Paragraph (e) (continued) (A/CONF.97/C.1/L.11, L.12)
5. Mr. OPALSKI (Poland) supported the Canadian proposal (A/CONF.97/C.1/L.11). The Convention was general enough in scope to permit deletion of the paragraph.
6. Mr. SEVÓN (Finland) also supported the proposal. To exclude such sales from the scope of the Convention would not be to leave them free from regulation, but would merely mean that they were covered by national legislation. It had been objected that application of the provisions of the Convention would cause difficulties with sales of ships, but he could not see that the position would be any more difficult than that which existed under national legislation. The question of registration, which had been held to be an obstacle, was in any case completely outside the seller/buyer relationship. If sales of ships, vessels and aircraft were to be excluded, the problem would arise of defining what kind of craft constituted a ship or a vessel.
7. Mr. STALEV (Bulgaria) supported the Canadian proposal for the reasons advanced by the representative of Finland.
8. Mr. MICCIO (Italy) preferred to keep the paragraph unchanged. The inclusion of ships had not been envisaged during the process of drafting the Convention. They were, moreover, covered by highly specialized legislation which varied from country to country and would be difficult to co-ordinate. Unlike the representative of Finland, he considered that registration was a vital element in such sales.
9. Mr. PREVEDOURAKIS (Greece) was also opposed to the proposal.
10. Mr. HERBER (Federal Republic of Germany) pointed out that contracts for sales of ships, being of a very special nature, might not comply with article 10 [became CISG article 11 ] of the Convention. In any event, sales of ships represented a fairly small category in comparison to the type of sale chiefly envisaged by the Convention. There was a danger that if they were included, some States might not ratify the Convention because of possible difficulties that might arise. He would therefore prefer to keep the paragraph.
11. Mr. EYZAGUIRRE (Chile) supported that view. Ships, vessels and aircraft were subject to specific public legislation covering such matters as flag and classification and were thus outside the scope of ordinary regulations governing the sale of goods.
12. Mr. MINAMI (Japan) was in favour of keeping paragraph (e). An important element in the sale of ships was registration of ownership, and the laws governing such registration varied from country to country. Sales of ships should be considered a different category from sales of ordinary goods.
13. Mr. MANTILLA-MOLINA (Mexico) also wished the paragraph to be kept. To include ships in the Convention would be inconsistent with the Convention on the Limitation Period in the International Sale of Goods, which excluded them.
14. Miss O'FLYNN (United Kingdom) said she would not be happy to see the paragraph deleted. It was rather late to propose such a radical change in the scope of the Convention by introducing a category of sales which had not been envisaged at all up to now. Under article 5 [became CISG article 6 ] parties to sales could exclude application of the Convention and in the view of her delegation the parties to a contract for the sale of ships would be likely to exclude the Convention. But in its view there was no reason why the Conference should seek to apply the Convention to such sales. Article 37(2) [became CISG article 39(2) ], in particular, would cause considerable difficulties where sales of ships were concerned.
15. Mr. SAMSON (Canada) said a number of speakers had objected to his proposal on grounds connected with national legislation. He felt, however, that those objections were met by articles 4 and 65 [became CISG article 4 and CISG article 79 ] of the Convention.
16. The CHAIRMAN, noting that opinion was divided on the Canadian proposal (A/CONF.97/C.1/L.11), invited the Committee to vote on it.
17. The Canadian proposal was rejected by 28 votes to 11, with 6 abstentions.
18. The CHAIRMAN invited comments on the Indian proposal (A/CONF.97/C.1/L.12).
19. Mr. ROGNLIEN (Norway) asked whether there was any specific legislation in India on sales of hovercraft.
20. Mr. KUCHIBHOTLA (India) said that there were special regulations covering hovercraft in his country, which was why he felt it desirable that such sales should be excluded from the scope of the Convention.
21. Mr. KHOO (Singapore) did not think it was necessary to mention hovercraft specifically. There was a danger that the provision would become unwieldy if it included too much detail and new types of vessel were introduced in the course of time. It would be better to leave it couched in terms broad enough to cover any future technological innovations.
22. Mr. ROGNLIEN (Norway) said that a specific reference to hovercraft would cause legal difficulties. He was therefore opposed to the Indian proposal.
23. Mr. FARNSWORTH (United States of America) agreed with the representatives of Norway and Singapore.
24. Mr. HERBER (Federal Republic of Germany) said that hovercraft were becoming increasingly important, and that preparations were in fact at present under way for the drafting of a convention on the law governing transport by hovercraft. Among lawyers, however, there was much discussion as to whether hovercraft were ships or aircraft. He therefore supported the Indian proposal, which would help to make the meaning of article 2(e) [became CISG article 2(e) ] clearer.
25. Mr. PREVEDOURAKIS (Greece) said that he entirely endorsed the remarks of the previous speaker and supported the Indian amendment.
26. The Indian amendment (A/CONF.97/C.1/L.12) was adopted by 15 votes to 12, with 17 abstentions.
27. Article 2 (e) [became CISG article 2(e) ], as amended, was adopted.
28. Article 2 (f) [became CISG article 2(f) ] was adopted.
29. Article 2 [became CISG article 2 ], as amended, was adopted.
30. Mr. KOPAC (Czechoslovakia) proposed that paragraph 1 should be deleted. In the everyday practice of international trade, a great many contracts contained stipulations for the supply of services and he saw no reason why contracts of that kind should be excluded from the scope of the Convention. Furthermore, the expression "preponderant part", as applied to the obligations of the "seller", was vague and might lead to differing interpretations in the application of the Convention. Lastly, it was perfectly clear that the draft Convention did not deal with the supply of labour or services but only with the sale of goods.
31. Miss O'FLYNN (United Kingdom) opposed the Czechoslovak proposal, considering that paragraph 1 embodied an exception which was desirable and should be kept.
32. Her delegation had proposed an amendment to paragraph 1 of article 3 [became CISG article 3 ], which had not yet been circulated. It simply reproduced the proposal already contained in the comments by her Government (A/CONF.97/8/Add.3, p. 11, section 1). For the reasons given in those comments, she proposed that the expression "preponderant part" should be replaced by the more precise formula "the major part in value".
33. Mr. REISHOFER (Austria) opposed the proposal to delete paragraph 1. In the practice of international trade, a contract was often of a mixed character and covered not only the supply of goods but also the supply of labour or services. If the preponderant or major part of the obligation of the "seller" was the supply of goods, then the whole contract should be covered by the future Convention. Contracts of that type would not, however, be covered if the Committee were to accept the proposal to drop paragraph 1.
34. Mr. ROGNLIEN (Norway) said that the significance of the proposed deletion would not be as drastic as the previous speaker had suggested. It would simply mean that the issue would be left to the national courts; it would be for the competent court in each case to decide whether a particular contract was to be designated a "sale of goods" or a "supply of labour (or services)".
35. In Norwegian law, there was no express provision to cover the mixed type of situation under discussion. It was felt, however, that a contract for the supply of services should be outside the scope of the Convention. He accordingly urged that paragraph 1 should be kept.
36. Mr. HERBER (Federal Republic of Germany) said that if paragraph 1 were omitted, there would be a risk of conflicting interpretations by the courts. He therefore urged that it should be kept with the clarification of language proposed by the United Kingdom.
37. Mr. FARNSWORTH (United States of America) said that he would not be in favour of referring the rewording proposed by the United Kingdom to the Drafting Committee, since he found it much too arbitrary. It would mean, for example, that a contract to paint a ceiling with gold leaf would be deemed to constitute a sale of goods, since at present prices the value of the gold would certainly be higher than the value of the labour or services.
38. Mr. SZÁSZ (Hungary) urged that paragraph 1 should be kept. Of course, even without it the courts would be able to decide whether a particular contract was preponderantly a sale of goods or not. The parties to the contract, however, would want to know the position at the time of concluding the contract itself rather than leave it to be decided, if need be, by the courts at a later stage.
39. Mr. DABIN (Belgium) said that he preferred to keep paragraph I but was not satisfied with its wording. In particular, he criticized the reference to the obligations of the "seller" in the context of a provision which specified that the contract in question was precisely not a contract of "sale". He accordingly suggested that the paragraph should be reworded so as to specify the draft Convention did not apply to contracts in which the supply of goods was accessory to other services of the party upon which that obligation fell.
40. Mr. MANTILLA-MOLINA (Mexico) felt that it was essential to keep paragraph 1. He agreed, however, on the need to improve the wording; for that purpose, the United Kingdom proposal would be useful, but it would also be necessary to remove the reference to the obligations of the "seller" from a text which specifically excluded the contracts under reference from the scope of the term "contract of sale"
41. The CHAIRMAN noted that there was a majority in favour of keeping paragraph 1. If there were no objections, he would therefore take it that the Committee rejected the Czechoslovak proposal.
42. It was so agreed.
43. The meeting was suspended at 4.30 p.m. and resumed at 4.50 p.m.
44. Mr. PLANTARD (France), introducing his delegation's amendment to paragraph 2 (A/CONF.97/C.1/L.9), said that it was of a purely drafting character and suggested that, if there was no objection, it should be referred to the Drafting Committee without discussion.
45. Mr. FARNSWORTH (United States of America) reiterated his delegation's opposition to the United Kingdom amendment to paragraph 1. His delegation was also unhappy with the Belgian proposal, with its reference to an "accessory" part of the obligations of the seller, which was not quite clear in English and would broaden the scope of the law. Under that proposal, as under the United Kingdom proposal, some contracts for the supply of services would be treated as a sale of goods simply because the materials used in the process were very expensive.
46. Before any proposals were referred to the Drafting Committee, the First Committee itself should decide whether it wished to broaden, or else to narrow down, the scope of the provision under discussion. In the absence of any clear instructions from the Committee on that point, the Drafting Committee would be unable to take any constructive action.
47. Mr. MATHANJUKI (Kenya), said that he found a difference of substance, and not merely of form, between the original text of paragraph 2 and the French amendment, which placed emphasis on performance rather than on the undertaking to perform. He did not believe that the Drafting Committee was empowered to deal with such a question of substance, which should be settled by the First Committee itself.
48. Mr. SEVÓN (Finland) opposed the United Kingdom proposal, which raised an issue of substance and not merely of drafting. Under that proposal 51 per cent of the value of a contract would decide the nature of that contract. The existing text was not so rigid.
49. Mr. SHAFIK (Egypt) supported the French proposal (A/CONF.97/C.1/L.9), which would improve the wording without affecting the substance in any way.
50. Mr. HJERNER (Sweden) said that his delegation was not altogether satisfied with the wording of paragraph 1, particularly with the adjective "preponderant". He could not, however, support the United Kingdom proposal because it made value the decisive factor.
51. Mr. PLUNKETT (Ireland) felt that the Committee ought to be clear as to the purpose of paragraph 1. As he saw it, the intention was to say that if the substantial purpose of a contract was to sell goods, then the contract would be covered by the Convention. If the Committee could agree on that, the article could be referred to the Drafting Committee.
52. Mr. PLANTARD (France) said that he would strongly favour referring paragraph 1 to the Drafting Committee for redrafting, particularly on the lines suggested by the Belgian delegation.
53. Mr. TRÖNNING (Denmark) was in favour of keeping the wording "preponderant part", which made for flexibility.
54. Miss O'FLYNN (United Kingdom) said that in view of the lack of support for her delegation's proposal, she would withdraw it.
55. Mr. EYZAGUIRRE (Chile), noting that the French amendment to paragraph 2 (A/CONF.97/C.1/L.9) was merely a matter of drafting, said that in Spanish he preferred the original text.
56. Mr. ROGNLIEN (Norway), introducing his delegation's amendment to paragraph 2 (A/CONF.97/C.1/L.13), said that there might be considerable differences of opinion as to the exact proportion which would constitute "a substantial part" of the materials the prospective buyer undertook to supply. The paragraph should be made more precise. The easiest way was to consider instead what the prospective seller, the party who took the order, undertook to do. The word "substantial" in his amendment might be replaced by "major", indicating that the proportion must be over 50 per cent.
57. Mr. HJERNER (Sweden) said that the French proposal was a drafting matter.
58. The Norwegian proposal appeared to be a slight improvement on the original text. Whether or not it involved a change of substance depended upon the intended meaning of the word "substantial" in the original text. A small part might well be "substantial" in the sense of essential, and the transaction involving it would therefore constitute a sale of goods under the Convention. He could support the Norwegian amendment without the change the Norwegian representative had proposed orally.
59. Mr. MEYER (Netherlands) said that although it was difficult to foresee what the practical effect of the Norwegian proposal might be, it was clear that in theory the difference of approach constituted a substantive change. In his view, the transaction would remain a contract for the sale of goods if a small part was supplied which was a key part.
60. Miss O'FLYNN (United Kingdom) said that her delegation could support both the French proposal and the Norwegian proposal as orally revised.
61. Mr. ROGNLIEN (Norway) said that whether or not his amendment constituted a change in substance depended upon the interpretation of the original text, which was ambiguous.
62. Mr. BENNETT (Australia) expressed his concern at the Norwegian proposal, particularly the change from "a substantial part" to "the substantial part", which raised the question of the exact proportion involved. Basically, the problem was the same as in paragraph 1.
63. Mr. TRÖNNING (Denmark) agreed that paragraph 2 should be precise, although he had expressed the opposite view with regard to paragraph 1. The difference was that paragraph 1 was concerned with the proportion between labour and goods; that was difficult to determine and the text should therefore be flexible. Paragraph 2, on the other hand, dealt solely with goods, for which the comparison was easier.
64. Mr. HERBER (Federal Republic of Germany) said that the main problem appeared to be differences of interpretation of the term "substantial part", which appeared in both the original text and the Norwegian proposal. His delegation had not previously held the view that it must necessarily imply over 50 per cent. If the original text was unclear, his delegation could support the Norwegian proposal.
65. The French proposal did not appear to differ greatly from the original text, except for the change from "undertakes to supply" to "supplies". "Undertakes" suggested a commitment at the time of entering into the contract or under the terms of the contract. It might be useful if a small group looked into the matter.
66. The CHAIRMAN suggested that a working group should be set up, composed of the representatives of Belgium, France, Hungary, Kenya, Mexico, Norway and the United States of America, to consider whether the Belgian proposal for paragraph 1 was a matter of drafting; whether in paragraph 2 an "essential part" was the same as a "substantial part"; whether that paragraph should be re-formulated along the lines of the Norwegian proposal or whether the original draft should be kept, perhaps improved by the French proposal; and what was the most appropriate order of the paragraphs.
67. It was so agreed.
68. Miss O'FLYNN (United Kingdom), introducing her delegation's amendment to paragraph 2 (A/CONF.97/C.1/L.26), said that the effect would be to exclude contracts for the supply of goods from the scope of the Convention if the party who ordered them undertook to provide the "knowhow" necessary for their production or manufacture.
69. The CHAIRMAN inquired whether the working group should be requested to consider the United Kingdom proposal.
70. Mr. SHAFIK (Egypt) suggested that the representative of the United Kingdom should be added to the working group.
71. Mr. PLANTARD (France) said that, as a member of the working group, he would be reluctant to see it consider the United Kingdom proposal, which would exclude from the scope of the Convention a category of contracts which were economically important, particularly to developing countries. The French proposal, by referring to "materials", made it clear that a party supplying expertise would still be subject to the Convention. In general, his country's attitude was that the scope of the Convention should be as wide as possible. The United Kingdom's proposal required more thought, but his first reaction was unfavourable.
72. Mr. HJERNER (Sweden) said there was merit in the United Kingdom proposal, although perhaps it went too far. It was doubtful, however, whether its proper place was in paragraph 2 of article 3 [became CISG article 3 ] rather than in an enlarged paragraph 1. The working group might consider the point.
73. Mr. SEVÓN (Finland) said he was not aware of any national legislation which restricted the definition of contracts for the sale of goods on the basis proposed by the United Kingdom. The amendment would remove from the scope of the Convention transactions involving, for example, instructions for making chemicals, specifications for machinery and designs for clothes. There would be very little left, and he was completely opposed to the idea.
74. Mr. SZÁSZ (Hungary), endorsing the views expressed by the Finnish and French representatives, said that he was against the proposal, which would narrow down the scope of the Convention very greatly, but that he would be prepared to discuss it in the working group.
75. Mr. MICCIO (Italy) said that he was in favour of setting up the working group, but that it should not attempt to discuss substantive proposals such as that of the United Kingdom.
76. Mr. HERBER (Federal Republic of Germany) said that it would be difficult to judge the merits of the United Kingdom proposal without considerable reflection, so that it could not be dealt with by the working group. If the buyer of the goods provided "knowhow" for their manufacture which subsequently turned out to be incorrect or inadequate, that might well alter the respective rights and duties of parties under the Convention, but the conclusion should not necessarily be that the entire Convention was inapplicable. Furthermore, he would ask the United Kingdom delegation how its proposal would affect the common case in which both parties to the contract provided technical knowhow.
77. With regard to the Norwegian proposal, he thought that the change in standpoint from buyer to seller made a considerable difference.
78. Mr. MEDVEDEV (Union of Soviet Socialist Republics) said that proposals could be referred to the working group only if there were no questions of substance involved. Such was not the case with the United Kingdom proposal, to which his first reaction was negative. If parties to a contract considered that the supply of specific information or other conditions made it impossible to apply the rules of the Convention, it was open to them to come to an agreement to that effect. There was no need to modify the Convention itself.
79. Mr. FOKKEMA (Netherlands) said he was against the United Kingdom proposal because it narrowed down the Convention's field of application. However, the Norwegian proposal might have the same effect because the change in approach made the rule the exception and the exception the rule. It would be better to keep the approach of the original draft.
80. Mr. KUCHIBHOTLA (India), opposing the United Kingdom amendment, said it dealt with an issue unconnected with article 3. The original text should be kept.
81. The CHAIRMAN suggested that the working group should keep to its original mandate and that after it had completed its work, the Committee should take a decision on the United Kingdom proposal.
82. It was so agreed.