(A/CONF.97/C.1/L.104, L.121, L.126)
1. Mr. FELTHAM (United Kingdom), introducing his delegation's amendment (A/CONF.97/C.1/L.104) said that it comprised two proposals. The first would involve the insertion, between the words "unless" and "the party in breach", of the phrase "at the time when the contract was concluded". As indicated in the Secretariat's commentary, article 23 [became CISG article 25 ] as drafted did not specify at what moment the party in breach should have foreseen the consequences of the breach, so that in case of dispute, the decision must be made by the tribunal. His delegation believed that the article itself should be more specific: the moment when the contract was concluded, i.e., when its scope was clearly defined by the parties, was the point at which the foresight clause should become effective, since it was at that point that the parties should determine, in their mutual interest, what would constitute substantial detriment.
2. Mr. ROGNLIEN (Norway), Mr. SEVÓN (Finland) and Mr. SZÁSZ (Hungary) spoke in opposition to the proposal. Information provided after the conclusion of a contract could modify the situation as regards both substantial detriment and foresight. The wording of article 23 [became CISG article 25 ] should therefore be flexible.
3. Mr. FELTHAM (United Kingdom) withdrew his delegation's first proposal in the light of those comments.
4. Turning to the second United Kingdom proposal, for the addition of a sentence at the end of the article, he said that much of the debate at the previous meeting had been concerned with the definition of "substantial detriment". Notwithstanding the difficulties involved, his delegation believed that an attempt must be made to arrive at an understanding on the matter; one step in the right direction might be to ensure that a party adversely affected by an unfavourable move in market prices could not too easily escape from a detrimental situation by seeking all possible grounds to allege breach by the other party, so that the contract might be avoided. The extreme measure of avoidance could be averted if it were specified in article 23 [became CISG article 25 ] that "a breach does not result in substantial detriment to the other party if damages would be an adequate remedy for him."
5. Mr. ROGNLIEN (Norway) supported the proposal.
6. Mr. STALEV (Bulgaria) opposed the amendment. Compensation for injury was an established principle, but he did not believe that the manner of compensation should be imposed on the injured party. Apart from the fact that the nature and scale of damages due in respect of injury through breach of contract could be the subject of extremely lengthy deliberations, the injured party should, as a matter of principle, have the right to decide whether to sue for damages or to avoid the contract, as a consequence of substantial detriment.
7. Mr. SEVÓN (Finland) said that the purpose of article 23 [became CISG article 25 ] was to establish the circumstances which permitted avoidance, presumably with the understanding that in other circumstances, other remedies (i.e., damages) could be sought. The United Kingdom proposal appeared to reverse the question, by establishing the circumstances where damages could replace avoidance. He could not accept that change of emphasis, the effect of which, moreover, would be to modify the notion of a "fundamental breach".
8. Mr. DATE-BAH (Ghana) was also troubled by the United Kingdom proposal which begged the question of whether damages would be an adequate remedy. Furthermore, he understood that in English law itself, adequacy of damages was a notion used to determine the availability of the remedy of specific performance. The latter remedy was available only in a very narrow range of circumstances. The use of that very notion of adequacy of damages was likely to lead to the remedy of avoidance being available for too narrow a range of circumstances. For that reason, he could not support the amendment.
9. Mr. PLUNKETT (Ireland) appreciated the intent behind the United Kingdom proposal, but considered that avoidance was a just solution in cases where a party was in fundamental breach of contract. Not only might it be unfair to oblige that party to accept damages; there was also the question of what were adequate damages. Would capacity to pay be taken into account? If so, the determination of that capacity could take considerable time after the breach of contract itself and prolong the uncertainty; if not, the injured party -- notwithstanding a ruling that damages, rather than avoidance, would constitute a remedy -- could have great difficulty in recovering them.
10. Mr. GARRIGUES (Spain) also opposed the amendment. Article 23 [became CISG article 25 ] should be concerned solely with rights to avoidance as a result of substantial detriment through breach of contract. The proper place for consideration of other remedies for breach of contract -- including damages -- was in articles 41, 42 and 57 of the Convention [became CISG article 45, CISG article 46 and CISG article 61 ].
11. Mr. FELTHAM (United Kingdom) withdrew his delegation's second proposal (A/CONF.97/C.1/L.104).
12. The CHAIRMAN called attention to the Turkish amendment (A/CONF.97/C.1/L.121). The proposal being of a purely formal nature, it could perhaps be transmitted without comment to the Drafting Committee.
13. It was so decided.
14. The CHAIRMAN called attention to the Indian amendment (A/CONF.97/C.1/L.126). The idea of "a reasonable person" was incorporated in the Egyptian proposal (A/CONF.97/C.1/L.106) adopted subject to final drafting at the previous meeting, so that the Indian amendment appeared to require no further debate.
15. It was so decided.
16. The CHAIRMAN observed that consideration of article 23 [became CISG article 25 ] must now be suspended, pending the conclusions of the working group set up in connection with the earlier proposals by the Federal Republic of Germany and Pakistan concerning definition of the term "substantial detriment".
17. The CHAIRMAN pointed out that the only amendment (A/CONF.97/C.1/L.100) was of a formal nature and might thus be transmitted without comment to the Drafting Committee.
18. It was so decided.
19. Mr. KLINGSPORN (Federal Republic of Germany) introduced his delegation's amendment (A/CONF.97/C.1/L.65), the purpose of which was to extend the provision concerning a delay or error in communication to the Convention as a whole. In the draft before the Committee, that provision concerned only Part III, whereas his delegation believed that it should be applicable elsewhere, and more particularly in Part II, article 17(2) [became CISG article 19(2) ]. If the amendment was adopted, article 23 [became CISG article 25 ] might be incorporated in Part I of the draft Convention (Sphere of Application and General Conditions), in a manner to be determined by the Drafting Committee.
20. Mr. WAGNER (German Democratic Republic) introduced his delegation's amendment (A/CONF.97/C.1/L.123), the intention of which was to limit the scope of article 25 [became CISG article 27 ]. As drafted, the provision concerning delay or error appeared to raise a number of questions which lay outside the framework of the Convention, not the least of which was the definition of "error". His delegation believed that the term should be employed with circumspection and that the provision contained in article 25 [became CISG article 27 ] should only relate to notices securing claims of one party in cases where no decisions were taken by the other party during the period between the due date of notice and the date on which that notice reached the other party. Such cases were mentioned in articles 37, 39(2) and 40(2) [became CISG article 39, CISg article 43 and CISG article 42 ]. In other cases, it was very questionable whether one party should be allowed to rely on notice which the other had not received. As drafted at present, article 25 [became CISG article 27 ] could give rise to considerable difficulties in relation to articles 42(2), 44(2), 45(2) and 61(2) [became CISG article 46(2), CISG article 48(2), CISG article 49(2) and CISG article 65(2) ] -- to cite just a few examples.
21. Mr. ROGNLIEN (Norway) observed that the article, which dealt with the risk of delay or error in connection with transmissions, pursued the desirable aim of establishing a general rule, albeit with exceptions. Provision was in fact made for such exceptions in the draft Convention, by means of specific references to receipt; delegates who disagreed with the references could contest them as each article came up for consideration; he himself would do so in the case of article 65(4) [became CISG article 79(4) ].
22. He explained the philosophy behind article 25 [became CISG article 27 ]: Whenever a party was called upon to give notice to comply with a duty or to obtain relief from a loss, it was unreasonable to make that party responsible for delay or error in the transmission or failure of the communication to arrive (the "dispatch" theory). On the other hand, when the purpose of the notice was to create an obligation for the other party, that party should not be penalized as the result of delay, error, or failure to arrive and the "receipt" theory should be applied instead of the rule in article 25 [became CISG article 27 ].
23. On the proposal submitted by the Federal Republic of Germany, he considered that the dispatch rule in article 25 [became CISG article 27 ] was generally acceptable when contracts had been concluded, i.e., in matters related to Part III of the draft Convention (Sales of Goods). The situation as regards Part II (Formation of the Contract) was different; for example, it could not be assumed that a contract had been concluded simply because one party had sent a communication which might or might not have been received by the other. For that reason, and notwithstanding the general philosophy to which he had referred, it might be wise to indicate in article 25 [became CISG article 27 ] that it did not apply to Part II.
24. Mr. FOKKEMA (Netherlands) fully supported the proposal by the German Democratic Republic.
25. Mr. MICCIO (Italy) proposed that the final phrase of article 25 [became CISG article 27 ] should be amended by the insertion of the word "reasonable" before the word "delay" and by an indication to the effect that failure to arrive must be independent of the will of the parties concerned.
26. The CHAIRMAN ruled that the previous speaker's proposal, which had not been submitted in writing, was out of order.
27. Mr. WAGNER (German Democratic Republic) said that he had endeavoured to interpret the draft Convention in the manner suggested by the representative of Norway as regards the conditions under which article 25 [became CISG article 27 ] was not applicable. But his uncertainty remained, particularly in the light of paragraph 15 of the commentary by the Secretariat on article 44 [became CISG article 48 ].
28. The CHAIRMAN observed that the commentary by the Secretariat had been prepared with the aim of helping delegates towards a better understanding of the text of the draft Convention; its contents were in no sense formally interpretative.
29. Mr. ROGNLIEN (Norway) invited the attention of the representative of the German Democratic Republic to the commentary provided by his own Government in document A/CONF.97/8. He reiterated his belief that the most satisfactory procedure would be to specify, by appropriate language at the appropriate points, where the provisions of article 25 [became CISG article 27 ] were not to apply.
30. Mr. KRISPIS (Greece) said that his delegation would have preferred article 25 [became CISG article 27 ] not to figure in the Convention at all. It would have been better to leave the question of delay, error or failure to arrive to be assessed in the light of the interpretation of each contract in each particular case. Since there was no proposal to delete the article, he would support the wording proposed by the German Democratic Republic, as being the narrowest.
31. Mr. KLINGSPORN (Federal Republic of Germany) agreed with the representative of Norway that article 25 [became CISG article 27 ] could not be applied as a general rule as far as Part II of the Convention was concerned. However, in most of the provisions in Part II it was expressly stated that a communication by one party to another must reach the other party in order to be effective. In all those cases, the so-called receipt theory applied, rather than article 25 [became CISG article 27 ]. But there was one provision in Part II -- article 17(2) [became CISG article 19(2) ] -- that did not indicate whether or not a communication from the offeror must reach the offeree in order to become effective, and in that case it would be appropriate to apply article 25 [became CISG article 27 ].
32. The CHAIRMAN put the amendments to article 25 [became CISG article 27 ] to the vote.
33. The amendment proposed by the Federal Republic of Germany (A/CONF.97/C.1/L.65) was rejected by 25 votes to 7.
34. The amendment proposed by the German Democratic Republic (A/CONF.97/C.1/L.123) was rejected by 17 votes to 11.
35. The CHAIRMAN said that as the two amendments had been rejected, article 25 was adopted as it stood.
36. Mr. HJERNER (Sweden) thought that a vote should also be taken on the article itself. The UNCITRAL text was only the Conference's working document, and each article needed to be adopted by the members, by a simple majority vote in the two Committees and by a two-thirds vote in the Plenary. He felt, furthermore, that a proposal for the deletion of an article was not an amendment.
37. The CHAIRMAN thought that to require a vote to be taken on each article was tantamount to a proposal to delete them all.
38. Mr. ROGNLIEN (Norway) suggested that it might be simpler to adopt a procedure whereby any delegation that felt that an affirmative vote was needed on a particular article could ask for a vote to be taken. Otherwise, the article could be regarded as tacitly adopted.
39. After procedural discussion in which Mr. VIS (Secretary of the Committee), Mr. POPESCU (Romania), Mr. MEIJER (Netherlands), Mr. STALEV (Bulgaria), Mr. MEDVEDEV (Union of Soviet Socialist Republics), Mr. ROGNLIEN (Norway), Mr. LI Chih-min (China), Mr. MICCIO (Italy), Mr. SHORE (Canada) and Mr. SAM (Ghana) took part, the CHAIRMAN said that as there appeared to be a majority against both the Swedish proposal and the Norwegian proposal, he would, if there was no objection, consider them rejected.
40. It was so decided.
41. Mr. FELTHAM (United Kingdom), introducing his delegation's amendment (A/CONF.97/C.1/L.113), said that it was identical with the United States amendment (A/CONF.97/C.1/L.117). The United States delegation would reserve its remarks in case any further explanation was needed later in the discussion.
42. He reminded the Committee of the terms of article VII(1) of the 1964 Hague Convention, recapitulated in article 16 of the Uniform Law on the International Sale of Goods: "1. Where under the provisions of the Uniform Law one party to a contract of sale is entitled to require performance of any obligation by the other party, a court shall not be bound to enter or enforce a judgement providing for specific performance except in the cases in which it would do so under its law in respect of similar contracts of sale not governed by the Uniform Law."
43. That formulation had been an attempt to ease the position of those States whose courts regarded specific performance as an exceptional rather than a usual remedy. In the formulation in article 26 of the draft Convention [became CISG article 28 ], however, the important word "would" had been changed to "could". The effect was to reduce vastly the protection afforded by the earlier provision to those States whose courts did not readily grant the remedy of specific performance. Under article 26 [became CISG article 28 ], if a national court had jurisdiction to grant specific performance -- in other words, if it "could" do so -- it would be obliged to give such a judgement if that was, under the Convention, an appropriate remedy in the circumstances.
44. Courts in England in fact had jurisdiction entitling them to order specific performance, but it was very rarely exercised. The general principle was that it was not exercised where damages were an appropriate remedy. However, because the courts had jurisdiction to grant it, they no longer enjoyed the protection extended by article VII of the Hague Convention. Since it was not possible to say that they never granted specific performance, they might arguably be compelled to do so under the Convention. The problem was perhaps particular to common law jurisdictions, and he would be interested to hear the views of countries with different legal systems.
45 Mr. DATE-BAH (Ghana) said that his delegation associated itself with the position stated by the United Kingdom.
46. Mr. KRISPIS (Greece) found the argument for the amendment convincing and said that a similar situation could arise in civil law countries as well. It was his delegation's understanding that "law", in the phrase "under its own law" in article 26 [became CISG article 28 ], included the rules of private international law applicable to the particular forum.
47. Mr. KIM (Republic of Korea) asked whether article 26 [became CISG article 28 ] covered arbitration proceedings as well as ordinary judicial proceedings. In England, for instance, the two were closely related. As most international commercial disputes were settled by arbitration, it was important to make it clear that article 26 [became CISG article 28 ] would also be applicable to such proceedings.
48. The CHAIRMAN pointed out that in many States the relevant legislation also related to arbitration proceedings. That should be taken into account in deciding whether article 26 [became CISG article 28 ] could or should apply to arbitral tribunals as well.
49. Mr. WAGNER (German Democratic Republic) said that his delegation preferred the present text of the Convention, which it interpreted as a compromise to prevent common law courts from being compelled to do something which they could not normally do under their law.
50. Mr. POPESCU (Romania) said he was doubtful about the scope of the present text, since it was possible for international disputes to be judged in the first instance in one country, but for judgement to be enforced by a second judge in another country. In such cases, would article 26 [became CISG article 28 ] apply to both the original court action and the execution of judgement, and what would happen if the law of the exequatur country did not provide for specific performance? Article 26 [became CISG article 28 ] should apply to arbitration proceedings as well, if numerous cases were not to fall outside the scope of the Convention.
51. Mr. DATE-BAH (Ghana) agreed with the representative of the German Democratic Republic that the purpose of the compromise was to prevent common law courts from being compelled to order specific performance when they would not ordinarily do so. The amendment, however, would not affect the compromise, but would merely make the article conform more closely to the expectations that would arise under the compromise.
52. The United Kingdom and United States amendments (A/CONF.97/C.1/L.113, L.117) were adopted by 26 votes to 10.
53. Mr. FARNSWORTH (United States of America), introducing his delegation's amendment (A/CONF.97/C.1/L.119), said that it was a drafting matter only.
54. The CHAIRMAN said that, if there were no objections, the amendment would be sent to the Drafting Committee.
55. It was so decided.
56. Mr. BONELL (Italy), introducing amendment A/CONF.97/C.1/L.68, said that paragraph 2 of article 27 [became CISG article 29 ] laid down the principle that a contract which contained a provision requiring modifications or abrogation to be made in writing could not be otherwise modified or abrogated. Although that principle was unknown in Italian law, under which a contract could be derogated from by oral agreement as well, his delegation was nevertheless prepared to accept it, on the grounds that it offered a sound solution for other legal systems and for international trade in general. However, his delegation considered that it was necessary to limit the principle to a particular situation which often occurred in trade practice, when the requirement of written abrogation or modification had not been specifically accepted by the parties to a contract, but had merely been included in the general conditions drawn up unilaterally by one of them but nevertheless forming part of the contract. It often happened that the same party agreed orally to certain modifications in the conditions. In that case the oral agreement modifying the contents of the general conditions should prevail, and the general principle in paragraph 2 should not apply. Furthermore, as the party who had drawn up the general conditions was sometimes represented by an authorized agent in the actual negotiations, oral modifications agreed to by the agent might be repudiated by his principal in the event of a dispute. The paragraph he had proposed was intended to prevent the economically weaker party from falling into that kind of trap.
57. His delegation was aware that objections might be raised on the grounds that it was too late to introduce another provision on the subject of general conditions into the Convention. He would point out, however, that it did not deal with general conditions as such, but with a de facto situation involving general conditions which came under the scope of article 27 [became CISG article 29 ]. The result aimed at by his delegation's proposal could also be achieved by the application of the second sentence of article 27 [became CISG article 29 ], paragraph 2, but his delegation doubted whether the sentence exactly covered the situation it envisaged.
58. Mr. STALEV (Bulgaria) said that his delegation could not support the Italian proposal since it appeared to be more suited to consumer contracts than to international commercial contracts. The parties to commercial contracts usually enjoyed equal bargaining power and did not need the defence offered by the amendment.
59. Mr. KOPAC (Czechoslovakia) said that his delegation was also unable to support the amendment, since it would not serve any purpose to introduce a separate provision concerning a written form of agreement to be contained in general conditions when the concept of general conditions was in itself unclear.
60. The amendment by Italy (A/CONF.97/C.1/L.68) was rejected.
61. Mr. ROGNLIEN (Norway), introducing his delegation's amendment (A/CONF.97/C.1/L.66), pointed out that article 27 had been placed in its present position in the draft text before a separate part on formation of the contract had been established. As the article was concerned with the modification of contracts or their termination by mutual agreement, and as a modified contract was in a sense a new contract, it would be more appropriate for it to be transferred to part II. Its inclusion in that part would also simplify the references in article 11.
62. Mr. HJERNER (Sweden) said that his delegation supported the Norwegian proposal, since the modification of a contract or its termination by agreement was an act in the formation of the contract and would therefore be more appropriately placed in part II. Moreover, unless article 27 [became CISG article 29 ] was transferred to part II, paragraph 2 of the article might be invoked to prevent accession to part III.
63. Mr. TRÖNNING (Denmark), Mr. KUCHIBHOTLA (India) and Mr. WAGNER (German Democratic Republic) supported the Norwegian proposal.
64. Mr. SZÁSZ (Hungary) pointed out that in some legal systems modification was dealt with after fulfillment of the contract, as in Hungary. But in order to meet the requirements of systems where it was dealt with at the time of the conclusion of the contract, it would be theoretically and practically more satisfactory to insert article 27 [became CISG article 29 ] in part II.
65. Mr. PLANTARD (France) reminded the Committee of his delegation's position that neither the modification nor abrogation of a contract was connected with the formation of the contract.
66. Mr. DATE-BAH (Ghana) said that although modification of a contract in a sense constituted formation of a contract, it was not formation of a contract simpliciter but rather formation of a contract modifying a pre-existing contract. If article 27 [became CISG article 29 ] was transferred, it was liable to create problems for common law countries because of the doctrine of consideration, and should therefore remain where it was.
67. Mr. MANTILLA-MOLINA (Mexico) supported the Norwegian proposal on the grounds that modification of contract was tantamount to an agreement and could therefore be considered a contract in the strict sense. If the transfer of article 27 [became CISG article 29 ] would create problems for common law countries, however, his delegation would not press for it.
68. Mr. SHAFIK (Egypt) said that his delegation could not support the Norwegian proposal, since it was illogical to deal with the modification of existing contracts in a part of the Convention which was devoted to the formation of the contract. In the Egyptian system of law, a distinction was made between a contract and an agreement. The purpose of a contract was always to create an obligation, whereas an agreement was more general and covered the creation, modification or termination of a contract. Consequently, under Egyptian law, the act of modification or termination implied the existence of an agreement, not a contract, and was therefore unrelated to part II.
69. Mr. KOPAC (Czechoslovakia) supported the proposal for the practical reason that if the article was left in part III it would also apply to article 25 [became CISG article 27 ], and that would be inadvisable.
70. Mr. POPESCU (Romania) said that it would be inappropriate to insert article 27 [became CISG article 29 ] in part II, as a contract had to exist before it could be modified or abrogated. His delegation was therefore in favour of leaving the article where it was.
71. Mr. LEBEDEV (Union of Soviet Socialist Republics) said that his delegation considered it dubious to state that article 27 [became CISG article 29 ] related to formation of contract. For there to be modification or abrogation of a contract, the contract must already have been concluded, as the representative of France had rightly indicated. If article 27 [became CISG article 29 ] was left in part III of the Convention, it would be applicable in countries that might wish to limit their acceptance to that part of the Convention and not to accept part II. The Norwegian proposal to move article 27 [became CISG article 29 ] to part II would be tantamount to stating that countries which did not ratify part II of the Convention would not be governed by article 11 [became CISG article 12 ] in its amended form. That would be incompatible with the compromise solution on that very difficult matter which UNCITRAL had sought for almost 10 years and which the present Conference had finally adopted.
72. Mr. SEVÓN (Finland) said his delegation was unable to support the proposal. The idea behind article 27 [became CISG article 29 ] was precisely to prevent the doctrine of consideration in common law countries from taking effect.
73. Mr. ROGNLIEN (Norway) emphasized, first, that article 27 [became CISG article 29 ] was applicable solely to modification or termination by agreement and was not intended to cover avoidance, and secondly, that if the article remained in part III, States ratifying part II only would not be bound by it.
74. The amendment by Norway (A/CONF.97/C.1/L.66) was rejected by 27 votes to 9, with 9 abstentions.
75. Mr. KRISPIS (Greece), introducing his delegation's amendment, said that the three basic obligations imposed on the seller by article 28 [became CISG article 30 ], namely, to deliver the goods, to hand over the documents and to transfer the property had to be performed "as required by the contract and this Convention". The Convention, however, contained no provisions as regards the transfer of property and as article 28 [became CISG article 30 ] stood only the clauses of the contract would apply. It was possible that situations would arise where the contract contained no specific provision on the transfer of property or contained a provision which conflicted with legislation applicable in accordance with private international law. Such situations could be covered by deleting the words "as required by the contract and this Convention" or by adding the words "and the law applicable" at the end of the article.76. After an exchange of views in which the CHAIRMAN, Mr. KLINGSPORN (Federal Republic of Germany) and Mr. KRISPIS (Greece) took part, Mr. Krispis withdrew his draft amendment.