Go to Database Directory || Go to CISG Table of Contents


REASONABLENESS

Overview comments

Editor: Albert H. Kritzer

Reasonableness is specifically mentioned in thirty-seven provisions of the CISG and clearly alluded to elsewhere in the Uniform Sales Law. Reasonableness is a general principle of the CISG. For confirming citations, see views of commentators on references to reasonableness in the CISG.

Although not specifically defined in the CISG, reasonableness is so defined in the Principles of European Contract Law. Moreover, the PECL definition of reasonableness also fits the manner in which this concept is used in the CISG. This definition can help researchers apply reasonableness to the CISG provisions in which it is specifically mentioned and as a general principle of the CISG.

As a general principle of the CISG, reasonableness has a strong bearing on the proper interpretation of all provisions of the CISG. No provision of any law can purport to expressly settle all questions concerning matters governed by it. The CISG recognizes this and provides in its Article 7(2):

Part One:   Such matters are to be settled in conformity with the general principles on which the CISG is based.

       [Reasonableness, we submit, is one of the most fundamental principles on which the CISG is based.]

Part Two:   In the absence of general principles on which the CISG is based, such matters are to be settled in

       conformity with the law applicable by virtue of the rules of private international law.

There is much doctrine in support of the good-faith and uniform-law logic of seeking to apply Part One of Article 7(2) in lieu of its Part Two, wherever it is reasonable to do so -- see, for example, the scholarly writings cited with our Annotated text of Article 7. We submit that regarding reasonableness as a fundamental principle of the CISG and reading reasonableness into every article of the CISG, whether specifically mentioned in the article or not, helps tilt the scales in favor of Part One rather than Part Two applications of Article 7(2) -- a tilting of scales that we submit is required by virtue of the good-faith and uniform-law mandate recited in Article 7(1) of the CISG.


Definition of reasonableness recited in the PECL

PECL Article 1:302
(complete and revised version 1998)

Under these Principles reasonableness is to be judged by what persons acting in good faith and in the same situation as the parties would consider to be reasonable. In particular, in assessing what is reasonable the nature and purpose of the contract, the circumstances of the case and the usages and practices of the trades or professions involved should be taken into account.


Comment and notes on PECL 1:302

Like the commentary to the UNIDROIT Principles and the U.S. Restatements, the comments to the PECL help explain the meaning of the text. The PECL notes identify civil and common law antecedents and related domestic provisions. With the permission of the Commission on European Contract Law, the comments and notes to this PECL provision are presented below. The source of this material is Ole Lando & Hugh Beale eds., Principles of European Contract Law: Parts I and II, Kluwer Law International (2000) 126-128.


COMMENT

A. The terms "reasonable" and "unreasonable" in the Principles

(1) "Reasonable"

In these Principles the term reasonable is used to express various requirements, for example:

- What may one expect a party to know or to take into account? Articles 1:303(4), 2:102, 2:202(3), 3:201(3), 3:206, 3:209(3), 5:101(3), 6:111(2)(a), 8:103(2), 8:108(1) and 9:503.

- How long may a party wait to act? Articles 2:206(2) and (3), 3:203, 7:109(2), 7:102(3), 8:106(3), 8:105(2), 8:108(3), 9:303(2) and (3) and 9:506.

- How long may the parties take to reach agreement? Article 6:111(3).

- How long should the notice be? Articles 4:113(1) and (2), 6:109 and 8:104(3).

- Is a price or a term equitable? Articles 4:105(3), 4:115, 6:104, 6:105, 6:106(2), 7:110(2)(a) and (b), 9:101(2)(a), 9:506 and 9:509(2). [page 126]

- Which efforts can one expect a party to make? Articles 7:110(1), 9:102(2)(d) and 9:505(1).

- Is there a proportionate relationship between value and effort? Article 7:110(3).

- Is there a proportionate relationship between the seriousness of the non-performance and the remedy exercised? Article 9:201(1).

- How great is the likelihood of a future contingency? Article 1:303(2), 8:105(1) and 9:501(2)(b).

See also Article 6:108.

(ii) "Unreasonable"

The term unreasonable is used:

- To explain how great a nuisance a party must suffer from the other party's behaviour: Article 7:103.

- What constitutes an unconscionable usage or an unreasonable term: Articles 1:105(2), 6:105, and 6:106(2).

- Whether there is a proportionate relationship between value and cost (unreasonably expensive): Article 7:110(1).

- What constitutes an unreasonable omission? Article 9:303(3)(b).

- What makes the burden upon the party too great: Article 9:101(2)(b) and 9:102(2)(b).

B. Standards to measure reasonableness

Reasonableness in the contexts of the Articles mentioned in Comment A is to be judged by what parties acting in good faith and the same situation as the parties would consider to be reasonable.

In deciding what is reasonable all relevant factors should be taken into consideration. Account should be taken of the nature and purpose of the contract. Thus the period of time within which a notice of termination under Article 9:303 must be given will depend upon whether the contract requires quick action by the aggrieved party. This may be the case if by deferring the notice it may take advantage of price fluctuations which are frequent in the trade.

The circumstances of the case will have to be considered. Thus the notice to end a distributorship contract made to last for an indefinite period of time, see Article 6:109, is longer when the contract has lasted for a long period, or when the distributor has made considerable investments in the performance of the contract, and shorter if the contract has not lasted for a long period or if the distributor has made few or no investments.

Furthermore, the usages and practices of the trade or profession should be taken into account. These generally reflect the behaviour of reasonable parties. Thus, in determining whether a price or another contractual term is reasonable for the purpose of Articles 6:104, 6:105 or 6:106(2) comparable contracts made in analogous situations should be considered. Also here the nature and the purpose of the contract, the status of the parties, and the practices and usages in the trade or profession concerned should be taken into account. [page 127]

NOTES: PECL art. 1:302 [Match-ups with Continental and Common Law domestic rules, doctrine and jurisprudence]

Article 1:302 expresses what seems to be the common core of the legal systems. There is, as far as is known, no statutory provision of this kind in any of the Member States. Some provisions of the UNITED KINGDOM Unfair Contract Terms Act 1977 refer to "the requirements of reasonableness", and to what is "fair and reasonable", to describe under which circumstances a contract term excluding or limiting liability may be enforced. Schedule 2 of the Act gives "guidelines" for the application of this reasonableness test. However, these guidelines are linked to the special problems relating to clauses excluding or limiting liability. For the interpretation of Article 8:109 on terms limiting or excluding liability, see the Comment to that provision. On the Unfair Contract Terms Act and Schedule 2, see Cheshire, Fifoot & Furmston 193-196 and Chitty I 14-045 ff. and 14-068 ff. Similar but less extensive statutory provisions on "reasonableness" exist in IRELAND, Sale of Goods and Supply of Services Act 1980, see Clark 172; and some of the criteria referred to in Article 1:302 will be found in the general fairness rule of Contract Acts 36 in FINLAND and SWEDEN.

DUTCH BW art. 3:12 states that: "In determining what reasonableness and equity require, reference must be made to generally accepted principles of law, to current juridical views in the Netherlands and to the particular societal and private interests involved." This appears to have a broader application than Article 1:302. [page 128]

Go to PECL Bibliography || Go to PECL Schedule of Abbreviations
Go to full texts of Parts I & II of Principles of European Contract Law


Views of commentators on references to reasonableness in the CISG

Jelena Vilus

In her commentary on Common Law Institutions in the United Nations Sales Convention, [*] Jelena Vilus states:

"The term 'reasonable person' is an institute of the common law system and after it has been introduced for the first time into the Hague Uniform Law on International Sales (ULIS), [25] it had provoked stormy reaction on the part of the lawyers of the civil law system. Professor A. Tunc in his Commentary of Article 9 of the ULIS considers that assessing the conduct of 'a reasonable person' (reasonable man) according to 'the situation proper to the other party' covers both the character and the factual situation that person is in. [26] Independently of numerous remarks addressed to the UNCITRAL regarding the provision on 'reasonable person' from the ULIS, that standard has remained also in the UN Convention on International Sale. Undoubtedly, in this respect the most significant is Article 8 by which criteria are determined for the interpretation of the contract. According to that article, 'statements made by, and other conduct of, a party are to be interpreted according to his intent where the other party knew or could not have been unaware what the intent was'. Further text in the same article goes on for the case of an impossibility to apply that rule while stating that 'statements made by, and other conduct of, a party are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances'.

"In contrast to that criterion which is taken over from the common law system, the civil law system usually speaks of 'a bonus pater familias' or 'good businessman'.[**]

"One should emphasize that it is good that the criterion of 'a reasonable person' is followed by the sentence according to which his conduct shall be assessed in conformity with the conduct of a person 'of the same kind'.[27] It was considered that these additional words would make the reasonable person criterion more impartial, since it was related to a person engaged in the same branch of business, or in the same trade, etc.

"Professor Farnsworth considers that the formulation in paragraph 2 of Article 8 is good since it is not given in an abstract way, instead being specifically related to the conduct of the specific party. This author further elaborates that a judge shall have regard as to whether the other party is of the same technical quality, whether he speaks the same language [28] and altogether, whether and to what degree there exists the similarity between the two persons whose conduct has to be compared with one another.

"Additional criteria are formulated in paragraph 2 of Article 8 which are to be used while determining the conduct (intentions) of the other party and defining 'a reasonable person of the same kind as the other party'. Circumstances of the case, negotiations, practices and subsequent conduct of the parties are listed as exempli causa, namely as examples of additional criteria while determining the intents of the contracting parties which, however, does not mean that a judge or an arbitrator should not take into consideration some other facts, too, which according to their opinion could be relevant."[29]


FOOTNOTES

* In Homenaje a Jorge Barrera Graf, Bd. 2, Mexico: Universidad Nacional Autóma de Mexico (1989) 1440-1441.

25. See art. 9 concerning the usages and their application in case when the contracting party did not refer to them explicitly.

26. Tunc, A. Commentary of the Hague Convention on International Sale of Goods, The Hague, 1966, p. 26.

** In a similar vein, Zuppi refers to the Latin pater familiae as "equivalent to the CISG's reasonable man", citing as an implementation of the concept Art. 947 of the Codigo de Comercio of El Salvador which provides that all commercial duties must be performed with the diligence of a good commercial man in his own business. Alberto L. Zuppi, A Comparison of Buyer's Remedies Under the CISG with the Latin American Legal Tradition, Pace Review of the Convention on Contracts for the International Sale of Goods (CISG) 1998, Kluwer Law International (1999) 31 and n.124.

27. During the debate on this question the views were divided as to whether the English expression "acting in the same capacity" is equivalent to the French expression referring to persons "de même qualité". One may wonder, indeed, as to what will happen with the translation of these terms into the other languages.

28. Farnsworth, A. Interpretation of the Contract, [Bianca-Bonell Commentary, Milan: Giuffré (1987)], no. 5 at p. 99.

29. Paragraph 3 of art. 8 of the UN Sales Convention was inspired by art. 9 (para. 3 of ULIS which laid down the instruction of interpretation of the "expressions, provisions or forms of contract commonly used in commercial practice". Their interpretation, according the ULIS, shall be "according to the meaning usually given to them in the trade concerned".


References to reasonableness by Schlechtriem, van der Velden, Maskow, Bonell, Honnold

Citing the numerous references to reasonableness in the CISG ["arts. 46(3) sentences 1 and 2, 49(2), 63(1), 65(2), 72(1), 73(2), 75, 77, 79(1), 85 sentence 1, 87, 88(1), 88(2) and 88(3)"] Schlechtriem states that "the rule that the parties must conduct themselves according to the standard of the 'reasonable person' . . . must be regarded as a general principle of the Convention".[1]

References to reasonableness may also be found in arts. 8(2) and (3), 16(2)(b), 18(2), 25, 33(c), 34, 35(1)(b), 37, 38(3), 39(1), 43(1), 44, 47(1), 48(1) and (2), 60(a), 64(2)(b), 72(2), 76(2), 79(4) and 86(1). For extrapolations of the concept of the "reasonable person" to still other parts of the CISG -- arts. 9 and 74, for example -- see van der Velden [2] who also cites Tesa v. Amram [3] as an illustrative judicial precedent for reasonableness as a general principle of the Convention. The issue before the court was the reasonableness of the length of the period of time set for payment according to article 62, section 2, ULIS. The court stated: "The Uniform Law on International Sale . . . uses in its articles 10, 11, 13, 22, 26(1), 26(4), 37, 42(2), 61(2), 66(2), 74, 88 and 91 the words 'reasonable', 'unreasonable' and 'reasonably'; 'reasonableness' is therefore one of the general principles by which, in accordance with Article 17 ULIS, the questions not expressly settled in the uniform sales law shall be answered. . . ."[4]

Van der Velden interprets the concept of reasonableness as connoting, among other things, "an ethical standard of behavior so that [one] must . . . be judicious and fair".[5] Maskow calls attention to the fact that reasonableness is to be defined according to its meaning in socialist, developing and developed market economy countries, not simply in developed market-economy countries.[6] Bonell also states that "in applying . . . the 'reasonableness' test in order to determine whether a party in a particular circumstance has been (re-)acting with due diligence, a judge of a highly industrialized country may not automatically refer to the standards of care and professional skill normally required from national business people in domestic affairs. The answer should be found either in the Convention itself or at least on the basis of standards which are currently adopted also in other legal systems."[7]

Honnold states that "What is 'reasonable' can appropriately be determined by ascertaining what is normal and acceptable in the relevant trade. This approach is analogous to and is supported by article 9, which provides that contractual obligations include 'practices established by the parties and usages . . . in the particular trade'."[8]


FOOTNOTES

1. Peter Schlechtriem, Uniform Sales Law: The UN Convention on Contracts for the International Sale of Goods, Vienna: Manz (1986) 39 and 22 n.41.

2. Frans J.A. van der Velden, The Law of International Sales: The Hague Conventions 1964 and the UNCITRAL Uniform Sales Code 1980 -- Some Main Items Compared, in: Voskuil & Wade eds., Hague-Zagreb Essays 4 on the Law of International Trade, The Hague: Nijhoff (1983) 59.

3. Gerechtshof Amsterdam, 5 January 1976, S&S 1978, 79.

4. The source of this translation is van der Velden, Indications of the Interpretation by Dutch Courts of the United Nations Convention on Contracts for the International Sale of Goods 1980, in: Gerver, Hondius & Steenhoff, eds., Netherlands Reports to the Twelfth International Congress of Comparative Law - Sydney/Melbourne 1986, The Hague: Asser Instituut/Nijhoff (1987) 44 n.42.

5. Van der Velden, note 2, supra at 52.

6. Dietrich Maskow, The Convention on the International Sale of Goods from the Perspective of the Socialist Countries, in: La Vendita Internazionale, Milan: Giuffrè (1986) 58-59.

7. Michael Joachim Bonell, Article 7: Interpretation, Gap-filling, in: Bianca-Bonell Commentary, Milan: Giuffrè (1987) 81-82.

8. John O. Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention, 3d ed., Kluwer Law International (1999) 101.


© Pace Law School Institute of International Commercial Law - Last updated January 23, 2001
Go to Database Directory || Go to CISG Table of Contents
Comments/Contributions