1. The CHAIRMAN said that the Committee had still to reach a decision on the proposal by the ad hoc working group (A/CONF.97/C.1/L.243) regarding article 65(2) [became CISG article 79(2) ]. The group had proposed two solutions: variant I, a version close to the existing text, and variant II, deletion of the paragraph.
2. Mr. SCHLECHTRIEM (Federal Republic of Germany) said that he was not entirely clear as to the significance of variant I. According to the explanation given by the Swedish representative at an earlier meeting, it would appear that the new version would substantially broaden the scope of the provision. He therefore felt unable to support it.
3. Mr. VENKATASUBRAMANYAN (India) said that he would prefer to delete the paragraph. It should be open to the seller, in a case in which reliance had to be placed on a single subcontractor, to make appropriate arrangements. However, he could not support a general provision whereby the seller would escape liability if the subcontractor to whom he had entrusted the performance of the contract was prevented from performing it, even though there might be alternative ways in which the seller could have the contract performed.
4. Mr. BENNETT (Australia) said he favoured variant I, which made the position clear. The existing text of article 65(2) [became CISG article 79(2) ] was somewhat ambiguous, and might be interpreted as allowing exemption in circumstances which should not warrant it.
5. Mr. EYZAGUIRRE (Chile) said he also supported variant I, which did not substantially change the sense of the existing text.
6. Mr. ROGNLIEN (Norway) pointed out that article 65(2) [became CISG article 79(2) ] limited exemption from liability, and hence enlarged the liability. If the provision were deleted, it would mean that the liability of the failing party was less than if it were retained. That point should be borne in mind if the proposal for deletion were put to the vote.
7. Mr. ZIEGEL (Canada) said that the discussions of the amendment hinged on the meaning of the word "impediment" in article 65(1) [became CISG article 79(1) ]. If that were to be construed as including impediments due to the failure of a subcontractor or other third party to perform subportions of the contract, then a provision such as paragraph 2 was necessary to circumscribe what would otherwise be an open-ended defence for the principal contracting party.
8. It had become clear from the lengthy discussion that had taken place in the UNCITRAL Working Group that different legal systems had different concepts of the role of the defence of impediment, and the problem was thus a complex one. However, if it was to be assumed that the basis of the defence in question was the concept of an impediment beyond the control of the contracting party, then it would be logical to add a paragraph to make it clear that what was involved was the failure of the subcontracting party to carry out that part of the contract entrusted to him.
9. He thus accepted the amendment in principle, but suggested that the Drafting Committee might be asked to replace the phrase "for the performance of the whole or a part of the contract" by "to perform the whole or a part of the contract".
10. Mr. HONNOLD (United States of America) agreed that the amendment was important to add clarity to the provision. As currently worded, it could be construed as giving too wide an exemption from responsibility when performance had not been in accordance with the contract.
11. It was necessary to appreciate the importance of the concept of "impediment" in paragraph 1 in order to appreciate the significance of the wording of paragraph 2. In ULIS (1964) exemption could be based on a "condition" over which the party had no control. In UNCITRAL it was felt that the language was open to too broad an interpretation and might apply where a seller supplied defective goods but could not be proved to have been at fault. To avoid that construction, it had been decided to replace "circumstance" by the concept of "impediment". That concept implied that the seller was not to be held free of responsibility for defects in the goods he supplied, even if he had not been at fault in regard to his own manufacturing processes. It was also understood that, even under article 65(1) [became CISG article 79(1) ], there would be no "impediment" if a seller instead of doing the manufacturing himself, bought goods from a supplier and those goods proved defective.
12. That was a sound result because, if the seller was responsible for the defect, he had a recourse action to recover his loss from the supplier, a recourse which the ultimate buyer might not have. Because it had been felt that that was not spelt out clearly enough in article 65(1) [became CISG article 79(1) ], article 65(2) [became CISG article 79(2) ] had been drafted to avoid any possible ambiguity.
13. In view of the complexity of the subject and the language problems it involved, he thought it essential that the revised text of article 65(2) [became CISG article 79(2) ] should be entirely clear as to the scope of the exemption from liability, lest it should be construed as being more broad than intended.
14. Mr. NICHOLAS (United Kingdom) said he was disturbed that some people should have received the impression that the article could provide a defence for a seller who had supplied goods with a latent defect; that had certainly not been the intention of those who had drafted the provision.
15. He agreed with the Indian representative that the deletion of paragraph 2 would weaken the position of the buyer vis-à-vis the seller. That was precisely the result which the working group had intended to avoid by including paragraph 2, and he considered it would be deplorable if the paragraph were deleted.
16. Mr. KRISPIS (Greece) said he considered that the amendment proposed for a revised article 65(2) [became CISG article 79(2) ] was already covered by the existing article 65(1) [became CISG article 79(1) ]; nevertheless, it would be as well to retain such a provision in order to exclude any possibility of doubt.
17. As currently worded, however, both versions of the paragraph gave the impression that non-exemption was the rule and exemption was the exception. It was important in legal provisions to make it clear which was in fact the rule and which the exception since, in cases of doubt, it was the rule which was taken to be applicable. He would thus prefer the following wording: "However, the failure of a third person whom a party has engaged for the performance of a whole or part of the contract exempts that party from liability if the said third person . . ." etc.
18. Mr. WIDMER (Switzerland) said that, even after the comments by the Greek representative, he feared that the provision would still be liable to misinterpretation by persons who had not followed the current discussion. In principle, the contents of paragraph 2 were already covered by paragraph 1, and the best solution would thus be to delete paragraph 2 for the sake of greater clarity.
19. Mr. OSAH (Nigeria) said that deletion of paragraph 2 would not solve the problem. The existing article 65(2) [became CISG article 79(2) ] tended to make exemption available only to the seller, since there was no reference to, for example, such impediments as force majeure or government action which might prevent the buyer from fulfilling his obligations under the contract. Such impediments, particularly in developing countries, could have serious effects and should be regarded as beyond the expectation or control of the buyer. He therefore supported variant I.
20. Mr. MANTILLA-MOLINA (Mexico) said that, as had already been pointed out, the concept underlying the proposed paragraph 2 was contained in paragraph 1. He felt that the proposed amendment would not clarify the issue but rather confuse it and that such a wording was a positive invitation to a breach of contract. It would be a great mistake to include such a provision, which should be deleted.
21. Mr. GREGOIRE (France) said that the prolonged and somewhat confused discussion which had taken place had obviously stemmed from a misunderstanding due to faulty drafting. The resultant ambiguity had led many speakers to interpret the revised text of article 65(2) [became CISG article 79(2) ] as meaning precisely the opposite of what the working group had intended. He felt that he could put forward, at least for the French text, a better form of words that would satisfy the vast majority of delegations.
22. In reply to a question by Mr. INAAMULLAH (Pakistan), Mr. DATE-BAH (Ghana) explained that the third person who was engaged for the performance of the whole or a part of the contract need not be mentioned expressly, or even indicated impliedly in the contract itself.
23. Mr. MASKOW (German Democratic Republic) said he supported variant II of the joint proposal, namely deletion of paragraph 2. No convincing reason had been put forward during the discussion to justify making a difference between the normal supplier, who was subject to the provisions of article 65(1) [became CISG article 79(1) ], and a person engaged to perform the whole or a part of the contract, who was dealt with in article 65(2) [became CISG article 79(2) ]. There were cases in practice in which subsuppliers were even more important than persons engaged to perform the whole or a part of the contract.
24. His delegation could see no justification for making a different assessment of the obligations of a party in those two cases and thought that the rule in article 65(1) [became CISG article 79(1) ] should apply in all cases.
25. Mrs. FERRARO (Italy) said that she was unable to support variant I of the joint proposal. As the Ghanaian representative had just explained, the third party in question might not even be mentioned in the contract. It was unacceptable that the aggrieved party in a case of failure to perform should be placed in the position of having to introduce legal proceedings against a totally unknown person.
26. The principle to be applied in the matter was that, where a third party was selected solely by the party engaging him, that party to the contract was responsible for the acts of the third party. Liability for the conduct of the third party would cease to apply only if the third party had been selected by the aggrieved party.
27. In reply to a question by Mr. LEBEDEV (Union of Soviet Socialist Republics), the CHAIRMAN explained that variant I would be voted on with the addition of the word "also" at the end of the third line of the English text as it appeared in document A/CONF.97/C.1/L.243.
28. Mr. HJERNER (Sweden) said that, at a previous meeting, the Committee had already rejected a proposal to delete paragraph 2 of article 65 [became CISG article 79 ]. Following that vote, it had set up the five-member ad hoc working group for the sole purpose of clarifying the text of the paragraph. In his view, therefore, the ad hoc working group's variant II could not be put to the vote, since it simply proposed the deletion of paragraph 2, a proposal that had already been rejected by the Committee.
29. Following a brief procedural discussion in which Mr. ROGNLIEN (Norway) and Mr. DATE-BAH(Ghana) took part, the CHAIRMAN put to the Committee the procedural issue as to whether it would be in order to take a vote on variant II in document A/CONF.97/C.1/L.243.
30. Having noted that the Committee had decided in the affirmative by a large majority, he invited it to vote on variant II of the working group's proposal, namely the deletion of paragraph 2 of article 65 [became CISG article 79 ].
31. Variant II of the proposal was rejected by 23 votes to 22.
32. In reply to a question by Mr. MATHANJUKI (Kenya), Mr. ZIEGEL (Canada) explained that his subamendment to replace in variant I the words "for the performance of" by the shorter formula "to perform" was a mere drafting proposal which could, he understood, be considered by the Drafting Committee.
33. In reply to a question by Mr. DABIN (Belgium), the CHAIRMAN said that, if the Committee adopted the text appearing in variant I of the joint proposal, the Drafting Committee would take into account the Canadian drafting subamendment and, with regard to the French version of the text, the comments by the representative of France.
34. Mr. HJERNER (Sweden) said that the Canadian subamendment to the text in variant I was not a mere drafting proposal. The ad hoc working group had intentionally made use of the formula "for the performance of" in the original (English) text. The French text did not correspond to the original and should be brought into line with it.
35. In reply to a question by Mr. PLANTARD (France), the CHAIRMAN explained that, if the text in variant I was rejected, the Committee would thereby decide to retain the existing text of article 65(2) [became CISG article 79(2) ].
36. He invited the Committee to vote on variant I of the working group's proposal (A/CONF.97/C.l/L.243).
37. Variant I of the Proposal was rejected by 21 votes to 16.
38. The CHAIRMAN invited the Committee to consider the joint proposal by the Federal Republic of Germany, Ghana, Greece, Norway, Turkey and the United Kingdom (A/CONF.97/C.1 /L.221) for a revised text of article 60(2) [became CISG article 64(2) ].
39. Mr. ROGNLIEN (Norway), introducing the joint proposal, said that, when the Committee had discussed article 60 [became CISG article 64 ] at a previous meeting, there had been widespread dissatisfaction with the wording of its paragraph 2. As for its substance, the prevailing view during the discussion had been that the seller should be able to declare the contract avoided if the buyer had not taken delivery of the goods, even after the latter had already paid the price.
40. In order to clarify the meaning of the provision, the sponsors proposed that the paragraph should be reworded in such a way as to divide into two separate subparagraphs the contents of the existing subparagraph a. The proposed new subparagraph a would deal exclusively with the question of late payment by the buyer, while the new subparagraph b would cover cases of late performance other than late payment of the price.
41. Lastly, the former subparagraph b would become a new subparagraph c, with some purely drafting changes.
42. In reply to a question by Mr. MINAMI (Japan), Mr. ROGNLIEN (Norway) said that it had not been the sponsors' intention to make any change of substance in the provisions of the former subparagraph b. They were able to agree that the concluding words of the new subparagraph c should be brought into line with those of article 45(2)(a) [became CISG article 49(2)(a) ].
43. Mr. SEVÓN (Finland) said that the question put to the sponsors by the representative of Japan involved an issue of substance.
44. Mr. STALEV (Bulgaria) said that he could not support the joint proposal to reword article 60(2) [became CISG article 64(2) ]. The formula proposed made the text of the paragraph more complex and more casuistic; it was bound to cause difficulties, particularly in relation to article 45 [became CISG article 49 ], which the Committee had already adopted.
45. In reply to a question by Mr. WAGNER (German Democratic Republic), Mr. ROGNLIEN (Norway) explained that late payment, which was covered by the new subparagraph a, was a part of late performance, the remainder of which was covered by the new subparagraph b.
46. In reply to a question by Mr. PLANTARD (France), Mr. ROGNLIEN (Norway) explained that the new subparagraph c was simply the former subparagraph b with a new letter. Since no change of substance was intended, he suggested that the contents of the subparagraph and the text of the original subparagraph b should be referred to the Drafting Committee, with instructions that the provision was to be brought into line with article 45 [became CISG article 49 ], as adopted by the Committee.
47. The CHAIRMAN said that, if there were no further comments on that point, he would take it that the concluding subparagraph of article 65(2) [became CISG article 79(2) ] was to be referred to the Drafting Committee in the manner proposed by the Norwegian representative.
48. It was so agreed.
49. The CHAIRMAN said that there remained only the question of the proposed subdivision of the former subparagraph a into two new subparagraphs, a and b,dealing with late payment and with late performance other than late payment respectively. He put to the vote the joint proposal to that effect.50. The joint proposal was rejected by 20 votes to 19.
The meeting was suspended at 11.25 a.m. and resumed at 11.45 a.m.
51. Mr. BOGGIANO (Argentina) said that the representative of Singapore had participated in the work of the ad hoc working group in addition to the representatives of the countries listed in the heading of the draft proposal (A/CONF.97/C.1/L.246).
52. The proposed amendment to article 77(1) [became CISG article 88(1) ] consisted of two parts, the first of which was the addition of a reference to paying the price, as well as to the cost of preservation, in order to bring the paragraph into line with the amendment to article 74 [became CISG article 85 ] which had been adopted.
53. The second part of the amendment, which had been decided upon after a prolonged discussion of various alternatives as being the one most likely to meet with general acceptance, was the addition of the word "reasonable" before "notice" in the last phrase of the paragraph. The existing text contained no reference to the time or nature of the notice to be given, and might be deemed to cover a very short notice indeed.
54. The danger of such a wording was that the party bound to preserve the goods might decide unilaterally that the delay in taking possession of them was unreasonable, notify his intention to sell and then do so immediately, the other party thus being faced with a fait accompli. The amendment, however, stipulated that reasonable notice of the intention to sell must be given so as to to enable the party which would suffer the consequences of the sale to react accordingly, a last recourse that should be preserved for that party.
55. Moreover, it had also been pointed out that such a sale could give rise to uncertainties concerning its validity and the title of the new owner of the goods and, while such considerations did not of course enter into the contract proper and thus did not need to be covered by the Convention, it would be wise to prevent such difficulties from arising by giving the other party an opportunity to prevent the sale.
56. Another possible situation was that of a buyer who had received the goods but intended to reject them for lack of conformity under article 75 [became CISG article 86 ] and subsequently decided that he was entitled to sell them. Such a sale could make it difficult to examine the goods and determine whether or not they conformed to the contract. That was another reason why the other party should be given the opportunity to prevent the sale, even at the last moment, although such a situation was also covered by the principles of contractual good faith.
57. With the slight change proposed in the amendment, however, paragraph 1 would safeguard the commercial interests of both buyer and seller or, more specifically, those of the party who was bound to preserve the goods and those of the party who should have taken action concerning them.
58. Mr. KRISPIS (Greece) said that he preferred the existing wording because the word "reasonable" might be interpreted as referring to the content of the notice rather than to the time at which it was given.
59. Mr. VINDING KRUSE (Denmark) said that the wording should be more specific. He suggested the expression "notice of a reasonable length".
60. Mr. ZIEGEL (Canada) reiterated the comment he had made at the Committee's 31st meeting that the word "notice" in the existing text implied notice of a reasonable length and that double delay would not necessarily result. It would be for the courts to determine whether or not reasonable time had been given to the other party, a conclusion that would largely depend on the circumstances of the case.
61. Mr. MATHANJUKI (Kenya) said that his delegation had difficulty in agreeing to the proposal, mainly because it extended the seller's right to sell the goods when the buyer had delayed taking possession. The seller already had the right to declare the contract avoided under article 60 [became CISG article 64 ] or to claim for damages under article 70 [became CISG article 74 ]. Any extension of those rights would merely complicate the Convention.
62. He had no objection to the word "reasonable" because he assumed that the first party would allow for the time it would take for his notice to reach the other party.
63. Mr. SAMI (Iraq) said that the amendment might complicate the matter still further since it could be interpreted in various ways. He considered the existing text to be perfectly clear and understood that the notice of intention to sell would be given after the unreasonable delay and before the party bound to preserve the goods took steps to sell them, so that the other party would have time to fulfill his obligations and thus avoid the sale.
64. Mr. ROGNLIEN (Norway) doubted whether the word "reasonable" was really necessary, since the principle of good faith enunciated in article 6 [became CISG article 7 ] would favour that interpretation of the existing text. It might be better if, instead of referring to "reasonable notice", the amendment added to the end of the sentence the phrase "a reasonable time in advance".
65. Mr. GREGOIRE (France) said that the discussion appeared to revolve around the English text of the amendment. There was no problem with the French text which spoke of "dans des conditions raisonnables".
66. Mr. SCHLECHTRIEM (Federal Republic of Germany) said that, since the amendment also included the addition of the words "the price or" which was necessitated by the amendment to the text of article 74 [became CISG article 85 ] [see A/CONF.97/C.1/SR.30, paras. 79-83 ], he suggested that the two parts of the amendment should be put to the vote separately.
67. Mr. WIDMER (Switzerland) said that, for the sake of reaching a consensus, he would agree to the addition of yet another "reasonable" to the text of the draft Convention.
68. Mr. STALEV (Bulgaria) said he could not support the amendment because it would not be possible to give the other party reasonable notice of intention to sell in the case of goods which, owing to defects, deteriorated very rapidly.
69. Mr. BOGGIANO (Argentina) said that the idea of the ad hoc working group was more effectively conveyed in the Spanish text by the phrase "con antelación razonable". Many of the objections that had been voiced appeared to be due to the unsatisfactory nature of the English text which would have to be improved by the Drafting Committee.
70. In response to the point made by the Bulgarian representative, he said that paragraph 2 of article 77 [became CISG article 88 ] would apply in the case of perishable goods.
71. The CHAIRMAN asked whether the Committee wished to add to the text of article 77 [became CISG article 88 ] the words "the price or", as a consequential amendment to the amendment of article 74 [became CISG article 85 ].
72. It was so decided.
73. The CHAIRMAN invited the Committee to vote on the principle underlying the reference to "reasonable notice", on the understanding that, if the amendment were adopted, the text in all languages would be brought into line by the Drafting Committee.
74. The amendment to article 77 [became CISG article 88 ] (A/CONF.97/C.1/L.246) was accepted by 23 votes to 15.
75. The CHAIRMAN said that the delegation of Canada wished to submit an amendment (A/CONF.97/C.1/L.239) to article 66 [became CISG article 81 ], which the Committee had already adopted. According to rule 32 of the rules of procedure, such a course required approval by a two thirds majority of the representatives present and voting. He would therefore ask the Canadian representative to explain his proposal.
76. Mr. ZIEGEL (Canada), introducing his delegation's draft amendment to article 66 [became CISG article 81 ](A/CONF.97/C.1/L.239), said that under Canadian law, as was also the case in other common law countries, once the goods had been delivered and title was deemed to have passed to the buyer, it would be too late to seek the return of the goods. It was therefore the invariable practice in such countries for the seller to take the necessary steps to reserve his title to goods.
77. The application of article 66 [became CISG article 81 ] as it stood would bring about a fundamental change in the situation. That might not be a matter of grave concern in so far as it related merely to the respective rights of buyer and seller, but it appeared that article 66 [became CISG article 81 ] would also encompass the possibility of the buyer's bankruptcy and other situations involving the rights of third parties. In such cases, therefore, it would be difficult to reconcile the article with domestic legislation. The latter could of course be amended, but in federal countries such as Canada, where jurisdiction was divided between the constituents, that was not an easy task. His delegation therefore proposed the addition of another paragraph to article 66 [became CISG article 81 ] in order to make it clear that it was not intended that the seller's rights should interfere with those of third parties or creditors in the event of the buyer's bankruptcy. There were two alternative texts, but their aim was identical.
78. The CHAIRMAN, speaking as the representative of Austria, said he did not think that the problem was peculiar to common law countries. The question of bankruptcy was a complex one in all legal systems and there were different schools of thought about the best way to decide the order of priority among creditors even under the same legal system. Furthermore, the problem did not affect sales only. In any case, article 4(b) of the draft Convention [became CISG article 4(b) ] made it clear that such matters fell outside its scope. The Canadian amendment was too simple to provide a satisfactory solution in all cases.
79. Mr. KOPAC (Czechoslovakia) concurred.
80. Mr. SHAFIK (Egypt) said that the matter should be kept outside the Convention. Under Egyptian domestic law, the seller in such a case would lose not only his right to restitution of the goods but also his right to damages.
81. Mr. ZIEGEL (Canada) said that he would not insist on a vote being taken on whether or not article 66 [became CISG article 81 ] should be reconsidered.
82. He did not feel that the Chairman's explanation entirely resolved the difficulty, since the seller's right of restitution might be interpreted as a right in rem and not merely as giving him the status of a preferred creditor in the event of bankruptcy.
83. Mr. FOKKEMA (Netherlands) said he wondered whether the use throughout the draft Convention of the phrase "avoidance of contract" was a happy choice. It appeared that lawyers from common law countries had far less difficulty with the phrase "discharge by breach". The attention of the Drafting Committee might, perhaps, be drawn to the matter.
84. The CHAIRMAN said that it might be regarded as rather late in the day to change a key phrase in the draft Convention.
85. The CHAIRMAN said that there had also been a request to reconsider article 72 [became CISG article 76 ] under article 32 of the rules of procedure. He asked the sponsors of the amendment (A/CONF.97/C.1/L.245) to explain their proposal, after which the request would be put to the vote.
86. Mr. BENNETT (Australia), introducing the amendment to article 72 [became CISG article 76 ] on behalf of the delegations of Greece, Norway, Republic of Korea and his own delegation. said that, during the previous discussions of paragraph 1 of the article [see A/CONF.97/C.1/SR.30, paras. 28-54], some delegations had thought that the time citerion was much too vague and would have the undesirable effect of encouraging parties to resort to precipitate action to declare contracts avoided. The amendment proposed to fix the time as that of actual avoidance but, in view of the undesirability of encouraging delay for reasons of speculation, it also included a final sentence about the current price to be applied in such a situation.
87. There were 21 votes in favour of reconsidering article 72 [became CISG article 76 ] and 14 against. Having failed to obtain the required two-thirds majority, the proposal was not adopted.