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Source: Doc. B(1) Reproduced from UNCITRAL Yearbook VIII (1977), A/32/17, pages 25-64

EXCERPT FROM ANNEX I

Report of Committee of the Whole I relating to the
draft Convention on the International Sale of Goods

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CISG
number		 Art. 3

Article 3

37. The text of article 3, as adopted by the Working Group on the International Sale of Goods, is as follows:

"(1) This Convention does not apply to contracts in which the preponderant part of the obligations of the seller consists in the supply of labour or other services.
"(2) Contracts for the supply of goods to be manufactured or produced are to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production."

38. The Committee considered a proposal that article 3 be deleted and then considered proposals relating to paragraph (2).

Deletion of provision

39. The proposal to delete article 3 was based on the ground that the types of contract envisaged by the article fell outside the sphere of the sale of goods and that the article was therefore not appropriate in a Convention which regulated the obligations of the buyer and the seller. There was, however, a considerable body of opinion in favour of retaining article 3, particularly for the reason that the provision was useful for determining whether the Convention applied in borderline cases. It also provided a useful guideline for the courts of a number of common law countries which otherwise might assume that the Convention would apply. After deliberation, the Committee decided not to retain the proposal to delete article 3.

Paragraph (2)

40. The Committee, for the same reasons, did not retain a proposal that paragraph (2) be deleted.

41. The Committee also considered a proposal under which the words "a substantive part of the materials" were to be replaced by the words "materials or any part of them", so that, if any part of the materials were supplied by the buyer, the Convention would not apply. The proposal was based on the premise that it would not be equitable to make the seller responsible for conformity of the goods if some of the materials for the production of those goods were supplied by the buyer. In opposition to this proposal it was pointed out that the text provided a useful guideline for a number of legal systems. It was also noted that the provision followed article 6(2) of the Convention on the Limitation Period. After deliberation, the Committee decided to retain the original text.

Relationship of article 3(2) to seller's responsibility for defects

42. The Committee considered a proposal to amend article 3(2) to regulate the question of the seller's responsibility for the goods in cases where the buyer has supplied less than a "substantial part" of the materials. This proposal is discussed in paragraphs 179 to 184 of the report relating to article 19.

Decision

43. The Committee concludes that no change of substance is called for in respect of article 3. It therefore recommends that the Commission should adopt the following text:

"Article 3

"(1) This Convention does not apply to contracts in which the preponderant part of the obligations of the seller consists in the supply of labour or other services.
"(2) Contracts for the supply of goods to be manufactured or produced are to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production." [page 28]

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CISG
number		 Art. 3(2)

(ii) That the underscored words be added to article 3(2):

"(2) Contracts for the supply of goods to be manufactured or produced are to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production. If the buyer undertakes to supply less than a substantial part of those materials, this Convention applies to that supply as it would to a sale unless the circumstances indicate the contrary."

181. In support of the first proposal it was pointed out that even though the amount of material supplied by the buyer was not substantial, a defect in these materials might cause a major lack of conformity in the goods as produced by the seller. It was stated that the seller should be liable for any lack of conformity of goods produced by him caused by defects in materials supplied by the buyer but that this obligation should not be absolute. The seller should not be liable if the seller did not know or could not have been aware of such defects or if the buyer insisted on the use of those materials after notification of the defects in the materials supplied.

182. Under another view, the proposal was unnecessary since it dealt with a matter of minor importance and merely stated an obvious result.

183. The second proposal, which sought to achieve the same result by amending article 3(2), was met by the same criticisms that were directed against the first proposal. In addition, it was stated that the notion that the Convention applied to the supply of materials by the buyer to the seller "as it would to a sale unless the circumstances indicate the contrary" could raise difficulties of interpretation since the buyer would have to be treated as the seller and vice versa. Further, such a fictional contract, without a price, would cause difficulties in a number of legal systems.

184. Although there was considerable support for the general principle contained in these proposals the Committee, after extensive discussion centered on eliminating drafting difficulties, decided to reject both proposals. [page 38]

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Pace Law School Institute of International Commercial Law - Last updated July 13, 2007
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