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Problems of Unification of International Sales Law, Working papers submitted to the Colloquium of the International Association of Legal Science, Potsdam, August 1979, Oceana Publications (1980) 53-103. Reproduced with permission of Oceana.

[The context of this commentary is the 1978 Draft of the CISG, not the final text of the CISG.]

The Rules of the Convention Relating to Its
Field of Application and to Its Interpretation

László Réczei


The antecedents of the DRAFT
Principles and their invalidation
The new DRAFT
The sphere of application of ULIS and the DRAFT
Application by way of conflict rules
Application by exclusion of the conflict rule
Open gate to the non-acceding countries
The solution of the DRAFT
The open gate of the DRAFT
Limitations of application
Contracts exempted from under the Convention
Delimitation of contracts other than such sales
The Autonomy of the contracting parties
Usages and practices

I. The antecedents of the DRAFT

(1) It was debated on in the third session of UNCITRAL in 1970, how the Working Group appointed in the year before should proceed with the elaboration of the convention on the international sales of goods. The discussions centered round the wording of the Convention approved at the Hague on the subject matter in 1964. The delegations of a number of countries which took part in formulating the Hague text (hereinafter ULIS), now as members of the Working Group undertook the formulation of a new convention. There were several delegations which thought that the text of ULIS was unacceptable even as the underlying instrument of the discussions and brought forward suggestions for the elaboration of a wholly new, unambiguous, concise wording. Other delegations voiced that the Working Group should set out from the text of ULIS, and that until the new wording was completed UNCITRAL should bring forward recommendations to the member states of the United Nations to ratify ULIS in its present form.[1]

Eventually UNCITRAL agreed that the wording of ULIS was appropriate for serving as the underlying document for the elaboration of a uniform convention on sales which would be acceptable for a considerable majority of states. Consequently the elaboration of the wording began as the revision of ULIS and the session advised the Working Group that "Instead of selected items the Working Group should consider ULIS systematically, chapter by chapter, giving priority to Articles 1-17."[2] [page 53]

(2) The doubt as to the wording of ULIS wAS not wholly unfounded. At that time ULIS was not yet in operation, for until 1970 only three states had ratified it.[3]

It was only after the fifth ratification that ULIS came into operation on 18th August, 1972, and the assumption cannot wholly be dismissed that ratification and operation were to some extent accelerated by the work UNCITRAL had taken up.

On the other hand it is possible that exactly the work UNCITRAL began detained other governments from ratifying ULIS thus forestalling the birth of a highly complicated legal situation which might be brought about should a definite country become the signatory to two "uniform" and "universal" conventions, to conventions namely which would bring under regulation one and the same question in a divergent form.[4]

It cannot be doubted, however, that opinions differ as to the applicability and utility of ULIS.[5] Still, due to the fact that through the accession of eight states ULIS has come into operation, this instrument in a high measure excels among the conventions signed in the latter quarter of a century, conventions namely which had as their goal the settlement of yet other questions associated with international sales and which had not come into operation to the present day.[6]

(3) It is not the objective of the present paper by weighing the pros and cons of ULIS to come to any definite conclusions. Although as participant of the Hague Conference the present author has been impressed differently, he would nevertheless agree with Professor André Tunc that ULIS is the product of creative activities rather than of a compromise.[7]

However practice tends to demonstrate that Professor Tunc has exaggerated the significance of the positive opinions formed of ULIS.[8] The rigor commercialis which ULIS has luckily brought close to the law merchant of the most developed capitalist countries has had a deterrent effect on the developing countries which have become connected with world trade only of late.[9] [page 54] Ratification of ULIS would stumble upon difficulties even in the socialist countries. The approach which would have the termination of the contract as the first sanction of a breach of contract cannot be reconciled with planned economy whose targets can be achieved by the performance of the contract and not by its termination.

II. Principles and their invalidation

(4) The principles which prevailed in the conference drawing up ULIS have served as guidance also for those formulating the UNCITRAL draft. Such principles are e.g. the yet wider application of the convention, and what follows from it: the restricted recourse to the municipal laws, the exclusion of the conflicts of laws, the full, or nearly full, autonomy of the parties, in the hierarchical order the contract, custom, etc. preceding the uniform law, etc.

All these principles have, however, forfeited some of their force by the circumstance that the word of ULIS has opened the gates to reservations of which the signatories can at their option select such as would relegate the applicability of the convention to exceptional cases. International conventions as a rule set up barriers to the operation of the municipal law. A legal relationship coming within the sphere of an international convention cannot be governed by a municipal law. This is the case even more with conventions which have as their goal the unification of law. If the convention gives way to reservations which disagree with this goal, this might lead to the frustration of the convention, still in any case they will retard the process of unification.

(5) Of the reservations[10] of the convention in particular the one incorporated in Article V deserve special mention. This reservation does not only prevent the application of the uniform law within as wide as possible a domain, but even calls into doubt the efficacy of the law as law by the circumstance that the application of the uniform law of sales has been made dependent only on the express contractual stipulation of the parties. [page 55]

A law becomes law by its automatic application. Permissive law is permissive only for the parties, for the judge such a distinction is unthinkable. He will be bound by all laws with equal force. Still permissive law will bind him only if the parties have not agreed to the contrary in their contract. Still in matters not provided for by the contract the law will automatically settle the situation of the parties. If the judge cannot apply the law unless the contract of the parties permits him to do so, the judge will observe the law due to the will of the parties and not that of the State, i.e. in the same way as any other contractual stipulation of the parties. By this ULIS has become a certain type of contract, not even "foreign law", for foreign law may be chosen by implication, yet according to this reservation ULIS requires express choice.[11]

(6) The prevention of the automatic application of the uniform law even Counted during the elaboration of UNCITRAL text. An amendment came to be brought forward according to which the law would apply to a transaction only if it was made so applicable by the parties ..."[12] One of the member states pointed out in its comments that "states could be reluctant to accede to the Convention, if its application is automatic ..."[13] and suggested to supplement the wording by the words "by express statements."

The Working Group did not though admit the recommendations, still this indicates that the universal acceptance of the UNCITRAL draft will not be plain sailing. There is still the struggle ahead for deciding whether the contract should be made subject to the uniform law, or whether the application of the uniform law should be made dependent on the will of the parties.

(7) This issue is not the counterpart of the one whether or not the parties may preclude the application of the uniform law (Article 5 of the DRAFT). This would namely amount to the recognition and the reinforcement of the autonomy of the parties which would empower them to designate [page 56] the law governing the contract (and by this preclude the application of another law). By their precluding the application of the convention by virtue of Article 5 of the DRAFT the parties subject the contract to the law applicable in conformity with the conflict law of the forum. And the application of this law takes place automatically, provided that the parties have not precluded the application of the convention by recourse to another law.[14]

Still if the court of the country of one or the other signatory to the convention cannot apply the convention unless the parties agree thereto in their contract, then notwithstanding the convention the judge will automatically apply the municipal law whose scope of operation exactly the convention intends to restrict.[15]

It may be taken for certain that in the diplomat conference to be convened in the matter of the UNCITRAL Draft this question will come up for discussion.

(8) The judicial practice of the courts of the Federal Republic of Germany serves the ends of universality more efficiently.[16] In the opinion of this author the courts correctly give a restrictive interpretation of Article 3 of ULIS. In a given case the contracting parties have stipulated the municipal law of the Federal Republic of Germany as the law governing their contract, but have failed to specify whether they subject their contract to the municipal law of the Federal Republic or to ULIS. The court has applied ULIS. In other cases the court did not consider ULIS precluded by the parties, which appeared from the fact that the parties did not even know of the existence of ULIS when they had made their contract.[17]

III. The new Draft

(9) The Draft of UNICTRAL is shorter, more concise, and though its sanctions are not milder, the regulation serves better its end, namely the preservation of the validity of the contract. [page 57] In other words the authors of the Draft have tried to find other solutions for those which detained the developing and the socialist countries from acceding to ULIS. The Swedish government, whose delegation played a prominent role in the elaboration of ULIS in its comments on the UNCITRAL Draft admits that "the draft must be regarded as a considerable improvement on the 1964 Hague Convention relating to a Uniform Law on the International Sale of Goods (ULIS)".[18]

(10) UNCITRAL has instructed the Working Group it has appointed in the course of a revision of the text of ULIS to give priority to Articles 1-17.[19] These Articles define the scope of application of the Uniform Law and the rules to be observed for its interpretation. The UNCITRAL Draft settles these questions in Articles 1 to 11. In both instances Article 1 provides the positive conditions for application. A comparison of the two would be even more useful if we kept in mind the ends and principles which guided the makers of ULIS. Such are, e.g. the achievement of the accession of the possibly largest number of countries, the application of the convention even when the states of the contracting parties have not ratified it, the nonmandatory character of ULIS, the guarantee of the unity of interpretation, in this respect the preclusion of the application of both the law of the forum and of the law governing the contract according to the conflict rules. It is the consequence of the permissive nature of ULIS that any stipulation relying on the express, tacit, or implied agreement of the parties has priority before the provisions of ULIS. The statement may, therefore, be made that ULIS is the last member of a hierarchical sequence. In the hierarchical sequence the following have priority before ULIS:

  1. the contract of the parties;

  2. the practices established in the dealings of the contracting parties;

  3. usages, international or national;

  4. the expressly or impliedly accepted standard forms; [page 58]

  5. in the event of Article 4 of ULIS all municipal mandatory rules which would be applied had not the parties subjected their contract to ULIS;

  6. thereafter recourse may be had to ULIS as a residuary set of rules.

Basically this hierarchical order is in agreement with the situation prevailing in the majority of states. What gives rise to misgivings in the case of ULIS is the "international" character of the legal relationship and the want of establish and concise definition of commercial usages. Section 2 of Article 9 does not distinguish between the usages of the home market and those of an international character and opens the gates to recourse to a usage which was known perhaps to neither party, if contracting parties in general applied this usage to their contract. The expedient was sharply criticized by Yugoslavia in the debate on the UNCITRAL text,[20] and by Professor Eörsi in the analysis of ULIS.[21]

If this we now add to reservations ULIS recognize we may have a fair idea of the circumstance that the law of international trade compiled with the idea of universality may be resorted to in practice in exceptional cases only. Naturally it cannot be predicted which reservations will be agreed on by the diplomatic conference to be convened on the UNCITRAL Draft. Still it would not be the proper course to take over the reservations in the way of the application of ULIS those which put obstacles in the way of the application of the convention within the widest possible sphere.

IV. The sphere of application of ULIS and the Draft

(11) Article 1 of ULIS makes the application of the uniform law dependent on the joint presence of subjective and objective conditions. The subjective condition demands that the places of business of the contracting parties should be in different countries irrespective of the nationality of the parties and of whether these countries are signatories or not. [page 59] The presence of a single of the three objective conditions by the side of the subjective condition suffices. The three conditions are (1) carriage of goods from one country to another; (2) offer and acceptance have been effected in the territories of different States; (3) the goods must be delivered to a country other than the one where offer and acceptance have been effected.[22]

V. Application by way of conflict rules

(12) It is an item in the historical past of the ULIS text that according to earlier drafts, before 1964, the uniform law will be applicable only when in conformity with the conflict rule of the forum, the law of a State which is signatory to the convention has to be applied.

According to this earlier concept the mechanism would have operated as follows: above all the forum settles the conflict in conformity with its own municipal conflict law or with rules based upon an international convention. If these suggest the law of a country which is signatory to the convention, then recourse will be had to ULIS and not to the general rules of sales of the respective country. This is of necessity followed by a question of qualification: it has to be decided whether the deal of the parties is a sales contract coming within the purview of ULIS. Naturally this can be decided only on the grounds of ULIS (secondary qualification) and if the decision is a positive one the dispute can be settled in its substance.

VI. Application by exclusion of the conflict rule

(13) The conference of 1964 thought that this solution was fraught with a high degree of complexity and by accepting the recommendation of the Federal Republic of Germany decided that the application of ULIS should be achieved without recourse to the conflict rule. [page 60] The delegation of the Federal Republic of Germany proposed that the courts of the contracting states should apply ULIS to international sales by setting aside any other questions. This proposal was then supplemented by one for a compromise, which agreed to have recourse to the reservations in Article III of the Convention, i.e. that a contracting country should apply ULIS only to deals with merchants having their place of business in the territory of other contracting state.[23]

Accordingly the application of ULIS became unconditional, and Article 2 categorically preclude the recourse to the rules of private international law once ULIS was applied.

Since at that time already a number of states undertook in conventions to establish the law governing international contracts of sales in conformity with uniform conflict rules,[24] and declined to withdraw from the conventions, as a compromise the path was opened to recourse to the reservation in Article IV of the Convention.

Hence the "uniformity" of the uniform law was undermined by giving possibility to recourse to the reservations in Articles II, III and IV, at the very outset. The acceding state could, in a manner departing from the wording of the Convention, determine when it regarded the other state as "different" make the application of ULIS dependent on the provision of the conflict of laws, and narrow down the sphere of application by applying the uniform law only against another contracting country.

VII. Open gate to the non-acceding countries

(14) The recommendation of the Federal Republic of Germany met the demand for universality and would have advanced the spread of ULIS. Apart from the reservations it suffices to point out that ULIS is part and parcel of the municipal law of the judge and he can apply it even when the country of neither contracting party has ratified the Convention and even when besides the establishment of jurisdiction the country of the judge has nothing more to do with the deal.[25] [page 61]

This is a novel "legal effect" in the law of international contracts. All that a country can do according to the dominant opinion is to apply a convention it has ratified to the other acceding country. A foreign convention cannot be forced upon a non-acceding country, and if there are benefits stipulated in the convention, a non-signatory state cannot be granted a share in it. This difficulty can be eliminated according to ULIS when the acceding country incorporates ULIS into its own legislation, or promulgates it as such (Article II of the Convention).[26]

(15) The misgiving that ULIS is applicable to merchants of countries which have not ratified the Convention does not concern the states that have ratified it. They have acceded to the Convention exactly because they want to apply it to themselves and also to others.[27]

If the merchants of the non-acceding countries are desirous to avoid the application of ULIS to their contracts, they have to avoid the court in an acceding country which at the ratification waived the reservation in Article III of the Convention, i.e. to apply the Convention only to another contracting country only.[28] [29]

Naturally this is not a safe method for the merchant of a non-signatory state to avoid the application of ULIS. The Federal Republic of Germany has ratified ULIS with the reservation provided in Article III: the German court will not apply ULIS to a case arisen between a German merchant and an alien whose country is not signatory to the Convention. Still in this case the law according to the German conflict rule will have to be applied. If according to the German conflict rule the law of a signatory governs the case which has not made use of the reservation in Article III, then the German court will, though by a roundabout way, nevertheless apply ULIS.[30] [page 62]

(16) Hence ULIS will have to be applied:

(1) between two signatory countries;

(2) between a signatory and non-signatory when the forum is in the signatory country;

(3) between two non-signatories if the forum is in the territory of a signatory;

(4) if neither the country of the forum is a signatory, still in conformity with its conflicts law the law of a signatory has to be applied to the sales contract; (?)

(5) if in conformity with Article IV the parties stipulate that application of ULIS (?) .

In the following cases ULIS cannot be applied:

(1) between two countries if either of them has made use of the reservations in Article II, IV or V;

(2) between a signatory and non-signatory state if the signatory state has made use of the reservation in Article III;

(3) if the contracting parties preclude the application of ULIS (Article 3 of ULIS).

This multifariousness of the conditions of the application calls into doubt the success of ULIS as a legislation bringing under regulation international sale with a uniform rule.

VIII. The solution of the DRAFT

(17) Much criticism has been brought forward against the provision of ULIS which precludes the preliminary settlement of a conflict among the conditions of the application of the uniform law.[31] There are opinions which want to know that this is the reason why the developing countries have declined to accede to ULIS. Also this may account for the demand on the part of UNCITRAL for the revision of ULIS. [page 63] Still the concept again prevailed in the conference of 1974, which discussed the wording of the Convention on Limitations.

The UNCITRAL DRAFT, in its Article 1, defines the scope of application as follows: "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;

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

Hence the DRAFT has taken over the subjective condition of ULIS: the places of business of the contradicting parties are in two different states application is precluded between enterprises operating in the same country. The nationals cannot avoid the rule of their municipal law, except when it is agreed to by the permissive rules of municipal law.

Similarly the DRAFT has taken over the expedient that in the mutual relationship between two contracting states the Convention has to be applied unconditionally and it would be wrong if the application of the Convention would be dependent on whether the conflict rule of the contracting countries or of either of them "approved" the application of the Convention. The approval of this expedient superseded the maintenance of the preservation in Article II of ULIS.

Hence for the DRAFT it is sufficient for the application of the uniform law that the contracting parties have their places of business in two different countries ratifying the Convention. The objective condition is implied in the circumstance that the states of the contracting parties are signatories and not in the transaction of the parties. ULIS demands for the establishment of the presence of the subjective condition also that of any of the three objective conditions (see (11) supra): (1) delivery of goods beyond the frontier; (2) offer-acceptance across the frontier; (3) close of the deal and performance in two different countries. [33][page 64]

(18) Is the scope of application of the DRAFT wider than that of ULIS with the abandonment of these conditions? We hardly believe that this is the case. No doubt it is the common goal of both instruments to bring about the uniform regulation of the international sale of goods. Neither the Convention nor the DRAFT defines in a positive form what a sales contract exactly is.[32a] Nor do the three objective conditions of ULIS help us to a definition of the concept of a sales contract, still they define which contract should be regarded as "international". ULIS uses a rule of extreme complexity to define this notion, which is perhaps the least contested questions in international judicial practice. Since the following articles of both ULIS and the DRAFT withdraw certain types of the sales contract from the ruling of the uniform law, therefore if there is incongruity between the spheres of application of the two instruments for this the articles creating exceptions account rather than the article 1 of the two.

Condition (a) of Article 1 will come into full operation only when the forum is also in the one or the other contracting country. In the court of a third, non-contracting country, the Convention cannot preclude the application of the conflicts law of the forum. The DRAFT will not come into operation if a lawsuit is instituted in such a country and in conformity with the conflicts law of that country the law of the forum or of another non-contracting country will be applicable. This possibility, however, applies also to signatories of ULIS. It may occur, however, that in conformity with the law of the forum the law of the one or the other contracting party will be applicable. In this case the judge of the non-contracting country will decide the case in accordance of the rule that a foreign law has to be applied in the same way as the judge of the foreign country would apply it.

Hence condition (a) of Article 1 restricts the sphere of operation of the law to the contracting countries. [page 65]

IX. The open gate of the DRAFT

(19) In conformity with paragraph (b) of Article 1 for the application of the DRAFT it suffices that even if the contracting parties have no place of business in the contracting country under the conflict rule of the forum the law of a country has to be applied which has become signatory to the Convention. This will, of course, hold only when the subjective condition of Article 1 has also been met, i.e. the places of business of the parties to the contract are in different countries.

Here we are: the appetite of the DRAFT is not much smaller than that of ULIS. It is applicable also in cases where neither the parties, nor the judge is in a contracting state, still in conformity with the conflict rule the law of a country has to be applied that has acceded to the Convention. Can the forum stem this appetite? Is it lawful that when the countries of the judge and of the two litigants are non-contracting countries, the case should be determined on the grounds of a convention the countries in question have never ratified? Or is it in agreement with the law that the judge applies the foreign law in the same way as the foreign judge? And what will the situation be when under the conflict rule of the signatory state to the DRAFT Convention it is not the law of that state that will prevail? This amounts to a case of renvoi still it may occur that the law of the forum precludes the renvoi. If in such a case the forum of the non-contracting country ignores the renvoi, then it would not determine the case as the judge of the foreign law would have determined it. On the other hand if this forum takes into account the renvoi, then it would infringe its own law.

Paragraph (b) of Article 1 gave rise to protracted disputes and provoked a series of counterproposals. [page 66] There were delegates who would have the whole of paragraph (b) discarded. Still there were others who brought forward less ambitious suggestions according to which the uniform law would not be applicable unless the conflicts law of the one or the other contracting state decrees its application.[34]

X. Limitations of application

(20) One of the barriers to the application of paragraphs (a) and (b) has been set up by section (2) of Article 1. Accordingly either contracting party has to acquire, in the one way or the other, knowledge of the fact that the place of business of the party contracting with him is in a foreign country. If an agent of the same country as the first contracting party closes the deal and fails to disclose his principal in the other country, no recourse can be had to the Convention when only after the making of the contract the foreign nationality of the principal will become known. In other words, if there are no external signs which would inform the contracting party of the "international" character of the transaction, thus the Convention must not be applied. At the latest at the making of the contract parties will have to know that their contract comes within the sphere of the Convention. A restriction of this nature has not been taken up in ULIS.

(21) Both Conventions appropriately ignore the nationality of the contracting parties and whether the deal has been closed in the capacity of merchants or another capacity. (ULIS, section 3 of Article 1 and Article 7; section 3 of Article 1 of the DRAFT.)

The by-pass of the nationality of the contracting parties has been brought under regulation in all earlier drafts of ULIS. Against a provision of identical meaning of the DRAFT strictly speaking of only a single government submitted a counterproposal. This government took the stand that the Convention should be applicable to sales contract where the contracting parties are nationals of different countries and their places of business are also in different countries.[36][page 67] The committee rejected this suggestion. In international economic life nationality comes to be thrust to the background more and more. The process is accelerated by that the "merchant" appears as natural person on rare occasions only. It is the enterprise that takes part in international economic relations. As for the juristic person (corporation) the country of the business activity is of importance.

The provision of the DRAFT that for the purpose of the Convention it is immaterial whether the contracting parties or either of them are not merchants, is uniform with the respective provision of ULIS. Even in the Hague Conference only a single recommendation was submitted against this provision of ULIS[37], the same provision appeared in every earlier draft, and the conference approved of it.[38]

XI. Contracts exempted from under the Convention

(22) As has been seen ULIS does not define[39] the notion of an international sale. Article 1 merely defines which transactions should be regarded as international. Articles 5 und 6 of ULIS, however, seriatim enumerate certain types of contract which have to be exempted from under the operation ULIS. The DRAFT follows the same method and enumerates the exemptions in its Articles 2 and 3.

This is not a defect of either ULIS or the DRAFT. "Mixed" contracts are also imaginable which are at the same time contracts for work, labour and materials and for sale, which are of sale and donation, sale and barter commingled.[40] In practice, however, such contracts are of an extremely rare occurrence to the extent that one million contracts will be performed before the nature of one would be questioned for want of definition. The "international" character is what counts. This will determine whether the Convention or a municipal law applies to the contract, whether resorting to their autonomy the parties did stipulate the law which they intend to govern their legal relationship.[41] [page 68] Even those who are not satisfied with the definition that the legal relation is tied up with more than one legal system (Batiffol), or the presence of more than one state can be established recognize that this is an "approximation grossière, suffisant peut-être pour l'usage courant du terme ..."and that "qu'il n'existe pas de conception unique de ce qui peut leur conférer un caractère international".[42]

(23) According to Article 5 the provisions of ULIS cannot be applied to the sale of shares, stock, bonds, negotiable instruments, the sale of vessels registered or bound to registration, other water crafts or aircrafts, electrical power and to sales by auction decreed by the law. Sale by instalments has not been exempted from under the operation of ULIS, still the mandatory rules of municipal law serving the safeguard of the buyer's interest are applicable contrary to the provision of ULIS (or the contract).

According to Article 6 the provisions of ULIS apply to goods to be manufactured in the future, except, however, if an essential and substantial part of the material necessary for manufacture is supplied by the customer.

Articles 2 and 3 of the DRAFT depart in several respects from the provisions of ULIS stating the exceptions.

(24) Above all the DRAFT exempts from the regulation what may be termed retail sales, i.e. the case when the customer buys the goods for personal or household use. This rule has been taken up for a more precise interpretation of the provision of paragraph (3) of Article 1, viz. that for the purpose of the application of the Convention it is immaterial whether itself is indispensable and not merely useful. Sales for consumption are in a number of countries governed by special rules which safeguard the interest of the buyer, i.e. rules of a mandatory nature. Here recourse would be had to the special law against the rules of the Convention. [page 69] A large portion of such consumer sales come in any case within the purview of the municipal law of the place of sale, although cases are not unlikely when in response to the catalogues distributed by the great department stores the world over orders are incoming from, and deliveries of goods are made to, abroad. If in this case until the deal has been closed the seller has no information of the destination of the goods for domestic or personal use, the contract will come within the sphere of the Convention.

(25) Sub-paragraph (b) exempts sales by auction from under the operation of the Convention. The reason for making this exception was that in most countries sales by auction had been brought under regulation by special legislation and that it appeared to be convenient not to exempt such sales from under the ruling of such legislation. The reason given for this exemption is not quite conclusive and the present author believes sales by auction should not be withdrawn from the sphere of application of the Convention. Auctions of this kind are mostly organized by institutions (exchanges, market organizations) which proceed in conformity with their own usages and not under national law. And for that matter usages have priority before the DRAFT (Article 8). The goods submitted to auction are the property of the merchant and not of the auctioneer. The alien buyer is in like way a merchant. The auction itself merely serves to have an important element of sales, viz. the price established in public. For the rest it is an international sale with the same rights and obligations as any other contract coming within the purview of the DRAFT. There is no reason whatever why the Convention should not be applicable to a sales contract which comes into being in this manner. On the other hand the exemption specified in sub-paragraph (c) relies on solid foundations. Sales on execution or by authority of law are expressly relying on statute. A sale of this kind is one of the cases of forced sales, which cannot be exempted from under the operation of the law by which recourse had been to forced sale.[43] [page 70]

(26) Sub-paragraph (e) exempts vessels, water crafts and aircrafts completely from under the operation of the DRAFT irrespective of whether these have been registered or are not even bound to registration. This definition is fairly vague in particular when a wording other than English has been accepted for ratification. In the English language namely the terms "ship" and "vessel" are used to denote water craft of larger dimensions. The question is, how other languages are capable of expressing the shades and hues distinguishing the one term from the other. This may explain the large number of counter-proposals brought forward against this otherwise laudably concise formulation. It has been considered necessary to restrict the rule to craft which at the time of sale have already been registered. Such vessels or ships can be sold namely only in conformity with the rules of the port of registration and the special standard conditions. Any other vessel irrespective of whether or not bound to registration comes within the scope of operation of the uniform law of sales. According to other recommendations the relevant provisions should be restricted to vessels in excess of ten gross tons.[44]

I believe we can agree with those who do not want to discover special features in contracts for the sale or the construction of ships which would distinguish them from all other international sales. Hungarian shipyards build sea-going vessels of medium size, still the machine factories of Hungary are capable of supplying large manufacturing plants, oxygen factories, aluminium processing plants, etc. Why should the sales of a ship be governed by provisions other than that of an aluminium processing plant? The exemption of registered vessels may have its reasons, still since their sale takes place on standard conditions (which have priority before the Convention), no special complexities will arise if water and aircraft is omitted among the exceptions, or in other words, if the sales contracts covering these are allowed to remain within the sphere of operation of the uniform law. This does not mean that I consider it absolutely necessary that the contract for sale of a ship or vessel had to be governed by the uniform law, the less that this is possible. [page 71] For this, i.e. the extension of the operation of the uniform law to the sale of ships, a traditional attitude would have to change which treats ships under the same heading as realty or real estate. (It does not consider ships objets mobiliers.)[44a] The sale of small sailboats, or other vessels not bound to registration, may, provided the contract serves commercial ends and not personal use, be drawn with the help of interpretation within the sphere of operation of the Convention. This end is served by the recommendations of the Mexican government, which sets from the understanding that the rules of registration of larger vessels depart from those of the registration of smaller craft for personal use. The latter come within the purview of the rules of local or municipal registration, the registration of the latter is of a national character. By virtue of this discrimination then the Mexican delegate proposed the exemption of smaller vessels from under the operation of the Convention.[45]

(27) Sub-paragraph (b) exempts electricity, too, from under the operation of the Convention. Recommendations have been brought forward also for the cancellation of this provision giving a reason that "electricity would not be regarded as goods".[46]

This recommendation is proper, however in view of likely variants in the translation of the uniform law it appears that the exemption of electricity should be preserved.[47]

(28) Sales of livestock have not been exempted from under the operation of the DRAFT, and the transactions enumerated in sub-paragraph (d) do not include documentary sales, i.e. sales of goods by way of instruments representing the goods.[48] This interpretation may, however, come into conflict with the interpretations current in certain legal systems which qualify transaction of this kind as sales of securities. Still it should be made clear that the relevant provisions of the DRAFT are construed so as to extend the force of the uniform law to such transactions. [page 72]

XII. Delimitation of contracts other than such for sales

(29) Article 6 of ULIS regards contracts for goods to be manufactured in the future also as coming within its sphere, except, however, the case when the customer undertakes the supply of an essential part of the materials necessary for production. This provision is in agreement with paragraph (2) of Article 3 of the DRAFT. Still there is yet another rule incorporated in paragraph (1) of the same article, namely that "This Convention does not apply to contracts in which the preponderant part of the obligations of the seller consists in the supply of labour or other services".[49]

Apparently, Article 6 of ULIS and Article 3 of the DRAFT are congruous. Still it seems that the DRAFT is more concise. It abandoned the sphere of delivery of goods and (if not with this designation) exempted the contracts for work, labour and materials from under the operation of the Convention.

Recommendations have been brought forward to delete Article 3 of the DRAFT. Those recommending the cancellation of this article argue that since here we have not the case of a sales contract there is no reason to fear that even in want of a provision the court would apply the Convention to a transaction as specified in Article 3. Undoubtedly this is correct. Still it is worth considering that no clear-cut line can be drawn between a sale and a contract for work, labour and materials.[50] As guidance for such marginal cases we may perhaps accept the ratio of the material provided by the customer and the productive work he has ordered. This may be of particular significance in the case of contracts for the machinery of such turnkey plants where the seller undertakes installation work of equipment as well.

(30) Naturally neither ULIS nor the DRAFT settle all problems by the delimitation of contracts for work, labour and materials. [page 73] It is not clear, e.g. whether the leasing-contract, which guarantees to the leaseholder an option for the purchase of the object of lease, comes within the domain of the Convention. There are legal systems which do not consider leasing-contracts without option as leasing. According to others an option clause qualifies the leasing contracts as sales contract. According to Dölle's Kommentar the hire-purchase contract and in general the contracts where at the expiry of the lease the leaseholder acquires the ownership of the leasehold (Mietkaufvertrage) come under the heading of sales contracts.[51]

Far more amendments were moved against the article of ULIS stating the exceptions than against Articles 2 and 3 of ULIS.

Recommendations have been brought forward for taking up a number of specific sales contracts among the exceptions. Such are the hire-purchase contracts, the purchase of goods to be acquired subsequently, sales on return, part exchange contracts, sales of emblements, etc.[52]

While the formulation of the DRAFT was in progress only a single amendment was moved, namely the exemption of the sales of natural gas, like electricity, from under the operation of the Convention. The commission rejected the motion. Unlike electricity gas was declared to be a corporeal movable which can be purchased also in a liquid or solid state and not only in a gasous state. Instead of a lengthy regulation of marginal cases it has been left to the contracting parties to specify in their contracts whether or not the Convention should be applied.

Both ULIS and the DRAFT agree that in conformity with the principal rule defining the legal form of exemptions the sales contract should as a rule be regarded as coming within the purview of the Convention. The party desirous to avoid the application of the Convention has to produce evidence to the effect that the concrete contract is exempted from under the Convention. [page 74]

No rule in agreement with paragraph (2) Article 5 of ULIS has been taken up in the DRAFT. This rule states that ULIS does not affect the municipal mandatory provisions applying to sales by payment of the price by instalments. These rules safeguard the interests of the buyer or consumer, and since in conformity with paragraph (a) of Article 2 sales of this kind do not come within the purview of the Convention, the rule has become superfluous.

XIII. The autonomy of the contracting parties

(31) In the sphere of international economic contracts the parties enjoy autonomy by far in excess of what they would enjoy under their respective municipal law. This is the case notwithstanding the circumstance that legislation (and here actually the case of the socialist countries may be handled together with that of the capitalist world) in a number of spheres controls and by this restricts the autonomy relying on the principle of laissez-faire. This is what Steindorff calls "the steering function of private law".[54]

Notwithstanding state "interference" the autonomy of the parties is even today an important precondition of the development of international economic relations. The unrestricted recognition of the choice of law is making headway more and more. By the application of the chosen law the parties may avoid the application of the mandatory rules of the law to be applied in want of a choice of law. They may submit their dispute to arbitration and define the rules of procedure of the court of arbitration. Moreover the parties may decree that the arbitrators pronounce their award and determine the case ex aequo et bono by disregarding any concrete legal order.

Both ULIS and the DRAFT do not affect the freedom of the contracting parties.[55] [page 75] According to Article 3 of ULIS:

"The parties to a contract of sale shall be free to exclude the application thereto of the present law either entirely or partially. Such exclusion may be express or implied."

According to Article 15 of the DRAFT:

"The parties may exclude the application of this Convention or, subject to article 11, derogate from or vary the effect of any of its provisions."

From a comparison of the two wordings it is apparent that unlike ULIS by the last sentence of Article 3 the DRAFT does not provide how the parties may exclude the application of the Convention.

Paragraph 3 of Article 3 of the Limitation Convention provides that "This Convention shall not apply when the parties have expressly excluded its application".

An amendment has been moved for Article 3 of the DRAFT according to which the words "by express stipulation" should be added.[56]

According to the official motivation the parties may exclude the application of the Convention "by choosing a law other than this Convention ...". By virtue of the amendment moved before the application of the Convention may be excluded by express stipulation. According to the motivation this wording is still inadequate. The other law should be chosen expressis verbis, as this excludes the application of the Convention. The terseness of the formulation has already raised issues of interpretation. In any case it is welcome that the DRAFT has not taken over "implied" exclusion.[57]

(32) ULIS has thrown open yet another gate to the autonomy of the parties by Article 4. This Article authorizes the parties to stipulate the application of ULIS even when the subjective and objective conditions enumerated in Article 1 are not present. [page 76] It adds, however, "... it does not affect the application or any mandatory provision of law which would have been applicable if the parties had not chosen the Uniform Law" .

A similar provision has been taken up in Article 4 of the earlier formulation of the DRAFT: "This Convention also applies where "it has been chosen as the law of the contract by the parties." The motivation believes the provision to be of use because on its score a businessman of a contracting country may for his transaction with a businessman of a non-contracting country stipulate the application of the Convention. Still it may be of use also for the businessmen of non-contracting countries if the legislation of their countries has failed to call into life "a modern law of sales applicable to international contracts...". Finally the stipulation may be of use in the event of a local contract associated with an international transaction. This is a recognition of the fact that Article 4 of the DRAFT skirts on the boundaries of the autonomy of the parties.

Although the provision does not incorporate the same closing sentence as Article 4 of ULIS, still for the makers of the DRAFT it was not doubtful that the stipulation of the parties had the same limitation as the one included in ULIS. An opponent of the article correctly argued that "Even if article 4 of ULIS did not exist, contracting parties still could agree on the application of the law of a given country or of any convention and such application would be valid within the limits of optional law as opposed to mandatory law …"[59] Hence the admissibility of this stipulation does not follow from Article 4 of ULIS, it has its roots in the autonomy of the parties. Consequently, the DRAFT has omitted this provision, still by this it has not prevented the parties in agreeing on the application of the Convention in their contract within the above limits.

(33) Does the Convention extend its sphere of operation when the parties within the limitation of the previous section consider it the Convention normative for their contract? [page 77] A reply will again be obtained by way of the notion of autonomy.

Strictly speaking we are inaccurate when in the domain of the conflict of laws we classify the right of choice of the law by the parties according to which the parties (a) may choose whatever law without limitation, (b) may choose the law within the limitations defined by the law; and (c) cannot for certain contracts or in certain cases choose the law. The courts in general disregard the law chosen in contradiction to cases (b) and (c), and apply the law of the legal system specified by their own conflicts law. This is not a reassuring expedient: the limitation of the autonomy is not equal to the withdrawal of autonomy. In the event of a transgression of the limitation we have to ascertain the legal effect of the choice of law. If the law chosen cannot be applied as a law then it stands to reason that the contract of the parties is subject to the law applicable in the absence of choice. Still it cannot be doubted that the parties wanted the provisions of the other legal system to be applied to their contract. Therefore, the provisions of the law chosen must be regarded at least as part and parcel or the extension of their contract. This means that in the absence of a choice only the mandatory rules of the legal system to be applied are applicable to the contract, whereas within its permissive rules the provisions of the law chosen by the parties will be valid.

This is the conclusion which for that matter may be drawn from the correctly formulated thesis of Dölle's Kommentar (see note (55)) .

(34) In connection with Article 4 of ULIS yet another question emerges. Namely the right of the parties to choose the law to be applied to their contract cannot be but the law of one or the other specified country. This law can be only one which is part of the municipal law of a given country. This may be a municipal enactment or a ratified and incorporated convention. No rule can be applied as law unless it is backed by a state. A dispute under a bill of exchange may be determined by the Hungarian Act of Bills. [page 78] This means that the Geneva Convention on Bills will be applied. Still the Convention itself cannot be stipulated as law without the indication of a country, the less when in the course of its circulation the bill does not turn up at all in a country which has ratified the Geneva Convention. The judge cannot apply it because the Geneva Convention on Bills in itself is a series of abstract rules, to which no recourse can be had in conformity with any conflicts rule. The freedom of the parties to choose the law does not extend to the choice of a regulation abstracted from all states and legal systems.[60] Actually, this is the technique of private international law which with the spread of uniform legislation might undergo changes.

What happens if the parties stipulate the application of ULIS, although they are nationals of non-contracting countries? If the judge's country is a signatory to ULIS he will apply it as the law of the forum. Still if this condition is not met ULIS cannot be applied as law. If the parties stipulate ULIS as an international convention valid somewhere in the world, then it is merely an extension of their contract and not law to which the contract of the parties is subject. If ULIS has been stipulated as the law of the one or the other acceding country, then the judge will determine on the ground of his own conflict law to what extent he may accept the stipulation as valid.

Hence on the ground of Article 4 ULIS comes to be degraded to a contract. In this case its erroneous application of interpretation is not infringement of law. On this count no remedial action is admitted. The provision of ULIS will not hold when they conflict with the mandatory rules of a law, etc.

(35) On the grounds of ULIS there is, however, a chance for applying the uniform law as law even when the country of the one contracting party, or only the country of the forum have become signatories to ULIS. This is the case when the signatory country has had no recourse to the reservation guaranteed in Article III of the Convention, i.e. the application does not depend on the status of the other country of a Contracting State. [page 79] The DRAFT does not recognize this facility. According to paragraph (a) of Article 1 the Convention comes into operation automatically when both states are contracting states. In conformity with paragraph (b) the uniform law may be applied even if neither state is signatory to the Convention, still in this case application will depend on the law of the forum, or possibly on the position the judge takes. If the forum is not a signatory, the judge is not bound to apply the Convention: he may have recourse to the municipal law of the country. On the other hand if the business place of either contracting party is in a signatory state, then in agreement with the other contracting party the uniform law may be stipulated. Any forum will respect a stipulation in this sense. This can be achieved only by the supplementation of Article 1, by adding a provision approximately reading "(c) where the State of only one of the parties is a contracting State, and this Convention has been chosen by the parties". The law stipulated by the contracting parties has to be applied namely in any case if it is the law of either party.[61]1

(36) A comparison of the sphere of application ULIS and the DRAFT have brought under regulation impresses as if for its simplicity and lucidity the regulation of the DRAFT had provided better chance for broader acceptance of the convention. While as compared to ULIS the DRAFT narrows down the sphere of application of the Convention, as regards the definition of the subject-matter of the regulation it considerably extends this sphere. It will suffice to point out that the contract will become "international" even when the places of business of the two contracting parties are in different states. Not a single of the three objective conditions of ULIS have to be met to this end. On the other hand the DRAFT expressly excludes contracts of a personal or household character, for else tourists going to a foreign country would for almost all their purchases come under the operation of the uniform law. (Under ULIS this would be the case only when seller forwards the goods to the address of the alien buyer.) [page 80]

The provision of paragraph (b) of Article 1, that the uniform law is applicable also when in conformity with conflicts law the law of a state is applicable which has not become signatory to the Convention, in reality implies the contingency that the Convention will be applied even when neither the countries of the parties nor that of the forum is signatory. (See ch. VIII.19) We have to add, however, that this "open gate" does not threaten the non-signatories with absorption. The Hague Convention of June 15th, 1955 and so also the convention of the socialist countries unanimously decree the application of the seller's law to sale contracts. This connecting factor is making headway more and more. Hence the DRAFT merely provides a facility for the application of the uniform law to non-signatories, still in practice the occurrence of such cases in negligible: in practice the state of the one of the parties will be a signatory to the Convention.[62]

XIV. Usages and practices

(37) In section (10) we have made clear that the uniform law is the last link in a hierarchical chain and recourse to it will be had only when from the sources preceding it the mutual rights and obligations of the parties cannot be established. Of these preceding sources the usages have given rise to most disputes, partly because with the signature of their contract the parties will find themselves under the ruling of the usages even without their express will, partly because both ULIS and the DRAFT have brought under regulation the application of the usages. The application of the uniform law begins where that of the usages ends in a sense that they do not provide for the dispute to be decided. Hence the usages have a dual role: first, they narrow down the sphere of application of the law, secondly, by supplementing the contract facilitate the interpretation of the contract and the law.

The literature defends divergent positions taken in theory as to the origin, purpose and application of the usages.[63] [page 81] The scope of the present paper does not allow of the taking of a position in the matter, therefore we merely call forth attention to the circumstance that as for their function the usages occasionally rise to the level of a provision of law. On other occasions they may supplement the contract, on yet others they serve the interpretation of the contract.[64] Theoretically it has not been settled what makes the usages binding on the parties. Does their application rely on statute or the contract? This uncertainty may perhaps explain the great variety of names given to the institution.[64a] There are civil codes which expressly provide for the application and function of the usages.[65] Here the source of application can be established. Even this does not answer the questions which of the several usages should be applied, whether an internationally approved usage has become international by setting out from the national soil, or do usages originate on the level of international traffic.[66]

(38) Article 9 of ULIS and Article 8 of the DRAFT incorporate provisions on the binding force of the usages. The two provisions differ from each other. According to ULIS the scope of application of the usages is wider than the DRAFT would have it. And since the application of the convention begins where that of the usages ends, under the DRAFT the uniform law has better chances of application.

ULIS contains three provisions governing the application of the usages:

(i) the parties shall be bound by any usage which they have expressly or impliedly made applicable to their contract ...

(ii) the parties are bound by usages which reasonable persons in the same situation as the parties usually consider to be applicable to their contract ...

(iii) in case of conflict with the law the usages shall prevail unless otherwise agreed by the parties. [page 82]

Hence the application of the usages may be stipulated: their application may follow from the contract, and finally from the fact that the usages are normally and usually applied by reasonable persons in the same situation as the parties. Consequently, it is not necessary that the parties should be acquainted with the usage or should have knowledge of their existence at all.[67] To this we have to add that commercial or professional usages develop in the countries with developed economies. For the mind of a reasonable person always the mind of a merchant of a developed capitalist country should be understood. Therefore this rule is apt to produce inequitable results in particular for enterprises in developing countries.[68] ULIS does not distinguish between international and national usages, i.e. there is scope for the application of both and in practice this rule prevails.[69] There are opinions according to which such a distinction would be meaningless, moreover even dangerous for the obstacles it puts up to application.[70]

The Hague conference approved the rule notwithstanding the many objections. Moreover, there was a moment when it appeared as if the passage on usages not known to the parties would be dropped.[71] Nevertheless the conference passed the provision with the addition that the parties were bound by the practice which became established between them.

The provision in (iii) that in the event of a conflict between law and usage the usage should prevail follows from the permissive nature of the law and the priority of the usage.

(39) Article 8 of the DRAFT has narrowed down the sphere of the application of usages substantially. By this it has widened the sphere of application of the DRAFT. It has decidedly rejected the application of local usages "by surprise." At the same time it tied the implied application of usages to different conditions. [page 83]

The DRAFT has in principle accepted paragraph 1 of Article 9 of ULIS. The first rule of the applicability of usages is the agreement of the parties. This agreement is not, of course, limited to international usages: the parties are free to agree on the application of any local or specific usages. Without any agreement the parties are bound by any practices established between them.

Without an express agreement the application of usages based on implied agreement depends on the simultaneous existence of two conditions. The one is that only usages can be applied of which the parties knew or have reason to know. Secondly, usages can be applied only which are widely known in international trade and regularly observed by parties to contracts of the type current in the particular trade concerned.

According to the commentary this last half-sentence exactly defines the usages the parties "had reason to know," nevertheless it is not quite clear whether such usages will in any case have an international character. Paragraph 4 of Article 38 of ULIS provides for the application of local usages. The corresponding Article 22 does not mention the applicability of usages, the commentary to it reads as follows:

"Because of the international nature of the transaction the determination of the type and scope of examination required should be made in the light of international usages."[72]

It is hard to imagine that for the examination of goods supplied to buyer "international" usages should have come to be established. This is possible for goods which are traded and sold on the exchange (grain, wool, cotton, metals, etc.) where the quality standards have been defined and are controlled in conformity with exchange usages. In the majority of sales contracts, however, the method of control is tied to the locality and may not only be of as many kinds as goods or commodities may be objects of the transaction, but depends on the package, quantity and many other circumstances. Unless the parties have agreed on the method of control, the application of local usages can hardly be avoided. [page 84]

(40) The contrary opinions brought forward against the provision of the DRAFT on usages objected on one hand the priority of the usages and the frequency of their application, while others on the other hand objected the narrowing down of the wide sphere of application ULIS grants to usages. Already in the preliminary stage of the formulation of the DRAFT it was suggested that "when redrafting the text of article 9 of ULIS it was proposed that after the word 'usages' be included 'even if of local origin'."[73] Recommendations have been forwarded suggesting that the usages should be applicable even when a newcomer in the trade is not acquainted with them. He cannot therefore plead ignorance. Recourse may be had even to local usages "in the case where they are internationally known."[74]

Others have drawn the conclusion from the actual text "that usages will be most frequently applied thus derogating from the provisions of the Convention ..." and this is unwelcome also because the usages have been developed by groups economically strong having a power position in the world market.[75] This, far-seeing argumentation cannot, however, be resolved with means the law lends, or only in a very limited measure. Law cannot defeat economic power, and in particular not a law which is optimal for the parties, i.e. where their contract can even exclude its application. And coercive rules cannot be resorted to for the unification of the law of international trade. Nor will such rules help this uniform law to spread.

(41) The departure of the provisions on the application of the usages of the DRAFT from those of ULIS is even more accentuated than the different in the field of application of the Convention itself. On the formulation of Article 8 of the DRAFT not only legal considerations prevailed. Also politics had a word to say. Already at the Hague it was suggested that Article 9 of ULIS might become an obstacle to the ratification of the Convention by the developing countries. It may be presumed that Article 8 of the DRAFT has removed these obstacles. [page 85]

The legal significance of the DRAFT consists in that with the narrowing down of the sphere of application of the usages the sphere of application of the uniform law has expanded. Wherever usage has come to be thrust out the contract of the parties may enter, and in want of a contract the law will become the ruling factor. It appears, therefore, as if the concept of the DRAFT had brought us closer to the goal of the unification of law.

XV. Interpretation

(42) The provisions of both ULIS and the DRAFT bringing under regulation the method of interpretation are those which have elicited the keenest disputes. Already the Hague Conference rejected he motion that the judge should be vested with powers very much the same as laid down in Article 1 of the Swiss Zivilgesetzbuch.[76] The outcome of the debate is nevertheless a wording coming close to what the Swiss civil code formulates as "... soll der Richter ... nach der Regel entscheiden, die er als Gesetzgeber aufstellen wurde."

From a collation of the relevant provisions of ULIS and the DRAFT it is evident that for the application of the uniform law the DRAFT turns to conflicts law (unlike Article 3 of ULIS), still from the rule of interpretation it excludes the solution of private international law in the same way as ULIS. In other words both instruments agree on that interpretation has to rely on the uniform law itself and on the principles derived from it.

(43) ULIS sets up two rules of interpretation. The first relates to the interpretation of the contract of the parties. Paragraph 3 of Article 9 provides that "Where expressions, provisions and forms of contract commonly used in commercial practice are employed, they shall be interpreted according to the meaning usually given to them in the trade concerned". [page 86]

For the interpretation of ULIS itself Article 17 provides as follows:

"Questions concerning matters governed by the present law which are not expressly settled therein shall be settled in conformity with the general principles on which the present law is based."

If we now interpret this rule of interpretation it will be evident immediately that it provides guidance for the closing of possible gaps, i.e. for the solution of questions for which ULIS does not provide rather than for the interpretation of the written text of ULIS.

Hence ULIS provides only for one half of the interpretation, i.e. for how to fill the gaps of law, whereas it fails to bring under regulation the method of interpreting the text itself. This is consistent with the principle set forth in Article 2, whereas all proposals moved to the effect that for cases not regulated by this law the law applicable according to conflicts rule should be taken into consideration, have been rejected. This expedient met in particular with the opposition of the Federal Republic of Germany, because an additional nest of litigation would be brought about in respect of the question whether there is a gap in law.[77] Professor Tunc believes the solution to be satisfactory for two reasons. First, "the law is very detailed so that true omission will doubtless only be rarely found in it", and, secondly, "because it contain a large number of provisions it will ordinarily be easy to extract its general principles."[78] This solution of ULIS is the source of many doubts. It does not exclude the possibility of a gap of law, still it does not authorize a solution by invoking another provision of law, in other words by analogia legis. Such a lex would normally be national or municipal law. Instead the rule closing the gap has to be derived from ULIS itself which is but the adoption of Article 1 of the Swiss civil code: the judge turns law-giver. Although in the debate preceding the formulation of ULIS it was sounded that "es ist nicht Sache des Richters, wie ein nationaler oder internationaler Gesetzgeber aufzutreten," Article 17 nevertheless grants this privilege to the judge. [page 87]

(44) Despite the possibility of recourse to analogy the filling of the gap is nevertheless inevitably legislative activity. "Im Ergebnis läuft dies zwar auf eine Gesetzgebung ähnliche Funktion", writes Dölle, when at the same time he expresses his anxiety that there will be few judges who could free themselves of their training in national law and come to conclusions on the ground of principles accepted specifically in international commercial life.[80] The law may exclude the application of conflicts law, still the law whose knowledge qualifies the judge as judge cannot be excluded from the judgment. This is not a pleading for conflicts law, only an analysis to establish to what extent the solution replacing conflicts law brought us closer to the goal of ULIS, i.e. uniform law. Recourse to conflicts law has its risk: there are as many laws as there are countries, and as many interpretations and ways to fill gaps of law. And there is perhaps no less truth in stating that there are as many laws as there are judges.

(45) Article 17 of ULIS is not without examples. Similar rules of interpretation and filling gaps of law have been taken up in Article 38 of the Statutes of the International Court of Justice, in other international instruments and in the legislation of a number of countries for the interpretation of treaties and conventions. These have a common trait, however, viz. they provide rules for interpretation for a single forum only, which may be an international forum or perhaps the supreme court of the one or the other country. The Rome Treaty laying the foundations of the European Economic Community organized a special court for the application and interpretation of the Treaty (Articles 164 and 177).The organization of such a special court cannot be hoped for in the event of a convention whose goal is the creation of the uniform law of states of different economic systems and degree of development. Not all of the signatory states would accept a uniform interpretation originating from some sort of an international forum, at least not in the present phase of the development of world economics. Professor Tunc himself does not seem to indulge in his optimism for he expresses his hope "that an international body of case law will be formed, and that it will carry de facto authority, even in the absence of supra-national jurisdiction."[81] [page 88]

(46) Article 6 of the DRAFT formulates the rule of interpretation as follows:

"In the interpretation and application of the provisions of this Convention regard is to be had to its international character and to the need to promote uniformity and the observance of good faith in international trade."

This formulation does not take into account possible gaps of law. Implicitly it pronounces that any question may be solved on the ground of the interpretation of the provisions of the DRAFT, when it is agreed that even before recourse to the relevant provisions of law the contract of the parties, the practices established in the course of business relations or the usages give a solution into the hands of the judge. The DRAFT does not seem to reckon with the contingency that after or even besides the interpretation of the existing rules further tasks may confront the judge. The makers of the DRAFT do not seem to fear what Bacon brought up against the Church of Rome: "... pretextu interpretationis Scripturarum etiam addit aliquid quandoque et immutat."

Article 13 of the draft preceding the above rule of the present DRAFT brought under regulation the method of interpretation in agreement with Article 7 of the Limitation Convention. The passage "and the observance" has been added by the last conference to the rule.

ULIS, the Limitation Convention and the DRAFT agree that the law according to the conflicts law cannot advance the cause of interpretation. This precludes recourse to both the analogia legis and analogia juris. So far there is no legal order of international validity or a convention bringing under regulation related scopes which by the means of analogy would provide facilities for the appropriate interpretation. It is the condition of analogy that there be another regulation relating to an allied scope, the one or the other concrete provision of which may replace the missing rule (analogia legis], or from the other law principles may be derived which provide a solution for the cases not provided for by the law (analogia iuris). [page 89] For this purpose municipal law or the legal system of a country cannot come into consideration. Hence those in charge of the application of law cannot come to a solution unless by transgressing the boundaries set by the traditional methods of interpretation and creating a new law. We are inclined to believe that a fear of this contingency may account for the repeated moving of recommendations which want to extend the methods available for interpretation by means of the conflict rule. A number of recommendations have been moved also for the insertion into the DRAFT of rules for the interpretation of the Convention in agreement with paragraph 3 of Article 9 of ULIS.

The commentary attached to the DRAFT thought that the rule relating to the interpretation of the contract may be dispended with. The reasoning sets out from the thesis that the usages are binding on the parties merely because they have become part and parcel of the contract, expressly or tacitly. Because the contract has priority before the law, the usages cannot come into conflict with the law: owing to the autonomy of the parties the usages will have to be taken into consideration.[83] Still the commentary adds that paragraph 3 of Article 9 "is regarded to be in conflict with the constitutional principles of some States and against public policy of others ..."[84] This addition betrays that the authors of the commentary were of the opinion that it was not beyond dispute that the usages were part and parcel of the contract. They seem to believe that they are some sort of a transitory regulation between law and contract.

This seems to have been borne out by the recommendation suggesting that ''as regards delivery clauses of the f.o.b. and the c.i.f. type it is important that it should be made clear that these should generally be interpreted not on the basis of the Convention but in accordance with usages and practices …" The motion evidently wants to avoid that any forum should consider usages as law.[85] [page 90]

We are of the opinion that the methods relating to the interpretation of contracts are fairly well known. In addition these "methods are uniform enough so that here a separate regulation appears to be superfluous. The DRAFT contents itself when providing guiding principles for the interpretation of its own wording. It is the function of the judge from the correspondence of the parties their conduct or any other evidence to establish the rules of interpretation valid for other sources (contract, usages, practice, forms of contract, etc.) applicable on the ground of the law. What the judge establishes as being the meaning of the interpretation of law is law itself, and the law will become uniform as soon as the uniformity of interpretation has been achieved.

(47) The many motions which wanted to obtain an amendment of the article seem to have feared this uniformity of interpretation. Above all they want to have the guidance of Article 17 of ULIS rest according to which at the interpretation of the Convention "regard is to be had to the general principles on which this Convention is based ...

A number of opinions came to be sounded against the motion. "A judge would undoubtedly wonder what general principles were being referred to," whereas others called for attention to the circumstance that" ... if the Secretariat does not define them every jurist from every country would prepare papers on general principles ... which even the Working Group was unable, to define ..."

Many repeatedly moved that in such cases, with regard to matters ... not covered by this Convention, the law of the country should be applied where seller had his place of business.[88]

There were critics who feared lest this provision should deprive the parties of their right to define the law governing their contract.[89] The Working Group approved a single amendment only namely the one on "the observance of good faith in international trade." [page 91]

The good faith of the parties is a subjective moment and will provide nothing for the judge to go by when it comes to interpret the objective content of the law correctly. In any event to the judges of countries other than those of the Common law the notion of good faith is not unknown, and since it is not only a legal but also a moral concept, it may help to achieve the uniformity of interpretation.

(48) In the background of this timid prophecy there is the recognition that according to our present concepts the uniformity of interpretation cannot be achieved unless through the agency of some sort of common forum, something that is today still beyond feasibility. Still the risk has to be obviated of the prevalence of as many interpretations as there are countries acceding to the Convention. This would mean that as soon as the uniform law comes into operation it would begin to differ from itself: it would not be the uniform law which would be applied as such, but the uniform law as interpreted in the one or the other contracting country. In other words the conflicts of provisions of law would be superseded by the conflicts of interpretation. And by this the conflicts of provisions of law, whose elimination is the primary goal of any unification, would revive in the law of international economic relations and so also would uncertainty and the want of predictability come to life again.

This is at the same time an answer to why this would amount to inconsistency and why it would imply a danger for uniformity if in cases not brought under regulation a solution had to be sought through recourse to the conflict rule. To this end it would have to be established in the first place whether there is a gap in the law or not, and whether could the dispute maybe settled by an interpretation of the text. Hence the determination of the conflict would be preceded by a question of qualification (primary qualification), and by this not only interpretation would come to be atomized in as many parts as there are legal systems according to which qualification takes place, but in the one or the other concrete case the application or non-application of a municipal law would become dependent on a number of uncertainty factors. [page 92] Perhaps the joining of forces of science and practice might obviate the danger, e.g. in a manner that under the auspices of a definite institution a periodical could be started with the task to collect judgments passed on the ground of the Convention from all parts of the world, publish and mainly discuss them. Perhaps the word of science, even if it is fainter than that of a super-forum, might sound sufficiently convincing.

(49) Neither ULIS nor the DRAFT answer the question whether the interpretation of the uniform law should be extensive or restrictive. Nor do they deal with the question how the rule relating to the recourse to usages should be interpreted. The policy of the DRAFT is to extend its sphere of application, for in this case we should approach universality. This will say that the rule relating to the application of the usages should be interpreted restrictively. The Convention will, whenever it comes into operation, prevail as a special regulation by the side of the municipal, and an exceptional special rule should, with respect to the general, be interpreted restrictively. This would mean that in the marginal cases of application the judges would incline to determine the case in conformity with their municipal law instead of having recourse to the Convention.

Still we believe, and with this we would begin the interpretation of the DRAFT, that Article 6 states with adequate clarity that the Convention has in all cases to be interpreted extensively. This is borne out by the emphasis the rule of interpretation lays on the need for the promotion of the trend towards uniformity, by the fact that the Convention brings under regulation legal relations of an international nature, i.e. that it has been compiled for the general and not special regulation of such legal relations. [page 93]


1. Yearbook, vol. I, p. 132

2. Yearbook, vol. II, p. 51

3. The United Kingdom, San Marino, Belgium

4. So far ULIS has been ratified by eight states

5. See Gy. Eörsi: The Hague Conventions of 1964 and the International Sale of Goods, (Acta Juridica Academiae Sc. Hungaricae, 1969)

6. A few of the conventions of the Hague Conference: 1958: transfer de la propriete; competence du for contractuel. 1955: conflicts entre la loi nationale et deomicile. 1956: reconnaissance de la personnalite juridique. 1965: l'election du for, etc.

7. Tunc: Commentary, p. 8. Similarly O. Riese in 1964 supplement of Int. and Comp. Law Quarterly and A. Szakats, ibid., year 1964, p. 751

8. The uniform law has appeared not only acceptable, but positively good to experts belonging to very different legal and political systems. Commentary, p. 16.

9. Nor is there any attempt to make rules to aid the weak and ignorant or inattentive, like the rules of the Sales article of the Uniform Commercial Code… . John Honnold: The Hague Convention of 1954. (Issue of Law and Contemporary Problems ... 1965, Durham N.C., p. 335.)

10. There was an almost unanimous opposition to Article V of the Convention ... It was stated among others, that this reservation was inconsistent with the purpose of the Convention ... that it was inadmissible to subordinate the Uniform Law to the will of the parties ... P. Katona: The second session of UNCITRAL, Journal of World Trade Law, 1969, p. 564

11. Paragr. (3) of Article I of the Uniform Law on International Sales Act 1967: While an Order of Her Majesty in Council is in force declaration by the United Kingdom under Article V of the First Convention (application by choice of parties has been made and not withdrawn the Uniform Law on Sale shall apply to a contract of Sale only if it has been chosen by the parties to a contract as the law of the contract.

12. Doc. A/CN/9/126, p. 7

13. Doc. A/CN/9/125, p. 6

14. The non-mandatory character of the Convention is explicitly stated in article 5. The parties may exclude its application entirely by choosing a law other than this Convention to govern their contract. (A/CN/9/116 - Ann. II. p. 9)

15. The constitutions of a number of countries state that the mandatory power of treaties and conventions precedes that of municipal law. In our opinion no law is stronger than another promulgated by the same legislator. A municipal provision bringing under regulation a definite legal relationship is a general rule, a treaty or convention relating to the same legal relationship is, relation between the contracting states their nationals a special rule. Hence the priority of a treaty or convention derive from the thesis of Roman law that lex specialis derogat generali. The legislator by ratifying a treaty or convention throws difficulties in the way only to its amendment or rescission: as long as his country is signatory to the treaty or convention, it has to be applied and a change can be effected only in agreement with the other contracting states. The reservation in article V of ULIS has degraded ULIS: it is with neither municipal law nor any other international instrument on an equal footing in the hierarchical order of sources.

16. Im Zweifel kann deshalb die Wahl des Rech eines Vertragstaates nicht als Ausschluss der einheitlichen Gesetze gewertet werden Landgericht Landshut, 4.07.76. Unidroit Revue 1977, vol. II, p. 267

17. Ibid., p. 271

18. 18 A/CN/9/125. Add. 1; similar Finland A/CN/9/126. p. 12

19. See Note 2

20. A/CN/9/126. p. 59

21. The solution adopted in respect of permissiveness and usages is basically correct but operates in an unavoidable manner against the unification of law; it diminishes the chances to foresee the applicable law; the stronger party benefits from it. (op. cit. p. 338) (Ital. By author)

22. In reality there is yet another objective condition namely that the law can be applied only to contracts of sale of goods. Article 1 does not define the notion of sale of goods, still it defines when the contract should be considered international. Instead of a positive definition. articles 5 and 6 approach the notion of the sale of goods by a method of exclusion. It sets out perhaps from the thesis that omnis definitio est negatio.

23. O. Riese: Haager Abkommen ... usw. Rabels, 1965, p. 10.

24. See in particular the Hague Convention of the 15th June, 1955.

25. Almost all authors call forth attention to the open gate of ULIS. (Honnold, op. cit., p. 333; Eorsi, op. cit., p. 327; Riese, op. cit., p. 11; Tunc, Commentary p. 16; Dölle, Kommentar p. XXXII, etc.).

26. This is not without examples. The Geneva convention on bills of exchange of 1930 is at the same time the Hungarian Act on Bills of Exchange. If therefore a dispute under an international bill has to be determined according to Hungarian law, this will take place on the grounds of the Geneva conventions even when the bill has been signed by persons whose countries have not acceded to the convention. Still there is no special Hungarian law of bills, whereas ULIS lives parallel to municipal law.

27. … these difficulties will be deposited on the doorsteps of non-adopting states. (Honnold: The Uniform Law etc. Law and Contemporary Problems Durham N.C. 1965, p. 334.)

28. Belgium, Israel and Italy have not had recourse to this reservation. If, therefore the parties can foresee that a lawsuit might be instituted against them in any of these countries by invoking Article 4 of ULIS they may exclude the application of the reservation. It is, of course, odd to exclude the application of a law that does not apply to the parties. On the other hand if a party intending the institution of a lawsuit hopes to win the case on the grounds of ULIS, all he will have to do is to find grounds for the jurisdiction of any of the three states, and by this he will have subjected the case to ULIS. This is an occasion for forum shopping and an example for the uncertainty of law.

29. The system of reservations provides facilities for the ratifying state only not to apply ULIS unconditionally, whereas no protection is afforded to the non-ratifying country. So e.g. the Dutch act introducing ULIS (15th December, 1971) states that ULIS has to be applied even when by either a foreign or a Dutch conflict rule Dutch law has to be applied. (Dölle: Kommentar p. 4). Hence this ratification also decrees the recourse to renvoi: the Dutch court may namely apply Dutch law on the ground of a foreign conflict rule when it has met the obligation of renvoi. The Dutch ratification may call into doubt the validity of the reservation based on Article III of the Convention of another acceding country. When country A has ratified with this reservation, whereas country B has acceded to ULIS, then the Convention cannot be applied in country A in respect of a transaction in country B. Still when for the one reason or the other the lawsuit is instituted in the Netherlands and according to the Dutch conflict rule the law of country A has to be applied, the Dutch judge will apply ULIS.

30. Dölle: Kommentar, p. 16. A few questions may still have to be answered. E.g. when in the acceding country ULIS is applied as foreign law, will it be bound to apply it in conformity with the foreign interpretation? Is there chance for legal remedy of the third instance (in case a violation of the law)? According to Kropholler there is. (Der Ausschluss des IPR im Einheitlichen Kaufgesetz, Rabels, Jg. 1974, p. 378.)

31. See Kropholler, op. cit. p. 385. On the contrary Caemmerer: "... das Haager Kaufrecht ... soll dem Richter und den Parteien bei Kaufvertragen über die Grenzen hinweg die Unsicherheiten und Schwierigkeiten des IPR und der Anwendung fremden Rechts ersparen" (Probleme ... usw., p. 122.]

32. A/CONF/63/16- 1975: paragr. 2 of Art. 3: Unless this Convention provides otherwise, it shall apply irrespective of the law which would otherwise be applicable by virtue of the rules of private international law.

32a "Il a paru aux redacteurs ... que le concept, 'vente' était suffisamment clair pour qu'il ne dût pas être défini dans l'acte international lui-même." Rigaux: Le contract economique international, Bruxelles 975, 70. old.

33. There were governments which thought it would be more appropriate to retain the additional requirements as laid down in ULIS (A/CN/9/125 - p. 22.)

34. Yearbook, vol. VIII. 1977 p. 26. The ICC approved the incorporation of the conflict rule. In their opinion ULIS by the exclusion of the applicability of the rules of private international law in Art. 2 introduced complexities into the applicability of the Convention. It opened the gates to reservations and operated against universality as it detained many from ratification. (A/CN/9/126 - p. 8.]

35. Yearbook, vol. VII. 1966, p. 97

36. A/CN/9/125 - p. 41.

37. Riese, op. cit., Rabels Jg. 1965, p. 19

38. Eörsi agrees with ULIS that it has drawn no line between commercial and consumer's purchase. Still in want of an express provision he is of the opinion that ULIS nevertheless does not apply to consumer's purchases. He believes that by way of restrictive interpretation the application of ULIS may be excluded to such transactions. (Eörsi, op. cit. p. 342)

39. See note 20

40. Under Common law the latter does not give birth to problems of delimitation.

41. The French Cour de Cassation finds the international character in the fact that the goods cross the frontier, whereas its price passes the other way round. (Rev. Crit. de DIP. 1965, p. 348.) Else this is the principle criterion according to § 2 of the Czechoslovak law of foreign trade of the 18th December, 1963. The law of the German Democratic Republic of the 5th February, 1976 does not define the notion of international character for international economic contracts, still according to the commentary to the act a contract between two enterprises of the German Democratic Republic may for reasons of connectedness be regarded as international. (D. Maskow & H. Wagner: Kommentar zum GIW, Berlin, 1978, pp. 39 et seq.)

42. Marcel Fontaine: Le contract economique international, Brussels, 1975, pp. 22, 23.

43. On the other hand it is true that this is not even a sales contract; the seller is not owner but the official agency of the
















































Pace Law School Institute of International Commercial Law - Last updated July 2, 2003
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