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Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods

Professor Jacob S. Ziegel, University of Toronto
July 1981

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Article 1

(1) This Convention applies to contracts of sale of goods between parties whose places of business are in different States:

(a) when the States are Contracting States; or

(b) when the rules of private international law lead to the application of the law of a Contracting State.

(2) The fact that the parties have their places of business in different States is to be disregarded whenever this fact does not appear either from the contract or from any dealings between, or from information disclosed by, the parties at any time before or at the conclusion of the contract.

(3) Neither the nationality of the parties nor the civil or commercial character of the parties or of the contract is to be taken into consideration in determining the application of this Convention.

COMMENT

1. Article 1 should be read in conjunction with Articles 2 and 3. Article 1 defines the scope of the CISG; Article 2 excludes certain types of sale, while Article 3 clarifies the application of the Convention to contracts of work and materials.

2. The requirement in Art. 1(1)(a) that the parties must have their places of business in different contracting states means that the mere existence of a foreign element is not sufficient. Thus the fact that the parties have different nationalities or that the contract is to be performed, in whole or in part, in a state other than the state in which the contract was concluded will not be sufficient. "Business" and "places of business" is not defined in the Convention. Article 10 however specifies which place of business applies where a party has more than one, and also that if he does not have a place of business reference is to be made to his "habitual residence". Art. 1(1)(b) also adopts the position that the Convention should apply to parties in non-contracting states where the proper law of the contract is the law of a contracting state. The result is a substantial expansion of the scope of CISG, thus promoting the Convention's goal of maximising the uniformity of international sales law. Assume a contract between a Canadian company and an American company, which is to be governed by the law of the State of New York. If the United States has adopted the convention, CISG, rather than the domestic law of New York, will apply to the contract, assuming the U.S. has not invoked the federal-state clause (Art. 93).

3. Article 1 also raises three definitional problems which should be noted:

(a) It is clear from para. (3) that neither the nationality nor the commercial or civil character of the parties affects the applicability of CISG. The same comprehensiveness also applies to the provincial Sale of Goods Acts. The provincial Acts differ however from CISG in that merchant sellers are subjected to a stricter regime of warranty liability than non-merchants. This distinction is not drawn in CISG. For further discussion of this problem see Art. 35. What is less obvious is whether Art. 1, by referring to the parties' places of business, intends to restrict the scope of CISG to persons in business. The secretariat's commentary does not answer the question directly, but, in the light of Art. 2 and 10 the answer would appear to be no, or at least uncertain.

(b) "Contracts of sale" in Art. 1(1) is not defined. It is defined in the OSGA as an agreement for the transfer of general property in goods for a money consideration called the price. The civilian systems appear to adopt a similar, if not identical, definition. Difficulties may arise however with respect to the application of the test, particularly in the near-sales context, to such agreements as equipment leases, hire-purchase and consignment agreements. The Anglo-Canadian courts, where not otherwise required by statute (as under the Personal Property Security Acts), have generally adopted a fairly strict test whereas the American courts have tended to look at the substantive effect of the agreement. The [Secretariat] Commentary offers no guidance as to the type of test to be applied.

(c) A similar difficulty arises with respect to the meaning of goods. The definition in the Ontario Act (s. 1(1)(g)) excludes choses in action but includes growing crops, fixtures and other things attached to land that are to be severed under the contract of sale. Art. 2 suggests that choses in action (incorporeals) are meant to be excluded in their entirety, but it is not clear to what extent this is true of things attached to land that are intended to be severed under the contract of sale. This could be of some significance in contracts for the sale of agricultural products.

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Pace Law School Institute of International Commercial Law - Last updated April 1, 1999
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