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Reproduced with Permission of 8 Northwestern Journal of International Law and Business (1988) 574-622

excerpts from

Unification and Community: A Rhetorical Analysis of the United Nations Sales Convention

Amy H. Kastely [*]

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[Trade usages]
[Article 9]

There is no doubt that the Sales Convention is less dependent upon the conceptual tools of any one legal system than were the 1964 Hague Uniform Laws and other unification attempts.[146] It is also true that many non-Western legal systems have been heavily influenced by Anglo-American or Western European jurisprudence [147] and that lex mercatoria, the unofficial international law merchant, was developed during the primacy of Western European-oriented trade.[148] Nevertheless, it is also true that the Sales Convention draws heavily from Anglo-American and European legal concepts and systems.[149]

This characteristic of the Convention raises two potential problems. First is the possibility that some will perceive the Convention and its international community as dominated by the industrialized Western nations. Such a perception might discourage some nations from ratifying the Convention. In addition, this perception may influence interpretation and deliberation under the Convention by focusing attention on conflicts between the industrialized West and the rest of the world. If this is seen as a legitimate topic of concern under the Convention, then courts and others may be persuaded to interpret the text in light of these conflicts.

The second problem threatened by the Sales Convention's use of Anglo-American and Western European legal terms is that courts and others may rely too heavily on these legal systems in interpreting the Convention.[150] For example, even though the Convention's formation provisions use the terms "offer" and "acceptance," it would be a mistake to assume that these words carry the detailed meanings given to them in Anglo-American or Western European law. Dependence on Western law in the interpretation of the Convention would undermine its rhetorical integrity in a way similar to that discussed earlier. The language of the Convention has force only as it can be used to resolve disputes involving contracts for the international sale of goods. If the terms of the Convention are interpreted to incorporate Western domestic law, then the focus of deliberation must shift to that domestic law. This shift would substantially undermine the Convention's claim to internationalism and uniformity.

Some representatives saw a similar danger of Western domination in the Convention's treatment of trade usage. Influenced by the weight given to commercial practices by the international law merchant, some UNCITRAL members argued that trade usage should be recognized as an important element in international commerce.[151] This view favored inclusion of a provision specifying that the parties are bound by accepted trade usage.[152]

This suggestion was very controversial.[153] Opponents argued first that trade usage, if binding, would function as an independent source of law and should not be given prominence over the terms of the Convention itself.[154] In addition, several representatives objected that international trade usage was established during a period of dominance by traders in the Western industrialized nations and therefore should not be given weight under the Convention:[155]

"In the view of Mexico, the subordination of the Uniform Laws to normative and interpretative usages and practices could result in the imposition of unfair usages or inequitable practices . . . which in standard contracts were usually laid down by the economically stronger party to the detriment of the weaker party. . . .

". . .[t]he Union of Soviet Socialist Republics expressed a similar view. . . . Usages were often devices established by monopolies and it would hence be wrong to recognize their priority over the law.[156]

( . . . )

"[One] view considered usages as a means of imposing the will of the stronger party on the weaker. In this connection reference was made to the interests of developing States whose merchants had not participated in the development of usages and who might not be aware of them." [157]

Both objections raised important issues regarding the significance of trade usage within the language of the Convention. If trade usage is considered to be an independent source of law, then its recognition seriously undermines the integrity of the Convention. Moreover, if trade usage is viewed as a manifestation of domination by merchants from the industrialized West, then deference to it would belie the Convention's claim to equality and mutual respect among the member states.

These objections prompted debate over the Sales Convention's trade usage provision that persisted throughout the drafting history. The final version of Article 9 evolved as both a partial answer to the objections and as a compromise with them.[158] Proponents argued that trade usage is not an independent source of law, but rather that parties normally expect regular trade practices to be followed and therefore that trade usage is an important part of the unspoken, implied agreement of the parties. If this is true, then parties should be bound by trade usage as an actual part of their contract.[159] This conception overcame the first major objection, and Article 9 was written to emphasize the agreement of the parties as the core of the obligation to follow trade usage and accepted practices.[160] As a corollary, Article 9 provides that parties are not bound to follow trade usage if they so agree.[161] Yet subsection 2 of Article 9 does provide that parties are considered to have implicitly agreed to widely known usages of which the parties ought to have known.[162] Under this formulation, a party could be bound by a usage of which he was not actually aware, if it were found that he should have known of it. This aspect of the provision was of great concern to representatives of the developing nations, whose merchants typically are new to international trade and might not know of established usage. This concern in turn revived the second major objection to the use of trade usage: traditional trade usage has been developed without the participation of the developing nations and reflects the interests of powerful traders at the expense of weak traders.

Debate on this issue was reopened at the Vienna Conference by an amendment submitted by China to the effect that only "reasonable" usages be made binding,[163] and by a Czechoslovakian suggestion that a usage may be binding only if it "is not contrary to this Convention."[164] The importance of this issue was reflected in the serious remarks made during these debates:

"Mr. Blagojeveic (Yugoslavia) explained that he had [supported] the Chinese amendment since, in his view, it should constitute a step towards the recognition of usages established with the consent of all peoples, whereas commercial usages to date had been formed by a restricted group of countries only whose position did not express worldwide opinion.

"Mr. Kopac (Czechoslovakia) said that, although he was well aware that [A]rticle [9] was regarded as being the result of a compromise, he had grave doubts about its content and the principles it set forth. The principle was valid when it was a question of usages which the parties had agreed to apply in accordance with paragraph 1 of the article, but that was not the case when it was merely a question of usages to which they were considered to have impliedly referred, as set forth in paragraph 2. . . . It should not be forgotten also that the buyers and sellers from some countries, particularly those from the developing countries, had not participated in the establishment of usages and would yet be bound by them, even if those usages were contrary to the Convention. . . ." [165]

The concern expressed by these delegates goes to the heart of the Convention's claim to establish equal treatment and mutual respect. If the Convention requires merchants from the developing nations to comply with usages of which they are unaware and which serve the interests of merchants from the industrialized nations, then the Convention truly operates as an instrument of continued domination. Moreover, if usages are perceived as serving the interests of some merchants at the expense of others, the Convention's claim of equal treatment is called into question.

The Chinese and Czechoslovakian amendments were rejected in relatively close votes.[166] Opponents of these amendments argued first that issues of the validity of usages was left to domestic law under Article 4 and second that respect for the parties right to determine the terms of their contract required that the usages to which they had agreed should be given effect even if they conflict with other provisions of the Convention.[167] These arguments meet part of the objections raised by proponents of the amendments, yet concern for merchants from the developing nations and the fear that trade usages work to the advantage of more powerful traders remain.[168]

As these concerns persist, they complicate the development of a coherent jurisprudence under the Convention. They require that the language of the Convention address the issues of inequality and domination in some direct fashion. Courts, arbiters, and others concerned with the activity of international trade must find some way to discuss these issues without challenging the basic integrity and fairness of the Convention. One possibility would be to focus on the validity of usages under domestic law, as preserved in Article 4, and to develop standards of fairness and equality as an aspect of validity. This approach was suggested in the course of debate over Article 9, and Article 4 was written expressly to preserve national law on the validity of usages as well as of other elements of the contract.[169] Yet this solution tends to undermine the rhetorical strength of the Convention by diverting this important issue to domestic law. If, instead, the topic can be discussed and explored within the language of the Convention itself, then the international community may strengthen its bonds through significant discourse. Concern with issues of inequality and domination are critical to an international community. The Convention's contribution to formation of such a community will be significantly greater if it can allow for discussion of these matters.

Such discourse is possible under the current text of the Convention if Article 9 is interpreted to allow individual consideration of whether newcomers to a trade should be bound by its usages and whether usages that operate to the distinct advantage of powerful traders should be binding. Article 9(2) provides that parties are considered to have incorporated a usage impliedly only if they knew or "ought to have known" of it. In United States law, all people who engage in a particular trade are treated as though they "ought to have known" of its usages, even if they are newcomers to the trade.[170] During debate over Article 9, the International Chamber of Commerce argued for a similar rule under the Convention,[171] but no explicit mention of newcomers was included in the text. The rhetorical analysis suggested above indicates that Article 9 should be interpreted to allow discussion of whether newcomers and others who lack experience or sophistication in international trade "ought to have known" of its usages.

In addition, interpretation of Article 9 with regard to promoting the observance of good faith in international trade, as mandated by Article7,[172] suggests that discussion should focus on whether a particular trade usage operates to the advantage of powerful traders. Article 9 should be interpreted to say that a usage perpetuating domination by the powerful threatens the spirit of good faith in international trade and therefore is not impliedly incorporated into contracts under Article 9(2).

The foregoing interpretation of Article 9 will reclaim for the Convention the critical issue of inequality and domination in international trade. If this is done, the community will have a significant opportunity to explore and develop a common understanding of these important elements in international relations.

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FOOTNOTES

* Associate Professor of Law, William S. Richardson School of Law, University of Hawaii. J.D. University of Chicago, 1977. The author would like to express her thanks to John Honnold, Kate Federle, and Mari Matsuda for helpful comments on an earlier draft; Kellie Seklya for her excellent assistance; Joyce McCarthy for careful critique and sustaining friendship; and J. Kastely for his patient instruction and invaluable insight.

(. . .)

146. See J. Honnold, supra note 4, at 67-70.

147. See generally R. David & J. Brierley, Major Legal Systems in the World Today 69-73, 419 (1978); David, Sawer, Szabo, Afchar, Derrett, Iyer, Noda & MBaye, The Different Conceptions of the Law, in 2 International Encyclopedia of Comparative Law ch. 1 (1975).

148. See generally L. Trakman, The Law Merchant: The Evolution of Commercial Law (1983).

149. The substantial difference between the Sales Convention and the uniform law among several socialist states is discussed in Comment, The Convention on Contracts for the International Sale of Goods and the General Conditions for the Sale of Goods, 12 Ga. J. Intl & Comp. L. 451 (1982). See also Farnsworth, Problems from the Standpoint of the Common Law Countries, supra note 77 (discussing the similarities and differences between the Sales Convention and the common law).

150. Cf. Hellner, supra note 7, at 79 ("Since the Convention is intended to work impartially, . . . no preference can be given to any particular legal system in its interpretation."); Herber, The Rules of the Convention Relating to the Buyers Remedies in Cases of Breach of Contract, in Problems of Unification, supra note 4, at 104, 106 (1980): The Sales Convention "must be interpreted out of itself, not in connection with a national or regional legal concept. And it should therefore be able to be looked at by all countries as a result of their common endeavour to create something new and appropriate to modern world trade, so that parties can entrust their case to it without surrendering to unknown foreign law.")

151. See generally, J. Honnold, supra note 4, at 144 (noting the importance of trade usage to the Sales Convention); Goldstajn, Usages of Trade and Other Autonomous Rules of International Trade According to the U.N. (1980) Sales Convention, in Dubrovnik Lectures, supra note 4, at 55 (discussing the law merchant and the Sales Convention).

152. The 1964 Uniform Law on International Sales includes a section on trade usages. See 1964 Uniform Law on International Sales, supra note 18, art. 9. Article 9 of the Sales Convention differs from this in significant respects. See Comment, Trade Usages in International Sales of Goods: An Analysis of the 1964 and 1980 Sales Conventions, 24 Va. J. Intl L. 619 (1984).

153. See Eörsi, A Propos, supra note 4, at 342; Farnsworth, Developing International Trade Law, supra note 4, at 465-66.

154. See, e.g., Analysis of Replies and Comments by Governments on Hague Conventions of 1964: Report of the Secretary-General, U.N. Doc. A/CN.9/31, reprinted in [1970] 1 Y.B.U.N. Commn on Intl Trade L. 159, 169, U.N. Doc. A/CN.9/SER.A/1970 [hereinafter Analysis of Replies and Comments on 1964 Hague Conventions]; Sixth Session, supra note 129, at 52. Pending Questions: Secretary General, supra note 129, at 93. United Nations Secretary General, Analysis of Comments and Proposals by Governments and International Organizations on the Draft Convention on Contracts for the International Sale of Goods, and on Draft Provisions Concerning Implementation, Reservations and Other Final Clauses, U.N. Doc. A/CONF.97/9 (1980), reprinted in U.N. Official Records, supra note 1, at 71, 73.

155. These objections were pressed especially by the socialist countries. See Eörsi, A Propos, supra note 4, at 342; Farnsworth, Developing International Trade Law, supra note 4, at 465. Some representatives also objected that trade usage was too vague and difficult to prove. See, e.g., Summary Records of the Meetings of the First Committee, (6th mtg.) U.N. Doc. A/CONF.97/C.1/SR.6 reprinted in U.N. Official Records, supra note 1, at 259, 263 [hereinafter Summary Records First Committee 6th mtg.].

156. Analysis of Replies and Comments on 1964 Hague Conventions, supra note 154, at 169. See also Summary Records First Committee, 6th mtg., supra note 155, at 169. (Mr. Kopac of Czechoslovakia stated: "It should not be forgotten also that the buyers and sellers from some countries, particularly those from the developing countries, had not participated in the establishment of usages and would yet be bound by them, even if those usages were contrary to the Convention.").

157. Sixth Session, supra note 129, at 52.

158. See Summary Records First Committee, 6th mtg., supra note 155, at 263. (Mr. Kopac, Czechoslovakia, "was well aware that Article 9 was regarded as being the result of a compromise.").

159. Secretary-General: Pending Questions, supra note 129, at 94 ("consideration might be given to making more explicit the justification for recourse to custom: the expectation that the other party will perform in the manner that is customary in the trade.").

160. Sales Convention, art. 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 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. This was unchanged from 1978 to final version."

See 1979 Draft Convention, supra note 137, art. 8, at 178, 179.

161. Sales Convention, art. 9.

162. Id.

163. Report of the First Committee, supra note 138, at 89.

164. Id.

165. Summary Records First Committee, 6th mtg., supra note 155, at 263.

166. The Chinese amendment was rejected by a vote of 9 votes in favor, 17 against, and 15 abstentions; the vote on the Czechoslovakian amendment is not reported, but the debate indicated a similar breakdown in support. Report of the First Committee, supra note 138, at 89; Summary Records First Committee, 6th mtg., supra note 155, at 262-64.

167. See supra note 166.

168. See Enderlein, Problems of the Unification of Sales Law from the Standpoint of the Socialist Countries, in Problems of Unification, supra note 4, at 26, 32-33 ("unification of law must not sanction customs developed by capitalist monopolies vis-à-vis weaker parties, specially in developing countries. On the other hand, unification of law can take into account, as its cornerstone such international usages and customs which can rightly be considered as democratic and equitable."); Date-Bah, Problems from the Standpoint of the Developing Countries, supra note 22, at 39, 46; Goldstajn, supra note 151, at 77-85, 95-99.

169. See Sales Convention, art. 4 (quoted supra note 60); see also Analysis of Replies and Comments on 1964 Hague Conventions, supra note 154, at 169 ("The representative of Norway expressed the view that under article 8 of the Uniform Law the validity of usages was left to national law."); Summary Records First Committee, 6th mtg., supra note 155, at 262.

170. See Warren, Trade Usage and Parties in the Trade: An Economic Rationale for an Inflexible Rule, 42 U. Pitt. L. Rev. 515 (1981). But see U.S. ex rel. Union Bldg. Materials Corp. v. Haas & Haynie Corp., 577 F.2d 568 (9th Cir. 1978) (newcomer to the trade was not bound by usages of which it was unaware); Flower City Painting Contractors, Inc. v. Gumina Constr., 591 F.2d 162 (2d Cir. 1979) newly formed, minority-owned business was not bound by trade usages).

171. Report of the Secretary-General: Analysis of Comments by Governments and International Organizations on Draft Convention on International Sale of Goods as Adopted by the Working Group on International Sale of Goods, U.N. Doc. A/CN.9/126, reprinted in [1977] 8 Y.B.U.N. Commn on Intl Trade L. 142, 148, U.N. Doc. A/CN.9/SER.A/1977 ("ICC concludes that the essence of any rule as to usages is that the newcomer in the trade should not be able to plead his ignorance of the usages as a defence.") [hereinafter Report of the Secretary-General: Analysis of Comments].

172. Sales Convention, art. 7(1) (quoted supra note 125).

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