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Reproduced with the permission from 27 American Journal of Comparative Law (1979) 311-323

[This is a commentary on provisions on Formation of the contract, contained in the 1978 Draft. Except as indicated by an Editor's note added to this text, there are only minimal differences between the 1978 Draft provisions on Formation of the contract and the provisions on Formation of the contract contained in the CISG.]

excerpt from

Problems of Unifying Law on the Formation of Contracts for the International Sale of Goods

Gyula Eörsi

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Interpretation, Especially "Good Faith"

In preparing the 1978 Draft Convention, UNCITRAL made a significant addition to its earlier general rule on interpretation of the Convention. Art. 6 of the 1978 Draft (with the new language emphasized) reads 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."

The first part of the text is derived from provisions in the earlier drafts on the interpretation of the Sales Convention. The "good faith clause" was drawn from art. 5 of the Working Group's 1977 Draft Convention on formation of international sales contracts, which provided: [10]

"In the course of the formation of the contract the parties must observe the principles of fair dealing and act in good faith."

Adding this provision to the Formation Draft was supported on the ground that this would help implement the U.N. resolutions on the New International Economic Order. However, the "good faith" provision could be supported on other grounds. One ground was that "good faith" was required under domestic law, and the same requirement should be extended to international trade. Such an extension by individual countries had been opposed on the ground that this would give aliens greater protection against nationals in domestic courts than such nationals would receive from foreign courts.[11] This objection, however, is inapplicable to the inclusion of such rules in an international convention, for the convention's rules would become mutually applicable within the field of operation of the Convention.

Those opposing the insertion of the "good faith" provision argued that such general clauses were vague, and thus could not promote uniformity. Proponents of the "good faith" rule replied that such general clauses were of necessity vague and yet were indispensable in modern law.[l2] Proponents added that, in most cases, one knew what conduct was inconsistent with good faith; in any event, experience with such rules in domestic law showed that even vague provisions were clarified by judicial development, and a similar development could be expected at the international level. In reply, the opposition noted that judicial development, at the international level, by a variety of forums was incomparably more difficult than within the framework of a single national jurisdiction.[l3]

The requirement of good faith by the parties in the formation of the contract was approved by a slight majority of the Working Group, but was rejected (again by a slight majority) by UNCITRAL. In view of these sharply-divided opinions, an uneasy compromise was reached: The general provision on interpretation of the Convention would be expanded to mention not only "the need to promote uniformity" but also "the observance of good faith in international trade." Such is the background of art. 6 of the 1978 Draft Convention [became CISG article 7(1)], quoted above.

This question arose: What would be the effect of such a rule for interpreting the Convention? According to some delegations: None. Others pointed out that a court or arbitral tribunal might conclude that communications conflicting with the good faith requirement would be ineffective. For example, art. 22 of the 1978 Draft Convention [became CISG article 24] states that any "indication of intention reaches the addressee when it is made orally to him or delivered by any other means to him, his place of business or mailing address. . . ." Suppose that one party knew that the other party and his family would be absent for a long time from his residence and yet sent the declaration there; the court might conclude that such a declaration sent in bad faith was not "delivered" to the addressee and therefore ineffective. As a second case, suppose that the addressee had several places of business. The party always had sent his declarations and notices to place "A", but on a single occasion sent his message to place "B" with the intention that it would not reach the addressee in time. Here, the court might interpret the term "place of business" to have been "A" and that therefore the message sent to "B" was ineffective. Or suppose that a party, in the course of contract-making in bad faith, was silent on an essential matter; this might be relevant in interpreting the requirements of art. 33 [became CISG article 35] on conformity of the goods.

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10. The full text of the 1978 Draft Convention on Contracts for the International Sale of Goods appears infra at II-H. The Draft Convention on the Formation of Contracts for the International Sale of Goods, prepared by the UNCITRAL Working Group (the "1977 Formation Draft"), appears in U.N. Doc. A/CN.9/142/Add 1.

11. See Eörsi, "Contracts of Adhesion and the Protection of the Weaker Party in International Trade Relations" in: I UNIDROIT (ed.), New Directions in International Trade Law 155-175 (1977).

12. The "good faith clause" turns up not only in the Civil law codes but as a general clause also in UCC 1-203 and at other sections in connection with the particular rules. See Honnold, Law of Sales and Sales Financing 25-26 (4th ed. 1976).

13. At one point the ULF requires the observance of good faith: under art. 5(2) an offer "can be revoked unless the revocation is not made in good faith or in conformity with fair dealing." Good faith in the setting of revocation will be discussed infra. On the debate in the Working Group see Enderlein, supra n. 9, s. 3.3.

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

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