Article 7


Robert A. Hillman [*]

Editorial analysis and cross-references to other provisions of the CISG

Article 7(1)

According to Article 7(1), interpreters of the Convention should be guided by (1) its "international character;" (2) "the need to promote uniformity in its application;" and (3) "the need to promote . . . the observance of good faith in international trade." The first two criteria, paying attention to the Convention's "international character"[1] and promoting uniformity, require decisionmakers to avoid local definitions of the language, which would likely lead to narrow and conflicting interpretations of the Convention.[2] Instead, tribunals should interpret provisions with an eye toward their purposes and policies and the more general principles of the Convention.[3] Because most of the articles, if not all, manifest a purpose and policy, in a sense the entire Convention is a cross-reference to Article 7(1). These purposes and policies are discussed in the paragraphs below dealing with Article 7(2). An interpreter can also gain a feel for the "international character" of the Convention by consulting its rich legislative history.[4]

Professor Honnold suggests that decisions construing the Convention and secondary analysis will also clarify the significance of focusing on the "international character" of the Convention. In fact, most authorities have called for the publication of cases construing the Convention to increase the potential for its uniform application.[5] The problem with this approach is that a high reliance on cases may create the impression that they are the primary source of international sales law and that the Convention's principles are inadequate. Such an environment may encourage tribunals not only to take their eyes off the principles but to engage in distinguishing, overruling, and even manipulating precedent. Lawyers from common-law states may feel comfortable with these activities, but they do not offer much promise if the goal is to achieve uniformity and certainty in the international sales law. Perhaps most worrisome, de-emphasizing principles may encourage tribunals facilely to turn to domestic cases, expressly or implicitly, when interpreting and gap-filling under Article 7. Analysts should therefore urge tribunals to try to find answers within the four corners of the Convention and to look to cases only in the unusual case where the Convention does not supply adequate guidance.

The third criterion, promoting good faith, is a compromise between those who feared that the good-faith standard was too vague and took on too many different meanings in different legal systems,[6] and those who supported the use of a broad standard to police inappropriate conduct.[7] Under the compromise, the parties have no general duty to act in good faith. Instead, good faith is an instrumental policy that courts must attempt to advance when they interpret the Convention.

Courts can promote good faith by interpreting the Convention to discourage bad faith. For example, a party acts in bad faith when it fails to satisfy any of the Convention's requirements, such as the duty to notify or to act reasonably.[8] To ensure that the parties receive the fruits of their exchange, a party also acts in bad faith by taking advantage of the other party to extract gains not due under the contract.

As an illustration of the latter, Article 29(1) requires a "mere agreement" to modify a contract. Nevertheless, to promote good faith, tribunals should interpret the provision to bar enforcement of modification agreements formed when one party takes advantage of the other's dependence on the contract to extract price or other concessions.[9] Although expressly a guide to interpretation of the Convention, Article 7(1) therefore establishes a duty on the part of the parties to act in good faith.

Article 7(2)

Article 7(2) focuses on gap filling when the Convention governs an issue but does not expressly speak to it.[10] The line between interpretation and gap filling is, of course, not always easy to draw. Not surprisingly, Article 7(2) also leads tribunals primarily to the Convention's general principles and policies and only secondarily to "the law applicable by virtue of the rules of private international law."

Ample sources of internal principles exist in the Convention. Some articles or portions thereof are nothing more than broad pronouncements of principle. For example, Article 6 announces the Convention's allegiance to the principle of freedom of contract.

Most articles setting forth a particular rule also reflect an overarching principle or policy. In fact, the Convention's rules generally stand for one or more of four basic policies. One policy ensures freedom of contract. In addition to Article 6, several articles abolish formalities that might impede the parties from freely achieving their goals. For example, Article 11 eliminates the statute of frauds and Article 29(1) dispenses with both the writing and consideration requirements for enforceable modifications.[11] Article 19(2) eliminates in part the "mirror image rule" of contract formation; acceptances containing immaterial additional or different terms still form a contract.

A second set of Articles promotes cooperation and reasonableness to enable each party to receive the fruits of the exchange.[12] For example, under Article 60(a), the buyer must cooperate in facilitating the seller's delivery. Conversely, under Article 32(3), the seller must provide information so that the buyer can obtain insurance for goods when the seller is not required to insure them in transit. In addition, Articles 18(2), 39(1), 65(1), 71(3), 72(2) measure the various notice requirements in the Convention by their reasonableness as to content and time. Articles 16(2)(b), 29(2), and 47(2) also safeguard a party's reasonable reliance on the other party's communications.

As a third succinct policy, many provisions of the Convention facilitate the successful completion of exchanges even when something goes awry. For example, Articles 19(2), 39(1), 48(2), 68, and 71 encourage or require communication between the parties to resolve problems before a total breakdown. Moreover, a party gains the right to avoid a contract only when the other party commits a "fundamental breach," a fairly narrow construct under Article 25. Under Article 48(1), a seller may cure a failure to perform on time if "without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty of reimbursement." Article 71(1) permits a party to "suspend" but not repudiate a prospective performance if "it becomes apparent that the other party will not" substantially perform due to inability, financial difficulties, or inappropriate preparations. If the other party provides "adequate assurance of performance" an aggrieved party must perform, according to Article 71(3).

The Convention's goal of saving deals encourages future exchanges, thereby helping to unite the international trading community. The approach also avoids the costs of contract breakdown, such as negotiation and litigation costs.[13]

A final set of principles involves compensating injured parties for breach. Article 74 sets forth the primary rule: "Damages for breach of contract . . . consist of a sum equal to the loss, including loss of profit . . . as a consequence of the breach." The Article focuses on how to make the injured party whole, not on punishing the breaching party. This approach, common to many legal systems, seeks to encourage contracting by assuring the injured party the value of performance and by eliminating the prospect of penalties for nonperformance.

The Convention also recognizes a limited right to restitution of benefits conferred on the breacher. Under Article 81(2), a party who rightfully avoids the contract can recover whatever it has "supplied or paid under the contract." According to Article 84(2), a seller can recover the "benefits" a breaching buyer "has derived from the goods."

In the absence of general principles, which should be rare, Article 7(2) directs interpreters to the choice-of-law rules that determine the governing domestic law. Note that the Article 7(2) gap-filling rules apply only to matters governed by the Convention. Gaps with respect to issues specifically excluded by the Convention, such as questions of validity under Article 4(a), are to be settled by outside law.[14]

Cross-References to other Uniform Laws and Instruments

Cross-references to provisions of other uniform laws and international contract instruments that contain provisions related to CISG Article 7

Uniform law instruments with provisions related to CISG Article 7(1):

Uniform law instruments with provisions related to CISG Article 7(2):

A "good faith" variation on themes expressed in CISG Article 7(1) and 7(2):

A "good faith" variation on themes expressed in CISG Article 7(1) and 7(2) is encountered in the UNIDROIT Principles of International Commercial Contracts of 1994. The counterpart provisions of the CISG and the Principles are:

CISG Article 7 UNIDROIT Principles Article 1.6
(1) In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.

(2) Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.

1) In the interpretation of these Principles, regard is to be had to their international character and to their purposes included the need to promote uniformity in their application.

(2) Issues within the scope of these Principles but not expressly settled by them are as far as possible to be settled in accordance with their underlying general principles.

UNIDROIT Principles Article 1.7

(1) Each party must act in accordance with good faith and fair dealing in international trade.

(2) The parties may not exclude or limit this duty.

See also the Principles of European Contract Law of 1997 (unofficial preview of the provisional complete and revised version). These Principles contain language that parallels Articles 1.6 and 1.7 of the UNIDROIT Principles.[18]


* Associate Dean and Professor of Law, Cornell Law School. This commentary is based on Robert A. Hillman, Applying the United Nations Convention on Contracts for the International Sale of Goods: The Illusive Goal of Uniformity, 1 Review of the Convention on Contracts for the International Sale of Goods (l995) 21-49.

1. For a discussion of the meaning of "international character," see John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention 136-37, 142-44 (2d ed. l991).

2. C.M. Bianca & M.J. Bonell, Commentary on the International Sales Law: The 1980 Vienna Sales Convention 72-73 (l987).

3. Id. at 78.

4. See generally John O. Honnold, Documentary History of the Uniform Law for International Sales (l989).

5. Bianca & Bonell, supra note 2, at 88-90; Honnold, supra note 1, at 142-45; Peter Schlechtriem, Recent Developments in International Sales Law, 18 Israel L. Rev. 325-26 (l983).

6. Honnold, supra note 1, at 68-69, 85-86. For example, good faith may or may not be limited to the performance of the contract or may or may not be tied to an objective test of reasonableness.

7. Id. at 83-84.

8. See, e.g., CISG Articles 19(2), 21(2), 39(1) (duty to notify); 32(3), 60(a), 65(1), 71(3) (duty to act reasonably); see also Honnold, supra note 1, at 147-48; Arthur Rosett, Critical Reflections on the United Nations Convention on Contracts for the International Sale of Goods, 45 Ohio St. L.J. 265, 290 (l984).

9. Whether this is a question of validity and therefore excluded from the Convention is unclear. See Rosett, supra note 8, at 290.

10. The Convention applies to issues of formation and performance. Article 4 excludes questions of validity and property rights: "[E]xcept as otherwise expressly provided in this Convention, it is not concerned with: (a) The validity of the contract or of any of its provisions or of any usage; (b) The effect which the contract may have on the property in the goods sold." See Bianca & Bonell, supra note 2, at 75-76.

11. But see CISG Article 96 (ratifying countries can exclude the effect of these articles).

12. See Honnold, supra note 1, at 148 n.28, 430 n.2. For additional examples, see Bianca & Bonell, supra note 2, at 81.

13. "For both practical and legal reasons, it is more important to avoid the rescission of contract in the context of international sales than in the setting of domestic transactions. Rescission is likely to lead to the unwanted inconvenience and expense of litigation. Litigation, in turn will generate jurisdictional problems and, in all likelihood, the view by the losing party that the result was not impartial. When rescission follows delivery, the goods will have to be stored and then disposed of, generally at great expense and loss. Accordingly, the Convention limits the right of rescission to fundamental breaches." Bernard Audit, The Vienna Sales Convention and the Lex Mercatoria, Lex Mercatoria and Arbitration, Carbonneau ed. 150 (l990).

14. See supra note 10.

15. CISG Article 7(1) compares as follows with the cited provisions:

16. Article 3 of the UN Convention on the Carriage of Goods by Sea (The Hamburg Rules) of 1978 simply states:

In the interpretation and application of the provisions of this Convention regard shall be had to its international character and to the need to promote uniformity.

Article 7 of the UN Convention on the Limitation Period in the International Sale of Goods of 1974 in the version of the Protocol of 1990 is to the same effect.

17. Article 3(2) of the UN Model Law on Electronic Commerce of 1996 is patterned after Article 17 of the 1964 Hague Uniform International Sales Law (ULIS) rather than CISG Article 7(2). It is substantively identical to ULIS Article 17. CISG Article 7(2) and Article 3(2) of the Model Law on Electronic Commerce compare as follows:

18. Article 1.6 and 1.7 of the UNIDROIT Principles and Articles 1.106 and 1.201 of the Principles of European Contract Law of 1997 (unofficial preview of the provisional complete and revised version) compare as follows:

Neither the UNIDROIT Principles nor the European Principles is an instrument such as the CISG which has the force of law where that Convention is in effect. These Principles are instead comparable to Restatements of the law published in the United States. At a future date, however, pursuant to the regulatory mechanisms of the European Community it is possible that a text such as the European Principles may be set in place as an instrument that has the force of law in the European Community. Referring to the desirability of "a common European Code of Private Law", this goal is set forth in the Resolution of 6 May 1994 of the European Parliament that set in place the Commission on European Contract Law that authored the Principles of European Contract Law.

Pace Law School Institute of International Commercial Law - September 1997