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Reproduced with permission of 17 Journal of Law and Commerce (1998) 365-379

excerpt from

The Neglect of CISG: A Workable Solution

John E. Murray, Jr. [*]

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As we complete a decade of CISG experience, the dilemma continues. Worldwide, the number of adjudications applying, interpreting and construing the Convention is small in relation to the volume of transnational contracts for the sale of goods that have occurred during this decade.[15] In particular, only three significant CISG cases come from United States courts.[16] That number would be incredible even if the Convention were limited to the United States and its NAFTA partners, Canada and Mexico, much less numerous other nation states.[17]

Beyond the small number of applications, the extant CISG case law is anything but a testament to the ability of courts to transcend their particular traditions and pursue the development of those elusive CISG general principles. One American court sees no difference between its domestic parol evidence rule and Article 8(3) of the Convention that allows a court to give due consideration to the negotiations of the parties.[18] While there is some scholarly debate as to whether Article 8(3) rejects the parol evidence rule or is confined to interpretation questions,[19] there is no doubt that CISG does not recognize the parol evidence rule as we know it.[20] Because that court viewed CISG through its domestic lens, however, it provides a distorted image.

In another case involving the extent of liability under CISG, the district court identified CISG as the governing law without citing the applicable CISG Article. Rather, the court cited two U.S. cases, one of which mentions CISG in a footnote.[21] Applying Article 74 of the Convention which limits damages to "what the breaching party foresaw or ought to have foreseen . . . in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach. . .," the court does not refer to any decision of a court from another Contracting State. Instead, it refers to the Restatement (Second) of Contracts,[22] Corbin on Contracts,[23] and precedent from its appellate court.[24]

On appeal, the Second Circuit begins its discussion of CISG with the recognition that its interpretation must be informed by its international character to promote uniformity, particularly "because there is virtually no caselaw under the Convention."[25] It then immediately disavows that principle with the incredible suggestion that "[c]aselaw interpreting analogous provisions of Article 2 of the U.C.C. may also inform a court where the language of the relevant CISG provisions track that of Article 2."[26] As authority for this startling proposition, the court cites the same footnote cited by the lower court from an 1989 opinion by the U.S. Court of International Trade that provides a peripheral mention of CISG, but cannot possibly be said to support the court's assertion.[27] Instead of relying on cases from other Contracting States that discuss Article 74, the court equates Article 74 with the revered foreseeability test of Hadley v. Baxendale [28] that has been incorporated in the Uniform Commercial Code. The court said:

"The Convention provides that a contract plaintiff may collect damages to compensate for the full loss. This includes, but is not limited to, lost profits, subject only to the familiar limitation that the breaching party must have foreseen, or should have foreseen, the loss as a probable consequence. CISG art. 74; see Hadley v. Baxendale. . . ." [29]

This is a consummate illustration of a court unwittingly seeing a provision of the Convention through a domestic lens having just insisted that it must provide an autonomous interpretation. The Article 74 foreseeability limitation is not the equivalent of the "familiar" Hadley v. Baxendale limitation that American judges and lawyers know so well. Article 74 limits consequential damage recovery to those matters which a party "knew or ought to have known as a possible consequence of the breach. . . ."[30] In the court's own words, the familiar Hadley case limits lost profits to those that the breaching party must or should have foreseen "as a probable" consequence.[31] While very similar, the two tests apply different threshold levels.[32] The Article 74 test is broader than the Hadley test. As applied to the facts of this particular case, the result would not change regardless of which test had been applied. The harm, however, is to precedent. We now have a case from a United States Court of Appeals which not only erroneously equates an important CISG principle with a sacred rule of American contract law, but suggests that this process should be pursued whenever a CISG provision "tracks" a U.C.C. provision. This is a directive to view CISG through the lens of domestic law.

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Go to entire text of Murray commentary


FOOTNOTES

* President and Professor of Law, Duquesne University

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15. The total number of judicial applications of CISG worldwide is difficult to determine because of the uneven reporting of cases among Contracting States. While some 200 decisions are known, some undetermined number of additional unreported cases could be added to this number. UNILEX (Transnational Juris Publications Inc.) is a computer data base compiling CISG cases. Another source is CLOUT (Case Law on Uncitral Texts) which are summaries compiled by the UN Commission on International Trade Law. See also Michael R. Will, CISG: The UN Convention on Contracts for the International Sale of Goods, International Bibliography, 1980-1995; The First 150 or So Decisions, 1988-1995 (1995).

16. Delchi Carrier SpA v. Rotorex, 71 F.3d 1024 (2d Cir. 1995); Beijing Metals & Minerals Import/Export Corp. v. American Bus. Ctr., Inc., 993 F.2d 1178 (5th Cir. 1993); Filanto SpA v. Chilewich Intíl Corp., 789 F. Supp. 1229 (S.D.N.Y. 1992).

17. A lexis search reveals that CISG is mentioned in only thirteen U.S. cases, only three of which, cited in the previous note, manifest a significant discussion of CISG. One of the thirteen is the lower court decision in the Rotorex case in note 16, Delchi Carrier, SpA v. Rotorex Corp., U.S. Dist. LEXIS 12820 (N.D.N.Y. 1994). The other nine, at best, contain incidental discussions of CISG (i.e., a court may refer to the Convention in passing or reject an argument as to its application as a procedurally defective afterthought); Attorneys Trust v. Videotape Computer Products, unpublished opinion, 9th Cir., 1996 U.S. App. LEXIS 21792 (belated atempt to insert CISG Ė "too little too late"); Kahn Lucas Lancaster, Inc. v. Lark Intíl Ltd., 1997 U.S. Dist. LEXIS 11916 (S.D.N.Y. 1997) (CISG mentioned in footnote); Helen Kaminski Pty. Ltd. v. Marketing Australian Prod., 1997 U.S. Dist. LEXIS 10630 (S.D.N.Y. 1997) (court refused to apply CISG to goods seller failed to ship under a distributorship agreement); Graves Import Co. v. Chilewich Intíl Corp., 1994 U.S. Dist. LEXIS 10630 (S.D.N.Y. 1997) (CISG mentioned in footnote); S.V. Braun, Inc. v. Alitalia-Linee Aeree Italiane, S.p.A., 1994 Dist. LEXIS 4114 (S.D.N.Y. 1994) (plaintiff could not claim proportionate price reduction under CISG Article 50 where it stipulated goods were conforming); Intertag Co. v. Stafford Phase Corp., 1990 U.S. Dist. LEXIS 6134 (S.D.N.Y. 1990) (CISG mentioned analogously); Orbisphere Corp. v. United States, 726 F. Supp. 1344 (U.S. Court Intíl Trade 1989) (CISG mentioned in footnote); Promaulayko v. Amtorg Trading Corp., 224 N.J. Super. 391, 540 A.2d 893 (N.J. Super. 1988) (CISG mentioned in footnote); GPL Treatment Ltd. v. Louisiana-Pacific Corp., 894 P.2d 470 (Or. Ct. App. 1995) (belated attempt to insert a CISG argument which is mentioned in a dissenting opinion footnote). Germany and Holland appear to apply CISG with the greatest frequency. One scholar attributes this phenomenon to the prior experience of courts in these countries with previous conventions dealing with uniform sales laws, such as the two Hague Conventions, as contrasted with France which has barely applied CISG and had not ratified the Hague Conventions. The same author admits, however, that Italy, which had ratified the Hague Conventions, has rarely applied CISG. Claude Witz, Les Premieres Applications Jurisprudentielles du Droit Uniforme de la Vente Internationale 18 (1995).

18. Beijing Metals & Minerals Import/Export Corp. v. American Bus. Ctr., Inc., 993 F.2d 1178 (5th Cir. 1993). CISG, art. 8(3).

19. Ronald A. Brand & Harry M. Fletchner, Arbitration and Contract Formation in International Trade: First Interpretations of the U.N. Sales Convention, 12 J.L. & Com. 239, 251-52 (1993).

20. In Filanto, SpA v. Chilewich Intíl Corp., 789 F. Supp. 1229, 1238 n.7 (S.D.N.Y. 1992), the opinion states, "It should be noted that . . . the Convention essentially rejects both the Statute of Frauds and the parol evidence rule."

21. The court cites Filanto, 789 F. Supp. 1229, and Orbisphere, 726 F. Supp. 1344 (the footnote reference).

22. Restatement (Second) of Contracts ß 331.

23. Arthur Corbin, 5 Corbin on Contracts ß 1020 (1951).

24. Merlite Indus., Inc. v. Vlassis Inserts, Inc., 12 F.3d 373, 376 (2d Cir. 1993).

25. Delchi Carrier SpA v. Rotorex Corp., 71 F.3rd 1024, 1027-1028 (2d Cir. 1995).

26. Id.

27. Orbisphere, 726 F. Supp. at 1356.

28. 156 Eng. Rep. 145 (1854).

29. Delchi Carrier SpA v. Rotorex Corp., 71 F.3d 1024, 1030 (2d Cir. 1995) (emphasis supplied).

30. CISG, art. 74.

31. See Delchi, 71 F.3d at 1030.

32. V. Susanne Cook, The U.N. Convention on Contracts for the International Sale of Goods: A Mandate to Abandon Legal Ethnocentricity, 16 J.L. & Com. 257, 260 (1997).

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Pace Law School Institute of International Commercial Law - Last updated August 16, 1999
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