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1 COPYRIGHT AND CITATION CONSIDERATIONS FOR THIS THESIS/ DISSERTATION o Attribution You must give appropriate credit, provide a link to the license, and indicate if changes were made. You may do so in any reasonable manner, but not in any way that suggests the licensor endorses you or your use. o NonCommercial You may not use the material for commercial purposes. o ShareAlike If you remix, transform, or build upon the material, you must distribute your contributions under the same license as the original. How to cite this thesis Surname, Initial(s). (2012) Title of the thesis or dissertation. PhD. (Chemistry)/ M.Sc. (Physics)/ M.A. (Philosophy)/M.Com. (Finance) etc. [Unpublished]: University of Johannesburg. Retrieved from: (Accessed: Date).

2 THE VIENNA SALES CONVENTION AND PRIVATE INTERNATIONAL LAW by MARLENE MURIEL WETHMAR-LEMMER submitted in fulfilment of the requirements for the degree DOCTOR LEGUM in PRIVATE INTERNATIONAL LAW in the FACULTY OF LAW at the UNIVERSITY OF JOHANNESBURG PROMOTER: PROF JL NEELS 2010

3 ACKNOWLEDGEMENTS I would like to express my sincere appreciation to: Above all, my Heavenly Father. My promoter, Prof JL Neels, for his expert guidance and assistance. I truly appreciate his academic mentorship and I value his kindness and wisdom. My colleagues and friends in the Department of Jurisprudence, School of Law, UNISA, for their support and friendship. In particular, I would like to thank Prof IJ Kroeze, the Chair of the Department, for her support and encouragement. I also extend my sincere appreciation to my friends Proff MP Ferreira-Snyman, MN Slabbert and M Swanepoel, Mrs A Jacobs and Ms L Wildenboer. Prof M Swanepoel for her assistance with the technical finalisation of this thesis. My colleague and friend Adv EA Fredericks for assisting with the transport of chapters of this thesis to and from Johannesburg. Prof GTS Eiselen for providing me with a copy of the International Contract Manual for purposes of my research. Dr E Schoeman for providing me with an electronic copy of a report on The Impact of the CISG on National Legal Systems (2008, author: F Ferrari). Mrs L van Zyl from the University of Johannesburg Law Library. Mrs M van Wyk, from the Faculty of Law of the University of Johannesburg. My mother and father, Mrs MI Wethmar and Prof CJ Wethmar, and my sister, Dr E Wethmar, for their love, encouragement, advice and support. My mother- and father-in-law, Mrs SD Lemmer and Mr FJ Lemmer, for their love and support. My Dachshund daughter, Dogmatix, for her constant companionship during the research conducted for and the writing of this thesis. My beloved husband, Jurie Lemmer words cannot sufficiently express my gratitude for his constant and enduring love, support, encouragement and assistance.

4 TABLE OF CONTENTS CHAPTER 1 RESEARCH PROBLEM AND MODUS OPERANDI Introduction: Research problem Point of departure Hypothesis Main themes of the thesis as relating to the research problem and hypothesis The context of the CISG: its central role in the modern lex mercatoria The role of private international law in the scope of application of the CISG: articles 1(1)(b), 95 and Article 1(1)(b) Article Article The role of private international law in the proper functioning of the CISG: articles 7(2) and Article 7(2) Article Modus operandi Employment of sources explained Primary sources Secondary sources Case law Documentary history Background to the main theme: overview of the structure of the CISG CHAPTER 2 UNIFORM INTERNATIONAL SALES LAW, PRIVATE INTERNATIONAL LAW AND THE CISG Introduction The lex mercatoria The lex mercatoria defined Brief overview of the historical development of the lex mercatoria Modern lex mercatoria arguments Components of the lex mercatoria relevant to international sales law The CISG as an important part of the lex mercatoria Conclusion on the lex mercatoria Unification of international sales law The necessity of the unification of international sales law Models or methods for unifying international sales law Unification of international sales law via conventions General The predecessors of the CISG: The Uniform Law on the International Sale of Goods (ULIS) and the Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF) Legislative history of the 1980 Convention on Contracts for the International Sale of Goods (CISG) CISG methodology Introduction Article 7(1) of the CISG i

5 General International character of the CISG Promotion of uniformity of the CISG s application Observance of good faith in the CISG s interpretation The role of the Vienna Convention on the Law of Treaties in the interpretation of the CISG A CISG-specific interpretation a method of interpretation for the CISG Exclusion of article 7(1) Conclusion The importance of private international law for unifying substantive law in the field of international sales law Introduction The ULIS and private international law Article 2: exclusion of private international law Article 17: the gap-filling provision The CISG and private international law Evaluation of the divergent approaches Conclusion CHAPTER 3 THE SCOPE OF APPLICATION OF THE CISG AND PRIVATE INTERNATIONAL LAW: AN ANALYSIS OF THE MEANING AND EFFECT OF ARTICLES 1(1)(b), 6, AND Introduction Article Introduction Sales contracts Goods Internationality Article 1(1)(a) and the direct application of the CISG Article 1(1)(a) as a unilateral rule of private international law Should application under article 1(1)(a) enjoy preference over application under article 1(1)(b)? Article 1(1)(b) Introduction Legislative history Application of the CISG under article 1(1)(b) A reference to the rules of private international law of the forum? A reference to the rules of private international law of the forum, including its rules on renvoi? A reference to the rules of the private international law of a contracting state only? A reference to domestic sales law or to the CISG? The relationship between the CISG and other Conventions or regional instruments Relationship between the CISG, the 1980 Rome Convention or the 2008 Rome I Regulation and the 1955 Hague Sales Convention in the context of the application of the CISG under article ii

6 The sphere of application of the conventions and the Rome I Regulation Overlap between the application of the Hague and Rome Conventions and the Rome I Regulation Overlap between the application of the CISG and the Rome Convention or the Rome I Regulation Overlap of the 1955 Hague Convention, the Rome Convention / Rome I Regulation and the CISG Evaluation of the relationship between the conventions (and the Rome I Regulation) Relationship between the CISG and the 1994 Mexico City Convention Relationship between the CISG and the 1974 Limitation Convention Relationship between the CISG and the 2005 United Nations Convention on the Use of Electronic Communications in International Contracting Conclusion on the relationship between the CISG and other Conventions Conclusions on article The meaning and effect of the article 95 reservation for fora in reservation states, non-reservation contracting states and non-contracting states Introduction Documentary history of article Effect of the reservation in general Different variations of the article 95 reservation: more adversity for the uniform application of the CISG Uncertainty as to the effect of article Position where the forum is situated in a reservation state, the requirements for application of the CISG under article 1(1)(a) are not met, and the law of a reservation state is found to be applicable in terms of the private international law of the forum Position where the forum is situated in a reservation state, the requirements for application of the CISG under article 1(1)(a) are not met and the law of a non-reservation contracting state is found to be applicable in terms of the private international law of the forum Position where the forum is situated in a reservation state, the requirements for application of the CISG under article 1(1)(a) are not met and the law of a non-contracting state is found applicable in terms of the private international law of the forum Position where the forum is situated in a non-reservation contracting state, the requirements for application of the CISG under article 1(1)(a) are not met and the law of a reservation state is found to be applicable in terms of the private international law of the forum Position where the forum is situated in a non-contracting state, the requirements for application of the CISG under article 1(1)(a) are not met and the law of a reservation state is found to be applicable in terms of the private international law of the forum Conclusion concerning the meaning and effect of article Article Introduction Legislative history of article Express or implied exclusion of the CISG iii

7 3.7.4 Interpretation of contractual provisions in order to determine whether the application of the CISG was implicitly excluded Possible forms of implied exclusion as identified by scholars and in case law Article 6 and the inclusion of a choice of law clause in the contract Interpretation of a choice of law clause designating the law of a CISG contracting state Choice of law clause designating the law of a non-contracting state as the law applicable to a contract Excluding the CISG by inserting a negative choice of law clause Derogating from provisions of the CISG Opting into the CISG Is a direct choice of the CISG as governing law permitted? Conclusion on article Conclusion on the sphere of application of the CISG Summary on the interplay between articles 1, 6 and APPENDIX TO CHAPTER 3 SCOPE OF APPLICATION OF THE CISG CHAPTER 4 ARTICLES 7(2) AND 28 OF THE CISG AND PRIVATE INTERNATIONAL LAW WHEN RECOURSE TO DOMESTIC LAW IS EXPRESSLY PERMITTED BY THE CISG Introduction Article 7(2) Introduction Legislative history of article 7(2) The link between articles 7(1) and 7(2) Matters governed by but not expressly settled by the Convention Matters governed by but not expressly settled by the CISG distinguished from matters excluded from the scope of the CISG Gaps in the CISG to be dealt with in terms of article 7(2) Approaches to gap filling Introduction Gap-filling by analogy Recourse to general principles on which the Convention is based Introduction Hierarchy of general principles? Where are the general principles to be found? Introduction General principles expressly stated in the CISG General principles deduced from CISG provisions General principles found in the UNIDROIT Principles General principles found in the lex mercatoria Examples of general principles as identified in case law and by scholars Different methodologies followed in utilising general principles for gapfilling iv

8 4.4.4 Recourse to the law applicable by virtue of the rules of private international law An illustration of gap-filling: the interest rate Evaluation of methods employed for gap-filling Article Introduction Legislative history of article The reason for the inclusion of article 28 in the CISG: Different approaches to the remedy of specific performance in common law, civil law and mixed jurisdictions Specific performance under the CISG The meaning of article 28 clarified Meaning of court Meaning of own law Meaning of similar contracts of sale not governed by this Convention Applying article CISG case law on article Conclusion regarding the meaning and effect of article Conclusion CHAPTER 5 CONCLUSIONS Preliminary remarks Conclusion on the role of the CISG in international commercial law Conclusion on the role of private international law in the scope of application of the CISG: articles 1(1), 6 and Article 1(1)(b) Article Article Conclusion on the role of private international law in the functioning of the CISG: articles 7(2) and Article 7(2) Article General conclusion Final remarks BIBLIOGRAPHY ARTICLES CHAPTERS AND CONTRIBUTIONS IN BOOKS CISG ADVISORY COUNCIL REPORTS CONVENTIONS OTHER INTERNATIONAL AND REGIONAL INSTRUMENTS OFFICIAL UNCITRAL DOCUMENTS UNCITRAL PUBLICATIONS OTHER OFFICIAL PUBLICATIONS TABLE OF ARBITRAL AWARDS TABLE OF CASES v

9 CHAPTER 1 RESEARCH PROBLEM AND MODUS OPERANDI 1.1 Introduction: Research problem The United Nations Convention on Contracts for the International Sale of Goods (the CISG or the Vienna Sales Convention) 1 was adopted at a diplomatic conference of the United Nations held in Vienna during The Convention came into force on 1 January According to its preamble, the Convention is based on the premise that the adoption of uniform rules which govern contracts for the international sale of goods and take into account the different social, economic and legal systems would contribute to the removal of legal barriers in international trade and promote the development of international trade. 3 The CISG has proven to be successful in its endeavour and currently has 74 member states 4 representative of all legal traditions. As an international convention, the CISG has been lauded for its simplicity, practicality and clarity. 5 Schlechtriem observed that the CISG has now gained worldwide acceptance. 6 It has even been stated that the CISG has established a world law on international sales 7 and that it has influenced several domestic sales laws. It is submitted that the CISG constitutes an important component of modern international commercial law or of the modern lex mercatoria. Therefore, a study that aims to establish a better understanding of the scope and functioning of the CISG and its relationship with domestic law, is of special relevance for the international business and legal community United Nations Convention on Contracts for the International Sale of Goods, , Vienna, UN Document A/CONF.97/18: 1489 UNTS 3; 1980 International Legal Materials 668. Available online on the UNCITRAL website at (last accessed ). The drafting history of the CISG will be analysed in chapter 2 of this thesis. See the text of the Convention (n 1). The status of the CISG may be accessed on the UNCITRAL website at (last accessed ). The official status of treaties deposited at the United Nations may be accessed at (last accessed ). Sono UNCITRAL and the Vienna Sales Convention 1984 The International Lawyer Schlechtriem Introduction in Schlechtriem and Schwenzer Commentary on the UN Convention on the International Sale of Goods (CISG) (2005) 1. Lando Preface in Janssen and Meyer (eds) CISG Methodology (2009)

10 The two basic methods of the unification of law, ie the unification of substantive law and the unification of private international law, 8 have both been utilised in the field of the international sale of goods. The CISG is the most notable example of first mentioned method of unification. The CISG governs the formation of the contract for the international sale of goods, as well as the rights and obligations of the buyer and seller. 9 It is therefore a uniform substantive law convention. However, the CISG does not provide answers to all substantive law matters relating to contracts for the international sale of goods. As previously stated, its substantive scope of application is limited to the formation of the contract and the rights and obligations of the parties. Numerous matters therefore fall outside the scope of the CISG. When the CISG is applicable, a residual legal system would have to be identified to provide answers to substantive law matters falling outside the scope of the Convention. If the parties insert a choice of law clause into their contract designating a legal system to apply to matters not governed by the CISG, it would have to be interpreted and its validity would have to be established in conformity with the rules of private international law of the forum. If the parties do not effect a choice of law, then the legal system applicable to matters falling outside the sphere of the CISG would have to be determined in accordance with the rules of private international law of the forum. In addition, there are a number of matters governed by the CISG, but not settled in it. Even though the Convention prescribes that such matters be filled in accordance with the general principles on which the Convention is based, and in the absence of such general principles, in accordance with the legal system applicable by virtue of the rules of private international law, 10 it is envisioned that many of such gaps will have to be filled by utilising last-mentioned method David The Methods of Unification 1968 The American Journal of Comparative Law Article 4(a) of the CISG. Article 7(2) of the CISG. 2

11 Furthermore, the CISG employs the rules of private international law to extend its sphere of application. 11 From the outset, it is therefore evident that there exists a relationship between the CISG and private international law. In this thesis it will be endeavoured to analyse this relationship. 1.2 Point of departure Throughout this thesis, a pro conventione approach is employed as the point of departure. In circumstances where there exists uncertainty regarding the CISG s application, its application is strongly supported, unless marked policy considerations exist against its application. 1.3 Hypothesis The main hypothesis of this thesis is that private international law plays an important role in the success of an international uniform substantive law convention such as the CISG. It is postulated that the rules of private international law are necessary for the proper functioning and ultimate success of the CISG. This hypothesis constitutes the opposite of the view held by many scholars, namely that uniform substantive law reduces or completely supersedes the need for resorting to the rules of private international law. 12 This widely held opinion may be See article 1(1)(b) of the CISG. See the Report of the Working Group on the international sale of Goods, First Session, 5 16 January 1970 (A/CN.9/35) in United Nations Commission on International Trade Law Yearbook (hereinafter UNCITRAL Yearbook) Volume I ( ) , 179 where it is stated that the unification of substantive rules obviates the need for conflict rules. References to scholars marginalising the role of private international law in a substantive law convention, will be made throughout this thesis. See, for example, Diamond Harmonization of Private International Law relating to Contractual Obligations Recueil des Cours. Collected Courses of the Hague Academy of International Law 1986 IV (1987) who states that one way to avoid questions relating to private international law is to harmonize the substantive law of different countries. Goode Reflections on the Harmonisation of Commercial Law 1991 Revue de droit uniforme / Uniform Law Review also argues that harmonisation of substantive law obviates the need to resort to conflict of laws rules. Zeller CISG and the Unification of International Trade Law (2007) 28 states that the important function of the CISG... is to overcome the need to resort to the conflict of laws rule. 3

12 summarised by Bridge s words, namely that where the CISG does embrace private international law, it does so in a measured and essentially marginal way. 13 The accuracy of this thesis s hypothesis will be investigated by analysing articles 1(1)(b), 6, 7(2), 28 and 95 of the CISG. 1.4 Main themes of the thesis as relating to the research problem and hypothesis In order to establish whether the hypothesis of this thesis is valid, the provisions of the CISG which highlight the relationship between the Convention and private international law need to be analysed. These provisions may be placed in two categories, namely those pertaining to the scope of application of the CISG and those pertaining to the functioning of the CISG The context of the CISG: its central role in the modern lex mercatoria 14 At the outset of this inquiry and before the CISG s provisions are investigated, the context of the Convention needs to be analysed. It is undisputed that the CISG is an international uniform substantive law convention. The international sale of goods forms the centrepiece of international commerce and therefore it is submitted that the CISG constitutes an essential part of modern international commercial law or of the modern lex mercatoria. In order to justify this submission, the concept of the lex mercatoria, its development and contents need to be examined. The CISG s legislative history is of utmost importance in its contextualisation. The Convention s legislative history includes the history of its forerunners in the field of the international sale of goods as well as the drafting history of the CISG itself. The reasons why the CISG s predecessors, the Convention relating to a Uniform Law on the International Sale of Goods (ULIS) 15 and the Convention relating to a Uniform Bridge The International Sale of Goods. Law and Practice (2007) 513. This theme is discussed in chapter 2 of this thesis , The Hague, 834 UNTS

13 Law on the Formation of Contracts for the International Sale of Goods (ULF), 16 were not successful and necessitated revision and replacement, will be investigated in light of the hypothesis of this thesis. Drafting a convention containing uniform substantive law rules only constitutes the preliminary step towards unifying law in a particular field. The attainment of the goal of ensuring uniformity depends upon the convention s interpretation and application. Investigating CISG methodology is therefore also most relevant The role of private international law in the scope of application of the CISG: articles 1(1)(b), 95 and Article 1(1)(b) Article 1(1) of the CISG sets out the applicability criteria of the CISG. According to article 1(1), the Convention applies to contracts of sale of goods between parties whose places of business are in different states either (a) when the states are contracting states or (b) when the rules of private international law lead to the application of the law of a contracting state. The word or as employed in article 1(1) of the Convention, implies that articles 1(1)(a) and 1(1)(b) constitute alternative applicability criteria. It needs to be investigated whether this is indeed the correct interpretation of article 1(1) or whether application under article 1(1)(a) enjoys preference over application in terms of article 1(1)(b). Application of the CISG under article 1(1)(b) prompts several questions. Firstly, does article 1(1)(b) refer to the private international law of the forum? Secondly, when a forum s rules of private international law point to the law of a CISG contracting state, the forum would have to decide whether to apply the Convention because its private international law rules point to the law of a contracting state as the law applicable to , The Hague, 834 UNTS 169. These articles are analysed in chapter 3 of this thesis. 5

14 the contract, or whether to make a further inquiry into the lex cauae s rules of private international law. The question in this regard is whether or not renvoi is to be applied. Thirdly, does article 1(1)(b) refer to the rules of private international law of a contracting state only? In other words, is the CISG only applied via the private international law route by fora situated in contracting states? The answer to this question would determine whether fora in non-contracting states would ever be called upon to apply the CISG or not. Lastly, when a forum s rules of private international law refer to the law of a CISG contracting state, is this a reference to that state s domestic (sales) law 18 or does it include a reference to the CISG? Article 95 When faced with the possible application of the CISG in terms of article 1(1)(b), one needs to pay heed to article 95. Article 95 allows a contracting state to declare at the time of ratification, acceptance, approval or accession that it will not be bound by article 1(1)(b) of the Convention. At first glance, the meaning of article 95 seems apparent: the courts of a contracting state availing itself of this reservation are relieved from having to apply the Convention in terms of article 1(1)(b). However, the question of how far the effect of an article 95 reservation stretches, has given rise to much controversy and debate. For example, where the forum is situated in a non-reservation contracting state, the requirements for application of the CISG under article 1(1)(a) are not met and the law of a reservation state is found to be applicable in terms of the rules of private international law of the forum, should the CISG be applied? Conversely, where the forum is situated in a reservation state, article 1(1)(a) s requirements are not met and the law of a non-reservation contracting state is found applicable in terms of the private international law of the forum, is the CISG applicable or not? These and other 18 The term domestic sales law as employed in this thesis, refers to the sales law of a particular domestic law system, but excludes the CISG. 6

15 possible scenarios that may arise under article 95, will be analysed in the context of the scope of application of the CISG Article 6 Article 6 is an important provision in a contract law convention such as the CISG, since it gives recognition to the principle of party autonomy and guarantees the freedom of contract of the parties. According to article 6, the parties may exclude the application of the CISG or, subject to article 12, 19 derogate from or vary the effect of any of its provisions. The inclusion of article 6 makes it necessary for a forum, when having to decide on the possible application of the CISG, to investigate whether the Convention was not excluded, modified or derogated from by the parties Several matters pertaining to article 6 need to be investigated. Firstly, it is not evident from the wording of article 6 whether exclusion of the CISG must be effected through an express agreement between the parties or whether implied exclusion of the Convention is also permitted. Secondly, if implied exclusion of the CISG is possible, what would qualify as implied exclusion thereof? Another matter pertaining to the party autonomy provision concerns the correct interpretation of choice of law clauses. If a choice of law clause is inserted into a contract which designates the law of a CISG contracting state as the lex causae or proper law of the contract, 20 should it be interpreted as including a reference to the CISG or should it be interpreted as referring to the domestic (sales) law of the chosen country? On the other hand, does the inclusion of a choice of law clause designating Article 12 of the CISG provides that, any provision of the CISG which allows a contract of sale or its modification or termination by agreement or any offer acceptance or other indication of will be made in any other form than writing, does not apply when a party has his place of business in a CISG contracting state which has made an article 96 reservation. Article 96 permits a contracting state whose laws require a contract of sale to be evidenced in writing, to declare that it will not be bound by CISG provisions allowing for the contract, its termination or modification to be evidenced in other methods than in writing. The terms lex causae of the contract and proper law of the contract are used interchangeably in this thesis. Where reference is made to a legal system other than the proper law, which may be applicable to certain aspects of the contract, the wider term lex causae is employed. 7

16 the law of a non-contracting state as the proper law of the contract, automatically exclude the application of the CISG where it would otherwise have been applicable? Lastly, is it permissible to make a direct choice in favour of the CISG as the governing law of a contract? There is regular interplay between articles 1(1), 6 and 95. However, the interplay differs where the forum is situated in a contracting state and article 1(1)(a) s requirements for application are met; the forum is situated in a contracting state but article 1(1)(a) s requirements for application are not met; the forum is situated in a reservation state and article 1(1)(a) s requirements for application are not met and where the forum is situated in a non-contracting state to the CISG. The analysis of the role of private international law in the application of the CISG will be concluded with a synopsis of the interaction between the mentioned provisions in each of the scenarios The role of private international law in the proper functioning of the CISG: articles 7(2) and Articles 7(2) and 28 both permit recourse to domestic law under certain circumstances. It is postulated that these provisions of the Convention and recourse to domestic law as authorised by these two provisions, improve the proper functioning of the CISG Article 7(2) Article 7(2) of the Convention provides that [q]uestions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law. Article 7(2) is known as the gap-filling provision of the Convention. Several important topics for analysis arise from this provision. Firstly, which matters are 21 This topic is analysed in chapter 4 of this thesis. 8

17 governed by the CISG but not settled therein? One would have to distinguish between matters governed but not settled in the Convention and matters excluded from the scope of the CISG. Only the former constitute gaps for purposes of article 7(2). Secondly, gap-filling by means of general principles necessitates a list of inquiries. What are the general principles on which the CISG is based? Where are they to be found? Is there a hierarchy among the different general principles? How are they to be employed for gap-filling? Thirdly, when should one resort to the legal system applicable by virtue of the rules of private international law to provide an answer to a gap? Article 28 Article 28 provides that [i]f, in accordance with the provisions of this Convention, one party is entitled to require performance of any obligation by the other party, a court is not bound not enter a judgment for specific performance unless the court would do so under its own law in respect of similar contracts of sale not governed by this Convention. The meaning and effect of this provision need to be analysed. Does court refer to fora in contracting and non-contracting states to the CISG? Does own law refer to the whole law of the forum (including its rules of private international law) or to its internal law only? What is the correct interpretation of similar contracts of sale not governed by this Convention? Does this provision indeed improve the functioning of the CISG? The CISG articles permitting recourse to domestic law will therefore be analysed to ascertain whether they indeed improve the functioning of the Convention. 1.5 Modus operandi At the outset of this inquiry, the history of uniform international sales law and the place of the CISG within this field need to be traced. 9

18 A study of the articles of the Vienna Sales Convention which establish the relationship between the CISG and private international law, forms the centrepiece of this thesis. The study of each article would have to be preceded by an analysis of the reasons for including the article in the Convention. In this regard, the documentary history of the Convention pertaining to each relevant article will be consulted. The analyses of the authoritative English CISG commentaries on each article will be critically evaluated. Relevant journal articles on each article will be engaged with. Available case law on each article will be analysed. At the onset of this research project, it was envisioned that a comparative analysis would be provided of the rules of private international law of contract of CISG contracting states representative of the various legal traditions. However, the International Contract Manual, 22 first published in 2008, makes such an analysis superfluous. 1.6 Employment of sources explained Primary sources The most important primary source for this thesis is the text of the CISG, as drafted and published by the United Nations Commission on International Trade Law (UNCITRAL). The texts of various other international conventions will also be referred to. Official United Nations Treaty Series (UNTS) 23 references will be included for international conventions where possible Secondary sources The official languages of the CISG are Arabic, Chinese, English, French, Russian and Spanish. 24 A cursory search of the bibliography of scholarly writings available on the The latest edition is Kritzer, Vanto, Vanto and Eiselen International Contract Manual Volume 1 5 (2009). More information on the United Nations Treaty Collection may be accessed at (last accessed ). The UNTS is available online at (last accessed ). See the declaration at the end of the official CISG text (n 1). 10

19 Pace University CISG website 25 attests to the fact that there are secondary sources available in all the official languages of the Convention as well as in the languages of most CISG contracting states. Due to the wealth of secondary sources on the CISG, references were limited to English commentaries, 26 with a few exceptions. With regard to journal articles, it was endeavoured to refer to the original texts as published in the relevant journals. Where original articles could not be obtained, they were accessed electronically on the Pace CISG website. 27 In such instances, it is clearly indicated that reference is made to the online version of the article. The Pace CISG website also constitutes a valuable resource for unpublished essays and theses on the Convention. Relevant sources available to the present author were included until 5 March Case law An overwhelming and ever-growing body of CISG case law exists. For purposes of this thesis, it would not be possible to provide exhaustive lists of case law. The case law references are employed to illustrate the various views and relevant arguments and are not meant to be exhaustive. The UNCITRAL Digest of Case Law on the United Nations Convention on the International Sale of Goods 29 was consulted. The Case Law on UNCITRAL Texts or CLOUT collection 30 was searched for relevant CISG cases Bibliography available at (last accessed ). Dalhuisen Dalhuisen on Transnational and Comparative Commercial, Financial and Trade Law (2007) 5 points out that English has become the lingua franca of the commercial and financial world. Full text articles may be accessed at (last accessed ). The author is aware of the third English edition of Schlechtriem and Schwenzer Commentary on the UN Convention on the International Sale of Goods (CISG) (2010). However, the author was not able to obtain a copy of this edition before finalisation of the thesis. Published by the United Nations. The CLOUT system is available for online searching. The relevant URL for online searching is (last accessed ). 11

20 The UNILEX database 31 contains the full text of numerous decisions in their original language. The present author found the UNILEX case law database most helpful. The UNILEX database may be searched by CISG article number, which provides an overview of relevant case law on a specific CISG topic. 32 References to available translations of texts of decisions handed down in any other language than English from the Queen Mary Translation Programme and available as part of the Pace University CISG Database, are provided. 33 Full website references are provided in the bibliography, whereas a shortened referencing method is employed in the footnotes. The Uniform Research Locator is followed by a case-specific reference. In the footnotes, the URL is omitted, and the case-specific reference is provided. If a decision is available on CLOUT and UNILEX, references to the case numbers in both databases are provided. All available English translation references are also provided Documentary history With regard to the historical analysis of the drafting process, three terms are used. Legislative history refers to the history of unified international sales law, and encompasses the history of the CISG s predecessors, the ULIS and the ULF. The terms drafting history or documentary history are used in a narrower context to denote the drafting process of the CISG text The website address is (last accessed ). The editor-in-chief is Prof MJ Bonell. UNILEX is based on a research project started in 1992 by the Centre for Comparative and Foreign Law Studies a joint venture of the Italian National Research Council, the University of Rome I La Sapienza and the International Institute for the Unification of Private Law (UNIDROIT). The project has been financed by the Italian National Research Council. Printed versions of UNILEX are available from Transnational Publishers. Reference will be made to UNILEX case numbers in this thesis. It is, however, not possible to search the UNILEX database by UNILEX case number only. The following Uniform Research Locator needs to be utilised: The 6 in the URL refers to the UNILEX case number. The UNILEX cases referred to in this thesis may be accessed by substituting the 6 in the URL provided with the relevant case number. More information on the Queen Mary Translation Programme may be obtained on the Pace CISG website at (last accessed ). 12

21 The Reports of the Working Group on the International Sale of Goods were consulted in the relevant UNCITRAL Yearbooks from The documents that pertain to the 1980 Vienna Diplomatic Conference were accessed in the Official Records of the Conference. 35 Honnold s compilation of documents relating to the documentary history of the CISG 36 was employed as a guide to establish which draft article was discussed during which Working Group session and meeting. 1.7 Background to the main theme: overview of the structure of the CISG The CISG is divided into four main parts and three of the parts are subdivided into chapters. The chapters are divided into specific articles. The first part contains two chapters. Chapter I includes articles 1 6 and deals with the CISG s sphere of application. The two alternative applicability criteria are set out in article 1, article 2 contains a list of goods not governed by the Convention and article 3 describes when manufactured goods and sales contracts with a service component fall within the ambit of the CISG. Articles 4 and 5 distinguish between matters pertaining to an international sales contract which are and which are not governed by the CISG and recognition is given to party autonomy in article 6. Chapter II ( general provisions ) of part I spans from article 7 to article 13. Article 7(1) encompasses interpretation criteria and article 7(2) directs how gaps within the Convention should be filled. This chapter also contains provisions on the interpretation of parties conduct (article 8), on usages (article 9), and on the lack of form requirements. Part II (articles 14 24) enunciates the rules on the formation of the contract. It contains provisions on what amounts to an offer (article 14), when an offer becomes effective (article 15), when an offer may be revoked (article 16), when an offer is The UNCITRAL Yearbooks are available on the UNCITRAL website at (last accessed ). United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March - 11 April 1980, Official Records; UN Document no A/CONF.97/19. Honnold Documentary History of the Uniform Law for International Sales. The Studies, Deliberations and Decisions that led to the 1980 United Nations Convention with Introduction and Explanations (1989). 13

22 terminated (article 17), when an acceptance becomes effective (article 18), late acceptance (article 21), and withdrawal of an acceptance (article 22). Article 23 provides that a contract is concluded at the moment when the acceptance of an offer becomes effective in terms of this Convention, which is the moment the assent reaches the offeror. Part III (articles 25 88) is entitled sale of goods and contains the substantive rules in this regard. Chapter I (articles 25 29) encompasses general provisions. Article 25 defines a fundamental breach of contract as a breach that results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result. As mentioned previously, article 28 provides that, when a party is entitled to claim specific performance, a court is not bound to enter a judgment for specific performance unless it is an available remedy under the lex fori for similar contracts of sale. According to article 29, the contract may be modified or terminated by mere agreement between the parties, unless it contains a provision requiring such to be effected in writing. Chapter II of Part III (articles 30 52) sets out the obligations of the seller. Article 30 provides that the seller is obliged to deliver the goods, hand over any documents relating to them and transfer the property in the goods, as required by the contract and this Convention. This chapter is divided into three sections. Section I (articles 31 34) deals with the delivery of the goods and the handing over of the documents. Section II (articles 35 44) contains provisions relating to the conformity of the goods and third party claims. Section III (articles 45 52) describes the remedies available to the buyer in the case of breach of contract by the seller. The buyer may claim performance of the seller, unless the buyer has resorted to an inconsistent remedy (article 46). The buyer may fix an additional, reasonable period of time for performance by the seller of his obligations (article 47). The buyer may declare the contract avoided if the seller commits fundamental breach of contract or, in the case where an additional period of time was fixed for delivery, after expiry of such period of time (article 49). In the case of non-conforming goods, the buyer may claim price reduction, subject to the 14

23 conditions as set out in article 50. Resorting to any of these remedies, does not deprive the buyer from claiming damages in terms of articles Chapter III of Part III (articles 53 65) sets out the obligations of the buyer. Article 53 provides that the buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention. This chapter is also divided into three sections. Section I (articles 54 59) contains provisions on the payment of the purchase price. The general rule in this regard is that the buyer is under the obligation to pay the price at the seller s place of business, or, if payment is to be made against the handing over of the good or of documents, at the place where the handing over takes place; unless the contract contains a provision to the contrary (article 57). According to article 60 (which constitutes section II of chapter III) the buyer s obligation to take delivery consists of doing all the acts which could reasonably be expected of him in order to enable the seller to make delivery and in taking over the goods. Section III (articles 61 65) lists the remedies available to the seller in the case of breach of contract by the buyer. The seller may require the buyer to perform his duties in terms of this Convention and the contract, unless the seller has resorted to a remedy inconsistent with a claim for performance (article 62). The seller may fix an additional period of time for the buyer to comply with his obligations (article 63). The seller may declare the contract avoided if the buyer has committed fundamental breach of contract, or, where an additional period of time for performance was fixed, if the buyer did not perform before the expiry of such additional period of time (article 64). In cases where the buyer has paid the price, the seller loses the right to declare the contract avoided, unless he does so under the circumstances provided for in article 64(2). In general however, the seller may rely on the remedies as stipulated in articles without losing the right to claim damages. Chapter IV of Part III (articles 66 70) contains provisions on the passing of risk. Article 67 stipulates that, if the contract involves carriage of goods and the seller is not bound to hand them over at a specified place, the risk passes to the buyer when the goods are handed over to the first carrier for transmission to the buyer. In the case of goods sold in transitu, article 68 provides that the risk passes to the buyer from the time of the conclusion of the contract, unless circumstances indicate that the risk is 15

24 assumed by the buyer from the time the goods were handed over to the carrier who issued the documents embodying the contract of carriage. Chapter IV (articles 71 88) contains provisions common to the obligations of the seller and buyer. Section I (articles 71 73) concerns anticipatory breach and instalment contracts. Section II (articles 74 77) makes provision for damages. According to article 74, damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract. If the contract was avoided and if, in a reasonable time and manner, the buyer has bought substitute goods or the seller has resold the goods, the party claiming damages may also claim the difference between the original contract price and the substitute transaction price (article 75). Article 76 provides that, in the case of avoidance where no substitute contract could be concluded and there is a current price for the goods, the party claiming damages may also claim the difference between the contract price and the current price of the goods at the time of avoidance. Article 78 makes provision for interest payable on any sum in arrears, irrespective of a claim for damages in terms of article 74. Articles 79 and 80 (section IV) sets out circumstances that exempt a party from his obligations. According to article 79(1), a party is not liable for failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of conclusion of the contract or to have avoided or overcome it or its consequences. Section V of chapter IV (articles 81 84) concerns the effects of avoidance. Article 81(1) provides that avoidance of the contract releases both parties from their obligations under it, subject to any damages which may be due. According to article 81(2), both parties are entitled to restitution of performances rendered. 16

25 Section VI (articles 85 88) contains provisions on the preservation of the goods. Article 85 stipulates that where the buyer delays in taking delivery of the goods or fails to pay the purchase price and the seller is in possession or control of the goods, the seller should take reasonable steps to preserve the goods. The seller then acquires a retention right over the goods until he has been reimbursed for his reasonable expenses. Article 86 provides that, under circumstances where the buyer receives nonconforming goods and intends to reject them, the buyer should also take reasonable steps to preserve the goods. The buyer then also acquires a retention right for his reasonable expenses. Part IV of the Convention (articles ) is entitled final provisions. It contains public international law provisions. Article 89 designates the Secretary-General of the United Nations as the depositary for the CISG. According to article 90, the CISG does not prevail over any other international agreement which contains provisions concerning matters governed by the CISG under circumstances where the parties have their places of business in contracting states to such international agreements. Article 91 contains provisions on the signature, ratification, accession, approval or acceptance of the Convention. Articles contain reservations that contracting states are permitted to make. Article 98 stipulates that no other reservations are permitted except for those expressly authorised in the CISG. Articles 99 and 100 contain provisions on the CISG s entry into force and entry into force and application of the Convention in contracting states. Article 101 deals with denunciation of the Convention. The CISG was signed in Vienna on 11 April

26 CHAPTER 2 UNIFORM INTERNATIONAL SALES LAW, PRIVATE INTERNATIONAL LAW AND THE CISG 2.1 Introduction An analysis of the development of the international market and international commerce shows that international merchants have long strived towards the selfregulation of their trade. As advantageous as international trade might be for national economies and the merchants themselves, it is burdened by clashing regulatory frameworks. Merchants have long yet recognised this constraint and have extricated their commercial disputes from the tangled regulatory web of the national legal order. 1 In order to understand the international market s need for uniform international commercial regulation, the basic functioning of free trade needs to be understood. 2 Merchants meet in the international market place in order to exchange goods and services. The role players in international trade create business conditions underlying their free trade within the environment of the international marketplace and here they display their good faith or bad faith as members of the business community through honouring or dishonouring their agreements. 3 These agreements are the instruments of commercial interaction. With time, certain standardised agreements developed, indicating the advent of inter-party practices. These practices evolve into business usage and ultimately into trade custom. These trade customs that evolve continually with the changing needs of international merchants constitute the international law merchant or lex mercatoria. Even though heated scholarly debates have ensued the past five decades over the existence and contents of the lex mercatoria, current commercial reality attests to the Medwig The New Law Merchant: Legal Rhetoric and Commercial Reality 1993 Law and Policy in International Business Trakman The Law Merchant: The Evolution of Commercial Law (1983) 2. Ibid. 18

27 fact that a transnational body of law, governing international business transactions exclusively, indeed exists. During the twentieth century, various initiatives towards the formalised unification of international commercial law were founded. Berger mentions the fact that, with the foundation of UNCITRAL 4 and UNIDROIT, 5 a growing body of clearly identifiable general principles is being manifested and codified as international trade law. 6 It is submitted that the United Nations Convention on Contracts for the International Sale of Goods (CISG) 7 also forms part of this codification process of transnational commercial law or lex mercatoria. This submission warrants a historical overview of the development of the lex mercatoria, as well as an analysis of scholarly debate concerning its existence, nature and content. Numerous scholars support the view that the rules and principles surrounding the international sale of goods form the centrepiece of the lex mercatoria. 8 Therefore, the necessity, scope and methods of the international unification of sales law will be investigated. With regard to unification of international sales law by means of conventions, the drafting history of the CISG s predecessors, the Convention relating to a Uniform Law on the International Sale of Goods (ULIS) 9 and the Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF) 10 will be examined before the CISG s drafting process will be analysed. This chapter will be concluded with an exposition on CISG methodology as well as a The United Nations Commission on International Trade Law see n 122 below. The International Institute for the Unification of Private Law (Rome) was established in 1926 as an auxiliary organ of the League of Nations. UNIDROIT was re-established in 1940 on the basis of a multilateral agreement, the UNIDROIT Statute. The Statute may be accessed at (last accessed ). Membership of UNIDROIT is restricted to states acceding to the UNIDROIT Statute and the Institute has sixty three member states. The composition of UNIDROIT, its working methods and other information on its functioning are set out in the Statute. According to article 1 of the UNIDROIT Statute, the Institute s purposes are to examine ways of harmonising and coordinating the private law of States and of groups of States and to prepare gradually for the adoption by the various States of uniform rules of private law. Berger The Creeping Codification of the Lex Mercatoria (1999) 34. United Nations Convention on Contracts for the International Sale of Goods, , Vienna, UN Document A/CONF.97/18: 1489 UNTS 3; 1980 International Legal Materials 668. Available online on the UNCITRAL website at (last accessed ). See par below , The Hague, 834 UNTS , The Hague, 834 UNTS

28 synopsis of the relationship between the CISG as an instrument of international uniform substantive law and private international law. 2.2 The lex mercatoria The lex mercatoria defined According to Berger, the term lex mercatoria can be understood in one of three possible meanings. 11 Firstly, it can be understood as a mere legal mass of rules and principles without any internal consistency or systematic quality. This mass derives its validity and enforceability from the sovereign states themselves, in that the principle of party autonomy in contract law has been accepted by most jurisdictions. Secondly, it can be viewed as the totality of trade usages that are refined according to the needs of international commerce and constitute a factual ius commune. 12 Lastly, the lex mercatoria is regarded as an independent, supra-national legal system which derives its validity either from its autonomous existence or through the principle of party autonomy as a meta-legal rule. 13 Nygh attributes three essential characteristics to the lex mercatoria. 14 Firstly, it must be autonomous. This means that it must not only be dissociated from the historical and doctrinal peculiarities of municipal systems of law 15 but also have a normative value which is independent of any one national legal system. 16 Secondly, the lex mercatoria must provide rules sufficient to decide a dispute. 17 Thirdly, the lex mercatoria must have the character of rules which bind parties to the contract as well as those who are called upon to resolve any dispute. 18 If the rules of the lex mercatoria are nothing more than guidelines, a choice of the lex mercatoria to govern an agreement would deprive it of contractual force Berger (n 6) Berger (n 6) 40. Berger (n 6) 40. Nygh Autonomy in International Contracts (1999) Nygh (n 14) 180 quotes Schmitthoff The Law of International Trade, its Growth, Formulation and Operation in Schmitthoff (ed) The Sources of Law of International Trade (1964) 148 in this regard. Nygh (n 14) 180 quotes Mustill The New Lex Mercatoria in Bos and Brownlie (eds) Liber Amicorum Lord Wilberforce (1987) 151. Nygh (n 14) 180. Nygh (n 14)

29 According to Dalhuisen, the lex mercatoria is not dependent on a pre-existing, internally coherent legal system, not even when part of treaty law and even less when operating as transnational custom, practice or general principle. It rather forms itself through a dynamic law creation process A study of the abundant literature available on the topic, attests to the fact that numerous and varying definitions of the lex mercatoria exist. 20 It is submitted that in essence it can be described as a constantly evolving, autonomous body of rules comprising all the tenets governing international commerce, whether in the form of written codes, customs or trade usages Brief overview of the historical development of the lex mercatoria 22 The history of the lex mercatoria can be traced back to the advent of international trade. 23 The ancient Assyrians, Egyptians, Carthaginians, Phoenicians, Greeks and Romans all played important roles in the early history of commerce. 24 The only commercial laws known to us today are those of the Greeks and Romans no Dalhuisen Dalhuisen on Transnational and Comparative Commercial, Financial and Trade law (2007) 3. For example, Goldstajn defines the lex mercatoria as a body of customary law consisting of the business practices and customs of international businessmen (Goldstajn The New Law Merchant 1961 Journal of Business Law 12 12). Booysen advocates a wide definition and describes the lex mercatoria as an embodiment of the legal norms governing the activities of persons involved in international trade (Booysen International Transactions and the International Law Merchant (1995) 3). Highet defines the lex mercatoria as the principles of the developing transnational or international law merchant, capable of being applied by decision makers (judges or arbitrators) as a source of legal rules, in order to give content to decisions, in much the same way that these decision makers would apply a legal system such as the lex fori or lex loci arbitri (Highet The Enigma of the Lex Mercatoria in Carbonneau (ed) Lex Mercatoria and Arbitration: A Discussion of the New Law Merchant (1998) ). Epstein simply regards the law merchant as the commercial law rules contractual, customary and statutory that govern transactions among merchants (Epstein Reflections on the Historical Origins and Economic Structure of the Law Merchant 2004 Chicago Journal of International Law 1 1). Wethmar-Lemmer The Existence of a Modern Lex Mercatoria (2005) LLM dissertation (University of Johannesburg) 5. Compare in this regard, Wethmar-Lemmer The Development of a Modern Lex Mercatoria: A Historical Perspective 2005 Fundamina 183. Graveson The International Unification of Law 1968 The American Journal of Comparative Law 4 4 remarks that [t]he international process of assimilating the diverse legal systems of various countries goes back to ancient history. Register Notes on the History of Commerce and Commercial Law 1913 University of Pennsylvania Law Review See also Trakman The Evolution of the Law Merchant: Our Commercial Heritage. Part I: Ancient and Medieval Law Merchant 1980 Journal of Maritime Law and Commerce

30 fragments of the commercial laws of the other ancient nations have been preserved. The oldest commercial law of which knowledge exists today, is that of the Dorian island of Rhodos from the third century BC. Of this Lex Rhodia we only have indirect knowledge through Roman law. 25 The Athenian laws are the first of which preserved texts exist. The expansion of the Roman empire from circa 300 BC onwards, provided great impetus for international trade. 26 Rome provided a sophisticated regulatory framework for ancient international trade. In this regard, one needs to have regard to the ius gentium. 27 In short, the ius gentium was the body of law developed by the praetor peregrinus from 242 BC onwards to apply in disputes between Roman citizens and foreigners. Since most of the principles of Roman commercial law came from the ius gentium, it is not surprising that many of the laws bearing on commerce are to be found in the codification of the praetorian edicts, known as the Edictum Perpetuum. 28 After the fall of the Western Roman empire in AD 476 a period of five centuries followed during which international commerce almost disappeared. 29 From the eleventh century onwards the Crusades re-established relations between Europe and the East, which had a profound impact on the growth of international commerce and production. The proliferation of international trade gave rise to the need for a sophisticated regulatory framework. This prompted the reception of Roman law from the twelfth century onwards. 30 The reception process ensured that all the legal systems of the Western European continent had a Roman-law basis and had the effect of permeating all commercial custom from the twelfth century onwards with a Digesta 14 2 De lege rhodia jactu. See on this topic in general, Boak and Sinnigen A History of Rome to AD 565 (1965). In short, the ius gentium was the body of law developed by the praetor peregrinus from 242 BC onwards to apply in disputes between Roman citizens and foreigners. See, for example, Spruit Cunabula Iuris: Elementen van het Romeinse Privaatrecht (2003) in this regard. For an in-depth analysis of the Edictum Perpetuum, see Lenel Das Edictum Perpetuum: ein Versuch zu seiner Wiederherstellung (1927). See, in this regard, Gibbins The History of Commerce in Europe (1903) The reception process was driven by the need for a more sophisticated legal system to govern complex international trade transactions, since the Germanic customary law that regulated daily life during this time was not sufficient. See Stein Roman Law in European History (1999) for a detailed analysis of the reception process. 22

31 decidedly Roman-law character. In later medieval times the lex mercatoria attained a cosmopolitan character, liberated from the restraints of national legal systems. 31 With the rise of nationalism and the codification of national legal systems in the eighteenth and nineteenth centuries, rules of the lex mercatoria were assimilated into domestic legal codes. 32 The twentieth century heralded the advent of true globalism. As stated above, 33 during the twentieth century large parts of the lex mercatoria were codified in international conventions. 34 It may be added that the modern lex mercatoria is also found in model laws and other documents of various forms, drafted by international organisations. Berger refers to this as the creeping codification of the lex mercatoria. 35 This twentieth century lex mercatoria, referred to by many scholars as the new lex mercatoria, has also been recognised by courts, 36 arbitral tribunals 37 and even by legislation Modern lex mercatoria arguments During the twentieth century, scholars developed the so-called new lex mercatoria theory. 38 Schmitthoff and Goldman represent the two important viewpoints in this regard. Schmitthoff is arguably the most well-known proponent of this theory. 39 According to Schmitthoff s theory, transnational law or the lex mercatoria is not a branch of Trakman (n 2) Trakman (n 2) See par 2.1. See Schmitthoff The Law of International Trade, its Growth, Formulation and Operation in Schmitthoff (ed) The Sources of International Trade (1964) 3 5. Berger s book (n 6) by this title discusses this topic in detail. Ferrari Uniform Interpretation of the 1980 Uniform Sales Law 1994 Georgia Journal of International and Comparative Law n 24 for references to case law. Ferrari (n 36) 187 n 25. De Ly International Business Law and the Lex Mercatoria (1992) 207. See, in this regard, Schmitthoff Commercial Law in a Changing Economic Climate (1981); Schmitthoff Nature and Evolution of the Transnational Law of Commercial Transactions in Horn and Schmitthoff (eds) The Transnational Law of International Commercial Transactions (1982)

32 public international law it derives its power from the sovereign power of national lawgivers. 40 Within any national legal system, one may distinguish between branches of mandatory law on the one hand and branches of optional law on the other. Subject to a few exceptions, 41 contract law falls within the field of optional law and is governed by the principle of party autonomy or freedom of contract. 42 According to Schmitthoff, the legal technique of contracting has been depoliticised and this is evident from the fact that countries of different economic orders and legal traditions co-operate in the formulating agencies of international trade such as UNCITRAL, 43 the ICC 44 and UNIDROIT. 45 This transnational law is developed through a parallelism of action in the various national legal systems through which uniform rules for international trade are established. 46 Schmitthoff summarises his theory as follows: It is, therefore, wrong to attribute the character of international or supranational law to international trade law. It acquires its autonomous character by leave and license of all national sovereigns. In character it is very different from public international law. Ultimately it is found on national law but has been developed by international business in an area in which all national sovereigns are, in principle, disinterested. The best way to describe the peculiar character of international trade law is to refer to it as transnational law. 47 According to Schmitthoff, transnational law consists of international legislation and international commercial custom. 48 International legislation refers to uniform international substantive law conventions as introduced into the national legal systems of contracting states. 49 International commercial custom refers to commercial practices and usages formulated by international agencies, for example the ICC Incoterms. 50 Schmitthoff regards international commercial custom as rules Schmitthoff (n 39 (1982)) 20. An example of such an exception is mandatory consumer protection legislation. Schmitthoff (n 39 (1982)) 20. See n 122 below. The International Chamber of Commerce. See n 79 below. Schmitthoff (n 39 (1982)) 21. See n 5 above for a description of the functioning of UNIDROIT. Ibid. Schmitthoff (n 39 (1981)) 22. Schmitthoff (n 39 (1982)) 23. Ibid. Schmitthoff (n 39 (1982))

33 expressed by a formulating agency and as only applicable if incorporated by the parties in their contract. 51 It may be concluded that Schmitthoff seeks to legitimise the existence of a transnational law within the sphere of national law in his lex mercatoria theory. Schmitthoff also requires all components of the lex mercatoria to be codified in some form. Conversely, Goldman, a contemporary of Schmitthoff, regards the lex mercatoria as an autonomous, non-national legal system. 52 However, Goldman also recognises the role of public international law and national law in international trade law. 53 Goldman therefore regards the lex mercatoria as an incomplete legal system 54 it is separate from national legal systems, but does not govern international trade exclusively. International commercial arbitration was an important element of Goldman s lex mercatoria theory. 55 According to De Ly, one of Goldman s most important contributions to the subject is found in his research concerning the development of an autonomous set of conflict rules for international commercial arbitration. 56 According to Goldman, the lex mercatoria consists of several elements or sources. Firstly, reference may be made to transnational substantive rules, which Goldman regarded as part of national legal systems. 57 Secondly, Goldman referred to codified usages and international conventions concerning international companies as formal sources of the lex mercatoria 58 because of the fact that they have the necessary legitimacy and are general enough to qualify. Thirdly, Goldman referred to general principles of law in international commercial contracts and in arbitral awards as sources of the new lex mercatoria. These general principles govern international Ibid. De Ly (n 38) 214 refers to Goldman Fontieres du droit et lex mercatoria (1964). De Ly (n 38) 214 refers to Goldman Le contrat international in Commission droit et vie des affairs (ed) Renaissance du phénomène contractuel (1971). De Ly (n 38) 213. De Ly (n 38) 212 refers to Goldman Arbitrage international et droit commun des nations 1956 Revue de l arbitrage De Ly (n 38) De Ly (n 38) 211 refers to Goldman Les problèmes spécifiques de l arbitrage international 1980 Revue de l arbitrage De Ly (n 38) 211 refers to Goldman Les conflits de lois dans l arbitrage international de droit privé Recueil des Cours. Collected Courses of the Hague Academy of International Law 1963 (II) (1964)

34 commerce exclusively and are widely known by states engaging in international commerce. 59 According to Goldman, this third source of the lex mercatoria plays an important role in filling gaps in other sources. 60 Schmitthoff and Goldman s theories on the lex mercatoria are illustrative of the two schools of thought that developed during the twentieth century with regard to this phenomenon. On the one hand, those supporting Schmitthoff s view, regarded the new lex mercatoria as existing out of rules forming part of domestic legal systems but which governed international commercial law exclusively and were contained in codes of some form. On the other hand, scholars following Goldman s view, considered the lex mercatoria to be an autonomous legal system. According to the latter view, the constituent parts of the lex mercatoria could be in written form or in the form of uncodified usages or general principles. The theory of a new lex mercatoria has also drawn harsh criticism. Two main points of criticism may be mentioned. The first is that the lex mercatoria lacks legitimacy as an autonomous legal system, since it has not been promulgated by a sovereign state. 61 The second point of criticism levelled against the lex mercatoria is that its content is confused, unascertainable and full of gaps. 62 However, commercial reality attests to the fact that a body of law governing international business transactions exclusively, indeed exists. Current views on the lex mercatoria reveal that the debate on whether its rules are contained within national legal orders or whether its rules are indeed a-national is irrelevant the lex mercatoria has always comprised various types of legal rules: those contained in national laws, codified usages or unwritten commercial custom. 63 According to this contemporary lex mercatoria argument, global commercial law De Ly (n 38) 212 refers to Goldman Le contract international (n 53) 471. Ibid. See Berger (n 6) for an overview of the debate surrounding the legitimacy of the lex mercatoria as an autonomous legal system. See, for example, Turley Lex Mercatoria: Quo Vadis? 1999 Tydskrif vir die Suid-Afrikaanse Reg / Journal of South African Law Michaels The True Lex Mercatoria: Law Beyond the State 2007 Indiana Journal of Global Legal Studies

35 transcends boundaries between state and non-state sources. 64 The true lex mercatoria comprises state and non-state norms and institutions 65 that are most suitable to the governing of international commercial law. The contents of the true lex mercatoria should therefore be ascertained through a functional analysis 66 and distinctions between national and non-national or code and custom should be forgotten. When establishing whether a certain rule or document forms part of the lex mercatoria, it merely needs to be ascertained whether it enhances, and is suitable to, international commerce. Within the context of the contemporary view of the lex mercatoria as a body of law consisting of various types of rules and instruments, the question arises whether a hierarchy exists among the various components thereof. Different views exist on this question. One view is that no obvious hierarchy exists among the various constituent parts of the lex mercatoria the principle or instrument chosen in any given circumstance is that which is most suitable from a commercial perspective, according to this view the choice between instruments is made along functional lines. 67 The converse view is that there exists a distinct hierarchy between the principles and documents that constitute the lex mercatoria. 68 Dalhuisen proposes the following hierarchy: first one must have regard to fundamental basic principles of the lex mercatoria, for example the principle of pacta sunt servanda. Secondly, uniform substantive law conventions of a mandatory nature should be consulted. 69 Thirdly, one should pay heed to the contractual terms. Fourthly, regard should be had to relevant directory customs or practices, for example the UCP. 70 Fifthly, one should consult uniform convention rules of a directory nature, such as the CISG. 71 Thereafter, one may have regard to general principles of law, and as a last resort, one Michaels (n 63) 452. Michaels (n 63) 464. Michaels (n 63) 452. See Michaels (n 63) 459. Dalhuisen (n 19) 157 and Dalhuisen (n 19) 158. Ibid. UCP refers to the Uniform Customs and Practice for Documentary Credits; see n 83 below. Dalhuisen (n 19)

36 may consult the domestic legal system applicable by virtue of the rules of private international law. 72 The present author submits that a choice between the various rules and principles of the lex mercatoria would indeed be made along functional lines. However, in cases where there exists a connecting factor to the CISG, it is submitted that this Convention would be central to the governing regime of the relevant international transaction. The other sources of the lex mercatoria should rather be seen as complementary, not as in conflict with one another or within such a strict hierarchy Components of the lex mercatoria relevant to international sales law It is important to bear in mind that the lex mercatoria is constantly evolving and adapting in order to meet the needs of the international commercial community. It would therefore not be possible to compile an exhaustive list of principles and instruments that constitute the lex mercatoria, even if one limits the list to international sales law principles and documents. However, when conducting a study on the CISG, it is essential to contextualise the Convention by identifying the other relevant lex mercatoria instruments that a party to an international sales contract may encounter. In general, mention may be made of CENTRAL s list of principles, rules and standards of the lex mercatoria, which is available online. 73 The UNIDROIT 74 Principles of International Commercial Contracts 75 are of particular importance in the context of international sales law. According to the preamble to the UNIDROIT Principles these Principles may be applied when the parties have agreed Ibid. CENTRAL or the Centre for Transnational Law was established by Klaus Peter Berger at the University of Cologne s Faculty of Law. CENTRAL conducts ongoing research on the lex mercatoria. The list of principles, rules and standards may be accessed at (last accessed ). See n 5 above. An integrated text of and commentary on the Principles may be accessed at 04-e.pdf (last accessed ). 28

37 that their contract be governed by general principles of law, the lex mercatoria or the like. 76 The Principles contain a comprehensive set of substantive law provisions designed for governing international commercial contracts. The Principles are divided into chapters covering, inter alia, the formation, validity and interpretation of the contract and the rights and obligations of the parties. 77 The scope of the UNIDROIT Principles is much wider than that of the CISG, but the former also includes contracts for the international sale of goods. The UNIDROIT Principles may possibly provide solutions to gaps within the CISG. The role of the UNIDROIT Principles in the context of gap-filling will be analysed in detail in this thesis. 78 The ICC 79 Incoterms 80 also make a valuable contribution to the law governing international sales. Incoterms are standard trade definitions most commonly used in international sales contracts. The most well-known Incoterms include FOB (Free on Board); CIF (Carriage, Insurance, Freight) and DDU (Delivery Duty Unpaid). 81 The Incoterms therefore govern the method of delivery, provide information on the modes of transport used for the goods and specify the method employed to calculate the price of the goods. The inclusion of an Incoterm in an international sales contract does not amount to an implied exclusion of the CISG Preamble to the UNIDROIT Principles (n 75). See the text of the UNIDROIT Principles (n 75). See par in chapter 4. The International Chamber of Commerce (ICC) was founded in 1919 with the task of promoting trade and investment, open markets for goods and services and the free flow of capital. The ICC expanded dramatically over the years to become a true world business organisation with thousands of member companies in more than 130 countries. The work of the ICC is carried out by different commissions that compile voluntary codes on various topics relevant to international business. Parties to business transactions can include these voluntary codes in their business contracts of their own volition. The ICC focuses on self-regulation in business and is of the conviction that business operates most effectively with a minimum of government intervention. Information on the ICC and its Constitution may be accessed at (last accessed ). The Incoterms or International Commerce Terms are drafted and updated by the ICC Commission on Commercial Law and Practice. The current version in force is the Incoterms The Incoterms 2010 are expected to enter into force in See the website (last accessed ) in this regard. See par in chapter 3. 29

38 Another important ICC document is the Uniform Customs and Practice for Documentary Credits or UCP. The current version is the UCP The UCP has been widely adopted by banking associations and individual banks. The documentary letter of credit is the preferred method of payment in international sales transactions and therefore parties to such contracts need to pay heed to the UCP. UNCITRAL 84 compiled various documents of specific value for international sales law. The most important of these is the Convention on Contracts for the International Sale of Goods (CISG) of Other relevant conventions include the United Nations Convention on the Limitation Period in the International Sale of Goods (1974); 86 the United Nations Convention on the Carriage of Goods by Sea (1978); 87 and the United Nations Convention on the Use of Electronic Communications in International Contracting (2005). 88 With regard to other UNCITRAL instruments, reference may be made to the UNCITRAL Arbitration Rules 89 and the UNCITRAL Model Law on International Commercial Arbitration. 90 Numerous disputes concerning international sales contracts are referred to international commercial arbitration. 91 The UNCITRAL Arbitration Rules are frequently used by individual parties and are also employed to serve as a model for arbitration rules of arbitral institutions See (last accessed ). See par and n 122 below for an analysis of UNCITRAL s most important functions. See n 7 above. United Nations Convention on the Limitation Period in the International Sale of Goods , New York, 1511 UNTS 3. The text of the 1974 Limitation Convention may be accessed online on the UNCITRAL website at (last accessed ). 31 March 1978, 1695 UNTS 3. The text of the Convention may be accessed online at (last accessed ). The text of the Electronic Communications Convention may be accessed on the UNCITRAL website at (last accessed ). The UNCITRAL Arbitration Rules were adopted by the United Nations General Assembly on via Resolution 31/98. A copy of these Rules may be accessed on the UNCITRAL website at (last accessed ). The Model Law was adopted by the United Nations General Assembly on via Resolution 40/72. It amended version was adopted on via Resolution 61/33. The amended version may be accessed at (last accessed ). See the numerous arbitral awards stemming from contracts governed by the CISG available on (last accessed ). Murray, Holloway and Timson-Hunt Schmitthoff s Export trade. The Law and Practice of International Trade (2007)

39 Finally, reference may be made to documents in various forms compiled by the Hague Conference on Private International Law 93 that have bearing on the international sale of goods. The 1955 Hague Convention on the Law Applicable to International Sales of Goods 94 is of special relevance for parties in contracting states to this convention. Mention may also be made of the important work of the Working Group on Choice of Law in International Commercial Contracts 95 of the Hague Conference. This Working Group is preparing a set of Principles on Choice of Law in International Commercial Contracts. 96 The instruments mentioned above form part of a constantly growing and evolving collection of principles and instruments governing international sales law, the latter being an important constituent part of the modern lex mercatoria The CISG as an important part of the lex mercatoria It has been stated that the sale of goods is the major starting point 97 of transnational commercial law. According to Schlechtriem, international sales law is the only workable part of the modern lex mercatoria. 98 Schmitthoff stated that the CISG is intended to be the centrepiece of international harmonisation of trade law. 99 Bridge declared that the CISG is a remarkable instrument whose influence has been felt at many levels of the international and regional uniformity movement The Hague Conference s website may be accessed at (last accessed ) , The Hague, (last accessed ). See n 108 concerning the 1986 Hague Convention on the Law Applicable to International Sales of Goods. The Report of the First Meeting of the Working Group on Choice of Law in International Commercial Contracts may be accessed at (last accessed ). Ibid. Dalhuisen (n 19) 3. Schlechtriem Introduction in Schlechtriem and Schwenzer Commentary on the UN Convention on the International Sale of Goods (CISG) (2005) 10. Murray, Holloway and Timson-Hunt (n 92) 855. Bridge Uniformity and Diversity in the Law of International Sale 2003 Pace International Law Review

40 2.2.6 Conclusion on the lex mercatoria It is submitted that the lex mercatoria, a body of law that regulates international commercial transactions, has existed since the advent of international trade and continues to exist. Its content constantly develops and adapts to suit the needs of an ever-changing international commercial community. It consists of binding international instruments, codified practices and mere commercial custom. No distinction should be drawn between the so-called ancient lex mercatoria, the medieval lex mercatoria and the modern law merchant. 101 The lex mercatoria is a single entity which is constantly adapting to govern international commercial law effectively. 2.3 Unification of international sales law The necessity of the unification of international sales law The following statement concerning the desirability of the international unification of law in general, particularly rings true for the law concerning international sales: It is the function of national law to regulate matters of internal law. As a general rule, it is not its function to regulate matters with international characteristics; the reasonable, natural solution is that these matters be governed by agreement among the national jurisdictions having a substantial interest in these matters. 102 Wool states that [t]he belief that commercial law ought to be gradually unified is a salient feature of orthodox thought on international commercial law reform. 103 Two divergent groups of arguments have been advanced in favour of the unification of international commercial law. The first group of arguments emphasise the reduction of costs and legal certainty brought about by international unification of commercial Berman and Kaufman The Law of International Commercial Transactions (Lex Mercatoria) 1978 Harvard International Law Journal David The Methods of Unification 1968 The American Journal of Comparative Law Wool Rethinking the Notion of Uniformity in the Drafting of International Commercial Law: A Preliminary Proposal for the Development of a Policy-based Unification Model 1997 Revue de droit uniforme / Uniform Law Review

41 law. 104 Unification of international commercial law would increase legal certainty and drastically reduce costs associated with the transaction itself as well as possible compliance and enforcement costs. 105 The second group of arguments centre around the promotion of general and widely accepted international commercial standards, practices and principles. 106 This second rationale for unification ties in with the continuing development of the lex mercatoria to keep pace with the ever changing needs of international merchants. Therefore, the question in this field of international commercial law is not why unification is necessary, but which method of unification to use Models or methods for unifying international sales law The two basic methods of the international unification of law, namely the unification of rules of substantive law on the one hand and the unification of the rules of private international law on the other, have both been employed in the field of the international sale of goods. The CISG is one of the most notable examples of the former and the 1955 Hague Convention on the Law Applicable to International Sales of Goods 108 an example of the latter. The future Hague Principles on Choice of Law in International Commercial Contracts 109 may also be mentioned as a notable contemporary initiative in the field of the unification of private international law. It has been argued that these methods of unification are not in conflict with each other Wool (n 103) 47. Ibid. Wool (n 103) 47 states with regard to the second line of argumentation in favour of unification: It encourages law reform that is transnational in nature, and commercial in orientation, it is consistent with a future in which sophisticated international business practices will play an even greater role and in which legal rules, on policy and efficiency grounds, will increasingly accommodate and often encourage such practices. David (n 102) 14. The Hague Convention on the Law Applicable to International Sales of Goods, , The Hague, (last accessed ) warrants mentioning, although it never entered into force. See n 95 above. David (n 102) 13. But, see Dalhuisen (n 19) 156, who argues that the uniform substantive and conflict of laws approaches are conceptually mutually exclusive. 33

42 The important difference between the use of conventions as opposed to other instruments of unification is the fact that the former creates an international law obligation for states parties to uphold such a convention. It has been stated that international unification of substantive law via soft law instruments such as the UNIDROIT Principles on the one hand and codification via conventions such as the CISG on the other should be evaluated in terms of the conflicting ideals of legal certainty versus flexibility and adaptability: 111 conventions provide the former and lack the latter, soft law instruments provide the latter and lack the former. It is submitted that both types of instruments have an important role to play in the unification of international sales law and complement 112 each other. 113 The CISG provides a system of rules governing contracts for the international sale of goods that is binding on contracting states. Non-binding instruments such as the UNIDROIT Principles may supplement the CISG and provide legal solutions to matters pertaining to the international sale of goods not regulated or not settled in the CISG such matters may have been purposefully left out by the drafters on account of the fact that consensus could not have been reached or may pertain to new developments that the CISG s drafters could not foresee Unification of international sales law via conventions General It has been stated that the criterion for evaluating the success of any instrument purporting to bring about an international unification of legal norms within a certain Kronke International Uniform Commercial Law Conventions: Advantages, Disadvantages, Criteria for Choice 2000 Revue de droit uniforme / Uniform Law Review Bonell International Uniform Law in Practice Or Where the Real Trouble Begins 1990 The American Journal of Comparative Law emphasises the fact that a comparison of the CISG on the one hand and the standard form contracts used in international trade on the other leads to the conclusion that these different kinds of instruments are compatible and complementary. Nadelmann Uniform Legislation versus International Conventions Revisited 1968 The American Journal of Comparative Law states that hard and fast rules cannot be established on what method to use in international work on unification of law. 34

43 field is the degree to which this instrument enhances certainty in the particular field. 114 The method of harmonising law employed most frequently over the past several decades is the international convention. 115 Goode argues that using international conventions for harmonisation create[s] a special regime for international transactions while preserving the identity of national laws for domestic transactions. 116 When drawing up an international convention, the delegates may reach one of two possible forms of agreement: compromise or consensus. 117 Compromise is described as reaching agreement on the technical formulation of the text, the interpretation of which may be flexible, whereas consensus refers to agreement on the underlying meaning of a rule. 118 Compromise is regarded as an effective means of unifying rules of legal systems that are substantially similar. However, when attempting to unify rules of legal systems that are fundamentally different, it demands that consensus be reached on the rules to be unified. 119 The disadvantages of unifying substantive law via conventions are firstly, that conventions are incomplete in nature it would not be possible to regulate all matters pertaining to a certain field of substantive law in a document that is a product of diplomatic compromise between states. Secondly, an international convention rarely keeps up with developments in the relevant field. 120 It is a cumbersome and time-consuming process to modify an existing convention Note Unification and Certainty: The United Nations Convention on Contracts for the International Sale of Goods 1983/1984 Harvard Law Review Diamond Harmonization of Private International Law Relating to Contractual Obligations Recueil des Cours. Collected Courses of the Hague Academy of International Law 1986 IV (1987) ; Rose The Challenges for Uniform Law in the Twenty-first Century 1996 Revue de droit uniforme / Uniform Law Review Goode Reflections on the Harmonisation of Commercial Law 1991 Revue de droit uniforme / Uniform Law Review Note (n 114) Ibid. Note (n 114) Calliess The Making of Transnational Contract Law 2007 Indiana Journal of Global Legal Studies argues that the harmonisation of law via multilateral treaties does not keep pace with globalisation and therefore private law-making has become dominant in the field of international commerce. Dalhuisen (n 19)

44 There are also distinct advantages to unifying substantive law via conventions. The fact that a contracting state is under the obligation to give effect to an international convention, requires the contracting state to adapt its domestic law to be able to comply with its obligations. This mandatory process requires a re-evaluation of relevant domestic law and with this re-evaluation it may happen that an international convention influences the development of a domestic legal system. There exists evidence of the CISG influencing outdated domestic sales law of various jurisdictions The predecessors of the CISG: The Uniform Law on the International Sale of Goods (ULIS) and the Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF) The need to draft an international instrument unifying substantive international sales law was already recognised in the early 1920 s. 123 Rabel 124 approached the Governing Council of UNIDROIT 125 with the suggestion that it should start a project on the unification of the law on the international sale of goods. The history of the Vienna Sales Convention itself dates back to 1930, when UNIDROIT set up a drafting committee to start work on a uniform law for international sales. By the time the Second World War started, the committee had prepared a first draft, received comments on it and incorporated them into a revised draft. 126 In 1951 a twenty-one nation conference was held at the Hague, during which the revised draft was approved and a special commission was appointed to continue work on it De Ly Sources of International Sales Law: An Eclectic Model 2005/2006 Journal of Law and Commerce 1 11 refers to an unpublished thesis by Lamazerolles Les apports de la Convention de Vienne au droit interne de la vente (2003) that points out how the CISG s concepts influence French domestic sales law. Ferrari (n 36) 189. See also Rabel The Hague Conference on the Unification of Sales Law 1952 The American Journal of Comparative Law 1 1. The Austrian scholar Ernst Rabel is widely recognised as the father of the twentieth century unification movement in the field of international sales contracts. His most important work is entitled Das Recht des Warenkaufs vol I (1936), vol II (1957). See n 5 above. Farnsworth The Vienna Convention: History and Scope 1984 The International Lawyer 17. Ibid. 36

45 In 1964, a diplomatic conference was convened by the Dutch government at the Hague during which the Convention relating to a Uniform Law on the International Sale of Goods (ULIS) 128 and the Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF) 129 were approved. 130 The ULIS and ULF enjoyed limited success and only came into force in nine and eight countries respectively. 131 The fact that the ULIS explicitly rejects the rules of private international law is of particular significance to the main topic of this thesis. Article 2 of the ULIS states: Rules of private international law shall be excluded for the purposes of the application of the present Law, subject to any provision to the contrary in the said Law. 132 The impact of the exclusion the rules of private international law from the ULIS will be discussed below Legislative history of the 1980 Convention on Contracts for the International Sale of Goods (CISG) 134 In 1966, during its Twenty-first Session, the United Nations General Assembly established the United Nations Commission on International Trade Law, 135 known by , The Hague, 834 UNTS 107. For a discussion of the ULIS, see Ellwood Hague Uniform Laws Governing the International Sale of Goods 1964 International and Comparative Law Quarterly 38, Honnold Uniform Law of the International Sale of Goods: The Hague Conventions of Law and Contemporary Problems 326 and Sutton Hague Conventions of 1964 and the Unification of the Law of the International Sale of Goods 1970 University of Queensland Law Journal , The Hague, 834 UNTS 169. For a discussion of the ULF, see Aubrey The Formation of International Contracts, with Reference to the Uniform Law on Formation 1965 International and Comparative Law Quarterly 1011; Lagergren The Uniform Law on Formation of Contracts for the International Sale of Goods 1966 Journal of Business Law 22. The documentary history of the 1964 Diplomatic Conference is available in two volumes: Diplomatic Conference on the Unification of Law Governing the International Sale of Goods, The Hague, 2-25 April 1964; Records (Volume I); Documents (Volume II) (1966). The ULIS came into force in Belgium, Great Britain, the Federal Republic of Germany, Gambia, Israel, Italy, Luxembourg, the Netherlands and San Marino. The ULF was ratified by the listed states, with the exception of Israel. The ULIS entered into force on and the ULF on See, also, Ferrari Specific Topics of the CISG in the Light of Judicial Application and Scholarly Writing 1995 Journal of Law and Commerce 1. However, parties to the 1964 Convention were allowed to make a reservation to the effect that the 1964 Convention would only be applicable in cases where the 1955 Hague Convention on the Law Applicable to International Sales of Goods rules pointed to its application. See, in this regard, Diplomatic Conference on the Unification of Law Governing the International Sale of Goods, The Hague, 2-25 April 1964; Records 146, 259. See par below. For a general history of the Vienna Sales Convention, see Sono The Vienna Sales Convention: History and Perspective in Volken and Šarčević (eds) International Sale of Goods: Dubrovnik Lectures (1986)

46 the acronym UNCITRAL. UNCITRAL s main objective is the promotion of the progressive harmonisation and unification of the law of international trade by the preparation of conventions, model laws and standard trade terms. 136 The work done by UNCITRAL is recorded in a series of yearbooks dating from 1968 onwards. 137 UNCITRAL s work on international sales is of relevance for the topic of this thesis. Work to be conducted in the field of international sales was put on UNCITRAL s priority list at the Commission s First Session in Three stages may be distinguished in the drafting process of the CISG, namely the sessions of the UNCITRAL Working Group ( ); the review by the Full Commission ( ) and the review and adoption of the final text by the Diplomatic Conference (1980). 139 At the UNCITRAL Commission s Second Session in 1969, a Working Group on the International Sale of Goods, consisting of representatives from fourteen states, was established. 140 The Working Group was given the mandate to prepare draft legislation on the international sale of goods which would need to be acceptable to diverse UNICITRAL was established by General Assembly Resolution 2205 (XXI) of 17 December This resolution may be found in UNCITRAL Yearbook I ( ) 65. General information on UNCITRAL s methods of work, legislative techniques and other relevant information may be found in The UNCITRAL Guide. Basic Facts about the United Nations Commission on International Trade (2007). This publication is also available electronically on the UNCITRAL website at _Ebook.pdf (last accessed ). See also in this regard, Farnsworth UNCITRAL Why? What? How? When? 1972 The American Journal of Comparative Law 314 and Honnold The United Nations Commission on International Trade Law: Mission and Methods 1979 The American Journal of Comparative Law 201. General Assembly Resolution 2205 (XXI) (n 135). The UNCITRAL Yearbooks may be accessed electronically on the UNCITRAL website at (last accessed ). The Yearbooks firstly contain reports of UNCITRAL s annual sessions. These reports provide an overview of work in progress, summaries of debates by delegations on important issues and texts of legislation approved by the Commission. Furthermore, the Yearbooks contain the final texts of UNCITRAL conventions. See Honnold UNCITRAL Documents: Research Sources, Style and Citation 1979 The American Journal of Comparative Law 217 for a detailed explanation of the various UNCITRAL documents and the citation system employed. First Session, Report of the Commission in UNCITRAL Yearbook I ( ) 71-85, 77 par 40. Honnold Documentary History of the Uniform Law for International Sales. The Studies, Deliberations and Decisions that led to the 1980 United Nations Convention with Introduction and Explanations (1989) 2. Second Session, Report of the Commission in UNCITRAL Yearbook I ( ) , 99 par

47 jurisdictions. 141 The Working Group completed their mandate in nine sessions, held from During its First Session, the Working Group decided on its legislative approach and working method, discussed the scope of application of the new uniform law, the role of private international law in the new uniform law in the context of negation of reference to private international law under the ULIS, the recourse to general principles for gap-filling and the relationship between the uniform law and mandatory rules of national law in the context of consumer protection. 142 During its Second Session, the Working Group reviewed articles 1 17 of the ULIS. These articles include provisions on inter alia, the scope of application of the uniform law, its exclusion by the parties, exclusion of certain goods from its sphere of application, usages, specific performance and interpretation of the uniform law. 143 At its Third Session, the Working Group approved the text to replace articles 1 6 of the ULIS. It also reviewed ULIS articles concerning the obligations of the seller. 144 The Working Group continued its analysis of articles of the ULIS during its Fourth Session. 145 These provisions would ultimately become articles of the CISG (the obligations of the seller). It also started review of the ULIS articles providing for the obligations of the buyer during this session. The Working Group completed its review of the ULIS s substantive provisions during its Fifth Session. 146 It compiled a revised text of the uniform law resulting from its work of its first five sessions. 147 During its Sixth Session, the Working Group discussed several pending questions on the revised text drawn up during its fifth session. 148 In 1976, at its Seventh Session, the Working Group approved the Working Group Draft Convention Ibid. Report of the Working Group on the International Sale of Goods, First Session, 5 16 January 1970 (A/CN.9/35) in UNCITRAL Yearbook I ( ) Working Group on the International Sale of Goods: Report on the Work of the Second Session, 7 18 December 1970 (A/CN.9/52) in UNCITRAL Yearbook II (1971) Progress Report of the Working Group on the International Sale of Goods on the Work of its Third Session, held in Geneva from January 1972 (A/CN.9/62) in UNCITRAL Yearbook III (1972) Progress Report of the Working Group on the International Sale of Goods on the Work of its Fourth Session, New York, 22 January 2 February 1973 (A/CN.9/75) in UNCITRAL Yearbook IV (1973) Progress Report of the Working Group on the International Sale of Goods on the Work of its Fifth Session, Geneva, 21 January 1 February 1974 (A/CN.9/87) in UNCITRAL Yearbook V (1974) Progress Report of the Working Group on the International Sale of Goods on the Work of its Fifth Session (n 146) Report of the Working Group on the International Sale of Goods on the Work of its Sixth Session, New York, 27 January 7 February 1975 (A/CN.9/100) in UNCITRAL Yearbook VI (1975)

48 on the International Sale of Goods. 149 At is Eighth Session, the Working Group examined the ULF s provisions to prepare a new uniform law on the formation of contracts for the international sale of goods. 150 At the time when the Eighth Session was held, the Working Group was under the impression that there would be two separate conventions, such as in the case of the ULIS and the ULF. The Working Group completed the Working Group Draft Convention on the Formation of Contracts for the International Sale of Goods 151 during its Ninth Session. 152 At its Tenth 153 and Eleventh 154 Sessions in 1977 and 1978 respectively, the UNCITRAL Full Commission reviewed the two draft conventions prepared by the Working Group and combined them into one document: the 1978 Draft Convention on Contracts for the International Sale of Goods. The draft convention was given unanimous approval and it was recommended that the United Nations General Assembly convene a diplomatic conference to review the draft convention and adopt a final convention. 155 In 1980 the United Nations held a Diplomatic Conference in Vienna from 10 March 11 April to propose a final text of the CISG. 156 The conference was attended by sixtytwo states. The draft Convention on the International Sale of Goods was reviewed, a number of changes were made and it was given unanimous approval on 11 April The review of the provisions was conducted by two Committees during the conference. Both Committees consisted of representatives of each state that attended For the text of the Working Group Sales Draft, see UNCITRAL Yearbook VII (1976) Report of the Working Group on the International Sale of Goods on the Work of its Eighth Session, New York, 4 14 January 1977 (A/CN.9/128) in UNCITRAL Yearbook VIII (1977) The text of the Draft Formation Convention is available in UNCITRAL Yearbook IX (1978) Report of the Working Group on the International Sale of Goods on the Work of its Ninth Session, Geneva, September 1977 (A/CN.9/142) in UNCITRAL Yearbook IX (1978) Report of the United Nations Commission on International Trade Law on the Work of its Tenth Session (1977) (A/32/17) in UNCITRAL Yearbook VIII (1977) Report of the United Nations Commission on International Trade Law on the Work of its Eleventh Session (1978) (A/33/17) in UNCITRAL Yearbook IX (1978) Honnold (n 139) 3. United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March 11 April 1980, Official Records; UN Document no A/CONF.97/19 (hereinafter Official Records). Final Act of the United Nations Conference on Contracts for the International Sale of Goods (A/CONF.97/18) (1980); reprinted in the Official Records (n 156) 176 and 1980 International Legal Materials

49 the Conference. The First Committee prepared the final version of articles 1 88 of the CISG. 158 The Second Committee 159 prepared articles , the final provisions of the Convention. The CISG came into force on January 1, The CISG managed to consolidate provisions on the formation of the contract and the rights and duties of the parties in a single text replacing both the ULF and the ULIS. 161 With reference to the main theme of this study, the documentary history of the CISG provisions highlighting the relationship between the Convention and private international law needs to be traced. 162 This will be included under the discussion of each relevant article in chapters three and four of this thesis. Though it is an onerous task to analyse and systematise all the documents pertaining to the CISG s drafting history, Honnold has made the task much easier by compiling a collection of the most relevant ones CISG methodology Introduction The adoption of the CISG is only the preliminary step towards the ultimate goal of unification of the law governing the international sale of goods. The area where the Summary Records of Meetings of the First Committee in Official Records (n 156) Summary Records of Meetings of the Second Committee in Official Records (n 156) This is in accordance with article 99(1) of the CISG, which provides that the Convention will come into force twelve months after the deposit of the tenth instrument of ratification. Ferrari (n 36) 196. This is especially relevant in light of the fact that the 1964 Conventions (the ULIS and the ULF) explicitly rejected all reference to private international law rules, whereas the 1980 Convention expressly incorporates such rules. The relevant CISG provisions are articles 1(1)(b); 6; 7(2); 28 and 95. See Honnold (n 139). This work provides a compilation of the legislative records of the Vienna Sales Convention. These records consist of Working Group Proceedings of their Nine Sessions ( ); Reports of the Commission s deliberations during the Review of the draft convention by the full Commission ( ) and documents of the Diplomatic Conference held from 10 March to 11 April 1980, during which the final text of the Convention was approved. 41

50 battle for international unification will be fought and won, or lost, is the interpretation of the CISG s provisions. 164 CISG methodology refers to the method how the CISG is, and should be, interpreted and applied Article 7(1) of the CISG General Article 7(1) is the CISG s interpretation provision and requires that [i]n the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade. This provision establishes the principle of autonomous interpretation 166 which requires the CISG to be interpreted free from any preconceptions based on domestic law. 167 Article 7(1) of the Convention does not prescribe a method of interpretation, it merely provides aims 168 or goals and principles 169 of its interpretation Felemegas The United Nations Convention on Contracts for the International Sale of Goods: Article 7 and Uniform Interpretation (2000) 13, available on the Pace CISG website at (last accessed ); Pace Review of the Convention on Contracts for the International Sale of Goods (CISG) ( ) Reference is made to the online version of this document. Similarly Bonell (n 112) 866 cautions: The approval of a particular convention or uniform law constitutes only the first albeit important, stage in the process of unification. Furthermore, the process requires not only the incorporation of the contents of the convention or uniform rules into the domestic law of each of the states concerned, but also their uniform interpretation by national judges and their actual application by those operating in the affected economic sectors. Rosett Unification, Harmonisation, Restatement, Codification, and Reform in International Commercial Law 1992 The American Journal of Comparative Law echoes this sentiment: It may well be possible to create a situation in which the text that expresses the rules of international commercial law will be identical everywhere. But to suggest that this would unify the law ignores the extent to which legal rules operate in a very particular social and political setting. If one focuses too hard on the unity of the text, one is quite likely to lose sight of the disparity of result that is produced when that text is applied in different systems. Magnus Tracing Methodology in the CISG: Dogmatic Foundations in Janssen and Meyer (eds) CISG Methodology (2009) Eiselen Literal Interpretation: The Meaning of Words in Janssen and Meyer (n 165) 61 74; Schlechtriem Article 7 in Schlechtriem and Schwenzer (n 98) (par 11). Eiselen (n 166) 74. Magnus (n 165) 52. Eiselen (n 166)

51 Bonell points out that article 7(1) emphasises the fact that the CISG remains an autonomous body of law even after its incorporation into the different national legal systems of the contracting states. 170 According to Eörsi, article 7(1) s principles create two rules of interpretation, namely that the homeward trend in interpretation should be eliminated and that foreign CISG precedents should be considered International character of the CISG Firstly, the international character of the CISG has to be taken into account when interpreting its provisions. This instruction refers to the autonomous interpretation requirement 172 of the CISG, the fact that the Convention constitutes its own legal cosmos 173 and is to be interpreted without reference to the concepts and legal institutions of domestic legal systems. 174 Schlechtriem adds that this provision also prohibits recourse to methodological theories of interpretation of domestic texts. 175 Instead of having regard to domestic legal concepts for interpretation, taking the international character of the CISG into account entails that one should rather look to other international documents as interpretational aids. 176 In this regard, reference may be made to other relevant conventions as well as other international instruments such as the UNIDROIT Principles. Another aspect of the international character of the CISG is the fact that the Convention employs its own set of neutral or a-national terminology in order to Bonell Article 7 Interpretation of Convention in Bianca and Bonell Commentary on the International Sales Law. The 1980 Vienna Sales Convention (1987) Eörsi General Provisions in Galston and Smit (eds) International Sales. The United Nations Convention on Contracts for the International Sale of Goods (1984) Schlechtriem (n 166) 96 (par 11). Magnus (n 165) 40. Enderlein and Maskow International Sales law. United Nations Convention on Contracts for the International Sale of Goods. Convention on the Limitation Period in the International Sale of Goods (1992) 55. Schlechtriem (n 166) 96 (par 12). Enderlein and Maskow (n 174)

52 enhance its autonomous interpretation. 177 This terminology reflects the fact that the CISG governs international transactions. An example of such terminology may be found in the CISG provision governing the transfer of the risk. 178 According to article 67(1), the risk passes to the buyer when the goods are handed over to the first carrier for transmission to the buyer in accordance with the contract of sale. 179 Honnold argues that taking the international character of the CISG into account also requires one to have due regard to its legislative history Promotion of uniformity of the CISG s application Secondly, promotion of uniformity of the CISG s application has to be borne in mind during its interpretation. It is widely acknowledged that uniform application of the CISG is dependant on its uniform interpretation by various fora. 181 In turn, uniform interpretation of the CISG depends upon the extent to which fora take cognisance of foreign precedents in this regard. 182 Certain authors are of the opinion that the latter does not and will not happen. 183 However, article 7(1) of the CISG directs that in its interpretation, regard is to be had to its international character and to the need to promote uniformity in its application. Several authors deduce from this provision that fora in contracting states are under a treaty obligation to take foreign CISG jurisprudence into account when interpreting Felemegas Introduction in Felemegas (ed) An International Approach to the Interpretation of the United Nations Convention on Contracts for the International Sale of Goods (1980) as Uniform Sales Law (2007) Felemegas (n 177) 20. Own italics. Honnold Uniform Law for International Sales under the 1980 United Nations Convention. Edited and updated by Harry M Flechtner (2009) 88 (hereinafter referred to as Honnold Flechtner). Bonell (n 112) 866; Magnus (n 165) 41; Note (n 114) Note (n 114) 1998; see Andersen Uniform International Sales Law and the Global Jurisconsultorium 2004/2005 Journal of Law and Commerce 159 for a general discussion in this regard. See, for example, Bridge (n 100) 77 and Note (n 114)

53 the Convention. 184 Lookofsky states more broadly that contracting states are under the obligation to interpret the CISG with regard to its international character. 185 It has been stated that, in taking foreign decisions into account, a forum engages in an international dialogue 186 on the CISG which will promote uniform interpretation and application of the Convention. In order to take foreign decisions into account, it will require willingness by fora to discard the sanctity of their national legal precedents. 187 There exists no international rule of stare decisis, however, foreign CISG decisions should at least be regarded by courts as of persuasive value. 188 An analysis of reported case law on the CISG shows that very few courts up to date have analysed and taken the decisions of foreign courts into account. 189 Fora in CISG contracting states should be encouraged to take cognisance of relevant foreign decisions, since this would be the only manner in which the aim of uniform application of the CISG can be reached. Online CISG databases are expanding on a daily basis and make an ever-growing number of judgments available to judges at the click of a button. Mention may be made of UNCITRAL s case law information system, known under the acronym CLOUT (Case Law on UNCITRAL Texts). CLOUT functions on the basis of reporting offices in CISG contracting states transmitting decisions to the Commission s Secretariat. The original decisions are then made available at the Secretariat and an abstract of the decision is translated into all the CISG s working languages. The CLOUT information system may be accessed online 190 and the UNCITRAL Digest of Case Law on the United Nations Convention Bridge (n 100) 87 points out that CISG contracting states have committed themselves to uniform application of the Convention. See also Magnus (n 165) 41. Lookofsky Understanding the CISG. A Compact Guide to the 1980 United Nations Convention on Contracts for the International Sale of Goods (2008) 30. Cook The UN Convention on Contracts for the International Sale of Goods: A Mandate to Abandon Legal Ethnocentricity 1996/1997 Journal of Law and Commerce Bridge (n 100) 78 states that [t]he skill lies in being able to stand outside one s national legal culture when applying the CISG. Cook (n 186) 263 states in this regard that the CISG requires courts to abandon legal ethnocentricity. Felemegas (n 177) 16. As will become evident in chapters 3 and 4 of this thesis, a study of numerous cases decided on the CISG as available on UNILEX, CLOUT and the Pace CISG website has been conducted by the present author. Two examples of cases that refer to foreign case law extensively are the decisions by the Tribunale Civile di Monza (Italy), : case number 21 (UNILEX), 54 (CLOUT), i3.html (Pace) and the Tribunale di Vigevano (Italy), : case number 387 (UNILEX), 378 (CLOUT), i3.html (Pace). The internet address is (last accessed ). 45

54 on the International Sale of Goods was published in 2008 and is currently being updated. The completeness of this information system depends on the input of the national reporters. A possible suggestion for ensuring that all relevant decisions are submitted to the Secretariat is including a Protocol in the CISG akin to Protocol II to the Lugano Convention, 191 imposing a treaty obligation upon contracting states to provide details of CISG judgments to the Commission. 192 Several other comprehensive CISG case law databases are also available online. The database employed most comprehensively in this thesis is UNILEX. 193 The advantage of UNILEX is the fact that most decisions are available in full text in their original language. The Pace University CISG website 194 provides translations of a large and constantly growing number of CISG decisions through the Queen Mary Case Translation Programme. 195 Lastly, mention may be made of CISG-online, 196 the referencing system used by Schlechtriem and Schwenzer 197 in their commentary. In light of the ready availability of CISG case law, it is possible to cultivate and enhance uniform interpretation and application of the CISG. 198 Uniform interpretation and application of the CISG would be greatly aided by the creation of a supranational commercial court charged with the task of interpreting the Convention of 16 September 1988 on jurisdiction and the enforcement of judgments in civil and commercial matters. The text of the Lugano Convention and its protocols are available at (last accessed ). Bridge (n 100) 76. Available at (last accessed ). The editor-in-chief is Prof MJ Bonell. UNILEX is based on a research project started in 1992 by the Centre for Comparative and Foreign Law Studies a joint venture of the Italian National Research Council, the University of Rome I La Sapienza and the International Institute for the Unification of Private Law (UNIDROIT). The project has been financed by the Italian National Research Council. Printed versions of UNILEX are available from Transnational Publishers. Accessible at (last accessed ). Accessible at (last accessed ). Accessible at (last accessed ). It is currently edited by Prof Ingeborg Schwenzer of the University of Basel, Switzerland. See n 166 above. De Ly (n 38) 12 remarks that the CISG is in the process of maturing into a more reliable and more self-contained system where uniform patterns of interpretation and application prosper. 46

55 Convention. Unfortunately, there exists no realistic chance of such a court ever coming into being. 199 Several commentators argue that it is not only case law that has a part to play in uniform interpretation of the CISG. Academic literature, even though not a formal source of law and not mentioned in article 7(1), is also influential. 200 In this regard, special reference needs to be made to the work of the CISG Advisory Council, 201 which has set itself the aim of promoting uniform interpretation of the CISG Observance of good faith in the CISG s interpretation Thirdly, article 7(1) requires the observance of good faith in the interpretation process. It is a matter of controversy whether good faith in the context of the CISG refers only to its interpretation 202 or whether it constitutes a general principle underlying the CISG and places a general duty of good faith upon parties. 203 Furthermore, the meaning and use of the principle of good faith differ in common law and civil law jurisdictions. 204 Therefore it is all the more important that good faith should be awarded an autonomous meaning in the context of the CISG. According to Magnus, the good faith requirement in article 7(1) is the commandment to interpret the provisions of the CISG in a way that their application leads to reasonable and fair solutions. 205 Several authors regard this requirement as being linked to the pervasive Convention standard of reasonableness 206 in other words, the observation of goods faith in the Convention s interpretation requires a reasonable interpretation Bridge (n 100) 75. Bridge (n 100) 77-78; Felemegas (n 177) 18; Honnold Flechtner (n 180) 92; Schlechtriem (n 166) 99 (par 14). The CISG Advisory Council is a group of CISG scholars, first established in The Council publishes opinions on certain CISG matters in order to promote proper understanding and uniform interpretation of the CISG. More information may be accessed on the Council s website, (last accessed ). This view is supported by Honnold Flechtner (n 180) 94; Schlechtriem (n 166) 100 (par 17). A view supported by Bonell (n 170) 84-85; Enderlein and Maskow (n 174) 54-55; Lookofsky (n 185) 37. See par in chapter 4 for a discussion in this regard. Magnus (n 165) 43. Ibid. See Lookofsky (n 185) 37 for this phrase and see also Schlechtriem (n 166) 104 (par 30). 47

56 2.4.3 The role of the Vienna Convention on the Law of Treaties in the interpretation of the CISG In light of the fact that article 7(1) of the CISG does not contain specific directives on the interpretational method to be utilised, guidance on this matter would have to be obtained elsewhere. Bearing in mind that uniform interpretation of the CISG is of utmost importance for its uniform application, regard must be had to a universally accepted framework of interpretational guidelines. These guidelines are to be found in the Vienna Convention on the Law of Treaties. 207 Several scholars contest the application of the 1969 Vienna Convention s provisions to the CISG. One argument in this regard is that the 1969 Convention does not apply to Conventions of a commercial nature. 208 Another argument is that articles of the 1969 Convention only apply in respect of the interpretation of article of the CISG, but that the interpretation of the remainder of the Convention is governed by article However, the present author contends that article 1 of the Treaties Convention provides that it is applicable to treaties between states and that the CISG therefore falls under its scope of application. Contracting states to both the 1969 Convention and the CISG are therefore certainly bound by the provisions of the Treaty Convention when interpreting the CISG. Furthermore, numerous non-contracting states to the 1969 Convention also adhere to its provisions. It has been argued that the Treaties Convention codifies principles of customary international law. 210 Indeed, several decisions handed down by the International Court of Justice regard the principles embodied in articles of the Treaties Convention as customary international law. 211 A number of commentators also support reference to the 1969 Treaties Convention to provide guidelines for the interpretation of the CISG Vienna Convention on the Law of Treaties, , Vienna, 1155 UNTS 331, 1969 International Legal Materials 679. See chapter 4 of this thesis. Volken The Vienna Convention: Scope, Interpretation and Gap-filling in Volken and Šarčević (eds) International Sale of Goods: Dubrovnik Lectures (1986) Aust Modern Treaty Law and Practice (2007) 12-13; Magnus (n 165) 47. See Aust (n 210) 232 n 10 for references to ICJ cases regarding articles of the Treaties Convention as an embodiment of customary international law. Eiselen (n 166) 62; Lookofsky (n 185) 32; Magnus (n 165)

57 Articles of the 1969 Treaties Convention therefore provides the outer frame of the method to be employed in interpreting the CISG. 213 Article 31 of the Treaties Convention contains the general rule of interpretation. According to article 31(1), [a] treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. This provision contains three elements to be considered in the interpretation of a treaty: its text, context and object and purpose. 214 It may be assumed that the ordinary meaning of words most likely reflects what the parties intended unless the contrary is proven. 215 The ordinary meanings of terms are to be established in the context of the treaty and in light of its object and purpose. According to Aust, the good faith requirement for interpretation entails that, if the ordinary meaning of the words seems clear, but its application would lead to a result that would be manifestly absurd or unreasonable, another interpretation needs to be found. 216 Article 31(1) refers to two methods of interpretation: the literal or textual method and the purposive or teleological method. Article 31(2) provides more information on the context of the treaty to be taken into account during the interpretation process. The important principle in this regard is the fact that one must look at the treaty as a whole, including its preamble and annexes. 217 Article 31(4) allows for a special meaning to be attached to a term if it is proved that the parties intended a certain term to bear a special meaning instead of its literal meaning. Article 32 authorises the use of supplementary means of interpretation in cases where following the rules in article 31 leaves the meaning ambiguous or obscure or if it leads to a result which is manifestly absurd or unreasonable. Such supplementary means of interpretation include, but are not limited to, travaux préparatoires and the Magnus (n 165) 52. Aust (n 210) 234. Aust (n 210) 235 Aust (n 210) 234. Ibid. 49

58 circumstances of the treaty s conclusion. The CISG has a well-documented legislative history, which may therefore be consulted as a supplementary means of interpretation. Article 33(1) provides that the text of a treaty authenticated in two or more languages is equally authoritative in each language, unless the treaty contains a provision to the contrary. The CISG has six official languages, which are all equally authoritative A CISG-specific 219 interpretation a method of interpretation for the CISG The Treaties Convention provides general rules of interpretation that may be used in respect of any convention. It remains necessary to contextualise and individualise these general rules for purposes of the CISG s interpretation It is argued that article 7(1) of the CISG takes precedence over articles of the Treaties Convention in matters concerning the CISG s interpretation. 220 However, it has been noted that article 7(1) of the CISG does not specify a method for interpretation. It is generally accepted that, in the interpretation of the CISG, the starting point is the wording of the disputed provision or term. 221 At the outset, the wording should be accorded its ordinary meaning 222 the meaning generally used and understood in the CISG Community. 223 If it is possible to establish the ordinary meaning of such a term or provision, several commentators regard the task of interpretation as having been completed. 224 Schlechtriem argues that, only if literal interpretation provides no answer, should one attempt to establish the purpose of the provision and this should be done with reference to the travaux préparatoires The official languages of the CISG are Arabic, Chinese, English, French, Russian and Spanish. See the declaration at the end of the official CISG text (n 7). See Magnus (n 165) 52 for this wording. Magnus (n 165) 51. Lookofsky (n 185) 31; Magnus (n 165) 53. Compare article 31(1) of the Treaties Convention. Magnus (n 165) 53. Magnus (n 165) 53, Schlechtriem (n 166) 101 (par 20). Schlechtriem (n 165) 101 (par 20). 50

59 On the other hand, there are authors who criticise the strict literalist approach and argue that compliance with article 7(1) requires that interpreters approach the text of the CISG with as many interpretational aids as possible to ensure that they take sufficient notice of the international context of the Convention and the underlying purposes. 226 When taking the context of the CISG into account, the text of the Convention as a whole needs to be considered. In doing so, the interpreter would, inter alia, examine the preamble of the CISG, which contains the Convention s object and purpose. In doing so, the teleological method of interpretation is also applied. 227 In the context of the CISG, supplementary means of interpretation would primarily include the Convention s documentary history and relevant case law on the provision to be interpreted. It is submitted that, in light of the obligation placed on the interpreter by article 7(1) to take the CISG s international character and the need to promote uniformity in its application into account, international CISG jurisprudence is elevated to a primary source of interpretation. Other relevant international conventions 228 and instruments also form part of the CISG s context and constitute important supplementary means for its interpretation. It has been argued that contextual interpretation of the CISG should even allow reference to the UNIDROIT Principles Exclusion of article 7(1) Bonell 230 raises the question whether the provisions of article 7(1) may be derogated from or excluded in terms of article Bonell argues that derogation from or exclusion of article 7(1) should not be allowed. He advances the argument that, allowing parties to agree on rules of interpretation applicable to domestic legislation disregards the CISG s international character and would detract from the Eiselen (n 166) Also referred to in article 31(1) of the Treaties Convention alongside the literalist approach. Magnus (n 165) 55 refers to an interconventional interpretation that is helpful when interpreting uniform law conventions on private law. Magnus (n 165) 55. Bonell (n 170) 93. See par 3.7 in chapter 3 for a detailed discussion of article 6. 51

60 Convention s main aim of providing uniform rules for the international sale of goods. 232 Article 6 permits derogation of any provision except article 12 (if applicable). At first glance it therefore seems as though article 7(1) may indeed be excluded or its effect varied by the parties. However, even if this is done, the preamble to the CISG echoes the goals and aims enunciated in article 7(1). It is submitted that, if the CISG is applicable and parties exclude or vary article 7(1), a forum charged with the interpretation of the contract is still bound to interpret the CISG in line with its purpose of providing uniform rules for the international sale of goods Conclusion It is submitted that article 7(1) indeed requires the interpreter to venture beyond a narrow literalist approach. An integrated approach to interpretation of the CISG is supported in which the wording, object and purpose and context of the provision are analysed before a conclusion is reached. This approach to interpretation would enhance uniform application of the CISG. Magnus remarks that under an overall perspective a rather far-reaching, self-induced uniformity of application of the CISG of reasonable quality has been achieved. 233 In conclusion, it may be said that the future uniform interpretation and application of the CISG seems decidedly possible in view of the CISG s well-documented history, constantly growing body of case law and abundance of commentaries and the fact that most jurisdictions regard these aids as admissible in interpreting conventions The importance of private international law for unifying substantive law in the field of international sales law Introduction It is one of the main premises of this thesis that private international law plays an Bonell (n 170) 94. Magnus (n 165) 38. Eiselen (n 166)

61 invaluable role in the unification of substantive law on international sales. Firstly, it is not possible to regulate all aspects of international sales contracts in a convention 235 since the views of different legal traditions on some points of law are simply irreconcilable. The only workable solution to these exclusions from the scope of the convention is the application of the rules of private international law in order to determine the legal system that would provide the answer to the legal question in dispute. This argument is also valid in the case of gaps in the convention, defined in article 7(2) of the CISG as matters governed but not settled in the convention. The Vienna Convention and its predecessors, the Uniform Laws on the International Sale of Goods of 1964, seek to unify substantive law on the international sale of goods, but have diagonally opposite approaches with regard to conflict of laws rules. The ULIS expressly prohibited any reference to the rules of private international law. 236 The CISG, on the other hand, specifically incorporates conflict of laws rules and utilises them inter alia to broaden its scope of application. 237 According to Kaczorowska, the choice between the two approaches is in essence a choice between certainty with injustice and uncertainty in the quest for justice the first choice represents the approach of the ULIS and the latter that of the CISG The ULIS and private international law Article 2: exclusion of private international law Article 2 of the ULIS states that for the application of the present Convention the rules of private international law are excluded. 239 With regard to this Convention s sphere of application, article 1 directs that the ULIS applies to contracts for the sale of Ferrari Forum Shopping Despite International Uniform Contract Law Conventions 2002 International and Comparative Law Quarterly ; Ferrari The Relationship between International Uniform Contract Law Conventions 2000 Revue de droit uniforme / Uniform Law Review emphasises that such conventions are not exhaustive; see also Lookofsky Loose Ends and Contorts in International Sales: Problems in the Harmonisation of Private Law Rules 1991 The American Journal of Comparative Law Article 2 of the ULIS. Section 1(1)(b) of the CISG. See also Kaczorowska International Trade Conventions and their Effectiveness (1995) 8. Kaczorowska (n 237) 15. See the text of the ULIS (n 9). 53

62 goods entered into by parties who have their places of business in different states, provided that there exists an international carriage of goods contract, or that offer and acceptance took place in different states or that delivery of the goods is to be effected in a different state than that in which the contract was concluded. Furthermore, article 1 places a legal obligation on a member state to incorporate the ULIS into its domestic legislation as the law governing its international sale of goods. The effect of these provisions is the abolition of the requirement that an international sales contract should have a connection with a contracting state in order for the ULIS to be applicable to it. The Uniform Law will be applied by a contracting state since it is under a legal obligation to apply the ULIS to all disputes arising out of international sales contracts. 240 Thus, where both parties are from non-contracting states but the forum sits in a contracting state, the ULIS will be applicable. Even when the buyer and seller are from non-contracting states and the forum sits in a non-contracting state, if the parties refer to the law of a contracting state as the lex contractus, the ULIS will be applied, even if the true intention of the parties was that domestic law should be applied. 241 The main argument advanced in support of the universal approach employed by the ULIS is that, even if the international sales contract has no connection with the forum of a contracting state, the Uniform Law is incontestably superior to any municipal law. 242 This argument follows the reasoning that the ULIS is the product of intensive research done by experts in the field of international sales and therefore constitutes the better law in this field. However, the universalist approach under the ULIS which requires no substantial connection between the contract and the convention was widely criticised for being wholly incompatible with the general principles of private international law Kaczorowska (n 237) 19. Kaczrorowska (n 237) 21. Kaczorowska (n 237) 21. Nadelmann The Uniform Law on the International Sale of Goods: A Conflict of Laws Imbroglio 1964/1965 Yale Law Journal

63 Article 17: the gap-filling provision According to article 17 of the ULIS, questions concerning matters governed but not expressly settled therein shall be settled in conformity with the general principles on which it is based. 244 An argument made in favour of the ULIS approach in this regard is that national legal systems tend to advance their own policy considerations and may be prejudicial to one of the parties to an international sales contract. According to this argument the fact that the ULIS negates any reference to private international law protects the parties to an international sales contract from eccentricities and injustices inherent in any municipal system. 245 On the other hand, this approach has been criticised as being unworkable: The elimination of national law in the ULIS leaves the parties with the alternatives either to exclude the Convention or to incorporate a very large number of detailed legal rules in their contract. Courts would be unable to deduce the general principles essential to internal analogy. Further, the ULIS does not provide the courts with an explicit statement of the general principles on which it is based The CISG and private international law The drafters of the CISG recognised the fact that private international law remains relevant in a uniform substantive law context and the CISG refers to and employs private international law to improve its functioning. Firstly, the CISG widens its scope of application by providing that, in addition to being applicable when both parties have places of business in contracting states, it will also be applicable if the rules of private international law lead to the application of the law of a contracting state. 247 The spatial sphere of application of the Vienna See the text of the ULIS (n 9). Tunc Commentary in I Hague Conference Records and Documents (1966) 363 as quoted by Kaczorowska (n 137) 22. Ndulo The Vienna Sales Convention 1980 and the Hague Uniform Laws on the International Sale of Goods 1964: A Comparative Analysis 1989 International and Comparative Law Quarterly 1 9. Article 1(1)(b). 55

64 Convention as set out in article (1)(1)(a) is very limited 248 and without the widening of its scope by article (1)(1)(b) the CISG may not have been able to satisfy the requirements of international trade. 249 However, critics of the conflicts approach of the CISG believe that article (1)(1)(b) will encourage forum shopping and lead to legal uncertainty. 250 Secondly, the CISG resorts to conflict of laws rules to aid with gap-filling. According to article 7(2), 251 [q]uestions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law. Several matters pertaining to an international sales contract fall outside the CISG s scope of application. According to article 4(a) of the Convention, the CISG only governs the formation of the contract of sale as well as the rights and obligations of the buyer and the seller. Such matters would be governed by the legal system applicable by virtue of the rules of private international law. Identifying a residual legal system (either by virtue of the rules of private international law of the forum or by way of inserting a choice of law clause, the validity of which would also have to be ascertained in terms of the conflict rules of the forum) to govern excluded matters, gaps and matters not contemplated by the parties 252 is therefore of the utmost importance in the context of the CISG Article (1)(1)(a) states that the Vienna Convention applies to contracts for the sale of goods between parties whose places of business are in different States if the said States are Contracting States. Kaczorowska (n 137) 32. See, in this regard, all the critique levelled against article 1(1)(b) during the drafting of the Convention, for example the Report of the Working Group on the International Sale of Goods, First Session (n 142) 179. A detailed discussion of article 1(1)(b) s drafting history may be found in par of chapter 3. See par 4.2 in chapter 4 for an analysis of article 7(2). Fountoulakis The Parties Choice of Neutral Law in International Sales Contracts 2005 European Journal of Law Reform points out that the parties would usually not regulate every contingency in their contract. 56

65 2.5.4 Evaluation of the divergent approaches The universal approach followed in the ULIS is problematic from a private international law perspective since it disregards the traditional conflictual method. The fact that no link is required between the international sales contract and a contracting state in order for the ULIS to be applicable, will frequently lead to a legal regime being applicable to the contract that was not foreseen or intended by the parties. This would hardly be in the interests of justice. The general exclusion of any reference to private international in article 2 of the ULIS is problematic on various accounts. Firstly, article 8 of the ULIS states that it shall only govern the obligations of the seller and the buyer arising from a contract of sale. This article expressly excludes matters relating to the formation of the contract, the transfer of property in the goods sold and validity of the contract or of any of its provisions or any usage from the Uniform Sales Law s sphere of application. These matters invariably need to be governed by the legal system applicable by virtue of the rules of private international law. The difficulty encountered in this regard is that of dividing an international sales contract into those aspects subject to the ULIS from which any reference to private international law is excluded; and the other aspects which will be subject to the rules of private international law. 253 In light of the fact that a vast number of legal questions are not covered by the ULIS, the drafters who wished to exclude reference to conflict rules in the field of the international sale of goods were highly unrealistic in their expectations. Graveson et al point out that even litigation concerning the obligations of the parties (as governed by the ULIS) would have to take place in a jurisdictional and procedural framework of private international law. 254 Therefore, the fact that the CISG does not exclude reference to the rules of private international law displays a far more realistic approach. It recognises the inevitable incompleteness of any international uniform substantive law convention and the fact that reference to the Graveson, Cohn and Graveson The Uniform Laws on International Sales Act 1967 (1968) 15. Graveson, Cohn and Graveson (n 253)

66 rules of private international law to determine the law applicable to matters it does not govern would always remain necessary. Secondly, as will be discussed in detail in chapter 4 of this thesis, mere reference to general principles on which a convention is based is often not sufficient to fill gaps in that convention. Article 17 of the ULIS therefore does not provide an adequate solution for matters that fall within the Uniform Law s subject field but for which it provides no answer. General principles on which the Uniform Law is based may often not provide a concrete enough answer. In such an event, a forum having to apply the ULIS is faced with an insoluble problem: the ULIS provides no answer, but recourse to another applicable system of law determined by the rules of private international law is expressly prohibited. Article 7(2) of the CISG provides a far more workable solution to gap-filling. The approach of the ULIS is thus based on the erroneous assumption that the unification of substantive sales law would automatically exclude the need for the application of the rules of private international law. 255 One of the premises of this thesis is that private international law is essential for the successful functioning of unified substantive law: especially in the field of the international sale of goods. This argument will be developed with reference to the CISG and its express inclusion of the rules of private international law. The Chairman of the Council of the Institute for the Unification of Private Law, emphasised the importance of private international law for uniform substantive law as follows: Uniform law is a method... that makes it entirely possible to progress along lines parallel with those followed in private international law, and even to bring about fruitful interchange for reciprocal integration.... In truth, the breadth and complexity of this panorama sometimes require us to omit from our field of study on a specific subject, certain aspects thereof which are to closely bound to the particular guiding concepts of different States; a requirement whose cogency has been demonstrated, indeed, precisely in relation to the subject of sales. This is why we must still have recourse to national legal systems and particularly in international dealings to the solutions indicated by 255 Graveson, Cohn and Graveson (n 253)

67 the knowledge and the Conventions of Private International Law, as integrating sources which ensure a unified regulation of the matter. 256 The ULIS did not succeed in its aim of providing a widely accepted, uniform set of substantive rules on contracts for the international sale of goods it was only ratified by nine countries. In contrast, the CISG has been ratified by 74 countries to date and has produced a large and ever-growing body of case law as well as scholarly writing. It is submitted that the reason for the failure of the former and the success of the latter lies in the fact that the CISG recognises the necessity of private international law for the proper functioning of a uniform substantive law convention. 2.6 Conclusion The traditional governing framework of international sales contracts may be termed the domestic conflicts model. 257 According to this approach, the law applicable to an international sales contract is to be determined by the rules of private international law of the forum which points out the relevant domestic legal system to govern the contract. Another approach is the uniform substantive law approach. 258 This approach was followed in the ULIS and the ULF, where any reference to domestic law was excluded. 259 The complete exclusion of any reference to conflict of laws rules and domestic law proved to be unworkable. 260 The third option has been termed the intermediate model 261 and this model was utilised in the CISG. This model relies on the uniform substantive law model, but also refers to domestic law and private international law. It is erroneous to argue that the international unification of substantive law in the field of the international sale of goods eliminates 262 or greatly reduces the need for President Eula, Actes et documents de la Dixième Session / Proceedings of the Hague Conference on Private International Law, Tenth Session (1964) Volume I 7-9. De Ly Sources of International Sales Law: An Eclectic Model 2005/2006 Journal of Law and Commerce 1 1. De Ly (n 257) 2. Ibid. Ibid. Ibid. See, for example, Diamond (n 115) 242 who states that one way to avoid questions relating to private international law is to harmonize the substantive law of different countries. Goode (n 103) 55 also argues that harmonisation of substantive law obviates the need to resort to conflict of laws rules. Zeller CISG and the Unification of International Trade Law (2007) 28 states that 59

68 resorting to the rules of private international law. Being able to refer to the rules of private international law enhances the proper functioning of a harmonised substantive law document such as the CISG. The large amount of reported CISG cases which invoke the rules of private international law (mostly in the context of the CISG s application or gap-filling) attest to the fact that it plays an important role in the functioning of the Convention. The relationship between the CISG and private international law is therefore of importance on various levels and forms the main inquiry of this thesis. the important function of the CISG... is to overcome the need to resort to the conflict of laws rule. Dalhuisen (n 19) 155 argues that reference to private international law in the context of uniform substantive law instruments tends to destroy completely what little uniform law these Conventions bring. 60

69 CHAPTER 3 THE SCOPE OF APPLICATION OF THE CISG AND PRIVATE INTERNATIONAL LAW: AN ANALYSIS OF THE MEANING AND EFFECT OF ARTICLES 1(1)(b), 6, AND Introduction Articles 1(1), 6, and 95 are the most relevant articles of the CISG 1 for the purposes of analysing the private international law implications concerning the scope of the Convention. These articles and their interaction form the foundation for the application of the Vienna Sales Convention and therefore a proper understanding of their meaning and interplay is of cardinal importance. Articles 1 to 6 set out the CISG s sphere of application. The two main applicability criteria, which will be analysed in detail in this chapter, are contained in article 1. These criteria have been classified as unilateral conflicts rules. 2 Article 6 constitutes the party autonomy provision and will also be discussed in detail. Articles 2 to 5 limit the sphere of application of the CISG by excluding certain types of contracts, several types of goods and certain matters pertaining to a contract for the international sale of goods from the ambit of the Convention. According to article 4, the CISG only governs the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. It is important to note that the CISG does not aim to govern all aspects of a contract for the international sale of goods. 3 Article 4 explicitly excludes the validity 4 of the contract and the effect of the contract on the property in the goods sold from the CISG. Therefore, even where a contract is governed by the CISG, it is imperative to also assign a residual legal system applicable to the matters not governed or not settled by the CISG. In the cases where the parties did not insert a choice of law clause in their contract, the domestic legal system applicable to the contract would have to be determined by virtue of the rules United Nations Convention on Contracts for the International Sale of Goods , Vienna, 1489 UNTS 3. Schlechtriem Introduction to Articles 1 6 in Schlechtriem and Schwenzer Commentary on the United Nations Convention on Contracts for the International Sale of Goods (CISG) (2005) (par 4). See Schlechtriem and Butler UN Law on International Sales. The UN Convention on the International Sale of Goods (2009) 11. This provision refers to material validity, since the formal validity of the contract is addressed in article 11 of the CISG. 61

70 of private international law. Even where the parties inserted a choice of law clause, the forum would have to determine its validity with reference to the rules of private international law. According to article 1(1) of the CISG, the Convention applies to contracts of sale of goods between parties whose places of business are in different states either (a) when the states are contracting states or (b) when the rules of private international law lead to the application of the law of a contracting state. The application of the CISG under article 1(1)(a) is frequently referred to as the direct application of the Convention, whereas the application under article 1(1)(b) is known as application of the Convention via the private international law route. It is submitted that article 1(1) indeed constitutes a unilateral rule of private international law, since it delineates the CISG s sphere of application. 5 The fact that article 1(1) states that the Convention may be applied under provision (a) or (b) implies a free choice between the two possible options. The question that needs to be answered in this regard is whether a choice between articles 1(1)(a) and 1(1)(b) is indeed a free choice for the forum to make or whether direct application under article 1(1)(a) should be preferred where the requirements are met? Furthermore, the meaning of article 1(1)(b) is ambiguous on various levels and prompts several inquiries to be addressed in this chapter. Article 6 of the Vienna Sales Convention makes provision for party autonomy and permits parties to exclude the application of the CISG or to derogate from or vary the effect of any of its provisions. A contentious matter in this regard is whether such an exclusion or derogation needs to be made in express terms or whether implied exclusion or derogation is also permitted. If implied exclusion is permitted, it needs to be investigated what would qualify as an implied exclusion of the CISG. Another controversial matter concerning article 6 is whether parties are allowed to designate the CISG directly as the law applicable to their contract by means of inserting a choice of law clause into their contract to that effect. When faced with the application of the CISG in terms of article 1(1)(b), one needs to pay heed to article 95. Article 95 of the Vienna Sales Convention states that any state 5 See par below. 62

71 may declare at the time of the deposit of its instruments of ratification, acceptance, approval or accession that it will not be bound by subparagraph (1)(b) of article 1 of this Convention. A forum situated in a reservation state is therefore deprived of the possibility of applying the Convention via the private international law route. However, article 95 prompts other complex inquiries with regard to the application of the convention which need to be analysed. The interaction between articles 1(1), 6 and 95 differ where (1) the forum is situated in a contracting state and the article 1(1)(a) requirements are met; (2) the forum is situated in a contracting state but the article 1(1)(a) requirements are not met; (3) the forum is situated in a contracting state which made an article 95 reservation but article 1(1)(a) s requirements for application are not met; and (4) the forum is situated in a non-contracting state to the CISG. This chapter will be concluded with a synopsis on the interplay between these three articles in each relevant scenario. For the purposes of this thesis, contracting state 6 or non-reservation contracting state refers to a state which did not make an article 95 reservation. The terms reservation contracting state or reservation state refer to a CISG contracting state which has made an article 95 reservation. The term non-contracting state refers to a state which is not a party to the CISG. 3.2 Article Introduction Article 1(1) sets out the basic requirements for applicability of the CISG. The Convention applies to a sales contract, when the object of the sales contract is goods, and the contract is an international one, the internationality requirement being satisfied if the parties have their places of business in different states and either both parties have their places of business in contracting states or the rules of private 6 Of course, a state which made an article 95 reservation remains a CISG contracting state. See par below in this regard. In order to avoid confusion, when reference is made to a state which made an article 95 reservation, the term reservation contracting state is used and contracting state refers to contracting states that have not availed themselves of the option of making an article 95 reservation. 63

72 international law refer to the law of a contracting state. In essence therefore, article 1(1) is a unilateral conflict rule, 7 since it delineates the CISG s scope of application. 8 According to article 1(2), the internationality requirement is only satisfied if it appears from the contract or dealings between parties or from information disclosed before the conclusion of the contract that the parties have their places of business in different states. It has been stated that this requirement entails that the parties must consciously have entered into an international contract 9 for the CISG to apply. Article 1(2) therefore limits the CISG s application to sales contracts concluded between parties who were cognisant of the fact that they concluded an international contract. 10 Article 1(3) excludes the nationality of the parties and the civil or commercial character of the parties or the contract from playing any role in determining the application of the CISG. With regard to the CISG s temporal scope of application, article 100(1) directs that part II of the CISG concerning the formation of the contract will only apply to a contract if the offer was made on or after the date when the Convention entered into force in respect of the contracting states or contracting state referred to in articles 1(1)(a) and 1(1)(b) respectively. According to article 100(2), the CISG only applies to contracts concluded on or after the date when the Convention enters into force in respect of the contracting states or contracting state referred to in articles 1(1)(a) and 1(1)(b) respectively A unilateral conflict rule indicates when the legal system that it forms part of, applies. It therefore delineates the scope of application of a specific legal system or set of rules. Conversely, a multilateral conflict rule does not indicate when a specific legal system or set of rules is applicable. It consists of a legal category and a connecting factor. The connecting factor then points to the applicable legal system. See Forsyth Private International Law. The Modern Roman-Dutch Law including the Jurisdiction of the High Courts (2003) 6-9. Bell The Sphere of Application of the Vienna Convention on Contracts for the International Sale of Goods 1996 Pace International Law Review ; Jayme Sphere of Application Article 1 in Bianca and Bonell Commentary on the International Sales Law. The 1980 Vienna Sales Convention (1987) Volken The Vienna Convention: Scope, Interpretation and Gap-filling in Volken and Šarčević International Sale of Goods: Dubrovnik Lectures (1986) See also the decision by the Tribunale di Vigevano (Italy), : case number 387 (UNILEX), 378 (CLOUT), i3.html (Pace) in this regard. Jayme (n 8)

73 3.2.2 Sales contracts The CISG does not delineate what constitutes a contract of sale for the purposes of the Convention. It has been stated that it can be deduced from the provisions on the obligations of the parties 11 that a sales contract within the context of the CISG is a contract in terms of which the seller is obliged to deliver the goods and the buyer is obliged to pay the price. 12 Contracts for the supply of goods to be manufactured and contracts containing a service element as mentioned in articles 3(1) and 3(2) respectively, have given rise to considerable controversy regarding their classification as contracts for the sale of goods. It has been stated that article 3 extends the Convention s scope to contracts which do not constitute contracts for the sale of goods in the classic sense. 13 Article 3 of the CISG has generated much scholarly debate and writing, but an in-depth analysis of these materials falls beyond the scope of this thesis. The main controversies in this regard will be discussed briefly. According to article 3(1) contracts for the supply of goods to be manufactured or produced are to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production According to article 30, [t]he seller must deliver the goods, hand over any documents relating to them and transfer the property in the goods, as required by the contract and this Convention. Article 53 provides that the buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention. The decision by the Tribunale di Rimini (Italy), : case number 823 (UNILEX), 608 (CLOUT), i3.html (Pace) also states that the meaning of a sales contract for purposes of the CISG may be inferred from articles 30 and 53 of the Convention. Enderlein and Maskow International Sales Law. United Nations Convention on Contracts for the International Sale of Goods. Convention on the Limitation Period in the International Sale of Goods (1992) 27; Ferrari The Sphere of Application of the Vienna Sales Convention (1995) 18; Huber Scope of Application of the Convention 3: Rules on the Scope of Application in Huber and Mullis The CISG. A New Textbook for Students and Practitioners (2007) 41 43; Kritzer Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods (1989) 69; Schlechtriem Article 1 in Schlechtriem and Schwenzer (n 2) (par 14); Schwenzer and Fountoulakis International Sales Law (2007) 26; Volken (n 9) 33; Winship The Scope of the Vienna Convention on International Sales Contracts in Galston and Smit (eds) International Sales. The United Nations Convention on Contracts for the International Sale of Goods (1984) See the decision of the Tribunal Cantonal Vaud (Switzerland), : case number 302 (UNILEX), s1.html (Pace); Kritzer, Vanto, Vanto and Eiselen International Contract Manual Volume 4 (2009) 84:6 (hereinafter referred to as Kritzer et al). 65

74 Firstly, the meaning of substantial part is unclear. Is the determinant the economic value of the contribution, its volume, or the importance of the contribution? According to the CISG Advisory Council, an economic value criterion should be used in this regard. 14 The economic value criterion dictates that the materials provided by the buyer ought to be higher in value (price) 15 as compared to those provided by the seller in order to exclude the CISG. 16 The Advisory Council suggests that an essential criterion should only be considered where the economic value is impossible or inappropriate to apply taking into account the circumstances of the case. 17 The CISG Advisory Council disagrees with the approach of quantifying substantial part by using predetermined percentages of value and proposes that it should be determined on the basis of an overall assessment. 18 Ferrari favours a qualitative above a quantitative approach in this regard. 19 Huber suggests that an analysis needs to be done on a case-by-case basis to determine whether the buyer s contribution was substantial or not. 20 Secondly, it needs to be determined what materials are to be included under materials necessary for manufacture or production. The raw materials necessary for manufacture of the goods would qualify under this phrase, while secondary materials such as materials supplied for packaging the goods would probably be excluded. 21 It is ambiguous whether the supply of know-how by the buyer in the form of, for example, designs or plans, are to be included under materials necessary for manufacture or production CISG AC Opinion 4, Contracts for the Sale of Goods to be manufactured or produced and mixed contracts (Article 3 CISG), 24 October Rapporteur: Professor Pilar Perales Viscasillas. Reprinted in 2005 Pace International Law Review Par 2.6 of the CISG AC Opinion 4 (n 14) states: Absent any other indication in the contract, the price of the materials to be considered is that of the buyer s market at the time of conclusion of the contract. CISG AC Opinion 4 (n 14) par 2.3 CISG AC Opinion 4 (n 14) par 2.7. CISG AC Opinion 4 (n 14) par2.9. Ferrari (n 12) 22. Huber (n 12) 45. Huber (n 12) 44. According to CISG AC Opinion 4 (n 14) point 5, materials necessary for such manufacture do not cover drawings, technical specifications, technology or formulas, unless they enhance the value of the materials supplied by the parties. The decision of the Handelsgericht Zurich (Switzerland), : case number 484 (UNILEX), s1.html (Pace) supports the view of the Advisory Council. Conversely, the Cour d Appel de Chambery (France), : case number 29 (UNILEX), 157 (CLOUT) found that the buyer had provided a substantial 66

75 Article 3(2) excludes contracts in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services from the ambit of the Convention. A contract in terms of which the seller performs work on or repairs the buyer s goods is therefore excluded from the CISG. Once again, the meaning of the preponderant part needs to be established. It has been suggested that the main criterion in this regard should be a comparison between the economic value of the goods supplied on the one hand and the economic value of the services rendered on the other. If the value of the services constitutes more than 50% of the overall value of the obligation, the contract will be excluded from the scope of the CISG in terms of article 3(2). 23 Case law exists in support of this approach to determining preponderance. 24 Conversely, Schlechtriem argued that preponderance implies a percentage well over 50%. 25 According to the CISG Advisory Council, linking a fixed percentage to preponderance may be arbitrary and the particularities of each case ought to be taken into account. 26 Furthermore, Schlechtriem pointed out that, under certain circumstances it may be difficult to calculate the correct percentages or values in order to follow an economic value approach in this regard. 27 He stated that the intention of the parties should always prevail. 28 Numerous decisions exist in which the parties intention was determined to provide an answer to the question of whether the contract s preponderant part consisted of rendering services part of materials necessary for production in a contract concerning the production of adaptors based on the buyer s specifications and design and therefore did not apply the CISG. Ferrari (n 12) 23; Huber (n 12) 46. ICC Court of Arbitration Paris, award number 7153/1992: case number 15 (UNILEX), i.html (Pace); Cour d Appel de Grenoble (France), : case number 109 (UNILEX), 152 (CLOUT), f1.html (Pace); Tribunal of Commercial Arbitration at the Russian Federation Chamber of Commerce, : case number 874 (UNILEX), r1.html (Pace). Schlechtriem Article 3 in Schlechtriem and Schwenzer (n 2) (par 7 b). CISG AC Opinion 4 (n 14) par 2.9. Schlechtriem (n 25) (par 7a). Ibid. ICC Arbitral award no 7153/1992 (n 24); Corte Suprema di Cassazione (Italy), : case number 170 (UNILEX), i3.html (Pace); Landgericht Mainz (Germany), : case number 346 (CLOUT), g1.html (Pace); Landgericht München (Germany), : g1.html (Pace); Oberlandesgericht München (Germany), : case number 499 (UNILEX), 430 (CLOUT), g1.html (Pace). 67

76 Several authors raise the question whether a contract for the supply of goods and services is to be governed by the CISG in its entirety or whether the provisions relating to the sales part should be severed from the rest of the contract and governed by the CISG. 30 The legislative history 31 and most scholars 32 support the view that the question of whether scission is allowed should be answered by reference to the applicable domestic law as determined by the rules of private international law of the forum. Conversely, Ferrari argues that one should look to the provisions of the CISG concerning severability. 33 It seems as though Ferrari regards this matter as a gap in the CISG (within the meaning of article 7(2)) 34 which is to be filled by general principles on which the CISG is based. 35 He does not provide any guidance regarding the general principles to be employed in this regard or regarding the provisions of the CISG from which such general principles may be deduced. The present author submits that no indication may be found in the CISG that scission is indeed governed by the Convention and therefore agrees with the scholars that designate this matter to the legal system as determined by the rules of private international law of the forum. It is submitted that the classification of a contract as a sales contract or service contract would have to be determined by the proper law of the contract, the latter being determined by the rules of private international law of the forum. Schlechtriem suggests that the burden of proof should be on the party who argues that the CISG is not applicable. 36 It is possible that a certain contract may fall under both articles 3(1) and 3(2), in other words a contract for goods to be manufactured with service obligations of the seller Ferrari (n 12) 23; Honnold Uniform Law for International Sales under the 1980 United Nations Convention. Edited and updated by Harry M Flechtner (2009) (hereinafter referred to as Honnold Flechtner) Commentary on the Draft Convention on Contracts for the International Sale of Goods, prepared by the Secretariat, UN Document no A/CONF.97/5 in the United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March 11 April 1980, Official Records; UN Document no A/CONF.97/19 (hereinafter Official Records) Honnold Flechtner (n 30) 60.2; Schlechtriem (n 25) 58 (par 5). Ferrari (n 12) 23. According to article 7(2) of the CISG, questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law. See chapter 4 of this thesis for an analysis of article 7(2). Ibid. Schlechtriem (n 25) 62 (par 10). 68

77 An example may be the case where the contract requires the seller to manufacture certain goods and install the goods on the buyer s premises. 37 The difficulty is where to start the investigation into the CISG s application under such circumstances. Huber suggests that one first examines whether the contract is excluded from the CISG under article 3(1) thereby determining whether the buyer provides the substantial part of the materials or not. If the contract is not excluded from the Convention under article 3(1), one then proceeds with an investigation into the question whether the contract exists preponderantly out of the rendering of services. 38 Dissenting views also exist on the question of whether a barter contract qualifies as a sales contract and should be governed by the CISG. 39 Admittedly, barter contracts would not be encountered often in international trade today. Scholars in favour of applying the CISG to barter contracts argue that both parties to such a contract may be viewed as a buyer and a seller with regard to the different obligations. 40 Honnold is of the view that the CISG does not prescribe how the purchase price should be paid and that the Convention may therefore be applied to barter contracts. 41 Those opposed to the inclusion of barter contracts under the CISG argue that article 53 expressly requires payment of a purchase price. 42 Other contracts which may lead to controversy concerning their classification as sales contracts for purposes of the CISG, include distribution agreements and commercial agency agreements. Such contracts may include individual contracts of sale under the overarching agreement which creates a long-term contract between the parties. 43 The prevailing view is that the CISG is applicable to the individual contracts of sale Huber (n 12) 47. Huber (n 12) 48. Enderlein and Maskow (n 12) 28 are in favour of applying the CISG to barter contracts, whereas Schlechtriem (n 12) 28 (par 18) rejects application of the CISG to barter contracts. Martin-Davidson Selling Goods Internationally: Scope of the UN Convention on Contracts for the International Sale of Goods 2008/2009 Michigan State Journal of International Law states that the legislative history of the CISG provides support for the view that barter contracts fall under the CISG unless its application is excluded by the parties in terms of article 6. Enderlein and Maskow (n 12) 28. Honnold Flechtner (n 30) Ferrari (n 12) 19. Kritzer et al (n 13) 84:6. 69

78 concluded, but not to the master agreement (be it agency or a distributorship). 44 It may, however, be difficult to distinguish between the overarching agreements and the individual sales contracts since many of the master agreements contain provisions relating to the individual sales contracts. 45 It has been suggested that the sales contracts concluded in light of the master agreements be regarded as separate contracts governed by the CISG and that the relevant provisions relating to these sales contracts contained in the master agreement be incorporated into these individual sales contracts Goods The Convention contains no definition of goods 47 but it is generally accepted that it refers to tangible, movable things. 48 Article 2 excludes the sale of goods bought for personal, family or household use. The CISG does therefore not govern consumer contracts. 49 The main reason for this exclusion is the fact that most states have Kritzer et al (n 13) 84:6; Schlechtriem (n 12) (par 21); Oberlandesgericht Koblenz (Germany), : case number 64 (UNILEX), 281 (CLOUT), html (Pace); Oberlandesgericht Düsseldorf (Germany), : case number 206 (UNILEX), 169 (CLOUT), g1.html (Pace); Bundesgerichtshof (Germany), : case number 259 (UNILEX), g2.html (Pace); Oberlandesgericht München (Germany), : case number 728 (UNILEX), 288 (CLOUT), g1.html (Pace). Kritzer et al (n 13) 84:6. Ibid. Contra Richards Contracts for the International Sale of Goods: Applicability of the United Nations Convention 1983/1984 Iowa Law Review who states that article 2 of the CISG provides a residuary definition of goods by listing the things not to be considered goods. Ferrari (n 12) 23; Honnold Flechtner (n 30) 56; Huber (n 12) 41; Loewe The Sphere of Application of the UN Sales Convention 1998 Pace International Law Review (the author points out that the early uniform sales law drafts in the 1930 s, 1950 s and 1960 s were only drawn up in French and purported to govern the sale of objets mobiliers corporels, which may be translated as movable physical things ); Schlechtriem (n 12) 28 (par 20); Schwenzer and Fountoulakis (n 12) 26. See also the decisions by the Oberster Gerichtshof (Austria), : case number 110 (UNILEX) a3.html (Pace); Tribunale di Pavia (Italy), : case number 734 (UNILEX), 380 (CLOUT), i3.html (Pace); Tribunale di Rimini (Italy), (n 11). Schlechtriem Requirements of Application and Sphere of Applicability of the CISG 2005 Victoria University of Wellington Law Review It warrants mentioning that the meaning accorded to consumer contracts differs substantially from one jurisdiction to the other. For example, the Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the Law Applicable to Contractual Obligations (Rome I), Official Journal of the European Union 2008 L 177/6 defines a consumer contract under article 6 as a contract concluded by a natural person for a purpose which can be regarded as being outside his trade or profession (the consumer) with another person acting in the exercise of his trade or profession (the professional). A far broader definition of consumer contracts may be found in the definition clause of the South African Consumer Protection Act 68 of 2008, which includes under consumer (a) a person to whom particular goods or services were marketed in the ordinary course of the supplier s business; (b) a person who has entered into a transaction with 70

79 consumer protection legislation governing consumer contracts and these rules invariably have a mandatory character. 50 It has been argued that this exclusion de facto limits the CISG s application to commercial contracts. 51 Other scholars contend that the CISG s scope of application is not restricted to commercial sales. 52 It is submitted that article 1(3) s directive that the civil or commercial character of the contract is to be disregarded, does not allow for a conclusion that the CISG applies to commercial contracts only. However, the interpretation of this exclusion may lead to difficulties, since the definition of consumer contracts may differ from jurisdiction to jurisdiction. It has been suggested that the intention of the buyer at the time of the conclusion of the contract should be decisive in determining whether the goods are purchased for personal, family or household use. 53 Article 2 also excludes sales by auction, on execution or otherwise by authority of law and sales of stocks, shares, investment securities, negotiable instruments or money. The rationale behind these exclusions is that the sale of such commercial papers is mostly subject to mandatory provisions of domestic law. 54 Furthermore, article 2 excludes sales of ships, vessels, hovercraft or aircraft. According to the documentary history of the CISG, the main reason for excluding these objects from the application of the CISG is the fact that some domestic legal systems classify these things as immovable. 55 It is not entirely clear whether the sale of component parts of these goods would fall under the CISG or not a supplier in the ordinary course of the supplier s business; (c) if the context so requires or so permits, a user of those particular goods or a recipient or beneficiary of those particular services, irrespective of whether the user, recipient or beneficiary was a party to a transaction concerning the supply of those particular goods or services, and (d) a franchisee in terms of a franchise agreement (only under specific circumstances as provided for in the Act). A consumer contract is then defined as an agreement between a supplier and a consumer. The CISG s definition of consumer contracts as referring to goods bought for personal, family and household use is broader than the Rome I Regulation s definition, but not a wide as the Consumer Protection Act s definition. Enderlein and Maskow (n 12) 35; Volken (n 12) 36; Winship (n 12) 1-23; Official Records (n 31) 16. Ferrari (n 12) 26. Volken (n 9) 34. Ferrari (n 12) 27. See also the decision of the Bundesgerichtshof (Germany), : case number 736 (UNILEX), 445 (CLOUT), g1.html (Pace) in this regard. Ferrari (n 12) 29. Commentary on the Draft Convention on Contracts for the International Sale of Goods, prepared by the Secretariat in Official Records (n 31) 14-66, 16. The Secretariat Commentary also states in this regard (at 16): Furthermore, in most legal systems at least some ships, 71

80 Lastly, the sale of electricity is excluded from the scope of the CISG. The reported reason for this exclusion is that electricity is not regarded as goods in several jurisdictions. 57 A contentious matter in this regard is whether computer software and the sale thereof fall within the ambit of the CISG. 58 Software in the broad sense includes computer programs in the form of operating system software and application software as well as other digital information such as music, films and games. 59 Furthermore, it has been pointed out that a reference to the sale of software may entail the sale of one or more of three aspects of software, namely the sale of the copyright in the software, the sale of the tangible form on which the software is captured or the sale of the information. 60 According to Sono, the copyright and the tangible form in which the software is captured may be sold and ownership thereof transferred. 61 However, ownership of the information per se cannot be transferred. 62 Sono therefore argues that information cannot be sold, only licensed. 63 The CISG is not applicable to licensing agreements, since such agreements do not qualify as contracts for the sale of goods. 64 Sono postulates that transactions involving information as well as certain vessels and aircraft are subject to special registration requirements. The rules specifying which ones must be registered differ widely. In order not to raise questions of interpretation as to which ships, vessels or aircraft were subject to this Convention, especially in view of the fact that the relevant place of registration, and therefore the law which would govern the registration, might not be known at the time of the sale, the sale of all ships, vessels and aircraft was excluded from the application of this Convention. Ferrari (n 12) 32 argues in favour of the application of the CISG to the international sale of such component parts. Schlechtriem Article 2 Schlechtriem and Schwenzer (n 2) (par 35) argues that component parts of aircraft may qualify as goods to be governed by the CISG. Official Records (n 31) 16. De Ly Sources of International Sales Law: An Eclectic Model 2005/2006 Journal of Law and Commerce 1 7; United Nations Commission on International Trade Law UNCITRAL Digest of Case Law on the United Nations Convention on the International Sale of Goods (2008) 5. Sono The Applicability and Non-applicability of the CISG to Software Transactions in Andersen and Schroeter (eds) Sharing International Commercial Law across National Boundaries: Festschrift for Albert H Kritzer on the Occasion of his Eightieth Birthday (2008) Sono (n 59) Sono (n 59) 516. However, it needs to be borne in mind that it is widely accepted that goods under the CISG refer to tangible, movable objects. Copyright would not qualify as such. Ibid. Ibid. Rendell The new UN Convention on International Sales Contracts: An Overview 1989 Brooklyn Journal of International Law Sono (n 59) 526 argues that applying the CISG to licensing agreements may open the door to applying the CISG to other types of contracts as well. 72

81 transactions concerning physical copies may be classified as licensing agreements rather than sales contracts, therefore the applicability of the CISG to software agreements should be determined on a case-by-case basis. 65 Some commentators regard software in any form (ie any one of the three possible aspects of software as mentioned in the preceding paragraph) as goods for purposes of article 1 of the Convention 66 as long as the intention exists to transfer ownership of the software to the buyer. 67 The mere granting of a license to use the software for a limited period of time would not suffice. 68 According to Kritzer et al, this type of licensing agreement granting use for a limited period of time must be distinguished from the situation where standard software is bought subject to a licensing agreement. 69 In the latter instance, the licensing agreement merely protects the intellectual property rights of the software developer and is analogous to the sale of a book subject to copyright restrictions. 70 The licensing fee is paid upon purchase of the software and the license provides restrictions concerning the utilisation of the software; it does not place a temporal limit on its use. It is widely accepted that such a transaction constitutes a sale of goods and is governed by the CISG. 71 Most commentators also support the view that a distinction should not be made between the purchase of a physical copy of software and the downloading of software available online application of the CISG to both these types of transactions is widely supported. 72 Sono disagrees and argues that the sale of software supplied online is a Sono (n 59) 517. Huber (n 12) 43; Lookofsky Understanding the CISG. A Compact Guide to the 1980 United Nations Convention on Contracts for the International Sale of Goods (2008) asserts that goods under the CISG are not limited to tangible things. Diedrich Maintaining Uniformity in International Uniform Law via Autonomous Interpretation: Software Contracts and the CISG 1996 Pace International Law Review argues for an autonomous definition of goods under the CISG which would include standard software, custom-made software as well as software intangible form and downloaded software. Huber (n 12) 43. Huber (n 9) 43. Schlechtriem (n 49) 786 points out that, when the software may only be used for a certain period of time, it is a licensing contract and is not governed by the CISG. Contra Lookofsky (n 66) 21 who supports application of the CISG to such licensing agreements. Kritzer et al (n 13) 84:6. Ibid. Kritzer et al (n 13) 84:6; Schlechtriem (n 12) 29 (par 21). Bridge The International Sale of Goods: Law and Practice (2007) 520; Lookofsky In Dubio pro Conventione? Some Thoughts about Opt-outs, Computer Programs and Preemption under the 1980 Vienna Sales Convention (CISG) 2003 Duke Journal of Comparative and International Law ; Schlechtriem (n 12) 29 (par 21). 73

82 transaction concerning information and can only be a license, not a sales contract. 73 According to this view, where the sale of physical copies is not involved, the CISG cannot apply. 74 A further question is whether only standard software is considered to be goods for purposes of the CISG or whether custom-designed software would also thus qualify. 75 Conflicting case law decisions exist in this regard. 76 Several authors regard standard and custom-designed software as goods under the CISG. 77 According to this view, custom-designed software may be excluded from the application of the CISG in terms of article 3(2) if the preponderant part of the contract consists of rendering services. 78 Schlechtriem argues that goods should be interpreted as widely as possible to cover all objects which form the subject-matter of commercial sales contracts. 79 However, this statement should be qualified by his endorsement of the view that the term goods under the CISG refers to tangible, movable objects. 80 The present author supports the widest possible interpretation of the term goods within the framework of tangible, movable things Internationality The test of internationality under the CISG is satisfied if the parties have their places of business in different states. The nationality of the parties is expressly excluded as a Sono (n 59) 521. Sono (n 59) 521; Ziegel The Scope of the Convention: Reaching out to Article 1 and Beyond 2005/2006 Journal of Law and Commerce also argues that it is difficult to fathom how the sale of software can be regulated by the CISG where the software is not imbedded in a tangible thing at the time of sale, e.g. a disk or as part of a computer, cell phone or other accessory or piece of equipment. Ferrari The CISG s Sphere of Application: Articles 1-3 and 10 in Ferrari, Flechtner and Brand (eds) The Draft UNCITRAL Digest and Beyond: Cases, Analysis and Unresolved Issues in the UN Sales Convention (2004) The decisions of the Oberlandesgericht Köln (Germany), : case number 66 (UNILEX), g1.html (Pace) and the Landgericht München (Germany), : case number 117 (UNILEX), 131 (CLOUT), g1.html (Pace) only regarded standard computer software as goods for purposes of the CISG, whereas the Oberlandesgericht Koblenz (Germany), (n 44) regarded any kind of computer software as goods under the CISG. Ferrari (n 75) 78; Lookofsky (n 72) 278; Schlechtriem (n 12) 29 (par 21). Ferrari (n 75) 78; Sono (n 59) 522 supports application of the CISG to customised software as long as there is a sale of physical copies. Schlechtriem (n 12) 28 (par 21). Schlechtriem (n 12) 28 (par 20). 74

83 ground for determining the international character of the contract. 81 The place of conclusion of the contract and the place of performance are also factors excluded by implication the only test for internationality is whether the parties places of business are located in different states. Therefore, even if the goods sold do not cross any state borders, the contract may be deemed international and fall under the CISG as long as the parties have their places of business in different states. 82 Article 1(2) must be borne in mind when compliance with the internationality requirement has to be ascertained. If compliance with the internationality requirement is not evident from the contract or from the parties dealings, then the internationality requirement is not satisfied. 83 The CISG s internationality requirement has been criticised for making the CISG applicable to sales contracts where the goods do not even cross borders, as long as the parties have their places of business in different states, on the one hand, and for denying application of the CISG where goods are indeed imported or exported if the parties are in the same state on the other. 84 This may be illustrated as follows: If two parties with their places of business both in Australia (a CISG contracting state) conclude a contract for the sale of goods to be shipped from Australia or New Zealand to Italy or Greece, the CISG would not be applicable. On the other hand, if a French company and a German company (France and Germany are CISG contracting states) conclude a contract of sale for goods to be transported from Adelaide and delivered in Melbourne, the CISG will indeed be applicable (presuming all the other requirements for its application are met and its application has not been excluded by the contracting parties) Article 1(3) of the CISG. See the decisions of the Bundesgerichtshof (Germany), (n 53) and the Court of Arbitration of the Bulgarian Chamber of Commerce and Industry (Bulgaria), : case number 421 (UNILEX), bu.html (Pace) in this regard. Ferrari (n 12) 9; Schlechtriem From the Hague to Vienna Progress in Unification of the Law of International Sales Contracts? in Horn and Schmitthoff (eds) The Transnational Law of International Commercial Transactions Volume 2 (1982) See also Schlechtriem Uniform Sales Law The Experience with Uniform Sales Law in the Federal Republic of Germany 1991/1992 Juridisk Tidskrift 1 5. This article is also available on the Pace CISG website at (last accessed ). Volken (n 9)

84 The CISG provides no definition of place of business. The drafting history suggests that a definition was purposefully omitted, since consensus could not be reached in this regard. 85 It may be deduced from the different definitions proposed by the various delegations, that place of business presupposes some degree of permanency; a temporary or coincidental place of conducting business would not suffice. 86 Existing case law attests to the fact that a certain degree of autonomy is also required before a specific place of conducting business qualifies as a place of business within the meaning of the CISG. 87 The autonomy requirement in the context of place of business has been interpreted as referring to a place where business is actually conducted, which requires stability as well as a certain independent sphere of authority. 88 Should a party have multiple places of business, article 10(a) provides that the relevant place of business is that which has the closest relationship to the contract and its performance. Article 10(a) prompts the question of how the closest relationship should be established. It allows only for circumstances known to or contemplated by the parties before or at the time of conclusion of the contract to be taken into account. 89 The parties may of course determine their respective relevant places of business in the contract. 90 Should the parties provide no indication in the contract, surrounding circumstances may often prove to be inconclusive in determining the parties relevant places of business. It has been suggested that the same difficulties which may potentially arise in determining the closest relationship for purposes of assigning the proper law to a contract in private international law may mutatis Official Records (n 31) (para 65-88). Honnold Flechtner (n 30) 43 states that place of business should be construed to mean a permanent and regular place for the transacting of general business, and would not include a temporary place of sojourn during ad hoc transactions. See also Jayme (n 8) 30 and Winship (n 12) In this regard Ferrari (n 12) 10 concludes that conference centers or temporary exhibitions or hotels would not suffice. In a case decided by the Cour de Cassation (France), : case number 106 (UNILEX), 155 (CLOUT), f1.html (Pace) it was found that the seller s liaison office did not enjoy sufficient autonomy to qualify as a separate place of business. Oberlandesgericht Stuttgart (Germany), : case number 829 (UNILEX), g1.html (Pace). As per the wording of article 10(a). Kritzer (n 12) 75. It is submitted that, if the parties elect one of their places of business as the relevant place of business for purposes of the contract and this place of business is not the place of business which has the closest relationship to the contract and its performance as prescribed by article 10(a), the election of such a place of business constitutes a derogation of article 10(a) as authorised by article 6 of the CISG. See par with regard to derogation. 76

85 mutandis present themselves here. 91 If, for example, the contract is concluded at one party s place of business in Rome and delivery of the goods is to take place at the same party s place of business in New York, what is the party s relevant place of business for purposes of the CISG? One argument in this regard is that legal certainty requires that the place of business where the contract was concluded to be taken into account for purposes of determining compliance with the internationality requirement of the CISG. 92 Ferrari supports this solution insofar as the buyer did not know that the seller s performance takes place at a different place of business to where the contract was concluded. 93 He argues that, if the buyer knew that the contract is performed by the seller at a different place of business than where the contract was concluded, article 10 (a) suggests that the relevant place of business of the seller then is the place of business where the performance takes place. 94 It is submitted that parties would invariably agree on the place of delivery of the goods, which would make the distinction drawn by Ferrari superfluous in most cases. The fact that article 10(a) determines that the relevant place of business is that which has the closest relationship to the contract and its performance 95 adds to this conundrum, since this article provides no guidance as to whether the place of conclusion of the contract or the place of performance should take precedence in the common situation where the contract is concluded at a party s one place of business but is to be performed at another. 96 Should a party not have a place of business, article 10 (b) provides that reference should then be made to the party s habitual residence. Article 7(1) requires an autonomous interpretation of the Convention. However, the meaning of habitual residence cannot be established within the four corners of the CISG. It is submitted that the determination of habitual residence will have to be established by the lex fori, since it is a general rule of private international law that the content of connecting factors is established by the lex fori Kritzer (n 12) 75; Kritzer et al (n 13) 84:7. Enderlein and Maskow (n 9) 72. Ferrari (n 12) 11. Ibid. See article 10(a), emphasis added by present author. Kritzer et al (n 13) 84:7; Rajski Article 10 in Bianca and Bonell Commentary on the International Sales Law. The 1980 Vienna Sales Convention (1987) Collins (ed) Dicey, Morris and Collins on the Conflict of Laws Volume 1 (2006) 34; Forsyth (n 7) 10. In the Rome I Regulation (n 49) par 39 of the Preamble, it is stated that, in order to promote legal certainty, there should be a clear definition of habitual residence in the conflict 77

86 The Tribunale di Vigevano decision held that the party which denies the internationality of the contract and argues against the application of the CISG, bears the burden of proof to prove non-compliance with the internationality requirement. 98 Conversely, Schlechtriem argues that the burden of proof rests on the party claiming compliance with the Convention s internationality requirement. 99 The present author supports a pro conventione approach in this regard and therefore supports the Tribunale di Vigevano decision Article 1(1)(a) and the direct application of the CISG Application of the CISG under article 1(1)(a), where both parties are situated in different contracting states to the CISG, is frequently referred to as the direct 100 or autonomous 101 application of the Convention. 102 This presumably means that the CISG is applied in terms of article 1(1)(a) without reference to the rules of private international law. 103 The CISG will be applicable in terms of article 1(1)(a) if the parties have their places of business in different CISG contracting states, even if the parties were not aware of rules (of the forum). The following definition of habitual residence as contained in article 19 of the Rome I Regulation, applies in fora of EU countries (except Denmark): (1) For the purposes of this Regulation, the habitual residence of companies and other bodies, corporate or unincorporated, shall be the place of central administration. The habitual residence of a natural person acting in the course of his business activity shall be his principle place of business. (2) Where the contract is concluded in the course of the operations of a branch, agency or any other establishment, or if, under the contract, performance is the responsibility of such a branch, agency or establishment, the place where the branch, agency or any other establishment is located shall be treated as the place of habitual residence. (3) For the purposes of determining the habitual residence, the relevant point in time shall be the time of conclusion of the contract. Tribunale di Vigevano (Italy), (n 9); Ferrari (n 75) 32. Schlechtriem (n 12) 31 (par 25). Saf A Study of the Interplay between the Conventions Governing International Contracts of Sale (1999) 5. This thesis is available at (last accessed ). Schwenzer and Fountoulakis (n 12) 23. See Ferrari CISG and Related Matters: Brief Remarks on the Occasion of a Recent Dutch Court Decision 1995 Nederlands Internationaal Privaatrecht ; Schweizerisches Bundesgericht (Switzerland), , case number: 794 (UNILEX), s1.html (Pace). This was stated in a decision rendered by the Bundesgerichtshof (Germany), : case number 290 (UNILEX), 268 (CLOUT), g1.html (Pace). Numerous authors also echo this statement, for example, Honnold (n 30) 45.1; Schwenzer and Fountoulakis (n 12)

87 this fact. 104 However, in order to satisfy the internationality requirement, the parties must have been aware that they had their places of business in different states. 105 It has been stated that, if both parties are from CISG contracting states and the forum is situated in a contracting state as well, the forum is bound by its international law obligations to apply the CISG by virtue of article 1(1)(a) 106 even if its rules of private international law would lead to a different result, assuming that the parties have not excluded the application of the Convention. 107 According to Lookofsky, a forum may not use conflict of laws rules as an intermediary vehicle to arrive at article 1(1)(a). 108 Similarly, Schlechtriem argues that the prior application of the rules of private international law is not allowed and that the CISG s provisions should always be applied as lex fori. 109 In other words, these authors are of the view that a forum in a CISG contracting state should not consult its rules of private international law in order to determine whether the CISG is in principle the applicable set of legal rules. Several cases also support the conclusion that fora in contracting states must first look at the Convention s provisions before they resort to the rules of private international law, in other words that the CISG enjoys preference over the rules of private international law. 110 According to some of these decisions, the Convention should prevail over reference to the rules of private international law in compliance with the principle of lex specialis derogat lex generalis Ferrari Specific Topics of the CISG in the Light of Judicial Application and Scholarly Writing 1995/1996 Journal of Law and Commerce As per article 1(2) of the CISG; compare par above. If the state follows a dualist approach and requires international conventions to be incorporated into its domestic legislation before they are domestically applicable, it is submitted that the state is under an international law obligation to incorporate the CISG in the appropriate manner. See n 395 below with regard to dualism and monism. Ferrari (n 12) 13; Secretariat Commentary on the Draft Convention on Contracts for the International Sale of Goods Official Records (n 31) However, see par 3.4 below for a discussion of the relationship between the CISG and other international conventions. This statement may possibly be challenged in the event that the relevant rules of private international law are also contained in an international convention. Lookofsky (n 66) 13. Schlechtriem (n 2) 16 (par 6). Oberlandesgericht Frankfurt am Main (Germany), : case number 47 (UNILEX), 84 (CLOUT); Oberlandesgericht Dresden (Germany), : case number 502 (UNILEX), 347 (CLOUT), g1.html (Pace); Handelsgericht Zürich (Switzerland), : case number 409 (UNILEX), 251 (CLOUT), s1.html (Pace); Tribunale di Pavia (Italy), (n 48); Tribunale di Vigevano (Italy), (n 9). Tribunale di Pavia (Italy), (n 48); Tribunale di Rimini (Italy), (n 8); Tribunale di Vigevano (Italy), (n 9). 79

88 Several commentators argue that article 1(1)(a) will only be applied by a forum situated in a CISG contracting state. 112 The reason for this is the fact that a forum in a non-contracting state is not bound to the application of the CISG in terms of article The present author submits that, when a forum in a non-contracting state is faced with a dispute concerning a contract for the international sale of goods between two parties from CISG contracting states, nothing prohibits the judge from founding application of the CISG on article 1(1)(a). Admittedly, such circumstances would rarely, if ever, present themselves. It is unlikely that a forum in a non-contracting state would start its investigation concerning the applicable law by consulting the provisions of the CISG. The question may arise when a state may be considered as a CISG contracting state. Article read together with article directs that a state becomes a contracting state twelve months after ratification, acceptance, approval or accession. According to article 92, a state which has availed itself of the option of not being bound by part II (formation of the contract) or part III (provisions on the sale of goods) of the CISG, is not to be considered a contracting state to the part to which its reservation pertains. However, article 95 does not provide that a contracting state declaring itself not bound by article 1(1)(b), is not a contracting state for the purposes of article 1(1)(b). It is contended that a contracting state which made an article 95 reservation, remains a contracting state for the purposes of article 1(1)(b) Bernasconi The Personal and Territorial Scope of the Vienna Convention on Contracts for the International Sale of Goods (Article 1) 1999 Netherlands International Law Review ; Huber (n 12) 51; Reczei Area of Operation of the International Sales Convention 1981 The American Journal of Comparative Law Huber (n 12) 51. Article 91(2) provides that the Convention is subject to ratification, acceptance or approval by the signatory states. According to article 91(3), the Convention is open for accession by all states which are not signatory states as from the date it is open for signature. Article 99 (2) provides that, when a state ratifies, accepts, approves or accedes to the Convention (after the CISG has entered into force), the CISG enters into force in respect of that state on the first day of the month following the expiration of twelve months after the date of deposit of its instrument of ratification, acceptance, approval or accession. See par 3.6 below. 80

89 3.2.6 Article 1(1)(a) as a unilateral rule of private international law 117 As stated above, 118 a unilateral rule of private international law indicates when the legal system or set of rules it forms part of, applies. A multilateral rule of private international law on the other hand, consists of a legal category and a connecting factor (or several connecting factors). 119 The connecting factor(s) then point to the applicable legal system. Article 1(1)(a) does not contain a rule for choosing between the possibly applicable legal systems. It directs when the CISG would be applicable. Therefore article 1(1)(a) does amount to a unilateral conflict rule Should application under article 1(1)(a) enjoy preference over application under article 1(1)(b)? The question arises with regard to fora situated in CISG contracting states, whether they have to start their inquiry at article 1(1)(a) and apply the CISG if this provision s Von Mehren Explanatory Report, Convention on the Law Applicable to Contracts for the International Sale of Goods par 192 (reprinted in The Hague Conference on Private International Law Proceedings of the Extraordinary Session of October 1985, and quoted by Fawcett, Harris and Bridge International Sale of Goods in the Conflict of Laws (2005) 918) stated that article (1)(1)(a) can be seen as including a kind of choice of law rule, one which makes the Vienna Convention as adopted and interpreted by either the buyer s state or the seller s state applicable where both states are parties to the Vienna Convention. (The choice between the buyer s and seller s state is clearly not regulated by the Vienna Convention and would be made under the forum s relevant conflicts rules.) Thus one reading of article 1(1)(a) treats the provision not only as a delimitation of the boundary between a state s law respecting non-domestic sales (the Vienna Convention) and its law for internal sales (its domestic sales law) but also an incomplete provision respecting choice of law. Fawcett et al point out (at 919) that if article 1(1)(a) does amount to an incomplete choice of law rule, as advocated by Von Mehren, it impacts upon the interplay between the CISG and a choice of law convention if the state in question is a party to both. They suggest that article 1(1)(a) should be taken at face value as directing the application of the Vienna Convention as part of the law of the forum (at 919). Bridge (n 72) 513 adds that viewing article 1(1)(a) as an incomplete choice of law rule, disregards the essential difference between uniform law and private international law and adds nothing useful to the interpretation of the CISG. See n 7 above. See n 7 above. Neels Consumer Protection Legislation and Private International Law 2010 Obiter (to be published) refers to a third category of private international law rules, namely bilateral conflict rules. He distinguishes multilateral and bilateral conflict rules as follows: A bilateral conflicts rule connects a factual scenario to a governing legal system by way of a prescribed indicator (connecting factor). Multilateral conflict rules connect a factual scenario via a variety of connecting factors to a governing legal system. Saf (n 100) 5; Schlechtriem (n 49) 784 states that article 1(1)(a) could be regarded as a onesided conflict rule. 81

90 requirements are met, or whether they may start at their rules of private international law to determine the law applicable to the contract. 121 Fawcett et al explicitly state that of the two grounds for application of the Convention, however, the one in article 1(1)(a), as a matter of common understanding, is the dominant one. 122 Conversely, Ferrari argues that that the CISG contains two (equal) alternative applicability criteria. 123 Likewise, in the Fondmetal case 124 it was said that the Vienna Convention contains two alternative criteria of applicability, each sufficient by itself to bring a transaction within the scope of the Convention. 125 Reference may be made to article 31 of the Vienna Convention on the Law of Treaties of in order to establish the correct interpretation of article 1(1) of the CISG and to answer the question of whether article 1(1)(a) enjoys supremacy over article 1(1)(b). Article 31 of the 1969 Convention sets out the general rule for interpretation of treaties. As will be expanded upon later in this chapter, 127 it is widely accepted that the provisions concerning interpretation of treaties contained in the 1969 Convention constitutes a codification of customary international law principles in this regard. Article 31(1) of the 1969 Convention provides that a treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. 128 The present author contends that the ordinary meaning attached to article 1(1) and the use of the word or is that articles 1(1)(a) and 1(1)(b) constitute alternative applicability criteria. A teleological interpretation of article 1(1) would render the same outcome, since application of the CISG in terms of article 1(1)(a) or 1(1)(b) would give effect to the Ferrari (n 75) 21. Fawcett, Harris and Bridge (n 117) 916. Ferrari (n 12) 13; Ferrari (n 104) 33 states that article 1(1) provides for two alternative criteria of applicability, the existence of either of which is sufficient for the Convention to be applicable (provided the contract is an international one). Tribunale Civile di Monza (Italy), : case number 21 (UNILEX), 54 (CLOUT), i3.html (Pace). See Ferrari Uniform Law of International Sales: Issues of Applicability and Private International Law 1995/1996 Journal of Law and Commerce for this translated quotation from the decision. Vienna Convention on the Law of Treaties, , Vienna, 1155 UNTS 331, 1969 International Legal Materials 679. See par below. See the text of the 1969 Convention (n 126). 82

91 CISG s object and purpose of adopting uniform rules for international sales contracts in order to remove legal barriers to international trade. 129 It is therefore submitted that application of the CISG by virtue of article 1(1)(a) should not necessarily enjoy preference over application in terms of article 1(1)(b). Even when the forum applies the CISG in terms of article 1(1)(a), it does not necessarily eliminate 130 or reduce 131 the need for resorting to the rules of private international law. 132 If the parties have inserted a choice of law clause into the contract, it will have to be determined in accordance with the conflict of laws rules of the forum whether the choice of law is valid. 133 If not, the legal system applicable by virtue of the rules of private international law of the forum will have to be determined to solve possible gaps in the CISG. If the forum has to determine the (domestic) legal system applicable to the contract in any event, it seems artificial to argue that the CISG must be applied ex article 1(1)(a) if article 1(1)(a) s requirements are met. The court could equally justify application of the CISG ex article 1(1)(b) under these circumstances. 3.3 Article 1(1)(b) Introduction It is generally acknowledged that article 1(1)(b) extends the CISG s sphere of application See the preamble of the CISG (n 1). According to Bell (n 8) 247 and Winship Private International Law and the UN Sales Convention 1988 Cornell International Law Journal , the purpose of article 1(1)(a) is to eliminate the need to conduct a private international law analysis. Bernasconi (n 112) 150 states that, under article 1(1)(a) there is no need to perform a conflict of laws analysis and that the forum s private international law is eluded. Jayme (n 8) 28 states that article 1(1)(a) of the Convention reduces the necessity of resorting to the rules of private international law. Schlechtriem (n 49) 784 states in this regard: Even if it was thought by those drafting and promulgating a uniform sales law that it would make conflict of laws rules obsolete, this is not the case. Even if the CISG is applicable on account of article 1(1)(a) which in itself could be regarded as a one-sided conflict rule, there are many questions not covered by the Convention which have to be solved under domestic law determined by conflict rules of the forum. Schlechtriem (n 12) 35 (par 38-39). Bernasconi (n 112) 160; Dore and Defranco A Comparison of the Non-substantive Provisions of the UNCITRAL Convention on the International Sale of Goods and the Uniform Commercial Code 1982/1983 Harvard International Law Journal 49 55; Carr International Trade Law (2010) 63; Ferrari (n 12) 15; Schlechtriem (n 2) 17 (par 7); Ziegel (n 74)

92 According to Ferrari, the addition of article 1(1)(b) to the CISG coordinates the rules resulting from the Convention and those of private international law. 135 Article 1(1)(b) has been criticised for making the CISG applicable under circumstances that would come as a surprise to the parties. 136 Schlechtriem and Butler counter this criticism by pointing out that [e]ven if the applicability of the CISG comes as a surprise to the parties, the CISG devises a legal paradigm for specific problems arising out of cross-border sales of goods contracts often more modern than a domestic sale of goods law. But importantly, the advantage of the domestic sale of goods law can only ever be afforded to one party whereas the CISG is more advantageous because it is neutral as between the parties. 137 It may be added that the applicable domestic legal system as determined by the rules of private international law of the forum, may equally come as a surprise to the parties. Article 1(1)(b) is also a unilateral conflict rule, since it demarcates the CISG s sphere of application Legislative history The inclusion, formulation and interpretation of article 1(1)(b) gave rise to much debate and controversy during the drafting process of the CISG. At the First Session of the Working Group on the International Sale of Goods, held in January 1970, several controversial articles and matters arising from the 1964 Hague Convention on Sales (ULIS) had to be addressed. 139 With regard to the scope of Ferrari (n 12) 15. See, for example, Goode Reflections on the Harmonisation of Commercial Law 1991 Revue de droit uniforme / Uniform Law Review 54 67: [W]here both parties carry on business in Contracting States they can reasonably be subjected to the Convention automatically since it forms part of their national law, whereas parties carrying on business in different non- Contracting States who agree that their contract is to be governed by the law of a third State which is a Contracting State may well have in mind only the domestic law of that State and arguably ought not to be bound by the Convention unless they contract into it. Dore and Defranco (n 134) 55 voice similar criticism. Schlechtriem and Butler (n 3) 16. See (n 7) and par above. Report of the Working Group on the International Sale of Goods, First Session, 5 16 January 1970 (A/CN.9/35) in UNCITRAL Yearbook I ( ) , ; Honnold 84

93 application of the future CISG, articles 1 and 2 of the ULIS were discussed. 140 One of the important questions discussed was the inclusion of rules in the future CISG concerning the application of the uniform law to transactions involving one or more non-contracting states. 141 Four possible alternatives were identified. The first alternative represented the universalist approach taken by the ULIS (as per articles 1 and 2) and directed application of the uniform law by fora in contracting states without requiring any relationship between the transaction and a contracting state. 142 The second alternative was the inclusion of conflict rules in the uniform law prescribing the relationship required between a contracting state and the sales transaction to warrant application of the uniform law. 143 The third alternative in this regard was restriction of the application of the uniform law to sales transactions involving parties from different contracting states. 144 The fourth proposed alternative was the exclusion of any conflict rules from the uniform law and therefore the relegation of the question of application of the uniform law to the choice of law rules of the forum. 145 A Working Party was established on 6 January 1970 to consider the abovementioned question in detail. 146 A revision of article 2 (which, in revised form, would ultimately Documentary History of the Uniform Law for International Sales. The Studies, Deliberations and Decisions that led to the 1980 United Nations Convention with Introduction and Explanations (1989) Convention relating to a Uniform Law on the International Sale of Goods (ULIS), , The Hague, 834 UNTS 107; (last accessed ). According to article 1 of the ULIS, this convention is applicable (a) where the contract involves the sale of goods which are at the time of conclusion of the contract in the course of carriage or will be carried from the territory of one state to the territory of another; (b) where the acts constituting the offer and the acceptance have been effected in the territories of different states or (c) where the delivery of the goods is to be made in the territory of a state other than that within whose territory the acts constituting the offer and the acceptance were effected. Article 2 of the ULIS excluded the rules of private international law for purposes of its application. Report of the Working Group on the International Sale of Goods, First Session (n 139) 178; Honnold (n 139) 16. Ibid. Ibid. Ibid. Ibid. Report of the Working Group on the International Sale of Goods, First Session (n 139) 179; Honnold (n 139)

94 become article 1 of the CISG) was proposed by the Working Party I 147 to read as follows: 1. The Law shall apply where the places of business of the contracting parties are in the territory of States that are parties to the Convention and the law of both these States makes the Uniform Law applicable to the contract; 2. The Law shall also apply where the rules of private international law indicate that the applicable law is the law of a contracting State and the Uniform Law is applicable to the contract according to this law. 148 Some of the delegations were opposed to including paragraph 2 in the proposal, since it could possibly make the Convention applicable where the parties had no intention of making the CISG applicable to their contract. 149 A further objection raised against the inclusion of paragraph 2 was that a reference to conflict rules would hamper unification and introduce uncertainty in this field. 150 At its Third Session, the Working Group approved the text to replace articles 1 6 of the ULIS concerning the sphere of application of the uniform law. 151 Article 1 of this text read as follows: 1. The present Law shall apply to contracts of sale of goods entered into by parties whose places of business are in different States: a) when the states are both Contracting States; or b) when the rules of private international law lead to the application of the law of a Contracting State. 2. The fact that the parties have their places of business in different States shall be disregarded whenever this fact does not appear either from the contract or from any dealings between, or from information disclosed by the parties at any time before or at the conclusion of the contract. 3. The present Law shall also apply where it has been chosen as the law of the contract by the parties See the Report by Working Party I to the Working Group on the International Sale of Goods, included as Annex III to the Report of the Working Group on the International Sale of Goods, First Session (n 139) ; Honnold (n 139) Report of the Working Group on the International Sale of Goods, First Session (n 139) 179; Honnold (n 139) 17. Report of the Working Group on the International Sale of Goods, First Session (n 139) 179; Honnold (n 130) 17; Winship (n 130) 487. Ibid. Progress Report of the Working Group on the International Sale of Goods on the Work of its Third Session, held in Geneva from January 1972 (A/CN.9/62) in UNCITRAL Yearbook III (1972) 77-95, 79; Honnold (n 139) 96. Ibid. 86

95 During the Sixth Session of the Working Group, the revised text of the ULIS, as approved during the Third Session, was discussed. 153 A proposal was made to delete article 1(1)(b). 154 Several reasons were advanced for this proposal, two of which deserve mentioning. Firstly, it was argued that the rules of private international law of some states could lead to the application of different legal systems to the obligations of the buyer and seller respectively. 155 This, in turn, could lead to difficulties concerning the application of the Convention in terms of article 1(1)(b), such as whether all the provisions of the CISG are applicable to a certain dispute, or only those pertaining to the buyer or to the seller. 156 Secondly, it would lead to controversy whether the CISG should be applied by a forum in a non-contracting state whose rules of private international law lead to the application of the law of a contracting state. 157 Despite these criticisms, the Working Group retained article 1(1)(b). Article 1(1)(b) was included in the 1976 Working Group Draft Convention on the International Sale of Goods. 158 A proposal for the removal of article 1(1)(b) was once again brought during the Ninth Session of the Working Group. 159 The argument was repeated that article 1(1)(b) could lead to uncertainty as to the application of the CISG if the forum seized of the dispute is situated in a non-contracting state and its rules of private international law Report of the Working Group on the International Sale of Goods on the Work of its Sixth Session (New York, 27 January 7 February 1975) (A/CN.9/100) in UNCITRAL Yearbook VI (1975) Report of the Working Group on the International Sale of Goods on the Work of its Sixth Session (n 153) 49-62, 50; Honnold (n 139) 241. Ibid. For example, in South African private international law of contract there exists authority for the application of the scission principle in circumstances where the locus solutionis in respect of payment differs from the locus solutionis in respect of the characteristic performance of the contract (in the case of a contract for the sale of goods, the characteristic performance would be the delivery of the goods). The scission principle was endorsed in the decisions of Standard Bank of SA Ltd v Efroiken and Newman 1924 AD and Laconian Maritime Enterprises Ltd v Agromar Lineas Ltd 1986 (3) SA 509 (D) (Conversely, however, the unitary principle was endorsed in the decision of Improvair (Cape) Pty (Ltd) v Establissements Neu 1983 (2) SA 138 (C) 147.) See in this regard, Fredericks and Neels The Proper Law of a Documentary Letter of Credit (Part 1) 2003 South African Mercantile Law Journal Ibid. Ibid. See UNCITRAL Yearbook VII (1976) for the text of the Draft Convention. Report of the Working Group on the International Sale of Goods on the Work of its Ninth Session (Geneva September 1977) (A/CN.9/142) in UNCITRAL Yearbook IX (1978) 61-83; 68-69; Honnold (n 139)

96 lead to the application of the law of a contracting state. 160 The point was raised that the application of the CISG under such circumstances may depend upon the manner of incorporation of the CISG within the relevant contracting state s (the state to which the rules of private international law of the forum refer) domestic law. 161 It was once again decided to retain article 1(1)(b), since its interpretation by non-contracting states does not constitute a valid ground for its exclusion. At UNCITRAL s Tenth Session, the Committee of the Whole (which is in essence the Full Commission) reviewed the 1976 Draft Convention 162 and prepared the 1977 Draft Convention on the International Sale of Goods. 163 Article 1(1)(b) was included in the 1977 Draft Convention. 164 In 1978 the Commission approved the Draft Convention and requested the Secretary- General to prepare a commentary on this draft. The 1978 Secretariat Commentary explains the functioning of each provision of the Draft Convention. 165 With regard to article 1, the Commentary emphasises that, in addition to the fact that the parties must have their places of business in different states, it is required that the states are contracting states, or that the rules of private international law refer to the law of a contracting state, for the Convention to apply. 166 According to the Commentary, the rules of private international law of the forum are referred to in article 1(1)(b). 167 Furthermore, the Commentary states in answer to the question of which sales law of that state should apply, that the CISG should be applied Report of the Working Group on the International Sale of Goods on the Work of its Ninth Session (n 159) 69; Honnold (n 139) 301. Ibid. See the Report of Committee of the Whole I relating to the draft Convention on the International Sale of Goods (A/32/17, Annex I) in UNCITRAL Yearbook VIII (1977) Text of the 1977 Draft Convention available in UNCITRAL Yearbook VIII (1977) Report of Committee of the Whole I relating to the draft Convention on the International Sale of Goods (n 162) 26; Honnold (n 139) 319. Commentary on the Draft Convention on Contracts for the International Sale of Goods, prepared by the Secretariat in Official Records (n 31) Commentary on the Draft Convention on Contracts for the International Sale of Goods, prepared by the Secretariat in Official Records (n 31) 15. Ibid. Ibid. 88

97 The delegation from the Federal Republic of Germany submitted proposed amendments to article 1(1)(b) before the 1980 Diplomatic Conference. 169 The Federal German Republic proposed deleting article 1(1)(b) from the draft Convention 170 or, in the alternative, rewording article 1(1)(b) to read: when the rules of private international law, with regard to the contractual rights and duties of the parties, lead to the application of the law of a Contracting state. 171 Article 1(1)(b) and the proposed amendments were discussed during the first meeting of the First Committee during the Diplomatic Conference. 172 The representative from the Federal Republic of Germany reiterated that article 1(1)(b) introduced an unwelcome element of complication and would involve serious problems of interpretation and application. 173 It was argued in this regard that a certain conflict of laws rule could possibly only indicate the legal system applicable to the conclusion of the contract or to the rights and obligations of the parties. The German Federal Republic s representative stated that this fact made the reference to the rules of private international law in article 1(1)(b) difficult to apply and therefore suggested the reformulation of article 1(1)(b) as mentioned above. 174 Furthermore, the German delegation objected to the fact that article 1(1)(b) had the effect of binding contracting states to apply an instrument governed by international law to nationals of states that are not parties to the Convention. 175 The Czechoslovakian and Swedish delegations also supported deletion of article 1(1)(b). 176 On the other hand, the delegations in favour of retaining article 1(1)(b), such as the Bulgarian, Norwegian and French delegations, argued that this sub-article had the effect of extending the application of the Convention and since the Convention would constitute the law governing international sales in ratifying states, the widest possible application of the Convention was to be supported. 177 The proposal for deletion of article 1(1)(b) was put to a vote and the majority of the delegations voted for its retention. 178 Article Official Records (n 31) 83. Document A/CONF.97/C.1/L.7. Document A/CONF.97/C.1/L.17. A/CONF.97/C.1/SR.1, Official Records (n 31) Official Records (n 31) 236 (para 9-10). Official Records (n 31) 237 (par 11). Official Records (n 31) 237 (par 12). Official Records (n 31) 237 (para 13-16). Official Records (n 31) 237 (para 17-21). Official Records (n 31) 238 (par 29). 89

98 was adopted by the First Committee during its thirty fifth meeting. 179 Article 1 was finally adopted by the Plenary Conference during its sixth plenary meeting Application of the CISG under article 1(1)(b) According to article 1(1)(b), the Convention applies to contracts of sale of goods between parties whose places of business are in different States when the rules of private international law lead to the application of the law of a Contracting State. These rules of private international law may be the domestic conflict of laws rules or rules of private international law contained in conventions such as the Hague Convention on the Law Applicable to International Sales of Goods 181 or regional instruments such as the Rome I Regulation. 182 The relationship between the CISG, other relevant international conventions and the Rome I Regulation will be discussed below. 183 Four matters concerning the meaning and application of article 1(1)(b) need to be analysed A reference to the rules of private international law of the forum? Fawcett at al contend that, even though the text of article 1(1)(b) does not state which country s rules of private international law are referred to, practical sense and the absence of any intelligible alternative mean that only the forum s rules could be applied. 184 Most commentators refer to the private international law of the forum Official Records (n 31) 423 (para 31-32). A/CONF.97/SR.6, Official Records (n 31) 200. This Convention was concluded on and came into force on 1 September It was drawn up in French only and may be accessed at en.php?act=conventions.text&cid=31 (last accessed ). The contracting states are Belgium, Denmark, Finland, France, Luxembourg, the Netherlands, Italy, Norway, Spain, Sweden and Switzerland. See n 49 above. The Convention on the Law Applicable to Contractual Obligations, , Rome, 80/943/EEC, Official Journal L 266, 1605 UNTS 59 has been replaced by the Rome I Regulation in European Union countries (except in Denmark) for contracts concluded from 17 December Concerning the temporal scope of application of the Rome I Regulation, article 28 of the Regulation originally stated that the Regulation shall apply to contracts concluded after 17 December However, a corrigendum to article 28 of the Regulation was published in the Official Journal of the European Union L309/87 on 24 November 2009, amending article 28 of the Regulation to read: This Regulation shall apply to contracts concluded as from 17 December See par 3.4 below. Fawcett, Harris and Bridge (n 117) Bridge (n 72) 514 states that, even though article 1 does not specify which country s rules of private international law are relevant, it can only be a reference to those of the forum. See also Bertrams and Kruisinga Overeenkomsten in het Internationaal Privaatrecht en het Weens 90

99 The well-known decision of the Tribunale di Vigevano expressly referred to the rules of private international law of the forum. 186 An interpretation of this article to mean the rules of private international law of the forum, is probably the only correct interpretation thereof, though it is somewhat disquieting that the words of the forum were not included in this article A reference to the rules of private international law of the forum, including its rules on renvoi? If a forum s rules of private international law point to the law of a CISG contracting state, the forum would have to decide whether to apply the Convention because its conflicts rules point to the law of a contracting state as the applicable law or whether to make a further inquiry into the proper law s rules of private international law. The question in this regard is whether or not renvoi is to be applied. According to the no-renvoi approach, if the conflict rules of the forum point to the application of the law of another state, it only refers to that state s internal law it excludes that state s conflict of laws rules. 187 The Convention on the Law Applicable to Contractual Obligations (1980) 188 and the Rome I Regulation 189 exclude renvoi. The generally accepted view is that renvoi will also not be applied in private international law of contract in common law jurisdictions. 190 Forsyth states in this regard that it is seldom, if ever, suggested that renvoi has any role to play in the Koopverdrag (2007) 135; Conetti Uniform Substantive and Conflicts Rules on the International Sale of Goods and their Interaction in Volken and Šarčević (eds) (n 9) and Schlechtriem (n 12) 26 (par 10). Tribunale di Vigevano (Italy), (n 9). Forsyth (n 7) 85. Article 15 of the Rome Convention (n 182) excludes renvoi. Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to Contractual Obligations (Rome I), Official Journal of the European Union 2008 L 177/6. Article 20 of the Rome I Regulation excludes renvoi. This Regulation will be applied in the EU countries (except Denmark) to determine the law applicable to contracts concluded from 17 December See, for example, Collins (ed) (n 97) Volume The authors state (at 1554): At common law, renvoi had no place in the law of contract. See also in this regard Diwan and Diwan Private International Law. Indian and English (1998) 112, Einhorn Private International Law in Israel (2009) 63 and Forsyth (n 7)

100 contractual field. 191 It is therefore clear that the rules of private international law of most jurisdictions would not apply renvoi to contract law matters. Most commentators support the no-renvoi approach for purposes of article 1(1)(b) of the CISG. 192 Conversely, Réczei suggests that renvoi possibly has to be taken into account under article 1(1)(b). 193 Ferrari submits convincingly that it is not possible to derive a definite answer from the Convention or its documentary history to the question of whether of renvoi should be included / excluded in this instance. 194 He submits that the exclusion or application of renvoi in this regard should be determined by the rules of private international law of the forum. 195 If, for example, the relevant conflicts rules are contained in the Rome I Regulation, then renvoi is to be excluded. It also warrants mentioning that the application of renvoi per se, as well as the existence of different approaches followed with regard to renvoi, for instance the partial renvoi approach 196 or the total renvoi approach, 197 would lead to uncertainty concerning the law applicable to the contract. 198 An Austrian decision delivered by the Bundesgericht für Handelssachen 199 in Vienna provides an example of the position when renvoi is indeed taken into account. This case concerned a dispute regarding a contract for the international sale of goods concluded in 1988 between an Italian seller and an Austrian buyer. The court Forsyth (n 7) 84. Schlechtriem (n 12) 35 (par 39) argues that article 1(1)(b) functions as an internal allocation norm and excludes renvoi. Other commentators in favour of excluding renvoi include Enderlein and Maskow (n 12) 30; Reiley International Sales Contracts. The UN Convention and Related Transnational Law (2008) 45; Winship (n 130) argues that the CISG s drafting history supports a no-renvoi approach as evidenced in the 1978 Secretariat Commentary, Official Records (n 31) 15. Réczei (n 112) Ferrari (n 104) 38. Ibid. If a partial renvoi approach is followed, one onward reference by the lex causae is allowed. Compare Forsyth (n 7) 87. Or stated differently, under the partial renvoi theory, it is assumed that the lex causae follows a no-renvoi approach. Under the total renvoi approach, it is not assumed that the lex causae follows a no-renvoi approach. Forsyth (n 7) 88 describes this approach as follows: The total renvoi theory accepts the principle of an onward reference by the conflict rules of the lex causae (the legal system referred to by the conflict rules of the lex fori), but it goes further: it recognizes that the extent and effect of that onward reference depend upon the attitude of the lex causae to the question of renvoi. Compare Collins (ed) (n 97) Volume Bundesgericht für Handelssachen, : case number 12 (UNILEX), a3.html (Pace). 92

101 determined that the rules of Austrian private international law referred to the law of Italy. Italy was a CISG contracting state. However, the Austrian court found that renvoi had to be taken into account. The court denied the application of the CISG since Italian private international law referred back to Austrian law and Austria was not a contracting state at the relevant time. Except for the Austrian decision mentioned, the author could not find any other decisions in which renvoi was applied in terms of article 1(1)(b). In any event, renvoi is excluded in both the Rome Convention (which entered into force on 1 December 1998 for Austria) 200 and the Rome I Regulation A reference to the rules of the private international law of a contracting state only? The question in this regard is whether the Convention would only be applicable under article 1(1)(b) if the forum is situated in a CISG contracting state or whether the phrase the rules of private international law refers to the private international law of all states, thus including the rules of private international law of non-contracting states. 201 This question is of crucial importance to all non-contracting states, such as Portugal, South Africa and the United Kingdom. The answer to this question will determine whether a forum in a non-contracting state would potentially be placed in a position to apply the Convention or not. If this phrase is interpreted in such a manner that the Convention only applies if the private international law rules of one contracting state refer to the law of another contracting state, then it means that no forum sitting in a non-contracting state would ever be called upon to apply the Convention to a dispute brought before it. If, on the other hand, this phrase refers to the rules of private international law of all states, contracting and non-contracting alike, it would mean See Neels and Fredericks The Music Performance Contract in European and South African Private International Law (2) 2008 Tydskrif vir Hedendaagse Romeins-Hollandse Reg / Journal of Contemporary Roman-Dutch Law for further references with regard to the Rome Convention and Austrian law. Behr Commentary to Journal of Law and Commerce Case I; Oberlandesgericht Frankfurt am Main 1992/1993 Journal of Law and Commerce states that the applicability of [the] CISG based on private international law can be confusing since CISG provisions only address Contracting States. 93

102 that even a forum sitting in a non-contracting state could be placed in a position to apply the Convention. According to the international law of treaties, treaties are binding upon states in accordance with the principle of pacta sunt servanda. 202 In other words, only contracting states to a convention are bound to uphold and give effect to the convention. In theory, this principle may justify the conclusion that the phrase the rules of private international law, as employed in article 1(1)(b) of the CISG, refers to the private international law rules of fora situated in contracting states only, since non-contracting states to the CISG are by no means bound to give effect to the content of the said Convention. However, even though a forum in a non-contracting state, when faced with the task of having to assign the law applicable to a contract for the international sale of goods, will not start its inquiry at article 1 of the CISG, it may well be led to application of the CISG under the circumstances as made provision for by article 1(1)(b). The forum will apply its rules of private international law to determine the law applicable to the contract or to the specific issue. According to one view, when a forum s rules of private international law refer to the law of a CISG contracting state, article 1(1)(b) directs that the applicable sales law should be the CISG and not the proper law s domestic sales law. 203 In this sense, article 1(1)(b) constitutes an internal conflict rule from the perspective of the CISG contracting state if its law is found to be the lex causae of the contract, article 1(1)(b) determines that the CISG, and not domestic sales law, 204 should be applied. 205 The result of this argument is that the CISG is applied in terms of article 1(1)(b) as part of the proper law or lex causae and indeed as the relevant rules that the proper law designate for sales contracts of this nature Dugard International Law: A South African Perspective (2005) 406. See article 26 of the Vienna Convention on the Law of Treaties (n 126) which states that every treaty in force is binding upon the parties and must be performed by them in good faith. Huber (n 12) 53 and Schlechtriem (n 12) 35 (par 39), referring to article 1(1)(b) as an internal allocation norm. See also par below. The term domestic sales law as employed in this context, refers to the state s rules governing sales, excluding the CISG. The term may, however, include domestic rules and principles specifically applicable to international sales (excluding the CISG). Ibid. Schlechtriem and Butler (n 3) 17 state that article 1(1)(b) is part of the national law of the member state referred to. Schlechtriem (n 12) 34 (par 37) also states in this regard that [t]he CISG is applied by the court in the forum state, if it is a [c]ontracting state, not as foreign law, 94

103 This view supports application of the CISG in terms of article 1(1)(b) by fora situated in contracting and non-contracting states alike. On the other hand, it has been argued that, when a forum in a CISG contracting state is faced with a dispute concerning a contract for the international sale of goods and the requirements for application of the CISG in terms of article 1(1)(b) are met, the forum applies the CISG in terms of article 1(1)(b), since article 1(1)(b) is binding upon fora in CISG contracting states who have not made a reservation in terms of article According to this view, in this instance the forum in the contracting state is applying the CISG not as part of the proper law of the contract but as part of its own law. 208 An advantage of this line of reasoning is the fact that it would allow a forum in a contracting state to apply the CISG under article 1(1)(b) even where the law applicable to the contract is that of a contracting state which made a reservation under article Since this argument contends that, where the rules of private international law of a forum in a contracting state point to the application of the law of a contracting state, it should apply the CISG because article 1(1)(b) forms part of its own law, it is irrelevant that the requirements for application of the Convention are not met from the point of view of the proper law state. However, this view may possibly lead to the conclusion that, since article 1(1)(b) is not part of the law of a non-contracting state, the CISG should not be applied by fora in non-contracting states. Dore reasons that article 1(1)(b) makes the CISG applicable when the places of either one or both of the parties are in non-contracting states and the rules of private international law of a forum in a contracting state designates the law of a contracting state as the applicable law but as law created by an international convention and enacted by the forum state as its own law. Huber (n 12) 53, see also Fawcett, Harris and Bridge (n 117) Schlechtriem (n 12) 34 (par 37). See par 3.6 below. Dore Choice of Law under the International Sales Convention: A US Perspective 1983 The American Journal of International Law

104 According to Schlechtriem, article 1(1)(b) cannot be applied in non-contracting states, 211 although fora in non-contracting states may have to apply the CISG as foreign law if their rules of private international law lead to the application of the law of a contracting state. 212 Schlechtriem and Butler argue that, when a forum in a noncontracting state is lead by its rules of private international law to apply the law of a CISG contracting state, it is bound to apply the proper law of the contract in the same way as a forum in the country of the proper law would have. Therefore, the forum in the non-contracting state should apply the CISG as the fora in the contracting state would have. 213 Ferrari also argues that, when a forum in a non-contracting state applies the CISG in terms of its rules of private international law, it does not amount to application of the Convention by virtue of article 1(1)(b) but merely as part of the legal system to which the forum s rules of private international law points. 214 However, most commentators support the notion that article 1(1)(b) makes the CISG applicable whether the rules of private international law of a forum situated in a contracting state or a non-contracting state refer to the law of a contracting state. 215 Even though the forum in the non-contracting state will not start its enquiry at article 1 of the CISG and is not bound by article 1(1)(b) since the Convention does not form part of the lex fori, the fact that the CISG is applied in circumstances as provided for in article 1(1)(b), should allow a forum in the non-contracting state to declare that it is applying the CISG under article 1(1)(b). When a forum is lead by its rules of private international law to the application of the law of a CISG contracting state, it will first endeavour to find out what the relevant sales law for an international sale of goods contract is in the applicable legal system. Once it has ascertained that the CISG is the applicable sales law, it will investigate the relevant provisions of the CISG. Certainly it will look at the applicability requirements of the CISG and most probably come to Schlechtriem (n 12) 35 (par 40). Ibid. Schlechtriem and Butler (n 3) 14; Schlechtriem (n 12) 26 (par 10). Ferrari (n 102) 327. Ferrari criticises the decision of the Arrondissementsrechtbank Amsterdam (Netherlands), : case number 124 (UNILEX) for stating that it applied the CISG by virtue of article 1(1)(b) before the CISG had come into force in the Netherlands (at 327). According to Ferrari (at 328), the court was not supposed to rely on article 1(1)(b) for application of the CISG. Collins (ed) (n 97) Volume ; Naón The UN Convention on Contracts for the International Sale of Goods in Horn and Schmitthoff (eds) (n 82) 89 98; Volken (n 9) 29; Schlechtriem and Butler (n 3) 15. Schlechtriem (n 12) 34 (par 37) states that it does not matter whether the forum state itself is a contracting state or not. 96

105 the conclusion that it is applying the CISG under the circumstances as made provision for by article 1(1)(b). Numerous court decisions exist where fora in non-contracting states indeed stated that they applied the CISG in terms of article 1(1)(b). Quite a few decisions were handed down by German courts applying the CISG by virtue of article 1(1)(b) before it came into force in Germany. 216 All of these decisions concern disputes based on contracts for the international sale of goods concluded between German buyers and Italian sellers. 217 The German courts all followed the same approach: they referred to the rules of German private international law in order to determine the law applicable to the dispute at hand. The rules of German private international law pointed to the law of a CISG contracting state, namely Italian law, as the lex causae of the contract and therefore the courts applied the CISG in terms of article 1(1)(b) even though the courts handing down the decision were situated in a non-contracting state at the time. Belgian courts have also delivered a number of decisions 218 in which the CISG was applied by virtue of article 1(1)(b) before it had come into force in Belgium. 219 Furthermore, decisions were delivered by Dutch courts 220 applying the CISG under article 1(1)(b) before the CISG entered into force in The Netherlands. 221 These fora all explicitly state that they are applying the CISG in terms of article 1(1)(b). The UNCITRAL Digest of Case Law also refers to the fact that the CISG has been applied The CISG came into force in Germany on 1 January The list of CISG contracting states may be accessed at (last accessed ). Schlechtriem and Butler (n 3) 15 also refer to the fact that the CISG was applied by German fora on numerous occasions before it had entered into force in Germany. See the decisions of the Landgericht München (Germany), : case number 6 (UNILEX), 3 (CLOUT), g1.html (Pace); the Landgericht Stuttgart (Germany), : case number 1 (UNILEX), g1.html (Pace); the Oberlandesgericht Koblenz (Germany), : case number 22 (UNILEX); the Landgericht Aachen (Germany), : case number 24 (UNILEX); the Amtsgericht Oldenburg in Holstein (Germany), : case number 5 (UNILEX), 7 (CLOUT), g1.html (Pace) and the Landgericht Hamburg (Germany), : case number 7 (UNILEX), 5 (CLOUT), g1.html (Pace). See the decisions of the Rechtbank van Koophandel, Hasselt (Belgium), : case number 268 (UNILEX); : case number 267 (UNILEX); : case number 269 (UNILEX); : case number 265 (UNILEX); : case number 264 (UNILEX) and the Tribunal de Commerce de Bruxelles (Belgium), : case number 176 (UNILEX), b1.html (Pace). The CISG entered into force in Belgium on 1 November Arrondissementsrechtbank Roermond (Netherlands), : case number 34 (UNILEX); Arrondissementsrechtbank Dordrecht (Netherlands), : case number 32 (UNILEX). The CISG entered into force in the Netherlands on 1 January

106 by fora in non-contracting states when their rules of private international law refer to the law of a CISG contracting state. 222 Bonell and Liguori confirm that it is established practice that the CISG is applied by virtue of the applicability criterion in article 1(1)(b) by fora in non-contracting states as well. 223 The present author submits that, whether a forum in a contracting state or a noncontracting state applies the CISG on the basis of article 1(1)(b) s requirements being met, the CISG is applied as being the relevant set of rules for international sale of goods contracts of the proper law of the contract. Where the forum is situated in a CISG contracting state and article 1(1)(b) s requirements for application are met, it is submitted that the forum has two grounds for applying the CISG where neither the forum state nor the proper law state has made an article 95 reservation. The first ground for application is the fact that the rules of private international law of the forum point to the law of a contracting state and that the CISG is the applicable body of rules to be applied from the perspective of the proper law, since one of the requirements of its application is met. Article 1(1)(b) thus acts as an internal allocation norm from the perspective of the proper law. The second ground for application is the fact that article 1(1)(b) s requirements are met and since article 1(1)(b) forms part of the law of the forum state, it is bound to apply the CISG. It seems contrary to the CISG s purpose of providing uniform rules for international sales contracts and therefore of ensuring application of the Convention as widely as possible, to interpret article 1(1)(b) as only referring to the private international law of fora situated in CISG contracting states. It may be contended that fora in noncontracting states would not apply the CISG via article 1(1)(b) directly, ie, they would not start their investigation into the applicable law at article 1 of the CISG, but if they apply the CISG under the conditions as set out in article 1(1)(b), it still remains application of the CISG as authorised in terms of article 1(1)(b), whatever the route followed to get to the application of the CISG under conditions mirroring the UNCITRAL Digest of Case Law on the United Nations Convention on the International Sale of Goods (n 58) 6 and n 68. Bonell and Liguori The UN Convention on the International Sale of Goods: A Critical Analysis of Current International Case Law 1997 (Part I) 1997 Revue de droit uniforme / Uniform Law Review ; see also references in Bonell and Liguori The UN Convention on the International Sale of Goods: A Critical Analysis of Current International Case Law (Part I) 1996 Revue de droit uniforme / Uniform Law Review

107 requirements of article 1(1)(b). When a forum in a non-contracting state is lead by its rules of private international law to the application of the CISG, it would most probably note that its application of the CISG under the circumstances conforms with the requirements of the Convention s application in terms of article 1(1)(b) and, in many cases, as was evidenced, would even state that it is applying the CISG in terms of article 1(1)(b) A reference to domestic sales law or to the CISG? When a forum s rules of private international law refer to the law of a contracting state, is this a reference to that state s domestic (sales) law or does it include a reference to the CISG? In terms of public international law, when a state ratifies a convention, the state is under the obligation to implement and give effect to the convention in its domestic law. 224 Aust states that when a treaty provides for rights and obligations to be conferred on persons (legal or natural), they can usually be given effect only if they are made part of the domestic law of each party, and with provisions for their enforcement. 225 The CISG is a convention which confers rights and obligation upon individuals and it therefore seems fair to conclude that the CISG needs to be incorporated into the domestic law of a contracting state. 226 Numerous scholars argue that, when a forum faced with an international sale of goods dispute is directed by its rules of private international law to the law of a CISG contracting state, the appropriate rules to be applied are those of the Convention Aust Modern Treaty Law and Practice (2007) Aust reiterates (at 180) that, if a party to a treaty does not perform it, it constitutes a breach of its international law obligations. See, in general, Jacobs and Roberts (eds) The Effect of Treaties in Domestic Law (1987). Aust (n 224) 178. Fawcett, Harris and Bridge (n 117) state that the Vienna Convention is in Contracting States a part of the domestic law of the Contracting State. In that state s courts, the Convention is not foreign law but rather local, specialized law that applies in the same way as is applied any separate laws for commercial and consumer contracts of sale. If the Convention is part of the forum state s domestic law in this way, and if that state subscribes to the principle of jura novit curia, then its courts will be bound to apply the Convention even if the parties themselves do not invoke it. See also the Tribunale di Vigevano decision (n 9) in this regard. According to Kastely Unification and Community: A Rhetorical Analysis of the United Nations Sales Convention 1988 Northwestern Journal of International Law and Business once ratified, the Convention becomes a part of the domestic law of each member state. Winship (n 12)

108 Enderlein and Maskow advance the argument that states, in acceding to the CISG, have indicated that the provisions of the CISG are the relevant rules concerning contracts for the international sale of goods in their legal systems. 228 According to these authors, when a forum applies the law of a foreign state in terms of its rules of private international law, it is under the obligation to apply these rules in the same way as the foreign state would. 229 Therefore, the forum should apply the CISG if it is faced with applying the law of a contracting state. Bernasconi asserts that it may be legitimately presumed that a state that has ratified the CISG has substituted its domestic law or (internal) sales for the more suitable rules of the Convention. It seems, therefore, appropriate that the judge of a foreign forum honors the contracting state s decision. 230 A multitude of reported case law exists in support of the view that a reference to the law of a CISG contracting state includes a reference to the CISG. To date numerous arbitral awards, 231 and Argentinean, 232 Austrian, 233 Belgian, 234 Canadian, 235 Dutch, Enderlein and Maskow (n 12) 30. Ibid. Bernasconi (n 112) 161. ICC Court of Arbitration, Paris, award number 7197/1992: case number 37 (UNILEX); Belarusian Chamber of Commerce and Industry International Court of Arbitration, : case number 1130 (UNILEX); ICC Court of Arbitration, award number 9978/1999: case number 471 (UNILEX); International Arbitration Court of the Chamber of Commerce and Industry of the Russian Federation, award number 97/2002: case number 1043 (UNILEX). Camara Nacional de Apelaciones en lo Comercial de Buenos Aires, : case number 820 (UNILEX), a1.html (Pace) and Camara Nacional de Apelaciones en lo Comercial de Buenos Aires, : case number 925 (UNILEX), 636 (CLOUT), a1.html (Pace). Oberster Gerichtshof, : case number 202 (UNILEX), a3.html (Pace). Rechtbank van Koophandel, Hasselt, (n 218); Tribunal de Commerce de Bruxelles, (n 218); Rechtbank van Koophandel, Hasselt, (n 218); Rechtbank van Koophandel, Hasselt, : case number 261 (UNILEX); Rechtbank van Koophandel, Hasselt, (n 218); Rechtbank van Koophandel, Hasselt, (n 218); Rechtbank van Koophandel, Hasselt, (n 218); Rechtbank van Koophandel, Ieper, : case number 780 (UNILEX), b1.html (Pace); Cour d Appel, Mons, : case number 749 (UNILEX), b1.html (Pace) and Hof van Beroep, Gent, : case number 778 (UNILEX), b1.html (Pace). British Columbia Supreme Court, : case number 1168 (UNILEX). Arrondissementsrechtbank, Alkmaar, : case number 31 (UNILEX); Arrondissementsrechtbank Dordrecht, (n 220); Arrondissementsrechtbank Roermond, (n 218); Arrondissementsrechtbank Arnhem, : case number 95 (UNILEX); Gerechtshof s Hertogenbosch, : case number 97 (UNILEX);Arrondissementsrechtbank Roermond, : case number 94 (UNILEX); Arrondissementsrechtbank Arnhem, : case number 61 (UNILEX); Arrondissementsrechtbank Amsterdam, : case number 124 (UNILEX); Hoge Raad, : case number 333 (UNILEX), n1.html (Pace) and Hof Arnhem, : case number 391 (UNILEX), n1.html (Pace). 100

109 French, 237 German, 238 Italian, 239 Spanish 240 and Swiss 241 decisions have been handed down that applied the CISG on the grounds that a reference by the forum s rules of private international law to the law of a contracting state includes a reference to the CISG. The fora listed above are all situated in CISG contracting states. However, it is submitted that fora in non-contracting states would also apply the CISG as part of the legal system indicated by their rules of private international law. Schmitthoff states that the CISG is applicable (in terms of article 1(1)(b)) when the proper law of the contract is that of a contracting state. 242 It is submitted that this observation summarises the correct interpretation of article 1(1)(b). When the law of a Cour d Appel de Grenoble, : case number 27 (UNILEX), 25 (CLOUT), f1.html (Pace); Cour de Cassation, (n 80); Cour d Appel de Grenoble, (n 20); Cour d Appel de Paris, : case number 276 (UNILEX), 223 (CLOUT); Cour d Appel de Colmar, : case number 493 (UNILEX), f1.html (Pace); Cour de Cassation, : case number 717 (UNILEX); Cour de Cassation, : case number 735 (UNILEX), f1.html (Pace) and Cour d Appel de Paris, : case number 984 (UNILEX), f1.html (Pace). Landgericht München, (n 217); Landgericht Stuttgart, (n 217); Oberlandesgericht Koblenz, : (n 217); Landgericht Aachen, (n 217); Amtsgericht Oldenburg in Holstein, (n 217); Landgericht Hamburg, (n 217); Amtsgericht Frankfurt am Main, : case number 25 (UNILEX), g1.html (Pace); Landgericht Frankfurt am Main, : case number 4 (UNILEX); Landgericht Baden-Baden, : case number 13 (UNILEX), 50 (CLOUT), g1.html (Pace); Landgericht Frankfurt am Main, : case number 3 (UNILEX) 6 (CLOUT), g1.html (Pace); Oberlandesgericht Frankfurt am Main, : case number 8 (UNILEX), 2 (CLOUT), g1.html (Pace); Oberlandesgericht Koblenz, : case number 128 (UNILEX), 316 (CLOUT), g1.html (Pace); Oberlandesgericht Karlsruhe, : case number 63 (UNILEX), 317 (CLOUT) g1.html (Pace); Oberlandesgericht Düsseldorf, : case number 145 (UNILEX), 310 (CLOUT), g1.html (Pace); Oberlandesgericht Düsseldorf, : case number 26 (UNILEX), 49 (CLOUT), g1.html (Pace); Oberlandesgericht Düsseldorf, : case number 68 (UNILEX), 81 (CLOUT), g1.html (Pace); Landgericht Düsseldorf, : case number 150 (UNILEX), g1.html (Pace); Oberlandesgericht Frankfurt am Main, : case number 169 (UNILEX), 276 (CLOUT), g1.html (Pace); Landgericht Siegen, : case number 219 (UNILEX); Landgericht Oldenburg, : case number 255 (UNILEX), g1.html (Pace); Landgericht Braunschweig, : case number 868 (UNILEX), g1.html (Pace) and Landgericht Saarbrücken, , case number 917 (UNILEX), g1.html (Pace). Corte di Appello di Milano, : case number 275 (UNILEX), i3.html (Pace). Audiencia Provincial de Barcelona, : case number 432 (UNILEX). Pretura di Locarno-Campagna, : case number 42 (UNILEX), 55 (CLOUT), s1.html (Pace); Pretura di Locarno-Campagna, : case number 41 (UNILEX), 56 (CLOUT), s1.html (Pace); Gerichtspräsident von Laufen: : case number 105 (UNILEX), s1.html (Pace); Gerichtskommission Oberrheintal, : case number 383 (UNILEX) 262 (CLOUT), s1.html (Pace); and Handelsgericht Zürich, (n 110). Murray, Holloway and Timson-Hunt Schmitthoff s Export Trade. The Law and Practice of International Trade (2007)

110 CISG contracting state is found to be applicable to a contract for the international sale of goods by the rules of private international law of a forum situated in a contracting state or a non-contracting state, the CISG should be applied to the contract. This conclusion is substantiated by the fact that, when the CISG s applicability criteria are met, the relevant body of sales law of the proper law is indeed the CISG. It may be reiterated 243 that article 1(1)(b) constitutes an internal allocation norm from the perspective of the proper law, indicating that the CISG, and not domestic sales law, should be applied. The correct application of the proper law by the forum as indicated by its rules of private international law would necessitate application of the CISG to the matter. It may therefore be concluded that a reference to the legal system of a CISG contracting state includes a reference to the CISG. 3.4 The relationship between the CISG and other conventions or regional instruments Relationship between the CISG, the 1980 Rome Convention or the 2008 Rome I Regulation and the 1955 Hague Sales Convention 244 in the context of the application of the CISG under article 1 The two most prominent uniform private international law conventions in the field of the international sale of goods are arguably the 1955 Hague Convention on the Law Applicable to International Sales of Goods (1955 Hague Sales Convention) 245 and the 1980 Convention on the Law Applicable to Contractual Obligations (Rome Convention). 246 The EC Regulation on the Law Applicable to Contractual Obligations This argument was also raised in par above. After the CISG was drafted, the 1986 Hague Convention on the Law Applicable to International Sales of Goods was concluded on The 1986 Hague Convention has not entered into force yet and it is also highly unlikely that it ever will enter into force. It is therefore not discussed in detail under par The text of the 1986 Hague Convention may be accessed at (last accessed ). According to article 23, the 1986 Convention will not prejudice the application of CISG. This means that, if it ever comes into force, the 1986 Convention will merely supply the relevant rules of private international law for contracting states. According to article 28 of the 1986 Convention, when it comes into force, it will replace the 1955 Hague Convention for contracting states to both the 1955 and 1986 Conventions. See n 181 above. See n 182 above. The Rome I Regulation (n 49) is applicable in EU countries (except in Denmark) to contracts concluded from 17 December For contracts concluded before 17 December 2009, the Rome Convention remains relevant. 102

111 (Rome I) supersedes the importance of the Rome Convention for contracts concluded from 17 December The sphere of application of the conventions and the Rome I Regulation As stated above, 248 according to article 1(1) of the CISG, the Convention applies to contracts of sale of goods between parties whose places of business are in different states either (a) when the states are contracting states or (b) when the rules of private international law lead to the application of the law of a contracting state. Article 1(1) of the Rome Convention dictates that it shall apply to contractual obligations in any situation involving a choice between the laws of different countries. According to article 2, any law specified by the Rome Convention shall apply, whether it is the law of a contracting state or not. 249 According to Article 1(1) of the Rome I Regulation, it applies in situations involving a conflict of laws, to contractual obligations in civil and commercial matters. Article 2 of the Rome I Regulation also states that any law specified by the Regulation shall be applied whether or not it is the law of a member state. Article 1 of the 1955 Hague Convention states that it is applicable to international contracts for the sale of corporeal goods. 250 At first glance it is evident that the sphere of application of these conventions and the Rome I Regulation may well overlap. It has been recognised that substantive law conventions, such as the CISG, could by virtue of their own rules determine their sphere of application in such a manner that it would interfere with private international law conventions system of determining the applicable law. 251 It is important to bear in mind that certain matters are excluded from the scope of one or more of these conventions and the regulation. The most important matters excluded See n 182 above. See par 3.1 above. See the text of the Convention (n 182). See the text of the Convention (n 181). Conetti (n 185)

112 from the scope of all three abovementioned conventions are contractual capacity, property, intellectual property, insurance, evidence and procedure as well as arbitration and choice of court agreements. 252 In order to determine the law applicable to these matters, one must have regard to private international law rules of the forum other than the rules contained in both the Hague and the Rome Conventions (or in the Rome I Regulation, when applicable) Overlap between the application of the Hague and Rome Conventions and the Rome I Regulation It is evident from the sphere of application of the two mentioned conventions and the regulation that an overlap between them would occur in cases where states are parties to the Hague Convention and Rome Convention / Rome I Regulation and the contract in question concerns the international sale of tangible goods. Art 21 of the Rome Convention states that it shall not prejudice the application of international conventions to which a contracting State is, or becomes, a party. 253 This seems to indicate that the Hague Convention enjoys preference over the Rome Convention in matters pertaining to the international sale of tangible goods. 254 Article 25(1) of the Rome I Regulation provides that the Regulation shall not prejudice international conventions to which EU member states are parties at the time of its adoption and which contains rules relating to contractual obligations. This provision may indicate that the Rome I Regulation would not take precedence over the 1955 Hague Convention in determining the law applicable to a contract for the international sale of goods. Article 25(2) of the Rome I Regulation provides that the Compare Saf (n 100) All these matters are also excluded from the Rome I Regulation see article 1 of the Regulation (n 49). See the text of the Rome Convention (n 182). Saf (n 100) 11 refers to the fact that the Hague Convention and the Rome Convention contain different provisions on consumer sales of tangible goods. She states that the supremacy of the Hague Convention over the Rome Convention in this regard was problematic since it deprived the consumer of protection afforded him/her under the latter. However, contracting states to the Hague Convention are permitted under the 1980 Declaration to make specific conflict of laws rules for consumer sales. Contracting states to both the Hague Convention and Rome Convention can therefore exclude consumer sales from the application of the former and apply the latter in such instances. Fawcett, Harris and Bridge (n 117) state in this regard that where a state has enacted the Hague Sales Convention 1955 and also the Rome Convention, the former will apply to determine the choice of law rules applicable to a contract of sale falling within the scope of that Convention. 104

113 Regulation shall, as between member states, take precedence over other conventions concluded exclusively between two or more of them in so far as such conventions concern matters governed by the Rome Regulation. However, the 1955 Hague Convention does not qualify as a convention envisaged under article 25(2) of the Rome I Regulation, since it was also open for signature, ratification and accession by non-eu countries. The Rome Convention, 255 the Rome I Regulation 256 and the Hague Convention 257 allow parties to choose the law applicable to their contract. With regard to the applicable law in the absence of choice, article 3 of the 1955 Hague Convention determines, with certain exceptions, that the contract will be governed by the law of the state where the seller has its habitual residence at the time of conclusion of the contract. 258 Article 4(1) of the Rome Convention states in this regard that the contract shall be governed by the law of the country with which it is most closely connected. In terms of article 4(2) it is presumed that the contract is most closely connected with the country where the party who is to effect the characteristic performance has its place of business or habitual residence at the time of conclusion of the contract. 259 With regard to an international sales contract, the characteristic performance is the delivery of the goods. 260 Article 4(5) directs that the presumption in article 4(2) should be disregarded if it appears from the circumstance as a whole that the contract is more closely connected with another country. In the absence of a choice of law effected by the parties, article 4(1)(a) of the Rome I Regulation provides that a contract for the sale of goods shall be governed by the law of the country where the seller has its habitual residence. According to article 4(3) of the Regulation, where it is clear from the circumstances of the case that the contract is manifestly more closely See article 3 of the Rome Convention (n 182). See article 3 of the Rome I Regulation (n 49). See article 2 of the Hague Convention (n 181). See the text of the 1955 Hague Convention (n 181). See the text of the Rome Convention (n 182). Guliano Lagarde Report 23, available at (last accessed ). 105

114 connected with a country other than the habitual residence of the seller, the contract shall be governed by the law of that other country. 261 In theory the application of the Hague Convention and the Rome Convention or the Rome I Regulation would mostly lead to the same result, namely the application of the law of the place of business or habitual residence of the seller to an international sales contract unless, of course, the legal system as determined by the exceptions or escape clauses in one of these instruments is found applicable. It is, however, necessary to investigate how the courts apply these conventions in practice. 262 Lastly, it must be borne in mind that the 1955 Hague Convention only applies to the sale of movable, corporeal goods, so there would be international sales of goods that do not qualify under the Hague Convention and in such cases the Rome Convention or the Rome I Regulation would in any event be applicable Overlap between the application of the CISG and the Rome Convention or the Rome I Regulation Instances where the CISG and the Rome Convention or Rome I Regulation are applicable to the same international sales contract may occur quite often, since most contracting states to the Rome Convention or states in which the Rome I Regulation is applicable, are contracting states to the CISG as well. 263 Should the international sales contract under dispute contain a choice of law clause and be heard by a forum situated in a contracting state to the Rome Convention, or in a state and under circumstances where the Rome I Regulation is applicable, the forum will determine the validity of the choice of law with reference to either the Rome Convention s or the Rome I Regulation s provisions. Should a choice of law clause be absent from an international sales contract and the dispute is to be heard by a forum in a contracting state to the Rome Convention or under circumstances where the Rome I Regulation is applicable, the forum would The formulation of the escape clause of the Rome I Regulation (article 4(3)) is close to the formulation of the escape clause in article 8(3) of the 1986 Hague Convention (this convention never entered into force see n 244 above). See par below. The exceptions in this regard are Ireland, Portugal and the United Kingdom. These countries are not CISG contracting states. See n 216 above for the reference to the list of CISG contracting states. 106

115 have to decide whether to start its inquiry at the Rome Convention / Rome I Regulation or the CISG. In cases where both the buyer and seller are from contracting states to the CISG, the requirements of article 1(1)(a) are met and the CISG may be applied directly, without prior reference to the Rome Convention/Rome I Regulation. Whether the fora indeed follow this approach in practice needs to be investigated. 264 If the provisions of the Rome Convention or the Rome I Regulation lead to the application of the law of a CISG contracting state, the CISG may be found applicable as part of the proper law. In these instances, the fact that the Rome Convention / Rome I Regulation and CISG are both applicable, does not create ambiguity with regard to the applicable law the CISG will be applied. If, however, the law of a noncontracting state to the CISG is applicable in terms of the Rome Convention / Rome I Regulation but the requirements of article 1(1)(a) of the CISG are met, the question needs to be answered whether preference should be given to the Rome Convention / Rome Regulation s determination or to the CISG? 265 Schlechtriem suggests that the CISG shall be applied in such instances, since there exists a general preference for uniform substantive law. 266 The logical step is to turn to the provisions in the CISG and the Rome Convention / Rome I Regulation dictating their relationship with other relevant conventions. On conducting this analysis, one finds that a negative conflict exists between the CISG and the Rome Convention: they yield to each other. Article 90 of the CISG states that it does not prevail over any international agreement which has already been or may be entered into and which contains provisions concerning the matters governed by this Convention, provided that the parties have their places of business in States parties, to such agreement. As mentioned above, article 21 of the Rome Convention yields to other international conventions. 267 The difficulty in this regard is thus the fact that the CISG and the Rome Convention both give way to the other. However, the generally accepted view in this regard is that in any circumstances involving a choice between See par below. See Schlechtriem Article 90 in Schlechtriem and Schwenzer (n 2) (par 7) for this set of facts. Schlechtriem (n 265) 921 (par 7). See par above. Art 21 of the Rome Convention states that it shall not prejudice the application of international conventions to which a contracting State is, or becomes, a party. 107

116 the CISG and the Rome Convention, the CISG should be preferred since it is a substantive law instrument. 268 Article 25(1) of the Rome I Regulation also states that it shall not prejudice international conventions to which EU member states are parties at the time of its adoption and which contain rules relating to contractual obligations. 269 Concerning the relationship between the CISG and the Rome I Regulation, Fawcett et al point out that article 90 of the CISG defers its application in favour of international agreements containing provisions on the same subject matter. However, they note that the Rome I Regulation is not as such an international agreement and therefore it may not be inferred that article 90 of the CISG defers its applicability in favour of the Rome I Regulation Overlap of the 1955 Hague Convention, the Rome Convention / Rome I Regulation and the CISG As stated above, article 21 of the Rome Convention and article 25(1) of the Rome I Regulation decline applicability in favour of other relevant conventions; article 90 of the CISG similarly determines that it does not prevail over any other relevant convention. However, the Hague Convention does not contain a provision to this effect. At first glance it therefore seems as though the Hague Convention would take preference where the Hague Convention and the Rome Convention / Rome I Regulation are potentially applicable. Different views exist on the relationship between these international instruments. One view is that, where the parties to a contract for the international sale of goods have their relevant places of business in contracting states to the CISG, there will not be any interplay between these instruments, since such contracts will fall exclusively under the CISG by virtue of article 1(1)(a). 271 According to this argument, only where the CISG is not directly applicable under article 1(1)(a), the applicable law must be identified by the private international of the forum, for example the Hague or Rome Fawcett, Harris and Bridge (n 117) 965; Saf (n 100) 11; see also the cases of Ixela and T v R Etablissement discussed in par below. Also mentioned under par above. Fawcett, Harris and Bridge (n 117) 962. Saf (n 100)

117 Convention / Rome I Regulation. 272 If the subject matter falls under both, the Hague Convention enjoys preference over the Rome Convention / Rome I Regulation. 273 Similarly, Fawcett et al are of the view that the 1955 Hague Convention prevails over the Rome Convention / Rome I Regulation in cases where they are in force 274 and in relation to the CISG, the Hague Convention merely furnishes the rules of private international law that may or may not give rise to the application of the CISG by way of article 1(1)(b) of the latter. 275 Another approach dictates that the question of supremacy between these conventions should be answered with reference to the Vienna Convention on the Law of Treaties 276 provisions and the relevant provision in this regard dictates that uniform substantive law (the CISG) should prevail since it is a lex specialis in contrast to uniform conflict of laws conventions or instruments (the Hague or Rome Convention / Rome I Regulation) which qualify as a lex generalis. 277 Bearing in mind the different theories in this regard, it seems prudent to turn to an analysis of case law on the topic. Reference will be made to selected relevant cases of member states to the Hague, Rome and Vienna Conventions, 278 which include Belgium, France, Italy and the Netherlands. Belgium was a contracting state to the 1955 Hague Sales Convention, but denounced it on 19 February 1999 with effect from September The CISG came into force in Belgium on 1 January The Rome Convention came into force on 1 April Three Belgian cases warrant mentioning. The first, Porter Textil GmbH v Ibid. Saf (n 100) 11. Fawcett, Harris and Bridge (n 117) 849. Fawcett, Harris and Bridge (n 117) 969. See n 126 above. Thoma Relations between Conflict of Laws rules and Uniform Law 2000 Revue Hellénique de Droit International The cases discussed refer to the relationship between the Hague Convention, the Rome Convention and the CISG. No cases decided on the relationship between the Rome I Regulation, the Hague Convention and the CISG could be found at the time of finalising the thesis. See the list of CISG contracting states (n 216). See n 182 above. 109

118 JPS BVBA, 281 was delivered before Belgium denounced the Hague Convention, after the Rome Convention had entered into force but before the CISG had entered into force in Belgium. It concerned an international sales contract for movable goods between a German seller and a Belgian buyer. The court determined that, in the case of a dispute regarding an international sale of movable corporeal objects, Belgian conflict rules were to be found in the 1955 Hague Convention. According to article 3 of the Convention, the domestic law of the state of the habitual residence of the seller would be applicable to the contract. This rule pointed to German law as the applicable law and since the CISG was in force in Germany from 1 January 1991, the CISG was applied to the dispute at hand. However, the court stated that when the CISG came into force in Belgium, it would have been applied to the dispute directly, without reference to conflict of laws rules. The court did not even mention the Rome Convention, assuming that the only applicable conflicts law in this case was to be found in the Hague Convention. Another Belgian case on this topic is that of Hoechst Trevira GmbH & Co KG v NV Recospin. 282 This case concerned a dispute over an international sale of goods contract between a German seller and a Belgian buyer. The contract was concluded during The court stated that the lex contractus of a contract concluded before 19 February is to be determined by the provisions of the 1955 Hague Convention. Article 3 of this Convention dictates that, in the absence of a choice of law by the parties, an international sales contract is subject to the domestic law of the country in which the seller has its place of business or habitual residence. In the present case German law was found applicable to the contract, and since the CISG had been in force in Germany since 1 January 1991, the CISG was applied to the contract in case. The Rome Convention was once again not mentioned and the CISG applied by virtue of article 1(1)(b) since Belgium was not a contracting state to the CISG when the dispute came before the court Rechtbank van Koophandel, Hasselt, (n 218). Hof van Beroep Gent, (n 234). This is the date on which Belgium denounced the 1955 Hague Convention. See the text of the case (n 234). 110

119 Conversely, in a case heard by the Belgian Court of Appeal in Mons 284 two months before the Recospin-case, which also concerned an international sales contract concluded before the denunciation of the 1955 Hague Convention, the Rome Convention was applied to determine the applicable law. A French seller brought action against a Belgian buyer for payment in terms of an international sales contract in a Belgian court. The court of first instance allowed the claim and the buyer appealed. The court of appeal decided that the law applicable to the contract under dispute should be determined by the 1980 Rome Convention, since the parties had their places of business in different states. It was found that, in the absence of a choice of law by the parties, article 4(2) of the Rome Convention determines that the law of the country where the seller has its place of business governs the contract. The court stated that the same result would have followed from the application of the 1955 Hague Convention. In this case French law was found to be applicable and the court stated that, since the CISG is part of French substantive law, the contract is to be subjected to the provisions of the CISG. One of the more recent French cases on the CISG 285 concerned an international sales contract between a Portuguese seller and a French buyer. In this instance the court made specific mention of the 1955 Hague Convention determining the applicable law. The court found that French law should be applicable to the contract, and since France is a contracting state to the CISG (although Portugal is not), the CISG should be applied by virtue of article 1(1)(b). Mention may be made of relevant Italian cases which have been reported on the subject. Italdecor Sas v Yiu s Industries (HK) Ltd 286 concerned an international contract for the sale of goods between a Hong Kong seller and an Italian buyer. The court referred to the 1955 Hague Convention as the point of departure for determining the applicable law. According to the Convention, the law of the state of the seller s place of business should be applied to the contract. This would lead to the application of the law of Hong Kong. However, according to Italian private international law, if the law of a state is not ascertainable, as was the situation in the present case, then Cour d Appel Mons, (n 234). Cour d Appel de Paris, (n 237). Corte di Appello di Milano, (n 239). 111

120 Italian law should be applied. The court therefore applied the CISG by virtue of article 1(1)(b). In Tessile v Ixela, 287 a case concerning a dispute over a contract for the international sale of goods between an Italian seller and a Greek buyer, the seller argued that the law applicable to the said contract should be determined with reference to the 1980 Rome Convention. The court did not agree with this argument and stated that the conflict of laws rules for international sales are to be found in the 1955 Hague Convention instead. Furthermore, the court referred to the fact that the Hague Convention takes precedence over the 1980 Rome Convention by virtue of article 21 of the Rome Convention. Referring to article 3 of the Hague Convention, the court determined that the applicable law is Italian law. The court therefore found the CISG applicable under article 1(1)(b) since Italy was a CISG contracting state at the relevant time. It is interesting to note that the court stated that uniform substantive law created by international conventions should prevail over conflict rules. This statement could indicate that the court would have applied the CISG without any reference to the conflicts convention if the former s applicability criteria under article 1(1)(a) were met. One of the most well-known Italian CISG cases, Rheinland Versicherungen v Atlarex, 288 concerns an international sales contract between a German seller and an Italian buyer. The court stated that, contrary to initial appearances, the substantive law applicable to the contract should not be determined by the rules of private international law under the 1955 Hague Sales Convention, but rather with reference to the CISG. The court motivated this decision by stating that the CISG contained far more specific provisions than the Hague Convention. The court stated that rules of uniform substantive law must always prevail over rules of private international law. Since the seller and buyer were both from contracting states to the CISG, the court applied this Convention under article 1(1)(a). In the Dutch case Maglificio Esse v Wehkamp BV, 289 the 1980 Rome Convention was employed to determine the legal system applicable to a contract for the international sale of goods. In this case both parties to the contract, a Dutch buyer and an Italian Tribunale di Pavia, (n 48). Tribunale di Vigevano, (n 9). Gerechtshof Arnhem, : case number 335 (UNILEX) n1.html (Pace). 112

121 seller, relied on article 8 of the 1980 Rome Convention concerning the material validity of the contract. However, at the time of conclusion of the contract, the Rome Convention was not in force yet. The court deems the Convention applicable by way of anticipation because it is a codification of unwritten rules of private international law already in force in the Netherlands. Mention also needs to be made of the Hoge Raad decision in WMJM Bronneberg v Ceramica Belvedere Spa. 290 This case concerned a dispute between an Italian seller and a Dutch buyer regarding the sale of floor tiles. With regard to the law applicable to the contract, the court stated that Dutch rules of private international law dictated that the relationship be governed by the law of the state of the party having to render the characteristic performance, thereby applying article 4(2) of the Rome Convention. The court found Italian law to be applicable and since Italy was a contracting state to the CISG, the CISG was applied to the contract under article 1(1)(b) Evaluation of the relationship between the conventions (and the Rome I Regulation) The cases above bear witness to the fact that the hierarchy between the international instruments mentioned is far from finalised. One finds no uniform answer in case law to the question of whether the Hague or the Rome Convention should be applied to a contract for the international sale of goods. None of the scholarly theories on the relationship between the conventions prove to be followed consistently by the courts having to decide on matters involving contracts for the international sale of goods. No case could be found in which the 1969 Vienna Convention on the Law of Treaties was referred to in order to decide which of the possible conventions enjoys preference. Under circumstances where article 1(1)(a) of the CISG s requirements for application are not met, the forum would turn to its rules of private international law to determine the applicable law (or the validity of a choice of law clause inserted in the contract). In the cases analysed above, the fora were situated in contracting states to both the 1955 Hague Convention and the 1980 Rome Convention. The case law referred to illustrates that even fora in the same state differ on which of these two conventions should have preference in a case involving the international sale of goods. The Hoge Raad, : case number 328 (UNILEX). 113

122 Hague Convention should prevail over the 1980 Rome Convention / Rome I Regulation since both the Rome Convention and Regulation contain provisions stating that they yield to other international agreements, whereas the Hague Convention contains no such provision. The present author submits that another ground for favouring application of the Hague Convention above the Rome Convention / Rome I Regulation in cases involving contracts for the international sale of goods may be found in the customary international law rule lex specialis derogat lex generalis a specific rule prevails over a general rule. 291 The Rome Convention / Rome I Regulation contain conflict of laws rules for contractual obligations in general, whereas the Hague Convention provides conflict rules for contracts of international sale of goods specifically. Technically however, as was pointed out by a Belgian court of appeal, 292 application of the 1955 Hague Convention and the Rome Convention under these circumstances would mostly lead to the same result: application of the law of the state where the seller has its place of business. Where the relevant legal system as determined by the relevant rules of private international law (under either the Hague or Rome Convention / Rome I Regulation) is that of a CISG contracting state, the fora in all the cases analysed, applied the CISG as part of that legal system. Under these circumstances therefore, there does not seem to exist a clash between the private international law conventions on the one hand and the CISG on the other if the CISG s requirements for application under article 1(1)(b) are satisfied (where the relevant rules of private international law are to be found in either the Hague or Rome Convention / Rome I Regulation), the CISG is applied. A potential clash may arise between all these international instruments under circumstances where the requirements for application of the CISG under article 1(1)(a) are met but where the private international law conventions point to the law of a non-contracting state to the CISG as the proper law of the contract. The Tessile 293 and Rheinland 294 cases suggest that the CISG would be accorded preference under such circumstances, since uniform substantive law is specific and must prevail over Compare Aust (n 224) 249. See n 284 above. See n 287 above. See n 288 above. 114

123 the rules of private international law. The present author agrees that the CISG would indeed qualify as lex specialis in cases involving the international sale of goods and that the conflict of laws conventions would be leges generales Relationship between the CISG and the 1994 Mexico City Convention The Inter-American Convention on the Law Applicable to International Contracts 295 was approved in Mexico City on 18 March 1994 by the Fifth Inter-American Specialised Conference on Private International Law (CIDIP-V) of the Organisation of American States (OAS). 296 According to the Preamble to the Mexico City Convention, the purpose of this Convention is to continue the progressive development and codification of private international law among member states of the OAS and to foster regional integration by removing legal barriers to international contracts. 297 This Convention entered into force on 12 December To date, Mexico and Venezuela are the only states that have ratified the Mexico City Convention. 298 Mexico is currently the only state in which the Mexico City Convention and the CISG are both in force. 299 According to article 1, 300 read together with article 5, 301 the Mexico City Convention would be applicable when a Mexican court has to determine the law applicable to a contract for the international sale of goods The text of the 1994 Inter-American Convention as well as the list of contracting states may be accessed at (last accessed ). Juenger The Inter-American Convention on the Law Applicable to International Contracts: Some Highlights and Comparisons 1994 The American Journal of Comparative Law See the text of the Mexico City Convention (n 295). See the text of the Mexico City Convention (n 295). See the list of CISG contracting states (n 216). Article 1 sets out the sphere of application of the Convention and states that the Convention shall determine the law applicable to international contracts. A contract is regarded as international if the parties have their habitual residence or establishments in different contracting states to this Convention or if the contract has objective ties with more than one contracting state. Article 5 excludes certain matters from the scope of the present Convention. However, contracts for the international sale of goods are not excluded. 115

124 Article 7 of the Mexico City Convention gives recognition to the principle of party autonomy by providing that the contract shall be governed by the law chosen by the parties. 302 In the absence of a choice by the parties, this Convention determines that the contract shall be governed by the law of the state with which it has the closest ties. 303 In determining the law of the state with which the contract has the closest ties, the Mexico City Convention directs that the court is to take into account all objective and subjective elements as well as the general principles of international commercial law recognized by international organizations. 304 According to Juenger, the reference to subjective elements allows for courts to take into account the parties presumed intention. 305 A potential clash between the CISG and the Mexico City Convention may occur where both parties have their places of business in CISG contracting states, but where the rules of private international law as contained in the Mexico City Convention point to the application of a non-contracting state to the CISG. The present author submits that the CISG should enjoy preference under such circumstances in relation to the Mexico City Convention, the CISG also qualifies as lex specialis and the former as lex generalis. A number of reported decisions rendered by Mexican courts exist in which the CISG s requirements for application in terms of article 1(1)(a) were met. The courts all applied the CISG without further reference to the Mexico City Convention and without investigating which legal system would be found applicable in terms of last mentioned convention s provisions. 306 From these decisions it seems reasonable to conclude that Mexican fora would apply the CISG directly when the requirements for its application in terms of article 1(1)(a) are met See the text of the Mexico City Convention (n 295). Article 9 of the Mexico City Convention (n 295). Article 9 of the Mexico City Convention (n 295). Juenger (n 296) 289. Civil Court of First Instance, Tijuana, : case number 514 (UNILEX), m1.html (Pace); Primer Tribunal Colegiado, : case number 1118 (UNILEX), m1.html (Pace) and Civil Court of First Instance, Tijuana, ; case number 1093 (UNILEX), m1.html (Pace). 116

125 3.4.3 Relationship between the CISG and the 1974 Limitation Convention The United Nations Convention on the Limitation Period in the International Sale of Goods was signed in New York on 14 June This Convention was amended by a Protocol adopted by the United Nations Conference on 11 April 1980 the same day that the CISG was approved. The purpose of the 1980 Protocol was to align the provisions of the Limitation Convention with the CISG. The 1974 Convention and the 1980 Protocol entered into force on 1 August According to the preamble to the 1974 Convention, as amended by the 1980 Protocol, the purpose of the Limitation Convention is to provide uniform rules governing the limitation period with regard to contracts for the international sale of goods in order to facilitate the development of world trade. 309 Article 3(1) of the amended Limitation Convention demarcates its scope of application and provides that it will apply (a) if the places of business of the parties to a contract of international sale of goods are in contracting states at the time of conclusion of the contract or (b) if the rules of private international law make the law of a contracting state applicable to the contract of sale. Article 36bis of the amended 1974 Convention allows a contracting state to make a declaration at the time of its accession that it will not be bound by the amendments to article 3 made by the 1980 Protocol. Before its amendment by the Protocol, article 3 of the Limitation Convention provided that it will be applicable irrespective of the law which would otherwise be applicable by virtue of the rules of private international law. 310 The parties to the amended 1974 Limitation Convention may therefore opt to exclude any United Nations Convention on the Limitation Period in the International Sale of Goods, , New York, 1511 UNTS 3. The text of the 1974 Limitation Convention may be accessed online on the UNCITRAL website at (last accessed ). Enderlein and Maskow (n 12) 394. Preamble to the 1974 Convention. See the text of the Convention (n 307). Article 3 of the unamended 1974 Convention is provided in a footnote to the amended text as accessible on the UNCITRAL website (n 307). 117

126 reference to choice of law rules with regard to the Convention s sphere of application. 311 This reservation is similar to the article 95 reservation of the CISG. Article 3(2) of the Limitation Convention authorises parties to exclude the Convention s application expressly. The 1974 Convention s sphere of application closely mirrors that of the CISG. It also confirms the principle of party autonomy but differs from the CISG in that it only allows for the express exclusion of its application. The 1974 Convention as amended by the 1980 Protocol excludes goods bought for personal, family or household use; goods sold by auction, on execution or otherwise by authority of law; the sale of stocks, shares, investment securities, negotiable instruments or money and the sale of ships, vessels, hovercraft, aircraft and electricity from its scope of application. 312 The amended Limitation Convention s substantive scope of application is therefore also aligned with that of the CISG. 313 The original version of the Limitation Convention only excludes goods bought for personal, family or household use and the sale of ships, vessels and aircraft from its substantive scope of application. 314 Article of the amended 1974 Convention and article 5 of the CISG both exclude claims based upon the death or personal injury of any person from their application. Article 8 of the Limitation Convention provides that the limitation period shall be four years. According to article 22, the limitation period may not be modified except by a written declaration by the debtor made during the running of the limitation period. Article 23 provides that the limitation period may not exceed a period of ten years from its commencement Smit The Convention on the Limitation Period in the International Sale of Goods: UNCITRAL s First-born 1975 The American Journal of Comparative Law Article 4 of the 1974 Limitation Convention as amended by the 1980 Protocol (n 307). See article 2 of the CISG (n 1). Article 4 of the unamended Limitation Convention (n 307). Article 5 of the amended 1974 Limitation Convention also excludes claims based upon nuclear damage caused by the goods sold; a lien, mortgage or other security interest in property; a judgment or award made in legal proceedings; a document on which enforcement or execution can be obtained in accordance with the law of the place where such enforcement or execution is sought and a bill of exchange, cheque or promissory note. 118

127 A complex matter concerning the application of the 1974 Convention is the fact that not all contracting states acceded to the 1980 Protocol. 316 Also, a number of the contracting states to the 1974 Convention which have not acceded to the Protocol, are CISG contracting states. 317 When faced with the possible application of the Limitation Convention, the forum would have ascertain whether it is to be applied in its unamended form or whether it should be applied as amended by the 1980 Protocol. If it is to be applied unamended by the Protocol or if the forum is situated in a contracting state which acceded to the Protocol but which made a reservation under article 36bis, the forum will not make any reference to choice of law rules in the application of the Limitation Convention. 318 It is also bears mentioning that the unamended 1974 Convention s substantive scope of application is wider than that of the CISG and the Limitation Convention amended by the 1980 Protocol first-mentioned Convention only excludes consumer contracts and the sale of ships, vessels and aircraft. Incidences may therefore occur where the unamended 1974 Limitation Convention is applicable to an international contract for the sale of a movable tangible object where the application of the CISG is excluded in terms of article 2. The 1974 Limitation Convention, as amended by the 1980 Protocol, is intended to complement the CISG by providing a uniform limitation period for claims resulting from a contract for the international sale of goods. The 1974 Convention does not encroach upon nor contradicts the CISG s provisions concerning the international sale of goods. The limitation period is widely regarded as a matter excluded from the application of the CISG. 319 There is therefore no potential for conflict between the CISG and the Limitation Convention See the status document of the 1974 Limitation Convention, available on the UNCITRAL website at (last accessed ). This document lists the contracting states to the Limitation Convention in its original form and the contracting states which acceded to the 1980 Protocol separately. CISG contracting states which have not acceded to the 1980 Protocol include Bulgaria, Burundi, Mongolia, Montenegro, Norway, Serbia and the Ukraine. See the status document on the 1974 Limitation Convention (n 316). Smit (n 311) 340. See chapter 4 of this thesis. 119

128 3.4.4 Relationship between the CISG and the 2005 United Nations Convention on the Use of Electronic Communications in International Contracting 320 This Convention has not entered into force as yet. 321 When it enters into force, it will exist alongside the CISG for contracting states to both Conventions. The 2005 Convention warrants mentioning, since many international sales contracts are concluded electronically in the global economy. When it enters into force, it is envisaged that numerous international sales contracts would be subject to the CISG as well as the 2005 Convention. According to the preamble of the Electronic Communications Convention, its purpose is to provide a common solution to remove legal obstacles to the use of electronic communications in a manner acceptable to states with different legal, social and economic systems. 322 Article 1(1) of the 2005 Convention provides that it is applicable to the use of electronic communications in connection with the formation or performance of a contract between parties with places of business in different states. Article 2 of the Electronic Communications Convention excludes inter alia consumer contracts; foreign exchange contracts; inter-bank payment agreements; bills of exchange; bills of lading and any transferable document or instrument that entitles the bearer or beneficiary to claim the delivery of goods or the payment of a sum of money from its sphere of application. Article 3 of the Convention allows parties to exclude the application of the Convention or to derogate from or vary the effects of any of its provisions. The 2005 Convention s provisions on interpretation and gap-filling are identical to the corresponding provisions of the CISG. Articles 9 14 contain the substantive provisions concerning the use of electronic communications in , New York. The text of the Electronic Communications Convention may be accessed on the UNCITRAL website at (last accessed ). See the document on the status of the 2005 Electronic Communications Convention accessible at (last accessed ). Eighteen states have signed the Convention, but it has not been ratified by any of the signatory states yet. See the text of the Convention (n 320). 120

129 international contracts and provide for matters such as the legal recognition of electronic communications, form requirements, the time and place of dispatch and receipt of electronic communications and the effect of errors in electronic communications. The 2005 Convention contains no provisions which could create a possible conflict in circumstances where it would be applicable in conjunction with the CISG. Article 20 of the Electronic Communications Convention specifically mentions that the provisions of this Convention apply to the use of electronic communications in connection with the formation or performance of a contract to which the CISG applies Conclusion on the relationship between the CISG and other Conventions The most relevant substantive law conventions within the field of the CISG, namely the Limitation Convention and the Electronic Communications Convention, complement and enhance the functioning of the CISG and do not contain any substantive provisions that are in conflict with the CISG. Conflict may arise between the CISG and one of the uniform conflict of laws conventions / the Rome I Regulation where the CISG s requirements for its application are met under article 1(1)(a) but the conflict of laws convention / the regulation points to the law of a non-contracting state as the law applicable to the contract. It is submitted that the CISG should indeed be applied in following a pro conventione approach in favour of the CISG. If article 1(1)(a) s requirements for application are not met and a forum is situated in a state which is a party to the CISG as well as to one of the uniform conflict of laws conventions (or if the Rome I Regulation is applicable), conflict would not arise. The relevant rules of private international law as referred to in article 1(1)(b) of the CISG are those contained in the conflict of laws convention (or the Rome I Regulation) and if they refer to the law of a CISG contracting state, the lastmentioned convention will be applicable. 121

130 3.5 Conclusions on article 1 Article 1 affirms that the CISG departs from the universalist character of its predecessor, the ULIS. This article sets out the connection required between the sales contract and the CISG for the Convention to be applicable. According to article 1(1)(a), the CISG is applicable if the contractual parties have their places of business in different contracting states. Article 1(1)(b) widens the sphere of application of the CISG by making the Convention applicable if the rules of private international law refer to the law of a contracting state. A teleological interpretation of this provision necessitates the conclusion that a reference to the legal system of a contracting state includes a reference to the CISG, or stated differently, article 1(1)(b) directs that, when the rules of private international law of the forum point to the law of a contracting state as the law applicable to a contract for the international sale of goods, the relevant rules of that legal system to be applied are those of the CISG. Furthermore, the CISG may be applied under the circumstances as provided for by article 1(1)(b) by fora in contracting and non-contracting states to the Convention. The present author is also of the opinion that the CISG text contains no wording to justify the conclusion that application of the Convention in terms of article 1(1)(a) should enjoy preference over its application under article 1(1)(b). The criteria for application in article 1(1)(a) in article 1(1)(b) are alternative application criteria. The present author concludes that application of the CISG under article 1(1)(b) is not subject to the non-compliance with applicability criteria under article 1(1)(a). The CISG does not govern all matters pertaining to a contract for the international sale of goods. Furthermore, several matters governed by the CISG are not settled in it and the Convention itself directs that such matters should be governed by the legal system applicable to the contract as determined by the rules of private international law. Therefore, reference to another (domestic) legal system would mostly be necessary when the CISG is applied to a contract. Since the forum seized of the matter would have to refer to its rules of private international law to determine the law applicable to matters not governed by the CISG or to confirm the validity of a choice 122

131 of law effected by the parties, there seems to be no reason why the forum should not be allowed to state that it is applying the CISG in terms of article 1(1)(b), even though the criteria for application under article 1(1)(a) are met. It is therefore concluded that it is acceptable for a forum to apply the CISG as part of the law of a contracting state (in terms of article 1(1)(b)), even where criteria for its application under article 1(1)(a) are met. As follows from the last-mentioned point, it is concluded that, when a forum seized of a matter concerning a contract for the international sale of goods, has to determine the law applicable to the contract in terms of its conflict rules and the rules of private international law refer to the law of a CISG contracting state, such a reference includes a reference to the CISG. This conclusion is based on the argument that the CISG forms part of the law of a contracting state. The law of a CISG contracting state therefore has two sets of sales law rules: its domestic sales law 323 and the CISG. If the requirements for the CISG s application are met, which is the case in this scenario article 1(1)(b) s requirements are complied with then the CISG is the relevant body of sales law (of the proper law) to be applied. In this sense, article 1(1)(b) acts as an internal allocation norm to point to the relevant legal rules of the proper law that has to be applied. Where the forum is situated in a CISG contracting state, it is of course also bound to apply the CISG in this scenario from its own point of view: since the CISG s requirements for application under article 1(1)(b) are met, the forum is under an obligation to apply the CISG. In these circumstances, it may therefore be argued that there is a double justification for the application of the CISG. It is submitted that article 1(1)(b) renders the CISG applicable whether the rules of private international law of a CISG contracting state or non-contracting state refer to the law of a contracting state. Even though a forum in a non-contracting state is not bound by application of the CISG in terms of article 1(1)(b), correct application of the proper law of the contract, as indicated by its rules of private international law, would require it to apply the CISG. From the perspective of the proper law, the requirements for application of the Convention in terms of article 1(1)(b) are complied with, and that indicates that the relevant rules of the proper law to be applied, are those 323 As stated previously, the term domestic sales law refers to a country s rules applicable to sales contracts minus the CISG. 123

132 contained in the CISG. It is submitted that nothing precludes a forum in a noncontracting state to declare under these circumstances that it is applying the CISG in terms of article 1(1)(b). Lastly, it is submitted that the question of whether renvoi is to be taken into account in the context of article 1(1)(b), should be answered with reference to the rules of private international law of the forum. Whenever there exists doubt, the present author supports a pro conventione approach to the interpretation of the CISG s sphere of application in terms of article The meaning and effect of the article 95 reservation for fora in reservation states, non-reservation contracting states and non-contracting states Introduction Article 95 of the CISG is of extreme importance in any discussion concerning the sphere of application of the Convention, since it allows a contracting state to declare at the time of ratification, acceptance, approval or accession that it will not be bound by article 1(1)(b) of the Convention. To date, six states 325 have availed themselves of the option of declaring an article 95 reservation. Making an article 95 reservation does not impact upon a country s status as contracting state, 326 it merely serves as the basis for exclusion of one of the Convention s alternative applicability criteria See also Wethmar-Lemmer The Impact of the Article 95 Reservation on the Sphere of Application of the United Nations Convention on Contracts for the International Sale of Goods 2010 De Jure (to be published) in this regard. The states that have made a reservation under article 95 are China, the Czech Republic, Singapore, Slovakia, Saint Vincent and the Grenadines and the United States. See the status document of the CISG (n 216) in this regard. According to Fawcett, Harris and Bridge (n 117) 976, there are indications (based on Law Com 250 (1997) Thirty Second Annual Report par 2.17) that, should the United Kingdom accede to the Convention, it would also make an article 95 reservation. Schlechtriem (n 12) 37 (par 44). 124

133 The courts of a contracting state availing itself of this reservation, such as the United States of America, are relieved from having to apply the Convention ex article 1(1)(b). 327 The reasons why the United State made a reservation under article 95 are also well documented and may be found in Appendix B of the letter of submittal from the then Secretary of State. 328 According to this document, the United States regarded the rules of private international law, on which the application of the CISG under article 1(1)(b) depends, as uncertain and as creating international disharmony. Furthermore, they alleged that article 1(1)(b) would displace their domestic law more frequently than it would displace foreign law. They argue in this regard that article 1(1)(b) would be relevant where one contracting party is from the United States and the other from a non-contracting state. Should the law of the non-contracting state be found to be applicable to the contract, the CISG will not displace the foreign law, since subparagraph (1)(b) makes the Convention applicable only when the rules of private international law lead to the application of the law of a contracting state. [Consequently] when those rules point to United States law, subparagraph (1)(b) would normally operate to displace United States law (the Uniform Commercial Code). 329 Furthermore, the United States was of the opinion that their sales law as contained in the Uniform Commercial Code is well equipped to deal with the special problems that arise in international trade. 330 Fawcett et al remark that the United States reasoning is odd in that it assumes that national sales law in the US is superior to the Convention so as to prompt the question why did the United States accede to the Convention in the first place. 331 It is submitted that the reasons brought forward by the United States substantiating their decision to make an article 95 reservation, are not convincing. Article 1(1)(b) does not prejudice the application of the United States law in particular its application could equally displace foreign law. Furthermore, Bernasconi (n 112) 137 describes the effect of the article 95 reservation (from a US perspective) as follows (at 167): [A] sales contract to which at least one of the parties is from a non-contracting state and which, according to the forum s conflicts rules, is subject to the law of the forum (or the law of another reservation state) is not governed by the CISG but rather by the forum s domestic rules on sales, in this case presumably by the UCC. The letter of transmittal from the then President of the United States, Ronald Reagan; the letter of submittal of the then Secretary of State and the appendices motivating the article 95 reservation were reprinted in 1983 International Legal Materials These documents are also accessible at (last accessed ). Letter of submittal, Appendix B (n 328). Letter of submittal Appendix B (n 328). Fawcett, Harris and Bridge (n 117)

134 from the perspective of international harmonisation of substantive sales law, the CISG is certainly preferable to any national legal system. The question, as yet unresolved, remains how far the effect of an article 95 reservation stretches. Is it merely a provision that relieves the courts in the reserving state of applying the CISG under article 1(1)(b) or does it have the effect that all fora in nonreservation contracting states or non-contracting states whose rules of private international law lead to the application of the law of a reservation state, should only apply the CISG if the article 1(1)(a) requirements are met (ie if both parties are from CISG contracting states)? 332 The correct interpretation of article 95 is relevant for fora in non-reservation contracting states, reservation states and also non-contracting states such as South Africa and the United Kingdom Documentary history of article 95 Article 95 was included in the CISG pursuant to a proposal by the Czechoslovakian delegation to this effect. 333 The proposal read as follows: Alternative I: (1) Any State may declare at the time of the deposit of its instrument of ratification or accession that it will not apply subparagraph (b) of paragraph 1 of this Convention. (2) This Convention does not apply if the rules of private international law lead to the application of the law of a State making a declaration under the preceding paragraph unless places of business of the parties to the contract are in different Contracting States. 334 Alternative II: Paragraph (1) only. 335 The Czechoslovak representative stated that the reason for introducing the reservation was that quite a number of Eastern European countries had enacted special legislation For this far-reaching interpretation, see Gabor Stepchild of the New Lex Mercatoria: Private International Law from the United States Perspective 1988 Northwestern Journal of International Law & Business The Czechoslovak proposal was discussed at the Eleventh Plenary meeting of the 1980 Vienna Diplomatic Conference, Official Records (n 31) If this paragraph was adopted, it would have meant that a forum in a non-reservation contracting state, in a reservation state or in a non-contracting state, when lead by its rules of private international law to the application of the law of a reservation state, would only apply the CISG if the requirements for its application under article 1(1)(a) are met. If not, the forum would have to apply the domestic sales law of the proper law and not the CISG. Document A/CONF.97/L.4; Official Records (n 31)

135 to govern international trade transactions. 336 According to him, the extensive scope of application of the CISG as articulated in article 1(1) of the Convention would have the effect of discarding the special legislation. This, in turn, would make such countries unwilling to accede to the CISG. 337 However, the proposed reservation would limit the application of the CISG in reservation countries to contracts concluded between parties who both have their places of business in contracting states. According to this view, the special codes on international trade would then still govern contracts for the international sale of goods where one party is from a non-contracting state. 338 Several representatives expressed concern over the second paragraph of the first alternative of the proposed reservation and criticised it for being vague, repetitive and difficult to grasp. 339 Due to the concerns voiced over alternative I, the Czechoslovakian representative confined his proposal to the second alternative. The proposal was put to a vote and adopted. 340 It was proposed that the phrase it will not apply be replaced with it will not be bound by and the wording instrument of ratification or accession be replaced by instrument of ratification, acceptance, approval or accession. Both these drafting changes were approved Effect of the reservation in general It has been argued that reservations promote the flexibility of international conventions by allowing potential contracting states to opt out of certain provisions contained in a convention which is incompatible with their domestic legal systems or policy. 342 This in turn contributes to the success of a convention by making it more suitable for adoption by a large number of states with diverse legal systems Official Records (n 31) 229 (par 80). Official Records (n 31) 229 (par 81). Official Records (n 31) 229 (par 82). Official Records (n 31) (para 87-90). Official Records (n 31) 230 (para 91-93). Official Records (n 31) 230 (para 94 and 96-98). Torsello Reservations to International Uniform Commercial Law Conventions 2000 Revue de droit uniforme / Uniform Law Review

136 On the other hand, it must be borne in mind that a large degree of flexibility often comes at the expense of uniformity, the latter being an important objective of any international uniform substantive convention such as the CISG. 343 This principle is clearly illustrated by the confusion that the article 95 reservation creates and by the multitude of different interpretations assigned to this article by courts and scholars. Reference may be made to the provisions of the Vienna Convention on the Law of Treaties of (the 1969 Convention) concerning reservations in order to determine the meaning and effect article 95 of the CISG. According to article 2(1)(d) of the 1969 Convention, a reservation is defined as follows: a unilateral statement, however phrased or named, made by a State, when signing, ratifying, accepting, approving or acceding to a treaty, whereby it purports to exclude or to modify the legal effect of certain provisions of the treaty in their application to that State. Article 19 of the 1969 Convention authorises a state when signing, accepting, approving or acceding to a treaty to make a reservation unless the reservation is prohibited by the treaty. Article 20(1) of the 1969 Convention provides that a reservation expressly authorised by a treaty (such as in the case of article 95 of the CISG) does not require any subsequent acceptance by the other contracting states. According to article 21(1), a reservation modifies (a) for the reserving state in its relations with that other party the provisions to which the reservation relates to the extent of the reservation and (b) those provisions to the same extent for that other party in its relations with the reserving state. Article 21(2) provides that the reservation does not modify the provisions of the treaty for the other parties to the treaty inter se Torsello (n 342) 86 states in this regard: Clearly, the twin needs of uniformity and flexibility can never be wholly reconciled. Uniformity at least in its most naïve manifestation of cosmopolitan enthusiasm would require the drafting process to produce a single text, acceptable in its totality to every single State, leaving no gaps to be filled by reference to domestic law and interpreted uniformly worldwide; flexibility, taking a more realistic approach, would require some issues, in particular policy related issues, to be left open. See also Wool Rethinking the Notion of Uniformity in the Drafting of International Commercial Law: A Preliminary Proposal for Development of a Policy-based Unification Model 1997 Revue de droit uniforme / Uniform Law Review 46. See the text of the Convention (n 126). It has been pointed out that many non-signatory states, including South Africa, this Convention is regarded as the definitive statement on treaty law. See Dugard (n 202) in this regard. 128

137 Article 21(1)(b) of the 1969 Convention has caused contention with regard to the effect of article 95 of the CISG since the former establishes the principle of reciprocity. In the context of article 95, it is accepted that fora in states having declared an article 95 reservation are relieved from having to apply the CISG under article 1(1)(b). A literal reading of article 21(1)(b) of the 1969 Convention may suggest that another contracting state (who did not avail itself of the possibility of declaring a reservation in terms of article 95) would have to give effect to the article 95 reservation when it has to apply the law of a reservation state. Whether or not this is indeed the case, forms the centre of the controversy surrounding article 95. Aust states with regard to article 21 of the 1969 Convention: [I]f a party has made an effective reservation it will operate reciprocally between it and any other party which has not objected to it, modifying the treaty to the extent of the reservation for them both in their mutual relations. But as between the other parties the treaty is unaffected. 345 Goode et al 346 state that the 1969 Convention does not provide detailed provisions on what they call contemplated declarations 347 declarations that states are expressly permitted to make by the text of the relevant convention. They declare that such declarations or reservations are increasingly common in transnational commercial law treaties and that [t]reaty practice confirms that contemplated declarations made pursuant to such a provision may not be reservations for certain purposes of Vienna 1969, avoiding the myriad implications of the contrary conclusion. 348 At this point it is important to emphasise that, even though the terms reservation and declaration are used interchangeably in many sources, they have very different meanings. A declaration may amount to a reservation, but it is not always the case. The following quote explains the difference succinctly: A declaration relating to a state s understanding of the interpretation to be attached to a specific provision in a treaty, or a state s policy statement concerning a specific aspect of a treaty, must be distinguished from reservations. The intention with which the Aust (n 224) 143. Goode, Kronke, McKendrick and Wool Transnational Commercial Law: International Instruments and Commentary (2004) 4. Ibid. Ibid. 129

138 declaration or statement is made, and not the form in which it is moulded, is the decisive factor. If a declaration, whatever its name, title or form, purports to exclude or modify the legal effect of a treaty in its application to the state making the declaration, it constitutes a reservation. Conversely, if a so-called reservation merely reflects a state s understanding of a specific provision without excluding or modifying that provision in its application to that state, it will not be regarded as a reservation. 349 It is therefore clear that article 95 indeed amounts to a reservation, since it modifies the legal effect of the CISG in its application to the state making the declaration. Another author professes that the article 95 reservation creates no reciprocal effect in international uniform commercial law conventions. 350 He avers that article 21(1)(b) of the 1969 Convention does not apply to reservations in respect of international uniform commercial law conventions, since the fragmentation of the multilateral Convention into bilateral relationships implied by the application of the aforementioned provision would contrast with the obligation undertaken by each Contracting State to apply the Convention in full. 351 According to this view, article 21(1)(b) of the 1969 Convention only refers to bilateral Conventions of a political nature and would therefore not apply to the CISG. 352 It could possibly alleviate the confusion surrounding the effect of article 95 if the last mentioned author s view were to be accepted. However, there does not seem to exist any convincing authority that article 21(1)(b) of the 1969 Convention may be disregarded for purposes of article 95 of the CISG. The 1969 Convention does not expressly exclude uniform international commercial law conventions from its sphere of application 353 nor does it contain any provision from which it may safely be alluded that its sphere of application is confined to treaties of a political nature. 354 Contracting Ferreira and Ferreira-Snyman The Impact of Treaty Reservations on the Establishment of an International Human Rights Regime 2005 Comparative and International Law of South Africa Torsello (n 342) 88. He cites a German decision by the Bundesgerichtshof (VIII Zivilsenat, 4 December 1985) as authority for this statement. Torsello (n 342) 89. Ibid. According to article 1 of the 1969 Convention, it applies to treaties between States. Basedow Uniform Law Conventions and the UNIDROIT Principles of International Commercial Contracts 2000 Revue de droit uniforme / Uniform Law Review points out with regard to international conventions relating to private law (such as the CISG): These Conventions employ the form of the international treaty as a technique of private law regulation 130

139 states to the 1969 Convention would certainly turn to the provisions of the said convention when having to interpret the effect of unclear provisions in another convention. Furthermore, as stated previously, 355 it is widely acknowledged that articles of the 1969 Convention largely codifies international customary law concerning interpretation which existed prior to its existence. 356 Magnus states in this regard: Although the Treaties Convention has been ratified by less than half of all states on the globe and not by all CISG states, most of the general interpretation rules of the Treaties Convention are widely accepted and constitute international customary law. 357 According to article 31(1) of the 1969 Convention, a treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. This is an important provision to bear in mind when attempting to attribute the correct meaning to article 95 of the CISG. According to the preamble to the CISG, the parties to the Convention are of the opinion that the adoption of uniform rules which govern contracts for the international sale of goods and take into account the different social, economic and legal systems would contribute to the removal of legal barriers to international trade and promote the development of international trade. 358 It is clear from the preamble to the CISG that the object and purpose of the Convention is to transcend the differences between different national legal systems and create a uniform body of international sales law. This must be borne in mind when analysing the meaning and effect of article 95. An interpretation of article 95 which would make the scope of application as broad as possible, would be in line with the object and purpose of the Convention in the international arena. It can therefore hardly be contested that the general rules on the interpretation of treaties are of equal applicability in the field of international Conventions relating to uniform private law. See par above. Magnus Tracing Methodology in the CISG: Dogmatic Foundations in Janssen and Meyer (eds) CISG Methodology (2009) Magnus (n 356) See the preamble to the Convention (n 1). 131

140 3.6.4 Different variations of the article 95 reservation: more adversity for the uniform application of the CISG De Ly observes that different formulations have been used with regard to the article 95 reservation. 359 The first variation is the reservation as provided for by article 95 itself. The reservation state declares that it elects not to be bound by article 1(1)(b) of the CISG. 360 The second variation was employed by Germany. At the time of its accession to the CISG, Germany declared that its courts would not apply article 1(1)(b) where an article 95 reservation state is involved. 361 The opinion has been voiced that this wording should have been included in article On the other hand, it has been stated that the meaning of this statement is unfathomable. 363 It is not a declaration authorised by the CISG text. 364 It is uncertain whether this statement is merely an interpretative declaration if it is adhered to by the German courts, it would alter the scope of application of the CISG in Germany. Bell 365 argues that it is not clear whether this official interpretation of the CISG by the German government would even bind the German courts. Furthermore, he states that trying to bind one s own courts into interpreting the CISG in a particular way seems to go against article 7(1): In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application. 366 Reference may be made here to the decision of the Oberlandesgericht Dusseldorf, where the court indeed disregarded the declaration and applied the CISG De Ly (n 58) 10. De Ly (n 58) 10. See the status of the CISG Convention (n 216). According to Lookofsky (n 66) 174 [t]his German declaration can be viewed as a statement which contains a reasonable interpretation of the CISG concept of Contracting States in article 1(1)(b), the effect of which is to exclude from that concept States which have made article 95 declarations. Bell Why Singapore should withdraw its [Article 95] Reservation to the United Nations Convention on Contracts for the International Sale of Goods (CISG) 2005 Singapore Year Book of International Law This article is also accessible online on the Pace website at (last accessed ). Fawcett, Harris and Bridge (n 117) 980. In terms of article 98 of the CISG, only reservations expressly permitted by the CISG text may be made. Bell (n 362) n 41. Bell (n 362) n 41. See par below. 132

141 Of relevance in this regard is a provision that the Netherlands included in its domestic law concerning article 95. In article 2 of a Dutch Act of December 1991, 368 the Netherlands requests fora in article 95 reservation states not to apply Dutch domestic sales law provisions but rather the CISG, in instances where Dutch law is found to be applicable by virtue of the rules of private international law of the forum. 369 This clearly does not amount to a reservation as authorised by article 95 of the CISG. It may merely be seen as a declaration, depicting the Netherlands understanding of article Uncertainty as to the effect of article 95 Nine scenarios may be distinguished in respect of the applicability of the CISG. These scenarios are: where the forum is situated in a reservation state and the law of a reservation state, or of a non-reservation contracting state, or of a non-contracting state is found to be applicable in terms of the private international law of the forum; where the forum is situated in a non-reservation contracting state and the law of a reservation state, or of a non-reservation contracting state, or of a non-contracting state is found to be applicable in terms of the private international law of the forum; and where the forum is situated in a non-contracting state and the law of a reservation state, or of a non-reservation contracting state, or of a non-contracting state is found to be applicable in terms of the private international law of the forum. Of these nine scenarios, four are not relevant for the purposes of article 95, namely the scenarios where the forum is situated in a non-reservation contracting state and the law of a non-reservation contracting state or of a non-contracting state is found to be applicable in terms of the private international law of the forum and the scenarios where the forum is situated in a non-contracting state and the law of a non-reservation contracting state or of a non-contracting state is found to be applicable in terms of the private international law of the forum. The five scenarios relevant to article 95 are analysed below. In all the scenarios discussed, article 1(1)(a) s requirements for application of the CISG are not met. Under circumstances where article 1(1)(a) s The full title of this Act is Wet van 18 December 1991, tot intrekking van de Eenvormige wet inzake de internationale koop van roerende lichamelijke zaken en de Eenvormige wet inzake de totstandkoming van internationale koopovereenkomsten betreffende roerende lichamelijke zaken Stb. 1991, 753. De Ly (n 58) 10. As De Ly points out, foreign courts are not bound by this Dutch provision. It does, however, indicate that Dutch law strongly supports international uniform law. 133

142 requirements for application are indeed met, the fact that law of a reservation state is found applicable or that the forum is situated in a reservation state does not impact upon the Convention s application. The terms reservation state and reservation contracting state refer to a CISG contracting state which availed itself of the option of making an article 95 reservation and the term non-reservation contracting state refers to a CISG contracting state which has not made an article 95 reservation Position where the forum is situated in a reservation state, the requirements for application of the CISG under article 1(1)(a) are not met, and the law of a reservation state is found to be applicable in terms of the private international law of the forum This is the most uncomplicated scenario. 370 The requirements for application of the CISG in terms of article 1(1)(a) are not met. Application of the CISG under article 1(1)(b) has been excluded by the lex fori, with the necessary result that the CISG would not be found to be applicable. 371 The domestic sales law 372 of the reservation state, as indicated by the forum s private international law rules (that is the law of the reservation state minus the CISG), 373 will be applied to the dispute at hand. It does not make a difference whether the law of the forum or the law of another reservation state is the proper law of the contract. The relevant rules of the proper law are not those contained in the CISG article 1(1)(a) s requirements for application are not met and article 1(1)(b) has been excluded by the proper law state. In the case of Zheng Hong Li Ltd Hong Kong v Jill Bert Ltd Swiss, 374 the Supreme Court of the People s Republic of China was confronted with a dispute concerning a contract for the international sale of goods between a Swiss seller and a Hong Kong buyer. During the proceedings of the Court of First Instance, the parties agreed on the Evans Article 95 Declaration as to Art 1(1)(b) in Bianca and Bonell (n 8) ; Torsello (n 336) 108. Winship (n 12) In the case of the United States of America, this would be the Uniform Commercial Code or UCC. For a comparative analysis of CISG and UCC provisions in general, see Kritzer (n 12). Dore and Defranco (n 134) 49, who also confirm (at 55) that in this scenario, in the case of the US, the UCC would be applicable. Bell (n 362) 62. English translation accessible at (last accessed ). 134

143 application of the laws of the People s Republic of China. The Court of First Instance applied the CISG. The Supreme Court found Chinese domestic law applicable. At the relevant time, Hong Kong s sovereignty fell under the United Kingdom, a non-contracting state. Switzerland was a non-reservation contracting state at that time. The requirements for application of the CISG under article 1(1)(a) were clearly not met and China had made an article 95 reservation. The Chinese court was therefore relieved from applying the CISG under article 1(1)(b) and applied Chinese domestic law to the dispute. In Impuls ID International SL, Impuls ID Systems Inc and PSIAR SA v Psion Teklogix Inc, 375 the United States District Court, Southern District of Florida, was confronted with a dispute regarding an international sales contract between a Spanish, a United States and an Argentinean company (the plaintiffs) and an English company (the defendant). The court found that the CISG did not apply to the dispute at hand even though all three plaintiffs had their places of business in CISG contracting states, the defendant s place of business was in a non-contracting state; therefore the applicability criteria under article 1(1)(a) were not met. 376 Since the United States made an article 95 reservation, the court would not apply the CISG under article 1(1)(b). The court stated that the only circumstance in which the CISG could apply is if all the parties to the contract were from Contracting States. 377 The same approach was followed by the Federal District Court, Washington State in the case of Prime Start Ltd v Maher Forest Products Ltd. 378 In this case a British Virgin Islands corporation sued a Washington corporation for breach of contract resulting from a contract for the international sale of goods. The parties did not include a choice of law clause in their contract. The United Kingdom is not a CISG contracting state. The court therefore found that article 1(1)(a) of the CISG cannot provide the basis for application of the CISG, since only one of the parties was from a contracting state. The plaintiff invoked article 1(1)(b) of the Convention as basis for application of the CISG, stating that United States, Canadian or Russian law may be : case number 835 (UNILEX). See also Gabriel Contracts for the Sale of Goods: A Comparison of Domestic and International Law (2004) 23 and Schwenzer and Fountoulakis (n 12) with regard to the Impuls case. Text of the case (n 375) : case number 1230 (UNILEX). 135

144 found applicable by virtue of the conflict rules of the forum and all these states are CISG contracting states. The court found the law of Washington to be applicable to the contract because both parties have either relied on or tacitly approved of reliance on Washington law. 379 However, the court refused to apply the CISG, since article 1(1)(b) could not be relied upon by reason of the article 95 reservation made by the United States. The court relied on the quoted dictum in the Impuls case. Furthermore, it stated that [b]ecause not all parties are from countries that signed the CISG, the CISG cannot apply to this dispute, even if a traditional choice-of-law analysis leads to the application of the law of the United States (or one of its states) or any other signatory State. 380 It may therefore be concluded that the position in this scenario is as follows: where the requirements for application under article 1(1)(a) are not met and a forum in a reservation state finds the law of a reservation state to be applicable to an international sales law dispute, it will apply the domestic sales law of the law applicable to the contract Position where the forum is situated in a reservation state, the requirements for application of the CISG under article 1(1)(a) are not met and the law of a non-reservation contracting state is found to be applicable in terms of the private international law of the forum Numerous scholars support the application of the CISG in this scenario. According to Schlechtriem, if the conflict rules of a forum situated in a reservation state, lead to the application of the law of a non-reservation contracting state, the forum has to apply the CISG if the basic requirements for application are met. 381 Ferrari suggests that the CISG should be applied in this scenario not by virtue of article 1(1)(b), but as part of the law of the contracting state to which the rules of private international law lead. 382 Torsello also advocates the application of the CISG in this scenario as part of the applicable foreign law. 383 Honnold argues that application of the CISG in this See full text of the decision (n 378). See text of the decision (n 378). Schlechtriem (n 12) 36 (par 41). Ferrari (n 104) 45. Behr, in his commentary on the Frankfurt am Main case (n 201), also supports this view and states (at 272) that [w]hen the State s private international law requires its courts to apply foreign law under which the CISG is triggered, the court must apply the CISG as part of that foreign law. See also Bell (n 362) 64 for a similar conclusion. Torsello (n 342)

145 scenario is analogous to application of the CISG by a forum in a non-contracting state which is faced with the application of the law of a contracting state the forum is not bound by article 1(1)(b), but should apply the CISG on the grounds that it is the correct application of the proper law. From the perspective of the proper law, the CISG is the relevant body of law to apply to such a matter. 384 Bernasconi states that the CISG should be applied under these circumstances, since the forum finds a foreign legal order applicable and there is no displacement of the forum s domestic law the rationale for making the reservation. 385 Saf also supports the application of the CISG in this scenario, on the grounds that the reservation only applies to cases where the law of the reservation state is identified as the law applicable to the contract. 386 She also remarks that a court of a declaring contracting state is not bound by article 1(1)(b) as the provision no longer forms part of its law, ie the lex fori, but it may still have to apply the provision as part of the lex contractus as identified by its conflict rules. 387 On the other hand, it has been argued that a court in [a reservation state] might adopt the line of reasoning that since its own legislature has deprived it of the possibility of applying the Convention pursuant to article 1(1)(b), then it should only apply it when the requirements of article 1(1)(a) are met. 388 In other words, the forum in the reservation state might consider itself not bound to apply the CISG via article 1(1)(b) under any circumstances. 389 Another author arguing against the application of the CISG in this scenario, remarks that a state that made an article 95 reservation will not apply the CISG to an international sales contract unless both parties places of business are in CISG contracting states. 390 He therefore concludes that, where a reservation state s conflict rules lead to the application of a non-reservation contracting state, and one party is from a non-contracting state, the forum would not apply the CISG. 391 The two United States cases referred to above 392 seem to indicate Honnold Flechtner (n 30) Bernasconi (n 112) 167. See also par above. Saf (n 100) 36. Saf (n 100) 36. Evans (n 370) 656. Bell (n 362) 64. Thieffry Sale of Goods between French and US merchants: Choice of Law Considerations under the UN Convention on Contracts for the International Sale of Goods 1988 The International Lawyer Thieffry (n 390)

146 that the United States would only apply the CISG where both parties are from contracting states. 393 The present author agrees with the scholars who support the application of the CISG in this scenario. Since the requirements for application of the convention under article 1(1)(a) are not met, the forum will turn to its rules of private international law to determine the law applicable to the contract. If its private international law finds the law of a CISG contracting state applicable, it should apply the CISG as part of that legal system. This does not amount to application in terms of article 1(1)(b) from the perspective of the forum state. 394 Since one of the CISG applicability criteria is met from the perspective of the lex causae of the contract, the relevant body of law to be applied is the CISG. According to this argument, the CISG is applied as part of the proper law of the contract, assuming that it has been ascertained by the forum that the CISG does indeed form part of the proper law. 395 Correct application of the proper law would then necessitate application of the Convention Position where the forum is situated in a reservation state, the requirements for application of the CISG under article 1(1)(a) are not met and the law of a non-contracting state is found applicable in terms of the private international law of the forum It is clear that the CISG would not be applied in this scenario the requirements for application of the CISG under neither article 1(1)(a) nor under article 1(1)(b) are met See par above. See also Gabriel (n 376) 25 for this conclusion. Fawcett, Harris and Bridge (n 117) In this regard it would be relevant whether a monist or dualist approach is followed by the lex causae (for an excursus on monism and dualism, see Aust (n 224) ). Should a dualist approach be followed, the CISG would only form part of the domestic law of the lex causae if the treaty has been transformed or adopted into domestic law by enacting the necessary legislation (Dugard (n 202) 47). Parties to international conventions / treaties would be in breach of their treaty obligations if they did not give effect to the treaty by enacting or, if necessary, amending their domestic legislation. However, it may not be safely assumed that, once a treaty has entered into force for a state, it is in force in that state; in other words, that it has become part of its law (Aust (n 224) 178). For the most part states would comply with their international treaty obligations, but it may be prudent for the forum seized of the dispute to investigate whether the CISG indeed forms part of the domestic law of the lex causae of the contract before applying it on that ground. 138

147 Position where the forum is situated in a non-reservation contracting state, the requirements for application of the CISG under article 1(1)(a) are not met and the law of a reservation state is found to be applicable in terms of the private international law of the forum One of the important questions concerning the application of the CISG in this scenario is whether the reservation state is to be regarded as a contracting state for the purposes of article 1(1)(b); or stated differently, whether the forum state is faced with the application of the law of a CISG contracting state. 396 Fawcett et al contend that a reservation state should indeed be regarded as a contracting state in terms of article 1(1)(b), since article 95 of the convention does not provide, as it does in the case of the article 92 declarations, that the reservation state is not to be regarded as a contracting state in terms of article 1(1)(b). Fawcett et al argue that the forum should indeed apply the CISG in these circumstances. They aver that the forum is applying the Vienna Convention under article 1(1)(b) as part of the law of the forum and not as part of the law of the reservation state. 397 In other words, article 1(1)(b) forms part of the law of the forum, and the forum is bound to give effect to article 1(1)(b). Because of the fact that a reservation state remains a contracting state, article 1(1)(b) s requirements for application of the CISG are met and the forum is under an obligation to apply the CISG. Conversely, it has been argued that a state which exercised the option of making an article 95 reservation, is not to be regarded as a contracting state for the purposes of article 1(1)(b). 398 A proponent of this argument substantiates his view by stating that this analysis is in accordance with the spirit of stipulations in the CISG regarding the reservations provided for in articles 92 and Fawcett, Harris and Bridge (n 117) 980. Fawcett, Harris and Bridge (n 117) 981. See also Zeller CISG and Unification of International Trade (2007) 40, who states that it is difficult to imagine that a forum situated in a nonreservation contracting state, whose conflict of laws rules point to the application of the law of a reservation state and who could apply the CISG as part of their own legal principles under article 1(1)(b), would elect to apply the domestic law of the reservation state instead. Hugo The United Nations Convention on the International Sale of Goods: Its Scope of Application from a South African Perspective 1999 South African Mercantile Law Journal Hugo (n 398)

148 The main argument of those opposing application of the CISG in this scenario is that a forum whose rules of private international law point to the law of a contracting reservation state, has to apply the CISG as part of the law of that reservation state 400 and therefore in the same way as the reservation state s courts would have approached the CISG in the dispute at hand in order to ensure international harmony of decision. In this scenario, a forum in the reservation state would not have applied the CISG, since the requirements for its application under article 1(1)(a) are not met. According to this view, the forum in the contracting state is indirectly bound 401 by article 95 and should give effect to it in the same manner as the courts of the reservation state would have. In the present scenario, the forum should therefore not apply the CISG. 402 It has been pointed out that the application of the CISG in this scenario by the forum seized of the dispute, where a forum situated in the reservation state would not apply the CISG, could encourage forum shopping. 403 Schlechtriem also advocates the view that a reference by the rules of private international law of the forum (situated in a non-reservation contracting state) to the law of a reservation state must respect the reservation and apply the same sales law as the reservation state, ie normally not the CISG. 404 Schlechtriem motivates his view by arguing that article 7(1) of the CISG requires the promotion of uniformity of application of the Convention and that disregarding the article 95 reservation when applying the law of a reservation state would negate this directive. 405 Another author arguing against the application of the CISG here, states that the law of the reservation state as the lex causae of the contract has not enacted the CISG for cases similar to this one, thus the Convention s rules are inapplicable. By refusing to See n above for numerous cases that support the view that the CISG forms part of the law found applicable in terms of the rules of private international law of the forum. See also Wethmar-Lemmer When could a South African Court be expected to apply the United Nations Convention on Contracts for the International Sale of Goods (CISG)? De Jure in this regard. Schlechtriem (n 12) 37 (par 43). See Dore (n 210) who states (at 539) that the UCC should be applied by a forum in a contracting state whose conflict rules point to the application of United States law. Bell (n 362) 62. Schlechtriem Article 95 in Schlechtriem and Schwenzer (n 2) (par 4). Winship (n 130) 525 also agrees with this argument. Furthermore, Evans (n 370) 657 promotes the argument that the forum in this scenario should apply the domestic sales law of the reservation state. Schlechtriem (n 12) 37 (par 43). 140

149 consider the reservation filed under article 95, the forum judge would fail to recognize the lex causae altogether. 406 As stated above, Germany, when ratifying the CISG, made a statement to the effect that it would not apply article 1(1)(b) in respect of any state which made an article 95 reservation. 407 If this declaration were indeed followed by the German courts, then Germany would not apply the CISG in this scenario. 408 Article 1(1)(b) may possibly be viewed as a rule of private international law in itself, which refers to the CISG as the applicable law of the forum should the forum s private international law refer to the law of a contracting state, whether the state has made an article 95 reservation or not. From this point of view it may be advocated that a forum situated in a non-reservation contracting state, whose rules of private international law point to the law of a reservation state as the applicable law, should disregard the fact that the mentioned state made an article 95 reservation and apply the CISG as if the latter state had not made a reservation. This argument hinges on the view that only the fora of the reservation state itself are exempted from having to apply the CISG in terms of article 1(1)(b) 409 and that fora in non-reservation contracting states are bound to apply the CISG under article 1(1)(b) 410 even if their rules of private international law refer to the law of a reservation state. The reason for this duty to apply the CISG is the fact that the requirements of its application under article 1(1)(b) are met in this scenario. 411 Furthermore, it has been stated that an article 95 reservation made by one state cannot bind another state. 412 The present author agrees with the view that the CISG should be applied in this scenario. Firstly, a state availing itself of the option of making an article 95 reservation, remains a CISG contracting state. It is submitted that the argument to the contrary is not convincing. The fact that it is stated expressly in articles 92 and 93 that Bernasconi (n 112) 168. See par above. See par below for the reference to a German court case in which this declaration was disregarded. Enderlein and Maskow (n 12) 381. Bell (n 362) 62. Ferrari (n 104) 46; Torsello (n 342) 108. Ferrari (n 104)

150 states availing themselves of the reservations provided for in these articles are not regarded as contracting states for the purposes of the CISG articles impacted upon by these reservations, but that any such express provision is omitted in article 95, clearly warrants a conclusion to the opposite. Furthermore, such an interpretation of article 95 would impact negatively on the extent of its application and does not accord with the object and purpose of the CISG which requires the CISG to be applied as widely as possible. Therefore, any such interpretation of article 95 ignores the basic directives of treaty interpretation, namely interpretation in line with the object and purpose of the treaty, contained in article 31 of the 1969 Convention. 413 Secondly, article 95 only provides that the reservation state and therefore fora in the reservation state, are not bound to apply the CISG under article 1(1)(b). Fora in non-reservation contracting states are bound to apply the CISG in terms of article 1(1)(b) if the requirements for application there under are met. In this scenario the requirements for application of the CISG under article 1(1)(b) are met, since the rules of private international law refer to the law of a contracting state Position where the forum is situated in a non-contracting state, the requirements for application of the CISG under article 1(1)(a) are not met and the law of a reservation state is found to be applicable in terms of the private international law of the forum According to one view, the CISG should be applied in this scenario by the forum in the non-contracting state not by virtue of article 1(1)(b), 414 because the forum in the non-contracting state is not bound by article 1(1)(b), but by virtue of its being part of the law of a CISG contracting state. 415 The same argument is therefore employed as in the case of a forum in a non-contracting state being faced with the application of a non-reservation CISG contracting state. 416 Conversely, it may be argued that the CISG does not form part of the applicable law in this scenario, since the requirements for application of the CISG in terms of article 1(1)(a) are not met and application of the CISG under article 1(1)(b) is excluded by the proper law state See par above. Ferrari (n 104) 317. Ferrari (n 104) 48; Torsello (n 342) 109. See n above for references to cases applying the CISG as part of the law of the contracting state. See also the discussion in par above. 142

151 The German Oberlandesgericht in Düsseldorf 417 applied the CISG in the present scenario. The case concerned an international sales law dispute between a United States seller and a German buyer. At the time of conclusion of the contract, the CISG was in force in the United States (a reservation state) but not yet in Germany. The court referred to the relevant German rules of private international law to determine the law applicable to the contract. In terms of article 28 of the German EGBGB, the law of the place of business of the seller or contractor was applied to contracts for the supply of materials. In this case United States (Indiana) law was found applicable. Since the CISG was in force in the US, the court applied the CISG to the dispute in terms of article 1(1)(b). A significant aspect of the German decision is the fact that the court paid no heed to the German declaration that it will not apply article 1(1)(b) of the CISG in respect of any state that had made an article 95 declaration. This decision therefore evidences the fact that German courts do not necessarily regard themselves bound by this declaration. 418 Schlechtriem criticises the judgment by stating that, because of the article 95 reservation made by the United States, the Convention should not have been applied here since one party has its place of business in a non-contracting state. 419 This accords with his view that, when a forum s rules of private international law point to the application of the law of a reservation state, it should only apply the CISG if the requirements of article 1(1)(a) are met. 420 Similarly, Dore 421 argues that if the rules of private international law of a forum situated in a non-contracting state find the law of the United States applicable, it should apply the Uniform Commercial Code (United States law) and not the CISG. Winship also supports this view. 422 The rationale behind this argument is that, when Decision delivered (n 238). See also Bonell and Liguori (n 223 (1996)) 154 as well as Schwenzer and Fountoulakis (n 12) with regard to this decision. Bernstein and Lookofsky Understanding the CISG in Europe (1997) 142. Schlechtriem Commentary on Oberlandesgericht Düsseldorf 2 July 1993 in International Contract Manual: Guide to the UN Convention (1994). This commentary may also be accessed at (last accessed ). Schlechtriem (n 404) 933 (par 4). Dore (n 210) 538. Winship (n 130)

152 the law of a reservation contracting state is found to be applicable and the requirements for application under article 1(1)(a) are not met, the forum seized of the dispute should always apply the domestic law of the applicable legal system and not the CISG. 423 A few tentative arguments may be raised in favour of application of the CISG in this scenario. Firstly, the widest possible application of the CISG accords with the object and purpose of the Convention. Secondly, a reservation state still qualifies as a CISG contracting state and as such the CISG is part of the law of the reservation state. The forum does not necessarily have to consider itself bound by the reservation made by the proper law state and therefore does not have to apply the CISG in the same manner as a forum of the proper law state would have done under these circumstances. Nevertheless, it is submitted that application or negation of the CISG rests upon the question of whether the CISG could be seen as part of the applicable law in this scenario. It seems as though this question should be answered in the negative, since the requirements for application of the CISG under article 1(1)(a) are not met and application under article 1(1)(b) is excluded by the reservation. From the perspective of the proper law, the CISG is therefore not the relevant body of law to be applied. Article 1(1)(b) also does not form part of the law of the forum, since the forum is situated in a non-contracting state. Even though the present author follows a pro conventione approach in general, application of the CISG is not supported in this scenario. Application of the CISG would not constitute a correct application of the proper law Conclusion concerning the meaning and effect of article 95 The controversy surrounding the meaning and effect of article 95 prompts the question of whether it should have been included in the CISG at all. The arguments made for the inclusion of article 95 at the Vienna diplomatic conference display a preference for domestic sales law and unwillingness to apply the CISG as widely as possible. It is difficult to comprehend why a state would accede to the CISG if it 423 Dore (n 210)

153 regards its domestic sales law as superior to it. Also, the CISG is a product of lengthy deliberation and drafting efforts by some of the finest legal minds in the field of international commercial law. It is unlikely that any single domestic legal code would be of a superior quality to the CISG. The provisions of the 1969 Treaties Convention requiring reciprocity with regard to permitted reservations seem to require that a forum in a CISG contracting state which finds the law of a reservation state applicable, should respect the reservation and apply the CISG in the same manner as a forum in the reservation state would. On the other hand, article 31 of the 1969 Convention requires a treaty to be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. The purpose of the CISG is the adoption of uniform rules for international trade in order to contribute to the removal of trade barriers and to promote the development of international trade. It seems as though the object and purpose of the CISG requires it to be applied as widely as possible. Therefore, it may be concluded that a forum in a non-reservation contracting state should apply the CISG if the requirements for application under either article 1(1)(a) or 1(1)(b) are satisfied. In order to promote the widest possible application of the CISG it is also concluded that a forum in a reservation state or in a non-contracting state that finds the law of a non-reservation contracting state applicable under circumstances where article 1(1)(a) is not applicable, should apply the CISG as part of the proper law, even though the forum is not bound by article 1(1)(b). 3.7 Article Introduction It has long been recognised that party autonomy, or the ability of the parties to choose the law applicable to their transactions, plays a central role in international sales law. 424 Article 6 of the CISG gives recognition to the principle of party autonomy See, for example, Ferrari (n 104) 84; Kritzer et al (n 13) 84:49 state that party autonomy is a fundamental principle underlying the CISG. Borisova Freedom of Contract: Remarks on the Manner in which the UNIDROIT Principles may be used to Interpret or Supplement Article 6 of the CISG in Felemegas (ed) An International Approach to the Interpretation of the United Nations Convention on Contracts for 145

154 and guarantees the freedom of contract of the parties. 426 It has been stated that article 6 expressly allows for choice of law clauses. 427 This article also confirms the nonmandatory nature of the Convention. 428 According to article 6, the parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions. Article 12 of the CISG states that any provision of the Convention allowing a contract of sale or its modification or termination by agreement or any offer, acceptance or other indication of intention to be made in any form other than in writing does not apply where any party has his place of business in a Contracting state which has made a declaration under article 96. Article 96 allows a Contracting state whose legislation requires contracts of sale to be concluded or evidenced in writing to make a reservation in terms of article 12, thereby excluding the application of any provision of the CISG that allows the conclusion of a contract of sale in any other form than in writing. It has been submitted that article 6 makes provision for two different options: excluding the application of the CISG in its entirety or derogating from its provisions. 429 The wording of article 6 seems to indicate that full exclusion of the CISG s application is not subject to any restrictions whereas derogation from provisions of the CISG may possibly be subject to restrictions where one of the parties has its place of business in a contracting state which made a reservation under article Article 6 therefore allows parties to exclude the application of the CISG the International Sale of Goods (1980) as Uniform Sales Law (2007) 39 states in this regard (at 39) that [a]rticle 6 represents an important guarantee for effective functioning of international trade and accommodates the fulfilment of the principle of freedom of contract, which is a basic tenet of international commercial relations. The inclusion of this principle in the provisions of the CISG reflects the strong conviction of the international community that specific warranties must be created for the establishment of a freely operating market-oriented international economy within which the contracting parties have the freedom to act in conformity with their business interests. Party autonomy is also widely regarded as a general principle on which the CISG is based. See, in this regard, chapter 4 par of this thesis. Kritzer et al (n 13) 84:49. Thieffry (n 390) Bonell and Liguori (n 223 (1996)) 155; Borisova (n 425) 40; Carr (n 134) 68; Schwenzer and Fountoulakis (n 12) 57. Ferrari (n 104) 85. Ferrari (n 104) 86; Reiley (n 192) 50. Ferrari Remarks on the UNCITRAL Digest s Comments on Article 6 CISG 2005/2006 Journal of Law and Commerce points out that the mere fact that one of the parties to the contract has its place of business in a contracting state which made a reservation in terms of article 96, does not mean that the form requirements of that 146

155 in its entirety where it would otherwise have been applicable and allows parties to derogate from or vary the effect of the provisions of the Convention subject to a possible article 96 reservation. It has been pointed out that, although not mentioned in article 6, the public international law provisions of the CISG as contained in articles may not be derogated from or varied. 431 According to Schlechtriem, party autonomy operates on two levels in the context of the CISG. 432 Firstly, party autonomy operates at a private international law level parties may choose the law applicable to their contract, and thereby exclude the application of the CISG where it would otherwise have been applicable by virtue of article The validity of such a choice of law is not governed by article 6 of the CISG, but by the rules of private international law of the forum. Secondly, party autonomy operates at the level of article 6, which confirms the principle of freedom of contract by allowing parties to vary the content of their contract by excluding or modifying the CISG s provisions. 434 Article 6 confirms that the CISG is not mandatory law of a contracting state 435 and that parties are free to determine the content of their contract on the level of the substantive law of international sales enacted by the Convention. 436 The inclusion of article 6 makes it necessary for a forum, when having to decide on the possible application of the CISG, to investigate whether or not the Convention was excluded by the parties. 437 The absence of an agreement between the parties to reservation contracting state are to apply. The law applicable in terms of the rules of private international law of the forum will determine which form requirements are to be met. See the decision of the Hoge Raad (Netherlands), (n 236) in this regard. Ferrari CISG Rules on Exclusion and Derogation: Article 6 in Ferrari, Flechtner and Brand (eds) (n 75) refers to the decision by the Tribunale di Vigevano, (n 9), also expressing this view. Schlechtriem Article 6 in Schlechtriem and Schwenzer (n 2) (par 3). Ibid. Schlechtriem (n 432) 84 (par 4). Schlechtriem (n 432) 84 (par 4). Several court decisions have also confirmed the nonmandatory character of the CISG. See, for example, the decisions by the Tribunal Cantonal Valais (Switzerland), : case number 177 (UNILEX), 199 (CLOUT), s1.html (Pace); Oberster Gerichtshof (Austria), : case number 478 (UNILEX), 425 (CLOUT), a3.html (Pace). Schlechtriem (n 432) 84 (par 4). Numerous cases refer to this point. See, for example, the decisions of the Tribunal Cantonal Valais (Switzerland), (n 435); Oberster Gerichtshof (Austria), (n 48); Oberlandesgericht München (Germany), : case number 253 (UNILEX),

156 exclude the Convention has even been termed an applicability requirement of the CISG Legislative history of article 6 At its Second Session 439 the Working Group on the International Sale of Goods reviewed article 3 of the ULIS - the predecessor of article 6 of the CISG. Article 3 of the ULIS provided that [t]he 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. 440 It was recommended that the wording of this article be changed to the following: The parties may exclude the application of the present Law or derogate from or vary the effect of any of its provisions. 441 The main reason advanced for omitting any reference to the possibility of implied exclusion of the Convention was the fear expressed by several representatives that its inclusion may encourage courts to conclude, on insufficient grounds, that the Law had been wholly excluded. 442 Other representatives concurred with the omission of the reference to implied exclusion, but on the grounds that the Convention does not ordinarily attempt to establish special rules for construing agreements. 443 The report states that the proposed wording makes it evident that two distinct matters are dealt with: the exclusion of the whole Convention on the one hand and the relationship between the parties agreement and the Convention on the other. This article reinforces the notion that the Convention s provisions are secondary and defer to the agreement of the parties (CLOUT), g2.html (Pace); Cour d Appel de Paris (France), (n 237) and the Tribunale di Vigevano (Italy), (n 9). Ferrari (n 431) 115; Landgericht Trier (Germany), : case number 185 (UNILEX), 170 (CLOUT), g1.html (Pace). Working Group on the International Sale of Goods: Report on the Work of the Second Session, 7 18 December 1970 (A/CN.9/52) in UNCITRAL Yearbook II (1971) See n 140 above. Working Group on the International Sale of Goods: Report on the Work of the Second Session (n 439) 55; Honnold (n 139) 61. Ibid. Ibid. Ibid. 148

157 The proposed wording of article 6 was once again approved by the Working Group at its Third Session 445 and included as article 5 of the Working Group Draft Convention on the International Sale of Goods. 446 In 1977, the Committee of the Whole (which is in essence the Full Commission) reviewed the Working Group Draft Convention. 447 With regard to article 5 (which would become article 6), the Committee considered a proposal that the CISG should only be made applicable if the parties include an express stipulation in their contract to this effect. 448 This proposal was rejected on the grounds that it would defeat the purpose of moulding the international uniform sales law into a Convention namely that it would automatically be applicable unless excluded by agreement. 449 The Committee also declined a proposal that the Convention may only be excluded by an express stipulation of the parties. It was argued that it may be sufficiently clear from the agreement that the parties intended to exclude the application of the Convention, even if no express clause to that effect was included in the contract. 450 Furthermore, it was pointed out that the Convention itself envisaged exclusion or modification of its provisions by other than express means, as in article 8 on usages. 451 The Committee recommended adoption of the following provision as part of the 1978 UNCITRAL Draft Convention on Contracts for the International Sale of Goods: 452 The parties may exclude the application of this Convention or, subject to article 11, 453 derogate from of vary the effect of any of its provisions. 454 In the Secretariat Commentary on the 1978 Draft Convention 455 it was stated that the effect of article 5 (article 6 of the CISG) is that parties may exclude the Convention in its entirety by choosing a law other than the Convention to govern their contract or Progress Report of the Working Group on the International Sale of Goods on the Work of its Third Session (n 151) 77; Honnold (n 139) 96. See UNCITRAL Yearbook VII (1976) for the text of the Working Group Draft Convention on the International Sale of Goods. Report of the Committee of the Whole I relating to the Draft Convention on the International Sale of Goods (n 164) 29; Honnold (n 139) 322. Ibid. Ibid. Ibid. Ibid. The text of the Draft Convention may be found in UNCITRAL Yearbook IX (1978) as well as in the Official Records (n 31) Article 11 became article 12 of the CISG. Official Records (n 31) 5. Commentary on the Draft Convention on Contracts for the International Sale of Goods, prepared by the Secretariat in Official Records (n 31) 14-66,

158 they may exclude its application in part or vary the effect of any of its provisions. It was emphasised that reference to implied exclusion is omitted to dissuade courts from too easily inferring that the parties intended to exclude the Convention s application. 456 Article 5 of the Draft Convention and the proposed amendments to this provision were deliberated upon during the third 457 and fourth meetings 458 of the First Committee during the Diplomatic Conference. The Canadian delegation proposed that, except where the parties had wholly excluded the application of the Convention, they may not exclude the obligations of good faith, diligence and reasonable care prescribed by this Convention. Furthermore, this delegation proposed inserting a sub-article 5(2) providing that a choice of law of a particular state excludes the application of the CISG, even in cases where the state is a contracting state. 459 The first point of the proposal was criticised on the grounds that the Convention s text did not contain any reference to obligations of diligence and reasonable care and disallowing the exclusion of the provision on good faith would have the effect of elevating it to a general obligation. 460 The second point of the proposal was seen by various delegations as contrary to article 1(1)(b). 461 The representative from France explained that the Convention becomes part of the law of a contracting state. 462 Several delegations raised the point that a choice of the law of a contracting state as the governing law of a contract would only exclude the CISG if Ibid. Document A/CONF.97/C.1/SR.3, Official Records (n 31) Document A/CONF.97/C.1/SR.4, Official Records (n 31) Document A/CONF.97/C.1/L.10, Official Records (n 31) 86: Revise article 5 to read as follows: (1) 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. However, except where the parties have wholly excluded this Convention, the obligations of good faith, diligence and reasonable care prescribed by this Convention may not be excluded by agreement, but the parties may by agreement determine the standards by which performance of such obligations are to be measured if such standards are not manifestly unreasonable. (2) A provision in the contract that the contract shall be governed by the law of the particular State shall be deemed sufficient to exclude the application of this Convention even where the law of that State incorporates the provisions of the Convention. Official Records (n 31) 248 (para 58 and 60). Official Records (n 31) (para 33 and 35). Official Records (n 31) 250 (par 40). 150

159 the unequivocal intention of the parties to apply the internal domestic law on sales could be established. 463 The Canadian proposals were rejected. 464 The delegation from the United Kingdom 465 proposed inserting a phrase allowing for express or implied derogation from or exclusion of the CISG. Several representatives argued that this addition was unnecessary, since it was evident from the comments of the working Group that exclusion of the Convention or variation of the effect of the provisions could be done expressly or implicitly and that it was a matter of common understanding that this is indeed the correct interpretation of article The delegation from Belgium 467 suggested the addition of a sub-paragraph requiring the exclusion, variation or derogation to be express or to derive with certainty from the circumstances of the case. This proposal was also rejected. 468 The Pakistani delegation proposed that the word expressly be added to the provision. 469 This proposal was rejected without debate. 470 It seems as though almost all the delegations accepted that article 5 (which became article 6) did not require express derogation, exclusion or variation. The German Democratic Republic suggested that article 5 (article 6) be amended to include a provision stating that, even if the CISG s application is excluded in terms of article 2 or 3, it will be applicable if it has been validly chosen by the parties. 471 This amendment was deemed superfluous on the grounds that the principle of party autonomy allowed parties to make the Convention applicable to their contract where Official Records (n 31) 251 (para 40 and 42). Official Records (n 31) 247 (par 51); 252 (par 51). Document A/CONF.97/C.1/L.8, Official Records (n 31) 85. The proposal read as follows: Add the following sentence to article 5: Such exclusion, derogation or variation may be express or implied. Official Records (n 31) (para 4 and 11). Document A/CONF.97/C.2/L.41, Official Records (n 31) 86. The Belgian delegation proposed inserting a new paragraph 2 stating that such exclusion, derogation or variation must be express or derive with certainty from the circumstances of the case. Official Records (n 31) 250 (par 31). Document A/CONF.97/C.1/L.45, Official Records (n 31) 86. Official Records (n 31) 250 (par 31). Document A/CONF.97/C.1/L.32, Official Records (n 31) 86. This proposal was amended orally by the representative of the German Democratic Republic to exclude article 2(a) from the amendment. See Official Records (n 31) 251 (par 69). 151

160 its application would otherwise have been excluded under article 2 or The question concerning the possible limits placed on party autonomy is to be answered in accordance with the law applicable in absence of the Convention. The Italian delegation amended its original proposed amendment to add to the German Democratic Republic s proposal the words to the extent that it does not affect the application of any mandatory provisions of law which would have been applicable if the parties had not chosen this Convention. 473 The Italian representative withdrew its proposal on the basis of the rejection of the German proposal. 474 The First Committee adopted the text of article 5 (article 6) subject to the reference to the Drafting Committee of the amendment suggested by India. 475 The Second Committee of the Diplomatic Conference considered a proposal by the Australian delegation to change the approach under article 5 (which would become article 6) from an opt-out to an opt-in approach. In order to effect this, the Australian delegation proposed adding an article to the Convention in terms of which states may make a reservation that it would only apply the Convention to contracts where parties have chosen its application. 476 The Australian representative argued that the inclusion of the abovementioned provision would increase the number of contracting states to the Convention. 477 This provision offered businesses engaged in international trade with the assurance that the application of the Convention would not be forced upon them and in turn, states would more readily accede to a Convention if the business communities in their territories offered no objection to such accession Official Records (n 31) 252 (para 60-61). Document A/CONF.97/C.1/L.58, Official Records (n 31) 86. The original Italian proposal entailed adding a sub-paragraph to article 5 (which became article 6) to read: The Convention may only be excluded in its entirety where the parties have expressly so agreed or where they have chosen the law of a non-contracting state to govern their contract. This proposal was orally amended during the fourth meeting of the First Committee. See Official Records (n 31) 252 (par 63). Official Records (n 31) 253 (par 77). The Indian delegation suggested changing the word order of the draft provision to read: Subject to article 11 [which became article 12], the parties may exclude the application of this Convention or derogate from or vary the effect of any of its provisions (Document A/CONF.97/C.1/L.30, Official Records (n 31) 86). Document A/CONF.97/C.2/L.3: A contracting state may, at the time of signature, ratification or accession, make a declaration that it will apply the Convention only where the parties have chosen the Convention as the law governing the formation and interpretation of their contract. Official Records (n 31) 436 (para 40-41). Ibid. 152

161 The main objections lodged against the Australian proposal included the fact that it would limit the Convention s application severely; 479 that it would be counter to the process of unifying international sales law; 480 that a state which was not willing to accept the Convention as part of its law, could not be regarded as a contracting state to the Convention 481 and that it nullified the rationale behind the whole UNCITRAL process of unifying international sales law by way of an international Convention. This provision meant that there would be no difference between the position of a contracting state and of a non-contracting state. 482 The Australian proposal was put to a vote and rejected. 483 Article 5 (which became article 6) was adopted by the Plenary Conference during its sixth meeting Express or implied exclusion of the CISG It is a contentious matter whether article 6 requires that exclusion of the CISG must be done via express agreement between the parties or whether implied (or tacit) 485 exclusion of the Convention is possible. Furthermore, if implied exclusion is authorised by article 6, it needs to be determined what amounts to implied exclusion of the Convention. The documentary history of the Convention supports a conclusion that implied exclusion of the CISG is permissible and that the possibility of its implied exclusion was not mentioned in article 6 to prevent fora from too readily inferring that the Official Records (n 31) 437 (para 42 and 50). Official Records (n 31) 438 (par 53). Official Records (n 31) 438 (par 54). Official Records (n 31) 439 (par 5). Official Records (n 31) 439 (par 6). Document A/CONF.97/SR.6; Official Records (n 31) 201. The final English text of the Convention is included in the Official Records (n 31) From a South African (and civil law) perspective, tacit term mostly refers to a contractual provision that the parties had in mind but did not express in the contract and an implied term mostly refers to the naturalia of a contract (those provisions implied by law if the essentialia of the contract are complied with). However, the terms implied and tacit are often used interchangeably and may refer to both mentioned types of contractual terms. See, for example, Kerr The Principles of the Law of Contract (1998) 316. The term implied as employed in the context of article 6 of the CISG refers to a contractual provision that the parties had in mind but did not express in their contract. 153

162 Convention was implicitly excluded. 486 Bonell argues that an express reference to implicit exclusion was omitted from the CISG to discourage courts from too easily inferring an implied exclusion or derogation. 487 According to Richards, article 6 would have clearly mandated express exclusion if it was meant to be the only permissible form of exclusion. 488 Winship also states that express exclusion is not required by the Convention. 489 Borisova reasons that, if the drafters intended only to allow for express exclusion of the CISG, they would have included detailed requirements to this effect in article 6. In light of the fact that article 6 contains no requirements as to the form of the exclusion, it is reasonable to infer that express or implied exclusion would be acceptable. 490 Most commentators support the possibility of implicitly excluding the CISG s application. Ferrari submits that the lack of express reference to the possibility of implicit exclusion of the CISG should not be regarded as precluding such possibility. 491 According to Schlechtriem, the existence of an agreement to exclude the CISG is a definite requirement for its exclusion, but such agreement may be in implied form. 492 Honnold states that, even though exclusion of the CISG need not be done expressly, the agreement to exclude its application may only be implied from facts pointing to real and not fictitious agreement to this effect. 493 On the other hand, there are authors who argue that article 6 only allows for express exclusion of the Convention. 494 According to Dore and Defranco, the parties may only exclude the CISG by express agreement. 495 According to these authors, the fact that reference to implied exclusion was omitted from the Convention on the grounds that courts are to be discouraged from too readily inferring that the Convention was Official Records (n 31) 17. Bonell Article 6 Parties Autonomy in Bianca and Bonell (eds) (n 8) 55; Huber (n 12) 62 concurs with this argument. See also Bertrams and Kruisinga (n 185) 136. Richards (n 47) 237. Winship (n 12) Borisova (n 422) 41. Ferrari (n 104) 87. Schlechtriem (n 432) (par 7). Honold Flechtner (n 30) 77. Winship Changing Contract Practices in the Light of the United Nations Convention: A Guide for Practitioners 1995 The International Lawyer ; Murphy United Nations Convention on Contracts for the International Sale of Goods: Creating Uniformity in International Sales Law 1988/1989 Fordham International Law Journal Dore and Defranco (n 134) 53; Dore (n 210)

163 excluded by the parties, justifies the conclusion that implied exclusion is not permissible. 496 Murphy submits that, even though there is some merit in the arguments for implied exclusion, the policy arguments only allowing for express exclusion are stronger. 497 She argues that article 7(1) of the CISG, which mandates that the observance of good faith in international trade has to be taken into account when interpreting the Convention, requires article 6 to be interpreted as only allowing for express exclusion of the CISG. 498 The reason behind this argument is the fact that one party may be prejudiced by a court incorrectly concluding that the CISG was implicitly excluded. The principle of freedom of contract is adhered to by requiring the parties to exclude the CISG by express agreement, since it places the parties in control of the content of their contract, unfettered by the possibility of subsequent interpretations of a court. 499 Furthermore, Murphy reasons that implied exclusion would detract from the uniform application of the CISG, since judges are given a wide discretion to decide whether it was excluded on a case by case basis. 500 Several court decisions state in this regard that the possibility of opting-out of the application of the CISG is subject to the unambiguous intent of the parties. In a dispute between a Californian buyer and a Canadian seller heard by the United States Federal District Court, 501 the contract in question contained two conflicting choice of law clauses one designating Californian law as the applicable law and the other clause stating that the law of British Columbia was the proper law governing the contract. The buyer contended that the inclusion of the choice of law clauses in the contract showed an intention of the parties to opt out of the application of the CISG. However, the court found that the choice of law clauses did not contain clear language exhibiting the parties intention to opt out of the CISG. The court reasoned that the CISG is applicable to international sales of goods in California and in British Columbia and applied it to the contract by pursuant to article 1(1)(a). In the case of SAP v AWS, 502 a Belgian Tribunale de commerce had to decide on the law applicable Dore and Defranco (n 134) Murphy (n 494) 745. Ibid. Murphy (n 494) 747. Murphy (n 494) 749. US District Court, ND California, : case number 741 (UNILEX). Tribunale de commerce Namur, : case number 745 (UNILEX), b1.html (Pace). 155

164 to a contract for the international sale of goods between a Belgian seller and a German buyer. The contract contained no choice of law clause. The court stated that it could not be deduced from the fact that the contract was drawn up in German that the parties intended referring to German domestic law to govern their contract and intended excluding the CISG, which is part of German law. Furthermore, the court even decided that a reference in the contract to conditions of delivery of domestic German sales law does not permit the inference that the parties intended to exclude the application of the CISG. Numerous court decisions support the possibility of implicitly excluding the application of the CISG, even though the Convention does not contain a reference to implicit exclusion. In a case decided by the Austrian Oberster Gerichtshof 503 concerning an international sales contract between a Hungarian seller and Austrian buyer, the court stated that if the parties wish to exclude the application of the CISG, they need to reach an agreement to exclude its application and this exclusion may be done expressly or impliedly. The buyer contended that the choice of law clause in favour of Austrian law constituted an implied exclusion of the CISG. The court found that this was not the case and emphasised that an implicit exclusion of the CISG may only be assumed if the corresponding intent of the parties is sufficiently clear. The CISG was applied to the case at hand since it could not be established with sufficient clarity that the parties indeed intended to exclude the application of the CISG. In order to answer the question whether the parties implicitly excluded the application of the CISG, the court stated that regard may be given to the criteria in article 8 of the Convention 504 for the interpretation of a party s statements and other conduct. In the case of Rheinland Versicherungen v Atlarex, 505 the court stated that, although parties may exclude the application of the CISG either expressly or impliedly, a mere reference to domestic law in the parties pleadings during the case in court does not : case number 764 (UNILEX), 605 (CLOUT), a3.html (Pace). According to article 8(1) of the CISG, for purposes of this Convention, statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware of what that intent was. If this is not the case, then article 8(2) directs such statements and other conduct of a party to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances. In determining the intent of a party or the understanding that a reasonable person would have had, article 8(3) states that due consideration is to be given to all relevant circumstances of the case including negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties. Tribunale di Vigevano (Italy), (n 9). 156

165 amount to an implicit exclusion of the Convention. The court contended that there could be no implicit exclusion unless the parties were aware that the CISG would be applicable and they intended to exclude its application. In an international sales dispute between a Dutch seller and a German buyer, heard by the German Oberlandesgericht in Dresden, 506 the court once again mentions the possibility of excluding the CISG implicitly under article 6, but reiterates that a choice of Dutch law as the governing law of the contract is to be understood as a reference to the entire Dutch law, including the CISG. There are also cases which support the opposite view, namely that the CISG may not be excluded implicitly because the Convention does not provide for implicit exclusion. 507 One German case, heard by a German lower court, 508 concerned a contract for the international sale of goods between a German seller and a Swiss buyer. The court found that parties may only exclude the CISG by explicit agreement and a mere agreement that German law applies is not sufficient to exclude the application of the Convention. In Orbisphere Corp v US, 509 the United States Court of International Trade stated that the law applicable to international contracts for the sale of goods concluded after 1 January 1989, is the CISG and not the UCC, 510 unless the parties expressly contract out of the Convention s coverage. According to an arbitral award made by the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce, 511 the parties choice of the law of a particular state as the governing law of their contract does not exclude the CISG unless the parties reach an express agreement to this effect. It is submitted that both express and implied exclusion of the Convention is possible. The present author concurs with the view that, if express exclusion of the CISG is required, the drafters would have included a directive to that effect in article 6. However, if there is doubt whether CISG has been excluded or not, the pro : case number 441 (UNILEX), g1.html (Pace). Landgericht Landshut (Germany), : 121 (UNILEX), g1.html (Pace); US Court of Appeals for the Fifth Circuit, : case number 924 (UNILEX); US District Court New Jersey, : case number 1035 (UNILEX); US District Court Minnesota, : case number 1166 (UNILEX). Landgericht Landshut (Germany), (n 507) : case number 69 (UNILEX). The United States Uniform Commercial Code. Award number 54/1999: case number 841 (UNILEX). 157

166 conventione approach as subscribed to in this thesis, would require the Convention to be applied Interpretation of contractual provisions in order to determine whether the application of the CISG was implicitly excluded Another controversial matter concerns the rules applicable to the interpretation of choice of law clauses or other contractual provisions in order to determine whether such provisions amount to an implicit exclusion of the CISG. In general, the law in terms of which a choice of law clause is to be interpreted would be determined in accordance with the rules of private international law of the forum. 512 However, several authors support the argument that article of the CISG should be employed to interpret the parties declarations and to determine whether such declarations amount to an implicit exclusion of the Convention. 514 Case law also exists in support of this view. 515 Huber argues that such would at least be the position if the dispute is heard by a forum in a CISG contracting state, since fora in contracting states are bound to apply the CISG. 516 Fora in non-contracting states would employ their rules of private international law to determine the law applicable to the interpretation of the choice of law agreement. 517 Bonell is of the opinion that the criteria to be employed to determine whether the CISG has been excluded by the parties, are to be found within the Convention itself rather than in domestic law. 518 Bonell states that, since the question essentially involves the interpretation of statements made by and other Schlechtriem (n 432) 86 (par 8) states: [s]ince the conflict rules of the forum govern (positive or negative) choice of law clauses, it is those rules that must decide what amounts to an implicit election to derogate from the CISG. It is submitted that the lex causae of the contract would be applicable to the interpretation of choice of law clauses at least in common law jurisdictions. See, for example, Collins (ed) (n 97) Volume Article 8 of the CISG reads as follows: (1) For the purposes of this Convention statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what that intent was. (2) If the preceding paragraph is not applicable, statements made by and other conduct of a party are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have in the same circumstances. (3) In determining the intent of a party or the understanding a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties. Bonell (n 487) 55-56; Huber (n 12) 63. Oberlandesgericht Linz (Austria), : case number 1234 (UNILEX), a3.html (Pace). Huber (n 12) 63. Ibid. Bonell (n 487)

167 conduct by the parties, reference is to be made to article 8 of the CISG. 519 Zeller also argues that an implied agreement between the parties is governed by article 8 of the CISG and explains that this provision classifies the conduct and statements of contractual parties according to the knowledge which the other party has or ought to have. 520 He states in this regard: If a party knows or ought to know the intent of the other party, article 8(1) is applicable. If that is not the case, the courts and tribunals will attempt to define such intent using the reasonable person test, which is described in article 8(2). Article 8(3) assists the courts in determining the intent of the party by listing matters to which the courts must direct their attention, such as the negotiations, any practices which the parties have established between themselves, usages, and any subsequent conduct of the parties. Importantly, article 8(3) not only specifies some circumstances but also invites the court to give consideration to all relevant circumstances. 521 Article 8 directs a forum to assess the entire contractual relationship between the parties in order to determine their true intent and not to limit its enquiry to the express content of the contract. 522 The present author is of the opinion that article 8 is to be employed by a forum situated in a CISG contracting state to determine whether the Convention was implicitly excluded by the parties, but only under circumstances where either article 1(1)(a) s or 1(1)(b) s requirements for application of the Convention are complied with. Where the requirements for application of the CISG are complied with, a forum in a contracting state is bound to apply the Convention, unless its application has been excluded by the parties in terms of article 6. In cases where one of the alternative applicability criteria under article 1 of the CISG is met, a forum in a contracting state would consult the provisions of the Convention as the relevant body of law applicable to an international sales contract. It follows that the forum would then employ article 8 to determine whether the parties had intended to exclude the application of the CISG as authorised by article 6. It must be borne in mind that, even though article 8 may be applied under these circumstances to interpret the parties declarations and Ibid. Zeller Determining the Contractual Intent of Parties under the CISG and Common Law A Comparative Analysis 2002 European Journal of Law Reform Ibid. Zeller (n 520)

168 conduct, the validity of the choice of law clause is still governed by the rules of private international law of the forum. 523 Conversely, where a forum in a non-contracting state to the CISG is faced with the question of whether choice of law clauses, statements made by parties and other conduct by the parties amount to implied exclusion of the Convention, this should be answered with reference to the relevant rules of the legal system indicated by the rules of private international law of the forum. It is submitted that this would also be the approach to be followed by a forum in a CISG contracting state where one of the applicability criteria is not met Possible forms of implied exclusion as identified by scholars and in case law Most scholars regard the choice of law of a non-contracting state as an implicit exclusion of the CISG. 524 A choice of law clause electing the domestic or national law of a contracting state has been noted as a form of implicit exclusion of the CISG. 525 A few decisions 526 have classified a choice of the law of a CISG contracting state per se as an implicit exclusion of the Convention, even though there exist numerous decisions in favour of the view that a choice of law of a contracting state includes the Convention. 527 Several authors regard it as an implicit exclusion of the applicability of the CISG if the contract contains several references to domestic sales law. 528 However, it has been pointed out that references to domestic law may only lead to the exclusion of the whole Convention if it may reasonably be inferred that the parties intended to exclude The question of which legal system should be applied to the assessment of the validity of a choice of law clause, has given rise to some controversy. See, for example, Forsyth (n 7) The validity of a choice of law clause cannot be assigned to the chosen legal system - if the clause is invalid, then there is no choice of law. According to Forsyth (n 7) 296 the validity of the choice of law clause can hardly be determined by the lex fori, since the lex fori is only determined a posteriori and the contract is surely valid or invalid a priori. Bonell (n 487) 56; Borisova (n 425) 42; Goode, Kronke, McKendrick and Wool (n 346) 207; Schwenzer and Fountoulakis (n 12) 57. Ferrari (n 12) 34. See par below for a detailed discussion in this regard and where a conclusion to the opposite is reached. ICC Court of Arbitration award no 7754/1995: case number 519 (UNILEX); Ad hoc Tribunal Florence (Italy), : case number 60 (UNILEX). See par below. Bertrams and Kruisinga (n 185)

169 the CISG; otherwise such references are to be interpreted as derogations from the CISG. 529 Case law exists in favour of the view that mere references to a domestic legal code of a CISG contracting state do not constitute an implicit exclusion of the Convention. 530 Ferrari states that the use of standard form contracts may also amount to implicit exclusion of the CISG if the content of the contract is so profoundly influenced by the rules and concepts of a specific legal system that their use is incompatible with the CISG and implicitly manifests the parties intention to have the contract governed by that legal system and their use suggests an intention to exclude the application of the CISG as a whole. 531 On the other hand, a mere reference to standard terms does not imply an exclusion of the CISG. 532 Case law and scholarly opinion support the view that the inclusion of Incoterms in the contract does not amount to an implicit exclusion of the CISG. 533 Another way of implicitly excluding the application of the CISG is for parties to agree that certain fundamental matters in their contract are to be governed by the (internal) domestic law of a certain state in circumstances that it may reasonably be inferred from the contract that the parties intended the whole contract to be governed by this legal system. 534 The inclusion of contractual terms that are wholly inconsistent with the CISG has also been termed an implied exclusion. 535 Conflicting decisions exist on whether the fact that the parties argue their case exclusively on the basis of domestic law where the CISG s requirements for application are met, amounts to implicit exclusion of the Convention. The Tribunale di Vigevano decision 536 and several other decisions 537 do not regard this as an Enderlein and Maskow (n 12) 49 Oberlandesgericht Rostock (Germany), : case number 906 (UNILEX), g1.html (Pace). Ferrari (n 431) Tribunal de commerce, Namur (Belgium), (n 502). Oberster Gerichtshof (Austria), (n 503); Honnold Flechtner (n 30) 76; Schlechtriem (n 432) 89 (par 12). See chapter 2 par with regard to the ICC Incoterms. Ferrari (n 431) 130. Borisova (n 425) (n 9). Similarly, a decision by the Oberlandesgericht Stuttgart (Germany), : case number 1317 (UNILEX), g1.html (Pace) did not regard this as evident of the parties intention to exclude the CISG. 161

170 indication of the parties intention to exclude the CISG. On the other hand, a few decisions have been reported which found that references to domestic law only during the proceedings do amount to an implicit exclusion of the Convention. 538 A French court found that the parties implicitly excluded the CISG s application by not invoking it before the court. 539 This decision is clearly incorrect, since it would change the applicability of the CISG from an opting-out to an opting-in approach. Most scholars argue that the fact that the parties did not invoke the CISG before the court may not be seen as an implied exclusion of the Convention. 540 Schlechtriem and Butler argue that, based on the principle of iura novit curia, the court should not uphold the parties incorrect determination of the relevant applicable legal principles; if the law of a CISG contracting state is applicable, the principles to be applied are found in the CISG. 541 They qualify this argument by stating that the presiding officer should enquire why the parties based their arguments on domestic law instead of the CISG and whether an agreement existed between the parties to exclude the CISG Article 6 and the inclusion of a choice of law clause in the contract Interpretation of a choice of law clause designating the law of a CISG contracting state The question in this regard is: what is the correct interpretation of a choice of law clause in an international sales contract determining that the contract is to be governed by the law of a country which happens to be a CISG contracting state? 543 Should such a choice of law clause be interpreted as including a reference to the CISG or should it be interpreted as referring to the domestic (sales) law 544 of the chosen country? The documentary history of the CISG supports its application in this scenario. The Secretariat Commentary on the 1978 Draft Convention states in this regard: If two Oberlandesgericht Hamm (Germany), : case number 130 (UNILEX), 125 (CLOUT), g1.html (Pace). Cour de Cassation (France), : case number 1064 (UNILEX), 837 (CLOUT), f1.html (Pace). Cour de Cassation (France), (n 237). Ferrari Tribunale di Vigevano: Specific Aspects of the CISG Uniformly dealt with 2000/2001 Journal of Law and Commerce ; Schlechtriem and Butler (n 3) 20. Schlechtriem and Butler (n 3) 20. Ibid. Fawcett, Harris and Bridge (n 117) 682. Once again, this refers to the sales law of the domestic legal system minus the CISG. 162

171 parties from different States have designated the law of a Contracting State as the law of the contract, this Convention is applicable even though the parties have not specifically mentioned the Convention. 545 According to Schlechtriem and Butler, unless the parties have expressly referred to the domestic sales law of a contracting state, a choice of the law of a contracting state includes the CISG. 546 According to several authors, the choice of law of a contracting state includes the CISG 547 and does not amount to an implicit exclusion of the Convention. 548 It has even been said that a choice of law of a CISG contracting state amounts to an implied choice of the Convention. 549 On the other hand, where the parties expressly chose the domestic law of a contracting state to govern their contract, most authors consider the CISG as having been excluded. 550 Furthermore, it has been pointed out that a choice of law clause designating the law of a contracting state as the applicable law, has practical meaning even where the CISG would have been applicable ex article 1(1)(a) insofar as it designates the law applicable to matters falling outside the scope of the Convention. 551 Most authors endorse the view that such choice of law clauses are to be interpreted in the sense that the parties agreed on the rules that the chosen state provides for international sales contracts; in the case of a CISG contracting state, the relevant rules would be those contained in the CISG. 552 This view is based on the premise that the CISG forms part of the law of a contracting state, therefore a choice of law clause Official Records (n 31) 15. Schlechtriem and Butler (n 3) 15. Ferrari (n 125) 174; Schlechtriem (n 432) (par 14). Bell (n 8) 256; Bonell (n 487) 56; Enderlein and Maskow (n 12) 48. See also par above. Bonell and Liguori (n 223 (1996)) 155. Huber (n 12) 64; Schlechtriem (n 432) 89 (par 12) uses the example of a clause electing the sales law of the BGB. This view was supported by the Oberlandesgericht Frankfurt (Germany), : case number 511 (UNILEX), 429 (CLOUT), g1.html (Pace). See also the decision by the ad hoc tribunal in Florence (n 526) in this regard. Ferrari (n 125) 174; Schlechtriem (n 432) (par 14). Huber (n 12) 63; Reiley (n 192) 51 states that such a governing law specification should be viewed as nothing more than a reference to the CISG. 163

172 referring to the law of a contracting state, renders the CISG applicable. 553 argument was also followed in several court decisions. 554 This According to some commentators, the CISG is applied under this scenario because of the fact that, when the parties choose the law of a contracting state as the law applicable to their contract, article 1(1)(b) of the CISG leads to the application of the Convention since the rules of private international law which recognise party autonomy lead to the application of the law of a contracting state. 555 According to Dore, [a] further application of the principle in article 1(1)(b) is that if two parties from different states designate the law of a contracting state as their governing law, the Convention will apply even though it is not specifically mentioned. 556 This argument bases application of the CISG under a choice of law clause designating the law of a contracting state as the applicable law, on the fact that article 1(1)(b) s requirements for application of the CISG are met. In other words, the forum s rules of private international law, which under these circumstances are the rules giving effect to party autonomy, point to the application of the law of a contracting state as chosen by the parties in their choice of law clause. Case law also exists in support of this view. 557 A few court decisions exist in which it was stated that a choice of law of a contracting state ought to amount to an implicit exclusion of the Convention in order to give Bertrams and Kruisinga (n 185) 136; Bonell (n 487) 56; Borisova (n 425) 42; Huber (n 12) 64; Lookofsky (n 72) 272; Lookofsky (n 66) 28; Reiley (n 192) 51; Schlechtriem (n 432) 90 (par 14). Landgericht Düsseldorf (Germany), : case number 234 (UNILEX), g1.html (Pace); Oberlandesgericht Karlsruhe (Germany), : case number 296 (UNILEX), 230 (CLOUT), g1.html (Pace); Hof Arnhem (the Netherlands), (n 236); Hanseatisches Oberlandesgericht Hamburg (Germany), : case number 719 (UNILEX), g1.html (Pace); Oberster Gerichtshof (Austria), : case number 858 (UNILEX), 541 (CLOUT), a3.html (Pace). See, also, the long list of decisions in the UNCITRAL Digest of Case Law on the United Nations Convention on the International Sale of Goods (n 58) 24 n 20. Lookofsky (n 66) 28; Winship (n 12) Dore (n 210) 531. In the decision of the Oberlandesgericht Bamberg (Germany), : case number 504 (UNILEX), 294 (CLOUT), g1.html (Pace) the court stated that, when the parties choose the law of a CISG contracting state as the law applicable to their contract, the CISG is applied pursuant to article 1(1)(b) of the Convention. 164

173 practical meaning to the choice of the parties. 558 In a dispute between an Italian seller and a Japanese buyer concerning a contract for the international sale of goods heard by an ad hoc tribunal in Florence, 559 the forum found that a choice of law clause directing that the contract be governed exclusively by Italian law amounted to an implicit exclusion of the CISG. The tribunal therefore applied domestic Italian law to the dispute. In the Fondmetal case, 560 domestic Italian law was applied to a dispute concerning an international sales contract between a Swedish buyer and an Italian seller. The contract contained a choice of law clause in favour of Italian law. At the time of conclusion of the contract, the CISG had entered into force in Italy but not in Switzerland. The requirements for application if the CISG in terms of article 1(1)(a) were therefore not met. The court also excluded the application of the CISG under article 1(1)(b) by arguing that article 1(1)(b) only operates in the absence of a choice of law effected by the parties. Ferrari criticises this decision by arguing that a choice of law agreement designating the law of a contracting state, when made without clear reference to the purely domestic law [of the designated jurisdiction], does not exclude the applicability of the Vienna Convention. On the contrary, such an agreement makes it certain that the Convention applies. In addition, an agreement to apply the law of a contracting state has the effect of designating the law applicable to questions outside the scope of the Convention. 561 Most decisions to date do not support the notion that the choice of the law of a CISG contracting state amounts to an implicit exclusion of the CISG s application. 562 In a dispute between a Belgian seller and a French buyer heard by the Belgian Hof van Beroep in Gent, 563 the parties chose French law to govern their contract for the international sale of goods. The buyer contended that the parties referred to French domestic law with the exclusion of the CISG, since the CISG was not in force in Belgium at the time of conclusion of the contract. The court found that last-mentioned fact was irrelevant. The CISG had been in force in France since 1 January The court reiterated that, according to the rules of international law, the CISG becomes part of the domestic legal system once it has entered into force in that state. The Kantonsgericht des Kantons Zug (Switzerland), : case number 326 (CLOUT); Cour d Appel Colmar (France), : case number 236 (UNILEX) (n 526). Tribunale Civile di Monza (Italy), (n 124). Ferrari (n 125) See the long list of decisions in UNCITRAL Digest of Case Law (n 58) 24 n : case number 940 (UNILEX), b1.html (Pace). 165

174 German Oberlandesgericht in Frankfurt 564 decided in a dispute between a Swiss seller and a German buyer that a choice of law clause stipulating that all transactions and sales are subject to Swiss law does not amount to a valid exclusion of the CISG. The court stated that an effective agreement between the parties that Swiss domestic law should be applied to their contract with the exclusion of the CISG should refer to the name of the relevant Swiss Code. The German Bundesgerichtshof 565 reiterated the principle that a choice of law provision in a contract for the international sale of goods directing that German law applies, does not exclude the application of the CISG where both parties are from contracting states. 566 There are many other German decisions supporting this view. 567 In Sté Ceramique Culinaire de France v Sté Musgrave Ltd, 568 a case involving a dispute over a contract for the international sale of goods between a French seller and an Irish buyer, the French court found that a choice of law clause in the contract designating French law as the applicable law did not set aside the CISG. In the case of Smits BV v Jean Quetard, 569 a Dutch court stated that a choice of law clause in favour of Dutch law led to the application of the CISG, since the Netherlands is a contracting state to the Convention. There are also numerous arbitral awards supporting the view that a choice of law clause in favour of a CISG contracting state does not constitute an implicit exclusion of the Convention. 570 The ICC Court of Arbitration in Paris found that a choice of law clause designating French law as the law applicable to the contract and a contractual clause which contradicts the CISG on one matter do not warrant the conclusion that (n 550) : case number 356 (UNILEX), 270 (CLOUT), g1.html (Pace). See Schlechtriem Uniform Sales Law in the Decisions of the Bundesgerichthof accessible at (last accessed ). This dispute concerned an international sales contract between a German seller and an Austrian buyer. See decisions by the Oberlandesgericht Düsseldorf, : case number 17 (UNILEX), 48 (CLOUT), g1.html (Pace); Oberlandesgericht Koblenz, (n 44); the Oberlandesgericht Köln, : case number 54 (UNILEX), g1.html (Pace); the Oberlandesgericht Hamm, (n 537); the Oberlandesgericht Karlsruhe (n 553); the Bundesgerichthof, (n 44) and the Oberlandesgericht München, : case number 297 (UNILEX), 297 (CLOUT), g1.html (Pace). Cour de Cassation, : case number 245 (UNILEX), 206 (CLOUT), f1.html (Pace). Arrondissementsrechtbank Gravenhage, : case number 154 (UNILEX), n1.html (Pace). Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft, award number SCH-4318, : case number 56 (UNILEX); Tribunal of International Commercial Arbitration at the Russian Federation, award number 340/1999, : case number 876 (UNILEX). 166

175 the CISG has been implicitly excluded. 571 The departure from the CISG s position on a certain matter is to be interpreted as a derogation from the Convention. 572 Numerous court decisions cite two grounds for the application of the CISG in this scenario: compliance with the requirements of article 1(1)(a) or 1(1)(b) and the fact that a choice of law of a contracting state does not exclude the CISG under article The present author supports application of the CISG in this scenario, 574 based mutatis mutandis on the same arguments for its application when the rules of private international law of the forum point to the law of a contracting state as the law applicable to an international sales contract. 575 If the parties elect the law of a CISG contracting state and the requirements for application of the CISG are met, the CISG is the relevant set of rules of the chosen legal system to be applied. It is submitted that the rules of private international law of the forum would have be employed to determine what amounts to an implicit election by the parties (in the form of a choice of law clause) to exclude the CISG, since choice of law clauses are governed by the rules of private international law. 576 Furthermore, is submitted that an interpretation of such choice of law clauses favouring the application of the CISG is preferable in the light of the fact that wide application of the CISG is beneficial to the promotion of uniform law in international trade. If the parties intended to exclude the CISG from their choice of the law of a contracting state, they must have been aware of its application and would have to express their intention to exclude its application. Consequently, a choice of law of a CISG contracting state would render the CISG applicable, unless it is undisputedly clear that the parties intended to exclude its application under article 6 of the Convention. It is suggested that the correct approach ICC Court of Arbitration Paris, award number 11333/2002: case number 1163 (UNILEX). Ibid. Landgericht München (Germany), (n 76); Oberlandesgericht Dresden (Germany), (n 506); Oberster Gerichtshof (Austria), : case number 481 (UNILEX), 427 (CLOUT), a3.html (Pace); US District Court, Northern District of Illinois, Eastern Division, : case number 834 (UNILEX); US District Court, Eastern District of Michigan, : case number 1224 (UNILEX). Namely where a choice of law clause designates the law of a CISG contracting state as the law applicable to the contract. See par above. Schlechtriem (n 432) 86 (par 8). 167

176 in this regard is to base application of the Convention on either article 1(1)(a) or 1(1)(b) and the fact that the choice of law of a CISG contracting state does not amount to an exclusion of the Convention under article 6. It must be borne in mind that, whenever application of the CISG is based on article 1(1)(b), the implications of a possible article 95 reservation need to be considered. Ferrari argues that the CISG should be applied as being part of the law of a contracting state even when the chosen law is that of a contracting state which made an article 95 reservation. 577 Ferrari s submission may be open to critique, as will become apparent from the next paragraph. The CISG constitutes the relevant legal rules of the proper law of the contract if either article 1(1)(a) or article 1(1)(b) s requirements for application are met. If neither of the grounds for application of the CISG is present, the CISG cannot be said to be the relevant body of law of the contracting state to be applied. Where application of the CISG is based on article 1(1)(b), the forum is situated in a non-reservation contracting state and the parties choose the law of a reservation contracting state as the proper law of the contract, it may be argued that the CISG should not be applied since its requirements for application are not met from the perspective of the proper law. 578 However, from the point of view of the forum state, the requirements for application of the CISG under article 1(1)(b) are complied with, only fora in reservation states are relieved from having to apply the CISG in terms of article 1(1)(b). If the forum is situated in a reservation state, the law chosen by the parties is that of a reservation state and article 1(1)(a) is not complied with, it is submitted that the forum state would not apply the CISG. The only way in which this result could be altered is if application of the CISG as part of the law of a contracting state is not based on the fulfilment of either of its applicability criteria in article 1, but solely on article 6. However, it is difficult to see how the CISG would be the applicable set of rules from the perspective of the lex causae of the contract if one applicability criterion is excluded and the other not complied with. If the forum is situated in a reservation contracting state, the law chosen by the parties is that of a non-reservation contracting state and article 1(1)(a) s requirements are not complied with, it is submitted that the Ferrari (n 430) 27. Neither under article 1(1)(a) nor under article 1(1)(b). 168

177 CISG should be applied as part of the lex causae of the contract. From the perspective of the proper law, one of the applicability requirements is satisfied, it will therefore regard the CISG and not its domestic sales law, as the applicable law. In conclusion, one of the applicability criteria should be satisfied from the perspective of the chosen legal system for the CISG to be seen as the applicable set of rules of the chosen proper law to be applied. Choice of law clauses merely designating the law of a CISG contracting state are nevertheless ambiguous and should be drafted in a manner that makes it clear whether the parties intend the domestic law (the sales law of the state minus the CISG) of the chosen state or the CISG to govern their contract. 579 However, the present author agrees with Lookofsky that the maxim in dubio pro conventione should apply in this instance Choice of law clause designating the law of a non-contracting state as the law applicable to a contract Most authors support the view that a choice of law clause inserted into an international sales contract designating the law of a non-contracting state as the applicable law, would exclude the application of the CISG under circumstances where it would otherwise have been applicable. 581 Case law also exists in support of this view. 582 Several authors regard the choice of the law of a non-contracting state as indicative of the parties intention to exclude the application of the CISG. 583 If the choice of law Fawcett, Harris and Bridge (n 117) 682 refer to article 14(a) of the ICC Model International Sale Contract as an example of a choice of law clause for parties seeking the application of domestic law under these circumstances. The relevant clause states: This contract is governed by the domestic law of country x. However, Klotz Critical Review of the ICC Model International Sale Contract accessible at (last accessed ) suggests that the phrase the application of the CISG is expressly excluded should be added to avoid any ambiguity. Schlechtriem (n 49) 785 also states that parties should include a phrase in such choice of law clauses stating that the CISG should not be applied. Lookofsky (n 72) 273. Bridge (n 72) 541; Schlechtriem (n 432) 84 (par 5). Oberlandesgericht Düsseldorf (Germany), (n 238); Audiencia Provincial de Alicante (Spain), : case number 796 (UNILEX), 483 (CLOUT, s4.html (Pace). Huber (n 12) 63; Ferrari (n 431)

178 clause is found to be invalid, the law applicable to the contract would have to be assigned in accordance with the rules of private international law of the forum. 584 Ferrari, who supports the notion of such a choice of law indicating the parties intention to exclude the Convention, argues that, if in the event of the invalidity of such a choice of law clause and the forum s conflict rules assigning the law of a contracting state to the contract, the domestic law of that state (and not the CISG) should be applied to the contract. 585 The UNCITRAL Digest of Case Law 586 refers to a case heard by the Oberlandesgericht in Düsseldorf on 2 July in which it was stated that a possible means of excluding the CISG is to choose the law of a non-contracting state as the governing law of an international sales contract. Schlechtriem points out that the requirements for and validity of such a choice of law agreement is to be determined in accordance with the rules of private international law of the forum. 588 He adds that the conflict rules governing the scope and interpretation of such a choice of law clause, which is a matter of private international law, must be used to decide whether the exclusion is meant to be restricted to issues outside the Convention only or to exclude the Convention too. 589 The present author agrees with Schlechtriem s argument that the choice of law clause needs to be interpreted to ascertain whether the parties intended to exclude the application of the CISG or whether they merely wished to designate matters falling outside the scope of the Convention (or possible gaps) to the chosen domestic legal system, which happens to be that of a non-contracting state Excluding the CISG by inserting a negative choice of law clause It is widely accepted that, if a contract contains a clause excluding the application of the CISG without designating the applicable law, the latter must be determined in Ferrari (n 431) 133. Ibid. UNCITRAL Digest of Case Law (n 58) 22. See n 236 above. Schlechtriem (n 432) 85 (par 7). Ibid. 170

179 accordance with the rules of private international law of the forum. 590 It is submitted that, if the law of a CISG contracting state is designated as the applicable law by the conflict rules of the forum, the domestic law of that state is to be applied. 591 Conflicting opinions exist on the rules applicable to the validity of such a negative choice of law agreement. According to one view, the formation of the exclusion agreement should be governed by the CISG s provisions on the formation of the agreement as contained in articles Conversely, it has been argued that the CISG s contract formation provisions are intended to apply to the sales contract only and do not extend to a choice of law or choice of forum agreement. 593 The majority view is that the validity of such a negative choice of law clause, ie the agreement excluding the application of the CISG, is to be governed by the legal system as indicated by the conflict rules of the forum Derogating from provisions of the CISG Article 6 of the Convention also allows parties to derogate from or vary the effect of certain provisions of the CISG. Instead of completely opting out of the CISG where it is in principle applicable, parties may agree on the non-application of certain of its provisions or the on modification of certain provisions. 595 Several authors argue that, since the CISG is applicable in such circumstances, the formation and interpretation of such a derogation agreement is to be governed by the CISG s provisions as contained articles 8 and Article 4 (a) of the CISG excludes the validity of the contract from its sphere of application. In terms of this argument, the validity of the derogation agreement would then be governed by the Ferrari (n 431) 134; Honnold Flechtner (n 30) 75; Huber (n 12) 60; Schlechtriem (n 432) (par 7); Schwenzer and Fountoulakis (n 12) 60; UNCITRAL Digest of Case Law (n 58) 22. Ferrari (n 431) 134. Ferrari Art 6 in Schlechtriem and Schwenzer Kommentar zum Einheitlichen UN-Kaufrecht CISG (2004) par 13. Huber (n 12) 61. Schlechtriem (n 432) 86 (par 7). For examples of derogation from the CISG s provisions, see the decisions of the Landgericht Stuttgart (Germany), : case number 86 (UNILEX), g1.html (Pace) and the Oberlandesgericht Karlsruhe (Germany), (n 238). Huber (n 12) 66; Schlechtriem (n 432) (par 12). 171

180 relevant domestic law 597 applicable by virtue of the rules of private international law of the forum. A contentious matter arises where certain provisions of the CISG are derogated from without any indication as to the rules applicable to the matters governed by the derogated provisions. Certain scholars argue that the issues provided for by the excluded provisions, are to be dealt with in terms of article 7(2). 598 According to article 7(2), matters governed but not expressly settled by the Convention, are to be settled in conformity with the general principles on which the CISG is based or, in the absence of such general principles, in conformity with the law applicable by virtue of the rules of private international law. 599 Other scholars advocate determining the law applicable to the matters dealt with in the excluded provisions in accordance with the rules of private international law of the forum. 600 It is submitted that the second view is correct. The reasoning behind the latter view is that employing article 7(2) to settle matters dealt with by the provisions excluded may render the derogation ineffective. 601 By derogating from certain provisions of the CISG, the contractual parties expressly indicate that they do not wish the CISG to be applicable to the matters dealt with by the excluded provisions. Should a forum settle such matters in accordance with the general principles on which the CISG is based, it disregards the parties contractual freedom as provided for in article 6. It may be added that such matters expressly excluded by the parties from being governed by the CISG do not amount to gaps as defined in article 7(2) they are not matters governed but not fully settled in the CISG; they are matters governed but excluded from the CISG by agreement between the contractual parties. Classifying such exclusions made in terms of article 6 as gaps under article 7(2) and thereby applying the CISG, is clearly contrary to the intention of the CISG s drafters who wished to give full recognition to the principle of party autonomy Huber (n 12) 66. Bonell (n 487) 59. See chapter 4 of this thesis for a detailed analysis of article 7(2). Ferrari (n 431) 134. Ferrari (n 431)

181 3.7.8 Opting into the CISG Is a direct choice of the CISG as governing law permitted? The question of whether contracting parties are permitted to stipulate that their contract is to be governed by the rules contained in the CISG, is relevant for fora in contracting and non-contracting states. 602 The uncertainty arises in this regard because of the fact that, even though the CISG contains a provision allowing parties to exclude the applicability of the Convention, it contains no provision on the possibility of parties opting in to the application of the Convention where it would not otherwise apply. Some authors argue that parties should be allowed to choose as governing law international instruments such as the CISG; the UNIDROIT Principles of International Commercial Contracts (PICC); the Principles of European Contract Law (PECL); and the Uniform Customs and Practice for Documentary Credits (UCP). 603 The proponents of this view advance the following reasons for their submission: firstly, it is common practice to incorporate such international legal instruments into international contracts without reference to a national legal system, as evidenced for example by the fact that almost all letters of credit contain a reference to the UCP and not to a national legal system. Secondly, they argue that the alternative of first having to establish the applicable domestic legal system and then to determine whether this system allows for incorporation of the international legal instrument is too complicated and would prolong litigation unnecessarily. Thirdly, the principles with regard to incorporation by reference are ambiguous in many legal systems. Finally, international legal instruments are mostly more advanced and readily determinable than domestic legal rules Fawcett, Harris and Bridge (n 117) 687. Juenger (n 296) 384; Neels and Fredericks Revision of the Rome Convention on the Law Applicable to Contractual Obligations (1980): Perspectives from International Commercial and Financial law 2006 Tydskrif vir die Suid-Afrikaanse Reg / Journal of South African Law (This article was originally published in EUREDIA Revue européenenne de droit bancaire et financier / European Banking and Financial Law Journal ). Neels and Fredericks (n 603)

182 Fountoulakis argues that, where the validity of a direct choice of international legal instruments such as the UNIDROIT Principles or PECL as the governing law of a contract may be contested on the ground that such instruments are soft law, the same does not hold true for the CISG. The CISG is an international convention and as such hard law of the same authoritative quality as any other chosen domestic sales law. 605 Ferrari supports the possibility of opting into the application of the CISG and argues that the omission of an express reference to the possibility of opting in should not be interpreted as preventing parties from being entitled to do so. 606 He bases his argument on the fact that the German Democratic Republic s proposal that a provision for opting in be included in the text 607 was only rejected on the grounds that it was unnecessary because the principle of party autonomy always makes it possible for parties to agree upon the application of the Convention. 608 However, he points out that by virtue of opting in, the Convention becomes part of the contract not unlike any other contractual clause, consequently it must be presumed that the mandatory rules of the applicable law are not affected by the opting in. 609 A Belgian decision was handed down which finds the CISG applicable because of the fact that the parties expressly agreed to the CISG as the applicable law. The court makes no reference to article 1(1)(a) or 1(1)(b). 610 The Netherlands Arbitration Institute also handed down an arbitral award 611 applying the CISG by virtue of a direct choice of the Convention by the parties. The dispute concerned a contract for the international sale of goods between a German buyer and a Dutch seller. The Arbitration Institute applied the CISG to the dispute on the ground that the parties agreed to its application at the proceedings. It did not refer to either of the two alternative grounds for application in articles 1(1)(a) or 1(1)(b) and applied the CISG directly because of the choice effected by the parties. However, in this case the parties Fountoulakis The Parties Choice of Neutral Law in International Sales Contracts 2005 European Journal of Law Reform Ferrari (n 125) 96. See Kritzer (n 12) with regard to the proposal. Ferrari (n 125) 96; Official Records (n 31) 252. Ferrari (n 125) 96; Enderlein and Maskow (n 12) 51. Rechtbank van Koophandel, Hasselt, : case number 263 (UNILEX) : case number 836 (UNILEX). 174

183 were from two contracting states to the CISG, therefore article 1(1)(a) s requirements for application were met in any event. The private international law rules of the forum 612 would most probably point to the law of the place of the seller as the applicable law and since Germany is a CISG contracting state the requirements for application under article 1(1)(b) were met as well. Case law authority also exists for the opposite view, namely that the choice of an a- national body of rules does not amount to a valid choice of law and such rules may merely be incorporated into the contract as contractual terms to the extent that they are not incompatible with the mandatory rules of the applicable domestic legal system. 613 It will also be interesting to observe whether fora in non-contracting states will give effect to a choice by the parties to apply the CISG where the requirements for its under application under article 1(1)(a) or 1(1)(b) are not met. Schlechtriem points out that the question whether the CISG may be chosen directly, and not as part of the law of a contracting state, is still a controversial one. 614 He submits that this issue should be determined with reference to the applicable conflict rules and [i]f those rules allow not only the choice of law enacted as state law, but of law in general, the parties may be allowed to choose the CISG directly. 615 The present author agrees that the question of whether the parties are allowed to choose the CISG directly as the governing law of their contract is to be determined in accordance with the rules of private international law of the forum. 616 In other words, is the direct choice of an international convention as the governing law of a contract permitted in terms of the conflict rules of the forum? For example, article 1(1) of the This is the general rule in the 1955 Hague Convention as well as in the 1980 Rome Convention, unless the forum finds the contract most closely connected with another legal system under article 4(5) of the latter (n 182). Tribunale di Padova (Italy), : case number 1005 (UNILEX), 651 (CLOUT), i3.html (Pace). Schlechtriem (n 432) 88 (par 11); Schlechtriem (n 49) 781. Schlechtriem (n 432) 88 (par 11). Fawcett, Harris and Bridge (n 117) 687. Schwenzer and Fountoulakis (n 12) 33 state in this regard that [w]hether the parties may deliberately choose the CISG as the law applicable to their contract is a question governed by domestic law. It depends on how much leeway the domestic law gives to party autonomy regarding the choice of substantive law. In other words, the question of whether the parties may expressly choose the CISG as the applicable law to their sales contract, regardless of whether they have their places of business in a contracting state or not, will depend on their respective domestic law. 175

184 Rome Convention refers to the choice between the laws of different countries only, 617 and the CISG is not a legal system per se, but may only form part of a system of law to the extent that it is incorporated into the domestic legal system applicable in terms of the choice of laws principles. Several authors therefore held the opinion that contracting parties were not allowed to opt into the CISG where the Rome Convention was the applicable private international law of the forum. 618 Article 3(1) of the Rome I Regulation directs that a contract shall be governed by the law chosen by the parties. 619 Since this provision does not specify that the choice needs to be the law of a state, it may possibly allow for the conclusion that other legal instruments such as the CISG or the UNIDROIT Principles may be chosen as the proper law of the contract. Conversely, it has been concluded that parties are not allowed under the Rome I Regulation to choose non-state compilations of rules (such as the Principles of European Contract Law or the UNIDROIT Principles of International Commercial Contracts 620 as the governing law of their contract. Instead of choosing the CISG as the law applicable to the contract on a choice of law level, the parties could incorporate provisions of the CISG into their contract in the form of contractual terms. 621 The validity of such provisions would be determined in accordance with the domestic contract law applicable to the parties contract and the extent to which this legal system allows for freedom of contract. Furthermore, if parties were to incorporate certain CISG provisions by reference, the requirements for incorporation by reference would also be determined by the domestic legal system as indicated by the rules of private international law of the forum. For example, recital 13 of the Rome I Regulation states that it does not preclude parties from incorporating by reference into their contract a non-state body of law or an international convention. 622 This provision seems to permit parties to make an international instrument or convention part of their contractual provisions once again, such See, in general, Drobnig The UNIDROIT Principles in the Conflict of laws 1998 Revue de droit uniforme / Uniform Law Review Huber (n 12) 65-66; Saf (n 100) 47; Schlechtriem (n 432) 88 (par 11). Rome I Regulation (n 49). Bogdan The Rome I Regulation on the Law Applicable to Contractual Obligations and the Choice of Law by the Parties 2009 Nederlands Internationaal Privaatrecht Huber (n 12) 66. See the text of the Rome I Regulation (n 49). 176

185 incorporation would be subject to the law of contract provisions of the relevant domestic legal system as determined by the private international law of the forum. Schlechtriem argues that parties could possibly extend the application of the CISG by agreement to matters not governed by it. For instance, they could agree on its application to internal sales or to the sale of goods excluded from the CISG under article One commentator views the application of the CISG to goods excluded under article 2 or matters excluded under article 4 as a derogation from either article 2 or 4 as authorised by article and not as an extension of the CISG s application. This extension of the CISG s application takes place on the level of substantive contract law and Schlechtriem argues that such extension is not governed by article 6 but by the rules on party autonomy of the applicable law. 625 Such extension of the CISG may be prevented by mandatory provisions of the forum such as consumer protection provisions Conclusion on article 6 In order to avoid any uncertainty, it is recommended that, if the parties wish to exclude the application of the CISG, it should be excluded explicitly and the law applicable in the absence of the Convention be clearly indicated. Nonetheless, it is submitted that implied exclusion of the Convention is possible, but that such exclusion should be manifestly clear from the contract before such an inference is made Conclusion on the sphere of application of the CISG If the basic requirements for application of the CISG under either article 1(1)(a) or 1(1)(b) are met, the Convention will be applied. Article 1(1)(b) extends the application of the CISG considerably by rendering it applicable if the rules of private Schlechtriem (n 432) 89 (par 13). Reiley (n 192) 54. Schlechtriem (n 432) 90 (par 13). See Stanton How to be or not to be: The United Nations Convention on Contracts for the International Sale of Goods, Article Cardozo Journal of International and Comparative Law for a similar sentiment. 177

186 international law of a forum in a contracting state or (it is submitted) a noncontracting state refer to the law of a CISG contracting state. This fact underlines the important role of private international law in extending the application of the CISG. If the parties wish to exclude the CISG s application, the onus is on them to do so in a manner which would amount to a valid exclusion under article 6. When having to determine whether the requirements for the CISG s application are met (taking into account the effect of a possible article 95 reservation) or whether its application has been excluded by the parties, it is submitted that a pro conventione approach should be followed. Promoting the widest possible application of the CISG would lead to greater uniformity and predictability of the rules governing contracts for the international sale of goods. This, in turn, would facilitate and encourage international trade. 3.9 Summary on the interplay between articles 1, 6 and 95 The interaction between articles 1(1), 6 and 95 will differ where (1) the forum is situated in a contracting state and the article 1(1)(a) requirements are met; (2) the forum is situated in a contracting state but the article 1(1)(a) requirements are not met; (3) the forum is situated in a contracting state which made an article 95 reservation but article 1(1)(a) s requirements for application are not met; and (4) where the forum is situated in a non-contracting state to the CISG. Firstly, in the scenario where the forum is situated in a CISG contracting state and both parties have their places of business in CISG contracting states, the CISG would be directly or automatically applicable in terms of article 1(1)(a). However, even where the CISG s requirements for application under article 1(1)(a) are met, the forum would frequently have to determine the domestic legal system applicable in terms of its rules of private international law to designate the principles applicable to matters falling outside the scope of the Convention or to gaps. If the legal system as designated by the rules of private international law, is that of a CISG contracting state, it is submitted that the forum may declare that it is applying the CISG in terms of article 1(1)(b), even though the CISG s requirements for application under article 1(1)(a) are complied with. The reason for this submission is the fact that articles 178

187 1(1)(a) and 1(1)(b) constitute alternative applicability criteria. There seems to be no reason for preferring application under article 1(1)(a) where the designated proper law is that of a CISG contracting state. Article 6 of the CISG gives recognition to the principle of party autonomy and parties may choose the legal system applicable to their contract. The validity of a choice of law is to be determined in accordance with the rules of private international law of the forum. If the parties choose the law of a non-contracting state as the applicable law, most authors would conclude that this amounts to an exclusion of the CISG. The present author submits that the choice of law clause needs to be interpreted to ascertain whether the parties intended to exclude the application of the CISG, or merely to assign matters not governed or not settled in the CISG to the chosen domestic legal system. A choice of law of a CISG contracting state would lead to the application of the CISG since the CISG s requirements for application in terms of article 1(1)(a) are complied with, the CISG would be the relevant body of rules of the proper law to be applied. Secondly, in the circumstances where the forum is situated in a CISG contracting state and only one or neither of the parties hail from a CISG contracting state, reference will have to be made to article 1(1)(b) to determine whether the CISG is to be applied. According to article 1(1)(b), the CISG will be applicable if the forum s rules of private international law refer to the law of a CISG contracting state. Whether or not renvoi is to be taken into account, will be determined by the conflict rules of the forum. However, most legal systems conflict rules do not apply renvoi to contractual matters. Should the parties insert a choice of law clause into their contract, its validity will have to be determined with reference to the relevant rules of private international law of the forum. A choice of the law of a CISG contracting state will once again render the CISG applicable as part of the law of the chosen legal system. If the parties assign the law of a non-contracting state as the law applicable to the contract, this choice of law clause will have to be interpreted to gauge the true intention of the parties regarding the exclusion of the CISG. The relevant rules of private international law may be contained in an international convention such as the 1980 Rome Convention or the 1955 Hague Convention or a 179

188 regional instrument such as the Rome I Regulation. Where a forum is situated in a CISG contracting state which is also a contracting state to the Hague and Rome Conventions, or where the Rome I Regulation is applicable, the 1955 Hague Convention will take precedence over the Rome Convention / Rome I Regulation. In the context of application of the CISG in terms of article 1(1)(b), no possible conflict will arise between the CISG and a uniform private international law convention or the regulation, the latter will merely provide the relevant rules of private international law as referred to in article 1(1)(b) of the first-mentioned convention. If the relevant rules of private international law refer to the law of a non-reservation contracting state, such a reference would render the CISG applicable. The requirements for application of the Convention are complied with from the perspective of the forum as well as from the perspective of the proper law, and the CISG is therefore the relevant body of law to be applied. When the forum s rules of private international law point to the law of a contracting state which made an article 95 reservation, the situation is more complex. On the one hand, the forum may argue that, as it is situated in a non-reservation contracting state, it is as such bound to apply the CISG if its requirements for application are met. From the forum s perspective, the requirements for application of the CISG in terms of article 1(1)(b) are met. An article 95 reservation only relieves fora in reservation states from the duty of applying the CISG in terms of article 1(1)(b). On the other hand, from the perspective of the proper law, the requirements for the CISG s application are not met: parties are not both from CISG contracting states and the proper law state has elected not to be bound by article 1(1)(b). Therefore, the relevant body of sales law of the proper law would be the domestic sales law. If the forum s conflict rules designate the law of a non-contracting state as the proper law of the contract, the CISG would not be applicable. If the parties chose the law of a CISG contracting state as the law applicable to their contract, the CISG would be applicable, since the Convention s requirements for application under article 1(1)(b) are met. If the parties chose the law of a reservation contracting state, the CISG could possibly be found applicable from the point of view of the forum state, the CISG s requirements for application under article 1(1)(b) are met. However, from the perspective of the chosen law, the requirements for 180

189 application of the CISG are not met and the relevant rules of the chosen legal system would not be those contained in the CISG. Thirdly, in the scenario where the forum is situated in a reservation state and article 1(1)(a) s requirements for application of the Convention are not met, the forum would turn to its rules of private international law to determine the legal system applicable to the contract in the absence of a choice of law made by the parties. If the forum s rules of private international law point to the law of a non-reservation contracting state, it is submitted that the CISG should be applied. From the perspective of the proper law, the requirements for application of the Convention in terms of article 1(1)(b) are met. The relevant rules of the proper law to be applied are therefore those contained in the CISG and correct application of the proper law would necessitate the application of the Convention. From the perspective of the forum, it is not applying the CISG in terms of article 1(1)(b) but as part of the proper law to which its conflict rules point. If the law of a reservation state is found to be applicable, the domestic sales law of the proper law, and not the CISG, will be applied. The validity of a choice of law effected by the parties is to be determined by the rules of private international law of the forum. If the parties chose the law of a contracting state, the CISG should be applied. If the parties chose the law of a reservation state, the CISG would most probably not be applied. A choice of law of a non-contracting state would have to be interpreted to ascertain the parties intention with regard to the exclusion of the CISG. Lastly, a forum situated in a non-contracting state would turn to its rules of private international law to determine the legal system applicable to a contract for the international sale of goods that lacks a choice of law clause. If the conflict rules of the forum designate the law of a CISG contracting state as the proper law of the contract, the CISG should be applied as part of the applicable law. It is submitted that a forum in a non-contracting state is not prohibited from stating that it is applying the CISG on the grounds that its requirements for application under article 1(1)(b) are met. If the forum s rules of private international law find the law of a reservation state applicable, it is submitted that the CISG should be applied if both parties are from CISG contracting states. If not, the CISG is not the relevant body of sales law to be 181

190 applied from the perspective of the proper law. The validity of a choice of law made by the parties will be determined in accordance with the rules of private international law of the forum. The conflict rules of the forum would therefore determine whether the parties may choose an international convention such as the CISG or an international instrument such as the UNIDROIT Principles to govern their contract. A valid choice of law in favour of a CISG contracting state would render the CISG applicable. 182

191 APPENDIX TO CHAPTER 3 TABLE ON THE SCOPE OF APPLICATION OF THE CISG FORUM PARTIES FROM APPLICABLE LAW CISG APPLICABLE? NRCS NRCS + NRCS NRCS YES art 1(1)(a) NRCS NRCS + RCS NRCS YES art 1(1)(a) NRCS NRCS + NCS NRCS YES art 1(1)(b) NRCS RCS + RCS NRCS YES art 1(1)(a) NRCS RCS + NCS NRCS YES art 1(1)(b) NRCS NCS + NCS NRCS YES art 1(1)(b) NRCS NRCS + NRCS RCS YES art 1(1)(a) NRCS NRCS + RCS RCS YES art 1(1)(a) NRCS NRCS + NCS RCS YES art 1(1)(b) from perspective of forum NRCS RCS + RCS RCS YES art 1(1)(a) NRCS RCS + NCS RCS YES art 1(1)(b) from perspective of forum NRCS NCS + NCS RCS YES art 1(1)(b) from perspective of forum NRCS NRCS + NRCS NCS NO NRCS NRCS + RCS NCS NO NRCS NRCS + NCS NCS NO NRCS RCS + RCS NCS NO NRCS RCS + NCS NCS NO NRCS NCS + NCS NCS NO 183

192 RCS NRCS + NRCS NRCS YES art 1(1)(a) RCS NRCS + RCS NRCS YES art 1(1)(a) RCS NRCS + NCS NRCS YES part of proper law RCS RCS + RCS NRCS YES art 1(1)(a) RCS RCS + NCS NRCS YES part of proper law RCS NCS + NCS NRCS YES part of proper law RCS NRCS + NRCS RCS YES art 1(1)(a) RCS NRCS + RCS RCS YES art 1(1)(a) RCS NRCS + NCS RCS NO RCS RCS + RCS RCS YES art 1(1)(a) RCS RCS + NCS RCS NO RCS NCS + NCS RCS NO RCS NRCS + NRCS NCS NO RCS NRCS + RCS NCS NO RCS NRCS + NCS NCS NO RCS RCS + RCS NCS NO RCS RCS + NCS NCS NO RCS NCS + NCS NCS NO NCS NRCS + NRCS NRCS YES part of proper law NCS NRCS + RCS NRCS YES part of proper law NCS NRCS + NCS NRCS YES part of proper law NCS RCS + RCS NRCS YES part of proper 184

193 law NCS RCS + NCS NRCS YES part of proper law NCS NCS + NCS NRCS YES part of proper law NCS NRCS + NRCS RCS YES part of proper law NCS NRCS + RCS RCS YES part of proper law NCS NRCS + NCS RCS NO NCS RCS + RCS RCS YES part of proper law NCS RCS + NCS RCS NO NCS NCS + NCS RCS NO NCS NRCS + NRCS NCS NO NCS NRCS + RCS NCS NO NCS NRCS + NCS NCS NO NCS RCS + RCS NCS NO NCS RCS + NCS NCS NO NCS NCS + NCS NCS NO KEY: NRCS Non-reservation contracting state RCS Reservation contracting state NCS Non contracting state 185

194 CHAPTER 4 ARTICLES 7(2) AND 28 OF THE CISG AND PRIVATE INTERNATIONAL LAW WHEN RECOURSE TO DOMESTIC LAW IS EXPRESSLY PERMITTED BY THE CISG 4.1 Introduction Articles 1, 6 and 95 of the CISG, as analysed in chapter 3 of this thesis, pertain to the private international law questions surrounding the application of the CISG. It has been shown that recourse to the rules of private international law broadens the sphere of application of the CISG and that international uniform substantive law instruments such as the CISG and private international law indeed have a symbiotic relationship. Articles 7(2) and 28 are the other two provisions of the CISG that also have important private international law implications. These two provisions will be analysed in one chapter since they both relate to circumstances under which reference to domestic law is authorised by the CISG. It is also submitted that such recourse to domestic law improves the functioning of the CISG. According to article 7(2), [q]uestions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law. Several important topics for analysis stem from this sub-article. Firstly, which matters are governed by the CISG but not expressly settled by it? Matters governed but not settled by the CISG must be distinguished from matters not governed by the CISG. As a starting point in this regard, attention must be given to article 4 of the CISG. Matters which concern contracts for the international sale of goods but which are not governed by the CISG, must be settled with reference to the (domestic) legal system applicable to the contract. In the absence of a choice of law clause in the contract, this legal system would have to be assigned to the contract with reference to the rules of private international law of the forum. This once again underlines the important relationship between the CISG, a uniform international substantive law convention, 186

195 and the rules of private international law. Secondly, what are the general principles on which the CISG is based? It is contended that complete consensus on what these general principles should encompass, is not possible. Existing CISG case law is an important source in this regard. It must be endeavoured to delineate these principles in order to employ them for gap-filling. Thirdly, when may recourse be had to the legal system as indicated by the rules of private international law under article 7(2)? According to article 28, [i]f, in accordance with the provisions of this Convention, one party is entitled to require performance of any obligation by the other party, a court is not bound to enter a judgment for specific performance unless the court would do so under its own law in respect of similar contracts of sale not governed by this Convention. This is an interesting stipulation, since most other aspects of an international sales contract not governed by the CISG would be governed by the lex causae of the contract (termed the proper law of the contract in numerous jurisdictions) as determined by the rules of private international law. The law applicable to the contract may or may not be the lex fori. From a private international law perspective, article 28 of the CISG may bring about depeçage 1 if the lex fori is not the law applicable to the contract. From a uniform sales law perspective, article 28 may hamper decisional harmony, since common law and civil law systems differ vastly in their approach to specific performance. The important questions surrounding articles 7(2) and 28 will be analysed in this chapter. 4.2 Article 7(2) Introduction Article 7(2) of the CISG is most commonly referred to as the gap-filling provision of the Convention. 2 The reason for including this provision in the CISG is the fact that it would be impossible to draft a Convention covering a topic a wide as contracts for the 1 2 See par below. See Schlechtriem Article 7 in Schlechtriem and Schwenzer Commentary on the UN Convention on the International Sale of Goods (CISG) (2005) (par 5). 187

196 international sale of goods and not leave any gaps. 3 The possible permutations in such contracts are endless and it would not have been possible for the drafters to foresee all these permutations. Furthermore, the CISG represents a compromise between divergent legal traditions and it would have been impossible to achieve complete uniformity and consensus on all legal principles concerning contracts for the international sale of goods. 4 According to Schlechtriem, the purpose of this gap-filling provision is to adjust the Convention to new developments not foreseen by its draftsmen. 5 He states that the CISG reflects the state of knowledge and experience up to 1980 only; its drafters did not and could not foresee new technical and economic developments such as electronic communication and contracts involving software. Gap-filing, therefore, becomes an instrument of developing the Convention and adjusting it to new needs. 6 It has been pointed out that such adaptability and flexibility are vital characteristics of an instrument that attempts to deal with a subject matter as fluid and dynamic as international trade. 7 It has been stated that article 7(2) is in many ways the linchpin of the CISG since its use by courts and tribunals will have a marked effect upon the future of the CISG Eörsi General Provisions in Galston and Smit International Sales. The United Nations Convention on Contracts for the International Sale of Goods (1984) Ferrari General Principles and International Uniform Commercial Law Conventions: A Study of the 1980 Vienna Sales Convention and the 1988 UNIDROIT Conventions 1997 Revue de droit uniforme / Uniform Law Review states in this regard that no convention can (or indeed wishes to) pose as an exhaustive body of rules. According to Koneru The International Interpretation of the UN Convention on Contracts for the International Sale of Goods: An Approach based on General Principles 1997 Minnesota Journal of Global Trade , the CISG was drafted in an atmosphere of compromise to find a reasonably workable solution and is not meant to be an exhaustive codification of international commercial behaviour. Such codification would have been unrealistic and would make the Convention too inflexible to adapt to changing circumstances of international trade. Schlechtriem (n 2) 96 (par 9). Schlechtriem (n 2) 103 (par 29). Felemegas Introduction in Felemegas (ed) An International Approach to the Interpretation of the United Nations Convention on Contracts for the International Sale of Goods (1980) as Uniform Sales Law (2007) 1 9. Bridge A Commentary on Articles 1 13 and 78 in Brand, Flechtner and Ferrari (eds) The Draft UNCITRAL Digest and Beyond: Cases, Analysis and Unresolved Issues in the UN Sales Convention (2004) Janssen and Kiene The CISG and its General Principles in Janssen and Meyer (eds) CISG Methodology (2009) also emphasise that article 7(2) CISG is a crucial provision for the uniform interpretation and application of the CISG. Koneru (n 4) argues that article 7(2) is the most important provision in ensuring the future success of the CISG. Felemegas (n 7) 8 regards articles 7(1) and 7(2) as the most important articles in the CISG, stating (at 9) that their success or failure will determine the CISG s eventual fate as uniform law. 188

197 As Schlechtriem 9 points out, although the meaning of this article seems clear at first glance, it is extremely difficult to apply. He states that the basic concept underlying gap-filling is simple. If matters are governed by the Convention (see article 4), then they are to be decided in accordance with the general principles on which the Convention is based, even if a particular aspect is not expressly settled in it. Only if no such principles can be determined, may and must recourse be had to the legal rules invoked under the applicable private international law. 10 It has been emphasised by several scholars that, in the interest of the CISG as a uniform law instrument, it must be attempted to find a solution to gaps from within the CISG, recourse to domestic law being the last resort. 11 At the outset, a distinction must be drawn between gaps and exclusions, since this article applies to gaps only. 12 Matters excluded from the scope of the CISG are to be resolved by direct reference to the legal system applicable in terms of the rules of the private international law of the forum. 13 Within this context, a gap exists when a legal matter is governed by the CISG (thus not excluded from the CISG), but the Convention provides no satisfactory answer. 14 A possible example of such a gap occurs in article 78 of the Convention which provides that if a party fails to pay a sum of money that is due, the other party is entitled to interest on that sum. However, this article does not specify at what rate this interest is to be calculated. No article in the CISG excludes the calculation of interest from the application of the Convention, but there is also no article that provides further clarification in this regard. Thus it could be concluded that this issue is governed by the CISG but not resolved by any express rule of the CISG. However, as will be seen later, 15 the distinction between gaps and exclusions is contentious is most cases, even with regard to the interest rate Schlechtriem (n 2) 96 (par 9). Schlechtriem (n 2) (par 8). See, for example, Bonell Interpretation of Convention in Bianca and Bonell Commentary on the International Sales Law. The 1980 Vienna Sales Convention (1987) Mather Choice of Law for International Sales Issues not Resolved by the CISG 2001 Journal of Law and Commerce Schlechtriem (n 2) 103 refers to a true gap as an internal gap and to an exclusion as an external gap. Janssen and Kiene (n 8) 161. Kritzer, Vanto, Vanto and Eiselen International Contract Manual Volume 4 (2009) 85:13 (referred to hereinafter as Kritzer et al). See par below. 189

198 Of course, it is also problematic to ascertain when a true gap exists and this is a question of interpretation that differs from one jurisdiction to the next. Huber summarises this difficulty as follows: The question of what has to be considered as a gap under the Convention cannot be answered on a mere rational basis. Someone who has a positive stand towards the Convention will discover but few gaps. On the other hand, if a person is sceptical about the international unification of the sales law, he will every now and then run into unsettled questions. In addition, a common law jurist, because of his legal tradition, will probably tend towards a more restrictive interpretation of the Convention and its provisions. Thus he might more often be confronted with a gap than would be a civil law jurist. Civil law jurists are more frequently used to work with generally framed, systematically conceived legal codes. Out of this experience, they are more readily prepared to solve unsettled questions or to fill gaps by referring to the general principles contained in the code itself. 16 Other scholars also refer to the fact that reference to general principles in order to fill gaps in a code is a practice that civil law jurists are most familiar with. 17 Provisions similar in meaning and effect to article 7(2) are to be found in many civilian codes. 18 Common law jurists, on the other hand, follow a casuistic approach looking at case law for general principles and interpreting statutes very strictly. 19 A jurist trained Quoted and translated by Volken The Vienna Convention: Scope, Interpretation and Gapfilling in Volken and Šarčević (eds) International Sale of Goods: Dubrovnik Lectures (1986) This translation extracted from Huber Der UNCITRAL-Entwurf eines Uebereinkommens über Internationale Warenkaufverträge 1979 Rabels Zeitschrift für ausländisches und internationales Privatrecht 422. Honnold The Sales Convention in Action Uniform International Words: Uniform Application? 1988 Journal of Law and Commerce 207 also refers to the diverging common law and civil law approaches to gap-filling within codes. He states in this regard that [i]f judges simply follow habit, common law courts will be less inclined than civil law courts to extract general principles from the Convention and, conversely, will be more likely than civil law courts to see a gap in the statute that requires the use of domestic law (at 210). Bonell (n 11) 76; Eörsi (n 3) 2-11; Rosenberg The Vienna Convention: Uniformity in Interpretation for Gap-filling An Analysis and Application 1992 Australian Business Law Review Eorsi (n 3) 2-11 refers to the fact that article 1of the Swiss Zivilgesetzbuch resembles article 7(2) of the CISG. Ferrari Uniform Interpretation of the 1980 Uniform Sales Law 1994 Georgia Journal of International and Comparative Law refers to article 12(2) of the Italian Civil Code s Preliminary Provisions which directs that any controversy in the code which cannot be solved by a specific provision of the code or by analogous application of the code s provisions, must be solved in accordance with the general principles underlying the Italian legal system. Bonell (n 11) 77. See, in general, with regard to the differences between civil law and common law legal systems and the challenges it may provide in the context of international uniform law, Kahn-Freund Common law and Civil law Imaginary and Real Obstacles to Assimilation in Cappelletti (ed) New Perspectives for a Common Law of Europe (1978) 137. He states (at 154) that [v]ery broadly speaking one may say that perhaps the most essential difference lies in the 190

199 within the common law legal tradition would therefore be less inclined to utilise general principles for filling gaps in a code. Distinguishing gaps from exclusions, identifying and applying general principles for gap-filling and determining when recourse to domestic law under article 7(2) is appropriate, are all contentious matters to be analysed in this section Legislative history of article 7(2) Article 17 of the ULIS, 20 which is article 7(2) s predecessor, negated any reference to the rules of private international law and directed that [q]uestions 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. At the UNCITRAL Working Group s First Session in 1970, some delegates raised concern over the effectiveness of filling gaps merely by reference to general principles, since it would be difficult to identify such general principles. 21 It was suggested by some delegates that article 17 of the ULIS should be modified to include a reference to the legal system applicable by virtue of the rules of private international law. 22 Other delegates supported the original wording of article 17 of the ULIS and were opposed to any references to domestic legal systems for gap-filling. 23 At its Second Session, the Working Group recommended that article 17 of the ULIS be deleted and that the following provisions be adopted: In interpreting and applying the provisions of this Law, regard shall be had to its international character and to the expectation that in Continental countries principles are laid down by legislation and some of the details are in judgments, whilst in the common law world the lawyer looks for his principles in cases, and the statutes merely fill in the details, the case law playing the role of the Codes on the Continent. Convention relating to a Uniform Law on the International Sale of Goods (ULIS), , The Hague, 834 UNTS 107; (last accessed ). Report of the Working Group on the International Sale of Goods, First Session, 5 16 January 1970 (A/CN.9/35) in UNCITRAL Yearbook I ( ) and Honnold Documentary History of the Uniform Law for International Sales. The Studies, Deliberations and Decisions that led to the 1980 United Nations Convention with Introduction and Explanations (1989) 20. Ibid. Ibid. 191

200 need to promote uniformity (in interpretation and application). 24 Several representatives suggested supplementing the suggested text by a provision on gapfilling. One suggestion was to direct that gaps in the text be solved in conformity with its underlying principles and purposes. 25 Other representatives were sceptical of finding answers to unresolved matters in the text with reference to general principles which were not clearly demarcated. These representatives suggested the following provision for gap-filling: Private international law shall apply to questions not settled by the Uniform Law. 26 This suggestion was criticised by representatives who were of the view that it would encourage references to domestic law and would lead to costly litigation concerning the relevant rules of private international law. 27 The matter was referred to the Commission. The Commission decided that it was not possible to decide on this matter until the revised text of the ULIS could be read as a whole. 28 In 1977, the Committee of the Whole (which is in essence the Full Commission), had to decide on the following provision approved by the Working Group and included in the 1976 Working Group Draft Convention on the International Sale of Goods: 29 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. 30 The Committee had to decide on various proposals for supplementing the article by adding a gap-filling provision. 31 One suggestion was that gaps be filled by applying the substantive law of the State where the seller has his place of business. 32 The ratio behind this rule was the fact that it was in line with the 1955 Hague Convention on Working Group on the International Sale of Goods: Report on the Work of the Second Session, 7 18 December 1970 (A/CN.9/52) in UNCITRAL Yearbook II (1971) 50-65, 62; Honnold (n 21) 68. Ibid. Ibid. Ibid. Report of the United Nations Commission on International Trade Law on the Work of its Fourth Session in Official Records of the General Assembly, Twenty-sixth Session, Supplement no 17 (A/8417) par 71, UNCITRAL Yearbook II (1971) part one, II A. See UNCITRAL Yearbook VII (1976) Article 13 of the 1976 Working Group Draft Convention on the International Sale of Goods in UNCITRAL Yearbook VII (1976) Report of the Committee of the Whole I relating to the Draft Convention on the International Sale of Goods (A/32/17, Annex I) in UNCITRAL Yearbook VIII (1977) 25-64, 34; Honnold (n 21) 327. Ibid. 192

201 the Law Applicable to the International Sale of Goods and that such a rule could be a step towards harmonising the rules of private international law in the field of the international sale of goods. 33 Those opposed to this proposal countered that a private international law rule has no place in an international substantive law document and that its inclusion could in fact create difficulties for parties to the 1955 Hague Convention wishing to become member states of the Sales Convention. 34 None of the proposals met with the necessary support and the article as set out above was adopted without change. 35 Upon reviewing article 5 36 of the draft Convention on the Formation of Contracts for the International Sale of Goods 37 in 1978 and combining it with the 1976 Draft Convention on Contracts for the International Sale of Goods, the Commission decided to merge article 5 with article 13 of the 1976 Sales draft 38 and decided to include the following as article 6 of the 1978 UNCITRAL Draft Convention on Contracts for the International Sale of Goods: 39 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. Article 6 (which became article 7 of the CISG) was deliberated during the fifth meeting of the First Committee during the Conference. 40 The delegations from Bulgaria, 41 Czechoslovakia, 42 and Italy 43 proposed an addition to article 6 to provide Ibid. Report of the Committee of the Whole I relating to the Draft Convention on the International Sale of Goods (n 31) 35; Honnold (n 21) 328. Though article 3 of the 1955 Hague Convention did make the law of the place of the seller applicable, it also contained exceptions on this general rule. These exceptions could lead to a clash between such a provision in the Sales Convention and the 1955 Hague Convention. Ibid. The text of article 5 read: In the course of the formation of the contract the parties must observe the principles of fair dealing and act in good faith. Draft Convention on the Formation of Contracts for the International Sale of Goods of 1977 in UNCITRAL Yearbook IX (1978) Summary of Deliberations of the Commission on the Draft Convention on the Formation of Contracts for the International Sale of Goods (A/33/17, Annex I) in UNCITRAL Yearbook IX (1978) 31-45, 36; Honnold (n 21) 370. The text of the Draft Convention may be found in UNCITRAL Yearbook IX (1978) as well as in the United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March 11 April 1980, Official Records; UN Document no A/CONF.97/19 (hereinafter Official Records) 5-14, 5; Honnold (n 21) 382. A/CONF.97/C.1/SR.5, Official Records (n 39) A/CONF.97/C.1/L.16: Add a new paragraph (2) to article 6, reading as follows: (2) Questions which cannot be solved according to paragraph (1) of this article shall be settled according to 193

202 for gap-filling. None of the proposals were accepted individually. The Bulgarian proposal which called for gaps to be filled with reference to the law of the seller s place of business, was rejected since it would create problems for contracting states to the 1955 Hague Sales Convention to comply with their obligations under the latter Convention. 44 The representative of the German Democratic Republic suggested a combination of the Italian and Czechoslovakian proposals providing for recourse to the general principles on which the Convention is based (as suggested by the Italian delegation) and in the absence of such general principles, reference to the law applicable by virtue of the rules of private international law (as advocated by the Czechoslovakian delegation). 45 This suggestion by the German Democratic Republic was adopted by seventeen votes to fourteen, with eleven abstentions. 46 The revised article 6 was adopted by the First Committee during its thirty-fifth meeting 47 and sent through to the Plenary Conference for approval. 48 The Plenary Conference adopted article 6 during its sixth plenary meeting. 49 This became article 7 of the United Nations Conference on Contracts for the International Sale of Goods The link between articles 7(1) and 7(2) The fact that articles 7(1) and 7(2) are sub-articles under the same article, points to the fact that there must be some underlying link between the two. 51 According to article the law of the seller s pace of business. The same applies to the questions mentioned in article 4, paragraph (a), as well as to other questions, governed by the law proper to the contract. A/CONF.97/C.1/L.15: Add a new paragraph (2) to article 6 to read as follows: (2) Questions concerning matters governed by this Convention which are not settled therein shall be settled in conformity with the law applicable by virtue of the rules of private international law. A/CONF.97/C.1/L.59: Delete the words and the observance of good faith in international trade and add a new sentence: Questions concerning matters governed by this Convention which are not expressly settled therein shall be settled in conformity with the general principles on which this Convention is based or, in the absence of such principles, by taking into account of the national law of each of the parties. See the argument raised by the Swedish delegation Official Records (n 39) 257 par 30. Official Records (n 39) 256 par 26. Official Records (n 39) 257 par 35. A/CONF.97/C.1/SR.35; Official Records (n 39) , 423 par 46. See doc A/CONF.97/11/Add.1 and 2, Official Records (n 39) A/CONF.97/SR.6, Official Records (n 39) , 202 par 42. A/CONF.97/18, Annex I; Official Records (n 39) , 178. Felemegas The United Nations Convention on Contracts for the International Sale of Goods: Article 7 and Uniform Interpretation (2000) 75, available on the Pace CISG website at (last accessed ). This essay was published in the Pace Review of the Convention on Contracts for the International Sale of Goods (CISG) (2000/2001) Reference is made to the page numbers of the text as available on the Pace website. 194

203 7(1), in the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade. Article 7(1) is the interpretation provision of the CISG. It has been pointed out that the CISG opted for autonomous interpretation, 52 which amounts to interpretation of its provisions and concepts independent from the particular concepts of a specific legal system. 53 To have regard to its international character in its interpretation has been explained as refraining from reference to domestic law for interpretation purposes. 54 According to Ferrari, autonomous interpretation of the CISG promotes, up to a certain point, the uniformity of its application. 55 It has been stated that uniformity in the law governing contracts for the international sale of goods can only be achieved if there is uniform interpretation of the provisions of the CISG and a uniform approach to filling gaps in the CISG. 56 It has been contended that articles 7(1) and (2) have the same aim, namely uniformity in the CISG s application. 57 The question of whether or not a gap exists in a certain instance is one of interpretation. 58 This shows the link between article 7(1) and 7(2). In interpreting the provisions of the CISG when a possible gap is encountered and in filling the gap either by way of analogous application of CISG provisions or identifying general principles on which the CISG is based, regard must be had to article 7(1). The interpretive criteria as set forth in article 7(1) must therefore be borne in mind when attempting to ascertain whether a gap exists and how to fill it. 59 One commentator explains the important link between articles 7(1) and 7(2) by stating that the general scheme of article 7 is that the judge should give an international rather than a domestic interpretation to the Convention and that article 7(2) requires that the text of the Convention itself should be the primary source of Bonell (n 11) 74; Bridge (n 8) 249; Ferrari (n 18) 200. Ferrari (n 18) 200. Ferrari (n 18) 200; Rosenberg (n 17) 450. Ferrari (n 18) 203. Rosenberg (n 17) 443. Felemegas (n 7) 23; Ferrari (n 18) 216; Ferrari Gap-filling and Interpretation of the CISG: Overview of International Case Law 2003 Vindobona Journal of International Commercial Law and Arbitration Eorsi (n 3) Viscasillas The Role of the UNIDROIT Principles and the PECL in the Interpretation and Gap-filling of the CISG in Janssen and Meyer (eds) (n 8)

204 interpretation. 60 Gebauer states that the requirement in article 7(1) that the CISG should be interpreted by having regard to its international character calls for autonomous interpretation of the Convention. 61 According to this argument, autonomous interpretation requires the Convention s terms and concepts to be interpreted in the context of the Convention itself. 62 This entails regarding the CISG s terms and concepts as independent and interpreting them with reference to the Convention s own system and objectives. 63 According to Gebauer, article 7(2) requires gaps also to be filled autonomously in conformity with the general principles of the CISG; the latter which will become evident from an autonomous interpretation of the Convention. 64 Schlechtriem also emphasises the fact that the borderline between broad interpretation and gap-filling is uncertain. 65 A liberal interpretation of certain provisions of the CISG may make gap-filling unnecessary in some instances. 66 When having to interpret the existence of a gap under article 7(2), the provisions of article 7(2) therefore have to be borne in mind. 4.3 Matters governed by but not expressly settled by the Convention Matters governed by but not expressly settled by the CISG distinguished from matters excluded from the scope of the CISG 67 The provisions delineating the CISG s sphere of application constitute the starting point in this regard. Article 2 excludes sales of goods bought for personal, family or household use; sale of goods by auction; sale on execution or otherwise by authority of law; sale of stocks, shares, investment securities, negotiable instruments or money; Koneru (n 4) 106. Gebauer Uniform Law, General Principles and Autonomous Interpretation 2000 Revue de droit uniforme / Uniform Law Review Gebauer (n 61) 687. Gebauer (n 61) 687. Gebauer (n 61) 687. Schlechtriem (n 2) 103 (par 28) Janssen and Kiene (n 8) 270. The authors add that broad interpretation should, however, not push the Convention s sphere of application too far. Ferrari Uniform Application and Interest Rates under the 1980 Vienna Sales Convention 1994/1995 Georgia Journal of International and Comparative Law 467 refers to these concepts as (at 471) a lacuna intra legem on the one hand - a matter outside the scope of the Convention, and a lacuna praeter legem on the other a gap within the meaning of article 7(2). 196

205 sale of ships, vessels hovercraft or aircraft and the sale of electricity. Article 3 includes contracts for the supply of goods to be manufactured or produced under the CISG unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production. Article 3 excludes the CISG from applying to contracts in which the preponderant part of the obligations of the party who furnishes the goods consists of the supply of labour or other services. According to article 4, the Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. 68 From article 4 it may be deduced that matters arising from one of these three mentioned aspects of an international sales contract which are not sufficiently settled by provisions of the CISG text, constitute gaps for purposes of article 7(2). 69 Such gaps are often referred to as internal gaps. 70 Article 4 of the CISG expressly excludes (a) the validity of the contract 71 or of any of its provisions or of any usage and (b) the effect which the contract may have on the property in the goods sold. Furthermore, article 5 excludes the liability of the seller for death or personal injury caused by the goods from the application of the CISG. A literal reading of articles 4 and 5 prompts the conclusion that the matters excluded and all matters pertaining to a contract for the international sale of goods that are not concerned with the formation of the contract or the rights and obligations of the parties, fall outside the scope of the CISG. Another issue not governed by the CISG, even though not expressly excluded, is the capacity of the parties. 72 All these matters Kritzer et al (n 14) 84:33 state in this regard: By necessary implication, it must be assumed that whatever topic is not included, either specifically, by necessary inference or appropriate gap-filling in terms of article 7, within the scope of the CISG, must be excluded. According to Mather (n 12) 156, issues governed by the CISG but not resolved by an express rule of the CISG, are interstitial gaps. Andersen General Principles of the CISG Generally Impenetrable? in Andersen and Schroeder (eds) Sharing International Commercial Law across National Boundaries: Festschrift for Albert H Kritzer on the Occasion of his Eightieth Birthday (2008) 13 18; Magnus General Principles of UN-Sales Law 1997 International Trade and Business Law Annual See Kritzer et al (n 14) 84:34 for a comprehensive discussion of validity matters excluded from the scope of the CISG and the different schools of thought on the extent of this exclusion. Bonell (n 11)

206 do not constitute gaps under article 7(2) and are governed by the law applicable in terms of the rules of private international law of the forum. 73 However, in many instances the borderline between internal gaps and matters excluded from the sphere of application of the CISG is vague. 74 The Convention does not provide a definition of a gap, nor does article 7(2) contain any helpful criteria in this regard. According to Andersen, a whole range of definitions may be provided, with an extreme at either end. 75 At one end, which provides for very few possibilities of gaps, the term governed by the CISG is interpreted as meaning encompassed directly by a problem-solving aspect of a provision of the CISG 76 if a solution to a certain matter or detail of a certain matter is omitted from a provision of the CISG and not found elsewhere in the text of the Convention, the matter is regarded as outside the scope of the Convention. At the other end of the range of definitions, the broadest concept of a gap would be any matter not resolved in the CISG but which relates to the law of contract for the international sale of goods not expressly excluded in the Convention. 77 Andersen states that the correct definition of a gap must be found somewhere between the two extremes, but doubts whether it is possible to formulate a universally accepted definition of this concept. 78 She does, however, suggest a list of guidelines to assist in the classification of a certain matter as a gap within the meaning of article 7(2): The issue must arise from a contract for the international sale of goods as defined by the CISG; the subject matter must not be excluded from the CISG; there should ideally be a specific provision which deals with the issue in part; the classification in the lex fori of the issue as substantive or procedural should not be decisive, unless it is uniformly accepted to exclude an issue from being a gap in an established body of international CISG precedents/scholarship; regard should be had to whether an established body of international CISG precedents/scholarship has already determined whether the issue is an internal gap According to Kritzer et al (n 14) 84:33, issues generally excluded from the scope of the CISG include agency, limitation of actions and set-off. Magnus (n 70) 38; Lookofsky Walking the Article 7(2) Tightrope between CISG and Domestic Law 2005/2006 Journal of Law and Commerce Andersen (n 70) 19. Ibid. Ibid. Andersen (n 70) 20. Andersen (n 70)

207 In essence, it is necessary to determine the intention of the drafters in order to resolve whether a certain matter is a gap or whether it is excluded from the scope of the CISG. It has been suggested that the intention of the drafters may be determined by a three-step process which consists of an analysis of the legislative history of the Convention or relevant provisions, an examination of similar matters regulated by specific provisions of the Convention and an investigation into the principles which underlie the CISG. 80 One author suggests that, in some instances where it is unclear whether a certain matter constitutes a gap or falls outside the sphere of application of the CISG, a tribunal may apply a substance/procedure analysis in order to find an answer. 81 This author suggests that substantive matters then be treated as gaps under article 7(2) and procedural matters be regarded as falling outside the scope of the CISG and governed by the lex fori. 82 It was pointed out, however, that the distinction between substance and procedure may differ from one jurisdiction to the next, which impacts negatively on uniform interpretation in this regard. 83 Furthermore, some legal traditions may consider certain matters governed by the CISG as procedural, even though it is generally accepted that the CISG is a substantive law instrument. 84 However, it is difficult to comprehend how the substance-procedure analysis would provide a clear answer to the question of whether or not a matter is governed by the CISG. Various sales law matters which fall outside the scope of the CISG are substantive in nature. Ultimately, however, this distinction remains a question of interpretation and it is a well-known fact that interpretation diverges from court to court. Reference may be made to case law in this regard, where some cases classify a matter as a gap whereas other cases regard the same matter as being outside the scope of the CISG. Examples Rosenberg (n 17) 449. McMahon Differentiating between Internal and External Gaps in the UN Convention on Contracts for the International Sale of Goods: A Proposed Method for Determining Governed by in the Context of Article 7(2) 2005/2006 Columbia Journal of Transnational Law Ibid. Ibid. McMahon (n 81) 995. See also Orlandi Procedural Issues and Uniform Law Conventions 2000 Revue de droit uniforme / Uniform Law Review 23 in this regard. Orlandi refers (at 28) to the law of evidence, which has been the object of intense and ongoing debate regarding its nature as substantive or procedural. Rules of evidence are classified as substantive in most, but not in all legal systems. With regard to the classification of matters as substantive or procedural under South African private international law, see Laurens v von Höhne 1993 (2) SA 104 (W). 199

208 of such matters are set-off, 85 the burden of proof (with regard to non-conformity of goods) 86 and agency. 87 Arguably the most controversial matter in this regard is the interest rate. A large number of decisions regard the interest rate as outside the scope of the CISG 88 while there are quite a number of precedents classifying it as a gap The decisions by the Tribunale di Vigevano (Italy), : case number 387 (UNILEX), 378 (CLOUT), i3.html (Pace); Hof s Hertogenbosch (the Netherlands), : case number 960 (UNILEX), n1.html (Pace); Landgericht Mönchengladbach (Germany), : case number 967 (UNILEX), g1.html (Pace) and the Schweizerisches Bundesgericht (Switzerland), : case number 991 (UNILEX), s1.html (Pace) regard set-off as being outside the scope of the CISG, whereas a decision by the Amtsgericht Duisburg (Germany), : case number 715 (UNILEX), 360 (CLOUT), g1.html (Pace) regard it as a matter governed but not expressly settled by the CISG. A large number of cases have regarded the burden of proof as a gap in the CISG, including the Bezirksgericht der Saane (Switzerland), : case number 403 (UNILEX), 261 (CLOUT), s1.html (Pace); Tribunale di Appello di Lugano (Switzerland), : case number 368 (UNILEX), s1.html (Pace); Handelsgericht Zürich (Switzerland), : case number 409 (UNILEX), 251 (CLOUT), s1.html (Pace); Camara Nacional de Apelaciones en lo Comercial de Buenos Aires (Argentina), : case number 820 (UNILEX), a1.html (Pace); Tribunale di Vigevano (Italy), (n 85); Schweizeriches Bundesgericht (Switzerland), : case number 907 (UNILEX), s1.html (Pace); Bundesgerichtshof (Germany), : case number 766 (UNILEX), g1.html (Pace); Court of Appeals, Fourth Circuit (United States), : case number 770 (UNILEX); Camara Nacional de Apelaciones en lo Comercial de Buenos Aires (Argentina), : case number 925 (UNILEX), 636 (CLOUT), a1.html (Pace); Netherlands Arbitration Institute, : case number 836 UNILEX); Tribunale di Rimini (Italy), : case number 823 (UNILEX), 608 (CLOUT), i3.html (Pace); Schweizeriches Bundesgericht (Switzerland), : case number 979 (UNILEX), s1.html (Pace) and the Schweizerisches Bundesgericht (Switzerland), (n 85). However, the ICC Court of Arbitration (Paris), Award no 6653/1993: case number 36 (UNILEX) regarded the burden of proof as a matter excluded from the CISG. According to decisions by the Landgericht Berlin (Germany), : case number 440 (UNILEX), g1.html (Pace) and the Tribunal Cantonal Valais (Switzerland), : case number 1083 (UNILEX), s1.html (Pace) agency is excluded from the scope of the CISG. Conversely, in a case heard by the Handelsgericht des Kantons Aargau (Switzerland), : case number 485 (UNILEX), 333 (CLOUT), s1.html (Pace) agency was regarded as a gap to be filled in terms of article 7(2). See, for example, the decisions by the Tribunale di Pavia (Italy), : case number 734 (UNILEX), 380 (CLOUT), i3.html (Pace) and the Court of Appeal of Turku (Finland), : case number 939 (UNILEX), f5.html (Pace). The UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods (2008) also reiterates that the majority of courts regard the calculation of the interest rate as a matter outside the scope of the CISG. See, for example, a decision by the Arrondissementsrechtbank Amsterdam (the Netherlands), : case number 126 (UNILEX); two arbitral awards by the Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft (Austria), number SCH-4366: case number 55 (UNILEX) and number SCH-4318: case number 56 (UNILEX); a decision by the Landgericht Aachen (Germany), : case number 125 (UNILEX), g1.html (Pace) and an arbitral award by the Schiedsgericht der Handelskammer Hamburg (Germany), : case number 195 (UNILEX), g1.html (Pace). In the last-mentioned award, the tribunal referred the determination of the interest rate to the domestic law otherwise applicable to the contract, but specifically stated that the reference was made in terms of article 7(2). 200

209 There is also evidence of the fact that reference to the rules of private international law for determining the law applicable to matters excluded from the scope of the CISG, such as the effect on property, and reference to private international law for gap-filling under article 7(2), are not always distinguished Gaps in the CISG to be dealt with in terms of article 7(2) An analysis of CISG case law provides insight into the matters fora regard as governed but not settled by the CISG. What is disconcerting however, as pointed out above, is the fact that numerous matters are classified as gaps by certain fora and as exclusions by others. Gaps identified in case law include the rules on contributory negligence, 91 the effect of a consensual termination of the contract, 92 one party s right to withhold performance in case of breach of contract by the other party, 93 assignment, 94 where payment of the refunded purchase price by the seller in case of avoidance of the contract must take place, 95 prescription, 96 the place of payment of damages, 97 setoff, 98 and the inclusion of standard terms in the contract See the decision of the Federal Court, South Australia District Adelaide (Australia), : case number 197 (UNILEX), 308 (CLOUT). Court of Arbitration of the Bulgarian Chamber of Commerce and Industry, : case number 421 (UNILEX), bu.html (Pace). Oberster Gerichtshof (Austria), : case number 419 (UNILEX), 422 (CLOUT), a3.html (Pace). Oberster Gerichtshof (Austria), : case number 1082 (UNILEX), a3.html (Pace). Cour d Appel de Grenoble, Chamber Commerciale (France), : case number 151 (UNILEX), 202 (CLOUT), f1.html (Pace). Cour d Appel de Paris (France), : case number 278 (UNILEX), f1.html (Pace). Cour d Appel de Paris (France), : case number 772 (UNILEX), f1.html (Pace). Oberlandesgericht Düsseldorf (Germany), : case number 26 (UNILEX), 49 (CLOUT), g1.html (Pace). See n 85 above. Hoge Raad (the Netherlands), : case number 1012 (UNILEX), n1.html (Pace). 201

210 4.4 Approaches to gap filling Introduction Kritzer identifies three general approaches to gap-filling in a code. 100 The first approach to gap-filling takes place by way of internal analogy and is known as the civil law approach or the true code approach. 101 According to this approach, one should not seek solutions outside the code. The second approach entails reference to external legal principles and is termed the common law approach by Kritzer. 102 It has also been called the meta code approach. 103 The third approach is a combination of the first two approaches. According to the third approach, one firstly endeavours to identify general principles to fill the gap. In the absence of such general principles, reference is made to the legal system indicated by the rules of private international law for a solution. 104 It is therefore clear that gap-filling via recourse to general principles is but one method of finding a solution for matters not settled in a code or convention. 105 This prompts the question of whether article 7(2) of the CISG, although it only mentions gap-filling via general principles, or in the absence of the former, reference to the rules of private international law, should be interpreted broadly to include other methods of legal reasoning as well, such as analogical application. 106 Quite a few scholars advocate a broad interpretation of this sub-article to allow for an analogical application of specific provisions of the CISG and a consideration of the general principles underlying the CISG as a whole, when the gap cannot be filled by analogical application of specific provisions. 107 The broad interpretation of article Kritzer Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods (1989) 117. See Hawkland Uniform Commercial Code Methodology 1962 University of Illinois Law Forum Kritzer (n 100) 117. Felemegas (n 51) 79. Felemegas (n 51) 80. Ferrari (n 18) 222. Ibid. Enderlein and Maskow International Sales Law. United Nations Convention on Contracts for the International Sale of Goods. Convention on the Limitation Period in the International Sale of Goods (1992) 58 support gap-filling by way of extensive interpretation and analogy. Felemegas (n 7) 26 argues that gap-filing by analogy is primary gap-filling and only when no 202

211 7(2) is supported in this regard. There seems to be no logical reason why the drafters of the CISG would have wanted to exclude the filling of gaps by way of analogical application of its provisions. Analogical application of CISG provisions would ensure a wider application of the CISG itself and would lessen the need to resort to principles or solutions outside of the CISG Gap-filling by analogy Many scholars advocate the view that it should be attempted to fill gaps by analogous application of existing provisions of the CISG before resorting to general principles underlying the Convention. 108 It has been convincingly argued that, even though the CISG does not expressly mention the possibility of filling gaps by way of analogical application of other CISG provisions, there exists no rational reason for excluding it. 109 The drafting history of article 7(2) also seems to endorse gap-filling by way of analogy. 110 In order to fill a gap by way of analogy, one would have to discern a CISG provision governing a situation similar to the situation that constitutes a gap. 111 One would then have to determine whether the content of the analogous provision should be restricted to a specific context and whether its analogical application would be arbitrary and contrary to the intention of the drafters or the purpose of the rule itself. 112 According to Bonell, once a provision is identified which may be applied by way of analogy, the question needs to be asked if the issue normally regulated by it and the issue at hand are so analogous that it would be inherently unjust not to adopt the same solution for both issues solution can be found by analogous application of existing CISG provisions, should recourse be had to general principles on which the CISG is based. See also Ferrari (n 18) 222. Bonell (n 11) Enderlein and Maskow (n 107) 60; Ferrari (n 18) 222 and Schlechtriem (n 2) 106 (par 30) advance similar arguments. Gebauer (n 61) 697 states in this regard: To settle an unresolved question by the analogical application of specific provisions present a closer connection to the Convention s system than does abstract recourse to somewhat vague underlying principles. Gebauer (n 61) 697. Working Group on the International Sale of Goods: Report on the Work of the Second Session (n 24) 62: One source of these principles would be generalizations that appear from the examination of various specific provisions of the law. According to Kritzer et al (n 14) 85:13, this calls for reasoning by analogy. Felemegas (n 51) 81. Ibid. Bonell (n 11)

212 An example of a gap that could be filled by way of analogy is the question of where restitution of the purchase price already paid by the buyer should take place after avoidance of the contract by the seller. 114 This question falls within the ambit of the obligations of the seller and is therefore a matter governed by the CISG but not settled by it. According to article 57 (1)(a), the buyer has the obligation to pay the purchase price at the seller s place of business. Article 57(1)(a) could be applied in an analogous manner to the gap regarding the seller s restitution obligation and it may be concluded that restitution is to take place at the buyer s place of business. 115 Schlechtriem and Butler point out that gap-filling by way of analogy is a useful method of filling gaps concerning issues which could not have been anticipated at the time of the CISG s drafting, such as those emerging due to technological advances. 116 The authors refer to the example of applying article 13 analogously to declarations made via fax or Gap-filling by way of analogy differs from gap-filling by resorting to general principles on which the Convention is based. 118 The former approach entails finding a solution for a gap by the extension of existing provisions of the CISG to analogous situations, whereas the latter entails the application of principles that may be applied on a wide scale because of their general character Recourse to general principles on which the Convention is based Introduction When the Convention applies to an international sales contract, but does not resolve Ibid. Bonell (n 11) 79; Oberster Gerichtshof (Austria), : case number 1053 (UNILEX), a3.html (Pace). Schlechtriem and Butler UN Law on International Sales (2009) 54. Schlechtriem and Butler (n 116) 54. According to article 13, writing includes telegram and telex. For a detailed discussion concerning the differences between analogical application of provisions and reference to general principles, see Kropholler Internationales Einheitsrecht. Allgemeine Lehren (1975) Bonell (n 11)

213 all the legal questions before the forum, regard must be given to the general principles on which the Convention is based before one resorts to the law applicable by virtue of the rules of private international law. 120 What is a principle or a general principle? In the juristic sense, a principle is described as an abstract rule applicable to particular concrete instances. 121 It has also been stated that a principle is by its nature vague and imprecise 122 and that it needs to be interpreted 123 in order to be employed. According to Schlechtriem, resorting to a general principle when a gap is encountered, should only be the third stage in the process of filling the gap. 124 He advocates that the first stage in gap-filling should be interpreting the parties intention under article 8 of the CISG and those elements of their previous dealings that could be said to amount to established practices (under article 9). The second stage in the process of gap-filling should then encompass the liberal interpretation of relevant provisions in the CISG or their application by analogy. 125 Only if a satisfactory solution is still elusive after the first and second stages of the gap-filling analysis should one resort to general principles on which the Convention is based. The procedures employed for gap-filling by analogy and by application of general principles are different. In the case of the former, specific provisions of the CISG are merely extended to analogical questions or situations. On the other hand, general principles on which the Convention is based are by their nature broad concepts underlying substantive rules contained in the Convention 126 and have to be identified and extracted from the text before they may be applied Mather (n 12) 157. Alpa General Principles of Law 1994 Annual Survey of International and Comparative Law 1 1. See Neels Regsekerheid en die Korrigerende Werking van Redelikheid en Billikheid (Deel 2) 1999 Tydskrif vir die Suid-Afrikaanse Reg / Journal of South African Law for a detailed discussion of the distinction between rules and principles. Alpa (n 121) 19. Ibid. Schlechtriem (n 2) 106 (par 30). Schlechtriem (n 2) 106 (par 30). Felemegas (n 51) 82 sees gap-filling by analogy as primary gap-filling. Felemegas (n 51)

214 Different views exist on the ease of identification of general principles to be employed for gap-filling. One commentator states that it should be a rare, or nonexistent, case where there are no relevant general principles to which a court might have recourse under article 7(2). 127 Conversely, other commentators point out that the text of the CISG contains almost no general principles which are explicitly described as such. 128 It needs to be investigated whether general principles are readily identifiable and, once they have been identified, how they are to be used for gap-filling Hierarchy of general principles? More than one general principle may be applicable to the same issue or question. This prompts the question of whether a hierarchy exists among the general principles. It is also possible that general principles may clash. Which principle is given preference? For instance, it has been stated that the principles of good faith and party autonomy may clash. 129 Winship refers to the fact that the Vienna Diplomatic Conference rejected with relative little debate a suggestion that the principles of party autonomy should be limited by a principle of good faith. 130 It has been argued that party autonomy is the dominant principle in the CISG. 131 Scholars who support this view argue that the rules contained in the CISG are supplementary 132 to the parties contract and only provide for matters not regulated by contract. According to this view, in the case of a conflict between the contract and the Convention, the former prevails. 133 According to Schlechtriem and Butler, the priority of party autonomy constitutes a general Felemegas (n 51) 79. Schwenzer and Fountoulakis International Sales Law (2007) 72. Kritzer (n 100) 113; Kritzer et al (n 14) 85:12. Winship The Scope of the Vienna Convention on International Sales Contracts in Galston and Smit (n 3) ; Official Records (n 39) Felemegas (n 51) 82. According to Felemegas (n 51) 14, it is therefore possible that parties could derogate from or exclude the provisions of article 7 of the CISG and agree on different rules for interpretation of the CISG or for gap-filling. This would, however, endanger uniform application of the CISG. Janssen and Kiene (n 8) 271 also regard party autonomy as the dominant general principle of the CISG. Sono The Vienna Sales Convention: History and Perspective in Volken and Šarčević (eds) (n 16) See Kritzer (n 100) for numerous references in this regard. 206

215 principle of the CISG. 134 Kritzer et al argue that, if party autonomy is seen as the dominant principle in the CISG, the Convention would be seen to have various strata of principles: a dominant theme, namely party autonomy; the unity theme and other general principles. 135 According to Gebauer, a distinction may be drawn between internal general principles and external general principles, 136 the former being principles derived from the system and ratio of the CISG and the latter derived from outside the CISG. 137 According to this argument, general principles on which the Convention is based refer primarily to internal general principles 138 and internal general principles should be given priority. 139 However, the text of the Convention provides no guidelines on the relative importance of the different general principles for purposes of gap-filling. The present author submits that, in lieu of any guidelines in the CISG text in this regard, the establishment of a hierarchy of general principles would be arbitrary. It is also submitted that it would be impossible to draw up a hierarchy of general principles that will meet with universal acceptance. The fact that there exists no certainty concerning the relative importance of various general principles for gap-filling constitutes another challenge with regard to gap-filling via general principles Where are the general principles to be found? Introduction The wording of article 7(2) must be borne in mind when attempting to ascertain where these general principles may be found. Article 7(2) provides that recourse may only be had to general principles on which it (the CISG) is based. According to Magnus, this requirement entails that for a particular general principle to apply to the convention it Schlechtriem and Butler (n 116) 52. Kritzer et al (n 14) 85:13. Gebauer (n 61) 694. Ibid. Gebauer (n 61) 697. Gebauer (n 61)

216 has to be expressed in the convention itself or has to result from it with sufficient clarity. Without such a link to the text and structure of the convention the utilisation of general principles becomes arbitrary and the goal of uniform interpretation is more endangered than furthered. 140 Honnold explains the meaning of is based by stating that such principles must be moored to premises that underlie specific provisions of the Convention. 141 It is evident that the general principles identified and employed in gap-filling should bear clear evidence of a substantial link with the CISG General principles expressly stated in the CISG Firstly, some of these general principles are expressly stated in the text of the CISG. 142 These include the principles of good faith (in article 7(1)) and party autonomy (in article 6) General principles deduced from CISG provisions It has been stated that, unlike the principles of good faith and party autonomy which are expressly stated in the CISG, most of these general principles have to be extracted from provisions of the CISG dealing with certain substantive issues. 144 These include the principles of reasonable conduct by the parties 145 and favor contractus. 146 There are varying opinions on the method to be followed when deducing general principles from CISG provisions. A few scholars advocate the use of comparative law in this regard. 147 According this view, the CISG in its entirety is based upon general Magnus (n 70) 39. Honnold Uniform Law for International Sales under the 1980 United Nations Convention. Edited and Updated by Harry M Flechtner (2009) 102 (hereinafter referred to as Honnold Flechtner). Eorsi (n 3) Janssen and Kiene (n 8) 271 refer to such principles as general principles to be derived from a single article of the Convention. Bonell (n 11) 81; Ferrari (n 18) 223. Bonell (n 11) 80; Ferrari (n 52) 224. The general principle that parties should act reasonably may be deduced from articles 8(2), 25, 35(1)(b), 60, 72(2), 79(1), 85, 86 and 88(2). The principle that a solution in favour of the valid existence should be found wherever possible may be deduced from articles 19(2), 25 26, 34, 37, 48, 49, 51(1), and 64. See, for example, Felemegas (n 7)

217 principles derived from a comparative law analysis, and the use of comparative law to find general principles underlying the CISG is therefore justified. 148 Other scholars negate reference to comparative law in determining general principles. 149 Magnus argues that the requirement that the CISG must be based on such general principles excludes the possibility to develop based on a comparative legal analysis common principles either from the law of all nations or even only from the law of the contracting states of the CISG for the purpose of filling gaps ad hoc for a specific case. 150 Janssen and Kiene identify two other methods of inferring general principles from CISG provisions. The first involves analysing several articles of the CISG and finding an overarching purpose. 151 An example of this method is deducing the principle of favor contractus from articles 25, 49(2) and The second method identified by these authors entails generalising a single provision for application to similar situations. An example of this method is deducing a general principle of place of payment of monetary obligations from article 57 of the CISG. 153 According to Mather, the principle of reasonableness (ie that the parties act reasonably) is a norm closely related to or even an additional aspect of the principle of good faith. 154 He then deduces a number of more concrete principles flowing from the principles of good faith and reasonableness, namely that each party should communicate information needed by the other party; the estoppel principle; the principle disfavouring premature termination of the contract and the principle of mitigation of loss Felemegas (n 7) 30; Viscasillas (n 59) 303. Enderlein and Maskow (n 107) 60; Ferrari (n 18) 224. Magnus (n 70) 39. Janssen and Kiene (n 8) 271. Janssen and Kiene (n 8) 271. Article 25 concerns fundamental breach, articles 49(2) and 82 deal with the right of the buyer to declare the contract avoided. Ibid. Mather (n 12) 157. Mather (n 12)

218 Magnus states that certain basic principles may be implicitly assumed from the overall context of the CISG, the pacta sunt servanda rule being an example. 156 Koneru asserts that general principles on which the CISG is based may also be extracted from its legislative history. 157 The present author submits that the use of comparative law to extract general principles from the CISG text would negate article 7(1) s directive of autonomous interpretation. However, it is difficult to envisage any other method of extraction that would lead to a widely accepted set of general principles underlying the CISG General principles found in the UNIDROIT Principles The question needs to be answered of whether general principles may also be found in other international sales law instruments 158 such as the UNIDROIT Principles. The UNIDROIT Principles are generally regarded as a soft law text, 159 which become applicable when the parties have chosen it to govern their contract. According to the preamble to the UNIDROIT Principles, the Principles may be applied when the parties have agreed that their contract be governed by general principles of law, the lex mercatoria or the like. 160 Before being able to use the UNIDROIT Principles for gap-filling under the CISG, it needs to be established whether they indeed constitute general principles on which the CISG is based. The fact that the CISG pre-dates the UNIDROIT Principles may possibly disallow a conclusion to this effect. Furthermore, the phrase is based in article 7(2) may indicate that reference to external general principles for gap-filling is not authorised Magnus (n 70) 40. Koneru (n 4) 116. The discussion in this regard is limited to the UNIDROIT Principles. The present author is of the opinion that regional instruments such as the Principles of European Contract Law (PECL) and the draft OHADA Uniform Act on Contracts do not constitute sources of general principles underlying the CISG. An integrated text of and commentary on the Principles may be accessed at 04.pdf (last accessed ). See also, Viscasillas (n 59) 288. Case law and arbitral awards on the UNIDROIT Principles may be accessed at (last accessed ). Preamble to the UNIDROIT Principles (n 159). 210

219 Scholars are divided on the question of whether the UNIDROIT Principles may be used to fill gaps in the CISG. 161 Reference will firstly be made to the main arguments of scholars supporting the utilisation of the Principles for gap-filling and thereafter to the views of scholars arguing against such use of the Principles. Bonell states with regard to the compatibility of the CISG and the UNIDROIT Principles: To the extent that the two instruments address the same issues, the rules laid down in the UNIDROIT Principles are normally taken either literally or at least in substance from the corresponding provisions of the CISG; cases where the former depart from the latter are exceptional. 162 Bonell supports the use of the UNIDROIT Principles in filling gaps in the CISG if it can be shown that the relevant provisions of the former are indeed the expression of a general principle underlying the CISG. 163 For instance, Bonell regards the principle of full compensation as a general principle underlying both the CISG and the UNIDROIT Principles. If this is indeed so, he argues, then the detailed provisions in article of the UNIDROIT Principles concerning the calculation of interest may be used to fill the gap in the CISG in this regard. 164 Felemegas, who supports the use of the Principles for gap-filling, argues that the wording of article 7(2) should be interpreted widely, and the fact that the CISG predates the UNIDROIT Principles should not exclude the latter from being general principles on which the CISG is based, since the word based in article 7(2) should be given a substantive and thematic nuance, which is broader than the one merely signifying a strict temporal correlation. 165 Magnus also supports the use of the Felemegas (n 51) 93. Bonell The UNIDROIT Principles of International Commercial Contracts and the CISG Alternatives or Complementary Instruments? 1996 Revue de droit uniforme / Uniform Law Review 26 36; Bonell The UNIDROIT Principles in Practice The Experience of the First Two Years 1997 Revue de droit uniforme / Uniform Law Review Bonell (n 162 (1997)) 36. Schlechtriem and Butler (n 116) 54 echo this sentiment. Bonell (n 162 (1997)) 37. According to article of the UNIDROIT Principles, the prescribed interest rate is the average bank short term lending rate to prime borrowers prevailing for the currency of payment at the place for payment. Felemegas (n 51) 86. See also Basedow Uniform Law Conventions and the UNIDROIT Principles of International Commercial Contracts 2000 Revue de droit uniforme / Uniform Law Review for a similar conclusion. 211

220 UNIDROIT Principles for gap-filling and promotes a dynamic 166 understanding of general principles underlying the CISG. 167 He contends that it does not disqualify the UNIDROIT Principles from being general principles underlying the CISG merely because the former was not yet in existence when the CISG was drafted. Such an interpretation would diminish the CISG s ability to adapt to new circumstances. 168 Similarly, Basedow argues for a wide interpretation of article 7(2) wording and contends that the words base and basis is given too narrow a meaning if it is argued that reference to the UNIDROIT Principles should be excluded pursuant to this wording. 169 Basedow argues that the UNIDROIT Principles are suitable for gapfilling in the CISG and have the added advantage of providing a system of neutral rules. 170 He concludes that: [n]ational courts, when interpreting uniform law Conventions and supplementing their internal gaps, [should] take their departure from the rebuttable presumption that the UNIDROIT Principles give evidence of general principles of international commercial contracts. 171 Garro advocates that, should the UNIDROIT Principles provide a solution, they be used to supplement matters falling under the scope of the CISG but not settled by it. 172 He adds that this suggestion is subject to the condition that the Principles are not in conflict with any possible applicable mandatory law, the intention of the parties or applicable trade usages. 173 Fawcett et al provide an interesting argument in support of reference to the UNIDROIT Principles for gap-filling, which underlines the close connection between articles 7(1) and 7(2) once again. They state in this regard: [T]he [UNIDROIT] Principles might well be invoked under article 7(1) by a tribunal engaged in the task of providing an international interpretation of the Vienna See Van Alstine Dynamic Treaty Interpretation 1998 University of Pennsylvania Law Review 687. Magnus Tracing Methodology in the CISG: Dogmatic Foundations in Janssen and Meyer (eds) (n 8) Magnus (n 167) 46. Basedow (n 165) 136. Basedow (n 165) 138. Ibid. Garro The Gap-filling Role of the UNIDROIT Principles in International Sales Law: Some Comments on the Interplay between the Principles and the CISG 1994/1995 Tulane Law Review Ibid. 212

221 Convention. It would be systematically difficult to usher in the Principles under article 7(1) whilst expelling them under article 7(2), given that the dividing line between interpretation and the filling of gaps is not clear-cut. 174 Viscasillas argues that, even though the UNIDROIT Principles may not be general principles underlying the CISG, resort should be had to them if no general principles are found in the CISG in a certain instance, before resorting to domestic law for gapfiling. 175 The argument most frequently employed against reference to the UNIDROIT Principles for gap-filling is that article 7(2) does not allow for reference to external general principles. For instance, Ferrari argues that the requirement that gaps are to be filled by resorting to general principles on which the Convention is based necessitates the conclusion that no recourse can be had to external general principles such as the Principles of International Commercial Contracts drafted by UNIDROIT. 176 Similarly, Zeller reasons that general principles can only be discovered within the four corners of the CISG. 177 Huber also contends that article 7(2) requires that gaps be filled by general principles within the Convention. 178 Some authors argue that the fact that the UNIDROIT Principles were drafted considerably later than the CISG, necessitates the conclusion that the former cannot contain general principles underlying the latter. 179 However, quite a number of fora refer to the UNIDROIT Principles in order to fill gaps in the CISG. 180 Article of the Principles is often employed in case law to fill the gap regarding the interest rate on sums in arrears. 181 Article 2.20 of the Fawcett, Harris and Bridge International Sale of Goods in the Conflict of Laws (2005) 935. Viscasillas (n 59) 303. Ferrari (n 3) 459. Zeller Damages under the Convention on Contracts for the International Sale of Goods (2009) 29. Huber General Issues concerning the Application of the Convention in Huber and Mullis The CISG. A New Textbook for Students and Practitioners (2007) Ferrari Interpretation of the Convention and Gap-filling: Article 7 in Brand, Flechtner and Ferrari (eds) (n 8) ; Huber (n 178) 36. See Bonell The UNIDROIT Principles and Transnational Law 2000 Revue de droit uniforme / Uniform Law Review Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft (Austria) (n 89); ICC Court of Arbitration, Basel, award number 8128/1995: case number 207 (UNILEX); i1.html (Pace); ICC Court of Arbitration, Zürich, award number 8769/1996: case 213

222 Principles has been referred to in the context of standard contract terms. 182 Article of the Principles has been utilised with regard to the question of where obligations concerning payment in terms of an international sales contract should be performed. 183 Article has been referred to in the context of the CISG to determine the amount of damages to be awarded. 184 Article of the Principles has been cited in confirmation of the general principle that parties have the duty to mitigate their loss. 185 The current author supports reference to the UNIDROIT Principles to aid in gapfilling of the CISG. A comparison of the former and the latter shows that there are so many similarities that it warrants the conclusion that the UNIDROIT Principles were based on the CISG as far as the UNIDROIT provisions on contracts for the international sale of goods are concerned. Furthermore, the UNIDROIT Principles are sometimes of a more concrete nature than other general principles and may therefore provide concrete solutions to gaps where applicable. An example of a concrete solution provided by the UNIDROIT Principles may be found in article 7.4.9, which provides a method of calculation of the interest rate. It is also submitted that it would be counterproductive to effective gap-filling to advocate a strict temporal interpretation of the words is based on and exclude possible solutions provided by the UNIDROIT Principles. Lastly, the wording of article 7(2) does not necessitate the conclusion that general principles on which the CISG is based, require them to be contained within the four corners 186 of the Convention. As part of an ever-growing body of international substantive law in the field of international sales law, the CISG shares many general principles with other international instruments in its field number 397 (UNILEX), i1.html (Pace); Supreme Economic Court of the Republic of Belarus, : case number 1010 (UNILEX). Hof s Hertogenbosch (the Netherlands), (n 85). Cour d Appel de Grenoble (France), : case number 222 (UNILEX), 205 (CLOUT), f1.html (Pace). ICC Court of Arbitration, Paris, award number 8502/1996: case number 395 (UNILEX), i1.html (Pace). In line with article of the Principles, the difference between the contract price and the market price at the place of the delivery and at the time the contract was terminated, plus interest, was awarded. ICC Court of Arbitration, Paris, award number 8817/1997: case number 398 (UNILEX), i1.html (Pace). See Zeller (n 177) 16 for this phrase. 214

223 General principles found in the lex mercatoria According to Magnus, the content of the lists of general principles underlying the CISG as identified by commentators corresponds to the contents of the lex mercatoria. 187 He includes in the collection of general principles underlying the CISG that constitute rules of the lex mercatoria, inter alia the principles of party autonomy, pacta sunt servanda, good faith, lack of form requirements, favor contractus, the duty to avoid damages and the duty to pay damages. 188 It has also been argued that in binding parties to usages of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned, 189 article 9(2) of the CISG also expressly recognises the lex mercatoria and the important role it plays within the context of international commercial law. 190 Since it is a main premise of this thesis that the CISG forms part of the lex mercatoria, 191 recourse to rules or principles of the lex mercatoria to aid in filling gaps within the CISG is encouraged. In this regard mention may be made of CENTRAL s 192 list of principles, rules and standards of the lex mercatoria. 193 These principles may be applied as means to allow for an autonomous interpretation of and for the filling of internal gaps in international conventions and other uniform law instruments Magnus (n 70) 41. See Magnus (n 70) Article 9(2) of the CISG. Viscasillas (n 59) 311. See chapter 2 of this thesis. Centre for Transnational Law, its database may be accessed at (last accessed ). CENTRAL was established by Klaus-Peter Berger, author of The Creeping Codification of the Lex Mercatoria (1999). Available online at (last accessed ). Berger Lex Mercatoria Online: The CENTRAL Transnational Law Database at Arbitration International 83 describes these lex mercatoria principles as follows (at 86): The list reproduces all those rules and principles of the lex mercatoria as black-letter law which have been accepted in international arbitral and contract practice together with comprehensive comparative references. The list unifies the various sources that have fostered the evolution of a transnational commercial legal system into a single, open-ended set of rules and principles: the reception of general principles of law, the codification of international trade law by formulating agencies, the case law of international arbitral tribunals, the law-making forces of international model contract forms and general conditions of trade, and finally the analysis of comparative legal science. See the CENTRAL database (n 192). 215

224 Mather argues that some of the most important general principles in the context of the CISG are adjudicative standards that encourage tribunals to decide cases in ways that facilitate international trade. 195 These principles include: freedom of contract and party autonomy with regard to the rules governing the contract; the principle that international sales contracts should not be subject to unnecessary formal requirements and a general presumption in favour of a valid contract. 196 Lando proposes the adoption of eight international principles of contract law. 197 These principles include: substantive freedom of contract; pacta sunt servanda; informality; the principle that the unilateral promise should be binding; good faith and fair dealing; the principle of reliance; the principle that parties are held accountable for acts or omissions that they could reasonably foresee at the time of conclusion of the contract and the principle of proportionality. 198 Even though it is generally accepted that it would not be possible to compile a universally acceptable exhaustive list of general principles underlying the CISG, it is suggested that Lando s principles provide a starting point in the search for such general principles Examples of general principles as identified in case law and by scholars Commentators have identified a number of broad principles on which the CISG is based within the meaning of article 7(2). Firstly, reference may be made to party autonomy. 199 As stated above, party autonomy is regarded by numerous scholars 200 as the foremost principle underlying the CISG. Another principle widely recognised as a general principle is that the parties should act in good faith 201 and this is expressed in article 7(1), which provides that the CISG Mather (n 12) 158. Ibid. Lando CISG and its Followers: A Proposal to Adopt some International Principles of Contract Law 2005 The American Journal of Comparative Law 379. Lando (n 197) Ferrari (n 18) 223; Koneru (n 4) 117. See, for example, Honnold Flechtner (n 141) 74; Kritzer (n 100) 114 and Sono (n 132) 14. Enderlein and Maskow (n 107) 59; Ferrari (n 18) 223; Janssen and Kiene (n 8) 272; Koneru (n 4) 120; Schlechtriem and Butler (n 116) 52. In a decision of the Arrondissementsrechtbank Arnhem (the Netherlands), : case number 355 (UNILEX), n1.html (Pace) good faith was also explicitly regarded as a general principle underlying the CISG. 216

225 should be interpreted as to promote the observance of good faith in international trade. It is regarded as an additional aspect of good faith that the parties act reasonably, 202 in other words, reasonableness is used as a general criterion for evaluating the parties behaviour to which one may resort in the absence of any specific regulation. 203 Those in support of good faith as a general principle point out that the principle may be detected in other CISG provisions, such as article 16(2)(b), 204 and is not a concept confined to article 7(1). 205 It has been stated in this regard that there exists a pervasive presence 206 of good faith in the CISG s provisions and that the deduction of a general principle requiring parties to act in good faith seems logical. 207 However, there is also support for the view that good faith is only required with regard to the interpretation of the Convention and does not pertain to the behaviour of the parties. 208 Some commentators question whether the concept of good faith, specifically referred to in article 7(1) in the context of the interpretation of the CISG may be elevated to a general principle under article 7(2). 209 According to this view, if good faith is seen as a general principle on which the CISG is based, it would place a direct and positive duty of good faith upon the contracting parties. 210 Winship argues that the drafting history of the Convention supports a very limited interpretation of the role of good faith in the CISG. 211 Furthermore, to regard good faith as a general principle on which the Convention is based may even impose on Additional principles seen as being related to good faith and reasonable conduct include: the principle that each party should communicate information needed by the other party, the principle disfavouring premature termination of the contract and the principle requiring a party to mitigate loss from the other party s breach. See Mather (n 12) 157 and Zeller (n 177) 25. Bonell (n 11) 81. According to article 16(2)(b), an offer is irrevocable if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer. Ferrari (n 18) According to Koneru (n 4) 107, the general principles underlying many provisions of the Convention collectively impose an obligation of good faith on the parties. Koneru (n 4) 140. Lookofsky Understanding the CISG. A Compact Guide to the 1980 United Nations Convention on Contracts for the International Sale of Goods (2008) 37. See, for example, Andersen (n 70) 30, who refers to the fact that a general duty to act in good faith was not included in the CISG text, since agreement could not be reached on this point. Felemegas (n 51) 40. Felemegas (n 51) 40. Winship International Sales Contracts under the 1980 Vienna Convention 1984 Uniform Commercial Code Law Journal 55; Winship Commentary on Prof Kastely s Rhetorical Analysis 1987/1988 Northwestern Journal of International Law and Business Magnus (n 167) 43 refers to the fact that common law and civil law jurisdictions have divergent understandings of the concept of good faith. 217

226 the parties additional obligations of a positive character 212 not contemplated by the drafters of the Convention. It has also been pointed out that the content of the concept of good faith is not clearly defined and may differ from one jurisdiction to the next. 213 The inherent danger here is that the concept of good faith may become so wide to encompass the different meanings attached to it in different jurisdictions that it is no longer useful and would bring about a large degree of uncertainty. 214 Ferrari suggests a compromise between the two views enunciated above. 215 He does not view good faith merely as an instrument of interpretation; on the other hand, one should not permit additional obligations being imposed on parties based upon a general principle of good faith. He therefore suggests that the performance of parties obligations arising from the CISG text should be measured against a good faith standard. 216 Another general principle that enjoys wide support is that of favor contractus. 217 Furthermore, the principle of mitigation of loss suffered has been identified as a general principle of the CISG. 218 Some authors also list the following as principles underlying the CISG: the principle that widely known and observed usages must be taken into account; that, if one party is in arrears on any amount owing, the other party is entitled to interest on the outstanding sum; and that the agreement between the parties is not subject to any formal requirements, save for the cases provided for by article 12. On the other hand, there are authors, such as Felemegas, who negate that the above are general principles on which the Convention is based. Felemegas argues that they are no more than rules set out in the CISG. A general principle stands at a higher level of abstraction than a Bonell (n 11) 85. Ferrari (n 18) 211; Rosett Critical Reflections on the United Nations Convention on Contracts for the International Sale of Goods 45 Ohio State Law Journal Bridge (n 7) 253. Ferrari (n 179) 155. Ibid. Bonell (n 11) 81; Felemegas (n 51) 84; Koneru (n 4) 121; Janssen and Kiene (n 8) 273. Felemegas (n 51)

227 rule, or might be said to underpin more than one such rule. 219 In other words, authors supporting Felemegas s view would only regard overarching principles such as party autonomy and reasonableness as general principles underlying the CISG. The following principles have been identified as general principles underlying the CISG by case law: good faith, 220 party autonomy, 221 favor contractus, 222 full compensation, 223 no form requirements, 224 the duty to mitigate loss, 225 estoppel, 226 the principle that the claimant/plaintiff should bring evidence in support of its cause of action, 227 the principle that the buyer bears the burden to prove non-conformity of the goods, 228 the principle that obligations to pay are to be performed at the creditor s place of business 229 and the principle that the seller s place of business governs all questions relating to payment for the goods. 230 It has been pointed out that it may not be deduced from the identification of a general principle by a forum or tribunal that such principle is automatically and universally recognised as such; neither does the fact that a certain principle has not been Felemegas (n 51) 83. See, for example, Court of Appeal, New South Wales (Australia), : case number 57 (UNILEX); Arrondissementsrechtbank Arnhem (the Netherlands), (n 201); Corte di Appello di Milano (Italy), : case number 359 (UNILEX), 645 (CLOUT), i3.html (Pace); Hof van Beroep Gent (Belgium), : case number 940 (UNILEX), b1.html (Pace) and numerous references in the UNCITRAL Digest (n 88) n 20. Hof van Beroep Gent (Belgium), (n 220); Tribunale di Rimini (Italy), (n 86). Schweizerisches Bundesgericht (Switzerland), : case number 382 (UNILEX), 248 (CLOUT), s1.html (Pace). Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft (Austria), (n 89); Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft (Austria), (n 89); Tribunale di Rimini (Italy), (n 86). Corte Constitucional (Colombia), : case number 827 (UNILEX), c7.html (Pace) and Tribunale di Rimini (Italy), (n 85). ICC Court of Arbitration, Paris, award number 8817/1997 (n 185) and Tribunale di Rimini (Italy), (n 86). Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft (Austria), (n 89). Tribunale di Vigevano (Italy), (n 85); Schweizerisches Bundesgericht (Switzerland), (n 86); Tribunale di Rimini (Italy), (n 85); and Schweizerisches Bundesgericht (Switzerland) : case number 979 (UNILEX), s1.html (Pace). Handelsgericht Zürich (Switzerland), : case number 136 (UNILEX), 97 (CLOUT), s1.html (Pace). Cour d Appel de Grenoble (France), (n 183). Landgericht Berlin (Germany), (n 88). 219

228 identified by a forum, preclude it from being a general principle underlying the CISG. 231 The present author is of the opinion that the CISG forms an important part of the lex mercatoria and that principles that would qualify as general principles of the lex mercatoria, could be regarded as general principles on which the CISG is based. The principle of good faith certainly plays an important role in the lex mercatoria and is therefore also regarded as a general principle underlying the CISG. Drawing up a numerus clausus of such principles would be virtually impossible Different methodologies followed in utilising general principles for gapfilling Once identified, the question remains to be answered how the general principles are to be utilised to fill a gap. Despite the fact that article 7(2) has generated much scholarly commentary, not much guidance may be found on the method to be followed when attempting to fill a gap by way of a general principle. Mather proposes that the following methodology be followed: Contract formation issues may be solved by the principle that negotiation statements be interpreted according to an objective reasonable person standard, or by one of the principles relating to good faith or the principle favouring a finding that a binding contract has been formed. 232 Furthermore, he advocates that questions relating to whether a party has violated a contractual obligation or not, be solved by the general principle requiring reasonable conduct or the good faith principle. Lastly, he suggests that other gaps may be filled by applying the principles of full compensation or mitigation of loss. 233 It is submitted that this proposal constitutes an oversimplification of the gap-filling process. All of the principles enumerated above, may be assigned various and conflicting interpretations that would lead to divergent results to the same gap. It is difficult to fathom how the application of vague general principles to gaps in the Ferrari (n 179) 160. Mather (n 12) 158. Ibid. 220

229 CISG would promote international harmony of decision. Furthermore, on what grounds is a specific general principle preferred above another in a specific case? Clearly, the principles of full compensation and mitigation of loss would provide very different answers when applied to a gap. The fact that the CISG provides no guidance on the method to be followed when utilising general principles to fill a gap, creates another barrier to effective gap-filling via general principles Recourse to the law applicable by virtue of the rules of private international law If there are no general principles to solve a gap, the rules of private international law of the forum must be employed to indicate a legal system that would provide an answer to the legal problem. This would entail establishing the relevant lex causae. In most instances this would be the proper law of the contract. 234 Some commentators are vehemently opposed to resorting to the rules of private international law to indicate the legal system applicable to a gap in the CISG. 235 It has been argued that reference to the solution provided by the rules of private international law will harm the Convention s uniform application by producing divergent results. 236 Furthermore, it has been stated in this regard that in filling any gaps concerning matters governed by the CISG, the elusive goal of uniformity is promoted through the use of general principles; whereas resorting to the rules of private international law detracts from that goal 237 and a reference to private international law under article 7(2) is an admission that the uniformity vehicle has Winship Private International Law and the UN Sales Convention 1988 Cornell International Law Journal Some issues of contractual liability may be governed by legal systems other than the proper law. Felemegas (n 7) 35 argues that recourse to the rules of private international law should not have been permitted. He refers to the fact that many delegates voiced the same argument at the Diplomatic Conference and that reference to the rules of private international law represents regression into doctrinal fragmentation and practical uncertainty (at 35). Also see Felemegas (n 51) 75. Bridge The International Sale of Goods. Law and Practice (2007) 539 states in this regard that [w]ith a modicum of creative energy, a tribunal ought not to have to adopt this expedient but should find the answer to a problem within the CISG itself. A readiness to turn to rules of private international law in this way is destructive of uniformity. Felemegas (n 51) 75. Ferrari (n 3) 458 also concludes that uniformity would be compromised if judges employ different domestic laws to fill gaps within the CISG. Felemegas (n 51) 76 and

230 broken down. 238 Most scholars also regard a reference to the rules of private international law in gap-filling as a last resort solution 239 or ultima ratio. 240 While the wording of article 7(2) clearly states that reference to general principles should precede a reference to private international law to solve a gap, it seems dangerous to avoid a reference to the rules of private international law at all costs and stretch the notion of a general principle to solve a gap beyond all reasonable limits. Many cases have been reported in which gaps were solved by reference to the domestic legal system as determined by the rules of private international law. The burden of proof for non-conformity of goods, 241 the interest rate, 242 prescription 243 and set-off 244 are a few examples of gaps that were filled with reference to the legal system applicable by virtue of the rules of private international law of the forum An illustration of gap-filling: the interest rate Article 78 of the CISG provides that interest is due on any sum in arrears. However, the CISG contains no provision on the calculation of the interest rate. The calculation of the interest rate provides an ideal example of the difficulties associated with gapfilling. The question of the interest rate has generated much scholarly commentary Bridge (n 8) 252. Garro (n 172) 1156; Koneru (n 4) 122; Macmahon (n 81) 993. Bonell (n 11) 83; Corterier A New Approach to Solving the Interest Rate Problem of Art 78 CISG 2000 International Trade and Business Law Annual 33 34; Ferrari (n 18) 228 and Gebauer (n 61) 688. ICC Court of Arbitration (Paris) award number 6653/1993 (n 86) and Court of Appeals, Fourth Circuit (United States), (n 86). ICC Court of Arbitration (Paris), award number 6653/1993 (n 85); Arrondissementsrechtbank Amsterdam (the Netherlands), (n 88); ICC Court of Arbitration (Paris), award number 7660/JK, : case number 48 (UNILEX); Landgericht Landshut (Germany), : case number 121 (UNILEX), g1.html (Pace); Landgericht Aachen (Germany), (n 89); Schiedsgericht der Handelskammer (Germany), (n 89); Handelsgericht Zürich (Switzerland), (n 86); Schiedsgericht Hamburger Freundschafliche Arbitrage (Germany), : case number 394 (UNILEX), g1.html (Pace); Landericht Berlin (Germany), : case number 445 (UNILEX), g1.html (Pace); Handelsgericht des Kantons Aargau (Switzerland), (n 86); Court of Appeal of Turku (Finland), (n 88); District Court, North District Illinois (United States), : case number 974 (UNILEX); American Arbitration Association, award number 50181T/ , : case number 1346 (UNILEX); District Court, District of Kansas (United States) : case number 1308 (UNILEX);. ICC Court of Arbitration (Paris), award number 7660/JK, (n 242). Amtsgericht Duisburg (Germany), and Hof s Hertogenbosch (the Netherlands), (n 85). 222

231 and has been dealt with by many fora and many different solutions have been proposed. The legislative history of article 78 indicates that the drafters of the Convention could not agree upon a formula for the rate of interest. 245 From the final statements made in the eleventh plenary meeting, it may be gleaned that the calculation of interest was a matter extensively considered but omitted in the final text. 246 When faced with a matter that the text of the CISG provides no definitive solution to, the first question to be answered is whether the matter qualifies as a gap to be filled in terms of article 7(2) or whether the matter is excluded from the scope of the CISG. In the case of the interest rate, the difficulties start with this initial question, since case law and scholars are heavily divided on whether the calculation of interest payable in terms of article 78 falls outside the scope of the CISG or whether it is a gap to be filled in terms of article 7(2). Most cases decided on this topic regard the interest rate as a matter to be determined with reference to the law governing the contract in the absence of the CISG, 247 although there are also reported cases classifying it as a gap. 248 To compound the difficulties surrounding article 78, many of the cases applying domestic law to determine the rate of interest do not provide a clear indication of whether the matter is regarded as a gap or as an exclusion from the CISG Decisions by the Plenary Conference: 11 th Plenary Meeting April 10, 1980, A/CONF.97/SR.11; Official Records (n 39) The Chairman of the working group set up to work on the interest provision, stated that it had finally come to the conclusion that fundamental differences in the approach of different national legal systems to the question of interest rendered that task too difficult... The working group had decided to recommend a provision based, as it were, on the highest common factor, so that the Convention might at least contain a clear statement on the question of interest Official Records (n 39) 226 par 3. Ibid. See n 88 above. See also Callaghan UN Convention on Contracts for the International Sale of Goods: Examining the Gap-filling Role of the CISG in Two French Decisions 1995 Journal of Law and Commerce 183. See n 89 above. See, for example, Landgericht Landshut (Germany), and Landericht Berlin (Germany), (n 242). The UNCITRAL Digest (n 88) n 29 also provides a long list of cases where the interest rate was determined with reference to domestic law applicable by virtue of the rules of private international law. See furthermore Mazzotta CISG Article 78: Endless Disagreement among Commentators, much less among the Courts 2004 Review of the Convention on Contracts for the International Sale of Goods 123; also available 223

232 Scholars who consider the calculation of the interest rate to be a gap, advance varying reasons in support of their view. One argument in support of this view is that the CISG does indeed establish a general entitlement to interest. 250 Another argument is this regard is that the principle of full compensation underlies the CISG and that interest and related matters are therefore indeed governed by the Convention. 251 According to Andersen, the drafting history of article 78 indicates that the interest rate is a gap within the CISG on which consensus could not be reached. 252 Scholars who regard the calculation of interest payable in terms of article 78 as a matter outside the scope of the CISG, 253 also provide various arguments. Ferrari considers the numerous decisions by the German courts regarding it as a matter to be governed by domestic law as conclusive proof that it falls outside the scope of the CISG. 254 Schlechtriem and Butler view the calculation of the interest rate under article 78 as an exclusion from the Convention, since the delegates could not reach agreement on the matter and therefore intentionally left this issue outside the scope of the Convention. 255 Eiselen concludes from the legislative history that the rules of private international law should determine the proper law of the contract and that this legal system should determine the rate of interest, in other words that the determination of the rate of interest falls outside the scope of the Convention. 256 A third view in this regard is that recourse should be had to the legal system applicable by virtue of the rules of private international law, irrespective of whether at (last accessed ). Reference will be made to the electronic version of the article. This entitlement is established by article 78. Bridge (n 8) 258; Koneru (n 4) 125; Mazzotta (n 249) 13. Corterier (n 240) 126. The principle of full compensation may be deduced from articles of the CISG. Andersen (n 70) 22. Nicholas Interest in Bianca and Bonell (n 11) Ferrari (n 67) 476. Schlechtriem and Butler (n 116) 51.The authors state that [i]n this case it is not possible to substitute the non-decision of the CISG drafters, which is also a non-decision of the ratifying domestic legislature and either to develop a CISG private international law rule or even to develop a CISG substance norm to fill the gap (at 51). Eiselen Interest on Sums in Arrears: Remarks on the manner in which the UNIDROIT Principles of International Commercial Contracts may be used to Interpret or Supplement Article 78 of the CISG in Felemegas (ed) (n 7)

233 the interest rate is regarded as a gap or an exclusion. 257 The main argument advanced in this regard is the fact that it is evident from divergent approaches followed in case law concerning the interest rate that no widely accepted general principle exists in this regard. 258 To add to the confusion surrounding the interest rate, scholars who regard this issue as a gap to be dealt with according to article 7(2), advance conflicting approaches for gap-filling in this regard. One approach entails the negation of the use of general principles and the endorsement of reference to the legal system applicable by virtue of the rules of private international law. 259 According to this approach, reference to general principles to determine the interest rate would only lead to more uncertainty. 260 Another approach suggests that the interest rate should be determined by way of analogous application of article In terms of article 76, damages are to be calculated as the difference between the contract price of the goods and current market price of the goods at the time and place of delivery, in other words, this article awards the hypothetical cost of a substitute purchase. 262 By analogy to article 76, interest under article 78 should then be the market interest rate for the sum and currency owed at the time and place the payment should have been made. 263 It has also been argued that article 9(2) of the CISG makes it possible to fill gaps with reference to applicable trade practice. 264 According to this view, trade usages would normally point to a commercial lending rate. 265 This commentator proposes that the interest rate under article 78 should be customised by awarding actual borrowing costs when a party incurs them, and an average investment return, such as one for a certificate of deposit for the currency in which the transaction is denominated, when the creditor does not borrow. 266 A further approach entails the application of the UNIDROIT Principles to determine the interest rate Janssen and Kiene (n 8) 268. Ibid. Mazzotta (n 249) 19. Ibid. Corterier (n 240) 40. Ibid. Corterier (n 240) Kizer Minding the Gap: Determining Interest Rates under the UN Convention for the International Sale of Goods 1998 University of Chicago Law Review Kizer (n 264) Kizer (n 264) See par above for references in this regard. 225

234 The present author agrees with the view that recourse be had to the legal system applicable by virtue of the rules of private international law to determine the interest rate irrespective of whether this matter is seen as a gap or an exclusion. The present author regards the interest rate as a gap, since the entitlement to interest falls within the scope of the CISG. However, attempting to fill this gap by way of a general principle will not lead to uniform application of the CISG: the different approaches referred to above are proof of this fact. Employing the rules of private international law to provide an answer to the calculation of the interest rate would at least found a predictable approach to filling this gap. Several private international law approaches may be distinguished. One approach advocates that the interest rate should be based on the loss suffered by the nondefaulting party and should therefore be determined by the law of the place of business of the creditor. 268 It has also been argued that the rate of interest should be determined by the law of the debtor s place of business. 269 A third approach entails the application of the proper law of the contract to determine the interest rate. 270 The present author supports the application of the proper law of the contract to the determination of the interest rate Evaluation of methods employed for gap-filling It does not seem certain that the process of determining general principles on which Honnold Flechtner (n 141) 421. Behr Sales Convention in Europe: From Problems in Drafting to Problems in Practice 1997/1998 Journal of Law and Commerce Eiselen (n 256) 234. It is submitted that the rules of private international law of most jurisdictions would apply the law applicable to the contract (the proper law of the contract) to the determination of the interest rate. This would be the case in all European Union countries (excluding Denmark) in terms of article 12(1) of the Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the Law Applicable to Contractual Obligations (Rome I), Official Journal of the European Union 2008 L 177/6. This would also be the position where the relevant rules of private international law of fora are still to be found in the Convention on the Law Applicable to Contractual Obligations, , Rome, 80/943/EEC, Official Journal L 266; 1605 UNTS 59 (for contracts concluded before 17 December 2009) see article 10 of the Rome Convention. In terms of the rules of South African private international law, the proper law would also be applicable to the determination of the interest rate. See Forsyth Private International Law: The Modern Roman-Dutch Law including the Jurisdiction of the High Courts (2003) According to Forsyth, it is in the interests of legal certainty that the proper law should govern as many aspects of the contract as possible (at 313). 226

235 the Convention is based will promote uniformity of its application. Neither the commentators 272 nor the courts are unanimous on the list of general principles on which the CISG is based. It has been stated that there exists no such thing as a closed number of principles and therefore they cannot be inventoried. 273 Furthermore, even if courts or commentators were to agree on the list of general principles underlying the Convention, they may be interpreted differently in different jurisdictions and their application to a substantive question or gap may also produce different results. 274 A clear example of this is the different meanings or content attached to the principle of good faith in the different jurisdictions. 275 Furthermore, the concept of promoting uniformity of application of the CISG by utilising general principles for gap-filling presupposes that courts take foreign court decisions in account when faced with the task of gap-filling. Do courts rely strongly on foreign case law in CISG cases? What about the language barrier? 276 It has also been pointed out that, in civil law cases specifically, the case analysis is often brief and not suitable to offer guidance in similar matters before other fora. 277 The most problematic aspect of relying on case law to provide guidance with regard to gapfilling is the fact that, when resorting to national law, courts do not provide proper reasons for doing so 278 it is often difficult to deduce whether courts rely on domestic law because they regard a matter as excluded from the scope of the CISG or whether they rely on domestic law in terms of article 7(2) Ferrari (n 18) 227. Alpa (n 121) 21. Kritzer et al (n 14) 85:13 add that the use of general principles for gap-filling may even produce different results between courts of the same jurisdiction. Bonell (n 11) 85. See, in this regard, Hesselink Good faith in Hartkamp, Hesselink, Hondius, Joustra and Du Perron (eds) Towards a European Civil Code (1998) Andersen Uniform International Sales Law and the Global Jurisconsultorium 2004/2005 Journal of Law and Commerce and Ferrari (n 18) 205. Conversely, Magnus (n 167) 41 argues that the language barrier argument is not valid, since databases such as the CLOUT database contains English abstracts of reported cases. However, the CISG has six official languages and not all fora necessarily understand English. Furthermore, the translations may contain mistakes. Amato Recent Developments: CISG, UN Convention on Contracts for the International Sale of Goods The Open Price Term and the Uniform Application: An Early Interpretation by Hungarian Courts 1993/1994 Journal of Law and Commerce Kroll Selected Problems concerning the CISG s Scope of Application 2005/2006 Journal of Law and Commerce Kroll (n 278) 40. This problem is illustrated by numerous cases decided on the calculation of the interest rate, where it is not possible to ascertain whether the forum regarded the matter as a gap or an exclusion. See n 249 above. 227

236 The difficulties surrounding the calculation of interest as analysed above, illustrate once more that gap-filling via general principles fails to promote uniform application of the CISG. Many gaps in the CISG, and most notably the interest rate gap, came about as a result of the fact that the drafters could not reach a satisfactory compromise on such matters. This is to be expected given the diverse legal cultures of the world. It is unrealistic to expect these diverse legal traditions to identify the same general principles underlying the CISG, to give the same content to such general principles and to apply them in the same manner to fill a gap. It is an illusion to assume that any of the approaches to gap-filling would produce uniform results. The present author argues that reference to the legal system applicable by virtue of the rules of private international law would at least lead to a more predictable result than gap-filling based on general principles. Another commentator, who has misgivings about the effectiveness of employing general principles for filling gaps in the CISG, states that filling gaps based on vague, non-descript principles which are difficult to identify and place is indeed questionable in terms of predictability and foreseeability as well as insight. Without a solid guideline for their application, or at least their identification, the use of general principles is unlikely to become similar in any jurisdictions, but rather ways of expressing homeward trends by choice and application of general principles as a carte blanche for interpretation. 280 Furthermore, a general principle on which the Convention is based may not provide a concrete enough answer to a gap. By their very nature, general principles are abstract concepts which may not always be able to fill a concrete question. 281 In such instances, reference to the rules of private international law and ultimately to the legal system to which the former points, is vital to provide a solution. There are commentators who support the notion that, in such circumstances, one is not only permitted to have recourse to the rules of private international law, one is obliged to do so Andersen (n 70) 24. This sentiment was expressed by Kopać, the Czechoslovakian representative, during the First Committee Deliberations of the Diplomatic Conference Official Records (n 39) 255 (par 12). But see Ferrari (n 3) 471 who concludes the opposite. Bonell (n 11) 83; Ferrari (n 18)

237 Gap-filling once again underlines the important symbiosis between the CISG and the rules of private international law. The CISG or any other similar uniform international substantive law convention does not exist in isolation from the various domestic legal systems and jurisdictions. Basedow also states in this regard that: Since most Conventions are explicitly fragmentary in nature and none contains a comprehensive codification of a whole area of the law, reference to a supplementary national legal system and to the rules of private international law continues to be necessary. 283 The ULIS adopted a strict policy of not allowing reference to the rules of private international law. 284 This provision of the ULIS has been criticised and it has even been stated that this prohibition of referring to the rules of private international law contributed to its unpopularity. 285 The CISG has adopted a more workable solution to gap-filling, reference being made to general principles and thereafter to the rules of private international law. 286 ULIS s approach of complete negation of reference to domestic law was not followed in the CISG and the latter s approach to gap-filling has illustrated the important symbiosis between uniform international substantive law instruments and private international law. The argument most frequently employed against reference to the rules of private international law, namely that the latter are difficult to ascertain and frequently do not provide a clear answer, 287 is losing potency against the backdrop of the successful uniform private international law conventions such as the Convention on the Law Applicable to Contractual Obligations, recently transformed into an EC Regulation (Rome I) 288 and the promise of more such regional codifications of private Basedow (n 165) 130. According to article 2 of the ULIS, rules of private international law shall be excluded for the purposes of the application of the present Law, subject to any provision to the contrary in the said Law. See also par of chapter 2 of this thesis. Dore and Defranco A Comparison of the Non-substantive Provisions of the UNCITRAL Convention on the International Sale of Goods 1982 Harvard International Law Journal Ferrari (n 57) 81 points out that the inclusion of the reference to the rules of private international law for gap filling, shows that the drafters were aware of the fact that the absolute independence from domestic law is unattainable (at 80-81). Corterier (n 240) 34-35; Felemegas (n 51) 75. See n 271 above. This Regulation will be applied in the European Union countries (excluding Denmark) to determine the law applicable to contracts concluded from 17 December Compare also the Inter-American Convention on the Law Applicable to International 229

238 international law to follow. 289 Such private international law codifications make the rules employed by fora to determine the proper law of the contract more predictable and the parties may reasonably foresee which legal system would govern gaps in the CISG. The present author agrees with the argument that it is impossible to expect uniform application of general principles when there is hardly consensus on their identification. 290 It is proposed that the idea of relying on general principles in gapfilling in order to ensure uniform application of the CISG, would have been more convincing if there were an overarching court structure presiding over CISG disputes. 291 Where a clear and widely accepted general principle, cannot be ascertained to fill a gap, it is suggested that recourse be had to the legal system applicable by virtue of the rules of private international without further ado. Schlechtriem pointed out that article 7(2) puts a limit on an all too inventive search for general principles. 292 It is acknowledged that domestic legal systems and the solutions they would provide, may differ substantially. However, this would at least found a predictable approach to gap-filling. It has been illustrated that gap-filling via recourse to general principles provides neither uniformity nor predictability. It is also proposed that parties to international sales contracts should be encouraged to insert choice of law clauses into their contracts. 293 If the chosen legal system is a CISG contracting state, it is submitted that the CISG forms part of the law of such Contracts, , Mexico City, (last accessed ) in this regard. One of the objectives of the Research Centre for Private International Law in Africa, hosted in the Faculty of Law of the University of Johannesburg (director: Prof JL Neels) is to draft regulations, conventions, model laws and other legislative instruments in the field of private international law for utilisation by the various organs and member states of the African Union and other stakeholders. Viscasillas (n 59) states in this regard (at 295): The recourse to general principles on which the CISG is based adds further problems to the method of filling gaps within the Convention as there is neither an enumeration of general principles, nor are their contents and effects established with the obvious risk that the interpreters would not only derive different principles from the Convention but also with a different effect. However, it is submitted that the opinions of the CISG Advisory Council may aid in uniform interpretation of the CISG in future. See n 201 in chapter 2 of this thesis. Schlechtriem From The Hague to Vienna Progress in Unification of the Law of International Sales Contracts? in Horn and Schmitthoff (eds) The Transnational Law of International Commercial Transactions (1982) In order to avoid possible uncertainty, it would be advisable for parties to insert the following choice of law clause: This contract is governed by the law of France, including/excluding the rules of the CISG. 230

239 state and is as such applicable to the contract, unless expressly excluded by the parties Article Introduction Article 28 provides that [i]f, in accordance with the provisions of this Convention, one party is entitled to require performance of any obligation by the other party, a court is not bound not enter a judgment for specific performance unless the court would do so under its own law in respect of similar contracts of sale not governed by this Convention. As stated above, 295 article 28 has important private international law implications. Article 28 has been termed a rule of private international law in itself. 296 This seems correct since article 28 assigns the entitlement to a judgment for specific performance to a legal system the law of the court seized of the matter. The meaning of the phrase own law is, however, ambiguous and needs to be analysed. The drafting history of the CISG confirms that the main reason for the inclusion of article 28 in the Convention was the necessity to reach a compromise between jurisdictions that readily hand down judgments for specific performance and those that require exceptional circumstances before entering a judgment for specific performance. 297 The former represents the approach of most civil law jurisdictions whereas the latter constitutes the approach of most common law jurisdictions. 298 In general, it is accepted in this regard that specific performance constitutes the primary remedy in civil law systems, while damages form the primary remedy in common law countries. 299 However, according to Treitel, four approaches to specific performance See chapter 3 of this thesis. See par 4.1 above. Schlechtriem and Butler (n 116) 54. These authors regard article 28 as the only rule of private international law contained in the CISG. Enderlein and Maskow (n 107) 122 regard this provision as a horizontal conflict of laws rule. See par below; Müller-Chen Article 28 in Schlechtriem and Schwenzer (n 2) (par 1). See par below. Boghossian A Comparative Study of Specific Performance Provisions in the United Nations Convention on Contracts for the International Sale of Goods 1999/2000 Pace Review of the 231

240 may be distinguished among the different jurisdictions. 300 These approaches are: a general entitlement to specific performance subject to certain exceptions; 301 availability of specific performance based on the content of the obligation; 302 specific performance available at the discretion of the judge 303 and a mixed approach. 304 It has been stated that another ratio for the inclusion of article 28 is the fact that, under some legal systems, courts do not have the authority or procedural mechanism to order specific performance. 305 The question has been raised whether a judge has a judicial discretion under article 28 to order specific performance even if the law of the forum does not require specific performance under such circumstances? 306 It has been submitted in this regard that article 28 does not require a court to apply its domestic law to the question of specific performance; it permits the court to follow its domestic law in this regard if it needs to Legislative history of article 28 The predecessor of article 28 is Article 16 of the ULIS which provides: Where under the provisions of the present Law one party to a contract of sale is entitled to require performance of any obligation by the other party, a court shall not be bound to enter or enforce a judgment providing for specific performance except in accordance with the provisions of Article VII 308 of the Convention dated the 1 st day of July 1964 relating to a Uniform Law on the International Sale of Goods Convention on Contracts for the International Sale of Goods This article is also available on the Pace CISG website at (last accessed ). Treitel Remedies for Breach of Contract. A Comparative Account (1988) 51. Ibid. Treitel (n 300) 55. Treitel (n 300) 63. Treitel (n 300) 71. Report of the United Nations Commission on International Trade Law on the Work of its Second Session (UN Doc A/7618); Kastely The Right to require Performance in International Sales: Towards an International Interpretation of the Vienna Convention 1988 Washington Law Review Kastely (n 305) 638. Ibid. According to article VII of the ULIS, where one party is entitled to require specific performance from the other a court shall not be bound to enter or enforce a judgment for specific performance except in cases in which it would do so under its own law in respect of similar contracts of sale not governed by the Uniform Law. 232

241 Article 16 of the ULIS was considered by the UNCITRAL Working Group during its Second Session. 309 No comments or proposals were made during this session and it was suggested that the content of article 16 be adopted without change. 310 At its Sixth Session, 311 the Working Group revised the wording of article 16 of the ULIS in line with the provisions concerning the buyer s and seller s right to performance. The revised article 16 read as follows: Where, in accordance with article 42, paragraph 1, 312 or article 71 paragraph 2, 313 one party to a contract of sale is entitled to require performance of any obligation by the other party, a court shall not be bound to enter a judgment providing for specific performance unless this could be required by the court under its own law in respect of similar Contracts not governed by this Convention. 314 Article 16 became article 12 of the 1976 Draft Convention on the International Sale of Goods 315 and read as follows: If, in accordance with the provisions of this Convention, one party is entitled to require performance of any obligation by the other party, a court is not bound to enter a judgement for specific performance unless the court could do so under its own law in respect of similar contracts of sale not governed by this Convention Working Group on the International Sale of Goods: Report on the Work of the Second Session (n 24) 61; Honnold (n 21) 67. Working Group on the International Sale of Goods: Report on the Work of the Second Session (n 24) 62; Honnold (n 21) 68. Report of the Working Group on the International Sale of Goods on the Work of its Sixth Session (New York, 27 January 7 February 1975) (A/CN.9/100) in UNCITRAL Yearbook VI (1975) Article 42(1), which became article 46(1) of the CISG, read as follows: Subject to article 16, the buyer has the right to require the seller to perform the contract, unless the buyer has acted inconsistently with that right, in particular by avoiding the contract under article 44 or by reducing the price under article 45. See the Report of the Working Group on the International Sale of Goods on the Work of its Sixth Session (n 311) 56; Honnold (n 21) 247. Article 71(2), which became article 62(1) of the CISG, read as follows: Subject to the provisions of article 16, if the buyer fails to take delivery or to perform any other obligation in accordance with the contract and this Convention, the seller may require the buyer to perform his obligation. See the Report of the Working Group on the International Sale of Goods on the Work of its Sixth Session (n 311) 59; Honnold (n 21) 250. Report of the Working Group on the International Sale of Goods on the Work of its Sixth Session (n 311) 54. See Report of the Committee of the Whole I relating to the Draft Convention on the International Sale of Goods (n 31) This document contains the text of the Sales draft as well as deliberations of the Commission. Report of the Committee of the Whole I relating to the Draft Convention on the International Sale of Goods (n 31) 34; Honnold (n 21)

242 In combining the Draft Convention on the International Sale of Goods and the Draft Convention on the Formation of Contracts for the International Sale of Goods, it was decided that article 12 should be included in chapter II of the Draft CISG under the general provisions. 317 Article 12 of the 1976 Draft Convention became article 26 of the 1978 UNCITRAL Draft Convention on Contracts for the International Sale of Goods. 318 The delegations from the United Kingdom 319 and the United States 320 submitted preconference proposals, recommending that the word could be replaced by would in article This suggested amendment was discussed in the First Committee during the Diplomatic Conference. 322 The representative of the United Kingdom delegation referred to article VII of the ULIS which limited a claim for specific performance to cases where the court would enter such a judgment under its own law. During the drafting of the CISG, would was replaced by could, which he argued, greatly diminished the protection offered by the earlier provision to those states whose courts did not readily grant the remedy of specific performance. 323 The effect of the wording of article 26 was therefore that, if a court had jurisdiction to grant specific performance and the latter was the available remedy in terms of the Convention, then the court was obliged to enter a judgment for specific performance. 324 This was in conflict with the general approach of courts in the United Kingdom which, even though they may have jurisdiction to entertain a claim for specific performance, rarely entered such a judgment. Specific performance would not be granted by an English court if damages would be an adequate remedy. The United Kingdom delegation concluded that the wording of article 26 would have the effect of compelling an English court to enter a judgment for specific performance under circumstances where Report of the Secretary-General: Incorporation of the Provisions on the Draft Convention on the Formation of Contracts for the International Sale of Goods into the Draft Convention on the International Sale of Goods (A/CN.9/145) in UNCITRAL Yearbook IX (1978) , ; Honnold (n 21) 362. Text of the Draft Convention on Contracts for the International Sale of Goods approved by the United Nations Commission on International Trade Law (A/CONF.97/5) in Official Records (n 39) 5-14, 7. Doc A/CONF.97/C.1/L.113. Doc A/CONF.97/C.1/L.117. Report of the Secretary General on the Pre-conference Proposals on the 1978 Draft in Official Records (n 39) 71-82, 76. First Committee Deliberations, 13 th Meeting (A/CONF.97/C.1/SR.13) in Official Records (n 39) Official Records (n 39) 304 par 43. Official Records (n 39) para

243 it would not otherwise have done so. 325 Other delegates concurred with this argument and the proposed amendment was approved. 326 The amended article 26 was adopted at the thirty-sixth meeting of the First Committee. 327 Article 26 was formally adopted during the seventh plenary meeting of the Plenary Conference 328 and became article 28 of the CISG The reason for the inclusion of article 28 in the CISG: Different approaches to the remedy of specific performance in common law, civil law and mixed jurisdictions 330 In most common law systems, a judgment for specific performance constitutes a direct order to the defaulting party and failure to comply is punishable by contempt of court. 331 It has been stated that the concept of specific performance is much narrower in common law than in civil law jurisdictions. 332 Furthermore, in common law jurisdictions, even in circumstances where specific performance is an available remedy, the party so entitled always has the choice of rather claiming damages Ibid. Ibid. First Committee Deliberations, 36 th Meeting (A/CONF.97/C.1/SR.36) in Official Records (n 39) 426 par 25. Plenary Conference, 7 th Meeting (A/CONF.97/SR.7) in Official Records (n 39) 206 par 21. A/CONF.97/18, Annex I in Official Records (n 39) , 181. For a general overview of the differences between common law and civil law systems in this regard, see Gordley and Von Mehren An Introduction to the Comparative Study of Private Law. Readings, Cases, Materials (2006) ; Herman Specific Performance: A Comparative Analysis (1) 2003 Edinburgh Law Review 5 and Herman Specific Performance: A Comparative Analysis (2) 2003 Edinburgh Law Review 194. Kastely (n 305) 633. Treitel (n 300) 46. See Farnsworth Damages and Specific Relief 1979 The American Journal of Comparative Law 247 for a discussion of the availability of the remedy of specific performance under common law in general. With regard to the concept of specific performance in English law, compare Piliounis The Remedies of Specific Performance, Price Reduction and Additional Time (Nachfrist) under the CISG: Are these worthwhile Changes or Additions to English Sales Law? 2000 Pace International Law Review 1. Consult Greenberg Specific Performance under Section of the Uniform Commercial UCC: A More Liberal Attitude in the Grand Style 1981/1982 New England Law Review 321 and Peters Remedies for Breach of Contract relating to the Sale of Goods under the Uniform Commercial UCC: A Roadmap for Article /1963 Yale Law Journal 199 for an analysis of the remedy of specific performance in the United States of America. Treitel (n 300)

244 In the context of a contract for the sale of goods, an order for delivery of the goods would be classified as an order for specific performance under the common law, but a judgment for payment of the contract price not. 334 According to Treitel, the general approach of common law jurisdictions in this regard is one of discretionary availability of specific performance. 335 This approach, as well as the fact that specific performance is regarded as a secondary remedy in common law, may be traced back to the history of the development of the common law. 336 Common law jurisdictions still regard specific performance as an equitable remedy, since it was developed in the Court of Chancery. 337 It is contrasted with the common law remedy of damages, which was originally the only available remedy in common law courts. Even though the distinction between common law and the law of equity no longer exists, it retains significance because of the fact that equitable remedies were, and still are, only available at the discretion of the court. 338 The fact that specific performance was a remedy developed under the law of equity, also accounts for the fact that the common law regards it as a secondary remedy, whereas damages, the default remedy available under the common law, was regarded as the primary remedy. During the time that the common law and the law of equity operated as two separate legal systems, the dictum equity follows the law described the relationship between these legal systems. This dictum means that the common law was the principal body of law, and the law of equity was used to supplement it when deemed necessary. 339 The law of equity was employed to supplement the common law when the latter did not provide sufficient relief. This fact then accounts for the fact that specific performance is considered an exceptional remedy under the common law, to be employed when the normal remedy of damages does not provide satisfactory compensation Kastely (n 305) 634; Treitel (n 300) 45. Treitel (n 300) 63. Reilly International Sales Contracts. The UN Convention and related Transnational Law (2008) 219 states in this regard that [c]ommon law lawyers should recognise that this is the result of historical accident and not the product of some kind of superior intellectual effort. Teitel (n 300) 63. Treitel (n 300) 63. For an overview of the relationship between common law and the law of equity, see Newman Equity and Law: A Comparative Study (1961). Kritzer (n 100) 215; Kritzer et al (n 14) 87:

245 Conversely, most civil law legal systems follow the approach that each party to a contract is entitled to expect performance from the other party or parties. 341 Therefore, contractual remedies in civil law systems emphasise the aggrieved party s right to require the breaching party to perform its obligations. 342 The general approach in civil law systems may be traced back to the Roman law principle of pacta sunt servanda. 343 In line with this principle, civil law embraces the view that the aggrieved party should be able to choose between damages and specific performance. This choice is not awarded to the party defaulting on his/her promise. 344 Furthermore, not all civil law jurisdictions provide the same answer to the question of whether the creditor has a choice between claiming specific performance or damages where both remedies are in principle available. Several different approaches to specific performance may be discerned among the civil law jurisdictions. 345 Legal systems of a hybrid nature, containing civil law and common law influences, also display mixed approaches to the availability of specific performance. 346 Scottish law, for example, declares a general right to the remedy of specific performance on the one hand, but also regards it as discretionary in nature. 347 Similarly, in South African law the creditor has a right to an order for specific performance, 348 but the court also has the discretion to denounce a claim for specific performance Kastely (n 305) 610. Szladits The Concept of Specific Performance in Civil Law 1955 The American Journal of Comparative Law Digesta The Roman law history of specific performance points to it only becoming routinely available as a remedy during the post-classical period. In terms of the in cognitio procedure it was possible to claim for a specific thing. See Inst During the Classical period of Roman law, under the formula procedure, only claims for damages were allowed. See Gaius Inst IV 48. For an overview of Roman rules of civil procedure, see Greenidge The Legal Procedure of Cicero s Time (1971) See also, Herman 1 (n 330) 10 and Müller-Chen (n 297) 317 (par 1). Herman 1 (n 330) 10; Müller-Chen (n 297) 317 (par 1); Schlechtriem and Butler (n 116) 104. Herman 1 (n 330) 9-10 states by way of explanation that [f]or example, Spanish law... seems decisively committed to specific performance, and provides strong procedural safeguards for achieving it. Both Germany and France may have a commitment to specific performance exceeding that of New York, but neither country seems as dedicated to specific relief as Spain. See Treitel (n 300) for a brief overview of the German and French approaches in this regard. Treitel (n 300) 71. Treitel (n 300) See, in general, McBryde The Law of Contract in Scotland (2007) Farmer s Co-operative Society v Berry 1912 AD ; Kerr The Principles of the Law of Contract (1998) 598. In South African law, a claim for specific performance may include an order for delivery of the goods or for delivery of the remainder of the goods, an order for 237

246 The fact that common law, civil law and mixed jurisdictions follow markedly different approaches to the remedy of specific performance makes it difficult to envisage that all CISG contracting states could possibly have agreed on a uniform approach in this regard and strengthens the argument in favour of the inclusion of article 28 in the Convention Specific performance under the CISG The principal remedial provisions of the CISG provide a right to performance to the buyer as well as the seller. 350 It has been stated that, in providing a general claim for specific performance, the CISG is more in line with the civil law approach than with the common law approach. 351 Honnold states in this regard that the Convention grants specific performance on a wider scale than does the common law, which works from the premise that performance will be compelled only when damages do not provide an adequate remedy. 352 Subject to article 28, the aggrieved party may opt for specific performance or another remedy the discretion is awarded to the party, not to the court. 353 It is a well-established fact that the concept of specific performance is interpreted differently in various jurisdictions. However, it is not permissible to attach the meaning of the term under a specific jurisdiction to the same term in the CISG article 7(1) requires the CISG to be interpreted with regard to its international character. It is submitted that specific performance in the CISG should be interpreted delivery of substitute goods or an order for the repair of the goods if the repair would render the goods compliant with the contract. See, also, Eiselen A Comparison of the Remedies for Breach of Contract under the CISG and South African law in Basedow et al Aufbruch nach Europa 75 Jahre Max Planck-Institut für Privatrecht (2001) Haynes v King William s Town Municipality SA 371 (A) 378; Benson v SA Mutual Life Assurance Society SA 776 (A) 781. Catalano More Fiction than Fact: The Perceived Differences in the Application of Specific Performance under the United Nations Convention on Contracts for the International Sale of Goods 1996/1997 Tulane Law Review ; Enderlein and Maskow (n 107) 122; Kastely (n 305) 612. See Kritzer et al (n 14) 87:36. Honnold Flechtner (n 141) 194. Reilly (n 336)

247 as any order requiring full performance by the buyer or seller in terms of articles 46 or 62 respectively. 354 According to article 46, [t]he buyer may require performance by the seller of his obligations.... The provision made for specific performance in the CISG is justifiable in light of the fact that the payment of damages and the subsequent acquisition of substitute goods may not always present a satisfactory solution, specifically in the case of a contract for the international sale of goods. 355 The goods may not be readily available or the price or quality may not be comparable. 356 The buyer may claim repair of the goods under article 46(3). A claim for specific performance instituted by the buyer in terms of article 46 would consist of a claim for delivery of conforming goods as agreed upon in the contract. In a wide sense, the buyer may of course claim performance of all the seller s obligations as enunciated in the CISG 357 and which include: the seller s duty to deliver the goods, 358 to hand over the documents, 359 to transfer ownership in the goods 360 and to replace and repair the goods in case of nonconformity. 361 Article 62 provides that [t]he seller may require the buyer to pay the price, take delivery or perform his other obligations. A claim for specific performance instituted by the seller in terms of article 62 could require the buyer to pay the purchase price 362 or to take delivery of the goods. 363 In essence, article 46 prompts a court to order specific performance in the event of a seller defaulting on delivery, and article 62 prompts a judgment for specific performance in the event of a buyer defaulting on payment subject to article See Kastely (n 305) 635 for a similar conclusion. Boghossian (n 299) 63. Kastely (n 305) 611. Müller-Chen (n 297) 319 (par 6). Compare article 31. Compare article 34. Compare article 30. Compare article 46. Compare article 53. Compare articles 53 and

248 It has been pointed out that the right to claim specific performance under the CISG does not depend on the inadequacy of damages. 364 The general rule in this regard is that the creditor may claim specific performance unless (s)he has resorted to a remedy which is inconsistent with a claim for specific performance. 365 It seems clear that if the aggrieved party elects to declare the contract avoided 366 due to a fundamental breach 367 committed by the other party, it would amount to a remedy inconsistent with a claim for specific performance. 368 Treitel questions whether a claim for damages would amount to a remedy inconsistent with a claim for specific performance under the CISG. 369 He states that under the Convention, the aggrieved party is not deprived of his right to claim damages by exercising his right to claim performance, but the converse is not necessarily true. 370 According to Treitel, a buyer claiming damages for late delivery of the goods could not be said to have resorted to a remedy inconsistent with specific performance. On the other hand, a claim for damages for non-delivery of the goods calculated as the difference between the contract and market price, would be regarded as inconsistent with a claim for specific performance. 371 Walt also argues that a claim for damages based on the market-contract price differential under article would qualify as an inconsistent remedy. He adds that a claim for the reduction of the contract price under article 50 would also thus qualify. 373 In the case of a claim for specific performance by a seller under article 62, avoidance would constitute an inconsistent remedy Garro Reconciliation of Legal Traditions in the UN Convention on Contracts for the International Sale of Goods 1989 The International Lawyer Articles 46(1) and 62 contain this phrase. Articles 49(1) and 64(1). According to article 25 of the CISG a breach committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result. Huber Remedies of the Buyer in Huber and Mullis (n 178) ; Treitel (n 300) 51. Ibid. Treitel (n 300) 51. According to article 45(2) the buyer and according to article 61 (2) the seller is not deprived of any right (s)he may have to claim damages by exercising his/her right to other remedies. Treitel (n 300) 51. Walt For Specific Performance under the United Nations Sales Convention 1991 Texas International Law Journal Article 74 states: Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract. Walt (n 372) 214. Boghossian (n 299) 20 and Huber (n 368) 192 also support this conclusion. According to article 50 if the goods do not conform with the contract and whether or not the 240

249 Various other limits exist on the availability of a claim for specific performance under the CISG. 375 For instance, when the seller has delivered non-conforming goods, article 46(2) only permits the buyer to require delivery of substitute goods if the lack of conformity constitutes a fundamental breach of contract. It has been stated that, if non-conforming goods have been delivered and the non-conformity does not constitute a fundamental breach of contract, the buyer is only entitled to repair of the goods and damages. 376 Some commentators regard the mitigation duty contained in article of the CISG as placing a limitation on the option of claiming specific performance. 378 According to this view, mitigation may qualify as a remedy inconsistent with a claim for specific performance, such as would be the case where a seller mitigates its loss by resale of the goods. 379 Others argue that the drafting history supports a conclusion to the contrary. 380 Kritzer et al point out in this regard: [I]n an action for specific performance, applicability or non-applicability of [a]rticle 77 is apt to be a moot issue to the extent that domestic concepts of mitigation are brought into play when domestic law is invoked by article Authors who support the view that article 7(1) imposes a general obligation of conduct in good faith, support the notion that article 7 requires the right to specific performance to be exercised in good faith. 382 Such obligation would limit a party s price has already been paid, the buyer may reduce the price in the same proportion as the value that the goods actually delivered had at the time of delivery bears to the value that conforming goods would have had at that time. Boghossian (n 299) 25. Enderlein and Maskow (n 107) 122. Catalano (n 350) According to article 77, a party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss, including loss of profit, resulting from the breach. If he fails to take such measures, the party in breach may claim a reduction in damages in the amount by which the loss should have been mitigated. Enderlein and Maskow (n 107) 122; Flechtner Remedies under the New International Sales Convention: The Perspective from Article 2 of the UCC 1988 Journal of Law and Commerce 53 62; Herman 2 (n 326) 196. Herman 2 (n 330) 201. Catalano (n 350) 1812; Kastely (n 305) 623; Kritzer et al (n 14) 87:41; Zeller CISG and the Unification of International Trade Law (2007) 58. See also, First Committee Deliberations, 30 th Meeting (A/CONF.97/C.1/SR.30) in Official Records (n 39) para Kritzer et al (n 14) 87:41. Catalano (n 350) 1813; Kastely (n 305)

250 ability to claim specific performance if it would create undue hardship for the debtor. 383 However, it must be borne in mind that the inquiry should start with the availability of specific performance in terms of the provisions of the CISG. If limits are placed on specific performance by internal CISG provisions, it would not be necessary to invoke article 28 in any event. Müller-Chen correctly points out that article 28 allows domestic fora to deny a claim for specific performance under the circumstances as set out, but does not permit domestic courts to allow claims for specific performance that would not be allowed in terms of the provisions of the CISG. 384 Article 28 has been criticised for undermining articles 46 and 62 of the CISG, because an aggrieved party must always fear that a court will not order specific performance. 385 In this regard it has been suggested by Kastely that parties should avoid possible confusion created by article 28 by specifying in their contract whether the remedy of specific performance would be available or not. 386 Parties are permitted to contract out of or vary provisions of the CISG pursuant to article 6. Kastely argues that the drafting history points to the non-mandatory nature of the Convention as a whole and that parties should be permitted to waiver article However, many authors argue that article 28 has a mandatory character and that parties may not exclude article 28 in terms of article Lando points out that, even if parties expressly agree on specific performance in their contract and thereby vary or derogate from the CISG in terms of article 6, a court may still refuse to enter a judgment for specific performance in terms of article Another point of critique raised against the inclusion of article 28 in the CISG is that it is incompatible with the main purpose of the CISG, since designating the issue of specific performance to the law of the relevant forum drastically impacts on Ibid. Müller-Chen (n 297) 323 (par 11). Kastely (n 305) 627. Kastely (n 305) 641. Kastely (n 305) Bonell Article 6 Parties Autonomy in Bianca and Bonell (n 11) 51 62; Huber (n 368) 190; Müller-Chen (n 297) 327. Lando Article 28 Specific Performance in Bianca and Bonell (n 11)

251 uniformity and harmonisation of law in the field of international sales. 390 It has also been stated in this regard that there may exist a duality of policies in the CISG s remedial scheme 391 articles 46 and 62 establish a right to specific performance, but this right is substantially compromised by the inclusion of article 28 and diluted by limitations placed on such a claim by articles 46 and 62 themselves. 392 Furthermore, it has been argued that article 28 will encourage forum-shopping. 393 This argument hinges on the fact that, since article 28 assigns the granting or negating of an order for specific performance to the law of the forum, parties would forum-shop to find a domestic legal system suitable to their needs in this regard. 394 On the other hand, various commentators argue that article 28 does not impede the availability of specific performance under the CISG. The most convincing argument in this regard is that the types of international sales contracts for which specific performance is sought are those types of contracts for which common law courts routinely grant specific performance. 395 This argument pertains to the fact that goods sold under the CISG are mostly non-standard (ie unique ) or in short supply in the buyer s domestic market. These features comply with requirements set by most common law courts for a judgment of specific performance. Furthermore, it has been stated that, if specific performance would be ordered in terms of the relevant domestic law, a court must make the remedy available for a claim governed by the CISG. The debtor, and not the court, therefore has the choice between the available remedies in the particular circumstances. 396 The CISG does not prescribe the procedural measures to be employed by fora to enforce a judgment for specific performance. 397 Rules of procedure vary from forum to forum, so it would have been cumbersome if the CISG had contained any directives Boghossian (n 299) 29. But the same author reaches the opposite conclusion later in the same article (at 75). Carr International Trade Law (2010) 87 also argues that the inclusion of article 28 has eroded the level of uniformity that the drafters intended to achieve. See also Müller- Chen (n 297) 318 (par 3) and Reilly (n 336) 227. Herman (1) (n 330) 7. Ibid. Kastely (n 305) 615. Ibid. Walt (n 372) 218. Flechtner Buyers Remedies in General and Buyers Performance-oriented Remedies 2005/2006 Journal of Law and Commerce also raises this point. Walt (n 372) 224. Lando (n 389)

252 in this regard. It is a trite principle of private international law that procedural matters are governed by the lex fori. 398 One commentator argues that the measures to be employed by a court to enforce performance, constitutes a gap in the CISG to be filled in accordance with article 7(2). 399 It is submitted that it is unnecessarily onerous to subject procedural enforcement of specific performance granted in terms of the CISG to the article 7(2) gap-filling mechanism, when this matter would clearly not be solved by a general principle on which the CISG is based and the answer would still lie in domestic rules of procedure The meaning of article 28 clarified Meaning of court It has been suggested that court in article 28 be interpreted as referring to fora in contracting as well as in non-contracting states. 400 This seems to be the correct interpretation, since it accords with the purpose of article 28 allowing the forum seized of the matter to enter in an order for specific performance if it would do so under its own law and has measures in place to ensure compliance with such an order Meaning of own law In terms of article 28, a court is under no obligation to enter a judgment for specific performance unless it were obliged to do so under its own law in respect of similar contracts of sale not governed by the CISG. It is not apparent from the wording of article 28 whether own law refers to the whole law of the forum (including its rules of private international law) or to the internal law only Collins (ed) Dicey, Morris and Collins on the Conflict of Laws Volume 1 (2006) 177. Zeller (n 380) 60 states in this regard: It should be stressed that it is not due to the fact that the rules requiring performance are procedural in nature that a domestic solution is required. The CISG comprises many articles that, in several systems, are procedural in nature. Awarding damages for attorney s fees is such an example. The simple fact is that gap-filling according to article 7(2) is relevant whenever a gap exists; whether the gap is procedural or substantive in nature does not matter. Huber (n 368)

253 Most authors 401 agree that own law refers to the relevant internal law, ie the domestic law of the forum minus its rules of private international law. One author takes the opposite view, namely that own law includes a reference to the rules of private international law of the relevant forum. 402 According to his argument, such interpretation will disallow a mere choice of court by the parties in order to dictate the availability of specific performance, which is to be regarded as a substantive matter to be determined by the proper law of the contract. 403 However, the application of the rules of private international law would, firstly, necessitate classification of the question of the availability of specific performance as a matter of substance or procedure. If the request for a judgment for specific performance is considered by the forum to be a matter of procedure, the court would reason that the (internal) lex fori is applicable, since it is a general principle of private international law that matters of procedure are governed by the lex fori. 404 If this is indeed the case, an interpretation of the phrase own law as meaning whole law, would present no challenge to the purpose of article 28. On the other hand, if the forum classifies the bid for specific performance as a matter of substance to be governed by the proper law of the contract, and own law in article 28 is interpreted as referring to the whole law of the forum (including its rules of private international law), the purpose of article 28 may be defeated. It may be that, under the proper law of the contract, specific performance is granted in the particular circumstances, but that the forum would not grant specific performance in similar cases. The forum is then forced to enter a judgment for specific performance where it would normally not do so this result is completely anomalous to the intention of article 28. Furthermore, even if the proper law s approach to specific performance accords with that of the forum, it is possible that the operation of the doctrine of renvoi may direct the forum to the application of a legal system whose rules regarding specific performance are at odds with its own and may then force the forum to hand down a judgment for specific performance where it would not otherwise do so Boghossian (n 299) 27; Catalano (n 350) 1819; Honnold Flechtner (n 141) 195; Kastely (n 305) 72; Müller-Chen (n 297) 321 (par 9); Reilly (n 336) 227; Walt (n 372) 219. Naón The UN Convention on Contracts for the International Sale of Goods in Horn and Schmitthoff (eds) (n 292) Naón (n 402) 108. Collins (ed) (n 398) Volume

254 Where the lex fori is not the proper law (applicable law) of the contract, application of the law of the forum to the issue of specific performance and the proper law to the other substantive issues would lead to dépeçage. 405 According to Reese, dépeçage is appropriate, inter alia, when the application of the rules of different legal systems would serve to effectuate the purpose of each of the rules applied. 406 If this reasoning is followed, the fact that article 28 may lead to two different legal systems being applied to the substantive issues under the same contract (assuming that the forum regards specific performance as a substantive issue) should be accepted in light of the purpose of this article. According to Honnold, the legislative history of the CISG provides an answer to the questions surrounding the correct interpretation of own law in article He refers to the fact that the specific performance provisions of the ULIS and the CISG are virtually identical and that the Special Commission preparing the ULIS Convention responded to comments by governments on this point by emphasising that the text referred to the lex fori, the domestic law of the forum. 408 The present author supports the view that own law refers to the internal law of the forum, since the application of the rules of private international law in this instance may defeat the purpose of article 28 allowing fora to negate a claim for specific performance in circumstances where it would not normally have granted such a claim Meaning of similar contracts of sale not governed by this Convention A cursory reading of article 28 prompts the question of which contracts are to be included under similar contracts of sale not governed by the CISG? The text of the Convention provides no description or guidance in this regard Reese Dépeçage: A Common Phenomenon in Choice of Law 1973 Columbia Law Review 58, defines dépeçage broadly as to cover all situations where the rules of different states are applied to govern different issues in the same case (at 58). A somewhat narrower definition of dépeçage would be a reference to situations where the rules of different legal systems govern different substantive issues pertaining to the same case or, in present circumstances, contract. Reese (n 405) 60. Honnold Flechtner (n 141) 195. Ibid. 246

255 As a starting point, similar contracts would refer to contracts governing subject matters comparable to those to which the CISG applies. 409 Article 2 of the CISG excludes certain categories of contracts from the application of the Convention. It has been stated that all sales contracts that do not fall within article 2 are potentially similar contracts. 410 Another author argues that, in order to identify contracts similar to those governed by the CISG, it is necessary to identify the distinguishing features of contracts governed by the CISG. 411 Two characteristic features of the subject matter of the CISG have been identified, namely that the goods sold are not standard or generic goods in the buyer s domestic market or that the goods are in short supply in the buyer s domestic market. 412 Therefore, similar contracts could be interpreted as contracts for the sale of goods not readily available (at a competitive price) or non standard in the buyer s domestic market. Thirdly, this phrase has also been interpreted as referring to domestic contracts of sale in general and contracts for the sale of goods between parties from non-contracting states. 413 The present author is of the opinion that this phrase should be interpreted as referring to contracts for the sale of goods not governed by the CISG. It is submitted that similar contracts therefore refers to the sale of tangible, movable goods under circumstances where the CISG s applicability criteria under sub-articles 1(1)(a) and 1(1)(b) are not met or where the CISG s internationality requirements have otherwise not been complied with Applying article 28 When faced with a claim for specific performance based on a contract governed by the CISG, the court must first determine whether the claimant is entitled to specific performance in terms of the CISG s provisions. 414 The starting point is therefore article 46 in the case of a buyer claiming specific performance and article 62 if the seller is the claimant. If the relevant requirements for specific performance under the CISG are met, the forum must then turn its attention to article 28. It must identify Walt (n 372) 220. Ibid. Walt (n 372) 221. Walt (n 372) 223. Boghossian (n 299) 28. Müller-Chen (n 297) 326 (par 20); Walt (n 372)

256 similar contracts in its internal/domestic law and ascertain whether it would grant an order for specific performance for such contract(s) under similar circumstances. If the last question is answered in the affirmative, the court is bound to enter a judgment for specific performance, it has no further discretion in the matter. 415 If the question is answered in the negative, the court may invoke article 28 and deny a claim for specific performance. 416 However, the forum may still order specific performance if it is available under the lex fori CISG case law on article 28 Very few cases involving article 28 have been reported. 417 The UNCITRAL Digest 418 only mentions one, namely the American decision in Magellan International Corp v Salzgitter Handel GmbH. 419 In this case the court referred to the fact that the buyer may claim specific performance under article 46(1) of the CISG, unless the claimant has resorted to an inconsistent remedy. The court mentions that, as such, this provision would appear to make specific performance routinely available under the Convention. 420 The court continues by stating that article 28 conditions the availability of specific performance and in present circumstances has the effect of directing the availability thereof to section of the UCC. The court found that the claimant qualified to specific performance in terms of both article 46(1) of the CISG and article of the UCC Conclusion regarding the meaning and effect of article 28 It is submitted that the phrase own law in article 28 should be interpreted as the internal law of the forum, ie the law of the forum without its rules of private international law. If own law is interpreted as referring to the whole law of the forum its internal law as well as its rules of private international law it may have the effect that the matter of specific performance is determined by a legal system Walt (n 372) 224. Müller-Chen (n 297) 326 (par 21). Flechtner (n 395) 344 states that article 28 has to date generated very little case law, and almost no controversy. UNCITRAL Digest of Case Law on the United Nations Convention on the International Sale of Goods (n 58) 87. Federal District Court, Northern District of Illinois (United States), : case number 423 (UNILEX), 417 (CLOUT). Magellan-case (n 419) Judgment: Count II. 248

257 other than the lex fori, namely if the private international law of the forum finds a foreign legal system to be the proper law of the contract. This certainly defeats the purpose of article 28, which relieves a forum from having to enter a judgment for specific performance if its own rules would normally not allow such judgment under the relevant circumstances of the case. One commentator concludes that article 28 is to be understood in the setting of domestic procedural systems and can mitigate the appearance of rigidity of the Conventions s general rules on requiring performance. 421 It has been pointed out that all fora limit the availability of specific performance. 422 It has been questioned whether the inclusion of article 28 into the CISG was necessary in light of the fact that, even though the conceptual framework for specific performance differs in various jurisdictions, there exists agreement on many significant points. 423 It has been mentioned that the difference between enforced performance in common law and civil law is more theoretical than practical. 424 In light of this fact it seems unlikely that article 28 would hamper the uniformity of the application of the CISG in relation to the availability of remedies. 425 It has also been said with regard to the effect of article 28 that [i]n international trade, the buyer generally has an economic interest in legal enforcement of his claim for delivery only if he has a guarantee [of] unproblematic enforcement of the ruling, if the object of the purchase is otherwise not available in the market or is available only with disproportionate effort, if the matter involves claims for subsequent performance (repair or replacement) or if the available alternatives do not Honnold Flechtner (n 141) Walt (n 372) 213. Kastely (n 305) 628. Lando (n 389) argues that a compromise on the position could have been reached at the Vienna Conference, obviating the need for the inclusion of article 28. He states in this regard (at 237): The civil law countries could have admitted that specific performance should be restricted to the situations for which this remedy is needed in practice. The common law countries might have conceded that in these situations specific performance should be a right which the court would have to grant the aggrieved party. Kritzer et al (n 14) 87:36 also point out that restrictions are placed upon the availability of specific performance in civil law and common law traditions, making the practical differences between various approaches regarding specific performance very few. Catalano (n 350) See Gonzalez Remedies under the UN Convention for the International Sale of Goods 1984 International Tax and Business Law for a similar conclusion. Catalano (n 350)

258 compensate for his economic losses. This also applies mutatis mutandis to the seller s claim to have the goods accepted and to receive payment. 426 It may therefore be concluded that instances in which specific performance affords the claimant greater relief than damages, are rare. However, the fact remains that numerous common law jurisdictions did oppose an unmitigated right to claim specific performance under the CISG. It could have reduced the number of contracting states significantly if article 28 was not included. It has been pointed out that a forum in a jurisdiction that allows specific performance as an exceptional remedy, may still enforce the Convention s broader scope of specific performance, it is simply not required to do so. 427 The fact that there exists so few reported cases 428 on article 28, quells most points of critique levelled at its inclusion in the CISG. It supports a conclusion that the availability of specific performance under the CISG (which refers to the general principle and all the internal qualifiers in this regard) accords with its availability in most jurisdictions be they civil law, common law or mixed jurisdictions. 429 From a practical point of view, it has also been pointed out that parties generally address the issue of specific performance in their contract Müller-Chen (n 297) 319 (par 4). According to Kritzer et al (n 14), [i]n international trade, there are few instances where specific performance can serve a useful purpose except in cases of substitute performance or repair (at 87:36). Gonzalez (n 424) 97. Flechtner (n 378) 59 similarly concludes that the wording of article 28 appears to permit but not mandate imposition of a forum s restrictive specific performance rules. Müller-Chen (n 297) 326 supports the same conclusion. Lando (n 389) 237 notes that nothing prohibits a forum from entering a judgment of specific performance in terms of the CISG in cases for which it previously had not allowed a claim for specific performance. Enderlein and Maskow (n 107) 122 reach a similar conclusion to Lando s. Kritzer et al (n 14) 87:36. Zeller (n 380) at 62 concludes in this regard: It can be argued that specific performances, which are contained in the CISG, are so obvious and clear that there is really no viable alternative but to grant these remedies. This is especially so, as the CISG also included stoppers that need to be overcome before specific performance can be claimed. Lando (n 389) 234 also notes that circumstances under which a claim for specific performance is instituted in civil law courts, are those in which a common law court would also generally enter a judgment for specific performance. Kritzer (n 100)

259 Article 28 therefore represents a political compromise reached by the representatives during the Diplomatic Conference to assuage fears that delegates from common law countries voiced. If its inclusion persuaded the delegates from certain states to recommend adoption of the Convention, it is good enough reason for its inclusion. Practice has shown that its inclusion has so far not been detrimental to the uniform application of the Convention. 4.6 Conclusion In this chapter it was endeavoured to analyse the provisions of the CISG permitting recourse to domestic law: article 7(2) permits recourse to domestic law to fill gaps when no general principles on which the Convention is based are available for this purpose and article 28 allows the forum seized of the matter to limit the availability of the remedy of specific performance to instances where the remedy would be handed down by the forum under similar circumstances. With regard to article 7(2), it was concluded that gap-filling via recourse to general principles does not lead to uniform application of the CISG, since there exists no general consensus on the identification, interpretation or application of such general principles. Conflicting opinions of scholars and divergent approaches followed in case law were analysed to substantiate this conclusion. Even though it is acknowledged that the rules of private international law differ from forum to forum, this objection against reference to private international law is losing force in light of the increasing number of unified and harmonised private international law instruments being drawn up. Article 7(2) directs that, when attempting to fill a gap, recourse first be had to general principles on which the CISG is based before the legal system applicable by virtue of the rules of private international law is resorted to. The present author supports the notion that where there exists widespread consensus on a certain general principle which is also widely acknowledged as being able to fill a certain gap, the general principle should indeed be utilised to do so. In such cases, it would be an incorrect application of the CISG s gap-filling provision to resort to the domestic legal system applicable by virtue of the rules of private international law. 251

260 However, case law as analysed bears witness to the fact that attempting to fill gaps via recourse to general principles leads to divergent results in many instances. The present author therefore disagrees with the view held by many commentators that gapfilling via general principles promotes uniform application of the CISG whereas gapfilling via the legal system applicable by virtue of the rules of private international law necessarily negates uniform application. Reference to the rules of private international law may prove to be the only viable solution to gap-filling in many instances. If the reference to the rules of private international law were omitted from article 7(2), it would have impacted negatively upon gap-filling and, ultimately, upon the CISG s functioning. Article 28 allows a forum approached with a claim for specific performance in terms of the CISG to negate such a claim if it would not grant such an order in terms of its own law under similar circumstances. This provision constitutes a rule of private international law in itself, since it refers the availability of an order for specific performance to the lex fori. Article 28 has not given rise to much litigation and the necessity of its inclusion has been questioned by some commentators. The present author submits that the inclusion of article 28 is justified, since it has managed to quell common law states reservation to acceding to the CISG and therefore has widened the scope of application of the Convention. An analysis of articles 7(2) and 28 warrants the conclusion that private international law plays an important role in the proper functioning of the CISG on various levels. 252

261 CHAPTER 5 CONCLUSIONS 5.1 Preliminary remarks The hypothesis of this thesis is that private international law plays an important role in the success of an international substantive law convention. This hypothesis was investigated with reference to the relationship between the CISG and private international law. It is concluded that the analysis of the relationship between the CISG and private international law undertaken in this thesis, provides evidence of the correctness of the hypothesis. In this final chapter it will be endeavoured to highlight the conclusions stemming from the research conducted in this thesis and how it attests to the accuracy of the hypothesis. 5.2 Conclusion on the role of the CISG in international commercial law The twentieth century witnessed the rise of a true global marketplace. From a legal perspective, this vast growth of international trade brought with it a renewed interest in its regulatory framework the so-called new law merchant or new lex mercatoria. Heated scholarly debates have ensued over the existence and contents of this new lex mercatoria. However, from a current perspective, it would be justified to conclude that a transnational body of law, governing international business transactions exclusively, indeed exists. It is widely acknowledged that the United Nations Convention on Contracts for the International Sale of Goods or the CISG is one of the most important components of contemporary international commercial law or the modern lex mercatoria. The CISG is an influential uniform substantive law convention with 74 member states from all legal traditions. 253

262 An analysis of the historical context of the CISG warrants the conclusion that the hypothesis of this thesis is indeed correct. The failure of the CISG s predecessors to establish a widely recognised set of rules for the international sale of goods, prompted UNCITRAL s drafting of the CISG. The CISG s drafters had to pay heed to the reasons for its predecessors failure in order to ensure that their efforts to establish a uniform set of rules governing international sales of goods contracts were rewarded with success. One of the widely recognised reasons for the failure of the ULIS and the ULF is the fact that they negate any reference to the rules of private international law in the context of their application. The drafters of the CISG remedied this shortcoming by, inter alia, allowing for application of the Convention via the private international law route and therefore notably extending the CISG s scope of application and by allowing recourse to the legal system applicable by virtue of the rules of private international law to aid in gap-filling. The legislative history of the CISG therefore attests to the incorrectness of the widely held opinion that unification of substantive law reduces or obviates the need for resorting to the rules of private international law. 5.3 Conclusion on the role of private international law in the scope of application of the CISG: articles 1(1), 6 and 95 The overarching conclusion with regard to this theme is that reference to private international law broadens the sphere of application of the CISG and therefore actively promotes one of the basic premises of a uniform substantive law instrument: the widest possible application thereof Article 1(1)(b) Article 1(1) of the CISG directs that the Convention is applicable to contracts for the international sale of goods when the parties have their places of business in different states either (a) when the states are CISG contracting states or (b) when the rules of private international law lead to the application of the law of a contracting state. The first question that needs to be addressed when analysing article 1(1)(b), is whether application of the CISG under article 1(1)(b) only becomes relevant when 254

263 article 1(1)(a) s requirements for application are not met? In other words, does application of the Convention in terms of article 1(1)(a) enjoy preference over its application under article 1(1)(b)? The present author submits that the ordinary meaning attached to article 1(1) and, specifically to the word or, warrant the conclusion that articles 1(1)(a) and 1(1)(b) constitute alternative applicability criteria. A teleological interpretation of article 1(1) would merit the same conclusion, since the application of the CISG under article 1(1)(a) or 1(1)(b) would give effect to the Convention s object and purpose. It is therefore concluded that the application of the CISG by virtue of article 1(1)(a) should not necessarily enjoy preference over its application in terms of article 1(1)(b). The second important matter in the context of article 1(1)(b) concerns the question whether this provision refers to the private international law of the forum. It is submitted that this is indeed the case. Thirdly, if a forum s rules of private international law point to the law of a CISG contracting state, the forum would have to decide whether to apply the Convention because its conflicts rules point to the law of a contracting state or whether to make a further inquiry into the proper law s rules of private international law. Of relevance here is whether or not renvoi is to be applied. It is submitted that the exclusion or application of renvoi should be determined by the rules of private international law of the forum. If the private international law of the forum excludes renvoi in contract law matters, as is the case in most jurisdictions, then article 1(1)(b) should be interpreted as referring to the private international law of the forum. Fouthly, does article 1(1)(b) only refer to the rules of private international law of CISG contracting states? In other words, may the CISG only be applied via the private international law route by fora situated in contracting states? The answer to this question would ascertain whether a non-contracting state would potentially be placed in a position to apply the Convention or not. It is submitted that an interpretation of article 1(1)(b) as only referring to the private international law of fora situated in CISG contracting states, would be contrary to the 255

264 CISG s purpose of providing uniform rules for international sale of goods contracts and therefore of ensuring application of the Convention as widely as possible. It may be contended that fora in non-contracting states would not apply the CISG via article 1(1)(b) directly, ie, they would not start their investigation into the applicable law at article 1 of the CISG, but if they apply the CISG under the conditions as set out in article 1(1)(b), it still remains application of the CISG as authorised in terms of article 1(1)(b), whatever the route followed to get to the application of the CISG under conditions mirroring the requirements of article 1(1)(b). Lastly, when a forum s rules of private international law refer to the law of a CISG contracting state, is this a reference to that state s domestic (sales) law or does it include a reference to the CISG? It is submitted that when a forum s rules of private international law refer to the law of a CISG contracting state, article 1(1)(b) directs that the applicable sales law should be the CISG and not the proper law s domestic sales law. In this sense, article 1(1)(b) constitutes an internal conflict rule from the perspective of the CISG contracting state if its law is found to be the proper law of the contract, article 1(1)(b) determines that the CISG, and not domestic sales law, should be applied. A multitude of reported case law exists in support of the view that a reference to the law of a CISG contracting state includes a reference to the CISG. All commentators also support this view Article 95 When faced with the possible application of the CISG in terms of article 1(1)(b), one needs to pay heed to article 95. Article 95 allows a contracting state to declare at the time of ratification, acceptance, approval or accession that it will not be bound by article 1(1)(b) of the Convention. The courts of a contracting state availing itself of this reservation, such as the United States of America, are relieved from having to apply the Convention in terms of article 1(1)(b). The question of how far the effect of an article 95 reservation stretches, has given rise to much controversy and debate. 256

265 Numerous scenarios may be distinguished in respect of the applicability of the CISG. 1 The five scenarios most relevant to article 95 were analysed in detail. The present author s conclusions in this regard will be summarised briefly. Under the first scenario, the forum is situated in a reservation state, the requirements for application of the CISG under article 1(1)(a) are not met and the law of a reservation state is found to be applicable in terms of the private international law of the forum. This is the most uncomplicated scenario. Application of the CISG under article 1(1)(b) has been excluded by the lex fori, with the necessary result that the CISG would not be found applicable. The domestic sales law of the reservation state as indicated by the forum s private international law rules (that is the law of the reservation state minus the CISG) will be applied to the dispute at hand. Under the second scenario, the forum is situated in a reservation state, article 1(1)(a) s requirements for application are not met and the law of a non-reservation contracting state is found applicable in terms of the private international law of the forum. The present author agrees with the numerous scholars who support the application of the CISG in this scenario. Since the requirements for application of the convention under article 1(1)(a) are not met, the forum will turn to its rules of private international law to determine the law applicable to the contract. If its private international law finds the law of a CISG contracting state applicable, it should apply the CISG as part of that legal system. This does not amount to application in terms of article 1(1)(b) from the perspective of the forum state. Since one of the CISG applicability criteria is met from the perspective of the proper law of the contract, the relevant body of law to be applied is the CISG. According to this argument, the CISG is applied as part of the proper law of the contract. Correct application of the proper law therefore necessitates application of the Convention. Thirdly, in the scenario where the forum is situated in a reservation state, the requirements for application of the CISG under article 1(1)(a) are not met and the law of a non-contracting state is found applicable in terms of the private international law 1 See the table illustrating the scope of application of the CISG as appendix I to chapter 3 of this thesis. 257

266 of the forum, the CISG would not be applicable since neither the requirements of article 1(1)(a) nor of article 1(1)(b) are met. The fourth scenario concerns the position where the forum is situated in a nonreservation contracting state, the requirements for application of the CISG under article 1(1)(a) are not met and the law of a reservation state is found to be applicable in terms of the rules of private international law of the forum. It is submitted that the CISG should be applied under this scenario, since article 95 only provides that the reservation state and therefore fora in the reservation state are not bound to apply the CISG under article 1(1)(b). Fora in non-reservation contracting states are bound to apply the CISG in terms of article 1(1)(b) if the requirements for application thereunder are met. In this scenario the requirements for application of the CISG under article 1(1)(b) are met, since the rules of private international law refer to the law of a contracting state. It must be borne in mind that a state availing itself of the option of making an article 95 reservation, remains a CISG contracting state. In the final scenario, the forum is located in a non-contracting state whose rules of private international law lead to the application of the law of a reservation state and the requirements for application of the CISG under article 1(1)(a) are not met. It is submitted that application or negation of the CISG rests upon the question of whether the CISG could be seen as part of the applicable law in this scenario. It seems as though this question should be answered in the negative, since the requirements for application of the CISG under article 1(1)(a) are not met and application under article 1(1)(b) is excluded by the reservation. Article 1(1)(b) obviously does not form part of the law of the forum, since the forum is situated in a non-contracting state. From the perspective of the proper law, the CISG is therefore not the relevant body of law to be applied. Even though the present author follows a pro conventione approach in general, application of the CISG is not supported in this scenario. Application of the CISG would not constitute a correct application of the proper law. Article 95 has given rise to much uncertainty concerning the CISG s scope of application and it is submitted that this provision should not have been included in the Convention. 258

267 5.3.3 Article 6 Article 6 of the CISG gives recognition to the principle of party autonomy and guarantees the freedom of contract of the parties. According to article 6, the parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions The inclusion of article 6 makes it necessary for a forum, when having to decide on the possible application of the CISG, to investigate whether the Convention was not excluded by the parties. It is a matter of some controversy whether implied exclusion is allowed or whether only express exclusion is authorised. Majority opinion holds that exclusion may be express or implied. The present author concurs with the view that, if express exclusion of the CISG is required, the drafters would have included a directive to that effect in article 6. However, if there is doubt whether the CISG has been excluded or not, the pro conventione approach as subscribed to in this thesis, would require the Convention to be applied. Another question in the context of article 6 concerns the correct interpretation of a choice of law clause inserted in an international sales contract determining that the contract is to be governed by the law of a CISG contracting state. Should such a choice of law clause be interpreted as including a reference to the CISG or should it be interpreted as referring to the domestic (sales) law of the chosen country? Most authors endorse the view that such choice of law clauses are to be interpreted on the basis that the parties agreed on the rules that the chosen state provides for international sales contracts, and in the case of a CISG contracting state, the relevant rules would be those contained in the CISG. This view is based on the premise that the CISG forms part of the law of a contracting state, therefore a choice of law clause referring to the law of a contracting state, renders the CISG applicable. This argument was also followed in several court decisions. The present author supports application of the CISG in such circumstances based mutatis mutandis on the same arguments for 259

268 its application when the rules of private international law of the forum points to the law of a contracting state as the proper law of the contract. If the parties elect the law of a CISG contracting state and the requirements for application of the CISG are met, the CISG is the relevant set of rules of the chosen legal system to be applied. Numerous authors support the view that a choice of law clause inserted into an international sales contract designating the law of a non-contracting state as the applicable law, would exclude the application of the CISG under circumstances where it would otherwise have been applicable. It must be borne in mind that the requirements for and validity of such a choice of law agreement is to be determined in accordance with the rules of private international law of the forum. The present author concurs with the argument that the choice of law clause needs to be interpreted to ascertain whether the parties intended to exclude the application of the CISG or whether they merely wished to designate matters falling outside the scope of the Convention (or possible gaps) to the chosen domestic legal system, which happens to be that of a non-contracting state. Another question of importance under article 6 is whether this provision permits parties to make a direct choice in favour of the CISG as governing law of their contract, where it would not otherwise have been applicable? It is submitted that whether the parties are allowed to choose the CISG directly as the governing law of their contract is to be determined in accordance with the rules of private international law of the forum. Article 6 also allows parties to derogate from or vary the effect of certain provisions of the CISG. Instead of completely opting out of the CISG where it is in principle applicable, parties may agree on the non-application of certain of its provisions or the on modification of certain provisions. If parties exclude the application of certain provisions of the CISG without indicating the law applicable to matters governed by the derogated provisions, such matters will be governed by the law applicable by virtue of the rules of private international law of the forum. Three-way interplay between articles 1(1)(b), 95 and 6 may occur. This interplay is discussed at the end of chapter

269 5.4 Conclusion on the role of private international law in the functioning of the CISG: articles 7(2) and 28 Articles 7(2) and 28 permit recourse to domestic law in the context of the CISG. Article 7(2) assigns gaps to the proper law of the contract under circumstances where they cannot be filled by the general principles on which the CISG is based. It was shown in this thesis that gaps often have to be filled by the lex causae. Article 28 ensures the effectiveness of an order for specific performance by qualifying its availability with reference to the availability of such an order in the lex fori. Article 28 constitutes a rule of private international law in itself, since it refers the availability of an order for specific performance to the lex fori Article 7(2) Article 7(2) of the Convention provides that [q]uestions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law. The CISG was drafted through a diplomatic process which brought together representatives from numerous and diverse legal traditions. It was impossible to reach consensus on all matters pertaining to the formation of the contract and the rights and obligations of the buyer and seller. It is therefore inevitable that a number of gaps exist in the Convention. If workable solutions are not provided to gaps in the CISG, its functioning may be compromised. With regard to gap-filling in terms of article 7(2), it is concluded that gap-filling via recourse to general principles mostly does not lead to uniform application of the CISG, since there exists no general consensus on the identification, interpretation or application of such general principles. Conflicting opinions of scholars and divergent approaches followed in case law were analysed to substantiate this conclusion. It is submitted that employing the law applicable by virtue of the rules of private 261

270 international law for gap-filling at least ensures a predictable approach to gap-filling when a gap is encountered, reference is made to the legal system applicable in terms of the rules of private international law. Reference to the rules of private international law may prove to be the only viable solution to gap-filling in many instances. If the reference to the rules of private international law were omitted from article 7(2), it would have impacted negatively upon gap-filling and ultimately, upon the CISG s functioning Article 28 According to article 28, [i]f, in accordance with the provisions of this Convention, one party is entitled to require performance of any obligation by the other party, a court is not bound not enter a judgment for specific performance unless the court would do so under its own law in respect of similar contracts of sale not governed by this Convention. It is submitted that court in article 28 refers to fora in contracting as well as in noncontracting states. This interpretation accords with the purpose of article 28, namely allowing a forum seized of a matter falling within the ambit of the CISG to hand down an order for specific performance only if it would have done so under its own law so as to ensure effectiveness of such an order. It is concluded that own law in article 28 refers to the internal law of the forum and excludes the rules of private international law. If the matter of specific performance is subjected to the proper law as determined by the conflict rules of the lex fori, the purpose of article 28 may be defeated. It may be that specific performance is granted in terms of the proper law of the contract under these circumstances, but the forum would not allow for specific performance. The forum is then forced to enter a judgment for specific performance under circumstances where it would normally not do so this result is anomalous to the intention of article 28. When faced with a claim for specific performance based on a contract governed by the CISG, the court must first determine whether the claimant is entitled to specific performance in terms of the CISG s provisions. If the relevant requirements for 262

271 specific performance under the CISG are met, the forum must then turn its attention to article 28. It must identify similar contracts in its internal domestic law and ascertain whether it would grant an order for specific performance for such contract(s) under similar circumstances. If the last question is answered in the affirmative, the court is bound to enter a judgment for specific performance, it has no further discretion in the matter. If the question is answered in the negative, the court may invoke article 28 and deny a claim for specific performance. Article 28 therefore ensures that remedies granted under the CISG may effectively be enforced by the relevant forum. This certainly enhances the proper functioning of the CISG. 5.5 General conclusion An analysis of the historical development of international commerce illustrates that the importance of uniform international sales law has long been recognised. The CISG represents an important international instrument that aspires to establish a uniform international sales legal order. Private international law plays a significant role in the Convention as evidenced in articles 1(1)(b), 6, 7(2), 28 and 95. An analysis of the private international law implications of the Vienna Sales Convention is of importance for contracting and non-contracting states. The CISG represents the substantive provisions relating to contracts for the international sale of goods that could be agreed upon between diverse legal systems. Several matters could not be agreed upon. If provisions relating to such matters were indeed included in the CISG, it would certainly have diminished its success. Many current contracting states would not have been prepared to ratify or accede to the Convention if it contained provisions incompatible with its legal tradition. Therefore the drafters were wise to exclude or contentious matters from the Convention. However, the result is that the CISG cannot function alone another system of governing law needs to be applied to the matters not governed by or not settled in the CISG. This legal system needs to be determined by the rules of private international law of the forum. If the parties include a choice of law clause in their contract, the validity of such a provision would be determined in accordance with the conflict rules 263

272 of the forum. If the parties do not effect a choice of law, the legal system applicable to the contract would also be determined by the relevant rules of private international law. It is therefore concluded that the rules of private international law enhance the functioning of the CISG. If it was not possible to resort to another body of law to apply to matters which could not be agreed upon and regulated within the CISG, the convention would have been unsuccessful. Even though the CISG is not able to govern or settle all matters pertaining to a contract for the international sale of goods, it is highly valuable, since it represents a widely accepted body of rules that indeed unifies a substantial part of such matters. It does therefore promote international trade. The argument that the relevant rules of private international law are difficult to find, comprehend and apply is losing force against the backdrop of ever-increasing initiatives to unify or harmonise conflict of laws rules. It is also concluded that the harmonisation of substantive law rules and the harmonisation of conflict of laws rules should not be seen as either / or approaches to the international harmonisation of law. As illustrated with the relationship between the CISG and private international law, the functioning of uniform substantive law conventions in general would also be enhanced by uniform conflict of laws conventions. 5.6 Final remarks It has been illustrated in this thesis that the reference to private international law in article 1(1)(b) of the Convention broadens the sphere of application of the CISG and therefore actively promotes one of the basic premises of a uniform substantive law instrument: the widest possible application thereof. The party autonomy provision contained in article 6 and the interpretation of choice of law clauses also underline the impact of the principles of private international law on the CISG. The reference to private international law for gap-filling often provides 264

273 the only workable solution to matters governed but not settled in the Convention and therefore enhances the proper functioning of the CISG. An analysis of the provisions of the CISG provide evidence of the fact that the animosity of certain commentators towards the reference to private international law in the field of international sales law is unfounded and that private international law is indeed vital to the proper functioning and ultimate success of a uniform substantive law instrument such as the CISG. 265

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283 Koneru P The International Interpretation of the UN Convention on Contracts for the International Sale of Goods: An Approach based on General Principles 1997 Minnesota Journal of Global Trade 105 Kroll S Selected Problems concerning the CISG s Scope of Application 2005/2006 Journal of Law and Commerce 39 Kronke H International Uniform Commercial Law Conventions: Advantages, Disadvantages, Criteria for Choice 2000 Revue de droit uniforme / Uniform Law Review 13 L Lagergren G The Uniform Law on Formation of Contracts for the International Sale of Goods 1966 Journal of Business Law 22 Lando O CISG and its Followers: A Proposal to Adopt some International Principles of Contract Law 2005 The American Journal of Comparative Law 379 Lipstein K Characteristic Performance: A New Concept in the Conflict of Laws in Matters of Contract for the EEC 1981 Northwestern Journal of International Law and Business 402 Loewe R The Sphere of Application of the UN Sales Convention 1998 Pace International Law Review 79 Lookofsky JM Loose Ends and Contorts in International Sales: Problems in the Harmonisation of Private Law Rules 1991 The American Journal of Comparative Law 403 Lookofsky JM In Dubio Pro Conventione? Some Thoughts about Opt-outs, Computer Programs and Preemption under the 1980 Vienna Sales Convention (CISG) 2003 Duke Journal of Comparative and International Law

284 Lookofsky JM Walking the Article 7(2) Tightrope between CISG and Domestic Law 2005/2006 Journal of Law and Commerce 87 M Magnus U General Principles of UN-Sales Law 1997 International Trade and Business Law Annual 33 Martin-Davidson SJ Selling Goods Internationally: Scope of the UN Convention on Contracts for the International Sale of Goods 2008/2009 Michigan State Journal of International Law 657 Mather H Choice of Law for International Sales Issues not Resolved by the CISG 2000 Journal of Law and Commerce 155 Mazzotta FG CISG Article 78: Endless Disagreement among Commentators, Much Less among the Courts 2004 Review of the Convention on Contracts for the International Sale of Goods 123 McMahon AJ Differentiating between Internal and External gaps in the UN Convention on Contracts for the International Sale of Goods: A Proposed Method for Determining governed by in the Context of Article 7(2) 2005/2006 Columbia Journal of Transnational Law 992 Medwig MT The New Law Merchant: Legal Rhetoric and Commercial Reality 1993 Law and Policy in International Business 589 Michaels R The True Lex Mercatoria: Law Beyond the State 2007 Indiana Journal of Global Legal Studies 447 Murphy MT United Nations Convention on Contracts for the International Sale of Goods: Creating Uniformity in International Sales Law 1988/1989 Fordham International Law Journal

285 N Nadelmann KH The Uniform Law on the International Sale of Goods: A Conflict of Laws Imbroglio 1964/1965 Yale Law Journal 449 Nadelmann KH Uniform Legislation versus International Conventions Revisited 1968 The American Journal of Comparative Law 28 Ndulo M The Vienna Sales Convention 1980 and the Hague Uniform Laws on the International Sale of Goods 1964: A Comparative Analysis 1989 International and Comparative Law Quarterly 1 Neels JL Geoorloofdheid van n Kontrak en Openbare Beleid in die Internasionale Privaatreg 1991 Tydskrif vir die Suid-Afrikaanse Reg / Journal of South African Law 694 Neels JL Die Gedeeltelike Uitsluiting van Renvoi in Resente Wetgewing 1992 Tydskrif vir die Suid-Afrikaanse Reg / Journal of South African Law 739 Neels JL Regsekerheid en die Korrigerende Werking van Redelikheid en Billikheid (Deel 2) 1999 Tydskrif vir die Suid-Afrikaanse Reg / Journal of South African Law 256 Neels JL and Fredericks EA Revision of the Rome Convention on the Law Applicable to Contractual Obligations (1980): Perspectives from international commercial and financial law 2004 EUREDIA Revue européene de droit bancaire et financier / European Banking and Financial Law Journal 173, also published in 2006 Tydskrif vir die Suid-Afrikaanse Reg / Journal of South African Law 121 Neels JL and Fredericks EA The Music Performance Contract in European and South African Private International Law (2) 2008 Tydskrif vir Hedendaagse Romeins-Hollandse Reg / Journal of Contemporary Roman-Dutch Law

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288 Stanton H How to be or not to be: The United Nations Convention on Contracts for the International Sale of Goods, Article Cardozo Journal of International and Comparative Law 423 Sutton KCT Hague Conventions of 1964 and the Unification of the Law of the International Sale of Goods 1970 University of Queensland Law Journal 145 Szladits C The Concept of Specific Performance in Civil Law 1955 The American Journal of Comparative Law 208 T Thieffry P Sale of Goods between French and US Merchants: Choice of Law Considerations under the UN Convention on Contracts for the International Sale of Goods 1988 The International Lawyer 1017 Torsello M Reservations to International Uniform Commercial Law Conventions 2000 Revue de droit uniforme / Uniform Law Review 85 Trakman LE The Evolution of the Law Merchant: Our Commercial heritage. Part 1: Ancient and Medieval Law Merchant 1980 Journal of Maritime Law and Commerce 1 Turley IF Lex Mercatoria: Quo Vadis? 1999 Tydskrif vir die Suid-Afrikaanse Reg / Journal of South African Law 454 V Van Alstine MP Dynamic Treaty Interpretation 1998 University of Pennsylvania Law Review

289 W Walt S For Specific Performance under the United Nations Sales Convention 1991 Texas International Law Journal 211 Wethmar-Lemmer MM The Development of a Modern Lex Mercatoria: A Historical Perspective 2005 Fundamina 183 Wethmar-Lemmer MM When could a South African Court be Expected to Apply the United Nations Convention on Contracts for the International Sale of Goods (CISG)? 2008 De Jure 419 Wethmar-Lemmer MM The Impact of the Article 95 Reservation on the Sphere of Application of the United Nations Convention on Contracts for the International Sale of Goods 2010 De Jure (to be published) Winship P International Sales Contracts under the 1980 Vienna Convention 1984 Uniform Commercial Code Law Journal 55 Winship P Commentary on Prof Kastely s Rhetorical Analysis 1987/1988 Northwestern Journal of International Law and Business 623 Winship P Private International Law and the UN Sales Convention 1988 Cornell International Law Journal 487 Winship P The UN Sales Convention: A Bibliography of English-language Publications 1994 The International Lawyer 401 Winship P Changing Contract Practices in the Light of the United Nations Convention: A Guide for Practitioners 1995 The International Lawyer

290 Wool J Rethinking the Notion of Uniformity in the Drafting of International Commercial Law: A Preliminary Proposal for Development of a Policy-based Unification Model 1997 Revue de droit uniforme / Uniform Law Review 46 Z Zeller B Determining the Contractual Intent of Parties under the CISG and Common Law A Comparative Analysis 2002 European Journal of Law Reform 629 Ziegel J The scope of the Convention: Reaching out to Article 1 and Beyond 2005/2006 Journal of Law and Commerce

291 BOOKS A Aust A Modern Treaty Law and Practice (2007) Cambridge: Cambridge University Press B Berger KP The Creeping Codification of the Lex Mercatoria (1999) The Hague: Kluwer Law International Bernstein H and Lookofsky J Understanding the CISG in Europe (1997) The Hague: Kluwer Law International Bertrams RIVF and Kruisinga SA Overeenkomsten in het Internationaal Privaatrecht en het Weens Koopverdrag (2007) Deventer: Kluwer Bianca CM and Bonell MJ Commentary on the International Sales Law. The 1980 Vienna Sales Convention (1987) Milan: Giuffrè Boak AER and Sinnigen WG A History of Rome to AD 565 (1965) New York: The Macmillan Co Booysen H International Transactions and the International Law Merchant (1995) Pretoria: Interlegal Bridge M The International Sale of Goods: Law and Practice (2007) Oxford: Oxford University Press C Carr I International Trade Law (2010) London: Cavendish Publishing Limited 283

292 Collins L (ed) Dicey, Morris and Collins on the Conflict of Laws Volume 1 and Volume 2 (2006) London: Sweet & Maxwell D Dalhuisen JH Dalhuisen on Transnational and Comparative Commercial, Financial and Trade law (2007) Oregon: Hart Publishing De Ly F International Business Law and the Lex Mercatoria (1992) Amsterdam: North-Holland Diwan P (Paras) and Diwan P (Peeyushi) Private International Law. Indian and English (1998) New Delhi: Deep & Deep Publications E Einhorn T Private International Law in Israel (2009) Alphen aan den Rijn: Wolters Kluwer Law & Business Enderlein F and Maskow D International Sales Law. United Nations Convention on Contracts for the International Sale of Goods. Convention on the Limitation Period in the International Sale of Goods (1992) New York: Oceana Publications F Fawcett J, Harris J and Bridge M International Sale of Goods in the Conflict of Laws (2005) Oxford: Oxford University Press Fawcett JJ and Carruthers JM Cheshire, North and Fawcett Private International Law (2008) Oxford: Oxford University Press 284

293 Felemegas J (ed) An International Approach to the Interpretation of the United Nations Convention on Contracts for the International Sale of Goods (1980) as Uniform Sales Law (2007) Cambridge: Cambridge University Press Ferrari F The Sphere of Application of the Vienna Sales Convention (1995) The Hague: Kluwer Law International Ferrari F, Flechtner H and Brand RA (eds) The Draft UNCITRAL Digest and Beyond: Cases, Analysis and Unresolved Issues in the UN Sales Convention (2004) Munich: Sellier European Law Publishers Ferarri F (ed) Quo Vadis CISG? Celebrating the Twenty Fifth Anniversary of the United Nations Convention on Contracts for the International Sale of Goods (2005) Brussels: Bruylant Forsyth CF Private International Law: The Modern Roman-Dutch Law including the Jurisdiction of the High Courts (2003) Cape Town: Juta & Co Ltd G Gabriel HD Contracts for the Sale of Goods: A Comparison of Domestic and International Law (2004) New York: Oceana Publications Galston NM and Smit H (eds) International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984) New York: Matthew Bender Gibbins HB The History of Commerce in Europe (1903) London: Macmillan and Co Goode R, Kronke H, McKendrick E and Wool J Transnational Commercial Law: International Instruments and Commentary (2004) Oxford: Oxford University Press Gordley J and Von Mehren AT An Introduction to the Comparative Study of Private Law. Readings, Cases, Materials (2006) Cambridge: Cambridge University Press 285

294 Graveson RH, Cohn EJ and Graveson D The Uniform Laws on International Sales Act 1967 (1968) London: Butterworths Greenidge AHJ The Legal Procedure of Cicero s Time (1971) New York: Augustus M Kelley Publishers H Honnold JO Documentary History of the Uniform Law for International Sales. The Studies, Deliberations and Decisions that led to the 1980 United Nations Convention with Introduction and Explanations (1989) Deventer: Kluwer Law and Taxation Publishers Honnold JO Uniform Law for International Sales under the 1980 United Nations Convention (1991) Boston: Kluwer Honnold JO Uniform Law for International Sales under the 1980 United Nations Convention (1999) Boston: Kluwer Honnold JO and Flechtner HM Uniform Law for International Sales under the 1980 United Nations Convention. Edited and updated by Harry M Flechtner (2009) Alphen aan den Rijn: Wolters Kluwer Huber P and Mullis A The CISG. A New Textbook for Students and Practitioners (2007) Munich: Sellier European Law Publishers J Janssen A and Meyer O (eds) CISG Methodology (2009) Munich: Sellier European Law Publishers 286

295 K Kaczorowska A International Trade Conventions and their Effectiveness: Present and Future (1995) The Hague: Kluwer Law International Kerr AJ The Principles of the Law of Contract (1998) Durban: Butterworths Kritzer AH Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods (1989) Boston: Kluwer Kritzer AH, Vanto J (Jarno), Vanto J (Jessica) and Eiselen GTS International Contract Manual Volume 4 (2009) Thomson Reuters Kritzer AH, Vanto J (Jarno), Vanto J (Jessica) and Eiselen GTS International Contract Manual Volume 5 (2009) Thomson Reuters Kropholler J Internationales Einheitsrecht. Allgemeine Lehren (1975) Tübingen: JCB Mohr Paul Siebeck L Lenel O Das Edictum Perpetuum: ein Versuch zu seiner Wiederherstellung (1927) Leipzig: Tauchnitz Lookofsky J Understanding the CISG. A Compact Guide to the 1980 United Nations Convention on Contracts for the International Sale of Goods (2008) Alphen aan den Rijn: Wolters Kluwer M McBryde WW The Law of Contract in Scotland (2007) Edinburgh: W Green & Son Ltd 287

296 Murray C, Holloway D and Timson-Hunt D Schmitthoff s Export Trade. The Law and Practice of International Trade (2007) London: Sweet & Maxwell N Newman RA Equity and Law: A Comparative Study (1961) New York: Oceana Publications Nygh P Autonomy in International Contracts (1999) Oxford: Clarendon Press R Reilly EH International Sales Contracts. The UN Convention and related Transnational Law (2008) Durham: Carolina Academic Press S Saf C A Study of the Interplay between the Conventions governing International Contracts of Sale (1999) (last accessed ) Šarčević P (ed) International Contracts and Conflicts of Laws: A Collection of Essays (1990) London: Graham & Trotman Schlechtriem P Commentary on the UN Convention on the International Sale of Goods (CISG) (1998) Oxford: Oxford University Press Schlechtriem P and Butler P UN Law on International Sales (2009) Heidelberg: Springer-Verlag Schlechtriem P and Schwenzer I Commentary on the UN Convention on the International Sale of Goods (CISG) (2005) Oxford: Oxford University Press 288

297 Schwenzer I and Fountoulakis C International Sales Law (2007) London: Routledge- Cavendish Schmitthoff CM (ed) The Sources of the Law of International Trade (1964) London: Stevens & Sons Schmitthoff CM Commercial Law in a Changing Economic Climate (1981) London: Sweet & Maxwell Spruit JE Cunabula Iuris: Elementen van het Romeinse Privaatrecht (2003) Deventer: Kluwer Law International Stein P Roman Law in European History (1999) Cambridge: Cambridge University Press T Trakman LE The Law Merchant: The Evolution of Commercial Law (1983) Colorado: Fred B Rothman & Co Treitel GH Remedies for Breach of Contract. A Comparative Account (1988) Oxford: Clarendon Press U United Nations Commission on International Trade Law UNCITRAL Digest of Case Law on the United Nations Convention on the International Sale of Goods (2008) New York: United Nations V Van Rooyen JCW Die Kontrak in die Suid-Afrikaanse Internasionale Privaatreg (1972) Cape Town: Juta & Co Ltd 289

298 Volken P & Šarčević P (eds) International Sale of Goods: Dubrovnik Lectures (1986) New York: Oceana Publications Z Zeller B CISG and the Unification of International Trade Law (2007) New York: Routledge-Cavendish Zeller B Damages under the Convention on Contracts for the International Sale of Goods (2009) New York: Oxford University Press 290

299 CHAPTERS AND CONTRIBUTIONS IN BOOKS A Andersen CB General Principles of the CISG Generally Impenetrable? in Andersen CB and Schroeder UG (eds) Sharing International Commercial Law across National Boundaries: Festschrift for Albert H Kritzer on the Occasion of his Eightieth Birthday (2008) London: Wildy, Simmonds & Hill Publishing B Bonell MJ Article 6 Parties Autonomy in Bianca CM and Bonell MJ Commentary on the International Sales Law. The 1980 Vienna Sales Convention (1987) Milan: Giuffrè Bonell MJ Article 7 Interpretation of Convention in Bianca CM and Bonell MJ Commentary on the International Sales Law. The 1980 Vienna Sales Convention (1987) Milan: Giuffrè Borisova B Freedom of Contract: Remarks on the Manner in which the UNIDROIT Principles may be Used to Interpret or Supplement Article 6 of the CISG in Felemegas J (ed) An International Approach to the Interpretation of the United Nations Convention on Contracts for the International Sale of Goods (1980) as Uniform Sales Law (2007) Cambridge: Cambridge University Press Bridge M A Commentary on articles 1 13 and 78 in Ferrari F, Flechtner H and Brand RA (eds) The Draft UNCITRAL Digest and Beyond: Cases, Analysis and Unresolved Issues in the UN Sales Convention (2004) Munich: Sellier European Law Publishers

300 C Conetti G Uniform Substantive and Conflicts Rules on the International Sale of Goods and their Interaction in Volken P and Šarčević P (eds) International Sale of Goods: Dubrovnik Lectures (1986) New York: Oceana Publications D Diamond AL Harmonization of Private International Law relating to Contractual Obligations in Recueil des Cours. Collected Courses of the Hague Academy of International Law 1986 IV (1987) Dordrecht: Martinus Nijhoff Publishers E Eiselen GTS A Comparison of the Remedies for Breach of Contract under the CISG and South African law in Basedow J, Drobnig U, Ellger R, Hopt KJ, Kötz H, Kulms R and Mestmäcker EJ Aufbruch nach Europa 75 Jahre Max Planck-Institut für Privatrecht (2001) 923; available at (last accessed ) Eiselen GTS Interest on sums in arrears: Remarks on the Manner in which the UNIDROIT Principles of International Commercial Contracts may be used to Interpret or Supplement Article 78 of the CISG in Felemegas J (ed) An International Approach to the Interpretation of the United Nations Convention on Contracts for the International Sale of Goods (1980) as Uniform Sales Law (2007) Cambridge: Cambridge University Press Eiselen GTS Literal Interpretation: The Meaning of Words in Janssen A and Meyer O (eds) CISG Methodology (2009) Munich: Sellier European Law Publishers Eörsi G General Provisions in Galston NM and Smit H International Sales. The United Nations Convention on Contracts for the International Sale of Goods (1984) New York: Matthew Bender

301 Evans M Article 95 Declaration as to art 1(1)(b) in Bianca CM and Bonell MJ Commentary on the International Sales Law. The 1980 Vienna Sales Convention (1987) Milan: Giuffrè F Felemegas J Introduction in Felemegas J (ed) An International Approach to the Interpretation of the United Nations Convention on Contracts for the International Sale of Goods (1980) as Uniform Sales Law (2007) Cambridge: Cambridge University Press 1-38 Ferrari F The CISG s Sphere of Application: Articles 1 3 and 10 in Ferrari F, Flechtner H and Brand RA (eds) The Draft UNCITRAL Digest and Beyond: Cases, Analysis and Unresolved Issues in the UN Sales Convention (2004) Munich: Sellier European Law Publishers Ferrari F CISG Rules on Exclusion and Derogation: Article 6 in Ferrari F, Flechtner H and Brand RA (eds) The draft UNCITRAL Digest and Beyond: Cases, Analysis and Unresolved Issues in the UN Sales Convention (2004) Munich: Sellier European Law Publishers Ferrari F Interpretation of the Convention and Gap-filling: Article 7 in Ferrari F, Flechtner H and Brand RA (eds) The Draft UNCITRAL Digest and Beyond: Cases, Analysis and Unresolved Issues in the UN Sales Convention (2004) Munich: Sellier European Law Publishers H Herrmann G The Contribution of UNCITRAL to the Development of International Trade law in Horn N and Schmitthoff CM (eds) The Transnational Law of International Commercial Transactions Volume 2 (1982) Deventer: Kluwer

302 Hesselink M Good faith in Hartkamp A, Hesselink M, Hondius E, Joustra C and Du Perron E (eds) Towards a European Civil Code (1998) The Hague: Kluwer Law International Highet K The Enigma of the Lex Mercatoria in Carbonneau TE (ed) Lex Mercatoria and Arbitration: A Discussion of the New Law Merchant (1998) The Hague: Kluwer Law International Horn N Uniformity and Diversity in the Law of International Commercial Contracts in Horn N and Schmitthoff CM (eds) The Transnational Law of International Commercial Transactions Volume 2 (1982) Deventer: Kluwer 3-18 Huber P General Issues concerning the Application of the Convention in Huber P and Mullis A The CISG. A New Textbook for Students and Practitioners (2007) Munich: Sellier European Law Publishers 7-40 Huber P Scope of Application of the Convention 3: Rules on the Scope of Application in Huber P and Mullis A The CISG. A New Textbook for Students and Practitioners (2007) Munich: Sellier European Law Publishers Huber P Remedies of the Buyer in Huber P and Mullis A The CISG. A New Textbook for Students and Practitioners (2007) Munich: Sellier European Law Publishers J Janssen A and Kiene SC The CISG and its General Principles in Janssen A and Meyer O (eds) CISG Methodology (2009) Munich: Sellier European Law Publishers Jayme E Article 1 International Sales Contracts in Bianca CM and Bonell MJ Commentary on the International Sales Law. The 1980 Vienna Sales Convention (1987) Milan: Guiffrè

303 K Kahn-Freund O Common law and Civil Law Imaginary and Real Obstacles to Assimilation in Cappelletti M (ed) New Perspectives for a Common Law of Europe (1978) Leyden, London, Boston: Sijthoff L Lando O Article 28 Specific performance in Bianca CM and Bonell MJ Commentary on the International Sales Law. The 1980 Vienna Sales Convention (1987) Milan: Giuffrè Lando O Preface in Janssen A and Meyer O (eds) CISG Methodology (2009) Munich: Sellier European Law Publishers 1-4 M Magnus U Tracing Methodology in the CISG: Dogmatic Foundations in Janssen A and Meyer O (eds) CISG Methodology (2009) Munich: Sellier European Law Publishers Müller-Chen M Article 28 in Schlechtriem P and Schwenzer I Commentary on the UN Convention on the International Sale of Goods (CISG) (2005) Oxford: Oxford University Press N Naón HAG The UN Convention on Contracts for the International Sale of Goods in Horn N and Schmitthoff CM (eds) The Transnational Law of International Commercial Transactions Volume 2 (1982) Deventer: Kluwer Nicholas B Article 78 Interest in Bianca and Bonnell Commentary on the International Sales Law: The 1980 Vienna Convention (1987) Milan: Giuffrè

304 R Rajski J Article 10 Place of business in Bianca CM and Bonell MJ Commentary on the International Sales Law. The 1980 Vienna Sales Convention (1987) Milan: Giuffrè S Schlecthriem P From the Hague to Vienna Progress in Unification of the Law of International Sales Contracts? in Horn N and Schmitthoff CM (eds) The Transnational Law of International Commercial Transactions Volume 2 (1982) Deventer: Kluwer Schlechtriem Commentary on Oberlandesgericht Düsseldorf 2 July 1993 in International Contract Manual: Guide to the UN Convention (1994) Deventer: Kluwer; also available at (last accessed ) Schlechtriem Introduction in Schlechtriem P and Schwenzer I Commentary on the UN Convention on the International Sale of Goods (CISG) (2005) Oxford: Oxford University Press 1-11 Schlechtriem P Article 6 in Schlechtriem P and Schwenzer I Commentary on the UN Convention on the International Sale of Goods (CISG) (2005) Oxford: Oxford University Press Schlechtriem P Article 7 in Schlechtriem P and Schwenzer I Commentary on the UN Convention on the International Sale of Goods (CISG) (2005) Schmitthoff CM The Law of International Trade, its Growth, Formulation and Operation in Schmitthoff CM (ed) The Sources of the Law of International Trade (1964) London: Stevens & Sons

305 Schmitthoff CM Nature and Evolution of the Transnational Law of Commercial Transactions in Horn N and Schmitthoff CM (eds) The Transnational Law of International Commercial Transactions Volume 2 (1982) Deventer: Kluwer Sono H The Applicability and Non-applicability of the CISG to Software Transactions in Andersen and Schroeter (eds) Sharing International Commercial Law across National Boundaries: Festschrift for Albert H Kritzer on the Occasion of his Eightieth Birthday (2008) London: Wildy, Simmonds & Hill Publishing Sono K The Vienna Sales Convention: History and Perspective in Volken P and Šarčević P (eds) International Sale of Goods: Dubrovnik Lectures (1986) New York: Oceana Publications 1-18 V Viscasillas PP The Role of the UNIDROIT Principles and the PECL in the Interpretation and Gap-filling of CISG in Janssen A and Meyer O (eds) CISG Methodology (2009) Munich: Sellier European Law Publishers Volken P The Vienna Convention: Scope, Interpretation and Gap-filling in Volken P and Šarčević P (eds) International Sale of Goods: Dubrovnik Lectures (1986) New York: Oceana Publications W Winship P The Scope of the Vienna Convention on International Sales Contracts in Galston NM and Smit H (eds) International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984) New York: Matthew Bender

306 CISG ADVISORY COUNCIL REPORTS CISG AC Opinion 4, Contracts for the Sale of Goods to be manufactured or produced and mixed contracts (Article 3 CISG), 24 October Rapporteur: Professor Pilar Perales Viscasillas. Reprinted in 2005 Pace International Law Review

307 CONVENTIONS Conventions drafted by the Hague Conference on Private International Law The Hague Convention on the Law Applicable to International Sales of Goods, , The Hague, (last accessed ) The Hague Convention on the Law Applicable to International Sales of Goods, , The Hague, (last accessed ) Conventions drafted by the United Nations Vienna Convention on the Law of Treaties, , Vienna, 1155 UNTS 331; 1969 International Legal Materials 679; (last accessed ) United Nations Convention on the Limitation Period in the International Sale of Goods, , New York, 1511 UNTS 3; (last accessed ) United Nations Convention on the Carriage of Goods by Sea, , Hamburg, 1695 UNTS 3; pdf (last accessed ) United Nations Convention on Contracts for the International Sale of Goods, , Vienna, 1489 UNTS 3; 1980 International Legal Materials 668; (last accessed ) 299

308 United Nations Convention on the Use of Electronic Communications in International Contracting, , New York, (last accessed ) Conventions drafted by UNIDROIT Convention relating to a Uniform Law on the International Sale of Goods (ULIS), , The Hague, 834 UNTS 107; (last accessed ) Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF), , The Hague, 834 UNTS 169; (last accessed ) Regional Conventions Convention on the Law Applicable to Contractual Obligations, , Rome, 80/943/EEC, Official Journal L 266; 1605 UNTS 59; (last accessed ) Inter-American Convention on the Law Applicable to International Contracts, , Mexico City, (last accessed ) 300

309 OTHER INTERNATIONAL AND REGIONAL INSTRUMENTS UNIDROIT Principles of International Commercial Contracts, 2004, nciples2004-e.pdf (last accessed ) Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to Contractual Obligations (Rome I), Official Journal of the European Union 2008 L 177/6; (last accessed ) 301

310 OFFICIAL UNCITRAL DOCUMENTS (In chronological order) Report of the Working Group on the International Sale of goods, First Session, 5 16 January 1970 (A/CN.9/35) in UNCITRAL Yearbook I ( ) Working Group on the International Sale of Goods: Report on the Work of the Second Session, 7 18 December 1970 (A/CN.9/52) in UNCITRAL Yearbook II (1971) Report of the United Nations Commission on International Trade Law on the Work of its Fourth Session in Official Records of the General Assembly, Twenty-sixth Session, Supplement no 17 (A/8417) par 71, UNCITRAL Yearbook II (1971) part one, II A Progress Report of the Working Group on the International Sale of Goods on the Work of its Third Session, held in Geneva from January 1972 (A/CN.9/62) in UNCITRAL Yearbook III (1972) Progress Report of the Working Group on the International Sale of Goods on the Work of its Fourth Session, New York, 22 January 2 February 1973 (A/CN.9/75) in UNCITRAL Yearbook IV (1973) Progress Report of the Working Group on the International Sale of Goods on the Work of its Fifth Session, Geneva, 21 January 1 February 1974 (A/CN.9/87) in UNCITRAL Yearbook V (1974) Report of the Working Group on the International Sale of Goods on the Work of its Sixth Session (New York, 27 January 7 February 1975) (A/CN.9/100) in UNCITRAL Yearbook VI (1975) Report of the Committee of the Whole I relating to the Draft Convention on the International Sale of Goods (A/32/17, Annex I) in UNCITRAL Yearbook VIII (1977)

311 Report of the Working Group on the International Sale of Goods on the Work of its Eighth Session, New York, 4 14 January 1977 (A/CN.9/128) in UNCITRAL Yearbook VIII (1977) Summary of deliberations of the Commission on the Draft Convention on the Formation of Contracts for the International Sale of Goods (A/33/17, Annex I) in UNCITRAL Yearbook IX (1978) Report of the Working Group on the International Sale of Goods on the Work of its Ninth Session (Geneva September 1977) (A/CN.9/142) in UNCITRAL Yearbook IX (1978) Report of the Secretary-General: Incorporation of the Provisions on the Draft Convention on the Formation of Contracts for the International Sale of Goods into the Draft Convention on the International Sale of Goods (A/CN.9/145) in UNCITRAL Yearbook IX (1978) United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March - 11 April 1980, Official Records; UN Document no A/CONF.97/19 (1981) Vienna: United Nations Commentary on the Draft Convention on Contracts for the International Sale of Goods, prepared by the Secretariat (A/CONF.97/5) in United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March - 11 April 1980, Official Records; UN Document no A/CONF.97/19 (1981)

312 UNCITRAL PUBLICATIONS The UNCITRAL Guide. Basic facts about the United Nations Commission on International Trade Law (2007) Vienna: United Nations. Publication Sales number E.07.V.12. UNCITRAL Digest of Case Law on the United Nations Convention on the International Sale of Goods (2008) Vienna: United Nations. Publication Sales number E.08.V.15 OTHER OFFICIAL PUBLICATIONS Diplomatic Conference on the Unification of Law Governing the International Sale of Goods, The Hague, 2-25 April 1964; Records (Volume I); Documents (Volume II) (1966) The Hague: Government Printing Office 304

313 TABLE OF ARBITRAL AWARDS (Listed alphabetically per country and chronologically under each country) Austria Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft, award number SCH-4366, : case number 55 (UNILEX) Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft, award number SCH-4318, : case number 56 (UNILEX) Belarus Belarusian Chamber of Commerce and Industry International Court of Arbitration, award number 24/13-95, : case number 1130 (UNILEX) Bulgaria Court of Arbitration of the Bulgarian Chamber of Commerce and Industry, award number 59/ : case number 421 (UNILEX), Court of Arbitration of the Bulgarian Chamber of Commerce and Industry, award number 56/1995, : case number 422 (UNILEX) France ICC Court of Arbitration, Paris, award number 7153/1992: case number 15 (UNILEX), ICC Court of Arbitration, Paris, award number 7197/1992: case number 37 (UNILEX) 305

314 ICC Court of Arbitration, Paris, award number 6653/1993: case number 36 (UNILEX) ICC Court of Arbitration, Paris, award number 7660/JK, : case number 48 (UNILEX) ICC Court of Arbitration, Paris, award number 7754/1995: case number 519 (UNILEX) ICC Court of Arbitration, Paris, award number 8502/1996: case number 395 (UNILEX), ICC Court of Arbitration, Paris, award number 8817/1997: case number 398 (UNILEX), ICC Court of Arbitration, Paris, award number 9978/1999: case number 471 (UNILEX) ICC Court of Arbitration, Paris, award number 11333/2002: case number 1163 (UNILEX) Germany Schiedsgericht der Handelskammer Hamburg, : case number 195 (UNILEX), Schiedsgericht Hamburger Freundschafliche Arbitrage, : case number 394 (UNILEX), Italy Ad hoc Tribunal Florence, : case number 60 (UNILEX) 306

315 Netherlands Netherlands Arbitration Institute, award number 2319, : case number 836 (UNILEX) Russia Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce, award number 54/1999; case number 841 (UNILEX) Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce, award number 340/1999, : case number 876 (UNILEX) Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce, award number 356/1999, : case number 874 (UNILEX); Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce, award number 97/2002: case number 1043 (UNILEX) Switzerland ICC Court of Arbitration, Basel, award number 8128/1995: case number 207 (UNILEX); ICC Court of Arbitration, Zürich, award number 8769/1996: case number 397 (UNILEX), United States of America American Arbitration Association, award number 50181T/ , : case number 1346 (UNILEX) 307

316 TABLE OF CASES (Listed alphabetically per country and chronologically under each country) Argentina Juzgado Nacional de Primera Instancia en lo Comercial, : case number 14 (UNILEX) Camara Nacional de Apelaciones en lo Comercial de Buenos Aires, : case number 820 (UNILEX), Camara Nacional de Apelaciones en lo Comercial de Buenos Aires, : case number 925 (UNILEX), 636 (CLOUT), Australia Court of Appeal, New South Wales, : case number 57 (UNILEX) Federal Court, South Australia District Adelaide, : case number 197 (UNILEX), 308 (CLOUT) Austria Bundesgericht für Handelssachen Wien, : case number 12 (UNILEX), Oberster Gerichtshof, , case number 110 (UNILEX) Oberster Gerichtshof, : case number 202 (UNILEX), 308

317 Oberster Gerichtshof, : case number 419 (UNILEX), 422 (CLOUT), Oberster Gerichtshof, : case number 478 (UNILEX), 425 (CLOUT), Oberster Gerichtshof, : case number 481 (UNILEX), 427 (CLOUT), Oberster Gerichtshof, : Case number 764 (UNILEX), 605 (CLOUT), Oberster Gerichtshof, : case number 858 (UNILEX), 541 (CLOUT), Oberster Gerichtshof, : case number 1053 (UNILEX), Oberster Gerichtshof, : case number 1082 (UNILEX), Oberlandesgericht Linz, : case number 1234 (UNILEX), Belarus Supreme Economic Court of the Republic of Belarus, : case number 1010 (UNILEX) Belgium Rechtbank van Koophandel, Hasselt, : case number 268 (UNILEX) Rechtbank van Koophandel, Hasselt, : case number 267 (UNILEX) 309

318 Tribunal de Commerce de Bruxelles, : case number 176 (UNILEX), Rechtbank van Koophandel, Hasselt, : case number 261 (UNILEX) Rechtbank van Koophandel, Hasselt, : case number 269 (UNILEX) Rechtbank van Koophandel, Hasselt, : case number 263 (UNILEX) Rechtbank van Koophandel, Hasselt, : case number 265 (UNILEX) Rechtbank van Koophandel, Hasselt, : case number 264 (UNILEX) Rechtbank van Koophandel, Ieper, : case number 780 (UNILEX), Cour d Appel, Mons, : case number 749 (UNILEX), Hof van Beroep, Gent, : case number 778 (UNILEX), Tribunal de Commerce, Namur, : case number 745 (UNILEX), Hof van Beroep Gent, : case number 940 (UNILEX), Canada British Columbia Supreme Court, : case number 1168 (UNILEX) 310

319 China Supreme Court of the People s Republic of China, : Colombia Corte Constitucional, : case number 827 (UNILEX), Finland Court of Appeal of Turku, : case number 939 (UNILEX), France Cour d Appel de Paris, : case number 142 (UNILEX), 158 (CLOUT) Cour d Appel de Chambery, : case number 29 (UNILEX), 157 (CLOUT) Cour d Appel de Grenoble, : case number 27 (UNILEX), 25 (CLOUT), Cour de Cassation, : case number 106 (UNILEX), 155 (CLOUT), Cour d Appel de Grenoble, : case number 109 (UNILEX), 152 (CLOUT), Cour d Appel de Grenoble, Chamber Commerciale, : case number 151 (UNILEX), 202 (CLOUT), Cour d Appel de Colmar, : case number 236 (UNILEX) 311

320 Cour d Appel de Grenoble, : case number 222 (UNILEX), 205 (CLOUT), Cour de Cassation, : case number 245 (UNILEX), 206 (CLOUT), Cour d Appel de Paris, : case number 276 (UNILEX), 223 (CLOUT) Cour d Appel de Paris, : case number 278 (UNILEX), Cour d Appel de Colmar, : case number 493 (UNILEX), Cour de Cassation, : case number 717 (UNILEX) Cour de Cassation, : case number 735 (UNILEX), Cour d Appel de Paris, : case number 772 (UNILEX), Cour d Appel de Paris, : case number 984 (UNILEX), Cour de Cassation, : case number 1064 (UNILEX), 837 (CLOUT), http;//cisgw3.law.pace.edu/cases/051025f1.html Germany Landgericht München, : case number 6 (UNILEX), 3 (CLOUT), 312

321 Landgericht Stuttgart, : case number 1 (UNILEX), Oberlandesgericht Koblenz, : case number 22 (UNILEX) Landgericht Aachen, : case number 24 (UNILEX) Amtsgericht Oldenburg in Holstein, : case number 5 (UNILEX), 7 (CLOUT), Landgericht Hamburg, : case number 7 (UNILEX), 5 (CLOUT), Amtsgericht Frankfurt am Main, : case number 25 (UNILEX), Landgericht Frankfurt am Main, : case number 4 (UNILEX) Landgericht Stuttgart, : case number 86 (UNILEX), Landgericht Baden-Baden, : case number 13 (UNILEX), 50 (CLOUT), Landgericht Frankfurt am Main, : case number 3 (UNILEX) 6 (CLOUT), Oberlandesgericht Frankfurt am Main, : case number 8 (UNILEX), 2 (CLOUT), Oberlandesgericht Koblenz, : case number 128 (UNILEX), 316 (CLOUT), 313

322 Oberlandesgericht Karlsruhe, : case number 63 (UNILEX), 317 (CLOUT) Oberlandesgericht Düsseldorf, : case number 17 (UNILEX), 48 (CLOUT), Oberlandesgericht Düsseldorf, : case number 145 (UNILEX), 310 (CLOUT), Oberlandesgericht Düsseldorf, : case number 26 (UNILEX), 49 (CLOUT), Oberlandesgericht Koblenz, : case number 64 (UNILEX), 281 (CLOUT), Oberlandesgericht Düsseldorf, : case number 68 (UNILEX), 81 (CLOUT), Oberlandesgericht Köln, : case number 54 (UNILEX), Oberlandesgericht Frankfurt am Main, : case number 47 (UNILEX), 84 (CLOUT) Landgericht Düsseldorf, : case number 150 (UNILEX), Oberlandesgericht Köln, : case number 66 (UNILEX), Landgericht München, : case number 117 (UNILEX), 131 (CLOUT), 314

323 Landgericht Landshut, : 121 (UNILEX), Oberlandesgericht Hamm, : case number 130 (UNILEX), 125 (CLOUT), Oberlandesgericht Frankfurt am Main, : case number 169 (UNILEX), 276 (CLOUT), Landgericht Aachen, : case number 125 (UNILEX), Landgericht Düsseldorf, : case number 234 (UNILEX), Landgericht Trier, : case number 185 (UNILEX), 170 (CLOUT), Landgericht Siegen, : case number 219 (UNILEX) Landgericht Oldenburg, : case number 255 (UNILEX), Oberlandesgericht Düsseldorf, : case number 206 (UNILEX), 169 (CLOUT), Bundesgerichtshof, : case number 290 (UNILEX), 268 (CLOUT), Oberlandesgericht Karlsruhe, : case number 296 (UNILEX), 230 (CLOUT), Oberlandesgericht München, : case number 253 (UNILEX), 287 (CLOUT), 315

324 Bundesgerichtshof, : case number 259 (UNILEX), 231 (CLOUT), Oberlandesgericht München, : case number 297 (UNILEX), 297 (CLOUT), Oberlandesgericht München, : case number 728 (UNILEX), 288 (CLOUT), Landgericht Berlin, : case number 440 (UNILEX), Oberlandesgericht Dresden, : case number 502 (UNILEX), 347 (CLOUT), Bundesgerichtshof, : case number 356 (UNILEX), 270 (CLOUT), Landgericht Mainz, : case number 346 (CLOUT), Oberlandesgericht Bamberg, : case number 504 (UNILEX), 294 (CLOUT), Landericht Berlin, : case number 445 (UNILEX), Oberlandesgericht München, : case number 499 (UNILEX), 430 (CLOUT), Oberlandesgericht Dresden, : case number 441 (UNILEX), 316

325 Hanseatisches Oberlandesgericht Hamburg, : case number 719 (UNILEX), Oberlandesgericht Stuttgart, : case number 829 (UNILEX), Amtsgericht Duisburg, : case number 715 (UNILEX), 360 (CLOUT), Oberlandesgericht Frankfurt : case number 511 (UNILEX), 429 (CLOUT), Landgericht München, : Landgericht Braunschweig, : case number 868 (UNILEX), Oberlandesgericht Rostock, : case number 906 (UNILEX), Bundesgerichtshof, : case number 736 (UNILEX), 445 (CLOUT), Bundesgerichtshof, : case number 766 (UNILEX), Landgericht Saarbrücken, , case number 917 (UNILEX), Landgericht Mönchengladbach, : case number 967 (UNILEX), Bundesgerichtshof, : case number 992 (UNILEX) 317

326 Oberlandesgericht Stuttgart, : case number 1317 (UNILEX), Hungary Arbitration Court of Commerce and Industry of Budapest (Hungary), , Italy Tribunale Civile di Monza, : case number 21 (UNILEX), 54 (CLOUT), Corte Suprema di Cassazione, : case number 170 (UNILEX), Corte di Appello di Milano, : case number 275 (UNILEX), Corte di Appello di Milano, : case number 359 (UNILEX), 645 (CLOUT), Tribunale di Pavia, : case number 734 (UNILEX), 380 (CLOUT), Tribunale di Vigevano, : case number 387 (UNILEX), 378 (CLOUT), Tribunale di Rimini, : case number 823 (UNILEX), 608 (CLOUT), Tribunale di Padova, : case number 1005 (UNILEX), 651 (CLOUT), 318

327 Mexico Civil Court of First Instance, Tijuana, : case number 514 (UNILEX), Primer Tribunal Colegiado, : case number 1118 (UNILEX), Civil Court of First Instance, Tijuana, ; case number 1093 (UNILEX), Netherlands Arrondissementsrechtbank Alkmaar, : case number 31 (UNILEX) Arrondissementsrechtbank Dordrecht, : case number 32 (UNILEX) Arrondissementsrechtbank Roermond, : case number 34 (UNILEX) Gerechtshof s Hertogenbosch, : case number 97 (UNILEX) Arrondissementsrechtbank Arnhem, : case number 95 (UNILEX) Arrondissementsrechtbank Roermond, : case number 94 (UNILEX) Arrondissementsrechtbank Arnhem, : case number 61 (UNILEX) Arrondissementsrechtbank Amsterdam, : case number 126 (UNILEX) Arrondissementsrechtbank Amsterdam, : case number 124 (UNILEX) Arrondissementsrechtbank s Gravenhage, : case number 154 (UNILEX), 319

328 Gerechtshof Arnhem, : case number 335 (UNILEX) Arrondissementsrechtbank Arnhem, : case number 355 (UNILEX), Hoge Raad, : case number 333 (UNILEX), Hoge Raad, : case number 328 (UNILEX) Hof Arnhem, : case number 391 (UNILEX), Hof s Hertogenbosch, : case number 960 (UNILEX), Hoge Raad, : case number 1012 (UNILEX), South Africa Farmer s Co-operative Society v Berry 1912 AD 343 Standard Bank of SA Ltd v Efroiken and Newman 1924 AD 171 Haynes v King William s Town Municipality 1951 (2) SA 371 (A) Improvair (Cape) (Pty) Ltd v Establissements Neu 1983 (2) SA 138 (C) Benson v SA Mutual Life Assurance Society 1986 (1) SA 776 (A) Laconian Maritime Enterprises Ltd v Argomar Lineas Ltd 1986 (3) SA 509 (D) 320

329 Laurens v von Höhne 1993 (2) SA 104 (W) Spain Audiencia Provincial de Barcelona, : case number 432 (UNILEX) Audiencia Provincial de Alicante, : case number 796 (UNILEX), 483 (CLOUT), Switzerland Pretura di Locarno-Campagna, : case number 42 (UNILEX), 55 (CLOUT), Pretura di Locarno-Campagna, : case number 41 (UNILEX), 56 (CLOUT), s1.html Gerichtspräsident von Laufen: : case number 105 (UNILEX), Handelsgericht Zürich, : case number 136 (UNILEX), 97 (CLOUT), Tribunal Cantonal Valais, : case number 177 (UNILEX), 199 (CLOUT), Kantonsgericht des Kantons Zug, : case number 326 (CLOUT) Gerichtskommission Oberrheintal, : case number 383 (UNILEX), 262 (CLOUT), Tribunal Cantonal Vaud, : case number 302 (UNILEX), 321

330 Bezirksgericht der Saane, : case number 403 (UNILEX), 261 (CLOUT), Tribunale di Appello di Lugano, : case number 368 (UNILEX), Schweizerisches Bundesgericht, : case number 382 (UNILEX), 248 (CLOUT), Handelsgericht Zürich, : case number 409 (UNILEX), 251 (CLOUT), Handelsgericht Zürich, : case number 484 (UNILEX), Handelsgericht des Kantons Aargau, : case number 485 (UNILEX), 333 (CLOUT), Schweizerisches Bundesgericht, : case number 794 (UNILEX), Schweizeriches Bundesgericht, : case number 907 (UNILEX), Schweizeriches Bundesgericht, : case number 979 (UNILEX), Schweizerisches Bundesgericht, : case number 991 (UNILEX), Tribunal Cantonal Valais, : case number 1083 (UNILEX), 322

331 United States United States Court of International Trade, : case number 69 (UNILEX). Federal District Court, Northern District of Illinois (United States), : case number 423 (UNILEX), 417 (CLOUT) District Court, ND California, : case number 741 (UNILEX) Court of Appeals, Fourth Circuit, : case number 770 (UNILEX) District Court, Southern District of Florida, : case number 835 (UNILEX). District Court, Northern District of Illinois, Eastern Division, : case number 834 (UNILEX) Court of Appeals for the Fifth Circuit, : case number 924 (UNILEX) District Court, North District Illinois, : case number 974 (UNILEX) District Court New Jersey, : case number 1035 (UNILEX) Federal District Court, Washington State, : case number 1230 (UNILEX) District Court Minnesota, : case number 1166 (UNILEX) District Court, Eastern District of Michigan, : case number 1224 (UNILEX) District Court, District of Kansas, : case number 1308 (UNILEX) 323

332 SUMMARY The United Nations Convention on Contracts for the International Sale of Goods (CISG or Vienna Sales Convention) of 1980 governs the sale of movable goods between parties who have their places of business in different states either (a) if the states are contracting states or (b) if the rules of private international law lead to the application of the law of a contracting state. The CISG currently has 74 contracting states representative of all legal traditions. The CISG is therefore an influential international convention and international merchants from CISG contracting states and non-contracting states alike are regularly confronted with its possible application to their international sales contracts. The CISG governs the formation of the contract for the international sale of goods, as well as the rights and obligations of the buyer and seller. It is a uniform substantive law convention and it is submitted that the CISG constitutes an important component of the modern lex mercatoria. This thesis challenges the widely held opinion that uniform substantive law reduces or completely supersedes the need for resorting to the rules of private international law. The main hypothesis of this thesis is that private international law plays an important role in the success of an international uniform substantive law convention such as the CISG. The accuracy of the hypothesis is proved by an analysis of articles 1(1)(b), 6, 7(2), 28 and 95 of the CISG. The fact that article 1(1)(b) also allows for the application of the CISG when the rules of private international law lead to the application of the law of a contracting state, broadens the sphere of application of the CISG. This, in turn, promotes one of the basic premises of a uniform substantive law convention: the widest possible application thereof. Article 95, which allows a contracting state to make the reservation that it would not apply the CISG in terms of article 1(1)(b), has lead to so much confusion that its inclusion in the Convention has been severely criticised. 324

333 Article 6 of the Convention gives recognition to the principle of party autonomy and guarantees the freedom of contract of the parties. The interpretation of choice of law clauses constitutes an important matter under article 6 and once again emphasises the impact of the principles of private international law on the CISG. Article 7(2) of the CISG directs that matters governed by the CISG but not settled therein are to be settled in conformity with the general principles on which the Convention is based, or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law. The present author concludes that gap-filling via recourse to general principles mostly does not lead to uniform application of the CISG, since there exists no consensus on the identification, interpretation or application of such general principles. Reference to the rules of private international law may therefore prove to be the only viable solution to gapfilling in many instances. In terms of article 28, a court is not bound to enter a judgment for specific performance unless it would do so under its own law in respect of similar contracts of sale not governed by the CISG. Article 28 is a rule of private international law in itself, since it assigns the entitlement to a judgment for specific performance to a legal system, namely the law of the court seized of the matter. Article 28 ensures that a remedy granted under the CISG may effectively be enforced by the relevant forum and therefore enhances the proper functioning of the CISG. The general conclusion reached in this thesis is that the rules and principles of private international law is indeed vital to the proper functioning and ultimate success of a uniform substantive law convention such as the CISG. 325

334 KEYWORDS AND PHRASES Choice of law Choice of law clause CISG contracting state CISG documentary history CISG methodology CISG scope of application Conflict of laws Contracts for the international sale of goods Gap-filling General principles underlying the CISG Lex mercatoria International sales law Party autonomy Private international law Proper law / lex causae of the contract Reservation Specific performance UNIDROIT Principles Uniform substantive law United Nations Commission on International Trade Law (UNCITRAL) United Nations Convention on Contracts for the International Sale of Goods (CISG / Vienna Sales Convention) 326