General observations on use of the UNIDROIT Principles to inform as to the meaning of provisions of the CISG

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General observations on use of the UNIDROIT Principles to help interpret the CISG

A stated purpose of the UNIDROIT Principles of International Commercial Contracts is: "They may be used to interpret or supplement international uniform law instruments" (Preamble to the Principles).

The text of the CISG was promulgated in 1980, the text of the UNIDROIT Principles in 1994. Many of the persons who worked on the Principles participated in the development of the CISG.

"Naturally, to the extent that the UNIDROIT Principles address issues also covered by the CISG, they follow the solutions found in that Convention, with such adaptations as were considered appropriate . . ." (Introduction to the Principles) (see note 1)

In a similar vein, one of the principal architects of the Principles has stated:

"To the extent that the two instruments address the same issues, the rules laid down in the UNIDROIT Principles are normally taken either literally or at least in substance from the corresponding provisions of CISG; cases where the former depart from the latter are exceptional" (see note 2).

The premise of this section of the CISG W3 database is:

Where the Principles address issues also covered by the CISG and follow solutions found in that Convention, the supranational committee of experts constituted to devise the UNIDROIT Principles can be regarded as a council of "wise men [and women]" (see note 3) whose views can help us interpret the CISG.

In the United States, when a tribunal is ruling on sales provisions of the U.S. Uniform Commercial Code, references to the Restatement of Contracts are frequently encountered. Its examples and explanations of the meaning of terms and concepts are useful. In UCC proceedings, courts and arbitrators refer to the Restatement of Contracts as it helps them reason through the applicable law.

In a similar vein, see Austrian Arbitral Proceeding SCH-4318 and Arbitral Proceeding SCH-4366 (both dated 15 June 1994); see also ICC Arbitral Award No. 8128 of 1995, FRANCE Court of Appeal of Grenoble 23 October 1996; ICC Arbitral Award No. 11638 of 1992, ICC Arbitral Award 12097 of 1993, ICC Arbitral Award 12460 of 1994, CHINA CIETAC Arbitral Award of September 2004, SERBIA Foreign Trade Court of Arbitration, Serbian Chamber of Commerce 23 January 2008, examples of cases in which tribunals have referred to the UNIDROIT Principles as it helped them reason through the CISG (for further remarks on this subject, see note 4). One can anticipate many such references to the UNIDROIT Principles in CISG proceedings.

Michael Joachim Bonell illustrates the manner in which recourse to the Principles can help one reason through the CISG. He states:

"For example, the criteria laid down in Art. 7.3.1 of the UNIDROIT Principles for the determination of whether or not there has been a fundamental breach of contract, may be used for a better understanding of the rather cryptic manner in which this important concept is defined in CISG. Indeed, in addition to the general criterion laid down in Art. 25 CISG, i.e. the fact that the non-performance substantially deprives the aggrieved party of what it was entitled to expect under the contract, provided the other party could not reasonably have foreseen such result, paragraph 2 of Art. 7.3.1 indicates as further factors to be taken into account in each single case whether strict compliance with the non-fulfilled obligation is of essence under the contract, whether the non-performance is intentional or reckless, whether the aggrieved party has reason to believe that it cannot rely on the other party's future performance, and finally whether the defaulting party would suffer disproportionate loss as a result of the preparation or performance if the contract is terminated.

"Equally, Art. 7.1.4 which . . . expressly states that the right of the non-performing party to cure its own failure may be exercised notwithstanding the fact that the aggrieved party has given notice of termination of the contract, may be involved in order to resolve the doubts which in this respect exist under the corresponding Art. 48 CISG. . . .

"Another example may be found in paragraph 1 of Art. 7.4.9 which, by expressly stating that the right to interest is independent of whether or not the non-payment of the sum of money due is excused, provides an answer to a question which Art. 78 CISG leaves open. . . .

"Finally, reference may be made to paragraph 4 of Art. 7.1.7 which, by expressly mentioning among the remedies not affected by the occurrence of an impediment preventing a party from performance the right to terminate the contract, to withhold performance and to request interest on money due, but not the right to performance, makes it clearer than does the corresponding provision in CISG . . . that as to this latter remedy the solution has to be found in each single case, in accordance with the criteria laid down for its availability in general.

"Yet besides clarifying unclear language, the UNIDROIT Principles may also be used to fill veritable gaps found in CISG.

"According to Art. 7(2) CISG '[q]uestions 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 [. . .]'. . . .

"So far it has been each judge's or arbitrator's task case by case both to determine those general principles and from the general principles to derive the solution for the specific question to be settled. This latter task could be facilitated by resorting to the UNIDROIT Principles. The only condition which needs to be satisfied is to show that the relevant provisions of the UNIDROIT Principles are the expression of a general principle underlying CISG. . . . (see note 5).

Ulrich Magnus provides the conceptual framework for resort to the UNIDROIT Principles as expressions of general principles underlying the CISG. He states:

"Art. 7(2) CISG allows utilization of the general principles, on which the Convention is based and which merely haven't been expressed directly, for the purpose of filling gaps. In general, any general principles existing outside of the CISG are not to be considered. Is that also true for the 'Principles'? As seen above, their authors, among other things, have designed the 'Principles' for the purpose of providing a guideline for interpretation and for filling gaps in international Conventions regarding commercial contracts. . . . To be sure, this intention alone cannot suffice. . . .

"However, in my opinion the 'Principles' are nevertheless to be considered as additional general principles in the context of the CISG. The most important reason for this is that they vastly correspond both to the respective provisions of the CISG as well as to the general principles which have been derived from the CISG. . . . In light of the fact that the CISG basically was the force behind the 'Principles', this correspondence is not surprising.

"Further, the approach in developing the 'Principles' appears appropriate with respect to the current state of attempts to unify law. The CISG provides a basic set of rules which has resulted from an intensive comparison of legal systems and politically supported compromises between these legal systems. Therefore, the CISG can and should constitute the basis for the creation of a general law of contracts. Its provisons are to be generalized only to supplement new issues and solutions and align these issues and solutions with the needs of the industry. The UNIDROIT working group has proceeded with this concept in mind. Thus, its results, to the extent that they formulate general principles which cannot be derived directly from the CISG, can be utilized for filling gaps in the Convention. . . ." (see note 6).

Bonell illustrates the manner in which the UNIDROIT Principles formulate general principles which cannot be derived directly from the CISG, but which can be utilized for filing gaps in the Convention. He states:

"For example, Arts. 6.1.7, 6.1.8 and 6.1.9 of the UNIDROIT Principles may provide an answer to the questions, not expressly settled in CISG, of whether, and if so under what conditions, the seller is entitled to pay by cheque or by other similar instruments, or by a funds transfer, and in which currency payment is to be made. One of the general principles on which CISG is based is that of reasonableness. . . . [T]he duty of the parties to act in a reasonable manner clearly underlies the rule laid down in Art. 6.1.7, according to which the obligor may pay in any form used in the ordinary course of business at the place for payment, but cheques or other similar instruments are accepted by the obligee on condition that they will be honoured. The same may be said of the rule contained in Art. 6.1.8 whereby, if the obligee has made known its bank account number(s), payment may be made by a funds transfer to such account(s); or of the rule stated in Art. 6.1.9, according to which, even if a monetary obligation is expressed in a currency other than that of the place for payment, payment may be made in that latter currency unless, apart from an agreement to the contrary between the parties, that currency is not freely convertible.

"Other provisions of the UNIDROIT Principles which may be used in order to fill in gaps in CISG are paragraphs 1 and 2 of Art. 7.4.9 on interest and Art. 7.4.12. CISG expressly settles neither the question of the time from which the right to interest accrues or of the rate of interest to be applied, nor that of the currency in which to assess damages. Yet as the principle of full compensation can be considered to be a general principle underlying CISG, these gaps may well be filled by the above-mentioned articles of the UNIDROIT Principles which are inspired by the same principle. Indeed, Art. 7.4.9, by stating that the aggrieved party is entitled to interest from the time payment is due (paragraph 1) and that the applicable interest rate shall be the average bank short-term lending rate to prime borrowers prevailing for the currency of payment at the due place of payment or, where no such rate exists at that place, the same rate in the State of the currency of payment, or in the absence of such a rate at either place the appropriate rate fixed by the law of the State of the currency of payment (paragraph 2), clearly intends to make sure that the interest to be paid covers to the greatest possible extent the loss actually suffered by the aggrieved party as a consequence of the non-payment of the sum of money due . . . The same is true of Art. 7.4.12, according to which damages are to be assessed either in the currency in which the monetary obligation was expressed or in the currency in which the harm was suffered, whichever is more appropriate. . ." (see note 7).

Commenting on the results of a survey of national reporters, Bonell further states:

"A . . . question put to the national reporters was whether the UNIDROIT Principles can serve as a means of interpreting and supplementing existing international uniform law instruments, and if so to what extent.

"In practice the question is particularly relevant in the context of the 1980 UN Convention on Contracts for the International Sale of Goods (CISG), Article 7 of which expressly states that '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 that 'Questions concerning matters governed by this Convention which are not expressly settled it are to be settled in conformity with the general principles on which it is based'.

"The answers given are sharply divided. On the one hand there are those who categorically deny that the UNIDROIT Principles can be used to interpret or supplement the CISG, invoking the rather formalistic and not necessarily convincing argument that the UNIDROIT Principles were adopted later in time than the CISG and therefore cannot be of any relevance to the latter. On the other hand there are those who, perhaps too enthusiastically, justify the use of the UNIDROIT Principles for this purpose on the mere ground that they are 'general principles of international commercial contracts.' The correct solution would appear to lie between these two extreme positions. In other words, there can be little doubt that in general the UNIDROIT Principles may well be used to interpret or supplement even pre-existing international instruments such as the CISG; on the other hand in order for individual provisions to be used to fill gaps in the CISG, they must be the expression of general principles also underlying the CISG." (see note 8).

To assist in efforts to utilize the Principles to fill gaps in the CISG or otherwise help interpret the Convention, we present counterpart provisions of the CISG and the UNIDROIT Principles. The "match-ups" of CISG provisions with provisions of the UNIDROIT Principles (black letter rules) and the UNIDROIT Commentary on each set of rules compared are presented with our analyses of the individual articles of the CISG. Our selections of counterpart provisions are judgmental. Others can, and we ourselves will, elaborate upon the approach taken, pointing out caveats as well as additional instances in which the UNIDROIT Principles formulate general principles which cannot be derived directly from the CISG, or can otherwise inform as to the meaning of provisions of the CISG. For this purpose the Official Commentaries to the Principles -- particularly the helpful examples they contain -- can be of great help. They are provided with each set of counterpart provisions presented.

An important caveat to recourse to the Principles to interpret the general principles of the CISG is pointed out by Bonell: there is a need to show that the relevant provisions of the UNIDROIT Principles are the expression of a general principle underlying the CISG (see note 9). This need is, of course, not satisfied where the Principles and the CISG adopt different solutions -- for example, in their approach to the battle of the forms. In such instances, in this presentation we do not provide match-ups of counterpart provisions. We do, however, endeavor to provide such match-ups where counterpart provisions appear to track one another. Three categories of match-ups are provided.

For the match-ups we present, our approach is to commence by arraying the counterpart provisions side by side calling attention to the need to always also access the entire text of the CISG and the Principles. We do this to best enable the reader to draw his own conclusions as to the extent to which the matched Principles can properly be used to help interpret the CISG. This is followed by the views of our editors (at present, the editorial comments are only partially completed) and the full texts of the Official UNIDROIT Commentaries that apply.

The Principles came into being in the following manner (material in quotes taken from the Introduction to the Principles):

The experts who participated came from Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, China, Columbia, Denmark, Finland, France, Germany, Ghana, Hungary, India, Israel, Japan, Mexico, Netherlands, Nigeria, Poland, Russian Federation, Singapore, Spain, Sweden, Switzerland, Thailand, United Kingdom, United States, Venezuela and Yugoslavia.

As is the case throughout the world, the majority of these countries are civil law jurisdictions with the common law, of course, also represented. For example, from the United States UNIDROIT had as a member of its Working Group E. Allan Farnsworth (Professor of Law, Columbia University; Member of the UNIDROIT Governing Council; Chair of the Editorial Committee) and drew upon the advice and counsel of Eric E. Bergsten (Pace University School of Law; former Secretary to the United Nations Commission on International Trade Law); Amelia Boss (Temple University); Richard Buxbaum (University of California at Berkeley); Louis Del Duca (Dickinson School of Law); James Gordley (University of California at Berkeley); Anita Hill (University of Oklahoma); Richard Hyland (Rutgers University at Camden); Arthur Rosett (University of California Los Angeles); and Peter Winship (Southern Methodist University).

Albert H. Kritzer


FOOTNOTES

1. See also, Pilar Perales Viscasillas, "UNIDROIT Principles of International Commercial Contracts: Sphere of Application and General Provisions," 13 Arizona Journal of International and Comparative Law (1996) 385: "[T]he Principles have been deeply influenced by the Convention. . . . See Ulrich Magnus, 'Die allgemeinen Grundsätze im UN-Kaufrecht', 59 Rabels Zeitschrift 492-93 (1995). Magnus points out that the harmony between the Convention and the UNIDROIT Principles comes as no surprise, because the Convention could be considered the 'godfather' of the UNIDROIT Principles."

2. Michael Joachim Bonell, "The UNIDROIT Principles of International Contracts and CISG: Alternative or Complementary Instrument?," Uniform Law Review 1996, 26-39.

3. For references to the concept of a supranational committee of experts or council of "wise men" to help us interpret the CISG, see Michael Joachim Bonell, "Proposal for the Establishment of a Permanent Editorial Board for the Vienna Sales Convention", in: International Uniform Law in Practice/Le droit uniforme international dans la pratique [Acts and Proceedings of the 3rd Congress on Private Law held by the International Institute for the Unification of Private Law (Rome 7-10 September 1987)], Oceana: New York (1988) 241-244; and Ulrich Drobnig, Observations, in: International Uniform Law in Practice, supra at 306. For related comments, see Francis A. Gabor, "Stepchild of the New Lex Mercatoria: Private International Law from the United States Perspective", 8 Northwestern J. Int'l L. & Bus. (1988) 557.

4. Michael Joachim Bonell, "The UNIDROIT Principles in Practice - The Experience of the First Two Years", Uniform Law Review 1997, 34-35. Other excellent material on the Principles by Professor Bonell includes: "The UNIDROIT Principles of International Contracts and CISG: Alternative or Complementary Instrument?," supra note 2; and "The UNIDROIT Principles of European Contract Law: Similar Rules for the Same Purposes?", Uniform Law Review 1996, 229-246.

5. Bonell, supra note 2. For a commentary on similarities and differences between the UNIDROIT Principles and the CISG, see A.S. Hartkamp, "The UNIDROIT Principles for International Commercial Contracts and the United Nations Convention on Contracts for the International Sale of Approval". in Essays on Comparative Law, Private International Law and International Commercial Arbitration in honour of Dimitra Kokkina-Intridou, Boeli-Woelki/ Grosheide/Hondius/Steenhof eds (Martinus Nijhoff 1994) 85-98. See also Joseph M. Perillo, "UNIDROIT Principles of International Commercial Contracts: The Black Letter Text and a Review", 63 Fordham Law Review (1994) 281-316.

6. Ulrich Magnus, supra note 1 (English translation of this text provided).

7. Bonell, supra note 2.

8. Michael Joachim Bonell, "General Report", in: A New Approach to International Commercial Contracts: The UNIDROIT Principles of International Commercial Contracts, XVth International Congress of Comparative Law, Bristol, 26 July-1 August 1998 (Kluwer Law International 1999) 12-13 [citations omitted].

9. See the last sentence of our initial quotation from Bonells "The UNIDROIT Principles and CISG: Alternative or Complementary Instruments?". For elaboration upon this caveat, see Ferrari: The Principles "may . . . serve to corroborate a solution based on the Conventions general principles or to interpret the latter. . . . They cannot, however, be used as an independent source of gap-filling." See also Drobnig: If general principles on which the Convention is based are not contained in the CISG, "there does not seem to be any room for recourse to the UNIDROIT Principles."

The source of our Ferrari quotation is: Franco Ferrari, "General Principles and International Uniform Commercial Law Conventions, A Study of the 1980 Vienna Sales Convention and the 1988 UNIDROIT Convention on International Factoring and Leasing" (1997) [manuscript on file at the Institute of International Commercial Law of the Pace University School of Law]. The source of the Drobnig quotation is: Ulrich Drobnig, "The Use of Unidroit Principles by National and Supranational Courts," speech delivered on the occasion of a colloquium on International Commercial Contracts and the New Unidroit Principles: A New Law Merchant?, held in Paris, 20-21 October 1994.

10. Members of the UNIDROIT Working Group

Secretary to the Working Group was Lena PETERS of the UNIDROIT Secretariat.

Initially the Working Group also included C. Massimo Bianca (University of Rome I "La Sapienza"); Jerzy Rajski (University of Warsaw; Co-Rapporteur on the preliminary drafts of Chapters 5 and 6); Tony Wade (The Asser Institute at The Hague); Wang Zhenpu (Deputy Director of the Department of Treaties and Law at the Ministry of Foreign Economic Relations and Trade of the Peopleís Republic of China).

11. Other Participants in the Project

The following experts also participated in the project:


Pace Law School Institute of International Commercial Law - Last updated June 30, 2009
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