopts one such position by using the Convention both as a foil for testing proposed amendments and as a potential source of new concepts and rules. National sales laws from other countries may be used in a similar way and law reform bodies in many countries routinely use this comparative method.[15] As explained above, however, the Convention is more than just another foreign law. It is the law of the United States and consequently attorneys have more reason to become familiar with it than the law of other countries.

A more persuasive intermediate position, therefore, is to adopt a general strategy for coordinating the two laws. Such a strategy might identify (1) issues so important that differences between the two laws should be justified; (2) issues so relatively unimportant that there is no reason for differences even in language; and (3) devices to ensure that sellers and buyers know how the two laws complement each other.

The first category of important issues might include warranties of quality and, possibly, remedies. Importers of goods, for example, may have to look to the Convention to determine the warranties of their sellers, while the same importers may themselves give warranties to local consumers as determined by the Uniform Commercial Code.[16] Differences in the two laws may affect, inter alia, questions of indemnification and preconditions to recovery. [page 48]

Remedies for breach of contract constitute a more problematic class of important issues. It is unlikely, for example, that the Study Group will be persuaded to adopt the self-help remedy of reduction of price set out in article 50 of the Convention which can be traced to the actio quanti minoris of Roman law. Just as unlikely would be a decision to give the same primacy to specific performance that is apparently given by the Convention notwithstanding the recent spate of law review commentaries defending the theoretical primacy of specific performance.[17] Given the practical importance of damage remedies, on the other hand, the Study Group should consider carefully the Convention's damage formulas and the explicit statement of the mitigation principle.

The proposed second category would include relatively less important rules for which there is little justification for separate statutory formulas. Examples would include rules on preservation of goods that have been rejected and rules on inspection. In some cases, the Convention supplies unobjectionable additional details, such as requiring notification. In other cases, the Convention may omit rules for reasons worth consideration. For example, the Study Group might consider the decision of the Convention's drafters not to codify trade terms such as C.I.F.[18] because of the continuing evolution of these terms in response to changes in practice and technology.

A third suggested category would focus on specific provisions that link the two laws. The definition of U.C.C. Article 2's scope,[19] for example, might include a reference to the Convention's sphere of application. Likewise, the choice-of-law section in Article 1 [20] might be reexamined to provide guidance for those circumstances when the Convention refers to choice-of-law rules.

The strategy traced out above and the proposed categories are merely suggestions. The Study Group may identify additional or different categories; it may wish to adopt an entirely different strategy. What is important, however, is that the Study Group [page 49] adopt some general strategy and state this strategy explicitly in its final report.

II. SYSTEMATIC COMPARISON

While the Permanent Editorial Board's Study Group may have implicitly adopted a strategy of using the Convention as a foil against which to test Article 2, there is no assurance that its members systematically compared the Convention text with the Code provisions, Without knowing what strategy the Study Group will ultimately adopt, the following systematic comparison of the two laws merely suggests possible issues to be addressed. With the adoption of a strategy, a closer study should be made of the relevant texts.

Article 1

U.C.C. Section 1-103: Recommendation A.1

Section 1-103 of the Uniform Commercial Code provides that "principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement" the Code "[u]nless displaced by the particular [Code] provisions.[21] The Study Group recommends that the Drafting Committee [22] consider how to revise section 1-103 in order to expand the displacement of common law contract principles that are inconsistent with the policies of Articles 1 and 2.[23] The Convention faces a similar problem of displacement or gap-filling. To avoid hurried reference to domestic sales law, the Convention stresses the need to consult "the [page 50] general principles on which it is based" before turning to national law. Article 7(2) of the Convention provides:

"Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law [i.e., conflict of laws rules]."[24]

The Study Group may wish to consult the Convention's formula.[25]

The Convention indirectly raises another problem under section 1-103. Article 4(a) of the Convention states that, except as it otherwise provides, the Convention is not concerned with "the validity of the contract or of any of its provisions or of any usage."[26] The Convention provides no definition of validity and, unless a uniform definition of this concept is widely accepted, article 4(a) threatens the Convention's objective of providing uniform rules for international sales contracts.[27] Section 1-103 also leaves many issues of validity to common law and equitable principles.[28] The Study Group may wish to consider whether they should denominate those issues that they consider to be issues of validity under article 4(a) of the Convention. A national definition of validity, of course, would not be dispositive when interpreting the Convention because interpretation of its articles are governed by its own rules of interpretation, including directives to consider "its international character and to ... promote uniformity."[29] Nevertheless, a national attempt to identify issues of validity would have considerable persuasive power and, at the very least, would cause courts and commentators to refine their analysis of the problem.

A more radical solution to this problem would be for the Drafting Committee to undertake a codification of some or all of [page 51] the rules on validity, such as mistake or coercion.[30] There are, however, at least three objections to taking such action. First, the charge to the Study Group may not extend to such a codification, which arguably should appear in Article 1 rather than Article 2. Second, there may be too few problems with issues of validity in practice to justify a codification. Third, the difficulties of drafting are considerable, as evidenced by the failure to agree on an international text during the UNCITRAL proceedings to consider the draft sales convention.[31]

U.C.C. Section 1-105: Recommendation A.1(2)

Subsection (1) of section 1-105 of the Uniform Commercial Code sets out general choice-of-law rules, but these rules are subject to the Code's special rules listed in subsection (2).[32] At present; there is no special rule for sales but the Study Group recommends that the Drafting Committee consider a more particularized choice-of-law provision for sales.[33] A justification for such a section is that it would provide some certainty when the Convention refers to choice-of-law rules. The United States has opted out of the most controversial of such references.[34] Choice-of-law rules, however, [page 52] play an equally-significant role when there are gaps in the Convention. As directed by article 7(2), a reader fills these gaps, first, by applying the general principles underlying the Convention and, if this is not possible, by applying the domestic sales law determined by choice-of-law analysis.[35]

If the Drafting Committee does undertake to draft a particularized choice-of-law section, it should consider the 1986 Convention on the Law Applicable to Contracts for the International Sale of Goods.[36]

Article 2: Part 1 [37]

U.C.C. Section 2-102: Recommendation A2.1(1)(E)

Article 2 declares that its scope is limited to "transactions in goods."[38] Noting, however, that courts have generally interpreted Article 2 as applying to "mixed" transactions, the Study Group recommends that the Drafting Committee review various options with respect to the application of Article 2.[39] The Study Group canvasses several options. Section 2-102 could be revised to apply to "contracts for the sale of goods." The Study Group also considered applying Article 2 wholesale to any transaction in which goods are sold unless the sale is incidental. To these options might be added the Convention formula for distinguishing between contracts for service and contracts for sale: [page 53]

"(1) Contracts for the supply of goods to be manufactured or produced are to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production.

"(2) This Convention does not apply to contracts in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services."[40]

U.C.C. Section 2-103: Recommendation A2.1(2)(C)

The Study Group recommends [41] that the Drafting Committee consider whether Article 2 should adopt the definition of consumer goods found in the Magnuson-Moss Warranty Act.[42] This Act defines a consumer product as "any tangible personal property which is distributed in commerce and which is normally used for personal, family, or household purposes."[43] Article 2(a) of the Convention excludes from its scope sales of "goods bought for personal, family or household use" -- adopting, in other words, the Code's definition of consumer goods.[44] If not compelled for other reasons, maintaining consistency between the Code and the Convention should be weighed in the balance when considering the Study Group's recommendation.

U.C.C. Section 2-107

The Study Group reaffirms the desirability of including within Article 2 contracts for the sale of energy sources, such as gas, coal and electricity.[45] Disputes under long-term contracts between producers and purchasers "reveal the wide variety of risk allocation devices employed in energy contracts[.]"[46] In resolving these disputes, courts have been forced to apply Article 2 piecemeal and in situations for which the Code was not engineered: [page 54]

[C]ourts have been required to apply Article 2 to unique transaction types which are influenced, indirectly, by regulatory rather than market policies. Moreover, the relational implications of the long-term contract frequently collide with those parts of Article 2 with roots in neo-classical concepts of contract. This tension is apparent in the decisions involving the "take or pay" clause. These developments do not warrant an exclusion of energy contracts from Article 2. Quite the contrary, they require a recognition that there are important sub-contexts within contracts for the sale of goods and that differences within each sub-context pose continuing challenges in the application of Article 2 standards.[47]

Although the Convention expressly excludes from its coverage contracts for the sale of electricity,[48] the debates on the draft text make clear that sales of oil and gas are within the Convention's scope for reasons similar to those set out by the Study Group.[49]

Article 2: Part 2 [50]

U.C.C. Section 2-201

As noted by the Study Group,[51] article 11 of the Convention does not impose formal requirements for enforceability of contracts [52] within the Convention's scope. However, a "contracting [page 55] State" may make a declaration that it will not be bound by article 11.[53] The decision by the United States not to make a declaration was taken with remarkably little dissent. The State Department's Legal Analysis explains the United States' decision to adopt article 11 without reservation:

"Formal requirements [in domestic sales laws] have generated litigation and uncertainty, and are generally regarded to be of doubtful value for international trade. ... Most delegates [to the 1980 diplomatic conference], however, including the United States, concluded that formal requirements were inconsistent with modern commercial practice -- particularly in view of the speed and informality that characterized many transactions in a market economy. ... A declaration (reservation) under [a]rticle 96 would not ensure that the formal requirements of the declaring State would apply to transactions involving its buyers and sellers. Such applicability would result only when conflicts rules point to the formal requirements of the declaring State. However, conflicts rules may point to foreign law, which may have no formal requirements or may impose formal requirements that are unfamiliar to traders in the declaring State. These considerations explain why it is not recommended that the United States make a declaration pursuant to [a]rticle 96."[54] [page 56]

Although the Study Group notes the absence of a parol evidence rule in the Convention, the report draws no conclusions.[55] Article 8(3) of the Convention rejects domestic rules that bar the fact finder from considering any evidence other than a written contract document without regard to the parties' intent.[56] To the extent that section 2-202 [57] merely allocates the task of determining the parties' intent between judge and jury, it is not inconsistent with the Convention. But the Convention requires that whoever determines intent must do so by giving "due consideration ... to all relevant circumstances of the case"[58] unless the parties agree otherwise [59] (e.g., by an "integration" or "merger" clause).

U.C.C. Section 2-204

The Convention adopts an "offer-acceptance" paradigm that implicitly rejects the flexibility inherent in section 2-204.[60] Section 2-204(1) of the Code, for example, provides that " [a] contract for [page 57] sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract." The Code's flexibility makes it easier to deal with formation transaction types (e.g., fully negotiated agreement incorporated in a single contract document) that do not easily fall within the Convention paradigm.[61]

U.C.C. Section 2-207

The Convention's adoption of a slightly-modified "mirror-image" rule is inconsistent with the Study Group's proposal,[62] which focuses on determination of a contract's terms rather than on whether a tribunal should enforce a "contract."[63] Numerous commentators have elaborated on the difficulties inherent in the Convention text and support the Study Group's reluctance to consider the Convention's solution to the "battle of the forms."

Article 2: Part 3

U.C.C. Section 2-302: Recommendation A2.3(1)

Section 2-302 of Article 2 provides that unconscionable contracts are unenforceable, The Study Group (or a majority of it) supports section 2-302 [64] as a residual principle and recommends no change in the text, although it does suggest that the Comments should be revised to clarify the scope of the standard for unconscionability.[65] The Convention does not directly address the issue [page 58] of unconscionability and therefore is not inconsistent with this recommendation. Article 4(a) states that, except as otherwise expressly provided, the Convention is not concerned with "the validity of the contract or of any of its provisions or of any usage."[66] The text of section 2-302 or the Official Comments to that section might be amended to state that unconscionability is an issue of validity within article 4(a) and therefore excluded from the Convention's coverage.[67]

Article 7(1) of the Convention states that "[i]n the interpretation of [the] Convention, regard is to be had to ... the need to promote ... the observance of good faith in international trade."[68] While on its face this language does not impose a general obligation on the parties to act in good faith, commentators persist in asserting that there is such an obligation.[69]

U.C.C. Section 2-304: Recommendation A2.3(2)

The Study Group recommends that the Drafting Committee consider the remedial problems created when the price is made payable in a foreign currency.[70] For many of the sales contracts, this problem will be governed by the Convention rather than by the Code. It is possible that an amendment to section 2-304 [71] could extend its coverage to sales contracts governed by the Convention, but that section is not the obvious place to look for such a solution. A partial solution is to refer the issue to an Article 1 definition of [page 59] "money."[72] A better solution would be to endorse adoption of the Uniform Foreign-Money Claims Act.[73]

U.C.C. Section 2-305

The Study Group recommends no revision of section 2-305.[74] On the enforceability of open price terms, the Convention has made a mess.[75] The Convention formula does, however, raise an interesting question about how specific the gap-filling standard should be. Section 2-305(1) refers to "reasonable price at the time for delivery;" subsection (2) refers to a price "fix[ed] in good faith;" subsection (3) refers simply to "a reasonable price." Article 55 of the Convention, on the other hand, refers to "the price generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade concerned." Presumably the different formulas reflect different judgments on what a majority (or plurality) of parties would agree to if they did formally agree on the contract price. Are the Code's judgments the most accurate? [page 60]

U.C.C. Section 2-308

The Study Group recommends no revisions of section 2-308.[76] Similar default rules appear in article 31 of the Convention.[77] The Study Group may wish to consider whether article 31 is a more accurate rendering of the reasonable expectation of a majority (or plurality) of sellers and buyers.

U.C.C. Section 2-309: Recommendation A2.3(4)(A)

The Study Group recommends that the Drafting Committee clarify when the contract price is due.[78] Section 2-309 promulgates a "reasonable time" standard.[79] Article 58 provides a similar default provision.[80] The Study Group may wish to consider article 58 when it considers the Study Group's recommendations. [page 61]

U.C.C. Section 2-312

At the time it published its preliminary report, the Study Group made no recommendations on the revision of section 2-312.[81] However, "obvious problems" were noted: "(1) What is a sufficient 'cloud' on title to breach [a] warranty; (2) Who makes a warranty of title in auctions and sheriff's sales; (3) Does § 2-312(1) adequately account for the development of trade practice; and (4) Should the disclaimer provision in § 2-312(2) [be] moved to § 2-316?"[82] Articles 41 and 42 of the Convention deal with the seller's obligations with respect to the transfer of property.[83] Although the [page 62] Convention does not address the specific questions raised in the preliminary report, the Study Group may wish to consider the Convention text before submitting its final report.

U.C.C. Sections 2-313 through 2-318

The Study Group makes numerous recommendations with respect to warranties of quality.[84] One such recommendation is that [page 63] a Comment discuss identified gaps in protection between federal [page 64] and non-uniform state law.[85] Several recommendations attempt to define the relation between tort claims and warranty claims.[86]

Articles 35, 36, 39 and 40 of the Convention cover much of the same territory as Article 2 although the Convention does not deal with consumer transactions, disclaimers, privity, and liability for death or personal injury.[87] It is doubtful that the consolidation of [page 65] express and implied warranties in article 35 of the Convention responds to any of the Study Group's criticisms of the Code's warranty provisions. Given, however, the potential importance of having a single legal regime govern a seller's obligations as to quality when goods are first imported and then resold in the United States, the Study Group may wish to study whether the language of the two laws may be made to conform on at least some points. The difference in substance between the two laws is slight.

There has been some controversy on at least one issue with respect to the relation between the Code and the Convention. Although there is weighty authority to the contrary, it has been suggested that failure to disclaim an implied warranty of merchantability following the procedure in section 2-316(2) (use of the word merchantability; disclaimer must be conspicuous if in writing) is an issue of validity left to national law by article 4(a) of [page 66] the Convention.[88] The Study Group might consider whether the Code should include a statement resolving this issue to the extent that national law can do so.

U.C.C. Sections 2-319 through 2-324

Without making a formal recommendation, the Study Group suggests that the Drafting Committee should review, inter alia, the Convention to ensure a proper mesh between the Code's definition of trade terms (e.g., F .A.S. vessel)[89] and the Convention provisions.[90] The Convention does not attempt to define trade terms, leaving this to the parties and to the codifications of trade usage, such as the International Chamber of Commerce's Incoterms.[91] There is, therefore, no need to mesh the provisions of the Code with the Convention. The lesson to be learned from the Convention may be that it is inappropriate to codify trade terms in legislation.[92]

Article 2: Part 4

The Convention has little to offer when reviewing the sections in part 4 of Article 2. The Convention is not concerned with "the effect which the [sales] contract may have on the property in the goods sold."[93] It, therefore, does not address the rights of third-party creditors or good faith purchasers. Allocation of the risk of loss under the Convention is similar to the Code in that transfer of the risk is not determined by transfer of "title."[94] [page 67]

Article 2: Part 5

U.C.C. Section 2-502: Recommendation A2.5(2)(A)

The Study Group recommends deletion of section 2-502.[95] The Convention does not specifically address the issue of the buyer's rights on the seller's insolvency. In principle, the Convention does, however, provide that the buyer is entitled to require the seller to perform whether or not the buyer has pre-paid, although presumably the buyer must at least be prepared to tender whatever payment is due under the contract.[96] In the United States, however, this right to specific performance would be limited by article 28, which states that a court "is not bound to enter a judgment for specific performance unless the court would do so under its own law in respect of similar contracts of sale not governed by this Convention."[97] A State that is party to the Convention is presumably under an international law obligation not to defeat its purposes by amending domestic law post-ratification to curtail the right to specific performance.[98] For the reasons identified by the Study Group, especially the existing uncertainty with respect to the enforceability of section 2-502 in bankruptcy proceedings, the proposed repeal would presumably be, at most, a de minimis modification for international law purposes.[99] In any event, the Convention is concerned only with the rights of the seller and the buyer so that the priority of third-party claims is left to other law.[100] [page 68]

U.C.C. Section 2-504

The Study Group recommends no change in the text of section 2-504.[101] The Study Group may, however, wish to consult article 32 of the Convention, which covers much of the same ground.[102] Sub-article (3) adds what might be considered a useful addition with respect to insurance. while sub-article (1) raises the question of whether prompt notice of shipment should always be required.[103]

U.C.C. Section 2-507: Recommendation A2.5(4)(A)

As presently drafted. Article 2 makes the seller's obligation to transfer and deliver the goods and the buyer's duty to accept and pay for them concurrent conditions.[104] The Study Group recommends that the seller should be required to tender delivery before the buyer must tender payment.[105] The Convention expresses this same idea in article 58(1), while the remaining two sub-articles of [page 69] article 58 deal with the seller's tender of documents and the buyer's right to inspect, respectively.[106] The Study Group may also wish to consider this consolidation of related provisions.

U.C.C. Section 2-508(1): Recommendation A2.5(5)(A)

The Study Group recommends that where "the time for performance has not yet expired" the seller should have the right to cure even if the buyer has accepted and then justifiably revoked acceptance.[107] Articles 34 and 37 of the Convention give the seller a similar broad right to cure in more detailed language which the Study Group may wish to consider, especially the specific reference to documentary transactions.[108] [page 70]

U.C.C. Section 2-508(2): Recommendation A2.5(5)(B)

The Study Group also recommends clarification of the seller's right to cure even after the time for performance has passed.[109] Specifically, the Preliminary Report expresses concern over the imprecision of section 2-508(2)'s "reasonable grounds" test and the meaning and application of the right to "cure."[110] Article 48 of the Convention does not answer clearly all the issues raised by the Study Group but does add more elaborate rules on communications between the parties.[111] The Study Group may wish to consider article 48 when revising section 2-508, but they should be [page 71] aware that there is significant debate about whether the seller may cure after the buyer has "avoided" the contract pursuant to article 49.[112]

U.C.C. Section 2-509: Recommendation A2.5(6)

The Study Group recommends only minor amendments to section 2-509 [113] and in its analysis of this section the Study Group expressly calls attention to relevant commentary on the Convention.[114] Both the Convention and the Code approach risk of loss problems in a similar fashion. Article 68 of the Convention does add a rule on passage of risk when goods are in transit, but the rule -- that, unless otherwise agreed, risk passes at time of contracting rather than at the time the goods are handed over to the carrier -- is not realistic.[115] It will, for example, be very difficult to [page 72] prove exactly when goods are lost or damaged when the goods are in sealed containers on the high seas.

U.C.C. Section 2-510: Recommendation A2.5(6)

Section 2-510 of the Code attempts to delineate the effect of breach on risk of loss.[116] "Given the tenuous nature of the reallocation policy in § 2-510," the Study Group recommends its repeal.[117] Articles 69 and 70 of the Convention, on the other hand, will continue to make exceptions to the usual rules on allocation of loss when one party has breached the contract.[118]

U.C.C. Section 2-511

The Study Group recommends no revisions to the text of section 2-511 [119] but does recommend that the Comment to this section should call attention to the proposed changes to section [page 73] 2-507(1).[120] On the possible use of article 58 of the Convention as a model for the proposed change to section 2-507, see the discussion under section 2-507 supra.

Article 2: Part 6

U.C.C. Sections 2-601 through 2-608: Recommendation A2.6(1)

As to the buyer's rights on improper delivery, a majority of the Study Group recommends only minor revisions to section 2-601,[121] although the Preliminary Report observes that a minority favors substantial changes.[122] As the Study Group notes, the Convention in effect rejects the "perfect tender" rule.[123] Indeed, the Study Group discusses the option of substituting a "substantial impairment" test for the "perfect tender" rule of section 2-601.[124]

One must, however, compare the two laws with care because the Convention's conceptual scheme differs significantly from that of the Code. Whereas the Code distinguishes the right to reject and the right to revoke acceptance from the right to cancel,[125] the Convention speaks usually of the right to "avoid" [cancel] the contract.[126] As long as a breach is "fundamental," a buyer under the Convention may avoid the contract whether or not the buyer has [page 74] taken steps that would amount to acceptance if the Code had governed. The Convention thereby avoids some of the difficulties involved in the more refined Code distinctions between rejection and revocation of acceptance.

Some common issues are, therefore, expressed in different forms. Under the Code, for example, one asks whether the seller may cure after the buyer revokes acceptance; under the Convention one debates whether the seller may cure after the buyer has avoided the contract.

U.C.C. Sections 2-602 through 2-605: Recommendation A2.6(2)(C)

The Study Group recommends a major restructuring of Code sections 2-602 through 2-605 [127] to improve clarity.[128] When reviewing the buyer's duties with regard to rightfully rejected goods, the [page 75] Study Group may wish to consider the language used in the Convention to regulate these same duties.[129] [page 76] [page 77]

U.C.C. Section 2-607: Recommendation A2.6(5)(A)

The Study Group recommends revision of the text of section 2-607(3)(a) [130] or of the comments to require only an informal notice of problems.[131] The Convention regulates the notice requirement in more detail.[132].

The Study Group may wish to consider section 2-607(3)(a) in light of some of the differences between the two laws. First, the Convention requires notice only when there is "lack of conformity of the goods," whereas the Code speaks generally of "breach."[133] Second, under the Convention the bar to any remedy is mitigated under article 44 when buyer has "a reasonable excuse for his failure to give the required notice." Third, article 39(2) establishes a two-year limitation of notice of lack of conformity. This latter rule is not a "statute of limitation:" notice must be given within the article 39(2) period but legal action must be brought within the statute of limitation (e.g., four years).

U.C.C. Section 2-612: Recommendation A2.6(8)

The Study Group recommends that section 2-612(2) be revised to require perfect tender of an installment, and that section [page 78] 2-612(3) be revised to require a "substantial impairment" test before the contract as a whole may be canceled.[134] The Convention applies a "fundamental breach" test both as to a single installment and as to other installments.[135] The Study Group may wish to consider several points raised by this text. First, the Convention extends its rules to both seller and buyer, not just to the buyer as does the Code.[136] Second, the Study Group may wish to reconsider the text of comment 6 to section 2-612, which states: "Whether the non-conformity in any given installment justifies cancellation as to the future depends, not on whether such non-conformity indicates an intent or likelihood that the future deliveries will also be defective, but whether the non-conformity substantially impairs the value of the whole contract."[137] Third, sub-article (3) refines the Code's notion of "breach of the whole [contract]"[138] by focusing on the interdependence of the installments and the buyer's expectations at the time of contracting. [page 79]

U.C.C. Sections 2-613 through 2-616: Recommendations A2.6(9) and (10)

The Study Group notes several areas of uncertainty under sections 2-613 through 2-616, but recommends relatively minor amendments to the text.[139] Articles 79 and 80 of the Convention cover much the same ground.[140] The Study Group may wish to consider several points raised by the differences between the two laws. For example, the Convention expressly delineates the effect of any failure by a third party to perform.[141] By contrast, the uncertainty provisions of Article 2 do not address third party failure per se, but instead categorize specific types of failure, such as casualty,[142] carrier,[143] payment,[144] and delivery.[145] [page 80]

Article 2: Part 7 [146]

U.C.C. Section 2-701: Recommendation A2.7(1)(B)

The Study Group recommends that a newly-drafted section 2-701 should provide for the general principle of mitigation.[147] If it adopts this recommendation, the Drafting Committee might consider the text of article 77 of the Convention for possible language stating the general mitigation principle.[148] The Committee should [page 81] be aware, however, that there is debate about whether the Convention article applies to remedies other than damages (e.g., specific performance).[149] If it adopts this Convention language, the Committee might wish to disclaim the limitation. Note also that any general statement of the mitigation principle should take into account the specific example of mitigation set out in section 2-704(2).

U.C.C. Section 2-701: Recommendation A2.7(1)(C)

The Study Group recommends that a newly-drafted section 2-701 [150] should provide for cumulation of remedies.[151] While the Convention generally recognizes the cumulation of remedies, it does foreclose the market measure of damages if a party chooses to cover.[152] [page 82]

U.C.C. Section 2-702: Recommendation A2.7(2)(B)

Article 2 specifically addresses the credit seller's power to reclaim goods from an insolvent buyer but does not expressly delineate the reclamation rights of a seller who delivers goods in exchange for a check that is dishonored.[153]The Study Group recommends that section 2-702 [154] be revised to include both common law grounds for reclamation.[155] The Convention grants a seller who avoids a contract the right to reclaim delivered goods, whether the sale was for cash or on credit.[156] While this reclamation right arises when the seller has avoided the contract, which includes cases other than the buyer's insolvency, the Convention does not include details, such as the Code's time limits on the credit seller's reclamation power.

U.C.C. Section 2-705: Recommendation A2.7(4)(A)

Subsection 2-702(1) addresses the seller's right to refuse delivery in the event of the buyer's insolvency.[157] Section 2-705 discusses other circumstances that justify the seller's stoppage of delivery.[158] In order to "improve[ ] the functional unity of the seller's [page 83] 'self-help' remedies and facilitate[ ] the redrafting of Section 2-702 to deal exclusively with reclamation rights[,]" the Study Group recommends that section 2-702(1) be moved to become the first subsection of section 2-705 but that no amendments be made to the text. [159] Comparison of that section with article 71 of the Convention suggests possible amendments to the Code text.[160] The Convention requires, for example, that the seller give the buyer notice when the seller exercises its rights to withhold delivery.[161] Likewise, the Convention permits the buyer to satisfy the seller by "adequate assurance" of payment while the Code requires payment in cash.

Article 71(2) authorizes a seller to stop delivery under circumstances prescribed in article 71(1), which are broader than those [page 84] stated in section 2-705(1). The Drafting Committee may wish to reconsider when delivery may be stopped.

The final clause of the first sentence in article 71(2) -- "even though the buyer holds a document which entitles him to obtain them " -- is inconsistent with the Code.[162]

U.C.C. Section 2-706

The Study Group recommends no changes in the substance of section 2-706.[163] Article 75 of the Convention sets out the equivalent resale formula but without the detail of section 2-706.[164] The Convention does require, however, that resale take place "within a reasonable time after avoidance"[165] -- a requirement only implicit in section 2-706.

U.C.C. Section 2-706: Recommendation A2.7(5)(B)

The Study Group recommends that in the absence of lost volume a seller who has resold the goods should be limited to the damages allowed by section 2-706(1).[166] This recommendation is consistent with the Convention, which permits recovery of the [page 85] market price/contract price differential only when the aggrieved party has not covered.[167]

U.C.C. Section 2-708(1)

Subsection 2-708(1) measures "damages for non-acceptance or repudiation by the buyer [as] the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages. ..."[168] Article 76 of the Convention sets out a market price/contract price formula that is consistent in principle with section 2-708(1).[169] The Convention formula differs, however, in that it refers in some cases to the current or market price at "the time of avoidance" and in other cases to the price at the time the aggrieved party takes over the goods.[170] The Code, on the other hand, looks only to the time for tender.[171] The 1980 diplomatic conference debated the formula at great length and the Study Group may wish to consult the minutes of these debates in the official records.[172]

U.C.C. Section 2-708(2)

The Convention does not have a specific formula similar to that found in section 2-708(2) [173] and relies instead on the general [page 86] formula of article 74 of the Convention: "a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach."[174] The relation between this general formula and the more specific market price/contract price formula of article 76 of the Convention is addressed by the clause at the end of the first sentence of article 76(1), which allows recovery of "any further damages recoverable under article 74."[175] The Drafting Committee may wish to consider the structure of the Convention's formulae when considering the solutions canvassed by the Study Group.[176]

U.C.C. Section 2-709

Article 62 of the Convention adopts the civil law approach, which would allow the seller to "require" the buyer to perform as the seller's principal remedy.[177] This approach is inconsistent with section 2-709,[178] which limits the circumstances in which the seller [page 87] may bring an action for the price, but consistent with the Convention's general affirmation of the principle that specific performance yields the fairest results. While the Drafting Committee may wish to reconsider the Study Group's recommendation in the light of the more general debate with respect to the availability of specific performance, the Drafting Committee should note that the Convention itself recognizes contrary national rules. Article 28 of the Convention states that a court is not bound to order the buyer to perform "unless the court would do so under its own law in respect of similar contracts of sale not governed by this Convention."[179] In other words, the Convention does not require a United States court to grant a judgment in an action for the price even for sales contracts otherwise covered by the Convention.

U.C.C. Section 2-710: Recommendation A2.7(8)

The Convention is consistent with the recommendation that the Code be revised to permit a seller to recover consequential damages.[180] Articles 74-76 of the Convention provide the same damage formulae for both the seller and the buyer, and article 74 explicitly contemplates recovery of foreseeable consequential damages.[181]

U.C.C. Section 2-712: Recommendation A2.7(10)

Although noting that the result is implicit under the current Code,[182] the Study Group recommends that subsection 2-712(3) [183] be revised to state expressly that "a buyer who effects a proper cover under section 2-712 should be barred from remedy under section 2-713".[184] The Convention is consistent with the current and the proposed rule that a buyer who covers should be barred from recovery under the market price/contract price formula.[185] [page 88]

U.C.C. Section 2-715: Recommendation A2.7(13)

The Study Group recommends no changes in the text of sub-section 2-715(2)(A).[186] The Convention is consistent with the endorsement of the Code's present formula for recovery of foreseeable consequential damages and a duty to mitigate.[187] The Convention, however, excludes from its coverage "liability of the seller for death or personal injury caused by the goods to any person."[188]

U.C.C. Section 2-716: Recommendation A2.7(14)(A)

Adopting the civil law's emphasis on specific performance, the Convention authorizes the buyer to "require performance by the seller of his obligations. ..."[189] As noted, however, in connection with the discussion of the seller's analogous right, the action for the price, article 28 of the Convention provides that a court is not bound to order the seller to perform "unless the court would do so under its own law in respect of similar contracts of sale not governed by this Convention."[190] Although article 6 of the Convention authorizes parties to derogate from the effect of "any of [the Convention's] provisions,"[191] it is unlikely that a court would enforce a contract term derogating from article 28. If, however, the Drafting Committee adopts the Study Group's recommendation that parties be permitted to contract for specific performance,[192] the effect would be to avoid the limitation in article 28.

U.C.C. Section 2-716: Recommendation A2.7(14)(B)

The Convention is silent on the remedy of replevin. Article 4(b) of the Convention provides that the Convention is "not concerned with ...(b) the effect which the contract may have on the [page 89] property in the goods sold."[193] As noted by the Study Group,[194] the remedy of specific performance yields the same results as replevin.

U.C.C. Section 2-718

The Convention provides the parties an array of remedies but article 6 also provides that the parties may "derogate from or vary the effect of any of its provisions." While article 6 affirms indirectly the principle of freedom of contract, it nowhere provides explicitly for liquidation of damage clauses. The validity of such clauses, however, is expressly excluded from the Convention's coverage by article 4(a).

U.C.C. Section 2-718: Recommendation A2.7(15)(B), (C)

The Study Group recommends the deletion of subsection 2-718(2)(b).[195] The Convention contains no statutory liquidated damage clause similar to this subsection. Articles 81(2), 82 and 84 of the Convention do, however, set out several provisions on restitution claims which the Drafting Committee might look to if it adopts the Study Group's recommendation.[196]

U.C.C. Section 2-719 [197]

Any redrafting of the text or comments of section 2-719 [198] should consider the extent to which the formula should state that [page 90] it is a rule of validity within the meaning of article 4(a) of the Convention. Such a statement will not be dispositive -- the Convention concept should be interpreted in accordance with article 7 -- but it may help identify such issues.

U.C.C. Section 2-725

In regard to the statute of limitation in sale contracts,[199] the Study Group was undecided.[200] The Sales Convention does not address the issue of statutes of limitation, but a companion convention, the Convention on the Limitation Period of the International Sale of Goods, 1974 (as amended by a 1980 Protocol), does so in considerable detail.[201] The Limitation Convention came into force on August 1, 1988, and now has 11 contracting parties, Although the United States is not yet a party to the Limitation Convention, the American Bar Association has recommended that the United States accede. If the Drafting Committee decides to revise section 2-725 it may wish to consider the revision in light of the Limitation Convention.[202] [page 91]

III. CONCLUSION

There are two different general sales laws in force in the United States today: the U.N. Convention on Contracts for the International Sale of Goods and Article 2 of the Uniform Commercial Code. While there is virtually no overlap between the two laws because the Convention is limited to international sales, more and more attorneys will become familiar with both laws as transnational trade expands. While the two laws are very similar, there remain differences in both language and concept. To the extent that these differences can be reduced when and if Article 2 is revised, the drafters will remove legal "transaction costs" that are barriers to the free flow of trade in goods. Identifying these differences requires the drafters to adopt a strategy. The drafters should adopt a strategy and then implement it systematically.

How the drafters of a revised Article 2 approach the Sales Convention has wider implications. There are a number of other international initiatives to unify or harmonize law. The sponsors of the Uniform Commercial Code can set a useful precedent by revising domestic sales law with careful attention to the text of the United Nations Sales Convention. [page 92]


FOOTNOTES

* James Cleo Thompson Sr. Trustee Professor of Law, Southern Methodist University, A.B., LL.B. Harvard; LL.M. London.

1. This article is based on a memorandum prepared by the author for an A.B.A. task force chaired by Professor David Frisch. The A.B.A. Business Law Section established the task force to review recommendations made by an Article 2 Study Group appointed by the Permanent Editorial Board (PEB) for the Uniform Commercial Code. When adapting the memorandum for publication, the author has rewritten its general analysis (Part I), but not the article-by-article commentary (Part II). The commentary has been amplified by brief introductory summaries of existing Uniform Commercial Code provisions.

After the memorandum was edited for publication, the Article 2 Study Group published an Executive Summary of its report. PEB Study Group, Uniform Commercial Code, Article 2, Executive Summary to Permanent Editorial Board of the Uniform Commercial Code (March 5, 1991). In this summary, the Study Group recommends the appointment of a Drafting Committee to revise Article 2. It also recommends that the Drafting Committee "constantly monitor, assess and integrate, where appropriate, developments" in certain areas, including "ratification and implementation of the Convention on the International Sale of Goods (CISG) in the United States." Executive Summary at 1.

United Nations Convention on Contracts for the International Sale of Goods, opened for signature April 11, 1980, U.N. Doc. A/CONF.97/18, Annex I (1980), reprinted in United Nations Conference on Contracts for the International Sale of Goods, Official Records, U.N. Doc. A/CONF.97/19, at 178-90 (1981); 19 INT'L LEGAL MATERIALS 668 (1980); 52 Fed. Reg. 6264 (1987). Subsequent references to the convention in the text will be to "the Convention"; citations in subsequent footnotes will be to "CISG."

2. Uniform Commercial Code, Official Text (1989).

3. U.S. CONST. art. II, § 2, cl. 2 (the president "shall have Power, by and with the Advice and Consent of the Senate to make Treaties"); art. VI, cl. 2 ("all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land").

4. CISG, supra note 1, arts. 1, 6. See generally Winship, The Scope of the Vienna Convention on International Sales Contracts 1-1, in INTERNATIONAL SALES: THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS § 1-02 (N. Galston & H. Smit eds. 1984).

5. For a bibliography of English-language writings on the Convention, see Winship, A Bibliography of Commentaries on the United Nations International Sales Convention, 21 INT'L LAW, 585 (1987), updated at 22 INT'L LAW, 605 (1988) & 24 INT'L LAW, 307 (1990). For a bibliography of non-English materials, see M. WILL, INTERNATIONALE BIBLIOGRAPHIE ZUM UN-KAUFRECHT (Cologne: Bundesstelle Für Aussenhandelsinformation, 3d ed. 1991).

6. R. Speidel & C. Mooney, Jr., Proposal for a Preliminary Study on A Possible Project for the Revision of Article 2, UCC (November 23, 1987). The Proposal notes a prior study by an American Bar Association committee under the leadership of the late Fairfax Leary. The substance of this prior A.B.A. study appears in Leary & Frisch, Is Revision Due for Article 2?, 31 VILL. L. REV. 399 (1986).

7. The charge to the Study Group is summarized in PEB Study Group Uniform Commercial Code Article 2, Preliminary Report at 6 (March 1, 1990) [hereinafter Preliminary Report]. For a summary of the background to the appointment of the Study Group, see Speidel, Committee Studies Revising UCC Article 2, 8 Bus. LAW. UPDATE 3 (No. 6, July/August 1988).

8. Preliminary Report, supra note 7.

9. PEB Study Group, Uniform Commercial Code, Article 2, Executive Summary to Permanent Editorial Board of the Uniform Commercial Code (March 5, 1991).

10. Professors Leary and Frisch, on "the other hand, suggest that the Convention is one of several sources for discovering a "need for revision of Article 2." Leary & Frisch, supra note 6, at 404; see also id. at 405 & n. 21 (describing the seventh source of information regarding the need to revise Article 2: "differences between Article 2 and the rules of other countries," including the Convention). It is not altogether clear from their text whether Professors Leary and Frisch are arguing that (1) the existence of the Convention is a reason to revise Article 2, or (2) the Convention text is a source of ideas if Article 2 is to be revised.

11. The Preliminary Report, supra note 7, refers to the Convention at the following points: 51 (citing CISG, supra note 1; art. II in support of repeal of the statute of frauds); 59 n. 21 (citing CISG in support of the proposition that the parol evidence rule presents no major problems); 68 n. 36 (rejecting CISG art. 19 on "battle of forms"); 116 (urging Drafting Committee to consider CISG, when reviewing "F.A.S." trade term); 145 n. 21 (citing sources analyzing CISG's risk of loss provisions); 146 n. 23 (citing CISG in support of limited definition of "carrier"); 157 & n. 3 (rejecting CISG provisions on cancellation of contract only if fundamental breach).

12. Several foreign authors have addressed the question of how the Convention might be used to reform domestic sales law. See Sevón, The New Scandinavian Codification on the Sale of Goods and the 1980 United Nations Convention on Contracts for the International Sale of Goods, in EINHEITLICHES KAUFRECHT UND NATIONALES OBLIGATIONENRECHT 343 (P. Schlechtriem ed., Baden-Baden: Nomos 1987); Manwaring, Reforming Domestic Sales Law: Lessons to be Learned from the International Convention on the Sale of Goods, in ACTES DU COLLOQUE SUR LA VENTE INTERNATIONALE 137 (L. Perret & N. Lacasse eds., 1989).

13. For background to the Scandinavian legislation, see generally Sale of Goods Acts in Denmark, Finland, Norway and Sweden: A Summary of a Report (Offprint from the Report Nordiska koplagar Forslag au den nordiska arbetsgruppen for koplagstiftning, NU 1984:5). See also Sevón, supra note 12. Commenting on whether to incorporate the Convention and domestic sales law in a single act, Dr. Sevón notes that a single law would "minimize the number of provisions on sales, a point which does not lack importance in a climate of a strong, though often more or less unreflected demand for deregulation". Sevón, supra note 12, at 348.

14. It might also be argued that the attributes of transnational sales are different from those of domestic sales and, because the drafters of the Convention had in mind only the former sales, the Convention's rules are not necessarily relevant to the latter. On examination, however, this argument has little weight. There are remarkably few differences between the scope of the two laws. With the exception or several unusual civil law concepts (e.g., the buyer's right to give the seller days or grace) and more elaborate rules on risk or loss, the Convention adopts an approach and incorporates concepts that closely approximate those of Article 2. Likewise, Article 2 includes rules for documentary transactions and even codifies trade terms (e.g., "C.I.F.") used in international trade.

15. Except for one passing reference to the Ontario Law Reform Commission's Report on Sale of Goods (1979), the Study Group's preliminary report reflects no study of, or interest in the experience of other countries with their sales laws. Preliminary Report, supra note 7, at 42 n. 9. As Professor Rudolf Schlesinger reported to the New York Law Revision Commission:

The Uniform Commercial Code, of course, was not drafted by officials of a Ministry of Justice; but that is hardly a sufficient reason for losing the advantages of a method which permits us to learn from the accomplishments and the mistakes of others. Problems of commercial law are apt to be similar or at least comparable in all commercial countries, so that in this field, perhaps more than in any other, foreign experience is likely to be instructive. As was said by a leading English scholar, 'The value of comparative investigation of commercial law is so obvious as to make it unnecessary to labour the point.'

R. Schlesinger, The Uniform Commercial Code in the Light of Comparative Law, in I REPORT FOR 1955: A STUDY OF THE UNIFORM COMMERCIAL CODE 87, 96 (New York Law Revision Commission, 1955).

16. See, e.g., U.C.C. § 2-313.

17. Compare Schwartz, The Case for Specific Performance, 89 YALE L.J. 271 (1979) and Ulen, The Efficiency of Specific Performance: Toward a Unified Theory of Contract Remedies, 83 MICH. L. REV. 341 (1974) with Kronman, Specific Performance, 45 U. CHI. L. REV. 351 (1978).

18. See U.C.C. § 2-320. See also infra note 89.

19. See U.C.C. § 2-102.

20. See U.C.C. § 1-105.

21. U.C.C. § 1-103. Cf. the Official Comment to § 1-103 ("except insofar as they are explicitly displaced by this Act" [emphasis added]).

22. The Study Group's Preliminary Report includes numerous recommendations that "the Drafting Committee should consider" an issue which the Study Group has raised, but about which it makes no recommendation. There is no apparent logic for determining when the Study Group itself will make a recommendation and when it will leave the matter to the Drafting Committee. The following comments are addressed, therefore, to both the Study Group and the Drafting Committee, if appointed.

23. Preliminary Report, supra note 7, at 23-25. "For example, the Comments [to the Code] could state a preference for the Restatement, Second as a reliable source of modern contract law and encourage courts to reject external precedents not clearly displaced by a particular section." Id. at 24.

24. CISG, supra note 1, art. 7(2).

25. See generally Winship, Private International Law and the U.N. Sales Convention, 21 CORNELL INT'L L.J. 487 (1988).

26. CISG, supra note 1, art. 4(a).

27. See Winship, Commentary on Professor Kastely's "Rhetorical Analysis," 8 NW. J. INT'L L. & Bus. 623, 635-39 (1988).

28. U.C.C. § 1-103. The final phrase of this section -- " other validating or invalidating cause" -- suggests that the listed legal topics raise issues of validity. Id. (emphasis added).

29. CISG, supra note 1, art. 7.

30. See RESTATEMENT (SECOND) OF CONTRACTS §§ 151-196 (1979) (black letter rules on mistake, misrepresentation, duress, undue influence, and unenforceability on grounds of public policy).

31. Report of the Working Group on the International Sale of Goods on the work of its ninth session, 11 48-87 U.N. Doc. A/CN.9/142 (1978), reprinted in IX UNCITRAL Yearbook 61, 65-67 (1978).

32. See U.C.C. § 1-105. Pursuant to this section, parties to a transaction involving foreign trade may choose a state's U.C.C. as controlling "when [the] transaction bears a reasonable relation to [the] state." Id. In the absence of an agreement, "an appropriate relation" suffices to justify application of the U.C.C. Id.

33. Preliminary Report, supra note 7, at 24-25.

34. Article 1(1)(b) of the Convention provides that: "This Convention applies to contracts of sale of goods between parties whose places of business are in different States: ... (b) when the rules of private international law lead to the application of the law of a Contracting State." CISG, supra note 1, art. l(l)(b). However, the United States is not bound by this subparagraph because it has made a declaration pursuant to article 95. Therefore, a court sitting in the United States is required to apply the Convention only if the parties before it have their places of business in different Contracting States.

Illustration 1. Seller has its place of business in Illinois; Buyer has its place of business in Mexico. Both the United States and Mexico are Contracting States. If the parties have not excluded the Convention and a dispute is brought before an Illinois court, the Convention will govern by virtue of paragraph (l)(a) of article 1. Paragraph (l)(b) and the article 95 declaration are irrelevant.

Illustration 2. Seller has its place of business in Illinois; Buyer has its place of business in Brazil. Only the United States is a Contracting State. If the parties do not mention the Convention and a dispute is brought before an Illinois court, the Convention will not be applicable even if choice-of-law rules would make the law of the United States applicable.

35. See generally Winship, supra note 25, at 529-30.

36. Draft Convention on the Law Applicable to Contracts for the International Sale of Goods, in Hague Conference on Private International Law Extraordinary Session, Proceedings of the Extraordinary Session of October 1985, Final Act, at 690-97, reprinted in 24 INT'L LEGAL MATERIALS 1573 (1985). For analysis of this product of the Hague Conference on Private International Law, see McLachlan, The New Hague Sales Convention and the Limits of the Choice of Law Process, 102 LAW Q. REV. 591 (1986); Winship, supra note 25.

37. See generally Winship, supra note 4; Note, Contracts for the International Sale of Goods: Applicability of the United Nations Convention, 69 IOWA L. REV. 209 (1983).

38. U.C.C. § 2-102 provides:

Unless the context otherwise requires, this Article applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction nor does this Article impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers.

39. Preliminary Report, supra note 7, at 41-42.

40. CISG, supra note 1, art. 3.

41. Preliminary Report, supra note 7, at 45.

42. Magnuson-Moss Warranty-Federal Trade Commission Improvement Act, 15 U.S.C. §§ 2301-2312 (1988). It is not clear that any definition of "consumer goods" will be necessary in a revised Article 2. See Recommendation A2.7 (16)(C) (recommending deletion of reference to consumer goods in § 2-719(3)). Preliminary Report, supra note 7, at 239-40.

43. 15 U.S.C. § 2301(1).

44. U.C.C. §§ 2-103(3), 9-109(1).

45. Preliminary Report, supra note 7, at 46-48.

46. Id. at 46.

47. Id. at 47-48 (footnotes omitted).

48. CISG, supra note 1, art. 2(f).

49. See generally Winship, Energy Contracts and the U.N. Sales Convention, 25 TEX. INT'L L.J. 365 (1990). On the question of whether the sale of electricity is included within the scope of Article 2, see Mallor, Utility "Services" Under the Uniform Commercial Code: Are Public Utilities in For a Shock?, 56 NOTRE DAME LAW, 89 (1980).

50. See generally Murray, An Essay on the Formation of Contracts and Related Matters Under the United Nations Convention on Contracts for the International Sale of Goods, 8 J.L. & COM. 11 (1988); Winship, Formation of International Sales Contracts under the 1980 Vienna Convention, 17 INT'L LAW, 1 (1983); Comment, Contract Formation Under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code, 3 DICKINSON J. INT'L L. 107 (1984); Note, The United Nations Convention on Contracts for the International Sale of Goods: Contract Formation and the Battle of Forms, 21 COLUM. J. TRANSNAT'L L. 529 (1983).

51. Preliminary Report, supra note 7, at 51; see generally id. at 50-58. In addition to the Convention's articles cited in the preliminary report, the Study Group should cite article 12. The report might also note that even if the United States were to make a declaration pursuant to article 96, the U.C.C.'s statute of frauds would only govern a transnational sales contract if conflict of laws rules lead to application of United States law. See J. HONNOLD, UNIFORM LAW FOR INTERNATIONAL SALES UNDER THE 1980 UNITED NATIONS CONVENTION 126-27 (1987).

52. Section 2-201 of the U.C.C. incorporates a Statute of Frauds for sales contracts:

(1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.

(2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received.

(3) A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable
(a) if the goods are to be specially manufactured for the buyer and are not suitable for sale to others' in the ordinary course of the seller's business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement; or
(b) if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or
(c) with respect to goods for which payment has been made and accepted or which have been received and accepted (Sec. 2-606).

53. See CISG, supra note 1, art. 96.

54. Department of State, Legal Analysis of the United Nations Convention on Contracts for the International Sale of Goods 5-6 (1983), reprinted in THE CONVENTION FOR THE INTERNATIONAL SALE OF GOODS: A HANDBOOK OF BASIC MATERIALS 79, 83-84 (2d ed., R. Kathrein & D. Magraw eds., 1990), and also reprinted in INTERNATIONAL SALES: THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS, supra note 4, at appendix I-7, I-11-12.

55. Preliminary Report, supra note 7, at 59 n. 21. See generally id. at 58-62.

56. CISG, supra note 1, art. 8(3) provides:

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.

57. U.C.C. § 2-202 provides:

Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented
(a) by course of dealing or usage of trade (Section 1-205) or by course of performance (Section 2-208); and
(b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.

58. CISG, supra note 1, art. 8(3).

59. CISG, supra note 1, art. 6.

60. Compare U.C.C. § 2-204(2) ("An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined") with CISG art. 23 ("A contract is concluded at the moment when an acceptance of an offer becomes effective in accordance with the provisions of this Convention").

61. See also Preliminary Report, supra note 7, at 62-63 (recommending that the language "intended to make a contract" in § 2-204(3) be substituted for "intended to conclude a bargain").

62. Preliminary Report, supra note 7, at 67-71.

63. Id. at 68 n. 36.

64. U.C.C. § 2-302 provides:

(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.

(2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.

65. Preliminary Report, supra note 7, at 79-81.

66. CISG, supra note 1, art. 4(8).

67. But see Winship, supra note 27, at 635-39 (worrying about the difficulty of keeping national enforcement of unconscionability standard consistent with the Convention's objective of providing uniform rules for international sales contracts). For a general discussion of how the Code might address issues of validity in the light of article 4(a) of the Convention, see the analysis of § 1-103, supra notes 21-31 and accompanying text.

68. CISG, supra note 1, art. 7(1).

69. For general analysis, see Winship, supra note 27, at 630-35. See also Kastely, Unification and Community: A Rhetorical Analysis of the United Nations Sales Convention, 8 NW. J. INT'L L. & Bus. 574, 597 (1988); J. HONNOLD, supra note 51, at 125.

70. Preliminary Report, supra note 7, at 82-83.

71. U.C.C. § 2-304 provides:

(1) The price can be made payable in money or otherwise. If it is payable in whole or in part in goods each party is a seller of the goods which he is to transfer.

(2) Even though all or part of the price is payable in an interest in realty the transfer of the goods and the seller's obligations with reference to them are subject to this Article, but not the transfer of the interest in realty or the transferor's obligations in connection therewith.

72. U.C.C. § 1-201(24). " 'Money' means a medium of exchange authorized or adopted by a domestic or foreign government as a party of its currency." Id.

73. Uniform Foreign-Money Claims Act, 13 U.L.A. (Supp. 1990) (approved by the National Conference of Commissioners on Uniform State Laws in 1989).

74. Preliminary Report, supra note 7, at 83-85. Section 2-305 of the Uniform Commercial Code provides:

(1) The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if
(a) nothing is said as to price; or
(b) the price is left to be agreed by the parties and they fail to agree; or
(c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded.
(2) A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.
(3) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party the other may at his option treat the contract as cancelled or himself fix a reasonable price.
(4) Where, however, the parties intend not to be bound unless the price be fixed or agreed and it is not fixed or agreed there is no contract. In such a case the buyer must return any goods already received or if unable so to do must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account.

75. See CISG, supra note 1, arts. 14, 55. See generally Honnold, International Sales and the Open Price Contract, in ESTUDJOS EN HOMENAJE A JORGE BARRERA GRAF 915 (1989).

76. Preliminary Report, supra note 7, at 89. Section 2-308 of the Uniform Commercial Code provides:

Unless otherwise agreed
(a) the place for delivery of goods is the seller's place of business or if he has none his residence; but
(b) in a contract for sale of identified goods which to the knowledge of the parties at the time of contracting are in some other place, that place is the place for their delivery; and
(c) documents of title may be delivered through customary banking channels.

77. CISG, supra note 1, art. 31 provides:

If the seller is not bound to deliver the goods at any other particular place, his obligation to deliver consists:
(a) if the contract of sale involves carriage of the goods -- in handing the goods over to the first carrier for transmission to the buyer;
(b) if, in cases not within the preceding subparagraph, the contract relates to specific goods, or unidentified goods to be drawn from a specific stock or to be manufactured or produced, and at the time of the conclusion of the contract the parties knew that the goods were at, or were to be manufactured or produced at, a particular place -- in placing the goods at the buyer's disposal at that place;
(c) in other cases -- in placing the goods at the buyer's disposal at the place where the seller had his place of business at the time of the conclusion of the contract.

78. Preliminary Report, supra note 7, at 90-91.

79. Section 2-309 provides in pertinent part:

"(1) The time for shipment or delivery or any other action under a contract if not provided in this Article or agreed upon shall be a reasonable time."

U.C.C. § 2-309. Section 1-204, in turn, expands on what is "reasonable":

"(1) Whenever this Act requires any action to be taken within a reasonable time, any time which is not manifestly unreasonable may be fixed by agreement.
(2) What is a reasonable time for taking any action depends on the nature, purpose and circumstances of such action." Id. at § 1-204.

80. CISG, supra note 1, art. 58 provides:

(1) If the buyer is not bound to pay the price at any other specific time, he must pay it when the seller places either the goods or documents controlling their disposition at the buyer's disposal in accordance with the contract and this Convention. The seller may make such payment a condition for handing over the goods or documents.
(2) If the contract involves carriage of the goods, the seller may dispatch the goods on terms whereby the goods, or documents controlling their disposition, will not be handed over to the buyer except against payment of the price.
(3) The buyer is not bound to pay the price until he has had an opportunity to examine the goods, unless the procedures for delivery or payment agreed upon by the parties are inconsistent with his having such an opportunity.

81. Preliminary Report, supra note 7, at 93-94. U.C.C. section 2-312 provides:

(1) Subject to subsection (2) there is in a contract for sale a warranty by the seller that
(a) the title conveyed shall be good and its transfer rightful; and
(b) the goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge.
(2) A warranty under subsection (1) will be excluded or modified only by specific language or by circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third person may have.
(3) Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications.

82. Preliminary Report, supra note 7, at 94.

83. CISG, supra note 1, arts. 41-42 provide:

Article 41

The seller must deliver goods which are free from any right or claim of a third party, unless the buyer agreed to take the goods subject to that right or claim. However, if such right or claim is based on industrial property or other intellectual property, the seller's obligation is governed by article 42.

Article 42

(1) The seller must deliver goods which are free from any right or claim of a third party based on industrial property or other intellectual property, of which at the time of the conclusion of the contract the seller knew or could not have been unaware, provided that the right or claim is based on industrial property or other intellectual property:
(a) under the law of the State where the goods will be resold or otherwise used, if it was contemplated by the parties at the time of the conclusion of the contract that the goods would be resold or otherwise used in that State; or
(b) in any other case, under the law of the State where the buyer has his place of business.
(2) The obligation of the seller under the preceding paragraph does not extend to cases where:
(a) at the time of the conclusion of the contract the buyer knew or could not have been unaware of the right or claim; or
(b) the right or claim results from the seller's compliance with technical drawings, designs, formulae or other such specifications furnished by the buyer.

84. Preliminary Report, supra note 7, at 94-100.

U.C.C. section 2-313 provides:

(1) Express warranties by the seller are created as follows:
(a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.
(b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
(c) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.
(2) It is not necessary to the creation of an express warranty that the seller use formal words such as "warrant" or "guarantee" or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty.

U.C.C. section 2-314 provides:

(1) Unless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.
(2) Goods to be merchantable must be at least such as
(a) pass without objection in the trade under the contract description; and
(b) in the case of fungible goods, are of fair average quality within the description; and
(c) are fit for the ordinary purposes for which such goods are used; and
(d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and
(e) are adequately contained, packaged, and labeled as the agreement may require; and
(f) conform to the promises or affirmations of fact made on the container or label if any.
(3) Unless excluded or modified (Section 2-316) other implied warranties may arise from course of dealing or usage of trade.

U.C.C. section 2-315 provides:

Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.

U.C.C. section 2-316 provides:

(1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this Article on parol or extrinsic evidence (Section 2-202) negation or limitation is inoperative to the extent that such construction is unreasonable.
(2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that "There are no warranties which extend beyond the description on the face hereof."
(3) Notwithstanding subsection (2)
(a) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is," "with all faults" or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty; and
(b) when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and
(c) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.
(4) Remedies for breach of warranty can be limited in accordance with the provisions of this Article on liquidation or limitation of damages and on contractual modification of remedy (Sections 2-718 and 2-719).

U.C.C. section 2-317 provides:

Warranties whether express or implied shall be construed as consistent with each other and as cumulative, but if such construction is unreasonable the intention of the parties shall determine which warranty is dominant. In ascertaining that intention the following rules apply:
(a) Exact or technical specifications displace an inconsistent sample or model or general language of description.
(b) A sample from an existing bulk displaces inconsistent general language of description.
(c) Express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.

U.C.C. section 2-318 provides alternative rules:

ALTERNATIVE A

A seller's warranty whether express or implied extends to any natural person who is in the family or household of his buyer or who is a guest in his home if it is reasonable to expect that such person may use, consume or be affected by the goods and who is injured in person by breach of the warranty. A seller may not exclude or limit the operation of this section.

ALTERNATIVE B

A seller's warranty whether express or implied extends to any natural person who may reasonably be expected to use, consume or be affected by the goods and who is injured in person by breach of the warranty. A seller may not exclude or limit the operation of this section.

ALTERNATIVE C

A seller's warranty whether express or implied extends to any person who may reasonably be expected to use, consume or be affected by the goods and who is injured by breach of the warranty. A seller may not exclude or limit the operation of this section with respect to injury to the person of an individual to whom the warranty extends.

85. Preliminary Report, supra note 7, at 96.

86. Id. at 98, 100.

The Preliminary Report provides:

Subject to the terms of any Product Liability Legislation, the Study Group recommends that the freedom of a buyer to sue in tort even though the claim could be pursued under Article 2 be preserved. ...

The Study Group recommends that this option be preserved. But the buyer who pursues a warranty claim involving personal injury or property damage should be subject to the same limitations under Article 2 as a buyer who has suffered only economic loss. We recommend, therefore, that this parity be achieved by eliminating any special rules, such as § 2-719(3) and § 2-318, based upon personal injury and property damage. ...

The Study Group endorses the limitation upon access to tort in cases of pure economic loss, but believes it is beyond our scope to place a limitation in Article 2. In these cases where everyone has a contract with someone in the distributive chain and the losses involve contract interests, Article 2 is the appropriate source of law. The Study Group makes no recommendation where the loss also includes damage to the goods sold. Rather, this problem is left to the courts for decision on a case-by-case basis. Id.

87. CISG, supra note 1, arts. 35, 36, 39 and 40 provide:

Article 35

(1) The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract.
(2) Except where the parties have agreed otherwise, the goods do not conform with the contract unless they:
(a) are fit for the purposes for which goods of the same description would ordinarily be used;
(b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller's skill and judgement;
(c) possess the qualities of goods which the seller has held out to the buyer as a sample or model;
(d) are contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods.
(3) The seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for any lack of conformity of the goods if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity.

Article 36 (1)

(1) The seller is liable in accordance with the contract and this Convention for any lack of conformity which exists at the time when the risk passes to the buyer, even though the lack of conformity becomes apparent only after that time.
(2) The seller is also liable for any lack of conformity which occurs after the time indicated in the preceding paragraph and which is due to a breach of any of his obligations, including a breach of any guarantee that for a period of time the goods will remain fit for their ordinary purpose or for some particular purpose or will retain specified qualities or characteristics.

Article 39

(1) The buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it.
(2) 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 from the date on which the goods were actually handed over to the buyer, unless this time-limit is inconsistent with a contractual period of guarantee.

Article 40

The seller is not entitled to rely on the provisions of articles 38 and 39 if the lack of conformity relates to facts of which he knew or could not have been unaware and which he did not disclose to the buyer.

88. Compare J. HONNOLD, supra note 51, at 257.59 (§ 2-316(2) merely provides rule of interpretation) with Longobardi, Disclaimers of Implied Warranties: The 1980 United Nations Convention on Contracts for the International Sale of Goods, 53 FORDHAM L. REV. 863 (1985) (§ 2-316 raises issues of validity).

89. The Uniform Commercial Code defines (unless the parties otherwise agree) the terms: "F.O.B." ("free on board"), § 2-319(1), see also § 2-323; "F.A.S." ("free alongside"), § 2-319(2); "C.I.F." ("price includes in a lump sum the cost of the goods and the insurance and freight to the named destination"), § 2-320, see also §§ 2-321, 2-323; "C. & F." or "C.F." ("price so includes cost and freight to the named destination") id.; "ex-ship" (from the carrying vessel), § 2-322; "overseas," § 2-323; "no arrival, no sale," § 2-324.

90. Preliminary Report, supra note 7, at 114-18.

91. International Chamber of Commerce, Incoterms (1990) (Pub. No. 460).

92. Cf. Honnold, The Uniform Law for the International Sale of Goods: The Hague Convention of 1964, 30 LAW & CONTEMP. FROBS. 326, 341 (1965) (tentatively concluding that international sales law's decision not to codify trade terms is preferable).

93. CISG, supra note 1, art. 4(b).

94. CISG, supra note 1, arts. 66-70.

95. Preliminary Report, supra note 7, at 132-33. U.C.C. section 2-502 provides:

(1) Subject to subsection (2) and even though the goods have not been shipped a buyer who has paid a part of all of the price of goods in which he has a special property under the provisions of the immediately preceding section may on making and keeping good a tender of any unpaid portion of their price recover them from the seller if the seller becomes insolvent within ten days after receipt of the first installment on their price.
(2) If the identification creating his special property has been made by the buyer he acquires the right to recover the goods only if they conform to the contract for sale.

96. CISG, supra note 1, art. 46(1).

97. CISG, supra note 1, art. 28.

98. Vienna Convention on the Law of Treaties (1969), art. 18, reprinted in BASIC DOCUMENTS IN INTERNATIONAL LAW 349, 357 (I. Brownlie ed. 1983).

99. Preliminary Report, supra note 7, at 132-33 & n. 2.

100. CISG, supra note 1, art. 4.

101. Preliminary Report, supra note 7, at 135-36. U.C.C. section 2-504 provides:

Where the seller is required or authorized to send the goods to the buyer and the contract does not require him to deliver them at a particular destination, then unless otherwise agreed he must
(a) put the goods in the possession of such a carrier and make such a contract for their transportation as may be reasonable having regard to the nature of the goods and other circumstances of the case; and
(b) obtain and promptly deliver or tender in due form any document necessary to enable the buyer to obtain possession of the goods or otherwise required by the agreement or by usage of trade; and
(c) promptly notify the buyer of the shipment.

Failure to notify the buyer under paragraph (c) or to make a proper contract under paragraph (a) is a ground for rejection only if material delay or loss ensues.

102. CISG, supra note 1, art. 32 provides:

(1) If the seller, in accordance with the contract or this Convention, hands the goods over to a carrier and if the goods are not clearly identified to the contract by markings on the goods, by shipping documents or otherwise, the seller must give the buyer notice of the consignment specifying the goods.
(2) If the seller is bound to arrange for carriage of the goods, he must make such contracts as are necessary for carriage to the place fixed by means of transportation appropriate in the circumstances and according to the usual terms 'for such transportation.
(3) If the seller is not bound to effect insurance in respect of the carriage of the goods, he must, at the buyer's request, provide him with all available information necessary to enable him to effect such insurance.

103. Cf. U.C.C. § 2-504(c).

104. U.C.C. § 2-301.

105. Preliminary Report, supra note 7, at 136-38. U.C.C. section 2-507 provides:

(1) Tender of delivery is a condition to the buyer's duty to accept the goods and, unless otherwise agreed, to his duty to pay for them. Tender entitles the seller to acceptance of the goods and to payment according to the contract.
(2) Where payment is due and demanded on the delivery to the buyer of goods or documents of title, his right as against the seller to retain or dispose of them is conditional upon his making the payment due.

106. CISG, supra note 1, art. 58 provides:

(1) If the buyer is not bound to pay the price at any other specific time, he must pay it when the seller places either the goods or documents controlling their disposition at the buyer's disposal in accordance with the contract and this Convention. The seller may make such payment a condition for handing over the goods or documents.
(2) If the contract involves carriage of the goods, the seller may dispatch the goods on terms whereby the goods, or documents controlling their disposition, will not be handed over to the buyer except against payment of the price.
(3) The buyer is not bound to pay the price until he has had an opportunity to examine the goods, unless the procedures for delivery or payment agreed upon by the parties are inconsistent with his having such an opportunity.

107. Preliminary Report, supra note 7, at 140; see generally id. at 139-41.

U.C.C. subsection 2-508(1) provides:

"Where any tender or delivery by the seller is rejected because non-conforming and the time for performance has not yet expired, the seller may seasonably notify the buyer of his intention to cure and may then within the contract time make a conforming delivery."

108. CISG, supra note 1, arts. 34, 37 provide:

Article 34

If the seller is bound to hand over documents relating to the goods, he must hand them over at the time and place and in the form required by the contract. If the seller has handed over documents before that time, he may, up to that time, cure any lack of conformity in the documents, if the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. However, the buyer retains any right to claim damages as provided for in this Convention.

Article 37

If the seller has delivered goods before the date for delivery, he may, up to that date, deliver any missing part or make up any deficiency in the quantity of the goods delivered, or deliver goods in replacement of any non-conforming goods delivered or remedy any lack of conformity in the goods delivered, provided that the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. However, the buyer retains any right to claim damages as provided for in this Convention.

109. Preliminary Report, supra note 7, at 141-43. U.C.C. subsection 2-508(2) provides:

"Where the buyer rejects a non-conforming tender which the seller had reasonable grounds to believe would be acceptable with or without money allowance the seller may if he seasonably notifies the buyer have a further reasonable time to substitute a conforming tender."

110. Preliminary Report, supra note 7, at 142-43. The Preliminary Report discusses several specific issues:

Should [the reasonable grounds test) apply in cases where the seller is unaware of a nonconformity in the goods? Suppose the tender is rejected for delay. Should the seller still be able to "substitute a conforming tender?" We think the answer to both questions should be yes and recommend that the Drafting Committee revise § 2508(2) accordingly.

The question of what is a proper cure also arises under § 2-508(2). Does "cure" include repair by the seller of the non-conformity or the grant of a money allowance, as well as the substitution of new, conforming goods? The answer is clearly yes if repair or money allowance are authorized by the agreement between the parties. The answer is less clear where there is no agreement, and there is some dispute in the literature. We recommend that the Drafting Committee resolve this question in a revised § 2-508(2).

The Study Group disagreed on whether a "cure" should be permitted after acceptance and after the time for performance had passed, even though the acceptance had been rightfully revoked under § 2-608(1). Resolution of this issue is left for the Drafting Committee and, in any event, depends upon whether the "perfect" tender rule in § 2-601 is retained or rejected.

Id. at 142-43 (footnotes omitted).

111. CISG, supra note 1, art. 48 provides:

(1) Subject to article 49, the seller may, even after the date for delivery, remedy at his own expense any failure to perform his obligations, if he can do so without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the buyer. However, the buyer retains any right to claim damages as provided for in this Convention.
(2) If the seller requests the buyer to make known whether he will accept performance and the buyer does not comply with the request within a reasonable time, the seller may perform within the time indicated in his request. The buyer may not, during that period of time, resort to any remedy which is inconsistent with performance by the seller.
(3) A notice by the seller that he will perform within a specified period of time is assumed to include a request, under the preceding paragraph, that the buyer make known his decision.
(4) A request or notice by the seller under paragraph (2) or (3) of this article is not effective unless received by the buyer.

112. See Will, Article 48, 2.1.1.1 et seq., in COMMENTARY ON THE INTERNATIONAL SALES LAW 349 (C. Bianca & M. Bonell eds., 1987).

113. U.C.C. section 2-509 provides:

(1) Where the contract requires or authorizes the seller to ship the goods by carrier.
(a) if it does not require him to deliver them at a particular destination, the risk of loss passes to the buyer when the goods are duly delivered to the carrier even though the shipment is under reservation (Section 2-505); but
(b) if it does require him to deliver them at a particular destination and the goods are there duly tendered while in the possession of the carrier, the risk of loss passes to the buyer when the goods are there duly so tendered as to enable the buyer to take delivery.
(2) Where the goods are held by a bailee 'to be delivered without being moved, the risk of 1088 passes to the buyer
(a) on his receipt of a negotiable document of title covering the goods; or
(b) on acknowledgment by the bailee of the buyer's right to possession of the goods; or
(c) after his receipt of a non-negotiable document of title or other written direction to deliver, as provided in subsection (4)(b) of Section 2-503.
(3) In any case not within subsection (1) or (2), the risk of loss passes to the buyer on his receipt of the goods if the seller is a merchant; otherwise the risk passes to the buyer on tender of delivery.
(4) The provisions of this section are subject to contrary agreement of the parties and to the provisions of this Article on sale on approval (Section 2-327) and on effect of breach on risk of loss (Section 2-510).

114. Preliminary Report, supra note 7, at 145-48.

115. CISG, supra note 1, art. 68 provides:

The risk in respect of goods sold in transit passes to the buyer from the time of the conclusion of the contract. However, if the circumstances so indicate, the risk is assumed by the buyer from the time the goods were handed over to the carrier who issued the documents embodying the contract of carriage. Nevertheless, if at the time of the conclusion of the contract of sale the seller knew or ought to have known that the goods had been lost or damaged and did not disclose this to the buyer, the loss or damage is at the risk of the seller.

116. U.C.C. section 2-510 provides:

(1) Where a tender or delivery of goods so fails to conform to the contract as to give a right of rejection the risk of their loss remains on the seller until cure or acceptance.
(2) Where the buyer rightfully revokes acceptance he may to the extent of any deficiency in his effective insurance coverage treat the risk 'Of loss as having rested on the seller from the beginning.
(3) Where the buyer as to conforming goods already identified to the contract for sale repudiates or is otherwise in breach before risk of their loss has passed to him, the seller may to the extent of any deficiency in his effective insurance coverage treat the risk of loss as resting on the buyer for a commercially reasonable time.

117. Preliminary Report, supra note 7, at 149-51.

118. CISG, supra note 1, arts. 69, 70 provide:

Article 69

(1) In cases not within articles 67 and 68, the risk passes to the buyer when he takes over the goods or, if he does not do so in due time, from the time when the goods are placed at his disposal and he commits a breach of contract by failing to take delivery.
(2) However, if the buyer is bound to take over the goods at a place other than a place of business of the seller, the risk passes when delivery is due and the buyer is aware of the fact that the goods are placed at his disposal at that place.
(3) If the contract relates to goods not then identified, the goods are considered not to be placed at the disposal of the buyer until they are clearly identified to the contract.

Article 70

If the seller has committed a fundamental breach of contract, articles 67, 68 and 69 do not impair the remedies available to the buyer on account of the breach.

119. U.C.C. section 2-511 provides:

(1) Unless otherwise agreed tender of payment is a condition to the seller's duty to tender and complete any delivery.
(2) Tender of payment is sufficient when made by any means or in any manner current in the ordinary course of business unless the seller demands payment in legal tender and gives any extension of time reasonably necessary to procure it.
(3) Subject to the provisions of this Act on the effect of an instrument on an obligation (Section 3-802), payment by check is conditional and is defeated as between the parties by dishonor of the check on due presentment.

120. Preliminary Report, supra note 7, at 152.

121. U.C.C. § 2-601 provides:

Subject to the provisions of this Article on breach in installment contracts (Section 2-612) and unless otherwise agreed under the sections on contractual limitations of remedy (Sections 2718 and 2719), if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may
(a) reject the whole; or
(b) accept the whole; or
(c) accept any commercial unit or units and reject the rest.

122. Preliminary Report, supra note 7, at 156-59.

123. Id. at 157.

124. Id.

125. U.C.C. §§ 2-602, 2-703(f).

126. CISG, supra note 1, art. 49; see also arts. 25-27, 81-88.

127. U.C.C. § 2-602 provides:

(1) Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.
(2) Subject to the provisions of the two following sections on rejected goods (Sections 2-603 and 2-604),
(a) after rejection any exercise of ownership by the buyer with respect to any commercial unit is wrongful as against the seller; and
(b) if the buyer has before rejection taken physical possession of goods in which he does not have a security interest under the provisions of this Article (subsection (3) of Section 2-711), he is under a duty after rejection to hold them with reasonable care at the seller's disposition for a time sufficient to permit the seller to remove them; but
(c) the buyer has no further obligations with regard to goods rightfully rejected.
(3) The seller's rights with respect to goods wrongfully rejected are governed by the provisions of this Article on Seller's remedies in general (Section 2-703).

U.C.C. § 2-603 provides:

(1) Subject to any security interest in the buyer (subsection (3) of Section 2-711), when the seller has no agent or place of business at the market of rejection 8 merchant buyer is under a duty after rejection of goods in his possession or control to follow any reasonable instructions received from the seller with respect to the goods and in the absence of such instructions to make reasonable efforts to sell them for the seller's account if they are perishable or threaten to decline in value speedily: Instructions are not reasonable if on demand indemnity for expenses is not forthcoming.
(2) When the buyer sells goods under subsection (1), he is entitled to reimbursement from the seller or out of the proceeds for reasonable expenses of caring for and selling them, and if the expenses include no selling commission then to such commission as is usual in the trade or if there is none to a reasonable sum not exceeding ten per cent on the gross proceeds.
(3) In complying with this section the buyer is held only to good faith and good faith conduct hereunder is neither acceptance nor conversion nor the basis of an action for damages.

U.C.C. § 2-604 provides:

Subject to the provisions of the immediately preceding section on perishables if the seller gives no instructions within a reasonable time after notification of rejection the buyer may store the rejected goods for the seller's account or reship them to him or resell them for the seller's account with reimbursement as provided in the preceding section. Such action is not acceptance or conversion.

U.C.C. § 2-605 provides:

(1) The buyer's failure to state in connection with rejection a particular defect which is ascertainable by reasonable inspection precludes him from relying on the unstated defect to justify rejection or to establish breach
(a) where the seller could have cured it if stated seasonably; or
(b) between merchants when the seller has after rejection made a request in writing for a full and final written statement of all defects on which the buyer proposes to rely.
(2) Payment against documents made without reservation of rights precludes recovery of the payment for defects apparent on the face of the documents.

128. Preliminary Report, supra note 7, at 159-64.

A major restructuring is recommended for § 2-602. Section 2-602(1) should be combined with § 2-605 to create a new section numbered § 2-602 and entitled "Manner, Effect and Form of Rightful Rejection." Section 2-602(2) should then be combined with § 2-603 to create a new section numbered § 2-603 and entitled "Buyer's Duties as to Rightfully Rejected Goods" and covering the duties of both merchant and non-merchant buyers.

We recommend that § 2-602(2) be combined with § 2-603 to provide in one section all of the buyer's rights and duties with regard to "rightfully" rejected goods. That section (§ 2-603) also would govern the obligations of a buyer who is in possession of goods after a justifiable revocation of acceptance under § 2-608. See § 2-608(3).

In addition, the same rights and duties, to the extent appropriate, should apply where the buyer is in possession after a justifiable revocation of acceptance.

A major restructuring is recommended for § 2-603. Section 2-603 should be expanded to cover the duties of all buyers in possession of rightfully rejected or justifiably revoked goods, with clarifications on the nature and effect of subsequent use and the nature and effect of any post-rejection or post-revocation use. Id. at 159-61, 164.

129. CISG, supra note 1, arts. 82-88 provide:

Article 82

(1) The buyer loses the right to declare the contract avoided or to require the seller to deliver substitute goods if it is impossible for him to make restitution of the goods substantially in the condition in which he received them.
(2) The preceding paragraph does not apply:
(a) If the impossibility of making restitution of the goods or of making restitution of the goods substantially in the condition in which the buyer received them is not due to his act or omission;
(b) If the goods or part of the goods have perished or deteriorated as a result of the examination provided for in article 38; or
(c) If the goods or part of the goods have been sold in the normal course of business or have been consumed or transformed by the buyer in the course of normal use before he discovered or ought to have discovered the lack of conformity.

Article 83

A buyer who has lost the right to declare the contract avoided or to require the seller to deliver substitute goods in accordance with article 82 retains all other remedies under the contract and this Convention.

Article 84

(1) If the seller is bound to refund the price, he must also pay interest on it; from the date on which the price was paid.
(2) The buyer must account to the seller for all benefits which he has derived from the goods or part of them:
(a) If he must make restitution of the goods or part of them; or
(b) If it is impossible for him to make restitution of all or part of the goods or to make restitution of all or part of the goods substantially in the condition in which he received them, but he has nevertheless declared the contract avoided or required the seller to deliver substitute goods.

Section VI. Preservation of the goods

Article 85

If the buyer is in delay in taking delivery of the goods or, where payment of the price and delivery of the goods are to be made concurrently, if he fails to pay the price, and the seller is either in possession of the goods or otherwise able to control their disposition, the seller must take such steps as are reasonable in the circumstances to preserve them. He is entitled to retain them until he has been reimbursed his reasonable expenses by the buyer.

Article 86

(1) If the buyer has received the goods and intends to exercise any right under the contract or this Convention to reject them, he must take such steps to preserve them as are reasonable in the circumstances. He is entitled to retain them until he has been reimbursed his reasonable expenses by the seller.
(2) If goods dispatched to the buyer have been placed at his disposal at their destination and he exercises the right to reject them, he must take possession of them on behalf of the seller, provided that this can be done without payment of the price and without unreasonable inconvenience or unreasonable expense, This provision does not apply if the seller or a person authorized to take charge of the goods on his behalf is present at the destination. If the buyer takes possession of the goods under this paragraph, his rights and obligations are governed by the preceding paragraph.

Article 87

A party who is bound to take steps to preserve the goods may deposit them in a warehouse of a third person at the expense of the other party provided that the expense incurred is not unreasonable.

Article 88

(1) A party who is bound to preserve the goods in accordance with article 85 or 86 may sell them by any appropriate means if there has been an unreasonable delay by the other party in taking possession of the goods or in taking them back or in paying the price or the cost of preservation, provided that reasonable notice of the intention to sell has been given to the other party.
(2) If the goods are subject to rapid deterioration or their preservation would involve unreasonable expense, a party who is bound to preserve the goods in accordance with article 85 or 86 must take reasonable measures to sell them. To the extent possible he must give notice to the other party of his intention to sell.
(3) A party selling the goods has the right to retain out of the proceeds of sale an amount equal to the reasonable expenses of preserving the goods and of selling them, He must account to the other party for the balance.

130. U.C.C. § 2-607(3)(a) provides in pertinent part: "Where a tender has been accepted (a) the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy. ..."

131. Preliminary Report, supra note 7, at 167-69.

132. CISG, supra note 1, arts. 39, 40 and 44 provide:

Article 39

(1) The buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it.
(2) 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 from the date on which the goods were actually handed over to the buyer, unless this time-limit is inconsistent with a contractual period of guarantee.

Article 40

The seller is not entitled to rely on the provisions of articles 38 and 39 if the lack of conformity relates to facts of which he knew or could not have been unaware and which he did not disclose to the buyer.

Article 44

Notwithstanding the provisions of paragraph (1) of article 39 and paragraph (1) of article 43, the buyer may reduce the price in accordance with article 50 or claim damages, except for 1088 of profit, if he has a reasonable excuse for his failure to give the required notice.

133. See also CISG, supra note 1, arts. 41-43 (notice also required when breach of warranty against third party claims in the goods).

134. Preliminary Report, supra note 7, at 176-79. U.C.C. section 2-612 provides in pertinent part:

(2) The buyer may reject any installment which is non-conforming if the nonconformity substantially impairs the value of that installment and cannot be cured or if the non-conformity is a defect in the required documents; but if the non-conformity does not fall within subsection (3) and the seller gives adequate assurance of its cure the buyer must accept that installment.
(3) Whenever non-conformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a breach of the whole. But the aggrieved party reinstates the contract if he accepts a non-conforming installment without seasonably notifying of cancellation or if he brings an action with respect only to past installments or demands performance as to future installments.

135. CISG, supra note 1, art. 73 provides:

(1) In the case of a contract for delivery of goods by installments, if the failure of one party to perform any of his obligations in respect of any installment constitutes a fundamental breach of contract with respect to that installment, the other party may declare the contract avoided with respect to that installment.
(2) If one party's failure to perform any of his obligations in respect of any installment gives the other party good grounds to conclude that a fundamental breach of contract will occur with respect to future installments, he may declare the contract avoided for the future, provided that he does so within a reasonable time.
(3) A buyer who declares the contract avoided in respect of any delivery may, at the same time, declare it avoided in respect of deliveries already made or of future deliveries if, by reason of their interdependence, those deliveries could not be used for the purpose contemplated by the parties at the time of the conclusion of the contract.

136. See CISG, supra note 1, art. 73(1), (2).

137. U.C.C. § 2-612 Official U.C.C. Comment 6. Cf. CISG, supra note 1, art. 73(2).

138. U.C.C. § 2-612(3).

139. Preliminary Report, supra note 7, at 181-89.

140. CISG, supra note 7, arts. 79, 80 provide:

Article 79

(1) 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 avoided or overcome it, or its consequences.
(2) If the party's failure is due to the failure by a third person whom he has engaged to perform the whole or a part of the contract, that party is exempt from liability only if:
(a) He is exempt under the preceding paragraph; and
(b) The person whom he has so engaged would be so exempt if the provisions of that paragraph were applied to him.
(3) The exemption provided by this article has effect for the period during which the impediment exists.
(4) The party who fails to perform must give notice to the other party of the impediment and its effect on his ability to perform. If the notice is not received by the other party within a reasonable time after the party who fails to perform knew or ought to have known of the impediment, he is liable for damages resulting from such non-receipt.
(5) Nothing in this article prevents either party from exercising any right other than to claim damages under this Convention.

Article 80

A party may not rely on a failure of the other party to perform, to the extent that such failure was caused by the first party's act or omission.

141. See CISG, supra note 1, art. 79(2).

142. U.C.C. § 2-813 provides:

Where the contract requires for its performance goods identified when the contract is made, and the goods suffer casualty without fault of either party before the risk of loss passes to the buyer, or in a proper case under a "no arrival, no sale" term (Section 2-324) then
(a) if the loss is total the contract is avoided; and
(b) if the loss is partial or the goods have so deteriorated as no longer to conform to the contract the buyer may nevertheless demand inspection and at his option either treat the contract as avoided or accept the goods with due allowance from the contract price for the deterioration or the deficiency in quantity but without further right against the seller.

143. U.C.C. § 2-614(1) provides:

"Where without fault of either party the agreed berthing, loading, or unloading facilities fail or an agreed type of carrier becomes unavailable or the agreed manner of delivery otherwise becomes commercially impracticable but a commercially reasonable substitute is available, such substitute performance must be tendered and accepted."

144. U.C.C. § 2-614(2) provides:

If the agreed means or manner of payment fails because of domestic or foreign governmental regulation, the seller may withhold or stop delivery unless the buyer provides a means or manner of payment which is commercially a substantial equivalent. If delivery has already been taken, payment by the means or in the manner provided by the regulation discharges the buyer's obligation unless the regulation is discriminatory, oppressive or predatory.

145. U.C.C. § 2-615 provides:

Except so far as a seller may have assumed a greater obligation and subject to the preceding section on substituted performance:
(a) Delay in delivery or non-delivery in whole or in part by a seller who complies with paragraphs (b) and (c) is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any' applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.
(b) Where the causes mentioned in paragraph (a) affect only a part of the seller's capacity to perform, he must allocate production and deliveries among his customers but may at his option include regular customers not then under contract as well as his own requirements for further manufacture. He may so allocate in any manner which is fair and reasonable.
(c) The seller must notify the buyer seasonably that there will be delay or non-delivery and, when allocation is required under paragraph (b), of the estimated quota thus made available for the buyer.

146. See generally Farnsworth, Damages and Specific Relief, 27 AM, J, COMP, L. 247 (1979); Flechtner, Remedies Under the New International Sales Convention: The Perspective from Article 2 of the U.C.C., 8 J.L. & COM. 53 (1988).

147. Preliminary Report, supra note 7, at 193.

148. CISG, supra note 1, art. 77 provides:

A party who relies on a breach of Contract must take such measures as are reasonable in the circumstances to mitigate the loss, including loss of profit, resulting from the breach. If he fails to take such measures, the party in breach may claim a reduction in the damages in the amount by which the loss should have been mitigated.

149. See, e.g., Knapp, Article 77, 3.1-3.10 in COMMENTARY ON THE INTERNATIONAL SALES LAW 564-66 (C. Bianca & M. Bonell eds., 1987).

150. U.C.C. section 2-701 provides that:

"Remedies for breach of any obligation or promise collateral or ancillary to a contract for sale are not impaired by the provisions of this Article."

151. Preliminary Report, supra note 7, at 193-94. The Study Group notes:

The text should state the general principle that remedies are essentially cumulative and any artificial doctrine of election is rejected. Two limitations on this principle should be expressed in general terms; (a) The choice of remedy should not exceed the expectation interest objective stated in § 1-106(1), but this depends upon the facts of each case, and (b) The choice of one remedy forecloses other remedies where there is a fundamental inconsistency or the aggrieved party has relied.

Id. (footnote omitted).

152. CISG, supra note 1, arts. 75, 76(1) provide:

Article 75

If the contract is avoided and if, in a reasonable manner and within a reasonable time after avoidance, the buyer has bought goods in replacement or the seller has resold the goods, the party claiming damages may recover the difference between the contract price and the price in the substitute transaction as well as any further damages recoverable under article 74.

Article 76

(1) If the contract is avoided and there is a current price for the goods, the party claiming damages may, if he has not made a purchase or resale under article 75, recover the difference between the price fixed by the contract and the current price at the time of avoidance as well as any further damages recoverable under article 74. If, however, the party claiming damages has avoided the contract after taking over the goods, the current price at the time of such taking over shall be applied instead of the current price at the time of avoidance.

153. See U.C.C. § 2-702(2).

154. U.C.C. § 2-702 provides:

(1) Where the seller discovers the buyer to be insolvent he may refuse delivery except for cash including payment for all goods theretofore delivered under the contract, and stop delivery under this Article (Section 2-705).
(2) Where the seller discovers that the buyer has received goods on credit while insolvent he may reclaim the goods upon demand made within ten days after the receipt, but if misrepresentation of solvency has been made to the particular seller in writing within three months before delivery the ten day limitation does not apply. Except as provided in this subsection the seller may not base a right to reclaim goods on the buyer's fraudulent or innocent misrepresentation of solvency or of intent to pay.
(3) The seller's right to reclaim under subsection (2) is subject to the rights of a buyer in ordinary course or other good faith purchaser under this Article (Section 2-403). Successful reclamation of goods excludes all other remedies with respect to them.

155. Preliminary Report, supra note 7, at 195-96.

156. CISG, supra note 1, arts. 64(1), 81(2), and 84(2).

157. See supra note 154.

158. U.C.C. § 2-705 provides:

(1) The seller may stop delivery of goods in the possession of a carrier or other bailee when he discovers the buyer to be insolvent (Section 2-702) and may stop delivery of carload, truckload, planeload or larger shipments of express or freight when the buyer repudiates or fails to make a payment due before delivery or if for any other reason the seller has a right to withhold or reclaim the goods.
(2) As against such buyer the seller may stop delivery until
(a) receipt of the goods by the buyer; or
(b) acknowledgment to the buyer by any bailee of the goods except a carrier that the bailee holds the goods for the buyer; or
(c) such acknowledgment to the buyer by a carrier by reshipment or as warehouseman; or
(d) negotiation to the buyer of any negotiable document of title covering the goods.
(3)(a) To stop delivery the seller must so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.
(b) After such notification the bailee must hold and deliver the goods according to the directions of the seller but the seller is liable to the bailee for any ensuing charges or damages.
(c) If a negotiable document of title has been issued for goods the bailee is not obliged to obey a notification to stop until surrender of the document.
(d) A carrier who has issued a non-negotiable bill of lading is not obliged to obey a notification to stop received from a person other than the consignor.

159. Preliminary Report, supra note 7, at 202.

160. CISG, supra note 1, art. 71 provides:

(1) A party may suspend the performance of his obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of his obligations as a result of:
(a) A serious deficiency in his ability to perform or in his creditworthiness; or
(b) His conduct in preparing to perform or in performing the contract.
(2) If the seller has already dispatched the goods before the grounds described in the preceding paragraph become evident, he may prevent the handing over of the goods to the buyer even though the buyer holds a document which entitles him to obtain them. The present paragraph relates only to the rights in the goods as between the buyer and the seller.
(3) A party suspending performance, whether before or after dispatch of the goods, must immediately give notice of the suspension to the other party and must continue with performance if the other party provides adequate assurance of his performance.

161. Cf. Indussa Corp. v. Reliable Stainless Steel Supply Co., 369 F. Supp. 976, 980 (E.D. Pa. 1974) ("reasonable commercial standards of fair dealing" required seller to notify buyer when it stopped shipment of final installments because buyer had failed to pay for earlier installments).

162. See U.C.C. §§ 2-702(2), (3); 7-403(1)(d).

163. Preliminary Report, supra note 7, at 204.

164. U.C.C. § 2-706 provides in pertinent part:

(3) Where the resale is at private sale the seller must give the buyer reasonable notification of his intention to resell.
(4) Where the sale is at public sale
(a) only identified goods can be sold except where there is a recognized market for a public sale of futures in goods of the kind; and
(b) it must be made at a usual place or market for public sale if one is reasonably available and except in the case of goods which are perishable or threaten to decline in value speedily the seller must give the buyer reasonable notice of the time and place of the resale; and
(c) if the goods are not to be within the view of those attending the sale the notification of sale must state the place where the goods are located and provide for their reasonable inspection by prospective bidders; and
(d) the seller may buy.

165. CISG, supra note 1, art. 75.

166. Preliminary Report, supra note 7, at 206. U.C.C. § 2-706(1) provides:

Under the conditions stated in Section 2-703 on seller's remedies, the seller may resell the goods concerned or the undelivered balance thereof. Where the resale is made in good faith and in a commercially reasonable manner the seller may recover the difference between the resale price and the contract price together with any incidental damages allowed under the provisions of this Article (Section 2-710), but less expenses saved in consequence of the buyer's breach.

167. CISG, supra note 1, art. 76(1) provides:

If the contract is avoided and there is a current price for the goods, the party claiming damages may, if he has not made a purchase or resale under article 75, recover the difference between the price fixed by the contract and the current price at the time of avoidance as well as any further damages recoverable under article 74. If, however, the party claiming damages has avoided the contract after taking over the goods, the current price at the time of such taking over shall be applied instead of the current price at the time of avoidance.

168. U.C.C. § 2-708(1). The Study Group recommends several revisions in the text and comments of this section. Preliminary Report, supra note 7, at 207-12. However, "[n]o revisions of substance are recommended in the measure of damages. Id. at 210.

169. The Study Group notes the possibility that "section 2-708(1) could be revised to state that damages should be measured in any way that puts the seller in the same position as full performance would have and that a common way to achieve that result is through the contract price/market price formula." Id.

170. CISG, supra note 1, art. 76(1).

171. U.C.C. § 2-708(1).

172. See United Nations Conference on Contracts for the International Sale of Goods, Official Records, supra note 1, at 222-23, 394-96, 415 (debating "article 72," the precursor to the present article 76).

173. U.C.C. subsection 2-708(2) provides:

If the measure of damages provided in subsection (1) is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in this Article (Section 2-710), due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.

The Study Group recommended several revisions in the text and comments of this section. See Preliminary Report, supra note 7, at 212-18.

174. CISG, supra note 1, art. 74.

175. Compare the uncertain relation of subsections (1) and (2) of § 2-708.

176. Preliminary Report, supra note 7, at 208-9.

177. CISG, supra note 1, art. 62 provides:

"The seller may require the buyer to pay the price, take delivery or perform his other obligations, unless the seller has resorted to a remedy for breach of contract."

178. U.C.C. § 2-709 provides:

(1) When the buyer fails to pay the price as it becomes due the seller may recover, together with any incidental damages under the next section, the price
(a) of goods accepted or of conforming goods lost or damaged within a commercially reasonable time after risk of their loss has passed to the buyer; and
(b) of goods identified to the contract if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing.
(2) Where the seller sues for the price he must hold for the buyer any goods which have been identified to the contract and are still in his control except that if resale becomes possible he may resell them at any time prior to the collection of the judgment. The net proceeds of any such resale must be credited to the buyer and payment of the judgment entitles him to any goods not resold.
(3) After the buyer has wrongfully rejected or revoked acceptance of the goods or has failed to make a payment due or has repudiated (Section 2-610), a seller who is held not entitled to the price under this section shall nevertheless be awarded damages for non-acceptance under the preceding section.

See also Preliminary Report, supra note 7, at 218-19.

179. CISG, supra note 1, art. 28.

180. Preliminary Report, supra note 7, at 219-20.

181. CISG, supra note 1, arts. 74, 76.

182. See U.C.C. § 2-711(1).

183. Subsection 2-712(3) provides that the "[f]ailure of the buyer to effect cover within this section does not bar him from any other remedy."

184. Preliminary Report, supra note 7, at 221-22.

185. U.C.C. § 2-713(1):

"[T]he measure of damages for non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages. ..." Compare CISG, supra note 1, art. 76(1). See discussion of U.C.C. § 2-706 and Recommendation A2.7 (5)(B), supra notes 165-66 and accompanying text.

186. Preliminary Report, supra note 7, at 228-29. Section 2-715(2)(A) provides that:

"Consequential damages resulting from the seller's breach include (a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise. ..."

187. Compare U.C.C. § 2-715(2)(a) with CISG arts. 74 (2d sent.), 77.

188. Compare U.C.C. § 2-715(2)(b) with CISG art. 5.

189. CISG, supra note 1, art. 46(1).

190. CISG, supra note 1, art. 28.

191. CISG, supra note 1, art. 6.

192. Preliminary Report, supra note 7, at 229-230.

193. CISG, supra note 1, art. 4(b).

194. Preliminary Report, supra note 7, at 231.

195. Preliminary Report, supra note 7, at 234. U.C.C. subsection 2-718(2) provides in pertinent part:

(2) Where the seller justifiably withholds delivery of goods because of the buyer's breach, the buyer is entitled to restitution of any amount by which the sum of his payments exceeds ...
(b) in the absence of such terms, twenty per cent of the value of the total performance for which the buyer is obligated under the contract or $500, whichever is smaller.

196. CISG, supra note 1, art. 81(2) provides:

A party who has performed the contract either wholly or in part may claim restitution from the other party of whatever the first party has supplied or paid under the contract. If both parties are bound to make restitution, they must do so concurrently.

The texts of articles 82 and 84 are set out supra at note 129.

197. Preliminary Report, supra note 7, at 234-40.

198. U.C.C. § 2-719 provides:

(1) Subject to the provisions of subsections (2) and (3) of this section and of the preceding section on liquidation and limitation of damages,
(a) the agreement may provide for remedies in addition to or in substitution for those provided in this Article and may limit or alter the measure of damages recoverable under this Article, as by limiting the buyer's remedies to return of the goods and repayment of the price or to repair and replacement of non-conforming goods or parts; and
(b) resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.
(2) Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this Act.
(3) Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.

199. Section 2-725 sets a basic four-year statute of limitation, beginning from the date the cause of action accrues. This period may not be extended by the original agreement, but may be reduced to as short as one year. U.C.C. § 2-725.

200. Preliminary Report, supra note 7, at 242-45.

201. [United Nations] Convention on the Limitation Period in the International Sale of Goods, New York, 1974, U.N. Doc. A/CONF.63/15 (1974); English version printed in 13 INT'L LEGAL MATERIALS 952 (1974); Protocol Amending the [United Nations) Convention on the Limitation Period in the International Sale of Goods, Vienna, 1980, U.N. Doc. A/CONF.97/18, Annex II; English version printed in 19 INT'L LEGAL MATERIALS 696 (1980); Consolidated Text of the Limitations Convention prepared by the United Nations pursuant to Article XIV(2) of the 1980 Protocol, United Nations letter (X.7 (b)), 29 September 1989 ref. C.N.1989.Treaties.3 (Depositary Notification).

202. See generally Hill, A Comparative Study of the United Nations Convention on the Limitation Period in the International Sale of Goods and Section 2-725 of the Uniform Commercial Code, 25 TEXAS INT'L L.J. 1 (1990).


Pace Law School Institute of International Commercial Law - Last updated April 18, 2006
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