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Presentation at a seminar on the UNIDROIT Principles at Valencia, Venezuela (6-9 November 1996). Reproduced with permission from the author.

The UNIDROIT Contract Principles, CISG and National Law

Jacob S. Ziegel [*]

I. Introduction

The UNIDROIT Principles constitute a major achievement in the progressive development of international commercial law, and crown almost 70 years of effort to build a solid foundation for a modern lex mercatoria for the international trading community. The task began with Ernst Rabel's efforts in the late 1920s to draft an international sales code and resulted in the adoption in 1964 of the Uniform Law for the International Sale of Goods (ULIS) and the Uniform Law on the Formation of Contracts for International Sale of Goods (ULFC). The second step was the approval in 1980 of the Convention on the International Sale of Goods (CISG). CISG was a great improvement on ULIS and ULFC. Nevertheless, many compromises had to be made in CISG to secure the contracting parties' support at Vienna. CISG also contains important ambiguities and there are many gaps in its provisions, as is becoming increasingly clear.

The UNIDROIT Principles, while building on the Convention's very solid foundation, have remedied many of its unavoidable shortcomings. The Principles are much more comprehensive in scope, often much more detailed in addressing the same issues, and they fill many of the gaps in CISG. No less important, because the Principles' drafting team was made up of eminent jurists speaking only for themselves and not representing any governments, they were free to adopt the contractual doctrines, principles and rules they believed most appropriate in the contemporary international commercial environment unhampered by political considerations or loyalty to narrow legal traditions. Another point in the Principles' favor is that, being only a restatement of contract principles, the Principles can, and presumably will, be modified and revised over time in the light of evolving experience and new insights.

How can the UNIDROIT Principles best serve the international community? The Principles' sponsors were quick to appreciate the Principles' many potential uses: as inspiration for future conventions in the contractual area; as aids in the interpretation of existing conventions, notably CISG, and the filling of gaps; as a replacement for domestic contract rules where the principles of private international law lead to the application of the domestic rules of a country; and as an important model for the introduction of domestic contract codes or the revision of existing codes. As a nonexpert on the UNIDROIT Principles, I will primarily confine my short presentation to two of these potential uses, that is, the role of the Principles in interpreting and filling gaps in CISG, and the Principles' potential influence on Common law contract rules, with particular emphasis on the Canadian, British, and American positions.

II. The Interaction of CISG and the UNIDROIT Principles

Many commentators on CISG have noted in it important gaps and ambiguities. To provide some well known examples:

A recent review of the CISG case law by Louis and Patrick Del Duca [1], persuasively illustrates the practical impact of the gaps. The authors found that of the 142 reported cases decided up to January 1, 1996, 52 involved disputed issues of law not addressed in CISG. 42 involved questions of interest rates where the buyer was late in making payment or the seller was late in making a refund. Other issues raised by the cases that are not addressed in CISG were the following:

It will be noted that five of these issues involved familiar sales questions.[2]

The UNIDROIT Principles resolve many of these ambiguities and could fill many of the gaps if it were legitimate to invoke the Principles for this purpose. The critical question is whether it is legitimate, and when. To answer the question we must begin by examining Article 7(1) of CISG.

1. Using the Principles as interpretational aids

Article 7(1) of CISG tells us that in interpreting the Convention regard is to be paid to (i) its international character; (ii) the need to promote uniformity; and (iii) the observance of good faith in international trade.

These prescriptions do not take us very far. The first prescription essentially means that in interpreting the CISG provisions the tribunal must put aside its preconceptions and perspectives based on domestic contract systems and approach the CISG provisions in an international spirit. Suppose the tribunal does that, will this enable it, to use some familiar examples, to resolve the conflict between Articles 14 and 55 on the role of price in the formation of the contract or to determine the meaning of fundamental breach of contract in Article 25?

The second interpretational guide in Article 7(1) -- the need to promote uniformity -- is also not particularly helpful. It seems to have two meanings. The first is that the interpretation is to be the same regardless of the character of the underlying contract. The second possible meaning is that if there is an international consensus about the meaning of a provision the tribunal should follow it and not be tempted to strike out on its own. However, a strong-minded judge or arbitrator may find this expected deference difficult to accept if he or she is convinced that the earlier interpretations were clearly erroneous. Presumably it could also be argued that if, on a particular point of interpretation, the domestic rules of the ratifying State substantially point in one direction they should be used as a key in unlocking the CISG ambiguity. In my opinion, this would be a backward step since the whole point of a Convention like CISG is to avoid the necessity of having to consult domestic rules of contract law. Nevertheless, faute de mieux, it is better than no solution and should not be dismissed out of hand.

It also goes without saying that the tribunal should be entitled to look at the travaux préparatoires of CISG -- a recourse that is expressly permitted in the Vienna Convention on the Law of Treaties -- with a view to ascertaining the drafters' meaning.[3] However, this may not provide much help if all that the Convention debates show is that the various factions were deadlocked (as often they were) and that the particular provision was adopted as a compromise. Article 7(1) does not direct the CISG interpreters to look at the underlying purposes of the ambiguous provisions (although this lacuna too is filled in Article 3(1) of the Vienna Convention on Treaties), nor does it authorize resort to provisions in other Conventions with comparable objectives. It seems inconceivable, however, that this latter interpretational aid should be excluded. Once again I fall back on the Vienna Treaties Convention and I read in Article 3(2) that recourse may be had to supplementary means of interpretation, including the preparatory work leading to the treaty.

For the purposes of my remarks I will therefore assume that we may use the UNIDROIT Principles as supplementary interpretational aids. How far will this take us? My first impression is that we may not find the Principles as helpful as we might wish in resolving the ambiguities in the CISG provisions. This observation is qualified by what I say hereafter about the role of good faith as an interpretational aid. Let me give some examples:

(a) Price as an essential term of the contract

This was an issue over which the diplomatic conference convened in Vienna in 1980 to finalize the CISG provisions nearly foundered. The difficulty was that France and other Civil law jurisdictions following the Code Napoleon tradition regarded agreement on the price as an essential term of the contract whereas Common law jurisdictions and other Civil law and mixed jurisdictions favored a more flexible approach. Article 14(1) of CISG,[4] which was carried forward from ULFC,[5] adopts the French rule. After long discussions and in the final stages of the Vienna conference, Article 55 [6] was adopted as a compromise solution -- but without deleting Article 14(1). So which prevails?

My own answer is that Article 55 is a face saving solution and that it was meant to adopt the Common law rule that the buyer's obligation to pay a reasonable price will be implied, where the contract itself contains no price indication, by adding a large gloss to Article 14(1). If a tribunal accepts this reconciliation of Article 14(1) and 55 there will be no need to invoke the UNIDROIT Principles. One may hope the tribunal will favor this solution because it is also consistent with the UNIDROIT rule.[7] It is conceivable (although one hopes not probable) that a tribunal will find that CISG provides no rule because Articles 14(1) and 55 cancel each other out. If that is the case, the tribunal will presumably fall back on Article 7(1) of CISG as a gap filler and conclude that UNIDROIT Article 5.7(1) points to the same solution as Article 55.

(b) Meaning of "fundamental breach" in Article 25

This is another key CISG concept that was exhaustively discussed at Vienna and that has attracted voluminous attention from commentators. To what extent can Article 7.3.1 of the Principles be invoked to amplify the meaning of the CISG concept in a particular case? I believe the inquiry should fall into two parts. The first part is whether there is anything in the history of CISG that casts light on the question, for example whether delay in delivery of goods can constitute a fundamental breach and if so, when. This may be sufficient to answer the question. If it fails to do so, then one hopes the adjudicator will feel free to look at Article 7.3.1 for a list of the factors that are commonly regarded as evidence of a fundamental breach.

(c) Meaning of "impediment" in CISG Article 79 and the "hardship" provisions in the Principles Articles 6.2.2. and 6.2.3

All legal systems have to determine when a contracting party should be excused from performance of its obligations because of supervening circumstances. Some systems only accept a narrow range of excuses; others are more generous. Article 79 of CISG uses the term "impediment" to describe the types of event beyond the contracting party's control that will be acceptable as an excuse. "Impediments" is not defined and the question is bound to arise whether the "hardship" provisions in Articles 6.2.2 and 6.2.3 of the Principles can be invoked to expand the meaning of impediment to include cases of economic or commercial hardship.

There appear to be considerable difficulties. The UNCITRAL debates show [8] that the CISG drafters were opposed to allowing commercial or economic hardship as an excuse for non-performance and that this was the reason for adopting the requirement of an impediment as a precondition for relief in place of the more liberal ULIS test of a change of circumstances. The test there is whether, having regard to the parties' intention at the time of the conclusion of the contract, the non-performing party was not bound to take into account or to avoid or overcome the circumstances creating the hardship.[9] No doubt "impediment" is capable of many meanings. Nevertheless, it seems fairly obvious that a tribunal would first have to examine the UNCITRAL debates to see what range of impediments the drafters had in mind before accepting the relevance of the UNIDROIT hardship provisions as an interpretational aid.

If the tribunal finds an impediment sufficient to excuse one or both of the parties from further performance of their contractual obligations, it will have to address the consequences of the frustration of the contract. CISG does not spell out all the consequences and so, once again, the question will arise to what extent the Principles can be used as gap fillers.[10]

2. Interpretational aids and good faith

The third interpretational aid offered in CISG Article 7(1) is the observance of good faith in international trade. On the face of it, this is a baffling expression. One usually associates good faith with the party's conduct and not with the interpretation of a legal text. We know, however,[11] that there was much opposition among the UNCITRAL delegates to adopting an explicit good faith behavioral norm in CISG and that the good faith language in Article 7(1) was added as a compromise in the final phases of the drafting.

Commentators are by no means agreed on the significance of this addition. So far as I am aware, the issue has not so far arisen for decision in a reported case. Professors Enderlein and Maskow seem to be of the view [12] that good faith in interpretation leads to the same result as good faith in conduct. If they are right, the good faith provision in CISG is in the wrong place. It should be either in Article 7(2), as an aid in filling gaps, or stand on its own, as it does in the Principles.[13] Giving the good faith requirement in Article 7(1) the status of a behavioral norm may certainly be helpful in filling gaps in CISG. However, it is less obvious how much assistance it can provide as an interpretational guide to resolve conflicting provisions, such as the conflict between Articles 48 and 49 of CISG so far as the scope of the seller's right to cure is concerned. It could be argued, it seems to me, that the requirement of good faith, coupled with the implied principle in CISG that contracts should not be terminable for minor breaches, leads to the conclusion that there is no fundamental breach if the breaching party makes a prompt offer to cure. As a result, what was a fundamental breach has or will be made harmless on tender or performance of the cure.

3. Conclusion on CISG 7(1) and the use of the UNIDROIT Principles

Whether or not you agree with my specific examples of ambiguities in CISG, one point seems clear. If we see an ambiguity in CISG, we cannot simply apply the UNIDROIT solution, attractive and sensible as this may seem. We must first seek to determine what caused the ambiguity and what the drafters had in mind. It is only when these avenues have been exhausted and fail to supply an answer that it appears legitimate to resort to the UNIDROIT Principles to resolve the ambiguity. The post-CISG generation of lawyers may feel impatient with this fussy approach and may prefer to resolve ambiguities by going directly to the Principles. While I understand and sympathize with this means of bypassing the tortuous process of seeking a formal revision of CISG; it is nevertheless unacceptable. It took ten years for UNCITRAL to reach agreement on the composition of CISG. The governmental representatives at the Vienna diplomatic conference fully appreciated that they were adopting what in many instances were compromise provisions that fell markedly short of what some of the delegates would have liked to adopt. The Contracting Parties are therefore entitled to expect that adjudicators will respect the CISG provisions, despite their shortcomings, even if they feel that they could have been substantially improved upon.

4. Filling the gaps: CISG Article 7(2) and the UNIDROIT Principles

The test for the filling of gaps are very similar in CISG and the Principles. In CISG's case, there is a twofold requirement. First, the issue must not be expressly settled in the Convention and, second, the gaps must be settled in conformity with the general principles on which the Convention is based. If the Convention reveals no such general principles, then we are enjoined to apply the relevant municipal law as indicated by the rules of private international law.[14] How much scope, then, does CISG Article 7(2) provide for supplementing the CISG provisions with the UNIDROIT rules? It goes without saying that since CISG and the Principles are both broadly based contractual structures they cover much common territory. It is also not too difficult to discover in them many common underlying principles: respect for the parties' contract and protection of the parties' reliance and expectation interests, requirements of reasonableness, and of notification of events affecting the other party's interests. If Article 7(1) is correctly interpreted as importing standards of good faith and fair dealing, then those overarching duties must be added as well.

In every one of its seven chapters, the Principles are richer in content and more detailed in working out the basic concepts than the generally much leaner CISG provisions. The Principles also contain very powerful fair dealing and policing provisions, which have no counterpart in CISG. These include the rules governing the avoidance of unconscionable contracts and contract terms (Article 3.10), the policing of exemption/disclaimer clauses relieving either party from the consequences of a breach of its obligations (Article 7.1.6), and the disallowance of unreasonable liquidated damages or penalty clauses (Article 7.4.13).

It seems then that the UNIDROIT Principles offer a rich lode for filling CISG gaps and to some extent this is undoubtedly true. It is also true that the UNIDROIT provisions can be used to confirm results that would be reached without their use by simply following the Article 7(2) tests in CISG. It is just as clear, I believe, that we are not entitled to read UNIDROIT provisions into CISG because we believe it desirable to do so or because they reflect a more rounded view of contractual principles. This is so for several reasons. First, Article 4 of CISG excludes from the Convention's scope all questions of validity of the contract. This should be contrasted with the Principles, which only exclude questions of invalidity arising from lack of capacity, lack of authority, and immorality or illegality.[15] However, there is a complication because Article 1.4 also provides that nothing in the Principles shall restrict the application of mandatory rules, whether of national, international or supranational origin, which are applicable in accordance with the relevant rules of private international law. Nevertheless, for the purposes of this presentation I will assume that there is no conflict between Articles 1.4 and 3.1 of the Principles and that Article 1.4 is not concerned with the validity of the contract.

There is an ongoing debate about how broadly Article 4 of CISG should be read.[16] It will surely be agreed that disallowing unconscionable contracts and contractual provisions, exemption clauses, and penalty clauses belongs to the core of what is commonly understood by contract policing. This would be true even if we regarded these provisions as merely a working out of canons of good faith and fair dealing between the parties. In short, Article 4 would appear to preclude these behavioral norms from striking down contractual provisions valid under the proper law of the contract as distinct from prescribing how contractual provisions, valid under the applicable municipal law, are to be observed and performed by the parties. One may regret this result since it means that an important area of modern contract law is left to the vagaries of domestic contract rules, but it is difficult to see a better solution to this dilemma.

A second reason for not expecting too much from the gap filling validation in Article 7(2) is that it requires us to find a lacuna in the CISG rules. There is a world of difference between silence on an issue, on the one hand, and a CISG rule which we do not like and would wish to replace with a clearer and substantively superior UNIDROIT provision on the other. For example, the battle of the forms provisions in CISG Article 19 are much less attractive than the more sophisticated rule in the Principles.[17] Nevertheless, the CISG provisions exist and we cannot wish them away. By way of contrast, the rules of interpretation of contracts in Chapter 4 of the Principles are only an elaboration of the more succinct provisions in Article 8 of CISG and should therefore be admissible gap fillers on an analogical basis. The same would appear to be true of many, but not all, of the provisions in Chapter 5 of the Principles governing the parties' express and implied obligations.

III. Express Incorporation of UNIDROIT Principles in the Parties' Contract

If I am right in my analysis of the very significant limits on using the UNIDROIT Principles as supplementary provisions to CISG, then the question arises whether the difficulties can be overcome by more direct means -- by the parties incorporating the UNIDROIT Principles into their contract. In my view, this task too must be approached with considerable care. Consider the following possibilities, each of which is based on the assumption that, unless otherwise provided, the CISG rules will apply to the parties' contract.

Example 1. The contract provides that the Principles shall be applied in interpreting the contract and the parties' obligations thereunder, to the extent that the Principles are not inconsistent with the CISG provisions. Such a contractual provision, while harmless, would accomplish little. It would essentially be a contractual iteration of what already appears in Article 7(2) of CISG.

Example 2. The contract provides that it shall be governed by CISG and the UNIDROIT Principles. This would either create confusion or, preferably, would be interpreted by a tribunal as an inelegant way of importing the UNIDROIT Principles as supplementary aids in interpreting CISG and as a gap filler.

Example 3. The contract expressly excludes the CISG rules and provides that the contract shall be governed by the Principles. The first half of the clause should be all right but the second half may run into difficulties. First, unless the contracting parties are sovereign States or international agencies, or have the benefit of provisions such as those in Article 28(1) of the UNCITRAL Model Law on International Commercial Arbitrations,[18] they cannot sever themselves from municipal law. In case of dispute, it will be a municipal tribunal or, more controversially, an arbitrator subject to the lex fori that will decide on the acceptability of the Principles as the proper law of the contract.

The second difficulty is that the parties cannot lift themselves up by their bootstraps. They cannot invoke the Principles before it has been decided that there is a binding contract to begin with. That question presumably will be decided under the applicable municipal law. I appreciate, however, that an argument can be made that the UNIDROIT Principles should be applied to determine whether a contract exists because this is what the parties appear to have intended. A further, potentially fatal, difficulty is that it is not clear that the lex fori will recognize a denationalized set of norms, principles and rules as capable of constituting the proper law of the contract.[19] Another, and very different objection, is that by excluding the CISG provisions entirely the parties will have deprived themselves of the benefit of the distinctive sales provisions in the Convention which have no counter part in the Principles. The parties would therefore be remitted to municipal law, as determined by the forum's private international law rules, to ascertain what their rights and obligations are with respect to these issues.

My tentative conclusions, therefore, are as follows. Let me emphasize again however, that my remarks are premised on the assumption that unless excluded the contract is governed by CISG:

1. Merely providing that the Principles may be used as supplementary aids in interpretation will accomplish little.

2. Providing that gaps in CISG shall be filled by resort to the Principles would be more helpful. However, it should be made clear that a gap shall be deemed to exist whether or not it falls within the general principles underlying a specific provision in CISG.

3. A superior solution would be to provide that the contract shall be governed by the Principles and that CISG shall only be invoked to fill any gaps in the Principles. This will give the parties the benefit of the more detailed and complete rules in the Principles, as well as an explicit set of normative behavioral standards, while retaining the specific sales features in CISG, such as those relating to the parties' warranty and delivery obligations [20] and risks of loss,[21] that are not covered in the Principles. Additionally, the parties would be wise to spell out explicitly those rights and obligations which they regard of particular importance for the purpose of their contract and which experience shows most likely to give rise to disputes.[22]

One difficulty about all these propositions is that they assume that contracting parties in international trade typically address choice of law issues. Unfortunately, often this is not correct. It seems fairly clear that many thousands of international contracts are concluded each year without a choice of law clause that will trigger the CISG rules pursuant to Article 1(2) of the Sales Convention.[23]

One other conclusion is also warranted. There is no comfortable fit between CISG and the Principles. This mismatch is likely to become more pronounced over the years. The ideal solution would be to update CISG in light of the Principles but politically and logistically this seems unrealistic at the present time. But unless something is done to remedy the ambiguities and gaps in CISG, we are likely to face the following scenario:

(a) Knowledgeable contracting parties will contract out of CISG and adopt either the Principles as the governing law of their contract or a national law in which they have greater confidence; and

(b) Small contracting parties located in countries that have ratified CISG, and whose contracts are not prepared by knowledgeable lawyers, will be saddled with CISG and its various weaknesses.[24]

IV. The Potential Influence of the UNIDROIT Principles on Common Law Contract Rules

In his excellent book on the UNIDROIT Principles,[25] Professor Bonell notes the fact that in the short period the Principles have been in force they have aroused keen interest in various Eastern European and South East Asian countries as a prototype for the contractual provisions in the new or revised civil codes of those jurisdictions. He also rightly observes the influence which earlier versions of the Principles exerted on the new Quebec Civil Code and in the revision of the Netherlands Civil Code. All this is most encouraging news but it does not provide much guidance as to what is likely to happen in Common law jurisdictions without contract codes, such as Canada, the United States and England.

It must be obvious that their position is very different from the position of countries trying to adapt to a free market economy or from countries that are rewriting their existing civil codes. For the most part, the American, Canadian and English contract law is still predominantly judge-made. It is true that the Americans have the Restatement Second on the Law of Contracts, but the Restatement is not a code and, like the UNIDROIT Principles, it is only as persuasive as its merits and the extent to which it resonates with courts, practitioners and law professors. A further distinguishing feature is that in all three countries -- the same could be said for many other members of the Common law family -- contract law has reached a high degree of maturity and, it would appear, a high level of acceptance among the business community. There is no clamor for broadly gauged changes. Past changes have been incremental, not 180 degree turns, and this is likely to remain so in the foreseeable future.

The British have been particularly conservative in their approach to changes. In part, this is due to the strong grip which the doctrine of precedent still has on British legal culture. In equal measure it is due to the belief of many judges, particularly in the higher courts, that predictability and certainty are more important contract values than doing justice in a particular case and that a judge's role is to tamper as little as possible with the parties' own contract. In practice, as my colleague Professor Waddams points out,[26] the picture is not nearly so neat and judges in all Common law jurisdictions regularly police unfair bargains in the guise of contractual interpretation [27] or uphold bare promises by finding a largely fictitious bargain. Intermittently, equity based doctrines have also been tapped or expanded to relax some of the rigors of 19th century contract doctrines.[28] Over the past twenty years Canadian courts have carried the process considerably further and have shown, with some important exceptions,[29] a growing willingness to relax 19th century contract principles in favor of a more communitarian approach.[30]

All this not meant to suggest that the Principles will have no impact in the Common law world. Quite the contrary. As we know, over the past 25 years American jurists and practitioners have played a very active role in many international agencies. Their contribution in developing international commercial principles is also leaving a domestic legacy. In the discussions of the revision of Article 2 of the Uniform Commercial Code there are frequent references to the CISG provisions and, more recently, to the UNIDROIT Principles. In Canada, the reports of the Ontario Law Reform Commission (OLRC) on the revision of the Ontario Sale of Goods Act [31] and amendments of the law of contract [32] also contain many references to international developments in the doctrinal area, as well as to the American Uniform Commercial Code, to support the Commission's recommendations. It is safe to assume this trend will continue in the future, particularly since Canada and the United States have both ratified CISG and are also active members in UNIDROIT. The influence of the UNIDROIT Principles, however, is likely to be interstitial and not radical.

V. Conclusion

So where does all this leave us overall with respect to the potential influence of the UNIDROIT Principles? Paradoxically, it leads me to conclude that the Principles will have some, but not a profound, influence on CISG because of the relatively detailed provisions already appearing in CISG and the structure of Article 7 of the Sales Convention. The Principles could have the most lasting influence if and when UNCITRAL feels the time is propitious for a revision of CISG. The prospects for a stronger and more immediate influence should be better in the UNIDROIT and UNCITRAL sponsored Conventions in the contractual area because they lack the detailed provisions in CISG conflicting with the UNIDROIT Principles. At the domestic level, for the reasons I have given, the Principles will score high with developing countries and countries emerging from State-regulated economies. In other countries, particularly members of the Common law family, the influence is likely to remain confined to discrete changes in doctrines and rules.


FOOTNOTES

* Professor of Law Emeritus, University of Toronto, Correspondent of UNIDROIT.

1. Louis F. Del Duca and Patrick Del Duca, "Practice Under the Convention on International Sale of Goods (CISG): A Primer for Attorneys and International Traders (Part II)" (1996) 29 Uniform Commercial Code Law Journal 99.

2. However, one of the five issues, the law governing prescription of a claim, is dealt with in the Convention on the Limitation Period in the International Sale of Goods, 1974 (CLPISG), as amended in 1980. It seems that many domestic lawyers are not aware of this Convention’s existence, which is understandable given the fact that the Convention has attracted much less attention than CISG.

3. See further Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 2nd ed. (1991), §§ 88-91.

4. Article 14(1) reads:

"A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates 'the intention of the offeror to be bound in case of acceptance. A proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price."

5. Article 4. See further Honnold, op. cit., §§ 137.4-137.8.

6. Article 55 reads:

"Where a contract has been validly concluded but does not expressly or implicitly fix or make provision for determining the price, the parties are considered, in the absence of any indication to the contrary, to have impliedly made reference 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."

7. Article 5.7(1) reads:

"Where a contract does not fix or make provision for determining the price, the parties are considered, in the absence of any indication to the contrary, to have made reference to the price generally charged at the time of the conclusion of the contract for such performance in comparable circumstances in the trade concerned or, if no such price is available, to a reasonable price."

8. Honnold, op. cit., §§ 432.1-432.2.

9. ULIS Article 74.

10. Cf. CISG Article 79(5) (excuse from non-performance of one party does not preclude the other party to the contract from exercising any remedy other than to claim damages under the Convention) with the much more liberal provisions in Article 6.2.3 of the Principles which however only apply to cases of hardship. These entitle the disadvantaged party suffering the hardship to request re-negotiation of the contract and if the parties fail to agree to resort to the court. If the court finds hardship it may terminate the contract at a date and on terms to be fixed or to adapt the contract with a view to restoring the equilibrium.

Note also carefully the sharp distinction which the Principles draw between cases of hardship (dealt with in Article 6.2.3) and cases of force majeure, which are addressed in Article 7.1.7. In the later case, the remedies of the party not receiving performance are substantially the same as under CISG Article 79(5). The structural similarity between the CISG and the Principles’ provisions with respect to excuse for non-performance on grounds of an impediment provides further support for the conclusion that CISG Article 79(5) does not apply to cases of hardship and that the failure to address hardship cases was intentional.

11. Honnold, op. cit., § 94.

12. F. Enderlein & D. Maskow, International Sales Law (1992), p. 56, cited in J.M. Perillo, "UNIDROIT Principles of International Commercial Contracts: The Black Letter Text and a Review" (1994) 63 Fordham Law Review 281, 285, n.28.

13. Article 1.7.1.

14. Article 1.6(2) of the Principles differs because it does not explicitly refer to the municipal rules as a last resort. Presumably, it is meant to be implied.

15. Article 3.1.

16. Honnold, op. cit., p. [115].

17. Article 2.20-2.22.

18. Article 28(1) provides in part that the arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute.

19. The emerging consensus is strongly in favour of allowing the parties to adopt supranational rules ("general rules of law") as the law governing their relations. See M.J. Bonell, An International Restatement of Contract Law. The UNIDROIT Principles of International Contract, 2nd Enlarged Edition (1997), pp. 196-207.

20. Arts. 30-44.

21. CISG Ch. IV.

22. In a well-drafted sales contract these provisions will usually include the seller’s warranty and shipping obligations, risks of loss, price and payment terms, and buyer’s remedies for breach of the seller’s obligations, particularly the seller’s warranty obligations.

23. Of course, if each of the parties has its place of business in a CISG jurisdiction the CISG rules will apply automatically unless excluded pursuant to Article 6. Regrettably, there are still major trading countries (such as the United Kingdom, Japan and India) that have not ratified CISG.

24. Experience to date seems to support this prediction. Many if not most of the CISG cases reported to date appear to involve relatively unsophisticated buyers and sellers. It is also striking how few CISG cases have so far come before the U.S. and Canadian courts (both countries have ratified CISG) despite the fact that Canada and the United States are each other’s single most important trading partner and despite the enormous amount of sales litigation in the U.S.

25. M.J. Bonnell, op. cit., pp. 235-238.

26. S.M. Waddams, The Law of Contracts, 3rd ed. (1993), pp. 360-361.

27. The treatment for many years of exemption clauses in England and Canada is a classical example of this approach. For the details, see Waddams, op. cit. pp. 312-325. Note, however, that Canadian courts, including most recently the Supreme Court of Canada, have shown increasing willingness to adopt a doctrine of unconscionability in policing exemption clauses. See Hunter Engineering Co. v. Syncrude Canada Ltd. [1989] 1 Can. Sup. St. Rep. 426. Many of the Common law provinces have also adopted legislation authorizing courts to set aside or reform unconscionable bargains in consumer transactions.

28. Lord Denning’s revival of the equitable doctrine of estoppel in the High Trees case (Central London Property Trust Ltd. v. High Trees House Ltd. [1947] 1 K.B. 130); Waddams, op. cit., pp. 133-134) is an excellent example. So is his distinction between legal and equitable doctrines of mistake in Solle v. Butcher [1950] 1 K.B. 671 (C.A.) to justify giving relief for mistaken assumptions by the parties even when the mistake is not about the subject matter of the contract.

29. See London Drugs Ltd. v. Kuehne & Nagel International Ltd. (1992) 97 D.L.R. (4th) 261, Waddams, op. cit., pp. 189-90, in which a majority of the Supreme Court of Canada refused to depart from the traditional Common law doctrine that contracts for the benefit of third parties are not enforceable by the third party although in fact relief was given to the third party by implying an agency relationship.

30. See inter alia Hon. Beverly M. McLachlin, "A New Morality in Business Law?" (1990), 16 Canadian Business Law Journal 319 and S.K. O’Byrne, "Culpable Silence: Liability for Non-Disclosure in the Contractual Arena", a paper presented at the 27th Annual Workshop on Commercial and Consumer Law, Faculty of Law, University of British Columbia, October 17-18, 1997 and accepted for publication in the Canadian Business Law Journal. An important feature of the Canadian developments is the Supreme Court of Canada’s willingness to expand the sphere of fiduciary relationships into new areas with the far-reaching remedial consequences that this implies. For the details, see John D. McCamus, "Prometheus Unbound: Fiduciary Obligation in the Supreme Court of Canada" (1997) 28 Canadian Business Law Journal 107.

31. OLRC, Report on Sale of Goods (Toronto, 1979, 3 vols.).

32. OLRC, Report on Amendments of the Law of Contract (Toronto, 1987).


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