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Reproduced with permission from Revue de droit uniforme/Uniform Law Review (1997) 385-395

excerpt from

The U.N. Convention on the International Sale of Goods: A Critical Analysis of Current International Case Law - 1997 (Part 1)

Michael Joachim Bonell [*] and Fabio Liguori [**]

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Works contracts

Under Article 3(2), the Convention applies to contracts for the supply of goods and labour or other services, unless the supply of services represents a "preponderant part" of the obligation. When the services supplied by the seller consist in the manufacture or production of the goods -- without the buyer's supplying a "substantial part" of the materials necessary for such production (for this hypothesis comes under Article 3(1) CISG) -- the contract comes very close to being a works contract. It is however disputed whether works contracts, in their entirety or in part, should be considered among the contracts Article 3 CISG assimilates to sales contracts.

The problem has recently been addressed by the Italian Supreme Court in a case concerning a contract concluded between an Italian company and an English company for the manufacture and supply of leather items to be marked with the latter's brand.[19] The Italian company brought an action claiming avoidance for fundamental breach by the English company and damages. The defendant objected that the Italian court had no jurisdiction and deferred the matter to the Supreme Court for a final decision.

The Supreme Court left it to the judge of the merits to decide whether the contract in question was a sales or a works contract (as in either case the Italian courts would have had jurisdiction); however in order to determine the kind of obligation involved according to Article 5(1) of the 1968 Brussels Convention, the Court distinguished works contracts from sales contracts, ruling that the former occur whenever one of the parties, as in the case at hand, is obliged to supply both goods and services.

In the Court's opinion, the distinction is to be made having regard to the fundamental purpose of the contract and to the importance of the supply of the materials necessary for the manufacture of the goods and the services to be provided with respect to the result the materials are meant to reach. On these grounds, the Court stated that under Article 3 CISG, as well as under Italian law, a contract is a works contract when the materials are merely a means for manufacturing the goods, and the essential purpose of the contract is the production of the goods.

The Supreme Court's ruling is only partially convincing. It is correct to consider that under the Convention the preponderance of the supply of a service with respect to the supply of goods can be evaluated bearing in mind the parties' intention and the overall purpose of the transaction concerned. Nevertheless, according to the prevailing view in legal writings, for the purposes of Article 3(2) CISG, the main criterion for making a distinction is the value of the goods supplied with respect to the service provided.[20]

Sale of software

A decision by the Landgericht of Munich concerns the problem of the applicabilty of CISG to contracts for the sale of movable incorporating software.[21]

The case involved a contract for the sale and installation of a computer programme. The court held that the Convention does apply to standard software, thereby implying that it would not apply in cases involving original software because the service provided by the party who furnishes the goods would, pursuant to Article 3(2), represent the preponderant part of the obligation.[22]

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* Professor, Law Faculty, University of Rome 1 "La Sapienza"; Legal Consultant, Unidroit.

** Attorney in Rome; Research fellow, University of Rome 1 "La Sapienza".

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19. Corte Suprema di Cassazione, Sez. Un., 9 June 1995, n. 6499, in Giustizia Civile (1997) 1, 2065; Foro Italiano (1997) I, col. 562.

20. Cf. P. Schlechtriem, Uniform Sales Law, the UN Convention on Contracts for the international Sale of Coods (Vienna, 1986) 31-32; J.O. Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention (2nd edition) (Deventer, 1991) 106.

21. Landgericht München, 8 February 1995, n. 8 HKO 24667/93, unpublished, but see abstract in CLOUT, A/CN.9/SER.C/ABSTRACT/10, 16 August 1996, Case 131.

22. Cf. M.J. Bonell- F. Liguori, The U.N. Convention, cit., at 149.

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

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