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CISG
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LEGISLATIVE HISTORY
1980 Vienna Diplomatic Conference

Summary Records of Meetings of the First Committee

16th meeting

Thursday, 20 March 1980, at 3 p.m.

Chairman: Mr. LOEWE (Austria)

The meeting was called to order at 3.05 p.m.

CONSIDERATION OF ARTICLES 1-82 OF THE DRAFT CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS AND OF DRAFT ARTICLE "DECLARATIONS RELATING TO CONTRACTS IN WRITING" IN THE DRAFT PROVISIONS PREPARED BY THE SECRETARY-GENERAL CONCERNING IMPLEMENTATION, DECLARATIONS, RESERVATIONS AND OTHER FINAL CLAUSES FOR THE DRAFT CONVENTION (agenda item 3) (A/CONF.97/5) (continued)

38
Article 36 [became CISG article 38 ] (continued)
(A/CONF.97/C.1/L.118, L.154, L.155)

Paragraph 3

1. Mr. SAMSON (Canada) said that his delegation would be disposed to withdraw its amendment to paragraph 3 (A/CONF.97/C.1/L.118), which was merely of a drafting nature, unless other members of the Committee wished to see it maintained.

2. Mr. FELTHAM (United Kingdom) said that commercial circles in the United Kingdom had sought clarification as to whether "redispatch" included redirection for the purposes of sale to a third party. He had thought that the existing text sufficed but since two common law delegations had proposed amendments, he would like them to be put to the Committee.

3. Mr. HJERNER (Sweden) said that the choice of the word "redispatch" had been discussed at length by the UNCITRAL Working Group. The case it had particularly considered was that of an inland buyer who had bought goods CIF New York and had subsequently borne the cost of forward carriage to Chicago. It would not be necessary to examine the goods in New York, since their ultimate destination was clear at the time the contract was concluded. However, the paragraph did not necessarily cover the case of resales. It was important for both seller and buyer to know where they stood. The provision did not aim at dispensing the buyer from conducting an examination merely on the grounds that he proposed to resell the goods. It would not be reasonable to expect him to unpack an entire consignment of television sets packed in individual cartons, but he should perhaps unpack one such set. The Canadian amendment went too far in covering the general case of resales. The well-balanced existing text should be retained.

4. Mr. FELTHAM (United Kingdom) said he was troubled to hear the Swedish representative state that paragraph 3 was not intended to cover resales. It was recognized under common law that in the case, for instance, of the sale of a chemical packed in drums to a French buyer who resold to an ultimate consumer in Belgium, an examination of the goods was not practicable until they reached the subpurchaser. He hoped that position was covered by paragraph 3.

5. The CHAIRMAN said that from the discussion in UNCITRAL which had led up to the adoption of the present draft text, he had the impression that resale played a part in paragraph 3, but neither the important one conferred on it by the Australian and Canadian proposals nor the insignificant part attributed to it by the Swedish representative. The text should be taken literally. There were three conditions for deferring examination of goods until they reached a new destination. The first was redispatch by the buyer, the second was that, before such redispatch, there had been no reasonable opportunity for examination and the word "reasonable" was taken to include economic considerations and the third was that the original seller should know about the redispatch of the goods. Otherwise, he might think that they conformed if he was not notified within the usual period. The conditions permitting deferment of examination often occurred in resales but the resale, in itself did not suffice to authorize such a postponement.

6. Mr. MICHIDA (Japan), Rapporteur, confirmed the Chairman's explanation of paragraph 3.

7. Mr. VISCHER (Switzerland) agreed with the Chairman's explanation.

8. Mr. LOW (Canada) said that according to his delegation's interpretation of the original text, whether or not the buyer's opportunity to examine goods came within the scope of article 36 [became CISG article 38 ] depended on whether or not it was reasonable. In the case of a commission agent transmitting goods, the opportunity did not reasonably arise until they reached a party concerned and able to conduct an examination. If that interpretation was accepted by the Committee, his delegation would be content with the text as it stood and withdraw its amendment.

9. Mr. ROGNLIEN (Norway), agreeing with the conditions mentioned by the Chairman and that they covered resales, said that the wording of the Australian amendment in A/CONF.97/C.1/L.154 was more in harmony with the Chairman's explanation. He could support it if the phrase "in the existing packaging" was added after the words "redirected in transit or redispatched", and subject to further consideration of the actual drafting.

10. Mr. BENNETT (Australia) accepted the two suggestions made by the Norwegian representative.

11. Mr. KHOO (Singapore) said he was uneasy whenever it was stated that if the delegations at the Conference reached an understanding on the interpretation of the text, it was perfectly acceptable. The Conference was not drafting a convention for its own consumption but for use by courts, tribunals and ordinary traders throughout the world. It was the Conference's task to remove phrases open to several interpretations. The Australian amendment was useful in that it helped towards achieving uniformity in interpretation and application. He also supported the suggestions made by the Norwegian representative.

12. Mr. SZÁSZ (Hungary) thought that the Australian amendment was generally acceptable but the phrase "purposes of resale or otherwise" was too wide to be a definition -- it covered everything. The question of resale could more appropriately be dealt with in the commentary on the Convention. The main element was whether the buyer had a reasonable opportunity for examination. He had no objection to the phrase "in existing packaging", but he did not feel that it made a significant addition to the text.

13. Mr. OSAH (Nigeria) considered that the Australian amendment was clearer and easier to interpret than the original paragraph 3.

14. Mr. HJERNER (Sweden) said that the question to be asked was whether the Australian amendment was compatible with the Chairman's interpretation of the text, with which he agreed. It clarified the text by adding "redirected in transit" but the phrase "for purposes of resale or otherwise" was superfluous. Furthermore, the addition of the phrase "in existing packaging" made the provision stricter against the buyer since a buyer would not be relieved from his duty of examination in the case of a bulk load split up for redispatch.

15. Mr. MICHIDA (Japan), Rapporteur, observed that the Australian amendment did not state by whom the goods were to be redirected or redispatched. Was it by a carrier or the buyer? He preferred the wording of the original text. The reference to resale also caused him concern. As the Chairman had stated, postponement of the examination of goods was subject to three strict requirements including the knowledge of the seller, which would be weakened by the amendment. He preferred the existing text of paragraph 3.

16. Mr. EYZAGUIRRE (Chile) said he agreed with the Chairman's interpretation of the original text of paragraph 3. The Australian amendment was compatible with that interpretation and was therefore acceptable.

17. The CHAIRMAN asked what the distinction was between "redirected in transit" and "redispatched". The words used in the French text seemed to be synonymous.

18. Mr. FOKKEMA (Netherlands) said that was indeed true of the choice of words in the French text but in English there was a distinction between the two terms used. "Redispatched" implied that the goods had reached their first destination and had subsequently been sent on. "Redirected in transit" implied that they had never reached their first destination.

19. Mr. LI Chih-min (China) believed that the Australian amendment much improved the text. In the Chinese text, "other purposes" gave flexibility. The purpose of article 36 [became CISG article 38 ] was to ensure that the time fixed for the examination was reasonable. Unless all elements were considered, it was difficult to make such a judgement.

20. Mr. BENNETT (Australia) requested that the vote should be taken on his original text in document A/CONF.97/C.1/L.154 and on the two groups of phrases underlined separately.

21. The phrase "redirected in transit or" was accepted by 20 votes to 19.

22. The CHAIRMAN noted that the translation of "redirected in transit" would have to be reviewed in the text of other languages.

23. He took it that the words "redirection or" in the fifth line of the amendment should be regarded as a consequential amendment.

24. It was so agreed.

25. Mr. ROGNLIEN (Norway), speaking on a point of order, inquired whether the Australian representative would retain after the word "redispatched", the words "by the buyer" which appeared in the original text and the reference to opportunity for examination by him.

26. Mr. BENNETT (Australia) said that the intention behind his proposal was not to restrict the examination to the buyer if he did not have sufficient opportunity to conduct it. He regarded the latter part of the paragraph and the reference to the seller's knowledge at the time of the conclusion of the contract as the important element in the paragraph.

27. The words "for purposes of resale or otherwise, without the buyer having a reasonable opportunity for examination", were rejected by 24 votes to 15.

28. Mr. FOKKEMA (Netherlands), introducing his delegation's amendment (A/CONF.97/C.1/L.155), explained that it was intended to cover the case where goods might be transferred from one means of transport to another, before redirection in transit or redispatch, with a consequent risk of damage. That case was not covered by article 36(3) [became CISG article 38(3) ] and as a result the balance between the interest of buyer and seller was unfairly tilted in favour of the buyer. He noted that the corresponding ULIS article included a reference to transshipment.

29. Mr. SEVÓN (Finland) said he had difficulty with the proposal, because a buyer might well receive the goods without knowledge of where or how they might have been transshipped. The proposed addition would mean that paragraph (3) lost much of its meaning.

30. Mr. FOKKEMA (Netherlands) said that in view of those objections he would withdraw his proposal.

31. Article 36 [became CISG article 38 ] was adopted.

39
Article 37 [became CISG article 39 ]
(A/CONF.97/C.1/L.111, L.125, L.124, L.137, L.131, L.75)

32. Mr. DATE-BAH (Ghana), introducing his delegation's amendment (A/CONF.97/C.1/L.124), said his delegation wished to see article 37(1) [became CISG article 39(1) ] deleted and the matter regulated by paragraph 2. The sanction contained in paragraph 1 was too draconian. Traders in jurisdictions which did not have a rule requiring notice to the seller might be unduly penalized, since they were not likely to be aware of the new requirement until it was too late. If the amendment in paragraph 1 of his proposal were rejected, an alternative formulation was suggested in paragraph 2, which did not deprive the party of his rights to rely on non-conformity.

33. Mr. SEVÓN (Finland) remarked that articles 36 [became CISG article 38 ] and 37 [became CISG article 39 ] were closely connected. The word "must" in article 36(1) [became CISG article 38(1) ] implied that unless the buyer examined the goods within the specified period, he could not give notice of lack of conformity. If article 37(1) [became CISG article 39(1) ] were deleted, the word "must" in article 36(1) [became CISG article 38(1) ] had no meaning, since it meant that no penalties were provided if the buyer did not comply.

34. Mr. STALEV (Bulgaria) did not agree that article 37(1) [became CISG article 39(1) ] was draconian. It embodied a view that was accepted by many legislations.

35. Miss O'FLYNN (United Kingdom) could not accept the Ghanaian proposal to delete article 37(1) [became CISG article 39(1) ]. As she saw it, the rule in article 37(1) [became CISG article 39(1) ] was much less draconian from the buyer's point of view than that in article 37(2) [became CISG article 39(2) ]. She could more readily support a proposal for deletion of article 37 [became CISG article 39 ] as a whole than for the deletion of paragraph 1.

36. Mr. OSAH (Nigeria) supported the Ghanaian proposal for the deletion of article 37(1) [became CISG article 39(1) ]. If not deleted, the paragraph should be redrafted.

37. Mr. GHESTIN (France) opposed the proposal. It was essential to retain the requirement in paragraph 1 that a buyer should give notice as soon as possible after he discovered the lack of conformity.

38. Mr. BENNETT (Australia) and Mr. KRISPIS (Greece) were also opposed to the proposal.

39. The CHAIRMAN said that as a majority appeared not to favour the Ghanaian proposal to delete article 37(1) [became CISG article 39(1) ], he would, if there were no objection, consider the proposal rejected.

40. It was so agreed.

41. Mr. DATE-BAH (Ghana), introducing his alternative amendment (A/CONF.97/C.1/L.124, paragraph 2), explained that the proposal was intended to ensure that failure to give notice should not lead to the very drastic loss of remedy which an innocent party might suffer under the existing text.

42. Mr. WAITITU (Kenya) supported the proposal. The very rigorous sanction to which a buyer might be subjected under the existing text might discourage many countries from accepting the Convention. The sanction in question was not commonly known, and he urged the Committee to consider carefully whether it should rightly be the intention of the Conference to impose it.

43. Mr. FOKKEMA (Netherlands) did not find the proposal acceptable because an element of uncertainty would be introduced if the buyers waited too long before giving notice.

44. Mr. KIM (Korea) also found the proposal unacceptable. Article 37 [became CISG article 39 ] was not intended to deal with the consequences of failure to give notice within a certain period but to lay down the length of that period.

45. Mr. VISCHER (Switzerland) said he could not accept the Ghanaian proposal but pointed out that article 38 [became CISG article 40 ] might go some way towards meeting the Ghanaian representative's concern that over-strict sanctions might unduly penalize the buyer.

46. Mr. MEHDI (Pakistan) supported the proposal. It was surely not the intention to impose such extreme penalties on the buyer. The most that could be contemplated was to indicate that the buyer should compensate the seller for any loss or damage resulting from the failure to give notice envisaged in the article.

47. Mr. LI Chih-min (China) also supported the proposal. A buyer who failed to give notice to the seller in due time should not forfeit his right to rely on a lack of conformity of the goods. The Ghanaian proposal maintained a proper balance between the interests of the buyer and of the seller.

48. Mr. OSAH (Nigeria) said it would be unfortunate if the wording of article 37(1) [became CISG article 39(1) ] remained as it stood as it took away the buyer's right to remedy if notice were not given within a specific period. The question of uncertainty did not arise, since article 37(2) [became CISG article 39(2) ] stipulated a period of notice of two years.

49. Miss O'FLYN (United Kingdom) also supported the proposal. It seemed harsh to deprive the buyer of his right to damages based on non-conformity of goods merely because he had not given notice of that non-conformity within a reasonable time. Her support of the Ghana proposal did not mean that she was withdrawing her own delegation's proposal for the deletion of article 37(2) [became CISG article 39(2) ].

50. Mr. MANTILLA-MOLINA (Mexico) supported the Ghanaian proposal, which had the merit of being applicable both to perishable and non-perishable goods.

51. Mr. KHOO (Singapore) said article 37 [became CISG article 39 ] was one of the most controversial in the entire Convention. All would agree that the buyer should give notice of non-conformity, within a reasonable time, since otherwise the credibility of his claim might be questioned. The point on which the Committee was divided was what sanctions should be attached to failure to give notice in time. There was much to be said for the view that the sanction provided in the present text of the Convention was draconian. One possible solution was that suggested in the Ghanaian proposal, namely that failure to give notice should result in mitigation of damages. Another was that the buyer should be held responsible for any eventual loss to the seller. In any event, some alternative should be found to the present wording, which was too drastic.

52. Mr. HJERNER (Sweden) did not think the provision was as drastic as had been implied, since it had to be read in conjunction with article 38 [became CISG article 40 ], which provided for an exception to the rule. The Ghanaian proposal went too far. Reduction of damages was an unsatisfactory remedy, and was as hard on the seller as on the buyer. The main purpose of the rule was in fact to secure evidence in the case of dispute. If the seller were to establish the cause of the defects complained of, he would need to know of them at an early stage. It would not help him to know that at some later stage damages might be reduced. Furthermore, the Ghanaian proposal overlooked the duty of the seller to repair goods or to deliver substitute goods. If there were to be any restriction at all on the rule in article 37 [became CISG article 39 ] it should be along different lines. The Ghanaian representative might consider redrafting his proposal to take into account the points he had mentioned, and reintroduce it when article 38 [became CISG article 40 ] was discussed.

53. Mr. STALEV (Bulgaria) said that article 37(1) [became CISG article 39(1) ] gave the seller an opportunity of ascertaining whether there was a defect in the goods as claimed by the buyer at the moment of the passing of the risk. Experience in arbitration cases on liability for defects showed how difficult it was to establish whether goods were really defective at that decisive moment. Goods initially in perfect conformity with the contract were not uncommonly damaged subsequently through the negligence of the buyer or as a result of causes beyond the seller's control.

54. He might have been able to accept the Ghanaian amendment if it had been possible to know the real meaning of the "reduction of damages" proposed for failure to give notice within a reasonable time. He could not however visualize what the liability of the buyer for defects could be in the absence of due notice. He accordingly could not support the amendment.

55. Mr. TRÖNNING (Denmark) considered that the UNCITRAL text should be kept. It was essential that disputes regarding non-conformity should be settled quickly and therefore that buyers should give prompt notice if they discovered a lack of non-conformity. There was, however, a danger that in the absence of a severe sanction of the kind provided in article 37(1) [became CISG article 39(1) ], buyers would fail to give notice.

56. Under the Ghanaian proposal, the sanction would simply be a reduction in the damages that might possibly be due to the buyer. That sanction would not serve the purpose of settling the question of non-conformity as speedily was possible. A more severe sanction was required for that purpose.

57. The Ghanaian amendment would place the buyer in a favoured position. He would be able to speculate at the risk of the seller. If he found a lack of conformity, he could simply watch the market for the goods so as to keep them if the price rose. If the price fell, he would invoke non-conformity to avoid the contract and buy the goods he required more cheaply elsewhere.

58. Mr. TARKO (Austria) said that, under Austrian law, the time-limit for a buyer to give notice of non-conformity was eight days. Experience gained in court practice in Austria and other countries with similar rules showed that the provision was a good one. His delegation considered the two-year period specified in article 37(2) [became CISG article 39(2) ] unduly long, but was prepared to accept it as a compromise.

59. Mr. ELHURVI (Libyan Arab Jamahiriya) supported the Ghanaian proposal. His delegation would find it difficult to accept article 37 [became CISG article 39 ] as it stood because of the drastic sanction against the buyer for failure to give due notice of non-conformity.

60. Mr. BENNETT (Australia) said that he could not support the Ghanaian proposal. It was highly desirable that disputes arising out of claims of non-conformity should be settled with reasonable expedition and the obligation to give notice within a reasonable time was most important in that respect. The sanction for failure to give notice proposed by Ghana as an alternative to the sanction specified in article 37 [became CISG article 39 ] would be extremely difficult to administer by courts of law.

61. Mr. HOSOKAWA (Japan) remarked that he could understand the concern that had prompted the Ghanaian proposal but could not support the proposed new text because of the difficulties and uncertainties of its application to concrete cases. Adoption of the proposal would prevent the speedy settlement of disputes, which was of the utmost importance in international trade.

62. Mr. HERBER (Federal Republic of Germany) said that the provisions of article 37 [became CISG article 39 ] were crucial because one of the main difficulties in cases of non-conformity was to secure proof. Under article 37 [became CISG article 39 ], the buyer would lose his claim -- a very severe sanction -- if he did not notify the buyer of any defects known to him. For that purpose he had, however, a reasonable period of time which could amount to as much as two years -- a long period in commercial terms.

63. The alternative sanction proposed by Ghana could well prove to be too weak to ensure that the buyer made defects known to the seller as soon as possible in order to have them examined in time. The "mitigation of damages" formula would, to begin with, only work if there was a claim for damages. The seller would have to prove that he had sustained a loss as a result of the failure to notify. The mitigation system would thus actually come into play only in very rare cases.

64. It should be remembered moreover that the rule in article 37 [became CISG article 39 ] was not mandatory: the parties could always derogate from it in their contractual arrangements. It was a useful rule that could be easily administered and applied wherever the parties had not agreed on different arrangements.

65. The formula proposed by Ghana was contrary to the established usage in the matter and would thus render the future Convention less attractive to commercial circles, thereby diminishing the likelihood of its wide acceptance by Governments.

66. Mr. DABIN (Belgium) said that he shared the views of those who were unable to accept the Ghanaian amendment and noted that there were sound economic as well as legal arguments against its adoption.

67. Mr. SEVÓN (Finland) remarked that it would be desirable to find a compromise solution on such an important issue but felt it was virtually impossible to devise a formula capable of satisfying both the supporters and the opponents of the Ghanaian amendment.

68. Mr. OLIVENCIA RUIZ (Spain) defended the existing text of article 37(1) [became CISG article 39(1) ] which, in its reference to a reasonable period, provided the needed flexibility. Paragraph 2, for its part, specified a very long period of two years -- a formula which also made for flexibility.

69. Mr. DATE-BAH (Ghana) said that he was not wedded to the actual wording of his amendment. Provided the underlaying idea was retained, he could agree to replace the reference to a reduction of the damages by a formula more acceptable to the other representatives, such as a reference to a "financial sanction" that would replace the drastic sanction in the present text of article 37 [became CISG article 39 ].

70. Mr. KRISPIS (Greece) considered that it was not possible to vote on the amendment with such an important change made orally. A revised amendment should be submitted in writing.

71. After a discussion in which Mr. PLUNKETT (Ireland), Mr. HJERNER (Sweden), Mr. KHOO (Singapore), Mr. ROGNLIEN (Norway), Mr. DABIN (Belgium) and Mr. KRISPIS (Greece) took part, the CHAIRMAN, after seeking the views of members on the idea contained in the Ghanaian amendment, noted that there was a substantial majority against the principle of the amendment.

72. Mr. DATE-BAH (Ghana) said that, in the circumstances, no useful purpose would appear to be served in attempting to frame a revised version of his amendment (A/CONF.97/C.1/L.124). He accordingly withdrew it.

The meeting rose at 6 p.m.

Pace Law School Institute of International Commercial Law - Last updated January 29, 1999
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