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GUIDE TO ARTICLE 29

Use of the UNIDROIT Principles to help interpret CISG Article 29


Match-up of CISG Article 29 with counterpart provisions of UNIDROIT Principles

UNIDROIT Principles
Article 3.2 - Validity of mere Agreement

CISG
Article 29

A contract is concluded, modified or terminated by the mere agreement of the parties, without any further requirements.

Article 2.17 - Merger Clause

A contract in writing which contains a clause indicating that the writing completely embodies the terms on which the parties have agreed cannot be contradicted or supplemented by evidence of prior statements or agreements. However, such statements or agreements may be used to interpret the writing.

1. A contract may be modified or terminated by the mere agreement of the parties.

2. A contract in writing which contains a provision requiring any modification or termination by agreement to be in writing may not be otherwise modified or terminated by agreement. However, a party may be precluded by his conduct from asserting such a provision to the extent that the other party has relied on that conduct.

Article 2.18 - Written Modification Clause

A contract in writing which contains a clause requiring any modification or termination by agreement to be in writing may not be otherwise modified or terminated. However, a party may be precluded by its conduct from asserting such a clause to the extent that the other party has acted in reliance on that conduct.

[The UNIDROIT articles displayed above are to be read in conjunction with the Official Comments on them as "the comments on the articles are to be seen as an integral part of the Principles" (UNIDROIT).]


To examine CISG provisions displayed above in their context, go to the full text of the CISG || To examine UNIDROIT Principles displayed above in their context, go to the full text of the UNIDROIT Principles


Editorial remarks

Remarks on the manner in which the UNIDROIT
Principles of International Commercial Contracts may
be used to interpret or supplement Article 29 of the CISG

Sieg Eiselen [*]
September 2002

a. Article 29 of the CISG deals with the requirements for the modification and termination of contracts. It further entrenches the principles of party autonomy, freedom of contract and freedom from formalities contained in article 11 of the CISG.[1] These principles also form the foundation of the UNIDROIT Principles of International Commercial Contracts as expressed in articles 1.1, 1.5 and 2.18 and should therefore form the governing principles in the interpretation of any contract as well as its modification or termination.[2]

b. Article 2.18 of the UNIDROIT Principles in itself sheds little light on the interpretation or augmentation of article 29 of the CISG as both articles are formulated in almost exactly the same words, with one insignificant exception. Where article 2.18 of the UNIDROIT Principles deals with the abuse of the written modification clause, it refers to the prohibition to rely on such clause to the extent that the other party has "acted in reliance" on that conduct. The CISG merely refers to the extent that the other party has "relied on that conduct." It is submitted that nothing turns on this divergence as reliance in itself implies some action or failure to act on the part of that party.

c. In interpreting the scope of article 2.18 of the UNIDROIT Principles, regard should also be had to the provisions of article 3.2 which deals with freedom of form and formalities. In the Comments it is stated that mere agreement between the parties is sufficient for the valid conclusion, modification and termination of agreements without any further requirements to be found in domestic law. Specific reference is made to the fact that the requirement of consideration, which may be applicable in common law legal systems, is excluded. This is in conformity with the approach taken in the CISG.[3]

d. The first object of both article 29 CISG and article 2.18 of the UNIDROIT Principles is to reinforce the principle that any agreed modification or termination will be valid in whatever form it is made or contained.[4] Its second object is also to eliminate an important difference in approach between civil and common law, namely clearly establishing that no consideration is necessary for any amendment to be valid.[5] However, it also entrenches the time honored principle that where parties have by agreement voluntarily restricted their ability to modify or terminate a contract by requiring formalities for such actions, that agreement will be valid and enforceable.[6]

e. The commentary to article 2.18 of the UNIDROIT Principles makes it clear that the second object of the article is to generally render oral modifications or terminations void where parties have prescribed formalities, thereby rejecting the idea that such modification or termination may be viewed as an implied abrogation of the written modification or termination clause. This approach confirms the same interpretative conclusion reached by Schlechtriem in respect of Article 29 CISG.[7]

f. Both article 29 CISG and article 2.18 of the UNIDROIT Principles seem to apply only where the modification or restriction clause is contained in a "written agreement."[8] In interpreting what constitutes a "written agreement," the UNIDROIT Principles may be helpful as article 13 CISG only extends the concept of writing to telegrams and telexes. Article 1.10 of the UNIDROIT Principles extends the meaning of written to "any mode of communication that preserves a record of the information contained therein and is capable of being reproduced in tangible form." It is generally recognized that article 13 CISG contains a gap in that it only refers to older forms of technology and does not provide for more modern forms of electronic communications such as e-mail, fax or Internet communications.[9] It is suggested that the meaning of "written" should be extended to include these forms of communications in accordance with the definition contained in article 1.10 of the UNIDROIT Principles.[10] It has the advantage of being clear, practical and technologically neutral without losing sight of the object of the written formality, namely preserving an objective reproducible record of the communication between the parties.

g. The issue of merger clauses is not dealt with in these remarks as they are more appropriately covered under article 8 CISG which deals with the interpretation and proof of agreements.[11]

h. The exception created in article 29(2) CISG is one area where the application of article 29 may lead to interpretational difficulties.[12] The rule is based on principles contained in the so-called "Mißbrauchseinwand" of German law, or the "nemo suum venire contra factum proprium" principle of Roman law, or the doctrine of waiver and estoppel of Anglo-American law.[13]

i. The illustrations contained in the Comments to article 2.18 of the UNIDROIT Principles may be helpful in the interpretation of article 29 CISG in this regard. See also the examples mentioned by Schlechtriem.[14] It may be asked, however, whether the Comments call for a further requirement not specifically contained in article 2.18 of the UNIDROIT Principles, namely that the reliance must have been reasonable under the circumstances.[15] It would seem that this requirement is justifiable viewed in the light of the principle of good faith. Where reliance was not reasonable under the circumstances, a party ought not to be allowed to use the defense contained in article 29(2).[16]

j. Neither the CISG nor the UNIDROIT Principles makes provision for the case where the parties have agreed to further formalities such as signature or witnesses for an amendment or termination.[17] It is submitted that it would be in accordance with the provisions of article 29 CISG and 2.18 of the UNIDROIT Principles that the parties be held bound to such formalities and that non-complying modifications or terminations would be void, unless the abuse exception contained in article 29(2) CISG and 2.18 of the UNIDROIT Principles should apply.[18]

[See also commentary by the author on this subject in: John Felemegas ed., An International Approach to the Interpretation of the United Nations Convention on Contracts for the International Sale of Goods (1980) as Uniform Sales Law, Cambridge University Press (2006) 163-166]


FOOTNOTES

* Professor of Private Law, Faculty of Law, University of South Africa; Advocate of the High Court of South Africa.

1. Ferrari F., in Schlechtriem P.H. & Bacher K., Kommentar zum einheitlichen UN Kaufrecht 3rd ed (2000 München) Art 7 Rn 48; Magnus U., in Martinek M. (ed) J. von Staudingers Kommentar zum Bürgerlichen Gesetzbuch mit Einführungsgesetz und Nebengesetze: Wiener UN-Kaufrecht (1999 Berlin) Art 7 Rn 42, Art 29 Rn 1, 2 & 9; Burkhart F Interpretatives Zusammenwirken von CISG und UNIDROIT Principles (2000 Baden-Baden) 194; Karollus M., in Honsell H., Kommentar zum UN Kaufrecht (1997 Berlin) Art 29 Rn 9; Witz W., Salger in Salger H.C. & Lorenz M., Internationales Einheitliches Kaufrecht (2000 Heidelberg) Art 29 Rn 8; Kritzer A.H., Guide to the Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods (1989 Deventer) 115.

2. UNIDROIT Principles Art 2.18 Comment 1; Petz T., Die UNIDROIT Prinzipien für internationale Handelsverträge (2000 Wien) 56-57; Bonell M.J., 1995 Tulane LR 1134-1135.

3. See paragraph d. below.

4. Enderlein F. & Maskow D., International Sales Law - United Nations Convention on Contracts for the International Sale of Goods (1992 New York) par 1.1 at p. 123 <http://cisgw3.law.pace.edu/cisg/biblio/enderlein.html>; Salger Art 29 Rn 13; Honsell/Karollus Art 29 Rn 1 & 8; Schlechtriem Art 29 Rn 3; Magnus Art Rn 7 & 9; and United States 22 September 1994 Federal District Court [New York] (Graves v. Chilewich) <http://cisgw3.law.pace.edu/cases/940922u1.html>. In the case Germany 22 February 1994 Oberlandesgericht [Appellate Court] Köln <http://cisgw3.law.pace.edu/cases/940222g1.html>, the court held that although a termination could not be construed from silence or inaction in itself, silence or inaction in conjunction with other factors may provide sufficient evidence of an acceptance of an offer of termination. It is suggested that this also holds true for modifications. See Switzerland 5 October 1999 Obergericht [Appellate Court] Basel <http://cisgw3.law.pace.edu/cases/991005s1.html> where the principle was discussed but the court found that on the facts an amendment had not been proven; and Belgium 17 May 2002 Hof van Beroep [Appellate Court] Gent <http://cisgw3.law.pace.edu/cases/991005s1.html> where the failure of the one party to respond to the letter of another was interpreted as constituting an acceptance of the amendment offered by the other party. On this issue, see also Enderlein & Maskow para 6.1 at p. 125.

5. Commentary of the UNCITRAL Secretariat on Article 27 of the 1978 Draft, Document A/CONF.97/5 p 27-28 as reprinted in Honnold J., Documentary History of the Uniform Law for International Sales (1989 Deventer) and at <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-29.html>. See also John E. Murray, Jr., excerpt from 8 Journal of Law and Commerce (1988) 11-51 "An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods" <http://cisgw3.law.pace.edu/cisg/text/murray29.html>). This has been confirmed in the following decisions: United States 17 December 2001 Federal District Court [Michigan] (Shuttle Packaging v. Tsonakis) <http://cisgw3.law.pace.edu/cases/011217u1.html>; ICC Arbitration Case No. 7331 of 1994 <http://cisgw3.law.pace.edu/cases/947331i1.html>.

6. Honsell/Karollus Art 29 Rn 1,9 & 11; Salger Art 29 Rn 13 & 14; Magnus Art 29 Rn 7 & 9.

7. Schlechtriem Art 29 Rn 5. See also Salger Art 29 Rn 5; Honsell/Karollus Art 29 Rn 15; Magnus Art 29 Rn 12.

8. Schlechtriem Art 29 Rn 9; Honsell/Karollus Art 29 Rn 12.

9. Eiselen S., "Electronic Commerce and the UN CISG" 1996 EDI Law Review 21 <http://cisgw3.law.pace.edu/cisg/biblio/eiselen1.html>; Schlechtriem Art 13 Rn 2; Magnus Art 29 Rn 13.

10. See Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention 3rd ed. (1999 Deventer) Rn 130; Eiselen 21. For a contrary view on electronic communications, see Schlechtriem Art 13 Rn 2.

For a further relevant discussion of CISG Art. 13, see Ulrich G. Schroeter, "Editorial Remarks on the manner in which the Principles of European Contract Law may be used to interpret or supplement CISG Article 13" <http://cisgw3.law.pace.edu/cisg/text/peclcomp13.html#er>.

11. See the Editorial Remarks by Perillo J.M. on Article 8 CISG at <http://cisgw3.law.pace.edu/cisg/principles/uni8.html#edrem>.

12. See the discussion in Honsell/Karollus Rn 17-23; Robert A. Hillman, "Article 29(2) of the United Nations Convention on Contracts for the International Sale of Goods: A New Effort at Clarifying the Legal Effect of 'No Oral Modification' Clauses", 21 Cornell Int'l Law Journal (1988) 449-466 at <http://cisgw3.law.pace.edu/cisg/biblio/hillman2.html> p 458, 460 and 465. In the case law, the exception has been mentioned but denied in cases where there was a lack of any evidence showing reliance. See Belgium 2 May 1995 Rechtbank van [District Court] van koophandel Hasselt (Vital Berry Marketing v. Dira-Frost) <http://cisgw3.law.pace.edu/cases/950502b1.html>. However, in Austria 15 June 1994 Vienna Arbitration proceeding SCH-4318 <http://cisgw3.law.pace.edu/cases/940615a4.html>, the arbitrator did apply the exception relying on the principle of estoppel.

13. Schlechtriem Art 29 Rn 10; Honnold Rn 204 footnote 8; Salger Art 29 Rn 16; Kritzer 235; Honsell/Karollus Art 29 Rn 18 & 19; Enderlein & Maskow para 5.1 at p 125. See also Austria 15 June 1994 Vienna Arbitration proceeding SCH-4318 <http://cisgw3.law.pace.edu/cases/940615a4.html> para 5.4. These principles are also underpinned by the principle of bona fides contained in Art 7 CISG. In this regard, see the comments in Mexico 30 November 1998 Compromex Arbitration (Dulces Luisi v. Seoul International) <http://cisgw3.law.pace.edu/cases/981130m1.html>; and Austria 15 June 1994 Vienna Arbitration proceeding SCH-4318 <http://cisgw3.law.pace.edu/cases/940615a4.html>.

14. Art 29 Rn 10. See also the discussion and examples mentioned in Honnold Rn 204; Salger Art 29 Rn 16 & 18; Honsell/Karollus Art 29 Rn 18 & 19.

15. This would seem to be the scope of the decision in Germany 22 May 1992 Landgericht [District Court] Mönchengladbach <http://cisgw3.law.pace.edu/cases/920522g1.html> where the court states that when receiving a document such as an expert's opinion rendered on behalf of the other party, the latter should be held bound to that document as a declaration of will if the party receiving it should have understood it as such and in fact understood it as such, looking at it objectively.

16. Magnus Art 29 Rn 17; Honsell/Karollus Art 29 Rn 20. See also the discussion of the necessity to apply this exception with flexibility in Salger Art 29 Rn 17. See also the concept of reasonableness as a general principle of the CISG <http://cisgw3.law.pace.edu/cisg/text/reason.html>.

17. Honsell/Karollus Art 29 Rn 14.

18. Enderlein & Maskow par 3.2 at p 124; Honnold Rn 202. Note the contrary view of Honsell/Karollus Art 29 Rn 14 who argues that, unless there is a clear indication that the parties indeed insisted on stricter formalities, there should be no presumption that the parties required such strict compliance.


Official Comments on Articles of the UNIDROIT Principles cited

Comments reprinted with permission from UNIDROIT

 

ARTICLE 3.2

(Validity of mere agreement)

A contract is concluded, modified or terminated by the mere agreement of the parties, without any further requirement.

COMMENT

The purpose of this article is to make it clear that the mere agreement of the parties is sufficient for the valid conclusion, modification or termination by agreement of a contract, without any of the further requirements which are to be found in some domestic laws.

1. No need for consideration

In common law systems, consideration is traditionally seen as a prerequisite for the validity or enforceability of a contract as well as for its modification or termination by the parties.

However, in commercial dealings this requirement is of minimal practical importance since in that context obligations are almost always undertaken by both parties. It is for this reason that Art. 29(1) CISG dispenses with the requirement of consideration in relation to the modification and termination by the parties of contracts for the international sale of goods. The fact that the present article extends this approach to the conclusion, modification and termination by the parties of international commercial contracts in general can only bring about greater certainty and reduce litigation.

2. No need for cause

This article also excludes the requirement of cause which exists in some civil law systems and is in certain respects functionally similar to the common law "consideration".

Illustration

1. At the request of its French customer A, bank B in Paris issues a guarantee on first demand in favour of C, a business partner of A in England. Neither B nor A can invoke the possible absence of consideration or cause for the guarantee.

It should be noted however that this article is not concerned with the effects which may derive from other aspects of cause, such as its illegality. See comment 2 on Art. 3.3.

3. All contracts consensual

Some civil law systems have retained certain types of "real" contract, i.e. contracts concluded only upon the actual handing over of the goods concerned. Such rules are not easily compatible with modern business perceptions and practice and are therefore also excluded by the present article.

Illustration

2. Two French businessmen, A and B, agree with C, a real estate developer, to lend C 300,000 French francs on 2 July. On 25 June, A and B inform C that, unexpectedly, they need the money for their own business. C is entitled to receive the loan, although the loan is generally considered a "real" contract in France.


ARTICLE 2.17

(Merger clauses)

A contract in writing which contains a clause indicating that the writing completely embodies the terms on which the parties have agreed cannot be contradicted or supplemented by evidence of prior statements or agreements. However, such statements or agreements may be used to interpret the writing.

COMMENT

If the conclusion of a contract is preceded by more or less extended negotiations, the parties may wish to put their agreement in writing and declare that document to constitute their final agreement. This can be achieved by an appropriately drafted "merger" or "integration" clause (e.g. "This contract contains the entire agreement between the parties"). However, the effect of such a clause is not to deprive prior statements or agreements of any relevance: they may still be used as a means of interpreting the written document. See also Art. 4.3(a).

A merger clause of course covers only prior statements or agreements between the parties and does not preclude subsequent informal agreements between them. The parties are, however, free to extend an agreed form even to future amendments. See Art. 2.18.

This article indirectly confirms the principle set out in Art. 1.2 in the sense that, in the absence of a merger clause, extrinsic evidence supplementing or contradicting a written contract is admissible.


ARTICLE 2.18

(Written modification clauses)

A contract in writing which contains a clause requiring any modification or termination by agreement to be in writing may not be otherwise modified or terminated. However, a party may be precluded by its conduct from asserting such a clause to the extent that the other party has acted in reliance on that conduct.

COMMENT

Parties concluding a written contract may wish to ensure that any modification or termination by agreement will also be in writing and to this end include a special clause in the contract. This article states that as a rule such a clause renders any oral modification or termination ineffective, thus rejecting the idea that such oral modification or termination of the contract may be seen as an implied abrogation of the written modification clause.

The article however provides for an exception to the general rule by specifying that a party may be precluded by its conduct from invoking the written modification clause to the extent that the other party has acted in reliance on that conduct.

Illustration

A, a contractor, contracts with B, a school board, for the construction of a new school building. The contract provides that the second floor of the building is to have sufficient bearing capacity to support the school library. Notwithstanding a written modification clause in the same contract, the parties orally agree that the second floor of the building should be of non-bearing construction. A completes construction according to the modification, and B, who has observed the progress of the construction without making any objections, only at this point objects to how the second floor has been constructed. A court may decide that B is not entitled to invoke the written modification clause as A reasonably relied on the oral modification, and is therefore not liable for non-performance.


Pace Law School Institute of International Commercial Law - Last updated January 5, 2007
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