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Use of the UNIDROIT Principles to help interpret CISG Article 9


Match-up of CISG Article 9 with counterpart provisions of UNIDROIT Principles


UNIDROIT Principles
Article 1.8 - Usages and Practices

CISG
Article 9

(1) The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves.

(2) The parties are bound by a usage that is widely known to and regularly observed in international trade by parties in the particular trade concerned except where the application of such usage would be unreasonable.

1. The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves.

2. The parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned.

[The UNIDROIT article displayed above is to be read in conjunction with the Official Comments on it 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


Remarks on the Manner in which the UNIDROIT Principles
May Be Used to 1nterpret or Supplement CISG Article 9

Jorge Oviedo Albán [*]
October 2004

  1. Introduction
  2. Normative value of usages and practices
  3. Distinction between usages, practices and custom
  4. International custom
       a) A usage of which the parties knew or ought to have known
       b) A usage which in international trade is widely known to, and regularly observed
            by, parties to contracts of the type involved in the particular trade concerned
  5. Conclusion

1. Introduction

Article 9 CISG is located in Chapter II, entitled "General Provisions", of the Convention. The other provisions of the Convention included in that chapter deal with general matters, such as the interpretation of the Convention (Art. 7) and the conduct of the parties (Art. 8)

Equally, in the UNIDROIT Principles of International Commercial Contracts, Art. 1.8, which has a similar structure to that of Art. 9 CISG, is located in chapter 1, entitled "General Provisions", of the UNIDROIT Principles. Included in that chapter, equally, are similar references to rules of interpretation sources.

In an introductory way, it may be said that the recognition of the normative value of international usages and practices in contracts of international trade is a characteristic common to these two instruments of international commercial law.

2. Normative Value of Usages and Practices

Art. 9, paragraph (1), of the Convention recognizes the normative value of usages, by pointing out that "[t]he parties to a contract are bound by any usage to which they have agreed and by any practices which they have established between themselves".

Furthermore, Art. 9, paragraph (2), provides that "[t]he parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned".[1]

Art. 1.8 of the UNIDROIT Principles also refers to the normative value of usages and practices:

(1) The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves.
(2) The parties are bound by a usage that is widely known to and regularly observed in international trade by parties in the particular trade concerned except where the application of such a usage would be unreasonable.

At first, it can be considered that the counterpart provisions acknowledge the normative value of usages and practices,[2] that is to say, the parties to the contract are bound by any relevant usages and established practices. It would be convenient to clarify those respective provisions, because other provisions of the CISG (Art. 8(3)),[3] as well as provisions of the UNIDROIT Principles (Art. 4.3 (b), (e) and (f)),[4] refer to usages and practices, in an interpretive function.

Although the counterpart articles in the CISG and the UNIDROIT Principles, to which those other provisions make reference, are apparently similar - structurally as well as linguistically - reference must be made to some possible difficulties in the interpretation of Art. 9 CISG, and to the manner in which the provision in Art. 1.8 UNIDROIT Principles may be used to assist that interpretation.

3. Distinction between Usages, Practices and Custom

Both Art. 9 of the Convention and Art. 1.8 of the UNIDROIT Principles require the interpreter to establish a distinction between usages, contractual practices and customs.

The Convention's provision makes reference, on the one hand, to established practices between the parties to the contract, and, on the other hand, to trade usages, which acquire a sense of generality.

The counterpart provision in Art. 1.8 of the UNIDROIT Principles adopts an identical way to refer to practices and usages agreed upon by the parties to the contract.

Custom can be conceived as a general and obligatory behavior for a community, confirmed by public facts, uniform in substance and reiterated in a certain place. The Italian author Domenico Barbero, affirms: "Custom is a form of production of juridical norms that consists on the general, constant repetition and uniform of a certain behavior in certain circumstances".[5]

On the contrary, in usages, the characteristics of publicity and uniformity are not present as they are in custom. These are constituted as behaviors observed by people in their contracts or in the conduct of their own business in general.

The Convention, in Art. 9, and the UNIDROIT Principles, in Art. 1.8, make reference to contractual practices and conventional usages,[6] pointing out that the parties will be bound by any usage to which they have agreed and by any practices which they have established between themselves. In other words, it is a series or a sequence of previous behaviors of the parties, related in particular to transactions carried out previously between the parties, that can be always considered obligatory for the parties in future negotiations and transactions, so that they become a rule common of behavior.

In Art. 9(1) CISG and Art. 1.8(1) UNIDROIT Principles, a distinction must be maintained between conventional usages and contractual practices.[7] The usages and practices which the parties have established between themselves can be agreed expressly or tacitly,[8] Consequently, it is the series of previous behaviors of the parties, related in particular to transactions carried out previously, that for that fact of the regularity of that practice, such practices can be always considered obligatory between themselves in future negotiations.[9]

On the other hand, Art. 9(2) CISG refers to a different category that is neither the practices nor the conventional usages mentioned in Art. 9(1). The same observation may be made in relation to Art. 1.8(2) UNIDROIT Principles. Based on analysis provided below, it is submitted that where the respective provisions make reference to a usage which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned, such reference is to the general customs of international trade.

4. International Custom

In Art. 9(2), the Convention refers to international customs – i.e., objective and international usages whose validity has not been made a pact by the parties in an expressed or tacit way.[10]

Next, reference must be made to the requirements mentioned in Art. 9(2) CISG, to highlight the differences that exist between that provision and those that in turn are established in Art. 1.8 of the UNIDROIT Principles. The initial conclusion that may be reached is that the provisions in Art. 9 CISG can be used for different conceptions, while Art. 1.8 of the UNIDROIT Principles provides a wider formula, to which one may turn for assistance in interpreting and applying Art. 9(2) CISG.

In consequence, the requirements laid down in Art. 9(2) of the Convention are:

     a) A usage of which the parties knew or ought to have known

The provisions in Art. 9(2) require that the parties to the contract indeed know and understand usages which are incorporated into the contract as custom, because the obligation such usages impose is derived from the generality of such usages. Such usages constitute a custom; thus, maintaining the distinction between usages that are particular (to the parties) and conventional usages. In many fields of the international trade – such as maritime sales, insurance, financial transactions etc. – there exist certain accepted usages that are observed and applied to contracts of the type involved in the particular trade concerned such business in spite of possible ignorance of the particular merchants or of their inclusion of such usages in like contracts.[11]

It has been pointed out that Art. 9(2) of the Convention is based on two theories that recognize custom or usages in commercial contracts in the particular trade concerned.[12]

The first theory, known as a "subjective theory", comprises usages that are applicable only when the parties have had knowledge of them; in consequence, if the usages are not known by the parties, they are not applicable to the contract.[13]

In a contrary way, pursuant to the "objective theory", certain usages that might be unknown to the parties may yet be applicable to the contract.[14]

In that sense, Art. 9(2) of the Convention, through its incorporation of the two theories of influence of trade usages in commercial contracts,[15] provides that usages of which the parties had or ought to have had knowledge prevail and are, thus, applicable to the contract.

Tribunals and courts have recognized the normative value of usages of international trade. For example, the United States Court of Appeals, Fifth Circuit has considered that: "The CISG incorporates Incoterms through article 9(2), [...] Even if the usage of Incoterms is not global, the fact that they are well known in international trade means that they are incorporated through article 9(2)".[16]

The wording of the counterpart provision in Art. 1.8 of the UNIDROIT Principles provides that "[t]he parties are bound by a usage that is widely known to a regularly observed in international trade by parties in the particular trade [...]".

It is apparent that the UNIDROIT Principles do not require that the parties to the contract knew or ought to have known the applicable usage. That is because the UNIDROIT Principles adopt an approach in which usages that are widely known and observed in trade acquire juridical value independently of the degree of knowledge of the parties to the contract; due to the wide observance of such usages, knowledge of them is presumed in the participants in international trade. The objective parameter used to determine the existence of such custom or widely observed usages in the particular trade, is the fact that they are widely and regularly observed by the participants in international trade. Note, however, the important qualification contained in Art. 1.8(2) of the UNIDROIT Principles, that the application of such usage must not be unreasonable.[17]

As such, the UNIDROIT Principles, like the Convention, refer to the requirement of generality attributed to the custom, in terms of doctrine and jurisprudence, not different national regulations.

     b) A usage which in international trade is widely known to, and regularly observed by parties to contracts of the type involved in the particular trade concerned.

In this respect, it is the requirements of generality, publicity, uniformity and reiteration in the operations of international trade. As for the requirement for usages to be widely known, it is not required that they are so known in all the commercial places; rather, they may be widely known in regional or parochial operations,[18] provided they arise from transactions in international trade. That is to say, the application of usages developed or emanating from transactions in domestic trade should be rejected as irrelevant for the purposes of international trade. In principle, only usages that are observed in international trade, not domestic, should form the source of the legal effects envisaged in Art. 9 CISG.[19]

It must be noted, however, that a local usage might perhaps be applicable in some instances, provided it is linked directly to transactions in international trade.[20]

Such extension of applicable usages is, for example, contemplated in the Official Comment on Art. 1.8 of the UNIDROIT Principles.[21]

Further support for that proposition can be found in the case law. The Court of Appeal [OLG] of Graz, Austria, 9 November 1995, held that "Art. 9(2) CISG, save a limited number of exceptions, could not be interpreted as barring the application of national or local usage in interpreting a contract even though no mention of such usage was made in the contract itself. Accordingly, a seller who has been engaging in business in a country for many years and has repeatedly concluded contracts of the type involved in the particular trade concerned is obliged to take national usage into consideration".[22]

In conclusion, regarding the interpretation of Art. 9(2) of the Convention, much doctrine as well as jurisprudence point to possible applicability of local usages, but with the provisos that have been stated above. That does not, however, mean that local usages may always be applicable to contracts for the sale of goods governed by the Convention, as it will be required that the parties to the contract had or ought to have had knowledge of usages that are widely known and regularly observed in the particular trade concerned. That last characteristic can also be given to a local usage if the parties knew of it or it is widely known and observed.

Support for that proposition can be found in the decision of the Appellate Court of Frankfurt, 5 July 1995, which held that "no contract had been concluded by means of a letter of confirmation followed by silence. Although there is an established trade usage which recognizes such a conclusion of contract by silence in the jurisdiction of the recipient's place of business, due to the international character of the CISG, regard is to be given only to trade usages that are known to the law both in the jurisdiction of the offeror and in the jurisdiction of the recipient (Art. 9(2) CISG). Moreover, the legal effects of the trade usage have to be known to both parties".[23]

In the counterpart provisions of the UNIDROIT Principles, in Art. 1.8, the wording used is wider than that of Art. 9 CISG and it does not define what is a "usage" nor does it require – as the Convention does – that the usage is either known or ought to be known to the contracting parties.

It is submitted that the UNIDROIT Principles concentrate in a wider way than the CISG does on the requirement of "generality" of the custom, whereas it seems that Art. 9(2) of the Convention restricts its approach to usages known to both parties to the contract.

As for the requirement that the usage is obligatory on the parties unless the application of this use is not reasonable, it is helpful to consider the explanation and illustration contained in the Official Comment on Art. 1.8(2) of the UNIDROIT Principles:[24]

"A usage may be regularly observed by the generality of businesspeople in a particular trade sector but its application in a given case may nevertheless be unreasonable. Reasons for this may be found in the particular conditions in which one or both parties operate and/or the atypical nature of the transaction. In such cases the usage will not be applied."

"Reasonableness" is an important concept in the Convention and it is regarded a general principle of the CISG. As a general principle of the Convention, reasonableness has a strong bearing on the proper interpretation of all provisions of the CISG.[25]

On the validity and proof of usages, the Convention does not contain any special disposition. Pursuant to Art. 4 of the Convention,[26] the matter of validity must be generally left to the norms of international private law. Therefore, reliance must be placed on private international law, the opinions of the Chamber of Commerce of the relevant place or the summaries of such usages made by specialized institutions.[27] If a party to the contract alleged the existence and applicability of a usage, he should bear the onus of proving it.[28]

Finally, applicable usages, practices and custom will be prevail over the provisions of the Convention [29] and over the UNIDROIT Principles [30] as implied terms of the contract, although they will be superseded by any contrary express contractual terms.

5. Conclusions

The counterpart provisions in the Convention and in the UNIDROIT Principles, dealing with conventional usages and practices established between the parties to the contract recognize the obligatory value of such norms on the parties, and unless the parties agree otherwise, such norms are presumed to have been incorporated by the parties into the contract.

Usages or customs are applied to contracts of sale, provided they fulfill the requirements that the usage is one which

(a)   is widely known in international trade, and
(b)   is regularly observed by parties to contracts of the type involved in the particular trade concerned.

The present comparative analysis of the counterpart provisions on usages identified several similarities in structure and application but also some distinctions in the wording and approach adopted in the respective instruments.

[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) 51-59]


FOOTNOTES

* Lawyer (J.D.), Javeriana University (Bogotá D.C. - Colombia). Specialist in Commercial Law Javeriana University. Professor of Contracts and Commercial Law at University La Sabana (Bogotá D.C. - Colombia). He has been Lecturer in Colombian and other international universities. Author of publications on International Commercial Law in Argentina, Spain, Colombia, Peru, Mexico, and the United States.

1. Art. 9(1) and 9(2) CISG. For relevant commentary in Spanish and in English, see the following selection: OVIEDO ALBÁN, J., "El sistema de fuentes del contrato de compraventa internacional de mercaderías", in Estudios de Contratación Internacional. Régimen uniforme e internacional privado. Pontificia Universidad Javeriana, Facultad de Ciencias Jurídicas, Bogotá D.C. - Colombia, 2004, pp. 221- 304. SCHLECHTRIEM, P., Uniform Sales Law - the U.N. Convention on Contracts for the International Sale of Goods, Manz, Vienna, 1986, pp. 39 - 42. PENDON MELENDEZ, M.A., Comentario al artículo 1.8, in: Comentario a los Principios de Unidroit para los Contratos del Comercio Internacional. MORÁN BOVIO, D., (Coordinator), Thomson Aranzadi, segunda edición, Elcano Navarra, 2003, pp. 86- 93. OVIEDO ALBÁN, J., La costumbre en la compraventa internacional de mercaderías (comentarios a los artículos 8(3) y 9 de la Convención de Viena de 1980 [Custom in the International Sale of Goods (Commentary on Arts. 8.3 and 9 of the Vienna Convention of 1980)]. Revista de Derecho Internacional y del MERCOSUR. La Ley, Buenos Aires - Argentina, año 7 nº 3, 2003, pp. 17 - 37. GOLDSTAJN, A., "Usages of Trade and Other Autonomous Rules of International Trade According to the UN (1980) Sales Convention", in SARCEVIC P. & VOLKEN P., eds., International Sales of Goods: Dubrovnik Lectures, Oceana (1986) Ch. 3, 55- 110.

2. "The so called 'normative' usages were extremely controversial. According to the German understanding, their validity is not based on the parties' agreement": SCHLECHTRIEM, P., op. cit., p. 39. See GARRO, A. and ZUPPI, A., Compraventa Internacional de Mercaderías, Ediciones La Rocca, Buenos Aires, Argentina, p. 61.

3. Art. 8(3) CISG provides: "In determining the intent of a party or the understanding a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties."

4. Art. 4.3 of the UNIDROIT Principles, located in Chapter 5 and entitled "Interpretation" provides:

"In applying Article 4.1 [interpretation of the intention of the parties] and 4.2 [interpretation of the conduct of the parties], regard shall be had to all the circumstances, including […] (b) practices which the parties have established between themselves; […] (e) the meaning commonly given to terms and expressions in the trade concerned; (f) usages."

5. BARBERO, D., Sistema del derecho privado. I. Ediciones Jurídicas Europa América, Buenos Aires, 1967, p. 92.

6. ILLESCAS ORTIZ, R. and PERALES VISCASILLAS, M.del P., Derecho Mercantil International, El derecho uniforme, Universidad Carlos III de Madrid, Editorial Centro de Estudios Ramón Areces S.A., Madrid, 2003, p. 125. See: ICC Arbitration Award 8611/HV/JK of 23 January 1997: "Nevertheless, regarding the relationship between the parties, a prompt delivery of replacement parts had become normal practice as defined by Art. 9(1) of the CISG by which the [seller] was bound". Abstract available at Unilex Database. Case presentation and English translation available at <http://cisgw3.law.pace.edu/cases/978611i1.html>.

7. See ILLESCAS ORTIZ, R. and PERALES VISCASILLAS, op. cit. See official Comment on Art. 1.8 of the UP, available at <http://www.cisg.law.pace.edu/cisg/principles/uni9.html>. It is helpful to consider the explanation contained in the Official Comment on Art. 1.8 of the UNIDROIT Principles:

"2. Practices established between the parties

A practice established between the parties to a particular contract is automatically binding, except where the parties have expressly excluded its application. Whether a particular practice can be deemed to be "established" between the parties will naturally depend on the circumstances of the case, but behaviour on the occasion of only one previous transaction between the parties will not normally suffice".

"3. Agreed usages

By stating that the parties are bound by usages to which they have agreed, para. (1) of this article merely applies the general principle of freedom of contract laid down in Art. 1.1. Indeed, the parties may either negotiate all the terms of their contract, or for certain questions simply refer to other sources including usages. The parties may stipulate the application of any usage, including a usage developed within a trade sector to which neither party belongs, or a usage relating to a different type of contract. It is even conceivable that the parties will agree on the application of what are sometimes misleadingly called usages, i.e. a set of rules issued by a particular trade association under the title of "Usages", but which only in part reflects established general lines of conduct".

8. CARLSEN, A. "Remarks on the Manner in which the PECL may be used to Interpret or Supplement Art. 9 CISG, available online at <http://cisgw3.law.pace.edu/cisg/text/peclcomp9.html#er>. See China post-1989 CIETAC Arbitration proceedings (Contract #QFD890011), translation available online at <http://cisgw3.law.pace.edu/cases/900000c1.html>; Austria 21 March 2000 Oberster Gerichtsfhof [Supreme Court], presentation available online at <http://cisgw3.law.pace.edu/cases/000321a3.html>. Case Law on UNCITRAL Texts (CLOUT) abstract no. 425.

9. PERALES VISCASILLAS, M. del P., La formación del contrato en la compraventa internacional de mercaderías, Tirant Lo Blanch, Valencia, 1996, p. 81. "The Convention does not state when it is possible to speak of "practices established between the parties". According to some courts, for these practices to be binding on the parties pursuant to article 9(1), it is necessary that the parties' relationship lasts for some time and that it has led to the conclusion of various contracts. One court expressly emphasized this requirement, as it stated that the practice it had to decide upon "does not establish usage in the meaning of [article 9(1)], which would require a conduct regularly observed between the parties and thus requiring a certain duration and frequency [...]. Such duration and frequency does not exist where only two previous deliveries have been handled in that manner. The absolute number is too low". The UNCITRAL Digest of Case Law on the United Nations Convention on the International Sale of Goods. A/CN.9/SER.C/DIGEST/CISG/9 [8 June 2004], available online at <http://cisgw3.law.pace.edu/cisg/text/anno-art-09.html#udfn6>. See relevant case law:

    -     Germany 13 April 2000 Amtsgericht [Lower Court], case presentation and English translation available online at <http://cisgw3.law.pace.edu/cases/000413g1.html>, CLOUT abstract no. 360;
 
    -     Austria 6 February 1996 Oberster Gerichtshof [Supreme Court], case presentation and English translation at <http://cisgw3.law.pace.edu/cases/960206a3.html>, CLOUT abstract no. 176: "The parties had initially intended to enter into a "basic agreement", which would contain the general conditions of the seller and would constitute the trade usages that would govern the transactions between the parties, but could not reach an agreement. The draft of the "basic agreement" stated that all orders should be in writing. However, the seller could not prove that the "basic agreement" nor the general conditions had been made known to the buyer". In this case the Court considered that preliminary business conversations can become practices according with article 9 CISG. The court found that the parties could be bound by any trade practices or usage established between themselves (article 9(1) CISG). In such instances, article 9(1) CISG must be interpreted in the light of article 8(1) CISG to the effect that a party must have known of the intent of the other party.

10. See CALVO CARAVACA, A.L., "Comentario, Artículo 9", in DÍEZ PICAZO Y PONCE DE LEON, L., La compraventa internacional de mercaderías. Comentario de la Convención de Viena. Civitas, Madrid, 1998, p. 138.

11. See United States 10 May 2002 Federal District Court [New York] (Geneva Pharmaceuticals Tech. Corp. v. Barr Labs. Inc.), case presentation available at <http://cisgw3.law.pace.edu/cases/020510u1.html>, where the court stated, in para 25: "The usages and practices of the parties or the industry are automatically incorporated into any agreement governed by the Convention, unless expressly excluded by the parties. CISG Art. 9."

12. See CARLSEN, A., op. cit.

13. Ibid.

14. "According to the subjective theory, usages unknown to either party are not applicable. Contrary hereto is the objective theory, whereby usages are applicable if they represent a legal norm. According to the objective theory, usages unknown to both parties may be applicable to an agreement. Both theories agree that the usage must be so widespread and widely recognized that businesspersons knew or ought to have known of it." CARLSEN, op. cit.

15. See CARLSEN, op. cit.; GARRO, A., op. cit.; ZUPPI, A.L., op. cit., pp. 61-62.

16. United States 11 June 2003 Federal Appellate Court [5th Circuit] (BP Oil International v. Empresa Estatal Petroleos de Ecuador) available online at <http://cisgw3.law.pace.edu/cases/030611u1.html>, where the court held, at III. B. that "[t]he CISG incorporates Incoterms through article 9(2) [...]. Even if the usage of Incoterms is not global, the fact that they are well known in international trade means that they are incorporated through article 9(2)." The judgment, at footnote 9, also cites FOLSOM, R et al.: "Incoterms could be made an implicit term of the contract as part of international custom. Courts in France and Germany have done so, and both treaties and the UNCITRAL Secretariat describe Incoterms as a widely-observed usage for commercial terms". FOLSOM, R. GORDON, M., SPANOGLE, J. International Business Transactions, Second Edition, West Group, St. Paul Minn, 2001, p. 72.

See also United States 26 March 2002 Federal District Court [New York] (St. Paul Guardian Insurance Company et al. v. Neuromed Medical Systems & Support et al.), available online at <http://cisgw3.law.pace.edu/cases/020326u1.html>, where the court concluded that the risk of loss passed to the buyer upon delivery to the port of shipment by virtue of the CIF delivery term. The court found that the International Chamber of Commerce’s 1990 CIF Incoterm governed by virtue of article 9(2) CISG. The court also noted that German courts apply the Incoterm as a commercial practice with the force of law: CLOUT abstract no. 447, prepared by WINSHIP, P.

17. Art. 1.8(2) of the UNIDROIT Principles. See also text accompanying notes 24 and 25, infra.

18. See PERALES VISCASILLAS, M. del P., 1996, op. cit., p. 84.

19. See FOLSOM, R.; GORDON, M. W., SPANOGLE, J. A., International Business Transactions In a Nut Shell, West Group, St. Paul Minn, 2000, p. 62.

20. See Austria 21 March 2000 Oberster Gerichtshof [Supreme Court], case presentation available at <http://cisgw3.law.pace.edu/cases/000321a3.html>, CLOUT abstract no. 425, prepared by NIEDERBERGER, S.: "In the sense of article 9(2) a usage is widely known and regularly observed when it is recognized by the majority of persons doing business in the same field. To be applicable such usages must be known or at least should have been known by the parties having their place of business in the area of the usages. The Supreme Court affirmed the findings of the court of first instance, noting that since the plaintiff in its acceptance of the order expressly stated the applicability of the "Tegernseer Gebräuche" and had delivered wood to the defendant before, the defendant must have known these usages". See also "Editorial remarks", excerpt from analysis of Austrian case law by Willibald Posch & Thomas Petz, "Austrian Cases on the UN Convention on Contracts for the International Sale of Goods", 6 Vindobona Journal of International Commercial Law and Arbitration (2002) 1-24, at 10: Usages and practices. "In [this] decision on the relationship of trade usages and CISG, the Austrian Supreme Court had the opportunity to decide on the merits of the case. [G]enuine domestic usages for the trade of timber, the ‘Tegernsee Usages’, were at stake. The Austrian Supreme Court held that these Bavarian usages prevailed over the provisions of CISG, since it had been established by the Court of First Instance that these usages were widely known to and regularly observed by parties in cross-border timber trade between Austria and Germany."

21. See Official Comment on Art. 1.8 of the UNIDROIT Principles, available online at <http://cisgw3.law.pace.edu/cisg/principles/uni9.html#official>.

22. Austria 9 November 1995 Oberlandesgericht [Appellate Court] Graz, case presentation and English translation available at <http://cisgw3.law.pace.edu/cases/951109a3.html>: "In remanding the case to the court of first instance, the Court of Appeal held that article 9(2) CISG, save a limited number of exceptions, could not be interpreted as barring the application of national or local usage in interpreting a contract even though no mention of such usage was made in the contract itself. Accordingly, a seller who has been engaging in business in a county for many years and has repeatedly concluded contracts of the type involved in the particular trade concerned is obliged to take national usage into consideration". CLOUT abstract no.175.

23. Germany 5 July 1995 Oberlandesgericht [Appellate Court] Frankfurt, case presentation and English translation available at <http://cisgw3.law.pace.edu/cases/950705g1.html>.

See also PERALES VISCASILLAS, M. del P., "Tratamiento jurídico de las cartas de confirmación en la Convención de Viena de 1980 sobre Compraventa Internacional de Mercaderías", available online at <http://cisgw3.law.pace.edu/cisg/biblio/confirma.html>.

24. See Official Comment on Art. 1.8(2) of the UNIDROIT Principles, available online at <http://cisgw3.law.pace.edu/cisg/principles/uni9.html#official>. Comment 5. The following illustration of the comment is offered, ibid.

A usage exists in a commodity trade sector according to which the purchaser may not rely on defects in the goods if they are not duly certified by an internationally recognized inspection agency. When A, a buyer, takes over the goods at the port of destination, the only internationally recognized inspection agency operating in that port is on strike and to call another from the nearest port would be excessively costly. The application of the usage in this case would be unreasonable and A may rely on the defects it has discovered even though they have not been certified by an internationally recognized inspection agency.

25. "Reasonableness" is an important concept in the Convention; "reasonableness" is specifically mentioned in numerous provisions of the CISG and it is regarded a general principle of the CISG, see KRITZER, A.H., "Overview Comments on Reasonableness – A General Principle of the CISG", available online at <http://cisgw3.law.pace.edu/cisg/text/reason.html#overv>. See Art. 7(2) CISG, which contains the built-in interpretation mechanism of the Convention; see also relevant scholarly writing on the proper interpretation of Art. 7 CISG, presentation available online at <http://cisgw3.law.pace.edu/cisg/text/e-text-07.html>.

26. See Article 4 CISG, which states: style="mso-spacerun: yes">  "[...] except as otherwise expressly provided in this Convention, [the CISG] is not concerned with: (a) the validity of the contract or of any of this provisions or of any usage [...]" (emphasis added).

27. See FERNÁNDEZ DE LA GÁNDARA, L., CALVO CARAVACA, A.- L., "El contrato de compraventa internacional de mercaderías", in Contratos Internacionales, CALVO CARAVACA, A.L.; FERNANDEZ DE LA GÁNDARA, L. (Directors), BLANCO MORALES LIMONES, P., (Coordinator), Tecnos, Madrid, 1999, pp. 187-188.

28. Germany 9 July 1998 Oberlandesgericht [Appellate Court] Dresden, case presentation and English translation available at <http://cisgw3.law.pace.edu/cases/980709g1.html>, where the court held that the buyer did not prove that there was a usage known in international trade whereupon silence to a commercial letter of confirmation amounted to consent (Article 9 CISG)". CLOUT abstract no. 347.

29. See FOLSOM, GORDON, SPANOGLE, op. cit., pp. 13-14, where the authors state: "[I]t should be noted that, although CISG gives wide recognition to "party autonomy" (the ability of the parties to determine the terms of their deal), in Article 6 it only recognizes the ability of the parties to exclude the Convention".

30. See Official Comment on Art. 1.8(2) of the UNIDROIT Principles, available online at <http://cisgw3.law.pace.edu/cisg/principles/uni9.html#official>. Comment 6:

Both courses of dealing and usages, once they are applicable in a given case, prevail over conflicting provisions contained in the Principles. The reason for this is that they bind the parties as implied terms of the contract as a whole or of single statements or other conduct on the part of one of the parties. As such, they are superseded by any express term stipulated by the parties but, in the same way as the latter, they prevail over the Principles, the only exception being those provisions which are specifically declared to be of a mandatory character.


Official Comments on Articles of the UNIDROIT Principles cited

Comments reprinted with permission from UNIDROIT

 

ARTICLE 1.8

(Usages and practices)

(1) The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves.

(2) The parties are bound by a usage that is widely known to and regularly observed in international trade by parties in the particular trade concerned except where the application of such a usage would be unreasonable.

COMMENT

1. Practices and usages in the context of the Principles

This article lays down the principle according to which the parties are in general bound by practices and usages which meet the requirements set forth in the article. Furthermore, these same requirements must be met by practices and usages for them to be applicable in the cases and for the purposes expressly indicated in the Principles. See, for instance, Arts. 2.6(3), 4.3, and 5.2.

2. Practices established between the parties

A practice established between the parties to a particular contract is automatically binding, except where the parties have expressly excluded its application. Whether a particular practice can be deemed to be "established" between the parties will naturally depend on the circumstances of the case, but behaviour on the occasion of only one previous transaction between the parties will not normally suffice.

Illustration

1. A, a supplier, has repeatedly accepted claims from B, a customer, for quantitative or qualitative defects in the goods as much as two weeks after their delivery. When B gives another notice of defects only after a fortnight, A cannot object that it is too late since the two-weeks' notice amounts to a practice established between A and B which will as such be binding on A.

3. Agreed usages

By stating that the parties are bound by usages to which they have agreed, para. (1) of this article merely applies the general principle of freedom of contract laid down in Art. 1.1. Indeed, the parties may either negotiate all the terms of their contract, or for certain questions simply refer to other sources including usages. The parties may stipulate the application of any usage, including a usage developed within a trade sector to which neither party belongs, or a usage relating to a different type of contract. It is even conceivable that the parties will agree on the application of what are sometimes misleadingly called usages, i.e. a set of rules issued by a particular trade association under the title of "Usages", but which only in part reflects established general lines of conduct.

4. Other applicable usages

Para. (2) lays down the criteria for the identification of usages applicable in the absence of a specific agreement by the parties. The fact that the usage must be "widely known to and regularly observed [...] by parties in the particular trade concerned" is a condition for the application of any usage, be it at international or merely at national or local level. The additional qualification "in international trade" is intended to avoid usages developed for, and confined to, domestic transactions also being invoked in transactions with foreigners.

Illustration

2. A, a real estate agent, invokes a particular usage of the profession in its country vis-à-vis B, a foreign customer. B is not bound by such a usage if that usage is of a local nature and relates to a trade which is predominantly domestic in character.

Only exceptionally may usages of a purely local or national origin be applied without any reference thereto by the parties. Thus, usages existing on certain commodity exchanges or at trade exhibitions or ports should be applicable provided that they are regularly followed with respect to foreigners as well. Another exception concerns the case of a businessperson who has already entered into a number of similar contracts in a foreign country and who should therefore be bound by the usages established within that country for such contracts.

Illustrations

3. A, a terminal operator, invokes a particular usage of the port where it is located vis-a-vis B a foreign carrier. B is bound by this local usage if the port is normally used by foreigners and the usage in question has been regularly observed with respect to all customers, irrespective of their place of business and of their nationality.

4. A, a sales agent from country X, receives a request from B, one of its customers in country Y, for the customary 10% discount upon payment of the price in cash. A may not object to the application of such a usage on account of its being restricted to country Y if A has been doing business in that country for a certain period of time.

5. Application of usage unreasonable

A usage may be regularly observed by the generality of businesspeople in a particular trade sector but its application in a given case may nevertheless be unreasonable. Reasons for this may be found in the particular conditions in which one or both parties operate and/or the atypical nature of the transaction. In such cases the usage will not be applied.

Illustration

5. A usage exists in a commodity trade sector according to which the purchaser may not rely on defects in the goods if they are not duly certified by an internationally recognised inspection agency.When A, a buyer, takes over the goods at the port of destination, the only internationally recognised inspection agency operating in that port is on strike and to call another from the nearest port would be excessively costly. The application of the usage in this case would be unreasonable and A may rely on the defects it has discovered even though they have not been certified by an internationally recognised inspection agency.

6. Usages prevail over the Principles

Both courses of dealing and usages, once they are applicable in a given case, prevail over conflicting provisions contained in the Principles. The reason for this is that they bind the parties as implied terms of the contract as a whole or of single statements or other conduct on the part of one of the parties. As such, they are superseded by any express term stipulated by the parties but, in the same way as the latter, they prevail over the Principles, the only exception being those provisions which are specifically declared to be of a mandatory character. See comment 3 on Art. 1.5.


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