UN Convention on Contracts for the International Sale of Goods (CISG): A Commentary 9781509923601, 9783406714559

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Reemers Publishing Services GmbH o:/Beck/978-3-406-71455-9/3d/A1 - Foreword.3d from 20.02.2018 17:59:21 3B2 9.1.580; Page size: 160.00mm  240.00mm

Foreword This is the second edition of this commentary. In the first edition we stated that there is hardly any need to provide a justification for a new commentary on such an important topic as the United Nations Convention on Contracts for the International Sales of Goods (“Vienna Convention” or “CISG”). The Convention was signed in 1980, currently has 89 Contracting States and is potentially applicable to up to two thirds of international trade in goods; sales contracts are a daily occurrence and the fundamental agreement in international commerce. There are many good publications on the topic, predominately in continental Europe or the United States, but we do hope that this commentary offers some new dimensions. First, this commentary aims to be an international approach to the CISG: it brings together 22 authors from sixteen countries in four continents with a wide range of profound academic and practical expertise. They include some very well established names in the field and few very promising newcomers. Second, the coverage is consistent in addressing the general principles and drafting history of each article before providing a detailed commentary and discussion of comparable rules in other instruments, namely the UNIDROIT Principles of International Commercial Contracts (“PICC”), and various regional instruments such as the Principles of European Contract Law (“PECL”), as well as Incoterms where necessary. Finally, this commentary highlights all the main commercial law aspects of international sales as well as covering civil law dimensions. Private international law and “procedural” aspects, such as burden of proof, are also consistently addressed. While we reflect on the doctrinal discussion on the CISG, we have made every effort to also be practical and give due regard to case law with the hope to make this a book useful for both academics and practitioners. We have considered all reviews of the first edition and various comments and recommendations we have received formally and informally. We hope that the second edition not only receives the same positive response as the first one, but also proves to be an improvement rather than a mere update. Not only the text but also the indices have been thoroughly updated. The three editors got to know each other and became friends through the Willem C Vis International Commercial Arbitration Moot. It has been a great experience to work with one another and solidify a long-standing academic friendship. The editors have a strong interest in international sales ignited and supported by a number of mentors and friends; these include Professor Eric Bergsten, Professor Norbert Horn, Professor Rafael Illescas, the late Professor Albert Kritzer and the late Professor Oskar Hartwieg. Warm thanks and appreciation are due to them for the enthusiastic and professional way in which they inspired us to work in this area of international commercial law. Thanks are also due to all contributors for their submissions and embracing the project with great motivation, drive and the necessary regard to the international application of the CISG and the need to promote uniformity in the application of the Convention. They have all worked to keep the project alive and bring it to fruition. Friendships were enhanced and strengthened through this project. Deadlines are not easy to keep in such large-scale projects but the gestation of the book remained within set targets and every effort was made to state the law as of October 2017. We also want to extend our thanks to our publisher and in particular, Dr Wilhelm Warth who worked with us on the first edition and Thomas Klich who supported us in

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Foreword the second edition who patiently encouraged us through deadlines and spared no effort to ensure the quality of editing and publishing one would expect from Beck. The editing co-ordination and the lion share of language and consistency editing fell on Dr Metka Potocnik, at the School of International Arbitration Queen Mary University of London. We thank her for the dedication, commitment and contribution to this publication. We hope you find this commentary useful and we are happy to receive any feedback. A book is almost never perfect, even in its second edition, so any suggestions for improvement in future editions are welcome and may be sent to any of three editors or to the following email address: [email protected]. Stefan Kro¨ll, Loukas Mistelis, Pilar Perales Viscasillas Cologne, London and Madrid February 2018

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How to use this Commentary To make the commentary as user-friendly as possible the comments on each article follow the same structure. The first part (I) gives a short overview on the content of the article, its drafting history and its role in the context of the CISG where appropriate. The second part (II) contains the detailed commentary of the article while the third part (III) contains references to comparable rules in other legal instruments which may be useful in interpreting and applying the article There is wealth of resources relating to the CISG. We have made every effort to ensure that all major authorities are referred to, but in a fashion which keeps the book in a manageable size and points the user to readily available online resources. In particular: – Often cited sources are listed in the abbreviated bibliography section and hence in the commentary only the names of the authors and short titles are listed in the footnotes; moreover, whenever articles are also available through the Pace University Albert H Kritzer CISG Database (www.cisg.law.pace.edu) we have indicated that through the following reference: (Pace) – We do not use the full citation of judicial decisions or arbitration awards where there is a freely accessible online publication of the same: in such cases, we refer wherever appropriate to the case with the number provided by the CISG Online database maintained by the Global Sales Law project of the University of Basel (http:// www.globalsaleslaw.org/index.cfm?pageID=28) and indicate if an English translation of the case exists on the Pace University Albert H Kritzer CISG Database (www.cisg.law.pace.edu) by the reference: (Pace). Full texts and English translations (typically through the Queen Mary Translation Programme) are readily available on these free access databases. As both of them are very user-friendly and cases can easily be retrieved by the date of the decisions, we have refrained from giving the exact webaddress for every case. There are a few very good free access databases on the CISG. These include: – The award winning Albert H Kritzer CISG Database: http://www.cisg.law.pace.edu/ (comprehensive collection of case law, academic commentary, guides and an articleby-article collection of resources) – CISG Online: http://www.globalsaleslaw.org/index.cfm?pageID=28 – CISG Advisory Council: http://www.cisgac.com/ – UNCITRAL: www.uncitral.org and more specifically: http://www.uncitral.org/uncitral/en/case_law/digests.html (CISG Digest) and http://www.uncitral.org/uncitral/en/ case_law/abstracts.html (CLOUT abstracts) – UNILEX: http://www.unilex.info/ – CISG Spain and Latin America: https://www.cisgspanish.com and autonomous network: http://www.cisg.law.pace.edu/network.html#cp

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List of Contributors Yes˛im M. Atamer Yes˛im M. Atamer (LLB, LLM, PhD, Istanbul University) is Professor of Private Law and Comparative Private Law, and Vice Director of the European Institute at Istanbul Bilgi University. She is a member of the CISG Advisory Council. [Arts 78–80] Ivo Bach Ivo Bach is professor of Law at Georg August University Go¨ttingen (Germany) where he has held the chair for German and European Private Law since 2016. He teaches and researches in the fields of national and international contract law and international dispute resolution. [Arts 49–52] Gary F. Bell Gary F. Bell is Associate Professor at the National University of Singapore, Director of its LL.M. Programme in Arbitration and Director of the Asian Law Institute (ASLI). He teaches the CISG, Arbitration, and Indonesian Law. He acts regularly as an arbitrator. He is trained in both common law and civil law at McGill and is an editor of the Asian Journal of Comparative Law and is on the Executive Editorial Board of the American Journal of Comparative Law. [Arts 61-65] Andrea Bjo¨rklund Andrea Bjo¨rklund is Full Professor and L. Yves Fortier Chair in International Arbitration and International Commercial Law at McGill University Faculty of Law. An expert in international commercial and investment arbitration, she serves as arbitrator and is on the arbitration panels of the ICDR and NAFTA Chapter 19. [Arts 25–29] Stavros Brekoulakis Stavros Brekoulakis is a Professor in International Arbitration at Queen Mary University of London. He is the Co-Chair of the ICCA-Queen Mary Task Force on Third-Party Funding, member of the International Law Association, member of the ICC Task Force on Emergency Arbitrator Proceedings, Member of the ICC Commission on Arbitration, General Editor of the Journal of International Dispute Settlement and Editor-in-Chief of the (CIArb’s) International Journal of Arbitration, Mediation and Dispute Management. Brekoulakis has been involved in international arbitration for more than 20 years as counsel, arbitrator and expert. [Art. 10] Michael Bridge Michael Bridge, a Fellow of the British Academy, Queen’s Counsel (honoris causa), Bencher of the Middle Temple and Chair Elect of the CISG Advisory Council, is a Professor of Law at the National University of Singapore, Senior Research Fellow at Harris Manchester College, University of Oxford, Visiting Professor at Queen Mary University of London, and Emeritus Professor at the London School of Economics. He is the author of numerous books on Sale, International Sale, Personal Property and Secured Credit. [Arts 81–84] Petra Butler Dr Petra Butler is professor at Victoria University of Wellington, co-director of the Centre for Small States, Queen Mary University of London, a German qualified lawyer and a New Zealand barrister. Petra specialises in domestic and international human rights, comparative law, and private international law with an emphasis on international commercial contracts. She has published extensively in those areas. Petra is New Zealand’s CLOUT correspondent for the CISG and Convention on the Use of Electronic Communications in International Contracts. [Arts 53–60, jointly with Arjun Harindranath] Milena Djordjevic´ Milena Djordjevic´ is a Vice-Dean for International Cooperation, Director of the Center for Legal Skills, General Secretary of the Belgrade Open Pre-Moot and an Assistant Professor at the University of Belgrade Faculty of Law where she teaches International Commercial Law, International Commercial Arbitration, Foreign Investment Law, EU Trade Policy and Legal English. She has published extensively in those areas. Milena holds an LL.B. (U. Belgrade), LL.M. (U. Pittsburgh), and a Dr. iur. (U. Belgrade) degrees. She regularly acts as arbitrator or expert witness in arbitration, both domestic and international. Milena is also a CLOUT correspondent for Serbia. [Arts 4, 74–77]

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List of Contributors Johan Erauw Johan Erauw is Dr. Iuris (1980), Dr.h.c. (Shanghai 2005) and Professor Emeritus of law at University of Gent (Belgium), where he still teaches International Business Transactions. An active member of the Ghent bar until November 2017, is now active in international commercial arbitration (ICC, CEPANI, ad hoc, NAI, SCC, CIETAC, Belgian Sports Arbitration), having also served as Vice-President of CEPANI-Brussels. He was a member of various academic institutions, including American University (Washington D.C.), University of Florida (Gainesville) and East China University (Shanghai) and China University (Beijing). Equally he was an expert advisor to UNCITRAL, the Belgian Ministry of Justice, the Parliament and WTO. He is member of the Institut de Droit International. He has published numerous books and articles, primarily on international business transactions. [Arts 66–67, 70] Franco Ferrari Professor Ferrari, formerly Legal Officer at the United Nations Office of Legal Affairs/International Trade Law Branch (UNCITRAL) and Professor of Law at Tilburg University School of Law (the Netherlands), Bologna University School of Law (Italy) and Verona University School of Law, is Professor of Law and Director of the Center for Transnational Litigation and Commercial Law at NYU School of Law. [pre Arts 14–24, Arts 14–24] Arjun Harindranath Arjun Harindranath has a BA (1st class hon) in philosophy and an LLB from Victoria University of Wellington. He now lives in Medellin, Colombia and work as an editor and writer. [Arts 53–60, jointly with Petra Butler] Johnny Herre Johnny Herre is a justice at the Supreme Court of Sweden. He received a degree in economics and business administration from the Stockholm School of Economics (SSE), a degree in law from Stockholm University and a PhD in civil law from the SSE. Before joining the Supreme Court in 2010, he was a Professor in civil law at the SSE, teaching and researching in the fields of contract law, the law of obligations and international trade law. [Arts 89–101] Peter Huber Peter Huber is professor of Law at Johannes Gutenberg University Mainz (Germany) where he has held the chair for private law, conflict of laws and comparative law since 2000. He publishes in private law, international arbitration and international commercial law. [Arts 45–48] Stefan Kro¨ll Stefan Kro¨ll is an independent arbitrator in Cologne, Director of the Center for International Dispute Resolution at Bucerius Law School in Hamburg and one of the directors of the Willem C Vis Arbitration Moot. In addition, he is a visiting professor at the School of International Arbitration, Queen Mary London. He received his education at the Universities of Marburg, Geneva and Cologne, holds a LL. M. from the University of London (LSE) and a doctorate from the University of Cologne (www.rechtsanwalt-kroell.de). [Introduction, jointly with Loukas Mistelis and Pilar Perales Viscasillas, pre Arts 35–44; Arts 35–44] Loukas Mistelis Loukas Mistelis is the Clive M Schmitthoff Professor of Transnational Commercial Law and Arbitration and the Director of the School of International Arbitration, Centre for Commercial Law Studies, Queen Mary University of London. He also teaches at NYU in London. He was educated at Athens (LLB), Strasbourg, Hannover (MLE), and Keio. He regularly sits as an arbitrator. He has published extensively in international commercial law, private international law, comparative law and international arbitration. [Introduction, jointly with Stefan Kro¨ll and Pilar Perales Viscasillas; Preamble; Art. 1; Art. 3, jointly with Anjanette Raymond; Art. 6] Pilar Perales Viscasillas Pilar Perales Viscasillas is the Chair of Commercial Law at the University Carlos III of Madrid, where she is also the Director of the School of Law. Member of the CISG-AC Advisory Council. Director of the Madrid Moot and author of several books and articles in the area of international commercial contracts and arbitration. She is also an arbitrator in both domestic and international matters. [Introduction, jointly with Stefan Kro¨ll and Loukas Mistelis; Arts 7, 9, 11–13] Burghard Piltz Professor Dr. Piltz studied law at Mu¨nster, Munich, Buenos Aires and London. He is Partner at Ahlers & Vogel Rechtsanwa¨lte, Hamburg and since 1997 Professor honoris causae at the University of Bielefeld, Germany. His areas of expertise and publications include International Sales, Distribution and related transactions, Incoterms and Latin American Law, in particular Argentinian Law. He is member of the ICC Incoterms 2020 Drafting Group [Arts 30–34].

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List of Contributors Anjanette (Angie) Raymond Angie Raymond is an Associate Professor in the Department of Business Law and Ethics, at the Kelley School of Business and an Adjunct Associate Professor at Maurer School of Law (Indiana). She is the Program Director of the Ostrom Workshop Data Management and Information Governance. Angie is a US National Consultant delegate to UNCITRAL reporting on the Electronic Commerce related issues and has previously attended the Online Dispute Resolution Working Group. [Art. 3, jointly with Loukas Mistelis, Arts 68–69] John Ribeiro John Ribeiro holds a Ph.D. in international commercial arbitration from Osaka University and specialises in international commercial arbitration and other forms of dispute resolution at Herbert Smith Freehills (Tokyo and London). His experience includes advising business conglomerates, pharmaceutical and technology companies in a number of arbitration cases under, for example, the ICC, LCIA, JCAA, AAA and UNCITRAL rules. He is fluent in both written and spoken Japanese and has published on topics including international commercial arbitration, international sales law and cross-border intellectual property disputes. [Art. 5] Djakhongir Saidov Djakhongir Saidov is Professor of Commercial Law at Dickson Poon School of Law (King’s College London), with an LLB degree from University of World Economy and Diplomacy (Uzbekistan), and LLM and PhD degrees from University of East Anglia (UK). His research interests and publications are in the law of sale of goods, international commercial law and the law relating to international oil and gas operations. He is a Reporter to CISG Advisory Council, Editor of the English Sale of Goods Law section in the LMCLQ Yearbook of International Maritime and Commercial Law, an Academic Fellow at Centre for Maritime Law in the National University of Singapore and a Member of the Education Advisory Board of the Association of International Petroleum Negotiators (AIPN). [Arts 71–73] Hiroo Sono Hiroo Sono is Professor of Law at Hokkaido University, Japan. He is a member of the CISG Advisory Council (CISG-AC) and the Global Private Law Forum (GPLF) of Japan. He also serves as the Japanese delegate to UNCITRAL Working Group VI (Security Interests). [Arts 85–88] Frank Spohnheimer Frank Spohnheimer is a Researcher at FernUniversity in Hagen and a Lecturer at the University of Kaiserslautern (both Germany). He teaches civil law, civil procedure and international business transactions and focusses in his research on broker agreements, civil procedure, international commercial arbitration, conflict of laws and the CISG. [Art 2, Index]. Alberto L. Zuppi Alberto L. Zuppi, JD Universidad Buenos Aires, PhD Universita¨t des Saarlandes, is former Robert & Pamela Martin Associate Professor of Law, Paul M. Hebert Law Center, Louisiana State University, and Professor of International Business Transactions at Europa-Institut, Universita¨t des Saarlandes, Universidad de Buenos Aires and Universidad Austral, Buenos Aires. He is arbitrator at the Buenos Aires Bar Association and co-author with Alejandro Garro, La Compraventa Internacional de Mercaderı´as (2012) and also co-author together with the former and Fernando Breda Pessoa of “Compra e venda internacional de Mercadorias – Convença|˘o de Viena de 1980”, Jurua´, Curitiba (2016) and several articles related to CISG in US and Argentine law journals. [Art. 8]

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Reemers Publishing Services GmbH o:/Beck/978-3-406-71455-9/3d/A4 - Table of Cases.3d from 20.02.2018 18:00:50 3B2 9.1.580; Page size: 160.00mm  240.00mm

Table of Cases International Courts Court of Justice of the European Union (CJEU, previously ECJ) 25 February 2010 (airbag systems), Car Trim GmbH v Key Safety Systems SRL, case C-381/08, CISGOnline 2351 (Pace) – Art. 3, para. 1; Art. 57, para. 5 3 May 2007, Color Drack GmbH v LEXX International Vertriebs GmbH, case C-386/05 (Pace) – Art. 57, para. 5 16 March 1999, Transporti Castelleti Spedizioni Internazionali S. p. A. v. Hugo Trumpy S. p. A.) (Pace) – Art. 9, para. 35 20 February 1997 (Pace), Mainschiffahrts-Genossenschaft eb (MSG) v. Les Gravihres Rhinanes SARL – Art. 9, para. 35 9 December 1987, SAR Schotte v Parfums Rothschild, case C-218/86, [1987] ECR 819 6 April 1995, Lloyd’s Register of Shipping v Soc Campenon Bernard, case C- 439/93, [1995] ECR I-961 – Art. 10, para. 21 Iran – United States Claims Tribunal 28 July 1989, Watkins – Johnson v. Islamic Republic of Iran, No. 370, CISG-Online 9 (Pace) – Art. 88, paras 20, 36 McCollough & Co. Inc. v Ministry of Post, Tel. & Tel., 11 Iran-U. S. Cl. Trib. Rep. 3 (1986) – Art. 78, para. 11 Argentina Ca´mara Nacional de Apelaciones en lo Comercial 31 May 2007 (almonds), Sr. Carlos Manuel del Corazo´n de Jesu´s Bravo Barros v Salvador Martı´nez Gares, CISG-Online 1517 (Pace) – Art. 4, para. 46; Art. 7, para. 55 21 July 2002 (barley/malt), Cervecerı´a y Malteria Paysandu´ S. A. v Cervecerı´a Argentina S. A., CISGOnline 803 (Pace) – Art. 7, para. 55, Art. 28, para. 2; Art. 35, para. 170 24 April 2000 (coal), CISG-Online 699 (Pace) – Art. 1, para. 51; Art. 7, para. 55; Art. 35, para. 170 31 October 1995, CISG-Online 299 (Pace) – Art 67, para. 35 14 October 1993 (machinery), Inta v Officina Meccanica, CISG-Online 87 (Pace) – Art. 4, para. 32; Art. 8, para. 13; Art. 9, para. 30; Art. 11, para. 12; Art. 18, para. 8 Juzgado Commercial Buenos Aires 17 March 2003, Wacker-Polymer Systems GmbH v Quiebra v Glaube S. A. et al., CISG-Online 1844 (Pace) – Art. 4, para. 46 Juzgado Nacional de Primera Instancia en lo Comercial Buenos Aires 2 July 2003, Arbatax S. A. Reorganization Proceeding, (Pace) – Art. 9, para. 38 6 October 1994 (looms), Bermatex v Valentin Rius, CISG-Online 378 (Pace) – Art. 6, para. 8; Art. 9, para. 38; Art. 78, para. 21 23 October 1991, Aguila Refractarios S.A. v Conc. preventivo, CISG-Online 460 – Art. 78, para. 21 20 May 1991, Elastar Sacifia v Bettcher Industries, CISG-Online 461 (Pace) – Art. 9, para. 38 Australia Federal Court of Australia 20 April 2011 (electrical appliances), Castel Electronics Pty Ltd v Toshiba Singapore Pte Ltd, CISGOnline 2219 (Pace) – Art. 35, paras 156, 157, 162 28 September 2010 (electrical appliances), CISG-Online 2158 (Pace) – Art. 35, para. 75 20 May 2009 (machinery for the processing of olive oil), Olivaylle Pty Ltd v Flottweg GMBH & Co KGAA, CISG-Online 1902 (Pace) – Art. 6, para. 10 24 October 2008 (cherries), Hannaford (t/as Torrens Valley Orchards) v Australian Farmlink Pty Ltd, CISG-Online 1782 – Art. 7, para. 42; Art. 93, para. 3 Supreme Court of Queensland 12 October 2001, Downs Investments v Perwaja Steel, CISG-Online 955 (Pace) – Art. 25, para. 44; Art. 54, paras 3, 15; Art. 71, para. 9; Art. 72, paras 19, 31 17 November 2000 (scrap steel), Downs Investments v. Perwaja Steel, CISG-Online 587 and 859 (Pace) – Art. 1, paras 37, 51; Art. 6, para. 18; Art. 54, paras 3, 15; Art. 75, para. 24

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Table of Cases Supreme Court of Western Australia 17 January 2003, Ginza Pte Ltd v Vista Corporation Pty Ltd, CISG-Online 807 (Pace) – Art. 50, para. 48 Supreme Court of New South Wales 30 January 2012 (glass bottles), Fryer Holdings v Liaoning MEC Group, CISG-Online 2325 (Pace) – Art. 35, para 75 13 October 2006 (capers, semi-dried tomatoes, eggplant and capsicum), Italian Imported Foods Pty Ltd v Pucci S. r. l., CISG-Online 1494 (Pace) – Art. 6, para. 10 Federal Court of Australia, South Australian District, Adelaide 28 April 1995 (tent hall structures), Roder Zelt- und Hallenkonstruktionen GmbH v Rosedown Park Pty Ltd et al., CISG-Online 218 (Pace) – Art. 4, paras 18, 28; Art. 25, paras 29, 58; Art. 26, para. 8; Art. 41, para. 23 Austria Oberster Gerichtshof 16 December 2015 (silkscreen), CISG-Online 2663 (Pace) – Art. 45, para. 9 15 January 2013 (glass mosaic tiles), CISG-Online 2398 (Pace) – Art. 74, para. 11 13 December 2012 (insulating material), CISG-Online 2438 – Art. 18, paras 2, 8, 9, 17, 21 15 November 2012 (fashion), CISG-Online 2399 (Pace) – Art. 25, para. 42 28 June 2012 (seat belts), CISG-Online 2569 (Pace) – Art. 38, paras 20, 35, 41, 50, 145 14 February 2012 (paprika powder), CISG-Online 2308 (Pace) – Art. 40, paras 1, 11, 28, 30 22 November 2011 (video surveillance system), CISG-Online 2239 – Art. 49, para. 20 31 August 2010 (old timber), CISG-Online 2236 (Pace) – Art. 39, paras 35, 76, 82, 89 2 April 2009 (boiler), CISG-Online 1889 (Pace) – Art. 6, paras 16, 18; Art. 39, para. 109; Art. 82, paras 9, 12 3 April 2008 (violins), CISG-Online 1680 (Pace) – Art. 57, para. 5 19 December 2007 (laminated glass), CISG-Online 1628 (Pace) – Art. 39, paras 16, 97; Art. 44, para. 10 4 July 2007 (car), CISG-Online 1560 (Pace) – Art. 6, para. 18 19 April 2007 (scaffold hooks), CISG-Online 1495 (Pace) – Art. 35, paras 3, 88 12 September 2006 (CD media), CISG-Online 1364 (Pace) – Art. 4, para. 35; Art. 42, paras 9, 12, 49, 54; Art. 43, paras 15, 28; Art. 74, para. 15 29 November 2005, CISG-Online 1227 (Pace) – Art. 18, para. 7 8 November 2005 (glass recycling machine), CISG-Online 1156 (Pace) – Art. 7, para. 58 31 August 2005 (tantalum powder), CISG-Online 1093 (Pace) – Art. 4, para. 24; Art. 8, para. 29; Art. 9, paras 2, 9, 10, 11, 34; Art. 14, paras 38, 39 21 June 2005 (software), CISG-Online 1047 (Pace) – Art. 1, para. 40; Art. 25, para. 39; Art. 51, paras 10, 53 24 May 2005 (grinding stock), CISG-Online 1046 (Pace) – Art. 27, para. 19 23 May 2005, CISG-Online 1041 (Pace) – Art. 7, paras 18, 33; Art. 50, paras 34, 48; Art. 82, para. 2; Art. 83, para. 3 2 March 2005 (pork meat), CISG-Online 774 (Pace) – Art. 9, para. 34 26 January 2005 (mushrooms), CISG-Online 1045 – Art. 6, para. 18 17 December 2003 (tantalum powder), CISG-Online 828 (Pace) – Art. 4, paras 24, 30, 39; Art. 9, para. 2; Art. 14, para. 38; Art. 38, paras 12, 43, 81, 91, 101, 103; Art. 39, paras 38, 79, 82, 120 27 February 2003 (frozen fish), CISG-Online 794 (Pace) – Art. 9, para. 34; Art. 35, paras 54, 134; Art. 40, para. 31 18 December 2002, CISG-Online 1279 (Pace) – Art. 1, para. 3 14 January 2002 (cooling system), CISG-Online 643 (Pace) – Art. 4, paras 30, 39; Art. 8, para. 25; Art. 6, para. 18; Art. 38, paras 12, 43, 81, 91, 101, 103; Art. 39; Art. 46, para. 53; Art. 48, para. 26; Art. 74, paras 2, 11, 21, 28, 29, 30, 33, 42, 43, 63 22 October 2001 (gasoline and gas oil), CISG-Online 614 (Pace) – Art. 4, paras 7, 17, 18, 27, 30; Art. 6, paras 16, 20, 24; Art. 7, para. 55; Art. 14, para. 24 22 October 2001 (fruits and vegetables), CISG-Online 613 (Pace) – Art. 4, paras 17, 18, 27, 30; Art. 7, para. 55; Art. 54, para. 13 13 September 2001, CISG-Online 644 (Pace) – Art. 19, para. 15 5 July 2001 (Intel Pentium II/300 processors), CISG-Online 652 (Pace) – Art. 26, para. 4; Art. 39, para. 109; Art. 49, para. 63 7 September 2000 (tombstones), CISG-Online 642 (Pace) – Art. 1, para. 47; Art .4, paras 25, 30, 46; Art. 7, para. 55 28 April 2000 (jewellery), CISG-Online 581 (Pace) – Art. 1, para. 47; Art. 26, para. 4; Art. 64, para. 10; Art. 74, paras 3, 40, 53, 74, 75; Art. 75, paras 12, 14, 20; Art. 76, paras 3, 15, 19; Art. 77, para. 26

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Table of Cases 13 April 2000 (machines), CISG-Online 576 (Pace) – Art. 1, para. 47; Art. 4, para. 22; Art. 9, para. 1; introductory remarks Arts 35–44, para. 9; Art. 35, paras 25, 52, 85, 88, 89, 120, 204 21 March 2000 (wood), CISG-Online 641 (Pace) – Art. 1, para. 46; Art. 4, paras 27, 39; Art. 6, para. 8; Art. 9, paras 14, 23, 26, 34; Art. 35, paras 29, 54; Art. 38, para. 25; Art. 39, paras 18, 55, 113, 124; Art. 40, para. 7 9 March 2000 (roofing material), CISG-Online 573 (Pace) – Art. 14, paras 2, 4; Art. 19, para. 10; Art. 74, paras 2, 63; Art. 75, para. 7 27 August 1999 (trekking shoes), CISG-Online 485 (Pace) – Art. 26, para. 3; Art. 38, paras 18, 25, 32, 39, 55, 91; Art. 39, paras 7, 43, 78, 129 28 July 1999 (pipes), CISG-Online 2021 (Pace) – Art. 4, para. 46 29 June 1999 (plates/dividing wall panels), CISG-Online 483 (Pace) – Art. 11, para. 1; Art. 26; Art. 35, para. 29; Art. 81, paras 8, 16, 23, 30, 32; Art. 82, para. 18 11 March 1999 (frames for mountain bikes), CISG-Online 524 (Pace) – Art. 35, paras 120, 129 19 January 1999, CISG-Online 1233 (Pace) – Art. 81, para. 4 15 December 1998 (construction material), CISG-Online 1535 (Pace) – Art. 79, paras 50, 92 12 November 1998 (cellulose), CISG-Online 645 – Art. 9, paras 14, 23, 26, 34 15 October 1998 (timber), CISG-Online 380 (Pace) – Art. 4, para. 27; Art. 6, para. 8; Art. 9, para. 34; Art. 38; Art. 39; Art. 44 30 June 1998 (pineapple), CISG-Online 410 (Pace) – Art. 27, paras 19, 28 31 25 June 1998 (gravestones), CISG-Online 352 (Pace) – Art. 4, paras 30, 46 10 March 1998, CISG-Online 356 (Pace) – Art. 4, para. 10; Art. 7, para. 55; Art. 57, para. 28; Art. 81, para. 10 12 February 1998 (umbrellas), CISG-Online 349 (Pace) – Art. 1, paras 26, 51; Art. 4, para. 46; Art. 71, para. 19 18 June 1997, CISG-Online 292 (Pace) – Art. 14, paras 7, 11 26 April 1997 – Art. 13, para. 11 24 April 1997 (processing plant), CISG-Online 291 (Pace) – Art. 4, para. 46 20 March 1997 (mono ammonium phosphate), CISG-Online 269 (Pace) – Art. 1, paras 45, 47; Art. 4, paras 18, 21; Art. 14, paras 2, 5, 22; Art. 19, paras 10, 13, 18, 24 27 February 1996, CISG-Online 648 – Art. 53, para. 5 6 February 1996 (propane gas), CISG-Online 224 (Pace) – Art. 1, paras 31, 32, 37, 39; Art. 2, para. 52; Art. 7, para. 27; Art. 9, para. 10; Art. 14, paras 1, 2, 4, 17, 25, 38, 39; Art. 41; Art. 49, paras 62, 63; Art. 53, paras 10, 14; Art. 54, paras 3, 7; Art. 58, para. 25; Art. 71, paras 13, 37; Art. 74, para. 46; Art. 76, para. 7; Art. 77, paras 11, 32, 35, 36; Art. 80, para. 6 24 October 1995 (galvanized wire), CISG-Online 166 (Pace) – Art. 4, para. 30 10 November 1994 (chinchilla furs), CISG-Online 117 (Pace) – Art. 1, paras 25, 37, 42, 43; Art. 6, para. 7; Art. 8, para. 25; Art. 14, paras 1, 2, 21, 24, 26, 28, 30; Art. 55, paras 3, 4; Art. 57, paras 10, 11, 23 27 October 1994 (brushes and brooms), CISG-Online 133 (Pace) – Art. 3, para. 17 2 July 1993, CISG-Online 527 (Pace) – Art. 13, para. 11 Oberlandesgericht Graz 19 June 2013 (heavy oil), CISG-Online 2461 – Art. 35, para. 127 22. November 2012 (machine), CISG-Online 2459 – Art. 46, para. 53 29 July 2004 (construction equipment), CISG-Online 1627 (Pace) – Art. 10, para. 17; Art. 25, para. 40; Art. 26, paras 6, 9; Art. 75, para. 8; Art. 76, paras 7, 10, 13 16 September 2002, CISG-Online 1198 (Pace) – Art. 88, paras 16, 18 7 March 2002, CISG-Online 669 (Pace) – Art. 9, para. 9; Art. 14, para. 2; Art. 18, para. 10 24 January 2002 (excavator), CISG-Online 801 Pace) – Art. 76, para. 13 15 June 2000 (ski shoes), CISG-Online 799 (Pace) – Art. 4, para. 18 24 February 1999 (military weapons) CISG-Online 797 (Pace) – Art. 4, paras 7, 18 11 March 1998 (wood/timber), CISG-Online 670 (Pace) – Art. 27, paras 15, 20; Art. 39, paras 28, 33, 52, 59; Art. 44, para. 24; Art. 50, para. 11 9 November 1995 (marble slabs), CISG-Online 308 (Pace) (Unilex) – Art. 9, para. 27; Art. 35, para. 48 Oberlandesgericht Innsbruck 18 December 2007 (steel bars), CISG-Online 1735 (Pace) – Art. 3, paras 5, 20 1 February 2005, CISG-Online 1130 – Art. 14, paras 38, 39 1 July 1994 (garden flowers), CISG-Online 107 (Pace) – Art. 4, para. 35; Art. 25, para. 41; Art. 35, paras 71, 191; Art. 38, para. 52; Art. 74, para. 15 Oberlandesgericht Linz 8 February 2012 (safety belts), CISG-Online 2444 (Pace) – Art. 38, paras 12, 20; Art. 74, para. 11 24 September 2007 (resin laminated glass), CISG-Online 1583 (Pace) – Art. 3, para. 5; Art. 36, para. 9

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Table of Cases 23 January 2006 (car), CISG-Online 1377 (Pace) – Art. 6, paras 16, 17, 18, 23; Art. 36, para. 8; Art. 69, para. 2; Art. 82, paras 11, 12, 22 8 August 2005 (spacers for insulation glass), CISG-Online 1087 (Pace) – Art. 4, para. 30; Art. 9, para. 2; Art. 14, para. 39 23 March 2005 (conveyor band), CISG-Online 1376 (Pace) – Art. 4, paras 24, 39; Art. 19, paras 11, 13 Handelsgericht Wien 1 June 2004, CISG-Online 954 (Pace) – Art. 81, para. 23 4 March 1997, CISG-Online 743 – Art. 6, para. 8 Belarus Supreme Economic Court of the Republic of Belarus 31 July 2006, CISG-Online 2048 (Pace) – Art. 61, para. 8 20 May 2003 (fish flour), CISG-Online 1040 – Art. 7, para. 61 Belgium Court of Cassation 19 June 2009 (steel tubes), CISG-Online 1963 (Pace) – Art. 7, para. 61; Art. 79, paras 82, 84 Rechtbank van Koophandel Hasselt 28 June 2006, Drukkerij Moderna NV v IVA Groep BV, (Pace) – Art. 35, para. 105 10 May 2006, Scanlift Nederland NV v Belgium Coach Service BVBA, CISG-Online 1259 (Pace) – Art. 78, para. 25 19 April 2006 (doors), CISG-Online 1389 (Pace) – Art. 4, paras 21, 22; Art. 35 20 September 2005 (bread), CISG-Online 1496 (Pace) – Art. 74, para. 17; Art. 78, para. 25 14 September 2005 (printed media) CISG-online 2001(Pace) – Art. 49, para. 35 25 February 2004 (carpet), K BVBA v BV, CISG-Online 831 (Pace) – Art. 4, para. 42; Art. 74, para. 87; Art. 78, para. 23 6 January 2004 (polo shirts), CISG-Online 829 (Pace) – Art. 38, para. 132 22 May 2002 (packaging for vegetables), CISG-Online 703 (Pace) – Art. 11, para. 16 2 June 1999, CISG-Online 762 (Pace) – Art. 10, paras 19, 36 5 May 1999, Leithauser G. M. B. H. & CO v Willem van Praet, CISG-Online 1340 (Pace) – Art. 61, para. 8 21 January 1997 (neon light signs), Epsilon v Interneon, (Pace) CISG-Online 360 (Pace) – Art. 4, paras 2, 26; Art. 74, para. 38 2 May 1995 (frozen raspberries), CISG-Online 371 (Pace) – Art. 1, para. 25; Art. 12, para. 7; Art. 66, para. 29; Art. 79, para. 78; Art. 96, para. 5 1 March 1995, JPS BVBA v Kabri Mode BV, CISG-Online 373 (Pace) – Art. 71, para. 20 Rechtbank van Koophandel Ieper 18 February 2002 (pork meat), Lavameat v SA Cointa, CISG-Online 764 (Pace) – Art. 66, para. 35; Art. 74, para. 38; Art. 78, para. 23 29 January 2001 (cooling installations), CISG-Online 606 (Pace) – Art. 4, para. 30 Rechtbank van Koophandel Kortrijk 3 October 2001, CISG-Online 757 (Pace) – Art. 85, para. 25 4 April 2001 (shoes), (Pace) – Art. 11, paras 16, 17 6 October 1997 (crude yarn), CISG-Online 532 (Pace) – Art. 1, para. 51; Art. 35, para. 174 Cour d’Appel de Lie`ge 28 April 2003, CISG-Online 944 – Arts 14–24 introductory remarks, para. 4; Art. 18, para. 7 Rechtbank van Koophandel Oudenaarde 10 July 2001 (textiles), CISG-Online 1785 (Pace) – Art. 14, para. 1; Art. 23, para. 1; Art. 78, para. 25 Rechtbank van Koophandel Tongeren 25 January 2005 (steel), CISG-Online 1106 (Pace) – Art. 9, para. 24; Art. 11, para. 1; Art. 14, paras 1, 11; Art. 15, paras 1, 12; Art. 18, para. 6; Art. 19, para. 1 Rechtbank van Koophandel Veurne 25 April 2001 (diesel tram), CISG-Online 765 – Art. 1, para. 44; Art. 38, paras 60, 90, 104; Art. 39; Art. 78, para. 23 Tribunal Commercial de Bruxelles 13 November 1992, Maglificio Dalmine Srl v S C Covires, CISG-Online 458 (Pace) – Art. 71, para. 20 Tribunal Commercial de Namur 15 January 2002 (Flexivit n 3/milling machine), CISG-Online 759 (Pace) – Art. 74, para. 11

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Table of Cases Tribunal de commerce de Nivelles 19 September 1995 (extrusion press), S.A. Gantry v. Research Consulting Marketing, CISG-Online 366 – Art. 8, para. 22; Art. 14, para. 39; Art. 19, para. 18 Hof van Beroep Antwerpen 24 April 2006 (wood), GmbH Lothringer Gunther Grosshandelsgesellschaft fu¨r Bauelemente und Holzwerkstoffe v NV Fepco International, CISG-Online 1258 (Pace) – Art. 9, para. 4; Art. 75, para. 19; Art. 77, para. 17; Art. 78, para. 29; Art. 85, para. 25; Art. 88, para. 12 27 June 2001 (tiles), CISG-Online 2342 (Pace) – Art. 7, para. 27 18 June 1996 (clothes), CISG-Online 758 (Pace) – Art. 4, para. 26; Art. 74, para. 38 Hof van Beroep Gent 24 March 2010 (unpublished) – Art. 34, para. 10 24 November 2004 (computer hardware and software), CISG-Online 966 (Pace) – Art. 3, para. 20; Art. 14, para. 24; Art. 19, para. 10; Art. 23, para. 1 16 June 2004, CISG-Online 988 (Pace) – Art. 66, para. 35 10 May 2004 (plastic film), CISG-Online 991 (Pace) – Art. 77, para. 13, 15 28 January 2004 (breeding sows and cages), CISG-Online 830 (Pace) – Art. 39, paras 31, 126, 127; Art. 40, para. 29 11 September 2003 (digital archive), (Pace) – Art. 84, para. 12 15 May 2002 (design of pagers), CISG-Online 746 (Pace) – Art. 1, para. 52; Art. 6, para. 18; Art. 7, paras 28, 32; Art. 9, para. 29; Introduction to Arts 14–24, para. 7; Art. 29, para. 8; Art. 74, para. 38 31 January 2002 (candy), CISG-Online 1349 (Pace) – Art. 1, para. 47; Art. 4, para. 46 26 April 2000, BV BA JP v S Ltd, CISG-Online 1316 (Pace) – Art. 71, para. 43 Brazil Tribunal de Justiça Rio Grande do Sul (Appellate Court) 30 March 2017 (electric motors), CISG-Online 2819 – Art. 7, paras 25, 27, 61; Art. 9, para. 36 14 February 2017 (chicken feet), CISG-Online 2818 – Art. 7, paras 25, 27; Art. 9, para. 36; Art. 11, para. 17; Art. 99, para. 1 20 May 2009 (electrical discharge machine), Prakasa Indu´stria e Come´rcio de utilitades do lar Ltda v. Mercoma´quinas Insdu´stria Come´rcio e Representaço˜es Ltda, CISG-Online 2368 (Pace) – Art. 7, para. 25; Art. 8, para. 27; Art. 77, para. 20 Tribunal de Contas da Unia˜o 7 December 2011 (Unilex) – Art. 79, para. 78 Canada Supreme Court of Canada 3 October 1978, Asamera Oil Corp. Ltd. v. Sea Oil & General Corp. et al.; Baud Corp., N. V. v. Brook, 1 SCR. 633 – Art. 77, para. 2 Supreme Court of British Columbia 13 May 2015 (steel), CISG-Online 2734 – Art. 4, para. 28 21 August 2003, Mansonville v Kurtz, CISG-Online 1017 (Pace) – Art. 71, paras 7, 20, 40, 57 Supreme Court of Justice Ontario 6 October 2003 (vacuum panel insulation), Diversitel Communications Inc. v Glacier Bay, Inc. CISGOnline 1436 (Pace) – Art. 25, para. 6 Ontario Superior Court of Justice 28 October 2005 (wine corks), Chateau des Charmes Wines Ltd v Sabate´ USA, Inc. et al., CISG-Online 1139 (Pace) – Art. 11, para. 13; Art. 29 para. 7 31 August 1999 (picture frame mouldings), CISG-Online 433 (Pace) – Art. 1, para. 47; Art. 35, paras 20, 22, 28, 73, 75 Ontario Court of Appeal 26 January 2000 (molds used in manufacture of automobiles), CISG-Online 582 (Pace) – Art. 4, para. 39 Ontario Court (General Division) 16 December 1992 (molds used in manufacture of automobiles), CISG-Online 572 (Pace) – Art. 74, para. 43 Court d’Appel de Quebec 12 April 2011(frozen lobster), Mazetto Company Ilc c De´gust-Mer Inc, CISG-Online 2278 (Pace) – Art. 8, para. 31; Art. 57, para. 10

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Table of Cases Canadian International Trade Tribunal 6 October 2005, Cherry Stix Ltd. v President of the Canada Borders Services Agency, CISG-Online 1140 (Pace) – Art. 14, para. 29; Art. 23, para. 1 China Supreme Court of the People’s Republic of China 21 September 2005 (furniture), CISG-Online 1611 (Pace) – Art. 4 para. 11, Art. 55, para. 4 11 January 2001 (electricity generators and boilers), CISG-Online 1635 (Pace) – Art. 7, para. 19 Guangdong Higher People’s Court 1 January 2005 (ferromanganese and silicomanganese), CISG-Online 1966 (Pace) – Art. 9, para. 10 Shanghai High Court 21 September 2011 (electronic equipment), Comac SpA v. Shanghai Swift Mechanical & Electronic Equipment Co., Ltd, CISG-Online 2318 (Pace) – Art. 7, para. 28 Shanghai No. 1 Intermediate People’s Court 23 March 2004 (chemical products), CISG-Online 1497 – Art. 4, para. 18 Jiangsu Higher People’s Court 19 February 2001 (excavating machines), CISG-Online 1636 (Pace) – Art. 7, para. 28 Zhejiang High People’s Court 24 April 2008 (garments), CISG-online Case No. 2058 (Pace) – Art. 62, para. 6 High People’s Court Ningxia, Autonomous Region 27 November 2002, CISG-Online 867 (Pace) – Art. 67, para. 33 Rizhao Intermediate People’s Court, Shandong Province 17 December 1997 (Pace) – Art. 84, para. 14; Art. 88, para. 26 Xiamen Intermediate People’s Court 5 September 1994 (fish powder/meal), CISG-Online 464 (Pace) – Art. 6, para. 27 31 December 1992 (fish meal), (Pace) – Art. 74, para. 74 Beihai Maritime Court, Guangxi Zhuang Autonomous Region 5 March 2002, Sino-Add PTE. Ltd. v Karawasha Resources Ltd, CISG-Online 1383 (Pace) – Art. 74, para. 59 Dalian Maritime Court 29 June 2005 (magnesia chromite clinker), CISG-Online 2030 (Pace) – Art. 35, para. 197 Czech Republic Supreme Court 25 June 2008 (manufactured paint) (Pace) – Art. 55, para. 4 Denmark Højesteret (Supreme Court) 17 October 2007 (motorcycles), CISG-Online 2014 (Pace) – Art. 75, para. 19; Art. 77, paras 17, 35 3 May 2006 (casting moulds), CISG-Online 2630 (Pace) – Art. 27, para. 18 Østre Landsret 23 April 1998 (women’s clothing), CISG-Online 486 (Pace) – Art. 1, paras 49, 51; Arts 14–24 introductory remarks, para. 20; Art. 92, para. 5 Vestre Landsret 10 November 1999 (Christmas trees), CISG-Online 704 (Pace) – Art. 49, para. 77 Randers County Court 8 July 2004 (mobile grain dryer case), CISG-Online 2152 (Pace) – Art. 69, para. 2 Danish Maritime and Commercial Court 31 January 2002 (fish (mackerel)), CISG-Online 679 (Pace) – Art. 9, para. 23; Art. 35, para. 54; Art. 38, paras 49, 50, 53 Sø Og Handelsretten 1 July 1992 (plastic gloves), CISG-Online 459 – Art. 57, para. 4 Egypt Court of Cassation 11 April 2006 (marble), (Pace) – Art. 13, para. 6

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Table of Cases Estonia Harju County Court, Tartu mnt Court House 23 February 2009 (wood), CISG-Online 2644 (Pace) – Art. 11, para. 8 Tallinna Ringkonnakohus 5 March 2010 (peat), CISG-Online 2642 (Pace) – Art. 11, para. 19 19 February 2004 (tomato paste), Novia Handelsgesellschaft mbH v AS Maseko, CISG-Online 826 (Pace) – Art. 76, paras 6, 7, 10, 13 Finland Helsinki Court of Appeal 31 May 2004 (chemicals), (Pace) – Art. 74, paras 15, 18; Art. 77, para 11 26 October 2000 (plastic grass carpets), CISG-Online 1078 (Pace) – Art. 4, para. 36; Art. 7, para. 27; Art. 9, para. 24; Art. 74, para. 18 30 June 1998 (skin care products), CISG-Online 1304 (Pace) – Art. 71, para. 53; Art 72, paras 10, 19; Art 73, paras 7, 19, 29 29 January 1998 (steel plates), CISG-Online 1302 (Pace) – Art. 9, para. 23; Art. 38, paras 25, 130 Turku Court of Appeal 12 April 2002 (forestry equipment), CISG-Online 660 (Pace) – Art. 4, para. 42; Art. 9, para. 10; Art. 36, para. 20; Art. 74, para. 87; Art. 78, para. 17 18 February 1997 (packages), CISG-Online 1297 (Pace) – Art. 33, para. 27 Helsinki Court of First Instance 11 June 1995 (skin care product), confirmed by Helsinki Court of Appeal, 30 June 1998, CISG-Online 1304 (Pace) – Art. 73, para. 24 Korkein oikeus 14 October 2005 (log house), CISG-Online 1882 – Art. 2, para. 14 Kuopio Ka¨ra¨ja¨oikeus 5 November 1996, CISG-Online 869 (Pace) – Art. 74, para. 17; Art. 84, para. 12 France Cour de Cassation 2 November 2016 (floor tiles), Socie´te´ Bois et mate´riaux vs. Socie´te´ Ceramiche Marca Corona, CISG-Online 2804 – Art. 39, para. 99; Art. 40, para. 30 21 June 2016 (engines), Caterpillar Energy Solutions GmbH contre SA Allianz IARD et SA Electricite´ industrielle JP Fauche et SA Circleprinters Europe, CISG-Online 2762 – Art. 39, para. 120 17 February 2015 (radiators), CISG-Online 2598 (Pace) – Art. 79, para. 78 4 November 2014 (christmas trees), CISG-Online 2563 (Pace) – Art. 40, para. 29 27 May 2014 (paving stones), CISG-Online 2514 (Pace) – Art. 19, para. 10 17 December 2013 (lamb meat), Socinter v. Wallace, CISG-Online 2478 – Art. 25, para. 38 13 February 2013 (bags), Solodem v. Codefine, CISG-Online 2435 (Pace) – Art. 39, para. 121 27 November 2012 (cooking unit), SMEG v. Rothelec, CISG-Online 2403 (Pace) – Art. 35, para. 205; Art. 39, paras 40, 61, 93, 94, 124, 128 8 November 2011 (press breaks), CISG-Online 2310 – Art. 49, para. 77 22 March 2011 (rolls), CISG-Online 2246 – Art. 31, para. 34 8 April 2009, Socie´te´ Bati-Seul v Socie´te´ Ceramiche Marca Corona (floor tiles), CISG-Online (Pace) – Art. 39, para. 95 2 April 2008 – Art. 93, para. 3 20 February 2007 (perfume), CISG-Online 1492 (Pace) – Art. 1, paras 28, 33; Art. 71, para. 18 13 February 2007 (computer components), CISG-Online 1561 – Art. 4, para. 46; Art. 74, para. 38 30 June 2004 (cases made from polyurethane foam), CISG-Online 870 (Pace) – Art. 1, para. 28; Art. 7, para. 44 24 September 2003, Aluminum and Light Industries Company v Saint Bernard Miroiterie Vitretie (decorated laminated glass panels), CISG-Online 791 (Pace) – Art. 35, para. 141, 142; Art 36, para. 9 19 March 2002 (footwear), CISG-Online 662 (Pace) – Art. 42 para. 38 26 June 2001 (auto parts), CISG-Online 600 (Pace) – Art. 6 paras 16, 20 26 May 1999 (rolled sheets metal), Socie´te´ Karl Schreiber GmbH v Socie´te´ Thermo Dynamique Service et al, CISG-Online 487 (Pace) – Art. 1, para. 47; Art. 25, para. 41; Art. 49, para. 39; Art. 84, para. 10 5 January 1999 (cooling plant), Thermo King v Cigna Insurance, CISG-Online 431 (Pace) – Art. 4, para. 9 16 July 1998 (aluminium hydrate), CISG-Online 344 (Pace) – Art. 1, para. 47; Art. 19, paras 11, 15 27 January 1998 (hooks, sockets/cartridges for fitting to electrical connectors), CISG-Online 309 (Pace) – Art. 1, para. 51; Art. 18, para. 8

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Table of Cases 17 December 1996 (ceramic ovenware), Ceramique v Musgrave; CISG-Online 220 (Pace) – Art. 6, para. 18; Art. 35, para. 103 23 January 1996 (wine), Sacovini/M Marrazza v Les fils de Henri Ramel, CISG-Online 159 (Pace) – Art. 25, para. 39; Art. 35, para. 98; Art. 49, para. 39 4 January 1995 (electronic components), CISG-Online 138 (Pace) – Art. 1, para. 51; Art. 10, para. 17; Art. 35, para. 22; Art. 55, para. 3; Art. 85, para. 30 Cour d’appel d’Aix-en-Provence 21 November 1996, CISG-Online 1505 (Pace) – Art. 84, para. 10 Cour d’appel de Bordeaux 12 September 2013 (tiles). Wolseley France Bois v Ceramiche Marca Corona, CISG-Online 2552 (Pace) – Art. 40, paras 19, 30 Cour d’appel de Chambe´ry 25 May 1993 (connectors), CISG-Online 223 (Pace) – Art. 3, paras 5, 14 Cour d’appel de Colmar 5 May 2017 (wooden deck boards), NEZ vs. SAS TCP et al., CISG-Online 2817 – Art. 40, para. 11 (fn 16) 26 February 2008 (printed products), CISG-Online 1657 (Pace) – Art. 3, para. 15 13 November 2002 (printed textile fabric), CISG-Online 792 (Pace) – Art. 42, para. 38 12 June 2001 (air-conditioning system for trucks), CISG-Online 694 (Pace), approved by Cour de cassation (France) 30 June 2004, CISG-Online 870 (Pace) – Art. 7, para. 28; Art. 61, para. 4; Art. 79, paras 72, 78 26 September 1995 (ceramic baking dishes/cake pans, souffle´ pans, etc.), CISG-Online 226 (Pace) – Art. 6, para. 18 Cour d’appel de Douai 6 February 2014 (press brake), CISG-Online 2548 (Pace) – Art. 26; Art. 82, para. 16 Cour d’appel de Grenoble 28 November 2002 (machinery), CISG-Online 787 (Pace) – Art. 11, para. 8 21 October 1999 (footwear), CISG-Online 574 (Pace) – Art. 1, para. 47; Art. 8, para. 3 4 February 1999 (orange juice), CISG-Online 443 (Pace) – Art. 63, para. 4; Art. 75, para. 14 4 March 1998 (industrial machines), CISG-Online 535 – Art. 46, para. 52 23 October 1996 (stock equipment), CISG-Online 305 (Pace) – Art. 50, para. 56; Art. 57, para. 28 15 May 1996 (cooling plant), Thermo King v Cigna Insurance Company of Europe et al., CISG-Online 219 (Pace) – Art. 1, para. 33; Art. 36, para. 23 13 September 1995 (cheese), Caito Roger v Socie´te´ francaise de factoring, CISG-Online 157 (Pace) – Art. 4, para. 46; Art. 7, para. 55; Art. 9, para. 12; Art. 35, paras 25, 91, 93, 98 26 April 1995 (second hand metallic hangar), Marques Roque v Manin Reviere, CISG-Online 154 (Pace) – Art. 1, para. 37; Art. 3 para. 17; Art. 11, para. 12 26 April 1995 (candy), CISG-Online 153 (Pace) – Art. 6, para. 7; Art. 8, para. 22 29 March 1995 (grain), CISG-Online 156 (Pace) – Art. 78, para. 16 22 February 1995 (jeans), S.a.r.l. Bri Production “Bonaventure” v. Socie´te´ Pan African Export, CISGOnline 151 (Pace) – Art. 1, para. 26; Art. 7, para. 28; Art. 25, para. 42; Art. 73, para. 22 Cour d’appel de Lyon 18 May 2017 (steel sheets), Manitowoc Crane Group France vs. Commercio Materie Prime SPA, CISGOnline 2917 – Art. 38, para. 53; Art. 39, para. 68 18 October 2012 (Christmas trees), CISG-Online 2402 (Pace) – Art. 39, para. 78; Art. 40, para. 22 Cour d’appel de Nancy 6 November 2013 (tractors), O. v P., CISG-Online 2549 (Pace) – Art. 25, para. 24 Cour d’appel de Paris 19 November 2010 (make-up chairs), CISG-Online 2206 – Art. 31, para. 59 4 June 2004, CISG-Online 872 – Art. 51, para. 45 10 September 2003, Socie´te´ H. H. GmbH & Co. v SARL MG, CISG-Online 788 (Pace) – Art. 8, para. 13; Art. 16, para. 7 6 November 2001 (cables), CISG-Online 677 (Pace) – Art. 4, para. 30, Art. 6, para. 18; Art. 38, para. 89; Art. 7, para. 55 21 May 1999 (electronic equipment), CISG-Online 498 (Pace) – Art. 1, para. 47 4 March 1998 (industrial machines), CISG-Online 535 – Art. 46, para. 41 14 January 1998 (elephants), CISG-Online 347 (Pace) – Art. 1, para. 37; Art. 57, para. 28; Art. 81, paras 23, 26; Art. 84, para. 10 13 December 1995 (outer wrappings of packets of biscuits), CISG-Online 312 (Pace) – Art. 9, para. 30 6 April 1995, CISG-Online 139 (Pace) – Art. 84, para. 12

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Table of Cases 22 April 1992 (electronic components), Socie´te´ Fauba France FDIS GC Electronique v. Socie´te´ Fujitsu Mikroelectronic GmbH, CISG-Online 222 – Art. 1, para. 43; Art. 14, para. 29; Art. 35, para. 22 Cour d’appel d’Orle´ans 29 March 2001 (high tension neon transformers), CISG-Online 611 (Pace) – Art. 1, para. 47 Cour d’appel de Reims 30 April 2013 (light decorations), CISG-Online 2479 – Art. 1, para. 33 Cour d’appel de Rennes 13 May 2016 (roofing), CISG-Online 2743 (Pace) – Art. 4, para. 9 27 May 2008 (brassiere cups), CISG-Online 1746 (Pace) – Art. 75, para. 17; Art. 77, para. 20 Cour d’appel de Rouen 26 September 2013 (glue), CISG-Online 2551 – Art. 6, para. 16 19 December 2006 (potato seedling), CISG-Online 1933 (Pace) – Art. 4, para. 9 Cour d’appel de Versailles 13 October 2005 (plush caterpillar toys for infants), CISG-Online 1433 (Pace) – Art. 4, paras 18, 30 ; Art. 7, para. 55 Tribunal de Grande Instance de Strasbourg 22 December 2006, CISG-Online 1629 (Pace) – Art. 63, paras 7, 9 Tribunal de Commerce de Besançon 19 January 1998 (sweat suits), CISG-Online 557 (Pace) – Art. 79, para. 12 Germany Bundesgerichtshof 25 March 2015 (replacement parts for ships), CISG-Online 2588 (Pace) – Art. 4, para. 32; Art. 14, para. 12 24 September 2014 (tools), CISG-Online 2545 (Pace) – Art. 4, para. 39; Art. 46, para. 53; Art. 48, paras 9, 10, 15; Art. 49, paras 34, 35, 37, 38; Art. 51, para. 42 28 May 2014 (bowling alleys), CISG-Online 2513 (Pace) – Art. 1, para. 26; Art. 7, para. 27; Art. 8, para. 26 14 May 2014 (coffee products), CISG-Online 2493 (Pace) – Art. 4, para. 39; Art. 7, para. 55 07 March 2013, BeckRS 2014, 20904 – Art. 2, para. 9 7 November 2012 (glass fibre cables), CISG-Online 2374 (Pace) – Art. 30, para. 40; Art. 31, paras 14, 16, 59, 65 26 September 2012 (clay), CISG-Online 2348 (Pace), Art. 7, paras 27, 58; Art. 35, paras 37, 48, 67, 69, 72, 160; Art. 40, para. 11; Art. 58, para. 6; Art. 77, para. 10; Art. 80, para. 10 23 June 2010 (wooden goods), CISG-Online 2129 (Pace) – Art. 4, para. 39 11 May 2010 (aluminium rings), CISG-Online 2125 (Pace) – Art. 1, para. 53; Art. 6, para. 18 27 November 2007 (glass bottles), CISG-Online 1617 (Pace) – Art. 8, para. 17; Art. 71, para. 20 7 June 2006, NJW 2006, 2839 – Art. 46, para. 37 26 January 2006 (automobile), CISG-Online 1200 (Pace) – Art. 41, para. 6; Art. 43, paras 3, 9, 13, 14; Art. 44, para. 6 2 March 2005 (Belgian frozen pork) CISG-Online 999 (Pace) – Art. 7, paras 18, 19; Art. 35, paras 14, 96, 97, 98, 99; Art. 50, para. 48 3 November 2004, VIII ZR 275/03 – Art. 2, para. 28 30 June 2004 (paprika), CISG-Online 847 (Pace) – Art. 38, para. 56 9 January 2002 (powdered milk), CISG-Online 651 (Pace) – Art. 4, paras 24, 34, 35, 37, 39, 46; Art. 7, para. 27; Art. 19, para. 13; Art. 35, paras 170, 187; Art. 50, para. 60; ; Art. 74, para. 8; Art. 79, para. 76 31 October 2001 (machinery), CISG-Online 617 (Pace) – Art. 1, para. 44; Art. 2, para. 8; Art. 4, para. 24; Art. 7, paras 27, 28; Art. 8, paras 17, 25; Art. 14, para. 39; Art. 77, para. 29; Art. 80, para. 7 3 November 1999 (hygienic tissues), CISG-Online 475 (Pace) – Art. 1, para. 47; Art. 38, paras 83, 89; Art. 39, paras 39, 59, 71, 81 24 March 1999 (vine wax), CISG-Online 396 (Pace) – Art. 1, para. 47; Art. 77, paras 20, 28, 32; Art. 79, para. 76 25 November 1998 (surface protective film), CISG-Online 353 (Pace) – Art. 5, para. 17; Art. 6, para. 18; Art. 8, para. 28; Art. 35, paras 52, 105, 144; Art. 39, paras 106, 109, 110; Art. 44, para. 9; Art. 74, para. 48 12 February 1998 (air cleaning installation), CISG-Online 343 (Pace) – Art. 1, para. 26; Art. 3, para. 15; Art. 4, paras 9, 46; Art. 7, para. 55 23 July 1997 (Benetton II), CISG-Online 276 (Pace) – Art. 1, para. 33; Art. 4, paras 11, 16; Art. 6, paras 18, 22

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Table of Cases 25 June 1997 (stainless steel wire), CISG-Online 277 (Pace) – Art. 51, para. 10; Art. 74, para. 45; Art. 82, para. 21 5 February 1997 (containers for plants), (Pace) – Art. 35, para. 148 11 December 1996 (marzipan), CISG-Online 225 (Pace) – Art. 1, para. 47 4 December 1996 (printing system and software), CISG-Online 260 (Pace) – Art. 39 paras 39, 44 3 April 1996 (cobalt sulphate), CISG-Online 135 (Pace), VIII ZR 51/95 – Art. 7, para. 18; Art. 8, para 33; Art. 25, para. 11; Art. 35, paras 25, 30, 32, 37; Art. 45, para. 6; Art. 49, paras 2, 3, 13, 34, 37, 45, 46, 81; Art. 51, paras 42, 44; Art. 57, para. 26; Art. 58, para. 29 8 March 1995 (New Zealand mussels), CISG-Online 144 (Pace) – Art. 35, paras 52, 88, 89, 91, 120; Art. 39; Art 46, para. 54; Art. 50, para. 60; Art. 49, para. 81; Art. 58, para. 3 15 February 1995 (key press machine), CISG-Online 149 (Pace) – Art. 4, para. 28, 46; Art. 49, paras 67, 77 10 November 1994, IPRax (1996) 137 – Art. 57, para. 11 26 March 1992 (doors and windows), CISG-Online 67 (Pace) – Art. 9, para. 30; Art. 57, para. 4 10 October 1991, BGHZ 115, 324 (326) – Art. 38, para. 21 27 June 1990, NJW (1990) 3077 – Art. 55, para. 8 25 January 1988, BGHZ 103, 143 – Art. 57, para. 12 21 January 1987, NJW 1987, 2435 – Art. 58, para. 8 24 September 1986, BGHZ 98, 263 (272) – Art. 57, para. 28 22 October 1980, NJW (1981) 1158 – Art. 50, para. 55; Art. 57, para. 28 4 April 1979, NJW (1979) 1782 – Art. 57, paras 19, 22, 23 28 March 1979, NJW (1979) 1779 – Art. 57, para. 22 23 March 1964, BGHZ 41, 215 – Art. 58, para. 8 Oberlandesgericht Bamberg 13 January 1999 (fabrics), CISG-Online 516 (Pace) – Art. 74, paras 28, 29, 32; Art. 75, para. 7; Art. 77, para. 16 Oberlandesgericht Berlin 24 January 1994 (wine), CISG-Online 130 (Pace) – Art. 1, para. 45; Art. 4, para. 18; Art. 7, para. 55; Art. 54, para. 9 Oberlandesgericht Brandenburg 8 April 2016 (car), CISG-Online 2727 – Art. 2, para. 31 3 July 2014 (cuttings), CISG-Online 2543 (Pace) – Art. 31, para. 38; Art. 35, paras 19, 182; Art. 38, para. 118; Art. 39, paras 34, 41, 82 5 February 2013 (beer), CISG-Online 2400 – Art. 49, para. 32; Art. 80, para. 17 18 November 2008 (beer), CISG-Online 1734 (Pace) – Art. 53, para. 2; Art. 73, paras 27, 29; Art. 74, para. 15 Oberlandesgericht Braunschweig 28 October 1999 (frozen meat), CISG-Online 510 (Pace) – Art. 4, paras 24, 30, 32; Art. 57, para. 28; Art. 77, paras 15, 29; Art. 88, paras 26, 27, 28 Oberlandesgericht Celle 29 January 2015 (equipment for laboratory), CISG-Online 2618 (Pace) – Art. 4, para. 39 24 July 2009 (broadcasters/multimedia recorders), CISG-Online 1906 (Pace) – Art. 4, para. 24; Art. 7, para. 27; Art. 8, para. 25; Art. 77, para. 31 10 March 2004 (commercial vehicles), CISG-Online 824 (Pace) – Art. 39, paras 19, 43 2 September 1998 (vacuum cleaners and watches), CISG-Online 506 (Pace) – Art. 74, para. 11; Art. 76, paras 9, 11; Art. 77, paras 5, 14 24 May 1995 (printing machine), CISG-Online 152 (Pace) – Art. 6, paras 16, 19; Art. 7, para. 28; Art. 47, paras 10, 23, 24; Art. 49, paras 32, 77; Art. 84, para. 12 2 September 1991 (vacuum cleaners), (Pace) – Art. 76, para. 4 Oberlandesgericht Dresden 27 May 2010 (car), CISG-Online 2182 – Art. 35, para. 166 8 November 2007 (funnel covers), CISG-Online 1624 (Pace) – Art. 38, paras 58, 126 11 June 2007 (airbag systems), CISG-Online 1720 – Art. 3, para. 20 21 March 2007 (stolen automobile case), CISG-Online 1626 (Pace) – Art. 41 paras 5, 11, 37, 42 10 November 2006 (meat), CISG-Online 1625 (Pace) – Art. 9, paras 7, 10, 12 27 December 1999 (chemical products), CISG-Online 511 (Pace) – Art. 1, para. 42; Art. 6, para. 16 9 July 1998 (terry cloth), CISG-Online 559 (Pace) – Art. 4, para. 27; Art. 9, para. 34 Oberlandesgericht Du¨sseldorf 23 March 2011 (loin ribs), CISG-Online 2218 – Art. 8, para. 25 24 July 2007 (coils), CISG-Online 1531 – Art. 57, para. 4

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Table of Cases 22 July 2004 (shoes), CISG-Online 916 (Pace) – Art. 26, para. 9; Art. 27, para. 19; Art. 72, para. 6; Art. 75, para. 7 28 May 2004 (television sets), CISG-Online 850 (Pace) – Art. 4, para. 39; Art. 29, para. 4; Art. 60, para. 8; Art. 81, para14; Art. 84, para. 12 21 April 2004 (car phones), CISG-Online 915 (Pace) – Art. 4, paras 24, 28; Art. 7, para. 28; Art. 8, para. 25; Art. 13, para. 6; Art. 14, paras 38, 39, 41, 42, 43; Art. 49, para. 29 30 January 2004 (generators), CISG-Online 821 (Pace) – Art. 4, para. 24; Art. 8, para. 25 23 January 2004 (stainless steel plates), CISG-Online 918 (Pace) – Art. 38, para. 130 25 July 2003 (rubber sealing parts), CISG-Online 919 (Pace) – Art. 4, para. 39; Art. 7, paras 28, 55; Art. 8, para. 25; Art. 19, para. 15 24 April 1997 (shoes), CISG-Online 385 (Pace) – Art. 4, para. 39; Art 25., paras 33, 34; Art. 47, paras 8, 29; Art. 49, paras 28, 30, 32; Art. 71, para. 31 11 July 1996 (lawn mower engines), CISG-Online 201 (Pace) – Art. 1, para. 33, Art. 4, paras 11, 39; Art. 74, para. 90 10 February 1994 (shirts), CISG-Online 116 (Pace) – Art. 1, para. 53; Art. 25, para. 45; Art. 38, paras 77, 103; Art. 45, para. 6; Art. 49, para. 50 10 February 1994 (fabrics), CISG-Online 115 (Pace) – Art. 25, para. 45; Art. 35, paras 32, 110; Art. 51, para. 10 14 January 1994 (shoes), CISG-Online 119 (Pace) – Art. 72, para. 9; Art. 74, paras 70, 72; Art. 75, paras 17, 19; Art. 77, para. 15; Art. 78, paras 12, 14 2 July 1993 (veneer cutting machine), CISG-Online 74 (Pace) – Art. 5, paras 9, 12; Art. 6, para. 17; Art. 7, para. 60; Art. 50, para. 56; Art. 57, paras 28, 29; Art. 74, paras 67, 68, 94; Art. 81, para. 26 12 March 1993 (textiles), CISG-Online 82 (Pace) – Art. 1, para. 53; Art. 39, paras 113, 114 8 January 1993 (tinned cucumbers), CISG-Online 76 (Pace) – Art. 1, para. 52; Art. 4, para. 17, Art. 6, para. 18; Art. 38, paras 71, 116; Art. 39, paras 100, 123; Art. 51, para. 25 Oberlandesgericht Frankfurt am Main 24 March 2009 (low carbon – iron manganese), CISG-Online 2165 – Art. 75, para. 8 26 June 2006 (printed goods), CISG-Online 1385 (Pace) – Art. 4, paras 24, 33 29 January 2004 (pork meat), CISG-Online 822 (Pace) – Art. 35, paras 14, 71 30 August 2000 (yarn), CISG-Online 594 (Pace) – Art. 1, para. 47; Art. 6, para. 18; Art. 14, para. 2; Art. 18, paras 2, 7, 8 15 March 1996 (fashion textiles), 25 U 187/95, CISG-Online 275 (Pace) – Art. 6, para. 18 15 March 1996 (fashion textiles), 25 U 100/95, CISG-Online 284 (Pace) – Art. 6, para. 22 5 July 1995 (chocolate products), CISG-Online 258 (Pace) – Art. 9, para. 30; Art. 11, para. 17; Arts 14– 24 introductory remarks, para. 9 23 May 1995 (shoes), CISG-Online 185 (Pace) – Art. 11, para. 17; Art. 18, para. 8; Art. 19, para. 10 20 April 1994 (New Zealand mussels), CISG-Online 125 – Art. 1, para. 3; Art. 4, para. 46; Art. 7, para. 18 4 March 1994 – introductory remarks to Articles 14–24, para. 2; Art 14, paras 17, 28; Art 19, paras 8, 10; Art 92, para. 5 18 January 1994 (shoes), CISG-Online 123 (Pace) – Art. 25, para. 37; Art. 49, paras 37, 38; Art. 58, para. 3; Art. 78, para. 12; Art. 84, para. 12 17 September 1991 (shoes), CISG-Online 28 (Pace) – Art. 3, paras 5, 14; Art. 25, paras 12, 42, 49; Art. 49, para. 48; Art. 81, para. 4 21 December 1982 – Art. 51, paras 10, 20 Oberlandesgericht Hamburg 15 July 2010 (medical equipment), CISG-online 2448 (Pace) – Art. 7, para. 27; Art. 39, paras 34, 40 25 January 2008 (cafe´ inventory), CISG-Online 1681 (Pace) – Art. 4, paras 26, 46; Art. 7, para. 55; Art. 49, para. 42; Art. 51, paras 10, 23; Art. 74, para. 38; Art. 78, para. 7; Art. 79, para. 15 26 November 1999 (jeans), CISG-Online 515 (Pace) – Art. 1, para. 51; Art. 4, para. 40; Art. 7, para. 55; Art. 49, para. 39; Art. 74, paras 13, 62; Art. 76, para. 13; Art. 84, para. 8; Art. 88, paras 20, 36, 37 5 October 1998 (circuit boards/electronic parts), CISG-Online 473 (Pace) – Art. 4, paras 23, 30; Art. 9, para. 3; Art. 29, para. 1; Art. 53, para. 12 4 July 1997 (tomato concentrate), CISG-Online 1299 (Pace) – Art. 4, para. 39; Art. 72, para. 21; Art. 76, paras 23 28 February 1997 (iron-molybdenum), CISG-Online 261 (Pace) – Art. 7, para. 28; Art. 25, para. 35; Art. 26, para. 7; Art. 47, para. 5; Art. 49, paras 28, 32, 62; Art. 75, paras 8, 11, 18, 19; Art. 77, paras 16, 18, 35; Art. 79, paras 44, 56, 64, 69, 70, 78, 82 9 July 1980, 5 U 122/80 – Art. 9, para. 30 Oberlandesgericht Hamm 30 November 2010 (pigs), CISG-Online 2217 – Art. 35, paras 26, 39, 54, 59, 88

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Table of Cases 2 April 2009 (car), CISG-Online 1978 (Pace) – Art. 1, para. 43 12 November 2001 (computer parts – memory modules), CISG-Online 1430 – Art. 7, para. 28; Art. 49, para. 30 23 June 1998 (furniture), CISG-Online 434 (Pace) – Art. 4, para. 46; Art. 66, paras 2, 25; Art. 67, para. 16; Art. 71, paras 10, 26, 41 5 November 1997 (inline skates), CISG-Online 381 (Pace) – Art. 1, para. 33; Art. 50, para. 55 9 June 1995 (window elements), CISG-Online 146 (Pace) – Art. 4, paras 30, 39; Art. 6, para. 18; Art. 46, paras 40, 52 8 February 1995 (socks), CISG-Online 141 (Pace) – Art. 4, para. 46; Art. 7, para. 55; Art. 24, paras 6, 8; Art. 27, para. 30; Art. 78, para. 22 22 September 1992 (pork bacon), CISG-Online 57 (Pace) – Art. 1, paras 34, 37; Art. 19, para. 13; Art. 25, para. 38; Art. 75, paras 6, 17, 29; Art. 76, paras 4, 13, 15, 22; Art. 77, para. 35 15 November 1979 (2 U 78/79) – Art. 9, para. 30 Oberlandesgericht Karlsruhe 14 February 2008, CISG-Online 1649 (Pace) – Art. 63, para. 9; Art. 82, para. 13 8 February 2006 (Hungarian wheat), CISG-Online 1328 (Pace) – Art. 35, para. 198; Art. 60, para. 6 20 July 2004 (shoes), CISG-Online 858 (Pace) – Art. 4, paras 24, 41; Art. 8, para. 25; Art. 14, paras 38, 39; Art. 71, paras 6, 10, 31, 38, 43, 57 19 December 2002 (machine), CISG-Online 817 (Pace) – Art. 26, para. 4; Art. 31, para. 25; Art. 49, para. 63; Art. 81, para. 24; Art. 82, para. 18; Art. 84, para. 12; Art. 86, para. 14 25 June 1997 (surface protective film), CISG-Online 263 (Pace) – Art. 4, para. 46; Art. 6, para. 18; Art. 7, para. 27; Art. 38, paras 21, 58, 65, 81; Art. 40, para. 12; Art. 44, para. 9 20 November 1992 (frozen chicken), CISG-Online 54 (Pace) – Art. 31, para. 34 Oberlandesgericht Koblenz 15 August 2015 (capsules), IHR 2017, 211, 213 – Art. 35, para. 135; Art. 38, para. 54; Art. 39, para. 68 10 September 2013 (hauler), CISG-Online 2472 (Pace) – Art. 35, para. 96; Art. 74, paras 13, 62 3 June 2013 (chemical bases for ice cream production and labels), CISG-Online 2469 (Pace) – Art. 39, paras 21, 31, 40 19 December 2012 (generator), CISG-Online 2470 (Pace) – Art. 35, paras 39, 158 24 February 2011 (clay), CISG-Online 2301 – Art. 7, para. 27; Art. 30, para. 29; Art. 35, paras 203, 205; Art. 74, para. 15 21 November 2007 (shoes), CISG-Online 1733 – Art. 49, para. 72; Art. 51, paras 10, 45 14 December 2006, CISG-Online 1408 (Pace) – Art. 66, paras 13, 21; Art. 67, para. 29 19 October 2006 (T-shirts), CISG-Online 1407 (Pace) – Art. 38, para. 66; Art. 39, para. 52; Art. 50, paras 34, 48; Art. 77, para. 20 14 September 2006 (bottles), CISG-Online 1408 (Pace) – Art. 35, paras 137, 147; Art. 36, para. 9; Art 39, para. 35 18 November 1999 (fiberglass fabric for filters), CISG-Online 570 (Pace) – Art. 38, paras 68, 81, 89 11 September 1998 (chemical substance (dryblend) used for production of plastic (PVC) tubes), CISGOnline 505 (Pace) – Art. 38, para. 81 31 January 1997 (acrylic blankets), CISG-Online 256 (Pace) – Art. 25, paras 47, 48; Art. 35, para. 19; Art. 48, para. 41; Art. 49, paras 20, 48, 77; Art. 50, para. 23; Art. 78, para. 23; Art. 80, para. 5 17 September 1993 (computer chip), CISG-Online 91 (Pace) – Art. 1, paras 33, 39, 40, 52; Art. 4, paras 11, 39; Art. 6, para. 18; Art. 54, para. 13; Art. 57, para. 1; Art. 61, para. 3; Art. 74, para. 11; Art. 78, para. 11 20 November 1992 (frozen chicken), CISG-Online 54 (Pace) – Art. 8, para. 25 16 January 1992 (motor yacht), CISG-Online 47 (Pace) – Art. 4, para. 28 27 September 1991, CISG-Online 30 (Pace) – Art. 82, para. 11; Art. 82, para. 22 18 May 1984 – Art. 51, paras 10, 44 21 January 1983 – Art. 54, para. 13 Oberlandesgericht Ko¨ln 24 April 2013 (printing job), CISG-Online 2480 – Art. 79, para. 92 21 November 2012 (chemicals), CISG-Online 2401 – Art. 1, para. 26 19 May 2008 (pesticide), CISG-Online 1700 (Pace) – Art. 4, para. 39; Art. 7, paras 55, 58; Art. 71, para. 1; Art. 84, para. 8 14 January 2008 (shoes), CISG-Online 1730 (Pace) – Art. 53, para. 2 2 July 2007 (cutter head), CISG-Online 1811 – Art. 8, para. 31 24 May 2006, CISG-Online 1232 – Art. 19, para. 15 3 April 2006 (strawberry plants), CISG-Online 1218 (Pace) – Art. 74, para. 90 13 February 2006 (woollen cloth), CISG-Online 1219 (Pace) – Art. 4, paras 30, 39 21 December 2005, CISG-Online 1201 (Pace) – Art. 9, para. 26; Art. 57, para. 5; Art. 77, para. 31

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Table of Cases 14 October 2002 (designer clothes), CISG-Online 709 (Pace) – Art. 26, para. 4; Art. 49, paras 2, 20, 21, 37, 63; Art. 84, para. 8 13 November 2000 (plug couplings), CISG-Online 657 (Pace) – Art. 1, para. 45; Art. 10, para. 22; Art. 38, paras 50, 65 21 August 1997 (aluminium hydroxide), CISG-Online 290 (Pace) – Art. 38, paras 15, 49, 89, 93; Art. 39 9 July 1997 (video camera case), CISG-Online 495 (Pace) – Art. 58, para. 13; Art. 69, para. 2 8 January 1997 (tannery machines), CISG-Online 217 (Pace) – Art. 71, para. 36; Art. 74, paras 43, 44 21 May 1996 (used car), CISG-Online 254 (Pace) – Art. 1, paras 37, 42; Art. 4, para. 23; Art. 7, para. 27; Art. 35, paras 49, 162; Art. 74, para. 17 16 November 1995 (used car), CISG-Online 265 (Pace) – Art. 1, para. 37 26 August 1994 (market research study), CISG-Online 132 (Pace) – Art. 1, paras 37, 38, 40; Art. 3, paras 5, 24; Art. 6, para. 22; Art. 7, para. 34 22 February 1994 (rare hard wood), CISG-Online 127 (Pace) – Art. 6, para. 18; Art. 9, para. 30; Art. 11, para. 17; Art. 29, para. 8; Art. 38; Art. 49, para. 50 16 October 1992 (computers), CISG-Online 50 (Pace) – Art. 3, para. 24 27 November 1991 (tickets for the Soccer World Cup Final), CISG-Online 31 (Pace) – Art. 1, para. 44 Oberlandesgericht Mu¨nchen 10 January 2017 (shoes), CISG-Online 2800 (the final decison in CISG-Online 2799 (decision of 26 October 2016) – Art. 39, para. 124 12 October 2009 (valve assembly), CISG-Online 1997 (Pace) – Art. 92, para. 4 14 January 2009 (metal cover materials), CISG-Online 2011 (Pace) – Art. 8, paras 17, 25 5 March 2008 (stolen car), CISG-Online 1686 (Pace) – Art. 4, para. 28; Art. 7, para. 8; Art. 74, paras 11, 90; Art. 79, para. 74 17 November 2006 (dust ventilator), CISG-Online 1395 (Pace) – Art. 27, para. 31; Art. 35, para. 104; Art. 39, para 52 19 October 2006 (cars), CISG-Online 1394 (Pace) – Art. 4, para. 40; Art. 26, para. 7; Art. 55, para. 4; Art. 49, para. 54; Art. 81, para. 14 15 September 2004 (leather for furniture), CISG-Online 1013 (Pace) – Art. 7, para. 27; Art. 16, para. 22; Art. 26; Art. 55, para. 7; Art. 75, para. 8; Art. 76, para. 7s 13 November 2002 (barley), CISG-Online 786 (Pace) – Art. 35, para. 26 1 July 2002 (shoes), CISG-Online 656 (Pace) – Art. 25, para. 31; Art. 80, para. 3 11 March 1998 (cashmere sweaters), CISG-Online 310 (Pace) – Art. 4, para. 39; Art. 38, paras 21, 45, 50, 53; Art. 39, paras 16, 114 28 January 1998 (leather goods), CISG-Online 339 (Pace) – Art. 4, paras 11, 39; Art. 74, para. 23; Art. 81, para. 11 21 January 1998 (thermal insulation material), CISG-Online 536 (Pace) – Art. 1, paras 26, 33; Art. 4, para. 30; Art. 6, para. 18; Art. 58, paras 2, 16, 26; Art. 59, para. 2 9 July 1997 (fitness equipment), CISG-Online 281 (Pace) – Art. 3, para. 17; Art. 4, para. 11; Art. 6, para. 18 9 July 1997 (leather goods), CISG-Online 282 (Pace) – Art. 1, para. 33; Art. 4, paras 11, 39; Art. 6, para. 16; Art. 7, para. 55; Art. 57, paras 9, 12, 13, 17; Art. 59, paras 2, 3; Art. 79, para. 3 8 March 1995 (nickel-copper cathodes), CISG-Online 145 (Pace) – Art. 11, paras 8, 16; Arts 14–24 introductory remarks, paras 2, 7; Art. 14, paras 33, 35; Art 23 para. 2; Art. 53, paras 2, 16; Art. 92, para. 5 8 February 1995 (automobiles), CISG-Online 143 (Pace) – Art. 1, para. 26; Art. 4, paras 10, 26; Art. 62, para. 6; Art. 74, para. 38; Art. 80, para. 6; Art. 84, para. 12 8 February 1995 (polypropolene plastic granulate), CISG-Online 142 (Pace) – Art. 3, para. 5; Art. 6, para. 18; Art. 38, paras 68, 122; Art. 39, paras 19, 79 2 March 1994 (coke), CISG-Online 108 – Art. 25, para. 16; Art. 49, paras 14, 35, 77; Art. 50, paras 29, 32 Oberlandesgericht Naumburg 13 February 2013 (cereal), CISG-online 2455 (Pace) – Art. 7, para. 27; Art. 14, paras 38, 39 27 April 1999 (automobile), CISG-Online 512 – Arts 14–24 introductory remarks, para. 2; Art. 19, para. 10; Art. 27, para. 19; Art. 47, para. 24 Oberlandesgericht Oldenburg 20 December 2007 (industrial tools), CISG-Online 1644 – Art. 3, para. 5; Art. 4, para. 24; Art. 6, para. 23 5 December 2000 (tiller (subsoiler)), CISG-Online 618 (Pace) – Art. 38, para. 5; Art. 39 28 April 2000 (furniture), CISG-Online 683 (Pace) – Art. 39, paras 34, 47; Art. 40, paras 18, 19; Art. 44, para. 18

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Table of Cases 22 September 1998 (raw salmon), CISG-Online 508 (Pace) – Art. 49, paras 72, 77; Art. 66, para. 42; Art. 68, para. 38; Art. 69, para. 2 8 September 1998, CISG-Online 1887 (Pace) – Art. 66, para. 42; Art. 67, para. 38; Art. 68, para. 38 1 February 1995 (furniture), CISG-Online 253 (Pace) – Art. 25, para. 49; Art. 84, para. 15 Oberlandesgericht Rostock 27 October 2003 (trucks), CISG-Online 815 (Pace) – Art. 11, para. 16 25 September 2002 (frozen food), CISG-Online 672 (Pace) – Art. 35, paras 19, 22; Art. 39, para. 20; Art. 52, para. 33 10 October 2001 (frozen food), CISG-Online 671 (Pace) – Art. 14, para. 29; Art. 55, para. 7 27 July 1995 (flowers), CISG-Online 209 (Pace) – Art. 1, para. 49; Arts 14–24 introductory, para. 2; Art. 14, para. 35; Art. 58, para. 3; Art. 92, para. 5 Oberlandesgericht Saarbru¨cken 12 May 2010 (window parts), CISG-Online 2155 (Pace) – Art. 53, para. 16 17 January 2007 (natural stone marble panels), CISG-Online 1642 (Pace) – Art. 7, para. 8; Art. 35, paras 34, 53, 141, 196; Art. 39, para. 31 14 February 2001, CISG-Online 610 (Pace) – Art. 9, para. 30 3 June 1998 (flowers), CISG-Online 354 (Pace) – Art. 38, para. 91; Art. 39, para. 55 13 January 1993 (doors), CISG-Online 83 (Pace) – Art. 6, para. 22; Art. 9, paras 19, 33; Art. 18, para. 8; Art. 38, para. 22; Art. 39, paras 34, 112, 130 Oberlandesgericht Schleswig-Holstein 24 October 2008 (shop furnishings), CISG-Online 2020 (Pace) – Art. 4, para. 18; Art. 7, para. 55 29 October 2002, CISG-Online 717 (Pace) – Art. 18, para. 8; Art. 66, para. 5; Art. 67, para. 28; Art. 69, para. 2 22 August 2002 (live sheep), CISG-Online 710 (Pace) – Art. 35, paras 69, 72; Art. 36, paras 6, 13; Art. 38, paras 81, 91; Art. 39, para. 37; Art. 40, para. 20; Art. 66, para. 15; Art. 74, paras 7, 63 Oberlandesgericht Stuttgart 18 April 2011 (fire trucks), CISG-Online 2226 (Pace) – Art. 31, para. 35 31 March 2008 (automobile), CISG-Online 1658 (Pace) – Art. 2, para. 18; Art. 8, para. 26; Art. 49, paras 77, 79 20 December 2004 (decorative paper), CISG-Online 997 (Pace) – Art. 4, paras 39, 46 12 March 2001, CISG-Online 841 (Pace) – Art. 74, para. 32; Art. 82, para. 23 28 February 2000 (floor tiles), CISG-Online 583 (Pace) – Art. 1, para. 43; Art. 9, para. 30 21 August 1995 (machinery), CISG-Online 150 (Pace) – Art. 4, para. 39 Thu¨ringisches Oberlandesgericht 26 May 1998 (live fish), CISG-Online 513 (Pace) – Art. 1, paras 27, 37; Art. 4, para. 10; Art. 35, para. 203; Art. 38, para. 26; Art. 38, paras 41, 63, 65, 145; Art. 39, paras 26, 77, 129 Oberlandesgericht Zweibru¨cken 2 February 2004 (milling equipment), CISG-Online 877 (Pace) – Art. 35, paras 30, 188; Art. 40, paras 9, 11, 12, 15; Art. 44, paras 10, 24 31 March 1998 (vine wax), CISG-Online 481 (Pace) – Art. 14, para. 42; Art. 74, para. 15 Landgericht Aachen 14 May 1993 (electronic ear device), CISG-Online 86 (Pace) – Art. 4, paras 21, 22, 46; Art. 5, para. 19; Art. 9, para. 30; Art. 60, para. 2 3 April 1990, CISG-Online 12 (Pace) – Art. 61, para. 4; Art. 78, para. 16 Landgericht Aurich 8 May 1998, CISG-Online 518 – Art. 18, para. 2 Landgericht Baden-Baden 14 August 1991 (wall tiles), CISG-Online 24 (Pace) – Art. 19, para. 13; Art. 25, paras 45, 47 Landgericht Bamberg 13 April 2005 (furnishing), CISG-Online 1402 (Pace) – Art. 2, para. 8 Landgericht Berlin 21 March 2003 (fabric), CISG-Online 785 (Pace) – Art. 38, paras 59, 100, 103; Art. 78, para. 25 24 March 1998 (knitwear), CISG-Online 742 (Pace) – Art. 1, para. 53; Art. 4, paras 18, 39, 46 15 September 1994 (shoes), CISG-Online 399 (Pace) – Art. 25, para. 37; Art. 26, para. 5; Art. 35, paras 42, 76, 129, 174; Art. 71, paras 4, 22, 41 30 September 1992 (shoes), CISG-Online 70 (Pace) – Art. 72, paras 7, 19; Art. 75, paras 25, 26 Landgericht Bielefeld 12 December 2003 (frozen salmon), CISG-Online 905 (Pace) – Art. 4, para. 39 15 August 2003 (strapping machine), CISG-Online 906 (Pace) – Art. 4, para. 39; Art. 39, para. 51

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Table of Cases 24 November 1998 (agency for sanitary products), CISG-Online 697 (Pace) – Art. 9, para. 10; Art. 57, para. 9 2 August 1996 (Pace) – Art. 74, para. 23 18 January 1991, CISG-Online 174 – Art. 18, paras 7, 8, 32 Landgericht Coburg 12 December 2006 (plants), CISG-Online 1447 (Pace) – Art. 8, para. 25; Art. 35, para. 91, 103, 122, 124; Art. 39, paras 16, 34 Landgericht Darmstadt 12 March 2013 (shoes), CISG-Online 2446 (Pace) – Art. 66, para. 30 29 May 2001, CISG-Online 686 (Pace) – Art. 50, para. 11; Art. 71, paras 16, 38, 43 9 May 2000 (video recorders and other electrical appliances), CISG-Online 560 (Pace) – Art. 35, para. 51; Art. 38, para. 143; Art. 74, paras 83, 85; Art. 77, para. 31 Landgericht Duisburg 17 April 1996 (textiles), CISG-Online 186 – Art. 4, para. 39; Art. 11, para. 12; Art. 53, para. 10; Art. 57, para. 17 Landgericht Du¨sseldorf 5 March 1996, CISG-Online 181 – Art. 50, para. 9 11 October 1995 (generator), CISG-Online 180 (Pace) – Art. 4, para. 30; Art. 81, para. 10 25 August 1994 (fashion goods), CISG-Online 451 (Pace) – Art. 4, para. 35; Art. 39, para. 53; Art. 74, para. 15 23 June 1994 (engines for hydraulic presses and welding machines), CISG-Online 179 (Pace) – Art. 38, paras 53, 63, 92; Art. 39, para. 62 Landgericht Ellwangen 15 September 2006, BeckRS 2010, 06236 – Art. 31, para. 54 21 August 1995 (Spanish paprika), CISG-Online 279 (Pace) – Art. 1, para. 26; Art. 35, para. 91; Art. 73, paras 10, 12, 19, 29; Art. 79, para. 76 Landgericht Erfurt 29 July 1998 (shoe soles), CISG-Online 561 (Pace) – Art. 39, paras 33, 38 Landgericht Flensburg 19 January 2001 (sheep), CISG-Online 619 – Art. 1, para. 37 24 March 1999 (meat), CISG-Online 719 (Pace) – Art. 66, para. 22; Art. 67, para. 28; Art. 78, para. 16 Landgericht Frankfurt 11 April 2005 (used shoes), CISG-Online 1014 (Pace) – Art. 38, paras 87, 119, 128, 129, 137, 140; Art. 39, para. 1, 59, 150; Art. 44, para. 16 13 July 1994 (shoes), CISG-Online 118 (Pace), confirmed by Oberlandesgericht Frankfurt am Main (Germany), 23 May 1995, CISG-Online 185 (Pace) – Art. 11, para. 17; Art. 26, para. 3; 6 July 1994 (chocolate products), CISG-Online 257 (Pace) – Art. 4, para. 35; Art. 74, para. 15 9 December 1992 (shoes), CISG-Online 184 (Pace) – Arts 14–24 introductory remarks, para. 9; Art. 23, para. 5; Art. 26, para. 3; Art. 39, para. 29 16 September 1991 (shoes), CISG-Online 26 (Pace) – Art. 78, para. 25 Landgericht Freiburg 22 August 2002 (car), CISG-Online 711 (Pace) – Art. 41, paras 5, 26, 41; Art. 49, para. 77; Art. 79, paras 49, 74; Art. 81, para. 21; Art. 82, para. 19; Art. 84, para. 15 Landgericht Fulda 29 September 2015 (car), CISG-Online 2716 – Arts 14–24, para. 5; Art. 14, paras 38, 39, 40 Landgericht Gießen 18 March 2003, CISG-Online 951 – Art. 50, paras 11, 30, 48 17 December 2002, CISG-Online 766 (Pace) – Art. 50, para. 56; Art. 81, para. 26 5 July 1994 (women’s clothes), CISG-Online 111 (Pace) – Art. 6, para. 7 Landgericht Hagen 15 October 1997 (socks), CISG-Online 311 (Pace) – Art. 4, para. 39, Landgericht Halle 27 March 1998 (car), CISG-Online 521 – Art. 49, para. 31 Landgericht Hamburg 6 September 2004 (containers), CISG-Online 1085 (Pace) – Art. 35, paras 56, 188 26 November 2003 (phtalic anhydride), CISG-Online 875 (Pace) – Art. 75, para. 8 10 September 2003, CISG-Online 874 – Art. 58, para. 12 21 December 2001 (stones), CISG-Online 1092 (Pace) – Art. 21, para. 10; Art. 74, para. 47

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Table of Cases 19 June 1997 (hazelnuts), CISG-Online 283 – Art. 4, para. 33; Art. 19, para. 17 5 November 1993 (cobalt sulphate), CISG-Online 215 (Pace) – Art. 62, para. 6 26 September 1990 (fashion textiles), CISG-Online 21 (Pace) – Art. 1, paras 26, 45; Art. 4, paras 17, 18; Art. 8, paras 2, 8; Art. 10, para. 40; Art. 29, para. 8; Art. 53, para. 10; Art. 58, para. 2, Art. 74, para. 10; Art. 78, para. 11 Landgericht Heidelberg 2 November 2005 (natural stones), CISG-Online 1416 (Pace) – Art. 4, para. 46; Art. 78, para. 25 3 July 1992 (computer components), CISG-Online 38 (Pace) – Art. 1, para. 40; Art. 25, para. 45 27 January 1981 [ULIS precedent] (Pace) – Art. 54, para. 13; Art. 74, para. 70 Landgericht Heilbronn 15 September 1997 (film coating machine), CISG-Online 562 – Art. 1, para. 3; Art. 4, para. 25, 30 Landgericht Karlsruhe 23 October 1981, 7 O 530/80 – Art. 9, para. 30 Landgericht Kassel 15 February 1996 (marble steps), CISG-Online 191 (Pace) – Art. 1, para. 52; Art. 6, para. 18; Art. 8, para. 35; Art. 27, paras 32, 33; Art. 53, para. 16 21 September 1995, CISG-Online 192 (Pace) – Art. 71, paras 1, 7, 11, 20; Art. 54, para. 3; Art. 72, para. 9 22 June 1995 (clothes), CISG-Online 370 (Pace) – Art. 1, para. 45; Art. 11, para. 17; Art. 26, para. 3; Art. 39; Art. 78, para. 23 14 July 1994, CISG-Online 194 – Art. 18, para. 2 Landgericht Konstanz 3 June 1983 (construction materials) [ULIS precedent], (Pace) – Art. 74, para. 70 Landgericht Ko¨ln 29 May 2012 (printed works), CISG-Online 2476 – Art. 74, para. 90 29 March 2011 (glass fibre cables), CISG-Online 2534 – Art. 31, para. 65 5 December 2006 (plastic faceplates for mobile telephones), CISG-Online 1440 (Pace) – Art. 39, para. 41; Art. 52, para. 33; Art. 85, para. 10; Art. 88, para. 32 30 November 1999 (stones for facades), CISG-Online 1313 (Pace) – Art. 39, paras 36, 40 Landgericht Krefeld 20 September 2006 (charcoal), CISG-Online 1459 (Pace) – Art. 57, para. 4; Art. 58, para. 12 28 April 1993 (shoes), CISG-Online 101 (Pace) – Art. 75, para. 24 24 November 1992, CISG-Online 62 (Pace) – Art. 81, paras 12, 24 24 September 1992, CISG-Online 62 – Art. 18, para. 8 Landgericht Landshut 12 June 2008 (metallic slabs), CISG-Online 1703 (Pace) – Art. 4, paras 18, 24, 39; Art. 7, para. 55; Art. 8, para. 25 5 April 1995 (clothes), CISG-Online 193 (Pace) – Art. 6, para. 16; Art. 25, para. 38; Art. 35, paras 19, 24, 190; Art. 38, paras 2, 16, 49, 55, 77, 98; Art. 40, paras 9, 15, 23, 31; Art. 74, para. 45; Art. 78, para. 10; Art. 84, para. 12 Landgericht Lu¨beck 30 December 2010 (chairs), CISG-Online 2292 – Art. 38, para. 82 Landgericht Mainz 26 November 1998 (cylinder for the producion of tissue-paper), CISG-Online 563 (Pace) – Art. 3, paras 8, 19, 20 Landgericht Marburg 12 December 1995 (agricultural machine), CISG-Online 148 (Pace) – Art. 39, para. 40 22 April 1982, 4 O 22/82 – Art. 9, para. 30 Landesgericht Memmingen 1 December 1993 (granite stones), CISG-Online 73 (Pace) – Art. 11, para. 18 Landgericht Mo¨nchengladbach 15 July 2003 (high pressure filters), CISG-Online 813 (Pace) – Art. 4, para. 39; Art. 7, para. 55; Art. 62, para. 5; Art. 84, para. 8 Landgericht Mu¨nchen 27 February 2002 (globes), CISG-Online 654 (Pace) – Art. 35, para. 101, 118, 134; Art. 36, para. 18; Art 38, para. 61 20 February 2002 (shoes), CISG-Online 712 (Pace) – Art. 39, para. 78; Art. 74, para. 17

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Table of Cases 6 April 2000 (furniture), CISG-Online 665 (Pace) – Art. 71, paras 20, 53; Art. 74, para. 74; Art. 75, paras 33, 34 6 May 1997 (cars), CISG-Online 341 (Pace) – Art. 1, para. 53; Art. 4, para. 39, 29 May 1995 (computer hardware), CISG-Online 235 (Pace) Art. 1, para. 40; Art. 4, para. 24; Art. 6 para. 16 20 March 1995 (bacon), CISG-Online 164 (Pace) – Art. 4, para. 39; Art. 84, para. 8 8 February 1995 (software), CISG-Online 203 (Pace) – Art. 1, para. 40; Art. 3, paras 24, 25; Art. 14, para. 17; Art. 39, para. 31 3 July 1989 (fashion textiles), CISG-Online 4 (Pace) – Art. 39, para. 34 Landgericht Neubrandenburg 3 August 2005 (pitted sour cherries), CISG-Online 1190 (Pace) – Art. 4, para. 24; Art. 7, para. 28; Art. 14, paras 28, 29, 36, 38, 39, 40; Art. 55, para. 7; Art. 77, para. 31 Landgericht Nu¨rnberg-Fu¨rth 27 February 2003 (car accessories), CISG-Online 818 – Art. 57, para. 8 Landgericht Oldenburg 9 March 1996 (clothes), CISG-Online188 – Art. 49, para. 30 9 November 1994 (lorry platforms and belts), CISG-Online 114 (Pace) – Art. 39, para. 21; Art. 74, para. 15 27 April 1994 (timber), CISG-Online 359 – Art. 31, para. 34 Landgericht Paderborn 25 June 1996 (granulated plastic – PVC), CISG-Online 262 (Pace) – Art. 35, paras 12, 24 Landgericht Potsdam 7 April 2009 (pharmaceutical machines, diagnostical tests), CISG-Online 1979 (Pace) – Art. 74, para. 90 Landgericht Regensburg 24 September 1998 (cloth), CISG-Online 1307 (Pace) – Art. 3, para. 5; Art. 35, para. 104 Landgericht Saarbru¨cken 1 June 2004 (pallets), CISG-Online 1228 (Pace) – Art. 35, para. 25; Art. 38, para. 148; Art. 39, para. 71 2 July 2002 (tiles), CISG-Online 713 (Pace) – Art. 4, paras 35, 39; Art. 25, para. 37; Art. 39, para. 35; Art. 74, para. 15 26 March 1996 (fixture for ice-cream parlor), CISG-Online 391 (Pace) – Art. 7, para. 28; Art. 38, para. 143; Art. 39, paras 33, 34 23 March 1992 (doors), CISG-Online 60 (Pace) – Art. 38, paras 50, 65 Landgericht Stade 19 February 2015 (truck/vehicle), CISG-Online 2669 – Arts14–24 introductory remarks, para. 5; Art. 14, para. 38 Landgericht Stendal 12 October 2000 (granite rock), CISG-Online 592 (Pace) – Art. 6, para. 8; Art. 50, para. 11; Art. 58, para. 4; Art. 71, paras 40, 41, 43, 57; Art. 74, para. 38; Art. 78, para. 16 Landgericht Stuttgart 29 October 2009 (artificial lawn), CISG-Online 2017 (Pace) – Art. 4, para. 39; Art. 7, para. 55; Art. 50, para. 36 15 October 2009 (printing machine), CISG-Online 2019 (Pace) – Art. 4, para. 24; Art. 8, para. 25; Art. 39, paras 33, 43 4 June 2002 (porphyr stones), CISG-Online 909 (Pace) – Art. 35, paras 29, 30 13 August 1991 (textiles), CISG-Online 33 (Pace) – Art. 27, para. 26 31 August 1989 (shoes), CISG-Online 11 (Pace) – Art. 11, para. 17; Art. 38, paras 35, 42, 53, 65, 66; Art. 39, paras 29, 127; Art. 78, para. 23 Landgericht Trier 8 January 2004 (synthetic window parts), CISG-Online 910 (Pace) – Art. 4, paras 24, 32; Art. 14, paras 38, 40 12 October 1995 (wine), CISG-Online 160 (Pace) – Art. 35, para. 93; Art. 40, para. 10; Art. 74, para. 42 Landgericht Tu¨bingen 18 June 2003 (computers and accessories), CISG-Online 784 (Pace) – Art. 35, para. 198; Art. 38, para. 89; Art. 39, para. 79 Landgericht Zwickau 19 March 1999 (chemical products), CISG-Online 519 – Art. 1, para. 3; Art 14–24 introductory remarks, para. 4; Art. 14, para. 2; Art. 77, para. 1; Art. 78, para. 10

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Table of Cases Amtsgericht Alsfeld 12 May 1995 (flagstone tiles), CISG-Online 170 (Pace) – Art. 1, para. 45; Art. 4, para. 18; Art. 7, para. 55; Art. 79, para. 60 Amtsgericht Augsburg 29 January 1996 (shoes), CISG-Online 172 (Pace) – Art. 4, para. 42; Art. 74, para. 87 Amtsgericht Berlin-Tiergarten 13 March 1997, CISG-Online 412 (Pace) – Art. 4, para. 42; Art. 74, paras 87, 90 Amtsgericht Charlottenburg 4 May 1994 (shoes), CISG-Online 386 (Pace) – Art. 80, para. 2 Amtsgericht Duisburg 13 April 2000 (pizza boxes), CISG-Online 659 (Pace) – Art. 1, para. 43; Art. 4, para. 39, 40; Art. 9, paras 11, 33; Art. 36, para. 6; Art. 67, para. 8 Amtsgericht Frankfurt 31 January 1991, CISG-Online 34 (Pace) – Art. 9, para. 33; Art. 71, paras 38, 41, 45, 47 Amtsgericht Geldern 17 August 2011 (corn), CISG-Online 2302 – Art. 58, para. 31 Amtsgericht Kehl 6 October 1995 (knitwear), CISG-Online 162 (Pace) – Art. 11, para. 17; Art. 19, para. 15; Art. 24, para. 8; Art. 27, para. 20 10 June 1995 – Art. 11, para. 17 Amtsgericht Mu¨nchen 23 June 1995 (tetracycline), CISG-Online 368 (Pace) – Art. 48, para. 9; Art. 74, para. 43; Art. 77, para. 35; Art. 80, para. 4 Amtsgericht Nordhorn 14 June 1994 (shoes), CISG-Online 259 – Art. 4, para. 25; Art. 14, paras 40, 42; Art. 50, para. 62 Amtsgericht Oldenburg in Holstein 24 April 1990 (fashion textiles), CISG-Online 20 (Pace) – Art. 49, para. 50; Art. 51, para. 39; Art. 78, para. 12 Amtsgericht Riedlingen 21 October 1994 (ham), CISG-Online 358 (Pace) – Art. 38, paras 86, 89, 91 Amtsgericht Stendal 12 October 2000 (granite rock), CISG-Online 592 (Pace) – Art. 58, para. 4 Amtsgericht Viehtach 11 April 2002 (pallets), CISG-Online 755 – Art. 35, paras 29, 30, 32; Art. 74, para. 90; Art. 78, para. 16 Greece Court of Appeals Athens 2006, 4861/2006 (automobile catalyst) (Pace) – Art. 4, para. 28; Art. 74, paras 2, 7, 63 Court of Appeals Lamia 2006 (sunflower seeds), (Pace) – Art. 75, para. 6; Art. 77, para. 13 Multi-Member Court of First Instance of Athens 1 January 2009 (bullet-proof vest), 4505/2009 CISG-Online 2228 (Pace) – Art. 1, paras 3, 42; Art. 4, paras 10, 30, 39; Art. 6, para. 18; Art. 74, paras 11, 28, 33, 38 Single-Member Court of First Instance of Thessalonika 2008 (clothes), 43945/2007, (Pace) – Art. 7, para. 55 Hungary Legfelso´bb Biro´sag 25 September 1992 (airplane engines), United Technologies International Inc. Pratt and Whitney Commercial Engine Business vs. Magyar Le´gi Ko¨zlekede´si Va´llalat (Ma´lev Hungarian Airlines), CISG-Online 63 (Pace) – Art. 2, para. 38; Art. 14, para. 28; Art. 19, para. 13; Art. 55, paras 3, 8 Fova´rosi Biro´sa´g Budapest 1 July 1997 (used timber machinery), CISG-Online 306 (Pace) – Art. 4, para. 21; Art. 54, para. 1 21 May 1996, CISG-Online 252 (Pace) – Art. 1, para. 49; Art. 7, para. 55; Art. 12, para. 10 24 March 1992, CISG-Online 61 (Pace) – Art. 9, para. 2; Art. 12, para. 10; Arts 14–24 introductory remarks, para. 2; Art. 92, para. 5 19 March 1996 (instruments), CISG-Online 289 (Pace) – Art. 1, para. 33, Art. 4, para. 11 24 March 1992 – Art. 9, para. 2; Art. 12, para. 10; Art. 96, para. 6

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Table of Cases Israel Supreme Court 17 March 2009 (tiles), Pamesa Ceramica v Yisrael Mendelson Ltd, CISG-Online 1980 (Pace) – Art. 4, paras 5, 10; Art. 39; Art. 40 22 August 1993, Eximin v Textile and Footwear (Jeans boots), CISG-Online 1082 (Pace) – Art. 42, paras 2, 39, 42, 43 Italy Corte Suprema di Cassazione 19 June 2000 (sale and installation of plant for processing of metal), CISG-Online 1317 (Pace) – Art. 6, para. 8 14 December 1999 (manufactured goods), CISG-Online 1314 (Pace) – Art. 1, para. 33 7 August 1998 (women’s stockings), CISG-Online 538 (Pace) – Art. 1, para. 47; Art. 9, para. 4; Art. 57, para. 9 9 June 1995, Alfred Dunhill Ltd. V Tivoli Group S. r. l., CISG-Online 314 (Pace) – Art. 3, para. 11 Corte d’Appello di Milano 23 January 2001 – Art. 92, para. 5 1 December 1998 (printer device), CISG-Online 430 (Pace) – Art. 1, para. 47 20 March 1998 (knitwear), Italdecor s. a. s. v Yiu’s Industries (H. K.) Limited, CISG-Online 348 (Pace) – Art. 1, para. 51; Art. 25, para. 34; Art. 49, para. 30 Tribunal di Bolzano 29 January 2009 (industrial machines), CISG-Online 2344 – Art. 74, para. 15 Tribunale di Busto Arsizio 13 December 2001 (machinery for recycling of plastic bags), CISG-Online 1323 (Pace) – Art. 7, para. 28; Art. 35, para. 18 Tribunale Civile di Cuneo 31 January 1996 (sports clothes), CISG-Online 268 (Pace) – Art. 38, para. 89 Tribunale de Foggia 21 June 2013 (wine), Samuel Smith, The Old Brewery v. Vini San Barbato, snc, CISG-Online 2674 (Pace) – Art. 25, para. 37 Tribunale di Forli 12 November 2012 (industrial equipment), CISG-Online 2594 (Pace) – Art. 33, para. 27 16 February 2009 (cisterns and related accessories), CISG-Online 1780 (Pace) – Art. 1, paras 25, 37; Art. 3, para. 18; Art. 7, para. 42 11 December 2008 (shoes), CISG-Online 1729 (Pace; CLOUT 867) – Art. 1, para. 3; Art. 7, para. 42; Art. 84, para. 12 Tribunale Civile di Monza 14 January 1993 (ferrochrome), CISG-Online 540 (Pace) – Art. 6, para. 18; Art. 79, para. 78 Tribunale di Padova 11 January 2005 (rabbits), CISG-Online 967 (Pace) – Art. 6, para. 27; Art. 7, para. 14 31 March 2004 (pizza boxes), Scatolificio La Perla S. n. c. di Aldrigo Stefano e Giuliano v Martin Frischdienst GmbH, CISG-Online 823 (Pace) – Art. 16, para. 22; Art. 29, para. 9; Art. 78, paras 16, 23 25 February 2004 (agricultural products), CISG-Online 819 (Pace) – Art. 4, paras 18, 26, 30, 39, 46; Art. 7, paras 12, 41, 55; Art. 16, para. 22; Art. 74, paras 2, 38; Art. 77, para. 1 Tribunale di Pavia 29 December 1999 (high fashion textiles), Tessile v Ixela, CISG-Online 678 – Art. 1, paras 3, 37; Art. 4, para. 35; Art. 7, paras 18, 41, 42; Art. 74, paras 15, 70 Tribunale di Reggio Emilia 12 April 2011 (ceramic materials), CISG-Online 2229 (Pace) – Art. 39, para. 81 Tribunale di Rimini 26 November 2002 (porcelain tableware), CISG-Online 737 (Pace) – Art. 1, paras 25, 37, 42, 43; Art. 4, para. 35; Art. 7, paras 18, 27, 41; Art. 16, para. 22; Art. 38, paras 94, 99, 140; Art. 39, paras 55, 60, 127; Art. 74, paras 15, 38 Tribunale di Rovereto 21 November 2007 (mirrors), Takap B. V. v Europlay S. r. l., Case 914/06, CISG-Online 1590 (Pace) – Art. 4, para. 24; Art. 8, paras 2, 10, 15, 25; Art. 77, para. 31 24 August 2006, CISG-Online 1374 – Art. 8, para. 25

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Table of Cases Tribunale di Vigevano 12 July 2000 (sheets of vulcanized rubber used in manufacture of shoe soles), Rheinland Versicherungen v Atlarex, CISG-Online 493 (Pace) – Art. 1, paras 3, 38, 42, 45, 46, 47, 51; Art. 4, paras 18, 26, 30, 35, 39, 46; Art. 6, paras 9, 16; Art. 7, paras 18, 41; Art. 35, para. 182; Art. 38, paras 63, 148, 170; Art. 39, para. 29; Art. 74, paras 15, 38; Art. 75, para. 6; Art. 76, para. 6; Art. 79, para. 99 Pretura circondariale di Parma/Fidenza 24 November 1989 (knapsacks, bags, wallets), CISG-Online 316 (Pace) – Art. 25, para. 49; Art. 49, para. 31; Art. 84, para. 13 Mexico First Civil Court of First Instance, Lerma de Villada 3 October 2006 (foil trading cards), CISG-Online 1357 (Pace) – Art. 39, para. 13 Juzgado Cuarto de lo Civil de Tijuana, Baja California 3 September 2010 (metals), (www.cisgspanish.com) – Art. 11, para. 17 Sixth Civil Court of First Instance, City of Tijuana, State of Baja California 14 July 2000 (wood), CISG-Online 571 (Pace) – Art. 1, para. 47; Art. 58, para. 37 Primer Tribunal Colegiado en Materia Civil del Primer Circuito 10 March 2005 (chemical product), CISG-Online 1004 (Pace) – Art. 8, para. 17; Art. 13, para. 6 Comisio´n para. la Proteccio´n del Comercio Exterior de Me´xico 29 April 1996 (canned fruit), Conservas la Costena v Lanis, CISG-Online 350 (Pace) – Art. 12, para. 9; Art. 18, para. 8; Art. 31, para. 56; Art. 35, paras 34, 36, 137, 145; Art. 36, para. 9 Netherlands Hoge Raad 4 February 2005 (panels for construction of green house), CISG-Online 1003 (Pace) – Art. 39, para. 51 28 January 2005 (tomato plants), B. V. B. A. Vergo Kwekerijen v Defendant, CISG-Online 1002 (Pace) – Art. 4, para. 24; Art. 14, para. 38 7 November 1997 (vodka), CISG-Online 551 (Pace) – Art. 1, para. 51; Art. 12, para. 10; Art. 96, paras 6, 7 26 September 1997 (fabrics), CISG-Online 286 (Pace) – Art. 1, para. 47 Gerechtshof Amsterdam 16 July 1992 (shower cabinets), CISG-Online 48 (Pace) – Art. 1, para. 33; Art. 4, para. 11 5 January 1978 (gold and jewellery), [ULIS precedent] (Pace) – Art. 7, para. 26 Gerechtshof Arnhem-Leeuwarden 15 September 2015 (horse), CISG-Online 2628 – Art. 2, para. 9 18 July 2006 (potting soil), CISG-Online 1266 (Pace) – Art. 39, paras 63, 88, 124 18 April 2000, CISG-Online 1897 (Pace) – Art. 4, para. 18 27 April 1999 (movable room-units), G. Mainzer Raumzellen v Van Keulen Mobielbouw Nijverdal BV, CISG-Online 741 (Pace) – Art. 1, para. 33; Art. 35, paras 91, 92, 93, 120, 126 9 February 1999 (painting), Kunsthaus Math. Lempertz v Wilhemina van der Geld, CISG-Online 1338 (Unilex) – Art. 36, para. 8; Art. 66, para. 37 17 June 1997 (gas compressors), CISG-Online 547 (Pace) – Art. 38, para. 29 5 June 1996 (vodka), CISG-Online 325 (Pace) – Art. 12, para. 10 21 May 1996 (knitwear), Maglificio Esse v Wehkamp, CISG-Online 1290 (Pace) – Art. 4, para. 35; Art. 35, paras 49, 162; Art. 42, para. 54; Art. 74, para. 15 22 August 1995 (live lambs), Diepeveen-Dirkson v Nieuwenhoven Veehandel, CISG-Online 317 (Pace) – Art. 4, para. 26; Art. 7, para. 55; Art. 74, para. 38; Art. 77, para. 23 Gerechtshof Den Haag (formerly Gerechtshof ‘s Gravenhage) 22 April 2014 (nuts, dried fruits and seeds), CISG-Online 2515 (Pace) – Art. 8, para. 17 23 April 2003 (wheat flour), Rynpoort Trading v Meneba Meel, CISG-Online 903 (Pace) – Art. 7, para. 28; Art. 13, para. 6; Art. 25, para. 39; Art. 35, para. 95; Art. 82, para. 19 Gerechtshof ‘s Hertogenbosch 29 September 2015 (conveyor belts), CISG-Online 2655 – Art. 14, para. 38 26 July 2011 (chicken), CISG-Online 2384 – Art. 30, para. 8 13 November 2007, Adex International Ltd v. First International Computer Europe B.V., (unpublished) – Art. 6, para. 18 29 May 2007 (machine), CISG-Online 1550 (Pace) – Art. 8, para. 17; Art. 9, para. 7 2 January 2007, CISG-Online 1434 – Art. 53, para. 15 16 October 2002 (plants), CISG-Online 816 (Pace) – Art. 7, paras 43, 61; Art. 14, para. 38 15 December 1997 (furs), CISG-Online 552 (Pace) – Art. 38, para. 93

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Table of Cases 2 October 1997 (leather goods), Van Dongen Waalwijk Leder v Conceria Adige, CISG-Online 550 (Pace) – Art. 4, para. 39 24 April 1996 (yarn), CISG-Online 321 (Pace) – Art. 9, para. 7 26 February 1992 (shoes), CISG-Online 65 (Pace) – Art. 4, para. 46 Hof van Beroep Antwerpen 22 January 2007 (road sweeping vehicles), CISG-Online 1586 (Pace) – Art. 6, para. 24 Arrondissementsrechtbank Amsterdam 5 October 1994 (textiles), Tuzzi Trend Tex Fashion v Keijer-Somers, CISG-Online 446 (Pace) – Art. 1, para. 53; Art. 4, para. 46; Art. 7, para. 27; Art. 24, para. 11 Arrondissementsrechtbank Den Haag (formerly Arrondissementsrechtbank s’Gravenhage) 2 July 1997 (cushions), CISG-Online 1331 (Pace) – Art. 1, para. 33 7 June 1995 (apple trees), CISG-Online 369 (Pace) – Art. 1, para. 52; Art. 6, para. 18 Arrondissementsrechtbank Arnhem 30 December 1993 (live lambs), CISG-Online 104 (Pace) – Art. 1, para. 37 25 February 1993 (clothes), P. R. Van den Heuvel v Santini Maglificio Sportivo de Santini, CISGOnline 98 (Pace) – Art. 4, para. 39; Art. 7, para. 55 Arrondissementsrechtbank Gelderland 30 July 2014 (truck), CISG-Online 2541 (Pace) – Art. 19, para. 10 17 July 1997 (painting), Kunsthaus Math. Lempertz v Wilhemina van der Geld, CISG-Online 548 (Pace) – Art. 36, para. 8; Art. 66, para. 37; Art. 69, para. 2 Arrondissementsrechtbank Limburg 16 April 2014 (glass), CISG-Online 2542 – Art. 16, para. 17 9 July 2008 (potatoes), CISG-Online 1748 (Pace) – Art. 79, para. 51 19 December 1991 (cheese), CISG-Online 29 (Pace) – Art. 38, paras 50, 91; Art. 40, para. 28 Arrondissementsrechtbank Middelburg 25 January 1995 (beef), CISG-Online 374 – Art. 4, para. 39 Arrondissementsrechtbank Midden-Nederland 20 January 2016 (meat), CISG-Online 2685 – Arts 14–24 introductory remarks, para. 5, Art. 14, para. 39 18 July 2007 (gable plates), CISG-Online 1551 (Pace) – Art. 71, para. 38 Arrondissementsrechtbank Oost-Brabant 23 January 2013 (conveyor belts), CISG-Online 2393 (Pace) – Art. 18, para. 10 1 November 2012 (articulated loader), CISG-Online 2394 (Pace) – Art. 35, para. 96; Art. 38, paras 46, 68 6 May 1994 (yarn), CISG-Online 453 (Pace) – Art. 57, para. 9 2 October 1998 (powdered milk), CISG-Online 1309 (Pace) – Art. 79, para. 50 Arrondissementsrechtbank Overijssel 9 August 1995, Wolfgang Richter Montagebau GmbH v 1. V. o. f. Handelsonderneming Euro-Agra; 2. Te Wierik; 3. Bosma, CISG-Online 365 (Pace) – Art. 78, para. 23 Arrondissementsrechtbank Roermond 6 May 1993 (electric kettles), Gruppo IMAR v Protech Horst, CISG-Online 454 (Pace) – Art. 4, para. 39; Art. 74, paras 70, 71 Arrondissementsrechtbank Zeeland-West-Brabant 16 January 2009 (watermelon), CISG-Online 1769 (Pace) – Art. 38, para. 118; Art. 39, paras 29, 77, 124, 127 27 February 2008 (Pace) – Art. 9, para. 7 Arrondissementsrechtbank Zutphen 29 May 1997 (petunia cuttings), Aartsen v Suykens, CISG-Online 546 (Pace) – Art. 4, para. 25; Art. 9, para. 29 Arrondissementsrechtbank Zwolle 5 March 1997 (fish), CISG-Online 545 (Pace) – Art. 7, para. 29; Art. 38, paras 25, 72, 91, 93 1 March 1995 (textiles), CISG-Online 372 (Unilex) – Art. 4, para. 35; Art. 42, para. 54; Art. 74, para. 15 Rechtbank Arnhem 17 January 2007, CISG-Online 1455/1476 (Pace) – Art. 11, paras 2, 12 1 March 2006 (steel products), CISG-Online 1475 (Pace) – Art. 74, para. 46 17 March 2004 (soil for plants), CISG-Online 946 (Pace) – Art. 11, para. 2 8 April 1999 (blades for windmill drives), CISG-Online 1339 – Art. 4, para. 46

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Table of Cases Rechtbank Breda 16 January 2009 (watermelons), CISG-Online 1789 (Pace) – Art. 74, para. 90 27 February 2008 (sulphuric acid), CISG-Online 2252 (Pace) – Art. 9, para. 7 Rechtbank Midden-Nederland 25 March 2015 (software programme), CISG-Online 2591 – Art. 4 para. 11; Art. 7, para. 12 Rechtbank Gelderland 6 November 2013 (hardware), CISG-Online 2590 – Art. 4, para. 24 Rechtbank Rotterdam 2 December 2015 (fruits and vegetables), CISG-Online 2683 – Arts 14–24 introductory remarks, para. 5; Art. 14, paras 38, 39 1 October 2014 (chemicals), CISG-Online 2558 (Pace) – Art. 67, para. 34 2 June 2010 (adapters for water treatment plant), XL Insurance Company v. Italian Industrial Agency, CISG-Online 2340 (Pace) – Art. 39, para. 119 23 December 2009 (armatures), CISG-Online 2071 – Art. 31, para. 65 25 February 2009 (fruits), Fresh-Life International B.V. v. Cobana Fruchtring GmbH & Co., KG, CISGonline 1812 (Pace) – Art. 7, para. 28 5 November 2008 (crabs), CISG-Online 1817 – Art. 6, para. 18 15 October 2008 (fire resistant paint), CISG-Online 1899 (Pace) – Art. 74, para. 90; Art. 78, para. 20 1 November 2001, Nederlands Internationaal Privaatrecht, 2002, No. 114 – Art. 1, para. 25 12 July 2001 (lemons, mandarins, oranges), CISG-Online 968 (Pace) – Art. 12, paras 7, 10; Art. 18, para. 10; Art. 79, para. 68; Art. 96, paras 5, 6 14 October 1999 (sheepskin), CISG-Online 1312 (Pace) – Art. 4, para. 24; Art. 23, para. 1 Rechtbank Utrecht 21 January 2009 (sesame seeds), CISG-Online 1814 (Pace) – Art. 4, para. 24 New Zealand Supreme Court Otago Station Estates Ltd v Parker [2005] 2 NZLR 734 (SCNZ) – Art. 54, para. 20 High Court of New Zealand 30 July 2010 (trucks), RJ & AM Smallmon v Transport Sales Limited and Grant Alan Miller, CISGOnline 2113 (Pace) – Art. 7, paras 41, 48; Art. 35, paras 85, 89, 96, 125 Auckland High Court 31 March 2003, International Housewares Ltd. V SEB S. A., CISG-Online 833 (Pace) – Art. 35, para. 75 Court of Appeal New Zealand 22 July 2011 (trucks), RJ & AM Smallmon v. Transport Sales Limited and Grant Alan Miller, CISGOnline 2215 (Pace) – Art. 7, paras 12, 19, 41; Art. 35, paras 26, 88, 96, 125; Art. 54, para. 6 3 October 2001 (shoes), Bobux Marketing Ltd. V. Raynor Marketing Ltd., CISG-Online 2451 (Pace) – Art. 7, para. 42 2 July 1998 (commercial property lease), Tri-Star Customs and Forwarding Ltd. V. Denning, CISGOnline 2453 (Pace) – Art. 7, para. 42 Poland Supreme Court 25 June 2015 (hyperbaric chamber), CISG-Online 2782 – Art. 4, para. 28 11 May 2007 (leather to manufacture shoes), CISG-Online 1790 (Pace) – Art. 7, paras 28, 53; Art. 80, para. 3 27 January 2006 (metallurgical sand), CISG-Online 1399 (Pace) – Art. 75, para. 7 10 November 2005 (furniture), CISG-Online 2073 – Art. 4, para. 11 19 December 2003 (door components), “O. O.” AG in M. v Leszek W. & Zbigniew W., CISG-Online 1222 (Pace) – Art. 4, para. 46 Katowice Court of Appeals 22 January 2009 (aluminium profiles), CISG-Online 2787 – Art. 4, para. 39 Warsaw Court of Appeals 15 May 2015 (dietary products), CISG-Online 2783 – Art. 7, para. 55 20 November 2008 (truck), CISG-Online 2539 – Art. 7, para. 56 Poznan District Court 16 October 2015 (flowers), CISG-Online 2780 – Art. 4, para. 30

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Table of Cases Republic of Korea High Court Seoul 23 July 2009 (duck feathers), CISG-Online 2507 (Pace) – Art. 4, para. 39 Central District Court Seoul 21 September 2012 (window shade), CISG-Online 2774 – Art. 4, para. 21 Serbia High Commercial Court 22 April 2008, CISG-Online 1990 (Pace) – Art. 4, para. 11 Slovakia Supreme Court 19 June 2008 (health care products), CISG-Online 1875 (Pace) – Art. 4, para. 30 30 April 2008 (health care products), CISG-Online 1873 (Pace) – Art. 4, para. 30; Art. 8, para. 23 3 April 2008 (raw materials for women’s coats), CISG-Online 1763 – Art. 31, para. 56 Regional Court Bratislava 11 October 2005 (fur), CISG-Online 1858 (Pace) – Art. 4, para. 30 Regional Court Kosice 22 May 2007 (plastic bottles), CISG-Online 1898 (Pace) – Art. 4, para. 46 Regional Court Zilina 18 June 2007 (baked and confectionary goods case) – CISG-Online 1951(Pace) – Art. 9, para. 10 District Court Nitra 29 May 2008, CISG-Online 1766 (Pace) – Art 53, para. 2 23 June 2006 (raw material for women’s coats), CISG-Online 1764 (Pace) – Art. 54, para. 1 District Court Trnava 17 September 2008 (chicken products), CISG-Online 1991 (Pace) – Art. 4, para. 46 Slovenia Supreme Court 13 September 2011 (water and oil pumps), CISG-Online 2329 – Art. 26, para. 6 8 April 1998 (caprolactum), CISG-Online 1957 – Art. 4, para. 23 Higher Court Ljubljana 14 December 2005 (door and door jamb), CISG-Online 1959 – Art. 49, para. 23 Higher Court Maribor 21 October 2010 (printing machines), CISG-Online 2331 (Pace) – Art. 75, para. 15 Spain Tribunal Supremo 9 July 2014 (red pepper powder), CISG-Online 2578 (Pace) – Art. 31, para. 4 1 July 2013 (cereals), CISG-Online 2495 (Pace) – Art. 9, para. 23 17 March 2011 (coffee), CISG-Online 2521 (Pace) – Art. 8, para. 32; Art. 57, para. 25 17 January 2008 (300 second-hand automobiles), CISG-Online 1640 (Pace) – Art. 8, para. 29; Art. 35, paras 2, 56; Art. 39, paras 56, 65, 75; Art. 53, para. 2 21 December 2007 – Art. 9, para. 35 11 July 2007 – Art. 9, para. 35 16 May 2007 (water apparatus), CISG-Online 1638 (Pace) – Art. 7, para. 19 28 January 2000 (jute), Internationale Jute Maatschappij v Marı´n Palomares, CISG-Online 503 (Pace) – Art. 1, para. 47; Art. 9, para. 10; Art. 77, paras 17, 19, 27 17 February 1998, CISG-Online 1333 (Pace) – Art. 4, para. 33 Audiencia Provincial de Alicante 16 November 2000 (shoes), CISG-Online 1318 (Pace) – Art. 6, paras 16, 17 Audiencia Provincial de Asturias 29 September 2010 (anchovies), CISG-Online 2313 (Pace) – Art. 9, para. 23; Art. 39, para. 77 Audiencia Provincial de Barcelona 24 March 2009 (cuttlefish), People Fisheries (Pvt) Ltd v Pescados Videla SA, CISG-Online 2042 (Pace) – Art. 36, para. 24 28 April 2004 (metal covers for sewage drains), CISG-Online 931 (Pace) – Art. 8, para. 23 2 February 2004 (soy oil), CISG-Online 950 (Pace) – Art. 75, para. 7 27 November 2003 (ski equipment rental), CISG-Online 1102 (Pace) – Art. 55, para. 4 11 March 2002, CISG-Online 1325 (Pace) – Art. 86, para. 8

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Table of Cases 12 February 2002, CISG-Online 1324 (Pace) – Art. 31, para. 52 3 November 1997, CISG-Online 442 (Pace) – Art. 73, paras 19, 29 20 June 1997 (dye for clothes), CISG-Online 338 (Pace) – Art. 4, para. 35; Art. 35, para. 169; Art. 74, paras 15, 32 Audiencia Provincial de Ca´ceres 14 July 2010 (rolls of rubber), CISG-Online 2131 – Art. 8, para. 3 Audiencia Provincial de Cantabria 9 July 2013 (steel cable), CISG-Online 2487 (Pace) – Art. 53, para. 15; Art. 54, paras 1, 6; Art. 80, para. 6 Audiencia Provincial de Cuenca 31 January 2005 (calves), CISG-Online 1241 (Pace) – Art. 78, para. 10 Audiencia Provincial de Girona 21 January 2016 (live molluscs/mussels), Alexandridis G. & CO. OESC v. Treatment Servimant, SL, CISG-Online 2729 – Art. 7, paras 23, 58; Art. 74, para. 2 Audiencia Provincial de Granada 2 March 2000 (food), CISG-Online 756 (Pace) – Art. 35, paras 52, 88, 89 Audiencia Provincial de Madrid 17 February 2015 (garments), CISG-Online 2620 (Pace) – Art. 7, para. 61 18 October 2007 (textiles), CISG-Online 2082 (Pace) – Art. 7, para. 55 20 February 2007 (olive stones), CISG-Online 1637 (Pace) – Art. 8, para. 3 Audiencia Provincial de Murcia 25 May 2012 (red pepper powder), CISG-Online 2463 – Art. 25, para. 39; Art. 35, para. 98 Audiencia Provincial de Palencia 9 September 2014 (coffee), CISG-Online 2577 (Pace) – Art. 11, para. 2 Audiencia Provincial de las Palmas 16 February 2012 (margarine), CISG-Online 2516 (Pace) – Art. 39, para. 77 Audiencia Provincial de Navarra 30 July 2010 (billets – steel rods), CISG-Online 2315 (Pace) – Art. 39, para. 79 27 December 2007 (machine for repair of bricks), CISG-Online 1798 (Pace) – Art. 7, paras 27, 28; Art. 8, para. 22; Art. 11, para. 12 22 September 2003 (motors for production of electricity), (Pace) – Art. 7, para. 28; Art. 11, para. 12 27 March 2000 (electrical goods), CISG-Online 575 (Pace) – Art. 1, para. 47 Audiencia Provincial de Pontevedra 6 October 2014 (frozen fish), CISG-Online 2576 – Art. 29, para. 8 19 December 2007 (frozen seafood), CISG-Online 1688 (Pace) – Art. 7, para. 19 8 February 2007 (machine) CISG-Online 1802 – Art. 36, para. 5 Audiencia Provincial de Valencia 13 March 2007 (coconut), CISG-Online 1719 (Pace) – Art. 4, para. 30; Art. 74, para. 15 31 March 2005 (oranges), Frischaff Produktions GmbH v Guillem Export S. L, CISG-Online 1369 (Pace) – Art. 26, para. 9; Art. 75, paras 6, 7 7 June 2003 (grape juice), CISG-Online 948 (Pace) – Art. 4, para. 35; Art. 7, paras 11, 13, 18, 35, 43; Art. 74, para. 15 Audiencia Provinciale de Zaragoza 31 March 2009 (legs of pork), CISG-Online 2085 (Pace) – Art. 7, para. 28; Art. 9, para. 23 Juzgado de Primera Instancia No. 1 de Fuenlabrada 11 May 2012 (machine), Instalaciones y FabricacionesIndustriales, S.A. v. PM di Pizzolato Giorgio & C., S.A.S., CISG-Online 2464 (Pace) – Art. 7, paras 18, 41; Art. 84, para. 12 Juzgado Primera Instancia e Instruccion No. 2, La Almunia de Dona Godina 28 November 2013 (cheese), SMR Automotive Systems Spain v. Bu¨hler Motor GmbH, CISG-Online 2532 (Pace) – Art. 7, para. 18; Art. 8, para. 32; Art. 9, para. 23 Juzgado de Primera Instancia, No. 3 de Badalona 22 May 2006 (Bermuda shorts), CISG Online 1391 (Pace) – Art. 13, para. 6 Juzgado de Primera Instancia, No. 3 de Tudela 29 March 2005 (machine for rectification of bricks), Cera´mica Tudelana, S. A. v Wassmer Gruppe Spezial Machinen GmbH, CISG-Online 1016 (Pace) – Art. 35, para. 14; Art. 84, para. 12 Primer tribunal colegiado en materia civil del primer circuito 10 March 2005, CISG Spain Online – Art. 19, para. 10

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Table of Cases Switzerland Bundesgericht 2 April 2015 (wire rod), CISG-Online 2592 – Art. 8, para. 17; Art. 34, paras 3, 10; Art. 35, para. 39; Art. 39, paras 22, 34, 35, 43, 127; Art. 40, paras 12, 15; Art. 49, paras 13, 29; Art. 51, para. 45 23 September 2013 (steel coils), CISG-Online 2560 – Art. 8, para. 3; Art. 35, para. 39 23 April 2013 (watches), CISG-Online 2482 – Art. 8, para. 13 26 March 2013 (organic juices and organic oil), CISG-Online 2434 (Pace) – Art. 39, paras 109, 112, 116 16 July 2012 (spinning mill), CISG-Online 2371 (Pace) – Art. 35, paras 170, 171, 175, 182; Art. 50, para. 60; Art. 51, para. 10 17 April 2012 (EAS tags), CISG-Online 2346 (Pace) – Art. 42, paras 9, 54 16 September 2010 (fuel oil), CISG-Online 2220 – Art. 76, para. 7 17 December 2009 (watches), CISG-Online 2022 (Pace) – Art. 4, para. 37; Art. 74, paras 18, 53; Art. 77, paras 9, 13 26 June 2009 (anti grafitti protection coating), CISG-Online 1907 – Art. 8, para. 2 18 May 2009 (packaging machine), CISG-Online 1900 (Pace) – Art. 4, para. 30; Art. 39, para. 121; Art. 49, paras 42, 72, 77 17 July 2007, CISG-Online 1515 (Pace) – Art. 71, paras 11, 16, 18, 25, 47 20 December 2006 (machines), CISG-Online 1426 (Pace) – Art. 4, para. 39; Art. 47, para. 21; Art. 49 para. 63; Art. 58, para. 12; Art. 84, para. 8 12 June 2006 (triethylen tetramin), CISG-Online 1516 – Art. 79, para. 68 5 April 2005 (triethylen tetramin), CISG-Online 1012 – Art. 7, para. 26; Art. 11, para. 18; Art. 14, paras 24, 28; Art. 18, paras 10, 11; Art. 19, paras 9, 10; Art. 79, para. 92 7 July 2004 (cable drums), CISG-Online 848 (Pace) – Art. 4, paras 10, 35, 39; Art. 35, paras 19, 175, 180, 182; Art. 38, para. 5; Art. 50, para. 60; Art. 74, para. 15 13 January 2004 (menthol USP brand crystals), CISG-Online 838 (Pace) (Unilex) – Art. 35, paras 44, 110, 172, 174, 193 13 November 2003 (used laundry machine), CISG-Online 840 (Pace) – Art. 4, para. 35; Art. 7, para. 42; Art. 9, para. 33; Art. 35, paras 170, 171; Art. 39, paras 19, 36, 38, 39, 43, 46, 81; Art. 46, para. 54; Art. 49, para. 81; Art. 50, para. 60; Art. 74, para. 15 28 May 2002 (lumber), CISG-Online 676 (Pace) – Art. 39, para. 36 22 December 2000 (used rotary printing textile machine), CISG-Online 628 (Pace) – Art. 4, para. 21; Art. 35, paras 39, 57 11 December 2000 (fitted kitchen), CISG-Online 1319 – Art. 4, para. 21 17 October 2000 (locker system), Severin Wagner AG v Gu¨nter Lieber, CISG-Online 1053 (Pace) – Art. 4, para. 46 15 September 2000 (Egyptian cotton), FCF S. A. v Adriafil Commerciale S. r. l., CISG-Online 770 (Pace) – Art. 4, para. 35; Art. 25, paras 12, 33; Art. 26, para. 7; Art. 74, para. 15 11 July 2000 (building materials), CISG-Online 627 (Pace) – Art. 1, para. 47; Art. 4, paras 31, 32; Art. 11, para. 12 28 October 1998 (frozen meat), CISG-Online 413 (Pace) – Art. 1, para. 47; Art. 25, para. 37; Art. 49, paras 37, 38; Art. 50, para. 64 3 April 1996 – Art. 25, para. 37 18 January 1996 (plant for purification of exhaust gases), CISG-Online 214 (Pace) – Art. 58, paras 16, 26 25 October 1983, BGE 109 II 319 (322) – Art. 41, para. 44 Appelationsgericht Basel-Stadt 26 September 2008 (packaging machine), CISG-Online 1732 – Art. 4, para. 39; Art. 8, para. 2; Art. 35, paras 42, 50; Art. 49, para. 51 23 August 2003 (soyaprotein products), CISG-Online 943 (Pace) – Art. 35, paras 24, 39 Appellationsgericht Tessin 8 June 1999 (wine bottles), CISG-Online 497 (Pace) – Art. 39, para. 16 15 December 1998, CISG-Online 422 – Art. 4, para. 11 15 January 1998 (cocoa beans), CISG-Online 417 (Pace) – Art. 4, para. 36; Art. 35, paras 187, 198; Art. 38, para. 143; Art. 84, para. 12 12 February 1996 (copy paper), CISG-Online 233 (Pace) – Art. 1, para. 45; Art. 4, para. 18 Cour de Justice de Gene`ve 20 May 2011 (multifunctional facsimile and components), CISG-Online 2429 – Art. 8, para. 22 12 March 2010 (diamonds), CISG-Online 2426 – Art. 8, para. 4 12 May 2006 (office furniture), CISG-Online 1726 (Pace) – Art. 8, para. 8 15 November 2002 (window frames), CISG-Online 853 (Pace) – Art. 4, paras 31, 36, 37; Art. 11, para. 16; Art. 50, paras 4, 29, 30, 34, 52; Art. 74, para. 18

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Table of Cases 13 September 2002 (grain), CISG-Online 722 (Pace) – Art. 13, para. 2 10 October 1997 (acrylic cotton), CISG-Online 295 (Pace) – Art. 4, para. 30; Art. 39, para. 121 Kantonsgericht Appenzell Ausserhoden 9 March 2006 (fitness equipment), CISG-Online 1375 (Pace) – Art. 39, para. 79, 81, 127 10 March 2003, CISG-Online 852 (Pace) – Art. 71, paras 6, 22 Kantonsgericht Basel 5 October 1999 (garments), CISG-Online 492 (Pace) – Art. 9, para. 33 Kantonsgericht Freiburg 11 October 2004 (chemical product), CISG-Online 964 (Pace) – Art. 11, para. 21; Art. 14, para. 31; Art. 18, para. 34; Art. 19, para. 9; Art. 55, para. 4 23 January 1998 (commercial laundry machine), CISG-Online 423 (Pace) – Art. 4, para. 39; Art. 7, paras 26, 55 Kantonsgericht Glarus 6 November 2008 (bags), CISG-Online 1996 (Pace) – Art. 35, para. 69, 97 Kantonsgericht Jura 3 November 2004, CISG-Online 965 (Pace) – Art. 6, paras 16, 17 Kantonsgericht Nidwalden 23 May 2005 (farm machines), CISG-Online 1086 (Pace) – Art. 4, paras 30, 35, 37; Art. 57, para. 5; Art. 74, paras 15, 18 3 December 1997 (furniture), CISG-Online 331 (Pace) – Art. 6, para. 18; Art. 39, para. 34; Art. 78, para. 23 Kantonsgericht Schaffhausen 27 January 2004 (model locomotives), CISG-Online 960 (Pace) – Art. 4, para. 30; Art. 35, para. 37; Art. 38, paras 42, 59; Art. 39, paras 12, 53, 82; Art. 40, para. 13; Art. 81, para. 21; Art. 84, para. 12 20 October 2003 (aluminium foil film wrap), CISG-Online 957 (Pace) – Art. 4, para. 40 25 February 2002 (machines, devices & replacement parts), CISG-Online 723 (Pace) – Art. 58, para. 5; Art. 78, para. 16 Kantonsgericht St. Gallen 15 June 2010 (StencilMaster 1621), CISG-Online 2159 (Pace) – Art. 8, para. 23 13 May 2008 (skid chains and adaptors), CISG-Online 1768 (Pace) – Art. 1, para. 42; Art. 4, para. 23 12 August 1997 (clothes), CISG-Online 330 (Pace) – Art. 31, para. 54 Kantonsgericht Tessin 29 October 2003 (modular wall partitions), CISG-Online 912 (Pace) – Art. 8, para. 23; Art. 79, para. 64 Kantonsgericht Waadt 28 January 2009 (fiberglass composite materials) (Pace) – Art. 9, para. 38; Art. 39, para. 38 11 April 2002 (clothing), CISG-Online 899 (Pace) – Art. 78, para. 25 26 May 2000, CISG-Online 1840 (Pace) – Art. 66, paras 24, 34 11 March 1996 (aluminium granules), CISG-Online 333 (Pace) – Art. 4, para. 39; Art. 74, para. 69; Art. 78, para. 23 20 December 1994 (artificial stones), CISG-Online 302 (Pace) – Art. 58, para. 11 17 May 1994, CISG-Online 122 (Pace) – Art. 87, para. 10; Art. 88, para. 5 Kantonsgericht Wallis 28 January 2009 (fiberglass composite materials), CISG-Online 2025 (Pace) – Art. 4, para. 46; Art. 8, para. 29; Art. 9, para. 38; Art. 74, para. 70; Art. 78, para. 10 27 April 2007 (oven), CISG-Online 1721 (Pace) – Art. 4, paras 17, 18, 35, 46; Art. 74, para. 15 23 May 2006 (suits), CISG-Online 1532 (Pace) – Art. 1, para. 43; Art. 4, para. 46; Art. 9, para. 10; Art. 10, para. 15 19 September 2005 (fiberglass composite materials), (Pace) – Art. 4, paras 18, 35, 46; Art. 74, para. 15 27 May 2005 (welding devices), CISG-Online 1137 (Pace) – Art. 4, paras 18, 35, 46; Art. 7, para. 55; Art. 74, para. 15 21 February 2005 (CNC-machine), CISG-Online 1193 (Pace) – Art. 4, paras 17, 31; Art. 25, paras 16, 19; Art. 35, para. 57; Art. 39; Art. 49, paras 77, 81 30 June 1998 (granite stones), CISG-Online 419 (Pace) – Art. 4, para. 46; Art. 54, para. 10 29 June 1998 (sports clothing), CISG-Online 420 (Pace) – Art. 35, paras 39, 155 28 October 1997 (second hand bulldozer), CISG-Online 328 (Pace) – Art. 35, paras 12, 155 11 March 1996 (clay) (Pace) – Art. 1, para. 25 29 June 1994 (furniture), CISG-Online 134 – Art. 6, para. 8

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Table of Cases Kantonsgericht Zug 5 March 2013 (marble slabs), CISG-Online 2471 – Art. 31, para. 16; Art. 32, para. 10; Art. 58, para. 21 14 December 2009 (spinning plant), CISG-Online 2026 (Pace) – Art. 3, para. 5; Art. 49, paras 52, 62, 63 27 November 2008 (packaging foils), CISG-Online 2024 (Pace) – Art. 78, para. 10 30 August 2007 (GMS modules), CISG-Online 1722 (Pace) – Art. 39, paras 31, 33, 37, 89, 127 2 December 2004 (dextrose), CISG-Online 1194 (Pace) – Art. 8, para. 31; Art. 14, paras 1, 14, 24, 28; Art. 18, para. 8; Art. 58, para. 9 11 December 2003 (plastic granulate), CISG-Online 958 (Pace) – Art. 4, paras 31, 32 12 December 2002 (MTBE), CISG-Online 720 (Pace) – Art. 78, para. 16 21 October 1999 (PVC and other synthetic materials), CISG-Online 491 (Pace) – Art. 1, paras 25, 37; Art. 76, paras 1, 7, 13; Art. 78, para. 10 25 February 1999 (building materials), CISG-Online 490 (Pace) – Art. 3, paras 15, 17 16 October 1997 (hygrometers), CISG-Online 335 (Pace) – Art. 53, para. 5 16 March 1995 (cobalt), CISG-Online 230 (Pace) – Art. 6, para. 18 Obergericht Aargau 3 March 2009 (prefabricated house), CISG-Online 2013 (Pace) – Art. 3, para. 5 Obergericht Bern 19 May 2008, CISG-Online 1738 (Pace) – Art. 6, para. 20 11 February 2004 (cables), CISG-Online 1191 (Pace) – Art. 4, para. 35; Art. 7, para. 13; Art. 9, para. 33; Art. 11, para. 17; Art. 35, para. 175; Art. 38, paras 5, 39, 91; Art. 39, paras 28, 52, 56, 62; Art. 74, para. 15 Obergericht Luzern 12 May 2003 (used textile cleaning machine), CISG-Online 846 – Art. 35, para. 175 8 January 1997 (blood infusion devices), CISG-Online 228 (Pace) – Art. 1, paras 33, 34; Art. 3, para. 17; Art. 4, para. 11; Art. 35, para. 103; Art. 38, paras 27, 34, 35, 50, 126, 132; Art. 39, para. 81 Obergericht Thurgau 12 December 2006 (building materials), CISG-Online 1566 – Art. 8, paras 2, 23 19 December 1995 (cloth), CISG-Online 496 (Pace) – Art. 1, para. 45; Art. 4, paras 18, 39, 46 Obergericht Zug 8 November 2011 (spinning mill), CISG-Online 2425 – Art. 8, para. 2; Art. 35, paras 171, 182, 198 19 December 2006 (stove), CISG-Online 1427 (Pace) – Art. 38, paras 82, 110; Art. 39, para. 37, 127; Art. 44 Obergericht Zu¨rich 6 February 2009 (graffiti protection coating), CISG-Online 2000 (Pace) – Art. 11, para. 16; Art. 31, para. 16 Bezirksgericht Arbon 9 December 1994 (cloth), CISG-Online 376 (Pace) – Art. 4, para. 46; Art. 78, para. 23 Bezirksgericht Laufen 7 May 1993 (goods (presumably metal-works)), CISG-Online 136 (Pace) – Art. 3, para. 15 Bezirksgericht Locarno-Campagna 27 April 1992 (furniture), CISG-Online 68 (Pace) – Art. 7, para. 19; Art. 38, para. 93 Bezirksgericht Saane 20 February 1997 (spirits), CISG-Online 426 (Pace) – Art. 1, paras 26, 47; Art. 4, para. 36; Art. 9, paras 33, 38; Art. 10, para. 19; Art. 64, para. 10; Art. 54, paras 1, 15; Art. 72, para. 11; Art. 74, para. 18; Art. 81, para. 4; Art. 84, paras 2, 12 Bezirksgericht Sissach 5 November 1998 (summer clothes collection), CISG-Online 1466 (Pace) – Art. 9, paras 28, 29; Art. 29, para. 6; Art. 74, para. 10 Bezirksgericht St. Gallen 3 July 1997 (fabrics), CISG-Online 336 (Pace) – Art. 8, para. 9; Art. 14, paras 1, 4; Art. 55, para. 1 Amtsgericht Luzern-Land 21 September 2004, CISG-Online 963 – Art. 50, para. 64 Amtsgericht Sursee 12 September 2008 (second hand tractor), CISG-Online 1728 (Pace) – Art. 1, para. 26 Amtsgericht Willisau 12 March 2004 (wood), CISG-Online 961 (Pace) – Art. 74, para. 26; Art. 80, paras 6, 12

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Table of Cases Zivilgericht Basel-Stadt 8 November 2006 (packaging machine), CISG-Online 1731 – Art. 8, para. 2 3 December 1997 (Bulgarian white urea), CISG-Online 346 (Pace, CLOUT 221) – Art. 9, paras 11, 30, 35; Art. 57, paras 11, 13 21 December 1992 (textiles), CISG-Online 55 (Pace) – Art. 1, para. 45; Art. 4, para. 7; Art. 9, para. 30; Arts 14–24 introductory remarks, para. 4 Handelsgericht Aargau 21 June 2011 (cosmetic products), CISG-Online 2432 – Art. 58, para. 11 26 November 2008 (fruit and vegetables), CISG-Online 1739 (Pace) – Art. 4, paras 17, 46; Art. 8, paras 2, 10, 31; Art. 75, para. 4 5 February 2008 (fruit and vegetables), CISG-Online 1740 – Art. 8, paras 10, 29 19 June 2007 (railway rails), CISG-Online 1741 (Pace) – Art. 53, para. 1 25 January 2005 (floor tiles), CISG-Online 1091 (Pace) – Art. 48, paras 38, 41; Art. 58, para. 11 5 November 2002 (inflatable triumphal arch), CISG-Online 715 (Pace) – Art. 35, paras 118, 122; Art. 49, para. 20; Art. 58, paras 16, 26; Art. 78, para. 16 11 June 1999 (granular plastic), CISG-Online 494 (Pace) – Art. 4, para. 18 26 September 1997 (cutlery), CISG-Online 329 (Pace) – Art. 14, para. 36; Art. 49, para. 48; Art. 74, para. 74; Art. 75, paras 4, 24 Handelsgericht Bern 22 December 2004 (watches), CISG-Online 1192 (Pace) – Art. 28, para. 2 17 January 2002 (grapefruit seed extract), CISG-Online 725 (Pace) – Art. 39, paras 71, 122 30 October 2001 (H-F-A (machine)), CISG-Online 956 (Pace) – Art. 39, para. 122 Handelsgericht St. Gallen 14 June 2012 (organic juices and organic oils), CISG-Online 2468 (Pace) – Art. 34, para. 11; Art. 35, paras 26, 54, 129, 190; Art. 36, para. 9; Art. 39, paras 109, 112; Art. 58, paras 31, 33 11 February 2003 (audio CDs), CISG-Online 900 (Pace) – Art. 38, para. 90; Art. 59, para. 4; Art. 73, para. 10 3 December 2002 (sizing machine), DT Ltd. v B. AG, CISG-Online 727 (Pace) – Art. 74, paras 16, 28, 30, 42, 70, 72; Art. 77, paras 15, 29, 34, 35 paras 23, 47; Art. 81, para. 10 5 December 1995, CISG-Online 245 (Pace) – Art. 11, para. 8; Art. 14, paras 2, 16, 18 24 August 1995 (cleaning products) CISG-Online 247 – Art. 4, para. 21 Handelsgericht Zu¨rich 17 September 2014 (wire rod), CISG-Online 2656 – Art. 74, para. 2 3 April 2013 (steel coils), CISG-Online 2562 (Pace) – Art. 35, para. 39 18 June 2012 (antique statue), CISG-Online 2660 (Pace) – Art. 35, paras 180, 182 25 June 2010 (aerosol can manufacturing series), CISG-Online 2161 – Art. 8, para. 32 25 June 2007 (printed materials), CISG-Online 1564 – Art. 74, para. 15 22 December 2005 (retail fashion clothes), CISG-Online 1195 (Pace) – Art. 4, paras 35, 39; Art. 14, para. 8; Art. 74, para. 15 17 February 2000 (software), CISG-Online 637 (Pace) – Art. 3, para. 25 8 April 1999 (driving engines for wind power plants), CISG-Online 489 (Pace) – Art. 3, para. 5 10 February 1999 (art books) CISG-Online 488 (Pace) – Art. 3, para. 5; Art. 4, para. 35; Art. 6, para. 22; Art. 50, paras 11, 23, 27, 36, 62; Art. 74, paras 9, 11, 15, 76, 83; Art. 79, para. 63 30 November 1998 (lambskin coats), CISG-Online 415 (Pace) – Art. 1, paras 3, 26; Art. 4, paras 18, 35, 46; Art. 8, paras 24, 28; Art. 35, paras 15, 29, 33, 59, 175; Art. 38, paras 50, 77, 102, 132, 146; Art. 39, paras 34, 36, 53, 79, 109, 111, 113, 114; Art. 40, para. 28; Art. 44, paras 5, 6; Art. 54, para. 1; Art. 73, paras 5, 12; Art. 74, para. 15 21 September 1998, CISG-Online 416 – Art. 50, para. 11 5 February 1997 (sunflower oil), CISG-Online 327 (Pace) – Art. 6, para. 18; Art. 73, para. 19; Art. 74, paras 15, 32, 70, 72; Art. 78, para. 10; Art. 84, paras 11, 12 10 July 1996 (plastic chips), CISG-Online 227 – Art. 19, para. 17; Art. 78, paras 12, 13 26 April 1995 (saltwater isolation tank), CISG-Online 248 (Pace) – Art. 3, paras 15, 17; Art. 4, paras 32, 35; Art. 5, paras 15, 16, 19; Art. 11, para. 12; Art. 74, paras 15, 32, 67; Art. 79, para. 2 9 September 1993 (furniture), CISG-Online 79 (Pace) – Art. 3, para. 5; Art. 4, para. 35; Art. 74, para. 15; Art. 78, para. 22 St. Gallen Gerichtskommission Oberrheintal 30 June 1995 (sliding doors), CISG-Online 425 (Pace) – Art. 58, paras 4, 5 Tribunale d’appello Ticino 20 April 2016 (cans of a bottling machine), CISG-Online 2759 – Art. 4, para. 28

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Table of Cases United Kingdom English Court of Appeal 18 December 2006 (sale of shares in a Lloyd’s broker), The Square Mile Partnership Ltd. v. Fitzmaurice McCall Ltd., CISG-Online 1425 (Pace) – Introduction, para. 35 17 February 2006 (supply of labor personnel and cleaning equipment), ProForce Recruit Ltd v. Rugby Group Ltd, 2006 EWCA Civ 69, CISG-Online 1424 (Pace) – Introduction, para. 35 High Court of Justice 1 May 2012 (borence, polymer), Kingspan Environmental Ltd et al v Bore-alis A/S et al, CISG-Online 2391 (Pace) – Art. 1, para. 54; Art. 35, paras 40, 101, 108, 118, 194; Art. 39, paras 28, 33, 35, 37, 38, 39; Art. 40, paras 3, 11, 12, 23 Court of Exchequer Hadley v Baxendale (1854) 9 Exch 341 – Art. 74, paras 27, 31 United States of America Supreme Court 25 March 2008, Hall Street Associates, LLC v Mattel, Inc. – Art. 28, para. 26 Michigan Supreme Court 19 December 1974, Shiffer v Board of Education of Gibraltar School District, 393 Mich 190) – Art. 77, para. 2 Superior Court of Massachusetts 28 February 2005 (smoke detection units), Vision Systems, Inc. v EMC Corporation, CISG-Online 1005 (Pace) – Art. 1, para. 44; Art. 10, paras 11, 20, 35 Court of Appeals, 2nd Circuit 6 December 1995 (compressors for air conditioners), Delchi Carrier S. p. A. v Rotorex Corp., CISGOnline 140 (Pace) – Art. 7, para. 19; Art. 25, para. 38; Art. 49, paras 14, 35, 39; Art. 74, paras 2, 27, 40, 43, 45; Art. 75, paras 14, 24, 35 Court of Appeals, 3rd Circuit 16 April 2010, Forestal Guarani S. A., v Daros International, Inc. (Pace) – Art. 12, para. 10 19 July 2007 (naphtha), Valero Marketing Supply Co vs. Greeni Oy, CISG-Online 1510 – Art. 29, para. 9; Art. 47, paras 2, 20; Art. 49, para. 60 20 June 2003, Standard Bent Glass Corp. v Glassrobots Oy – Art. 92, para. 6 Court of Appeals, 4th Circuit 21 June 2002 (drapery fabric), Schmitz-Werke GmbH & Co v Rockland Industries, Inc., CISG-Online 625 (Pace) – Art. 4, para. 35; Art. 7, para. 19; Art. 35, para. 194; Art. 74, para. 15 Court of Appeals, 5th Circuit 11 June 2003 (gasoline), B P Petroleum International Ltd. v Empresa Estatal Petroleos de Ecuador, CISG-Online 730 (Pace) – Art. 6, paras 16, 18 15 June 1993, Beijing Metals & Minerals v American Business Center, Inc, 993 F.2 d 1178, CISGOnline 89 (Pace) – Art. 6, para. 18 Court of Appeals, 7th Circuit 21 January 2016 frozen potatoes), VLM Food Trading International, Inc. v. Illinois Trading Co., et al – Art. 19, para. 15 23 May 2005 (pork ribs), Chicago Prime Packers Inc. v Northam Food Trading Co., 320 F. Supp. 2 d 702, 715 (N. D. Ill. 2004), affirmed, 408 F.3 d 894, CISG-Online 1026 (Pace) – Art. 4, para. 35; Art. 7, para. 19; Art. 35, paras 174, 198; Art. 66, para. 23; Art. 74, para. 15; Art. 78, para. 21 19 November 2002 (cookie tins), Zapata Hermanos v Hearthside Baking, CISG-Online 684 (Pace) – Art. 4, para. 31; Art. 74, para. 69 Court of Appeals, 8th Circuit 14 February 2011 (inulin), Dingxi Longhai Dairy, Ltd. V. Becwood Technology Group L.L.C., CISGonline 2256 (Pace) – Art. 7, para. 19 Court of Appeals, 9th Circuit 8 November 2007, Barbara Berry, S. A. de C. V. v Ken M. Spooner Farms, Inc., CISG-Online 1835 (Pace) – Art. 4, para. 16; Art. 29, para. 7 5 May 2003 (wine corks), Chateau des Charmes Wines Ltd. v. Sabate´ USA, Sabate´ S. A., CISG-Online 767 (Pace) – Art. 4, para. 33; Art. 8, para. 32; Art. 9, para. 30; Art. 11, para. 13; Art. 23, para. 1; Art. 29, para. 7 12 April 1995 (cedar shakes (wood)), GPL Treatment Ltd. V Louisiana-Pacific Group, CISG-Online 147 (Pace) – Art. 6, para. 20

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Table of Cases Court of Appeals, 11th Circuit 12 September 2006 (tantalum carbide), Treibacher Industrie, A. G. v Allegheny Technologies, Inc., CISG-Online 1278 (Pace) – Art. 8, para. 23; Art. 9, paras 4, 23; Art. 77, paras 13, 16, 32, 35 29 June 1998 (ceramic tiles), MCC-Marbel Ceramic Center Inc. v Ceramica Nuova D’Agostino S. p. A., 144 F.3 d 1384, CISG-Online 342 (Pace) – Art. 1, para. 47; Art. 7, para. 41; Art. 8, paras 8, 9, 26; Art. 35, paras 39, 155 District Court for the Northern District of Alabama 27 April 2005 (hard metal powders), Treibacher Industrie, A. G. v TDY Industries, Inc., CISG-Online 1178 (Pace) – Art. 4, para. 23; Art. 77, para. 18 District Court for the Eastern District of Arkansas 19 August 2010 (refrigerator motors), Electrocraft Arkansas, Inc. v Super Electric Motors, Ltd and Raymond O’Gara, Individually and as Partner and Agent of Super Electric Motors, Ltd, CISG-Online 2149 (Pace) – Art. 93, para. 3 23 December 2009 (refrigerator motors), Electrocraft Arkansas, Inc. v Electric Motors, Ltd et al. CISGOnline 2045 (Pace) – Art. 4, paras 10, 23; Art. 35, paras 200, 205 25 June 2009 (floating paddle-wheel aerators), Granjas Aquanova S.A. de C.V. v House Manufacturing Co. Inc., CISG-Online 1527 – Art. 74, para. 94 District Court for the Northern District of California 2 November 2005 (corks for bottles of wine), McDowell Valley Vineyards, Inc. v Sabate´ USA Inc. et al., (Pace) – Art. 10, para. 20 27 July 2001 (electronic components/computer chips), Asante Technologies, Inc. v PMCSierra, Inc., CISG-Online 616 – Art. 1, para. 45; Art. 4, para. 9; Art. 7, para. 39; Art. 10, paras 22, 33 30 January 2001 (computer parts), Supermicro Computer, Inc. v. Digitechnic, S.A., et al., CISG-Online 612 (Pace) – Art. 8, para. 8 District Court for the Eastern District of California 21 January 2010 (centrifuge), Golden Valley Grape Juice and Wine, LLC v Centrisys Corporation et al., CISG-Online 2089 (Pace) – Art. 4, paras 24, 32 District Court of Colorado 28 July 2015 (wastewater evaporation technology), Orica Australia Pty Ltd v. Aston Evaporative Services, LLC, CISG-Online 2661 (Pace) – Art. 19, para. 9 6 July 2010 (coal mining equipment), Alpha Prime Development Corporation v. Holland Loader Company, CISG-Online 2111 (Pace) – Art. 8, para. 17 District Court of Delaware 9 May 2008 (soy lecithin), Solae, LLC v Hershey Canada, Inc., CISG-Online 1769 (Pace) – Art. 11, para. 13 District Court for the Southern District of Florida 19 May 2008 (polyester dyed fabric), Zhejiang Shaoxing Yongli Printing and Dyeing Co., Ltd v Microflock Textile Group Corporation, CISG-Online 1771 (Pace) – Art. 4, para. 19; Art. 12, paras 6, 7 22 November 2002, Impuls I. D International, S. L., Impuls I. D. Systems Inc., and PSIAR S. A. v Psion Teklogix Inc. – Art. 95, para. 3 District Court for the Northern Division of Georgia 17 December 2009 (printer cartridges), CISG-Online 2044 (Pace) – Art. 93, para. 3 District Court for the Northern District of Illinois 3 September 2008 (refrigerators and freezers), CNA Int’l Inc. v. Guangdong Kelon Electronical Holdings et al., CISG-Online 2043 (Pace) – Art. 7, para. 1; Art. 93, para. 3 6 July 2004 (used railroad rails), Raw Materials Inc. v Manfred Forberich GmbH & Co., KG, CISGOnline 925 (Pace) – Art. 7, para. 19; Art. 79, para. 20; Art. 79, paras 46, 50 21 May 2004 (pork ribs), Chicago Prime Packers, Inc. v Northam Food Trading Co., CISG-Online 851 (Pace) – Art. 7, para. 42; Art. 38, paras 23, 146; Art. 74, para. 2; Art. 78, para. 23 6 October 2003 (beer), CISG-Online 1225 (Pace) – Art. 4, para. 11 29 January 2003 (fluidized bed furnace), Ajax Tool Works, Inc. v Can-Eng Manufacturing Ltd, CISGOnline 772 (Pace) – Art. 6, para. 17; Art. 7, para. 27 28 March 2002 (steel plate), Usinor Industeel v Leeco Steel Products, CISG-Online 696/1326 (Pace) – Art. 4, paras 9, 28; Art. 7, para. 42; Art. 81, para. 16 28 August 2001 (cookie tins), Zapata Hermanos Sucesores v Hearthside Baking Co. Inc., CISG-Online 599 (Pace) – Art. 78, para. 24 7 December 1999 (steel bars), Magellan International v Salzgitter Handel, CISG-Online 439 (Pace) – Art. 28, para. 2; Art. 72, para. 28

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Table of Cases 27/28 October 1998 (aircraft parts), Mitchell Aircraft Spares, Inc. v. European Aircraft Service AB, CISG-Online 444 (Pace) – Art. 1, para. 47; Art. 7, para. 41; Art. 8, para, 29; Arts 14–24 introductory remarks, para. 2; Art. 92, para. 6 District Court of Kansas 28 September 2007 (headwear), Guang Dong Light Headgear Factory Co., Ltd., v. ACI International, Inc., CISG-Online 1602 – Art. 8, para. 17 District Court for the Eastern District of Kentucky 22 February 2010 (caviar), Princesse D’Isenbourg et CIE Ltd. v Kinder Caviar, Inc., CISG-Online 2185 – Art. 95, para. 3 18 March 2008 (concrete light poles), Sky Cast, Inc v Global Direct Distribution, LLC, CISG-Online 1652 (Pace) – Art. 4, para. 10 District Court for the Eastern District of Louisiana 17 May 1999 (medical equipment), Medical Marketing v Internazionale Medico Scientifica, CISGOnline 387 (Pace)) – Art. 1, para. 47; Art. 7, paras 19, 41 District Court for the District of Maryland 18 July 2011 (metalsort machine), CISG-Online 2222 (Pace) – Art. 4, para. 46; Art. 74, para. 38 8 February 2011 (Cable assemblies and related components), CISG-Online 2177 – Art. 8, paras 3, 25 District Court for the Eastern District of Michigan 28 September 2007 (sport bar assembly system), CISG-Online 1601 (Pace) – Art. 4, para. 46; Art. 6, para. 18 District Court for the Western District of Michigan 17 December 2001 (thermoforming line equipment for manufacture of plastic gardening pots together with the technology), Shuttle Packaging Systems L. L. C. v Tsonakis, CISG-Online 773 (Pace) – Art. 4, para. 20; Art. 8, para 17; Art. 11, para. 11; Art. 38, paras 92, 96; Art. 39, para. 91; Art. 72, para. 9 District Court of Minnesota 1 July 2008 (organic kosher Inulin), CISG-Online 1774 – Art. 4, para. 23 9 March 1999 (billboards, remote controls), KSTP-FM v Specialized Communications, CISG-Online 471 (Pace) – Art. 4, para. 9 District Court for the Eastern District of Missouri 10 January 2011 (chunk polysilicon and ingot), Semi-Materials Co., Ltd. v. MEMC Electronic Materials, Inc., CISG-Online 2168 and 2169 (Pace) – Art. 4, para. 23; Art. 76, para. 7 District Court of New Jersey 19 March 2012 (photograph printing and processing machine), CISG-Online 2357 (Pace) – Art. 4, para. 9 7 October 2008 (wooden finger-joints), Forestal Guarani, S. A. v Daros International, Inc., CISGOnline 1779 (Pace) – Art. 4, para. 19; Art. 7, para. 39; Art. 12, paras 6, 7 4 April 2006 (naphtha), Valero Marketing and Supply Co vs. Greeni Oy and Greeni Trading Oy, CISGOnline 1216 – Art. 25, paras 31, 47; Art. 49, paras 28, 31 15 June 2005, Valero Marketing v Greeni Oy (merits) – Art. 92, para. 6 District Court for the Northern District of New York 7 September 1994 (compressors for air conditioners), Delchi Carrier, SpA v Rotorex Corp., CISGOnline 113 (Pace) – Art. 74, para. 17; Art. 78, para. 10 District Court for the Southern District of New York 23 March 2015 (sports apparel), Korea Trade Insurance v. Oved Apparel Corporation, CISG-Online 2608 (Pace) – Art. 7, para. 41 28 September 2011 (liquid phenol), Cedar Petrochemicals, Inc v Dongbu Hannong Chemical Co, Ltd, CISG-Online 2338 (Pace) – Art. 9, para. 38; Art. 36, para. 5 18 January 2011 (toluene), Hanwha Corporation v. Cedar Petrochemicals, Inc., CISG-Online 2178 – Art. 8, paras 8, 29 30 March 2010 (frozen tilapia filets), Guangxi Nanning Baiyang Food Co. Ltd. v Long River International, Inc., CISG-Online 2091 (Pace) – Art. 4, para. 46 29 May 2009 (women’s clothes), Doolim Corp v R Doll, LLC, CISG-Online 1892 (Pace) – Art. 6, para. 18; Art. 71, paras 11, 20 20 August 2008 (acrylic yarn), Hilaturas Miel, S. L. v Republic of Iraq, CISG-Online 1777 (Pace) – Art. 7, para. 19; Art. 54, para. 4; Art. 79, paras 57, 58 16 April 2008 (frozen chicken parts), CISG-Online 1653 (Pace) – Art. 79, para. 58 19 July 2007 (liquid phenol), Cedar Petrochemicals, Inc. v Dongbu Hannong Chemical Co., Ltd., CISGOnline 1509 (Pace) – Art. 4, para. 9

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Table of Cases 23 August 2006 (packaging system), TeeVee Tunes, Inc. et al v Gerhard Schubert GmbH, CISG-Online 1272 (Pace) – Art. 4, para. 23; Art. 8, paras 3, 8, 29; Art. 11, paras 16, 23; Art. 29, para. 18; Art. 74, para. 27 1 Jun 2006 (beverages), Multi-Juice, S.A., Snapple Hellas, S.A., and New Age Beverages Hellas v. Snapple Beverage Corp., and Mistic Brands, Inc., CISG-Online 1229 (Pace) – Art. 4, para. 11 10 May 2002 (chemicals), Geneva Pharmaceuticals Tech. Corp. v Barr Labs. Inc., CISG-Online 653 (Pace) – Art. 4, paras 10, 13, 20; Art. 7, para. 39; Art. 9, para. 24; Art. 11, para. 16; Art. 14, para. 1; Art. 16, para. 22; Art. 60, para. 6 26 March 2002, St. Paul Guardian Insurance Co., et al. v Neuromed Medical System & Support, et al, CISG-Online 615 (Pace) – Art. 7, para. 17; Art. 9, para. 38 8 August 2000, Fercus v Mario Palazzo et al., CISG-Online 588 (Pace) – Art. 11, para. 1 6 April 1998 (shoes), Calzaturificio Claudia v Olivieri Footwear, CISG-Online 440 (Pace) – Art. 1, para. 47; Art. 7, para. 19; Art. 8, paras 13, 25, 26; Art. 9, para. 11; Art. 11, para. 16; Art. 19, para. 11 23 July 1997 (fashion accessories), Helen Kaminski Pty., Ltd v Marketing Australian Products d/b/a Fiona Waterstreet Hats, Inc., CISG-Online 297 (Pace) – Art. 1, para. 33; Art. 61, para. 8 14 April 1992 (footware/boots), Filanto v Chilewich, CISG-Online 45 (Pace) – Art. 4, para. 33; Art. 9, para. 29; Art. 11, para. 13; Art. 81, para. 7 22 May 1990, Interag Company Ltd. v Stafford Phase Corporation, CISG-Online 18 (Pace) – Art. 7, para. 19 District Court for the Eastern District of New York 19 March 2005, Genpharm Inc. v Pliva-Lachema A. S, CISG-Online 1006 (Pace) – Art. 7, para. 19 District Court of Ohio 10 October 2006 (used paper winder), Miami Valley Paper, LLC v Lebbing Engineering & Consulting GmbH, CISG-Online 1362 (Pace)/26 March 2009, CISG-Online 1880 (Pace) – Art 4., para. 23; Art. 35, para. 202 District Court for the Western District of Pennsylvania 10 September 2013 (copper mold plates), Roser Technologies, Inc. v. Carl Schreiber GmbH d/b/a Csn Metals, CISG-Online 2490 (Pace) – Art. 8, para. 17; Art. 14, para. 39; Art. 19, para. 1; Art. 71, para. 11 25 July 2008 (locomotives), Norfolk Southern Railway Company v Power Source Supply, Inc., CISGOnline 1776 (Pace) – Art. 4, para. 46; Art. 35, paras 165, 190; Art. 74, para. 38 District Court for the Middle District of Pennsylvania 13 July 2013 (cosmetic products), It’s Intoxicating, Inc. v. Maritim Hotelgesellschaft mbH and Daniela Zimmer, CISG-Online 2492 (Pace) – Art. 18, para. 10 6 January 2006 (software), American Mint LLC et al. v GOSoftware, Inc., CISG-Online 1175 (Pace) – Art. 4, para. 26; Art. 74, para. 38 16 August 2005 (software), American Mint LLC v GOSoftware, Inc., CISG-Online 1104 (Pace) – Art 4, para. 9; Art. 6, para. 9 District Court for the Eastern District of Pennsylvania 19 January 2016 (furniture), Fujian Zhangzhou Foreign Trade Co, Ltd. and Haining Wansheng Sofa Co., Ltd. v World Imports, Ltd., CISG-Online 2732 – Art. 9, para. 38 29 January 2010 (styrene), ECEM European Chemical Marketing B.V. v. The Purolite Company, CISGOnline 2090 (Pace) – Art. 1, para. 42; Art. 8, para. 29; Art. 74, para. 18 29 March 2004 (gas meters and related piping), Amco Ukrservice et al. v American Meter Company, CISG-Online 1664 (Pace) – Art. 4, para. 11; Art. 55, para. 4 29 August 2000 (wine), CISG-Online 675 (Pace) – Art. 1, para. 33; Art. 4, para. 10, 11 District Court for the Eastern Division of Tennessee 20 October 2010 (gemstones), America’s Collectible Network, Inc., d/b/a Jewelry Television, and BBJ Bangkok, Ltd. v Timlly (HK), Timlly BBK Co., Ltd., Sunil Ratwani, and Sanjay Punjabi, CISG-Online 2484 (Pace) – Art. 93, para. 3 District Court for the Southern District of Texas, Houston Division 7 February 2006 (explosive boosters), CISG-Online 1177 (Pace) – Art. 9, para. 38; Art. 67, paras 26, 37 District Court for the Western District of Washington 17 July 2006, Prime Start Ltd. v Maher Forest Products Ltd. – Art. 95, para. 3 13 April 2006 (raspberry roots), Barbara Berry, S. A. de C. V. v Ken M. Spooner Farms, Inc., CISGOnline 1354 – Art. 4, para. 13; Art. 9, para. 29; Art. 18, para. 8 District Court for the Western District of Wisconsin 7 July 2007 (polycarbonate sheets), CISG-Online 1962 (Pace) – Art. 4, para. 32

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Table of Cases Bankruptcy Court for the Middle District of Georgia 25 July 2002 (airplane and airplane engines), First National Bank of South Georgia vs. Ayers, CISGOnline 1663 (Pace) – Art. 2, para. 38 Bankruptcy Court for the Northern District of Ohio 10 April 2001 (pig iron from Russia), Victoria Alloys, Inc. v Fortis Bank SA/NV, CISG-Online 589 (Pace) – Art. 4, para. 28 Bankruptcy Court for the District of Oregon 29 March 2004 (Christmas trees), In re Siskiyou Evergreen, Inc., CISG-Online 1174 (Pace) – Art. 35, paras 43, 45; Art 39, paras 9, 28, 42 Federal Court of International Trade 24 October 1989, Orbisphere Corp. v United States, CISG-Online 7 (Pace) – Art. 6, para. 16 Federal District Court Arizona 16 December 2014 (skincare products), Adonia Holding GmbH v. Adonia Organics LLC, (Pace) – Art. 1, para. 33 Arbitral Awards Arbitration Court attached to the Bulgarian Chamber of Commerce and Industry 30 November 1998 (production of automobiles), CISG-Online 1832 (Pace) – Art. 55, para. 4 12 February 1998 (steel ropes), CISG-Online 436 (Pace) – Art. 1, para. 47; Art. 78, para. 17; Art. 79, paras 72, 82 24 April 1996 (coal), CISG-Online 435 (Pace) – Art. 1, para. 44; Art. 7, para. 55; Art. 79, paras 49, 50 Arbitration Court attached to the Hungarian Chamber of Commerce and Industry 25 May 1999 (sour cherries), CISG-Online 438 (Pace) – Art. 1, para. 47; Art. 73, para. 23 10 December 1996 (caviar), CISG-Online 774 (Pace) – Art. 66, paras 33, 34; Art. 79, paras 42, 73, 87 5 December 1995 (containers), CISG-Online 163 (Pace) – Art. 3, para. 7; Art. 39, paras 70, 92; Art. 50, para. 26; Art. 71, paras 20, 30; Art. 73, para. 19; Art. 78, para. 23 17 November 1995 (mushrooms), CISG-Online 250 (Pace) – Art. 6, para. 18; Art. 7, para. 28; Art. 54, para. 1; Art. 71, para. 20; Art. 73, para. 20 20 December 1993 (shares of a limited liability company), CISG-Online 94 (Pace) – Art. 1, para. 38 CIETAC 18 April 2008 (PTA powder), CISG-Online 2057 (Pace) – Art. 4, para. 28 9 January 2008 (metallic silicon), CISG-Online 2056 (Pace) – Art. 11, para. 17 1 October 2007 (CD-R and DVD-R production line systems), CISG/2007/03, CISG-Online 1931 (Pace) – Art. 76, para. 4; Art. 87, para. 14 20 September 2006 (welding machine), CISG-Online 1473 – Art. 4, para. 26; Art. 74, para. 38 3 August 2006 (water pump), CISG-Online 1919 (Pace) – Art. 74, paras 29, 33, 46 21 May 2006 (diesel generator), CISG-Online 1454 (Pace) – Art. 1, para. 20 9 November 2005 (DVD machines), CISG-Online 1444 – Art. 4, para. 26; Art. 74, para. 38 21 October 2005 (sheet metal producing system), CISG-Online 1472 (Pace) – Art. 4, para. 23 15 September 2005 (wool), CISG/2005/15, CISG-Online 1714 (Pace) – Art. 78, para. 10 2 September 2005 (freezing units), CISG/2005/17, CISG-Online 1712 (Pace) – Art. 78, para. 25 18 August 2005, (Automatic production line) CISG-Online 1710 (Pace) – Art. 53, para. 1 April 2005 (caprolactam), CISG/2005/22, CISG-Online 1912 (Pace) – Art. 4, para. 18 7 April 2005 (U.S. gin motes), CISG/2005/01, CISG-Online 1453, (Pace) – Art. 73, para. 33 12 March 2004 (fireworks), CISG-Online 1599 – Art. 4, para. 18 3 December 2003 (false hair), CISG-Online 1469 (Pace) – Art. 4, para. 19 17 September 2003 (cotton), CISG/2003/14, CISG-Online 1558 (Pace) – Art. 79, para. 50 27 December 2002 (medicine manufacturing equipment), CISG/2002/29, CISG-Online 2205 (Pace) – Art. 71, paras 8, 11, 29 18 December 2002, CISG-Online 1543 (Pace) – Art. 85, para. 24 13 September 2002 (velvet clothes), CISG-Online 1537 – Art. 80, para. 5 10 June 2002 (rapeseed dregs/a rice agricultural product), CISG/2002/02, CISG-Online 1528 (Pace) – Art. 78, para. 24 7 March 2002 (lube oil), CISG-Online 974 – Art. 4, para. 18 22 March 2001 (mung beans), CISG-Online 1442 (Pace) – Art. 60, para. 6 February 2001 (equipment, material and services) (Pace) – Art. 54, para. 1 6 December 2000 (pharmaceutical products), CISG/2000/13, CISG-Online 1449 (Pace) – Art. 78, para. 20 27 April 2000 (wool), CISG/2000/05 (Pace) – Art. 75, paras 6, 12 11 February 2000 (silicon metal), CISG-Online 1529 (Pace) – Art. 4, para. 42; Art. 74, para. 87; Art. 75, para. 6; Art. 76, para. 7

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Table of Cases 1 February 2000 (silicon and manganese alloy), CISG/2000/01 (Pace) – Art. 74, para. 47; Art. 76, para. 9 1 January 2000 (souvenir coins), CISG/2000/17, CISG-Online 1614 (Pace) – Art. 4, para. 46; Art. 74, para. 38 31 December 1999 (hot rolled steel sheets in coil), CISG/1999/32, CISG-Online 1805 (Pace) – Art. 78, para. 10 4 June 1999 (industrial raw material), CISG/1999/28, CISG-Online 1806 – Art. 49, para. 46 1 June 1999 (peanut kernel), CISG/1999/03, CISG-Online 1671 (Pace) – Art. 77, para. 14 31 May 1999 (indium ingot), CISG-Online 1254 (Pace) – Art. 4, para. 23 21 May 1999 (Pace) – Art. 9, para. 4 12 May 1999 (excavators), CISG/1999/26, CISG-Online 1659 (Pace) – Art. 9, para. 4 8 April 1999 (raw wool), CISG-Online 1114 (Pace) – Art. 74, para. 2 7 April 1999 (PVC suspension resin), CISG/1999/20, CISG-Online 1244 (Pace) – Art. 66, paras 31, 37; Art. 67, para. 35 5 April 1999 (air conditioner equipment), CISG/1999/19, CISG-Online 1253 (Pace) – Art. 73, para. 32 30 March 1999 (flanges), CISG-Online 1170 (Pace) – Art. 40, para. 27 12 February 1999 (nickel plating machine production line equipment case), CISG-Online 1113 (Pace) – Art. 4, para. 42; Art. 74, para. 87 30 November 1998, CISG-Online 1281 (Pace) – Art. 84, para. 12 8 August 1998 (diaper machine), CISG/1996/36 (Pace) – Art. 71, para. 13 24 March 1998 (hempseed), CISG/1998/03, CISG-Online 930 (Pace) – Art. 6, para. 23 19 December 1997 (steel), CISG/1997/36, CISG-Online 1418 (Pace) – Art. 4, para. 30; Art. 72, para. 29 16 December 1997 (hot-dipped galvanized steel coils), CISG/1997/35, CISG-Online 1662 (Pace) – Art. 72, para. 9 15 December 1997 (hot-rolled coils), CISG-Online 1204 (Pace) – Art. 12, para. 7 30 November 1997 (canned oranges), CISG/1997/33, CISG-Online 1412 (Pace) – Art. 75, para. 18; Art. 79, paras 50, 68 8 September 1997, CISG/1997/27, CISG-Online 1074 (Pace) – Art. 88, para. 28 18 August 1997 (Vitamin C), CISG/1997/26, CISG-Online 1073 (Pace) – Art. 77, para. 13 31 July 1997, CISG/1997/24, CISG-Online 1072 (Pace) – Art. 9, paras 14, 23 26 June 1997 (monohydrate zinc sulphate), CISG/1997/17 (Pace) – Art. 73, paras 10, 20 25 June 1997 (art paper), CISG/1997/16, CISG-Online 1896 (Pace) – Art. 9, paras 36, 38 22 May 1997 (soybean oil), CISG-Online 1164 (Pace) – Art. 4, para. 17 7 May 1997 (sanguinarine), CISG/1997/11, CISG-Online 1152 (Pace) – Art. 79, paras 72, 73 23 April 1997, CISG 1997/08, CISG-Online 1151 (Pace) – Art. 84, para. 2 1 April 1997 (Pace) – Art. 68, para. 4 31 December 1996 (high carbon tool steel), CISG/1996/58, CISG-Online 1524 (Pace) – Art. 72, para. 19; Art. 79, para. 73 18 December 1996 (lentils), CISG/1996/56, CISG-Online 2281 (Pace) – Art. 54, para. 1; Art. 71, para. 20 15 November 1996 (oxtetrecycline), CISG/1996/52, CISG-Online 1148 (Pace) – Art. 77, para. 13 17 October 1996 (Pace) – Art. 9, para. 3 18 September 1996 (metal (lanthanide compound)), CISG/1996/01 (Pace) – Art. 73, para. 21 6 September 1996 (engines), CISG-Online 1146 (Pace) – Art. 12, para. 6 30 July 1996 (ferro-molybdenum alloy), CISG/1996/33, CISG-Online 1280 (Pace) – Art. 79, para. 69 22 May 1996 (broadcasting equipment) (Pace) – Art. 35, para. 39 14 May 1996 (down coat), CISG-Online 1125 (Pace) – Art. 4, para. 42; Art. 74, para. 87 29 March 1996 (natural rubber), CISG/1996/16, CISG-Online 2280 (Pace) – Art. 1, para. 22; Art. 71, para. 41; Art. 72, para. 28 14 March 1996 (sweet dried potatoes), CISG/1996/14, CISG-Online 1523 (Pace) – Art. 79, para. 68 8 March 1996, CISG/1996/12, CISG-Online 1034 (Pace) – Art. 88, para. 20 8 March 1996 (horsebeans), CISG-Online 1245 (Pace) – Art. 60, para. 6 27 February 1996 (wool), CISG/1996/11, CISG-Online 1033 (Pace) – Art. 71, paras 7, 20, 47 5 February 1996 (antimony ingots), CISG/1996/07, CISG-Online 1122 (Pace) – Art. 72, para. 11 30 January 1996 (compound fertilizer), CISG/1996/05, CISG-Online 1120 (Pace) – Art. 72, para. 28 23 April 1995 (Australian raw wool), CISG/1995/07, CISG-Online 1031 (Pace) – Art. 9, paras 22, 24 22 March 1995 (down jacket and winter coat), CISG-Online 1118 (Pace) – Art. 35, paras 44, 71 10 March 1995 (wool), CISG 1995/04, CISG-Online 1065 (Pace) – Art. 79, para. 60; Art. 81, para. 19; Art. 84, para. 14; Art. 88, para. 37 23 February 1995 (jasmine aldehyde), CISG/1995/01, CISG-Online 568 (and also 971) (Pace) – Art. 35, para. 36; Art. 66, para. 37; Art. 67, para. 36; Art. 74, para. 17 17 June 1994 (warm rolled steel plates), CISG/1994/08, CISG-Online 1063 (Pace) – Art. 79, para. 69

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Table of Cases 30 March 1994 (cow’s liver fungus), CISG/1994/04, CISG-Online 1030 (Pace) – Art. 71, para. 24 20 February 1994 (cysteine), CISG/1994/03 (Pace) – Art. 9, para. 23 20 January 1994 (hydraulic press) (Pace) – Art. 35, para. 161 1 January 1992 (white cardboard scrap paper), CISG 1993/14, CISG-Online 1231 (Pace) – Art. 82, paras 11, 22 7 August 1993 (semi-automatic weapons), CISG/1993/11, CISG-Online 1060 (Pace) – Art. 79, para. 73 6 June 1991, CISG/1991/03, CISG-Online 845 (Pace) – Art. 85, para. 26; Art. 88, paras 26, 28 18 April 1991 (silicate-iron), CISG/1991/01 (Pace) – Art. 76, para. 10 1990 (cloth wind coats), CISG/1990/01 (Pace) – Art. 74, para. 17 1 January 1989 (Thai-made emulsion), CISG/1989/02, CISG-Online 1230 (Pace) – Art. 71, paras 20, 37 Corte Cubana de Arbitraje Comercial Internacional 23 December 2013, CISG-Online 2572 – Art. 58, para. 13 30 September 2013 (lifting platform), CISG-Online 2579 (Pace) – Art. 7, para. 61 Foreign Trade Court attached to the Serbian Chamber of Commerce 27 July 2011 (copper wire rod), CISG-Online 2276 – Art. 4, para. 26; Art. 74, para. 38 9 July 2010 (non-alcoholic beverages and fruit nectar), CISG-Online 2260 (Pace) – Art. 74, para. 2 15 June 2010 (Euro diesel), CISG-Online 2261 (Pace) – Art. 74, paras 28, 47 31 May 2010 (mobile shear baler), CISG-Online 2262 (Pace) – Art. 4, para. 26; Art. 74, para. 38 6 May 2010 (agricultural products and grains), CISG-Online 2358 (Pace) – Art. 7, para. 58 10 November 2009 (DVD editions), CISG-Online 2354 – Art. 74, para. 2 19 October 2009 (mineral water), CISG-Online 2265 (Pace) – Art. 7, para. 58; Art. 74, para. 2, 42; Art. 78, paras 10, 25 17 August 2009 (vegetable fats), CISG-Online 2039 (Pace) – Art. 6, paras 10, 22 4 June 2009 (mineral water), CISG-Online 2266 (Pace) – Art. 78, para. 19 28 January 2009 (medicaments), CISG-Online 1856 (Pace) – Art. 4, paras 11, 45; Art. 74, para. 2; Art. 78, para. 19 15 September 2008 (Feta cheese and other cheese products), CISG-Online 2269 (Pace) – Art. 4, para. 46 19 August 2008 (peaches and nectarines), CISG-Online 2271 (Pace) – Art. 74, para. 2 15 July 2008 (milk packaging equipment), CISG-Online 1795 (Pace) – Art. 1, para. 25; Art. 4, paras 11, 26, 28; Art. 74, paras 15, 38 23 May 2008 (seamless steel pipes), CISG-Online 2272 (Pace) – Art. 74, para. 11 23 January 2008 (white crystal sugar), CISG-Online 1946 (Pace) – Art. 34, para. 10; Art. 78, para. 25 13 November 2007 (mineral water and wooden pallets), CISG-Online 1794 – Art. 4, para. 11 1 October 2007 (timber), CISG-Online 1793 (Pace) – Art. 76, para. 4 24 January 2006 (Australian wool), CISG-Online 2274 – Art. 4, para. 30 21 February 2005 (young chickens), CISG-Online 2038 (Pace) – Art. 4, para. 36 27 May 2004 (hydro-isolation material), CISG-Online 2079 (Pace) – Art. 78, para. 16 23 February 2004 (gray cast iron), no. T-09/01, CISG-Online 2078 – Art. 35, paras 161, 199 9 December 2002 (aluminium), CISG-Online 2123 (Pace) – Art. 7, paras 27, 58; Art. 74, para. 38; Art. 77, para. 31 ICC 1 January 2011, ICC 13184/2011, CISG-Online 2724 – Art. 4, para. 21 Case No. 16369 (2011), Yearbook Commercial Arbitration XXXIX (2014), 169 – Art. 33 – para. 27 1 January 2007 (chemical compound), ICC 9926, CISG-Online 1850 (Pace) – Art. 4, para. 36 2004, ICC 12460/2004 (Pace, Unilex) – Art. 7, para. 61 1 January 2003 (fashion products), ICC 11849/2003, CISG-Online 1421 (Pace) – Art. 4, para. 11; Art. 7, paras 28, 58; Art. 8, para. 29; Art. 26, para. 6; Art. 27, para. 26; Art. 54, para. 1; Art. 62, para. 7; Art. 63, paras 4, 7; Art. 73, para. 21; Art. 78, paras 20, 25; Art. 80, para. 20 2003, ICC 12097/2003 (Pace, Unilex) – Art. 7, para. 61 1 January 2002 (machine for production of household textile product), ICC 10377/2002, CISG-Online 1419 (Pace) – Art. 82, para. 22 1 January 2002 (machine), ICC 11333 CISG-Online 1420 (Pace) – Art. 4, para. 30; Art. 6, paras 16, 18 1 January 2000 (industrial product), ICC 10329, CISG-Online 1173 (Pace) – Art. 4, para. 18; Art. 23, para. 1 1 January 2000 (processed food), ICC 8790/2000, CISG-Online 1172 – Art. 79, para. 56 2000 (waste recycling plant), ICC 9781 of 2000 (Pace) – Art. 1, para. 43 1 August 1999 (books), ICC 9083/1999, CISG-Online 706 (Pace) – Art. 3, para. 5; Art. 35, para. 17; Art. 40; Art. 44 August 1999 (chemicals), ICC 9887/1999 (Pace, Unilex) – Art. 73, para. 20; Art. 81, para. 8

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Table of Cases 1 July 1999 (roller bearings), ICC 9448/1999, CISG-Online 707 (Pace) – Art. 1, para. 33; Art. 3, para. 5; Art. 6, para. 18; Art. 71, para. 31 1 June 1999 (coke/koks), ICC 9187, CISG-Online 705 – Art. 6, para. 18; Art. 8, paras 3, 4, 10; Art. 38, paras 20, 27; Art. 40, paras 13, 21; Art. 44, para. 9; Art. 74, paras 30, 32; Art. 77, para. 35; Art. 78, para. 10; Art. 79, para. 60 1 March 1999, ICC 9978/1999, CISG-Online 708 (Pace) – Art. 4, para. 26; Art. 26, para. 4; Art. 74, para. 38; Art. 79, para. 69; Art. 81, paras 8, 11; Art. 84, para. 12 1 January 1999 (poultry feed), ICC 10274/1999, CISG-Online 1159 (Pace) – Art. 25, paras 30, 41; Art. 73, para. 10 1 December 1998 (pipes), ICC 8908/1998, CISG-Online 1337 (Pace) – Art. 1, para. 33; Art. 78, para. 29 1 October 1998 (services), ICC 9333/1998, CISG-Online 1308 (Pace) – Art. 1, para. 22; Art. 9, para. 36; Art. 78, para. 20 1 March 1998, ICC 9117, CISG-Online 777 – Art. 29, para. 22 1 December 1997 (food products), ICC 8817/1997, CISG-Online 750 and 776 (Pace) – Art. 7, para. 61; Art. 9, para. 12; Art. 77, para. 1 1 September 1997 (glass commodities), ICC 8962/1997, CISG-Online 1300 (Pace) – Art. 78, para. 11 23 January 1997 (industrial equipment), ICC 8611/HV/JK, CISG-Online 236 – Art. 1, para. 33; Art. 19, para. 92; Art. 71, para. 41 1 January 1997 (clothing), ICC 8786/1997, CISG-Online 749 (Pace) – Art. 16, para. 22; Art. 25, para. 34; Art. 71, paras 13, 22; Art. 72, paras 11, 35; Art. 77, paras 15, 20, 36; Art. 78, para. 10 1 December 1996 (electrical appliances plus tooling), ICC 8769/1996, CISG-Online 775 (Pace) – Art. 7, para. 61; Art. 78, para. 25 1 November 1996 (rice), ICC 8502/1996, CISG-Online 1295 (Pace) – Art. 9, para. 36; Art. 78, para. 29 1 October 1996 (Russian coal), ICC 8740/1996, CISG-Online 1294 (Pace) – Art. 73, para. 10; Art. 76, para. 12 1 September 1996 (metal concentrate), ICC 8574, CISG-Online 1293 (Pace) – Art. 71, paras 26, 37; Art. 72, para. 14; Art. 76, para. 13; Art. 77, para. 35 June 1996 (chemical compound), ICC 8247, (Pace) – Art. 38, para. 77 1 January 1996, ICC 8769, CISG-Online 1276 – Art. 11, paras 16, 23 1 October 1995 (machine for medical use), ICC 8453/1995, CISG-Online 1275 (Pace) – Art. 6, para. 20; Art. 9, para. 36 1 March 1995 (crude metal), ICC 7645/1995, CISG-Online 844 (Pace) – Art. 4, para. 26; Art. 25, para. 45; Art. 26, para. 4; Art. 74, para. 38 1 January 1995 (chemical fertilizer), ICC 8128/1995, CISG-Online 526 (Pace) – Art. 7, para. 61; Art. 26, para. 4; Art. 49, paras 28, 30, 31; Art. 73, para. 13; Art. 75, paras 15, 16, 18, 24; Art. 79, paras 64, 73 1 January 1995 (mineral of manganese), ICC 8324/1995, CISG-Online 569 (Pace) – Art. 1, para. 52; Art. 6, para. 18; Art. 7, para. 53; Art. 8, para. 22 23 August 1994 (battery machinery), ICC 7660/1994, CISG-Online 129 (Pace) – Art. 1, para. 51; Art. 4, para. 30; Art. 6, para. 18; Art. 51, para. 10; Art. 84, para. 12 1 January 1994 (cowhides), ICC 7331/1994, CISG-Online 106 (Pace) – Art. 1, para. 26; Art. 4, para. 46; Art. 7, para. 28; Art. 9, para. 36; Art. 78, para. 25 1 January 1994 (scaffold fittings), ICC 7531/1994, CISG-Online 565 – Art. 9, para. 36; Art. 25, paras 45, 47, 49; Art. 49, para. 18; Art. 51, para. 10; Art. 85, para. 29 1 January 1994 (coke), ICC 7565/1994, CISG-Online 566 (Pace) – Art. 6, para. 18; Art. 78, para. 20 1 January 1994 (radio-communication equipment), ICC 7844/1994, CISG-Online 567 (Pace) – Art. 6, para. 18; Art. 7, para. 55 1 January 1993 (steel bars), ICC 6653/1993, CISG-Online 71 (Pace, Unilex) – Art. 6, para. 18; Art. 35, para. 170; Art. 78, para. 26; Art. 84, paras 11, 12 1 January 1993 (shoes), ICC 7399, CISG-Online 748 (Pace) – Art. 4, para. 36 1 January 1992, ICC 7153/1992, CISG-Online 35 (Pace) – Art. 3, para. 15; Art. 78, para. 24 1 January 1992 (failure to open letter of credit and penalty clause), ICC 7197/1992, CISG-Online 36 (Pace) – Art. 4, para. 26; Art. 7, para. 55; Art. 25, para. 44; Art. 54, para. 15; Art. 62, para. 5; Art. 74, para. 38; Art. 77, para. 21; Art. 79, paras 49, 50 1 January 1992 (production line for foamed boards), ICC 7585/1992, CISG-Online 105 (Pace) – Art. 1, para. 49; Art. 4, para. 42; Arts 14–24 introductory remarks, para. 2; Art 25, para. 44; Art. 54, paras 1, 15; Art. 74, paras 45, 87; Art. 77, paras 21, 29; Art. 78, para. 11; Art. 84, para. 12 1990 (clothing), ICC 6149 (Pace) – Art. 9, para. 36 26 August 1989 (steel bars), ICC 6281/1989, CISG-Online 8 (Pace) – Art. 9, para. 36; Art. 79, para. 82 1 January 1989, ICC 5713/1989, CISG-Online 3 – Art. 9, para. 36; Art. 38, para. 17 ICC 11638/2002 – Art. 7, para. 61

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Table of Cases ¨ sterreich Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft in O 15 June 1994 (rolled metal sheets), Vienna Arbitral Tribunal, SCH 4318/4366, CISG-Online 120/121/ 691 (Pace) – Art. 1, para. 51; Art. 4, para. 46; Art. 6, para. 18; Art. 7, paras 27, 58; Art. 16, para. 22; Art. 38, paras 72, 144; Art. 39, paras 102, 113, 116; Art. 74, paras 2, 45, 63; Art. 78, paras 24, 25 Netherlands Arbitration Institute 10 February 2005, CISG-Online 1621 (Pace) – Art. 8, para. 31; Art. 9, paras 7, 10, 12 15 October 2002 (condensate crude oil mix), NAI No. 2319, CISG-Online 740 (Pace) – Art. 1, para. 53; Art. 7, para. 9; Art. 35, paras 68, 74, 77, 79, 82, 113, 199; Art. 39, para. 93 15 October 2002, Case 2319 (Pace) – Art. 71, paras 6, 23, 24, 25, 42; Art. 73, paras 3, 5, 7, 19, 23, 33 SCC 5 June 1998 (rail press), Beijing Light Automobile Co. Ltd. v Connell Limited Partnership, CISGOnline 379 (Pace) – Art. 1, para. 47; Art. 7, para. 27; Art. 35, paras 39, 65, 101, 102, 168; Art. 36, para. 13; Art. 40, paras 1, 2, 3, 5, 12, 26, 27; Art. 84, para. 15 Schiedsgericht der Handelskammer Hamburg 21 June 1996 (Chinese goods), CISG-Online 465 (Pace) – Art. 1, paras 26, 51; Art. 4, para. 42; Art. 6, para. 18, 21 21 March 1996 (Chinese goods), CISG-Online 187 (Pace) – Art. 4, para. 42; Art. 73, paras 3, 5; Art. 74, para. 87; Art. 79, paras 23, 64 Supreme Arbitration Court of the Russian Federation (Moscow) 27 July 2011, CISG-Online 2520 (Pace) – Art. 57, para. 22 26 February 2009 (wheat), CISG-Online 2523 (Pace) – Art. 12, para. 6 Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 30 June 2009, CISG-Online 2614 (Pace) – Art. 12, para. 7 13 May 2008, CISG-Online 2103 (Pace) – Art. 79, para. 42 8 February 2008 (natural gas), CISG-Online 2102 (Pace) – Art. 7, para. 25 15 November 2006, CISG-Online 2008 (Pace) – Art. 78, para. 25 13 April 2006, CISG-Online 1944 – Art. 4, para. 26; Art. 8, para. 23; Art. 9, para. 38; Art. 74, para. 38; Art. 77, para. 12 7 April 2006 (equipment), CISG-Online 1943 (Pace) – Art. 78, para. 19 1 March 2006, CISG-Online 1941 (Pace) – Art. 4, para. 26; Art. 7, para. 55; Art. 49, para. 52; Art. 74, para. 38 13 February 2006 (equipment), CISG-Online 1623 (Pace) – Art. 1, para. 21; Art. 4, para. 26; Art. 9, para. 38 13 January 2006, CISG-Online 1622 (Pace) – Art. 4, para. 26; Art. 74, para. 38 21 November 2005 (equipment), CISG-Online 1520 – Art. 79, para, 58 27 October 2005, 132/2004, CISG-Online 1503 (Pace) – Art. 35, para. 19 18 October 2005 (varnish and paint machine), 21/2005, CISG-Online 1457 (Pace) – Art. 25, para. 6; Art. 82, para. 20 27 May 2005, 95/2004, CISG-Online 1456 – Art. 7, para. 28; Art. 81, para. 8 27 April 2005, CISG-Online 1500 (Pace) – Art. 4, para. 26; Art. 74, para. 38 23 March 2005, CISG-Online 1481 – Art. 50, para. 23 16 March 2005, CISG-Online 1480 (Pace) – Art. 6, para. 18 29 December 2004 (equipment), CISG-Online 1212 (Pace) – Art. 80, para. 5 23 December 2004, CISG-Online 1188 (Pace) – Art. 36, para. 13; Art. 74, para. 28; Art. 77, paras 12, 14 12 November 2004, CISG-Online 2406 – Art. 71, paras 35, 37 22 October 2004, CISG-Online 1359 (Pace) – Art. 6, para. 18 9 June 2004, CISG-Online 1239 (Pace) – Art. 4, paras 17, 26; Art. 12, para. 2; Art. 74, para. 38; Art. 75, para. 6 28 May 2004, 175/2003, CISG-Online 1513 (Pace) – Art. 84, para. 12 19 May 2004, 100/2002, CISG-Online 1358 (Pace) – Art. 84, paras 12, 13 12 April 2004, CISG-Online 1208 (Pace) – Art. 6, para. 18 9 April 2004, CISG-Online 1207 (Pace) – Art. 55, para. 4; Art. 79, para. 69 16 February 2004, 107/2002, CISG-Online 1181 (Pace) – Art. 1, para. 30; Art. 29, para. 18; Art. 77, para. 15 17 September 2003, CISG-Online 979 (Pace) – Art. 6, para. 18 25 June 2003 (equipment), CISG-Online 978 (Pace) – Art. 6, para. 18 16 June 2003, 135/2002, CISG-Online 977 (Pace) – Art. 84, para. 10 16 April 2003, 99/2002, CISG-Online 1683 (Pace) – Art. 84, para. 12 10 December 2002, 211/2001, CISG-Online 942 (Pace) – Art. 88, para. 38 11 October 2002, CISG-Online 893 (Pace) – Art. 6, para. 18

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Table of Cases 24 January 2002 (case iron products), CISG-Online 88 (Pace) – Art. 60, para. 5 13 June 2000, CISG-Online 1083 (Pace), 280/1999 – Art. 81, paras 7, 8 6 June 2000, CISG-Online 1249 (Pace) – Art. 4, para. 30; Art. 74, paras 33, 46; Art. 75, para. 4; Art. 78, para. 23 29 February 2000, in: Rozenberg (ed.), Praktika Mezhdunarodnogo Kommercheskogo Arbitrazhnogo Suda pri TPP RF za 1999–2000gg. (2002), p. 233 seq. – Art. 71, paras 3, 18, 40, 41 10 February 2000, No. 340/1999, CISG-Online 1084 (Pace) – Art. 88, para. 26 24 January 2000, 54/1999, CISG-Online 1042 (Pace) – Art. 6, para. 16; Art. 38, para. 116; Art. 44, para. 9; Art. 75, para. 7; Art. 76, para. 7 17 January 2000 (Pace) – Art. 9, para. 10 27 July 1999, CISG-Online 779 (Pace) – Art. 7, para. 27; Art. 71, paras 20, 38; Art. 77, paras 9, 22 7 June 1999 (Pace), 238/1998 – Art. 72, paras 11, 19 24 November 1998 (equipment), CISG-Online 1525 (Pace) – Art. 7, para. 28 25 May 1998 (Pace) – Art. 71, paras 20, 35 5 March 1998, 160/1997, (Pace) – Art. 81, para. 8 16 February 1998, CISG-Online 1303 (Pace) – Art. 12, para. 7; Art. 55, para. 5; Art. 96, para. 5 22 January 1998, 102/1997 (Pace) – Art. 71, para. 55 21 January 1998, 99/1997, CISG-Online 1246 (Pace) – Art. 41, para. 27 10 January 1998, CISG-Online 2122 (Pace) – Art. 4, para. 26; Art. 74, para. 38 25 December 1997 (Pace), 53/1997 – Art. 84, para. 12 5 June 1997, CISG-Online 1247 (Pace) – Art. 4, para. 26; Art. 9, paras 25, 36; Art. 74, para. 49 29 May 1997 (Pace), 439/1995 – Art. 84, para. 12 11 May 1997, 2/1995, CISG-Online 1514 (Pace) – Art. 79, para. 82; Art. 81, para. 19 3 March 1997, 82/1996, CISG-Online 1298 (Pace) – Art. 81, para. 14 25 December 1996 (Pace) – Art. 9, para. 38 25 April 1996 (Pace), 72/1995 – Art. 84, para. 12 10 February 1996 (Pace) – Art. 85, para. 19 19 December 1995 (Pace), 133/1999 – Art. 84, para. 12 13 December 1995, CISG-Online 1368 (Pace) – Art. 79, para. 63 1 December 1995 (Pace), 22/1995 – Art. 84, para. 12 22 November 1995 (Pace) – Art. 55, para. 5 17 October 1995 (automatic diffractameter), CISG-Online 207 (Pace) – Art. 54, paras 3, 6; Art. 79, para. 23 28 April 1995, (Pace) – Art. 13, para. 11 25 April 1995, 161/1994 (Pace) – Art. 72, paras 11, 17; Art. 81, para. 7 25 April 1995, 142/1995, CISG-Online 367 (Pace) – Art. 88, paras 20, 37 16 March 1995 (chemical products), CISG-Online 205 (Pace) – Art. 75, para. 14; Art. 79, paras 64, 99 3 March 1995, CISG-Online 204 (Pace) – Art. 14, para. 36; Art. 55, paras 3, 4 1 January 1995 (chemical fertilizer), ICC 8128/1995, CISG-Online 526 (Pace) – Art. 79, para. 66 21 April 1994, (Pace) – Art. 74, para. 70 15 April 1994, 1/1993, CISG-Online 449 (Unilex) – Art. 84, paras 12, 13 9 June 2004, CISG-Online 1239 (Pace) – Art. 4, para. 17, 26, 30 142/1994, CISG-Online 367 (Pace) – Art. 88, para. 14 Tribunal of International Commercial Arbitration at the Ukraine Chamber of Commerce and Trade 23 January 2012 (corn), CISG-Online 2556 – Art. 31, para. 52; Art. 79, para. 90 1 January 2005, 48/2005, CISG-Online 1372 (Pace) – Art. 71, paras 38, 40; Art. 77, para. 15 15 April 2004, CISG-Online 1103 (Pace) – Art. 4, paras 11, 30 10 October 2003 (barter transactions), CISG-Online 923/1268 (Pace) – Art. 1, para. 30 21 June 2002 (equipment), CISG-Online 922/1387 (Pace) – Art. 80, para. 11 18 November 2004 (manufactured articles), CISG-Online 1371 – Art. 49, para. 31 Others 12 December 2007 (frozen chicken parts), AAA 50181T 0 036406, Macromex Srl. v Globex International Inc., CISG-Online 1647 (Pace) – Art. 26, para. 7; Art. 29, para. 8 23 October 2007 (frozen chicken parts), interim arbitral award, American Arbitration Association, Macromex Srl. v Globex International Inc., CISG-Online 1645 (Pace) – Art. 7, paras 19, 35, 43; Art. 25, para. 34; Art. 9, para. 10; Art. 74, para. 29; Art 79, para. 57 ¨ retim ve Ticaret Limited Sirketi v 19 January 2007, PSEG Global Inc. and Konya Ilgin Elektrik U Republic of Turkey (ICSID Case No. ARB/02/5) – Art. 78, para. 29 17 January 2007, Siemens A. G. v Argentine Republic (ICSID Case No. ARB/02/8) – Art. 78, para. 29 30 November 2006 (Unilex), Centro de Arbitraje de Me´xico – Art. 79, para. 51

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Table of Cases 2 October 2006, ADC Affiliate Limited and ADC & ADMC Management Limited v Republic of Hungary (ICSID Case No. ARB/03/16) – Art. 78, para. 29 14 July 2006, Azurix Corp. v Argentine Republic (ICSID Case No. ARB/01/12) – Art. 78, para. 29 26 May 2003 (coal), Federal Arbitration Court for the Moscow Region (Russia), CISG-Online 836 (Pace) – Art. 1, para. 30; Art. 4, para. 11 6 August 2002, Arbitration Court [Appellate Court] for the Western Siberia Circuit (Russia), O. I. L. Otto International Leasing AG v Zernopererabatyvayuschy kombinat Barnaulskaya melnitsa (Pace) – Art 71, paras 13, 26; reversed later by High Arbitration Court for Presidium of Supreme Arbitration Court (Russia) 28 January 2003, CISG-Online 835 – Art. 41, para. 34 28 September 2001 (steel wire, nails and wire rod), Chamber of National and International Arbitration of Milan (Italy), CISG-Online 1582 (Unilex) (Pace) – Art. 4, para. 39; Art. 10, para. 37; Art. 71, para. 31; Art. 73, paras 6, 23; Art. 80, para. 6 25 May 2001, Foreign Trade Arbitration Court attached to the Yugoslav Chamber of Commerce in Belgrade, Serbia T-15/01 (Pace) – Art. 88, para. 15 8 December 2000, Wena Hotels Limited v Arab Republic of Egypt (ICSID Case No. ARB/98/4) – Art. 78, paras 11, 29 13 November 2000, Agustı´n Maffezini v Kingdom of Spain (ICSID Case No. ARB/97/7) – Art. 78, para. 29 17 February 2000, Santa Elena S. A. v Republic of Costa Rica (ICSID Case No. ARB/96/1) – Art. 78, para. 29 29 December 1998 (cheese), Schiedsgericht der Hamburger freundlichen Arbitrage, CISG-Online 638 (Pace) – Art. 1, para. 26; Art. 6, para. 21; Art. 49, para. 32; Art. 57, para. 8; Art. 73, paras 10, 12, 19; Art. 84, para. 12 18 December 1998, Russian Maritime Commission Arbitral Tribunal (military submarine), CISGOnline 1588 (Pace) – Art. 2, para. 39 30 November 1998 (sweets), Comisio´n para. la Proteccio´n del Comercio Exterior de Me´xico, Dulces Luisi v Seoul International, CISG-Online 504 (Pace) – Art. 7, paras 3, 26, 28; Art. 11, para. 8; Art. 54, para. 1 1 January 1998 (steel bars), 107/1997, Arbitration Institute of the Stockholm Chamber of Commerce, CISG-Online 1301 (Pace) – Art. 74, para. 45 10 December 1997 (barley), Schiedsgericht der Bo¨rse fu¨r landwirtschaftliche Produkte Wien (Austria), CISG-Online 351 (Pace) – Art. 9, para. 4; Art. 35, para. 197; Art. 38, para. 32; Art. 39, para. 102; Art. 72, paras 9, 15, 27; Art. 73, paras 7, 18, 19, 29, 36 25 March 1997 (onions), Presidium of the Supreme Arbitration Court of the Russian Federation, 4670/ 96, CISG-Online 1224 (Pace) – Art. 12, para. 7 31 May 1996 (aluminium), Handelskammer Zu¨rich, Soinco v NKAP, CISG-Online 1291 (Pace), ZHK 273/95 – Art. 4, paras 23, 37; Art. 28, para. 2; Art. 72, para. 28; Art. 73, paras 5, 6, 7, 19, 23, 29; Art. 80, para. 3 21 March 1996, Schiedsgericht der Handelskammer Hamburg, CISG-Online 187 (Pace) – Art. 79, para. 69 5 October 1995 (refrigerators and deep-freezers), Belarusian Chamber of Commerce and Industry International Court of Arbitration (Belarus), ATT v Armco, CISG-Online 861 (Pace) – Art. 71, paras 3, 20, 37, 41, 55; Art. 80, para. 3 19 April 1994, ad hoc Florence (leather/textile wear), CISG-Online 124 (Pace) – Art. 1, para. 51; Art. 6, para. 18 4 May 1993 (garlic), Comisio´n para. la Proteccio´n del Comercio Me´xico, CISG-Online 75 (Pace) – Art. 11, paras 1, 17; Art. 84, para. 15 22 April 1986, McCollough & Co., Inc. v Ministry of Post, Tel. & Tel., 11 Iran-U. S. Cl. Trib. Rep. 3 (1986) – Art. 78, para. 11

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Abbreviations AAA ....................................... ABA ....................................... AC .......................................... AIA ........................................ ALI ......................................... All ER .................................... ALR ........................................ Art(s) ..................................... ASA ........................................ ATF ........................................ BCSC ..................................... BGB ....................................... BGE ....................................... BGHZ .................................... Brussels Convention .......... Brussels Regulation ............ C&F ....................................... CA .......................................... CAMCA ................................ Cc ........................................... CCI ........................................ CCP ....................................... CEPANI ................................ Cf ............................................ CFR ........................................ Ch D ...................................... CIETAC ................................ CIF ......................................... CIP ......................................... Cir .......................................... CISG ...................................... CISG-AC .............................. CISG-Online ........................ Civ .......................................... CLOUT ................................. CLR ........................................ Clunet .................................... CMEA ................................... CMI ....................................... CMR ...................................... COD ...................................... COM ...................................... Compromex ......................... Corp ....................................... CPC ....................................... CPR ........................................ CPT ........................................ CRCICA ............................... Ct ............................................ Ct App .................................. CTO ....................................... DAF ....................................... DAP .......................................

American Arbitration Association American Bar Association Law Reports, House of Lords (Appeal Cases) Italian Arbitration Association American Law Institute All England Law Reports Australian Law Reports Article(s) Swiss Arbitration Association Arreˆts du Tribunal Fe´de´ral Suisse British Columbia Supreme Court Bu¨rgerliches Gesetzbuch (German Civil Code) Entscheidungen des schweizerischen Bundesgerichts Sammlung der Entscheidungen des Bundesgerichtshofs in Zivil-sachen Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters Cost and Freight Court of Appeal of England and Wales Commercial Arbitration and Mediation Centre for the Americas Code civil, Codice civile, Civil code, Co´digo civil Chamber of Commerce and Industry of the Russian Federation Code of Civil Procedure Belgian Centre for Arbitration and Mediation confer Cost and Freight Chancery Division China International Economic and Trade Arbitration Commission Cost, Insurance, Freight Carriage and Insurance Paid Circuit UN Convention on Contracts for the International Sale Goods of 11 April 1980 Advisory Council of the CISG CISG Database based at the University of Basel www.cisg-online.ch Cour de Cassation, Chambre civile Case Law on UNCITRAL Texts Commonwealth Law Reports Journal de droit international Council of Mutual Economic Assistance Comite´ Maritime International UN Convention on the Contract for the International Carriage of Goods by Road of 19 May 1956 Cash On Delivery EC document intended for communication to the public Mexican Commission for the Protection of Foreign Trade Corporation Codice di Procedura Civile, Code de Procedure Civile Civil Procedure Rules (England) Carriage Paid To Cairo Regional Centre For International Commercial Arbitration Court Court of Appeals Combined Transport Operator Delivered At Frontier Delivered At Place

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Abbreviations DAT ....................................... DCFR .................................... DDP ....................................... DDU ...................................... DEQ ....................................... DES ........................................ DIS ......................................... Dist ........................................ EC .......................................... ECB ........................................ ECE ........................................ ECHR .................................... ECJ ......................................... ECOSOC .............................. ED .......................................... ed(s) ....................................... EDI ......................................... EDF ........................................ EEC ........................................ Eg ........................................... EGBGB .................................. ER ........................................... et al ........................................ et seq ..................................... etc ........................................... EU .......................................... eUCP ..................................... EWCA Civ ........................... EWiR ..................................... Ex ........................................... EXW ...................................... F .............................................. F 2d ........................................ F 3d ........................................ FAA ....................................... FAS ........................................ FCA ....................................... FIDIC .................................... FOB ........................................ FS ........................................... F Supp ................................... GAFTA ................................. GDR ....................................... HGB ....................................... HKHC ................................... HKIAC .................................. HL .......................................... IACAC .................................. IBA ......................................... IBA Rules ............................. Ibid ......................................... ICAC ..................................... ICC ........................................ ICC Bulletin ......................... ICCA ..................................... ICDR ..................................... ICSID .................................... Idem ......................................

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Delivered At Terminal Draft Common Frame of Reference Delivered Duty Paid Delivered Duty Unpaid Delivered Ex Quay Delivered Ex Ship Deutsche Institution fu¨r Schiedsgerichtsbarkeit District European Community European Central Bank Economic Commission for Europe European Convention on Human Rights Court of Justice of the European Communities United Nations Economic and Social Council Eastern District editor(s), edition Electronic Data Interchange European Development Fund European Economic Community for example Einfu¨hrungsgesetz zum BGB English Reports and others and following etcetera European Union Supplement to the Uniform Customs and Practice for Documentary Credits for Electronic Presentation Neutral citation for England and Wales Court of Appeal civil division decisions Entscheidungen zum Wirtschaftsrecht Court of Exchequer Ex Works Federal Reporter The Federal Reporter Second Series The Federal Reporter Third Series United States Federal Arbitration Act Free Alongside Ship Free Carrier Fe´de´ration Internationale des Inge´nieurs-Conseils Free on board Festschrift Federal Supplement Grain and Feed Trade Association German Democratic Republic Handelsgesetzbuch Hong Kong High Court Hong Kong International Arbitration Centre House of Lords Inter-American Commercial Arbitration Commission International Bar Association IBA Rules on the taking of Evidence in International Commercial Arbitration ibidem Moscow International Commercial Arbitration Court International Chamber of Commerce International Chamber of Commerce International Court of Arbitration Bulletin International Council for Commercial Arbitration American Arbitration Association International Center for Dispute Resolution International Centre for the Settlement of Investment Disputes the same person

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Abbreviations Ie ............................................. IHR ........................................ ILR ......................................... Incoterms ............................. IPR ......................................... IPRax ..................................... JCAA ..................................... JDI .......................................... KB .......................................... LCIA ...................................... LG .......................................... LJ ............................................ LMAA ................................... LT ........................................... Ltd .......................................... MERCOSUR ........................ Model Law ........................... MR ......................................... Mu¨nchKomm ...................... Mu¨nchKommHGB ............. NAI ........................................ NCPC .................................... ND ......................................... New York Convention ...... NJW ....................................... No(s) ..................................... NSWLR ................................. NZLJ ...................................... OECD .................................... OGH ...................................... OHADA ............................... OJ ........................................... OLG ....................................... OR .......................................... p, pp ...................................... Pace ........................................ PC .......................................... PCA ....................................... PECL ..................................... PICC ...................................... PIL ......................................... PIL Sales Convention ........ QBD ....................................... RabelsZ ................................. Reg ......................................... Rev Arb ................................. Rev crit dip .......................... RIW ....................................... Rome Convention .............. RPS ........................................ RSC ........................................ S Ct ........................................ s(s) ......................................... SCC ........................................ SchiedsVZ ............................ SchwZIER ............................. sec ..........................................

id est Internationales Handelesrecht (law journal) International Law Reports ICC International Commercial Terms revised in 2010 Internationales Privatrecht Praxis des internationalen Privat- und Verfahrensrechts Japan Commercial Arbitration Association Journal du Droit International (Clunet) King’s Bench Division London Court of International Arbitration Landgericht Lord Justice London Maritime Arbitration Association Law Times Reports Limited Common Market of the Southern Cone pursuant to the Treaty of Asuncio´n of 26 March 1991 UNCITRAL Model Law on International Commercial Arbitration adopted 21 June 1985 Master of the Rolls Mu¨nchener Kommentar zum Bu¨rgerlichen Gesetzbuch Mu¨nchener Kommentar zum Handelsgesetzbuch Netherlands Arbitration Institute French Code of Civil Procedure (Nouveau Code de Procedure Civile) Northern District UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 Neue Juristische Wochenschrift number(s) New South Wales Law Reports New Zealand Law Journal Organisation for Economic Co-operation and Development Oberster Gerichtshof (Austrian Supreme Court) Organization for the Harmonization of Business Law in Africa Official Journal of the European Communities Oberlandesgericht (Court of Appeal) Official Records page, pages Albert H Kritzer CISG Database based at Pace University: www.cisg.law.pace.edu Privy Council Permanent Court of Arbitration (The Hague) Principles of European Contract Law UNIDROIT Principles of International Commercial Contracts (Swiss) Private International Law Convention on the Law Applicable to Contracts for the International Sale of Goods of 22 December 1986 Queen’s Bench Division Rabels Zeitschrift fu¨r ausla¨ndisches und internationales Privatrecht Regulation Revue de l’arbitrage Revue critique de droit international prive´ Recht der Internationalen Wirtschaft EC (Rome) Convention on the Law Applicable to Contractual Obligations 1980 Recht und Praxis der Schiedsgerichtsbarkeit Rules of Supreme Court Supreme Court of the United States section(s) Stockholm Chamber of Commerce Arbitration Institute Zeitschrift fu¨r Schiedsverfahren Schweizeriche Zeitschrift fu¨r internationals und europa¨isches Recht Section

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Abbreviations SGA ....................................... SIAC ...................................... TRIPS .................................... UCC ....................................... UCP ....................................... UKPC .................................... ULF ........................................ ULIS ....................................... UN ......................................... UNCITRAL .......................... UNIDROIT .......................... UNILEX ................................ US, USA ............................... USSR ...................................... v .............................................. vol .......................................... WG ........................................ WIPO .................................... WLR ...................................... WM ....................................... WR ......................................... WTO ..................................... WuB ...................................... YB .......................................... YBCA .................................... ZBB ........................................ ZfRV ...................................... ZIP ......................................... ZPO ....................................... ZVglRwiss ............................

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Sale of Goods Act Singapore International Arbitration Centre Agreement on Trade Related Aspects of Intellectual Property Rights Uniform Commercial Code Uniform Customs and Practices relating to Documentary Credits Neutral citation for decisions of the Privy Council Uniform Law on the Formation of Contracts for the International Sale of Goods of 1 July 1964 Uniform Law on the International Sale of Goods of 1 July 1964 United Nations United Nations Commission for International Trade Law International Institute for the Unification of Private Law International Case Law and Bibliography on the CISG and the UNIDROIT Principles: http://www.unilex.info/ United States of America Union of Soviet Socialist Republics Versus Volume Working Group World Intellectual Property Organisation The Weekly Law Reports Wertpapier-Mitteilungen Weekly Reporter World Trade Organization Entscheidungssammlung zum Wirtschafts- und Bankrecht UNCITRAL Yearbook Yearbook of Commercial Arbitration Zeitschrift fu¨r Bankrecht und Bankwirtschaft Zeitschrift fu¨r Rechtsvergleichung Zeitschrift fu¨r Wirtschaftsrecht und Insolvenzpraxis German Code of Civil Procedure (ZPO) Zeitschrift fu¨r vergleichende Rechstwissenschaften

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Abbreviated bibliography Audit, Vente Internationale (1990) ................................................... Author, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012) .................................. Author, in: BeckOK BGB Kommentar (2015) ..................................... Benjamin’s Sale of Goods (2006) ... Benjamin’s Sale of Goods (2010) ... Bernstein/Lookofsky, Understanding the CISG (2003) .......................... Bernstein/Lookofsky, Understanding the CISG (2012) .......................... Author, in: Bianca/Bonell, Commentary (1987) .................................. Bonell, Restatement (1997) .............. Bonell, Restatement (2005) .............. Bridge, Sale of Goods (1997) .......... Bridge, Sale of Goods (2009) .......... Bridge, International Sale of Goods (2013) ................................................... Author, in: Brunner, Kommentar (2014) ...................................................

Author, in: Festschrift fu¨r Ingeborg Schwenzer zum 60. Geburtstag (2011) ................................................... Author, in Dı´ez-Picazo, Comentario (1998) ............................ Author, in: DiMatteo, International Sales Law: A Global Challenge (2014) ........................................

Audit, Bernard, La vente internationale de marchandises, Convention des Nations Unies du 11 avril 1980 (LGDJ: Paris, 1990) Bamberger, Heinz Georg, Roth, Herbert (eds.), BGB, Kommentar, 3rd edition (C.H. Beck: Mu¨nchen 2012) Beck’scher Online-Kommentar, BGB, Bamberger, Heinz Georg, Roth, Herbert (eds.) 36th edition (C.H. Beck: Mu¨nchen 2015) Benjamin’s Sale of Goods, 7th edition (Sweet & Maxwell: London, 2006, A. Guest et al, eds) Benjamin’s Sale of Goods, 8th edition (Sweet & Maxwell: London, 2010, M. Bridge, ed.) Bernstein, Herbert/Lookofsky, Joseph, Understanding the CISG in Europe, 2nd edition (Kluwer: The Hague/London/New York, 2003) Bernstein, Herbert/Lookofsky, Joseph, Understanding the CISG in Europe, 4th edition (Kluwer: The Hague/London/New York, 2012) Bianca, C. M./Bonell, M. J., Commentary on the International Sales Law: The 1980 Vienna Sales Convention (Giuffre`: Milan, 1987) Bonell, Michael Joachim, An International Restatement of Contract Law, 2nd enlarged edition (Transnational Publishers: Irvington-onHudson, 1997) Bonell, Michael Joachim, An International Restatement of Contract Law, 3rd enlarged edition (Transnational Publishers: Irvington-onHudson, 2005) Bridge, Michael G., The Sale of Goods (Clarendon Press: Oxford, 1997) Bridge, Michael G., The Sale of Goods, 2nd edition (Oxford University Press: Oxford, 2009) Bridge, Michael G., The International Sale of Goods, 3rd edition (Oxford University Press: Oxford, 2013) Brunner, Christoph, UN-Kaufrecht – CISG, Kommentar zum ¨ bereinkommen der Vereinten Nationen u¨ber Vertra¨ge u¨ber den U internationalen Warenkauf von 1980, 2nd edition (Sta¨mpfli: Bern, 2014) Bu¨chler, Andrea/Mu¨ller-Chen, Markus (eds.), Festschrifft fu¨r Ingeborg Schwenzer zum 60. Geburstag (Sta¨mpfli Verlag AG: Bern 2011) Dı´ez-Picazo y Ponce de Leon, Luis (ed.), La compraventa internacional de mercaderı´as: comentario de la Convencio´n de Viena (Civitas: Madrid, 1998) DiMatteo, Larry A. (ed.), International Sales Law: A Global Challenge (Cambridge University Press: 2014)

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Abbreviated bibliography Author, in: Di Matteo/Janssen/ Magnus/Schulze, International Sales Law (2016) ................................ Eckert/Maifeld/Matthiessen, Handbuch des Kaufrechts (2014) ............ Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991) ... Enderlein/Maskow, International Sales Law (1992) ................................

Author, in: Ensthaler, HGB- Gemeinschaftskommentar mit UNKaufrecht (2015) ................................ Author, in: Felemegas, An International Approach to the Interpretation of the CISG (2007) ...................

Author, in: Ferrari, The 1980 Uniform Sales Law (2003) ...................... Author, in: Ferrari/Flechtner/ Brand, Draft Digest and Beyond (2003) ................................................... Author, in: Ferrari et al., Internationales Vertragsrecht (2012) .........

Ferrari/Torsello, International Sales Law—CISG (2014) ............................ Author, in: Flechtner/Brand/ Walter, Drafting Contracts (2007) . Gabriel, Sale of Goods (2004) ......... Garro/Zuppi, Compraventa internacional (1990) ..................................

Garro/Zuppi, Compraventa Internacional (2012) ..................................

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DiMatteo, Larry A./Janssen, Andre´/Magnus, Ulrich,/Schulze, Reiner, International Sales Law: Contract, Principles & Practice (C.H. Beck/Hart/Nomos: 2016) Eckert, Hans-Werner/Maifeld, Jan/Matthiessen Michael, Handbuch des Kaufrechts – Der Kaufvertrag nach Bu¨rgerlichem Recht, Handelsrecht und UN-Kaufrecht, 2nd ed. (C. H. Beck: Mu¨nchen, 2014) Enderlein, Fritz/Maskow, Dietrich/Strohbach, Heinz, Internationales Kaufrecht (Haufe: Berlin, 1991) Enderlein, Fritz/Maskow, Dietrich, 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 (Oceana: New York, 1992) Ensthaler Ju¨rgen (ed.), HGB-Gemeinschaftskommentar zum Handelsgesetzbuch mit UN-Kaufrecht, 8th ed. (Luchterhand: 2015) Felemegas, John (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 (Cambridge University Press, Cambridge: 2007) Ferrari, Franco, The 1980 Uniform Sales Law – Old Issues – Revisited in the Light of Recent Experiences (Sellier European Law Publishers: Mu¨nchen, 2003) Ferrari, Franco/Flechtner, Harry/Brand, Ronald A., The Draft UNCITRAL Digest and Beyond (Sellier European Law Publishers: Mu¨nchen, 2004) Ferrari, Franco/Kieninger, Eva Maria/Mankowski, Peter/Otte, Karsten/Saenger, Ingo/Schulze, Go¨tz/Staudinger, Ansgar, Internatio¨ , 2nd edition nales Vertragsrecht: EGBGB, CISG, CMR, FactU (C. H. Beck: Mu¨nchen, 2012) Ferrari, Franco/Torsello, Marco, International Sales Law – CISG – in a Nutshell (West Academic Publishing: St. Paul 2014) Flechtner, Harry M./Brand, Ronald A./Walter, Mark S. (eds), Drafting Contracts Under The CISG (Oxford University Press: New York, 2007) Gabriel, Henry, Contracts for the Sale of Goods – A Comparison of Domestic and International Law (Oceania: New York, 2004) Garro, Alejandro/Zuppi, Alberto, Compraventa internacional de mercaderı´as: el proceso de unificacio´n en la venta internacional de cosas muebles, naturaleza jurı´dica, estructura e interpretacio´n (La Rocca: Buenos Aires, 1990) Garro, Alejandro/Zuppi, Alberto, Compraventa internacional de mercaderı´as: La Convencion de Viena de 1980 (AbeledoPerrot: Buenos Aires 2012)

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Abbreviated bibliography Gillette/Walt, UN-Convention (2014) ................................................... Gillette/Walt, UN Convention (2016) ................................................... Gillette/Walt, Sales Law (2016) ...... Herber/Czerwenka, Kommentar (1991) ...................................................

Heuze´, Vente Internationale (2000) ................................................... Honnold, Documentary History (1989) ................................................... Honnold, Uniform Law (1999) ...... Honnold/Flechtner, Uniform Law (2009) ................................................... Author, in: Honsell, Kommentar (1997) ................................................... Author, in: Honsell, Kommentar (2010) ................................................... Author, in: Huber/Mullis, The CISG (2007) ........................................ llescas Ortiz/Perales Viscasillas, Derecho Mercantil Internacional (2003) ................................................... Author, title of contribution, in: Janssen/Meyer, CISG Methodology (2009) ................................................... Karollus, UN-Kaufrecht (1991) ...... Author in: Kritzer/Vanto/Vanto/ Eiselen, International Contract Manual ................................................. Author, in: Lookofsky/Andersen (eds) The CISG Convention (2014) ...................................................

Gillette, Clayton P./Walt, Steven D., The UN Convention on Contracts for the International Sale of Goods: Practice and Theory, 1st edition (LexisNexis: 2014) Gillette, Clayton P./Walt, Steven D., The UN Convention on Contracts for the International Sale of Goods: Theory and Practice, 2nd edition (Cambridge University Press: 2016) Gillette, Clayton P./Walt, Steven D, Sales Law: Domestic and International, 3rd ed. (Foundation Press: 2016) Herber, Rolf/Czerwenka, Beate, Internationales Kaufrecht: Kom¨ bereinkommen der Vereinten Nationen vom mentar zu dem U 11. April 1980 u¨ber Vertra¨ge u¨ber den internationalen Warenkauf (C. H. Beck: Mu¨nchen, 1991) Heuze´, Vincent, La Vente Internationale de Marchandises – Droit Uniforme (LGDJ: Paris, 2000) Honnold, John, Documentary History of the Uniform Law for International Sales (Kluwer: The Hague/London/New York, 1989) Honnold, John, Uniform Law for International Sales Under the 1980 United Nations Convention, 3rd edition (Kluwer: The Hague, 1999) Honnold, John/Flechtner, Harry M., Uniform Law for International Sales Under the 1980 United Nations Convention, 4th edition (Kluwer: The Hague, 2009) ¨ bereinkomHonsell, Heinrich, Kommentar zum UN-Kaufrecht: U men der Vereinten Nationen u¨ber Vertra¨ge u¨ber den Internationalen Warenkauf (CISG) (Springer: Berlin/New York, 1997) ¨ bereinkommen der Honsell, Kommentar zum UN-Kaufrecht: U Vereinten Nationen u¨ber Vertra¨ge u¨ber den Internationalen Warenkauf (CISG), 2nd edition (Springer: Berlin/New York, 2010) Huber, Peter/Mullis, Alastair, The CISG – a new textbook for students and practitioners, (Sellier European Law Publishers: Mu¨nchen, 2007) Illescas Ortiz Rafael/Perales Viscasillas, Pilar, Derecho Mercantil Internacional. El Derecho Uniforme (Cerasa: Madrid, 2003) Janssen, Andre´/Meyer, Olaf (eds), CISG Methodology (Sellier European Law Publishers: Mu¨nchen, 2009) Karollus, Martin, UN-Kaufrecht. Eine systematische Darstellung fu¨r Studium und Praxis (Springer Verlag: Wien 1991) Kritzer, Albert H./Vanto, Jarno/Vanto, Jessica/Eiselen, Sieg, International Contract Manual, Volume 4 (Loose-leaf), (Thomson West: Rochester, 2008) Lookofsky, Joseph/Andersen, Mads Bryde (eds), The CISG Convention and Domestic Contract Law – Harmony, Cross-Inspiration or Discord? (Djøf Publishing, Copenhagen 2014)

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Abbreviated bibliography Author, in: Mu¨nchKommBGB (2007) ................................................... Author, in: Mu¨nchKommBGB (2012) ................................................... Author, in: Mu¨nchKommBGB (2015) ...................................................

Author, in: Mu¨nchKommBGB (2016) ................................................... Author, in: Mu¨nchKommHGB (2013) ................................................... Author, Compraventa Internacional (2003) .................................. Lookofsky, Understanding the CISG (2012) ........................................ Neumann, The duty to cooperate in international sales (2011) ........... Neumayer/Ming, Convention de Vienne (1993) ..................................... Piltz, Compraventa internacional (1998) ................................................... Piltz, Internationales Kaufrecht (2008) ................................................... Rabel, Warenkauf 1 (1957); Rabel, Warenkauf 2 (1958) .......................... Author, in Reimann/Zimmermann, Oxford Handbook (2006) ... Schlechtriem, Internationales UNKaufrecht (2007) ................................ Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) ... Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2016) ............. Schlechtriem/Butler, CISG (2009) ..

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Mu¨nchener Kommentar zum Bu¨rgerlichen Gesetzbuch: Vol. 3 Schuldrecht: Besonderer Teil – §§ 433–610, CISG, Kru¨ger/Westermann (eds), 5th edition (C. H. Beck: Mu¨nchen, 2007) Mu¨nchener Kommentar zum Bu¨rgerlichen Gesetzbuch: Vol. 3 Schuldrecht: Besonderer Teil – §§ 433–610, CISG, Kru¨ger/Westermann (eds), 6th edition (C. H. Beck: Mu¨nchen, 2012) Mu¨nchener Kommentar zum Bu¨rgerlichen Gesetzbuch: Vol. 10 Internationales Privatrecht I – Europa¨isches Kollisionsrecht, Einfu¨hrungsgesetz zum Bu¨rgerlichen Gesetzbuche (Art. 1–24), von Hein (ed), 6th edition (C. H. Beck: Mu¨nchen, 2015) Mu¨nchener Kommentar zum Bu¨rgerlichen Gesetzbuch: Vol. 3 Schuldrecht: Besonderer Teil – §§ 433–610, CISG, Westermann (ed), 7th edition (C. H. Beck: Mu¨nchen, 2016) Mu¨nchener Kommentar zum Handelsgesetzbuch: Vol 5: 4. Buch. Handelsgescha¨fte: §§ 343–406, CISG, B. Grunewald (ed), 3rd edition (C. H. Beck: Mu¨nchen, 2013) Larroumet et al., Compraventa internacional de mercaderı´as. Comentarios a la Convencio´n de Viena de 1980. Coleccio´n Seminarios, n\ho15 (Pontificia Universidad Javeriana: Bogata´, 2003) Lookofsky, Joseph, Understanding the CISG, 4th (Worldwide) edition (Wolters Kluwer: The Netherlands, 2012) Neumann, Thomas, The duty to cooperate in international sales. The scope and scale of Art. 80 CISG (Sellier: Munich, 2012) Neumayer, Karl H./Ming, Catherine, Convention de Vienne sur les contrats de vente internationale de merchandises: Commentaire (CEDIDAC: Lausanne, 1993) Piltz, Burghard, Compraventa internacional. Convencio´n de Vienas sobre compraventa internacional de mercancı´as de 1980 (Astrea: Buenos Aires, 1998) Piltz, Burghard, Internationales Kaufrecht – Das UN-Kaufrecht in praxisorientierter Darstellung, 2. Auflage (C. H. Beck: Mu¨nchen, 2008) Rabel, Ernst, Das Recht des Warenkaufs: Eine rechtsvergleichende Darstellung, Vol. 1 (de Gruyter: Berlin/Leipzig, 1957), Vol. 2 (de Gruyter: Berlin/Mohr: Tu¨bingen, 1958) Reimann, Mathias/Zimmermann, Reinhard, The Oxford Handbook of Comparative Law (Oxford University Press: Oxford, 2006) Schlechtriem, Peter, Internationales UN-Kaufrecht, 4th edition, (Mohr Siebeck: Tu¨bingen, 2007) Schlechtriem, Peter/Schroeter, Ulrich G., Internationales UN-Kaufrecht, 5th edition (Mohr Siebeck 2013) Schlechtriem, Peter/Schroeter, Ulrich G., Internationales UN-Kaufrecht, 6th edition (Mohr Siebeck 2016) Schlechtriem, Peter/Butler, Petra, UN Law on International Sales – The UN Convention on the International Sale of Goods (Springer: Heidelberg, 2009)

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Abbreviated bibliography Author, in: Schlechtriem/ Schwenzer, Kommentar (German ed. 2004) ............................ Author, in: Schlechtriem/ Schwenzer, Commentary (2005) .... Author, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008) ..................................................... Author, in: Schlechtriem/ Schwenzer, Commentary (2010) .... Author, in: Schlechtriem/ Schwenzer, Kommentar (German ed. 2013) ............................ Author, in: Schlechtriem/ Schwenzer, Commentary (2016) .... Schroeter, UN-Kaufrecht und Europa¨isches Gemeinschaftsrecht (2005) ................................................... Author, in: Schwenzer/Atamer/ Butler, Current Issues in the CISG and Arbitration (2013) .....................

Schwenzer/Fountoulakis, International Sales Law (2007) ................ Schwenzer/Fountoulakis/Dimsey, International Sales Law (2012) ....... Schwenzer/Hachem/Kee, Global Sales and Contract Law (2012) ...... Author, in: Schwenzer/Spagnolo, Growing the CISG (2016) ............... Secretariat Commentary on 1978 Draft ..................................................... Spagnolo, CISG Exclusion and Legal Efficiency (2014) ..................... Magnus, in: Staudinger Kommentar (2013) ........................... Torsello, Common Features (2004)

Schlechtriem, Peter/Schwenzer, Ingeborg, Kommentar zum Einheitlichen UN-Kaufrecht: CISG, 4th edition (C. H. Beck: Mu¨nchen, 2004) Schlechtriem, Peter/Schwenzer, Ingeborg, Commentary on the UN Convention on the International Sale of Goods (CISG), 2nd edition (Oxford University Press: New York, 2005) Schlechtriem, Peter/Schwenzer, Ingeborg, Kommentar zum Einheitlichen UN-Kaufrecht: CISG, 5th edition (C. H. Beck: Mu¨nchen, 2008) Schlechtriem, Peter/Schwenzer, Ingeborg, Commentary on the UN Convention on the International Sale of Goods (CISG), 3rd edition (Oxford University Press: New York, 2010) Schlechtriem, Peter/Schwenzer, Ingeborg, Kommentar zum Einheitlichen UN-Kaufrecht: CISG, 6th edition (C. H. Beck: Mu¨nchen, 2013) Schlechtriem, Peter/Schwenzer, Ingeborg, Commentary on the UN Convention on the International Sale of Goods (CISG), 4th edition (Oxford University Press: New York, 2016) Schroeter,Ulrich G., UN-Kaufrecht und Gemeinschaftsrecht (Sellier European Law Publishers: 2005) Schwenzer, Ingeborg/Atamer, Yesim/Butler, Petra (eds.), International Commerce and Arbitration (Vol. 15), Current Issues in the CISG and Arbitration (Eleven Law International Publishing: The Hague 2013) Schwenzer, Ingeborg/Fountoulakis, Christiana, International Sales Law (Routledge Cavendish: London/New York, 2007) Schwenzer, Ingeborg/Fountoulakis, Christiana, Mariel, International Sales Law, 2nd ed. (Hart Publishing: Oxford 2012) Schwenzer, Ingeborg/Hachem, Pascal/Kee, Christopher, Global Sales and Contract Law, 1st edition (Oxford University Press 2012) Schwenzer, Ingeborg/Spagnolo, Lisa, Growing the CISG (Eleven Law International Publishing: The Hague 2016) Secretariat Commentary, in: Honnold, John, Documentary History of the Uniform Law for International Sales (Kluwer: The Hague/ London/New York, 1989) Spagnolo, Lisa, CISG Exclusion and Legal Efficiency (Kluwer Law International: The Hague/London/New York, 2014) Staudinger Kommentar zum Bu¨rgerlichen Gesetzbuch: Wiener UN-Kaufrecht (Sellier/deGruyter: Berlin, 2013) Torsello, Marco, Common Features of Uniform Commercial Law Conventions – A Comparative Study Beyond the 1980 Uniform Sales Law (Sellier European Law Publishers: Mu¨nchen, 2004)

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Abbreviated bibliography UNCITRAL, Digest of Case Law on the CISG ........................................ Author, in Vogenauer/Kleinheisterkamp, UNIDROIT Commentary (2008) ......................... Author, in: Witz/Salger/Lorenz, Kommentar (2000) ........................... Author, in: Witz/Salger/Lorenz, Kommentar (2016) ...........................

Zweigert/Ko¨tz, Comparative Law (1998) ...................................................

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UNCITRAL, Digest of Case Law on the United Nations Convention on the International Sale of Goods (New York, 2008) Vogenauer, Stefan/Kleinheisterkamp, Jan, Commentary on the UNIDROIT Principles of International Commercial Contracts (Oxford University Press: Oxford, 2008) Witz, Wolfgang/Salger, Hanns-Christian/Lorenz, Manuel, Internationales Einheitliches Kaufrecht: Praktiker-Kommentar und Vertragsgestaltung (Recht und Wirtschaft: Heidelberg, 2000) Witz, Wolfgang/Salger, Hanns-Christian/Lorenz, Manuel, Internationales Einheitliches Kaufrecht: Praktiker-Kommentar und Vertragsgestaltung, 2nd edition (Recht und Wirtschaft: Heidelberg, 2016) Zweigert, Konrad/Ko¨tz, Hein, An Introduction to Comparative Law, 3rd edition (Oxford University Press: Oxford, 1998)

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Status of the CISG1 State

Ratification, Accession, Approval, Acceptance or Succession

Entry into force

Albania

13 May 2009 (b)

1 June 2010

Argentina (a)

19 July 1983 (b)

1 January 1988

Armenia (a)

2 December 2008 (b)

1 January 2010

Australia

17 March 1988 (b)

1 April 1989

29 December 1987

1 January 1989

Azerbaijan

3 May 2016 (b)

1 June 2017

Bahrain

25 September 2013 (b)

1 October 2014

Belarus (a)

9 October 1989 (b)

1 November 1990

Belgium

31 October 1996 (b)

1 November 1997

Benin

29 July 2011 (b)

1 August 2012

Bosnia and Herzegovina

12 January 1994 (c)

6 March 1992

Brazil

4 March 2013 (b)

1 April 2014

Bulgaria

9 July 1990 (b)

1 August 1991

Burundi

4 September 1998 (b)

1 October 1999

Cameroon

11 October 2017 (b)

1 November 2018

Canada (d)

23 April 1991 (b)

1 May 1992

Austria

Signature

11 April 1980

Chile (a)

11 April 1980

7 February 1990

1 March 1991

China (e)

30 September 1981

11 December 1986 (f)

1 January 1988

Colombia

10 July 2001 (b)

1 August 2002

Congo

11 June 2014 (b)

1 July 2015

Costa Rica

12 July 2017 (b)

1 August 2018

Croatia (g)

8 June 1998 (c)

8 October 1991

Cuba

2 November 1994 (b)

1 December 1995

Cyprus

7 March 2005 (b)

1 April 2006

Czech Republic (h), (i)

30 September 1993 (c)

1 January 1993

14 February 1989

1 March 1990

7 June 2010 (b)

1 July 2011

Denmark (j) Dominican Republic

26 May 1981

1 As stated on the UNCITRAL website (http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/ 1980CISG_status.html) on 15 February 2018.

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Status of the CISG State

Ratification, Accession, Approval, Acceptance or Succession

Entry into force

Ecuador

27 January 1992 (b)

1 February 1993

Egypt

6 December 1982 (b)

1 January 1988

El Salvador

27 November 2006 (b)

1 December 2007

Estonia (k)

20 September 1993 (b)

1 October 1994

7 June 2017

1 July 2018

15 December 1987

1 January 1989

6 August 1982 (f)

1 January 1988

Gabon

15 December 2004 (b)

1 January 2006

Georgia

16 August 1994 (b)

1 September 1995

21 December 1989

1 January 1991

Greece

12 January 1998 (b)

1 February 1999

Guinea

23 January 1991 (b)

1 February 1992

Guyana

25 September 2014 (b)

1 October 2015

Honduras

10 October 2002 (b)

1 November 2003

16 June 1983

1 January 1988

Iceland (j)

10 May 2001 (b)

1 June 2002

Iraq

5 March 1990 (b)

1 April 1991

Israel

22 January 2002 (b)

1 February 2003

11 December 1986

1 January 1988

Japan

1 July 2008 (b)

1 August 2009

Kyrgyzstan

11 May 1999 (b)

1 June 2000

Latvia (a)

31 July 1997 (b)

1 August 1998

Lebanon

21 November 2008 (b)

1 December 2009

18 June 1981

1 January 1988

Liberia

16 September 2005 (b)

1 October 2006

Lithuania (a)

18 January 1995 (b)

1 February 1996

Luxembourg

30 January 1997 (b)

1 February 1998

Madagascar

24 September 2014 (b)

1 October 2015

Mauritania

20 August 1999 (b)

1 September 2000

Mexico

29 December 1987 (b)

1 January 1989

Fiji

Signature

26 May 1981

Finland (j) France

27 August 1981

Germany (l), (m)

26 May 1981

Ghana

11 April 1980

Hungary (a), (n)

Italy

Lesotho

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11 April 1980

30 September 1981

18 June 1981

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Ratification, Accession, Approval, Acceptance or Succession

Entry into force

Mongolia

31 December 1997 (b)

1 January 1999

Montenegro

23 October 2006 (c)

3 June 2006

13 December 1990 (o)

1 January 1992

22 September 1994 (b)

1 October 1995

20 July 1988

1 August 1989

Paraguay (a)

13 January 2006 (b)

1 February 2007

Peru

25 March 1999 (b)

1 April 2000

19 May 1995

1 June 1996

Republic of Korea

17 February 2004 (b)

1 March 2005

Republic of Moldova

13 October 1994 (b)

1 November 1995

Romania

22 May 1991 (b)

1 June 1992

Russian Federation (a), (p)

16 August 1990 (b)

1 September 1991

Saint Vincent and the Grenadines (i)

12 September 2000 (b)

1 October 2001

San Marino

22 February 2012 (b)

1 March 2013

Serbia (q)

12 March 2001 (c)

27 April 1992

16 February 1995

1 March 1996

Slovakia (h), (i)

28 May 1993 (c)

1 January 1993

Slovenia

7 January 1994 (c)

25 June 1991

Spain

24 July 1990 (b)

1 August 1991

State of Palestine

29 December 2017 (*)

1 January 2019

15 December 1987

1 January 1989

Switzerland

21 February 1990 (b)

1 March 1991

Syrian Arab Republic

19 October 1982 (b)

1 January 1988

The former Yugoslav Republic of Macedonia

22 November 2006 (c)

17 November 1991

Turkey

7 July 2010 (b)

1 August 2011

Uganda

12 February 1992 (b)

1 March 1993

Ukraine (a)

3 January 1990 (b)

1 February 1991

11 December 1986

1 January 1988

25 January 1999 (b)

1 February 2000

Netherlands

Signature

29 May 1981

New Zealand Norway (j)

Poland

Singapore (i)

Sweden (j)

United States of America (i) Uruguay

26 May 1981

28 September 1981

11 April 1980

26 May 1981

31 August 1981

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Signature

Uzbekistan Venezuela (Bolivarian Republic of) Viet Nam (a) Zambia

Ratification, Accession, Approval, Acceptance or Succession

Entry into force

27 November 1996 (b)

1 December 1997

18 December 2015 (b) 6 June 1986 (b)

1 January 2017 1 January 1988

28 September 1981

Parties: 89 (a) Declarations and reservations. This State declared, in accordance with articles 12 and 96 of the Convention, that any provision of article 11, article 29 or Part II of the Convention that allowed 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, would not apply where any party had his place of business in its territory. (b) Accession. (c) Succession. (d) Declarations and reservations. Upon accession, Canada declared that, in accordance with article 93 of the Convention, the Convention would extend to Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island and the Northwest Territories. (Upon accession, Canada declared that, in accordance with article 95 of the Convention, with respect to British Columbia, it will not be bound by article 1, paragraph (b), of the Convention. In a notification received on 31 July 1992, Canada withdrew that declaration.) In a declaration received on 9 April 1992, Canada extended the application of the Convention to Quebec and Saskatchewan. In a notification received on 29 June 1992, Canada extended the application of the Convention to the Yukon Territory. In a notification received on 18 June 2003, Canada extended the application of the Convention to the Territory of Nunavut. (e) Declarations and reservations. Upon approving the Convention, the People’s Republic of China declared that it did not consider itself bound by sub-paragraph (b) of paragraph (1) of article 1 and article 11, nor the provisions in the Convention relating to the content of article 11. (f) Approval. (g) Upon succeeding to the Convention, Croatia has decided, on the basis of the Constitutional Decision on Sovereignty and Independence of the Republic of Croatia of 25 June 1991 and the Decision of the Croatian Parliament of 8 October 1991, and by virtue of succession of the Socialist Federal Republic of Yugoslavia in respect of the territory of Croatia, to be considered a party to the Convention with effect from 8 October 1991, the date on which Croatia severed all constitutional and legal connections with the Socialist Federal Republic of Yugoslavia and took over its international obligations. (h) The former Czechoslovakia signed the Convention on 1 September 1981 and deposited an instrument of ratification on 5 March 1990, with the Convention entering into force for the former Czechoslovakia on 1 April 1991. On 28 May and 30 September 1993, respectively, Slovakia and the Czech Republic, deposited instruments of succession, with effect from 1 January 1993, the date of succession of both States. (i) Declarations and reservations. This State declared that it would not be bound by paragraph 1 (b) of article 1. (j) Declarations and reservations. Upon ratifying the Convention, Denmark, Finland, Norway and Sweden declared, in accordance with article 92, paragraph 1, that they would not be bound by Part II of the Convention (“Formation of the Contract”). These declarations have since been withdrawn: in Denmark with the effect from 1 February 2013; in Finland with the effect from 1 June 2012; in Norway with the effect from 1 November 2014; and in Sweden with the effect from 1 December 2012. Upon ratifying the Convention, Denmark, Finland, Norway and Sweden declared, pursuant to article 94, paragraph 1 and 94, paragraph 2, that the Convention would not apply to contracts of sale where the parties have their places of business in Denmark, Finland, Iceland, Norway or Sweden. In a notification effected on 12 March 2003, Iceland declared, pursuant to article 94, paragraph 1, that the Convention would not apply to contracts of sale or to their formation where the parties had their places of business in Denmark, Finland, Iceland, Norway or Sweden. (k) Declarations and reservations. On 9 March 2004, Estonia withdrew the reservation made upon ratification mentioned in footnote (a).

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Status of the CISG (l) The Convention was signed by the former German Democratic Republic on 13 August 1981 and ratified on 23 February 1989 and entered into force on 1 March 1990. (m) Declarations and reservations. Upon ratifying the Convention, Germany declared that it would not apply article 1, paragraph 1 (b) in respect of any State that had made a declaration that that State would not apply article 1, paragraph 1 (b). (n) Declarations and reservations. Upon ratifying the Convention, Hungary declared that it considered the General Conditions of Delivery of Goods between Organizations of the Member Countries of the Council for Mutual Economic Assistance to be subject to the provisions of article 90 of the Convention. (o) Acceptance. (p) The Russian Federation continues, as from 24 December 1991, the membership of the former Union of Soviet Socialist Republics (USSR) in the United Nations and maintains, as from that date, full responsibility for all the rights and obligations of the USSR under the Charter of the United Nations and multilateral treaties deposited with the Secretary-General. (q) The former Yugoslavia signed and ratified the Convention on 11 April 1980 and 27 March 1985, respectively. On 12 March 2001, the former Federal Republic of Yugoslavia declared the following: “The Government of the Federal Republic of Yugoslavia, having considered [the Convention], succeeds to the same and undertakes faithfully to perform and carry out the stipulations therein contained as from April 27, 1992, the date upon which the Federal Republic of Yugoslavia assumed responsibility for its international relations.”

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Introduction to the CISG Outline I. General Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Legislative History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. The search for an international sales law: driving forces and objectives . . 2. From the UNIDROIT Initiative to the Hague Uniform Laws . . . . . . . . . . . . . 3. The drafting process and the adoption of the CISG . . . . . . . . . . . . . . . . . . . . . . . . III. Content and Legal Nature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Legal nature of the CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Structure and content at a glance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Main Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. The CISG’s Global Reach and Grounds for Success . . . . . . . . . . . . . . . . . . . . . . . . . . . V. Impact on International and Regional Harmonization and National Modernization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI. Application in Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. The original scepticism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Increasing role in practice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Commodity Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII. Advantages of the CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VIII. Working with the CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IX. Contract Drafting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X. Electronic Commerce. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 3 3 5 8 10 10 13 18 22 29 39 40 42 46 48 51 56 61

I. General Remarks The CISG, i. e. the United Nations Convention on Contracts for the International Sale of 1 Goods,1 – often also referred to as the Vienna Convention or the UN Sales Convention – is rightly praised as “the most significant piece of substantive contract legislation in effect at the international level”.2 More than thirty five years after its adoption at the diplomatic conference in Vienna in 1980 and about thirty years after its entry into force on 1 January 1988, the CISG has become the primary law for international sales contract. Its more than 90 Contracting States3 comprise countries from all regions of the world with different economic and political regimes and include representatives of all major legal systems. These States, include most major industrial nations (e. g. Brazil, China, France, Germany, Japan, and the U.S.), and amount to more than two thirds of the world’s population and include nine of the ten leading industrial nations. As a consequence, the CISG is potentially applicable for over 80 % of the world’s trade in goods. Still, there are important countries that have not yet ratified the CISG, such as the UK and India.4 One of the reasons for the clear success of the CISG is that it enshrines a modern 2 understanding of the principal legal institutions of the contract of sale while achieving a uniform regime that provides a common understanding to buyers and sellers around the world. Traders from the United States to China, from Norway to Australia speak the 1

UN Document A/CONF.97/18 Annex 1. Lookofsky, The 1980 United Nations Convention on Contracts for the International Sale of Goods, in: Blanpain (ed.), International Encyclopaedia of Law (1993), p. 18. 3 As of 19 February 2018 the CISG had been ratified by 89 countries; an up-to-date list of the Contracting States can be found on the website of UNCITRAL at. http://www.uncitral.org/uncitral/en/ uncitral_texts/sale_goods/1980CISG_status.html and also at http://www.cisg.law.pace.edu/cisg/countries/ cntries.html. 4 For an analysis of the position of the UK see Baasch Andersen, Of Cats and Cream – The UK and the CISG, in: Schwenzer/Spagnolo, Growing the CISG (2016), p. 1 et seq. 2

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Introduction CISG 3–5 same sales law language, use the same concepts and solve their conflicts according to the same principles.5 This convergence and harmonisation inevitably help to reduce transaction costs.6 At the same time the substantive provisions of the CISG are – despite some opposing views and criticism7 – overall neutral between the sellers and buyers and at least economically as efficient as the comparable national sales laws.8

II. Legislative History 1. The search for an international sales law: driving forces and objectives The CISG is the product of a long quest for the enhancement of cross-border business and promotion of international trade; it is well understood that this can be achieved by establishing a secure, fair and culturally-neutral international regime for sales contracts. The increasing importance of international trade at the beginning of the 19th century, a direct consequence of industrialisation and the improvements and celerity of means of transport as well as developments in communications, was the driving force which finally led to the international movement towards the unification of the substantive rules applicable to international trade. While commercial law was largely harmonised until the end of the 18th century, the 19th century witnessed the “nationalisation” or domestication of civil and commercial law, introducing a high level of disunification of law. Commercial and trade realities brought the quest for harmonisation of law back on the agenda. 4 The existing conflict of laws approach was considered to be risky, uncertain and insufficient to deal with the complex issues raised in international sale of goods contracts. Indeed, apart from the deficiencies of this approach, most legal systems at that time were obsolete, incomplete, fragmented and inadequate to govern international transactions. The focus of these systems was on a pre-industrial economy, and adopted a purely local perspective to trade. A new legal regime was urgently needed: a regime apt to new emerging economic and commercial traffic based on the sale of complex manufactured industrial goods that needed to be transported to distant places, that resort also to satellite (ancillary) transactions, such as financing payment arrangements, insurance, transport contracts and guarantees. 3

2. From the UNIDROIT Initiative to the Hague Uniform Laws 5

The movement towards the unification of the rules of law for international sale of goods contracts began in 19309 when UNIDROIT undertook the initiative to unify the 5 Schlechtriem, 25 Years of the CISG: An International lingua franca for Drafting Uniform Laws, Legal Principles, Domestic Legislation and Transnational Contracts, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 167 (168). 6 See Spagnolo, CISG Exclusion and Legal Efficiency (2014), pp. 29 et seq., providing a detailed account of the original economic objectives of the drafters; critical Cuniberti, Is the CISG Benefiting Anybody? 39 Vanderbilt Journal of Transnational Law, 2006, 1511, 1519 et seq.; Gillette/Scott, The Political Economy of International Sales, 25 International Revue Law & Economics, 2005, 446 et seq. 7 Gillette/Walt, Sales Law (2016), pp. 5 et seq. 8 Spagnolo, CISG Exclusion and Legal Efficiency (2014), pp. 47 et seq. 9 Before that date several regional unification efforts were made: The 1905 Uniform Laws on the International Sale of Goods for the Nordic countries and the Projet de Code des Obligations et des Contrats drafted by a group of French and Italian lawyers under the chairmanship of Prof. Vittorio Sciajola and with the idea of creating a new European ius commune. This was, however, rejected by the French and Italian governments. See Bonell, The Unidroit Initiative for the Progressive Codification of International Trade Law, 27 International and Comparative Law Quarterly (1978) 413 (413 et seq.).

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Introduction CISG

substantive rules for the contract of sale. Although initially the Committee entrusted with this task dealt with all the aspects of the contract of sale, in 1934 it was decided to separate the rules on formation from the rules on performance of contract.10 In 1964, after several drafting projects11 and several years of interruption due to World War II, representatives of 28 States met at The Hague during three intensive working weeks with the task of approving two Conventions. On 1 July 1964 two texts were approved: The Convention relating to a Uniform Law on the International Sale of Goods with an Annex: The Uniform Law on the International Sale of Goods (ULIS), and the Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods, also with an Annex: The Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF)12 (collectively referred to as “Uniform Laws”). The ULIS entered into force on 18 August 1972, while the ULF came into force five days 6 later. However, they did not succeed universally for several reasons. First, only a small number of States were represented at the diplomatic conference: 22 out of the 28 States represented were Western European and highly developed countries; only three developing countries and three countries from Eastern Europe attended. Second, as a consequence of the low participation, the rules adopted were more closely related to trade among countries with similar attitudes towards international commerce; a situation that raised much criticism against the Uniform Laws13. Third, only a very small number of States ratified both Conventions: nine in total14. Fourth, there was much criticism in the “hectic” way in which the Conventions and the Uniform Laws were adopted, not only in terms of speed15, but also because of pressure asserted by the representatives of the continental (civil) legal systems, who represented the majority in the Drafting Committee16. As a result, much of the criticism derived from the unclear and abstract drafting of the rules. It is therefore no surprise that developing countries rejected the texts of the Uniform 7 Laws since they were adopted without their participation (most developing countries 10 The Committee explained the separation due to the importance of the rules on performance of the contract. However, the true reason was that the Committee was incapable of reaching a consensus on the precise moment of the conclusion of the contract to which the Draft Project referred to in several occasions. See A/CN.9/128, Annex II, UNCITRAL YB VIII (1977), pp. 103–104. 11 In 1936 a draft was published on the formation of contract (Loi uniforme sur la formation des contrats internationaux par correspondance) and there was also a project on the performance of contract drafted on the basis of the work done by the German jurist Ernst Rabel (Rabel, Das Recht des Warenkaufs, Vol. I (1936) and Vol. II (1958)). The so-called Rabel’s Draft was distributed among the members of the League of Nations and after observations were made, a Draft was prepared in 1939. After World War II, the work was resumed and these projects were replaced by a 1957 Draft Uniform Law on the International Sale of Goods, and 1959 Draft Uniform Law on Formation, followed by a 1963 Project. 12 Available at http://www.unidroit.org/english/conventions/c-main.htm. There are several important publications on The Hague Conventions and Uniform Laws. See: Kahn, La Convention de La Haye du 1er juillet 1964 portant loi uniforme sur la vente internationale des objets mobiliers corporels, 17 Revue Trimestrielle du Droit Commercial (1964) 689 (689 et seq.); Do¨lle (ed.), Kommentar zum Einheitlichen Kaufrecht (1976); and Mertens/Rehbinder, Internationales Kaufrecht (1975). 13 Ndulo, The Vienna Sales Convention 1980 and the Hague Uniform Laws on International Sale of Goods 1964: a comparative analysis, 38 International and Comparative Law Quarterly (1989) 1 (4 et seq.). See A/CN.9/17, International Sale of Goods. The Hague Conventions of 1964. Analysis of the replies and studies received from Governments: report of the Secretary-General, where several criticisms were made by several States. 14 Belgium, Gambia, Germany, Israel, Italy, Luxembourg, Netherlands, San Marino and the United Kingdom. The status is available at http://www.unidroit.org/english/implement/i-main.htm. 15 Honnold, The Uniform Law for the International Sale of Goods: the Hague Convention of 1964, 30 Law and Contemporary Problems 326 (326 et seq.). 16 The controversy between Prof. Nadelmann and Prof. Tunc is very illustrative. See: Nadelmann, The Uniform Law on the International Sale of Goods: A Conflict of Laws Imbroglio, 74 Yale Law Journal 1964–65) 446 (446 et seq.); and Tunc, The Uniform Law on the International Sale of Goods: A reply to Professor Nadelmann, 74 Yale Law Journal 1409 (1409 et seq.).

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Introduction CISG 8 were emerging at the same time as the result of a slow decolonisation process) and did not reflect their interests in international trade. Moreover, one has to reflect on the refusal to ratify by the common law countries, which were based on different grounds: i. e. U.S. did not participate in the drafting and negotiation process, and, at the end of the Conference, Great Britain succeeded in introducing a reservation to the Uniform Law – the so-called British Reservation (Art. V) – by which the field of application was severely restricted by virtue of an express opting in requirement17. Despite these criticisms, the Uniform Laws ought to be considered important steps towards the unification of the law relating to the international sale of goods. Although the attempts were clearly insufficient, they were the first stone on which the CISG was based and as such the CISG has successfully replaced the Uniform Laws (Art. 99(3) CISG)18.

3. The drafting process and the adoption of the CISG 8

In light of the limited “success” of the 1964 Hague Conventions, the Hungarian representative before the United Nations asked the United Nations for the adoption of the necessary measures to promote the harmonization and unification of international trade law. A research document prepared by Prof. Schmitthoff between 1964 and 1966 was the basis for the Report of the Secretary General19 and the subsequent establishment of the United Nations Commission on International Trade Law (UNCITRAL) on 17 December 1966 by Resolution 2205 (XXI) of the General Assembly. UNCITRAL began its work in January 196820. During its first period of sessions, UNCITRAL decided to focus its work on the study of three subjects: the international sale of goods, payments and arbitration. Consequently, UNCITRAL had to decide whether to “adopt” the 1964 Uniform Laws or to formulate a new text that would gain the necessary international consensus. Due to the technical difficulties in approaching this task, UNCITRAL began its work on the limitation period in the international sale of goods and finally approved a Convention in 1974 that was later amended to encompass the 1980 Vienna Convention. At the same time, UNCITRAL sent the 1964 Uniform Laws coupled with comments made by Prof. Tunc21 to the Member States and UN observers to receive their comments. During UNCITRAL’s second session, the responses were analysed and a conclusion to reject the Uniform Laws was reached22. A Working Group was formed under the chairmanship of Prof. Barrera Graf of Mexico and composed of members from 15 countries with the task of effecting the necessary amendments to the 17 Article V of The 1964 Convention on the International Sale of Goods: “Any State may, at the time of the deposit of its instrument of ratification of or accession to the present Convention declare, by a notification addressed to the Government of the Netherlands, that it will apply the Uniform Law only to contracts in which the parties thereto have, by virtue of Article 4 of the Uniform Law, chosen that Law as the law of the contract”. Belgium, Gambia and UK made an Art. V reservation. 18 The Hague Conventions are still in force in Gambia, Israel, San Marino and UK. Note that UK and Gambia made an Art. V reservation. 19 A/6396 – Report to the Secretary General (“The Schmitthoff Study”) (available at: http://www.uncitral.org). 20 Presently sixty member States have been elected by the General Assembly. Membership is structured so as to be representative of the world’s various geographic regions and its principal economic and legal systems. Members of the Commission are elected for terms of six years, the terms of half the members expiring every three years. For the text of Resolution 2205 (XXI) and more information about UNCITRAL see http://www.uncitral.org. 21 Tunc, Commentary of the Hague Conventions of 1 July 1964 on the International Sale of Goods and on the Formation of Contracts of Sale, Ministerie Van Justitie, Den Haag-Nederland, available at the Pace database at http://www.cisg.law.pace.edu/cisg/biblio/tunc.html. 22 A/CN.9/31 – Analysis of replies and comments by governments on the Hague Conventions of 1964 1st session, 5–16 January 1970, New York.

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Uniform Laws, taking into account the interests of countries with different legal, social and economic systems23. Initially UNCITRAL decided to work separately on the issues of formation of contract and the rights and obligations of the parties. In January 1976 the work done on the ULIS was finalized, adopting the form of a Draft Convention that was adopted in the 10th UNCITRAL session24. Similarly, in 1977, the work on the ULF was also discussed and approved in the form of a Draft Convention on Formation in 197825. It was then unanimously decided by the Commission to combine the two Drafts in a single Draft Convention and to circulate it among the Member States and observers. The General Assembly of the UN called a Diplomatic Conference to work on the 9 1978 Draft Convention26 that was held between 10 March and 11 April 1980 in Vienna with the participation of 62 States, plus one State observer and eight international organizations. Prof. Gyula Eo¨rsi (Hungary) was elected President and at that time Prof. Willem C. Vis was the Secretary of UNCITRAL. The Convention was adopted by the Conference on 10 April by 42 votes in favour and 9 abstentions, and opened for its accession on 11 April 1980. The Convention entered into force on 1 January 198827.

III. Content and Legal Nature 1. Legal nature of the CISG The Vienna Convention contains substantive rules on two of the most important 10 questions in international sales transactions. Part II regulates the formation of the contract of sale by matching acceptance and performance. Part III contains rules on the rights and obligations of sellers and buyers arising from the international sale of goods contract, as well as the remedies that parties to a contract of sale have in response to the breach of its counterparty (Part III). Furthermore, Part I of the CISG is devoted to the field of application as well as to the general provisions applicable to the Vienna text, while Part IV is devoted to the final provisions mainly related with possible reservations to the Convention. The CISG is a substantive law treaty and as such it is not a conflict of laws 11 instrument.28 Beyond defining its own scope and sphere of application, the Convention does not deal with conflict of laws,29 i. e. rules that decide the applicable law when there are several converging in a transaction. The Vienna Convention is a uniform law 23 See: A/7618 – Report of the United Nations Commission on International Trade Law on the work of its second session. The member States of the Working Group were: Brazil, France, Ghana, Hungary, India, Iran, Japan, Kenya, Mexico, Norway, UK, Tunisia, former USSR and USA. 24 A/32/17 – Report of the United Nations Commission on International Trade Law on the work of its tenth session, 10th Session, 23 May – 17 June 1977, Vienna at 13 et seq. See also: A/CN.9/128/Annex I – Draft convention on the formation of contracts for the international sale of goods as approved or deferred for further consideration by the Working Group on the International Sale of Goods at its eighth session, 10th Session, 23 May – 17 June 1977, Vienna. 25 A/CN.9/143 – Draft Convention on the formation of contracts for the international sale of goods; and A/CN.9/144 – Commentary on the draft convention on the formation of contracts for the international sale of goods, 11th Session, 30 May – 16 June 1978, New York. 26 Resolution 33/93, in A/CONF.97/1, at A/CONF.97/19, p. XV. The Conference was held in Vienna at the Kongresszentrum Hofburg. 27 Art. 99 CISG. On 11 December 1986, China, Italy and USA ratified the Convention so the number of Member States of the CISG increased to 11, and as such the number of countries needed for entry into force was satisfied. 28 For the relevance of choice of laws questions within the CISG, see Bridge, Choice of Law and the CISG: Opting In and Opting Out, in: Flechtner/Brand/Walter, Drafting Contracts (2007), pp. 65–100. 29 But see Art. 10 which is conflict of laws provision. Art. 1 is a unilateral conflict of laws provision.

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Introduction CISG 12–16 instrument that supersedes the choice of law analysis.30 The importance of the Convention is seen in the simple fact that it provides to operators (parties, lawyers, judges and arbitrators) from Mexico, Germany, US, Japan, etc., the same substantive regime to be applied to the contract of sale: the same uniform language,31 methodology and a common understanding to the basic issues of the international sale of goods contract. 12 Despite the international origin and features of the Convention, once it is ratified by a State32, it is fully incorporated within the national legal system displacing the domestic regime otherwise applicable, whether this would be a single regime or a double regime depending upon the civil or commercial character of the transaction. The CISG does not contribute to the battle between codes – typical of legal regimes with a double regulation for a contract of sale – reflecting the neutral choice of the drafters (Art. 1(3)). As such, the national distinction between civil and commercial transactions is of no importance to the CISG when deciding its scope of application. Only in instances where the domestic law needs to be considered, i. e., when there is a matter excluded from the CISG or a gap that cannot be filled within the system of the Convention (Art. 7(2)), does the distinction matter. Having said this, it has to be recognized that, in light of Art. 2(a), most international sale of goods contracts governed by the CISG are considered to be commercial contracts within the dualistic legal domestic systems. Thus, the CISG is in line with the trend observed in other uniform international commercial instruments that exclude from their scope of application consumer transactions.

2. Structure and content at a glance The CISG is composed of 101 articles, divided up into four Parts. Its substantive provisions are primarily contained in Part II (Formation of the Contract) and Part III (Sale of Goods). 14 Part I (Articles 1–13) deals with General Rules of the Convention. In particular, Arts 1–5 concern the scope of application of the CISG, they explain the definition of sales and the exclusion of certain sales. Arts 6 and 9 explain the hierarchy of sources, i. e. contract, customary rules and the rules of the Convention. Art. 7 provides a guide to the interpretation of the CISG as well as a method for filling gaps in the CISG, while Art. 8 provides standards for the interpretation of the contract and conduct of the parties. Art. 11 deals with form requirements introducing a low threshold. 15 Part II (Articles 14–24) addresses Formation of Contract and has specific provisions relating to offer, revocation, acceptance and withdrawal as well as to the time when an offer, acceptance of other indication of intent reaches its addressee. 16 Part III (Articles 25–88) is the longest part of the CISG and covers the performance of a contract for the sale of goods and focuses on the obligations of the buyer and the seller for proper fulfilment of the contract and the remedies in case of breach. It is organised in five chapters: Chapter I covers general provisions and most importantly fundamental breach (Art. 25), notices and communications (Arts 26–27), specific performance (Art. 28) and contract modification (Art. 29). Chapter II addresses the obligations of the seller (delivery of goods, handling of documents, conformity of goods and third party claims) and remedies for breach of contract by the seller. Chapter III 13

30 For the prevalence of the CISG, see Tribunale di Vigevano (Italy) 12 July 2000 (sheets of vulcanized rubber used in manufacture of shoe soles), CISG-Online 493 (Pace). 31 In the words of John Honnold: “Words are mushy, ambiguous things,” but they are all we lawyers have to work with. Expecting them to function equally on a global scale is utopian. Honnold, The 1980 Sales Convention – Can Uniform Words Give Us Uniform Results?, 2 Juridisk Tidsskrift (1990–91) 3–14. 32 From a public international law perspective, the means for a State to effect the application of the CISG are ratification, accession, approval, acceptance or succession. The method most commonly used for the CISG is ratification.

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focuses on obligations of the buyer (payment of price, taking delivery) and remedies for breach of contract by the buyer. Chapter IV covers passing of risk and Chapter V contains provisions common to the obligations of the seller and the buyer (instalment contracts, anticipatory breach, damages, interest, exemption from paying damages, effects of avoidance of contract and preservation of the goods). Finally, Part IV (Articles 89–101) covers the Final Provisions concerning rules of 17 ratification and entry into force, and the reservations.

3. Main Principles The CISG contains a number of fundamental principles,33 mostly enshrined in Part I. The main principle of the Convention is party autonomy and freedom of contract, as manifested in Art. 6 and Art. 9. The Convention also has an “internal mechanism” for its interpretation (Art. 7): it requires that when issues of interpretation of its provisions arise, “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.” In the event of gap-filling, and where matters are not expressly covered by the CISG, one should settle such matters primarily “in conformity with the general principles on which [the CISG] is based”; if such principles cannot be found then one will have to resort the “law applicable by virtue of the rules of private international law.” Furthermore, the CISG clearly expresses the need to respect customs and practices established between the parties or established in a particular industry or region (Art. 9). The Convention has also a mechanism for the interpretation of statements made by the parties or the conduct of the parties (Art. 8). A subjective interpretation (for which the subjective intent of the party in question is primarily relevant) is to be followed, unless such intent is not known (Art. 8(1)). In that case the objective meaning of the declaration or conduct will be relevant, i.e. how a reasonable party in the position of the other party would have understood it. In either case, consideration should also be given to the circumstances of the case, the negotiations and any practices established between the parties as well as usages and their subsequent conduct (Art. 8(3)). The Convention relies significantly on the principle of sanctity of contracts: parties should not try to terminate or avoid the contract but every effort should be made to save the contract and perform it as far as possible. Avoidance is an exceptional and drastic remedy and only to be used in rare and exceptional circumstances. In this respect, the CISG expects that the contracting parties continue to communicate, avoid surprises and to the extent possible provide adequate notice of actions they intend to take. The importance of “notice” in particular can be demonstrated by its 25 references in the Convention (e. g., Arts 19, 20, 21, 26, 32, 39, 40, 43, 44, 46, 47, 48, 49, 67, 71, 72, 79, 88). There are also no less than 47 references of the word “reasonable”34 in the CISG (reasonable time, reasonable person and/or reasonable notice).35 It seems that the term reasonableness in the CISG the same function as it has in common law jurisdictions, i. e. a standard of assessment akin to the civil law equivalent of good faith. 33

Kritzer refers to general principles in http://www.cisg.law.pace.edu/cisg/text/principles7.html. For a critique on the excessive reliance on the word “reasonable”, possibly an expression of compromise in cases of cultural clashes see Schlechtriem, From the Hague to Vienna: Progress in Unification of the Law of International Sales Contracts?, in: Horn/Schmitthoff (eds), The Transnational Law of International Commercial Transactions: Studies in Transnational Economic Law, vol. 2 (1982), pp. 125–135; Gillette/Scott, The Political Economy of International Sales, 25 International Revue Law & Economics, 2005, 446, 473 et seq. 35 See Weiszberg, Le “Raisonnable” en Droit du Commerce International, French thesis of 2003. See also DiMatteo, The Counterpoise of Contract: The Reasonable Person Standard and the Subjectivity of Judgment, 48 South Carolina Law Review (1997) 293–355. 34

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IV. The CISG’s Global Reach and Grounds for Success At the legislative/state level the CISG has undoubtedly been a success story beyond imagination. The most obvious proof of its wide-spread use and global acceptance is the number of its Contracting States, coming from all legal families, including the world’s biggest trading nations as well as developing countries (see supra section I). Additionally, the CISG has strongly influenced other legislative initiatives at the international, regional and national level. Beyond doubt, the CISG has gained far more international consensus than its predecessors, i. e. the ULIS and ULF. Over twice as many states participated in the CISG’s drafting process than in the 1964 Conventions,36 and it has been translated into the local language of a wide range of Contracting States. In other words, the Vienna Convention has succeeded where the Hague Uniform Laws failed; namely, it moved away from Euro-centrism, lack of participation of developed countries and the low number of ratifying States. 23 There are several reasons for this considerable success. The Vienna Convention has found a common ground for the different interests of the various players involved and achieved the difficult task of appealing to, through a uniform law, countries with strong and at first sight irreconcilable political, economic, social and legal structures. The most important barrier to the unification of trade law was the legal-technical differences among countries, particularly in those instances in which the conflict between common law and civil law was impossible to overcome due to different traditions, diversity of methodology and legal thinking. The solution was by no means found by legal imperialism or legal transplant, but rather by a patient and systematic dialogue, the spirit of compromise, the focus on transactions and the fine balance, achieved between seller’s and buyer’s respective rights and obligations37. Due to the long period of gestation and the experiences with the Uniform Laws, the drafters of the CISG had sufficient time to fine tune the Convention’s provisions, taking into account not only the extensive comparative analysis of domestic sales laws, but also the critical comments of academics and practitioners.38 24 The Convention achieves in most of its solutions a good equilibrium among several principles that inspire the legal systems around the world. By no means is the CISG a patchwork of different legal systems adopting rules that are more convenient, a common solution adopted by the legal systems, or a solution adopted by the majority. On the contrary, the CISG is built on the basis of facilitating international trade, under the influence of commercial practice, its own interpretative rules and principles, and an 22

36 Out of the total number of 62 States, 22 were developed countries, 11 socialist, 11 South American, 7 from Africa, and 11 from Asia: Eo¨rsi, A Propos the Vienna Convention on Contracts for the International Sale of Goods, 27 American Journal of Comparative Law (1983) 335 (note 5). Statistics show that during the Hague Conference the distribution of participating countries was: developed (78.6 %), third world (10.7 %), while during the Diplomatic Conference in 1980 participation was: developed (35.5 %) and third world (46.8 %). See Brussel, The 1980 United Nations Convention on Contracts for the International Sale of Goods: a legislative study of the North-South debates, 6 New York International Law Review (1993) 53 (61). 37 Olivencia, La Convencio ´ n de las Naciones Unidas sobre los contratos de compraventa internacional de mercaderı´as: Antecedentes histo´ricos y estado actual, 201 Revista de Derecho Mercantil 377 (394). For more information on the legal compromises, see Garro, Reconciliation of Legal Traditions in the UN Convention on Contracts for the International Sale of Goods, 23 International Lawyer (1989) 443–483 (Pace). 38 Schlechtriem, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 167 (169); insofar the criticism by Gillette/Roberts, The Political Economy of International Sales Law, Working Paper No. 0502 New York University Law and Economics Research Paper Series (April 2005) (Pace) that commercial interests were not sufficiently taken account of does not appear justified.

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authentic spirit of compromise. The reason for the success of the Convention is that it was able to produce acceptable results for all legal systems and interests confronted. In the view of most legislators these benefits outweigh the necessary downsides of 25 such an approach. In order to reach this common ground, it is sometimes unavoidable to compromise in relation to the simplicity and clarity of the rules.39 Beyond the mere number of Contracting States the importance and the success of the 26 CISG can also be measured by several other factors. First, it has successfully achieved the unification of the legal regime of the contract which is the centrepiece of international trade as well as the most important contract in domestic legal systems. Second, it has overcome the psychological barriers of lawyers and traders to adapt their way of reasoning and commercial behaviour to a new international text. Third, the supremacy of the legal approach and methodology adopted by the CISG has also lead to a new approach of the law rotating around uniformity, internationality and globalization of international trade law. Judicial and arbitral application of the Convention are also worth considering since a global application is a growing tendency. This can be attributed to the awareness of the need for a uniform and international application of the CISG and the widespread use of the electronic resources on the CISG40. At the same time, abundant and increasingly global legal literature on the CISG contributes to the uniform understanding of CISG notions, concepts and principles. In this regard, the Convention is considered an international lingua franca41 to the 27 point that the Convention extends its influence well beyond the international sale of goods contract.

V. Impact on International and Regional Harmonization and National Modernization42 There is a large international consensus about the value of the Vienna Convention 28 rules and principles.43 The CISG is one of the preferred instruments used in the modernization of contract law, whether domestic, regional or international. This evidences the general character of the rules of the Convention – general rules of the law of contract, and even to the law of obligations – apt to be applied to any kind of 39 That has, however, led to considerable criticism from authors adopting a primarily economical approach to the default rules contained in the CISG, which in their view are inferior to rules in the domestic sales; see Gillette/Scott, The Political Economy of International Sales Law, 25 International Review of Law and Economics (2005) 446 (448 et seq.) (Pace). 40 CLOUT and Digest (www.uncitral.org), UNILEX (www.unilex.info), Pace Database (www.cisglaw.pace.edu), and CISG-Online (cisg-online.ch), as well as other regional or national databases are excellent sources to the CISG and related instruments. 41 See Schlechtriem, in: Flechtner/Brand/Walter, Drafting Contracts (2007), pp. 167 et seq. In case law see: Arbitral Award (CIETAC) 11 February 2000 (Silicon Metal) CISG-Online 1529 (Pace), considering the CISG as a “set of uniform rules which takes different legal systems into account; hence, it is more understandable for merchants from different jurisdictions in international trade. Moreover, compared with the national laws of some States, CISG equally reflects the interests of seller and buyer”; and Audiencia Provincial of Barcelona (Spain) 3 July 2007 (Parts and machinery) CISG-Online 1767 (Pace): “CISG’s principles correspond to the sense of justice universally accepted”. 42 For a more detailed discussion see the various contributions in Ferrari (ed.), The CISG and its Impact on National Legal Systems (2008) with country reports from 23 countries and two general reports; Lookofsky/Andersen (eds), The CISG Convention and Domestic Contract Law – Harmony, CrossInspiration or Discord? (2014). 43 For a critical assessment see Bailey, Facing the Truth: Seeing the Convention on Contracts for the International Sale of Goods as an Obstacle to a Uniform Law of International Sales, Cornell International Law Journal (1999) 273–317 (Pace); see also below for the criticism concerning the suitability of the CISG for commodity trade.

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Introduction CISG 29–30 contracts, including consumer contracts44. The close relationship between the CISG and regional and international instruments justifies the inclusion of a section in this commentary dealing with a comparison of the CISG and those instruments as well as domestic legal regimes when pertinent. 29 At the national level, the CISG was a clear model in the Reform of the Law of Obligations in Germany, and in the modernization of other domestic legal systems, such as the Dutch Civil Code (1992), Russian Civil Code (1994), Chinese Civil Code (2002) and the Estonian Law of Obligations (2002). 30 Regionally, it is possible to refer to the Uniform Laws in the framework of OHADA45, and the Principles of European Contract Law (PECL)46. PECL was drafted as the foundation stone towards the building of a European Civil Code on the Law of Contracts and Obligations47. Since 1997, the Study Group of a European Civil Code, has been drafting the different chapters that presumably would be integrated under this prospective “Civil Code”. In 2003, the European Commission published a so-called “Action Plan”48 that consists of several measures within the Common Frame of Reference, the CFR. In order to prepare this CFR, a Joint Network on European Private Law was set up in 2005 including several institutions and research groups, and primarily the Study Group. A Draft Common Frame of Reference (DCFR) was published in January 200949. This predominately academic DCFR was intended to serve as a model to prepare the CFR50. Also, the draft regulation for an optional Common European Sales Law,51 which was in the end not pursued, drew heavily on the CISG in the areas where they overlapped.52 44 See, EC Directive 1999/44, 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees. O. J. 1999 L 171/12. Also the influence of CISG is seen in EC Directive 2000/35 on Late Payment. Perales Viscasillas, Late Payment Directive 2000/35 and the CISG, FS Farnsworth (2007), Pace International Law Review (2007) 125 (128 et seq.). The same influence is seen in EC Directive 2011/ 7, 16 February 2011 which replaces EC Directive 2000/3 on Late Payment. 45 OHADA, the French acronym for “Organisation pour l’Harmonisation du Droit des Affaires en Afrique” translated in English as the “Organization for the Harmonisation of Business Law in Africa” is an organisation created on 17 October 1993 in Port Louis (Mauritius). The OHADA Treaty is made up today of 16 African states. See: http://www.ohada.com. See Book V (Commercial Sale) of The Uniform Act relating to General Commercial Law (1998). 46 Drafted by the Commission on European Contract Law (or the “Lando Commission” after his president Prof. Ole Lando) and published by Ole Lando and Hugh Beale (eds), Principles of European Contract Law, Parts I and II (2000). Part I and Part II were published in 1999 and deal with formation of contract, validity, performance, non-performance and remedies. Part III, published in 2002, deals with assignment, assumption of debts, set off, prescriptions and conditions. The European Principles are similar to the Restatements and have closely followed both the CISG and the UNIDROIT Principles on International Commercial Contracts. It covers civil and commercial contracts within the EU. See: http:// frontpage.cbs.dk/law/commission_on_european_contract_law/index.html. 47 The establishment of the Commission on Contract Law entrusted to the drafting of the Principles is due to several resolutions of the European Parliament. See: O. J. 1989 C 158/400 (Resolution A2–157/89); O. J. 1994 C 205/518 (Resolution A3–0329/94); and COM (2001) 398, Resolution of the European Parliament on the approximation of Civil Law and Commercial Law of the Member States. See also: Communication on Contract Law (2001/C 255/01), O. J. 13. 9. 2001, at 1. 48 Action Plan on a more coherent European Contract Law (2003/C 63/01), O. J. 2003 C 63/1 (hereinafter Action Plan); Further, European Contract Law and the Revision of the Acquis: The Way Forward (COM (2004) 651 Final) of 11 October 2004 (hereinafter ‘The Way Forward’). 49 Principles, definitions and Model Rules of European Private Law. Draft Common Frame of Reference (DCFR). Prepared by the Study Group on a European Civil Code and the Research Group on EC Private Law (Acquis Group). Edited by Christian von Bar, Eric Clive and Hans Schulte-No¨lke, Sellier (2009), available also at http://www.law-net.eu. 50 Introduction DCFR (January 2009). 51 See the draft Regulation of 11.10.2011, COM(2011) 635. 52 Lando, CESL or CISG? Should the proposed EU Regulation on a Common European Sales Law (CESL) replace the United Nations Convention on International Sales (CISG)?, in: Remien/Herler/

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Finally, internationally the CISG has been the inspiration to other UNCITRAL53 and UNIDROIT instruments, particularly influencing one of the most important soft law instruments in the area of international commercial contracts: The UNIDROIT Principles of International Commercial Contracts (PICC)54. Undoubtedly both the PICC and PECL were drafted with the CISG in mind and there is a close resemblance among them.55 Particularly, the PICC goes further than the CISG as it is more detailed and tries to develop several CISG provisions as well as to fill its gaps. The role that the PICC and PECL might develop in relation with the Convention depends on the circumstances of each particular transaction and the body entrusted with the judgement of the case. The PICC, contrary to the PECL, states expressly in its Preamble that it “may be used to interpret or supplement international uniform law instruments”, which undoubtedly includes the CISG. The Comments justify this position on the basis of the principles of internationality and uniformity in the interpretation and application of uniform law56; principles that are rooted in the CISG (Art. 7(1)). The PECL is less explicit in this regard although it is foreseen that it will play a role as a gap-filler for the applicable law. As most of these regional projects or modernizations at the national level are not limited to sales contracts, the CISG has a considerable harmonizing effect going far beyond its actual scope of application.57 The value of the substantive rules of the Convention has also increasingly been recognized by courts and arbitral tribunals around the world. Some of them have taken advantage of the CISG’s fundamental rules and principles as an aid to confirm general principles of a national domestic system, to confirm a trend in domestic judicial interpretation, or, more importantly, as a tool of interpretation and supplementation of the various kinds of domestic contracts, not limited to commercial contracts58 and not limited to courts in Contracting States.59 In this respect, the CISG has served as an important instrument for the development of national legal systems. The Vienna Convention has also served to develop certain domestic institutions under the umbrella of the CISG. For example, the influence of the good faith principle in the CISG is evident in the developments of case law in certain common law Limmer (eds), Gemeinsames Europa¨isches Kaufrecht fu¨r die EU (2012), p. 15. See also Magnus, CISG and CESL (September 1, 2012). Liber Amicorum Ole Lando, pp. 225–255, Bonell, Holle and Nielsen, eds., Djøf Forlag, 2012; Max Planck Private Law Research Paper No. 12/27. Available at SSRN: https:// ssrn.com/abstract=2165758. 53 See for example Art. 11 of the 2005 UN Convention on the use of Electronic Communications in International Contracts, which is a “translation” of Art. 14 CISG to encompass electronic means. 54 First edition (1994), second edition (2004), third edition (2010), fourth edition on long-term contracts (2016). For more information, see http://wwww.unidroit.org. 55 For list of the provisions of the CISG influencing PICC and PECL, see: Flechtner, The CISG’s impact on international unification efforts: The UNIDROIT Principles of International Commercial Contracts and the Principles of European Contract Law. The 1980 Uniform Sales Law. Old Issues Revisited in the Light of Recent Experiences. Verona Conference (2003) 176 (176 et seq.). 56 See Comment 5 to the Preamble. 57 Further: Perales Viscasillas, The Role of the UNIDROIT Principles and the PECL in the interpretation and Gap-Filling of CISG, in: Janssen/Meyer (eds), CISG Methodology (2009), pp. 287–317. In case law, recently filling-gaps (hardship) within the CISG: Court of Cassation (Belgium) 19 June 2009 (Steel tubes) CISG-Online 1963 (Pace). 58 For example, Tribunal Supremo (Spain) 20 July 2006, CISG-Online 1801 (Pace), in a domestic contract considering that Art. 25 CISG fills the gap of Art. 1124 Spanish Civil Code. Doctrine followed by many appellate courts, among the latest: Audiencia Provincial de Madrid (Spain) 8 April 2008, CISGOnline 2083 (Aranzadi/Westlaw No. 189 148). 59 See the two decisions by the English Court of Appeal, using the CISG as a yardstick for good commercial contract law interpretation, in ProForce Recruit Ltd v. Rugby Group Ltd, 17 February 2006 (Pace) and in The Square Mile Partnership Ltd. v. Fitzmaurice McCall Ltd., 18 December 2006 (Pace).

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Introduction CISG 36–39 jurisdictions, such as Australia and New Zealand. There, courts have used that principle as an important tool in relation to domestic contracts.60 36 Finally, international model contract clauses offered by different international organizations have received a source of inspiration from the CISG, for example by stipulating the CISG as the governing law of the contract.61 37 The increasingly global importance of the Convention and thus sensibility of the Contracting States towards its international and uniform character are also demonstrated by the process of erosion of the non-unified provisions within the CISG, mainly the reservation provisions (Arts 92, 95, 96). Norway, Finland, Denmark and Sweden withdrew from their Art. 92 reservation which was included in the Convention due to pressure asserted by these countries as they were not satisfied with some aspects of Part II (Formation of the Contract).62 Arts 95 and 96 reservations have been withdrawn by some States63 and others are exploring the possibility of withdrawing in the future.

VI. Application in Practice 38

As early as 1992 the New Zealand Law Commission wrote in its report preparing the ratification of the CISG by New Zealand that the CISG, is “not a case of uniformity for the sake of uniformity. Rather, the world trading community has made the practical decision that this uniform law will facilitate international trade”.64 Irrespective of this correct perception and decision, for a considerable time the CISG only played a limited role in practice in most jurisdictions, as the available empirical as well as anecdotal data shows.65

1. The original scepticism 39

At the beginning, the CISG was met with considerable scepticism by the parties in international trade. It contained new and often unfamiliar rules which had not been tested in practice.66 Unlike many national sales laws, the CISG lacked a centuries’ (rather than century’s) old body of case law and legal thinking available to provide 60 Court of Appeal New South Wales (Australia) 12 March 1992, CISG-Online 44 (Pace); Federal Court of Australia (Australia) 3 November 2000, CISG-Online 586 (Pace). Also in New Zealand: Court of Appeal of Wellington (New Zealand) 3 October 2001 (Pace). Of course in civil law systems as well: see Audiencia Provincial de Navarra (Spain) 22 September 2003 (Pace). 61 E. g., the ICC Model for International Sale Contracts (Manufactured Goods intended for resale receives inspiration from both CISG and PICC). See ICC Publication, no 556 (1998). The model contract declares the transaction subject to the CISG, see Art. 1.2(A) of Part B. The International Trade Center UNCTAD/WTO offers the Model Contract and User’s Guide for International Commercial Sale of Perishable Goods of 1999. Number 14 of the Model Contract provides the applicable rules of law by applying, first the CISG, second the PICC, and third the possibility of determining a domestic law, or in its absence, the seller’s place of business. 62 For further background discussion on this see Lookofsky, Alive and Well in Scandinavia: CISG Part II, 18 Journal of Law and Commerce (Spring 1999) 289; Baasch-Andersen, Recent Removals of Reservations under the International Sales Law – Winds of Change heralding a Greater Unity under the CISG?, [2012] Journal of Business Law, 698 et seq. 63 See infra comments to Arts 12 and 96. 64 New Zealand Law Commission, The United Nations Conventions on Contracts for the International Sale of Goods: New Zealand’s Proposed Acceptance Report No. 23 of the Law Commission (Wellington, New Zealand, June 1992), p. 10 (Pace). 65 For an analysis of the available empirical data see Schroeter, Empirical Evidence of Courts’ and Counsels’ Approach to the CISG (with some Remarks on Professional Liability) in: DiMatteo, International Sales Law: A Global Challenge (2014), pp. 649 et seq. 66 The lack of familiarity of both counsel and the parties played a very prominent role as a ground for exclusion in the enquiry under German lawyers; see Meyer, UN-Kaufrecht in der deutschen Anwalts-

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guidance for the application of it in practice.67 Moreover, applying the CISG meant not only that the parties and their lawyers had to familiarize themselves with the new rules, but also that contract practices and existing model contracts had to be adapted to the new rules. As a consequence, parties, often following the advice of their lawyers and national business organizations, regularly tried to opt out of the CISG and exclude its application.68 There was a tendency to prefer “the devil you know” to the devil you do not know.69 At the same time judges and arbitrators also lacked the necessary knowledge and experience with the CISG and were thus more than willing to interpret the parties’ declarations and behaviour as an exclusion of the CISG.70 In addition, parties had concerns about the quality of the provisions of the CISG. It 40 was presumed that due to the need to reach compromises, the CISG often only adopted second best solutions. Moreover, the use by the CISG drafters of vague concepts such as “fundamental breach” or “reasonable time” was considered to constitute a considerable threat to predictability of results, even more so as no coherent body of case law existed.71 Last but not least, parties were concerned about the CISG’s lack of completeness which required the application of national laws for all issues not governed by the CISG. There was the fear that this could result in frictions which could be avoided if the complete transaction was governed by a single but complete national law.

2. Increasing role in practice Over the years the tide has slowly been turning. In numerous countries lectures about 41 the CISG are now part of the standard curriculum of law schools and every year far more than 2,000 students participate in the Willem C. Vis Moot, which deals with the CISG, either in Vienna or Hong Kong. Consequently, more and more students and practitioners are now familiar with the rules of the CISG and appreciate its potential benefits. Libraries can be filled with legal writings about the CISG and a considerable body of case law has developed, accessible to a considerable extent for free via the Internet.72 Courts in numerous countries are now very reluctant to interpret all but the most explicit statements by the parties as an agreement to exclude the CISG. In particular, subsequent behaviour of the parties, such as pleading their case on the basis of national law, is only considered to constitute a choice of law in favour of the national law pleaded if the parties were aware of them opting out of the CISG.73 praxis, 69 RabelsZ (2005) 457 (474 et seq.); for a comprehensive analysis of the problem see Spagnolo, CISG Exclusion and Legal Efficiency (2014), pp. 149 et seq. 67 Smits, Problems of Uniform Sales Law – why the CISG may not promote international trade, in: DiMatteo, International Sales Law: A Global Challenge (2014), p. 605, 610; electronic copy available at: http://ssrn.com/abstract=2197468 on a contrary view: See: Berman, The inevitable legal pluralism within universal harmonization regimes: the case of the CISG, ULF, 2016, vol. 21, pp. 23–40, p. 32. 68 Koehler, Survey regarding the relevance of the United Nations Convention for the International Sale of Goods (CISG) in legal practice and the exclusion of its application (Pace). 69 For a critical assessment of the older German practice see Koch, Wider den formularma ¨ßigen Ausschluss des UN-Kaufrechts, NJW (2000) 910. 70 It appears that this homeward trend is well embedded in certain legal systems where jura novit curia exists and it will take some time before it is reduced or eliminated. See some rather positive examples in Oregon Court of Appeals (U.S.) 12 April 1995 (Cedar shakes (wood)), GPL Treatment Ltd. v. LouisianaPacific Group, CISG-Online 147 (Pace); Cour de cassation (France) 26 June 2001 (Auto parts), CISGOnline 600 (Pace); Arbitral Award, ICC 8453/1995 (Medical machine), CISG-Online 1275 (Pace). 71 See Meyer, UN-Kaufrecht in der deutschen Anwaltspraxis, 69 RabelsZ (2005) 457 (474 seq.) reporting that in his enquiry of German lawyers, the presumed lacked of certainty accounted for more than 40 % of the exclusion of the CISG. 72 See supra at VIII. Working with the CISG in practice. 73 See Oberlandesgericht Oldenburg (Germany) 20 December 2007 (Industrial tools) CISG-Online 1644; Arbitral Award (CIETAC) 24 March 1998 (Hempseed) CISG-Online 930. Further: CISG-AC Opinion

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Introduction CISG 42–45 As a consequence, users have slowly changed their attitude towards the CISG. A good example is provided by the developments in Germany. For a long time, as a matter of course, parties excluded the application of the CISG in the standard terms, often on the basis of recommendation by their business associations.74 In 2002 the Deutsche Industrie und Handelskammertag (DIHK), the leading business association, reversed its previous position and recommended its members to submit all their international contracts to the CISG.75 43 It was furthermore realized that most of the perceived downsides of the CISG could easily be remedied by appropriate contractual drafting. Provisions in the contract stipulating when the seller has to be informed about the non-conformity of the goods under Art. 39 or what constitutes a fundamental breach remove most uncertainties inherent in broad notions such as reasonable time.76 In addition, the otherwise applicable non-harmonized national sales laws often used equally vague concepts77 and consequently had to be supplemented to provide for the necessary legal certainty and predictability. The only difference was insofar that they were part of a system with a highest court empowered to give binding interpretations of the concepts used. 44 With the increasing body of case law providing guidance as to the application of such broad principles also this disadvantage is gradually diminishing. Consequently, there are predictions that in the future the CISG legislative success will be mirrored by its success in practice.78 An advice to exclude the CISG which is not based on a proper evaluation of its advantages and disadvantages constitutes a case of malpractice.79 42

3. Commodity Trade 45

One important area of cross border sales where the CISG, until today, only plays a very limited role, if any, is the trade in commodities such as metals, raw materials, grain or other foodstuff. The model contracts, forms and rules recommended by the relevant institutions or used by the parties normally explicitly exclude an application of the CISG as a matter of course. The reasons given, in particular by English authors, are that the CISG is not suitable for the particularities of commodity trade.80 The main focus of the criticism is regularly the limited right of both parties to avoid the contract for its breach by the other side, in particular the requirement of a fundamental breach. According to the critics, the particularities of the trade in commodities, i. e. the highly fluctuating prices and the often documentary element of the transactions, require that any breach No. 16, Exclusion of the CISG under Article 6, Rapporteur: Doctor Lisa Spagnolo, Monash University, Australia. Adopted by the CISG Advisory Council following its 19th meeting, in Pretoria, South Africa on 30 May 2014. 74 For such recommendation, see Meyer, UN-Kaufrecht in der deutschen Anwaltspraxis, 69 RabelsZ (2005) 457 (464). 75 Herber, Editorial, IHR (2002) 1. 76 Behr, Dealing with Non-Conformity – A Transaction Test Analysis of CISG Regulations on Examination and Notice under Articles 38 through 44, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 429 (435). 77 Behr, Dealing with Non-Conformity – A Transaction Test Analysis of CISG Regulations on Examination and Notice under Articles 38 through 44, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 429 (437). 78 Spagnolo, Green Eggs and Ham: The CISG, Path Dependence, and the Behavioural Economics of Lawyers’ Choices of Law in International Sales Contracts; 6 Journal of Private International Law (2010) pp. 417 et seq. 79 Schroeter, Empirical Evidence of Courts’ and Counsels’ Approach to the CISG (with some Remarks on Professional Liability) in: DiMatteo, International Sales Law: A Global Challenge (2014), pp. 649, 665 et seq. 80 See Bridge, The Bifocal World of International Sales: Vienna and Non-Vienna, in: Cranston (ed.) Making Commercial Law (1997), pp. 277 et seq.

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should entitle a party to terminate a contract and not only “fundamental” breaches and any right to cure should be excluded. A further reason given for the non-suitability of the CISG, is that it does not provide for the required certainty, as, unlike English law, it lacks sufficiently detailed rules on passing of risk and property and a developed body of case law.81 Such criticism, however, has not remained uncontested. There is a strong current in 46 the CISG-literature which doubts the veracity of the above reasoning and considers the CISG perfectly suitable to govern the trade in commodities.82 The fact remains that the CISG is a permissive legal text giving way to the application of customary rules or practises established between the contracting parties or in a particular region or industry. A proper application of Art. 9 allows to take account of the needs of the commodities trade.

VII. Advantages of the CISG The major advantage of the CISG is that it provides for international transactions a 47 uniform set of substantive rules specifically drafted for such transactions taking into account their particularities. Thus it avoids the need to undergo the difficulties of the otherwise necessary conflict of laws approach in determining the applicable law and that at least one party must submit to a law with which it is not familiar. Consequently, at least in the long run, after the adaptation of the models used, the CISG helps to reduce transaction costs. The same type of contract can be used in transactions with parties from different jurisdictions. An agreement on such a CISG-contract is to a lesser extent dependent on the respective bargaining power, as would be a contract based on a particular national law. Moreover, as an international convention, the CISG is in principle not open to subsequent changes requiring an adaptation of the contract. In court proceedings in one of its no less than 89 Contracting States, the CISG avoids 48 the necessity to ask for costly and time consuming expert reports as to the applicable law. As the CISG constitutes part of the national law, the judges should in principle be aware of its content.83 In addition, there are also some intrinsic advantages of the CISG. Unlike some 49 national contract laws which either favour buyers or sellers, the CISG tries to balance the rights and obligations of both equally.84 In light of Art. 6, the parties may, however, always change the allocation of risks embodied in the CISG if they want to favour either the seller or the buyer. 81 See Bridge, The Bifocal World of International Sales: Vienna and Non-Vienna, in: Cranston (ed.) Making Commercial Law (1997), p. 277; Mullis, Termination for Breach of Contract in C. I. F. Contracts Under the Vienna Convention and English Law: Is there a substantial Difference, in Lomnicka/Morse (ed.), FS-Guest (1997) pp. 137 et seq., emphasizing the lack of a developed case law. 82 Winsor, The Applicability of the CISG to Govern Sales of Commodity Type Goods, 14 Vindobona Journal of International Commercial Law and Arbitration (2010) 83 et seq.; Zeller, Commodities Sale and CISG, in: Andersen/Schroeter (eds), Sharing International Commercial Law across National Boundaries, FS Kritzer (2008), pp. 627–639; id, Commodity Sales – Can they be governed by the CISG?, in: Schwenzer/Spagnolo, Growing the CISG (2016), pp. 91 et seq.; Schwenzer/Hachem, The CISG – Successes and Pitfalls, 57 American Journal of Comparative Law (2009) 457 (478). 83 This was mentioned as one of the advantages of the CISG in the enquiry of German lawyers: See Meyer, UN-Kaufrecht in der deutschen Anwaltspraxis, 69 RabelsZ (2005) 457 (479 seq.). A similar comment is made in, Schlechtriem, Requirements of Application and Sphere of Applicability of the CISG, 36 Victoria University of Wellington Law Review (2005) 781 (793–794) where he illustrates the point using two practical examples. 84 Eiselen, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual, Vol. 4 § 81:5; Honnold, Uniform Law (1999), p. 69.

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VIII. Working with the CISG 50

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Parties and counsel faced in practice with CISG related legal questions can now draw from a vast number of sources to gain the necessary information. In English, the lingua franca of international commerce, there are now several article-by-article commentaries available which provide direct guidance on a particular question.85 In addition, a considerable amount of information is also available for free on the Internet on the various CISG related websites.86 UNCITRAL provides with its CLOUTdatabase English language abstracts of the most important decision on the CISG.87 They are prepared by the various national correspondents appointed by the respective governments and made available to UNCITRAL jointly with the full text in the original language which can also be requested from UNCITRAL. Moreover, there is a regularly updated Digest available on the UNCITRAL website, summarizing the various decisions rendered.88 Case law in the original language as well as other useful materials can also be found at the CISG-Online website maintained by Prof. Schwenzer at the University of Basel. Spanish and Latin American cases can be found at the University Carlos III database.89 The most comprehensive collection of CISG related cases and materials is provided by the Pace University website founded by Albert Kritzer.90 It contains more than 3,000 cases with 10,000 annotations and 10,300 bibliographical citations as well as the full text of 1,700 scholarly writings. Most decisions are translated full text into English by the Queen Mary Translation Program: as of June 2017 more than 1,885 cases were translated into English or their translation has been assigned. Finally, one should refer to the CISG Advisory Council (CISG-AC), a private initiative which aims at promoting a uniform interpretation of the CISG. It is a private initiative in the sense that its members do not represent countries or legal cultures, but rather are scholars who look beyond the cooking pot for ideas and for a more profound understanding of the issues relating to CISG. As at November 2017 the CISG-AC has produced 17 Opinions and two Declarations (translated in the official languages of the United Nations and German, Japanese and Portuguese); although four or five more opinions are expected in the near future.91

IX. Contract Drafting 55

In the early days, one of the major obstacles to the application of the CISG was the need to adapt existing contract forms and standard terms and conditions which have been developed over decades for application under national law. In the meantime, numerous Model Contracts have been developed on the basis of the CISG. The most prominent example is probably the ICC Model International Sales Contract for manufactured goods intended for resale.92 85 Bernstein/Lookofsky, Understanding the CISG (2012); Bianca/Bonell, Commentary (1987); Schlechtriem/Butler, CISG (2009); Schlechtriem/Schwenzer, Commentary (2016). 86 For an overview see Newman, CISG Sources and Researching the CISG, in: DiMatteo, International Sales Law: A Global Challenge (2014), pp. 37, 43 et seq. 87 http://www.uncitral.org/uncitral/en/case_law.html 88 For the 2016 version of the digest see http://www.uncitral.org/pdf/english/clout/CISG_Digest_2016.pdf. 89 For a list of CISG related websites see Annex supra chapter “How to use this Commentary?”. 90 http://www.cisg.law.pace.edu. 91 http://www.cisg-ac.org. 92 ICC Publication No 738, (2013), replacing the 1997 version published in ICC Publications No 556, (1997), The ICC Model International Sales Contract – Manufactured goods intended for resale.

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Additionally, a fair number of manuals for drafting international contracts take account of the CISG and suggest clauses to deal with issues that require contractual stipulation.93 Inter alia the leading CISG website of Pace University provides a freely accessible and article-by-article guide for drafting contracts under the CISG, primarily against the common law background.94 At the same time the website contains a regularly updated Guide for Managers and Counsel on applying the CISG. In this respect UNCITRAL’s Draft Digest on the CISG, prepared and updated by leading scholars, may play a valuable role. By organizing the existing jurisprudence on the CISG, it can provide examples of what problems may have to be addressed in contract drafting.95 In addition, as a consequence of the harmonizing effects of the CISG, parties may use it as a guideline for drafting their contracts. References to concepts and terminology developed in national laws – in addition to the fact that they are often drafted for domestic sales transactions – always entail the danger that they are misunderstood by the other party.96 By contrast, references to the harmonized CISG terminology and concepts reduce such dangers. The parties are, however, well advised to define a number of the broad concepts, such as “fundamental breach” or “reasonable time”. Moreover, appropriate contract drafting can avoid most of the perceived disadvantages of the CISG, and in particular the criticized lack of certainty. The lack of predictability due to reliance on vague concepts such as “reasonable time” and “fundamental breach”, of which a trial lawyer may rightly complain, may be prevented by the transaction lawyer through appropriate contract drafting, i. e. by defining those concepts for the particular contract.

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X. Electronic Commerce The globalization of market economies due to technological developments is one of 60 the most distinguished features today in international trade. The CISG was drafted before the emergence of e-commerce and as such only refers to telegraph and fax as a means of communication (Art. 13). For the same reason, the Vienna Convention did not foresee transactions made entirely by electronic means: contract conclusion, delivery of the goods and their payment. The CISG, however, is able to cope with electronic transactions by a simple adapta- 61 tion of its provisions to electronic means97. First, an extended interpretation of writing within the CISG is possible so as to cover electronic means of communications98. Second, contract conclusion by electronic means is not perceived as a problem by scholars and case law as it is consistent with the principle of freedom of form (Art. 11). 93 Gelzer, in: Mu ¨ nch/Bo¨hringer/Lehne/Probst (eds), Schweizer Vertragshandbuch: Mustervertra¨ge fu¨r die Praxis (2010), pp. 273–299; Gildeggen/Willburger, Internationale Handelsgescha¨fte, 4th ed. (2012) pp. 142–149; Piltz, Sale agreement pursuant to the United Nations Convention on Contracts for the International Sale of Goods, in: Schu¨tze/Weipert/Rieder, Mu¨nchener Vertragshandbuch, Band 4 (Wirtschaftsrecht III), 7th ed. (2012); Flechtner/Brand/Walter (eds), Drafting Contracts (2007); McMahon, Guide for Managers and Counsel: Drafting CISG Contracts and Documents and Compliance Tips for Traders (2004) (Pace); Ostendorf, International Sales Terms (2010). 94 See McMahon, Drafting CISG Contracts and Documents and Compliance Tips for Traders (2004), available at http://www.cisg.law.pace.edu/cisg/contracts.html. 95 See Lookofsky, Tooling up for Warranties with the CISG Case Digest, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 343 (344 seq.) pointing also to the limits of that approach. 96 Schlechtriem, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 167. 97 CISG-AC Opinion no 1, Electronic Communications under CISG, 15 August 2003. Rapporteur: Professor Christina Ramberg, Gothenburg, Sweden (at http://www.cisg-ac.org). 98 Infra comments to Art. 13.

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Introduction CISG 62 The use of electronic means is admitted within the CISG not only during the formation of the contract but also during its performance. A more difficult question to consider is, however, whether some kinds of “goods” such as software, which might be transmitted electronically, are to be considered within the CISG’s scope of application. 62 The CISG further is now considered suitable for a broader range of contracts involving digital goods subject, of course to several conditions, given that the CISG was developed primarily for tangible goods and traditional payments. The expansion of the CISG to cover digital goods and digital trade as well the use of digital currencies would exponentially expand the scope of application. There seems to be good reasons to argue that the CISG is in principle compatible with all demands of modern digital trade.99 99 Eggen, Digitale Inhalte unter dem CISG Eine Rundschau u ¨ ber Herausforderungen und mo¨gliche Lo¨sungen, Internationales Handelsrecht, 17(6), 229–237.

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Preamble THE STATES PARTIES TO THIS CONVENTION, BEARING IN MIND the broad objectives in the resolutions adopted by the sixth special session of the General Assembly of the United Nations on the establishment of a New International Economic Order, CONSIDERING that the development of international trade on the basis of equality and mutual benefit is an important element in promoting friendly relations among States, BEING 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 in international trade and promote the development of international trade, HAVE DECREED as follows: The Preamble introduces the 101 articles of the Convention on Contracts for the International Sale of Goods (CISG) and provides the broad justification for the drafting of the Convention as well as the motivation of the signatory parties. The Convention is organized in four Parts: Part I is focused on the Sphere of Application and General Provisions (Articles 1–13); Part II deals with Formation of Contract (Articles 14–24); Part III is by far the longest and provides the main body of provisions for the Sale of Goods (Articles 25–88); finally Part IV is dedicated to the Final Provisions (Articles 89– 101). The Preamble sets three main broader aspects in which the Convention operates: the New International Economic Order, the development of trade on the basis of equality and promotion of friendly relations amongst States and the adoption of uniform rules for contracts for the international sale of goods which can in turn further international trade by lifting barriers. The Convention fits well with the main objectives of UNCITRAL:1 i. e. the facilitation and development of international trade and the promotion of friendly relations among States on the basis of equality and harmonization of law. In this regard, harmonization of law2 is also the convergence of legal systems: one should consider different social, economic and legal backgrounds. It is for this reason that Conventions, such as the CISG, aim at lifting barriers imposed by different legal systems and creating a level playing field amongst nations and their traders. The Preamble of the CISG clearly spells out the said objectives. It is notable that the Preamble sets out the economic/ideological context in which the CISG operates, the “New International Economic Order” but also the promotion and development of international trade. As such these objectives and context are rather 1 The United Nations Commission on International Trade Law (UNCITRAL) was established by the General Assembly of the United Nations in 1966 (Resolution 2205 (XXII) of 17 December 1966). The General Assembly recognized that disparities in national laws governing international trade created obstacles to the flow of trade, and it regarded the Commission as the vehicle by which the United Nations could play a more active role in reducing or removing these obstacles. See http://www.uncitral.org/ uncitral/en/commission/sessions/pre.html and Herrmann, The Role of UNCITRAL, in: Fletcher/Mistelis/ Cremona (eds), Foundations and Perspectives of International Trade Law (2001), pp. 28–36. 2 See, e. g., Mistelis, Is Harmonisation a Necessary Evil? Use and Abuse of Comparative Law and the Future of Harmonisation, in: Fletcher/Mistelis/Cremona (eds), Foundations and Perspectives of International Trade Law (2001), pp. 1–27.

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Preamble political and not legal.3 While the economic context refers to the period of the drafting and adoption of the CISG,4 the broader objectives are enduring and arguably renewed. Indeed, with the launch of the UN Global Compact since 2000 the United Nations promote sustainable development and protection of human rights through ten principles which have been developed in 2000 and 2004.5 The UN Global Compact is not a regulatory instrument and merely highlights the new UN “ideology” in respect of trade and business. Legal and economic objectives are now combined with ethical values.6 The most important issue in relation to the Preamble is whether it has any role in the interpretation of the Convention it introduces. Different views have been expressed. Leading commentators have correctly indicated that the Preamble has as its main objective to manifest the “goals of the signatory states” and hence is of no use for the interpretation of normative substantive provisions.7 Moreover, the CISG ultimately has a “technical” character and specific rules of interpretation, such as those found in Article 7,8 so that “the scope for interpretation in the light of the Preamble may not be very wide”.9 However, the contrary view that the Preamble “informs many other provisions” of the Convention10 also exists in the literature. In this vein, “the spirit of the Preamble should also be taken account of when agreed texts of sales contracts are to be interpreted.”11 There are references to the Preamble in the case law. In a 2002 case from the United States,12 the court states that “[t]he intent of the contracting parties to the CISG can be discerned from the introductory text.”13 The issue in question was to decide what law governed the sales contract: state law or the CISG. The court found that the Convention’s “expressly stated goal of developing uniform international contract law to promote international trade indicates the intent of the parties to the treaty to have the treaty pre-empt state law causes of action.”14 Despite the character of the Preamble as an expression of political declaration of the Contracting States which may well contrast with the technical/normative nature of the substantive provisions of the Convention, it may be used for the compliance of possible interpretations with the spirit of the Convention, especially in legal cultures where the Preamble is looked at customarily. 3

Schwenzer/Hachem in Schwenzer (ed), Schlechtriem & Schwenzer, pp 15–16. The General Assembly of the United Nations adopted resolutions on the Establishment of a New International Economic Order in 1974 (Resolution 3201 of 1 May 1974 and Resolution 3281 of 12 December 1974) and 1975 (Resolution 3362 of 16 December 1975). 5 https://www.unglobalcompact.org/. 6 Schwenzer/Leisinger, Ethical Values and International Sales Contracts, in: Leisinger/Probst (eds), Human Security and Business, Zurich 2007, 124–149, 139–141. 7 Schlechtriem, Uniform Sales Law – The UN Convention on Contracts for the International Sale of Goods (1986), p. 38 para. 111. 8 See comments to Art. 7 infra 1.3.3. 9 Evans, in: Bianca/Bonell, Commentary (1987), p. 25. 10 Kastely, Rhetorical Analysis of the Convention, 8 Northwestern Journal of International Law and Business (1988) 594. See also Grigera Nao´n, The UN Convention on Contracts for the International Sale of Goods, in: Horn/Schmitthoff (eds) Transnational Law of International Commercial Transactions – Studies in Transnational Law Vol. 2 (1982), p. 92. 11 Enderlein/Maskow, International Sales Law (1992), p. 20. See also comments to Art. 7 infra 1.3.3. 12 District Court, SD of New York (U.S.) 10 May 2002 (chemicals), Geneva Pharmaceuticals Tech. Corp. v. Barr Labs. Inc., CISG-Online 653 (Pace). See also further cases in comments to Art. 7 infra 1.3.3. 13 Id., at 285. References were also made to the statement made during the introduction of the CISG as legislation to be adopted in the U.S. Senate. 14 Id., at 285–286. See also District Court, ND of California (U.S.) 27 July 2001 (electronic components), Asante Technologies, Inc. v. PMC-Sierra, Inc., CISG-Online 616 (Pace). 4

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PART I Sphere of Application and General Provisions Chapter I Sphere of Application Article 1 (1) This Convention applies to contracts of sale of goods between parties whose places of business are in different States:

(a) when the States are Contracting States; 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 is to 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) Neither the nationality of the parties nor the civil or commercial character of the parties or of the contract is to be taken into consideration in determining the application of this Convention. Bibliography: Bernasconi, The Personal and Territorial Scope of the Vienna Convention on Contracts for the International Sale of Goods (Article 1), 46 Netherlands International Law Review (1999) 137; Bridge, Uniform and Harmonized Sales Law: Choice of Law Issues, in: Fawcett/Harris/Bridge, International Sale of Goods in the Conflict of Laws (2005) 908; Butler, Article 1 CISG – The Gateway to the CISG, in Schwenzer/Pereira/Tripodi (eds.), CISG and Latin America: Regional and Global Perspectives (2016) pp 379–396; Ferrari, The Sphere of Application of the 1980 Vienna Sales Convention (1995); Ferrari, What Sources of Law for Contracts for the International Sale of Goods? Why One Has to Look Beyond the CISG, 25 International Review of Law and Economics (September 2005) 314; Ferrari, Contracts for the International Sale of Goods: Applicability and Application of the 1980 United Nations Sales Convention (2012); Gilette/Walt, The UN Convention on Contracts for the International Sale of Goods – Theory and Practice, 2nd edition (2016); Jansen and Spilker, The Application of the CISG in the World of International Commercial Arbitration, 77 RabelsZ (2013) 131; Petrochilos, Arbitration Conflict of Laws Rules and the 1980 International Sales Convention, 52 Revue Hellenique de Droit International (1999) 191; Schlechtriem, Requirements of Application and Sphere of Applicability of the CISG, Victoria University Wellington Law Review (2005/4) 781; Spagnolo, CISG Exclusion and Legal Efficiency (2014); Ziegel, The Scope of the Convention: Reaching Out to Article One and Beyond, 25 Journal of Law and Commerce (2005–2006) 59; CISG-AC Opinion no 4, Contracts for the Sale of Goods to be Manufactured or Produced and Mixed Contracts (Article 3 CISG), 24 October 2004. Rapporteur: Pilar Perales Viscasillas, Universidad Carlos III de Madrid (at http://www.cisg-ac.org).

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Territorial scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Subject matter – substantive scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Arbitration as a special case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Drafting history . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Importance of provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Article 1 1–3

Part I. Sphere of Application and General Provisions

II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Sales contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Contract of sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Related contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Internationality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Introductory remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Place of business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Automatic application if international sales contract . . . . . . . . . . . . . . . . . . . . . . 5. Territorial application – Contracting States. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Application by operation of conflict of laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25 25 26 32 36 42 42 43 45 47 50 51 55

I. Importance and Role of the Provision 1

Art. 1 is a significant provision and can be characterised as a unilateral conflict of laws rule: it determines the sphere of application (applicability) of the Convention and at the same time prevails over recourse to conflict of laws to the greatest extent possible. As a unilateral conflict of laws rules, Art. 1 does not provide for an applicable law when the Convention does not apply. In fact, this article provides only some of the rules for determining whether the Convention applies. It should be read in conjunction with Arts. 2 and 3 which respectively narrow and extend the CISG’s substantive sphere of application. Moreover, Art. 100 defines the temporal sphere of application of the Convention.

1. General Art. 1 introduces a number of criteria. First, the CISG requires the underlying transaction to be a contract of sale, but stops short of providing an express definition of such contract – this definition may be deduced from Arts. 30 and 53. Second, it applies to the international sale of goods: the internationality is established on the basis that the contracting parties have their place of business in different States (Art. 1(1)). This is a relative internationality and has to be assessed at the time of conclusion of contract. Third, the CISG requires that the parties of the sales contract relate to more than one Contracting State (Art. 1(1)(a)); such internationality may well be established by operation of private international law which may refer the matter to the law of a Contracting State (Art. 1(1)(b)). 3 Art. 1 is to be read in conjunction with Arts 2–5. From a combined reading of Art. 1 with Arts. 2 and 3 it is concluded that not all sales contracts will be covered by the CISG. As will be discussed in detail below as well as in the corresponding articles, certain restrictions exist in respect of certain goods and certain kinds of contracts of sale. Finally we should not overlook the fact that the CISG has a defined scope of application and only regulates certain aspects of sales contract (i. e. performance and formation) and that certain matters are not covered (Arts. 4 and 5). It is expected that the CISG will eliminate the scope of forum shopping1 and reduce the need to recourse to rules of private international law.2 In countries where the CISG is applicable, if the substantive rules of the Convention apply, 2

1 See Ferrari, Forum Shopping et Droit Materiel Uniforme, Journal du Droit International 383 (2002); Ferrari, ‘Forum Shopping’ despite international uniform Contract law Conventions, 51 International and Comparative Law Quarterly (2002) 689–707. 2 Tribunale di Vigevano (Italy) 12 July 2000 (Vulcanized rubber), CISG-Online 493 (Pace); Tribunale di Pavia (Italy) 29 December 1999 (High fashion textiles), CISG-Online 678; Landgericht Zwickau (Germany) 19 March 1999 (Chemical products), CISG-Online 519; Handelsgericht des Kantons Zu¨rich (Switzerland) 30 November 1998 (Lambskin coat), CISG-Online 415; Landgericht Heilbronn (Germany) 15 September 1997 (Film coating machine), CISG-Online 562; Oberlandesgericht Frankfurt am Main (Germany) 20 April 1994 (New Zealand mussels), CISG-Online 125.

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4–7

Article 1

there is in principle no need to refer to private international law.3 Ultimately the CISG provides a modern (uniform) law of sales appropriate for transactions of an international character and technically the Convention prevails over the recourse to the otherwise applicable conflict of laws rules.4 It is important also to consider the interrelation of sub-paragraphs (a) and (b) of 4 Art. 1(1).5 It appears that the two entry points for the CISG under Art. 1(1)(a) and 1(1)(b) are alternatives with primacy given to sub-paragraph (a). This proposition is not necessarily consistent with the practice of national courts and arbitration tribunals which tend to consider the two sub-paragraphs as complementary ones, so that the Convention would apply through sub-paragraph (b) even though the case at hand is prima facie one that would fall under sub-paragraph (a).6 In any event it is also clear that the two sub-paragraphs serve different purposes. Sub- 5 paragraph (a), on the one hand, introduces an autonomous and unilateral system for the application of the CISG and renders the application of conflict of laws rules obsolete.7 Sub-paragraph (b), on the other hand, acknowledges the application of conflict of laws rules and also makes explicit that the Convention will be part of national domestic law in all Contracting States. In the latter case, if only one party, or indeed if neither party, has its place of business in a Contracting State, the CISG may well be applicable if private international law makes the law of a Contracting State (e. g., France) the applicable law. Schlechtriem aptly comments and advises that: “Although it was thought by those drafting and promulgating a uniform sales law that it 6 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. And in the case of an article 1(1)(b) situation, conflict rules are indispensable, since they are a prerequisite to the application of the Convention. Therefore, even in the case of a sale clearly governed by the Convention, it is advisable to have a choice of law clause.”8 [footnote omitted]

In short the CISG will apply by effect of party autonomy, direct choice of rules of 7 the Convention by the contracting parties or when there is a sale of goods and the seller and buyer have their places of business in different Contracting States9 or when

3 Polimeles Protodikio Athinon (Greece), case no 4505/2009, available at http://cisgw3.law.pace.edu/ cases/094505gr.html (Material for bullet-proof vest); Tribunale di Forli (Italy) 11 December 2008, (shoes) CLOUT Case no 867 (Pace). See, however, Gilette/Walt, at p. 25, who correctly point out that the “CISG only partly avoids the uncertainty in applicable law created by conflicts rules”. 4 This view is widely held in PR China. See, for example, High People’s Court of Zhejiang Province, People’s Republic of China, 26 August 2011, (Daewoo GSI (Korea) Co. Ltd v. Zhejiang Wuyi Tea Co. Ltd) (2011) Zhe Shang Wai Zhong Zi No. 16 Civil Judgment, available on the Internet at www.court.gov.cn; and further references in CISG Digest 2016, page 7, note 2. This view is also held in other jurisdictions, e.g., CLOUT case No. 867, Tribunale di Forli|‘, Italy, 11 December 2008, (shoes), English translation available on the Internet at www.cisg.law.pace.edu; Oberlandesgericht Schleswig, Germany, 24 October 2008, (shop furnishings), English translation available on the Internet at www.cisg.law.pace.edu; Oberster Gerichtshof, Austria, 18 December 2002, English translation available on the Internet at www.cisg.law.pace.edu. For further refererences see UNCITRAL CISG Digest, Article 1, note 2. 5 Petrochilos, Arbitration Conflict of Laws Rules and the 1980 International Sales Convention, 52 Revue Hellenique de Droit International (1999) 191–218. 6 Petrochilos, Arbitration Conflict of Laws Rules and the 1980 International Sales Convention, 52 Revue Hellenique de Droit International (1999) 191–218, 192-4 with further references. 7 See to the same effect Gillete/Walt, p. 25. 8 Schlechtriem, Requirements of Application and Sphere of Applicability of the CISG, Victoria University Wellington Law Review (2005/4) 781 (784). 9 For an up-to-date list see www.uncitral.org.

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Article 1 8–13

Part I. Sphere of Application and General Provisions

the applicable private international law points to the application of the law of a Contracting State. 8

9

10

11

12

13

a) Territorial scope. Art. 1(1) provides that the basic criterion for the application of the CISG to a contract for the sale of goods as well as to its formation is that the parties’ places of business are in different States. This Convention is not concerned with the law governing contracts of sale or their formation where the parties of whatever nationality have their places of business within one and the same State. These matters will normally be governed by the domestic law of that State, unless the State has a single law for both international and domestic sales. Even though the parties have their places of business in different States, the CISG applies only if the States in which the parties have their places of business are Contracting States; or the rules of private international law lead to the application of the law of a Contracting State. An example for the former is where the Seller is a company with his place of business in Australia and the Buyer a company with his place of business in France: here the CISG clearly applies. An example for the latter is where the Seller is a company with his place of business in China and the Buyer is a company with his place of business in England10 (a non-Contracting State) and the parties have agreed to the jurisdiction of the English courts. English courts in accordance with EC Regulation 593/2008 and/or the Contracts (Applicable Law) Act will apply the law of the place of business of the seller (China) as it is deemed to provide the characteristic performance to this contract of sale. As a result, the CISG will apply. If the two States in which the parties have their places of business are Contracting States the CISG applies even if the rules of private international law of the forum would normally designate the law of a third country, such as the law of the State in which the contract was concluded. This result could be defeated only if the litigation took place in a third non-Contracting State, and the rules of private international law of that State would apply the law of the forum, i. e., its own law, or the law of a fourth nonContracting State to the contract. Such cases will be far and few between. Even if one or both of the parties to the contract have their places of business in a State which is a non-Contracting State, the CISG is applicable if the rules of private international law of the forum lead to the application of the law of a Contracting State. In such a situation, the question is then which law of sales of that State shall apply. If the parties to the contract are from different States, the appropriate law of sales is the CISG. A further application of this principle is that if two parties from different States have designated the law of a Contracting State as the law of the contract, the CISG is applicable even though the parties have not specifically mentioned it. The example would be where the Seller has his place of business in Ireland and the Buyer has his place of business in the UK; the parties agreed to the application of Swiss or French law as a neutral law to govern the contract of sale. In such a case the CISG would apply. Pursuant to Art. 1(2), the CISG does not apply if “the fact that the parties have their places of business in different States … 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”. One example of such a situation is where the parties appear to have their places of business in the same State but one of the parties was acting as the agent for an undisclosed foreign principal. In such a situation, 10 The United Kingdom is not a Contracting State but arguably because of constitutional reforms in the UK and devolution of certain powers to Scotland, Wales and Northern Ireland, each of the constituent parts of the UK could ratify the CISG independently from the others.

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Article 1

Art. 1(2) provides that the sale, which appears to be between parties whose places of business are in the same State, is not governed by this Convention. However, the question whether the CISG is applicable to a contract of sale of goods is 14 determined primarily by whether the relevant “places of business” of the parties are in different Contracting States. The relevant “place of business” of a party is determined by application of Art. 10(a)11 without reference to nationality, place of incorporation, or place of head office. Art. 1(3) reinforces that rule by making it clear that the nationality of the parties is not to be taken into consideration. b) Subject matter – substantive scope. The scope of application of the Convention is 15 also determined by looking at the subject matter of the sales contract. Indeed, in some legal systems the law relating to sale of goods contracts is different depending on whether the parties or the contract are characterized as civil or commercial. In other legal systems this distinction is not known. In order to ensure that the CISG’s scope provisions are not interpreted to apply only to contracts of sale characterized as “commercial” or between parties characterized as “commercial” under the law of a Contracting State, Art. 1(3) provides that the civil or commercial character of the parties or of the contract is not to be taken into consideration. It should be noted, however, that Art. 2 excludes from the substantive sphere of 16 application certain contracts for the sale of goods which are likely to be characterized as “civil” contracts by legal systems that recognize the distinction between civil and commercial contracts. In particular, Art. 2(a) excludes the sale “of goods bought for personal, family or household use.” In other words consumer sales contracts fall outside the sphere of application of the CISG. c) Arbitration as a special case. It appears that disputes relating to international sales 17 contracts are more often than not referred to international arbitration tribunals for resolution. Arbitration is a very fertile ground for the resolution of international sale disputes, however it is impossible to expect that Art. 1 will be treated in the same way in arbitration as it would by national courts. The reason for this is that in arbitration there are specific conflict of laws rules, typically found in arbitration rules12 and in arbitration laws13 so that a different method for the determination of applicable law is employed.14 Arbitral tribunals apply a specific law or rules of law either by operation of conflict of laws (indirect reference or voie indirecte) or directly without having to resort to a private international law system (direct reference or voie directe). This is arguably a three-step method:15 (1) First one must ask whether there is a choice of law by the parties. If this can be answered in the affirmative, next one looks to whether it covers the entire dispute before the tribunal; whether there is any contradiction with mandatory rules or public policy; and, in any event, whether it is possible to solve the dispute by relying exclusively on the contract. (2) In the absence of choice of law by the parties, one then asks whether it is possible to determine the applicable law or non-legal standard without reference to conflict of laws, and whether this is an appropriate law or non-legal standard for this particular dispute. (3) Finally one asks whether it is necessary to employ conflict of laws rules, and which conflict of laws rules should be applied. This will involve assessing whether there is a conflict of laws system most closely connected 11

See further Art. 10 infra. See, e. g., Art. 21 ICC Rules of Arbitration, Art. 35 UNCITRAL Arbitration Rules. 13 See, e. g., Art. 28 UNCITRAL Model Law, Section 46 English Arbitration Act. 14 See, e. g., Lew/Mistelis/Kro ¨ ll, Comparative International Commercial Arbitration (2003), Chapter 17; Born, International Commercial Arbitration, volume 2, 2nd edition (2014), 2620 et seq. 15 Ibid., paras 17–78. 12

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Article 1 18–21

18

19

20

21

Part I. Sphere of Application and General Provisions

with the dispute, whether it is possible to apply cumulatively all relevant conflict of laws systems, and whether it is possible to apply generally accepted conflict of laws rules. A review of the published awards reveals a fascinating picture about how the CISG has been applied by arbitral tribunals.16 This survey was completed in July 2008 and looked at all published awards in the major collections, i. e. the Pace database, Unilex and ICC collections of abstracted awards,17 as well as CLOUT. The most comprehensive database on the CISG, the Pace CISG Database, features in July 2017 3152 court decisions and arbitral awards on the CISG. Out of the 3152 decisions, more than 1600 are arbitral awards. Although arbitral awards account for 50 % of the published decisions, the real number of awards on the CISG must be significantly higher. It is a well known fact that very few awards get published: arguably, significantly less than 5 % of arbitral awards get published. On that basis one can assume that there are well more than 10,000 awards on the CISG. For example, this author is aware of at least ten unpublished awards on the CISG in the LCIA.18 This makes arbitration the main forum for the resolution of disputes arising out of international sales contracts under the CISG. Arguably, more than 70 % of cases relating to the CISG will have been (or actually are) rendered in arbitration. The endorsement of the CISG by arbitral tribunals is not only encouraging, but is also essential for the widespread use and well being of the Convention. It also follows that arbitral tribunals do not apply Art. 1 in a strict and/or consistent fashion; some tribunals apply the CISG as the choice of parties, others by operation of conflict of laws, very often as a choice of the tribunal or even as a general principle of law.19 However, the path to the CISG is not always without problems. For example, in a CIETAC award the tribunal, instead of referring to CISG Article 1(1)(a), applied the CISG by operation of Article 142 of the Civil Code of the PRC.20 A Moscow tribunal was far more precise in its award as to applicable law. The contract concluded by the parties did not contain provisions on the applicable law. Since Russia and Germany are Contracting States, the tribunal held that the CISG was applicable to the relations of the parties by virtue of Art. 1(1)(a) CISG. As to the 16 Mistelis, CISG and Arbitration, in: Janssen/Meyer (eds), CISG Methodology (2009), pp. 375 et seq. See also Butler, CISG and International Arbitration – A Fruitful Marriage? (2014). XVII International Trade and Business Law 322, Special Volume for Professor Zeller’s 70th Birthday, 322–357 (2014); Janssen & Spilker, The CISG and International Arbitration, in DiMatteo (Ed.), International Sales Law: A Global Challenge. (2014), also at 77 RabelsZ (2013) 131-157; Kro¨ll, Arbitration and the CISG, in Schwenzer/ Atamer/Butler, Current Issues in CISG and Arbitration (2014); Perales Viscasillas and Ramos Munoz, CISG & Arbitration, 10 Spanish Arbitration Review 63–84 (2011). 17 Most notably the ICC International Court of Arbitration Bulletin, Volume 11(2) 2000. 18 LCIA stands for London Court of International Arbitration. LCIA has a strong confidentiality policy and awards are never published. 19 Interestingly enough, out of the 512 published awards between 1988 and 2007, in 57 awards or 11 % of the cases, the CISG is choice of parties; in 115 awards or 22 % of the cases, the CISG applied by effect of conflict of laws; in 289 awards or 57 % of the cases, the CISG applied as the choice of the tribunal; in 12 awards or 2 % of the cases, the CISG applied as general principles of law; and in 39 awards or 8 % of the cases there is no discussion why the CISG is applied. There has been a significant increase of published arbitral awards applying the CISG in the last decade. 20 Arbitral Award, CIETAC, 21 May 2006 (Diesel generator), CISG-Online 1454 (Pace). The tribunal held: The Contract has no stipulation on the applicable law. The [Buyer]’s place of business is in China and the Respondents’ are in Singapore, and both China and Singapore are Contracting States of the United Nations Convention on Contracts for the International Sales of Goods (hereafter referred to as, the “CISG”). Therefore, based on Article 142 of the Civil Code of the PRC, the CISG shall apply and has priority. As to the issues beyond the scope of the CISG, the Arbitration Tribunal deems that China has the closest relationship with the dispute in this case. Therefore, based on Article 145 of the Civil Code of the PRC, the proximate connection principle, Chinese law shall be applied to those issues.

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22–24

Article 1

subsidiary law applicable to the issues directly not regulated by the Convention, the tribunal referred to Art. 28(1) of the Law of the Russian Federation “On International Commercial Arbitration.”21 It is also worth noting a couple of arbitral awards that apply the CISG as general 22 principles of law. The first is an ICC award which pointed out that an exclusion of the right to the payment of interest for delayed payment would have been difficult to reconcile with the usages of international trade which are echoed by, among others, the CISG and also the PICC.22 Also interesting is a CIETAC award in a dispute between a Thai seller and a UK buyer (neither Thailand nor UK are Contracting States), in which the tribunal found that although the parties’ places of business were located in nonContracting States, they made reference to the CISG in their statement of claim and statement of defence. Considering this as well as the fact that Chinese law was applied to the instant case, the tribunal held that the relevant provisions of the CISG should be referred to.23

2. Drafting history Art. 1 ULF and Arts 1, 2 and 7 ULIS contain similar provisions to Art. 1 CISG albeit 23 with different scope. It was widely felt that the sphere of application of the Hague Sales Laws was a source of confusion with various subjective and objective tests as well as a number of reservations declared by most Contracting States.24 As a result, the Working Group on the drafting of this Convention25 took careful steps to elaborate rules relating to the sphere of application which were simpler and to the extent possible clearer. The consequence of these efforts is that there is no longer a principle of absolute universality,26 since the place of business of the parties is an undisputed criterion for the application of the Convention pursuant to Art. 1(1)(a); there is, however, a qualified universality by virtue of Art. 1(1)(b) which is also balanced out by the reservation in Art. 95.27

3. Importance of provision The importance of Art. 1 can be ascertained by the fact that Art. 1 is to-date 24 mentioned in roughly one in three known CISG cases, whether court decisions or arbitral awards. Art. 1 sets out the CISG’s own (autonomous) rules of application and also limit the scope of the Convention. It is correctly pointed out that the importance lies in the fact that “the unification of sales law is only a partial one: the CISG only purports to regulate a section of the law.”28 Inevitably, domestic law retains its relevance and hence it is essential to delimit the sphere and scope of application of the CISG as precisely and uniformly as possible. 21 Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 13 February 2006, (Equipment), CISG-Online 1623 (Pace). The Tribunal held that for matters not governed by the CISG German law was applicable. 22 Arbitral Award, ICC 9333/1998 (Services), CISG-Online 1308 (Pace). 23 Arbitral Award, CIETAC, 29 March 1996 (Natural rubber), (Pace). 24 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 1 para. 1. 25 Honnold, Documentary History (1989), pp. 16–18, 29–39, 44–63, 96, 100–101, 197–198, 213–218, 241–243, 275–277, 300–302, 318–323, 358–361, 392, 394. 26 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 1 para. 2 with further references. 27 See also Art. 95 infra; pursuant to Art. 95 reservations the CISG cannot apply through Art. 1(1)(b), only through 1(1)(a). 28 Schlechtriem/Butler, CISG (2016), para. 8.

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Article 1 25–26

Part I. Sphere of Application and General Provisions

II. Detailed Commentary 1. Sales contracts 25

The CISG will only apply to contracts for the sale of goods and certain mixed contracts29 with a preponderant sales contract element. While there is no express definition of sales contract in the Convention30 one can devise one autnonomous31 definition by looking at Arts 30 and 53.32 A contract for the sale of goods is a contract where goods are exchanged for money33 and a formal “labelling” of the contract by the contracting parties as a contract or sale would not normally be required.34 It would be more precise though to consider as a sales contract covered by the CISG, a contract pursuant to which the seller is bound to deliver the goods and transfer the property in the goods sold and the buyer is obligated to pay the price and accept the goods.35 Not all contracts with characteristics of a sales contract will fall under the ambit of the CISG: sometimes what is relevant is the nature of the contract, and in other cases the nature of the goods sold. A particular modern legal challenge relates to the use of the CISG in digital contracts and contracts for the sale of digital goods.36

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a) Contract of sale. The CISG covers the basic contract for the sale of tangible goods (goods delivered against payment) but also other contracts of sale. For example, it follows from Art. 73 that the CISG applies to contracts for the delivery of goods by instalments,37 and contracts providing for the delivery of the goods sold directly from the supplier to the seller’s customer, i. e. the buyer.38 Contracts for the delivery of instalments are quite common in business practice and so are contracts where the seller effectively acts as an intermediary between the supplier and the buyer – in fact the seller purchases goods from the supplier and sells them on to the buyer.39 They possess all characteristics of sales contracts and should be treated as such. Moreover, and pursuant to Art. 29, contracts modifying or even avoiding the original sales contract also fall within the sphere of 29

See Art. 3 infra. See Oberster Gerichtshof (Austria) 10 November 1994 (Chinchilla furs), CISG-Online 117 (Pace). 31 See Tribunale di Forli (Italy), 16 February 2009 (cisterns), CISG-Online 1780 (Pace). 32 See Rechtbank Rotterdam (Netherlands) 1 November 2001, Nederlands Internationaal Privaatrecht, 2002, No. 114; Kantonsgericht Wallis (Switzerland) 11 March 1996 (Clay); Tribunale di Rimini (Italy) 26 November 2002 (Porcelain tableware), CISG-Online 737 (Pace). 33 Schlechtriem/Butler, CISG (2009), para. 24. See also Kantonsgericht des Kantons Zug (Switzerland) 21 October 1999 (PVC and other synthetic materials), CISG-Online 491 (Pace); Tribunale di Forli (Italy), 16 February 2009 (cisterns), CISG-Online 1780 (Pace). 34 Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce, Serbia, Arbitral Award of 15 July 2008 (milk packaging equipment), CLOUT no 1021 (Pace). 35 See Oberster Gerichtshof (Austria) 10 November 1994 (Chinchilla furs), CISG-Online 117 (Pace) (see full text of the decision); for a reference to the buyer’s obligation mentioned in the definition cited in the text, see Rechtbank Koophandel Hasselt (Belgium) 2 May 1995 (Frozen raspberries), CISG-Online 371 (Pace). 36 Eggen, (2017). Digitale Inhalte unter dem CISG Eine Rundschau u ¨ ber Herausforderungen und mo¨gliche Lo¨sungen, 17(6) Internationales Handelsrecht 229. 37 See Arbitral Award, Schiedsgericht der Hamburger freundlichen Arbitrage, 29 December 1998 (Cheese), CISG-Online 638 (Pace); Handelsgericht des Kantons Zu¨rich (Switzerland) 30 November 1998 (Lambskin coat), CISG-Online 415; Oberster Gerichtshof (Austria) 12 February 1998 (Umbrella), CISGOnline 349 (Pace); Arbitral Award, Schiedsgericht der Handelskammer Hamburg, 21 June 1996 (Chinese goods), CISG-Online 465 (Pace); Landgericht Ellwangen (Germany) 21 August 1995 (Paprika), CISGOnline 279 (Pace); Cour d’appel Grenoble (France) 22 February 1995 (Jeans), CISG-Online 151 (Pace). 38 Bundesgerichtshof (Germany) 12 February 1998 (Air cleaning installation), CISG-Online 343 (Pace); Bezirksgericht der Sanne (Switzerland) 20 February 1997 (Spirits), CISG-Online 426 (Pace). 39 Schlechtriem/Butler, CISG (2009), para. 24 a. 30

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application of the CISG.40 In this context, even a repurchase obligation would be governed by the Convention if it is associated with a sales contract.41 Contracts modifying a prior contract may assume other characteristics than the original contract, but also normally carry on with the features of the original contract. One may consider two different scenarios: in the first, the contract originally fell under the CISG at the time of contract drafting, but at the time of modification this became no longer so; e. g. where one party no longer has its place of business in a Contracting State. In such a case, the CISG continues to apply if it were applicable at the time of contract conclusion. In the second scenario the original contract was governed by national law, but at the time of the contract modification the CISG could become applicable if a new contract had been concluded. Arguably the CISG could apply also in this second factual scenario. It is rightly suggested that the CISG should also apply to framework contracts which obligate the contracting parties to agree a sales contract, provided the framework contains the main rights and duties without having to refer to them in the main contract: in other words one should equate contacts of sale with contracts for sale.42 Specific examples of framework contracts where the CISG may apply include distribution and franchising agreements, discussed below. Art. 3 specifically deals with contracts of a mixed nature and contains a special rule which extends, within certain limits, the CISG’s sphere of application to contracts for the sale of goods to be manufactured or produced as well as to contracts pursuant to which the seller is also bound to deliver additional services, such as labour.43 It is widely accepted that barter (countertrade – goods delivered in exchange for other goods) does not fall under the substantive sphere of application of the CISG. Although the CISG could possibly apply,44 it is clear that barter falls outside the definition of contract of sale suggested above. If one were to read the definition broadly (goods delivered against a value rather than price) the barter could be accommodated under the CISG.45 Barter contracts have become a less regular occurrence in many parts of the world, but do survive in certain parts of central Asia and Africa. Certain contracts of sale are excluded from the substantive sphere of application of the CISG, pursuant to Art. 2.46 This may be justified the basis of the nature (or more accurately the objective) of the sales contract (in particular, pursuant to Art. 2(a), sale of 40 See Oberlandesgericht Mu ¨ nchen (Germany) 21 January 1998 (Insulating materials), CISG-Online 536 (Pace); Oberlandesgericht Mu¨nchen (Germany) 8 February 1995 (Automobiles), CISG-Online 143 (Pace); Arbitral Award, ICC 7331/1994 (Cowhides), CISG-Online 106 (Pace); Landgericht Hamburg (Germany) 26 September 1990 (Textiles), CISG-Online 21 (Pace); Amtsgericht Sursee (Switzerland) 12 September 2008 (Second hand tractor), CISG-Online 1728 (Pace). 41 Bundesgerichthof (Germany), 28 May 2014 (sale of bowling alleys with repurchase obligation in sales contract), CISG-Online 2513, Contrast Oberlandesgericht Ko¨ln (Germany), 21 November 2012 (repurchase obligation contained in court settlement in a CISG case), CISG-Online 2401. 42 Schlechtriem/Butler, CISG (201609), para. 24 b. See also Bridge, International Sale of Goods (2007), para. 2.18; Cour de cassation (France) 30 June 2004, CISG-Online 870 (Pace); Cour de cassation (France) 20 February 2007 (Perfume), CISG-Online 1492 (Pace). See also related contracts below at paras 32 et seq. 43 See further Art. 3 infra. See also CISG-AC Opinion no 4. 44 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 1 para. 18; Tribuna Of International Commercial Arbitration at the Ukrainian Chamber of Commerce and Trade (Ukraine), 10 October 2003 (Pace). 45 Bridge, International Sale of Goods (2007), para. 11.19; Schwenzer/Hachem, in: Schlechtriem/ Schwenzer, Commentary (2010), Art. 1 para. 11; it is noteworthy that the authors state that in barter contract most likely both parties can be treated as sellers. As a matter of fact, both parties can be treated as sellers and buyers. See also Arbitral Award, International Court of Arbitration at the Russian Chamber of Commerce and Industry, 9 March 2004, CISG-Online 1181; Federal Arbitration Court of the Moscow Region (Russian Federation), 26 May 2003 (Pace). 46 See Art. 2 infra.

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Part I. Sphere of Application and General Provisions

goods bought for personal, family or household use) or the non-contractual basis of the sales transaction, in particular sale by auction (Art. 2(b)) or sale on execution or by authority of law (Art. 2(c)). The former is justified as the law wishes to protect weaker parties, the latter exists because the contract is neither negotiated nor clearly expresses the intent of the parties and most terms are implied by statute. b) Related contracts. A number of contracts with a sales element may also be considered as falling within the substantive sphere of the CISG. There is case law (and clarity) in respect of certain types of contracts while there is debate and no practice in relation to other contracts. 33 Most courts (but not all courts)47 have held that the CISG does not apply to distribution agreements;48 the reasoning has been that distribution agreements have as their focus the organization of distribution of goods (mostly as a service) rather than the passing of property and delivery of goods.49 It follows that all sales contracts concluded in performance and implementation of the distribution agreement could and should be governed by the CISG.50 A good example is provided in case law51 where a possible combination of the framework agreement (in this particular case, distribution), which is subject to domestic law, and the sales contracts made in the performance of this agreement, which are subject to the Convention.52 34 It is also accepted in case law that franchising agreements also fall outside the substantive sphere of application of the CISG:53 franchising agreements contain many additional features, such as a license to use a trademark, know-how of the organization and running of business, all of which are significant and distinct from rights and duties under a sales contract. However, if under a franchise contract there are several contracts 32

47 One court has applied the CISG to a distributorship agreement. See Corte di Cassazione (Italy) 14 December 1999 (Manufactured goods), CISG-Online 1314 (Pace). For a case in which the issue was raised but not resolved, see Federal District Court, SD of New York (U.S.) 23 July 1997 (Fashion accessories), CISG-Online 297 (Pace). 48 See Cour d’appel de Reims (France), 30 Apirl 2013; Oberlandesgericht Mu ¨ nchen (Germany) 21 January 1998 (Insulating materials), CISG-Online 536 (Pace); Oberlandesgericht Hamm (Germany) 5 November 1997 (Inline skates), CISG-Online 381 (Pace); Oberlandesgericht Mu¨nchen (Germany) 9 July 1997 (Leather goods), CISG-Online 282 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 11 July 1996 (Lawn mower engines), CISG-Online 201 (Pace); Fova´rosi Biro´sa´g (Hungary) 19 May 1996 (Instruments), (Pace); Oberlandesgericht Koblenz (Germany) 17 September 1993 (Computer chip), CISG-Online 91 (Pace); Hof Amsterdam (Netherlands) 16 July 1992 (Shower cabinets), CISG-Online 48 (Pace); U.S. District Court, District of Arizona (U.S.), 16 December 2014, Adonia Holding GmbH v. Adonia Organics LLC (Pace); Federal District Court, ED of Pennsylvania (USA) 29 August 2000 (Wine), CISG-Online 675 (Pace); Hof Arnhem (Netherlands) 27 April 1999 (Movable room units), CISG-Online 741 (Pace); Rechtsbank ‘s-Gravenhage (Netherlands) 2 July 1997 (Cushions), CISG-Online 1331 (Pace). 49 Obergericht des Kantons Luzern (Switzerland) 8 January 1997 (Blood infusion devices), CISG-Online 228 (Pace); Cour de cassation (France) 20 February 2007 (perfume), CISG-Online 1492 (Pace). The contrary view was held in Arbitral Award, ICC 9448/1999 (Roller bearings), CISG-Online 707 (Pace) where the tribunal held that a framework agreement was governed by the CISG because it ultimately provided for future sales. 50 See Oberlandesgericht Hamm (Germany) 5 November 1997 (Inline skates), CISG-Online 381 (Pace); Oberlandesgericht Mu¨nchen (Germany) 9 July 1997 (Leather goods), CISG-Online 282 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 11 July 1996 (Lawn mower engines), CISG-Online 201 (Pace); Cour d’appel Grenoble (France) 15 May 1996, Thermo King v Cigna Insurance, CISG-Online 219 (Pace); Oberlandesgericht Koblenz (Germany) 17 September 1993 (Computer chip), CISG-Online 91 (Pace); Arbitral Award, ICC 8908/1998 (Pipes), CISG-Online 1337 (Pace); Arbitral Award, ICC 8611/1997 (Industrial equipment), CISG-Online 236 (Pace). 51 Bundesgerichtshof (Germany) 23 July 1997 (Benetton II), CISG-Online 276 (Pace). 52 See also discussion by Schlechtriem, Uniform Sales Law in the Decisions of the Bundesgerichtshof, http://www.cisg.law.pace.edu/cisg/biblio/schlechtriem3.html. 53 See Obergericht des Kantons Luzern (Switzerland) 8 January 1997 (Blood infusion devices), CISGOnline 228 (Pace).

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for the international sale of goods between the parties of the franchise contract, these sales contracts should be governed by the CISG. It is also widely accepted that a contract for the sale of goods with a special finance 35 agreement would typically be excluded from the substantive sphere of application of the CISG. Examples of such contracts with a finance facility would include hire purchase (leasing) agreements and sale-and-lease back contracts. The justification is that the finance facility in such agreements is more important than the sales element itself, although the circumstances of each agreement may modify the degree of importance.54

2. Goods The Convention contains no definition of “goods”. Despite this fact, the term 36 “goods”, as it is a Convention term, has to be interpreted in accordance with Art. 7(1): “goods is to be interpreted autonomously, having regard to the “international character” of the CISG and the “need to promote uniformity in its application”.55 In other words any definition of “goods” will be made without any reference to the same term in domestic laws. Similarly, the CISG does not introduce distinctions between tangible and intangible goods, movable and immovable goods, and the like. According to case law, CISG “goods” typically are items that are, at the moment of 37 delivery,56 “moveable and tangible”,57 regardless of whether they are solid,58 used or new,59 inanimate or alive.60 It is correctly suggested that human organs, artificial limbs, cultural and art objects, pharmaceuticals and similar goods would qualify as CISG goods,61 with the caveat that domestic law may impose restrictons as to the sale of said goods or the validity of such contracts.62 At the same time, intangibles, such as intellectual property, an interest in a limited 38 liability company,63 or an assigned debt64 have been considered not to fall within the 54 See Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 1 paras 12–13; See a different view in Ferrari, in: Schlechtriem/Schwenzer, Kommentar (6th German ed. 2013), Art. 1 paras 27 and 30. 55 See Art. 7. 56 See Cour d’appel Grenoble (France) 26 April 1995, Marques Roque v Manin Reviere (Second hand portable warehouse shed), CISG-Online 154 (Pace); Tribunale di Rimini (Italy) 26 November 2002 (Porcelain tableware), CISG-Online 737 (Pace); Tribunale di Forli (Italy), 16 February 2009 (cisterns), CISG-Online 1780 (Pace). 57 See Kantonsgericht des Kantons Zug (Switzerland) 21 October 1999 (PVC and other synthetic materials), CISG-Online 491 (Pace); Tribunale di Pavia (Italy) 29 December 1999 (High fashion textiles), CISG-Online 678; Oberlandesgericht Ko¨ln (Germany) 26 August 1994 (Market study), CISG-Online 132 (Pace); Oberster Gerichtshof (Austria) 10 November 1994 (Chinchilla furs), CISG-Online 117 (Pace); Tribunale di Rimini (Italy) 26 November 2002 (Porcelain tableware), CISG-Online 737 (Pace); Tribunale di Forli (Italy), 16 February 2009 (cisterns), CISG-Online 1780 (Pace). 58 See Oberster Gerichtshof (Austria) 6 February 1996 (Propane), CISG-Online 224 (Pace), applying the CISG to the sale of propane gas. 59 See Oberlandesgericht Ko ¨ ln (Germany) 21 May 1996 (Used car), CISG-Online 254 (Pace) and the prior instance: Landgericht Ko¨ln (Germany) 16 November 1995 (Used car), CISG-Online 265; Tribunale di Forli (Italy), 16 February 2009 (cisterns), CISG-Online 1780 (Pace). 60 See Rechtbank Arnhem (Netherlands) 30 December 1993 (live lambs), CISG-Online 104 (Pace); Oberlandesgericht Jena (Germany) 26 May 1998 (live fish), CISG-Online 513 (Pace); Cour d’appel Paris (France) 14 January 1998 (circus elephants), CISG-Online 347 (Pace). Cf. Oberster Gerichtshof (Austria) 10 November 1994 (Chinchilla furs), CISG-Online 117 (Pace); Oberlandesgericht Hamm (Germany) 22 September 1992 (bacon), CISG-Online 57 (Pace). For a decision that deems animals to be “goods” in the sense of the Convention, see Landgericht Flensburg (Germany) 19 January 2001 (Live sheep), CISG-Online 619 (Pace). 61 See Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 1 para. 16. 62 See Bridge, International Sale of Goods, no 157. 63 See Arbitral Award, Arbitration Court attached to the Hungarian Chamber of Commerce and Industry, 20 December 1993 (Shares of stock), CISG-Online 94 (Pace). 64 See Tribunale di Vigevano (Italy) 12 July 2000 (Vulcanized rubber), CISG-Online 493 (Pace).

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CISG’s concept of “goods”, to a large extent because there can be no element of physical delivery in accordance with the provisions of the Convention65. The same is true for a market research study66 or similar intellectual products that would hardly qualify as goods. In fact, one can argue that market research or an expert report is a contract of different quality, namely the provision of a service or a contract for the performance of a work. There is, however, significant scholarly opinion suggesting that sale of digital goods may also qualify as a contract for the sale of goods under the CISG.67 39 It is also clear that the sale of a business would not qualify as a CISG sale, nor would a sale of rights. According to one court, however, the concept of “goods” is to be interpreted broadly,68 with the arguable conclusion that the CISG may apply also to intangible goods. It is generally accepted that the CISG will not apply to immovable property or property which is at law treated as immovable, i. e. registered property such as ships and aircrafts. (Art. 2(e)). Certain other restrictions in relation to “goods” are introduced in Art. 269 where sale of electricity (Art. 2(f)) – but not necessarily of all forms of energy resources70 – and sale of stocks, shares, investment securities, negotiable instruments or money (Art. 2(d))71 are excluded from the substantive sphere of the Convention. 40 Another contentious area is that of the sale of software and whether software qualifies as “goods” under the CISG. While the sale of computer hardware clearly falls within the sphere of application of the CISG,72 the application of the Convention is disputed when it comes to software. Some courts consider only standard software to be “goods” under the Convention;73 another court concluded that any kind of software, including tailormade software, should be considered “goods”.74 Software is not always delivered in a tangible form: it may well happen that the “buyer” of software merely acquires an access key, a license to use the software. Most certainly, the acquisition of software is also associated with the acquisition of intellectual property for which a separate license is given. The CISG may be applicable to the sale of software, but it would be inevitable that some of its provisions may have to be adapted as software transactions also involve

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See Gilette/Walt, at p. 44. See Oberlandesgericht Ko¨ln (Germany) 26 August 1994 (Market study), CISG-Online 132 (Pace). 67 See the comprehensive discussion in Eggen, Digitale Inhalte unter dem CISG Eine Rundschau u ¨ ber Herausforderungen und mo¨gliche Lo¨sungen. 17(6) Internationales Handelsrecht, 231 et seq. 68 See Oberlandesgericht (Germany) 17 September 1993 (Computer chip), CISG-Online 91 (Pace). 69 See Art. 2 infra. 70 A different view may be taken in relation to liquidated natural gas or propane gas. See Oberster Gerichtshof (Austria) 6 February 1996 (Propane), CISG-Online 224 (Pace), applying the CISG to the sale of propane gas. 71 See also the discussion in FMLC, Implementation of the Vienna Sales Convention – Issue 130: Legal assessment of various financial markets aspects of the question whether the UK should implement the Vienna Sales Convention – July 2008, available at http://www.fmlc.org/papers/Issue130reportJuly08.pdf. 72 See Landgericht Mu ¨ nchen (Germany) 29 May 1995 (Computer hardware), CISG-Online 235 (Pace); Landgericht Heidelberg (Germany) 3 July 1992 (Computer components), CISG-Online 38 (Pace). See also, for a comprehensive discussion, Gilette/Walt, at pp. 49–55; and Sono. The Applicability and NonApplicability of the CISG in Software Transactions, in Andersen & Schroeter (eds.), Sharing International Commercial Law across National Boundaries: Festschrift for Albert H. Kritzer on the Occasion of his Eightieth Birthday (2008) 512–526. 73 See Oberlandesgericht Ko ¨ ln (Germany) 26 August 1994 (Market study), CISG-Online 132 (Pace); Landgericht Mu¨nchen (Germany) 8 February 1995 (Standard software), CISG-Online 203 (Pace). See also Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 1 para. 38; Diedrich, Maintaining Uniformity in International Uniform Law Via Autonomous Interpretation: Software Contracts and the CISG, 8 Pace International Law Review (1996) 303 (325–332). 74 See Oberlandesgericht Koblenz (Germany) 17 September 1993 (Computer chip), CISG-Online 91 (Pace); Oberster Gerichtshof (Austria) 21 June 2005, CISG Online 1043. 66

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intellectual property transactions and may also otherwise qualify as mixed contracts (tailor-made software is also discussed under Art. 3).75 Documentary sales will not introduce any problem to the application of the CISG.76 41 Documentary sales are normal sales for which goods will have to be delivered; simply because of the distance between the parties and a number of ancillary obligations, such as shipment and insurance, documents are also produced which are delivered in addition to the delivery of goods. The most important documents in this respect are documents of title, such as a bill of lading.77

3. Internationality a) Introductory remarks. The CISG applies to contracts for the international sale of 42 goods. Pursuant to Art. 1(1), a contract for the sale of goods is international when the parties have, at the moment of the conclusion of the contract,78 their relevant place of business in different States.79 “Place of business” is hence essential in the determination of internationality. The CISG, however, does not define it; it merely addresses the issue of which of a party’s multiple places of business is to be taken into account in determining internationality.80 b) Place of business. In absence a definition of “place of business” in the CISG, the 43 matter has been addressed on a number of occasions by case law. According to one court, “place of business” may be defined as “the place from which a business activity is de facto carried out […]; this requires a certain duration and stability as well as a certain amount of autonomy.”81 Another court has concluded that a liaison office cannot be considered a “place of business” under the Convention.82 In other words, the case law clearly suggests that under the CISG “place of business” require a genuine and effective link of the business with a place with at least regular business activity. It is irrelevant as such whether the seller or buyer is incorporated in the “place of business”. As a result, the place of contracting does not necessarily constitue a place of business;83 the same applies in relation to the place of storage of goods.84

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See Art. 3 infra. Schlechtriem, Requirements of Application and Sphere of Applicability of the CISG, Victoria University Wellington Law Review (2005/4) 781 (784). 77 Bridge, International Sale of Goods, para 10.20. 78 See Oberlandesgericht Dresden (Germany) 27 December 1999 (Chemical products), CISG-Online 511 (Pace); Tribunale di Forli (Italy), 11 December 2008 (shoes), CISG-Online 1768 (Pace). 79 See Tribunale di Vigevano (Italy) 12 July 2000 (Vulcanized rubber), CISG-Online 493 (Pace); Oberlandesgericht Ko¨ln (Germany) 21 May 1996 (Used car), CISG-Online 254 (Pace); Oberster Gerichtshof (Austria) 10 November 1994 (Chinchilla furs), CISG-Online 117 (Pace); Tribunale di Rimini (Italy) 26 November 2002 (Porcelain tableware), CISG-Online 737 (Pace); Polimeles Protodikion Athinon (Greece), 4505/2009 (Materials forbull-proof vests) CISG-Online 2228 (Pace). 80 See Art. 10 infra. See also U.S. District Court, Eastern District of Pennsylvania (U.S.). 29 January 2010 (Styrene), CISG-Online 2090. 81 Oberlandesgericht Hamm (Germany) 2 April 2009 (cars), CISG-Online 1978; Oberlandesgericht Stuttgart (Germany) 28 February 2000 (Floor tiles), CISG-Online 583 (Pace); Tribunale di Rimini (Italy) 26 November 2002 (Porcelain tableware), CISG-Online 737 (Pace); for a similar definition see Oberster Gerichtshof (Austria) 10 November 1994 (Chinchilla furs), CISG-Online 117 (Pace); for a court decision stating that the phrase “place of business” requires the parties to “really” do business out of that place, see Amtsgericht Duisburg (Germany) 13 April 2000 (Pizza cartons), CISG-Online 659 (Pace). 82 See Cour d’appel Paris (France) 22 April 1992 (Electronic components), CISG-Online 222 (Pace). 83 Arbitral Award, ICC Court of Arbitration, in case no 9781 of 2000 (waste recycling plant) at para. 33. (Pace). 84 Tribunal cantonal du Valais (Switzerland), 23 May 2006 (clothing, suits), CISG-Online 1532 (Pace). 76

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The internationality requirement is not met where the parties have their relevant place of business in the same country;85 diversity of place of business is an absolute condition for Art. 1(1) to operate. This is true even if the seller and the buyer have different nationalities, as Art. 1(3) states that the nationality of the parties is not relevant when determining the application of the CISG.86 It is diversity of place of business not diversity of citizenship that is relevant to establish internationality. Equally, the fact that the place of the conclusion of the contract is located in a different State from the State in which the performance takes place does not render the contract “international”.87 It is also irrelevant whether the goods will cross borders or not. For example, a seller of beer with a place of business in Germany who agrees with a hotel chain with place of business in Switzerland for beer to be transferred from the warehouse of a beer producer in Moscow to the hotels of the chain operating in Russia qualifies as international sale under the CISG.

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c) Agency. An intriguing point of Art. 1 relates to the use of intermediaries or agents in “international” sales contracts. Where the contract for the sale of goods is concluded through an intermediary or an agent,88 it is essential to establish who the parties to the sales contract are in order to determine whether the contract is international.89 The CISG, however, does not deal with the question of who is party to a contract of sale, in particular, in cases where the identity of the parties is not directly clear from the contract formation (e. g. when both parties use agents for the contract negotiation and conclusion)90 Consequently, the question must be answered by reference to the law applicable by operation of the private international law91 of the deciding court or the private international law applicable to an arbitral tribunal. Once the places of business of the parties have been determined, the court or tribunal can decide whether the contract is international.92

85 See Superior Court of Massachussetts (U.S.), 28 February 2005 (smoke detection units), CISG-Online 1005 (Pace). 86 For references to the irrelevance of the nationality of parties, see Bundesgerichtshof (Germany) 31 October 2001 (Machinery), CISG-Online 617 (Pace); Rechtbank Koophandel Veurne (Belgium) 25 April 2001 (Diesel tram), CISG-Online 765 (Pace); Arbitral Award, Court of Arbitration of the Bulgarian Chamber of Commerce and Industry 56/1995, 24 April 1996 (Coal), CISG-Online 435 (Pace). 87 See Oberlandesgericht Ko ¨ ln (Germany) 27 November 1991 (Ticket for soccer world championship), CISG-Online 31 (Pace). 88 See also Schwenzer/Hachem, in: Schlechtrriem/Schwenzer, Commentary (2016), Art. 1 paras 26–27; Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 1 paras 41–42, 51; Honnold/ Flechtner, Uniform Law (2009), Art. 1 para. 41. 89 U.S. District Court, ND of California (U.S.) 27 July 2001, Asante Technologies, Inc. v PMC-Sierra, Inc. (Computer chips), CISG-Online 616. See also the discussion in Honnold/Flechtner, Uniform Law (2009), Art. 1 para. 42. 90 For court decisions stating that issues of agency and similar matters are outside the sphere of application of the CISG, see Tribunale di Vigevano (Italy) 12 July 2000 (Vulcanized rubber), CISG-Online 493 (Pace); Oberster Gerichtshof (Austria) 20 March 1997 (Mono ammonium phosphate), CISG-Online 269 (Pace); Appellationsgericht Tessin (Switzerland) 12 February 1996 (Copy paper), CISG-Online 233 (Pace); Obergericht des Kantons Thurgau (Switzerland) 19 December 1995 (Cloth), CISG-Online 496 (Pace); Landgericht Kassel (Germany) 22 June 1995 (Clothes), CISG-Online 370 (Pace); see Amtsgericht Alsfeld (Germany) 12 May 1995 (Flagstone tiles), CISG-Online 170 (Pace); Kammergericht Berlin (Germany) 24 January 1994 (Wine), CISG-Online 130 (Pace); Zivilgericht Basel-Stadt (Switzerland) 21 December 1992 (Textiles), CISG-Online 55 (Pace); Landgericht Hamburg (Germany) 26 September 1990 (Textiles), CISG-Online 21 (Pace). 91 Ferrari in Schlechtriem/Schwenzer (German ed., 2013), Art. 1, para 41. Saenger in Ferrari et al, Internationales Vertragsrecht, Article 1, para. 12. 92 See Oberlandesgericht Ko ¨ ln (Germany) 13 November 2000 (Plug-couplings), CISG-Online 657 (Pace).

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Pursuant to Art. 1(2), whether the internationality requirement is met or not, it is 46 irrelevant where the places of business in different States do not follow 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.93 In other words, the CISG protects the parties’ reliance upon what appears to be a domestic setting for a transaction. In such a case, the burden of proof rests with the party asserting that the CISG is not applicable because the internationality of the contract was not apparent.94

4. Automatic application if international sales contract According to Art. 1(1) there are in total three criteria essential for the application of 47 the CISG. The first two have to be met in any event: first it must be a “contract for the sale of goods”, second it has to be an “international contract”. The third criterion is one of two alternative criteria which has to be made in addition95 to the first two (establishing internationality and subject matter) to make the Convention applicable. One alternative criterion can be found in Art. 1(1)(a) and makes the application of the Convention “automatic” or “autonomous”96 or “direct”,97 without any need for recourse to private international law rules.98 The second alternative is discussed under section 6 below. The application of the CISG is autonomous or direct when the States in which the parties have their relevant places of business are Contracting States. With the increase of the number of Contracting States,99 this criterion has as a consequence that the application of the Convention will be automatic in an ever-increasing number of cases.100 93 For a reference to this provision, see Oberster Gerichtshof (Austria) 21 March 2000 (Wood), CISGOnline 641 (Pace); Tribunale di Vigevano (Italy) 12 July 2000 (Vulcanized rubber), CISG-Online 493 (Pace). 94 See Tribunale di Vigevano (Italy) 12 July 2000 (Vulcanized rubber), CISG-Online 493 (Pace). 95 See Tribunale di Vigevano (Italy) 12 July 2000 (Vulcanized rubber), CISG-Online 493 (Pace). 96 See Tribunale di Vigevano (Italy) 12 July 2000 (Vulcanized rubber), CISG-Online 493 (Pace); Oberster Gerichtshof (Austria) 20 March 1997 (Mono ammonium phosphate), CISG-Online 269 (Pace). 97 See Bundesgericht (Switzerland) 11 July 2000 (Building materials), CISG-Online 627 (Pace); Berzirksgericht der Sanne (Switzerland) 20 February 1997 (Spirits), CISG-Online 426 (Pace). 98 See Bundesgerichtshof (Germany) 11 December 1996 (Marzipan), CISG-Online 225 (Pace). 99 See http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html for an upto-date status of the Convention. There are 89 Contracting States as of February 2018. 100 For a selection of court decisions applying the Convention by virtue of Art. 1(1)(a), see, e. g., Hof Beroep Gent (Belgium) 31 January 2002 (Candy), CISG-Online 1349 (Pace); Cour d’appel Orle´ans (France) 29 March 2001 (High tension neon transformers), CISG-Online 611 (Pace); Oberster Gerichtshof (Austria) 7 September 2000 (Tombstones), CISG-Online 642 (Pace); Oberlandesgericht Frankfurt am Main (Germany) 30 August 2000 (Yarn), CISG-Online 594 (Pace); Sixth Civil Court of First Instance, City of Tijuana, State of Baja California (Mexico) 14 July 2000 (Wood), CISG-Online 571 (Pace); Tribunale di Vigevano (Italy) 12 July 2000 (Vulcanized rubber), CISG-Online 493 (Pace); Oberster Gerichtshof (Austria) 28 April 2000 (Jewellery), CISG-Online 581 (Pace); Oberster Gerichtshof (Austria) 13 April 2000 (Machines), CISG-Online 576 (Pace); Audiencia Provincial de Navarra (Spain) 27 March 2000 (Electrical goods), CISG-Online 575 (Pace); Tribunal Supremo (Spain) 28 January 2000 (Jute), CISGOnline 503 (Pace); Bundesgerichtshof (Germany) 3 November 1999 (Machine for producing hygenic tissues), CISG-Online 475 (Pace); Cour d’appel Grenoble (France) 21 October 1999 (Footwear), CISGOnline 574 (Pace); Ontario Superior Court of Justice (Canada) 31 August 1999 (Picture frame mouldings), CISG-Online 433 (Pace); Cour de cassation (France) 26 May 1999 (Laminated sheet metal), CISG-Online 487 (Pace); Arbitral Award, Arbitration Court attached to the Hungarian Chamber of Commerce and Industry, 25 May 1999 (Sour cherries), CISG-Online 500 (Pace); Cour d’appel Paris (France) 21 May 1999 (Electronic equipment), CISG-Online 498 (Pace); Federal District Court, ED of Louisiana (U.S.) 17 May 1999 (Medical equipment), CISG-Online 387 (Pace); Bundesgerichtshof (Germany) 24 March 1999 (Vine wax), CISG-Online 396 (Pace); Corte di Appello, Milano (Italy) 11 December 1998 (Printer device), CISGOnline 430 (Pace); Bundesgericht (Switzerland) 28 October 1998 (Meat), CISG-Online 413 (Pace); Federal District Court, ND of Illinois (U.S.) 28 October 1998 (Aircraft parts), CISG-Online 444 (Pace); Corte di

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Article 1 48–50

Part I. Sphere of Application and General Provisions

As it was unambiguously stated during the 1980 Diplomatic Conference, “if the two States in which the parties have their places of business are Contracting States, the Convention applies even if the rules of private international law of the forum would normally designate the law of a third country.”101 This statement will have to be qualified though; the CISG will not be automatically applied if a third country’s law would apply because of a choice of law agreement by which the parties to the sales contract express their intention to exclude the CISG, a right the parties have pursuant Art. 6 of the Convention.102 49 It is also important to establish when a State becomes a Contracting State. This is to be determined by Art. 99;103 inter-temporal rules about the application of the CISG pursuant to Art. 1(1)(a) are contained in Art. 100.104 In addition, one should also ascertain whether the States in which the parties have their relevant places of business have made either an Art. 92105 or an Art. 93106 reservation.107 48

5. Territorial application – Contracting States 50

Generally, a Contracting State is any State which has implemented the Convention by ratification or accession pursuant to Art. 91(2) and Art. 91(3)108 and by its entry into force in accordance with Art. 99(2)109 and Art. 91(4)110. Cassazione (Italy) 7 August 1998 (Women’s stockings), CISG-Online 538 (Pace); Cour de cassation (France) 16 July 1998 (Aluminium hydrate), CISG-Online 344 (Pace); US Court of Appeals, 11th Circuit (U.S.) 29 June 1998 (Ceramic tiles), CISG-Online 342 (Pace); Arbitral Award, Arbitration Institute of the Stockholm Chamber of Commerce, 5 June 1998 (4,000 ton rail press), CISG-Online 379 (Pace); Federal District Court, SD of New York (U.S.) 6 April 1998 (Shoes), CISG-Online 440 (Pace); Arbitral Award, Arbitration Court attached to the Bulgarian Chamber of Commerce and Industry 11/1996, 12 February 1998 (Steel ropes), CISG-Online 436 (Pace); Hoge Raad (Netherlands) 26 September 1997 (Fabrics), CISG-Online 286 (Pace). 101 United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March11 April 1980, Official Records, Documents of the Conference and Summary Records of the Plenary Meetings and of the Meetings of the Main Committee, 1981, 15. 102 See Art. 6 infra. 103 See Art. 99 infra. 104 See Art. 100 infra. 105 See Art. 92 infra. See also Østre Landsret (Denmark) 23 April 1998 (Women’s clothing), CISGOnline 486 (Pace); Fova´rosi Biro´sa´g (Hungary) 21 May 1996, CISG-Online 252 (Pace); Oberlandesgericht Rostock (Germany) 27 July 1995 (Plants), CISG-Online 209 (Pace); Arbitral Award, ICC 7585/1992 (Foamed board machinery), CISG-Online 105 (Pace). If one State has made an Art. 92 reservation declaring that it is not bound by a specified part of the CISG, the Convention as a whole cannot be applicable by virtue of Art. 1(1)(a). Rather, one must determine on the basis of Art. 1(1)(b) whether the part of the Convention to which the reservation relates applies to the transaction. 106 See Art. 93 infra. Upon accession to the Convention, Canada declared, pursuant to Art. 93, that the Convention would be applicable in some but not all of its territorial units. Since accession, Canada has extended the application of the Convention to specific territorial units not covered by its original accession. 107 See also CISG-AC Declaration No 2: Use of Reservations under the CISG. Rapporteur: Professor Dr. Ulrich G. Schroeter, University of Mannheim, Germany. Adopted by the CISG-AC following its 18th meeting, in Beijing, China, on 21 October 2013. 108 See Art. 91 infra. “(2) This Convention is subject to ratification, acceptance or approval by the signatory States. (3) This Convention is open for accession by all States which are not signatory States as from the date it is open for signature.” 109 See Art. 99 infra. According to (2) “When a State ratifies, accepts, approves or accedes to this Convention after the deposit of the tenth instrument of ratification, acceptance, approval or accession, this Convention, with the exception of the Part excluded, 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 the deposit of its instrument of ratification, acceptance, approval or accession.” 110 See Art. 91 infra. According to (4) “Instruments of ratification, acceptance, approval and accession are to be deposited with the Secretary-General of the United Nations.”

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Article 1

6. Application by operation of conflict of laws The CISG can also apply by operation of Art. 1(1)(b) where only one (or neither) 51 party has its relevant place of business in Contracting States,111 if the rules of private international law lead to the law of a Contracting State.112 It is not always clear which rules of private international law would be relevant, but it is reasonable to assume that they will be those of the forum,113 at least in the context of litigation. Consequently, it will very much depend on the domestic rules of private international law whether the parties are allowed to choose the applicable law, whether renvoi is allowed (i. e. one has to look into the rules of private international law designated by the rules of private international law of the forum), and the like. Under most private international law rules systems (such as the one based on 52 EC Regulation 593/2008 on the Law Applicable on Contractual Obligations114 or its predecessor, the 1980 Rome Convention on the Law Applicable to Contractual Obligations115), the parties’ choice of the law of a Contracting State can lead to the applicability of the Convention by virtue of Art. 1(1)(b):116 both the Rome Convention and the Regulation recognize the primacy of party autonomy. This is also true where the rules of private international law of the forum are those laid down in the 1955 Hague Convention on the Law Applicable to International Sales.117

111 United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March11 April 1980, Official Records, Documents of the Conference and Summary Records of the Plenary Meetings and of the Meetings of the Main Committee, 1981, 15. 112 There are many cases referring to Art. 1(1)(b); see, e. g., Supreme Court of Queensland (Australia) 17 November 2000 (Scrap steel), CISG-Online 587 (Pace) (Malaysian and Australian parties chose law applying in Brisbane); Ca´mara Nacional de Apelaciones en lo Comercial (Argentina) 24 April 2000 (Charcoal), CISG-Online 699 (Pace); Oberlandesgericht Hamburg (Germany) 26 November 1999 (Jeans), CISG-Online 515 (Pace); Østre Landsret (Denmark) 23 April 1998 (Women’s clothing), CISGOnline 486 (Pace); Corte d’Appello Milano (Italy) 20 March 1998 (Knitwear), CISG-Online 348 (Pace); Oberster Gerichtshof (Austria) 12 February 1998 (Umbrella), CISG-Online 349 (Pace); Cour de cassation (France) 27 January 1998 (Hooks, sockets/cartridges for fitting to electrical connectors), CISG-Online 309 (Pace); Hoge Raad (Netherlands) 7 November 1997 (Vodka), CISG-Online 551 (Pace); Rechtbank Koophandel Kortrijk (Belgium) 6 October 1997 (Crude yarn), CISG-Online 532 (Pace); Arbitral Award, Schiedsgericht der Handelskammer Hamburg, 21 June 1996 (Chinese goods), CISG-Online 465 (Pace); Cour de cassation (France) 4 January 1995 (Electronic components), CISGOnline 138 (Pace); Arbitral Award, ICC 7660/1994 (Battery machinery), CISG-Online 129 (Pace); Arbitral Award, Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft (SCH 4366), 15 June 1994 (Rolled metal sheets), CISG-Online 121 (Pace); Arbitral Award, Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft (SCH-4318), 15 June 1994 (Rolled metal sheets), CISG-Online 120 (Pace); Arbitral Award, Ad hoc Florence, 19 April 1994 (Leather/textile wear), CISG-Online 124 (Pace). 113 See Tribunale di Vigevano (Italy) 12 July 2000 (Vulcanized rubber), CISG-Online 493 (Pace). 114 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:177:0006:0016:EN:PDF. 115 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:41998A0126(02):EN:NOT. 116 See Hof Beroep Gent (Belgium) 15 May 2002 (Design of radio phone), CISG-Online 746 (Pace); Landgericht Kassel (Germany) 15 February 1996 (Marble slab), CISG-Online 191 (Pace); Arbitral Award, ICC 8324/1995 (Magnesium), CISG-Online 569 (Pace); Rechtbank s’Gravenhage (Netherlands) 7 June 1995 (Apple trees), CISG-Online 369 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 8 January 1993 (Tinned cucumbers), CISG-Online 76 (Pace); Oberlandesgericht Koblenz (Germany) 17 September 1993 (Computer chip), CISG-Online 91 (Pace). 117 For the relation of CISG to these and other similar Conventions see Bridge, International Sale of Goods (2007), paras 11.14–11.15. See also Fawcett/Harris/Bridge, International Sale of Goods in the Conflict of Laws (2005), pp. 843 et seq., 905 et seq.

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Article 1 53–55

Part I. Sphere of Application and General Provisions

The Convention may be selected directly by the parties as the law applicable to the contract.118 In the absence of a choice of law by the parties, one has to consider the criteria set forth by the rules of private international law applicable to the case to determine whether the CISG is applicable by virtue of Art. 1(1)(b). For example, in the European Union the Uniform Law on Law Applicable to Contractual Obligations (EC Regulation 593/2008 on the Law Applicable on Contractual Obligations)119 stipulates that one has to apply the law “most closely connected” to the contract. It is presumed that the contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract has its habitual residence at the time of conclusion of the contract. Under the regulation, the party providing the characteristic performance120 is the seller. For this reason, the CISG has often been applied by courts in Contracting States to the Rome Convention when the seller, had his place of business in a Contracting State to the CISG.121 54 Although the CISG does not bind non-Contracting States, it has been applied in courts of non-Contracting States where the forum’s rules of private international law led to the law of a Contracting State or where a national law is applicable and that law incorporates the CISG by way of ratification.122 While the CISG is an international convention when signed ratified or acceded to by State, it becomes part of the law of that State. Depending on national law (typically Constitutional law), in some states123 a ratified international convention may well rank immediately after the Constitution and above any other domestic law, in other states it ranks equal to other domestic law. Arguably, in either system the Convention becomes part and parcel of domestic law and as such should be considered by the courts.124 53

III. Comparable Rules 55

Comparable provisions about the sphere of application of the texts in question can be found in the PICC, PECL and DCFR. In the Preamble of the PICC there is expression of the situations when the PICC may be applied as an international commercial contracts body of rules of law. In Art. 1:101 PECL the sphere of application of the PECL as a European Union contract law is referred to. In the first provisions of the DCFR there is discussion of its sphere and scope. The CISG as an international convention has a more clearly defined and limited sphere of application. 118 See, for example, Bundesgerichtshof (Germany), 11 May 2010 (aluminium rings) CISG-Online 2125; Arbitral Award, Netherlands Arbitration Institute, 15 October 2002 (Condensate crude oil mix), CISGOnline 740 (Pace). 119 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:177:0006:0016:EN:PDF. 120 For cases expressly pointing out that the seller is the party that has to effect the characteristic performance, see Landgericht Berlin (Germany) 24 March 1998 (Knitwear), CISG-Online 742 (Pace); Landgericht Mu¨nchen (Germany) 6 May 1997 (Cars), CISG-Online 341 (Pace); Rechtbank Amsterdam (Netherlands) 5 October 1994 (Textiles), CISG-Online 446 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 10 February 1994 (Shirts), CISG-Online 116 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 12 March 1993 (Textiles), CISG-Online 82 (Pace). 121 One should also consider in this regard Art. 95 of the Convention. 122 High Court of England and Wales (UK), Kingspan Environmental et al v Boralis A/S and another, 1 May 2012 (borence, polymer) CISG-Online 2391. 123 E.g. amongst others, Germany and Greece. 124 For the role of various reservations see Ferrari, What Sources of Law for Contracts for the International Sale of Goods? Why One Has to Look Beyond the CISG, 25 International Review of Law and Economics (September 2005) 314–341, 318–321; Walt, The CISG’s Expansion Bias: A Comment on Franco Ferrari, 25 International Review of Law and Economics (September 2005) 342–349; Ziegel, The Scope of the Convention: Reaching Out to Article One and Beyond, 25 Journal of Law and Commerce (2005-06) 59–73, 63–67.

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Article 2 This Convention does not apply to sales:

(a) of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use; (b) by auction; (c) on execution or otherwise by authority of law; (d) of stocks, shares, investment securities, negotiable instruments or money; (e) of ships, vessels, hovercraft or aircraft; (f) of electricity. Bibliography: Achilles, Kommentar zum UN-Kaufrechtsu¨bereinkommen (CISG) (2000); Czerwenka, Rechtsanwendungsprobleme im internationalen Kaufrecht – Das Kollisionsrecht bei grenzu¨berschreitenden Kaufvertra¨gen und der Anwendungsbereich internationaler Kaufrechtsu¨bereinkommen (1988); Daun, Grundzu¨ge des UN-Kaufrechts, JuS (1997) 811; Financial Markets Law Committee, Issue 130 – Implementation of the Vienna Sales Convention. Legal assessment of various financial markets aspects of the question whether the UK should implement the Vienna Sales Convention, available at: http://www.fmlc.org/papers/ Issue130reportJuly08.pdf; Herber, Mangelfolgescha¨den nach dem CISG und nationales Deliktsrecht, IHR ¨ bereinkommens u¨ber Internationale Warenkauf(2001) 187; U. Huber, Der UNCITRAL-Entwurf eines U vertra¨ge, 43 RabelsZ (1979) 413; Janssen, Kollision des einheitlichen UN–Kaufrechts mit Verbraucherschutzrecht am Beispiel der Richtlinie u¨ber den Verbrauchsgu¨terkauf und–garantien, VuR (1999) 324; Karollus, UN-Kaufrecht – Eine systematische Darstellung fu¨r Studium und Praxis (1991); Magnus, UNKaufrecht und Verbraucher, Liber amicorum Kurt Siehr (2010), 405; Micklitz, Die Verbrauchsgu¨terRichtlinie, EuZW (1999) 485; Pereira, Application of the CISG to International Government Procurement of Goods, 35 Years CISG and Beyond (2016), 205; Piltz, Gestaltung von Exportvertra¨gen nach der Schuldrechtsreform, IHR (2002) 2; Schroeter, UN–Kaufrecht und Europa¨isches Gemeinschaftsrecht. Verha¨ltnis und Wechselwirkungen (2006); Schroeter, Die Anwendbarkeit des UN–Kaufrechts auf grenzu¨berschreitende Versteigerungen und Internetauktionen, ZEuP (2004) 20.

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Consumer sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Goods bought for personal use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) General remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Mixed-use of goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Discernability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Special issues in regard to EU Consumer Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Sales by auction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Definition of auction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) No exclusion of Internet auctions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Sales on execution or otherwise by authority of law . . . . . . . . . . . . . . . . . . . . . . . . 4. Sales of stocks, shares, investment securities, negotiable instruments or money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Sales of ships, vessels, hovercraft or aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) General Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Ships and vessels. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Aircrafts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Sales of electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Spohnheimer

1 6 6 9 9 15 16 24 27 28 31 33 36 41 41 43 46 47 49 50

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Article 2 1–5

Part I. Sphere of Application and General Provisions

I. Importance and Role of the Provision 1

2

3

4

5

In general, a sale of goods is covered by the CISG if the requirements of Art. 1 are met and the parties did not exclude the application of the CISG by an agreement pursuant to Art. 6. Since Art. 1 only refers to an objective understanding of an ‘international sales’ transaction, the Convention’s sphere of application is more expansive than that of its predecessor, Art. 1 ULIS. As a result, there are cases in which the application of the CISG would be unreasonable, despite being applicable pursuant to Art. 1. The general underlying rationale of Art. 2 is to limit the Convention’s sphere of application, and to remove those transactions that would otherwise – but unreasonably – be governed by the CISG.1 Art. 2, therefore, provides for several exceptions which should not be covered by the CISG, even if these transactions meet the requirements for the CISG to be applicable according to Art. 1. These exceptions can be classified in three main groups which were discussed during the drafting of the CISG: first, exceptions based on the purpose of the transactions for which the goods are sold (Art. 2(a)); second, exceptions based on specific types of transactions (Art. 2(b) and (c)); and third, exceptions based on the kinds of goods sold (Art. 2(d)–(f)).2 Although the rationales underlying these exceptions are different in detail, there are two general themes that can be identified. Firstly, the Convention should not be applied to legal relationships that are covered by national provisions that are generally so diverse that harmonisation would be very difficult.3 Secondly, the Convention should not apply to sales transactions that are insignificant in both value and impact and that have generally no international aspect4, e. g. when a tourist buys something during a holiday abroad. The exceptions enumerated in Art. 2 were – in part – already made by Art. 5(1) ULIS.5 They are exhaustive and generally not to be applied to other, even similar cases, by way of analogy.6 Even if the Convention is not applicable pursuant to Art. 2, this does not mean that the parties cannot contractually agree that the contract concluded should be covered by the CISG. Rather, the parties are free to ‘opt in’ to the Convention in regard to those sales transactions excluded by Art. 27 provided that the otherwise applicable national law allows for such a choice of law.8 1

Lu¨deritz/Fenge, in: Soergel, Bu¨rgerliches Gesetzbuch (2000), Art. 2 para. 1. See UNCITRAL, Digest of Case Law on the CISG, Art. 2 para. 1. See also Czerwenka, Rechtsanwendungsprobleme im internationalen Kaufrecht (1988) p. 148; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 CISG para. 1; Enderlein/Maskow, International Sales Law (1992), p. 32. Slightly different Honnold/Flechtner, Uniform Law (2009), Art. 2 para. 50, according to whom the exceptions are based on the nature of the transaction (Art. 2(a)–(c)) and the nature of the goods (Art. 2(d)–(f)). 3 Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 1; Benicke, in: Mu ¨ nchKommHGB (2013), Art. 2 CISG para. 1. 4 Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 2. 5 Khoo, in: Bianca/Bonell, Commentary (1987), Art. 2 para. 1.1. 6 Ferrari, in: Schlechtriem/Schwenzer Kommentar (2013), Art. 2 para. 5; Huber, in: Mu ¨ nchKommBGB (2016), Art. 2 CISG para. 2; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 CISG para. 1. 7 Lookofsky, Understanding the CISG (2012), p. 17. 8 In the case of Art. 2(a) such a choice of law would e. g. be forbidden by the national provisions enacting Art. 7 of the EC Directive 99/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees, when already made at the time of conclusion of the contract. 2

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II. Detailed Commentary 1. Consumer sales Art. 2(a) is the result of a compromise.9 Attempts to establish an exception for all 6 sales contracts that are covered by mandatory national provisions have not been accepted by the conference.10 Rather, the Norwegian proposal to focus on the use the goods are bought for has been adopted and no stipulation has been provided for limiting these exclusions to ones that are covered by mandatory provisions of national law.11 As a consequence of this exception being so broad, the Convention is not applicable to all consumer sales – de lege lata, at least when the seller could have been aware of the nature of the contract12. Although the nature of the sales contract is not of relevance for the application of the 7 CISG according to Art. 1, the exclusion of consumer sales in Art. 2(a) limits the Convention’s sphere of application de facto to commercial sales contracts.13 Art. 2(a) applies if the goods are sold to a consumer but it does not apply in either case if 8 the goods are sold by a consumer, so that the Convention may be applicable although a consumer is involved in the contract.14 It applies if goods are sold for a professional purpose (consumer-trader transaction). But it can also apply in a consumer-consumer transaction: If the buyer is a consumer but the seller could not have known it, the sales contract is covered by the CISG although no commercial party is involved in the transaction.15 a) Goods bought for personal use aa) General remarks. The CISG is not applicable, according to Art. 2(a), if the goods 9 are bought for personal use including consumption16. This includes both family and household use. The exception is only based on the intended purpose the goods are bought for and applies irrespective of whether the buyer is a businessman or not.17 In other words, it is not the buyer’s status that is of relevance (e. g. whether he is a merchant);18 rather, the decisive factor is the intended use at the time of the conclusion of the contract.19 Therefore, the Convention will apply to all sales that are intended for non-personal use – e. g. both industrial and professional20 – if the transaction does not fall under another exception as provided for in Art. 2(b)–(e) and the parties have not contractually excluded the CISG’s application as provided for in Art. 6. 9

Czerwenka, Rechtsanwendungsprobleme im internationalen Kaufrecht (1988), p. 149. See Khoo, in: Bianca/Bonell, Commentary (1987), Art. 2 paras 1.3 et seq. 11 See Ferrari, in Schlechtriem/Schwenzer, Kommentar (2013), Art. 2 para. 3. 12 But see also infra paras 22 et seq. 13 Huber, in: Huber/Mullis, The CISG (2007), p. 49; Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 4. For the remaining cases, in which the seller could not know that the goods are bought for a consumer’s personal use, cf. infra paras 24 et seq. 14 Lorenz, in: Witz/Salger/Lorenz, Kommentar (2016), Art. 2 para. 2; Magnus, Liber amicorum Kurt Siehr (2010), p. 405 (415). 15 Magnus, Liber amicorum Kurt Siehr (2010), p. 405 (415). 16 Huber, in: Mu ¨ nchKommBGB (2016), Art. 2 para. 6; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 CISG para. 3; Piltz, Internationales Kaufrecht (2008), paras 2–60; Lu¨deritz/ Fenge, in: Soergel, Bu¨rgerliches Gesetzbuch (2000), Art. 2 CISG para. 2. 17 Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 11. 18 Bundesgerichtshof (Germany) 31 January 2001 (machinery), CISG-Online 617 (Pace); Benicke, in: Mu¨nchKommHGB (2013), Art. 2 para. 3. 19 Schroeter, UN-Kaufrecht und Europa ¨isches Gemeinschaftsrecht, § 6 para. 87; Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016) Art. 2 para. 4. 20 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 4. 10

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12

13

14

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A personal use is given if a retired civil servant buys a horse for leisure purposes21 or if a kitchen was bought for private use22. A business and not a personal use of the goods is given if office equipment is bought by a lawyer.23 If an enterprise buys a car to make it available to its employee for private use, the sales contract has nevertheless a professional purpose; so in this case the application of the CISG is not excluded by Art. 2(a).24 A Dutch Court held in favour of a professional purpose of a sales agreement on a horse because the buyer invested in a horse stable and paid no VAT on the purchase price.25 Nevertheless, whether the payment of the VAT is an indication in the one or the other direction, depends on the applicable tax law. The relevant point in time is the conclusion of the contract; the (later) actual use of the goods is not of relevance for the question whether the Convention’s application is excluded.26 If the buyer intended to use the goods for personal needs, the CISG is not applicable even if the buyer later uses the goods for professional purposes. Conversely, if the buyer originally intended to use the goods for professional purposes, the CISG remains applicable regardless of an actual personal use. The underlying rationale of this principle is to create legal certainty at the time of the conclusion of the contract. The seller should not be burdened with a later (non-) applicability of the Convention. It can be rather difficult to determine whether the goods are bought for professional or personal use. If the buyer is a legal entity, there can be no consumer sales transaction.27 Less problematic are cases where goods that are usually bought for professional use are bought for that purpose. However, goods that are normally bought for personal use can also have a professional use (e. g. clothes) and goods that are normally intended to be used professionally might exceptionally be used personally (e. g. when an amateur cameraman buys professional camera equipment as part of his hobby). In the end, however, these considerations are only relevant in determining whether the seller could have been aware of the buyer’s intended personal use in regard to the ‘counter-exception’ concerning the non-discernable intention of a personal use of the goods.28 Furthermore, the decisive intention is the intention of the buyer of the CISG contract, not the use the goods are generally intended for. For example, parlour games are typically intended for a personal use by the end-consumer. Nevertheless, a contract between a distributor and a merchant who sells the goods to an end-consumer has a commercial purpose and is covered by the CISG if the other requirements are met. The Convention places personal use and family or household use on equal footing.29 The notions ‘family’ and ‘household’ are to be interpreted broadly30 and are not related to any legal relationship based on family law31. 21

LG Mu¨nster (Germany) 11 September 2013 (horse), CISG-Online 2554 (Pace). Bundesgerichtshof (Germany) 7 March 2013 (fitted kitchen) NJW 2013, 1431. 23 Landgericht Bamberg (Germany) 13 Aril 2005 (furnishings) CISG-Online 1402 (Pace); Schwenzer/ Hachem, in: Schlechtriem/Schwenzer Commentary (2016), Art. 2 para. 4. 24 Magnus, Liber amicorum Kurt Siehr (2010), p. 405 (414). 25 Gerechtshof Arnhem-Leeuwarden (Netherlands) 15 September 2015 (horse), CISG-Online 2628. 26 UNCITRAL, Digest of Case Law on the CISG, Art. 2 para. 2; Lorenz, in: Witz/Salger/Lorenz Kommentar (2016), Art. 2 para. 3; Ferrari, in: Schlechtriem/Schwenzer Kommentar (2013), Art. 2 para. 8; Siehr, in: Honsell, Kommentar (2010), Art. 2 para. 13; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 CISG para. 3. 27 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 2 para. 3. 28 For a more detailed discussion concerning the discernability cf. infra paras 16 et seq.; for a discussion on who bares the burden of proof cf. infra para. 49. 29 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 6. 30 Piltz, Internationales Kaufrecht (2008), paras 2–60; Lorenz, in: Witz/Salger/Lorenz Kommentar (2016), Art. 2 para. 4. 31 Similar Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 6. 22

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bb) Mixed-use of goods. Not undisputed but also not explicitly answered by the 15 Convention’s wording is the question whether the CISG is applicable in cases, in which the goods’ use is not solely personal; in other words, in cases, in which the goods are bought for a personal and also for a professional use. Some scholars32 and courts33 are of the opinion that the exception of Art. 2(1) only applies if the goods are intended to be used exclusively for personal purposes. In a case34 where a log house has ben bought primarily for private living but also to run office premises, it was held that the contract was governed by the CISG. Others are of the opinion that the exception applies if the goods are also (but not only) bought for an intended personal purpose.35 The decision is highly important since it results in further questions of differentiations between the CISG and national consumer sales provisions partially enacting supranational directives.36 In the interest of legal certainty, the sphere of application of the CISG and the sphere of application of other non-national provisions or national provisions enacting non-national directives which regulate international sales should be distinguished in a way that avoids overlaps. As a result, in deciding whether the application of the CISG should be excluded or not, it is this author’s submission that the sphere of application of these other provisions should be taken into account. This is not contrary to the principles laid down in Art. 7(1) since it takes into account provisions regulating international sales transactions and promoting uniformity in its application, rather than national law. It is furthermore in accord with the underlying rationales of Arts 90 and 94 that allow nonnational provisions regulating international sales contracts to prevail. If non-national provisions or national provisions enacting international law, such as an EU directive, are applicable to sales contracts if the goods are also, but not exclusively, bought for personal use, the exception of Art. 2(a) should apply.37 This takes into account the fact that a body of law relating to an international sales transaction exists so there is no need for the CISG to be applicable since there is already a harmonised body of law. In cases where the Convention interferes with national provisions that do not have an international base, the rule and the exception have to be taken into account: the CISG applies as long as the goods are not solely bought for personal use. b) Discernability. The last part of Art. 2(a) creates an exception from the exception38. 16 Where the seller neither knew nor ought to have known that the goods were bought for any such use, the exclusion of the Convention’s general applicability does not apply, so the contract that fulfils all other requirements of the Convention’s application is governed by the CISG. Consequently, according to its wording, the CISG applies if two requirements are 17 met: firstly, the seller does not know the intended personal use of the goods, and secondly, the seller should not ought to have known that the goods were bought for any 32 Siehr, in: Honsell, Kommentar (2010), Art. 2 para. 13; Schwenzer/Hachem, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 2 para. 7; Lorenz, in: Witz/Salger/Lorenz Kommentar (2016), Art. 2 para. 4 (arguing in fn. 12 that the wording of the provision is clear and does not allow any other interpretation – however the wording of Art. 2 lit. a is not that clear, it does not speak of only a private use); Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 17; Magnus, in: Liber amicorum Kurt Siehr (2010), p. 405 (412); Piltz, Internationales Kaufrecht (2008), paras 2–61; Martiny, in: Mu¨nchKommBGB (2015), Anhang Art. 4 Rom I-VO para. 46; Benicke, in: Mu¨nchKommHGB (2013), Art. 2 CISG para. 4. 33 Korkein Orkeus (Finland) 14 October 2005 (log house), CISG-Online 1882 (Pace). 34 Korkein Orkeus (Finland) 14 October 2005 (log house), CISG-Online 1882 (Pace). 35 See Lu ¨ deritz/Fenge, in: Soergel, Bu¨rgerliches Gesetzbuch (2000), Art. 2 CISG para. 3. 36 For further details, cf. infra paras 24 et seq. 37 Cf. infra para. 24. 38 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 8, name it a ‘counter-exception’.

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19

20

21

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such use. As it is clear from the wording of the provision, the relevant point in time is the conclusion of the contract. Subsequent awareness of the personal use is not of relevance.39 If the seller is aware of an intended personal use of the goods, the CISG does not apply regardless of whether he ought not have known this intent. This is in line with the underlying principle of the exception that only the seller’s justified reliance in the Convention’s application should be protected. If the seller could not have been unaware – meaning that he could have been aware – of the intended personal, family or household use, he cannot rely on his unawareness. Therefore, the relevant but at the same time most difficult question to answer is whether the seller could have been aware of the intended use of the goods for personal purposes. As there is no general duty on the seller to inquire about the purpose of the goods,40 the decisive factor in determining whether the seller ought to have known about this purpose is whether a reasonable third person in the shoes of the seller would have understood the indications in the case in dispute as giving evidence that the goods bought are intended for personal use.41 In this case, the seller cannot rely on his unawareness of the intended personal use.42 There are various indications to make the intention to use the goods personally apparent.43 Such indications can be inter alia the nature of the goods, the person of the buyer – especially the legal form he is acting in44, or the quantity of the goods bought.45 Other indications can follow from the circumstances of the conclusion of the contract, e. g. the use of professional stationery, the delivery to a business address, or other statements made by the buyer during the negotiations.46 Also the mere fact, that sales transactions for private purposes between two countries over long distances in regard to specific goods are quite unusual can be an indication for a business transcation.47 If there is an indication that the goods are generally used for personal purposes, in absence of any other indication, it is submitted that the seller cannot rely on the idea that the goods are bought for professional use. In this situation, a reasonable person in the shoes of the seller would not rely on a professional use. On the contrary, if there is an indication that the goods are intended to be used professionally, it is submitted that the seller – in absence of any other indication – should not be deemed to ought to have known the intention of a personal use. However, the decision can only be made on a case to case basis taking all available cirumstances into consideration. Each indication for a personal use in itself might lead to the conclusion that the seller could not have been unaware of the intended personal use of the goods. However, this indication might nevertheless be rebutted by a contra39 Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 26; Schwenzer/Hachem, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 2 para. 12. 40 Ferrari, in: Schlechtriem/Schwenzer, Kommentar (2013), Art. 2 para. 20; Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 11; Piltz, Internationales Kaufrecht (2008), paras 2–64; Meier/Stacher, in: Brunner Kommentar (2014) Art. 2 para. 10. 41 In a similar way Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 22. 42 This approach avoids to decide whether the seller was grossly negligent or not (criteria argued by Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 11) and provides more legal certainty. 43 For numerous examples see Magnus, in: Staudinger Kommentar (2013), Art. 2 paras 22 et seq.; Benicke, in: Mu¨nchKommHGB (2013), Art. 2 CISG para. 7. 44 See Oberlandesgericht Stuttgart (Germany) 31 March 2008 (automobile), CISG-Online 1658 (Pace). 45 See Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 23; Ferrari, in: Schlechtriem/Schwenzer Kommentar (2013), Art. 2 para. 17. 46 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 10; Magnus, Liber amicorum Kurt Siehr (2010), p. 405 (413). 47 Magnus, Liber amicorum Kurt Siehr (2010), p. 405 (414) (for a sale of a car).

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indication that leads to the conclusion that the goods are bought for professional use. If several (weak) indications that might lead to the conclusion that the goods are bought for a personal use are given each of these indications might strengthen the other indications, so several (weak) indications can work hand in hand. The more indications lead to the conclusion that the buyer bought the goods for personal use, the less the seller can rely on its unawareness of this intended use. Likewise, in cases where the seller thought the goods were bought for an intended 22 personal use, but the intended use is indeed a professional one, the Convention does apply.48 This is in line with the Convention’s underlying principles. Art. 1 has a broad sphere of application to ensure that international sales transactions are generally covered by the CISG. Art. 2 creates exceptions for cases when the Convention’s application would be unreasonable, whereas the ‘counter-exception’ in Art. 2(a) protects the seller’s reliance in the Convention’s applicability. However, the CISG does not protect the reliance in the inapplicability of its provisions. If the seller wants to ensure the transaction is not covered by the CISG it is in his own sphere of responsibility to exclude the Convention’s application pursuant to Art. 6. The general unawareness of the Convention’s existence is not protected. It is only the seller who can invoke that he neither know nor ought to have known 23 that the goods were bought for a personal use. This is because Art. 2(a) requires the private purpose of the transaction to be discernible to protect the seller’s expectation that the international sales transactions will be covered by the CISG. c) Special issues in regard to EU Consumer Law. Problems concerning Art. 2(a) 24 arise in regard to EU Consumer Law, i. e. the EU’s Directive on certain aspects of the sale of consumer goods and associated guarantees49. Although the CISG was the Directive’s antitype,50 there are different legal consequences in regard to several aspects. It is the purpose of Art. 2(a) to avoid conflicts and interferences between the Convention’s sphere of application and consumer protection law.51 Nevertheless, there remain two areas where interferences could not be completely avoided. Firstly, Art. 2(a) limits the exclusion of the CISG to cases where the seller was aware or could not have been unaware of the intended personal use. The Directive has no such limitation.52 Consequently, in cases where the seller ought not to have known that the goods were bought for an intended personal use, the Convention’s applicability is not excluded, but the provisions of the Directive are also applicable. Secondly, it is argued that the Convention’s application is only excluded in cases where the goods are only bought for a personal use.53 If a professional use is also intended, this transaction is covered by the CISG. On the other hand, national provisions enacting the Directive are applicable if there is also a personal use.54 Consequently, in the case of a mixed-use of the goods, two bodies of law with provisions containing different legal consequences would be applicable. 48

Magnus, in: Lieber amicorum Kurt Siehr (2010), p. 405 (410). EC Directive 99/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees. 50 Piltz, Internationales Kaufrecht (2008), paras 2–69; Micklitz, Die Verbrauchsgu ¨ ter-Richtlinie, EuZW (1999) 485 et seq.; Financial Markets Law Committee, Legal assessment of various financial markets aspects, Issue 130, para. 3.3. 51 Schlechtriem/Butler, CISG (2009), para. 29 b; Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 1. 52 Schroeter, UN–Kaufrecht und Europa ¨isches Gemeinschaftsrecht (2005), § 6 para. 110. 53 Cf. supra para. 15. 54 According to Schroeter, UN–Kaufrecht und Europa ¨isches Gemeinschaftsrecht (2005), § 6 para. 106, the EU Directive is not applicable in cases of a mixed use of the goods. 49

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With these points in mind, the question whether the CISG or the national provision enacting the Directive prevails comes into play. It has been argued that the CISG prevails over national consumer protections laws.55 It is argued in the literature that this is also true with respect to domestic consumer legislation based on EU directives.56 The reasons given are only different in the details. It is usually argued that the CISG contains special provisions for international sales and demands its application in so far as there is no exception. 26 It is this author’s opinion that the national provisions enacting the EU Directive must prevail for several reasons. Firstly, it is not only the CISG’s but also the EU Directive’s goal to create special provisions concerning international sales transactions.57 As it is the Directive’s goal to create a special body of laws concerning international consumer sales contracts, the Directive’s provisions are lex specialis in relation to those of the CISG which do not even intend to cover consumer contracts. Secondly, although it is argued in the literature that a state that signs the Convention and implements it by ratification has public international law obligations which would be violated if it enacted laws conflicting with provisions of the Convention,58 it is submitted that non-compliance with a directive that the Member States of the European Union are bound to according to Art. 288 TFEU would also be a violation of an obligation set out by public international law.59 It is true that the Convention itself does not stipulate that the national provisions enacting EU directives prevail over the CISG. Furthermore, Art. 90 is said not to apply since a directive is not an international agreement that contains provisions that regulate matters governed by the Convention.60 Nevertheless, the Convention recognises in Art. 94 the principle that the CISG should not apply if there are provisions that contain harmonised principles in regard to cross-border sales transactions. The underlying principle is that the Convention does not demand its application if there is no (further) need for the application of harmonised legal rules. Since both provisions do not deal with the relationship between the Convention and the national provisions enacting EU directives, the solution does not follow from a direct application of the Convention. Rather, it is this author’s submission that the legal basis for this result is an analogous application of both Arts 90 and 94. The usual requirements for an analogy are met: there is an unintended gap and the interests involved in the question at hand are identical to those underlying Art. 90 and Art. 94. Since the rationales underlying both provisions do not apply to situations different than an internationles sales contract between parties from different Member States of the European Union, in cases where a party from a non-EU country is involved, the Convention must prevail over the national provisions that most often contain a more extensive regulation than is asked for by the directive and is not related to inter-EU-sales transactions. As far as a declaration of the states is required under 25

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Cf. supra para. 24. Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 18; Magnus, in: Staudinger Kommentar (2013), Art. 2 paras 30 et seq.; Benicke, in: Mu¨nchKommHGB (2013), Art. 2 CISG para. 8; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 CISG para. 7; Piltz, Gestaltung von Exportvertra¨gen nach der Schuldrechtsreform, IHR (2002) 2 (4); Huber, in: Huber/Mullis, The CISG (2007), p. 49. 57 See inter alia recital 2 of the EC Directive EC/99/44. 58 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 18 with footnote 73. 59 Vice versa the EU is not a party to the CISG and therefore not hindered to enact directives that creates conflicts with the Convention. 60 Huber, in: Mu ¨ nchKommBGB (2016), Art. 90 para. 2; differently Herber, Mangelfolgescha¨den nach dem CISG und nationales Deliktsrecht, IHR (2001) 187 (191); Daun, Grundzu¨ge des UN-Kaufrechts, JuS (1997) 811 (813); Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 90 CISG para. 8; Janssen, Kollision des UN-Kaufrechts mit dem Verbraucherschutzrecht, VuR (1999) 324 et seq. 56

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Art. 94(1), it is submitteld that the states’ obligation to enact EU Directives can be seen as such a declaration.

2. Sales by auction Sales by auctions have been undisputedly considered to be covered by special national 27 provisions and usages and should therefore be excluded from the Convention’s sphere of application.61 Additionally, it was often argued that it would be uncertain whether it is a national or an international sales transaction until the acceptance of the bid was made.62 Since the seller should not be unexpectedly confronted with the application of the CISG to a sales contract, it was seen to be more favourable to exclude auctions from the Convention’s sphere of application.63 In addition, it was the general understanding in the deliberations of the Convention that an auction is usually held in one place, governed by the law and usages of that place and that the parties are normally not aware of the fact that they have their places of business in different states.64 a) Definition of auction. Auctions in the sense of Art. 2(b) are either auctions by law 28 or private auctions.65 These are sales to the highest bidder and – as in most national provisions – the sale at auction is completed when the auctioneer so announces in a customary manner usually upon a formal acceptance of the bid66. An auction must be publicly announced before it takes place.67 Auctions in enforcement proceedings are not subject to this provision but rather to Art. 2(c).68 Consequently, Art. 2(b) only applies to auctions of a private auctioneer. Sales on commodity markets are not included in the exception and are therefore 29 covered by the CISG.69 The exception does not apply if the sales transaction was initiated by a competitive 30 (public) procurement process.70 This is because no party is unaware of the CISG’s application. The economic operator taking part in the competitive procedure (being usually the seller) is already aware of the party contracting with and therefore also on the Convention’s application. If he could have been aware of the Convention’s application and places an offer, he cannot rely on the Convention’s non-application. The same is true if the Convention does not apply: He cannot rely on its application. The party asking for offers in the competition can already exclude the Convention’s application in the call for competition. If it failed to do so, it still has the possibility to decide what offer to accept and can take into account the application of the CISG as a ground to contract with a specific party or not to contract with it. This is because not only costs have to be taken into account when deciding on the award of the contract.71 61

Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 32. Khoo, in: Bianca/Bonell, Commentary (1987), Art. 2 para. 2.3; Benicke, in: Mu¨nchKommHGB (2013), Art. 2 para. 9. 63 Ferrari, in: Schlechtriem/Schwenzer, Kommentar (2013), Art. 2 para. 30. 64 Ferarri, in: Schlechtriem/Schwenzer, Kommentar (2013), Art. 2 para. 30. 65 UNCITRAL, Digest of Case Law on the CISG, Art. 2 para. 5. 66 See Martiny, in: Mu ¨ nchKommBGB (2015), Anhang Art. 4 Rom I-VO para. 48. 67 Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 33. 68 Ferrari, in: Schlechtriem/Schwenzer Kommentar (2013), Art. 2 para. 29; Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 33. For a discussion of Art. 2(c) cf. infra paras 33 et seq. 69 Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 35; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 CISG para. 8. 70 Saenger, in: Ferrari et al., Internationals Vertragsrecht (2012), Art. 2 para. 8; Magnus, in: Staudinger, Kommentar (2013), Art. 2 para. 34; Pereira, 35 years CISG and beyond (2016), p. 205 (207, 210 et seq.). 71 See eg Art. 67 Directive 2014/14/EU. 62

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b) No exclusion of Internet auctions. Keeping in mind the reasons why auctions should not be covered by the CISG, i. e. that they normally are only of local relevance, it is questionable whether Internet auctions should fall under Art. 2(b). The majority opinion in the literature is that the exception of Art. 2(b) also includes Internet auctions.72 Following this opinion, a sales contract concluded in an Internet auction is not covered by the CISG even if the seller and the buyer are from different states and the CISG would be applicable according to Art. 1. In this author’s view, Internet auctions should not fall within the exception of Art. 2(b) for several reasons. Firstly, the general rule, established by Art. 1 is that international sales contracts should (reasonably) be covered by the CISG. Therefore, the exceptions made by Art. 2 must be interpreted narrowly and whenever there is no reasonable ground for the exception, the Convention should be applied. Therefore, the starting point in determining this question must be whether there are reasonable grounds to exclude the application of the Convention from an international sales contract. When the drafters provided for the Art. 2(b) exclusion, their focus was on situations where a buyer from abroad came to a local auction – a situation no doubt unusual at the time. Nowadays, it is more likely that a seller who sells goods using the Internet cannot reasonably be unaware of the fact that the Internet is accessible from almost all over the world and his goods can thus be bought from all over the world. It is therefore not unreasonable for the seller to take into account that the highest bidder may come from a different country. In addition, it should be remembered that this ‘burden’ is only one side of the coin. The other side is that the use of an Internet auction gives the seller an additional benefit compared to a traditional auction. Namely, if an article is offered worldwide, there is a greater pool of potential buyers which may correlate to a higher sale price. If the seller uses the advantage of an Internet auction – being that anybody in (nearly) the whole world can bid on an item – he must also bear the disadvantage – being that the sales contract might potentially be covered by the CISG. This is in line with another underlying principle pointed out in the Convention: the CISG does not apply if the buyer is a consumer according to Art. 2(a), but it does apply if the seller is a consumer73 and the buyer buys the goods for an intended professional use. If the seller is not aware of the existence of the CISG, he may not have regard to whether the buyer comes from his own country or from abroad. He is, however, in this case bound to the provisions of the CISG regardless of his lack of awareness. Taking the last-mentioned point into account, it does not overburden the seller in an Internet auction that the Convention is applicable if a buyer is a merchant from another country. In the end, it is up to the seller to protect himself from the application of the CISG if he does not want to be bound to it. He can simply exclude the Convention’s application in the Internet auction’s conditions. If a potential buyer bids on the item, in this case, he implicitly agrees that the sales contract should not be covered by the CISG, resulting in an agreement to exclude it according to Art. 6. 32 In recent times, (international) business to business sales using Ebay and the like have increased. While it is suggested that the reasoning above also applies to Internet auction portals such as Ebay, it is argued that, in any event, it is questionable whether a sale on Ebay is an auction in the sense of Art. 2(b) at all. The German Bundesgerichtshof has decided that this is not an auction in regard to § 312 d (4) (Nr. 5) of the German BGB in its old version.74 This provision limited the applicability of the provisions enacting the EU Distance Selling Directives75 in case of auctions. As already mentioned above, an auction 31

72 See Schroeter, Anwendbarkeit des UN-Kaufrechts auf grenzu ¨ berschreitende Auktionen, ZEuP (2004) 20 (30 et seq.) with a detailed discussion; Lorenz, in: Witz/Salger/Lorenz, Kommentar (2016), Art. 2 para. 7. 73 Cf. supra para. 7. 74 Bundesgerichtshof (Germany), 3 November 2004, VIII ZR 275/03. 75 EC Directive 97/7/EC.

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requires that the highest bid is formally accepted by the auctioneer.76 Such a formal acceptance does not take place if goods are sold on Ebay even on the basis of the highest bid. This result was already convincing for German law. This argument becomes even stronger taking into account the wording of § 312g(2)(Nr. 10) – the new provision enacting EU Directive 2011/83/EU. Although, the Convention should be interpreted in its international context according to Art. 7(1), the reasoning given by the German Bundesgerichtshof is also convincing for the question whether Art. 2(b) includes Internet auctions and can therefore be used in order to decide that question. Therefore, in this author’s view, an auction on Ebay is no auction in the sense of Art. 2(b) and these sales are consequently covered by the CISG if the preconditions given by Art. 1 are met and the transaction does not fall under another Art. 2 exception and the parties have not contractually excluded the CISG’s application pursuant to Art. 6.

3. Sales on execution or otherwise by authority of law These sales have been removed from the Convention’s sphere of application since the 33 parties are not able to negotiate the terms of the contract77. Additionally, in these transactions, special attention must be given to public interest; this may not be guaranteed under the CISG.78 Since the CISG’s underlying principle is that of party autonomy, its application would 34 be unreasonable. In addition, these sales are generally subject to special regulations other than (usual) sales law provisions, independent of whether the sale is based on a contract or a sovereign act79. The national law of the state whose courts have initiated the sale of goods decides 35 what sales transactions are meant to fall under the exception.80 The decisive factor is that the sale was initiated by an institution that has state powers comparable to judicial powers,81 i. e. sales in enforcement proceedings by public authorities or in insolvency proceedings82. Conversely, sales contracts that are concluded by the insolvency representative in the normal course of business do not fall within this exception.83 This is based on the fact, that the insolvency representative represents the debtor and can – unlike state authorities that are bound by law – negotiate contractual obligations with the buyer and therefore act like any other (private) seller. Therefore, Art. 2(c) does also apply if a pledged item is not sold in an auction but rather by private agreement (e. g. according to Sect. 817 a para. 3, 821, 825 of the German Code of Civil Procedure).84

4. Sales of stocks, shares, investment securities, negotiable instruments or money This provision is identical to its predecessor, Art. 5(1)(a) ULIS. The exception made 36 in Art. 2(d) is based on the idea that the CISG is not tailored to cover sales of stocks, shares, investment securities, negotiable instruments or money, and that the CISG is 76

Cf. supra para. 28; Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 33. Honnold/Flechtner, Uniform Law (2009), Art. 2 para. 52. 78 Lu ¨ deritz/Fenge, in: Soergel, Bu¨rgerliches Gesetzbuch (2000), Art. 2 para. 7. 79 Achilles, UN-Kaufrechtsu ¨ bereinkommen (2000), Art. 2 para. 6. 80 Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 36; Siehr, in: Honsell, Kommentar (2010), Art. 2 para. 16. 81 Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 36; Siehr, in: Honsell, Kommentar (2010), Art. 2 para. 16. 82 Saenger in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 para. 9. 83 Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 37; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 para. 8. 84 Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 para. 9. 77

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38

39

40

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only applicable to the sale of goods, not the sale of rights.85 In this sense, the provision is only of declaratory character.86 In addition, conflicts with – mostly mandatory – national provisions should be avoided.87 Therefore, in general, financial instruments should be removed from the Convention’s sphere of application.88 Consequently, Art. 2(d) removes sales transactions of collateralised securities from the Convention’s sphere of application. ‘Documents of title to goods’ are not included in this exclusion.89 This is convincing since these securities only ‘replace’ the goods that are part of the sales transaction and that the provisions of the CISG are tailored to. The exception of ‘negotiable instruments’ means bills of exchange, cheques, shares, stocks, and ‘effets’ de commerce,90 and should be interpreted in a way that it includes all financial markets instruments91. Art. 2 makes no mention of derivatives. International sales contracts for derivatives are nevertheless not governed by the Convention. Derivatives are of the same character as options.92 In the end, a derivative is a right, not a good and consequently, sales of derivatives are sales of rights, not sales of goods. Since the Convention’s sphere of application is limited to sales of goods according to Art. 1 and does not cover sales of rights93, these contracts do not fall within its sphere of application. This is also true for the sale of over-the-counter (OTC)-derivatives, regardless of whether there is a provision for physical delivery or not. Money means all lawful coins and paper money.94 The CISG is, however, applicable to money that is not functional as currency any longer.95 In this case, the function of the money is not to be a lawful currency, but to be a collectible in the foreground. It is suggested that the Convention should be applied if currencies are dealt with that are emitted by private entities (e. g. BITCOINS).96 However, it is questionable, whether these transactions are even a sale of goods under Art. 1.

5. Sales of ships, vessels, hovercraft or aircraft 41

a) General Remarks. Art. 2(e) states an exception for sales transactions of ships, vessels, hovercrafts and aircrafts. The underlying rationales are to avoid interferences with national duties to register these goods and to clarify that these goods that are widely 85

Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 para. 10. Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 2; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 para. 10. 87 Enderlein/Maskow, International Sales Law (1992), p. 34; Schwenzer/Hachem, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 2 para. 23. 88 Financial Markets Law Committee, Legal assessment of various financial markets aspects, Issue 130, para. 6.9. 89 Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 41; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 para. 10. 90 Enderlein/Maskow, International Sales Law (1992), p. 34; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 para. 10; Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 39; Martiny, in: Mu¨nchKommBGB (2015), Anhang Art. 4 Rom I-VO para. 51; Huber, in: Mu¨nchKommBGB (2016), Art. 2 para. 18; Khoo, in: Bianca/Bonell, Commentary (1987), Art. 2 para. 2.5. 91 Financial Markets Law Committee, Legal assessment of various financial markets aspects, Issue 130, para. 6.17. 92 Similar Lorenz, in: Witz/Salger/Lorenz, Kommentar (2016), Art. 2 para. 8. 93 Lorenz, in: Witz/Salger/Lorenz, Kommentar (2016), Art. 1 para. 5. 94 Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 para. 10; Lu ¨ deritz/Fenge, in: Soergel, Bu¨rgerliches Gesetzbuch (2000), Art. 2 para. 8. 95 Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 43; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 para. 10; Siehr, in: Honsell, Kommentar (2010), Art. 2 para. 19; Lorenz, in: Witz/Salger/Lorenz, Kommentar (2016), Art. 2 para. 8. 96 Lorenz, in: Witz/Salger/Lorenz, Kommentar (2016), Art. 2 para. 8. 86

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considered to be immovable goods97 should not be within the Convention’s sphere of application.98 Unlike under its predecessor (Art. 5(1)(b) ULIS), for the exception to apply it is not necessary that the vehicle be registered, although the underlying rationale of this exception is that the application of the CISG might come in conflict with national provisions stating a duty to register.99 Consequently, Art. 2(e) applies regardless of whether the vehicle actually has to be registered or not. The exception set out by Art. 2(e) only applies for assembled goods; the sale of 42 components that have still to be assembled is covered by the Convention.100 This argumentation is in line with the underlying rationale that interferences with national obligations of registration should be avoided.101 On the other hand, the exception also applies when the manufacturing process is still ongoing.102 b) Ships and vessels. Ships and vessels are not easy to distinguish.103 Since a 43 differentiation does not result in any legal consequence, it is submitted that no distinction has to be made. The decisive factor is that they can be moved on or under water104 regardless of the intended use105. It is disputed whether the exception applies irrespective of the size of the ship. It has 44 been argued that vehicles must have a minimum size to classify as a ship in the sense of Art. 2(e).106 Taking into account that one of the major purposes of the Convention is to provide legal certainty and that the wording does neither foresee a minimum size nor a duty to register, it is, in this author’s view, more favourable not to require a minimum size for the exception to apply.107 The decisive factor is whether these vehicles, be it civil or military vessels108, are intended for a continual movement.109 Therefore ‘vehicles’ that are intended for a local use at the same place (e. g. house boats, oil rigs and floating

97

Honnold/Flechtner, Uniform Law (2009), Art. 2 para. 55. UNCITRAL, Digest of Case Law on the CISG, Art. 2 para. 9; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 1 CISG para. 6. 99 Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 44. For a more detailed discussion of the drafting history see Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 27; Khoo, in: Bianca/Bonell, Commentary (1987), Art. 2 para. 2.6. 100 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 2 para. 21; Achilles, UN-Kaufrechtsu¨bereinkommen (2000), Art. 2 para. 9 (in regard to aircrafts); Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 para. 11; Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 32; Lookofsky, Understanding the CISG (2012), p. 17 fn. 32; Legfelso´bb Biro´sag (Hungary) 25 September 1992 (airplane engines), United Technologies International Inc. Pratt and Whitney Commercial Engine Business vs. Magyar Le´gi Ko¨zlekede´si Va´llalat (Ma´lev Hungarian Airlines), CISG-Online 63 (Pace). It seems that this has been overseen in the decision US Bankruptcy Court for the Middle District of Georgia (USA) 25 July 2002 (airplane and airplane engines), First National Bank of South Georgia vs. Ayers, CISG-Online 1663 (Pace): In regard to the aircraft engines, the CISG was indeed applicable. The decisive question was whether the parties had an intent that the sale of the engines and the sale of the aircraft should be covered by the same law. In this case one could argue that the parties implicitly excluded the Convention’s application according to Art. 6. 101 Piltz, Internationales Kaufrecht (2008), paras 2–51. 102 Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 47. 103 Enderlein/Maskow, International Sales Law (1992), p. 35. 104 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 28. 105 Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 45. 106 Piltz, Internationales Kaufrecht (2008), paras 2–52; Meier/Stacher, in: Brunner Kommentar (2014), Art. 2 Rn. 14; Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 46. 107 See also Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 30; Honnold/Flechtner, Uniform Law (2009), Art. 2 para. 54. 108 Arbitral Award, Russian Maritime Commission Arbitral Tribunal, 18 December 1998 (military submarine), CISG-Online 1588 (Pace). 109 Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 para. 11. 98

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docks) are not included in the exception created by Art. 2(e).110 Taking into account the underlying rationale of the provision, the exception does not apply to sailing boats and other sporting equipment.111 This follows from the wording of the provision: these goods cannot be classified as a ‘ship’ or ‘vessel’. 45 Taking these difficulties into account, parties should explicitly agree to the applicable law in the contract.112 46

c) Aircrafts. The term aircraft includes civil and military aircrafts that are intended to transport humans or goods and are intended for a continual movement113. Model planes are not considered to be an aircraft in the sense of Art. 2(e).114 The same is true for hang-gliders, satellites and skyrockets.115

6. Sales of electricity The reason to exclude sales of electricity from the Convention’s sphere of application is that there are tendencies arguing that electricity is not a ‘good’, which is of course a prerequisite for the CISG to be applicable at all according to Art. 1.116 In addition, contracts for the supply of electricity often contain special provisions for which the rules established by the CISG are inappropriate.117 48 Taking this underlying principle into account, it is questionable whether the Convention is applicable to sales contracts concerning other energy sources, such as oil, gas and liquidated gas. These are to be considered goods in the sense of Art. 1, even if gas is not tangible.118 In this author’s opinion the decisive factor should be that these energy sources can be traded like every other good and can even be made movable. Consequently, these contracts are governed by the Convention if no other exception applies. Although providing for such an exception was discussed during the drafting of the Convention119, the drafters rejected a broader exception during their deliberation.120 Furthermore, these goods cannot be removed from the CISG’s sphere of application by analogy121 for two reasons. Firstly, as it has already been mentioned, Art. 2 contains explicit exceptions which have to be interpreted narrowly and cannot be extended to other goods. Secondly, an analogous interpretation cannot be made against the drafters’ 47

110 Saenger, in: BeckOK BGB Kommentar (2017), Art. 2 para. 10; Lorenz, in: Witz/Salger/Lorenz, Kommentar (2016), Art. 2 para. 9; Piltz, Internationales Kaufrecht (2008), paras 2–52. 111 Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 para. 11; Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 46; Benicke, in: Mu¨nchKommHGB (2013), Art. 2 CISG para. 19. 112 Lorenz, in: Witz/Salger/Lorenz, Kommentar (2016), Art. 2 para. 12. 113 Piltz, Internationales Kaufrecht (2008), paras 2–53. 114 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 32. 115 Piltz, Internationales Kaufrecht (2008), paras 2–53. 116 Khoo, in: Bianca/Bonell, Commentary (1987), Art. 2 para. 2.7. 117 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 33; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 para. 12. 118 Magnus, in: Staudinger Kommentar (2013), Art. 1 para. 45; Honnold/Flechtner, Uniform Law (2009), Art. 2 para. 56.1; Karollus, UN-Kaufrecht (1991), p. 22. The CISG has been applied to a sale of propane gas by the Oberster Gerichtshof (Austria) 6 February 1996 (propane gas), CISG-Online 224 (Pace). See also UNCITRAL, Digest of Case Law on the CISG, Art. 2 para. 9. 119 See the criticism by U. Huber, UNCITRAL-Entwurf eines U ¨ bereinkommens u¨ber internationale Warenkaufvertra¨ge, 43 RabelsZ (1979) 413 (419). 120 Official Records, Doc. A/CONF.97/19, p. 200 et seq.; Benicke, in: Mu ¨ nchKommHGB (2013), Art. 2 CISG para. 22; Honnold/Flechtner, Uniform Law (2009), Art. 2 para. 56; Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 33. 121 Achilles, UN-Kaufrechtsu ¨ bereinkommen (2000), Art. 2 para. 10; Magnus, in: Staudinger Kommentar (2013), Art. 2 para. 50; Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 2 para. 33; Lookofsky, Understanding the CISG (2012), p. 20 footnote 49; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 para. 12.

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expressed intent, which has to be respected. In addition, this result is in line with the Convention’s aim to strengthen legal harmonisation and to avoid legal uncertainty in international sales transactions. Taking this into account, the CISG should apply to these contracts if no other body of law exists that excludes the Convention’s application according to Arts 90 and 94.

7. Burden of proof According to the general principle ‘ei incumbit’ that underlies the Convention, the 49 party who argues that the contract, which would otherwise be covered by the CISG according to Art. 1, falls under one of the exceptions given by Art. 2, generally bears the burden of proof.122 However this general rule is disputed especially in regards to consumer sales contracts (Art. 2(a)). According to some authors it shall always be the buyer who bears the burden of proof that the sales contract the parties entered into is a consumer contract; and it should always be the seller who bears the burden of proof that he was not aware of the specific purpose and could reasonably be unaware of it.123 The majority opinion however applies the general principle. From a practical point of view, there is no difference between both points of view, if it is – like usual – the buyer who relies on the non-applicability of the CISG according to Art. 2 and if it is the seller who relies on its applicability.124 The situation is, however, different if it is the claiming seller who argues that the transaction is a consumer contract, because he does not want the transaction governed by the CISG. Following the general principles, it would be up to the buyer to argue and to prove that the private purpose of the contract was not discernable. However, the decisive question is whether Art. 2(a) prevents the buyer from relying on the counter-exception. No such restriction is mentioned in the wording of the provision. Nevertheless, it is the Convention’s goal to protect a seller who could not be aware of a private use of the goods by the Convention’s application and it is not the Convention’s goal to protect reliance on its inapplicabiltiy125. Therefore, a buyer should not be allowed to rely on the indiscernibility of the private purpose of the sales transaction. Consequently, in cases where, the buyer argues that the transaction is a consumer contract (Art. 2(a)), the burden of proof that this was not discernable, is always with the seller who wants to rely on the exception from the exception.126 This follows from the wording of Art. 2(a) whereupon the Convention does not apply “unless the seller neither knew nor ought to have known” the intention of a personal use.

III. Comparable Rules There is no similar provision in the PECL and the PICC since these principles are 50 intended to have a broader sphere of application and there is no need for such a limitation. However, the DCFR contains exclusions similar to those of Art. 2, i. e. Art. I. – 1:101(2)(d) excludes rights similar to these mentioned in Art. 2(d). 122 In a similar way Achilles, UN-Kaufrechtsu ¨ bereinkommen (2000), Art. 2 para. 11; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 CISG para. 13. 123 Karollus, UN-Kaufrecht (1981) p. 22. 124 Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 para. 13; Ferrari, in: Schlechtriem/Schwenzer Kommentar (2013), Art. 2 para. 22. 125 Schwenzer/Hachem, in: Schlechtriem/Schwenzer Commentary (2016), Art. 2 para. 8; cf. supra para. 17. 126 See also Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 2 CISG para. 13; Siehr, in: Honsell, Kommentar (2010), Art. 2 para. 14; H. P. Westermann, in: Mu¨nchKommBGB (2012), Art. 2 para. 6; Benicke, in: Mu¨nchKommHGB (2013), Art. 2 CISG paras 24 seq; Schlechtriem/Butler, CISG (2009), para. 29 b.

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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. (2) This Convention does not apply to 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. Bibliography: Bevilacqua, L’artcile 3 de la Convention de Vienne et les contrats comlexes dans le domaine de l’informatique; une lecture de la jurisprudence pertinente, 50 McGill Law Journal 553 (2005); CISG-AC Opinion no 4, Contracts for the Sale of Goods to Be Manufactured or Produced and Mixed Contracts (Article 3 CISG), 24 October 2004. Rapporteur: Professor Pilar Perales Viscasillas; Eggen, Digitale Inhalte unter dem CISG Eine Rundschau u¨ber Herausforderungen und mo¨gliche Lo¨sungen, 17(6) Internationales Handelsrecht, (2017), pp. 229–237; Gilette/Walt, The UN Convention on Contracts for the International Sale of Goods – Theory and Practice, 2nd edition (2016); Green/Saidov, Software as Goods, Journal of Business Law (March 2007) 161; Lookofsky, In Dubio Pro Conventione? Some Thoughts about Opt-outs, Computer Programs and Preemption Under the 1980 Vienna Sales Convention (CISG), 13 Duke Journal of Comparative and International Law (2003) 263; Perovic, Selected Critical Issues Regarding the Sphere of Application of the CISG, 3 Annals of the Faculty of Law in Belgrade 181 (2011); Schroeter, Vienna Sales Convention: Applicability to “Mixed Contracts” and Interaction with the 1968 Brussels Convention, 5 Vindobona Journal of International Commercial Law and Arbitration (2001) 74; Sono. The Applicability and Non-Applicability of the CISG in Software Transactions, in Andersen & Schroeter (eds.), Sharing International Commercial Law across National Boundaries: Festschrift for Albert H. Kritzer on the Occasion of his Eightieth Birthday (2008) 512–526; CISG-AC Opinion no 4, Contracts for the Sale of Goods to Be Manufactured or Produced and Mixed Contracts (Article 3 CISG), 24 October 2004. Rapporteur: Professor Pilar Perales Viscasillas, Universidad Carlos III de Madrid.

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Drafting history . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Contracts for the sale of goods to be manufactured or produced. . . . . . . . . a) Substantial test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Substantial versus essential. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Materials necessary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Service Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Preponderant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) The issue of severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 2 5 5 6 11 14 15 17 21 23 26 27

I. Importance and Role of the Provision 1. General 1

Art. 3 extends the Convention’s sphere of application beyond the supply of goods in two important ways: (1) contracts where the buyer provides a non-substantial portion of the materials necessary, and (2) to contracts which include services as a non-preponderant portion of the obligation provided by the party furnishing the goods. This extension of the sphere of application is significant as the CISG can apply 54

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not only to the sale of ready or manufactured goods but also in relation to goods which are to be manufactured and certain mixed contracts where the sale is a significant element.1

2. Drafting history Art. 3(1) may be compared with ULIS Art. 6, according to which contracts in which 2 the party who orders the goods also supplies a substantial part of the materials are excluded from the scope of the Convention.2 The criterion would be whether the materials supplied are “substantial” or not. The party claiming that the ULIS does not apply must prove that the ordering party supplied, or was supposed to supply, a substantial amount of the materials. The same burden of proof would presumably apply in the case of the CISG.3 Art. 3(2) excludes mixed contracts with a sales element which are predominately 3 contracts for the supply of labour or services. One of the issues to be addressed here is the case of goods delivered which require an installation (e. g. complex machinery). This issue was considered problematic under the ULIS and may well continue to be problematic under the CISG. Generally, the language used, i. e. “preponderant part”, should be understood in terms of relative value and would normally imply significantly higher than 50 % of the price.4 It is worth mentioning that during the deliberations, the UK delegation proposed to 4 address in (and exclude from) Art. 3 transfer of technology and transfer of know-how. It was generally felt that it was excessively difficult to characterize such contracts and that they would normally be excluded from sales contracts in domestic laws.5

II. Detailed Commentary 1. Contracts for the sale of goods to be manufactured or produced Art. 3 makes clear that the Convention should apply to contracts for the sale of goods 5 to be manufactured and/or produced provided that the party ordering the goods has not 1 Court of Justice of European Union Case C-381/08, Car Trim GmbH v Key Safety Systems srl, 25 February 2010 (airbag systems) CISG-Online 2351, in the context of Art. 3 CISG looked as the criteria of distinguishing between “sale of goods” and “provision of services” and noted that it is important that the buyer has not supplied the materials and the seller/supplier is responsible for the quality of the goods and their conformity oftp te contract. The Court of Justice of the European Union looks at the CISG as an incidental matter in relation to EC Regulation 44/2001 and the question of jurisdiction in civil and commercial matters. 2 Schlechtriem, Uniform Sales Law – The UN-Convention on Contracts for the International Sale of Goods (1986) p. 31. See also Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 65–74. 3 Schlechtriem, Uniform Sales Law – The UN-Convention on Contracts for the International Sale of Goods (1986) p. 31 with reference to Riese, 29 RabelsZ (1965) 18. 4 See, e. g., Honnold/Flecthner, Uniform Law (2009), Art. 3 para. 59; see also Kahn, La Convention de Vienne du 11 avril 1980 sur les contrats de vente internationale de marchandises, Review internation-ale de droit compare (1981) 955 (presumption that the CISG is applicable to contracts with a clearly preponderant “service” component as well as to “turn-key” contracts); A/Conf. 97/C.1/L.26, Official Records 84; Secretariat Commentary on 1978 Draft, Art. 3 (now Art. 3); contra Honnold/Flechtner, Uniform Law (2009), Art. 3 para. 60 (arguing that the Convention should apply to the entire agreement). See also Schlechtriem, Uniform Sales Law – The UN-Convention on Contracts for the International Sale of Goods (1986) p. 32. It is generally clear that a mere quantitative assessment would be inadequate, Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 67 et seq. 5 Schlechtriem, Uniform Sales Law – The UN-Convention on Contracts for the International Sale of Goods (1986) p. 32.

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supplied a substantial part of the necessary materials.6 It should not matter if the goods being considered are thought of as specific, or customized goods7 – nor should it matter if the seller enlists the assistance of a designer or purchases components from another party.8 Another issue of contention is non-physical contributions, such as technical knowledge or intellectual property; they are generally understood not to fall under the scope of Art. 3(1).9 a) Substantial test. The Convention is silent on the definition of‘substantial part’; however, one should note the different phrasing used in para. 2 of the article, that of‘preponderant’. Based on the different phrasing used, one certainly must recognize the lower standard that is present in the expression ‘substantial’ used within para. 1 of the article. 7 Case law and commentators have shed some light on how the phrase substantial should be interpreted. Some suggest the determination of substantial should be based on a simple quantitative criterion. For example, a criterion based upon weight or volume of the material provided in relation to the total weight or volume of material used.10 However, some commentators argue that the use of a quantitative measure is much too simplistic and will lead to odd and often unanticipated results. Honnold, for example, gives examples in which the primary criterion should be based in ‘value.’ It follows that value would then be used to consider the value of the portion supplied as measured against the value of the entire value of all material used.11 8 Clearly, one must admit that quantitative analysis is a reasonable initial consideration; however, one can easily find examples of how the use of quantitative measures as the sole criterion will fall wilfully short.12 Moreover, value as a primary criterion may also lead to some unintended outcomes. Numerous examples exist in the area of electronics in which a single component can greatly out-value the value of all other 6

6 Kantongericht Zug (Switzerland), 14 December 2009 (spinning company) CISG-Online 2026; Obergericht Aargau (Switzerland), 3 March 2009 (Prefabricated house) CISG-Online 2013; Handelsgericht des Kantons Zu¨rich (Switzerland) 8 April 1999 (Windmill drives), CISG-Online 489 (Pace); Handelsgericht des Kantons Zu¨rich (Switzerland) 10 February 1999 (Art books) CISG-Online 488 (Pace); Oberlandesgericht Oldenburg (Germany), 20 December 2007 (Industrial tools) CISG-Online 1644 (Pace); Oberlandesgericht Innsbruck (Austria), 18 December 2007 (steel bars) CISG-Online 1735 (Pace); Oberlandesgericht Linz (Austria) 24 September 2007 (lamninated glass) CISG-Online 1583 (Pace); Landgericht Regensburg (Germany) 24 September 1998 (Cloth), CISG-Online 1307 (Pace); Oberlandesgericht Mu¨nchen (Germany) 8 February 1995 (Polypropylene plastic granulate), CISG-Online 142 (Pace); Oberlandesgericht Ko¨ln (Germany) 26 August 1994 (Market study), CISG-Online 132 (Pace); Handelsgericht des Kantons Zu¨rich (Switzerland) 9 September 1993 (Furniture), CISG-Online 79 (Pace); Oberlandesgericht Frankfurt am Main (Germany) 17 September 1991 (Shoes), CISG-Online 28 (Pace); Arbitral Award, ICC Court of Arbitration, Award no 9083, CLOUT Case 1086, ICC Court of Arbitration, Award no 9448, July 1999, CLOUT Case No 630. 7 For example, see the Swiss case of Handelsgericht des Kantons Zu ¨ rich (Switzerland) 10 February 1999 (Art books) CISG-Online 488 (Pace); the German case of Oberlandesgericht Frankfurt am Main (Germany) 17 September 1991 (Shoes), CISG-Online 28 (Pace). In contrast, see the French case of Cour d’appel de Chambe´ry (France) 25 May 1993 (Adapters), CISG-Online 223 (Pace). For an examination of the distinction in made to order goods and services, see, Ferrari, excerpt from Selected Topics of the CISG in the Light of Judicial Application and Scholarly Writing, 15 Journal of Law and Commerce (1995) 1– 126 (Pace). 8 See Piltz, Internationales Kaufrecht, para 2–33; Enderlein/Maskow, International Sales Law (1992), p. 38. 9 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 3 para. 8. 10 See, for example, the Hungarian case Arbitral Award, Arbitration Court attached to the Hungarian Chamber of Commerce and Industry, 5 December 1995 (Waste container) CISG-Online 163 (Pace). 11 See Honnold/Flechtner, Uniform Law (2009), Art. 3 para. 59. 12 This argument was advanced in courts in the German case of Landgericht Mainz (Germany) 26 November 1998 (Cylinder), CISG-Online 563 (Pace).

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9–12

Article 3

components. Should the sale of a computer be eliminated from the Convention merely because the buyer orders a computer with specifications, but elects to source the processor from another manufacturer? Some commentators have attempted to place a more specific value or percentage to 9 quantify ‘substantial.’ Commentators have suggested rangers between 15 % to 50 %.13 However the vast majority support a threshold of ‘50 % and above’ to be appropriate.14 Despite attempts at fixing a rigid value-based percentage to exclude certain types of contracts from the Convention, some commentators argue that the rigid standard should be rejected,15 and some argue that each standard serves its purpose, but that no single criterion should be used.16 Despite the lack of a precise definition, one must appreciate the importance of 10 allowing a level of flexibility in determining ‘substantial’ in light of the surrounding circumstances. As the commentary clearly describes, Art. 3 is designed to eliminate contracts for the supply of services or labour from the sales convention.17 As such, Art. 3(1) should exclude contracts that are more “akin to contracts for the supply of services or labour than to contracts for sale of goods.”18 This should be the effect of Art. 3 and a level of flexibility to achieve this effect is not necessarily a bad thing. b) Substantial versus essential. Arguments have been made that the determining 11 criteria would be better expressed with the use of the phrase ‘essential’ part of the materials necessary for such manufacture or production.19 This discussion partly derives from the French text of the Convention which refers to “essential”.20 The arguments for the use of the term ‘essential’ are supported for several reasons. The use of essential as a single determinative criterion, however, must ultimately be rejected. As the French translation of the Convention in fact uses the term ‘essential’ in place 12 of the term ‘substantial’ which is used in the English version,21 some French, German and Swiss commentators argue that this should be the criterion.22 Clearly, ‘essential’ will then be the language considered by the courts in these instances as this is in fact the language within the Convention. However, the use of the term essential should not be over interpreted to the effect that a court or tribunal considers ‘essential’ to be a better measure. Moreover, the use of the term essential does not eliminate the grey areas created by the use of such a term – it merely shifts the debate slightly. Essential, although possibly a term with a clear definition on its face (perhaps shifting the focus on a qualtitative rather than quantitative criterion), does not eliminate the unintended outcomes within this occasionally grey area of law. If the seller was to provide the 13 See Honnold/Flechtner, Uniform Law (2009), Art. 3 para. 59 stating “a tribunal might well conclude that 15 % is ‘substantial’ but the evaluation of such questions of degree is difficult to predict”. Enderlein/ Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 3 para. 3 (less than 50 %). 14 See the pertinent discussion in Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 3 para. 5. 15 See Magnus, in: Staudinger Kommentar, Art. 3, para. 18. 16 See Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 3 para. 7. 17 See Secretariat Commentary on 1978 Draft, Art. 3 (now Art. 3) para. 5. 18 Secretariat Commentary on 1978 Draft, Art. 3 (now Art. 3) para. 5. 19 For example, the Italian case of Corte Suprema di Cassazione (Italy) 9 June 1995, Alfred Dunhill Ltd. v Tivoli Group S. r. l., CISG-Online 314 (Pace). 20 See Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 3 para. 6. 21 See Schroeter, Vienna Sales Convention: Applicability to “Mixed Contracts” and Interaction with the 1968 Brussels Convention, 5 Vindobona Journal of International Commercial Law and Arbitration (2001) 74–86. 22 See Schroeter, Vienna Sales Convention: Applicability to “Mixed Contracts” and Interaction with the 1968 Brussels Convention, 5 Vindobona Journal of International Commercial Law and Arbitration (2001) 74–86.

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processor for the computers, should the court determine the processor more essential to the overall computer than the hard drive? This single example highlights the fact that the changing of the terminology does not eliminate the same grey area created with the use of the term substantial. 13 The legislative history suggests that the drafters considered and rejected the use of the term ‘essential’ within Art. 3,23 and as such, it is suggested that the use of the term should be rejected as the single interpretive measure. Moreover, the use of the term also does not promote the international character of the Convention, but instead places yet another obstacle in interpretation. 14

c) Materials necessary. Controversy also sometimes surrounds the use of the phrase ‘materials necessary’ for the manufacture or production because this arguably could include design specifications, etc.24 Of course, design specifications and similar instructions or plans used by the seller to produce specific and/or tailor made goods for the buyer should not preclude the application of the Convention to the goods25 as these should be considered ‘immaterial’ contributions. As such, these ‘immaterial’ contributions should not be misunderstood to be included in the expression ‘materials’ necessary for manufacture or production.

2. Service Contracts Art. 3(2) sets forth that the Convention does not apply to service contracts in which the ‘preponderant part’ of the contractual obligations are labour or other services.26 Of course, the Convention will apply to mixed contracts only in the situation where a single contract exists,27 and merely providing traditional ancillary packaging/delivery obligations should not be considered services or labour.28 16 In this sense, some commentators argue that ‘turnkey contracts’ will most likely by excluded from the Convention as “the sale of goods element is rarely at the forefront”.29 While it is true that most turnkey contracts will be drafted in such detail as to practically leave no room for the CISG,30 it is suggested that courts should not be too quick to exclude them from the scope of the Convention. As a national court’s definition of a turnkey contract will often vary jurisdiction to jurisdiction, a case-by-case analysis as to whether the requirements for the exclusion is satisfied is recommended.31 15

23

See CISG-AC Opinion no 4, para. 2.5. Some courts disagree on the issue of whether design specifications provided by the buyer constitutes ‘materials necessary’ for the production of the goods under Art. 3(1). See e. g., Cour d’appel de Chambe´ry (France) 25 May 1993 (Adapters), CISG-Online 223 (Pace). 25 See Oberlandesgericht Frankfurt am Main (Germany) 17 September 1991 (Shoes), CISG-Online 28 (Pace). 26 See Arbitral Award, ICC 7153/1992, 1 January 1992, CISG-Online 35 (Pace); Kantonsgericht Zug (Switzerland) 25 February 1999 (Building materials), CISG-Online 490 (Pace); Bundesgerichtshof (Germany) 12 February 1998 (Air cleaning installation), CISG-Online 343 (Pace); Handelsgericht des Kantons Zu¨rich (Switzerland) 26 April 1995 (Saltwater isolation tank), CISG-Online 248 (Pace); Bezirksgericht Laufen (Switzerland) 7 May 1993, CISG-Online 136 (Pace). 27 See Secretariat Commentary on 1978 Draft, Art. 3 (now Art. 3) para. 3; Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2010), Art. 3 para. 17. 28 Such as packaging, dispatching the goods, concluding contracts with carriers and other traditional basic obligations in relation to protecting the goods or arranging transport. See CISG-AC Opinion no 4, para. 3.1. See, for example: Cour d’appel de Colmar (France) 26 February 2008 (Printed products), CISGOnline 1657 (Pace) (the work necessary for the production and the packaging of the goods cannot be considered a service in the sense of Art. 3(2)). 29 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 3 para. 21. 30 Ibid. 31 CISG-AC Opinion no 4, para. 3.5. 24

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a) Preponderant. The Convention clearly stipulates that contracts that include an obligation to provide services alongside the delivery of goods are excluded from the Convention if the service obligations are a preponderant part of the obligations.32 However, the Convention is silent as to the definition of ‘preponderant’. As mentioned above, one should note the different phrasing used in para. 1 and para. 2 of this article. Based on the different phrasing used, one certainly must recognize the higher standard that is present in the expression ‘preponderant’, used within para. 2. But the question remains, if substantial is arguably at least 50 % of the value,33 how much is a preponderant part of the obligations and what should be the determinative factor. The prevailing view is that the test should be one of an economic value34 based on a comparison of the parties’ obligations in light of the entire agreement.35 Most commentators agree that overly prescriptive percentages designed to determine the application of the Convention are too dogmatic. However, when a percentage is used, most agree that the percentage must certainly ‘exceed 50 %’,36 although some argue the percentage must ‘significantly exceed 50 %’. This high of a standard is not widely followed. Regardless of the use of percentages, most commentators and courts support the view that the economic value factor should be supplemented by consideration of the parties’ intentions as expressed in the contract and surrounding circumstances.37 In fact, several courts have considered the weight the parties themselves have placed upon the various obligations as one of the primary determinative factors. The Belgian case of S. r. l. Orintix v NV Fabelta Ninove (2004)38 is enlightening on this issue. In this case, the court determined that “the circumstance that the price of the delivered hardware was higher than the price of the software is not determinative in the case at hand.”39 This is true because the “will of the parties was that [Seller] would create a system for [Buyer] and make it operational.”40 To accomplish this, the Seller needed to repeatedly adjust the software – either at the place of the buyer or elsewhere so that the said goals would be reached. In this case, the court enumerated “the services 32 See, for example, Kantonsgericht Zug (Switzerland) 25 February 1999 (Building materials), CISGOnline 490 (Pace); Oberlandesgericht Mu¨nchen (Germany) 9 July 1997 (Fitness equipment), CISG-Online 281 (Pace); Obergericht des Kantons Luzern (Switzerland) 8 January 1997 (Blood infusion devices), CISGOnline 228 (Pace); Handelsgericht des Kantons Zu¨rich (Switzerland) 26 April 1995 (Saltwater isolation tank), CISG-Online 248 (Pace); Cour d’appel de Grenoble (France) 26 April 1995 (Second hand metallic hangar), CISG-Online 154 (Pace); Oberster Gerichtshof (Austria) 27 October 1994 (Brushes and brooms), CISG-Online 133 (Pace). 33 As arguably established above as the minimum percentage to qualify as ‘substantial’ under Art. 3 (1). 34 See Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 3 para. 18; Enderlein/ Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 3 para. 7; Honnold/Flechtner, Uniform Law (2009), Art. para. 60.1; Magnus, in: Staudinger Kommentar, Art. 3 para. 22. 35 See CISG-AC Opinion no 4, para. 3.4. 36 See Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 3 para. 20. See also, for example, Tribunale di Forli (Italy) 16 February 2009 (Cisterns and accessories) CISG-Online 1780 (Pace) stating that the Convention shall not apply if the value of the goods to be delivered is lower than that of the labour (and/or services), that is to say, when the value of manpower or other services amounts to more than 50 % of the value of the goods. 37 As expected under Art. 6. See CISG-AC Opinion no 4, para. 3.4. See also, Landgericht Mainz (Germany) 26 November 1998 (Cylinder), CISG-Online 563 (Pace). 38 See Hof van Beroep Gent (Belgium) 24 November 2004 (Computer hardware and software), CISGOnline 966 (Pace) [translation used for commentary]. See also in this respect, Oberlandesgericht Dresden (Germany) 11 June 2007 (Airbag parts), CISG-Online 1720; Landgericht Mainz (Germany) 26 November 1998 (Cylinder for production of tissue paper), CISG-Online 563. 39 Hof van Beroep Gent (Belgium) 24 November 2004 (Computer hardware and software), CISGOnline 966 (Pace). 40 Ibid.

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Part I. Sphere of Application and General Provisions

are determinative in the task of [Seller], so that the CISG cannot be applied.”41 Overall, the approach taken by the court is one to appreciate as both efficient and practical. b) The issue of severability. Certainly, one can – and should – consider the option of severing the services part of the contract and having this portion of the contract covered by the application of applicable domestic law. Some commentators go so far as to import the domestic definition of services into the international contract for the sale of goods and thereby use this definition to determine the portion to be severed.42 22 This of course, would be a reasonable approach if the vast majority of domestic systems afforded great weight to the promotion of giving full effect to the rules governing international sales. However, this approach is far from universal and, as such, one must appreciate that States that are parties to the Convention have agreed via Art. 7 to give regard to its international character and the need to promote uniformity. Importing domestic law definitions would fail to honour this obligation. 21

3. Software Despite a bit of confusion over sales of software in general, the Convention should not be interpreted to be overly hostile toward the sale of software43 – even software to be produced. As discussed above, even a contract for the supply of goods “to be manufactured or produced” is a CISG sale under Art. 3(1). This general statement is arguably true even in situations where the value of the labour and services involved in the production exceeds the value of the raw materials needed to manufacture the goods concerned. Consequently, software should not be excluded merely because it is the product of intellectual efforts, the value of which exceeds the value of the medium in which the software is embodied. Software should be considered, in many ways, in the same manner as any other sale of intangible property. Although intellectual property rights flow from such an endeavour, this is no different than many other goods that have intellectual property rights associated with the good.44 24 Clearly a distinction can be drawn between contracts involving standard software,45 contracts for software specifically developed for the needs of a particular customer46 23

41 Hof van Beroep Gent (Belgium) 24 November 2004 (Computer hardware and software), CISG-Online 966 (Pace). See also, the Austrian court determination: “Mixed-type contracts are not governed by the United Nations Convention on Contracts for the International Sale of Goods, if the part which does not relate to the sale is crucially predominant. The individual circumstances of the relation between the part which relates to the sale and the part which does not relate to the sale are decisive (citing 4Ob 179/05 k). The quantitative balance does not constitute the sole requirement in respect to the question whether the supply of services is predominant. In addition, further components have to be taken into account in each case such as in particular the interest of the parties as regards the remaining performances.” Oberlandesgericht Innsbruck (Austria) 18 December 2007 (Steel bars), CISG-Online 1735 (Pace). 42 See Secretariat Commentary on 1978 Draft, Art. 3 (now Art. 3) para. 3. Unsurprisingly this approach has been criticised, see Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 3, note 7. Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 3 para. 5, suggests the distinction is “unlikely to have any practical consequence”. This comment is not made in the 2010 edition. 43 See Fawcett/Harris/Bridge, International Sale of Goods in the Conflict of Laws (2005), pp. 516–517; Bevilacqua, L’artcile 3 de la Convention de Vienne et les contrats comlexes dans le domaine de l’informatique; une lecture de la jurisprudence pertinente, 50 McGill Law Journal 553 (2005); Gilette/ Walt, 49–55. 44 Eggen, Digitale Inhalte unter dem CISG Eine Rundschau u ¨ ber Herausforderungen und mo¨gliche Lo¨sungen, 17(6) Internationales Handelsrecht, (2017) 231 et seq. 45 See Landgericht Mu ¨ nchen (Germany) 8 February 1995 (Software), CISG-Online 203 (Pace). 46 For cases considering that standard software is governed by the CISG, but not custom-made software, see: Oberlandesgericht Ko¨ln (Germany) 16 October 1992 (Computers), CISG-Online 50 (Pace); Oberlandesgericht Ko¨ln (Germany) 26 August 1994 (Market study), CISG-Online 132 (Pace); and Landgericht Mu¨nchen (Germany) 8 February 1995 (Software), CISG-Online 203 (Pace).

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Chapter I. Sphere of Application

25–26

Article 3

and contracts for software that includes various support services, such as installation support, system support, program support services and/or training.47 Although software in many instances is substantially different from the traditional sales of tangible goods, for the purposes of the application of the Convention this distinction should be minimized, although some authors point out that the online sale of software merely can be seen as a license to use a software and not a transfer of a tangible asset.48 Moreover, as discussed within considerations of what constitutes a ‘good’ under the Convention, the value of creativity, amount of workhours needed and/or technology necessary to produce is irrelevant when considering whether or not the item should be considered a ‘good’. In fact, most goods have within their price matrix considerations given to such elements and this salient fact should not shift the definition of a ‘good.’ Even software that is delivered by an installation specialist should not fall afoul of 25 the Convention,49 unless the installation is of such great measure as to become the ‘predominant’ standard. An example of this are situations where the parties contract for the sale of software that must be installed by an installation specialist, who then remains on site to provide training for end users. Situations such as this would clearly cause issue as the predominant threshold will most likely have been met.50 Consequently, in cases where the service element predominates the total value of the transaction, Art. 3(2) should serve to ensure that the entire transaction is removed from the application of the Convention.51

4. Burden of proof The party who argues that a contract falls outside the scope of the CISG pursuant to 26 Art. 3 bears the burden of proof. Namely, the party asserting the exception (buyer or seller) must prove either that the party who ordered the goods undertook to supply a substantial part of the material necessary for the production/manufacture in the case of Art. 3(1) or that the preponderant part of contract consisted of the supply of labour or other services in the case of Art. 3(2). This is based on the general principle of ei incumbit probatio qui dicit, non qui negat, which is the basis for the allocation of the burden of proof under the CISG.52

47 For a full discussion, see Green/Saidov, Software as Goods, Journal of Business Law (March 2007) 161 (170–173) (Pace) and Gilette/Walt, 49–55; Bevilacqua, L’artcile 3 de la Convention de Vienne et les contrats comlexes dans le domaine de l’informatique; une lecture de la jurisprudence pertinente, 50 McGill Law Journal 553 (2005). 48 See Sono. The Applicability and Non-Applicability of the CISG in Software Transactions, in Andersen & Schroeter (eds.), Sharing International Commercial Law across National Boundaries: Festschrift for Albert H. Kritzer on the Occasion of his Eightieth Birthday (2008) 512–526. Gilette/Walt, p. 52, argue that since “goods” is undefined may well also include intangible assets. 49 See Landgericht Mu ¨ nchen (Germany) 8 February 1995 (Software), CISG-Online 203 (Pace). 50 See Handelsgericht des Kantons Zu ¨ rich (Switzerland) 17 February 2000 (Software), CISG-Online 637 (Pace). 51 Art 3. For a further discussion, see Lookofsky, In Dubio Pro Conventione? Some Thoughts about Opt-outs, Computer Programs and Preemption Under the 1980 Vienna Sales Convention (CISG), 13 Duke Journal of Comparative and International Law (2003) 263 (274–279). 52 See, for example, Ferrari, Burden of Proof under the CISG, Pace Review of the Convention on Contracts for the International Sale of Goods (CISG) (2000–2001) 1 (1–8) (Pace). Although the issue of burden of proof is an internal gap of the Convention, reference to wording such as that in Art. 3 itself (i. e. ‘unless’ in Art. 3(1)), suggests that the general principal of ei incumbit probatio qui dicit is determinative. See also, Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 3 para. 23.

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Article 3 27–29

Part I. Sphere of Application and General Provisions

III. Comparable Rules Comparable provisions cannot be found in the PICC or the PECL. The PICC neither define a sales contract nor distinguish between sales contracts and other types of contracts. Similarly, the PECL are intended to be applied as general rules of contract law in the European Union and, hence, make no distinction between sales and service contracts. 28 The DCFR is similar to the CISG in that it applies to contracts under which one party undertakes to manufacture or produce goods (Art. IV. A. – 1:102). It does not, however, make the same distinction as the CISG with respect to contracts under which the ordering party supplies a substantial part of the goods necessary (Art. 3(1) CISG). This point is irrelevant to the application of the DCFR. 29 Furthermore, the DCFR provides for pure service contracts (see, for example, Book IV Part C),53 unlike Art. 3(2) CISG, which only applies to contracts in which the preponderant part does not comprise of labour or other services. Service contracts under the DCFR are regulated with a separate set of rules than those governing the sale of goods, which, at first blush, seems to bring about problems similar to those faced by the CISG. Namely, difficult questions may arise in determining which set of rules (Sales under Part A or Services under Part C) applies in the case of ‘mixed contracts’ and how and where the line should be drawn in making this determination. However, unlike the CISG, in a “quest for comprehensiveness”54 the DCFR has provided a formula for dealing with ‘mixed contracts’ (Art. II. – 1:107) by allowing the rules “applicable to each relevant category [to] apply … to the corresponding part of the contract and the rights and obligations arising from it”, except where “one part of a mixed contract is in fact so predominant that it would be unreasonable not to regard the contract as falling primarily within one category.” 27

53 Along with the “general rules” provided in Book IV Part C Chapter 2, the DCFR has “special rules” governing contracts concerning construction, processing, storage, design, information or advice, and treatment, which will be give priority over the general rules (Art. IV. C. – 1:103(b)). 54 Eidenmu ¨ ller/Faust/Grigoleit/Jansen/Wagner/Zimmermann, The Common Frame of Reference for European Private Law-Policy Choices and Codification Problems, 28(4) Oxford Journal of Legal Studies (2008) 659 (667).

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Article 4 This 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. In particular, except as otherwise expressly provided in this Convention, it is not concerned with:

(a) the validity of the contract or of any of its provisions or of any usage; (b) the effect which the contract may have on the property in the goods sold. Bibliography: Ferrari, Scope of application: Articles 4–5, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), p. 96; Flechtner, Selected Issues Relating to the CISG’s Scope of Application, 13 Vindobona Journal of International Commercial Law and Arbitration (1/2009) 91, (Pace) Huber, Some introductory remarks on the CISG, 6 Internationales Handelsrecht (2006) 228 (Pace); Huber, Standard Terms under the CISG, 13 Vindobona Journal of International Commercial Law and Arbitration (2009) 123 (Pace), Kro¨ll, Selected Problems Concerning the CISG’s Scope of Application, 25 Journal of Law and Commerce (2005–2006) 39 (Pace); Lookofsky, Loose Ends and Contorts in International Sales: Problems in the Harmonization of Private Law Rules, 39 American Journal of Comparative Law (1991) 403 (Pace); Magnus, Incorporation of Standard Contract Terms under the CISG, FS Kritzer (2008), p. 303 (Pace); CISG-AC Opinion no 6, Calculation of Damages under CISG Article 74. Rapporteur: Professor John Y. Gotanda, Villanova University School of Law, Villanova, Pennsylvania, USA (at http://www.cisg-ac.org); CISG-AC Opinion no 8, Calculation of Damages under CISG Articles 75 and 76. Rapporteur: Professor John Y. Gotanda, Villanova University School of Law, Villanova, Pennsylvania, USA (at http://www.cisgac.org); CISG-AC Opinion no 9, Consequences of Avoidance of the Contract, 15 November 2008. Rapporter: Professor Michael Bridge, Tokyo, Japan (at http://cisg-ac.org); CISG-AC Opinion no 10, Agreed Sums Payable upon Breach of an Obligation in CISG Contracts, 3 August 2012, Rapporteur: Dr. Pascal Hachem, Ba¨r & Karrer AG, Zurich, Switzerland (at http://www.cisg-ac.org); CISG-AC Opinion no 12, Liability of the Seller for Damages Arising Out of Personal Injuries and Property Damage Caused by Goods and Services under the CISG. Rapporteur: Professor Hiroo Sono, School of Law, Hokkaido University, Sapporo, Japan (at http://www.cisg-ac.org); CISG-AC Opinion no 13 Inclusion of Standard Terms under the CISG, Rapporteur: Professor Sieg Eiselen, College of Law, University of South Africa, Pretoria, South Africa (at http://www.cisg-ac.org); CISG-AC Opinion no 14, Interest under Article 78 CISG, 21 and 22 October 2013. Rapporteur: Professor Doctor Yes˛im M. Atamer, Istanbul Bilgi University, Turkey (at http://www.cisg-ac.org); CISG-AC Opinion no 17, Limitation and Exclusion Clauses in CISG Contracts, 16 October 2015. Rapporteur: Prof. Lauro Gama Jr., Pontifical Catholic University of Rio de Janeiro, Brazil (at http://www.cisg-ac.org).

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Drafting history . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Matters explicitly governed by the Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Formation of sales contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Rights and obligations of the seller and the buyer. . . . . . . . . . . . . . . . . . . . . . . c) Other contracts excluded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Matters explicitly excluded from the Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The validity of the contract or of any of its provisions or of any usage aa) Capacity and authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Formal validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Consideration and causa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Mistake, fraud and concurrent remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . ee) Incorporation and validity of standard terms . . . . . . . . . . . . . . . . . . . . . . . ff) Validity of penalty clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . gg) Validity of usages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) The effects on the property of the goods sold. . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Part I. Sphere of Application and General Provisions

3. Other (non)contentious matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Limitation of actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Procedural issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Issues of jurisdiction and dispute resolution clauses . . . . . . . . . . . . . . . . . . . . d) Burden of proof and standard of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f) Recovery of attorneys’ fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g) Interest rate on sums in arrears . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . h) Other issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

29 30 31 32 34 38 42 44 46 47

I. Importance and Role of the Provision 1. General The CISG is not a comprehensive code regulating all matters that fall within its sphere of application.1 On the contrary, when applied in practice it “resembles an island of international rules surrounded by an ocean of still-applicable national law […]. This means that courts will often face difficult boundary questions as to exactly where the sovereignty of the CISG ends and domestic law takes over.”2 Art. 4 is a provision that aims to help judges and arbitrators in answering these questions. 2 Whilst Arts 1–3 and Art. 6 define the sphere of application, i. e. determine whether the CISG applies at all to the contract concluded between the parties (whether its application is excluded, whether the internationality requirement is complied with, whether the ‘goods’ or the modality of transaction involved are of the type covered by the CISG, whether the sales elements of the contract prevail over other elements, and whether the nexus requirement between the law of the parties’ ‘state of origin’ and the Convention is met),3 Arts 4 and 5 perform a different function – they set “the legal scope” of the CISG’s application, i. e. they define the issues to which the CISG applies.4 3 While Art. 5 excludes the applicability of the CISG in regard to the seller’s liability for death or personal injury caused by the goods to any person5, Art. 4 sets further limits to “the substantive ambit”6 of the CISG both positively and negatively. The former is articulated in its explicit declaration of applicability only to the formation of the contract of sale and to the rights and obligations of the seller and the buyer arising from such a contract. The latter excludes from its scope of application, unless otherwise expressly provided in the Convention, issues of validity of the contract or of any of its provisions or of any usage and to the effect which the contract may have on the property in the goods sold. Consequently, the proper application of the CISG to any contentious issue amongst the parties to the sales contract first requires answering the question whether such an issue is governed by the CISG or whether it lies outside its 1

1 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), p. 96; Kro ¨ ll, Selected Problems Concerning the CISG’s Scope of Application, 25 Journal of Law and Commerce (2005–2006) 39 (Pace); Lookofsky, Loose Ends and Contorts in International Sales: Problems in the Harmonization of Private Law Rules, 39 American Journal of Comparative Law (1991) 403 (404) (Pace); Zeller, CISG and the Unification of International Trade Law (2007), p. 64. 2 Flechtner, The U. N. Sales Convention (CISG) and MCC-Marble Ceramic Center, Inc. v Ceramica Nuova D’Agostino, S. p. A.: The Eleventh Circuit Weighs in on Interpretation, Subjective Intent, Procedural Limits to the Convention’s Scope, and the Parol Evidence Rule, 18 Journal of Law and Commerce (1999) 259 (286) (Pace). 3 See Commentary on Arts 1–3 and 6. 4 Huber, Some introductory remarks on the CISG, 6 Internationales Handelsrecht (2006) 231 et seq. (Pace). 5 See Commentary on Art. 5; CISG-AC Opinion no 12. 6 Schlechtriem/Butler, CISG (2009), para. 33.

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Chapter I. Sphere of Application

4–5

Article 4

scope. If the answer is affirmative, the relevant solution to the issue will be either expressly provided in the CISG or should be found by various gap-filling techniques;7 if the answer is negative, the otherwise applicable law or rules of law should govern the issue. Determining whether an issue is governed by the Convention (expressly or 4 impliedly) has proved to be often difficult in practice and represents the source of much controversy both in legal doctrine and case law. Namely, more than forty different legal issues have so far been identified where the answer was not always clear.8 This number is steadily increasing as the trend in applying the CISG (and publishing decisions thereon) increases and given the complexities of modern developments in the field of international trade. However, such a development is not a desired one, since diverging views on whether an issue is covered by the CISG or not represent a serious obstacle to achieving the fundamental goal of the Convention – uniformity in its application. Consequently, classification of a relevant legal issue as falling in or outside the scope of the CISG should always be carefully made with due regard to the international character of the Convention and the need to enable and preserve its uniform application.

2. Drafting history During the drafting process, certain matters were purposefully omitted from the CISG’s 5 scope of application since they were considered to be too controversial and such that a uniform solution could lead to an excessively difficult and time-consuming process for the intended goal.9 Consequently, despite certain attempts to include a validity provision in the CISG,10 the text of Art. 4 remained to a large degree the same as the language of its predecessor Art. 8 ULIS and was adopted without opposition. The differences lie in the fact that, unlike the CISG, the ULIS did not deal with the issues of formation of contracts (as they were covered by ULF); hence, unlike the CISG, these issues where excluded from ULIS. Also, unlike the CISG, the ULIS only made reference to parties’ obligations arising out of sales contracts and not to their rights. However, such minor differences should not prevent one from using available ULIS case law on Art. 8 for guidance in interpreting Art. 4 CISG.11 Interestingly enough, the reverse process has also been noted in case law – i. e. using case law under Art. 4 CISG for the purposes of interpretation of Art. 8 ULIS and its scope of application.12

7

See Commentary on Art. 7. Namely, on a survey of the reported case law more than 50 issues have been identified as potentially falling in or outside the scope of the CISG. 9 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), p. 99; Herber, in: Schlechtriem, Commentary (1998), Art. 4 para. 4; Secretariat Commentary on 1978 Draft, Art. 4 (now Art. 4) para. 4. 10 See Eiselen/Kritzer, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual, Vol. 4 § 84:34(c)(iii). 11 As Mann correctly stated: “[i]t is simply common sense that if the Convention adopts a phrase which appears to have been taken from one [uniform law] where it is used in a specific sense, the international legislators are likely to have that sense in mind and to intend its introduction into the Convention.” See Mann, Uniform Statutes in English Law, 99 Law Quarterly Review (1983) 376 (383) (Pace); see also Audit, The Vienna Sales Convention and the Lex Mercatoria, in: Carbonneau (ed.), Lex Mercatoria and Arbitration: A Discussion of the New Law Merchant (1998), p. 188. 12 Supreme Court of Israel (Israel), 17 March 2009, Pamesa Ceramica v Yisrael Mendelson Ltd, CISGOnline 1980 (Pace) (with respect to concurrent remedies under uniform and domestic law). 8

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Article 4 6–9

Part I. Sphere of Application and General Provisions

II. Detailed Commentary 1. Matters explicitly governed by the Convention 6

Art. 4(a) explicitly lists the matters as to which the Convention prevails over domestic law – i. e. the formation of sales contracts and the rights and obligations of the parties arising from it. Accordingly, Arts 14 et seq. provide specific rules on formation, and Arts 25 et seq. provide specific rules on the rights and obligations of the parties. Nevertheless, these are not “the only issues” the CISG governs, rather the issues which are “without any doubt” governed by the Convention.13 Undisputedly, the Convention also covers the interpretation of the parties’ statements and conduct (Art. 8), the relevance of the parties’ practices and usages (Art. 9), formal requirements for contracts (Art. 11), modifications and termination of contracts (Art. 29) and establishes rules for the interpretation of the Convention and gap-filling (Art. 7).

7

a) Formation of sales contract. As far as the formation of the contract is concerned, the Convention merely governs the issue of the objective requirements for the conclusion of the contract – i. e. the technical process thereof, the so-called ‘external consensus’ by means of offer and acceptance.14 Issues of validity of the contract, the so-called ‘internal consensus’ are, with few exceptions, explicitly excluded from the domain of the Convention and left to the otherwise applicable domestic law.15 Furthermore, the objective scope of the Convention is limited to the contracts of sale and should not be extended to contracts of a different type.16

b) Rights and obligations of the seller and the buyer. Besides issues in relation to the formation of contract, the Convention delineates its scope to rights and obligations of the seller and the buyer arising from the sales contract (Part. III). At the same time, the Convention gives wide leeway to party autonomy (Art. 6) and allows derogations from its provisions, subject to a ‘validity check’ of included clauses in accordance with the rules of otherwise applicable law or rules of law.17 9 The Convention adheres to the principle of privity of contract and is only concerned with the rights of the seller and the buyer and not with the rights of third parties to make direct claims against the parties to the sales contract, or vice versa,18 e. g. the CISG does not cover claims by sub-purchasers against the seller for defects of the goods.19 Likewise, 8

13

Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), p. 97. Ferrari in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), p. 98; Herber, in: Schlechtriem, Commentary (1998), Art. 4 para. 7; Huber, Some introductory remarks on the CISG, 6 Internationales Handelsrecht (2006) 231 (Pace); Kro¨ll, Selected Problems Concerning the CISG’s Scope of Application, 25 Journal of Law and Commerce (2005–2006) 39 (42) (Pace); Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 4 para. 8; Oberster Gerichtshof (Austria) 22 October 2001 (Agricultural products), CISG-Online 613 (Pace); Oberlandesgericht Graz (Austria) 24 February 1999 (Military weapons) CISGOnline 797 (Pace); Zivilgericht Basel (Switzerland) 21 December 1992 (Textiles), CISG-Online 55 (Pace). 15 See infra II.2.a. 16 See infra II.1.c. 17 See infra 2.1. 18 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), p. 98; Heuze ´, Vente Internationale (2000), p. 82; Kro¨ll, Selected Problems Concerning the CISG’s Scope of Application, 25 Journal of Law and Commerce (2005–2006) 39 (47) (Pace); Mather, Choice of Law for International Sales Issues Not Resolved by the CISG, 20 Journal of Law and Commerce (Spring 2001) 155 (159) (Pace); Schwenzer/ Schmidt, Extending the CISG to Non-Privity Parties, 13 Vindobona Journal of International Commercial Law and Arbitration (1/2009) 109 (116) (Pace). 19 See Cour d’appel de Rennes (France) 13 May 2016 (Roofing), CISG-Online 2743; U.S. District Court, New Jersey (U.S.) 19 March 2012 (Photograph printing and processing machine), CISG-Online 2357 14

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the CISG is not concerned with the effects that the contract might have on third parties, e. g. the CISG does not cover whether a third party has a security interest in the goods sold to the buyer.20 Hence, the existence and exercise of these rights need to be determined in accordance with the otherwise applicable law. The Convention also limits its application to issues arising out of the contract. Non- 10 contractual entitlements even between the same parties are not governed by the Convention. It has been repeatedly confirmed in case law that unjustified enrichment claims21 and tort claims22 do not fall within the CISG purview. Also, a prevailing view is that the issue of pre-contractual liability is not amongst the issues governed by the CISG.23 c) Other contracts excluded. The CISG restricts its application to contracts of sale. 11 Hence, it should neither apply to contracts concluded in relation to the sales contract (contracts for carriage, insurance contracts, etc.) nor should it be applied to contracts of a different type. The relevant legal qualification of the transaction in question should be made by reference to the express provisions of the Convention determining the parties’ obligations (Arts 30 and 53) and not to the domestic law.24 Consequently, if the (Pace); Cour d’appel de Rouen (France) 19 December 2006 (Potato seedling), CISG-Online 1933 (Pace); see also Federal District Court, SD of New York (USA) 19 July 2007, Cedar Petrochemicals, Inc. v Dongbu Hannong Chemical Co., Ltd., CISG-Online 1509 (Pace); Federal District Court, MD of Pennsylvania (U.S.) 16 August 2005, American Mint LLC v GOSoftware, Inc., CISG-Online 1104 (Pace); District Court of Minnesota (U.S.) 9 March 1999, KSTP-FM v Specialized Communications, CISG-Online 471 (Pace); Cour de Cassation (France) 5 January 1999, Thermo King v Cigna Insurance, CISG-Online 431 (Pace); Bundesgerichtshof (Germany) 12 February 1998 (Air cleaning installation), CISG-Online 343 (Pace). It has been stated, however, that this rule might be subject to exception where the third party (manufacturer) has been actively involved in selling the goods to the buyer, even though he was not formally a party to the contract. See Honnold/Flechtner, Uniform Law (2009), Art. 4 para. 63; Federal District Court, ND of California (U.S.) 27 July 2001, Asante Technologies v PMC-Sierra, CISG-Online 616 (Pace). 20 Federal Northern District Court of Illinois (U.S.) 28 March 2002, Usinor Industeel v Leeco Steel Products, CISG-Online 1326 (Pace); Bundesgerichtshof (Germany) 12 February 1998 (Air cleaning installation), CISG-Online 343 (Pace). 21 Supreme Court (Israel) 17 March 2009, Pamesa Ceramica v Yisrael Mendelson Ltd, CISG-Online 1980 (Pace) (note: decided under ULIS); Bundesgericht (Switzerland) 7 July 2004 (Cable drums), CISGOnline 848 (Pace); Oberster Gerichtshof (Austria) 10 March 1998, CISG-Online 356 (Pace); Oberlandesgericht Mu¨nchen (Germany) 8 February 1995 (Automobiles), CISG-Online 143 (Pace). 22 Federal District Court, ED of Arkansas (U.S.) 23 December 2009, Electrocraft Arkansas, Inc. v Electric Motors, Ltd et al., CISG-Online 2045 (Pace); Supreme Court (Israel) 17 March 2009, Pamesa Ceramica v Yisrael Mendelson Ltd, CISG-Online 1980 (Pace) (note: decided under ULIS); Multi-Member Court of First Instance of Athens (Greece) 1 January 2009 (Bullet-proof vest), CISG-Online 2228 (Pace); Federal District Court, ED of Kentucky (USA) 18 March 2008, Sky Cast, Inc v Global Direct Distribution, LLC, CISG-Online 1652 (Pace); Federal District Court of New York (U.S.) 10 May 2002 Geneva Pharmaceuticals Tech. Corp. v Barr Labs. Inc., CISG-Online 653 (Pace); District Court, ED of Pennsylvania (U.S.) 29 August 2000, Viva Vino Import v Farnese Vini, CISG-Online 675 (Pace); Oberlandesgericht Thu¨ringen (Germany) 26 May 1998 (Live fish), CISG-Online 513 (Pace). 23 Huber, Some introductory remarks on the CISG, 6 Internationales Handelsrecht (2006) 234 (Pace); Korpela, Article 74 of the United Nations Convention on Contracts for the International Sale of Goods, Pace Review of the Convention on Contracts for the International Sale of Goods (CISG) 2004–2005 (2006) 94; Neumayer/Ming, Convention de Vienna (1993), Art. 4 para. 11; Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 4 para. 18; Multi-Member Court of First Instance of Athens (Greece) 1 January 2009 (Bullet-proof vest), CISG-Online 2228 (Pace). 24 By applying this methodology in at least one case a license agreement was classified as a ‘contract of sale of movable property’ within the meaning of the CISG. See Rechtbank Midden-Nederland (the Netherlands) 25 March 2015 (Software programme), CISG-Online 2591. Similarily, repurchase agreements under the leasing contracts were deemed to be subject to the CISG, see Bundesgerichtshof (Germany) 28 May 2014 (Bowling alleys), CISG-Online 2513 (Pace). However, in at least one case, in this author’s view, the court erred when resorting to domestic law in order to qualify the legal transaction that was the subject matter of the dispute, whereas such assesment could have been made possible against the provisions of the CISG (as putative lex causae). Namely, the agreement which was the subject matter of the dispute was found to ‘include more than sales of goods’, as the parties in the agreement stipulated

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underlying transaction does not encompass the basic obligations of the buyer and the seller, it will most likely fall outside the ambit of the CISG. This was found to be true for leasing contracts,25 franchising contracts,26 barter transactions,27 distribution agreements,28 joint venture agreements,29 etc. Yet, it has been generally held that the CISG may apply to individual sales transactions arising from framework agreements,30 and that a repurchase obligations in leasing agreements should be subject to the CISG.31 Application of the CISG to ‘mixed contracts’ is governed by Art. 3.32 However, the legal qualification the parties attached to the contract (i. e. its title) should not be decisive in determining whether the Convention applies or not,33 while party automony remains supreme where agreeing to application of the CISG (even in the previosly mentioned excluded types of contracts).34 exhibition and sales. The Court held that “[t]he stipulation on exhibition and storage was the step before the sale of furniture. Only disputes arising during the placing of orders or thereafter pertain to the sales relationship. Because the parties disputed as to whether the three installments of furniture were for exhibition or for sales, the Court should not apply CISG only; it should apply the relevant [domestic] laws […] to decide whether the parties established the legal relation of sales.” See Supreme Court (China) 21 September 2005 (Furniture) CISG-Online 1611 (Pace). 25 See Huber, in: Huber/Mullis, The CISG (2007), p. 48; Schlechtriem, Uniform Sales Law – The Experience with Uniform Sales Laws in the Federal Republic of Germany, Juridisk Tidskrift (1991/1992) 1 (10) (Pace); Arbitral Award (Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce) 15 July 2008 (Milk packaging equipment), CISG-Online 1795 (Pace). 26 Bundesgerichtshof (Germany) 23 July 1997, “Benetton II” (Fashion textiles), CISG-Online 276 (Pace). 27 Federal Arbitration Court for the Moscow Region (Russia) 26 May 2003, CISG-Online 836 (Pace). But for a different view with regard to barter transactions see: Arbitral Award (Tribunal of International Commercial Arbitration at the Ukraine Chamber of Commerce and Trade) 15 April 2004, CISG-Online 1103 (Pace). 28 High Commercial Court (Serbia) 22 April 2008, CISG-Online 1990 (Pace); Arbitral Award (Foreign Trade Court attached to the Serbian Chamber of Commerce) 13 November 2007 (Mineral water and wooden pallets), CISG-Online 1794; District Court, Southern District, New York (U.S.) 1 Jun 2006 (Beverages), Multi-Juice, S.A., Snapple Hellas, S.A., and New Age Beverages Hellas v. Snapple Beverage Corp., and Mistic Brands, Inc., CISG-Online 1229 (Pace); District Court, Northern District, Illinois, Eastern Division (U.S.) 6 October 2003 (Beer), CISG-Online 1225 (Pace); District Court, ED of Pennsylvania (U.S.) 29 August 2000, Viva Vino Import v Farnese Vini, CISG-Online 675. 29 Federal District Court, ED of Pennsylvania (U.S.) 29 March 2004, Amco Ukrservice et al. v American Meter Company, CISG-Online 1664 (Pace); Tribunale d’appello des Kantons Tessin (Switzerland) 15 December 1998, CISG-Online 422. 30 High Commercial Court (Serbia) 22 April 2008, CISG-Online 1990 (Pace); Arbitral Award (Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce) 28 January 2009 (Medicaments) CISG-Online 1856 (Pace); Arbitral Award (Foreign Trade Court attached to the Serbian Chamber of Commerce) 13 November 2007 (Mineral water and wooden pallets), CISG-Online 1794; Oberlandesgericht Mu¨nchen (Germany) 28 January 1998 (Leather goods), CISG-Online 339 (Pace); Bundesgerichtshof (Germany) 23 July 1997 “Benetton II” (Fashion textiles), CISG-Online 276 (Pace); Oberlandesgericht Mu¨nchen (Germany) 9 July 1997 (Leather goods), CISG-Online 282 (Pace); Oberlandesgericht Mu¨nchen (Germany) 9 July 1997 (Fitness equipment), CISG-Online 281 (Pace); Obergericht des Kantons Luzern (Switzerland) 8 January 1997 (Blood infusion devices), CISG-Online 228 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 11 July 1996 (Lawn mower engines), CISG-Online 201 (Pace); Fova´rosi Biro´sa´g Budapest (Hungary) 19 March 1996 (Instruments), CISG-Online 289 (Pace); Oberlandesgericht Koblenz (Germany) 17 September 1993 (Computer chip), CISG-Online 91(Pace); Gerechtshof Amsterdam (Netherlands) 16 July 1992, Box Doccia Megius v Wilux International, CISG-Online 48 (Pace). 31 Bundesgerichtshof (Germany) 28 May 2014 (Bowling alleys), CISG-Online 2513 (Pace). 32 See Commentary on Art. 3. 33 Pavic/Djordjevic, Application of the CISG Before the Foreign Trade Court of Arbitration at the Serbian Chamber of Commerce – Looking Back at the Latest 100 Cases, 28 Journal of Law and Commerce (2009) 1 (22 et seq.) (Pace); Arbitral Award (Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce) 15 July 2008 (Milk packaging equipment), CISG-Online 1795 (Pace); Supreme Court (Poland), 10 November 2005 (Furniture) CISG-Online 2073 (Pace). 34 For application of the CISG to distributorship agreement based on party’s agreement see Arbitral Award, ICC 11849/2003 (Fashion products) CISG-Online 1421(Pace).

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2. Matters explicitly excluded from the Convention The Convention expressly lists several examples of issues which it is not concerned 12 with. The list is not exhaustive, as evidenced by the use of words ‘in particular’,35 i. e. there may be numerous other issues that the Convention is not concerned with, such as issues of agency, limitation periods and recovery of attorneys’ fees.36 These particular issues mentioned in Art. 4 were excluded because they were deemed so controversial that achieving a uniform solution would entail an overly difficult and time-consuming process.37 However, even where an issue falls under the list of excluded matters, it does not a priori mean that the issue is excluded from the Convention. On the contrary, if the issue relates to matters ‘expressly provided in this Convention’, the language of the second sentence of Art. 4 precludes application of domestic law and leaves the issue within the CISG ambit.38 Just as the interpretation of the terms used in the first sentence of Art. 4 should not be too narrow, the interpretation of the terms used in the second sentence of Art. 4 should not be too wide. Otherwise, this may lead to considerable limitations on the scope of application of the CISG, a result contradictory to the unifying attempts in the field of international sales law. a) The validity of the contract or of any of its provisions or of any usage. In order to 13 specify the extent of the ‘validity’ exception, one has to first determine what issues the validity covers. However, there is no universal definition of “validity”.39 As a matter of fact, there can be as many definitions of validity as the number of Contracting States to the CISG.40 Not surprisingly, the conception of validity has been often described as a potential ‘black hole’ which may remove issues from the Convention’s universe.41

35 Ferrari, Implementations of the Convention on Contracts for the International Sale of Goods (CISG), 7 International Business Law Journal (1998) 835 (836); Khoo, in: Bianca/Bonnel, Commentary (1987), Art. 4 para. 2.4; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 4 para. 4. 36 See infra II.3.a. et seq. 37 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), p. 99. 38 Ferrari, Implementations of the Convention on Contracts for the International Sale of Goods (CISG), 7 International Business Law Journal (1998) 835 (836). For example, although the issue of consideration is considered a matter of validity under some national laws, the existence or lack of consideration for concluding a contract and its impact to validity of the contract is not an issue to be dealt under the national law if it arises out of a contract governed by CISG. The CISG contains exhaustive rules on formation of contracts that override the domestic validity concepts, such as consideration. See infra II.2.cc. 39 Prof. Schlechtriem has suggested the following definition of a validity: “if a contract is rendered void ab initio, either retroactively by a legal act of the state or of the parties such as avoidance for mistake or revocation of one’s consent under special provisions protecting certain persons such as consumers, or by a ‘resolutive’ condition (i. e. a condition subsequent) or a denial of approval of relevant authorities, the respective rule or provision is a rule that goes to validity and therefore is governed by domestic law and not by the CISG.” (Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 4 para. 7). According to one court’s definition, the validity issue is “any issue by which the domestic law would render the contract void, voidable or unenforceable’. See Federal District Court of New York (U.S.) 10 May 2002, Geneva Pharmaceuticals Tech. Corp. v Barr Labs. Inc., CISG-Online 653 (Pace); also cited in District Court, Western District Washington at Tacoma (U.S.) 13 April 2006 (Raspberry Roots), Barbara Berry, S.A. de C.V. v. Ken M. Spooner Farms, Inc., CISG-Online 1354. This definition was borrowed from one of the scholarly works on the topic. See Hartnell, Rousing the Sleeping Dog: The Validity Exception to the Convention on Contract for the International Sale of Goods, 18 Yale Journal of International Law (1993) 1 (20) (Pace). 40 Hartnell, Rousing the Sleeping Dog: The Validity Exception to the Convention on Contract for the International Sale of Goods, 18 Yale Journal of International Law (1993) 1 (20) (Pace). 41 Koneru, The International Interpretation of the UN Convention on Contracts for the International Sale of Goods: An Approach Based on General Principles, 6 Minnesota Journal of Global Trade (1997)

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The need for an autonomous and uniform interpretation of the Convention dictates the understanding of validity in the international context of a transaction and detached from national perceptions on the matter in order to avoid diverging results.42 The substance rather than the label or characterization of the domestic competing rule determines whether it is displaced by the Convention.43 Hence, the interpretation of “validity” is not initially a question of domestic law.44 15 Even when the relevant issue is one that concerns the validity of the contract or any of its provisions and usages under the domestic law, an examination needs to be made whether such an issue is expressly or implicitly dealt with in the Convention.45 If the answer is affirmative, the rules of the Convention displace the domestic validity rule.46 This is what the Convention expressly requires by using the ‘except as otherwise expressly provided in this Convention’ language in the second sentence of Art. 4. 16 Most commentators agree that validity encompasses issues of fraud, duress, unconscionability, misrepresentation, incapacity and mistake (subject to certain exceptions). Further examples arise from domestic or international regulations prohibiting certain sales such as embargos or export bans and restrictions, public policy reasons, etc.47 In cases like these, the issue should be deemed excluded from the CISG’s scope and governed by otherwise applicable law. 14

17

aa) Capacity and authority. The first prerequisite for a validly concluded contract is that the parties have the required legal capacity to enter into a particular contract.

105 (145) (Pace); Winship, Commentary on Professor Kastely’s Rhetorical Analysis, 8 Northwestern Journal of International Law and Business (1988) 623 (636 et seq.) (Pace). 42 Bridge, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), p. 243; Ferrari, in: Ferrari/ Flechtner/Brand, Draft Digest and Beyond (2004), p. 100; Huber, Some introductory remarks on the CISG, 6 Internationales Handelsrecht (2006) 231 (Pace); Kro¨ll, Selected Problems Concerning the CISG’s Scope of Application, 25 Journal of Law and Commerce (2005–2006) 39 (40); Kruisinga, (Non)conformity in the 1980 UN Convention on Contracts for the International sale of Goods: a uniform concept?, (2004), pp. 189 et seq.; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 4. para. 7. Cf. Hartnell, Rousing the Sleeping Dog: The Validity Exception to the Convention on Contract for the International Sale of Goods, 18 Yale Journal of International Law (1993) 1 (47 et seq.) (Pace). 43 Honnold/Flechtner, Uniform Law (2009), Art. 4 para. 65; Khoo, in: Bianca/Bonell, Commentary (1987), Art. 4 para. 3.3.5. 44 But see Longobardi, Disclaimers of Implied Warranties: the 1980 United Nations Convention on Contracts for the International sale of Goods, 53 Fordham Law Review (1985) 863 (871 et seq.) (Pace). 45 Kro ¨ ll, Selected Problems Concerning the CISG’s Scope of Application, 25 Journal of Law and Commerce (2005–2006) 39 (54) (Pace); Zeller, CISG and the Unification of International Trade Law (2007), pp. 69 et seq. 46 Secretariat Commentary on 1978 Draft, Art. 4 (now Art. 4) para. 2. 47 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), p. 98; Heiz, Validity of Contracts Under the United Nations Convention on Contracts for the International Sale of Goods, April 11, 1980, and Swiss Contract Law, 20 Vanderbilt Journal of Transnational Law (1987) 639 (Pace); Henschel, The Conformity of Goods in International sales, An analysis of Article 35 in the United Nations Convention on Contracts for the International Sale of Goods (CISG) (2005), pp. 132 et seq.; Huber, Some introductory remarks on the CISG, 6 Internationales Handelsrecht (2006) 231 (Pace); Lookofsky, Understanding the CISG (2008), pp. 22 et seq.; Mather, Choice of Law for International Sales Issues Not Resolved by the CISG, 20 Journal of Law and Commerce (2001) 155 (162) (Pace); Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 4 para. 7; Schwenzer/Fountoulakis, International Sales Law (2007), p. 49; Winship, The scope of the Vienna Convention on International Sales Contracts, in: Galston/Smit, International sales: The United Nations Convention on Contracts for the International sale of Goods (1984), Chapter 1 footnote 78 (Pace); Rechtbank Midden-Nederland (Netherlands) 25 March 2015 (Software programme), CISG-Online 2591; Federal Court of Appeals (9th Cir.) (U.S.) 8 November 2007, Barbara Berry, S. A. de C. V. v Ken M. Spooner Farms, Inc., CISG-Online 1603 (Pace); Bundesgerichtshof (Germany) 23 July 1997, “Benetton II” (Fashion textiles), CISG-Online 276 (Pace).

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This requirement is almost always met in international business. However in case that it is disputed, the issue of capacity should be deemed outside the scope of the Convention.48 More contentious are issues regarding the conclusion of international sales contracts 18 by agents and the scope of the agent’s authority. Here it should be noted that the Convention does not regulate questions of agency.49 Hence, the otherwise applicable law should apply to these issues.50 bb) Formal validity. Issues of the formal validity of contracts are the most obvious 19 examples of the scope of the ‘unless otherwise explicitly provided’ restriction to second sentence of Art. 4. Although in some countries the requirement of written form may be deemed an issue of validity of sales contracts, the CISG express regulation of the issue in 48 Bonell, The CISG, European Contract Law and the Development of a World Contract Law, 56 American Journal of Comparative Law (2008) 1 (3); Herber, in: Schlechtriem, Commentary (1998), Art. 4 para. 11; Honnold/Flechtner, Uniform Law (2009), Art. 4 para. 66; Neumayer/Ming, Convention de Vienna (1993), Art. 4 para. 10; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 4 para. 11; Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 4 para. 32; Handelsgericht des Kantons Aargau (Switzerland) 26 November 2008 (Fruit and vegetables), CISG-Online 1739 (Pace); Tribunal Cantonal du Valais (Switzerland) 27 April 2007 (Oven), CISG-Online 1721 (Pace); Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 9 June 2004, CISG-Online 1239 (Pace); Oberster Gerichtshof (Austria) 22 October 2001 (Agricultural products), CISG-Online 613 (Pace); Arbitral Award (CIETAC) 22 May 1997 (Soybean oil), CISG-Online 1164 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 8 January 1993 (Tinned cucumbers), CISG-Online 76 (Pace); Landgericht Hamburg (Germany) 26 September 1990 (Textiles), CISG-Online 21 (Pace). 49 Eiselen/Kritzer, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual, Vol. 4 § 84:33(a); Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), p. 101; Honnold/Flechtner, Uniform Law (2009), Art. 4 para. 66; Neumayer/Ming, Convention de Vienna (1993), Art. 4 para. 10; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 4 para. 11; Schwenzer/Fountoulakis, International Sales Law (2007), p. 49. 50 So far this rule has been followed in practice without a single exception. See Rechtbank MiddenNederland (Netherlands) 25 March 2015 (Software programme), CISG-Online 2591; Oberlandesgericht Schleswig (Germany) 24 October 2008 (Shop furnishings), CISG-Online 2020 (Pace); Landgericht Landshut (Germany) 12 June 2008 (Metalic slabs), CISG-Online 1376 (Pace); Tribunal Cantonal du Valais (Switzerland) 27 April 2007 (Oven), CISG-Online 1721 (Pace); Cour d’appel de Versailles (France) 13 October 2005 (Caterpillar toys), CISG-Online 1433 (Pace); Tribunal Cantonal Valais (Switzerland) 19 September 2005 (Fiberglass composite materials), (Pace); Tribunal Cantonal du Valais (Switzerland) 27 May 2005 (Welding devices), CISG-Online 1137 (Pace); Arbitral Award (CIETAC) April 2005 (Caprolactam), (Pace); First Intermediate People’s Court of Shanghai (China) 23 March 2004 (Chemical products), CISG-Online 1497 (Pace); Arbitral Award, (CIETAC) 12 March 2004 (Fireworks), CISGOnline 1599 (Pace); Tribunale di Padova (Italy) 25 February 2004 (Agricultural products), CISG-Online 819 (Pace); Arbitral Award (CIETAC) 7 March 2002 (Lube oil), CISG-Online 974 (Pace); Oberster Gerichtshof (Austria) 22 October 2001 (Agricultural products), CISG-Online 613 (Pace); Tribunale di Vigevano (Italy) 12 July 2000, Rheinland Versicherungen v Atlarex, CISG-Online 493 (Pace); Oberlandesgericht Graz (Austria) 15 June 2000 (Ski shoes), CISG-Online 799 (Pace); Gerechtshof Arnhem (Netherlands) 18 April 2000, CISG-Online 1897 (Pace); Arbitral Award, ICC 10 329, 1 January 2000 (Industrial product), CISG-Online 1173 (Pace); Handelsgericht des Kantons Aargau (Switzerland) 11 June 1999 (Granular plastic), CISG-Online 494 (Pace); Oberlandesgericht Graz (Austria) 24 February 1999 (Military weapons), CISG-Online 797 (Pace); Handelsgericht des Kantons Zu¨rich (Switzerland) 30 November 1998 (Lambskin coat), CISG-Online 415 (Pace); Landgericht Berlin (Germany) 24 March 1998 (Knitwear), CISG-Online 742 (Pace); Handelsgericht Zurich (Switzerland) 30 November 1998 (Lambskin coat), CISG-Online 415 (Pace); Oberster Gerichtshof (Austria) 20 March 1997 (Mono ammonium phosphate), CISG-Online 269 (Pace); Appellationsgericht Tessin (Switzerland) 12 February 1996 (Copy paper), CISG-Online 233 (Pace); Obergericht des Kantons Thurgau (Switzerland) 19 December 1995 (Cloth), CISG-Online 496 (Pace); Amtsgericht Alsfeld (Germany) 12 May 1995 (Flagstone tiles), CISGOnline 170 (Pace); Federal Court of South Australia, Adelaide (Australia) 28 April 1995, Roder v Rosedown, CISG-Online 218 (Pace); Kammergericht Berlin (Germany) 24 January 1994 (Wine), CISGOnline 130 (Pace); Landgericht Hamburg (Germany) 26 September 1990 (Textiles), CISG-Online 21 (Pace).

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Art. 11 (subject to Arts 12 and 96)51 makes it clear that its provisions override the otherwise applicable validity provisions of otherwise applicable domestic law. Consequently, unless when dealing with contracts where one of the parties has its place of business in a state that declared a reservation under Art. 96, or where the parties expressly agreed that the contract is invalid unless in a written form, the question of formal validity of a contract should not arise in disputes over a contract governed by CISG.52 20

cc) Consideration and causa. Some national legal systems require something more than an offer and acceptance mechanism in order for a contract to be concluded. These requirements are generally recognized as consideration and causa.53 However, such conditions should not be construed as validity issues under the CISG since the formation of contract is exhaustively governed by the CISG. Hence, there is no need for importing further ‘validity’ elements to it and the contract should not be invalidated for alleged lack of consideration or causa.54

21

dd) Mistake, fraud and concurrent remedies. Mistake is one of the common examples of a validity issue. The CISG, as a matter of principle, does not govern validity issues. Accordingly, it does not regulate mistake. Nonetheless, some provisions of the CISG contain rules that govern issues that would be treated as issues of mistake under the domestic law. Consequently, where the mistake relates to the characteristics of the goods (Arts 35 et seq. and Arts 45 et seq. apply) or creditworthiness or ability of the other party to perform the contract (Art. 71 applies), the majority view is that the rules of the otherwise applicable law give way to those of the CISG, since the Convention exhaustively deals with those matters.55 On the contrary, in all other 51 E. g. in once case before CIETAC in a dispute between Chinese seller and U.S. buyer, the formal validity of the contract was determined in accordance with the Chinese domestic law despite the fact that the CISG was found to be the governing law of the contract (Chinese law, unlike the CISG, requires that a contract be signed and sealed in order to be valid). The reasoning of the arbitrators was correct since China is one of the countries that filed a declaration under Art. 96. See Arbitral Award (CIETAC) 3 December 2003 (False hair), CISG-Online 1469 (Pace). See also Federal District Court, New Jersey (U.S.) 7 October 2008, Forestal Guarani, S. A. v Daros International, Inc., CISG-Online 1779 (Pace); Federal District Court, SD of Florida (U.S.) 19 May 2008, Zhejiang Shaoxing Yongli Printing and Dyeing Co., Ltd v Microflock Textile Group Corporation, CISG-Online 1771 (Pace). 52 It should be noted that even in contracts where the parties agreed to a no-oral modification clause, a party may be precluded by its conduct form asserting such a provision to the extent that the other party has relied on that conduct. See Commentary on Art. 29(2), paras 16–25. 53 See Zweigert/Ko ¨ tz, Comparative Law (1998), pp. 356 et seq. 54 Bridge, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), p. 244; Butler, The Doctrines of Parol Evidence Rule and Consideration – A Deterrence to the Common Law Lawyer?, in: Celebrating Success: 25 Years United Nations Convention on Contracts for the International Sale of Goods (2005), p. 62 (Pace); Eiselen/Kritzer, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual, Vol. 4 § 84:34(c); Huber, Some introductory remarks on the CISG, 6 Internationales Handelsrecht (2006) 232 (Pace); Garro, Reconciliation of Legal Traditions in the U. N. Convention on Contracts for the International Sale of Goods, 23 International Lawyer (1989) 443 (453 et seq.) (Pace); Lookofsky, Understanding the CISG (2008), p. 23; Perales Viscasillas, in: Ferrari/Fletchner/Brand, The Draft Digest and Beyond (2004), p. 260 et seq., with further references in footnote 10. See also Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 2; Federal District Court, WD of Michigan (U.S.) 17 December 2001, Shuttle Packaging Systems v Tsonakis et al., CISG-Online 773. However, in another U.S. decision, the court erred by regarding the issue of consideration as a validity issue governed by domestic law. See Federal District Court of New York (U.S.) 10 May 2002, Geneva Pharmaceuticals Tech. Corp. v Barr Labs. Inc., CISG-Online 653 (Pace). For criticism of this decision see: DiMatteo et al., The Interpretative Turn in International Sales Law: an Analysis of Fifteen Years of CISG Jurisprudence, 24 Northwestern Journal of international law and Business (2004) 299 footnotes 167–169 (Pace); Perales Viscasillas, in: Ferrari/Fletchner/Brand, The Draft Digest and Beyond (2004), pp. 260 et seq. 55 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), p. 98; Herber, in: Schlechtriem, Commentary (1998), Art. 4 para. 23; Kro¨ll, Selected Problems Concerning the CISG’s Scope of Application, 25 Journal of Law and Commerce (2005–2006) 39 (55 et seq.); Magnus, Incorporation of Standard

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cases, where the CISG does not address the situation in question, the rules of the Convention give way to those of the domestic law.56 Furthermore, it is submitted that where the CISG governs the issue of‘mistake’ there 22 should be no concurrent recourse to domestic remedies for invalidity.57 Thus, a buyer who has lost the right to rely on non-conformity by not complying with Art. 39 notice requirements, should not be allowed to have recourse to domestic remedies for mistake, since the CISG provides a comprehensive remedial system for non-conformity of the goods including the issue of mistake in relation to the quality of the goods.58 A different solution would undermine the basic values of the CISG including the availability of avoidance in case of non-conformity as a remedy of last resort.59 The interest in security of transactions and legal certainty further warrant such a conclusion, since national laws may vary to a large extent with regards to remedies available for this kind of mistake.60 If the domestic law would be allowed to draw more extensive legal consequences than the CISG based on the same operative set of facts, the uniformity reached by the Convention would be severely jeopardized.61

Contract Terms under the CISG, FS Kritzer (2008), p. 310 (Pace); Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2005), Art. 4 para. 13; Huber, Some introductory remarks on the CISG, 6 Internationales Handelsrecht (2006) 232 (Pace); Henschel, The Conformity of Goods in International sales, An analysis of Article 35 in the United Nations Convention on Contracts for the International Sale of Goods (CISG), (2005), p. 131 with further references in footnote 193; Schroeter, Defining the Borders of Uniform International Contract Law: the CISG and Remedies for Innocent, Negligent, or Fraudulent Misrepresentation, 58 Vill. L. Rev. (2013) 553 (577); Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 4 para. 36; Rechtbank van Koophandel, Hasselt (Belgium) 19 April 2006, Brugen Deuren BVBA v Top Deuren VOF, CISG-Online 1389 (Pace); Landgericht Aachen (Germany) 14 May 1993 (Electronic hearing aid), CISG-Online 86 (Pace). For a different view leading to application of otherwise applicable domestic law see Bundesgericht (Switzerland) 11 December 2000 (Fitted kitchen), CISG-Online 1319 (Pace) (note, however, that the court found CISG to be applicable to the contract although it was clear that the goods were bought for household use). 56 Central District Court Seoul (Republic of Korea) 21 September 2012 (Window shade), CISG-Online 2774; Arbitral Award, ICC 13184/2011, CISG-Online 2724 (Pace); Bundesgericht (Switzerland) 22 December 2000, Roland Schmidt GmbH v Textil-Werke Blumenegg AG, CISG-Online 628 (Pace); Fova´rosi Biro´sa´g Budapest (Hungary) 1 July 1997 (Used timber machinery), CISG-Online 306 (Pace); Oberlandesgericht (Austria) 20 March 1997 (Mono ammonium phosphate), CISG-Online 269 (Pace); Handelsgericht des Kantons St. Gallen (Switzerland) 24 August 1995 (Cleaning products) CISG-Online 247. 57 Herber, in: Schlechtriem, Commentary (1998), Art. 4 para. 13; Heuze ´, Vente Internationale (2000), pp. 248 et seq.; Honnold/Flechtner, Uniform Law (2009), Art. 4 para. 240; Huber, Some introductory remarks on the CISG, 6 Internationales Handelsrecht (2006) 232 (Pace); Kro¨ll, Selected Problems Concerning the CISG’s Scope of Application, 25 Journal of Law and Commerce (2005–2006) 39 (55 et seq.) (Pace); Kruisinga, (Non-)conformity in the 1980 UN Convention on Contracts for the International sale of Goods: a uniform concept?, (2004), pp. 92 et seq.; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 4 para. 13; Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 4 para. 36. But some authors argue that recourse to domestic remedies is still available under these circumstances. See Hartnell, Rousing the Sleeping Dog: The Validity Exception to the Convention on Contracts for the International Sale of Goods, 18 Yale Journal of International Law (1993) 77 (Pace). Cf. Lookofsky, In Dubio Pro Conventione? Some Thoughts About Opt-Outs, Computer Programs and Pree¨mption Under the 1980 Vienna Sales Convention (CISG), 13 Duke Journal of Comparative and International Law (2003) 279 et seq. (Pace); Neumayer/Ming, Convention de Vienna (1993), Art. 39 para. 4. 58 Rechtbank van Koophandel, Hasselt (Belgium) 19 April 2006, Brugen Deuren BVBA v Top Deuren VOF, CISG-Online 1389 (Pace); Oberster Gerichtshof, (Austria) 13 April 2000 (Machines), CISG-Online 576 (Pace); Landgericht Aachen (Germany) 14 May 1993 (Electronic hearing aid), CISG-Online 86 (Pace). 59 See Commentary on Arts 35, 45 et seq. For an elaborate discussion on concurrent remedies under the CISG see Commentary on Art. 5 paras 18–27. 60 See Zweigert/Ko ¨ tz, Comparative Law (1998), pp. 410 et seq. 61 As Prof. Schlechtriem amply stated, deciding otherwise would open the door for national legislators to deviate from the Convention at will by creating tort claims for every buyer if the object of a sales contract is defective and the buyer suffers a purely economic loss. See Schlechtriem, Uniform Sales Law –

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It has been unanimously held in legal doctrine and case law that where the buyer has been induced to conclude the contract by fraud, such a validity issue is not governed by the CISG and needs to be resolved by domestic law (giving the buyer recourse to remedies for fraud).62 By the same token, whether the contract’s validity is affected by the allegations of usury should be determined under the otherwise applicable domestic law.63

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ee) Incorporation and validity of standard terms. The CISG does not contain a separate provision dealing with the incorporation of standard terms into the contract. Nevertheless, the prevailing view in doctrine and case law is that the CISG rules on the formation and interpretation of parties’ declarations must answer when, in which form and under what conditions standard contract terms are effectively incorporated into a sales contract (this also includes the problem of the battle of forms).64 Consequently, The Experience with Uniform Sales Laws in the Federal Republic of Germany, Juridisk Tidskrift (1991/ 92) 1 (14) (Pace). 62 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), p. 98; Henshel, The Conformity of Goods in International Sales, An analysis of Article 35 in the United Nations Convention on Contracts for the International Sale of Goods (CISG) (2005), p. 131; Honnold/Flechtner, Uniform Law (2009), Art. 4. para. 65; Huber, Some introductory remarks on the CISG, 6 Internationales Handelsrecht (2006) 232 (Pace); Lookofsky, Understanding the CISG (2008), p. 23; Schlechtriem, The Borderland of Tort and Contract: Opening a New Frontier? 21 Cornell International Law Journal (1988) 467 (474) (Pace); Central District Court Seoul (Republic of Korea) 21 September 2012 (Window shade), CISG-Online 2774; District Court for the Eastern District of Missouri, Eastern Division (USA) 10 January 2011, Semi-Materials Co., Ltd. v. MEMC Electronic Materials, Inc., CISG-Online 2168 (Pace); Federal District Court, ED of Arkansas (U.S.) 23 December 2009, Electrocraft Arkansas, Inc. v Electric Motors, Ltd et al., CISG-Online 2045 (Pace); District Court, Southern District of Ohio, Western Division (U.S.), 26 March 2009, Miami Valley Paper, LLC v. Lebbing Engineering & Consulting GmbH, CISG-Online 1880 (Pace); U.S. District Court, Minnesota (U.S.) 1 July 2008 (Organic kosher Inulin), CISG-Online 1774 (Pace); Kantonsgericht St. Gallen (Switzerland) 13 May 2008 (Skid chains and adaptors), CISG-Online 1768 (Pace); Federal District Court, Ohio (U.S.) 10 October 2006, Miami Valley Paper, LLC v Lebbing Engineering & Consulting GmbH, CISG-Online 1362 (Pace); Federal District Court, SD of New York (U.S.) 23 August 2006, TeeVee Tunes, Inc. et al v Gerhard Schubert GmbH, CISG-Online 1272 (Pace); Arbitral Award (CIETAC) 21 October 2005 (Sheet metal producing system), CISG-Online 1472 (Pace); District Court, ND of Alabama (U.S.) 27 April 2005, Treibacher Industrie, A. G. v TDY Industries, Inc., CISG-Online 1178 (Pace); Arbitral Award (CIETAC) 31 May 1999 (Indium ingot), CISG-Online 1254 (Pace); Oberlandesgericht Hamburg (Germany) 5 October 1998 (Circut boards), CISG-Online 473 (Pace); Arbitral Award (Handelskammer Zu¨rich) 31 May 1996, Soinco v NKAP, CISG-Online 1291 (Pace); Oberlandesgericht Ko¨ln (Germany) 21 May 1996 (Used car), CISG-Online 254 (Pace). 63 Supreme Court (Slovenia), 8 April 1998 (Caprolactum), CISG-Online 1957 (Pace). 64 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 4 para. 12; CISG-AC Opinion no 13; Huber, Standard Terms under the CISG, 13 Vindobona Journal of International Commercial Law and Arbitration (2009) 123 (125); Kro¨ll, Selected Problems Concerning the CISG’s Scope of Application, 25 Journal of Law and Commerce (2005–2006) 39 (47) (Pace); Magnus, Incorporation of Standard Contract Terms under the CISG, FS Kritzer (2008), pp. 305 et seq (Pace); Perales Viscasillas, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), p. 265; Schlechtriem, in: Schlechtriem/Schwenzer Commentary (2005), Art. 19 para. 20; Rechtbank Gelderland (Netherlands) 6 November 2013 (Hardware), CISG-Online 2590; Oberlandesgericht Celle (Germany) 24 July 2009 (Multimedia recorders), CISG-Online 1906 (Pace); Landgericht Landshut (Germany) 12 June 2008 (Metalic slabs for building construction) CISG-Online 1703 (Pace); Oberlandesgericht Oldenburg (Germany) 20 December 2007 (Industrial tools), CISG-Online 1644 (Pace); Tribunale di Rovereto (Italy) 21 November 2007 (Mirrors), CISG-Online 1590 (Pace); Oberlandesgericht Frankfurt am Main (Germany) 26 June 2006 (Printed Goods) CISG-Online 1385 (Pace); Oberster Gerichtshof (Austria), 31 August 2005 (Tantalum powder) CISG-Online 1093 (Pace); Landgericht Neubrandenburg (Germany) 3 August 2005 (Pitted sour cherries), CISG-Online 1190 (Pace); Oberlandesgericht Linz (Austria) 23 March 2005 (Conveyor band), CISG-Online 1376 (Pace); Hoge Raad (Netherlands) 28 January 2005, B. V. B. A. Vergo Kwekerijen v Defendant, CISG-Online 1002 (Pace); Oberlandesgericht Karlsruhe (Germany) 20 July 2004 (Shoes), CISG-Online 858 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 21 April 2004 (Mobile car phones), CISG-Online 915 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 30 January 2004 (Generators), CISGOnline 821 (Pace); Langericht Trier (Germany) 8 January 2004 (Synthetic window parts), CISG-Online 910 (Pace); Oberster Gerichtshof (Austria) 17 December 2003 (Tantalum powder), CISG-Online 828

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this issue should not be regarded as excluded from the CISG scope of application. In line with this stance, the CISG Advisory Council Opinion and the relevant case law confirm a party’s right to be supplied with the standard terms of the other party in a way reasonably accessible to him, and in the language that he can reasonably be expected to understand.65 The material validity of standard terms, on the other hand, should not be deemed 25 governed by the CISG and should be subject to the otherwise applicable law.66 However, as with the other ‘unless otherwise expressly provided in the Convention’ exceptions, the domestic validity test of a standard term may be avoided if the relevant issue is governed by the Convention. For example, in a case where parties have agreed on notification of the intention to avoid the contract within a reasonable time, the Convention may prove to be a sufficient basis which will uphold the validity of such a clause since its contents are in line with the general principles of the CISG.67 On the other hand, there may be instances where the validity check under domestic law may not prove sufficient for the purposes of the CISG (e. g. domestic law validates a provision excluding the buyer’s rights for non-conformity). In such instances, even if the domestic law upholds the validity of such a term, the clause should be deemed invalid under the CISG if it contradicts the fundamental principles of the Convention.68

(Pace); Bundesgerichtshof (Germany) 9 January 2002 (Powdered milk), CISG-Online 651 (Pace); Bundesgerichtshof (Germany) 31 October 2001 (Machinery), CISG-Online 617 (Pace); Oberlandesgericht Braunschweig (Germany) 28 October 1999 (Frozen meat), CISG-Online 510 (Pace); Arrondissementsrechtbank Rotterdam (Netherlands) 14 October 1999 (Sheepskin), CISG-Online 1312 (Pace). For a different view see: Landgericht Mu¨nchen (Germany) 29 May 1995 (Computer hardware), CISG-Online 235 (Pace). 65 CISG-AC Opinion no 13; Rechtbank Gelderland (Netherlands) 6 November 2013 (Hardware), CISGOnline 2590; U.S. District Court, E.D. of California (U.S.) 21 January 2010 (Centrifuge), CISG-Online 2089 (Pace); Landgericht Stuttgart (Germany) 15 October 2009 (Printing machine), CISG-Online 2019 (Pace); Oberlandesgericht Celle (Germany) 24 July 2009 (Multimedia recorders), CISG-Online 1906 (Pace); Rechtbank Utrecht (Netherlands) 21 January 2009 (Sesame seeds), CISG-Online 1814 (Pace); Landgericht Landshut (Germany) 12 June 2008 (Metalic slabs for building construction) CISG-Online 1703 (Pace); Tribunale di Rovereto (Italy) 21 November 2007 (Mirrors), CISG-Online 1590 (Pace); Oberster Gerichtshof (Austria), 31 August 2005 (Tantalum powder) CISG-Online 1093 (Pace); Landgericht Neubrandenburg (Germany) 3 August 2005 (Pitted sour cherries), CISG-Online 1190 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 21 April 2004 (Mobile car phones), CISG-Online 915 (Pace); Langericht Trier (Germany) 8 January 2004 (Synthetic window parts), CISG-Online 910 (Pace); Bundesgerichtshof (Germany) 31 October 2001 (Machinery), CISG-Online 617 (Pace). 66 Huber, Standard Terms under the CISG, 13 Vindobona Journal of International Commercial Law and Arbitration (2009) 123 (131); Magnus, Incorporation of Standard Contract Terms under the CISG, FS Kritzer (2008), p. 306 (Pace); Schlechtriem/Butler, CISG (2009), para. 58; Ferrari, in: Ferrari/Flechtner/ Brand, Draft Digest and Beyond (2004), p. 101; Oberster Gerichtshof (Austria) 7 September 2000 (Tombstones), CISG-Online 642 (Pace); Landgericht Heilbronn (Germany) 15 September 1997 (Film coating machine), CISG-Online 562; Arrondissementsrechtbank Zutphen (Netherlands) 29 May 1997, Aartsen v Suykens, CISG-Online 546 (Pace); Amtsgericht Nordhorn (Germany) 14 June 1994 (Shoes), CISG-Online 259 (Pace). 67 Koneru, The International Interpretation of the UN Convention on Contracts for the International Sale of Goods: An Approach Based on General Principles, 6 Minnesota Journal of Global Trade (1997) 105 (147 et seq.) (Pace); Amtsgericht Nordhorn (Germany) 14 June 1994 (Shoes case), CISG-Online 259 (Pace). 68 Kro ¨ ll, Selected Problems Concerning the CISG’s Scope of Application, 25 Journal of Law and Commerce (2005–2006) 39 (55) (Pace); Oberlandesgericht Du¨sseldorf (Germany) 21 April 2004 (Mobile car phones), CISG-Online 915 (Pace); Oberster Gerichtshof (Austria) 7 September 2000 (Tombstones), CISG-Online 642 (Pace). Cf. Farnsworth, Review of Standard Forms or terms Under the Vienna Convention, 21 Cornell International Law Journal (1988) 439 (441): “Taken together, articles 6 and 4 create a tripartite hierarchy, with domestic law on validity at the top, the agreement of the parties in the middle, and the Convention at the bottom.”

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ff) Validity of penalty clauses. Although the CISG contains an extensive list of remedies in case of a breach of contract, it does not regulate the issue of penalty clauses (also referred to as liquidated damages or agreed sums).69 Whereas the issue was found to be extremely important for removing uncertainties and obstacles to the flow of international trade, it was also found that it raises too many complex problems that could not be adequately addressed at the time.70 It was thus left to UNCITRAL to deal with the issue of penalty clauses more extensively at some later stage.71 Admittedly, there are no obstacles for the parties to provide for such a clause (remedy) in their contract, in accordance with Art. 6 CISG.72 The validity of such a clause, according to the prevailing view, is an issue excluded from the Convention and thus governed by the otherwise applicable law.73 Nevertheless, these domesticly tailored rules should not 69 However, it should be noted that during the drafting process of the CISG there was considerable support for the idea that the Uniform Law should regulate liquidated damages clauses. A provision on liquidated damages was considered at the 1977 UNCITRAL review of the Working Group ‘Sales’ draft. See Honnold, Documentary History (1989), p. 354. 70 Stoll, in: Schlechtriem, Commenatry (1998), Art. 4 para. 46. 71 This resulted in the 1983 Uniform Rules on Contract Clauses for an Agreed Sum Due upon Failure of Performance (www.uncitral.org). 72 Koneru, The International Interpretation of the UN Convention on Contracts for the International Sale of Goods: An Approach Based on General Principles, 6 Minnesota Journal of Global Trade (1997) 105 (141 et seq.) (Pace); Arbitral Award (Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce) 15 July 2008 (Milk packaging equipment), CISG-Online 1795 (Pace); Federal District Court, MD of Pennsylvania (U.S.) 6 January 2006, American Mint LLC v GOSoftware, Inc., CISG-Online 1175 (Pace); Arbitral Award, ICC 9978, 1 March 1999, CISG-Online 708 (Pace). 73 Chengwei, Remedies in International Sales: Perspectives from CISG, UNIDROIT Principles and PECL (2007), pp. 540 et seq.; Hachem, Fixed Sums in CISG Contracts, 13 Vindobona Journal of International Commercial Law and Arbitration (2009) 217 (222 et seq.) (Pace); Stoll/Gruber, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 4 para. 49; Arbitral Award (Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce) 31 May 2010 (Mobile Shear Baler), CISGOnline 2262(Pace); Arbitral Award (Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce) 15 July 2008 (Milk packaging equipment), CISG-Online 1795 (Pace) (penalty clause was found to be valid under domestic law); Oberlandesgericht Hamburg (Germany) 25 January 2008 (Cafe´ inventory), CISG-Online 1681 (Pace) (penalty clause was found to be valid under domestic law); Arbitral Award (CIETAC) 20 September 2006 (Welding machine) CISG-Online 1473 (Pace); Arbitral Award (Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry Russia) 13 April 2006, CISG-Online 1944 (Pace); Arbitral Award (Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry Russia) 1 March 2006, CISG-Online 1941 (Pace) (penalty clause was found to be valid, but its amount was reduced under domestic law); Arbitral Award (Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry) 13 January 2006, CISG-Online 1622 (Pace) (penalty clause was found to be valid, but its amount was reduced against the general principle of reasonableness under the CISG); Arbitral Award (CIETAC) 9 November 2005 (DVD machines), CISG-Online 1444 (Pace); Arbitral Award (Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry) 27 April 2005, CISG-Online 1500 (Pace) (penalty clause was found to be valid, but its amount was reduced under domestic law); Arbitral Award (Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry) 9 June 2004, CISG-Online 1239 (Pace) (penalty clause was found to be valid under domestic law, but it was acknowledged that had the English law applied such clause would not be upheld); Tribunale di Padova (Italy) 25 February 2004 (Agricultural products), CISG-Online 819 (Pace) (case only mentions that validity of penalty clauses is not governed by the CISG as an example of excluded issues); Tribunale di Vigevano (Italy) 12 July 2000, Rheinland Versicherungen v Atlarex, CISG-Online 493 (Pace) (case only mentions that validity of penalty clauses is not governed by the CISG as an example of excluded issues); Arbitral Award, ICC 9978, 1 March 1999, CISG-Online 708 (Pace) (penalty clause was found to be valid under domestic law; aggrieved party’s recourse to Art. 74 calculation of damages was impaired); Arbitral Award (Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry) 10 January 1998, CISG-Online 2122 (Pace) (penalty clause was found to be valid, but its amount was reduced under domestic law); Arbitral Award (Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry) 5 June 1997, CISG-Online

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ignore the realities of international sales. Thus, domestic provisions on the protection of the obligor should be applied against the underlying principles of the CISG.74 gg) Validity of usages. Art. 4(a) clearly states that the CISG does not govern the 27 validity of usages. Hence it is undisputed that the otherwise applicable law should apply.75 The question of the existence of a usage is not a question of validity, rather a question of fact that should be answered by an inquiry into the relevant trade sector.76 b) The effects on the property of the goods sold. The CISG also explicitly excludes 28 from its scope of application the effects which the contract may have on the property in the goods sold.77 This issue is exclusively governed by the otherwise applicable law.78 Moreover, the proprietary aspects of security interests in the goods sold (e. g. 1247 (Pace) (penalty clause was found to be valid and its amount reduced on the basis of Article 7.4.13 of the UNIDROIT Principles referred to as international usages under Art. 9(2) CISG); Rechtbank van koophandel Hasselt (Belgium) 21 January 1997, Epsilon v Interneon, (Pace) CISG-Online 360 (Pace) (penalty clause was found to be invalid under domestic law); Hof van Beroep Antwerpen (Belgium) 18 June 1996 (Clothes), CISG-Online 758 (Pace) (penalty clause was found to be valid but its amount was reduced under domestic law); Arbitral Award, ICC 7645/1995 (Crude metal) CISG-Online 844 (Pace) (penalty clause was found to be valid under domestic law but the conditions for its excercise were found not to be met); Gerechtshof Arnhem (Netherlands) 22 August 1995, Diepeveen-Dirkson v Nieuwenhoven Veehandel, CISG-Online 317 (Pace) (penalty clause was found to be valid; the Court also held that no provision in CISG (not even Arts 8 or 77) provides a basis for reduction of a contractual penalty and that consequently this issue is subject to domestic law); Oberlandesgericht Mu¨nchen (Germany) 8 February 1995 (Automobiles), CISG-Online 143 (Pace) (the court dismissed the seller’s argument that the bank guaranty for the sale price should serve as a penalty for not taking delivery by the buyer by application of domestic law); Arbitral Award, ICC 7197, 1 January 1992 (Failure to open letter of credit and penalty clause), CISG-Online 36 (Pace) (penalty clause was found to be valid under domestic law and the aggrieved party was entitled to full amount of damages irrespective of the limit set by the penalty clause). But see Koneru, The International Interpretation of the UN Convention on Contracts for the International Sale of Goods: An Approach Based on General Principles, 6 Minnesota Journal of Global Trade (1997) 105 (142) (Pace) stating that the validity of such clauses should be judged in light of the CISG general principles and not the domestic law, in particular the good faith requirement under Art. 7(1). Also see Commentary on Art. 7 footnote 123 stating that all issues related to penalty clauses are governed by the CISG since CISG governs all remedies for breach of contract. Consequently, questions of formation, validity and moderation of these clauses, irrespective of their function should be resolved under the general principles of CISG. Similarily see Arbitral Award (Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce) 27 July 2011 (Copper wire rod), CISG-Online 2276 (Pace). 74 CISG-AC Opinion no 10. 75 Oberster Gerichtshof (Austria) 22 October 2001 (Agricultural products), CISG-Online 613 (Pace); Oberster Gerichtshof (Austria) 21 March 2000 (Wood), CISG-Online 641(Pace); Oberster Gerichtshof (Austria) 15 October 1998 (Timber), CISG-Online 380 (Pace). 76 Oberster Gerichtshof (Austria) 21 March 2000 (Wood), CISG-Online 641 (Pace); Oberlandesgericht Dresden (Germany), 9 July 1998 (Terry cloth), CISG-Online 559 (Pace). See Commentary on Art. 9 para. 34. 77 Tribunale d’appello Ticino (Switzerland) 20 April 2016 (Cans of a bottling machine), CISG-Online 2759; Supreme Court (Poland) 25 June 2015 (Hyperbaric chamber), CISG-Online 2782; Oberlandesgericht Mu¨nchen (Germany) 5 March 2008 (Stolen car), CISG-Online 1686 (Pace); Arbitral Award, CIETAC, 18 April 2008 (PTA powder), CISG-Online 2057 (Pace); Arbitral Award (Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry Russia) 13 April 2006 CISG-Online 1944 (Pace); Federal District Court of Illinois (U.S.) 28 March 2002, Usinor Industeel v Leeco Steel Products, CISG-Online 1326 (Pace); Federal Court of South Australia, Adelaide (Australia) 28 April 1995, Roder v Rosedown, CISG-Online 218 (Pace); Bundesgerichtshof (Germany) 15 February 1995 (Key press machine), CISG-Online 149 (Pace). But see Federal Bankruptcy Court, ND of Ohio (USA) 10 April 2001, Victoria Alloys, Inc. v Fortis Bank SA/NV, CISG-Online 589 (Pace) citing Art. 53 in support of the proposition that payment or non-payment of the price was significant in determining whether the title to the goods has passed to the buyer. 78 For a comparative overview of law on transfer of property see: Drobnig, Transfer of Property, in: Hartkamp et al. (eds), Towards a European Civil Code (1998), pp. 495 et seq.

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retention of title) will in principle be governed by the otherwise applicable law.79 The CISG also does not deal with the priority of rights in the goods between the seller and a third party creditor.80

3. Other (non)contentious matters 29

It has been correctly stated that distinguishing matters covered by the Convention from those which are not is much easier when it comes to issues explicitly mentioned in Art. 4 than those which are not mentioned.81 While the exclusion of certain matters from the CISG ambit has been undisputed in case law and doctrine, other issues resulted in diverging solutions.

30

a) Limitation of actions. The limitation period for claims arising from international sales contracts governed by the CISG has unanimously been held to be a matter excluded from the CISG’s sphere of application82 with the exception of one court 79 Tribunale d’appello Ticino (Switzerland) 20 April 2016 (Cans of a bottling machine), CISG-Online 2759; Supreme Court of British Columbia (Canada) 13 May 2015 (Steel), CISG-Online 2734; Arbitral Award (Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce) 15 July 2008 (Milk packaging equipment), CISG-Online 1795 (Pace); Court of Appeals Athens (Greece) 4861/2006 (Automobile catalyst) (Pace); Federal District Court of Illinois (USA) 28 March 2002, Usinor Industeel v Leeco Steel Products, CISG-Online 1326 (Pace); Federal Court of South Australia, Adelaide (Australia) 28 April 1995, Roder v Rosedown, CISG-Online 218 (Pace); Oberlandesgericht Koblenz (Germany) 16 January 1992 (Motor yacht), CISG-Online 47 (Pace). 80 Federal District Court of Illinois (U.S.) 28 March 2002, Usinor Industeel v Leeco Steel Products, CISG-Online 1326 (Pace). 81 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 4 para. 4. 82 Bonell, The CISG, European Contract Law and the Development of a World Contract Law, 56 American Journal of Comparative Law (2008) 1 (3); Eiselen/Kritzer, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual, Vol. 4 § 84:33(b); Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), p. 106; Huber, Some introductory remarks on the CISG, 6 Internationales Handelsrecht (2006) 234 (Pace); Janssen/Kiene, The CISG and Its General Principles, in: Janssen/Meyer, CISG Methodology (2009), pp. 268 et seq.; Neumayer/Ming, Convention de Vienna (1993), Art. 4 para. 12; Poznan District Court (Poland) 16 October 2015 (Flowers),, CISG-Online 2780; Bundesgericht (Switzerland) 18 May 2009 (Packaging machine), CISG-Online 1900 (Pace); Multi-Member Court of First Instance of Athens (Greece) 1 January 2009 (Bullet-proof vest), CISG-Online 2228 (Pace); Supreme Court (Slovak Republic) 19 June 2008 (Health care products), CISG-Online 1875 (Pace); Supreme Court (Slovak Republic) 30 April 2008 (Health care products) CISG-Online 1873 (Pace); Audiencia Provincial de Valencia (Spain) 13 March 2007 (Coconut), CISG-Online 1719 (Pace); Oberlandesgericht Ko¨ln (Germany) 13 February 2006 (Woollen cloth), CISG-Online 1219 (Pace); Arbitral Award (Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce) 24 January 2006 (Australian wool), CISGOnline 2274 (Pace); Cour d’appel de Versailles (France) 13 October 2005 (Caterpillar toys), CISG-Online 1433 (Pace); Regional Court Bratislava (Slovak Republic) 11 October 2005 (Fur), CISG-Online 1858 (Pace); Oberlandesgericht Linz (Austria) 8 August 2005 (Spacers for insulation glass), CISG-Online 1087 (Pace); Kantonsgericht Nidwalden (Switzerland) 23 May 2005 (Farm machines), CISG-Online 1086 (Pace); Arbitral Award (Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry) 9 June 2004, CISG-Online 1239 (Pace); Arbitral Award (Tribunal of International Commercial Arbitration, Ukrainian Chamber of Commerce and Trade) 15 April 2004, CISG-Online 1103 (Pace); Tribunale di Padova (Italy) 25 February 2004 (Agricultural products case), CISG-Online 819 (Pace); Kantonsgericht Schaffhausen (Switzerland) 27 January 2004 (Model locomotives), CISG-Online 960 (Pace); Arbitral Award, ICC 11 333, 1 January 2002 (Machine), CISG-Online 1420 (Pace); Oberster Gerichtshof (Austria) 14 January 2002 (Cooling system), CISG-Online 643 (Pace); Cour d’appel de Paris (France) 6 November 2001, Traction Levage SA v Drahtseilerei, CISG-Online 677 (Pace); Oberster Gerichtshof (Austria) 22 October 2001 (Agricultural products case), CISG-Online 613 (Pace); Rechtbank van Koophandel Ieper (Belgium) 29 January 2001 (Cooling installations), CISG-Online 606 (Pace); Oberster Gerichtshof (Austria) 7 September 2000 (Tombstones), CISG-Online 642 (Pace); Tribunale di Vigevano (Italy) 12 July 2000, Rheinland Versicherungen v Atlarex, CISG-Online 493 (Pace); Arbitral Award (Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry) 6 June 2000, CISG-Online 1249 (Pace); Oberlandesgericht Braunschweig (Germany) 28 October 1999 (Frozen meat), CISG-Online 510 (Pace); Oberlandesgericht Hamburg

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decision where the answer to this question is somewhat unclear; i. e. it implies that the CISG governs this issue yet that the recourse to general principles cannot help determining the applicable limitation period.83 b) Procedural issues. Many of the contentious issues regard so-called procedural 31 issues. Namely, in determining the scope of Art. 4, it has been repeatedly stated that the CISG is about contracts (substantive law) and not procedure (procedural law),84 and hence certain ‘procedural matters’ were deemed excluded from its scope. On the other hand, it has been correctly stated that in interpreting international conventions, all abstract distinctions between substantive and procedural laws may be counterproductive.85 This is because the distinction between substance and procedure varies in different jurisdictions.86 Consequently, instead of qualifying an issue as either procedural or substantive, one should answer the question whether the matter is covered by the CISG or not. Otherwise, the efforts on harmonizing the law of international sales would be in vain and the doors for the application of domestic rules and standards in this sphere would be wide open.87 c) Issues of jurisdiction and dispute resolution clauses. It is generally recognized 32 that the CISG is not concerned with the jurisdiction of courts and arbitration tribu(Germany) 5 October 1998 (Circuit boards), CISG-Online 473 (Pace); Oberster Gerichtshof (Austria) 25 June 1998, CISG-Online 352 (Pace); Oberlandesgericht Mu¨nchen (Germany) 21 January 1998 (Insulating materials), CISG-Online 536 (Pace); Arbitral Award, CIETAC, 19 December 1997 (Steel), CISGOnline 1418 (Pace); Cour de Justice de Gene`ve (Switzerland) 10 October 1997, Filinter v Moulinages Poizat, CISG-Online 295; Landgericht Heilbronn (Germany) 15 September 1997 (Film coating machine), CISG-Online 562; Oberster Gerichtshof (Austria) 24 October 1995 (Galvanized wire case), CISG-Online 166 (Pace); Landgericht Du¨sseldorf (Germany), 11 October 1995 (Generator), CISG-Online 180 (Pace); Oberlandesgerich Hamm (Germany) 9 June 1995 (Window elements), CISG-Online 146 (Pace); Arbitral Award, ICC 7660, 23 August 1994 (Battery machinery), CISG-Online 129 (Pace). 83 The court held that the limitation period was a matter governed by but not expressly settled in the Convention (reference to Art. 39), but nevertheless resolved the issue by reference to applicable domestic law. See Cour d’appel de Paris (France) 6 November 2001, Traction Levage SA v Drahtseilerei, CISG-Online 677. 84 Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2004), Art. 4 para. 33; Flechtner/ Lookofsky, Viva Zapata! American Procedure and CISG Substance in a U. S. Circuit Court of Appeal, 7 Vindobona Journal of International Commercial Law and Arbitration (2003) 93 et seq. (Pace); Herber, in: Schlechtriem, Commentary (1998), Art. 4 para. 20; Khoo, in: Bianca/Bonell, Commentary (1987), Art. 2 para. 3.2; Lookofsky, Walking the Article 7(2) Tightrope Between CISG and Domestic Law, 25 Journal of Law and Commerce (2005–2006) 87 (98 et seq.) (Pace); Neumayer/Ming, Convention de Vienna (1993), Art. 4 para. 13; Saidov, The Law of Damages in International Sales – The CISG and other International Instruments (2008) p. 163; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 4 paras 19 and 22; Schwenzer/Hachem, The CISG – Successes and Pitfalls, 57 American Journal of Comparative Law (2009) 457 (471); Tribunal Cantonal du Valais (Switzerland) 21 February 2005 (CNC machine), CISG-Online 1193 (Pace); Federal Court of Appeals (7th Cir.) (U.S.) 19 November 2002, Zapata Hermanos v Hearthside Baking, CISG-Online 684 (Pace); Cour de Justice de Gene`ve (Switzerland) 15 November 2002 (Window frames), CISG-Online 853 (Pace); Bundesgericht (Switzerland) 11 July 2000, Gutta-Werke AG v Do¨rken-Gutta Pol. and Ewald Do¨rken AG, CISG-Online 627. 85 Gotanda, When Recessions Create Windfalls: The Problems of Using Domestic Law to Fix Interest Rates under Article 78 CISG, 13 Vindobona Journal of International Commercial Law and Arbitration (2009) 229 (234) (Pace); Orlandi, Procedural Law Issues and Law Conventions, 5 Uniform Law Review (2000) 23 (25) (Pace). 86 Boele Woelki, The Limitation of Actions in International Sale of Goods, 4 Uniform Law Review (1999-3) 621–650; Gotanda, Awarding Interest in International Arbitration, 90 American Journal of International Law (1996) 40 (50); Orlandi, Procedural Law Issues and Law Conventions, 5 Uniform Law Review (2000) 23 (26) (Pace); Schroeter, Defining the Borders of Uniform International Contract Law: the CISG and Remedies for Innocent, Negligent, or Fraudulent Misrepresentation, 58 Vill. L. Rev. (2013) 553 (560). 87 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Introduction, p. 7.

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nals.88 There are specific international instruments that govern the issues of validity of forum selections clauses89 and, if applicable, they have priority over the CISG in accordance with Art. 90.90 However, whether the choice of forum clause is effectively incorporated into the contract can be a matter resolved under the CISG rules on formation.91 33 Similarly, whether an arbitration agreement is properly concluded may be one of the debated issues in a dispute arising out of a contract containing an arbitration clause and otherwise governed by the CISG. In such a case, the doctrine of severability requires that an arbitration agreement be treated differently than the sales contract it is embedded in.92 There should be no automatism in applying the CISG to the issues of formation and validity of the arbitration clause given that specially tailored rules exist that determine (possibly different) applicable laws to different aspects of the arbitration agreement – its formation, formal validity and substantive validity.93 While it has been generally recognized that the CISG can perhaps apply to the issues on the formation of arbitration agreements (offer and acceptance)94 and (unlikely) to their interpretation, it

88 Ferrari, Choice of Forum and CISG: Remarks on the Latter’s Impact on the Former, in: Flechtner/ Brand/Walter, Drafting Contracts (2007), p. 104; Kro¨ll, Selected Problems Concerning the CISG’s Scope of Application, 25 Journal of Law and Commerce (2005–2006) 39 (43) (Pace); Magnus, Incorporation of Standard Contract Terms under the CISG, FS Kritzer (2008), p. 308; Bundesgerichtshof (Germany) 25 March 2015 (Replacement parts for ships), CISG-Online 2588; Bundesgericht (Switzerland) 11 July 2000, Gutta-Werke AG v Do¨rken-Gutta Pol. and Ewald Do¨rken AG, CISG-Online 627 (Pace); Handelsgericht des Kantons Zu¨rich (Switzerland) 26 April 1995 (Saltwater isolation tank), CISG-Online 248; Ca´mara Nacional de Apelaciones en lo Commercial (Argentina), 14 October 1993, Inta v Officina Meccanica, CISG-Online 87 (Pace). 89 E. g. jurisdiction agreements are dealt with by, inter alia, Brussels I Regulation, Lugano Convention and the 2005 Hague Convention on Choice of Court Agreements. Arbitration agreements are dealt with by, inter alia, 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards and 1961 European Convention on International Commercial Arbitration. 90 Magnus, Incorporation of Standard Contract Terms under the CISG, FS Kritzer (2008), pp. 308 et seq.; District Court, Western District of Wisconsin (U.S.) 7 July 2009, Amit Israeli v. Dott. Gallina S.r.l., Dario Gallina and David Gallina, CISG-Online 1962 (Pace); Kantonsgericht Zug (Switzerland) 11 December 2003 (Plastic granulate), CISG-Online 958 (Pace). 91 Federal District Court, ED of California (U.S.) 21 January 2010, Golden Valley Grape Juice and Wine, LLC v Centrisys Corporation et al., CISG-Online 2089 (Pace); Langericht Trier (Germany) 8 January 2004 (Synthetic window parts), CISG-Online 910 (Pace); Oberlandesgericht Braunschweig (Germany) 28 October 1999 (Frozen meat), CISG-Online 510 (Pace). 92 Blackaby/Partasides/Redfern/Hunter, Redfern and Hunter on International Arbitration (2009), para. 2.89 et seq.; Born, International Commercial Arbitration (2009), Vol. I p. 311 et seq.; Gaillard/Savage, Fouchard Gaillard Goldman on International Commercial Arbitration (1999), paras 389 et seq.; Lew/ Mistellis/Kro¨ll, Comparative International Commercial Arbitration (2003), paras 6-1 et seq.; Poudret/Besson, Comparative Law of International Arbitration (2007), pp. 132 et seq. See also Art. 16(1) UNCITRAL Model Law on International Commercial Arbitration. 93 In one case an application for enforceability of an arbitral award was denied since the court found that the arbitration clause had not become a legally effective part of the contract according to Art. II (2) of the 1958 New York Convention, which requires a written agreement of the parties. The court argued, that an arbitration clause, as provision concerning the settlement of disputes, is always considered to alter the offer materially under Art. 19(3) CISG, thus the silence of the respondent cannot be considered as acceptance of the applicant’s general terms and conditions containing an arbitration clause. As a result, since the lack of form has not been cured during arbitral proceedings, the court had no other option than to deny recognition of an arbitral award. See Oberlandesgericht Frankfurt am Main (Germany) 26 June 2006 (Printed goods), CISG-Online 1385 (Pace). 94 See District Court, SD of New York (U.S.) 14 April 1992, Filanto v Chilewich, CISG-Online 45 (Pace); Federal Appellate Court (9th Circuit) (USA) 5 May 2003, Chateau des Charmes Wines Ltd. v Sabate´ USA, Sabate´ S. A., CISG-Online 767 (Pace); Tribunal Supremo, (Spain) 17 February 1998, CISG-Online 1333; Tribunal Supremo, (Spain) 17 February 1998, (Pace); Landgericht Hamburg (Germany) 19 June 1997 (Hazelnuts), CISG-Online 283.

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is not very likely that the CISG will govern their substantive validity, and, it is submitted, that it will never be relevant for their formal validity.95 d) Burden of proof and standard of proof. Whether the burden of proof is covered 34 by the CISG or not is subject to lengthy debates. The majority view argues that it is within the scope of the CISG and derives this conclusion from Art. 79 and a systematic reading of the Convention.96 In addition, according to some views, Art. 2(a) also addresses the issue of burden of proof although tacitly, and thus blocks the application of national non-uniform law.97 At least one author has advocated for the rules on burden of proof to be deemed governed by the CISG by deriving them from the rules on contract interpretation provided for in Art. 8, which are considered as rules of evidence.98 Furthermore, Arts 25, 35(2)(b) and 44 have been cited as representative of general principles of the Convention from which the rule on burden of proof can be derived from.99 The contents of the burden of proof principle under the CISG have been described by 35 the rule ‘ei incumbit probatio qui dicit, non qui negat’.100 This means that, on the one 95 Koch, The CISG as the Law applicable to Arbitration Agreements?, FS Kritzer (2008), pp. 285–286; Mistellis, CISG and Arbitration, in: Janssen/Meyer, CISG Methodology (2009), pp. 394 et seq.; Kro¨ll, Selected Problems Concerning the CISG’s Scope of Application, 25 Journal of Law and Commerce (2005– 2006) 39 (43 et seq.) (Pace). For a different view see: Walker, Agreeing to Disagree: Can We Just Have Words? CISG Article 11 and the Model Law Writing Requirement, 25 Journal of Law and Commerce (2005–06) 153–165. 96 Ferrari, Burden of Proof under the United Nations Convention on Contracts for International Sale of Goods (CISG), 5 International Business Law Journal 835 (2000) 666; Herber, in: Schlechtriem, Commentary (1998), Art. 4 para. 22; Kro¨ll, Selected Problems Concerning the CISG’s Scope of Application, 25 Journal of Law and Commerce (2005–2006) 39 (48) (Pace); Kruisinga, (Non-) conformity in the 1980 UN Convention on Contracts for the International sale of Goods: a uniform concept? (2004), p. 159; Orlandi, Procedural Law Issues and Law Conventions, 5 Uniform Law Review (2000) 23 (27 et seq.); Perales Viscasillas, Battle of the Forms and the Burden of Proof: An Analysis of BGH 9 January 2002, 6 Vindobona Journal of International Commercial Law and Arbitration (2002) 217 (228) (Pace); Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 4 para. 25; Magnus, Die allgemeinen Grundsa¨tze im UN-Kaufrecht, 59 RabelsZ (1995) 485 footnote 86 et seq. (Pace). 97 Perales Viscasillas, Battle of the Forms and the Burden of Proof: An Analysis of BGH 9 January 2002, 6 Vindobona Journal of International Commercial Law and Arbitration (2002) 217 (227) (Pace); Bundesgerichtshof (Germany) 9 January 2002 (Powdered milk), CISG-Online 651 (Pace). 98 Henschel, The Conformity of Goods in International sales, An analysis of Article 35 in the United Nations Convention on Contracts for the International Sale of Goods (CISG) (2005), pp. 111 et seq. 99 See footnotes 90–92 supra and footnote 94 infra. 100 Tribunal Cantonal du Valais (Switzerland) 27 April 2007 (Oven), CISG-Online 1721 (Pace); Oberster Gerichtshof (Austria) 12 September 2006 (CD media), CISG-Online 1364 (Pace); Handelsgericht des Kantons Zu¨rich (Switzerland) 22 December 2005 (Retail fashion clothes), CISG-Online 1195 (Pace); Tribunal Cantonal Valais (Switzerland) 19 September 2005 (Fiberglass composite materials), (Pace); Tribunal Cantonal du Valais (Switzerland) 27 May 2005 (Welding devices), CISG-Online 1137 (Pace); Federal Court of Appeals (7th Cir.) (U.S.) 23 May 2005, Chicago Prime Packers, Inc. v Northam Food Trading Co., CISG-Online 1026 (Pace); Kantonsgericht Nidwalden (Switzerland) 23 May 2005 (Farm machines), CISG-Online 1086 (Pace); Bundesgericht (Switzerland) 7 July 2004 (Cable drums), CISGOnline 848 (Pace); Obergericht des Kantons Bern (Switzerland) 11 February 2004 (Wire and cable), CISGOnline 1191 (Pace); Bundesgericht (Switzerland) 13 November 2003 (Used laundry machine), CISGOnline 840 (Pace); Tribunale di Rimini (Italy) 26 November 2002, Al Palazzo S. r. l. v Bernardaud di Limoges S. A., CISG-Online 737 (Pace); Landgericht Saarbru¨cken (Germany) 2 July 2002 (Tiles), CISGOnline 713 (Pace); Federal Court of Appeals (4th Cir.) (USA) 21 June 2002, Schmitz-Werke v Rockland, CISG-Online 625 (Pace); Bundesgerichtshof (Germany) 9 January 2002 (Powdered milk), CISG-Online 651 (Pace); Bundesgericht (Switzerland) 15 September 2000, FCF S. A. v Adriafil Commerciale S. r. l., CISG-Online 770 (Pace); Tribunale di Vigevano (Italy) 12 July 2000, Rheinland Versicherungen v Atlarex, CISG-Online 493 (Pace); Tribunale di Pavia (Italy) 29 December 1999, Tessile v Ixela, CISG-Online 678 (Pace); Handelsgericht des Kantons Zurich (Switzerland) 10 February 1999 (Art books), CISG-Online 488 (Pace); Handelsgericht Zurich (Switzerland) 30 November 1998 (Lambskin coat), CISG-Online 415 (Pace); Audiencia Provincial de Barcelona (Spain) 20 June 1997 (Dye for clothes), CISG-Online 338

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hand, the party has to prove the existence of the factual prerequisites contained in the legal provision from which it wants to derive beneficial legal consequences; and, on the other, that a party claiming an exception has the burden of proving the factual prerequisites of that exception.101 36 The minority view relies on the legislative history of the Convention and treats the issue of burden of proof as one of procedural character that should be governed by domestic law.102 However, as previously mentioned, interpreting the Convention against the domestic perceptions of the substance-procedure dichotomy undermines the basic goals the Convention aims to achieve. Moreover, with respect to the matter of burden of proof, it goes against the interpretative methods suggested in Art. 7. In this author’s opinion, the burden of proof rule can be substantiated by the Convention’s general principle that a party invoking a right has to prove the factual prerequisites justifying it. Furthermore, the issue of burden of proof is closely linked to the substantive law that a rule on its allocation has to be derived from the CISG.103 37 Another issue closely related to the issue of burden of proof deserves special attention – the standard of proof. Surprisingly, the vast majority of cases and authors who follow the view that burden of proof is covered by the CISG do not find the issue of standard of proof to also be governed by the Convention bur rather leave it to the lex fori.104 Only (Pace); Gerechtshof Arnhem (Netherlands) 21 May 1996, Maglificio Esse v Wehkamp, CISG-Online 1290 (Pace); Handelsgericht des Kantons Zurich (Switzerland) 26 April 1995 (Saltwater isolation tank), CISGOnline 248 (Pace); Arrondissementsrechtbank Zwolle (Netherlands) 1 March 1995, Wehkamp v Maglificio Esse, CISG-Online 372 (Pace); Landgericht Du¨sseldorf (Germany) 25 August 1994 (Fashion goods case), CISG-Online 451 (Pace); Landgericht Frankfurt (Germany) 6 July 1994 (Chocolate products case), CISGOnline 257 (Pace); Oberlandesgericht Innsbruck (Austria) 1 July 1994 (Garden flowers case), CISG-Online 107 (Pace); Handelsgericht des Kantons Zurich (Switzerland) 9 September 1993 (Furniture), CISG-Online 79 (Pace). 101 Ferrari, Burden of Proof under the United Nations Convention on Contracts for International Sale of Goods (CISG), 5 International Business Law Journal 835 (2000) 667. In line with this view see Audiencia Provincial de Valencia (Spain) 7 June 2003 (Grape juice), CISG-Online 948 (Pace) (“[even if] the issues related to burden of proof were not governed by the Convention, but taking into account its systematic structure [at least] some principles can be inferred. Taking into account that the liability for defects of the goods constitutes a core aspect of the seller’s obligations by virtue of the contract, it is the seller who must demonstrate the lack of defects at the moment of passing of risk. The buyer assumes the burden of proof in regard to the reasonable examination and the notification of the lack of conformity and, once having accepted the goods without notifying of lack of conformity, the burden of proof regarding the existences of defects at the moment of the passing of risk passes to the buyer”). 102 Flechtner, Selected Issues Relating to the CISG’s Scope of Application, 13 Vindobona Journal of International Commercial Law and Arbitration (2009) 91 (102 et seq.); Khoo, in: Bianca/Bonell, Commentary (1987), Art. 2 para. 3.2; Lookofsky, Understanding the CISG (2008), p. 84, footnote 117; Rosett, Critical Reflections on the United Nations Convention on Contracts for the International Sale of Goods, 45 Ohio State Law Journal (1984) 265 (281) (Pace). See also Arbitral Award, ICC 9926, 1 January 2007, (Chemical compound), CISG-Online 1850 (Pace); Arbitral Award (Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce) 21 February 2005 (Young chickens), CISGOnline 2038 (Pace); Cour de Justice de Gene`ve (Switzerland) 15 November 2002 (Window frames), CISGOnline 853 (Pace); Helsinki Court of Appeals (Finland) 26 October 2000 (Plastic carpets), CISG-Online 1078 (Pace); Arbitral Award, ICC 7399, 1 January 1993 (Shoe), CISG-Online 748 (Pace). In one case the issue remained unresolved, i. e. the court did not take any definite view on the topic: Cantone del Ticino, Corte d’Appello, (Switzerland) 15 January 1998 (Cocoa beans case), CISG-Online 417 (Pace). In another case the court resolved the issue by application of domestic law but based on Art. 7(2) CISG: Bezirksgericht der Saane (Switzerland) 20 February 1997 (Spirits case), CISG-Online 426 (Pace). 103 Bianca, in: Bianca/Bonell, Commentary (1987), Art. 36 para. 3.1; Ferrari, in: Ferrari/Flechtner/ Brand, Draft Digest and Beyond (2004), p. 111 with further references in footnote 87; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 4 para. 22. 104 Henschel, The Conformity of Goods in International sales, An analysis of Article 35 in the United Nations Convention on Contracts for the International Sale of Goods (CISG) (2005), p. 112; Kruisinga, (Non-)conformity in the 1980 UN Convention on Contracts for the International sale of Goods: a uniform concept? (2004), p. 167; Lookofsky, Understanding the CISG (2008), p. 131; Orlandi, Procedural

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recently there have been different voices heard on this topic.105 However, if one accepts the view that burden of proof is covered by the CISG, then it is only logical that its counterpart – standard of proof – is governed by the Convention as well. Arguments on how the question is a procedural issue and therefore not governed by the Convention, should be dismissed for the same reasons regarding the question of burden of proof. Furthermore, a relevant general principle that determines the required standard of proof under the CISG can be derived from the Convention – the principle of reasonableness.106 Hence, in this author’s view, the relevant standard of proof under the CISG should be the one of reasonable certainty.107 e) Set-off. It is clear that the issue of set-off is not expressly governed by the 38 Convention. However, this should not automatically mean that the issue of set-off is excluded from the CISG. Rather, one should look into the provisions of the Convention in search for the answer to this question. According to the prevailing view expressed in case law and doctrine,108 set-off is not 39 governed by the Convention. The rarely expressed reasoning in support of this position Law Issues and Law Conventions, 5 Uniform Law Review (2000) 23 (28) (Pace). Also see: Bundesgericht (Switzerland) 17 December 2009 (Watches), CISG-Online 2022 (Pace); Kantonsgericht Nidwalden (Switzerland) 23 May 2005 (Farm machines), CISG-Online 1086 (Pace); Cour de Justice de Gene`ve (Switzerland) 15 November 2002 (Window frames), CISG-Online 853 (Pace); Bundesgerichtshof (Germany) 9 January 2002 (Powdered milk), CISG-Online 651 (Pace). 105 Hachem/Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 4 para. 26; Saidov, The Law of Damages in International Sales – The CISG and other International Instruments (2008), p. 165; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 74 para. 66; CISG-AC Opinion no 6, para. 2.1. et seq. 106 Bonell, in: Bianca/Bonell, Commentary (1987) Art. 7 para. 2.3.2.2. 107 See also: Saidov, The Law of Damages in International Sales – The CISG and other International Instruments (2008), pp. 168 et seq.; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 74 para. 67. 108 Bonell, The CISG, European Contract Law and the Development of a World Contract Law, 56 American Journal of Comparative Law (2008) 1 (3); Eiselen/Kritzer, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual, Vol. 4 § 84:33(c); Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), p. 108; Honnold/Flechtner, Uniform Law (2009), Art. 4 para. 70; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 4 para. 22 a; Huber, Some introductory remarks on the CISG, 6 Internationales Handelsrecht (2006) 234 (Pace); Oberlandesgericht Celle (Germany) 29 January 2015 (Equipment for laboratory), CISG-Online 2618 (Pace); Bundesgerichtshof (Germany) 23 June 2010, CISG-Online 2129 (Pace); High Court, Seoul (Republic of Korea) 23 July 2009 (Duck feathers) CISG-Online 2507 (Pace); Katowice Court of Appeals (Poland) 22 January 2009 (Aluminium profiles), CISG-Online 2787; Multi-Member Court of First Instance of Athens (Greece) 1 January 2009 (Bullet-proof vest), CISG-Online 2228 (Pace); Appellationsgericht Basel-Stadt (Switzerland) 26 September 2008 (Packaging machine), CISG-Online 1732 (Pace); Oberlandesgericht Ko¨ln (Germany) 19 May 2008 (Pesticide), CISG-Online 1700 (Pace); Bundesgericht (Switzerland) 20 December 2006 (Machines), CISG-Online 1426 (Pace); Oberlandesgericht Ko¨ln (Germany) 13 February 2006 (Woollen cloth), CISG-Online 1219 (Pace); Handelsgericht des Kantons Zu¨rich (Switzerland) 22 December 2005 (Retail fashion clothes), CISG-Online 1195 (Pace); Oberlandesgericht Linz (Austria) 23 March 2005 (Conveyor band), CISG-Online 1376 (Pace); Oberlandesgericht Stuttgart (Germany) 20 December 2004 (Decorative paper), CISG-Online 997 (Pace); Bundesgericht (Switzerland) 7 July 2004 (Cable drums), CISG-Online 848 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 28 May 2004 (Television sets), CISG-Online 850 (Pace); Tribunale di Padova (Italy) 25 February 2004 (Agricultural products), CISG-Online 819 (Pace); Landgericht Bielefeld (Germany) 12 December 2003 (Frozen salmon), CISG-Online 905 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 25 July 2003 (Rubber sealing parts), CISG-Online 919 (Pace); Landgericht Mo¨nchengladbach (Germany) 15 July 2003 (Filters), CISG-Online 813 (Pace); Landgericht Saarbru¨cken (Germany) 2 July 2002 (Tiles), CISG-Online 713 (Pace); Oberster Gerichtshof (Austria) 14 January 2002 (Cooling system), CISG-Online 643; Arbitral Award, Chamber of National and International Arbitration of Milan, 28 September 2001 (Steel wire case), CISG-Online 1582 (Pace); Bundesgerichtshof (Germany) 9 January 2002 (Powdered milk), CISG-Online 651; Oberster Gerichtshof (Austria) 22 October 2001 (Gasoline and gas oil case), CISG-Online 614 (Pace); Tribunale di Vigevano (Italy) 12 July 2000, Rheinland Versicherungen v Atlarex, CISG-Online 493 (Pace); Amtsgericht Duisburg (Germany) 13 April 2000 (Pizza

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claims that set-off should be deemed inadmissible under the CISG given that the Convention does not completely govern problems related to set-offs (e. g., the determination of the requisites which must exist in order to balance mutual debts); and given that this issue was not addressed during the drafting process.109 40 On the other hand, there is a growing consensus amongst some authors and courts that where both claims arise from the same transaction governed by the CISG, they can be offset against each other (e. g. the buyer’s claim for damages for non-conformity can be offset against the seller’s claim for payment of the price), as allowed by the general principles underlying Arts 81(2), 84(2) and 88(3).110 41 In this author’s opinion, the latter view should be preferred. Not only can it be stated that set-off is an issue governed by, even though not expressly settled in, the Convention, the CISG’s general principles provide a sufficient basis for establishing all relevant criteria for exercising a right to set-off where receivables arise from the same contract. Namely, the CISG is based on the principle that declarations extinguishing obligations need to be made by notice to the other party (Art. 26) – hence, set-off needs to be declared. Furthermore, such notices are effective upon dispatch (Art. 27). The mutuality of claims and the identity cartons), CISG-Online 659 (Pace); Ontario Court of Appeal (Canada) 26 January 2000 Nova Tool v. London Industries, CISG-Online 582 (Pace); Oberlandesgericht Mu¨nchen (Germany) 11 March 1998 (Cashmere sweaters), CISG-Online 310 (Pace); Kantonsgericht Freiburg (Switzerland) 23 January 1998 (Commercial laundry machine), CISG-Online 423 (Pace); Landgericht Hagen (Germany) 15 October 1997 (Socks), CISG-Online 311 (Pace); Gerechtshof ‘s Hertogenbosch (Netherlands) 2 October 1997, Van Dongen Waalwijk Leder v Conceria Adige, CISG-Online 550 (Pace); Oberlandesgericht Hamburg (Germany) 4 July 1997 (Tomato concentrate case), CISG-Online 1299 (Pace); Landgericht Mu¨nchen (Germany) 6 May 1997 (Cars), CISG-Online 341(Pace); Oberlandesgericht Du¨sseldorf (Germany) 24 April 1997 (Shoes), CISG-Online 385 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 11 July 1996 (Lawn mower engines), CISG-Online 201 (Pace); Landgericht Duisburg (Germany) 17 April 1996 (Textiles), CISG-Online 186 (Pace); Tribunal Cantonal Vaud (Switzerland) 11 March 1996 (Aluminium granules), CISG-Online 333 (Pace); Obergericht des Kantons Thurgau (Switzerland) 19 December 1995 (Cloth), CISG-Online 496 (Pace); Oberlandesgericht Stuttgart (Germany) 21 August 1995 (Machinery), CISGOnline 150 (Pace); Oberlandesgericht Hamm (Germany) 9 June 1995 (Window elements), CISG-Online 146 (Pace); Landgericht Mu¨nchen (Germany) 20 March 1995 (Rancid bacon), CISG-Online 164 (Pace); Arrondissementsrechtbank Middelburg (Netherlands) 25 January 1995, CISG-Online 374; Oberlandesgericht Koblenz (Germany) 17 September 1993 (Computer chip), CISG-Online 91 (Pace); Arrondissementsrechtbank Roermond (Netherlands) 6 May 1993, Gruppo IMAR v Protech Horst, CISG-Online 454 (Pace); Arrondissementsrechtbank Arnhem (Netherlands) 25 February 1993, P. T. Van den Heuvel v Santini Maglificio Sportivo de Santini, CISG-Online 98 (Pace); Kantonsgericht Freiburg (Switzerland) 28 January 1990 (Commercial laundry machine), CISG-Online 423 (Pace). In one case the buyer’s claim for set-off was rejected on the grounds that he has lost the rights to rely on non-conformity since he did not give timely notice thereof. Admissibility of the set-off under the CISG was not addressed in this case. See Landgericht Berlin (Germany) 24 March 1998 (Knitwear), CISG-Online 742 (Pace). 109 See Tribunale di Padova (Italy) 25 February 2004 (Agricultural products case), CISG-Online 819 (Pace). See also: Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2004), Art. 4 para. 39; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 4 para. 22 a. 110 Bridge, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), pp. 251 et seq.; Kro ¨ ll, Selected Problems Concerning the CISG’s Scope of Application, 25 Journal of Law and Commerce (2005–2006) 39 (48) (Pace); Magnus, Die allgemeinen Grundsa¨tze im UN-Kaufrecht, 59 RabelsZ (1995) 485 (footnotes 67 et seq.) (Pace); Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2010), Art. 4 para. 28; CISG-AC Opinion no 9, para. 3.23, stating that a general denial of set-off as a subject dealt with by the Convention is too widely stated (Pace). See also: Bundesgerichtshof (Germany) 24 September 2014 (Tools), CISG-Online 2545 (Pace); Bundesgerichtshof (Germany) 14 May 2014 (Coffee products), CISGOnline 2493 (Pace); Landgericht Stuttgart (Germany) 29 October 2009 (Artificial turf), CISG-Online 2017 (Pace); Oberlandesgericht Mu¨nchen (Germany) 19 October 2006 (Auto), CISG-Online 1394 (Pace); Kantonsgericht Schaffhausen (Switzerland) 20 October 2003 (Aluminium foil film wrap), CISG-Online 957 (Pace); Amtsgericht Duisburg (Germany) 13 April 2000 CISG-Online 659 (Pace); Oberlandesgericht Hamburg (Germany) 26 November 1999 (Jeans), CISG-Online 515 (Pace); Oberlandesgericht Mu¨nchen (Germany) 28 January 1998 (Leather goods), CISG-Online 339 (Pace); Oberlandesgericht Munich (Germany) 9 July 1997 (Leather goods), CISG-Online 282 (Pace).

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of their nature (‘of the same kind’) as requirements for set-off can also be derived from the CISG’s general principles.111 The same applies for the ‘ascertainment’ requirement.112 Finally, it is worth noting that the preponderant part of cases where set-off was deemed inadmissible relates to situations where the receivables requested to be offset did not arise under the same transaction. This author agrees that in such an instance the CISG should not be applied. However, it is submitted that since most of these cases regarded a different kind of set-off (set-off of claims arising out of different transactions), they should not serve as confirmation of the exclusion of set-off under the CISG in all circumstances.113 f) Recovery of attorneys’ fees. Recovery of attorneys’ fees incurred in litigation over 42 claims arising out of contracts governed by the CISG is another area where diverging views have been expressed in legal doctrine and case law. Amongst the authors who advocate recourse to domestic law to resolve this matter, there are authors who find it a matter of procedural law and consequently not governed by the CISG,114 authors who base their argument on the drafter’s intent (i. e. lack of an intent to have this issue covered by the CISG),115 authors who find recovery of attorneys’ fees under the CISG in contravention with the principle of equality of the parties to the sales contract,116 and authors who find the CISG principles not well-suited to deal with the calculation of attorneys’ fees as recoverable loss.117 Also, many authors justify their position by combining two or more of these reasons.118 On the other hand, the group of authors advocating for recovery of attorneys’ fees under the CISG provisions base their arguments on the plain wording of Art. 74 and principles of full compensation, foreseeability, mitigation and reasonableness.119 As for the case law, it seems that the 111

See Commentary on Art. 84. Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 4 para. 28. 113 E. g. in one case the court explicitly emphasized that: “[a]s the CISG does not deal with set-offs – as here, claims from another than the actual sales contract in question- their legitimacy and effect are not governed by the CISG but by the supplemental applicable national law.” (emphasis added). See Oberlandesgericht Karlsruhe (Germany) 20 July 2004 (Shoes), CISG-Online 858 (Pace). 114 Flechtner, Recovering Attorneys’ Fees as Damages under the UN Sales Convention: A Case Study on the New International Commercial Practice and the Role of Case Law in CISG Jurisprudence, with Comments on Zapata Hermanos Sucesores, S. A. v Hearthside Baking Co.’ 22 Northwestern Journal of International Law and Business (2002) 121 (153 et seq.) (Pace); Huber, in: Huber/Mullis, The CISG (2007), p. 278; Lookofsky, Walking the Article 7(2) Tightrope Between CISG and Domestic Law, 25 Journal of Law and Commerce (2005–2006) 87 (98 et seq.) (Pace); Stoll/Gruber, in: Schlechtriem/ Schwenzer Commentary (2005), p. 757. 115 Flechtner/Lookofsky, Viva Zapata! American Procedure and CISG Substance in a U. S. Circuit Court of Appeal, 7 Vindobona Journal of International Commercial Law and Arbitration (2003) 93 (98) (Pace); Lookofsky/Flechtner, Zapata Retold: Attorneys’ Fees Are (Still) Not Governed by the CISG, 26 Journal of Law and Commerce (2006–2007) 1 (2) (Pace); Mullis, Twenty-Five Years On – The United Kingdom, Damages and the Vienna Sales Convention, 71 RabelsZ (2007) 44 (Pace). 116 CISG-AC Opinion no 6, para. 5.4; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 74 para. 30. 117 Flechtner, Recovering Attorneys’ Fees as Damages under the UN Sales Convention: A Case Study on the New International Commercial Practice and the Role of Case Law in CISG Jurisprudence, with Comments on Zapata Hermanos Sucesores, S. A. v Hearthside Baking Co. 22 Northwestern Journal of International Law and Business (2002) 121 (152) (Pace); Gotanda, Awarding Damages under the United Nations Convention on the International Sale of Goods: A Matter of Interpretation, 37 Georgetown Journal of International Law (2005) 95 (131 et seq.) (Pace); Keily, How Does the Cookie Crumble? Legal Costs under a Uniform Interpretation of the United Nations Convention on Contracts for the International Sale of Goods, Nordic Journal of Commercial Law of the University of Turku (2003), § 6.2(c) et seq. (Pace); Mullis, Twenty-Five Years On – The United Kingdom, Damages and the Vienna Sales Convention, 71 RabelsZ (2007) 35 (44 et seq.) (Pace). 118 See supra footnotes 108–111. 119 Piltz, Litigation Costs as Eeimbursable Damages in DiMatteo, International Sales Law – A global Challenge (2014), pp. 286 et seq; Diener, Recovering Attorneys’ Fess under CISG: An Interpretation of 112

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majority of the awards and judgments where the CISG was applied is in line with the former standpoint given that the recovery of attorneys’ fees was almost always required and awarded on the basis of the procedural law of the forum.120 43 In this author’s opinion, the issue is excluded from the CISG ambit since it does not constitute a loss suffered by the aggrieved party ‘as a consequence of the breach’ but rather as a consequence of litigation (arbitration). The difference results from the nature of litigation itself, since its initiation (filing a claim in the court and delivering the claim to the defendant) transforms the two-party relationship, i. e. a sales contract (buyerseller), into a three party relationship, i. e. litigation (plaintiff-court/arbitration tribunaldefendant). Hence, the legal basis for the recovery of attorneys’ fees incurred in litigation is in the litigation itself and not in the breach of the contract which was the reason for initiating the proceedings.121 Consequently, it is fair to say that both parties have suffered financially as a result of litigation, and not necessarily as a result of the breach – since these expenses are incurred even if the court finds that there has been no breach of contract. In other words, they can exist independently from the breach. Furthermore, the amount of the incurred expenses will depend not only on the behaviour of the breaching party but also on the extent of the court’s orders and instructions. This makes the causal link between the breach and this type of loss interrupted. Consequently, it is submitted that once the proceedings are instituted, the incurred attorneys’ fees become a loss that is too distinct from the usual loss suffered as a consequence of breach of contract thus not allowing for its recovery under the CISG. Hence, the application of general principles of the CISG to resolve the issue is not warranted and the relevant solution should be found in the otherwise applicable domestic law. 44

g) Interest rate on sums in arrears. The question of an applicable interest rate naturally arises in any dispute over an international sales contract. However, while the entitlement to interest of the creditor is made clear in Art. 78, there is no relevant provision that fixes the applicable interest rate in the Convention.122 Consequently, a wide variety of different solutions to this question has been suggested in both legal doctrine and case law. Article 74, Nordic Journal of Commercial Law (2008) note 45; Felemegas, An Interpretation of Article 74 CISG by the U. S. Circuit Court of Appeals, 15 Pace International Law Review (2003) 91 (Pace); Zeller, Damages under the Convention on Contracts for the International Sale of Goods (2005), pp. 143 et seq. 120 There are more than 2,500 cases from 45 jurisdictions available at the Pace database. Yet, to the best of our knowledge, less than ten invoke Art. 74 CISG as the applicable law for the issue of recovery of attorneys’ fees (merely 0.4 % of all reported cases). See: Rechtbank van Koophandel Hasselt (Belgium) 25 February 2004, K BVBA v BV, CISG-Online 831 (Pace); Court of Appeal in Turku (Finland) 12 April 2002 (Forestry equipment), CISG-Online 660 (Pace); Arbitral Award (CIETAC) 11 February 2000, (Silicon metal), CISG-Online 1529 (Pace); Arbitral Award, (CIETAC) 12 February 1999, (Nickel plating machine production line equipment case), CISG-Online 1113 (Pace); Amtsgericht Berlin-Tiergarten (Germany) 13 March 1997, CISG-Online 412 (Pace); Arbitral Award (Schiedsgericht der Handelskammer Hamburg) 21 March 1996 (Chinese goods), CISG-Online 187 (Pace); Arbitral Award, CIETAC, 14 May 1996 (Down coat), CISG-Online 1125 (Pace); Amtsgericht Augsburg (Germany) 29 January 1996 (Shoe case), CISG-Online 172 (Pace), Arbitral Award, ICC 7585, 1 January 1992 (Foamed board machinery), CISG-Online 105 (Pace). For criticism of some of these decisions see: Flechtner, Recovering Attorneys’ Fees as Damages under the UN Sales Convention: A Case Study on the New International Commercial Practice and the Role of Case Law in CISG Jurisprudence, with Comments on Zapata Hermanos Sucesores, S. A. v Hearthside Baking Co., 22 Northwestern Journal of International Law and Business (2002) 121 (127 et seq.) (Pace). 121 Such an understanding of the legal nature of attorneys’ fees seems universal since none of the national legal systems (both the ‘American rule’ and ‘English rule’ jurisdictions) treat the issue of recovery of attorneys’ fees as one governed by the damages provisions. See Djordjevic, ‘Mexican Revolution’ in CISG Jurisprudence and Case-law: Attorney’s Fees as (Non)recoverable Loss for Breach of Contract, FS Christa Jessel Holst (2010), footnote 7 (Pace). 122 See Commentary on Art. 78 paras 15, 19–28.

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Some find this question as not being governed, i. e. excluded from the CISG, hence they directly search for an answer in the otherwise applicable law. Some find it governed, but not expressly settled in the Convention – thus they apply different general principles to resolve the issue or, in the absence of those, apply the otherwise applicable law. Finally, some look at international usages in answering this question.123 The issue is further complicated by the fact that scholars who advocate for a same approach (e. g. exclusion form the CISG) propose different solutions to the matter.124 In this author’s opinion, despite the fact that the Contracting States have consciously 45 left a gap concerning the rate of interest,125 this question should not be deemed excluded from the CISG since the issue of entitlement to interest is explicitly governed by the Convention. Consequently, the applicable interest rate, being an issue naturally tied to the issue of interest (such as the time of accrual of interest, or the formalities needed to exercise this right), should be considered as a matter governed by but not expressly settled in the Convention and should be resolved by application of the CISG general principles.126 This is the only approach that enables fostering the CISG goal of uniformity in its interpretation and certainty and predictability in international trade transactions; goals which can successfully be met by a combined application of the principle of full compensation and the principle of prohibiting overcompensation (windfall) of the creditor.127 Determining the applicable interest rate in such a manner preserves the system of 123 For an extensive overview of these diverging approaches see: CISG-AC Opinion no 14; Behr, The Sales Convention in Europe: From Problems in Drafting to Problems in Practice, 17 Journal of Law and Commerce (1998) 263 (Pace); Chengwei, Recovery of Interest, 1 Nordic Journal of Commercial Law of the University of Turku (2003) (Pace); Corterier, Interest in Uniform Application – How to Solve the UN Sales Law’s Interest Rate Problem Under Article 78 CISG and Article 84 CISG, Review of the Convention on Contracts for the International Sale of Goods (2002–2003) 1 (2004) (Pace); Ferrari, Uniform Application and Interest Rates Under the 1980 Vienna Sales Convention, Cornell Review of the Convention on Contracts for the International Sale of Goods (1995) 3 (Pace); Garbers, The Dogmatic and Practical Implications of Article 78 of the United Nations Convention on Contracts for the International Sale of Goods on Claims for Interest under International Sales Contracts (2003) (Pace); Kizer, Minding the gap: Determining interest rates under the UN Convention for the International Sale of Goods, 65 University of Chicago Law Review (1998) 1279 (Pace); Mazzotta, CISG Article 78: Endless Disagreement Among Commentators, Much Less Among the Courts (2004) (Pace); Pavic/Djordjevic, Application of the CISG Before the Foreign Trade Court of Arbitration at the Serbian Chamber of Commerce -Looking Back at the Latest 100 Cases, 28 Journal of Law and Commerce (2009) 1 (51 et seq.); Thiele, Interest on Damages and Rate of Interest Under Article 78 of the U. N. Convention on Contracts for the International Sale of Goods, 2 Vindobona Journal of International Commercial Law and Arbitration (1998) 3 (Pace); Zoccolillo, Determination of Interest Rate Under the 1980 United Nations Convention on Contracts for the International Sale of Goods: General Principles vs. National Law, 1 Vindobona Journal of International Commercial Law and Arbitration (1997) 3 (Pace). 124 Amongst those who prefer application of national law to the issue propose application of lex causae, others the law of debtor’s seat, the law of the seller’s country, the law of the country of the currency, or the law of the place of performance; amongst those favouring uniform determination of interest rate based on CISG general principles, some use the principle of full compensation, while others resort to the principle of full restitution. See footnote 122 supra. 125 See Commentary on Art. 78 paras 2–3. 126 The CISG Advisory Council also advocates for determining a relevant interest rate under both Art. 78 and Art. 84(1) (albeit with a different purpose and thus in a different manner) by recourse to general principles underlying the Convention. See CISG-AC Opinion no 9, para. 3.25; CISG-AC Opinion no 14. 127 See Gotanda, When Recessions Create Windfalls: The Problems of Using Domestic Law to Fix Interest Rates under Article 78 CISG, 13 Vindobona Journal of International Commercial Law and Arbitration (2009) 229 (236 et seq.); Pavic/Djordjevic, Application of the CISG Before the Foreign Trade Court of Arbitration at the Serbian Chamber of Commerce – Looking Back at the Latest 100 Cases, 28 Journal of Law and Commerce (2009) 1 (59); Arbitral Award (Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce) 28 January 2009 (Medicaments), CISG-Online 1856 (Pace). For the principle of full compensation and principle of windfall prevention as the CISG general principles see: CISG-AC Opinion no 8.

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remedies set by the Convention (damages and interest as separate remedies) whilst not making the damages provisions redundant (as they would had been had the interest amounted at all times to the full amount of loss, a result that would be reached by application of the principle of full compensation exclusively) and not jeopardizing the compensatory nature of interest (as the principle of full restitution does).128 In concreto, the proposed solution usually entails the application of the savings rate for the currency in the creditor’s place of business (or the place for payment). With similar considerations in mind, aiming to compensate the time value of money for the creditor whilst not exposing the debtor to unpredictable solutions, an alternative approach might be used. This approach, advocated by the CISG Advisory Council, is also focused on the creditor’s place of business and results in application of the laws of the country where creditor has its place of business.129 46

h) Other issues. The CISG does not govern the assignment of claims,130 assignment of contracts,131 assumption of debts,132 the acknowledgment of debts133 and the admission of liability.134 Likewise, the CISG does not contain the rules on seniority of payments,135 currency of payment136 and the manner of pay128 The purpose of interest is to compensate an aggrieved party for the loss of the use of money. See Gotanda, Supplemental Damages in Private International Law (1998), p. 14. 129 CISG-AC Opinion no 14. 130 Handelsgericht des Kantons Aargau (Switzerland) 26 November 2008 (Fruit and vegetables), CISGOnline 1739 (Pace); District Court Trnava (Slovak Republic) 17 September 2008 (Chicken products), CISG-Online 1991 (Pace); Arbitral Award, Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce, 15 September 2008 (Feta cheese), CISG-Online 2269 (Pace); Oberlandesgericht Hamburg (Germany) 25 January 2008 (Cafe´ inventory), CISG-Online 1681 (Pace); Tribunal Cantonal du Valais (Switzerland) 23 May 2006 (Suits), CISG-Online 1532 (Pace); Tribunale di Padova (Italy) 25 February 2004 (Agricultural products), CISG-Online 819 (Pace); Supreme Court (Poland) 19 December 2003, “O. O.” AG in M. v Leszek W. & Zbigniew W., CISG-Online 1222 (Pace); Oberster Gerichtshof (Austria) 7 September 2000 (Tombstones), CISG-Online 642 (Pace); Tribunale di Vigevano (Italy) 12 July 2000, Rheinland Versicherungen v Atlarex, CISG-Online 493 (Pace); Rechtbank Arnhem (Netherlands) 8 April 1999, CISG-Online 1339; Oberster Gerichtshof (Austria) 25 June 1998, CISG-Online 352 (Pace); Bundesgerichtshof (Germany) 12 February 1998 (Air cleaning installation), CISG-Online 343 (Pace); Obergericht des Kantons Thurgau (Switzerland) 19 December 1995 (Cloth), CISG-Online 496 (Pace); Cour d’appel de Grenoble (France) 13 September 1995, Caito Roger v Socie´te´ française de factoring, CISGOnline 157 (Pace); Oberlandesgericht Hamm (Germany) 8 February 1995 (Socks), CISG-Online 141 (Pace); Bezirksgericht Arbon (Switzerland) 9 December 1994 (Cloth), CISG-Online 376 (Pace). 131 Bundesgerichtshof (Germany) 15 February 1995 (Key press machine), CISG-Online 149 (Pace). 132 Regional Court Kosice (Slovak Republic) 22 May 2007 (Plastic bottles) CISG-Online 1898 (Pace); Landgericht Heidelberg (Germany) 2 November 2005 (Natural stones), CISG-Online 1416 (Pace); Oberster Gerichtshof (Austria) 24 April 1997 (Processing plant), CISG-Online 291 (Pace). 133 Bundesgericht (Switzerland) 17 October 2000, Severin Wagner AG v Gu ¨ nter Lieber, CISG-Online 1053 (Pace); Oberlandesgericht Hamm (Germany) 23 June 1998 (Furniture), CISG-Online 434 (Pace). 134 Bundesgerichtshof (Germany) 9 January 2002 (Powdered milk), CISG-Online 651. 135 Magnus, Die allgemeinen Grundsa ¨tze im UN-Kaufrecht, 59 RabelsZ (1995) 485 (footnote 94 et seq.) (Pace). 136 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), p. 109; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 4 para. 23; Tribunal Cantonal du Valais (Switzerland) 28 January 2009 (Fiberglass composite materials), CISG-Online 2025 (Pace); Ca´mara Nacional de Apelaciones en lo Commercial de Buenos Aires (Sala A) (Argentina) 31 May 2007, Sr. Carlos Manuel del Corazo´n de Jesu´s Bravo Barros v Salvador Martı´nez Gares, CISG-Online 1517 (Pace); Tribunal Cantonal du Valais (Switzerland) 27 April 2007 (Oven), CISG-Online 1721 (Pace); Tribunal Cantonal du Valais (Switzerland) 23 May 2006 (Suits), CISG-Online 1532 (Pace); Tribunal Cantonal du Valais (Switzerland) 27 May 2005 (Welding devices), CISG-Online 1137 (Pace); Tribunal Cantonal Valais (Switzerland) 19 September 2005 (Fiberglass composite materials), (Pace); Juzgado Commercial Buenos Aires (Argentina) 17 March 2003, Wacker-Polymer Systems GmbH v Quiebra v Glaube S. A. et al., CISG-Online 1844 (Pace); Oberster Gerichtshof (Austria) 22 October 2001 (Gasoline and gas oil), CISG-Online 614 (Pace); Handelsgericht des Kantons Zu¨rich (Switzerland) 30 November 1998 (Lambskin coat), CISG-Online 415

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ment.137 It also does not regulate the right of retention,138 right of lien,139 punitive damages,140 injunctive reliefs,141 validity of limitation of liability clauses142 or disclaimer of liability clauses,143 novation144 and the validity of settlement agreements.145 Hence, to all these issues the otherwise applicable law or rules of law should be applied.146 On the other hand, the issue of estoppel is a matter covered by the CISG as an expression of the good faith principle or venire contra factum proprium,147 and recourse to domestic law should be excluded.

III. Comparable Rules The PICC and the PECL do not contain a comparable provision. Rather, relevant 47 provisions limiting the scope of the PICC with respect to a certain matter are included in chapters or sections dealing with such matters. In any event, since the intended scope (Pace); Tribunal Cantonal du Valais (Switzerland) 30 June 1998 (Granite stones), CISG-Online 419 (Pace); Oberlandesgericht Frankfurt am Main (Germany) 20 April 1994 (New Zealand mussels), CISGOnline 125 (Pace). In one case the court considered currency of payment as an issue governed but not expressly settled in the Convention. Yet, in the absence of general principles that would govern the issue it applied the otherwise applicable domestic law – that lead it to the same result – application of currency at the seller’s place of business. See Landgericht Berlin (Germany) 24 March 1998 (Knitwear), CISG-Online 742 (Pace). The minority view deems the issue governed by the relevant general principle that in case of doubt payment of the purchase price has to be made in the currency at the creditor’s place of business. See Magnus, Die allgemeinen Grundsa¨tze im UN-Kaufrecht, 59 RabelsZ (1995) 485 (footnote 82) (Pace); Kammergericht Berlin (Germany) 24 January 1994 (Wine), CISG-Online 130 (Pace). 137 Tribunal Cantonal du Valais (Switzerland) 23 May 2006 (Suits), CISG-Online 1532 (Pace); Hof van Beroep, Gent (Belgium) 31 January 2002, CISG-Online 1349. 138 Oberlandesgericht Stuttgart (Germany) 20 December 2004 (Decorative paper), CISG-Online 997 (Pace). 139 District Court, Eastern District Michigan (U.S.) 28 September 2007 (Sport bar assembly system), Easom Automation Systems, Inc. v. Thyssenkrupp Fabco, Corp., CISG-Online 1601 (Pace). 140 Federal District Court, SD of New York (U.S.) 30 March 2010, Guangxi Nanning Baiyang Food Co. Ltd. v Long River International, Inc., CISG-Online 2091 (Pace). 141 Oberster Gerichtshof (Austria) 28 July 1999 (Pipes), CISG-Online 2021 (Pace). 142 District Court for the Middle District of Tennessee, Nashville Division (U.S.) 18 July 2011, MSS, Inc. v. Maser Corporation, CISG-Online 2222 (Pace) (the enforceability of the limitations on consequential damages provision was upheld under domestic law); Cour de Cassation (France) 13 February 2007, CISGOnline 1561; Arbitral Award CIETAC CISG/2000/17 (Souvenir coins) CISG-Online 1614 (Pace) (the clause was found reasonable and valid under domestic law). 143 District Court for the Western District of Pennsylvania (U.S.) 25 July 2008 (Locomotives), Norfolk Southern Railway Company v. Power Source Supply, Inc., CISG-Online 1776 (Pace) (disclaimer of liability was found to be valid under domestic law); Cour de Cassation (France) 13 February 2007, CISG-Online 1561. 144 Arbitral Award, ICC 7331, 1 January 1994 (Cowhides), CISG-Online 106 (Pace). 145 Landgericht Aachen (Germany) 14 May 1993 (Electronic hearing aid), CISG-Online 86 (Pace). 146 CISG Advisory Council has recently advocated that even where the provisions of the domestic law are applied on protection of the obligee, the international character of the contract and the general principles underlying the CISG should be observed, including the principles of freedom of contract and reasonableness. See CISG-AC Opinion no 17. 147 Eiselen/Kritzer, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual, Vol. 4 § 84:33(f); Ferrari, Implementations of the Convention on Contracts for the International Sale of Goods (CISG), 7 International Business Law Journal (1998) 835 (838); Oberlandesgericht Karlsruhe (Germany) 25 June 1997 (Surface protective film), CISG-Online 263 (Pace); Arbitral Award (Internationales Schiedsgericht ¨ sterreich), SCH-4318, 15 June 1994, CISG-Online der Bundeskammer der gewerblichen Wirtschaft in O 120 (Pace); Arbitral Award (Internationales Schiedsgericht der Bundeskammer der gewerblichen ¨ sterreich), SCH-4366, 15 June 1994, CISG-Online 691; Gerechtshof ‘s Hertogenbosch Wirtschaft in O (Netherlands) 26 February 1992, Melody v Loffredo, h. o. d. n. Olympic, CISG-Online 65 (Pace). Cf. Arrondissementsrechtbank Amsterdam (Netherlands) 5 October 1994, Tuzzi Trend Tex Fashion v KeijerSomers, CISG-Online 446 (Pace).

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of application of these documents is much wider than the intended scope of the CISG, the important parallels cannot be drawn by comparing the abovementioned articles with Art. 4 CISG.

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Article 5 This Convention does not apply to the liability of the seller for death or personal injury caused by the goods to any person. Bibliography: Lookofsky, In Dubio Pro Conventione? Some Thoughts about Opt-outs, Computer Programs and Pree¨mption Under the 1980 Vienna Sales Convention (CISG), 13 Duke Journal of Comparative and International Law (2003) 263; Schlechtriem, The Borderland of Tort and Contract – Opening a New Frontier?, 21 Cornell International Law Journal (1988) 467; Zeller, CISG and the Unification of International Trade Law (2007), p. 64; CISG-AC Opinion no 12, Liability of the Seller for Damages Arising out of Personal Injuries and Property Damage Caused by Goods and Services Under the CISG, 20 January 2013, Rapporteur: Professor Hiroo Sono, School of Law, Hokkaido University, Sapporo, Japan; CISG-AC Opinion no 6, Calculation of Damages under CISG Article 74, 2006, Rapporteur: Professor John Y. Gotanda, Villanova University School of Law, Villanova, Pennsylvania, USA.

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Drafting History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Death or personal injury caused by the goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Death or personal injury caused by other means . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Death or personal injury of third parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Claims advanced by third parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Claims advanced by the buyer to be indemnified . . . . . . . . . . . . . . . . . . . . . . . 4. Liability for property damage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Concurrent remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 3 5 5 7 8 9 10 14 17 27

I. Importance and Role of the Provision 1. General The CISG provides the buyer with the right to claim damages for any foreseeable loss 1 suffered as a result of the seller’s breach of contract, including (but not limited to) the delivery of non-conforming goods (Arts 45(1)(b), 74).1 Art. 5, on the other hand, effectively excludes from the scope of the Convention certain claims for damages arising out of non-contractual product liability (e. g. loss arising from defective goods).2 For claims of this nature, domestic law will apply instead.3 Under the CISG, this concept of product liability refers expressly and solely to 2 liability for death or personal injury caused by the goods. Claims for property damage do not fall under the Art. 5 exclusion and are thus actionable under the Convention. Furthermore, it is clear that product liability under the CISG does not refer to claims arising outside the buyer/seller contractual relationship and consumer claims 1

CISG-AC Opinion no 12, para. 1.1. Schlechtriem, Uniform Sales Law – The UN-Convention on Contracts for the International Sale of Goods (1986) p. 33; Khoo in: Bianca/Bonell, Commentary (1987), Art. 5 para. 2.3; Enderlein/Maskow, International Sales Law (1992), p. 45. 3 CISG-AC Opinion no 12, para. 1.2 2

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against manufacturers, producers and the like (Arts 2(a), 4).4 Although this clear core principle5 of Art. 5 has failed to attract significant scholarly writing and case law, there has been an argument as to whether it applies to buyer’s claims to be indemnified for personal injury suffered by his customers and the extent to which the CISG pre-empts domestic law when concurrent remedies may be available.

2. Drafting History Art. 5 has no predecessor in the ULIS,6 however, it has been suggested that to the extent that product liability is characterized as non-contractual, its exclusion from the ULIS was understood as an unwritten rule.7 4 The actual text of Art. 5 was not submitted until the 1980 Vienna Conference in a proposal of the US delegation,8 which was subsequently consolidated in a joint proposal with Finland and France.9 The reason given for the inclusion of this text was to ensure that “complex” domestic product liability rules would not be displaced by the Convention.10 Despite considerations for a more extensive provision, as initially proposed by the Finish representative,11 to exclude liability for damage caused by the goods to the goods or other property, the framers of the CISG chose to omit unqualified references to ‘product liability’ generally and ‘property damage’ explicitly due to lack of consensus among the delegates.12 In this sense, property damage has been implicitly excluded from the scope of Art. 5. 3

II. Detailed Commentary 1. Death or personal injury caused by the goods 5

Regardless of whether domestic product liability rules apply in a particular case,13 Art. 5 completely excludes liability for death or personal injury of the buyer caused by the goods from the scope of the CISG. This includes all pecuniary and non-pecuniary 4 See discussion in the Honnold, Documentary History (1989), pp. 466–467; Winship, Changing Contract Practices in the Light of the United Nations Sales Convention: A Guide for Practitioners, 29 International Lawyer (1995) 525 (excerpt on ‘Products Liability Claims’) (Pace). 5 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 5 para. 2. 6 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 5 para. 1; Honnold/Flechtner, Commentary (2009), Art. 5 para. 71 footnote 1; Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 102. 7 Schlechtriem, Uniform Sales Law – The UN-Convention on Contracts for the International Sale of Goods (1986) p. 33. 8 A/CONF.97/C.1/L.4. See Honnold, Documentary History (1989), pp. 393, 657. CISG-AC Opinion no 12, para. 2.1.3. 9 A/CONF.97/C.1/L.51. See Honnold, Documentary History (1989), pp. 393, 657. CISG-AC Opinion no 12, para. 2.1.3. 10 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 5 para. 1; Khoo in: Bianca/Bonell, Commentary (1987), Art. 5 para. 2.1; Schlechtriem, Uniform Sales Law – The UNConvention on Contracts for the International Sale of Goods (1986) p. 33. CISG-AC Opinion no 12, para. 2.1.4. See also, Schlechtriem, Requirements of Application and Sphere of Applicability of the CISG, 36 Victoria University of Wellington Law Review (2005) 781 (792) who notes that the drafters of the CISG did not want to interfere with the general products liability issue that had emerged in the 1960 s and established new rules of strict liability. 11 A/CONF.97/C.1/L.21. See Honnold, Documentary History (1989), pp. 393, 657. This extension was indeed supported by many of the representatives at the Diplomatic Conference including the UK, Denmark, the German Democratic Republic, Norway and Egypt. See Honnold, Documentary History (1989), pp. 466–467. 12 Honnold, Documentary History (1989), pp. 466–467. 13 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 5 para. 2.

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damages flowing from the death or personal injury, including medical expenses, loss of earnings, pain and suffering, loss of faculty and amenity. All such claims must be brought under the appropriate domestic law which will be determined by private international law rules in accordance with Art. 7.14 Claims for loss of profit or damage to property caused by the same goods, however, will be governed by the CISG.15 As domestic law will exclusively govern claims based on death and personal injury, 6 the requirements stipulated in the CISG normally necessary for the enforcement of claims for damages will also be excluded.16 Thus, although it is normally necessary for the buyer to give notice of non-conformity within a reasonable time or in any event within two years in order to claim damages for defective goods (Art. 39), the fact that notice was not given would not necessarily preclude the buyer from claiming damages for personal injury under domestic law. In this case, limitations such as notice requirements, are regulated by domestic law, not the CISG.

2. Death or personal injury caused by other means Although Art. 5 provides that the Convention will not apply to the liability of the 7 seller for death or personal injury ‘caused by the good’, this does not mean that personal injury arising from the provision of labour or other ancilliary services, such as in the course of delivering the goods, falls within the scope of the CISG. The essence of Art. 5 is to remove from the sphere of application the complex area of the law dealing with product liability17 and and to leave the recovery of personal injury to domestic law.18 As the CISG Advisory Council notes that there is no reason to make a distinction between defective services and defective goods.19

3. Death or personal injury of third parties Although it has been argued that Art. 5 should apply regardless of whether the 8 personal injury was to the buyer himself, his employees, his customers or third parties,20 this has been held to be not necessarily so.21 a) Claims advanced by third parties. It is unquestionable that claims advanced by 9 persons who are not party to a CISG contract will not be governed by the CISG.22 Thus, any third party to which the original goods have been re-sold to will have no claim against the original seller under the CISG. This is a natural conclusion in light of Art. 4.23 The same can also be said for product liability claims from the employees of the buyer24 and, pursuant to Art. 2(a), of product liability claims brought by consumers against manufacturers and producers, irrespective of whether or not they purchase directly from the manufacturer. 14

CISG-AC Opinion no 12, para. 2.1.1. CISG-AC Opinion no 12, para. 2.1.1. 16 Khoo in: Bianca/Bonell, Commentary (1987), Art. 5 para. 2.3. 17 Khoo in: Bianca/Bonell, Commentary (1987), Art. 5 para. 2.1. 18 CISG-AC Opinion no 12, para. 2.2.2. 19 CISG-AC Opinion no 12, para. 2.2.2. 20 Enderlein/Maskow, International Sales Law (1992), p. 45. 21 See Oberlandesgericht Du ¨ sseldorf (Germany) 2 July 1993 (Veneer cutting machine), CISG-Online 74 (Pace), discussed at para. 12. 22 CISG-AC Opinion no 12, para. 2.3.4. 23 Lookofsky, The 1980 United Nations Convention on Contracts for the International Sale of Goods, in: Herbots/Blanpain, International Encyclopaedia of Laws – Contracts (2000), Art. 5 para. 67; Schwenzer/ Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 5 para. 4. 24 Honnold/Flechtner in: Commentary (2009), Art. 5 para. 71. 15

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b) Claims advanced by the buyer to be indemnified. As Art. 5 is perhaps “unfortunately worded”,25 opinion is divided as to whether liability to indemnify the buyer for the death or personal injury of third parties caused by the goods (and in particular defective goods) is also excluded. One view is that the text of Art. 5 (‘to any person’) should be given an all-inclusive interpretation to the effect that, as a third party is ‘any person,’ the buyer’s claims for indemnification should also be excluded from the scope of the Convention and be governed by the applicable domestic law. In other words, this view excludes outright all claims arising from personal injury before considering the kind of loss the buyer is claiming damages for. This all-inclusive interpretation appears to be in accord with the legislative intent of the Convention26 and has received support from the majority of commentators.27 Proponents argue that allowing the buyer to claim his customers’ injuries as damages of his own would lead to an undesirable collision of product liability with sales law remedies under the CISG.28 They further add that if such claims fall within the ambit of the CISG, in some cases, the buyer would be prevented from making claims against the seller if the injury did not arise until after the period for making claims for non-conforming goods under the CISG had already past (see Art. 39).29 This is a general question of whether the CISG pre-empts domestic product liability law and will be discussed in detail below (infra paras 18 et seq.). 11 The alternative view is that the buyer is merely seeking to recover the economic loss of having to compensate his customers rather than trying to hold the seller liable for death or personal injury. In this sense, the buyer’s claim should be understood as one of consequential loss covered by Art. 74 and not excluded by Art. 5.30 This view was adopted in one of the few reported cases on Art. 5 in what has been heralded by one commentator as a “gratifying” and “sensible commercial interpretation”31 by the German court.32 Although the court made no direct reference to Art. 5, it did rule that a 10

25

Fawcett/Harris/Bridge, International Sale of Goods in the Conflict of Laws (2005), p. 951. See Honnold, Documentary History (1989), p. 644 for comments by Mr. Plantard (France) explaining that the “words [‘to any person’] had been introduced in deference to the wishes of certain delegations in order to clarify the meaning of the provisions of [the] article … on the question of a claim by one of the parties to the contract against the other resulting from a claim against the former asserted by a third party.” 27 Schlechtriem, Uniform Sales Law – The UN-Convention on Contracts for the International Sale of Goods (1986) p. 33; Khoo in: Bianca/Bonell, Commentary (1987), Art. 5 para. 2.2; Enderlein/Maskow, International Sales Law (1992), p. 45; Lookofsky, The 1980 United Nations Convention on Contracts for the International Sale of Goods, in: Herbots/Blanpain, International Encyclopaedia of Laws – Contracts (2000), Art. 5 para. 67; Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 103; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 5 para. 7; Huber, Some introductory remarks on the CISG, 6 Internationales Handelsrecht (2006) 228 (232) (Pace); Kashiwagi, in: Sugiura/ Kubota (eds), Wein baibai jouyaku no jitsumu kaisetsu (Practical Commentary on the Vienna Sales Convention) (2009), p. 20; Schlechtriem/Butler, CISG (2009), para. 39. 28 Schlechtriem, Commentary on Oberlandesgericht Du ¨ sseldorf 2 July 1993 (Pace). 29 Schlechtriem, Uniform Sales Law – The UN-Convention on Contracts for the International Sale of Goods (1986) p. 33; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 5 para. 7. 30 In support of this view see: Lookofsky, In Dubio Pro Conventione? Some Thoughts about Opt-outs, Computer Programs and Pree¨mption Under the 1980 Vienna Sales Convention (CISG), 13 Duke Journal of Comparative and International Law (2003) 263 (287); Fawcett/Harris/Bridge, International Sale of Goods in the Conflict of Laws (2005), p. 952; Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 5 paras 8–10 and Art. 74 para. 14. 31 Bridge, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 246; cf critics of this decision, Karollus, Judicial Interpretation and Application of the CISG in Germany 1988–1994, Cornell Review of the Convention on Contracts for the International Sale of Goods (1995) p. 58; Ferrari, in: Ferrari/ Flechtner/Brand, Draft Digest and Beyond (2003), p. 103; Schlechtriem, Commentary on Oberlandesgericht Du¨sseldorf 2 July 1993 (Pace). 32 Oberlandesgericht Du ¨ sseldorf (Germany) 2 July 1993 (Veneer cutting machine), CISG-Online 74 (Pace). 26

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German buyer’s claim to be indemnified for liabilities to his customers (namely, a Russian sub-purchaser whose employees suffered death and personal injury due to a faulty cutting machine) is governed by the CISG and allowed for compensation under Arts 45, 74. In this author’s opinion, the alternative view is preferred.33 Although the legislative 12 history suggests a literal interpretation of Art. 5, too much emphasis on this should be avoided. It is suggested that adopting a literal interpretation of Art. 5 runs contrary to the observance of the international character of the CISG and promotion of uniformity that the Convention seeks to attain in international trade (Art. 7(1)). Fawcett/Harris/ Bridge elucidate this contravention by noting that treating a buyer’s claim to be indemnified for the death or personal injury of his customers caused by defective goods as a matter of domestic law and dealing with claims for recovery or price reduction that arise from the same defective goods separately under the CISG “would lead to an untidy de´peçage” in respect of the buyer’s claims against the seller.34 Instead, “a dynamic and progressive approach to the interpretation of the Conven- 13 tion should be taken into consideration, particularly catering to developments of international trade law.”35 This can be done by adopting a practical approach to the interpretation of Art. 5 and first determining the kind of loss the buyer is claiming for. While it is true that the origin of the buyer’s claim for indemnification is personal injury, the actual claim, however, is one of “balance sheet loss”36 or consequential economic loss stemming from having to compensate his customers.37 In order to ensure the uniform application of the CISG, this consequential loss should be treated as every other consequential loss arising from CISG contracts.38 In other words, there should be no difference in the way the CISG handles this consequential loss than from one flowing from damage to the property of the buyer’s customers, which, as discussed below, is not necessarily excluded from the CISG.39 Such a distinction would be illogical40 and deprive the buyer of the opportunity of full compensation under the CISG, a general principle which must not be overlooked when interpreting its provisions (Art. 7(2)).41

4. Liability for property damage Art. 5 does not exclude a seller’s liability for property damage from the scope of the 14 Convention.42 Thus, with respect to property damage, instead of resorting to the 33

See also CISG-AC Opinion no 12, para. 2.3.2, which also agrees with this approach. Fawcett/Harris/Bridge, International Sale of Goods in the Conflict of Laws (2005), p. 951; see also Zeller, CISG and the Unification of International Trade Law (2007), p. 68. Cf. Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 5 para. 7 who argues that a de´peçage in this case is “reasonable and appropriate”. 35 See supra Art. 7 para. 36 (or to be replaced with the second edition – this commentary – if the text has changed). 36 Bridge, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 246. CISG-AC Opinion no 12, para. 2.3.2. 37 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 5 paras 8–10. Fawcett/ Harris/Bridge, International Sale of Goods in the Conflict of Laws (2005), p. 952. 38 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 5 para. 10. 39 Fawcett/Harris/Bridge, International Sale of Goods in the Conflict of Laws (2005), p. 952. 40 Zeller, CISG and the Unification of International Trade Law (2007), p. 67. 41 On this point see Zeller, CISG and the Unification of International Trade Law (2007), pp. 66–68. 42 For case law recognition see: Handelsgericht Zu ¨ rich (Switzerland) 26 April 1995 (Saltwater isolation tank), CISG-Online 248 (Pace). For recognition among commentators see for example: Schlechtriem, Uniform Sales Law – The UN-Convention on Contracts for the International Sale of Goods (1986) p. 34; Khoo in: Bianca/Bonell, Commentary (1987), Art. 5 para. 3.2; Enderlein/Maskow, International Sales Law (1992), p. 46; Lookofsky, In Dubio Pro Conventione? Some Thoughts about Opt-outs, Computer Programs and Pree¨mption Under the 1980 Vienna Sales Convention (CISG), 13 Duke Journal of 34

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applicable domestic law, buyers must claim for damages under the CISG pursuant to Arts 45(1)(b) and 74, subject to limitations such as foreseeability and notification requirements (Arts 38, 39).43 As discussed below (infra paras 18 et seq.), a buyer will not be able to claim for damages under a more lenient national law, if for example he cannot meet these requirements. 15 In the assessment of what property damage will be actionable under the CISG, reference should be made to the buyer/seller contractual relationship. In this sense, property damage will include not only damage to the buyer’s property, but also damage to the goods themselves and damage to property to which the goods are combined, commingled or processed with in the normal course of business or use.44 It will not necessarily include damage to property that is not ‘caused by the goods’. As discussed above (supra paras 7–8), an assessment will need to be made on a case-bycase basis whether loss of this nature can be said to have arisen from the buyer/seller contractual relationship.45 This approach was followed by the Commercial Court in Zurich, where the buyer sued for water damage due to a leaky saltwater isolation tank and damage to the buyer’s staircase, which occurred as a result of the inaccurate transport of the tank.46 Along with recognising the right to claim for the water damage,47 the court found the damage to the buyer’s staircase to be contractual in nature and within the scope of the CISG because the contract included “delivery of the tank and installation”.48 Where defective goods give rise to both property damage and personal injury of the buyer, it has been suggested that the CISG will govern liability for the former, but not the latter.49 16 With respect to damage to the property of third parties, Art. 4 excludes claims brought by third parties who are not party to the CISG contract. Claims brought by a buyer seeking to recover the economic loss of having to compensate his customers for property damage caused by the goods will, on the other hand, be actionable under the CISG as this is recognised as a consequential loss flowing from the breach of contract (Art. 74).50 Thus, for example, a buyer of ‘removable’ protective film used to protect his products during transport may recover the economic loss of having to reimburse his customer’s expenditures in cleaning an adhesive residue left after the faulty film is removed.51

Comparative and International Law (2003) 263 (287); Schlechtriem/Butler, CISG (2009), para. 40; Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 5 para. 2; see also CISG-AC Opinion no 12, para. 3.1.1. 43 This lack of notice was detrimental to the buyers claim under the CISG in Handelsgericht Zu ¨ rich (Switzerland) 26 April 1995 (Saltwater isolation tank), CISG-Online 248 (Pace). 44 This view is also endorsed by CISG-AC Opinion no 12, para. 3.2. 45 Arguing that liability for damage to property not ‘caused by the goods’ should be settled on the basis of applicable domestic law see: UNCITRAL, Digest of Case Law on the CISG, Art. 5 para. 3. 46 Handelsgericht Zu ¨ rich (Switzerland) 26 April 1995 (Saltwater isolation tank), CISG-Online 248 (Pace). 47 However, the buyer lost his right to claim damages by failing to make timely notice pursuant to Art. 39. 48 Ibid. 49 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 5 para. 5; Spanogle/Winship, International Sales Law – A Problem-Oriented Coursebook (2000), pp. 82–83; Enderlein/Maskow, International Sales Law (1992), p. 46. 50 CISG-AC Opinion no 6,, para. 6; for recognition in the commentary see: Infra, Art. 74 paras 23–24 (see Art. 74 (1st edition, paras 23–24 (p. 997) – to be replaced with a reference to second edition of this commentart on “consequential loss”); Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2010), Art. 74 para. 32. 51 Bundesgerichtshof (Germany) 25 November 1998 (Surface protective film), CISG-Online 353 (Pace).

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5. Concurrent remedies As property damage claims and claims to indemnify the buyer for losses suffered by his customers fall within the scope of the CISG, the question now arises as to whether the CISG should be applied to the exclusion of domestic tort law claims.52 In other words, does the CISG pre-empt the applicability of domestic law with respect to these claims or will domestic law remain applicable concurrently with the CISG? The practical importance of this matter is often illustrated by the fact that in order to claim damages for defective goods under the CISG, the buyer must notify the seller of any non-conformity within a reasonable time or in any event within two years (Art. 39), whereas the notice requirement of many legal systems is either longer or non-existent.53 If concurrent remedies were permitted (and the non-conformity held to give rise to tortious claims), the buyer may be able to in effect circumvent the CISG limitations on recovery. Whilst these limitations may be inappropriate for the protection of interests such as death and personal injuries, as noted by the CISG Advisory Council, in some instances “[t]hese limitations may be appropriate for the protection of “contractual interests” created by the contract and for which the parties bargained.”54 The CISG itself is silent in regards to concurrent remedies. The reported case law, however, does offer some guidance. As noted by the 2012 UNCITRAL Digest, some courts have held that the CISG does not pre-empt the applicability of domestic law wih respect to tort claims or those based on the seller’s negligent or fraudulent misrepresentation.55 The starting point for these courts56 appears to be an examination as to the nature of the claim: “a tort that is in essence a contract claim and does not involve interests existing independently of contractual obligations (such as goods that cause bodily injury) will fall within the scope of the CISG regardless of the label given to the claim.”57 Scholarly opinion is divided as to how this issue should be resolved, with a “spectrum of opinions” both justifying and rejecting the application of the CISG to the exclusion of domestic law.58 Honnold is the leading supporter in favour of the view that the CISG operates to the exclusion of domestic tort law.59 He argues that “domestic rules that turn on substan52 This author is using reference to domestic “tort” law, but this need not necessarily be the case. As Schlechtriem persuasively argues, insofar as domestic law applies concurrently with the CISG, it is irrelevant whether domestic law treats the remedy as contractual, quasi-contractual, or extra-contractual. Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 5 para. 12; confirmed in Schwenzer/ Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 5 para. 15. Also in agreement see Honnold/Fechtner, Uniform Law (2009), Art. 4 para. 65 who argues that domestic law labelling (e. g. “tort” or “product liability”) is not conclusive in determining whether the rule is displaced by the CISG. It is the “substance rather than the label or characterization of the competing rule of domestic law that determines whether it is displaced by the Convention.” In agreement, see Khoo in: Bianca/Bonell, Commentary (1987), Art. 4 para. 3.3.5. 53 While this issue is raised by most commentators over the last 20 years, interestingly enough, it has yet to arise in the reported case law. 54 CISG-AC Opinion no 12, para. 2.1.8. 55 UNCITRAL, Digest of Case Law on the CISG (2012), Art. 5 para. 4. 56 U.S. District Court, Eastern District of Arkansas (United States) 23 December 2009 (Refridgerator motors), CISG-Online 2045 (Pace); U.S. District Court, Southern District of Ohio (United States) 26 March 2009 (Paper winding machine), CISG-Online 1880 (Pace). 57 U.S. District Court, Eastern District of Arkansas (United States) 23 December 2009 (Refridgerator motors), CISG-Online 2045 (Pace). 58 Eiselen, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual, Vol. 4 § 84:42, who offers a survey of some of these opinions looking at Enderlein/Maskow, Honnold, Khoo, Lookofsky and Schlechtriem. 59 Also in agreement, see Enderlein/Maskow, International Sales Law (1992), pp. 43, 46.

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tially the same facts as the rules of the Convention must be displaced by the Convention” as allowing the concurrent application of domestic law “would destroy the Convention’s basic function to establish uniform rules (Art. 7(1)).”60 He suggests that this approach most likely captures the result intended by the drafters because if they had intended domestic law to be preserved on a particular matter they would have explicitly excluded that matter from the CISG, as was done, for example, in Art. 2.61 Flechtner agrees and further adds that allowing concurrent remedies only for property damage would result in a strange set of priorities. He argues that this would create a preference, not necessarily intended by the drafters, for property damage claims over claims for death and personal injury as property damage claimants would have their choice of remedies either under the CISG or domestic law, whereas personal injury claimants would be limited to domestic law only.62 In support of concurrent remedies, opinions are varied. For example, Bridge argues that, unlike with contract, there is no concept of tort under the CISG that could limit the application of domestic tort rules.63 He suggests that this should be treated as a matter of domestic law and that if the drafters intended to deprive the buyer of the freedom to sue in tort, then they should have done so explicitly. Also championing this view, Schlechtriem suggests that in resolving this issue a distinction needs to be made between “contractual interests” and “extra-contractual duties” which protect “interests such as health and property existing independently of contractual obligation.”64 He argues that it is the essence of contractual interests which is regulated by CISG rules and remedies, and that these should not be altered or changed by domestic law. According to Schlechtriem, consequential loss resulting from property damage (and, it is suggested, from having to reimburse customers’ claims) is in the field of extra-contractual remedies “outside the principal domain of interests created by contracts and protected by contractual remedies.”65 In this situation, he argues, concurrent application of domestic tort law may be justified. Schwenzer/Hachem also support concurring domestic remedies, though in a slightly more limited sense. They argue that with respect to property damage particularly, a distinction needs to be made between property damage which results as a breach of contract and that which results as a “breach of standard safety expectations and where it was only coincidence that the buyer and not a third party was harmed.”66 Under this view the CISG applies exclusively to the former, but not the latter as the CISG is not concerned with general duties of safety, which not only protect the buyer but also third parties. Lookofsky warns of “stretching” the CISG “beyond its essential design”.67 He argues that a pre-emption of domestic tort law should not be done lightly, pointing to the fact that a State’s accession to the CISG only demonstrates its willingness to substitute its 60 Honnold/Flechtner, Uniform Law (1999), Art. 5 para. 73; affirmed in Honnold/Flechtner, Uniform Law (2009), Art. 5 para. 73. See also Khoo in: Bianca/Bonell, Commentary (1987), Art. 5 para. 3.2. 61 Ibid. 62 Honnold/Flechtner, Uniform Law (2009), Art. 5 para. 73. 63 Bridge, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 246. 64 Schlechtriem, The Borderland of Tort and Contract – Opening a New Frontier?, 21 Cornell International Law Journal (1988) 473–474. 65 Ibid. Also in support of this view see Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 104–105. 66 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 5 para. 14; see also Schwenzer/Hachem, The CISG – Successes and Pitfalls, 57 American Journal of Comparative Law (Spring 2009) 457 (469–472). 67 Lookofsky, In Dubio Pro Conventione? Some Thoughts about Opt-outs, Computer Programs and Pree¨mption Under the 1980 Vienna Sales Convention (CISG), 13 Duke Journal of Comparative and International Law (2003) 263 (289).

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domestic sales law with the CISG rules, not an intention to place its contract and tort regimes “under one CISG roof”.68 For Lookofsky, concurrent remedies pose little threat to the uniform interpretation of the CISG, as this could still be attained if the courts of Contracting States, when faced with similar facts, interpret the applicable Convention remedies as “non-exclusive”.69 In this author’s opinion, domestic law should be excluded where the CISG would 25 otherwise provide remedies for the loss suffered. The question is, therefore, whether the claim involves interests that exist independently of contractual obligations. To the extent that the interests, for which the buyer is seeking protection are independently “tortious” or “extra-contractual”, application of domestic law should be permited.70 It is suggested that allowing the concurrent application of domestic law in relation 26 to the protection of contractual interests would contravene the parties’ intention in contracting under the CISG.71 The CISG prescribes both remedies and limitations to these remedies with respect to certain kinds of loss. Insofar as property damage and claims for indemnification can be found to fall within the scope of the CISG as consequential loss, limitations provided by the CISG should not be allowed to be circumvented by the operation of domestic tort law (e. g. by allowing domestic tort law to displace Art. 39 limitations). In other words, when parties contract under the CISG, they do so with the intent that its provisions should not be excluded by the operation of domestic law. It would clearly be contrary to this intention to allow the application of domestic law remedies when the kind loss suffered is already provided for under the Convention. In return for imposing strict liability on the seller in the case of nonconforming goods, buyers have made a compromise by submitting to Convention limitations, such as foreseeability and notice requirements. Courts should hold buyers to their compromises otherwise the fair balance between buyers and sellers devised by the Convention may be disrupted.72

III. Comparable Rules Neither the PICC nor the PECL contain comparable provisions dealing with death or 27 personal injury specifically or product liability generally. “Radically” different from the CISG,73 however, damages for non-pecuniary loss resulting from death or personal injury may be recoverable under both the PICC (Art. 7.4.2(2)) and the PECL (Art. 9:501(2)(a)).74 The reason for this has been attributed as not so much as a difference in approach between the CISG and these unifying instruments, but rather to the compromise made at the Vienna Conference and the wish to remove product liability rules from the sphere of the Convention.75 68

Ibid. at 288. Ibid. 70 CISG-AC Opinion no 12, paras 3.1.6 and 3.3.2. Although it is admitted that these these qualifications or labels are essentially dependant on the determination of the national court before whom the matter comes and in this sense lack universal appeal. 71 This intention can be presumed from either the express inclusion of the CISG or, where the parties have not expressly excluded the CISG, in cases of default application pursuant to Art. 1. 72 Honnold/Flechtner, Uniform Law (2009), Art. 5 para. 73. 73 Eiselen, Remarks on the Manner in which the UNIDROIT Principles of International Commercial Contracts May Be Used to Interpret or Supplement Article 74 of the CISG (2004) (Pace). 74 See also Chengwei, Remedies for Non-Performance: Perspectives from CISG, UNIDROIT Principles & PECL (2003) para. 13.4 (Pace). 75 Eiselen, Remarks on the Manner in which the UNIDROIT Principles of International Commercial Contracts May Be Used to Interpret or Supplement Article 74 of the CISG (2004) (Pace). 69

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In Book VI (Non-contractual liability arising out of damage caused to another), the DCFR, unlike the CISG, provides specifically for the recovery of non-economic loss including death and personal injury (e. g. Art. VI. – 2:201).

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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. Bibliography: Bridge, The Bifocal World of International Sales: Vienna and Non-Vienna, in: Cranston (ed.) Making Commercial Law (1997), p. 277; Ferrari, Remarks on the UNCITRAL Digest’s Comments Article 6 CISG, 25(1) Journal of Law and Commerce (2005/2006) 13; CISG-AC Opinion no 16, Exclusion of the CISG under Article 6, Rapporteur: Dr Lisa Spagnolo, Adopted by the CISG Advisory Council following its 19th meeting in Pretoria, South Africa on 30 May 2014; Fountoulakis, The Parties Choice of “Neutral Law” in International Sales Contracts, VIII European Journal of Law Reform 303–329 (2005); Lookofsky, Opt-outs under Article 6, 13 Duke Journal of Comparative Law (2003) 272, Schlechtriem, Requirements of Application and Sphere of Applicability of the CISG, 4 Victoria University of Wellington Law Review (2005) 781; Schroeter, To Exclude, to Ignore or to Use? Empirical Evidence on Courts’, Parties’ and Counsels’ Approach to CISG, https//ssrn.com/abstract=1981742; Spagnolo, CISG Exclusion and Legal Efficiency (2014).

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Drafting history . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Party autonomy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Dispositive character of the CISG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Conditions for the derogation or exclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Methods of opting out. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Choice of law methods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Contractual methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Derogation from or modification or exclusion of the CISG. . . . . . . . . . . . . . . . a) Bases for derogation or modification or exclusion. . . . . . . . . . . . . . . . . . . . . . . aa) Implied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Express. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Derogation from the CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Modification of the CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Opting in – agreements to apply the CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 4 7 7 8 10 11 12 13 14 15 16 22 23 25 26 28

I. Importance and Role of the Provision 1. General Party autonomy and freedom of contract are essential features of the CISG. The 1 Convention, throughout its text, provides for the primacy of party autonomy in respect of the content of sales contracts. In other words, it “affirms and preserves the absolute” freedom “of the parties to determine the content of their contract”.1 More specifically, Art. 6 provides that parties to a sales contract may expressly or impliedly derogate from some or all2 of the provisions of the Convention. It also implies that the parties may decide to subject their contract to the CISG even if the CISG is not applicable by operation of Arts 1, 2 and 3. 1

Schlechtriem/Butler, CISG (2016), p. 3. Bridge, The International Sale of Goods (2007), para. 11.42; Ferrari, CISG Rules on Exclusion and Derogation: Article 6, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004). 2

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The CISG applies automatically when the conditions of the Convention are satisfied. This could have the consequence that certain businesspeople are caught by surprise. Art. 6 ensures that standard terms (or standard form) contracts elaborated by commodities or other trading associations are valid even when they opt out of the CISG, where the CISG would have otherwise been applicable. Indeed, many standard form contracts (e. g. GAFTA3 and FOSFA4) are governed by English law and opt out of the CISG.5 During the comments before the diplomatic conference that led to the adoption of the CISG it was noted that “traders … should feel reassured” by the non-mandatory or “enabling statute” character of the Convention.6 The conference rejected the suggestion, almost without any discussion, that party autonomy should be limited by a principle of good faith.7 3 While party autonomy is welcome by both the business world and commentators, it is also acknowledged that the variation in substantive rights under the Convention, rather than complete exclusion of the CISG, would significantly complicate the application of CISG remedies.8 2

2. Drafting history There is significant literature on the drafting history of Art. 6 and its comparison with its predecessors: it is clear that Art. 6 CISG follows Art. 3 ULIS and Art. 2 ULF.9 Art. 6 is identical to Art. 5 of the Draft Convention. 5 During the drafting negotiations of the CISG it was suggested that any exclusion of the Convention should be conditioned on the valid choice of an applicable domestic law. UNCITRAL decided not to adopt any restriction. If it is clear that the parties opt out of the CISG, then conflict of laws rules will determine which law is applicable.10 6 Art. 3 ULIS in its second sentence provided that a total or partial exclusion of the application of the Uniform Law “may be express or implied.” Such references did not survive in the CISG as it was thought that references to “implied” exclusion might encourage courts to conclude, on insufficient grounds, that the Convention had been wholly excluded.11 4

3 Grain and Feed Trade Association: http://www.gafta.com. See, in particular, clause 29 in the GAFTA Contract no 100: http://www.gafta.com/write/MediaUploads/Contracts/2010/100.pdf. 4 Federation of Oils, Seeds and Fats Association: http://www.fosfa.org/. 5 Bridge, The International Sale of Goods (2007), para. 11.42 and footnote 197. He also notes that the major trading associations exclude all conventions, even the predecessors of the CISG, namely ULIS and ULF. 6 Winship, The Scope of the Vienna Convention of International Sales Contracts, in: Galston/Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sales of Goods (1984, 1999), at 1–33 with reference to the Comments by the Swiss government, A/CONF.97/8, Add.2, p. 7, also with support expressed by Egypt, Korea and Chile, A/CONF.97/C.1/SR.4, paras. 60, 61 and 74, reprinted in Official Records, pp. 252–253. 7 A/CONF.97/C.1/SR.3 paras 53–65, reprinted in Official Records, pp. 247–248. 8 Erauw/Flechtner, Remedies under the CISG and Limits to their Uniform Character, in: Sarcevic/ Volken (eds), The International Sale of Goods Revisited (2001), p. 35 at 66. 9 Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 6 paras 1–4; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 6 para. 1; Magnus, in: Staudinger Kommentar (2005), Art. 6 paras 5–7. A comparison of Art. 6 with its antecedent counterparts in ULIS and ULF is available at http://www.cisg.law.pace.edu/cisg/text/matchup/matchup-u-06.html. 10 Honnold/Flechtner, Commentary (2009), Art. 6 para. 75. 11 Official Records, p. 17, UNCITRAL YB II, A/CN.9/SER.A/1970, p. 55, para. 45; Honnold, Documentary History (1989), p. 61.

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II. Detailed Commentary 1. Party autonomy Parties to a sales contract are free to agree terms or rules of law which supplement, 7 modify or replace the CISG. Such party autonomy may be exercised in many different ways. For example, a seller and a buyer from CISG Contracting States may decide to submit their contract to the law of a non-Contracting State (e. g. English law). In that respect choice of court or arbitration clauses are also relevant to the extent that a court of a Contracting State that would normally apply the CISG would have to determine whether a choice of law submitting to a third country law is effective or not and whether the mandatory rules of the forum are applicable.12 Art. 6, of course, states that the Convention is not mandatory law of a Contracting State.13 A choice of law in favour of the law of a Contracting State would normally lead to the application of the CISG, as it will be discussed infra. It has also been argued that the freedom of contract provided for in Art. 6 only extends to the level of substantive law while associated choice of law clauses would be governed by the conflict of laws rules of the deciding court.14 It is also generally understood that the CISG would govern the manner in which the CISG may be excluded, modified or derogated from.15 a) Dispositive character of the CISG. The CISG has a dispositive character16 so that 8 contracting parties may derogate from or exclude its application.17 This is manifested by Art. 6 and other provisions, such as Arts 30, 35 and 53, which state that performances are to be in accordance with the contract and the Convention. Exceptions to the dispositive character can be found in Art. 12 and in Part IV of the 9 Convention. The former relates to the form requirements pursuant to Art. 11 which do not apply when one of the contracting parties has its place of business in a Contracting State which has made a reservation pursuant to Art. 96. Thus, it would follow that strict 12 See EC Regulation no 593/2008 on the Law Applicable to Contractual Obligations (Rome I), Arts 3 and 9; Bridge, International Sale of Goods (2007), para. 1.23. 13 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 6 para. 4. See also, e. g., that a court has stated that Art. 55, relating to open-price contracts, is only applicable where the parties have not agreed anything to the contrary – Cour d’appel Grenoble (France) 26 April 1995 (Candy), CISG-Online 153 (Pace); another court observed that Art. 39, relating to the notice requirement, is not mandatory and can be derogated from – Landgericht Giessen (Germany) 5 July 1994 (Women’s clothes), CISG-Online 111 (Pace). In the same vein, the Austrian Supreme Court has concluded that article 57 also can be derogated from – Oberster Gerichtshof (Austria) 10 November 1994 (Chinchilla furs), CISG-Online 117 (Pace). 14 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 6 para. 15. 15 CISG-AC Opinion 16, Rule 2 and related comments. There is also empirical evidence of the various approaches taken by parties, counsel on the matter of exclusion, derogation of modification of the CISG. See Schroeter, To Exclude, to Ignore or to Use? Empirical Evidence on Courts’, Parties’ and Counsels’ Approach to CISG, https//ssrn.com/abstract=1981742. 16 Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 6 para. 5 with further references. See also Audit, Vente Internationale (1990), p. 37; Landgericht Stendal (Germany) 12 October 2000, CISG-Online 592 (Pace); Juzgado Nacional de Primera Instancia en lo Comercial (Argentina), 6 October 1994, CISG-Online 378 (Pace). 17 For express references to the dispositive character of the Convention, see Corte Supreme di Cassazione (Italy) 19 June 2000 (Metal processing plant), CISG-Online 1317 (Pace); see Oberster Gerichtshof (Austria) 21 March 2000 (Wood case), CISG-Online 641 (Pace); Oberster Gerichtshof (Austria) 15 October 1998 (Timber), CISG-Online 380 (full text of the decision); Handelsgericht Wien (Austria) 4 March 1997, CISG-Online 743; Tribunal Cantonal Valais (Switzerland) 29 June 1994 (Furniture), CISG-Online 134.

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Part I. Sphere of Application and General Provisions

form requirements of a Contracting State (with express reservation to that effect) cannot be derogated from by virtue of Art. 6.18 The other exception relates to Part IV, which is addressed to Contracting States and not to contracting parties so that its application cannot be controlled by the parties.19 10

b) Conditions for the derogation or exclusion. There are no formal conditions for the derogation or exclusion of the CISG. It suffices that the parties to the sales contract express their agreement to that effect, but such agreement does not require any specific form.20 Nothing in the language of the CISG suggests otherwise. Thus, it is for the competent court or tribunal to determine which law is to be applied by operation of conflict of laws rules.21 There is an argument amongst scholars as to which law would be applicable to the validity of an agreement seeking to exclude or derogate from the CISG; as there is no relevant case law, the debate appears to be purely academic.22 It is the view of this author that an agreement of the parties aiming to exclude the CISG should be seen as a stand-alone agreement and should be governed by the law it selects or failing that by the law applicable by virtue of conflict of laws rules.

2. Methods of opting out 11

Parties may opt out of the CISG in part (derogation or modification) or in total (exclusion) by either choosing a governing law other than the CISG or by drafting their contract in a detailed form and excluding the CISG, or at least specific parts of it (most typically Part III) in this way. The other option is to refer to standard terms and conditions, which is quite common in the commodities trade. The reference to standard terms upstage specific parts of the CISG by active choice of specific rules of law.

12

a) Choice of law methods. Choice of law clauses are a common occurrence in international commerce. More than 80 % of international contracts will normally contain a choice of law clause. In this way the parties may purport to opt out of the CISG and subject their contract to another law. This can be done by either choosing the law of a non-Contracting State (e.g. English law) or by specifically choosing only the domestic sales law of a Contracting State. The parties may also decide to make a jurisdiction agreement in favour of a non-Contracting State without a specific agreement of applicable substantive law to govern the contract, expecting that the court will then choose its own domestic law as the governing law; a jurisdiction agreement in favour of a non-Contracting State would not normally (or necessarily) have the effect of derogating or excluding the application of the CISG. However,

18 Schroeter, Freedom of contract: Comparison between provisions of the CISG (Article 6) and counterpart provisions of the Principles of European Contract Law, 6 Vindobona Journal of International Commercial Law and Arbitration (2002-2) 257 (261). 19 See Tribunale die Vigevano (Italy) 12 July 2000, CISG-Online 493, Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2005), Art. 6 para. 4. 20 See Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 6 para. 12; Ferrari/ Saenger, Internationales Vertragsrecht, Art. 6 para. 2; Bonell, in: Bianca/Bonell, Commentary (1987), Art. 6 para. 4; Winship, The Scope of the Vienna Convention, in: Galston/Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sales of Goods (1984, 1999), pp. 1–33. 21 See e.g., Arbitral Award, Foreign Trade Court of Arbitration Attached to the Serbian Chamber of Commerce in Belgrade, 17 August 2009 (vegetable fats case), CISG-Online 2039 (Pace); Federal Court of Australia (Australia) 20 May 2009, Olivaylle Pty Ltd v Flottweg GMBH & Co KGAA, CISG-Online 1902 (Pace); Supreme Court of Wales (Australia) 13 October 2006, Italian Imported Foods Pty Ltd v Pucci S. r. l., CISG-Online 1494 (Pace). 22 See Ferrari, in Schlechtriem/Schwenzer, Kommentar (German ed. 2013), paras 13–14 with further references in footnotes 51–59.

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parties should be cautious and study the law of the jurisdiction they have selected before finally agreeing to it. b) Contractual methods. The most common way to opt out of the CISG, and most 13 specifically its Part III, is by drafting the sales contract in a way that renders the CISG either obsolete or inapplicable, e. g. by drafting a very detailed contract. By using this method the parties insert directly in their contracts specific rules of law they wish to abide by, unlike the choice-of-law method where the parties indirectly make such insertion, i.e. they choose a law and by the choice of law the choose rules of law to the derogation or exclusion of the CISG. For many years, one of the major obstacles to the development and application of the Convention was that most standard contract forms for international sales contained no reference whatsoever to the CISG or if a reference was contained it was to the effect of excluding its application. It seems that this situation is now changing. For example, the ICC Model International Sales Contract for manufactured goods intended for resale has been adapted to be consistent with the CISG.23 In the United States it seems that most U.S. exporters continue to opt out of the CISG in their contracts, although even in the U.S. the CISG is gaining more acceptance.24 In certain industries, however, and most typically in commodities sales, there is usually an express opting out of the CISG.25

3. Derogation from or modification or exclusion of the CISG The actual derogation from or modification of the CISG may be effected impliedly 14 (typically by choice of another law) or expressly (with a positive choice of another law and negative choice of the CISG). It would be useful to examine the derogation from the CISG separately from the modification of the CISG after the discussion about the various bases for derogation or modification. a) Bases for derogation or modification or exclusion. A derogation from or 15 modification or exclusion of the Convention’s provisions may be by implied or express agreement of the parties. aa) Implied. A good number of court decisions and arbitration awards have dealt 16 with the question of implied derogation or modification or exclusion of the Convention. Indeed most courts acknowledge the validity of an implied exclusion,26 provided that

23

ICC Publications No 738E, (2013). See McMahon, Drafting CISG Contracts and Documents and Compliance Tips for Traders (2004), available at http://www.cisg.law.pace.edu/cisg/contracts.html. 25 See Bridge, The Bifocal World of International Sales: Vienna and Non-Vienna, in: Cranston (ed.) Making Commercial Law (1997), p. 277; Mullis, Termination for Breach of Contract in C. I. F. Contracts Under the Vienna Convention and English Law: Is there a substantial Difference, FS Guest (1997), pp. 137 et seq., emphasizing the lack of a developed case law. See also, in particular, clause 29 of GAFTA Contract no 100: http://www.gafta.com/write/MediaUploads/Contracts/2010/100.pdf. 26 See Cour d’appel de Rouen (France), 26 September 2013 (glue) CISG-Online 2551; Oberster Gerichtshof (Austria) 2 April 2009 (boiler) CISG-Online 1889; Arbitral Award, ICC Court of Internatonal Arbitration Award 11333 of 2002 (machines) CISG-Online 1420 (Pace); Oberster Gerichtshof (Austria) 22 October 2001 (Gasoline and gas oil), CISG-Online 614 (Pace); Cour de cassation (France) 26 June 2001 (Auto parts), CISG-Online 600 (Pace); Audiencia Provincial de Alicante (Spain) 16 November 2000 (Shoes), CISG-Online 1318 (Pace); Tribunale di Vigevano (Italy) 12 July 2000 (Sheets of vulcanized rubber used in manufacture of shoe soles), CISG-Online 493 (Pace); Oberlandesgericht Dresden (Germany) 27 December 1999 (Chemical products), CISG-Online 511 (Pace); Oberlandesgericht Mu¨nchen (Germany) 9 July 1997 (Leather goods), CISG-Online 282 (Pace); Landgericht Mu¨nchen (Germany) 29 May 1995 (Computer hardware), CISG-Online 235 (Pace); Oberlandesgericht Celle (Germany) 24 May 1995 (Used printing) CISG-Online 152 (Pace). 24

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Part I. Sphere of Application and General Provisions

the (implied) intention of the parties27 is clear28 and real29. However, there is nothing in the language of the Convention indicating the possibility of implied exclusion.30 There are, however, also a few cases suggesting, at least in respect of exclusion, that an exclusion cannot be effected impliedly. 17 There are different ways in which the parties can impliedly exclude the CISG. For example and most typically, the parties choose the law31 of a non-Contracting State to govern their contract.32 18 The situation is less clear when the parties choose the law of a Contracting State to govern their contract without any reference to the CISG in their contract. In such a situation case law is not unanimous. Most likely mistakenly, some arbitral awards33 and several court decisions34 suggest that such a choice amounts to an implied exclusion of the Convention, because otherwise the choice would have no practical meaning. Such an approach, however, does not try to ascertain the true intent of the parties, it simply second-guesses it. The majority of the cases, however, takes a different view. Most court decisions from many different jurisdictions35 and arbitral 27 According to CISG-AC Opinion 16, Rule 3, the intent of the parties to exclude the CISG must be determined in accordance with Art. 8 CISG. See in this respect comments 3-1 to 3.8 following this black letter rule. 28 See Oberlandesgericht Linz (Austria) 23 January 2006 (car) CISG-Online 1377 (Pace); Tribunal Cantonal du Jura (Switzerland) 3 November 2004 CISG-Online 965 (Pace); Court of Appeals (5th Circuit) (U.S.), BP International, Ltd. and BP Exploration & Oil, Inc v Empresa Estatal Petroleos de Ecuador, et al. Empresa Estatal Petroleos de Ecuador and Saybolt, Inc., 11 June 2003, corrected on 7 July 2003 (Gasoline) CISG-Online 730; Oberster Gerichtshof (Austria) 22 October 2001 (gasoline) CISG-Online 614. 29 See Tribunal Cantonal du Jura (Switzerland) 3 November 2004 CISG-Online 965 (Pace). 30 See Landgericht Landshut (Germany) 5 April 1995 (Sport clothing case); Federal Court of International Trade (U.S.) 24 October 1989, Orbisphere Corp. v United States, CISG-Online 7 (Pace). There is also an award to the same effect: Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Award 54/1999, 24 January 2000, CISG-Online 1042 (Pace). 31 Whether such a choice is to be deemed to be valid and enforceable depends on the rules of private international law applied by the deciding court of tribunal. 32 See Oberlandesgericht Linz (Austria) 23 January 2006 (car) CISG-Online 1377 (Pace); Tribunal Cantonal du Jura (Switzerland) 3 November 2004 CISG-Online 965 (Pace); District Court, Northern District of Illinois (U.S.), 29 January 2003, Ajax Tool Works Inc., v Can-Eng. Manufacturing Ltd (fluidized bed furnace) CISG-Online 772 (Pace); Audiencia Provincial de Alicante (Spain) 16 November 2000 (Shoes), CISG-Online 1318 (Pace), where the parties implicitly excluded application of the Convention by providing that their contract should be interpreted in accordance with the law of a nonContracting State and by submitting their petitions, statements of defence, and counterclaims in accordance with the domestic law of the forum (a Contracting State); Oberlandesgericht Du¨sseldorf (Germany) 2 July 1993 (Veneer cutting machine), CISG-Online 74 (Pace). 33 See Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (Russian Federation), 16 March 2005, CISG-Online 1480 (Pace); Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (Russian Federation), 12 April 2004, CISG-Online 1208 (Pace); Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (Russian Federation), 11 October 2002, CISG-Online 893 (Pace);Arbitral Award, Ad hoc Florence Arbitration, 19 April 1994 (Leather/textile wear), CISG-Online 124 (Pace). 34 See Hof’s-Hertogenbosch (Netherlands), 13 November 2007, Adex International Ltd v. First International Computer Europe B.V., unpublished; Cour d’appel Colmar (France) 26 September 1995 (Ceramic baking dishes/cake pans, souffle´ pans, etc.), CISG-Online 226 (Pace); Kantonsgericht des Kantons Zug (Switzerland) 16 March 1995 (Cobalt), CISG-Online 230 (Pace); Tribunale Civile de Monza (Italy) 14 January 1993 (Ferrochrome), CISG-Online 540 (Pace). 35 Bundesgerichtshof (Germany), 11 May 2010 (aluminium rings) CISG-Online 2125 (Pace); Oberster Gerichtshof (Austria) 2 April 2009 (boiler), CISG-Online 1889 (Pace); Polimeles Protodikion Athinon (Greece) case 4505/2009 (materials for bullet-proof vests) CISG-Online 2228 (Pace); Rechtbank Rotterdam (Netherlands) 5 November 2008 (crabs) CISG-Online 1817; District Court, Eastern District Michiagn (U.S.), 28 September 2007, Easom Automation Systems, Inc v hyssenkrupp Fabco, Corp (Sport bar

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awards36 correctly argue the contrary, i. e. the CISG is the law for international sales in the Contracting State whose law the parties chose. The parties’ choice is not meaningless, rather it identifies the national law to be used for filling gaps in the Convention37 avoiding at the same time any unnecessary recourse to private international law. In other words, the choice of the law of a Contracting State does not exclude the Convention’s applicability, since it forms an integral part of the national law of that state and is the specific law to be applied for international sales (especially where more than one system of sales law exist, such as in the United States and China). It also follows that if the parties clearly chose the domestic law of a Contracting State, rather than the law of the State in general or its international law specifically, the Convention must be deemed excluded.38 A prime example would be assembly system) CISG-Online 1601; Oberlandesgericht Linz (Austria) 23 January 2006 (car) CISGOnline 1377 (Pace); Oberster Gerichshof (Austria) 26 January 2005 (mushrooms) CISG-Online 1045; Court of Appeals (5th Circuit) (U.S.), BP International, Ltd. and BP Exploration & Oil, Inc v Empresa Estatal Petroleos de Ecuador, et al. Empresa Estatal Petroleos de Ecuador and Saybolt, Inc., 11 June 2003, corrected on 7 July 2003 (Gasoline) CISG-Online 730; Oberster Gerichtshof (Austria) 14 January 2002 (Cooling system), CISG-Online 643 (Pace); Hof van Beroep Gent (Belgium) 15 May 2002 (Design of radio phone), CISG-Online 746 (Pace); Cour d’appel Paris (France) 6 November 2001 (Cables), CISG-Online 677 (Pace); Supreme Court of Queensland (Australia) 17 November 2000 (Scrap steel), CISG-Online 587 (Pace); Oberlandesgericht Frankfurt (Germany) 30 August 2000 (Yarn), CISG-Online 594 (Pace); Bundesgerichtshof (Germany) 25 November 1998 (Surface protective film), CISG-Online 353 (Pace); Oberlandesgericht Mu¨nchen (Germany) 21 January 1998 (Insulating materials), CISG-Online 536 (Pace); Kantonsgericht Nidwalden (Switzerland) 3 December 1997 (Furniture), CISG-Online 331 (Pace); Bundesgerichtshof (Germany) 23 July 1997 (Benetton II fashion textiles), CISG-online 276 (Pace); Oberlandesgericht Mu¨nchen (Germany) 9 July 1997 (Fitness equipment), CISG-Online 281 (Pace); Oberlandesgericht Karlsruhe (Germany) 25 June 1997 (Surface protective film), CISG-Online 263 (Pace); Handelsgericht des Kantons Zu¨rich (Switzerland) 5 February 1997 (Sunflower oil), CISG-Online 327 (Pace); Cour de cassation (France) 17 December 1996 (Ceramic baking dishes/cake pans, souffle` pans, etc.), CISG-Online 220 (Pace); Landgericht Kassel (Germany) 15 February 1996 (Marble slab), CISG-Online 191 (Pace), Oberlandesgericht Hamm (Germany) 9 June 1995 (Window elements), CISG-Online 146 (Pace); Rechtbank s’Gravenhage (Netherlands) 7 June 1995 (Apple trees), CISG-Online 369 (Pace); Oberlandesgericht Mu¨nchen (Germany) 8 February 1995 (Plastic granules), CISG-Online 142 (Pace); Oberlandesgericht Ko¨ln (Germany) 22 February 1994 (Rare hard wood), CISG-Online 127 (Pace); Oberlandesgericht Koblenz (Germany) 17 September 1993 (Computer chip), CISG-Online 91 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 8 January 1993 (Tinned cucumbers), CISG-Online 76 (Pace). 36 See Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (Russian Federation), 22 October 2004, CISG-Online 1359 (Pace); Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (Russian Federation), 17 September 2003, CISG-Online 979 (Pace); Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (Russian Federation), 25 June 2003, CISG-Online 978 (Pace); Arbitral Award, ICC Court of Internatonal Arbitration Award 11333 of 2002 (machines) CISG-Online 1420 (Pace); Arbitral Award, ICC 9448/1999 (Roller bearings), CISGOnline 707 (Pace); Arbitral Award, ICC 9187/1999 (Coke), CISG-Online 705 (Pace); Arbitral Award, Arbitration-Schiedsgericht der Handelskammer Hamburg, 21 March 1996 and 21 June 1996 (Chinese goods), CISG-Online 465 (Pace); Arbitral Award, Arbitration Court attached to the Hungarian Chamber of Commerce and Industry, 17 November 1995 (Mushrooms), CISG-Online 250 (Pace); Arbitral Award, ICC 8324/1995 (Magnesium); Arbitral Award, ICC 7844/1994 (Radio equipment), CISG-Online 567 (Pace); Arbitral Award, ICC 7660/1994 (Battery machinery), CISG-Online 129 (Pace); Arbitral Award, ICC 7565/1994 (Coke), CISG-Online 566 (Pace); Arbitral Award, ICC 6653/1993 (Steel bars), CISGOnline 71 (Pace); Arbitral Award, Arbitration-Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft – Wien, 15 June 1994 (SCH-4366) (Rolled metal sheets), CISG-Online 121 (Pace). 37 Circuit Court of Appeals, 5th Circuit (U.S.) 11 June 2003, B. P. Petroleum International Ltd. v Empresa Estatal Petroleos de Ecuador, CISG-Online 730 (Pace). 38 District Court, Southern District of New York (U.S.) 29 May 2009, Doolim Corp. v. R Doll, LLC, et al. (garments), (Pace); Oberster Gerichtshof (Austria), 4 July 2007 (cars) CISG-Online 1560 (Pace); Oberlandesgericht Frankfurt (Germany) 30 August 2000 (Yarn), CISG-Online 594 (Pace); Oberlandesgericht Frankfurt (Germany) 15 March 1996 (Fashion textiles), CISG-Online 275 (Pace).

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when the parties choose the Italian Codice civile rather than Italian Law. Some may even argue that a reference to Texas law rather than U.S. law would also be sufficient to exclude the application of the CISG.39 19 For an exclusion of the CISG by way of a reference to domestic law, it is essential that the contracting parties have knowingly consented to the exclusion of the Convention. As such it is unnecessary whether the parties are aware of the fact that the CISG is the normally applicable law; such awareness or knowledge is not required for the application of the Convention. If the parties are not aware of the Convention’s applicability and argue on the basis of a domestic law merely because they in error believe that domestic law applies, a court may and even should apply the Convention.40 20 According to few court decisions, the fact that the parties incorporated an INCOTERM into their agreement does not constitute an implied exclusion of the Convention,41 unless the trade terms are incompatible or inconsistent with the CISG.42 Such line of decisions is undisputedly correct. For such an approach, it is irrelevant in practice whether the national court recognizes the principle of jura novit curia (i. e. the duty of and presumption that the court knows or at least has to ascertain the law) or not.43 The Convention ought to apply if it is not expressly and unambiguously excluded. 21 There is also an arguable question as to whether a choice of a forum may also lead to the implied exclusion of the Convention’s applicability. This would normally be the case where the chosen forum is in a non-Contracting State and the local legal culture would imply that the local court normally applies local law; the case of course is different in legal systems where the courts always look at conflict of laws and there is no requirement that the parties have to plead and prove foreign law for the court to apply the foreign law. However, where there is evidence that the parties wanted to apply the law of the chosen forum and that forum is located in a Contracting State, courts or arbitral tribunals will normally apply the Convention.44 In this author’s experience, even if the parties choose, for example, LCIA arbitration to be seated in London one cannot and should not assume automatic application of English law and exclusion of the CISG. Although the LCIA does not publish its awards, it is well known that the CISG has been applied in many LCIA arbitration cases with their seat in London. 22

bb) Express. Parties to a sales contract can exclude the application of the Convention by express agreement to that effect. Such exclusion agreements may at the same time indicate the parties’ choice of law governing the contract or they may merely exclude the application of the CISG. Where the parties exclude the CISG and select the applicable law in the course of legal proceedings,45 the law applicable will be that designated by the rules of private 39 Such as scenario can be seen, but is not adequately discussed, in U.S. Circuit Court of Appeals (5th Circuit) (U.S.) 1993, Beijing Metals & Minerals v American Business Center Inc., 993 F.2 d 1178. 40 See Oberlandesgericht Celle (Germany) 24 May 1995 (Used printing), CISG-Online 152 (Pace). 41 See, e. g., Oberster Gerichtshof (Austria) 22 October 2001 (Gasoline and gas oil case), CISG-Online 614 (Pace). 42 Obergericht Kanton Bern (Switzerland) 19 May 2008, CISG-Online 1738 (Pace). 43 Oregon Court of Appeals (U.S.) 12 April 1995, GPL Treatment Ltd. v Louisiana-Pacific Group, CISGOnline 147 (Pace); Cour de cassation (France) 26 June 2001 (Auto parts), CISG-Online 600 (Pace); Arbitral Award, ICC 8453/1995 (Medical machine), CISG-Online 1275 (Pace). 44 Arbitral Award, Schiedsgericht der Hamburger freundlichen Arbitrage, 29 December 1998 (Cheese) CISG-Online 638 (Pace); Arbitral Award, Arbitration-Schiedsgericht der Handelskammer Hamburg, 21 March 1996 and 21 June 1996 (Chinese goods), CISG-Online 465 (Pace). 45 This is, e. g., the case in Germany; see, for example, Oberlandesgericht Ko ¨ ln (Germany) 26 August 1994 (Market study), CISG-Online 132 (Pace); Oberlandesgericht Saarbru¨cken (Germany) 13 January 1993 (Doors), CISG-Online 83 (Pace); this is also the case in Switzerland, see Handelsgericht Kanton Zu¨rich (Switzerland) 10 February 1999 (Art books), CISG-Online 488 (Pace).

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Article 6

international law of the deciding court (forum),46 with the rather predictable result of the primary application of the law chosen by the parties.47 Where the parties expressly exclude the Convention but do not choose the applicable law, the governing law is to be identified by means of the private international law rules of the forum. This will lead either to the law most closely connected to the contract often by way of establishing a strong connecting factor, such as characteristic performance and the like. It appears that in the majority (often 80 or 85 %) of international commercial contracts parties will make a choice of law. b) Derogation from the CISG. It is the express language of Art. 6 that parties may 23 derogate from the CISG. This may be a partial or total derogation. Total derogation would normally be effected by reference to a domestic sales or contract law, rather than a reference to national law. For example, a reference to U.S. law would and should not be sufficient to exclude or derogate from the CISG, but a reference to Texas law would as this may be seen as an implied reference to State sales law. Similarly, a reference to the Greek Civil Code rather than to Greek law would be sufficient to derogate from the CISG while the CISG would retain some limited applicability.48 A reference to a national civil code may not necessarily lead to the exclusion of the CISG, where the domestic sales law, for example, does not regulate sales contracts amongst businesspersons, or only applies to commercial persons but the contracting persons do not qualify as such.49 The extent or degree of derogation is not always easy to ascertain. As far as total 24 derogation is concerned, commentators50 agree that this is exceptional and cannot be assumed by the reference to a domestic sales law, Incoterms51 or a contract drafted in much detail (regulatory contract) that aims at replacing the provisions of the Convention. National courts at variable degrees are recognising the importance of the CISG and its unification role and increasingly find ways to apply the CISG in addition to the different choice the parties may have made.52 c) Modification of the CISG. It is the express language of Art. 6 that parties may 25 modify the provisions of the CISG. This may be a partial modification. Modification is particularly appropriate when the parties are satisfied with the Convention itself but feel 46 See Bundesgerichtshof (Germany) 23 July 1997 (Fashion textiles), CISG-Online 276 (Pace); Oberlandesgericht Frankfurt (Germany) 15 March 1996 (Fashion textiles), CISG-Online 284 (Pace). 47 Where the rules of private international law of the forum are those laid down either in the 1955 Hague Convention on the Law Applicable to International Sales of Goods Convention, 510 U. N. T. S. 149, in the 1980 Rome Convention on the Law Applicable to Contractual Obligations (United Nations, Treaty Series, vol. 1605, No. 28 023), the EC Regulation 593/2008 on the Law Applicable to Contractual Obligations, or in the 1994 Inter-American Convention on the Law Applicable to Contractual Obligations (Organization of American States Fifth Inter-American Specialized Conference on Private International Law: Inter-American Convention on the Law Applicable to International Contracts, March 17, 1994, OEA/Ser.K/XXI.5, CIDIPV/doc.34/94 rev. 3 corr. 2, March 17, 1994, available on the Internet at ), the law chosen by the parties (party autonomy or lex voluntatis) will govern. See also Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce (Serbia) 17 August 2009 (Pace). 48 See, Oberlandesgericht Oldenburg (Germany) 20 December 2007, CISG Online 1644; Arbitral Award, CIETAC, 24 March 1998, CISG Online 930. 49 See, Oberlandesgericht Linz (Austria) 23 January 2006, CISG Online 1377 (Pace). See also Schwenzer/ Hachem, in: Schlechtriem/Schwenzer, Commentary (2010), Art. 6 para. 25 50 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 6 para. 25; Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2003), Art. 6. para. 30; Witz/Salger/Lorenz, Kommentar (2016), Art. 6 paras. 17–20. 51 See Oberster Gerichtshof (Austria) 22 October 2001, CISG-Online 614 (Pace); Hof van Beroep Antwerpen (Netherlands) 22 January 2007, CISG Online 1586 (Pace). 52 See the wealth of cases in http://www.iicl.law.pace.edu/cisg/page/annotated-text-cisg-article-6. More recent cases seem to appreciate the importance of CISG and find ways for an application of the Convention.

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Part I. Sphere of Application and General Provisions

that certain aspects (such as delivery) may be better served by different arrangements (often contractual clauses, Incoterms or other soft law). In this respect the Convention serves commercial needs in an exemplary form and works well in most industries, including the commodities trade.53

4. Opting in – agreements to apply the CISG The CISG does not deal with the issue of opting in, i. e. the situation when the parties may wish the Convention to govern their contracts when their contract would normally apply, either because the conditions of Art. 1 are not met or because this is a contract of sale not covered by the CISG (pursuant to Art. 2 or to Art. 3). For example, an English seller selling goods to Portugal may wish to subject the sales contracts to the CISG rather than to the English law that would have otherwise been applicable. Leaving aside the issue as to whether the CISG would be applied as a set of rules of law rather than a Convention or international law which has been incorporated into a domestic legal system (an issue important in international litigation, but not in international arbitration where parties can easily choose rules of law rather than law),54 the question is an important one and it seems to be resolved in favour of opting in.55 27 Article 4 of the 1964 ULF, expressly provided for the power of parties to “opt in”. The lack of similar provision in the CISG should not be read as an automatic rejection of the possibility to opt in. It was understood that such an express opt in provision was not necessary.56 Case law seems to agree with this, as there is substantial practice where courts confirm the power of the parties to opt in to the CISG57 and actually parties do from time to time opt in to the CISG. 26

III. Comparable Rules Comparable provisions as to extent of party autonomy and the ability of the parties to exclude or modify relevant rules can be found in the PICC, PECL and DCFR. 29 Pursuant to Art. 1.5 PICC, parties may exclude the application of the PICC or derogate from or vary the effect of any of their provisions. However, it is also acknowledged that certain provisions are of a mandatory nature, although it is not always easy to ascertain which rules of law may have such character.58 The only such limitation one 28

53 Schlechtriem, Requirements of Application and Sphere of Applicability of the CISG, 36 Victoria University of Wellington Law Review (2005) 781; Winsor, The Applicability of the CISG to Govern Sales of Commodity Type Goods, 14 Vindobona Journal of International Commercial Law and Arbitration (2010) 83 et seq.; Zeller, Commodities Sale and CISG, FS Kritzer (2008), pp. 627–639; Schwenzer/Hachem, The CISG – Successes and Pitfalls, 57 American Journal of Comparative Law (2009) 457 (478). 54 See Lew/Mistelis/Kro ¨ ll, Comparative International Commercial Arbitration (2003), paras 18–34, 18– 35 and 18–41 et seq. 55 See UNCITRAL, Digest of Case Law on the CISG, Art. 6. See also Audit, Vente Internationale (1990), p. 40. According to Bonell, in: Bianca/Bonell, Commentary (1987), pp. 63–64, the issue of the possibility of “opting-in” arises only where State courts are involved, since generally the parties are not allowed to select by virtue of a choice of law an international convention, instead of a particular domestic law. 56 But see also the specific proposal by GDR: Official Records, pp. 86, 252–253. 57 Tribunale di Padova (Italy) 11 January 2005, CISG-Online 967 (Pace). See Xiamen Intermediate People’s Court (China), 5 September 1994 (fish power case), CISG-Online 464 (Pace); See also Ferrari, Remarks on the UNCITRAL Digest’s Comments on Article 6 CISG, 25 Journal of Law and Commerce (2005–06) 13 (14, 34). 58 For a comparison between the UNIDROIT Principles and the CISG see Borisova, Remarks on the Manner in which the UNIDROIT Principles May Be Used to Interpret or Supplement Article 6 of the CISG, http://www.cisg.law.pace.edu/cisg/principles/uni6.html#ed. See also 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 (2006), pp. 39–44.

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may readily identify in the CISG is Art. 12 as the language of Art. 6 CISG indicates. Of course, one cannot overemphasize the fact that the PICC overall are of a dispositive nature providing a set of guideline rules for international contracts and as such any mandatory character would be indicative of the importance of a rule of law in the PICC system and would be of a different nature than a mandatory rule of law in international or domestic law. In the PECL the comparable provisions are Arts 1:102 and 1:103. Art. 1:102(1) 30 provides that the freedom of contract is subject to “good faith and fair dealing, and the mandatory rules established” in PECL and in para. (2) it is established that “the parties may exclude the application of any of the Principles or derogate from or vary their effects, except as otherwise provided by these Principles”. Art. 1:103 clarifies the role of mandatory rules of law of national, supranational and international law applicable by operation of relevant conflict of laws rules. The PECL have the aspiration to create a system suitable for adoption by national or international legislators and coordinate the application of dispositive and mandatory rules.59 Finally, the DCFR provides for party autonomy and its limits in Art. 1:102. Freedom 31 of contract is subject to any applicable mandatory rules (para. 1), while parties may “exclude the application of any…rules relating to contracts or…the rights and obligations arising from them, or derogate from or vary their effects, except as otherwise provided”. The DCFR provides a normative system very similar to that created by the PECL and equally has the aspiration of being a model for consideration or adoption by national and international legislators. 59 For a comparison between the PECL and the CISG see Schroeter, Freedom of contract: Comparison between provisions of the CISG (Article 6) and counterpart provisions of the Principles of European Contract Law, 6 Vindobona Journal of International Commercial Law and Arbitration (2002-2) 257–266.

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Chapter II General Provisions Article 71 (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. (2) 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. Bibliography: Andersen, Defining Uniformity in Law, 1 Uniform Law Review (2007) 5; Bonell, L’Interpretazione del Diritto Uniforme alla Luce dell’ Art. 7 della Convenzione di Vienna Sulla Vendita Internazionale, Rivista di diritto Civile (1986); Ferrari, Uniform interpretation of the 1980 Uniform Sales Law, 24 Georgia Journal of International and Comparative Law (1994-95) 183; Gebauer, Uniform Law, General Principles and Autonomous Interpretation, 4 Uniform Law Review (2000) 683; Kastley, Unification and Community: A Rhetorical Analysis of the United Nations Sales Convention, 8 Northwestern Journal of International Law and Business (1988) 574; Magnus, General Principles of UN-Sales Law, 3 ~ellas, La interpretacio´n y la International Trade and Business Law Annual (1997) 33; Martı´nez Can integracio´n de la Convencio´n de Viena sobre compraventa internacional de mercaderı´as de 11 de abril de 1980 (2004); Van Alstine, Dynamic Treaty Interpretation, 146 University of Pennsylvania Law Review (1998) 687; Zeller, Four-Corners – The Methodology for Interpretation and Application of the UN (2003) (Pace); CISG-AC Opinions: CISG-AC Opinion no 4, Contracts for the Sale of Goods to Be Manufactured or Produced and Mixed Contracts (Article 3 CISG), 24 October 2004. Rapporteur: Professor Pilar Perales Viscasillas, Universidad Carlos III de Madrid (at http://www.cisg-ac.org); CISG-AC Opinion no 6, Calculation of Damages under CISG Article 74, Spring 2016. Rapporteur: Professor John Y. Gotanda, Villanova University School of Law, Villanova, Pennsylvania, U.S. (at http://www.cisg-ac.org); CISG-AC Opinion no 9, Consequences of Avoidance of the Contract, 15 November 2008. Rapporteur: Professor Michael Bridge, Tokyo, Japan (at http://www.cisg-ac.org); CISG-AC Opinion no 10, Agreed Sums Payable upon Breach of an Obligation in CISG Contracts, 3 August 2012. Rapporteur: Dr. Pascal Hachem, Ba¨r & Karrer AG, Zurich, Switzerland (at http://www.cisg-ac.org); CISG-AC Opinion no 12, Liability of the Seller for Damages Arising Out of Personal Injuries and Property Damage Caused by Goods and Services under the CISG, 20 January 2013. Rapporteur: Professor Hiroo Sono, School of Law, Hokkaido University, Sapporo, Japan (at http://www.cisg-ac.org); CISG-AC Opinion no 13, Inclusion of Standard Terms under the CISG, 20 January 2013. Rapporteur: Professor Sieg Eiselen, College of Law, University of South Africa, Pretoria, South Africa (at http://www.cisg-ac.org); CISG-AC Opinion no 14, Interest under Article 78 CISG, 21 and 22 October 2013. Rapporteur: Professor Doctor Yes˛im M. Atamer, Istanbul Bilgi University, Turkey (at http://www.cisg-ac.org); CISG-AC Opinion no 16, Exclusion of the CISG under Article 6, 30 May 2014. Rapporteur: Doctor Lisa Spagnolo, Monash University, Australia (at http:// www.cisg-ac.org).

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Interpretation of the Convention (Art. 7(1)). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) General remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Interpretative principles of the CISG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Internationality and uniformity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 7 7 7 10 16

1 Arts 7, 9, 11, 12 and 13 are written under the Research Project of Plan Nacional de I+D del Ministerio de Economı´a y Competitividad (DER2013-48401-P) and (DER2016-78572-P).

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1–2

bb) Irrelevance of precedent derived from domestic law . . . . . . . . . . . . . . . cc) Good faith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (i) Drafting history . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (ii) Good faith as a principle of interpretation of the Convention (iii) Good faith as a substantive principle to be applied to the formation and the performance of the contract. . . . . . . . . . . . . . . . (iv) Pre-contractual liability under the CISG. . . . . . . . . . . . . . . . . . . . . . . . c) Tools for the interpretation of the Convention . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Literal interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Legislative history. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) The Preamble of the CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Case law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ee) Doctrine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ff) Other tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Gap-filling within the CISG (Art. 7.2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) General remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Matters excluded from the CISG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Internal gaps within the CISG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) General Principles embodied in the CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) General Principles external to the CISG: Lex Mercatoria and the PICC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Article 7 18 21 22 23 24 31 37 37 39 42 44 47 49 51 52 54 56 62 67 68

I. Importance and Role of the Provision The main objective of the Convention – to provide a universal set of rules of law 1 applicable to any international sale of goods – is enshrined in Art. 7. Art. 7 provides a method to ensure that the Convention is applied in a uniform way so as to remove legal barriers to international trade2. The drafters established autonomous interpretative criteria based upon the principles of internationality, uniformity and good faith (Art. 7(1)), and an autonomous gap-filling method through the application of general principles inherent to the CISG (Art. 7(2)). To apply Art. 7(2) a distinction should be drawn between internal gaps (lacunae praeter legem), i. e., an issue that it is unresolved, and external gaps (lacunae intra legem), i. e., issues intentionally excluded, and matters expressly outside the Convention3. Art. 7 is considered to be the most important provision within CISG since the 2 Convention’s success depends upon the direction taken by courts and arbitral tribunals with respect to interpretation and gap-filling. It has been considered the centre-piece of the CISG – and other uniform international law instruments as well, since it is their source of inspiration – as it applies throughout the Convention in order to protect the Convention’s integrity by interpreting or filling gaps in a uniform way, hence achieving an autonomous interpretation and application of the Convention4. It tries to avoid forum shopping, i. e. choosing a forum with jurisprudence more favourable to one of the parties5, and achieve the goal of making minimum interference with the rules of private international law. 2 A goal recognized by several Courts: see in support of the application of the CISG to Hong-Kong: United States District Court, Northern District of Illinois (U.S.) 3 September 2008 (refrigerators and freezers), CNA Int’l Inc. v Guangdong Kelon Electronical Holdings et al., CISG-Online 2043 (Pace). 3 For a description of the different terminology employed by scholars: Janssen/Kiene, The CISG and Its General Principles, in: Janssen/Meyer (eds), CISG Methodology (2009), 263–265. 4 Art. 7 CISG applies throughout the Convention, including the interpretation of usages of trade. 5 On this point, see: Ferrari, Forum shopping et droit materiel uniforme, Journal du Droit International (2002) 383 (383 et seq.). In agreement: Witz, L’interpre´tation de la CVIM: Divergences dans l’interpre´tation de la Convention de Vienne, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 279 (280).

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The system introduced by Art. 7 has proven to be very successful in practice and has been well received by scholars and jurisprudence. This is due not only to the sensible choice made by the drafters and hence the quality of the rule, but also to the efforts made by several institutions, scholars, and case law to achieve a widespread and uniform interpretation and application of the Convention. For this reason, and due to the fact that Art. 7(1) is addressed to its interpreters, Art. 7(1) ought to be considered an imperative provision for the parties6. It is highly questionable whether derogation from such a general principle would be valid or enforceable under various domestic laws or any general principles for international trade practice. 4 Art. 7(2), however, is in part dispositive, and the parties may agree that in absence of general principles within CISG, resort should be had to soft law rules before turning to domestic law7. This consideration relies on the fact that reference to domestic law in Art. 7(2) is a conflict of law rule which can be displaced by the parties. 5 There is a strong link between Art. 7 paras 1 and 2. On the one hand, interpretation techniques should be used for gap-filling and thus the interpretative criteria set forth in para. 1 also applies to para. 2. On the other hand, some general principles on which the CISG is based (Art. 7(2)) also apply to the interpretation of the Convention (Art. 7(1)). It is sometimes difficult to draw a line between interpretation and gap-filling, and indeed in some instances it is unnecessary: the combination of both techniques may be adapted to include new technical and economic developments in the Convention8. Furthermore, an interplay between Arts 7 and 8 CISG can be observed, particularly when applying to the interpretation of the contract some of the general principles upon which the CISG is based9. 6 The ULIS did not have any rule on the interpretation of the Uniform Law, although its drafters were clear that in order to apply the law, the rules of private international law were excluded (Art. 2 ULIS). The purpose of this provision was clear: to achieve a uniform application of the text thus avoiding recourse to the rules of private international law as that method may lead to different results. 3

II. Detailed Commentary 1. Interpretation of the Convention (Art. 7(1)) 7

a) General remarks. The inclusion of this provision in the CISG arises from the desire of the drafters to avoid dangers and risks that may result in the interpretation and application of an international text, creating uniform rules in countries belonging to different legal systems and thus with distinctive interpretative rules and principles. In other words, it means the recognition of a provision largely ignored during the process of unification of the sales of goods that was introduced in the 1978 Draft Project. The 6 Bonell, in: Bianca/Bonell, Commentary (1987), Art. 7 para. 3.3 (Pace); Bridge, in: Ferrari/Flechtner/ Brand, Draft Digest and Beyond (2003), p. 253, in regard to Art. 7(1). In case law: Arbitral Award, Compromex, 30 November 1998 (sweets), CISG-Online 504 (Pace). 7 See the applicable law clause proposed by Illescas Ortiz/Perales Viscasillas, Derecho Mercantil Internacional (2003), p. 84. The clause reads as follows: “The law applicable to the present contract is the UN Convention on Contracts for the International Sale of Goods. Issues not expressly settled by the Convention or by its general principles, shall be resolved in accordance with the UNIDROIT Principles for International Commercial Contracts and subsidiary by the Law of the State” (translation by the author). 8 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 7 para. 5; and Schlechtriem/Witz, Convention de Vienne sur les Contrats de Vente Internationale de Marchandises (2008), para. 80. 9 See for example: Rule 8 CISG-AC Opinion no 10. But see denying the application of the good faith principle as a guiding principle for the interpretation of the contract: Schmidt-Kessel, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 8 para. 31.

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Article 7

Convention creates an almost self-sufficient system detached from the usual interpretation of domestic laws and by which attention should be paid to certain principles in order to interpret the Convention. By doing so, risks derived from the application of interpretative rules specific to a domestic legal system – which are inadequate for a text originated, elaborated, applied and approved in an international context – is avoided, and at the same time an international, autonomous and uniform interpretation and application of the Convention is achieved10. In any case, a balance must be achieved between the international origin of the Convention and the fact that the CISG is inserted in the general structure of each domestic law. Despite the fact that Art. 7 is silent on the issue, scholars are in agreement as to the 8 way (method) in which interpretation is to be done: a wide interpretation of the CISG that is to be complemented by a literal (grammatical), teleological, systematic and historical interpretation supported by the gap-filling system contained in para. 211. A wide interpretation of the CISG as a principle is not incompatible with a restrictive interpretation of certain provisions or terms within the Convention, such as for example a restrictive interpretation of Art. 79 CISG12 or Art. 44 CISG13. The CISG should not be interpreted in light of public international law14, and 9 especially in accordance with the 1969 Vienna Convention on the Law of Treaties15. Although some scholars are in disagreement, the 1969 Convention is generally considered to only apply in regard to CISG Part IV16. Very few cases rely on the 1969 Convention and even when relying on it, it is suggested that the same result would have been achieved if applying the criteria set forth in Art. 7 which is the lex specialis17. 10 Cf. Bonell, L’Interpretazione del Diritto Uniforme alla Luce dell’Art. 7 della Convenzione di Vienna Sulla Vendita Internazionale, Rivista di diritto Civile (1986) 221 (221 et seq.); Ferrari, Uniform interpretation of the 1980 Uniform Sales Law, 24 Georgia Journal of International and Comparative Law (1994) 183 (200 et seq.) (Pace); and Perales Viscasillas, Una aproximacio´n al artı´culo 7 de la Convencio´n de Viena de 1980 sobre compraventa internacional de mercaderı´as. (Aplicaciones concretas en la parte II de la Convencio´n), Cuadernos de Derecho y Comercio (1995) 55 (55 et seq.). Or at least a “high degree of consistency”: Bergsten, Methodological Problems in Drafting of the CISG, in: Janssen/ Meyer (eds), CISG Methodology (2009), p. 31. 11 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 7 (see comment in text) paras 21 et seq.; Volken, The Vienna Convention: Scope, Interpretation and Gap-filling, in: Volken/ Sarcevic (eds), International Sale of Goods (1986), p. 19 (19 et seq.) (Pace); Melis, in: Honsell, Kommentar (1997), Art. 7 (see comment in text) para. 11; Witz/Salger/Lorenz, Kommentar (2000), Art. 7 paras 18–25. 12 Oberlandesgericht Mu ¨ nchen (Germany), 5 March 2008 (stolen car), CISG-Online 1686 (Pace), but also considering further that the concept of seller’s liability must be given an extensive interpretation. 13 Art. 44 is an exception, and as such must be narrowly interpreted: Saarla ¨ ndisches Oberlandesgericht (Germany) 17 January 2007 (atural stone marble panels), CISG-Online 1642 (Pace). 14 See: Secretariat Explanatory Note to Art. 5 (identical to Art. 7) of the UN Convention on the Use of Electronic Communication in international contracts (2005), para. 107: “It follows a practice in private law treaties to provide self contained rules of interpretation, without which the reader would be referred to general rules of public international law on the interpretation of the treaties that might not be entirely suitable for the interpretation of private law provisions”. 15 Available at http://untreaty.un.org/ilc/texts/instruments/english/conventions/1_1_1969.pdf. But see: Magnus, Tracing Methodology in the CISG: Dogmatic Foundations, in: Janssen/Meyer (eds), CISG Methodology (2009), pp. 46–52. 16 Volken, The Vienna Convention: Scope, Interpretation and Gap-filling, in: Volken/Sarcevic (eds), ~ellas, La interpretacio´n y la integraInternational Sale of Goods (1986), p. 19 (38) (Pace); Martı´nez Can cio´n de la Convencio´n de Viena sobre compraventa internacional de mercaderı´as de 11 de abril de 1980 (2004) p. 134; Honnold, Uniform Law (2009), paras 103 seq.; Enderlein, Ley Uniforme y su aplicacio´n por jueces y a´rbitros, Revista de la Facultad de Derecho de la Universidad Complutense, Curso 1987–1988, 229 (233); Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 7 para. 23. ~ellas, La interpretacio´n y la integracio´n de la Convencio´n de Viena sobre 17 See Martı´nez Can compraventa internacional de mercaderı´as de 11 de abril de 1980 (2004) p. 109 in relation with the Arbitral Award, Netherlands Arbitration Instituut, 15 October 2002 (condensate crude oil mix), CISGOnline 740 or 780 (Pace).

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Part I. Sphere of Application and General Provisions

b) Interpretative principles of the CISG. The principles of interpretation of the CISG are those expressly considered in Art. 7(1): international character, uniformity in its application and the observance of good faith in international trade. 11 This provision is universally recognized through most uniform commercial law texts, particularly those emanating from UNCITRAL and UNIDROIT18. Resorting to the general principles is not always necessary i. e., when the Convention itself gives the interpretative standards to apply to specific situations such as in Art. 10 when determining the relevant place of business where a party has offices in more than one location. 12 However, in some instances, the CISG uses broad and general terms that might create divergent interpretations of the convention. For example, in Art. 3 the use of the terms “substantial part” and “preponderant part”, the concepts of fundamental breach under Art. 25, specific performance in Art. 28, impediment under Art. 79, etc. The risk of using abstract terms is that judges may reach different interpretations, especially if the interpretations are based on the meaning of these terms in the light of their domestic legal, economic, and social concepts19. However, these terms – and others, e. g. good faith, validity, goods20, sale, place of business21, conformity, intellectual property22 – under CISG have their own meaning separate from national concepts and thus an international interpretation and a uniform and autonomous CISG understanding of these notions ought to be achieved (Art. 7(1))23. In this regard, some of the undefined terms and principles – like the use of the word reasonable – are used to provide a flexible interpretation of the CISG and thus permit its adaptation to the specific circumstances of the case at hand and to its present application. 13 In this sense, the Convention creates its own terminology displacing similar concepts under domestic law; the meaning of CISG terms are to be found within the CISG and not in domestic laws. The Convention, through its uniform and autonomous concepts24, methodology25 and progressive awareness, tries to achieve an international, concrete, predictable, and uniform interpretation. 10

18 And recognized by the courts, see e. g.: Audiencia Provincial de Valencia (Spain) 7 June 2003 (concentrate grape juice), Cherubino Valsangiacomo, S.A. v American Juice Import, Inc., CISG-Online 948 (Pace) (www.cisgspanish.com). Infra III. 19 See also Witz, L’interpre ´tation de la CVIM: Divergences dans l’interpre´tation de la Convention de Vienne, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 279 (284). 20 I.a., adopting a wide concept of “goods” on the basis of Art. 7.1 CISG as to include tangible and intangible: Rechtbank Midden-Nederland (Netherlands) 25 March 2015 (software programm), Corporate Web Solutions Ltd. v Vendorlink B.V., CISG-Online 2591. The autonomous concept is flexible enough as to include capacity contracts in the gas industry: Perales Viscasillas, Las conexiones internacionales por gasoductos: contratos de interconexio´n y de capacidad, Revista de Derecho de la Competencia y la Distribucio´n, 2017, No 20. 21 See Brekoulakis, Art. 10, para. 10 (in this commentary); Schwenzer/Hachem, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 10 para. 2. 22 See Kro ¨ ll, Art. 42, para. 12 (in this commentary): “reference to “intellectual property” in Art. 42 should be understood in the broad sense adopted in various international conventions, evidencing a broad international consensus”. 23 Tribunale di Padova (Italy) 25 February 2004 (agricultural products), SO.M.AGRI s.a.s. di Ardina Alessandro & C. v Erzeugerorganisation Marchfeldgemu¨se, GmbH & Co. KG, CISG-Online 819 (Pace). See also Court of Appeal of New Zealand (New Zealand) 22 July 2011 (trucks), CISG-Online2215 (Pace) considering only valid an interpretation based upon case law and scholarly writing on CISG in regard to Art. 35. 24 Such as conformity of the goods: Appelationshof Bern (Switzerland) 11 February 2004 (cables), CISGOnline 1191 (Pace). Also the international and autonomous concept of the “salc of goods” and thus an extended concept o the contract is found for example in Art. 3 CISG. See CISG-AC, opinion No 4. However, recently in a narrow and domestic interpretation: SAP Guipuzcoa (Spain) 6 June 2017 (rollers) where the buyer provided the “construction plans”, the Court considered the transaction as a work contract without considering Art. 3.1 CISG. Similarly without considering the Convention: Ca´mara Nacional de Apelaciones en lo Commercial (Argentina) 27 February 2015 (books) in relation with a “contrato estimatorio”. 25 See Audiencia Provincial de Valencia (Spain) 7 June 2003 (concentrated grape juice), Cherubino Valsangiacomo, S.A. v American Juice Import, Inc., CISG-Online 948 (Pace) (www.cisgspanish.com). Also De Ly, Uniform interpretation: What is being done? Official efforts, in: Ferrari, The 1980 Uniform

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Article 7

In any case, the CISG also adopts different bases for certain issues than those 14 considered in domestic laws, i. e., the division between procedural and substantive matters26 or the remedies for defects in the goods, to the extent that the CISG is the preferred model to be followed in modern contract law. The domestic law of the forum should only be considered when the CISG refers to a concept foreign to uniform substantive law, such as when referring to private international law27, although in this area also international private law uniform instruments might be considered28. Finally, it is useful to note that divergent interpretations of the CISG do arise in 15 certain situations. This is seen in particular when it is unclear whether a matter is to be considered an internal or external gap, from unclear drafting of a rule due to legal compromise, such as in the case of irrevocable offers under Art. 16(2)(a), or when two provisions within the Convention apparently contradict each other, such as Arts 14 and 55 in relation to open price contracts. aa) Internationality and uniformity. Art. 7(1) mandates that “in the interpretation of 16 the Convention, regard is to be had to its international character and to the need to promote uniformity in its application”. In order to take into account the international character of the Convention, consideration is to be given to the international framework of the application and permanent development of uniform law rules. Internationality and uniformity are functionally interrelated and interdependent29. The goal of uniform interpretation of the Convention aims to ensure that uniform 17 rules will be considered the common denominator in international business transactions, independent from the nationality of the parties, the place of performance, or the kind of goods30. Although uniformity does not mean an equal solution in all cases31, there is a possibility to adapt the solutions provided by the CISG to the particular circumstances of each case, especially when applying undefined terms or general Sales Law (2003), p. 335 (344): “uniform interpretation creates a new methodology in which different interpretation techniques from different legal traditions are being blended”. 26 See Giovannucci, Procedural Law Issues and Uniform Law Conventions, Uniform Law Review (2000) 23 (23 et seq.) A paradigmatic situation is that of attorney’s fees where case law and scholars and clearly in disagreement as to whether it is a substantive or procedural issue. Cf.: CISG-AC Opinion no 6, paras 5.1 et seq. 27 For such a conclusion: Ferrari, Do Courts interpret the CISG Uniformly?, in: Ferrari (ed.), Quo Vadis CISG? Celebrating the 25th anniversary of the United Nations Convention on Contracts for the International Sale of Goods (2005), p. 6 (10), Tribunale di Padova (Italy) 11 January 2005 (rabbits), Ostroznik Savo v La Faraona soc. coop. a.r.l., CISG-Online 967 (Pace); and Tribunale di Padova (Italy) 25 February 2004 (agricultural products), SO.M.AGRI s.a.s. di Ardina Alessandro & C. v Erzeugerorganisation Marchfeldgemu¨se, GmbH & Co. KG, CISG-Online 819 (Pace). According to Ferrari, The CISG’s interpretative goals, its interpretative method and its general principles in case law (Part I), IHR, 4/2013, pp. 145–146, the concept of “party” is to be found in domestic private international law rules because agency contracts are not covered by CISG. 28 See Preamble of The Hague Principles on choice of law in international commercial contracts (approved on 19 March 2015): “They may be used to interpret, supplement and develop rules of private international law”. 29 Felemegas, Part One. 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), p. 12. 30 U.S. District Court for the Southern District of New York (U.S.) 26 March 2002 (magnetic resonance imaging system (“MRI”)), CISG-Online 615 (Pace): The CISG aims to bring uniformity to international business transactions, using simple, non-nation specific language. 31 Relative uniformity: DiMatteo/Dhooge/Greene/Maurer/Pagnattro, International Sales Law. A Critical Analysis of CISG Jurisprudence (2005), pp. 10–11; Andersen, Defining Uniformity in Law, Uniform Law Review (2007) 5 (50 et seq.); Flechtner, The future of the Sales Convention: In defense of diversity (some non-uniformity) in interpreting the CISG, in: Festschrifft fu¨r Ingeborg Schwenzer zum 60. Geburtstag (2011), Band II, pp. 493–514.

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Part I. Sphere of Application and General Provisions

principles within the CISG. At the same time, the application of the CISG in a uniform way implies the need to find also a good solution from a legal technical side, i. e., convincing and authoritative32. In any case, “uniformity does not mean that the Convention should be frozen in time and independent of evolving circumstances”33 as evidenced by the importance that the Convention adjusts to the interpretations and gap-filling of the contract by the usages of trade (Art. 9), which might change over time34. Furhtermore the objective to reduce transaction costs speaks in favour of a uniform interpretation35. bb) Irrelevance of precedent derived from domestic law. International interpretation of the Convention further means that application of domestic rules of interpretation to the Convention is to be avoided.36 In general, an autonomous interpretation detached from the traditional concepts, principles, rules and terms of a domestic legal system is to be sought, unless these domestic concepts are also commonly and internationally recognized37. 19 There are a number of examples where not only courts, but also arbitral tribunals rely on domestic standards when interpreting the CISG. In particular, when there is an analogous domestic provision to that of the Convention, some courts rely on cases on the domestic provision for interpreting the CISG38. However, this kind of interpretation 18

32 See Gebauer, Uniform Law, General Principles and Autonomous Interpretation, Uniform Law Review (2000) 686 (692). 33 Sekolec, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 2; Magnus, Tracing Methodology in the CISG: Dogmatic Foundations, in: Janssen/Meyer (eds), CISG Methodology (2009), pp. 45– 46. Other international uniform law instruments are an example: The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards has been subject to a progressive interpretation of the term “agreement in writing” in Art. II.2 as to the point that UNCITRAL has rendered a Recommendation on the interpretation of such term to present times. See UNCITRAL Recommendation regarding the interpretation of Art. II (2) and Art. VII (1) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958), 7 July 2006. See also comments to Art. 13 para. 10. 34 Hackney, Is the United Nations Convention on the International Sale of Goods Achieving Uniformity?, 61 Louisiana Law Review (2001) 473 (476). 35 Flechtner, Uniformity and Politics: Interpreting and filling gaps in the CISG. Festschrift fu ¨ r Ulrich Magnus zum 70 Geburstag. Sellier (2014), pp. 194–195. 36 See Secretariat Commentary on 1978 Draft Convention, Art. 6 (now Art. 7) para. 1; Audiencia Provincial de Valencia (Spain) 7 June 2003 (concentrated grape juice), Cherubino Valsangiacomo, S.A. v American Juice Import, Inc., CISG-Online 948 (Pace) (www.cisgspanish.com); Oberlandesgericht Frankfurt a. M. (Germany) 20 April 1994 (mussels from New Zealand), CISG-Online 125 (Pace) confirmed by Bundesgerichtshof (Germany) 3 April 1996 (cobalt sulphate), CISG-Online 135 (Pace); Tribunale di Pavia (Italy) 29 December 1999 (high fashion textiles), Tessile 21 S.r.l. v Ixela S.A., CISG-Online 678 (Pace); Tribunale di Rimini (Italy) 26 November 2002 (porcelain tableware), CISG-Online 737 (Pace); and Tribunal di Vigevano (Italy) 12 July 2000 (sheets of vulcanized rubber used in manufacture of shoe soles), CISG-Online 493 (Pace); Oberster Gerichtshof (Austria) 23 May 2005 (coffee machines), CISG-Online 1041 (Pace); Bundesgerichtshof (Germany) 2 March 2005 (frozen pork meat), CISG-Online 999 (Pace); Juzgado Primera Instancia nu´m.1 de Fuenlabrada (Spain) 11 May 2012 (machine), Instalaciones y FabricacionesIndustriales, S.A. v PM di Pizzolato Giorgio & C., S.A.S., CISG-Online 2464 (Pace); and ~a Godina (Spain) 28 November Juzgado de Primera Instancia e Instruccio´n, No 2 de La Almunia de Don 2013 (cheese), CISG-Online 2532 (Pace). 37 Bundesgerichtshof (Germany) 2 March 2005 (frozen pork meat), CISG-Online 999 (Pace). 38 It is particularly the case of U.S. courts that resort to domestic law in order to interpret CISG. For example: generally; U.S. Federal Appellate Court, 4th Circuit (U.S.) 21 June 2002 (drapery fabric), SchmitzWerke v Rockland, CISG-Online 625 (Pace); burden of proof and § 2–314 UCC in comparison with Art. 35(2) CISG: U.S. Federal Appellate Court 7th Circuit (U.S.) 23 May 2005 (pork ribs), Chicago Prime Packers, Inc. v Northam Food Trading Co., Chicago Prime Packers, Inc. v Northam Food Trading Co., CISG-Online 1026 (Pace); contract formation under Art. 2 UCC: U.S. Federal District Court New York (U.S.) 19 March 2005 (generic pharmaceutical ingredient), Genpharm Inc. v Pliva-Lachema A.S, CISGOnline 1006 (Pace); Art. 50 CISG in relation with § 2–714 UCC as considered by U.S. District Court,

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is not in line with the parameters set forth in Art. 7(1). First, these courts are reading the CISG domestically. Second, developed case law on domestic provisions is heavily attached to national roots and domestic interpretations and thus it is not apt to interpret the CISG39 when there are similarities in the terms used40, or when a term appears to be adopted from a domestic system41. Third, one cannot rely on the faux amis, i. e., identical words in the CISG and domestic law might well mean different things and may have been developed differently since the CISG adopts a neutral and aSouthern District of New York (U.S.) 22 May 1990 (rubber sealing members), Interag Company Ltd. v Stafford Phase Corporation, CISG-Online 19 (Pace); Art. 79 CISG and case law on § 2–615 UCC: U.S. District Court Northern District of Illinois Eastern Division (U.S.) 6 July 2004 (used railroad rails), Raw Materials Inc., v Manfred Forberich GmbH & Co., KG, CISG-Online 925 (Pace); and Interim Arbitral Award, AAA, 23 October 2007 (frozen chicken parts), Macromex Srl. v Globex International Inc., CISGOnline 1645 (Pace): “If the CISG and its case law fail to provide the necessary information the next step is to look beyond that to private law (…). Analytic approaches of American courts have certainly included analogizing to the UCC to clarify Art. 79 of the CISG (…). This approach is persuasive as the UCC contains a provision on commercially reasonable substitutes (…) that are quite similar (…). The relevance of using the UCC to interpret the CISG depends on whether the UCC has been interpreted in such a way that would provide more guidance than the CISG and its provisions. As one scholar put it: “where no principle can be found, gap-filling by uniform rules is impossible, and one has to revert to domestic law. [Thus], recourse to domestic law is unavoidable in most cases.” (…)”. It is clear that when those cases refer to the case law on the CISG at least USA cases are included. However, international CISG cases were considered by: U.S. District Court Eastern District of Louisiana (U.S.) 17 May 1999 (mammography units), Medical Marketing v Internazionale Medico Scientifica, CISG-Online 387 (Pace). See also Canton of Ticino: Pretore della giurisdizione di Locarno Campagna (Switzerland) 27 April 1992 (furniture), CISG-Online 68 (Pace), pointing out that the procedure to notify the lack of conformity of the goods under the CISG follows the same principles as in Swiss Law, thus Swiss scholarly writing and case law were considered pertinent to the interpretation of the CISG. 39 Also critical with those U.S. cases: Ferrari, Do Courts interpret the CISG Uniformly?, in: Ferrari (ed.), Quo Vadis CISG?. Celebrating the 25th anniversary of the United Nations Convention on Contracts for the International Sale of Goods (2005), p. 6 (6 seq.); and Flechtner, The CISG in US Courts: The Evolution (and Devolution) of the Methodology of Interpretation, in: Ferrari (ed.), Quo Vadis CISG?. Celebrating the 25th anniversary of the United Nations Convention on Contracts for the International Sale of Goods (2005), p. 93 et seq.), but also pointing out other decisions from the U.S. and other countries in which an international understanding of CISG; see also Honnold, Uniform Law (2009), para. 92. See Audiencia Provincial de Pontevedra (Spain) 19 December 2007 (frozen seafood), CISGOnline 1688 (Pace) (www.cisgspanish.com) denying the use of case law on the Spanish Commercial Code to interpret the CISG. 40 But see: U.S. Federal District Court of New York (U.S.) 6 April 1998 (shoes), Calzaturificio Claudia v Olivieri Footwear, CISG-Online 440 (Pace): “The Second Circuit has cautioned that case law interpreting UCC provisions is not “per se applicable.” (…). Although the CISG is similar to the UCC with respect to certain provisions, it differs from the UCC with respect to others, including the UCC’s writing requirement for a transaction for the sale of goods and parol evidence rule. Where controlling provisions are inconsistent, it would be inappropriate to apply UCC case law in construing contracts under the CISG”. See also: U.S. Court of Appeals, 2nd Circuit (U.S.) 6 December 1995 (compressors for air conditioners), Rotorex Corp. v Delchi Carrier, S. p. A., CISG-Online 140 (Pace): “Because there is virtually no case law under the Convention, we look to its language and to “the general principles” upon which the Convention it is based […]. Case law interpreting analogous provisions of Art. 2 of the UCC, may also inform a court where the language of the relevant CISG provisions tracks that of the UCC. However, UCC case law “is not per se applicable”; Federal Appellate Court, 8th Circuit (U.S.) 14 February 2011 (inulin), Dingxi Longhai Dairy, Ltd. v Becwood Technology Group L.L.C, CISG-Online 2256 (Pace). 41 But see: Magnus, Tracing Methodology in the CISG: Dogmatic Foundations, in: Janssen/Meyer (eds), CISG Methodology (2009), pp. 40–41; and Schwenzer/Fountoulakis, International Sales Law (2007), p. 63 referring to the foreseeability rule under Art. 74. Cautious: Gabriel, Contracts for the sale of Goods: A Comparison of Domestic and International Law (2004), pp. 49–50: because the need to interpret the CISG internationally and because it is not clear why specific language within CISG was adopted: a mixture of more than one tradition. Contrary: Ferrari, Homeward Trend: What, Why and Why not, in: Janssen/Meyer (eds), CISG Methodology (2009), pp. 171 et seq, particularly pp. 85–192 comparing the foreseeability rule under common law and CISG and concluding that the rules are rather different.

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Part I. Sphere of Application and General Provisions

national language42. Finally, relying exclusively on domestic case law when interpreting the CISG might have legal consequences43. The same conclusion applies to domestic scholarly writings44. In light of the above, when interpreting the CISG it is only possible to resort to domestic case law when all other relevant interpretation and gap-filling techniques have been exhausted, including the use of foreign case law, scholarly writing, and other international uniform law instruments. 20 Despite those situations, an increased tendency in observing the mandate of Art. 7(1) has been seen in domestic case law and thus there has been a gradual increase in the use of the specific and diverse techniques to interpret and fill gaps within the Convention45, including the use of modern international uniform law instruments. This development in the interpretation of the Convention is due to several factors: the increasing number of countries that have ratified the Convention, the abundant information easily available on the CISG, the success of other international uniform law instruments, such as the PICC and PECL, the success and growing number of international commercial arbitrations, the fact that comparative law and domestic law are increasingly using international uniform law in different ways (contributing to an interpretation of the legal texts at the light of international uniform law instruments), and finally the increased effort in educating international operators on the specificities of uniform international commercial law. 21

cc) Good faith. The last principle of interpretation considered in Art. 7(1) is good faith: in the interpretation of the Convention regard is to be had to the need to the observance of good faith in international trade. 42 Cf. Felemegas, Part One. 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), pp. 141–142. Therefore, it is erroneous to maintain that: “The CISG is the international analogue to Article 2 of the Uniform Commercial Code (“UCC”)”: US Federal Appellate Court 7th Circuit (U.S.) 23 May 2005 (pork ribs), Chicago Prime Packers, Inc. v Northam Food Trading Co, CISG-Online 1026 (Pace). Also the “faux-amis” might create problems, e. g. the term “fundamental breach” in CISG is not the same as it counterpart in common law systems. See: Honnold, Uniform Words and Uniform Application. The 1980 Sales Convention and International Juridical Practice, in: Schlechtriem (ed.). Einhetliches Kaufrecht und Nationales Obligationenrecht (1987), p. 115 (115 et seq.). However, some decisions insist on relying on similar provisions of domestic law: “§ 2–614 UCC is a useful guide in addressing the question of substitute performance under the CISG”: US Federal District Court of New York (U.S.) 20 August 2008 (acrylic yarn), Hilaturas Miel, S. L. v Republic of Iraq, CISG-Online 1777 (Pace). 43 Bundesgerichtshof (Germany) 2 March 2005 (frozen pork meal), CISG-Online 999 (Pace) (CLOUT 774) where “the Federal Court of Justice reversed the judgment of the Higher Regional Court and amended the Regional Court’s verdict. It held that the Higher Regional Court had reached its decision incorrectly by referring to precedents of the national jurisdiction only”. Consideration of both domestic provisions and the CISG was not however considered a ground to reverse the judgment of an appellate Court: Sentencia del Tribunal Surpremo (Spain) 16 May 2007 (water apparatus), CISG-Online 1638 (Pace) (www.cisgspanish.com) which considered that consideration to the rules of the Commercial Code was to the extent to reinforce the decision and that the same result would have been achieved under domestic law. A manifest disregard of the law might be considered a ground for denying the confirmation of an arbitration award under certain jurisdictions or as a ground to deny the recognition and enforcement of an award under the 1958 New York Convention. However, in those situations strict conditions need to be met. An opportunity to consider this issue was lost by a seller in an international sale of goods contract where it did not contest the arbitrator’s decision to use the UCC to help clarify the CISG, but rather that the arbitrator misapplied the UCC: U.S. Federal District Court New York (U.S.) 16 April 2008 (frozen chicken parts), Macromex Srl. v Globex International, Inc., CISG-Online 1653 (Pace). 44 Court of Appeal of New Zealand (New Zealand) 22 July 2011 (trucks), CISG-Online 2215 (Pace) stating that resort to authorities dealing with domestic law is not permissible. 45 See Ferrari, Have the Dragons of Uniform Sales Law Been Tamed?. Ruminations on the CISG’s Autonomous Interpretation by Courts, FS Kritzer (2008), p. 134 (156 et seq.).

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(i) Drafting history. The placement of good faith as a general principle of interpretation 22 of the Convention may go unnoticed to a reader that is not familiar with the process of elaboration of international instruments, since good faith was exiled to a remote province as part of a compromise only detected by analysing the official records46. Good faith was placed as a principle of interpretation of the Convention due to a compromise between delegations – mainly of civil law background – that were in favour of a wider application of good faith as a standard of conduct during the formation of the contract. Other delegations – particularly from common law background – were in favour of deleting the good faith provision as it was too vague and would lead to uncertainty in its application by judges who may be influenced by their own legal system47. After several proposals, it was agreed to move good faith to the interpretative provisions of the 1978 Draft Project (Art. 6). Several unsuccessful attempts48 were made during the Diplomatic Conference held in Vienna to place good faith as a standard of conduct of the parties during the formation and performance of the contract or to locate it in the Preamble. In the end, no substantial changes were made in the drafting and Art. 7 was finally approved. (ii) Good faith as a principle of interpretation of the Convention. Considering the 23 actual place of the principle of good faith, it is clear that it is an important principle to the interpretation of the Convention and thus acts as a framework or guide to the judge or arbitrator. Furthermore, good faith may function to limit abuse by the parties49 and as a principle that modulates the parties’ conduct during the formation and performance of the contract, thus giving the interpreter the opportunity to decide the way in which the provisions of the Convention and its undetermined concepts should be interpreted50. In any case, as it happens with the other principles embodied in Art. 7(1), good faith plays an important role in filling gaps of the Convention (Art. 7(2)). To this regard, according to the dynamic approach of the CISG and its adaptation to present times51, the observance of good faith in international trade ought to be considered a moral or ethical standard to be followed by businesspersons, projecting fundamental ethical values in international sales contracts. As certain ethical values are elevated to principles that ought to be protected, their infringement – e. g., violations of human rights in the production of contractual goods – could well be reflected in contractual sanctions, particularly it may amount to a fundamental breach of the contract. Arguably this is not a question of validity, which is outside the scope of the CISG52. Not only an autonomous concept of validity applies to the Convention and only those matters related to defects of consent are outside CISG, but 46 As recognized by Eo ¨ rsi, A propos the Vienna Convention on Contracts for the International Sale of Goods, 31 American Journal of Comparative Law (1983) 333 (349 and 354) (Pace). 47 See: Honnold, Documentary History (1989), pp. 369, 476 and 659. 48 See proposal of the Italian delegation: A/CONF.97/C.1/S. R.5, at A/CONF.97/19, paras or 14 et seq., pp. 276 et seq. ~ellas, La interpretacio´n y la integracio´n de la Convencio´n de Viena sobre compraventa 49 Martı´nez Can internacional de mercaderı´as de 11 de abril de 1980 (2004) p. 144. 50 Audiencia Provincial de Girona (Spain), 21 January 2016 (live molluscs), Alexandridis G. & CO. OESC v Treatment Servimant, SL, CISG-Online 2729 correcting on the basis of the principle of good faith, the principle of full compensation that was initially considered to determine the dies a quo of the interest rate in a situation in which the first claim was made nearly two years after the payment was due, without the Court finding an explanation for such a delay. 51 Van Alstine, Dynamic Treaty Interpretation, 146 University of Pennsylvania Law Review (1998) 687 (780 seq.) (Pace); and Ala´n Barrera, La integracio´n de lagunas en la Convencio´n de las Naciones Unidas sobre los contratos de compraventa internacional de mercaderas, in: Jorge Oviedo Alban ed., Obligaciones y Contratos en el Derecho Contemporaneo, Dike´ Biblioteca Jurı´dica (2010) 311–355. 52 But see considering it outside the Convention: Schwenzer/Leisinger, Ethical Values and International Sales Contracts, FS Hellner (2007), p. 249 (262).

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also modern sensibilities permeate the interpretation of the Convention and its rules. Needless to say, ethical values might be express or implied terms of the contract via Arts 9(1) or amount to international trade usages under 9(2)53. (iii) Good faith as a substantive principle to be applied to the formation and the performance of the contract. Scholars disagree as to the role of good faith in specific situations. One position that strictly follows the legislative history of this provision is that the good faith principle cannot be considered a standard of behaviour of the parties during the formation of contract54. Other authors disagree55, giving a prominent role to the good faith principle. 25 Despite the legislative history of this provision and its present placement, the better view is that the principle of good faith permeates the whole text of the Convention56, deriving 24

53 See Art. 9 para. 18. Schwenzer/Leisinger, Ethical Values and International Sales Contracts, FS Hellner (2007), p. 249 (263 seq.). Further discussion: Butler, The CISG- A secret weapon in the fight for a fairer world. 35 Years CISG and Beyond. International Commerce and Arbitration, vol.19. Edited by Ingeborg Schwenzer. Eleven International Publishing, 2016, pp. 295–316; for the remedial system: Nalin, International Fair Trade (Fair Trade in International Contracts and Ethical Standards. International Commerce and Arbitration, vol.19. Edited by Ingeborg Schwenzer. Eleven International Publishing, 2016, pp. 317–340. 54 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 7 para. 17. “The maxim of “observance of good faith in international trade”, therefore, concerns the interpretation of the Convention only and cannot be regarded as having prevailed”, although recognizing an indirect relationship with the interpretation of the contract and to concretize rights and obligations established by the provisions of the CISG; Schlechtriem/Witz, Convention de Vienne sur les Contrats de Vente Internationale de Marchandises (2008), para. 77; Huber/Mullis, The CISG (2007), p. 8; Farnsworth, The Convention on the International Sale of Goods from the Perspective of the Common Law Countries. La Convenzione di Vienna dell”11 aprile 1980, Quaderni di Giurisprudenza Commerciale (1981) 5 (5 et seq.); Honnold, Uniform Law (2009), para. 94, although pointing out to a liberal application of such principle under CISG (id., para. 95); Felemegas, Part One. 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), p. 13. Going too far Schwenzer, CESL and CISG, in The Evolution of Global Trade Over the Last Thirty years, Mexico, UNAM (2014), p. 338 considering that a far reaching principle of good faith under CISG is hardly reconcilable with the necessity of certainty and predictability in commercial transactions and would not be recognized by common law lawyers. An intermediate position is that of Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 154–155, who states that good faith does not impose on the parties additional obligations unless derived from the CISG provisions. Id., The CISG’s interpretative goals, its interpretative method and its general principles in case law (Part I), IHR, 4/2013, pp. 154–155. 55 Bonell, L’Interpretazione del Diritto Uniforme alla Luce dell’Art. 7 della Convenzione di Vienna Sulla Vendita Internazionale, Rivista di diritto Civile (1986) 235 et seq.; Enderlein/Maskow, International Sales ~ellas, La interpretacio´n y la integracio´n de la Convencio´n de Law (1992), pp. 53 et seq.; Martı´nez Can Viena sobre compraventa internacional de mercaderı´as de 11 de abril de 1980 (2004) pp. 142, 148 seq., pp. 323 et seq.; Va´zquez Lepinette, La compraventa internacional de mercaderı´as. Una visio´n jurisprudencial (2000) pp. 163 et seq.; Zeller, Four-Corners -The Methodology for Interpretation and Application of the UN Convention on Contracts for the International Sale of Goods (2003), Chapter 4 (Pace). Oviedo Alba´n, El sistema de fuentes del contrato de compraventa internacional de mercancı´as, in: Estudios de contratacio´n internacional. Re´gimen uniforme e internacional privado (2004), p. 256 (pp. 261 et seq.); Gala´n Barrera, Los Principios de Interpretacio´n de la Convencio´n de las Naciones Unidas sobre los contratos de compraventa internacional de mercaderı´as, in: Estudios de Contratacio´n Internacional. Re´gimen uniforme e internacional privado (2004), p. 305 (320 et seq.), pointing out that good faith is of utmost importance to sanction notorious corruption practices of multinational enterprises; Bell, How the Fact of Accepting Good Faith as a General Principle of the CISG Will Bring More Uniformity, Review of the Convention on Contracts for the International Sale of Goods (CISG) (2005–2006) (18 et seq.), pointing out that a general duty to act in good faith under the CISG is derived from the uniformity principle; Witz/Salger/Lorenz, Kommentar (2000), Art. 7 paras 12 et seq. 56 The Secretariat Commentary on 1978 Draft, Art. 6 (now Art. 7) para. 3 recognizes that the good faith principle applies to Part II and Part III, and thus points out that there are several manifestations of the good faith principle throughout the Convention: Arts 16(2)(b), 21(2), 29(2), 37, 38, 40, 49(2), 64(2), 82, 85–88. The principle is even broader and applies to more aspects of the interpretation and application of the Convention (id., para. 4).

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from it specific duties and rights to the parties. As pointed out “the confidence and expectations generated between the parties are guided by the contractual principle of good faith. The principle of good faith provides a basis for the expectation that contractual duties will be duly performed. It requires a model of conduct socially accepted by the parties at the time of the conclusion of the contract. It imposes a code of behaviour on both parties, calling each to consider the interests of the other contracting party. These codes represent a collaborative component within the contractual relationship”57. And that in order to create uniformity of rules validly applied in international contracts, the CISG “structured the concept of a contract based upon two fundamental pillars, namely, freedom of contract and objective good faith”58. Although this development of the good faith principle seems contrary to the 26 intention of the drafters, it is coherent with the dynamic approach to the interpretation of the Convention and its evolution in international commercial law. It is therefore suggested that good faith is now playing a substantive role detached from domestic law, a result that may be attributed to the evolution in understanding the values of the Convention59. The international and autonomous concept of good faith60 and its substantive role is derived not only from the CISG itself – and particularly from the reasonableness principle61 – but also from case law and scholarly writing. Specific manifestations of good faith are also found within the CISG, as it encourages 27 parties to act in good faith, thus evidencing that good faith is also a substantive provision and not only a mere interpretative principle of the CISG. Manifestations of good faith as a standard of conduct are found in Arts 8, 16(2)(b), 29(2) and 80 that reflect the estoppel principle also known as the venire contra factum proprium62, which 57 Tribunal de Justiça do Rio Grande do Sul (Brazil) 20 May 2009 (electrical discharge machine), CISGOnline 2368 (Pace). Similarly: Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry Arbitration (Russian Federation) 8 February 2008 (natural gas), CISG-Online 2102 (Pace). 58 Tribunal de Justiça do Rio Grande do Sul (Brasil) 14 February 2017 (frozen chicken legs), (www.cisgspanish.com); and Tribunal de Justiça do Rio Grande do Sul (Brasil) 30 March 2017 (electric motors) (cisgspanish.com), which also referred to the good faith as “the greatest canon of international trade relations Governed by the new Lex mercatoria”, consdering both art. 7.1 CISG and art. 1.7 PICC. 59 Van Alstine, Dynamic Treaty Interpretation, 146 University of Pennsylvania Law Review (1998) 687 (780) (Pace). 60 Arbitral Award, Compromex, 30 November 1998 (sweets), CISG-Online 504 (Pace). 61 The reasonable principle has been considered of the same character of good faith within domestic legal systems: see Hof Amsterdam (Netherlands) 5 January 1978 (gold and jewelry), Amran v Tesa, (Pace): an ULIS case referring to the “buona fede” in art. 1375 of the Italian Code Civil and “goede trouw” (good faith) in art. 1374 of the Dutch Civil Code at that time in place. In regard to Art. 8(2) CISG: Bundesgericht (Switzerland) 5 April 2005 (triethylen tetramin (“TETA”)), CISG-Online 1012 (Pace); and Kantonsgericht Freiburg (Switzerland) 23 January 1998 (laundry machine), T. Maschinenbau GmbH v T. Maschinenvertrieb AG., CISG-Online 423 (Pace). 62 Arbitral Award, Internationales Schiedsgericht der Bundeskammer der gewerblichen WirtschaftWien, 15 June 1994 (cold-rolled sheets), CISG-Online 120 and 121 (Pace), which expressly states citing Arts 7, 16(2)(b) and 29(2), that the principle of estoppel or, to use another expression, the prohibition of venire contra factum proprium, represents a special application of the general principle of good faith. See also recognizing estoppel from Arts 7(1) and 80: Oberlandesgericht Karlsruhe (Germany) 25 June 1997 (foil), CISG-Online 263 (Pace); Audiencia Provincial de Navarra (Spain) 27 December 2007 (machine for repair of bricks) (Pace) (www.cisgspanish.com); Oberlandesgericht Mu¨nchen (Germany) 15 September 2004 (leather for furniture), CISG-Online 1013 (Pace): considering that good faith under Art. 7(1) CISG “pave the way for the consideration of established and fixed principles of the national legal systems of the Contracting States, created as concrete ideals of the principle of good faith”; and that “the prohibition of venire contra factum proprium can apply to the interpretation of the provisions of the CISG”; BGH (Germany) 26 September 2012 (clay), CISG-Online 2348 (Pace) in relation to Art. 80 CISG; and Tribunale di Rimini (Italy) 26 November 2002 (porcelain tableware), CISG-Online 737 (Pace) (obiter dicta), without referring to any particular provision of the Convention. The principle also precludes one

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is also a general principle of the lex mercatoria63. It is also found in Art. 4064 and in the recognition of other general principles such as the prohibition of abuse of rights stemmed from Art. 46(1), the loyalty principle65, the duty not to impair each other’s expectations that the contract will be performed which is often interpreted as requiring the parties’ continuous commitment to the bargain,66 and the principle of mitigation of damages in Art. 7767. 28 Among those duties particularly important is the duty to cooperate that have found particular applications during the formation of the contract, such in relation with the incorporation of standard terms deriving duties of information towards the receipient of the standard terms68. To that extent it would contradict the principle of good faith in international trade as well as the common cooperation and information-sharing obligation of the parties to impose the contracting partner with a responsibility to inquire regarding unsent contractual documents would burden him with the risks and disadvantages of unknown opposing terms and conditions69. It has been correctly pointed out that the principle of cooperation is seen under different angles within CISG: a) rules of communication of information in the interest of the other party; b) a duty to cooperate by acting in the interest of the other party (Arts 85–88 CISG); c) rules that party from relying on a written form for the conclusion of a contract if he did not inform the other: Oberster Gerichtshof (Austria), 6 February 1996 (propane gas), CISG-Online 224 (Pace), citing Art. 29(2) CISG. Among the scholars: Honnold, Uniform Law (2009), para. 99; Kee/Opie, The Principle of Remediation, FS Kritzer (2008), p. 232 (232 et seq.); Neumann, The duty to cooperate in international sales. The scope and role of Art. 80 CISG. Sellier (2011), p. 156. Minority view estoppel under domestic law: Arrondissementsrechtbank Amsterdam (The Netherlands) 5 October 1994 (textiles), Tuzzi Trend Tex Fashion, GmbH v W.J.M. Keijzer-Somers, CISG-Online 446 (Pace); and U.S. District Court, Northern District of Illinois, Eastern Division (U.S.) 29 January 2003 (fluidized bed furnace), Ajax Tool Works, Inc. v Can-Eng Manufacturing Ltd, CISG-Online 772 (Pace). 63 Principle, no I.7 (Central at http://www.tldb.net). Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 27 July 1999 (goods), CISG-Online 779 (Pace) citing the good faith principle under Art. 7(1) and considering also estoppel as a principle of the lex mercatoria. 64 Hof van Beroep Antwerpen (Belgium) 27 June 2001 (tiles) (Pace); Oberlandesgericht Ko ¨ ln (Germany) 21 May 1996 (used car), CISG-Online 254 (Pace): “when there is fraudulent conduct of the seller, the inapplicability of Art. 35(3) CISG follows from Art. 40 in connection with Art. 7(1) CISG”. Art. 40 is an expression of the principles of fair trading that underlie also many other provisions of the CISG, and it is by its very nature a codification of a general principle: Arbitral Award, SCC, 5 June 1998 (4,000 tons rail press), Beijing Light Automobile Co., Ltd. v Connell Limited Partnership, CISG-Online 379 (Pace). 65 Appellate Tribunal of Helsinki (Finland) 26 October 2000 (plastic grass carpets), CISG-Online 1078 (Pace); Tribunal de Justiça do Rio Grande do Sul (Brasil) 14 February 2017 (frozen chicken legs) (cisgspanish.com); and Tribunal de Justiça do Rio Grande do Sul (Brasil) 30 March 2017 (electric motors) (cisgspanish.com). The loyalty principle is expressly recognized in Arts 5.3 PICC and 1:202 PECL. 66 See, Saidov, Article 71, para 2. 67 BGH (Germany) 26 September 2012 (Clay), CISG-Online 2348 (Pace) in relation to Art. 80 CISG. The Court made further the following reasoning: “it is not expressly settled in the CISG how to treat cases in which both parties to the contract contributed to the damage by committing independent breaches of contract. Pursuant to Art. 7(2) CISG, this question has to be answered in light of the general principles underlying Arts. 77 and 80 CISG. In case of dividable remedies, like damages, the respective party’s contribution to the damage has to be reasonably taken into account. It is the general opinion that both provisions are an expression of the duty under Art. 7(1) CISG to safeguard good faith in international trade”. 68 Bundesgerichtshof (Germany) 31 October 2001 (machinery), CISG-Online 617 (Pace). Also: Foreign Trade Court of Arbitration attached to the Yugoslav Chamber of Commerce (Serbia) 9 December 2002 (aluminium), CISG-Online 2123 (Pace); Bundesgerichtshof (Germany) 9 January 2002 (milk powder), N.S.M.b.v. v Molkerei A. M. GmbH & Co. KG, CISG-Online 651 (Pace); Oberlandesgericht Celle (Germany) 24 July 2009 (Broadcasters case) (multimedia recorders), a. t. AG v A. GmbH, CISG-Online 1906 (Pace). 69 Cfr. Oberlandesgericht Hamburg (Germany) 15 July 2010 (medical equipment), CISG-Online 2448 (Pace); Appellate Court Naumburg (Germany) 13 February 2013 (cereal), CISG-Online 2455 (Pace); Oberlandesgericht Koblenz (Germany) 24 February 2011 (clay), CISG-Online 2301 (Pace).

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requires steps to be taken by one or both parties (Arts 54 and 60a); and d) a duty to refrain from not cooperating70. In terms of the interpretation of the contract, the contra proferentem rule might 29 be considered also as a principle derived from good faith71 without loosing its independent character as such which plays an important role when using general terms and conditions. Case law has recognized good faith not only plays a role within the Convention for 30 interpretation, but also plays a seminal role throughout the Convention to modulate its content72 and be used as a standard of conduct for the parties during the formation73, particularly if general terms and conditions are used74, or when the offer and acceptance process is not identified and the contract is concluded through a more complex mechanism75. Furthermore, the good faith principle served during the performance of contract 31 to sanction a particular conduct of the parties76, for example in an international distribu70

Neumann, pp. 110–113. BGH (Germany) 28 May 2014 (bowling alleys), CISG-Online 2513 (Pace); CISG-AC Opinion n 13. 72 The good faith principle in Art. 7(1) CISG extends its application to arbitration clauses and helps the courts to determine the content of the contract in accordance with the expectation of the parties. See: Audiencia Provincial de Navarra (Spain) 27 December 2007 (machine for repair of bricks), (Pace) (www.cisgspanish.com), and Audiencia Provincial de Navarra (Spain) 22 September 2003 (motors for production of electricity), (Pace) (www.cisgspanish.com). 73 Oberlandesgericht Celle (Germany) 24 May 1995 (printing machine), CISG-Online 152 (Pace); Hof’sGravenhage (Netherlands) 23 April 2003 (wheat flour), CISG-Online 903 (Pace), also considering that: “A company secret does not deserve protection in jure in a situation in which good faith demands to speak out”; Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 24 November 1998 (equipment), CISG-Online 1525 (Pace); Arbitral Award, Compromex, 30 November 1998 (sweets), CISG-Online 504 (Pace). 74 Bundesgerichtshof (Germany) 31 October 2001 (machinery), CISG-Online 617 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 25 July 2003 (rubber sealing members), CISG-Online 919 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 21 April 2004 (car phones), CISG-Online 915 (Pace); Landgericht Neubrandenburg (Germany) 3 August 2005 (sour cherries), CISG-Online 1190 (Pace); Rechtbank Rotterdam (Netherlands) 25 February 2009 (fruits), Fresh-Life International B.V. v Cobana Fruchtring GmbH & Co., KG, CISG-Online 1812 (Pace): The court considered that, having regard to the general principle of good faith in international trade as provided for in Article 7(1) CISG, it is not sufficient for the application of general conditions to refer to such conditions in the offer without making the text of the conditions available before or at the time of the conclusion of the contract. 75 Such as when there is a letter of intent (agreement on principles): Hof van Beroep Gent (Belgium) 15 May 2002 (design of pagers), N.V.A.R. v N.V.I., CISG-Online 746 (Pace), considering that it engages the parties to continue the negotiations in good faith. 76 Cour d’Appel de Grenoble, Chambre Commerciale (France) 22 February 1995 (jeans), S.a.r.I. Bri Production “Bonaventure” v Socie´te´ Pan African Export, CISG-Online 151 (Pace) the conduct of the buyer was contrary to the good faith principle and was aggravated during the procedure as to the extent that it was considered an abuse of procedure; Arbitral Award, Hungarian Chamber of Commerce and Industry Court of Arbitration, 17 November 1995 (mushrooms), CISG-Online 250 (Pace) (Unilex); Jiangsu Higher People’s Court (China) 19 February 2001 (excavating machines), Tai Hei Business Co., Ltd. v Jiangsu Shun Tian International Group Nantong Costume Import and Export Company, CISGOnline 1636 (Pace); Cour d‘appel de Colmar (France) 12 June 2001 (air-conditioning system for trucks), CISG-Online 694 (Pace); Oberlandesgericht Hamburg (Germany) 28 February 1997 (iron molybdenum), CISG-Online 261 (Pace); Oberlandesgericht Hamm (Germany) 12 November 2001 (memory module), CISG-Online 1430 (Pace); Landgericht Saarbru¨cken (Germany) 26 March 1996 (fixture for ice-cream parlor), CISG-Online 391 (Pace); Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 27 May 2005 (unidentified goods), CISGOnline 1456 (Pace); Arbitral Award, Hungarian Chamber of Commerce and Industry Court of Arbitration, 17 November 1995 (mushrooms), CISG-Online 250 (Pace) (Unilex); Tribunale di Busto Arsizio (Italy) 13 December 2001 (machinery for recycling of plastic bags), Expoplast C.A. v Reg Mac s.r.l., CISGOnline 1323 (Pace). See Supreme Court (Poland) 11 May 2007 (leather to manufacture shoes), CISGOnline 1790 (Pace) reversing and remanding the lower decision mandating the court to analyse the 71

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tion contract a seller was held liable towards the buyer when the former appointed a new sole distributor in China without giving the buyer reasonable notice for making suitable arrangements for the stock there by impeding buyer to resell the stock77; prevents a party from taking undue advantage of the remedies provided in case of breach of the other party’s obligations78; or to derive particular duties, such as the duty to promptly communicate the lack of conformity of the goods under Art. 39 CISG79. 32 In this respect, a position closer to civil law systems has been adopted, as opposed to the common law view in which there is no general recognition of good faith and fair dealing duty during the formation and negotiations of the contract80. Later developments in international uniform law instruments have also expressly recognized the role of the good faith principle as being in line with civil law traditions81. 33 As to the content of good faith, an international and uniform approach should prevail disregarding interpretations based on domestic law82 and equally, the risks derived from the vagueness of the term should be avoided to reduce its inherent unpredictability. Good faith is inferred from usages and practices in several instruments of international contract law and widely used standard forms and trade terms83. 34 It is not clear whether a concrete principle to protect the weaker party is derived from good faith. Although some scholars have so held84, presumably by considering them as consumers, the parties in international trade are businessman or professionals and thus equal or similar bargaining power is presumed85. Consumer transactions are outside the scope of CISG (Art. 2 (a)). 35

(iv) Pre-contractual liability under the CISG. The understanding of the role of the good faith principle in comparative law is profound and dogmatic and has clear consequences in the treatment of pre-contractual liability. The majority of scholars consider it to be a matter outside the scope of the Convention based on the legislative dispute in light of the good faith principle; Among scholars: Sheehy, Good Faith in the CISG: The Interpretation Problems of Art. 7, Review of the Convention on Contracts for the International Sale of Goods (CISG) (2005–2006) 172 (172 et seq.,) analysing case law on this issue that shows a broader application of good faith beyond the interpretation of the CISG; and Zeller, The observance of Good Faith in International Trade, in: Janssen/Meyer (eds), CISG Methodology (2009), pp. 133 et seq. 77 Shanghai High People’s Court (China) 21 September 2011 (electronic equipment), Comac SpA v Shanghai Swift Mechanical & Electronic Equipment Co., Ltd., CISG-Online 2318 (Pace). 78 Arbitral Award, ICC/11849, 2003 (fashion products) (Pace) (Unilex). 79 Appellate Court of Zaragoza, 31 March 2009 (pork shoulder) (www.cisgspanish.com). 80 § 1–304 UCC (2001). Obligation of Good Faith states that: Every contract or duty within [the Uniform Commercial Code] imposes an obligation of good faith in its performance and enforcement. 81 PICC/PECL have provisions on good faith. Also: Principle no I.1: “The parties must act in accordance with the standard of good faith and fair dealing in international trade” (Central at http:// www.tldb.net). Good faith as a general principle internationally accepted in trade: Arbitral Award, ICC 7331/1994 (cow hides) (Unilex). 82 Arrondissementsrechtbank Zwolle (Netherlands) 5 March 1997 (fish), CME Cooperative Maritime Etaploise, S.A.C.V. v Bos Fishproducts Urk BV, CISG-Online 545 (Pace) (Unilex) considering that an objective concept of good faith is derived from the CISG as well as the PICC which is different to domestic French Law that follows a subjective approach. 83 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 7 para. 18. 84 Bonell, L’Interpretazione del Diritto Uniforme alla Luce dell’Art. 7 della Convenzione di Vienna Sulla Vendita Internazionale, Rivista di diritto Civile (1986) 223 et seq.; Silva-Ruiz, La buena fe en la Convencio´n de las Naciones Unidas sobre los contratos de compraventa internacional de mercaderı´as, in: Centenario del Co´digo Civil I (1989) 111 (111 et seq.). ~ellas, La interpretacio´n y la integracio´n de la 85 In agreement with this conclusion: Martı´nez Can Convencio´n de Viena sobre compraventa internacional de mercaderı´as de 11 de abril de 1980 (2004), p. 145. Principle no I.9 of Central list of principles of the lex mercatoria: “no weaker party exists in international business transactions that need to be protected as if it were a consumer”. Central at http:// www.tldb.net).

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history: a proposal to regulate pre-contractual liability if expenses were made by one of the parties before breaking off negotiations by the other was made by the former Democratic Republic of Germany, and was rejected86. However, there are certain instances in which the CISG governs the issue as provided in 36 Arts 16(2)(a) and (b)87, such as where a party sells the goods despite there being a binding offer to a third party and consequently no contract can be concluded with the originally anticipated buyer. This is also the case where pre-contractual liability is merged with contractual liability. For example, when bad faith that originated during the pre-contractual stage – e. g. defects in the goods not mentioned by the seller – causes its effects, namely damages, during the performance of the contract. In this case, when there is concurrence of pre-contractual and contractual liability, the latter absorbs the former and thus damages under Arts 74–77 will apply88. Even when the parties have only come to a preliminary agreement, pre-contractual liability may be considered under Art. 889. The same applies when there is a letter of intent and one of the parties unlawfully ends the negotiations90. c) Tools for the interpretation of the Convention aa) Literal interpretation. Literal interpretation is considered the primary method for 37 the interpretation of the CISG91. The Convention is equally authentic in six official languages and thus it is preferable 38 to avoid an interpretation of Convention terms in light of a national meaning or meaning given by the different national legal systems. These interpretations have no place in the CISG system92. Also, when approaching the problem of conflicting versions of a term in the Convention, different interpretative criteria should be used to avoid the prevalence of one of text over the other93; prima facie preference for the English version 86 See: Honnold, Documentary History (1989), p. 515. Among the scholars, see Schlechtriem, Uniform Sales Law (1986), p. 57 (Pace). But see Bonell, Vertragsverhandlungen und culpa in contrahendo nach dem Wiener Kaufrechtsu¨bereinkommen, RIW (1990) 693 (700 et seq.), considering that during the formation of the contract, pre-contractual liability is a gap and applies by analogy Art. 74 CISG and thus a damage liability; the same solution is provided for in the comments to Art. 2.1.15 PICC. For criticism to the last position within CISG, see Marchand, Les Limites de L’Uniformisation Mate´rielle du Droit de la Vente Internationale. Mise en ouvre de la Convention des Nations-Unies du 11 avril 1980 sur la vente internationale de marchandises dans le contexte juridique suisse (1994), pp. 276 et seq. Under Principle IV.7.1 (Precontractual Liability) (a) A party who breaks off contract-negotiations in bad faith (i. e. when the other party was justified in assuming that a contract would be concluded) is liable for the losses caused to the other party (“culpa in contrahendo”).(b) It is bad faith, in particular, for a party to enter into or continue negotiations when intending not to reach an agreement with the other party (Central at http://www.tldb.net). 87 See Perales Viscasillas, La formacio ´ n del contrato de compraventa internacional de mercancı´as (1996), pp. 145 et seq. 88 Marchand, Les Limites de L’Uniformisation Mate ´rielle du Droit de la Vente Internationale. Mise en ouvre de la Convention des Nations-Unies du 11 avril 1980 sur la vente internationale de marchandises dans le contexte juridique suisse (1994), pp. 276 et seq. 89 Goderre, International Negotiations Gone Sour: Precontractual Liability under the United Nations Sales Convention, 66 University of Cincinnati Law Review (1997) 257 (257 et seq.). 90 Hof van Beroep Gent (Belgium) 15 May 2002 (design of pagers), N.V.A.R. v N.V.I., CISG-Online 746 (Pace). 91 Oberster Gerichtshof (Austria) 23 May 2005 (coffee machines), CISG-Online 1041 (Pace). Among the scholars, see: Eiselen, Literal Interpretation: The Meaning of the Words, in: Janssen/Meyer (eds), CISG Methodology (2009), pp. 74 et seq. 92 It is enough to mention the problems raised by Art. 19 ULIS and the concept of delivery. See, Alcover ~ol e internacional (1991), Garau, La transmission del riesgo en la compraventa mercantil. Derecho espan pp. 87 et seq. Generally on the problems raised by the different language versions under CISG: Bergsten, Methodological Problems in Drafting of the CISG, in: Janssen/Meyer (eds), CISG Methodology (2009), pp. 18–21. ~ellas, La interpretacio´n y la integracio´n de la Convencio´n de Viena sobre compraventa 93 Martı´nez Can internacional de mercaderı´as de 11 de abril de 1980 (2004), p. 178; and Gala´n Barrera, Los Principios de

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should be rejected94 unless confirmed by other interpretative techniques. Equally, when a conflict exists between the UN versions of CISG and the official text of the Convention in a non-official UN language (i. e., German, Italian, etc.), preference should be given to the interpretation of the Convention based on the authentic intention derived from the CISG in its official versions95, particularly taking into consideration the official version of the text used for the non-official text and the language of the contract. bb) Legislative history. The interpretation of the CISG in light of its legislative history is particularly relevant in order to understand the evolution of the rules of the Convention and thus to apprehend its finality and correctness. In regard to Art. 7(2), the legislative history is an important element to discern when there is an internal or external gap. The legislative history is supported by the guide offered by the legislative records contained in 10 volumes (Yearbooks) as well as in the Official Records of the Diplomatic Conference held in Vienna during the spring of 1980. In the Official Records, the 1978 Draft Project – the immediate antecedent of CISG – is accompanied by a commentary prepared by the UNCITRAL Secretariat that is frequently used by scholars but also has been considered by case law96. 40 However, too much emphasis on the legislative history of the Convention should be avoided. First, a dynamic and progressive approach to the interpretation of the Convention should also be taken into consideration, particularly catering to developments of international trade law (case law, new international uniform instruments, development of practices and usages, scholarly writing, new interpretative methods, comparative law, and evolution in legal thinking). Second, the analysis of the legislative history itself may be unclear or contentious97 and thus several readers analysing the same legislative history 39

Interpretacio´n de la Convencio´n de las Naciones Unidas sobre los contratos de compraventa internacional de mercaderı´as, in: Estudios de Contratacio´n Internacional. Re´gimen uniforme e internacional privado (2004), p. 305 (312–313). An example of several issues in regard to the interpretation of CISG due to the use of the different languages: CISG-AC Opinion no 4, paras 2.1 and 4.1. 94 Bell, Taking the languages of the CISG seriously, in: Festschrifft fu ¨ r Ingeborg Schwenzer zum 60. Geburtstag (2011), Band II, p. 151. On the contrary: Witz/Salger/Lorenz, Kommentar (2000), Art. 7 para. 20; Schlechtriem/Hachem, in: Schlechtriem/Schwenzer, Commentary (2010), Art. 7 para. 22, consider that the English text (and occasionally the French) expresses the intention of the Conference better than the other versions; Magnus, Tracing Methodology in the CISG: Dogmatic Foundations, in: Janssen/Meyer (eds), CISG Methodology (2009), p. 53. Or both English and French: Zeller, Four-Corners–The Methodology for Interpretation and Application of the UN Convention on Contracts for the International Sale of Goods (2003), Chapter 2 (6)(b) (Pace). Also: Bundesgericht (Switzerland) 13 November 2003 (used textile cleaning machine), CISG-Online 840 (Pace), considering primarily English text and secondly French version in regard to the German translation of the CISG. 95 See Oberlandesgericht Ko ¨ ln (Germany) 26 August 1994 (market research study), CISG-Online 132 (Pace), resorting to the English (goods) and French (merchandises) texts as compared with the term used in the German translation (Waren) and concluding that a market analysis is not a sale of goods within the meaning of Arts 1 or 3. 96 See Audiencia Provincial de Valencia (Spain) 7 June 2003 (concentrated grape juice), Cherubino Valsangiacomo, S.A. v American Juice Import, Inc., CISG-Online 948 (Pace); and Interim Arbitral Award, AAA, 23 October 2007 (frozen chicken parts), Macromex Srl. v Globex International Inc., CISG-Online 1645 (Pace). 97 Scholars are also in agreement and cautious with the legislative history. Honnold, Uniform Law (2009), para. 91; Enderlein, Ley Uniforme y su aplicacio´n por jueces y a´rbitros, Revista de la Facultad de Derecho de la Universidad Complutense, Curso 1987–1988, 229 (235); Van Alstine, Dynamic Treaty Interpretation, 146 ~ellas, La interpretacio´n y la University of Pennsylvania Law Review (1998) 687 (747) (Pace); Martı´nez Can integracio´n de la Convencio´n de Viena sobre compraventa internacional de mercaderı´as de 11 de abril de 1980 (2004), p. 172; Zeller, Four-Corners–The Methodology for Interpretation and Application of the UN Convention on Contracts for the International Sale of Goods (2003), Chapter 3(3)(c) (Pace). Lookofsky, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 221; id. Lookofsky, Understanding the CISG. Wolters Kluwer, 2017, 3th edition, p. 31 and Felemegas, Part One. Introduction, in: Felemegas (ed.), An International Approach to the Interpretation of the United Nations Convention on Contracts for the

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might arrive to different results. Thirdly, also in regard to the Secretariat Commentary, certain reservations should be made: it is not an official commentary of the CISG and thus countries used to this system – i. e. common law systems – should not consider it as such; even if considered similar or functionally equivalent to an official commentary, sometimes the statements of the Secretariat are influenced by the legal framework of its drafters or even assume a position that was not finally reflected in the provision. Finally, the 1964 ULIS and ULF may also play an interesting role in assessing the 41 development of some of the rules of the Convention, and have been used as such by scholars for comparative analysis. Reference to ULIS and ULF case law was important when Convention first came into force due to the fact that the texts were similar and consolidated case law on CISG was lacking. However, this case law is mostly Germanoriented and has no bearing on the CISG today. cc) The Preamble of the CISG. The value of the Preamble to the interpretation of the 42 Convention, is not expressly addressed in the CISG. Unlike other international instruments, the wording of Art. 7(1) needs to be interpreted in regard to the object and purpose as set forth in the Preamble98. The Preamble thus has a substantive role in establishing criteria to direct the interpreter and is not a mere philosophical-legal declaration of principles99. It ought to be considered whether the Preamble could be a useful aid in interpreting the CISG and filling gaps. While some scholars favour the use of the Preamble100, others have expressly rejected this possibility101. In this author’s view, the Preamble emphasizes the goals of the Convention as also 43 provided in Art. 7: universality, uniformity and internationality. At the same time, the goal of removing legal barriers and the promotion of development of international trade as stated in the Preamble helps to understand the dynamic approach of the Convention towards its interpretation and gap-filling, and legitimate together with other elements an approach on which recourse to external general principles of the CISG is possible102. International Sale of Goods (1980) as Uniform Sales Law (2007), p. 19. Trying to reconcile the dynamic interpretation with the legislative intention stating that the former might try to ascertain the presumed will of the legislator, which is the main goal of the CISG’s interpretation: Gruber, Legislative intention and the CISG, in: Janssen/Meyer (eds), CISG Methodology (2009), pp. 91 et seq. 98 See Art. 6 UNIDROIT Convention on International Financial Leasing (Ottawa, 28 May 1988); Art. 4 UNIDROIT Convention on International Factoring (Ottawa, 28 May 1988); Art. 5 UNIDROIT Convention on International Interests in Mobile Equipment (Cape Town, 2001), as well as Art. 7(1) UN Convention on the Assignment of Receivables (2001). 99 See Torsello, The CISG’S impact on Legislators: The Drafting of International Contract Law Conventions, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 230 (236 and 271). 100 See Grigera, The UN Convention on Contracts for the International Sale of Goods, in: Horn/ Schmitthoff (eds), The Transnational Law of International Commercial Transactions (1982), p. 92; Kastley, Unification and Community: A Rhetorical Analysis of the United Nations Sales Convention, 8 Northwestern Journal of International Law and Business (1988) 574 (594) (Pace); Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2005), Preamble paras 7 and 8; but see more precisely: Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2010), Preamble para. 4; Maskow, The Convention on the International Sale of Goods from the Perspective of the Socialist Countries, in: la Vendita Internazionale (1981), p. 57; Adame Goodard, Reglas de Interpretacio´n de la Convencio´n sobre compraventa internacional de mercaderı´as, Diritto del Commercio Internazionale (1990) 103 (109), who derives from it two interpretative criteria from equality and mutual benefit, respectively: reciprocity and proportional equality; and Torsello, The CISG’s impact on Legislators: The Drafting of International Contract Law Conventions, in: Ferrari, The 1980 Uniform Sales Law (2003), 230 (271), considering that those Conventions that after CISG adopt minor changes such as “the express reference to the Preamble, may well be regarded as improvements of the rule coherently in line with the basic philosophy underlying the CISG’s provision”. 101 Schlechtriem, Uniform Sales Law (1986), p. 38; and Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Preamble paras 7 and 8. 102 Perales Viscasillas, The Role of the UNIDROIT Principles and the PECL in the interpretation and gap-filling of CISG, in: Janssen/Meyer (eds), CISG Methodology (2009), pp. 287 et seq.

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On the contrary, principles of equality and mutual benefit, as considered in the Preamble, do not seem applicable since they refer to relationships among the states. At least one Court has referred to the Preamble in order to apply the pro-Convention principle103. dd) Case law. Case law should be considered as one of the primary sources104 of the interpretation of the Convention and one of the main tools to achieve consistency among the decisions rendered under the CISG. A consistent body of case law is progressively being built under the CISG and an increasing tendency to rely on foreign case law is gradually observed. Due to diverse initiatives, case law on the CISG is easily accessible and understood by the operators of international trade: CLOUT and Digest105, UNILEX106, the Pace Database107 and its autonomous network108, and CISGOnline109 are the most important tools to understand what arbitral tribunals and courts are doing when interpreting and applying the CISG, and to the promotion of the Convention and its understanding. 45 International case law is a persuasive authority albeit not binding110. Here, a critical assessment is needed. First, a line needs to be drawn between plainly “wrong cases” on 44

103 U.S. Federal District Court of New York (U.S.) 10 May 2002 (chemicals), Geneva Pharmaceuticals Tech. Corp. v Barr Labs. Inc., CISG-Online 653 (Pace). Using the Preamble, the Court concludes that the expressly stated goal of developing uniform international contract law to promote international trade indicates the intent of the parties to the treaty to have the treaty pre-empt state law causes of action. Same conclusion in: U.S. Federal District Court of California (U.S.) 27 July 2001 (electronic components), Asante Technologies v PMC-Sierra, CISG-Online 616 (Pace). Also but without referring to the Preamble: a common law claim for quantum merit is pre-empted by the CISG to the extent that the CISG governs the issue: U.S. Federal District Court of New Jersey (U.S.) 7 October 2008 (lumber products), Forestal Guarani, S. A. v Daros International, Inc. (Pace). 104 Lookofsky, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 216 (217), who considers case law as the single most important source of CISG. Id. Lookofsky, Unterstanding, p. 32. 105 Case Law on UNCITRAL Texts and Digest at http://www.uncitral.org. An instrument that a Court is obliged to observe: Juzgado Cuarto de lo Civil de Tijuana, Baja California (Me´xico) 3 September 2010 (metals), (www.cisgspanish.com), and thus the need to consider foreign decisions in order to reach a uniform interpretation. 106 Available at http://www.unilex.info. It is also an important database for PICC. 107 Available at http://www.cisg.law.pace.edu. According to the database the top ten countries are: Germany, China, Russia, Netherlands, Switzerland, Belgium, Austria, U.S., France and Spain. 108 Countries databases are located in important CISG states, like Spain (www.cisgspanish.com), France, Belgium, etc. All of them at: http://www.cisg.law.pace.edu/network.html. 109 Available at http://www.cisg-online.ch. 110 The same conclusion in Tribunal di Vigevano (Italy) 12 July 2000 (sheets of vulcanized rubber used in manufacure of shoe soles), CISG-Online 493 (Pace); Tribunale di Pavia (Italy) 29 December 1999 (high fashion textiles), Tessile 21 S.r.l. v Ixela S.A., CISG-Online 678 (Pace); Tribunale di Rimini (Italy) 26 November 2002 (porcelain tableware), CISG-Online 737 (Pace); and Tribunale di Padova (Italy) 25 February 2004 (agricultural products), SO.M.AGRI s.a.s. di Ardina Alessandro & C. v Erzeugerorganisation Marchfeldgemu¨se, GmbH & Co. KG, CISG-Online 819 (Pace). Also U.S. District Court Eastern District of Louisiana (U.S.) 17 May 1999 (mammography units), Medical Marketing v Internazionale Medico Scientifica, CISG-Online 387 (Pace), although considering the BGH, 8 March 1995 (a German case on CISG) as a precedent or at least as an authoritative opinion. See also: High Court of New Zealand (New Zealand) 30 July 2010 (trucks), RJ & AM Smallmon v Transport Sales, Ltd., CISG-Online 2113 (Pace): “the Convention must be applied and interpreted exclusively on its own terms, having regard to the principles of the Convention and Convention-related decisions in overseas jurisdictions”; and Court of Appeal of New Zealand (New Zealand), 22 July 2011 (Trucks), RJ & AM Smallmon v Transport Sales Limited and Grant Alan Miller, CISG-Online 2215 (Pace). For a consideration of case law as semibinding, see: Juzgado Primera Instancia nu´m.1 de Fuenlabrada (Spain) 11 May 2012 (Machine), Instalaciones y FabricacionesIndustriales, S.A. v PM di Pizzolato Giorgio & C., S.A.S., CISG-Online ~ellas, La 2464 (Pace). The majority of the scholars are also in agreement, inter alia, Martı´nez Can interpretacio´n y la integracio´n de la Convencio´n de Viena sobre compraventa internacional de mercader´ıas de 11 de abril de 1980 (2004), p. 131 and pp. 201–202; Schwenzer/Hachem, in: Schlechtriem/

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the CISG, as opposed to different legitimate views on the CISG111. An example of the former is a U.S. Court decision stating that the parol evidence rule applies within the CISG, while later decisions have strongly denied that position112. Also in this category are decisions that adopt a myopic and domestic interpretation of the CISG. An example of the latter is the different interpretations with respect to interest rates. Second, a consolidated trend on the interpretation of a specific issue of the CISG should be given regard by other courts, such as for example, in relation to the issue of compliance with the regulatory provisions or standards of the importing country and the criteria fixed by the BGH 8 January 1995113, and be well reasoned if a divergent result is achieved114. Third, a decision on the CISG is not a better one just because it comes from the highest court of a country. Rather, a good decision is persuasive, wellreasoned and sensible with respect to the different tools of interpreting the CISG. Thus, using a combination of different interpretation criteria as mentioned above, including case law, is the preferable way to achieve a uniform and international interpretation of the CISG. Finally, the importance of case law goes beyond the uniform interpretation of the Convention as it is also used as a tool to assist the negotiation and drafting process of the contract115. Schwenzer Commentary (2016), Art. 7 para. 13; Ferrari, Do Courts interpret the CISG Uniformly?, in: Ferrari (ed.), Quo Vadis CISG?. Celebrating the 25th anniversary of the United Nations Convention on Contracts for the International Sale of Goods (2005), p. 6 (20 seq.), rejecting that there is no “supranational stare decisis”; DiMatteo/Dhooge/Greene/Maurer/Pagnattro, International Sales Law. A Critical Analysis of CISG Jurisprudence (2005) pp. 4–5; and DiMatteo, Case Law Precedent and Legal Writing, in: Janssen/Meyer (eds), CISG Methodology (2009), p. 114. 111 See the distinction in Witz, L’interpre ´tation de la CVIM: Divergences dans l’interpre´tation de la Convention de Vienne, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 279 (282): “erreur d’interpre´tation” and “interpre´tation divergente”. Also considering a critical approach to judicial interpretation of the CISG: Lookofsky, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 216 (217); Veneziano, Uniform interpretations: What is being done? Unofficial efforts and their impact, in: Ferrari, The 1980 Uniform Sales Law. Old issues revisited in the light of recent experiences. Verona Conference (2003) 325 (326); Curran, A Comparative Perspective on the CISG, in Drafting Contracts, p. 50. 112 Inter alia: U.S. Federal District Court of Illinois (U.S.) 27 October 1998 (aircraft parts), Mitchell Aircraft Spares v European Aircraft Service (Pace); U.S. District Court for the Southern District Court of New York (U.S.), 23 March 2015 (sports apparel), Korea Trade Ins. Corp. v Oved Apparel Corp., CISGOnline 2608 (Pace). In some of these decisions the Courts also add the Letter of Transmittal from Ronald Reagan, President of the United States, to the United States Senate, reprinted at 15 U. S. C. app. 70, 71 (1997), as an aid in the interpretation, see, inter alia: U.S. Federal Appellate Court 11th Circuit (U.S.) 29 June 1998 (ceramic tiles), MCC-Marble Ceramic Center v Ceramica Nuova D’Agostino, CISG-Online 342 (Pace). However, the documents used for the internal ratification to the CISG should not be considered when interpreting the Convention due to its unilateral creation but might be used by the ~ellas, Interpretacio´n del courts as one among many of the interpretative criteria. See: Martı´nez Can derecho mercantil uniforme internacional: el artı´culo 7.1 de la Convencio´n de las Naciones Unidas sobre compraventa internacional de mercaderı´as, 9 DeCita (2008) 79 (92). 113 In the famous “mussels case” that has created the doctrinal status around the world, See among many decisions: Court of Appeal of New Zealand (New Zealand) 22 July 2011 (trucks), RJ & AM Smallmon v Transport Sales Limited and Grant Alan Miller, CISG-Online 2215 (Pace). Among scholars: Henschel, The impact of the UN CISG on the Harmonization of National and International nonconformity Rules. Unification and Harmonization of International Commercial Law. Interaction of Deharmonization?. Edited by Morten M.Fogt. Walters Kluwer (2012), pp. 37–55. 114 See Veneziano, Uniform interpretations: What is being done? Unofficial efforts and their impact, in: Ferrari, The 1980 Uniform Sales Law. Old issues revisited in the light of recent experiences. Verona ~ellas, La interpretacio´n y la integracio´n de la Convencio´n Conference (2003) p. 325 (325); Martı´nez Can de Viena sobre compraventa internacional de mercaderı´as de 11 de abril de 1980 (2004) p. 132; Lookofsky, CISG foreign case law: how much regard should we have? in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 216 (218 seq.). 115 Sekolec, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 3; Witz, Contract Drafting under the CISG, 10 International Law Review of Wuhan University (2008–2009), pp. 132–135 (129–137).

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Several trends can be observed with respect to the use of case law by courts and arbitral tribunals. First, civil law courts are becoming increasingly sensitive to foreign case law116, while common law courts have begun to approach scholarly writings as a source of interpretation117. Second, an increasing number of decisions by arbitral tribunals, whether from civil or common law, are using foreign CISG cases, doctrinal cases and other interpretative tools, such as soft law instruments. Third, as a general observation, courts are becoming more sensitive to the globalization of contract law and thus one can observe a growing tendency in the use of international instruments to interpret or supplement domestic and international contracts118. These instruments, created after the CISG, contemplate an “international common law” and provide a dynamic approach towards their interpretation where courts and arbitral tribunals assume an active role to the point that they are legitimised to construct substantive solutions for gaps in the CISG119. Furthermore, as case law has helped to develop default rules based on the CISG’s general principles and other international instruments, the CISG is increasingly being understood as a general code for the international sale of goods and, in some respects, as a code for international commercial law. 116 Examples of the use of international case law and international doctrine are, inter alia: Bundesgericht (Switzerland) 13 November 2003 (used textile cleaning machine), CISG-Online 840 (Pace), pointing out the importance of resorting to the CISG data bases to achieve a uniform interpretation of the Convention (Art. 7(1)), citing an impressive number of CISG cases; Tribunale di Pavia (Italy) 29 December 1999 (high fashion textiles), Tessile 21 S.r.l. v Ixela S.A., CISG-Online 678 (Pace) and Tribunale di Forli (Italy) 11 December 2008 (shoes) and 16 February 2009 (cisterns and related accessories) (Pace); for good examples from the common law world see U.S. Federal District Court of Illinois (U.S.) 28 March 2002 (steel), Usinor Industeel v Leeco Steel Products, CISG-Online 696 (Pace); U.S. Federal District Court (U.S.) 21 May 2004 (blast frozen pork back ribs), Chicago Prime Packers, Inc. v Northam Food Trading Co., et al., CISG-Online 851 (Pace). 117 Bell, Uniformity through Persuasive International Authorities–Does Stare Decisis really Hinder the Uniform Interpretation of the CISG?. FS Kritzer (2008), p. 35 (44). 118 Illustrative enough is the situation in Spain where the high Supreme Court is increasingly considering the solutions found in international or regional contract law instruments like CISG/PICC/ ~a de la Convencio´n de Viena de 1980 PECL, see Perales Viscasillas, La aplicacio´n jurisprudencial en Espan sobre compraventa internacional, los Principios de UNIDROIT y los Principios del Derecho Contractual Europeo: de la mera referencia a la integracio´n de lagunas, La Ley (31 mayo 2007) 1 (2 seq.). It might be that one of the reasons for that is that paragraph 1 is inspired in common law methodology while paragraph 2 is in civil law. See Curran, Humanity’s Gain: Remarks on Similarity, Difference and the Vienna Convention. In Emptio-Vendito InterNationes. Convention de Vienne sur la vente international de merchandise, FS Neumayer (1997), pp. 80–81. Other courts do follow this approach, see: Federal Court Australia (Australia), 24 October 2008 (cherries), Hannaford v Australian Farmlink Pty, Ltd. (Pace) in a domestic case referring to CISG and PICC. An interesting case where domestic law (term “Knowledge” was interpreted as actual knowledge using CISG as a tool where it uses an extended meaning which captures constructive knowledge (Arts 2(a), 9(2), 38(3) and 49(2) CISG) with the words “knew or ought to have known”. Therefore, the Court concluded interpreting domestic law than where the word “known” is intended to have a meaning extending beyond its ordinary one, the legislature can be expected to spell that out. See: Court of Appeal of New Zealand (New Zealand) 2 July 1998 (commercial property lease), Tri-Star Customs and Forwarding Ltd. v Denning, CISG-Online 2453 (Pace). A similar approach using CISG as an aid in the interpretation of domestic law: Court of Appeal of New Zealand (New Zealand) 3 October 2001 (shoes), Bobux Marketing Ltd. v Raynor Marketing Ltd., CISG-Online 2451 (Pace) in relation with the good faith principle. 119 Van Alstine, Dynamic Treaty Interpretation, 146 University of Pennsylvania Law Review (1998) 687 (691, 756 and 760 et seq.) (Pace); Andersen, Macro-systematic Interpretation of Uniform Commercial Law: The Interrelation of the CISG and Other Uniform Sources, in: Janssen/Meyer (eds), CISG Methodology (2009), pp. 207 et seq. See also DiMatteo/Dhooge/Greene/Maurer/Pagnattro, International Sales Law. A Critical Analysis of CISG Jurisprudence (2005), pp. 20–22, considering CISG as a semiCode; and Magnus, Tracing Methodology in the CISG: Dogmatic Foundations, in: Janssen/Meyer (eds), CISG Methodology (2009), p. 55 considering an “interconventional interpretation” of the CISG, including also soft law instruments, such as PICC and PECL.

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ee) Doctrine. Scholarly writing is also an important tool for interpretation, par- 47 ticularly in civil law systems but also in common law systems120, where a significant trend is observed in using scholarly work121. The role of legal literature is not only to describe the state of affairs of a particular issue, but also to take a position on critical issues attending to the improvements in uniform international law, case law, commercial practices, and usages. Particularly, in light of the volume of cases available on the CISG, critical positions on cases can be very useful guidance to other courts. Consequently, even a minor position in the case law might turn to be a preferred one if supported by a strong number of authors122. Also, interesting to note is that even the most reputed scholars may change their original position on a certain issue due to new developments or changes in the state of affairs. Scholarly work is not binding even in civil law systems. It is usually an ancillary tool: the use of comparative law as a source of interpretation123 in order to find the common core of legal systems124. Comparative law is, however, more than just a method useful for the interpretation of the CISG125; it is an element to consider in contrast with the CISG’s solutions, since some of these solutions are in fact based on general principles derived from comparative law126. With the exception of Art. 8, the CISG has no rules on the interpretation of the 48 contract, although even this provision does not directly address the interpretation of the contract but rather the interpretation of statements and conduct made by a party. However, with respect to the interpretation of the contract, the general principles on which the CISG is based, particularly good faith and the international character of the Convention, may play an important role127. ff) Other tools. Apart from the several attempts to achieve an autonomous, uniform 49 and international interpretation of CISG mentioned above, other ambitious proposals have been made: the establishment of an international tribunal competent to deal

120 It is frequent that case law resorts to several scholarly works to support a specific interpretation of the CISG. Inter alia: Interim Arbitral Award, AAA, 23 October 2007 (frozen chicken partsMacromex Srl. v Globex International Inc., CISG-Online 1645 (Pace). And it has been considered an important tool for the interpretation of the CISG by Audiencia Provincial de Valencia (Spain) 7 June 2003 (concentrated grape juice), Cherubino Valsangiacomo, S.A. v American Juice Import, Inc., CISG-Online 948 (Pace) (www.cisgspanish.com). ~ellas, La interpretacio´n y la integracio´n de la 121 See e. g. the analysis of case law in Martı´nez Can Convencio´n de Viena sobre compraventa internacional de mercaderı´as de 11 de abril de 1980 (2004) pp. 253–255. 122 See Witz, L’interpre ´tation de la CVIM: Divergences dans l’interpre´tation de la Convention de Vienne, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 279 (281). 123 Gebauer, Uniform Law, General Principles and Autonomous Interpretation, Uniform Law Review (2000) 686 (690 seq.); Basedow, Uniform Law Conventions and the UNIDROIT Principles of International Commercial Contracts, Uniform Law Review (2000) 136 seems to consider it as a primary source. 124 Gerechtshof ‘s-Hertogenbosch (Netherlands) 16 October 2002 (plants), CISG-Online 816 (Pace). 125 See also expressing doubts: Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 7 para. 24. 126 Felemegas, Part One. 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), p. 30, considering that a distinction should be made between those principles extrapolated from specific provisions of the Convention and the general principles of comparative law on which CISG as a whole is based. 127 Cour de Cassation (France) 30 June 2004 (cases made from polyurethane foam), CISG-Online 870 (Pace). But see Schmidt-Kessel, Article 8: in: Schlechtriem/Schwenzer, Commentary (2016), Art. 8 para. 31 in relation with the good faith principle.

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with CISG cases128; the creation of an international body of scholars129 or an informal interpretation committee similar to the one established by the ICC in regard to UCP130; an international thesaurus131; and the establishment of a Permanent Editorial Board that will recommend the common interpretation of the CISG as derived from case law132. Finally, at least two different initiatives in interpreting CISG have fructified: the PICC133 and The Convention on International Sale of Goods-Advisory Council (CISG-AC)134. 50 The CISG-AC is a private initiative whose main objective is to promote a uniform interpretation of the Convention following the mandate of Art. 7. The CISG-AC is composed of scholars from around the world representing different legal backgrounds. It renders Opinions on different controversial aspects of the Convention upon request or on its own motion. So far the Opinions have been used by scholars around the world as an authoritative (and in some cases binding) interpretation of the Convention135, but more importantly they have an impact on practice136.

2. Gap-filling within the CISG (Art. 7.2) 51

The Convention provides that certain issues are outside its scope (i. e. Arts 2–5 and 54) and thus the applicable law or rules of law will be applied. At the same time, it is clear that the Convention deals with formation and performance of sales contracts (Art. 4). It is, however, more difficult to ascertain whether there is an internal gap, i. e., a matter that is governed by CISG but that is not expressly settled in it, or an external gap, i. e., a matter not governed by CISG at all, but by the applicable law.

52

a) General remarks. Art. 7(2) tries to resolve the problems that arise from issues not expressly determined by the Convention137. One of the better achievements of 128 De Ly, Uniform interpretation: What is being done? Official efforts, in: Ferrari, The 1980 Uniform ~ellas, La interpretacio´n y la integracio´n de la Sales Law (2003), p. 335 (346 et seq.); and Martı´nez Can Convencio´n de Viena sobre compraventa internacional de mercaderı´as de 11 de abril de 1980 (2004) pp. 198 et seq. All of them sceptical. But see: Linarelli, The Economics of Uniform Laws and Uniform Lawmaking, Wayne Law Review (2003) 1 (1 et seq.). 129 Adame Goodard, Reglas de Interpretacio ´ n de la Convencio´n sobre compraventa internacional de mercaderı´as, Diritto del Commercio Internazionale (1990) 103 (113 seq.). 130 See De Ly, Uniform interpretation: What is being done? Official efforts, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 335 (348 seq.), in favour of a voluntarily scheme under the auspices or not of UNCITRAL in which the parties may agree to submit interpretation issues to an advisory committee. 131 Rogers, The Lexical Initiative for international commerce, FS Kritzer (2008), pp. 404 et seq. 132 Bonell, A Proposal for the Establishment of a “Permanent Editorial Board” for the Vienna Sales Convention, in: International Uniform Law in Practice (1987), p. 241. Contrary: Report of UNCITRAL on the Work of its 21st session. A/43/17, 1988. 133 See infra para. 61. 134 Available at http://www.cisg-ac.org. 135 Hahnkamper, Acceptance of an offer in light of electronic communications, 25 Journal of Law and Commerce (Fall 2005/Spring 2006) 147 (148) (Pace) (Uncitral), in regard to Opinion no 1. Also: Charters, Growth of the CISG with Changing Contract Technology: “Writing” in Light of the UNIDROIT Principles and CISG-AC Advisory Council Opinion no 1, 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), pp. 73 seq. (Pace). 136 Courts in the U.S., Germany, The Netherlands and Poland have for example referred to CISG-AC Opinions Nos 1, 2, 3, 5, 6, 13 and 14. A List of those cases is available at www.cisg-ac.org. 137 Paragraph 2 derives from Art. 17 ULIS in general, except for the reference to the rules of private international law that was included during the Diplomatic Conference due to a proposal of the old Democratic Republic of Germany as a compromise between those that considered that the recourse to the general principles was too vague as they are not formulated in the CISG and those that were afraid of the direct recourse to national law. See Honnold, Documentary History (1989), pp. 62, 87, 476 et seq.

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the CISG is that it avoids premature recourse to national law by applying general principles on which the CISG is based. While creating this self-sufficient system, however, the CISG provides for a secondary recourse to domestic law as determined by the conflict of laws rules of the forum. Further, recourse to domestic law is the ultima ratio138. It is clear that it was not the intention of the drafters to create a comprehensive, 53 long and complicated text on the international sale of goods, but rather to regulate the main issues arising in a contract for the sale of goods, avoiding easy recourse to domestic law when interpreting and applying the CISG. This is not to say that private international law rules139 and hence domestic law is to be totally excluded. It may play a role in relation to matters not within the scope of CISG and also as a last resort when filling gaps. Also, parties might exclude the Convention totally or partially thus giving room to domestic law (Art. 6). More importantly, in these instances, domestic law might be replaced by other international uniform law instruments. The possibility of opting out of the Convention and the existence of reservations does not, in this author’s view, convert the Convention into a soft law instrument140. When opting out, parties exercise the utmost principle of freedom of contract and this is consistent with the non-mandatory character of the Convention (and in general in uniform international commercial law texts). Furthermore, as mentioned above, it does not necessarily endanger the unification of law, since the parties may well give room, totally or partially, to other international rules. In any case, considering the above approach and the systematic approach of the Convention itself, a broad interpretation should be given to solutions by which general principles are found to fill the internal gaps of the Convention. b) Matters excluded from the CISG. The Convention expressly considers certain 54 contracts outside its scope. More specifically, services or labour contracts (Art. 3(2)) are excluded, as well as specific transactions due to their purpose, such as consumer sales (Art. 2(a)). Other exclusions are due to the kind of goods, as in the case of the electricity (Art. 2(f)), or the type of sales contract, as in the case of a sale by auction (Art. 2(b)). Finally, certain other matters are also excluded like the validity of the contract or any of its provisions or of any usage (Art. 4(a)), the transfer of property of the goods (Arts 4(b) and 30), and the liability of the seller for death or personal injury caused by the goods to any person (Art. 5). These express exclusions raise several issues of interpretation in certain instances. 55 First, some of the matters excluded are subject to exceptions that open the door for their inclusion within the CISG, such as consumer transactions under Art. 2(a), or the exclusions listed in Art. 4(a),(b). Second, some of these exclusions are open to divergent interpretations due to the use of uncertain terms, such as the meaning of preponderant part in Art. 3(2). Third, even when considering a plain and straightforward exclusion not subject to any limitation or vague terms, such as the exclusion in

138 Inter alia: Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 7 para. 42; and Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 170. In case law: “recourse to domestic law is prohibited by Article 7”: High Court of New Zealand (New Zealand) 30 July 2010 (trucks), RJ & AM Smallmon v Transport Sales, Ltd., CISG-Online 2113 (Pace). 139 For the impact of the private international law of the forum on along CISG (Arts 1.1 b), 95, 7(2), 92–94): Ferrari, CISG and Private International Law, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 19 (19 et seq.). 140 Contrary: see, inter alia: Sarcevic, The CISG and regional unification, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 3 (8 seq.)

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Art. 2(e) of the sales of ships, vessels, hovercraft or aircraft, or in Art. 5 in regard to the liability of the seller for death or personal injury caused by the goods, or proprietary issues (Art. 4 (b))141, scholars and case law open the door for different interpretations that may result in the application of the Convention142. As a consequence, depending on the methods and the weight given to the different interpretative techniques, the total or partial exclusion or inclusion of the Convention on a matter apparently outside the CISG might vary. For example, although the reason for excluding the sale of ships, vessels, hovercraft or aircraft from the Convention is clear (Art. 2(e), registration requirement in domestic law means that they are treated as immovables), the interpretation of scholars and case law on the specific words therein may vary from total exclusion to partial inclusion depending on the weight, size, or navigability of the object. c) Internal gaps within the CISG. First, the drafters intended matters governed by the Convention that are not expressly provided for in it (internal gaps) to be dealt with exclusively by the Convention. In this regard, as mentioned above, the legislative history is an important element in ascertaining whether a specific issue is governed by the CISG. Second, matters governed by the Convention are those issues that are within the field of application of the Convention despite its classification under domestic law and thus are matters covered by the provisions of the CISG143. 57 Once a gap is detected, the following hierarchy of solutions applies: first, specific provisions of the CISG are applied directly by way of analogical technique created by scholars and case law144; if the gap still cannot be filled, resort is to be had to the general principles on which the CISG is based (internal principles) or in their absence to other external principles and finally to the applicable domestic law. 58 Some issues within the CISG are so problematic that none of the possible solutions are viable, such as in the case of the “battle of the forms”. Some scholars have considered this situation an issue of validity and thus outside the scope of the Convention by virtue of Art. 4(a). If considered, however, to be an internal gap, a direct application of a provision of the CISG by analogy can be considered by applying Arts 18 and 19 to resolve this issue and thus a last-shot rule applies. If it can be considered that application of internal principles is possible, i. e., the good faith 56

141 See Torsello, Transfer of Ownership and the 1980 Vienna Sales Convention: A Regretful Lack of Uniform Regulation?, International Business Law Journal (2000) 939 et seq. 142 For an interpretation of Art. 5, see: CISG-AC Opinion no 12. 143 Schlechtriem, Unification of the Law for the International Sale of Goods, in: Schlechtriem (ed.), XII International Congress of Comparative Law (1986), p. 121 (129 et seq.); Magnus, Wa¨hrunsfragen im Einheitlichen Kaufrecht. Zugleich ein Beitrag zu seiner Lu¨ckenfu¨llung und Auslegung, RabelsZ (1989) 116 (119 et seq.). 144 Hellner, Gap-Filling by Analogy – Art. 7 of the U. N. Sales Convention in Its Historical Context, FS ~ellas, La interpretacio´n y la integracio´n de la Convencio´n de Hjerner (1990), pp. 219 et seq.; Martı´nez Can Viena sobre compraventa internacional de mercaderı´as de 11 de abril de 1980 (2004), pp. 317–320; Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 159–160; Bernstein/Lookofsky, Understanding the CISG in Europe (1997), p. 25; Felemegas, Part One. 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), pp. 26–27. And in case law, inter alia, Arbitral Award, ICC 8324/1995 (mineral of maganese), CISG-Online 569 (Pace), stating that Arts 8 and 9 might be complemented by applying the usual techniques applied in legal reasoning: interpretation by analogy, a contrario, etc; Supreme Court (Poland) 11 May 2007 (leather to manufacture shoes), CISGOnline 1790 (Pace) reversing and remanding the lower decision, because an interpretation of Art. 71 by analogy was not done; and many court decisions applying CISG Part II (Formation of the Contract) to Art. 29 on the modification of the contract. See: Perales Viscasillas, Modification and Termination of the Contract (Art. 29 CISG) 25 Journal of Law and Commerce (Fall 2005/Spring 2006) 167 (170) (Pace) (UNCITRAL).

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principle (Art. 7(1)), then application of the knock-out rule would be foreseen; the same is considered when a partial exclusion of Art. 19 is the thesis followed. External principles applicable to this issue may be found in Art. 2.1.22 PICC that would serve to fill the gap by also applying the knock out rule. Finally, domestic applicable law would also be considered where other methods have failed, demanding a solution outside the Convention145. Case law and scholars are progressively drawing the line between issues covered and 59 not covered by the CISG. Some of these issues are clearly outside the scope of the CISG, while others are gaps within the Convention where the courts were unable to find general principles to fill them and thus resorted to domestic law. However, the adscription of certain matters to one category or another is contentious and thus case law and scholars are in disagreement as to whether the CISG or domestic law governs certain issues. One of those issues are penalty clauses that, although initially considered outside of 60 the scope of the CISG146, are presently considered under a pro Convention principle approach147. In this author’s view one has to consider the function of the clause. If the intention is exclusively to punish the breaching party, one might argue that its validity might be assessed against domestic law, which might even consider that such clauses are void (Art. 4(a)). Once considered valid under domestic law, the clause might be analysed within the Convention’s general principles. Although this interpretation is certainly more in line with the uniformity principle as compared with the solution based on the entire exclusion from the Convention irrespective of the function of the clause (Art. 4(a)), the author’s preferred view is to consider that the issue is entirely governed by the CISG even if the clause is a true penalty clause because the Convention adopts the philosophy to govern all remedies for the breach of contract not only damages as proved by the treatment of the right of interest (Art. 78) distinct from that of damages (Art. 74), more so if it is contractually agreed by the parties as the CISG acknowledges the importance of this general principle throughout the Convention. If, as ordinarily the case, the function of the clause is to compensate (damage function) for the breach of the contract by one of the parties, then there is no issue of validity at all since this matter is governed entirely by the Convention148. These clauses are universally recognized and thus they are not only covered by the CISG but also issues related to their moderation, if any and whether pertinent, should be governed by the Convention. To this regard, in both situations, the moderation would only and exceptionally be made if grossly contrary to the

145

See infra Comments to Art. 19. Arbitral Award, ICC 7197/1992 (unidentified goods), CISG-Online 36 (Pace), Tribunale di Padova (Italy) 25 February 2004 (agricultural products), SO.M.AGRI s.a.s. di Ardina Alessandro & C. v Erzeugerorganisation Marchfeldgemu¨se, GmbH & Co. KG, CISG-Online 819 (Pace) (obiter dicta), and Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 1 March 2006 (unidentified goods) (Pace). Indifferent as to the same result would be derived applying domestic Law: Oberlandesgericht Hamburg (Germany) 25 January 2008 (inventory for a cafe´), CISG-Online 1681 (Pace). The CISG does not regulate the question of whether the penalty the parties agreed upon can be moderated: Gerechtshof Arnhem (Netherlands) 22 August 1995 (live lambs), Diepeveen-Dirkson BV v Nieuwenhoven Veehandel, GmbH, CISG-Online 317 (Pace). 147 See Bridge, The International Sale of Goods. Law and Practice 2007, para. 11.38, considering that penalty clauses are impliedly governed by the CISG and that a general principle derived from Art. 74 implies that penalties should be disallowed because they punish rather than compensate. For agreed sums, see: CISG-AC Opinion no 10. 148 Impliedly considering that a penalty clause displaces Art. 74, although considering domestic law for its moderation: SAP Madrid (Spain), 18 October 2007 (textiles), (www.cisgspanish.com). 146

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general principles of the CISG. In any case, the PICC (Art. 7.4.13) offer an interpretative guide useful to consider in conjunction with the CISG. Noted that Art. 7.4.14 considers widely both functions of the clause: liquidated damage clause and penalty clauses. Finally, in this author’s view, the general principle of full compensation applies to the interpretation of the penalty clause and thus other damages are available to the aggrieved party. 61 Similar developments are found in relation to other matters, but uncertainties remains in some cases. However, most of them are just obiter dicta without a CISG in depth discussion or a refinement: agency issues149, conditions for the conclusion of the contract150, transfer of credit, rights and obligations151, framework distribution agreement152, although CISG applies to contracts of sales concluded on the basis of the distribution agreement153, the proof of defects of the goods154, the procedure to determine the nonconformity of the goods delivered155, restitution of payment due to the avoidance of the contract156, prescription157,

149 Tribunale di Padova (Italy) 25 February 2004 (agricultural products), SO.M.AGRI s.a.s. di Ardina Alessandro & C. v Erzeugerorganisation Marchfeldgemu¨se, GmbH & Co. KG, CISG-Online 819 (Pace) (obiter dicta); Oberstergerichtshof (Austria) 22 October 2001 (agricultural products), CISG-Online 613 (Pace). Amtsgericht Alsfeld (Germany) 12 May 1995 (tiles), CISG-Online 170 (Pace); Kammergericht Berlin (Germany) 24 January 1994 (wine), CISG-Online 130 (Pace); Cantonal Court of Valais (Switzerland), 27 May 2005 (Welding devices), CISG-Online 1137 (Pace): CISG does not apply to issues of representative authority; transfer of authority is not governed by the CISG: Landgericht Landshut (Germany), 12 June 2008 (Metallic slabs), CISG-Online 1703 (Pace); Oberlandesgericht Schleswig (Germany), 24 October 2008 (Shop furnishings), CISG-Online 2020 (Pace): the CISG is not applicable because it does not govern agency;. Among scholars: Ferrari, CISG and Private International Law, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 19 (46). 150 Arbitral Award, ICC 7844/1994 (radio-communication equipment), CISG-Online 567 (Pace). 151 The transfer of the price of the sales contract to a third person: Oberlandesgericht Hamm (Germany) 8 February 1995 (socks), CISG-Online 141 (Pace); and Cour d’ appel de Grenoble (France) 13 September 1995 (cheese), Socie´te´ francaise de Factoring international Factor France v Roger Caiato, CISG-Online 157 (Pace). It is not governed by the CISG: the transfer of the contract by agreement of the parties or by operation of the law: Bundesgerichtshof (Germany) 12 February 1998 (air cleaning installation), CISGOnline 343 (Pace) and Tribunale di Padova (Italy) 25 February 2004 (agricultural products), SO.M.AGRI s.a.s. di Ardina Alessandro & C. v Erzeugerorganisation Marchfeldgemu¨se, GmbH & Co. KG, CISGOnline 819 (Pace) (obiter dicta). 152 Court of Appeals in Warsaw (Poland) 15 May 2015 (dietary products), CISG-online 2783, CISG does not apply neither to framework contracts nor to the exclusivity clause because it refers to the distribution part of the agreement. 153 See further discussion with relevant cases: Perales Viscasillas, International distribution contracts and CISG, in: Schwenzer/Atamer/Butler, Current Issues in the CISG and Arbitration (2013), pp. 43–58, going forward and considering CISG applicable also to framework agreements with case law in favor. 154 Ca ´ mara Nacional de Apelaciones en lo Comercial (Argentina) 24 April 2000 (coal), Mayer Alejandro v Onda Hofferle GmbH & Co., CISG-Online 699 (Pace). 155 Ca ´ mara Nacional de Apelaciones en lo Comercial (Argentina) 21 July 2002 (barley), CISG-Online 803 (Pace); Ca´mara Nacional de Apelaciones en lo Comercial de Buenos Aires (Sala A) (Argentina) 31 May 2007 (almonds), Sr. Carlos Manuel del Corazo´n de Jesu´s Bravo Barros v Salvador Martı´nez Gares, CISG-Online 1517 (Pace). 156 Oberster Gerichtshof (Austria) 10 March 1998 (unidentified goods), CISG-Online 356 (Pace). 157 Cour d’appeal de Versailles (France) 13 October 2005 (chenilles en peluche), CISG-Online 1433 (Pace); Cour d’appeal de Paris (France) 6 November 2001 (cables), CISG-Online 677 (Pace), considered it as a matter governed by the Convention, but not settled in it; and Oberstergerichtshof (Austria) 7 September 2000 (tombstones), CISG-Online 642 (Pace).

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assignment158, contributory negligence, i. e., joint contributors to the harm159, and set-off160 but not if the claims are based on the CISG161: aa) General Principles embodied in the CISG. Recourse to the general principles on 62 which the CISG is based is an attempt to build a systematic interpretation of the CISG. These general principles are discovered and built up progressively by case law and scholars. However, recourse to the general principles adds further problems to the method of filling gaps within the Convention. There is no enumeration of the general principles in the CISG and as their content and effect are not established within the Convention, there remains the obvious risk that interpreters would derive from the Convention not only different principles but also divergence effects162; furthermore some confusion is observed in several cases between application by analogy and the application of a general principle163. There are several striking examples such the interest rate in Art. 78164, the use of general terms and conditions or the battle of the forms problem under Part II, where scholars and case law are in disagreement as to whether they are issues governed by the Convention, and if governed, what general principles are to be applied165. 158 Oberster Gerichtshof (Austria) 7 September 2000 (tombstones), CISG-Online 642 (Pace); Oberlandesgericht Hamburg (Germany) 25 January 2008 (inventory for a cafe´), CISG-Online 1681 (Pace). 159 Arbitral Award, Bulgarian Chamber of Commerce and Industry, 24 April 1996 (coal), CISG-Online 435 (Pace). 160 Oberlandesgericht Dusseldorf (Germany), 25 July 2003 (rubber sealing parts), CISG-Online 919 (Pace); Oberlandesgericht Ko¨ln (Germany) 19 May 2008 (pesticide), CISG-Online 1700 (Pace). Also: Kantonsgericht Freiburg (Switzerland) 23 January 1998 (laundry machine), T. Maschinenbau GmbH v T. Maschinenvertrieb AG, CISG-Online 423; Tribunale di Padova (Italy) 25 February 2004 (agricultural products), SO.M.AGRI s.a.s. di Ardina Alessandro & C. v Erzeugerorganisation Marchfeldgemu¨se GmbH & Co. KG, CISG-Online 819 (Pace); and Decision 43 945/2007 of the Single-Member Court of First Instance of Thessalonika (Greece) 2008 (clothes) (Pace). A discussion among scholars: Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 7 para. 29; Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 167–168. 161 Oberlandesgericht Mu ¨ nchen (Germany) 9 July 1997 (leather goods), CISG-Online 282 (Pace); Hanseatisches Oberlandesgericht Hamburg (Germany) 26 November 1999 (jeans), CISG-Online 515 (Pace); Arrondissementsrechtbank Arnhem (Netherlands) 25 February 1993 (clothes), P.R. Van den Heuvel v Santini Maglificio Sportivo de Santini P&C S.A.S., CISG-Online 98 (Pace); Landesgericht Mo¨nchengladbach (Germany) 15 July 2003 (filter), CISG-Online 813 (Pace), in relation with Art. 84(2) CISG; Landgericht Stuttgart (Germany), 29 October 2009 (artificial turf), CISG-Online 2017 (Pace): “A set-off is at least admissible in the field of application of the CISG without an express provision as long as the counterclaim is based on the same legal relationship”; Bundesgerichtshof (Germany), 14 May 2014 (coffee products), CISG-Online 2493 (Pace). See also: Bridge, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 251–252. It is also considered that set off is also derived from Art. 88.3 (CISG-AC Opinion no 9, para 3.24). Contrary: Tribunale di Padova (Italy) 25 February 2004 (agricultural products), SO.M.AGRI s.a.s. di Ardina Alessandro & C. v Erzeugerorganisation Marchfeldgemu¨se GmbH & Co. KG, CISG-Online 819 (Pace): set-off is not governed by CISG “even when considering counterbalancing credits arising from contracts subject to the Convention”. 162 This is particularly so since according to some scholars Art. 7(2) rejects the common law approach to interpretation based upon a strict and literal reading: see Bell, How the Fact of Accepting Good Faith as a General Principle of the CISG Will Bring More Uniformity, Review of the Convention on Contracts for the International Sale of Goods (CISG) (2005–2006) 16. 163 An example where general principles were applied in a case of application by analogy is the case decided by Warsaw Court of Appeals (Poland) 20 November 2008 (truck), CISG-Online 2539 (Pace) where the Court of Appeals stated that the Convention does not expressly govern the consequences of the termination of a contract as a result of the lapse of contractually established time limit. However, in light of Art. 7 CISG, which calls for the application of the general principles, Art. 81(2) CISG was applied. 164 CISG-AC Opinion no 14. 165 CISG-AC Opinion no 13. Other example is the burden of proof: Ferrari, CISG and Private International Law, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 19 (40 et seq.), that choose it to illustrate the difficulties in distinguishing the internal and external gaps; and 2016 UNCITRAL, Digest of Case Law on the CISG, Art. 7 para. 20.

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Part I. Sphere of Application and General Provisions

Since the Convention is neither a perfect model166 nor an exhaustive text, some critical issues of divergent interpretation exist; transaction costs might be reduced through drafting contract clauses tailored for contracts under CISG. Far from being a disadvantage167, the vagueness of the content and enumeration of the general principles is compensated by the flexibility and adaptability of the Convention provisions to permeate new general principles as the study and applicability of the Convention grows. 64 Apart from the clear principles embodied in Art. 7 (principles of internationality, uniformity and good faith), there are also several other principles easy to detect as embodied in the general dispositions of the Convention. These are found in Arts 1–13, particularly the reasonability principle (Arts 8, and inter alia 39, 43, 46, 70), freedom of form and evidence (Art. 11), freedom of contract or party autonomy (Art. 6), the rules in regard to the hierarchy of the norms, and the value of usages and practices established between the parties. In Part II (Formation of the Contract), principles include: the receipt or reception principle as a general principle for the effectiveness of declarations of will within Part II (Art. 24), the principle of exchange of information168, the principle to preserve the contract (Arts 19(2) and 21(2)), estoppel and venire contra factum proprium (Arts 16(2)(b)) and 29(2)). In Part III principles include: the duty to cooperate (Arts 32(3), 48(2) and 60)169, pacta sunt servanda, favor executionis170, full compensation (Art. 74)171, the duty to mitigate (Art. 77)172, the right to withhold performance (Arts 58 and 71173, 81(2), 85(2), and 86(1)), the synallagmatic principle (Arts 58, 71174 and 81(2)), the avoidance of business disruption and economic waste (Arts 25 and 77)175, etc176. 63

166 Tallon, Damages, Exemption Clauses and Penalties, 40 American Journal of Comparative Law (1992) 675 (675 seq.). 167 But see a negative view: Andersen, General Principles of the CISG–Generally Impenetrable?, FS Kritzer (2008), p. 13 (13 et seq.). 168 Foreign Trade Court of Arbitration attached to the Yugoslav Chamber of Commerce (Serbia) 9 December 2002 (Aluminium), CISG-Online 2123 (Pace). 169 Honnold, Uniform Law (2009), para. 100; Beraudo, The United Nations Convention on Contracts for the International Sale of Goods and arbitration, 5 ICC International Court of Arbitration Bulletin (1994) 63. See: Art. 5.3 PICC. Foreign Trade Court of Arbitration attached to the Yugoslav Chamber of Commerce (Serbia) 9 December 2002 (aluminium), CISG-Online 2123 (Pace). 170 National Commercial Court of Appeals, Division “A”, Buenos Aires (Argentina) 31 May 2007 (almonds), Sr. Carlos Manuel del Corazo´n de Jesu´s Bravo Barros v Salvador Martı´nez Gares (Pace) referring to specific performance. 171 Recognized as a gap filler in regard to the interest rate in Art. 78, Arbitral–Awards, Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft – Wien (Austria), 15 June 1994 (rolled metal sheets), No. SCH 4318/SCH-4366, CISG-Online 120/121 and also considering that the same result would be derived from Art. 7.4.9 PICC; Foreign Trade Court attached to the Serbian Chamber of Commerce (Serbia), 19 October 2009 (mineral water), CISG-Online 2265 (Pace); Foreign Trade Court attached to the Serbian Chamber of Commerce (Serbia), 6 May 2010 (agricultural products and grains), CISG-Online 2358 (Pace). Or the principle of full restitution derived from Arts 74 and 84(1) CISG to determine the dies a quo for the interest rate: Audiencia Provincial de Girona (Spain), 21 January 2016 (live molluscs), Alexandridis G. & CO. OESC v Treatment Servimant, SL, CISG-Online 2729. 172 Inter alia: Bundesgerichtshof (Germany), 26 September 2012 (clay), CISG-Online 2348 (Pace). 173 The principle of simultaneous exchange of performances derives from Arts 58 and 71. Or exceptio non adimpleti contractus (Arbitral Award, ICC/11849, 2003 (fashion products) (Unilex)). From this principle it is derived that the buyer has the right to withhold payment of the price when the performance rendered is not in conformity with the contract: Oberstergerichtshof (Austria) 8 November 2005 (machine for recycling glass), CISG-Online 1156 (Pace). 174 Oberlandesgericht Ko ¨ ln (Germany), 19 May 2008 (pesticide), CISG-Online 1700 (Pace). 175 CISG-AC Opinion no 9, paras 3.11 and 3.23. 176 Scholars have drawn up several lists of general principles which might be considered ambitious and are not always coincident. See: Magnus, General Principles of UN-Sales Law, International Trade and Business Law Annual (1997) 33 (33 et seq.) (Pace); Honnold, Uniform Law (2009), paras 99 et seq.; Bonell,

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Further, other general principles apply to the whole Convention: the favor contractus 65 principle177 or favor negotii that might influence the interpretation178 and conclusion of the contract and the pro-Convention principle. The pro-Convention principle, on the one hand, dictates an interpretation in favour of the applicability of the CISG179, and as a consequence an international and uniform interpretation (Art. 7) would decrease transaction costs, and forum shopping as well as an exclusion of conflicts of law rules180. On the other hand, this principle claims an extensive and broad interpretation of the gap-filling rule, attaching to the CISG several matters that otherwise might fall outside the scope of the Convention. To this regard, a high portion of the CISG is to be considered general contract law rules and the fact that there is not a general contract law treaty justifies a broader application of the Convention. Other general principles include the principle of in dubio pro Conventione181, which considers the preference in the applicability of the CISG before domestic law and the applicability of the CISG over the purely domestic or national public order182; and the principle of equality between buyers and sellers that was considered decisive to the interpretation of Art. 74 and to conclude that attorney’s fees were not to be covered within that provision183. Other principles need to be inferred from a process of abstraction and deduction on 66 specific provisions of the Convention184, e. g., case law has considered that the place of payment of damages is the creditors place of business as derived from Art. 57(1)(a) which deals with the place of payment of the purchase price185. in: Bianca/Bonell, Commentary (1987), Art. 7 CISG para. 2.3.2.1 (Pace); Ferrari, in: Ferrari/Flechtner/ ~ellas, La interpretacio´n y la integraBrand, Draft Digest and Beyond (2003), pp. 160–170; Martı´nez Can cio´n de la Convencio´n de Viena sobre compraventa internacional de mercaderı´as de 11 de abril de 1980 (2004), pp. 322–337, considering the principles derived from scholarly work as well as for judicial or arbitral decisions; Rosenberg, The Vienna Convention: Uniformity in Interpretation for Gap-Filling- An Analysis and Application, 20 Australian Business Law Review (1992) 442 (449 et seq.); Janssen/Kiene, The CISG and Its General Principles, in: Janssen/Meyer (eds), CISG Methodology (2009), 270–285; and Gonza´lez Painemal, Interpretacio´n e integracio´n de la Convencio´n de Viena de 1980 sobre los contratos de compraventa internacional de mercaderı´as, Santiago de Chile (2013), pp. 178–195. See also 2016 UNCITRAL, Digest of Case Law on the CISG, Art. 7 paras 12 et seq. 177 See Keller, Favor contractus: Reading the CISG in favor of the contract, FS Kritzer (2008), p. 247 (247 et seq.). 178 See Zuppi, Art. 8, para. 31 in this commentary; Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 51. 179 See CISG-AC Opinion no 4, para. 4.4; CISG-AC Opinion no 16, comment 3.5 Or the principle favor ~ellas, La interpretacio´n y la integracio´n de la Convencio´n de Viena sobre conventionis: Martı´nez Can compraventa internacional de mercaderı´as de 11 de abril de 1980 (2004), p. 316; and Moreno Rodrı´guez, Derecho aplicable y arbitraje internacional, Thomson/Aranzadi (2014), pp. 246–247. 180 See De Ly, Uniform interpretation: What is being done? Official efforts, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 335 (341). See advocating that CISG would reduce transaction costs: Lehn, in: Flechtner/Brand/Walter, Drafting Contracts (2007), pp. 263–265. 181 As considered by several authors: Lookofsky, In dubio pro conventione? Some thoughts about optouts, computer programs and pre-emption under the 1980 Vienna Sales Convention (CISG), 13 Duke Journal of Comparative and International Law (Summer 2003) 263 (263 et seq.) (Pace); and Martı´nez ~ellas, La interpretacio´n y la integracio´n de la Convencio´n de Viena sobre compraventa internacional Can de mercaderı´as de 11 de abril de 1980 (2004) pp. 130–131. ~ellas, La interpretacio´n y la integracio´n de la Convencio´n de Viena sobre compraventa 182 Martı´nez Can internacional de mercaderı´as de 11 de abril de 1980 (2004) p. 131. 183 CISG-AC Opinion no 6, para. 5.4. 184 Maskow, The Convention on the International Sale of Goods from the Perspective of the Socialist Countries, in: la Vendita Internazionale (1981), pp. 57 et seq.; Adame Goodard, Reglas de Interpretacio´n de la Convencio´n sobre compraventa internacional de mercaderı´as, Diritto del Commercio Internazionale (1990) 103 (112); following Bonell, in: Bianca/Bonell, Commentary (1987), Art. 7 para. 2.3.2.2. (Pace). 185 Oberlandesgericht Du ¨ sseldorf (Germany) 2 July 1993 (veneer cutting machine), CISG-Online 74 (Pace). The better rule derived from Arts 57(1) and 7 is that such payment is to be made at the obligee’s place of business. Therefore, one might go even further and infer that the place of payment of any

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bb) General Principles external to the CISG: Lex Mercatoria and the PICC. The autonomous interpretation of the Convention is defined by some scholars through a negative definition – no external concepts to interpret the CISG – and a positive one – interpretation of the Convention within its system and objectives186. However, it is rather controversial187 whether external principles may play a role in the interpretation and gapfilling of the CISG absent an agreement of the parties188; from those that deny any role of the external principles, and particularly PICC189, to those that identify the PICC as the general principles on which the Convention is based (Art. 7(2) CISG)190. The common understanding is that the PICC are generally not considered to be the general principles of the CISG, but rather that it might be a tool to interpret the CISG191 or to fill its gaps, particularly where there is no collision between them192, or even applied as an expression of the good faith principle (Art. 7(1) CISG)193. The answer also depends upon the applicable law to the contract as well as the dispute resolution method. In any case, modern trends in the interpretation of the CISG allow considering the lex mercatoria and

monetary obligation under CISG is determined by the creditor’s place of business (see: CISG-AC Opinion no 14, at 9). However, there are opposite views, see Ferrari, CISG and Private International Law, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 19 (43) and 2016 UNCITRAL, Digest of Case Law on the CISG, Art. 7 para. 18, inter alia: Cour d’Appel de Paris (France) 14 January 1998 (elephants), Ste´ Productions SCAP v Faggioni, CISG-Online 347 (Pace), unable to derive a general principle and thus the Court held that Art. 57(1)(a) does not express a general principle on the place of payment, because in the cases it governs the seller and the creditor coincide. 186 Torsello, The CISG’s impact on Legislators: The Drafting of International Contract Law Conventions, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 230 (235 et seq., note 229); Gebauer, Uniform Law, General Principles and Autonomous Interpretation, Uniform Law Review (2000), p. 686 (686 et seq.); Zeller, Four-Corners – The Methodology for Interpretation and Application of the UN Convention on Contracts for the International Sale of Goods, 2003, Chapter 6 (Pace); Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 7 para. 26. 187 Cf. Perales Viscasillas, The Role of the UNIDROIT Principles and the PECL in the interprtation and gap-filling of CISG, in: Janssen/Meyer (eds), CISG Methodology (2009), pp. 287 et seq. 188 See UNIDROIT Model Clauses for the Use of the UNIDROIT Principles of International Commercial Contracts (2013) which provides a model clause for the use of PICC and CISG to be included in the contract and a model clause for use after a dispute has arisen (Models 3 and 4). As pointed out in comment 3 to Model Clause 4 by using it there would be an implied derogation of Art. 7.2 CISG. 189 Among the most recent ones: Flechtner, Uniformity and Politics: Interpreting and filling gaps in the CISG. Festschrift fu¨r Ulrich Magnus zum 70 Geburstag. Sellier (2014), pp. 196–198 discussing the “aggressive approach” v “more cautious approach”, critical to PICC considering that Art. 7.1 CISG principles might conflict with those of PICC; and Fogt, Private International Law in the process of harmonization of International Commercial Law: “The Ugly Duckling”?. Unification and Harmonization of International Commercial Law. Interaction of Deharmonization?. Edited by Morten M.Fogt. Walters Kluwer, (2012), pp. 97–98. 190 Curiously enough Comment 3 to Model clause 4 of the UNIDROIT Model Clauses (supra footnote 188) recognizes that the general principles under Art. 7.2 CISG “are as such not identical with the UNIDROIT Principles”. 191 Magnus, Harmonization and Unification of Law by means of general principles. Unification and Harmonization of International Commercial Law. Interaction of Deharmonization?. Edited by Morten M.Fogt. Walters Kluwer (2012), p. 173 referring also to other principles but with more emphasis on PICC. 192 Michaels, Preamble, Commentary on the UNIDROIT Principles of International Commercial Contracts (PICC). Edited by Stefan Vogenauer, 2nd edition, Oxford University Press, 2015, No 110, in so far as PICC reinstate the CISG’s general principles. But PICC cannot automatically and without exception be used to supplement the CISG (id., No 124). Similarly: Monberg, The UNIDROIT Principles – The Ugly Duckling of Gap-Filling Instruments under the CISG (2012) (Pace). 193 Gerechtshof’s Hertogenbosch (The Netherlands), 16 October 2002 (plants), CISG-Online 816 (Pace) analysing an international sales of goods contacts under the CISG that, in order to achieve a uniform and international solution, it should be interpreted in light of PICC (also PECL). The Tribunal considered the comments to Arts 2.20 PICC and 2.104 PECL in the interpretation of the CISG.

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the PICC194, as a means of interpreting and supplementing the CISG when no general principles within the Convention are found195 or as to be applied for matters excluded from CISG such as limitation periods196 or to validity issues in a direct application of chapter 3 PICC197- a solution that is based upon the uniformity principle (Art. 7(1))198. Furthermore, after the UNCITRAL endorsement of the PICC, the legitimacy behind the Principles to play an interpretative and supplementary role towards the CISG has increased (Art. 7)199. This is particularly so since the endorsement is not restricted to the use by the parties, as happens to be the case with other international instruments endorsed by UNCITRAL200. 194 And to a lesser extent the PECL, since international instruments ought to prevail over regional instruments: CISG-AC Declaration no 1, The CISG and Regional Harmonization, Rapporteur: Professor Michael Bridge, London School of Economics, London, United Kingdom, 3 August 2012 (at http://cisgac.org). 195 Cf. Perales Viscasillas, The Role of the UNIDROIT Principles and the PECL in the interpretation and gap-filling of CISG, in: Janssen/Meyer, CISG Methodology (2009), pp. 287 et seq. Several courts and arbitral awards have considered PICC as the general principles on which the CISG is based. See Arbitral Award, ICC 8817/1997, 1 December 1997 (food products), CISG-Online 776 (Pace) (YCA, XXV, 2000), in relation with an exclusive distribution contract in Spain and Portugal, where the sole arbitrator declared that the CISG was applicable to the case as well as its general principles as embodied in the UNIDROIT Principles mentioning Arts 9(1), 25, 64, 74 and 78 CISG. Particularly in relation with the rate of interests (Art. 78 CISG): Arbitral Award, ICC 8128/1995 (PICC and PECL), 1 January 1995 (chemical fertilizer), CISGOnline 526 (Pace); Arbitral Award, ICC 8769/1996 (PICC), 1 December 1996 (electrical appliances plus tooling), CISG-Online 775 (Pace); Supreme Economic Court of the Republic of Belarus, 20 May 2003 (fish flour), Holzimpex, Inc. v Sozh State farm complex, CISG-Online 1040, directly applying PICC to fill the rate of interest. Also in relation with hardship as an impediment under Art. 79 and so that under Art. 7(2) the general principles “as incorporated inter alia in the Unidroit Principles of International Commercial Contracts, the party who invokes changed circumstances that fundamentally disturb the contractual balance, as mentioned in paragraph 1, is also entitled to claim the renegotiation of the contract”: Court of Cassation (Belgium) 19 June 2009 (steel tubes), CISG-Online 1963 (Pace). Or as in Arbitral Award, ICC 12 460/2004 (Unilex): “CISG, as per its article 7, may be supplemented by those general principles which have inspired its provisions and particularly those which have been substantiated and codified in the UNIDROIT Principles of International Commercial Contracts and actually used in relation with the CISG implementation. This can be observed in arbitral jurisprudence (see ICC Publication No. 642.2002) and in various ICC precedents. At the hearing, the Tribunal raised the issue with the parties whether they might be relevant. The Tribunal has accordingly concluded that the UNIDROIT Principles should provide guidance”. See also: Arbitral Award, ICC 12 097/2003 (fashion products) (Unilex); Arbitral Award, ICC 11 638/2002 (unidentified goods). For a more detailed discussion, infra, Atamer, Art. 79, paras 78–86. Finally as usages of trade in relation to CISG, considering Art. 6.1.9 PICC as a confirmation also of the general principles embodied CISG: Corte Cubana de Arbitraje Comercial Internacional (Cuba), 30 September 2013 (lifting platform), CISG-Online 2579 (Pace). 196 Audiencia Provincial de Madrid (Spain), 17 February 2015 (Garments), CISG-Online 2620 (Pace) resorting to Art. 10.2 PICC. Contrary: Michaels, Preamble, Commentary on the UNIDROIT Principles of International Commercial Contracts (PICC). Edited by Stefan Vogenauer, 2nd edition, Oxford University Press (2015) No 126. 197 Perales Viscasillas, The Role of the UNIDROIT Principles, pp. 286 et seq; Tribunal de Justiça do Rio Grande do Sul (Brasil) 30 March 2017 (electric motors) (cisgspanish.com) in relation with issues related to the nullity of the contract. 198 Perales Viscasillas, The Role of the UNIDROIT Principles, pp. 286 et seq. 199 Report of the United Nations Commission on International Trade Law on the work of its fortieth session Vienna, 25 June-12 July 2007 A/62/17 (Part I) General Assembly (http://www.uncitral.org), paras 210 et seq.: “Taking note that the Unidroit Principles 2004 complement a number of international trade law instruments, including the United Nations Convention on Contracts for the International Sale of Goods (1980)”, “Noting that the preamble of the Unidroit Principles 2004 states that (…)”, “Congratulating Unidroit on having made a further contribution to the facilitation of international trade by preparing general rules for international commercial contracts”, “Commends the use of the Unidroit Principles 2004, as appropriate, for their intended purposes”. See resorting to the UNCITRAL Recommendation on Incoterms 2000: Audiencia Provincial de Valencia (Spain) 7 June 2003 (concentrated grape juice), Cherubino Valsangiacomo, S.A. v American Juice Import, Inc., CISG-Online 948 (Pace) (www.cisgspanish.com). 200 Cf. UNCITRAL YB (2000), paras 432–434.

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Part I. Sphere of Application and General Provisions

III. Comparable Rules The majority of uniform international commercial law texts have a rule on interpretation and gap-filling following the model of Art. 7 CISG201. In fact, UNCITRAL was the first organization to insert a specific interpretation provision in its uniform law instruments202, and thus a systematic interpretation of uniform law instruments is to be followed203. According to this approach, a coherent interpretation among uniform law instruments should be considered as a general principle of interpretation of uniform law instruments; as a consequence the interpretation more favourable to coherence among uniform international texts is to be preferred. 69 The influence of Art. 7 is not only seen in the instruments of UNCITRAL204, but also of UNIDROIT205, as well as other regional texts, like the PECL and DCFR206. Usually the model is reproduced in its entirety, although sometimes with minor changes. In a minority number of the texts, substantive changes are considered due to the need to further develop the rules, or accommodate them to the specificities of the subject matter of the instrument. 70 Contrary to the CISG, the PICC do not mention subsidiary recourse the national law207. This omission is consistent with the creation of an autonomous self-sufficient system. 71 The recognition of the principle of good faith and fair dealing in Art. 1.7 PICC (also in Art. 1:106 PECL)208, not expressly as a principle of interpretation of the PICC but as a 68

201 Before similar provisions with no reference to good faith: UN Convention on the Limitation Period in the International Sale of Goods (14 June 1974) and Art. 3 of the Convention on the Carriage of Goods by sea, 1978 (Hamburg Rules). 202 De Ly, Uniform interpretation: What is being done? Official efforts, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 335 (343). 203 See Ferrari, The relationship between international uniform contract law Conventions, Uniform Law Review (2000) 76–78, who refers to the Conventions and justifying this approach on the basis that the different Conventions have the same goal and in the existence of identical interpretation rules. 204 Follow Art. 7(1) CISG, e. g.: Art. 4 United Nations Convention on International Bills of Exchange and International Promissory Notes of 1988; Art. 5 of the UNCITRAL Convention on Independent Guarantee and Stand By Letters of Credit of 1995 that refers to good faith; Art. 8 UNCITRAL Model Law on Cross Border Insolvency; Art. 5 UN Convention on independent guarantees and stand-by letters of credit; Art. 5(1) of the UN Convention on the Use of Electronic Communications in international contracts (2005); Art. 2 UN Convention on the contracts for the international carriage of goods wholly or partly by sea (2008); Art. 6.1 UNIDROIT Convention on Agency in the International Sale of Goods (Geneva, 17 February 1983); and Art. 4.1 UNIDROIT Model Law on Leasing (13 November 2008). 205 Art. 6 UNIDROIT Convention on Agency in the International Sale of Goods (Geneva, 17 February 1983) is a copy of Art. 7 CISG. Art. 5 of the UNIDROIT Convention on International Interests in Mobile Equipment (Cape Town, 2001) follows Art. 7 CISG but it considers also the Preamble and there is no reference to the good faith principle. Similar approach is seen in Art. 4 of the UNIDROIT Convention on Substantive Rules for Intermediated Securities (2009) where also the principle of predictability in its application is considered. 206 Art. 1:106 and Art. 1:201 PECL; Art. I.-1:102(3) and (4) DCFR are similar to Art. 7 CISG with some departures do to the different scope of application. 207 The same approach is found in Art. 3(2) UNCITRAL Model Law on Electronic Commerce (1996); Art. 4(2) UNCITRAL Model Law on Electronic Signature (2001); Art. 2(2) UNCITRAL Model Law on International Commercial Conciliation (2002); Art. 2A UNCITRAL Model Law on International Commercial Arbitration (1985 as amended in 2006); and Art. 4.2 UNIDROIT Model Law on Leasing (13 November 2008). 208 More details: Magnus, Comparative editorial remarks on the provisions regarding good faith in CISG Art. 7(1) and the UNIDROIT Principles Art. 1.7., 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), pp. 45 et seq.; and Felemegas, Comparison between the provision regarding the concept of good faith in CISG Art. 7 and the counterpart provisions of the PECL, 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), pp. 268 et seq.

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mandatory standard of behaviour of the parties, is one of the greatest and most correct innovations of the PICC. The drafters of the PICC were aware of the compromise that embodied good faith during the discussions of the Vienna Sales Convention. They have extracted good faith from the interpretative principles and have relocated it in an independent disposition with a mandatory character (“The parties may not exclude or limit this duty” Art. 1.7 (2) PICC). At the same time they have given to good faith its natural content (“Each party must act in accordance with good faith and fair dealing in international trade”). Art. 1.7 PICC is complemented by Art. 2.1.15 (Negotiations in bad faith) and 2.1.16 (Duty of confidentiality).

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Article 8 (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 had 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. Bibliography: Bonell/Peleggi, UNIDROIT Principles of International Commercial Contracts and Draft Common Frame of Reference: a Synoptical Table, Uniform Law Review (2009) 437; Brand/Flechtner, Arbitration and the Contract Formation in International Trade: First Interpretations of the U. N. Sales Convention, Journal of Law and Commerce (1992/1993) 239; Charters, Fitting the “Situation”: the CISG and the Regulated Market, Washington University Global Studies Law Review (2005) 1; Cueto Rua, Judicial Methods of Interpretation of the Law (1981); Dickerson, The Interpretation and Application of Statutes (1975); Garro/Zuppi, Compraventa internacional de Mercaderı´as (2012); Kakzorowska, Re`gles uniformes d’interpretation d’un contrat international, 68 Revue de Droit International et Droit Compare´ (1991), 294; Patterson, The Interpretation and Construction of Contracts, 64 Columbia Law Review (1964) 833; Schmidt-Kessel, in Schlechtriem/Schwenzer, Article 8, 111; Schro¨ter, Ru¨ckkaufverpflichtungen und ‘contra proferentem’-Regel unter dem UN-Kaufrecht, 5 IHR (2014); Schwenzer/ Fountoulakis/Dimsey, International Sales Law (2012); Vettori, The Interpretation of Good Faith and According to Human Rights, Fundamental Freedoms and Constitutional Laws in the Common Frame of Reference, Persona e Mercato (2009); Zeller, Determining the Contractual Intent of Parties under CISG and Common Law–A Comparative Analysis, 4 European Journal of Law Reform (2000) 629; Zuppi, La interpretacio´n en la Convencio´n de Viena de 1980 (CISG) – Compraventa internacional de mercaderı´as, Revista Jurı´dica La Ley (1997) 1290; “The Parol Evidence Rule. A comparative study of the Common Law, the Civil Law Tradition and Lex Mercatoria” 35 Ga. J. Int’l & Comp. L. 2, 233 (2007); CISG-AC Opinion no 3, Parol Evidence Rule, Plain Meaning Rule, Contractual Merger Clause and the CISG, 23 October 2004. Rapporteur: Professor Richard Hyland, Rutgers Law School, Camden, NJ, U.S. (at http://www.cisg-ac.org).

Outline I. Importance and Role of Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Legislative history . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. First Paragraph . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) The meaning of “intent” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Objective and subjective intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. The second paragraph: The reasonable understanding . . . . . . . . . . . . . . . . . . . . 3. The third paragraph . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Chapter II. General Provisions

1–2

Article 8

I. Importance and Role of Provision 1. Introduction Art. 8 governs the interpretation of statements or manifestations of intent exchanged 1 by the parties in a contract submitted to the control of the CISG. It excludes local rules of interpretation per se, unless such local rule matches the practice or usage established between the parties.1 It is divided into three paragraphs according to the way such statements should be interpreted. The first paragraph resolves the case when the other party knew, or should have known, the intention of the statement-maker. When neither of these alternatives is applicable, the second paragraph explains that the statement should be interpreted following the understanding of a reasonable person of the same kind as the recipient in the same circumstances, with some examples of what should be seen as “relevant circumstances” in the third paragraph. Art. 8 looks for the real expression of will of the parties in the contract, establishing some steps for reaching it.2 First, the subjective intention as far as the other party knows it. Second, if the misunderstanding continues, then the objective intention should be observed, having regard of all circumstances of the case.3 Notwithstanding the fact that the text refers to “statements” in particular, Art. 8 will 2 be applied when interpreting the contract in general. Moreover, it will even be referred to for the interpretation of other possible legal relationships that arise between the parties and go beyond the scope of the CISG.4 Art. 8 should be considered together with Arts 7 and 9, which together form the pillars of the CISG in interpretation matters. These articles form the core of the CISG with respect to questions related to the understanding of an international contract and, notwithstanding Art. 65 and express reference of Art. 12 when the parties are prevented from derogating or varying the effect of CISG provisions6, which cannot be derogated from or varied without excluding the CISG ex toto.7 1 OG Thurgau (Germany) 12 December 2006, CISG-Online 1566 (Pace); and LH Hamburg (Germany) 26 September 1990, CISG-Online 21 (Pace). 2 See HG Aargau (Germany) 26 November 2008, CISG-Online 1739 (Pace); AG Basel-Stadt (Switzerland) 26 September 2008, CISG-Online 1731 (Pace); and Zivilgericht Basel-Stadt, (Switzerland) 8 November 2006, CISG-Online 1732 (Pace). 3 See decision OG Zug (Switzerland) 8 November 2011, CISG-Online 2425 (Pace), nos 4 and 5. 4 See Schlechtriem, Internationales UN-Kaufrecht (2005), p. 49 para. 54. As an example, Schlechtriem refers to the case of the so-called “general conditions of the contract” or Allgemeinene Gescha¨ftsbedingen, very popular in Europe among unions of attorneys counselling clients belonging to the same industry. See an example of this going beyond the CISG in Tribunale di Rovereto (Italy) 21 November 2007, Takap B. V. v Europlay S. r. l., Case 914/06, CISG-Online 1590 (Pace), and in the case decided by the BGH (Germany) 26 June 2009, CISG-Online 1908 (Pace), See further infra II.2. 5 “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.” 6 See Art. 12: “Any provision of article 11, article 29 or Part II of this Convention that allows 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 of this Convention. The parties may not derogate from or vary the effect of this article.” [Emphasis added]. 7 Several CISG provisions cannot be derogated by the parties despite Art. 6, unless they declare the CISG as non-applicable as a whole. See for example the final provisions of Arts 89 to 101 which cannot be derogated from despite not including a specific prohibition as seen with Art. 12. See Zuppi, La interpretacio´n en la Convencio´n de Viena de 1980 (CISG) – Compraventa internacional de mercaderı´as), Revista Jurı´dica La Ley (1997) 1290. It would be possible that the parties may agree to apply a specific method of interpretation varying the alternatives offered in the CISG. However, the way the CISG should

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Article 8 3–4

Part I. Sphere of Application and General Provisions

Art. 8 presents different alternatives for resolving problems that arise when the parties’ intent regarding expressions of their will in a contract are in dispute. The first paragraph is used for resolving conflicts in the subjective intent expressed by the statement-maker when the other party knew or could not have been unaware of what the statement-maker’s intent was when issuing the statement.8 If the other party was unaware or could not have known the alleged stated subjective intent, then the CISG resorts in the second paragraph to the understanding of a reasonable person of the same kind as the recipient in the same circumstances. Presented in this way, Art. 8(1) provides for the relevance of the actual intent of the statement-maker and, where this would not be applicable, the second paragraph states the objective theory provided by the reasonable person in the same circumstances which should be resolved following the explanations given in the third paragraph.9 Accordingly, while determination of the actual (subjective) intent seems to be an issue of fact for the existence of which evidence has to be submitted, “the interpretation of the objective intent of a party’s statements and conduct pursuant in Art. 8(2) CISG has to be done by the Arbitral Tribunal in the light of the principle of good faith and is an issue of law.”10 4 However, Art. 8 leaves several questions unanswered.11 It does not explain, for example, whether “intent” refers to the statement-maker’s actual intent or simply what he stated, which can be problematic if the statement was different from what he actually meant. Also, the text does not explain the consequences of being unable to determine the statement-maker’s intent despite exhausting all methods provided by this article. A similar question arises when the expressed intent concerns several aspects of the contract and only part of the contract is unclear. Will this partial misunderstanding affect the whole statement or only the parts that are unclear? It is clear that Art. 8 deals with interpretation, however, would it be possible to confine its methods of gap filling to only part of a statement?12 3

be interpreted and the interplay of such a specific clause in a given contract with the core principles of the CISG will be decided by the interpreter in case of a conflict beyond the parties’ control. 8 See for example, decision of the Swiss BGH (Switzerland) 23 September 2013, CISG-Online 2560 (Pace) using Art. 8 for determining whether a certain point of the contract agreed between the parties should be understood for them as fundamental or not. See also Cour d’appel de Grenoble (France) Socie´te´ Calzados Magnanni v. SARL Shoes General International, 21 October 1999, CISG-Online 574 (Pace), where the seller had to interpret the indications and other behaviour of buyer “according to the buyer’s intent where the seller knew or could not have been unaware what that intent was.” In relation with not being unaware see U.S. District Court, District of Maryland (U.S.) CSS Antenna, Inc. v. Amphenol-Tuchel Electronics, GmbH, 8 February 2011, CISG-Online 2177 (Pace) deciding that buyer knew or should have known that seller intended the General Conditions to apply to their contract; in the same sense U.S. District Court, Southern District of New York (U.S.) TeeVee Toons, Inc. (d/b/a TVT Records) & Steve Gottlieb, Inc. (d/b/a Biobox) v. Gerhard Schubert GmbH, 23 August 2006, CISG-Online 1272 (Pace); Audiencia Provincial de Ca´ceres (Spain) 14 July 2010, CISG-Online 2131 (Pace); and Audiencia Provincial de Madrid, seccio´n 14\ha (Spain) Sunprojuice DK, Als v. San Sebastian, S.c.A., 20 February 2007, CISGOnline 1637 (Pace) (… seller could not ignore buyer’s intention since it signed the contract in which quality conditions were established and which expressly identified the purpose of such conditions.) 9 See Hogg/Bishop/Barnhizer, Contracts – Cases and Theory of Contractual Obligation (2008) p. 146. 10 See Arbitral Award, ICC 9187/1999, June 1999 (Coke), CISG-Online 705 (Pace). 11 A Swiss case considered that the method of interpretation proposed by Art. 8 is the same method developed in Switzerland from Art. 18 of the Swiss Code of Obligations. See Cour de justice de Gene`ve (Switzerland) 12 March 2010, CISG-Online 2426 (Pace). 12 Some gap-filling provisions are in the CISG for specific purposes such as the cases of lack of determination of the place of delivery in Art. 31, or time for delivery in Art. 33. In Arbitral Award, ICC 9187/1999, June 1999 (Coke), CISG-Online 705 (Pace), it was stipulated that certain quality standards in the contract of the sale of coke provided a reduction of price if the delivered coke does not met these standards. The Tribunal decided that the defendant had to prove that it intended for the reduction mechanism to be limited in a certain (minor) amount of reduction instead of a reduction to zero in case of major discrepancies. “Further, defendant must provide evidence for the fact, that claimant knew or

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Chapter II. General Provisions

5–7

Article 8

When no understanding can be obtained despite exhausting all the alternatives of 5 Art. 8, no juridical effect will take place between the parties. In the case of a partial misunderstanding, the decision concerning whether that will affect the contract as a whole, or only part of it, will depend on the significance of the statement. Thus, if the statement-maker intended to determine the price of his indeterminate offer with the statement made, following the rules of Art. 8, any lack of understanding will result in the non-existence of the contract. However, when the statement of one party is not related to the main elements of a contract, despite a lack of understanding, following the rules of Art. 8 CISG, the contract will continue to bind the parties.

2. Legislative history The Official Records of the Conference13 refer to Art. 9(3) ULIS,14 Arts 4(2),15 5(3),16 6 1217 and 13(2) ULF,18 as well as Arts 3, 4 and 5 of the 1972 UNIDROIT Draft of a Law for the Unification of Certain Rules relating to Validity of Contracts of International Sale of Goods (ULVC) as prior uniform law to this text. It has been mentioned that this is the only article of the CISG, which refers to the former UNIDROIT draft as a source.19 While the CISG refers to “other conduct” that should be interpreted in accordance with the party’s “actual common intent”, the ULVC uses the word “acts”. In addition, the ULVC included “where such intent can be established,” but this latter requirement was suppressed as it was considered superfluous.20

II. Detailed Commentary 1. First Paragraph a) The statement. “Statement” in the sense of this article is any unilateral signifi- 7 cant act issued from one party to another that allows the latter to know, or be able to know, what the statement meant. The statements mentioned in article 8 CISG must relate to a matter govern by the Convention. Topics excluded from its scope by Art. 4 should have known this intent when signing the contract (Art. 8.1 CISG). Defendant does neither bring forward substantial allegations nor proof in this respect.” 13 See U. N. Doc A/CONF.97/19. 14 Art. 9.3 ULIS: “Where expressions, provisions or forms of contract commonly used in commercial practice are employed, they shall be interpreted according to the meaning usually given to them in the trade concerned.” 15 Art. 4.2 ULF: “This communication may be interpreted by reference to and supplemented by the preliminary negotiations, any practices which the parties have established between themselves, usage and any applicable legal rules for contracts of sale.” 16 Art. 5. 3 ULF: “An indication that the offer is firm or irrevocable may be express or implied from the circumstances, the preliminary negotiations, any practices which the parties have established between themselves or usage.” 17 Art. 12 ULF: “1. For the purposes of the present Law, the expression “to be communicated” means to be delivered at the address of the person to whom the communication is directed. 2. Communications provided for by the present Law shall be made by the means usual in the circumstances.” 18 Art. 13 ULF: “2. Where expressions, provisions or forms of contract commonly used in commercial practice are employed, they shall be interpreted according to the meaning usually given to them in the trade concerned.” 19 See Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 8 para. 1.1. The first paragraph was taken with small changes from Art. 3.2, the second paragraph from Art. 3.3 with the addition to the quality of reasonable person the requirement to be of “the same kind as the other party.” The third paragraph was taken from Art. 4.1 with two suppressions related to reasonability of the interpretation. 20 See Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 8 para. 1.2.

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Article 8 8–10

Part I. Sphere of Application and General Provisions

CISG must be interpreted according to the law governing the subject if that would be possible.21 8 The first paragraph of Art. 8 presents the so-called “subjective intent,” “will theory” or “actual intent.” When the interpreter inquires whether the statement-maker has sufficiently shown his intent or not, the answer remains in the limits of the objective or subjective theories.22 Subjective intent theory looks into the statement-maker’s will when that was known or could not be ignored by the recipient.23 The subjective intent of a party must be manifested in some way for being recognizable as such.24 9 In contrast, the so-called “objective intent theory” looks into the actual intent of the statement-maker and what a “reasonable man” would understand.25 When it is impossible to determine subjective intent, then Art. 8(2), which requires the interpreter to use the reasonable person test, comes into application. Here the meaning of the statement will be what a reasonable person in the same shoes, as the recipient of the statement would have understood. If, despite this further step, no interpretation is possible, then no contract will be deemed to have been formed, and as contract validity goes beyond the scope of the CISG (Art. 426), domestic law will be applied to resolve any remaining conflict.27 A party who asserts that the other party knew or could not have been unaware of the former party’s intent must prove it.28 10 The Commentary29 included in the Official Records of the Conference explains the rules to be applied in the interpretation of the unilateral acts of each party and proposes as examples: their communication relating the intended contract, the offer and acceptance, notices, etc.30 Art. 12 repeats the acts of offer and acceptance as examples of 21 See Schwenzer/Fountoulakis/Dimsey, International Sales Law (2012), Art. 8 p. 59; Garro/Zuppi, Compraventa internacional de Mercaderı´as (2012), p. 82. 22 See Farnsworth, Contracts 4th ed. (2004) p. 114. 23 See U.S. District Court, Southern District of New York (U.S.) Hanwha Corporation v. Cedar Petrochemicals, Inc., 18 January 2011, CISG-Online 2178 (Pace), not accepting as evidence of subjective intent self-serving declarations of how they respectively viewed the other side’s offers and counter-offers; and U.S. District Court, Southern District of New York (U.S.) TeeVee Toons, Inc. (d/b/a TVT Records) & Steve Gottlieb, Inc. (d/b/a Biobox) v. Gerhard Schubert GmbH, 23 August 2006, CISG-Online 1272 (Pace), quoting Federal Appellate Court (11th Circuit) (U.S.) MCC-Marble Ceramic Ctr. v. Ceramica Nuova D’Agostino, S.p.A., 29 June 1998, CISG-Online 342 (Pace), noting that Art. 8(1) “requires a court to consider … evidence of the parties’ subjective intent” and that Art. 8(3) “is a clear instruction to admit and consider parol evidence regarding the negotiations to the extent they reveal the parties’ subjective intent.” Also quoting MCC- Marble Ceramic case, in U.S. District Court, N.D., California (U.S.) Supermicro Computer, Inc. v. Digitechnic, S.A., et al., 30 January 2001, CISG-Online 612 (Pace), the tribunal decided that the CISG requires a “mirror-image” approach to contract negotiations that allows the court to inquire into the subjective intent of the parties. 24 See Cour de justice de Gene `ve (Switzerland) 12 May 2006, CISG-Online 1726 (Pace), where it was decided that the subjective intent must be exteriorized in a fashion that could be recognized by the addressee of the manifestation and LG Hamburg (Germany), 26 September 1990, CISG-Online 21 (Pace). 25 See opinion of Judge Jerome Frank, Ricketts v Pennsylvania R. Co., 2 Cir. 1946, 153 F.2 d 757, 760– 762, 164 A. L. R. 387. 26 Art. 4: “This 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. In particular, except as otherwise expressly provided in this Convention, it is not concerned with: (a) the validity of the contract or of any of its provisions or of any usage; …” 27 Also Zeller, Determining the Contractual Intent of Parties under CISG and Common Law–A Comparative Analysis, 4 European Journal of Law Reform (2000) 629 (635). 28 See this implicit in the decision of the BG St. Gallen, (Switzerland) 3 July 2007 (http://www.unilex.info/case.cfm?pid=1&do=case&id=306&step=FullText). 29 See U. N. Doc A/CONF.97/18. 30 Any previous negotiations as well as the subsequent conduct of the parties may show what they understood in their respective declarations of intent. See HG Aargau (Switzerland), 5 February 2008, CISG-Online 1740 (Pace), and Handelsgericht des Kantons Aargau (Switzerland) 26 November 2008, CISG-Online 1739 (Pace).

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11–12

Article 8

“indication of intention.”31 An offer will be valid when it is “definite”32 and clearly indicates the intention of the offeror to be bound by his offer. From this point of view and for determining the conclusion of a contract, the Commentary regards it as the product of the sum of two unilateral acts, its offer and corresponding acceptance, both being declarations of intention of each issuer.33 As some tribunals have recognized, the interpreter may perform a substantial inquiry 11 into the parties’ subjective intent through Art. 8, contrary to the stance commonly seen in U.S. courts.34 The CISG requires a judge to evaluate the evidence that will prove whether the recipient party of a statement was aware or unaware of the subjective intent of the other party, which has delivered the statement in question. This requirement is contrary to the parol evidence rule known in the common law.35 The parol evidence rule provides that a written instrument intended by the parties thereto as the final manifestation of their mutual understanding cannot be challenged by past or contemporary evidence contradicting it or modifying its content.36 The parol evidence rule it is not applicable to CISG contracts,37 as it is deduced from the content of Art. 11 accepting any evidence, even witnesses, for proving a contract. In a treaty such as the CISG, with the primary goal of obtaining uniformity and harmonizing different global understandings of the most important contract, it was very unlikely to include a rule that has lost supporters even in its own legal family.38 To make a “statement” means to utter an expression of will by any method fitted 12 for exteriorizing such manifestation. A statement is very different from a negative activity such as, mere silence or inaction.39 A statement will include any representation of fact, whether made in words or otherwise necessary, given to the other party. This is consistent with translations in other official languages of the CISG. For example, “statements” have been translated as “indications” in French and as “declaraciones” in Spanish, both official versions requiring exteriorization of the will of the party, as an active and passive demonstration of will. In an Italian case,40 the paragraph was used to recognize the “distinguishable will” of one party for including general conditions in a contract.41 31 Art. 12: “Any provision of article 11, article 29 or Part II of this Convention that allows 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 of this Convention. The parties may not derogate from or vary the effect of this article.” 32 See Art. 14.1: “… A proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price.” 33 See Art. 24. 34 MCC-Marble Ceramic Center, Inc. v Ceramica Nuova d’Agostino, S. p.A, 144 F.3 d 1384 (11th Cir. 1998) reversed. In another American case, Guang Dong Light Headgear Factory Co., Ltd. v ACI International, Inc., 2007 U. S. Dist. LEXIS 76 844 (D.C. Kan. 2007) a tribunal affirmed that “… the plain language of the CISG requires the Court to evaluate a party’s subjective intent, so long as the other party was aware of that intent.” 35 See infra note 67. 36 For similar definitions see Farnsworth, Contracts 4th ed. (2004) para 7.3 and Corbin, Corbin On Contracts (1952) p. 534. 37 See CISG-AC Opinion no 3, and Zuppi, “The Parol Evidence Rule. A comparative study of the Common Law, the Civil Law Tradition and Lex Mercatoria” 35 Ga. J. Int’l & Comp. L. 2, 233 (2007). See further this subject in II.3. 38 See Zuppi ibid, p. 265. 39 See Art. 18(1). 40 Tribunale di Rovereto (Italy), Takap B. V. v Europlay S. r. l., 21 November 2007, CISG-Online 1590 (Pace). 41 Idem in Italian “la volonta ` riconoscibile” or the recognizable will. In Arbitral Award, ICC 9187/1999, June 1999 (Coke), CISG-Online 705 (Pace) it was decided that since the defendant did not prove that it

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Article 8 13–15

Part I. Sphere of Application and General Provisions

The idea of “distinguishing the will of the issuer” obliges the interpreter to consider exterior acts.42 Art. 8 will not only be used to help interpret the contractual terms of the given contract, but also those statements issued during the negotiation of the contract as well as those issued after the contract was concluded.43 14 Usually the interpreter tries to assess the “plain meaning” of any disputed term of a statement between the parties.44 “Plain meaning” is the meaning attributed by a common sense reading or understanding the words as saying what they say,45 but it is not always possible to apply this rule. General words usually have several meanings and thus are inherently ambiguous.46 Words are rarely used in isolation, but rather in association with other words in the form of utterances. In Nix v Hedden,47 Justice Grey discussed whether “tomatoes” considered as provisions, are to be classed as “vegetables” or as “fruit,” within the meaning of the Tariff Act of 1883.48 As Cueto Rua explained in length, it is impossible to find natural language words with such accuracy that no uncertainty or obscurity could ever appear.49 13

15

b) The meaning of “intent”. Despite the literal meaning of the word “statement”, the objective of Art. 8 is to set forth interpretation rules for determining the intent of the parties. Silence or inactivity of one of the parties may constitute a clear indication of his will when related to usages or practices developed by the parties. When the parties develop the habit of only refusing changes on a revolving contract expressly, inactivity or silence related to a request for an extension of time for performance would indicate acceptance.50 This understanding should also be deduced from “the other conducts” referred to in the first paragraph. The French text speaks of “indications et les autres comportements” and the Spanish text of “las declaraciones y otros actos de una parte.” Conducts, “comportements” and “actos” have in common a wide enough latitude to include those relevant inactions, passive conducts or silence, which could be interpreted as having a clear meaning. In Filanto v Chilewich51 it was admitted that the Italian seller failed to respond promptly, which represented his acceptance for the court. The judge in intended to enter into the contract as an “agent,” the Arbitral Tribunal could not assert that role “… if a reasonable party in claimant’s position would have understood defendant’s statement as intent to be an agent only (objective intent Art. 8.2 CISG). Given the wording of the contract, which clearly defined the defendant as the seller and the fact that the defendant had signed the contract as the ‘seller’; claimant had reasonably to understand and rationally to conclude that defendant was the seller.” 42 Neumayer/Ming, Convention de Vienne (1993), p. 111. 43 See decision of the Swiss Federal Tribunal, (Switzerland) 23 April 2013, CISG-Online 2482 (Pace), using the rules of Art. 8 CISG to the interchange of statements and other manifestations of will between the parties that the Tribunal understands substantially similar to the Swiss principle of trust (principe de la confiance). 44 See Patterson, The Interpretation and Construction of Contracts, 64 Columbia Law Review (1964) 833 (838). 45 See Dickerson, The Interpretation and Application of Statutes (1975) p. 229. 46 See Cueto Rua, Judicial Methods of Interpretation of the Law (1981) p. 96. 47 149 U. S. 304 (1893). 48 Tariff Act of March 3, 1883, c. 121, imposing a duty on “vegetables in their natural state, or in salt or brine, not specially enumerated or provided for in this act, ten per centum ad valorem,” and which the plaintiffs contended came within the clause in the free list of the same act, “Fruits, green, ripe, or dried, not specially enumerated or provided for in this act.” 22 Stat. 504, 519. 49 Cueto Rua, Judicial Methods of Interpretation of the Law (1981) p. 99. 50 Ca ´ mara Nacional de Apelaciones en lo Comercial [Appellate Court] (Argentina) Inta S. A. v MCS Officina Meccanica S. p. A., 14 October 1993, CISG-Online 87 (Pace). By the same idea, the lack of confirmation when the usage was to confirm by writing shows that no contract arises between the parties, see French decision of Court of Appeal of Paris (France) Socie´te´ H. H. … GmbH & Co. v SARL MG, 10 September 2003 (Pace). 51 US District Court, Southern District of New York (U.S.) Filanto v Chilewich International Corp., 14 April 1992, CISG-Online 45 (Pace).

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this case decided that, in light of the extensive course of prior dealings between these parties, Filanto was certainly under a duty to alert Chilewich in a timely fashion as to its objections to the terms of the agreement. Fridman52 understands the basic distinction between “statements” intended to be 16 terms in the contract and simple “inducements” by one party to the other to enter into the contract as a question of fact. He refers to the British case of Bannerman v White53 where, during negotiations for the sale of hops, the seller answered the buyer that sulphur had not been used in the treatment of the hops. The jury decided that this statement bounds the seller and that the buyer could thus avoid the contract. Blackburn J in Smith v Hughes presents the case of “apparent consensus.”54 In this case, the judge applied a kind of estoppel finding that consent should be presumed when a reasonable man would believe that, from the other party’s behaviour, he was assenting to the proposed terms.55 When the will of the parties can be clearly understood, such agreement will prevail 17 even before the understanding of a reasonable person, as a consequence of the “subjective test” established by paragraph 1. When the statement issued is clear and the recipient could not have been unaware of the intent of the issuer, the international contract should be protected and preserved.56 Those statements and actions should be analysed in light of the parties’ common intent or, when there is no common intent, in light of the objective, “reasonable person” standard.57 Some national jurisprudence interpreting the extent of this text in Art. 8(1) has even generously included the requirement to apply to a particular group of general conditions issued by the other party.58 If the intention of one of the parties has been to incorporate standard terms to the contract, they will be seen as part of the contract only when the other party was aware of this or could not have been unaware.59 The domestic jurisprudence usually resolves conflicts of interpretation of the state- 18 ment by looking into the “meeting of the minds” of the parties.60 How should this be Fridman, The Law of Contract 5th ed. (2006) p. 439. (1861) 10 C. B. N. S. 844, 142 E. R. 685. 54 (1871) LR 6 QB 507, 607. 55 “If, whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms.” 56 See, for example, U.S. District Court, S.D., Michigan (U.S.) Shuttle Packaging Systems, L.L.C. v. Jacob Tsonakis, INA S.A., et al., 17 December 2001, (http://www.unilex.info/case.cfm?pid=1&do=case&id=732&step=FullText). On the contrary, if the statement is unclear it will not be sufficient for expressing the party’s will. See Swiss BGH (Germany), 2 April 2015, CISG-Online 2592 (Pace); or the mere existence of the contract could not be evidenced, as it was decided in Primer Tribunal Colegiado en Materia Civil del Primer Circuito (Mexico) Kolmar Petrochemicals Americas, Inc. v. Idesa Petroquimica Sociedad Anonima de Capital Variable,,10 March 2005, CISG-Online 1004 (Pace); and in U.S. District Court, District of Kansas (U.S.) Guang Dong Light Headgear Factory Co., Ltd., v. ACI International, Inc., 28 September 2007 CISG-Online 1602 (Pace). 57 See U.S. District Court for the District of Colorado (U.S.) Alpha Prime Development Corporation v. Holland Loader Company, LLC; and Steven Michael Svatek, 6 July 2010, CISG-Online 2111 (Pace). 58 See Tribunale di Rovereto (Italy) Takap B. V. v Europlay S. r. l., 21 November 2007, CISG-Online 1590 (Pace). 59 See BGH (Germany) (2001) VIII ZR 60/01, also BGH (Germany) on 27 November 2007, CISGOnline 1617 (Pace); Gerechshof Den Haag (The Netherlands) 22 April 2014, CISG-Online 2515 (Pace); Hof’s-Hertogenbosch (The Netherlands) 29 May 2007 (machine), CISG-Online 1550 (Pace);,and OLG Mu¨nchen (Germany) 14 January 2009, CISG-Online 2011 (Pace). See U.S. District Court, Western District of Pennsylvania (U.S.) Roser Tecnologies v. Carl Schreiber GmbH, 10 September 2013, CISG-Online 2490 (Pace), denying the applicability of German law included in the general standard conditions of sales. 60 Corbin, Corbin On Contracts (1952) p. 157. 52 53

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resolved in international transactions? In the case of the CISG it is mandatory by Art. 7(1) to have regard to the contract’s international character and to respect the need to obtain a uniform application by all parties engaged. Art. 7(2) emphasizes the application of the principles in which the CISG has been established as well as private international law as a general principle if that is the applicable situation. c) Objective and subjective intent. The discussion of subjective and objective theories of intent in U.S. doctrine has a long history. Williston in 1919 explained that the point of dispute for determining intent consists of either including the mental assent of the parties as a requisite or just taking the statement by its meaning when it is clear notwithstanding what the issuer of the statement had in mind.61 20 Lord Denning has held that the English language is not an instrument of “mathematical precision;”62 words have several meanings even in a dictionary, which may turn language vague or not accurate enough or ambiguous.63 Sometimes, the frame of reference changes and what was deemed to be unambiguous becomes ambiguous.64 These propositions are applicable to any language and may vary to the different parties of a contract. When the misunderstanding is related to a core element, the very existence of the contract will be in question. 21 The Restatement of the Law of Contracts is very precise with respect to the meaning of a manifestation of assent. There will be no juridical bond if the parties attach materially different meanings to their manifestations.65 22 When the parties have discussed and agreed on a specific term of the contract, the final agreement reached on that term should prevail if that term conflicts with another term of the contract not specifically discussed between the parties.66 Therefore, if the terms of the contract are clear, they are to be given their literal meaning, so parties cannot later claim that their undeclared intentions should prevail.”67 19

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See Burton, Principles of Contract Law (1995) p. 16. Seaford Court Estates Ltd v Asher [1949] 2 KB 481. 63 Holmes, The Theory of Legal Interpretation, 12 Harvard Law Review (1899) 417. 64 Cueto Rua, Judicial Methods of Interpretation of the Law (1981) p. 482 with illustrations. 65 See Restatement of the Law Second Contracts (2 d) § 20. “(1) There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and (a) neither party knows or has reason to know the meaning attached by the other; or (b) each party knows or each party has reason to know the meaning attached by the other. (2) The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if (a) that party does not know of any different meaning attached by the other, and the other knows the meaning attached by the first party; or (b) that party has no reason to know of any different meaning attached by the other, and the other has reason to know the meaning attached by the first party.” 66 When the parties have agreed the required conditions for resolution of the contract, the tribunal should look within the agreed conditions and not in Art. 49 CISG. See Cour de justice de Gene`ve (Switzerland) 20 May 2011, CISG-Online 2429 (Pace) para. 5.2.1. See also Cour d’Appel de Grenoble, Chambre Commerciale (France) Enterprise Alain Veyron v. Socie´te´ E. Ambrosio, 26 April 1995, CISGOnline 153 (Pace) applying Art. 8 for understanding that the offered price had been accepted; for accepting discussed general conditions of sale, see Tribunal de commerce Nivelles (France) S.A. Gantry v. Socie´te´ de Droit Suisse, Research Consulting Marketing, 19 September 1995, CISG-Online 365 (Pace); for determining the content of the price agreed, see ICC Court of Arbitration – Paris, N\ha 8324/1995 (http://www.unilex.info/case.cfm?pid=1&do=case&id=240&step=FullText). 67 See 2012 UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods, Digest of Article 8 case law, available at http://www.uncitral.org/pdf/english/clout/CISG-digest2012-e.pdf. See Audiencia Provincial de Navarra, seccio´n 3\ha (Spain), Cera´mica Tudelana S.A. v. Wassmer Gruppe Spezialmachinen GmbH, 27 December 2007, CISG-Online 1798 (Pace) explaining that if the terms of the contract are clear, they are to be given their literal meaning. 62

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2. The second paragraph: The reasonable understanding When the interpretation of the intent of the issuer is not possible, the CISG will 23 consider what would be the understanding of a reasonable person placed in the recipient’s shoes under the same circumstances surrounding the issued statement.68 The legal principle of a reasonable person connotes a pattern of behaviour, prudence and responsibility, which define the standard of care of a person of the same kind under the same circumstances.69 The requirement of reasonability is a leitmotif repeated several times throughout the text of the CISG. Sometimes, the text only allows for the application of a remedy unless the resulting inconvenience is unreasonable.70 Other times the reference is to a reasonable reliance of one of the parties,71 or a reasonable time,72 a reasonable price,73 reasonable measure,74 reasonable expenses75 or even a reasonable excuse.76 However, the reference to a reasonable person of the same kind is only used here in Art. 8 and in the case of fundamental breach in Art. 25 CISG. The term “reasonable person” has been however criticized because it is a vague concept.77 Although the principle is common within the civil law tradition, interpreters arriving 24 from the common law family have not properly understood this kind of elusive concept. Lord Denning qualified it as a “doubtful proposition” to consider that “reasonable” is something that “everyone knows”78 as suggested by Scrutton LJ in Reigate v Union Manufacturing.79 In fact within this tradition, “reasonable” has been mostly understood as a “relative” term proportionate to the circumstances of the case considered as a whole. That which was seen as “reasonable” once could be viewed to the contrary after a while.80 In the opinion of some courts however, the principle of good faith is included in Art. 8.81 The requirement of looking into the reasonability of a person of “the same kind” 25 makes a clear reference to the understanding of the recipient. It does not matter 68 See Federal Circuit Court of Appeals (11th Circuit) (U.S.) Treibacher Industrie, A. G. v. Allegheny Technologies, Inc., 12 September 2006, CISG-Online 1278 (Pace); Audiencia Provincial de Barcelona (Spain), 28 April 2004, CISG-Online 931 (Pace); Supreme Court of the Slovak Republic (Slovak Republic) 30 April 2008 (Health care products), CISG-Online 1873 (Pace) and Kantonsgericht St. Gallen (Switzerland) 15 June 2010, CISG-Online 2159 (Pace). 69 See among other cases, Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Chamber of Commerce and Industry, 13 April 2006, CISG-Online 1944 (Pace); Obergericht des Kantons Thurgau (Switzerland) 12 December 2006, CISG-Online 1566 (Pace) and Tribunale d’appello Lugano, Cantone del Ticino (Italy), 29 October 2003, CISG-Online 912 (Pace). 70 See Arts 37, 48(1). 71 See Arts 16(2)(b), 46(2) and (3), 79(1). 72 See Arts 18(2), 33(c), 39(1), 43(1), 47(1), 48(2), 49(2)(a) and (b), 64(2)(b), 65, 72(2), 73(2), 75, 79(4) and 88(1). 73 See Art. 76(2). 74 See Arts 77, 85, 86(1) and 88(2). 75 See Arts 88(2) and 3. 76 See Art. 44. 77 See Kakzorowska, Re `gles uniformes d’interpretation d’un contrat international, 68 Revue de Droit International et Droit Compare´ (1991), 294, p. 306. 78 Lord Denning, The Discipline of Law (1979) p. 36. 79 [1918] 1KB 592 at 605. 80 Glamorgan Coal Co. v South Wales Miners’ Federation [1903] 2 K. B. 545. 81 Arbitral Award, Arbitral Tribunal of the Chamber of Commerce, Hamburg (Germany), RIW (1996) ¨ bereinkommen u¨ber 771–774. See also the Swiss Botschaft des Bundesrates betreffend das Wiener U Vertra¨ge u¨ber den internationalen Warenkauf vom 11 Januar 1989, BBI 1989 I (745) 767. Including good faith among the elements that should be regarded according to Art. 8, see also HG Zu¨rich (Switzerland) 30 November 1998, CISG-Online 415 (Pace).

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whether a person with the same skills as the issuer will understand the statement.82 The statement in question should be understandable for any person of the same kind as its recipient and, as a logical consequence, any doubt arising from it must be resolved against the party who issued the ambiguity.83 How far can this reference to the understanding of the reasonable recipient be expanded? Magnus84 uses this paragraph for resolving a special situation of the so-called “battle of the forms.” In his opinion, the mere reproduction of different standard terms from the ones sent in earlier communications would not be regarded as a modification of the contract since a reasonable person would generally not consider such a communication as an offer to change the existing contract.85 The same could be applicable to the use of the general conditions of sale or Allgemeine Gescha¨ftsbedingungen (AGB) as they are known in German law. According to the interpretation made by some courts under Art. 8 CISG, the recipient of a contract offer, which is supposed to be based on standard terms and conditions, must have the possibility to become aware of them in a reasonable manner.86 Within the scope of the Convention, the effective inclusion of standard terms and conditions requires not only that the offeror’s intention that he wants to include his standard terms and conditions into the contract be apparent to the recipient.87 In addition, the CISG requires the user of standard terms and conditions to transmit the ext or make it available in another way.88 An Italian tribunal decided that in order to make the standard contract terms part of the contract, it has to be written either in the same language idiom of the contract, or in the other part’s idiom or in an idiom that the other party knows.89 A German tribunal90 applied Art. 8(2) CISG for construing the expression “frei Haus” or “frei Bestimmungsort” referred to delivery of goods including transportation and insurance up to the destination. The tribunal understood with this, the parties’ intention to accept the passing of risks at the buyer’s place of business, different to Art. 31(a) CISG. 82 See OGH (Austria) 10 November 1994, CISG-Online 117 (Pace), applying this principle of Art. 8 for determining whether an offer was definite enough. 83 For example, this method has been accepted to establishing whether a loss suffered should be considered foreseeable under Art. 74 CISG. See OG (Austria) 14 January 2002, CISG-Online 643 (Pace). 84 Magnus, Incorporation of Standard Contract Terms Under the CISG, FS Kritzer (2008), p. 303 (325). 85 Ibid. 86 See BGH (Germany) (2001), BGHZ Vol. 149, 113, pp. 116 et seq. See also OLG Mu ¨ nchen (Germany), 14 January 2009, CISG-Online 2011 (Pace); OLG Celle (Germany) 24 July 2009, CISG-Online 1906 (Pace).; Tribunale di Rovereto (Italy) Takap B. V. v Europlay S. r. l., 21 November 2007, CISG-Online 1590 (Pace), and in Tribunale di Rivoreto (Italy) 24 August 2006, CISG-Online 1374 (Pace); U.S. District Court, District of Maryland (U.S.) CSS Antenna, Inc. v. Amphenol-Tuchel Electronics, GmbH, 8 February 2011, CISG-Online 2177 (Pace); LG Coburg (Germany), 12 December 2006, CISG-Online 1447 (Pace); OLG Karlsruhe (Germany), 20 July 2004, CISG-Online 858 (Pace); OLG Du¨sseldorf (Germany), 21 April 2004, CISG-Online 915 (Pace); and Oberlandesgericht Du¨sseldorf (Germany), 25 July 2003 (rubber sealing members (car acessories)) CISG-Online 919 (Pace). 87 See OLG Mu ¨ nchen (Germany), 14 January 2009, CISG-Online 2011 (Pace); OLG Du¨sseldorf (Germany), 30 January 2004, CISG-Online 821 (Pace); and Oberlandesgericht Du¨sseldorf (Germany) 25 July 2003 (rubber sealing members (car acessories)), CISG-Online 919 (Pace). 88 With references to the above quoted BGH case (which one?), see CISG AC Opinion no 13. See also OLG Du¨sseldorf (Germany) 23 March 2011, CISG-Online 2218 (Pace); and LG Stuttgart (Germany), 15 October 2009, CISG-Online 2019 (Pace); LG Landhut (Germany) 12 June 2008, CISG-Online 1703 (Pace); and Tribunale di Rovereto (Italy) Takap B.V. v. Europlay S.r.l., 21 November 2007, CISG-Online 1590 (Pace). 89 See already quoted case Tribunale di Rovereto (Italy) Takap B.V. v. Europlay S.r.l., 21 November 2007, CISG-Online 1590 (Pace). 90 See OLG Karlsruhe (Germany), 20 November 1992, CISG-Online 54 (Pace). See also U.S. District Court, S.D., New York (U.S.) Calzaturificio Claudia s.n.c. v. Olivieri Footwear Ltd. 6 April 1998, CISGOnline 440 (Pace).

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Where a term is obscure or ambiguous, its meaning will be construed against the 26 party including it in the contract.91 This is the so called “contra proferentem” rule.92 However, where the term is obscure, it will be open to interpretation as to what it means to “construe against” the author of the text.93 When the plaintiff failed to mitigate its own losses, a Brazilian tribunal criticized such 27 behaviour as having not acted as a reasonable businessman would have done in similar circumstances as required under Art. 8(3) CISG.94 Art. 8(2) CISG has also been used to determine whether a seller had implicitly 28 waived, its right to argue that the buyer’s notice of lack of conformity in the goods was not timely expressed.95

3. The third paragraph Last paragraph of Art. 8 presents a list of examples of what should be understood as 29 the relevant circumstances for measuring the intent of the issuer or the understanding of the reasonable recipient: prior negotiations between the parties,96 practices that have been established between them,97 usages or any conduct subsequent to the contract.98 The list does not pretend to be exhaustive.99 This paragraph prevents a tribunal from the application of domestic rules that might 30 bar the court from “considering” any evidence that is relevant between the parties, and is a clear direction to the court to admit and consider all other evidence related to the negotiations, which could reveal the parties real intent.100 Accordingly, the reference made by Art. 8(3) to the “subsequent conduct of the parties” authorizes the interpreter 91 Honnold, Uniform Law (2009), Art. 8 para. 107.7. A fresh case where this rule has been applied in relation with the English expression “otherwise disposed of” has been the recent decision of Bundesgerichtshof (Germany) 28 May 2014 (Bowling alleys), CISG-Online 2513 (Pace). See Schro¨ter, Ru¨ckkaufverpflictungen und ‘contra proferentem’-Regel unter dem UN-Kaufrecht, 5 IHR (2014) 173. 92 Included in PICC Art. 4.6. See the rule contra proferentem in relation with Art. 8 CISG in SchmidtKessel, in Schlechtriem/Schwenzer, Commentary (year?) Art. 8, 111 p. 132 and in the decision of the German BGH quoted above (which one? – 28 May 2014 or?). 93 Charters, Fitting the “Situation”: the CISG and the Regulated Market, Washington University Global Studies Law Review (2005) 1 (10). See decision of the OG Stuttgart (Germany) 31 March 2008, CISGOnline 1658 (Pace). 94 See Tribunal de Justiça Rio Grande do Sul (Brasil) Prakasa Indu ´ stria e Come´rcio de utilitades do lar Ltda v. Mercoma´quinas Insdu´stria Come´rcio e Representaço˜es Ltda, 20 May 2009, CISG-Online 2368 (Pace). 95 See the decision of the BGH (Germany), 25 November 1998, CISG-Online 353 (Pace); and HG Zu¨rich (Switzerland), 30 November 1998, CISG-Online 415 (Pace). 96 See Arbitral Award, ICC (11849/2003) (fashion products), (Pace). 97 See Oberlandesgericht Stuttgart (Germany), 31 March 2008 (Automobile), CISG-Online 1658 (Pace); Oberster Gerichtshof (Austria), 31 August 2005 (Tantalum powder), CISG-Online 1093 (Pace); U.S. District Court, Southern District of New York (U.S.) Hanwha Corporation v. Cedar Petrochemicals, Inc., 18 January 2011, CISG-Online 2178 (Pace), and Tribunal Cantonal de Valais (Switzerland), 28 January 2009 (composite materials), CISG-Online 2025 (Pace). 98 See U.S. District Court, Eastern District of Pennsylvania (U.S.) ECEM European Chemical Marketing B.V. v. The Purolite Company, 29 January 2010, CISG-Online 2090 (Pace); U.S. District Court, Southern District of New York (U.S.), TeeVee Toons, Inc. (d/b/a TVT Records) & Steve Gottlieb, Inc. (d/b/a Biobox) v. Gerhard Schubert GmbH, 23 August 2006 (Packaging System), CISG-Online 1272 (Pace); Tribunal Supremo (Spain) Improgess GmbH v. Canary Islands Car., SL and Autos Cabrera Medina, SL, 17 January 2008, CISG-Online 1640 (Pace); and HG Aargau (Switzerland), 5 February 2008, CISG-Online 1740 (Pace). 99 See Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 8 para. 2.6; Honnold, Uniform Law (1982), p. 171; Henschel, The Conformity of Goods in International Sales (2005) p. 104; Lo´pez, in: Picazo/ Leo´n, La Compraventa Internacional de Mercaderı´as (1998), Art. 8, p. 125. 100 U.S. Circuit Court of Appeals (11th Circuit) (U.S.) MCC-Marble Ceramic Center, Inc. v Ceramica Nuova D’Agostino S. p. A., 29 June 1998 (ceramic tiles), CISG-Online 342 (Pace).

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to look beyond the four corners of the contract and any merger clause. Some scholars, however, understand that the parol evidence rule is merely a particular interpretation of the “intent principle” of contract law.101 The common law principle of the parol evidence rule102 cannot be applied in an international sale regulated by the CISG,103 as the CISG clearly provides that a contract of sale may be proved by any means, including witnesses.104 31 The reference to “usages” established between the parties should be completed with Art. 9 binding the parties by any usage they have agreed on, expressly or impliedly.105 Schlechtriem recognizes usages which are local, national or from a particular group within the concept of Art. 8(3), distinguishing them from the usages referred in Art. 9.106 In his opinion, the “usages” mentioned in the third paragraph refer to the special interpretation of explanations given between the parties.107 This is the reason why concrete circumstances and usages are important in explaining the behaviour of the recipient of a statement. However, beyond the binding aspect of a usage agreed on between the parties as explained in Art. 9, Art. 8(3) emphasizes that when construing the intent of the issuer or the recipient one should pay attention to the usages that the parties may have developed between them. Under this understanding it does not matter whether the usages have local, regional or particular character. Usages are as helpful as any other tool found in Art. 8(3) and are available for looking past the apparent meaning of the words or behaviour of the parties and determining their subjective intent.108The proof of the existence of a given usage burdens the party who invoked it.109 32 The reference in Art. 8(3) to consider any “subsequent conduct” of the parties does not mean that one of them, by subsequent conduct, may be able to change the content of their agreement. It only means that the subsequent behaviour may be taken into account when construing their intentions.110 In Filanto, the tribunal, quoting Art. 8(3), considered previous relations between the parties in assessing whether a party’s conduct 101 Brand/Flechtner, Arbitration and the Contract Formation in International Trade: First Interpretations of the U. N. Sales Convention, Journal of Law and Commerce (1992/1993) 239 (251). 102 The parol evidence rule provides that a written instrument intended by the parties thereto as the final manifestation of their mutual understanding cannot be challenged by past or contemporary evidence contradicting it or modifying its content. See Farnsworth, Contracts 4th ed. (2004) para. 4.3. 103 See CISG-AC Opinion no 3. See US District Court, Southern District of New York (U.S.), Filanto v Chilewich International Corp., 14 April 1992, CISG-Online 45 (Pace); and U.S. District Court, N.D., Illinois, Eastern Division (U.S.) Mitchell Aircraft Spares Inc. v. European Aircraft Service AB, 28 October 1998, CISG-Online 444 (Pace). 104 See Art. 11 CISG. See also Art. 1.2 PICC. 105 See this interplay between usages and Art. 9 CISG in OLG Ko ¨ ln (Germany), 2 July 2007, CISGOnline 1811 (Pace); and Arbitral Award, Netherlands Arbitration Institute, 10 February 2005, CISGOnline 1625 (Pace). 106 Schlechtriem, Internationales UN-Kaufrecht (2005), paras 51, 56. 107 Looking into circumstantial evidence and the selected words chosen by the parties for determining their real will, see HG Aargau (Germany), 26 November 2008, CISG-Online 1739 (Pace). 108 So, for example, a Canadian Court in deciding that the place of payment was in the U.S. it looked the pattern of payments between the parties in accordance with the rules of Art. 8(3) CISG. The evidence indicated that over the course of dealings between the parties, payment had always been made in Quebec. See Cour d’Appel de Quebec (Canada), 12 April 2011, CISG-Online 2278 (Pace). 109 See Kantonsgericht Zug (Switzerland), 2 December 2004, CISG-Online 1194 (Pace). 110 Huber/Mullis, The CISG (2007), p. 14. In this sense, see Handelsgericht Zu ¨ rich (Switzerland), 25 June 2010, CISG-Online 2161 (Pace) that construed that Art. 8 CISG includes ulterior changes of the content of the contract. In the case of Tribunal Supremo Sala de lo Civil Seccio´n 1ra. (Spain), Amtraco Commodity SL v. OLAN Int’l Ltd., 17 March 2011, CISG-Online 2521 (Pace), para. 30, in which the Spanish Court used Art. 8 for determining that the prior relationships between seller and buyer were sales. See also U.S. Circuit Court of Appeals (9th Circuit) (U.S.) Chateau des Charmes Wines Ltd. v. Sabate´ USA Inc., Sabate´ S.A., 5 May 2003, CISG-Online 767 (Pace), rejecting the contention that an invoked subsequent conduct created an agreement between the parties.

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constituted acceptance, and concluded that in light of the extensive course of prior dealings between these parties, the plaintiff was certainly under a duty to alert Chilewich in timely fashion.111 The common law tradition has developed the theory of “business efficacy” for dealing 33 with implied terms.112 Accordingly, implied terms used to resolve contractual gaps should be interpreted in light of the efficacy of the contract, which is presumed to have been the intent of the parties. Later, this theory was completed by Scrutton LJ in Reigate v Union Manufacturing Co (Ramsbottom) Ltd with the so called “necessity test” under which implied terms will only be interpreted into the contract if necessary for giving efficacy.113 This method for gap filling is not in contradiction with the spirit of the CISG. Under the CISG there is a clear position, praised by both doctrine and jurisprudence, for favouring the continuation of the contract whenever possible (favor negotii), having regard for the international character of the agreement and the necessary expenses involved in it.114

III. Comparable Rules No surprise should be expected when comparing the text of Art. 8 CISG with its 34 equivalent in other compilations of principles prepared for international trade. For example, terms similar to those used in the first and second paragraphs of Art. 8 CISG have been selected for the text of Art. 4.2 PICC.115 As with the CISG, the PICC also refer to the relevant circumstances of the case to assist the interpreter in determining the common intention of the parties, the most important of which are listed in Art. 4.3 PICC. Here, far more detail is given than from the text of Art. 8(3) CISG.116 Vettori 111 U.S. District Court, Southern District of New York (U.S.) Filanto, S. P. A. v Chilewich International Corp., 14 April 1992, CISG-Online 45 (Pace). In a recent Spanish case Juzgado de Primera Instancia e ~a Godina (Spain) SMR Automotive Systems Espan ~a v. Bu¨hler Instruccio´n N\ho 2 La Almunia de Don Motor GmbH, 28 November 2013, CISG-Online 2532 (Pace), it has been understood that the so called “technical factor” is a usage within the automotive market and as such it shall be applicable to international sale of goods independently that the document containing it has been signed by the parties or not. 112 Traditionally The Moorcock (1889) 14 P.D, 64, Bowen L. J.: “In business transactions such as this, what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are business men; not to impose on one side all the perils of the transaction, or to emancipate one side from all the chances of failure, but to make each party promise in law as much, at all events, as it must have been in the contemplation of both parties that he should be responsible for in respect of those perils or chances.” 113 [1918] 1 KB 592 at 605: “A term can only be implied if it is necessary in the business sense to give efficacy to the contract; that is, if it is such a term that it can confidently be said that if at the time the contract was being negotiated some one had said to the parties, ‘What will happen in such a case’, they would both have replied, “Of course, so and so will happen; we did not trouble to say that; it is too clear”. 114 See BGH (Germany) 3 April 1996 (Cobalt sulphate), CISG-Online 135 (Pace). 115 “(1) The statements and other conduct of a party shall be interpreted according to that party’s intention if the other party knew or could not have been unaware of that intention. (2) If the preceding paragraph is not applicable, such statements and other conduct shall be interpreted according to the meaning that a reasonable person of the same kind as the other party would give to it in the same circumstances.” 116 “In applying Articles 4.1 and 4.2, regard shall be had to all the circumstances, including (a) preliminary negotiations between the parties; (b) practices which the parties have established between themselves; (c) the conduct of the parties subsequent to the conclusion of the contract; (d) the nature and purpose of the contract; (e) the meaning commonly given to terms and expressions in the trade concerned; (f) usages.”

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Article 8 35–38

35

36

37

38

Part I. Sphere of Application and General Provisions

notes an interesting point in Art. II. – 8:102(2) DCFR that should be included within the external circumstances to be regarded by the interpreter: “where an issue arises in relation to a person, first, who is not a party to the contract (or an assignee) or second, who, by law, has no better rights than such a party, but who has relied on the contract’s apparent meaning, regard may be had to external circumstances only to the extent that those circumstances were known to, or could reasonably be expected to have been known to that party, subject to the general principle of good faith.”117 Art. 4.7 PICC states that where a contract is drawn up in two or more language versions, which are equally authoritative, there is, in case of discrepancy between the versions, a preference for the interpretation according to a version in which the contract was originally drawn up.118 Bonell and Peleggi,119 comparing the PICC and the DCFR, point out that whereas the PICC restrict the applicable usages to those “widely known to and regularly observed in international trade by parties in the particular trade concerned,”120 under the DCFR the parties are bound by any usage “which would be considered generally applicable by persons in the same situation as the parties, except where the application of such usage would be unreasonable.”121 An additional tool for interpreting the contract is offered in Art. 5.102 PECL.122 A similar text, merely changing the order of two paragraphs, can be found at Art. II. – 8:102 DCFR. Bonell and Peleggi123 point out another subtle difference between the PICC and the DCFR concerning the application of the rule contra proferentem: under the PICC, if contractual terms are unclear, there is a preference for the interpretation against one party if that party has supplied those terms;124 under the DCFR, the rule applies to the interpretation of both terms that are not individually negotiated and terms established under the dominant influence of one party.125 The requirement of comparing the understanding of a reasonable person in Art. 8(2) CISG is another point that deserves attention when comparing the texts. The PECL establishes in Art. 1:302 a general criteria for determining reasonableness: “Under these Principles reasonableness is to be judged by what persons acting in good faith and in the 117 Vettori, The Interpretation of Good Faith and According to Human Rights, Fundamental Freedoms and Constitutional Laws in the Common Frame of Reference, Persona e Mercato (2009) available at http://www.personaemercato.it/editoriale/DCFRgoodfaith/#more-206. 118 See LG Kassel (Germany), 15 February 1996, CISG-Online 191 (Pace) decided that if a party accepts statements in a language different from the one used for the contract, the party is bound by such statements. 119 Bonell/Peleggi, UNIDROIT Principles of International Commercial Contracts and Draft Common Frame of Reference: a Synoptical Table, Uniform Law Review (2009) 437 (452). 120 Art. 1.9(2) PICC. 121 Art. II.-1:104(2) DCFR. 122 “In interpreting the contract, regard shall be had, in particular, to: (a) the circumstances in which it was concluded, including the preliminary negotiations; (b) the conduct of the parties, even subsequent to the conclusion of the contract; (c) the nature and purpose of the contract; (d) the interpretation which has already been given to similar clauses by the parties and the practices they have established between themselves; (e) the meaning commonly given to terms and expressions in the branch of activity concerned and the interpretation similar clauses may already have received; (f) usages; and (g) good faith and fair dealing.” 123 Bonell/Peleggi, UNIDROIT Principles of International Commercial Contracts and Draft Common Frame of Reference: a Synoptical Table, Uniform Law Review (2009) 437 (453). 124 Art. 4.6 PICC. 125 Art. II.-8:103 DCFR.

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same situation as the parties would consider to be reasonable. In particular, in assessing what is reasonable the nature and purpose of the contract, the circumstances of the case, and the usages and practices of the trades or professions involved should be taken into account.” On the other hand, the definition provided by Annex J of the DCFR looks for an objective verification.126 126 “Reasonable: What is “reasonable” is to be objectively ascertained, having regard to the nature and purpose of what is being done, to the circumstances of the case and to any relevant usages and practices.”

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Article 9 (1) The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves. (2) The parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage 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. Bibliography: Bainbridge, Trade Usages in International Sales of Goods: An Analysis of the 1964 and 1980 Sales Conventions, 24 Virginia Journal of International Law (1984) 619; Bout, Trade Usages: Article 9 of the Convention on Contracts for the International Sale of Goods (1998); Coetzee, The role and function of trade usages in modern international sales law, 20 Uniform Law Review (2015) 243; Pamboukis, The Concept and Function of Usages in the United Nations Convention on International Sale of Goods, 25 Journal of Law and Commerce (2005–2006) 107; Walker, Trade Usages and the CISG: Defending the Appropriateness of Incorporating Custom into International Commercial Contracts, 24 Journal of Law and Commerce (2005) 263; CISG-AC Opinion no 3, Parol Evidence Rule, Plain Meaning Rule, Contractual Merger Clause and the CISG, 23 October 2004. Rapporteur: Professor Richard Hyland, Rutgers Law School, Camden, NJ, U.S., (at http://www.cisg-ac.org).

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Art. 9 in the context of the CISG: Hierarchy of rules . . . . . . . . . . . . . . . . . . . . . . 3. Validity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Practices established between the parties: Art. 9(1) . . . . . . . . . . . . . . . . . . . . . . . . a) Definition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Agreed usages (Art. 9(1)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. International usages of trade: Art. 9(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) General remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Definition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Binding character of the usage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Regional or local usages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Letters of confirmation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Conflict between usages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Procedural aspects/burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Extended application of Art. 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. CISG and other instruments as usages of trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 4 6 8 8 8 11 13 17 17 20 24 27 28 32 33 35 36 39

I. Importance and Role of the Provision 1. Introduction 1

Art. 9(1) expressly acknowledges the recognition of international trade usages as one of the most important sources for the regulation of the international sale of goods contracts. At the same time Art. 9(2) considers the binding force of the practices established between the parties and agreed usages. Art. 9 refers to three different institutions in name, content and effect: practices established between the parties,

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agreed usages, and international usages of trade or customs. While, the practices and agreed usages have a bilateral effect and are thus constrained to the habitual conduct of the parties or the agreement of the parties concerned, the international usages of trade have an erga omnes or general application as their existence is disconnected from a concrete commercial operation. A common effect of all these usages is that they become an integral part of the contract, usually during its formation but also in its performance1, binding the contracting parties. The source of the obligation (and incorporation) is qualitatively different and includes: an expectation between the parties that has been created (established practice), agreement between the parties (agreed usage) and implied agreement (trade usage). The value of the practices and usages is normative as they are considered to be sources of the contract by express or implied agreement. Usages and practices (Art. 9) are important elements in determining the content of 2 the contract, usually during the process of the formation of contract. The essential elements of the contract may well be determined by usages or, more generally, by the practices established between the parties2. They also serve another important function within the Convention, i. e. as an 3 interpretative criteria to the contract as considered in Art. 8(3)3.

2. Art. 9 in the context of the CISG: Hierarchy of rules By virtue of the principle of autonomy of the parties (Art. 6 – also reflected in 4 Art. 9(1)) and because of the hierarchy that the Convention itself gives to international trade usages (above the Convention but below the parties agreement), a hierarchy of rules apply. Above all, the agreement of the parties (Arts 6 and 9(1): practices and agreed usages) will displace the CISG4 except for Arts 12 and 965. Next in the hierarchy importance is placed on the usages of trade of Art. 9(2), and at the bottom, the rules of 1 Also in agreement: Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 3. See also Art. 18(3) referring to the practices and usages in contract formation. Indirectly other provisions refer to usages: Arts 32(2) and 35(2)(a). See for the latter provision: Oberster Gerichtshof (Austria) 13 April 2000 (machines), CISG-Online 576 (Pace). 2 See e. g., Fova ´ rosi Biro´sa´g Budapest (Hungary) 24 March 1992 (unidentified goods), Adamfi Video Production GmbH v Alkoto´k Studio´sa Kisszo¨vetkezet, CISG-Online 61 (Pace) (price of the contract impliedly determined by the practices). The incorporation of standard terms in the offer might be derived from the practices: Oberster Gerichtshof (Austria) 17 December 2003 (tantalum powder), (Pace), confirmed by Oberster Gerichtshof (Austria) 31 August 2005 (tantalum powder), CISG-Online 1093 (Pace); and Oberlandesgericht Linz (Austria) 8 August 2005 (spacers for insulation glass), CISG-Online 1087 (Pace). 3 See comments to Art. 8 supra. Inter alia: Oberlandesgericht Hamburg (Germany) 5 October 1998 (electronic parts), CISG-Online 473 (Pace) and Arbitral Award, CIETAC, 17 October 1996 (tinplate) (Pace). 4 Arbitral Award, Schiedsgericht der Bo ¨ rse fu¨r landwirtschaftliche Produkte in Wien, 10 December 1997 (barley), CISG-Online 351 (Pace) (agreed usages over CISG); Hof van Beroep Antwerpen (Belgium) 24 April 2006 (wood), GmbH Lothringer Gunther Grosshandelsgesellschaft fu¨r Bauelemente und Holzwerkstoffe v NV Fepco International, CISG-Online 1258 (Pace): usages of trade over CISG. It is in accordance with the legislative history where a proposal from former Czechoslovak was rejected to add to Art. 9(2) that usages are applicable only to the extent that they are not in contradiction with the Convention. See: Honnold, Documentary History (1989), pp. 394, 484, 661. Contrary and wrongfully: Corte Suprema di Cassazione (Italy) 7 August 1998 (women block stockings), CISG-Online 538 (Pace) considering that “the practice may simply be the consequence of a mere tolerance by the seller and, as such, unable to establish a place of performance different from the legal one”. 5 According to Eo ¨ rsi, General Provisions, in: International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), pp. 2–22, under ULIS, the usage prevailed over the imperative provisions. It has to be noted that this seems to be undisputed in China (reservation state under Arts 12 and 96) that non-written usages apply despite those imperative provisions. See e. g.: Arbitral Award, CIETAC, 21 May 1999 (excavators), CISG-Online 1659 (Pace).

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Part I. Sphere of Application and General Provisions

the Convention6. As a consequence if a trade usage (Art. 9(2)) conflict with a practice established between the parties (Art. 9(1)), the latter prevails7. 5 Although this hypothesis may be unlikely in practice, in the case of a conflict between a practice and an agreed usage, the agreed usage would prevail over the practice since it is presumed that the parties have derogated the practice by the express agreement on a usage of trade8. Thus if a practice (Art. 9(1)) conflicts with an agreed usage of trade (Art. 9(1)), the former prevails9.

3. Validity Art. 4(a) excludes from the scope of the Convention issues in regard to the validity of any usage, i. e., whether the usage is contrary to an imperative rule of the applicable law to the contract10. The same applies to questions of whether the agreement to make the usage binding is defective, such as if it was obtained through fraud, violence or abuse11. By contrast the issue of mistake of one of the parties concerning the existence and content of the trade usage is governed by the CISG12. Other issues are governed by the applicable domestic law as determined by the conflict of laws rules, or by the law applicable to the location where the specific usage takes place13. The concept of validity is also to be found autonomously and internationally and thus the definition, the binding force and the relationship of the usage with other provisions of the CISG are governed by the Convention14. 7 Since, according to the majority view, the incorporation of standard terms into the contract is not considered an issue of validity that would fall to domestic law, Art. 9 is important in order to determine this issue15. 6

6 Among scholars, Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 paras 7, 15; Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 199; Pamboukis, The Concept and Function of Usages in the United Nations Convention on International Sale of Goods, 25 Journal of Law and Commerce (Fall 2005/Spring 2006) 107 (109 et seq.) (Pace), but see p. 114 in regard to the trade practices and CISG. 7 In case law: U.S. Court of Appeals (11th Circuit) (U.S.) 12 September 2006 (tantalum carbide), Treibacher Industrie, A. G. v Allegheny Technologies, Inc., CISG-Online 1278 (Pace) considering the interplay between Arts 8 and 9: “the parties’ usage of a term in their course of dealings controls that term’s meaning in the face of a conflicting customary usage of the term”. Concurring Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 11, pointing out that there is an abstract concept to pinpoint the relationship between the articles. 8 In agreement: Pamboukis, The Concept and Function of Usages in the United Nations Convention on International Sale of Goods, 25 Journal of Law and Commerce (Fall 2005/Spring 2006) 107 (115) (Pace). See also Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 11 considering that it is an issue of the parties intent to be determined through interpretation. Contrary: Enderlein/Maskow, International Sales Law (1992), p. 68. § 1–303(e) UCC (2001) considers the conflict and it states that course of performance prevails over course of dealing and usage of trade; and that course of dealing prevails over usage of trade. 9 Among scholars, Bout, Trade Usages: Article 9 of the Convention on Contracts for the International Sale of Goods (1998), p. 1 (9) (Pace). 10 Bonell, in: Bianca/Bonell, Commentary (1987), Art. 9 para. 3.4.1 (Pace); Adame, El contrato de compraventa internacional (1994) p. 83. 11 Bonell, in: Bianca/Bonell, Commentary (1987), Art. 9 para. 3.4.1 (Pace), who correctly points out that defects in consent are only seen in regard to Art. 9(1) and not 9(2); Adame, El contrato de compraventa internacional (1994) p. 83; Bout, Trade Usages: Article 9 of the Convention on Contracts for the International Sale of Goods (1998), p. 1 (4) (Pace). 12 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 14. 13 E. g., as considered by Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 195, in the case of seaports or stock exchanges usages. 14 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2010), Art. 4 para. 15. 15 See Arbitral Award (Interim), Netherlands Arbitration Institute, 10 February 2005 (meet), CISGOnline 1625 (Pace); Gerechtshof’s Hertogenbosch (Netherlands) 24 April 1996 (yarn), E.H.T.M. Peters v

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Article 9

II. Detailed Commentary 1. Practices established between the parties: Art. 9(1) a) Definition. “Practice” in the sense of Art. 9(1) can be defined as considered 8 actions or conduct established between the participants in a contract during a certain time and number of contracts for the fulfilment of their respective obligations, that, due to their repetition in time, are binding upon them and thus are incorporated into the contract16. It has also been considered that notions that are not expressly agreed to and which 9 arise from preliminary discussions, might amount to a practice in the sense of Art. 9(1)17. However, practices established between the parties ought to be distinguished from the negotiations. The negotiations might well serve to interpret the contract (Art. 8(3)) but they are not to be considered as practices in the sense of Art. 9(1)18. For the same reason, negotiations cannot amount to an implied usage19. As considered by case law and scholars, there are several examples of practices 10 established between the parties. The practice can concern a prompt delivery of replacement parts which renders delivery after a certain period a breach of contract. The practice can also concern the conclusion of the contract and the inclusion of certain terms such as to sign the faxed copy of the confirmation20; acceptance of an offer without communicating it to the offeror (Art. 18(3)); acceptance of general conditions Kulmbacher Spinnerei GmbH & Co. Produktions KG., CISG-Online 321 (Pace);Gerechtshof’s-Hertogenbosch (Netherlands) 29 May 2007 (machine), CISG-Online 1550 (Pace); Rechtbank Breda (Netherlands) 27 February 2008 (unidentified goods) (Pace). Contrary: Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 5 who considers that validity refers to the validity of the terms incorporated into the contract through usages. 16 It is similar to the “Course of dealing” of § 1–205 1) UCC that defines it as “a sequence of previous conduct between the parties to a particular transaction which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.” Although, CISG scholars have considered the UCC definition as substantially coincident with Art. 9(1) second phrase (Witz/Salger/Lorenz, Kommentar (2000), Art. 9 para. 16, that section of the UCC which indeed provides for a useful definition within CISG, in its original drafting, referred more to interpretative practices (Art. 8(3) CISG) than to normative practices (Art. 9(2)). Cf. Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercancı´as (1996), p. 85; and Flechtner, in: Flechtner/Brand/Walter, Drafting Contracts (2007) 329 (337). Practices also include “course of performance” as defined in § 1–303 (a): a sequence of conduct between the parties to a particular transaction that exists if: (1) the agreement of the parties with respect to the transaction involves repeated occasions for performance by a party and (2) the other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection. Presently § 1–303 (d) UCC (2001) considers the normative character of both course of dealing and course of performance. 17 Oberster Gerichtshof (Austria) 31 August 2005 (tantalum powder), CISG-Online 1093 (Pace); and Oberster Gerichtshof (Austria) 6 February 1996 (propane gas), CISG-Online 224 (Pace) where the court held that: “an intent pursued by a party during the first phase of negotiations can bind the parties under Art 9(1) CISG as far as the other party knows this intent”. Criticisms to the case might be seen at Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 196. 18 Contrary: Adame, El contrato de compraventa internacional (1994) p. 81, and Pendo ´ n, Disposiciones generales, in: Mora´n Bovio (ed.), Comentarios a los Principios de UNIDROIT (2003), p. 60 (84), who considers that practices would be normally established during the negotiation of the contract. 19 But see: Oberlandesgericht Graz (Austria) 7 March 2002 (animals), CISG-Online 669 (Pace): “The intentions a party uttered during negotiations – even if not explicitly mentioned in the agreement – may be considered as usages under Art. 9 CISG impliedly applicable to the contract, provided that the other party knew or could not have been unaware of that condition (Art. 8(1) CISG)”. 20 Arbitral Award (Interim), Netherlands Arbitration Institute, 10 February 2005 (meet), CISG-Online 1625 (Pace).

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Part I. Sphere of Application and General Provisions

written in a different language to the order without protesting21; and the incorporation of a warranty clause and the limitation of liability clauses22. Practice may also relate the buyer’s payment obligation, such as the period of time to pay for the price23; the means of payment24, such as by a Letter of Credit25; procedure of payment26; practice of settlement of payments27; and discount for prompt payment28. Finally, practice can relate to the delivery of the goods or its conformity, such as the period of time to deliver the goods; the quality of the goods to be delivered; the place of delivery29; the use of certain means of communications to order the goods; disregard of notice deadlines30; and the delivery tolerances31. 11

b) Requirements. The predominant opinion as to the requirements for a practice to be established is that the practice occurs with a “certain frequency and during a certain period of time”32 or “an ongoing business relationship with several sales

21

Oberster Gerichtshof (Austria) 31 August 2005 (tantalum powder), CISG-Online 1093 (Pace). Court of Appeal (Hovioikeus) of Turku (Finland) 12 April 2002 (forestry equipment), CISG-Online 660 (Pace). 23 See 2016 UNCITRAL, Digest of Case Law on the CISG, Art. 9 para. 6. 24 Tribunal Supremo (Spain) 28 January 2000 (jute), Internationale Jute Maatschappij BV v Marin Palomares S.L., CISG-Online 503 (Pace). Also: Adame, El contrato de compraventa internacional (1994) p. 80. 25 Therefore if the operation is made through the same advising bank, the buyer cannot rely on the seller’s lack of information to that regard as an excuse for not issuing the L/C since there was a practice established between the parties. See: Guangdong Higher People’s Court (China) 2005 (ferromanganese and silicomanganese) (Pace). 26 The cost of the money transfer: Landgericht Bielefeld (Germany) 24 November 1998 (agency for sanitary goods), CISG-Online 697 (Pace). 27 Which were made in the following manner: either the [buyer] or third parties (ultimate buyers) used to wire various amounts to the account of the [seller] referring to neither the number of the contract nor the name of the goods: Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 17 January 2000 (unidentified goods) (Pace). 28 Oberster Gerichtshof (Austria) 31 August 2005 (tantalum powder), CISG-Online 1093 (Pace). 29 Regional Court in Zilina (Slovak Republic) 18 June 2007 (baked and confectionary goods), CISGOnline 1951(Pace). 30 Oberster Gerichtshof (Austria) 31 August 2005 (tantalum powder), CISG-Online 1093 (Pace); also Bonell, in: Bianca/Bonell, Commentary (1987), Art. 9 para. 2.1.1. 31 Oberster Gerichtshof (Austria) 31 August 2005 (tantalum powder), CISG-Online 1093 (Pace), citing one of its previous decisions of 6 February 1996 (propane gas), CISG-Online 224 (Pace). In the later case the court held that: “an intent pursued by a party during the first phase of negotiation can bind the parties under Art 9(1) CISG as far as the other party knows this intent” (Abstract at Unilex). Criticism to the case might be seen at Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 196. See also: Arbitral Award (Interim), AAA, 23 October 2007 (frozen chicken parts), Macromex Srl. v Globex International Inc., CISG-Online 1645 (Pace). 32 Oberster Gerichtshof (Austria) 31 August 2005 (tantalum powder), CISG-Online 1093 (Pace) “which the parties can then assume in good faith will be observed again in a similar instance”; Amtsgericht Duisburg (Germany) 13 April 2000 (pizza boxes), CISG-Online 659 (Pace), where the tribunal held that Art. 9 requires a behaviour of the parties to be regularly observed and thus certain duration and frequency in the commercial relationship considered; 2016 UNCITRAL, Digest of Case Law on the CISG, Art. 9 para. 7 considering court decisions to this regard. Among scholars, the following seems to be in agreement: Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 196; Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 8; Bout, Trade Usages: Article 9 of the Convention on Contracts for the International Sale of Goods (1998), p. 1 (3) (Pace); and Pamboukis, The concept and Function of Usages in the United Nations Convention on International Sale of Goods, 25 Journal of Law and Commerce (Fall 2005/Spring 2006) 107 (116–118) (Pace). Comment 2 to Art. 1.9 PICC–similar to Art. 9 CISG- points out that the behaviour founded in a single previous operation would not be considered enough to raise the status of a practice established between the parties. The same consideration might be considered in interpreting CISG. 22

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contracts”33. In this sense, some decisions have considered that in order to consider a practice established between the parties at least three or four previous dealings are necessary34. Once the practice exists, it becomes automatically binding on the parties despite silence in the written contract. An established practice might be changed by an express or implied agreement 12 between the parties35, but not by an abrupt cancellation of the commercial relationship derived from a long established practice between the parties36 since the binding force of the practice also derives from the principle of estoppel or the prohibition of the venire contra factum proprium37.

2. Agreed usages (Art. 9(1)) The term “agreed usages” may include different institutions that derive their binding 13 force from the agreement of the parties. Firstly, agreed usages are particular agreements of the parties, express or implied, to 14 apply a particular usage to a specific transaction38. As an agreement between the parties, the rules on contract formation apply (as does Art. 29 on modification and termination) and the agreement can take place before or after the conclusion of the contract39. The

33 Zivilgericht Kanton Basel-Stadt (Switzerland) 3 December 1997 (Bulgarian white uria), F.SA v I. SRL, CISG-Online 346 (Pace), pointing also out that “a previous relationship between two parties that is limited to two simultaneously-executed contracts does not fulfil this requirement”. 34 Amtsgericht Duisburg (Germany) 13 April 2000 (pizza boxes), CISG-Online 659 (Pace); and Zivilgericht Kanton Basel-Stadt (Switzerland) 3 December 1997 (Bulgarian white uria), F.SA v I. SRL, CISG-Online 346 (Pace). Seems to support that at least two are enough: U.S. Federal District Court of New York (U.S.) 6 April 1998 (shoes), Calzaturificio Claudia v Olivieri Footwear, CISGOnline 440 (Pace). “it is questionable whether this one transaction is enough to establish a course of dealing”. 35 See Arbitral Award, ICC 8817/1997 (food products), CISG-Online 776 (Pace), that considered in regard to the modification of the periods of payment of an exclusive distributor contract that a practice was established between the contracting parties (Art. 9(1)) and thus an intended modification of that practice trying to diminish the time of payment required an offer to modify to be accepted by the other party. However, according to Bout, Trade Usages: Article 9 of the Convention on Contracts for the International Sale of Goods (1998), p. (Pace) 1 (5); and Pamboukis, The Concept and function of Usages in the United Nations Convention on International Sale of Goods, 25 Journal of Law and Commerce (Fall 2005/Spring 2006) 107 (113) (Pace) (UNCITRAL) only an express agreement is possible. 36 Appellate Court Grenoble (France) 13 September 1995 (cheese), Socie ´te´ francaise de Factoring international Factor France v Roger Caiato, CISG-Online 157 (Pace). 37 Witz/Salger/Lorenz, Kommentar (2000), Art. 9 para. 16. Also: Arbitral Award (Interim), Netherlands Arbitration Institute, 10 February 2005 (meet), CISG-Online 1625 (Pace). 38 Arbitral Award CIETAC, 31 July 1997 (axle sleeves), CISG-Online 1072 (Pace) referring to the inspection and compensation usage agreed by the parties. The usage means that the goods should be handed over to the inspection agency agreed on by both parties within a certain period of time after the goods arrive at the destination port. If there is a quality or quantity problem, the [Buyer] should demand compensation from the [Seller] within a certain period of time. This is a common clause in international sales contracts, and it is also a trade usage; Oberster Gerichtshof (Austria) 21 March 2000 (cellulose), CISG-Online 645 (Pace). In agreement: Bout, Trade Usages: Article 9 of the Convention on Contracts for the International Sale of Goods (1998), p. 1 (5) (Pace). Contrary: Bainbridge, Trade Usages in International Sales of Goods: An Analysis of the 1964 and 1980 Sales Conventions, 24 Virginia Journal of International Law (1984) 619 (653) (Pace). An intermediate position at Pamboukis, The Concept and function of Usages in the United Nations Convention on International Sale of Goods, 25 Journal of Law and Commerce (Fall 2005/Spring 2006) 107 (112 seq.) (Pace), denying usages derived from the presumed will of the parties. 39 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 7; Ferrari, in: Ferrari/ Flechtner/Brand, Draft Digest and Beyond (2003), p. 192.

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Part I. Sphere of Application and General Provisions

agreement may be on the application of usages of trade of the type described in Art. 9(2), regional or local usages40, and usages of other trade sectors41. 15 Second, further included are contractual clauses emanating from certain “formulating agencies”42 that compile and create, recognised business conduct which has been developed, accepted and constantly practiced in the relevant trade and that has positively established the modus operandi of the operators in international trade. The most well known examples are Incoterms (2010) and UCP 600 (2007) (formerly UCP 500, 1993) from the ICC43, which are also considered by some scholars and case law as usages of trade under Art. 9(2)44. 16 Thirdly, despite attempts to define the usages of trade, it has been argued that the definition of usage is of no importance under Art. 9(1)45 since the agreement of the parties applies whether the term agreed might be considered a usage or not. Although the consequence of the agreement is as such, in this author’s view, the Convention refers properly to the word “usages” to recognize the importance of certain codified usages or rules in international trade. Thus, the agreement of the parties in regard to certain contractual terms that are not usages, such as the agreement on the general conditions of a specific trade or industry that do not achieve the status of a “usage”, is not an agreement within Art. 9(1), but a mere contractual agreement (Art. 6).

3. International usages of trade: Art. 9(2) a) General remarks. Art. 9(2) internationally codifies and expressly recognizes at least part of the so-called lex mercatoria as the “law of merchants” and that it is the origin, development and one of the most important features of international commercial law and domestic commercial law46. Usages of trade were one of the most important sources of commercial law in medieval times where the usage was international, entirely a creation of the merchants, and solely applied by them. Although the international conception was later abandoned, it is now emerging again due to the CISG. This recognition of the usages of trade is also found in international commercial arbitration where the vast majority of the arbitration laws as well as arbitration rules47 consider an obligation of the arbitrators in all circumstances – whether or not there is applicable law and whether or not the arbitration is ex aequo et bono – to consider the application of the usages of trade. 18 The recognition of usages of trade confers a dynamic interpretation of the Convention projecting ethical values48 and reducing the cost of negotiating the contract49. 17

40 See also 2016 UNCITRAL, Digest of Case Law on the CISG, Art. 9 para. 4; Oberster Gerichtshof (Austria) 21 March 2000 (cellulose), CISG-Online 645 (Pace): considering that usages under Art. 9(1) “do not need to be widely applied in international trade”. Among the scholars: Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 6; Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 194; Adame, El contrato de compraventa internacional (1994), p. 81; Illescas Ortiz/ Perales Viscasillas, Derecho Mercantil Internacional (2003), pp. 125 et seq. 41 Bonell, in: Bianca/Bonell, Commentary (1987), Art. 9 para. 2.1.2 (Pace). 42 For the use of the term: Schmitthoff, Commercial Law in a Changing Economic Climate (1981), p. 219. 43 Bonell, in: Bianca/Bonell, Commentary (1987), Art. 9 para. 3.5 (Pace). Also considering Incoterms: Pamboukis, The Concept and function of Usages in the United Nations Convention on International Sale of Goods, 25 Journal of Law and Commerce (Fall 2005/Spring 2006) 107 (112) (Pace). 44 See supra Art. 7 para. 23. 45 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 6. 46 See e. g. Art. 2 Spanish CCo. 47 Art. 28.3 UNCITRAL Model Law on International Commercial Arbitration (1985); Art. 15 OHADA Uniform Act on Arbitration; Art. 17.5 ICC Arbitration Rules, and Art. 33.3 of the UNCITRAL Arbitration Rules (1976). 48 Supra Art. 7. 49 Walker, Trade Usages and the CISG: Defending the Appropriateness of Incorporating Custom into International Commercial Contracts, 24 Journal of Law and Commerce (2005) 263 (265 seq.) (Pace).

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Article 9

The parties may agree, expressly or impliedly50, on the exclusion of the usage of trade 19 as recognized expressly by Art. 9(2). An agreement contrary to a well-established usage might also be considered when a well-drafted merger clause exists in the contract, but only if those usages and practices are specifically mentioned in the merger clause51or if a clear reference is made to displace Art. 952. b) Definition. Although the term “usage” is not defined in the Convention, and thus 20 it must be interpreted internationally and autonomously53, there are domestic definitions and conditions for usages that might be considered to embody the same concepts as the term “usage” within the Convention. Conduct generated by the societas mercatorum in a particular sector of business or trade is widely known and regularly observed by the participants54 as there is the conviction of their binding force or their present practice (the so-called opinio juris seu neccessitatis)55. These requirements coincide with the domestic conditions for usages of trade under many domestic law systems56. In this regard, the old distinction between customs and usages of trade whereby the former had binding character and the latter a mere contractual effect has been abandoned in many national laws, international Conventions and the practice of international arbitration57. The CISG uses the word usage in the widest possible sense making domestic 21 distinctions somehow irrelevant58. It encompasses different possible sources of the lex mercatoria, including, from this author’s point of view, the distinction between codified and uncodified “usages of trade” when the former fulfils the requirements of Art. 9(2). Although within Art. 9(2) it may be that not all possible sources of the lex mercatoria59 50 Contrary: Oberlandesgericht Saarbru ¨ cken (Germany) 13 January 1993 (doors), CISG-Online 83 (Pace): “However, according to Art. 9(2) CISG, a usage is only applicable if the parties have not agreed otherwise, and this ‘priority of contract’ (…) argues against setting aside the duty to examine the goods and to give notice on the lack of conformity in Arts 38, 39 CISG by means of an – implicit – trade usage to that effect in the present case”. 51 CISG-AC Opinion no 3, para. 4.7. See: Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 15; Flechtner, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 337– 338. 52 An example of a merger clause excluding Art. 9: Flechtner, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 338. 53 For all: Bonell, in: Bianca/Bonell, Commentary (1987), Art. 9 para. 3.2 (Pace); Melis, in: Honsell, Kommentar (1997), Art. 9 CISG para. 3; Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 12; Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 193; Bout, Trade Usages: Article 9 of the Convention on Contracts for the International Sale of Goods (1998), p. 1 (3) (Pace); Pamboukis, The Concept and function of Usages in the United Nations Convention on International Sale of Goods, 25 Journal of Law and Commerce (Fall 2005/Spring 2006) 107 (111) (Pace); and Kro¨ll/Hennecke, Kaufma¨nnische Besta¨tigungsschreiben beim internationalen Warenskauf, RabelsZ (2003) 448. 54 The CISG does not require that the custom be ancient, or long established, since usages need not be long established (inveterata consuetudo): Honnold, Uniform Law (2009), para. 117; Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 17. See comment 5 to (§ 1–303(d) UCC 2001): “it is not required that a usage of trade be “ancient or immemorial”, “universal” or the like.” 55 The definition provided by § 1–205(2) UCC (§ 1–303(d) UCC 2001) of the usage of trade is valid to be considered under the Convention: “A usage of trade is any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question.” Usages have both an interpretative and normative role: see § 1–303(d) UCC (2001). 56 See e. g.: Schlechtriem, Uniform Sales Law (1986), p. 40 (Pace). 57 Lo ´ pez Rodrı´guez, Lex Mercatoria and Harmonization of Contract Law in the EU (2003), pp. 51–52. 58 In agreement: Bonell, in: Bianca/Bonell, Commentary (1987), Art. 9 para. 3(2) (Pace); and Bout, Trade Usages: Article 9 of the Convention on Contracts for the International Sale of Goods (1998), p. 1 (3) (Pace). 59 Berger, The Creeping Codification of the Lex Mercatoria (1999), pp. 278–311 considered this term in the widest possible sense.

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are included, nevertheless, what is included are the rules derived from international commercial practice as well as international principles generally accepted60. 22 According to the majority view, usages “include all those actions or modes of behaviour (including omissions) that are generally and regularly observed in the course of business transactions in a specific area of trade or at a certain trade center”61. 23 In practice62, usages have been relied on in the context of the conclusion of the contract (e. g. confirmation letter, or as to confirm an oral contract in an invoice in the trade of cereals63) as well as in the context of defining the parties rights and obligations such as: usages of wood “Tegernseer Gebra¨uche” 64; usage by which the delay in delivery implies the duty of the seller to compensate the excess customs65; a usage whereby the buyer should demand compensation from the seller within a certain period of time if there is a quality or quantity problem66; in the trade of steel plates there is a trade usage concerning checking of goods, by which the buyer has to give the seller an opportunity to be present while checking the goods67; in the automovile sector a trade usage is recognized in relation with the “technical factor”68; in the hard metals industry, “consignment” meant that material would be shipped to the customer, but would be stored separately and identified as property of the supplier until actually used by the customer, and that the customer was under no obligation to use any of a supplier’s consignment inventory, and the supplier remained free to retrieve its product at any time69; and finally customs of fish merchants: a) where the determination of the number of fish/kg of the different qualities and their prices depends on the fishing obtained in each campaign (number of captured anchovies and 60 Cf. Perales Viscasillas, The Role of the UNIDROIT Principles and the PECL in the interpretation and gap-filling of CISG, in: Janssen/Meyer (eds), Methodology of the CISG (2009). 61 As compiled by Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), cit., p. 194. Or as considered by Bonell, in: Bianca/Bonell, Commentary (1987), Art. 9 para. 3.2 (Pace): “any practice or line of conduct regularly observed within a particular trade sector or at a particular market place”, and the definition in Art. 13.1 ULF: “any practice or method of dealing”. And “industry custom is a practice that persons in such industry know and follow, or they ought to know and follow”: Arbitral Award, CIETAC 23 April 1995 (Australian raw wool), CISG-Online 1031 (Pace). 62 See also the individual cases identified by Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 22. 63 In connection with the conclusion of the contract, the issuance of an invoice by an intermediary and the absence of denunciation by either party upon receipt, is for them the assumption of a usage of trade on the trade of cereal, by which the invoice proves the existence of the purchase agreement conclude over the phone in accordance with the general principle of freedom of form (Art. 11 CISG: Tribunal Supremo (Spain) 1 July 2013 (cereals), CISG-Online 2495 (Pace). 64 Oberster Gerichtshof (Austria) 21 March 2000 (cellulose), CISG-Online 645 (Pace). The usage obliges the buyer to take the delivery and to give a written notice to the seller clearly specifying the lack of conformity of the delivered wood within fourteen days after he was or would have been able to examine the goods. 65 Arbitral Award, CIETAC, 20 February 1994 (cysteine) (Pace). 66 Award CIETAC CISG/1997/24, 31 July 1997 (axle sleeves), CISG-Online 1072 (Pace). 67 Appellate Court of Helsinki (Finland) 29 January 1998 (steel plates), CISG-Online 1302 (Pace). ~a Godina (Spain) 68 Juzgado de Primera Instancia e Instruccio ´ n, No 2 de La Almunia de Don 28 November 2013 (cheese), SMR Automotive Systems Spain v Bu¨hler Motor GmbH, CISG-Online 2532 (Pace) and confirmed by Audiencia Provincial de Zaragoza (Spain) 27 May 2014 (electrical actuators), SMR Automotive Systems Spain v Bu¨hler Motor GmbH, CISG-Online 2529 (Pace): The “technical factor “ is a formula for determining liability, which involves setting a percentage of blame on a sampling of parts delivered by suppliers to the final recipient, to quantify the portion of guilt that has each. This is done by the inability to collect thousands of pieces already installed in the final product. 69 U.S. Court of Appeals (11th Circuit) (U.S.) 12 September 2006 (tantalum carbide), Treibacher Industrie, A. G. v Allegheny Technologies, Inc., CISG-Online 1278 (Pace). No discussion of the concept of a contract of sale is noted on the decision and thus considering “consignment contracts” as contracts for the sale of goods, although this kind of situation might be well considered differently under domestic laws, even as a mixed contract of deposit and sale.

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size thereof70; b) where the trade is made using Latin designations for fish71. It might be also noted that for tariff purposes in international trade the Latin names are used in order to specifically designate some goods such as fish72. c) Binding character of the usage. Based on the Secretariat Commentary73 and the 24 very wording of Art. 9(2) (to have impliedly made applicable) it might be considered that there are only two figures embodied in Art. 9: practices and agreed usages, and thus the latter also comprises of normative usages of trade that are applicable to the contract as an implied agreement of the parties when the usage is widely known and regularly observed in the particular trade. This approach means that a subjective perspective of usages is adopted as the value of usages is achieved only if they are expressly or impliedly integrated in the will of the parties during the process of formation of contract. However, we consider -in accordance with the tripartite division and in agreement with the legislative history of this provision74 and the previous texts, such as Art. 9 ULIS where the distinction of the three institutions was clearer- that usages of trade in Art. 9(2) are objective in character and thus ought to be considered as an objective and normative rule and “source of the law”75 in international sale of goods contracts76. The different positions of scholars are also seen in regard to the application 70 Audiencia Provincial de Asturias (Spain) 29 September 2010 (anchovies), Mattera Hermanos, S.A. v Gonzales Barrio, S.L., CISG-Online 2313 (Pace). 71 Danish Maritime Commercial Court (Denmark) 31 January 2002 (fish), Dr. S. Sergueev Handelsagentur v DAT-SCHAUB A/S, CISG-Online 679 (Pace). According to the Court “As a preliminary point, it should be made clear that within both families “scumbrida” and “carangidae” several fish in Danish, English and German are called “”makrel”, “mackerel” and “Makrele” or contain this word as part of their names. The only way in which to precisely identify a species is to use its Latin name. According to the statement by the Association of Danish Fish Processing Industries and Exporters and the evidence given by Mr. Sørensen of [Seller], the court finds that the Latin names are used in dealings in fish. In his evidence [Buyer] stated that the only previous contract for the sale of fish between the parties had been based on the Latin name of the species concerned”. 72 See for example: GATT (http://tariffdata.wto.org) and DR-CAFTA (Dominican Republic-Central America Free Trade Agreement). 73 See Secretariat Commentary on 1978 Draft, Art. 8 (now Art. 9) (A/CONF.97/5, in A/CONF.97/19, para. 2). But see 2016 UNCITRAL, Digest of Case Law on the CISG, Art. 9 para. 1, making a triple distinction. 74 See further details: Jokela, The Role of Usages in the Uniform Law on International Sales, 10 Scandinavian Studies in Law (1966) 81 (88 et seq.) (Pace). 75 In agreement: Bonell, in: Bianca/Bonell, Commentary (1987), Art. 9 paras 1.4.1, 2.2 and 2.3 (Pace); Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercancı´as (1996), pp. 79 et seq.; Illescas Ortiz/Perales Viscasillas, Derecho Mercantil Internacional (2003), pp. 125–126; Adame, El contrato de compraventa internacional (1994) p. 82; Garro/Zuppi, Compravanta internacional (1990), p. 61; Oviedo Alba´n, El sistema de fuentes del contrato de compraventa internacional de mercancı´as, in Estudios de contratacio´n internacional. Re´gimen uniforme e internacional privado (2004), pp. 244 et seq.; Bout, Trade Usages: Article 9 of the Convention on Contracts for the International Sale of Goods (1998), p. 1 (5) (Pace); Pamboukis, The Concept and function of Usages in the United Nations Convention on International Sale of Goods, 25 Journal of Law and Commerce (Fall 2005/Spring 2006) 107 (108) (Pace); Melis, in: Honsell, Kommentar (1997), Art. 9 paras 2 and 8; Witz/Salger/Lorenz, Kommentar (2000), Art. 9 para. 7; Lo´pez Rodrı´guez, Lex Mercatoria and Harmonization of Contract Law in the EU (2003), pp. 54–55. Contrary: Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 201; Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 paras 2, 13 and 18; Eo¨rsi, General Provisions, in: International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), pp. 2–23. 76 “The usages and practices of the parties or the industry are automatically incorporated into any agreement governed by the Convention, unless expressly excluded by the parties. CISG Art. 9”. U.S. District Court, Southern District of New York (U.S.) 10 May 2002 (chemicals), Geneva Pharmaceuticals Tech. Corp. v Barr Labs. Inc., CISG-Online 653 (Pace). The statement is in agreement with the objective and normative character of Art. 9(2). However, the decision has been criticised: inter alia: Walker, Trade Usages and the CISG: Defending the Appropriateness of Incorporating Custom into International

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of certain rules of the Convention to usages. For example, if a normative character were adopted, Art. 7(1) applies to the interpretation of usages77, while a contractual character – implied knowledge of the usage – implies the application of Art. 878. 25 The objective character of the usage of trade in Art. 9(2) is shown in the drafting of the rule itself: “the parties knew or ought to have known”. A legal presumption of knowledge of the usage confers its objective feature and thus its direct application independent from the effective knowledge by commercial operators, laying the protection of such expectation in the promotion of economy efficency79. The implied application of the usage to the contract, is distortive and complicates the understanding of the question of the real meaning of the usage of trade in Art. 9(2) and seems to degrade it to a mere tacit contractual practice80, diminishing the efficacy of the international customs or usages of trade. This condition was introduced as a compromise, since the normative character of the usages of trade was not universally recognized at the time of the negotiation of the Vienna Convention–particularly, former USSR accepted only their contractual effect. At the same time, a fear that unknown usages of trade were being imposed on weaker parties or parties belonging to less industrialized countries was behind the compromise81. The development is well seen by comparing the drafting of Art. 9 ULIS and Art. 9 CISG. Still, under the CISG, a party not even knowing a usage of trade can be bound by it if that party ought to have known of it82.

Commercial Contracts, 24 Journal of Law and Commerce (2005) 263 (272 seq.) (Pace). Also: Rechtbank van Koophandel Tongeren (Belgium) 25 January 2005 (steel), Scafom International BV & Orion Metal BVBA v Exma CPI SA, CISG-Online 1106 (Pace): “while Art. 9 lifts practices and trade usages to a source of contractual obligations that is just as important as the clauses that the parties have explicitly agreed on”; Helsinki Court of Appeals (Finland) 26 October 2000 (plastic grass carpets), CISG-Online 1078 (Pace): “According to international trade usage, a contractual relationship concerning imports brings about duties to the parties, even if the details had not been agreed on”; Arbitral Award, CIETAC CISG/ 1995/07, 23 April 1995 (Australian raw wool), CISG-Online 1031 (Pace). 77 Marı´n Fuentes, Compraventa internacional de mercancı´as (2006) p. 61. 78 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 21. 79 Coetzee, p. 250, but p. 262 considering under CISG the presumption of an implied agreement of the parties. ~ol e inter80 Alcover Garau, La transmisio ´ n del riesgo en la compraventa mercantil: Derecho espan nacional (1991), pp. 128–131; and Bainbridge, Trade Usages in International Sales of Goods: An Analysis of the 1964 and 1980 Sales Conventions, 24 Virginia Journal of International Law (1984) 619 (638 seq.) (Pace). 81 The discussion was raised several times: see Honnold, Documentary History (1989), pp. 21, 236, 243; Eo¨rsi, General Provisions, in: International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), pp. 2–20 and 2–25 seq., referring to parties that did not have wellestablished legal services or information; Date-Bah, The Convention on the International Sale of Goods from the Perspective of the Developing Countries, in: La Vendita Internazionale (1981), p. 27; Maskow, The Convention on the International Sale of Goods from the Perspective of the Socialist Countries, in: la Vendita Internazionale (1981), pp. 58 seq., who points out that for a usage to be widely known, it has to be widely accepted for countries with different economic system; Re´czei, The Rules of the Convention Relating to its Field of Application and to its interpretation. Problems of Unification of International Sales Law, Working papers submitted to the Colloquium of the International Association of Legal Science, Potsdam, August 1979 (1980), p. 84; Kastley, Unification and Community: A Rhetorical Analysis of the United Nations Sales Convention, 8 Northwestern Journal of International Law and Business (1988) 574 (607 seq.) (Pace). 82 Contrary Eo ¨ rsi, General Provisions, in: International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), pp. 2–22; Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 20; and Bout, Trade Usages: Article 9 of the Convention on Contracts for the International Sale of Goods (1998), p. 1 (6) (Pace) considering that exceptionally usage under Art. 9(2) would not be applicable in the case of a producer that by necessity has to make a foreign purchase just once.

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The harshness of the rule has been mitigated by some scholars by providing several 26 extreme examples in which this legal presumption might be rebutted either by the application of the principle of reasonableness, as a means to protect parties from poor industrialized and less developed regions and with lack of experience in international operations83, or by applying the good faith principle84. Also, some courts have misunderstood the scope of the application of Art. 9(2) trying to restrict its binding force and have considered that the usage can only bind the parties if “either have their place of business within the area of these usages, or which continuously do business in this area for a considerable period of time”85. However, Art. 9(2) does not depend upon the parties subjective intent, their place of business or the fact that the party conducts business regularly in the specific area where the usage applies, but to the objective fact that the usage is widely known and regularly observed by traders86. d) Regional or local usages. Art. 9(2) does not require a universal application, which 27 of course is also within the provision, but regular observation of the usage in the framework of international commercial operations in a particular trade. Furthermore, local87 or regional88 usages, as well as purely commercial or legal usages, might also be included within the provision since it refers to usages widely known and observed by parties to contracts involved in a particular trade. This means that it will be necessary to distinguish industry, parties and place89 and a sufficient relation with international trade as well as sufficient awareness and observance by international traders90. Finally, in exceptional cases, a local usage of trade might be binding on the party that regularly does business in the place where the usage applies. Therefore, although under Art. 9(2) any usage must or ought to be known to the parties, and must be widely known in the 83 See: Audit, Vente Internationale (1990), pp. 45 et seq.; and Comment 5 Art. 1.9 PICC. However, China’s proposal trying to add the word “reasonable” before “usage” was rejected: Honnold, Documentary History (1989), pp. 483 seq., 661. 84 Bonell, in: Bianca/Bonell, Commentary (1987), Art. 9 para. 3.4.2 (Pace); Kastley, Unification and Community: A Rhetorical Analysis of the United Nations Sales Convention, 8 Northwestern Journal of International Law and Business (1988) 574 (597 seq.) (Pace), considering that a usage perpetuating domination by the powerful is not incorporated into the contracts under Art. 9(2). It has also been considered that something that contradicts the principle of good faith cannot be considered to be a usage of trade: Oberlandesgericht Ko¨ln (Germany) 21 December 2005 (unidentified goods), CISG-Online 1201 (Pace). Among scholars: Bout, Trade Usages: Article 9 of the Convention on Contracts for the International Sale of Goods (1998), p. 1 (3 seq.) (Pace). 85 Oberster Gerichtshof (Austria) 21 March 2000 (cellulose), CISG-Online 645 (Pace). 86 Oberster Gerichtshof (Austria) 21 March 2000 (cellulose), CISG-Online 645 (Pace) according to which Art. 9(2) CISG’s requirements are satisfied when the usages “are recognized by the majority of persons doing business in the same field”. 87 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 19. Comment to Art. 1:105 PECL (similar to Art. 9(2) CISG) clearly establishes that it applies also to local usages or usages particular to a certain trade sector. But see denying that local usages might play a role within CISG: Adame, El contrato de compraventa internacional (1994) p. 82; and Enrich/Malet, La Convencio´n de las Naciones Unidas sobre los contratos de compraventa internacional de mercaderı´as, Revista Jurı´dica de ~a (1991) 133 (140 seq.). Catalun 88 The Secretariat Commentary on 1978 Draft (A/CONF.97/5, at A/CONF.97/19, pfo.3, p. 20) seems also to admit regional usages. The scholars are also in agreement: Goldstajn, Usages of Trade and other autonomous rules of international trade according to the UN (1980) Sales Convention, in: Volken/ Sarcevic (eds), International Sale of Goods (1986), p. 55 (74 seq.) (Pace); Honnold, Uniform Law (2009), para. 120.1; Bonell, in: Bianca/Bonell, Commentary (1987), Art. 9 para. 2.2.3 (Pace); Witz/Salger/Lorenz, Kommentar (2000), Art. 9 para. 9; Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 19; Bout, Trade Usages: Article 9 of the Convention on Contracts for the International Sale of Goods (1998), p. 1 (6) (Pace). 89 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 17. 90 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 19. Coetzee, pp. 261– 262.

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international trade and regularly observed, it is also possible that, in certain circumstances, a local usage may be applicable to the contract. This is particularly true in cases with respect to usage applied within local commodity exchanges, fairs and warehouses, provided that such usage is regularly observed also with respect to businesses involving foreign dealers91. Hence the requirements for a local usage to be binding are stricter than those considered generally under Art. 9(2). e) Letters of confirmation. An example of a regional legal usage subject to an interesting body of case law is the letters of confirmation, i. e., a written confirmation that is within a reasonable time92 sent either after an oral conclusion of the contract, or after an oral modification. Therefore, the parties, through the letter of confirmation, intend to confirm in writing the oral conclusion or modification of the contract93, but some modifications are introduced. 29 Although some scholars consider that the issue of letters of confirmation is a gap within CISG that should be filled by applying domestic law (Art. 7(2) CISG94, or by applying Art. 2.1.12 PICC as they reflect the general principles on which the CISG is based95, in this author’s opinion letters of confirmation are governed by CISG. This position is confirmed by the legislative history of the CISG96. CISG governs that issue either directly or by resorting to the general principles within CISG (Art. 7(2))97 and their use can be considered normal practice between businessmen. To this extent, it has also been considered that oral orders confirmed by invoices with sales terms is commonplace, i. e., a usage of trade under Art. 9(2)98. The rules on contract formation99 and the general provisions of the CISG apply to resolve the issue of the modifications 28

91 See Oberlandesgericht Graz (Austria) 9 November 1995 (marble slabs), CISG-Online 308 (Pace), citing Prof. Bonell. The same consideration is found in the scholarly writings see: Bonell, in: Bianca/ Bonell, Commentary (1987), Art. 9 para. 2.2.3 (Pace) and comment 4 to Art. 1.9 PICC drafted by Prof. Bonell. In agreement: Huber/Mullis, The CISG (2007), p. 19. Contrary: Schmidt-Kessel, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 9 para. 19 considering that it goes too far and usages should only be considered under Arts 8.3 and 9(1). 92 Comment 2 to Art. 2.1.12 PICC. 93 Inter alia: Bezirksgericht Sissach (Switzerland) 5 November 1998 (summer cloth collection), CISGOnline 1466 (Pace). 94 Stern, Erkla ¨rungen im UNCITRAL-Kaufrecht (1990), para. 116. In case law: Arrondissementsrechtbank Zutphen (Netherlands) 29 May 1997 (cuttings), Handelskwekerij G. Aartsen BV v G. Suykens, CISG-Online 546 (Pace). 95 Garro, The Gap-Filling Role of the UNIDROIT Principles in International Sales Law: Some Comments on the Interplay between the Principles and the CISG, 69 Tulane Law Review (1995) 1149 (1168). 96 A/CN.9/142, UNICTRAL YB (1978), para. 228. 97 The majority of the scholars consider that the letters of confirmation are a matter governed by the Convention: Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Intro to Arts 14–24 para. 4; Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 23; Perales Viscasillas, Tratamiento jurı´dico de las cartas de confirmacio´n en la Convencio´n de Viena de 1980 sobre Compraventa Internacional de Mercaderı´as, Revista Jurı´dica del Peru´, octubre-diciembre (1997) 241 (241 et seq.); Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 202; Schlechtriem/Witz, Convention de Vienne sur les Contrats de Vente Internationale de Marchandises (2008), para. 103; Noussias, Die Zugangsbedu¨rftigkeit von Mitteilungen nach den Einheitlichen Haager Kaufgesetzen und nach dem UNKaufgesetz (1982), pp. 121 seq.; and Ludwig, Der Vertragsschluss nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law: dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands, in: Studien zum vegleichenden und internationalen Recht-Comparative and International Law Studies, Band 24 (1994), pp. 88 et seq.; Kro¨ll/Hennecke, Kaufma¨nnische Besta¨tigungsschreiben beim internationalen Warenskauf, RabelsZ (2003) 448. 98 U.S. Federal District Court of the State of Washington (U.S.) 13 April 2006 (raspberry roots), Barbara Berry, S. A. de C. V. v Ken M. Spooner Farms, Inc., CISG-Online 1354 (Pace). 99 See infra comments to Arts 14–24, and particularly important the value given to the silence or inaction of the addressee of the letter of confirmation. Provisions on writings in confirmation might be

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introduced in letters of confirmation and particularly whether the silence of the addressee of the letter that amends or supplements a previous orally concluded contract amounts to an acceptance of those modifications. Here, national courts have found that a duty to object exists by application of the good faith principle100 and that a practice or usage between the parties101 will exist so as to confer to the silence of the addressee constitutive effect102. With respect to usage of trade, national courts usually refer to the usage of German, 30 Swiss and Austrian commercial letters of confirmation103 whereby, between businessmen, silence or inaction of the addressee of a commercial letter of confirmation (Kaufma¨nnisches Besta¨tigungsschreiben) which contains modifications of a previous oral contract are deemed to be an acceptance. As it is clear from the case law, usage only applies if the conditions of Art. 9(2) are met and particularly when both parties belong to a legal system in which that trade usage is recognized104; a position that is found at Arts 2.1.12 PICC, 2:210 PECL and II.-4:210 DCFR, applying the rules on contract formation, particularly counteroffers if a material alteration is included. 100 See expressly: Bezirksgericht Sissach (Switzerland) 5 November 1998 (summer cloth collection), CISG-Online 1466 (Pace): In a contract of sale of textiles between a buyer (Switzerland) and a seller (Germany), the court considered that the oral modification of the contract -a payment agreement regarding the outstanding claims- that was followed by a letter that was accepted by the seller’s silence an application of the good faith principle. Impliedly: Hof van Beroep Gent (Belgium) 15 May 2002 (design of pagers), N.V. A.R. v N.V. I., CISG-Online 746 (Pace). See also for the acceptance of an offer by silence during the formation of the contract: U.S. District Court for the Southern District of New York (U.S.) 14 April 1992 (footware), Filanto v Chilewich, CISG-Online 45 (Pace). 101 See considering silence or inaction as an acceptance when supported by a usage as in the case of letters of confirmation: Esser, Commercial Letters of Confirmation in International Trade: Austrian, French, German and Swiss Law and Uniform Law under the 1980 Sales Convention, Georgia Journal of International and Comparative Law (1988) 427 (450 et seq.) (Pace); Neumayer/Ming, Convention de Vienne (1993), p. 169; Noussias, Die Zugangsbedu¨rftigkeit von Mitteilungen nach den Einheitlichen Haager Kaufgesetzen und nach dem UN-Kaufgesetz (1982), pp. 110 et seq.; Enderlein/Maskow, International Sales Law (1992), p. 93; Herber/Czerwenka, Kommentar (1991), para. 17, p. 107; Ludwig, Der Vertragsschluss nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law: dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands, in: Studien zum vegleichenden und internationalen Recht-Comparative and International Law Studies, Band 24 (1994), pp. 356 et seq. 102 For a discussion on the constitutive versus declarative effect, see: Kro ¨ ll/Hennecke, Kaufma¨nnische Besta¨tigungsschreiben beim internationalen Warenskauf, RabelsZ (2003) 448 . 103 It also exists in other countries as listed by Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 25, who also expresses his doubts about the existence of such a usage in some countries, such as Austria, France, and Italy. But see: Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 4 para. 4, considering that it is a usage in Austria, as well as in Germany and Switzerland. In agreement with the later position: Kro¨ll/Hennecke, Kaufma¨nnische Besta¨tigungsschreiben beim internationalen Warenskauf, RabelsZ (2003) 448, but problematic in France, only known in the U.S. in certain circumstances, and impossible to recognize in the UK. The position in Spain, according to legal scholars, is that silence of the addressee of the letter of confirmation will amount to an acceptance if so derived from the good faith principles, practices or usages of trade: see Perales Viscasillas, Tratamiento jurı´dico de las cartas de confirmacio´n en la Convencio´n de Viena de 1980 sobre Compraventa Internacional de Mercaderı´as, Revista Jurı´dica del Peru´, octubre-diciembre (1997) 241 (note 8) (Pace). A comparative study at: Esser, Commercial Letters of Confirmation in International Trade: Austrian, French, German and Swiss Law and Uniform Law under the 1980 Sales Convention, Georgia Journal of International and Comparative Law (1988) 427 (429 et seq.) (Pace); and Coetzee, pp. 254–260. 104 Zivilgericht Basel-Stadt (Switzerland) 21 December 1992 (fibre), W.T.GmbH v P.AG, CISG-Online 55 (Pace), where the seller was from Austria and the buyer from Switzerland. The court considered the value of the commercial letters of confirmation under Art. 9. It recognized that both in Austria and Switzerland the silence to a letter of confirmation means acceptance and that this is considered to be a usage (Art. 9(2)). Furthermore, the court held that a practice established between the parties was considered to exist (Art. 9 (1)). See also: Oberlandesgericht Frankfurt am Main (Germany) 5 July 1995 (chocolate products), CISG-Online 258 (Pace), considering that in the case at hand no usage of trade existed because it was only known in the buyer’s country (Germany) but not in the seller’s country (France). However, the Court considered the letter of confirmation as evidence and applying other means

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confirmed by the majority of scholars105. However, this line of reasoning is sometimes qualified when the modifications relate to forum selection clauses at the back of invoices that might be considered, in certain situations, to require express assent106. Another qualification exists in situations where invoices cannot play the role of a “letter of confirmation” during the formation of the contract since they might belong to its performance107. Only a case-by-case analysis is possible since invoices may be used by the parties during the formation of the contract108 or its modification as a habitual practice or usage in the trade109. 31 The letters of confirmation must be made in writing (letter sent by post, fax or email will suffice). It might exceptionally be made orally,110 but in this situation evidence of its content is needed, for example, if the confirmation is made orally but recorded.

4. Conflict between usages 32

If several usages under Art. 9(2) apply and contradict each other, it has been correctly suggested that those usages most closely related to the contractual relationship will be applied111 as opposed to a mutual exclusion of those usages112. If a conflict exists of evidence held in favour of the seller. Oberlandesgericht Ko¨ln (Germany) 22 February 1994 (wood), CISG-Online 127 (Pace) in a contract of sale of wood between a seller (Nigeria) and a buyer (Germany), the court did not consider the contract modified by a confirmation letter, and therefore the court expressly stated that: “there is no room for a reference to the German Conflict of Laws provisions regarding the conclusion of a contract by silence as an acceptance of a commercial letter of confirmation”. See also 2016 UNCITRAL, Digest of Case Law on the CISG, Art. 9 para 17. The same conclusion before in the case law on ULF in Germany: Oberlandesgericht Hamm (Germany) 15 November 1979 (2 U 78/79); Oberlandesgericht Hamburg (Germany) 9 July 1980 (5 U 122/80); Landesgericht Karlsruhe (Germany) 23 October 1981 (7 O 530/80); and Landesgericht Marburg (Germany) 22 April 1982 (4 O 22/82); Bundesgerichtshof (Germany) 26 March 1992 (windows and doors). Scholars are also in agreement; e. g.: Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 4 para. 4. But see: Oberlandesgericht Saarbru¨cken (Germany) 14 February 2001 (windows and doors), CISG-Online 610 (Pace): in a contract of sale of windows and doors between an Italian seller and a German buyer. The buyer sent two letters of confirmation establishing a special discount of 14 %. The court considered that according to the application of a commercial trade usage, silence to a letter of confirmation means acceptance. 105 Esser, Commercial Letters of Confirmation in International Trade: Austrian, French, German and Swiss Law and Uniform Law under the 1980 Sales Convention, Georgia Journal of International and Comparative Law (1988) 427 (453) (Pace); Schlechtriem, Uniform Sales Law (1986), pp. 56 seq. (Pace); Ludwig, Der Vertragsschluss nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law: dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands, in: Studien zum vegleichenden und internationalen Recht-Comparative and International Law Studies, Band 24 (1994), pp. 357 seq.; Mu¨ller/Otto, Allgemeine Gescha¨ftsbedingungen im internationalen Wirtschaftsverkehr (1994), p. 37; Illescas Ortiz/Perales Viscasillas, Derecho Mercantil Internacional (2003), p. 169; and Kro¨ll/ Hennecke, Kaufma¨nnische Besta¨tigungsschreiben beim internationalen Warenskauf, RabelsZ (2003) 448. 106 U.S. Circuit Court of Appeals (9th Circuit) (U.S.) 5 May 2003 (wine corks), Chateau des Charmes Wines Ltd, v Sabate´ USA, Sabate´ S. A., CISG-Online 767 (Pace); Cour d’Appel Paris (France) 13 December 1995 (outer wrappings of packets of biscuits), Socie´te´ Isea industrie SPA et al. v SA Lu et al., CISGOnline 312 (Pace). 107 Zivilgericht Kanton Basel-Stadt (Switzerland) 3 December 1997 (Bulgarian white uria), F.SA v I. SRL, CISG-Online 346 (Pace). 108 Ca ´ mara Nacional en lo Comercial (Argentina) 14 October 1993 (machinery), Inta. S.A. v MCS Officina Meccania S.P.A., CISG-Online 87 (Pace); Landesgericht Aachen (Germany) 14 May 1993 (electronic ear device), CISG-Online 86 (Pace); and Oberlandesgericht Stuttgart (Germany) 28 February 2000 (floor tiles), CISG-Online 583 (Pace). 109 See Comment 3 to Art. 2.1.12 PICC. 110 Contrary: Schlechtriem/Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 11 para. 7. 111 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 199. 112 Bonell, in: Bianca/Bonell, Commentary (1987), Art. 9 para. 2.2.3 (Pace) stating that in that situation the issue has to be resolved either according to the relevant provisions of the Convention or, in the

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between an applicable local usage and an international one, the former prevails since the requirements for its application are stricter and more in line with the particular trade between the parties113. As an additional criterion it is observed that “different practices within the same industry and same locality negate sufficient observance of the trade usage” with the inapplication of Art. 9(2) unless a clear predominance is seen114.

5. Procedural aspects/burden of proof The burden of proof is an issue dealt with by the CISG (Art. 7(2) and expressly in 33 Art. 79) and thus the evidence of the usage or practice is governed by the CISG and it is not an issue of validity115. Several courts have considered that it is the party alleging the existence of practices established between them, an agreed usage or usages of trade (Art. 9), who bears the burden of proof and thus the principle of actore incumbit probatio applies116. The territorial, temporal, personal and factual sphere of application of the usage have to be established117. However, if the usage is notorious, the court might allege its existence ex officio, even more so if the usage is codified118. This solution is in accordance with the majority of the legal systems119. Evidence about usages is considered a question of fact120 to be determined by the 34 court or arbitral tribunal using all possible means121, usually through expert witnesses

absence thereof, according to the gap-filling principles of Art. 7. Following this author: Pamboukis, The Concept and Function of Usages in the United Nations Convention on International Sale of Goods, 25 Journal of Law and Commerce (Fall 2005/Spring 2006) 107 (122) (Pace). 113 Contrary Pamboukis, The Concept and function of Usages in the United Nations Convention on International Sale of Goods, 25 Journal of Law and Commerce (Fall 2005/Spring 2006) 107 (123–124) (Pace) who alleges that a priority and a relevance rules apply favouring the application of international usages of trade. 114 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 18. 115 But see: Espinosa, Compraventa Internacional (2003), p. 244. 116 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 205; Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 21; Huber/Mullis, The CISG (2007), p. 18; Pamboukis, The Concept and Function of Usages in the United Nations Convention on International Sale of Goods, 25 Journal of Law and Commerce (Fall 2005/Spring 2006) 107 (118 seq.) (Pace). Amtsgericht Duisburg (Germany) 13 April 2000 (pizza boxes), CISG-Online 659 (Pace); Bundesgericht (Switzerland) 13 November 2003 (used textile cleaning machine), CISG-Online 840 (Pace), considering also the proximity to the evidence as a principle to consider when allocating the burden of proof; similarly: Appelationshof Bern (Switzerland) 11 February 2004 (cables), CISG-Online 1191 (Pace); in case of an unclear letter of confirmation, the burden of proof cannot be reversed by assuming the correctness of the letter’s content: Obergericht des Kantons des Basel Landschaft (Switzerland) 5 October 1999 (clothes), CISG-Online 492 (Pace). Contrary, Bonell, in: Bianca/Bonell, Commentary (1987), Art. 9 para. 3.3 (Pace) considering that the procedural law of the forum governs; and Bezirksgericht der Saane (Zivilgericht) (Switzerland) 20 February 1997 (spirits), U. GmbH v D. and Ch. AG, CISG-Online 426 (Pace). 117 Oberlandesgericht Saarbru ¨ cken (Germany) 13 January 1993 (doors), CISG-Online 83 (Pace). 118 Coetzee, pp. 246–247. 119 Bonell, in: Bianca/Bonell, Commentary (1987), Art. 9 para. 3.3 (Pace); Bout, Trade Usages: Article 9 of the Convention on Contracts for the International Sale of Goods (1998), p. 1 (8) (Pace). 120 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 21; Schlechtriem/ Witz, Convention de Vienne sur les Contrats de Vente Internationale de Marchandises (2008), para. 104; Huber/Mullis, The CISG (2007), p. 18. In case law: Oberster Gerichtshof (Austria) 15 October 1998 (wood), CISG-Online 380 (Pace); Oberster Gerichtshof (Austria) 21 March 2000 (cellulose), CISGOnline 645 (Pace); Oberster Gerichtshof (Austria) 31 August 2005 (tantalum powder), CISG-Online 1093 (Pace); Oberster Gerichtshof (Austria) 27 February 2003 (frozen fish), CISG-Online 794 (Pace). UCC § 1– 303(c) (2001), but if the trade usage is embodied in a trade code, the interpretation is a question of law. 121 Oberster Gerichtshof (Austria) 27 February 2003 (frozen fish), CISG-Online 794 (Pace). See Coetzee, p. 246, considering that arbitrators might easily prove the existence of a usage as compared with national judges.

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offered by chambers of commerce or by trade organizations122. Art. 7(1) applies to the interpretation of usages.

6. Extended application of Art. 9 35

Some authors as well as case law have held that Art. 9 also applies to issues in principle outside the scope of application of the Convention, i. e., to issues not governed by the CISG but that are part of the contract, such as venue or arbitration clauses123. This position is justified on several grounds: the interpretation and determination of the content of the contract as a whole, and the fact that Art. 9(3) refers to several issues outside the scope of the CISG124. Although the extent to which arbitration clauses are governed by the CISG125 is contentious, this author agrees with the commented position in the sense that Art. 9 might be applied to issues of the contract outside the scope of the CISG. To this regard, Art. 9 is the model to several other legal instruments confirming its value as a rule generally applied in commercial contracts. Furthermore, other provisions of the CISG extend their application outside the Convention, and finally an extended application of Art. 9 is seen in domestic case law that relies on the CISG as an aid in the interpretation of domestic concepts126.

7. CISG and other instruments as usages of trade 36

Apart from the role that the CISG attributes to both the practices established between the parties and trade usage (Art. 9), some decisions have considered the Convention or certain of its provisions as evidence of existing trade usages127, rules and usages of 122 See: Oberlandesgericht Dresden (Germany) 9 July 1998 (textiles), CISG-Online 559 (Pace), in regard to a contract of sale between a German and a Turkish party considered that in order to prove whether an international usage of trade exists whereby the silence of the addressee of a letter of confirmation amounts to an acceptance, the buyer has to prove it. In the case at hand the buyer has neither explained such an alleged trade usage in detail, nor proven it (as might have been done through evidence given by the International Chamber of Commerce or similar body). Among the scholars: Bout, Trade Usages: Article 9 of the Convention on Contracts for the International Sale of Goods (1998), p. 1 (8) (Pace). 123 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 26; European Court of Justice (as it then was – now CJEU) (EU), 20 February 1997 (a contract for time charter of a vessel) (Pace) in regard to the interpretation of Art. 17 of the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968, and the binding effect of a statement of jurisdiction set out in a commercial letter of confirmation, relying on Art. 9(2) CISG: “the ECJ determined that, in international trade according to Art. 17(1),(2)(c) Brussels Convention, “an agreement on jurisdiction can also be made in such a way that the contractual party does not react to a commercial letter of confirmation set to it by the other party, which contains a pre-printed reference to the jurisdiction, or repeatedly pays invoices containing such a reference without objection” (ibid, para. 25)”. Similarly: European Court of Justice (as it then was – now CJEU) (EU), 16 March 1999 (unidentified goods) (Pace); and Zivilgericht Kanton Basel-Stadt (Switzerland) 3 December 1997 (Bulgarian white uria), F.SA v I. SRL, CISG-Online 346 (Pace). The same solution can be found in the Council (Brussels) Regulation (EC) 44/2001, 22 December 2000 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil Law and Commercial Matters that supersedes the Brussels Convention (Art. 23). 124 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 26 and Art. 8 para. 5, who also considers the fact that Art. 9 is incorporated into EU Law. 125 Cf. infra Art. 11 paras 12–14. 126 Cf. supra Art. 7. 127 Arbitral Award, ICC 5713/1996 (Pace); Arbitral Award, ICC 6149/1996 (clothing) (Pace); Arbitral Award, ICC 8502/1996 (rice), CISG-Online 1295 (Pace), considering also the PICC. See also considering that both CISG and PICC are a proof of the practices admitted in international trade: Arbitral Award, ICC 8502/1996 (rice), CISG-Online 1295 (Pace); Arbitral Award, International Chamber of Commerce and Industry of the Russian Federation, 5 June 1997 (unidentified goods), CISG-Online 1247 (Pace); Arbitral Award, CIETAC, 25 June 1997 (art paper) (Pace) CISG as international trade custom; and Arbitral Award, ICC 9333/1998 (services), CISG-Online 1308 (Pace). In agreement: Audit, The Vienna

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international trade128, international customs129, admitted practices under international trade law130, or as general principles of international commercial practice131. Despite these general references in the case law that seem to implicate a complete identity between the lex mercatoria or the usages of trade and the CISG, there is a partial application of some of the rules of the CISG to a given case as some of them are understood to reflect usages of trade. The same consideration applies to the PICC and PECL when they have been considered as a reflection of international trade usages. When the PICC/PECL reflect usages of trade in the sense of Arts 8(3) and 9(2)132 or when a judge or arbitrator considers that in the interpretation and gap-filing of the CISG regard is to be had to international usages of trade or to the lex mercatoria133, the PICC and PECL may play a significant role within the CISG134. In case of conflict, PICC should be preferred over PECL. Another interesting issue is whether Incoterms, should be considered usages of trade 37 under Art. 9(2), i. e., whenever one of the parties uses the three letter trade term but with no reference to Incoterms. First, there is an important interplay between the CISG and international commer- 38 cial terms in regard to delivery, passing of risk and payment. Even where the parties have not expressly agreed on an application of the Incoterms to a used three letter acronym, courts have considered that the interpretation of that agreed term should rely on the terms codified by the ICC Incoterms and the CISG (Art. 8(3))135. In this Sales Convention and the Lex Mercatoria, in: Carbonneau (ed.), Lex Mercatoria and Arbitration (1998), p. 173 (174) (Pace) considering the CISG as and expression of international mercantile customs. 128 Arbitral Award, ICC 6281/1989 (steel bars) (Pace); and Arbitral Award, ICC 8453/1995 (machine for medical use), CISG-Online 1275 (Pace). See Illescas Ortiz/Perales Viscasillas, Derecho Mercantil Internacional (2003), pp. 111–113. 129 Tribunal de Justiça do Rio Grande do Sul (Brasil) 14 February 2017 (frozen chicken legs), (cisgspanish.com); and Tribunal de Justiça do Rio Grande do Sul (Brasil) 30 March 2017 (electric motors) (cisgspanish.com), justifying this application of the CISG in the light of public international law due to the worldwide consistency and regularity of its application. The Court also applied PICC as lex mercatoria. 130 Arbitral Award, ICC 8502/1996 (rice), CISG-Online 1295 (Pace) referring both to CISG and PICC. 131 Arbitral Award, ICC 7331/1994 (cowhides), CISG-Online 106 (Pace). 132 See Arbitral Award, International Chamber of Commerce and Industry of the Russian Federation, 5 June 1997 (unidentified goods), CISG-Online 1247 (Pace), in a transaction in which CISG was applicable, basing their decision on the PICC Preamble, the Tribunal resorted to Art. 7.4.13(2) PICC, but it also held that recourse to the PICC was justified as well on the basis of Art. 9(2) CISG. The application of PICC as usages of trade (Art. 9) is considered among others by Huber/Mullis, The CISG (2007), pp. 20 and 36 on a case-by-case basis. The PICC are generally considered a usage of trade: Pamboukis, The Concept and function of Usages in the United Nations Convention on International Sale of Goods, 25 Journal of Law and Commerce (Fall 2005/Spring 2006) 107 (129 seq.) (Pace). 133 Ramberg, International Commercial Transactions (1997), p. 20: “Gap-filling of international commercial contracts may be achieved by the application of the so-called lex mercatoria or, in other words, the law merchant”, and considering at the time of his writing that it was premature to regard the PICC and PECL as generally accepted lex mercatoria; Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 204; and Similarly: Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9, para 27 in regard to Incoterms, UCP 600 and PICC and also pointing out that they are interpretation material to be considered under Art. 8(3) CISG. 134 See Perales Viscasillas, The Role of the UNIDROIT Principles and the PECL in the interpretation and gap-filling of CISG, in: Janssen/Meyer (eds), Methodology of the CISG (2009). 135 See Perales Viscasillas, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 259. Further: Juzgado de Primera Instancia en lo Comercial No. 26 (Argentina) 2 July 2003 (credit) (Pace) (www.cisgspanish.com): FOB agreed in the contract interpreted in conformity with Incoterms and Art. 9 CISG; Bezirksgericht der Saane (Zivilgericht) (Switzerland) 20 February 1997 (spanish), U. GmbH v D. and Ch. AG, CISG-Online 426 (CLOUT 261) interpreting “CIF Moscow” in accordance with Incoterms (1990); High Arbitration Court (or Presidium of Supreme Arbitration Court) of the Russian Federation (Russia) 25 December 1996 (medical goods) (Pace); Tribunal cantonal Valais (Switzerland) 28 January 2009

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regard, Art. 8(2) will be useful136, and with similar effect Arts 9(3) ULIS and 13(2) ULF137. Second, the use of those terms does not entirely displace the CISG rules on the passing of the risk, as it is only a partial exclusion of the CISG (Art. 6). Third, generally speaking, reference in the contract to a term codified by the ICC should be made to Art. 9(1) (agreed usage) and not to Art. 9(2) (normative usages, i. e. usages that have the force of law), unless it can be proved that the agreed term fulfils the requirements of Art. 9(2). This might be the case in regard to the most frequently used terms: CIF and FOB clauses138 unles the parties have adopted a different understanding through a practice139. As a consequence, the fact that certain trade terms are codified does not mean that they are to be considered usages of trade, but may become usages140.

(fiberglass composite materials), CISG-Online 2025 (Pace), relying also on Art. 9(1) CISG. Also: Principle No. IV.4.6 (Central at http://www.tldb.net). But see: Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 203. A minority view considers that trade terms are excluded from the Convention itself (Eo¨rsi, General Provisions, in: International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), pp. 2–25). 136 Bonell, in: Bianca/Bonell, Commentary (1987), Art. 9 para. 3.5 (Pace) resorts to Art. 8(2) to interpret the commercial terms included in the contract; and Schlechtriem, Uniform Sales Law (1986), p. 42 (Pace). 137 “Where expressions, provisions or forms of contract commonly used in commercial practice are employed, they shall be interpreted according to the meaning usually given to them in the trade concerned”. It was considered that it was necessary to have this provision since there is a difference between the usages covered by Art. 9 and the interpretation of trade terms such as FOB and CIF in respect of which several interpretations exist. However a contrary view was expressed in the sense that there was no need to keep it since it was already covered by Art. 9 or by Art. 8. See Honnold, Documentary History (1989), pp. 324, 489, 661. 138 U.S. District Court for the Southern District of New York (U.S.) 26 March 2002 (magnetic resonance imaging system (“MRI”)), St. Paul Guardian Insurance Co., et al. v Neuromed Medical System & Support, et al, CISG-Online 615 (Pace); and critic to the decision: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 203; and Bridge, The International Sale of Goods. Law and Practice 2007, para. 11.50. See also: U.S. Federal District Court of Texas (U.S.) 7 February 2006 (explosive boosters), China North Chemical Industries Corporation v Beston Chemical Corporation, CISG-Online 1177 (Pace); Bankruptcy Court for the Eastern District of Pennsylvania (U.S.) 18 June 2014 (unidentified goods) (decision affirmed by the U.S. District Court for the Eastern District of Pennsylvania, United States, 19 January 2016 (2016 WL 215229)) 511 B.R. 738 (CLOUT 1639); Juzgado Nacional de Primera Instancia (Argentina) 20 May 1991 (unidentified goods) (Pace); Juzgado de Primera Instancia en lo Comercial (Argentina) 6 October 1994 (looms) (Pace); Tribunal cantonal Valais (Switzerland) 28 January 2009 (fiberglass composite materials) (Pace); Federal District Court [New York] (U.S.) 28 September 2011 (liquid phenol), Cedar Petrochemicals inc. v Dongbu Hannong Chemical Ltd., CISG-Online 2338 (Pace). Considering that Incoterms are usages of trade in the sense of Art. 9(2) Pamboukis, The Concept and function of Usages in the United Nations Convention on International Sale of Goods, 25 Journal of Law and Commerce (Fall 2005/Spring 2006) 107 (127 seq.) (Pace). Also generally referring to Incoterms (1990): Arbitral Award, CIETAC, 25 June 1997 (art paper) (Pace), or to Incoterms (2000) but unclear as to whether interpretative usages (Art. 8(3)) but not normative usage (Art. 9(2)) is considered: Arbitral Award, Tribunal of International Commercial Arbitrationat the Russian Federation Chamber of Commerce and Industry, 13 April 2006 (unidentified goods), CISG-Online 1944 (Pace). 139 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 9 para. 27. 140 Bonell, in: Bianca/Bonell, Commentary (1987), Art. 9 para. 3.2 (Pace), referring to “the conscious creation of usages”. See also: Piltz, Internationales Kaufrecht (2008), paras 2–197; and Witz/Salger/Lorenz, Kommentar (2000), Art. 9 paras 14 and 19. See considering that those cases overstate the authority of the Incoterms definitions under the Convention: Honnold, Uniform Law (2009) para. 118.

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III. Comparable Rules Art. 9 CISG reflects general principles of international commercial contracts as well 39 as domestic commercial contracts. Art. 9 has been reflected in the PICC as well as in other international instruments141. Art. 1.9 PICC follows to a great extent Art. 9 CISG142 but has sensibly improved on 40 the drafting of Art. 9(2) CISG. This improvement consists of the total recognition of the international usage. This recognition is due, first, to the suppression of the reference that the parties knew or ought to have known of that usage, and, secondly, to the suppression of the reference that it is presumed that the application of the international usage is derived from a tacit incorporation of it into the contract. Accordingly, unlike Art. 9(2) CISG where the recognition of international usage is obscured by its tacit application, the PICC are clearer when recognizing international usage without any further conditions143. PECL and DCFR depart from the PICC: “The parties are bound by a usage which would be considered generally applicable by persons in the same situation as the parties” (Art. 1.105(2) PICC and Art. II.-1:104 (2) DCFR). The departure is logical considering the different scope of application and thus the PECL have simply “de-commercialized” the trade usages in CISG and PECL144. Finally, the PICC prevent the application of the international usage when it is not reasonable145. 141 Paragraph 1 of Art. 1.9 PICC, Art. 1.105 (1) PECL and Art. II.-1:104 (1) DCFR are identical to Art. 9(1) CISG. See also: Principle of the Lex Mercatoria I.3 (Central at www.tldb.net) almost identical to Art. 9(2) CISG. Follows Art. 9 CISG: Art. 207 OHADA Uniform Act Relating to General Commercial Law (commercial sale, 1 January 1998); Art. 23.1(c); Council Regulation (EC) 44/2001 of 22 December 2000; and Art. 11(2) and 3 of The United Nations Convention on the Assignment of Receivables in International Trade (2005). 142 For a comparison of PICC/PECL with the CISG see Oviedo Alba ´ n, Usages and Practices: Editorial Remarks on the manner in which the UNIDROIT Principles may be used to interpret or supplement CISG Art. 9, 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) p. 51 (51 seq.) (Pace); and Carlsen, Usages and Practices: Editorial Remarks on the manner in which the PECL may be used to interpret or supplement CISG Art. 9, 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), p. 277 (277 seq.). 143 Bonell, Restatement (2005), p. 99. 144 Cf. Berger, The Creeping Codification of the Lex Mercatoria (1999), p. 205. 145 Art. 1.105 (2) PECL and Art. II.-1:104 (1) DCFR. See also: Bonell, Restatement (2005), pp. 306–307.

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Article 10 For the purposes of this Convention:

(a) if a party has more than one place of business, the place of business is that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract; (b) if a party does not have a place of business, reference is to be made to his habitual residence. Bibliography. Butler, Place of business: Comparison between the provisions of CISG Article 10 and the counterpart provisions of UNIDROIT Principles Article 1.10, 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); Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (CISG) (OUP 2016).

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Autonomous versus domestic meaning of “place of business” . . . . . . . . . . . . 2. Essential elements of the term “place of business” . . . . . . . . . . . . . . . . . . . . . . . . . a) Permanence or stability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Ability to conduct business autonomously or independently . . . . . . . . . . 3. Place of business that has the “closest relationship to the contract and its performance” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Crucial factors for the determination of “the place of business that has the closest to the contract relationship” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. “Having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract” . . . . . . . . . . 6. Art. 10(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 9 9 13 14 17 23 32 38 40 43

I. Importance and Role of the Provision It is not unusual for commercial corporations to maintain and operate through various places of business situated in different places or different states. When this happens, Art. 10 will apply to determine which one of the several places of business will be relevant for the purposes of the Convention. In that sense, Art. 10 is an ancillary provision, used in order to ensure the proper application of other provisions in the CISG, which can only apply on the basis of a single place of business. 2 Art. 10 has not attracted extensive scholarly writing. It has not often been cited in court decisions or arbitral awards either. Nevertheless, the provision is of important relevance to the international character and scope of application of the Convention.1 Indeed, Art. 1 provides that for the Convention to apply the parties must have their places of business in different states. Thus, Art. 10 is particularly important when at least one of the several places of business of a party is situated either in the same state as the place of business of the other party or even in a non-Contracting State.2 In such cases, Art. 10 may well 1

1 2

See Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 26. Kritzer/Vanto/Vanto/Eiselen, International Contract Manual, Vol. 4, No. 3 paras 85–144.

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determine that the relevant places of business of both parties are situated in the same state (or in non-Contracting States), in which case the Convention would not apply. Art. 10 also has relevance to other CISG provisions: – To Art. 20(2) in order to ascertain the relevant place of business of the offeror, which is crucial to determine the extension of a fixed period of time for the acceptance of the offer. – To Art. 24 in order to ascertain the relevant place of business of the addressee, which is the crucial place where an offer and declaration of acceptance must reach him. – To Arts 94 and 96 in order to determine whether one or more Contracting State(s) may declare that the Convention or Parts of it will not apply in specific circumstances. – To a number of articles referring to important contractual duties of the parties. More specifically, for Art. 31(3) in order to ascertain the place of delivery of the goods; Art. 42(1)(b) in order to ascertain the law under which we will determine whether the seller has delivered goods free from rights or claims of a third party; Art. 57 in order to ascertain the place where the buyer must pay the price to the seller.3 Art. 10 comprises two paragraphs; however, the gravity of the provision is found in paragraph (a), which lays down the applicable legal rule, i. e. when a party is associated with more than one possible place, the one that should be taken into account for the purposes of the CISG is the one “which has the closest relationship to the contract and its performance”. The same legal rule is implicitly repeated in paragraph (b), the only difference being that the “place of business” is substituted by “habitual residence” as the crucial point of reference for a party. Thus, in essence paragraph (b) is a legal variation or alternative of the legal rule set out in paragraph (a).

3 4

5 6 7

8

II. Detailed Commentary 1. Autonomous versus domestic meaning of “place of business” Despite the fact that it is mentioned in several CISG provisions, the term “place of 9 business” is not given a definition in the Convention.4 Naturally, thus, a question arises as to which standards should apply to determine the “place of business” for the purposes of Art. 10(a) and the Convention more generally. Specifically, a question arises as to whether the term “place of business” should be defined by reference to domestic law or should be given an autonomous interpretation by reference to Art. 7? The prevailing view seems to be that for the purposes of the Convention5 the term 10 “place of business” should be given an autonomous meaning in accordance with the international character of the Convention.6 3 The term place of business is also mentioned in Art. 69, but here it seems that it is not necessary to determine the relevant place of business under Art. 10, see Secretariat Commentary on 1978 Draft, Art. 9 (now Art. 10) para. 5; see also Kritzer/Vanto/Vanto/Eiselen,Kritzer/Vanto/Vanto/Eiselen, International Contract Manual, Vol. 4, No. 3 paras 85–51. 4 Ferrari notes that the CISG does not include a definition of the term “place of business” due to the lack of meaning with general acceptance, or at least acceptance to the delegates to the Vienna Diplomatic Conference. Thus the meaning will be usually defined on a case-by-case basis: see Ferrari, in: Ferrari/ Flechtner/Brand, Draft Digest and Beyond (2003), p. 26. 5 By contrast, for purposes that go beyond the Convention – say for example to determine the place of business for establishing jurisdiction or for tax purposes – the term “place of business” will be determined by reference to domestic law Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), footnote 8. 6 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 10 para. 2; also Kritzer/ Vanto/Vanto/Eiselen, in Kritzer/Vanto/Vanto/Eiselen, International Contract Manual, Vol. 4, No. 3 paras, 85–53. See also Kantonsgericht Wallis (Switzerland) 23 May 2006, CISG-Online 1532 (Pace) para. 3: “The

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Part I. Sphere of Application and General Provisions

Indeed, the prevailing view must be accepted as the right one, considering in particular the impact of the term “place of business” on the scope of application of the Convention by virtue of Arts 1 and 10.7 Allowing national courts to interpret the term by reference to divergent domestic standards would undermine uniformity and predictability in the application of the Convention. 12 For example, a seller conducts business through branches in states A and B, whereas the buyer only operates in state A. If domestic standards applied to determine whether the seller’s braches in states A and B qualify as “place of business” for the purposes of the Convention, there could be no uniform or in abstracto predictable answer as to whether the Convention would apply to the contract. Indeed, it could well be that in accordance with the standards of state X both states A and B would qualify as “place of business”, in which case Art. 10 would apply, leading most likely to the application of the Convention.8 However, it could also be that in accordance with the standards of state Y only state A would qualify as “place of business”, in which case Art. 10 and, necessarily, the Convention would be inapplicable.9 11

2. Essential elements of the term “place of business” 13

Adopting an autonomous interpretation of the term “place of business” requires us to identify the essential elements of its meaning.10 A review of the relevant case law and scholarly writing reveals that there are two requirements for a company’s branch to qualify as a “place of business” under the Convention: first, permanence or stability; second, ability to conduct business autonomously or independently.

14

a) Permanence or stability11. A stable business connection must exist between a corporation and a particular state. The issue of stability of a “place of business” was discussed in detail in the preparation of the Convention. In particular, it was feared that the term “place of business” was unduly wide, and that it might include a temporary place, used by a travelling agent to negotiate and conclude a contract.12 Accordingly, it was suggested that the word “permanent” be added before the term “place of business”, in order to narrow down its meaning. In the end, it was rightly concluded that there was notion of ‘e´tablissement’ is not defined by the CISG, but a uniform legal interpretation has developed: it is sufficient if an organisation of certain constancy and determined commercial activity exists, which can be distinguished from the market stands or store-rooms for goods.” 7 Schlechtriem, in the 2005 edition of Schlechtriem/Schwenzer, Commentary (2005), Art. 10 para. 4 even mentioned that “the courts exhibit a tendency to find the relevant places of business in different states in order to apply the Convention”. This is not to argue though that courts will hesitate to apply Art. 10(1) in a way that would exclude the application of the Convention: see for example the case in Superior Court of Massachusetts (U.S.) 28 February 2005, Vision Systems, Inc. v EMC Corporation, CISGOnline 1005 (Pace) (discussed infra 4). 8 It was additionally held that State B was the place of business which has the closest relationship to the specific contract and its performance. 9 In this case, the “place of business” of both the seller and the buyer would be in the same state A. 10 Although, it should be noted that whether the requirements of the definition are met will have to be assessed on a case-by-case analysis. See Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 26. 11 See Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 27; Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 10 para. 2. Cf. the Kantonsgericht Wallis (Switzerland) 19 August 2003, CISG-Online 895 (Pace) para. 3: “The concept of ‘establishment’ is not defined by the Convention but a uniform judicial interpretation clarifies this: It suffices that there exists an organization of certain continuance and having certain stands in trade fairs or depots for goods.” 12 See Records 1980 United Nations Conference on Contracts for the International Sale of Goods, Analysis of Comments and Proposals: (Comment by ICC), Honnold, Documentary History (1989), p. 394. See also Honnold, Uniform Law (1999), para. 124.

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no need to alter the wording of Art. 10(a) (as is now found in the Convention), as temporary sojourns would never qualify as a “place of business” in the first place.13 As was noted, the terms “e´tablissement” and “establecimiento” used in French and Spanish respectively (also official languages of the Convention) would not extend to a temporary place of business. Thus, it is generally accepted14 that a hotel room or an exhibition centre or any other 15 transitory place used by a corporation to conduct business in view of a particular contract would not qualify, at least for the purposes of the Convention, as a “place of business.”15 This must also be accepted even when a party uses the same place every year (or for a series of years), albeit for a short period of time; for example, a party that has the same place in an annual exhibition centre and has even secured this place for some years in the future. In this case, the place might be described as periodical (at most), but not as permanent. The same applies for the location of a company’s server for contracts concluded via the Internet.16 Indeed, the correct meaning of the term – at least for the purposes of the Convention – 16 becomes clear when the term is read together with the phrase “which has the closest relationship to the contract and its performance” found in Art. 10(a). The reference to the “performance” of the contract, in particular, indicates that the term “place of business” refers to a place of permanent and regular business.17 b) Ability to conduct business autonomously or independently18. The important 17 question for this requirement is whether the branch has the “business set up” required to largely effect transactions with third parties autonomously of the company’s central place of administration or the other branches of the company. This will normally require the branch to have a corporate status of its own. Thus, it was held that a business liaison office of a German company, which was registered at the trade registry of Cre´teil (France) did “not have a corporate status of its own,” as it was “simply a commercial office set up in France by the German-regulated company Fujitsu and therefore it did not qualify as a “place of business.”19 While the necessary degree of autonomy will depend on the factual circumstances, it 18 can safely be argued that complete autonomy will not normally be required. Indeed, a branch or an establishment of a corporation must retain a certain amount of business links with that corporation so that it is considered part of its business operation. For 13 As was noted the terms “e ´tablissement” and “establecimiento” used in French and Spanish respectively, which are also official languages of the Convention, would not extend to a “temporary place”. 14 See Honnold, Uniform Law (1999), para. 124; and Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 27. 15 See also Kantonsgericht Wallis (Switzerland) 23 May 2006, CISG-Online 1532 (Pace) para. 3: “The notion of ‘e´tablissement’ is not defined by the CISG, but a uniform legal interpretation has developed: it is sufficient if an organisation of certain constancy and determined commercial activity exists, which can be distinguished form the market stands or store-rooms for goods.” 16 Schlechtriem/Schwenzer, Commentary (2016), Art. 10 para. 2. 17 Cf. Honnold, Uniform Law (1999), para. 124, who also arrives at the same conclusion by reference to the use of the term “place of business” in the context of Arts 24, 31(c), 42(b) and 69(2). 18 See Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 26. Cf. also Oberlandesgericht Graz (Austria) 29 July 2004, CISG-Online (Pace) 1627 para. 1: “the term place of business must be broadly interpreted but does not constitute a technical legal tem. It refers to any place from which participation in commercial transactions with third parties takes place with a certain autonomy. It is not necessary to have the epicentre of commercial activity or the seat of the business management at that place.” 19 Cour de Cassation (France) 4 January 1995, CISG-Online 138 (Pace). See also Oberlandesgericht Graz (Austria) 29 July 2004, CISG-Online 1627 (Pace) para. 1 “The ‘place of business’ merely requires to execute a minimum of actual functions within the business of the company concerned. Only mere ancillary functions will not qualify to establish a place of business.” (emphasis added).

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Part I. Sphere of Application and General Provisions

example, a branch would qualify as a place of business under Art. 10(a) when it has the business ability to negotiate and then perform a contract with a third party, even if the contract would first require approval by the central place of business. It should be kept in mind that the Convention in Art. 10(a) has consciously not opted for the criterion of the “central administration”. Thus, even peripheral branches, which retain an operational autonomy, will qualify as “place of business”. On the other hand, the fact that there must be a business relationship between a branch and a corporation does not mean that the branch has to be part of a specific group of companies or corporations. No parent-subsidiary relationship is required between the branch and the corporation. Even legal entities that are not part of a group of companies can qualify as a “place of business” of a corporation.20 The converse also applies: the fact that two companies have a parent-subsidiary affiliation does not necessarily mean that the subsidiary would not qualify as a place of business under Art. 10(a) due to lack of “autonomy or independence”. Indeed, courts have held that different companies of the same group would establish different “places of business” of a single party under Art. 10(a).21 This view is in line with the “group of companies” theory, rather than the principle of “separate legal personality” and it is in fact closer to commercial reality. What seems to be crucial here is not whether two or more branches belong to a single entity, in strict legal terms, but whether two or more branches (or a branch and a principal) have such close business and operational links that they can reasonably be taken as belonging to a single group entity. Commercial reality is important here; not formalities concerning the legal personality of the subsidiary. Thus, if one company operates through a branch in a different place, this place can be taken into account under Art. 10(a) if the two requirements above are met, and irrespective of whether the “branch” has a separate legal personality or not.22 An issue arises as to whether a person or a company, acting as an agent of another company based in a different place, may qualify as a “place of business” of the second company. It seems that the answer here would be negative: a person or a company acting as a (disclosed) agent of another legal entity acts in the name and on behalf of the principal, and thus it could not meet the requirement of independence and autonomous business activity. This was the approach taken by German courts,23 in a case where the buyer had his place of business in Germany and the seller had his place of business in Italy, but the contract was negotiated on seller’s behalf by another company in 20 Indeed, courts have accepted that two companies that had no parent-subsidiary relationship and that were based in different places qualified as different “places of business” under Art. 10; see Rechtbank van Koophandel, Hasselt (Belgium) 2 June 1999, CISG-Online 762 (Pace) and Bezirksgericht der Saane (Switzerland) 20 February 1997, CISG-Online 426 (Pace). 21 This was the case in Federal District Court of California (U.S.) 2 November 2005, McDowell Valley Vineyards, Inc. v Sabate´ USA Inc. et al., CISG-Online 1416 (Pace), where it was held that the U.S. subsidiary of the French Sabate´ company did qualify as a “place of business” under Art. 10. Similarly, Superior Court of Massachusetts (U.S.) 28 February 2005, Vision Systems, Inc. v EMC Corporation, CISGOnline 1005 (Pace). 22 The same approach is taken under the European Council Reg. 44/2001 “On Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters” for jurisdictional purposes. Here, also commercial reality is the crucial factor. Thus, the Court of Justice of the EU (European Court of Justice, as it then was) has held that for the purposes of Reg. 44/2001 Art. 5(5) a company with separate legal personality would qualify as a “branch or agency” of another company legally established in a different country; see for example C-218/86 SAR Schotte v Parfums Rothschild [1987] ECR 819 (ECLI:EU:C:1987:536); C-439/93 Lloyd’s Register of Shipping v Soc Campenon Bernard [1995] ECR I-961 (ECLI:EU:C:1995:104). 23 See the decision of Oberlandesgericht Ko ¨ ln (Germany) 13 November 2000, CISG-Online 657 (Pace).

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Germany.24 It was held that the person who negotiated with the buyer was the seller’s commercial agent rather than an independent merchant. Therefore, it could not qualify as the manager of a German place of business of the seller.25

3. Place of business that has the “closest relationship to the contract and its performance” The aim of Art. 10(a) is to ascertain the relevant place of business out of the several business places of a party in view of a particular contract. The determination of the specific place of business of a corporation, by reference to Art. 10(a), will not have other legal repercussions for that corporation. For example, it cannot be used to determine the nationality of a corporation with business places in several states. It will only be an oneoff determination of a place of business that is relevant to the specific contract, and in view of the factual circumstances of the negotiation and the performance of the specific contract. It might well be that a different place of business of the same corporation will be designated with regard to a different contract. Exactly because the purpose of the provision is to designate a place of business for a contract, the criterion adopted by Art. 10(a) is the “closest relationship to the contract and its performance”.26 This is despite the fact that the original view of the drafters was to adopt the criterion of the “principal place of business.”27 Thus, the current provision is contract oriented rather than party oriented: the particulars of the contract at hand should be taken into account rather than the operational centre of the corporation that is party to the contract. One could argue that the criterion of the “central place of business” would be preferable to the ‘closest relationship’ criterion in order to enhance predictability, as corporations typically have a single central place of business, which is easy to ascertain. However, it would be artificial to determine whether the Convention would be applicable to a contract on the basis of a business place that had a limited, or no role at all, in the negotiation and the performance of the specific contract even if that place was the central place of business of the corporation. By contrast, the criterion of “the closest to the contract” place of business allows the Convention to follow commercial reality, and apply only to contracts that have actually been concluded and performed in different places. Thus, in view of the international character of the Convention the approach adopted by Art. 10(a) must be considered the right one. 24 Note, though, that Italy seemed to be the most relevant place of business, anyway, as the buyer directed all correspondence after the negotiation and conclusion of the contract directly to the seller in Italy, and the defective goods were transported back to Italy. 25 However, see the U.S. District Court of California, San Jose Division (U.S.) 27 July 2001, Asante Techs., Inc. v PMC-Sierra, Inc., CISG-Online 616 (Pace), where a U.S. company was acting as a nonexclusive distributor of the seller that had its central place of business in Canada. The buyer argued that the distributor acted as a U.S. agent of the seller, so that the US should be held as the relevant “place of business” for the purposes of the particular contract. The court rejected the assertion of the buyer noting that the U.S. company was merely a distributor of the goods manufactured by the seller rather than an agent, and thus the U.S. could not be established as a seller’s place of business. However, this reasoning might create the misleading impression that if the distributor were acting as a U.S. agent of the seller, the U.S. could be considered as a place of business of the seller. 26 The same criterion is used in Art. 1.11 PICC. 27 It seems that the original view of the drafters of the CISG was to adopt the criterion of the “principal place of business” where the following provision was suggested: “where a party has places of business in more than one State, his place of business shall be his principal place of business…” see UNICTRAL YB (1971), p. 52; see also Rajski, in: Bianca/Bonell, Commentary (1987), pp. 116–117; cf. Records 1980 United Nations Conference on Contracts for the International Sale of Goods, Analysis of Comments and Proposals: (Comment by ICC), Honnold, Documentary History (1989), p. 394.

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Part I. Sphere of Application and General Provisions

Yet, this is not a solution without problems. In particular, an issue arises with the twin references in Art. 10(a) to both the contract and its performance as pertinent factors to determine the relevant place of business. The question in particular is which one of the above factors will prevail to determine the relevant place of business if the contract is concluded in one place and performed in another. 29 Here, one should first examine whether the parties have specifically agreed on a particular place of business or whether there is an established practice or usage binding upon the parties.28 30 If no such arrangement or established practice or usage exists between the parties, the wording of Art. 10(a) (“which has the closest relationship to the contract and its performance” emphasis added) would suggest that preference should be given to the place of the performance over the place of the conclusion of the contract.29 Indeed, the provision singles “performance” out of other possible relevant factors related to a contract, such as negotiation, conclusion, termination.30 31 However, if the place of performance of the contract was not known to either party at the time when the contract was concluded, the place of conclusion of the contract will be the relevant place, instead of the place of performance. The latter will have to be disqualified because of the wording of the provision itself: “having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract”. The place where the contract has been concluded will always be known to the parties.31 28

4. Crucial factors for the determination of “the place of business that has the closest to the contract relationship” Different factors may be crucial for courts and tribunals to determine which is “the place of business that has the closest (relationship?) to the contract relationship”. 33 Some courts have given particular emphasis on the place where the contract representations came from. This was the criterion applied by the U.S. courts in Asante Techs Inc. v PMC-Sierra Inc.32 In this case, the buyer was based in California (U.S.), whereas the seller had his corporate headquarters, marketing office, public relations department, principal warehouse, and most of his design and engineering functions in Canada. The seller’s products were sold in California through an authorized, nonexclusive distributor of the seller’s products in North America. In the particular transaction, four out of the five purchase orders were submitted to the seller through the Californian distributor whereas only one purchase order was directly submitted to 32

28

Schwenzer/Fountoulakis, International Sales Law (2007), Art. 10 p. 106. Same Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 31; this is also supported by the Official Comments to the UNIDROIT Principles, 2004 edition which in 1.11 set out the same provision as CISG Art. 10(1), available at 1.11.2 http://www.unilex.info/dynasite.cfm?dssid=2377&dsmid=13 637. 30 Cf. Schlechtriem/Schwenzer, Commentary (2016), Art. 10 para. 6, who adopt the view favouring the place of business which has the most power to exert influence upon the contractual relationship, acknowledging that this place will often coincide with the principal place of business. This view may be difficult to reconcile with the letter and legislative history of Art. 10 expressly rejecting the principal place of business for the purposes of the provision (see para. 24 above). 31 See Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 30; same, Butler, Place of business: Comparison between the provisions of CISG Article 10 and the counterpart provisions of UNIDROIT Principles Article 1.10, 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), p. 61. 32 U.S. District Court of California, San Jose Division (U.S.) 27 July 2001, Asante Techs., Inc. v PMCSierra, Inc., CISG-Online 616 (Pace). 29

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the seller in Canada. Nevertheless, the court put emphasis on the representations regarding contractual technical specifications, which eventually were not satisfied by the delivered goods. The court noted that these representations, the breach of which constituted the buyer’s claim, came from Canada and therefore it concluded that the seller’s place of business with the closest relationship to the contract and its performance was Canada, which lead to the application of the CISG.33 In other instances, courts have put more emphasis on the place where the price quotations came from, especially when this was the same place where the purchase orders were submitted, even if the delivered goods were developed and manufactured at a different place. For example, in Vision Systems, Inc. v EMC Corporation,34 the buyer, whose place of business was in Massachusetts (U.S.), negotiated the contract with a representative from a U.S. subsidiary of a multinational company. The buyer also discussed technical details with an engineer at the U.S. subsidiary and he finally sent purchase orders to the U.S. subsidiary. An Australian subsidiary of the multinational company carried out all the research, development and manufacture of the units sold. It was held that the relevant place of business for the purposes of CISG was the U.S. In particular, the court found that the “centre of gravity of circumstances” was Massachusetts, as first, it was the U.S. subsidiary that made the price quotations; second, the quotations referred to delivery FOB Massachusetts; and third, all the buyer’s orders were submitted to the U.S. subsidiary. Other factors may also come into play when courts and tribunals determine the relevant place of business under Art. 10(a). For example, in the Isocab France v E. C. B. S.35 case, the Belgian courts relied on the language of the contract to ascertain the relevant place of business. The buyer had two places of business, one in the U.S. and another in Belgium, and the court held that it was the Belgian establishment that had the closest relationship to the contract since the invoice was addressed to it, in Dutch (one of the official Belgian languages). In the final award of the National and International Arbitration Chamber of Milan, 28 September 2001,36 the seller had two places of business, one in Moscow and one in Nicosia. The tribunal applied Art. 10(a) and held that the Moscow was the relevant place of business, as the contract was signed in Russia, all the correspondence between the buyer and the seller came by and from the Moscow office and the goods were shipped from Russia and loaded aboard Russian ships. By contrast, Nicosia (Cyprus), which was the place of seller’s incorporation, was essentially an accounting and payment centre only.

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5. “Having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract” Only those factors, which both parties were aware of at any time before or at the 38 conclusion of the contract, can be taken into account for the determination of the 33 The same criterion was relied upon in Federal District Court of California (U.S.) 2 November 2005, McDowell Valley Vineyards, Inc. v Sabate´ USA Inc. et al., CISG-Online 1416 (Pace). Here, the buyer had its place of business in the U.S., whereas seller had two different places of business: one in California (U.S.) and another in France. The court referred to the Asante case, noting that the key criterion to determine the relevant place of business was “where did the representations about the product came from”. In the particular case the court found that the representations came largely if not entirely from the California company, since all the seller’s advertising literature and letters proposing the sale of the product were printed on a letterhead of the U.S. branch of the seller, stating a California address and telephone number. 34 Superior Court of Massachusetts (U.SA.) 28 February 2005, CISG-Online 1005 (Pace). 35 Rechtbank van Koophandel, Hasselt (Belgium) 02 June 1999, CISG-Online 762 (Pace). 36 Arbitral Award, Chamber of National and International Arbitration of Milan, 28 September 2001, CISG-Online 1582 (Pace).

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Part I. Sphere of Application and General Provisions

relevant place of business. The purpose of this requirement is to exclude unilateral knowledge of one party regarding matters of its internal organisation, which the other party could never have knowledge of. Thus, for example, if one party, in accordance with the internal allocation of power within its organisation, maintains a place of business with an important role on the performance of the contract, this place will be irrelevant under Art. 10(a), unless the importance of this place was apparent to the other party before or at the conclusion of the contract.37 39 Also, the above reference to “the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract” may apply to disqualify places used by an agent of an undisclosed principal. Thus, the place of business of the undisclosed principal will normally not be taken into account under Art. 10, as this will not be known to the other party before or at the conclusion of the contract.38

6. Art. 10(b) In case a party has no place of business, its habitual residence will be taken into account. Although it is unlikely that commercial parties to international sales transactions have no place of business, Art. 10(b) was included to avoid a void in the application of the Convention in the rare case where a party lacks a place of business.39 41 The term “habitual residence” is not defined in the Convention. Again here, as with the term “place of business” above, the prevailing view is that “habitual residence” must be given an autonomous interpretation in accordance with Art. 7(1). As the term is often used in domestic legislation, we would need to avoid discrepancy by excluding domestic standards to apply to define habitual residence.40 42 What constitutes habitual residence will have to be determined in a case-by-case basis, taking in view the particular factual circumstances. However, it is accepted that, whereas intention would not always be relevant, residence must be for a certain period of time,41 if not for a long period of time.42 40

III. Comparable Rules 43

The PICC and PECL contain an identical provision to that of Art. 10(a). In particular, Art. 1.11 PICC and Art. 2.106(2) PECL provide, inter alia, that “where a party has more than one place of business the relevant ‘place of business’ is that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract”. In addition, Art. 2.106(3) PECL contains an identical provision to that of Art. 10(b) providing that “[i]f a party does not have a place of business his habitual residence is to be treated as his place of business.” 37 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 10 para. 9; cf. also Secretariat Commentary on 1978 Draft, Art. 9 (now Art. 10) para. 8, which refers to the example of a head office located in another state, which supervises the making of the contract. 38 Cf. Honnold, Honnold, Uniform Law (1999), para. 41; however, Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 10 para. 4, argues that it does not matter whether a disclosed or an undisclosed agent exists, as the business place of an agent acting for one of the parties would usually not constitute an independent place of business of that party, as it is the party itself that normally has the closest relationship to the contract and its performance. 39 Honnold, Uniform Law (1999), para. 125; courts have only exceptionally referred to Art. 10(b); see for example, Landgericht Hamburg (Germany) 26 September 1990, CISG-Online 21 (Pace). 40 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 10 para. 11. 41 Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 10 para. 11. 42 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 31.

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Article 11 A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses. Bibliography: Flechtner, Addressing Parol Evidence Issues in Contracts Governed by the CISG, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 329; Schlechtriem, Opting out of Merger and Form Clauses Under the CISG – Second thoughts on TeeVee Toons, Inc. & Steve Gottlieb, Inc. v Gerhard Schubert GmbH, FS Kritzer (2008), p. 416; Walker, Agreeing to disagree: Can We Just Have Words? CISG Art. 11 and The Model Law Writing Requirement, 25 Journal of Law and Commerce (2005–2006) 163; CISG-AC, Opinion no 1, Electronic Communications under CISG, 15 August 2003. Rapporteur: Professor Christina Ramberg, Gothenburg, Sweden (at http://www.cisg-ac.org); CISG-AC Opinion no 3, Parol Evidence Rule, Plain Meaning Rule, Contractual Merger Clause and the CISG, 23 October 2004. Rapporteur: Professor Richard Hyland, Rutgers Law School, Camden, NJ, U.S. (at http://www.cisg-ac.org).

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Freedom of form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Meaning of the provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Form and agreements outside the CISG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Freedom of evidence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Meaning of the provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Means of evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Evaluation of the evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Agreement of the parties requiring writing or evidence in writing . . . . . . . . 4. Electronic form and evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 7 7 7 11 15 16 17 18 19 24 25

I. Importance and Role of the Provision Contracts subject to the CISG are governed by a general principle of informality 1 that has been widely recognized by scholars and case law1. Art. 11 displaces any domestic requirements as to form2 irrespective of whether it constitutes a requirement for the validity of the contract (forma ad valorem) or merely a means of prescribed evidence (forma ad probationem), relevant primarily in cases where the existence of the contract is challenged. Thus, the principle of informality as enshrined in Art. 11 refers to freedom of form and freedom of evidence and recognizes the normal behaviour of businesspersons when contracting for the sale of goods in international settings. The principle of informality, within the general provisions of the Convention,

1 Rajski, in: Bianca/Bonell, Commentary (1987), Art. 11 para. 2.1 (Pace) referring to the principle of consensualism; Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 208. Similar provisions are found in Arts 15 ULIS and 3 ULF. Rechtbank van Koophandel Tongeren (Belgium) 25 January 2005 (steel), Scafom International BV & Orion Metal BVBA v Exma CPI, S.A., CISG-Online 1106 (Pace); and Arbitral Award, Compromex (Mexico) 4 May 1993 (garlic), Jose´ Luis Morales y/o Son Export, S.A. de C.V v Nez Marketing de Los Angeles California, E.U.A., CISG-Online 75 (Pace). 2 Inter alia: U.S. Federal District Court of New York (U.S.) 8 August 2000 (shoes), Fercus v Mario Palazzo et al., CISG-Online 588 (Pace).

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Article 11 2–6

2

3

4 5

6

Part I. Sphere of Application and General Provisions

applies throughout the whole contractual process, i. e. in the formation, performance, modification and termination of the contract3. An international sale of goods contract can be concluded or modified orally, by the conduct of the parties or even by the silence of the offeree (Art. 18(3))4. Thus, on the application of general standard terms and conditions no requirement as to form applies to the agreement5. Form and evidence of the contract are issues closely interrelated but they are not coincidental. Although there is no definition of ‘form’ under the CISG, scholars have put forth an autonomous and broad definition6, namely, the means through which declarations of intent ought to be exteriorized to reach full validity and efficiency7. Evidence, on the other hand, is a means to prove the existence of declarations of intent. The concept of from within Art. 11 is broad enough as to encompass and thus to displace special requirements of consent such as consideration or causa. Art. 11 has a very important limitation through an Art. 96 reservation in conjunction with Art. 128 to satisfy states that require written form or written evidence of the contract. An Art. 96 reservation applies strictly to the declarations in Part II relating to the formation of the contract (Arts 14–24) and to the modification and termination of the contract by agreement (Art. 29). The reservation does not apply to any other notice or communication under Part III of the Convention to which the general principle of informality applies9. Finally, although not expressly provided for, the principle of informality also applies to other declarations within the Convention (Art. 7(2))10.

3 Also in agreement: Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 11 para. 10: Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 207; Witz/Salger/ Lorenz, Kommentar (2000), Art. 11 para. 4. In case law: Oberster Gerichtshof (Austria) 29 June 1999 (plates), CISG-Online 483 (Pace): The avoidance of a sales contract under the CISG is, in principle, not subject to formal requirements. Thus, avoidance could also be done orally, or as here, over the telephone, as well as impliedly. Contrary: Butler, Formal Requirements: Editorial Remarks on the manner in which Art. 2:201(2) of the PECL may be used to interpret or supplement Art. 11 of the CISG, 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), p. 286 (286) (Pace). 4 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 207–208; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercancı´as (1996), pp. 512 et seq. For the modification of the contract by silence together with various other elements such as the previous behaviour of the parties: Audiencia Provincial de Palencia (Spain) 9 September 2014 (coffee), Kru¨ger GmbH & Co.KG v Soluble Products, Inc., CISG-Online 2577 (Pace). 5 Arrondissementsrechtsbank Arnhem (Netherlands) 17 March 2004 (soil for plan), CISG-Online 946 (Pace); and Arrondissementsrechtsbank Arnhem (Netherlands) 17 January 2007 (compensators), Hibro Compensatoren B.V. v Trelleborg Industri Aktiebolag, CISG-Online 1455 and 1476 (Pace). 6 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 210. 7 Perales Viscasillas, La formacio ´ n del contrato de compraventa internacional de mercancı´as (1996), p. 102; and Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 210. 8 Cf. infra comments to Arts 12 and 96. As considered by the Secretariat Commentary on 1978 Draft, Art. 10 (now Art. 11) para. 3, the form requirements is a question of public policy. 9 Witz/Salger/Lorenz, Kommentar (2000), Art. 12 para. 11; Melis, in: Honsell, Kommentar (1997), Art. 12 para. 2; Coca Payeras, in: Dı´ez-Picazo, Comentario (1998), Art. 12 p. 157; Andersen, General Principles of the CISG-Generally Impenetrable?, FS Kritzer (2008), p. 13 (32). But see: Rajski, in: Bianca/ Bonell, Commentary (1987), Art. 12 para. 2.2 (Pace); for a detailed discussion see infra Art. 96. 10 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 11 paras 6 and 11.

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Article 11

II. Detailed Commentary 1. Freedom of form a) Meaning of the provision. The principle of freedom of form is well recognized in 7 civil law systems11 yet it is less known in common law systems and former socialist countries. Although, some common law systems have relaxed the need of writing for the enforceability of sale of goods contracts (statute of frauds)12, they still require consideration for the contract conclusion or its modification. The CISG does not require any particular form or any special requirements for the 8 conclusion or validity of the contract, thus the statute of frauds13, consideration (common law systems)14, causa (civil law systems) and any other formal requirements are irrelevant. To this regard, the Convention does not require a signature15 for the conclusion of the contract or any other requirement for its validity; a notion contrary to some domestic legal systems that do require certain contracts be signed, registered or authenticated by a notary16. For the same reason, special form requirements due to certain control exchange rules or due to the intervention of the state as a contracting party are displaced by the Convention17. However, some authors, following the legislative history of the Convention, have concluded that the contract is not enforceable against the party which concluded the non-written contract”18. Simply, Art. 11 allows the offer (Art. 14) and the acceptance (Art. 18) as well as the 9 conclusion of the contract (Arts 18(2) and 23) to be made in any form, including acceptance by conduct, silence or inaction of the offeree (Arts 18(1) and 18(3)). 11

See e. g.: Arts 51 Spanish CCo and 1278 Spanish CC. In Great Britain, the Law Reform (Enforcement of Contracts) Act abolished in 1954 the Statute of Frauds that since 1677 required written form for a number of contracts, including the sale of goods. § 2201 UCC, requires written form for the enforceability of the contract. It has to be noted that U.S. did not make the reservation under Art. 96. See Farnsworth, The Convention on the International Sale of Goods from the Perspective of the Common Law Countries, in: La Vendita Internazionale (1981), pp. 5 et seq.; and Comoglio, Liberta` di forma el liberta` di prova nella compravendita internazionale di merci, Rivista Trimestrale di Dirtito Processuale e Civile (1990) 785 (786 et seq.). 13 Honnold, Uniform Law (2009), para. 126; Schlechtriem/Witz, Convention de Vienne sur les Contrats de Vente Internationale de Marchandises (2008), para. 107; Huber/Mullis, The CISG (2007), pp. 37 seq.; Piltz, Internationales Kaufrecht (2008), paras 2–129. 14 Honnold, Documentary History (1989), p. 379; Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 11 para. 12; Schlechtriem/Witz, Convention de Vienne sur les Contrats de Vente Internationale de Marchandises (2008), para. 107; Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 211; Huber/Mullis, The CISG (2007), pp. 37 seq.; Piltz, Internationales Kaufrecht (2008), paras 3–132. See also: Drobnig, Substantive Validity, 40 American Journal of Comparative Law 635 (635 et seq.) (Pace); Nicholas, The Vienna Convention on International Sales Law, 105 LQR 201 (214 et seq.) (Pace). 15 Handelsgericht des Kantons St. Gallen (Switzerland) 5 December 1995 (computer hardware devices), CISG-Online 245 (Pace); Appellate Court Grenoble (France) 28 November 2002 (machinery), CISGOnline 787 (Pace); Oberlandesgericht Mu¨nchen (Germany) 8 March 1995 (nickel-copper cathods), CISGOnline 145 (Pace); Arbitral Award, Compromex (Mexico) 30 November 1998 (sweets), CISG-Online 504 (Pace); and Harju County Court, Tartu mnt Court House (Estonia) 23 February 2009 (wood), Saratoga Forest Products Inc. v AS UM Components, CISG-Online 2644 (Pace). 16 See Honnold, Documentary History (1989), p. 259. 17 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 211. Contrary: Secretariat Commentary on 1978 Draft, Art. 10 (now Art. 11) para. 2. 18 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 211. Honnold, Uniform Law (2009), para. 127 considers that Art. 11 does not interfere with the imposition of sanctions for evasion or violation of a regulatory program; Art. 11 merely removes any impediment to enforcement between the parties based on any domestic “requirements as to form”. 12

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Article 11 10–12

Part I. Sphere of Application and General Provisions

Modification and termination of the contract (Art. 29) are similarly governed by the same principle of freedom of form by the same rules (though with minor adjustments) as seen with the formation of the agreement19. In addition, any notices or communications under Part III are governed by this same principle. 10 Form, as considered in the CISG, has its own autonomous and uniform meaning; thus, even if the issue of form is a matter of validity, Art. 11 prevails20. The Convention will, for example, override form requirements even in situations where they are intended to protect the consumers21 or small businesses. An example of this is the incorporation of EU directives into domestic law. These directives are displaced by the CISG22 and thus EU directives are not within the scope of Art. 9023. b) Form and agreements outside the CISG. Some scholars argue that the principle of freedom of form applies exclusively to issues dealt with in the CISG and therefore it is up to the applicable domestic law to determine the form requirements of agreements outside the CISG. This has been considered in relation, for example, with competition clauses24, or issues related to the consent of the principal to the transaction concluded by his agent25. 12 The most controversial issue among scholars is whether the form of arbitration agreements included in the contract of sale – which is normally the case – is an issue governed by the CISG26. One view is that under the principle of separability, and because of the CISG’s field of application, the Convention does not govern arbitration 11

19 Cf. Perales Viscasillas, Modification and Termination of the Contract (Art. 29 CISG), 25 Journal of Law and Commerce, 167 (169 seq.) (Pace) (Uncitral). 20 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 11 para. 17. 21 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 11 para. 16. 22 E. g.: Art. 11 (Placing of the order) of the EU Directive 2000/31/EC of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on Electronic Commerce), EC Official Journal, L 178, 17 July 2000, p. 1, breaks the rules of offer/acceptance and modification of CISG, which does not provide for a mandatory confirmation. Thus, the CISG deals specifically with the matter of contract formation and modification and therefore the domestic law is displaced. See: Illescas Ortiz/Perales Viscasillas, Derecho Mercantil Internacional (2003), p. 166. See for a more general discussion: Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 11 para. 18, reaching similar conclusion. 23 Schlechtriem/Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2010), Art. 90 paras 1 et seq. See also Mohs, in: Schlechtriem/Schwenzer, Commentary (2010), Art. 58 para. 22, in relation with the EU Directive 2000/35 on late payment. Both authors agree (as does this author) that the directives are not within Art. 90 CISG, and on a minimum interference of the directives within the CISG. See also Magnus, The CISG’s Impact on European Legislation, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 129 (131), also considering the prevalence of CISG. In general terms Prof. Ferrari points out that the directives are not international agreements in the sense of Art. 90 CISG: Ferrari, in: Schlechtriem/ Schwenzer, Kommentar (German ed. 2004), Art. 90 para. 3; and id., Universal and Regional Sales Law: Can they coexist?, Uniform Law Review (2003) 177 (181 seq.); Piltz, Internationales Kaufrecht (2008), paras 2–176 ; Perales Viscasillas, Late Payment Directive 2000/35 and the CISG, 19 Pace International Law Review 125 (127 et seq.). 24 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 208. But see: U.S. Federal District Court of Michigan (U.S.) 17 December 2001 (thermoforming line equipment for manufacture of plastic gardening pots together with the technology), Shuttle Packaging Systems v Tsonakis et al., CISGOnline 773 (Pace). 25 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 11 para. 7. 26 Even if considered outside the CISG, an extended application of Art. 11 would be possible as it happens with Art. 9 (supra Art. 9 para. 26) or with Art. 7(1) in regard to the good faith principle that it is considered when examining the validity of jurisdiction clauses contained in general conditions under the Council Regulation (EC) 44/2001 (Audiencia Provincial de Navarra (Spain) 27 December 2007 (machine for repair of bricks) (Pace) (www.cisgspanish.com)) or under Art. II 1958 New York Convention (Audiencia Provincial de Navarra (Spain) 22 September 2003 (motors for production of electricity) (Pace) (www.cisgspanish.com)).

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13 Article

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11

agreements27 or jurisdiction clauses28. The majority view, however, is that while the form of arbitration agreements is generally outside the scope of the CISG and primarily governed by the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Art. II), the formation of the arbitration agreement might be analysed under CISG (Arts 14–24)29. It is this author’s view, for several reasons30, both the form and formation of an 13 arbitration agreement might well be considered under the CISG rules31. First, arbitration agreements are dealt with by the CISG in regard to the formation of the contract (Art. 19(3)) and the avoidance of the contract (Art. 81(1)). Secondly, modern trends in international commercial laws consider that arbitration agreements are not subject to special requirements as to form and formation, and thus an agreement to arbitrate is achieved through the same means as the formation of a sale of goods contract32. Thus, it is suggested that special requirements for formal validity are not necessary and that 27 Kro ¨ ll, Selected Problems Concerning the CISG’s Scope of Application, 25 Journal of Law and Commerce 39 (43 seq.) (Pace) (UNCITRAL), although see p. 46 in fine; Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 11 para. 9. See: Landesgericht Duisburg (Germany) 17 April 1996 (textiles), CISG-Online 186 (Pace); Bundesgericht (Switzerland) 11 July 2000 (construction materials), Do¨rken-Gutta Pol.; Ewald Do¨rken AG v Gutta-Werke AG, CISG-Online 627 (Pace); and Handelsgericht Zu¨rich (Switzerland) 26 April 1995 (second hand metallic hangar), Marques Roque Joachim v S.a.r.l. Holding Manin Rivie`re, CISG-Online 154 (Pace). 28 Bundesgericht (Switzerland) 11 July 2000 (construction materials), Do ¨ rken-Gutta Pol. ; Ewald Do¨rken AG v Gutta-Werke AG, CISG-Online 627 (Pace); Ca´mara Nacional de Apelaciones en lo Comercial (Argentina) 14 October 1993 (machinery), Inta. S.A. v MCS Officina Meccania S.P.A., CISGOnline 87 (Pace) on the basis of Art. 4, but considering that some of its provisions might be used when the jurisdiction clause is within the contract of sale. 29 Koch, The CISG as the Law Applicable to Arbitration Agreement?, FS Kritzer (2008), p. 267 (280 et seq.); Mistelis, CISG and Arbitration, in: Janssen/Meyer (eds), CISG Methodology (2009), p. 394 considering that the CISG can never apply to formal validity of the arbitration agreements but can apply sometimes, but not very likely, to substantive validity. Also Art. 9 ought to be considered, see supra Art. 9 para. 35. Arts 14–24 and 8 are generally considered when dealing with arbitration clauses contained in general terms and conditions where CISG is decisive, inter alia: Arrondissementsrechtsbank Arnhem (Netherlands) 17 January 2007 (compensators), Hibro Compensatoren B.V. v Trelleborg Industri Aktiebolag, CISG-Online 1455 and 1476 (Pace). Under Council (Brussels) (EC) Regulation 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil law and commercial m atters, Art. 23 considers the validity of forum selection clauses that are in writing or evidenced in writing, or in a form that accords the practice established between the parties. Therefore, to the extent possible, Art. 11 might be considered. ~oz, CISG and Arbitration, in: Festschrifft fu¨r Ingeborg Schwenzer 30 See Perales Viscasillas/Ramos Mun zum 60. Geburtstag (2011), Band II. pp. 1355–1374. For a mere recent status in doctrinal discussion in both arbitration and CISG: Flecke-Giammarco/Grimm, CISG and Arbitration Agreements: A Janus-Faced Practice and How to Cope with It, 25 Journal of Arbitration Studies (2015), pp. 33–58; and Kroll, Arbitration and the CISG, in: Schwenzer/Atamer/Butler, Current Issues in the CISG and Arbitration (2013), pp. 59–86. 31 Walker, Agreeing to disagree: Can We Just Have Words? CISG Art. 11 and The Model Law Writing Requirement, 25 Journal of Law and Commerce 153 (156 seq.) (Pace) (Uncitral); Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercancı´as (1996), pp. 671 et seq. In case law, see: U.S. District Court, Southern District of New York (U.S.) 14 April 1992 (footware), Filanto v Chilewich, CISG-Online 45 (Pace). U.S. Federal Appellate Court (U.S.) 5 May 2003 (wine corks), Chateau des Charmes Wines Ltd. v Sabate´ USA, Sabate´ S. A., CISG-Online 767 (Pace); Ontario Superior Court of Justice (Canada) 28 October 2005 (wine corks), Chateau des Charmes Wines Ltd v Sabate´ USA, Inc. et al., CISG-Online 1139 (Pace); U.S. Federal District Court of Delaware (U.S.) 9 May 2008 (soy lecithin), Solae, LLC v Hershey Canada, Inc. (Pace). 32 See new Art. 7 UNCITRAL Model Law on International Commercial Arbitration (2006) (both Option I and II) and Recommendation of UNCITRAL of 7 July 2006 regarding the interpretation of Art. II(2) and Art. VII(1) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958). See: Perales Viscasillas, Forma escrita del convenio arbitral: Nuevas disposiciones de la CNUDMI/UNCITRAL, 197 Derecho de los Negocios, 5 (7 et seq.).

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Article 11 14–16

Part I. Sphere of Application and General Provisions

arbitration agreements in a sale of goods contract should be concluded by the same means as the conclusion of the contract in which it is inserted. This position confirms the expectation of businesspersons when dealing internationally. It also means that it is no longer the problem of validity of the agreement but rather an issue of its evidence. Art. 90 CISG is not an obstacle33 when considering Art. VII NYC and thus Art. 11 CISG – a substantive provision – could be considered as the more favourable provision (MFP)34. 14 In conclusion, in this author’s opinion, Art. 11 might play a role in relation to agreements outside the CISG if they are included within the sale of goods contract governed by the CISG. Art. 11 expressly recognizes an important principle in international commercial transactions and thus it is apt to an extended application. This is conceivable for any of the general principles embodied within the Convention35.

2. Freedom of evidence 15

The principle of freedom of evidence applies to both judicial and arbitral proceedings36. Whether the issues of evidence are considered substantive or procedural under domestic law is of no importance37 since the CISG displaces domestic law in this regard. Particularly, the CISG displaces, at least in part, those domestic rules that in addition to substantive law form requirements often impose further evidentiary restrictions as to what can be pleaded, which evidence is admissible and how evidence has to be weighed (freedom of form, after all, makes no sense if informal contracts cannot be enforced).

16

a) Meaning of the provision. The principle of informality also applies to evidentiary means and thus the Convention provides freedom to the parties to present evidence as to the existence of the contract38. A sale of goods contract need not be evidenced by writing, and it may be proven by any means, including witnesses (Art. 11). Thus, domestic evidentiary rules (e. g., if the contract is higher than a certain amount39) requiring that a sale of goods contract must proved by certain means, such as in writing40, or that exclude oral testimony (parole evidence rule)41, are displaced by the 33 But see: Waincymer, The CISG and International Commercial Arbitration: Promoting a Complimentary relationship Between Substance and Procedure, FS Kritzer (2008), p. 582 (588). 34 Walker, Agreeing to disagree: Can We Just Have Words? CISG Art. 11 and The Model Law Writing Requirement, 25 Journal of Law and Commerce 153 (163 seq.) (Pace) (Uncitral). 35 See supra Art. 9 para. 26. 36 Comoglio, Liberta ` di forma el liberta` di prova nella compravendita internazionale di merci, Rivista Trimestrale di Dirtito Processuale e Civile (1990) 785 (789); and Rajski, in: Bianca/Bonell, Commentary (1987), Art. 11 para. 2.3 (Pace). 37 Schlechtriem/Witz, Convention de Vienne sur les Contrats de Vente Internationale de Marchandises (2008), para. 108. Honnold, Uniform Law (2009), para. 126 considers that modern common law scholars consider it as a substantive issue. As a procedural matter is considered by: Va´zquez Lepinette, La Compraventa internacional de mercaderı´as Una visio´n jurisprudencial (2000), no I. VI.3. 38 All means of proof possible: Rechtbank van Koophandel, Kortrij (Belgium) 4 April 2001 (shoes) (Pace); U.S. Federal District Court of New York (U.S.) 6 April 1998, Calzaturificio Claudia v Olivieri Footwear, CISG-Online 440 (Pace); U.S. Federal District Court of New York (U.S.) 10 May 2002 (chemicals), Geneva Pharmaceuticals Tech. Corp. v Barr Labs. Inc., CISG-Online 653 (Pace). 39 A list of domestic systems stipulating conditions of written form is provided by: Piltz, Internationales Kaufrecht. Das UN-Kaufrecht in praxisorientierter Darstellung (2008) Internationales Kaufrecht (2008), paras 3–130: U.S., Russia Federation, Argentina, Spain, France, and Italy. It is considered an issue of evidence and not a matter of the form of the contract. 40 See § 2–201 UCC. 41 § 2–202 UCC. In agreement: CISG-AC Opinion no 3, para. 1.2; Inter alia: U.S. Federal District Court of New York (U.S.) 6 April 1998 (shoes), Calzaturificio Claudia v Olivieri Footwear, CISG-Online 440 (Pace), and see comments to Art. 8 supra.

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Article 11

Convention42. In fact, during the legislative history, several attempts were made to limit evidence requirements. First, an attempt was made to delete evidence by writing, but this was kept on the ground that in common law systems it would be problematic since some systems provide for the recognition of oral contracts but not their enforceability unless in writing43. Second, an attempt was made to limit witness evidence, but this was rejected as it was seen as contrary to the principle of free appreciation of evidence by the judge44. In this regard, judges may maintain their own rules of evidence giving more weight to documentary evidence45, or to the contrary to consider that the CISG allows “all relevant information into evidence even if it contradicts the written documentation”46. The principle of freedom of evidence in Art. 11 is also confirmed by Art. 8(3) that acceptsa full range of evidentiary means to interpret the statements and declarations of the parties, and thus to determine the agreement of the parties. b) Means of evidence. A liberal interpretation of Art. 11 allows for different means 17 of evidence to be considered, such as electronic data and or oral witnesses, as mentioned specifically by the provision. Also, evidence as to the conclusion of the contract and its terms might well be obtained not only through evidence of the offer and acceptance, but also by the contractual documents that the parties might have exchanged prior to the conclusion of the contract, documents exchanged through the negotiation, or after its conclusion, such as letters of confirmation47 or invoices48. Therefore, although international sale of goods contracts might be concluded orally or notice might be sent orally, it is advisable for the parties to keep a record of it, for 42 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 211–212; Piltz, Internationales Kaufrecht (2008), paras 3–130; Coca Payeras, in: Dı´ez-Picazo, Comentario (1998), Art. 11 pp. 151– 152; Witz/Salger/Lorenz, Kommentar (2000), Art. 11 para. 8. Also: Obergericht Zu¨rich (Switzerland) 6 February 2009, (Graffiti protection coating case) (Pace) considering that: “Under Art. 11 CISG, a relevant oral agreement can be proved by any means, including witnesses. By its refusal to conduct the taking of [relating] evidence, the lower court violated the right to a court hearing and the right to present evidence”. 43 Honnold, Documentary History (1989), p. 367. 44 A proposal made by Canada. See: Honnold, Documentary History (1989), pp. 491, 662; Rajski, in: Bianca/Bonell, Commentary (1987), Art. 11 para. 1.3 (Pace). For cases where witness testimony was relevant: Oberlandesgericht Mu¨nchen (Germany) 8 March 1995 (nickel-copper cathods), CISG-Online 145 (Pace); Oberlandesgericht Rostock (Germany) 27 October 2003 (trucks), CISG-Online 921 (Pace); Appelationshof Bern (Switzerland) 11 February 2004 (cables), CISG-Online 1191 (Pace). 45 Rechtbank van Koophandel, Hasselt (Belgium) 22 May 2002 (packaging for vegetables), R.B.V. N.V. v J.V. B.V., CISG-Online 703 (Pace). 46 U.S. Federal District Court of New York (U.S.) 6 April 1998 (shoes), Calzaturificio Claudia v Olivieri Footwear, CISG-Online 440 (Pace); Federal District Court of New York (U.S.) 23 August 2006 (packaging system), TeeVee Tunes, Inc. et al v Gerhard Schubert GmbH, CISG-Online 1276 (Pace). 47 Oberlandesgericht Frankfurt am Main (Germany) 5 July 1995 (chocolate products), CISG-Online 258 (Pace); and Oberlandesgericht Ko¨ln (Germany) 22 February 1994 (wood), CISG-Online 127 (Pace), after rejecting the German usage on Kaufma¨nnisches Besta¨tigungsschreiben: “Nevertheless, the importance of the commercial letter of confirmation as evidence for the formation of the contract remains unaffected”. Contrary: Esser, Commercial Letters of Confirmation in International Trade: Austrian, French, German and Swiss Law and Uniform Law under the 1980 Sales Convention, Georgia Journal of International and Comparative Law (1988) 427 (459) (Pace), considering that is a procedural issue to be left to the lex fori. 48 Compromex (Mexico) 4 May 1993 (garlic), Jose ´ Luis Morales y/o Son Export, S.A. de C.V v Nez Marketing de Los Angeles California, E.U.A., CISG-Online 75 (Pace) has considered that the existence of an international sale of goods contract between a Mexican seller and a U.S. buyer of 24 tons of garlic is evidenced by the invoice issued by the seller as well as by the carriage documents that point out to the buyer as the final addressee. See also: Rechtbank van Koophandel Kortrij (Belgium) 4 April 2001 (unidentified goods) (Pace); Juzgado Cuarto de lo Civil de Tijuana, Baja California (Me´xico) 3 September 2010 (metals), (www.cisgspanish.com); and Tribunal de Justiça do Rio Grande do Sul (Brasil) 14 February 2017 (frozen chicken legs), (cisgspanish.com), relying both in Art. 11 CISG and art. 1.2 PICC.

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Part I. Sphere of Application and General Provisions

example, by recording the conversation or by sending a letter of confirmation. Otherwise, the evidence of the existence of the contract or any other subsequent requirement might be difficult to prove49. However, it is not impossible if the circumstances of the case demonstrate that oral communications form part of a practice or proof of a reasonable behaviour of businesspersons50. 18

c) Evaluation of the evidence. The weight to be given to the evidence is a matter to be left to the judge or arbitrator and thus the probative value of the evidence is to be assessed in accordance with the procedural laws or rules of law51. This would usually be the case under the principle of freedom of appreciation of the evidence by the judge or the arbitrator, who would generally consider the evidence on a case-by-case basis. If procedural rules impose limitations on the judges according to domestic rules of evidence, they should be disregarded on the application of Art. 1152. However, as with any other evidence, the discretionof the judge or arbitrator applies and thus the evidence might be excluded anyway.

3. Agreement of the parties requiring writing or evidence in writing Parties might well expressly or impliedly agree on the exclusion or derogation of the principle of informality under Art. 11, requiring the need of writing for contract conclusion, modification or for any other notice due during the performance of the contract or requiring the signature of the contract for the contract conclusion (Art. 6)53. Such an agreement is subject to domestic validity requirements that might prohibit such agreements54, particularly if we consider the exclusion or limitation of the evidence when certain aspects of the evidence might be considered a procedural issue and thus outside the scope of the Convention. 20 In accordance with the general principle of informality, an agreement of the parties with respect to writing is considered to be a rebutted presumption of the evidentiary character of the writing requirement, unless a clear indication to the contrary, i. e., that 19

49 E. g. in regard to Art. 39 there is abundant case law declaring the buyer’s loss of the remedies for the lack of conformity of the goods due to the lack of evidence in regard to the communication to be sent in a reasonable time under Art. 39 and its content: Landesgericht Frankfurt am Main (Germany) 13 July 1994 (shoes), CISG-Online 118 (Pace), confirmed by Oberlandesgericht Frankfurt am Main (Germany) 23 May 1995 (shoes), CISG-Online 185 (Pace); Amtsgericht Kehl (Germany) 6 October 1995 (fashion goods) (Pace); Landesgericht Kassel (Germany) 22 June 1995 (clothes), CISG-Online 370 (Pace); Amtsgericht Kehl (Germany) 6 October 1995 (knitwear), CISG-Online 162 (Pace); and Landesgericht Stuttgart (Germany) 31 August 1989 (shoes), CISG-Online 11 (Pace). Other situations include the buyer’s obligation under FOB terms to notify the delivery terms and thus when done by phone and with no further evidence constitutes a fundamental breach of the Contract: CIETAC Arbitration proceeding (China) 9 January 2008 (metallic silicon), CISG-Online 2056 (Pace). 50 Appelationshof Bern (Switzerland) 11 February 2004, CISG-Online 1191 (Pace). 51 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 11 para. 14. Landesgericht Memmingen (Germany) 1 December 1993 (granite stones), CISG-Online 73 (Pace); Ferrari, in: Ferrari/ Flechtner/Brand, Draft Digest and Beyond (2003), p. 212; Bundesgericht (Switzerland) 5 April 2005 (triethylen tetramin (“TETA”)), CISG-Online 1012 (Pace). 52 Somehow contrary: Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2010), Art. 11 para. 13, making a distinction not adopted within Art. 11 according to which the evidence is either a condition of validity in which case Art. 11 applies or mere means of proof where procedural rules of the lex fori applies. 53 An example of the latter where parties agreed for the need of a contract signed for its conclusion and thus by not complying with this requirement the Court concluded that the contract was not concluded between the parties: Tallinn Circuit Court (Estonia) 5 March 2010 (peat), CISG-Online 2642 (Pace). 54 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 11 para. 19.

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the writing be a condition of validity of the contract55. The consequence of a party’s failure to comply with an agreement as to form is governed by domestic law56. According to the general rules applied to the burden of proof, the burden is on the 21 party asserting the existence of an agreement to comply with a specific form57. The parties might also agree on requiring evidence in writing, i. e., an agreement that 22 oral evidence of the contract is to be excluded. Agreements contrary to the general principles established in Art. 11 might be 23 achieved by a well-drafted merger clause or by a “No Oral Modification Clause” (NOM Clause) whereby the former excludes all prior oral negotiations in order to interpret or supplement the contract58, while the latter excludes oral agreements for the modification of the contract (Art. 29).

4. Electronic form and evidence The flexible statement of Art. 11 makes it possible to include computer messages 24 among the means of form and proof, i. e. the exchange of declarations of intent by EDI (Electronic Data Interchange) or by electronic mail (email). In addition, any proof that the contract has been concluded by those means is admissible59.

III. Comparable Rules Principles of freedom of form and proof under Art. 11 have been adopted almost 25 literally by other instruments of uniform international commercial law, confirming that this principle is not just a rule specific to the CISG, but rather that it is considered to be a general principle of international business transactions60. The following provisions follow Art. 11 CISG without deviation: Art. 1.2 PICC, 26 Art. 2:101(2) PECL, Art. II.-1:107 DCFR; Art. 9(1) of the UN Convention on the Use

55 Somehow a different position at Schlechtriem/Witz, Convention de Vienne sur les Contrats de Vente Internationale de Marchandises (2008), para. 110, considering that the meaning of the agreement is to be seen at the light of Art. 8. 56 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 214. 57 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 214–215; Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 11 para. 18. Kantonsgericht Freiburg (Switzerland) 11 October 2004 (triethylen tetramin (“TETA”)), CISG-Online 964 (Pace). 58 See Flechtner, Addressing Parol Evidence Issues in Contracts Governed by the CISG, in: Flechtner/ Brand/Walter, Drafting Contracts (2007), p. 329 (333 seq.) giving an example of a merger clause by which Art. 11 is displaced, but pointing out that the reference to Art. 11 is not necessary since a merger clause does not create a formality requirement or a form-of-evidence requirement. There are limitations as considered by Federal District Court of New York (U.S.) 23 August 2006 (packaging system), TeeVee Tunes, Inc. et al v Gerhard Schubert GmbH, CISG-Online 1276 (Pace) relying on CISG-AC Opinion no 3. See Schlechtriem, Opting out of Merger and Form Clauses Under the CISG–Second thoughts on TeeVee Toons, Inc. & Steve Gottlieb, Inc. v Gerhard Schubert GmbH, FS Kritzer (2008), p. 416 (416 et seq.); and Meyer, Die privatautonome Abbedingung der vorvertraglichen Abreden–Integrationsklauseln im internationalen Wirtschaftsverkehr, RabelsZ (2008) 562 (596 et seq.). 59 CISG-AC, Opinion no 1, para. 11.1. The Opinion states that: “A contract may be concluded or evidenced by electronic communications”. See also infra comments to Art. 13 para. 6. 60 It is considered a general principle of the lex mercatoria. See: Principle no IV.3.1- Principle of Informality: “Contractual declarations are valid even when they are not evidenced in writing unless mandatory rules of any applicable domestic law provide otherwise” (Central at http://www.tldb.net). Also in terms of formal validty of choice of law agreements, see Art. 5 of The Hague Principles on choice of law in international commercial contracts (approved on 19 March 2015): “A choice of law is not subject to any requirement as to form unless otherwise agreed by the parties”; a rule that is a substantive rule of private international law and not a conflict of law rule in itself (see comment 5.3).

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Part I. Sphere of Application and General Provisions

of Electronic Communications in International Contracts (2005), and Art. 208 OHADA Uniform Act Relating to General Commercial Law61. 27 Both principles (freedom of form and proof) can be excluded or modified by the parties; a possibility that Art. 1.5 PICC recognizes. As opposed to the CISG that has an important limitation to this freedom of form and proof (Art. 96), the PICC do not consider it necessary to satisfy the written form requirements of some states, since the users of the PICC are not states but operators in international commercial trade. 61

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Article 12 Any provision of Article 11, Article 29 or Part II of this Convention that allows 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 of this Convention. The parties may not derogate from or vary the effect of this Article. Bibliography: Schroeter,The Cross-Border Freedom of Form Principle under Reservation: The Role of Articles 12 and 96 CISG in Theory and Practice, 33 Journal of Law and Commerce (2014), 81–118; Wang/Andersen, The Chinese Art. 96 Reservation against Oral Contracts Under the CISG–Time to Withdraw?, 8 Vindobona Journal of International Commercial Law and Arbitration (2004) 145; CISGAC Opinion no 15, Reservations under Articles 95 and 96 CISG, 21 and 22 October 2013. Rapporteur: Professor Doctor Ulrich G. Schroeter, University of Mannheim, Germany (at http://www.cisg-ac.org)

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Drafting history . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1. Scope of Art. 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2. Art. 96 reservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

I. Importance and Role of the Provision 1. Introduction The principle of informality in Art. 11 has a very important limitation through an 1 Art. 96 reservation in conjunction with Art. 121. Art. 12 is the only provision of the CISG that is mandatory and thus not subject to the contrary agreement of the parties or by the application of a usage of trade (Art. 12 last sentence) as it creates an obligation of public international law character2. A reminder of this mandatory character is also found in Art. 6. The purpose of an Art. 96 reservation is to give the states an opportunity to preserve their domestic requirements of writing, not only with respect to the form of the contract–and other related communications – but also to its evidence.

2. Drafting history Art. 12 was introduced in the 1978 CISG Project3 due to pressures made by Eastern 2 countries, especially the former USSR, whose domestic laws consider the written form 1 Argentina, Armenia, Belarus, Chile, Paraguay, Russian Federation,Vietnam and Ukraine have made Art. 96 reservation. Upon approving the Convention, the People’s Republic of China declared that it did not consider itself bound by Art. 11, nor the provisions in the Convention relating to the content of Art. 11. Art. 96 is the provision within Part IV with the higher number of states making a reservation. Estonia, Latvia, Lithuania and Hungary withdrew the reservation. For a comprehensive study on this area, see: Schroeter, The Cross-Border Freedom of Form Principle under Reservation: The Role of Articles 12 and 96 CISG in Theory and Practice, 33 Journal of Law and Commerce (2014) 89–94. 2 Sarcevic, The CISG and regional unification, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 3 (6). 3 There were several attempts before that tried to amend Art. 11 as proposed by former USSR to include the written form of the contract if so required by at least one of the countries whereof the parties of the

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Part I. Sphere of Application and General Provisions

of the contract as a question of validity, due to the state’s rigid control of international business transactions, particularly for the international sale of goods4. In fact, a great number of the states that have made the Art. 96 reservation have done so to respond to that concern5. There are several states that have made an Art. 96 reservation presumably due to their own domestic evidentiary requirements, such as Argentina6 and Chile7. There are, however, some states with similar form or evidentiary requirements that have decided not to make the reservation probably due to the desire of achieving a higher degree of uniformity within the Convention, e. g. U.S. and Spain8. Finally, some states no longer have these domestic requirements due to major changes in their legislation9. Also The CISG Advisory Council recommends that: a) States which newly acceed to the Convention do so without making any declarations under Arts 92–96 CISG; and b) Contracting States that have made one or more declarations under Articles 92–96 CISG consider withdrawing them in accordance with Article 97(4) CISG10.

II. Detailed Commentary 1. Scope of Art. 12 3

Art. 12 (also Art. 96) prevents the principle of freedom of form and evidence to apply. Once within the scope of Arts 12 and 96, any provision on the formation (i. e., offer, acceptance, counteroffer, withdrawal11, revocation, late acceptance), modification and termination of the contract that allows indications of intention to be made in any form other than in writing, do not apply. Other formality requirements contract have their place of business: Honnold, Documentary History (1989), pp. 53, 63. The question remained unsettled during the years in which the projects were discussed: Honnold, Documentary History (1989), pp. 236, 245. Finally in 1977, Art. 11 was amended to include a similar provision to Art. 12 and also a proposed provision for Art. 96 reservation: Honnold, Documentary History (1989), p. 326. 4 See Art. 162.3 Russian Federation CC (1994); Maskow, The Convention on the International Sale of Goods from the perspective of the Socialist Countries, in: La Vendita Internazionale (1981), p. 39 (42 seq.). Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 9 June 2004 (unidentified goods), CISG-Online 1239 (Pace) referring to Art. 11 stated that: “This provision of the Vienna Convention of 1980 takes into consideration peremptory norms of Russian civil legislation (Art. 162 of Russian Civil Code), according to which non-observance of simple written form of an external economic agreement entails its nullity”. 5 Feltham, The United Nations Convention on contracts for the international sales of goods, Journal of Business Law (1981) 346 (346 et seq.); and Rajski, in: Bianca/Bonell, Commentary (1987), Art. 11 para. 2.1 (Pace). 6 Art. 209 CCo of Argentina (1890) requiring a principle of written evidence to contracts of more than a certain amount. Since it does not require written form, some authors doubt about the reservation: Garro, The U. N. Sales Convention in the Americas: Recent Developments, 17 Journal of Law and Commerce 219 (229) (Pace). 7 See Grob Duhalde, La reserva de Chile a la Convencio ´ n de Viena de 1980, Revista de Derecho de la Pontificia Universidad Cato´lica de Valparaı´so, 2011, pp. 37–67. 8 § 2–201 UCC and Art. 51 Spanish CCo. 9 For China, see: Wang/Andersen, The Chinese Art. 96 Reservation against Oral Contracts Under the CISG–Time to Withdraw?, 8 Vindobona Journal of International Commercial Law and Arbitration 145 (145 et seq.) (Pace); and Schroeter, Backbone or Backyard of the Convention? The CISG’s Final Provisions, FS Kritzer (2008), p. 425 (436 seq.). 10 CISG-AC Declaration No 2 Use of Reservations under the CISG. Rapporteur: Professor Dr. Ulrich G. Schroeter, University of Mannheim, Germany. Adopted by the CISG-AC following its 18th meeting, in Beijing, China, on 21 October 2013. 11 Contrary: Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 12 para. 6. However, Art. 12 expressly refers to other indication of intention under Part II, thus covering also withdrawal of the offer. In agreement considering any communication of Part II is covered: Rajski, in: Bianca/Bonell, Commentary (1987), Art. 12 para. 2.2 (Pace); Ziegel, Comments to Art. 12, Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods (1981) (Pace).

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fall outside the scope of Art. 12, such as formalities relating to the registration of the contract12, sealed documents, authentication by a notary13 and any other notice or communication under Part III of the Convention14. Art. 12, taken literally, prevents the formation of contract to be made through 4 different means, such as an oral offer which is accepted in writing or vice versa, or the situation described in Art. 29(2) second sentence. However, it is possible that different means may be used to make a declaration of intent, which can be made through writing, silence, inaction or conduct15.

2. Art. 96 reservation The close interplay between Arts 12 and 96 obligates one to investigate the effect of 5 the state’s reservation under the latter provision16. Art. 96 allows states, whose legislation requires sale of goods contracts to be concluded in or evidenced17 by writing, to make a reservation. Art. 96’s writing considerations are assessed autonomously under Art. 1318. Therefore, when, due to an Art. 96 reservation, the writing requirements of domestic law applies, these writing requirements will be assessed by Art. 13. The effect of the provision is not to invalidate contracts concluded or evidenced in 6 any form other than in writing19, but rather to disapply of the provisions of the Convention that allow an oral form (Arts 11, 29 and Part II). 12 Honnold, Uniform Law (1999), para. 129, considering that resort is to be had to the conflict of law rules of the lex fori. But see, Honnold, Uniform Law (2009), para. 129, considering again the position in the first edition of the book. 13 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 12 para. 5. Schroeter, The cross-border, pp. 96–97. They are covered by Art. 11 which displaces those requirements. 14 Contrary: Rajski, in: Bianca/Bonell, Commentary (1987), Art. 13 para. 3.1 (Pace), in relation with the declaration of avoidance; Id., Art. 12, para. 2.2. 15 Inter alia: Enderlein/Maskow, International Sales Law (1992), p. 83 and pp. 92 et seq.; Patti, Silenzio, Inerzia e compartamento concludente nella Convenzione di Vienna sui contratti di vendita internazionale di beni mobile, Rivista del Diritto Commerciale e del Diritto generale della obligazione (1991) 135 (146); Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercancı´as (1996), p. 113. With doubts: Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), p. 97. Contrary: Stern, Erkla¨rungen im UNCITRAL-Kaufrecht, in: Wiener Rechtswissenschaftliche Studien (1990), para. 134; Schlechtriem, Uniform Sales Law- The UN-Convention on Contracts for the International Sale of Goods (1986), pp. 44 et seq., and pp. 62 seq.; Hillman, Art. 29(2) of the United Nations Convention on Contracts for the International Sale of Goods: A New Effort at Clarifying the Legal Effect of “No Oral Modification” Clauses, 21 Cornell International Law Journal 449 (460 seq.), and probably: Heuze´, La Vente Internationale de marchandises. Droit Uniforme (1992), pp. 145 seq. 16 Cf. Comments to Art. 96 by Prof. Herre. 17 Therefore if the domestic legislation provides no form for the contract conclusion but yet for its evidence, the state might resort to the reservation. This is the case of Argentina, Chile and Paraguay. 18 Schwenzer/Fountoulakis, International Sales Law (2007), p. 118; Schmidt-Kessel, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 13 para. 5–7. Considering that is to be determined by the applicable Law: Rajski, in: Bianca/Bonell, Commentary (1987), Art. 12 para. 2.3 (Pace), but see, id., Art. 13, para. 3.1 justifying on the basis of a uniform application of the CISG an extended application of Art. 13 to domestic law as determined by the rules of private international law; Eiselen, Electronic Commerce and the UN Convention on Contracts for the International Sale of Goods, 6 EDI Law Review (1999) 21 (36) (Pace). It seems to be also the position of Mazzotta, Notes on the United Nations Convention on the Use of Electronic Communications in International Contracts and Its Effects on the United Nations Convention on Contracts for the International Sale of Goods, 33 Rutgers Computer and Technology Law Journal (2007) 251 (271) (Pace) when he considers that resort to electronic communications is barred when a reservation on Arts 12 and 96 have been made. 19 Contrary: Arbitral Award, CIETAC, 6 September 1996 (engines), CISG-Online 1146 (Pace); U.S. Federal District Court of New Jersey (U.S.) 7 October 2008, Forestal Guarani, S. A. v Daros International, Inc. (Pace); and U.S. Federal District Court of Florida (U.S.) 19 May 2008 (polyester dyed fabric), Zhejiang Shaoxing Yongli Printing and Dyeing Co., Ltd v Microflock Textile Group Corporation (Pace).

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Part I. Sphere of Application and General Provisions

As to the application of the reservation20, some case law and academics (minority view) argue that the contract should be in writing if at least one of the parties has its place of business in the reservation state21; a position that seems to be supported by the language of Arts 12 and 96: “any party has his place of business in a Contracting State”. 8 However, this author is of the opinion that this sentence opens the door to the applicability of Arts 12 and 96 and thus the non-application of Arts 11, 29 and Part II. In this situation, since these provisions of the CISG do not apply, the applicable law in the contract or the rules of private international law of the forum (or to the system applied by the arbitrators to find the applicable law) would decide the issue (majority view). 9 However, there is disagreement among the supporters of the majority view as to the further application of CISG in a situation described under b). 10 a) It is clear that if the court or the arbitrator is directed to a reservation state, its nonuniform domestic rules would be applied. It has to be reminded that the reservation applies to countries whose domestic legislation requires writing for the conclusion, or evidence of, a contract and thus it might be possible under the domestic law of the reservation state that the writing requirement only refers to the evidence of the contract. Thus, under domestic law an oral contract might be considered valid, but would require some evidence of its existence in writing, e. g., through an invoice22. 7

20 See an extended discussion: CISG-AC Opinion no 15. The Opinion conforms the majority view and so clarifies that: “Where any party to a sales contract has its place of business in a Contracting State which has made a declaration under Article 96, 6.1 no Contracting State is under any obligation under public international law to apply any provision of Article 11, Article 29 or Part II of the Convention that allows 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 (Article 12): 6.2 the forum’s rules of private international law determine which law governs the requirements as to form applicable to such sales contract and the manner in which it may be evidenced”. 21 Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 16 February 1998 (goods), CISG-Online 1303 (Pace); Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 25 March 1997 (onions), CISG-Online 1224 (Pace); Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (Russian Federation) 30 June 2009 (unidentified goods), CISG-Online 2614 (Pace); Rechtbank van Koophandel Hasselt (Netherlands) 2 May 1995 (frozen rasberries), Vital Berry Marketing NV v Dira-Frost NV, CISG-Online 371 (Pace) (Unilex); Arrondissementsrechtbank Rotterdam (Netherlands) 12 July 2001 (lemons, mandarins and oranges), Hispafruit BV v Amuyen S.A., CISG-Online 968 (Pace); U.S. Federal District Court of New Jersey (U.S.) 7 October 2008 (lumber products), Forestal Guarani, S. A. v Daros International, Inc. (Pace); and U.S. Federal District Court of Florida (U.S.) 19 May 2008 (polyester dyed fabric), Zhejiang Shaoxing Yongli Printing and Dyeing Co., Ltd v Microflock Textile Group Corporation (Pace). Impliedly this seems to be the position of the Chinese Arbitral Awards under CIETAC, e. g.: Arbitral Award, CIETAC, 15 December 1997 (hot-rolled coils), CISG-Online 1204 (Pace). Among scholars: Eo¨rsi, General Provisions, in: International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), pp. 2–32; Adame, El contrato de compraventa internacional (1994), p. 22; Garro/Zuppi, Compraventa internacional (1990), pp. 69 seq.; Garro, The U. N. Sales Convention in the Americas: Recent Developments, 17 Journal of Law and Commerce 219 (226) (Pace), pointing out that the contract to be valid ought to be in writing; Torsello, The CISG’S impact on Legislators: The Drafting of International Contract Law Conventions, in: Ferrari, The 1980 Uniform Sales Law (2003), pp. 251 et seq., considering Arts 12 and 96 as a sort of “supermandatory rules”; Hussonmorel, La Compraventa Internacional de Mercaderı´as (2004), p. 40; Piltz, Internationales Kaufrecht (2008), para. 2–132; Zuppi, The Parol Evidence Rule, International Electronic Documents and the United Nations Convention on Contracts for the International Sale of Goods (CISG), FS Kritzer (2008), p. 640 (643). This position, however, is rejected by the legislative history, see: Ferrari, CISG and Private International Law, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 19 (54). 22 Arbitral Award, Compromex, 29 April 1996 (canned fruit), Conservas la Costena S.A. de C.V. v Lanis San Luis S.A. & Agroindustrial Santa Adela S.A., CISG-Online 350 (Pace) considering an international sale of goods contract between an Argentinean seller (reservation state) and a Mexican buyer. The Commission considered that the essential matters of the contract were in writing and that to demand that the contract itself be in writing is against the general principles of the Convention.

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12

b) If a non-reservation state is designated, the CISG (Art. 11) applies since the 11 reservation under Art. 96 binds the reservation state but not the non-reservation state, and thus it is the CISG that is the applicable law to determine the issue23 and not the domestic rules of the non-reservation state24, which would have the negative effect to bring into play domestic form requirements of certain states that have internationally and intentionally decided to abandon them25. Thus, due to the terminology: “any party has his place of business in a Contracting State” in Arts 12 and 96, one must consider, as the first step, whether one of the parties have their place of business in a reservation state, and next, whether the conflict of laws provisions of that state point to the law of another reservation state. 23 In agreement: Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 213 seq.; Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 12 para. 3; Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 96 para. 3; Schroeter, The cross-border, pp. 103–108; id, Backbone, p. 425; Witz/Salger/Lorenz, Kommentar (2000), Art. 12 para. 12; Melis, in: Honsell, Kommentar (1997), Art. 12 para. 4; Schlechtriem/Witz, Convention de Vienne sur les Contrats de Vente Internationale de Marchandises (2008), para. 109; Huber/Mullis, The CISG (2007), p. 38; Bernstein/ Lookofsky, Understanding the CISG (2003), paras 2–14; Piltz, Internationales Kaufrecht (2008), para. 2– 132; Schroeter, Backbone or Backyard of the Convention? The CISG’s Final Provisions, FS Kritzer (2008), p. 425 (443). Also case law: Arrondissementsrechtbank Rotterdam (Netherlands) 12 July 2001 (lemons, mandarins and oranges), Hispafruit BV v Amuyen S.A., CISG-Online 968 (Pace); Gerechtshof Leeuvarden (Netherlands) 5 June 1996 (vodka), CISG-Online 325 (Pace) (Unilex) followed by Hooge Raad (Netherlands) 7 November 1997 (vodka), J.T. Schuermans v Boomsma Distilleerderij/Wijnkoperij BV, CISGOnline 551 (Pace); Fova´rosi_Biro´sa´g_Budapest (Hungary) 24 March 1992 (unidentified goods), Adamfi Video Production GmbH v Alkoto´k Studio´sa Kisszo¨vetkezet, CISG-Online 61 (Pace) (Unilex). Contrary: Honnold, Uniform Law (2009), para. 129, although considering that rules on formality may be affected by conduct demonstrating that a contract had been made (estoppel); and considering the application of Art. 8 CISG: Ishida, Reservation of the Freedom-of-Form (FOF) Provisions by Articles 12 & 96 of the CISG- Let Us Do without Article 11: We Have 8-, 58 Himeji Law Review, 1 (2016), 1–27. 24 See i.e., among the latest cases: U.S. Court of Appeals, Third Circuit (U.S.) 16 April 2010 (lumber products), Forestal Guarani S. A., v Daros International, Inc., (Pace), which has an interesting dissenting opinion, in an oral contract of sale between an Argentina seller and a U.S. buyer, the Court held that: “We conclude that where, as here, one party’s country of incorporation has made a declaration while the other’s has not, a court must first decide, based on the forum state’s choice-of-law rules, which forum’s law applies, and then apply the law of the forum designated by the choice-of-law analysis”. The Court rejected the District Court conclusion that Argentina’s declaration imposed a writing requirement and that the absence of a written contract in this case precluded the plaintiff’s claim. To this regard the Court considered the issue in the light of Art. 7(2) as a gap within the Convention and so concluded that the CISG does not “expressly settle” the question whether a breach-of-contract claim is sustainable in the absence of a written contract. Further, “given that neither the CISG nor its founding principles explicitly or implicitly settle the question, Article 7(2)’s reference to “the rules of private international law” is triggered. In other words, we have to consider the choice-of-law rules of the forum state, in this case New Jersey, to determine whether New Jersey or Argentine form requirements govern”. 25 As in the case of U.S. where domestically the Statute of Frauds applies (§ 2–201 UCC). See considering that domestic law would be applicable: Brand/Flechtner, Arbitration and Contract Formation in International Trade: First Interpretations of the U. N. Sales Convention, 12 Journal of Law and Commerce (1993) 239 (240 et seq.); Butler, Formal Requirements: Editorial Remarks on the manner in which Art. 2:201(2) of the PECL may be used to interpret or supplement Art. 11 of the CISG, 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), p. 286 (287 note 7) (Pace); Herre, Article 96, para 8 (in this commentary). The same pattern but with a different solution is found in the case Fova´rosi Biro´sa´g Budapest (Hungary) 24 March 1992 (unidentified goods), Adamfi Video Production GmbH v Alkoto´k Studio´sa Kisszo¨vetkezet, CISG-Online 61 (Pace) (Unilex), where the contract was a Hungarian (reservation state) and a German party. The Tribunal resorted to the applicable law–German Law- and considered that under domestic rules–in that instance: Art. 147.1 BGB 1869- the contract does not need to comply with any special form requirements; and Fova´rosi Biro´sa´g Budapest (Hungary) 21 May 1996 (goods), CISG-Online 252 (Pace), in a contract of sale between a Hungarian and a Swedish, the Court applied Swedish domestic rules and considered the contract was concluded as the domestic written requirements were fulfilled.

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Article 12 12–13

Part I. Sphere of Application and General Provisions

III. Comparable Rules By the very nature of the Arts 12 and 96 CISG there are no comparable rules in soft law instruments such as PICC. 13 Other international Conventions prepared by UNCITRAL and UNIDROIT do not have similar provisions to Arts 12 and 96 CISG, except for Art. 27 of the 1983 Unidroit Convention on Agency in the International Sale of Goods26. 12

26

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See Herre, Article 96, para 9 (in this Commentary).

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Article 13 “Writing” includes telegram and telex. Bibliography: Eiselen, Electronic Commerce and the UN Convention on Contracts for the International Sale of Goods, 6 EDI Law Review (1999) 36; Schroeter, Interpretation of “writing”: Comparison between provisions of CISG (Art. 13) and counterpart provisions of the Principles of European Contract Law, 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); CISG-AC, Opinion no 1, Electronic Communications under CISG, 15 August 2003. Rapporteur: Professor Christina Ramberg, Gothenburg, Sweden (at http://www.cisg-ac.org).

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1. Scope of Art. 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2. Expansive interpretation of Art. 13: fax and electronic means . . . . . . . . . . . . . 6 3. Interpretation of Art. 13 in light of other international uniform law instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

I. Importance and Role of the Provision Art. 13 is an interpretative provision which purports to include certain means of 1 communications, namely telegrams and telex, within the meaning of writing. A broad interpretation of Art. 13 implies that fax and modern electronic means of communication should be included within the provision. This interpretation is in line with modern trends in international uniform law instruments, domestic law, and business practice and with a media-neutral approach within CISG1 that encompasses cross-border sales in the 21st century.2 Art. 13 applies to those provisions within the CISG that refer to writing, as well as 2 when a writing requirement is derived from an agreement between the parties. The concept of writing is also important in situations where the Convention provides for different legal regimes depending on whether the communication is either written or oral. Art. 18(2) is an example of this situation as it imposes on the addressee of an oral offer a diligent duty of communicating the acceptance. In this regard, the concept of oral communications should include radio, telephone and electronic communications that provide for oral instantaneous communications3.

1

For the latter: Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 11 para. 6. Butler, Electronic Commerce within the framework of the United Nations Convention on Contracts for the International Sale of Goods, in: Schwenzer/Atamer/Butler, Current Issues in the CISG and Arbitration (2013), p. 121. 3 Cour de Justice Gene `ve (Switzerland) 13 September 2002 (printed goods), CISG Online 722 (Pace): “The notion of an oral offer, before being in principle accepted immediately, includes conversations face-to-face, by telephone or any other technical or electronic means of communication allowing immediate oral contact, but not statements captured in a material medium such as, notably a fax”. It is also the situation considered by Art. 20 which refers to instantaneous means of communication. 2

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Article 13 3–6

Part I. Sphere of Application and General Provisions

II. Detailed Commentary 1. Scope of Art. 13 Art. 13 was introduced at the last stage of the legislative history of the Convention4. It is clear from the wording of Art. 13 that it does not provide for a definition of writing, but rather that it should be viewed as an interpretative rule5 that has a substantive role. 5 Art. 13 not only applies to provisions within CISG that refer to writing, such as Arts 12, 21(2), 29 and 96, but also applies to situations in which the writing requirement is derived from an agreement between the parties (Art. 6)6, from a practice established between the parties or from a usage of trade7. What is meant to the parties “by writing” is to be understood under Art. 8 as well as within the scope of writing under Art. 138 and the principle laid down in Art. 11. Furthermore, if the parties agree that any declaration must be signed, Art. 11 and not Art. 13 is derogated9. 3 4

2. Expansive interpretation of Art. 13: fax and electronic means 6

Art. 13 refers only to telex and telegrams in a non-exhaustive way reflecting the commercial practice in 1980. In present day, neither of them are a frequent means of communication, and have been displaced by fax and electronic means such as email. The need to tailor the CISG to the special needs of these modern means implies that it is uncontroversial among scholars and case law that modern means of communication – especially electronic means – that were not contemplated within Art. 13 ought to be included (Art. 7(2))10. This conclusion is achieved on the basis of both the informality 4 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 13 para. 1, considers that Art. 13 was introduced ex novo during the Diplomatic Conference in April 1980 thanks to a proposal of the former Federal Republic of Germany. See: Honnold, Documentary History (1989), pp. 490, 662. But the proposal was raised earlier: See: Honnold, Documentary History (1989), p. 326. 5 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 209; Coca Payeras, in: Dı´ezPicazo, Comentario (1998), Art. 13, p. 159. 6 Rajski, in: Bianca/Bonell, Commentary (1987), Art. 13, para. 3.1 (Pace); Ferrari, in: Ferrari/Flechtner/ Brand, Draft Digest and Beyond (2003), p. 210; Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2010), Art. 13 para. 2. 7 Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 210; Schlechtriem/SchmidtKessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 13 para. 2. 8 Similarly: Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 13 para. 2; id., Art. 11 para. 17, but considering that the intention of the parties might be considered under domestic law. 9 Contrary: Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 13 para. 2; and Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2010), Art. 13 para. 4. 10 CISG-AC, Opinion no 1, Arts 11 and 13. Also fax: Judicial Division of the Supreme Arbitration Court of the Russian Federation (Russian Federation) 26 February 2009 (wheat), Agro-Holding, LLC v VALARS, S.A., CISG-Online 2523 (Pace). Among scholars; Honnold, Uniform Law (1999), para. 130, referring to fax and EDI; Nicoll, E. D. I. Evidence and the Vienna Convention, 52 Journal of Business Law (1995) 21 (31); Ferrari, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 209; Ludwig, Der Vertragsschluss nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law: dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994), p. 350; Eiselen, Electronic Commerce and the UN Convention on Contracts for the International Sale of Goods, 6 EDI Law Review (1999) 21 (36) (Pace) (fax, email and EDI); Piltz, Internationales Kaufrecht (2008), paras 3–129 (fax, SMS, EDI, email); Mazzotta, Notes on the United Nations Convention on the Use of Electronic Communications in International Contracts and Its Effects on the United Nations Convention on Contracts for the International Sale of Goods, 33 Rutgers Computer and Technology Law Journal (2007) 251 (271) (Pace); Zuppi, The Parol Evidence Rule, International Electronic Documents and the United Nations Convention on Contracts for the International Sale of Goods (CISG), FS Kritzer (2008), p. 640 (645). However,

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7–8

Article 13

principle in Art. 1111, and an expansive interpretation or an interpretation by analogy12 of Art. 13. Particularly, case law shows that modern means within the CISG are considered without further discussion13, just as a fact of commercial life. Some scholars qualify the consideration of fax and electronic means as writing under 7 Art. 13 to the fact that the message can be printed14. In this author’s opinion, no such requirement is needed. The fact that fax and electronic means are writing within the CISG derives from an interpretation by analogy of Art. 13. This provision includes within its scope a means of communication – telegram and telex – between distant places by which the process of communication involves a segment that it is not in written form. The same process is seen when using a fax where the initial and the final stage of the process are in writing, but not the intermediate one. The application by analogy of Art. 13 to modern electronic means (EDI, email and 8 the Internet) is more difficult, because there may be no writing stage involved. However, even if no message is printed, electronic communications might be considered as writing if they are functionally equivalent to writing, i. e., establish the content and identification of the author15. The fact that telex and telegrams are included within the provision implies that a general principle might be considered under Art. 1316: a concept of writing17 that goes far beyond the traditional consideration of writing as a Gabriel, Contracts for the Sale of Goods: A Comparison of Domestic and International Law (2004), p. 65, seems to consider that the writing requirement should be analysed under domestic law. 11 E. g.: CISG-AC, Opinion no 1, para. 11.1; Secretariat Commentary on 1978 Draft, Art. 10 (now Art. 11) para. 2. 12 Perales Viscasillas, La formacio ´ n del contrato de compraventa internacional de mercancı´as (1996), pp. 106 et seq (fax and EDI); Schlechtriem/Witz, Convention de Vienne sur les Contrats de Vente Internationale de Marchandises (2008), para. 111; Garro/Zuppi, Compraventa internacional (1990), p. 69 (fax); Hussonmorel, La Compraventa Internacional de Mercaderı´as (2004), p. 41 (fax and email); Coetzee, Securing the Future of Electronic Sales in the Context of International Sales, 11 Vindobona Journal of International Commercial Law & Arbitration (1/2007) 11–24. 13 See e. g.: Court of Cassation (Egypt) 11 April 2006 (marble) (Pace) considering that within Art. 13 fax, email and other electronic means of communication are included; Hof’s-Gravenhage (Netherlands) 23 April 2003 (wheat flour), CISG Online 903 (Pace) a contract concluded by fax; Juzgado de Primera Instancia, No 3 de Badalona (Spain), 22 May 2006 (Bermuda shorts), CISG Online 1391 (Pace) (www.cisgspanish.com) where the contract was concluded through the exchange of emails; Primer Tribunal Colegiado en Materia Civil del Primer Circuit,. Amparo Directo Civil (Mexico) 10 March 2005 (chemical product), Kolmar Petrochemicals Ame´ricas, Inc. v Idesa Petroquı´mica Sociedad Ano´nima de Capital Variable, CISG Online 1004 (Pace) in regard to negotiations through email; Oberlandesgericht Du¨sseldorf (Germany) 21 April 2004 (car phones), CISG Online 915 (Pace) where all the communications including the formation of the contract where done through email. 14 Schmidt-Kessel, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 13 para. 5; Schlechtriem/Witz, Convention de Vienne sur les Contrats de Vente Internationale de Marchandises (2008), para. 111; Huber/Mullis, The CISG (2007), p. 39; Witz/Salger/Lorenz, Kommentar (2000), Art. 13 para. 2. 15 Rajski, in: Bianca/Bonell, Commentary (1987), Art. 13 para. 2.2 (Pace), referring to telegram and telex; CISG-AC, Opinion no 1, para. 13.1, considering that electronic communication should fulfil the same functions as the paper: to save (retrieve) the message and to understand (perceive) it. Contrary, Schroeter, Interpretation of “writing”: Comparison between provisions of CISG (Art. 13) and counterpart provisions of the Principles of European Contract Law, 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), p. 265 (269) (Pace), considering that these requirements derived from domestic laws and not from CISG. The principle of functional equivalent is well established in other UNCITRAL texts, mainly the 2005 Convention on the use of electronic communications in international contracts (Art. 9) and the Model Law on Electronic Commerce (1996) (Arts 6–8). 16 Contrary stating that no general principle can be inferred from Art. 13: Schroeter, Interpretation of “writing”: Comparison between provisions of CISG (Art. 13) and counterpart provisions of the Principles of European Contract Law, 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), p. 265 (269) (Pace). 17 See: Explanatory Note on the 1996 Model Law on Electronic Commerce, para. 15.

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Article 13 9–10

Part I. Sphere of Application and General Provisions

paper document. Thus, writing under Art. 13 includes any means of communication that provides the content of the information and that is capable of being reproduced in a tangible or perceivable form18: printed, recorded or stored on a computer or disk. Thus, if the electronic message is recorded on a computer or disk, or the fax is transmitted through the computer and stored or printed, it will fulfil the writing requirement19. The same applies to contracting via the Internet, e. g. on a website or through an automated message system. It is the possibility to make the electronic data tangible – whether by paper or not – that ought to be considered when interpreting Art. 13.

3. Interpretation of Art. 13 in light of other international uniform law instruments The extended scope of Art. 13 to modern means of communication is also achieved by a dynamic interpretation of Art. 13 in light of other international uniform instruments, such as the 1996 Model Law on Electronic Commerce, Art. 1.10 PICC20 and Art. 1:301(6) PECL21, or by resorting to CISG-AC Opinion no 122. There is, however, only one exception when considering these instruments: the PECL consider “any means of communication capable of providing a readable record of the statement on both sides”. However, in this author’s opinion, in order to meet the requirements of Art. 13, it is sufficient to provide only one record23. The question is then to assess the evidence presented, and a judge or arbitral tribunal might consider that the record presented only by one side is not enough as such. 10 The 2005 UN Convention on the Use of Electronic Communications in International Contracts might be used to fill the gap of Art. 13 in two different circumstances. First, 9

18 CISG-AC, Opinion no 1: “The term “writing” in CISG also includes any electronic communication retrievable in perceivable form”. 19 In agreement: Perales Viscasillas, La formacio ´ n del contrato de compraventa internacional de mercancı´as (1996), pp. 106 et seq.; Illescas Ortiz/Perales Viscasillas, Derecho Mercantil Internacional (2003), pp. 133 et seq.; Schroeter, Interpretation of “writing”: Comparison between provisions of CISG (Art. 13) and counterpart provisions of the Principles of European Contract Law, 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), p. 265 (270) (Pace). 20 Charters, Growth of the CISG with Changing Contract Technology: “Writing” in Light of the UNIDROIT Principles and CISG-AC Advisory Council Opinion no 1, 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), pp. 68 seq. (Pace). 21 See considering that Art. 1:301(6) PECL is an aid in the interpretation of Art. 13: Schroeter, Interpretation of “writing”: Comparison between provisions of CISG (Art. 13) and counterpart provisions of the Principles of European Contract Law, 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), p. 265 (269 seq.) (Pace). 22 CISG-AC Opinion no 1 has been considered as the applicable interpretation of the CISG with regard to electronic communications: Hahnkamper, Acceptance of an offer in light of electronic communications, 25 Journal of Law and Commerce 147 (148) (Pace) (Uncitral); and Charters, Growth of the CISG with Changing Contract Technology: “Writing” in Light of the UNIDROIT Principles and CISG-AC Advisory Council Opinion no 1, 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), pp. 73 seq. (Pace). 23 Contrary Schroeter, Interpretation of “writing”: Comparison between provisions of CISG (Art. 13) and counterpart provisions of the Principles of European Contract Law, 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), p. 265 (273) (Pace), as he relies on PECL, and thus he concludes that a declaration made through a website form does not provide a readable record of the statement on both sides.

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13

by a direct application of Art. 20 of the 2005 Convention that considers the situation in which, if a state has ratified the 2005 Convention and the CISG, the 2005 Convention applies to the provisions of the CISG related to electronic communications24. As such, Arts 11, 13 and 14 are “replaced” by Arts 9(1),(2) and 11 of the 2005 Convention. Second, even if there is no ratification of the 2005 Convention or even if it has not yet entered into force, the possibility to resort to this instrument to interpret or supplement Art. 13 is not to be rejected since Art. 7(2) CISG allows, from a dynamic perspective, resort to other international texts25; an approach based on the goals of uniform and international interpretation of the CISG (Art. 7(1)) which are shared by the 2005 Convention26. Furthermore, impliedly, the intended purpose of UNCITRAL when considering the interplay between the 2005 Convention and other international conventions was to create a “recommendation”27, whereby the interpretation of such conventions – including the CISG – should be made in light of electronic communications as conceived by the 2005 Convention28. In conclusion, Art. 9(2) of the 2005 Convention ought to be considered in relation to the CISG: writing under Art. 13 includes any electronic communication “if the information contained therein is accessible so as to be usable for subsequent reference”29.

III. Comparable Rules The meaning of writing within Art. 1330 has been taken as a model for many other 11 international and regional legal texts justifying the interplay between uniform law instruments31. Most of them have been drafted in more recent times therefore taking into account the new developments in modern means of communication32. We can 24 More details at Eiselen, Integration of the UN electronic communications Convention and the United Nations Convention on Contracts for the International Sale of Goods in: Schwenzer/Atamer/ Butler, Current Issues in the CISG and Arbitration (2013), pp. 145–165. 25 Similarly: Meyer, Constructive Interpretation- Applying the CISG in the 21st Century, in: Janssen/ Meyer (eds), CISG Methodology (2009), p. 338. 26 The Preamble of the CISG emphasizes the goal of creating uniform rules with the purpose of removing obstacles that might be derived from existing international trade instruments. See also comments to supra Art. 7 para. 39. 27 It is true, however, that Art. 20 is not meant to provide an authentic interpretation of the CISG: see Explanatory Note by the UNCITRAL Secretariat on the 2005 UN Convention on the Use of Electronic Communications in International Contracts, para. 289. 28 Electronic communication as equivalent to writing is now the term used in the more recent instrument prepared by UNCITRAL: e. g., Art. 3 UN Convention on the contracts for the international carriage of goods wholly or partly by sea (2008 Rotterdam Rules). 29 The same approach is found in Art. 6.1 Model Law on Electronic Commerce (1996). The Guide to enactment of the Model Law, para. 50 considers that Art. 6 focuses on the information being reproduced and read and that “accessible” means that the information is readable and interpretable. See also Explanatory Note to the 2005 UN Convention on the Use of Electronic Communications in International Contracts, para. 146. 30 The model for Art. 13 CISG was Art. 1.3(g) UNCITRAL Prescription Limitation Convention (1974). 31 Art. 13 has been used in regard to the interpretation of an arbitration agreement concluded by exchange of telex: Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 28 April 1995 (unidentified goods), (Pace). But see denying the application by analogy of Art. 13: Oberster Gerichtshof (Austria) 2 July 1993 (domestic lease), CISG Online 527 (Pace) (Unilex) in a case involving a domestic lease contract made by telefax; Oberster Gerichtshof (Austria) 26 April 1997 (unidentified goods), (Unilex) in relation with a CMR Transport Contract: “Eine analoge Anwendung von Art 13 UN-Kaufrecht scheide nach der zitierten oberstgerichtlichen Entscheidung aus, weil Ausnahmebestimmungen nicht analogiefa¨hig seien”. 32 OHADA Uniform Act Relating to General Commercial Law (Commercial sale: Art. 209, 1 January 1998): including telefax. Art. 7 UNCITRAL Model Law on International Commercial Arbitration (as amended in 2006).

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even refer to instruments of a new generation where attention is paid to the functional concept of writing without the need of enumerating them. For example, the concept of writing in the PICC “means any mode of communication that preserves a record of the information contained therein and is capable of being reproduced in tangible form”33. The comment on this article enumerates the means of communication included within writing as not only a telegram and a telex (in clear allusion to Art. 13 CISG), but also any other mode of communication that preserves a record and can be reproduced in a tangible form. This provision certainly improves Art. 13. 33 See Art. 1(4) UNIDROIT Convention on International Factoring (1988). Art. I.-1:105 DCFR refers to the meaning of writing as “a statement is “in writing” if it is in textual form, on paper or another durable medium and in directly legible characters. Then defines textual form, durable medium and electronic means (Art. I.-105(2)(3) and Art. I.-1:106(5) DCFR).

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PART II Formation of the Contract Introduction to Articles 14–24 Outline I. Sphere of application and possibility of reservation according to Article 92. 1 1. Possibility of Reservation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Temporal sphere of application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 II. Scope of application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2. Standard Contract Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3. Other modes of contract conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 4. Commercial letter of confirmation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 III. Exclusion of Part II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

I. Sphere of application and possibility of reservation according to Article 92 1. Possibility of Reservation The (dispositive)1 provisions on “Formation of the Contract” are found in Part II of 1 the CISG. They were combined, at a very late stage in the drafting process, with provisions concerning the rights and obligations of the parties (Part III) to form a consolidated text.2 This combination made certain parallel provisions (such as those regarding the sphere of application) superfluous, though the provisions were necessary vis-a`-vis the ULIS and the ULF.3 The provisions of Part II of the CISG can be traced back to the rules found in ULF.4 Despite the consolidation into one single text, the independence of the various sets of rules relating to “Formation of the Contract” and “Sale of Goods” still shines through.5 Pursuant to Art. 92, it is possible for a Contracting State to “declare at the time of signature, ratification, acceptance, approval or accession that it will not be bound by Part II of this Convention or that it will not be bound by Part III of this Convention.”6 The Scandinavian Contracting States, namely Denmark, Finland, Norway and Sweden, which pushed for the possibility of declaring this reservation,7 all have declared a reservation according to Art. 92, pursuant to which

1

Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Intro. to Art. 14 CISG para. 47. For an overview of the history of these rules, see, e. g., Ludwig, Der Vertragsabschluß nach UNKaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994), pp. 287 et seq. 3 See UNCITRAL YB (1978), p. 13 paras 15 et seq. 4 See, among others, Schlechtriem, Einheitliches UN-Kaufrecht (1981), p. 34. 5 For this statement, see Magnus, in: Staudinger Kommentar (2013), Intro. to Art. 14 para. 1. 6 See Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 92. 7 See Brunner/Hutzli, Kommentar (2014), Art. 92para. 1; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 4; Herber/Czerwenka, Kommentar (1991), Art. 92 para. 1; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Intro. to Art. 14 CISG para. 2; Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (Vienna), p. 43 (45); Schroeter, Reservations and the CISG: The Borderland of Uniform International Sales Law and the Treaty-Law after Thirty-Five Years, 41 Brook. J. Int’l L. (2015) 203 (224). 2

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they would not be bound by Part II of the Convention.8 By now, all of the Scandinavian countries have withdrawn their reservation.9 2 This declaration constitutes a real reservation.10 However, unlike other reservations that can be declared under the CISG,11 this reservation affects whether a given country12 has overall Contracting State status and therefore has also to be taken into account by Contracting non-reservatory States.13 This is made clear by the text of para. 2, which explains the effects of the reservation at hand. Accordingly, a state cannot be considered a Contracting State with respect to the Part of the Convention to which the reservation relates.14 As a consequence, if a party has its place of business in a Contracting State that has declared an Art. 92 reservation, the CISG can never be applicable in toto by virtue of Art. 1(1)(a).15 In effect, only that part of the CISG in force in both states where the contracting parties have their places of business can be applicable under Art. 1(1)(a). Nevertheless, this does not foreclose the application of the provisions of the Part in respect of which the reservation has been declared.16 Rather, the application of that Part depends on whether the rules of private international law of the forum state refer to the law of a Contracting State that did not declare a reservation.17 In that case, the Part to which the declaration relates can be applicable by virtue of Art. 1(1)(b),18 provided, of 8 Lookofsky, Alive and Well in Scandinavia: CISG Part II, 18 Journal of Law and Commerce (1999) 289 (289 et seq.). 9 Brunner/Hutzli, Kommentar (2014), Art. 92 para. 2; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Intro to Arts 14–24 para. 78. 10 See Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 92 para. 2; in: Schwenzer/Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 92 para. 1. 11 See, e. g., Art. 95 and Art. 96. 12 Compare Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 1 para. 65. 13 Piltz, Internationales Kaufrecht (2008), para. 3-3. 14 Achilles, Kommentar (2000) Art. 92 para. 1; Herber/Czerwenka, Kommentar (1991), Art. 92 para. 3; Magnus, in: Staudinger Kommentar (2013), Art. 92 para. 5; Sannini, L’applicazione della Convenzione di Vienna sulla vendita internazionale negli Stati Uniti (2006) p. 69; Schwenzer/Hachem, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 92 para. 3. 15 See also Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 5; Siehr, in: Honsell, Kommentar (1997), Art. 1 paras 22 et seq.; Lookofsky, Alive and Well in Scandinavia: CISG Part II, 18 Journal of Law and Commerce (1999) 289 (292); Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 92 para. 3; incorrect: Oberlandesgericht Naumburg (Germany) 27 April 1999, CISG-Online 512: application of the CISG by virtue of Art. 1(1)(a), even though one of the parties had its place of business in a country that had declared an Art. 92 reservation; incorrect also Oberlandesgericht Frankfurt (Germany) 4 March 1994, CISG-Online 110; for critical remarks see Fogt, Rechtzeitige Ru¨ge und Vertragsaufhebung bei Waren mit raschem Wertverlust nach UN-Kaufrecht, ZeuP (2002) 580 (587 note 22). 16 See also Herber/Czerwenka, Kommentar (1991), Art. 92 para. 3; Lookofsky, Alive and Well in Scandinavia: CISG Part II, 18 Journal of Law and Commerce (1999) 289 (294 et seq.). 17 Brunner/Hutzli, Kommentar (2014), Art. 92 para. 3; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 92 para. 6; Ferrari, La vendita internazionale. Applicabilita` ed applicazioni della Convenzione delle Nazioni Unite sui contratti di vendita internazionale di beni mobili (2nd ed., 2006) pp. 79 et seq.; Flechtner, The Several Texts of the CISG in a Decentralized System: Observations on Translations, Reservations and other Challenges to the Uniformity Principle in Article 7(1), 17 Journal of Law and Commerce (1998) 187 (193 et seq.); Garro/Zuppi, Compraventa internacional de mercaderı´as (2012), p. 96; Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (Vienna), p. 43 (45); Piltz, Internationales Kaufrecht (2008), para. 3-3; Lu¨deritz/Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Intro. to Art. 14 para. 1; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Intro to Arts 14–24 para. 79. 18 See Brunner/Hutzli, Kommentar (2014), Art. 92 para. 3; Gruber, in: Mu ¨ nchKommBGB (2016), Intro. to Art. 14 para. 15; Rudolph, Kommentar (1996), Art. 92 para. 2; Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 1 para. 69; Saenger, in: Bamberger/Roth, Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Intro. to Art. 14 para. 2; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Intro. to Art. 14 para. 10; Witz/Salger/Lorenz, Kommentar (2016), Intro. to Art. 14 para. 1.

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3–4

Introduction to Articles 14–24

course, that all other requirements are met.19 This is true even in those instances where the court deciding the dispute is located in a Contracting State that has declared an Art. 92 reservation.20 This has been confirmed in case law.21

2. Temporal sphere of application Art. 100(1) defines the temporal sphere of application of Part II. According to that 3 provision, the rules of Part II apply only when the proposal for concluding the contract is made on, or after the date when the CISG enters into force (with respect to the Contracting States referred to in subparagraph (1)(a) or the Contracting State referred to in subparagraph (1)(b) of Art. 1). Thus, for Part II to apply, it is not sufficient that the contract has been concluded after the coming into force of the CISG in the mentioned states.22 Rather, the time the offer is made is decisive.23

II. Scope of application 1. Introduction The provisions of Part II, which govern all contractual agreements covered by the 4 CISG, including an agreement to terminate, modify, or supplement an already existing contract,24 only govern the external agreement, as pointed out by commentators25 and courts alike.26 In this respect “the CISG follows the conventional mechanism of offer 19 In case law, see US District Court, Northern District of Illinois, Eastern Division (U.S.), Mitchell Aircraft Spares Inc. v European Aircraft Service AB, 27 October 1998, CISG-Online 444; Fova´rosi Biro´sa´g Budapest (Hungary) 21 May 1996, CISG-Online 252; Oberlandesgericht Rostock (Germany) 27 July 1995, CISG-Online 209; Arbitral Award, ICC 7585/92, (Pace); unclear Oberlandesgericht Mu¨nchen (Germany) 8 March 1995, CISG-Online 145. 20 See also Herber/Czerwenka, Kommentar (1991), Art. 92 para. 3; Lookofsky, Loose Ends and Contorts in International Sales: Problems in the Harmonization of Private Law Rules, 39 American Journal of Comparative Law (1991) 403 (403). 21 Østre Landsret (Denmark) 23 April 1998, CISG-Online 486. 22 For this conclusion, see also Evans, in: Bianca/Bonell, Commentary (1987), Art. 100 para. 2.2; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 7; Piltz, Internationales Kaufrecht (2008), para. 2–108; Magnus, in: Staudinger Kommentar (2013), Art. 100 para. 5. 23 See Czerwenka, Rechtsanwendungsprobleme im internationalen Kaufrecht. Das Kollisionsrecht bei grenzu¨berschreitenden Kaufvertra¨gen und der Anwendungsbereich der internationalen Kaufrechtsu¨bereinkommen (1988) p. 155; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 9; Karollus, UN-Kaufrecht (1991) p. 36; Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 100 para. 2; in case law, see U. S. District Court, Southern District of Florida (U.S.), 22 November 2002, Impuls v Psion-Teklogix, CISG-Online 783 (Pace). 24 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Intro. to Art. 14 CISG para. 49; Piltz, Internationales Kaufrecht (2008), para. 3-1; Rehbinder, Vertragsschluss nach UN-Kaufrecht im Vergleich zu EAG und BGB, in: Schlechtriem (ed.), Einheitliches Kaufrecht und nationales Obligationenrecht (1987), p. 149 (153). 25 Bydlinski, Das allgemeine Vertragsrecht, in: Doralt (ed.), Das UNCITRAL-Kaufrecht im Vergleich zum o¨sterreichischen Recht (1985), p. 57 (60); Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2nd ed., 2006) p. 10; Herber/Czerwenka, Kommentar (1991), Intro. to Art. 14 para. 6; Gruber, in: Mu¨nchKommBGB (2016), Intro. to Art. 14 para. 1; Piltz, Internationales Kaufrecht (2008), para. 3-2; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Intro. to Art. 14 para. 1; Schlechtriem/Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Intro. to Arts 14–24 para. 1; Magnus, in: Staudinger Kommentar (2013), Intro. to Art. 14 para. 2; Stoffel, Formation du ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf (1985), p. 55 (56); contrat, in: Wiener U Wiltz/Salger/Lorenz, Kommentar (2016) Intro to Art. 14 para. 6. 26 See Cour d’Appel Lie `ge (Belgium) 28 April 2003, CISG-Online 944; Oberster Gerichtshof (Austria) 22 October 2001, CISG-Online 614; Oberster Gerichtshof (Austria) 6 February 1996, CISG-Online 224; Zivilgericht Basel-Stadt (Switzerland) 21 December 1992, CISG-Online 55.

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and corresponding acceptance.”27 Except for form requirements,28 validity requirements are not governed by the CISG,29 and must therefore be determined according to the applicable domestic law – identified case by case on the basis of the rules of private international law of the forum.30 Thus, it is unsurprising that both commentators and courts suggest that domestic law is applicable to some issues, relevant for determining whether a valid contract formation occurred. This is true, for instance, as regards the legal capacity of a person31 and/or capacity to contract,32 as well as questions concerning defects of intent, such as duress, fraud and mistake33 (except for issues relating to mistake as to the quality of goods and to mistake as to the other party’s capacity to perform or one party’s solvency, which are all governed by the CISG34), and questions concerning the power of representation in the case of a contract concluded by an agent.35 The same is true for questions concerning the effect of a violation of a statutory prohibition, domestic law is also applicable to those questions.36

2. Standard Contract Terms 5

The question of whether standard contract terms are incorporated into a contract is also subject to the rules found in Part II of the CISG.37 Consequently, these rules 27 Landgericht Zwickau (Germany) 19 March 1999, CISG-Online 519; in legal writing see Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (Vienna), p. 43 (45); Magnus, in: Staudinger Kommentar (2013), Intro. to Art. 14 para. 2; Piltz, Neue Entwicklungen im UN-Kaufrecht, NJW (1996) 2768 (2770); Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Intro. to Art. 14 para. 2; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 240; Witz/ Salger/Lorenz, Kommentar (2016), Intro. to Art. 14 para. 4. 28 See Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 4 para. 13. 29 Brunner/Pfisterer/Ko ¨ ster Kommentar (2014), Intro. to Art. 14 para. 2; Garro/Zuppi, Compraventa internacional de mercaderı´as (2012), p. 115; Heuze´, La formation du contrat selon la CVIM: quelques difficulte´s, Revue de droit des affaires internationales (2001) 277 (277); Gruber, in: Mu¨nchKommBGB (2016), Intro. to Art. 14 para. 8; Magnus, in: Staudinger Kommentar (2013), Intro. to Art. 14 para. 3; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Intro. to Art. 14 CISG para. 3. 30 Bydlinski, Das allgemeine Vertragsrecht, in: Doralt (ed.), Das UNCITRAL-Kaufrecht im Vergleich zum o¨sterreichischen Recht (1985). pp. 57 (pp. 84 et seq.); Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 11; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Intro. to Art. 14 para. 1; Schlechtriem/Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Intro. to Arts 14–24 para. 2. 31 Rudolph, Kommentar (1996), Art. 4 para. 5; Witz/Salger/Lorenz, Kommentar (2016), Intro. to Art. 14 para. 6. 32 Magnus, in: Staudinger Kommentar (2013), Intro. to Art. 14 para. 3. 33 Gruber, in: Mu ¨ nchKommBGB (2016), Intro. to Art. 14 para. 8; Piltz, Internationales Kaufrecht (2008), para. 3- 2; Lu¨deritz/Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Intro. to Art. 14 para. 4. 34 See Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 4 para. 24. 35 See Siehr, in: Honsell, Kommentar (1997), Art. 4 para. 7; Gruber, in: Mu ¨ nchKommBGB (2016), Intro. to Art. 14 para. 8; Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 4 para. 34; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Intro. to Art. 14 para. 1; Witz/ Salger/Lorenz, Kommentar (2016), Intro. to Art. 14 para. 7. 36 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Intro. to Art. 14 para. 1; Magnus, in: Staudinger Kommentar (2013), Intro. to Art. 14 para. 3. 37 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Intro. to Art. 14 para. 2; Ferrari/Torsello, International Sales Law – CISG (2015), p. 131; Gruber, in: Mu¨nchKommBGB (2016), Intro. to Art. 14 para. 6; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Intro. to Art. 14 CISG para. 21; Schlechtriem/Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Intro. to Arts 14– 24 para. 4; Schwenzer/Hachem, CISG – Success and Pittfalls, 57 American Journal of Comparative Law ¨ bereinkommen von 1980 u¨ber den (2009) 457 (473); Stoffel, Formation du contrat, in: Wiener U internationalen Warenkauf (1985), p. 55 (71); Witz/Salger/Lorenz, Kommentar (2016), Intro. to Art. 14 para. 10; in case law, see Rechtbank Midden-Nederland (Netherlands) 20 January 2016, CISG-Online 2685; Rechtbank Rotterdam (Netherlands) 2 December 2015, CISG-Online 2683; LG Fulda (Germany)

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to Articles 14–24

likewise govern38 the question of the battle of forms as a specific provision on the battle of forms is lacking, unlike for instance under the UNIDROIT Principles39 which contain a provision (Art. 2.1.22) that deals with the issue on the basis of the “knock-out-rule”.40 In contrast, domestic law is applicable to the question of whether standard contract terms that have been incorporated into a contract are valid,41 provided that this issue is not to be decided, as it is for instance under Italian law,42 on the sole basis of form requirements being met.43 This is due to the fact that Art. 4(a) excludes certain validity issues, such as the validity of contract terms, from the CISG’s scope of application.44 However, if for the purpose of deciding whether a contract term is valid the applicable domestic law requires one to evaluate the contents of a contract term in light of whether it meets certain standards (such as reasonableness), the evaluation must take into account the CISG’s standards (on reasonableness).45 By virtue of Art. 4(a), domestic law also determines the scope of rights granted to 6 particular groups of persons, such as consumers, to which the CISG may exceptionally apply – allowing them to dissolve a contract already concluded (rights of withdrawal or droits de repentir46 as well as cool-off periods).47 This has been justified by commentators on the grounds that these rights and cool-off periods serve a function that parallels that of protecting persons with limited capacities.48

29 September 2015, CISG-Online 2716; LG Stade (Germany) 19 February 2015, CISG-Online 2669; LG Neubrandenburg (Germany) 3 August 2005, CISG-Online 1190; Hoge Raad (Netherlands) 28 January 2005, CISG-Online 1002; OLG Du¨sseldorf (Germany) 21 April 2004, CISG-Online 915; Oberster Gerichtshof (Austria) 17 December 2003, CISG-Online 828; Bundesgerichtshof (Germany) 31 October 2001, CISG-Online 617; OLG Zweibru¨cken (Germany) 31 March 1998, CISG-Online 481. 38 Magnus, in: Staudinger Kommentar (2013), Intro. to Art. 14 para. 2. 39 See also Art. II-4:209 DCFR and Art. 2:209 PECL, both of which deal with the battle of forms issue on the basis of the knock-out rule. 40 See Fejo ¨ s, Battle of the Forms Under the CISG, 11 Vindobona Journal of International Commercial Law and Arbitration (2007) 113 (126 et seq.); Monti, A Comment on “An Ex-Ante View of the Battle of the Forms: Inducing Parties to Draft Reasonable Terms” by Omri Ben Shahar, International Review of Law and Economics (2005) 371 (276 note 20); Naude´, in: Vogenauer/Kleinheitserkamp (eds), Commentary on the Unidroit Principles (2009), Art. 2.1.22. paras 1 and 3 et seq.; Wildner, Art. 19 CISG: The German Approach to the Battle of the Forms in International Contract Law: The Decision of the Federal Supreme Court of Germany of 9 January 2002, 20 Pace International Law Review (2008) 1 (10 et seq.). 41 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Intro. to Art. 14 CISG para. 25; Schlechtriem/Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Intro. to Arts 14–24 para. 3. 42 See Article 1341 of the Italian Civil code; for a more detailed analysis of the issue at hand, see Ferrari, Vendita internazionale di beni mobili. Artt. 1–13. Ambito di applicazione. Disposizioni generali (1994) p. 216. 43 See Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Intro. to Art. 14 para. 1; contra see Witz/Salger/Lorenz, Kommentar (2016), Intro. to Art. 14 para. 11. 44 Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelt (eds), Het Weens Koopverdrag (1997), p. 71 (89). 45 See also Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 14 para. 12; Piltz, Internationales Kaufrecht (2008), para. 2-153; Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 4 para. 20. 46 Gruber, in: Mu ¨ nchKommBGB (2016), Intro. to Art. 14 para. 10; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Intro. to Art. 14 CISG para. 4. 47 Schlechtriem/Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Intro. to Arts 14–24 para. 8; Witz/Salger/Lorenz, Kommentar (2016), Intro. to Art. 14 para. 7. 48 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Intro. to Art. 14 para. 1.

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Part II. Formation of the Contract

3. Other modes of contract conclusion 7

It is well established49 that the provisions of Part II are based on the traditional scheme of contract conclusion through offer and acceptance.50 This fact – and the fact that during the drafting process proposals aimed at the introduction of provisions which state that a contract is to be considered concluded, even in cases where it is not possible to clearly identify an offer and a corresponding acceptance, have been withdrawn51 – has induced some commentators to suggest that agreements reached by means other than through offer and acceptance (such as agreements reached in pointby-point negotiations or lengthy exchange of correspondence) are not governed by the CISG.52 According to the prevailing opinion in both legal writing53 and case law54, however, “other forms of getting to an agreement [are] not excluded [by the CISG].”55 Hence, parties “can get to a contract even if offer and acceptance are not clearly distinguishable.”56 The issue – which requirements have to be met in order for a contract to be concluded – is therefore not a matter of domestic law,57 but one governed by the CISG,58 more specifically, one to be solved by resorting to the general principles

49

See supra the text accompanying note 27. Bydlinski, Das allgemeine Vertragsrecht, in: Doralt (ed.), Das UNCITRAL-Kaufrecht im Vergleich ¨ bereinkommen zum o¨sterreichischen Recht (1985) p. 57 (60); Eo¨rsi, Formation of Contract, in: Wiener U von 1980 u¨ber den internationalen Warenkauf (1985), p. 43 (44); Ferrari/Torsello, International Sales Law – CISG (2015), p. 131; Heuze´, La formation du contrat selon la CVIM: quelques difficulte´s, Revue de droit des affaires internationales (2001) 277 (278); Gruber, in: Mu¨nchKommBGB (2016), Intro. to Art. 14 para. 1; Lu¨deritz/Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Intro. to Art. 14 para. 1; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Intro. to Art. 14 CISG para. 6; Piltz, Internationales Kaufrecht (2008), para. 3-11; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Intro. to Art. 14 para. 2; Schlechtriem/Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Intro. to Arts 14–24 para. 15. 51 UNCITRAL YB (1978), p. 38 f. 52 U. Huber, Der UNCITRAL-Entwurf eines U ¨ bereinkommens u¨ber internationale Warenkaufvertra¨ge, 43 RabelsZ (1979) 413 (447). 53 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Intro. to Art. 14 paras 1 and 5; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Intro. to Art. 14 CISG para. 6; Schwenzer/Mohs, Old Habits Die Hard: Traditional Contract Formation in a Modern World, IHR (2006) 239 (239); Schlechtriem/Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Intro. to Arts 14– 24 para. 23. 54 See Bonell, Vertragsverhandlungen und culpa in contrahendo nach dem Wiener Kaufrechtsu ¨ bereinkommen, RIW (1990) 693 (695 et seq.); Brunner, Kommentar (2004), Intro. to Art. 14 paras 1 and 4; Bydlinski, Das allgemeine Vertragsrecht, in: Doralt (ed.), Das UNCITRAL-Kaufrecht im Vergleich zum o¨sterreichischen Recht (1985), p. 57 (61); Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) pp. 12 et seq.; Herber/Czerwenka, Kommentar (1991), Intro. to Art. 14 para. 16; Karollus, UN-Kaufrecht (1991) pp. 54 et seq.; Ludwig, Der Vertragsabschluß nach UNKaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994), pp. 294 et seq.; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Intro. to Art. 14 para. 5; Magnus, in: Staudinger Kommentar (2013), Intro. to Art. 14 para. 5; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) para. 239; Witz/Salger/Lorenz, Kommentar (2016), Intro. to Art. 14 para. 5. 55 Oberlandesgericht Mu ¨ nchen (German) 8 March 1995, CISG-Online 145. 56 Hof Beroep Gent (Belgium) 15 May 2002, CISG-Online 746. 57 See also Herber/Czerwenka, Kommentar (1991), Into. to Art. 14 para. 16. 58 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Intro. to Art. 14 para. 5; Witz/Salger/Lorenz, Kommentar (2016), Intro. to Art. 14 para. 5. 50

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upon which Part II of the CISG is based. Accordingly, it is generally sufficient59 that the parties have come to an agreement with regard to the essentialia negotii.60

4. Commercial letter of confirmation The issue of whether the failure to object to a commercial letter of confirmation also 8 constitutes an issue of contract formation.61 Does this mean that the issue is governed by the CISG, even though no specific CISG provision is dedicated to the issue, unlike, for instance, under the PICC which contained a provision (Art. 2.1.12) that specifically deals with the issue? Because Part II deals exhaustively with the issue of contract formation,62 it is unlikely that domestic standards developed in different national legal systems (such as in Germany) are relevant. Since, however, there are instances in which usages prevail over the (default) rules of the CISG (and, therefore, over the provisions of Part II as well),63 domestic rules concerning the failure to object to a commercial letter of confirmation may be relevant, provided that these rules have become usages in the sense of Art. 9,64 as also stated in case law.65 Rules on the failure to object to a commercial letter of confirmation certainly 9 constitute usages in an autonomous sense of CISG.66 But this alone is insufficient to bind the parties under Art. 9(2), and it is insufficient that these rules apply at the place of business of the addressee of the commercial letter of confirmation.67 Rather, both 59 For a reference to form requirements that have – exceptionally – to be met, see Ferrari, Form und UN-Kaufrecht, IHR (2004) 1 et seq.; Ferrari, Writing requirements: Articles 11–13, in: Ferrari/Flechtner/ Brand, Draft Digest and Beyond (2003), pp. 206 et seq. 60 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Intro. to Art. 14 para. 5; Ferrari/Torsello, International Sales Law – CISG (2015), p. 131; Karollus, UN-Kaufrecht. Eine systematische Darstellung fu¨r Studium und Praxis (1991), pp. 54 et seq.; Perales Viscasillas, La formacion del contrato de compraventa internacional de mercaderias (1996) p. 389 et seq.; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Intro. to Art. 14 para. 5; Magnus, in: Staudinger Kommentar (2013), Intro. to Art. 14 para. 5. 61 Lu ¨ deritz/Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Intro. to Art. 14 para. 118. 62 Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (Vienna), p. 43 (46); Piltz, Internationales Kaufrecht (2008), para. 3-2; Stoffel, Formation du contrat, in: ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf (1985), pp. 55 (67 et seq.); Wiener U Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 242; Schlechtriem/Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Intro. to Arts 14–24 para. 1; see also Bydlinski, Das allgemeine Vertragsrecht, in: Doralt (ed.), Das UNCITRAL-Kaufrecht im Vergleich zum o¨sterreichischen Recht (1985), p. 57 (61); but see Gruber, in: Mu¨nchKommBGB (2016), Intro. to Art. 14 para. 2. 63 For a comment on the impact of usages on the CISG, see Ferrari, Trade Usage and Practices Established between the Parties under the CISG, International Business Law Journal (2003) 571 et seq. 64 See Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Intro. to Art. 14 para. 7; Esser, Die letzte Glocke zum Geleit? – Kaufma¨nnische Besta¨tigungsschreiben im Internationalen Handel: Deutsches, Franzo¨sisches, ¨ sterreichisches und Schweizerisches Recht und Einheitliches Recht unter der Kaufrechtskonvention von O 1980, Zeitschrift fu¨r Rechtsvergleichung (1988) 167 (186); Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 13; Ferrari/Torsello, International Sales Law – CISG (2015), p. 133; Herber/Czerwenka, Kommentar (1991), Intro. to Art. 14 para. 18; Gruber, in: Mu¨nchKommBGB (2016), Intro. to Art. 14 para. 4; Piltz, Internationales Kaufrecht (2008), para. 2-127; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Intro. to Art. 14 para. 4; Magnus, in: Staudinger Kommentar (2013), Intro. to Art. 14 para. 6; Witz/Salger/Lorenz, Kommentar (2016), Art. 9 para. 10. 65 ZG Kanton Basel-Stadt (Switzerland) 21 December 1992, CISG-Online 55 (Pace). 66 For this conclusion see, e. g., Esser, Die letzte Glocke zum Geleit? – Kaufma ¨nnische Besta¨tigungss¨ sterreichisches und Schweizerisches chreiben im Internationalen Handel: Deutsches, Franzo¨sisches, O Recht und Einheitliches Recht unter der Kaufrechtskonvention von 1980, Zeitschrift fu¨r Rechtsvergleichung (1988) 167 (188 et seq.); Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Intro. to Art. 14 CISG para. 9; Piltz, Internationales Kaufrecht (1993), § 2 para. 178. 67 Accord Herber/Czerwenka, Kommentar (1991), Art. 9 para. 12; contra Ebenroth, Internationale Vertragsgestaltung im Spannungsverha¨ltnis zwischen ABGB, IPR-Gesetz und UN-Kaufrecht, o¨sterreichische Juristische Bla¨tter (1986) 681 (688).

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Part II. Formation of the Contract

contractual parties must have their places of business in an area which subscribes to that particular usage68 (or must maintain commercial operations in that area on a regular basis), the usage must be one that is widely known in international trade, and regularly observed by parties to contracts of the type involved in the particular trade concerned.69 This has been acknowledged at least by those courts70 that do not exclude a priori the possibility that the rules (concerning the failure to object to a commercial letter of confirmation) are a usage in terms of the CISG.71

III. Exclusion of Part II Since the provisions found in Part II are, like most – though not all72 – other provisions of the CISG, by nature dispositive,73 the parties can (explicitly or implicitly) exclude them or derogate from them.74 An agreement of the parties is required for this purpose.75 This agreement will often arise out of a preliminary agreement or a framework contract;76 this generally poses no serious issues, as the same considerations and requirements apply as to agreements excluding the CISG’s applicability in general.77 11 The question of the law applicable to the formation of contracts is problematic if the offeror attempts to exclude the CISG unilaterally, by inserting a clause to that effect into the offer.78 Some commentators suggest that, in this case, the applicable law to the formation is that determined by the offeror or, absent such a determination, the law applicable by virtue of the objective connecting factors of the private international law rules of the forum.79 This view cannot be shared.80 The question of whether a statement by the party taking the initiative towards the conclusion of the contract constitutes an 10

68

See Herber/Czerwenka, Kommentar (1991), Intro. to Art. 14 para. 18. See Achilles, Kommentar (2000), Art. 9 para. 4; Holl/Kessler, Selbstgeschaffenes Recht der Wirtschaft und Einheitsrecht – Stellung der Handesbra¨uche und Gepflogenheiten im Wiener UN-Kaufrecht, RIW (1995) 457 (459); Neumayer/Ming, Convention de Vienne (1993), Art. 9 para. 4; Schlechtriem, Internationales UNKaufrecht, Art. 9 para. 62; Lu¨deritz/Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Intro. to Art. 14 para. 7; Magnus, in: Staudinger Kommentar (2013), Art. 9 para. 27. 70 See Oberlandesgericht Frankfurt (Germany) 5 July 1995, CISG-Online 258. 71 For a court stating that the rules on the failure to object to a commercial letter of confirmation do not at all apply under the CISG, see Landgericht Frankfurt (Germany) 6 July 1994, CISG-Online 257. 72 Ferrari, Exclusion et inclusion de la CVIM, Revue de droit des affaires internationales (2001) 401 (402). 73 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Intro. to Art. 14 CISG para. 47. 74 Bonell, La formazione del contratto di compravendita, in: La vendita internazionale. La convenzione di Vienna dell’11 aprile 1980 (1981), p. 113 (117); Herber/Czerwenka, Kommentar (1991), Intro. to Art. 14 para. 3; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelt (eds), Het Weens Koopverdrag (1997), p. 71 (71). 75 Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 6 para. 12. 76 For this statement, see Herber/Czerwenka, Kommentar (1991), Intro. to Art. 14 para. 4; compare also Bonell, La formazione del contratto di compravendita, in: La vendita internazionale. La convenzione di Vienna dell’11 aprile 1980 (1981) p. 113 (118 et seq.). 77 For papers on the exclusion of the CISG, see, most recently, Ferrari, Remarks on the UNCITRAL Digest’s Comments on Article 6 CISG, 25 Journal of Law and Commerce (2005) 13 et seq.; Ferrari, Zum vertraglichen Ausschluss des UN-Kaufrechts, ZEuP (2002) 737 et seq. 78 For the following remarks, see also Ferrari, La vendita internazionale. Applicabilita ` ed applicazioni della Convenzione delle Nazioni Unite sui contratti di vendita internazionale di beni mobili (2nd ed., 2006) p. 233. 79 Brunner/Manner/Schmitt, Kommentar (2014), Art. 6 para. 6; Ferrari Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Intro. to Art. 14 CISG para. 47; Siehr, in: Honsell, Kommentar (1997), Art. 6 para. 4; Piltz, Internationales Kaufrecht (2008), para. 2-112; Rehbinder, Vertragsschluss nach UN-Kaufrecht im Vergleich zu EAG und BGB, in: Schlechtriem (ed.), Einheitliches Kaufrecht und nationales Obligationenrecht (1987), p. 149 (151). 80 For this conclusion, see also Karollus, Der Anwendungsbereich des UN-Kaufrechts im U ¨ berblick, Juritstische Schulung (1993) 378 (381); Magnus, in: Staudinger Kommentar (2013), Art. 6 paras 11 et seq. 69

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offer must be decided on the basis of Part II of the CISG, just as much as the question of whether a reply by the offeree constitutes an acceptance.81 If the latter issues a statement mirroring the offer, an agreement as to the CISG’s exclusion is reached. If the offeree does not agree to the CISG’s exclusion, by virtue of Art. 19 no such agreement is reached and the CISG applies.82 The same is true if it is the acceptor who wants to exclude the CISG, as the acceptor’s reply containing an exclusion clause not contained in the offer would necessarily be a reply which materially alters the terms of the offer and would, by virtue of Art. 19(2), constitute a counter-offer which would not lead to the exclusion of the CISG. 81 Accord Bonell, La formazione del contratto di compravendita, in: La vendita internazionale. La convenzione di Vienna dell’11 aprile 1980 (1981), p. 113 (118); Czerwenka, Rechtsanwendungsprobleme im internationalen Kaufrecht. Das Kollisionsrecht bei grenzu¨berschreitenden Kaufvertra¨gen und der Anwendungsbereich der internationalen Kaufrechtsu¨bereinkommen (1988) p. 169. 82 Magnus, in: Staudinger Kommentar (2013), Art. 6 para. 12.

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Article 14 (1) A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance. A proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price. (2) A proposal other than one addressed to one or more specific persons is to be considered merely as an invitation to make offers, unless the contrary is clearly indicated by the person making the proposal. Bibliography: Adami, Les contrats “open price” dans la Convention des Nations Unies sur les contrats de vente international de marchandises, Revue de droit des affaires itnernationales (1989) 103; Blandhol, A Pragmatic Approach to Contract Formation, in: Lookofsky/Andersen (eds), The CISG Convention and Domestic Contract Law (2014), p. 55; Bonell, La formazione del contratto di compravendita, in: La vendita internazionale. La convenzione di Vienna dell’11 aprile 1980 (1981); ¨ bereinkommen von 1980 u¨ber den internationalen WareEo¨rsi, Formation of contract, in: Wiener U nkauf (1985), p. 43; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006); Ferrari, A Comparative Overview of Offer and Acceptance Inter Absentes, 10 Boston University International Law Journal (1992) 171; Fortier, Le prix dans la Convention de Vienne sur la vente internationale de marchandises: les articles 14 et 55, Journal du droit international (1990) 381; Huber/Kro¨ll, Deutsche Rechtsprechung zum UN-Kaufrecht in den Jahren 2001/2002, IPRax (2003) 309; Janssen, Die Einbeziehung von allgemeinen Gescha¨ftsbedingungen in internationale Kaufvertra¨ge und die Bedeutung der UNIDROIT- und der Lando-Principles, IHR (2004) 194; Jenkins, Contract Resurrected! Contract Formation: Common Law- UCC- CISG, 40 N.C. J. Int’l L. & Com. Reg. (2015) 245; Kahn, La Convention de Vienne du 11 avril 1980 sur les contrats de vente internationale de marchandises, Revue internationale de droit compare´ (1981) 951; Kleineman, The New Nordic Approach to CISG Part II: Pragtism Wins the Day?, in: Lookofsky/Andersen (eds), The CISG Convention and Domestic Contract Law (2014), p. 21; Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994); Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996); Roth/Kunz, Zur Bestimmbarkeit des Preises im UN-Kaufrecht, RIW (1997) 17; Schultz, Rolling Contract Formation under the UN Convention on Contracts for the International Sale of Goods, 35 Cornell International Law Journal (2001) 263; Sono, Formation of International Contracts under the Vienna Convention: A Shift above the Comparative Law, in: Sarcevic/Volken (eds), International Sale of Goods (1986), p. 111; van Alstine, Consensus, Dissensus, and Contractual Obligation Through the Prism of Uniform International Sales Law, 37 Virginia Journal of International Law (1996) 1; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984).

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Proposal addressed to specific persons; invitation to make an offer . . . . . . 2. Intention to be bound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. The specificity requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Indication of the goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Indication of the quantity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Indication of the purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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4. The requirement of indication of the purchase price and price determination absent such indication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Offer containing a clause excluding Part II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Incorporation of standard contract terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Article 14 32 37 38 43

I. Importance and Role of the Provision This dispositive1 provision, which can be traced back, at least in part, to Art. 4(1) 1 ULF,2 provides that for a proposal to be considered an offer under the CISG, it must be addressed to one or more specific persons, must indicate an intent to be bound, and must exhibit a level of definiteness3 that leads to the contract conclusion where it is accepted by its addressee.4 For a proposal to be considered an offer, it is not necessary that the offeror use the word “offer” or words similar,5 nor must the offeror comply with other formalities.6 The party relying upon a valid offer has to prove the existence of the requirements for a proposal to constitute an offer.7 The question of whether a proposal meets the aforementioned requirements is subject 2 to Art. 8.8 In light of this provision, where the offeree did not know or could not have 1 Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 37; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 17; Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 16; since, however, the intention to be bound is essential to the existence of an offer, that element is not left to party autonomy; see, Ferrari, in: Mu¨nchKommHGB (2013), Art. 14 para. 1; Brunner/Pfisterer/ Ko¨ster, Kommentar (2014), Art. 14 para. 4; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 12. 2 For details as to some innovations of the CISG, see Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 2. 3 Compare Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 14 para. 1; Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 3; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/ Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (72); Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 269 et seq.; Schultz, Rolling Contract Formation under the UN Convention on Contracts for the International Sale of Goods, 35 Cornell International Law Journal (2001) 263 (271); Witz/Salger/Lorenz, Kommentar (2016), Art. 14 para. 1; in case law, see Bezirksgericht St. Gallen (Switzerland) 3 July 1997, CISG-Online 336; Oberster Gerichtshof (Austria) 10 November 1994, CISG-Online 117; compare, however, US District Court for the Southern District of New York (U.S.), Geneva Pharmaceuticals Technology Corp. v Barr Laboratories Inc., 10 May 2002, CISG-Online 653, not requiring that a proposal be addressed to specific persons to be considered an offer. 4 For this statement, see also Rechtbank Koophandel Tongeren (Belgium) 25 January 2005, CISG-Online 1106; Kantonsgericht Zug (Switzerland) 2 December 2004, CISG-Online 1194; Rechtbank Koophandel Oudenaarde (Belgium) 10 July 2001, CISG-Online 1785; Oberster Gerichtshof (Austria) 6 February 1996, CISG-Online 224; Oberster Gerichtshof (Austria) 10 November 1994, CISG-Online 117. 5 For this statement, see also Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 6; Ferrari, in: Mu¨nchKommHGB (2013), Art. 14 para. 1; Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 6; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 271; Piltz NJW (1996), 2768 (2770); Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 2; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 2. 6 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 14 para. 1; Piltz, Internationales Kaufrecht (2008) para. 3-15. 7 Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 38; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 14 para. 38; Hepting/Mu¨ller, in: Baumga¨rtel/Laumen (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 14 CISG para. 1; Jung, Die Beweislastverteilung im UN-Kaufrecht (1996) p. 5858; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 45; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 34; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 14 para. 8. 8 Vgl. Amato, Recent Developments: CISG. U. N. Convention on Contracts for the International Sale of Goods – The Open Price Term and Uniform Application: an Early Interpretation by the Hungarian Courts, 13 Journal of Law and Commerce (1993) 1 (6); Audit, Vente Internationale (1990), p. 57; Saenger,

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been unaware of the offeror’s intent,9 the proposal is to be interpreted “according to the offeror’s intent that was recognizable to the addressee.”10 “In doing so, pursuant to Article 8 CISG due consideration is to be given to the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties.”11 Where a proposal remains ambiguous despite an interpretation in light of Art. 8, no acceptable offer exists.12 If the proposal is composed in a language unknown to the addressee or in a language that a reasonable person of the same kind as the addressee would not know, the proposal cannot be considered an offer,13 provided that a different result cannot be reached on the grounds of practices established between the parties, any usage that is binding upon the parties on the basis of Art. 9, or from an agreement they have reached (on the occasion, for instance, of a framework agreement).14 3 It is worth noting that the offer – a declaration of will15 – not only has to meet all Art. 14 requirements, but also any validity requirements of the applicable law, determined on the basis of the private international law of the forum, such as requirements concerning legal capacity, the absence of certain kinds of mistake, duress, etc.16

in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 14 para. 2; Brunner/ Pfisterer/Ko¨ster, Kommentar (2014), Art. 14 para. 1; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 18; Neumayer/Ming, Convention de Vienne (1993), Art. 14 para. 5; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) pp. 297 et seq.; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 14 paras 3 and 7; Stern, Erkla¨rungen im UNCITRAL-Kaufrecht (1990) pp. 16 et seq.; van Alstine, Consensus, Dissensus, and Contractual Obligation Through the Prism of Uniform International Sales Law, 37 Virginia Journal of International Law (1996) 1 (17). 9 See Handelsgericht St. Gallen (Switzerland) 5 December 1995, CISG-Online 245. 10 Oberster Gerichtshof (Austria) 6 February 1996, CISG-Online 224; see also Oberlandesgericht Frankfurt (Germany) 30 August 2000, CISG-Online 594; Oberster Gerichtshof (Austria) 9 March 2000, CISGOnline 573; Landgericht Zwickau (Germany) 19 March 1999, CISG-Online 519; Oberster Gerichtshof (Austria) 20 March 1997, CISG-Online 269; Handelsgericht St. Gallen (Switzerland) 5 December 1995, CISG-Online 245; Oberster Gerichtshof (Austria) 10 November 1994, CISG-Online 117; in legal writing see Herber/Czerwenka Kommentar (1991), Art. 14 para. 10. 11 Oberster Gerichtshof (Austria) 6 February 1996, CISG-Online 224; also compare Oberlandesgericht Graz (Austria) 7 March 2002, CISG-Online 669; Oberster Gerichtshof (Austria) 10 November 1994, CISGOnline 117; in legal writing Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/ Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (74); J. Pierre/V. Pierre, A Comparison of the Rules on Formation of Sales Contracts Under the Louisiana Civil Code and the United Nations Convention on Contracts for the International Sale of Goods: What Buyers and Sellers Should Know, 20 Southern University Law Review (1993) 189 (190 et seq.). 12 See Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 4. 13 For a similar statement, see Piltz, Internationales Kaufrecht (2008) para. 3-18. 14 Piltz, Internationales Kaufrecht (2008) para. 3-18. 15 Compare Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 165; Schroeter, in: Schlechtriem/ Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 1. 16 In accord Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 168 et seq.; Dornis, in: Honsell, Kommentar (2010), Art. 14 paras. 2 and 4; Garro/Zuppi, Compraventa internacional de mercaderı´as (2012), p. 115; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 295; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 14 para. 2; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 1; Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 4; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 1; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 1; Witz/Salger/Lorenz, Kommentar (2016), Art. 14 para. 18.

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In principle,17 form requirements do not have to be fulfilled18 in order for a proposal 4 to be able to be considered an offer under the CISG.19 Thus, oral declarations, as well as silence and implied conduct, such as the handing over of goods,20 may amount to an offer21 (provided the requirements as regards content are fulfilled). The choice of the communication medium (telephone, telex, facsimile, email,22 etc.) is also subject to the offeror’s discretion.23 The offeror can indicate in its offer that the acceptance has to take a particular form. An offer providing that silence will be treated as acceptance is, however, not binding upon the offeree.24 In the absence of any one of the three aforementioned requirements (or where their 5 existence is to be considered irrelevant pursuant to Art. 8), a proposal can only constitute an invitation to make an offer.25 The same is true also if preliminary negotiations or practices established between the parties require that the proposal include additional elements in order to be able to be considered an offer.26 Where such elements are lacking, a proposal cannot constitute an offer.27 The party asserting that a proposal constitutes an offer bears the burden of proving 6 that all the aforementioned requirements are met.28

II. Detailed Commentary 1. Proposal addressed to specific persons; invitation to make an offer The question of whether a proposal addressed to an indefinite group of persons 7 (whether natural or legal)29 constitutes an offer was not answered by the ULF,30 this engendered much controversy.31 The question is now explicitly addressed in Art. 14. 17

But see Arts 12 and 96. In case law, see Oberster Gerichtshof (Austria) 9 March 2000, CISG-Online 573; Bezirksgericht St. Gallen (Switzerland) 3 July 1997, CISG-Online 336; Oberster Gerichtshof (Austria) 6 February 1996, CISG-Online 224. 19 In legal writing see Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 93; Bonell, La formazione del contratto di compravendita, in: La vendita internazionale. La convenzione di Vienna dell’11 aprile 1980 (1981) pp. 113 (121 et seq.); Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 5; Neumayer/Ming, Convention de Vienne (1993), Art. 14 para. 5; Piltz, Internationales Kaufrecht (2008) para. 3-15; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 11. 20 In accord Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 14 para. 2; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 296 note 38; Reinhart, Kommentar (1991) Art. 14 para. 3; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 3. 21 Piltz, Internationales Kaufrecht (2008) para. 3-15. 22 See Ferrari, in: Mu ¨ nchKommHGB (2013), Art. 14 para. 4. 23 See Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 5; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 14 para. 14. 24 For this statement, see also Herber/Czerwenka, Kommentar (1991), Art. 14 para. 14. 25 Oberster Gerichtshof (Austria) 20 March 1997, CISG-Online 269. 26 Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 5; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 5. 27 Compare Eo ¨ rsi, in: Bianca/Bonell, Commentary (1987), Art. 14 para. 2.2.2; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 2. 28 See, for instance, Hepting/Mu ¨ ller, in: Baumga¨rtel/Laumen (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 14 CISG para. 1; Jung, Die Beweislastverteilung im UN-Kaufrecht (1996) p. 58. 29 Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 4. 30 Bonell, La formazione del contratto di compravendita, in: La vendita internazionale. La convenzione di Vienna dell’11 aprile 1980 (1981) p. 113 (125). 31 In this respect, see von Caemmerer, Die Haager Konferenz u ¨ ber die internationale Vereinheitlichung des Kaufrechts vom 2. bis 25 April 1964, RabelsZ 29 (1965) 101 (118 et seq.). 18

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From Art. 14(1) it seems to result that only a proposal addressed to one or more specific persons constitutes an offer. This is not true.32 For example, a proposal addressed to a broader group of persons can also constitute an offer, if the party making the proposal clearly indicates that this should be so;33 it is not necessary, however, that that party does so explicitly.34 Irrespective of the size of the group of persons to which the offer is addressed, only a person within this group is entitled to accept the offer.35 8 A proposal is considered to be addressed to a group of specific persons not only where it addresses each member by name,36 but also where the party making the proposal has a clear idea of the persons addressed.37 This is why, for instance, sending a prospectus,38 a catalogue,39 or a price list40 does not amount to making an offer.41 The same is true with respect to advertisements in newspapers,42 on the radio or on television, as well as statements addressed to an indefinite group of persons via the Internet,43 for instance by sending out a high number of emails.44 The opposite is true, 32 Also compare Dı ´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 169; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) pp. 23 et seq. 33 Vessichelli Nuove leggi civ. comm. 1989, 51 (52). 34 Contra Perales Viscasillas, La formacio ´ n del contrato de compraventa internacional de mercaderı´as (1996) pp. 286 et seq. 35 See Oberster Gerichtshof (Austria) 18 June 1997, CISG-Online 292; contra in legal writing Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 290. 36 This, however, seems to be the view held by Piltz, Internationales Kaufrecht (2008) para. 3-19. 37 Compare Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 8; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 24; Ferrari/Torsello, International Sales Law – CISG (2015) p. 135; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 9; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) paras 733 et seq.; for a partially different view, see Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 290. 38 Garro/Zuppi, Compraventa internacional de mercaderı´as (2012), p. 116; Schroeter, in: Schlechtriem/ Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 27. 39 Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 94; Eo ¨rsi, Formation of contract, ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf (1985), p. 43 (45); Garro/Zuppi, in: Wiener U Compraventa internacional de mercaderı´as (2012), p. 116; Schultz, Rolling Contract Formation under the UN Convention on Contracts for the International Sale of Goods, 35 Cornell International Law Journal (2001) 263 (272); Sono, Formation of International Contracts under the Vienna Convention: A Shift above the Comparative Law, in: Sarcevic/Volken (eds), International Sale of Goods (1986), p. 111 (119); also compare Handelsgericht Zurich (Switzerland) 22 December 2005, CISG-Online 1195. 40 Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 32. 41 See Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 10; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 14 para. 4; Ferrari/Torsello, International Sales Law – CISG (2015) p. 135; Herber/Czerwenka, Kommentar (1991), Art. 14 para. 3; Honnold/Flechtner, Uniform Law (2009), para. 136; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 10; Neumayer/Ming, Convention de Vienne (1993), Art. 14 paras 2 and 12; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 289; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) para. 732; contra see Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) pp. 300 et seq.; Audit, Vente Internationale (1990), p. 58; see, however, Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 170, holding that the dispatch of a proposal to many persons constitutes an invitatio ad offerendum, even though a proposal may have been addressed to each single person only. 42 See Farnsworth, Formation of Contract, in: Galston/Smit (eds), International Sales (1984), pp. 3–01 (3–03 and 3–06); Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 13; Piltz, Internationales Kaufrecht (2008) para. 3-19. 43 See Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 25; Ferrari/Torsello, International Sales Law – CISG (2015) p. 135; Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2005), Art. 14 para. 15; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 37. 44 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 12; contra Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil

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as mentioned above, if the party making the proposal clearly indicates that he wants the declaration to be considered as an offer – i. e., if he manifests his intention to be bound unambiguously.45 This is the case, for instance, where the proposal contains a deadline for acceptance or a promise to deliver for a period of time at a particularly favourable price,46 or where the proposal contains a “while stocks last” clause,47 or any clause that makes it clear that the availability of goods is limited.48 The existence of the intent to be bound must also be assumed, at least according to the Secretariat’s Commentary,49 where the proposal contains the following wording: “This advertisement constitutes an offer” and “These goods will be sold to the first person who presents cash or an appropriate banker’s account.” Because a proposal addressed to an indefinite group of persons does not generally 9 constitute an offer, but a mere invitation to make an offer,50 the party asserting that such a proposal constitutes an offer bears the burden of proving that the party making the proposal had the intention to be bound by the proposal.51 It is worth pointing out that a proposal addressed to an indefinite group of persons, 10 which exceptionally does not constitute a mere invitation to make an offer, must also comply52 with the specificity requirements set forth in Art. 14.53

2. Intention to be bound A proposal constitutes an offer upon the condition that the party making the 11 proposal is willing to be bound in case of an acceptance of the proposal.54 In other words, the offer has to “embody an authorization for the addressee to conclude a Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) pp. 300 et seq. 45 Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 97; Ferrari/Torsello, International Sales Law – CISG (2015) p. 135. 46 See Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 15. 47 Compare Audit, Vente Internationale (1990), p. 58; Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 10; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 14 para. 13; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 25; Ferrari/Torsello, International Sales Law – CISG (2015) p. 135; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 14; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 13; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (73); Piltz, Internationales Kaufrecht (2008) para. 3-21; see, however, Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 12: mere invitatio ad offerendum. 48 See Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 97; Audit, Vente Internationale (1990), p. 58; Ferrari/Torsello, International Sales Law – CISG (2015) p. 135; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 14 para. 18; Neumayer/Ming, Convention de Vienne (1993), Art. 14 para. 13; contra see Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 14. 49 See Official Records (1981), p. 21. 50 Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 30. 51 Hepting/Mu ¨ ller, in Baumga¨rtel/Laumen (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 14 CISG para. 6; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 26. 52 In accord Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 169; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (73); Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 286; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 39; Vessichelli Nuove leggi civ. comm. 1989, 51 (52). 53 Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 31; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 33. 54 See Rechtbank Koophandel Tongeren (Belgium) 25 January 2005, CISG-Online 1785; Oberster Gerichtshof (Austria) 18 June 1997, CISG-Online 292 in legal writing, see Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) p. 87–88; Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 5; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012),

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contract through an acceptance that mirrors the proposal and without further need for action on the part of the party making the proposal: The party making the proposal manifests its intention to conclude for the sale of goods.”55 This intention to conclude a contract, which exists also where the contract is to be concluded subject to a condition,56 has to be distinguished from the intention to be bound by a revocable offer;57 the intention to be bound addressed in Art. 14 only refers to the former.58 12 Whether the intention to be bound exists is generally to be assessed on a case-by-case basis59 on the basis of Art. 8.60 Sill, some assumptions can be made. Thus, for instance, it is possible to assume that the more a proposal complies with the specificity requirement set forth in Art. 14 (concerning the addressees of the proposal, the goods, quantity and price) the more probable it is that the intention to be bound exists.61 13 Art. 14(2) itself establishes the rule that intent to be bound generally does not exist where the proposal is addressed to an indefinite group of persons.62 In that case, it is assumed that the party making the proposal, unlike in the case of a proposal addressed to a specific person, cannot evaluate the consequences.63 Therefore Art. 14(2), pursuant to which a proposal ad incertas personas is to be considered merely as an invitation to make an offer, is quite justifiable.

Art. 14 CISG para. 3; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 243; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 25. 55 Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) para. 722; see also Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 25; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 25. 56 See Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 14 para. 5. 57 Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 25; Eo ¨ rsi, Formation of contract, in: Wiener ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf (1985), p. 43 (47); Herber/Czerwenka, U Kommentar (1991), Art. 14 para. 7; Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 43 (48 note 20); Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 12; Vessichelli Nuove leggi civ. comm. 1989, p. 51 (52); Schroeter, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 14 para. 25. 58 See Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 14 para. 6; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 27; Herber/Czerwenka, Kommentar (1991), Art. 14 para. 8; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 14 para. 42; Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 5; Neumayer/Ming, Convention de Vienne (1993), Art. 14 para. 3; Piltz, Internationales Kaufrecht (2008) para. 3-30; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 270 note 4; Lu¨deritz/Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 14 para. 7; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 12; Stern, Erkla¨rungen im UNCITRAL-Kaufrecht (1990) pp. 18 et seq. 59 Ferrari/Torsello, International Sales Law – CISG (2015) p. 136; Schultz, Rolling Contract Formation under the UN Convention on Contracts for the International Sale of Goods, 35 Cornell International Law Journal (2001) 263 (271); in recent case law, see Bundesgerichtshof (Germany) 25 March 2015, CISGOnline 2588. 60 Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) p. 88. 61 In accord Ferrari/Torsello, International Sales Law – CISG (2015) p. 136; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 14 para. 7; Kahn, La Convention de Vienne du 11 avril 1980 sur les contrats de vente internationale de marchandises, Revue internationale de droit compare´ (1981) 951 (964); Piltz, Internationales Kaufrecht (2008) para. 3-33; in case law, see Bundesgerichtshof (Germany) 25 March 2015, CISG-Online 2588. 62 Ferrari/Torsello, International Sales Law – CISG (2015) p. 136; Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) p. 88. 63 See Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 93; Stern, Erkla ¨rungen im ¨ bereinkommen von 1980 UNCITRAL-Kaufrecht (1990) p. 18; Eo¨rsi, Formation of contract, in: Wiener U u¨ber den internationalen Warenkauf (1985), p. 43 (47); Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) p. 88; for comparative remarks, see Ferrari, A Comparative Overview of Offer and Acceptance Inter Absentes, 10 Boston University International Law Journal (1992) 171 (185 et seq.).

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However, a proposal addressed to one or more specific persons can fail to manifest an 14 intention to be bound. It is to be assumed, for instance, that such intent is lacking where the proposal contains expressions such as “without obligation,”64 “non-binding,”65 or other expressions to the same effect,66 even though under certain circumstances one may get to the opposite result.67 A proposal containing the reservation “subject to contract” lacks the necessary intention to be bound.68 A letter of intent, which normally contains all the other elements referred to in Art. 14 and is usually addressed to a specific person, generally lacks the intention to be bound.69 The same is true for a “memorandum of understanding.”70 It must be assumed that the intention to be bound exists where goods are being sent 15 to a party with indication of the purchase price,71 regardless of whether the relevant domestic law qualifies this differently – as does English Law, for instance.72 Where, however, various alternatives are submitted, it can be assumed that no intention to be bound exists.73 In addition, both commentators74 and courts75 have agreed that an intention to be 16 bound exists where a person submits an order for goods subject to no reservations or conditions.

64 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 4; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 25; Schroeter, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 14 para. 27. 65 See Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991) Art. 14 para. 5; Ferrari/Torsello, International Sales Law – CISG (2015) p. 137; Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 8; Piltz, Internationales Kaufrecht (2008) para. 3-31; in case law, see Kantonsgericht Zug (Switzerland) 2 December 2004, CISG-Online 1194. 66 See Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 28; Herber/Czerwenka, Kommentar (1991), Art. 14 para. 9; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 14 para. 48; Neumayer/Ming, Convention de Vienne (1993), Art. 14 para. 3; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 278 et seq.; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 27. 67 See Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 14 para. 5; Lu¨deritz/Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 14 para. 8; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 14. 68 See Bonell, Vertragsverhandlungen und culpa in contrahendo nach dem Wiener Kauf-rechtsu ¨ bereinkommen, RIW (1990) 693 (697); Ferrari/Torsello, International Sales Law – CISG (2015) p. 137; Witz/ Salger/Lorenz, Kommentar (2016), Art. 14 para. 23. 69 Compare Bonell, Vertragsverhandlungen und culpa in contrahendo nach dem Wiener Kaufrechtsu ¨bereinkommen, RIW (1990) 693 (696 et seq.); Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 30; Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 9; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 299; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 14 para. 49; see also Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 15, stating that this is an issue of interpretation; also compare Brunner/Pfisterer/Ko¨ster, Kommentar (2014), Art. 14 para. 6; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 26; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 28. 70 See also Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 30; Ferrari/Torsello, International Sales Law – CISG (2015) p. 137; Witz/Salger/Lorenz, Kommentar (2016), Art. 14 para. 24. 71 See Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 13. 72 Compare Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 13; see also Art. 6 a of the Swiss Code of obligations. 73 See Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 14 para. 46. 74 Compare Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (77); Witz/Salger/Lorenz, Kommentar (2016), Art. 14 para. 22. 75 See Handelsgericht St. Gallen (Switzerland) 5 December 1995, CISG-Online 245.

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3. The specificity requirement a) Preface. In order for a proposal to constitute an offer under the CISG (as in most legal systems),76 it has to be definite in such a manner that the sole acceptance of the proposal leads to the conclusion of the contract77 or that “in case of acceptance it can be made the basis for a decision.”78 This “absolute validity requirement,”79 which can be only partly traced back to the ULF,80 is met pursuant to Art. 14(1) if the goods are indicated and if the quantity and the price are expressly or implicitly fixed, or if provision is made for their determination.81 Consequently, a contract is concluded if a proposal meeting these requirements is accepted, irrespective of whether the parties reached an agreement on additional issues,82 since what is crucial is “that the parties have agreed to the essential minimum content the parties wanted to agree to.”83 18 Where one of the aforementioned essential elements84 is lacking (or if these elements are invalid according to Art. 4(a)),85 or where they exist but cannot be understood86 by “a reasonable person of the same kind […] in the same circumstances” as the addressee of the proposal,87 the proposal does not constitute an acceptable offer,88 and therefore its acceptance cannot lead to the conclusion of the contract.89 19 If it results from an agreement of the parties (e. g. a framework agreement),90 the practices established between them, the usages (as referred to in Art. 9)91 or the 17

76 See Ferrari, A Comparative Overview of Offer and Acceptance Inter Absentes, 10 Boston University International Law Journal (1992) 171 (185 et seq.). 77 Compare Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 12; Eo ¨ rsi, in: Bianca/Bonell, Commentary (1987), Art. 14 para. 2.2.2; Ferrari/Torsello, International Sales Law – CISG (2015) p. 135–136; Garro/Zuppi, Compraventa internacional de mercaderı´as (2012), p. 117; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 14; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 2; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 2; van Alstine, Consensus, Dissensus, and Contractual Obligation Through the Prism of Uniform International Sales Law, 37 Virginia Journal of International Law (1996) 1 (16); see also Oberster Gerichtshof (Austria) 6 February 1996, CISG-Online 224. 78 In case law, see Oberlandesgericht Frankfurt (Germany) 4 March 1994, CISG-Online 110; in legal writing, see Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 16; Schroeter, in: Schlechtriem/ Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 2. 79 Witz/Salger/Lorenz, Kommentar (2016), Art. 14 para. 27; for this conclusion, see also Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 13. 80 For a reference to the differences, see Witz/Salger/Lorenz, Kommentar (2016), Art. 14 para. 3. 81 See Ferrari/Torsello, International Sales Law – CISG (2015) p. 136; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 14; Schlechtriem/Schroeter, Internationales UNKaufrecht (2013) para. 244. 82 Ferrari/Torsello, International Sales Law – CISG (2015) p. 136. 83 Landgericht Mu ¨ nchen (Germany) 8 February 1995, CISG-Online 203. 84 See Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992) p. 43 (48). 85 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 2. 86 See also Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 10; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 10. 87 See Art. 8(2). 88 Also compare Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 12; Garro/Zuppi, Compraventa internacional de mercaderı´as (2012), p. 116 et seq.; Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 13; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 18; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 23; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 6. 89 See in case law in respect of the lack of the essentialia, Handelsgericht St. Gallen (Switzerland) 5 December 1995, CISG-Online 245. 90 Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 9. 91 Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 9.

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Article 14

proposal itself that the proposal has to contain additional elements in order to be considered an offer, an “acceptance” relating solely to the aforementioned essential elements will not lead to the conclusion of the contract.92 From this one can easily derive that “Art. 14(1), last sentence, does not lay down mandatory minimum or maximum requirements.”93 Except in the cases mentioned in the preceding paragraph,94 the offer does not have 20 to contain other elements, since other details relevant to the contract and its performance are settled by the CISG itself95 (such as the time of delivery or payment, place of delivery or payment, quality of the goods, packaging, etc.) – or from the elements to be taken into account by virtue of Art. 9.96 b) Indication of the goods. Art. 14(1) second sentence requires that the goods must 21 be indicated, but without specifically addressing whether the indication has to be made explicitly or whether it can also occur implicitly – as is possible with both the determination of price and of quantity. This question has been answered by commentators97 and courts98 affirmatively; the indication of goods can take any form and therefore can be made tacitly.99 There is a “tacit” indication where there is an indication of elements that permit the identification of the goods (or the particular quantity and price).100

92 Compare Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 14 para. 7; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 168; Eo¨rsi, in: Bianca/Bonell, Commentary (1987), Art. 14 para. 2.2.2; Ferrari/ Torsello, International Sales Law – CISG (2015) p. 138–139; Ludwig, Der Vertragsabschluß nach UNKaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 296; Gruber, in: Mu¨nchKommBGB (2016), Art. 14 paras 14 et seq.; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 275; Piltz, Internationales Kaufrecht (2008) para. 3-34. 93 Lu ¨ deritz/Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 14 para. 6. 94 See Ferrari, in: Mu ¨ nchKommHGB (2013), Art. 14 para. 19. 95 See also Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 13; Herber/Czerwenka, Kommentar (1991), Art. 14 para. 7; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 16; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 14 para. 25; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 277; Rudolph, Kommentar (1996), Art. 14 para. 4; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 2; Schroeter, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 14 para. 5. 96 Ferrari, in: Mu ¨ nchKommHGB (2013), Art. 14 para. 20; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) 275. 97 See Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 14 para. 11 and more specifically at note 622; Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 20; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 45; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (74); Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 18; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 paras 3 and 5; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 20. 98 See Oberster Gerichtshof (Austria) 10 November 1994, CISG-Online 117. 99 See Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 32; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 297; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 20; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 46; Witz/Salger/Lorenz, Kommentar (2016), Art. 14 para. 30; contra, without any justification, Vessichelli, Nuove leggi civ. comm. 1989, 51 (51). 100 See Oberster Gerichtshof (Austria) 10 November 1994, CISG-Online 117; in legal writing see Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 3.

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Furthermore, goods do not necessarily have to be indicated individually;101 an indication of the type of goods is sufficient.102 However, as noted by both commentators103 and courts,104 ambivalent indications are insufficient. 23 It is worth pointing out that the specificity requirement is not lacking just because some characteristics of the goods (relating, for instance, to their, dimension, etc.) are not indicated in the proposal.105 This conclusion can be derived from Art. 65,106 which deals with the seller’s rights in case the buyer fails to specify some features of the purchased goods (either on the date agreed upon or within a reasonable time after receipt of a request from the seller). The specification of those features can be left to the offeror, the offeree, or even a third party.107 In the last case, however, one has to take into account domestic rules concerning the validity of a clause which leaves the indication of the goods to a third party, since the validity of that clause – as well as other contract clauses – is generally not governed by the CISG.108 22

24

c) Indication of the quantity. The explicit or implicit109 determination (by the offeror or by a person other than the offeror)110 of the quantity of the goods or the possibility of its determination is a prerequisite for a proposal to be able to be considered an offer under the CISG.111 According to the Secretariat’s Commentary,112 this requirement is fulfilled if the entire inventory or the entire production is offered113 or if reference is made to “all my requirements.”114 In this author’s opinion, it must be doubted whether these formulations meet the specificity requirement set forth in Art. 14(1).115 101

Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 8. Compare Brunner/Pfisterer/Ko¨ster, Kommentar (2014), Art. 14 para. 11; Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 20; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 45; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 3; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 18. 103 Compare, among others, Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 20; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 45; Witz/Salger/Lorenz, Kommentar (2016), Art. 14 para. 32. 104 See Oberster Gerichtshof (Austria) 20 March 1997, CISG-Online 269. 105 See also Honnold/Flechtner, Uniform Law (2009), para. 137.2; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 19. 106 Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 3. 107 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 49; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 14 para. 4; Brunner/ Pfisterer/Ko¨ster, Kommentar (2014), Art. 14 para. 9; Herber/Czerwenka, Kommentar (1991), Art. 14 para. 5; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 13. 108 See Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 7; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 19. 109 Bundesgericht (Switzerland) 5 April 2005, CISG-Online 1012; Kantonsgericht Zug (Switzerland) 2 December 2004, CISG-Online 1194; Hof Gent (Belgium) 8 November 2004, CISG-Online 982; Oberster Gerichtshof (Austria) 10 November 1994, CISG-Online 117. 110 Herber/Czerwenka, Kommentar (1991), Art. 14 para. 5; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 22; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 52. 111 Compare Perales Viscasillas, La formacio ´ n del contrato de compraventa internacional de mercader´ıas (1996) p. 304. 112 See Official Records (1981), p. 21. 113 See also Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 14 para. 9; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 50; Witz/Salger/Lorenz, Kommentar (2016), Art. 14 para. 33. 114 See Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 14 para. 12; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 306 et seq.; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 21. 115 Expressing some doubts Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 14 para. 27; contra see Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) p. 87; Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale 102

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Article 14

The question of whether a proposal that determines the quantity of goods only in an 25 approximate manner constitutes a proposal depends, according to the Austrian Supreme Court,116 on whether this kind of determination complies with usages of the particular trade concerned.117 Whether a reference to “a larger quantity” complies with the specificity require- 26 ment118 is doubtful, and should arguably be answered in the negative because “a larger quantity” is emblematic of an indeterminate and also indeterminable quantity.119 Quantity can be determined by reference to an amount as a whole (e. g., 2,500 kg),120 27 but determination can also result from the indication of specific measuring units,121 as well as from reference to more closely identified needs for a specific purpose.122 d) Indication of the purchase price. Art. 14(1) second sentence requires that in order 28 for a proposal to constitute an offer, the proposal must indicate the price either explicitly or implicitly,123 or that the proposal allows for price determination124 (contingently by a third party,125 to be indicated, however, with sufficient precision126). Absent the indication of elements that may lead to the determination of the purchase price – elements which have to be proven by the party that claims that it is possible to determine the purchase price127 – the proposal does not constitute an offer under Art. 14(1).128 The same is true if the proposal indicates the price for only a fragment of the goods even though the offeror intends to buy all the goods.129 But where the parties of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193 (201). 116 Oberster Gerichtshof (Austria) 6 February 1996, CISG-Online 224. 117 See also Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 21. 118 In case law see Oberster Gerichtshof (Austria) 10 November 1994, CISG-Online 117. 119 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 34; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 53; Roth/Kunz, Zur Bestimmbarkeit des Preises im UN-Kaufrecht, RIW (1997) 17 (20). 120 Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 21. 121 See Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 95; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 14 para. 37. 122 Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 14 para. 9; Neumayer/Ming, Convention de Vienne (1993), Art. 14 para. 7. 123 For an express reference in case law to the possibility of implicitly indicating the price, see Bundesgericht (Switzerland) 5 April 2005, CISG-Online 1012; Kantonsgericht Zug (Switzerland) 2 December 2004, CISG-Online 1194; Oberster Gerichtshof (Austria) 10 November 1994, CISG-Online 117. 124 If the offer leaving the determination of the price to a third party is accepted, it must be assumed that the contract is concluded, subject to a condition, however. Thus, where the third party does not fix the price, the contract cannot have any effects. It cannot be assumed, as some commentators do (see Witz/Salger/Lorenz, Kommentar (2016), Art. 14 para. 51) that the party implicitly intended for the court to fix the price. Also, resort to Art. 55 is not possible (for commentators who do not seem to exclude this possiblity, see Witz/Salger/Lorenz, Kommentar (2016), Art. 14 para. 51). 125 See Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 14 para. 12; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 35; Neumayer/Ming, Convention de Vienne (1993), Art. 14 para. 8; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 351 et seq.; Lu¨deritz/Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 14 para. 4; Vessichelli Nuove leggi civ. comm. 1989, 51 (51). 126 Compare Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 41; Witz/Salger/Lorenz, Kommentar (2016), Art. 14 para. 49. 127 Bundesgericht (Switzerland) 5 April 2005, CISG-Online 1012. 128 Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193 (199 et seq.). 129 See Witz/Salger/Lorenz, Kommentar (2016), Art. 14 para. 35; in case law see Oberlandesgericht Frankfurt (Germany) 4 March 1994, CISG-Online 110; Legfelso´bb Biro´sag (Hungary) 25 September 1992, CISG-Online 63.

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Part II. Formation of the Contract

agree that a proposal should constitute an offer despite the lack of a price determination (which is possible given the autonomy they enjoy under Art. 6130), reference should be made to Art. 55 for the determination of the purchase price.131 29 For the purpose of an implicit indication of the purchase price, reference to price lists,132 catalogue prices, market prices, etc., is sufficient.133 It is, however, not necessary that these prices be fixed at the time when the proposal is made. Therefore, a proposal that refers to a market price at a particular time can also constitute an offer,134 – a view held by both commentators135 and courts.136 The mere unilateral reference to a future price determination by one party generally does not comply with the price determination requirement.137 30 The Austrian Supreme Court has held that the indication of a price range linked to the quality of the goods is sufficient vis-a`-vis the price determination requirement.138 The indication of a price range is, however, problematic for the exact determination of the purchase price.139 One commentator has suggested the application of the arithmetic mean of the range of prices.140 In this author’s opinion one should instead resort to the principle of good faith, as well as the principles laid down in Art. 55 to determine the purchase price.141 31 Where indication of preferred currency is lacking, it has been suggested that, absent a different indication in the proposal, the currency used at the seller’s place of business should be used.142 In this author’s opinion, this is untenable; a proposal that lacks an 130

See Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 2. See Landgericht Neubrandenburg (Germany) 3 August 2005, CISG-Online 1190. In case law see Oberlandesgericht Rostock (Germany) 10 October 2001, CISG-Online 671. 133 See Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 95; Brunner/Pfisterer/ Ko¨ster, Kommentar (2014), Art. 14 para. 13; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 167; Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193 (200); Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 19; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 35; Neumayer/ Ming, Convention de Vienne (1993), Art. 14 para. 8; Nicholas, The Vienna Convention on International Sales Law, Law Quarterly Review 105 (1989) 201 (214); Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 350; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 23; Witz/Salger/Lorenz, Kommentar (2016), Art. 14 para. 52; in case law see Landgericht Neubrandenburg (Germany) 3 August 2005, CISG-Online 1190. 134 Official Records (1981), p. 21. 135 Compare Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 18; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 14 para. 19; Lu¨deritz/Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 14 para. 4; Witz/Wolter, Die ersten Entscheidungen franzo¨sischer Gerichte zum Einheitlichen Kaufrecht, RIW (1995) 810 (810). 136 See Cour d’Appel Paris (France) 22 April 1992, CISG-Online 222; more recently, see Canadian International Trade Tribunal (Canada), Cherry Stix Ltd. v President of the Canada Borders Services Agency, 6 October 2005, CISG-Online 1140: “A contract may be unenforceable if essential terms are omitted. These include such things as price and quantity. However, these terms need not be conclusively settled if the agreement provides a manner for fixing them later.” For a statement that is even more explicit, see Landgericht Neubrandenburg (Germany) 3 August 2005, CISG-Online 1190. 137 In accord Witz/Salger/Lorenz, Kommentar (2016), Art. 14 para. 45; see also Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 14 para. 32; contra, see Achilles, Kommentar (2000) Art. 14 para. 5; Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 20; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 6. 138 Oberster Gerichtshof (Austria) 10 November 1994, CISG-Online 117. 139 For a criticism of the decision referred to in the text, see, e. g., Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 18. 140 Magnus, Unbestimmter Preis und UN-Kaufrecht, IPRax (1996) 145 (148). 141 See also Roth/Kunz, Zur Bestimmbarkeit des Preises im UN-Kaufrecht, RIW (1997) 17 (20). 142 See Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 14 para. 13, and more specifically at note 633; Magnus, Wa¨hrungsfragen im Einheitlichen Kaufrecht. Zugleich ein Beitrag zu seiner Lu¨ckenfu¨llung und Auslegung, RabelsZ 1989, 116 (129); Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 25. 131 132

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14

indication on currency does not constitute an acceptable offer (unless the currency can be determined by interpretation).143

4. The requirement of indication of the purchase price and price determination absent such indication Where the purchase price is neither determined nor determinable, the proposal 32 does not constitute an offer, which is easily derived from Art. 14(1). The relationship between this provision and Art. 55, which determines the purchase price where a contract has been validly concluded but does not expressly or implicitly fix or make provision for determining the price, is rather uncertain.144 In regard to this issue, which has already been identified as a problem area at the Vienna Diplomatic Conference,145 some commentators suggest that Art. 55 should always be applicable where the price is not indicated in the proposal,146 which, however, would mean that the price determination requirement set forth in Art. 14(1) would have no importance whatsoever.147 Other commentators advocate – sometimes very aggressively148 – that Art. 14 should always prevail over Art. 55,149 while other commentators hold the 143 Also compare Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 22; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 14 para. 10; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 37; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 44; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 14 para. 38; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 3; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 166. 144 For an overview of the state of the discussion, see Adami, Les contrats “open price” dans la Convention des Nations Unies sur les contrats de vente international de marchandises, Revue de droit des affaires itnernationales (1989) 103 et seq.; Bucher, Preisvereinbarung als Voraussetzung der Vertragsgu¨ltigkeit beim Kauf. Zum angeblichen Widerspruch zwischen Art. 14 und Art. 55 des “Wiener Kaufrechts”, in: Bucher (ed), Wiener Kaufrecht (1991), pp. 53 et seq.; Fortier, Le prix dans la Convention de Vienne sur la vente internationale de marchandises: les articles 14 et 55, Journal du droit international (1990) 381 et seq.; Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) p. 105 et seq.; Roth/Kunz, Zur Bestimmbarkeit des Preises im UN-Kaufrecht, RIW (1997) 17 et seq.; in case law see Kantonsgericht Freiburg (Switzerland) 11 October 2004, CISG-Online 964. 145 See Official Records (1981), p. 45. 146 Compare Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 96; Adami, Les contrats “open price” dans la Convention des Nations Unies sur les contrats de vente international de marchandises, Revue de droit des affaires internationales (1989) 103 (110 et seq.); Eo¨rsi, in: Bianca/Bonell, Commentary (1987), Art. 55 paras 2.2.2. et seq.; Corbisier, Rev. int. dr. comp. (1988) 767 828; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 168; Fortier, Le prix dans la Convention de Vienne sur la vente internationale de marchandises: les articles 14 et 55, Journal du droit international (1990) 381 (389); Garro, Reconciliation of Legal Traditions in the U. N. Convention on Contracts for the International Sale of Goods, 23 International Lawyer (1989) 443 (464); Honnold/Flechtner, Uniform Law (2009), paras 137.4 et seq.; Joseph, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code, 3 Dickinson Journal of International Law (1984) 107 (122); Karollus, UN-Kaufrecht (1989) p. 76; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG paras 32 et seq.; Sono, Formation of International Contracts under the Vienna Convention: A Shift Above Comparative Law, in: Sarcevic/Volken (eds), International Sale of Goods (1986), pp. 111 (120 et seq.); Stern, Erkla¨rungen im UNCITRAL-Kaufrecht (1990) p. 17; Stoffel, ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf (1985), Formation du contrat, in: Wiener U p. 55 (63). 147 For a reference to this consequence, see also Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 10. 148 See Heuze ´, Vente Internationale (2005), para. 169 et seq. 149 Herber/Czerwenka, Kommentar (1991), Art. 14 para. 6; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 14 para. 24; Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 55 para. 5: Magnus, in: Staudinger Kommentar (2013), Art. 14 paras 32 et seq.; Thieffry, Sale of Goods Between French and US Merchants: Choice of Law Considerations Under the United Nations Convention on Contracts for the International Sale of Goods, 22 International Lawyer (1988) 1017 (1030); Witz/Salger/Lorenz, Kommentar (2016), Art. 14 para. 11.

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Part II. Formation of the Contract

view150 that the issue constitutes a gap151 that must be filled on the basis of the applicable law.152 33 In this author’s opinion, the solution to the problem of the relationship between the two provisions, which in practice does not appear to cause too many problems,153 requires one to realize that the two provisions govern different situations.154 In effect, Art. 55 does not require that the contract be validly concluded via the traditional offer and acceptance mechanism.155 Thus, where a contract has not been concluded via that traditional mechanism,156 the purchase price has to be determined directly via Art. 55.157 This is regardless of domestic provisions that provide for the invalidity of contracts concluded without the indication of the purchase price,158 since the validity exception in Art. 4(a) allows for recourse to domestic law only insofar as the CISG itself does not deal with an issue, which, in the case at hand it does, given that the CISG governs the formation of contract exclusively.159 34 Furthermore, Art. 55 applies without any doubt where Part II of the CISG is not applicable as a consequence of a reservation made pursuant to Art. 92.160 35 Art. 55 applies even in cases where the contract is concluded through offer and acceptance, but the application of Art. 14(1) has been excluded by the parties161 (an 150 Expressly rejecting the view mentioned in the text, see Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 27; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 22. 151 Compare Ferrari, in: Mu ¨ nchKommHGB (2013), Art. 17 para. 43. 152 See Cottino, Posizione del compratore, in: La vendita internazionale. La convenzione di Vienna dell’11 aprile 1980 (1981) pp. 147 (152 et seq.); Ebenroth, Internationale Vertragsgestaltung im Spannungsverha¨ltnis zwischen ABGB, IPR-Gesetz und UN-Kaufrecht, o¨sterreichische Juristische Bla¨tter (1986) 681 (685); Kahn, La Convention de Vienne du 11 avril 1980 sur les contrats de vente internationale de marchandises, Revue internationale de droit compare´ (1981) 951 (980 et seq.); Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), pp. 71 (76 et seq.); Samson, E´tude comparative de certaines dispositions de la Convention de Vienne de 1980 et des re`gles du droit que´be´cois en la matie`re, in: Perret/Lacasse (eds), Actues du colloque sur la vente internationale (1989), pp. 105 (110 et seq.); Smart, Formation of Contracts in Louisiana under the United Nations Convention for the International Sale of Goods, 53 Louisiana Law Review (1993) 1339 (1354). 153 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 31. 154 See also Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 14 para. 14; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 40; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 32; see also Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 22; for a criticism of the position advocated in the text, see Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) pp. 108–109. 155 See Roth/Kunz, Zur Bestimmbarkeit des Preises im UN-Kaufrecht, RIW (1997) 17 (19); in case law see Oberlandesgericht Mu¨nchen (Germany) 8 March 1995, CISG-Online 145. 156 For a reference to other modes of contract conclusion, see Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Introduction to Art. 14 para. 2. 157 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 14 para. 17; Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 23; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 33; contra, see Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 24. 158 See Piltz, Internationales Kaufrecht (2008) para. 3-29; contra see Bonell, La formazione del contratto di compravendita, in: La vendita internazionale. La convenzione di Vienna dell’11 aprile 1980 (1981), ¨ bereinkommen u¨ber Vertra¨ge u¨ber den internationalen p. 113 (127); Botschaft betreffend das Wiener U Warenkauf (1989) p. 772. 159 Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 34. 160 Compare Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 23; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 14 para. 26; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 35; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 357; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 11; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 20; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 22. 161 Dornis, in: Honsell, Kommentar (2010), Art. 14 para. 23; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 248; in case law, see OLG Neubrandenurg (Germany) 3 August 2005, CISG-

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Article 14

exclusion that can also occur implicitly)162 or where Art. 14(1) is inapplicable.163 In these instances as well, recourse is to be had to Art. 55 to determine purchase price,164 irrespective of whether domestic provisions allow for the conclusion of a contract without the determination of the purchase price,165 since Art. 55 prevails over the applicable domestic law. Even in cases where the offeror deliberately leaves the purchase price open and the 36 addressee accepts the proposal – by starting performance, for instance – a contract is concluded, thus making recourse to Art. 55 necessary to determine the purchase price.166 This is a view shared by courts.167 Where, however, the proposal lacks a determination of the purchase price and does not make provision for determining it, and an interpretation pursuant to Art. 8 leads to the conclusion that the person making the proposal did not want to submit an offer susceptible of acceptance, no contract is concluded, thus making resort to Art. 55 unnecessary.168

5. Offer containing a clause excluding Part II The question of which law is applicable with regard to the conclusion of a contract 37 for the international sale of goods seems particularly problematic in cases where the offeror wants to unilaterally exclude the CISG by inserting a clause to that effect into the offer.169 Some commentators believe that this issue should be dealt with by consulting the law indicated as the applicable one by the offeror or, in the absence of such an indication, on the basis of the law to be determined by means of the objective connecting factors of the rules of private international law of the forum.170 This view is not tenable.171 The question of whether the declaration of the person initiating the

Online 1190; for a reference to the dispositive nature of Art. 14(1) second sentence, see Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 14 para. 70; Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 23; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 355; Piltz, Internationales Kaufrecht (2008) para. 3-27; Rudolph, Kommentar (1996), Introduction to Art. 14 para. 7. 162 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 14 para. 17; see also, however, Witz/Salger/Lorenz, Kommentar (2016), Art. 14 para. 13; Piltz, Internationales Kaufrecht (2008) para. 3-28. 163 Compare Oberlandesgericht Rostock (Germany) 27 July 1995, CISG-Online 209; Oberlandesgericht Mu¨nchen (Germany) 8 March 1995, CISG-Online 145. 164 Compare Rudolph, Kommentar (1996), Art. 14 para. 5. 165 See also Fortier, Le prix dans la Convention de Vienne sur la vente internationale de marchandises: les articles 14 et 55, Journal du droit international (1990) 381 (389); contra see Heuze´, La formation du contrat selon la CVIM: quelques difficulte´s, Revue de droit des affaires internationales (2001) 277 (291); Neumayer/Ming, Convention de Vienne (1993), Art. 14 para. 11; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 35. 166 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 14 para. 16; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) pp. 41 et seq.; Herber/Czerwenka, Kommentar (1991), Art. 14 para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 33; in case law see Handelsgericht des Kantons Aargau (Switzerland), 26 September 1997, CISG-Online 329. 167 Compare Landgericht Neubrandenburg (Germany) 3 August 2005, CISG-Online 1190; Bezirksgericht St. Gallen (Switzerland), 3 July 1997, CISG-Online 336. 168 Compare Arbitral Award, International Arbitral Tribunal of the Russian Chamber of Commerce, 3 March 1995, CISG-Online 204. 169 For the following, see also Ferrari, La vendita internazionale. Applicabilita ` ed applicazioni della Convenzione delle Nazioni Unite sui contratti di vendita internazionale di beni mobili (2006) pp. 233 et seq. 170 Siehr, in: Honsell, Kommentar (1997), Art. 6 para. 4; Rehbinder, Vertragsschluss nach UN-Kaufrecht im Vergleich zu EAG und BGB, in: Schlechtriem (ed), Einheitliches Kaufrecht und nationals Obligationenrecht 1987), p. 149 (151). 171 See also Karollus, Der Anwendungsbereich des UN-Kaufrechts im U ¨ berblick, Juristische Schulung (1993) 378 (381); Magnus, in: Staudinger Kommentar (2013), Art. 6 paras 11 et seq.

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conclusion of a contract constitutes an offer has to be answered on the basis of the provisions of Part II of the CISG. The same is true with regard to the question of whether a declaration of the party accepting the offer constitutes an acceptance for the purposes of the CISG.172 An agreement to exclude the CISG is clearly at hand where the acceptance mirrors the offer containing the exclusion clause; if the acceptance departs from the offer insofar as the offeree does not agree to the CISG’s exclusion, Art. 19 leads to the conclusion that no agreement as to the CISG’s exclusion has been reached.173 The same is true where it is the acceptor and not the offeror who wants to exclude the CISG. Since the addition of an exclusion clause on the part of the acceptor would clearly constitute a “material” modification of the offer under Art. 19(2), the statement by the acceptor cannot be considered an “acceptance”, but constitutes a counteroffer instead.

6. Incorporation of standard contract terms 38

The offeror will generally attempt to have his standard contract terms govern the contract. As regards the incorporation of standard contract terms, according to both commentators174 and courts,175 the “CISG does not postulate special requirements. The rules needed therefore have to be derived from Arts 14 et seq. CISG that govern the process of contract formation.”176 Recourse to domestic law or to non-binding rules, such as the UNIDROIT Principles, is neither necessary nor appropriate,177 as also expressly stated by a German court in 2015.178

172 See also Czerwenka, Rechtsanwendungsprobleme im internationalen Kaufrecht. Das Kollisionsrecht bei grenzu¨berschreitenden Kaufvertra¨gen und der Anwendungsbereich der internationalen Kaufrechtsu¨bereinkommen (1988) p. 169. 173 Magnus, in: Staudinger Kommentar (2013), Art. 6 para. 12. 174 Compare Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 44; Gruber, in: Mu¨nchKommBGB (2016), Introduction to Art. 14 para. 6; Herber/Czerwenka, Kommentar (1991), Art. 14 para. 11; Janssen, Nach welchem Recht richtet sich die Einbeziehung von Allgemeinen Gescha¨ftsbedingungen in den Niederlanden?, IHR (2005) 155 (156 et seq.); Janssen, Die Einbeziehung von allgemeinen Gescha¨ftsbedingungen in internationale Kaufvertra¨ge und die Bedeutung der UNIDROIT- und der Lando-Principles, IHR (2004) 194 (197); Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 40; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 14 CISG para. 22; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 14 para. 16; Schlechtriem/ Schroeter, Internationales UN-Kaufrecht (2013) para. 250; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 14 para. 55; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 33; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 40. 175 See Rechtbank Midden-Nederland (Netherlands) 20 January 2016, CISG-Online 2685; Rechtbank Rotterdam (Netherlands) 2 December 2015, CISG-Online 2683; Hof s’Hertogenbosch (Netherlands) 29 September 2015, CISG-Online 2655; Landgericht Fulda (Germany) 29 September 2015, CISG-Online 2716; LG Stade (Germany) 19 February 2015, CISG-Online 2669; OLG Naumburg (Germany) 13 February 2013, CISG-Online 2455; Oberster Gerichtshof (Austria) 31 August 2005, CISG-Online 1093; Landgericht Neubrandenburg (Germany) 3 August 2005, CISG-Online 1190; Oberlandesgericht Innsbruck (Austria) 1 February 2005, CISG-Online 1130; Hoge Raad (the Netherlands) 28 January 2005, CISGOnline 1002; Oberlandesgericht Karlsruhe (Germany) 20 July 2004, CISG-Online 858; Oberlandesgericht Du¨sseldorf (Germany) 21 April 2004, CISG-Online 915; Landgericht Trier (Germany) 8 January 2004, CISG-Online 910; Oberster Gerichtshof (Austria) 17 December 2003, CISG-Online 828. 176 Oberster Gerichtshof (Austria) 6 February 1996, CISG-Online 224; see also Rechtbank Rotterdam (Netherlands) 2 December 2015, CISG-Online 2683; contra see Landgericht Duisburg (Germany) 17 April 1996, CISG-Online 186. 177 See, however, Hofs’Hertogenbosch (the Netherlands) 16 October 2002, CISG-Online 816; for a comment on this decision, see Janssen, Die Einbeziehung von allgemeinen Gescha¨ftsbedingungen in internationale Kaufvertra¨ge und die Bedeutung der UNIDROIT- und der Lando-Principles, IHR (2004) 194 et seq. 178 Landgericht Fulda (Germany) 29 September 2015, CISG-Online 2716.

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To determine whether standard contract terms are part of the offer,179 special regard 39 must be given to Art. 8, as often suggested by both commentators180 and courts181. Hence, where the addressee knew or could not have been unaware of the fact (Art. 8(1)) that it was the offeror’s intent that the standard contract terms be part of the offer, those terms have to be considered an integral part of the offer.182 Even absent the aforementioned requirements, the standard contract terms must be considered an integral part of the offer if “a reasonable person of the same kind” as the addressee “in the same circumstances” (Art. 8(2)) would have understood that the terms were supposed to be part of the offer.183 Pursuant to Art. 8(3), in determining “the understanding a reasonable person [of the same kind as the addressee] 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.”184 Thus, “for an effective incorporation it is required that the addressee can gain knowledge of the standard contract terms in a reasonable manner.”185 “An effective incorporation of standard contract terms therefore requires above all that the addressee of the offer could become aware of offeror’s intent to incorporate his standard contract terms into the contract. Furthermore, the uniform sales law requires […] from the user of standard contract terms that he send their text to the addressee or make them available in another way.”186 179 For a very detailed discussion of the issue, see, among others, Hennemann, AGB-Kontrolle im UNKaufrecht aus deutscher und franzo¨sischer Sicht (2001); Teklote, Die Einheitlichen Kaufgesetze und das deutsche AGB-Gesetz: Probleme bei Verwendung allgemeiner Gescha¨ftsbedingungen im CISG und im EKG/EAG (1994). 180 Compare Dornis, in: Honsell, Kommentar (2010), Inro. Art. 14 para. 6; Ferrari/Torsello, International Sales Law – CISG (2015) p. 137; Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 28; Lu¨deritz/ Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 14 para. 10; Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 41; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 14 para. 40. 181 See Rechtbank Midden-Nederland (Netherlands) 20 January 2016, CISG-Online 2685; Rechtbank Rotterdam (Netherlands) 2 December 2015, CISG-Online 2683; Landgericht Fulda (Germany) 29 September 2015, CISG-Online 2716; OLG Naumburg (Germany) 13 February 2013, CISG-Online 2455; Oberster Gerichtshof (Austria) 31 August 2005, CISG-Online 1093; Oberster Gerichtshof (Austria) 8 August 2005, CISG-Online 1087; Landgericht Neubrandenburg (Germany) 3 August 2005, CISG-Online 1190; Oberlandesgericht Innsbruck (Austria) 1 February 2005, CISG-Online 1130; Oberlandesgericht Du¨sseldorf (Germany) 21 April 2004, CISG-Online 915; Bundesgerichtshof (Germany) 31 October 2001, CISG-Online 617; Oberster Gerichtshof (Austria) 6 February 1996, CISG-Online 224; Tribunal de commerce de Nivelles (Belgium) 19 September 1995, CISG-Online 366. 182 Bundesgerichtshof (Germany) 31 October 2001, CISG-Online 617. 183 Ferrari/Torsello, International Sales Law – CISG (2015) p. 137. 184 Oberster Gerichtshof (Austria) 6 February 1996, CISG-Online 224; for more recent decisions stating the same, see Landgericht Fulda (Germany) 29 September 2015, CISG-Online 2716; Oberster Gerichtshof (Austria) 8 August 2005, CISG-Online 1087; Landgericht Neubrandenburg (Germany) 3 August 2005, CISG-Online 1190. 185 Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 41; also compare Dornis, in: Honsell, Kommentar (2010), Vor Art. 14 para. 7; Garro/Zuppi, Compraventa internacional de mercaderı´as (2012), p. 120; Lu¨deritz/Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 14 para. 10; Witz/Salger/Lorenz, Kommentar (2016), Introduction to Art. 14 para. 12; in case law see Landgericht Fulda (Germany) 29 September 2015, CISG-Online 2716; U.S. District Court, Western District of Pennsylvania (U.S.), Roser Technologies, Inc. v. Carl Schreiber GmbH, 10 September 2013, CISG-Online 2490; OLG Naumburg (Germany) 13 February 2013, CISG-Online 2455; Landgericht Neubrandenburg (Germany) 3 August 2005, CISG-Online 1190. 186 Bundesgerichtshof (Germany) 31 October 2001, CISG-Online 617; see also Rechtbank MiddenNederland (Netherlands) 20 January 2016, CISG-Online 2685; Rechtbank Rotterdam (Netherlands) 2 December 2015, CISG-Online 2683; Oberlandesgericht Du¨sseldorf (Germany) 21 April 2004, CISGOnline 915; Oberster Gerichtshof (Austria) 6 February 1996, CISG-Online 224; in legal writing see Hennemann, AGB-Kontrolle im UN-Kaufrecht aus deutscher und franzo¨sischer Sicht (2001) pp. 72 et

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“By virtue of the differences between the legal systems and usages many differences exist between standard contract terms; this is why the contractual partner of the user of standard contract terms oftentimes will not be able to predict the particular contents of the terms he agreed to; moreover, a control as regards the contents of the standard contract terms according to domestic law (Article 4(2)(a) CISG) is not provided for everywhere. For the user of the standard terms it is easily possible to attach the terms – which are regularly advantageous to him – to the offer. It would violate both the principle of good faith in international trade (Article 7(1) CISG) and the general duty of the parties to corporate and to inform each other [as to issues relevant to the their contract] if one were to impose an obligation on the contractual partner of the user of the standard contract terms to inquire as to the contents of the terms that have not been transmitted, and, thus, impose upon that party the risks and disadvantages of unknown standard contract terms drafted by the opposing party. As regards the fact that standard contract terms referred to in commercial transactions or in transactions between businesses become part of the contract under German non-uniform law even if the opposing party is not aware of them, but could have become aware of them by using reasonable efforts – for instance, by requesting them from the user […], this is irrelevant in international commerce, with the consequence that, pursuant to the principle of good faith, the opposing party cannot be expected to have an obligation to inquire into their contents.”187 Where, however, the front side of an order form clearly contains a reference to the standard contract terms printed on the back side of the same (both in the language of the offeror and in that of the offeree), those standard contract terms have to be considered incorporated into the offer.188 In this author’s opinion, it is not sufficient189 that the user refers to its standard contract terms accessible on the Internet because, as previously mentioned, “the addressee is not under a duty to get access to standard contract terms that the user wants to use against the addressee.”190 If, however, the addressee is familiar with specific standard contract terms used by opposing party because “the standard contract terms have been used on the occasion of prior contracts between the parties, particularly in long standing business relationships”,191 the standard contract terms do not have to be transmitted to the addressee of the proposal.192 41 The question of whether the standard contract terms are incorporated into the offer cannot be clearly distinguished from that of what terms are part of the offer (not the contract). The aforementioned considerations are relevant with regard to the latter issue 40

seq.; Huber/Kro¨ll, Deutsche Rechtsprechung zum UN-Kaufrecht in den Jahren 2001/2002, IPRax (2003) 309 (311); Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 29; Piltz, Internationales Kaufrecht (2008) para. 3-83; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 254; Teklote, Die Einheitlichen Kaufgesetze und das deutsche AGB-Gesetz: Probleme bei Verwendung allgemeiner Gescha¨ftsbedingungen im CISG und im EKG/EAG (1994) pp. 112 et seq.; Ventsch/Kluth, Die Einbeziehung von Allgemeinen Gescha¨ftsbedingungen im Rahmen des UN-Kaufrechts, IHR (2003) 61 (61). 187 Landgericht Neubrandenburg (Germany) 3 August 2005, CISG-Online 1190; see also Landgericht Fulda (Germany) 29 September 2015, CISG-Online 2716; Landgericht Trier (Germany) 8 January 2004, CISG-Online 910. 188 See Oberlandesgericht Karlsruhe (Germany) 20 July 2004, CISG-Online 868; Amtsgericht Nordhorn (Germany) 14 June 1994, CISG-Online 259. 189 Dornis, in: Honsell, Kommentar (2010), Vor Art. 14 para. 12; Piltz, IHR (2004) 133 (134); Ventsch/ Kluth IHR (2003) 124; contra see Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 30; Stiegele/Halter, Nochmals: Einbeziehung von Allgemeinen Gescha¨ftsbedingungen im Rahmen des UN-Kaufrechts – Zuga¨nglichmachung im Internet, IHR (2003) 169 (169). 190 Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 41. 191 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 14 para. 31. 192 See Huber/Kro ¨ ll, Deutsche Rechtsprechung zum UN-Kaufrecht in den Jahren 2001/2002, IPRax (2003) 309 (311); Magnus, in: Staudinger Kommentar (2013), Art. 14 para. 41.

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as well. As a result, it must be assumed that standard contract terms are not considered part of the offer,193 when the addressee does not know or cannot understand the contents and when a reasonable person of the same kind as the addressee cannot have known or understood (for instance, because the language in which the standard contract terms are drafted is neither one known to the addressee nor one commonly used in the area of trade concerned).194 While the incorporation of standard contract terms is governed by the CISG provisions 42 on formation of contracts,195 in principle the determination of the appropriateness of their contents is, pursuant to Art. 4(a), left to the applicable domestic law.196 This is true, at least where the determination is not solely based on form requirements.197 This is the case in Italy, for instance, because the principle of informality provided by Art. 11 would apply (and override any domestic form requirements). If, according to the applicable domestic law, an evaluation has to occur with respect to the appropriateness of the contents of the standard contract terms, the evaluation must take into account that the contract is for an international, and not a domestic, sale of goods. Thus, the CISG’s values, rather than domestic ones, have to be taken into account.198

III. Comparable Rules Art. 14 CISG, which, as mentioned earlier, can be traced back, at least partially, to 43 Art. 4(1) ULF,199 deeply influenced the PICC provision that determines when a proposal constitutes an offer, namely Art. 2.1.2. Like Art. 14 CISG, Art. 2.1.2. PICC constitutes the starting point for the analysis of contract formation by means of the traditional offer-and-acceptance-approach.200 For a proposal to constitute an offer, Art. 2.1.2. PICC, like Art. 14 CISG, requires that 44 it indicates the offeror’s intention to be bound in case of acceptance and that it is sufficiently definite. Unlike Art. 14 CISG, however, Art. 2.1.2. PICC does not determine when this definitiveness requirement is met.201 It does not state, in other words, that “[a] proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price”.202 This is unsurprising, however, as Art. 2.1.2 PICC does not merely relate to contracts for the sale of goods. This is also the reason why the DCFR, the rules on formation of which are as much 45 based on the traditional approach to contract conclusion – based on offer and 193

Contra see Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 14 para. 57. Compare Gruber, in: Mu¨nchKommBGB (2016), Art. 14 para. 33; in case law see Oberlandesgericht Du¨sseldorf (Germany) 21 April 2004, CISG-Online 915. 195 Also see Oberlandesgericht Zweibru ¨ cken (Germany) 31 March 1998, CISG-Online 481. 196 In case law see Oberlandesgericht Du ¨ sseldorf (Germany), 21 April 2004, CISG-Online 915; Amtsgericht Nordhorn (Germany), 14 June 1994, CISG-Online 259; for more detailed remarks, see Dornis, in: Honsell, Kommentar (2010), Intro. Art. 14 para. 15; Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 4 para. 20. 197 Compare, for instance, Art. 1341(2) of the Italian Civil Code. 198 For this conclusion, see also Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 14 para. 12; Karollus, UN-Kaufrecht: Hinweise fu¨r die Vertragspraxis, o¨sterreichische Juristische Bla¨tter (1993) 23 (30); Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 4 para. 20; for critical remarks, see Schluchter, Die Gu¨ltigkeit von Kaufvertra¨gen unter dem UN-Kaufrecht (1996) pp. 195 et seq. 199 See supra the text accompanying note 2. 200 See also Kleinheisterkamp, in: Vogenauer/Kleinheitserkamp (eds), Commentary on the Unidroit Principles (2009), Art. 2.1.2. para. 1. 201 Nor does Art. 4(1) ULF determine when the definitiveness requirement is met. 202 Art. 14(1) CISG. 194

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acceptance – as those of the CISG and the PICC, while also requiring that a proposal indicate the intention to be bound and be definite (Art. II-4:201(1)),203 also omits a reference to the need for the proposal to indicate the goods and fix or make provision for determining the quantity and the price. 46 Unlike the PICC, the DCFR deals, however, with the issue dealt with in Art. 14(2) CISG, namely that of whether the proposal needs to be addressed to one or more specific persons for it to be considered an offer. Unlike Art. 14(2) CISG, Art. II-4:201(2) DCFR does not require that the proposal be addressed to one or more specific persons. In other words, under the DCFR an offer to the public does not merely constitute an invitation to make an offer. 47 It is also worth pointing out that the 2005 United Nations Convention on the Use of Electronic Communications in International Contracts also addresses an issue dealt with in Art. 14 CISG, more specifically, in Art. 14(2). In effect, like Art. 14(2) CISG, Art. 11 of the 2005 Convention sets forth the rule according to which a proposal to conclude a contract made through one or more electronic communications not addressed to one or more specific persons, but which is generally accessible to parties making use of information systems, constitutes a mere invitation to make an offer, unless it clearly indicates the intention of the party making the proposal to be bound in case of acceptance. 203

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The provision referred to in the text is based upon Art. 2:201 PECL.

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Article 15 (1) An offer becomes effective when it reaches the offeree. (2) An offer, even if it is irrevocable, may be withdrawn if the withdrawal reaches the offeree before or at the same time as the offer. ¨ bereinkommen von 1980 u¨ber den internatioBibliography: Eo¨rsi, Formation of contract, in: Wiener U nalen Warenkauf (1985), p. 43; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006); Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193; Ludwig, Der Vertragsabschluß nach UNKaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994); Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996).

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1. Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2. Death, insolvency and lack of legal capacity of the offeror. . . . . . . . . . . . . . . . . 15 III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

I. Importance and Role of the Provision Art. 15(1), the substantive rule of which can be traced back to Art. 5(1) ULF,1 states, 1 though not mandatorily,2 that an offer becomes effective only when it reaches the addressee.3 Consequently, an offer that does not reach the addressee is ineffective4 and cannot, therefore, be accepted.5 This is true even if the addressee learns of the contents of the offer in a different manner.6 Art. 15 does not determine when an offer “reaches” the offeree; rather, it is Art. 24 2 that defines when a declaration reaches its addressee.7 Pursuant to Art. 24, an offer 1 See Rubino, Nuove leggi civ. comm. (1989) 53 (53 note 1); Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 4. 2 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 48; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 376. 3 See Rechtbank Koophandel Tongeren (Belgium) 25 January 2005, CISG-Online 1106; in legal writing, see, e. g., Garro/Zuppi, Compraventa internacional de mercaderı´as (2012), p. 125; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 260. 4 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 15 CISG para. 5. 5 See also Audit, Vente Internationale (1990), p. 60; Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 2; Ferrari/Torsello, International Sales Law – CISG (2015) p. 139; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 15 para. 1; Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 5. 6 In accord Eo ¨ rsi, in: Bianca/Bonell, Commentary (1987), Art. 15 para. 2.1.2; Enderlein/Maskow/ Strohbach, Internationales Kaufrecht (1991) Art. 15 para. 1; Eo¨rsi, Formation of contract, in: Wiener ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf (1985) p. 43 (48); Ferrari/Torsello, U International Sales Law – CISG (2015) p. 139; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 15 para. 2. 7 Compare Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 98; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 15 para. 2; Brunner/

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“reaches” the addressee when it is made orally to him or delivered by other means to him personally, to his place of business or mailing address, or if he does not have a place of business or mailing address, to his habitual residence.8 In other words, when considering the question of when the offer might become effective (such as at the time of declaration, time of dispatch, time of receipt by the offeree, time of knowledge by the offeree),9 the drafters of the CISG decided in favour of the point in time that best spreads the risk of non-receipt and incorrect transmission of the offer between the persons concerned, i. e., the offeror and the offeree.10 While the offeror bears the risk of transmission until the time of delivery,11 which entails that the offer becomes effective as it was delivered and not as it was declared,12 and which under certain circumstances may lead to the voidability of the offer according to domestic law,13 the addressee bears the risk (loss, destruction, late knowledge, etc.) after delivery has occurred.14 The choice in favour of the time of delivery therefore serves the interests of both parties. 3 The time when an offer reaches its addressee does not only determine when the aforementioned risk to the offeror passes, but also when the offer can be accepted.15 Thus, it determines the beginning of the time period within which the offer can be Pfisterer/Ko¨ster, Kommentar (2014), Art. 15 para. 1; Dornis, in: Honsell, Kommentar (2010), Art. 15 ¨ bereinkommen von 1980 u¨ber den interparas. 1 and 2; Eo¨rsi, Formation of contract, in: Wiener U nationalen Warenkauf (1985) p. 43 (48); Garro/Zuppi, Compraventa internacional de mercaderı´as (2012), p. 125; Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) p. 88; Gruber, in: Mu¨nchKommBGB (2016), Art. 15 para. 1; Herber/Czerwenka, Kommentar (1991), Art. 15 para. 2; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 15 CISG para. 5; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 374; Rubino, Nuove leggi civ. comm. (1989) 53 (53); Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 15 para. 2; Sono, Formation of International Contracts under the Vienna Convention: A Shift above the Comparative Law, in: Sarcevic/Volken (eds), International Sale of Goods (1986), p. 111 (115); Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 5; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 15 para. 2. 8 Ferrari/Torsello, International Sales Law – CISG (2015) p. 139; Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193 (202 et seq.); Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11 (20); J. Pierre/V. Pierre, A Comparison of the Rules on Formation of Sales Contracts Under the Louisiana Civil Code and the United Nations Convention on Contracts for the International Sale of Goods: What Buyers and Sellers Should Know, 20 Southern University Law Review (1993) 189 (191 et seq.). 9 See Dı ´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 170; for comparative remarks on the issue at hand, see Ferrari, La formazione del contratto, in: Galgano/Ajani/Ferrari (eds), Atlante di diritto privato comparato (1999), pp. 129 (149 et seq.). 10 See also Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 171; Ferrari/Torsello, International Sales Law – CISG (2015) p. 139. 11 Compare Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 5; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 312; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 15 para. 3; Neumayer/Ming, Convention de Vienne (1993), Art. 15 para. 1; Piltz, Internationales Kaufrecht (2008) para. 3-35; Stern, Erkla¨rungen im UNCITRAL-Kaufrecht (1990) p. 21. 12 Dornis, in: Honsell, Kommentar (2010), Art. 15 para. Gruber, in: Mu ¨ nchKommBGB (2016), Art. 15 para. 8; Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 6. 13 See Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 15 para. 9; Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 6. 14 Ferrari/Torsello, International Sales Law – CISG (2015) p. 139. 15 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 50; Rubino, Nuove leggi civ. comm. (1989) 53 (53); an offer that has reached its addressee can be accepted by the addressee even where the offer reached the addressee before the time that the offer was expected to reach its addressee; see Neumayer/Ming, Convention de Vienne (1993), Art. 15 para. 1.

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Article 15

accepted16 and also the point after which a revocable offer can be revoked.17 Before that time an offer cannot be accepted.18 As previously discussed,19 this is true even where the addressee learns of the offer in a different manner.20 If the addressee accepts the offer as a precaution before the offer reaches the addressee, the contract does not come into existence until the time the offer reaches the addressee (provided, obviously, that the acceptance also reaches its addressee).21 Even where cross-offers are made, a contract conclusion can occur.22 This may, however, cause problems relating to the exact time of the contract conclusion. In this author’s opinion, the contract conclusion occurs when the second of the two offers reaches its addressee.23 When an offer is addressed to an indefinite group of persons, and therefore can bind 4 the offeror only under certain circumstances,24 the offer becomes effective only when it is possible to gain knowledge of the offer,25 unless, of course, the offer itself provides otherwise.26 Though not stated explicitly, Art. 24 requires that the offer be expressed with 5 the consent of the offeror.27 This requirement is not met, for instance, where a third party, without being authorized to do so, mails a letter that it has found in a drawer. In these cases, there is no offer that is susceptible to being accepted,28 which means that even where

16 See Perales Viscasillas, La Formacio ´ n del contrato de compraventa internacional de mercaderı´as (1996) p. 375. 17 Ferrari/Torsello, International Sales Law – CISG (2015) p. 140; Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2005), Art. 15 para. 2; Schlechtriem/Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 15 para. 2. 18 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 15 CISG para. 5; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 15 para. 2. 19 See Ferrari, in: Mu ¨ nchKommHGB (2013), Art. 15 para. 1. 20 Official Records (1981), p. 22; Audit, Vente Internationale (1990), p. 60; Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 2; Eo¨rsi, in: Bianca/Bonell, Commentary (1987), Art. 15 para. 2.1.2; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 172; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991) Art. 15 para. 1; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 15 CISG para. 5; Rubino, Nuove leggi civ. comm. (1989) 53 (53); Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2005), Art. 15 para. 2; Witz/Salger/Lorenz, Kommentar (2016), Art. 15 para. 4; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 15 para. 2. 21 See also Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 2; Neumayer/Ming, Convention de Vienne (1993), Art. 15 para. 1; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 15 para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 5; contra see Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 15 para. 7. 22 For this conclusion, see also Witz/Salger/Lorenz, Kommentar (2016), Art. 15 para. 5. 23 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 15 para. 7; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 390. 24 See Ferrari, in: Mu ¨ nchKommHGB (2013), Art. 14 para. 7. 25 See Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 3; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 52; Gruber, in: Mu¨nchKommBGB (2016), Art. 15 para. 5; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 31; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 15 para. 8. 26 Contra Achilles, Kommentar (2000) Art. 15 para. 1; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 15 para. 3; Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 5; for a partially different view see also Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 15 para. 3. 27 See also Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 15 CISG para. 7; Piltz, Internationales Kaufrecht (2008), para. 3-35. 28 See also Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 4; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 15 para. 9; Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 6; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 15 para. 2.

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Part II. Formation of the Contract

that letter reaches the addressee it does not become effective as an offer. The offeror bears the burden of proving that the offer was dispatched without his consent.29

II. Detailed Commentary 1. Withdrawal According to Art. 15(2), the moment when the offer reaches the offereee also determines the moment until which an offer – even an irrevocable one30 – can be withdrawn.31 A validly withdrawn offer never becomes effective in the first place,32 and therefore – by conceptual necessity – cannot be accepted.33 According to some commentators, this is the basic point Art. 15 makes.34 7 Art. 15(2) does not define the term withdrawal; from this provision, however, it can be derived that a withdrawal is a statement that has to reach its addressee to become effective35 (and whose substantial validity requirements are determined by domestic law36). This relates to a statement in itinere37 and aims at keeping the statement it relates to from becoming effective.38 Thus, an offer cannot be withdrawn if it has already reached the offeree.39 6

29 See Gruber, in: Mu ¨ nchKommBGB (2016), Art. 15 para. 20; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 15 para. 2 note 2; contra Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 21. 30 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 15 CISG para. 9; Piltz, Internationales Kaufrecht (2008), para. 3-42. 31 See also Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 98; Dı´ez-Picazo, in: ¨ bereinkommen von Dı´ez-Picazo, Comentario (1998), p. 173; Eo¨rsi, Formation of contract, in: Wiener U 1980 u¨ber den internationalen Warenkauf (1985) p. 43 (48); Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193 (206); Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 375; Rubino, Nuove leggi civ. comm. (1989) 53 (53 and 55); Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 15 para. 4. 32 See Perales Viscasillas, La Formacio ´ n del contrato de compraventa internacional de mercaderı´as (1996) p. 382; Rubino, Nuove leggi civ. comm. (1989) 53 (54); Rudolph, Kommentar (1996), Art. 15 para. 3. 33 See Gruber, in: Mu ¨ nchKommBGB (2016), Art. 15 para. 14; Neumayer/Ming, Convention de Vienne (1993), Art. 15 para. 2; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 15 para. 6; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 15 para. 7. 34 See Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 15 para. 4; Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 3. 35 Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 7; Rudolph, Kommentar (1996), Art. 15 para. 3; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 15 para. 4; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 15 para. 4; Stern, Erkla¨rungen im UNCITRAL-Kaufrecht (1990) p. 21; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 15 para. 5. 36 Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 11; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 53; Gruber, in: Mu¨nchKommBGB (2016), Art. 15 para. 11; Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 11; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 15 para. 3; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 15 para. 4; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 15 para. 15. 37 Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (78). 38 In accord Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 172; Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 6; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 15 CISG para. 8; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 377; Rubino, Nuove leggi civ. comm. (1989) 53 (54). 39 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 15 CISG para. 10.

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Article 15

For a withdrawal to have the intended effect on the offer, it must reach the offeree 8 before or at the same time as the offer that it aims to withdraw40 (however, when the withdrawal reaches its addressee is to be determined, like the offer, on the basis of Art. 24).41 For a withdrawal of an offer to have its intended effects, it is irrelevant whether the addressee gains actual knowledge of it.42 This has various consequences. If the withdrawal reaches the offeror before, or at the latest at the same time as the offer, the offer does not become effective. This is true even if the addressee learns of the offer at the same time or even before the withdrawal.43 On the other hand, the withdrawal does not become effective even if the addressee of the withdrawal gains knowledge of it before gaining knowledge of the offer if the offer has reached the addressee before the withdrawal.44 However, a withdrawal that reaches the offeree after the offer can constitute a revocation under Art. 16.45 A withdrawal must be distinguished from a mere clarification or modification of an 9 offer – neither of which, unlike the withdrawal, affect the effectiveness of an offer at all. The question of whether a statement qualifies as a withdrawal, modification or simple clarification of the offer is to be decided on the basis of an interpretation in light of Art. 8.46 A withdrawal of an offer to the public is also possible.47 With regard to the question 10 of when such a withdrawal becomes effective (and, thus, leads to the offer to the public never becoming effective) the same considerations as the ones mentioned earlier apply. 40 Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193 (206); Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11 (25); Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 377; Piltz, Internationales Kaufrecht (2008), para. 3-42; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 15 para. 4; contra, without justification, Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 43 (50). 41 See Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha ¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 311; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 15 para. 4; Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 9. 42 Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 10; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 48; Gruber, in: Mu¨nchKommBGB (2016), Art. 15 para. 10; Herber/Czerwenka, Kommentar (1991), Art. 15 para. 4; Ludwig, Der Vertragsabschluß nach UNKaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 303; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Introduction to Art. 14 para. 4; Piltz, Internationales Kaufrecht (2008), para. 3-42; Reinhart, Kommentar (1991), Art. 15 para. 2; Schroeter, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 15 para. 5. 43 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 15 para. 10; Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 9. 44 Herber/Czerwenka, Kommentar (1991), Art. 15 para. 4; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 15 para. 14; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 313; Piltz, Internationales Kaufrecht (2008), para. 3-42; Stern, Erkla¨rungen im UNCITRAL-Kaufrecht (1990) pp. 21 et seq.; contra, see Jametti Greiner, Der Vertragsabschluss, in: Hoyer/ Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 43 (50). 45 See Dı ´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 173; Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 13; Gruber, in: Mu¨nchKommBGB (2016), Art. 15 para. 2; Piltz, Internationales Kaufrecht (2008), para. 3-42; Rubino, Nuove leggi civ. comm. (1989) 53 (55); Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 9. 46 Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 8. 47 Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 7; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 15 para. 6; contra Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 476.

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11

12

13

14

Part II. Formation of the Contract

In order to prevent the offer to the public from becoming effective, the withdrawal must occur in a manner that (theoretically) allows every potential addressee to gain knowledge of it. This is surely the case when the form of the withdrawal mirrors that of the offer to the public.48 But it is possible that a withdrawal taking a different form might also bar the effectiveness of an offer to the public.49 There is dispute as to whether an oral offer can be withdrawn. Some commentators hold that a withdrawal is possible until the oral statement is completed.50 In this author’s opinion, this conclusion is not self-evident.51 This is due to the fact that when the oral statement is interrupted, there is not yet a full offer that can be accepted.52 Art. 15 does not deal with the form the withdrawal has to take. The withdrawal is – subject to Art. 12 – not subject to any form requirements.53 Thus, the withdrawal can also be made in a form different from that of the offer.54 According to prevailing opinion, a partial withdrawal is admissible.55 However, there is a dispute as to whether it is permissible to withdraw a withdrawal of an offer. Some commentators reject this idea categorically.56 In this author’s opinion, that view is untenable.57 Before the withdrawal becomes effective, the offeror can declare that the withdrawal will not have any effect,58 (the permissibility of declarations not explicitly governed by Part II, like a withdrawal of the withdrawal of the offer, arises out of Art. 24). Therefore, as long as the withdrawal of the withdrawal reaches the offeror before the original withdrawal, the offer becomes effective upon receipt.59 The party relying upon the effects of an offer or a withdrawal bears the burden of proving that the offer or withdrawal reached the addressee.60 48

See also Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 15 para. 11. Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 15 para. 5. 50 Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 9. 51 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) pp. 55 et seq.; contra Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 381. 52 Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 13; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 15 para. 17. 53 Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 8; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 15 para. 11; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 15 CISG para. 13; Rubino, Nuove leggi civ. comm. (1989) 53 (56); Rudolph, Kommentar (1996), Art. 15 para. 3; in case law see Rechtbank Koophandel Tongeren (Belgium) 25 January 2005, CISG-Online 1106; contra Piltz, Internationales Kaufrecht (2008), para. 3-42: suggesting that the withdrawal does not require any form, irrespective of Article 12. 54 See also Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 8; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 15 para. 6; Herber/Czerwenka, Kommentar (1991), Art. 15 para. 5; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 15 CISG para. 13; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 15 para. 4; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 15 para. 4; Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 10; Witz/Salger/Lorenz, Kommentar (2016), Art. 15 para. 5; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 15 para. 5; in case law see Rechtbank Koophandel Tongeren (Belgium) 25 January 2005, CISG-Online 1106. 55 See, among many, Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 8. 56 See, e. g., Eo ¨ rsi, in: Bianca/Bonell, Commentary (1987), Art. 15 para. 2.1.2; Neumayer/Ming, Convention de Vienne (1993), Art. 15 para. 2; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 15 para. 6. 57 Also compare Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) pp. 56 et seq. 58 Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 16; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 15 para. 14. 59 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 15 para. 21. 60 See also Achilles, Kommentar (2000) Art. 15 para. 2; Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 21; Gruber, in: Mu¨nchKommBGB (2016), Art. 15 para. 19; Hepting/Mu¨ller, in Baumga¨rtel/Laumen 49

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Article 15

2. Death, insolvency and lack of legal capacity of the offeror The CISG does not contain any provisions that govern the effects of death, insol- 15 vency, or lack of legal capacity of the offeror subsequent to him issuing the offer and before it reaches the addressee.61 It is therefore unsurprising that the impact of these occurrences on the offer is in dispute. Some commentators hold the view that the CISG contains an exhaustive list of reasons for which an offer becomes automatically ineffective after issuance. Those commentators therefore believe that the CISG (implicitly) deals with the issue, which is why they argue that no recourse is to be had to the applicable domestic law – despite the fact that Art. 4(a) states that the CISG is not concerned with “the validity of the contract or of any of its provisions or of any usage.” As a consequence, these commentators believe that the issue must be solved from within the CISG, and since death, insolvency, and lack of legal capacity are not among the reasons listed that may have an impact on the effectiveness of an offer, they conclude that these occurrences do not have an impact at all on the effectiveness of an offer.62 In this author’s opinion, the opposite holds true.63 Since the drafters of the CISG 16 deliberately abstained from settling this question, it is an external gap, beyond the CISG’s scope of application. Thus, the question must be settled on the basis of the law applicable by virtue of the private international law rules of the forum state.64

III. Comparable Rules The PICC contain a provision that is literally the same as Art. 15 CISG,65 namely 17 Art. 2.1.3, which is why no further comment on this provision is needed. A similar provision, exclusively referring to the offer, is lacking, however, in the DCFR. There is, (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 15 CISG para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 15 para. 16; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 15 para. 4. 61 Perales Viscasillas, La Formacio ´ n del contrato de compraventa internacional de mercaderı´as (1996) p. 467; Witz/Salger/Lorenz, Kommentar (2016), Intro. to Art. 14 para. 8. 62 See Eo ¨ rsi, in: Bianca/Bonell, Commentary (1987), Art. 16 para. 1.2.1; U. Huber, Der UNCITRAL¨ bereinkommens u¨ber internationale Warenkaufvertra¨ge, 43 RabelsZ (1979) 412 (441); Entwurf eines U Neumayer/Ming, Convention de Vienne (1993), Art. 15 para. 3; Rubino, Nuove leggi civ. comm. (1989) 58 (69); Magnus, in: Staudinger Kommentar (2013), Art. 15 paras 14 et seq. 63 Dornis, in: Honsell, Kommentar (2010), Art. 15 para. 19; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 15 CISG paras 21 et seq.; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 15 para. 8. 64 See also Achilles, Kommentar (2000) Art. 15 para. 1; Audit, Vente Internationale (1990), p. 62; Brunner/Pfisterer/Ko¨ster, Kommentar (2014), Art. 15 para. 3; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (1996) p. 58; Gruber, in: Mu¨nchKommBGB (2016), Art. 15 para. 17; Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener ¨ bereinkommen u¨ber Vertra¨ge u¨ber den Kaufrecht (1992), p. 43 (51); Botschaft betreffend das Wiener U internationalen Warenkauf (1989) p. 773; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 15 para. 2; Schmidt-Kessel, in: Schwenzer/Hager (eds), Festschrift fu¨r Peter Schlechtriem zum 70. Geburtstag (2003) pp. 255 (256 et seq.); Schlechtriem/Schroeter, Internationales UNKaufrecht (2013) para. 261; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 15 para. 67; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 15 para. 8; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) para. 916; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 15 para. 9; Witz/Salger/Lorenz, Kommentar (2016), Introduction to Art. 14 para. 8; see also Herber/Czerwenka, Kommentar (1991), Art. 15 para. 6, where the authors get to the same result in respect, however, only to bankruptcy. 65 Kleinheisterkamp, in: Vogenauer/Kleinheitserkamp (eds), Commentary on the Unidroit Principles (2009) Art. 2.1.3. para. 1.

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Article 15 18

Part II. Formation of the Contract

however, a provision (Art. 1:109 DCFR), based upon Art. 1:303 PECL, that deals, among others, with the effectiveness of a notice. This provision makes it clear that all notices are effective at the moment they reach their addressee. Although Art. 1:109 DCFR merely refers to notices, it seems, on the basis of an interpretation in light of that provision’s model, i. e., Art. 1:303 PECL, that the concept of notice includes offers. It is worth mentioning that the DCFR expressly deals with the effectiveness of the acceptance66 as well as the rejection of the offer,67 stipulating that they become effective at the moment they reach their addressee. It would be inconsistent if the offer were to become effective at a different moment in time. 18 It should be mentioned that the DCFR does not expressly refer to the withdrawal of the offer, nor do the PECL. It does, however, in Art. I-1:109(5) DCFR68 state that a “notice has no effect if a revocation of it reaches the addressee before or at the same time as the notice.” The wording used by the drafters of the DCFR is imprecise, as the “revocation” referred to is really a withdrawal. Be that as it may, from this provision one can derive the offeror’s right to withdraw the offer. 66

See Art. 4:205(1) PICC. See Art. 4:203 PICC. 68 See also Art. 1:303(5) PECL. 67

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Article 16 (1) Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance. (2) However, an offer cannot be revoked:

(a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or (b) 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. Bibliography: Andersen, CISG Article 16: A Well-placed Principle in the Law of Contract Formation?, in: Lookofsky/Andersen (eds), The CISG Convention and Domestic Contract Law (2014), p. 35; Eo¨rsi, ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf Formation of contract, in: Wiener U (1985), p. 43; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006); Konow, CISG Article 16 and Nordi Domestic Law: Some Challenges of Contract Formation Rules in International Sales, in: Lookofsky/Andersen (eds), The CISG Convention and Domestic Contract Law (2014), p. 47; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994); Magnus, Die Allgemeinen Grundsa¨tze im UN-Kaufrecht, 59 RabelsZ (1995) 469; Mather, Firm offers under the UCC and the CISG, 105 Dickinson Law Review (2000) 31; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996); J. Pierre/V. Pierre, A Comparison of the Rules on Formation of Sales Contracts Under the Louisiana Civil Code and the United Nations Convention on Contracts for the International Sale of Goods: What Buyers and Sellers Should Know, 20 Southern University Law Review (1993) 189; Sono, Formation of International Contracts under the Vienna Convention: A Shift above the Comparative Law, in: Sarcevic/ Volken (eds), International Sale of Goods (1986), p. 111; Stoffel, Formation du contrat, in: Wiener ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf (1985), p. 55; Wey, Der VertragsabsU chluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984).

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Revocation (para. 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. The end of the offeror’s right to revoke. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. The Irrevocability of the offer (para. 2) as per the offer itself . . . . . . . . . . . . . . 4. Irrevocability of the offer (para. 2) due to the offeree’s justified reliance and the prohibition of venire contra factum proprium . . . . . . . . . . . . . . . . . . . . . 5. Damages in case of revocation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 4 4 8 14 19 24 26

I. Importance and Role of the Provision By way of this dispositive1 provision, which had been very contentious on the 1 occasion of the Vienna Diplomatic Conference,2 even though for the most part it dates 1 Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 28; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 16 CISG para. 26. 2 See Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 99; Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 1; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 16 CISG para. 2; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 391 et seq.; for the discussion on the occasion of the Vienna Diplomatic Conference, see Official Records (1981), pp. 277 et seq.

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Article 16 2–3

Part II. Formation of the Contract

back to a provision already contained in the ULF3, the drafters of the CISG tried to reach a compromise4 between those legal systems in which an offer is generally irrevocable and those that consider an offer to be generally revocable.5 Equating the former solution exclusively with that found in civil law countries and the latter with that found in the common law countries is incorrect.6 In France and Italy, for instance, two legal systems which undoubtedly belong to the civil law tradition, the rule is that an offer is generally revocable.7 2 The result of the aforementioned efforts to reach a compromise may be summarized as follows. An offer is generally revocable8 (either until the dispatch of the acceptance9 or until the moment of the conclusion of the contract, namely where acceptance occurs by performance of an act indicating assent pursuant to Art. 18),10 provided that the offeror does not indicate his intent to be irrevocably bound by the offer and the offeree could not reasonably rely on the offer’s irrevocability and did not act in reliance on it. 3 Through this compromise, the drafters of the CISG have, according to some commentators,11 also tried to find a balance between the interests of the offeror

3

Rubino, Nuove leggi civ. comm. (1989) 56 (58). For a reference in legal writing to this compromise, see Eo¨rsi, in: Bianca/Bonell, Commentary (1987), Art. 16 para. 2.1.1; Bydlinski, Das allgemeine Vertragsrecht, in: Doralt (ed), Das UNCITRAL-Kaufrecht im Vergleich zum o¨sterreichischen Recht (1985), p. 57 (66); Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 174; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 59; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 16 para. 1; Mather, Firm offers under the UCC and the CISG, 105 Dickinson Law Review (2000) 31 (43); Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (78); Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 418; Rubino, Nuove leggi civ. comm. (1989) 56 (57); Rudolph, Kommentar (1996), Art. 16 para. 2; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 1; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 263; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 16 para. 1; UNCITRAL YB (1977), p. 80. For critisism vis-a`-vis this compromise, Eo¨rsi, A propos the 1980 Vienna Convention on Contracts for the International Sale of Goods, 31 American Journal of Comparative Law (1983) 333 (355 et seq.); Honnold/ Flechtner, Uniform Law (2009), paras 143 and 143.1; Neumayer/Ming, Convention de Vienne (1993), Art. 16 para. 2. 5 See Audit, Vente Internationale (1990), p. 61; Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 1; Heuze´, Vente Internationale (2005), para. 178; for comparative remarks, see Ferrari, Formazione del contratto, in: Galgano/Ferrari/Ajani (eds), Atlante di diritto privato comparato (1999), pp. 97 et seq.; Mather, Firm offers under the UCC and the CISG, 105 Dickinson Law Review (2000) 31 (41 et seq.); Rubino, Nuove leggi civ. comm. (1989) 56 (57). 6 See, however, Eo ¨ bereinkommen von 1980 u¨ber den ¨ rsi, Formation of contract, in: Wiener U internationalen Warenkauf (1985), p. 43 (48); Herber/Czerwenka Kommentar (1991), Art. 16 para. 1; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 16 para. 5; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (78); Rudolph, Kommentar (1996), Art. 16 para. 2; Sono, Formation of International Contracts under the Vienna Convention: A Shift above the Comparative Law, in: Sarcevic/Volken (eds), International Sale of Goods (1986), p. 111 (114); Stern, Erkla¨rungen im UNCITRAL-Kaufrecht (1990), p. 24; Stoffel, Forma¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf (1985), p. 55 tion du contrat, in: Wiener U (64). 7 Also see Ferrari, A Comparative Overview of Offer and Acceptance Inter Absentes, 10 Boston University International Law Journal (1992) 171 (188 et seq.); Gruber, in: Mu¨nchKommBGB (2016), Art. 16 para. 1; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 1. 8 Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 1; Ferrari/Torsello, International Sales Law – CISG (2015) p. 140. 9 J. Pierre/V. Pierre, A Comparison of the Rules on Formation of Sales Contracts Under the Louisiana Civil Code and the United Nations Convention on Contracts for the International Sale of Goods: What Buyers and Sellers Should Know, 20 Southern University Law Review (1993) 189 (192). 10 See Art. 18(3). 11 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 16 para. 2. 4

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4–6

Article 16

in being able to change his mind at any time and the offeree’s reliance on the offer’s irrevocability.12

II. Detailed commentary 1. Revocation (para. 1) In principle, any offer is revocable.13 In order for a revocation to be effective (and, thus, 4 eliminate the effectiveness of the offer and, consequently, the offeree’s possibility to accept the offer), different preconditions must be met. As regards its contents, the revocation must be designed in a way to allow a “reasonable person of the same kind” as the offeree “in the same circumstances” (Art. 8(2)) to understand that it refers to the offer and is intended to prevent it from becoming effective.14 The viewpoint of a reasonable offeree in the same circumstances is not only decisive in determining whether the offeror’s statement constitutes a revocation at all (rather than, for instance, a request for clarification), but also in deciding whether the revocation is merely a partial one, which is certainly permissible under the CISG,15 or a complete revocation of the offer.16 It is worth mentioning that a revocation, the substantive validity of which is, pursuant 5 to Art. 4(a), to be judged on the basis of the applicable domestic law rather than the CISG,17 may not only relate to an offer ad certam personam, but also to an offer addressed to the public.18 In this respect, what has been said with regard to the withdrawal of an offer addressed ad incertas personas applies mutatis mutandis.19 The revocation must be designed in a way for it to be able to reach all potential addressees of the offer to the public.20 This does not mean, however, that the revocation must take the same form or must be made using the same means as the offer to the public.21 Like the withdrawal of the offer, the revocation is a declaration of intent which (as a 6 rule) does not need to meet any form requirements22 and which must reach its 12 For a reference to the intended protection of the offeree, see Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 1; Stern, Erkla¨rungen im UNCITRAL-Kaufrecht (1990), p. 23. 13 Ferrari/Torsello, International Sales Law – CISG (2015) p. 140; Garro/Zuppi, Compraventa internacional de mercaderı´as, 2012, S. 127. 14 For a similar statement, see Ferrari/Torsello, International Sales Law – CISG (2015) p. 140; Schnyder/ Straub, in: Honsell, Kommentar (1997), Art. 16 para. 6; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2010), Art. 16 para. 8. 15 Compare also Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 2; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 16 para. 3; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 16 para. 3. 16 See Magnus, in: Staudinger Kommentar (2013), Art. 16 para. 6. 17 See Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 3; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 16 para. 3. 18 Compare Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 2; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 16 para. 3; Piltz, Internationales Kaufrecht (2008), para. 3-44; Rubino, Nuove leggi civ. comm. (1989) 58 (63); Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 16 para. 7; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 16 para. 3; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) paras 886 et seq. 19 See Ferrari, in: Mu ¨ nchKommHGB (2013), Art. 15 para. 11. 20 Rubino, Nuove leggi civ. comm. (1989) 58 (71). 21 See Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 16 para. 7; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) pp. 316 et seq.; contra, at least in part, Herber/Czerwenka Kommentar (1991), Art. 16 para. 11; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 477. 22 Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 3; Rubino, Nuove leggi civ. comm. (1989) 58 (70); contra Piltz, Internationales Kaufrecht (2008), para. 3-44: suggesting that the revocation needs to take the form of the offer it relates to.

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Article 16 7–8

Part II. Formation of the Contract

addressee to become effective.23 This can easily be inferred from para. 1, which requires that the revocation “reaches the offeree before he has dispatched an acceptance”24 (without, however, defining when a revocation “reaches” its addressee, an issue rather to be decided on the grounds of Art. 24).25 Therefore, what has been said in respect of the withdrawal also applies in relation to revocation.26 It is not at all necessary that the offeree gain knowledge of the revocation.27 Even where the offeree becomes aware of the revocation, this is insufficient for the revocation to be effective.28 In effect, if the offeree learns about the revocation before it reaches him, this does not lead to the offer losing its effectiveness.29 7 A declaration intended to be a revocation, which reaches the offeree before the offer shall be considered a withdrawal.30 Since a revocation becomes effective, as stated earlier, when it reaches the offeree, it is possible to withdraw a revocation31 but not to revoke it.32

2. The end of the offeror’s right to revoke 8

The offeror’s right to revoke the offer ends with the conclusion of the contract33 which is governed by Arts 18, 23 and 24. This does not come as a surprise,34 since, “[o]nce the contract is formed, the parties can no longer alter the declarations required for its formation; the declarations merge into the contract.”35 The right to revoke is to be kept distinguished from the right to rescind a contract that has been already concluded. 23 See Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 2; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 16 para. 3; Ferrari/Torsello, International Sales Law – CISG (2015) p. 140; Man-kowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 16 CISG paras 4 and 8; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 394 et seq.; Rubino, Nuove leggi civ. comm. (1989) 58, 60; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 16 para. 2; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 3; Stern, Erkla¨rungen im UNCITRAL-Kaufrecht (1990) p. 24; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) para. 886; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 16 para. 3. 24 See Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 16 para. 1; Gruber, in: Mu¨nchKommBGB (2016), Art. 16 para. 3; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 395; Piltz, Internationales Kaufrecht (2008), para. 44. 25 Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 5; Rubino, Nuove leggi civ. comm. (1989) 58 (62); Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 16 para. 3. 26 See Ferrari, in: Mu ¨ nchKommHGB (2013), Art. 15 para. 9. 27 See Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 5; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 16 para. 10. 28 Ferrari/Torsello, International Sales Law – CISG (2015) p. 140–141; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 314; Gruber, in: Mu¨nchKommBGB (2016), Art. 16 para. 4; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 16 para. 3. 29 In accord Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 3. 30 Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 5; Herber/Czerwenka Kommentar (1991) Art. 16 para. 4. 31 Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 6. 32 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 16 para. 29; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 16 para. 4; contra Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 3. 33 See, for instance, Article 1328 of the Italian Codice civile; for a more detailed analysis of the relationship between that provision and Art. 16 CISG, see Rubino, Nuove leggi civ. comm. (1989) 56 (58). 34 Ferrari/Torsello, International Sales Law – CISG (2015) p. 141. 35 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 4; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 16 para. 4.

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Article 16

Apart from the end of the offeror’s right to revoke an offer due to the conclusion of 9 the contract, that right also ends, pursuant to para. 2, where the offeree dispatches – by means appropriate in the circumstances, as required by Art. 27 – an acceptance.36 It is worth pointing out that the right to revoke ends irrespective of whether the acceptance later reaches the offeror or not.37 From this it clearly follows that the offeror’s right to revoke is limited in time.38 At first sight, it may look like para. 1 causes uncertainties as to the point in time (that 10 of the conclusion of the contract or that of dispatch of the acceptance) that may be relevant in a particular case.39 This, however, is not the case, since the moment of the conclusion of the contract and that of the dispatch of the acceptance relate to different situations. In this author’s opinion, for the purpose of ending the offeror’s right to revoke an offer the time of the conclusion of the contract is relevant only if acceptance is indicated by performing an act that exceptionally does not require a notice to the offeror (Art. 18(3)).40 The mere performance of this act leads to the conclusion of the contract, which is why a revocation that reaches the offeree prior to that act being performed may deprive an offer of its effectiveness.41 In all other circumstances, the end of the offeror’s right to revoke will depend on the dispatch of the offeree’s acceptance42 or, where the offeree indicates assent by performing an act that requires notice to the offeror, on the dispatch of that notice.43 A revocation that reaches the offeree after the offeree has dispatched an acceptance 11 is ineffective,44 irrespective of whether the lateness is due to the offeror or not. As a consequence, the conclusion of the contract – which the offeror wants to avoid – is uncertain until the acceptance reaches the offeror.45 For instance, in the case where the acceptance gets lost or does not reach the offeror for any other reason, the contract will never be concluded.46 What is certain, however, is the fact that the offeror cannot 36 Compare Achilles, Kommentar (2000), Art. 16 para. 1; Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 99; Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 9; Ferrari/ Torsello, International Sales Law – CISG (2015) p. 141; Garro/Zuppi, Compraventa internacional de mercaderı´as (2012), p. 129; Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) p. 89; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 16 para. 2; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/ Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (78); J. Pierre/V. Pierre, A Comparison of the Rules on Formation of Sales Contracts Under the Louisiana Civil Code and the United Nations Convention on Contracts for the International Sale of Goods: What Buyers and Sellers Should Know, 20 Southern University Law Review (1993) 189 (194); Rubino, Nuove leggi civ. comm. (1989) 53 (55); Rudolph, Kommentar (1996), Art. 16 para. 3; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 263. 37 In accord Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 15; Eo ¨ rsi, in: Bianca/Bonell, Commentary (1987), Art. 16 para. 3.1; Herber/Czerwenka Kommentar (1991), Art. 16 para. 5; Gruber, in: Mu¨nchKommBGB (2016), Art. 16 para. 6; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 5; contra Magnus, in: Staudinger Kommentar (2013), Art. 16 para. 7. 38 Perales Viscasillas, La formacio ´ n del contrato de compraventa internacional de mercaderı´as (1996) p. 405; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 4. 39 Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 8. 40 In accord Rubino, Nuove leggi civ. comm. (1989) 56 (59). 41 See also Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 16 para. 16; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 410. 42 Compare Stern, Erkla ¨rungen im UNCITRAL-Kaufrecht (1990) p. 23. 43 Compare Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 13; Herber/Czerwenka Kommentar (1991), Art. 16 para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 16 para. 7. 44 Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 24; Ferrari/Torsello, International Sales Law – CISG (2015) p. 141; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 16 para. 5. 45 See also Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 99; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 5. 46 Compare Neumayer/Ming, Convention de Vienne (1993), Art. 16 para. 3 note 6.

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Part II. Formation of the Contract

have any impact anymore on the conclusion of the contract.47 It is up to the offeree, and the offeree alone, to prevent the conclusion of the contract, by withdrawing the acceptance,48 which is why one commentator referred to the offeree’s “absolute and unilateral control”49 over the contract which allows the offeree to speculate at the expense of the offeror.50 Of course, where the acceptance never reaches the offeror, the contract cannot be deemed concluded.51 12 For a statement by the offeree to be able to end the offeror’s right to revoke the offer, that statement must constitute an acceptance under the CISG. Thus, the dispatch of a reply to an offer which purports to be an acceptance, but contains additional or different terms which materially alter the offer,52 does not bring an end to the offeror’s right to revoke the offer.53 Furthermore, where a statement by the offeree purporting to be an acceptance is dispatched by a person other than the offeree who is not authorized to do so, the offeror does not lose his right to revoke. 13 The burden of proving the ineffectiveness of the offer due to a timely revocation of the same lies with the party invoking the offer’s ineffectiveness.54 The dispatch of the acceptance, however, must always be proven by the offeree, as it pertains to the offeree’s sphere and it would practically be impossible for the offeror to prove.55

3. The Irrevocability of the offer (para. 2) as per the offer itself 14

From para. 2(a) it is clear that an offer is irrevocable if the offer itself indicates that it is irrevocable.56 Thus, where the offeror expressly states, irrespective of whether he does so in writing or not,57 that the offer is irrevocable, a revocation will remain ineffective58 47 Rubino, Nuove leggi civ. comm. (1989) 56 (59); Stern, Erkla ¨rungen im UNCITRAL-Kaufrecht (1990) p. 24; Eo¨rsi, in: Bianca/Bonell, Commentary (1987), Art. 16 para. 3.1, referring to a “trap for the offeror”; compare also Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 314. 48 See Herber/Czerwenka Kommentar (1991), Art. 16 para. 5; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 16 para. 7; Neumayer/Ming, Convention de Vienne (1993) Art. 16 para. 3 note 6; Rubino, Nuove leggi civ. comm. (1989) 56 (60). 49 Perales Viscasillas, La formacio ´ n del contrato de compraventa internacional de mercaderı´as (1996) p. 415. 50 Rubino, Nuove leggi civ. comm. (1989) 58 (60). 51 Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 24. 52 See Art. 19. 53 See Magnus, in: Staudinger Kommentar (2013), Art. 16 para. 7; Piltz, Internationales Kaufrecht (2008), para. 3-46. 54 Achilles, Kommentar (2000), Art. 16 para. 3; Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 29; Gruber, in: Mu¨nchKommBGB (2016), Art. 16 para. 21; Henniger, Die Frage der Beweislast im Rahmen des UN-Kaufrechts (1995) pp. 208 et seq.; Hepting/Mu¨ller, in Baumga¨rtel/Laumen (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 16 CISG para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 16 para. 16; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 16 paras 2 and 5; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 16 para. 32; Gruber, in: Mu¨nchKommBGB (2016), Art. 16 para. 21; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 3; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 16 para. 3. 55 See Jung, Die Beweislastverteilung im UN-Kaufrecht (1996) pp. 96 et seq.; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 16 para. 21; Reimers-Zocher, Beweislastfragen im Haager und Wiener Kaufrecht (1995) p. 191; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 4; Schnyder/ Straub, in: Honsell, Kommentar (1997), Art. 16 para. 32; contra Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 29. 56 Ferrari/Torsello, International Sales Law – CISG (2015), p. 141; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 16 CISG para. 10. 57 Mather, Firm offers under the UCC and the CISG, 105 Dickinson Law Review (2000) 31 (44). 58 Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 17.

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15–16

Article 16

and the offeree can accept the offer despite that revocation.59 Unlike in some legal systems,60 where the legislator provided for the offeror’s possibility to render irrevocable an offer that is generally revocable, provided that the offer indicates a period of time for which the offer remains irrevocable,61 under the CISG the offeror does not need to indicate such a period of time.62 Thus, it is unsurprising that most commentators consider an offer irrevocable in the event it includes expressions such as “fix”,63 “irrevocable”64 or “firm (irrevocable) offer”,65 irrespective of any indication of a time period. In this author’s view, the wording “will be held open” does not necessarily indicate the offeror’s intention to consider the offer irrevocable.66 The same is true as regards the wording “will hold this offer open until …”.67 In the latter case, the irrevocability of the offer may, however, derive from the (rebuttable) assumption – to be examined in detail later – pursuant to which an offer stating a fixed time for acceptance is irrevocable.68 In determining whether an offer is supposed to be irrevocable, the rules of interpretation set forth in Art. 8 always have to be taken into account.69 Where the offeror states a fixed time for which the offer shall be irrevocable, the offer 15 is then irrevocable during this time, even if the time period is unreasonable.70 The failure to set a fixed time – which, as mentioned earlier, is a prerequisite for an offer’s irrevocability in some legal systems71 – does not render the offer revocable pursuant to the CISG.72 Neither does it lead to the offer binding the offeror in perpetuity.73 Rather, the irrevocable offer lapses upon expiration of a reasonable time.74 An irrevocable offer is terminated for the same reasons as a revocable offer, except, of 16 course, for the revocation.75 59

Ferrari/Torsello, International Sales Law – CISG (2015) p. 141. See Rubino, Nuove leggi civ. comm. (1989) 56 (57). 61 See Art. 1329 of the Italian Codice civile. 62 Perales Viscasillas, La formacio ´ n del contrato de compraventa internacional de mercaderı´as (1996) p. 425. 63 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 16 para. 3; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 16 para. 6; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 16 para. 8. 64 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 16 para. 19. 65 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 16 para. 3; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 176; Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 17; Mather, Firm offers under the UCC and the CISG, 105 Dickinson Law Review (2000) 31 (44); Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 8; Magnus, in: Staudinger Kommentar (2013), Art. 16 para. 11. 66 Contra Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 17; Piltz, Internationales Kaufrecht (2008), para. 3-47; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 8; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 16 para. 8. 67 Contra Eo ¨ bereinkommen von 1980 u¨ber den internationalen ¨ rsi, Formation of contract, in: Wiener U Warenkauf (1985), p. 43 (49); Mather, Firm offers under the UCC and the CISG, 105 Dickinson Law Review (2000) 31 (44); Magnus, in: Staudinger Kommentar (2013), Art. 16 para. 11. 68 See Ferrari, in: Mu ¨ nchKommHGB (2013), Art. 16 para. 17. 69 See also Gruber, in: Mu ¨ nchKommBGB (2016), Art. 16 para. 11; Rubino, Nuove leggi civ. comm. (1989) 58 (66); Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 8. 70 Mather, Firm offers under the UCC and the CISG, 105 Dickinson Law Review (2000) 31 (44). 71 This is true, for instance, under Italian law; see Art. 1329 of the Italian Codice civile. 72 Perales Viscasillas, La formacio ´ n del contrato de compraventa internacional de mercaderı´as (1996) p. 425; Rubino, Nuove leggi civ. comm. (1989) 58 (66). 73 See also Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha ¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 316; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 426. 74 Rubino, Nuove leggi civ. comm. (1989) 58 (67); Rudolph, Kommentar (1996), Art. 16 para. 4. 75 See also Magnus, in: Staudinger Kommentar (2013), Art. 16 para. 10. 60

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Part II. Formation of the Contract

The irrevocability of an offer does not necessarily need to be stated explicitly.76 Pursuant to para. 2(a), the irrevocability of an offer can also be indicated “otherwise”, as long as the offeror’s intention to render the offer irrevocable is real.77 This appears to be the case, for instance, where the offer states a fixed time for acceptance.78 In this author’s view, however, fixing a time for acceptance does not necessarily compare to rendering an offer irrevocable.79 Rather, it merely creates a – rebuttable – presumption of irrevocability of the offer.80 This means, for instance, that where it is shown that fixing a time for acceptance is merely intended to let the offer lapse after that time, an offer cannot be considered irrevocable.81 This also means that – since the fixing of a time for acceptance indicates that the offer is (presumably) irrevocable – the party relying on the irrevocability of the offer must merely prove that a time for acceptance has been fixed.82 It is up to the opposing party to prove that fixing a time for acceptance did not render an offer irrevocable.83 18 From what has just been said, it follows that only an unambiguous wording may clear all doubts.84 In this author’s view, the words “I stand by my offer until May 13” are 17

76 Ferrari/Torsello, International Sales Law – CISG (2015) p. 141; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 16 para. 3; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (79). 77 Official Records (1981), p. 22. 78 Rechtbank Limburg (Netherlands) 16 April 2014, CISG-Online 2542. 79 In accord Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 101; Ferrari/ Torsello, International Sales Law – CISG (2015) p. 141; Sono, Formation of International Contracts under the Vienna Convention: A Shift above the Comparative Law, in: Sarcevic/Volken (eds), International Sale of Goods (1986), p. 111 (116); contra Bydlinski, Das allgemeine Vertragsrecht, in: Doralt (Hrsg.), Das UNCITRAL-Kaufrecht im Vergleich zum o¨sterreichischen Recht (1985), p. 57 (67); Kabik, Through the Looking-Glass: International Trade in the “Wonderland” of the United Nations Convention on Contracts for the International Sale of Goods, 9 International Tax and Business Lawyer (1992) 408 (418); Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193 (204 et seq.); Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (79); Neumayer/Ming, Convention de Vienne (1993), Art. 16 para. 5 a; Reinhart, Kommentar (1991), Art. 17 para. 3. 80 See also Achilles, Kommentar (2000), Art. 16 para. 1; Brunner/Pfisterer/Ko ¨ster, Kommentar (2014), Art. 16 para. 3; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 177; Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 18; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 16 para. 7; Herber/Czerwenka Kommentar (1991), Art. 16 para. 9; Heuze´, Vente Internationale (2005), para. 179; Honnold/Flechtner, Uniform Law (2009), para. 143.1; Jametti Greiner, Der Vertragsabschluss, in: Hoyer/ Posch (eds), Das Einheit-liche Wiener Kaufrecht (1992), p. 43 (51); Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 16 para. 7; Karollus, UN-Kaufrecht (1989) p. 65; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 16 CISG para. 12; Mather, Firm offers under the UCC and the CISG, 105 Dickinson Law Review (2000) 31 (45 et seq.); Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 439; Piltz, Internationales Kaufrecht (2008), para. 3-48; Rubino, Nuove leggi civ. comm. (1989) 58 (66); Schnyder/ Straub, in: Honsell, Kommentar (1997), Art. 16 para. 20; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 16 para. 9; Sono, Restoration of the Rule of Reason in Contract Formation: Has There Been Civil and Common Law Disparity?, 21 Cornell International Law Journal (1988) 477 (479); Stern, Erkla¨run¨ bereinkomgen im UNCITRAL-Kaufrecht (1990) pp. 19 et seq.; Stoffel, Formation du contrat, in: Wiener U men von 1980 u¨ber den internationalen Warenkauf (1985), p. 55 (65); Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) para. 857. 81 See Ferrari/Torsello, International Sales Law – CISG (2015) p. 141–142; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 9; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) para. 857. 82 Audit, Vente Internationale (1990), p. 61. 83 Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 29; Jung, Die Beweislastverteilung im UNKaufrecht (1996) p. 100. 84 See also Herber/Czerwenka Kommentar (1991), Art. 16 para. 9; Honnold/Flechtner, Uniform Law (2009), para. 143.

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Part II. Formation of the Contract

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Article 16

sufficiently unambiguous.85 The same, however, may not be said of the following wording: “Our offer is at any rate good until May 13”,86 since any reference to the offeror’s intention to be firmly bound by the offer so as to consider it irrevocable seems to be lacking. Irrespective of what has just been said, it must be pointed out that the rules on interpretation provided by Art. 8 will always have to be resorted to in order to determine whether an offer is irrevocable, which is why one may get to a result different from the ones just mentioned. Resort to the interpretive criteria set forth in Art. 8 will generally lead to the understanding of a reasonable person of the same kind as the addressee of the offer becoming relevant.87

4. Irrevocability of the offer (para. 2) due to the offeree’s justified reliance and the prohibition of venire contra factum proprium Where it was reasonable for the offeree to rely on the irrevocability of the offer and 19 the offeree acted in reliance on the offer, the offeror may not effectively revoke the offer.88 Accordingly, two prerequisites need to be met for an offer to be irrevocable pursuant to Art. 16(2) CISG: there has to be a justified reliance on the irrevocability of the offer and action has to have been taken in reliance thereupon.89 As for the first prerequisite, it is met where the offeree could assume, in light of the 20 specific circumstances, that the offeror felt irrevocably bound to the offer; this assumption is “reasonable” only where a “reasonable person of the same kind” as the offeree would, “in the same circumstances”, reach the same conclusion.90 This is the case, for instance, where prior to acceptance costly price calculations are necessary of which the offeror could not have been unaware.91 As mentioned, the offeree also has to have acted (or omitted to do so)92 in reliance on 21 the irrevocability of the offer.93 It can be said that the offeree has acted in reliance on the irrevocability, for instance, where production is started,94 material is obtained95 or new 85

In accord Eo¨rsi, in: Bianca/Bonell, Commentary (1987), Art. 16 para. 2.2.1. In accord Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 16 CISG para. 16; contra Eo¨rsi, in: Bianca/Bonell, Commentary (1987), Art. 16 para. 2.2.1; Magnus, in: Staudinger Kommentar (2013), Art. 16 para. 12. 87 Mather, Firm offers under the UCC and the CISG, 105 Dickinson Law Review (2000) 31 (46 et seq.); Gruber, in: Mu¨nchKommBGB (2016), Art. 16 para. 13. 88 See Ferrari/Torsello, International Sales Law – CISG (2015) p. 142; Perales Viscasillas, La formacio ´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 449 et seq.; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 16 para. 11. 89 Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 20; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 16 CISG para. 17; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 16 para. 22. 90 Achilles, Kommentar (2000), Art. 16 para. 1; Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 21; Ferrari/Torsello, International Sales Law – CISG (2015) p. 142; Rudolph, Kommentar (1996), Art. 16 para. 6. 91 See Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 16 para. 4; Kritzer, Guide to Practical Applications (1989) pp. 167 et seq.; Magnus, in: Staudinger Kommentar (2013), Art. 16 para. 13; Mather, Firm offers under the UCC and the CISG, 105 Dickinson Law Review (2000) 31 (48 et seq.); Official Records (1981), p. 22; Piltz, Internationales Kaufrecht (2008), para. 3-49; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 16 para. 23. 92 See Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 22; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 16 para. 17; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 11. 93 Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 102; Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 43 (50). 94 So Audit, Vente Internationale (1990), p. 61; Heuze ´, Vente Internationale (2005), para. 179. 95 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 16 para. 4; Dornis, in: Honsell, Kommentar ¨ bereinkommen von 1980 u¨ber den (2010), Art. 16 para. 22; Eo¨rsi, Formation of contract, in: Wiener U internationalen Warenkauf (1985), p. 43 (49). 86

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Part II. Formation of the Contract

personnel is employed.96 For the purposes of the issue at hand it may also be relevant that the offeree has rejected other offers.97 22 Many commentators98 derive from Art. 16(2)(b) the general principle99 pursuant to which it is prohibited to venire contra factum proprium100. This general principle has not only been recognized in the courts,101 but it has also been used by courts, for instance, “to solve the question of a possible forfeiture of the defence of late notice, not expressly settled in the Convention”.102 23 The burden of proof regarding the irrevocability based on Art. 16(2)(b) lies with the party invoking the irrevocability of the offer.103

96 Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 16 para. 9; Honnold/Flechtner, Uniform Law (2009), para. 144; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/ Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (80); Gruber, in: Mu¨nchKommBGB (2016), Art. 16 para. 17; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 452. 97 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 16 para. 17; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 11; Witz/Salger/Lorenz, Kommentar (2016), Art. 16 para. 14. 98 For a reference in legal writing to the prohibition to venire contra factum proprium as a general principle upon which the CISG is based, see Achilles, Kommentar (2000), Art. 7 para. 8; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 7 para. 6; Brunner/ Pfisterer/Ko¨ster, Kommentar (2014), Art. 16 para. 4; Burkart, Interpretatives Zusammenwirken von CISG und UNIDROIT Principles (2000) p. 195; Diesse, La bonne foi, la cooperation et le raisonnable dans la Convention des Nations Unies relative a` la vente internationale de marchandises (CVIM), Journal du droit international (2002) 55 (62 and 83); Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 177; Escher, RIW (1999) 495 (500); Felemegas, Comparative Editorial Remarks on the Concept of Good Faith in the CISG and the PECL, 13 Pace International Law Review (Fall 2001) 399 (402); Ferrari, General Principles and International Uniform Commercial Law Conventions: A Study of the 1980 Vienna Sales Convention and the 1988 UNIDROIT Conventions, Uniform Law Review (1997) 451 (464); Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 7 para. 10; Najork, Treu und Glauben im CISG, Diss. Bonn, 2000, S. 105; H.-J. Vogel, Die Untersuchungs- und Ru¨gepflicht im UN-Kaufrecht (2000) p. 12; Witz/Salger/Lorenz, Kommentar (2016), Art. 7 para. 14. 99 In general, see Ferrari, Das Verha ¨ltnis zwischen den UNIDROIT-Grundsa¨tzen und den allgemeinen Grundsa¨tzen internationaler Einheitsprivatrechtkonvention. Zugleich ein Beitrag zur Lu¨ckenfu¨llung durch staatliche Gerichte, JuristenZeitung (1998) 9 et seq.; Magnus, Die Allgemeinen Grundsa¨tze im UN-Kaufrecht, 59 RabelsZ (1995) 469 et seq. 100 Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu ¨ rgerlichen Gesetzbuch (2012), Art. 16 para. 4; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 263. 101 See Oberlandesgericht Mu ¨ nchen (Germany) 15 September 2004, CISG-Online 1013; Tribunale di Padova (Italy) 31 March 2004, CISG-Online 823; Tribunale di Padova (Italy) 25 February 2004, CISGOnline 819; Tribunale di Rimini (Italy) 26 November 2002, CISG-Online 737; US District Court for the Southern District of New York (U.S.), Geneva Pharmaceuticals Tech. Corp. v Barr Labs. Inc., 10 May 2002, CISG-Online 653; Arbitral Award, ICC 8786/1997, CISG-Online 749. 102 Arbitral Award, Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft in ¨ sterreich, SCH-4318, CISG-Online 120. O 103 See also Achilles, Kommentar (2000), Art. 16 para. 3; Dornis, in: Honsell, Kommentar (2010), Art. 16 para. 29; Gruber, in: Mu¨nchKommBGB (2016), Art. 16 para. 22; Hepting/Mu¨ller, in Baumga¨rtel/ Laumen (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 16 CISG para. 10; Jung, Die Beweislastverteilung im UN-Kaufrecht (1996) pp. 97 et seq.; Magnus, in: Staudinger Kommentar (2013), Art. 16 para. 17; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 16 CISG para. 29; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 16 para. 5; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 16 para. 32; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 16 para. 11.

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Article 16

5. Damages in case of revocation Since the CISG deals exhaustively with formation of contract,104 there is no room for 24 recourse to national law.105 Accordingly, the offeree may not claim damages (“e. g. for his reliance interest on the basis of expenses or obligations arising under a substitute transaction”106) on the grounds of remedies such as culpa in contrahendo; the CISG implicitly also deals with this issue by barring the offeror’s liability for damages.107 Damages arising out of an intentional tort committed by the offeror are, however, 25 subject to the applicable domestic law, tort liability being excluded from the CISG’s scope of application.108

III. Comparable Rules Not unlike Art. 15 CISG, Art. 16 CISG can be found verbatim in the PICC. In effect, 26 Art. 2.1.4 PICC corresponds word for word to the provision commented on here. The wording of the provision of the DCFR that deals with the revocation of the offer (Art. II-4:202), however, differs slightly from that of Art. 16 CISG, as does the model upon which Art. II-4:202 DCFR is based and to which it corresponds, namely Art. 2:202 PECL. In some instances, the differences in wording do not reflect a difference in substance at all, but serve to make clear a result that is also reached under the CISG, by way of interpretation. This is true, for instance, as regards the reference, in Art. II4:202(1) DCFR, to the fact that “[a]n offer may be revoked if the revocation reaches the offeree before the offeree has dispatched an acceptance or, in cases of acceptance by conduct, before the contract has been concluded.” Even though Art. 16 CISG does not refer to acceptance by conduct and its impact on the revocability of an offer, the same result is reached under the CISG as well.109 The same can be said in respect of Art. II104 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 73; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 16 para. 30; Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 43 (46). 105 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 16 para. 5; Karollus, UN-Kaufrecht (1989) p. 45; Piltz, Internationales Kaufrecht (2008) para. 3-45; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 13; contra Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 458. 106 Schlechtriem, in: Schlechtriem/Schwenzer (eds), Commentary (2005), Art. 16 para. 13. 107 See Achilles, Kommentar (2000), Art. 16 para. 2; Herber/Czerwenka Kommentar (1991), Art. 16 para. 12; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 16 para. 30; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 16 para. 2; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (80); Gruber, in: Mu¨nchKommBGB (2016), Art. 16 para. 9; Piltz, Internationales Kaufrecht (1993) § 3 para. 42; Rudolph, Kommentar (1996), Art. 16 para. 10; Magnus, in: Staudinger Kommentar (2005) Art. 16 para. 14; Witz/Salger/Lorenz, Kommentar (2016), Introduction to Art. 14 para. 17; contra Goderre, International Negotiations Gone Sour: Precontractual Liability under the United Nations Sales Convention, 66 University of Cincinnatti Law Review (1997) 257 (281); Heuze´, Vente Internationale (2005), para. 180; Honnold/Flechtner, Uniform Law (2009), para. 150; Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 43 (46); Neumayer/Ming, Convention de Vienne (1993), Art. 16 para. 6; Rosenberg, The Vienna Convention: Uniformity in Interpretation for Gap-Filling – An Analysis and Application, 20 Australian Business Law Review (1992) 442 (452 et seq.); Rubino, Nuove leggi civ. comm. (1989) 58 (64). 108 Magnus, in: Staudinger Kommentar (2013), Art. 16 para. 15; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 16 para. 31; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 16 para. 13; contra Gruber, in: Mu¨nchKommBGB (2016), Art. 16 paras 9 and 19; for papers on the relationship between the CISG and domestic tort law, see, e. g., Herber, Mangelfolgescha¨den nach dem CISG und nationales Deliktsrecht, IHR (2001) 187 et seq. 109 See the text accompanying note 9.

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4:202(2), pursuant to which “[a]n offer made to the public can be revoked by the same means as were used to make the offer.”110 27 In some instances, however, it appears that the difference in wording compares to a difference in substance. This is true, for instance, as regards Art. II-4:202(3)(b) DCFR, pursuant to which an offer cannot be revoked if “the offer states a fixed time for its acceptance”. Unlike Art. 16(2)(a) CISG, Art. II-4:202(3)(b) DCFR does not seem to set forth a presumption as to the offer’s irrevocability.111 It appears, in other words, that the offer containing a fixed time for acceptance necessarily constitutes an irrevocable offer. 110 111

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Article 17 An offer, even if it is irrevocable, is terminated when a rejection reaches the offeror. ¨ bereinkommen von 1980 u¨ber den internatioBibliography: Eo¨rsi, Formation of contract, in: Wiener U nalen Warenkauf (1985), p. 43; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006); Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996).

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1. Rejection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2. Legal effects of the rejection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

I. Importance and Role of the Provision This provision does not have a counterpart in the ULF1, however this did not hinder 1 commentators from assuming that the same rule applied under the ULF.2 It sets forth – although not mandatorily3 – a rule to be found in many legal systems,4 pursuant to which an offer – even an irrevocable one – is terminated when the rejection of the offer reaches the offeror.5 The purpose behind this rule is to ensure that the offeror will be free6 to conclude a contract with a third party once the offeree has rejected the offer;7 in other words, the offeror is protected against a change of mind by the offeree after receiving the rejection.8

1 Compare Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 179; Rocchietti, Nuove leggi civ. comm. (1989) 71 (72); Magnus, in: Staudinger Kommentar (2013), Art. 17 para. 3. 2 See Schlechtriem, in: Do ¨ lle (ed), Komentar (1975), Art. 5 EAG paras 44 et seq. 3 See Dornis, in: Honsell, Kommentar (2010), Art. 17 para. 17; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 75; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 17 para. 16. 4 See § 146 of the German Civil code. 5 Bydlinski, Das allgemeine Vertragsrecht, in: Doralt (ed), Das UNCITRAL-Kaufrecht im Vergleich zum o¨sterreichischen Recht (1985), p. 57 (69); Dornis, in: Honsell, Kommentar (2010), Art. 17 para. 1; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (80); Neumayer/Ming, Convention de Vienne (1993), Art. 17 para. 1; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 461; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 265. 6 See Dornis, in: Honsell, Kommentar (2010), Art. 17 para. 1; Piltz, Internationales Kaufrecht (2008) 351; Rocchietti, Nuove leggi civ. comm. (1989) 71 (74); Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 17 para. 2. 7 See also Official Records (1981), p. 22; Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 103; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 179; Eo¨rsi, Formation of contract, in: ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf (1985), p. 43 (49); also compare Wiener U Witz/Salger/Lorenz, Kommentar (2016), Art. 17 para. 4. 8 See also Honnold/Flechtner, Uniform Law (2009), para. 153; Perales Viscasillas, La formacio ´ n del contrato de compraventa internacional de mercaderı´as (1996) p. 460.

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In doing so, the provision refers to one of the main grounds for an offer’s termination dealt with by the CISG.9 Other grounds for termination of the offer addressed by the CISG are the revocation (Art. 16) and – subject to the rule set forth in Art. 21(2) – the lapse of time for acceptance.10 A statement that purports to be an acceptance but contains additions, limitations or other modifications that materially alter the offer does not constitute an autonomous ground for termination of the offer; rather, it constitutes a rejection of the original offer11 as well as a counter-offer.12 3 A withdrawal, on the other hand, does not lead at all to the termination of an offer, as the termination of the offer requires that the offer has become effective in the first place; a withdrawal, however, aims to preclude the offer’s effectiveness.13 4 Other grounds, such as death, the opening of insolvency proceedings,14 the loss of one’s capacity to contract which in some legal systems may lead to the termination of an offer are not governed by the CISG.15 Their effect on the offer is therefore to be determined on the basis of the applicable domestic law.16 2

II. Detailed Commentary 1. Rejection 5

The CISG does not explicitly define what constitutes a “rejection”. This does not mean that it is impossible to define. Rather, a rejection may be defined as a statement, 9 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 17 para. 1; Rocchietti, Nuove leggi civ. comm. (1989) 71 (74). 10 See Adame Goddard, El Contrato de Compraventa Internacional (1994) pp. 103 et seq.; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 464. 11 Compare Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 180; Gruber, in: Mu ¨ nchKommGB (2007), Art. 17 para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 17 para. 7; contra Dornis, in: Honsell, Kommentar (2010), Art. 17 para. 1; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (80). 12 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 17 para. 7; Rocchietti, Nuove leggi civ. comm. (1989) 71 (73); Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 17 para. 2; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 17 para. 2. 13 See Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 77; Magnus, in: Staudinger Kommentar (2013), Art. 17 para. 6; contra Dornis, in: Honsell, Kommentar (2010), Art. 17 para. 1; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 464. 14 See Ferrari, in: Mu ¨ nchKommHGB (2013), Art. 15 paras 16 et seq. 15 See also Achilles, Kommentar (2000), Art. 15 para. 1; Audit, Vente Internationale (1990), p. 62; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 15 para. 2; Brunner/ Pfisterer/Ko¨ster, Kommentar (2014), Art. 15 para. 3; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (1996) p. 58; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 15 para. 67; Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht ¨ bereinkommen u¨ber Vertra¨ge u¨ber den internationalen (1992), p. 43 (51); Botschaft betreffend das Wiener U Warenkauf (1989) p. 773; Gruber, in: Mu¨nchKommBGB (2016), Art. 15 para. 17; Schroeter, in: Schlechtriem/ Schwenzer, Kommentar (German ed. 2013), Art. 15 para. 8; Schmidt-Kessel, in: Schwenzer/Hager (Hrsg.), Festschrift fu¨r Peter Schlechtiem zum 70. Geburtstag (2003), pp. 255 (256 et seq.); Witz/Salger/Lorenz, Kommentar (2016), Introduction to Art. 14 para. 8; see also Herber/Czerwenka, Kommentar (1991), Art. 15 para. 6, where the authors get to the same result in respect, however, only to bankruptcy. 16 In accord Karollus, UN-Kaufrecht (1989) p. 62; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (81); Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 470; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 17 para. 6; contra Dı´ez-Picazo, in: Dı´ez-Picazo, ¨ bereinkommens u¨ber internationale Comentario (1998), p. 180; Huber, Der UNCITRAL-Entwurf eines U Warenkaufvertra¨ge, 43 RabelsZ (1979) 413 (441); Magnus, in: Staudinger Kommentar (2013), Art. 17 para. 6; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) para. 916; Witz/Salger/Lorenz, Kommentar (2016), Art. 17 para. 2.

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Article 17

the effectiveness of which requires that it reach the offeror,17 by means of which the offeree makes it clear that he refuses to accept the offer.18 The rejection may relate to only part of the offer; in this case, however, it must be determined on the basis of the Art. 19 whether the acceptance of that part of the offer that has not been rejected leads to the conclusion of a contract.19 Therefore, the rejection corresponds to an offeree’s waiver of the entitlement to accept the offer. Ultimately, this results in the offeror not being bound to the offer any longer and free to offer the same goods to a third party. The requirement that the rejection must reach its addressee to become effective means that for the purpose of its effectiveness it is irrelevant whether the offeror actually gains knowledge of the rejection;20 of course, validity issues may also have to be considered when determining whether a statement produces the effects of a rejection. The CISG, however, does not generally deal with validity issues (but for those connected to formal validity); rather, these issues are left to the applicable domestic law.21 Since the rejection constitutes a refusal of the offer, there is no rejection and, thus, the offer is not terminated, where the offeree simply makes inquiries22 or suggests some modifications that are legally irrelevant.23 Whether a statement qualifies as a rejection or as something that does not lead to the termination of the offer is to be determined on the basis of an interpretation pursuant to Art. 8.24 If the offeree changes his mind regarding the rejection, he may prevent it from becoming effective by means of an (overtaking25) withdrawal (which may at the same time constitute acceptance);26 for the withdrawal to have this effect, it is sufficient also in this respect27 that the withdrawal reach the offeror no later than the rejection.28 While a withdrawal of a rejection is possible, a revocation is not.29 For a statement to qualify as a rejection, it must neither take a given form30 (subject, of course, to Art. 12), nor must a particular wording or the expression “rejection” be used.31 A rejection may be effected explicitly, impliedly32 (for instance, by way of an 17 Dornis, in: Honsell, Kommentar (2010), Art. 17 para. 2; Rudolph, Kommentar (1996), Art. 17 para. 2; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 17 para. 2. 18 Rocchietti, Nuove leggi civ. comm. (1989) 71 (72). 19 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 17 para. 5. 20 See also Dornis, in: Honsell, Kommentar (2010), Art. 17 para. 8; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 78; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 17 para. 10. 21 Dornis, in: Honsell, Kommentar (2010), Art. 17 para. 7. 22 See also Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (80); Piltz, Internationales Kaufrecht (2008) 3-52; Witz/Salger/Lorenz, Kommentar (2016), Art. 17 para. 3. 23 Audit, Vente Internationale (1990), p. 62; Herber/Czerwenka, Kommentar (1991), Art. 17 para. 5. 24 Compare Dornis, in: Honsell, Kommentar (2010), Art. 17 para. 3; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 17 para. 2; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 17 para. 2; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 17 para. 2. 25 Witz/Salger/Lorenz, Kommentar (2016), Art. 17 para. 6. 26 See Herber/Czerwenka, Kommentar (1991), Art. 17 para. 6; Honnold/Flechtner, Uniform Law (2009), para. 156; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 17 para. 14; Neumayer/Ming, Convention de Vienne (1993), Art. 17 para. 2. 27 See Ferrari, in: Mu ¨ nchKommHGB (2013), Art. 15 para. 9. 28 Audit, Vente Internationale (1990), p. 62; Magnus, in: Staudinger Kommentar (2013), Art. 17 para. 10. 29 Dornis, in: Honsell, Kommentar (2010), Art. 17 para. 14; contra, without any justification, Rocchietti, Nuove leggi civ. comm. (1989) 71 (75). 30 Dornis, in: Honsell, Kommentar (2010), Art. 17 para. 5. 31 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 17 para. 8. 32 Dornis, in: Honsell, Kommentar (2010), Art. 17 para. 6; Herber/Czerwenka, Kommentar (1991), Art. 17 para. 5; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercader´ıas (1996) p. 461; Magnus, in: Staudinger Kommentar (2013), Art. 17 para. 8.

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“acceptance” containing material alterations vis-a`-vis the offer)33 or by performing an act implying rejection that, however, requires notice to the offer.34 If Art. 17 did not require that the rejection reach the offeror, the sale to a third party of the goods referred to in the offer could amount to a rejection.35 However, as the provision requires the rejection to reach the offeror, the sale to a third party of the goods sold cannot by itself amount to a rejection of the offer.36 If, however, the offeree notifies the offeror of the sale to a third party of the goods offered, the offer is terminated when the notice reaches the offeror.37 10 As mentioned already, in principle a partial rejection is possible. Where there is a partial rejection, one has to, however, determine – in light of Art. 19 – whether the acceptance of the remaining part of the offer constitutes an acceptance rather than a counter-offer.

2. Legal effects of the rejection The effects of a rejection that reaches the offeror are expressly set forth in Art. 17: the offer, whether irrevocable or not, is terminated,38 and, thus, cannot be accepted anymore by the offeree.39 This means, among others, that the offeree cannot change his mind, even if the original time for acceptance has not yet expired.40 12 There is doubt as to whether a contract is concluded where a rejection and an acceptance reach the offeror contemporaneously. Some commentators believe that it is;41 most commentators, however, believe that a rejection should be treated like a withdrawal; consequently, they suggest that where a rejection and an acceptance reach the offeror at the same time, the rejection will produce its effects.42 It must be pointed 11

33 See Official Records (1981), p. 22; Neumayer/Ming, Convention de Vienne (1993), Art. 17 para. 2; Reinhart, Kommentar (1991), Art. 17 para. 2. 34 Official Records (1981), p. 22; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 179; Gruber, in: Mu¨nchKommBGB (2016), Art. 17 para. 2; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 317; Magnus, in: Staudinger Kommentar (2013), Art. 17 para. 8; Rocchietti, Nuove leggi civ. comm. (1989) 71 (73); Piltz, Internationales Kaufrecht (2008) para. 3-51; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 17 para. 1. 35 In accord Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 17 para. 2; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 17 para. 2. 36 Dornis, in: Honsell, Kommentar (2010), Art. 17 para. 4; Herber/Czerwenka, Kommentar (1991), Art. 17 para. 6; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 17 para. 6; Gruber, in: Mu¨nchKommBGB (2016), Art. 17 para. 3. 37 Magnus, in: Staudinger Kommentar (2013), Art. 17 para. 10. 38 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 17 para. 1; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) pp. 81 et seq.; Magnus, in: Staudinger Kommentar (2013), Art. 17 para. 9; Piltz, Internationales Kaufrecht (2008) para. 3-51; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 265. 39 See Audit, Vente Internationale (1990), p. 62; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991) Art. 17 para. 1; Gruber, in: Mu¨nchKommBGB (2016), Art. 17 para. 4; Magnus, in: Staudinger Kommentar (2013), Art. 17 para. 9; Witz/Salger/Lorenz, Kommentar (2016), Art. 17 para. 4. 40 Garro/Zuppi, Compraventa internacional de mercaderı´as, 2012, S. 133; Herber/Czerwenka, Kommentar (1991), Art. 17 para. 7; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 460 et seq.; Piltz, Internationales Kaufrecht (2008) para. 3-51. 41 Herber/Czerwenka, Kommentar (1991), Art. 17 para. 6. 42 Dornis, in: Honsell, Kommentar (2010), Art. 17 para. 11; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 17 para. 4; Neumayer/Ming, Convention de Vienne (1993), Art. 17 para. 2; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 17 para. 3; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 17 para. 13; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 17 para. 3.

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Article 17

out that this solution, although in line, for instance, with Art. 15, seems to contradict the general principle of favor contractus43 upon which the CISG is based. It is worth pointing out that the party claiming that no contract has been concluded 13 due to a rejection has to prove that a rejection has indeed occurred.44 Where a rejection and an acceptance have reached the offeror at the same time, it is up to the party relying on the lack of conclusion of the contract to prove in what order the two statements have reached the offeror.45

III. Comparable Rules Both the PICC (Art. 2.1.5) and the DCFR (Art. II-4:203) contain a provision that 14 deals with the rejection of the offer. It is, however, wrong to state that these rules are literally the same as Art. 17.46 In effect, while both the PICC provisions and the DCFR equivalent47 require, not unlike Art. 17 CISG, that the rejection reach the offeror for it to terminate the offer, neither Art. 2.1.5 PICC nor Art. II-4:203 DCFR expressly deal with the issue of whether an irrevocable offer is also terminated by a rejection. In this author’s opinion, under the PICC and the DCFR one should be allowed to think so, but neither the PICC nor the DCFR give any express guidance on this issue. 43 See Ferrari, Das Verha ¨ltnis zwischen den UNIDROIT-Grundsa¨tzen und den allgemeinen Grundsa¨tzen internationaler Einheitsprivatrechtkonventionen. Zugleich ein Beitrag zur Lu¨ckenfu¨llung durch staatliche Gerichte, JuristenZeitung (1998) 9 (9 et seq.); Magnus, Die Allgemeinen Grundsa¨tze im UNKaufrecht, 59 RabelsZ (1995) 455 (483). 44 In accord Achilles, Kommentar (2000), Art. 17 para. 3; Dornis, in: Honsell, Kommentar (2010), Art. 17 para. 18; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 83; Gruber, in: Mu¨nchKommBGB (2016), Art. 17 para. 7; Hepting/Mu¨ller, in Baumga¨rtel/ Laumen (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 17 CISG para. 1; Jung, Die Beweislastverteilung im UN-Kaufrecht (1996) p. 105; Magnus, in: Staudinger Kommentar (2013), Art. 17 para. 11; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 17 para. 2. 45 Hepting/Mu ¨ ller, in Baumga¨rtel/Laumen (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 17 CISG paras 3 et seq.; Jung, Die Beweislastverteilung im UN-Kaufrecht (1996) p. 105. 46 For this erroneous statement see Kleinheisterkamp, in: Vogenauer/Kleinheitserkamp (eds), Commentary on the Unidroit Principles (2009), Art. 2.1.5. para. 1. 47 The same also holds true for Art. 2:203 PECL, which stood as a model for Art. 4:203 DCFR.

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Article 18 (1) A statement made by or other conduct of the offeree indicating assent to an offer is an acceptance. Silence or inactivity does not in itself amount to acceptance. (2) An acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror. An acceptance is not effective if the indication of assent does not reach the offeror within the time he has fixed or, if no time is fixed, within a reasonable time, due account being taken of the circumstances of the transaction, including the rapidity of the means of communication employed by the offeror. An oral offer must be accepted immediately unless the circumstances indicate otherwise. (3) However, if, by virtue of the offer or as a result of practices which the parties have established between themselves or of usage, the offeree may indicate assent by performing an act, such as one relating to the dispatch of the goods or payment of the price, without notice to the offeror, the acceptance is effective at the moment the act is performed, provided that the act is performed within the period of time laid down in the preceding paragraph. Bibliography: Bonell, La formazione del contratto di compravendita, in: La vendita internazionale. La convenzione di Vienna dell’11 aprile 1980 (1981) p. 113; Eo¨rsi, Formation of contract, in: ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf (1985), p. 43; Ferrari, Vendita Wiener U internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006); Jung, Die Beweislastverteilung im UN-Kaufrecht insbesondere bei Vertragsabschluß, bei Vertragsverletzungen des Ka¨ufers, bei allgemeinen Bestimmungen sowie bei gemeinsamen Bestimmungen u¨ber Verka¨ufer- und Ka¨uferpflicht (1996); Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 318; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1988) 11; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996); Schultz, Rolling Contract Formation under the UN Convention on Contracts for the International Sale of Goods, 35 Cornell International Law Journal (2001) 263; Sono, Formation of International Contracts under the Vienna Convention: A Shift above the Comparative Law, in: Sarcevic/Volken (eds), ¨ bereinkommen International Sale of Goods (1986), p. 111; Stoffel, Formation du contrat, in: Wiener U von 1980 u¨ber den internationalen Warenkauf (1985), p. 55; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984).

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Acceptance by express declaration, acceptance by conduct, silence and inactivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Acceptance by express declaration and acceptance by conduct. . . . . . . . b) Silence and inactivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Effectiveness of the declaration of acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The principle that acceptance must reach the offeror . . . . . . . . . . . . . . . . . . b) Acceptance without an indication reaching the offeror . . . . . . . . . . . . . . . .

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1–2

3. Time for acceptance (para. 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Fixed time for acceptance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Reasonable term of acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Immediate acceptance of an oral offer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Article 18 23 23 28 34 35 36

I. Importance and Role of the Provision This provision, the contents of which can be traced back to various provisions of the 1 ULF1 and which, like most CISG provisions, is non-mandatory,2 defines the term “acceptance” (para. 1) and establishes when an acceptance (of the original offer or of a counter-offer)3 becomes effective. In doing so, the provision distinguishes between different situations (paras 2 and 3).4 The acceptance is a declaration of intent, which (in principle) is not subject to any 2 form requirement5 and must – generally – reach the offeror for it to become effective.6 The acceptance, however, can also be an act, to be effected within given time frame,7 by which the offeree expresses assent to the offer.8 Though sometimes argued,9 the acceptance does not necessarily have to be “unconditional.” Indeed, as can be derived from Art. 19(2), the acceptance can contain additional or different terms compared to those of the offer and still lead to the conclusion of the contract.10 Whether a declaration amounts to an acceptance or merely constitutes a confirmation of receipt of the offer,11 a request for clarification,12 or a similar statement which will not lead 1 Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 18 para. 1; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 18 para. 1. 2 Bonell, La formazione del contratto di compravendita, in: La vendita internazionale. La convenzione di Vienna dell’11 aprile 1980 (1981) p. 113 (129); Ferrari, Vendita internazionale di beni mobili. Artt. 14– 24. Formazione del contratto (2006) p. 85; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 5; Witz/Salger/Lorenz, Kommentar (2016), Art. 18 para. 3. 3 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 12. 4 Rocchietti, Nuove leggi civ. comm. (1989) 77 (77); Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 18 para. 2; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 18 para. 2. 5 Ferrari/Torsello, International Sales Law – CISG (2015) p. 143; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 18 para. 5. 6 Brunner/Pfisterer/Ko ¨ster, Kommentar (2014), Art. 18 para. 1; Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 4; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 86; Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) p. 90; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 13; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 482; Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 6; Piltz, Internationales Kaufrecht (2008), paras 65 et seq.; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 18 para. 24; see also Oberster Gerichtshof (Austria) 13 December 2012, CISG-Online 2438 (distinguishing between three types of situations). 7 See Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 4; Ferrari/Torsello, International Sales Law – CISG (2015) p. 143; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 572. 8 In accord Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha ¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 318; Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 2; Perales Vis-casillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 481 et seq. 9 See Landgericht Kassel (Germany) 14 July 1994, CISG-Online 194. 10 See Heuze ´, Vente Internationale (2005), para. 186. 11 Rocchietti, Nuove leggi civ. comm. (1989) 77 (78). 12 See Sono, Formation of International Contracts under the Vienna Convention: A Shift above the Comparative Law, in: Sarcevic/Volken (eds), International Sale of Goods (1986), p. 111 (124).

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Part II. Formation of the Contract

to the conclusion of a contract13 must be determined through interpretation based on Art. 8.14 3 As a declaration of intent, the acceptance, not unlike the offer, withdrawal, or revocation, must comply with the validity requirements of the applicable domestic law.15 The applicable domestic law is also relevant for determining whether an acceptance that reaches a party other than the offeror leads to the conclusion of the contract. 4 In principle (Art. 11), the acceptance does not have to meet any form requirements16 (which leads, inter alia, to the acceptance not necessarily having to have the same form as the offer).17 Where, however, one of the parties has its place of business in a Contracting State that declared an Art. 96 reservation, a contract for the international sale of goods – and, thus, the acceptance as well – may be subject to form requirements, which would make it impossible, for instance, that the performance of an act indicating assent would lead to the conclusion of the contract.18 Also, where the offeror requires that the acceptance take a particular form, and as the “master of the offer”19 the offeror is certainly entitled to do so,20 acceptance taking a different form does not lead to the conclusion of the contract;21 rather, this amounts 13

See Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 181. Brunner/Pfisterer/Ko¨ster, Kommentar (2014), Art. 18 para. 3; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 18 para. 1; Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 18 para. 2.1; Ferrari/Torsello, International Sales Law – CISG (2015) p. 143–144; Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 2; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 319; Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 7; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (81); Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 482; Piltz, Internationales Kaufrecht (2008) 3-57; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 18 para. 4; Schroeter, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 18 para. 4; in case law see Oberster Gerichtshof (Austria) 13 December 2012, CISG-Online 2438; Oberlandesgericht Frankfurt (Germany) 30 August 2000, CISG-Online 594; Landgericht Aurich (Germany) 8 May 1998, CISG-Online 518. 15 Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 5; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 3; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 14; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 18 para. 3. 16 In accord Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 181; Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 6; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 88; Ferrari/Torsello, International Sales Law – CISG (2015) p. 144; Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 6; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 4; Neumayer/Ming, Convention de Vienne (1993), Art. 18 para. 1; Rocchietti, Nuove leggi civ. comm. (1989) 77 (78); Schultz, Rolling Contract Formation under the UN Convention on Contracts for the International Sale of Goods, 35 Cornell International Law Journal (2001) 263 (278); Witz/Salger/Lorenz, Kommentar (2016), Art. 18 para. 6. 17 See Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 15; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (81); Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 484 et seq.; Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 8; Schroeter, in: Schlechtriem/ Schwenzer, Kommentar (German ed. 2013), Art. 18 para. 5. 18 Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 18 para. 2. 19 See Gruber, in: Mu ¨ nchKommBGB (2016), Art. 18 para. 6; Neumayer/Ming, Convention de Vienne (1993), Art. 18 para. 1; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 5; Lu¨deritz/Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 18 para. 2; Witz/Salger/Lorenz, Kommentar (2016), Art. 18 para. 6. 20 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 9. 21 See Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 6; Perales Viscasillas, La Formacio ´ n del contrato de compraventa internacional de mercaderı´as (1996) p. 582; Rocchietti, Nuove leggi civ. comm. (1989) 77 (78); Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 15. 14

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Article 18

to a counter-offer.22 The alternate view, according to which a contract is concluded despite the lack of the required form, at least where the use of a different form does not alter the terms of the offer materially in terms of Art. 19,23 is untenable. The fact that the offeror requires compliance with a particular form requirement means that the use of a different form must always be considered as a “material” modification of the offer in terms of Art. 19, based on the governing principle of freedom from form requirements. Form requirements can also be imposed by the practices established between the parties, usages that are binding upon the parties by virtue of Art. 9, or simply by an agreement between the parties. If the acceptor uses a language different from the one used by the offeror, the 5 acceptor’s reply does not amount to an acceptance, unless the language used is that of the offeror, the language used during the negotiations, or a language the use of which was provided for in the offer.24 For a reply to the offer to amount to an acceptance it is not necessary that certain 6 formulations or expressions (such as “acceptance”) be used.25

II. Detailed Commentary 1. Acceptance by express declaration, acceptance by conduct, silence and inactivity a) Acceptance by express declaration and acceptance by conduct. Acceptance does 7 not necessarily have to occur by means of an express declaration;26 a given conduct can also amount to acceptance and, thus, lead to the conclusion of the contract.27 However, Art. 18(1) sets some boundaries for conduct that can amount to acceptance by providing that “silence or inactivity does not in itself amount to acceptance.”28

22

Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 107. Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 8 and Art. 19 para. 9; Witz/Salger/Lorenz, Kommentar (2016), Art. 18 para. 6. 24 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) pp. 89 et seq.; Ferrari/Torsello, International Sales Law – CISG (2015) p. 144; Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 9. 25 Perales Viscasillas, La Formacio ´ n del contrato de compraventa internacional de mercaderı´as (1996) p. 497; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 18 para. 5; in case law see Rechtbank Koophandel Tongeren (Belgium) 25 January 2005, CISG-Online 1106. 26 See Landgericht Bielefeld (Germany) 18 January 1991, CISG-Online 174, holding that an acceptance does not have to be express, more recently see Oberster Gerichtshof (Austria) 29 November 2005, CISGOnline 1227; in legal writing see Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 4. 27 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 18 para. 2; Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 8; Ferrari/Torsello, International Sales Law – CISG (2015) p. 145; Herber/Czerwenka, Kommentar (1991), Art. 18 para. 5; Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 3; J. Pierre/ V. Pierre, A Comparison of the Rules on Formation of Sales Contracts Under the Louisiana Civil Code and the United Nations Convention on Contracts for the International Sale of Goods: What Buyers and Sellers Should Know, 20 Southern University Law Review (1993) 189 (192); Rocchietti, Nuove leggi civ. comm. (1989) 77 (78); Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 18 para. 2; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 267; Stoffel, ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf (1985), Formation du contrat, in: Wiener U p. 55 (66); Witz/Salger/Lorenz, Kommentar (2016), Art. 18 para. 8. 28 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 90; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 5; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 27; in case law see Cour d’Appel Paris (France) 10 September 2003, CISG-Online 788; Cour d’Appel Lie`ge (Belgium) 28 April 2003, CISG-Online 944. 23

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Article 18 8 8

Part II. Formation of the Contract

Although it has to be determined (through interpretation on the basis of Art. 8)29 on the basis of a case-by-case approach if a given conduct amounts to acceptance,30 there are certain types of conduct that generally indicate assent to the offer.31 In this respect, above all one has to mention32 the shipment of the goods purchased.33 The shipment of the goods purchased amounts to acceptance, as is also confirmed by case law,34 even where the goods shipped are non-conforming goods under Art. 3535 – provided that the shipment of the non-conforming goods does not constitute a “substitute offer” and therefore merely amounts to a counter-offer36. The shipment of parts of the goods purchased also constitutes, as a matter of principle, conduct amounting to acceptance.37 The same is true with respect to the payment or partial payment of the purchase price.38 Further examples of conduct that generally amounts to acceptance are:39 the opening of a letter of credit for the purchase price,40 29 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 6; Rocchietti, Nuove leggi civ. comm. (1989) 77 (79); Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 267; in case law see Oberlandesgericht Frankfurt (Germany) 30 August 2000, CISG-Online 594. 30 Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 182; Ferrari/Torsello, International Sales Law – CISG (2015) p. 145. 31 See also Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 18 para. 13. 32 See Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 18 para. 2.2; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG paras 6 et seq.; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 501 et seq.; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 18 para. 7 a; Witz/Salger/Lorenz, Kommentar (2016), Art. 18 para. 5. 33 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2004), Art. 18 para. 6; Ferrari/Torsello, International Sales Law – CISG (2015) p. 145; Piltz, Internationales Kaufrecht (2008) para. 59; Rocchietti, Nuove leggi civ. comm. (1989) 77 (79); Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 18 para. 4. 34 See Landgericht Bielefeld (Germany) 18 January 1991, CISG-Online 174. 35 In accord Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 6; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 31; Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 5; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 18 para. 7 c; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) para. 1069; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 18 para. 15; Witz/Salger/Lorenz, Kommentar (2016), Art. 18 para. 18. 36 See also Achilles, Kommentar (2000), Art. 18 para. 2; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 7; contra Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 11, holding that the conscious dispatch of non-conforming goods always constitutes a counteroffer. 37 In accord Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 7; contra Oberlandesgericht Frankfurt (Germany) 23 May 1995, CISG-Online 185: delivery of the goods bought is to be considered an acceptance, whereas the delivery of only part of the goods does not. 38 Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu ¨ rgerlichen Gesetzbuch (2012), Art. 18 para. 4; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 182; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 91; in case law see US District Court, Western District Washington at Tacoma (U.S.), Barbara Berry, S. A. de C. V. v Ken M. Spooner Farms, Inc., 13 April 2006, CISG-Online 1354: payment of the purchase price and opening of the packaging constitute an acceptance; Handelsgericht des Kantons St. Gallen (Switzerland) 29 April 2004, CISG-Online 962: payment of the sums requested in the offer compares to an acceptance. 39 See also Ferrari/Torsello, Internationales Sales Law – CISG (2015) p. 145–146; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 30. 40 Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 182; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 18 para. 2; Heuze´, Vente Internationale (2005), para. 184; Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 4; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 7; Rocchietti, Nuove leggi civ. comm. (1989) 77 (87); Rudolph, Kommentar (1996), Art. 18 para. 2; in case law see US District Court, Northern District of Illinois, Eastern Division (U.S.), Magellan International Corp. v Salzgitter Handel GmbH, 7 December 1999, CISG-Online 439; Arbitral Award, Comisio´n pare la Proteccio´n del Comercio Exterior de Me´xico (Mexico), Conservas La ~a v Lanı´n, 29 April 1996, CISG-Online 350. Costen

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Part II. Formation of the Contract

9–10

Article 18

the dispatch of an invoice or the signature thereof by the buyer,41 the cashing of a cheque sent with the offer,42 the processing of the goods by the buyer,43 the entering into transactions to make the production of the goods possible and the commencing of production.44 Several courts have held that the unconditional acceptance of a shipment of non-conforming goods amounts to an implicit acceptance of the modified offer that the shipment of the non-conforming goods implies.45 One must wonder about the relationship that exists between the possibility to conclude a 9 contract through conduct indicating assent (Art. 18(2)) and the basic necessity that the acceptance reach the offeror provided for in Art. 18(1).46 Art. 18 itself deals with that relationship by providing in para. 3 an exception47 (for certain conduct indicating assent) to the principle that acceptance must reach the offeror for it to lead to contract conclusion. Accordingly, receipt is not necessary in those cases in which the acceptor is, as an exception, not required to give notice to the offeror of the conduct indicating assent.48 “Thus, conduct indicating assent generally amounts to acceptance only in those cases where notice thereof reaches the offeror in a way that allows the offeror to gain knowledge of that notice.”49 b) Silence and inactivity. From Art. 18(1) it can be derived that silence and inactivity 10 also can amount to conduct indicating assent on the part of the acceptor,50 provided that other circumstances exist that indicate the acceptor’s intention to accept the offer.51 Silence and inactivity on their own can be regarded neither as acceptance52 nor as refusal.53 41

See Ca´mara Nacional de Apelaciones en lo Comercial (Argentina) 14 October 1993, CISG-Online 87. Achilles, Kommentar (2000), Art. 18 para. 1; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 30. 43 See Oberster Gerichtshof (Austria) 13 December 2012, CISG-Online 2438; Oberlandesgericht Saarbru¨cken (Germany) 13 January 1993, CISG-Online 83. 44 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 18 para. 6; see also Heuze´, Vente Internationale (2005), para. 184; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 7. 45 For this statement, see Witz/Salger/Lorenz, Kommentar (2016), Art. 18 para. 5, citing to Cour de Cassation (France) 27 January 1998, CISG-Online 309; Oberlandesgericht Frankfurt (Germany) 23 May 1995, CISG-Online 185; Oberlandesgericht Saarbru¨cken (Germany) 13 January 1993, CISG-Online 83; see also Piltz, Internationales Kaufrecht (2008) para. 3-59, citing to Landgericht Krefeld (Germany) 24 September 1992, CISG-Online 62; for case law holding that taking delivery of the goods amounts to an acceptance, see Handelsgericht des Kantons Zug (Switzerland) 2 December 2004, CISG-Online 1194; Oberlandesgericht Schleswig-Holstein (Germany) 29 October 2002, CISG-Online 717. 46 See also Rocchietti, Nuove leggi civ. comm. (1989) 77 (79 et seq.). 47 For this qualification, see Oberster Gerichtshof (Austria) 13 December 2012, CISG-Online 2438. 48 In accord Dı ´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 182; Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2005), Art. 18 para. 7; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 18 para. 44. 49 Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 14; also compare Herber/Czerwenka, Kommentar (1991), Art. 18 para. 9. 50 Stoffel, Formation du contrat, in: Wiener U ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf (1985), p. 55 (66). 51 See also Heuze ´, Vente Internationale (2005), para. 185; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 9; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 18 para. 9; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 18 para. 18. 52 In case law see U.S. District Court, Middle District of Pennsylvania (U.S.), It’s Intoxicating, Inc. v. Maritim Hotelgesellschaft mbH and Daniela Zimmer, 13 July 2013, CISG-Online 2492; Rechtbank s’Hertogenbosch (Netherlands) 23 January 2013, CISG-Online 2393; Bundesgericht (Switzerland) 5 April 2005, CISG-Online 1012; Oberlandesgericht Graz (Austria) 7 March 2002, CISG-Online 669; Rechtbank Rotterdam (Netherlands) 12 July 2001, CISG-Online 968; Rechtbank Koophandel Hasselt (Belgium) 2 December 1998, CISG-Online 745. 53 Perales Viscasillas, La Formacio ´ n del contrato de compraventa internacional de mercaderı´as (1996) p. 512; Rudolph, Kommentar (1996), Art. 18 para. 3; Sono, Formation of International Contracts under the Vienna Convention: A Shift above the Comparative Law, in: Sarcevic/Volken (eds), International Sale of Goods (1986), p. 111 (122). 42

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Article 18 11 11

Part II. Formation of the Contract

Circumstances which may indicate intent to accept the offer include the agreement of the parties to that effect54 (which may have been reached, for instance, when concluding a framework agreement),55 the practices established between the parties,56 as well as the usages that are binding upon the parties on the grounds of Art. 9.57 The rules governing the effect of silence following a commercial letter of confirmation are generally not considered to be usages under Art. 9(2),58 which is why the addressee’s silence following the receipt of a commercial letter of confirmation will generally not amount to acceptance of the terms contained in the letter of confirmation that are different from those already agreed upon. Still, where the rules on silence following a commercial letter of confirmation are in force in the countries where the parties have their place of business, silence amounts to the acceptance of the terms contained in the letter of confirmation. The same is true where the parties are used to conducting business in countries where silence following a commercial letter of confirmation amounts to acceptance of the terms contained therein and where the rules on silence following a commercial letter of confirmation are known and regularly observed.59

54 Heuze ´, Vente Internationale (2005), para. 190; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (82); Neumayer/Ming, Convention de Vienne (1993), Art. 18 para. 2. 55 See also Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 185. 56 See Bundesgericht (Switzerland) 5 April 2005, CISG-Online 1012; see also Schroeter, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 18 para. 19. 57 See Official Records (1981), p. 23; Achilles, Kommentar (2000), Art. 18 para. 3; Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 18 para. 2.3; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 18 para. 3; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 94; Heuze´, Vente Internationale (2005), para. 190; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 321; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 34; Gruber, in: Mu¨nchKommBGB (2016), Art. 18 paras 6 and 21; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 520 et seq.; Piltz, Internationales Kaufrecht (2008) para. 3-62; Rocchietti, Nuove leggi civ. comm. (1989) 77 (80); Schultz, Rolling Contract Formation under the UN Convention on Contracts for the International Sale of Goods, 35 Cornell International Law Journal (2001) 263 (273 et seq.); Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 9; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 18 para. 19; Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 12. 58 See Kro ¨ ll/Hennecke, Kaufma¨nnische Besta¨tigungsschreiben beim internationalen Warenkauf, RabelsZ 67 (2003) 448 (489 et seq.); Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 24; Neumayer/ Ming, Convention de Vienne (1993), Art. 18 para. 3; Piltz, Internationales Kaufrecht (2008) paras. 3-63 et seq.; Rudolph, Kommentar (1996), Art. 18 para. 4; Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 13. 59 In accord Holl/Kessler, “Selbstgeschaffenes Recht der Wirstschaft” und Einheitsrechtstellung der Handelsbra¨uche und Geplogenheiten im Wiener UN-Kaufrecht, RIW (1995) 457 (459); Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 24; Magnus, in: Staudinger Kommentar (2013), Art. 9 para. 27.

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Part II. Formation of the Contract

12–13

Article 18

A statement by the offeror that silence or inactivity on the part of the offeree will 12 amount to acceptance will have no effect.60 Thus, no contract is concluded where the offeree does not at all react to the delivery of goods not ordered.61

2. Effectiveness of the declaration of acceptance a) The principle that acceptance must reach the offeror. Generally, a declaration of 13 acceptance must reach the offeror for it to become effective,62 as expressly mentioned in Art. 18(2), first sentence. This requirement also generally applies with regard to conduct indicating assent.63 From this it follows that such conduct only becomes effective when a notice (of any kind) of said conduct reaches the offeror in a manner that allows the offeror to gain knowledge of that notice.64 In this author’s opinion, nowhere in the text of Art. 18 does it say that the receipt of the notice leads to the conclusion of the contract even where the notice originates from a third party.65 60 See Audit, Vente Internationale (1990), p. 63; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 185; Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 6; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 18 para. 3; Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 18 para. 2.3; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 95; Hepting/ Mu¨ller, in: Baumga¨rtel/Laumen (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 18 CISG para. 2; Herber/Czerwenka, Kommentar (1991), Art. 18 para. 6; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 320; Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 12; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (82); Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 6; Neumayer/ Ming, Convention de Vienne (1993), Art. 18 para. 2; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 515 et seq.; Rocchietti, Nuove leggi civ. comm. (1989) 77 (80); Schultz, Rolling Contract Formation under the UN Convention on Contracts for the International Sale of Goods, 35 Cornell International Law Journal (2001) 263 (273); Lu¨deritz/Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 18 para. 12. 61 See Gruber, in: Mu ¨ nchKommBGB (2016), Art. 18 para. 20; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 9; Witz/Salger/Lorenz, Kommentar (2016), Art. 18 para. 11. 62 Compare Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 108; Dornis, in: Honsell, Kommentar (2010), Art. 18 paras. 10 and 31 et seq.; Herber/Czerwenka, Kommentar (1991), Art. 18 para. 3; Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193 (206 et seq.); Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 14; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 14; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), pp. 71 (83); Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 7; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1988) 11 (21); Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 269; Schroeter, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 18 para. 24; Neumayer/Ming, Convention de Vienne (1993), Art. 18 para. 1; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercader´ıas (1996) p. 528; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 18 para. 13. 63 See Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 21; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 18 para. 7; Piltz, Internationales Kaufrecht (2008), para. 3-67; Rocchietti, Nuove leggi civ. comm. (1989) 77 (83); Rudolph, Kommentar (1996), Art. 18 para. 9; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 36. 64 Official Records (1981), p. 23; Ferrari/Torsello, Internationales Sales Law – CISG (2015) p. 146; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 14; Schnyder/ Straub, in: Honsell, Kommentar (1997), Art. 18 para. 37; Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 14; contra Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 13. 65 This, however, appears to be the prevalent view; see Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 18 para. 2.7; Bonell, La formazione del contratto di compravendita, in: La vendita internazionale. La convenzione di Vienna dell’11 aprile 1980 (1981) p. 113 (129); Herber/Czerwenka, Kommentar (1991), Art. 18 para. 9; Rocchietti, Nuove leggi civ. comm. (1989) 77 (83 et seq.); Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 14.

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Article 18 14–17

Part II. Formation of the Contract

In those exceptional cases where silence or inactivity may lead to the conclusion of a contract, the contract is concluded at the moment in which the other circumstances that indicate the acceptor’s intention to assent come into existence.66 15 The moment in which an acceptance “reaches” the offeror is to be determined pursuant to Art. 24.67 Only the fact that the acceptance reached the offeror is decisive; the fact that the offeror becomes otherwise aware of the acceptance before the acceptance reached him is of no relevance and does not lead to the conclusion of the contract.68 16 The acceptance “travels” at the risk of the acceptor.69 This means that the acceptor is bound by the acceptance as it is received by the offeror,70 subject to the acceptor’s ability to rescind it on the basis of the applicable domestic law.71 14

17

b) Acceptance without an indication reaching the offeror. From para. 3 it follows, by way of an exception,72 that conduct indicating assent may be effective and, thus, lead to the conclusion of the contract even if the offeror was in no position to become aware of such conduct.73 This requires, however, that the acceptor is authorized not to notify the offeror of the performance of acts indicating assent.74 Such authorization, which can either relate to a specific act indicating assent or be framed in more general terms,75 can originate, as stated for instance by the Austrian Supreme Court,76 from a waiver on the part of the offeror of the need for a notice, from an agreement between the parties,77 from the practices established between the parties, or from usages78 that are binding upon the parties pursuant to Art. 9.79 66

Rocchietti, Nuove leggi civ. comm. (1989) 77 (81 et seq.). Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 32; Ludwig, Der Vertragsabschluß nach UNKaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 321. 68 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 37. 69 Achilles, Kommentar (2000), Art. 18 para. 4; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 18 para. 6; Ferrari/Torsello, Internationales Sales Law – CISG (2015), p. 147; Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193 (207); Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 15; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1988) 11 (28); Neumayer/Ming, Convention de Vienne (1993), Art. 18 para. 4; Rudolph, Kommentar (1996), Art. 18 para. 5; Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 24. 70 Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 32. 71 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 38. 72 Ferrari/Torsello, Internationales Sales Law – CISG (2015) p. 147; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 16; Schlechtriem/Schroeter, Internationales UNKaufrecht (2013) para. 270. 73 Contra Honnold/Flechtner, Uniform Law (2009), para. 164. 74 Herber/Czerwenka, Kommentar (1991), Art. 18 para. 10. 75 Compare Ferrari/Torsello, Internationales Sales Law – CISG (2015) p. 147; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 42. 76 Oberster Gerichtshof (Austria) 13 December 2012, CISG-Online 2438. 77 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 20. 78 See Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 21. 79 See Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 109; Bonell, La formazione del contratto di compravendita, in: La vendita internazionale. La convenzione di Vienna dell’11 aprile 1980 (1981) p. 113 (129); Brunner/Pfisterer/Ko¨ster, Kommentar (2014), Art. 18 para. 12; Dornis, in: ¨ bereinkommen Honsell, Kommentar (2010), Art. 18 para. 33; Eo¨rsi, Formation of contract, in: Wiener U von 1980 u¨ber den internationalen Warenkauf (1985), p. 43 (50); Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 98; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 40; Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple 67

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Article 18

As “master of the offer,” the offeror is certainly entitled to waive the need for a 18 notice informing him of the performance of acts indicating assent to reach him and, thus, anticipate that the moment in time at which the contract is concluded will be the time the act indicating assent is performed.80 It is doubtful whether formulations such as “ship immediately,” “rush shipment,” “procure without delay,” “require immediate shipping,” etc., necessarily indicate the offeror’s willingness to waive the notice requirement. Rather, in this author’s opinion, one has to interpret those statements in light of Art. 8 to determine whether a waiver is intended.81 Suggesting that those statements always indicate that willingness does not seem to be appropriate.82 In either case (i. e., both where authorization to accept by performing acts indicating 19 assent without the need to notify the offeror of such performance stems from the offer, and where it stems from the practices established between the parties, or from trade usages binding upon the parties pursuant to Art. 9) a subsequent notice to the offeror is not required.83 There is dispute as to whether authorization by the offeror to accept without the 20 acceptance having to reach the offeror merely relates to acts indicating assent, or whether it can also relate to more “traditional” acceptances, i. e., those that take the form of declarations. In this author’s opinion, the possibility of authorizing the acceptor to accept without the need for the acceptance to reach the offeror is not limited to acceptance by conduct.84 Whether the offeror has authorized the acceptor to forgo International and Comparative Law Journal (1992) 193 (207); Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (84); Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 8; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1988) 11 (30); Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 537; Piltz, Internationales Kaufrecht (1993) § 3 para. 64; Rocchietti, Nuove leggi civ. comm. (1989) 77 (80 and 88); Sono, Formation of International Contracts under the Vienna Convention: A Shift above the Comparative Law, in: Sarcevic/Volken (eds), International Sale of Goods (1986), p. 111 (121); Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 25; Stoffel, ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf Formation du contrat, in: Wiener U (1985), p. 55 (66); Witz/Salger/Lorenz, Kommentar (2016), Art. 18 para. 9. 80 Ferrari/Torsello, Internationales Sales Law – CISG (2015) p. 147. 81 See also Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 34; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 21. 82 In accord Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 18 para. 3.4; Herber/Czerwenka, Kommentar (1991), Art. 18 para. 12; contra Audit, Vente Internationale (1990), p. 63; Brunner/Pfisterer/ Ko¨ster, Kommentar (2104), Art. 18 para. 12 note 704; Enderlein/Maskow/Strohbach, Internationales ¨ bereinkommen von 1980 Kaufrecht (1991), Art. 18 para. 12; Eo¨rsi, Formation of contract, in: Wiener U u¨ber den internationalen Warenkauf (1985), p. 43 (50); Honnold/Flechtner, Uniform Law (2009), para. 163; Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 9; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 510; Rocchietti, Nuove leggi civ. comm. (1989) 77 (88); Rudolph, Kommentar (1996), Art. 18 para. 9; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 20; Lu¨deritz/Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 18 para. 11. 83 Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 38; Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193 (208); Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 322; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 23; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) para. 1039; contra Honnold/Flechtner, Uniform Law (2009), para. 164; Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 11. 84 In accord Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 37; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 18 para. 8; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 19;

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notification constitutes an issue of interpretation, and therefore requires recourse to the interpretive criteria set forth in Art. 8.85 In interpreting the offeror’s intention, regard is also to be had to the fact that such authorization has the effect of anticipating the moment of the conclusion of the contract. 21 An indication of assent that does not need to reach the offeror becomes effective as soon as it occurs.86 A notice to the offeror of the assent being given is not necessary for the acceptance to be effective;87 thus, where the time at which the act indicating assent is performed (or the acceptance of the offer which exceptionally does not have to reach the offeror is given) precedes the time determined by para. 2, within which the acceptance must reach the offeror, and provided that the assent indicated does not differ materially from the offer, the contract is concluded.88 Thus, contract conclusion occurs at a time prior to that of receipt.89 This means, for instance, that the possibility of a withdrawal of an acceptance provided for in Art. 22 does not exist for these kinds of acceptances,90 provided that the particular conduct does not take the form of qualified silence.91 In contrast, the revocation of an acceptance is always excluded, irrespective of whether the indication of assent has to reach the offeror in order to become effective.92

Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 44; contra Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 18 para. 2.8; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 18 para. 12; Honnold/Flechtner, Uniform Law (2009), para. 163; Neumayer/Ming, Convention de Vienne (1993), Art. 18 para. 6; Reinhart, RdNr. 6; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) paras 951 et seq. 85 Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 34. 86 See Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 18 para. 12; Ferrari/Torsello, Internationales Sales Law – CISG (2015) p. 148; Garro/Zuppi, Compraventa internacional de mercaderı´as (2012), p. 125; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1988) 11 (30); Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 538; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 18 para. 4; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 22; Stoffel, ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf (1985), Formation du contrat, in: Wiener U p. 55 (60); Sono, Formation of International Contracts under the Vienna Convention: A Shift above the Comparative Law, in: Sarcevic/Volken (eds), International Sale of Goods (1986), p. 111 (121); Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 28. 87 Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 18 paras 2.8 et seq.; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 45; Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193 (207 et seq.); Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 29. 88 Eo ¨ bereinkommen von 1980 u¨ber den internationalen ¨ rsi, Formation of contract, in: Wiener U Warenkauf (1985), p. 43 (50); Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992) p. 43 (56); Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 19; in case law see Oberster Gerichtshof (Austria) 13 December 2012, CISG-Online 2438. 89 Compare Witz/Salger/Lorenz, Kommentar (2016), Art. 18 para. 9. 90 In accord Achilles, Kommentar (2000), Art. 18 para. 4; Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 58; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 18 para. 17; Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 10; Neumayer/Ming, Convention de Vienne (1993), Art. 18 para. 8; Rudolph, Kommentar (1996), Art. 18 para. 10; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 22; Lu¨deritz/Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 18 para. 14. 91 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 22 para. 3. 92 Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 59; Lu ¨ deritz/Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 18 para. 14; Sono, Formation of International Contracts under the Vienna Convention: A Shift above the Comparative Law, in: Sarcevic/Volken (eds), International Sale of Goods (1986), p. 111 (116); Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 62.

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An indication of assent, which does not need to reach the offeror, must fulfil all 22 content requirements in order to lead to a contract conclusion. It therefore must basically mirror the offer.93 It is doubtful94 whether the exceptions to this rule, found in Art. 19(2), pursuant to which a reply to an offer, which purports to be an acceptance but contains additional or different terms that do not materially alter the terms of the offer, may constitute an acceptance, also apply to conduct indicating assent. This is due to the fact that in order for a contract to be concluded despite immaterial modifications of the offer, Art. 19(2) requires that there be no objection to the modifications – which, however, in the case of an indication of assent that does not need to reach the offeror, may occur only long after the act indicating assent has been performed since the offeror may become aware of those acts only long after they have taken place. In this author’s opinion, this results in the contract in these cases being subject to a resolutive condition until the expiration of the time for objection,95 which starts to run when the offeror becomes aware of the acts indicating the immaterially modified assent.

3. Time for acceptance (para. 2) a) Fixed time for acceptance. Every offer is effective for a limited period of time 23 only.96 This is for the benefit of the offeror, as it limits the time period in which the addressee of the offer can speculate at the cost of the offeror.97 This limitation can be derived directly from the offer (Art. 18(2) second sentence, first alternative) or, if the offeror has not fixed a time limit, from Art. 18(2) second sentence, second alternative. As a result, when the offeror fixes a time for acceptance, other criteria, such as the 24 reasonableness, are wholly irrelevant in light of both, the provision at hand,98 which provides for the priority of the fixed time period and the autonomy the offeror enjoys as “master of the offer.” The time can be fixed either expressly or implicitly.99 When the period of time is 25 fixed by the offeror, it must be pointed out that it is not required that the offeror refer to an exact date (“until October 26th”).100 The offeror can also fix a period within which the acceptance can occur by reference to particular events101 whose date can be determined (such as the “beginning of the New York Fashion Week”), or by indicating a specific period of time that allows for the determination of when the acceptance has to have occurred (“until at the latest 15 days after receipt of this offer”).102 It is unlikely that formulations like “answer immediately,” “shortly,” “promptly,” or similar formula93 See Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 101. 94 Rocchietti, Nuove leggi civ. comm. (1989) 77 (89). 95 Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 56. 96 Achilles, Kommentar (2000), Art. 18 para. 5; Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 41; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 102. 97 Ferrari/Torsello, International Sales Law – CISG (2015) p. 148. 98 Compare Gruber, in: Mu ¨ nchKommBGB (2016), Art. 18 para. 14. 99 Ferrari/Torsello, International Sales Law – CISG (2015) p 148; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (86); Rocchietti, Nuove leggi civ. comm. (1989) 77 (84). 100 Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 49; Piltz, Internationales Kaufrecht (2008), para. 3-72; see also Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 18 para. 27. 101 Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 49; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 14. 102 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 103; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 53; Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 14; Witz/Salger/Lorenz, Kommentar (2016), Art. 18 para. 21.

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tions must be considered as fixing a time for acceptance, as they appear too indefinite.103 Thus, where an interpretation based on Art. 8 does not allow one to state that these formulations are meant to fix the time for acceptance pursuant to Art. 18(2) second sentence, first alternative, Art. 18(2) second sentence, second alternative will apply.104 26 The offeror’s discretion regarding the length of the time period for acceptance is unfettered. It is therefore irrelevant whether the time for acceptance fixed by the offeror would have to be considered “unreasonable” pursuant to the criteria to be resorted to under Art. 18(2) second sentence, second alternative, absent a time fixed by the offer.105 Therefore, neither a period that would have to be considered too short nor one that would have to be considered too long will be changed into a reasonable period of time. 27 Where the acceptance is subject to the authorization of a third party, it will depend on the applicable domestic law whether the authorization has retroactive effects or not, i. e., whether the contract is concluded at the time when the acceptance reaches the offeror or at the time of the authorization.106 b) Reasonable term of acceptance. If no time has been fixed by the offeror for acceptance, the acceptance must reach the offeror within a reasonable time.107 In determining that “reasonable time,” Art. 18(2) second sentence, second alternative, expressly requires that due account be “taken of the circumstances of the transaction.”108 These circumstances can relate to any of the three time periods which together compose the reasonable time for acceptance:109 the time for the offer to reach the offeree (the importance of which results from the fact that Art. 18(2), second sentence, second alternative, expressly refers to the “the rapidity of the means of communication employed by the offeror” as an element to be taken into account),110 the time for consideration of the offer needed by the offeree, and the time for the reply purporting to be an acceptance to reach the offeror.111 29 The express reference to the “rapidity of the means of communication employed by the offeror” indicates the existence of a close relationship between the first and the last time periods referred to in the earlier paragraph, which together compose the reasonable time. This leads, in part, to the result that where the means of communication employed for the acceptance corresponds to that employed for the offer, the reason28

103

Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 50. See also Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 14; contra Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 53. 105 Ferrari/Torsello, International Sales Law – CISG (2015) p. 148. 106 Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 18 para. 14; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 18 para. 26. 107 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 23. 108 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 18 para. 9; Dornis, in: Honsell, Kommentar (2010), Art. 18 paras. 51 et seq.; Ferrari/Torsello, International Sales Law – CISG (2015) p. 148; Garro/ Zuppi, Compraventa internacional de mercaderı´as (2012) p. 135; Rocchietti, Nuove leggi civ. comm. (1989) 77 (84); Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 274. 109 Compare Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 18 para. 9; Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 52; Neumayer/Ming, Convention de Vienne (1993), Art. 18 para. 4; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 18 para. 15; Schroeter, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 18 para. 28. 110 Bydlinski, Das allgemeine Vertragsrecht, in: Doralt (ed), Das UNCITRAL-Kaufrecht im Vergleich zum o¨sterreichischen Recht (1985), p. 57 (69); Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (86); Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 575; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 275. 111 For this tripartite, see Ferrari/Torsello, International Sales Law – CISG (2015) p. Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 18 para. 56; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 15; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 18 para. 28. 104

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ableness of the time period referred to in Art. 18(2), second sentence, second alternative, depends basically on the time for consideration of the offer by the offeree.112 The offeree is, however, not obliged to use the same means of communication as was used for the offer – provided that this is not required by the offer, the practices established between the parties, or the trade usages that are binding upon the parties pursuant to Art. 9.113 The offeree can choose means that are quicker or slower than those used by the offeror; a very long time required for the reply by the offeree to reach the offeror may be counterbalanced by a very short time for consideration, and vice versa. In determining the reasonableness of the time for acceptance, the importance of the time period for consideration of the offer becomes evident from what has already been stated.114 When examining the time for consideration, account must be taken – above all – of the nature of the goods offered (including whether they are perishable or seasonal goods),115 price stability, the overall complexity of the transaction, the need to obtain further information (most notably in the context of contracts of a high value) or to negotiate with subcontractors or creditors, as well as the process of decision making on the part of the offeree.116 The reasonableness of the time for acceptance can also be derived from trade usages that bind the parties under Art. 9. In CISG case law,117 an acceptance that had occurred after more than two weeks was considered as “still being reasonable under Art. 18(2) CISG.”118 The “reasonable time” to accept a counter-offer is usually shorter than the time to accept an offer, since in this instance the parties involved already know about the particular circumstances.

30

31 32 33

c) Immediate acceptance of an oral offer. Pursuant to Art. 18(2), third sentence, an 34 oral offer must be accepted immediately,119 unless the circumstances (including the need to obtain certain information or a given permission120) or the offer itself121 indicate 112 For a similar statement, see Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 15. 113 In accord Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 52; Rocchietti, Nuove leggi civ. comm. (1989) 77 (85); Rudolph, Kommentar (1996), Art. 18 para. 6; Witz/Salger/Lorenz, Kommentar (2016), Art. 18 para. 24, state, however, that one has to resort to a means of communication which is at least as quick. 114 See also Piltz, Internationales Kaufrecht (2008), para. 3-77. 115 Compare Witz/Salger/Lorenz, Kommentar (2016), Art. 18 para. 24. 116 For this and other examples, see Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 18 para. 9; Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 52; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 18 para. 9; Herber/Czerwenka, Kommentar (1991), Art. 18 para. 15; Schnyder/ Straub, in: Honsell, Kommentar (1997), Art. 18 para. 56; Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 19; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 577 et seq.; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 15. 117 For a reference to the case law under ULIS, see Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 19. 118 Landgericht Bielefeld (Germany) 18 January 1991, CISG-Online 174. 119 Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 110; Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 42; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 18 para. 10; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 274; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 18 para. 16. 120 Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 184; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 28; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 16; Lu¨deritz/Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 18 para. 8. 121 Compare Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 18 para. 2.6; Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 20; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 26; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 18 para. 31.

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otherwise.122 The basic applicability requirement of this part of Art. 18, which greatly restricts the time for consideration of the offer by the offeree, is the existence of an oral offer. An oral offer encompasses not only situations where the parties involved (or their intermediaries who, however, must have power of representation, the existence of which is to be determined on the basis of the applicable domestic law) are physically present in the same space; rather, it is “merely” necessary that an “indication of assent is possible immediately after the offer has been made”.123 Thus, an offer made via telephone124 as well as one made via radio must also be accepted immediately.125 In contrast, an offer communicated via email,126 telefax or by videotext does not constitute an oral offer and, thus, does not have to be accepted immediately.127 An offer delivered by a messenger must be accepted immediately.128 However, “in that case the necessity for its transmission to the addressee or the distance between the addressee and offeror are part of the circumstances which may exclude the need for immediate acceptance.”129

4. Burden of proof 35

The party invoking the conclusion of a contract must prove the existence of the prerequisites of contract conclusion, such as offer and acceptance and the fact that the acceptance reached the offeror.130 This party, however, does not have to prove that the acceptance reached the offeror in a timely manner.131 Rather, it is the party claiming 122

In case law see Kantonsgericht Freiburg (Switzerland) 11 October 2004, CISG-Online 964. Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 16; in accord Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 45; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 106; Luig, Der internationale Vertragsschluss. Der Vergleich von UN-Kaufrecht, UNIDROIT Principles und Principles of European Contract Law (2003) p. 176; Piltz, Internationales Kaufrecht (2008), para. 3-73. 124 Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 18 para. 17. 125 Achilles, Kommentar (2000), Art. 18 para. 5; Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 42; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (86); Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 15; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 577 and 585; Piltz, Internationales Kaufrecht (2008), para. 3-76; Rudolph, Kommentar (1996), Art. 18 para. 7; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 18 para. 3; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 17; Witz/Salger/Lorenz, Kommentar (2016), Art. 18 para. 23. 126 Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 18 para. 17. 127 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 18 para. 10; Neumayer/Ming, Convention de Vienne (1993), Art. 18 para. 5; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 17; Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 21. 128 In accord Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 44; Lu ¨ deritz/Fenge, in: Soergel, Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 18 para. 10; contra Witz/Salger/ Lorenz, Kommentar (2016), Art. 18 para. 23. 129 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 17; see also Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 47; Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 17. 130 In accord Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 62; Hepting/Mu ¨ ller, in: Baumga¨rtel/ Laumen (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 18 CISG para. 1; Jung, Die Beweislastverteilung im UN-Kaufrecht insbesondere bei Vertragsabschluß, bei Vertragsverletzungen des Ka¨ufers, bei allgemeinen Bestimmungen sowie bei gemeinsamen Bestimmungen u¨ber Verka¨ufer- und Ka¨uferpflicht (1996) p. 107; Gruber, in: Mu¨nchKommBGB (2016), Art. 18 para. 27; Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 30; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 18 CISG para. 30; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 18 para. 5. 131 Contra Jung, Die Beweislastverteilung im UN-Kaufrecht insbesondere bei Vertragsabschluß, bei Vertragsverletzungen des Ka¨ufers, bei allgemeinen Bestimmungen sowie bei gemeinsamen Bestimmungen u¨ber Verka¨ufer- und Ka¨uferpflicht (1996) pp. 112 et seq.; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 18 para. 14. 123

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36–37

Article 18

that the acceptance reached the offeror in an untimely manner who has to prove when the acceptance reached the offeror.132

III. Comparable Rules The rules found in Art. 18 CISG are not characteristic of the CISG; they can also be 36 found in other international instruments. This is true, for instance, as regards the PICC. Art. 18(1) CISG, for instance, has its counterpart in Art. 2.1.6(1) PICC. Art. 18(2) CISG, however, is mirrored in Art. 2.1.6(2) PICC only in respect to that part that refers to the moment at which an acceptance becomes effective. The PICC equivalent of the CISG rule on the time for acceptance (Art. 18(2) CISG last sentence) is contained in Art. 2.1.7. As for the rule that addresses the issue of when an acceptance becomes effective that is indicated by performing an act that exceptionally does not require notice to the offeror (Art. 18(3) CISG), its counterpart can be found in Art. 2.1.6(3) PICC. Unsurprisingly, the latter provision does not refer to the examples of such acts (dispatch of the goods or payment of the price) found in the CISG provision, as the PICC refer to all kind of contracts, not merely those for the sale of goods. Provisions dealing – basically in the same way – with the issues addressed by Art. 18 37 CISG can also be found in the DCFR. The relevant provisions are Art. II-4:204,133 where acceptance is defined; Art. II-4:205,134 where the issue of time of conclusion of the contract is addressed, and Art. II-4:206,135 which deals with the time limit for acceptance. 132 Dornis, in: Honsell, Kommentar (2010), Art. 18 para. 62; Hepting/Mu ¨ ller, in: Baumga¨rtel/Laumen (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 18 CISG para. 6; also compare Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 107. 133 This provision is based on Art. 2:204 PECL. 134 This provision is based on Art. 2:205 PECL. 135 This provision is based on Art. 2:206 PECL.

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Article 19 (1) A reply to an offer which purports to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counteroffer. (2) However, a reply to an offer which purports to be an acceptance but contains additional or different terms which do not materially alter the terms of the offer constitutes an acceptance, unless the offeror, without undue delay, objects orally to the discrepancy or dispatches a notice to that effect. If he does not so object, the terms of the contract are the terms of the offer with the modifications contained in the acceptance. (3) Additional or different terms relating, among other things, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party’s liability to the other or the settlement of disputes are considered to alter the terms of the offer materially. ¨ bereinkommen von 1980 u¨ber den internationalen Bibliography: Eo¨rsi, Formation of contract, in: Wiener U Warenkauf (1985), p. 43; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006); Håstad, Article 19 CISG & Scandinavian Domestic Law: Conflict of Peaceful Coexistence? in: Lookofsky/Andersen (eds.), The CISG Convention and Domestic Contract Law (2014), p. 79; Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 43; Kro¨ll/Hennecke, Kollidierende Allgemeine Gescha¨ftsbedingungen in internationalen Kaufvertra¨gen, RIW (2001) 736; Ku¨hl/Hingst, Das UN-Kaufrecht und das Recht der AGB, in: Festgabe Herber (1999) p. 50; Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994); Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71; Moccia, The United Nations Convention on Contracts for the International Sale of Goods and the “Battle of the Forms”, 13 Fordham International Law Journal (1989) 649; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11; Nakata, Sounds of Silence Bellow Forth Under the CISG’s International Battle of Forms, 7 Transnational Lawyer (1994) 141; Neumayer, Offene Fragen zur Anwendung des Abkommens der Vereinten Nationen u¨ber den internationalen Warenkauf, RIW (1994) 99; Neumayer, Das Wiener Kaufrechtsu¨bereinkommen und die sogenannte “battle of forms”, in: FS Hans Giger (1989), p. 501; Noussias, Die Zugangsbedu¨rftigkeit von Mitteilungen nach den Einheitlichen Haager Kaufgesetzen und nach dem UN-Kaufgesetz (1983); Perales Viscasillas, “Battle of the Forms” Under the 1980 United Nations Convention on Contracts for the International Sale of Goods and the Principles of International Commercial Contracts, 10 Pace International Law Review (1998) 97; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996); Schultz, Rolling Contract Formation under the UN Convention on Contracts for the International Sale of Goods, 35 Cornell International Law Journal (2001) 263; Sono, Formation of International Contracts under the Vienna Convention: A Shift above the Comparative Law, in: Sarcevic/Volken (eds), International Sale of Goods (1986), p. 111; Steenfsgaard, Article 19 CISG & Scandinavian Domestic Law: Conflict or Peaceful Coexistence, in: Lookofsky/Andersen (eds.), The CISG Cnvention and Domestic ¨ bereinkommen von 1980 u¨ber den Contract Law (2014), p. 59; Stoffel, Formation du contrat, in: Wiener U internationalen Warenkauf (1985), p. 55; Sukurs, Harmonizing the Battle of the Forms: A Comparison of the United States, Canada, and the United Nations Convention on Contracts for the International Sale of Goods, 34 Vanderbilt Journal of Transnational Law (2001) 1481; van Alstine, Consensus, Dissensus, and Contractual Obligation Through the Prism of Uniform International Sales Law, 37 Virginia Journal of International Law (1996) 1; van Alstine, Fehlender Konsens beim Vertragsabschluß nach dem einheitlichen UN-Kaufrecht: eine rechtsvergleichende Untersuchung auf der Grundlage des deutschen sowie des US-amerikanischen Rechts (1995); van der Velden, Uniform International Sales Law and the Battle of Forms, FS Georges Sauveplanne (1984), p. 233; Vergne, The “Battle of the Forms” Under the 1980 United Nations Convention on Contracts for the International Sale of Goods, 33 American Journal of Comparative Law (1985) 233; Winship, The Hague Principles, the CISG and the “Battle of Forms”, 4 Penn. St. J. L. & Int’l Aff. (2015) 151.

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1 Article

Part II. Formation of the Contract

19

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Reply containing additions or different terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Additions, limitations or other modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Material alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Immaterial alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) “Battle of forms” and commercial letter of confirmation . . . . . . . . . . . . . . . e) Legal consequences of material and immaterial modifications . . . . . . . . . 2. Objection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Preface. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Timeliness and consequences of an objection. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 4 4 4 9 11 14 18 20 20 23 25 27

I. Importance and Role of the Provision Art. 19 (with the exception of para. 3)1 can be traced back to Art. 7 ULF.2 Art. 19(1) 1 states the basic principle3 that the terms of an acceptance must fully correspond to those of the offer in order to count as an acceptance of the offer and lead to the conclusion of the proposed contract.4 The origin of this basic principle is the “mirrorimage-rule”,5 which is currently in force in most legal systems,6 as various commen1

Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 19 CISG para. 2. For remarks on the history of this provision, see Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 626 et seq.; van Alstine, Fehlender Konsens beim Vertragsabschluß nach dem einheitlichen UN-Kaufrecht: eine rechtsvergleichende Untersuchung auf der Grundlage des deutschen sowie des US-amerikanischen Rechts (1995) pp. 195 et seq. 3 Garro/Zuppi, Compraventa internacional de mercaderı´as (2012), p. 140. 4 Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 1; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 108; Schlechtriem/Schroeter, Internationales UNKaufrecht (2013) para. 278; in recent case law, see Rechtbank Koophandel Tongeren (Belgium) 25 January 2005, CISG-Online 1106; but see Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 3. 5 U.S. District Court, W.D. Pa. (U.S.), Roser Technologies, Inc. v. Carl Schreiber GmbH, 10 September 2013, CISG-Online 2490; U.S. District, D. Minn. (U.S.), Travelers Property Cas. Co. of America v. SaintGobain Technical Fabrics Canada Ltd., 31 January 2007, CISG-Online 1435 (also 1522); US District Court, Northern District of Illinois, Eastern Division (U.S.), Magellan International Corporation v Salzgitter Handel GmbH, 7 December 1999, CISG-Online 439; in legal writing see Audit, Vente Internationale (1990), p. 68; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), pp. 186 et seq.; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 109; Ferrari/ Torsello, International Sales Law – CISG (2015) p. 151; Gabriel, Practitioner’s Guide to the Convention on Contracts for the International Sale of Goods (CISG) and the Uniform Commercial Code (UCC) (1994) p. 59; Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) p. 95; Nakata, Sounds of Silence Bellow Forth Under the CISG’s International Battle of Forms, 7 Transnational Lawyer (1994) 141 (151); Neumayer/Ming, Convention de Vienne (1993), Art. 19 para. 1; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 629 et seq.; Schultz, Rolling Contract Formation under the UN Convention on Contracts for the International Sale of Goods, 35 Cornell International Law Journal (2001) 263 (282); Smart, Formation of Contracts in Louisiana under the United Nations Convention for the International Sale of Goods, 53 Louisiana Law Review (1993) 1339 (1351); Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 7; Sukurs, Harmonizing the Battle of the Forms: A Comparison of the United States, Canada, and the United Nations Convention on Contracts for the International Sale of Goods, 34 Vanderbilt Journal of Transnational Law (2001) 1481 (1495); van Alstine, Consensus, Dissensus, and Contractual Obligation Through the Prism of Uniform International Sales Law, 37 Virginia Journal of International Law (1996) 1 (22). 6 See Rudolph, Kommentar (1996), Art. 19 para. 4; Lu ¨ deritz/Fenge, in: Soergel (ed), Kommen-tar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 19 para. 1; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 19 para. 2; Witz/Salger/Lorenz, Kommentar (2016), Art. 19 para. 1; 2

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Article 19 2–3

Part II. Formation of the Contract

tators have emphasized.7 Art. 19(1) determines the relationship that must exist between the contents of the offer and that of the acceptance in order to lead to the conclusion of the contract. 2 Art. 19(2), which is as dispositive as Art. 19(1),8 contains an exception to the socalled “mirror-image-rule”,9 as it allows for a contract conclusion even where the acceptance does not mirror the offer,10 provided that the points on which the acceptance differs from the offer do not materially alter the offer. Art. 19(3), on the other hand, contains a rebuttable presumption that any differences relating to the issues exhaustively listed are of a material nature.11 3 For Art. 19(1) to apply, the offeree must act with the intention to be bound when issuing the acceptance,12 as can be easily derived from that part of the provision which refers to “the reply to an offer which purports to be an acceptance.”13 If the reply of the offeree merely constitutes a request for clarification,14 or only contains a reference to the offeree’s expectations, Art. 19 is not applicable. This has been emphasized by both commentators15 and courts.16 The issue of whether the offeree’s reply is intended to be an acceptance or a different kind of statement is to be addressed by interpretation pursuant to Art. 8 CISG.17 also compare Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 19 para. 1.1; for a comparative analysis relating to the mirror-image rule, see Ferrari, Formazione del contratto, in: Galgano/Ferrari/ Ajani (eds), Atlante di diritto privato comparato (1999), pp. 97 et seq. 7 See Zwart, The New International Law of Sales: A Marriage Between Socialist, Third World, Common, and Civil Law Principles, 13 North Carolina Journal of International Law and Commercial Regulation (1988) 109 (117). 8 Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 44. 9 See Bellelli, Nuove leggi civ. comm. (1989), 90 (92); Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 19 para. 1; Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 1; Ferrari/Torsello, International Sales Law – CISG (2015) p. 151–152; Garro/Zuppi, Compraventa internacional de mercaderı´as (2012), p. 140; Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) p. 95; Jenkins, Contract Resurrected! Contract Formation: Common Law – UCC – CISG, 40 N.C. J. Int’l L. & Com. Reg. (2015) 245 (284); Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 7; Sukurs, Harmonizing the Battle of the Forms: A Comparison of the United States, Canada, and the United Nations Convention on Contracts for the International Sale of Goods, 34 Vanderbilt Journal of Transnational Law (2001) 1481 (1495); Tomko, United Nations Convention on the International Sale of Goods: Its Effect on United States and Canadian Sales Law, 66 University of Detroit Law Review (1988) 73 (88); van Alstine, Consensus, Dissensus, and Contractual Obligation Through the Prism of Uniform International Sales Law, 37 Virginia Journal of International Law (1996) 1 (26). 10 Piltz, Internationales Kaufrecht (2008), para. 3-94. 11 See Ferrari, in: Mu ¨ nchKommHGB (2013), Art. 19 para. 10. 12 Piltz, Internationales Kaufrecht (2008), para. 95. 13 Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 189; Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 3; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 19 para. 2. 14 See Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 7; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (89); Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 643. 15 Bellelli, Nuove leggi civ. comm. (1989), 90 (91); Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 3; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 19 para. 2; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 110; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 19 para. 2; Schlechtriem, in: Schlechtriem/Schwenzer, Commen-tary (2005), Art. 19 para. 7; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 19 para. 7. 16 Oberster Gerichtshof (Austria) 6 February 1996, CISG-Online 224. 17 Achilles, Kommentar (2000), Art. 19 para. 1; Bellelli, Nuove leggi civ. comm. (1989), 90 (91); Brunner/Pfisterer/Ko¨ster, Kommentar (2014), Art. 19 para. 2; Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 3; Herber/Czerwenka, Kommentar (1991), Art. 19 para. 8; Gruber, in: Mu¨nchKommBGB

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4–7

Article 19

II. Detailed commentary 1. Reply containing additions or different terms a) Additions, limitations or other modifications. Art. 19(2) provides an exception to the rule whereby only an acceptance that mirrors the offer can lead to the conclusion of the contract.18 In effect, as long as a reply to an offer that purports to be an acceptance contains only “additional or different terms which do not materially alter the terms of the offer,” a contract can be concluded, unless the offeror, without undue delay, objects orally to the discrepancy or dispatches a notice to that effect. According to some commentators, this rule conforms with a trend encountered in various domestic legal systems.19 With respect to the phrase “additional or different terms”, it is worth pointing out that it differs from Art. 19(1), where reference is made to “additions, limitations or other modifications.” This terminological discrepancy has no substantive impact, however.20 The additional elements referred to in Art. 19 are those elements not mentioned in the offer.21 For the purposes of Art. 19, those additions that merely mirror provisions of the applicable law (irrespective of whether domestic law or the CISG is applicable) are irrelevant.22 The same is true with respect to those additions that are consistent with practices established between the parties, or usages that bind the parties pursuant to Art. 9.23 Also, where the additions relate to issues which are covered, although not expressly, in the offer, they are irrelevant too.24 “Different terms” under the CISG are all other elements that lead to discrepancies between the acceptance and the offer.25 Mere terminological, grammatical or typographic discrepancies, however, generally should not fall into that category,26 because (2016), Art. 19 paras 4 et seq.; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 19 para. 5; Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 8. 18 Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 2; Ferrari/Torsello, International Sales Law – CISG (2015) p. 151; Garro/Zuppi, Compraventa internacional de mercaderı´as (2012), p. 140; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11 (41 et seq.). 19 Vergne, The “Battle of the Forms” Under the 1980 United Nations Convention on Contracts for the International Sale of Goods, 33 American Journal of Comparative Law (1985) 233 (253 et seq.). 20 Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 5; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 11. 21 Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 189; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 19 para. 10. 22 In accord Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 19 para. 2; Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 6; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 19 CISG para. 11; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 9; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 19 para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 19; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 648 et seq.; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 19 para. 9. 23 Piltz, Internationales Kaufrecht (1993) § 3 para. 83; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 19 para. 6. 24 Piltz, Internationales Kaufrecht (2008), para. 3-95; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 19 para. 6. 25 Dornis, in: Honsell, Kommentar (2016), Art. 19 para. 4. 26 In accord Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 19 para. 2; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 112; Piltz, Internationales Kaufrecht (1993) § 3 para. 82; Rudolph, Kommentar (1996), Art. 19 para. 4; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 19 para. 5; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed.

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Article 19 8–9

Part II. Formation of the Contract

despite this type of discrepancy,27 the parties are generally in full agreement, and therefore Art. 19(2) need not come into play.28 Of course, an interpretation based on Art. 8 may lead to the opposite result.29 8 Art. 8 is also relevant in determining if an acceptance accompanied by an offer leads to the discrepancies that bar contract conclusion pursuant to Art. 19.30 If the acceptance is independent from the accompanying offer, a contract is formed (with the terms contained in the original offer). If, however, the acceptance and the accompanying offer are closely linked, one must assume that the offeree made a counter-offer.31 It is clear from these brief remarks that what constitutes an acceptance will depend very much on the circumstances of the particular case. Therefore, it is unsurprising that a court has ruled that ordering a greater quantity than that offered by the offeror as well as ordering different goods will not lead to a contract conclusion, even with respect to the quantity originally offered by the offeror.32 9

b) Material alterations. A reply by the offeree that purports to be an acceptance but contains additional or different terms only leads to a contract where those terms do not materially alter the offer. If the offeree’s reply contains material differences, it is treated as a rejection,33 which results in the termination of the offer, as set forth in Art. 17.34 At the same time, that reply constitutes a counter-offer,35 the acceptance of which is also governed by the provisions of the CISG.36

¨ bereinkommen von 1980 u¨ber 2013), Art. 19 para. 5; contra Eo¨rsi, Formation of contract, in: Wiener U den internationalen Warenkauf (1985), pp. 43 (pp. 50 et seq.). 27 See also Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha ¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) pp. 331 et seq.; Witz/Salger/Lorenz, Kommentar (2016), Art. 19 para. 5; for further details, see Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) paras 580 et seq. and 1209 et seq. 28 Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 190; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 9; Piltz, Internationales Kaufrecht (1993) § 3 para. 82; Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2005), Art. 19 para. 5; Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 9; van der Velden, Uniform International Sales Law and the Battle of Forms, FS Georges Sauveplanne (1984), p. 233 (237); contra Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 19 para. 1.5. 29 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 9; see also Schroeter, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 19 para. 11. 30 Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 8; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 7. 31 See also Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 19 para. 7; compare, however, Bellelli, Nuove leggi civ. comm. (1989), 90 (91). 32 Oberlandesgericht Frankfurt (Germany) 4 April 1994, CISG-Online 110. 33 Ferrari/Torsello, International Sales Law – CISG (2015) p. 152; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 19 para. 10; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 19 para. 19. 34 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 19 para. 12; Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 10; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 19 para. 10; Schnyder/ Straub, in: Honsell, Kommentar (1997), Art. 19 para. 17; van Alstine, Consensus, Dissensus, and Contractual Obligation Through the Prism of Uniform International Sales Law, 37 Virginia Journal of International Law (1996) 1 (26); in case law see Bundesgericht (Switzerland) 5 April 2005, CISG-Online 1012. 35 Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 17; Ferrari/Torsello, International Sales Law – CISG (2015) p. 152; Piltz, Internationales Kaufrecht (2008), para. 3-98; Schroeter, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 19 para. 20; in case law, see U.S. District Court, D. Col. (U.S.), Orica Australia Pty Ltd. v. Aston Evaporative Services, LLC., 28 July 2015, CISG-Online 2661. 36 Compare Kantonsgericht Freiburg (Switzerland) 11 October 2004, CISG-Online 964; in legal writing see Piltz, Internationales Kaufrecht (2008), para. 3-103.

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The determination that an additional or different term is material depends on the 10 circumstances of the particular case.37 Despite the wording of Art. 19(3), this is also true with respect to the terms explicitly (but not exhaustively)38 listed in that provision (the price,39 payment,40 quality41 and quantity42 of the goods, place and time of delivery, extent of one party’s liability to the other,43 settlement of disputes),44 because Art. 19(3) – as emphasized both by commentators45 and courts46 – only states a rebuttable presumption of the materiality of differences relating to those terms.47 Therefore, as 37 Achilles, Kommentar (2000), Art. 19 para. 2; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 19 para. 5; Ferrari/Torsello, International Sales Law – CISG (2015) p. 152; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 330; Neumayer/Ming, Convention de Vienne (1993), Art. 19 para. 4; Reinhart, Kommentar (1991), Art. 19 para. 6; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 19 para. 9; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 13; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 19 para. 8 note 26. 38 Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu ¨ rgerlichen Gesetzbuch (2012), Art. 19 para. 5; Bellelli, Nuove leggi civ. comm. (1989), 90 (93); Bydlinski, Das allgemeine Vertragsrecht, in: Doralt (ed), Das UNCITRAL-Kaufrecht im Vergleich zum o¨sterreichischen Recht (1985), p. 57 (72); Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 191; Eo¨rsi, Formation of contract, in: Wiener ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf (1985), p. 43 (51); Ferrari, Vendita U internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 114; Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193 (213); Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 19 CISG para. 17; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (90); Perales Viscasillas, “Battle of the Forms” Under the 1980 United Nations Convention on Contracts for the International Sale of Goods and the Principles of International Commercial Contracts, 10 Pace International Law Review (1998) 97 (137); Piltz, Internationales Kaufrecht (1993) § 3 para. 89; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 19 para. 3; Sono, Formation of International Contracts under the Vienna Convention: A Shift above the Comparative Law, in: Sarcevic/Volken (eds), International Sale of Goods (1986), p. 111 (125); Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 19; van Alstine, Consensus, Dissensus, and Contractual Obligation Through the Prism of Uniform International Sales Law, 37 Virginia Journal of International Law (1996) 1 (24). 39 In case law see Bundesgericht (Switzerland) 5 April 2005, CISG-Online 1012; Primer tribunal colegiado en materia civil del primer circuito (Spain) 10 March 2005, CISG-Online 1004; Oberster Gerichtshof (Austria) 9 March 2000, CISG-Online 573. 40 Oberlandesgericht Frankfurt (Germany) 4 March 1994, CISG-Online 110. 41 Hof Gent (Belgium) 8 November 2004, CISG-Online 982. 42 See Cour de Cassation (France) 27 May 2014, CISG-Online 2514; Bundesgericht (Switzerland) 5 April 2005, CISG-Online 1012; Oberlandesgericht Frankfurt (Germany) 23 May 1995, CISG-Online 185. 43 Rechtbank Gelderland (Netherlands) 30 July 2014, CISG-Online 2541. 44 Piltz, Internationales Kaufrecht (2008), para. 3-100. 45 Bydlinski, Das allgemeine Vertragsrecht, in: Doralt (ed), Das UNCITRAL-Kaufrecht im Vergleich zum o¨sterreichischen Recht (1985), p. 57 (72); Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 191; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 19 para. 8; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) pp. 115 et seq.; Karollus, UNKaufrecht (1989) p. 70; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 19 CISG para. 13; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 19 para. 15; Neumayer/Ming, Convention de Vienne (1993), Art. 19 para. 3; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 660 et seq.; Piltz, Internationales Kaufrecht (1993) § 3 para. 87; Piltz, Neue Entwicklungen im UN-Kaufrecht, NJW (2000) 553 (557); Piltz, Internationales Kaufrecht (2008), para. 3-99; van Alstine, Fehlender Konsens beim Vertragsabschluß nach dem einheitlichen UN-Kaufrecht: eine rechtsvergleichende Untersuchung auf der Grundlage des deutschen sowie des US-amerikanischen Rechts (1995), pp. 200 et seq. 46 Oberster Gerichtshof (Austria) 20 March 1997, CISG-Online 269; contra Primer tribunal colegiado en materia civil del primer circuito (Spain) 10 March 2005, CISG-Online 1004. 47 See also Achilles, Kommentar (2000), Art. 19 para. 2; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 19 para. 5; Brunner/Pfisterer/Ko¨ster, Kommentar (2014),

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the Austrian Supreme Court notes,48 it is possible “that alterations of these terms will be classified as immaterial due to special circumstances of the particular case, practices established between the parties, pre-contractual negotiations or usage.”49 This has important consequences for the allocation of the burden of proof, as it imposes upon the party claiming that a contract was concluded the responsibility for proving that a contract was indeed concluded despite the (material) differences between offer and acceptance in respect of the aforementioned elements (price, quantity, quality, etc.).50 11

c) Immaterial alterations. Except for the elements expressly listed in Art. 19(3), no other elements lead to a presumption of the material nature of their alteration.51 This means that the distinction between material and immaterial alterations becomes even more difficult, and a careful consideration of the circumstances of the particular case even more important.52 Nevertheless, in this author’s opinion, it is still possible to identify some more general rules from which to infer the material or immaterial nature of the alterations, although under certain circumstances (in light of the practices established between the parties, usages that bind the parties pursuant to Art. 9 or an agreement of the parties, for example) these rules may not apply. Alterations, for instance, that deal with questions not addressed in the offer and that adopt solutions contrary to those of the applicable law should be considered material alterations.53 A choice of law clause contained in a reply to an offer, leading to the application of a law that would not be applicable absent that choice, must also be considered a material alteration.54 For the same reason, a reply to the offer containing a penalty clause,55 or a right to revoke not generally granted in the same circumstances by the applicable law,

Art. 19 para. 4; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 191; Ferrari/Torsello, International Sales Law – CISG (2015) p. 152–153; Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 16; Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 43 (52); Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 19 para. 8 b; contra Herber/Czerwenka, Kommentar (1991), Art. 19 para. 11; Heuze´, RdNo. 186; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 333; Gruber, in: Mu¨nchKommBGB (2016), Art. 19 para. 7; Reinhart, Kommentar (1991), Art. 19 para. 6; Witz/Salger/Lorenz, Kommentar (2016), Art. 19 para. 9; US District Court, Southern District of New York (U.S.), Filanto S. p. A. v Chilewich International Corp., 14 April 1992, CISG-Online 45. 48 See also Oberlandesgericht Naumburg (Germany) 27 April 1999, CISG-Online 512. 49 Oberster Gerichtshof (Austria) 20 March 1997, CISG-Online 269; in legal writing see Gruber, in: Mu¨nchKommBGB (2016), Art. 19 para. 8; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 19 para. 8. 50 Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 45; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 14; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 19 para. 15. 51 Ferrari/Torsello, International Sales Law – CISG (2015) p. 153. 52 Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu ¨ rgerlichen Gesetzbuch (2012), Art. 19 para. 5; Gruber, in: Mu¨nchKommBGB (2016), Art. 19 para. 9; Perales Viscasillas, “Battle of the Forms” Under the 1980 United Nations Convention on Contracts for the International Sale of Goods and the Principles of International Commercial Contracts, 10 Pace International Law Review (1998) 97 (137). 53 Ferrari/Torsello, International Sales Law – CISG (2015) p. 153. 54 Achilles, Kommentar (2000), Art. 19 para. 2; Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 19 para. 4; Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 19; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 280; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2010), Art. 19 para. 17; see also OLG Linz (Austria) 23 March 2005, CISG-Online 1376. 55 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 19 para. 4; Rudolph, Kommentar (1996), Art. 19 para. 7; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 19 para. 17.

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Article 19

does not constitute an acceptance.56 The same is true with respect to a reply containing an arbitration clause57 or a choice of forum clause.58 If the offeror requires that the reply to the offer take a given form, noncompliance with 12 that form requirement must be considered a material alteration of the offer.59 The reason for this is the CISG’s principle of freedom from form requirements, set forth in Arts 11 and 29. Thus, if the offeror explicitly requires compliance with a particular form requirement, this shows that compliance with that form requirement is so important to the offeror that non-compliance on the side of the offeree cannot lead to the conclusion of the contract.60 Whether modifications are immaterial also can depend on other elements, such as the 13 overall content of the contract as well as its value and the economic circumstances.61 Some commentators also suggest that consideration should be given to whether a reasonable person in the same circumstances as the offeree would agree to the modification.62 Furthermore, in deciding whether a modification by the seller constitutes a material modification, regard should be had to whether the modification is beneficial to the offeror63 (for instance, because it provides for a higher price or because it imposes on the offeree the obligation to deliver the goods to the offeror at no extra cost).64 In these instances, one may assume that the modification does not materially alter the offer65 – a view adopted by the Austrian Supreme Court.66 The same is true with respect to those instances where the modification relates to the packaging of the goods67 or their mode of shipment;68 though, 56

Gruber, in: Mu¨nchKommBGB (2016), Art. 19 para. 9. Ferrari/Torsello, International Sales Law – CISG (2015) p. 154; Gruber, in: Mu¨nchKommBGB (2016), Art. 19 para. 6; Nakata, Sounds of Silence Bellow Forth Under the CISG’s International Battle of Forms, 7 Transnational Lawyer (1994) 141 (161); Piltz, Internationales Kaufrecht (1993) § 3 para. 88; Sukurs, Harmonizing the Battle of the Forms: A Comparison of the United States, Canada, and the United Nations Convention on Contracts for the International Sale of Goods, 34 Vanderbilt Journal of Transnational Law (2001) 1481 (1497); in case law US District Court, Southern District of New York (U.S.), Filanto S. p. A. v Chilewich International Corporation, 14 April 1992, CISG-Online 45. 58 Cour de Cassation (France) 16 July 1998, CISG-Online 344; in legal writing Farnsworth, in: Bianca/ Bonell, Commentary (1987), Art. 19 para. 2.8; Gruber, in: Mu¨nchKommBGB (2016), Art. 19 para. 6; Sono, Formation of International Contracts under the Vienna Convention: A Shift above the Comparative Law, in: Sarcevic/Volken (eds), International Sale of Goods (1986), p. 111 (pp. 126 et seq.). 59 Ferrari/Torsello, International Sales Law – CISG (2015) p. 154; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 19 CISG para. 25; contra Bellelli, Nuove leggi civ. comm. (1989), 90 (92). 60 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 19 CISG para. 1. 61 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 19 para. 9. 62 Lu ¨ deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 19 para. 4; Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 19, citing to Piltz, Internationales Kaufrecht (1993) § 3 para. 89, and Loewe, Internationales Kaufrecht (1989) pp. 43 et seq.; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 19 CISG para. 9. 63 Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 280; Schroeter, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 19 para. 16; contra Bellelli, Nuove leggi civ. comm. (1989), 90 (93). 64 See also Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 19 CISG para. 12; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 19 para. 8. 65 Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu ¨ rgerlichen Gesetzbuch (2012), Art. 19 para. 5; Bydlinski, Das allgemeine Vertragsrecht, in: Doralt (ed), Das UNCITRAL-Kaufrecht im Vergleich zum o¨sterreichischen Recht (1985), p. 57 (72); Gruber, in: Mu¨nchKommBGB (2016), Art. 19 para. 8; Neumayer/Ming, Convention de Vienne (1993), Art. 19 para. 3; Rudolph, Kommentar (1996), Art. 19 para. 8; Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 19; Witz/Salger/Lorenz, Kommentar (2016), Art. 19 para. 10; contra Herber/Czerwenka, Kommentar (1991), Art. 19 para. 11. 66 Oberster Gerichtshof (Austria) 20 March 1997, CISG-Online 269. 67 Provided that the packaging itself is not part of the goods offered, as in the case, for instance, of designer products in relation to which the packaging may be relevant. Rather, references are made to the packaging as a means of protecting the goods from risks relating to their transport. 68 Bellelli, Nuove leggi civ. comm. (1989), 90 (93); Honnold/Flechtner, Uniform Law (2009), para. 167; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 19 para. 4; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 19 para. 13. 57

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under certain circumstances, the modification relating to those elements can, of course, also constitute material modifications.69 As for case law, an important decision rendered by a German court held that a modification requiring complaints to be made within one month from date of invoice is immaterial.70 This is not convincing; nor is the holding that, in a reply to an offer, a request to keep the reply confidential does not constitute a material modification.71 14

d) “Battle of forms” and commercial letter of confirmation. The issue of the “battle of forms” has been intensely debated, not only during the drafting of the CISG,72 but also during the discussions of Art. 19.73 The practical importance of the “battle of forms”74 becomes evident if one bears in mind that each contracting party will normally try to include its own standard contract terms, and that the standard contract terms of the various contracting parties usually (aside from the rare cases where both parties use the same standard contract terms)75 differ from each other.76 The question of what standard contract terms become part of the contract is controversial.77 What is uncontroversial is that there is no special CISG provision dealing with the “battle of forms”,78 which is why 69

Oberlandesgericht Hamm (Germany) 22 September 1992, CISG-Online 57. Landgericht Baden-Baden (Germany) 14 August 1991, CISG-Online 24. 71 See Legfelso ´ bb Biro´sag (Hungary) 25 September 1992, CISG-Online 63. 72 See Official Records (1981), pp. 288 et seq. 73 For papers on the “battle of forms”, see Baumgartner, Contract Formation under the CISG and under the Unidroit Principles: Special Focus on the Issue of the Battle of the Forms (2008); Blodgett, The UN Convention on the Sale of Goods and the “Battle of the Forms”, 18 Colorado Lawyer (1989) 421 et seq.; Ferrante, Contr. impr./Europa (2003) 485 ff.; ders., Unif. L. Rev. (2003) 975 ff.; Gabriel, 49 Bus. Law. (1994) 1053 et seq.; Janssen, De “battle of forms” in het Weens Koopverdrag. Het probleem van tegenstrijdige algemene voorwarden in het internationale kooprecht, Weekblad voor Privaatrecht, Notariaat en Registratie (2002) 453 et seq.; Kelso, The United Nations Convention on Contracts for the International Sale of Goods: Contract Formation and the Battle of Forms, 21 Columbia Journal of Transnational Law (1982) 529 ff.; Moccia, The United Nations Convention on Contracts for the International Sale of Goods and the “Battle of the Forms”, 13 Fordham International Law Journal (1989) 649 et seq.; Nakata, Sounds of Silence Bellow Forth Under the CISG’s International Battle of Forms, 7 Transnational Lawyer (1994) 141 et seq.; Neumayer, Das Wiener Kaufrechtsu¨bereinkommen und die sogenannte “battle of forms”, in: FS Hans Giger (1989), pp. 501 et seq.; Perales Viscasillas, “Battle of the Forms” Under the 1980 United Nations Convention on Contracts for the International Sale of Goods and the Principles of International Commercial Contracts, 10 Pace International Law Review (1998) 97 et seq.; Perales Viscasillas, La batalla de los formularios en la Convencion de Viena de 1980 sobre compraventa internacional de mercaderias, La Ley (1996) 1 et seq.; Ru¨hl, The Battle of the Forms: Comparative and economic observations, 24 University of Pennsylvania Journal of International Economic Law (2003) 189 et seq.; Vergne, The “Battle of the Forms” Under the 1980 United Nations Convention on Contracts for the International Sale of Goods, 33 American Journal of Comparative Law (1985) 233 et seq. 74 Wittmann, “Bedingungs- Ping-Pong” nach einheitlichem Kaufrecht, Computer und Recht (1989) 1078 (1079). 75 For an example of standard contract terms used by both parties which thus, cannot conflict, see van der Velden, Uniform International Sales Law and the Battle of Forms, FS Georges Sauveplanne (1984), p. 233 (p. 234). 76 Bellelli, Nuove leggi civ. comm. (1989), 90 (92); Heuze ´, Vente Internationale (2005), para. 187; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 19 CISG para. 39; Moccia, The United Nations Convention on Contracts for the International Sale of Goods and the “Battle of the Forms”, 13 Fordham International Law Journal (1990) 649 (659); Rudolph, Kommentar (1996), Art. 19 para. 10; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 19 para. 19. 77 For an overview of where the discussion stands see, in case law, Bundesgerichtshof (Germany) 9 January 2002, CISG-Online 651. 78 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 122; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens ¨ bereinkommen von 1980 Koopverdrag (1997), p. 71 (89); Stoffel, Formation du contrat, in: Wiener U u¨ber den internationalen Warenkauf (1985), p. 55 (71); Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 19 para. 33. 70

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one has to have recourse to Art. 19.79 Some commentators, however, hold the opposite view and suggest instead that the question at hand must be answered on the basis of the applicable domestic law.80 This view is hardly justifiable,81 the question at hand not being one of those not governed by the CISG and, therefore, subject to domestic law. In this author’s opinion, the issue of the “battle of forms” must be solved on the 15 basis of Art. 19.82 From this it follows that when the offeree replies to an offer containing standard contract terms by sending an acceptance that also contains standard contract terms, one must determine, as with every other reply to an offer, whether the reply contains additional or different terms that materially alter the offer. If it does not, i. e., if the discrepancies between the various terms included in the offer and acceptance are immaterial,83 a contract will come to existence, and its contents will be determined by the standard contract terms used by the offeror on which there is agreement and the standard contract terms of the offeree that do not materially alter 79 Gabriel, The Battle of the Forms: A Comparison of the United Nations Convention for the International Sale of Goods and the Uniform Commercial Code, 49 Business Lawyer (1994) 1053 (1058); Hartnell, Rousing the Sleeping Dog: The Validity Exception to the Convention on Contracts for the International Sale of Goods, 18 Yale Journal of International Law (1993) 1 (12 et seq.); Holthausen, ¨ bereinkommens u¨ber internationale Warenkaufvertra¨ge, RIW (1989) Vertraglicher Ausschluß des UN-U 513 (517 et seq.); Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 43 (p. 52); Kro¨ll/Hennecke, Kollidierende Allgemeine Gescha¨ftsbedingungen in internationalen Kaufvertra¨gen, RIW (2001) 736 (740); Ku¨hl/Hingst, Das UN-Kaufrecht und das Recht der AGB, in: Festgabe Herber (1999) p. 50 (p. 55); Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 336; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 19 CISG paras 33 et seq.; Gruber, in: Mu¨nchKommBGB (2016), Art. 19 para. 18; Perales Viscasillas, “Battle of the Forms” Under the 1980 United Nations Convention on Contracts for the International Sale of Goods and the Principles of International Commercial Contracts, 10 Pace International Law Review (1998) 97 (140); Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 19 para. 33; Rudolph, Kommentar (1996), Art. 19 para. 10; Magnus, in: Staudinger Kommentar (2013), Art. 19 paras 2 and 20; van Alstine, Fehlender Konsens beim Vertragsabschluß nach dem einheitlichen UN-Kaufrecht: eine rechtsvergleichende Untersuchung auf der Grundlage des deutschen sowie des USamerikanischen Rechts (1995) p. 206; contra, however, Hellner, The Vienna Convention and Standard Form Contracts, in: Sarcevic/Volken (eds), International Sale of Goods (1986), p. 335 (p. 342); in case law see, e. g., OLG Linz (Austria) 23 March 2005, CISG-Online 1376; Bundesgerichtshof (Germany) 9 January 2002, CISG-Online 651. 80 Dessemontet, La Convention des Nations Unies du 11 Avril 1980 sur les contrats de vente internationale de marchandises, in: Dessemontet (ed), Les contrats de vente internationale de marchandises (1991), p. 47 (p. 56); Ebenroth, Internationale Vertragsgestaltung im Spannungsverha¨ltnis zwischen ABGB, IPR-Gesetz und UN-Kaufrecht, o¨sterreichische Juristische Bla¨tter (1986) 681 (686); U. Huber, Der ¨ bereinkommens u¨ber internationale Warenkaufvertra¨ge, 43 RabelsZ (1979) UNCITRAL-Entwurf eines U 413 (445); Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11 (42 et seq.); Vergne, The “Battle of the Forms” Under the 1980 United Nations Convention on Contracts for the International Sale of Goods, 33 American Journal of Comparative Law (1985) 233 (256 et seq.); Winship, Changing Contract Practices in the Light of the United Nations Sales Convention: A Guide For Practitioners, 29 International Lawyer (1995) 525 (544). 81 See also Moccia, The United Nations Convention on Contracts for the International Sale of Goods and the “Battle of the Forms”, 13 Fordham International Law Journal (1989) 649 (674 et seq.); van der Velden, Uniform International Sales Law and the Battle of Forms, FS Georges Sauveplanne (1984), p. 233 (p. 243). 82 Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 37; Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) p. Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 20; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 19 CISG paras. 32 et seq.; OLG Linz (Austria) 23 March 2005, CISG-Online 1376; Hoge Raad (Netherlands) 28 January 2005, CISG-Online 1002; Bundesgerichtshof (Germany) 9 January 2002, CISG-Online 651; contra Ebenroth, JBl. (1986) 681 (686). 83 Rudolph, Kommentar (1996), Art. 19 para. 11, stating that this is the case, from a practical point of view.

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the offer.84 On the other hand, if the modifications do materially alter the offer, no contract has come into existence.85 The view that in both of these instances a contract is concluded on the basis of the knock-out rule – a view held both by commentators86 and courts87 – cannot be shared. If the contract is executed, one must assume that the (original) offeror has accepted the counter-offer of the offeree containing the (materially different) standard contract terms.88 This rule has been called by both commentators89 and courts90 the “last shot rule”. 84 Bellelli, Nuove leggi civ. comm. (1989), 90 (92); Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 39; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 19 para. 4; Herber/Czerwenka, Kommentar (1991), Art. 19 para. 18; Perales Viscasillas, “Battle of the Forms” Under the 1980 United Nations Convention on Contracts for the International Sale of Goods and the Principles of International Commercial Contracts, 10 Pace International Law Review (1998) 97 (147); Schroeter, in: Schlechtriem/Schwenzer, ¨ bereinkommen Kommentar (German ed. 2013), Art. 19 para. 36; Stoffel, Formation du contrat, in: Wiener U von 1980 u¨ber den internationalen Warenkauf (1985), p. 55 (p. 73); Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 21; Witz/Salger/Lorenz, Kommentar (2016), Art. 19 para. 15. 85 Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 43 (p. 53). 86 Achilles, Kommentar (2000), Art. 19 para. 5; Audit, Vente Internationale (1990), p. 70; De Nova, Condizioni generali di contratto confliggenti, in: Digiesto delle discipline privatistiche. Sezione di diritto civile (2000), p. 201; Ku¨hl/Hingst, Das UN-Kaufrecht und das Recht der AGB, in: Festgabe Herber (1999), p. 50 (p. 56); Gruber, in: Mu¨nchKommBGB (2016), Art. 19 para. 24; Niggemann, Die Bedeutung des Inkrafttretens des UN-Kaufrechts fu¨r den deutsch-franzo¨sischen Wirtschaftsverkehr, RIW (1991) 372 (377); Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 19 para. 20; Schlechtriem/ Schroeter, Internationales UN-Kaufrecht (2013) para. 287; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 19 para. 38; Sieg, Allgemeine Gescha¨ftsbedingungen im grenzu¨berschreitenden Gescha¨ftsverkehr, RIW (1997) 811 (814); Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 19 para. 5; Ventsch/Kluth, Die Einbeziehung von Allgemeinen Gescha¨ftsbedingungen im Rahmen des UN-Kaufrechts, IHR (2003) 61 (63 et seq.); Kro¨ll/Hennecke, Kollidierende Allgemeine Gescha¨ftsbedingungen in internationalen Kaufvertra¨gen, RIW (2001) 736 (742); Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 19 para. 25; Magnus, in: Staudinger Kommentar (2013), Art. 19 paras 24 et seq.; Stoffel, Formation du contrat, in: Wiener ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf (1985), p. 55 (p. 75). U 87 Cour de Cassation (France) 16 July 1998, CISG-Online 344; Amtsgericht Kehl (Germany) 6 October 1995, CISG-Online 162. 88 Audit, Vente Internationale (1990), pp. 69 et seq.; Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 40; Herber/Czerwenka, Kommentar (1991), Art. 19 para. 18; Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193 (214); Neumayer, Das Wiener Kauf-rechtsu¨bereinkommen und die sogenannte “battle of forms”, in: FS Hans Giger (1989), p. 501 (p. 524); Perales Viscasillas, “Battle of the Forms” Under the 1980 United Nations Convention on Contracts for the International Sale of Goods and the Principles of International Commercial Contracts, 10 Pace International Law Review (1998) 97 (145); Rudolph, Kommentar (1996), Art. 19 para. 11; Sono, Formation of International Contracts under the Vienna Convention: A Shift above the Comparative Law, in: Sarcevic/Volken (eds), International Sale of Goods (1986), p. 111 (p. 127 et seq.). 89 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 125; Frisch, Commercial Common Law, the United Nations Convention on the International Sales of Goods, and the Inertia of Habit, 74 Tulane Law Review (1999) 495 (517); Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) p. 95; Kelso, The United Nations Convention on Contracts for the International Sale of Goods: Contract Formation and the Battle of the Forms, 21 Columbia Journal of Transnational Law (1983) 529 (554); Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193 (214); Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (p. 93); Schultz, Rolling Contract Formation under the UN Convention on Contracts for the International Sale of Goods, 35 Cornell International Law Journal (2001) 263 (282); Sukurs, Harmonizing the Battle of the Forms: A Comparison of the United States, Canada, and the United Nations Convention on Contracts for the International Sale of Goods, 34 Vanderbilt Journal of Transnational Law (2001) 1481 (1496 and 1499). 90 U.S. Court of Appeals, 7th Circuit (U.S.), VLM Food Trading Intern., Inc. v. Illinois Trading Co., 21 January 2016, 811 F.3 d 247; U.S. District Court, D. Minn. (U.S.), Travelers Property Cas. Co. of

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Article 19

The “last shot rule” does not apply91 only where a contract is concluded with the 16 exclusion of the conflicting standards terms, as a result of either an agreement by the parties (concluded, for instance, on the occasion of a framework agreement), the practices established between the parties, or the usages that are binding upon the parties pursuant to Art. 9. The CISG does not provide any special provision to deal with silence following a 17 commercial letter of confirmation. In this situation as well, one has to resort to Art. 19.92 As a result, under the CISG one generally (i. e., where the practices established between the parties or the usages that are binding upon them do not provide otherwise)93 cannot apply the rule currently applied in Germany concerning silence following a commercial letters of confirmation. That rule leads to the modification of the terms of the contract as long as this does not violate the good faith principle,94 a view also held by courts.95 Only where an international usage of the kind referred to in Art. 9(2) exists as to the effects of silence following a commercial letter of confirmation, or where practices between the parties have been established to that effect, can silence following a commercial letter of confirmation be considered to alter the contract, within the limits just mentioned.96 e) Legal consequences of material and immaterial modifications. If the modifica- 18 tions contained in the offeree’s reply to the offer are immaterial, and if the offeror does not object without undue delay to those modifications, the contract comes into existence with the content of the offer97 as modified by the (immaterial) modifications America v. Saint-Gobain Technical Fabrics Canada Ltd., 31 January 2007, CISG-Online 1435 (also 1522); Oberster Gerichtshof (Austria) 13 September 2001, CISG-Online 644; Oberlandesgericht Ko¨ln (Germany) 24 May 2006, CISG-Online 1232; Oberlandesgericht Du¨sseldorf (Germany) 25 July 2003, CISG-Online 919. 91 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 38. 92 Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 26. 93 See also Karollus, UN-Kaufrecht (1989) p. 72; Schultz, Rolling Contract Formation under the UN Convention on Contracts for the International Sale of Goods, 35 Cornell International Law Journal (2001) 263 (286). 94 Bydlinski, Das allgemeine Vertragsrecht, in: Doralt (ed), Das UNCITRAL-Kaufrecht im Vergleich zum o¨sterreichischen Recht (1985), p. 57 (p. 78 et seq.); Karollus, UN-Kaufrecht (1989), p. 72; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Introduction to Art. 14 paras 17 et seq.; Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 26; for comparative remarks on the commercial letter of confirmation, see Esser, Commercial Letters of Confirmation in International Trade: Austrian, French, German and Swiss Law and Uniform Law Under the 1980 Sales Convention, 18 Georgia Journal of International and Comparative Law (1988) 427 et seq. 95 See Handelsgericht des Kantons Zu ¨ rich (Switzerland) 10 July 1996, CISG-Online 227. 96 See also Landgericht Hamburg (Germany) 19 June 1997, CISG-Online 283; Oberlandesgericht Frankfurt (Germany) 5 July 1995, CISG-Online 258; in legal writing, see Schultz, Rolling Contract Formation under the UN Convention on Contracts for the International Sale of Goods, 35 Cornell International Law Journal (2001) 263 (286). 97 Compare Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 105; Audit, Vente Internationale (1990), p. 69; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 19 para. 4; Bellelli, Nuove leggi civ. comm. (1989), 90 (92); Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 193; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 22; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 329; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (90); Gruber, in: Mu¨nchKommBGB (2016), Art. 19 para. 14; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 640; J. Pierre/V. Pierre, A Comparison of the Rules on Formation of Sales Contracts Under the Louisiana Civil Code and the United Nations Convention on Contracts for the International Sale of Goods: What Buyers and Sellers Should Know, 20 Southern University Law Review (1993) 189 (194 et seq.); Rendell, The New U. N. Convention on International Sales Contracts: An Overview, 15 Brooklyn Journal of International Law (1989) 23 (29);

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contained in the reply of the offeree98 – a solution also adopted in case law.99 The time of contract conclusion is the time when the acceptance containing the immaterial modifications reaches the offeror.100 19 If the reply to the offer contains material modifications, that reply has the same effects as a rejection of the offer,101 and thus terminates the offer pursuant to Art. 17.102 However, this reply containing material modifications constitutes a counter-offer that is just as subject to the CISG’s provisions on offer and acceptance as the original offer.103

2. Objection 20

a) Preface. As previously discussed, a reply to an offer containing only immaterial modifications constitutes an acceptance, which is why it leads to the conclusion of the contract when it reaches the offeror.104 Until expiration of the time for objection, however, the contract is subject to the condition105 that the offeror not object to the modifications. This possibility, that the offeror might object to the contract conclusion even where the reply to the offer “merely” contains immaterial modifications, has been criticized on the grounds that it provides an opportunity for the offeror to speculate at the risk of the offeree.106 This view cannot be shared. The offeror must be put in a position not to be bound by a contract the offeror did not want when making the offer.107 Schlechtriem/Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 19 para. 14; Schultz, Rolling Contract Formation under the UN Convention on Contracts for the International Sale of Goods, 35 Cornell International Law Journal (2001) 263 (282); Sono, Formation of International Contracts under the Vienna Convention: A Shift above the Comparative Law, in: Sarcevic/Volken (eds), International Sale of Goods (1986), p. 111 (125); Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 12; Witz/Salger/Lorenz, Kommentar (2016), Art. 19 para. 8. 98 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 19 CISG para. 26; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 278. 99 See Oberster Gerichtshof (Austria) 20 March 1997, CISG-Online 269; Tribunal de Commerce de Nivelles (Belgium) 19 September 1995, CISG-Online 366; Arbitral Award, ICC 8611, CISG-Online 326. 100 Bydlinski, Das allgemeine Vertragsrecht, in: Doralt (ed), Das UNCITRAL-Kaufrecht im Vergleich zum o¨sterreichischen Recht (1985), p. 57 (p. 73); Ferrari, Vendita internazionale di beni mobili. Artt. 14– 24. Formazione del contratto (2006) p. 128. 101 Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 10. 102 Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha ¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 328; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 19 para. 10; Witz/Salger/Lorenz, Kommentar (2016), Art. 19 para. 6. 103 See also Achilles, Kommentar (2000), Art. 19 para. 5; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 18; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 329; Piltz, Internationales Kaufrecht (1993) § 3 para. 93; Piltz, Internationales Kaufrecht (2008), para. 3-102 et seq.; Reinhart, Kommentar (1991), Art. 19 para. 2; Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2005), Art. 19 para. 11. 104 Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 20. 105 See Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 19 para. 3; Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 20; Karollus, UN-Kaufrecht (1989) p. 69; Ludwig, Der Vertragsabschluß nach UNKaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 329 note 140; Neumayer, Das Wiener Kaufrechtsu¨bereinkommen und die sogenannte “battle of forms”, in: FS Hans Giger (1989), p. 501 (p. 518); ders., ¨ bereinkommen von Der Vertragsschluss nach dem Recht des internationalen Warenkaufs (Wiener U 1980), in: Festschrift Werner Lorenz (1991), p. 747 (759); Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 14; contra Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 19 para. 15. 106 See Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11 (42). 107 Audit, Vente Internationale (1990), p. 69; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 19 CISG para. 27.

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Article 19

An objection can be defined as a statement that relates to the reply by the offeree 21 (which has to have already reached the offeror)108 and allows the offeror to avoid being bound by a contract concluded under the conditions imposed by the acceptor. In order to be effective, the objection must meet both the requirements laid down by the applicable domestic law as to its validity109 (except for its formal validity, as that is a matter governed by the CISG)110 and those laid down by the CISG itself. The objection need not reach its addressee, unlike an offer, revocation, withdrawal or acceptance.111 It can easily be derived from Art. 19(2)112 that the objection merely needs to be dispatched in an appropriate manner113 to become effective. Thus, the acceptor bears the risk of loss of the objection.114 This result can be justified on the grounds that it is the acceptor who initiates the “abnormity”115 – in the sense of the deviation from the original offer. Still, in order to protect the acceptor, it is necessary that the objection comply with certain requirements relating, for instance, to the exact and accurate indication of the address of the addressee, etc.116 A revocation of the objection is not possible, since the objection becomes effective upon dispatch.117 The objection does not have to comply with a particular form requirement;118 the 22 objection also does not have to contain specific words to be effective.119 An objection may be effective independently from whether it is made orally, in writing or via 108 An objection sent by the offeror prior to the reply containing additions or modifications reaching the offeror is ineffective; Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 30; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 29. 109 Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 29. 110 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 19 CISG para. 29. 111 Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu ¨ rgerlichen Gesetzbuch (2012), Art. 19 para. 4; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 27. 112 Contra Neumayer, Offene Fragen zur Anwendung des Abkommens der Vereinten Nationen u ¨ ber den internationalen Warenkauf, RIW (1994) 99 (103); Neumayer/Ming, Convention de Vienne (1993), Art. 19 para. 2. 113 See also Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 19 para. 6; Herber/ Czerwenka, Kommentar (1991), Art. 19 para. 14; Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 43 (52); Karollus, UN-Kaufrecht (1989) p. 69; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨lt-nis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Eng-lands und Deutschlands (1994) p. 330; Noussias, Die Zugangsbedu¨rftigkeit von Mitteilungen nach den Einheitlichen Haager Kaufgesetzen und nach dem UN-Kaufgesetz (1983) pp. 119 et seq.; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 637; Reinhart, Kommentar (1991), Art. 19 para. 5; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 19 para. 16; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 19 para. 4; Magnus, in: Staudinger Kom-mentar (2005), Art. 19 para. 13; Witz/Salger/Lorenz, Kommentar (2016), Art. 19 para. 12; contra Neumayer, Offene Fragen zur Anwendung des Abkommens der Vereinten Nationen u¨ber den internationalen Warenkauf, RIW (1994) 99 (103); Neumayer/Ming, Convention de Vienne (1993), Art. 19 para. 2. 114 Achilles, Kommentar (2000), Art. 19 para. 4; Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 19 para. 3; Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 29; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 19 para. 6; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 27; Gruber, in: Mu¨nchKommBGB (2016), Art. 19 para. 15; Noussias, Die Zugangsbedu¨rftigkeit von Mitteilungen nach den Einheitlichen Haager Kaufgesetzen und nach dem UN-Kaufgesetz (1983) p. 120; Piltz, Internationales Kaufrecht (1993) § 3 para. 100; Reinhart, Kommentar (1991), Art. 19 para. 5; Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 13; Witz/Salger/Lorenz, Kommentar (2016), Art. 19 para. 12; contra Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 192. 115 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 19 para. 16. 116 See also Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 27. 117 Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 32; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 30. 118 Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 25. 119 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 24.

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Part II. Formation of the Contract

electronic means.120 From the text of Art. 19(2) it follows, however, that it is insufficient for an offeror to indicate its intention not to be bound by the immaterial modifications of the offeree merely by performing an act.121 b) Timeliness and consequences of an objection. An objection must be made “without undue delay” (i. e., “sans retard injustifie´”). From both the English and French text one can easily gather that an “immediate” objection, or an objection “without delay” is not necessary,122 provided that the offeror is not to be blamed for the delay123 or the delay was unavoidable.124 24 A timely objection retroactively dissolves a contract that already was concluded.125 If the offeror does not object or does so in an untimely fashion, the contract remains effective. In these cases, the contents of the contract is determined by both the terms of the offer that do not contradict the immaterial modifications, and the immaterial modifications contained in the acceptance, as noted both in scholarly writing126 and case law.127 23

3. Burden of proof For the allocation of the burden of proof, one must distinguish between the rule set forth in para. (1), pursuant to which any discrepancy between offer and acceptance leads to the rejection of the offer, and the exception found in para. (2), pursuant to which a reply to an offer that contains modifications can lead to contract conclusion. 26 That the requirements of the basic rule are met must be proved by the party who invokes the rule.128 The same is true with regard to the exception. Thus, the person relying upon a concluded contract – generally the acceptor129 – must prove that the 25

120

Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 13. Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 26; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 25; contra Witz/Salger/Lorenz, Kommentar (2016), Art. 19 para. 12. 122 See Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 19 para. 3, and more specifically note 715; also compare Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 26; Gruber, in: Mu¨nchKommBGB (2016), Art. 19 para. 16. 123 See Herber/Czerwenka, Kommentar (1991), Art. 19 para. 14; Perales Viscasillas, La Formacio ´ n del contrato de compraventa internacional de mercaderı´as (1996) p. 640; for some contradicting statements, see Rudolph, Kommentar (1996), Art. 19 para. 9. 124 Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 13; contra, see Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 26. 125 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 132; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 31; Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2005), Art. 19 para. 15; Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 14. 126 Achilles, Kommentar (2000), Art. 19 para. 4; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 193; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11 (43); Neumayer/Ming, Convention de Vienne (1993), Art. 19 para. 2; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 640; Piltz, Internationales Kaufrecht (1993) § 3 para. 99; Witz/Salger/Lorenz, Kommentar (2016), Art. 19 para. 13. 127 Compare Oberster Gerichtshof (Austria) 20 March 1997, CISG-Online 269. 128 See Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 45; Jung, Die Beweislastverteilung im UNKaufrecht insbesondere bei Vertragsabschluß, bei Vertragsverletzungen des Ka¨ufers, bei allgemeinen Bestimmungen sowie bei gemeinsamen Bestimmungen u¨ber Verka¨ufer- und Ka¨uferpflicht (1996) p. 129; Hepting/Mu¨ller, in Baumga¨rtel/Laumen (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 19 CISG para. 2. 129 See Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 133; Henninger, Die Frage der Beweislast im Rahmen des UN-Kaufrechts (1995) p. 210; Gruber, in: Mu¨nchKommBGB (2016), Art. 19 para. 30; Jung, Die Beweislastverteilung im UN-Kaufrecht insbesondere bei Vertragsabschluß, bei Vertragsverletzungen des Ka¨ufers, bei allgemeinen Bestimmungen sowie bei gemeinsamen Bestimmungen u¨ber Verka¨ufer- und Ka¨uferpflicht (1996) p. 130. 121

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Part II. Formation of the Contract

27–29

Article 19

modifications contained in the reply do not materially alter the offer.130 The party arguing that the contract was not concluded must prove that an objection has been dispatched in a timely fashion.131

III. Comparable Rules Art. 19 CISG has a counterpart in various international instruments; Art. 2.1.11 27 PICC, for instance, deals with modified acceptance. It does so in basically the same manner as Arts 19(1) and 19(2) CISG. It does not, however, contain a provision comparable to Art. 19(3) CISG which contains a presumption as to the material nature of modifications relating to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party’s liability to the other and the settlement of disputes. Unlike the CISG, the PICC set forth a rule relating to both letters of confirmation and 28 the battle of forms. As regards the former issue, it is dealt with in Art. 2.1.12, pursuant to which, “[i]f a writing which is sent within a reasonable time after the conclusion of the contract and which purports to be a confirmation of the contract contains additional or different terms, such terms become part of the contract, unless they materially alter the contract or the recipient, without undue delay, objects to the discrepancy.” As regards the issue of the “battle of forms”, it is addressed in Art. 2.1.22 PICC, on 29 the basis of the “knock-out-rule”,132 the rule also adopted by Art. II-4:209 DCFR and Art. 2:209 PECL. The latter instruments also set forth rules on modified acceptance (namely Art. II-4:208 DCFR and Art. 2:208 PECL) which are based upon Art. 19 CISG. 130 Achilles, Kommentar (2000), Art. 19 para. 6; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 19 para. 40; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 19 para. 14. 131 Dornis, in: Honsell, Kommentar (2010), Art. 19 para. 45; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 19 para. 30; Henninger, Die Frage der Beweislast im Rahmen des UN-Kaufrechts (1995) p. 210; Hepting/Mu¨ller, in Baumga¨rtel/Laumen (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 19 CISG para. 9; Magnus, in: Staudinger Kommentar (2013), Art. 19 para. 27; contra Saenger, in: Bamberger/ Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 19 para. 6. 132 See Fejo ¨ s, Battle of the Forms Under the CISG, 11 Vindobona Journal of International Commercial Law and Arbitration (2007) 113 (126 et seq.); Monti, A Comment on “An Ex-Ante View of the Battle of the Forms: Inducing Parties to Draft Reasonable Terms” by Omri Ben Shahar, International Review of Law and Economics (2005) 371 (276 note 20); Naude´, in: Vogenauer/Kleinheitserkamp (eds), Commentary on the Unidroit Principles (2009), Art. 2.1.22. paras 1 and 3 et seq.; Wildner, Art. 19 CISG: The German Approach to the Battle of the Forms in International Contract Law: The Decision of the Federal Supreme Court of Germany of 9 January 2002, 20 Pace International Law Review (2008) 1 (10 et seq.).

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Article 20 (1) A period of time for acceptance fixed by the offeror in a telegram or a letter begins to run from the moment the telegram is handed in for dispatch or from the date shown on the letter or, if no such date is shown, from the date shown on the envelope. A period of time for acceptance fixed by the offeror by telephone, telex or other means of instantaneous communication, begins to run from the moment that the offer reaches the offeree. (2) Official holidays or non-business days occurring during the period for acceptance are included in calculating the period. However, if a notice of acceptance cannot be delivered at the address of the offeror on the last day of the period because that day falls on an official holiday or a non-business day at the place of business of the offeror, the period is extended until the first business day which follows. Bibliography: Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006); Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994); Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996); J. Pierre/V. Pierre, A Comparison of the Rules on Formation of Sales Contracts Under the Louisiana Civil Code and the United Nations Convention on Contracts for the International Sale of Goods: What Buyers and Sellers Should Know, 20 Southern University Law Review (1993) 189.

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1. Beginning of the period for acceptance (para. 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2. Calculation and expiry of the period of time (para. 2) . . . . . . . . . . . . . . . . . . . . . 7 3. The rule in Art. 20(2) as general principle upon which the CISG is based 12 III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

I. Importance and Role of the Provision 1

This provision – which is dispositive in nature1 – determines when the period for acceptance starts to run (para. 1), how that period is calculated, and when it lapses (para. 2).2 Consequently, resort to domestic law for these issues is inadmissible.3 This provision applies to both the period in which the revocation of the offer is excluded and the period after which the offer will lapse.4 1 See Dı ´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 194; Dornis, in: Honsell, Kommentar (2010), Art. 20 para. 29; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 135; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercader´ıas (1996) p. 586. 2 Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (86). 3 See Dornis, in: Honsell, Kommentar (2010), Art. 20 para. 1; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 20 para. 2. 4 See Hepting/Mu ¨ ller, in Baumga¨rtel/Laumen (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 20 CISG para. 1; Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 20 para. 3.1; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 20 para. 1; Schlechtriem/Schroeter, in: Schlecht-

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2–4

Article 20

II. Detailed Commentary 1. Beginning of the period for acceptance (para. 1) Art. 20(1), which can be traced back to Art. 8(2) ULF,5 determines when a time fixed 2 by the offeror through reference not to a given date, but rather to a period of time6 (for instance “within three weeks”) begins to run.7 In doing so, the provision at hand draws a distinction between a number of different means of communication used for the offer;8 it does not, however, determine whether the period of time fixed is one for the exclusion of the possibility of revoking the offer, or one after which the offer will lapse.9 If the offeror has fixed a period of time for acceptance by reference to a calendar date (“from 26 October” or “until 26 October”), or an event in time that allows for the determination of a calendar date (“until the beginning of the Munich fashion week”), Art. 20(1) is not applicable.10 Under certain circumstances, Art. 20(1) may be inapplicable even where a time is not fixed by reference to a calendar date or an event that allows for the determination of such date. If, for example, a clause states “10 days consideration period,” one must assume that this period will begin to run when the offer reaches its addressee, as before that moment the addressee cannot possibly consider it.11 Recourse to Art. 20(1) is unnecessary where a “reasonable time” referred to in 3 Art. 18(2) is concerned.12 Where it emerges from the offer itself13 (in this respect reference should be made to 4 Art. 8)14 from an agreement between the parties,15 from the practices established riem/Schwenzer, Kommentar (German ed. 2013), Art. 20 para. 1; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 20 para. 1. 5 See Napoli, Nuove leggi civ. comm. (1989) 94 (95); Lu ¨ deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 20 para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 20 para. 2; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 20 CISG para. 2. 6 The time fixed need not be a reasonable one to lead to the application to para. 1; see Napoli, Nuove leggi civ. comm. (1989) 94, 95. 7 See Witz/Salger/Lorenz, Kommentar (2016), Art. 20 para. 1. 8 Dornis, in: Honsell, Kommentar (2010), Art. 20 para. 1. 9 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 20 para. 6. 10 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 20 para. 1; Dornis, in: Honsell, Kommentar (2010), Art. 20 para. 2 et seq. Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 20 para. 2.1; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 136; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 323; Magnus, in: Staudinger Kommentar (2013), Art. 20 para. 4; Witz/Salger/Lorenz, Kommentar (2016), Art. 20 para. 4; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (86); Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 20 para. 7; Schroeter, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 20 para. 1. 11 Dornis, in: Honsell, Kommentar (2010), Art. 20 para. 3; Honnold/Flechtner, Uniform Law (2009), para. 171; Gruber, in: Mu¨nchKommBGB (2016), Art. 20 para. 3; contra Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11 (20 et seq.). 12 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 20 para. 6; Rudolph, Kommentar (1996), Art. 20 para. 4; Witz/Salger/Lorenz, Kommentar (2016), Art. 20 para. 4. 13 See also Witz/Salger/Lorenz, Kommentar (2016), Art. 20 para. 2; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 20 para. 5; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11 (21); Piltz, Internationales Kaufrecht (1993) § 3 para. 69; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 20 para. 1. 14 Compare Rudolph, Kommentar (1996), Art. 20 para. 3. 15 Neumayer/Ming, Convention de Vienne (1993), Art. 20 para. 1.

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Article 20 5–6

Part II. Formation of the Contract

between them, or from any usage that binds the parties pursuant to Art. 9, that the period of time starts to run at a different time, the rule set forth in Art. 20(1) does not apply.16 5 The issue of when a period of time begins to run depends on the means of communication used.17 When a telegram is used, the period begins to run from a moment that is easy to ascertain: the moment the telegram is handed over for dispatch. If a period of time is fixed in a letter, it starts to run from the date shown on that letter,18 i. e., a time also easily recognizable by the offeree.19 If no such date is shown, the period of time begins to run on the date shown on the envelope,20 which is normally the postmark date.21 If neither the letter nor the envelope show a date (or if it is not legible,22 or cannot be ascertained for any other reason), one must refer to the time the offer reaches the addressee;23 actual dispatch is irrelevant for determining the moment at which the period starts to run.24 If more than one date is shown on the envelope, the earliest one is taken into account.25 The day relevant for the purpose of determining when a period of time starts to run pursuant to Art. 20(1) is included in the period of time.26 6 Art. 20(1) second sentence states that where the period of time for acceptance is fixed by telephone, telex, or other means of instantaneous communication, the period of time begins to run from the moment the offer reaches the offeree.27 “Means of instantaneous 16 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 137; Herber/Czerwenka, Kommentar (1991), Art. 19 para. 3; Honnold/Flechtner, Uniform Law (2009), para. 171; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 20 para. 3; Magnus, in: Staudinger Kommentar (2013), Art. 20 para. 5. 17 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 20 CISG para. 6; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (87); Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 591. 18 Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 20 para. 2. 19 Herber/Czerwenka, Kommentar (1991), Art. 19 para. 2; Witz/Salger/Lorenz, Kommentar (2016), Art. 20 para. 6; UNCITRAL YB (1978), p. 118. 20 Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 110; Saenger, in: Bamberger/ Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 20 para. 2; J. Pierre/V. Pierre, A Comparison of the Rules on Formation of Sales Contracts Under the Louisiana Civil Code and the United Nations Convention on Contracts for the International Sale of Goods: What Buyers and Sellers Should Know, 20 Southern University Law Review (1993) 189 (193); Piltz, Internationales Kaufrecht (1993) § 3 para. 69. 21 Napoli, Nuove leggi civ. comm. (1989) 9 (95); Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 20 para. 2; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 20 para. 2. 22 Magnus, in: Staudinger Kommentar (2013), Art. 20 para. 8. 23 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 138; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 20 para. 10; Gruber, in: Mu¨nchKommBGB (2016), Art. 20 para. 6; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (87); Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 20 para. 2; contra Witz/Salger/Lorenz, Kommentar (2016), Art. 20 para. 6, where the authors refer to the day of actual dispatch. 24 Audit, Vente Internationale (1990), p. 66; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 20 para. 2; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 20 para. 2; Gruber, in: Mu¨nchKommBGB (2016), Art. 20 para. 5; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 20 para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 20 para. 8; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 20 para. 2; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 20 para. 2. 25 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 20 para. 7; Witz/Salger/Lorenz, Kommentar (2016), Art. 20 para. 6. 26 Piltz, Internationales Kaufrecht (1993) § 3 para. 70. 27 Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11 (21); Napoli, Nuove leggi civ. comm. (1989) 94 (96 et seq.).

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Article 20

communication” can be defined as those means that allow the time of dispatch and time of receipt by the addressee to almost coincide,28 such as communications by radio,29 by telefax, email,30 teletext,31 sms, etc.32 Because oral communications also constitute instantaneous communications, the rule set forth in Art. 20(1) second sentence extends to oral communications as well.33 The same rule also applies to oral communications made by a messenger.34

2. Calculation and expiry of the period of time (para. 2) Art. 20(2), which is as dispositive in nature as Art. 20(1), and which has an 7 antecedent in Art. 29 of the 1974 UNCITRAL Convention on the Limitation Period in the International Sale of Goods,35 sets forth a rule that is widely accepted.36 Pursuant to Art. 20(2), official holidays and non-business days are included in calculating the period37 (independently from whether the period of time is fixed by the offeror or whether it is a reasonable one).38 In doing so, the provision prevents the problems that would inevitably arise if in international sales transactions official holidays and nonbusiness days were not to be counted.39

28 Herber/Czerwenka, Kommentar (1991), Art. 19 para. 5; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 20 para. 12; Gruber, in: Mu¨nchKommBGB (2016), Art. 20 para. 4; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 20 para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 20 para. 6. 29 Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 20 para. 3. 30 Contra Dornis, in: Honsell, Kommentar (2010), Art. 20 para. 10; for a reference to the importance of electronic means of communication to contracts governed by the CISG, see Ferrari, Einige kurze Anmerkungen zur Awendbarkeit des UN-Kaufrechts beim Vertragsschluss u¨ber das Internet, EuLF (2001) 301 (306). 31 Neumayer/Ming, Convention de Vienne (1993), Art. 20 para. 1. 32 See also Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) pp. 139 et seq.; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 20 para. 12; Gruber, in: Mu¨nchKommBGB (2016), Art. 20 para. 4; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 593; Piltz, Internationales Kaufrecht (1993) § 3 para. 68; Rudolph, Kommentar (1996), Art. 20 para. 5; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 20 para. 5; Magnus, in: Staudinger Kommentar (2013), Art. 20 para. 10. 33 Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu ¨ rgerlichen Gesetzbuch (2012), Art. 20 para. 3; Herber/Czerwenka, Kommentar (1991), Art. 19 para. 5; Magnus, in: Staudinger Kommentar (2013), Art. 20 para. 11. 34 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 20 para. 4; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 20 para. 3; Witz/Salger/Lorenz, Kommentar (2016), Art. 20 para. 5; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 20 para. 3. 35 Napoli, Nuove leggi civ. comm. (1989) 94 (95). 36 Herber/Czerwenka, Kommentar (1991), Art. 19 para. 7; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 20 para. 8; Magnus, in: Staudinger Kommentar (2013), Art. 20 para. 12; contra Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 399. 37 Dornis, in: Honsell, Kommentar (2010), Art. 20 para. 13; J. Pierre/V. Pierre, A Comparison of the Rules on Formation of Sales Contracts Under the Louisiana Civil Code and the United Nations Convention on Contracts for the International Sale of Goods: What Buyers and Sellers Should Know, 20 Southern University Law Review (1993) 189 (193); Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 20 para. 15. 38 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 20 para. 14. 39 Napoli, Nuove leggi civ. comm. (1989) 94 (98); Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 20 para. 5; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 20 para. 5; see also Brunner/Pfisterer/Ko¨ster, Kommentar (2014), Art. 20 para. 2; Gruber, in: Mu¨nchKommBGB (2016), Art. 20 para. 9.

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Article 20 8–11

Part II. Formation of the Contract

However, Art. 20(2) second sentence states an exception to the foregoing rule: if a notice of acceptance cannot be delivered at the place of business of the offeror40 (or his mailing address, or if the offeror does not have a place of business or mailing address, his habitual residence)41 on the last day of the period because that day falls on an official holiday or a non-business day at the place of business of the offeror, the period is extended until the next business day.42 This exception also applies (by analogy) in cases where the notice of acceptance is made orally.43 9 Therefore, the importance of the meaning of the terms “official holidays” and “nonbusiness days” becomes apparent. While the determination of an “official holiday” does not cause any problems,44 the same cannot be said with respect to the determination of “non-business days.” Some commentators hold the view that for a day to be considered a “non-business day,” a statutory provision is required.45 More convincingly, others argue that non-business days on which there is no business because of national, regional or local usage are also to be considered.46 Circumstances that only affect the offeror or his business, such as illness, work outings, or a strike do not extend the period until the first business day that follows.47 10 The period does not extend to the first business day that follows, however, where it is possible for the offeror to know of the acceptance because he is present in his office on an official holiday or on a non-business day.48 11 For the period to extend to the first business day that follows, the impossibility of delivering the acceptance must be caused by the fact that the last day of the period falls on an official holiday or a non-business day.49 The burden of proof for this impossibility is on the party relying upon the conclusion of the contract, despite the acceptance reaching the offeror after the lapse of the period of time for acceptance.50 8

40 Dornis, in: Honsell, Kommentar (2010), Art. 20 para. 21; where the addressee has multiple places of business, the place of business is relevant to which the declaration is addressed; see Rudolph, Kommentar (1996), Art. 20 para. 6. 41 See Art. 24. 42 J. Pierre/V. Pierre, A Comparison of the Rules on Formation of Sales Contracts Under the Louisiana Civil Code and the United Nations Convention on Contracts for the International Sale of Goods: What Buyers and Sellers Should Know, 20 Southern University Law Review (1993) 189 (193); Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 20 para. 7. 43 Dornis, in: Honsell, Kommentar (2010), Art. 20 para. 25. 44 Napoli, Nuove leggi civ. comm. (1989) 94 (98). 45 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 20 para. 6; similarly Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 594. 46 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 142; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 20 para. 19; Gruber, in: Mu¨nchKommBGB (2016), Art. 20 para. 10; Napoli, Nuove leggi civ. comm. (1989) 94 (98); Eo¨rsi, Formation of contract, in: Wiener ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf (1985), p. 43 (51). U 47 See Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 20 para. 2; Gruber, in: Mu¨nchKommBGB (2016), Art. 20 para. 10, Rudolph, Kommentar (1996), Art. 20 para. 6; Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2005), Art. 20 para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 20 para. 13; contra Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (87); Neumayer/Ming, Convention de Vienne (1993), Art. 20 para. 2. 48 Dornis, in: Honsell, Kommentar (2010), Art. 20 para. 20; Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 20 para. 3.3; Napoli, Nuove leggi civ. comm. (1989) 94 (98); Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 594; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 20 para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 20 para. 13. 49 See also Gruber, in: Mu ¨ nchKommBGB (2016), Art. 20 para. 11; Witz/Salger/Lorenz, Kommentar (2016), Art. 20 para. 9. 50 Dornis, in: Honsell, Kommentar (2010), Art. 20 para. 30; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 143; Gruber, in: Mu¨nchKommBGB (2016),

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Part II. Formation of the Contract

12–14

Article 20

3. The rule in Art. 20(2) as general principle upon which the CISG is based Pursuant to Art. 7(2), questions concerning matters governed by the CISG which are 12 not expressly settled in it are to be settled in conformity with the general principles on which the CISG is based. According to many commentators,51 the rules found in Art. 20(2) concerning the calculation and expiry of the period of time for acceptance must be considered general principles in the sense of Art. 7(2). Thus one may also apply them to periods of time other than that for acceptance, provided that the CISG itself does not state otherwise.52

III. Comparable Rules The PICC also contain a provision, namely Art. 2.1.8, that addresses the issue of 13 when a period of acceptance fixed by the offeror starts to run. Unlike Art. 20(1) CISG, Art. 2.1.8 PICC does not, however, make any distinction as to what means of communication is used for the offer, which is why one commentator stated that “Art. 2.1.8 is a simplified version of Art. 20 CISG.”53 In effect, pursuant to Art. 2.1.8 PICC, “[a] period of acceptance fixed by the offeror begins to run from the time that the offer is dispatched. A time indicated in the offer is deemed to be the time of dispatch unless the circumstances indicate otherwise.” This rule can lead, however, to results different from those reached under Art. 20(1) CISG. This is the case, for instance, where a period of time for acceptance is fixed in a letter. Pursuant to Art. 20(1) CISG, in this case the time for acceptance begins to run from the date shown on the letter. Under Art. 2.1.8 PICC, however, that date is irrelevant where the circumstances indicate a time of dispatch. Thus, “[t]he fact that the transmitted letter indicates an earlier date can thus not shorten the offeree’s period for accepting the offer.”54 The PICC also contain a provision – Art. 1.12 – dealing with the computation of time 14 set by parties, i. e., the issue addressed in Art. 20(2) CISG. The PICC rule basically corresponds to that found in the CISG, even though it is phrased differently, in broader terms. Art. 1.12 PICC also contains, however, a provision on the time zone to be taken Art. 20 para. 15; Hepting/Mu¨ller, in Baumga¨rtel/Laumen (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 20 CISG para. 5; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 20 para. 6; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 20 para. 27. 51 Burkart, Interpretatives Zusammenwirken von CISG und UNIDROIT Principles (2000) pp. 199 et seq.; Dornis, in: Honsell, Kommentar (2010), Art. 20 para. 27; Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 20 para. 3.1; Ferrari, Das Verha¨ltnis zwischen den UNIDROIT-Grundsa¨tzen und den allgemeinen Grundsa¨tzen internationaler Einheitsprivatrechtkonventionen. Zugleich ein Beitrag zur Lu¨ckenfu¨llung durch staatliche Gerichte, JZ (1998) 9 (12); Gruber, in: Mu¨nchKommBGB (2016), Art. 20 para. 14; Magnus, Die Allgemeinen Grundsa¨tze im UN-Kaufrecht, 59 RabelsZ (1995) 469 (486–487); Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 20 CISG para. 17; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 20 para. 8; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 20 para. 7; Schroeter, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 20 para. 8; Witz/Salger/Lorenz, Kommentar (2016), Art. 20 para. 3; contra Reinhart, Kommentar (1991), Art. 4 para. 7. 52 See also Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 195; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) pp. 144 et seq.; Herber/Czerwenka, Kommentar (1991), Art. 19 para. 7; Magnus, in: Staudinger Kommentar (2013), Art. 20 para. 14. 53 Kleinheisterkamp, in: Vogenauer/Kleinheitserkamp (eds), Commentary on the Unidroit Principles (2009), Art. 2.1.8. para. 1. 54 Kleinheisterkamp, in: Vogenauer/Kleinheitserkamp (eds), Commentary on the Unidroit Principles (2009), Art. 2.1.8. para. 2.

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Article 20 15

Part II. Formation of the Contract

into account in the computation of the time set by the parties, an issue not addressed by the CISG at all. 15 It should be noted that the DCFR also contains a provision on the computation of time, namely Art. I-1:110, paras 5 and 6 of which address the issues governed by Art. 20(2) CISG.55 55

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See Art. 1:304 PECL, upon which Art. I-1:110 is based.

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Article 21 (1) A late acceptance is nevertheless effective as an acceptance if without delay the offeror orally so informs the offeree or dispatches a notice to that effect. (2) If a letter or other writing containing a late acceptance shows that it has been sent in such circumstances that if its transmission had been normal it would have reached the offeror in due time, the late acceptance is effective as an acceptance unless, without delay, the offeror orally informs the offeree that he considers his offer as having lapsed or dispatches a notice to that effect. Bibliography: Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006); Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994); Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11; Noussias, Die Zugangsbedu¨rftigkeit von Mitteilungen nach den Einheitlichen Haager Kaufgesetzen und nach dem UN-Kaufgesetz (1983) p. 115; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996); Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984).

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Late acceptance and approval by the offeror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Scope of Art. 21(1) and the approval of a late acceptance . . . . . . . . . . . . . . b) Effects of the approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Lateness due to delays in transmission (Art. 21(2)). . . . . . . . . . . . . . . . . . . . . . . . . a) Discernible delay in transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Effects of the offeror’s protest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Opportunity for speculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 5 5 5 9 11 11 18 21 22 23

I. Importance and Role of the Provision Art. 18(2) provides that an acceptance is not effective if the indication of assent 1 does not reach the offeror within the time he has fixed or, if no time is fixed, within a reasonable time.1 Art. 21, which is non-mandatory2 in nature and can be traced 1 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 21 para. 1; Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 1; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (88); Gruber, in: Mu¨nchKommBGB (2016), Art. 21 para. 1; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 597; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 275. 2 Compare Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 198; Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 41; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 146; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 21 para. 15; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 42; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 571; Rudolph, Kommentar (1996), Art. 21 para. 10; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 21 para. 15; Witz/Salger/Lorenz, Kommentar (2016), Art. 21 para. 2.

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Article 21 2–5

Part II. Formation of the Contract

back to Art. 9 ULF,3 provides an exception to this rule by allowing a contract to be formed under certain circumstances even by a late acceptance.4 In doing so, Art. 21 distinguishes between two different reasons for the lateness of the acceptance.5 Art. 21(1) governs every late acceptance, irrespective of the grounds for the delay,6 while Art. 21(2), which prevails as lex specialis over Art. 21(1),7 deals with the case in which the lateness of the acceptance is due to a discernible delay in its transmission. 2 The aforementioned provisions both require the existence of an effective acceptance;8 where an acceptance is ineffective for a reason other than the one referred to in Art. 18, neither provision applies.9 3 Both provisions also require that the late acceptance, or the conduct amounting to acceptance,10 constitute an acceptance11 (and not, for instance, a mere request for clarifications).12 4 Furthermore, neither provision distinguishes between the expiration of a time fixed by the offeror, or if no time was fixed, that of a “reasonable time”.13 Also, none of the aforementioned provisions distinguishes between material and immaterial lateness.14

II. Detailed Commentary 1. Late acceptance and approval by the offeror 5

a) Scope of Art. 21(1) and the approval of a late acceptance. Art. 21(1) governs all cases of late acceptance, irrespective of whether the acceptance is late because it was dispatched late or whether the acceptance reaches the offeror late despite its timely 3 Magnus, in: Staudinger Kommentar (2013), Art. 21 para. 3; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 21 para. 1; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 21 para. 1. 4 Ferrari/Torsello, International Sales Law – CISG (2015) p. 148–149; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 21 CISG para. 1. 5 Lipari, Nuove leggi civ. comm. (1989) 98 (100); Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 21 para. 2. 6 Ferrari/Torsello, International Sales Law – CISG, 2015, S. 149; Neumayer/Ming, Convention de Vienne (1993), Art. 21 para. 1; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 21 para. 1; contra Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 21 para. 2. 7 Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 18; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 146; Herber/Czerwenka, Kommentar (1991), Art. 19 para. 2; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 3; Lipari, Nuove leggi civ. comm. (1989) 98 (103). 8 Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 2. 9 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 7. 10 Art. 21 applies to all kind of acceptances; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 197. 11 In accord Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 147; Gruber, in: Mu¨nchKommBGB (2016), Art. 21 para. 3; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 602; Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2005), Art. 21 para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 21 para. 8. 12 Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 3; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 11. 13 Perales Viscasillas, La Formacio ´ n del contrato de compraventa internacional de mercaderı´as (1996) p. 601; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 8. 14 Achilles, Kommentar (2000), Art. 21 para. 2; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 198; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 10; Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2005), Art. 21 para. 4; Magnus, in: Staudinger Kommentar (2013), Art. 21 para. 9.

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Part II. Formation of the Contract

6–7

Article 21

dispatch.15 Thus, Art. 21(1) does not draw a distinction between the various reasons for lateness.16 In cases of delayed transmission of a timely dispatched acceptance, Art. 21(1) does not apply, though this is because Art. 21(2) has priority due to it being lex specialis17 and not because these cases would not fall within the scope of Art. 21(1). For a contract to be concluded despite a late acceptance, the offeror must inform the 6 acceptor without delay – orally or in writing18 – that he is treating the acceptance as effective.19 This statement of approval by the offeror is a declaration of will20 (its validity governed by the applicable domestic law21), and can be made in any form22 that allows for a “dispatch”23 and expresses the offeror’s will to consider the late acceptance effective. Therefore, an approval made by telefax, email24 or telex is as effective as one made by letter;25 an approval by mere conduct is, however, insufficient.26 This approval does not require that specific formulations or expressions be used. Whether the approval is made “without delay” depends on the amount of time that 7 elapses between the moment when the late acceptance reaches the offeror (or when the act indicating assent is performed)27 and the moment the approval is dispatched28 – which is 15 Contra Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 21 para. 2, but see also para. 5; see also Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 21 para. 2. 16 Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 198; Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 5; Gruber, in: Mu¨nchKommBGB (2016), Art. 21 para. 4; Herber/Czerwenka, Kommentar (1991), Art. 19 para. 2; Neumayer/Ming, Convention de Vienne (1993), Art. 21 para. 1; Magnus, in: Staudinger Kommentar (2013), Art. 21 para. 9; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 21 para. 1; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 9; contra Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercader´ıas (1996) p. 599. 17 Herber/Czerwenka, Kommentar (1991), Art. 19 para. 2. 18 In accord Achilles, Kommentar (2000), Art. 21 para. 2; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 21 para. 2; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 198; Karollus, UN-Kaufrecht (1989) p. 74; Neumayer/Ming, Convention de Vienne (1993), Art. 21 para. 1; Rudolph, Kommentar (1996), Art. 21 para. 4; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 21 para. 9; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 21 para. 3; Magnus, in: Staudinger Kommentar (2013), Art. 21 para. 11. 19 Ferrari/Torsello, International Sales Law – CISG (2015) p. 149. 20 See Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 8; Neumayer/Ming, Convention de Vienne (1993), Art. 21 para. 1; Rudolph, Kommentar (1996), Art. 21 para. 4; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 21 para. 2. 21 Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 13; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) pp. 148 et seq.; Gruber, in: Mu¨nchKommBGB (2016), Art. 21 para. 7; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 21 para. 7; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 21 para. 7. 22 Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 10. 23 Audit, Vente Internationale (1990), p. 66. 24 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 21 CISG para. 13; see also Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 21 para. 9, requiring, however, that the addressee, i. e., the offeree, agreed to the use of electronic means of communication. It should be noted, however, that there is nothing in the CISG that requires such an agreement. 25 Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 11. 26 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 16; Perales Viscasillas, La Formacio ´n del contrato de compraventa internacional de mercaderı´as (1996) p. 612; Piltz, Internationales Kaufrecht (1993) § 3 para. 106. 27 Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) para. 1175. 28 Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 21 para. 2.2; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) pp. 149 et seq.; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 341; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 608; Piltz,

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Article 21 8

Part II. Formation of the Contract

the only relevant moment,29 since, as can be derived from the text of the provision at hand, it is irrelevant whether the approval ever reaches the acceptor.30 This means, on the one hand, that a withdrawal of the approval is not possible,31 and, on the other hand, that the acceptor bears the risk of loss of the approval,32 because the approval is effective even if it gets lost or reaches the acceptor late.33 8 The time period for an approval made “without delay” does not coincide34 with the time period referred to in Art. 19 with respect to the timeliness of the objection.35 The time period referred to in Art. 21(1) is shorter.36 This can easily be derived from a comparison of the wording of the two provisions. While Art. 19(2) requires an objection to be made “without undue delay,” Art. 21(1) requires that approval be made “without

Internationales Kaufrecht (1993) § 3 para. 106; Reinhart, Kommentar (1991), Art. 21 para. 4; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 21 para. 8; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 275. 29 Brunner/Pfisterer/Ko ¨ster, Kommentar (2014), Art. 21 para. 2; Ferrari/Torsello, International Sales Law – CISG (2015) p. 149; Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 43 (p. 54); Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 21 CISG para. 11; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11 (33 et seq.); Noussias, Die Zugangsbedu¨rftigkeit von Mitteilungen nach den Einheitlichen Haager Kaufgesetzen und nach dem UN-Kaufgesetz (1983) pp. 115 et seq.; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 608; Rudolph, Kommentar (1996), Art. 21 para. 3; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 21 para. 2; Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2005), Art. 21 para. 7; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 21 para. 3; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 21 para. 7; Witz/Salger/Lorenz, Kommentar (2016), Art. 21 para. 5. 30 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 21 para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 21 para. 11; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 21 para. 7; contra Lipari, Nuove leggi civ. comm. (1989) 98 (104); Neumayer, Offene Fragen zur Anwendung des Abkommens der Vereinten Nationen u¨ber den internationalen Warenkauf, RIW (1994) 99 (104); Neumayer/ Ming, Convention de Vienne (1993), Art. 21 para. 2. 31 In accord Ferrari/Torsello, International Sales Law – CISG (2015) p. 149; Saenger, in: Bamberger/ Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 21 para. 2; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 22; contra Lipari, Nuove leggi civ. comm. (1989) 98 (104); Gruber, in: Mu¨nchKommBGB (2016), Art. 21 para. 11; Neumayer/Ming, Convention de Vienne (1993), Art. 21 para. 4; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 21 para. 12; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 21 para. 12; for a criticism of this contrary view, see Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 17. 32 Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 12; Ludwig, Der Vertragsabschluß nach UNKaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) pp. 341 (et seq.); Noussias, Die Zugangsbedu¨rftigkeit von Mitteilungen nach den Einheitlichen Haager Kaufgesetzen und nach dem UN-Kaufgesetz (1983) p. 116; Piltz, Internationales Kaufrecht (2008), para. 3-119; Rudolph, Kommentar (1996), Art. 21 para. 4; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 17; Witz/Salger/Lorenz, Kommentar (2016), Art. 21 para. 5; contra Neumayer/Ming, Convention de Vienne (1993), Art. 21 para. 2. 33 Ferrari/Torsello, International Sales Law – CISG (2015) p. 149; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 21 para. 6; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11 (34); Magnus, in: Staudinger Kommentar (2013), Art. 21 para. 11; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 17. 34 Contra Achilles, Kommentar (2000), Art. 21 para. 2; Witz/Salger/Lorenz, Kommentar (2016), Art. 21 para. 5. 35 See also Schlechtriem, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2004), Art. 21 para. 8 note 29. 36 Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 14; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 21 para. 7; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 20.

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Article 21

delay.”37 This does not mean, however that the offeror should not have the time to consider whether it is convenient or not to accept.38 b) Effects of the approval. Where all requirements for an effective and valid 9 approval are met, including those of the applicable domestic law (which governs the approval’s validity – with the exception of its formal validity), the contract is deemed to have been concluded when the late acceptance reached the offeror,39 or in case of acceptance indicated by the performance of an act, at the time that act was performed.40 Where an approval contains any additional or different terms from those of the 10 acceptance – even immaterial ones – a contract cannot be deemed to have been concluded.41 The same is true in cases where the offeror does not react at all.42

2. Lateness due to delays in transmission (Art. 21(2)) a) Discernible delay in transmission. As discussed ele=sewhere,43 where the lateness 11 of the acceptance is exclusively caused by the transmission,44 the rule set forth in Art. 21(2) (which in essence traces a rule found in § 149 BGB (German Civil Code))45 applies, provided that certain requirements are met. According to Art. 21(2), a late acceptance contained in a letter or other writing is effective as an acceptance if the letter or other writing shows that it was sent under such circumstances that if its transmission had been normal, it would have reached the offeror in due time. This provision aims to 37 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 151; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 21 para. 8. 38 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 21 CISG para. 15. 39 Official Records (1981), p. 25; Achilles, Kommentar (2000), Art. 21 para. 3; Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 112; Brunner/Pfisterer/Ko¨ster, Kommentar (2014), Art. 21 para. 1; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 198; Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 34; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 21 para. 3; Ferrari/Torsello, International Sales Law – CISG (2015) p. 149–150; Herber/Czerwenka, Kommentar (1991), Art. 19 para. 4; Heuze´, Vente Internationale (2005), para. 192 note 132; Karollus, UN-Kaufrecht (1989) p. 75; Lipari, Nuove leggi civ. comm. (1989) 98 (101); Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 342; Gruber, in: Mu¨nchKommBGB (2016), Art. 21 para. 9; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 21 CISG para. 4; Neumayer/Ming, Convention de Vienne (1993), Art. 21 para. 2; Rudolph, Kommentar (1996), Art. 21 para. 5; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 21 para. 2; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 21 paras 2 and 10; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 21 para. 5; Magnus, in: Staudinger Kommentar (2013), Art. 21 para. 12; expressing some doubts, Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 21 para. 2.2. 40 Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 34; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 21 para. 6; Witz/Salger/Lorenz, Kommentar (2016), Art. 21 para. 4; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 21 para. 10. 41 For a somewhat different view, see Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 14; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 21 para. 11; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 21 para. 6. 42 Herber/Czerwenka, Kommentar (1991), Art. 19 para. 5; Piltz, Internationales Kaufrecht (1993) § 3 para. 108; in case law see Landgericht Hamburg (Germany) 21 December 2001, CISG-Online 1092. 43 See Ferrari, in: Mu ¨ nchKommHGB (2013), Art. 21 para. 1. 44 Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 19; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 21 para. 17. 45 Lipari, Nuove leggi civ. comm. (1989) 98 (102); Gruber, in: Mu ¨ nchKommBGB (2016), Art. 21 para. 2; Rudolph, Kommentar (1996), Art. 21 para. 2; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 21 para. 8.

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Article 21 12–14

Part II. Formation of the Contract

protect the acceptor,46 who has done everything in his power for the acceptance to reach the offeror in due time, and therefore should be able to rely on the conclusion of the contract.47 Still, the offeror is protected too,48 as he can prevent contract conclusion, by informing the acceptor that he considers the acceptance lapsed by means of an oral or written notice to that effect.49 12 In light of this, the importance of an exact distinction between Art. 21(1) and 21(2) is evident. As a further example, while pursuant to para. 1 a contract is not concluded when the offeror does not react at all, a contract is concluded pursuant to para. 2 when the offeror does not react.50 Additionally, para. 2 provides for an exception to the general rule set forth in para. 1 only with respect to acceptances contained in a letter or other writing.51 Para. 2 is not otherwise applicable.52 13 Art. 21(2) requires that an acceptance would have reached the offeror in time – i. e., within the time stated in Art. 18(2) – if its transmission had been normal.53 Logically, this presupposes that the acceptance was dispatched before the time for acceptance has lapsed. Unlike para. 2., para. 1 of Art. 21 does not require this, which is why it also applies in cases where the acceptance has been dispatched after the time for acceptance has lapsed. 14 It also follows that the lateness must be caused by the abnormal transmission. The circumstances that may adversely affect transmission can relate to the transmission of a specific acceptance, such as a specific acceptance being misrouted at a post office,54 or may affect the transmission on a more general level, such as a general strike,55 inclement weather, blockage of a street, etc.56 46 Audit, Vente Internationale (1990), p. 66; Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 21 para. 3; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 199; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 21 para. 16. 47 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 153; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 610. 48 Audit, Vente Internationale (1990), p. 66; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage derRechtsordnungen Englands und Deutschlands (1994) p. 344; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11(35); Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 21 para. 16. 49 For a reference to the rationale behind Art. 21(2), see Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 21 para. 16. 50 Compare Audit, Vente Internationale (1990), p. 67; Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 35; Ferrari/Torsello, International Sales Law – CISG (2015) p. 150; Lipari, Nuove leggi civ. comm. (1989) 98 (100 and 102); Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 343; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 21 CISG para. 18; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11 (35); Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 599. 51 See Perales Viscasillas, La Formacio ´ n del contrato de compraventa internacional de mercaderı´as (1996) p. 599; Rudolph, Kommentar (1996), Art. 21 para. 1; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 21 para. 2; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 21 para. 16. 52 In accord Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 25. 53 Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu ¨ rgerlichen Gesetzbuch (2012), Art. 21 para. 3; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 199. 54 Piltz, Internationales Kaufrecht (2008), para. 3-116; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 21 para. 17; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 24. 55 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 21 CISG para. 20. 56 Ferrari/Torsello, International Sales Law – CISG (2015) p. 150; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 21 para. 17; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 21 para. 17.

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Article 21

Art. 21(2) is not applicable where lateness is due to reasons other than delays in 15 transmission, such as use of an incorrect address.57 In this author’s opinion,58 a transmission is not “normal” either if the acceptor uses 16 means of communication that are inappropriate in the circumstances, with regard to the trade concerned, the internationality of the relationship, etc.59 Art. 21(2) also presupposes that the writing containing the acceptance shows that the 17 acceptance would have reached the offeror on time if transmission had been normal.60 The issue of what elements have to be taken into account to determine this is controversial. Some commentators hold that subjective elements, such as comments made by the acceptor, also have to be taken into account.61 In this author’s opinion, this view cannot be shared.62 The wording of the provision clearly indicates that the writing has to “show […] that it has been sent in such circumstances” such that if its transmission had been normal, it would have reached the offeror in due time, thus making it clear that only objective63 elements, i. e., elements over which the acceptor has no control,64 are relevant in determining whether the transmission would have reached the offeror in due time. If the writing does not show that the lateness is due to a delay in transmission, Art. 21(1) applies.65 b) Effects of the offeror’s protest. If the aforementioned requirements are met (i. e., 18 if the lateness is caused by a delay in the transmission and this can be derived from the writing containing the acceptance), a contract is concluded66 at the time when the late acceptance reaches the offeror.67 If the offeror wants to avoid the conclusion of the contract, the offeror must protest “without delay.”68 It is worth pointing out that the offeror will not necessarily protest; there are instances in which the offeror may have an 57 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 21 para. 3; Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 20; Ferrari/Torsello, International Sales Law – CISG (2015) p. 150–151; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (88); Gruber, in: Mu¨nchKommBGB (2016), Art. 21 para. 17; Magnus, in: Staudinger Kommentar (2013), Art. 21 para. 14; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 21 CISG para. 20; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 343; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 21 para. 17. 58 See Ferrari, in: Mu ¨ nchKommHGB (2013), Art. 21 para. 16. 59 See also Perales Viscasillas, La Formacio ´ n del contrato de compraventa internacional de mercaderı´as (1996) p. 613; contra, see Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 21 para. 19; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 21 para. 19. 60 Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (88); Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 21 para. 18. 61 Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 199; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 21 para. 18. 62 Herber/Czerwenka, Kommentar (1991), Art. 19 para. 7; Reinhart, Kommentar (1991), Art. 21 para. 5. 63 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 21 para. 18; Neumayer/Ming, Convention de Vienne (1993), Art. 21 para. 3; Reinhart, Kommentar (1991), Art. 21 para. 5. 64 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 26; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 345. 65 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 155; Lipari, Nuove leggi civ. comm. (1989) 98 (103); Piltz, Internationales Kaufrecht (1993) § 3 para. 104; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 21 para. 18; Magnus, in: Staudinger Kommentar (2013), Art. 21 para. 16. 66 Heuze ´, Vente Internationale (2005), para. 192. 67 Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 112; Ferrari/Torsello, International Sales Law – CISG (2015) p. 151; Rudolph, Kommentar (1996), Art. 21 para. 8. 68 Audit, Vente Internationale (1990), p. 67; Lipari, Nuove leggi civ. comm. (1989) 98 (102); Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 21 para. 20.

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Article 21 19–21

Part II. Formation of the Contract

interest in the contract being concluded – for instance, where there has been a change in the economic conditions that favours the offeror.69 The acceptor is, thus, exposed to the will of the offeror, who alone can decide the fate of the contract70 because the acceptor cannot do anything to make the acceptance ineffective once it reached the offeror71 – not even in the time between the date on which the acceptance reached the offeror and the time of dispatch of the protest on the part of the offeror.72 19 For the protest of the offeror – which can be made both orally or in writing73 – to prevent the contract from being concluded, it is not necessary that it reaches the acceptor;74 its dispatch is sufficient,75 from which one can easily derive the impossibility of a withdrawal of the protest.76 From this one can also derive that it is the acceptor who bears the risk of loss of the protest.77 20 A statement dispatched before the late acceptance reaches the offeror amounts to a protest in the sense of Art. 21(2) and prevents the contract from being concluded only where it is sent after the time for acceptance has already lapsed.78

3. Opportunity for speculation 21

From the above it clearly follows that it is the offeror, and the offeror alone, who controls the fate of the contract where the acceptance has not reached the offeror, or where the act indicating assent has not been performed in due time. According to the 69 For a reference to the possibility on the part of the offeror to speculate at the cost of the offeree, see Ferrari, in: Mu¨nchKommHGB (2013), Art. 21 para. 21. 70 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 21 CISG para. 5. 71 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 38. 72 Contra Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 21 para. 3.3; Herber/Czerwenka, Kommentar (1991), Art. 19 para. 9; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11 (33). 73 Neumayer/Ming, Convention de Vienne (1993), Art. 21 para. 3; Piltz, Internationales Kaufrecht (1993) § 3 para. 103; Rudolph, Kommentar (1996), Art. 21 para. 8; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 21 para. 20. 74 Ferrari/Torsello, International Sales Law – CISG (2015) p. 151; Perales Viscasillas, La Formacio ´ n del contrato de compraventa internacional de mercaderı´as (1996) p. 613; Rudolph, Kommentar (1996), Art. 21 para. 3. 75 Achilles, Kommentar (2000), Art. 21 para. 5; Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 21 para. 3; Diez-Picazo, Ann. der. civ. (1995) 31; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto, (2006) p. 156; Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 43 (54); Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) pp. 344 and 404; Gruber, in: Mu¨nchKommBGB (2016), Art. 21 para. 19; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11 (33 et seq.); Noussias, Die Zugangsbedu¨rftigkeit von Mitteilungen nach den Einheitlichen Haager Kaufgesetzen und nach dem UN-Kaufgesetz (1983) pp. 120 et seq.; Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 613; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 21 para. 20; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) para. 191; Witz/Salger/Lorenz, Kommentar (2016), Art. 21 para. 11; contra Neumayer/Ming, Convention de Vienne (1993), Art. 21 para. 4; Ng’ong’ola, The Vienna Sales Convention of 1980 in the Southern Africa Legal Environment: Formation of a Contract of Sale, 4 African Journal of International and Comparative Law (1992) 835 (852). 76 Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 31; contra Gruber, in: Mu ¨ nchKommBGB (2016), Art. 21 para. 21. 77 Ferrari/Torsello, International Sales Law – CISG (2015) p. 151; Piltz, Internationales Kaufrecht (1993) § 3 para. 103; Reinhart, Kommentar (1991), Art. 21 para. 6. 78 In accord Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 29; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 21 para. 22; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 21 para. 21; contra Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 32.

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21

prevailing view, this allows the offeror to speculate at the acceptor’s cost,79 as in a case where there has been a lengthy delay in the transmission of the acceptance and during that delay economic conditions have changed.80 To counter the offeror’s potential for speculation, some commentators suggest that an approval under Art. 21(1) or a protest under Art. 21(2) should be considered ineffective where there has been an essential delay.81 Other commentators suggest that “considerably delayed declarations of acceptance contain an inherent limitation on the period of their validity and that they lapse after the expiry of that period.”82 Despite the differences between the theories, more often than not they get to the same result which, in this author’s view, is certainly justified – at least where the case falls under the sphere of application of Art. 21(2).

4. Burden of proof Since Art. 21 provides for an exception to the general rule set forth in Art. 18, pursuant 22 to which a late acceptance does not lead to the conclusion of the contract, the allocation of the burden of proof under Art. 21 is reversed compared to the allocation of the burden of proof under Art. 18.83 The party invoking the contract conclusion under Art. 21(1)84 bears the burden of proving that the offeror has, without delay, informed the acceptor that he considers the late acceptance to be nevertheless effective, or has dispatched a notice to that effect.85 To the extent that Art. 21(2) applies, the party invoking the conclusion of a contract must prove, on the one hand, that the writing containing the acceptance shows that the lateness is exclusively caused by problems in its transmission.86 79 See Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 112; Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 21 para. 3.3; Brunner/Pfisterer/Ko¨ster, Kommentar (2014), Art. 21 para. 3; Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 39; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 341; Magnus, in: Staudinger Kommentar (2013), Art. 21 para. 19; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/ Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (88); Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11 (35 et seq.); Perales Viscasillas, La Formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 618 et seq.; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 21 paras 4 and 23; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 39; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) para. 1165. 80 Audit, Vente Internationale (1990), p. 67. 81 Compare Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 21 para. 3.4; Herber/Czerwenka, Kommentar (1991), Art. 19 para. 8; Honnold/Flechtner, Uniform Law (2009), para. 175; Gruber, in: Mu¨nchKommBGB (2016), Art. 21 para. 20; Magnus, in: Staudinger Kommentar (2013), Art. 21 para. 19. 82 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 21 para. 23; see also Brunner/ Pfisterer/Ko¨ster, Kommentar (2014), Art. 21 para. 3. 83 See Henninger, Die Frage der Beweislast im Rahmen des UN-Kaufrechts (1995) p. 211. 84 See also Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 21 para. 24. 85 Achilles, Kommentar (2000), Art. 21 para. 7; Ferrari, Vendita internazionale di beni mobili. Artt. 14– 24. Formazione del contratto (2006) p. 159; Henninger, Die Frage der Beweislast im Rahmen des UNKaufrechts (1995) p. 211; Gruber, in: Mu¨nchKommBGB (2016), Art. 21 para. 24; contra Magnus, in: Staudinger Kommentar (2013), Art. 21 para. 20, stating that it is up to the offeror to prove dispatch of a notice pursuant to which the late acceptance is effective; in accord Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 21 para. 4. 86 Dornis, in: Honsell, Kommentar (2010), Art. 21 para. 39; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 159; Gruber, in: Mu¨nchKommBGB (2016), Art. 21 para. 24; Hepting/Mu¨ller, in Baumga¨rtel/Laumen (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 21 CISG paras. 3 et seq.; Jung, Die Beweislastverteilung im UN-Kaufrecht (1996) pp. 124 et seq.; Magnus, in: Staudinger Kommentar (2013), Art. 21 para. 19; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 21 CISG paras 24 et seq.; contra, at least partially, Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 21 para. 41.

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Article 21 23–25

Part II. Formation of the Contract

III. Comparable Rules Late acceptance is an issue also dealt with in the PICC, more specifically, in Art. 2.1.9. Although at first sight it may look like Art. 21 CISG and Art. 2.1.9 PICC lead to the same result, as the wording is very similar, there are various differences. While both provisions allow for a late acceptance to nevertheless be effective as an acceptance if the acceptor is notified to that effect, the requirements for a late acceptance to be effective pursuant to Art. 21(1) CISG and Art. 2.1.9 PICC are different. In effect, while Art. 21(1) CISG requires that notice be given “without delay”, Art. 2.1.9 PICC “merely” requires that notice be given “without undue delay”, thus allowing for consideration of the circumstances of the case and, thus, for more flexibility. Also, while under Art. 21(1) CISG it is sufficient for the (written) notice to be dispatched for the effects of the notice to be produced,87 the same is not true under the PICC. In effect, the CISG solution “is not applicable to the differently worded Art 2.1.9(1) [PICC]. There is no distinction between oral and written notifications as Art. 1.10 applies to all forms and means of communication. Although the notice must be dispatched “without undue delay”, it will only become effective and trigger the contract’s formation retroactively when it reaches the offeror (Art. 1.10(2)).”88 24 Similarly, for a notice of protest under Art. 21(2) CISG to produce its effects, it is sufficient for it to be dispatched,89 while under the PICC it is, once again, required that the notice reaches its addressee, i. e., the acceptor. 25 As regards the DCFR, its solution (to be found in Art. II-4:207) seems to be modelled more after the PICC provision referred to above than Art. 21 CISG, as it also requires that the notice reach the acceptor (pursuant to Art. I-1:109(3) DCFR) and be made “without undue delay”. In this respect, the DCFR also differs from the PECL, as Art. 2:207 PECL requires that notice occur “without delay”. 23

87

See the text accompanying notes 25 et seq. Kleinheisterkamp, in: Vogenauer/Kleinheitserkamp (eds), Commentary on the Unidroit Principles (2009), Art. 2.1.9. para. 7. 89 See the text accompanying note 71. 88

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Article 22 An acceptance may be withdrawn if the withdrawal reaches the offeror before or at the same time as the acceptance would have become effective. Bibliography: Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006); Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994); Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11.

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1. Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2. Effects of a withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

I. Importance and Role of the Provision This (non-mandatory)1 provision, which can be traced back to Art. 10 ULF,2 states 1 that the acceptor may change his mind after accepting the offer and prevent the acceptance from becoming effective. This possibility constitutes the counterpart to the offeror’s ability to withdraw the offer, provided for in Art. 15;3 pursuant to that provision, the offeror may withdraw an offer even if it is irrevocable. For the withdrawal of both the offer and the acceptance to be effective, it is required that the withdrawal reaches its addressee before or (at the latest) at the same time as the declaration to which it is related.4 For the effectiveness of the withdrawal it is irrelevant whether its addressee gains knowledge of it before gaining knowledge of the acceptance.5 1 Dornis, in: Honsell, Kommentar (2010), Art. 22 para. 20; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 160; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 22 para. 25. 2 Lu ¨ deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 22 para. 1; Magnus, in: Staudinger Kommentar (2013), Art. 22 para. 2; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 22 para. 1; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 22 para. 1. 3 See Achilles, Kommentar (2000), Art. 22 para. 1; Brunner/Pfisterer/Ko ¨ster, Kommentar (2014), Art. 22 para. 1; Dornis, in: Honsell, Kommentar (2010), Art. 22 para. 1; Loewe, Internationales Kaufrecht (1989) p. 46; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 345; Gruber, in: Mu¨nchKommBGB (2016), Art. 22 para. 1; Neumayer/Ming, Convention de Vienne (1993), Art. 22 para. 1; J. Pierre/V. Pierre, A Comparison of the Rules on Formation of Sales Contracts Under the Louisiana Civil Code and the United Nations Convention on Contracts for the International Sale of Goods: What Buyers and Sellers Should Know, 20 Southern University Law Review (1993) 189 (194); Magnus, in: Staudinger Kommentar (2013), Art. 22 para. 4; Witz/Salger/Lorenz, Kommentar (2016), Art. 22 para. 1. 4 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 22 para. 1; Dornis, in: Honsell, Kommentar (2010), Art. 22 para. 1; Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11 (28); Witz/Salger/Lorenz, Kommentar (2016), Art. 22 para. 5. 5 Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 22 para. 2.

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Article 22 2–5 2

Part II. Formation of the Contract

But while an offer can generally be revoked,6 an acceptance is irrevocable7 because once it becomes effective – generally when it reaches the offeror – the contract is concluded pursuant to Art. 23.8 Only where the acceptor’s right to revoke the acceptance is provided for in the acceptance can the conclusion of the contract be avoided after the acceptance has reached the offeror.9

II. Detailed Commentary 1. Withdrawal Not unlike the withdrawal of an offer,10 the withdrawal of an acceptance constitutes a declaration of intent aimed at preventing the acceptance in itinere from becoming effective. For the withdrawal to become effective, it must reach the offeror.11 The withdrawal can relate to the acceptance as a whole or only to parts of it.12 Whether an acceptance in respect of which a partial withdrawal has been made constitutes an acceptance depends on Art. 19.13 If the withdrawal is solely aimed at preventing the additional or different terms of the acceptance vis-a`-vis the offer from becoming effective, the partially modified acceptance will certainly lead to the conclusion of the contract when it reaches the offeror.14 4 Whether a statement by the acceptor constitutes a withdrawal must be decided on the basis of the interpretive criteria set forth in Art. 8;15 the interpreter may well determine that the acceptor merely wanted to clarify certain points.16 5 The validity requirements of withdrawal are not governed by the CISG,17 except for those relating to its formal validity – which is why one must have recourse to the applicable domestic law to settle, for instance, the issues of legal capacity, fraud, duress, mistake or the power of representation.18 Subject to Art. 12, a withdrawal can take 3

6

See Art. 16. See Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 22 para. 2.2; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 22 para. 22; Gruber, in: Mu¨nchKommBGB (2016), Art. 22 para. 2; Rudolph, Kommentar (1996), Art. 22 para. 2; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 22 para. 4; vgl. aber Musumeci, Nuove leggi civ. comm. (1989) 104 (104). 8 Dornis, in: Honsell, Kommentar (2010), Art. 22 para. 18; Lu ¨ deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 22 para. 1; see also Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) pp. 160 et seq. 9 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 22 para. 23; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 22 para. 9; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 22 para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 22 paras 1 and 5. 10 See Ferrari, in: Mu ¨ nchKommHGB (2013), Art. 15 para. 8. 11 Dornis, in: Honsell, Kommentar (2010), Art. 22 para. 6; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 22 CISG para. 4; Reinhart, Kommentar (1991), Art. 22 para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 22 para. 6. 12 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 161; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 22 para. 6. 13 Dornis, in: Honsell, Kommentar (2010), Art. 22 para. 8. 14 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 22 para 5; Schlechtriem/Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 22 para. 5. 15 Dornis, in: Honsell, Kommentar (2010), Art. 22 para. 7; Magnus, in: Staudinger Kommentar (2013), Art. 22 para. 4; Neumayer/Ming, Convention de Vienne (1993), Art. 22 para. 2. 16 In accord Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 22 para. 7. 17 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 22 para. 11; Schroeter, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 22 para. 4. 18 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 22 para. 4; Schlechtriem/Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 22 para. 4. 7

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Part II. Formation of the Contract

6–7

Article 22

any form.19 In particular, the acceptor is not obliged to use the form taken by the acceptance,20 nor must the same means of dispatch be used.21 Also, for a declaration to constitute a withdrawal, it is not necessary that certain formulations or words (such as the “withdrawal”) be used.22 Since a withdrawal becomes effective only upon its receipt by the offeror,23 which 6 means that a withdrawal of a withdrawal is possible,24 its dispatch is insufficient to prevent contract conclusion.25 It is necessary that the withdrawal reaches the offeror.26 If the acceptance and the withdrawal reach the offeror at the same time, the withdrawal has priority;27 as mentioned, the fact that the offeror gains knowledge of the acceptance prior to gaining knowledge of the withdrawal is irrelevant.28 Therefore, it follows that the indication of assent by performing an act, as referred to 7 in Art. 18(3), cannot be withdrawn.29 Where an acceptance is made orally, it becomes effective as soon as it is made, which is why withdrawal is not possible,30 at least if one defines “withdrawal” of an acceptance as a statement referring to an acceptance that is still in itinere.31 19 Dornis, in: Honsell, Kommentar (2010), Art. 22 para. 9; Saenger, in: Bamberger/Roth, Kommentar zum Bu¨rgerlichen Gesetzbuch (2007), Art. 22 para. 1. 20 Magnus, in: Staudinger Kommentar (2013), Art. 22 para. 8; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 22 CISG para. 4; Witz/Salger/Lorenz, Kommentar (2016), Art. 22 para. 6. 21 Dornis, in: Honsell, Kommentar (2010), Art. 22 para. 10; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 22 para. 9; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 22 para. 4. 22 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 22 para. 8. 23 See also Denkschrift der Deutschen Bundesregierung zum U ¨ bereinkommen der Vereinten Nationen (1980) p. 45. 24 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 22 CISG para. 11. 25 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 22 CISG para. 4. 26 Dornis, in: Honsell, Kommentar (2010), Art. 22 para. 12; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997) p. 71 (85); Neumayer/ Ming, Convention de Vienne (1993), Art. 22 para. 1. 27 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 22 para. 3; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 22 para. 3. 28 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 22 CISG para. 6; Schnyder/ Straub, in: Honsell, Kommentar (1997), Art. 22 para. 12. 29 Achilles, Kommentar (2000), Art. 22 para. 1; Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 113; Brunner/Pfisterer/Ko¨ster, Kommentar (2014), Art. 22 para. 1; Dornis, in: Honsell, Kommentar (2010), Art. 22 para. 4; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 163; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 22 CISG para. 8; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 22 para. 14; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 246; Gruber, in: Mu¨nchKommBGB (2016), Art. 22 para. 4; Neumayer/Ming, Convention de Vienne (1993), Art. 22 para. 1; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 22 para. 3; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 22 para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 22 para. 10; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 22 para. 3; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) para. 1070; Witz/Salger/Lorenz, Kommentar (2016), Art. 22 para. 3. 30 Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 200; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 22 CISG para. 10; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 22 para. 13; Gruber, in: Mu¨nchKommBGB (2016), Art. 22 para. 4; Reinhart, Kommentar (1991), Art. 22 para. 3; Witz/Salger/Lorenz, Kommentar (2016), Art. 22 para. 3. 31 Excluding the withdrawal of an oral acceptance, see also Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 200; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 22 para. 13; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 346; contra Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 22 para. 3; Magnus, in: Staudinger Kommentar (2013), Art. 22 para. 11.

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Article 22 8–9

Part II. Formation of the Contract

2. Effects of a withdrawal A withdrawal prevents the acceptance from becoming effective and, consequently, the contract from being concluded.32 In this respect it does not matter whether the acceptance to be withdrawn is a timely acceptance or a late acceptance governed by Art. 21;33 the withdrawal of a late acceptance is also possible only up to the moment the late acceptance reaches the offeror.34 Since a withdrawal becomes effective only once it reaches the offeror, a withdrawal of a withdrawal has to be possible; on the other hand, the revocation of a withdrawal is not possible.35 9 The acceptor’s option of withdrawing an acceptance is the counterpart of the offeror’s option to withdraw an offer – provided for in Art. 15.36 Nevertheless, some commentators have criticized the acceptor’s possibility of withdrawing an acceptance; they argue that since the offeror may no longer revoke his offer after the acceptance has been dispatched (Art. 16(1)), the rule in Art. 22 allows the acceptor to speculate37 at the offeror’s cost.38 It is true that the acceptor can choose a slow means of communication for transmitting the acceptance and thus cut off the offeror’s possibility to revoke the offer while maintaining the option to withdraw the acceptance by using a quicker means of communication to react to market changes.39 This does not mean, however, that a withdrawal made to take advantage of market changes must necessarily be considered ineffective for violating the principle of good faith.40 In this author’s opinion, further elements must exist for a withdrawal made between the time 8

32

Dornis, in: Honsell, Kommentar (2010), Art. 22 para. 15. Herber/Czerwenka, Kommentar (1991), Art. 19 para. 2; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 22 CISG para. 7; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 22 para. 17; Neumayer/Ming, Convention de Vienne (1993), Art. 22 para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 22 para. 9. 34 Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha ¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 342; Gruber, in: Mu¨nchKommBGB (2016), Art. 22 para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 22 para. 9; contra Honnold/Flechtner, Uniform Law (2009), para. 174, and Neumayer/Ming, Convention de Vienne (1993), Art. 22 para. 2. 35 Dornis, in: Honsell, Kommentar (2010), Art. 22 paras. 2 and 16; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 164; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 22 paras 20 et seq.; Gruber, in: Mu¨nchKommBGB (2016), Art. 22 para. 5. 36 See Ferrari, in: Mu ¨ nchKommHGB (2013), Art. 22 para. 1. 37 Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 113; Farnsworth, in: Bianca/ Bonell, Commentary (1987), Art. 22 para. 3.1; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 345; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (85); Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11 (29); Neumayer/Ming, Convention de Vienne (1993), Art. 22 para. 1; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 22 para. 6; for critical comments, see Murray, An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods, 8 Journal of Law and Commerce (1998) 11 (28 et seq.). 38 See for a partially different argument Witz/Salger/Lorenz, Kommentar (2016), Art. 22 para. 2. 39 Herber/Czerwenka, Kommentar (1991), Art. 19 para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 22 para. 12. 40 This view is, however, held for instance by Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 22 para. 3.1; Brunner/Pfisterer/Ko¨ster, Kommentar (2014), Art. 22 para. 3; Herber/Czerwenka, Kommentar (1991), Art. 19 para. 2; Kritzer S. 191 f.; Magnus, in: Staudinger Kommentar (2013), Art. 22 para. 12; Rudolph, Kommentar (1996), Art. 22 para. 3. 33

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Part II. Formation of the Contract

10–11

Article 22

of dispatch of the acceptance and its receipt by the offeror, with the goal of taking advantage of a change in the market situation, to be ineffective.41 The party arguing that the contract is not concluded bears the burden of proving that 10 an effective withdrawal has been made.42

III. Comparable Rules Art. 2.1.20 PICC corresponds – word for word – to Art. 22 CISG, which is why there 11 is no need to comment on it. The DCFR, however, does not contain a provision that expressly allows for the withdrawal of an offer. One may, however, invoke Art. I1:109(5) DCFR – which is based upon Art. 1:303(5) PECL – to derive the acceptor’s right to withdraw the acceptance. This is despite the fact that Art. I-1:109(5) DCFR refers to the right to “revoke” rather than that to “withdraw”.43 This is simply due to the imprecise language used by the drafters of the DCFR. From the provision de quo, it clearly results that what is meant is not the right to revoke. 41 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 165; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 22 para. 1; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 22 para. 7. 42 Dornis, in: Honsell, Kommentar (2010), Art. 22 para. 21; Jung, Die Beweislastverteilung im UNKaufrecht (1996) p. 126; Gruber, in: Mu¨nchKommBGB (2016), Art. 22 para. 10; Reimers-Zocher, Beweislastfragen im Haager und Wiener Kaufrecht (1995) p. 195; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 22 para. 1; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 22 para. 4; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 22 para. 24. 43 This is even more surprising, as the provision upon which Art. I-1:109(5) DCFR is based, namely Art. 1:303(5) PECL, expressly refers to “withdrawal”.

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Article 23 A contract is concluded at the moment when an acceptance of an offer becomes effective in accordance with the provisions of this Convention. Bibliography: Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006); Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994).

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Time of contract conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Place of contract conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 2 2 6 7

I. Importance and Role of the Provision 1

This (non-mandatory)1 provision, which does not have a predecessor in the ULF,2 establishes that a contract is concluded when the acceptance becomes effective.3 This provision is somewhat superfluous,4 since Art. 18 already sets forth the rule pursuant to which a contract is concluded at the time when the acceptance becomes effective,5 i. e., when the indication of assent reaches the offeror6 or when the performance of an act 1 Bernardi, Nuove leggi civ. comm. (1989) 106 (107); Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 166; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 23 CISG para. 8; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 23 para. 10; Karollus, UN-Kaufrecht (1989) p. 76; Gruber, in: Mu¨nchKommBGB (2016), Art. 23 para. 4; Rudolph, Kommentar (1996), Art. 23 para. 3; Magnus, in: Staudinger Kommentar (2013), Art. 23 para. 4. 2 Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 202; Magnus, in: Staudinger Kommentar (2013), Art. 23 para. 2; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 23 para. 1; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 23 CISG para. 2; Witz/Salger/Lorenz, Kommentar (2016), Art. 23 para. 2. 3 In case law see Canadian International Trade Tribunal (Canada), Cherry Stix Ltd. v President of the Canada Borders Services Agency, 6 October 2005, CISG-Online 1140; Hof Gent (Belgium) 8 November 2004, CISG-Online 982; US Circuit Court of Appeals, 9th Circuit (U.S.), Chateau des Charmes Wines Ltd. v Sabate´ USA, Sabate´ S. A., 5 May 2003, CISG-Online 767; Arbitral Award, ICC 10 329/2000, Yearbook Comm. Arb. (2004) 108 et seq.; Rechtbank Rotterdam (Netherlands) 14 October 1999, CISGOnline 1312. 4 For a similar assessment, see Dornis, in: Honsell, Kommentar (2010), Art. 23 para. 1: “no independent meaning”; Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 23 para. 2.1: “scarcely necessary”; Brunner/Pfisterer/Ko¨ster, Kommentar (2014), Art. 23 para. 1: “no additional value”; Herber/Czerwenka, Kommentar (1991), Art. 23 para. 2: “superfluous”; Rudolph, Kommentar (1996), Art. 23 para. 1: “this provisions is superfluous”; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 23 para. 1: “no autonomous meaning”; Schlechtriem/Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 23 para. 1: “Art. 23 provides the obvious”; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 23 para. 1: “Article is self-evident”; see, however, Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 23 CISG para. 1. 5 Ferrari/Torsello, International Sales Law – CISG (2015) p. 155; Garro/Zuppi, Compraventa internacional de mercaderı´as (2012), p. 134; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 23 para. 1. 6 Compare Rechtbank Koophandel Oudenaarde (Belgium) 10 July 2001, CISG-Online 1785.

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amounting to acceptance takes place.7 Thus, in principle,8 one must resort to9 that rule when, in the CISG, reference is made to the moment at which the contract is concluded.10 Where domestic law (such as domestic tax, accounting, or bankruptcy law) refers to the moment of contract conclusion, one must interpret domestic law to determine if recourse is to be had to that moment (as defined by the CISG) or rather to one to be determined on the basis of domestic law.11

II. Detailed Commentary 1. Time of contract conclusion With respect to the moment of contract conclusion, the drafters of the CISG have 2 favoured the so-called “receipt-theory”12 over other theories that determine that the contract is concluded at a different point in time, such as the “theory of declaration”, the “mail-box-rule” and the theory on the basis of which the contract is concluded upon the offeror gaining knowledge of the acceptance.13 This does not mean that a contract cannot be concluded at a different point in time. This may be the case when the parties agree to degorate from the “receipt-theory”, or when a contract is not concluded by means of the “traditional” approach, through offer and acceptance,14 because in these cases Art. 23 is not applicable.15 In such cases a contract is considered concluded when 7 See also Bernardi, Nuove leggi civ. comm. (1989) 106 (107); Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 23 para. 1; Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) p. 87; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 23 para. 1; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 23 para. 1; Magnus, in: Staudinger Kommentar (2013), Art. 23 para. 1; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 23 para. 1. 8 But see Art. 18(3); compare Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 348. 9 Compare, e. g., Art. 1(2); Art. 9(2); Art. 10(a); Art. 33(c); Art. 35(2)(b); Art. 35(3); Art. 42(1); Art. 42(2)(a); Art. 55; Art. 57(2); Art. 68; Art. 71(1); Art. 73(3); Art. 74; Art. 79(1); Art. 100(2). 10 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 23 CISG para. 5; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 224. 11 Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 202; Honnold/Flechtner, Uniform Law (2009), para. 178; Neumayer/Ming, Convention de Vienne (1993), Art. 23 para. 1; Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2005), Art. 23 para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 23 para. 6; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 23 para. 2; Witz/ Salger/Lorenz, Kommentar (2016), Art. 23 para. 3; contra Bernardi, Nuove leggi civ. comm. (1989) 106 (107). 12 See also Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 91; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 168; Ferrari/Torsello, International Sales Law – CISG (2015) p. 155; Leete, Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary, 6 Temple International and Comparative Law Journal (1992) 193 (207). 13 For comparative remarks, see Ferrari, Offer and Acceptance Inter Absentes, in: Smits (ed), Elgar Encyclopedia of Comparative Law (2006), pp. 497 et seq.; Ferrari, A Comparative Overview of Offer and Acceptance Inter Absentes, 10 Boston University International Law Journal (1992) 171 et seq.; Ferrari, Formation of Contracts in South American Legal Systems, 16 Loyola Los Angeles International and Comparative Law Journal (1994) 629 et seq. 14 See also Dornis, in: Honsell, Kommentar (2010), Art. 23 para. 2; Herber/Czerwenka, Kommentar (1991), Art. 23 para. 2; for the admissibility of different modes of contract conclusion under the CISG, see Oberlandesgericht Mu¨nchen (Germany) 8 March 1995, CISG-Online 145. 15 Ferrari/Torsello, International Sales Law – CISG (2015) p. 155–156; Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2005), Art. 23 para. 6; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 23 para. 3.

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the parties have reached an agreement; to determine when this is the case, resort is to be had to the rules of interpretation set forth in Art. 8.16 3 Where the contract is concluded subject to a condition precedent, the contract is not concluded upon receipt of the acceptance by the offeror, but rather at the moment in time agreed upon by the parties,17 which is to be determined by resort to the rules of interpretation set forth in Art. 8.18 In general, this will be the moment in time at which the condition is met.19 4 The issue of when a contract is concluded that by law requires for its effectiveness the consent of a third party, such as a governmental entity or body, must be settled on the basis of the applicable domestic law,20 because this issue falls outside the CISG’s scope of application.21 Where, however, it is the parties who have agreed that the effectiveness of the contract depends on the assent of a third party, the moment at which the contract is concluded depends on an interpretation of the parties’ agreement pursuant to Art. 8.22 5 The party relying upon the contract conclusion or upon the contract conclusion having occurred at a given point in time must prove all relevant facts.23

2. Place of contract conclusion 6

Art. 23 does not determine the place where the contract is concluded.24 Proposals to that effect made during the drafting process25 were rejected as were the proposals made 16 See Ferrari/Torsello, International Sales Law – CISG (2015) p. 156; Magnus, in: Staudinger Kommentar (2013), Art. 23 para. 5; Brunner/Pfisterer/Ko¨ster, Kommentar (2014), Art. 23 para. 2 note 758; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 202; Gruber, in: Mu¨nchKommBGB (2016), Art. 23 para. 3; Rudolph, Kommentar (1996), Art. 23 para. 2. 17 Ferrari/Torsello, International Sales Law – CISG (2015) p. 156; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 23 CISG para. 9; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 23 para. 3. 18 In accord Dornis, in: Honsell, Kommentar (2010), Art. 23 para. 2; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 169; Gruber, in: Mu¨nchKommBGB (2016), Art. 23 para. 4; Magnus, in: Staudinger Kommentar (2013), Art. 23 para. 4. 19 Ferrari/Torsello, International Sales Law – CISG (2015) p. 156; contra Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 23 para. 5, and Rudolph, Kommentar (1996), Art. 23 para. 4, who prefer to search for a solution in the applicable domestic law. 20 Dornis, in: Honsell, Kommentar (2010), Art. 23 para. 4. 21 See also Gruber, in: Mu ¨ nchKommBGB (2016), Art. 23 para. 5; Magnus, in: Staudinger Kommentar (2013), Art. 23 para. 7; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 23 CISG para. 6; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 23 para. 4. 22 For a similar statement, see Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 23 para. 4: “that reservation must be interpreted in order to establish whether consent is to take effect retroactively or only when given.” 23 Dornis, in: Honsell, Kommentar (2010), Art. 23 para. 7; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 170; Ferrari/Torsello, International Sales Law – CISG (2015) p. 156; Hepting/Mu¨ller, in: Baumga¨rtel/Laumen (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 23 CISG; in case law, see Landgericht Frankfurt (Germany) 6 July 1994, CISG-Online 257. 24 Official Records (1981), p. 26; Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 115; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 203; Dornis, in: Honsell, Kommentar (2010), Art. 23 para. 5; Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 23 para. 3.3; Ferrari/Torsello, International Sales Law – CISG (2015) p. 156–157; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 347; Neumayer/Ming, Convention de Vienne (1993), Art. 23 para. 1; Rudolph, Kommentar (1996), Art. 23 para. 5; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 23 para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 23 para. 8. 25 Compare UNCITRAL YB (1997), p. 81.

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Article 23

during the Vienna Conference.26 In this author’s opinion,27 one therefore has to resort to the applicable domestic law to determine the place of conclusion of the contract.28

III. Comparable Rules The results reached by means of the rule set forth in Art. 23 CISG are the same as 7 those that are reached under the PICC, the DCFR and the PECL, even though these instruments do not contain a provision mirroring Art. 23 CISG, which is unsurprising, given that Art. 23 CISG is basically superfluous. Rather, the results are to be reached on the basis of those provisions that constitute the counterparts to Art. 18 CISG. In this respect, it is worth mentioning that Art. 18(1) CISG, for instance, has its counterpart in Art. 2.1.6(1) PICC. Art. 18(2) CISG, however, is mirrored in Art. 2.1.6(2) PICC only in respect to that part that refers to the moment at which an acceptance becomes effective. As for the rule that addresses the issue of when an acceptance becomes effective that is indicated by performing an act that exceptionally does not require notice to the offeror (Art. 18(3) CISG), its counterpart can be found in Art. 2.1.6(3) PICC. Unsurprisingly, the latter provision does not refer to the examples of such acts (dispatch of the goods or payment of the price) found in the CISG provision, as the PICC refer to all kind of contracts, not merely those for the sale of goods. Provisions dealing – basically in the same way – with the issues addressed by Art. 18 8 CISG can also be found in the DCFR. The relevant provisions are Art. II-4:204,29 where acceptance is defined, and Art. II-4:205,30 where the issue of time of conclusion of the contract is addressed. 26

See Official Records (1981), pp. 290 et seq. See Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 170. 28 In accord Dornis, in: Honsell, Kommentar (2010), Art. 23 para. 5; Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 23 para. 3.3; Ferrari/Torsello, International Sales Law – CISG (2015) p. 157; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (95); Gruber, in: Mu¨nchKommBGB (2016), Art. 23 para. 6; Rudolph, Kommentar (1996), Art. 23 para. 5; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 23 para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 23 para. 8; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 23 para. 9; Witz/Salger/Lorenz, Kommentar (2016), Art. 23 para. 6; contra Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 23 para. 7, holding that the issue constitutes an “internal gap” that has to be filled by resorting to the general principles upon which the CISG is based; for this statement see – unsurprisingly – Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 23 para. 7; in accord Achilles, Kommentar (2000), Art. 23 para. 3; Adame Goddard, El Contrato de Compraventa Internacional (1994) p. 115; Bernardi, Nuove leggi civ. comm. (1989) 106 (108); Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 23 para. 7. 29 This provision is based on Art. 2:204 PECL. 30 This provision is based on Art. 2:205 PECL. 27

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Article 24 For the purposes of this Part of the Convention, an offer, declaration of acceptance or any other indication of intention “reaches” the addressee when it is made orally to him or delivered by any other means to him personally, to his place of business or mailing address or, if he does not have a place of business or mailing address, to his habitual residence. Bibliography: Bydlinski, Das allgemeine Vertragsrecht, in: Doralt (ed), Das UNCITRAL-Kaufrecht im ¨ bereinVergleich zum o¨sterreichischen Recht (1985), p. 57; Eo¨rsi, Formation of contract, in: Wiener U kommen von 1980 u¨ber den internationalen Warenkauf (1985), p. 43; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006); Jung, Die Beweislastverteilung im UNKaufrecht insbesondere bei Vertragsabschluß, bei Vertragsverletzungen des Ka¨ufers, bei allgemeinen Bestimmungen sowie bei gemeinsamen Bestimmungen u¨ber Verka¨ufer- und Ka¨uferpflicht (1996) pp. 80; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994); Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71; Noussias, Die Zugangsbedu¨rftigkeit von Mitteilungen nach den Einheitlichen Haager Kaufgesetzen und nach dem UN-Kaufgesetz (1983); Perales Viscasillas, Contract Conclusion under CISG, 16 Journal of Law and Commerce (1997) 315; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996); Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984).

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. “Oral” declarations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Declarations by “other means”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Preventing declarations from reaching the addressee . . . . . . . . . . . . . . . . . . . . . . 4. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 3 3 7 15 16 18

I. Importance and Role of the Provision 1

This (non-mandatory)1 provision defines when a declaration “reaches” its addressee.2 This definition applies to all declarations relevant for the conclusion of the contract3 (such as offer, revocation of the offer, withdrawal of the offer, rejection of an offer, acceptance, withdrawal of the acceptance).4 However, this rule does not apply to those declarations concerning the formation of contract which exceptionally5 become effective 1 Compare Audit, Vente Internationale (1990), p. 56; Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 43; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 171; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 24 para. 31; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 24 para. 31. 2 Achilles, Kommentar (2000), Art. 24 para. 1; Ferrari/Torsello, International Sales Law – CISG (2015) p. 157; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 24 para. 1. 3 Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 2. 4 See also Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 2; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 24 para. 1; Pace, Nuove leggi civ. comm. (1989) 109 (109); Rudolph, Kommentar (1996), Art. 24 para. 1; Witz/Salger/Lorenz, Kommentar (2016), Art. 24 para. 4; Schroeter, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 24 para. 3. 5 For a reference to the exceptions, see Achilles, Kommentar (2000), Art. 24 para. 1; Ferrari, Vendita internazionale di beni mobili. Art. 14–24. Formazione del contratto (2006) pp. 172 et seq.; Schnyder/

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at a different point in time, such as an act indicating assent, which, pursuant to Art. 18(3), becomes effective upon its performance,6 or an objection by the offeror to immaterial modifications and alterations contained in the acceptance, which, like the approval of a late acceptance,7 becomes effective upon dispatch.8 In other words, the drafters of the CISG preferred the so-called “receipt-theory”9 over other theories that determine that the contract is concluded at a different point in time, such as the “theory of declaration,” the “mail-box-rule”, and the theory on the basis of which the contract is concluded when the offeror gains knowledge of the acceptance.10 Declarations falling in the sphere of application of Part III CISG, are not generally 2 governed by the rule set forth in Art. 24 with respect to declarations relevant for the conclusion of a contract;11 rather, they are governed by the “dispatch-rule,” pursuant to which they become effective upon their dispatch.12 This, however, does not mean that Art. 24 cannot be applied by analogy13 where Part III expressly requires14 that a declaration become effective when it “reaches” its addressee.15 Similarly, Art. 24 should Straub, in: Honsell, Kommentar (1997), Art. 24 para. 6; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 24 para. 1. 6 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 24 para. 4. 7 See Art. 21. 8 Also see Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 24 para. 1; Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 2; Ferrari/Torsello, International Sales Law – CISG (2015) p. 157; Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 43 (p. 55); Magnus, in: Staudinger Kommentar (2013), Art. 24 para. 7; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) pp. 227 (et seq.); Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 para. 6. 9 Eo ¨ bereinkommen von 1980 u¨ber den internationalen Ware¨ rsi, Formation of contract, in: Wiener U nkauf (1985), p. 43 (p. 53); Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 43 (p. 55); Neumayer/Ming, Convention de Vienne (1993), Art. 24 ¨ bereinkommen von 1980 u¨ber den internationalen para. 1; Stoffel, Formation du contrat, in: Wiener U Warenkauf (1985), p. 55 (p. 59); Thieffry/Granier, La vente internationale (1985) p. 71. 10 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 para. 4; Perales Viscasillas, Contract Conclusion under CISG, 16 Journal of Law and Commerce (1997) 315 (315). 11 Ferrari/Torsello, International Sales Law – CISG (2015) p. 158. 12 Compare Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 24 para. 1; Bydlinski, Das allgemeine Vertragsrecht, in: Doralt (ed), Das UNCITRAL-Kaufrecht im Vergleich zum o¨sterreichischen Recht (1985), p. 57 (65); Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 173. 13 In accord Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 24 para. 3.1; Dı ´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), pp. 204 et seq.; Gruber, in: Mu¨nchKommBGB (2016), Art. 24 para. 2; Herber/Czerwenka, Kommentar (1991), Art. 24 para. 8; Honnold/Flechtner, Uniform Law (2009), para. 179; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 para. 7; Kritzer, Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods (1989) p. 196; Magnus, in: Staudinger Kommentar (2013), Art. 24 para. 9; Neumayer/Ming, Convention de Vienne (1993), Art. 24 para. 1; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 231; Rudolph, Kommentar (1996), Art. 24 para. 2; Saenger, in: Bamberger/ Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 24 para. 1; Witz/Salger/Lorenz, Kommentar (2016), Art. 24 para. 6. 14 See, e. g., Arts 47(2), 48(4), 63(2), 65(1), 65(2), 79(4). 15 Arguing in favour of the application by analogy of Art. 24, see Achilles, Kommentar (2000), Art. 24 para. 1; Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 24 para. 3.1; Brunner/Pfisterer/Ko¨ster, Kommentar (2014), Art. 24 para. 1; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 205; Enderlein/ Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 24 para. 1; Noussias, Die Zugangsbedu¨rftigkeit von Mitteilungen nach den Einheitlichen Haager Kaufgesetzen und nach dem UN-Kaufgesetz (1983) p. 152; Honnold/Flechtner, Uniform Law (2009), para. 179; Kritzer, Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods (1989) p. 196; Pace, Nuove leggi civ. comm. (1989) 109, 111; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 24 para. 2; Witz/Salger/Lorenz, Kommentar (2016), Art. 24 para. 6; see, however, Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 24 paras 2 and 4, for

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apply by analogy to those declarations that per agreement of the parties become effective upon receipt.16

II. Detailed Commentary 1. “Oral” declarations The provision distinguishes between declarations made orally and those made “by any other means.”17 Like the ULF (Uniform Law on the Formation of Contracts for the International Sale of Goods), the CISG does not distinguish between direct and indirect means of communication.18 However, the distinction is not irrelevant, as it may be helpful in defining what is an “oral” declaration: “the provision’s history makes it clear that ‘oral’ communication was regarded solely as one which could be understood immediately and the ‘receipt’ of which could instantly be ascertained and queried by the party who had made it.”19 This means that declarations made over the phone or via radio have to be treated as “oral” declarations,20 because they immediately reach the ear of the addressee,21 while declarations left by a person on an answering machine cannot be treated as “oral” declarations in the sense of the provision at hand.22 4 From the above it also follows that declarations made by electronic means of communication (Internet, etc.) do not constitute “oral” declarations under Art. 24,23 unless the means used allow for “a direct dialogue similar to one conducted in the presence of another person (as eg in a ‘chat forum’ over the internet)”.24 5 A declaration made orally by an intermediary with power of representation to the addressee (or to an intermediary with power of representation for said addressee) 3

contradicting remarks; whereas in para. 2 the author suggests to apply Art. 24 directly rather than by analogy to those declarations of Part III that do not become effective upon dispatch, in para. 4 he refers to the applicability by analogy; see also Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 24 para. 2, who argues that that Art. 24 embodies a general principle upon which the CISG is based (Art. 7(2)); see also Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 24 para. 3; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 24 para. 3. 16 Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 4. 17 See Audit, Vente Internationale (1990), p. 56; Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 5; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 24 para. 5; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 24 para. 4; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 para. 9. 18 Ferrari/Torsello, International Sales Law – CISG (2015) p. 158; see also, in relation to the ULIS (Uniform Law on the International Sale of Goods), von Caemmerer, Die Haager Konferenz u¨ber die internationale Vereinheitlichung des Kaufrechts vom 2. bis 25 April 1964, RabelsZ (1965) 123 et seq. 19 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 24 para. 4. 20 Compare Dı ´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 205; Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 5; Karollus, UN-Kaufrecht (1989) p. 57; Gruber, in: Mu¨nchKommBGB (2016), Art. 24 para. 4; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 24 para. 5; Piltz, Internationales Kaufrecht (1993) § 3 para. 34; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 24 para. 2; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 24 para. 5. 21 Magnus, in: Staudinger Kommentar (2013), Art. 24 para. 11. 22 Achilles, Kommentar (2000), Art. 24 para. 2; Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 5; Gruber, in: Mu¨nchKommBGB (2016), Art. 24 para. 4; Neumayer/Ming, Convention de Vienne (1993), Art. 24 para. 3; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 24 para. 2; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 para. 10; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 24 para. 5. 23 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 24 para. 4; Witz/Salger/Lorenz, Kommentar (2016), Art. 24 para. 10. 24 Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 24 para. 5.

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24

must be treated as an “oral” declaration under Art. 2425 and, therefore, “reaches” the addressee (or the addressee’s intermediary) at the moment it is made. The question of who qualifies as an intermediary with power of representation must be answered on the basis of the applicable domestic law.26 If the intermediary lacks power of representation, declarations made by or to such an intermediary must be regarded as “non-oral” declarations.27 As the possibility of interacting, which characterizes oral declarations,28 does not exist where declarations are left on an answering machine,29 these declarations become effective only when they “reach” the addressee, i. e., when they are being recorded by the machine.30 “Oral” declarations reach the addressee when they are “made.”31 Some commenta- 6 tors have interpreted the wording of this provision to mean that in order to “reach” the addressee, the addressee has to have gained knowledge of the declarations.32 This is not compelling33 because while drafting the CISG the theory pursuant to which a declaration becomes effective upon it being known by its addressee was expressly rejected.34 This, however, does not mean that for an oral declaration to “reach” its addressee it is merely sufficient that the declaration be communicated.35 Rather, the declaration must be formulated (as regards both its content and language) in a 25 In accord Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 7; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 24 para. 6; Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 24 para. 2.3; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 175; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 24 para. 2; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 para. 14; Gruber, in: Mu¨nchKommBGB (2016), Art. 24 para. 8; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 233; Rudolph, Kommentar (1996), Art. 24 para. 4; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 24 para. 7; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 24 para. 7; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) para. 795. 26 Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 24 para. 3; Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 206; Herber/Czerwenka, Kommentar (1991), Art. 24 para. 4; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 308; Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 230; Magnus, in: Staudinger Kommentar (2013), Art. 24 para. 23; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 24 para. 7. 27 Ferrari/Torsello, International Sales Law – CISG (2015) p. 159; Rudolph, Kommentar (1996), Art. 24 para. 4; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 para. 14; contra Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 8; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 24 para. 5; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 24 para. 2; Witz/Salger/Lorenz, Kommentar (2016), Art. 24 para. 10. 28 See also Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 para. 10. 29 Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu ¨ rgerlichen Gesetzbuch (2012), Art. 24 para. 2; Gruber, in: Mu¨nchKommBGB (2016), Art. 24 para. 4; Neumayer/Ming, Convention de Vienne (1993), Art. 24 para. 3; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 24 para. 3. 30 Perales Viscasillas, Contract Conclusion under CISG, 16 Journal of Law and Commerce (1997) 315 (315); Witz/Salger/Lorenz, Kommentar (2016), Art. 24 para. 8. 31 See Ferrari/Torsello, International Sales Law – CISG (2015) p. 159; Magnus, in: Staudinger Kommentar (2013), Art. 24 para. 13. 32 Noussias, Die Zugangsbedu ¨ rftigkeit von Mitteilungen nach den Einheitlichen Haager Kaufgesetzen und nach dem UN-Kaufgesetz (1983) pp. 26 et seq.; Owsisa, Formation of Contract, A Comparative Study under English, French, Islamic and Iranian Law (1994) pp. 550 et seq.; Pace, Nuove leggi civ. comm. (1989) 109 (109); Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 235; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 24 para. 3. 33 See also Gruber, in: Mu ¨ nchKommBGB (2016), Art. 24 para. 6. 34 See UNCITRAL YB (1978), pp. 36 et seq. 35 In accord Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 para. 12.

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way that would allow a reasonable person of the same kind as the addressee36 (and, therefore, with the same language skills as the addressee or as a reasonable person involved in the same trade as the addressee),37 and in the same circumstances (among which one must count the volume of the oral declaration) to gain knowledge of it.38 Where the declaring party has made such a declaration, the risk of the declaration being misunderstood lies with the addressee.39

2. Declarations by “other means” All declarations which, irrespective of the means of communication used,40 do not constitute “oral” declarations must be considered declarations “delivered by any other means.”41 8 These declarations, which have to have been put in circulation with the declaring party’s knowledge and approval,42 “reach” the addressee when their delivery occurs.43 Delivery (to be interpreted autonomously)44 occurs when the declaration arrives within the addressee’s “sphere of control”,45 so as to allow the addressee under normal circumstances to gain knowledge of the declaration.46 Whether the addressee actually gains knowledge of the declaration is irrelevant.47 Like the “oral” declaration, the 7

36

Ferrari/Torsello, International Sales Law – CISG (2015) p. 159. See Oberlandesgericht Hamm (Germany) 8 February 1995, CISG-Online 141. 38 In accord Ferrari/Torsello, International Sales Law – CISG (2015) p. 159; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 24 para. 6; Rudolph, Kommentar (1996), Art. 24 para. 6; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 24 para. 10; see Schroeter, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 24 para. 11: “a declaration must at least be perceptible”. 39 Contra Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 para. 13; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 24 para. 7. 40 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 24 para. 10. 41 Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 10; Lu ¨ deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 24 para. 4; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 para. 16. 42 See also Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 13; Ferrari, in: Mu ¨ nchKommHGB (2013), Art. 15 para. 6. 43 Achilles, Kommentar (2000), Art. 24 para. 3; Ferrari/Torsello, International Sales Law – CISG (2015) p. 160. 44 Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 12; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 24 para. 16. 45 See Bydlinski, Das allgemeine Vertragsrecht, in: Doralt (ed), Das UNCITRAL-Kaufrecht im Vergleich zum o¨sterreichischen Recht (1985), p. 57 (p. 64); Neumayer/Ming, Convention de Vienne (1993), Art. 24 para. 1; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013) para. 293; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 paras 2 and 20; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 24 para. 18; Witz/Salger/Lorenz, Kommentar (2016), Art. 24 para. 11. 46 Achilles, Kommentar (2000), Art. 24 para. 4; Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 24 para. 2; Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 14; Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 24 para. 2.4; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 178; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 para. 20; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverha¨ltnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994) p. 303; Gruber, in: Mu¨nchKommBGB (2016), Art. 24 para. 13; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 24 para. 13; Magnus, in: Staudinger Kommentar (2013), Art. 24 para. 15; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 24 para. 17; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) paras 795 et seq. 47 Official Records (1981), p. 26; Farnsworth, in: Bianca/Bonell, Commentary (1987), Art. 24 para. 24; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 24 para. 4; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 para. 20; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (96); Neumayer/Ming, Convention de Vienne (1993), Art. 24 para. 1; Pace, Nuove leggi civ. comm. (1989) 109 (110); Rudolph, Kommentar (1996), Art. 24 para. 7; Magnus, in: Staudinger Kommentar (2013), Art. 24 para. 15; Schroeter, in: 37

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declaration delivered by any other means must also be formulated in a way to allow a reasonable person in the same circumstances as the addressee to understand it.48 This means, for instance, that the language used must generally be one that is known to the addressee.49 The fact that the addressee knows a given language may be derived, for example, from previous business relations between the declaring party and the addressee, or from the bargaining process.50 Likewise, where the language is one generally used by parties to contracts of the type involved in the particular trade concerned, its use does not affect the issue of whether the declaration has “reached” its addressee.51 Use of the English language does not allow one to state that the declaration is always and necessarily comprehensible, as knowledge of English cannot be assumed.52 The CISG does not require the addressee to have the statements translated.53 Delivery by service of process can be, but is not necessarily always sufficient for a 9 declaration to be considered as having reached its addressee.54 Art. 24 allows for delivery of non-oral declarations by different means without 10 requiring, unlike Art. 27, that those means be “appropriate in the circumstances”.55 In effect, non-oral declarations can be handed over personally56 to the addressee (or to the addressee’s representative).57 Where the delivery occurs by handing over the non-oral declarations personally, the place of delivery is irrelevant;58 thus, delivery can occur in a hotel, at the addressee’s place of business, at the addressee’s place of sojourn, etc.59 Alternatively, delivery may take place at the addressee’s habitual residence or mailing 11 address.60 Therefore, a letter posted in the addressee’s mailbox61 must be considered as Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 24 para. 18; Schroeter, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 24 para. 18. 48 See Oberlandesgericht Hamm (Germany) 8 February 1995, CISG-Online 141. 49 Ferrari/Torsello, International Sales Law – CISG (2015) p. 160; for a reference to language problems as an impediment for effectiveness, see, apart from Oberlandesgericht Hamm (Germany) 8 February 1995, CISG-Online 141, Amtsgericht Kehl (Germany) 6 October 1995, CISG-Online 162. 50 Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 38. 51 See Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 24 para. 2; Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2005), Art. 24 para. 16; in case law, see Oberlandesgericht Hamm (Germany) 8 February 1995, CISG-Online 141. 52 See also Oberlandesgericht Hamm (Germany) 8 February 1995, CISG-Online 141; in legal writing, see Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 38; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 179; Gruber, in: Mu¨nchKommBGB (2016), Art. 24 para. 19; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 24 para. 38; contra Ku¨hl/Hingst, Das UN-Kaufrecht und das Recht der AGB, in: Festgabe Herber (1999) p. 50 (53); Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 24 para. 6; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 24 para. 16. 53 In accord Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 38; contra Witz/Salger/Lorenz, Kommentar (2016), Art. 24 para. 15. 54 Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 12; Ferrari/Torsello, International Sales Law – CISG (2015) p. 161; Gruber, in: Mu¨nchKommBGB (2016), Art. 24 para. 12; Schroeter, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 24 para. 17. 55 Ferrari/Torsello, International Sales Law – CISG (2015) p. 161; Schlechtriem, in: Schlechtriem/ Schwenzer, Commentary (2005), Art. 24 para. 10. 56 See Official Records (1981), p. 26; Witz/Salger/Lorenz, Kommentar (2016), Art. 24 para. 12. 57 See Ferrari/Torsello, International Sales Law – CISG (2015) p. 161. 58 In accord Achilles, Kommentar (2000), Art. 24 para. 3; Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 24; Herber/Czerwenka, Kommentar (1991), Art. 24 para. 3; Gruber, in: Mu¨nchKommBGB (2016), Art. 24 para. 21; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 24 para. 19. 59 Neumayer/Ming, Convention de Vienne (1993), Art. 24 para. 1. 60 See Rechtbank Amsterdam (Netherlands) 5 October 1994, CISG-Online 446. 61 Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 25; Piltz, Internationales Kaufrecht (2008), para. 3-39.

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reaching the addressee just as a letter inserted into the addressee’s post office box62 or a message left on the addressee’s answering machine.63 Similarly, a telefax reaches the addressee when the addressee’s telefax machine prints the declaration,64 provided that the telefax machine is under the addressee’s control.65 If the telefax machine is not under the addressee’s control, the telefax reaches the addressee when a printed copy of the telefax is delivered to the addressee.66 If printing is not possible because the telefax machine ran out of paper, one has to assume that the declaration has nevertheless reached the addressee.67 Dropping a notice into the addressee’s mailbox informing the addressee about a registered mailed letter also qualifies as delivery under Art. 24.68 The view that in these cases the declaration “reaches” its addressee only at the beginning of the next business day is not convincing.69 Emails reach ther addressee when they enter the server.70 12 Delivery at the addressee’s place of habitual residence, a concept that corresponds to that found in Art. 10,71 amounts to a delivery that allows the declaration to “reach” the addresse for the purposes of Art. 24 only where the addressee does not have a place of business or mailing address.72 If a declaration is delivered to the addressee’s place of habitual residence despite the fact that the addressee has a place of business or a mailing address, the declaration is treated as if it never reached the addressee.73 However, if the addressee gains knowledge of the declaration, he may not invoke the fact that the declaration was delivered at the wrong place.74 This can be derived from the CISG’s general principle of good faith.75 The fact that the addressee gains knowledge of the 62 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 24 para. 12; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) para. 796; Witz/Salger/Lorenz, Kommentar (2016), Art. 24 para. 11. 63 Ferrari/Torsello, International Sales Law – CISG (2015) p. 161; Neumayer/Ming, Convention de Vienne (1993), Art. 24 para. 3. 64 See also Witz/Salger/Lorenz, Kommentar (2016), Art. 24 para. 11; contra Piltz, Internationales Kaufrecht (2008), para. 20; Gruber, in: Mu¨nchKommBGB (2016), Art. 24 para. 13; Brunner/Pfisterer/ Ko¨ster, Kommentar (2014), Art. 24 para. 2; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 para. 23; Neumayer/Ming, Convention de Vienne (1993), Art. 24 para. 3. 65 See Ferrari/Torsello, International Sales Law – CISG (2015) p. 161; Neumayer/Ming, Convention de Vienne (1993), Art. 24 para. 3; Achilles, Kommentar (2000), Art. 24 para. 4. 66 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 24 para. 12. 67 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 para. 26; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 24 para. 14; Neumayer/Ming, Convention de Vienne (1993), Art. 24 para. 3. 68 Ferrari/Torsello, International Sales Law – CISG (2015) p. 161–162; Perales Viscasillas, Contract Conclusion under CISG, 16 Journal of Law and Commerce (1997) 315 (315); Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 para. 23; contra Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 23; Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 24 para. 12; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 24 para. 20; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) para. 804. 69 See, however, Herber/Czerwenka, Kommentar (1991), Art. 24 para. 6. 70 Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 21. 71 Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 24 para. 21. 72 Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 206; Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 26; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 180; Ferrari/Torsello, International Sales Law – CISG (2015) p. 162; Gruber, in: Mu¨nchKommBGB (2016), Art. 24 para. 21; Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 43 (p. 55); Pace, Nuove leggi civ. comm. (1989) 109 (109); Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 24 para. 3; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 para. 24. 73 Neumayer/Ming, Convention de Vienne (1993), Art. 24 para. 2; Witz/Salger/Lorenz, Kommentar (2016), Art. 24 para. 14. 74 For this conclusion see also Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 24 para. 22. 75 Ferrari/Torsello, International Sales Law – CISG (2015) p. 162.

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Article 24

declaration also entails that the declaring party is bound by the declaration, provided that delivery at the wrong place is to be imputed to the declaring party – this results from the CISG’s general principle pursuant to which it is prohibited to venire contra factum proprium.76 An issue closely related to the one of when a declaration reaches its addressee is that 13 of delivery outside business hours. Some commentators hold that a declaration delivered outside business hours, such as a telefax received after the closing of the store, reaches the addressee only at the beginning of the next business day.77 This view cannot be shared,78 because it would shift the risks relating to the communication from the addressee to the declaring party.79 Hence, under the CISG declarations delivered outside business hours “reach” the addressee at the moment when they are delivered pursuant to Art. 24.80 What has been said in regards to non-oral declarations also applies to notices 14 addressed to the offeror that an act indicating assent has been performed, where the notice is not superfluous on account “of the offer or as a result of practices which the parties have established between themselves or of usage.”81

3. Preventing declarations from reaching the addressee The drafters of the CISG did not lay down specific rules dealing with the addressee’s 15 conduct (consisting, for instance, of disconnecting a telefax, refusing to accept a letter, etc.) that results in a declaration not reaching the addressee.82 In this author’s opinion, this should not lead one to automatically resort to the applicable domestic law to resolve the issue.83 Rather, the issue is to be resolved on the basis of the general principles underlying the CISG,84 pursuant to which it is prohibited to venire contra factum 76 The prohibition to venire contra factum proprium is often considered a general principle upon which the CISG is based; see, e. g., Audit, Vente Internationale (1990), pp. 51 et seq.; Ferrari, Das Verha¨ltnis zwischen den UNIDROIT-Grundsa¨tzen und den allgemeinen Grundsa¨tzen internationaler Einheitsprivatrechtkonventionen. Zugleich ein Beitrag zur Lu¨ckenfu¨llung durch staatliche Gerichte, JuristenZeitung (1998) 9 (12); Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 7 para. 50; Herber/Czerwenka, Kommentar (1991), Art. 7 para. 6. 77 Audit, Vente Internationale (1990), p. 56; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 24 para. 4; Herber/Czerwenka, Kommentar (1991), Art. 24 para. 6; Gruber, in: Mu¨nchKommBGB (2016), Art. 24 para. 16; Neumayer/Ming, Convention de Vienne (1993), Art. 24 para. 6; Lu¨deritz/Fenge, in: Soergel (ed), Kommentar zum BGB. Schuldrechtliche Nebengesetze (2000), Art. 24 para. 5; Wey, Der Vertragsabschluss beim Internationalen Warenkauf nach UNCITRAL und schweizerischen Recht (1984) para. 803. 78 In accord Brunner/Pfisterer/Ko ¨ ster, Kommentar (2014), Art. 24 para. 3; Dornis, in: Honsell, Kommentar (2010), Art. 24 paras 17 and 36; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 24 para. 4; Ferrari/Torsello, International Sales Law – CISG (2015) p. 162–163; Karollus, UNKaufrecht (1989) p. 59; Meeusen, Totstandkoming van de Overeenkomst, in: van Houtte/Erauw/Wautelet (eds), Het Weens Koopverdrag (1997), p. 71 (96); Perales Viscasillas, La formacio´n del contrato de compraventa internacional de mercaderı´as (1996) p. 243; Piltz, Internationales Kaufrecht (1993) § 3 para. 37; contra Herber/Czerwenka, Kommentar (1991), Art. 24 para. 6. 79 See also Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 24 para. 14. 80 Contra Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 43 (55), suggesting that one should refer to a general principle without, however, identifying the general principle. 81 In accord Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 30; Magnus, in: Staudinger Kommentar (2013), Art. 24 para. 21. 82 Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 41; Ferrari/Torsello, International Sales Law – CISG (2015) p. 163; Neumayer/Ming, Convention de Vienne (1993), Art. 24 para. 4. 83 Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) pp. 182 et seq. 84 See also Gruber, in: Mu ¨ nchKommBGB (2016), Art. 24 para. 23; Neumayer/Ming, Convention de Vienne (1993), Art. 24 para. 2.

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proprium.85 Where the addressee consciously or intentionally86 prevents a declaration from reaching him, the declaration must be considered as having reached the addressee “at the moment when it would have done so, had [the addressee] not prevented that event”,87 i. e., at the moment the declaration would have reached the addressee under “normal” circumstances.88

4. Burden of proof The party invoking the fact that the declaration has reached the addressee must prove this fact,89 irrespective of whether that party is the declaring party or the addressee.90 17 If receipt of the declaration fails because it has been prevented, the party invoking that the declaration would have reached the addressee at a given time must prove that proper delivery has been attempted and that the declaration did not reach the addressee due to factors lying solely within the addressee’s sphere of control.91 16

III. Comparable Rules 18

Art. 24 CISG is not the only provision to be found in international instruments that deales with the issue of when a communication “reaches” its addressee. Art. 1.10(3) PICC also deals with that issue, by stating that “a notice ‘reaches’ a person when given to that person orally or delivered at that person’s place of business or mailing address.” Even a cursory reading of the two provisions shows that there is a difference, in that Art. 1.10(3) PICC does not refer to the addressee’s habitual residence, unlike Art. 24 CISG. One has to wonder, therefore, whether a notice delivered at the habitual residence of the addressee can at all be effective. In this author’s opinion, the answer should be 85

See also Ferrari, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 7 para. 48. Negligence by itself is insufficient; in accord Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 24 para. 41; Magnus, in: Staudinger Kommentar (2013), Art. 24 para. 25; contra Karollus, UNKaufrecht (1989) p. 60. 87 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 24 para. 17; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 24 para. 5; Brunner/Pfisterer/ Ko¨ster, Kommentar (2014), Art. 24 para. 4; Herber/Czerwenka, Kommentar (1991), Art. 24 para. 5; Karollus, UN-Kaufrecht (1989) p. 60. 88 Dı´ez-Picazo, in: Dı´ez-Picazo, Comentario (1998), p. 207; Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 41; Ferrari/Torsello, International Sales Law – CISG (2015) p. 162; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 24 para. 28; Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 24 para. 42. 89 Achilles, Kommentar (2000), Art. 24 para. 9; Dornis, in: Honsell, Kommentar (2010), Art. 24 para. 44; Gruber, in: Mu¨nchKommBGB (2016), Art. 24 para. 27; Jung, Die Beweislastverteilung im UNKaufrecht insbesondere bei Vertragsabschluß, bei Vertragsverletzungen des Ka¨ufers, bei allgemeinen Bestimmungen sowie bei gemeinsamen Bestimmungen u¨ber Verka¨ufer- und Ka¨uferpflicht (1996) pp. 80 et seq.; Magnus, in: Staudinger Kommentar (2013), Art. 24 para. 26; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 24 para. 30; Reimers-Zocher, Beweislastfragen im Haager und Wiener Kaufrecht (1995) p. 189; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 24 para. 6; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 24 para. 43; Witz/Salger/Lorenz, Kommentar (2016), Art. 24 para. 17. 90 In accord Hepting/Mu ¨ ller, in: Baumga¨rtel/Laumen (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 24 CISG para. 1; Jung, Die Beweislastverteilung im UN-Kaufrecht insbesondere bei Vertragsabschluß, bei Vertragsverletzungen des Ka¨ufers, bei allgemeinen Bestimmungen sowie bei gemeinsamen Bestimmungen u¨ber Verka¨ufer- und Ka¨uferpflichten (1996) pp. 82 et seq. 91 Hepting/Mu ¨ ller, in: Baumga¨rtel/Laumen (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 24 CISG para. 8; Ferrari, Vendita internazionale di beni mobili. Artt. 14–24. Formazione del contratto (2006) p. 183; Jung, Die Beweislastverteilung im UN-Kaufrecht insbesondere bei Vertragsabschluß, bei Vertragsverletzungen des Ka¨ufers, bei allgemeinen Bestimmungen sowie bei gemeinsamen Bestimmungen u¨ber Verka¨ufer- und Ka¨uferpflichten (1996) p. 89; Gruber, in: Mu¨nchKommBGB (2016), Art. 24 para. 27. 86

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24

positive, at least where the addressee has neither a place of business or a mailing address. This is the solution adopted not only by Art. 24 CISG, but also by Art. 1:303(3) PECL and by the DCFR. As regards the latter instrument, however, it is made clear that a notice delivered to the habitual residence is effective not only when the addressee has no place of business, but even where there is such place of business but “the notice does not relate to a business matter.”92 It is worth pointing out that the DCFR also determines when a notice transmitted by 19 electronic means “reaches” its addressee: “when it can be accessed by the addressee”.93 Art. 10 of the 2005 United Nations Convention on the Use of Electronic Communications in International Contracts is – unsurprisingly – more specific on the issue and states that “[t]he time of receipt of an electronic communication is the time when it becomes capable of being retrieved by the addressee at an electronic address designated by the addressee […]. An electronic communication is presumed to be capable of being retrieved by the addressee when it reaches the addressee’s electronic address.” 92 93

Art. I-1:109(4)(b) DCFR. Art. I-1:109(4)(c) DCFR.

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PART III Sale of Goods Chapter I General Provisions Article 25 A breach of contract 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. Bibliography: Babiak, Defining “Fundamental Breach” Under the United Nations Convention on Contracts for the International Sale of Goods, 6 Temple International and Comparative Law Journal (1992) 113; Ferrari, Fundamental Breach Under the UN Sales Convention: 25 Years of Article 25 CISG, 25 Journal of Law and Commerce (2005–06) 489; Graffi, Case Law on the Concept of “Fundamental Breach” in the Vienna Sales Convention, 3 Revue de droit des affaires internationales (2003) 337; Karambelas, United Nations Convention on the International Sale of Goods: An International Law as Domestic Law, Washington Lawyer (April 2009) 27; Koch, The Concept of Fundamental Breach under the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1998) 177; Magnus, The Remedy of Avoidance of Contract Under CISG – General Remarks and Special Cases, 25 Journal of Law and Commerce (2005–06) 423; Mullis, Avoidance for breach under the Vienna Convention; a critical analysis of some of the early cases, in: Andreas/Jarborg (eds), Anglo-Swedish Studies in Law (1998), p. 326; Perales Viscasillas, The Nachfrist Remedy, in: Celebrating Success: 25 Years United Nations Convention on Contracts for the International Sale of Goods (2005), p. 91; Reiley, International Sales Contracts: The UN Convention and Related Transnational Law (2008); Rustad, Understanding Sales, Leases, and Licenses in a Global Perspective (2008); Schlechtriem, Subsequent Performance and Delivery Deadlines- Avoidance of CISG Sales Contracts Due to Non-conformity of the Goods, 18 Pace International Law Review (2006) 82; Schlechtriem, Basic Structures and General Concepts of the CISG as Models for a Harmonisation of the Law of Obligations, 10 Juridica International (2005) 27; Schlechtriem, Interpretation, Gap-Filling and Further Developments of the U. N. Sales Convention, 16 Pace International Law Review (2004) 279; Schwenzer, Avoidance of the Contract in Case of Non-Conforming Goods (Article 49(1)(A) CISG), 25 Journal of Law and Commerce (2005–06) 437; Schwenzer/Hachem, The CISG – Successes and Pitfalls, 57 American Journal of Comparative Law (2009) 457; Whittington, Reconsidering Domestic Sale of Goods Remedies in Light of the CISG, 37 Victoria University of Wellington Law Review (2006) 421; CISG-AC Opinion no 5, The buyer’s right to avoid the contract in case of non-conforming goods or documents, 7 May 2005. Rapporteur: Professor Dr. Ingeborg Schwenzer, LL.M., Professor of Private Law, University of Basel (at http://www.cisg-ac.org).

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Departure from domestic laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Requirements for fundamental breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Detriment to the other party resulting in substantial deprivation . . . . . . b) Foreseeability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Examples of fundamental breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Non-performance and anticipatory repudiation . . . . . . . . . . . . . . . . . . . . . . . . . b) Late performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Deficient goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Ancillary contractual obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Part III. Sale of Goods

e) Documentary transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f) Relationship to ability to cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

43 47 50

I. Importance and Role of the Provision 1

Art. 25 is the first of the so-called “General Provisions.” It sets forth a definition of “fundamental breach,” a crucial concept in that it dictates what remedies are available to an injured party under the CISG. The remedy of avoidance – of the injured party’s right to terminate the contract, thereby cancelling any remaining obligations under the contract, and to seek appropriate remedies from the breaching party – hinges on the existence of a fundamental breach.1 The decision that a breach is fundamental affects the buyer’s entitlement to arrange for substitute delivery and the question of who carries the risk in the case of delivery of defective goods.2 Failures in performance that do not rise to the level of fundamental breach will permit an injured party to seek only more limited remedies, such as an action for damages.3

II. Detailed Commentary Art. 25 sets a deliberately high threshold for what constitutes a fundamental breach that will excuse performance under the contract. It gives primacy to performance for philosophical and practical reasons. Philosophically, the drafters of the CISG were influenced by the civil law’s preference for performance.4 Practically, Art. 25 recognises the likelihood that in cases where shipment of goods has already occurred, unwinding the transaction will make the entire transaction more expensive.5 It is a departure from the perfect-tender rule of Anglo-American law, which permits a buyer to reject goods on the basis of any non-conformity, and also sets a higher standard than the old, and to a lesser extent the new, German civil code.6 3 Either the buyer or the seller can declare a fundamental breach, but the remedy is likely to be used more often by the seller than by the buyer. The most likely breach committed by the buyer will be a failure to pay for the performance the seller has already delivered.7 Nonetheless, in appropriate circumstances the seller retains the ability to avoid the contract. 4 The legal consequences of a fundamental breach are derived from other CISG provisions. Art. 25 can only be applied in conjunction with those other provisions that are triggered by the existence of a fundamental breach.8 2

1

See commentary to Arts 49(1) and 64(1), infra. Ferrari, Fundamental Breach Under the UN Sales Convention: 25 Years of Article 25 CISG, 25 Journal of Law and Commerce (2005–06) 489 (490). 3 Every breach, no matter how minor, will support a claim for compensation in damages, Honold, Uniform Law (2009), Art. 25 para. 181.2. 4 Ferrari, Fundamental Breach Under the UN Sales Convention: 25 Years of Article 25 CISG, 25 Journal of Law and Commerce (2005–06) 489 (490 et seq., 496 fn. 56). 5 Schlechtriem, Subsequent Performance and Delivery Deadlines- Avoidance of CISG Sales Contracts Due to Non-conformity of the Goods, 18 Pace Int’l Law Review (2006) 82 (83 et seq.) (Pace). Professor Schlechtriem questioned how often this rationale holds true in practice (93 et seq.). Accord Honnold, Uniform Law (2009), Art. 25 para. 181.2. 6 Schlechtriem, Subsequent Performance and Delivery Deadlines- Avoidance of CISG Sales Contracts Due to Non-conformity of the Goods, 18 Pace Int’l Law Review (2006) 82 (83 et seq.) (Pace). 7 Karambelas, United Nations Convention on the International Sale of Goods: An International Law as Domestic Law, Washington Lawyer (April 2009) 27 (32). 8 Ferrari, Fundamental Breach Under the UN Sales Convention: 25 Years of Article 25 CISG, 25 Journal of Law and Commerce (2005–06) 489 (490); Kritzer, Guide to Practical Applications of the 2

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If a party is entitled to refuse to perform, then there is no fundamental breach.9 A 5 fundamental breach might also be excused if one of the exemptions under Art. 79 applies to the contract. In the case of a change of circumstances, an injured party cannot rely on a fundamental breach but must accept a reasonable change of terms.10

1. Departure from domestic laws The principle of fundamental breach is not drawn from any domestic laws.11 Al- 6 though English law contains a principle entitled “fundamental breach,” its sphere of application is different and it cannot be used to interpret the CISG provision.12 Art. 25 must be interpreted in light of its international character.13 This admonition has not stopped national courts from issuing decisions influenced by their respective traditions.14 German courts have been particularly reluctant to find that conduct amounts to fundamental breach.15 French, Austrian, and U.S. courts have been more prone to finding a fundamental breach that justifies avoidance of the contract.16 The requirement that a breach be fundamental in order to permit avoidance of the 7 contract by the injured party is one of the more controversial CISG rules in the view of common lawyers.17 In the context of the sale of goods, Anglo-American law developed the “perfect-tender rule” in the latter part of the nineteenth century.18 It is analogous to a condition precedent to the duty to perform: “the buyer’s obligation to accept and pay for the goods is subject to a condition precedent that the seller must have made a perfect United Nations Convention on Contracts for the International Sale of Goods (1989) pp. 200 seq. In addition to Arts 49(1) and 64(1), other linked provisions include Arts 51(2), 64(1)(a), 70, 72(1), 73(1) and (2), and 46(2). See generally Koch, The Concept of Fundamental Breach under the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1998) 177 (300 et seq.). 9 Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 25 para. 18. 10 Schwenzer/Hachem, The CISG – Successes and Pitfalls, 57 American Journal of Comparative Law (2009) 457 (475). 11 Ferrari, Fundamental Breach Under the UN Sales Convention: 25 Years of Article 25 CISG, 25 Journal of Law and Commerce (2005–06) 489 (491). 12 Ferrari, Fundamental Breach Under the UN Sales Convention: 25 Years of Article 25 CISG, 25 Journal of Law and Commerce (2005–06) 489 (490 et seq.); Honnold, Uniform Law (2009), Art. 25 para. 181.1. The doctrine of fundamental breach in English law acts to overcome contractual provisions restricting a buyer’s right to recover for defective goods. 13 Gabriel, Contracts for the Sale of Goods: A Comparison of US and International Law (2009) p. 108. 14 See, e.g., Supreme Court of Justice Ontario (Canada) 6 October 2003 (Vacuum panel insulation), Diversitel Communications Inc. v Glacier Bay, Inc., CISG-Online 1436 (Pace) (holding that the common law standard for “material breach” is the same as the CISG’s “fundamental breach” and then erroneously applying the common law); Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 21/2005, 18 October 2005 (Varnish and paint machine), CISG-Online 1457 (Pace) (assessing fundamental breach by reference to the quality of the goods required by the Russian Civil Code). The confusion in national courts is understandable. The idea of material breach is drawn from the doctrine of conditions: one party’s failure to perform a condition under the contract excuses the other party from performing its own duties. Restatement of the Law (Second) of Contracts (1981), s. 237. It has been replaced by the perfect tender rule in the sale of goods context. 15 Schlechtriem, Subsequent Performance and Delivery Deadlines – Avoidance of CISG Sales Contracts Due to Non-conformity of the Goods, 18 Pace Int’l Law Review (2006) 82 (93) (Pace). 16 Schlechtriem/Butler, CISG (2009), para. 115. 17 Mullis, Avoidance for breach under the Vienna Convention; a critical analysis of some of the early cases, in: Andreas/Jarborg (eds), Anglo-Swedish Studies in Law (1998), p. 326 (pp. 333 et seq.) (Pace). 18 Reiley, International Sales Contracts: The UN Convention and Related Transnational Law (2008), p. 99. Systems based on Roman law knew a similar rule. Schlechtriem, Basic Structures and General Concepts of the CISG as Models for a Harmonisation of the Law of Obligations, 10 Juridica International (2005) 27 (31).

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tender.”19 It was incorporated into the UCC in the U.S. Thus, if goods deviate in any way from the contractual specifications in a contract governed by the UCC, the buyer has the right to refuse delivery and to claim breach.20 The purpose of the perfect-tender rule is to protect the buyer. The buyer does not have to guess what might amount to a material breach, and the buyer does not have to disclose proprietary information in the course of arguing why some small departure from the specifications is important.21 English law is to similar effect.22 8 The perfect-tender rule in the UCC applies prior to acceptance; once a buyer has accepted the goods, he or she must prove that a later-discovered non-conformity “substantially impairs” the value of the goods.23 The perfect-tender rule is limited in other ways as well. If the non-conforming goods are delivered before the period for performance has expired, the seller has a right to cure.24 Even if there is no time left for performance, the seller might be able to cure if he reasonably believed the goods were acceptable.25 In addition, the perfect-tender rule does not apply to instalment contracts. Rather, the question in instalment contracts is: does the non-conformity “substantially impair” the value of the instalment and can it be cured?26 English law also places some limits on the perfect tender rule if, for example, “the breach is so slight that it would be unreasonable for [the buyer] to reject them.”27 Thus, even though the perfect-tender rule is more pro-buyer than the fundamental breach rule of the CISG, it is not without limits.28

2. Requirements for fundamental breach 9

The definition of fundamental breach in Art. 25 is less than precise. Indeed, it has been said that the rule “is open to criticism on the ground that it is likely to lead to uncertainty since the open-textured nature of the definition in Art. 25 makes it hard to predict just when a breach will be regarded as ‘fundamental.’”29 Determinations are fact-specific, and it is possible only to make general predictions as to what types of behaviour will be found to result in a fundamental breach.30 The fundamental breach inquiry has two components: substantial deprivation and foreseeability.

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a) Detriment to the other party resulting in substantial deprivation. The CISG does not define “detriment” or “substantial deprivation.” The UNCITRAL Secretariat’s official 19 Reiley, International Sales Contracts: The UN Convention and Related Transnational Law (2008), p. 99. 20 UCC § 2–601. 21 Honnold/Reitz, Sales Transactions: Domestic and International Law (2001) p. 390. 22 Mullis, Avoidance for breach under the Vienna Convention; a critical analysis of some of the early cases, in: Andreas/Jarborg (eds), Anglo-Swedish Studies in Law (1998), p. 326 (p. 330 et seq.) (Pace). 23 UCC § 2–608(1). 24 UCC § 2–508(1). 25 UCC § 2–508(2). 26 UCC § 2–612(2). It is not clear why different rules apply to instalment contracts and single-sale contracts. Reiley, International Sales Contracts: The UN Convention and Related Transnational Law (2008), p. 101 note 26. The most likely explanation is that an instalment contract has a long period for performance and the assumption is that any imperfection can be cured before performance is finally due. 27 S. 15A Sale of Goods Act 1979(1)(b). This rule applies when the buyer is not a consumer, and a buyer might still have an action under breach of warranty. 28 Rustad, Understanding Sales, Leases, and Licenses in a Global Perspective (2008) pp. 284, 305. 29 Treitel, in: Guest, Benjamin’s Sale of Goods (1997) paras 18–116. See also Schwenzer/Hachem, The CISG – Successes and Pitfalls, 57 American Journal of Comparative Law (2009) 457 (468); Graffi, Case Law on the Concept of “Fundamental Breach” in the Vienna Sales Convention, 3 Revue de droit des affaires internationales (2003) 337 (337) (Pace). 30 Gabriel, Contracts for the Sale of Goods: A Comparison of US and International Law (2009) p. 108.

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commentary on the 1978 draft said that “The determination whether the [detriment] is substantial must be made in the light of the circumstances of each case, e. g., the monetary value of the contract, the monetary harm caused by the breach, or the extent to which the breach interferes with other activities of the injured party.”31 The idea of “detriment” has been described as a filter for those cases in which breach of a fundamental obligation has occurred but has caused no injury.32 Such cases will presumably be rare; in most cases, the focus of the inquiry will be on whether there has been a substantial deprivation of what the injured party expected to receive under the contract. If there has been such a deprivation, the injured party will have incurred a detriment.33 Cumulative violations of various contractual obligations might make the finding of a fundamental breach more probable, but do not automatically amount to a fundamental breach.34 It is clear that the standard for fundamentality is high: “[a] breach of contract is fundamental when the purpose of the contract is endangered so seriously that, for the concerned party to the contract, interest in the fulfillment of the contract ceases to exist as a consequence of the breach of contract.”35 For a breach to be fundamental, it must “concern the essential content of the contract, the goods, or the payment of the price concerned, and it must lead to serious consequences to the economic goal pursued by the parties.”36 Though monetary harm is one component to be considered in establishing a breach, this does not mean either that significant monetary harm always equates to a fundamental breach, or that significant monetary harm is necessary for there to be a fundamental breach. Rather, the question is whether the impairment suppressed the damaged party’s interest in performance of the contract, or whether that party cannot be expected to be satisfied with damages that fall short of termination.37 The injuring party must know that the injured party considered performance of the breached contractual clause “so essential that he would have refused the contract if he had known of such future breach.”38 Factors such as loss of the injured party’s reputation are relevant.39 One important question is whether the interests of the non-breaching party can be satisfied by the payment of damages, rather than by the last resort of termination.40 The language of the provision occasioned a good deal of discussion among the delegates at the Convention.41 The general consensus was that it contained both subjective 31

Secretariat Commentary on 1978 Draft, Art. 23 (now Art. 25) para. 3. Koch, 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), p. 126; Will, in: Bianca/Bonell, Commentary (1987), Art. 25 para. 2.1.1.2. 33 Huber, in: Huber/Mullis, The CISG (2007), p. 214. 34 Bundesgerichtshof (Germany) 3 April 1996 (Cobalt sulfate), CISG-Online 135 (Pace). 35 Oberlandesgericht Frankfurt (Germany) 17 September 1991 (Shoes), CISG-Online 28 (Pace). 36 Bundesgericht (Switzerland) 15 September 2000 (Egyptian cotton), FCF S. A. v Adriafil Commerciale S. r. l., CISG-Online 770 (Pace). 37 Ferrari, Fundamental Breach Under the UN Sales Convention: 25 Years of Article 25 CISG, 25 Journal of Law and Commerce (2005–06) 489 (495 et seq.). 38 Bundesgericht (Switzerland) 15 September 2000 (Egyptian cotton), FCF S. A. v Adriafil Commerciale S. r. l., CISG-Online 770 (Pace). 39 Whittington, Reconsidering Domestic Sale of Goods Remedies in Light of The CISG, 37 Victoria University of Wellington Law Review (2006) 421 (435). 40 Koch, The Concept of Fundamental Breach of Contract under the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1998) 177 (350). 41 Koch, The Concept of Fundamental Breach of Contract under the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1998) 177 (271 et seq.). 32

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and objective components, but opinions on whether there was too much of one or the other varied.42 The emphasis on the expectations of the injured party was generally viewed as the key factor.43 Thus, what is substantial is based on the expectation of the injured party. Those expectations are not entirely subjective; they may involve the injured party’s hopes or inner expectations but they must be borne out by the terms of the contract.44 The most important question is what the parties themselves have made important in their contract.45 15 Fault or negligence on the part of the breaching party is not required to establish a fundamental breach.46 Even the presence of actual fault or negligence will not establish a fundamental breach; the question will still be whether the malicious behaviour impaired an important interest of the innocent party, or whether it so affected the relationship of trust between the parties that they cannot be expected to continue their contractual relationship.47 The effect on the buyer will control the fundamental breach decision, rather than the degree to which the seller engaged in bad behaviour.48 16 The first step in establishing whether or not there is a fundamental breach is identifying the scope of the contractual obligation that the breaching party is alleged not to have met. It is an elementary point, but if there is no breach at all then the alleged failure to perform can hardly be fundamental.49 The breach may arise from a violation of the terms of the contract itself, the practice established between the parties, or trade usage.50 17 The interpretation of the parties’ intentions is easiest when they have made clear, preferably expressly, what kinds of breaches they would regard as fundamental under 42 Kritzer, Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods (1989) pp. 205 seq.; Will, in: Bianca/Bonell, Commentary (1987), Art. 25 paras 2.1.2.1 seq; Schlechtriem/Butler, CISG (2009), para. 111 (emphasizing the subjective component based on the breach’s effect on the buyer, rather than on the value of the contract). 43 Kritzer, Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods (1989) p. 206; Huber, in: Huber/Mullis, The CISG (2007), p. 214. 44 Will, in: Bianca/Bonell, Commentary (1987), Art. 25 para. 2.1.2.2; Koch, The Concept of Fundamental Breach of Contract under the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1998) 177 (292). 45 Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 321 seq. 46 Magnus, The Remedy of Avoidance of Contract Under CISG – General Remarks and Special Cases, 25 Journal of Law and Commerce (2005–06) 423 (426). 47 Ferrari, Fundamental Breach Under the UN Sales Convention: 25 Years of Article 25 CISG, 25 Journal of Law and Commerce (2005–06) 489 (507); Koch, The Concept of Fundamental Breach of Contract under the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1998) 177 (224 seq.) 48 Huber, in: Huber/Mullis, The CISG (2007), pp. 214 seq. 49 Koch, The Concept of Fundamental Breach of Contract under the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1998) 177 (216); Oberlandesgericht Mu¨nchen (Germany) 2 March 1994 (Coke), CISG-Online 108 (Pace). A Swedish seller had sold coke to a German buyer and had delivered it to a Yugoslavian company, as directed by the contract. The German company had difficulty recovering it from the Yugoslavian enterprise, but the court held that did not constitute a breach by the Swedish seller. In obiter dicta, the court suggested that even if one conceived of the transaction between the Swedish seller and the Yugoslav company as a direct sale in contravention of the original agreement, the Swedish seller’s actions would still not constitute a fundamental breach because the German buyer would have its own claim for payment of the purchase price against the Yugoslav company. 50 Ferrari, Fundamental Breach Under the UN Sales Convention: 25 Years of Article 25 CISG, 25 Journal of Law and Commerce (2005–06) 489 (493); Babiak, Defining “Fundamental Breach” Under the United Nations Convention on Contracts for the International Sale of Goods, 6 Temple International and Comparative Law Journal (1992) 113 (120 seq.); Tribunal cantonal Valais (Switzerland) 21 February 2005 (CNC-Machine), CISG-Online 1193 (Pace) (by specifying in the contract that machine be “as-good-asnew”, buyers indicated their assumption that it would be functional).

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the contract.51 Parties should try to avoid using boilerplate language but should explain why a certain obligation is deemed fundamental to avoid giving the impression that the operative language was not intended to have a particular meaning as between themselves.52 Thus, parties can, to some extent, control the likelihood that a breach will be deemed fundamental by including express terms akin to conditions in their contracts.53 For example, a German court found important in its decision that a breach was not fundamental, notwithstanding significant departures from the contractual provisions, that the parties had not explicitly stated in the contract that they considered either product origin or quality to be fundamental.54 Avoidance requires terminating the contract and involves restoring any unused 18 goods. Thus, one question relevant in determining whether there has been a fundamental breach is whether the buyer or the seller is in a better position to dispose of the remaining goods.55 This has been termed a “remedy-oriented approach.”56 The burden of proving substantial deprivation lies on the party claiming to have been 19 harmed.57 Once he has established substantial deprivation, the burden will shift, as described below, to the breaching party to show that the extent of the harm was not foreseeable.58 This will channel some of the inquiry to the time at which the breach occurred, rather than focusing on the expectations of the parties at the time of the contract’s conclusion. b) Foreseeability. To qualify as fundamental, the results of the breach must have 20 been foreseeable to the defaulting party or “to a reasonable party of the same kind in the same circumstances.” The question of foreseeability was at the core of Art. 10 ULIS (Uniform Law on the International Sale of Goods), the fundamental breach provision, but it was considered too subjective.59 Art. 10 ULIS defined fundamental breach in terms of a question put to the breaching party: at the time he entered into the contract, would he have predicted that the other party would have entered into the contract could the injured party have foreseen the breach and its effects?60 While the question of foreseeability was not abandoned in Art. 25 CISG, the emphasis changed to the degree 51 Ferrari, Fundamental Breach Under the UN Sales Convention: 25 Years of Article 25 CISG, 25 Journal of Law and Commerce (2005–06) 489 (498). 52 Ferrari, Fundamental Breach Under the UN Sales Convention: 25 Years of Article 25 CISG, 25 Journal of Law and Commerce (2005–06) 489 (498). This is especially important if the transaction is occurring in the context of a fast-moving market where cover is likely to be difficult. Bridge, The CISG and the UNIDROIT Principles of International Commercial Contracts, 29 Uniform Law Review (2014) 623 (634). 53 Huber, in: Huber/Mullis, The CISG (2007), p. 214; Whittington, Reconsidering Domestic Sale of Goods Remedies in Light of the CISG, 37 Victoria University of Wellington Law Review (2006) 421 (437). The idea of making clear in the contract what performance is fundamental for CISG purposes is very similar to inserting a condition in a contract, the violation of which would lead to a material breach. Gabriel, Contracts for the Sale of Goods: A Comparison of US and International Law (2009) p. 111. 54 Bundesegrichtshof (Germany) 3 April 1996 (Cobalt sulfate), CISG-Online 135 (Pace); Lookofsky, Understanding the CISG (2008), p. 117. 55 Honnold, Uniform Law (2009), Art. 25 para. 181.2; CISG-AC Opinion no 5, para. 4.6. 56 Koch, The Concept of Fundamental Breach of Contract under the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1998) 177 (243 et seq.). 57 Gabriel, Contracts for the Sale of Goods: A Comparison of US and International Law (2009) p. 109; Tribunal cantonal Valais (Switzerland) 21 February 2005 (CNC-Machine), CISG-Online 1193 (Pace). 58 Kritzer, Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods (1989) p. 205; Garro, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 364. 59 Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 25 para. 3. 60 Honnold, Uniform Law (2009), Art. 25 para. 182.

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of detriment attributable to the breach.61 Detriment is then limited by the question of foreseeability – was the detriment caused by circumstances peculiar to the injured party, and should the breaching party have foreseen them?62 The foreseeability requirement in Art. 25 is similar to the foreseeability requirement with respect to damages found in Art. 74.63 Some suggest that foreseeability is a cumulative question; a defaulting party must both subjectively and objectively have predicted the result of the breach.64 Others emphasize the objective component.65 The latter approach is the more persuasive. The objective component is designed to be a safeguard against the defence that a breaching party did not actually foresee the damage; only if a reasonable person in the same circumstances would not have foreseen the results is the defence for lack of foreseeability available.66 The question is thus whether the defaulting party should have foreseen the consequences of a breach, or whether a reasonable person in the same circumstances would have foreseen detrimental effects. In practice, as the CISG is limited to commercial sales, this means a reasonable merchant in the same circumstances.67 Ordinarily this will mean merchants with a reasonable degree of knowledge and experience in their trade, including knowledge of the relevant market conditions, whether regional or global.68 In practice, the question of foreseeability should only arise if the parties have not adequately specified in their contract what issues are essential to them in the course of performance.69 The burden of proving that the detriment was not foreseen, or foreseeable, lies on the breaching party.70 This is demonstrated by the use of the words “unless the party in breach did not foresee” the breach.71 61

Honnold, Uniform Law (2009), Art. 25 para. 183. Honnold, Uniform Law (2009), Art. 25 para. 183; cf. Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 25 paras 26, 27, 36 (criticizing the idea of foreseeability as an excuse, and suggesting it should be viewed as part and parcel of the substantive inquiry as to the fundamentality of the breach). 63 Huber, in Huber/Mullis, The CISG (2007), p. 216; Koch, The Concept of Fundamental Breach of Contract under the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1998) 177 (322). 64 Ferrari, Fundamental Breach Under the UN Sales Convention: 25 Years of Article 25 CISG, 25 Journal of Law and Commerce (2005–06) 489 (499). 65 Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 321 seq. 66 Huber, in: Huber/Mullis, The CISG (2007), p. 214 (“The party in breach therefore will only be able to rely on the foreseeability requirement if it neither foresaw nor should have foreseen that result.”); Will, in: Bianca/Bonell, Commentary (1987), Art. 25 para. 2.2.2.1. (noting that “[a]nyone who has committed a breach of contract giving rise to major problems will hardly admit that he foresaw those problems”). 67 Babiak, Defining “Fundamental Breach” Under the United Nations Convention on Contracts for the International Sale of Goods, 6 Temple International and Comparative Law Journal (1992) 113 (122); Will, in: Bianca/Bonell, Commentary (1987), Art. 25 para. 2.2.2.2.1. 68 Babiak, Defining “Fundamental Breach” Under the United Nations Convention on Contracts for the International Sale of Goods, 6 Temple International and Comparative Law Journal (1992) 113 (122). A party’s relative lack of experience in the trade or lack of sophistication might affect the assessment of subjective knowledge. 69 Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 25 para. 30. 70 Honnold, Uniform Law (2009), Art. 25 para. 183; cf. Gabriel, Contracts for the Sale of Goods: A Comparison of US and International Law (2009) p. 109 (noting a split in common law authority as to whether the element of foreseeability is an element of the offense or a defence to the allegation of breach); Bundesgerichtshof (Germany) 3 April 1996 (Cobalt sulfate), CISG-Online 135 (Pace). 71 Honnold, Uniform Law (2009), Art. 25 para. 183; Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 325; Huber, in: Huber/Mullis, The CISG (2007), p. 215; cf. Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 25 para. 31 (suggesting the burden lies on the promisee to show the promisor did not foresee the damage if the matter was not objectively foreseeable); Court of Appeal of Nancy (France) 6 November 2013 (Tractors), O v. P, CISG-Online 2549 (Pace) (it was 62

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A controversial question has been the time at which foreseeability should be assessed. 25 Must the consequences of the breach have been evident to the party at the time of the contracting, or should he take into account information acquired later in assessing the degree to which a breach would be fundamental? Art. 25 does not answer the question directly: it asks what the party expects “under the contract”. The drafting history suggests that the delegates deliberately left the time frame open.72 “The Commission, after deliberation, did not consider it necessary to specify at what moment the party in breach should have foreseen or had reason to foresee the consequences of the breach.”73 The predominant line of thought is that the appropriate question is what was foreseeable at the time the contract was concluded.74 Some commentators have, however, suggested that information received subsequent to the time of the contract’s conclusion, but prior to shipment, should be taken into account in assessing whether the seller should have had reason to foresee that the breach would substantially deprive the buyer of what he had reason to expect under the contract.75 Information received only after performance should never be given effect.76 The better interpretation is that foreseeability must be gauged at the time the contract 26 is concluded, as the allocation of liability among the parties will depend on the information conveyed prior to the conclusion of the contract.77 This is also consistent with the assessment of fundamental breach depending on the legitimate expectations “under the contract.”

3. Examples of fundamental breach Art. 25 itself does not distinguish between different types of breach or establish 27 particular breaches – e. g., non-delivery or non-payment – as per se fundamental breaches. Whether a particular breach is fundamental depends on the circumstances of the contract at issue. “The reference to the expectation ‘under the contract’ makes clear that the yardstick for breach of contract is first and foremost to be found in the express and implied terms of the contract itself.”78 a) Non-performance and anticipatory repudiation. The most evident fundamental 28 breach is a party’s failure to perform entirely its obligations under the contract. Those incumbent on the buyer and not the seller to provide evidence of lack of conformity in the case of unconditional acceptance of goods). 72 Honnold, Uniform Law (2009), Art. 25 para. 183; Huber, in: Huber/Mullis, The CISG (2007), p. 216; Bridge, Avoidance for Fundamental Breach under the CISG, 59 ICLQ (2010), 911 (925 seq.). 73 Honnold, Documentary History (1989), p. 324. 74 Gabriel, Contracts for the Sale of Goods: A Comparison of US and International Law (2009) pp. 108 seq.; Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 324; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 25 para. 33. 75 Honnold, Uniform Law (2009), Art. 25 para. 183; Ferrari, Fundamental Breach Under the UN Sales Convention: 25 Years of Article 25 CISG, 25 Journal of Law and Commerce (2005–06) 489 (500). 76 Honnold, Uniform Law (2009), Art. 25 para. 183. 77 Huber, in: Huber/Mullis, The CISG (2007), p. 216.; Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 324 seq. (one-sided statements made after the bargain is struck should not be given effect); Schlechtriem/Butler, CISG (2009), para. 112. Post-contractual language conveyed prior to the commencement of performance, and which does not alter the allocation of risk bargained before between the parties, might be permitted on an exceptional basis. Will, in: Bianca/Bonell, Commentary (1987), Art. 25 para. 2.2.2.2.5; cf. Honnold, Uniform Law (2009), Art. 25 para. 183 (suggesting that foreseeability should extend to the time the party in breach could take steps to avoid substantial detriment). 78 Koch, The Concept of Fundamental Breach of Contract under the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1998) 177 (263 seq.). See also CISG-AC Opinion no 5, para. 4.2; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 25 para. 15.

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instances are unlikely to be controversial. Occasions that are likely to be more difficult to interpret will involve the inability to perform or the apparent unwillingness to perform.79 29 An example of the former is illustrated by a case involving a company’s insolvency. In an Australian case the court held that the appointment of an administrator by the buyer constituted a fundamental breach because it represented an acknowledgement by the Board of Directors that the company was insolvent, or likely to become so. In the circumstances of the case, it “resulted in such detriment to Roder as substantially to deprive it of what it was entitled to expect under the contract.”80 30 The quintessential example of the second occasion is that of anticipatory breach. Anticipatory breach is not foreclosed by the doctrine of fundamental breach. A final refusal of performance will amount to a fundamental breach, even if that performance is due in future.81 Thus, a buyer’s statement that it would not accept any shipments under an instalment contract until July, even though shipments were to be made in April and in May/June, constituted a fundamental breach that permitted the seller to avoid the contract because it deprived him of what he was entitled to expect under the contract.82 b) Late performance. The most common kind of late performance is the delayed delivery of goods by the seller, but it is clear that late delivery is not a per se fundamental breach.83 A “reasonable” delay under the parties’ or the industry’s definition of reasonable is usually not sufficient to constitute a fundamental breach.84 Parties can take two routes to make timeliness be of an essential character such that tardiness will amount to fundamental breach. 32 First, by setting a nachfrist period – an additional period of time for performance – a party can effectively make time be “of the essence” so that the failure to perform within the additional period is a fundamental breach.85 “The nachfrist remedy is particularly useful when the buyer or the seller has certain doubts about whether the breach of the other party constitutes a fundamental breach […]”86 33 Second, the parties can, at the time of contracting, make clear that failure to deliver in a timely manner would be a fundamental breach. A delay in delivery can be sufficient to establish a fundamental breach without the buyer setting a supplementary period for performance if it is sufficiently clear from the contractual terms that timing is an essential element of the contract.87 One way to do this is by making clear to the delivering party that downstream buyers would be depending on timely delivery.88 “Timely delivery must 31

79 Koch, The Concept of Fundamental Breach of Contract under the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1998) 177 (223 seq.). 80 Federal Court, South Australian District, Adelaide (Australia) 28 April 1995 (Tent hall structures), Roder Zeltund Hallenkonstruktionen GmbH v Rosedown Park Pty Ltd et al., CISG-Online 218 (Pace), para. 58. 81 Rowley, in: Hunter, Modern Law of Contracts (2007), para. 23:36. 82 Arbitral Award, ICC 10 274/1999 (Poultry feed) (Pace). 83 Oberlandesgericht Mu ¨ nchen (Germany) 1 July 2002 (Shoes), CISG-Online 656 (Pace). 84 US District Court, District of New Jersey (U.S.) 4 April 2006 (Naphtha), Valero Marketing & Supply Co. v Greeni Oy, CISG-Online 1216 (Pace). 85 Mullis, Avoidance for breach under the Vienna Convention; a critical analysis of some of the early cases, in: Andreas/Jarborg (eds), Anglo-Swedish Studies in Law (1998), p. 326 (pp. 332 et seq.) (Pace); Magnus, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 459 (462); See the commentary to Arts 49(2) and 64(2). 86 Perales Viscasillas, The Nachfrist Remedy, in: Celebrating Success: 25 Years United Nations Convention on Contracts for the International Sale of Goods (2005), p. 91 87 Bundesgericht (Switzerland) 15 September 2000 (Egyptian cotton), FCF S. A. v Adriafil Commerciale S. r. l., CISG-Online 770 (Pace). 88 DiMatteo et al., International Sales Law: A Critical Analysis of CISG Jurisprudence (2005) p. 126; Lookofsky, Understanding the CISG (2008), pp. 117 et seq.

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be of such interest to the buyer that he prefers not to receive the goods at all rather than to receive them late and this particular interest in timeliness must be recognizable to the seller at the conclusion of the contract.”89 It is possible that trade usage90 or other circumstances, such as the seasonal nature of 34 the goods being traded,91 would suffice to make a failure to deliver in a timely manner into a fundamental breach. In one arbitration proceeding, the tribunal suggested that in order to rely on temporal flexibility in industry practice, the party seeking to rely on the flexibility bore the burden of proving specific temporal parameters, rather than merely the existence of a “general latitude.”92 Boilerplate provisions that time is of the essence or delivery terms such as CIF 35 are possible but unreliable means of inserting a timeliness provision into a contract.93 Prudent traders should make clear in their contract that they consider timely performance to be an essential feature of the contract, and they should explain why. Most late performance claims emanate from buyers. A mere delay in payment usually 36 does not constitute a fundamental breach under Art. 25.94 The parties can in their contract make it plain that delay in payment would constitute a fundamental breach.95 This might be particularly advisable when currency fluctuations are especially volatile.96 The failure to take delivery also will fail to constitute a fundamental breach unless the seller has a particular interest in the timely receipt of the goods or the buyer refuses absolutely to take them.97 In particular circumstances, such as when the goods are perishable and/or the storage costs would be particularly high, failure to take delivery could amount to a fundamental breach.98 c) Deficient goods. Deficiency in the goods provided will support a claim of 37 fundamental breach, but the buyer must be substantially deprived of what he was entitled to expect under the contract. In some cases the fact of non-conformity will be relatively straightforward. In a case involving the sale of shoes, for example, the buyer claimed the jewellery ornamentation on the shoes was not straight, the straps on both the inside and the outside of the shoes were too long such that the shoes would not stay on the feet, the sole was not affixed properly, and the strips on the heels were backstitched too narrowly. The court held that the lack of conformity of the goods 89 Oberlandesgericht Du ¨ sseldorf (Germany) 24 April 1997 (Shoes), CISG-Online 385 (Pace) (the sale of fashionable children’s shoes did not qualify as an exceptional circumstance “such that the setting of an additional period would have been an unreasonable burden.”). 90 Lookofsky, Understanding the CISG (2008), p. 118. 91 Corte di Appello de Milano (Italy) 20 March 1998 (Knitwear), Italdecor s. a. s. v Yiu’s Industries (H.K.) Limited, CISG-Online 348 (Pace) (late delivery of the spring sales collection amounted to a fundamental breach); Arbitral Award, ICC 8786/1997, January 1997 (Clothing), (Pace); cf. Oberlandesgericht Du¨sseldorf (Germany) 24 April 1997 (Shoes), CISG-Online 385 (Pace) (parties had not specified that time was of the essence in their contract; moreover, the buyer had accepted some late shipments). 92 Arbitral Award, AAA 50181T 0 036 406, 23 October 2007 (Frozen chicken parts), Macromex Srl. v Globex International Inc., CISG-Online 1645 (Pace). 93 Ferrari, Fundamental Breach Under the UN Sales Convention: 25 Years of Article 25 CISG, 25 Journal of Law and Commerce (2005–06) 489 (504 et seq.). Cf. Oberlandesgericht Hamburg (Germany) 28 February 1997 (Iron molybdenum), CISG-Online 261 (Pace) (holding that CIF qualifies the transaction as a transaction in which the date is essential). 94 Ferrari, Fundamental Breach Under the UN Sales Convention: 25 Years of Article 25 CISG, 25 Journal of Law and Commerce (2005–06) 489 (505). 95 Magnus, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 459 (467). 96 Magnus, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 459 (467). 97 Ferrari, Fundamental Breach Under the UN Sales Convention: 25 Years of Article 25 CISG, 25 Journal of Law and Commerce (2005–06) 489 (506). 98 Magnus, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 459 (468).

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constituted a fundamental breach.99 Selling “impermeable” tiles that were easily stained by commonly used household products was a fundamental breach.100 Yet in many cases, so long as there is some use for the goods, it is possible that there will be no fundamental breach.101 This is true particularly if the buyer can resell the goods without going outside her usual market.102 Requiring a buyer to go outside her regular market to dispose of non-conforming goods would in itself substantially deprive her of her expectations under the contract, and that deprivation ought to be foreseeable to the seller.103 38 Frequently a certain percentage of the goods is defective, while others conform to specifications. These cases have been handled in varying ways. One response has looked at the alternatives for use or disposal of the defective goods. If the buyer can dispose of them in the ordinary course of business, then he has had to do so.104 Other courts have, however, placed a great deal of emphasis on the proportion of defective goods, and if a substantial proportion (nearly all) is defective, then the seller is in fundamental breach.105 In a case involving deficient air conditioners sold by a U.S. company to an Italian buyer, a U.S. court permitted avoidance of the contract because 93 percent of the air conditioners were defective, and attempts to cure the non-conformity failed.106 In a case involving shipments of vacuum-packed fresh lamb, only a small percentage of the meat was past its sell-by date, but the entire shipment was seized by the authorities due to erroneous labelling thus depriving the buyer of its goods. The buyer was entitled to avoid.107 39 Failure to deliver goods suitable for a buyer’s purpose can result in a fundamental breach so long as the seller is aware of the buyer’s needs.108 Absent that notice, the buyer cannot necessarily assume the seller will be aware of conditions prevailing in his 99 Landgericht Berlin (Germany) 15 September 1994 (Shoes), CISG-Online 399 (Pace). The delivery of poor-quality wine that could not be sold, even at a reduced price, was a fundamental breach. Tribunale de Foggia (Italy), 21 June 2013 (Wine), Samuel Smith, The Old Brewery v. Vini San Barbato, snc, CISGOnline 2674 (Pace). 100 Landgericht Saarbru ¨ cken (Germany) 2 July 2002 (Tiles), CISG-Online 713 (Pace). 101 Oberlandesgericht Frankfurt (Germany) 18 January 1994 (Shoes), CISG-Online 123 (Pace); Bundesgericht (Switzerland) 3 April 1996 (Cobalt sulphate), CISG-Online 135 (Pace) (holding that there was no fundamental breach even though the product was of a different origin than specified in the contract and was of inferior quality; the goods could have been marketed to buyers in Germany); Bundesgericht (Switzerland) 28 October 1998 (Frozen meat), CISG-Online 413 (Pace) (deviation of quality in meat in which there was an excessive proportion of fat and too much moisture did not constitute fundamental breach; buyer could have disposed of the meat at a lower price as part of its own business in Egypt). 102 Lookofsky, Understanding the CISG (2008), p. 116 note 69. 103 Lookofsky, Understanding the CISG (2008), p. 116 note 69; Schwenzer, Avoidance of the Contract in Case of Non-Conforming Goods (Article 49(1)(A) CISG), 25 Journal of Law and Commerce (2005–06) 437 (438). 104 Graffi, Case Law on the Concept of “Fundamental Breach” in the Vienna Sales Convention, 3 Revue de droit des affaires internationales (2003) 337 (342) (Pace). 105 Graffi, Case Law on the Concept of “Fundamental Breach” in the Vienna Sales Convention, 3 Revue de droit des affaires internationales (2003) 337 (342) (Pace). 106 US Court of Appeals (2nd Circuit,) (U.S.) 6 December 1995 (Compressors for air conditioners), Delchi Carrier, S. p. A. v Rotorex Corp., CISG-Online 140 (Pace); Landesgericht Landshut (Germany) 5 April 1995 (Clothes), CISG-Online 193 (Pace) (entire delivery of sportswear shrunk after being washed); cf. Oberlandesgericht Hamm (Germany) 22 September 1992 (Pork bacon), CISG-Online 57 (Pace) (420 kilos of defective goods out of total delivery of 22 tons insufficient to constitute total breach). 107 Cour de Cassation (France) 17 December 2013 (Lamb meat), Socinter v. Wallace, CISG-Online 2478. 108 Gabriel, Contracts for the Sale of Goods: A Comparison of US and International Law (2009) p. 108; Oberster Gerichtshof (Austria) 21 June 2005 (Software), CISG-Online 1047 (Pace) (if it was well-known that software was to be sold in Austria, then any detriment resulting from goods’ inability to be used in Austria was obvious and foreseeable).

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country. Thus, New Zealand mussels were sold to a German buyer, but they contained a level of cadmium in excess of that recommended by the German health authority. Yet the German Supreme Court declined to find a fundamental breach. It held that the cadmium standard was not legally binding, but was merely a recommendation.109 Moreover, it was incumbent upon the New Zealand seller to know of the regulations prevalent in the German market.110 By contrast, an Italian seller of wine in France committed a fundamental breach by adding sugar to wine in contravention of French wine regulations.111 Delivery of goods not fit for sale in any country, as was the case with wheat to which potassium bromide had been added, even though it was not a permitted food additive under the Codex Alimentarius, was a fundamental breach.112 A spice seller was deemed to be operating in a sector where safety concerns were paramount, given EU regulations on permissible levels of contamination and general concerns in the industry about safety threats from contaminated colourants.113 In order to ensure the ability to avoid, it is essential that a buyer include in the contract a requirement that the goods meet the specifications of the country in which the buyer plans to sell the goods. A frequent occurrence involves only the partial delivery of an expected shipment of 40 goods. This is dealt with specifically by Art. 51.114 The general rule is that a buyer can declare avoidance only as to the unperformed portion of the contract, but that in certain circumstances the failure to deliver the whole amount will amount to a fundamental breach of the contract.115 A related question is whether the failure to deliver one or more shipments under an instalment contract amounts to a fundamental breach. This question is controlled by Art. 73.116 The decision will depend on context, but a buyer’s failure to open the requisite letter of credit and announcement that it would not accept any shipments on previously scheduled dates has amounted to a fundamental breach.117 The variety of cases, and the variety of outcomes, show that what constitutes 41 deficiency is variable and context-dependant. Again it is essential that the contracting parties make clear what features of the goods are essential in the course of their bargaining.118 109 Bundesgerichtshof (Germany) 8 March 1995 (Mussels), CISG-Online 144 (Pace). It appeared that the mussels would not have violated New Zealand standards. 110 Bundesgerichtshof (Germany) 8 March 1995 (Mussels), CISG-Online 144 (Pace). The court left open the question whether this might change in the event that the seller had a branch in the buyer’s country or had been doing business there repeatedly for a period of time. 111 Cour de Cassation (France) 23 January 1996 (Wine), Sacovini/M. Marrazza v Les fils de Henri Ramel, CISG-Online 159 (Pace). 112 Gerechtshof Gravenhage (the Netherlands) 23 April 2003 (Wheat flour), Rynpoort Trading & Transport N. V. et al. v Meneba Meel Wormerveer B. V. et al., CISG-Online 903 (Pace). 113 Murcia Provincial High Court (Spain) 25 May 2012 (Red pepper powder), CISG-Online 2463 (Paee). 114 See the commentary to Art. 51 CISG, infra paras 1 et seq., 9 et seq., for a full exploration of this issue. 115 In another case, the lower court stated that when a buyer refuses to perform a residual part of the contract, it could amount to a fundamental breach because the parties attached importance to the “package as a whole.” Oberlandesgericht Graz (Austria) 29 July 2004 (Construction equipment), CISGOnline 1627 (Pace). 116 See the commentary to Art. 73 CISG, infra paras 8 et seq. and Art. 51, infra paras 4 et seq., for a full exploration of this issue. 117 Arbitral Award, ICC 10 274/1999 (Poultry feed) (Pace). 118 Schwenzer, Avoidance of the Contract in Case of Non-Conforming Goods (Article 49(1)(A) CISG), 25 Journal of Law and Commerce (2005–06) 437 (437 et seq.); Oberlandesgericht Innsbruck (Austria) 1 July 1994 (Garden flowers), CISG-Online 107 (Pace) (delivery of flowers that failed to bloom all summer as the buyer had expected did not qualify as fundamental breach because the buyer could not establish that those expectations were included in the contract); Cour de cassation (France) 26 May 1999

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Part III. Sale of Goods

d) Ancillary contractual obligations. The breach of any provision in a contract can prove to be fundamental. The CISG does not distinguish between principal and ancillary obligations.119 Provisions regarding exclusivity are an example. One Italian shoe manufacturer displayed at a trade fair shoes made for a German buyer, and bearing a trademark for which the German buyer was a licensee. The court held that this amounted to a fundamental breach in violation of a contractual exclusivity provision.120 In another case involving an alleged violation of an exclusivity agreement, the buyer initially declared avoidance of the contract, but after the goods were removed from the offerings of the competing retailer (5 weeks later), the buyer proposed instead to maintain the contract with a 50-percent price reduction. The seller did not accept. The Supreme Court of Austria found avoidance unjustified. Avoidance was a remedy of last resort, and assessing its application requires weighing the interests of the parties. Here the goods had been delivered to a competing retailer in only one of two cities where the buyer had its department store and had been sold for only a short time. Moreover, the buyer, by offering to maintain the contract, had demonstrated that performance of the contract was not unreasonable.121 Violating a contractual prohibition on the re-importation of goods has also been held to be a fundamental breach.122 Yet the burden of proving that an ancillary contractual obligation is in fact fundamental will lie, often heavily, on the injured party.123

e) Documentary transactions. Though the CISG does not contain a perfect-tender rule for goods, it is probable that at least some documents relating to goods, such as those required to satisfy the conditions in a letter of credit, are subject to what might be termed a perfect-tender rule.124 The CISG does not govern letters of credit per se; that is up to the contract between the parties and any applicable municipal laws.125 Payment of a letter of credit usually requires strict compliance with the terms of the letter of credit, and does not involve an enquiry into the quality of the goods underlying the documents. 44 Non-letter-of-credit documents have been treated differently, and some courts have been reluctant to regard the provision of inadequate or faulty documents as a fundamental breach. Rather, they have looked together at the performance underlying the documents and at the documents themselves.126 The obligation of the buyer to open a letter of credit, and his failure to do so in a timely way, has generally not been held to amount to a fundamental breach.127 43

(Rolled sheet metal), Socie´te´ Karl Schreiber GmbH v Socie´te´ Thermo Dynamique Service et al., CISGOnline 487 (Pace) (delivery of un-laminated sheet metal by a Germany company qualified as a fundamental breach when the French buyer specifically needed laminated steel to sell to its domestic purchasers). 119 Ferrari, Fundamental Breach Under the UN Sales Convention: 25 Years of Article 25 CISG, 25 Journal of Law and Commerce (2005–06) 489 (495 et seq.); Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 25 paras 24, 71 seq. 120 Oberlandesgericht Frankfurt (Germany) 17 September 1991 (Shoes), CISG-Online 28 (Pace). 121 Oberster Gerichstof (Austria) 15 November 2012 (Fashion), CISG-Online 2399. 122 Cour d’Appel Grenoble (France) 22 February 1995 (Jeans), BRI Production “Bonaventure” v Pan African Export, CISG-Online 151 (Pace). 123 Schlechtriem/Butler, CISG (2009), para. 114. 124 Reiley, International Sales Contracts: The UN Convention and Related Transnational Law (2008), p. 102; Schwenzer, Avoidance of the Contract in Case of Non-Conforming Goods (Article 49(1)(A) CISG), 25 Journal of Law and Commerce (2005–06) 437 (441). 125 Schlechtriem, Interpretation, Gap-Filling and Further Developments of the U. N. Sales Convention, 16 Pace International Law Review (2004) 279 (305 et seq.). 126 Mullis, Avoidance for breach under the Vienna Convention; a critical analysis of some of the early cases, in: Andreas/Jarborg (eds), Anglo-Swedish Studies in Law (1998), p. 326 (344 et seq.) (Pace). 127 Supreme Court of Queensland (Australia) 17 November 2000 (Scrap steel), Downs Investments Pty Ltd v Perwaja Steel, CISG-Online 587 (and 859) (Pace); Arbitral Award, ICC 7585/1992 (Foamed board machinery) (Pace); Arbitral Award, ICC 7197/1992 (Goods not specified; case involved a letter of credit) (Pace).

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It has even been suggested that if a buyer can obtain the correct documents, the 45 seller’s failure to provide them cannot amount to a fundamental breach.128 Yet this imposes too great an obligation on the buyer, and some courts have recognized that.129 In one case, the tribunal held that requiring the buyer to fix an additional time for performance before claiming fundamental breach would have been overly formalistic. The seller knew that its documents were non-conforming, and despite repeated contact between the buyer and the seller, the seller made no offer to correct the defective documents.130 Further, at least sometimes, even faulty documents not involving letters of credit could impose independent obligations on the provider and a failure to abide by those could in themselves amount to a fundamental breach.131 Though some have suggested that any documentary fault should amount to a 46 fundamental breach in the international sales context,132 this author suggests that a per se rule is going too far. Rather, the circumstances should be taken into account as to whether the failure to provide proper documentation amounts to a breach.133 Explicitness and clarity in the contractual obligations of the parties should be of help in clarifying those situations when it does. f) Relationship to ability to cure. The issue of fundamental breach is closely linked to 47 the ability to cure.134 One German court recognized the primacy of the buyer’s right to avoid the contract under Art. 48, but held that an offer to cure, if it did not cause the buyer great inconvenience, could mean that even a grave defect would not amount to a fundamental breach.135 The dividing line between great inconvenience and permitted inconvenience is unclear. In one case in which the cost of sorting out defects would have amounted to one-third of the purchase price, an arbitral tribunal permitted the buyer to avoid the contract.136 An injured party cannot by his conduct prevent cure and then rely on the fundamentality of the breach.137 The effect of the possibility of cure has not been definitively resolved. Does an offer to 48 cure alleviate an otherwise fundamental breach, or does it prevent the fundamental breach from occurring, at least until an extended period for performance has elapsed without the seller having followed through on the offer to cure?138 Need there even be an offer to cure, so long as the breach remains curable? Because Art. 48 permits cure 128 Landgericht Heidelberg (Germany) 3 July 1992 (Computer components), CISG-Online 38 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 10 February 1994 (Fabrics), CISG-Online 115 (Pace). 129 Arbitral Award, ICC 7531/1994 (Scaffold fittings) (Pace); Landgericht Baden-Baden (Germany) 14 August 1991 (Wall tiles), CISG-Online 24 (Pace). 130 Arbitral Award, ICC 7645/1995, March 1995 (Crude metal) (Pace). 131 Mullis, Avoidance for breach under the Vienna Convention; a critical analysis of some of the early cases, in: Andreas/Jarborg (eds), Anglo-Swedish Studies in Law (1998), p. 326 (p. 348 et seq.) (Pace). 132 Mullis, Avoidance for breach under the Vienna Convention; a critical analysis of some of the early cases, in: Andreas/Jarborg (eds), Anglo-Swedish Studies in Law (1998), p. 326 (p. 344 et seq.) (Pace). 133 CISG-AC Opinion no 5, paras 4.11 et seq. 134 Mullis, Avoidance for breach under the Vienna Convention; a critical analysis of some of the early cases, in: Andreas/Jarborg (eds), Anglo-Swedish Studies in Law (1998), p. 326 (p. 341 et seq.) (Pace); Honnold, Uniform Law (2009), Art. 25 para. 184. 135 Oberlandesgericht Koblenz (Germany) 31 January 1997 (Acrylic blankets), CISG-Online 256 (Pace). Not all cases have gone in that direction. Landgericht Baden-Baden (Germany) 14 August 1991 (Wall tiles), CISG-Online 24 (Pace). 136 Arbitral Award, ICC 7531/1994 (Scaffold fittings) (Pace). 137 US District Court, District of New Jersey (U.S.) 4 April 2006 (Naphtha), Valero Marketing & Supply Co. v Greeni Oy, CISG-Online 1216 (Pace). 138 Mullis, Avoidance for breach under the Vienna Convention; a critical analysis of some of the early cases, in: Andreas/Jarborg (eds), Anglo-Swedish Studies in Law (1998), p. 326 (p. 342 et seq.) (Pace); Schwenzer, Avoidance of the Contract in Case of Non-Conforming Goods (Article 49(1)(A) CISG), 25 Journal of Law and Commerce (2005–06) 437 (439).

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even after the date of delivery, some have argued that the ability to cure extends after the date of performance. Thus, if the seller delivers defective goods but repairs or replaces defective parts quickly such that substantial detriment is prevented, the action would prevent a fundamental breach from occurring.139 This has been described as a “vicious circle”: “no right to cure if the breach is fundamental, but no fundamental breach if the defect is curable.”140 49 One response is to permit the seller to cure unless the specific interests of the buyer dictate otherwise.141 This is a workable solution if the time for performance has not yet come due. Otherwise, it might be less than desirable, and, indeed, opinions are mixed as to whether cure even after the time performance has come due should be permitted.142 One criticism is that it does not lead to predictable results.143 Also, it does not take into account Art. 49, which permits a buyer to avoid notwithstanding the potential for cure, and to which Art. 48(1) is subordinated.144 Yet it is consistent with the general approach that contract termination should be a last remedy. The reference to Art. 49 essentially shifts the interpretation to that provision.145 If the buyer has a special interest in terminating the contract immediately, he should be able to do so, even if cure would be possible. If, on the other hand, curing the defects would not harm a fundamental interest of the buyer, then the cure should be permitted.146 Again, by making clear in the contract that timely delivery is essential to the buyer, the parties can avoid uncertainty with respect to interpretation of their contract and their intentions.

III. Comparable Rules 50

The PICC contain a notion similar to fundamental breach, but the terminology they use can lead to confusion. “Termination” is used in lieu of “avoidance” such that the effect of termination under the PICC is the same as the effect of avoidance under the 139 Honnold, Uniform Law (2009), Art. 25 para. 184; Oberlandesgericht Koblenz (Germany) 31 January 1997 (Acrylic blankets), CISG-Online 256 (Pace). 140 Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 323. 141 Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 323. 142 Graffi, Case Law on the Concept of “Fundamental Breach” in the Vienna Sales Convention, 3 Revue de droit des affaires internationales (2003) 337 (343) (Pace); Huber, in: Huber/Mullis, The CISG (2007), pp. 222 seq. 143 Mullis, Avoidance for breach under the Vienna Convention; a critical analysis of some of the early cases, in: Andreas/Jarborg (eds), Anglo-Swedish Studies in Law (1998), p. 326 (342 et seq.) (Pace); Graffi, Case Law on the Concept of “Fundamental Breach” in the Vienna Sales Convention, 3 Revue de droit des affaires internationales (2003) 337 (343 seq.) (Pace); Koch, in: Felemegas, 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), pp. 131 et seq.; Pretura circondariale di Parma (Italy) 24 November 1989 (Knapsacks, bags, wallets), CISG-Online 316 (Pace); Oberlandesgericht Frankfurt (Germany) 17 September 1991 (Shoes), CISG-Online 28 (Pace); Oberlandesgericht Oldenburg (Germany) 1 February 1995 (Furniture), CISG-Online 253 (Pace); Arbitral Award, ICC 7531/1994 (Scaffold fittings) (Pace). Cf. Schwenzer, Avoidance of the Contract in Case of Non-Conforming Goods (Article 49(1)(A) CISG), 25 Journal of Law and Commerce (2005–06) 437 (439) (suggesting that in most cases if timely delivery is of the essence the delay will result in fundamental breach); but see Bridge, The CISG and the UNIDROIT Principles of International Commercial Contracts, 29 Uniform Law Review (2014) 623 (634) (suggesting that “of essence” provisions are “contradictory” to the test of fundamental breach in Article 25 because the only question is the actual consequences of breach in a given case). 144 Koch, in: Felemegas, 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), p. 131. 145 Huber, in: Huber/Mullis, The CISG (2007), pp. 222 seq. 146 Huber, in: Huber/Mullis, The CISG (2007), pp. 222 seq.; CISG-AC Opinion no 5, para. 4.4; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 25 para. 47.

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CISG.147 The CISG adopted the usage found in ULIS, even though avoidance under the CISG differs significantly from avoidance under the ULIS.148 By contrast, avoidance under the PICC is concerned with defences to the formation of a contract, and not with performance.149 Art. 7.3.1(1) PICC states that “[a] party may terminate the contract where the failure 51 of the other party to perform an obligation under the contracts amounts to a fundamental non-performance.”150 Non-performance is defined as “failure by a party to perform any of its obligations under the contract, including defective performance or late performance.”151 Fundamental non-performance is to be assessed by looking at whether (a) the non-performance substantially deprives the aggrieved party of what it was entitled to expect under the contract unless the other party did not foresee and could not reasonably have foreseen such result; (b) strict compliance with the obligation which has not been performed is of essence under the contract; (c) the non-performance is intentional or reckless; (d) the non-performance gives the aggrieved party reason to believe that it cannot rely on the other party’s future performance; (e) the non-performing party will suffer disproportionate loss as a result of the preparation or performance if the contract is terminated.152 Much of this terminology is consistent with Art. 25 CISG. The factors include the 52 assessment of the injured party’s expectations under the contract and the foreseeability of the resulting injury from both subjective and objective points of view. The PICC recognise the primacy of the contractual provisions in assessing the preceding question. The final three factors have no clear analogues in Art. 25 CISG, although they have 53 been raised in commentary and to a lesser extent in cases. Whether the non-performance is unintentional or reckless has usually been held not to be a factor in assessing the fundamental nature of the breach.153 Similarly, the question of future reliability has not been addressed significantly in the CISG context, although some have suggested that it should be a factor.154 The weighing criterion is also not in Art. 25 CISG. Although weighing is implicitly a factor in the courts’ assessment of whether the buyer should be required to rectify any breach by marketing the goods himself, the analysis is different from that in the PICC. Under Art. 25 CISG the question of mitigating harm goes to whether a breach is fundamental; under Art. 7.3.1.2(e) PICC the weighing question goes to whether avoidance is permitted, notwithstanding the existence of a fundamental breach.155 147

Arts 7.3.5 seq. PICC. Secretariat Commentary to 1978 Draft, Art. 45 (now Art. 49) para. 2 (noting the narrowing of the usage of avoidance to eliminate the ipso facto avoidance available under ULIS); Will, in: Biana/Bonell, Commentary (1987), Art. 49 paras 1.2.1 et seq. 149 Arts 3.4 et seq. PICC. 150 Art. 7.3.1(1) PICC. 151 Art. 7.1.1. PICC. 152 Art. 7.3.1(2) PICC. 153 Koch, in: Felemegas, 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), p. 130. See para. 15, supra. 154 See paras. 28 et seq., supra. 155 Koch, in: Felemegas, 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), p. 130. Professor Bridge suggests that the deficiencies of Article 25 would be remedied were it possible to refer to factors besides factual deprivation of benefit, including “whether the non-performance is 148

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56

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The PICC also contain a nachfrist provision. “In the case of delay the aggrieved party may also terminate the contract if the other party fails to perform before the time allowed it under Article 7.1.5 has expired.”156 The PECL also address “fundamental non-performance.” “A non-performance of an obligation is fundamental to the contract if: (a) strict compliance with the obligation is of the essence of the contract; or (b) the non-performance substantially deprives the aggrieved party of what it was entitled to expect under the contract, unless the other party did not foresee and could not reasonably have foreseen that result; or (c) the nonperformance is intentional and gives the aggrieved party reason to believe that it cannot rely on the other party’s future performance.”157 The first two provisions are consistent with Art. 25 CISG. If the parties make clear in their contract that certain provisions are essential to their interests under the contract, a failure to abide by those provisions will result in a fundamental breach. The third provision is consistent with the PICC, but not with the CISG, which does not focus on the fault or intention of the breaching party.158 The PECL have a provision that addresses cure: “A party whose tender of performance is not accepted by the other party because it does not conform to the contract may make a new and conforming tender where the time for performance has not yet arrived or the delay would not be such as to constitute a fundamental non-performance.”159 As suggested above, the first phrase is consistent with Art. 25 CISG. The latter phrase would permit cure even after the time for performance has elapsed so long as the delay does not constitute fundamental non-performance. This solution has also been offered with respect to Art. 25 CISG;160 the PECL make clear that it is permitted. The PECL adopt a nachfrist solution to the question of late performance. Thus, an aggrieved party may set an additional time for performance, and may suspend its own performance during the additional period.161 At the end of the nachfrist period the aggrieved party may terminate the contract.162 The DCFR also refers to termination “if the debtor’s non-performance of a contractual obligation is fundamental.”163 What constitutes “fundamental” non-performance is further described in terms very similar to those in Art. 25 CISG: non-performance is fundamental if “it substantially deprives the creditor of what the creditor was entitled to expect under the contract, as applied to the whole or relevant part of the performance, unless at the time of conclusion of the contract the debtor did not foresee and could not reasonably be expected to have foreseen that result.”164 The DCFR provision makes explicit the time at which foreseeability should be measured – it is the time of the conclusion of the contract.

intentional or reckless, the degree of detriment that the non-performer would suffer if the contract were terminated, and whether strict compliance is ‘of essence’ under the contract.” Bridge, The CISG and the UNIDROIT Principles of International Commercial Contracts, 29 Uniform Law Review (2014) 623 (634). 156 Art. 7.3.1(3) PICC. 157 Art. 8:103 PECL. 158 Professor Bridge suggests that rules on misrepresentation could in fact “undermine the doctrine of fundamental breach with its philosophy of contractual continuance.” Bridge, The CISG and the UNIDROIT Principles of International Commercial Contracts, 29 Uniform Law Review (2014) 623 (638 & n. 58). 159 Art. 8:104 PECL. 160 See paras 47 et seq., supra. 161 Art. 8:106(1),(2) PECL. 162 Art. 8:106(3) PECL. 163 Art. III – 3:502(1) DCFR. 164 Art. III – 3:502(2)(a) DCFR.

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Unlike the CISG, but like the PECL and the PICC, the DCFR also adds a fault 60 provision: non-performance is fundamental if “it is intentional or reckless and gives the creditor reason to believe that the debtor’s future performance cannot be relied on.”165 165

Art. III – 3:502(2)(b) DCFR.

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Article 26 A declaration of avoidance of the contract is effective only if made by notice to the other party. Bibliography: Butler, A Practical Guide to the CISG: Negotiations Through Litigation (2007); Ferrari, Brief Remarks on the Conclusion of Contract on the Internet and the United Nations Convention on Contracts for the International Sale of Goods (CISG), 5 European Legal Forum (2000/2001) 301; Jacobs, Notice of Avoidance Under the CISG: A Practical Examination of Substance and Form Considerations, the Validity of Implicit Notice, and the Question of Revocability, 64 University of Pittsburgh Law Review (2003) 407; Magnus, The Remedy of Avoidance of Contract under CISG – General Remarks and Specific Cases, 25 The Journal of Law and Commerce (2005–06) 423; Schlechtriem, Basic Structures and General Concepts of the CISG as Models for a Harmonisation of the Law of Obligations, 10 Juridica International (2005) 27; Ziegel, Comment on Roder Zelt-und Hallenkonstruktionen GmbH v Rosedown Park Pty Ltd. Review of the Convention on Contracts for the International Sale of Goods (CISG) (1998) 53.

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Form of notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. The possibility of implicit notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Time period for notice to be given . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Risk of non-delivery of notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 2 3 7 12 15 16

I. Importance and Role of the Provision 1

Art. 26 makes clear that a party entitled to terminate a contract must give notice of avoidance to the breaching party. This distinguishes it from its predecessor, the ULIS, which provided for automatic termination of a contract.1 Requiring that notice be given avoids the problem of determining the date on which the termination is effective once there has been a breach.2 It also distinguishes CISG practice from that found in systems based on the French Civil Code, which does not permit unilateral notice of termination by an aggrieved party but requires that avoidance be declared by court decision.3 Permitting the aggrieved party to give notice of avoidance allows the contracting parties to clarify the status of their relationship without engaging in litigation, unless of course the non-avoiding party disputes the avoiding party’s right to terminate the contract.4

1 Magnus, The Remedy of Avoidance of Contract under CISG – General Remarks and Specific Cases, 25 The Journal of Law and Commerce (2005–06) 423 (426). See also Arts 49 (“buyer may declare the contract avoided”) and 64 (“seller may declare the contract avoided”). 2 Magnus, The Remedy of Avoidance of Contract under CISG – General Remarks and Specific Cases, 25 The Journal of Law and Commerce (2005–06) 423 (426). 3 Schlechtriem, Basic Structures and General Concepts of the CISG as Models for a Harmonisation of the Law of Obligations, 10 Juridica International (2005) 27 (32). 4 Schlechtriem, Basic Structures and General Concepts of the CISG as Models for a Harmonisation of the Law of Obligations, 10 Juridica International (2005) 27 (32).

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II. Detailed Commentary Art. 26 does not specify what form notice must take, nor does it clarify whether 2 notice need be explicit or implicit. It also says nothing about the time period in which notice needs to be given. These are the issues that have given rise to the greatest controversy under the provision.

1. Form of notice Art. 26 imposes no specific requirements as to the form that notice must take. Notice 3 of avoidance must be communicated to the other party by appropriate means, which can include either written or oral notification.5 Electronic communications will suffice, provided that the addressee has expressly or impliedly consented to receive electronic messages of that type, in that format, at that address.6 Thus, notice of avoidance can come by email in appropriate circumstances.7 The most important factor is that the information be conveyed to the addressee, rather than that it be conveyed in a particular form.8 Telephonic notice is acceptable.9 Several courts and commentators have suggested that the burden of proof will lie on the party giving notice to prove that the telephone call occurred, notwithstanding Art. 27’s allocation of the responsibility for a delay or error in the transmission at the door of the breaching party.10 Thus, written notice, whether electronic or in the form of paper, is desirable from an evidentiary standpoint.11 The communication need not contain the word “avoidance,” but it must make clear 4 that the injured party is no longer prepared to perform its duties under the contract as a result of the other party’s breach.12 For example, in one German case the notice from 5

Oberster Gerichtshof (Austria) 6 February 1996 (Propane gas), CISG-Online 224 (Pace). CISG – AC Opinion no 1, Art. 26. 7 Magnus, The Remedy of Avoidance of Contract under CISG – General Remarks and Specific Cases, 25 The Journal of Law and Commerce (2005–06) 423 (426). See also Ferrari, Brief Remarks on the Conclusion of Contract on the Internet and the United Nations Convention on Contracts for the International Sale of Goods (CISG), 5 European Legal Forum (2000/2001) 301 (307); Gabriel, General Provisions, Obligations of the Seller, and Remedies for Breach of Contract by the Seller, in: Ferrari/ Flechtner/Brand, Draft Digest and Beyond (2003), pp. 341 et seq. 8 CISG – AC Opinion no 1, para. 26.1. 9 Oberster Gerichtshof (Austria) 29 June 1999 (Plates), CISG-Online 483 (Pace); Landesgericht Frankfurt (Germany) 9 December 1992 (Shoes), CISG-Online 184 (Pace). If, however, a party’s principal place of business is in a state that has taken a reservation under Art. 96, the notice might have to be in writing. Gabriel, Contracts for the Sale of Goods: A Comparison of US and International Law (2009) p. 112; Honnold, Uniform Law (2009), Art. 26 para. 187.2. 10 See, e. g., Landgericht Kassel (Germany) 22 June 1995 (Clothes), CISG-Online 370 (Pace); Landgericht Frankfurt (Germany) 13 July 1994 (Shoes), CISG-Online 118 (Pace); Jacobs, Notice of Avoidance Under the CISG: A Practical Examination of Substance and Form Considerations, the Validity of Implicit Notice, and the Question of Revocability, 64 University of Pittsburgh Law Review (2003) 407 (411–12); Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 27 para. 5. 11 The parties to a contract can specify the means of communication by which notice of avoidance should be conveyed to the other party. Schlechtriem, 25 Years of the CISG: An International lingua franca for Drafting Uniform Laws, Legal Principles, Domestic Legislation and Transnational Contracts, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 182. 12 See, e.g., Huber, in: Huber/Mullis, The CISG, p. 210, Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 26 paras 6 et seq.; Oberster Gerichtshof (Austria) 5 July 2001 (Intel Pentium II/300 Processors), CISG-Online 652 (Pace); Oberster Gerichtshof (Austria) 6 February 1996 (Propane gas), CISG-Online 224 (Pace); Oberlandesgericht Ko¨ln (Germany) 14 October 2002 (Designer clothes), CISG-Online 709 (Pace); Oberlandesgericht Karlsruhe (Germany) 19 December 2002 (Machine), CISGOnline 817 (Pace). 6

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the buyer informed the seller that the goods were “immediately and totally” at his disposal, requested repayment of the price, and refused any further deliveries.13 The German court held these terms to have provided sufficient notice of avoidance.14 Court decisions stress that a “notice of avoidance under Art. 26 CISG must satisfy a high standard of clarity and precision”15 and “must be unambiguous in that the [aggrieved party] does not want to keep the contract on foot.”16 Notwithstanding these high standards, the parties’ declarations should be interpreted in conformity with what a reasonable person would have understood in those same circumstances.17 Thus, if a reasonable person would view the communication as clearly expressing the aggrieved party’s wish to avoid the contract as a result of the particular breach, notice of avoidance will have been given. 5 Once a party has avoided the contract, its subsequent conduct will not rescind the notice. In one case, a buyer’s offer to return non-conforming goods served as notice of avoidance in a case involving the sale of defective shoes.18 This notice was not undone by the buyer’s subsequent letter informing the seller that the buyer would try to sell the shoes; the latter action was simply an attempt by the buyer to mitigate damages.19 6 A party’s right to avoid a contract will frequently be linked to the expiry of an additional period of time granted for performance under the nachfrist principle. Once the extended period of time has elapsed, the aggrieved party must actually exercise its right to avoid; the passage of time alone will not be sufficient to serve as a notice of avoidance.20 Although one court has suggested in obiter dicta that it might be possible to declare an anticipatory notice of avoidance at the same time as a party sets the extra time period, the better and more commonly taken view is that specific notice must be given once the additional period has elapsed.21 Indeed, most tribunals have suggested that the setting of an additional period of time for performance is not compatible with automatic termination upon the expiry of that time period.22 This is because the ability 13

Oberlandesgericht Ko¨ln (Germany) 14 October 2002 (Designer clothes), CISG-Online 709 (Pace). Oberlandesgericht Ko¨ln (Germany) 14 October 2002 (Designer clothes), CISG-Online 709 (Pace). 15 Arbitral Award, ICC 9978/1999, March 1999 (Goods not specified) (Pace). 16 Oberster Gerichtshof (Austria) 28 April 2000 (Jewelry), CISG-Online 581 (Pace). 17 See Jacobs, Notice of Avoidance Under the CISG: A Practical Examination of Substance and Form Considerations, the Validity of Implicit Notice, and the Question of Revocability, 64 University of Pittsburgh Law Review (2003) 407 (409); Arbitral Award, ICC 8128/1995 (Chemical fertilizer) (Pace); Arbitral Award, ICC 7645/1995, March 1995 (Crude metal) (Pace) (buyer’s statement that it would not take shipment because cargo was loaded after the shipping date and after the expiry of the letter of credit was sufficient to constitute notice of avoidance). 18 Landgericht Berlin (Germany) 15 September 1994 (Shoes), CISG-Online 399 (Pace). 19 For discussion as to the possibility of rescinding notice, see the commentary to Art. 27 infra, paras 15 et seq. 20 Oberlandesgericht Graz (Austria) 29 July 2004 (Construction equipment), CISG-Online 1627 (Pace); Vrhovno sodisce (Slovenia) 13 September 2011 (Water and oil pumps), CISG-Online 2329 (Pace) (unclear whether notice had been given upon expiry of the Nachfrist period; Supreme Court remanded for factual findings on that question). 21 Oberlandesgericht Graz (Austria) 29 July 2004 (Construction equipment), CISG-Online 1627 (Pace). The Austrian court suggested the possibility of dual-purpose notice found in the seller’s statement – “Should you fail to make payment and collect the identified machinery until [sic] 10 July 2002, we will rely on claims for damages because of non-performance or avoid the contract.” – insufficient. The buyer, however, had responded by requesting cancellation of the contract, which in itself amounted to a notice of avoidance, and the court held that the seller was thus not obligated to provide any further declaration. The court did not explain why the seller’s initial declaration had been inadequate, although the most likely reason is that it provided alternatives and thereby created ambiguity. The DCFR provides that setting the nachfrist period can serve as automatic notice of avoidance on its expiration. See para. 16, infra. 22 Arbitral Award, ICC 11 849/2003 (Fashion products) (Pace). A seller who wrote a letter to a buyer giving it an additional 20 days to open a letter of credit and providing that the contract would be 14

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to terminate is triggered only by the elapse of the additional period of time set by the first notification. The latter view is preferred as it provides more certainty and avoids ambiguity about the status when the late-performing party performs, or partially performs, during the additional period of time.

2. The possibility of implicit notice The biggest controversy under Art. 26 has been whether implicit notice is permis- 7 sible. The bulk of authority suggests that the intention to avoid can be implied rather than express, but the implication must be very strong.23 A buyer who does not provide explicit notice of intent to avoid in a market in which prices are increasing sharply has not fulfilled the obligations in Art. 26.24 Yet in one case a Swiss court held that it could give juridical effect to the inaction of the parties after the late delivery of (nonconforming) goods: “This common inactivity of parties must be analyzed as the reciprocal manifestation of a tacit will to renounce the performance of the contract.”25 In another case, the buyer was excused from its failure to expressly avoid the contract due to the seller’s having “seriously and conclusively refused to perform its contractual obligations by disputing the existence of a binding contract.”26 These conclusions will likely be fairly fact-specific. In the first case, the court held that the time period for delivery was an essential part of the contract such that late delivery was a fundamental breach; the goods eventually delivered were late and there had been ample correspondence between the parties about the importance to the buyer of timely delivery of the product – Egyptian cotton – due to its commitments to subsequent purchasers.27 The second raised a question of estoppel. Filing a claim in local court has been held adequate to constitute notice of avoid- 8 ance.28 An Australian company failed to pay in full for tent hall structures it purchased from a German company, and ultimately filed for insolvency. After negotiation failed to terminated at the end of the period of time had not given notice of avoidance under Art. 26. According to the tribunal, termination would have required a second, specific notice after the elapse of the additional period of time. 23 Magnus, The Remedy of Avoidance of Contract under CISG – General Remarks and Specific Cases, 25 The Journal of Law and Commerce (2005–06) 423 (427 note 13) (collecting authorities for and against); Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 26 paras 7 et seq.; Andersen, Selected Notice Requirements under CISG, PECL, and UNIDROIT Principles: CISG Arts 39 & 26; UNIDROIT Principles, Arts 1.9, 3.14, 7.3.2; PECL Arts 1.303, 3.304, 4.112, 9.303, 13.104 (November 2004) (Pace); Jacobs, Notice of Avoidance Under the CISG: A Practical Examination of Substance and Form Considerations, the Validity of Implicit Notice, and the Question of Revocability, 64 University of Pittsburgh Law Review (2003) 407 (413); Butler, A Practical Guide to the CISG: Negotiations Through Litigation (2007) para. 6.05[A] (notice must be “recognizable and realizable to the other party”). 24 Arbitral Award, AAA 50181T 0 036 406, 12 December 2007 (Frozen chicken parts), Macromex Srl. v Globex International Inc., CISG-Online 1647 (Pace). 25 Bundesgericht (Switzerland) 15 September 2000 (Egyptian cotton), FCF S. A. v Adriafil Commerciale S. r. l., CISG-Online 770 (Pace). 26 Oberlandesgericht Mu ¨ nchen (Germany) 15 September 2004 (Leather for furniture), CISG-Online 1013 (Pace). 27 Oberlandesgericht Mu ¨ nchen (Germany) 15 September 2004 (Leather for furniture), CISG-Online 1013 (Pace); Oberlandesgericht Hamburg (Germany) 28 February 1997 (Iron molybdenum), CISG-Online 261 (Pace) (holding that an explicit declaration of notice was unnecessary because the seller had refused to deliver). 28 Federal Court Adelaide (Australia) 28 April 1995 (Tent hall structures), Roder Zelt- und Hallenkonstruktionen GmbH v Rosedown Park Pty Ltd et al., CISG-Online 218 (Pace), para. 48. The German seller retained title to the goods pending payment in full. According to the commentary on the case, the Court erred in treating it as a sale of goods; rather, performance on the part of the seller was complete, and the seller’s retention of title served a security function and should have been treated under the applicable domestic law on security interests. Ziegel, Comment on Roder Zelt-und Hallenkonstruktionen GmbH v

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resolve the dispute between the parties, the seller filed a statement of claim in court in which it asked for leave to take possession of the goods; the Federal Court in Adelaide held that the filing of the statement of claim sufficed as a declaration of avoidance.29 One commentator questioned this assumption on the grounds that the filing of a writ would, in some circumstances, be “too blunt an instrument for giving notice of avoidance.”30 This might be the case, for example, when a buyer initiates proceedings to avoid a contract because the goods were defective. Thus, scholars have taken the position that commencing court proceedings does not deprive a seller of the option to cure.31 Again, the lesson for the avoiding party is to provide clear notice of intent to avoid so as to circumvent later problems. 9 Avoidance under Art. 26 is also linked to the ability of the wronged party to “cover” by engaging in a substitute transaction. According to one Spanish court, a buyer cannot recover the difference in the price paid in the substitute transactions and the contract price, as provided for in Art. 75, before notice of avoidance is given to the seller.32 Yet according to another court, scholarly opinion is that “the party relying on a breach of contract may demand a claim for the price difference even without a formal act of contract avoidance by executing the cover transaction and thereby abdicating any further execution of the contract.”33 Implicit in this holding is that the breaching party have notice of the cover transaction and sufficient knowledge of the situation to understand its implications. Acts such as the return of goods without further explanation will tend not to equate to notice as the receiving party might interpret the act to be something other than notice of avoidance.34 10 The key factor is the avoidance of ambiguity. The CISG included an explicit notice provision to avoid many of the problems that had arisen under the ULIS, which permitted ipso facto avoidance – i. e., avoidance without notice to the breaching party.35 Because of the consequences of avoidance – likely a claim for damages and/or restitution on the part of the parties – the declaration of avoidance should be clear and precise.36 Rosedown Park Pty Ltd., Review of the Convention on Contracts for the International Sale of Goods (CISG) (1998) 53 (56–57) (Pace). 29 Federal Court Adelaide (Australia), 28 April 1995 (Tent hall structures), Roder Zelt- und Hallenkonstrucktionen GmbH v Rosedown Park Pty Ltd et al., CISG-Online 218 (Pace), para. 59. The appointment of an administrator also did not excuse Roder Zelt from notifying avoidance of the contract; while the Australian Companies Law prevented Roder Zelt from repossessing the goods while they were in administration, it did not prevent its filing a notice of avoidance. 30 Ziegel, Comment on Roder Zelt-und Hallenkonstruktionen GmbH v Rosedown Park Pty Ltd Review of the Convention on Contracts for the International Sale of Goods (CISG) (1998) 53 (60) (Pace); see also Gabriel, General Provisions, Obligations of the Seller, and Remedies for Breach of Contract by the Seller, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 339 (suggesting this would be a dangerous general proposition). 31 Ziegel, Comment on Roder Zelt-und Hallenkonstruktionen GmbH v Rosedown Park Pty Ltd Review of the Convention on Contracts for the International Sale of Goods (CISG) (1998) 53 (60 note 23) (Pace). 32 Audiencia Provincial de Valencia (Spain) 31 March 2005 (Oranges), Frischaff Produktions GmbH v Guillem Export S. L, CISG-Online 1369 (Pace). 33 Oberlandesgericht Graz (Austria) 29 July 2004 (Construction equipment), CISG-Online 1627 (Pace). What is not clear is whether when the aggrieved party is aware of the cover transaction, that conduct could amount to adequate notice for purposes of Art. 26. Cf. Oberlandesgericht Du¨sseldorf (Germany) 22 July 2004 (Shoes), CISG-Online 916 (Pace) (there was no indication that the buyer knew the seller intended to avoid the contract, even though the seller engaged in substitute transactions). 34 See, e.g., Butler, A Practical Guide to the CISG: Negotiations Through Litigation (2007) para. 6.05[A]. 35 Jacobs, Notice of Avoidance Under the CISG: A Practical Examination of Substance and Form Considerations, the Validity of Implicit Notice, and the Question of Revocability, 64 University of Pittsburgh Law Review (2003) 407 (417). 36 See, e. g., Schlechtriem/Butler, CISG (2009), pp. 94 seq.; Kritzer, Guide to Practical Application of the United Nations Convention on Contracts for the International Sale of Goods (1989) p. 209.

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It is difficult to distinguish between notices to avoid the contract in its entirety and 11 notices regarding non-conformity of goods that are designed to elicit repair or replacement. Art. 25, which permits a contract to be avoided only in the case of fundamental breach, is helpful here. The suggestion is that parties should not be allowed to avoid their contracts for anything less than a significant breach; similarly, a notice of dissatisfaction that does not make clear the injured party regards the breach as fundamental also favours construing unclear notices restrictively. A variation of this scenario occurs when a party declares a contract avoided and characterizes the breach as fundamental even though the conduct about which it complains does not in fact amount to a fundamental breach and thus it is not entitled to declare the contract avoided. Notice in that case might have been given but is not effective to create a fundamental breach.37 As a practical matter, it is good to have the notice of avoidance explain the reason for the avoidance, in addition to including a clear expression of avoidance.38 This also helps to avoid any ambiguity that might result from a letter that expresses only frustration with contract performance but does not explain the reason for it.

3. Time period for notice to be given Art. 26 says nothing about the time period in which the notice of avoidance must be 12 made. When the parties have performed their central obligations under the contract (e. g., the seller has already delivered the goods, or the buyer has paid the price but has violated another obligation, thereby committing a fundamental breach), Arts 49(2) and 64(2) require that declarations be made within a reasonable period of time.39 Aside from these provisions, the Convention contains no general time limit on a party’s exercise of its right of avoidance.40 One court has stated that “it was accepted in the case law that a period of two years was reasonable [sic]”.41 One possibility is that either the four-year period in the UN Limitation Convention42 or the limitations period under applicable national law should fill the void.43 Another option would be to tie the time period to the date the breach is discovered: “it seems appropriate to impose a reasonable period of time within which avoidance must be declared also in cases without explicit time limits. The period runs from the date at which the nonbreaching party knows or ought to know of its right of avoidance.”44 This requirement would help to alleviate the potential for one party to speculate during a period of

37 See Flambouras, When Bullets Penetrate Bullet-Proof Vests: Conformity of the Bullet-Proof Material to the Contract of Sale and Concurrent Remedies (A note on the judgment of the multi-member court of first instance of Athens 4505/2009), (2010–2011) 29:1 Journal of International Law and Commerce 171 (195). Ambiguity can arise if the notice declares avoidance but describes conduct that clearly does not amount to a fundamental breach. ibid. (195 n. 83) 38 Jacobs, Notice of Avoidance Under the CISG: A Practical Examination of Substance and Form Considerations, the Validity of Implicit Notice, and the Question of Revocability, 64 University of Pittsburgh Law Review (2003) 407 (409). Providing the reason for avoidance is especially useful when it is required in other cases, such as when a buyer seeks to reject non-conforming goods under Art. 39. 39 See the Commentary, infra, Art. 49 paras 62 et seq. and Art. 64 para. 17. 40 Magnus, The Remedy of Avoidance of Contract under CISG – General Remarks and Specific Cases, 25 The Journal of Law and Commerce (2005–06) 423 (428–29). 41 Court of Appeal of Douai (France), 6 February 2014 (Press brake), Getec v. Bystronic, CISG-Online 2548 (CLOUT 1504). 42 U. N. Convention on the Limitation Period in the International Sale of Goods, as amended. 43 Magnus, The Remedy of Avoidance of Contract under CISG – General Remarks and Specific Cases, 25 The Journal of Law and Commerce (2005–06) 423 (429). 44 Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 26 para. 17.

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Part III. Sale of Goods

fluctuating market prices – a problem that was recognized but not addressed during the negotiation of the Convention.45 13 Referring to the limitations period in the Limitation Convention as a default rule has several advantages. First, the scope of application of the Limitation Convention corresponds to that of the CISG. Second, using the Limitation Convention to establish the limitations period would lead to a uniform result, whereas reference to municipal law could well lead to disparate results given the variety of limitations periods used by different countries.46 Third, and relatedly, using the limitations period of the Limitation Convention would lead to greater predictability of result given potential uncertainty about applicable law. 14 Using the Limitations Convention as a default rule does not mean that a party could always wait four years before giving its notice of avoidance. A party that has led the other to believe that it would not exercise its right to avoid the contract would be precluded from doing so under principles of estoppel.47

4. Risk of non-delivery of notice 15

The risk of non-delivery of notice under Art. 26 is governed by Art. 27. Thus, so long as the notice is delivered by appropriate means, the avoiding party can rely on the declaration even if there is an error or delay in its transmission.48

III. Comparable Rules 16

Requiring that the aggrieved party give notice is consistent with practice under the PICC49 as well as the PECL50 and the DCFR.51 All three provide that notice by any appropriate means is sufficient.52 All three are somewhat ambiguous with respect to the timing of the notice. According to the PICC, “If performance has been offered late or otherwise does not conform to the contract the aggrieved party will lose its right to terminate the contract unless it gives notice to the other party within a reasonable time after it has or ought to have become aware of the offer or of the non-conforming performance.”53 This provision is similar to Arts 49(2) and 64(2) CISG, and does not answer what the limitation period should be in the case of a breach falling outside those provisions. Art. 9:303(2) of the PECL provides that notice should be given within a 45 Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 26 para. 17; Honnold, Uniform Law (2009), Art. 26 para. 187.1. 46 Flambouras, When Bullets Penetrate Bullet-Proof Vests: Conformity of the Bullet-Proof Material to the Contract of Sale and Concurrent Remedies (A note on the judgment of the multi-member court of first instance of Athens 4505/2009), (2010–2011) 29:1 Journal of International Law and Commerce 171 (216 et seq.) 47 Magnus, The Remedy of Avoidance of Contract under CISG – General Remarks and Specific Cases, 25 The Journal of Law and Commerce (2005–06) 423 (429). 48 Huber/Mullis, The CISG (2007), p. 211; Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 26 para. 13. For further analysis of the effect of this risk allocation provision, see the commentary to Art. 27 infra at paras 7 et seq. 49 Art. 7.3.2(1) PICC. 50 Art. 9:303(1) PECL. 51 Art. III – 3.507(1) DCFR. 52 Art. 1.10(1) PICC (“Where notice is required it may be given by any means appropriate to the circumstances.”); Art. 1.303(1) PECL (“Any notice may be given by any means, whether in writing or otherwise, appropriate to the circumstances.”); Art. I-1:109 DCFR (“The notice may be given by any means appropriate to the circumstances.”). 53 Art. 7.3.2(2) PICC. It thus aligns itself with Professor Fountoulakis’s suggestion that the notice period be limited.

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reasonable time: “The aggrieved party loses its right to terminate the contract unless it gives notice within a reasonable time after it has or ought to have become aware of the non-performance.” The DCFR provides that a creditor will lose its right to terminate “unless the notice of termination is given within a reasonable time.”54 The DCFR differs from the CISG significantly in providing explicitly that a nachfrist notice can provide for automatic termination in the event of non-performance after the expiry of the nachfrist period.55 Further notice need not be given. 54 55

Art. III-3:508(1) DCFR. Art. III-3:507(2) DCFR.

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Article 27 Unless otherwise expressly provided in this Part of the Convention, if any notice, request or other communication is given or made by a party in accordance with this Part and by means appropriate in the circumstances, a delay or error in the transmission of the communication or its failure to arrive does not deprive that party of the right to rely on the communication. Bibliography: Jacobs, Notice of Avoidance under the CISG: A Practical Examination of Substance and Form Considerations, the Validity of Implicit Notice, and the Question of Revocability, 64 University of Pittsburgh Law Review (2003) 407; Schlechtriem, Effectiveness and Binding Nature of Declarations (Notices, Requests or Other Communications) under Part II and Part III of the CISG, Cornell Review of the Convention on Contracts for the International Sale of Goods (1995) 95; CISG-AC Opinion no 1, Electronic Communications under CISG, 15 August 2003. Rapporteur: Professor Christina Ramberg, Gothenburg, Sweden (at http://www.cisg-ac.org.).

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Dispatch rule and allocation of risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Effect of dispatch of notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Proof of dispatch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Applicability to telephonic communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Applicability to email communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Derogating from Art. 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Derogation in the CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Derogation by usage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Derogation by the terms of the contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Appropriateness of the means of communication. . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 5 7 13 19 20 21 23 24 25 26 27 34

I. Importance and Role of the Provision This article sets forth the general rule on the allocation of risk with respect to communications made under Part III (Arts 25–88). It is applicable when one party must give notice to another for any of the myriad purposes notice can serve under Part III, such as notice of defectiveness and notice of avoidance, unless a particular article provides otherwise. It applies once a contract has been concluded and, usually, after there has been a breach.1 The rationale behind Art. 27 is to place the risk of non-receipt on the breaching party so long as the notifying party has attempted to communicate by reasonable means. 2 Giving effect to the sending of a communication is often referred to as a “dispatch” rule – the communicating party is protected immediately upon dispatch of the communication. Art. 27 stands in contrast to the rule of contract formation set forth in Part II, under which an acceptance becomes effective only upon receipt. Art. 27 applies to Part III generally because it was deemed desirable to have “one rule governing the hazards of transmission.”2 1

1 Gabriel, in Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 341 (noting three exceptions: Arts 32(1), 67(2) and 88). 2 Secretariat Commentary on 1978 Draft, Art. 25 (now Art. 27) para. 4.

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Art. 27 is a default rule. It does not apply when the specific Art. provides otherwise 3 (Arts 47(2), 48(4), 63(2), 65(1) and (2), and 79(4)), when the parties have agreed otherwise,3 or if there is usage to the contrary, whether that usage developed due to the parties’ course of dealings or whether it is usage regularly observed by parties in the particular trade concerned.4 The method of notice has to be reasonable in the circumstances. This means that the 4 communicating party must use a means of communication likely to reach the counterparty, and those means could vary from case to case.

II. Detailed Commentary Art. 27 is a deceptively simple provision. The clearest role played by Art. 27 is that of 5 allocating the risk of loss of a communication. A notifying party can protect himself and his ability to rely on other provisions of the CISG by notifying the breaching party of the breach; should that notice go astray the injured party can still claim the protection of the Convention. Less clear by its terms is the extent to which Art. 27 establishes a substantive rule 6 regarding the effective date of the dispatched notice. In other words, does Art. 27 mean a buyer’s notice, whether of avoidance or of defective goods, becomes effective immediately he sends it, or is it only effective when the seller receives it? If it is the former, does the buyer lose his ability to revoke the notice prior to the seller’s receipt of it? These questions and others will be addressed below.

1. Dispatch rule and allocation of risk Art. 27 is a “dispatch rule” and is often analogized to the “mailbox rule” familiar to common lawyers. The rule that a contract is formed when the offeree places her acceptance in the mail is often traced to the nineteenth-century English case Adams v Lindsell.5 Its primary advantage is in establishing a bright-line rule as to the time when the contract is formed. Otherwise, an acceptance could take effect “when it is actually communicated to the offeror, when it arrives at his address, when it would in the ordinary course of post have reached him, or when it is posted.”6 The mailbox rule plays a more limited role in Anglo-American practice than is often appreciated. It governs acceptance in the context of contract formation. Almost all other communications are effective only upon receipt.7 The decision to adopt a dispatch rule in the CISG was a “close question.”8 A significant factor was concern about protecting the injured party’s ability to rely on a communication he is required to make under the Convention.9 For example, absent a buyer’s notice to the seller that goods are defective, a buyer must pay the seller the full price for the goods. Providing that notice protects the buyer. Art. 27 usually applies after there has been a breach, and it places the risk of nonreceipt on the breaching party so long as the notifying party has attempted to 3 Jacobs, Notice of Avoidance under the CISG: A Practical Examination of Substance and Form Considerations, the Validity of Implicit Notice, and the Question of Revocability, 64 University of Pittsburgh Law Review (2003) 407 (411). 4 Art. 9 CISG; Huber, Huber/Mullis, The CISG (2007), p. 40. 5 Adams v Lindsell (1818) 1 B. & Ald. 681. 6 Chitty on Contracts, Vol. 1 (29th edition 2004), para. 2–046. 7 Perillo, Corbin on Contracts, Vol. 1 (1993), sect. 3.24. 8 Honnold, Uniform Law (2009), Art. 27 para 189. 9 Honnold, Uniform Law (2009), Art. 27 para. 189.

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Part III. Sale of Goods

communicate by reasonable means. The requirement that the notifying party use a circumstantially appropriate method of communication serves to provide some protection to the receiving party.10 11 Although Art. 27 is usually applicable in post-breach situations, it also applies to other communications, some of which also involve the transfer of risk from the notifying party to the party receiving the notice. It applies, for example, when a seller informs a buyer that certain goods are identified to the contract under Art. 67(1).11 12 The general allocation-of-risk function of Art. 27 had no exact counterpart in the ULIS, although ULIS Art. 39(3) applied a similar rule regarding notice of non-conformity of goods.

2. Effect of dispatch of notice By its terms, Art. 27 simply allocates the risk when properly dispatched notice goes astray. Yet Art. 27 can also be interpreted as having a substantive effect by making the date of dispatch significant for ascertaining the rights of the parties. This commentary takes the position that the latter position is the better interpretation. 14 A few commentators favour limiting Art. 27 to serving a risk-allocation function.12 This interpretation would presumably mean that the notice would be operative only upon receipt, or on the date receipt ought to have occurred absent the communication’s having gone astray, since the dispatch notion is found only in Art. 27.13 The problem with this interpretation is that it seems to undermine the protection the Convention drafters attempted to confer on the notifying party. It also is inconsistent with the structure of the Convention: many articles specify that notice is effective only upon receipt, and those provisions would have been unnecessary were Art. 27 to be read as incorporating a notice-on-receipt default rule. Furthermore, the Secretariat Commentary makes clear that it considered notices to be effective upon dispatch because acceptance of a generalized receipt theory would have required greater elaboration of procedural rules in support of receipt “since legal systems which operated on the theory that notices were effective on dispatch often did not contain such supporting rules.”14 The exceptions to those occasions were specified in the specific articles of Part III when notice on receipt was deemed more desirable.15 15 The operative date of the notice is important in many different situations. For example, a declaration of avoidance releases both parties from any further obligations they may have under the contract.16 Is that release effective as of dispatch, or as of receipt? Deciding that it is effective as of dispatch frees the notifying party to act secure in the knowledge that he has avoided the contract, without waiting for whatever time would be necessary for receipt. Thus, the better answer is dispatch.17 In principle a buyer must be able to make restitution of goods in order to avoid a contract (Art. 82), 13

10

Schlechtriem/Butler, CISG (2009), para. 108. Lookofsky, Understanding the CISG (2008) p. 103. 12 See, e.g., Jacobs, Notice of Avoidance under the CISG: A Practical Examination of Substance and Form Considerations, the Validity of Implicit Notice, and the Question of Revocability, 64 University of Pittsburgh Law Review (2003) 407 (423); Neumayer/Ming, Conventien de Vienne (1993), pp. 223 et seq. 13 Jacobs, Notice of Avoidance under the CISG: A Practical Examination of Substance and Form Considerations, the Validity of Implicit Notice, and the Question of Revocability, 64 University of Pittsburgh Law Review (2003) 407 (423); Schlechtriem/Butler, CISG (2009), para. 109. 14 Secretariat Commentary on 1978 Draft, Art. 25 (now Art. 27) para. 4; see also Schlechtriem/Butler, CISG (2009), para. 109. 15 Secretariat Commentary on 1978 Draft, Art. 25 (now Art. 27) para. 4. 16 Huber, in Huber/Mullis, The CISG (2007), p. 243. 17 Huber, in Huber/Mullis, The CISG (2007), p. 243. 11

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and whether a buyer is able to make restitution has to be determined at the time the buyer declares the contract avoided.18 Again the better answer is that the assessment of restitution is done at the time of dispatch.19 Notice of defect must be given in a timely manner under Art. 38(1); the posting of notice within the time limit will qualify as timely.20 The time of effectiveness is especially important for revocation of notice of avoidance 16 of a contract. The CISG is silent as to whether a party can revoke its notice of avoidance prior to the time it reaches the breaching party – what is known as an overtaking revocation. If the notice is effective upon dispatch, would this mean that it could not be withdrawn, either before or after it reaches the breaching party? Taking the strictest view of the effect of the declaration, the answer would be that it could not be withdrawn.21 The declaration becomes effective at the time it is sent. The arguments against permitting revocation are: (1) it would be inconsistent with the principle of certainty to permit the dispatching party to rescind the declaration of notice; (2) the dispatching party is the one protected by the allocation of risk, and it would be unfair to permit it to take advantage of a change of circumstances making revocation of the notice of avoidance desirable. These arguments are not persuasive. Although the common law mailbox rule has 17 adopted a strict reading of the effectiveness of dispatch such that revocation is impermissible after that point, this result is neither dictated by a dispatch rule nor consistent with common sense.22 Prior to the breaching party’s receipt of the notice, he could not have relied upon it. Thus, permitting revocation offers no unfairness to him.23 As for the possibility that the giver of notice will take advantage of a change in market conditions to revoke the notice, the response is two-fold. First, he is the injured party, and permitting revocation of notice simply permits him to insist on an already agreedupon contractual obligation. Second, this view is consistent with the overall goal of the CISG, which is to encourage performance and to limit the ability of parties to avoid their contractual obligations. Thus, there is no unfairness to it in permitting revocation of the notice prior to the time of receipt, and possibly even later. This leads to the question of whether revocation of a notice of avoidance should be 18 permitted if it arrives even after the notice. It has been suggested that revocation should be possible until the receiving party has actually relied on the notice.24 Yet it is desirable to have greater certainty with respect to the time after which revocation is no longer permissible. Thus, absent extraordinary circumstances, Art. 27 should be read to permit an overtaking revocation. Once notice of avoidance is received, however, it would no 18

Huber, in Huber/Mullis, The CISG (2007), p. 211. “According to the principle underlying Art. 27 CISG, this must be the moment when he dispatches it in an appropriate way.” Huber, in Huber/Mullis, The CISG (2007), p. 211. 20 Oberlandesgericht Graz (Austria) 11 March 1998 (Wood), CISG-Online 670 (Pace). 21 This is the view taken in Anglo-American jurisprudence. It has been widely criticized as an unnecessarily strict rule that often limits the ability of parties to alter their contracts even when doing so would be desirable. 22 Perillo, Corbin on Contracts, Vol. 1 (1993), sec. 3.24; cf. Chitty on Contracts, Vol. 1 (29th ed. 2004), para. 2–052. 23 Professor Schlechtriem argued vigorously that separating the effectiveness of the notice from its irrevocability is permitted by the Convention. Schlechtriem, Effectiveness and Binding Nature of Declarations (Notices, Requests or Other Communications) under Part II and Part III of the CISG, Cornell Review of the Convention on Contracts for the International Sale of Goods (1995) 95 (105 et seq.) (Pace). 24 Schlechtriem, Effectiveness and Binding Nature of Declarations (Notices, Requests or Other Communications) under Part II and Part III of the CISG, Cornell Review of the Convention on Contracts for the International Sale of Goods (1995) 95 (107 seq.) (Pace). 19

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longer be permitted, unless the parties specifically agree to alter the current state of their relationship, or in rare circumstances in which the equities dictated such a result.25 A Danish case is an illustrative example in which the court permitted revocation of the notice of avoidance long after it was received because of the conduct of the recipient of the notice, who refused to accept the notice of avoidance, and later refused to permit it to be revoked in order to benefit from the mitigating steps taken by the buyer.26

3. Proof of dispatch 19

The burden of proving that a communication was sent lies on the sending party.27 Once that fact is proved, the notice is deemed effective, whether or not it was ever received.28 The power of the rule, and the importance of proof of dispatch, is evidenced by a case in which a court dismissed a buyer’s claim that it had never received a reminding letter from the seller’s attorney. Receipt was not at issue; rather, the buyer did not claim the letter had never been sent, which was the key question.29

4. Applicability to telephonic communications 20

The wording of Art. 27 suggests that it is applicable only between absentees.30 Yet there is no question that notice can be given orally, so long as oral communication is appropriate in the circumstances.31 Oral statements need to be carried out audibly and in a manner that is understandable to the other party. Telephonic communications are usually likened to in-person communications in that it is relatively easy for the communicating party to ascertain whether the listening party has heard him.32 One of the significant drawbacks to a telephonic communication is the difficulty in proving that it was made, and that the appropriate information was conveyed to the appropriate

25 Professor Schlechtriem suggested that the burden of proving lack of reliance would be on the party seeking to revoke the notice. Yet that party is unlikely to have access to such factual information. Jacobs, Notice of Avoidance under the CISG: A Practical Examination of Substance and Form Considerations, the Validity of Implicit Notice, and the Question of Revocability, 64 University of Pittsburgh Law Review (2003) 407 (426 et seq.). 26 After receiving the buyer’s notice of avoidance, the seller refused to acknowledge its fundamental breach. In an attempt to mitigate its damages during the on-going litigation, the buyer repaired and used the machine. The seller resisted the buyer’s attempt to rescind its notice of avoidance and sought restitution of the machine. The Danish Supreme Court permitted the revocation of the notice of avoidance, apparently on a theory of estoppel. Højesteret (Denmark) 3 May 2006 (Block machine and mould), CISG-Online 2630 (Pace); Schlechtriem, Effectiveness and Binding Nature of Declarations (Notices, Requests or Other Communications) under Part II and Part III of the CISG, Cornell Review of the Convention on Contracts for the International Sale of Goods (1995) 95 (100) (Pace); Liu, in Felemegas, 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), p. 138 (143 note 28). 27 Oberster Gerichtshof (Austria) 30 June 1998 (Pineapple), CISG-Online 410 (Pace); Oberlandesgericht Naumburg (Germany) 27 April 1999 (Automobile), CISG-Online 512 (Pace). 28 Oberster Gerichtshof (Austria) 24 May 2005 (Grinding stock), CISG-Online 1046 (Pace). 29 Oberlandesgericht Du ¨ sseldorf (Germany) 22 July 2004 (Shoes), CISG-Online 916 (Pace). 30 Oberlandesgericht Graz (Austria) 11 March 1998 (Wood), CISG-Online 670 (Pace); Schwenzer/ Fountoulakis, International Sales Law (2007), p. 188; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 27 para. 5. 31 Liu, in Felemegas, 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), p. 138 (139). Several states have made declarations under Art. 96 CISG rejecting provisions allowing notice in any form other than writing. 32 Perillo, Corbin on Contracts, Vol. 1 (1993), s. 3.25; Chitty on Contracts, Vol. 1 (29th ed. 2004), para. 2–049; Schroeter, in Schlechtriem/Schwenzer, Commentary (2016), Art. 27 para. 5.

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person.33 One is thus wise to email, fax, or write whenever important information needs to be conveyed and proof of its transmission might be at issue.

5. Applicability to email communications Advisory Opinion no 1 makes clear that notices can be given by electronic means, 21 whenever the addressee has explicitly or impliedly consented to receive such messages.34 The communication must be sent to the address specified, but “the important factor is that the information be conveyed to the other party, not in what form it is conveyed.”35 With respect to effectiveness of the notice given, the Advisory Opinion refers to the Advisory’s Opinion’s comments with respect to Art. 15.36 The commentary to Art. 15, which deals with contract formation and requires an offer to “reach” an offeree, provides that an email message reaches the offeree when it reaches the offeree’s server, so long as it is properly addressed and the offeree has consented to receive communications by such means.37 This reference to Art. 15 is inconsistent with the conclusion reached above – that 22 communications under Art. 27 are effective upon dispatch, unless otherwise specified. In practice, given the speed with which electronic communications are usually effected, this difference might not matter very frequently. Also, the Advisory Council Opinion suggests that problems with the offeree’s server are within the sphere of influence of the offeree and thus cannot be invoked by the offeree to argue non-receipt of an offer.38 With respect, it would be more consistent with the CISG to create a separate rule for Art. 27 that is consistent with the separate treatment of notice between Parts II and III.

6. Derogating from Art. 27 Art. 27 is a default rule. Thus, it only applies absent other specification.

23

a) Derogation in the CISG. The rule in Art. 27 is specifically excluded by several 24 specific provisions in Part III. Arts 47(2), 48(4), 63(2), 65(1) and (2), and 79(4) all provide that notice is effective only on receipt.39 A number of these provisions involve communications by the breaching party, and the receipt rule was introduced in order to place the burden of ensuring receipt on the breaching party, rather than on the injured party.40 Thus, Art. 79(4) requires a seller who cannot perform due to impossibility, force majeure, or the like, to give notice to the buyer. If the notice is not received by the buyer within a reasonable period of time after the seller knew, or should have known, of the

33

Amtsgericht Kehl (Germany) 6 October 1995 (Knitwear), CISG-Online 162 (Pace). CISG-AC Opinion no 1, Art. 27. 35 CISG-AC Opinion no 1, para. 27.1. 36 CISG-AC Opinion no 1, para. 27.2. 37 CISG-AC Opinion no 1, Art. 15. 38 CISG-AC Opinion no 1, para. 15.3. Professor Gabriel predicts future problems with electronic communications because of differing national practices respecting what constitutes dispatch and receipt. Gabriel, in Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 342. 39 Art. 47(2) applies when a seller notifies a buyer that the seller will not perform within the additional time period specified by the buyer; Art 48(4) provides for a seller’s notice of the intent to cure; Art. 63(2) requires the seller not to resort to the remedy for breach of contract during the additional time period provided for performance; Art. 65(1) provides for the seller to supply missing information; Art. 65(2) requires the seller to give notice to the buyer of missing terms and fixes an additional time for the buyer to correct the supplied terms; and Art. 79(4) requires a party who fails to perform to give notice of any impediment and its effect on the ability to perform. 40 Honnold, Uniform Law (2010), Art. 27 para. 190; Gabriel, in Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 341 34

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impediment to its performance, the seller will be liable for damages resulting from the lack of notice to the buyer.41 25

b) Derogation by usage. Usage, by virtue of Art. 9(1), might serve to vary the provisions of Art. 27.42 This could also hold true for practices as between the parties, but the evidence that the parties intended to vary the allocation of risk under Art. 27 would have to be very strong.43

26

c) Derogation by the terms of the contract. The parties are free to derogate from the default rule in Art. 27 by providing that their communications are effective only on receipt, and by specifying the acceptable means of communication. The burden is on the recipient, however, to establish that the parties adopted a different rule to govern their relationship.44 Moreover, it appears that actual notice will be sufficient even if that notice that does not comport with the terms of the contract.45

7. Appropriateness of the means of communication The sender is protected under Art. 27 so long as the means of communication were appropriate in the circumstances. More than one means of communication might be appropriate; in such a case, the sender can select the means most convenient for him or her to use.46 Providing that communications be made by means appropriate in the circumstances is consistent with, but more generous than, ULIS Art. 14 and ULF Art. 12(2). Each provided that communications be made by means “usual” in the circumstances. The CISG substituted “appropriate” for “usual”, which suggests a party has a broader choice of methods to employ in sending notice.47 28 The circumstances of an individual case play an important role in assessing the appropriateness of the means of notice. While communication by airmail might usually be acceptable, a situation in which speed is of the essence might require communication by facsimile or email. For example, if fresh fruit or some other perishable food were the product in question, notice of defect must be sent in a manner commensurate with speed.48 If postal service is unreliable, then it would more appropriate to use another means of communication.49 Art. 27 is likely to be interpreted by reference to other provisions of the CISG, to trade usage, or to practice that has arisen between the parties. 29 As discussed above, electronic communications are acceptable, so long as the recipient has either expressly or implicitly consented to communication on that basis.50 27

41

Lookofsky, Understanding the CISG (2008), p. 143. Schroeter, in Schlechtriem/Schwenzer, Commentary (2016), Art. 27 para. 7. 43 Schroeter, in Schlechtriem/Schwenzer, Commentary (2016), Art. 27 para. 8. Professor Schroeter further suggests that such a derogation would have to be specially negotiated; adhesive terms would be insufficient to effect such a change. 44 Landgericht Stuttgart (Germany) 13 August 1991 (Textiles), CISG-Online 33 (Pace). 45 Arbitral Award, ICC 11 849/2003 (Fashion products) (Pace). In this case, communications between the parties were to be made in the language of the recipient. A letter sent to the buyer in New York was drafted in Italian when it should have been drafted in English and was not addressed to the correct recipient (though it was sent to the correct address). An officer of the company, however, actually received the letter and one of the principals spoke Italian. The notice was thus deemed sufficient notwithstanding its departure from the contractual language. See also Schroeter, in Schlechtriem/ Schwenzer, Commentary (2016), Art. 27 para. 3. 46 Secretariat Commentary on 1978 Draft, Art. 25 (now Art. 27) para. 2. 47 Honnold, Uniform Law (2009), Art. 27 para. 189. 48 Oberster Gerichtshof (Austria) 30 June 1998 (Pineapple), CISG-Online 410 (Pace). 49 Liu, in Felemegas, 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), p. 138 (140). 50 Garro, in Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 371. 42

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The language of the communication has also been an issue. Generally the communication must be made in the language of the underlying agreement or of the parties’ practice.51 If notice is received in a language unknown to the recipient, however, the recipient cannot simply ignore it. One court has suggested that the appropriate response for the recipient is to seek clarification from the sender.52 It is up to each party to apprise the other of any changes in address in order to ensure a smooth business relationship. A buyer who sends notice of defects to the seller’s last known address will be deemed to have provided adequate notice.53 In a similar vein, a party dealing in a perishable good, such as fresh fruit, must ensure that he can be reached on short notice, including during the weekend.54 Notice to a third party, such as a self-employed broker, is not necessarily an appropriate means of communication even if the broker effected the sale between the parties.55 Notice via a third party is not necessarily foreclosed, but the communicating party would have to point out to his messenger the role the messenger was supposed to play, and the function and meaning of the message.56 Actual notice, even if conveyed by otherwise-inappropriate means, will suffice under Art. 27.57 The risk-allocation provision operates in cases of non-notice, and the reasonableness of the means provision is included simply to determine whether the sending party can take advantage of the protections accorded it under Art. 27.

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31

32

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III. Comparable Rules The PICC have adopted the receipt principle of notice. They provide that, when 34 notice is required, “it is effective when it reaches the person to whom it is given.”58 Moreover, they explicitly place the risk of non-receipt with the sender: “An error occurring in the expression or transmission of a declaration is considered to be a mistake of the person from whom the declaration emanated.”59 The DCFR also provides that notice for any purpose becomes effective when it 35 reaches the addressee, unless the notice provides for a delayed effect.60 Notice “may be given by any means appropriate to the circumstances.”61 The PECL have adopted a position somewhat closer to the CISG, at least with respect 36 to communications from an aggrieved party to a breaching party. In the PECL, the general rule is that notice is effective on receipt, but there are exceptions.62 Art. 1.303(4) states that notices given because of the other party’s non-performance (or because of the 51 Gabriel, in Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 341; Art. 9 CISG; Oberlandesgericht Hamm (Germany) 8 February 1995 (Socks), CISG-Online 141 (Pace). 52 Oberlandesgericht Hamm (Germany) 8 February 1995 (Socks), CISG-Online 141 (Pace). 53 Oberlandesgericht Mu ¨ nchen (Germany) 17 November 2006 (Dust ventilator), CISG-Online 1395 (Pace). This was particularly true as the seller had sent invoices printed with the previous address several months after the effective date of its move. 54 Oberster Gerichtshof (Austria) 30 June 1998 (Pineapple), CISG-Online 410 (Pace). 55 Landgericht Kassel (Germany) 15 February 1996 (Marble steps), CISG-Online 191 (Pace). 56 Landgericht Kassel (Germany) 15 February 1996 (Marble steps), CISG-Online 191 (Pace). The buyer had justified his chosen means of communication due to speech impediments inhibiting telephonic communication on the part of the seller. Given the possibility of communication by telefax, however, this argument proved unavailing. 57 Landgericht Kassel (Germany) 15 February 1996 (Marble steps), CISG-Online 191 (Pace). 58 Art. 1.10(2) PICC. 59 Art 3.6 PICC. 60 Art. I-1:109(3) DCFR. 61 Art. I-1:109(2) DCFR. 62 Art. 1:303(2) PECL.

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reasonable apprehension of forthcoming non-performance), if dispatched properly, shall have effect as if they had arrived in ordinary circumstances.63 This is generally interpreted as falling short of an effectiveness on dispatch rule.64 A lost or delayed communication is deemed effective as of the date it should have arrived.65 Though oral notice is permissible, the PECL provide that “[f]or notices of major importance written form may be appropriate.”66 63

Art. 1:303(4) PECL. Liu, in Felemegas, 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), p. 138 (143). 65 Liu, in Felemegas, 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), p. 138 (143). 66 Art. 1:303, comment B PECL. 64

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Article 28 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 would do so under its own law in respect of similar contracts of sale not governed by this Convention. Bibliography: Bejesky, The Evolution in and International Convergence of the Doctrine of Specific Performance in Three Types of States, 13 Indiana International and Comparative Law Review (2003) 353; Boghossian, A Comparative Study of Specific Performance Provisions in the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1999–2000) 3; Dawson, Specific Performance in France and Germany, 57 Michigan Law Review (1959) 495; Flechtner, Buyers’ Remedies in General and Buyers’ Performance-Oriented Remedies, 25 Journal of Law and Commerce (2005–06) 339; Kastely, The Right to Require Performance in International Sales: Towards an International Interpretation of the Vienna Convention, 64 Washington Law Review (1988) 607; Kastely, Unification and Community: A Rhetorical Analysis of the United Nations Sales Convention, 8 Northwestern Journal of International Law and Business (1988) 574; Lookofsky, The 1980 United Nations Convention on Contracts for the International Sale of Goods, Art. 28, Specific Performance, in: Herbots/Blanpain (eds), International Encyclopaedia of Laws – Contracts, Supplement 29 (2000), p. 81; Whittington, Reconsidering Domestic Sale of Goods Remedies in Light of the CISG, 37 Victoria University Wellington Law Review (2006) 421.

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Specific performance under municipal law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Civil law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Common law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. The provisions of the Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The court’s “own law” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Court versus tribunal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) The court “is not bound” to enter (or to refuse) a judgement for specific performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) “Similar contracts of sale” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Derogation from Art. 28 and party autonomy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Seller’s right to require payment of the price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 3 4 5 8 13 15 17 19 21 22 24 26

I. Importance and Role of the Provision Art. 28 is a compromise position between the common law’s preference for money 1 damages in the event of a breach of contract and the civil law’s preference for performance. Art. 62(1) expressly recognizes the seller’s right to claim performance from the buyer, while Art. 46(1) specifies that the buyer has the right to claim performance from the seller. In this respect, the Convention reflects the civil law’s preference for performance over damages. Yet both of those articles are subject to Art. 28, which says a court need not order specific performance of a contract unless such a remedy would be available under its own law. This compromise was necessary as the Convention is enforced by decentralized national courts whose willingness to

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use their coercive powers in a given situation will vary.1 The same issue was resolved in a very similar fashion in Art. 16 ULIS, which provided that a domestic court would not be bound “to enter or enforce a judgment for specific performance except in cases in which it would do so under its law in respect of similar contracts of sale not governed by the Uniform Law.” 2 Art. 28 has generated a good bit of scholarly attention but has been the topic of very little practical controversy.2 Only one case has addressed it in detail.3 Fears that it would give rise to forum shopping by disgruntled parties4 appear to have been unfounded. There are several possible explanations for this. First, in numerous cases the courts to which parties have made application have ordered performance in a manner that has not sparked commentary.5 Those circumstances in which parties would prefer the remedy of performance might well be those occasions on which even common law courts would grant such a remedy.6 Second, Art. 28 is only implicated if performance is available under the Convention.7 The limiting provisions in the Convention mean that specific performance is not available in every situation.8 Third, parties to a contract themselves very often prefer damages, so they do not necessarily demand performance even if it would be available to them.9

II. Detailed Commentary 3

Art. 28’s explicit reversion to the preference of the municipal law of the forum seems to run counter to the general preference in the CISG to give priority to the international 1 Torsello, Remedies for Breach of Contract Under the 1980 Convention on Contracts for the International Sale of Goods (CISG), in: Ferrari (ed), Quo Vadis CISG: Celebrating the 25th Anniversary of the United Nations Convention on Contracts for the International Sale of Goods (2005), pp. 45 seq. 2 Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 326. 3 US District Court, Northern District of Illinois (U.S.) 7 December 1999 (Steel bars), Magellan International Corp. v Salzgitter Handel GmbH, CISG-Online 439 (Pace). A few cases have concluded it was not relevant to the case at hand. Handelsgericht Bern (Switzerland) 22 December 2004 (Watches), CISG-Online 1192 (Pace); Ca´mara Nacional de Apelaciones en lo Comercial de Buenos Aires (Argentina) 21 July 2002 (Barley), Cervecerı´a y Malteria Paysandu´ S. A. v Cervecerı´a Argentina S. A., CISG-Online 803 (Pace); Arbitral Tribunal, ZHK 273/95, 31 May 1996 (Aluminium), Soinco v NKAP, CISG-Online 1291 (Pace). 4 See, e.g., Kastely, Unification and Community: A Rhetorical Analysis of the United Nations Sales Convention, 8 Northwestern Journal of International Law and Business (1988) 574 (615); Ferrari, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 138. 5 See e.g., Zeller, CISG and the Unification of International Trade Law (2006) pp. 60 seq. 6 Flechtner, Buyers’ Remedies in General and Buyers’ Performance-Oriented Remedies, 25 Journal of Law and Commerce (2005–06) 339 (344) (Pace); Boghossian, A Comparative Study of Specific Performance Provisions in the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1999–2000) 3 (28) (Pace); Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 28 para. 4. 7 Reiley, International Sales Contracts (2008) p. 229. 8 Zeller, CISG and the Unification of International Trade Law (2006) p. 63; Gabriel, Contracts for the Sale of Goods: A Comparison of US and International Law (2009) pp. 118 seq.; Honnold, Uniform Law (2009), Art. 28 paras 192 seq.; Boghossian, A Comparative Study of Specific Performance Provisions in the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1999–2000) 3 (19 seq.) (Pace); Lookofsky, Understanding the CISG (2008), p. 111. 9 Flechtner, Buyers’ Remedies in General and Buyers’ Performance-Oriented Remedies, 25 Journal of Law and Commerce (2005–06) 339 (342 et seq.) (Pace); Bergsten, Commentary on Article 28 by Senior Legal Officer, International Trade Law Branch, United Nations, in: Kritzer (ed), Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods (1989), p. 215; Garro, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 368; Honnold, Uniform Law (2009), Art. 28 para. 199.

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nature of the convention10 and to seek a uniform application and harmonization in case outcomes.11 It also appears to run counter to the CISG’s general approach of prioritizing claims for performance over money damages.12 In practice, however, differences between the common law and civil law might be more philosophical than practical.13 Most claimants seek money damages.14 This tempers the potentially divisive effect of Art. 28.

1. Specific performance under municipal law A short overview of the differing approaches of the common law and the civil law 4 towards contract enforcement is essential to understanding the reasons why the compromise in Art. 28 was necessary. The concept of performance is much more limited in Anglo-American law; it refers to an order by a court to an individual directing that he perform a contract.15 In civil law systems, it means any process by which an injured party can get what he bargained for, including having defects cured at the expense of the breaching party.16 a) Civil law. It is taken for granted in civil legal systems that an aggrieved party is 5 entitled to demand performance. This derives from the principle pacta sunt servanda – contracts are to be honoured. There is a moral underpinning to this position: “the binding nature of the performance is of the utmost importance to the civil law, and the courts accordingly bind people to their promises.”17 This does not mean that performance is always available. Some categories of performance are excluded from the ambit of the performance preference: personal obligations are not enforceable, for example.18 Still, there is a baseline assumption that an order for performance will usually be available if the aggrieved party desires it.19

10

Schwenzer/Fountoulakis, International Sales Law (2007), p. 193. Zeller, CISG and the Unification of International Trade Law (2006) p. 55; Boghossian, A Comparative Study of Specific Performance Provisions in the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1999–2000) 3 (28) (Pace). 12 Huber, in: Huber/Mullis, The CISG (2007), p. 186; Reiley, International Sales Contracts (2008) p. 224. See the commentary, supra, Art. 46 paras 9 et seq. and Art. 62 paras 4 et seq. 13 See, e.g., Kritzer, Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods (1989) p. 219 (“despite differences in the rhetoric of their sales codes, parties from [Western civil law jurisdictions], for economic reasons, do not resort to [performance] more frequently than parties from common law jurisdictions.”); Spanogle/Malloy/Del Duca/Rowley/Bjorklund, Global Issues in Contract Law (2007) p. 85; Honnold, Uniform Law (2009), Art. 28 para. 192. 14 Klimas, Comparative Contract Law: A Transystemic Approach With an Emphasis on the Continental Law (2005) p. 276; Felemegas, The right to require specific performance: comparison between the provisions of the CISG (Arts. 28, 46, and 62) and counterpart provisions of the UNIDROIT Principles (Arts. 7.2.1–7.2.5), 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), p. 145 note 8. 15 Treitel, Remedies for Breach of Contract (1988) p. 46. 16 Treitel, Remedies for Breach of Contract (1988) p. 46. A plaintiff’s acting at the expense of the defendant is possible in English law, but only after an order for specific performance has been entered by the court. 17 Curran, Comparative Law: An Introduction (2002) pp. 24 seq.; see also Bejesky, The Evolution in and International Convergence of the Doctrine of Specific Performance in Three Types of States, 13 Indiana International and Comparative Law Review (2003) 353 (375 et seq.). 18 Klimas, Comparative Contract Law: A Transystemic Approach With an Emphasis on the Continental Law (2005) pp. 276 seq. 19 Spanogle/Malloy/Del Duca/Rowley/Bjorklund, Global Issues in Contract Law (2007) pp. 85 et seq. 11

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Thus, in Germany, specific performance is the preferred remedy and is excluded only if, for some reason, performance is not possible.20 Even though a damages remedy is sought in a high percentage of cases, the fact that performance is available should the claimant desire it affects the conduct of the parties and the functioning of the legal system.21 German courts do not assert a discretionary power to refuse an order of performance, although in certain cases “where performance is impossible, would involve disproportionate cost, would introduce compulsion into close personal relationships or compel the expression of special forms of artistic or intellectual creativity” a German court will not order performance.22 7 Performance is also the preferred remedy under French law, and in the many legal systems that follow the French Civil Code. A French court has no discretion to deny a request for performance if circumstances exist to support the claim.23 Performance is not, however, always available. French law distinguishes between obligations to “give,” which are subject to an order for performance, and obligations to “do or not do,” which are theoretically subject only to an award for damages.24 The theory behind this distinction is that the personal liberty of the individual should not be compromised. Yet there are many ways to get round the distinction so that an aggrieved party can obtain performance. One remedy is for the court to order an astreinte – a fine payable by the breaching party to the injured party for every day the obligation is not fulfilled.25 In practice in France, “a judgment for [specific performance] will be given in respect of all obligations except those positive obligations which require personal performance and those negative obligations the enforcement of which would result in such an interference with personal liberty as would be offensive to current morality.”26 6

8

b) Common law. The preference for the award of damages over specific performance in the common law is to some degree the result of historical accident. Common law courts in England had only limited authority. People would resort to courts of equity, which were controlled directly by the King through his Chancellor, when the powers of the common law courts did not extend to granting effective relief. These became known as chancery or equity courts. In the area of remedies, common law courts could only order the payment of money damages. Equity courts, on the contrary, had the authority to issue in personam decrees – effectively, to order specific performance.27 Thus, specific performance became available when the remedy at common law was inadequate and the equities dictated that the chancery court use its discretion to grant relief.28 Eventually the functions of the two courts were merged, but those remained the criteria governing the availability of specific performance. This historical accident was reinforced by a philosophy placing great faith in a market economy in which substitute transactions were readily available. The U.S. Restatement provides: “Specific performance or an injunction will not be ordered if damages would be adequate to protect the expectation interest of the injured party.”29 If the payment of monetary damages could put the injured party in the position he would have occupied absent the breach, for example by 20

§ 275(1) BGB; see also Schwenzer/Fountoulakis, International Sales Law (2007), p. 191. Dawson, Specific Performance in France and Germany, 57 Michigan Law Review (1959) 495 (529 seq.). 22 Dawson, Specific Performance in France and Germany, 57 Michigan Law Review (1959) 495 (529 seq.). 23 Klimas, Comparative Contract Law: A Transystemic Approach With an Emphasis on the Continental Law (2005) p. 275. 24 French Civil Code Art. 1142. 25 Treitel, Remedies for Breach of Contract (1988) pp. 60 seq. 26 Nicholas, The French Law of Contract (1992) pp. 218 seq. 27 Reiley, International Sales Contracts (2008) p. 220. 28 Reiley, International Sales Contracts (2008) p. 220. 29 Restatement (Second) of the Law of Contracts (1981), § 359(1). 21

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reimbursing him for any additional expenses incurred as a result of entering into a substitute transaction, then specific performance would not be available. In England, under the Sale of Goods Act, specific performance is possible when circumstances permit: “In any action for breach of contract to deliver specific or ascertained goods the court may, if it thinks fit, on the plaintiff’s application, by its judgement or decree direct that the contract shall be performed specifically, without giving the defendant the option of retaining the goods on payment of damages.”30 In the United States, the UCC is similar: “Specific performance may be decreed where the goods are unique or in other proper circumstances.”31 “Unique” is usually used to describe goods without any possible substitute because of their rarity or idiosyncratic value, such as family heirlooms.32 In determining whether or not to order performance, the first question a common law court will ask is whether damages at law are adequate.33 A significant factor in assessing the answer is whether cover – purchasing the goods from an alternate supplier – is readily available. If it is, specific performance will almost never be an option.34 If cover is not an option, the possibility of obtaining specific performance is much greater. Other factors will also influence the court’s decision. In the case of a long-term requirements contract, a substitute transaction might be difficult to arrange. Yet the length of time and difficulty a court will have in supervising the performance might lead it to decline to order performance. A court will also not order performance that interferes with the personal freedom of the defendant, a situation not often at issue with the sale of goods in commercial quantities.35 If, however, the performance requested is to repair defective goods, the defendant’s freedom of action might in fact be at issue. Because the matter is within the court’s discretion, it can be difficult to predict the outcome.36 At common law, the availability of specific performance is not subject to the dictates of party autonomy. Contracting parties can agree in their contract that specific performance would be an appropriate remedy should their relationship go awry, but the court need not give effect to that preference in the United States. Proposed revisions to the UCC would have placed greater emphasis on the parties’ agreement: “[I]n a contract other than a consumer contract, specific performance may be decreed if the parties have agreed to that remedy.”37 Even under this revised formulation, however, the court would not be obligated to order performance. This is a marked contrast to the CISG, in which the parties have the ability to select which remedies they prefer in the event of partial or fundamental breach. A party may

30

Sale of Goods Act 1979, sec. 52. UCC § 2–716(1). 32 Reiley, International Sales Contracts (2008) pp. 222 et seq. 33 Treitel, Remedies for Breach of Contract (1988) p. 64. 34 The exception will be if the goods have some idiosyncratic value such that replacement goods, even if functionally equivalent, will not suffice to put the claimant in the position he would have occupied absent the breach. This situation rarely arises when one is talking about commercial goods. 35 Boghossian, A Comparative Study of Specific Performance Provisions in the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1999–2000) 3 (39) (Pace). 36 Boghossian, A Comparative Study of Specific Performance Provisions in the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1999–2000) 3 (39 seq.) (Pace); cf. Treitel, Remedies for Breach of Contract (1988) p. 66 (suggesting discretion is not unfettered, but noting the significant number of factors and exceptions that make the remedy discretionary). 37 UCC Amended Version (2003), § 2–716(1). The proposed revisions have been withdrawn. 31

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foreclose its ability to seek specific performance by pursuing inconsistent remedies, but that choice is within its power.38

2. The provisions of the Convention Like the other general provisions, Art. 28 can only be read in conjunction with other substantive CISG articles. To the extent that it applies, it restricts the ability of the parties to demand performance. It might, therefore, restrict the right of the buyer to demand delivery of the goods or documents under Art. 30, to demand repair or replacement of defective goods under Art. 46, or to demand other performance-related obligations.39 14 Even though the Convention gives a preference to performance, whether in the original manner contracted for by the parties or in altered form to take into account intervening events,40 the right of a disputing party to demand performance under the CISG is not unlimited.41 The rules in Arts 46(1) and 62(1) do not apply if the party has engaged in conduct inconsistent with the remedy of performance.42 If third-party rights are at stake, for example in a bankruptcy proceeding filed by the buyer or the seller, specific performance might not be available.43 Finally, the ability to demand performance is limited by the principle of good faith.44 Art. 46(2) requires that there be a fundamental breach before a buyer is entitled to request substitute goods. Art. 46(3) permits a buyer to request repair “provided it is not unreasonable.” 13

a) The court’s “own law”. Art. 28 provides that a court is not bound to order specific performance unless it would do so under its “own law.” This phrase is designed to take into account the variable nature of performance available even among courts that share a tradition, whether within the common law or civil law. In other words, the availability of specific performance varies as between England and Scotland, and even as between France and Germany.45 It would have been too vague to refer to performance under “the civil law” or even under the “Anglo-American” common law.46 16 A second question is the breadth of the phrase “own law” – does it refer to the “whole law” of the forum, which would encompass its private international law (conflict of laws) rules, or does it refer only to the forum’s substantive remedies law? The most straightforward, and most convincing, interpretation of this phrase is that it refers to the forum’s municipal law on remedies. The forum’s private international law rules might point to the laws of a different jurisdiction, which would require the court to assess 15

38

Reiley, International Sales Contracts (2008) p. 225. Gabriel, Contracts for the Sale of Goods: A Comparison of US and International Law (2009) p. 118. 40 Torsello, Remedies for Breach of Contract Under the 1980 Convention on Contracts for the International Sale of Goods (CISG), in: Ferrari (ed), Quo Vadis CISG: Celebrating the 25th Anniversary of the United Nations Convention on Contracts for the International Sale of Goods (2005), p. 70 (suggesting that the remedial scheme is designed to limit the collateral costs incurred in remedying the breach by setting forth varied solutions suitable in different contexts). 41 Zeller, CISG and the Unification of International Trade Law (2006) p. 58. 42 Felemegas, The right to require specific performance: comparison between the provisions of the CISG (Arts 28, 46, and 62) and counterpart provisions of the UNIDROIT Principles (Arts. 7.2.1–7.2.5), 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), p. 151. 43 Gabriel, Contracts for the Sale of Goods: A Comparison of US and International Law (2009) p. 120. 44 Zeller, CISG and the Unification of International Trade Law (2006) pp. 58 seq.; Boghossian, A Comparative Study of Specific Performance Provisions in the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1999–2000) 3 (68 seq.) (Pace); Honnold, Uniform Law (2009), Art. 28 para. 199. 45 Zeller, CISG and the Unification of International Trade Law (2006) p. 56. 46 Zeller, CISG and the Unification of International Trade Law (2006) p. 56. 39

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whether or not specific performance would be available under that state’s law. Because the purpose of the article is to permit a court not to order specific performance when doing so would be against its own rules, the latter interpretation is preferred.47 This was the approach adopted by the only court decision to have addressed Art. 28.48 In Magellan v Salzgitter, a U.S. buyer of steel sought specific performance of specially manufactured steel because it alleged it was unable to engage in a substitute transaction. The U.S. District Court construed Art. 28 as directing it to look to the UCC to determine whether such relief would be available.49 Since inability to cover is one of the “appropriate circumstances” in which a buyer can seek specific relief, the court allowed the case, which was at a preliminary stage, to go forward. b) Court versus tribunal. Art. 28 refers to “court,” although many international 17 disputes are resolved by arbitral tribunals. Thus, the question arises what, if any, effect Art. 28 has on disputes heard by arbitral tribunals. The most reasonable approach is to apply Art. 28 equally to arbitral tribunals and to courts.50 This is also consistent with the usage in the Secretariat’s commentary to the predecessor to Art. 46: “Although the buyer has a right to the assistance of a court or arbitral tribunal to enforce the seller’s obligation to perform the contract, [Art. 28 CISG] limits that right to a certain degree.”51 This solution gives rise to further questions. Art. 28 refers to the “own law” of the 18 court. In the case of an arbitral tribunal, its “own law” would be the agreement between the parties, the applicable arbitral rules, the CISG, and the law of the place of arbitration (lex arbitri). The ability of arbitral tribunals to order specific performance will depend on the lex arbitri and the precise nature of the relief sought.52 The question of the appropriateness of the remedy is likely to arise again if the party ordered to perform balks, and the prevailing party must go to a court to enforce the award. In states party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards enforcement should not, by the terms of the Convention, be precluded because the arbitral tribunal awarded specific performance.53 One can imagine common law courts proving reluctant to enforce such orders. In practice this 47 Reiley, International Sales Contracts (2008) p. 227; Ferrari, in: Flechtner/Brand/Walter, Drafting Contracts (2007), pp. 137 seq.; Torsello, Remedies for Breach of Contract Under the 1980 Convention on Contracts for the International Sale of Goods (CISG), in: Ferrari (ed), Quo Vadis CISG: Celebrating the 25th Anniversary of the United Nations Convention on Contracts for the International Sale of Goods (2005), pp. 68 seq.; Garro, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 369; Honnold, Uniform Law (2009), Art. 28 para. 195; Huber, in: Huber/Mullis, The CISG (2007), pp. 187 seq.; Mu¨llerChen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 28 para. 9. 48 US District Court, Northern District of Illinois (U.S.) 7 December 1999 (Steel bars), Magellan International Corp. v Salzgitter Handel GmbH, CISG Online 439 (Pace). 49 US District Court, Northern District of Illinois (USA) 7 December 1999 (Steel bars), Magellan International Corp. v Salzgitter Handel GmbH, CISG-Online 439 (Pace). 50 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 28 para. 8; Lookofsky, Understanding the CISG (2008), pp. 112, 146; Felemegas, The right to require specific performance: comparison between the provisions of the CISG (Arts 28, 46, and 62) and counterpart provisions of the UNIDROIT Principles (Arts. 7.2.1–7.2.5), 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), p. 149 (suggesting that Art. 1.10 PICC, which defines court to include an arbitral tribunal, be used to support this conclusion). 51 Secretariat Commentary on 1978 Draft, Art. 42 (now Art. 46) para. 9. 52 Gabriel, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 530. The enforceability of the award, if made in a New York Convention state, will depend on the “rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles.” Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 10 June 1058, 330 UNTS 38. 53 Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) 376 seq.

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is not likely to be a significant issue, as the dominant type of relief sought is the payment of monetary damages.54 c) The court “is not bound” to enter (or to refuse) a judgement for specific performance. A change to the words during the negotiation of Art. 28 has given rise to uncertainty as to the degree of discretion afforded municipal courts by the Convention. The initial draft read that a court need not order specific performance unless it “could” do so, whereas the final version reads “would” do so.55 The fear expressed by the delegates to the Vienna conference was that if a court could grant specific performance it would have to grant it in an action governed by the CISG.56 The word “would” seems to give a court more leeway to decline to order specific performance; indeed, it could be read to limit its ability to order performance unless it actually would do so under its own law.57 The usual and better interpretation of the language, however, is that the court’s discretion is limited only in that it cannot deny an order of performance if that is the order it would give under its own laws.58 This is not to say that a common law court should give the same remedy a civil law court would give, as some have suggested.59 Rather, if the remedy is a possibility under the forum’s own law, the forum has the discretion to order it, and should take into account the circumstances of the case, including its international aspects, in reaching its decision.60 20 The ability of a court to enforce an order for performance will depend on its procedural laws. Placing the matter within the discretion of the forum allows the court to consider the circumstances of the case and its ability to effectuate an order of performance.61 This does not mean that the court should import the forum’s entire substantive law on specific performance. This would negate the provisions of the CISG, which are paramount.62 19

21

d) “Similar contracts of sale”. There is a comparative aspect to Art. 28 – a court need not order specific performance unless it would do so with respect to “similar contracts of sale” under its own law. One problem is that domestic sales contracts will often differ 54

Gabriel, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 531. Reiley, International Sales Contracts (2008) p. 226. The initial “could do so” language was directed towards courts in legal systems that did not have the procedural mechanisms to order specific performance. 56 Kritzer, Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods (1989) p. 213; Kastely, The Right to Require Performance in International Sales: Towards an International Interpretation of the Vienna Convention, 64 Washington Law Review (1988) p. 607 (626) (Pace). 57 Torsello, Remedies for Breach of Contract Under the 1980 Convention on Contracts for the International Sale of Goods (CISG), in: Ferrari (ed), Quo Vadis CISG: Celebrating the 25th Anniversary of the United Nations Convention on Contracts for the International Sale of Goods (2005), p. 68; Garro, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 368 seq. 58 Reiley, International Sales Contracts (2008) p. 229; Ferrari, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 136 seq. 59 Garro, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 368 seq; Kastely, The Right to Require Performance in International Sales: Towards an International Interpretation of the Vienna Convention, 64 Washington Law Review (1988) p. 607 (pp. 637 seq.) (Pace). 60 Honnold, Uniform Law (2009), Art. 28 para. 195; Huber, in: Huber/Mullis, The CISG (2007), p. 190; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 28 para. 22. 61 Zeller, CISG and the Unification of International Trade Law (2006) p. 59; Boghossian, A Comparative Study of Specific Performance Provisions in the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1999–2000) 3 (27 seq.) (Pace); Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 28 para. 10. 62 Huber, in: Huber/Mullis, The CISG (2007), pp. 188 seq.; Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 28 paras 9 et seq. 55

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from international sales contracts in significant respects, such as the distance the shipment must travel and the uncertainties faced in the journey.63 Assumptions about the ready availability of substitute performance might also be inapt. The possibility of cover is often taken for granted in a market economy, but might be less available in developing countries or non-market economies, for example.64 Burdensome government regulations might make arranging an alternate performance more difficult.65 Thus, in the context of an international sale, specific performance might be more appropriate than it would be in the domestic context. It is reasonable to suggest that courts take into account the international features, and the peculiarities attendant on the individual contract of sale, in assessing whether specific performance would be an appropriate remedy.

3. Derogation from Art. 28 and party autonomy Art. 6 authorizes the parties to “derogate from or vary the effect of the Convention” 22 without any limitation except for that found in Art. 12. Yet it is generally agreed that parties cannot exclude Art. 28’s application to their contract.66 In common law courts, whether or not to grant specific relief is a remedy within the discretion of the court, not within the discretion of the parties.67 Permitting the parties to derogate from Art. 28 would undercut the force of the exception provided therein. Thus, the availability of performance, and the effectiveness of the parties’ inclusion in their contract of preference for performance in the event of a breach, will depend on the law of the forum hearing any dispute.68 In practice, parties can control the degree to which performance is readily available in the event of a dispute by including in their contract a forum selection clause pointing to a jurisdiction that favours performance.69 A related question is whether the parties can make their own law with respect to 23 remedies. The purpose of Arts. 46 and 62, where not otherwise limited, was to “have the effect of changing the remedy of obtaining an order by a court that a party perform the contract from a limited remedy which in many circumstances was available only at the discretion of the court, to a remedy available at the discretion of the other party.”70 There is nothing to stop parties from including their preferred remedy in their contracts.71 This could take two guises: one limiting the availability of the remedy of performance, or one requiring it. The first approach is likely to be enforceable as a permissible calibration of the remedial scheme available under the 63

Reiley, International Sales Contracts (2008) p. 227. Boghossian, A Comparative Study of Specific Performance Provisions in the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1999–2000) 3 (21 et seq.) (Pace). 65 Boghossian, A Comparative Study of Specific Performance Provisions in the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1999–2000) 3 (65) (Pace). 66 Reiley, International Sales Contracts (2008) p. 228; Huber, in: Huber/Mullis, The CISG (2007), p. 190; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 28 para. 24. 67 See Section 1.2, supra. 68 Bridge, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 95. 69 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 28 para. 24. 70 Secretariat Commentary on 1978 Draft, Art. 26 (now Art. 28) para. 4. 71 Torsello suggests that requiring parties to include provisions respecting their preferred remedies in their contracts is inefficient as many will prefer not to incur the transaction costs associated with negotiating about matters that might never have any effect. Torsello, Remedies for Breach of Contract Under the 1980 Convention on Contracts for the International Sale of Goods (CISG), in: Ferrari (ed), Quo Vadis CISG: Celebrating the 25th Anniversary of the United Nations Convention on Contracts for the International Sale of Goods (2005), p. 49. 64

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Convention.72 The second approach is likely to be effective only insofar as the enforcing court is willing to give it effect.73 Again one might assume it would be more likely to be given effect in a civil law court rather than in a common law court, thus making essential the forum selection clause of the contract. In practice, however, the circumstances of the case and the feasibility of ordering performance will have an effect on the forum’s decision.

4. Seller’s right to require payment of the price One area of debate has been whether Art. 28 CISG will have an effect on the right of a seller to require payment from the buyer in an action for the price under Art. 62. Certainly requiring that a buyer pay the price of the goods that he has bought can be viewed as specific performance; he is giving what he would have given under the contract.74 Common law jurisdictions do not, however, view it as such. In New Zealand, for example, an action for the price is an action in debt rather than in contract. It is thus not subject to rules “relating to recovery of damages including proof, remoteness, and mitigation of loss.”75 A similar view prevails in England’s Sale of Goods Act.76 Under the UCC in the United States, a buyer is entitled to recover the price only when the buyer has accepted the goods or when the goods are damaged or lost after the risk of loss has passed to the buyer, or when the goods have been identified to the contract and the seller is unable to re-sell them at a reasonable price (or the circumstances indicate that such an effort would be fruitless).77 This is viewed as an action in damages. In no case is it viewed as specific performance.78 25 An action for the price under Art. 62 is more reasonably viewed as performance; the Convention ought not to be interpreted in accordance with domestic law categories.79 In common law courts, then, a claimant might be better advised to seek a remedy in damages under Arts 74 to 77.80 24

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Neither the PICC, nor the PECL, nor the DCFR contains a provision equivalent to Art. 28 CISG. They are thus not helpful in shedding light on the proper interpretation of Art. 28. All give creditors the right to demand performance, subject to certain 72 Torsello, Remedies for Breach of Contract Under the 1980 Convention on Contracts for the International Sale of Goods (CISG), in: Ferrari (ed), Quo Vadis CISG: Celebrating the 25th Anniversary of the United Nations Convention on Contracts for the International Sale of Goods (2005), pp. 75 et seq. 73 Torsello, Remedies for Breach of Contract Under the 1980 Convention on Contracts for the International Sale of Goods (CISG), in: Ferrari (ed), Quo Vadis CISG: Celebrating the 25th Anniversary of the United Nations Convention on Contracts for the International Sale of Goods (2005), p. 77. 74 Treitel, Remedies for Breach of Contract (1988) p. 43. 75 Whittington, Reconsidering Domestic Sale of Goods Remedies in Light of the CISG, 37 Victoria University Wellington Law Review (2006) 421 (439). 76 Sale of Goods Act 1979 s. 52. 77 UCC § 2–709. 78 Boghossian, A Comparative Study of Specific Performance Provisions in the United Nations Convention on Contracts for the International Sale of Goods, Review of the Convention on Contracts for the International Sale of Goods (CISG) (1999–2000) 3 (24) (Pace); Treitel, Remedies for Breach of Contract (1988) p. 45. 79 See the commentary to Art. 62 CISG infra paras 4 et seq. 80 Lookofsky, The 1980 United Nations Convention on Contracts for the International Sale of Goods, Art. 28, Specific Performance, in: Herbots/Blanpain (eds), International Encyclopaedia of Laws – Contracts, Supplement 29 (2000), p. 81 (Pace).

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exceptions.81 The PICC, the PECL, and the DCFR require that an aggrieved party seek specific performance within a reasonable time after he has become aware of the nonperformance; otherwise, he loses that option.82 The PICC also give parties the option of opting out of specific performance as a potential remedy.83 Absent those limiting factors, however, the PICC suggest a court does not have the discretion to refuse performance.84 81 Art. 7.2.2 PICC; Art. 9:102 PECL; Art. III-3:302 DCFR. These provisions are discussed thoroughly in the commentary to Arts 46(1) paras 9 et seq. and 62 para. 10, infra. 82 Art. 7.2.2(e) PICC; Art. 9:102(3) PECL; Art. III-3:302(4). 83 Art. 7.2.5 PICC. This exercise in party autonomy could be limited by the laws of the state in which enforcement is sought, in much the same way that Art. 28 CISG limits that remedy, if the jurisdiction views its laws as non-derogable mandatory laws or as court rules not subject to alteration by the parties. See, e. g., Gabriel, Contracts for the Sale of Goods: A Comparison of US and International Law (2009) p. 120; Supreme Court (U.S.) 25 March 2008, Hall Street Associates, LLC v Mattel, Inc., 552 U.S. 576 (holding that parties could not alter the standard of review accorded by courts to arbitral awards under the Federal Arbitration Act). 84 Felemegas, The right to require specific performance: comparison between the provisions of the CISG (Arts 28, 46, and 62) and counterpart provisions of the UNIDROIT Principles (Arts. 7.2.1–7.2.5), 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), pp. 155 seq.

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Article 29 (1) A contract may be modified or terminated by the mere agreement of the parties. (2) A contract in writing which contains a provision requiring any modification or termination by agreement to be in writing may not be otherwise modified or terminated by agreement. However, a party may be precluded by his conduct from asserting such a provision to the extent that the other party has relied on that conduct. Bibliography: Hillman, Article 29(2) of the United Nations Convention on Contracts for the International Sale of Goods: A New Effort at Clarifying the Legal Effect of “No Oral Modification” Clauses, 20 Cornell International Law Journal (1988) 449; Perales Viscasillas, Modification and Termination of the Contract (Art. 29 CISG), 25 Journal of Law and Commerce (2005–06) 167.

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Contract modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. The “pre-existing duty rule” at common law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. No-oral-modification clauses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 2 3 11 15 26

I. Importance and Role of the Provision 1

Art. 29 had no counterpart in the ULIS or in the ULF. During the Vienna Conference it provoked debate, primarily because Para. 1 is a significant departure from the common law, although a similar provision is in the UCC of the U.S.1 Para. 1 makes clear that the common law doctrine of consideration plays no role in questions of modification under the Convention. It thus adopts a position closer to that of the civil law, in which “an agreement between the parties to modify the contract is effective if there is sufficient cause even if the modification relates to the obligations of only one of the parties.”2 Para. 2 provides that parties can themselves agree to limit their ability to modify a contract orally, but if they act inconsistently with that agreement, they cannot then invoke the protections of their contractual no-oralmodification clause.

1

Schlechtriem/Butler, CISG (2009), para. 96. Secretariat Commentary on 1978 Draft, Art. 27 (now Art. 29) para. 2. See also Eiselen, Modification or termination of contract and formalities: Remarks on the manner in which the UNIDROIT Principles of International Commercial Contracts may be used to interpret or supplement Article 29 of the CISG, 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), pp. 163 seq.; Gabriel, Contracts for the Sale of Goods (2009) p. 121; Mullis, in: Huber/Mullis, The CISG (2007), pp. 102 seq. Professor Mullis cautions against permitting consideration to enter into the interpretation of the CISG as a rule of validity. One CISG case decided by a German court appears to have taken that route. Oberlandesgericht Hamburg (Germany) 5 October 1998 (Electronic parts), CISG-Online 473 (Pace). See also Perales Viscasillas, Modification and Termination of the Contract (Art. 29 CISG), 25 Journal of Law and Commerce (2005–06) 167 (169 note 9). 2

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II. Detailed Commentary On its face, Art. 29 appears uncontroversial. Permitting parties to modify or terminate 2 their contracts is consistent with the principle of party autonomy. Some parties will choose to limit their ability to modify their contract orally in order to provide greater certainty concerning issues related to proof. If they proceed to act inconsistently with their no-oralmodification agreement, principles of estoppel will ensure that one party cannot unfairly insist on hewing to the letter of the contract at the expense of the other party.

1. Contract modification Art. 29(1) reflects the realities of modern international contracting. Many of the 3 modifications that fall under Art. 29(1) will likely be small, technical changes that arise in the course of the parties’ performance under the contract. Art. 29(1) also permits modifications that inure only to the benefit of one party.3 Modification is closely linked to contract formation under Arts 18 and 19. Many 4 disputes will involve an additional term added in an invoice accompanying shipment, and the outcome will often depend on whether the parties had concluded an agreement prior to shipment, in which case the question becomes whether the additional term is permitted to modify the existing agreement, or whether the agreement is formed by acceptance of the goods.4 The prior case implicates Art. 29, yet the question of whether a party agrees to the modification by conduct, including a failure to protest, has not been decided uniformly. Art. 29(1) permits such a modification provided that the parties have agreed to it.5 5 Determining whether they have in fact agreed can be difficult. Art. 29 contains no definition of what constitutes agreement, and the cases generally have looked to the CISG provisions on contract formation for guidance. One commentator has suggested that this is a sensible result so long as courts do not import all of the contract formation provisions in Part II in the course of assessing whether or not there has been agreement for purposes of Art. 29.6 Limiting the reference to Part II is important for the structure of the Convention, as Art. 29 was deliberately put in Part III to make it applicable even if the State Parties to the CISG had reserved as to Part II.7 Others, however, have said that Arts 8 and 14–24 apply to modification or termination of the contract.8 Given the potential importance of modifications to a contract, requiring the party relying on such a modification to prove an actual agreement with respect to the modification seems reasonable. Ordinarily silence or inaction will not amount to agreement to contract modification or termination, but in exceptional circumstances it might do so.9 3

Secretariat Commentary on 1978 Draft, Art. 27 (now Art. 29) para. 3. The Secretariat Commentary suggests that this is an appropriate distinction: “A proposal to modify the terms of an existing contract by including additional or different terms in a confirmation or invoice should be distinguished from a reply to an offer which purports to be an acceptance but which contains additional or different terms. The latter situation is governed by Article 17.” Secretariat Commentary on 1978 Draft, Art. 27 (now Art. 29) para. 3. 5 Secretariat Commentary on 1978 Draft, Art. 27 (now Art. 29) para. 4. See the commentary under Art. 19 CISG, supra, for further discussion of what constitutes agreement by the parties. 6 Gabriel, Contracts for the Sale of Goods (2009) p. 122. 7 Schwenzer/Fountoulakis, International Sales Law (2007), p. 198. 8 See, e. g., Schlechtriem/Butler, CISG (2009), para. 97; Perales Viscasillas, Modification and Termination of the Contract (Art. 29 CISG), 25 Journal of Law and Commerce (2005–06) 167 (171). 9 Perales Viscasillas, Modification and Termination of the Contract (Art. 29 CISG), 25 Journal of Law and Commerce (2005–06) 167 (172). 4

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Part III. Sale of Goods

The most straightforward way to change an agreement would be to accept the modification by letter. The letter could be a response to an offer to modify or could be a written confirmation of an agreement arrived at orally. Written confirmations of oral agreements are one area in which a recipient might well have a duty to read and object if there is an error in the confirmation.10 This duty might be derived from principles of good faith or from the provisions of Art. 9, which make the contract subject to usages that the parties have created between themselves and to any usage in the parties’ particular field of trade.11 7 Whether or not circumstances warrant an implication of agreement by inaction or silence is a highly fact-specific inquiry. One dispute raising the issue was dealt with successively by a U.S. and a Canadian court, which appeared to come to conflicting conclusions. The question was whether one party could be said to have implicitly agreed to the other party’s unilateral attempts to alter an agreement by failing to object to the addition of a forum selection clause in the invoices dispatched by the seller with delivery of the goods in question. A U.S. Court held that they could not: “Nothing in the Convention suggests that the failure to object to a party’s unilateral attempt to alter materially the terms of an otherwise valid agreement is an ‘agreement’ within the terms of Article 29.”12 The Canadian court took a more nuanced position after the U.S. court had dismissed the case on grounds of forum non conveniens.13 There the Ontario Superior Court decided that delivery of the product accompanied by the first invoice could not amount to a modification of the contract, but that the outcome might differ with respect to subsequent deliveries after the buyer was on notice of the terms of the invoice and did not object to them.14 There is some suggestion that courts are particularly reluctant to find oral modifications to forum selection agreements, or to conclude that an oral modification itself has selected a forum.15 6

10 Bezirksgericht Sissach (Switzerland) 5 November 1998 (Summer clothes collection), CISG-Online 1466 (Pace); Perales Viscasillas, Modification and Termination of the Contract (Art. 29 CISG), 25 Journal of Law and Commerceu (2005–06) 167 (173). 11 See the commentary to Art. 9 CISG, supra paras 8 et seq.; Perales Viscasillas, Modification and Termination of the Contract (Art. 29 CISG), 25 Journal of Law and Commerce (2005–06) 167 (173) seq. 12 U.S. Court of Appeals for the Ninth Circuit (U.S.) 5 May 2003 (Wine corks), Chateau des Charmes Wines Ltd. v Sabate´ USA, CISG-Online 767 (Pace). Sabate´ had asked the U.S. court to honour the forum selection clause contained in the invoices it had repeatedly shipped to Chaˆteau des Charmes, which specified that any dispute should be heard in France. The trial court held that the forum selection clause was valid, but the appellate court reversed on the grounds that the party had come to an oral agreement for the purchase of the corks, which were to be shipped in 11 separate batches, prior to the time the first lot of corks was shipped. The forum selection clauses in the invoices accompanying the subsequent shipments were thus not valid, and no inference could be drawn from Chaˆteau des Charmes’ failure to object to the terms in the invoices. The trial court in a different U.S. case involving a similar issue – whether the limitation of liability contained in an invoice sent with the shipment of goods became part of the contract – did not consider whether the contract had been formed prior to shipment, thus making the terms an attempted modification, or whether the contract was formed upon the recipient’s acceptance of the goods without a rejection of the terms. The Ninth Circuit remanded with instructions for the trial court to consider those issues. U.S. Court of Appeals for the Ninth Circuit (U.S.) 8 November 2007 (Raspberry roots), Barbara Berry S. A. de C. V. v Ken M. Spooner Farms, Inc., CISG-Online 1835 (Pace). See also Perales Viscasillas, Modification and Termination of the Contract (Art. 29 CISG), 25 Journal of Law and Commerce (2005–06) 167 (172). 13 Superior Court of Justice, Ontario (Canada) 28 October 2005 (Wine corks), Chateau des Charmes Wines Ltd. v Sabate, USA, Inc., CISG-Online 1139 (Pace). 14 Superior Court of Justice, Ontario (Canada) 28 October 2005 (Wine corks), Chateau des Charmes Wines Ltd. v Sabate, USA, Inc., CISG-Online 1139 (Pace). The court did not, however, dismiss the case because it was not possible to distinguish the damage caused by corks shipped under the initial contract from that caused by those shipped under later contracts, and it would be undesirable to have duplicative proceedings. 15 Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) 111 seq.

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Modification of a contract can be proved by the behaviour of the parties themselves.16 8 A buyer who acquiesced in a shipment delay, “albeit while pressing for action to be taken and status information provided by Seller,” was deemed to have modified the delivery date in the contract.17 In a German case, a buyer notified the seller of defects in a delivery of wood, and the seller responded by indicating her decision to come to Germany to take the wood and find someone else to market it for her.18 The seller later argued that she had intended only to assist in the marketing, but the court refused to give credit to this argument. The buyer had been entitled to rely on the seller’s announced intentions, and the buyer’s failure to respond to the seller’s letters permitted the court to infer that the buyer acquiesced to the termination of the agreement.19 Agreeing to modify the contract, as opposed to fixing an additional time for perfor- 9 mance, can affect the ability of a party to claim damages. In Valero Marketing & Supply Co. v Greeni Oy, a U.S. appellate court found that a party had agreed to modify the contract to receive delivery of the goods at a later date than under the original contract, notwithstanding the argument of the buyer that it was “coerced” into agreeing to the extension of time.20 The court also rejected the argument that the agreement was an extension of time to perform (as had the trial court) because it contained an additional remedy in the form of a reduction of price, as prohibited by Art. 47.21 Yet the case illustrates how an agreement to extend time pursuant to Art. 47, under which a buyer would retain the right to claim damages for harm caused by the delay, might possibly be construed as an agreement to modify the contract, which would preclude any such claim. Art. 29(1) deals with the termination of a contract, in addition to modification, but it 10 does not specify the appropriate effect of a termination agreement.22 One German court has held that if the parties agree to terminate a contract and to excuse any remaining performance on either side, each party may claim restitution of what has been per-

16 Arbitral Award, AAA 50181T 0 036 406, 23 October 2007, (Frozen chicken parts), Macromex Srl. v Globex International Inc., CISG-Online 1645 (Pace) (quoting Hof van Beroep Gent (Belgium) 15 May 2002 (Pace)) (“‘[f]ollowing arts. 29(1) and 11 CISG, any agreement, regardless of the form in which it came about, can in principle be changed or ended by the mere agreement of the parties, which may be proved by any means, including the behaviour of the parties themselves.’”). 17 Arbitral Award, AAA 50181T 0 036 406, 23 October 2007 (Frozen chicken parts), Macromex Srl. v Globex International Inc., CISG-Online 1645 (Pace); Pontevedra Provincial High Court (Section 6) (Spain), 6 October 2014 (Frozen fish), Hoogendik Import/Export B.V. v. Blue Marine Fish International, S.L., CISG-Online 2576 (Pace). In Hoogendik, multiple emails suggesting modifications to which no response was made, coupled with acceptance of goods under the modified terms, amount to tacit acceptance of the new agreement. 18 Oberlandesgericht Ko ¨ ln (Germany) 22 February 1994 (Wood), CISG-Online 127 (Pace). 19 Oberlandesgericht Ko ¨ ln (Germany) 22 February 1994 (Wood), CISG-Online 127 (Pace). In a case involving the sale of textiles, a German court concluded that a party’s acceptance of a bill of exchange in payment for goods postponed the date on which payment was due until the maturity date in the bill of exchange. Landgericht Hamburg (Germany) 26 September 1990 (Fashion textiles), CISG-Online 21 (Pace). 20 U.S. Court of Appeals for the Third Circuit (U.S.) 19 July 2007 (Naphtha), Valero Marketing & Supply Co. v Greeni Trading Oy, CISG-Online 1510 (Pace). In a similar case, an extension of the period of time for payment granted prior to the time payment was due was deemed a modification of the terms of the contract; the seller was then estopped from seeking payment as of the date of delivery. Tribunale di Padova (Italy) 31 March 2004 (Pizza boxes), Scatolificio La Perla S. n. c. de Aldrigo Stefano e Giuliano v Martin Frischdienst GmbH, CISG-Online 823 (Pace). 21 U.S. Court of Appeals for the Third Circuit (USA) 19 July 2007 (Naphtha), Valero Marketing & Supply Co. v Greeni Trading Oy, CISG-Online 1510 (Pace). 22 In particular, Art. 29 does not distinguish between termination and termination followed by novation. Perales Viscasillas, Modification and Termination of the Contract (Art. 29 CISG), 25 Journal of Law and Commerce (2005–06) 167 (175).

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formed under the contract in accordance with Art. 81(2) first sentence.23 This result is a reasonable way to ensure that termination inures to the benefit of both parties.

2. The “pre-existing duty rule” at common law The doctrine of consideration requires that there be a “bargained-for exchange” of something of value to support the formation of a contract.24 In common law countries, consideration also plays a role in the issue of contract modification. Altering a contract in favour of one party only, while the other party’s obligations remain unchanged, is unenforceable because the new agreement lacks consideration – the second party renders only the performance he was already obligated to deliver. This is usually referred to as the pre-existing duty rule.25 The modified agreement is thus said to lack consideration and is unenforceable. 12 One of the primary motivations for this employment of the consideration doctrine is to permit courts to “police” the bargain between the parties by ensuring that one party was not coerced into agreeing to a modification of the original agreement because of untoward pressure brought by the other contracting party.26 Because the bargaining power between the parties can change significantly between the time of the original formation of the contract and the time when the obligation to perform draws near, an abuse of the contracting relationship is possible.27 Yet the pre-existing duty rule can also prevent reasonable modifications to a contract.28 13 The pre-existing duty rule is less important than it used to be. First, clever contracting parties can cloak the contract modification in a veneer of consideration by adding some new but trivial obligation to the duties of the party seeking to change the contract.29 Because courts historically do not measure the adequacy of consideration, a fairly cosmetic change will suffice to make the change pass the hurdle posed by the preexisting duty rule.30 Second, common law courts are increasingly likely to be more straightforward in assessing simply whether the changed agreement was the product of duress or undue influence.31 In England doctrines such as forbearance in equity can also serve to capture instances of abuse of the pre-existing duty rule.32 14 This trend away from the pre-existing duty rule is reflected most evidently in the UCC in the U.S. UCC § 2–209(1) permits the modification of an existing contract without payment of consideration. The doctrines of good faith and duress still permit courts to monitor those modifications that are unfairly induced.33 11

23

Oberlandesgericht Du¨sseldorf (Germany) 28 May 2004 (Television sets), CISG-Online 850 (Pace). Restatement of the Law (Second) of Contracts (1981), § 71; Chitty on Contracts (29th ed. 2004), secs. 3-004–3-007. 25 Perillo, Corbin on Contracts Vol. 2 (1995) sec. 7.1; Chitty on Contracts (29th ed. 2004), ss 3–076 et seq. 26 See, e.g., White/Summers, Uniform Commercial Code (2000) pp. 57 et seq.; Perillo, Corbin on Contracts Vol. 2 (1995) sec. 7.1; Restatement of the Law (Second) of Contracts (1981), 73, cmt. a. 27 See, e. g., White/Summers, Uniform Commercial Code (2000) p. 57 seq. (describing possibilities for extortion as time for performance draws near). 28 Perillo, Corbin on Contracts Vol. 2 (1995) s. 7.5. 29 Perillo, Corbin on Contracts Vol. 2 (1995) ss 7.5 seq., 7.20; Chitty on Contracts (29th ed. 2004), ss 3– 079 et seq.; Restatement of the Law (Second) of Contracts (1981), s. 71, s. 73 ill. c. 30 Perillo, Corbin on Contracts Vol. 2 (1995) ss 7.6., 7.20; Chitty on Contracts (29th ed. 2004), s. 3–014. 31 Perillo, Corbin on Contracts Vol. 2 (1995) s. 7.6. Professor Schroeter suggests that domestic law, such as German law on unlawful threats, can supplement the CISG in appropriate cases. Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 29 para. 3. 32 Chitty on Contracts (29th ed. 2004), ss 3–085 et seq. 33 Perillo, Corbin on Contracts Vol. 2 (1995) ss 7.14, 7.21; White/Summers, Uniform Commercial Code (2000) pp. 57 seq. The good faith requirement demands that any change be honest in fact and 24

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3. No-oral-modification clauses Art. 29(2) addresses what happens when parties have agreed in writing to modify their contract only in writing – a so-called “no-oral-modification clause.” Para. 2 comports with the principle of party autonomy by allowing the parties to impose greater limits on their ability to modify or terminate a contract than would otherwise be required under the CISG.34 The explicit no-oral-modification provision is consistent with the manner in which Art. 11 has been construed. Although Art. 11 provides that a contract of sale need not be evidenced by writing, the parties can modify that provision to add such a requirement as between themselves.35 No-oral-modification clauses present a conundrum: if parties can agree to amend their previous agreement, it seems they could agree to amend the no-oral-modification clause.36 This is something of an Alice-in-Wonderland question – to what degree does party autonomy permit the limitation of party autonomy? No-oral-modification clauses are often accompanied by “merger” or “integration” clauses in which parties stipulate that their entire agreement is encompassed by their written contract and that extrinsic (a. k. a. parol) evidence should not be allowed to vary or expand the terms of the agreement. This, too, is consistent with the principle of party autonomy, although it seems inimical to Art. 8, which permits an agreement to be proved by any means.37 It appears, however, that merger clauses might be overturned by conduct or an agreement of the parties suggesting the merger clause did not truly reflect the parties’ agreement, notwithstanding its inclusion in the written contract.38 The same would hold true for a change to the “no-oral-modification” clause in Art. 29(2), but the burden of proof might be higher.39 Nothing in Art. 29(2) specifies that the no-oral-modification agreement itself has to be in writing, although some have suggested that it should be.40 This is an esoteric

commercially reasonable. UCC s. 2.209 official cmt., Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) 112. 34 CISG Art. 6 permits the parties to vary their agreement. See the commentary to Art. 6, supra paras 7 et seq., for fuller discussion of party autonomy. 35 Eiselen, Modification or termination of contract and formalities: Remarks on the manner in which the UNIDROIT Principles of International Commercial Contracts may be used to interpret or supplement Article 29 of the CISG, 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), p. 164. 36 Hillman, Article 29(2) of the United Nations Convention on Contracts for the International Sale of Goods: A New Effort at Clarifying the Legal Effect of “No Oral Modification” Clauses, 20 Cornell International Law Journal (1988) 449 (451); cf. Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 29 para. 23 (discussing instances in which the agreement as to form serves only the function of proving an agreement; in such cases the modification itself might not be in writing) and para. 24 (suggesting any agreement to discontinue the effect of a no-oral-modification clause must be in writing). 37 Rustad, Understanding Sales, Leases, and Licenses in a Global Perspective (2008) p. 114. 38 See, e. g., U.S. District Court for the Southern District of New York (U.S.) 23 August 2006 (Packaging system), TeeVee Toons, Inc. et al. v Gerhard Schubert GmbH, CISG-Online 1272 (Pace). 39 Schlechtriem/Butler, CISG (2009), paras 98 seq. In one Russian Arbitration, the tribunal suggested that oral modification of the no-oral-modification clause would not be permitted. Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 107/2002, 16 February 2004 (Goods not specified), CISG-Online 1181 (Pace). 40 Eiselen, Modification or termination of contract and formalities: Remarks on the manner in which the UNIDROIT Principles of International Commercial Contracts may be used to interpret or supplement Article 29 of the CISG, 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), p. 165.

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conundrum; parties concerned with limiting their ability to modify a contract orally are unlikely to agree to such an important limitation without putting that agreement in writing. An oral agreement to limit oral modification would raise significant evidentiary questions, and anyone truly concerned with imposing such a limitation on their freedom of contract should do so in writing. Assuming there is a requirement that a no-oral-modification clause be in writing, commentators suggest that this encompasses modern electronic communications, such as email, fax, and Internet communication, in addition to telexes, telegrams, and letters.41 This result seems correct, and should extend to communications with respect to modification of the agreement as well.42 19 The difficulty presented by no-oral-modification clauses is that parties can and often do ignore this provision in their contract and make subsequent oral changes.43 On one view the clause could absolutely bar any reliance on those oral changes.44 Yet such a result would not be consistent with actual practice or with fundamental fairness. This problem is addressed by the estoppel provision – a party who agrees to amend the contract is precluded from invoking the provision as a defence if the other party has relied on the agreement. “The rule is based on principles contained in the so-called Mißbrauchseinwand of German law, the nemo suum venire contra factum proprium principle of Roman law, [and] the doctrine of waiver and estoppel of Anglo-American law.”45 20 Art. 29(2) provides that a party’s “conduct” might preclude invocation of the clause, but it does not further elaborate on the kind of conduct that would justify reliance. This lack of precision might be necessary given the likely variations in party conduct that could give rise to estoppel, yet it also introduces an element of uncertainty that might undercut the effectiveness of the no-oral-modification clause.46 Indeed, the existence of the estoppel provision itself might be held to undermine the certainty and guarding against false claims that no-oral-modification clauses are meant to provide.47 21 The extent to which a no-oral-modification provision can itself be modified by the conduct of the parties was addressed in an ICC arbitration. There the tribunal held that the no-oral-modification clause would act as a bar to finding an amendment to the contract based on general commercial practice, or on the behavioural practice as between

41 Eiselen, Modification or termination of contract and formalities: Remarks on the manner in which the UNIDROIT Principles of International Commercial Contracts may be used to interpret or supplement Article 29 of the CISG, 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), p. 165. 42 Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 29 para. 28. 43 See, e. g., Reiley, International Sales Contracts: The UN Convention and Related Transnational Law (2008) p. 123; Hillman, Article 29(2) of the United Nations Convention on Contracts for the International Sale of Goods: A New Effort at Clarifying the Legal Effect of “No Oral Modification” Clauses, 20 Cornell International Law Journal (1988) 449 (451). 44 Honnold, Uniform Law (2009), Art. 29 para. 204. 45 Eiselen, Modification or termination of contract and formalities: Remarks on the manner in which the UNIDROIT Principles of International Commercial Contracts may be used to interpret or supplement Article 29 of the CISG, 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), p. 165. 46 Hillman, Article 29(2) of the United Nations Convention on Contracts for the International Sale of Goods: A New Effort at Clarifying the Legal Effect of “No Oral Modification” Clauses, 20 Cornell International Law Journal (1988) 449 (460 seq.); Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) 114 et seq. 47 Gabriel, Contracts for the Sale of Goods (2009) p. 104; Schlechtriem/Butler, CISG (2009), para. 99.

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the parties.48 “[T]he explicit integration clause and the written modification clause, as contained in the Contract, operate as a bar against the assumption that a certain behavior or practice could reach the level of becoming legally binding between the Parties.”49 The CISG says nothing explicit about whether the reliance needs to be reasonable. It would seem, however, to be tacitly assumed, whether as a sub voce requirement of the estoppel doctrine or under the principle of good faith.50 Furthermore, the estoppel is limited to the extent of the reliance; the party should be able to insist on the original provisions not addressed by the oral modification.51 Finally, it appears that the estoppel provision cannot itself be overridden by the parties, although this conclusion limits the freedom of contract conferred on the parties by Art. 6. Because it acts as a safety valve to protect against abuse of the no-oral-modification provision, parties cannot derogate from it.52 It is useful to note here that setting a nachfrist period – setting an extended time for performance – is not viewed as a modification to the contract. Thus, even if the contract contains a no-oral-modification clause, the notice giving additional time for performance need not be in writing.53 Art. 29(2) addresses only written modification; it does not address what should happen in the event the parties try to limit their freedom to modify the contract by adding further formalities such as signatures or notarization. The principle of party autonomy would permit them to do so; most have concluded that such limitations should be upheld, subject to the estoppel principle also found in Art. 29(2).54 The CISG also does not explicitly address the interplay between Art. 29(2) and the reservations some states have taken under Arts 12 and 96 to permit contracts to be evidenced only by writing. Does the estoppel provision apply even in those cases? Though arguments have been made in both directions, the better answer seems to be

48

Arbitral Award, ICC 9117, March 1998 (Goods not specified), CISG-Online 777. Arbitral Award ICC 9117, March 1998 (Goods not specified), CISG-Online 777. The tribunal also found there was in any event no particular commercial practice between the parties. See also Gillette/ Walt, The UN Convention on Contracts for the International Sale of Goods (2016) 117 (suggesting reluctance to investigate potential conduct that might trigger exceptions based on conduct). 50 See, e. g., Eiselen, Modification or termination of contract and formalities: Remarks on the manner in which the UNIDROIT Principles of International Commercial Contracts may be used to interpret or supplement Article 29 of the CISG, 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), p. 166; Hillman, Article 29(2) of the United Nations Convention on Contracts for the International Sale of Goods: A New Effort at Clarifying the Legal Effect of “No Oral Modification” Clauses, 20 Cornell International Law Journal (1988) 449 (458). 51 Honnold, Uniform Law (2009), Art. 29 para. 204. 52 Honnold, Uniform Law (2009), Art. 29 para. 204; Hillman, Article 29(2) of the United Nations Convention on Contracts for the International Sale of Goods: A New Effort at Clarifying the Legal Effect of “No Oral Modification” Clauses, 20 Cornell International Law Journal (1988) 449 (462); Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) 117 seq. 53 Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016) 205 seq. (but noting that there could be difficulty distinguishing between the granting of additional time under Art. 47 and modifying a contract under Art. 29). 54 See Eiselen, Modification or termination of contract and formalities: Remarks on the manner in which the UNIDROIT Principles of International Commercial Contracts may be used to interpret or supplement Article 29 of the CISG, 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), p. 166. 49

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that it should not. Permitting reliance to undermine the requirement of writing would effectively negate the Art. 96 reservation.55

III. Comparable Rules Art. 2.1.18 PICC is similar to Art. 29(2) CISG. It also provides for a no-oral-modification clause and prevents a party from relying on the clause if, by its conduct, it has reasonably induced reliance by the other party.56 The PECL also permit parties to agree to limit their ability to alter their contracts orally, but would permit estoppel in the event of inconsistent conduct or statements.57 The DCFR contains a similar provision.58 27 The CISG departs in two respects from the PECL and the DCFR. First, it does not explicitly refer to estoppel based on statements, but only to estoppel based on conduct.59 A reasonable interpretation is that “conduct” encompasses statements.60 Written or telephonic assertions about the intention of the party would seem to be the most likely kinds of conduct to induce reliance and subsequent estoppel. The second difference is that both the PECL and the DCFR appear to limit the force of the “no-oral-modification” agreement by saying that such a clause (or “term” in the DCFR) establishes only a presumption that an oral statement is not intended to be legally binding.61 The CISG language does not contain such a caveat; nor do the PICC.62 26

55 Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 29 para. 40; Hillman, Article 29(2) of the United Nations Convention on Contracts for the International Sale of Goods: A New Effort at Clarifying the Legal Effect of “No Oral Modification” Clauses, 20 Cornell International Law Journal (1988) 449 (460–61). A U.S. court implicitly held that China’s now-withdrawn Art. 96 reservation extended to modification as well. U.S. District Court for the Southern District of Florida (U.S.), 19 May 2008 (Polyester dyed fabric), Zheijiang Shaoxing Yonghi Printing and Dyeing Co. Ltd. V. Microflock Textile Group Corp., CISG-Online 1771 (Pace). 56 Art. 2.1.18 PICC. 57 Art. 2.106 PECL states: “(1) A clause in a written contract requiring any modification or ending by agreement to be made in writing establishes only a presumption that an agreement to modify or end the contract is not intended to be legally binding unless it is in writing. (2) A party may by its statements or conduct be precluded from asserting such a clause to the extent that the other party has reasonably relied on them.” 58 Art. II – 4:105 DCFR. 59 The PICC also do not refer to “statements.” Art. 2.1.18 PICC. 60 Perales Viscasillas, Modification and Termination of the Contract (Art. 29 CISG), 25 Journal of Law and Commerce (2005–06) 167 (178). 61 Art. 2.106(1) PECL; Art. II-4:105(1) DCFR. 62 Art. 2.1.18 PICC.

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Chapter II Obligations of the Seller Article 30 The 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. Bibliography: Basedow, Die Incoterms und der Container, RabelsZ (1979) 116; Benedick, Die Informationspflichten im UN-Kaufrecht (CISG) und ihre Verletzung (2008); Dauner-Lieb/Quecke, in: Schulze/ von Bar/Schulte-No¨lke (eds), Der akademische Entwurf fu¨r einen Gemeinsamen Referenzrahmen (2008), p. 135; Derains/Ghestin, La Convention de Vienne sur la vente internationale et les incoterms (1990); Gru¨ske, Ratgeber INCOTERMS 2010 (2011); Huber, Modellregeln fu¨r ein Europa¨isches Kaufrecht, ZEuP (2008) 708; Piltz/Bredow, Incoterms (2016); Piltz, Incoterms 2010, IHR (2011) 1; Ramberg, ICC Guide to Incoterms 2010 (2011); Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995); Schackmar, Die Lieferpflicht des Verka¨ufers in internationalen Kaufvertra¨gen (2001), p. 78; Schwenzer/ Hachem/Kee, Global Sales and Contract Law (2012); Siehr, Internationales Sachenrecht, ZVglRWiss (2005) 145; Schulze (ed.), Common European Sales Law (CESL) (2012); Vanheusden, Leveringsvoorwaarden in international overeenkomsten, Incoterms anders bekeken (2013).

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Subject matter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Primary obligations of the seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. National laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Vienna Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Seller’s obligation to deliver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Seller’s obligation to transfer property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Essential Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Obligation to Transfer Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) The transfer of property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Seller’s obligation to hand over documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Party autonomy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Incoterms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Structure of the Incoterms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) E-group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) F-group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) C-group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) D-group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Legal nature of the Incoterms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) The rules of interpretation of the Incoterms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. PICC and PECL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. DCFR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 5 9 10 11 11 12 13 14 19 26 27 30 30 31 33 34 35 36 37 42 46 47

I. Importance and Role of the Provision 1. Subject matter Art. 30 summarizes the obligations of the seller which arise out of a contract of sale of 1 goods. It serves as an introduction to Chapter II “Obligations of the seller” and as counterpart to Art. 53 which summarizes the obligations of the buyer. However, Art. 30 governs only the primary obligations, not the secondary obligations of the seller which

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Article 30 2–7

Part III. Chapter II. Obligations of the Seller

result from his failure to perform the primary obligations properly. The secondary obligations of the seller are regulated by Arts 45 et seq. 2 Typical and characteristic of a contract of sale of goods governed by the CISG is the seller’s obligation to transfer the property in the goods1. Regularly – but not necessarily in all cases2 – the seller is also obliged to deliver the goods subject to the contract of sale. The obligation to hand over documents relating to the goods as well as other obligations of the seller is, however, not equally characteristic to a contract of sale governed by the CISG and arises only under certain circumstances. 3 The provisions governing the obligations of the seller are only applicable if the contract is a contract of sale within the CISG’s scope of application. However, these provisions can also be applied in situations where the contract goes beyond a simple sale of goods as long as the transaction pursuant to Art. 3 falls within the CISG’s scope of application. Art. 92(1) provides every Contracting State with the option to declare that it will not be bound by Part III of the CISG and hence will not be obliged to apply Arts 30 et seq. Since no Contracting State has exercised this reservation so far, Art. 30 regulates the seller’s obligations in every contract of sale for which the CISG is applicable. 4 Obligations of the seller can only derive from a contract of sale governed by the CISG if this contract has been effectively concluded. The conclusion of the contract of sale, its modification, amendment or termination as well as the requirements concerning the form are regulated by Arts 14 et seq., 11, 29. The validity of the contract or any of its provisions is governed by the subsidiarily applicable national law (see Art. 4(a)).

2. Primary obligations of the seller Art. 30 does not regulate the obligations of the seller completely and conclusively. Rather, Art. 30 has to be considered as a provision outlining the main primary obligations of the seller arising out of an international contract of sale. 6 The primary obligations of the seller to deliver the goods and to hand over the documents relating to them as mentioned in Art. 30 are defined in greater detail in Arts 31 et seq. Solely the obligation to transfer the property in the goods is exclusively regulated in Art. 30. Further obligations of the seller can be found in other articles of the CISG, namely the obligation to inform the buyer about the details of a specification to the goods made by the seller (Art. 65(2)), the obligation to preserve the goods (Art. 85), the obligation to give notice of any suspension of performance, (Art. 71(3)), and the obligation to give notice of impediments which affect the ability to perform (Art. 79(4)). 7 Art. 30 explicitly instructs the seller to perform his obligations “as required by the contract”. The primary obligations which have to be fulfilled and the content of these obligations have to be evaluated primarily by examining the parties’ agreements and any applicable usages and practices established between the parties (Arts 6 and 9). Party autonomy prevails over the provisions of the CISG, even if the obligations are stipulated in model contracts or in General Terms and Conditions3. Party autonomy is of special significance with regard to the obligations of the seller mentioned in Art. 30. According to experience, both parties generally put much more effort in negotiating and in specifically stipulating the primary obligations of the seller and the buyer, whereas the parties usually do not spend the same effort on the negotiation and stipulation of legal 5

1 See supra Art. 1 para. 25. See also Art. IV.-A.-1:202 DCFR. Misleading Secretariat Commentary on 1978 Draft, Art. 29 (now Art. 30) para. 1 (“seller’s primary obligation is to deliver the goods”). 2 See infra Art. 31 paras 8 et seq. 3 For more details see Ferna ´ ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 242.

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8–10

Article 30

remedies for situations where one party fails to perform its contractual obligations. Since the agreement between the parties and the circumstances surrounding the contract are of primary and paramount significance, Art. 30 only plays a supplementary role. It only gains significance to the extent that the seller’s obligations cannot be determined by looking at the contract and its circumstances4. Modifications or supplementations to the articles of the CISG in international 8 commercial contracts are often implemented by agreeing upon the Incoterms5. Apart from the Incoterms which were especially designed for international sales transactions and which apply irrespectively of a certain industry or a certain mode of transport, there are numerous other bodies of rules and regulations for certain business areas6, most frequently excluding the application of the CISG7, or certain transport modes8 and general commercial rules. “COD” (cash on delivery)9, “CAD” (cash against documents)10, “free delivery” or “franko”11 by way of example are, like the Incoterms, not reserved for a certain business area or transport mode. However, in contrast to the Incoterms no autonomous interpretation rules exist for these terms12.

3. National laws Recourse to national bodies of law can only be made insofar as the CISG does not 9 require its application to a certain legal question. Even though the CISG does not expressly formulate all imaginable obligations, the obligations of the seller are considered to be regulated comprehensively by the CISG regarding their extent and content. Legal provisions outside the CISG regarding the primary obligations of the seller can therefore only be relevant, if the parties have agreed on that (Art. 6), if other international agreements are relevant and applicable (Art. 90) or if there exists a well-founded possibility to argue that the CISG’s applicability is limited in that respect.

4. Vienna Conference Art. 30 corresponds almost literally with Art. 18 ULIS. During the Vienna conference, 10 Art. 30 was not controversial and was agreed on without major discussion13. 4 Magnus, in: Staudinger Kommentar (2013), Art. 30 para. 1, Art. 31 para. 6; Bernstein/Lookofsky, Understanding the CISG (2003), p. 72; Lando, in: Bianca/Bonell, Commentary (1987), Art. 31 para. 2.4. 5 See infra paras 30 et seq. 6 For example s. 32 et seq. of the Gescha ¨ftsbedingungen des Waren-Vereins der Hamburger Bo¨rse e. V.; s. 64 et seq. of the Einheitsbedingungen im Deutschen Getreidehandel; the Rules Relating to Contracts of The Refined Sugar Association; the rules laid down in the GAFTA (Grain and Feed Trade Association) and in the FOSFA (Federation of Oils, Seeds and Fats Association) contracts and many others. 7 The statement in these rules that the CISG does not apply does not necessarily mean that such exclusion is valid, for more details see Piltz, Internationales Kaufrecht (2008), para 2–113. 8 For example Trappe, U ¨ berseekaufvertrag und “maritime terms”, IHR (2008) 157 et seq. 9 Cf. Lebuhn, Zur Bedeutung der Klausel “c.o. d.”, IPRax (1986) 19. 10 For more details see Zwitser, CAD, waar we het zoeken moeten, Nederlands Tijdschrift voor Handelsrecht (2008) 181 et seq. and Oberlandesgericht Dresden (Germany) 9 July 1998, IHR (2001) 18 seq. 11 Cf. Hof’s-Hertogenbosch (Netherlands) 26 July 2011, CISG-Online 2384; Højesteret (Denmark) 15 February 2001, CISG-Online 601; Hof van Beroep te Gent (Belgium) 29 March 2000 (Pace); Hooge Raad (Netherlands) 21 May 1999, CISG-Online 1809; Ramberg, ICC Guide to Incoterms 2010 (2011), p. 60; Fogt, Die Vereinbarung und Auslegung von FRANCO-Lieferklauseln beim CISG-Kauf, European Legal Forum (2003) 61 et seq. and Lebuhn, Zur Frage der Auslegung der in einem u¨berseeischen Getreidehandelsgescha¨ft verwendeten Klausel “frei Lager … Bestimmungsort”, IPRax (1985) 10 et seq. 12 See infra paras 31 and 42. 13 Magnus, in: Staudinger Kommentar (2013), Art. 30 para. 2; Ferna ´ ndez de la Ga´ndara, in: Dı´ezPicazo, Comentario (1998), p. 244.

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Article 30 11–14

Part III. Chapter II. Obligations of the Seller

II. Detailed Commentary 1. Seller’s obligation to deliver 11

Art. 30 obliges the seller to deliver the goods. The further modalities of this obligation, namely the kind of act which the seller has to perform, the place and the time of delivery, the notice of consignment, the carriage and the insurance of the goods are governed by Arts 31–33, so reference is made to the respective commentaries. Depending on the circumstances, it is possible that the seller has no obligation to deliver the goods or this obligation has been replaced by other agreements between the parties14. Even in this case the nature of the contract, being a contract of sale of goods regulated by the CISG, is generally not affected.

2. Seller’s obligation to transfer property 12

By virtue of Art. 30 the seller is also obliged to transfer the property in the goods sold. This particular obligation characterizes every contract of sale and can be considered to be its core content15. Other than the seller’s obligation to deliver the goods and to hand over the documents relating to them the obligation to transfer the property is not regulated in any other article of the CISG. The sole basis for the obligation to transfer the property in the goods is Art. 30.

13

a) Essential Function. The obligation to transfer the property in the goods is essential for any contract to be qualified as a contract of sale16. If an obligation of the seller to transfer the property in the goods sold cannot be established, the respective contract is usually not considered a contract of sale of goods regulated by the CISG. This results in the inapplicability of the CISG17. For instance there is no contract of sale if only rights of use with regard to the goods are granted to the other party18. However, it is irrelevant when and under which conditions the transfer of property is to be conducted. Therefore, a contract of sale that stipulates a reservation of title is nonetheless considered a contract of sale according to the CISG19. It does not conflict with the qualification as a contract of sale if the goods sold are encumbered with rights of a third party or rights that serve to protect intellectual property of a third party20. However, there is usually no contract of sale in the terms of the CISG if the seller is not obliged vis-a`-vis the buyer to transfer the property in the goods sold.

14

b) Obligation to Transfer Property. The CISG does not govern the effect which the contract of sale may have on the property in the goods sold21 (Art. 4(b)). Therefore, Art. 30 only contains an abstract obligation of the seller to take all necessary actions and

14

See infra Art. 31 paras 8 et seq. Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 245. 16 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 30 para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 1 para. 14. 17 See supra Art. 1; Piltz, Internationales Kaufrecht (2008), paras 2–27. 18 Cf. Bertrams/Kruisinga, Overeenkomsten in het international privaatrecht en het Weens Koopverdrag (2010) pp. 183 seq.; Achilles, in: Ensthaler (ed.), Gemeinschaftskommentar zum Handelsgesetzbuch mit UN-Kaufrecht (2007), Art. 1 para. 4. 19 Cf. Saenger, in: Ferrari et al., Internationales Vertragsrecht (2011), Art. 4 para. 8. 20 Green/Saidov, Software as Goods, Journal of Business Law (2007) 161 (176) (Pace). 21 Obviously in contrast regarding the moment the title passes Arbitral Award, Federal Arbitration Court for the Northwestern Circuit (Russia) 3 June 2003, CISG-Online 947. 15

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Chapter II. Obligations of the Seller

15–17

Article 30

measures in order to transfer property22. The CISG does not provide for any specifications on the necessary actions and measures to be taken23. It is also irrelevant whether the seller or a third person is the proprietor or whether the seller has to transfer property to the buyer or to a third person. Nevertheless, the seller has to take all necessary actions and measures to transfer property in the goods sold and thus fulfil the obligations he has entered into by concluding the contract of sale with the buyer. The CISG does not contain any specifications as to where and when the seller has to 15 fulfil his obligation to transfer property. Unless otherwise stipulated or indicated by the circumstances, the provisions regarding the seller’s delivery obligation can be applied accordingly24. The rights of the seller to cure according to Arts 37 and 48 are applicable to the seller’s obligation to transfer property likewise. The parties are free to agree that regardless of the delivery of the goods, property in 16 goods shall only be transferred after the price for the goods has been paid in full. It has to be judged by the rules of the CISG whether or not such an agreement regarding a reservation of title is concluded with a legally binding effect25. The CISG also provides whether the seller is at all, on what specific conditions and with which contractual consequences entitled to declare the contract avoided in case the buyer fails to pay the price properly26. In contrast, the CISG does not govern under which conditions a reservation of title can have a legal impact on a third party and the specific nature and extent of such an impact. According to Art. 4(b) this question is dealt with by the respective national law. The applicable national law is determined by the relevant private international law27. Opinions differ on whether or not the seller is entitled to unilaterally declare a 17 reservation of title after the contract of sale has been concluded, i. e. when no reservation of title has been contractually agreed upon by the parties28. If property has not yet passed to the buyer according to the applicable national law indicated by the relevant private international law and the seller by virtue of Art. 58(1) second sentence is entitled to make unilaterally payment of the goods sold a condition for handing them over, then the seller is also entitled to unilaterally reserve the title in the goods sold without breaching his contractual obligation to transfer the property in the goods29. However, this applies only to a simple reservation of title, i. e. the reservation of title which aims to 22 Magnus, in: Staudinger Kommentar (2013), Art. 30 para. 10; Herber/Czerwenka, Kommentar (1991), Art. 30 para. 8. Rejecting a primary obligation of the seller to transfer the property in the goods Bucher, ¨ berblick u¨ber die Neuerungen des Wiener Kaufrechts; dessen Verha¨ltnis zu Kaufrechtstraditionen und U zum nationalen Recht, in: Bucher (ed.), Wiener Kaufrecht (1991), p. 13 (52). 23 See infra para. 19. 24 See infra Arts 31 and 33. 25 Hof’s-Hertogenbosch (Netherlands) 29 May 2007, CISG-Online 1550; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013), para. 177; Schwenzer/Fountoulakis, International Sales Law (2012), p. 207. 26 Critical Gabriel, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 336 (347). 27 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 30 para. 11; US District Court, Northern District of Illinois, Eastern Division (U.S.) 28 March 2002, Industeel vs. Steel Products Inc., CISG-Online 696 and Federal Court, South Australian District (Australia) 28 April 1995, Roder Zeltund Hallenkonstruktionen GmbH vs. Rosedown Park Party Ltd., CISG-Online 218. 28 In favour Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 30 para. 11; Magnus, in: Staudinger Kommentar (2013), Art. 30 para. 12; Benicke, in: Mu¨nchKommHGB (2013), Art. 30 CISG para. 3; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 30 CISG para. 4 a; Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 249 and Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 30 para. 15. In contrast Witz/Salger/Lorenz, Kommentar (2016), Art. 30 para. 16; Verweyen/Foerster/Toufar, Handbuch des Internationalen Warenkaufs UNKaufrecht (2008), p. 143; Soergel/Lu¨deritz/Schu¨ßler-Langeheine, Kommentar zum Bu¨rgerlichen Gesetzbuch (2000), Art. 30 CISG para. 7; Karollus, UN-Kaufrecht (1991), p. 113. 29 Cf. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 30 para. 11; Gruber, in: Mu¨nchKommBGB (2016), Art. 31 para. 29.

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Article 30 18–20

Part III. Chapter II. Obligations of the Seller

ensure only the payment of the price for the goods sold subject to the contract in question. There is no possibility for the seller to unilaterally impose an enlarged30 or an extended31 reservation of title. 18 In case of improper performance of the seller’s obligation to transfer property, the buyer enjoys the legal remedies regulated in Arts 45 et seq.32, namely the remedies for delivery of goods with defective title (Arts 41 and 42). Generally, the seller owes the buyer the duty to deliver goods free from any right or claim of a third party33. If the passing of property does not succeed due to circumstances which pursuant to Art. 4(b) are not governed by the CISG, the seller has not fulfilled his obligation to transfer property imposed upon him by Art. 30. However, if the transfer of property cannot be achieved due to a lack of cooperation by the buyer, the seller is protected by Art. 80. c) The transfer of property. When the transfer of property in the goods sold is not to be operated by handing over the relevant negotiable documents34, one has to turn to the relevant private international law to determine, which actions or measures have to be taken to achieve the transfer of property and for the seller to fulfil his obligations imposed by Art. 3035. In general, every state decides autonomously how to design its private international law. Since only a few specific constellations regarding the transfer of property are governed by international treaties, it is most often necessary to resort to the private international law of the respective state. As a general rule, the transfer of property in movables is governed by the national law of the state where the goods are situated (lex rei sitae)36. Although there are some exceptions to this rule, it is practically accepted as a general principle around the world37. Taking into account that the legal position of third parties can be affected by the transfer of property, there is virtually no alternative to this principle. Specific rules of interest in connection with contracts of sale exist to protect cultural assets (lex originis)38. 20 Looking at the existing national laws regarding the transfer of property, there are three different basic mechanisms or principles in national laws on how the transfer of property in movables operates. Without going too much into detail these can be described as follows39. 19

30 An enlarged reservation of title (“erweiterter Eigentumsvorbehalt”) means that the title of the goods remains with the seller until all debts of the purchaser including those resulting from other contracts with the seller have been paid. 31 An extended reservation of title (“verla ¨ngerter Eigentumsvorbehalt”) means that the title of the goods remains with the seller until the debts of the purchaser with the seller have been paid while the purchaser is entitled to sell or otherwise dispose of the goods in the ordinary course of business. To serve the security interests of the seller all claims of the purchaser against his customers arising out of the sale or processing of the goods are automatically transferred to the seller. Usually the seller authorizes the purchaser to collect those funds in his own name but on account of the seller to whom the purchaser shall forward all those funds immediately upon collection. 32 Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 30 para. 12. 33 In contrast Witz/Salger/Lorenz, Kommentar (2016), Art. 30 para. 11. 34 See infra Art. 34 para. 14. 35 See supra para. 14. 36 Magnus, in: Staudinger Kommentar (2013), Art. 30 para. 11; Schlechtriem/Butler, CISG (2009), para. 121. 37 Cf. Kropholler, Internationales Privatrecht (2006), p. 554; Siehr, Internationales Sachenrecht, ZVglRWiss (2005) 145 et seq. 38 Cf. Wendenburg, Kulturgu ¨ terschutz im Gemeinschaftsrecht, ZEuP (2008) 577 et seq.; Siehr, Internationaler Rechtsschutz von Kulturgu¨tern, Schweizerische Zeitschrift fu¨r Internationales und Europa¨isches Recht (2005) 53 et seq.; Siehr, Internationales Sachenrecht, ZVglRWiss (2005) 145 (151); Kienle/ Weller, Die Vindikation gestohlener Kulturgu¨ter im IPR, IPRax (2004) 290 et seq. 39 Cf. Martiny, in: Reithmann/Marrtiny, Internationales Vertragsrecht (2015) para. 6.143; Faber/Lurger, Rules for the Transfer of Movables (2008); Ziegler/Ronøe/Debattista/Ple´gat-Kerrault, Transfer of Ownership in International Trade (1999); Ro¨thlisberger, Traditionsprinzip und Konsensprinzip bei der Mobiliaru¨bereignung (1982); Wacke, Eigentumserwerb des Ka¨ufers durch schlichten Konsens oder erst mit

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The principle of consensus: The very conclusion of the contract of sale principally leads to the transfer of property in the goods sold. This principle is applied in Australia, Belgium, Bolivia, Canada, Denmark, England, France, Italy, Mexico, New Zealand, Portugal, Sweden, the U.S. and in Venezuela. The principle of tradition: In addition to the mere contract of sale the factual handing-over of the goods sold or of a surrogate for the handing-over of the goods is necessary in order to transfer property. This principle is in particular applied in Argentina, Austria, Brazil, Chile, China, Colombia, Cuba, Honduras, the Netherlands, Norway, Paraguay, Peru, Russia, Spain, South Africa, Switzerland and in Uruguay. The principle of separation: An additional collateral agreement on the transfer of property, which is legally independent from the contract of sale, is required as well as the handing-over of the goods sold or a surrogate for the handing-over of the goods. This principle is applied in Germany and in a modified form in Japan. Considering their dogmatic origin these principles hardly seem to be compatible with each other. In practice however, the principle of tradition and the principle of separation are relativized by allowing arrangements to substitute the handing-over of the goods. The pure principle of consensus is subject to modifications especially in commercial transactions and because of the need to specify unascertained goods as well as in specific constellations with regard to possession. If according to the applicable national law the handing-over of the goods is a prerequisite for the transfer of property, this handing-over must – even if it factually coincides with delivery – be considered as legally independent from the delivery40. On the other hand, the seller is not released from his obligation to deliver the goods merely because the transfer of property has already been achieved by concluding the contract (principle of consensus). Moreover, it cannot be concluded from the seller’s obligation to deliver the goods that under the CISG the transfer of property is linked with the handing-over of the goods sold41. Due to the fact that the CISG does not govern the effect which the contract of sale may have on the property in the goods sold (Art. 4(b)), the seller’s obligation to deliver the goods on one side and the actions and measures necessary pursuant to the applicable national law for the transfer of property on the other side have to be considered separately and independently from each other.

21

22

23

24

25

3. Seller’s obligation to hand over documents Finally, Art. 30 also obliges the seller to hand over any documents relating to the 26 goods. Details of this obligation are subject of Art. 34, so reference is made to the respective commentary. If an obligation to hand over documents cannot be established, it generally does not affect the characterization of the contract as a contract of sale according to the CISG.

4. Party autonomy In addition to the seller’s obligations to deliver the goods42, to transfer property in the 27 goods43 and to hand over the documents relating to them44, Art. 30 expressly stipulates ¨ bergabe? Unterschiede im Rezeptionsprozess und ihre mo¨gliche U ¨ berwindung, ZEuP (2000) 254 et seq.; U Ferrari, Vom Abstraktionsprinzip und Konsensualprinzip zum Traditionsprinzip, ZEuP (1993) 52 et seq. 40 Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 30 para. 14; Witz/Salger/Lorenz, Kommentar (2016), Art. 30 para. 7. 41 In contrast Ferna ´ ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 247. 42 See supra para. 11. 43 See supra paras 12 et seq. 44 See supra para. 26.

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that the seller has to fulfil his obligations “as required by the contract”. This means that the agreement of the contracting parties and all other relevant circumstances concerning the contract always have to be taken into consideration, especially regarding the interpretation of the contract’s content and the proper performance of the obligations to deliver the goods, to transfer property and to hand over the documents45. Furthermore, like Arts 6 and 9, this passage in Art. 30 is the basis for the binding character of all other obligations imposed on the seller which are not addressed explicitly in Art. 3046 and not described in other articles of the CISG. 28 In practice, the agreement on a clause of the Incoterms and thus the particular obligations of the seller arising out of the Incoterms rules for that clause are of particular relevance47. Yet without an agreement on Incoterms the seller may be committed to comply with further obligations not expressly regulated by the CISG. In particular these can regard the packaging and labelling of the goods sold48, the procurement of necessary licenses and permissions49 and the provision of customs declarations and the payment of tariffs50. If additional obligations of the seller can be established, either by agreement on Incoterms clauses or by other circumstances, these obligations are generally governed by the CISG as well51. The CISG namely governs the agreement on such further obligations and the consequences of a poor or non-performance of these obligations52. With due consideration, reasonable flexibility and dependant on the kind of obligation as well as the relevant circumstances, other provisions of the CISG can be applicable too, in particular the rights to cure according to Arts 37 and 4853. 29 It is quite controversial to what extent a general obligation of the seller to cooperate can be established and what the specific content of such a general obligation to cooperate could be54. For instance a seller was held responsible for not having clarified to the buyer that the goods were not suitable for the purpose he expected55. The legal basis of such an obligation should be seen primarily in Art. 7 and not in Art. 3056. Regarding the seller’s obligations, the text of Art. 30 is not exhaustive57. Nevertheless, one still has to be cautious in developing further obligations of the seller referring to Art. 758. The CISG is characterized by the principle of party autonomy. Then, authoritative for the seller’s obligations is primarily the agreement between the parties (Art. 6), 45

See supra para. 7. Gruber, in: Mu¨nchKommBGB (2016), Art. 30 para. 1. 47 For more details see infra paras 30 et seq. 48 See infra Art. 31 para. 50. 49 See infra Art. 31 paras 52 et seq. 50 See infra Art. 31 paras 52 et seq. 51 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 30 para. 12; Magnus, in: Staudinger Kommentar (2013), Art. 30 para. 18. 52 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 30 CISG para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 30 para. 19. 53 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 3; Benicke, in: Mu¨nchKommHGB (2013), Art. 48 CISG para. 2. 54 Cf. Gruber, in: Mu ¨ nchKommBGB (2016), Art. 30 para. 8; Witz/Salger/Lorenz, Kommentar (2016), Art. 30 para. 23; Dimsey, in: Brunner, Kommentar (2014), Art. 30 para. 21; Magnus, in: Staudinger Kommentar (2013), Art. 7 para. 47, Art. 30 para. 15; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 30 para. 18; Kock, Nebenpflichten im UN-Kaufrecht (1995), p. 32. 55 Oberlandesgericht Koblenz (Germany) 24 February 2011, CISG-Online 2301. 56 Witz/Salger/Lorenz, Kommentar (2016), Art. 30 para. 23; Magnus, in: Staudinger Kommentar (2013), Art. 30 para. 15. 57 See supra para. 5. 58 Pointing into the same direction Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 25 para. 17; Benedick, Die Informationspflichten im UN-Kaufrecht (CISG) und ihre Verletzung (2008), para. 254. 46

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the relevant usages and the practices that have been established between them (Art. 9), and only subsidiarily the provisions of the CISG (Art. 30). If according to this scheme no obligations of the seller can be established, the seller does not have to be concerned that further obligations are constructed to his detriment. Still, in the process of interpreting the parties’ agreement reference can be made to Art. 7. That provision cannot, however, be referred to in order to constitute obligations which have no solid foundation in Arts 6 and 9 or in any other provision of the CISG.

III. Comparable Rules 1. Incoterms In international trade, standardized abbreviations have been used for a long time59 to 30 denote the obligations of the buyer and the seller which are typical in the export and import of goods. Probably the most commonly applied abbreviations are the Incoterms (International Commercial Terms)60 set up by the International Chamber of Commerce (ICC) situated in Paris with the intention to provide internationally uniform rules for the interpretation of specific clauses. Drafted as a set of rules independent of a particular area of trade or mode of transport, the Incoterms were designed for cross-border sales of goods in general and thus address situations governed by the CISG. However, the Incoterms rules do not regulate the conclusion of the contract of sale, the exemption from a party’s obligation to perform or the consequences of improper performance61. Therefore, the Incoterms rules cannot supersede the CISG altogether. Instead the Incoterms rules concentrate on specific aspects of the primary obligations of the seller and the buyer. In doing so, the Incoterms supersede and modify the corresponding articles of the CISG62. Moreover, just like the CISG63 the Incoterms do not regulate the transfer of property64. a) Structure of the Incoterms. The Incoterms 201065 entered into force on 1 January 31 2011 and consist of eleven different clauses which are each coded by a three-lettercombination. The ICC has laid down interpretation rules for every clause, always using 59 For more information cf. Ramberg, CISG and INCOTERMS 2000 in Connection with International Commercial Transactions, FS Kritzer (2008), pp. 394 et seq.; Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995), pp. 5 et seq. 60 For more details see Piltz/Bredow, Incoterms (2016); Magnus/Piltz, in: DiMatteo/Janssen/Magnus/ Schulze, International Sales Law (2016), p. 267; O’Connor (eds), Incoterms 2010 Q&A (2013); Vanheusden, Leveringsvoorwaarden in international overeenkomsten, Incoterms anders bekeken (2013); Graf von Bernstorff, Incoterms 2010 (2012); Piltz, Incoterms 2010, Europen Journal of Commercial Contract Law (2011) 1 et seq.; Gru¨ske, Ratgeber INCOTERMS 2010 (2011); Bergami, Incoterms 2000 as a risk management tool for importer, Vindobona Journal of International Commercial Law and Arbitration (2006) 273 et seq.; Wertenbruch, Die Incoterms – Vertragsklauseln fu¨r den internationalen Kauf, Zeitschrift fu¨r das gesamte Schuldrecht (2005) 136 et seq.; Gabriel, International Chamber of Commerce Incoterms 2000: A Guide to their Terms and Usage, The Vindobona Journal of International Commercial Law and Arbitration (2001) 41 et seq.; Piltz, INCOTERMS 2000, Revista del Derecho Comercial (Argentina) (2000) 263 et seq.; Bredow/Seiffert, INCOTERMS 2000 (2000) and Ramberg, ICC Guide to Incoterms 2000 (1999), ICC publication No 620. 61 Piltz/Bredow, Incoterms (2016) paras A-240 and 249; Ramberg, ICC Guide to Incoterms 2010 (2011), ICC publication No 720, 17. 62 Piltz/Bredow, Incoterms (2016) paras A-240 et seq.; see supra paras 7 seq. and Magnus/Lu ¨ sing, CISG und INCOTERMS, Leistungsverzug und Fixgescha¨fte, IHR (2007) 1 (5). 63 See supra para. 14. 64 Arbitral Award, ICC 3779/1981, Yearbook of Commercial Arbitration (1984) 124 (125); Ferna ´ ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 246. 65 ICC, Incoterms 2010, ICC publication No 715 ED (2010).

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ten invariable headings66 in order to establish a foundation for an internationally coordinated, uniform application. 32 The Incoterms are divided into four main categories identified by the initial letter of their English version, namely the E-, the F-, the C- and the D-group. Every group distinguishes itself in that the assignment of the transportation of the goods and the absorption of the costs and risks within that particular group follow an identical principle, whereas the clauses of the other groups comply with a different principle concerning these issues. The obligations of the seller keep increasing from the E- to the F- and the C- and finally to the D-group, while the responsibility of the buyer decreases accordingly. aa) E-group 33 – EXW – ex work/a l’usine/ab Werk/franco fabrica/en fabrica

The E-group consists of only a single clause. The seller is only obliged to place the packed and labelled goods at the buyer’s disposal for pick up at the seller’s premises or another named place (i. e. factory, warehouse, etc.). The seller has no obligation to load the goods or to take care of export clearance. For the seller, this term represents the minimum obligation. bb) F-group 34 – FCA – free carrier/franco transporteur/frei Frachtfu¨hrer/franco vettore/franco trans-

portista – FAS – free alongside ship/franco le long du navire/frei La¨ngsseite Seeschiff/franco lungo bordo/franco al costado del buque – FOB – free on board/franco bord/frei an Bord/franco a bordo/franco a bordo According to the three clauses of the F-group, the buyer remains fully responsible for the main transport of the goods. Unlike the Incoterm clause EXW, the clauses of the Fgroup oblige the seller to transport the goods at his own expense and risk to the named place of delivery where the main transport commences (e. g. “FOB Hamburg”) and to clear the goods for export at his expense. The buyer has to take delivery of the goods at the named place of delivery and bears the costs and responsibility for the following main transport, the transit through third countries as well as the import into the country of destination. The Incoterms clauses FAS and FOB are solely suitable for transportation by ship67, whereas the Incoterm clause FCA is designed for any mode of transportation including transportation by ship and multimodal transport. FCA replaced the clause FOT which existed until 1990 and in particular is provided for containerized shipments for which FOB68 and FAS69 should not be used, because containers are usually handed over to the carrier at an earlier stage before being made available alongside or on board the vessel. cc) C-group 35 – CFR (cost and freight/cout et fret/Kosten und Fracht/costo e nolo/costo y flete)

– CIF (cost, insurance and freight/cout, assurance et fret/Kosten, Versicherung und Fracht/costo, assicurazione e nolo/costo, seguro y flete) 66

See infra para. 42. Disregarded by Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 19. 68 Piltz/Bredow, Incoterms (2016) para. A-404; Graf von Bernstorff, Incoterms 2010 (2012) para. 582; Bredow/Seiffert, Incoterms 2000 (2000), pp. 45, 66. 69 Piltz/Bredow, Incoterms (2016) para. A-404; Graf von Bernstorff, Incoterms 2010 (2012) para. 593; Bredow/Seiffert, Incoterms 2000 (2000), p. 62. 67

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CFR and CIF are only designed for transportation by ship, i. e. sea and inland waterway transportation, and require that the seller has access to the vessel. – CPT (carriage paid to/port paye jusqu’a/frachtfrei/trasporto pagato fino a/transporte pagado hasta) – CIP (carriage and insurance paid to/port paye, assurance comprise, jusqu’a/frachtfrei versichert/trasporto e assicurazione pagati fino a/transporte y seguro pagados hasta) On the contrary, the other two clauses (CPT and CIP) can be applied for all modes of transportation, including transportation by ship, and should be used for containerized shipments instead of CFR and CIF. CFR and CIF are inappropriate for containerized shipments, because containers are usually handed over to the carrier before being loaded on board the vessel. The common characteristic of all clauses of the C-group is the seller’s obligation to conduct the export clearance and – different from the F-group – to conclude the contract of the main transport to the named place of destination (e. g. “CIF Buenos Aires”) at his own expense. Unlike the F-clauses, the buyer has to take delivery of the goods only at the named place of destination. However, the risk is – equally to the F-group and despite the more extensive bearing of costs – transferred to the buyer as early as the moment in which the goods are delivered by handing them over to the carrier of the main transport. Therefore, when using a C-clause of the Incoterms no date of arrival should be stipulated70. The place of destination for the carriage can usually be derived from the agreement itself or its circumstances. In case of doubt, the transportation has to be directed to the buyer’s place of business or a port nearby. Contracts of sale with a C-clause of the Incoterms are contracts involving carriage of the goods in the meaning of Art. 31(a)71. In containerized shipments CFR and CIF lead to the same problems as using FOB72. dd) D-group – DAT – delivered at terminal/rendu au terminal/geliefert Terminal/reso al terminal/ 36 entregada en terminal – DAP – delivered at place/rendu au lieu de destination/geliefert benannter Ort/reso al luogo di destinazione/entregada en lugar, – DDP – delivered duty paid/rendu droits acquittes/eliefert verzollt/reso sdoganato/entregada derechos pagados) The typical characteristic of all D-group clauses is the seller’s obligation to bear all costs and – different from the C-group Incoterms – also all risks up to the moment in which the goods arrive at the named place of delivery (e. g. “DAT Hong Kong”). The buyer has to take delivery of the goods at the named place of delivery. Therefore, the Dclauses constitute to a large extent a reversed regulation of the F-clauses. The import clearance remains the buyer’s obligation. Only when using the clause DDP, the exporter has to take care of the import clearance as well. Thus, the DDP clause can be used as the counterpart to the Incoterms clause EXW when applied accordingly. b) Legal nature of the Incoterms. Although the Incoterms clauses have been applied 37 for decades, there is still no generally acknowledged legal opinion as to their legal nature and the basis for their operation73. The Incoterms are a private set of rules. Therefore 70

Cf. Arbitral Award, Hamburger freundschaftliche Arbitrage (Germany) 12 February 1985, RIW 1985,

328. 71 See infra Art. 31 paras 59 et seq. and Piltz, UN-Kaufrecht und internationaler Gu ¨ tertransport, in: Czerwenka/Paschke (eds), Ad multos annos: Seehandelsrecht und internationales Kaufrecht, Festgabe fu¨r Prof. Herber (2010), p. 7 (18). 72 Piltz/Bredow, Incoterms (2016) para. A-404; Graf von Bernstorff, Incoterms 2010 (2012) para. 586; Ramberg, ICC Guide to Incoterms 2010 (2011), ICC publication No 720, p. 22. 73 Cf. Piltz/Bredow, Incoterms (2016) paras A-300 et seq.

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they have a binding effect only if the parties have referred to them. Consequently, starting points to assess their legal nature and the basis for their operation have been and are still being looked for somewhere among74 standard business conditions75, customary law76, usages77, objective rules for interpretation78, soft law79 and lex mercatoria80. The Incoterms rules supersede and modify the corresponding articles of the CISG81. This possibility to alter and supplement the provisions of the CISG is principally provided for by Arts 6 and 9. Therefore, within the scope of application of the CISG, these articles constitute the starting point of the issue of the operation of the Incoterms rules. 38 The Incoterms clause by itself, i. e. the three-letter-combination in conjunction with the respective denomination of the place of delivery (e. g. “FOB Hamburg”) or destination (e. g. “CIF Buenos Aires”) which is used in a contract, is most often subject to an agreement between the parties pursuant to Art. 6. 39 If the parties make use of one of the three-letter-combinations of the Incoterms including an explicit reference to “Incoterms 2010”82, the rules of interpretation established by the ICC are applicable in order to further determine the seller’s obligations, which are connected to the Incoterms clause in question. The use of the reference “Incoterms 2010” is recommended in particular when contracting with parties in the Near and the Middle East due to the fact that the codes of commercial law of a number of Arab states contain statutory provisions concerning clauses of international trade which do not conform entirely with the interpretation rules of the Incoterms. The same applies regarding Denmark, as the Danish sales law regulates the meaning of clauses like FOB and CIF not always completely in line with the Incoterms rules83. However, if the parties refer explicitly to “Incoterms 2010” they have made clear that the three-letter-combination is to be understood according to the ICC’s rules of interpretation. Since the parties to the contract of sale generally lack concrete perceptions of the details of the rules of interpretation set up by the ICC and the text of these rules is normally not exchanged between the parties nor attached to the contract, an individual agreement about the full content of the particular rules of interpretation is usually out of question even when the reference “Incoterms 2010” is used. In lieu, the recourse to the ICC’s rules of interpretation for the respective Incoterms clause has to be qualified as a usage in the meaning of Art. 9(1) CISG, which the parties agreed on by phrasing the explicit reference to “Incoterms 2010” in the

74 Cf. Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995), pp. 15 et seq. and Basedow, Die Incoterms und der Container, RabelsZ (1979) 116 (125 et seq.). 75 Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Intro to Arts. 14–24 para. 5; Graf von Bernstorff, Incoterms 2010 (2012) paras 70 et seq.; Verweyen/Foerster/Toufar, Handbuch des Internationalen Warenkaufs UN-Kaufrecht (2008), p. 115;. In contrast Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995), pp. 28 (31). 76 Basedow, Die Incoterms und der Container, RabelsZ (1979) 116 (125). In contrast Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995), p. 21. 77 Heuze ´, Vente International (2000), pp. 229 seq. and Oberlandesgericht Karlsruhe (Germany) 30 March 1979, RIW (1979) 642 seq. In contrast Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995), p. 26. 78 Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995), pp. 32, 35; Oberlandesgericht Mu¨nchen (Germany) 19 December 1957, NJW (1958) p. 426. 79 Schneider, Incoterms 1990, RIW (1991) 91 (93). 80 Kappus, “conflict avoidance” durch “lex mercatoria” und UN-Kaufrecht 1980, RIW (1990) 788 (790). 81 See supra para. 30. 82 For example “FCA Hamburg – INCOTERMS 2010”. 83 Cf. Steinru ¨ cke, in: Graf von Westphalen (ed.), Handbuch des Kaufvertragsrechts in den EG-Staaten (1992), p. 151.

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contract84. As a consequence of this approach, however, other contractual agreements including General Terms and Conditions being made part of a contract prevail over the interpretation rules of the Incoterms. If one of the three-letter-combinations of the Incoterms is used, but a reference to the 40 interpretation rules drafted by the ICC is yet neither directly nor indirectly distinguishable, a recourse to the Incoterms rules of interpretation might still come into consideration. However, it is then necessary that the application of the rules of interpretation of the Incoterms constitutes a common usage which the parties knew or ought to have known and which is moreover widely known and regularly observed in comparable situations of international trade85 (Art. 9(2) CISG). However, the application of the rules of the Incoterms is not at all certain. The interpretation of the contract can arrive at a different conclusion, for instance at the application of the US-American Foreign Trade Definitions86. Invoking Art. 9(2), the usage, which has to be argued and where required proven by the party who advocates the application of the rules of interpretation of the Incoterms, does not necessarily have to comprise in detail the obligations of the seller and buyer in the way they are laid down in the rules of interpretation for the specific clause in question. In fact, it is sufficient to establish that there is a usage to generally resort to the ICC’s rules of interpretation of the clause referred to by the threeletter-combination in order to interpret the clause87. The Incoterms 2010 are applicable to both international and domestic contracts of 41 sale. Different to the Incoterms 2010 which are silent in this respect, the Incoterms 2000 did not consider software to be a good88. However, this restraint did not exclude their use in sales regarding computer software as long as the parties agreed on one of the three-letter-combinations established by the Incoterms and their rules of interpretation apply. Furthermore, the regulative content of the respective clause is in no way imperative and can be modified by the parties according to their intentions89. Furthermore, different regulations in General Terms and Conditions will generally prevail over the interpretation rules of the Incoterms90.

84 Piltz/Bredow, Incoterms (2016) para. A-304; Magnus, in: Staudinger Kommentar (2013), Art. 9 para. 8; Melis, in: Honsell, Kommentar (2010), Art. 9 para. 7; Honnold/Flechtner, Uniform Law (2009), Art. 9 para. 114. Cf. Vogenauer, in: Vogenauer/Kleinheisterkamp (eds), UNIDROIT Commentary (2008), Art. 1.9 para. 10. 85 Bundesgerichtshof (Germany) 7 November 2012, CISG-Online 2374 (IHR (2013) 15 et seq.); Juzgado Comercial no. 26 (Argentina) 2 July 2003, CISG-Online 2623; US Court of Appeals for the 5th Circuit (U.S.) 11 June 2003, BP Oil International Ltd. and BP Exploration & Oil Inc vs. Empresa Estatal Petroleos de Ecuador, CISG-Online 730; US District Court, Southern District of New York (U.S.) 26 March 2002, CISGOnline 615. Cf. Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 30 para. 5; Piltz/ Bredow, Incoterms (2016) paras. A-306 seq.; Witz/Salger/Lorenz, Kommentar (2016), Art. 9 para. 14;. Cf. Vogenauer, in: Vogenauer/Kleinheisterkamp, UNIDROIT Commentary (2008), Art. 1.9 para. 11. 86 Cf. Oberlandesgericht Koblenz (Germany) 16 October 2003, RIW (2004) 302 (305). Regarding the differences of the Incoterm “FOB” compared with the US-American foreign trade definition “F.O. B.” see Schackmar, Die Lieferpflicht des Verka¨ufers in internationalen Kaufvertra¨gen (2001), pp. 69 et seq. Cf. Spanogle, The International Lawyer (1997), pp. 111 et seq.; O’Hara, in: Hancock (ed.), Guide to the International Sale of Goods Convention (1993), chapter 107. The intended elimination of the corresponding sections of the Uniform Commercial Code was withdrawn. 87 Piltz/Bredow, Incoterms (2016) para. A-306; Cf. US Court of Appeals for the 5th Circuit (U.S.) 11 June 2003, BP Oil International Ltd. and BP Exploration & Oil Inc v. Empresa Estatal Petroleos de Ecuador, CISG-Online 730. 88 ICC, Incoterms 2000, ICC publication No 560 ED (1999), pp. 5, 133. 89 ICC, Incoterms 2010, ICC publication No 715 ED (2010), pp. 12, 136. 90 See supra para. 39 and Nienaber, in: Center for Transnational Law, Law and Practice of Export Trade (2001), 131 (137). In contrast Bredow, TranspR-IHR (1999) 45 (47). See for example § 34 of Gescha¨ftsbedingungen des Waren-Vereins Hamburger Bo¨rse e. V., which modifies the Incoterm FOB.

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c) The rules of interpretation of the Incoterms. In order to promote an internationally coordinated, uniform application of the Incoterms, the rules of interpretation provide which rights and obligations result from the specific agreement for each and every of the eleven clauses under ten always repeated and invariable, consecutively from one to ten numbered headings. The seller’s obligations are always denoted with the letter “A”, the buyer’s obligations with the letter “B”: – A1 – B1: General obligations of the seller/buyer – A2 – B2: Licences, authorizations, security clearances and other formalities – A3 – B3: Contracts of carriage and insurance – A4 – B4: Delivery and taking delivery – A5 – B5: Transfer of risks – A6 – B6: Allocation of costs – A7 – B7: Notices to the buyer/seller – A8 – B8: Delivery document/Proof of delivery – A9 – B9: Checking – packaging – marking/Inspection of the goods – A10 – B10: Assistance with information and related costs 43 According to section A1 of the rules of interpretation of all clauses, the “seller must provide the goods … in conformity with the contract of sale …”. This statement is not to be understood to constitute the seller’s obligation to deliver. It rather repeats the seller’s obligation already resulting from the contract of sale91. If the seller does not deliver at all or delivers goods not conforming with the contract or in some other way fails to comply with his obligation to deliver according to the contract, the consequences are derived from the applicable law92. Furthermore, A1/B1 of the rules of interpretation of the Incoterms 2010 give electronic communication the same effect as traditional correspondence if so agreed by the parties or customarily established. 44 According to section A1 of the rules of interpretation of each clause the seller must also provide a commercial invoice. Even though the CISG does not explicitly impose such an obligation on the seller it is common ground supported by bookkeeping and tax purposes that in contracts of sale governed by the CISG the buyer is entitled to get a commercial invoice93. Section A1 of the rules of interpretation of the Incoterms confirms this understanding and therefore reiterates the seller’s obligation already founded when concluding the contract of sale, rather than creating such an obligation. Regardless of the buyer’s entitlement to an invoice, the presentation of the invoice is not a prerequisite for the payment of the purchase price94 (cf. Art. 59 CISG). 45 The explanations given by the rules of interpretation of the Incoterms under the headings A2-B2 until A10-B10 will be commented in connection with the articles of the CISG with which they are related95. 42

2. PICC and PECL 46

Neither the PICC (UNIDROIT Principles of International Commercial Contracts) nor the PECL (Principles of European Contract Law) contain provisions regulating 91 Piltz/Bredow, Incoterms (2016) para. F-106; Ramberg, ICC Guide to Incoterms 2010 (2011), ICC publication No 720, p. 64. 92 Piltz/Bredow, Incoterms (2016) para. F-107; Renck, Der Einfluß der INCOTERMS 1990 auf das UNKaufrecht (1995), pp. 88 seq. 93 For more details see Art. 31 para. 56 and Piltz, Internationales Kaufrecht (2008), paras 4–148. 94 Supreme Court (Slovakia) 3 April 2008, CISG-Online 1763 (Pace); Piltz, Internationales Kaufrecht (2008), paras 4–148. In contrast Huber, in: Mu¨nchKommBGB (2008), Art. 59 para. 3; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 59 CISG para. 2. 95 See infra Art. 31 paras 58 et seq., Art. 32 paras 29 et seq., Art. 33 paras 34 et seq., Art. 34 paras 29 et seq. and Art. 67 paras 25 et seq.

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specific types of contracts. In practice, the contract of sale holds a rather prominent position and thus repeated reference was made to situations typical of a contract of sale when drafting the PICC and the PECL96. However, no rules regarding the rights and obligations which specifically arise out of a contract of sale were established, so that the regulatory content of Art. 30 does not find a counterpart in the PICC or in the PECL.

3. DCFR The DCFR (Draft Common Frame of Reference) dedicates Book IV to specific 47 contracts and the rights and obligations arising from them. Part A of Book IV deals with contracts of sale97. The rules set up by the DCFR regarding consumer contracts of sale will not be commented here as Art. 2(a) CISG excludes consumer contracts from its sphere of application. Just like the CISG, the DCFR only regulates the sale of goods and does not apply to contracts for the sale of immovable property (Art. IV.A.-1:101(3) DCFR). But even further, the sales law of the DCFR is to a large extent influenced by the techniques and principles underlying the CISG98. Although several other provisions which are part of the CISG are not regulated in Book IV Part A of the DCFR but elsewhere in the text, one can directly resort to the parallel provision of IV. A.-2:101 DCFR as regards the seller’s primary obligations summarized in Art. 30 CISG. According to Art. IV.A.-2:101 DCFR the seller must transfer the ownership of the goods, 48 deliver them and transfer the documents required by the contract. If there is no obligation to transfer ownership of the goods, there is no contract of sale99 (cf. Art. IV.A.-1:202 DCFR). On the other hand part A of Book IV DCFR just like the CISG100 does not regulate when, where and which actions and measures have to be taken by the seller to conduct the transfer of property and to discharge his obligation101. The interim outline edition of the DCFR did not contain any rules in this respect at all. The acquisition and loss of ownership of goods form the content of Book VIII DCFR and were published only in the outline edition of the DCFR in December 2008. Further obligations of the seller to deliver the goods and to transfer the documents are commented in the corresponding context102. According to Art. IV.A.-2:101(d) DCFR the seller must also ensure that the goods 49 conform to the contract103. The corresponding rule in the CISG is not Art. 30, but Art. 35(1).

96

See the numerous examples in the explanatory notes and commentaries. For more details see Huber, Modellregeln fu¨r ein Europa¨isches Kaufrecht, ZEuP (2008) 708 et seq.; Hondius/Heutger/Jeloschek/Sivesand/Wiewiorowska, Principles of European Law – Sales (PELS) (2008); Dauner-Lieb/Quecke, in: Schulze/von Bar/Schulte-No¨lke (eds), Der akademische Entwurf fu¨r einen Gemeinsamen Referenzrahmen (2008), pp. 135 et seq. and Heutger, Ein gemeineuropa¨isches Kaufrecht (2007). 98 Dauner-Lieb/Quecke, in: Schulze/von Bar/Schulte-No ¨ lke (eds), Der akademische Entwurf fu¨r einen Gemeinsamen Referenzrahmen (2008), p. 137. 99 Hondius/Heutger/Jeloschek/Sivesand/Wiewiorowska, Principles of European Law – Sales (PELS) (2008) pp. 159 seq. 100 See supra para. 19. 101 Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (2009), Comment B to Art. IV.A.-2:101. 102 See infra Art. 31 paras 77 et seq., Art. 32 para. 43, Art. 33 paras 38 et seq. and Art. 34 paras 36 et seq. 103 Cf. Huber, Modellregeln fu ¨ r ein Europa¨isches Kaufrecht, ZEuP (2008) 708 (note 41) and DaunerLieb/Quecke, in: Schulze/von Bar/Schulte-No¨lke (eds), Der akademische Entwurf fu¨r einen Gemeinsamen Referenzrahmen (2008), p. 135 (pp. 138 seq.). 97

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Just like the corresponding articles of the CISG104, the rules laid down in the DCFR regarding sales contracts are to a large extent default rules105. The agreement between the parties and the circumstances surrounding the contract are of primary and paramount significance. 104

See supra para. 7. Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (2009), Comment G to Art. IV.A.-1:101. Cf. Huber, Modellregeln fu¨r ein Europa¨isches Kaufrecht, ZEuP (2008) 708 (710 seq.). 105

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Section I Delivery the goods and handing over of documents Article 31 If the seller is not bound to deliver the goods at any other particular place, his obligation to deliver consists:

(a) if the contract of sale involves carriage of the goods – in handing the goods over to the first carrier for transmission to the buyer; (b) if, in cases not within the preceding subparagraph, the contract relates to specific goods, or unidentified goods to be drawn from a specific stock or to be manufactured or produced, and at the time of the conclusion of the contract the parties knew that the goods were at, or were to be manufactured or produced at, a particular place – in placing the goods at the buyer’s disposal at that place; (c) in other cases – in placing the goods at the buyer’s disposal at the place where the seller had his place of business at the time of the conclusion of the contract. Bibliography: DiMatteo/Janssen/Magnus/Schulze, International Sales Law (2016); Kock, Nebenpflichten im UN-Kaufrecht (1995); Kromer, Der Begriff der Lieferung im Haager einheitlichen Kaufrecht (1987) p. 245; Piltz/Bredow, Incoterms (2016); Piltz, Der Lieferort im Außenhandel, Außenwirtschaftliche Praxis (2001) 273; Ramberg, ICC Guide to Incoterms 2010 (2011); Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995) p. 108; Schackmar, Die Lieferpflicht des Verka¨ufers in internationalen Kaufvertra¨gen (2001) p. 136; Schulze (ed.), Common European Sales Law (CESL) (2012); Vanheusden, Leveringsvoorwaarden in international overeenkomsten, Incoterms anders bekeken (2013).

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Subject matter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Breach of contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Further context. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. National laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Vienna Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Obligation to deliver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Sales involving carriage of the goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Kinds of acts of delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Party autonomy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Handing over the goods to a carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Placing the goods at disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Not handing over to the buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Goods delivered. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Place of delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Party autonomy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Default rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Allocation of responsibilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Further obligations of the seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Application of the CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Typical further obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Packaging of the goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Costs of delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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cc) Clearance of the goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Invoice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Further obligations stipulated. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Incoterms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Contracts involving carriage of the goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Kinds of acts of delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Place of delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Packaging of the goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Costs of delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f) Export/import clearance of the goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g) Security clearance of the goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. PICC and PECL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. DCFR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

52 56 57 58 58 59 62 65 66 67 70 73 74 77

I. Importance and Role of the Provision 1. Subject matter Art. 31 specifies the place of delivery and the kind of act the seller has to perform in order to fulfil his obligation to deliver the goods. Thus, Art. 31 regulates the local coordinate and the modalities of the obligation to deliver addressed in Art. 30. Consequently, Art. 31 has to be observed only in case Art. 30 is applicable1. Just like Art. 302, Art. 31 plays only a supplementary role and gains significance merely to the extent that the seller’s obligation to deliver cannot be determined by looking at the contract and its circumstances alone3. Art. 31 does not regulate at what time delivery has to be performed. The aspects regarding delivery time are governed by Art. 33. Furthermore, the rules of Art. 31 are complemented by those in Art. 32. 2 Art. 31 determines the place where the seller has to perform the act he is required to undertake in order to deliver. The place where the buyer has to take over the goods or the destination of a further transportation is of no relevance for Art. 31. In particular, if the contract of sale involves carriage of the goods, Art. 31(a) only regulates the place of performance for the seller’s act of delivery but not the place where the goods are to be handed over to the buyer. If the seller performs the act he is required to undertake in order to deliver at the relevant place pursuant to Art. 31, but violates the relevant delivery time according to Art. 33, he has performed at the wrong time and is therefore in breach of Art. 33. The seller, however, cannot be reproached with having delivered at the wrong place and thereby having breached Art. 31. 3 The seller has to perform the act he is required to undertake in order to deliver pursuant to Art. 31. Unlike many national bodies of law which lack respective distinctions and often provide an obligation of the seller to hand over the goods to the buyer4, Art. 31 requests the seller either to place the goods at the buyer’s disposal or to hand them over to the first carrier5. Whether the goods do conform with the contract and are free from rights or claims of third parties is of no relevance with regard to the fulfilment of the seller’s obligation to deliver established by Art. 30. If the seller performs the act he is required to undertake in order to deliver pursuant to Art. 31, he has fulfilled his obligation to deliver, even if he has delivered only parts of the goods sold or goods that 1

1

See supra Art. 30 paras 3 et seq. See supra Art. 30 para. 7. 3 Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 3; Neumayer/Ming, Convention de Vienne (1993), p. 239; Lando, in: Bianca/Bonell, Commentary (1987), Art. 31 para. 2.2. 4 See infra para. 6. 5 Cf. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 30 para. 3. 2

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do not conform with the contract6. The same applies if goods with a defective title are delivered. The consequences of a delivery of non-conforming goods or goods with a defective title are regulated by Arts 35 et seq. and Arts 45 et seq.

2. Breach of contract The seller breaches his obligations arising out of Art. 31 if he fails to deliver at all, if 4 instead of handing over the goods to the carrier he only places them at the carrier’s disposal or if he performs the act he is required to do to deliver at a place different from the one determined as place of delivery according to Art. 31. The consequences of such a breach result directly from Art. 45 et seq. without any need for the buyer to give notice to the seller of the breach of contract. Art. 39 is only applicable if the seller has delivered and the goods delivered do not conform with the contract7. Art. 39 is, however, not relevant if the seller fails to deliver at all, fails to perform the act he is required to undertake in order to deliver or delivers at a place different from the place of delivery established by Art. 31.

3. Further context Although Art. 31 addresses only the obligation of the seller to deliver the goods, the 5 provisions in Art. 31 also give an indication with regard to the place where the seller has to perform other duties resulting from the contract of sale, in particular the duty to transfer property in the goods8.

4. National laws Rules regarding the place of delivery in national bodies of law cannot be applied 6 within the reach of the CISG, since the CISG governs the place of delivery conclusively9. The same is true for the act the seller is required to undertake in order to deliver. In particular, national law rules such as for instance § 433 BGB (German Civil Code), Art. 1476 Codice Civile (Italian Civil Code), Art. 1.462 Co´digo Civil (Spanish Civil Code) and Art. 184 Obligationenrecht (Swiss Code of Obligations) obliging the seller to hand over the goods sold to the buyer are without any relevance if the CISG applies. Unlike these national sales laws, Art. 31 does not require the seller to hand over the goods to the buyer.

5. Vienna Conference Art. 31 corresponds to Art. 15 of the “Sales” draft of 197710. The tying of delivery to 7 the conformity of the goods, as provided in Art. 19(1) ULIS, was abandoned11. A proposal to include an amendment in Art. 31(a) did not obtain the necessary support at the Vienna conference12. 6

See infra para. 30. Tribunal Supremo (Spain) 9 July 2014, CISG-Online 2578. 8 See supra Art. 30 para. 15. 9 See supra Art. 30 para. 9. 10 Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 4; Honnold, Documentary History (1989), p. 328. 11 For more details see Honnold/Flechtner, Uniform Law (2009), pp. 314 seq.; Lando, in: Bianca/Bonell, Commentary (1987), Art. 30 para. 1.2. and Kromer, Der Begriff der Lieferung im Haager einheitlichen Kaufrecht (1987), p. 245. 12 Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 5; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 4. 7

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II. Detailed Commentary 1. Obligation to deliver Art. 30 obliges the seller to deliver the goods. Art. 31 regulates details of this obligation, namely the kind and the place of the act the seller is required to undertake in order to deliver. However, depending on the circumstances, it is possible that a delivery obligation does not exist. Yet, this does not affect the contract’s character being a contract of sale according to the CISG13. 9 If the buyer has taken possession of the goods sold before the established delivery time and the parties agree that the buyer with the exclusion of the seller’s ownership shall be the sole owner from this moment on, the seller’s delivery obligation becomes obsolete14. Examples for such a constellation are the conclusion of a contract of sale after the goods have already been handed over to the buyer for use, in consignment or in commission or for any other reason the goods are already in the buyer’s possession at the moment the contract of sale is concluded. The party who relies on such a situation where delivery of the goods is superfluous bears the burden of proving it. 10 On the other hand, the parties are free to agree that the goods sold are to remain in the possession of the seller and that the seller exercises the possession acknowledging the buyer’s proprietary rights. This situation may, for instance, arise if a sale-and-leaseback agreement or an agreement regarding custody or lease is concluded15. In such cases no delivery is needed either. The party relying on such a situation where delivery of the goods is superfluous bears the burden of proof. 11 The seller’s obligation to deliver must be considered irrespectively of the transfer of property in the goods16. Therefore, any reservation in title is irrelevant for the delivery obligation pursuant to Art. 3117 and the seller is not released from the obligation to deliver if property has already been transferred to the buyer. 8

2. Sales involving carriage of the goods 12

The subsections of Art. 31 correlate to each other in order of priority. Art. 31(c) governs all “other cases” and therefore constitutes a subordinate gap rule18. Art. 31(b) is applicable only to cases not within the scope of Art. 31(a). Consequently, Art. 31(a) is authoritative in the first place. However, this provision requires that the contract of sale involves carriage of the goods. 13

Piltz, UN-Kaufrecht (2008), para. 4-13; Herber/Czerwenka, Kommentar (1991), Art. 30 para. 5. Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 30 para. 7; Witz/Salger/ Lorenz, Kommentar (2016), Art. 30 para. 8; Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 243; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 30 para. 3. 15 Witz/Salger/Lorenz, Kommentar (2016), Art. 30 para. 8; Ferna ´ ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 243; Cf. Kromer, Der Begriff der Lieferung im Haager einheitlichen Kaufrecht (1987), p. 254. 16 See supra Art. 30 para. 25. 17 Secretariat Commentary on 1978 Draft, Art. 29 para. 18. 18 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 paras 2 and 42; Benicke, in: Mu¨nchKommHGB (2013), Art. 31 para. 3; Chengwei Liu, Place of performance: Comparative analysis of Articles 31 and 57 of the CISG and counterpart provisions in Article 7:101 of the PECL, 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), p. 346 (359); Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 618. 14

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Art. 31(b),(c) regulate that the buyer has to collect the goods and thus the buyer has 13 to take care of their transportation19 (“Holschuld”). In contrast, Art. 31(a) governs sales which involve carriage of the goods, but still does not state an obligation of the seller to transport the goods in his own responsibility and at his own expenses like in such cases where the delivery obligation must be performed at the buyer’s place of business (“Bringschuld”). In cases where the sale involves carriage of the goods the seller is only obliged to conclude the contract necessary for the carriage of the goods, Art. 32(2). But it is the buyer who has to bear the costs of the carriage20 and the risk already passes to him at the moment the goods are handed over to the carrier and not at the moment the goods are handed over to him, Art. 67(1). Considering these provisions, it becomes obvious that a sale which involves carriage of the goods as addressed in Art. 31(a) cannot comprise any possible constellation in which – this being typical in international contracts of sale – goods are transported21. Corroborated by Art. 31(b),(c), a transaction which includes the collection of the goods by the buyer (“Holsschuld”) evidently is not a sale which involves carriage of the goods even if the buyer should transport the goods subsequently22. On the other hand, taking into account the provisions regarding the bearing of costs and the passing of risk in a sale which involves carriage of the goods, such a sale cannot be qualified – as if it were the counterpart to the constellation of collecting the goods by the buyer regulated in Art. 31(b),(c) – as a contract where the seller must transport the goods or have them transported by a third party at his own expenses and risk to the place of business of the buyer (“Bringschuld”)23. Therefore, for a sale which involves carriage of the goods addressed by Art. 31(a) the constellation that remains is that neither the buyer has to collect the goods and take delivery at the seller’s place of business (“Holschuld”) nor the seller has to deliver at the buyer’s place of business (“Bringschuld”)24. The common characteristics of those constellations where the delivery and the taking 14 of delivery is to be performed either at the seller’s (“Holschuld”) or at the buyer’s place of business (“Bringschuld”), is that the place where the seller delivers and the place where the buyer takes delivery coincide. In contrast, if the seller has to perform the act he is required to undertake in order to deliver at a place different from the one where the buyer takes over the goods, the characteristics for a sale which involves carriage of the goods are at hand: the place of delivery and the one of taking delivery diverge25. If the place of delivery and the place of taking delivery are not identical, carriage of the goods must be arranged from the place where the seller has to perform the act he is required to undertake in order to deliver to the place where the buyer has to take over the goods. The need to bridge the geographical distance between the place of delivery and the place of taking delivery justifies calling this constellation a sale which involves 19 Cf. Gruber, in: Mu ¨ nchKommBGB (2016), Art. 31 para. 5; Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 265. 20 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 31 para. 24; Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 30; Benicke, in: Mu¨nchKommHGB (2013), Art. 31 para. 32. 21 Obviously in contrast Grunewald, Kaufrecht (2006), § 5 para. 26; Sierralta Rios/Baptista, Aspectos Jurı´dicos del Comercio Internacional (1992), p. 102. 22 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 11. 23 Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 15. 24 Cf. Brunner/Dimsey, Kommentar (2014), Art. 31 paras 6 and 8; Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 13; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 38 para. 21; Mullis, in: Huber/Mullis, The CISG (2007), p. 113; Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), pp. 256 seq. 25 Cf. Bundesgerichtshof (Germany) 7 November 2012, CISG-Online 2374 (no. 16); Witz/Salger/Lorenz, Kommentar (2016), Art. 60 para. 7; Benicke, in: Mu¨nchKommHGB (2013), Art. 31 para. 4.

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Part III. Chapter II. Obligations of the Seller

carriage of the goods26. Like many national laws27 in this situation, Art. 31(a) obliges the seller to cause the transmission of the goods to the buyer. This rule is appropriate since the seller is generally closer to the goods. However, it must be noted that the carriage as such is not a contractual obligation of the seller; he only has to arrange the carriage of the goods to the place where delivery has to be taken. 15 The parties are free to agree that the buyer takes care of the transportation. It is irrelevant for the qualification as a sale involving carriage of the goods which party has to arrange the carriage28. The seller’s obligation to arrange the transmission of the goods to the buyer as addressed in Arts 31(a) and 32(2) is a dispositive consequence and not a prerequisite for a sale which involves carriage of the goods29. Furthermore, it is irrelevant for the qualification as a sale involving carriage of the goods whether a third independent entity is entrusted with the carriage of the goods30 and which party bears the costs31. The only requirement for a sale which involves carriage of the goods is the fact that the place of delivery and the place of taking delivery are not identical, taking into account the agreement between the parties and the relevant usages and practices established between them32. 16 There is no sale which involves carriage of the goods if the seller, pursuant to an agreement or other relevant circumstances, is obliged to perform the act he is required to undertake in order to deliver at the buyer’s place of business and the buyer must take over the goods only there33. There is neither a sale which can be qualified as a sale which involves carriage of the goods if the buyer, pursuant to an agreement or other relevant circumstances, is obliged to take delivery of the goods at the seller’s place of business34. This latter constellation will frequently – but not in all cases35 – apply if the buyer orders the carrier and concludes the contract for carriage36. In this constellation 26 View shared by Kiene, in: DiMatteo/Janssen/Magnus/Schulze, Internat Sales Law, 2016, paras 9 and 42. 27 For example s. 32 Sale of Goods Act (England), Art. 1510 Codice Civile (Italian Civil Code), § 2–504 UCC (USA). Cf. § 447 BGB (German Civil Code), S. 524 Greek Civil Code, Art. 544 ZGB (Polish Civil Code). Cf. Art. 189(1) OR (Swiss Code of Obligations). 28 Witz/Salger/Lorenz, Kommentar (2016), Art. 31 para. 12; Brunner/Dimsey, Kommentar (2014), Art. 31 para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 16; Soergel/Lu¨deritz/Schu¨ßlerLangeheine, Kommentar zum Bu¨rgerlichen Gesetzbuch (2000), Art. 31 para. 14; Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 256. In contrast Widmer Lu¨chinger, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 31 para. 11; Eckert/Maifeld/Matthiesen, Handbuch des Kaufrechts (2014), para. 525; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 31 para. 4; Mullis, in: Huber/Mullis, The CISG (2007), p. 111. 29 Obviously misapprehended by Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995), p. 108. 30 Piltz, UN-Kaufrecht und internationaler Gu ¨ tertransport, FS Rolf Herber (2010) p. 7 (12); Ernst/ Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 7. In contrast Oberlandesgericht Koblenz (Germany) 30 September 2008, IHR 2011 p. 145 (148); Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 17; Brunner/Dimsey, Kommentar (2014), Art. 31 para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 13; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 38 para. 21. 31 Brunner/Dimsey, Kommentar (2014), Art. 31 para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 17; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 30 CISG para. 4. 32 See supra para. 14. 33 Cf. Bundesgerichtshof (Germany) 7 November 2012, CISG-Online 2374; Obergericht Zurich (Switzerland) 6 February 2009, CISG-Online 2000; Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 17. In contrast Kritzer/Vanto/Vanto/Eiselen, International Contract Manual, Vol. 4, § 88:18 para. 5. 34 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 11. Not clear Gruber, in: Mu¨nchKommBGB (2016), Art. 31 para. 16. 35 See supra para. 15. 36 Cf. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 11.

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Article 31

the place of delivery will be the seller’s place of business. The buyer has to take over the goods at this place. In both cases the place where the seller – either by himself or through an authorized person – has to perform the act he is required to undertake in order to deliver (place of delivery) and the place where the buyer – either by himself or through an authorized person – has to take delivery of the goods (place of taking delivery) coincide. In this context it is irrelevant whether or not the authorized person is an independent third entity37. However, it is decisive that the place of delivery and the place of taking delivery are identical and therefore no carriage of the goods is necessary in order to fulfil the contract of sale. In case of doubt, it can be assumed that in an international delivery transaction the 17 place of delivery and the place of taking delivery diverge because of the geographical distance between the seller’s place of business on the one hand and the buyer’s place of business on the other hand38 and absent a general provision obliging the buyer to collect the goods at the place of business of the seller. Such obligation only arises if Art. 31(a) does not apply39, Art. 31(b),(c). Therefore, in case of doubt, delivery transactions governed by the CISG are sales which involve carriage of the goods pursuant to Art. 31(a)40. This assumption may, however, be disproved if the contractual agreement or other relevant circumstances indicate that the seller has to perform the act he is required to undertake in order to deliver at the same place where the buyer has to take delivery of the goods41. However, the seller’s obligation to pay for the carriage does not in itself shift the place of delivery to the place of destination42. The party relying on such circumstances claiming that the sale at hand is not a sale which involves carriage of the goods bears the burden of proving it. Otherwise, the rule of Art. 31(a) applies. For the qualification of a sale being a sale involving carriage of the goods it is 18 irrelevant whether the delivery of the goods has to be performed at the seller’s place of business or at a different place or whether the place of taking delivery is identical with the buyer’s place of business or not. If the seller is obliged to perform the act he is required to undertake in order to deliver at a particular place agreed upon by the parties, this does not mean that a sale which involves carriage of the goods pursuant to Art. 31(a) is out of the question43. The introductory sentence of Art. 3144 only relates to a differing determination of the place of delivery but not to the further delivery modalities regulated in Art. 31. Underlined by Art. 67(1), a sale which involves carriage of the goods does not exclude that the seller has to deliver the goods at a third place 37 Cf. Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 7. Not unambiguously clear Obergericht Kanton Zug (Switzerland) 5 March 2013, CISG-Online 2471. 38 See supra Art. 1 para. 42. 39 Witz/Salger/Lorenz, Kommentar (2016), Art. 60 para. 7. 40 Landgericht Bamberg (Germany) 23 October 2006, CISG-Online 1400; Landgericht Flensburg (Germany) 24 March 1999, CISG-Online 719; Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 14; Benicke, in: Mu¨nchKommHGB (2013), Art. 31 paras 4 and 38; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 31 para. 5; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 paras 6 and 11; Achilles, in: Ensthaler (ed.), Gemeinschaftskommentar zum Handelsgesetzbuch mit UN-Kaufrecht (2007), Art. 31 para. 3; Neumayer/Ming, Convention de Vienne (1993), p. 241. In contrast Gruber, in: Mu¨nchKommBGB (2016), Art. 31 para. 2 and 37; Magnus, in: Staudinger Kommentar (2013), Art. 31 paras 8 and 29. 41 Cf. Benicke, in: Mu ¨ nchKommHGB (2013), Art. 69 paras 6 seq. In contrast Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 13. 42 Ramberg, ICC Guide to Incoterms 2010 (2011), ICC publication No 720, p. 48. 43 In contrast Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 13; Neumayer/Ming, Convention de Vienne (1993), p. 244. 44 “If the seller is not bound to deliver the goods at any particular place…”

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Article 31 19–20

Part III. Chapter II. Obligations of the Seller

different from its own place of business45 and/or that for the taking over of the goods a place different from the buyer’s place of business has been stipulated46. If the agreed upon place of delivery is situated somewhere between the seller’s and the buyer’s place of business, a thorough examination has to be undertaken whether according to the contract of sale and the relevant circumstances the buyer is obliged to take delivery of the goods at the same place or if the buyer does not have to take delivery of the goods at the agreed upon place of delivery. Only in the latter case the sale is a sale which involves carriage of the goods.

3. Kinds of acts of delivery 19

Apart from the place of delivery47, Art. 31 also regulates the kind of act the seller is required to undertake in order to deliver. The CISG does not contain a general definition of delivery48. The term “delivery” is more of a collective term which comprises different kinds of delivery acts, ranging from a mostly passive placing at disposal of the goods on the one hand to an active handing over of the goods meaning the buyer gaining actual control over them on the other hand49. Art. 31 obliges the seller only in certain situations to place the goods at the buyer’s disposal (Art. 31(b),(c)). Regarding sales which involve carriage of the goods, the seller has to do more than only placing the goods at the buyer’s disposal. In sales which involve carriage of the goods the seller is obliged to hand over the goods to the first carrier for transmission to the buyer, Art. 31(a). On the other hand, there is no situation where the CISG provides an obligation of the seller to hand over the goods to the buyer50. Delivery does not involve receipt or taking possession of the goods by the buyer.51

20

a) Party autonomy. The parties are free to stipulate their own rules with respect to the kind of delivery act the seller is obliged to perform. Thus, irrespectively of the alternatives provided by Art. 31, the parties may agree upon an obligation of the seller to hand over the goods directly to the buyer or to a person authorized by the buyer. Likewise, the parties may contract a keeping ready of the goods by the seller or other modalities or mixed constellations52. If the parties agree on a clause of the Incoterms53, they have also determined the act the seller is required to undertake in order to deliver54. As far as other clauses apart from Incoterms are used, it depends on the circumstances which act of delivery the seller is obligated to undertake55. Applicable usages or established practices can become relevant in determining the act the seller is required to undertake in order to deliver as well. However, as far as specific clauses, agreements, usages or practices do not exist or cannot be proven by the party relying on 45 Cf. Ferna ´ ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 261; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 14. 46 Cf. Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 24. 47 See infra paras 32 et seq. 48 In contrast Art. 19 ULIS. 49 Comparing different legal systems Kromer, Der Begriff der Lieferung im Haager einheitlichen Kaufrecht (1987); cf. Witz/Salger/Lorenz, Kommentar (2016), Art. 30 para. 6; not unambiguously clear Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 30 para. 3. 50 See supra para. 6. 51 Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016), p. 157. 52 Cf. Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 paras 16 seq. 53 See supra Art. 30 paras 30 et seq. 54 Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 6. See infra para. 62. 55 In contrast regarding the term “Frei Haus” (free buyers adress) Widmer Lu ¨ chinger, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 31 para. 72; Benicke, in: Mu¨nchKommHGB (2013), Art. 31 para. 30. Cf. Witz/Salger/Lorenz, Kommentar (2016), Art. 31 paras 4 and 23.

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Article 31

such, Art. 31 regulates the act the seller is required to undertake in order to deliver depending on whether the sale in question is a sale which involves carriage of the goods56 or not. Contrary to the somewhat misleading wording of Art. 31, this distinction has also to be made if the parties have agreed on a place of delivery but have not determined the specific kind of act the seller is required to perform in order to deliver57. b) Handing over the goods to a carrier. With respect to a sale which involves carriage 21 of the goods58, the seller’s act of delivery consists of the handing over of the goods to the first carrier for transmission to the buyer59 (Art. 31(a)). This rule applies unless otherwise provided for by agreements, usages or practices for which the party who invokes such circumstances has the burden of proof. Handing over of the goods requires that the carrier takes direct possession of the goods60 and therefore presupposes his involvement. The mere placing at his disposal is not sufficient. Since in contracts of sale which involve carriage of the goods it is much more difficult for the buyer to protect the goods and safeguard his interest than for the seller61, the seller must ensure that the carrier takes possession of the goods62. Hence, the transportation to the first carrier as well as the handing over including the professional loading of the goods into or onto the means of transportation provided by the carrier are obligations and responsibilities of the seller63. The handing over is completed once the goods are stored independently of the loading device on or in the means of transportation. However, it is not part of the seller’s obligation to hand over the goods that the goods are fastened in or on the means of transport in order to comply with traffic safety requirements64. The seller does not necessarily have to perform the handing over obligations in person but may act through a third party e. g. a sub-supplier. As long as the handing over of the goods to the carrier has not been performed and the goods are still in possession of the seller or a party attributable to him, the delivery of the goods has not yet been performed. This rule applies all the more in constellations where the seller transports the goods using his own personnel65 since possible claims by the buyer for loss or damages during transportation would be very hard to enforce against the seller’s personnel. In addition to the physical handing over of the goods to the carrier, in a sale which 22 involves carriage of the goods the seller has to instruct the carrier to transmit the goods to 56

See supra paras 12 et seq. Gruber, in: Mu¨nchKommBGB (2016), Art. 31 para. 23; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 31 para. 19; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 51; Secretariat Commentary on 1978 Draft, Art. 29 para. 6. 58 See supra paras 12 et seq. 59 See infra para. 22. 60 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 25; Benicke, in: Mu¨nchKommHGB (2012), Art. 31 para. 8; Mullis, in: Huber/Mullis, The CISG (2007), p. 112. 61 See supra para. 14. 62 Similarly Achilles, in: Ensthaler (ed.), Gemeinschaftskommentar zum Handelsgesetzbuch mit UNKaufrecht (2007), Art. 31 para. 5; Soergel/Lu¨deritz/Schu¨ßler-Langeheine, Kommentar zum Bu¨rgerlichen Gesetzbuch (2000), Art. 31 para. 9. 63 Landgericht Bamberg (Germany) 23 October 2006, CISG-Online 1400; Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 25; Witz/Salger/Lorenz, Kommentar (2016), Art. 31 para. 25; Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 21; Benicke, in: Mu¨nchKommHGB (2012), Art. 31 para. 8; Achilles, in: Ensthaler (ed.), Gemeinschaftskommentar zum Handelsgesetzbuch mit UN-Kaufrecht (2007), Art. 31 para. 5. 64 Cf. Piltz/Bredow, Incoterms (2016) para. F-143. In contrast Hennecke, Gefahrtragung beim Ru ¨ cktransport mangelhafter Ware, IHR (2003) 268 (273). 65 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 18; Benicke, in: Mu¨nchKommHGB (2012), Art. 31 para. 10; Soergel/Lu¨deritz/Schu¨ßler-Langeheine, Kommentar zum Bu¨rgerlichen Gesetzbuch (2000), Art. 31 para. 16; Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995), p. 120. In contrast Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 27. 57

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the buyer and to conclude such contracts that are essential for carriage66 and additionally, if containers are handed over to the carrier for maritime transport the seller has to provide their “Verified Gross Mass” (VGM)67. Moreover, if necessary the seller has to give the buyer notice of consignment according to Art. 32(1). Furthermore, the seller has to transfer to the buyer any document needed by the buyer to take over the goods from the carrier holding the goods68. If several carriers are employed subsequently, the seller can either conclude the necessary contracts for every section of the transport himself or he can oblige the first carrier to take care of the transmission to the buyer. In case of doubt, the destination with regard to the transmission to the buyer is the buyer’s place of business69. Unless the parties have agreed otherwise the seller has not fulfilled his delivery obligation in sales involving carriage of the goods as long as he has not concluded the contracts necessary for transmission of the goods to the buyer70. The same applies if the seller handing over the goods to the carrier gives him a completely incorrect address of the buyer and the goods therefore cannot be transmitted to the buyer71. 23 Carrier as referred to in Art. 31(a) is only an autonomous72 carrier business, which is legally independent from the seller, for instance freight carriers, postal services, railway companies, shipping companies, etc. The forwarding agent usually does not transport the goods himself but only arranges their transportation. The forwarding agent who does not take over the goods can therefore generally not be considered a carrier according to Art. 31(a)73. Ultimately, the kind of task he is assigned with is essential and not the labelling as a forwarding agent. If the forwarding agent does not only arrange the transportation but takes over the goods74 or if he has obligated himself visa`-vis the seller to undertake the carriage either himself or through a subcontracting carrier75, then the forwarding agent can be considered a carrier according to Art. 31(a). The same applies if the buyer instructs the seller to deliver the goods to a forwarding agent or another third person instead of to a carrier76. 24 In a sale which involves carriage of the goods the seller has fulfilled his obligation to deliver according to Art. 31(a) if he has handed over the goods to a carrier in terms of Art. 31(a) and has concluded the contracts necessary for their transmission to the buyer77. The costs of further carriage have to be borne by the buyer78. The seller does not bear any 66 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 26. Less strictly Witz/Salger/Lorenz, Kommentar (2016), Art. 31 para. 19. See infra Art. 32 paras 17 et seq. 67 For more details see Piltz, Container weights in maritime trade, EJCCL (2016) p. 59. 68 See infra Art. 34 paras 10 et seq. 69 Benicke, in: Mu ¨ nchKommHGB (2012), Art. 31 para. 13; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 24. 70 Cf. Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 22. 71 Cf. Benicke, in: Mu ¨ nchKommHGB (2012), Art. 31 para. 13; Achilles, in: Ensthaler (ed.), Gemeinschaftskommentar zum Handelsgesetzbuch mit UN-Kaufrecht (2007), Art. 31 para. 7. 72 For more details see Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 paras 15 et seq. 73 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 22. 74 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 24; Gruber, in: Mu¨nchKommBGB (2016), Art. 31 para. 18; Benicke, in: Mu¨nchKommHGB (2012), Art. 31 para. 12; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 31 para. 6; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 25. In contrast Mullis, in: Huber/Mullis, The CISG (2007), p. 115. 75 Witz/Salger/Lorenz, Kommentar (2016), Art. 31 para. 18; Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 18. 76 Witz/Salger/Lorenz, Kommentar (2016), Art. 31 para. 18. 77 See infra Art. 32 paras 17 et seq. 78 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 31 para. 24; Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 30; Benicke, in: Mu¨nchKommHGB (2013), Art. 31 para. 32.

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responsibility for mistakes or inappropriate or even illegal behaviour of the carrier79 resulting e. g. in the damaging of the goods despite adequate packaging, in delaying the transport or in handing over the goods to the wrong recipient or in dispatching them to a wrong destination80. The passing of risk is regulated in Art. 67. If more than one carrier is employed, the handing over to the first carrier is sufficient81 (Art. 31(a)). Handing over of the goods to the first carrier is also sufficient if the first carrier undertakes only a local transport, for instance the transport from the seller’s premises to the railway station82. c) Placing the goods at disposal. Insofar as a sale involving carriage of the goods83 is 25 not at hand and no differing agreements, usages or practices can be established, the act the seller is required to undertake in order to deliver consists only of placing the goods at the buyer’s disposal at the relevant place of delivery (Art. 31(b),(c)). A physical handing over and therefore the need of the buyer’s cooperation84 – meaning the buyer or a person authorized by the buyer gaining actual possession of the goods sold – is not required85. On the contrary, the initiative to get possession of the goods rests on the buyer86. The loading – or if the goods must be placed at the buyer’s disposal at a place different from the one determined by Art. 31, the unloading87 – of the goods is, in case of doubt, not an obligation of the seller88. The seller has performed the act he is required to undertake in order to deliver when he has done everything to enable the buyer to take possession of the goods89, to load – or if the goods must be placed at the buyer’s disposal at a place different from the one determined by Art. 31 to unload – and to transport them. The passing of risk is regulated in Art. 69 or if goods in transit are sold, in Art. 68. If the parties have contractually agreed that the seller has to load the goods or in cases where the delivery obligation must be performed at some other place than the seller’s place of business has to unload them, such agreement constitutes an additional obligation of the seller90. However, in case of doubt the fulfilment of this additional obligation is not a prerequisite for the seller’s obligation to place the goods at disposal and thus for fulfilling his delivery obligation arising out of Art. 31(b),(c)91. In case the seller unilaterally links the taking over of the goods by the buyer to conditions which are not provided for by the contract or by law (for instance that a payment obligation arising out of a different contract has to be fulfilled first), the goods have not yet been placed at the buyer’s disposal92. 79 Kantonsgericht Wallis (Switzerland) 19 August 2003, CISG-Online 895; Handelsgericht Zu ¨ rich (Switzerland) 10 February 1999, CISG-Online 488; Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 28; Brunner/Dimsey, Kommentar (2014), Art. 31 para. 9. 80 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 36. 81 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 19. 82 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 19; Benicke, in: Mu¨nchKommHGB (2013), Art. 31 para. 11; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 20. 83 See supra paras 12 et seq. 84 See supra para. 21. 85 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 31 para. 7. 86 Lando, in: Bianca/Bonell, Commentary (1987), Art. 31 para. 2.5. 87 Cf. Witz/Salger/Lorenz, Kommentar (2016), Art. 31 para. 22. 88 Oberlandesgericht Karlsruhe (Germany) 19 December 2002, CISG-Online 817. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 51; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2011), Art. 31 para. 14; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2011), Art. 69 para. 9; Mullis, in: Huber/Mullis, The CISG (2007), p. 117. 89 Secretariat Commentary on 1978 Draft, Art. 29 para. 16. 90 See infra para. 57. 91 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 51; Benicke, in: Mu¨nchKommHGB (2013), Art. 31 para. 25. 92 Cf. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 52.

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Part III. Chapter II. Obligations of the Seller

In some situations the seller will only be able to take possession of the goods sold if they have been set aside and if they have been marked or labelled93. However, segregation of the goods may not be necessary if the allocation can be done easily when the buyer takes them over94. This is namely the case with bulk material or goods on stock. Depending on the circumstances, it may also be indispensable that the seller informs the buyer of the goods being placed at his disposal. However, this information is not a requisite in cases in which a date for the collection of the goods is agreed upon or the buyer can assume that the goods have been placed at his disposal relying on other circumstances95. 27 If the goods are in the possession of a third person such as a warehouseman or a carrier, the seller can perform the act he is required to undertake in order to deliver pursuant to Art. 31(b) by instructing the third person to release the goods to the buyer96 and/or to exercise the right of ownership for the buyer from this moment on97. The seller can also assign his claim against the third person to hand over the goods to the buyer98 and thus perform the act he is required to undertake in order to deliver provided that the fulfilment of this claim by the third person is ensured without further prerequisites. In case of a sale of goods in transit (rolling, flying or swimming goods) at the moment of the conclusion of the contract, the seller must enable the buyer to take over the goods at the destination of the transport99. To achieve this, the seller can instruct the carrier accordingly or hand over to the buyer the documents authorizing to take over the goods. 26

28

d) Not handing over to the buyer. Different from provisions in many national laws100, Art. 31 does not oblige the seller to hand over the goods directly to the buyer. Even if the delivery has to be performed at the buyer’s place of business (“Bringschuld”), it cannot be concluded offhand that the seller is obliged to hand over the goods to the buyer101. However, due to differing agreements, relevant usages or established practices, Arts 6 and 9, which have to be proven by the party relying on them, the seller may be obliged to hand over the goods directly to the buyer or a person authorized by him. In such a case the transportation to the place of delivery determined for the handing over of the goods, the actual handing over to the buyer as well as the appropriate loading of the goods onto or into a means of transportation provided by the buyer are generally the seller’s obligations and responsibilities. Different from the cases which require only a placing at the disposal of the buyer, the seller has performed the 93

Witz/Salger/Lorenz, Kommentar (2016), Art. 31 para. 28. Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 47; Gruber, in: Mu¨nchKommBGB (2016), Art. 31 para. 8; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 31 para. 14. 95 Cf. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 49; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 31 para. 14; Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), pp. 265 seq. 96 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 54. 97 Secretariat Commentary on 1978 Draft, Art. 29 para. 17. 98 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 54. 99 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 75; Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 28. 100 See for example § 1061 ABGB (Austrian Civil Code), § 433(1) BGB (German Civil Code), Art. 1476 Codice Civile (Italian Civil Code), Art. 7.9 BW (Dutch Civil Code), Art. 1.462 Co´digo Civil (Spanish Civil Code), Art. 184 OR (Swiss Code of Obligations). 101 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 31 para. 23; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 31 para. 19; Ernst/Lauko, in: Honsell, Kommentar (2011), Art. 31 para. 51; Secretariat Commentary on 1978 Draft, Art. 29 para. 6. In contrast Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 75. 94

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act he is required to undertake in order to deliver only if the buyer has taken possession of the goods. If the buyer fails to cooperate the way he is supposed to and therefore the seller is unable to pass the ownership to the buyer and as a consequence cannot deliver in the agreed upon manner, the seller can invoke Art. 80. e) Goods delivered. Subject of the seller’s act of delivery are the goods sold from the 29 seller to the buyer. The kind, the quality and the quantity of the goods to be delivered can usually be established by referring to the agreement between the parties or from the relevant usages or practices, especially since the determinability of the subject matter of the contract is a general requisite for a valid offer to conclude a contract102. Yet, the parties to a contract of sale may commit the determination of the goods to be delivered to a third person or leave it to one of the parties. If the buyer has to specify the features of the goods to be delivered pursuant to the contract of sale, Art. 65 contains further details for situations in which the buyer fails to cooperate the way he should. In all other cases the seller is usually entitled within the contractual or otherwise relevant guidelines to specify the goods sold103. Pursuant to Arts 35, 41, 42, the seller is generally obliged to deliver goods which 30 conform with the contract and are free from rights or claims of third parties. However, if the goods sold are delivered in the way demanded by Art. 31, but do not conform with the contract, are not packaged appropriately or are encumbered with rights or claims of third parties, the seller has nevertheless performed the act he is required to undertake in order to deliver104. The buyer may then rely on legal remedies for non-conformity of the goods or for a defective title, but he cannot argue that the seller has failed to perform delivery altogether only because the goods he received do not conform with the contract or are incomplete. Referring to the history of the CISG, it can be shown that contrary to the Secretariat Commentary105 no differentiation between delivery of wrong goods (aliud) and delivery of faulty goods (peius) was intended106. The delivery of goods which differ from the agreed upon kind, even the delivery of a completely different kind of goods (aliud), does not mean that the delivery has not been performed by the seller107. This applies for the delivery of a lesser quantity, Art. 35(1), and for the delivery of a greater quantity than agreed upon in the contract, Art. 52(2), accordingly. For the delivery in terms of Art. 30 it is only essential that the seller delivers goods to 31 the buyer in order to fulfil a certain contract of sale. Objectively judging from the buyer’s perspective, there must be reason to assume that the seller has performed the delivery obligation in order to satisfy a certain contract of sale108. Insofar as the goods do not conform with the contract regarding kind, quality or quantity of the goods or regarding their packaging or if they are encumbered with rights or claims of third parties, the buyer may resort to the remedies of Arts 45 et seq. Since the seller has delivered even if the goods do not conform with the contract or are under defective title, the buyer must give 102

See supra Art. 14 para. 21. Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 65 para. 2. 104 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 paras 29 and 60; Gruber, in: Mu¨nchKommBGB (2016), Art. 30 para. 3; Brunner/Dimsey, Kommentar (2014), Art. 30 paras. 3; Magnus, in: Staudinger Kommentar (2013), Art. 30 para. 5; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 30 para. 2; Secretariat Commentary on 1978 Draft, Art. 33 paras 2 et seq. Not unambigiously clear regarding packaging Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 50. 105 Secretariat Commentary on 1978 Draft, Art. 29 para. 3. 106 Kromer, Der Begriff der Lieferung im Haager einheitlichen Kaufrecht (1987), pp. 273 et seq. 107 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 30; Schlechtriem/ Butler, CISG (2009), para. 123; Gruber, in: Mu¨nchKommBGB (2016), Art. 30 para. 3.In contrast Kritzer/ Vanto/Vanto/Eiselen, International Contract Manual, Vol. 4, § 88:18 para. 3. 108 Cf. Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 30 para. 10 and Oberlandesgericht Hamburg (Germany) 26 January 2000, CISG-Online 509. 103

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Part III. Chapter II. Obligations of the Seller

notice to the seller according to Arts 39 and 43 in order not to risk his remedies. If the goods delivered differ blatantly from what was agreed upon, the seller may not rely on the buyer’s obligation to give notice because in such cases the seller is usually aware of the non-conformity of the goods or could not have been unaware (Art. 40).

4. Place of delivery 32

The act the seller is required to undertake in order to deliver109 must be performed at the place stipulated by the contract or regulated by law. Art. 31 determines at which place the seller has to perform the act he is required to undertake in order to deliver and thereby determines the place of delivery or place of performance. Transportation to the place of delivery is part of the seller’s delivery obligation.110. Sometimes the term “place of fulfilment” (“Erfu¨llungsort”) is used111. In any case reference is made to the place which marks the locally final point regarding the seller’s obligations112. The place where the goods are taken over by the buyer or the place of destination with respect to transportation of the goods is not addressed by Art. 31. However, it may coincide with the place of delivery113. Since the place of delivery marks the locally final point regarding the seller’s obligations, it is also suitable for defining the borderline between the seller’s area of responsibility on one side and the buyer’s on the other.

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a) Party autonomy. Art. 31 operates as a default provision and gains significance only to the extent that the place of delivery cannot be determined by looking at the contract and its circumstances114. Apart from an explicit agreement on the place of delivery, the use of a clause of the Incoterms115 or another trade term which stipulates a place of delivery116 is particularly common in practice. Both an explicit agreement as well as an agreement to use one of the clauses of the Incoterms117 supersede the place of delivery provided by Art. 31 even if the place of delivery agreed upon corresponds to Art. 31118. Art. 31 functions as a gap-filling provision and is only needed absent a contractual provision119. Even if no agreement of the parties can be established, the place of delivery sometimes can be derived from the circumstances of the contract at hand (“any other particular place”)120. The party relying on a place of delivery not determined by Art. 31 has the burden of proving the relevant circumstances121. However, if no agreement or circumstances regarding the place of delivery can be established, Art. 31 applies. 109

See supra paras 19 et seq. Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 73. Cf. Piltz/ Bredow, Incoterms (2016) para. D-325. 111 Cf. Witz/Salger/Lorenz, Kommentar (2016), Art. 31 para. 9; Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 24. 112 Piltz, Internationales Kaufrecht (2008), para. 4-36. Cf. Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 30; Herber/Czerwenka, Kommentar (1991), Art. 31 para. 2. See infra paras 41 et seq. 113 See supra paras 14 et seq. 114 See supra Art. 31 para. 1; Gabriel, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 347; Neumayer/Ming, Convention de Vienne (1993), p. 239. 115 See supra Art. 30 paras 30 et seq. 116 See infra para. 65. 117 Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 6. See supra Art. 30 para. 38. 118 In contrast Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 68. 119 Brunner/Dimsey, Kommentar (2014), Art. 30 para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 30 para. 1; Lookofsky, Convention on Contracts for the International Sale of Goods (2012) para. 151; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 30 para. 5; Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 242. 120 See infra para. 35. 121 Amtsgericht Duisburg (Germany) 13 April 2000, CISG-Online 659. 110

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If the parties use other trade terms outside the standardized catalogue of the 34 Incoterms122, it cannot always be determined with certainty whether the parties only wanted to stipulate the passing of risk or the bearing of costs or also the place of delivery123. In particular, the agreed payment modalities and those regarding the costs of transportation124 do not always justify conclusions with regard to the place of delivery125. Therefore, in most cases, court rulings do not consider clauses such as “free …” or “franco …” as a determination of the place of delivery126. Also the specification of a “place of fulfilment” does not necessarily determine the place of delivery127. If the parties wish to set a specific place of delivery, this place should be expressly denominated as such. If the buyer and the seller have fixed a specific address for delivery, this can be considered as the place of delivery agreed upon by the parties irrespective of whether the seller transports the goods to this place himself or employs a carrier128. Art. 31 is only relevant if the seller is not bound to deliver the goods at a particular place. 35 Even if no trade terms and no agreements between the parties with regard to the place of delivery exist129, other circumstances of the contract like for instance arrangements assigning the costs of transportation130 may still indicate a place of delivery which prevails over the rule contained in Art. 31131. A contract of sale regarding a machine which obligates the seller not only to deliver the machine but also to assemble it, to set up operation and to instruct the buyer’s personnel, may according to the specific contractual arrangements justify the assumption that delivery, just like the other obligations of the seller, have to be performed at the buyer’s place of business132. However, the situation is different if the seller has to attach a control unit and give respective instructions at the buyer’s place of business, but the buyer has already taken over the machine at the seller’s place of business, loaded 122

See infra para. 65. Cf. Piltz, Der Lieferort im Außenhandel, Außenwirtschaftliche Praxis (2001) 273. 124 See supra Art. 30 para. 8. 125 Witz/Salger/Lorenz, Kommentar (2016), Art. 31 para. 9; Brunner/Dimsey, Kommentar (2014), Art. 31 para. 3;. See further supra para. 17 and infra Art. 32 para. 20. 126 Cf. Hof van Beroep te Gent (Belgium) 29 March 2000 (Pace); Højesteret (Denmark) 15 February 2001, CISG-Online 601; Oberlandesgericht Mu¨nchen (Germany) 14 January 2009, CISG-Online 2011; Oberlandesgericht Koblenz (Germany) 30 September 2008, IHR (2011) 145 (148); Landgericht Bamberg (Germany) 23 October 2006, CISG-Online 1400; OLG Koblenz (Germany) 4 October 2002, CISG-Online 716; OLG Ko¨ln (Germany) 16 July 2001, CISG-Online 609; Bundesgerichtshof (Germany) 11 December 1996, CISG-Online 225; Landgericht Oldenburg (Germany) 27 April 1994, CISG-Online 359; Cour de Cassation (France) 22 March 2011, CISG-Online 2246; Hooge Raad (Netherlands) 21 May 1999, CISGOnline 1809; Kantonsgericht Zug (Switzerland) 11 December 2003, CISG-Online 958. In contrast Oberlandesgericht Du¨sseldorf (Germany) 21 November 2008, CISG-Online 2173; Landgericht Mu¨nchen II (Germany) 23 March 2004, CISG-Online 998; Oberlandesgericht Ko¨ln (Germany) 8 January 1997, CISG-Online 217; Oberlandesgericht Karlsruhe (Germany) 20 November 1992, CISG-Online 54; Cour d’Appel d’Orleans (France) 29 March 2001, CISG-Online 611. Cf. Widmer Lu¨chinger, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 31 para. 72; Brunner/Dimsey, Kommentar (2014), Art. 31 para. 3; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 55; Fogt, Die Vereinbarung und Auslegung von FRANCO-Lieferklauseln beim CISG-Kauf, The European Legal Forum (2003) 61; Lebuhn, Zur Frage der in einem u¨berseeischen Getreidehandelsgescha¨ft verwendeten Klausel “frei Lager …. Bestimmungsort”, IPRax (1985) 10. 127 Witz/Salger/Lorenz, Kommentar (2016), Art. 31 para. 9. 128 Hof’s-Gravenhage (Netherlands) 29 September 2006, CISG-Online 1808. 129 See supra para. 33. 130 Oberlandesgericht Stuttgart (Germany) 18 April 2011, CISG-Online 2226. Cf. Witz/Salger/Lorenz, Kommentar (2016), Art. 31 para. 8. 131 Oberlandesgericht Wien (Austria) 1 June 2004, CISG-Online 954. 132 Cf. Oberlandesgericht Ko ¨ ln (Germany) 21 December 2005, CISG-Online 1201; Oberlandesgericht Mu¨nchen (Germany) 3 December 1999, CISG-Online 585; Corte di Cassazione (Italy) 19 June 2000, CISG-Online 1317; WidmerLu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 78; Benicke, in: Mu¨nchKommHGB (2013), Art. 31 para. 29. 123

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and carried it and assembled and put it into operation at the place of destination133. In order to avoid uncertainties, in particular in more complex contracts, a specific place of delivery or several places of performance regarding the relevant obligations should be expressly stipulated. Nevertheless, it cannot be assumed automatically in a contract designed as one unit that there are different places of performance just because the seller faces different obligations (for instance delivery and instruction134). There need to be sufficient indications that this is what the parties really wanted135. b) Default rule. If neither the use of trade terms, or the contract itself, or any other circumstances sufficiently indicate at which place the seller has to perform the act he is required to undertake in order to deliver136, Art. 31 provides for distinctions. On a first level it has to be distinguished whether or not the sale at hand is a sale, which involves carriage of the goods. In case of doubt, a sale, which involves carriage of the goods is to be assumed137. If no sale involving carriage of the goods can be established, it must be distinguished on a second level whether or not the goods sold have already been individualized or are to be drawn from a specific stock or whether or not they are to be manufactured or produced at a particular place. 37 In sales which involve carriage of the goods138 the place of delivery is established at the place where the seller hands over the goods to the first carrier139 (Art. 31(a)). The CISG does not regulate where the seller has to hand over the goods to the carrier. Hence, the seller is widely free in setting the place of delivery in sales which involve carriage of the goods140. Therefore, Art. 31(a) is especially suitable for drop shipments (string sales). However, it must be ensured that the seller’s selection of the place of delivery does not lead to a delay in transport or to easily avoidable costs or other unreasonable disadvantages for the buyer141. Consequently, the place of delivery will be in the environments of the seller’s place of business unless there are other indications. Different from cases where the buyer has to take delivery at the seller’s place of business (“Holschuld”), in sales involving carriage of the goods the seller has to arrange the transport of the goods and instruct the carrier to transmit them to the buyer142. Moreover, delivery is performed when the goods are handed over to the carrier for transmission to the buyer143. Thus, the place of delivery and at the same time the locally final point of the seller’s obligations144 is where this obligation is fulfilled145 and not where the carrier hands over the goods to the buyer. 36

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Cf. Oberlandesgericht Ko¨ln (Germany) 30 April 2007, IHR 2007, p. 164. Cf. Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 78. 135 See infra para. 48. Cf. Benicke, in: Mu ¨ nchKommHGB (2013), Art. 31 para. 29; Cour d’Appel de Paris (France) 4 March 1998, CISG-Online 535; Gruber, in: Mu¨nchKommBGB (2016), Art. 31 para. 3 and Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 78. 136 See supra paras 19 et seq. 137 See supra para. 17. 138 See supra paras 12 et seq. 139 Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 24; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 18; Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 257. In contrast Achilles, in: Ensthaler (ed.), Gemeinschaftskommentar zum Handelsgesetzbuch mit UN-Kaufrecht (2007), Art. 31 para. 9. 140 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 27; Witz/Salger/ Lorenz, Kommentar (2016), Art. 31 para. 17. 141 Cf. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 27 para. 31; Witz/ Salger/Lorenz, Kommentar (2016), Art. 31 para. 17. 142 See supra para. 22. 143 See supra para. 22. 144 See infra paras 41 et seq. 145 Cf. Hondius/Heutger/Jeloschek/Sivesand/Wiewiorowska, Principles of European Law – Sales (2008), Art. 2:104 para. 1. 134

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If the sale at hand is not a sale which involves carriage of the goods and the contract 38 relates to specific goods sold or goods to be drawn from a specific stock or to be manufactured or produced at a specific place, delivery has to be performed at the respective place of storage or manufacture146 (Art. 31(b)). Art. 31(b) gains significance when the goods are stored at the premises of a third party or are produced by a third party or at a particular location147. However, a precondition for the relevance of the respective place of storage or manufacture is that both parties know of this place at the time of the conclusion of the contract of sale. It is not sufficient that one or the other party ought to have such knowledge148 or receives this information at a later point in time149. Especially for sales of goods in transit, meaning goods that are rolling, swimming or flying at the time of the conclusion of the contract of sale, the place of storage is authoritative pursuant to Art. 31(b)150. Therefore, the place of delivery in these cases is not the destination of the transport, but the respective means of transportation known to the parties, meaning the ship, the wagon, the airplane, etc., in or on which the goods are located151. The actual geographical position of the means of transportation is irrelevant. In all other cases the place of delivery is the seller’s place of business (Art. 31(c)). 39 Decisive is the moment at which the contract is concluded152 (Art. 23), so even if the seller’s place of business is relocated later on, the original place of delivery is principally still applicable153. If the seller has several places of business, Art. 10(a) applies. There is no provision in Art. 31 which provides that the buyer’s place of business is 40 the place of delivery154. Different from the buyer who in case of doubt pursuant to Art. 57 has to pay at the seller’s place of business, the seller is in case of doubt not obligated to perform the act he is required to undertake in order to deliver at the buyer’s place of business155. In order to set the place of delivery at the buyer’s place of business, respective trade terms, agreements between the parties or other sufficiently clear indications are required, for which the party relying on them bears the burden of proof. c) Allocation of responsibilities. The place of delivery being the locally final point of 41 the seller’s obligations does not only fix the place at which the actual act of delivery has to be performed, but also marks the point at which the responsibility for the goods passes from the seller to the buyer in a wider sense. In foreign trade transactions larger distances have to be overcome as compared in domestic ones, more than one legal 146

Cf. Benicke, in: Mu¨nchKommHGB (2013), Art. 31 para. 21. Oberlandesgericht Brandenburg (Germany) 3 July 2014, CISG-Online 2543; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 33. 148 Secretariat Commentary on 1978 Draft, Art. 29 para. 13; Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 26. 149 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 31 para. 13. 150 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 31 para. 12; Witz/Salger/Lorenz, Kommentar (2016), Art. 31 para. 24; Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 28; Benicke, in: Mu¨nchKommHGB (2013), Art. 31 para. 28; Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013), para. 347. In contrast Achilles, in: Ensthaler (ed.), Gemeinschaftskommentar zum Handelsgesetzbuch mit UN-Kaufrecht (2007), Art. 31 para. 12; Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 75; Brunner/Dimsey, Kommentar (2014), Art. 31 para. 11. 151 Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 37; Secretariat Commentary on 1978 Draft, Art. 29 (now Art. 31) para. 12. 152 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 46; Gruber, in: Mu¨nchKommBGB (2016), Art. 31 para. 6. 153 Reinhart, UN-Kaufrecht (1990), Art. 31 para. 8. 154 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 31 para. 22; Magnus, in: Staudinger Kommentar (2013), Art. 31 paras 8 and 31; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 50. 155 Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 50. 147

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system apply and further questions and risks arise – all of which are unknown in domestic affairs. Regarding the relationship between seller and buyer, these questions and risks have to be allocated between the exporter and the importer. Unless otherwise provided for by agreements, usages or practices (Arts 6, 9), the place of delivery is suitable in particular for allocating the costs incurred by performing an international contract of sale156 and as a starting point for determining which party has to provide the necessary export or import licenses or other permissions needed for the performance of the contract of sale157. The place of delivery also gives an orientation as to which party has to provide for customs and security clearance and bear customs duties, tariffs and taxes which are applicable to the specific contract of sale158 and quite often constitutes the point of reference regarding the law applicable in case of acquisition in good faith from a person having a defective or no title159. 42 On the other hand, those responsibilities in the relationship between seller and buyer which are attributed to either the seller or the buyer and cannot be divided up between them cannot be allocated by making reference to the place of delivery. Among those is the responsibility for packaging the goods160, the risk regarding transmission of communication (Art. 27), as well as the duty for pre-shipment-inspections ordered by public authorities161. Neither is the place of delivery suitable for determining which party has to bear taxes imposed not on a specific sale transaction but on an income as a whole. For instance, some states provide a liability to pay income taxes for foreign exporters which have no residence within that state but participate in the respective domestic business through a domestic agent with authority to conclude contracts162 or maintain a domestic consignment stock163. This liability to pay taxes as well as the obligation to file the respective tax returns cannot be passed on to the buyer simply by determining the place of delivery. For such a result, specific clauses shifting the liability to pay taxes and to file the returns – if admissible – have to be agreed upon. 43 Beyond the responsibilities addressed supra in para. 41 which can generally be divided up between the seller and the buyer and therefore can be subject to negotiation, the place of delivery is of further significance164. Consequently, the contracting parties are well advised to thoroughly reflect and ponder the legal consequences which may arise before agreeing on a place of delivery. 44 Pursuant to Art. 13 EC Regulation 207/2009 on the Community Trade Mark165 and Art. 15 Directive (EU) 2015/2436 of the European Parliament and of the Council166, the protection provided by trademark law ends when the goods have been put on the market either domestically or in a Member State of the European Union or the European Economic Area (EEA)167. Considerations regarding the protection of a trademark may urge parties to agree on a place of delivery outside of EEA if the goods are intended for non-European customers and shall be prevented from re-import. This applies all the more since the parties cannot vary the statement of Art. 13 EC Regulation 156

See infra para. 51. See infra paras 52 et seq. 158 See infra paras 52 et seq. 159 See supra Art. 30 para. 19. 160 See infra para. 50. 161 See infra para. 55. 162 For instance see Art. 5(5) OECD Model Tax Convention on Income and on Capital. 163 However, see Art. 5(4) OECD Model Tax Convention on Income and on Capital. 164 Cf. Piltz, Der Lieferort im Außenhandel, Außenwirtschaftliche Praxis (2001) 273. 165 EC Official Journal, L 078, 24 March 2009. 166 EC Official Journal, L 336/1, 23 December 2015. 167 Cf. Bundesgerichtshof (Germany) 27 April 2006, RIW (2006) 769. 157

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207/2009 and Art. 15 Directive (EU) 2015/2436 and therefore cannot agree that the protection provided by trademark law shall not be exhausted when choosing a domestic place for putting them on the market. However, protection by trademark law can be ensured if the contracting parties agree upon a place of delivery outside of EEA. European laws on value added tax generally apply the principle of the country of 45 destination168. Exports to foreign countries, in particular to countries outside the European Union are generally exempted from paying value added tax169. However, a prerequisite for these exemptions is always that the goods leave the country exempting them from paying value added tax. If a domestic place of delivery applies, the exporter loses control over the goods upon delivery and thus cannot provide the proof of exportation needed for value added tax purposes without the cooperation of the buyer. However, things are different if the place of delivery is abroad and it is therefore the seller’s responsibility to take care of the export modalities. Finally, with regard to possible legal disputes it has to be noted that the place of 46 performance generally constitutes a jurisdiction of the civil courts for claims arising out of a contract170, see in particular Art. 7(1) Brussels Ia-Regulation (recast)171, Art. 5(1) Brussels Convention172 and Art. 5(1) Lugano Convention (revised)173.

5. Further obligations of the seller Depending on the circumstances of the individual contract, the seller may face 47 further obligations apart from the cardinal obligations pursuant to Art. 30, i. e. the obligation to deliver, to hand over the relevant documents and to transfer property in the goods sold. Aside from those obligations regulated in the CISG174, the basis for such further obligations is, in particular, agreements between the parties as well as relevant usages or practices established between them175. Further obligations which are especially relevant with regard to delivery are addressed in Art. 32. Other additional obligations can arise in particular as a result of agreeing on clauses of the Incoterms176. a) Application of the CISG. Additional obligations of the seller are generally 48 governed by the CISG as well177. The CISG namely governs the agreement on such further obligations and therefore the rules regarding the conclusion of a contract according to Arts 14 et seq. apply. Moreover, the legal consequences of a failure to properly perform these obligations are principally governed by Arts 45 et seq.178 With due consideration and reasonable flexibility and dependant on the kind of obligation and the relevant circumstances, other provisions of the CISG can also be applicable, in 168

See recital 8 of EC Directive 92/12, EC Official Journal, L 076, 23 March 1992. Cf. § 4 para. 1 No. 1 b and § 6 Umsatzsteuergesetz (German Value Added Tax Act). 170 Cf. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 paras 83 et seq.; Brunner/Dimsey, Kommentar (2014), Art. 31 paras 16 et seq.; Wipping, Der europa¨ische Gerichtsstand des Erfu¨llungsortes – Art. 5 Nr. 1 EuGVVO (2008); Piltz, Jurisdiction of the place of performance in UNsales contracts, Nederlands Tijdschrift voor Handelsrecht (2007) 119; Klemm, Erfu¨llungsortvereinbarungen im Europa¨ischen Zivilverfahrensrecht (2005). 171 EC Official Journal, L 351/1, 20 December 2012. 172 EC Official Journal, C 189, 28 July 1990. 173 EC Official Journal, L 147, 5, 10 June 2009. 174 See supra Art. 30 para. 6. 175 See supra Art. 30 paras 5 et seq., 27 seq. 176 See supra Art. 30 paras 30 et seq. 177 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 30 para. 12; Magnus, in: Staudinger Kommentar (2013), Art. 30 para. 18. 178 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 30 para. 12; Benicke, in: Mu¨nchKommHGB (2013), Art. 30 para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 30 para. 19. 169

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particular the rights to cure according to Art. 34 sentence 2, Arts 37 and 48179. In case of doubt, such further obligations have to be performed at the relevant place of delivery180 (Art. 31), especially if they are connected with the seller’s obligation to deliver. For other obligations not connected with the seller’s obligation to deliver an autonomous place of performance independent from Art. 31 may be established181. Recurrence to national law can only be made if a solution can neither be derived from the circumstances of the contract or from the rules and regulations of the CISG or its basic principles (Art. 7(2)). 49

b) Typical further obligations. Due to the multiple forms and contents such additional obligations may have, a comprehensive compilation of these obligations is impossible. In the following, some further obligations of the seller typical in international trade will be addressed.

50

aa) Packaging of the goods. As part of his obligation to deliver, under the CISG as well as under the Incoterms182, the seller generally owes the buyer an appropriate packaging of the goods sold183. The seller faces this obligation irrespective of the kind of act the seller is required to undertake in order to deliver184 and irrespective of the relevant place of delivery185. The seller has to take care of an appropriate packaging in cases where the seller has to hand over the goods and in cases where the goods have to be placed at the buyer’s disposal, even if this happens at the seller’s place of business186. Unless otherwise provided by agreements, usages or practices between the parties, the requirement for and the kind of packaging is to be established taking into consideration the kind of goods and thus the need for protection of the specific goods, the inherent dangers of the goods, the means of transportation used, the route and the duration of the transport187. If the means of transportation, the route or the duration of the transport and the resulting packaging requirements are unknown to the seller and the seller could not have been aware of them, standard packaging taking into consideration that the goods are to be transported to the buyer is sufficient. In case the seller does not provide for appropriate packaging and this results in damages to the goods or to other objects, the seller has nevertheless performed the act he is required to undertake in order to deliver pursuant to Art. 31. Yet, the buyer enjoys the legal remedies for a delivery, which does not conform with the contract (Art. 35(2)(d)). An obligation of the seller to take back packaging material for disposal purposes, for instance, cannot be derived from the CISG even when the buyer is invoiced additionally for the packaging material. Specific agreements, usages or practices are required between the parties to the contract of sale to establish such an obligation.

179 Huber, in: Mu ¨ nchKommBGB (2016), Art. 48 para. 4; Benicke, in: Mu¨nchKommHGB (2013), Art. 48 para. 2. 180 See supra paras 32 et seq. 181 See supra para. 35. Cf. Gruber, in: Mu ¨ nchKommBGB (2016), Art. 31 para. 3; Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 78; Benicke, in: Mu¨nchKommHGB (2013), Art. 31 para. 29. 182 See infra para. 66. 183 Cf. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 paras 32 and 50; Magnus, in: Staudinger Kommentar (2005), Art. 31 para. 10 and Art. 35 para. 42; Neumayer/Ming, Convention de Vienne (1993), p. 237. 184 See supra paras 19 et seq. 185 See supra paras 32 et seq. 186 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 32; Piltz, Internationales Kaufrecht (2008), para. 4-107; Bianca, in: Bianca/Bonell, Commentary (1987), Art. 35 para. 2.7. 187 Cf. Cour de Cassation (France) 24 September 2003, CISG-Online 791; Arbitral Award, Compromex, 29 April 1996, CISG-Online 350.

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bb) Costs of delivery. Even though the CISG does not establish explicit rules 51 regarding the costs of delivery, there is no need to resort to domestic law188. Generally, the seller has to bear all expenses incurring until the act the seller is required to undertake in order to deliver is performed at the relevant place of delivery189. Additional expenses, especially such for further transportation from the place of delivery to a different place of destination or acceptance or costs for security controls required for such transportation190, are to be borne by the buyer unless otherwise provided by agreements, usages or practices. Different to the Incoterms191, this rule also applies if the seller has to arrange transportation in sales involving carriage of the goods192. If goods in transit are sold, the costs for transportation to the place of destination have usually to be borne by the seller unless otherwise provided for by other circumstances193. The costs, which have to be usually borne by the seller, further include the expenses for measuring, counting and weighing of the goods194 and for packaging195. If the seller is obliged to insure the transport, these expenses follow the costs for transportation notwithstanding other circumstances196. cc) Clearance of the goods. The determination of who is responsible for providing 52 permissions, licences, registration requirements and other formalities required in the course of performing the contract, namely with regard to the export, transit or import of the goods, and who has to provide for customs and related security clearance and bear customs duties, tariffs and taxes is, like the allocation of costs197, to be generally made by considering the respective place of delivery198. Others prefer to allocate to the seller the responsibilities for those foreign trade formalities and tariffs existing in his home country and to the buyer those to be respected in the import country, but applying a flexible approach ultimately arrive at quite comparable results199. Since the place of 188

Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 79. Gruber, in: Mu¨nchKommBGB (2016), Art. 31 para. 24; Brunner/Dimsey, Kommentar (2014), Art. 31 para. 13; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 31 para. 20; Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 30; Lando, in: Bianca/Bonell, Commentary (1987), Art. 31 para. 1.1. Cf. Mullis, in: Huber/Mullis, The CISG (2007), p. 109. 190 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 79; Piltz, IHR 2013, 61 (62). 191 See infra para. 67. 192 See supra para. 24; Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 79; Gruber, in: Mu¨nchKommBGB (2016), Art. 31 para. 24; Benicke, in: Mu¨nchKommHGB (2012), Art. 31 para. 32. 193 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 79. 194 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commetary (2016), Art. 31 para. 79. 195 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commetary (2016), Art. 31 para. 79; Kock, Nebenpflichten im UN-Kaufrecht (1995), p. 150. 196 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 29. 197 See supra para. 51. 198 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 31 para. 25; Brunner/Dimsey, Kommentar (2014), Art. 31 para. 13; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 31 para. 20; Eckert/Maifeld/Matthiesen, Handbuch des Kaufrechts (2014), para. 609; Benicke, in: Mu¨nchKommHGB (2012), Art. 31 para. 33 and Art. 60 para. 4; Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 30 and Art. 60 paras 11 and 12; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 54; Honnold/Flechtner, Uniform Law (2009), para. 211; Schackmar, Die Lieferpflicht des Verka¨ufers in internationalen Kaufvertra¨gen (2001), pp. 209, 213. 199 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 paras 80 et seq.; Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 66 para. 10; Mankowski, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 60 paras 10 et seq.; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 41 para. 4 and Art. 60 para. 3; Soergel/Lu¨deritz/ Schu¨ßler-Langeheine, Kommentar zum Bu¨rgerlichen Gesetzbuch (2000), Art. 30 para. 3; Neumayer/Ming, Convention de Vienne (1993), p. 237; Herber/Czerwenka, Kommentar (1991), Art. 30 para. 9. Cf. Audiencia Provincial de Barcelona (Spain) 12 February 2002, CISG-Online 1324; Arbitral Award, 189

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delivery marks the locally final point of the seller’s obligation to deliver200 and is generally chosen by the parties also with regard to the allocation of costs and risks, the approach linked to the place of delivery is to be preferred. In addition, this approach is useful in allocating problems arising in connection with transit of the goods through a third country. Furthermore, it widely ensures a parallel to the rules regarding the passing of risk. 53 However, a direct orientation at the rules regarding the passing of risk would require an array of exceptions – in particular with regard to Art. 68 – and therefore is not equally suitable201, especially because the rules regarding the passing of risk, in contrast to the approach based on the place of delivery, aim rather at a timed delimitation than at a location-based one. As the place of delivery constitutes a local intersection of importance, it is not convincing either to allocate foreign trade formalities and tariffs according to the parties’ agreement on transportation costs without regard to the relevant place of delivery202. The transportation costs are usually easy to calculate and in practice quite often agreed upon without allocating them according to the place of delivery203. On the other hand, the possible risks in connection with foreign trade formalities and related security clearance are difficult to assess and thus cannot be automatically considered as being covered by an agreement on transportation costs. If the absence of a required permission, licence, registration or any other formality prevents the contract of sale or any of its provisions from taking legal effect, Art. 4(a) may apply204. 54 Notwithstanding the application of Incoterms205 or any other agreements, usages or practices206, the determination of who is responsible for providing permissions, licences, registration requirements and other formalities needed in the course of the performance of the contract and who has to provide for customs and related security clearance207 and bear customs duties, tariffs and taxes, is to be made as follows according to the approach connected with the place of delivery: in sales which involve carriage of the goods208 the seller’s responsibility reaches beyond the place of delivery because he generally has to arrange for the transmission of the goods to the buyer (Art. 31(a))209 For this reason, even if the place of delivery is a domestic one, the seller in a sale involving carriage of the goods is responsible for the export and related security clearance as well as for all permissions, licences, registration requirements and for paying all duties to the extent that from a domestic point of view compliance is a prerequisite for the export210. If, on the other hand the buyer not only has to pay for the transportation but also has to Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 23 January 2012, CISG-Online 2556. 200 See supra para. 32. 201 Partialy in contrast Huber, in: Mu ¨ nchKommBGB (2016), Art. 66 para. 7; Witz/Salger/Lorenz, Kommentar (2016), Art. 66 para. 4. 202 Cf. Landgericht Essen (Germany) 5 February 1999, NJW-Rechtsprechungsreport Zivilrecht (2000) 503. Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 80. 203 See supra para. 34. 204 See supra Art. 4 para. 16. 205 See infra paras 70 et seq. 206 Cf. Audiencia Provincial de Barcelona (Spain) 12 February 2002, CISG-Online 1324. 207 Cf. Piltz, IHR 2013, 61. 208 See supra paras 12 et seq. 209 See supra paras 21 et seq. 210 Landgericht Ellwangen (Germany) 15 September 2006, BeckRS 2010, 06236; Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 28; Brunner/Dimsey, Kommentar (2014), Art. 31 para. 13; Benicke, in: Mu¨nchKommHGB (2012), Art. 31 para. 33; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 31 para. 54; Achilles, in: Ensthaler (ed.), Gemeinschaftskommentar zum Handelsgesetzbuch mit UN-Kaufrecht (2007), Art. 31 para. 17; Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995), pp. 193, 199; Lando, in: Bianca/Bonell, Commentary (1987), Art. 31 para. 2.4.

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organize it211, only the place of delivery is relevant. Moreover, in sales not involving carriage of the goods, the allocation is made depending on where the place of delivery is located, meaning the seller is responsible for all permissions, licences, registrations, duties, etc. including customs related security clearance which are a prerequisite to perform the act of delivery he is required to at the place of delivery212. The latter rule requires, however, that the buyer is obligated to take over the goods at the same place of delivery, thus the places of delivery and of acceptance coincide213. In the relation between the buyer and the seller and irrespectively of legal norms 55 obligating the buyer to pay tariff duties when importing goods, the responsibility for the payment of tariffs includes also punitive tariff duties which are imposed in accordance with the World Trade Organisation (WTO) as a reaction to non-permitted unfair trade practices214. Subject to the same treatment are taxes and other public duties, such as stamp duties or anti-dumping-duties which are imposed on an individual contract of sale and not with respect to certain revenues as a whole. Costs for pre-shipment-inspections cannot be allocated according to the place of delivery, but are to be borne by the buyer to the extent that they are a measure exclusively ordered by the import country215. dd) Invoice. As a general rule, the seller will invoice the buyer the sale price. 56 Moreover, the buyer usually is entitled to claim that the seller issues an invoice which displays the seller as the invoicing party, is addressed to the buyer216 and which is in accordance with the applicable laws of the seller’s country217. The invoice can also be contained in a confirmation of order or in a delivery note and must not necessarily have to be issued as an independent form or paper. Unless otherwise provided, the invoice does not have to be signed218. However, the issuing of an invoice is not a precondition for the maturity of the purchase price219. c) Further obligations stipulated. In addition to those issues addressed supra in 57 paras 50 et seq. and supra in Art. 30 para. 29, the parties sometimes enter into agreements which stipulate further obligations of the seller that go beyond the typical content of a contract of sale. In practice, such further obligations namely concern transportation, loading and unloading220, filling with regard to bulk materials and further distribution of the goods221. In connection with the delivery of technical equipment the parties often agree upon further obligations concerning planning, assembly, setting up of operation, instruction of personnel, maintenance and/or giving Less clear Honnold/Flechtner, Uniform Law (2009), para. 211. In contrast Witz/Salger/Lorenz, Kommentar (2016), Art. 31 para. 20. 211 See supra para. 15. 212 Cf. Kantonsgericht St. Gallen (Switzerland) 12 August 1997, CISG-Online 330; Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 81; Witz/Salger/Lorenz, Kommentar (2016), Art. 31 paras 22 et seq.; Magnus, in: Staudinger Kommentar (2013), Art. 60 paras 11 seq. 213 See supra para. 14. 214 Cf. Piltz, Wen treffen die Strafzo ¨ lle auf us-amerikanische Produkte?, Außenwirtschaftliche Praxis (2004) 180. 215 Cf. infra para. 71. 216 Cf. Arbitral Award, Compromex, 29 April 1996, CISG-Online 350; Benicke, in: Mu ¨ nchKommHGB (2007), Art. 59 para. 1. 217 Comision para la Proteccion del Comercio Exterior (Mexico) 29 April 1996, CISG-Online 350. See supra Art. 30 para. 44. 218 Cf. Art. 18(a)(4) UCP 600. 219 Supreme Court (Slowakia) 3 April 2008, CISG-Online 1763; Magnus, in: Staudinger Kommentar (2013), Art. 59 para. 4; Piltz, Internationales Kaufrecht (2008), para. 4-148. 220 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 51. See supra para. 25. 221 See e. g. Rechtbank Amsterdam (Netherlands) 19 August 2009, CISG-Online 2067.

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further instructions222. Additional obligations can also result from other agreements, for instance regarding the issuing of a certificate of compliance or a test certificate223, or from other relevant usages or practices. With respect to the content of Art. 7(1),(2) and anxious to ensure a uniform application of the CISG in the Contracting States, reference to national laws in connection with such further obligations should only be made if the legal questions arising in this context cannot be solved by applying the CISG’s regulations or basic principles224. However, if such further obligations which are not typical of a contract of sale are predominant, the contract in its entirety including its sale elements does not fall into the CISG’s scope of application (Art. 3(2)).

III. Comparable Rules 1. Incoterms 58

The Incoterms225 contain rules of their own regarding all aspects referred to in Art. 31 and commented above. If the parties to a contract of sale agree upon the application of a clause of the Incoterms, the rules of interpretation of the Incoterms regarding that clause supersede and modify Art. 31226.

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a) Contracts involving carriage of the goods. According to the explanations under headings A4 – B4 of the rules of interpretation of the Incoterms, the place of delivery and the place of taking delivery are generally identical. This rule applies regarding the Eand the D-clauses227 and is in particular true with regard to the F-clauses of the Incoterms228. The buyer has to take delivery when the goods have been delivered229 and since the revision of the Incoterms of 1990 the seller has no obligation with regard to the contract for carriage of the goods230. On the contrary, as a general rule it is the buyer who has to take care of their carriage231. Even if it is commercial practice that the seller contracts for carriage and the buyer does not object, the seller may still decline it. However, if the respective conditions are met and the seller contracts for the carriage (“additional service”), this option changes neither the place of delivery or the obligation of the buyer to take delivery there. The buyer has to take delivery of the goods when they are delivered at the named place of delivery or port of shipment notwithstanding whether the seller takes care of the carriage or not232. Therefore, also under the F-clauses of the Incoterms the place of delivery and the place of taking delivery are identical. Only

222 Achilles, in: Ensthaler (ed.), Gemeinschaftskommentar zum Handelsgesetzbuch mit UN-Kaufrecht (2007), Art. 30 para. 5. 223 See infra Art. 34 para. 11. 224 See supra para. 48. 225 See supra Art. 30 paras 30 et seq. 226 See supra Art. 30 paras 7 seq.; Piltz/Bredow, Incoterms (2016) paras A-240 et seq. 227 Bundesgerichtshof (Germany) 7 November 2012, CISG-Online 2374 (no. 16); Piltz/Bredow, Incoterms (2016) paras E-2 and D-2. 228 Piltz/Bredow, Incoterms (2016) para. F5; Kiene, in: DiMatteo/Janssen/Magnus/Schulze, International Sales Law, 2016, para. 9. In contrast Secretariat Commentary on 1978 Draft, Art. 29 (now Art. 31) para. 5. Cf. Gillette/Walt, The UN Convention on Contracts for the International Sale of Goods (2016), p. 158. 229 See the explanations under heading B4 of the rules of interpretation of the Incoterms. 230 See the explanations under heading A3 and B3 of the rules of interpretation of the Incoterms. 231 See the explanations under heading A3 and B3 of the rules of interpretation of the Incoterms. Piltz/ Bredow, Incoterms (2016) paras F-128, F-322 and F-524. 232 See the explanations under heading A4 and B4 of the rules of interpretation of the Incoterms. Piltz/ Bredow, Incoterms (2016) paras F-134, F-328 and F-530. Partially in contrast regarding the situation that in a contract with the Incoterms clause FCA the seller concludes the contract of carriage Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 68.

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if a C-clause is agreed, the place of delivery and the place of taking delivery diverge, leading to a sale involving carriage of the goods233. If a C-clause is applied, the place of delivery and the place of taking delivery are not 60 identical. The delivery obligation of the seller is performed by handing over the goods to the contracted carrier for shipment to the named place or by putting them on board a vessel for shipment to the port of destination, whereas the buyer takes delivery just at the named place or port of destination234. Risk passes to the buyer once the seller has complied with his delivery obligation235. However, different to the other clauses of the Incoterms if a C-clause applies the buyer has to take delivery not at the place of delivery, but at the named place or port of destination236. Therefore, only if a C-clause is agreed upon, the place of delivery and the place of taking delivery do not coincide and the situation characteristic for a sale requiring carriage of the goods in the meaning of Art. 31(a)237 is given. Those aspects of the delivery obligation of the seller such as the kind of act the seller is 61 required to perform in order to deliver238 and the place of delivery239 which are regulated differently from other kinds of contracts of sale governed by the CISG if the sale involves carriage of the goods, are ruled by the Incoterms autonomously. Therefore, regarding the delivery obligations of the seller, whenever Incoterms are used there is no need to examine in more detail and to determine precisely whether Art. 31(a) is applicable or not240. b) Kinds of acts of delivery. When the parties agree upon the Incoterms clause 62 EXW or upon a D-clause, the act the seller is required to undertake in order to deliver only consists of placing the goods at the buyer’s disposal241. A similar result occurs when the contract of sale uses the Incoterms clause FAS242 or FCA, the latter one in connection with a named place of delivery different from the seller’s place of business243. Under FAS the seller has to place the goods alongside the ship named by the buyer and under FCA in connection with a place of delivery different from the seller’s place of business the seller has to place the goods at the disposal of the carrier or another person nominated by the buyer244. In all remaining constellations, i. e. using FCA in connection with the place of delivery at the seller’s premises, applying FOB or agreeing upon a C-clause of the Incoterms, the seller is obligated to hand over 233 See the explanations under heading A4 and B4 of the rules of interpretation of the Incoterms. Cour d’Appel de Paris (France) 19 November 2010, CISG-Online 2206; Piltz/Bredow, Incoterms (2016) paras C-4 and C-145. Cf. supra Art. 30 para. 35; Benicke, in: Mu¨nchKommHGB (2013), Art. 31 para. 4. Partially in contrast Oberlandesgericht Hamm (Germany) 12 November 2001, CISG-Online 1430; Huber, in: Mu¨nchKommBGB (2016), Art. 67 paras 7 and 20; Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 52; Verweyen/Foerster/Toufar, Handbuch des Internationalen Warenkaufs UN-Kaufrecht (2008), pp. 114, 204; Achilles, in: Ensthaler (ed.), Gemeinschaftskommentar zum Handelsgesetzbuch mit UNKaufrecht (2007), Art. 32 para. 2. 234 See the explanations under headings A4 and B4 of the rules of interpretation of the Incoterms. Piltz/ Bredow, Incoterms (2016) para. C-145. 235 See the explanations under headings A5 – B5 of the rules of interpretation of the Incoterms. Piltz/ Bredow, Incoterms (2016) para. C-2. 236 See the explanations under heading B4 of the rules of interpretation of the Incoterms. Piltz/Bredow, Incoterms (2016) para. C-2. 237 See supra para. 14. 238 See supra paras 19 et seq. 239 See supra paras 32 et seq. 240 Piltz, INCOTERMS und UN-Kaufrecht, in: Transport- und Vertriebsrecht 2000, Festgabe fu ¨ r Prof. Herber (1999), p. 20 (pp. 23 seq.); cf. Lando, in: Bianca/Bonell, Commentary (1987), Art. 31 para. 2.4. 241 See the explanations under heading A4 of the rules of interpretation of the Incoterms. Cf. Tribunal Supremo (Spain) 9 December 2008, CISG-Online 2100. 242 Piltz/Bredow, Incoterms (2016) para. F-335. 243 Piltz/Bredow, Incoterms (2016) para. F-146. 244 See the explanations under heading A4 of the rules of interpretation of the Incoterms.

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the goods so that the carrier, or another person nominated by the buyer when applying FCA with the place of delivery at the seller’s premises, gets possession of them245. The Incoterms 2010 state expressly that the seller is to deliver the goods by “handing them over to the carrier”. The same applies regarding the clauses FOB, CFR and CIF as the seller is required to place the goods on board the ship246. The term “passed the ship’s rail” is not used any more in the Incoterms 2010. Once the seller has handed over the goods to the carrier or they have been placed on board the ship, the seller has fulfilled the act he is required to perform in order to deliver247. In order to reflect the situations arising under drop shipments (string sales) in waterway transports (FAS, FOB, CFR and CIF), according to the Incoterms 2010 the seller has delivered as well if he procures goods delivered by being placed alongside the ship (FAS) or on board (FOB, CFR and CIF). Just like in the CISG248, there is no situation covered in the Incoterms, which would provide an obligation of the seller to hand over the goods to the buyer. 63 Different to a mere placing at disposal, the seller who has to hand over the goods249 is also responsible for their loading250 and additionally, if containers are handed over to the carrier for maritime transport has to provide their “Verified Gross Mass” (VGM)251. In contracts of sale using the clauses EXW or FAS252 of the Incoterms, the seller being obliged only to place the goods at disposal is not responsible for their loading. With the exception of the DAT-clause, if a D-clause of the Incoterms applies, the seller is not responsible for the unloading of the goods after their arrival at the named destination, he only has to present them “ready for unloading”253. The result is the same when using the Incoterms rule FCA in connection with a named place of delivery different from the seller’s place of business254. Using FCA in connection with the place of delivery at the seller’s premises, applying FOB or agreeing upon CFR or CIF, the seller is obliged to take care of putting the goods in or onto the means of transportation provided by the carrier255. With regard to the clauses CPT and CIP, the issue of loading is not highlighted expressly by the rules of interpretation of the Incoterms. But it results from the structural principles, on which the C-clauses of the Incoterms are based256, namely the obligation of the seller to hand over the goods257 and the allocation of costs258 that the seller has to load them. 64 According to the introductory explanations to the Incoterms 2000, the expression “placing the goods at the disposal of” was the equivalent to the phrase “handing over 245

See the explanations under heading A4 of the rules of interpretation of the Incoterms. Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995), p. 80. 247 Cf. Ramberg, ICC Guide to Incoterms 2010 (2011), ICC publication No 720, p. 76; Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 24 January 2002, CISG-Online 887 and Hof Arnhem (Netherlands) 21 August 2007 (Pace). 248 See supra para. 28. 249 See supra para. 62. 250 Cf. supra para. 21; Piltz/Bredow, Incoterms (2016) para. F-143. 251 For more details see Piltz, Container weights in maritime trade, EJCCL (2016) p. 59. 252 See the explanations under heading A4 of the rules of interpretation of the Incoterms 2010; Piltz/ Bredow, Incoterms (2016) para. E-132 seq. and para. F-335. 253 See the explanations under heading A4 of the rules of interpretation of the Incoterms. Piltz/Bredow, Incoterms (2016) paras D-334 and D-512. 254 See the explanations under heading A4 of the rules of interpretation of the Incoterms. Piltz/Bredow, Incoterms (2016) para. F-145. 255 See the explanations under heading A4 of the rules of interpretation of the Incoterms, cf. Piltz, Incoterms 2010, IHR (2011) p. 1 (4). 256 See supra Art. 30 paras 31 et seq. 257 See supra para. 62. 258 See the explanations under heading A6 of the Incoterms rules of interpretation for the C-clauses. 246

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the goods” used in the CISG259. This statement is an obvious error and discontinued in the version of the Incoterms 2010. In particular, looking at the respective loading and unloading obligations260 it becomes apparent that the two alternatives “placing the goods at the disposal of” or “handing over the goods”, which are used to describe different kinds of acts of delivery in the Incoterms and in the CISG, have almost the same meaning in both the Incoterms and the CISG. c) Place of delivery. Under heading A4 of the rules of interpretation, the Incoterms 65 provide for each individual clause the relevant place of delivery which supersedes the rule established by Art. 31261. Under the E-clause (EXW), the place of delivery is the named place, usually the seller’s place of business262. Applying an F-clause (FCA, FAS and FOB), the place of delivery is established where the goods are delivered to the first carrier or at the port of shipment. The place of delivery is regularly named in connection with the three-letter-code263. Additionally, under the clauses FAS and FOB the buyer has to nominate the ship. If the parties do not determine a specific place of delivery but an area of delivery (e. g. “ARA” meaning Amsterdam-Rotterdam-Antwerpen), the buyer is entitled to specify the place of delivery since he is responsible for the main transport according to the F-clauses. However, if the parties agree upon the clause FCA without determining the place of delivery it should be determined by resorting to Art. 31(b),(c)264. When using a C-clause (CFR, CIF, CPT and CIP) and unless the parties have agreed on a specific point of delivery, the place of delivery usually is at the port of shipment or the place where the goods are handed over to the first carrier as well265. The difference with regard to the F-clauses cannot be seen in the determination of the place of delivery, but mainly in the allocation of the responsibility for the transport. Therefore, when using a C-clause, the place of delivery is not named, instead it is the relevant place of destination of the main transport266. Under the D-Incoterms the place of delivery is the one named as place of destination267. Furthermore, in connection with the rules on the place of delivery, the Incoterms 2010 address explicitly the specific point or terminal within the named place of delivery or destination where the delivery and taking delivery is supposed to take place. If applying an F-clause no 259

ICC, Incoterms 2000, ICC publication No 560 ED (1999), pp. 11, 138. See supra paras 21 and 25 and supra para. 63. 261 Bundesgerichtshof (Germany) 7 November 2012, CISG-Online 2374 (no. 16). See supra para. 33 and Chengwei Liu, Place of performance: Comparative analysis of Articles 31 and 57 of the CISG and counterpart provisions in Article 7:101 of the PECL, 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) 346 (349). In contrast Widmer Lu¨chinger, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 31 para. 68; Landgericht Ko¨ln (Germany) 29 March 2011, CISGOnline 2534. 262 Ramberg, ICC Guide to Incoterms 2010 (2011), ICC publication No 720, p. 89; Piltz/Bredow, Incoterms (2016) para.E-140. 263 For example “FCA railway station Nu ¨ rnberg – Incoterms 2010”. 264 Piltz/Bredow, Incoterms (2016) para. F-154. 265 See the explanations under heading A3 a) of the rules of interpretation of the Incoterms; Piltz/ Bredow, Incoterms (2016) paras C-145 and C-446. Cf. Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 11 April 1997 (Pace); Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 24 January 2002, CISG-Online 887 and Hof Arnhem (Netherlands) 21 August 2007 (Pace). 266 For example “CIF New York – INCOTERMS 2010”. Disregarded by Verweyen/Foerster/Toufar, Handbuch des Internationalen Warenkaufs UN-Kaufrecht (2008), p. 204. 267 For example “DDP Buenos Aires – Incoterms 2010”. Magnus, in: Staudinger Kommentar (2013), Art. 31 para. 31; Rechtbank Rotterdam (Netherlands) 23 December 2009, CISG-Online 2071. In contrast Landgericht Ko¨ln (Germany) 29 March 2011, CISG-Online 2534. 260

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specific point has been agreed, the buyer may indicate it268. Under the clauses CPT, CIP, DAT and DAP a specific point determined by practice has to be respected269. Otherwise under all clauses if no specific point is ascertainable and the buyer is not entitled to determine the point of delivery, it is up to the seller to select it. Just like in the CISG270, there is no provision in the Incoterms, which provides that the buyer’s place of business is the place of delivery. 66

d) Packaging of the goods. According to the explanations under heading A9 of the Incoterms rules of interpretation, regardless of the Incoterms clause applied and irrespective of the kind of act the seller is required to undertake in order to deliver and the place of delivery, the seller must provide packaging of the goods in a way similar to the respective obligation under the CISG and mark it appropriately271. However, the Incoterms 2010 introduced the possibility that the buyer may “notify” the seller of specific packaging requirements. This notification needs to be consented by the seller. A unilateral desire regarding the packaging does not seem to be sufficient. The specific packaging requirements have to become part of the obligations assumed by the seller when concluding the contract of sale or by amending it at a later stage. The expenses related to any form of packaging are to be borne by the seller unless the parties agree otherwise272.

e) Costs of delivery. According to the explanations under headings A2/B2, A3/B3, A6/B6, A8/B8, A9/B9 and A10/B10 of the rules of interpretation of the Incoterms, as a general rule the seller has to bear all costs and expenses incurred until the time when the goods have been delivered273. The costs of export or import clearance are allocated slightly differently and reflect the responsibility for the respective clearance274. Furthermore, applying a C-clause the seller has to bear those charges payable for transport which are for his account according to the contract of transport. Whereas the Incoterms are designed to specify only the primary obligations of the seller and the buyer275, the rules on the allocation of costs also determine that the buyer has to pay additional costs arising due to his failure to fulfil certain obligations imposed on him by the Incoterms and specified in the respective clause. 68 If an F-clause is agreed upon, the expenses for the provision of a container the seller has to deliver are to be borne by the seller. The subsequent terminal handling charges rest on the buyer if the clause FCA is applied276. However, under FOB the terminal handling charges and the costs of ascertaining the “Verified Gross Mass” (VGM) required for transport of containers carrying cargo by vessel are for the seller’s account277. If applying a C-clause or DAP or DDP the costs for unloading are for the seller’s account according to the contract of carriage, the seller is bound to bear them even though he is not responsible for unloading the goods278. The same applies in all Cclauses regarding other costs and charges arising after delivery of the goods until their 67

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Piltz/Bredow, Incoterms (2016) para. F-155 and F-344. Piltz/Bredow, Incoterms (2016) para. C-147, C-313, D-122 and D-344. 270 See supra para. 40. 271 See Piltz/Bredow, Incoterms (2016) paras F-201 et seq. and supra para. 50. 272 See the explanations under heading A9 of the rules of interpretation of the Incoterms; Piltz/Bredow, Incoterms (2016) para. F-202. 273 Piltz/Bredow, Incoterms (2016) para. F-176. 274 See infra para. 70. 275 See supra Art. 30 para. 30. 276 Piltz/Bredow, Incoterms (2016) para. F-176. 277 Piltz/Bredow, Incoterms (2016) para. F-563 and Piltz, Container weights in maritime trade, EJCCL (2016) p. 59. 278 Piltz/Bredow, Incoterms (2016) paras C-168, C-469, D-364 and D-516. See supra para. 63. 269

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arrival at the place of destination279. Irrespective of the place of delivery, the costs to be borne by the seller also include the expenses for checking quality, measuring, weighing and counting of the goods and for packaging. The general rule for the allocation of costs is almost the same as under the CISG280. 69 However, a significant difference to the CISG appears when using a C-clause of the Incoterms. Whereas in a contract of sale requiring carriage of the goods governed by the CISG the costs of transportation are to be borne by the buyer281, under a C-clause of the Incoterms it is the seller who must bear the costs for their carriage and related charges282. The allocation of costs according to the rules of interpretation of the Incoterms may change if the parties modify the respective clause, e. g. obligate the seller to deliver the goods “FOB stowed”283. f) Export/import clearance of the goods. The customs clearance including the issues 70 of who has to provide for it and bear customs duties, tariffs and taxes and who is responsible for the provision of licences, permissions or other formalities required for the export or import of the goods sold is addressed under heading A2/B2 of the rules of interpretation of the Incoterms. Using a C- or D-clause, the seller bears the responsibility to clear the goods sold for export284. The same is true if the place of delivery and the place of taking delivery are in the seller’s country and an F-clause of the Incoterms is agreed upon. According to EXW, however, the seller does not have any responsibility at all in this respect. The counterpart on the buyer’s side is the Incoterms clause DDP, which places the entire responsibility on the exporter including also the clearance of the goods for import into the buyer’s country. Under all other clauses of the Incoterms it is always the buyer who is responsible for import clearance. Licences, permissions, formalities and any other clearance issue, which arise in connection with the transit through a third country, fall under the buyer’s responsibility except for cases which involve D-clauses. However, the seller remains responsible as far as the transport of the goods through any country prior to delivery is concerned285. Therefore, the result is almost the same as under the CISG286. Nonetheless, if the place of delivery and the place of taking delivery are in the seller’s country, the seller is responsible for the export clearance if an F-Incoterm is agreed upon whereas under the CISG he has no obligation in this respect287. With the exception of the DDP-clause of the Incoterms, the responsibility for pre- 71 shipment inspections not mandated by the authorities of the country of export always rests on the buyer288. If the inspections are ordered by the seller’s country and the clause EXW is agreed upon, the buyer must pay the costs anyhow, whereas with regard to the other clauses of the Incoterms no such obligation exists289. However, if the clause DDP applies it is the seller who must bear the costs of any pre-shipment inspection irrespectively whether ordered by the country of export or import290. 279

Piltz/Bredow, Incoterms (2016) paras C-168 and C-469. See supra para. 51. 281 See supra para. 24. 282 See the explanations under heading A3 and A6 of the Incoterms rules of interpretation for the Cclauses and Piltz/Bredow, Incoterms (2016) paras C-123 and C-424. 283 See Bredow/Seiffert, Incoterms 2000 (2000), p. 69. 284 Cf. Arbitral Award, CIETAC, CISG/1998/01 (Pace). 285 Cf. Piltz/Bredow, Incoterms (2016) paras F-114 and C-114. 286 See supra para. 54. 287 See supra para. 54; Piltz/Bredow, Incoterms (2016) paras F-117. 288 See the explanations under heading A9 and B9 of the Incoterms\R rules of interpretation. 289 See the explanations under heading B9 of the Incoterms rules\R of interpretation. 290 See the explanations under heading A9 of the Incoterms\R rules of interpretation. 280

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The seller’s responsibility for the export clearance as regulated by the Incoterms does not sufficiently consider the fact that in particular country-specific export restrictions or embargoes are mainly implemented as a reaction to events in the respective country of destination. Given this situation, the exporter should, especially in constellations when a considerable period of time will pass between the conclusion of the contract and the time of delivery, be concerned with excluding or limiting his liability for such cases when at the time of delivery the export clearance cannot be effected due to circumstances not attributable to the exporter291. Otherwise, the exporter will eventually be held responsible for those circumstances in the country of destination which caused the export restrictions and all consequences thereof.

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g) Security clearance of the goods. The Incoterms 2010 have additionally included the term “security clearance” in the heading of A2/B2 in order to take account of the special concern about security in the movements of goods292. The security clearance operated by the customs authorities is regulated following the same principle underlying the responsibility for licences or permissions or other formalities required for the export or import of the goods293. However, if the security control is incumbent on the carrier it is the place of delivery that assigns the responsibility for it either to the seller or to the buyer294.

2. PICC and PECL Neither the PICC nor the PECL contain provisions explicitly regulating contracts of sale295. Therefore, the regulatory content of Art. 31 CISG does not find a direct counterpart in the PICC or in the PECL. 75 Neither the PICC nor the PECL expressly regulate any obligation of the seller to deliver the goods sold. Consequently, they offer no definition of the kind of act the seller is required to undertake in order to deliver296, do not explicitly obligate the seller to take care of the packaging297 nor do they distinguish between contracts involving carriage of the goods and other types of contracts of sale298. What they do regulate, in a very general manner299 however, is the place300 and the costs301 of performance. According to Art. 6.1.6 PICC and Art. 7:101 PECL, the place of performance for an obligation other than to pay money is the debtor’s (seller’s) place of business at the time of conclusion of the contract, unless another place is fixed by or determinable from the contract302. According to Art. 6. 1. 11 PICC and Art. 7:112 PECL, the seller has to bear the costs until the goods have been placed at the place of performance303. If the costs do not 74

291 Cf. Piltz/Bredow, Incoterms (2016) paras F-124 seq; Ramberg, ICC Guide to Incoterms 2010 (2011), ICC publication No 720, p. 66. 292 See no. 7 of the introduction to the Incoterms 2010 and Piltz/Bredow, Incoterms (2016) paras F-122 seq. 293 See supra para. 70. 294 Piltz IHR 2013, 61 et seq. 295 See supra Art. 30 para. 46. 296 See supra paras 19 et seq. 297 See supra para. 50. 298 See supra paras 12 et seq. 299 Atamer, in: Vogenauer/Kleinheisterkamp, UNIDROIT Commentary (2015), Art. 6.1.6 para. 20. 300 See supra paras 32 et seq. 301 See supra para. 51. 302 For more details see Atamer, in: Vogenauer/Kleinheisterkamp, UNIDROIT Commentary (2015), Art. 6.1.6 paras 17 et seq. and Lando/Beale, Principles of European Contract Law, Parts I and II (2000), pp. 329 et seq. 303 For more details see Atamer, in: Vogenauer/Kleinheisterkamp, UNIDROIT Commentary (2015), Art. 6. 1. 11 paras 1 et seq. and Lando/Beale, Principles of European Contract Law, Parts I and II (2000), p. 329.

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include the packaging needed for proper transportation304, the seller faces fewer obligations than under the CISG305 or the Incoterms306. Just like the CISG and the Incoterms, neither the PICC nor the PECL obligate the seller to hand over the goods directly to the buyer or determine the buyer’s place of business as the place of performance. Neither the PICC nor the PECL explicitly address the issue of which of the parties to 76 a contract of sale is responsible for the export or import and customs clearance307. It seems that the rules regarding the allocation of the costs of performance308 are applied mutatis mutandis309. In special situations Art. 6. 1. 14 PICC may be relevant310.

3. DCFR Unlike the situation according to the PICC and the PECL311, the regulatory content of 77 Art. 31 CISG has direct counterparts in the DCFR312. Yet, it has to be emphasized that just like under the CISG313 these rules of the DCFR only apply to the extent that the seller’s obligations cannot be determined otherwise314. Just like the CISG315, the DCFR differentiates between contracts of sale involving 78 carriage of the goods and other contracts of sale, not involving carriage of the goods. Art. IV.A.-2:204 DCFR regulates the consequences if the contract of sale involves carriage of the goods316. Unfortunately, there is no specific rule in the DCFR offering a definition what is to be understood as a contract of sale involving carriage of the goods. As situations where the seller’s or buyer’s employees transport the goods are not covered317 by this notion, it seems that no carriage is involved if the place of delivery and the place of taking delivery are identical. Therefore, just like under the CISG318, it is characteristic for a sale involving carriage of the goods that the seller has to perform the act he is required to undertake in order to deliver at a place different from the one where the buyer has to take over the goods. This finding is corroborated by the fact that the carriage must be executed by “a third party”319. Therefore, the emphasis put on the agreement on the carriage320 should not lead to the conclusion that special circum304

See Atamer, in: Vogenauer/Kleinheisterkamp, UNIDROIT Commentary (2015), Art. 6.1.11, note 326. See supra para. 50. 306 See supra para. 66. 307 See supra paras 52 et seq. and 70 et seq. 308 See supra para. 75. 309 Atamer, in: Vogenauer/Kleinheisterkamp, UNIDROIT Commentary (2015), Art. 6.1.11 para. 4. 310 For more details see Atamer, in: Vogenauer/Kleinheisterkamp, UNIDROIT Commentary (2015), Art. 6.1.14 para. 4. 311 See supra para. 74. 312 See supra Art. 30 paras 47 et seq. 313 See supra para. 1. 314 See supra Art. 30 para. 50. 315 See supra paras 12 et seq. 316 See infra Art. 32 para. 43. 317 Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (2009), Comment A to Art. IV.A.-2:204 and Comment D to Art. IV.A.2:201 and Hondius/Heutger/Jeloschek/Sivesand/Wiewiorowska, Principles of European Law – Sales (PELS) (2008) pp. 178, 168. 318 See supra paras 12 et seq. 319 Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (2009), Comment A to Art. IV.A.-2:204 and Hondius/Heutger/Jeloschek/ Sivesand/Wiewiorowska, Principles of European Law – Sales (PELS) (2008), p. 178. Cf. Kritzer/Vanto/ Vanto/Eiselen, International Contract Manual, Vol. 4, § 88:22. 320 Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (2009), Comment B to Art. IV.A.-2:204 and Hondius/Heutger/Jeloschek/ Sivesand/Wiewiorowska, Principles of European Law – Sales (PELS) (2008), p. 178. 305

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stances have to be proven in order to assume a contract involving carriage of the goods. Just like Art. 31(a)321, in case of doubt the seller has to arrange for carriage of the goods. Just like the CISG322, the DCFR does not offer a general definition of the term delivery, but regulates two different kinds of acts the seller is required to undertake in order to deliver. Unfortunately, the definition given for the term “delivery” in the Annex of the Outline Edition of the DCFR is not clear at all. However, if the contract involves carriage of the goods by a carrier, the seller has to hand over the goods to the first carrier for transmission to the buyer, Art. IV.A.-2:201(2) DCFR. This concept of delivery matches the one applied by Art. 31(a)323. Additionally, Art. IV.A.-2:201(2) DCFR orders the seller to transfer to the buyer any document necessary for him to take over the goods from the carrier. If no contract involving carriage of the goods is at hand, the seller delivers by making the goods available to the buyer, Art. IV.A.-2:201(1) DCFR. With this term, the DCFR covers different modes of delivery including the mere placing at disposal324 as well as the handing over325. Moreover, just like the CISG326, the DCFR does not obligate the seller to hand over the goods directly to the buyer. Art. IV.A.-2:202(1) DCFR determines at which place the seller has to perform the act he is required to undertake in order to deliver327 by referring to Art. III.-2:101 DCFR (place of performance). Unlike the CISG328, Art. III.-2:101(1)(a) DCFR does not distinguish different places of delivery and states that the place of performance of a non-monetary obligation is the debtor’s place of business, thus leading to the seller’s place of business being the place of delivery. According to Art. III.-2:101(3) DCFR, the time at which the obligation to deliver is entered into is the moment when the place of delivery is fixed. The concept of the place of delivery according to the DCFR is the one addressed in Art. 31(c)329. Moreover, just like the CISG330, the DCFR does not determine the buyer’s place of business being the place of performance. According to Art. IV.A.-2:301(b) DCFR, the goods do not conform with the contract unless they are contained or packaged as required by the contract. The corresponding rule in the CISG is Art. 35(2)(d). However, unlike the CISG331, the DCFR does not generally obligate the seller to take care of an appropriate packaging of the goods sold but rather refers to the contract. According to Art. III.-2:113(1) DCFR, the seller has to bear all expenses incurring to perform the obligations he is required to comply with at the relevant place of delivery. Additional expenses are to be borne by the buyer. Taking into account the kind of act the seller is required to undertake in order to deliver332 and that he is not obliged to perform transportation, this rule also applies with regard to the costs of transportation in sales involving carriage of the goods. As a result, the concept of division of costs used in the DCFR matches the one applied in the CISG333. 321

See supra para. 17. See supra paras 19 et seq. 323 See supra para. 21. 324 See supra para. 25. 325 Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (2009), Comment C to Art. IV.A.-2:201 and Hondius/Heutger/Jeloschek/ Sivesand/Wiewiorowska, Principles of European Law – Sales (PELS) (2008), pp. 167 seq. 326 See supra para. 28. 327 See supra para. 79. 328 See supra para. 36. 329 See supra para. 39. 330 See supra para. 40. 331 See supra para. 50. 332 See supra para. 79. 333 See supra para. 51. 322

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Art. III.-2:113(2) DCFR regulates the responsibility for complying with formalities 83 regarding monetary obligations. On the other hand, with regard to the obligation of the seller to deliver the goods to the buyer, the DCFR does not state explicitly who is responsible for the export, import, security or customs clearance. For the reasons explained when commenting on the CISG334, like the allocation of costs335, these issues should generally be resolved by considering the respective place of delivery and applying a special rule in contracts of sale involving carriage of the goods336. 334

See supra paras 52 et seq. See supra para. 82. 336 See supra para. 54. 335

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Article 32 (1) If the seller, in accordance with the contract or this Convention, hands the goods over to a carrier and if the goods are not clearly identified to the contract by markings on the goods, by shipping documents or otherwise, the seller must give the buyer notice of the consignment specifying the goods. (2) If the seller is bound to arrange for carriage of the goods, he must make such contracts as are necessary for carriage to the place fixed by means of transportation appropriate in the circumstances and according to the usual terms for such transportation. (3) If the seller is not bound to effect insurance in respect of the carriage of the goods, he must, at the buyer’s request, provide him with all available information necessary to enable him to effect such insurance. Bibliography: Benedick, Die Informationspflichten im UN-Kaufrecht (CISG) und ihre Verletzung (2008); ICC, ICC Guide on Transport and the Incoterms 2010 Rules (2016) ICC Publication 775E; Kock, Nebenpflichten im UN-Kaufrecht (1995); Piltz/Bredow, Incoterms (2016); Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995); Thume, Versicherung des Transports – Einfu¨hrung, TranspR (2006) 1; Vanheusden, Leveringsvoorwaarden in international overeenkomsten, Incoterms anders bekeken (2013).

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Subject matter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Breach of contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Further context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. National laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Vienna Conference. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Notice of consignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Carriage of the goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Seller’s obligation to arrange for carriage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Contract ensuring carriage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Information regarding insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Incoterms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Obligation to give notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Carriage of the goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Obligations regarding insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. PICC and PECL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. DCFR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 2 6 7 8 9 9 16 17 21 25 29 29 30 34 39 42 43

I. Importance and Role of the Provision 1. Subject matter 1

Art. 32 serves the same purpose as Arts 31 and 33. It defines in greater detail the seller’s obligation to deliver arising under Art. 30 and complements in particular Art. 31. Consequently, Art. 32 has to be observed if Art. 30 is applicable1. Irrespective of whether the seller or the buyer arranges the transportation, Art. 32(1) regulates the 1

See supra Art. 30 paras 3 and 4.

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seller’s obligation to give notice of the consignment to the buyer when handing over the goods to the carrier if otherwise the goods sold could not be clearly identified to the contract. Furthermore, Art. 31(2) obligates the seller, who has to arrange for the carriage of the goods, to conclude the contracts necessary for the transportation of the goods. Finally, the seller has to provide the buyer, at his request, with the necessary information in order to enable him to take out the insurance of the goods (Art. 32(3)). Just like Art. 302, Art. 32 merely plays a supplementary role and gains significance only to the extent that the contract and its circumstances do not indicate otherwise3.

2. Breach of contract The failure to perform any of the seller’s obligations arising out of Art. 32 constitutes 2 a breach of contract and entitles the buyer to enjoy the remedies laid down in Art. 45 et seq. However, the following distinctions have to be made. As long as the notice of consignment, as required pursuant to Art. 32(1), has not been 3 given4 and the buyer has not taken over the goods, the risk does not pass to the buyer (cf. Art. 67(2)). Furthermore, the breach of the obligation to give notice of the consignment may entitle the buyer to the remedies applicable in case of non-delivery if due to the missing notice the goods cannot be assigned to a specific contract of sale5. On the other hand, the buyer is not entitled to claim damages arguing that because of the missing notice he did not know about the dispatch of the goods and therefore suffered losses6. Since in sales which involve carriage of the goods the conclusion of a contract for the 4 transport of the goods is an integral part of the seller’s obligation to deliver7, the seller has not performed the required act of delivery so long as the respective contract of carriage addressed by Art. 32(2) has not been concluded8. On the other hand, as the seller does not owe the transportation itself9, he is not responsible for mistakes or inappropriate or even illegal behaviour of the carrier10. However, if the goods suffer damage because the seller concluded a contract of carriage choosing an unsuitable means of transportation or an unreasonable route, delivery has been performed but the seller has committed a breach of contract. Regardless of whether the non-conformity of the goods occurred only after the passing of risk, the non-conformity is nevertheless attributable to the seller because he has breached an obligation in terms of Art. 36(2)11. Nevertheless, the buyer has to give notice of the non-conformity pursuant to Art. 39 in 2

See supra Art. 30 para. 7. Lando, in: Bianca/Bonell, Commentary (1987), Art. 32 para. 2.1. 4 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 11; Benicke, in: Mu¨nchKommHGB (2013), Art. 32 para. 9. 5 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 32 para. 9; Magnus, in: Staudinger Kommentar (2013), Art. 32 para. 14. In contrast Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 269 and Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 32 para. 2. 6 Benedick, Die Informationspflichten im UN-Kaufrecht (CISG) und ihre Verletzung (2008), para. 593. In contrast Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 14; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2007), Art. 32 para. 6. 7 See supra Art. 31 paras 22 et seq. 8 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 33; Kock, Nebenpflichten im UN-Kaufrecht (1995), p. 125. In contrast Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 269. Cf. Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 32 para. 2. 9 See supra Art. 31 paras 14 and 24. 10 Kantonsgericht Wallis (Switzerland) 19 August 2003, CISG-Online 895; Handelsgericht Zu ¨ rich (Switzerland) 10 February 1999, CISG-Online 488; Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 28. 11 See infra Art. 36 para 13. 3

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order to sustain his remedies. Furthermore, the seller is liable for any other disadvantage resulting from a contract of carriage which is not in compliance with “the usual terms” of such transportation. However, the conclusion of a contract of carriage not complying with the requirements established by Art. 32(2) does not amount to a non-delivery but constitutes an improper performance even if due to the breach the goods do not arrive at the designated destination12. 5 A breach of the obligation to provide the necessary information for the conclusion of a contract of insurance does not affect the delivery obligation as such, but constitutes a breach of contract by the seller. This breach of contract does not require a notice by the buyer according to Arts 39 or 43 because the delivered goods cannot be considered to be nonconforming with the contract or to have a deficiency in title due to the missing information with regard to insurance issues. However, if the seller withholds such information necessary to take out insurance, it can constitute a fundamental breach of contract pursuant to Art. 25 since the buyer cannot be expected to bear the risks in connection with the transportation of the goods without the possibility to take out reasonable insurance13.

3. Further context 6

The obligations regulated in Art. 32 must be seen in context with Arts 31 and 33. Therefore, Arts 31 and 33 also give indications with regard to the place where and the time when the seller has to perform the duties imposed by Art. 32.

4. National laws 7

National law regulations regarding the notice of consignment, the contract of carriage and the transport insurance are inapplicable within the CISG’s scope of application since the CISG regulates these aspects conclusively14.

5. Vienna Conference 8

Art. 32 was formulated on the basis of Arts 19(3) and 54 ULIS15. During the Vienna conference, Art. 32 was only slightly modified and accepted without further discussion16.

II. Detailed Commentary 1. Notice of consignment 9

Art. 32(1) obliges the seller to give notice of the consignment if the goods handed over by the seller to a carrier for transportation to the buyer could not be clearly assigned to the corresponding contract of sale by other means. It is irrelevant whether the seller or the buyer has to arrange the transportation or concludes the contract of carriage17. However, if the seller’s act of delivery consists only in placing the goods at 12 Not unambiguously clear Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 33 and Gruber, in: Mu¨nchKommBGB (2016), Art. 32 para. 13. 13 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 34. 14 See supra Art. 30 para. 9. 15 For more details see Lando, in: Bianca/Bonell, Commentary (1987), Art. 32 para. 1. 16 Magnus, in: Staudinger Kommentar (2013), Art. 32 paras 5 seq.; Ferna ´ ndez de la Ga´ndara, in: Dı´ezPicazo, Comentario (1998), p. 270. 17 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 5. Cf. supra Art. 31 para. 15; Mullis, in: Huber/Mullis, The CISG (2007), p. 119; Ferna´ndez de la Ga´ndara, in: Dı´ezPicazo, Comentario (1998), p. 270; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 32 para. 4. In contrast Soergel/Lu¨deritz/Schu¨ßler-Langeheine, Kommentar zum Bu¨rgerlichen Gesetzbuch (2000), Art. 32 para. 2.

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the buyer’s disposal18, notwithstanding other agreements or other relevant circumstances, Art. 32(1) is not applicable19. Art. 32(1) is not applicable if the seller owes transportation to the place where the 10 buyer has to take over the goods, hence the place of delivery and the place of acceptance are identical20, and the seller employs a carrier for the transportation to that place. By handing over the goods to the carrier, the seller has not yet fulfilled his obligation to deliver. There is no need to identify the goods at such a pre-delivery stage. Furthermore, Art. 32(1) is not applicable if the seller hands over the goods to a carrier at the respective place of delivery which is also the place of taking delivery and the carrier takes over the goods on behalf of the buyer21 so that handing them over to the carrier equals handing over the goods to the buyer22. In this situation, with the handing over the goods to the carrier the buyer is taking delivery. There is no more need for further identification of the goods. Consequently, Art. 32(1) only applies if the contract of sale involves carriage of the goods23 and the seller’s act of delivery consists of the handing over of the goods to a carrier for transmission to the buyer24. The purpose of the notice of consignment as regulated in Art. 32(1) is to individualize 11 and to clearly identify the goods which are intended for the buyer25. Only if the goods sold can be clearly assigned to a specific contract, does the seller fulfil his delivery obligation by handing over the goods to a carrier26. A clear identification of the goods is also a prerequisite for the passing of risk (Arts 67(2) and 69(3))27. Consequently, if the goods handed over to the carrier for transmission to the buyer can already be attributed to a certain contract of sale with the necessary unequivocal clearness28, the notice of consignment regulated in Art. 32(1) is not required. Such a clear and unambiguous assignment of the goods to a certain contract of sale is 12 ensured if the goods sold can be identified without any doubt as the goods of a particular contract of sale. The wording of Art. 32(1) mentions the attribution of the goods to a particular contract. Yet, it is sufficient that the goods can be attributed to a particular buyer if by looking at the kind of the goods, the mode of transportation, the delivery time or other circumstances it can be clearly derived which contract of sale is to be fulfilled by handing over of the goods to the carrier. The details of how the identification is conducted are irrelevant. For instance, the goods, the packaging or the 18

See supra Art. 31 paras 25 et seq. Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 5; Magnus, in: Staudinger Kommentar (2013), Art. 32 para. 8. 20 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 32 para. 3; Magnus, in: Staudinger Kommentar (2013), Art. 32 para. 8; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 32 para. 3. 21 Obergericht Kanton Zug (Switzerland) 5 March 2013, CISG-Online 2471; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 32 para. 3; Magnus, in: Staudinger Kommentar (2013), Art. 32 para. 8; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 32 para. 3. In contrast regarding FOB-, FAS- and FCA contracts WidmerLu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 5; Witz/Salger/Lorenz, Kommentar (2016), Art. 32 para. 3. 22 Cf. supra Art. 30 para. 34, Art. 31 para. 59 and Piltz/Bredow, Incoterms (2016) paras. F-2 and F-5. 23 See supra Art. 31 paras 12 et seq. 24 See supra Art. 31 paras 21 et seq. 25 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 32 para. 4; Benicke, in: Mu¨nchKommHGB (2013), Art. 32 para. 3; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 32 para. 5; Benedick, Die Informationspflichten im UN-Kaufrecht (CISG) und ihre Verletzung (2008), para. 621;. Cf. Witz/Salger/Lorenz, Kommentar (2016), Art. 32 para. 2. Further reaching Widmer Lu¨chinger, in: Schlechtriem/Schwentzer, Commentary (2016), Art. 32 para. 2. 26 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 32 para. 2. 27 Cf. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 11. 28 Cf. Witz/Salger/Lorenz, Kommentar (2016), Art. 32 para. 4. 19

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container can be attributed to the buyer by attaching special markings or the buyer’s address. Without marking the object of transportation, it is also possible to identify the buyer in the transportation documents by naming him as consignee or recipient authorized to take delivery29, by attributing the container to a certain contract of sale or by including other details. Apart from this, any other method of identifying the goods is also imaginable as long as it is ensured that a reasonable third person knowing the contract of sale at hand would attribute the goods handed over to the carrier to this particular contract. However, no clear identification is achieved if the goods do not allow for any attribution and the transportation documents are issued to the seller or a forwarding agent authorized to take delivery of the goods30. 13 To the extent that an unambiguous identification of the goods to a specific contract is not ensured, Art. 32(1) obligates the seller to give notice of the consignment to the buyer. The sole purpose of such notice is to specify the goods which are handed over to the carrier31. For instance, the seller may inform the buyer about the description of the packing pieces, the containers handed over to a carrier or may individualize the means of transportation being used for carrying the goods. The seller may also forward the transportation documents regarding the particular contract to the buyer32. If collective transport is admissible and goods of the same kind are intended for different buyers, it is sufficient to identify the means of transportation and the number or weight of the units intended for the specific buyer33. 14 The notice of consignment necessary for the identification of the goods has to be given within reasonable time after the goods have been handed over to the carrier34. Art. 27 is applicable to such notice35, meaning that the seller is not liable for loss, delayed reception or any change with regard to the content occurring during the transmission of the notice if he uses means of communication which are appropriate in the circumstances36. The notice containing the identification can no longer be revoked once it has reached the buyer37. Unless the buyer objects, the seller is usually bound by the identification of the goods contained in the notice of consignment. If the seller wishes to change the identification later on, he needs the buyer’s consent. However, amendments and corrections to the notice of consignment are possible to the extent that they do not affect the buyer’s interest38. Furthermore, the notice of consignment has to be linguistically understandable for the buyer. If the seller uses the buyer’s language or the language which was used in the contract or during negotiations, the buyer cannot invoke any lack of understandability39. In cases where the seller uses a 29

Mullis, in: Huber/Mullis, The CISG (2007), p. 119. Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 7. 31 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 32 para. 4; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 32 para. 5; Benedick, Die Informationspflichten im UN-Kaufrecht (CISG) und ihre Verletzung (2008), para. 621. 32 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 8; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 32 para. 10. 33 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 8; Magnus, in: Staudinger Kommentar (2013), Art. 32 para. 13. 34 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 9; Lando, in: Bianca/Bonell, Commentary (1987), Art. 32 para. 2.2.2. Cf. Magnus, in: Staudinger Kommentar (2013), Art. 32 para. 10. 35 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 10; Gruber, in: Mu¨nchKommBGB (2016), Art. 32 para. 6. 36 For more details see supra Art. 27 paras 5 et seq. 37 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 12; Magnus, in: Staudinger Kommentar (2013), Art. 32 para. 12; Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 271. 38 Witz/Salger/Lorenz, Kommentar (2016), Art. 32 para. 2. 39 Cf. Magnus, in: Staudinger Kommentar (2013), Art. 18 para. 9. 30

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third language, the individual language skills of the buyer or usages or practices relevant according to Art. 9 have to be considered. Art. 32(1) does not provide for an independent obligation of the seller to inform the 15 buyer about the fact that the goods have been handed over to the carrier for transmission irrespective of any need for their identification or allocation40. Addressing the notice obligation in Art. 32(1) and not in chapter 4 (Passing of Risk) does not suggest that Art. 32(1) serves such a purpose41. An obligation to inform the buyer does not depend on the clear identification of the goods and may arise also in situations not covered by Art. 32(1)42. In order to establish such an obligation, an agreement between the parties (Art. 6) or usages or practices established between them (Art. 9) are necessary43. The party relying on such circumstances bears the burden of proof. An obligation to inform the buyer about the handing over to a carrier can usually be assumed if the buyer explicitly asks the seller for such information44. Further obligations to inform the buyer derive from an agreement on clauses of the Incoterms45.

2. Carriage of the goods The seller has to conclude the necessary contracts for the carriage of the goods if he 16 has to arrange for it according to the contract of sale, Art. 32(2). With respect to the carriage of the goods, Art. 32(2) provides the use of means of transportation appropriate under the circumstances and the adherence to the usual terms for such transportation. a) Seller’s obligation to arrange for carriage. The seller is not bound to arrange for 17 carriage of the goods in all international contracts of sale. In particular, Art. 32(2) does not state such an obligation of the seller, but rather implies its existence46. Thus, the basis for an obligation of the seller to arrange for carriage of the goods has to be found outside of Art. 32(2). The seller has to arrange for carriage of the goods according to the contract of sale 18 and thus is obliged to conclude the necessary contracts pursuant to Art. 32(2) if the place where the seller has to perform the act he is required to undertake in order to deliver (place of delivery) is not identical with the place where the buyer has to take over the goods (place of taking delivery)47. However, if the buyer has to take over the goods 40 Gruber, in: Mu ¨ nchKommBGB (2008), Art. 32 para. 4; Benicke, in: Mu¨nchKommHGB (2013), Art. 32 para. 2; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 32 para. 5; Benedick, Die Informationspflichten im UN-Kaufrecht (CISG) und ihre Verletzung (2008), para. 593; Lando, in: Bianca/Bonell, Commentary (1987), Art. 32 para. 2.2.3. Cf. Obergericht Kanton Zug (Switzerland) 5 March 2013, CISG-Online 2471. However, in favour of a general obligation to give notice of the consignment Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 2; Kock, Nebenpflichten im UN-Kaufrecht (1995), p. 109; Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995), pp. 155 seq. 41 In contrast Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 14. 42 See supra paras 9 seq. Cf. Piltz/Bredow, Incoterms (2016) paras F-182 and D-371. 43 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 32 para. 3; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 32 para. 8. 44 Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 32 para. 9; Kock, Nebenpflichten im UN-Kaufrecht (1995), p. 109. Cf. Benedick, Die Informationspflichten im UN-Kaufrecht (CISG) und ihre Verletzung (2008), para. 1180. 45 See infra paras 30 et seq. 46 Witz/Salger/Lorenz, Kommentar (2016), Art. 31 para. 19; Benicke, in: Mu ¨ nchKommHGB (2013), Art. 32 para. 11; Magnus, in: Staudinger Kommentar (2013), Art. 32 para. 16; Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 272. 47 See supra Art. 31 para. 14., Cf. Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 32 para. 16; Kock, Nebenpflichten im UN-Kaufrecht (1995), p. 113. In contrast Gruber, in: Mu¨nchKommBGB (2016), Art. 32 para. 9; Witz/Salger/Lorenz, Kommentar (2016), Art. 32 para. 7; Magnus, in: Staudinger Kommentar (2013), Art. 32 para. 15.

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at the place of delivery, the contract of sale does not usually48 require carriage of the goods which the seller would have to arrange for. It is of no relevance whether the goods are transported to the place of delivery and/or transported further from the place of taking delivery. With respect to the transportation to the place of delivery, including constellations where the seller has to perform his delivery obligation at the buyer’s place of business, the seller’s responsibility is not limited to only arrange for the necessary transportation. In fact, the seller owes the buyer the transportation to that place49. The expenses and the risk of transportation have to be borne by the seller. Consequently, he is liable for any failure of the carrier employed by him to transport the goods to the place of delivery. 19 If the place of delivery and the place of taking delivery are not identical and no circumstances indicate that the buyer has to arrange for transportation of the goods from the place of delivery to the place of taking delivery50, Art. 31(a) obligates the seller to arrange the carriage of the goods to the buyer51. Thus it triggers the obligation regulated in Art. 32(2)52. The place of delivery and the place of taking delivery also diverge whenever a C-clause of the Incoterms is used53. However, since the rules of the ICC interpreting the Incoterms autonomously regulate the responsibility for the carriage of the goods54, in this respect no reference to Art. 32(2) is necessary55 if the Incoterms apply. 20 Furthermore, it is also possible to establish an obligation of the seller to arrange for carriage of the goods in situations not covered by Art. 31(a)56. However, apart from sales involving carriage of the goods addressed in Art. 31(a), such a situation requires a sufficiently clear agreement between the parties57 or other circumstances sufficiently unambiguous. The party relying on such an exceptional situation bears the burden of proof. In practice, there might be constellations where the parties have concluded a contract using the EXW- or an F-clause of the Incoterms58, but in addition have agreed that the seller shall arrange for carriage of the goods. The expenses incurred for the carriage are usually covered by the respectively calculated sales price, in other cases these expenses are invoiced separately. It cannot be derived – without any additional circumstances from the mere obligation of the seller to take care of the carriage of the goods and to pay the transportation costs – that this situation leads to an obligation of the seller to transport the goods shifting the place of delivery to the place of the destination of the transport59. On the contrary, as confirmed by the C-clauses of the 48

See infra para. 20. Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 19; Brunner/ Lauterburg, Kommentar (2014), Art. 32 para. 4; Achilles, in: Ensthaler (ed.), Gemeinschaftskommentar zum Handelsgesetzbuch mit UN-Kaufrecht (2007), Art. 32 para. 4. Cf. Kock, Nebenpflichten im UNKaufrecht (1995), p. 113. 50 See supra Art. 31 para. 15. 51 See supra Art. 31 para. 14. 52 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 18; Brunner/ Lauterburg, Kommentar (2014), Art. 32 para. 3; Benicke, in: Mu¨nchKommHGB (2013), Art. 32 para. 11. In contrast Witz/Salger/Lorenz, Kommentar (2016), Art. 32 para. 7. 53 See supra Art. 31 paras 60 et seq., and Piltz/Bredow, Incoterms (2016) para. C-145. Cf. Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995), p. 176. 54 See infra paras 34 et seq., and Piltz, INCOTERMS und UN-Kaufrecht, in: Thume (ed.), Transportund Vertriebsrecht 2000, Festgabe fu¨r Prof. Herber (1999), pp. 23 seq. 55 In contrast Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 18. 56 Cf. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 18 and Ramberg, ICC Guide to Incoterms 2010 (2011), ICC publication No 720, p. 51. 57 Cf. Secretariat Commentary on 1978 Draft, Art. 30 para. 4. 58 See supra Art. 30 paras 33 seq. 59 See supra Art. 31 para. 34. Cf. Mullis, in: Huber/Mullis, The CISG (2007), p. 120. 49

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Incoterms60, there are situations where the seller has only to arrange for the carriage without owing the transport itself even when the costs of the transport rest on him61. b) Contract ensuring carriage. Insofar as the seller has to arrange for carriage of the 21 goods62, he does not owe transportation as such63. Unless respective agreements or circumstances provide otherwise, the seller does not have to bear the expenses64 or the risk of the transportation, Art. 67. Consequently, he is not liable for any defective or insufficient performance or even illegal behaviour of the carrier65. The seller only has to conclude an appropriate contract of carriage ensuring that the goods are carried to the “place fixed”, Art. 32(2). However, the seller is liable for any failure with regard to the choice or the instruction of the carrier66. In contrast, the performance of the transport according to the contract of carriage does not fall within the seller’s sphere of responsibility. The place of destination for the carriage can usually be derived from the contract 22 itself or its circumstances. If no different place of taking delivery or place of destination is determined, in case of doubt, the transportation has to be directed to the buyer’s place of business67, in particular since Art. 31(a) explicitly provides transmission of the goods to the buyer. If more than one means of transportation are used subsequently68, the seller can either conclude the necessary contracts for each part of the route himself or he can contractually oblige the first carrier to arrange for the further transport. The seller has fulfilled his obligation pursuant to Art. 31(2) when he has concluded 23 an appropriate contract of carriage with a carrier. If the seller assigns a forwarding agent with the task of arranging the carriage of the goods, he has not yet completed his obligation pursuant to Art. 32(2)69 but has rather delegated it to the forwarding agent. In such a case the seller’s obligation pursuant to Art. 32(2) is only complied with when the contracts necessary for carriage of the goods have been effectively concluded. However, when the forwarding agent does not only arrange for carriage of the goods but obligates himself vis-a`-vis the seller to perform the carriage either himself or subcontracting a carrier70, the requirements of Art. 32(2) are met71. Whether a handing over of the goods to the forwarding agent is required, is significant only with respect to the performance of the act the seller is required to undertake in order to deliver72. However, it is irrelevant with respect to the compliance with the obligation to conclude a contract of carriage pursuant to Art. 32(2). 60

See supra Art. 31 para. 65. Cf. Ramberg, ICC Guide to Incoterms 2010 (2011), ICC publication No 720, p. 48. 62 See supra paras 17 et seq. 63 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 32 para. 10. 64 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 28; Witz/Salger/ Lorenz, Kommentar (2016), Art. 32 para. 8; Magnus, in: Staudinger Kommentar (2013), Art. 32 para. 20; Benicke, in: Mu¨nchKommHGB (2018), Art. 31 para. 32; Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 272; Kock, Nebenpflichten im UN-Kaufrecht (1995), p. 12. 65 Kantonsgericht Wallis (Switzerland) 19 August 2003, CISG-Online 895; Handelsgericht Zu ¨ rich (Switzerland) 10 February 1999, CISG-Online 488; Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 28. 66 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 20; Gruber, in: Mu¨nchKommBGB (2016), Art. 32 para. 10. 67 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 21. 68 For example: truck/lorry-ship-train. 69 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 24. Cf. Witz/ Salger/Lorenz, Kommentar (2000), Art. 32 para. 10. 70 Cf. supra Art. 31 para. 23. 71 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 25. 72 See supra Art. 31 paras 22 et seq. 61

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The seller must conclude such contracts of carriage which provide for “means of transportation appropriate in the circumstances.” The seller is under an obligation to use suitable means of transportation for the carriage of the goods sold. Consequently, refrigerated goods must be shipped by means of transportation with the necessary refrigeration facilities and furniture cannot be transported on open vehicles. The choice of the suitable means of transportation lies within the seller’s discretion73, unless special circumstances demand otherwise. The obligation to use appropriate means of transportation also comprises the obligation to choose a route for the transportation which gives due consideration to the urgency of the transport, to special risks associated with the transport and, as far as possible, helps to avoid unnecessary trans-shipments of the goods or the making of detours74. Additionally, the contract of carriage has to be in accordance with the “usual terms” for such transportation, especially with regard to the expenses for the carriage, the carrier’s liability75, the taking out of insurance76 and all other conditions of the carriage77 (Art. 32(2)). The cornerstones of such usual terms can often be determined by considering the mandatory regulations existing in international transport conventions78. The speediness of the transport or the reliability of the carrier or any other reasonable considerations might allow the seller not to take the cheapest offer79. If the concept of what constitutes the usual terms for transportation at the seller’s place of business differs from the buyer’s place of business, the terms at the place of the seller are prevailing notwithstanding other agreements or other relevant circumstances80. However, the opinion of the individual seller is not essential, but rather the objective appreciation at the seller’s place of business regarding such transports.

3. Information regarding insurance Pursuant to Art. 32(3), the seller is obligated to provide the buyer with the necessary information to take out insurance. However, this obligation does not apply to the extent that the seller is bound to effect insurance in respect of the carriage81. 26 The seller’s obligation to take out transport insurance can result directly from the contract or from the delivery clause agreed upon. Namely the CIF- and the CIP-clauses of the Incoterms constitute that the seller has to effect insurance in respect to the carriage of the goods82. Apart from this, taking out cargo insurance and/or liability insurance83 can also be part of the “usual terms” for the transportation which have to be arranged by the seller84, in particular if the value of the goods to be carried exceeds the 25

73

Bezirksgericht Saane (Switzerland) 20 February 1997, CISG-Online 426. Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 22. 75 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 23; Gruber, in: Mu¨nchKommBGB (2016), Art. 32 para. 12. 76 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 29; Witz/Salger/ Lorenz, Kommentar (2016), Art. 32 para. 11. Cf. Kock, Nebenpflichten im UN-Kaufrecht (1995), pp. 120 seq. See infra para. 26. 77 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 23; Kock, Nebenpflichten im UN-Kaufrecht (1995), pp. 118 et seq. 78 Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 32 para. 7. 79 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 23; Benicke, in: Mu¨nchKommHGB (2013), Art. 32 para. 11. 80 Witz/Salger/Lorenz, Kommentar (2016), Art. 32 para. 12. 81 See supra para. 24. 82 See infra para. 39. 83 For more details see Thume, Versicherung des Transports – Einfu ¨ hrung, TranspR (2006) 1. 84 See supra para. 24, Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 29; Witz/Salger/Lorenz, Kommentar (2016), Art. 32 para. 11. Cf. Kock, Nebenpflichten im UNKaufrecht (1995), pp. 120 seq. See infra para. 24. In contrast Benicke, in: Mu¨nchKommHGB (2013), Art. 32 para. 13. 74

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maximum limit of liability set by law or by the contract of carriage and thus considering the conclusion of such additional insurance is common practice85. Unless relevant circumstances indicate differently, the costs for such an insurance taken out by the seller follow the transportation costs86. The CISG accepts a situation where an obligation of the seller to effect insurance for 27 the transport can be derived neither from the contract or from the relevant usages or the practices established between the parties. The mere fact that the seller bears the transportation costs does not constitute an obligation to effect insurance and to bear the respective costs87. Art. 32(3) rather assumes that the seller has no general obligation to effect insurance. This does not only apply to the cargo insurance but all the more to the liability insurance. Notwithstanding special situations, experience in practice confirms this position showing that the buyer should preferably take care of the insurance himself. Therefore, the party which relies on an obligation of the seller to effect insurance bears the burden of proof. If the seller is not obligated to take out transportation insurance, the buyer still has 28 the right to request from him all necessary information to enable him to effect such an insurance (Art. 32(3)). This rule exists independently from the applicable delivery modalities and even applies if the buyer could get the necessary information somewhere else. Even if the seller is obliged to hand over the goods to the buyer at the buyer’s place of business and thus the transportation of the goods falls into the seller’s sphere of responsibility, the buyer can have a legitimate interest in effecting such insurance for his benefit88. However, unless otherwise provided, the seller does not have to give the buyer any information necessary for effecting insurance without being asked for it89. On the contrary, the buyer has to request from the seller the information he needs90. Furthermore, the obligation to provide information is limited to the information available to the seller91. Since transportation of the goods without appropriate insurance cannot be expected from the buyer if the transportation is not the seller’s responsibility, the seller has to provide him with the available information early enough to enable him to effect insurance for the imminent transport. Accordingly, Art. 32(3) applies if the seller is obligated to take care of the insurance but the buyer wishes to extend the insurance to cover additional risks or amounts92. An obligation of the buyer to provide the seller with information for obtaining insurance is not regulated by the CISG. If the parties desire such an obligation in their contract of sale, they should agree on one of the Cor D-clauses of the Incoterms 2010 which deal with this issue under heading B3 of the rules of interpretation93.

85 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 29; Brunner/ Lauterburg, Kommentar (2014), Art. 32 para. 5. 86 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 32 para. 29; Brunner/ Lauterburg, Kommentar (2014), Art. 32 para. 5. 87 Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 32 para. 12. 88 Cf. Benicke, in: Mu ¨ nchKommHGB (2013), Art. 32 para. 14; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 32 para. 24. 89 Neumayer/Ming, Convention de Vienne (1993), p. 258; Lando, in: Bianca/Bonell, Commentary (1987), Art. 32 para. 2.4. 90 Mullis, in: Huber/Mullis, The CISG (2007), p. 121; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 32 para. 15. 91 Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 32 para. 26. 92 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 32 para. 14. 93 See infra para. 41.

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Article 32 29–32

Part III. Chapter II. Obligations of the Seller

III. Comparable rules 1. Incoterms 29

The Incoterms94 contain rules of their own regarding the issues referred to in Art. 32 and commented above. Therefore, if the parties to a contract of sale agree upon the application of a specific clause of the Incoterms, the rules of interpretation of the Incoterms applicable to that clause may supersede or modify Art. 3295.

a) Obligation to give notices. Unlike the CISG96, according to the explanations under headings A7 – B7 of the rules of interpretation of the Incoterms, both the seller and the buyer face obligations to give notices. Again unlike the CISG97, the purpose of this obligation to give notice is not the identification of the goods sold and handed over to the carrier, but to make known the delivery to the buyer and to inform the seller about the details necessary to be able to deliver98. Therefore, if an identification of the goods is necessary in order to assign them to a specific contract, Art. 32(1) remains applicable even though a clause of the Incoterms is agreed upon. With regard to the passing of risk99, the explanations under headings A5 – B5 of the rules of interpretation of the Incoterms have to be taken into consideration100. 31 According to A7 of the rules of interpretation of the Incoterms, applying EXW the seller must give the buyer the information he needs to take delivery. Under all of the Fclauses as well as under CPT and CIP the seller is bound to inform the buyer that the goods have been delivered. Additionally, under the FCA-clause and also under FAS and FOB the seller is obligated to inform the buyer if the carrier or the vessel fails to take delivery within the time agreed. Furthermore, in all contracts with C- or D-clauses of the Incoterms agreed upon, the seller has to give the buyer the information required to prepare for taking delivery. Therefore, unlike the CISG101, if the seller breaches his obligation to inform the buyer, this breach neither affects the performance of the delivery obligation by the seller as such, nor does it affect the passing of risk, but may however entitle the buyer to claim damages, e. g. because he did not know about the delivery of the goods and therefore suffered losses. 32 According to B7 of the rules of interpretation of the Incoterms, the buyer is obligated in particular to give the seller sufficient information to be able to perform the delivery obligation, e. g. to determine the time of delivery102, the place of destination if CPT or CIP applies and the point of delivery or taking delivery within the named place103 if he is entitled to fix it. The entitlement to exercise such a determination is not regulated by the Incoterms but is to be derived from the underlying contract of sale. However, if an F-clause is applied the rules of the Incoterms entitle the buyer to nominate the carrier or the vessel104 and to specify the loading point within the named place of delivery and the time for delivery within the period agreed for delivery. If the buyer fails to give the 30

94

See supra Art. 30 paras 30 et seq. See supra Art. 30 para. 7 seq. 96 See supra para. 9. 97 See supra para. 10. 98 Cf. Ramberg, ICC Guide to Incoterms 2010 (2010), ICC publication No 720, pp. 79 seq. 99 See supra para. 11. 100 See infra Art. 67 paras 25 et seq. 101 See supra para. 3. 102 See infra Art. 33 paras 24 and 36. 103 See the explanations under heading B7 of the rules of interpretation of the Incoterms. 104 Oberlandesgericht Karlsruhe (Germany) 12 February 1975, RIW (1975) 255. 95

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required notice, the seller will very often not be able to discharge the delivery obligation. However, as this failure is caused by an omission of the buyer, the seller is protected by Art. 80 notwithstanding the possibility of the seller to resort to Art. 61. Whereas Art. 27 is based in the dispatch-principle105, under the Incoterms this 33 principle106 and the rule that the communication has to be received by the other party107 are advocated. According to B7, the notices the seller must give to the buyer under the F-clauses are at the buyer’s risk and expense. Moreover, the Incoterms have to be regarded in the light of the CISG108. Since a differing interpretation cannot be concluded from the rules of interpretation of the Incoterms, generally the dispatch-principle of Art. 27 applies to the obligations to give notice imposed on the seller by the Incoterms as well. Only regarding the D-clauses, the seller is – in contrast to Art. 27 – responsible that the buyer receives the required notice correctly and punctually. By agreeing on a D-clause of the Incoterms the seller has taken over additional obligations, which, though not excluded, on the other hand are not reflected within the structure of the CISG109. Consequently, the content of Art. 27 has to be adjusted to such a modification as well110. b) Carriage of the goods. Headings A3 – B3 of the rules of interpretation of the 34 Incoterms regulate which party faces the obligation vis-a`-vis the other one to contract for the carriage of the goods111. Whereas the CISG addresses this issue if the place of delivery and the place of taking delivery do not coincide and therefore the contract of sale requires carriage of the goods112, the Incoterms go further. Under the EXW-clause of the Incoterms neither the seller nor the buyer is obligated 35 vis-a`-vis the other one to contract for carriage113. Even though the buyer will take care of the transportation of the goods after having taken delivery in his own interest, this transport is not an obligation of the buyer which he has to discharge vis-a`-vis the seller. It is irrelevant whether the buyer contracts with a carrier for this purpose or transports the goods by his own means. The F-clauses state an obligation of the buyer to contract for carriage from the named 36 place onwards even though he has to take delivery at the very same place114 and therefore the obligations regarding delivery and taking delivery are fulfilled already at that place and before the carriage itself starts. Different to an FCA-contract with a named place of delivery outside the seller’s place of business, the seller has to place the goods alongside (FAS) or on board (FOB) the ship nominated by the buyer or has to load them on the means of transport provided by the buyer (FCA with the place of delivery at the seller’s premises)115. These definitions may imply that, though not necessarily, in the majority of cases the contract of carriage concluded enables the seller to perform his delivery obligation. However, irrespective of the different modes of delivery and irrespective of whether the contract of sale requires carriage of the goods116, 105

See Art. 27 para. 2. Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995), pp. 158 et seq. 107 Bredow/Seiffert, Incoterms 2000 (2000), pp. 30 et seq. 108 See supra Art. 30 para. 8. 109 Cf. supra Art. 31 paras 13 et seq. and paras 37 et seq. 110 For more details see Piltz/Bredow, Incoterms (2016) para. D-372. 111 Cf. ICC, ICC Guide on Transport and the Incoterms 2010 Rules (2016) ICC Publication 775E. 112 See supra paras 18 seq. 113 Cf. Piltz/Bredow, Incoterms (2016) paras E-122 et seq. 114 See the explanations under heading B4 of the Incoterms rules of interpretation and Piltz/Bredow, Incoterms (2016) para. F-129. 115 See supra Art. 31 para. 62. 116 See supra paras 18 seq. 106

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Article 32 37–39

Part III. Chapter II. Obligations of the Seller

the Incoterms use the term carriage or carrier whenever a third person is typically involved to transport the goods sold117. This is the situation under the F-clauses of the Incoterms118 so that the issue of who is responsible for the carriage is addressed even though the contract does not require carriage of the goods119. In general, it is for the buyer to contract for carriage. The seller has no obligation regarding a contract of carriage unless the parties agree so, e. g. by stipulating “FOB shipped”120. However, under the F-clauses and given certain further conditions121 the seller must contract for carriage at the buyer’s risk and expense (“additional service”). In contrast, the transport to the named place preceding the seller’s act of delivery has to be performed by the seller using his own means of transportation or contracting an independent carrier and is not addressed in the F-clauses. 37 Both under the C- and D-clauses of the Incoterms the seller must contract at his own expense for the carriage of the goods122. Regarding the obligation to contract for carriage, the Incoterms do not distinguish whether the sale requires carriage of the goods in the meaning of the C-clauses123 or whether the transportation is owed by the seller to the buyer at the sellers risk because the place of delivery is at the place of destination named together with a D-clause124. Unlike the CISG, the Incoterms use the term carriage whenever a third person is typically involved to transport the goods125 and this is the case both under C- and D-clauses of the Incoterms. 38 Only the C-clauses of the Incoterms obligate the seller to contract the carriage “on usual terms”, by “a usual route” and “in a customary manner”. The result will be almost the same as under Art. 32(2)126. Regarding the F- and D-clauses, no such regulation exists except for the special situation that the seller must contract for carriage under an F-clause127. This omission reflects that under the F- and D-clauses of the Incoterms the transport is in the interest of the same party obliged to contract for carriage whereas under the C-clauses the risks inherent to transport arranged for by the seller are to be borne by the buyer128. 39

c) Obligations regarding insurance. Only the clause CIF and CIP of the Incoterms provide for an obligation of the seller to effect an insurance. The other clauses state expressly that the seller is not obligated in this respect129. Consequently, the argument that taking out insurance as regulated in the clauses CIF and CIP130 is part of the usual terms for the transportation131 is not valid in contracts where the Incoterms apply.

117

Cf. infra para. 38; ICC, Incoterms 2010, ICC publication No 715 ED (2010), pp. 12 and 137. See supra Art. 30 para. 34. See supra Art. 31 para. 59. 120 Cf. Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995), pp. 146 seq. and Bundesgerichtshof (Germany) 2 October 1963, Wertpapier-Mitteilungen (1963) 1185. 121 For more details see the explanations under heading A3 of the Incoterms rules of interpretation and Piltz/Bredow, Incoterms (2016) paras F-130 et seq, F-324 et seq. and F-526 et seq. 122 Piltz/Bredow, Incoterms (2016) paras C-2 and D-2. 123 See supra Art. 30 para. 35. 124 See supra Art. 30 para. 36 and Art. 31 para. 65. 125 Cf. infra para. 38; ICC, Incoterms 2010, ICC publication No 715 ED (2010), pp. 12 and 137; ICC, Incoterms 2000, ICC publication No 560 ED (1999), pp. 77, 85 and 201, 209. 126 See supra para. 24, and Piltz/Bredow, Incoterms (2016) para. C-127. 127 See supra para. 36, and Piltz/Bredow, Incoterms (2016) para. F-132. 128 See supra Art. 30 para. 35. 129 See the explanations under heading A3 of the Incoterms rules of interpretation. 130 See infra para. 40. 131 See supra para. 26. 118 119

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The details of the insurance to be obtained by the seller are explained under heading 40 A3 b of the rules of interpretation of the Incoterms132. Unlike the CISG133, the obligation to contract insurance regulated by the clauses CIF and CIP refers only to minimum cargo insurance and unless otherwise agreed or indicated does not include liability insurance. According to the rules of interpretation under heading A3 of the Incoterms 2010 and 41 applicable under all clauses, upon request of the buyer and at his risk and expense, the seller is obligated to procure the information necessary for the buyer to obtain insurance. Applying the clauses CIF and CIP this obligation concentrates on the information requested to procure additional insurance. Furthermore, whenever a C- or D-clause of the Incoterms is agreed the buyer is obligated to provide the seller upon request with the information he needs to contract an insurance.

2. PICC and PECL Neither the PICC nor the PECL contain provisions explicitly regulating contracts of 42 sale134. Consequently, they do not distinguish between contracts involving carriage of the goods and other types of contracts of sale and do not address issues related to the insurance of transported goods so that the regulatory content of Art. 32 does not find a counterpart in the PICC or in the PECL.

3. DCFR Unlike the situation according to the PICC and the PECL135, the regulatory content of 43 Art. 32 has a direct counterpart in the DCFR136. Art. IV.A.-2:204 DCFR repeats almost literally Art. 32. There is no indication that the comments on Art. 32 cannot be used unrestrictedly to interpret Art. IV.A.-2:204 DCFR137. 132 For more details see Piltz/Bredow, Incoterms (2016) paras C-304 et seq.; Lehr, Die neuen Incoterms 2000, VersR (2000) 548 (551 seq.); Bergami, The Importance of Defining the Level of Cargo Insurance Coverage in International Contracts under Incoterms 2000, Vindobona Journal of International Commercial Law and Arbitration (2000) 229; Murray/Holloway/Timson-Hunt, Schmitthoff’s Export Trade (2007), paras 19-018 et seq. and Oberlandesgericht Du¨sseldorf (Germany) 10 April 1980, IPRax (1982) 101. 133 See supra para. 26. 134 See supra Art. 30 para. 46. 135 See supra para. 42. 136 See supra Art. 30 paras 47 et seq. 137 Cf. Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (2009), Comment B to Art. IV.A.-2:204.

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Article 33 The seller must deliver the goods:

(a) if a date is fixed by or determinable from the contract, on that date; (b) if a period of time is fixed by or determinable from the contract, at any time within that period unless circumstances indicate that the buyer is to choose a date; or (c) in any other case, within a reasonable time after the conclusion of the contract. Bibliography: Magnus/Lu¨sing, CISG und INCOTERMS, Leistungsverzug und Fixgescha¨fte, IHR (2007) 1; Piltz/Bredow, Incoterms (2016).

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Subject matter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Breach of contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Further context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. National laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Vienna Conference. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Party autonomy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Time for delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Art. 33(a), (b) and (c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Art. 33(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Art. 33(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Seller’s right to choose the date for delivery . . . . . . . . . . . . . . . . . . . . . . . . bb) Buyer’s right to choose the date for delivery . . . . . . . . . . . . . . . . . . . . . . . c) Art. 33(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Non-business days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Part-deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Incoterms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. PICC and PECL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. DCFR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 4 7 8 9 10 10 11 14 15 19 20 23 26 30 31 34 34 37 38

I. Importance and Role of the Provision 1. Subject matter 1

Art. 33 specifies the date of delivery or the period of time within which the seller has to fulfil his obligation to deliver the goods and thus regulates the time frame for the performance of the seller’s obligation to deliver, as addressed in Art. 30. Consequently, Art. 33 has to be observed if Art. 30 is applicable1. Art. 33 does not regulate the kind of act which the seller has to perform in order to discharge his obligation to deliver or the place where the delivery obligation has to be fulfilled. These issues are governed by Art. 31 and complemented by Art. 32. Art. 33 merely regulates the time aspect of the seller’s obligation to deliver and hence, it is the basis for judging whether the seller has performed his delivery obligation in a timely manner or whether he did so prior to the 1

See supra Art. 30 paras 3 and 4.

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date of delivery or delayed. Just like Art. 302, Art. 33 plays merely a supplementary role and gains significance only to the extent that the time for delivery cannot be determined satisfactorily by looking at the contract and its circumstances. The seller must perform the act he is required to undertake in order to deliver in a 2 timely manner. Depending on the particular kind of act3, timely performance can mean the timely placing of the goods at disposal or the timely handing over of the goods4. However, it is irrelevant if the delivered goods conform with the contract and are free from rights and claims of third parties5. If the seller delivers goods not conforming with the contract but on the relevant date or within the relevant period of time, he has nevertheless delivered in a timely manner according to Art. 33, albeit in breach of Art. 35. The same applies for the timely delivery of goods being affected by rights and claims of third parties. In terms of Art. 33, only the timely performance of the act the seller is required to 3 undertake in order to deliver is important6. The point in time when the goods arrive at the place of destination or at the place where the buyer has to take delivery being different from the place of delivery is irrelevant for determining whether or not the performance is on time7. In particular if the contract of sale involves carriage of the goods (Art. 31(a)), only the seller’s act of delivery, i. e. the handing over of the goods by the seller to the first carrier for transmission to the buyer8 is relevant and not the handing over of the goods to the buyer. When the seller performs the act he is obligated to undertake in order to deliver in a timely manner pursuant to Art. 33, doing so on the relevant date or within the relevant period of time, but at a different place than the one established according to Art. 319, he has delivered at the wrong place and therefore is in breach of Art. 31. However, he cannot be held liable for not having performed in a timely manner and thus having breached Art. 33.

2. Breach of contract The seller is in breach of his contractual obligations if he fails to deliver in a timely 4 manner on the relevant date or within the relevant period of time according to Art. 33. Regarding the consequences of a non-timely delivery, it has to be differentiated whether the delivery took place prior to the relevant date or whether it was delayed. If the seller is not entitled to suspend performance pursuant to Art. 71 and is not 5 protected by Art. 80, the mere exceeding of the time of delivery being determined by Art. 33 constitutes a breach of contract10 and results in the buyer’s right to exercise the remedies provided for by Arts 45 et seq. There is no need for a reminder, the setting of a deadline or other formalities11. In particular, no period of grace can be granted to the 2

See supra Art. 30 para. 7. See supra Art. 31 para. 19. 4 Secretariat Commentary on 1978 Draft, Art. 31 (now Art. 33) para. 2. 5 See supra Art. 31 paras 29 et seq. 6 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 13; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 33 para. 7. 7 Witz/Salger/Lorenz, Kommentar (2016), Art. 33 para. 2; Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 8. 8 See supra Art. 31 para. 21. 9 See supra Art. 31 paras 32 et seq. 10 Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu ¨ rgerlichen Gesetzbuch (2012), Art. 33 para. 7. Regarding the question, under which circumstances the late delivery amounts to fundamental breach, see supra Art. 25 paras 31 et seq. 11 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 3; Magnus, in: Staudinger Kommentar (2013), Art. 33 para. 27. 3

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Article 33 6–8

Part III. Chapter II. Obligations of the Seller

seller by a court or an arbitral tribunal12 (Art. 45(3)). The expiration of the time of delivery determined by Art. 33 has to be proven by the buyer who exercises a remedy relying on these grounds13. If the buyer fixes the seller an additional period of time pursuant to Art. 47(1), this does not affect the relevant time for delivery established by Art. 3314. As a matter of fact, if the seller informs the buyer about a delay regarding the relevant delivery time and there is no objection by the buyer, such non-objection could constitute an approval of the date of delivery being modified and thus excluding the buyer’s legal remedies regarding late delivery only under special circumstances15. More often this will constitute a unilateral offer for late performance according to Art. 48(2). 6 The seller must perform the act he is required to undertake in order to deliver in a timely manner according to Art. 33. Without the consent of the buyer or in the absence of any relevant usages or practices established between the contracting parties the seller is not entitled to deliver prior to the date or the period of time relevant by virtue of Art. 33 (Art. 52). Delivery before the appropriate date constitutes a breach of contract by the seller such as a delayed delivery16 and generally allows the buyer to exercise the remedies provided for by Arts 45 et seq.17 Unless the buyer is obligated to take delivery and to preserve the goods according to Art. 86, he is free to take or to refuse delivery if the goods are delivered before the date relevant according to Art. 33 (Art. 52(1)). However, by taking delivery without any objection before the relevant date the buyer does not automatically waive his legal remedies arising out of the delivery, which was made before the relevant date18.

3. Further context 7

Although Art. 33 addresses only the obligation of the seller to deliver the goods, the rules of Art. 33 also give an indication with regard to the time or time period regarding the performance of other obligations of the seller resulting from the contract of sale19.

4. National laws 8

The concepts regarding the delivery time existing in national bodies of law are not transferable to the CISG, since the CISG governs the delivery time conclusively20. Rules of national law which for instance demand delivery within 24 hours after the conclusion of the contract21 or rules such as § 271 BGB (German Civil Code)22 or Art. 455 Polish Civil Code23 or other national rules regarding the delivery time24 are inapplicable within 12

Secretariat Commentary on 1978 Draft, Art. 43 (now Art. 47) para. 5. Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 20. 14 Magnus, in: Staudinger Kommentar (2013), Art. 47 para. 1. 15 More generous Hof van Beroep te Gent (Belgium) 8 November 2004, CISG-Online 982. 16 See supra para. 5. 17 Magnus, in: Staudinger Kommentar (2013), Art. 33 para. 28 and Art. 52 para. 10. Cf. Arbitral Award, CIETAC, 25 May 2005, CISG-Online 1685. 18 Achilles, in: Ensthaler (ed.), Gemeinschaftskommentar zum Handelsgesetzbuch mit UN-Kaufrecht (2007), Art. 52 para. 3; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 52 para. 5; but see Schlechtriem/Schroeter, Internationales UN-Kaufrecht (2013), para. 357 and Enderlein/Maskow/ Strohbach, Internationales Kaufrecht (1991), Art. 52 para. 2. 19 Magnus, in: Staudinger Kommentar (2013), Art. 33 para. 3. 20 See supra Art. 30 para. 9. 21 Cf. Garro/Zuppi, Compraventa internacional (2012), p. 179. 22 In case of doubt immediate performance. 23 In case of doubt immediate performance upon request/calling off. 24 For more details see Schwenzer/Hachem/Kee, Global Sales and Contract Law (2012) para. 29.59 and Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (2009), Notes to Art. III.-2:102. 13

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the sphere of application of the CISG. Likewise the concept of a “fixed date”, namely known in German law (“Fixtermin”)25, cannot be transferred to contracts governed by the CISG. If a CISG contract of sale includes the addition “fix” with regard to delivery time, the meaning of this addition can only be determined from the CISG’s perspective. The statements of Art. 33 are generally not affected by such an addition. However, the addition “fix” can gain significance with regard to the legal consequences of a failure to comply with the fixed date26.

5. Vienna Conference Art. 33 was formulated on the basis of Art. 20–22 ULIS. Nevertheless, the wording 9 was tightened, but without intending to modify its content27. During the Vienna conference, Art. 33 was accepted without further discussion.

II. Detailed Commentary 1. Party autonomy The date of delivery or the period of time within which the seller has to deliver is 10 primarily to be determined by examining the parties’ agreements, any usages applicable and practices which the parties have established between them (Arts 6, 9). This applies in particular to an agreement upon rights of the buyer to call off the goods28. Party autonomy prevails over the provisions of the CISG. Art. 33 is of a subsidiary nature and gains significance only insofar as the delivery time cannot be determined by the contract or its circumstances. In particular, terms regarding the delivery time such as “instant delivery” or “quickest possible/asap”29 have to be interpreted first of all by considering the relevant circumstances of the case (Art. 8). The same applies to delivery time particulars like “non-binding” or “subject to change”30. Also terms such as “delivery July, August, September+-” have to be interpreted primarily by considering the agreement itself before applying Art. 33(b)31. Art. 33 only gains significance when an agreement on delivery time turns out to be incomplete or is missing altogether32.

2. Time for delivery The time limit for the delivery of the goods sold addressed in Art. 33 has to be 11 distinguished from the time limit for taking delivery. The buyer’s obligation to take delivery is regulated in Art. 60. However, Art. 60 does not regulate at what date or within which period of time the buyer is obligated to perform the steps necessary in order to fulfil his obligation to take delivery. Since the obligation to take delivery includes enabling the seller to make delivery and taking over the goods (Art. 60), the time parameters for 25

See § 376 HGB (German Commercial Code). Cf. Oberlandesgericht Hamm (Germany) 12 November 2001, CISG-Online 1430. 27 Magnus, in: Staudinger Kommentar (2013), Art. 33 paras 4 and 5; Lando, in: Bianca/Bonell, Commentary (1987), Art. 33 para. 1.1. 28 Cf. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 paras 11 seq.; Ernst/ Lauko, in: Honsell, Kommentar (2010), Art. 33 para. 17. 29 Cf. Magnus, in: Staudinger Kommentar (2013), Art. 33 para. 15; Mullis, in: Huber/Mullis, The CISG (2007), pp. 123, 125; Oberlandesgericht Hamm (Germany) 12 November 2001, CISG-Online 1430; Atamer, in: Vogenauer/Kleinheisterkamp, UNIDROIT Commentary (2015), Art. 6.1.1 para. 10. 30 Cf. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 19. 31 Cf. Amtsgericht Oldenburg (Germany) 24 April 1990, CISG-Online 20; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 33 para. 2. 32 Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 33 para. 1. 26

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the buyer’s action necessary to perform his obligation to take delivery can be determined widely taking into account the delivery time regulated in Art. 3333. Therefore, the delivery time addressed in Art. 33 cannot be determined exclusively from the seller’s perspective. In fact, the determination of the delivery time requires an overall and comprehensive view, which also gives due consideration to the necessary complementary action of the buyer or other persons involved in the delivery process. 12 As far as the delivery requires certain preparatory actions from the buyer, namely calling off the goods, giving shipping instructions, naming the means of transport – especially when F-Incoterms are used34 –, providing export or import licences35, etc., the buyer must take the necessary actions in such a time in order to enable the seller to deliver in a timely manner pursuant to Art. 3336. Otherwise the seller can resort to Art. 80 to the extent that the delay in delivery is caused by insufficient cooperation from the buyer’s side. 13 Furthermore, the seller has to perform the act he is required to undertake in order to deliver so early within the time frame set by Art. 33 that the buyer or the involved carrier is able to take over the goods before the delivery time expires. Usually the taking over of the goods must be possible during the regular business hours existing at the place of delivery. Hence, the delivery is late when the buyer or the person authorized by him cannot be reasonably expected to collect the goods anymore on that day, even though the goods to be placed at disposal are made available by the seller on the last day of the time period for delivery (e. g. when the seller places the goods at disposal well after business hours of work). Also delivery is late when the seller offers the goods to be handed over to the person who is entitled to take them over on the last day of the time period for delivery and this person cannot reasonably be expected to take them over anymore on that day (e. g. when the goods are tendered to the carrier after regular business hours or shortly before midnight). However, as the time limit for delivery addressed in Art. 33 has to be distinguished from the time limit for taking delivery, it is irrelevant if the taking over of the goods in fact takes place before expiration of the delivery time or at a later point in time37. For deciding whether delivery was on time, the possibility to collect or to take them over during regular hours of work suffices.

3. Art. 33(a), (b) and (c) 14

Art. 33(a) and (b) govern constellations where the date of delivery or the period of time within which the seller has to deliver are binding and laid down in the contract of sale or can be determined considering the relevant circumstances of it. Art. 33(a),(b) differentiate according to whether a date, Art. 33(a), or a period of time, Art. 33(b), is applicable. Art. 33(c) regulates the remaining constellations not governed by Art. 33(a),(b). If the delivery is subject to an uncertain occurrence (for instance “delivery after export restrictions have been lifted”), the uncertain event may not just be a stipulation regarding the time of delivery, but the contract may be concluded under a condition precedent with respect to the uncertain occurrence38. The party who claims 33 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 4; Schnyder/ Straub, in: Honsell, Kommentar (2010), Art. 60 paras 20 et seq.; Lando, in: Bianca/Bonell, Commentary (1987), Art. 33 para. 2.1.2. Cf. Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 240. In contrast Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 60 para. 4. 34 See supra Art. 32 para. 32. 35 See supra Art. 31 paras 52 et seq. 36 Magnus, in: Staudinger Kommentar (2013), Art. 60 para. 15. Cf. Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 60 para. 10. 37 Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu ¨ rgerlichen Gesetzbuch (2012), Art. 33 para. 7. 38 Ferna ´ ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 279. Cf. Atamer, in: Vogenauer/ Kleinheisterkamp, UNIDROIT Commentary (2015), Art. 6.1.6 para. 12.

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that a date for delivery or a period of time within which the seller has to deliver was established or that the general rule using the term reasonable time is applicable has to provide evidence for this contention39. The seller bears the burden of proof for timely delivery40. a) Art. 33(a). If the contract of sale provides for a date of delivery, Art. 33(a) affirms 15 that the seller is bound to perform the act of delivery he is required to undertake in order to deliver on that date and thereby again emphasizes the paramount importance of the contract41. However, the parties can agree on different terms. For instance regarding a contract of sale which involves carriage of the goods42, the parties can agree that on the delivery date the goods shall not only be handed over to the carrier, but shall already be placed at disposal by the carrier to the buyer considering a certain time for the transport. Different legal consequences may also result from applicable usages or practices that have been established between the parties or from other relevant circumstances. However, with respect to all these consequences modifying the rule of Art. 33(a), the party who invokes these consequences bears the burden of proof. Otherwise the rule of Art. 33(a) remains unaltered. The content of Art. 33(a) becomes particularly clear in comparison with Art. 33(b)43. 16 Art. 33(b) requires a period of time with regard to delivery, whereas Art. 33(a) is applicable when a specific date for the delivery has been set. A typical constellation to which Art. 33(a) applies is when the delivery time is stipulated by giving an exact calendar date (for instance: “delivery on December 1st”)44. It is equally sufficient to stipulate the delivery time by making an indirect reference to a certain calendar date (for instance: “two days before Good Friday” or “on the first working day of each month”)45. A certain calendar date is not even required in order to apply Art. 33(a). It is sufficient that the date of delivery can be ascertained by referring to the occurrence of a future event being able to be established objectively (for instance: “on the day after calling off the goods”)46. However, it is essential that the seller disposes only of a date to perform the act he is required to undertake in order to deliver. This prerequisite may be doubtful in cases where the delivery time is described for example as “two months before Easter”47 or by comparably wide time ranges48. The longer the space of time between the delivery date and the occurrence referred to (in the aforementioned example: Easter) is, the less convincing is the assumption that delivery has to be made exactly on the date calculated accordingly. This applies all the more if the reference to a future event is ambiguous49 or the date calculated exactly is a Sunday or a public holiday. 39 See Gruber, in: Mu ¨ nchKommBGB (2016), Art. 33 paras 18 seq; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 33 para. 26. 40 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 33 para. 18; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 33 para. 27. 41 Lando, in: Bianca/Bonell, Commentary (1987), Art. 33 para. 2.2. 42 See supra Art. 31 para. 14. 43 See infra para. 19. 44 Cf. Magnus, in: Staudinger Kommentar (2013), Art. 33 para. 8. 45 Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 33 para. 3; Ferna ´ ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 276. 46 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 33 para. 4; Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 7; Magnus, in: Staudinger Kommentar (2013), Art. 33 para. 9; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 33 para. 3. 47 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 7. In contrast Magnus, in: Staudinger Kommentar (2013), Art. 33 para. 9. 48 See infra para. 19. 49 Easter: Easter Sunday or Easter Monday.

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Any calendar day being either directly or indirectly determined is to be regarded as a date in accordance with Art. 33(a)50. This understanding results from the Spanish (“fecha”) and the Chinese (“ri|‘ qı¯”) terminology which is exclusively used to identify a day but not a particular point in time or period of time during a day. The English (“date”) and the French (“date”) terminology has a similar understanding, although in everyday use it is sometimes used to fix a certain point in time during the day. The German translation (“Zeitpunkt”) is less clear and can only be justified due to the fact that in business it is commonly used to give a specified day for delivery, though not meaning a specific point in time during this day. This is especially apparent if the act of delivery only takes a few hours or even only a fraction of an hour. 18 If only a few hours or even less time is needed to perform the act of delivery and if the parties have not agreed (e. g. “during the afternoon”) or the circumstances do not indicate otherwise, the seller is generally free to deliver at any time during the relevant calendar day. The right of the seller to set the precise point in time during the relevant calendar day agreed for delivery is corroborated by the assessment underlying Art. 33(b)51 as well as common practice52. Insofar as the seller is dependent on the buyer’s cooperation to make delivery (for instance: handing over the goods to the buyer), the seller is usually bound to respect the regular business hours at the place of delivery. Even in situations where the seller only has to place the goods at the buyer’s disposal, the seller usually has to do this early enough in order to enable the buyer or the person authorized by him to collect the goods on the respective calendar day during regular hours of work53. As far as the buyer does not have to take over the goods or collect them, in particular if the sale at hand is a sale involving carriage of the goods54, the seller has delivered in time if he has performed his act of delivery and the handing over of the goods to the carrier in connection with the respective shipment instructions are completed55 before the end of the relevant calendar day. Depending on the circumstances of the individual case, the seller may not be free to make the delivery anytime during the relevant calendar day but it may be the buyer who is to choose a point in time when the delivery shall be made or even both parties have to agree on such a point in time56. However, such an assumption requires specific circumstances that have to be proven by the party who invokes them. 17

19

b) Art. 33(b). Art. 33(b) applies if according to the contract of sale, not a date, but a period of time is provided for delivery. This is the case when the seller has more than one calendar day at his hands to make delivery57 (for instance: “during calendar week 42” or “until June 1st” or “within four weeks after conclusion of this contract”). Characteristic for this kind of specification of the delivery time is that it is limited by a final point58. Hence, open delivery stipulations without setting a final point (for 50 Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 33 para. 4; Magnus, in: Staudinger Kommentar (2013), Art. 33 para. 8. 51 See infra paras 20 et seq. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 7. 52 Cf. Atamer, in: Vogenauer/Kleinheisterkamp, UNIDROIT Commentary (2015), Art. 6.1.1 para. 8. 53 See supra para. 13. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 7. 54 See supra Art. 31 paras 12 et seq. 55 See supra Art. 31 paras 21 et seq. 56 Cf. infra paras 23 et seq. 57 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 9. 58 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 33 para. 6; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2012), Art. 33 para. 4; Magnus, in: Staudinger Kommentar (2013), Art. 33 para. 13. In contrast Magnus, in: Staudinger Kommentar (2013), Art. 33 para. 15.

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instance: “delivery after Easter” or “delivery after calling off of the goods”) are not governed by Art. 33(b) but fall under Art. 33(c)59. Stipulations which determine the delivery time shortly before or after the occurrence of a certain event (for instance: “one week before Easter” or “five days after the date of the confirmation of the order”) do not provide for more than one day for the performance of the act of delivery60 unless otherwise agreed upon by the parties or subject to other relevant circumstances. If the scheduled space of time is relatively short, then this represents a special mode of determining the date for delivery according to Art. 33(a)61. However, the relevant circumstances may indicate that the seller has more than one day available for delivery and therefore Art. 33(a) is not applicable. In contrast to this, if there is a lack of an ascertainable final point until which delivery has to be completed, Art. 33(b) will not be applicable either62. Therefore, in cases of doubt, these constellations will be governed by Art. 33(c). In order for Art. 33(b) to be applicable, it has to be clear that the seller has more than one calendar day at his discretion to deliver and the period of time available lasts until an ascertainable final point. aa) Seller’s right to choose the date for delivery. Usually the seller may perform his 20 obligation to deliver at any time within the period of time for delivery63, Art. 33(b). Therefore, the seller may choose to deliver right at the beginning of the delivery time period, e. g. in order to be no longer responsible for the goods or to trigger the buyer’s obligation to pay the price for the goods. The seller may also deliver at any other time during the delivery time period that suits him or exhaust the time period until the last day. Whenever the seller delivers at some time before the end of the period of time for delivery, he enjoys the right to cure according to Art. 37. Generally the seller is not obliged to consult the buyer about the exact point in time 21 within the relevant delivery time when he wants to deliver. Art. 33(b) stipulates that it is the seller who determines the point in time on which he actually delivers. This applies all the more as in international commerce those sales which involve carriage of the goods are prevailing64 and in this kind of contract of sale the seller is only obligated to hand over the goods to the carrier for transport to the buyer. Since the carriage as such is not an obligation of the seller65, the arrival of the goods at the place of destination is not the concern of the seller. Therefore, no consultation with the buyer is needed. Yet, in virtue of further agreements between the parties, applicable usages or practices 22 or any other relevant circumstances, it may result that the precise delivery date within the relevant delivery time period has to be agreed upon by the buyer and the seller. Nevertheless, such an assumption requires certain circumstances for which the party who relies on it has to provide evidence. Even if the parties do not have to agree upon the exact delivery date, the seller may be still under an obligation to at least inform the buyer about the delivery time. In particular when the delivery is to be performed at the buyer’s (“Bringschuld”) or at the seller’s place of business (“Holschuld”) and the seller sets the delivery time, he may be obligated to inform the buyer about the forthcoming delivery early enough, since otherwise the buyer might be unable to take over or to 59

See infra paras 26 et seq. and Supreme Court (Hungary) 1 January 2000, CISG-Online 1687. See supra para. 16. Probably in contrast WidmerLu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 7. 61 See supra para. 16. Cf. Lando, in: Bianca/Bonell, Commentary (1987), Art. 33 para. 2.2. 62 In contrast Magnus, in: Staudinger Kommentar (2013), Art. 33 para. 15. 63 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 10. In contrast see Garro/Zuppi, Compraventa internacional (2012), p. 177. 64 See supra Art. 31 para. 17. 65 See supra Art. 32 para. 21. 60

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collect the goods before the delivery time expires66. In general, the seller will inform the buyer about the forthcoming delivery anyway, since it is in his own interest that the buyer takes over the goods instantaneously after the delivery. Nevertheless, a general obligation of the seller setting the delivery time to inform the buyer about the imminent delivery does not exist67. However, this is different if a clause of the Incoterms is agreed upon68. bb) Buyer’s right to choose the date for delivery. On the other hand it may result from the circumstances that it is not the seller but the buyer who is entitled to determine the exact point in time within the delivery time period on which the seller has to deliver (Art. 33(b)). For the timely performance of the delivery on the date set by the buyer see the commentary regarding Art. 33(a)69 which applies accordingly. Furthermore, it might be the case that the buyer is not only entitled to determine the date of delivery, but also the exact point in time during that day. It has to be established looking at the agreement between the parties, the relevant usages or practices and any other relevant circumstances, whether the seller in case the buyer does not set the time for delivery must nevertheless deliver at the end of the delivery time period or whether the delivery has to be performed only after a time for delivery has been set by the buyer70. In case of doubt, the seller is obligated to deliver only after the buyer has fixed the delivery time. 24 A right of the buyer to set the delivery time can be assumed in particular – however not always and without exception71 – if the carriage of the goods from the place of delivery onwards being organized by the buyer72 or other reasons on part of the buyer, such as limited storage capacity, require an exact planning of the delivery time by the buyer and these reasons are foreseeable and reasonable for the seller73. As a typical example for such a situation, the use of an F-clause of the Incoterms74 is referred to75. However, the rules of interpretation of the Incoterms regulate under heading B776 that the buyer is obligated to inform the seller about the required delivery time77. Therefore, if an F-clause is applied, no recourse to Art. 33(b) is necessary in order to find an entitlement for the buyer to determine the delivery time. However, in the absence of a regulation like the Incoterms or an express agreement, the general rule of Art. 33(b) can only be inverted to the buyer’s advantage if there are sufficient circumstances indicating such an entitlement of the buyer. With respect to the delivery modalities regulated in 23

66 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 48; Benicke, in: Mu¨nchKommHGB (2013), Art. 33 para. 3; Gruber, in: Mu¨nchKommBGB (2016), Art. 33 para. 10; Magnus, in: Staudinger Kommentar (2013), Art. 33 para. 20; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 33 para. 10 Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 277. 67 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 33 para. 10; Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 49. 68 See supra Art. 32 paras 30 seq. 69 See supra para. 18. 70 Cf. Gruber, in: Mu ¨ nchKommBGB (2016), Art. 33 para. 9. 71 See the case reported by Mullis, in: Huber/Mullis, The CISG (2007), p. 124. 72 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 12; Magnus, in: Staudinger Kommentar (2013), Art. 33 para. 18. 73 Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 33 para. 3; Erdem, La livraison des marchandises selon la Convention de Vienne (1990), para. 485; Secretariat Commentary on 1978 Draft, Art. 31 para. 6. Cf. Lando, in: Bianca/Bonell, Commentary (1987), Art. 33 para. 2.3. In contrast Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 12. 74 See supra Art. 30 para. 34. 75 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 12; Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 277. 76 See supra Art. 32 para. 32. 77 See infra para. 36.

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Art. 31(b),(c), there is no general right of the buyer to set the date of delivery78. For those circumstances indicating the right of the buyer to set the date for delivery, the party relying on it bears the burden of proving it. Without the existence of an agreement or indicating circumstances the right of the buyer to set the date may also result from applicable usages or practices established between the parties (Arts 6, 9). If the buyer is entitled to set the date for delivery or even the moment of delivery, the 25 buyer has to provide the seller with all the information necessary to perform the delivery at a reasonable time in advance79. Notwithstanding the provision in Art. 27, the buyer is responsible for the necessary information as well as the declaration setting the delivery time reaches the seller80. This applies all the more as the delivery has to be performed by the seller only after the delivery time has been set by the buyer81. As long as the seller has not received the buyer’s declaration setting the delivery time and all the information necessary to perform the act he is required to do to deliver, the seller can invoke Art. 80 in case he is reproached with not performing his delivery obligation in a timely manner82. Whether the seller is also entitled to bring a claim against the buyer for breaching the obligation to take delivery of the goods (Arts 60, 61) depends on whether the buyer is obligated to take delivery of the goods in any case or whether the obligation to take delivery exists only under certain conditions, e. g. depends on certain future occurrences or the buyer has the right to use discretion about calling off the goods83. c) Art. 33(c). As far as the contract of sale does not stipulate a binding delivery date 26 or a binding period of time within which the seller has to deliver and the delivery time cannot be established from other relevant circumstances, the seller has to perform the act he is required to undertake in order to deliver within a reasonable time after the conclusion of the contract (Art. 33(c)). Art. 33(c) also applies if the parties have agreed on a period of time for delivery without ascertaining a final point until which delivery has to be completed84. The moment at which a contract is concluded is regulated by Art. 23. However, this does not mean that in each and every case the period of reasonable time starts running instantaneously with the conclusion of the contract85. The beginning, the duration and the end of the period of reasonable time is rather to be determined with regard to the circumstances of the contract in question which are known or ought to be known by the parties86. The exact point in time for delivery within the period of reasonable time is generally determined by the seller87. The assessment of the reasonable time will differ from case to case depending on the 27 kind of goods, the preparations that have to be carried out by the seller before delivery, the urgency regarding the demand of the buyer or any other relevant circumstances88. 78 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 12; Mullis, in: Huber/Mullis, The CISG (2007), p. 124. In contrast Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 33 para. 3; Lando, in: Bianca/Bonell, Commentary (1987), Art. 33 para. 2.3. 79 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 33 para. 9; Mullis, in: Huber/Mullis, The CISG (2007), p. 125; Secretariat Commentary on 1978 Draft, Art. 31 para. 7; cf. supra para. 12. 80 Cf. Piltz, Internationales Kaufrecht (2008), paras 4–195. 81 See supra para. 23. 82 Cf. supra Art. 32 para. 32; Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 13; Secretariat Commentary on 1978 Draft, Art. 31 (now Art. 33) para. 7. 83 Cf. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 13. 84 Lauterburg, in: Brunner, Kommentar (2014), Art. 33 para. 5. Cf. supra para. 19. 85 Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 33 para. 13. Cf. infra para. 40. 86 Cf. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 15. 87 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 33 para. 12; Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 17. 88 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 15 seq.; Magnus, in: Staudinger Kommentar (2013), Art. 33 para. 22.

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Article 33 28–29

Part III. Chapter II. Obligations of the Seller

Foodstuffs or commodities are usually to be delivered within a shorter time89 if the products are subject to material price fluctuations. With regard to goods that have to be manufactured or obtained by the seller from third parties, generally more generous time limits will apply than to goods that are typically in stock. In case of doubt, if the seller knows or could not be unaware that spare parts are urgently needed by the buyer, these spare parts are to be delivered immediately90. When assessing the reasonable time for delivery, consideration may also be given to information or data with regard to the delivery time received from the seller before the conclusion of the contract91 or to delivery time periods used in earlier contracts92. If the parties have agreed on a nonbinding delivery time93 the reasonable time for delivery extends beyond it.94 If the seller without fixing a particular date or period for delivery has promised to deliver the goods within about one and a half months, a delivery more than three months later was considered as no longer within a reasonable time95. However, if the buyer in situations governed by Art. 33(c) accepts delivery and takes over the goods without any objection, this will under normal circumstances indicate that delivery was performed within a reasonable time96. 28 Depending on the circumstances, the period of reasonable time addressed in Art. 33(c) may start running instantaneously with the conclusion of the contract or expire shortly thereafter so that the seller is entitled or obligated to deliver immediately. Immediate delivery can be reasonable particularly when the contract of sale refers to goods that are on stock at the seller’s premises when getting them ready for dispatch involves no difficulties97 or the buyer has an urgent demand for the goods and the sellers knows or ought to know this. However, a general right to immediate delivery98 or a general preference of the seller’s rights over the buyer’s99 is not covered by Art. 33(c). The interests of both parties have to be weighed against each other considering all aspects that are known or ought to be known by the other party100. 29 For the purpose of avoiding imponderables the parties should not rely on the rule of Art. 33(c). Although being very flexible, it is not really precise. The parties should rather stipulate the specific delivery time whenever possible, also when the rules of the Incoterms apply101. Otherwise there is concern that when assessing the reasonable 89 Garro/Zuppi, Compraventa internacional (2012), p. 178. Cf. Turku Court of Appeals (Finland) 18 February 1997, CISG-Online 1297 (reasonable time for delivery of animal food in international sales is a maximum of eight weeks) and ICC Arbitration Case No. 16369, Yearbook Commercial Arbitration XXXIX (2014), 169 (no. 94). 90 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 16. 91 Tribunale de Forli (Italy) 12 November 2012, CISG-Online 2594; Kantonsgericht Appenzell Ausserrhoden (Switzerland) 10 March 2003, CISG-Online 852; too stringent Oberlandesgericht Naumburg (Germany) 27 April 1999, CISG-Online 512. 92 Rechtbank van Koophandel te Kortrijk (Belgium) 3 October 2001, CISG-Online 757. 93 See supra para. 26. 94 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 19. 95 Kantonsgericht Appenzell Ausserrhoden (Switzerland) 10 March 2003, CISG-Online 852. 96 Supreme Court (Hungary) 01 January 2000, CISG-Online 1687; Audiencia de Barcelona (Spain) 20 June 1997, CISG-Online 338. 97 Cf. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 16. 98 Schackmar, Die Lieferpflicht des Verka ¨ufers in internationalen Kaufvertra¨gen (2001), p. 169. In contrast Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 17; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 33 para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 33 para. 21 and Soergel/Lu¨deritz/Schu¨ßler-Langeheine, Kommentar zum Bu¨rgerlichen Gesetzbuch (2000), Art. 33 para. 7. 99 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 15. In contrast Soergel/Lu¨deritz/Schu¨ßler-Langeheine, Kommentar zum Bu¨rgerlichen Gesetzbuch (2000), Art. 33 para. 8. 100 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 33 para. 15. 101 See infra para. 34.

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Section I. Delivery the goods and handing over of documents

30–33

Article 33

time, the view of the relevant national setting102 will gain influence, possibly leading to surprising results for at least one of the parties and furthermore impeding the autonomous and uniform application of the CISG. d) Non-business days. The effects which Sundays, holidays or other non-business 30 days may have on the delivery date or the delivery time period has to be determined considering the parameters set out in Art. 20(2)103. In any case, the agreement between the parties, relevant usages and practices and other circumstances of the case are of paramount importance. Thus, the result may be that delivery has in fact to be performed on a holiday. In case of doubt, the circumstances at the relevant place of delivery are decisive104. As a result, in a contract of sale involving carriage of the goods105 the seller cannot hand over the goods to the carrier one day later arguing that the day agreed upon for delivery or the last day of the period of time for delivery is a national holiday at the buyer’s place of business if this very day is not a holiday at the place of delivery as well.

4. Part-deliveries The CISG does not contain any regulation concerning if and under which circum- 31 stances the seller is entitled to perform part-deliveries in absence of respective agreements with the buyer, relevant usages or established practices (Arts 6, 9). Generally, the seller cannot deliver before the respective delivery date106. On the 32 other hand, failing to deliver before the end of the delivery date also constitutes a breach of contract by the seller107. The mere possibility to cure any failure to perform his obligations by virtue of Art. 48, prerequisites of which have to be examined on a case-by-case basis, does not amount to a general right of the seller to deliver at his own discretion in part on the delivery date and in part at a later stage. Notwithstanding differing agreements, usages or practices, in case of doubt, the seller has to deliver at the relevant date of delivery and has to perform his obligation completely in only one act108. Otherwise, the seller breaches his obligation to deliver in a timely manner, unless under specific circumstances he is entitled to cure his failure enjoying the rights under Art. 48. The general rule according to which in case of doubt the seller has to deliver at the 33 relevant date of delivery and has to perform his obligation completely in only one act109 is basically not altered if the seller is not bound to deliver at a specific date but within a period of time, even if the seller has the right to determine the exact date of delivery110. As the modalities of delivery affect interests of the buyer, a right of the seller to deliver the goods in part even though only one delivery unit was agreed upon can only be assumed if there exist specific agreements, usages or practices. The seller who relies on such agreements, usages or practices must provide evidence for this.

102

See supra para. 8. Magnus, in: Staudinger Kommentar (2013), Art. 33 para. 25. 104 Magnus, in: Staudinger Kommentar (2013), Art. 33 para. 25. 105 See supra Art. 31 paras 12 et seq. 106 See supra para. 6. 107 See supra para. 5. 108 Coming to the same result Magnus, in: Staudinger Kommentar (2013), Art. 37 para. 23 and Art. 51 para. 10 and Huber, in: Mu¨nchKommBGB (2016), Art. 51 para. 14. In contrast Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 31 para. 31. 109 See supra para. 32. 110 See supra paras 20 et seq. 103

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Article 33 34–36

Part III. Chapter II. Obligations of the Seller

III. Comparable Rules 1. Incoterms Whereas one of the five articles of the CISG regulating the obligations of the seller deals with nothing else but the time of delivery, notwithstanding the utmost importance of this issue in practice, the Incoterms111 do not dedicate even one of the ten headings112 of their rules of interpretation to determine the delivery time in more detail. Under heading A4 of the rules of interpretation regulating the delivery obligation is merely set out for all Incoterms that the seller has to deliver “on the date or within the agreed period”113. Therefore, as a general rule, if a clause of the Incoterms and the CISG apply, the time of delivery is determined according to the contract of sale in combination with Art. 33114 and in case the contract is silent according to Art. 33115. This result underlines the character of the Incoterms as a set of rules which supplements or may modify the CISG, but does not make it superfluous116. 35 Apart from heading A-4, other regulations of the Incoterms also make reference to an agreed date or period of delivery or are based on A-4. Therefore, some of the regulations of the Incoterms may result inoperable if no date or period of delivery can be determined by looking at the contract and its circumstances117. 36 According to B7 of the rules of interpretation of the Incoterms, the buyer is obligated to give sufficient information to the seller in order to enable him to perform the delivery obligation118. In particular, the buyer has to determine the time of delivery to the extent that he is entitled to fix it. The E-, the C- and the D-clauses of the Incoterms do not regulate whether the buyer is entitled to set the delivery time119. As the E-, the C- and the D-clauses do not give this right to the seller either, this issue has to be settled according to the contract of sale or the CISG120. The FCA-, FAS- and the FOB-clauses of the Incoterms obligate the buyer to give notice of the “selected delivery time” without mentioning any necessity for an entitlement. Unlike the CISG121 and notwithstanding other agreements, considering the special transport modalities the FCA-, FAS- and the FOB-clauses of the Incoterms refer to, it is the buyer and not the seller who has the right to specify the point of time for delivery122. Whenever the buyer is entitled to specify the delivery time, he is responsible that the information reaches the seller123. However, the right of the buyer to specify the delivery time when an F-clause is applied exists only within the frame of the date or the period agreed for delivery addressed in A4 of the rules of interpretation. The 34

111

See supra Art. 30 paras 30 et seq. See supra Art. 30 para. 42. 113 Cf. Piltz/Bredow, Incoterms (2016) para. F-158; Magnus/Lu ¨ sing, CISG und INCOTERMS, Leistungsverzug und Fixgescha¨fte, IHR (2007) 1 (7). 114 Regarding the consequences of non-compliance with an agreed delivery date when applying Incoterms cf. Magnus/Lu¨sing, CISG und INCOTERMS, Leistungsverzug und Fixgescha¨fte, IHR (2007) 1. 115 Cf. Piltz/Bredow, Incoterms (2016) para. F-158. In contrast Bredow/Seiffert, Incoterms 2000 (2000), p. 39. 116 See supra Art. 30 paras 7 seq. and Art. 30 para. 30. 117 Piltz/Bredow, Incoterms (2016) paras E-154, F-168, F-355, F-555, C-158, C-459 and D-355. 118 See supra Art. 32 para. 32. 119 Piltz/Bredow, Incoterms (2016) para. E-174, C-182, C-482 and D-376. 120 In contrast Schackmar, Die Lieferpflicht des Verka ¨ufers in internationalen Kaufvertra¨gen (2001), p. 172. 121 See supra paras 18 and 20. 122 Piltz/Bredow, Incoterms (2016) para. F-187, F-374 and F-574; Magnus/Lu ¨ sing, CISG und INCOTERMS, Leistungsverzug und Fixgescha¨fte, IHR (2007) 1 (7). 123 Piltz/Bredow, Incoterms (2016) para. F-185, F-372 and F-572.Cf. supra para. 25. 112

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Section I. Delivery the goods and handing over of documents

37–39

Article 33

buyer does not enjoy a unilateral right to fix the delivery time if neither a date nor a period of time for delivery has been agreed between the parties124.

2. PICC and PECL Neither the PICC nor the PECL contain provisions explicitly regulating contracts of 37 sale125. On the other hand, both sets of rules address the time of performance so that the regulatory content of Art. 33 CISG finds a counterpart in the PICC and in the PECL. The respective texts of Art. 6.1.1 PICC and Art. 7:102 PECL are almost identical. Even more, they repeat almost literally Art. 33126 with just two deviations. Whereas Art. 33 CISG refers explicitly to the obligation of the seller to deliver the goods, Art. 6.1.1 PICC and Art. 7:102 PECL address the performance of contractual obligations in general. However, this does not exclude their application if a sales transaction is governed by the PICC or the PECL. Moreover, whereas Art. 33(a) CISG uses the term “date”, Art. 6.1.1(a) PICC and Art. 7:102(a) PECL prefer the wording “time”. However, this concept does not include a period of time because the period of time is regulated in Art. 6.1.1(b) PICC and Art. 7:102(b) PECL. Therefore, the meaning will be the same as in Art. 33(a)127 even though tending to some more flexibility than the term “date”128. As regards the rest of Art. 6.1.1(a) PICC and Art. 7:102(a) PECL, they are identical to Art. 33 CISG in all material aspects129.

3. DCFR The regulatory content of Art. 33 CISG has a direct counterpart in Art. IV.A.-2:202 38 DCFR130 which refers to Art. III.-2:102 DCFR. In the present context only Art. III.2:102(1) and (2) DCFR will be looked at. The further paragraphs deal with consumer contracts131 which are generally excluded from the scope of application of the CISG132. Furthermore, it has to be highlighted that just like under the CISG133, the rules of Art. III.-2:102(1) and (2) DCFR only apply to the extent that the time for delivery cannot be determined otherwise134. The structure of Art. III.-2:102(1) and (2) DCFR differs from both Art. 33 CISG and 39 Art. 6.1.1(b) PICC, Art. 7:102(b) PECL. However, this differentiation does not lead to a material distinction. Moreover, unlike Art. 33(a) CISG which uses the term “date”, Art. III.2:102(1) DCFR applies the wording “time”. However, the meaning will be almost the same as in Art. 33(a)135, even though the term “time” is more flexible than the term “date”136. 124 Piltz/Bredow, Incoterms (2016) para. F-187, F-374 and F-574. In contrast Magnus/Lu ¨ sing, CISG und INCOTERMS, Leistungsverzug und Fixgescha¨fte, IHR (2007) 1 (7). 125 See supra Art. 30 para. 46. 126 Atamer, in: Vogenauer/Kleinheisterkamp, UNIDROIT Commentary (2015), Art. 6.1.1 para. 1. 127 Cf. Atamer, in: Vogenauer/Kleinheisterkamp, UNIDROIT Commentary (2015), Art. 6.1.1 paras 7 et seq. 128 Cf. supra para. 17. 129 Colin Ying, Time for delivery and early delivery: Comparison between the provisions of CISG Articles 33 and 52(1) and the counterpart provisions of the PECL (Articles 7:102 and 7:103), 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), p. 360 (361). 130 See supra Art. 30 paras 47 et seq. 131 See supra Art. 30 para. 47. 132 See supra Art. 2 paras 6 et seq. 133 See supra para. 1. 134 See supra Art. 30 para. 50. 135 See supra para. 17. Cf. Atamer, in: Vogenauer/Kleinheisterkamp, UNIDROIT Commentary (2015), Art. 6.1.1 paras 7 et seq. 136 See supra para. 17.

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Article 33 40–42

Part III. Chapter II. Obligations of the Seller

Art. III.-2:102(1) DCFR combines the basic regulatory contents of Art. 33 CISG in just one paragraph. If a time at which or a period of time within which the obligation in question has to be performed cannot be determined, performance is due within a reasonable time after the obligation’s arising. This rule matches Art. 33(c) CISG137 with the only difference that Art. 33(c) refers to a reasonable time after the conclusion of the contract. Anyhow, in the essence both concepts are identical. If no time or period of time for delivery can be determined and due to special circumstances the obligation to perform does not arise with the conclusion of the contract, this feature has to be considered by setting the reasonable time138. 41 Condition precedent for applying the reasonable time regulated in Art. III.-2:102(1) DCFR is that no time or no period of time for the performance can be determined. If that condition is not complied with, the consequences are not explicitly stated in Art. III.-2:102(1) DCFR. However, it goes without saying that if a time or a period of time for the performance of an obligation can be determined, this result has to be respected139. Therefore, the result is the same as under Art. 33(a),(b) CISG140. 42 Art. III.-2:102(2) DCFR addresses the issue which of the two parties is entitled to determine at which moment an obligation is to be performed if a period of time applies. The result is almost the same as according to Art. 33(b) CISG141. 40

137

See supra paras 26 et seq. Cf. supra para. 26. 139 Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (2009), Comments B and C to Art. III.-2:102. 140 See supra paras 15 and 20. 141 See supra paras 20 et seq. 138

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Article 34 If the seller is bound to hand over documents relating to the goods, he must hand them over at the time and place and in the form required by the contract. If the seller has handed over documents before that time, he may, up to that time, cure any lack of conformity in the documents, if the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. However, the buyer retains any right to claim damages as provided for in this Convention. Bibliography: Fleischmann/Schmidt-Kessel, in: DiMatteo/Janssen/Magnus/Schulze, International Sales Law (2016), p. 341; Piltz/Bredow, Incoterms (2016); Kock, Nebenpflichten im UN-Kaufrecht (1995); Schu¨tze/Vorpeil, Das Dokumentenakkreditiv im Internationalen Handelsverkehr (2016).

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Subject matter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Breach of contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Further context. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. National laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Vienna Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Handing over of documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Obligation of the seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Documents governed by Art. 34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Place, time and form of handing over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Right to cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Incoterms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. PICC and PECL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. DCFR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 2 5 6 7 8 8 9 10 17 24 29 29 35 36

I. Importance and Role of the Provision 1. Subject matter Art. 34 serves the purpose of specifying the seller’s obligation addressed in Art. 30 to 1 hand over documents relating to the goods. Consequently, Art. 34 has to be observed if Art. 30 is applicable1. Just like Art. 302, Art. 34 merely plays a supplementary role and gains significance only to the extent that the issues regulated in Art. 34 cannot be determined satisfactorily by looking at the contract and its circumstances. Furthermore, Art. 34 supplements Art. 37 by providing an opportunity to cure an insufficient performance with regard to the handing over of documents.

2. Breach of contract Generally, the non-performance of the seller’s obligations pursuant to Art. 34, not 2 cured in accordance with Arts 34 or 483, constitutes a breach of contract and results in the consequences regulated by Arts 45 et seq. unless the seller may rely on Arts 71 or 80. 1

See supra Art. 30 paras 3 and 4. See supra Art. 30 para. 7. 3 See infra para. 24. 2

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Article 34 3–6

Part III. Chapter II. Obligations of the Seller

Arts 39 and 43 do not apply to documents subject to Art. 344. The obligation to give notice according to Arts 39 and 43 is designed for the actual subject of the delivery of a contract of sale, the goods sold. However, it is not suitable for the paperwork that has to be dealt with in cross-border commerce and the different modalities of passing on such paperwork. In particular, the legal remedies specifically provided for the delivery of non-conforming goods, namely the delivery of substitute goods which is conditioned to a fundamental breach of contract5 and the reduction of the price6, are not appropriate in such constellations where the seller fails to properly perform his obligation to hand over documents governed by Art. 347. Instead, the regular remedies provided for all kinds of breach of contract apply. This assessment is corroborated by the provisions contained in Art. 34 second and third sentence which would otherwise have been unnecessary because of the existence of Art. 37. Notwithstanding the aforesaid, the buyer remains under the obligation to take such measures as are reasonable in the circumstances to mitigate the loss pursuant to Art. 77. 4 If the failure to hand over correct documents relating to the goods results in the buyer’s inability to legitimize himself when taking over the goods, the seller has also breached his obligation to deliver8. In such a case the buyer is in particular entitled to rely on the legal remedies provided for non-delivery. 3

3. Further context 5

Even though the seller’s obligations regulated in Art. 34 have been developed as obligations independent from the ones addressed in Art. 30, they still have to be seen in the context of the seller’s obligation to deliver the goods and to transfer property in the goods sold. Therefore, unless the parties’ agreements, any usages applicable and practices which the parties have established between them (Arts 6, 9), or other relevant circumstances indicate otherwise, Arts 31 and 33 give indications also with regard to the place where and the time when the seller has to perform the duties imposed by Art. 349.

4. National laws 6

Regulations in national bodies of law regarding the seller’s obligations with respect to documents relating to the goods are not applicable within the CISG’s sphere of application since the CISG regulates such obligations of the seller conclusively10. The same applies for the right to cure pursuant to Art. 34 second and third sentence. 4 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 34 para. 7; Witz/Salger/Lorenz, Kommentar (2016), Art. 34 para. 10; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 34 para. 14; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 34 para. 5. In contrast Bundesgericht (Switzerland) 2 April 2015, CISG-Online 2592 (without going into details); Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 9; Lauterburg, in: Brunner, Kommentar (2014), Art. 34 para. 5; Benicke, in: Mu¨nchKommHGB (2013), Art. 34 para. 9; Magnus, in: Staudinger Kommentar (2013), Art. 34 para. 18; Ferrari, Contracts for the International Sale of Goods (2012), p. 192; Soergel/Lu¨deritz/Schu¨ßler-Langeheine, Kommentar zum Bu¨rgerlichen Gesetzbuch (2000), Art. 34 para. 4. Differentiating Kock, Nebenpflichten im UN-Kaufrecht (1995), p. 77. 5 See infra Art. 46 paras 32 et seq. 6 See infra Art. 50 para. 10. 7 See infra paras 10 et seq. 8 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 18; Benicke, in: Mu¨nchKommHGB (2013), Art. 34 para. 8; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 34 para. 14. 9 In contrast Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 4, however less stringent paras 6 and 7. 10 See supra Art. 30 para. 9.

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5. Vienna Conference Art. 34 first sentence was contained in Art. 50 ULIS with practically the same 7 content11. Art. 34 second and third sentence were added only during the Vienna conference12.

II. Detailed Commentary 1. Handing over of documents In addition to the obligation to deliver the goods and to transfer property in them, 8 the seller may be obligated to hand over documents relating to the goods (Art. 30). Art. 34 regulates the details of this obligation. However, Art. 34 does not constitute such an obligation, but rather implies the existence of a contractual duty to hand over documents13. A duty of the seller to assist the buyer in procuring required documents is not provided for in Art. 3414. a) Obligation of the seller. The obligation of the seller to hand over documents often 9 derives from agreements between the parties15. An obligation to hand over documents and details regarding this obligation can result particularly from the use of the Incoterms16. Moreover, any usages applicable and practices being established between the parties, (Arts 6, 9), or other relevant circumstances, especially the specific performance of the contract which the parties have agreed upon, may result in the seller’s obligation to hand over documents. Which specific documents are comprised by this obligation also has to be determined by considering the contract, the usages applicable, the practices established between the parties or other relevant circumstances. However, as Art. 34 regulates an obligation of the seller, only those documents are referred to which theoretically could be procured by the seller. Where a certain legal relation or status is required as precondition for being issued or provided a document and the seller as such does not meet these requirements, no obligation of the seller to provide this document exists unless the parties have agreed otherwise. b) Documents governed by Art. 34. Art. 34 generally governs all kinds of documents 10 typically used for the performance of cross-border contracts of sale17. On the one hand, Art. 34 encompasses those documents necessary for the performance of the contract of sale, namely documents which are needed by the buyer to acquire the property and/or the possession of the goods and – in case it is the buyer’s responsibility – to arrange for import, export and security clearance and release of the goods comprising licences, 11

Magnus, in: Staudinger Kommentar (2013), Art. 34 para. 4. For more details see Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 281; Lando, in: Bianca/Bonell, Commentary (1987), Art. 34 para. 1.1. 13 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 1; Witz/Salger/ Lorenz, Kommentar (2016), Art. 34 para. 2; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 34 para. 6. 14 Lando, in: Bianca/Bonell, Commentary (1987), Art. 34 para. 2.1. Probably in contrast Ferna ´ ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 281. 15 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 30 para. 8. 16 See infra paras 29 et seq. 17 Cf. Bundesgericht (Switzerland) 2 April 2015, CISG-Online 2592; Tribunal Supremo (Spain) 9 December 2008, CISG-Online 2100; Witz/Salger/Lorenz, Kommentar (2016), Art. 34 para. 3; Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 2; Gruber, in: Mu¨nchKommBGB (2016), Art. 30 para. 4; Benicke, in: Mu¨nchKommHGB (2013), Art. 34 para. 2; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 34 para. 4; Kock, Nebenpflichten im UN-Kaufrecht (1995), p. 47; Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 34 para. 2; Secretariat Commentary on 1978 Draft, Art. 32 para. 2. 12

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certificates and alike that have to be presented in order to clear the goods for import18. On the other hand, Art. 34 also includes those documents which are not necessarily required for the performance of the contract of sale, but nevertheless are needed by the buyer in order to make claims against third parties or to benefit from tariff advantages, tax privileges or other preferences19. A common characteristic of all documents governed by Art. 34 is the fact that these documents are relevant for the buyer’s relations with third parties organized either under public or private law20. Documents identifying21 or describing the goods sold, such as technical documents or circuit diagrams, or documents regarding the use of them, such as assembly or fitting instructions, instructions for use or maintenance or operating manuals, are part of the goods the seller is obligated to deliver according to Art. 35(2)(a) without any need for further agreements regarding this point22. Therefore, these kinds of documents are subject to the obligations to examine the goods and to give notice as provided for by Arts 38 et seq., in contrast to documents being addressed in Art. 3423. Certificates of compliance or test or guaranty certificates which the seller has to provide due to an agreement between the parties or other relevant circumstances are not within the scope of Art. 34 either. As a matter of fact, providing these documents which neither serve the purpose of describing the goods or relate to their intended use is an additional contractual obligation of the seller24. Therefore, these documents are not subject to the obligation to examine and give notice pursuant to Arts 38 et seq. Failure to perform this additional obligation does not result in non-conformity of the goods according to Art. 35, but leads directly to the legal remedies under Arts 45 et seq. With respect to their legal function, the documents governed by Art. 34 may be categorized as follows25. Transportation documents26: These documents serve the purpose of confirming the formation and the contents of the contract of carriage concluded by the seller and of proving the handing over of the goods to the carrier. Some transportation documents are negotiable instruments. Apart from the right to have the goods delivered at the place of destination which is embodied in such documents, also the property in the goods can be transferred by handing over such 18 CISG-AC Opinion no. 11, 259, 263 et seq.; Witz/Salger/Lorenz, Kommentar (2016), Art. 34 para. 3; Lauterburg, in: Brunner, Kommentar (2014), Art. 34 para. 1. 19 CISG-AC Opinion no. 11, 259, 267. Cf. Foreign Trade Court of Arbitration (Serbia) 23 January 2008, CISG-Online 1946; Hof van Beroep te Gent (Belgium) 24 March 2010, unpublished. 20 See also Fleischmann/Schmidt-Kessel, in: DiMatteo/Janssen/Magnus/Schulze, International Sales Law (2016), p. 367 (para. 77). 21 Handelsgericht St. Gallen (Switzerland) 14 June 2012, CISG-Online 2468 (Bio-Swiss Certificates). 22 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 34 para. 3; Benicke, in: Mu¨nchKommHGB (2013), Art. 34 para. 3; Magnus, in: Staudinger Kommentar (2013), Art. 34 para. 7; Kock, Nebenpflichten im UNKaufrecht (1995), p. 54. In contrast Garro/Zuppi, Compraventa internacional de mercaderı´as (2012), p. 181; Carlini, El contrato de compraventa internacional de mercaderı´as (2010), p. 133; Hussonmorel, La Compraventa Internacional de Mercaderı´as (2004), p. 61; Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995), p. 131; Erdem, La livraison des marchandises selon la Convention de Vienne (1990), para. 538; Reinhart, UN-Kaufrecht (1990), Art. 34 para. 2. 23 See supra para. 3. In contrast Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 3. 24 See supra Art. 31 para. 57. 25 Cf. CISG-AC Opinion no. 11, IHR (2013) 259, 263 et seq.; Widmer Lu ¨ chinger, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 34 para. 2; Jimenez, ICC Guide to Export/Import(2012), ICC publication No 686, pp. 23 et seq. and Ramberg, ICC Guide to Incoterms 2010 (2010), ICC publication No 720, pp. 36 seq. 26 For more details see Schu ¨ tze, Das Dokumentenakkreditiv im Internationalen Handelsverkehr (2008), pp. 86 et seq.

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documents. Examples of documents of this kind are the bill of lading, the consignment bill and the warehouse warrant. A special form of the consignment bill is the FIATA Multimodal Transport Bill of Lading. Other transportation documents are instruments solely intended for evidence pur- 15 poses which cannot be transferred like negotiable instruments of value. The good faith of the recipient who trusts in the content of the paper is not protected. Such documents are for instance the air waybill, the sea waybill and the waybill, the railway consignment note and the road consignment note, moreover the warehouse receipt and the forwarder’s certificate of receipt. Accompanying documents for export or import: Typical accompanying documents 16 are for instance export licences, import licences, customs delivery notes, cargo declarations, goods control certificates, sanitary certificates, weight certificates, certificates of origin27, supplier’s declarations28, commercial invoices29, consular invoices, packing lists and insurance policies30. c) Place, time and form of handing over. Regarding the place, the time and the form 17 of the handing over of the documents, Art. 34 first sentence refers to the contract of sale. Further specifications may apply when a clause of the Incoterms has been agreed upon31. According to Art. 9, applicable usages or practices established between the parties have to be considered likewise. These circumstances may also lead to the conclusion that the respective documents do not have to be handed over but only have to be placed at disposal or might completely or in part be transmitted in an electronic form. The seller has to provide the buyer with the documents he is obligated to hand over32 18 in a number and design which generally enables the buyer to take over the goods at the place of taking delivery33, to arrange for customs and security clearance and release of the goods, to apply for tax benefits and, if needed, to bring a suit against the carrier or the insurer34. These functions should determine the details of the handing over the seller is obligated to perform. If necessary, such papers therefore have to be authenticated or legalized. In instruments made out to order the buyer has to be identified as beneficiary. Hence, a continuous chain of endorsements is required35. However, only under special circumstances the seller owes translation of the documents into a language different from the one in which the papers are issued. The CISG does not regulate at which particular place or to whom the documents 19 have to be handed over. However, in most cases the place at which the seller is bound to hand over the documents will derive from the parties’ agreements concerning delivery modalities and the payment of the purchase price. Where the parties have agreed upon a documentary letter of credit or a documentary collection, the required papers have to 27 For more details see the WTO Agreement on Rules of Origin, at http://www.wto.org/english/docs_e/ legal_e/22-roo.pdf [last accessed 21 March 2017]. 28 For more details see EC Regulation 1207/2001 of 11 June 2001 (EC Official Journal, L 165, 21 January 2001), EC Regulation 1617/2006 of 24 October 2006 (EC Official Journal, L 300, 31 October 2006) and EC Regulation 75/2008 of 28 January 2008 (EC Official Journal, L 24, 29 January 2008. 29 For more details see Schu ¨ tze/Vorpeil, Das Dokumentenakkreditiv im Internationalen Handelsverkehr (2016), pp. 120 et seq. 30 For more details see Schu ¨ tze/Vorpeil, Das Dokumentenakkreditiv im Internationalen Handelsverkehr (2016), pp. 117 et seq. 31 See infra paras 29 et seq. 32 See supra para. 9. 33 See infra Art. 60 para. 3. 34 Secretariat Commentary on 1978 Draft, Art. 32 (now Art. 34) para. 3. 35 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 8; Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 285.

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be presented to the respective appointed bank36. Moreover, the place where the documents have to be handed over will regularly coincide with the relevant place of delivery37 notwithstanding other circumstances. Therefore, unless indicated differently, in sales which involve carriage of the goods38 the seller is bound to hand over the documents to a courier or another carrier appropriate for such transmission at the place of delivery and to instruct such carrier to transmit the documents to the buyer39. Art. 34 does not state an obligation of the seller to hand over the documents to the buyer40. Consequently, the cost for their transmission to the buyer and the risk of transmission in due time are to be borne by the buyer. However, the seller bears the risk of procuring them again if such documents do not reach the buyer at all41. 20 The CISG does not contain a regulation comparable to Art. 33 with respect to the time at which the documents governed by Art. 34 have to be handed over. The time for handing over the documents is to be determined by the circumstances of the transaction and the kind of documents in question, notwithstanding any specific agreements, usages or practices. In this context, the German translation (“Zeitpunkt”) turns out to be too narrow since the regulation of Art. 3442 comprises a specific point in time as well as a period of time. 21 When using a documentary letter of credit it is in the seller’s own interest to present the documents to the appointed bank in a timely manner before the expiration of the documentary letter of credit. Art. 6(d) UCP 600 regulates that all documentary letters of credit must have a date of expiration. Until this date the seller has to present the documents which are stipulated in the letter of credit (Art. 6(e) UCP 600), or otherwise he will lose his rights from the letter of credit43. Thus, the expiration date of a letter of credit indicates the end of a time period within which the seller may, comparable to Art. 33(b) CISG44, present the documents at any time. An early handing over of the documents is hardly imaginable. A right to cure a delayed handing over of the documents pursuant to Art. 48 CISG is excluded since the handing over of documents after the expiration date results in the loss of the rights arising out of the letter of credit. 22 If the buyer needs the documents in order to have the goods sold handed over to him, he has to be provided with the documents early enough to be able to take over the goods

36 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 7; Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 284. 37 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 34 para. 6; Witz/Salger/Lorenz, Kommentar (2016), Art. 34 para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 34 para. 8; Schackmar, Die Lieferpflicht des Verka¨ufers in internationalen Kaufvertra¨gen (2001), p. 189; Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 285. In contrast Lauterburg, in: Brunner, Kommentar (2014), Art. 34 para. 4; Eckert/Maifeld/Matthiesen, Handbuch des Kaufrechts (2014), para. 505; Benicke, in: Mu¨nchKommHGB (2013), Art. 31 para. 4. Mullis, in: Huber/Mullis, The CISG (2007), p. 129; Soergel/Lu¨deritz/Schu¨ßlerLangeheine, Kommentar zum Bu¨rgerlichen Gesetzbuch (2000), Art. 34 CISG para. 2. 38 See supra Art. 31 paras 12 et seq. 39 Cf. Gruber, in: Mu ¨ nchKommBGB (2016), Art. 34 para. 6; Witz/Salger/Lorenz, Kommentar (2016), Art. 34 para. 6; Ferna´ndez de la Ga´ndara, in: Dı´ez-Picazo, Comentario (1998), p. 285. In contrast Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 7; Saenger, in: Bamberger/Roth (eds), Kommentar zum Bu¨rgerlichen Gesetzbuch (2012), Art. 34 para. 4; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 34 para. 9. 40 In contrast Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 7; Soergel/Lu¨deritz/Schu¨ßler-Langeheine, Kommentar zum Bu¨rgerlichen Gesetzbuch (2000), Art. 34 CISG para. 2; Kock, Nebenpflichten im UN-Kaufrecht (1995), p. 57. 41 Witz/Salger/Lorenz, Kommentar (2016), Art. 34 para. 8. 42 “… he must hand them over at the time …” 43 Schu ¨ tze/Vorpeil, Das Dokumentenakkreditiv im Internationalen Handelsverkehr (2016), para. 487. 44 See supra Art. 33 paras 19 et seq.

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in conformity with the contract45. Thus, the date set for the taking over of the goods by the buyer will be the latest point in time of a period within which the seller may, comparable to Art. 33(b)46, hand over the documents to the buyer at any given time. Notwithstanding special circumstances, early handing over of the documents is hardly imaginable47. After the expiration of the time limit for the handing over of the documents the seller may be entitled to remedy his failure to perform pursuant to Art. 4848. By virtue of Art. 48, the seller can remedy a lack of conformity in the documents already handed over, but also perform his obligation to hand over the documents for the first time if it has not been done so far, provided that the requirements of Art. 48 are met. In other constellations it will usually be derived from the circumstances until which 23 point in time the documents have to be handed over, unless specific parties’ agreements provide otherwise. For instance, documents which the buyer needs for customs clearance when importing the goods have to be handed over so early that the import release can be carried out without any loss of time49. Insofar as no other circumstances are present to determine the time for the handing over of documents, some authors argue that the documents have to be handed over as soon as possible after the goods have been shipped50 or within a reasonable period of time51. In general, the relevant date will indicate the end of a time period within which the seller may, comparable to Art. 33(b)52, in case of doubt hand over the documents at any time. Notwithstanding special circumstances, after expiration of the time period for the handing over of the documents, the seller is entitled to remedy a lack of conformity in the documents already handed over and also to perform his obligation to hand over the documents for the first time if it has not been done so far, provided that the requirements of Art. 48 are met53.

2. Right to cure According to Art. 34 second sentence, the seller may generally cure any lack of 24 conformity in the documents if the documents were handed over ahead of time. After expiration of the relevant time for the handing over of documents the seller has a right to cure if the requirements of Art. 48 are met54. The early as well as the delayed handing over of the documents constitutes a breach of contract. However, in contrast to cases of premature delivery of goods55, it is hardly imaginable for an early handing over of documents to result in actual losses to be suffered by the buyer. It is even less apparent 45 Witz/Salger/Lorenz, Kommentar (2016), Art. 34 para. 5; Widmer Lu ¨ chinger, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 34 para. 6; Lauterburg, in: Brunner, Kommentar (2014), Art. 34 para. 3; Kock, Nebenpflichten im UN-Kaufrecht (1995), p. 56. 46 See supra Art. 33 paras 19 et seq. 47 Cf. Gruber, in: Mu ¨ nchKommBGB (2016), Art. 34 para. 8; Widmer Lu¨chinger, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 34 para. 11. 48 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 10. 49 Cf. Magnus, in: Staudinger Kommentar (2013), Art. 34 para. 8; Lauterburg, in: Brunner, Kommentar (2014), Art. 34 para. 3; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 34 para. 8. 50 Mullis, in: Huber/Mullis, The CISG (2007), p. 128; Renck, Der Einfluß der INCOTERMS 1990 auf das UN-Kaufrecht (1995), p. 132 seq. 51 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 6; Ernst/Lauko, in: Honsell, Kommentar (2010), Art. 34 para. 8; Neumayer/Ming, Convention de Vienne (1993), p. 267. 52 See supra Art. 33 paras 19 et seq. 53 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 10; Magnus, in: Staudinger Kommentar (2013), Art. 34 para. 11. 54 Schlechtriem/Butler, CISG (2009), para. 131; Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 10. 55 See supra Art. 33 para. 6.

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that an early handing over of the documents could amount to a fundamental breach of contract entitling the buyer to declare the contract avoided. Ultimately, early handing over of documents constitutes a breach of contract, but will generally not result in any consequences. 25 An early handing over of the documents will be practically very rare since hardly any constellations exist under which documents may be handed over only after a certain date, but not before it56. Nevertheless, the right to cure by virtue of Art. 34 second sentence is of significance for the seller. Art. 34 second sentence provides the opportunity to remedy such documents which have already been handed over as long as the final date for their handing over has not yet been reached. Respecting the requirements of Art. 34, the seller may offer documents which have been rejected by the buyer once again57 or may undertake more than one attempt to remedy a lack of conformity in the documents. Still, it can be derived from the contract or other circumstances that the right to cure is limited or excluded completely58. However, the right to cure should not be undermined by assuming the requirements of a fundamental breach of contract too generously prior to the date of performance according to Art. 72. 26 Until the final date for handing over the documents the seller may remedy any lack of conformity in the documents. It is irrelevant what causes the lack of conformity59. The seller may correct typing errors or other erroneous entries or – if the documents were not issued by the seller – have them corrected60. The same applies to annotations on the documents which possibly could impair their use. The seller may make up for missing signatures or legalizations or ensure that it is done by a third party. Confounded or other incorrect documents may be replaced by the seller with the correct ones or missing attachments may be added. The kind and extent of the lack of conformity in the documents is irrelevant. There is also a lack of conformity, if documents are completely different from the ones required or if an insufficient amount of documents has been handed over. However, a precondition for the application of Art. 34 second sentence is that a document has already been handed over or at least tendered61. Otherwise, the seller has no need to resort to Art. 34 second sentence. As long as the time period for the handing over of the documents has not yet expired, the seller may hand over documents not yet delivered at any time. 27 The seller is granted the right to cure any lack of conformity in the documents on condition that exercising this right does not result in unreasonable inconveniences for the buyer. Even though Art. 34 replicates Art. 37, the underlying interest of Art. 37 cannot be compared with the situation of Art. 34. Whilst the repair or replacement of the goods which have already been delivered to the buyer can indeed cause the buyer inconveniences62, the correction or exchange of documents being already handed over to the buyer can hardly cause any difficulties63. Also it is hardly imaginable that unreasonable expenses will occur from which the buyer shall be protected (Art. 34 56

See supra paras 20 et seq. Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 13. 58 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 11; Gabriel, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 351; Ferna´ndez de la Ga´ndara, in: Dı´ezPicazo, Comentario (1998), p. 283. 59 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 12; Magnus, in: Staudinger Kommentar (2013), Art. 34 para. 12. 60 Cf. Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 14. 61 Widmer Lu ¨ chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 13. Cf. Ernst/ Lauko, in: Honsell, Kommentar (2010), Art. 34 para. 15. 62 See infra Art. 37 paras 12 et seq. 63 Cf. Gruber, in: Mu ¨ nchKommBGB (2016), Art. 34 para. 8; Widmer Lu¨chinger, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 34 para. 15. 57

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second sentence). Thus, in case of doubt it must be assumed that the seller principally has a right to cure any lack of conformity in the documents. Or looking at it from another perspective, if the buyer wants to object to the right of the seller to cure pursuant to Art. 34 second sentence, he has to present evidence for the unreasonable inconvenience or expense this would cause. Comparable to the regulation in Art. 37, the buyer retains any right to claim damages 28 for disadvantages caused by the seller’s exertion of his right to cure. The basis for a claim for damages is Art. 45(1)(b)64. The extent of such damages has to be determined according to Arts 74 et seq., so that generally only foreseeable damages are to be indemnified (Art. 74 second sentence)65. The buyer is bound to take measures to mitigate the loss according to Art. 77.

III. Comparable Rules 1. Incoterms The Incoterms66 contain rules of their own regarding some of the issues referred to in Art. 34. Therefore, if the parties to a contract of sale agree upon the application of a clause of the Incoterms, the rules of interpretation of that clause apply supplemented by Art. 3467. Furthermore, unlike the CISG68, the Incoterms regulate a duty of the seller to assist the buyer in procuring required documents. Whereas Art. 34 does not constitute an obligation of the seller to hand over documents and does not specify the kind of documents to be handed over69, if the Incoterms apply, both the seller and the buyer face obligations to hand over certain documents according to the explanations under headings A8 – B8 of the rules of interpretation of the Incoterms. According to A8 of the rules of interpretation of the Incoterms, the seller is generally bound to provide the buyer with the usual proof of the delivery of the goods at his expense. Furthermore, if the CFR- or CIF-clause of the Incoterms is agreed upon, the transport document proving the delivery and the contracted carriage must be dated within the delivery period and enable the buyer to claim the goods from the carrier at the port of destination70 or sell them while in transit. In contrast, under the clauses CPT and CIP the seller has to provide the buyer with such transport document only if customary or requested by the buyer and the transport document must enable the buyer to claim the goods at the named place of destination or sell them only when agreed or customary. Applying a D-clause of the Incoterms, the seller is obligated to provide the buyer with the document necessary to take delivery of the goods which pursuant to the heading of A8/B8 is considered the delivery document or proof of delivery. Under the clause EXW no obligation of the seller with regard to any document proving the delivery exists. According to B8 of the rules of interpretation of the Incoterms clause EXW, the buyer is obligated to provide the seller with appropriate proof of having taken delivery. With regard to the F-, C- and D-clauses of the Incoterms, there is no obligation of the buyer to hand over any document of this kind to the seller. 64

Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 16. Cf. Widmer Lu¨chinger, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 34 para. 16. 66 See supra Art. 30 paras 30 et seq. 67 See supra Art. 30 para. 7 seq. 68 See supra para. 8. 69 See supra paras 8 et seq. 70 Cf. Interim Arbitral Award, ICC 7645/1995, Yearbook of Commercial Arbitration (2001) 130 (137 seq.). 65

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The Incoterms have to be considered in light of the CISG71. To the extent that a differing interpretation cannot be derived from the rules of interpretation of the Incoterms, generally the comments on Art. 34 regarding place, time and form of handing over documents72 also apply when the Incoterms obligate the seller to provide the buyer with documents73. However, under the CFR- and CIF-Incoterm the provision must be effected without delay74. Furthermore, A8 of the rules of interpretation of the Incoterms specifies that the seller has to bear the costs for providing the documents. 34 Unlike the CISG75, the Incoterms provide for duties of the seller or the buyer to assist the other party at his request, risk and expense in procuring documents. According to A8 of the rules of interpretation of the Incoterms, the seller must assist the buyer in obtaining a transport document if this document does not constitute the usual proof of delivery owed by the seller76. Furthermore, heading A10 of the rules of interpretation of the Incoterms stipulates that the seller has to provide or assist the buyer in getting any other document required by the buyer for the export, transit and/or import of the goods and their transport to the final destination. As under the DDP-clause the seller is responsible for the import clearance anyway77, the obligation is reduced to the documents necessary for the transport of the goods to their final destination. This regulation shows that the “transport to the final destination” as addressed under A10 of the rules of interpretation of the Incoterms means the transport beyond the place of delivery or the place of taking delivery78. Vice versa the buyer has to provide or assist the seller in getting any document required by the seller for the export, transit and if the DDP-clause applies, import of the goods. 33

2. PICC and PECL 35

Neither the PICC nor the PECL contain provisions explicitly regulating contracts of sale79. Consequently, they do not address issues related to the handing over of documents in contracts of sale so that the regulatory content of Art. 34 does not find a counterpart in the PICC or in the PECL.

3. DCFR Unlike the PICC and the PECL80, the articles of the DCFR81 dealing with sales refer to documents in various instances. Art. IV.A.-2:101(c) DCFR constitutes the general obligation of the seller to transfer documents82. Furthermore, Arts IV. A.-2:201(1),(2) and IV. A.-2:202(2) DCFR address certain issues regarding documents. 37 Art. IV.A.-2:101(c) DCFR obligates the seller to transfer those documents representing the goods. Unlike the CISG83, the DCFR differentiates between documents representing the goods and documents relating to the goods84. Due to the importance of 36

71

See supra Art. 30 para. 8. See supra paras 17 et seq. 73 Cf. Schackmar, Die Lieferpflicht des Verka ¨ufers in internationalen Kaufvertra¨gen (2001), p. 189. 74 See the explanations under heading A8 of the rules of interpretation of the Incoterms. 75 See supra para. 8. 76 See supra para. 31. 77 See supra Art. 31 para. 70. 78 Piltz/Bredow, Incoterms (2016) para. D-528. 79 See supra Art. 30 para. 46. 80 See supra para. 35. 81 See supra Art. 30 paras 47 et seq. 82 See supra Art. 30 para. 48. 83 See supra paras 12 et seq. 84 See infra para. 38. 72

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documentary sales85, the first group is elaborated on in more detail in Arts IV. A.2:201(1),(2) and IV. A.-2:202(2) DCFR. Furthermore, Art. IV.A.-2:101(c) DCFR obligates the seller to transfer the documents 38 relating to the goods as required by the contract. This part of Art. IV.A.-2:101(c) DCFR addresses all those documents which do not serve the purpose of representing the goods. However, the comments on this article86 remain ambiguous with regard to those documents, the purpose of which consists of describing the goods or their intended use87. The DCFR obligates the seller to “transfer” the documents. The purpose of this term 39 is to emphasize that more than just a handing over of the relevant documents is required88. However, the final result will be very much the same as under Art. 34 CISG which refers to the contract of sale and the relevant circumstances regarding the place, the time and the form of handing over of the documents89. Furthermore, just like Art. 34 second and third sentence, Art. IV.A.-2:203(2),(3) 40 DCFR provide an opportunity to cure an insufficient performance with regard to the transfer of documents. 85 For more details see Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (2009), Comment D to Art. IV.A.-2:102 and Notes paras 10, 13. 86 See Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (2009), Comment D to Art. IV.A.-2:102. 87 See supra para. 11. 88 See Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Full Edition (2009), Comment D to Art. IV.A.-2:102. 89 See supra paras 17 et seq.

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Section II Conformity of the goods and third party claims Introduction to Articles 35–44 I. Importance of Section II in Practice 1

Section II of Chapter II, composed of Arts 35–44 and entitled “Conformity of the goods and third party claims”, is of considerable importance for the success of the CISG in practice. Some of its provisions, i. e. Arts 35–40, are among the most cited provisions in case law.1 They address one of the central questions for any sales law regime: what are the requirements the seller has to meet in relation to the quality of the goods and under which circumstances is he liable for the non-conformity of the goods.

II. Structure of Section II Like most national laws, Section II distinguishes between the seller’s obligations as to the conformity of the goods in relation to quality, nature and quantity on the one hand (Arts 35–40, 44) and the seller’s obligations as to the title on the other hand (Arts 41– 43, 44).2 Both “parts” of Section II have largely the same structure. They define first the seller’s general obligations in relation to the goods (Arts 35–37 and 41–42) and then regulate the buyer’s duties concerning possible breaches of these obligations (Arts 38–39 and 43(1)), including cases in which the seller may not rely on the buyer’s failure to comply with such duties (Arts 40, 44 and 43(2)). 3 In this sense, the provisions contained in Section II can be divided in two groups. The first group of Articles, Arts 35–37 and Arts 41–42, deals with the primary function of Section II as expressed in the section’s title and its structure. They specify and supplement the content of the seller’s general obligation to deliver the goods in Art. 30.3 The seller is not only required to deliver goods, rather, he must deliver goods that are in conformity with the contractual and legal requirements (Arts 35–36) and are free from third party rights and claims (Arts 41, 42). A failure to comply with such duties constitutes a breach of contract and gives rise to the normal remedies in Art. 45. 4 The second group of Articles, Arts 38–39, 43 as well as Art. 44 specifies the procedures the buyer must follow in order to preserve those remedies. They impose important examination and notification duties upon the buyer relating to the fulfilment of the seller’s obligations (Arts 38, 39, 43). Systematically these provisions could also have been included in Section III, regulating the buyer’s remedies for breach of contract.4 In general, a failure to comply with these notification duties results in a loss of the remedies for the breach of the seller’s obligations as to the conformity of the 2

1 Schlechtriem/Butler, CISG (2009), para. 132; Eiselen, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual (2008), Vol. 4 § 89:1; Flechtner, Funky Mussels, a Stolen Car, and Decrepit Used Shoes: Non-Conforming Goods and Notice thereof under the United Nations Sales Convention, Boston University International Law Journal (2008) 1(3) (Pace). 2 Secretariat Commentary on 1978 Draft, Art. 39 (now Art. 41) para. 7. 3 Art. 2:001 PEL-Sales explicitly differentiates between the obligation to deliver goods and the duty as to the conformity of the goods, listing them as separate obligations. 4 See also Schlechtriem, The Seller’s Obligations Under the United Nations Convention on Contracts for the International Sale of Goods, in: Galston/Smit (eds), International Sales: The United Nations

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goods. Only where the seller knew about his breach of contract (Arts 40, 43(2)) or the buyer has a reasonable excuse for the lack of notification (Art. 44) are his remedies – at least partially – preserved. A violation of these notification duties by the buyer, however, does not constitute a breach of contract resulting in further remedies for the seller.

III. Differences Between the Liability Regimes for Non-conformity and Defects in Title There are certain differences between the two liability regimes for non-conformity 5 and defects in title.5 They relate primarily to the required levels of awareness of the defects. On the one hand, in the case of non-conforming goods, the seller’s liability is already excluded pursuant to Art. 35(3) if the buyer could not have been unaware of the deficiencies. For defects in title, Art. 41 requires the buyer’s actual consent. On the other hand, in the case of non-conforming goods, the seller may not rely on a buyer’s failure to give notice in time if he could not have been unaware of the lack of conformity (Art. 40). For defects in title, by contrast, positive knowledge is required (Art. 43(2)). Moreover, the examination obligation in Art. 38 and the final time limit for notifica- 6 tion in Art. 39(2) only exist in relation to the conformity of the goods. The same applies, at least according to the prevailing view, for some remedies. The wording of Arts 46(2)(3), 50, dealing with the remedies of repair, delivery of substitute goods and price reduction, only refers to the non-conformity of the goods and not to defects in title.6

IV. Differences in the Remedial Systems for Other Breaches Unlike legal systems following the Roman Law tradition7, the CISG, in principle, does 7 not provide for a special remedial system for breaches of the obligations contained in Arts 35, 41, 42. Such breaches give rise to the normal remedies listed in Art. 45. Irrespective of this general approach of a uniform system of remedies, there are a number of particularities which clearly distinguish the remedial systems for the delivery of non-conforming goods (which is the most relevant breach in practice8) from those of other breaches. The primary difference is the aforementioned notice requirement which exists for 8 non-confirming goods as well as for defects in title, the non-compliance with which will lead to a loss of remedies. Another particularity relates to the remedy of avoidance. According to the prevailing 9 view, the buyer may only avoid the contract if the breach is fundamental under Art. 49(1)(a). By contrast, the option to avoid the contract under Art. 49(1)(b) by setting an additional time for remedying the breach is not possible.9 This often leads Convention on Contracts for the International Sale of Goods (1984), pp. 6-1; see also the PEL-Sales and the DCFR (IV.A. – 4:301) where the provisions are included into the parts dealing with remedies. 5 On the differences see also Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 5; Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2012), Art. 35 CISG para. 4; Eckert/ Maifeld/Matthiessen, Handbuch des Kaufrechts (2014), para. 551. 6 For a detailed discussion see Art. 46 para. 7, Art. 50 paras 12 et seq. 7 For the abandonment of that tradition see Bianca, in: Bianca/Bonell, Commentary (1987), Art. 35 para 1.4; for the old Roman System see Zimmermann, The Law of Obligations – Roman Foundations of the Civilian Tradition (1996), pp. 293 et seq. 8 See Graffi, Case Law on the Concept of “Fundamental Breach” in the Vienna Sales Convention, International Business Law Journal (2003) 338 (341) (“most recurrent situation in international sales litigation”); Honnold/Flechtner, Uniform Law (2009), Art. 35 para. 222. 9 Cf infra Art. 49 para. 51

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Part III. Chapter II. Obligations of the Seller

to considerable uncertainty for the buyer. Unless the parties have expressly stipulated under which conditions non-conformity may amount to a fundamental breach, it may be difficult for a buyer to determine whether the breach is fundamental and, consequently, whether the contract can be avoided.10

V. Relationship to the National Remedies 10

Different views exist as to the relationship between the CISG’s rules on nonconformity and defects in title on the one hand and national non-contractual remedies such as mistake or tortious liability on the other. It is submitted that, with the exception of remedies which are based on facts and circumstances which go beyond the mere nonconformity of the goods or defects in title, remedies under national rules should be excluded. The CISG contains exhaustive remedies. Any other view would endanger the pursued harmonization in a central area of the CISG.11 10 Graffi, Case Law on the Concept of “Fundamental Breach” in the Vienna Sales Convention, International Business Law Journal (2003) 338 (341). 11 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 paras 47 et seq. with further references as to the development of this view and opposing views; Huber, Irrtumsanfechtung und Sachma¨ngelhaftung (2001), pp. 275 et seq.; cf. Oberster Gerichtshof (Austria) 13 April 2000 (machines), CISG-Online 576 (Pace) with note Schlechtriem, Noch einmal: Vertragsgema¨ße Beschaffenheit der Ware bei divergierenden o¨ffentlich-rechtlichen Qualita¨tsvorgaben, IPRax (2001) 161 (162); for a more detailed discussion see Art. 35 paras 200 et seq.

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Article 35 (1) The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract. (2) Except where the parties have agreed otherwise, the goods do not conform with the contract unless they:

(a) are fit for the purposes for which goods of the same description would ordinarily be used; (b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller’s skill and judgement; (c) possess the qualities of goods which the seller has held out to the buyer as a sample or model; (d) are contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods. (3) The seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for any lack of conformity of the goods if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity. Bibliography: Butler, The CISG a Secret Weapon in the Fight for a Fairer World, in Schwenzer (ed), 35 Years CISG and Beyond (2015), p. 295; Ferrari, Divergences in the application of the CISG’s rules on non-conformity of goods, RabelsZ (2004) 473 (Pace); Flechtner, Funky Mussels, a Stolen Car, and Decrepit Used Shoes: Non-Conforming Goods and Notice thereof under the United Nations Sales Convention, Boston University International Law Journal (2008) 1 (Pace); Gillette/Ferrari, Warranties and “Lemons” under CISG Article 35(2)(a), Internationales Handelsrecht (2010) 2 (Pace); Heilmann, Ma¨ngelgewa¨hrleistung im UN-Kaufrecht (1994); Henschel, Conformity of the goods: Interpreting or supplementing Article 35 of the CISG by using the UNIDROIT Principles of International Commercial Contracts and the Principles of European Contract Law, 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), p. 166 (Pace); Henschel, Conformity of Goods in International Sales Governed by CISG Article 35: Caveat Venditor, Caveat Emptor and Contract Law as Background Law and as Competing Set of Rules, Nordic Journal of Commercial Law (2004) (Pace); Hyland, Conformity of Goods to the Contract under the United Nations Sales Convention and the Uniform Commercial Code, in: Schlechtriem (Hrsg), Einheitliches Kaufrecht und nationales Obligationenrecht (1987), p. 305 (Pace); Kro¨ll/Hennecke, From New Zealand Mussels to New Zealand Trucks – The (not so) “ordinary use” in Article 35(2), in Schwenzer/Spagnolo (eds), Growing the CISG (2016), p. 43; Kruisinga, (Non-)conformity in the 1980 UN Convention on Contracts for the International Sale of Goods: a uniform concept? (2004); Maley, The Limits to the Conformity of Goods in the United Nations Convention on Contracts for the International Sale of Goods (CISG), 12 International Trade and Business Law Review (2009) 82; Mu¨ller, Ausgewa¨hlte Fragen der Beweislastverteilung im UN-Kaufrecht im Lichte der aktuellen Rechtsprechung (2005); Saidov, Art. 35 of the CISG: Reflecting on the Present and Thinking about the Future, 58 Villanova Law Review 2013, 529 (Pace); Saidov, Conformity of Goods and Documents, (2015); Vincze, Conformity of the Goods under the UN Convention on Contracts for the International Sale of Goods (CISG): Overview of CIETAC’s Practice, FS Kritzer (2008), p. 552 (Pace); CISG-AC Opinion no 17, Limitation and Exclusion Clauses in CISG Contracts, 16 October 2015. Rapporteur: Prof. Lauro Gama Jr., Pontifical Catholic University of Rio de Janeiro, Brazil (http://www.cisg-ac.org).

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Article 35 10

Part III. Chapter II. Obligations of the Seller Outline

I. Importance and Role of Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Overview on the content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Terminology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Art. 35 as part of the CISG’s liability regime for non-conformity . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. The concept of non-conformity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) General remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Lack of any materiality requirement concerning the discrepancy . . . . . c) Discrepancies in quantity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Discrepancies in quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Discrepancies in description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f) Discrepancies in containers and packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Art. 35(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Determining the relevant standard under Art. 35(1) . . . . . . . . . . . . . . . . . . . b) Implicit agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Practices and usages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Sale of used goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f) (Minimal) Ethical Standards, Codes of Conduct and other CSRPolicies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g) Subsequent amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Art. 35(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) General remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Fit for ordinary purpose: Art. 35(2)(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) General remarks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) The notion of “ordinary purpose”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Relationship to the standards of average and merchantable quality dd) Differing standards and public law provisions . . . . . . . . . . . . . . . . . . . . . ee) Application of the standard in practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (i) Resaleability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (ii) Suspicion of defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iii) Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iv) Necessary documentation for assembly and usage . . . . . . . . . . . . (v) Other issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Fit for a particular purpose stated by the buyer: Art. 35(2)(b) . . . . . . . . . aa) General remarks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Information about purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Reliance on the seller’s skill and knowledge . . . . . . . . . . . . . . . . . . . . . . . . d) In conformity with sample or model: Art. 35(2)(c) . . . . . . . . . . . . . . . . . . . . . aa) General remarks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) The required characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Samples provided by the buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Contained or packaged in the usual or adequate manner: Art. 35(2)(d) aa) The accessory duty of packing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) “Usual manner” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) “Adequate manner”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Damages limited to packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ee) Extent of the duty to packaging and costs associated with it. . . . . . 4. Art. 35(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Rationale and scope of the exclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Extension to breaches of Art. 35(1)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Buyer’s actual or presumed knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Seller acting in bad faith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Exclusion of express and implied obligations as to conformity . . . . . . . . . . . 6. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) General rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Allocation of the burden of proof in practice: Overview on the different positions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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c) Suggested approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Burden of proof concerning specific facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Art. 35(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Art. 35(2)(a) – Fitness for ordinary purpose . . . . . . . . . . . . . . . . . . . . . . . . cc) Art. 35(2)(b) – Fitness for a particular purpose . . . . . . . . . . . . . . . . . . . . . dd) Art. 35(2)(c) – Sale by sample or model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ee) Exclusion of liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Discharging the burden of proof: relevance of certificates confirming conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Relationship to the non-contractual remedies under national law. . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Article 35 184 195 195 198 200 202 203 204 207 215

I. Importance and Role of Provision Art. 35 as a whole is designed to establish which requirements the seller has to meet 1 in order to fulfil his delivery obligation in relation to conformity of the goods. Its importance in practice results from the fact that the majority of controversies arising from sales transactions relate to the conformity of the goods. Delivery of non-conforming goods, often also referred to as “defective delivery”, is in practice by far the most frequent breach of contract.1 In comparison, the complete failure to deliver any goods, i. e. cases of an actual “non-delivery”, are rare.

1. Overview on the content Art. 35 adopts a broad and largely unified concept of conformity.2 Unlike many 2 national sales laws, it covers not only quality but also quantity, identity and packaging.3 Outside the conformity concept of Art. 35 are, however, third party rights and claims, which are regulated separately in Arts 41–43.4 Art. 35(1) defines the contractual provisions of the parties, i. e. the description of the 3 goods in the contract, as the primary standard for conformity. Thus, it adopts a subjective standard, based on the promises or undertakings by the parties in connection with the specific transaction. Art. 35(2) then stipulates a number of the supplementary standards which apply unless excluded by the parties.5 To that extent, it can be said that Art. 35(1) respects the actual agreement of the parties where it exists, and Art. 35(2) protects the reasonable expectations of the parties where the contractual provisions concerning conformity of the goods are insufficient. Finally, Art. 35(3) contains an exclusion of liability for all cases in which the buyer knew or could not have been unaware of the lack of conformity under the objective standards set out in Art. 35(2). Notwithstanding the supplementary criteria in Art. 35(2), the parties must in their 4 contract include at least a minimum standard concerning the kind of goods to be supplied and their quantity. Where no agreement on these two issues has been reached, 1 See Gaffi, International Business Law Journal (2003) 338 (341): “most recurrent situation in international sales litigation”; Honnold/Flechtner, Uniform Law (2009), Art. 35 para. 222. 2 Honnold/Flechtner, Uniform Law (2009), Art. 35 para. 223; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 4 (“uniform concept”); Schlechtriem/Butler, CISG (2009), para. 132. 3 Tribunal Supremo (Spain) 17 January 2008 (300 second-hand automobiles), CISG-Online 1640 (Pace); for details see infra paras 12 et seq. 4 Secretariat Commentary on 1978 Draft, Art. 39 (now Art. 41) para. 7; the differences concern the effects of the buyer’s awareness of the existing defects (sufficient under Art. 35(3) – consent required under Art. 41), the time limit for liability (Art. 39(2)) and the available remedies (Arts 46(2)(3), 50); for a more detailed analysis of the differences see above Introductory Remarks pre Arts 35–44 para. 5. 5 Oberster Gerichtshof (Austria) 19 April 2007 (scaffold hooks), CISG-Online 1495 (Pace) at 1.1; for a more detailed analysis of the relationship between the two paragraphs see infra paras 64 et seq. (at 3.1).

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either directly or indirectly through a provision for a mechanism to make the necessary determination, in general no contract will exist between the parties.6

2. History Art. 35 is a mixture of elements from various legal systems.7 It differs from its predecessors in the ULIS, Arts 19(1), 33(1) and 36 ULIS, in several respects. One of the most important differences is the clear distinction between the obligation to deliver and non-performance on the one hand and obligations as to the conformity of the goods and defective performance on the other hand.8 Under Art. 33(1) ULIS a seller only fulfilled his delivery obligation if conforming goods were delivered. By contrast, under the CISG a seller may fulfil his general obligation to deliver pursuant to Art. 30 by goods which meet the general description of the contract but do not conform with the contractual or legal requirements as to quality and form. As a consequence, the buyer is limited to the remedies for non-conforming delivery and cannot invoke the remedies for non-delivery, such as Art 49(1)(b). A second difference relates to the abandonment of the requirement of “materiality of the discrepancy” previously contained in Art. 33(2) ULIS.9 As avoidance under the CISG is limited to fundamental breaches, the materiality-restriction of the ULIS is no longer considered to be justified for the other remedies.10 6 In addition, a different drafting technique was adopted. Art. 35 is a much simpler and, at the same time, more comprehensive text. Art. 33 ULIS limited itself to clarify the instances in which the seller has breached its delivery obligation. By contrast, Art. 35(2) defines the content of the seller’s delivery obligation in a positive way, setting out the legal requirements for conformity.11 5

3. Terminology 7

In some legal systems, such as the U.S., and in numerous international contracts the terms “express” or “implied warranties” are used to describe the type of obligations referred to in Art. 35(1) and (2).12 In practice, this use of the term “warranty” largely boils down to a question of terminology. Systematically, however, according to the concept underlying the CISG, the seller undertakes an obligation (and not only a warranty) to actually delivery the kind and quality of goods as agreed.13

4. Art. 35 as part of the CISG’s liability regime for non-conformity 8

Art. 35, by stipulating a duty to deliver conforming goods and determining the relevant standards of conformity, is the foundation of the CISG’s regime for liability for non-conformity. The relevant time at which the goods must be in conformity is defined in Art. 36. In principle, the goods must comply with the standards imposed by Art. 35 at the time when the risk passes (Art. 36(1)). This liability is extended to 6

Bianca, in: Bianca/Bonell, Commentary (1987), Art. 35 para. 2.2. Critical Hyland, Conformity of Goods, in: Schlechtriem (ed.), Einheitliches Kaufrecht (1987), p. 305. 8 Secretariat Commentary on 1978 Draft, Art. 33 (now Art. 35) para. 2; Mullis, in: Huber/Mullis, The CISG (2007), p. 107. 9 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 4. 10 For details see infra paras 15 et seq. 11 For a more comprehensive comparison between Art. 35 CISG and its ULIS antecedents see Bianca, in: Bianca/Bonell, Commentary (1987), Art. 35 paras 1.1 et seq.; Magnus, in: Staudinger Kommentar (2013), Art. 35 paras 3 et seq. 12 See Gillette/Walt, UN-Convention (2014), § 6.01. 13 Lookofsky, Understanding the CISG (2017), p. 76 seq.; Gillette/Walt, Sales Law (2016), Ch. 8-III p. 370 et seq. 7

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conformity at a later stage if the seller has either guaranteed such conformity or has breached an obligation resulting in the subsequent non-conformity (Art. 36(2)). The remedies for a breach of the obligation to deliver conforming goods are regulated 9 in Arts 45 et seq. In general, any failure of the seller to deliver goods which meet the relevant standards of Art. 35 constitutes a breach of contract giving rise to the remedies in Arts 45 et seq. and to the right of retention concerning the payment obligation.14 Unlike the ULIS, there is no longer a requirement concerning the materiality of the breach.15 Avoidance of the contract for non-conformity is, however, only possible where the lack of conformity constitutes a fundamental breach in the sense of Art. 49(1)(a). By contrast, the mere expiry of a time set for curing the lack of non-conformity in the sense of Art. 49(1)(b) is not sufficient. Moreover, the seller’s liability for his obligations under Art. 35 is not dependent on 10 any knowledge concerning the non-conformity of the goods. The CISG is generally based on non-fault liability. In those very rare cases where the non-conformity of the goods was due to an impediment beyond the seller’s control, claims for damages may be excluded pursuant to Art. 79. Equally, Art. 80 applies where the non-conformity is due to acts of the buyer. Irrespective of the non-conformity of the goods, in principle, the buyer’s remedies 11 only arise if he fulfils his examination and notification duties stipulated in Arts 38 and 39. Pursuant to Art. 39(1) the buyer “loses the right to rely on a lack of conformity of the goods” if he does not give proper notice of their non-conformity within a reasonable time. Exceptions to this rule exist where either the seller knew about the nonconformity (Art. 40) or the buyer has a reasonable excuse for not giving proper notice (Art. 44).

II. Detailed Commentary 1. The concept of non-conformity a) General remarks. Art. 35 is based on a wide concept of non-conformity which has 12 to be interpreted broadly and autonomously from comparable national concepts.16 In addition to quality, the concept in Art. 35 also includes differences in quantity, identity and packaging. In particular, if a broad interpretation of the various notions is adopted, the concept encompasses all relevant features of the goods. In any case, it is uncontested that the list is non-exhaustive. The parties may agree on additional requirements to be met by the goods for their conformity.17 As a consequence of this uniform concept of non-conformity, there is no need and no 13 justification for the subtle distinctions between the various forms of deviations that exist under many national laws. In principle, Art. 35 does not distinguish between the delivery of “defective goods” and the delivery of “different goods”, i. e. between peius and aliud or different types of aliud (capable and incapable of being approved by the 14

For details concerning the right of retention see below Art. 45 para. 8. See Eckert/Maifeld/Matthiessen, Handbuch des Kaufrechts (2014), para. 557; Piltz, Internationales Kaufrecht (2008), paras 5–31; for details see infra paras 15 et seq. 16 Bridge, International Sales Law (2013), para. 11.23; Piltz, Internationales Kaufrecht (2008), paras 5– 28; Tribunal Cantonal du Valais (Switzerland) 28 October 1997 (second hand bulldozer), CISG-Online 328 (Pace) at 4 b. 17 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 15; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 2 mentioning compliance with labelling and composition requirements; Landgericht Paderborn (Germany) 25 June 1996 (granulated plastic -PVC), CISG-Online 262 (Pace). 15

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buyer), as does, for example, Austrian law.18 Neither is a distinction made between ordinary characteristics of the goods and specific warranties as to their particular characteristics, i. e. between Sacheigenschaft and Zusicherung, as is done, for example, under Swiss law.19 Furthermore, Art. 35 does not distinguish between vice cache´ and vice apparent20, like the French law, between conditions and warranties, as is done under English law, or express and implied warranties, as is done under U.S. law. This has to be borne in mind when interpreting Art. 35. 14 In light of the relevance of this provision in practice, it is particularly important to give the concept an autonomous meaning as required by Art. 7 to avoid resort to national law concepts, which may undermine the intended harmonization of sales law. As national laws often provide for comparable standards using identical or comparable terminology there is an increased and imminent danger of importing national law standards into the CISG.21 Due to Art. 35’s reference to elements and formulations, which may be contained in various national laws, the risk of interpreting these concepts on the basis of the comparable national concept is fairly high.22 While Art. 35 might at first sight “mimic” domestic warranty provisions it is “an entirely different legal animal, best kept and studied in its own conformity cage”.23 15

b) Lack of any materiality requirement concerning the discrepancy. Discrepancies do not have to be material to constitute a breach of the obligation to deliver conforming goods under Art. 35.24 The materiality requirement imposed by Art. 33(2) ULIS, the predecessor of Art. 35, has been abolished.25 Its primary purpose under the ULIS was to prevent situations in which the buyer could require delivery of substitute goods or avoid the contract for minor deviations from the conformity requirements. Under the CISG, the necessary limitations upon both remedies are ensured by the additional requirement that the breach must be fundamental to justify either remedy (Arts 46(2), 49(1)(a)). To that extent, conformity in the sense of Art. 35 has to be clearly distinguished from the later question of whether the non-conformity constitutes a fundamental breach. The same applies to the question as to the amount of damages due. Therefore, it is in principle irrelevant whether the discrepancies affect the usability or value of the goods

18

Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 4; for the limits see below. Brunner, Kommentar (2014), Art. 35 para. 2. 20 Kruisinga, (Non-)conformity (2004), pp. 27 seq.; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 4. 21 Hyland, Conformity of Goods, in: Schlechtriem (ed.), Einheitliches Kaufrecht (1987), p. 305 (pp. 327 seq.). 22 For examples of an interpretation on the basis of national laws see Oberlandesgericht Frankfurt (Germany), 29 January 2004 (pork meat), CISG-Online 822 (Pace), criticized by Bundesgerichtshof (Germany) 2 March 2005 (Belgian frozen pork) CISG-Online 999 (Pace) at II1; Juzgado de Primera Instancia e Instruccio´n No. 3 de Tudela (Spain), 29 March 2005 (machine for rectification of bricks), Cera´mica Tudelana, S. A. v Wassmer Gruppe Spezial Machinen GmbH, CISG-Online 1016 (Pace) with critical comment by Schlechtriem/Perales di Viscasillas (Pace); for differences in interpretation see also Ferrari, Divergences in the application of the CISG’s rules on non-conformity of goods, RabelsZ (2004) 473 (474 et seq.); see also Ferrari,.”Domestication” of Art. 35(2)(a) CISG, in: Lookofsky/Andersen (eds). The CISG Convention (2014), p. 91 (101 et seq.). 23 Lookofsky, Tooling up for Warranties with the CISG Case Digest, in: Flechtner/Brand/Walter (eds), Drafting Contracts (2007), p. 343 (348). 24 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 34; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 13; Eckert/Maifeld/Matthiessen, Handbuch des Kaufrechts (2014), para. 557; Piltz, Internationales Kaufrecht (2008), paras 5–31; for a different view based on good faith considerations Neumayer/Ming, Convention de Vienne (1993), Art. 35 para. 2. 25 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 4; for the considerations relevant see Honnold, Documentary History (1989), p. 121. 19

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or even if they favour the buyer. Every discrepancy results in the non-conformity of the goods unless it is covered by contractual stipulations or usages or practices.26 Through the adoption of a conformity concept without any “materiality” require- 16 ment, the CISG avoids the often difficult decision of whether a discrepancy was immaterial or not. Moreover, the contractual equilibrium is best preserved if nonmaterial discrepancies constitute a breach of the obligation and entitle the buyer to the remedies of price reduction (Art. 50), repair (Art. 46(3)) or damages (Arts 74 et seq). However, in principle, the CISG concept of conformity is not based on a perfect 17 tender rule. Minor discrepancies are often within the tolerances allowed under the contract or in general practice. It is not uncommon that contracts provide that certain deviations as to quantity or quality are permissible and in certain sectors minor discrepancies in quantity or quality are considered to be permissible even without such explicit clauses. While such discrepancies, particularly in relation to quantity, may result in a reduction of price under the contract or trade usage, they do not constitute a breach of the obligation to deliver conforming goods.27 In addition, notwithstanding that it is in principle irrelevant for the finding of a 18 breach whether the non-conformity results in a reduced value or affects the utility, both factors de facto retain a certain relevance. In practice, both may be relevant considerations first in determining whether the goods are conforming, i. e. the definition of the relevant standard, and second whether the other requirements for the remedies are met. If goods are delivered which are equal in value and utility to conforming goods, in general, no damages will have occurred nor will the breach be fundamental. Where the non-conformity amounts to a fundamental breach it may form the basis for an avoidance of the contract.28 c) Discrepancies in quantity. Art. 35 is based on the concept that, in general, 19 discrepancies in quantity constitute a delivery of non-conforming goods and not partial non-delivery.29 Irrespective of the reference in Art. 51 to a delivery of “only a part of the goods”, the wording of Art. 35 is unequivocal. In principle, this applies irrespective of the size of the discrepancies and whether the discrepancies are evident from the relevant documents or not.30 Thus, the buyer is required to notify the seller even of large deviations to avoid the loss of his rights under Art. 39.31 While the buyer will often be 26 Magnus, in: Honsell, Kommentar (2010), Art. 35 para. 11; to that extent at least misleading Handelsgericht Zu¨rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace). 27 Arbitral Award, ICC, 1 August 1999 (books), CISG-Online 706; Schwenzer, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 35 para. 8; for the less than perfect deliveries see also Lookofsky, Tooling up for Warranties with the CISG Case Digest, in: Flechtner/Brand/Walter (eds), Drafting Contracts (2007), p. 343 (p. 349). 28 Tribunale di Busto Arsizio (Italy) 13 December 2001 (machinery for recycling of plastic bags), CISGOnline 1323 (Pace). 29 Piltz, Internationales Kaufrecht (2008), para. 5–28; Bundesgericht (Switzerland) 7 July 2004 (cable drums), CISG-Online 848 (Pace); Landgericht Landshut (Germany) 5 April 1995 (sport clothing), CISGOnline 193 (Pace); but see contra Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce 132/2004, 27 October 2005 (goods not specified), CISG-Online 1503 (Pace). 30 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 35 CISG paras 6 seq.; for the qualification as partial nondelivery where the discrepancy is obvious from the documents Enderlein/Maskow, International Sales Law (1992), Art. 35 para. 3; Salger, in: Witz/Salger/Lorenz, Kommentar (2016), Art. 35 para. 6. 31 Bundesgericht (Switzerland) 7 July 2004 (cable drums), CISG-Online 848 (Pace); Oberlandesgericht Brandenburg (Germany) 3 July 2014 (cuttings), CISG-Online 2543 (Pace), para. 22; Landgericht Landshut (Germany) 5 April 1995 (sport clothing), CISG-Online 193 (Pace); cf. for excess quantities: Oberlandesgericht Rostock (Germany) 25 September 2002 (frozen food), CISG-Online 672 (Pace); Heilmann, Ma¨ngelgewa¨hrleistung (1994), pp. 171 seq.; for a loss due to an unspecific notice Oberlandesgericht Koblenz (Germany) 31 January 1997 (acrylic blankets), CISG-Online 256 (Pace).

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21

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able to rely on Art. 40 in case of large discrepancies, this may not always be the case if the seller has informed the buyer about these discrepancies. Contracts sometimes provide that certain deviations as to quantity are permissible. Where the quantity is only stated as an approximate amount through clauses such as “more or less”, “not less than” or “about” the seller has some latitude as to the amount he can deliver. In certain sectors, minor discrepancies in quantity are considered to be permissible even without such explicit clauses (e. g. usage in the sense of Art. 9). Unless the permitted tolerances have been exceeded, such discrepancies do not constitute a non-conforming delivery.32 Nevertheless they will often result in a reduction of price under the contract or the trade usage. One further example where a temporary discrepancy in quantity may not lead to non-conformity is instalments contracts. In principle, each instalment has to be treated separately and this also pertains to conformity. However, unless the buyer needs a particular amount of the goods at a specified date, as in cases of just-in-time production, shortage in delivery in earlier instalments can be remedied by the delivery of a larger quantity in subsequent instalments. Such temporary shortages are regularly due to the availability of transportation space and are often covered by existing customs in particular areas of trade or practices between the parties.33 Equally, the delivery of excess quantity constitutes a non-conformity.34 Its consequences are regulated specifically in Art. 52(2) which provides that the buyer may take delivery of the excess quantity and pay for it or refuse to take delivery. The latter option may, however, be lost if the buyer violates its notice obligation under Art. 39. The above principles also apply mutatis mutandis to partial deliveries, which, in relation to non-conformity, can be equated with the explicitly mentioned lack of quantity.35 d) Discrepancies in quality. Quality as used in Art. 35 covers primarily the – broadly understood – physical condition of the goods, whether agreed upon (Art. 35(1)) or justifiably expected (Art 35(2)). Thus, deviations from the physical or chemical composition of the goods36 or the resulting characteristics, such as being washable without shrinking37 or being suitable for consumption, as well as from the expressly or impliedly agreed age or hours of use, constitute discrepancies in quality.

32 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 8; Arbitral Award, ICC 9083/1999, 1 August 1999 (books), CISG-Online 706; Ontario Superior Court of Justice (Canada) 31 August 1999 (picture frame mouldings), CISG-Online 433 (Pace). 33 See Arbitral Award, ICC 9083/1999, 1 August 1999 (books), CISG-Online 706, relying additionally on a practice established between the parties due to the lack of complaints against such discrepancies. 34 Piltz, Internationales Kaufrecht (2008), para. 5–33; Oberlandesgericht Rostock (Germany) 25 September 2002 (frozen food), CISG-Online 672 (Pace); Ontario Superior Court of Justice (Canada) 31 August 1999 (picture frame mouldings), CISG-Online 433 (Pace); but see Cour d’appel Paris (France) 22 April 1992 (electronic components), Socie´te´ Fauba France FDIS GC Electronique v Socie´te´ Fujitsu Mikroelectronic GmbH, CISG-Online 222 confirmed by Cour de cassation (France) 4 January 1995 (electronic components), CISG-Online 138 (Pace) applying Arts 81 et seq. to such cases with critical note by Witz, The First Decision of France’s Court of Cassation Applying the U. N. Convention on Contracts for the International Sale of Goods, 16 Journal of Law and Commerce (1997) 345–356. 35 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 15. 36 Appellationsgericht Basel-Stadt (Switzerland) 23 August 2003 (soyaprotein products), CISG-Online 943 (Pace); Landgericht Paderborn (Germany) 25 June 1996 (granulated plastic – PVC), CISG-Online 262 (Pace). 37 Landgericht Landshut (Germany) 5 April 1995 (sport clothing), CISG-Online 193 (Pace) – shrinking of one to two sizes considered to be fundamental breach.

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Additionally, quality in the sense of Art. 35 further encompasses non-physical attributes of the goods, i. e. factual and legal circumstances affecting the relationship of the goods to their surroundings.38 Depending on the circumstances of the case, these can include public law regulations,39 technical standards or compliance with certain standards in production, such as good manufacturing practice, the absence of child labour or other ethical or environmental standards.40 The origin of the goods may also be considered to be an element of their quality, particularly when the origin affects import quotas, customs duties or the general resalability of the goods for political reasons.41 The same applies to the existence of certificates or documents42 and the brand of the goods, i. e. whether they are originals or counterfeits.43 Also, cultural traditions and religious convictions can influence the parties’ expectation as to the quality of the goods, for example that foodstuff does not contain beef or pork. Documents necessary for the use of the goods, such as assembly instructions or user manuals, can equally be considered to form part of the quality of the goods.44 By contrast, documents used in the performance of international transactions, such as bills of lading or packing lists do not fall within the ambit of Art. 35 but are regulated separately in Art. 34.45 Discrepancies in quality permitted under the contract or under trade usages in the relevant sector – or practices established between the parties – do not result in the nonconformity of the goods.46

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e) Discrepancies in description. In principle, the delivery of different goods is 29 considered to constitute delivery of non-conforming goods. Unlike some national laws, the CISG does not differentiate between the delivery of non-conforming goods and the

38 For a comprehensive treatment of the issue see Maley, The Limits to the Conformity of Goods, 12 International Trade and Business Law Review (2009) 82 et seq. (Pace). 39 Oberster Gerichtshof (Austria) 13 April 2000 (machines), CISG-Online 576 (Pace) – lack of CEcertificate; Cour d’appel Grenoble (France) 13 September 1995 (cheese), Caito Roger v Socie´te´ francaise de factoring, CISG-Online 157 (Pace) – lack of correct labelling as to composition and expiry date of parmesan cheese. 40 Butler, The CISG a Secret Weapon in the Fight for a Fairer World, in Schwenzer (ed.), 35 Years CISG and Beyond, p. 295 (302); Schwenzer, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 35 para. 9. 41 Bundesgerichtshof (Germany) 3 April 1996 (cobalt sulphate), CISG-Online 135 (Pace) – from South Africa instead of UK; Landgericht Saarbru¨cken (Germany) 1 June 2004 (pallets), CISG-Online 1228 (Pace) – pallets not from Poland as alleged so that additional customs duties were due. 42 Oberlandesgericht Mu ¨ nchen (Germany) 13 November 2002 (barley), CISG-Online 786 (Pace) with note by Hohloch, Juristische Schulung 2003, 1134 (1135) – absence of a certificate identifying the goods as bio; Handelsgericht St. Gallen (Switzerland) 14 June 2012 (organic juices and organic oils), CISG-Online 2468 (Pace), para. III.2.a; Court of Appeal of New Zealand (New Zealand) 22 July 2011 (trucks), RJ & AM Smallmon v Transport Sales Ltd and Grant Alan Miller, CISG-Online 2215 (Pace) absence of a certificate that production is according to Australian Design Rules; Oberlandesgericht Hamm (Germany) 30 November 2010 (pigs), CISG-Online 2217, para. II.3 lack of breeding documentation. 43 Maley, The Limits to the Conformity of Goods, 12 International Trade and Business Law Review (2009) 82 (87 et seq.) (Pace); Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 8; where the “brand equity” is protected by intellectual property rights, the special rules in Art. 42 supersede Art. 35. 44 For details see below para. 102. 45 Piltz, Internationales Kaufrecht (2008), para. 5–29; for details see Art. 34 paras 3, 10 et seq. 46 Ontario Superior Court of Justice (Canada) 31 August 1999 (picture frame mouldings), CISG-Online 433 (Pace).

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delivery of different goods, i. e. the delivery of an aliud.47 This applies for bulk sales as well as for the sale of specific goods.48 Thus, even at the time of the economic embargo against South Africa, the delivery of cobalt sulphate of South African origin did not constitute a non-delivery of the English Cobalt Sulphate contracted for but merely the delivery of non-conforming cobalt sulphate.49 Equally, delivery of gravel instead of porphyry stones does not result in non-delivery but merely in a non-conforming delivery.50 However, different views exist as to whether a blatant divergence from a contractual condition has to be classified as non-delivery instead of delivery of non-conforming goods. The differentiation between non-delivery and delivery of non-conforming goods is of practical relevance as the notification obligation under Art. 39 only exists for the delivery of non-conforming goods. Furthermore, the buyer may only avoid the contract pursuant to Art. 49(1)(a) if the breach is fundamental, while in cases of non-delivery the buyer may additionally rely on Art. 49(1)(b) to avoid the contract, i. e. after the expiry of an additional period of time.51 Some authors and courts have submitted that the delivery of goods, which do not at least meet the general description of the contract, i. e. goods which are “absolutely extraneous to the seller’s obligation”, must be considered as non-delivery and not as defective delivery.52 Some support for this view can be found in the Secretariat’s Commentary, which states that the delivery of potatoes instead of corn does not fulfil the obligations to deliver goods for the purpose of Art. 30.53 The prevailing54 and, in this author’s opinion, better view is, however, to avoid such distinctions, even if this may sometimes seem contrary to the notion of delivery. Otherwise, the distinction between aliud and non-conforming goods would in those cases be merely replaced by a no less difficult distinction between non-conforming 47 See Oberster Gerichtshof (Austria) 29 June 1999 (dividing wall panels), CISG-Online 483 (Pace); Oberster Gerichtshof (Austria) 21 March 2000 (wood), CISG-Online 641 (Pace). Handelsgericht des Kantons Zu¨rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace) – goods with different article number delivered; cf. Amtsgericht Viechtach (Germany) 11 April 2002 (pallets), CISG-Online 755 (Pace) – pallets delivered did not fulfil the agreed EUR-Norm; Landgericht Stuttgart (Germany) 4 June 2002 (porphyr stones), CISG-Online 909 (Pace) – in part delivery of gravel instead of the purchased porphyr stones. Gruber, in: Mu¨nchKommBGB (2016), Art. 35 CISG para. 4. 48 Oberster Gerichtshof (Austria) 29 June 1999 (dividing wall panels), CISG-Online 483 (Pace); for a limitation in cases where specific goods are sold Benicke, in: Mu¨nchKommHGB (2013), Art. 35 para. 4. 49 Bundesgerichtshof (Germany) 3 April 1996 (cobalt Sulphate), CISG-Online 135 (Pace) at II 2 b; Benicke, Zur Vertragsaufhebung nach UN-Kaufrecht bei Lieferung mangelhafter Ware, IPRax (1997) 326 (328): see also Oberlandesgericht Zweibru¨cken (Germany) 2 February 2004 (milling equipment), CISGOnline 877 (Pace) – Russian and Turkish mills delivered are non-conforming German mills. 50 Landgericht Stuttgart (Germany) 4 June 2002 (porphyr stones), CISG-Online 909 (Pace); cf. Amtsgericht Viechtach (Germany) 11 April 2002 (pallets), CISG-Online 755 (Pace) (pallets delivered did not fulfil the agreed EUR-Norm). 51 See for details Art. 49 paras 49 et seq. 52 Bianca, in: Bianca/Bonell, Commentary (1987), Art. 35 para. 2.4. Neumayer/Ming, Convention de Vienne (1993), Art. 35 para. 3; Neumayer, Offene Fragen zur Anwendung des Abkommens der Vereinten Nationen u¨ber den internationalen Warenkauf, RIW (1994) 99 (105); see also Oberlandesgericht Du¨sseldorf (Germany) 10 February 1994 (fabrics), CISG-Online 115 (Pace); in obiter dicta favour also Amtsgericht Viechtach (Germany) 11 April 2002 (pallets), CISG-Online 755 (Pace); left open Bundesgerichtshof (Germany) 3 April 1996 (cobalt sulphate), CISG-Online 135 (Pace). 53 Secretariat Commentary on 1978 Draft, Art. 29 (now Art. 30) para. 3. 54 Aicher, Leistungssto ¨ rungen aus der Verka¨uferspha¨re, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 111 (p. 120 et seq.); Schlechtriem, The Seller’s Obligations Under the United Nations Convention on Contracts for the International Sale of Goods, in: Galston/Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), pp. 6–11; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 11; Gruber, in: Mu¨nchKommBGB (2016), Art. 35 CISG para. 4; Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 9.

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delivery and non-delivery. The legislative history of Art. 30 does not provide a basis for the statement in the Secretariat’s Commentary seemingly supporting such a distinction. Furthermore, there is no practical need for this distinction. The buyer’s legitimate interests are sufficiently protected even if blatant discrepancies between the goods delivered and contracted for are included into the concept of non-conforming delivery. In such cases, the buyer is generally substantially deprived “of what he is entitled to expect under the contract” and thus has the right to avoid the contract or to ask for delivery of substitute goods under Arts 46(2) and 49(1)(a). In addition, the argument of the problems encountered in calculating the reduction of price under Art. 50 is largely of a theoretical nature. In cases of blatant discrepancies, the buyer normally has an interest either in delivery of substitute goods or avoidance of the contract and not in a mere reduction of the price. The threat of losing the rights to rely on the nonconformity is negligible. In cases of blatant discrepancies, the seller will normally be aware of the non-conformity of the goods or at least ought to have been aware thereof.55 Pursuant to Art. 40, the seller will thus not be able to rely on any failure by the buyer to notify the seller under Art. 39. Furthermore, in cases where the discrepancies are of such a weight that the buyer is not even able to attribute the delivery to a particular contract,56 the buyer will be excused under Art. 44 for a failure to give notice.57 f) Discrepancies in containers and packaging. In light of the peculiarities of inter- 34 national transactions, often requiring long distance transportation crossing several borders, packaging of the goods may be of considerable importance. Accordingly, unlike in some national sales laws,58 deviations from the agreed mode of containment or packaging may result in non-conformity of the goods.59 Implicit agreements as to packaging are possible and may result from previous practice between the parties. This does not apply, however, in cases where the packaging under previous contracts was inadequate.60 The principle of good faith in Art. 7 prohibits reliance on discrepancies in packing if 35 the sole purpose of the containers or the packaging is to ensure that the goods can be transported without being damaged and this objective has been attained despite the failure to comply with the packaging requirements.61 Additionally, the packaging may also have the purpose of preventing harm or damage to other persons or goods that may be caused by improper packaging or it may be a crucial element in the brand image of the goods.

55 E. g. Handelsgericht Zu ¨ rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace) at 5 b, bb; for a different view in cases of a slight negligent mix up of goods Aicher, Leistungssto¨rungen aus der Verka¨uferspha¨re, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 111 (118); Benicke, Zur Vertragsaufhebung nach UN-Kaufrecht bei Lieferung mangelhafter Ware, IPRax (1997) 326 (328). 56 In favour of making the attributability an additional requirement Resch, Zur Ru ¨ ge bei Sachma¨ngeln ¨ JZ (1992) 470 (472); Janssen, Untersuchungs- und Ru¨gepflichten im deutschen, nach UN-Kaufrecht, O niederla¨ndischen und internationalen Kaufrecht (2001), p. 78. 57 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 35 CISG para. 5. 58 See the example in Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 12 note 63. 59 Comisio ´ n para la Proteccio´n del Comercio Exterior de Me´xico (Mexico) 29 April 1996 (canned fruit), Conservas la Costena v Lanis, CISG-Online 350 (Pace). 60 Saarla ¨ ndisches Oberlandesgericht (Germany) 17 January 2007 (natural stone marble panels), CISGOnline 1642 (Pace). 61 Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 10; Janssen, Untersuchungs- und Ru¨gepflichten im deutschen, niederla¨ndischen und internationalen Kaufrecht (2001), pp. 79 seq.

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In cases of inadequate packaging, the seller will be deemed to have delivered nonconforming goods even if the damage to the goods occurrs after the passing of risk.62

2. Art. 35(1) a) Determining the relevant standard under Art. 35(1). Art. 35(1) defines the contract as the primary source for the standard of conformity of the goods. It contains a clear endorsement of the supremacy of contractual provisions over the supplementary legal standard provided by Art. 35(2).63 Consequently the CISG, like many national laws, has as its starting point a subjective concept of non-conformity.64 38 A contractual agreement in the sense of Art. 35(1) does not require any special wording of the parties and its formation is governed by the general rules on formation. In particular, no confirmation or even guarantee of certain characteristics by the seller is required.65 Such guarantees may, however, be relevant in determining whether a breach is fundamental (Arts 46(2), 49(1)(a)) or for the application of Art. 36(2). 39 The contractual requirements may be explicit or implicit.66 They may be spelt out in some detail or may follow from the specific termionology used.67 In determining the exact content of the seller’s contractual obligation concerning the conformity of the goods, the parties’ statements and conduct have to be interpreted in accordance with the principles set out in Art. 8.68 This means, in particular, that the courts are not restricted to the four corners of the contract and what has been put down in writing. The parol evidence rule (at least its substantive part) as applied in common law jurisdictions is not applicable in this regard.69 Instead, as required by Art. 8(3), courts have to base their interpretation on “all relevant circumstances of the case”. In addition to the contractual document itself and its annexes, these include other documents exchanged between the parties, such as assembly instructions, service manuals,70 pre-contractual negotiations 37

62 Piltz, Internationales Kaufrecht (2008), paras 5–37; Comisio ´ n para la Proteccio´n del Comercio Exterior de Me´xico (Mexico) 29 April 1996 (canned fruit), Conservas la Costena v Lanis, CISG-Online 350 (Pace); see also Arbitral Award, CIETAC, 23 February 1995 (jasmine aldehyde), CISG-Online 568 (Pace). 63 Schlechtriem/Butler, CISG (2009), para. 133; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 5; cf. Bundesgerichtshof (Germany) 3 April 1996 (cobalt Sulphate), CISGOnline 135 (Pace) at II2c(aa); Kantonsgericht Schaffhausen (Switzerland) 27 January 2004 (model locomotives), CISG-Online 960 (Pace). 64 The objective standards implied by Art. 35(2) lead in the end to a mixed system of conformity; Magnus, in: Honsell, Kommentar (2010), Art. 35 para. 12. 65 Piltz, Internationales Kaufrecht (2008), para. 5–32; Flechtner, Funky Mussels, a Stolen Car, and Decrepit Used Shoes: Non-Conforming Goods and Notice thereof under the United Nations Sales Convention, Boston University International Law Journal (2008) 1 (5) (Pace). 66 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 7; Hyland, Conformity of Goods, in: Schlechtriem (ed.), Einheitliches Kaufrecht (1987), p. 305 (308); see also Bundesgericht (Switzerland) 22 December 2000 (used rotary printing textile machine), CISG-Online 628 (Pace). 67 Bundesgerichtshof (Germany) 26 September 2012 (clay), CISG-Online 2348 (Pace) where the dutch description used “Aardappelbescheidingsklei A 01” made clear that the clay was used as a separator of potatoes and therefore had to comply with food legislation. 68 Handelsgericht Zu ¨ rich (Switzerland) 3 April 2013 (steel coils), CISG-Online 2562 (Pace), para. 5.3.2; Bundesgericht (Switzerland) 23 September 2013 (steel coils), CISG-Online 2560 (Pace), para. 3.2; Oberlandesgericht Hamm (Germany) 30 November 2010 (pigs), CISG-Online 2217, para. II.1.a. 69 Lookofsky, Understanding the CISG (2017), p. 78; Gillette/Walt, Sales Law (2016), Chap. 8 III p. 370 seq.; see generally on the non-applicability of the parol evidence rule U.S. Court of Appeals (11th Circuit) (U.S.) 29 June 1998, MCC-Marbel Ceramic Center Inc. v Ceramica Nuova D’Agostino S. p. A., 144 F.3 d 1384 (ceramic tiles), CISG-Online 342 (Pace). 70 Arbitral Award, SCC 5 June 1998 (rail press), CISG-Online 379 (Pace) – relevance of service manual for determining the standard of conformity.

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and previous contacts.71 Documents issued by third parties in conjunction with the contract, such as letters of credit or inspection certificates, may also provide indications as to the parties’ agreed standard of conformity. Where, for example, a letter of credit provides that documents may be accepted which mention minor deficiencies in the goods, that may be an indication that such deficiencies do not affect the conformity of the goods.72 Equally, public statements of the seller or his advertising may be relevant in determining the characteristics of the goods the parties have agreed upon.73 There is, however, a need to distinguish between statements or conduct, which contain legally relevant descriptions of the goods, and those that are merely puffing language.74 In doing so, one has to take cultural differences into account, as well as the fact that often parties do not communicate in their native language. Consequently, the subtle distinctions developed in national laws between, for example, “affirmation of facts”, “promises”, “statements of commendation” or “opinion” as well as the meaning attached to certain phrases are largely irrelevant for interpretation under the CISG.75 This may be different, however, where both parties have used a certain phrase with a view to its meaning in a particular country, e. g. when the contract has been negotiated by lawyers coming from the same country. Different views exist as to who bears the risk of ambiguous descriptions. Some authors deduce from the wording of “could not have been unaware” in Art. 8(1) that the recipient of an ambiguous declaration has to enquire as to its contents. Others promote an application of the “contra proferentem rule” under Art. 8(2), imposing the burden upon the party making a statement to make its intention clear.76 The parties’ subsequent conduct can give valuable indications as to the exact content of the parties’ agreement. For example, the lack of any immediate complaint about missing quantities or over-shipments may be indicative that the parties agreed on the quantity delivered. Equally, efforts by the seller to increase the output of a machine upon complaints by the buyer are a strong indication that a higher output than attained by the machine was agreed by the parties.77 However, in the latter situation it must always be borne in mind that additional efforts are often made as an expression of good will to maintain the business relationship without the existence of a legal obligation. Also, efforts to sell the goods may be part of the buyer’s efforts to mitigate damages under Art. 77 and not an indication that the goods delivered were conforming.78 The contractual conformity requirements may result from individually agreed clauses or from standard terms which have become part of the contract. In practice, parties 71 For the relevance of previous correspondence see Appellationsgericht Basel-Stadt (Switzerland) 23 August 2003 (soyaprotein products), CISG-Online 943 (Pace); Arbitral Award, CIETAC, 22 May 1996 (broadcasting equipment) (Pace); Helsinki Court of First Instance (Finland) 11 June 1995, confirmed by Helsinki Court of Appeal (Finland) 30 June 1998 (skin care product), CISG-Online 1304 (Pace) – statement that product has a 30 months shelf life. 72 Bundesgericht (Switzerland) 2 April 2015 (wire rod), CISG-Online 2592 (Pace), para. 7.1.1 allowing bills of lading mentioning that “some bands brooken or loose”. 73 Schlechtriem/Butler, CISG (2009), para. 134; Oberlandesgericht Koblenz (Germany) 19 December 2012 (generator), CISG-Online 2470 (Pace) – relevance of description of the generator in the internet offer. 74 High Court of Justice (United Kingdom) 1 May 2012 (borence, polymer), Kingspan Environmental Ltd et al v Borealis A/S et al, CISG-Online 2391 (Pace), paras 626 seq. – general representation that Borecene was “fully UV stabilised” not apt to import contractual terms as to timespan of UV resistence. 75 Gillette/Walt, Sales Law (2016), Chap. 8 III pp. 370 seq. 76 For a discussion of the problem Maley, The Limits to the Conformity of Goods, 12 International Trade and Business Law Review (2009) 82 (108 seq.) (Pace). 77 Appelationsgericht Basel-Stadt (Switzerland) 26 September 2008 (packaging machine), CISG-Online 1732 (Pace). 78 See Landgericht Berlin (Germany) 15 September 1994 (shoes), CISG-Online 399 (Pace).

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often refer to particular industry norms or standards such as the various ISOstandards79 or standard terms prepared for a certain branch or industry by the relevant organisation. Thus, a reference in a contract for the delivery of fruits or vegetable to the COFREUROP-conditions, determines inter alia, that the goods supplied must comply concerning their condition, labelling and packaging “with the rules in force, in the country where the goods will be marketed” (Clause 3.1.1). By contrast, mere contractual references to the “usual characteristics”, “normal quality” or “big crystals”80 are normally too vague to constitute contractual stipulations in the sense of Art. 35(1) unless these notions have a particular meaning in the relevant industry. If the contractual description of the goods requires the certification or classification of the goods by a public authority or a third party, the mere absence of such a certification or classification leads to their non-conformity. Whether the goods actually fulfil the quality requirements and the certification or classification was wrongly denied or made is normally irrelevant. In general, the mere lack of the required stamps negatively affects the use of the goods.81 The agreement of the parties is also relevant where they agreed on characteristics, which cannot be attained with the present knowledge.82 The same applies for agreements concerning packaging, which go far beyond what is necessary for transportation.83 However, in all those cases, courts, when interpreting the parties’ agreement, should be reluctant to assume that the parties agreed on technically impossible characteristics. Also, ostensibly clear contractual descriptions of the goods have to be interpreted in light of the surrounding circumstances. Thus, where the parties had agreed on the sale of a particular machine selected by the buyer but specified a different category of machine in the contract, the non-compliance of the chosen machine with the contractual description does not amount to non-conformity.84 b) Implicit agreements. The parties may also agree implicitly on certain characteristics of the goods or the packaging required. The dividing line between an implicit agreement under Art. 35(1) and the requirements imposed by Art. 35(2) is slim and depends on the facts of each particular case. Its practical relevance results from the fact that an exclusion of liability under Art. 35(3) is in principle only possible for the breach of obligations imposed under Art. 35(2). In addition, unlike Art. 35(2)(b), Art. 35(1) does not require any reliance of the buyer on the seller’s skill.85 Thus, an implicit 79 E. g. Oberlandesgericht Ko ¨ ln (Germany) 12 January 2007 (paperboard containers), CISG-Online 1581 (Pace); U.S. Bankruptcy Court for the District of Oregon (USA) 29 March 2004, In re Siskiyou Evergreen, Inc. (Christmas trees), CISG-Online 1174 (Pace) where the parties defined the quality of the trees to be delivered by reference to a grading system for agricultural goods established by the US Department of Agriculture. 80 Bundesgericht (Switzerland) 13 January 2004 (menthol USP brand crystals), CISG-Online 838 (Pace) (UNILEX) at E. 3.4 considering the reference to be not sufficiently specific to constitute an agreement on a certain size of the crystals purchased; cf. Arbitral Award, CIETAC, 22 March 1995 (down jacket and winter coat), CISG-Online 1118 (Pace) – “European style”. 81 Obiter also U.S. Bankruptcy Court for the District of Oregon (USA) 29 March 2004 (Christmas trees), In re Siskiyou Evergreen, Inc., CISG-Online 1174 (Pace) at 3; see also Maley, The Limits to the Conformity of Goods, 12 International Trade and Business Law Review (2009) 82 (106 seq.) (Pace). 82 Schlechtriem/Butler, CISG (2009), para. 133; Piltz, Internationales Kaufrecht (2008), para. 5–31. 83 Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 10. 84 Arbitral Award, SCC 90/2004, 2 June 2006, SIAR 2007/2 211 (220) – contract provided for a “cold mill” but mill selected and delivered was a “temper mill” which unlike a cold mill is not able to flatten steel. 85 For a different view Neumann, Features of Article 35 in the Vienna Convention; Equivalence, Burden of Proof and Awareness, 11 Vindobona Journal of International Commercial Law and Arbitration (2007/ 1) 81 at paras 10 et seq. (Pace).

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agreement should not be assumed lightly. Its assumption should be limited to cases where, in light of the negotiations, the documents submitted, the express contractual provisions or the conduct of the parties, the buyer can expect certain qualities to be present.86 For example, samples provided by the buyer to the seller and accepted by the latter constitute an implicit agreement that the goods are of the same quality as the sample.87 Equally, the use of certain terms or phrases for goods which may be used for several different purposes can constitute an implicit agreement.88 Where documents are submitted which either show the production date or from which a certain use can be deduced, this normally constitutes an implicit agreement that the goods have that age and have not been used differently.89 Additionally, implicit agreements on a certain output per hour can be derived from the circumstances. In a Swiss case, the buyer had expressed his interest in buying a packaging machine with a certain output. Though the seller never explicitly stated that the machine had this output, subsequent communications, answers to other questions and postinstallation efforts to reach the output showed an implicit agreement on this output.90 There is normally also an implicit agreement that the goods are delivered with an appropriate user manual where it is necessary for the ordinary use of the goods.91 In principle, the implicit agreement also extends to the language of the manual. At least where the goods are produced and sold for a particular market, the manual should be in the language spoken in this country. By contrast, without any indications to the contrary, a Swiss buyer of stocked goods cannot expect that goods delivered by a German seller to Switzerland are accompanied by user manuals not only in German but also in French and Italian.92 Equally, it generally cannot be assumed that the parties implicitly agreed on the relevance of public regulations at the buyer’s place of business, if there are no indications to this effect in the contract.93 An agreement on the place of delivery, in particular where it is the buyer’s place of business, is in itself insufficient to justify the assumption of an implicit agreement that the goods will be in compliance with public law standards in that country.94 An implicit agreement may exist if such rules have 86 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 13 seq.; slightly different in favour of a theory of equivalence Neumann, Features of Article 35 in the Vienna Convention; Equivalence, Burden of Proof and Awareness, 11 Vindobona Journal of International Commercial Law and Arbitration (2007/1) 81 at paras 17 et seq. (Pace). 87 Oberlandesgericht Graz (Austria) 9 November 1995 (marble slabs), CISG-Online 308 (Pace) (Unilex); Lookofsky, Understanding the CISG (2017), p. 88. 88 Bundesgerichtshof (Germany) 26 September 2012 (clay), CISG-Online 2348 (Pace) where the dutch description used “Aardappelbescheidingsklei A 01” made clear that the clay was used as a separator of potatoes and therefore had to comply with food legislation. 89 Oberlandesgericht Ko ¨ ln (Germany) 21 May 1996 (used car), CISG-Online 254 (Pace) implicit agreement that car sold is not two years older than shown in the papers and has been driven an additional 50.000 km. 90 Appelationsgericht Basel-Stadt (Switzerland) 26 September 2008 (packaging machine), CISG-Online 1732 (Pace). 91 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 13; Achilles, CISG-Kommentar (2000), Art. 35 para. 5. 92 Landgericht Darmstadt (Germany) 9 May 2000 (video recorders and other electrical appliances), CISG-Online 560 (Pace). 93 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 15; Bundesgerichtshof (Germany) 8 March 1995 (New Zealand mussels), CISG-Online 144 (Pace) at II1 a; Oberster Gerichtshof (Austria) 13 April 2000 (machines), CISG-Online 576 (Pace); Audiencia Provincial de Granada (Spain), 2 March 2000 (food), CISG-Online 756 (Pace). 94 Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 6; cf. Bundesgerichtshof (Germany), 8 March 1995 (New Zealand mussels), CISG-Online 144 (Pace) at II1 a; Oberster Gerichtshof (Austria) 13 April 2000 (machines), CISG-Online 576 (Pace).

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already played a role in a previous contract or have been explicitly mentioned during the negotiations as a precondition for entering into the contract. 53 In general, one should be cautious to assume an implicit agreement whenever such an agreement would either result in a considerable burden for the seller or seriously limit the usability of the goods for the buyer. Agreements of a certain importance are normally made expressly. Thus, for example, the mere fact that the buyer did not complain about a certain method of packaging in previous deliveries does not amount, in general, to an implicit agreement where the packaging inadequately protects the goods.95 54

c) Practices and usages. In defining the relevant standard of conformity in Art. 35(1), usages and practices agreed and established between the parties in the sense of Art. 9(1) are relevant. The same applies for generally respected usages in a particular trade sector in the sense of Art. 9(2).96 Those usages prevail over the objective standards imposed by the CISG in Art. 35(2) and can relate to all aspects of conformity.97 They may have a bearing on the definition of the goods by determining which of the various designations used is relevant98 or prescribe a minimum quality of the goods or the documents which have to be provided with the goods.99 For example, in the international fish trade a usage exists that provides that, in the absence of an agreement to the contrary, fish delivered has to be of this year’s catch. Thus, a delivery of fish from last year’s catch will be deemed non-conforming irrespective of its quality.100 Such usages often define the acceptable tolerances in relation to quantity as well as to quality.

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d) Limitations. The seller’s right to determine the extent of his obligations as to the conformity of the goods is not affected by limitations contained in the national law, which may prohibit any restriction of the buyer’s remedies.101 In particular, in cases falling within the scope of the European Consumer Sales Directive102 the various restrictions imposed on limiting the buyer’s rights do not affect the seller’s right to define his contractual obligations as to conformity. 95 Saarla ¨ ndisches Oberlandesgericht (Germany) 17 January 2007 (natural stone marble panels), CISGOnline 1642 (Pace). 96 Bianca, in: Bianca/Bonell, Commentary (1987), Art. 35 para. 2.1; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 35 CISG para. 9; Huber, Vertragswidrigkeit und Handelsbrauch im UN-Kaufrecht, IPRax (2004) 358 (359) criticizing Oberster Gerichtshof (Austria) 27 February 2003 (frozen fish), CISG-Online 794 (Pace) for applying Art. 35(2)(a) in such a case. 97 See also in relation to the notification period under Art. 39; Oberster Gerichtshof (Austria) 21 March 2000 (wood), CISG-Online 641 (Pace) – Tegernseer Bra¨uche for the wood trade between Austria and Germany. 98 Danish Maritime and Commercial Court (Denmark) 31 January 2002 (fish (mackerel)), CISG-Online 679 (Pace) where the designation of the fish in Latin was considered to be relevant as the trade in fish was normally done on the basis of the latin denominations. 99 Handelsgericht St. Gallen (Switzerland) 14 June 2012 (organic juices and organic oils), CISG-Online 2468 (Pace), where the alleged trade usage was determined to be non-existent. 100 Huber, Vertragswidrigkeit und Handelsbrauch im UN-Kaufrecht, IPRax (2004) 358 (359); but see Oberster Gerichtshof (Austria) 27 February 2003 (frozen fish), CISG-Online 794 (Pace) which applied Art. 35(2)I to the case, as the seller had provided a sample from last year’s catch; see also Oberlandesgericht Hamm (Germany) 30 November 2010 (pigs), CISG-Online 2217, para. II.1.a – undertaking to delivery pigs from producers who are clinicly PRRS free does not mean that the pigs do not carry the PRRS-virus but only that there is no acute outbreak of the virus. 101 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 35 CISG para. 10; Piltz, Gestaltung von Exportvertra¨gen nach der Schuldrechtsreform, IHR (2002) 2 (4). 102 EC Directive 1999/44/EC of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees, EC Official Journal, L 171, 7 July 1999, pp. 12–16; for a detailed analysis of possible conflicts see Schroeter, UN-Kaufrecht und Europa¨isches Gemeinschaftsrecht (2005), § 6 paras 199 et seq., § 15 paras 98 et seq.

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The parties are, however, prevented from agreeing on the delivery of goods which do 56 not comply with those few minimal ethical standards which are protected by public international law and are suffiently defined to impose concrete obligations, e. g. Art. 3 of the ILO Convention No. 182 on the worst forms of Child Labour.103 e) Sale of used goods. Intricate problems as to the contractual requirements for 57 conformity are often raised by the sale of used goods. It is clear that they do not need to have the same quality as new goods.104 Irrespective of this, parties often have different views as to the acceptable signs of wear and tear, in particular if the contract does not contain any further specifications. It is, however, obvious that the buyer can be expected to be informed about all structural changes to the goods and important events which obviously go beyond the normal wear and tear. For example, in the sale of used containers, signs of abrasion can be expected but modifications to bottom struttings, which affect the stability and carrying capacity of the containers, may lead to their nonconformity if the buyer has not been informed of them.105 Often contracts contain further specifications. Used goods which are sold as “good- 58 as-new” must at least function properly to be conforming106 and should show little signs of use. By contrast, clauses explicitly providing for a sale on an “as it is” basis may constitute a warranty disclaimer denying the buyer the default protection of the ordinary use standard in Art. 35(2)(a). Cases where the pre-contractual or contractual correspondence refers to specifications that the used goods do not have are problematic. In such cases, the conflict between the specifications and the “as it is” clause have to be solved by interpretation.107 Where an examination has been made, the “as it is” clause will normally prevail at least in those cases where the non-compliance with the specifications is obvious. Things may be different if the specification has been made after the examination. In such cases, the seller may be understood to have undertaken an obligation to ensure that until the performance of the contract the goods will have the specified quality. f) (Minimal) Ethical Standards, Codes of Conduct and other CSR-Policies108. 59 Production, environmental or human rights standards promulgated in codes of conducts developed in the context of CSR-policies or other ethical standards become part of the contractual conformity requirements when compliance with them has been requested explicitly in the individually agreed terms or the applicable standard terms. The only question which then has to be answered by interpreting the relevant documents or conduct of the parties pursuant to Art. 8 is whether a seller, who relies on suppliers for 103 Butler, The CISG a Secret Weapon in the Fight for a Fairer World, in Schwenzer (ed), 35 Years CISG and Beyond, p. 295 (302). 104 Tribunal Supremo (Spain) 17 January 2008 (300 second-hand automobiles), CISG-Online 1640 (Pace). 105 Landgericht Hamburg (Germany) 6 September 2004 (containers), CISG-Online 1085 (Pace). 106 Tribunal Cantonal (Switzerland) 21 February 2005 (CNC machine), CISG-Online 1193 (Pace). 107 Bundesgericht (Switzerland) 22 December 2000 (used rotary printing textile machine), CISG-Online 628 (Pace) where the court held that a reference in the purchase order to a certain printing range merely specified the type of machinery and its potential printing range. Due to the “as it is” clause, the used machine sold, which obviously lacked the required additional materials did not have to attain this printing range. 108 On the issue see Butler, The CISG – a Secret Weapon in the Fight for a Fairer World, in Schwenzer (ed), 35 Years CISG and Beyond (2015), p. 295 (302 et seq.); Ramberg, Emotional Non-Conformity in the International Sale of Goods, Particularly in Relation to CSR-Policies and Codes of Conduct, in Schwenzer/Spagnolo (eds), Boundaries and Intersections (2014) p. 71; Schwenzer/Leisinger, Ethical Values and International Sales Contracts, in Cranston/Ramberg/Ziegel (eds), Commercial Law Challenges in the 21th Century: Jan Hellner in Memoriam (2007), p. 249 (Pace).

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the product or parts of it, merely undertook a “best efforts” obligation to ensure that its suppliers also complied with the standard or has actually ensured compliance. For that interpretation, numerous factors may play a role, such as the particularities of the industry in question, the possibility of the seller to supervise its suppliers as well as the effect non-compliance with the standard may have for the buyer. Taking into account commercial realities, which often make it impossible for a seller to guarantee compliance of its suppliers and their suppliers with the standard, in case of doubt a “best efforts” commitment seems to be the more likely contractual commitment. 60 Implicit agreements on such standards should not be assumed too readily. Where both parties have subscribed to a voluntary CSR-standard such as e. g. the UN Global Compact, an implicit agreement on such standard can be assumed, even without any direct communication between the parties as to the applicability of the standard, provided that the other party knows about the commitment.109 Without such knowledge, the standard becomes applicable via Art. 35(2). 61 Equally, where only one party has publicly declared its adherence to certain CSRstandards, such a standard will only become part of the contractual provisions under the rules for the inclusion of standard terms. The mere fact that one party is known to have a particular CSR-policy is in itself not sufficient to assume an implicit agreement on the standards contained in that policy. There must be additional factors present, such as a higher price or industry expectations, to turn such policies into binding contractual agreements. g) Subsequent amendment. The parties are free to modify the contractual requirements at any time. Within the limits imposed by Art. 29, such modifications may be explicit or implicit. Implicit modifications, however, should not be assumed lightly. In particular, not every acceptance of non-conforming goods by the buyer should be interpreted to constitute consent to a subsequent modification of the contractual conformity requirements. Such behaviour has to be evaluated in light of the surrounding circumstances, such as the extent of the modification and the parties’ general relationship. 63 A modification may be assumed where the buyer knowingly accepts goods with a different article number, which in their quality and appearance at first sight do not deviate to a great extent from the goods contracted for.110 Any subsequent modification has to be proven by the party who wishes to rely on it. Oral agreements are usually insufficient where the parties have subjected amendment of the contract to a writing requirement.111 62

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a) General remarks. Art. 35(2) sets out objective and supplementary standards of conformity that are presumed part of the agreement subject to the parties specifying otherwise.112 The purposes for which the buyer wants to use the goods is of paramount 109 Generally in favour of an implicit agreement independent of the knowledge of the particular parties Butler, The CISG a Secret Weapon in the Fight for a Fairer World, in Schwenzer (ed), 35 Years CISG and Beyond (2015), p. 295 (304); generally critical to the assumption of an implied agreement Ramberg, Emotional Non-Conformity in the International Sale of Goods, Particularly in Relation to CSR-Policies and Codes of Conduct in Schwenzer/Spagnolo (eds), Boundaries and Intersections (2014) p. 71 (80). 110 Handelsgericht Zu ¨ rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace) at 5 b, bb seq. 111 Oberlandesgericht Hamm (Germany) 30 November 2010 (pigs), CISG-Online 2217, para. II.1.a. 112 For the legal nature of the standards in Art. 35(2) and whether they contain default rules or supplemental standards see Flechtner, Excluding CISG Article 35(2) Quality Obligations: The “Default Rule” vs. The “Cumulation” View, FS Bergsten (2011), pp. 571 et seq.

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significance.113 Art. 35(2)(c) deals with cases where the seller has provided a model or sample, Art. 35(2)(b) with cases where a specific purpose has been made known to the seller, while Art. 35(2)(a) stipulates that in all other cases the goods must be fit for their ordinary purpose. In addition, Art. 35(2)(d) imposes obligations as to the packaging of the goods. Consequently, while the standards in subsections (a) and (d) apply to all contracts, subsections (b) and (c) require the presence of certain facts. In principle, the different standards in Art. 35(2) must be complied with cumulatively.114 Systematically, however, the more transaction specific standard in Art. 35(2)(b) prevails over the general standard in Art. 35(2)(a).115 A seller, who is informed by the buyer that the buyer wants to use the goods exclusively for a particular purpose, can normally assume that the goods do not have to be fit for other purposes, even if they are ordinary purposes in the sense of Art. 35(2)(a). Thus, a car sold to an artist solely for a performance or a piece of art need not be fit for use in ordinary traffic. In case of doubt, however, the goods must also be fit for their ordinary purposes.116 The objective legal standards contained in Art. 35(2) impose implied obligations on the seller and thereby allocate the risk of non-conforming deliveries to the seller.117 These obligations are based on the normal expectations of parties in comparable transactions, but not on promises or undertakings relating to the specific transaction. Thus, it is wrong to consider the standards in Art. 35(2)(b) and (c) primarily as rules to lighten the burden of proving an actual agreement in the sense of Art. 35(1).118 Art. 35(2) accounts for the fact that, in practice, parties often do not articulate all their expectations concerning the quality of the goods associated with a transaction. This may be due to time restraints, high transaction costs or because the parties just assume that these basic expectations are so obvious that they go without saying.119 The implied obligations imposed by Art. 35(2) are a codification of these expectations; or to put it differently, Art. 35(2) sets out those obligations “which would be so contained [in the contract] if the contract were accurately drawn out.”120 It follows from the wording of Art. 35(2), as well as from the supplementary character of the standards in Art. 35(2), that reliance on them is excluded where the parties have agreed on a different and conflicting standard under Art. 35(1). For example, in the sale of used goods, an agreement on an “as it is” standard deprives the buyer of the protection provided for by Art. 35(2)(a) if the goods delivered are no longer fit for their ordinary purpose. Unlike under some national laws, such as the UCC, no express or special wording is required for excluding the application of the objective standards in Art. 35(2). An exclusion may occur impliedly. This may be the case where 113 Schlechtriem, The Seller’s Obligations Under the United Nations Convention on Contracts for the International Sale of Goods, in: Galston/Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), pp. 6–19. 114 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 10. 115 Schlechtriem, Noch einmal: Vertragsgema ¨ße Beschaffenheit der Ware bei divergierenden o¨ffentlichrechtlichen Qualita¨tsvorgaben, IPRax (2001) 161 (163); Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 13. 116 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 26; generally in favour of an obligation to comply with both standards Koch, Vertragsma¨ßigkeit der Ware bei Divergenz o¨ffentlich-rechtlicher Vorgaben, IHR (2009) 233 (235). 117 Gillette/Ferrari, Warranties and “Lemons” under CISG Article 35(2)(a), Internationales Handelsrecht (2010) 2 (2) (Pace). 118 For such a tendency see Honnold/Flechtner, Uniform Law (2009), Art. 35 paras 226 seq. 119 Honnold/Flechtner, Uniform Law (2009), Art. 35 paras 222, 225. 120 This formulation was already used by Lord Justice Brett in Randall v Newson, 2. Q. B. 102 (C.A. 1877); Schlechtriem/Butler, CISG (2009), para. 135 refer to “what reasonable parties would have agreed upon had they put their mind to it”; cf. Gillette/Ferrari, Warranties and “Lemons” under CISG Article 35(2)(a), Internationales Handelsrecht (2010) 2 (3) (Pace).

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the agreement on a particular quality under Art. 35(1) is intended by the parties as a comprehensive and exclusive quality regime.121 69 However, such express “warranties” are often worded in positive terms and therefore do not relieve the seller from his responsibilities under Art. 35(2). In other words, they supplement the standards in Art. 35(2) and do not disclaim them. Thus, for example, the agreement that a machine was “made of the best materials with first class workmanship, brand new and unused” can be considered to be an addition to the standard of fitness for purpose rather than a disclaimer.122 b) Fit for ordinary purpose: Art. 35(2)(a) aa) General remarks. Art. 35(2)(a) contains the final default rule for the required quality: if the parties have neither agreed on a different conflicting quality standard (Art. 35(1)) nor have made such a standard applicable through information passed (Art. 35(2)(b)) or samples provided (Art. 35(2)(c)), Art. 35(2)(a) requires the seller to deliver goods which are “fit for the purpose for which goods of the same description would ordinarily be used”. To that extent, Art. 35(2)(a) takes account of the fact that in practice goods are often ordered by general description without any further indications as to their future use.123 71 As stated in the Secretariat Commentary, “the normal expectations of persons buying the goods of this contract description” are relevant for the standard.124 This means that the goods must have the normal qualities, i. e. have the characteristics normally required from goods of the types described in the contracts and be free from defects normally not expected in such goods.125 The fitness for special purposes, which go beyond the normal use, is not warranted by the seller under Art. 35(2)(a).126 It may, however, be that an agreed upon specific use of the goods results in side products which are then also ordinarily used in a certain way. In these cases, the resulting side products can also be relevant for the fitness for the ordinary purpose.127 72 The relevant time for determining the ordinary uses is the time of contract conclusion. Subsequent changes in the use of a product are not relevant.128 70

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bb) The notion of “ordinary purpose”. Goods purchased under the CISG are normally either bought for their use in the buyer’s undertaking (e. g. machinery), their consumption or reprocessing (e. g. raw materials) or their resale (e. g. clothing, food).129 Often there are several purposes from these larger categories for which the goods may ordinarily be used. Livestock, for example, may be sold to be used for breading, for 121 See Flechtner, Excluding CISG Article 35(2) Quality Obligations: The “Default Rule” vs. The “Cumulation” View, FS Bergsten (2011), p. 571 (581 et seq.). 122 Arbitral Award, SCC, Beijing Light Automobile Co. Ltd. v Connell Limited Partnership, 5 June 1998 (rail press), CISG-Online 379 (Pace). 123 Secretariat Commentary on 1978 Draft, Art. 33 (now Art. 35) para. 5. 124 Secretariat Commentary on 1978 Draft, Art. 33 (now Art. 35) para. 5; for other relevant consideration see Kro¨ll/Hennecke, From New Zealand Mussels to New Zealand Trucks – The (not so) “ordinary use” in Article 35(2), in Schwenzer/Spagnolo (eds), Growing the CISG (2016), pp. 43 et seq. 125 Bianca, in: Bianca/Bonell, Commentary (1987), Art. 35 para. 2.5.1. 126 Piltz, Internationales Kaufrecht (2008), para. 5–45. 127 Bundesgerichtshof (Germany) 26 September 2012 (clay), CISG-Online 2348 (Pace) where the clay delivered under the contract was used as a separator of potatoes and therefore had to comply with food legislation, while the seperated potatoes of a lower quality were used for feeding animals so that non-compliance of the lower quality potatoes with animal feed regulation resulted in a non-conformity of the goods. 128 But see Arbitral Award, NAI No. 2319, 15 October 2002 (condensate crude oil mix), CISG-Online 740 (780) (Pace), at para. 72. 129 Schlechtriem/Butler, CISG (2009), para. 136; Honnold/Flechtner, Uniform Law (2009), Art. 35 para. 225; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 14.

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direct slaughtering, or to be fattened before slaughtering. In principle, the goods delivered have to be fit for all these – not only theoretically conceivable – purposes and deficiencies in relation to a single one of them may lead to the non-conformity of the goods.130 That applies even where one of the purposes is the main focus of the contract and the other only concerns the ordinary use of derivative or side products.131 Thus, the Secretariat Commentary advises a seller who knows that the goods are only fit for some purposes to ask the buyer for which purpose the goods will be used and reject the offer if they are not fit for the intended use.132 In practice, it may be difficult to distinguish between the “ordinary uses” of goods and uses, which, though occurring in practice, may no longer be considered to be ordinary uses. It is impossible to give any generally applicable percentage of how frequent a use must be in practice to qualify as an “ordinary use”. Even if it were possible to determine with sufficient certainty how often goods are used for a particular purpose in practice, the disparity of the goods involved and the potential purposes for which they may be used would prevent the implementation of any general rule.133 There are numerous factors which can play a role in determining whether a particular purpose is an “ordinary use” in the sense of Art. 35(2)(a). These include inter alia the nature of the goods as such, the normal expectations of the general public as to certain characteristics,134 public statements or advertisements by the seller or the producer emphasizing certain qualities of the goods, the price of the goods,135 the place of likely use and international or regional usages.136 The parties involved are also of considerable importance. Thus, the legitimate expectations of the buyer are influenced by the nature of the seller. If the latter is a producer of premium products, the buyer may expect a higher quality than from a cheap producer.137 The same may apply, where the seller has actively marketed its social responsibility in production and sourcing of goods. The buyer may expect that the goods were produced in line with the relevant standards.138 Equally, the nature of the buyer may become relevant. For example, in the sale of sand it makes a difference of whether the sand is sold to a construction company or a company providing equipment for children’s playgrounds. Equally, for the sale of livestock, different expectations as to the characteristics of the stock, in particular their immediate suitability for slaughtering, exists when the goods are sold to a breeder or to a slaughter house.139 130 But see Oberlandesgericht Schleswig-Holstein (Germany) 22 August 2002 (live sheep), CISG-Online 710 (Pace) which held that unless the buyer informed the seller about his intention to directly slaughter the sheep purchased they had not to be fit for direct slaughtering; for the opposite view Kantonsgericht Glarus (Switzerland) 6 November 2008 (bags), CISG-Online 1996 (Pace), IV para. 1.3 (bad smell leads to non-conformity of bags if one of the possible uses for the bags is the packaging of food). 131 Bundesgerichtshof (Germany) 26 September 2012 (clay), CISG-Online 2348 (Pace), para. II.1(b)(aa). 132 Secretariat Commentary on 1978 Draft, Art. 33 (now Art. 35) para. 5; the information given about the intended use would make the standard in Art. 35(2)(b) applicable. 133 See Bridge, International Sales Law (2013), para. 11.23 who for that reason considers that the “reliance” criteria in Art. 35(2)(b) should also in this respect be the relevant criteria. 134 Oberlandesgericht Innsbruck (Austria) 1 July 1994 (garden flowers), CISG-Online 219 (Pace) – flowers should blossom for the whole summer. 135 Arbitral Award, CIETAC, 22 March 1995 (down jacket and winter coat), CISG-Online 1118 (Pace). 136 At least where not covered already by Art. 35(1); Oberster Gerichtshof (Austria) 27 February 2003 (pork meat), CISG-Online 794 (Pace); critical Huber, Vertragswidrigkeit und Handelsbrauch im UNKaufrecht, IPRax (2004) 358 (359) who considers that usages fall within the ambit of Art. 35(1). 137 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 19. 138 Generally on the issue of Corporate Social Responsibility Codes see Beckers, Enforcing Social Responsibility Codes (2015), pp. 58 et seq.; for a more detailed discussion see supra para. 59 et seq. 139 See Oberlandesgericht Schleswig (Germany) 22 August 2002 (live sheep), CISG-Online 710 (Pace).

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The goods are only fit for the ordinary purpose if they can be used without any additional precautionary or remedial measures, such as additional cleansing, which – while making the goods useable – are not expected by the market.140

cc) Relationship to the standards of average and merchantable quality. Fitness for ordinary use depends primarily on the quality of the goods. It is largely uncontested that the standard of “ordinary use” should not be equated with comparable standards used in the various national sales laws, such as the standard of average quality (§ 243(1) German Civil Code) or the standard of merchantability (§ 2–314 UCC).141 80 Irrespective of that, the question arises – and has been extensively discussed – of how the autonomous standard of “ordinary use” in the sense of Art. 35(2)(a) has to be understood, and in particular whether it requires the goods to be of an average quality, of a merchantable quality or whether the standard is that of a reasonable quality.142 In practice, it may well happen that the goods are below average quality but are still merchantable or fit for their ordinary purpose and vice versa. Shellfish, for example, may have an average cadmium content of 0.5mg while its resale and consumption is prohibited only from a cadmium content of 1.5mg onwards. In such a case, a consignment of shellfish containing 1mg of cadmium is well below the average quality, but is still fit for consumption and resale, without any reduction in price. 81 Relying primarily on the wording of the provision and the legislative history, i. e. the withdrawal of a Canadian proposal providing for an average-quality-standard, it is often submitted, in particular in common law jurisdictions, that as long as the goods are merchantable they are conforming, irrespective of whether they are of an average quality.143 82 Comparatively, in civil law jurisdictions in particular, the prevailing view appears to be that the seller is obliged to deliver goods of an “average quality”.144 In favour of this view, its proponents refer to the fact that numerous national laws have explicitly adopted the standard of average quality,145 so that the expectation from parties coming from such countries is normally that the goods delivered will have an average quality. Also Art. 5.1.6 PICC and Art. 6:108 PECL refer to an average quality as the default or at least the minimum standard.146 79

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Bundesgerichtshof (Germany) 26 September 2012 (clay), CISG-Online 2348 (Pace), para. II.1(b)(aa). See for the differences see Hyland, Conformity of Goods, in: Schlechtriem (ed.), Einheitliches Kaufrecht (1987), p. 305 (317 seq.); Gillette/Walt, Sales Law (2016), Chap. 8 III p. 373 seq.; but see Ontario Superior Court of Justice (Canada) 31 August 1999 (picture frame mouldings), CISG-Online 433 (Pace) where the judge without any further discussion relied on the Canadian standard of merchantability. 142 For a detailed discussion of the problem Arbitral Award, NAI No. 2319, 15 October 2002 (condensate crude oil mix), CISG-Online 740 (780) (Pace), at paras 68 et seq. and paras 88 et seq.; Gillette/ Ferrari, Warranties and “Lemons” under CISG Article 35(2)(a), Internationales Handelsrecht (2010) 2 (3 et seq.) (Pace). 143 For case law applying the standard of merchantability see Ontario Superior Court of Justice (Canada) 31 August 1999 (picture frame mouldings), CISG-Online 433 (Pace); High Court Auckland (New Zealand) 31 March 2003 (housewares (toasters, deep fryers, food processors, kettles, etc.)), International Housewares Ltd. v SEB S. A., CISG-Online 833 (Pace), paras 56 et seq.; Supreme Court of New South Wales (Australia) 30 January 2012 (glass bottles), Fryer Holdings v Liaoning MEC Group, CISG-Online 2325 (Pace), para. 19; Federal Court of Australia (Australia) 28 September 2010 (electrical appliances), CISG-Online 2158 (Pace), para. 123; further Soergel/Lu¨deritz/Schu¨ssler-Langheine, Kommentar (2000), Art. 35 para. 10. 144 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 19; Eckert/Maifeld/Matthiessen, Handbuch des Kaufrechts (2014), para. 559; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 15; Landgericht Berlin (Germany) 15 September 1994 (shoes), CISG-Online 399 (Pace). 145 See also Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 15. 146 See for their relevance in the interpretation of Art. 35: Henschel, Interpreting or supplementing Article 35 of the CISG by using the UNIDROIT Principles of International Commercial Contracts and the Principles of European Contract Law (2004) (Pace). 141

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Others have suggested a standard of “reasonable quality”, relying on the gap-filling provision in Art. 7(2) and declaring “reasonableness” to be a general principle underlying the CISG.147 It has correctly been doubted that the replacement or refinement of the notion “ordinary use” by other comparably broad, abstract and necessarily imprecise standards is helpful or even necessary for deciding cases in practice.148 The decisive issue is not so much the standard itself but more the criteria underlying these other standards. In light of this, the standard of “reasonable quality” is preferable, as it carries the least national baggage with it.149 The CISG tries to avoid, as far as possible, any references to concepts used in domestic law. Such concepts always entail the considerable danger that the interpretation in practice will be along the lines of domestic concepts, irrespective of any call for an autonomous interpretation in the Convention context. As the domestic concepts of “average quality” and in particular “merchantability” differ considerably, reliance on either of them could constitute a threat to harmonization. The standard of “reasonableness” is used in the CISG on several other occasions150 and constitutes a general principle underlying the CISG. Its open texture allows for sufficient flexibility, without being too vague,151 if properly understood. In comparison to a primarily mathematical “average quality” standard, it has the additional advantage of being sufficiently flexible to accommodate those cases where, due to the circumstances, the goods must be above average quality or can be below average quality.152 In general, in light of the problems associated with determining the average quality, it should normally be acceptable if the goods deviate from the average within certain parameters. Thus, in the above example, delivery of shellfish containing 0.7 mg cadmium would still be sufficient though below the average. In determining whether the goods are of a reasonable quality, from the factors listed above, special regard should be given to the price of the goods. To a certain extent, the price reflects the quality expectations of the market. Thus, the crucial question is whether a reasonable buyer aware of the alleged deficiencies would have paid in the same market conditions a substantially similar price for the goods as the contract price.153 In this respect not only the mere physical quality of the goods plays a role, but 147 Arbitral Award, NAI No. 2319, 15 October 2002 (condensate crude oil mix), CISG-Online 740 (780) (Pace), at para. 121; for a criticism of the decision see Gillette/Ferrari, Warranties and “Lemons” under CISG Article 35(2)(a), Internationales Handelsrecht (2010) 2 (9 seq.) (Pace). 148 Honnold/Flechtner, Uniform Law (2009), Art. 35 para. 225 who rightly doubt the practical use of the sometimes abstract discussions between the different broadly worded standards. 149 In favour of this standard Arbitral Award, NAI No. 2319, 15 October 2002 (condensate crude oil mix), CISG-Online 740 (780) (Pace), at paras 117 et seq.; for a different view Maley, The Limits to the Conformity of Goods, 12 International Trade and Business Law Review (2009) 82 (111 seq.) (Pace); Gillette/Ferrari, Warranties and “Lemons” under CISG Article 35(2)(a), Internationales Handelsrecht (2010) 2 (9 seq.) (Pace). 150 See, e. g., Arts 16(2)(b), 18(2), 25, 33(c), 39(2), 43(1), 47, 49(2), 63(1), 64(2)(b), 65(2), 72(2), 73(2), 75, 77 first sentence, 79(1) and (4), 85 first sentence, 86(1), 88(1) and (3); also “unreasonable”: e. g. in Arts 86(2), 87, 88(2); for the standard see also Magnus, Die Allgemeinen Grundsa¨tze im UN-Kaufrecht, RabelsZ (1995) 469 (482) (Pace); cf. Art. 7 para. 58. 151 But see Gillette/Ferrari, Warranties and “Lemons” under CISG Article 35(2)(a), Internationales Handelsrecht (2010) 2 (10) (Pace) which consider the standard to be too vague, creating “perverse incentive” for sellers to exploit their superior information. 152 See the illustration given for the reference to the additional standard of reasonableness in Art. 5.1.6. PICC of a company from a country with mediocre cuisine which orders meals from a renowned restaurant in Paris for a celebration exactly with the intention to get food above the average quality. 153 See also Gillette/Ferrari, Warranties and “Lemons” under CISG Article 35(2)(a), Internationales Handelsrecht (2010) 2 (14) (Pace) who, however, consider that to be part of the “merchantability” standard where the test originally comes from.

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also their brand value, which, in connection with fashion or luxury goods in particular, accounts for a large part of the price. 87 The second important factor is the seller. The legitimate expectations of the buyer are also influenced by the nature of the seller. If the latter is a producer of premium products the buyer may expect a higher quality than from a cheap producer. Someone buying from a premium producer and paying a price above the average market price can reasonably expect to receive goods which are above the average that someone buying the same type of goods for a much lower price from a less reputable producer would expect.154 The goods would then be deemed to lack a reasonable quality if any other buyer knowing their characteristics would pay less for them. 88 Another factor, which may play a role, is the long term nature of a relationship, which – even below the threshold of an established practice in the sense of Art. 9 – may have led to certain expectations as to quality.155 Art. 1:302 PECL lists other factors, which may play a role in determining what is reasonable.156 dd) Differing standards and public law provisions. Problems arise in cases where the standards – and consequently the expectations – as to the characteristics of goods for ordinary use differ between the seller’s place of business and the buyer’s place of business or the place of final destination or use. These differences may be due to a number of factors. The standards that have to be met for the “ordinary use” in a particular market can depend on factors such as historical developments, tradition, religious belief, the state of economic development or climatic conditions. For example, technical equipment or batteries which operate perfectly well in the seller’s country may hardly be usable at the final destination due to extreme altitude or permafrost conditions prevailing in that country. Differences may exist as to the industry standards to be complied with or the voltages for which fuses must be designed. The same applies for foodstuff, where the expectations as to the use of hormones, chlorine or radiation in the production process may differ considerably. 90 Of particular importance in this context are public law provisions which exist to protect consumers, employees or the environment. They vary considerably from country to country.157 Such regulations do not directly affect the physical characteristics of the goods and may not prevent their actual delivery in the sense of Art. 30. Nevertheless, they may strongly influence the use and merchantability of the goods. The alleged lack of fitness does not then arise from the physical properties of the goods, but as a result of the non-compliance with a regulatory requirement. 91 In numerous countries, the sale or consumption of food products, for example, is strictly regulated by public law regulations. The same applies to technical goods, the sale or use of which is submitted to certain industry standards or labelling requirements.158 It is obvious that deviations from such rules, which prevent or at least affect the future 89

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Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 19. Arbitral Award, NAI No. 2319, 15 October 2002 (condensate crude oil mix), CISG-Online 740 (780) (Pace), at para. 121. 156 The list included…the nature and purpose of the contract, the circumstances of the case, and the usages and practices of the trades or professions involved…”. In favour of making use of the concepts of reasonableness in the PICC and the PECL see also Henschel, Interpreting or supplementing Article 35 of the CISG by using the UNIDROIT Principles of International Commercial Contracts and the Principles of European Contract Law (2004) (Pace). 157 For a comprehensive treatment of the topic Kra ¨ ffentlichrechtliche Beschaffenheitsvor¨ tzschmar, O gaben und Vertragsma¨ßigkeit der Ware im UN-Kaufrecht (2008); see also Kro¨ll/Hennecke, From New Zealand Mussels to New Zealand Trucks – The (not so) “ordinary use” in Article 35(2), in Schwenzer/ Spagnolo (eds), Growing the CISG (2016), p. 43 (51 et seq.). 158 See for example Oberster Gerichtshof (Austria) 13 April 2000 (machines), CISG-Online 576 (Pace). 155

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sale or use of the goods, can result in the non-conformity of the goods. Due to the prescriptive character of such regulations, it is generally irrelevant whether the actual use of the goods would be affected or whether the thresholds imposed are scientifically justifiable.159 To that extent, public law regulations have a slightly different character compared to other external factors such as cultural or religious traditions, which may also affect the use of the goods.160 The wording of Art. 35(2)(a) is completely silent as to the standard of the public law 92 provisions applicable in such cases.161 The reference in the Secretariat Commentary to the “normal expectations of persons buying goods of this contract description” seems to point to the expectations of the buyer, which are primarily influenced by the uses in his country. This reference, however, is by no means conclusive. As far as it can be deduced from the available legislative materials, the issue did not attract any major discussion during the drafting of the CISG. Ultimately, it is a political question of how to allocate the risks: should the seller’s expectations as to the standards required by the goods prevail or those of the buyer?162 Some authors consider that in such cases, in principle, the requirements for the “ordinary 93 use” should be determined by the standards relevant at the buyers’s place of business or the place of destination and use of the goods.163 The underlying argument is that the goods are most likely to be used at the buyer’s place of business. In addition, at least in relation to the public law provisions, Art. 42(1)(b) seems at first sight to support such a view. It declares the rules of the buyer’s place of business applicable for intellectual property provisions, which could be considered to be comparable to other public law restrictions.164 The prevailing165 and, in this author’s opinion, better view, however, is that as a default 94 rule, in the absence of any other relevant considerations, the requirements for an “ordinary use” should be determined by the standards and public law provisions at the seller’s place

159 High Court of New Zealand (New Zealand) 30 July 2010, RJ & AM Smallmon v Transport Sales Limited and Grant Alan Miller (trucks), CISG-Online 2215 (Pace) where the mere absence of a compliance plate prevented the use of an otherwise roadworthy truck. 160 See Kra ¨ ffentlichrechtliche Beschaffenheitsvorgaben und Vertragsma¨ßigkeit der Ware im ¨ tzschmar, O UN-Kaufrecht (2008), pp. 12 et seq.; in favour of a completely equal treatment, Schlechtriem, Vertragsma¨ßigkeit der Ware als Frage der Beschaffenheitsvereinbarung, IPRax (1996) 12 (13). 161 Cf. Schlechtriem, Vertragsma ¨ßigkeit der Ware als Frage der Beschaffenheitsvereinbarung, IPRax (1996) 12 (14 seq.); who raises doubts whether the standard is at all applicable due to eventual absence of an ordinary use. 162 Kro ¨ ll/Hennecke, From New Zealand Mussels to New Zealand Trucks – The (not so) “ordinary use” in Article 35(2), in Schwenzer/Spagnolo (eds), Growing the CISG (2016), pp. 43 et seq. 163 Schlechtriem, The Seller’s Obligations Under the United Nations Convention on Contracts for the International Sale of Goods, in: Galston/Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), pp. 6–20 (Pace). 164 But see for the opposite conclusion emphasising the special character of intellectual property laws Bianca, in: Bianca/Bonell, Commentary (1987), Art. 35 para. 3.2. 165 Bianca, in: Bianca/Bonell, Commentary (1987), Art. 35 paras 2.5.1 and 3.2; Neumayer/Ming, Convention de Vienne (1993), Art. 35 para. 7; Gillette/Walt, Sales Law (2016), Chap. 8 III p. 373 seq.; Piltz, Internationales Kaufrecht (2008), para. 5–48; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 14; Magnus, in: Honsell, Kommentar (2010), Art. 35 para. 14; Aue, Ma¨ngelgewa¨hrleistung im UN-Kaufrecht (1989), p. 75; Eiselen, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual (2008), Vol. 4 § 89:9 (b); from case law Bundesgerichtshof (Germany) 8 March 1995 (New Zealand mussels), CISG-Online 144 (Pace); id. 2 March 2005 (Belgian meat), CISG-Online 999 (Pace) at II3 b; Oberlandesgericht Hamm (Germany) 30 November 2010 (pigs), CISG-Online 2217, para. II.1.b, Oberster Gerichtshof (Austria) 13 April 2000 (machines), CISG-Online 576 (Pace), id., 19 April 2007 (scaffold hooks), CISG-Online 1495 (Pace) at 1.2; Audienca Provincial Granada (Spain) 2 March 2000 (food), CISG-Online 756; Court of Appeal of New Zealand (New Zealand) 22 July 2011 (trucks), RJ & AM Smallmon v Transport Sales Ltd and Grant Alan Miller, CISG-Online 2215, paras 60 et seq.

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of business. It provides for the most appropriate allocation of the risk of non-conformity, taking into account the standards implied by Art. 35(2) and the system of the CISG.166 95 It is impossible for the seller to know the various public law regulations at the buyer’s place of business.167 As is well evidenced by the New Zealand-Mussels-decision of the German Supreme Court, such rules may be hidden in administrative guidelines as to the application of broad concepts contained in the relevant laws. By contrast, the buyer has the chance to inform the seller about an intended use and thereby ensure that the relevant standard becomes applicable under Art. 35(2)(b). Where he does not make use of that opportunity, it seems sensible from an economic point of view to allow the seller to rely on the standards in his country of origin. In addition, this solution is more in line with the structure of the CISG.168 In both cases, where the CISG explicitly declares that the rules at the buyer’s place of business or the place of final destination should be relevant, i. e. Arts 35(2)(b) and 42(1)(b), it contains an express limitation.169 By contrast, in the context of Art. 35(1)(a) no such limitation would exist. The seller would be liable irrespective of whether he could not have been unaware of the use or reliance on his knowledge was justified. In the end, the basic question in this context is often not one relating to the actual “ordinary use” of the goods but whether the seller can legitimately be expected to know the relevant provisions in the buyer’s country and be bound by them. 96 However, as in many other areas, there are no rules of general application, but rather the solution must be found on a case-by-case basis according to the particular circumstances.170 The above considerations concerning the seller’s lack of knowledge serve as a valid starting point and default rule,171 which may have a bearing on the burden of proof. In the majority of cases, there are special considerations which tip the balance in favour of the application of either standard without the need to resort to the default rule. Hence it is often primarily a question of interpreting the particular contract.172

166 See also Gillette/Ferrari, Warranties and “Lemons” under CISG Article 35(2)(a), Internationales Handelsrecht (2010) 2 (7) (Pace) pointing to the asymmetric information as the underlying risk allocation principle in Art. 35(2)(a) which only exist in relation to the standards in the seller’s country; Kro¨ll/ Hennecke, From New Zealand Mussels to New Zealand Trucks – The (not so) “ordinary use” in Article 35(2), in Schwenzer/Spagnolo (eds), Growing the CISG (2016), p. 43 (51 et seq.). 167 Bundesgerichtshof (Germany) 8 March 1995 (New Zealand mussels), CISG-Online 144 (Pace); id. 2 March 2005 (Belgian meat), CISG-Online 999 (Pace) at II3 b; Oberster Gerichtshof (Austria) 13 April 2000 (machines), CISG-Online 576 (Pace), id., 19 April 2007 (scaffold hooks), CISG-Online 1495 (Pace) at 1.2; Audienca Provincial Granada (Spain) 2 March 2000 (food), CISG-Online 756; High Court of New Zealand (New Zealand) 30 July 2010 (trucks), RJ & AM Smallmon v Transport Sales Limited and Grant Alan Miller, CISG-Online 2113 (Pace). 168 See also Art. 6. 2. 14(a) PICC referred to in support of this view by Henschel, Conformity of the goods: Interpreting or supplementing Article 35 of the CISG, 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), 166 (171 seq.). 169 For the limiting requirement of the reasonableness of the reliance on the “seller’s skill and judgment” see infra paras 122 et seq.; for the requirement in Art. 42 that the seller “knew or could not have been unaware” see Art. 42 paras 25 et seq.; see also Bridge, International Sales Law (2013), para. 11.23 who justifies the result with the reliance criteria which he wants to extend to Art. 35(2)(a). 170 Honnold/Flechtner, Uniform Law (2009), Art. 35 para. 225; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 paras 17 seq. 171 A comparable balancing of interest is also underlying Art. 6.1.14(a) PICC according to which applications for public permissions required for the validity of a contract or its performance should be made by the party located in the country where the permissions are needed. 172 Honnold/Flechtner, Uniform Law (2009), Art. 35 para. 225; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 paras 17 seq.

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Often the buyer may have informed the seller about the use of the goods in a particular 97 country or a particular use in the sense of Art. 35(2)(b).173 To that extent, it is not their “ordinary use” in the sense of Art. 35(2)(a) which determines the standards to be met, but the specific use under Art. 35(2)(b).174 Where the seller has been informed or knows from previous dealings or from the structure of their relationship that the goods are to be used in a particular country, he is normally aware that the goods must be fit for use in that country.175 This leads to the application of the standards relevant for this use, including existing public law regulations at the intended place of use.176 Awareness of such use can, for example, be assumed where the seller has appointed the buyer as his exclusive distributor in a certain territory. The same applies where the seller has to deliver the goods to a customer of the buyer, which is obviously the end user.177 At the same time, the limitations of Art. 35(2)(b) will be applicable, i. e. liability is excluded in all cases where it is unreasonable for the buyer to rely on the seller’s judgment. This may depend on the clarity and availability of the public regulation. Where the relevant rules are hidden in not readily available administrative guidelines, to be applied by analogy and the authorities have considerable discretion in their application, reliance is much less justified than in cases of clear prohibitions in obviously applicable laws.178 Different considerations may, however, apply in long lasting business relationships, 98 where the goods delivered do not conform with relevant standards at the buyer’s place of business but the buyer never raised any objection. In such cases, the seller may assume that the goods do not have to meet industry standards at the buyer’s place of business.179 In other cases, irrespective of prima facie existing differences between the standards 99 and expectations in the buyer’s and the seller’s countries, the relevant standard may be influenced by the existence of an international or at least regional usage. The latter may, for example, have been created by directives of the European Union, which have not yet been complied with by one of countries concerned.180 There may be other circum173 See in favor of a more frequent application of Art. 35 (2)(b) in such cases Schlechtriem, Vertragsma¨ßigkeit der Ware als Frage der Beschaffenheitsvereinbarung, IPRax (1996) 12; cf. Gerechthof’s Arnhem (Netherlands) 27 April 1999 (movable room units), G. Mainzer Raumzellen v Van Keulen Mobielbouw Nijverdal BV, CISG-Online 741 (Pace); Dokter/Kruisinga, The application of the CISG in the Netherlands: a Dutch treat for the CISG?, IHR (2003) 105 (109). 174 Critical towards qualifying the use in a particular market as a special use in the sense of ¨ ffentlichrechtliche “Vorgaben” im Ka¨uferland und Vertragsma¨ßigkeit der Ware Art. 35(2)(b), Daun, O nach UN-Kaufrecht, NJW (1996) 29 seq. 175 Cf. Cour d’appel Grenoble (France) 13 September 1995 (cheese), Caito Roger v Socie ´te´ francaise de factoring, CISG-Online 157 (Pace) – French labelling requirements as to composition and expiry date not met; critical Ferrari, Divergences in the application of the CISG’s rules on non-conformity of goods, RabelsZ (2004) 473 (477) who suggests that the court should have relied on a practice established between the parties in the sense of Art. 9; for a different view see Gerechthof’s Arnhem (Netherlands) 27 April 1999 (movable room units), G. Mainzer Raumzellen v Van Keulen Mobielbouw Nijverdal BV, CISG-Online 741 (Pace), though the case can be explained on the basis of its special circumstances; see infra at paras 109 et seq. 176 See Landgericht Ellwangen (Germany) 21 August 1995 (Spanish paprika), CISG-Online 279 (Pace) where it was held that the parties agreed that the goods had to be fit to be sold in Germany. 177 Landgericht Coburg (Germany) 12 December 2006 (plants), CISG-Online 1447 (Pace) – in relation to plants delivered from a tree nursery. 178 Schlechtriem, Noch einmal: Vertragsgema ¨ße Beschaffenheit der Ware bei divergierenden o¨ffentlichrechtlichen Qualita¨tsvorgaben, IPRax (2001) 161 (163); cf. Bundesgerichtshof (Germany), 8 March 1995 (New Zealand mussels), CISG-Online 144 (Pace) denying the relevance of German administrative guidelines issued for meat but applied by analogy to fish for the sale of mussels from New Zealand by a Swiss seller to a German buyer, however, with a different reasoning. 179 See Gerechthof’s Arnhem (Netherlands) 27 April 1999 (movable room units), G. Mainzer Raumzellen v Van Keulen Mobielbouw Nijverdal BV, CISG-Online 741 (Pace). 180 Landgericht Trier (Germany) 12 October 1995 (wine), CISG-Online 160 (Pace).

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stances, which weigh in favour of either standard, such as the price paid for the goods or previous dealings, which though not raising to the level of practice established between the parties in the sense of Art. 9, may indicate what the parties could expect.181 100 Different considerations may apply if the standard in the seller’s country of origin is higher than that in the buyer’s. The buyer may not assume that goods which do not fulfil the higher standard in the seller’s country but are fit for the ordinary use in the buyer’s country in general will be non-conforming in the sense of Art. 35(2)(a).182 The fact that goods which are not fit for their ordinary purpose in the seller’s country of origin are sold to a buyer in a different country, where they are fit for their ordinary purpose, may in itself already be an indication that the lower standard in the buyer’s country was the relevant one. 101 The evaluation may be different in cases where the buyer selected a particular seller from a number of potential other sellers because he comes from a country which has the reputation of producing goods which fulfil high standards, in particular if a higher price was paid for the goods.183 The same applies if the buyer explicitly emphasizes the importance of the quality. Thus, the addition of potassium bromate to wheat flour to enhance its tenability may render the goods non-conforming in the sense of Art. 35(2)(a) if such an addition is prohibited under EU Standards, irrespective of whether the same prohibition applies in Mozambique, i. e. the country of destination.184 102 The goods can reasonably be required to comply with foreign administrative and statutory requirements where these are the same as in the seller’s country or where the seller knows or ought to know these requirements, either from previous dealings or other sources.185 Examples are sellers who regularly sell to other customers in the same market and have been informed by them about the applicable regulations or who are themselves active in the relevant market through subsidiaries or branches.186 Also, marketing activities directed at a particular market may change the general rule.187 Even in such cases, it has to be determined for each particular case whether the seller has not made clear that he does not have the required knowledge by recommending, for example, the use of local experts for the import and registration of the goods.188

181 Cf. Cour d’appel Grenoble (France) 13 September 1995 (cheese), Caito Roger v Socie ´te´ francaise de factoring, CISG-Online 157 (Pace); critical Ferrari, Divergences in the application of the CISG’s rules on non-conformity of goods, RabelsZ (2004) 473 (477) who suggests that the court should have relied on a practice established between the parties in the sense of Art. 9; Gerechthof’s Arnhem (Netherlands) 27 April 1999 (movable room units), G. Mainzer Raumzellen v Van Keulen Mobielbouw Nijverdal BV, CISG-Online 741 (Pace). 182 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 17. 183 Gerechtshof’s Gravenhage (Netherlands) 23 April 2003 (wheat flour), Rynpoort Trading v Meneba Meel, CISG-Online 903 (Pace); Piltz, Internationales Kaufrecht (2008), para. 5–50 who correctly remarks that in such cases the additional requirements for remedies, such as damages, will often not be fulfilled. 184 Gerechtshof’s Gravenhage (Netherlands) 23 April 2003 (wheat flour), Rynpoort Trading v Meneba Meel, CISG-Online 903 (Pace). 185 Bundesgerichtshof (Germany) 2 March 2005 (Belgian frozen pork), CISG-Online 999 (Pace) at II 3 b; Oberlandesgericht Koblenz (Germany) 10 September 2013 (hauler), CISG-Online 2472 (Pace), para. II. 1. b. bb. 186 Rechtbank Hertogenbosch (Netherlands) 1 November 2012 (articulated loader), CISG-Online 2394 (Pace), para. 4.7. 187 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 22; Oberlandesgericht Koblenz (Germany) 10 September 2013 (hauler), CISG-Online 2472 (Pace), para. II. 1. b. bb. 188 See High Court of New Zealand (New Zealand) 30 July 2010, RJ & AM Smallmon v Transport Sales Limited and Grant Alan Miller (trucks), CISG-Online 2113 (Pace); confirmed by Court of Appeal of New Zealand (New Zealand) 22 July 2011 (trucks), RJ & AM Smallmon v Transport Sales Ltd and Grant Alan Miller, CISG-Online 2215 (Pace), paras 65 et seq.

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ee) Application of the standard in practice (i) Resaleability. In international wholesale and intermediate trade, but also in a 103 number of other cases, a resale of the goods belongs to the ordinary use for which the goods have to be fit.189 Consequently, the goods must be honestly resaleable in the normal course of business.190 Thus, goods which – due to their quality or non-physical factors, such as their reputation191 – can only be resold at a considerable discount, do not meet this requirement. The same applies if the goods may render the buyer liable for nonconformity to his customers.192 If one of the purposes of a contract concerning consumer goods is to sell the goods within Europe to consumers, European sellers will at least have to comply with the standards imposed by Art. 2(2)(d) of Directive 1999/44/EC.193 In the case of foodstuff intended for human consumption, resaleability includes that the 104 goods are unobjectionable as to health.194 Furthermore, existing labelling requirements must be complied with.195 The relevant standards can often be found in the national food regulations which – due to the existing differences in the various countries – raises the question as to the relevant rules (see supra at 3.2.4). Thus, not only the prohibited addition of water may render wine non-conforming, but also chapitalization if that is not accepted in the country of use.196 The same applies for other additional ingredients, such as flavors or coloring, which are regulated even if their health-relevance is not proven.197 (ii) Suspicion of defects. In principle, the mere suspicion that goods may be defective 105 does not result in the non-conformity of the goods nor does bad press. The goods must actually not be fit for their ordinary purpose. However, there may be cases where a reasonable suspicion that the goods are non-conforming, based on past events or experience, is in itself sufficient to render them unfit for their ordinary use. For example, in relation to potentially dangerous goods or foodstuff, local authorities, due to the health implications, often act upon the basis of such suspicions and ban the sale of such goods. However, even without such bans, there may not be sufficient time to dispel these concerns before the goods perish and the mere suspicion that the goods may be dangerous may render them non-merchantable.198 189 Bundesgerichtshof (Germany) 2 March 2005 (Belgian frozen pork), CISG-Online 999 (Pace); Kantonsgericht Glarus (Switzerland) 6 November 2008 (bags), CISG-Online 1996 (Pace), para. 1.3; Piltz, Internationales Kaufrecht (2008), para. 5–46. 190 Secretariat Commentary on 1978 Draft, Art. 33 (now Art. 35) para. 5. 191 See Maley, The Limits to the Conformity of Goods, 12 International Trade and Business Law Review (2009) 82 (112 seq.) (Pace). 192 Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 14. 193 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 15. 194 Bundesgerichtshof (Germany) 2 March 2005 (Belgian frozen pork), CISG-Online 999 (Pace) at II 3 b; for the relevant health regulations see supra paras 89 et seq. 195 Cour d’appel GFrancee (France), 13 September 1995 (cheese), Caito Roger v Socie ´te´ francaise de factoring, CISG-Online 157 (Pace). 196 Cour d’appel de Grenoble (France) 23 January 1996 (wine), Sacovini/M Marrazza v Les fils de Henri Ramel, CISG-Online 159 (Pace) concerning the sale of chapitalized Italian wine in France; for the prohibited addition of water see Landgericht Trier (Germany) 12 Ocotober 1995 (wine), CISG-Online 160 (Pace). 197 Audiencia Provincial de Murcia (Spain) 25 May 2012 (red pepper powder), CISG-Online 2463 (Pace) – food with too much colorant. 198 Magnus, in: Honsell, Kommentar (2010), Art. 35 para. 13; Eckert/Maifeld/Matthiessen, Handbuch des Kaufrechts (2014), para. 559; Bundesgerichtshof (Germany) 2 March 2005 (Belgian frozen pork), CISG-Online 999 (Pace) at II. 3. d., with critical comment as to the reasoning by Schlechtriem, JZ (2005) 846 (Pace); see also from outside the CISG context – but with a potential influence on the application of the CISG – European Court of Justice (as it then was) (EU) 5 March 2015, Boston Scientific Medizintechnik GmbH v AOK Sachsen-Anhalt – Die Gesundheitskasse et al., Joined Cases C-503/13 and C-504/13 (ECLI:EU:C:2015:148), PharmR 2015, 245 concerning cardiac pacemaker.

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(iii) Duration. The expectations concerning the ordinary use also extend to the duration of such use.199 107 The normal qualities of goods necessarily require that they remain in good condition for a reasonable time after delivery.200 The extent of that period depends on the nature of the goods and the particularities of the transaction. Professionally designed and manufactured machinery, e. g. motors for globes used for presentations or large steel presses or other high value machinery, must normally be suitable for several years of operation provided they are properly installed and maintained.201 The required duration of proper operation is not limited to the two-year cut-off period mentioned in Art. 39(2). To that extent, one has to distinguish between the question of conformity, which may require a proper use for much more than two years, and whether, for reasons of legal certainty, claims can be brought after the expiry of two years. Thus, for example, an expensive rail press, which breaks down three years after delivery due to the use of inappropriate parts in the construction of the press, may be considered non-conforming in the sense of Art. 35(2)(a) irrespective of the fact that pursuant to Art. 39(2) no claims could have been brought for such nonconformity had the seller not known about it (Art. 40).202 Even for perishable goods it can normally be expected that they remain intact for a sufficient time period necessary for their anticipated use. For other goods, expectations may be influenced by the price or statements made during negotiations.203 Thus, where raw material is bought to produce oil tanks which are supposed to last for 10 years, the polymer delivered is only conforming if it is capable of being used to produce tanks which last for such a timespan.204 106

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(iv) Necessary documentation for assembly and usage. Fitness for an ordinary purpose also requires that the necessary assembly instructions, operating manuals and other documentation are provided and do not contain mistakes which prevent the assembly or use of the goods or lead to defects when followed.205 Sellers which, for justified proprietary reasons, may not be willing to provide customers with descriptions containing all the details of the goods, are advised to exclude any liability for all installations not done by themselves, as the lack of crucial information or warnings may result in the non-conformity of the goods.206

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(v) Other issues. For certain goods requirements of fitness for ordinary use are beyond doubt. Thus, medical equipment must be sterile,207 ceramic baking dishes must 199 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 23; Landgericht Mu ¨ nchen I (Germany) 27 February 2002 (globes), CISG-Online 654 (Pace) – operational lifetime of three years for expensive globes for use in showrooms of a car rental agency assumed. 200 Eckert/Maifeld/Matthiessen, Handbuch des Kaufrechts (2014), para. 563. 201 Landgericht Mu ¨ nchen I (Germany) 27 February 2002 (globes), CISG-Online 654 (Pace); Arbitral Award, SCC, Beijing Light Automobile Co. Ltd. v Connell Limited Partnership, 5 June 1998 (rail press), CISG-Online 379 (PaI cf. s14(2B)(e) UK Sale of Goods Act. 202 Arbitral Award, SCC, Beijing Light Automobile Co. Ltd. v Connell Limited Partnership, 5 June 1998 (rail press), CISG-Online 379 (Pace). 203 Piltz, Internationales Kaufrecht (2008), para. 5–46; Helsinki Court of First Instance (Finland) 11 June 1995, confirmed by Helsinki Court of Appeal (Finland) 30 June 1998 (skin care product), CISG-Online 1304 (Pace) – statement that goods had a 30 month shelf life. 204 High Court of Justice (United Kingdom) 1 May 2012 (borence, polymer), Kingspan Environmental Ltd et al v Borealis A/S et al, CISG-Online 2391 (Pace), paras 651 et seq. – (in the context of Art. 35(2)(b) emphasising that under Art. 35(2) the polymer only had to be capable of being used for such a purpose but that the buyer bore the risk that the final product would meet the durability requirements). 205 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 54; Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 19. 206 See Arbitral Award, SCC, Beijing Light Automobile Co. Ltd. v Connell Limited Partnership, 5 June 1998 (rail press), CISG-Online 379 (Pace). 207 Obergericht des Kantons Luzern (Switzerland) 8 January 1997 (blood infusion devices), CISG-Online 228 (Pace).

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be heat resistant for use in an oven208 and plants must generally be able to prosper.209 Part of the suitability for an ordinary use is also that the goods operate at sufficient 110 speed, have the normally anticipated output210 and are of the right dimensions. A dust ventilator, for example, should contain adequate storage for the dust sucked in, which is not undersized such that it has to be emptied in short intervals.211 By contrast, it is not part of the conformity requirements for fabrics bought for the production of clothes that they allow for a particular cut, anticipated by the buyer but not communicated to the seller.212 Notwithstanding the absence of the materiality requirement, minor defects of the 111 goods will often not affect their ordinary use.213 However, protective coverage should be removable without leaving any traces on the goods.214 c) Fit for a particular purpose stated by the buyer: Art. 35(2)(b) aa) General remarks. Art. 35(2)(b) requires the seller to deliver goods which are fit for 112 a particular purpose expressly or impliedly made known to the seller. It is modelled on s. 14(3) Sale of Goods Act 1979 (UK) and § 2–315 UCC. The standard takes account of the fact that buyers often know that they need goods of a general description for a particular purpose but do not have sufficient knowledge about the goods to give exact specifications. They state their purpose and then rely on the superior knowledge of the sellers, familiar with the goods they offer, to determine whether the goods are suitable for such purposes. Consequently, the standard does not apply if the buyer either did not rely on the 113 information provided as to the suitability for that purpose or it was unreasonable for him to rely on it, because of the seller’s skill and judgment. All three requirements, i. e. information about the purpose, reliance on seller’s knowledge and reasonableness of reliance, must be fulfilled for the standard to be implied. It is, however, not necessary that the buyer has informed the seller about his reliance on the seller’s expertise. The practical consequence of the inclusion of Art. 35(2)(b) is that, whenever the 114 buyer informs the seller about a particular purpose for which he wants to use the goods, the seller is in principle obligated to object to such a purpose and refrain from entering into the contract if he does not want to be bound by it under Art. 35(2)(b).215 To a certain extent, Art. 35(2)(b) gives the buyer a limited right to unilaterally determine the content of the contract by informing the seller about a particular use.216 For that reason, it should be interpreted narrowly.217 bb) Information about purpose. For the standard to apply, it is necessary and 115 sufficient that the seller is informed about the special purpose. The inclusion of this standard in Art. 35(2) shows that no agreement of the parties on the purpose trans208 Cour de cassation (France) 17 December 1996 (ceramic ovenware), Ceramique v Musgrave, CISGOnline 220 (Pace). 209 Landgericht Coburg (Germany) 12 December 2006 (plants), CISG-Online 1447 (Pace) holding, however, that suitability for the concrete climate conditions could only be required if the place of use has been communicated under Art. 35(2)(b). 210 Rechtbank van Koophandel Veurne (Belgium) 25 April 2001 (diesel tram), CISG-Online 765. 211 Oberlandesgericht Mu ¨ nchen (Germany) 17 November 2006 (dust ventilator), CISG-Online 1395 (Pace). 212 Landgericht Regensburg (Germany) 24 September 1998 (cloth), CISG-Online 514 (Pace). 213 Rechtbank van Koophandel Hasselt (Belgium) 28 June 2006 (leaflets), Drukkerij Moderna NV v IVA Groep BV, (Pace). 214 Bundesgerichtshof (Germany) 25 November 1998 (surface protective film), CISG-Online 353 (Pace). 215 For the effect of clauses requiring approval of the use for a particular purpose High Court of Justice (United Kingdom) 1 May 2012 (borence, polymer), Kingspan Environmental Ltd et al v Borealis A/S et al, CISG-Online 2391 (Pace), paras 659 et seq. 216 Eckert/Maifeld/Matthiessen, Handbuch des Kaufrechts (2014), para. 566. 217 Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 18.

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mitted by the buyer is required.218 Such cases will fall under Art. 35(1). Looking at the legislative history, a proposal by Germany to make Art. 35(2)(b) dependent on consent has been rejected,219 to the effect that the consent requirement which existed under Art. 33(1)(e) ULIS has been abolished.220 Art. 35(2)(b) serves to reduce uncertainties for the buyer in all cases where the seller did not explicitly articulate any consent to the purpose transmitted by the buyer.221 The buyer is only required to prove that the seller was informed about the purpose and not that the seller consented to the information, as is necessary under Art. 35(1). The seller must, however, be able to deduce the particular purpose from the information passed.222 For example, the mere fact that different goods are ordered together does not imply that they should necessarily be used together. Consequently, the non-delivery of one of the goods does not result in the non-conformity of the other goods delivered, unless the buyer has informed the seller that the two different goods can only be used together.223 Problems arise where the seller ought to have deduced a particular purpose from the information provided to him but has not done so. Contrary to what appears to be the view supported by the Secretariat Commentary,224 no actual knowledge of the purpose is required. Rather, it is sufficient that the seller ought to have been aware of the purpose.225 The wording of Art. 35(2)(b), which focuses on the act of “making known” and not the result, as well as the underlying rationale, do not require actual knowledge. The buyer should not be burdened by having to prove facts, such as actual consent or actual knowledge, which are difficult to establish in practice.226 It follows from the above that the buyer must either have informed the seller about the particular purpose himself or least know that the seller has been informed about it. Furthermore, if the buyer does not know that the seller has been informed of the purpose, there will be no basis for the necessary reliance on the seller’s superior knowledge. The information about the purpose must have been passed by the time of contract conclusion.227 When making their decisions whether to enter into a contract, sellers must know the exact content of their obligations as to the conformity of the goods. Any other view would give the buyer the opportunity to subsequently impose additional requirements as to conformity upon the seller.

218 Schlechtriem/Butler, CISG (2009), para. 13 8; Eckert/Maifeld/Matthiessen, Handbuch des Kaufrechts (2014), para. 564; Oberster Gerichtshof (Austria) 19 April 2007 (scaffold hooks), CISG-Online 1495 (Pace) at 1.3. 219 Official Records, p. 316 paras 57 seq. 220 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 5; cf. s14(3) UK Sale of Goods Act upon which the provision is based. 221 Honnold/Flechtner, Uniform Law (2009), Art. 35 para. 226. 222 Bundesgericht (Switzerland) 13 January 2004 (menthol USP brand crystals), CISG-Online 838 (Pace) (UNILEX), at E. 3.4 where the reference in a contract to “grands cristaux” were held to be insufficient, since no special meaning was allocated to them in practice. 223 Oberlandesgericht Du ¨ sseldorf (Germany) 10 February 1994 (fabrics), CISG-Online 115 (Pace). 224 Secretariat Commentary on 1978 Draft, Art. 33 (now Art. 35) para. 8. 225 Schlechtriem/Butler, CISG (2009), para. 138; Magnus, in: Honsell, Kommentar (2010), Art. 35 para. 18; for a different view Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 18 interpreting the wording differently. 226 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 23; Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 26. 227 Secretariat Commentary on 1978 Draft, Art. 33 (now Art. 35) para. 8; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 18; Arbitral Award, NAI No. 2319, 15 October 2002 (condensate crude oil mix), CISG-Online 740 (780) (Pace), at para. 67.

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The information about a particular purpose may be passed explicitly or implicitly. Sources for implicit information can be, for example, brochures provided to the seller by the buyer, in which the latter describes its activities or products sold. Thus, where such a brochure given to the seller indicates that the buyer is selling scaffolds fulfilling a certain quality norm, hooks and scaffolding decks ordered must be fit to be used for that purpose.228 Equally, contractual agreements falling under Art. 35(1) may be relevant to determine additional characteristics required under Art. 35(2)(b). For example, a contractual requirement that the goods have to be labelled in a particular language constitutes an agreement on the required labelling in the sense of Art. 35(1). At the same time, it indicates to the seller that the goods are to be used in that country so that they have to be fit for that use in relation to other characteristics, such as the prevailing climate conditions in that country. In addition to the language, other references in the parties’ contract or during the negotiation to measures, industry norms or other facts peculiar to a particular country, are indicators that the goods will be used in that country. By contrast, the mere information about the place of delivery or to which of the buyer’s customers the goods have to be sent cannot, without further indications, be considered as implicit information about a particular use,229 as a resale is normally not excluded. This may be different if the buyer’s customer is a consumer or the goods are of a kind that a resale can be excluded. A particular purpose communicated may result in special safety requirement230 or may imply that the goods must have a certain operational lifetime.231 For example, the purchase of expensive and heavy globes by a company for the communicated purpose of using them as marketing tools in their offices was considered to imply that the motors for such globes must operate for at least three years.232 Where the particular purpose is the use of goods in a particular country, the goods must be fit for that purpose in relation to their inherent characteristics, such as being able to operate in the prevailing climatic conditions. The goods then also have to conform to the public law standards imposed in that country.233 Contrary to a widely held view234, there is no reason to treat standards imposed by public law any different than other factors which affect the use or resaleability in the relevant country, such as customary standards or religious beliefs. The argument that a seller cannot be required to know the standards in the country of 228 Oberster Gerichtshof (Austria) 19 April 2007 (scaffold hooks), CISG-Online 1495 (Pace) at 1.3, where reliance was placed on the seller’s catalogue. 229 Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 19. 230 Handelsgericht Aargau (Switzerland) 5 November 2002 (inflatable triumphal arch), CISG-Online 715 (Pace). 231 High Court of Justice (United Kingdom) 1 May 2012 (borence, polymer), Kingspan Environmental Ltd et al v Borealis A/S et al, CISG-Online 2391 (Pace), paras 651 et seq. – raw material bought to produce oil tanks for which a 10 years guarantee is given must be capable of being used for the production of oil tanks with such a lifespan. 232 Landgericht Mu ¨ nchen I (Germany) 27 February 2002 (globes), CISG-Online 654 (Pace). 233 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 21; Schlechtriem, Noch einmal: Vertragsgema¨ße Beschaffenheit der Ware bei divergierenden o¨ffentlich-rechtlichen Qualita¨tsvorgaben, IPRax (2001) 161 (162); but see for the issue of reliance infra paras 122 et seq. 234 Magnus, in: Honsell, Kommentar (2010), Art. 35 para. 19 Bundesgerichtshof (Germany), 8 March 1995 (New Zealand mussels), CISG-Online 144 (Pace); Oberster Gerichtshof (Austria) 13 April 2000 (machines), CISG-Online 576 (Pace); Oberster Gerichtshof (Austria) 19 April 2007 (scaffold hooks), CISG-Online 1495 (Pace) at 1.2; Gerechthof’s Arnhem (Netherlands) 27 April 1999 (movable room units), G. Mainzer Raumzellen v Van Keulen Mobielbouw Nijverdal BV, CISG-Online 741 (Pace).

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destination and therefore has to be protected, does not apply in the context of Art. 35(2)(b). Unlike under Art. 35(2)(a), the seller is adequately protected against the application of obscure or unexpected rules by the reliance requirement. The buyer has done his part by informing the seller about the use of the goods in a particular country. If the seller does not want to be bound by the public law regulations applicable in that country or does not know them, he has to inform himself or refuse to enter into the contract under those conditions. 127 This is also the solution explicitly adopted for defects in title in Art. 42(1)(a), which declares the “law of the State where the goods will be resold or otherwise used” to be relevant if the parties had anticipated the use in that country. There are no reasons to limit the underlying rule in Art. 42(1)(a) to defects in title and to allocate the risks differently for other cases of non-conformity.235 Industrial property rights are not public law regulations, which differ to such an extent from other provisions that they require different treatment. cc) Reliance on the seller’s skill and knowledge. The exception relating to the buyer’s non-reliance and the seller’s lack of skill and judgment is the necessary limitation to the buyer’s right to unilaterally determine the exact content of the contract.236 Its wording and the ensuing allocation of the burden of proof take into account that normally, whenever information is passed about a particular purpose, the buyer can and does rely on the seller’s knowledge about whether the goods are fit for that purpose. In the majority of cases, the seller – in particular if he is also the producer of the goods – knows the specific features of the goods better than the buyer. The latter normally trusts in that superior knowledge of the seller who should be able to evaluate whether the goods are fit for their purpose.237 Thus, it seems reasonable to put the burden on the seller. Where the buyer, however, does not rely on the seller’s knowledge there is no need to protect the buyer.238 129 The lack of reliance exception may be the result of two different sets of facts. It can be based either on a sufficient or even superior knowledge of the buyer or on an obvious lack of the seller’s knowledge. 130 Sufficient knowledge by the buyer may exist in all cases where the buyer himself has gained considerable experience in relation to the goods in question. For example the buyer may have previously reprocessed the goods in his factories. Indications demonstrating the buyer’s lack of reliance on the seller’s knowledge are when the buyer orders the goods by a specific brand name239, takes part in their selection or describes them “in terms of highly technical specifications”.240 The same applies if the buyer orders the goods despite doubts or warnings expressed by the seller.241 The mere fact that the buyer has some knowledge about the goods, however, does not in itself exclude reliance in the sense of Art. 35(2)(b). As long as the seller has superior knowledge, reliance is justified.242 128

235 Schlechtriem, Vertragsma ¨ßigkeit der Ware als Frage der Beschaffenheitsvereinbarung, IPRax (1996) 12 (15 seq.). 236 Eckert/Maifeld/Matthiessen, Handbuch des Kaufrechts (2014), para. 566. 237 Magnus, in: Staudinger Kommentar (2013), Art. 35 paras 31 seq.; Handelsgericht Aargau (Switzerland) 5 November 2002 (inflatable triumphal arch), CISG-Online 715 (Pace); Landgericht Coburg (Germany) 12 December 2006 (plants), CISG-Online 1447 (Pace). 238 See Rechtbank van Koophandel Hasselt (Belgium) 19 April 2006 (doors), CISG-Online 1389 (Pace). 239 For a limited value of this indication Maley, The Limits to the Conformity of Goods, 12 International Trade and Business Law Review (2009) 82 (119 et seq.) (Pace). 240 Secretariat Commentary on 1978 Draft, Art. 33 (now Art. 35) para. 9; Schwenzer, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 35 para. 25. 241 Piltz, Internationales Kaufrecht (2008), para. 5–42. 242 Landgericht Coburg (Germany) 12 December 2006 (plants), CISG-Online 1447 (Pace); Eckert/ Maifeld/Matthiessen, Handbuch des Kaufrechts (2014), para. 566; slightly different Schwenzer, in:

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The lack of seller’s skill may become particularly relevant in cases where the goods 131 are of a certain complexity and the seller is only an intermediary or where he informs the buyer about his lack of knowledge, for example, by recommending the use of local experts.243 By contrast, a lack of skill cannot normally be argued by a party producing the goods. In the absence of indications to the contrary, the buyer may not assume that the seller 132 knows the relevant public law standards in the buyer’s country.244 This may be different if the seller is regularly exporting goods to that country, has a local representative in the country or the standards are in accordance with internationally or regionally recognized standards which should be known to the seller.245 In all other cases the buyer should know the standards in his own country better than the seller and inform the latter about them if he expects compliance with them. General remarks, such as that the authorities impose a high standard, are not sufficient in this regard.246 Even in those cases where the buyer has obviously not relied on the seller’s knowl- 133 edge, the principle of good faith may impose on the seller an obligation to inform the buyer that the goods ordered do not qualify for the intended purpose.247 In appropriate circumstances, the breach of this obligation may give rise to claims for damages irrespective of the fact that the goods delivered are not in breach of the standard in Art. 35(2)(b).248 There is, however, no general obligation for the seller who has provided sufficient details about the goods delivered to investigate whether they can be used in the buyer’s facilities.249 d) In conformity with sample or model: Art. 35(2)(c) aa) General remarks. Art. 35(2)(c) determines the standard for contracts concluded 134 on the basis of a sample or a model held out by the seller. It obliges the seller to deliver goods which possess the quality of the sample or model, which are also relevant for the packaging of the goods.250 The underlying rationale of this standard is that holding out a sample or a model has 135 the same effect as describing the goods in detail. In general, the submission of a sample or a model can be seen as a factual description of the goods. For that reason, Art. 35(2)(c), unlike its predecessor Art. 33(c) ULIS, does not require an express or implied undertaking of the seller that the goods conform with the sample or model.251 Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 25 who requires superior knowledge of the buyer for the exception to apply; as the burden of proof lies anyway with the seller the difference in approach will probably have little effect in practice. 243 High Court of New Zealand (New Zealand) 30 July 2010 (trucks), RJ & AM Smallmon v Transport Sales Limited and Grant Alan Miller, CISG-Online 2113 (Pace); confirmed by Court of Appeal of New Zealand (New Zealand) 22 July 2011 (trucks), RJ & AM Smallmon v Transport Sales Ltd and Grant Alan Miller, CISG-Online 2215 (Pace), paras 65 et seq. 244 Cf. Schlechtriem, Noch einmal: Vertragsgema ¨ße Beschaffenheit der Ware bei divergierenden o¨ffentlich-rechtlichen Qualita¨tsvorgaben, IPRax (2001) 161 (163) who excludes reliance only for obscure provisions. 245 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 34. 246 Gerechthof’s Arnhem (Netherlands) 27 April 1999 (movable room units), G. Mainzer Raumzellen v Van Keulen Mobielbouw Nijverdal BV, CISG-Online 741 (Pace). 247 Secretariat Commentary on 1978 Draft, Art. 33 (now Art. 35) para. 9. 248 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 35. 249 Oberlandesgericht Graz (Austria) 19 June 2013 (heavy oil), CISG-Online 2461, para. C.2 holding that the buyer has in such cases an obligation to examine the suitability of the goods. 250 Piltz, Internationales Kaufrecht (2008), para. 5–39. 251 Bianca, in: Bianca/Bonell, Commentary (1987), Art. 35 para. 2.6.1; an explicit or implicit agreement of the parties that the goods have the characteristics of the sample is not required; but see: Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 36; Honnold/Flechtner, Uniform Law (2009), Art. 35

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Even without such an undertaking, the buyer expects that the goods have the same characteristics and features as the sample or model.252 However, the wording of Art. 35(2)(c) (“held out”) requires that the model or sample is not merely presented on a non-obligatory basis. The seller must intend it to be of relevance for the contract253 or at least his declarations and conduct must be able to be interpreted in such a way.254 bb) The required characteristics. Goods usually have an infinite number of characteristics. In particular, where a model is provided, it cannot be assumed that the goods have to comply with all of the characteristics of the model to be conforming. The problem is determining which characteristics must be complied with. If the seller indicates that the sample or model differs in some respects from the goods to be delivered, he will not be held to these qualities. The same applies in cases where a model has been presented with the intention to solely point out particular qualities of the goods. In such cases the goods only have to comply with these qualities.255 Such a limitation may be assumed, for example, if the sample or model was given to dispel a particular concern raised by the buyer during the negotiations or to show compliance with certain requirements set out by the buyer in his offer or his requests for offers. 137 There may be cases where the model or sample has been held out by the seller in order to give an approximate description of the goods. In these cases, while the sample or model binds the seller in principle, slight differences from it may be tolerated.256 138 Cases where the goods delivered comply with the sample or the model presented but do not have the characteristics and qualities contractually agreed upon between the parties under Art. 35(1), or are not fit for a special purpose in the sense of Art. 35(2)(b) or their ordinary purposes in the sense of Art. 35(2)(a) are problematic. In such circumstances, the question of whether the goods are non-conforming in the sense of Art. 35 is firstly a question of contractual interpretation.257 The sample or model provided may only relate to certain characteristics while other express contractual agreements exist. It may also be that the wording of the contractual agreements has to be interpreted narrowly as, for certain characteristics, a sample has been provided which should determine the quality due under the contract. 139 There may, however, be cases where conflicts turn out to be real and cannot be solved by means of contractual interpretation. In such cases, the contractually agreed requirements in the sense of Art. 35(1) should prevail, unless it is based on a general usage in 136

para. 227 who considers the standard to be one which “articulates contractual understandings that are given effect by paragraph (1)” which would imply an actual agreement of the parties. 252 Gabriel, Sale of Goods (2004), p. 120. 253 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 28; Eckert/Maifeld/Matthiessen, Handbuch des Kaufrechts (2014), para. 567; cf. Landgericht Berlin (Germany) 15 September 1994 (shoes), CISG-Online 399 (Pace). 254 See Oberster Gerichtshof (Austria) 11 March 1999 (frames for mountain bikes), CISG-Online 524 (Pace) where the question arose whether the sample presented at a fair formed the basis of the order or was merely a concept study for promotional purposes; cf. Handelsgericht St. Gallen (Switzerland) 14 June 2012 (organic juice and organic oils), CISG-Online 2468 (Pace), para. III. 3. c. where the sample was found to be provided merely to give a general impression of the goods but not to warrant certain characteristics. 255 Bianca, in: Bianca/Bonell, Commentary (1987), Art. 35 para. 2.6.2; Schwenzer, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 35 para. 26. 256 Rechtbank van Koophandel Hasselt (Belgium) 19 April 2006 (doors), CISG-Online 1389 (Pace) where the sample of the relevant wood provided was so small that it justified no assumption that there would be no change in colour in the doors produced from the wood. 257 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 39; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 27; critical Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 22 who assumes that Art. 35(2)(c) has generally a subsidiary character.

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the sense of Art. 9(2). In all other cases, though the standard in Art. 35(2)(c) is based on facts specific to the particular contract, it is overridden by the more specific express or implied contractual stipulations, which require consent by both parties. Comparable considerations apply for the relationship between Arts 35(2)(c) and 140 35(2)(a). In principle, the more specific standard in Art. 35(2)(c) prevails.258 This may be different in cases where the sample or model had a hidden defect, which excludes any presumption that the parties consented to such a standard.259 If the model or the sample has apparent defects, Arts 38 et seq. may apply by analogy, so that a failure to notify of such defects may exclude reliance on the lack of fitness for the ordinary use of the goods.260 Goods which have the same characteristics as the model or sample but are not fit for 141 a particular purpose communicated to the seller are normally conforming in the sense of Art. 35. One of the purposes of providing a sample or a model is to allow the buyer to examine it and make his own judgment as to whether the goods will be fit for the intended purpose so that he does not have to rely on the seller’s skill and knowledge. Things may be different where the buyer can prove that he was nevertheless justified to rely on the seller’s superior knowledge and did so.261 cc) Samples provided by the buyer. Art. 35(2)(c) does not apply to samples or 142 models provided by the buyer.262 The seller is only liable for the conformity with such samples or models if they fall within the scope of Art. 35(1), i. e. have become part of the contractual description of the goods, or under Art. 35(2)(b), if they can be considered to constitute information about a particular purpose. In all other cases, models or samples provided by the buyer do not result in obligations for the seller as to conformity.263 There may, however, be fact patterns where the samples or models provided by the buyer lead, under the principle of good faith, to duties to warn imposed on the seller if the goods provided do not comply with the buyer’s samples. e) Contained or packaged in the usual or adequate manner: Art. 35(2)(d) aa) The accessory duty of packing. Art. 35(2)(d), which has no antecedent in the 143 ULIS,264 imposes criteria as to the standard of packaging for all cases in which the parties have not agreed on a particular standard. It evinces the seller’s accessory duty to do what is ordinarily required to ensure that the buyer receives the goods in a satisfactory condition. Thus, in the absence of an agreement between the parties to the contrary, the seller is under an obligation to assure appropriate packaging. This is obvious in cases where the contract involves the carriage of goods. This duty, however, also exists in cases where the goods are to be handed over at the seller’s place of business or where the goods are stocked

258 Eckert/Maifeld/Matthiessen, Handbuch des Kaufrechts (2014), para. 568; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 22. 259 Piltz, Internationales Kaufrecht (2008), para. 5–40; see Oberster Gerichtshof (Austria) 27 February 2003 (frozen fish), CISG-Online 794 (Pace) with note Huber, IPRax (2004) 358 (359). 260 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 37; Landgericht Mu ¨ nchen I (Germany) 27 February 2002 (globes), CISG-Online 654 (Pace) where the buyer knew from the sample that the globes purchased for use in its showrooms were very noisy and could therefore not rely on that. 261 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 27; cf. Bianca, in: Bianca/ Bonell, Commentary (1987), Art. 35 para. 2.6.1.; for a different view, in favour of a general prevalence of the standard in Art. 35(2)(b) see: Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 38. 262 Schlechtriem/Butler, CISG (2009), para. 141. 263 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 40; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 29. 264 For a comparable standard see § 2–314 UCC.

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(Art. 31(b)(c)).265 Thus, even where goods are sold ex works, the seller has to ensure that they are packed in a way which is suitable for their transportation by the buyer.266 144 The provision implies two standards, i. e. the goods are required to have been packaged either in the “usual manner” or in an “adequate manner”. In general, it can be assumed that the “adequate manner” of containing or packaging is sufficient to preserve and protect the goods. Therefore, a buyer having difficulties in establishing the “usual manner” of packaging and non-compliance with it may rely on the supplementary second standard. bb) “Usual manner”. In principle, the goods must be “contained or packaged in the manner usual for such goods”. The “usual manner” in the sense of Art. 35(2)(d) is determined by the general industry standards that apply to the goods and the type of contract in question. Of particular relevance in this respect is normally the anticipated mode of transportation, unless the seller is not aware of the mode of transportation and the goods are sold ex works. By contrast, particular packaging practices agreed upon or established between the parties are covered by Art. 35(1).267 146 There may be cases where different standards of packaging exist in different countries. In determining the relevant standard for the purpose of Art. 35(2)(d), it must first be ascertained that the existing standards actually apply to international sales. Such sales are submitted to peculiar factual risks, in particular transportation risks, against which the packaging needs to protect. Thus, packaging standards developed for local transactions are of limited or at least lesser importance. Where different manners of packaging exist for international transactions in different countries, the method at the seller’s place of business prevails.268 To that extent, the same considerations apply as are relevant for determining the relevant national standards in the context of Art. 35(2)(a). 145

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cc) “Adequate manner”. Where there is no such “usual manner”,269 the goods must be contained and packaged in a “manner adequate to preserve and protect the goods.” A manner is adequate, if it preserves and protects the goods under ordinary circumstances, i. e. against the normal risks to which comparable goods in comparable contracts are submitted.270 Extraordinary risks or events are not relevant in determining the necessary standard of packaging. Relevant factors for the determination of what is adequate are the nature and value of the goods, the type and duration of the transport, the transportation route, climatic conditions and typical dangers associated with the particular mode of transportation. For example, goods to be shipped by sea to a destination with difficult climatic conditions may have to be contained or packaged in a way which prevents any damage through the normal humidity and variations in temperature.271 The packaging must not only be adequate to endure the carriage, including a foreseeable amount of delay, but also the normal time of storage at the destination. 265

Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 32. Oberlandesgericht Koblenz (Germany) 14 September 2006 (bottles), CISG-Online 1408 (Pace); for the duties in connection with an FOB contract see Comisio´n para la Proteccio´n del Comercio Exterior de Me´xico (Mexico) 29 April 1996 (canned fruit), CISG-Online 350 (Pace) (Unilex). 267 But see Cour d’appel de Douai (France) 17 March 2016 (alternators), CISG-Online 2744, para. 9 where the practice established between the parties was subsumed under Art. 35(2)(d). 268 Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 23. 269 For the subsidiary nature of that requirement see Cour d’appel de Douai (France) 17 March 2016 (alternators), CISG-Online 2744, para. 9. 270 Saarla ¨ ndisches Oberlandesgericht (Germany) 17 January 2007 (natural stone marble panels), CISGOnline 1642 (Pace). 271 See Cour de cassation (France) 24 September 2003 (decorated laminated glass panels), Aluminum and Light Industries Company v Saint Bernard Miroiterie Vitretie, CISG-Online 791 (Pace). 266

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In general, the fact that the packaging did not prevent damage to the goods is a 148 strong indication that the packaging was not adequate, unless the seller can show that the damage was due to extraordinary circumstances.272 Notwithstanding that the buyer is responsible to arrange transportation, the goods 149 must be contained and packaged by the seller in an adequate manner with regard to their destination, if this is known to the seller. Sending the goods to a particular destination can be considered to be one of the expressly or impliedly made known purposes with which the goods have to comply under Art. 35(2)(b). dd) Damages limited to packaging. The seller does not incur any liability for non- 150 conforming goods, if only the packaging is damaged during the transport but the goods are intact and the sole purpose of the packaging was to protect the goods during their transport.273 Non-conformity exists, however, if the goods are normally resold by the buyer with the same packaging. The same applies in cases of high end, luxury or other products where the packaging in itself has a commercial value. Pursuant to Art. 36(1), the relevant time for conformity of the goods is at the passing 151 of risk. Where goods are damaged during transportation after risk has passed, the seller may nevertheless be liable, if those damages are due to non-conforming packaging that already existed before the risk passed.274 ee) Extent of the duty to packaging and costs associated with it. The obligation as to 152 packaging under Art. 35(d) does not apply to goods which are normally not delivered with any particular packaging. This is, for example, the case with certain raw materials such as bulk shipments of coal or ore.275 In the absence of an explicit contractual agreement, the seller is not liable if the 153 packaging should serve additional purposes going beyond the usual purposes, such as including particular codes allowing for an automatic processing of the goods at the buyer’s premises.276 Maintaining sterility for goods which have to be sterile for their use is, however, part of the usual purpose of packaging.277 In the absence of contractual agreements to the contrary, the seller is required to bear 154 the costs associated with his obligation to deliver packaged goods. Where the packaging is merely intended to protect the goods during transport and is reusable, such as containers, the seller is in general not obligated to also transfer the property in the packaging. As such, the buyer may be obligated to return the packaging and a violation of that obligation may result in a liability of the buyer according to Art. 45(1)(b).278

272 The strength of the presumption may be limited; see Cour de cassation (France) 24 September 2003 (decorated laminated glass panels), Aluminum and Light Industries Company v Saint Bernard Miroiterie Vitretie, CISG-Online 791 (Pace). 273 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 33; Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 44. 274 Honnold/Flechtner, Uniform Law (2009), para. 242; Eckert/Maifeld/Matthiessen, Handbuch des Kaufrechts (2014), para. 572; Piltz, Internationales Kaufrecht (2008), para. 5–37; Comisio´n para la Proteccio´n del Comercio Exterior de Me´xico (Mexico) 29 April 1996 (canned fruit), CISG-Online 350 (Pace) (Unilex). 275 Honnold/Flechtner, Uniform Law (2009), Art. 35 para. 228. 276 Piltz, Internationales Kaufrecht (2008), para. 5–38. 277 Oberlandesgericht Koblenz (Germany) 14 September 2006 (bottles), CISG-Online 1408 (Pace) where the non-conformity of the goods resulted from the use of a porous foil, unsuitable to guarantee sterility. 278 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 45; but see Bundesgerichtshof (Germany) 5 February 1997 (containers for plants), (Pace) applying German law to the question as in its view the then applicable ULIS did not contain a provision on the question of return.

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4. Art. 35(3) a) Rationale and scope of the exclusion. Art. 35(3) excludes any liability of the seller for the delivery of goods not conforming to any of the standards in Art. 35(2)(a)–(d) if the buyer knew or could not have been unaware of such a lack of conformity at the time of contract conclusion. The obligations as to the quality of the goods arising from Art. 35(2) are imposed on the seller because the buyer can legitimately expect the goods to meet these standards even in the absence of any express or implicit stipulation in the contract.279 No such legitimate expectations exist if the buyer knows or ought to have known that the goods do not conform to such standards. The rationale of Art. 35(3) is that a buyer who knows or ought to have known which type of goods the seller is going to deliver cannot later ask for better qualities or conditions.280 Such a buyer can be considered to have consented to the seller’s proposal to deliver the goods in their present status or at least be treated as if he had consented. 156 In practice, the exclusion of liability under Art. 35(3) may become relevant primarily in two types of cases: first, where specific goods are sold which are known to the buyer; second, for the sale of generic goods where the buyer was given the chance to inspect or examine the goods or knows their effective state from earlier contracts. 157 In cases where the seller has provided a sample or a model, Art. 35(3) has only a limited scope of application. The model or sample provides the relevant standard pursuant to Art. 35(2)(c). Therefore, the buyer’s knowledge about certain qualities will, in principle, already exclude the non-conformity of the goods and not merely lead to an exclusion of liability. However, there remains scope for the application of Art. 35(3) in the following two situations. The first covers cases where the buyer knows from the examination of the sample that the apparent qualities of the sample, which define the relevant standard for conformity, are in fact not present.281 The second concerns qualities of the goods which were not described by the sample but have to be met according to any of the other standards in Art. 35(2). 155

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b) Extension to breaches of Art. 35(1)? Different views exist as to whether the exclusion of liability in Art. 35(3) may also apply for contractually agreed quality standards under Art. 35(1). Some authors favour an analogous application of Art. 35(3) to such cases, though the wording of the provision only refers to nonconformity with the standards in Art. 35(2).282 The prevailing view relies on the unequivocal wording of Art. 35(3) and limits the exclusion to the standards implied by Art. 35(2).283 Notwithstanding actual or constructive knowledge about the actual quality of the goods, the buyer should be able to rely on the engagement undertaken by the seller. The buyer’s knowledge should not change the content of the seller’s undertaking nor should it free the seller from the obligations assumed.284 279

Secretariat Commentary on 1978 Draft, Art. 33 (now Art. 35) para. 13. Bianca, in: Bianca/Bonell, Commentary (1987), Art. 35 para. 2.8.1; Schlechtriem, The Seller’s Obligations Under the United Nations Convention on Contracts for the International Sale of Goods, in: Galston/Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), p. 6–22. 281 Bianca, in: Bianca/Bonell, Commentary (1987), Art. 35 para. 2.9.1. 282 In favour of such an extension Herber/Czerwenka, Kommentar (1991), Art. 35 para. 11; critical of the limitation Neumayer/Ming, Convention de Vienne (1993), Art. 35 para. 14 (“limitation … peu compréhensible”). 283 Schlechtriem/Butler, CISG (2009), para. 144; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 27. 284 Secretariat Commentary on 1978 Draft, Art. 33 (now Art. 35) para. 14; Bianca, in: Bianca/Bonell, Commentary (1987), Art. 35 para. 2.9.2. 280

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The latter view is more in line with the rationale of Art. 35(3). In general, an 159 express285 contractual agreement by the parties precludes the assumption that the buyer consented to a different standard at the same time. This applies in all cases where the buyer had no actual knowledge but could not have been unaware of the non-conformity and where the buyer, despite his knowledge, could reasonably assume that the seller would remedy the defects before delivery.286 It could, however, be contrary to the principles of good faith to prevent the seller 160 from relying on Art. 35(3) in cases where the buyer had positive knowledge that the seller would deliver non-conforming goods. Buyers which have superior knowledge about the characteristics of the goods and nevertheless induce the seller to enter into contractual agreements which the seller will probably not be able to fulfil act contrary to good faith. This applies, in particular, in cases where the seller is an intermediary, who has already expressed doubts as to whether the goods to be resold by him will meet the contractually agreed standards.287 In these cases, it first has to be determined whether, in light of the buyer’s knowledge 161 about defects, the parties actually agreed on the standard expressly mentioned in the agreement. It may well be that the goods were sold under a different standard reflecting the knowledge of the parties.288 In particular, where the buyer’s knowledge is based on a prior examination of the goods, the parties may have agreed on the sale of the goods as witnessed, despite conflicting wording in the agreement.289 In practice, however, this distinction between relevant standards and the buyer’s knowledge is often not made and cases of an earlier examination are regularly treated under Art. 35(3).290 c) Buyer’s actual or presumed knowledge. Art. 35(3) requires that the buyer must 162 either have known about the non-conformity or that he could not have been unaware of it. The relevant point in time is, to that extent, the time of contract conclusion. Subsequent discovery of defects, even if they occurred before actual delivery, is irrelevant.291 The first alternative requires actual knowledge. “Constructive” knowledge on the 163 basis of clauses included into the contract is not sufficient.292 Furthermore, it always has to be ascertained whether or not the buyer is actually aware of the non-conformity. For example, a buyer of skin care products who is aware that over the lifetime of the product the chemical composition of a crucial vitamin will decrease is not necessarily at the same time aware that it will actually fall below the critical threshold. To the contrary, the buyer may, in most cases, assume that the seller is able to prevent such 285 The buyer’s knowledge about the actual qualities of the goods prevents to assume an implied agreement on different qualities; Bianca, in: Bianca/Bonell, Commentary (1987), Art. 35 para. 2.9.2. 286 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 50; see also Henschel, Conformity of Goods in International Sales Governed by CISG Article 35, Nordic Journal of Commercial Law (2004/1) (Pace), according to whom there is a presumption in favour of the buyer that the seller would remedy the defects until delivery. 287 In these cases it will often be possible to construe the agreement between the parties that they agreed on the actual characteristics of the goods as the relevant standard. 288 In this direction Tribunal Cantonal du Valais (Switzerland) 29 June 1998 (sports clothing), CISGOnline 420 (Pace). 289 Henschel, Conformity of Goods in International Sales Governed by CISG Article 35, Nordic Journal of Commercial Law (2004/1) (Pace) listing factors which may be relevant in this regard. 290 Tribunal Cantonal du Valais (Switzerland) 28 October 1997 (second hand bulldozer), CISG-Online 328 (Pace). 291 Federal Court of Australia (Australia) 20 April 2011 (electrical appliances), Castel Electronics Pty Ltd v Toshiba Singapore Pte Ltd, CISG-Online 2219 (Pace), para. 313. 292 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 47; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 28.

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deterioration in quality.293 Equally, the knowledge about one deviation from the agreed upon quality does not necessarily imply knowledge about another non-conformity.294 Where the seller has shown goods to the buyer or has given him the opportunity to examine them, his liability is only excluded for the apparent defects. The buyer is only required to undertake an examination that is normal in the particular industry or can be expected in light of the statements made by the seller.295 Thus, liability for hidden defects or defects which can only be discovered by examinations involving extra costs, time or complexity beyond those which can reasonably be expected, is not excluded by Art. 35(3). The exclusion of liability also extends to deficiencies of the goods of which the buyer “could not have been unaware”. Different views exist as to the understanding of the second alternative, i. e. that the buyer “could not have been unaware”. While some parts of the literature consider grossly negligent lack of knowledge sufficient,296 others want to impose a stricter standard. They rely on the fact that the CISG distinguishes between the concept of “ought to have known”, which covers gross negligence, and the concept of “could not have been unaware”. The latter does not lead to any examination duties297 and only covers those cases where all facts were apparent and the buyer had to draw the necessary conclusions. The purpose of the reference in this context is to lighten the burden of proving that the facts which were before the buyer’s eyes and also reached his mind, and that he drew the necessary conclusions as to the conformity of the goods.298 The two understandings may lead to different results in those cases where the buyer has not made use of an offer by the seller to examine the goods at the time of contract conclusion, which would have revealed the non-conformity. Gross negligence can be assumed in all cases where the lack of awareness results from the failure to undertake the necessary and possible examination of the goods. However, as the supporters of the gross negligence standard make it clear that they do not want to create an additional299 examination duty for the buyer through the back door,300 the practical relevance of the difference should not be exaggerated. The buyer’s knowledge or required knowledge may also result from previous dealings. The seller may have previously delivered goods which were below the objective standard in Art. 35(2). If the buyer did not complain about the non-conformity on that occasion he cannot expect that the seller will deliver goods of a higher quality under future contracts.301 293 Helsinki Court of First Instance (Finland) 11 June 1995, confirmed by Helsinki Court of Appeal (Finland) 30 June 1998 (skin care product), CISG-Online 1304 (Pace). 294 Federal Court of Australia (Australia) 20 April 2011 (electrical appliances), Castel Electronics Pty Ltd v Toshiba Singapore Pte Ltd, CISG-Online 2219 (Pace), paras 310 seq. (knowledge about lack of software irrelevant for defects based on faulty wiring). 295 See Oberlandesgericht Koblenz (Germany) 19 December 2012 (generator), CISG-Online 2470 (Pace), pp. 4 seq. (no need to verify detailed descriptions as to performance of the generator when examining it). 296 Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 29; Brunner, Kommentar (2014), Art. 35 para. 24; Gruber, in: Mu¨nchKommBGB (2016), Art. 35 CISG para. 36; also in favour of gross negligence Aue, Ma¨ngelgewa¨hrleistung im UN-Kaufrecht unter besonderer Beru¨cksichtigung stillschweigender Zusicherungen (1989), pp. 82 et seq. adopting, however, a restrictive standard. 297 Piltz, Internationales Kaufrecht (2008), para. 5–52. 298 Honnold/Flechtner, Uniform Law (2009), Art. 35 para. 229. 299 It must be distinguished from the examination duty pursuant to Art. 38 or other examination duties which do not affect the “conformity” of the goods as they concern examinations post contract conclusion; a violation of such duties may lead to a loss of all remedies or a reduction of the damages pursuant to Arts 77, 80; see Bundesgerichtshof (Germany) 26 September 2012 (clay), CISG-Online 2348 (Pace), para. II.3. 300 E. g. Gruber, in: Mu ¨ nchKommBGB (2016), Art. 35 CISG para. 36. 301 See Arbitral Award, CIETAC, 20 January 1994 (hydraulic press) (Pace).

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d) Seller acting in bad faith. Art. 35(3) does not explicitly restrict its scope of 168 application to cases where the seller was not aware of the non-conformity. Thus, it applies, in principle, to cases in which the seller was aware of the non-conformity of the goods but did not disclose that fact to the buyer. This may be justified in those cases where the buyer had positive knowledge about the non-conformity of the goods. In this case, the buyer may not also rely on national rules of fraudulent misrepresentation to circumvent the application of Art. 35(3). The exclusion of liability in Art. 35(3) does not, however, apply to such cases where the buyer only “could not have been unaware” of the non-conformity while the seller had positive knowledge of it.302 To that extent, Art. 40 contains a general principle which is a special emanation of the principle of good faith, i. e. the seller may not rely on failures by the buyer if he acts in bad faith to an even greater extent.303 e) Waiver. The seller may waive the right to rely on Art. 35(3). The question of a 169 potential waiver arises where the seller, despite being aware that the requirements of Art. 35(3) are met, has tried or promised to remedy defects or has partially compensated the buyer.304 A waiver should, however, not be assumed lightly. It requires that the seller is aware and has the intention to waive his rights under Art. 35(3) or his actions could at least be interpreted as a waiver pursuant to Art. 8(2)(3).

5. Exclusion of express and implied obligations as to conformity Clauses trying to limit or even exclude liability for non-conforming goods are fairly 170 standard in international contractual practice.305 The CISG – unlike some national sales laws306 – does not contain a special provision explaining how to exclude the legal standards imposed by Art. 35(2) or those agreed upon under Art. 35(1). Hence the general rules on the formation of contracts (Arts 14 et seq.) and interpretations of declarations (Art. 8) apply. The fact that only Art. 35(2) explicitly refers to an agreement to the contrary cannot 171 be interpreted as limiting a possible exclusion of liability to the standards imposed by Art. 35(2).307 In principle, and in line with Art. 6 endorsing party autonomy, the seller could also try to disclaim obligations resulting from Art. 35(1). However, courts are generally reluctant to interpret broadly worded disclaimer clauses to cover contractually agreed conformity standards, i. e. express warranties.308 Moreover, clauses which purport to exclude liability for contractually agreed conformity standards would probably be considered invalid, if they cannot be interpreted in a way which excludes the clear contradiction to the obligation assumed. In principle, the validity of all disclaimers is governed by national law (Art. 4).309 172 However, by stating that the obligations under Art. 35(2) only arise “[e]xcept where the 302 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 52; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 35 CISG para. 30. 303 Oberlandesgericht Ko ¨ ln (Germany) 21 May 1996 (used car), CISG-Online 254 (Pace). 304 See Federal Court of Australia (Australia) 20 April 2011 (electrical appliances), Castel Electronics Pty Ltd v Toshiba Singapore Pte Ltd, CISG-Online 2219 (Pace), para. 307. 305 E. g. ICC Model International Sales Contract, ICC Publication, Part A Clause 11; Part B Article 11; on the topic see CISG AC Opinion no 17. 306 E. g. § 2–316(3) UCC. 307 In this direction, however, Hyland, Conformity of Goods, in: Schlechtriem (ed.), Einheitliches Kaufrecht (1987), p. 305 (309). 308 Lookofsky, Tooling up for Warranties with the CISG Case Digest, in: Flechtner/Brand/Walter (eds), Drafting Contracts (2007), p. 343 (351). 309 Flechtner, Selected Issues Relating to the CISG’s Scope of Application, 13 Vindobona Journal of International Commercial Law and Arbitration (2009) 91 (97) (Pace); Hyland, Conformity of Goods, in:

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parties have agreed otherwise” the CISG made clear that disclaimers cannot be completely prohibited. The various national laws differ considerably as to the permissibility of such waivers and, in particular, as to the requirements for their effectiveness, which, for example, in the U.S. requires the use of certain wordings.310 Inquiries into the effects of such disclaimers can easily be phrased as questions concerning the validity of the disclaimer. Given the varying and sometimes very detailed requirements for the validity and effectiveness of such disclaimers under national laws, an approach requiring that a disclaimer would have to meet the various national provisions in regards to their appearance or wording to be valid would constitute a serious threat to the uniform application of the CISG. In light of this, a narrow understanding of “validity” should be adopted, which is largely restricted to the question of whether a disclaimer is as such permissible and if so to what extent, but does not cover issues relating to the effectiveness of such clauses. Questions relating to the “effectiveness” of such clauses should be treated as those of contract formation or contract interpretation, forming part of the contractual descriptions of the goods.311 In addition, where under national law a valid disclaimer requires special wording, the latter may be based on the formulations used for implied warranties in the national law and therefore not be applicable or at least not suitable for CISG contracts.312 173 Comparative analysis reveals that it is probably impossible to validly exclude all liability for non-conformity. In particular, exclusions of liability covering fraudulent behaviour are likely to be invalid.313 174 These limits imposed by the national laws, however, only relate to contractual disclaimers. The seller may always inform the buyer about the defects in the goods and thereby benefit from the exclusion of liability in Art. 35(3).314 175 In principle, the requirements as to conformity implied under Art. 35(2) may also be excluded by express warranties in regards to the characteristics of the goods, which would conflict with such implied standards. Such an exclusion should, however, not be assumed lightly. The primary purpose of such clauses is to make positive statements about the quality of the goods and not to relieve the seller of his responsibilities.315

6. Burden of proof 176

a) General rule. In the context of the seller’s liability for non-conforming goods, the burden of proof is of considerable practical relevance. Both buyer and seller will often encounter difficulties proving that the goods were or were not in conformity at the time Schlechtriem (ed.), Einheitliches Kaufrecht (1987), p. 305 (313); Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 53; see also Pennsylvania Federal District Court (U.S.) 25 July 2008 (locomotives), Norfolk Southern Railway Company v Power Source Supply, Inc, CISG-Online 1776 (Pace). 310 Hyland, Conformity of Goods, in: Schlechtriem (ed.), Einheitliches Kaufrecht (1987), p. 305 (314); for further references to national laws see also Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 45. 311 In favour of such an approach see Gillette/Walt, Sales Law (2016), Chap. 8 III pp. 377 seq.; Lookofsky, Tooling up for Warranties with the CISG Case Digest, in: Flechtner/Brand/Walter (eds), Drafting Contracts (2007), p. 343 (356 et seq.) see also Hyland, Conformity of Goods, in: Schlechtriem (ed.), Einheitliches Kaufrecht (1987), p. 305 (314 seq.); in favour of a broader concept of “validity” determined by the national law, Longobardi, Disclaimers of Implied Warranties: The 1980 United Nations Convention on Contracts for the International Sale of Goods, 53 Fordham Law Review (1985) 863 (873 et seq.) (Pace). 312 Flechtner, Selected Issues Relating to the CISG’s Scope of Application, 13 Vindobona Journal of International Commercial Law and Arbitration (2009) 91 (96 seq.) (Pace). 313 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 45; Oberlandesgericht Dresden (Germany) 27 May 2010 (used car), CISG-Online 2182 (Pace), para. II.3.C.a. 314 Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 54. 315 Arbitral Award, SCC, Beijing Light Automobile Co. Ltd. v Connell Limited Partnership, 5 June 1998 (rail press), CISG-Online 379 (Pace).

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the risk passed so that the outcome of a dispute depends on who bears the burden of proof.316 This applies, in particular, in cases of hidden defects only discovered after some time, but also for contracts involving the transport of goods317 or where the goods are used in combination with other products in a way that defects in the final product could have several different causes.318 Notwithstanding that Arts 35 et seq. do not explicitly regulate the burden of proof, it is 177 widely319 accepted that the CISG – and not national law – determines the allocation of the burden of proof for the non-conformity.320 Some go even further and submit that the CISG also governs the way in which this burden can be discharged.321 The prevailing view is, however, that national law governs by which means a party may discharge its burden, as well as other primarily procedural questions relating to the admissibility and weight of evidence. Thus, whether the party may prove the non-conformity by submitting the report of a party-selected expert or whether the non-conformity can only be proven by court appointed experts is a question for the national law.322 The same applies for questions of the evidentiary value and consequences of admissions of non-conformity.323 There is large consensus that the burden of proof in the context of Art. 35 follows the 178 general principles underlying the CISG in relation to burden of proof. Thus, in general, each party has to prove the existence of the factual prerequisites contained in the legal provision upon which it wants to rely for its claims or defences.324 The principle of proof proximity may require certain exceptions to that rule.325 What follows from these 316 See Kro ¨ ll, The burden of proof for the non-conformity of goods under Art. 35 CISG, 15 Vindobona Journal of International Commercial Law and Arbitration (2011) 33 seq. (Pace). 317 For a more detailed account of the proof problems arising from transportation see Antweiler, Beweislastverteilung im UN-Kaufrecht (1995), pp. 141 et seq. 318 Audiencia Provincial de Barcelona (Spain) 20 June 1997 (dye for clothes), CISG-Online 338 (Pace). 319 For the opposite view i. e. submitting the burden of proof to national law, Arbitral Award, ICC 6653/1993, 26 March 1993 (steel bars) (Pace); Khoo, in: Bianca/Bonell, Commentary (1987), Art. 2 para. 3.2; Heuze´, Vente Internationale (2000), para. 299; Gillette/Walt, Sales Law (2016), Chap. 6 V C p. 272 et seq.; Flechtner, Selected Issues Relating to the CISG’s Scope of Application, 13 Vindobona Journal of International Commercial Law and Arbitration (2009) 91 (102 et seq.) (Pace). 320 E. g. Bundesgerichtshof (Germany) 9 January 2002 (powdered milk), CISG-Online 651 (Pace) at 2(b) with note Perales Viscasillas, Battle of the Forms and the Burden of Proof: An Analysis of BGH 9 January 2002, 6 Vindobona Journal of International Commercial Law and Arbitration (2002) 217 (227) (Pace); Bundesgericht (Switzerland) 13 November 2003 (used laundry machine), CISG-Online 840 (Pace) at 5.3 with approving note Mohs, IHR (2004) 219 (220); Bundesgericht (Switzerland) 16 July 2012 (spinning mill), CISG-Online 2371 (Pace), para. 8.1; Ferrari, Burden of Proof under the CISG, Pace Review of the Convention on contracts for the International Sale of Goods (2000–2001), 1 et seq.; Mu¨ller, Ausgewa¨hlte Fragen der Beweislastverteilung im UN-Kaufrecht im Lichte der aktuellen Rechtsprechung (2005), pp. 28 et seq.; see also the decisions in the following footnotes. 321 DiMatteo et al., The Interpretive Turn in International Sales Law, 34 Northwestern Journal of International Law and Business (2004) 299 (438 seq.); see also Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 58 advocating that the CISG governs the standard of proof which should be “reasonableness”. 322 See Tribunale di Vigevano (Italy) 12 July 2000 (sheets of vulcanized rubber used in manufacture of shoe soles), CISG-Online 493 (Pace) where the evidence submitted by the German buyer to prove the non-conformity, i. e. the report and testimony of an expert appointed by the buyer, had been rejected under Italian procedural law; cf. Ca´mara Nacional de Apelaciones en lo Commercial (Argentina) 24 April 2000 (charcoal), CISG-Online 699 (Pace) at III; Ca´mara Nacional de Apelacioines en lo Commercial (Argentina) 21 July 2002 (malt), CISG-Online 803 (Pace) requesting proof of non-conformity under Art. 476 Commercial Code by submission to independent expert arbitrators (peritos arbitradores). 323 Bundesgerichtshof (Germany) 9 January 2002 (powdered milk), CISG-Online 651 (Pace). 324 Often referred to by the Latin adages “onus probandi incumbit ei qui dicit, non qui negat” or “actori incumbit probatio”; see Mu¨ller, Ausgewa¨hlte Fragen der Beweislastverteilung im UN-Kaufrecht im Lichte der aktuellen Rechtsprechung (2005), pp. 36 et seq. 325 Bundesgericht (Switzerland) 13 November 2003 (used laundry machine), CISG-Online 840 (Pace) at 5.4; Obergericht des Kantons Zug (Switzerland) 8 November 2011 (spinning mill), CISG-Online 2425

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general principles in the context of Art. 35 is, however, highly controversial. The various views are in part strongly influenced by the position taken under respective national laws, as is particularly evident with some of the French and German decisions.326 In addition, often the various statements by courts and tribunals or in the literature lack the necessary specificity and distinction to attribute them clearly to a particular view so that the same authors and decisions are relied upon for different views.327 That is in part due to the fact that there is no universally accepted concept of the notion of burden of proof, which is considered to be one of the most slippery notions of any legal system. On a proper understanding, the burden of proof only becomes relevant if at the end of the evidentiary process, which involves the application of all evidentiary tools such as prima facie evidence or presumptions, it cannot be established with the required certainty whether a relevant fact exists or not. b) Allocation of the burden of proof in practice: Overview on the different positions. The Swiss courts want to allocate the burden of proof primarily on the basis of the “actori incumbit probatio” principle. Thus, the burden of proof is largely dependent on the position of the parties in the process, i. e. who invokes Art. 35 in their favour. Where the seller claims for the purchase price he has to prove that he fulfilled his obligation to deliver conforming goods. By contrast, the burden of proof should lie with the buyer where he wants to hold the seller liable for non-conforming goods or where he refuses acceptance of the goods for non-conformity.328 180 In most other jurisdictions, courts and literature pay at best lip-service to this rule. De facto the burden of proof is allocated largely independently from the procedural position of the relevant parties. Due to the particularities of Art. 35, the application of the “rule-exception” principle is fraught with uncertainties. 181 Some courts have held that the burden should generally lie with the seller.329 Also, in the German literature, influenced by the situation in domestic law, the seller is in principle considered to bear the burden of proof that he properly performed his obligation.330 In the view of others, the buyer should normally bear the burden of proof.331 179

(Pace), para. 4.2.2 – overruled as to the question whether an exception was justified in the case at hand by Bundesgericht (Switzerland) 16 July 2012 (spinning mill), CISG-Online 2371 (Pace), para. 8.4. 326 For a critical analysis of this see Gruber, in: Mu ¨ nchKommBGB (2016), Art. 35 CISG para. 44. 327 For a detailed discussion of the various positions and issues see the monographs by Mu ¨ ller, Ausgewa¨hlte Fragen der Beweislastverteilung im UN-Kaufrecht im Lichte der aktuellen Rechtsprechung (2005), pp. 36 et seq.; Antweiler, Beweislastverteilung im UN-Kaufrecht (1995), pp. 141 et seq.; Linne, Burden of Proof under Article 35 CISG, 20 Pace international Law Review (2008) 31. 328 Bundesgericht (Switzerland) 13 November 2003 (used laundry machine), CISG-Online 840 (Pace) at 5.3 (in the case the principle is, however, de facto overridden by the “proof-proximity” principle); Bundesgericht (Switzerland) 13 January 2004 (menthol USP brand crystals), CISG-Online 838 (Pace) (UNILEX) at E. 3.1. in two of the cases; in this direction also Ferrari, Divergences in the application of the CISG’s rules on non-conformity of goods, RabelsZ (2004) 473 (479); Neumann, Features of Article 35 in the Vienna Convention; Equivalence, Burden of Proof and Awareness, 11 Vindobona Journal of International Commercial Law and Arbitration (2007/1) 81 at paras 16 et seq. (Pace). 329 Rechtbank van Koophandel Kortrijk (Belgium) 6 October 1997 (crude yarn), CISG-Online 532 (Pace); in this direction also Landgericht Berlin (Germany) 15 September 1994 (shoes), CISG-Online 399 (Pace) requiring, however, first a detailed complaint of the buyer. 330 Henninger, Die Frage der Beweislast im Rahmen des UN-Kaufrechts (1995), p. 221. 331 Bianca, in: Bianca/Bonell, Commentary (1987), Art. 36 para. 3.1; Mohs, Case note (Bundesgericht 13 November 2003), IHR (2004) 219 (220); U.S. Court of Appeals (7th Circuit) (U.S.) 23 May 2005 (pork ribs) Chicago Prime Packers, Inc. v Northam Food Trading Co., CISG-Online 1026 (Pace), to a large extent de facto also Bundesgericht (Switzerland) 13 January 2004 (menthol USP brand crystals), CISGOnline 838 (Pace) (UNILEX) at E. 3.1.

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The prevailing view in practice is that the burden shifts from the seller to the buyer in 182 conjunction with the delivery of goods.332 The exact time of such shift as well as its legal justification, however, is controversial. In general, a buyer who has taken delivery of the goods without any complaints or reservation as to their conformity has to prove that the goods were non-conforming at the time the risk passed.333 The seller has to prove the conformity of the goods before the buyer takes delivery or makes reservations.334 The views concerning the exact time of the shift of the burden of proof range from the mere physical acceptance of the goods,335 to the expiry of a time to examine the goods in the sense of Art. 58(3),336 to the expiry of the notification period under Art. 39.337 It is argued that due to the considerable protection afforded to the seller by Art. 39, it is justifiable to impose the burden of proof on the seller at least until the notification period expires. In the literature, a number of variances of these general approaches have been 183 suggested. They often try to facilitate the burden of proof for the buyer concerning the existence of the non-conformity at the time risk passes. Some authors consider it sufficient that the buyer proves the present non-conformity of the goods to put into operation a presumption in his favour that this non-conformity also existed at the time the risk passed. It is then for the seller to rebut such presumption by showing that the non-conformity is the consequence of a subsequent event.338 Others want to limit that exception to the period between the dispatch of the goods by the seller and their arrival to the buyer in cases of contracts including carriage and based on C-Incoterms.339 One author suggests a three step approach according to which the seller carries an initial burden of establishing a prima facie case of conformity, for example by inspection certificates or routine business practices. Upon fulfilment of this burden, the buyer would then have to establish a case of non-conformity and that this was not caused by 332 See in particular Handelsgericht Zu ¨ rich (Switzerland) 30 November 1998 (lambskin coats), CISGOnline 415 (Pace); Piltz, Internationales Kaufrecht (2008), para. 5–23; Schwenzer, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 35 para. 55; as well as the references in the following footnotes. 333 Bundesgericht (Switzerland) 13 November 2003 (used laundry machine), CISG-Online 840 (Pace) at 5.3.; Bundesgericht (Switzerland) 7 July 2004 (cable drums), CISG-Online 848 (Pace) at 3.3; Bundesgericht (Switzerland) 16 July 2012 (spinning mill), CISG-Online 2371 (Pace), para. 8.1; Bundesgerichtshof (Germany) 8 March 1995 (mussels), CISG-Online 144 (Pace) at II 1(b)(aa); Bundesgerichtshof (Germany) 9 January 2002 (milkpowder), CISG-Online 651 (Pace) at 2 (a); less explicit also Cour de cassation (France) 24 September 2003 (decorated laminated glass panels), Aluminium and Light Industries Company v Saint Bernard Miroiterie Vitretie, CISG-Online 791 (Pace). 334 Handelsgericht Zu ¨ rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace); Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 55. 335 Bundesgericht (Switzerland) 13 November 2003 (used laundry machine), CISG-Online 840 (Pace) at 5.3. 336 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 36 paras 8, 10; Mohs, Case note (Bundesgericht 13 November 2003), IHR (2004) 219 (220); Schwenzer, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 35 para. 52 note 265; different now in Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 55. 337 Antweiler, Beweislastverteilung im UN-Kaufrecht (1995), p. 162 et seq.; Henninger, Die Frage der ¨ ffentlichrechtliche “Vorgaben” Beweislast im Rahmen des UN-Kaufrechts (1995), p. 221 et seq.; Daun, O im Ka¨uferland und Vertragsma¨ßigkeit der Ware nach UN-Kaufrecht, NJW (1996) 29 (30); see also the earlier Swiss jurisprudence Handelsgericht Zu¨rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace); Obergericht Luzern (Switzerland) 12 May 2003 (used textile cleaning machine), CISG-Online 846; Appellationshof Bern (Switzerland) 11 February 2004 (wire and cable), CISG-Online 1191 (Pace), which has, however, been overruled by the Bundesgericht (Switzerland) 7 July 2004 (cable drums), CISG-Online 848 (Pace). 338 So originally Magnus, in: Staudinger Kommentar (2005), Art. 36 para. 25; in the 2013 edition the presumption was replaced by mere proof alleviations such a prima facie evidence, Art. 36 para. 25. 339 Piltz, Internationales Kaufrecht (2008), para. 5–23.

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the buyer. If the buyer meets that burden of proof, the burden would shift back to the seller to explain why he should not be liable for the non-conformity.340 184

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c) Suggested approach.341 In allocating the burden of proof a distinction should first be made between establishing the relevant standard for conformity on the one hand and the question of its breach or fulfilment when risk passes on the other. The allocation of the burden of proof for the determination of the relevant standard to be met, whether subjective (Art. 35(1)) or objective (Art. 35(2)), should be governed by the “actori incumbit probatio” principle. The starting point is the default standard in Art. 35(2)(a). A party seeking to rely on Art. 35 has to prove any deviations in its favour from that standard or, if he wants to rely on Art. 35(2)(a), the content of the standard as such. In most cases, it will therefore be the buyer who has to prove the relevant standard where he wants to rely on the non-conformity of the goods. This applies to the fall-back standard in Art. 35(2)(a) as well as any higher or different standard either on the basis of an agreement between the parties or because of a special purpose communicated or on the basis of a sample. By contrast, the seller has to prove any deviations from the ordinary use standard in Art. 35(2)(a) upon which he wants to rely, to counter requests by the buyer for the delivery of goods of a higher standard. The same applies for disclaimers. The allocation of the burden of proof for the second question, that of the breach or fulfilment of the standard established, should be governed primarily by the principles of proof proximity.342 Thus, before the actual delivery or where the buyer accepts the goods only with complaints or reservations, the seller has to prove their conformity. The goods are, or in case of acceptance with reservation were at least at the relevant time, still within the seller’s sphere of influence. He is in the most appropriate position to take the necessary evidence to prove their conformity. The same applies if the buyer objects to the non-conformity of the goods within the time necessary for the superficial inspection of the goods under Art. 58(3). The buyer must at least have the opportunity to inspect the goods as to their prima facie conformity. Given the short period between the handing over of the goods to the buyer and the reservations declared, it can normally be assumed that the goods have not deteriorated but are in the same condition as at the time of delivery. Thus, while the seller may no longer have direct possession of the goods at the time the reservation is declared, it is still justifiable to leave the burden of proof with him. By contrast, once the buyer has taken delivery of the goods without any complaints or reservations as to their conformity within the timeframe of Art. 58(3), he has to prove that the goods were non-conforming at the time the risk passed.343 This also includes 340

Linne, Burden of Proof under Article 35 CISG, 20 Pace international Law Review (2008) 31 (42 seq). For a more detailed discussion see Kro¨ll, The burden of proof for the non-conformity of goods under Art. 35 CISG, 15 Vindobona Journal of International Commercial Law and Arbitration (2011) 33 (45 et seq.) (Pace). 342 For the primary relevance of the principle see also Benicke, in: Mu ¨ nchKommHGB (2013), Art. 36 para. 11; cf. Bundesgericht (Switzerland) 7 July 2004 (cable drums), CISG-Online 848 (Pace) at 3.3; for a case where proof proximity was considered to be irrelevant Handelsgericht Zu¨rich (Switzerland) 18 June 2012 (antique statue), CISG-Online 660 (Pace), para. 4.3.1(c). 343 Bundesgericht (Switzerland) 13 November 2003 (used laundry machine), CISG-Online 840 (Pace) at 5.3; Bundesgericht (Switzerland) 7 July 2004 (cable drums), CISG-Online 848 (Pace) at 3.3; Bundesgericht (Switzerland) 16 July 2012 (spinning mill), CISG-Online 2371 (Pace), para. 8.1; Tribunale di Vigevano (Italy), 12 July 2000 (sheets of vulcanized rubber used in manufacture of shoe soles), CISG-Online 493 (Pace); Bundesgerichtshof (Germany) 8 March 1995 (mussels), CISG-Online 144 (Pace) at II 1(b)(aa); Bundesgerichtshof (Germany) 9 January 2002 (milkpowder), CISG-Online 651 (Pace) at 2(a). 341

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proof that insufficient quantities have been delivered.344 Different considerations can apply in cases where due to the nature of the alleged defect it is clear that it must have been present at the time of the passing of the risk and cannot have occurred later.345 As a consequence, a buyer in an ex works contract, where the risk passes when the goods have been made available at the agreed upon premises, has not met his burden of proof for non-conformity if it cannot be established whether defects result from manufacturing or from transportation.346 The same applies to FOB contracts, where the buyer has to establish that the non-conformity already existed at the time the risk passed at the mentioned place.347 To make the expiry of the notification period the relevant point in time when the burden of proof passes to the buyer, as is suggested in the literature and jurisprudence, does not give sufficient weight to the principle of proof proximity. In light of the possible length of the notification period in Art. 39, the seller would be faced with considerable problems in fulfilling an obligation to prove that the goods were conforming at the time risk passed. Not only are the goods in question no longer in his possession, but the seller, unlike the buyer, normally has no information about their treatment during the time between delivery and the notification of the non-conformity.348 Notwithstanding that the need to secure evidence also plays a role for the notification requirement in Art. 39, the latter also serves additional purposes. Consequently, the shift in the burden of proof should not be directly linked to the expiry of the notification requirement.349 This assertion is further supported by the fact that a clear distinction between the two allows for a graded approach which is more in line with the whole structure of the CISG, and in particular the various examination periods. These take into account the different stages in the process of performing a contract and the consequences resulting thereof for the ability of each party in proving its case. Thus, while the actual acceptance of the goods without any reservations after a superficial investigation of their conformity leads to a shift in the burden of proof, the later expiry of the notification period, including time for a more thorough examination under Art. 38, leads to a complete loss of remedies. Moreover, the imposition of the burden of proof on a buyer who has accepted the goods does not constitute an undue burden on the buyer. Given that the goods are in his possession, he should have no problem in proving that the current condition of the goods is not in conformity with the requirements of Art. 35. For the second step, i. e. to show that the non-conformity already existed at the time risk passed, he may frequently be able to rely on evidentiary privileges such as prima facie evidence or even presumptions.350 344 Bundesgericht (Switzerland) 7 July 2004 (cable drums), CISG-Online 848 (Pace) at 3.3, justifying the rule with the fact that after taking over the goods it is easier for the buyer to prove their non-conformity; for an exceptional case where the seller had to prove the quantities delivered as they were defined not by numbers, but by an area Oberlandesgericht Brandenburg (Germany) 3 July 2014 (cuttings), CISG-Online 2543 (Pace), para. 23 et seq.; generally in favour of putting the burden for the delivery of sufficient quantities upon the seller Obergericht des Kantons Zug (Switzerland) 8 November 2011 (spinning mill), CISG-Online 2425 (Pace), para. 4.2.2 overruled by Bundesgericht (Switzerland) 16 July 2012 (spinning mill), CISG-Online 2371 (Pace), para. 8.4. 345 Handelsgericht Zu ¨ rich (Switzerland) 18 June 2012 (antique statue), CISG-Online 2660 (Pace), para. 4.3.1.(c) – concerning the age of the statue. 346 Cour de cassation (France) 24 September 2003, Aluminium and Light Industries Company v Saint Bernard Miroiterie Vitretie (decorated laminated glass panels), CISG-Online 791 (Pace). 347 See the example in Honnold/Flechtner, Uniform Law (2009), para. 242 example 36A. 348 Bundesgericht (Switzerland) 13 November 2003 (used laundry machine), CISG-Online 840 (Pace) at 5.3 with approving note Mohs, IHR (2004) 219 (220); Schwenzer, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 35 para. 52 giving up an earlier support for extending the period. 349 See Benicke, in: Mu ¨ nchKommHGB (2013), Art. 36 para. 10 who fears that a linkage of both could lead to pressures to shorten the time for notification endangering a uniform interpretation of the CISG. 350 For details see Art. 36 paras 21 et seq.

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The CISG, however, only regulates the burden of proof within its own scope of substantive applicability. Questions as to what effects an admission or an acknowledgment of the non-conformity of goods by the buyer have on the burden of proof, are governed by the applicable national law. Thus, letters acknowledging the existence of deficiencies may result, under the relevant national law, in a mere alleviation of the standard of proof, presumptions in favour of the buyer or even a shift of the burden of proof.351 In this respect, other pre-trial correspondence of the parties may become relevant.352

d) Burden of proof concerning specific facts 195 aa) Art. 35(1). The buyer who alleges that certain requirements as to conformity have been agreed bears the burden of proof for that.353 Normally the burden can be discharged not only by direct evidence, i. e. submission of the express contractual terms, but also by indirect evidence such as the description of the goods in pro-forma invoices, examination reports, packing lists, to which the seller did not object at the time. 196 By contrast where the seller tries to rely on a contractually agreed standard in the sense of Art. 35(1) which imposes lower requirements than the standards in Art. 35(2), he has to prove such standard.354 197 Subsequent changes to an originally agreed standard have to be proven by the party relying on them.355 The opposite applies where a party alleges that, despite an uncontested subsequent amendment of a contract, certain previously agreed standards continue to be relevant.356 A party which relies on a usage allegedly defining the quality has to prove such usage.357 bb) Art. 35(2)(a) – Fitness for ordinary purpose. Allegations that the goods are not fit for the ordinary purpose must be proven by the buyer.358 This includes that a buyer, who wants to rely on the non-compliance of the goods with public law restrictions in a country different from the country of the seller, proves why the seller should have been aware of them. 199 By contrast, the seller has to prove that he disclaimed this or any other of the implied obligations found in Art. 35(2). 198

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cc) Art. 35(2)(b) – Fitness for a particular purpose. A buyer trying to invoke the non-conformity of the goods with the standard imposed by Art. 35(2)(b) has to prove that the particular purpose was made known to the seller.359 The seller then bears the 351 Bundesgerichtshof (Germany) 9 January 2002 (powdered milk), CISG-Online 651 (Pace) at 2(b) with note Perales Viscasillas, Battle of the Forms and the Burden of Proof: An Analysis of BGH 9 January 2002, 6 Vindobona Journal of International Commercial Law and Arbitration (2002) 217 (227) at 9. 352 See also Tribunale d’Appello Ticino (Switzerland) 15 January 1998 (cocoa beans), CISG-Online 417 (Pace) implicit acknowledgement of the non-conformity of the goods by relying merely on technicalities. 353 Oberlandesgericht Zweibru ¨ cken (Germany) 2 February 2004 (milling equipment), CISG-Online 877 (Pace) – origin of goods; Landgericht Hamburg (Germany) 6 September 2004 (containers), CISG-Online 1085 (Pace) – year of production. 354 Mu ¨ ller, Ausgewa¨hlte Fragen der Beweislastverteilung im UN-Kaufrecht im Lichte der aktuellen Rechtsprechung (2005) p. 65. 355 Landgericht Landshut (Germany) 5 April 1995 (sport clothing), CISG-Online 193 (Pace) at II 1 c. 356 Pennsylvania Federal District Court (U.S.) 25 July 2008 (locomotives), Norfolk Southern Railway Company v Power Source Supply, Inc., CISG-Online 1776 (Pace). 357 Handelsgericht St. Gallen (Switzerland) 14 June 2012 (organic juice – organic oil), CISG-Online 2468 (Pace), para. III.5 reliance on usage as to documents required. 358 Oberlandesgericht Innsbruck (Austria) 1 July 1994 (garden flowers), CISG-Online 219 (Pace). 359 Bundesgericht (Switzerland) 13 January 2004 (menthol USP brand crystals), CISG-Online 838 (Pace) (UNILEX) at E. 3.1; Neumann, Features of Article 35 in the Vienna Convention; Equivalence, Burden of Proof and Awareness, 11 Vindobona Journal of International Commercial Law and Arbitration (2007/1) 81 at paras 38 et seq. (Pace).

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burden of proof for the fact that the buyer did not rely upon the seller’s skill and judgment or that it was unreasonable for him to do so.360 To establish non-conformity pursuant to Art. 35(2)(b), it may be sufficient that the 201 buyer shows that the goods cannot be used for the purpose without providing direct evidence as to what was the actual cause or defect preventing such use.361 Such an inference is, however, only possible where it can be established that the non-suitability was not due to factors in the buyer’s sphere of responsibility, i. e. improper handling or wrong processes used.362 dd) Art. 35(2)(c) – Sale by sample or model. The buyer bears the burden of proof that 202 a sample or model has been provided and the goods do not conform with this sample.363 By contrast, where the seller tries to rely on the standard in Art. 35(2)(c) to avoid the application of Art. 35(2)(a), he has to prove that a sample or model has been provided.364 ee) Exclusion of liability. A seller trying to rely on Art. 35(3) to exclude liability has 203 to prove that the buyer knew of the defects at the time of contract conclusion.365 e) Discharging the burden of proof: relevance of certificates confirming confor- 204 mity. Parties regularly provide in their contract for an examination of the goods by outside experts. Clauses such as “final according to SGS certification”366 are not uncommon and seem to imply that the findings of the expert constitute conclusive evidence of the non-conformity. Whether that is really the case has to be determined by interpreting the clause on the basis of Art. 8. In the majority of cases, such clauses do not exclude proof to the contrary, i. e. that the findings in the expert report are wrong. It is, however, up to the party which contests the findings of the expert to prove that they are actually wrong, which may lead to a de facto reversal of the burden of proof. Moreover, the proof provided by such certificates cannot go further than the examination made. Thus, where it follows from the certificate that only the top layers of a consignment of bricks were examined, it does not provide any proof as to the conformity of the lower layers.367 Even beyond such express contractual provisions, inspection certificates issued by 205 third parties are often of crucial relevance in determining the conformity of the goods. However, they lose their evidentiary value if there is a considerable period of time between the inspection and the passing of the risk, during which the goods may have 360 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 56; Magnus, in: Staudinger Kommentar (2013), Art. 35 para. 56; Maley, The Limits to the Conformity of Goods, 12 International Trade and Business Law Review (2009) 82 (118 seq.) (Pace); hesitant in relation to the reliance requirement Hyland, Conformity of Goods, in: Schlechtriem (ed.), Einheitliches Kaufrecht und nationales Obligationenrecht (1987), p. 305 (322). 361 U.S. Court of Appeals (4th Circuit) (U.S.) 21 June 2002, Schmitz-Werke GmbH & Co v Rockland Industries, Inc. (drapery fabric), CISG-Online 625 (Pace) where the buyer could establish that transfer printing was not possible on the goods sold for that purpose but did not prove the reason for that. 362 High Court of Justice (United Kingdom) 1 May 2012 (borence, polymer), Kingspan Environmental Ltd et al v Borealis A/S et al, CISG-Online 2391 (Pace), paras 670 et seq. 363 Rechtbank van Koophandel Hasselt (Belgium) 19 April 2006 (doors), CISG-Online 1389 (Pace). 364 Mu ¨ ller, Ausgewa¨hlte Fragen der Beweislastverteilung im UN-Kaufrecht im Lichte der aktuellen Rechtsprechung (2005), p. 66. 365 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 57; Aue, Ma ¨ngelgewa¨hrleistung im UN-Kaufrecht (1989), p. 81; Saarla¨ndisches Oberlandesgericht (Germany) 17 January 2007 (natural stone marble panels), CISG-Online 1642 (Pace) – relating to the manner of packaging. 366 For such a clause and its treatment see Arbitral Award, Exchange for farm products Vienna, 10 December 1997 (barley), CISG-Online 351 (Pace) – at VII 1.5. 367 See the facts underlying the decision by the Dalian Maritime Court (China) 29 June 2005 (magnesia chromite clinker), CISG-Online 2030 (Pace) where allegedly only the upper layers which the SGS inspector was allowed to examine contained the ordered clinker while the lower layers contained ordinary bricks.

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deteriorated or may have been exchanged.368 Furthermore, where generic goods are sold, the buyer must also prove that the certificates relate to the goods in question.369 Equally, other documents, such as bills of lading, packing lists and invoices may also constitute prima facie evidence of the facts described in them.370 206 In addition, the conduct of the parties subsequent to the first complaints about the non-conformity plays an important role in determining the relevant standards, in particular in the context of Art. 35(1), as well as whether they have been met. Efforts by the seller to repair the goods, discussions about possible ways to remedy defects371, reductions in invoices and the like can constitute a strong indication that the goods were actually non-conforming.372 The conduct is, however, by no means conclusive since it may also be based on commercial reasons, i. e. to maintain a long-term relationship or retain a highly valued customer.

7. Relationship to the non-contractual remedies under national law Art. 35 clearly preempts reliance on national rules for non-conforming goods.373 Different views exist as to the relationship between the CISG’s rules on non-conformity and the concurrent or competing non-contractual remedial rules under the otherwise applicable national law. Of practical relevance in this respect are the remedies for misrepresentation or mistake374 as well as the remedies for tortious liability, when the defects in the goods result in damages to the buyer’s other property. Such national rules may allow for an avoidance of the contract under less strict requirements than those imposed by Art. 49 (“fundamental breach”) or may not make remedies dependent on compliance with any notification requirement. For example, in the U.S. the seller’s negligent misrepresentation as to the quality of the goods entitles the buyer to terminate the contract without any need to show that this misrepresentation was fundamental.375 Equally, the non-conformity of the goods may result, under national law, in concurrent claims in delict or tort which go beyond those provided for under the CISG. 208 Unlike the ULIS, where Art. 34 expressly provided for an exclusion of all remedies available for lack of conformity under domestic law, the CISG does not expressly 207

368 Tribunale d’Appello Ticino (Switzerland) 15 January 1998 (cocoa beans), CISG-Online 417 (Pace), SGS inspection certificate issued three weeks before shipment largely disregarded in determining the conformity of the goods. 369 U.S. Court of Appeals (7th Circuit) (U.S.) 23 May 2005 (pork ribs), Chicago Prime Packers, Inc. v Northam Food Trading Co., CISG-Online 1026 (Pace) where the buyer did not fulfil this burden; equally Oberlandesgericht Karlsruhe (Germany) 8 February 2006 (Hungarian wheat), CISG-Online 1328 (Pace). 370 Landgericht Tu ¨ bingen (Germany) 18 June 2003 (computers and accessories), CISG-Online 784 (Pace) relating to a shortfall in delivery, assumes a great likelihood “that the customers received exactly the goods that were ordered and for which the invoice was sent”; but see Obergericht des Kantons Zug (Switzerland) 8 November 2011 (spinning mill), CISG-Online 2425 (Pace), para. 4.3.3 where the fact that the bank paid under a letter of credit after submission of conforming documents was given little weight. 371 Arbitral Award, NAI No. 2319, 15 October 2002 (condensate crude oil mix), CISG-Online 740 (780) (Pace), at paras 74 et seq.; but see also para. 98. 372 Arbitral Award, Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce, 23 February 2004 (gray cast iron), CISG-Online 2078 (Pace) where the mere lack of clear objection to a complaint was already considered to be an admission. 373 E. g. Arkansas Federal District Court (U.S.) 23 December 2009 (refrigerator motors), Electrocraft Arkansas, Inc. v Electric Motors, Ltd et al, CISG-Online 2045 (Pace). 374 For an overview see Henschel, Conformity of the goods: Interpreting or supplementing Article 35 of the CISG, 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), 166 (172 seq.); see also Saidov, Conformity of Goods and Documents (2015), pp. 25 et seq. Lookofsky, Understanding the CISG (2012), pp. 69 et seq. 375 Farnsworth, Contracts (2004) §§ 4.10–4.15.

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address the question of a recourse to remedies under national law. The omission of such a provision in the CISG does not constitute a conscious decision in favour of the availability of remedies under national laws. In practice, parties have tried to rely on national remedies to terminate their contract, arguing either that the seller misrepresented the quality of the goods or that they have erred about what quality has been agreed. This view has found some support from the courts and legal literature.376 It is argued that questions of misrepresentation or mistake concern the validity of the contract in the sense of Art. 4(a) and are therefore outside the scope of the CISG with the consequence that a party can rely on the remedies available under national law. Equally, where the defects in the goods delivered resulted in damage to the buyer’s other property, buyers have tried to invoke remedies for tortious liability existing under the national law.377 However, the prevailing and, it is suggested, better view, is that questions as to the conformity of the goods are regulated exclusively by Arts 35 et seq., excluding all remedies under national law which are based on the same factual and legal considerations.378 Thus, the national remedies for mistake, negligent misrepresentation and tortious liability which are de facto based on the conformity of the goods are excluded.379 To that extent, the CISG contains exhaustive remedies. Any other view would endanger the allocation of informational risks and the pursued harmonization in a central area of the CISG.380 By contrast, the buyer’s remedies under domestic law for fraud and deceit are not excluded. In such cases, the buyer does not rely primarily on the non-conformity of the goods but on circumstances which clearly go beyond the mere non-conformity of the goods.381

376 Ohio Federal District Court (U.S.) 10 October 2006 (used paper winder), Miami Valley Paper, LLC v Lebbing Engineering & Consulting GmbH, CISG-Online 1362 (Pace) – negligent misrepresentation and in a later decision in the same matter of 26 March 2009, CISG-Online 1880 (Pace) for mistake; Lookofsky, Understanding the CISG (2017), pp. 80 et seq.; Lessiak, UNCITRAL-Kaufrechtsabkommen und Irrtumsanfechtung, JBl (1989) 487 (493); Neumayer/Ming, Convention de Vienne (1993), Art. 4 para. 6; see also Art. 4:119 PECL which explicitly allows for a choice between the different remedies. 377 See Thu ¨ ringisches Oberlandesgericht (Germany) 26 May 1998 (live fish), CISG-Online 513 (Pace) where the claim was however rejected for a non-compliance with the notice requirement under Art. 39; cf. Oberlandesgericht Koblenz (Germany) 24 February 2011 (clay), CISG-Online 2301 (Pace), para. II.B.10. 378 For details of the dual test see Schroeter, Defining the Borders of Uniform International Contract Law: The CISG and Remedies for Innocent, Negligent, or Fraudulent Misrepresentation, Villanova Law Review 2013, 553 (563 et seq.). 379 Saidov, Conformity of Goods and Documents (2015), pp. 26 et seq.; Oberster Gerichtshof (Austria) 13 April 2000 (machines), CISG-Online 576 (Pace) endorsing the decision of the lower instance which had rejected the application of Art. 4(a) to mistakes concerning the quality of the goods; for misrepresentation see Schroeter, Defining the Borders of Uniform International Contract Law: The CISG and Remedies for Innocent, Negligent, or Fraudulent Misrepresentation, Villanova Law Review 2013, 553 (568 et seq.); for questions of tortious liability see Ko¨hler, Die Haftung nach UN-Kaufrecht im Spannungsverha¨ltnis zwischen Vertrag und Delikt (2003), p. 135 et seq. 380 Schroeter, Defining the Borders of Uniform International Contract Law: The CISG and Remedies for Innocent, Negligent, or Fraudulent Misrepresentation, Villanova Law Review 2013, 553 (571 et seq.); Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 paras 47 seq. with further references as to the development of this view and opposing views; Huber, Irrtumsanfechtung und Sachma¨ngelhaftung (2001), pp. 275 et seq.; cf. Oberster Gerichtshof (Austria) 13 April 2000 (machines), CISG-Online 576 (Pace) with note Schlechtriem, Noch einmal: Vertragsgema¨ße Beschaffenheit der Ware bei divergierenden o¨ffentlich-rechtlichen Qualita¨tsvorgaben, IPRax (2001) 161 (162). 381 See Arkansas Federal District Court (U.S.) 23 December 2009 (refrigerator motors), Electrocraft Arkansas, Inc. v Electric Motors, Ltd et al., (Pace); Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 51.

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Equally, remedies for the violation of specific information and warning duties arising under Art. 7(1) are not excluded, even if they are closely connected with physical features of goods.382 214 According to the French courts, the same applies also for the remedy provided for in Art. 442-6 I 5 of the French Code de commerce for an immediate termination of existing contractual relationship without prior notice.383 213

III. Comparable Rules There is no direct equivalent to Art. 35 in the PICC or the PECL. Due to their much broader scope of application – covering contracts in general and not only sales contracts – both sets of principles have described the obligation to deliver conforming goods in much more general terms, allowing for maximum flexibility.384 The obligation to deliver conforming goods is not set out positively, but does form part of the rules on non-performance. While the text of Art. 7.1.1 PICC mentions defective performance as one of the incidences of non-performance, Art. 8:101 PECL only mentions the failure to perform and “defective performance” generally in the comments.385 Notwithstanding the absence of a provision directly comparable to Art. 35, there are several provisions in both sets of rules which parties could try to rely on in arguing a particular view in a given case. These include provisions on interpreting contracts and could be used to supplement Art. 8 in determining the parties’ agreement as to the required features of the goods in the sense of Art. 35(1). 216 In addition, as indicated above, Art. 5.1.6 PICC and Art. 6:108 PECL both refer to the standards of average quality and reasonableness in cases where no other standard has been agreed. The examples given, as well as the general factors for the standard of reasonableness listed in Art. 1:320 PECL, can be used by parties trying to support their view of what is reasonable in a particular case. 217 By contrast, the DCFR (Arts IV. A. -2:301 et seq.) and the PEL Sales (Arts 2:201 et seq.) contain provisions which directly address the issues regulated in Art. 35. In relation to their content they follow the same principles. They emphasize the primary importance of contractual descriptions in determining the conformity of the goods and provide default standards if the parties have not agreed on a particular standard. However, the drafting technique adopted differs slightly and the provisions are much more detailed in defining the various aspects of conformity. They explicitly mention a number of additional features of conformity, such as delivery of accessories and instructions. To that extent, they might provide support for submissions that certain characteristics are part of the required conformity also under the CISG. 215

382 Oberlandesgericht Koblenz (Germany) 24 February 2011 (potato separation clay), CISG-Online 2301 (Pace); Bundesgerichtshof (Germany) 26 September 2012 (clay), CISG-Online 2348 (Pace). 383 Cour de Cassation (France) 27 November 2012 (cooking unit), SMEG v. Rothelec, CISG-Online 2403 (Pace), p. 9. 384 Henschel, Conformity of the goods: Interpreting or supplementing Article 35 of the CISG, 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), p. 166 (167) (Pace). 385 Comment A.

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Article 36 (1) The seller is liable in accordance with the contract and this Convention for any lack of conformity which exists at the time when the risk passes to the buyer, even though the lack of conformity becomes apparent only after that time. (2) The seller is also liable for any lack of conformity which occurs after the time indicated in the preceding paragraph and which is due to a breach of any of his obligations, including a breach of any guarantee that for a period of time the goods will remain fit for their ordinary purpose or for some particular purpose or will retain specified qualities or characteristics. Bibliography: See selected bibliography of Art. 35; Bolle´e, The Theory of Risks in the 1980 Vienna Sales of Goods Convention, Pace Review of the Convention on Contracts for the International Sale of Goods (1999–2000) 245 (Pace).

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Art. 36(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Art. 36(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Breach of an obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 5 5 11 12 16 22 27

I. Importance and Role of the Provision Art. 36 defines the relevant point in time at which the goods have to be in conformity 1 with the standards in Art. 35. As the characteristics of the goods may change over time, defining the exact point is of considerable practical relevance for the delineation of the respective spheres of risk.1 Notwithstanding the wording declaring that the “seller is liable”, Art. 36 does not constitute a separate basis of claim.2 Art. 36(1), which contains the general rule, links the seller’s obligations as to con- 2 formity and his liability for non-conformity to the passing of the risk to the buyer.3 In principle, the relevant point in time is the passing of risk. That is in line with the solutions adopted in most national laws4 and also in the provision’s predecessor, Art. 35 ULIS. Art. 36(2) extends the seller’s liability to subsequent deficiencies if those are either due to 3 a violation of seller’s duties or if the seller has given a guarantee in the sense of Art. 36(2). Its underlying rationale is that the general transfer of the risk for deterioration to the buyer should not exempt the seller for consequences that arise from his breach of contract.5 1

Piltz, Internationales Kaufrecht (2008), para. 5–20. Magnus, in: Staudinger Kommentar (2013), Art. 36 para. 2. 3 Schlechtriem, The Seller’s Obligations Under the United Nations Convention on Contracts for the International Sale of Goods, in: Galston/Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), p. 6–23 seq.; the Secretariat Commentary on 1978 Draft, Art. 34 (now Art. 36) para. 2 speaks about a “necessary implication of the rules on risk of loss or damage”. 4 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 36 para. 2; see also DCFR, Art. IV:A. – 2: 308(1). 5 Bianca, in: Bianca/Bonell, Commentary (1987), Art. 36 para. 2.2. 2

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Article 36 4–8 4

Part III. Chapter II. Obligations of the Seller

The present wording is the product of controversial discussion during the drafting process. National laws differ in relation to the extension of liability beyond the passage of risk and the original draft of the provision underwent some changes. In particular, the requirement of an “express guarantee” for a “specific period” contained in Art. 34 of the New York Draft was replaced by a less strict formulation allowing for “implied guarantees” for “a period of time”.6

II. Detailed Commentary 1. Art. 36(1) Art. 36(1) requires the goods to be conforming “at the time the risk passes to the buyer”.7 The time for the passage of the risk of loss is primarily determined by the agreement of the parties. Of importance in this regard are agreements on the relevant shipping terms, which are often made by reference to trade terms, in particular INCOTERMS.8 Thus, an agreement on particular INCOTERMS such as F.O.B. does not exclude the application of Art. 36(1) but merely determines when the “risk passes” in the context of Art. 36(1).9 Additionally, usages and practices established between the parties (Art. 9(1)) or in international trade (Art. 9(2)) may become relevant. 6 In the absence of an agreement, the passage of risk is determined by the default rules in Arts 67–69. Thus, goods delivered under contracts involving carriage in the sense of Art. 31(a) must be in conformity when the seller hands them over to the first carrier,10 provided that the seller is not bound to hand them over at another place (Art. 67). For goods sold in transit, the relevant time is the conclusion of the contract (Art. 68), while for all other contracts it is, in principle, the taking over of the goods by the buyer (Art. 69). Arts 66 and 70 are of no relevance in this respect, since they do not address the time when the risk passes.11 7 Only the existence of a defect is relevant for the seller’s liability, not the buyer’s knowledge of it. Thus, in cases of contracts involving carriage, the mere fact that the buyer only discovers the defects when the goods are delivered to his place of business and not upon their handing over to the carrier when the risks passes, does not preclude the seller’s liability for non-conformity as long as it can be proven that the defect already existed.12 8 The same rule applies in cases of hidden defects where the time of the discovery of the defect is irrelevant as long as it existed at the time of risk passage.13 Thus, for example, the mere fact that a ban on the resale of foodstuff is only ordered after the risk has passed does not mean the goods are in conformity, if the circumstances which led to concerns as to the suitability of the goods for consumption already existed at the time of 5

6

Honnold, Documentary History (1989), pp. 533 et seq., 677; Official Records, pp. 312 et seq. But see Audiencia Provincial de Pontevedra (Spain) 8 February 2007 (machine), CISG-Online 1802, which seems to refer to the time of contract conclusion. 8 For a detailed discussion of passing of risk under the various INCOTERMS see Art. 30 paras 30 et seq. 9 U.S. District Court for the Southern District of New York (U.S.) 28 September 2011, Cedar Petrochemicals, Inc v Dongbu Hannong Chemical Co, Ltd (phenol), CISG-Online 2338 (Pace); see also Tribunal de Premie`re Instance de Gene`ve (Switzerland) 19 April 2016 (urea fertilizer), CISG-Online 2758 (Pace), para. 6. 10 See Oberlandesgericht Schleswig-Holstein (Germany) 22 August 2002 (live sheep), CISG-Online 710 (Pace); Amtsgericht Duisburg (Germany) 13 April 2000 (pizza boxes), CISG-Online 659 (Pace). 11 Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 36 CISG para. 3. 12 See Tribunal de Premie `re Instance de Gene`ve (Switzerland) 19 April 2016 (urea fertilizer), CISGOnline 2758, paras 5 seq. where the buyer was, however, unable to prove the defect. 13 Oberlandesgericht Linz (Austria) 23 January 2006 (car), CISG-Online 1377 (Pace). 7

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9–12

Article 36

the passing of the risk.14 The same applies if edible goods deteriorate early because of the use of an inadequate preservative or if cloths fade when first washed due to an unstable dye in material.15 Also covered by Art. 36(1) are defects in packaging which result in damages to the 9 goods during transportation. The goods may only physically become non-conforming after the risk has passed. However, the inappropriate packaging in itself, existing at the time of risk-passing, leads to their non-conformity per Art. 35.16 As a consequence, under an ex works contract a seller who made sterile bottles available to the buyer may become liable for non-conformity if such bottles lose their sterility during the transportation due to an unsuitable foil used for packaging.17 The duty to package the goods properly also exists under an ex works contract, thus it is irrelevant that the goods as such were still in conformity at the time of handing them over, when the risk passed. At the same time, a seller’s liability for the non-conformity of the goods at the time of 10 passing of the risk is not excluded by the fact that it is subsequently remedied by, for example, delivering missing certificates.18

2. Art. 36(2) According to the basic rule contained in Art. 36(1) the buyer bears the risk that the 11 goods may deteriorate after the risk has passed. Art. 36(2) takes account of the fact that specific circumstances warrant an extension of the seller’s liability for the conformity of the goods beyond the passage of the risk. This is the case, first, whenever the subsequent non-conformity is due to a breach of an obligation by the seller. Second, a guarantee given by the seller that the goods will keep their condition for some time will also justify an extension of the seller’s liability for the conformity of the goods. a) Breach of an obligation. The seller is liable for a subsequent non-conformity of 12 the goods if this is the direct result of a breach of an obligation by the seller or any third party for which the seller is responsible pursuant to Art. 79. By contrast, breaches of the contract of carriage or other duties by independent carriers, which are not used by the seller to perform his own obligations, do not justify an application of Art. 36(2). The seller has fulfilled his delivery obligations by handing over the goods to the carrier.19

14 Bundesgerichtshof (Germany) 2 March 2005 (frozen pork), CISG-Online 999 (Pace) at II. 3. c.; for a different view – probably driven by usage – concerning the attribution to a painter which was corrected subsequent to delivery Arrondissementsrechtbank Arnhem (Netherlands) 17 July 1997 (painting), Kunsthaus Math. Lempertz v Wilhemina van der Geld, CISG-Online 548 (Pace); affirmed, however, on the basis of domestic law by Gerechtshof Arnhem (Netherlands) 9 February 1999 (painting), Kunsthaus Math. Lempertz v Wilhemina van der Geld, CISG-Online 1338 (Unilex) critical comment Ferrari, Divergences in the application of the CISG’s rules on non-conformity of goods, RabelsZ 68 (2004) 473 (480). 15 Bolle ´e, The Theory of Risks in the 1980 Vienna Sales of Goods Convention, Pace Review of the Convention on Contracts for the International Sale of Goods (1999–2000) 245 (278) (Pace). 16 Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 36 CISG para. 4; Gruber, in: Mu¨nchKommBGB (2016), Art. 36 CISG para. 7; Cour de Cassation (France) 24 September 2003 (decorated laminated glass panels), CISG-Online 791 (Pace); Comisio´n para la Proteccio´n del Comercio Exterior de Me´xico (Mexico) 29 April 1996 (canned fruit), Conservas la Costena v Lanis, CISG-Online 350 (Pace); for an application of Art. 36(2) in such cases Benicke, in: Mu¨nchKommHGB (2013), Art. 36 para. 4; Brunner, Kommentar (2014), Art. 36 para. 3; Enderlein/Maskow, International Sales Law (1992), Art. 36 para. 5. 17 Oberlandesgericht Koblenz (Germany) 14 September 2006 (bottles), CISG-Online 1408 (Pace). 18 Handelsgericht St. Gallen (Switzerland) 14 June 2012 (organic juices and organic oils), CISG-Online 2468 (Pace), concerning the non-availability of bio-certification at the time of risk passing which was subsequently delivered. 19 Karollus, UN-Kaufrecht (1991), pp. 120 seq.; see Amtsgericht Duisburg (Germany) 13 April 2000 (pizza boxes), CISG-Online 659 (Pace).

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Article 36 13–19

Part III. Chapter II. Obligations of the Seller

In principle, it is irrelevant whether the breach is based on fault or not. An exclusion of liability under Art. 79, however, also affects the liability for non-conformity.20 14 Possible obligations, the breach of which may result in an extension of liability, may be primary or auxiliary obligations arising from the parties’ agreement or under the CISG. Of practical relevance in this respect are, primarily, information or warning duties concerning the transportation or handling of the goods and the duty to select an appropriate means of transportation and qualified carrier.21 Thus, the breach of an obligation to supply the necessary documents for export or import clearance may lead to an extended liability of the seller if it results in such a delay that the goods may no longer be sold since they are too close to their expiry date.22 The same applies if the deterioration of the goods is the direct result of instructions given by the seller to the carrier.23 Further obligations are assembly and service duties undertaken by the seller. Not covered by Art. 36(2), but by Art. 36(1), are breaches of the obligation to deliver conforming goods under Art. 35. 15 The breach may occur before or after the passing of the risk.24 For subsequent breaches, however, it is necessary that the obligation and its breach are closely related to the contract. This is, for example, the case where the non-conformity results from a breach of additional contractual duties such as subsequent service of maintenance obligations. 13

b) Guarantee. A seller, who has given a guarantee for future conformity beyond the passage of the risk, is liable if, within the period of guarantee, the goods become nonconforming. In principle, such liability is a direct consequence of the contractual undertaking given by the seller, so that Art. 36(2) merely states the obvious. 17 It is not necessary that the guarantee is part of the contractual agreement of the parties. Unilateral guarantees given by the seller are sufficient. Whilst the parties’ duties are predominantly defined at the time of contracting, guarantees given thereafter may change the extent of the seller’s liability in this regard and lead to the application of Art. 36(2). As subsequent changes of the parties’ contract should not be assumed lightly, it first has to be determined whether such statements are not mere confirmations of guarantees already given at the time of contracting in the sense of Art. 8(3). 18 In practice, such guarantees may be made through a direct reference to a certain time, i. e. usability for two years, expiration dates for food, or by referring to other factors having the same effect, i. e. guarantees for a certain mileage, operational hours or an output. Guarantees may be given for any purpose or characteristic of goods as the examples provided in Art. 36(2) are not intended to be conclusive.25 19 It follows from the drafting history that the guarantee must not necessarily be explicit. The reference to an “express guarantee” originally contained in the 1978 New York draft was replaced after a controversial discussion concerning the less strict wording of a “guarantee…for a period of time” which also covers implicit guarantees. These may arise, for example, from descriptions of the goods or communicated purposes which – in 16

20

Gruber, in: Mu¨nchKommBGB (2016), Art. 36 CISG para. 8. Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 36 CISG para. 5; for a violation of an information duty see Arbitral Award, SCC, 5 June 1998 (rail press), Beijing Light Automobile Co. Ltd. v Connell Limited Partnership, CISG-Online 379 (Pace). 22 Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce, 23 December 2004 (goods not specified), CISG-Online 1188 (Pace). 23 See obiter Oberlandesgericht Schleswig-Holstein (Germany) 22 August 2002 (live sheep), CISGOnline 710 (Pace). 24 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 36 CISG paras 9 et seq.; Magnus, in: Staudinger Kommentar (2013), Art. 36 para. 11. 25 Magnus, in: Staudinger Kommentar (2013), Art. 36 para. 18. 21

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Article 36

combination with the price paid – can implicate their continuous uninhibited use for some time.26 At the same time, such implicit guarantees should not be assumed lightly. In particular, there is not always a guarantee that the goods will keep their characteristics for a reasonable time. The inclusion of such an “implied guarantee” was explicitly rejected.27 While in theory goods are only conforming in the sense of Art. 35 if they remain useable for a normal period of time, the assumption of an implied guarantee to this effect would change the burden of proof. It would no longer be the buyer who has to prove that the non-conformity existed at the time of risk passage, but the seller who has to prove that the non-conformity is due to external factors not covered by the guarantee.28 As a consequence of the admission of implicit guarantees, it is also no longer 20 necessary that the relevant undertaking contains a “specific time”. If no such time is given, the length of the guarantee is to be determined through interpretation.29 Irrespective of this – and in light of the drafting history of the notion “period of time” – it is the time derived from the undertaking, which is relevant and not any other “reasonable” time determined by the local courts.30 Content and scope of such guarantees have to be determined according to Art. 8. In 21 general, such interpretation will lead to a limitation of the guarantee to defects inherent in the goods. Non-conformity arising from external factors, such as an incorrect handling of the goods or the non-observance of maintenance instructions, is normally not covered.31 To that extent, the seller is by no means liable for all subsequent defects, but only for those actually covered by the guarantee. Thus, defects due to the non-observance of maintenance instructions or incorrect handling are not covered by Art. 36(2). The same applies to defects resulting from force majeure, unless the parties have agreed differently.32

3. Burden of proof On the basis of the general principle of “ei incumbit probatio, qui dicit, non qui 22 negat” underlying the CISG, the buyer who has accepted the goods without any direct complaint or reservation as to their conformity bears the burden of proof for their nonconformity.33 This entails both the proof of the non-conformity as such, as well as its existence when the risk passed. Often, the proof of the non-conformity of the goods will at the same time prove, or at 23 least imply, its existence at the time of risk passage. This is obvious whenever goods of a different type or description are delivered. The same applies for structural deficiencies based on the use of defective or wrong materials. Equally, the nature or the extent of the non-conformity may be of such a kind that it excludes conformity of the goods at the 26 See Landgericht Mu ¨ nchen (Germany) 27 February 2002 (globes), CISG-Online 654 (Pace) – where in the context of Art. 35(2)(b) an impliedly agreed operational lifetime of three years was assumed for the globes bought due to the intended use communicated and the price paid for the globes. 27 Official Records, p. 105; Herber/Czerwenka, Kommentar (1991), Art. 36 para. 4; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 36 CISG para. 6; in favour of such an implied guarantee see Bianca, in: Bianca/Bonell, Commentary (1987), Art. 36 para. 3.2. 28 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 36 para. 7. 29 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 36 CISG para. 23. 30 Schlechtriem, The Seller’s Obligations Under the United Nations Convention on Contracts for the International Sale of Goods, in: Galston/Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), paras 6–24 seq. 31 Hovioikeus (Court of Appeal) of Turku (Finland) 12 April 2002 (forestry equipment), CISG-Online 660 (Pace); Schlechtriem/Butler, CISG (2009), para. 146. 32 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 36 para. 5. 33 Bianca, in: Bianca/Bonell, Commentary (1987), Art. 36 para. 3.1; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 36 CISG para. 9; for a detailed discussion see Art. 35 paras 171 et seq.

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Article 36 24–27

Part III. Chapter II. Obligations of the Seller

relevant time of risk-passing. Foodstuff, for example, which arrives at the buyer’s place already in a state of decay, can hardly have been conforming where the transport only took two days.34 24 However, cases where the goods may have deteriorated during transportation or missing quantities may have been stolen are problematic. In light of the problems associated with proving non-conformity at the time of risk passing, some authors want to alleviate the buyer’s burden through a presumption that once the non-conformity has been proven it is presumed that it existed when risk passed unless the seller can prove otherwise.35 While such a general presumption is not justified, there are cases where only special circumstances, to be pleaded by the seller, would justify a finding that the established non-conformity did not exist at the time of risk passage, taking into account the nature of the goods and the time expired between the discovery of the defect and the passage of risk. Thus, it is highly likely that a refrigerating unit, which proves to be defective upon first use 15 days after its installation, was already defective at the time risk passed.36 In such a case, it is then for the seller to provide other possible explanations as to why the non-conformity only occurred after the passage of risk, such as a breach of assembly or handling instructions.37 25 By contrast, it is much more likely that mushrooms or other foodstuff found to be non-conforming upon arrival were conforming at the time when the risk passed under a C&F contract and deteriorated during transport. In such cases, a presumption to the contrary in favour of the buyer would not be justified.38 The same also applies, to a lesser extent, in cases of complex machinery where the likelihood of mishandling is much higher than with the refrigerating unit. This is even more so where certificates of pre-transport examinations confirm the conformity at the time. 26 In the context of Art. 36(2), the burden of proof lies with the buyer that the seller either breached an obligation or gave a guarantee for future conformity of the goods. In the latter case, once the buyer has proven the guarantee and the non-conformity within the guarantee period, the seller has to prove that the actual non-conformity is not covered by the guarantee, i. e. is due to external factors39. To that extent, Art. 36(2) contains a shift of the burden of proof from the buyer to the seller.40

III. Comparable Rules 27

The PICC and the PECL, with their focus on general contract law, do not specifically address the non-conformity of the goods. Consequently, there is no rule which is comparable to Art. 36.

34 Bolle ´e, The Theory of Risks in the 1980 Vienna Sales of Goods Convention, Pace Review of the Convention on Contracts for the International Sale of Goods (1999–2000) 245 (278 seq.) (Pace). 35 Karollus, UN-Kaufrecht (1991), p. 121; see also Gruber, in: Mu ¨ nchKommBGB (2016), Art. 36 CISG para. 26; in this direction also Cour d’appel de Grenoble (France) 15 May 1996 (cooling plant), Thermo King v Cigna Insurance Company of Europe et al., CISG-Online 219 (Pace); previously also Magnus, in: Staudinger Kommentar (2005), Art. 36 para. 25 – given up in the 2013 edition. 36 Cour d’appel de Grenoble (France) 15 May 1996 (cooling plant), Thermo King v Cigna Insurance Company of Europe et al., CISG-Online 219 (Pace). 37 In this respect also inspection certificates by third parties or from its own exit-control may play a crucial role, if the examination occurred close to the passing of the risk. 38 See Audiencia Provincial de Barcelona (Spain) 24 March 2009 (cuttlefish), People Fisheries (Pvt) Ltd v Pescados Videla SA, CISG-Online 2042 (Pace). 39 Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 36 CISG para. 10. 40 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 36 CISG para. 17.

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Article 36

The relevant provision in the DCFR, Art. IV:A.-2:308, is nearly a verbatim adoption 28 of Art. 36(1). It contains, however, no direct equivalent to Art. 36(2). The same applies to Art. 2:208 PEL where the second paragraph merely contains an extension of liability in cases of consumer sales.

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Article 37 If the seller has delivered goods before the date for delivery, he may, up to that date, deliver any missing part or make up any deficiency in the quantity of the goods delivered, or deliver goods in replacement of any non-conforming goods delivered or remedy any lack of conformity in the goods delivered, provided that the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. However, the buyer retains any right to claim damages as provided for in this Convention. Bibliography: See selected bibliography of Art. 35; Keller, Early delivery and the seller’s right to cure lack of conformity: Comparison between the provisions of Article 37 CISG and the counterpart provisions of the UNIDROIT Principles, 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), p. 174 (Pace).

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Prerequisites for the right to cure under Art. 37 . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Delivery before the date for delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Non-conformity of the goods in the sense of Arts 35, 41, 42 . . . . . . . . . . c) Cure before the agreed date of delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Exclusion of the right to cure causing unreasonable inconveniences or expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Means of cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Legal consequences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Exclusion of remedies for non-conformity under Art. 45(1)(a). . . . . . . . b) Claims for damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 5 5 5 8 10 12 17 21 21 24 25 26

I. Importance and Role of the Provision Art. 37 regulates the seller’s right to cure before the date of delivery in cases where the seller has prematurely delivered goods which turn out to be non-conforming. An identical rule for the delivery of non-conforming documents is contained in Art. 34 sentences 2 and 3,1 while the right to cure after the date of delivery is regulated in Art. 48, which imposes additional requirements. 2 Art. 37 sentence 1 stipulates a right for the seller to remedy the non-conformity until the prescribed date of delivery, unless the exercise of such right would “cause the buyer unreasonable inconvenience or unreasonable expenses”. Sentence 2 clarifies this providing that a right to cure does not affect any right to claim damages arising from the delivery of the defective goods. 3 The most important part of Art. 37 with respect to its content is the definition of the limits of the right to cure. In light of the other provisions of the CISG, an avoidance of the contract would in such situations only be possible in the rare case where the premature delivery of the non-conforming goods constitutes an anticipatory breach in 1

1 In fact the first drafts of the CISG only contained a single rule covering both goods and documents. Official Records, pp. 106, 158, 309 seq.

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the sense of Art. 72. In all other cases, the seller’s right to deliver conforming goods until the prescribed date of delivery could, in general, be derived from contractual provisions. To that extent, Art. 37 has primarily a clarifying function, remedying any uncertainty which may exist concerning the existence and limits of the right to cure.2 Art. 37 is an expression of the general approach adopted by the CISG to keep the 4 contract alive wherever that is possible, taking into account the interests of both parties.3 The rule, which is adopted from Art. 37 ULIS,4 is eminently sensible and can therefore be found in a comparable form in many national sales laws as well as the European DCFR.5 In most cases, curing defective performance will solve any possible breach and the buyer will not be deemed to have suffered any harm as possible breaches will have occured before the prescribed time of delivery.6 Consequently, there is little case law on this provision.

II. Detailed Commentary 1. Prerequisites for the right to cure under Art. 37 a) Delivery before the date for delivery. Art. 37 only applies to the rare cases where 5 the seller delivered before the date of delivery and the buyer has accepted premature delivery, though not being obligated to do so under Art. 52(1). In all cases involving delivery at or after the agreed date of delivery, the seller’s right to cure is submitted to the stricter requirements of Art. 48. In this respect, it always has to be verified whether a delivery which is “premature” on the basis of the originally agreed date for delivery does not entail an amendment of this delivery date by the parties or evinces such an agreement. In particular, this also may be the case where the buyer fulfils his payment obligations prematurely. However, without any further indications, the mere acceptance of premature delivery without any reservations should not be lightly interpreted as an amendment of the original contract.7 Contracts sometimes provide for a period within which delivery must occur. In such 6 cases, any delivery occurring before the final date of that period constitutes a “premature” delivery in the sense of Art. 37, and the seller will be entitled to cure the defects until the end of the period.8 While it is true that in such cases the buyer cannot reject delivery pursuant to Art. 52(1),9 his interests are sufficiently protected by the exclusion 2 Brunner, Kommentar (2014), Art. 37 para. 1; see also Bianca, in: Bianca/Bonell, Commentary (1987), Art. 37 para. 2.1 emphasizing the need for such a clarification in light of the cooperation which might be required from the buyer in remedying the defects. 3 Magnus, in: Staudinger Kommentar (2013), Art. 37 para. 3; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 37 CISG para. 2. 4 For the drafting history and the slight differences to Art. 37 ULIS see Bianca, in: Bianca/Bonell, Commentary (1987), Art. 37 paras 1.1 et seq. 5 Ga ¨ rtner, Britain and the CISG: The Case for Ratification – A comparative Analysis with Special Reference to German Law, Pace Review of the Convention on Contracts for the International Sale of Goods (2000) 59 at C 1 (Pace); see § 2–508(1) UCC; but see Bianca, in: Bianca/Bonell, Commentary (1987), Art. 37 para. 1.3. 6 Eiselen, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual (2008), Vol. 4 § 89:32; cf. Gruber, in: Mu¨nchKommBGB (2016), Art. 37 CISG para. 1. 7 Magnus, in: Staudinger Kommentar (2013), Art. 37 para. 11; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 37 CISG para. 8. 8 Honnold/Flechtner, Uniform Law (2009), Art. 37 paras 245, 246; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 37 CISG paras 5 et seq.; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 37 CISG para. 5; Magnus, in: Staudinger Kommentar (2013), Art. 37 para. 9. 9 With this argument the application of Art. 37 is rejected in such cases by some authors. In the absence of a right to reject delivery a right to cure is only considered to be justified under the stricter requirements of Art. 48; for that see Herber/Czerwenka, Kommentar (1991), Art. 37 para. 3; Salger, in: Witz/Salger/Lorenz, Kommentar (2016), Art. 37 paras 5 seq.

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of the right to cure where it would cause unreasonable inconvenience. In light of the underlying rationale of the CISG to keep contracts alive to avoid reshipment of the goods, the requirement of a premature delivery should be interpreted broadly to cover all cases of delivery before the final date for agreed delivery. It is one of the purposes of a period for delivery to give the seller an option to fulfil his obligation to deliver conforming goods until the last day.10 7 Where the contract provides for delivery upon request by the buyer, any delivery occurring before such a request constitutes a premature delivery per Art. 37.11 b) Non-conformity of the goods in the sense of Arts 35, 41, 42. The goods delivered prematurely must be non-conforming per Art. 35. The right to cure is independent from the type and the size of the non-conformity.12 It also extends to serious defects which, in the absence of a cure, would result in a “fundamental breach”. Consequently, unless it is clear that the seller will not cure or a cure is obviously not possible, the buyer cannot avoid the contract for an anticipatory fundamental breach under Art. 72 before the date for delivery has passed.13 9 It is controversial whether Art. 37 also applies to cases where the goods are affected by third party claims under Arts 41 and 42. The Secretariat Commentary seems to exclude such an application.14 The considerations underlying Art. 37, however, also warrant its extension to cases of non-conformity due to defective title. In numerous cases, the seller may be able to remedy existing defects in relation to third party claims and thereby keep the contract alive without any harm being done to the buyer. For example, the seller may be able to satisfy an outstanding lien or other security interest, acquire the conflicting rights or a least a licence for the use of the goods, or prevent a third party from raising groundless claims. In such cases the cure does not even require the return of the goods. It cannot be deduced from the explicit stipulation of a right to cure in Arts 34 and 37 that no such right exists for goods with a defective title. To the contrary, Arts 34, 37 and 48 are the expression of a general principle underlying the CISG which should be used to fill gaps pursuant to Art. 7(2).15 8

c) Cure before the agreed date of delivery. The right to cure is limited in time until the prescribed date of delivery. Whenever delivery has to occur within a certain period, it is sufficient if the cure occurs on the last day of that period.16 11 In case the cure is to occur after the date of delivery, a right to cure only exists under the more restrictive requirements of Art. 48.17 10

12

d) Exclusion of the right to cure causing unreasonable inconveniences or expenses. A right to cure is excluded if it causes unreasonable inconvenience or expense to the buyer. Taking into account that under Art. 37 the seller offers to remedy the non10 Magnus, in: Staudinger Kommentar (2013), Art. 37 para. 10; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 37 CISG para. 6. 11 Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 37 CISG para. 5. 12 Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 37 CISG para. 6. 13 Honnold/Flechtner, Uniform Law (2009), Art. 37 para. 246; cf. Art. 72 paras 8 et seq. 14 Secretariat Commentary on 1978 Draft, Art. 39 (now Art. 41) para. 8. 15 Honnold/Flechtner, Uniform Law (2009), Art. 37 para. 245.1; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 37 CISG para. 10; Keller, Comparison between the provisions of Article 37 CISG and the counterpart provisions of the UNIDROIT Principles, 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) 174 (175) (Pace). 16 Brunner, Kommentar (2014), Art. 37 para. 4. 17 Magnus, in: Staudinger Kommentar (2013), Art. 37 para. 14; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 37 CISG para. 3.

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conformity at a time when delivery is still not due and that the buyer was, pursuant to Art. 52(1), not required to accept the premature delivery, this should rarely be the case as the standard ought to be high. Nevertheless, there are cases where the seller’s efforts to cure would affect the buyer’s interest in such a way that it justifies the exclusion of a right to cure or at least of certain possible measures. It follows from Art. 37 that the causation of inconvenience or cost for the buyer only excludes the seller’s right to cure if they are unreasonable. Whether this is the case has to be decided on a case-by-case basis balancing the interests of the parties.18 To this extent, it is not necessary that the inconvenience caused by the seller’s efforts exceeds in “an intolerable way the normal prejudice brought about to the buyer by the replacement or repair of the goods”.19 In some cases, the “normal prejudice” already caused by a second tender makes it unreasonable. Primarily relevant for the determination of unreasonableness is the extent of the inconvenience and the expense produced. In addition, the likely consequences of a failure to remedy the defects are also of importance. It makes a difference whether the alternative to allow the seller to cure the defects is an avoidance of the contract or merely a reduction of the price. As the former would very likely entail the reshipment of the goods, the threshold for the “unreasonableness” of the inconveniences and expenses is higher. Other relevant factors for the balancing process are the chances for a successful cure20 and contractual provisions which may eventually conflict with certain means of cure. Where the parties have explicitly excluded partial shipments in their contract, the right to cure discrepancies in quantities may not be abused to circumvent this contractual provision.21 Unreasonable inconveniences are caused to the buyer where the seller’s efforts to remedy defects would seriously affect the buyer’s business. This may be the case where a machine delivered has been included in the buyer’s production line and the offered repair would cause considerable interruption.22 Moreover, the lack of information about efforts to cure defects may result in unreasonable inconvenience.23 In principle, the seller has to bear the expenses for any efforts to remedy his defective performance. Consequently, the buyer may reject any efforts to cure where the seller wants to burden the buyer with considerable costs or to transfer the risk for such costs to the buyer.24 Where the seller provides adequate security, the buyer may also be obligated to advance certain costs related to the efforts to cure, which will then later be reimbursed by the seller.

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14

15

16

2. Means of cure Art. 37 lists the following as possible means of cure: the delivery of missing parts to 17 make up any deficiency in quantity, the delivery of replacement goods and efforts to remedy deficiencies in the goods delivered. The list is not intended to be exhaustive. For 18

Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 37 CISG para. 10. For this definition see Bianca, in: Bianca/Bonell, Commentary (1987), Art. 37 para. 2.5. 20 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 37 para. 6. 21 See for this problem Keller, Comparison between the provisions of Article 37 CISG and the counterpart provisions of the UNIDROIT Principles, 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) 174 (178) (Pace). 22 Honnold/Flechtner, Uniform Law (2009), Art. 37 para. 245. 23 Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 37 CISG para. 11; Keller, Comparison between the provisions of Article 37 CISG and the counterpart provisions of the UNIDROIT Principles, 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) 174 (177) (Pace). 24 Magnus, in: Staudinger Kommentar (2013), Art. 37 para. 17; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 37 CISG para. 12. 19

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example, breach of auxiliary instruction duties may be remedied by providing the necessary instruction or training. 18 In principle, and within the restrictions imposed by the above limitation, the seller has discretion as to which measure he adopts.25 He is not required to adopt a measure which is requested by the buyer or has the least effects on the buyer. Thus, as long as the additional burden on the buyer is not unreasonable in light of the costs involved with the various measures, the seller may choose how to remedy the non-conformity.26 In particular, the buyer may not always request the delivery of replacement goods if the goods delivered can be repaired without causing unreasonable inconvenience for the buyer. The latter may be the case if the repair of a machine included into the buyer’s production line entails the danger of seriously affecting the production for some time while a replacement could easily be included without any greater disturbance.27 19 The seller may also combine the various measures mentioned, i. e. repair those goods with minor defects and replace all other non-conforming goods. As long as the measures are taken before the agreed time for delivery, the failure of an effort to cure does not, in principle, exclude further efforts. The seller’s right is not limited to a single effort. Any failed effort will, however, be a factor in determining whether a further effort will cause an unreasonable inconvenience for the buyer. Furthermore, the buyer is not entitled to reject additional tenders, which are themselves not completely conforming or do not completely remedy any deficiency, unless they would cause an unreasonable inconvenience.28 Such an unreasonable inconvenience exists where the selected means of cure are obviously ineffective to even improve the situation.29 20 Delivery of replacement goods must only be made concurrently with the return of the non-conforming goods originally delivered. However, a buyer who has already paid the price for the goods without being required to do so has a retention right in relation to such goods.

3. Legal consequences a) Exclusion of remedies for non-conformity under Art. 45(1)(a). The existence of the right to cure under Art. 37 excludes all remedies of the buyer for non-conformity under Arts 45(1)(a), 46 et seq. until the agreed date of delivery.30 Only in exceptional cases, i. e. where the non-conformity amounts to an anticipatory fundamental breach, may the buyer declare the contract avoided pursuant to Art. 72. This requires that it is already obvious before the agreed date of delivery that the seller is either not willing or unable to cure the defects and that these defects constitute a fundamental breach.31 22 A buyer who has accepted a premature delivery is, within the limits imposed by Art. 37, bound to accept the seller’s efforts to remedy his defective performance. On the 21

25 Keller, Comparison between the provisions of Article 37 CISG and the counterpart provisions of the UNIDROIT Principles, 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) 174 (177) (Pace); Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 37 CISG para. 9. 26 In favour of a stricter limitation of the seller discretion to the least inconvenient measure Benicke, in: Mu¨nchKommHGB (2013), Art. 37 para. 7. 27 Honnold/Flechtner, Uniform Law (2009), Art. 37 para. 245. 28 Honnold/Flechtner, Uniform Law (2009), Art. 37 para. 246 with a detailed example; for a different view Bianca, in: Bianca/Bonell, Commentary (1987), Art. 37 para. 2.6 – only measures proper “to restore the goods to a fully sound condition” are covered. 29 Magnus, in: Staudinger Kommentar (2013), Art. 37 para. 12. 30 Magnus, in: Staudinger Kommentar (2013), Art. 37 para. 19. 31 For details see below Art. 72 paras 8 et seq.

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basis of the principle of good faith, the buyer can even be required to cooperate with the seller as far as that is necessary for the cure.32 If the buyer prevents the exercise of the right to cure by refusing to co-operate or to take necessary actions, he may not invoke any remedies for the original non-conformity of the goods. To that extent, Art. 80, or at least the principle expressed in it, is applicable.33 The buyer is, however, entitled to reject offers to cure which would lead to unreasonable inconvenience or cost. He may then rely on the normal remedies for non-conformity when the time for delivery has expired or the case falls within Art. 72.34 In some cases, the seller’s right to cure may entail a return of the goods already 23 delivered which may leave a buyer, who has already paid for the goods, in a disadvantageous position. In such a situation, the buyer may have a right of retention until the seller provides adequate security for the return of the goods.35 b) Claims for damages. Pursuant to Art. 37 sentence 2, a successful cure of non- 24 conformity before the time of delivery does not exclude a claim for damages caused to the buyer through the originally defective delivery. The buyer may, for example, have incurred costs in connection with the cure of the deficiencies, such as costs for transportation or for including machinery into a production line. Furthermore, the defective goods may have caused harm to other goods of the buyer. Examples are costs incurred by the buyer to remedy deficiencies or where the defective goods damage other property of the buyer. This covers, in particular, cases where the defective goods are used to produce other products which, as a consequence of the non-conformity, also become defective.

4. Burden of proof In accordance with the general principles underlying the CISG, the burden of proof 25 for the existence of the right to cure is borne by the seller. By contrast, the buyer has to prove the facts making any cure unreasonably inconvenient or expensive for the buyer, as well as the prerequisites for any claim for damages.

III. Comparable Rules The PICC (Art. 7.1.4) as well as the PECL (Art. 8:104) provide for a general right to 26 cure. Unlike the CISG, however, they make no distinction between the right to cure before the time for delivery has expired and for the time thereafter, but contain a single provision for both situations. Notwithstanding the absence of a direct equivalent to Art. 37, the provisions on the right to cure can provide valuable guidance in relation to the interpretation of Art. 37, given that it is based on the same rationale.36 In particular, the various factors mentioned in Art. 7.1.4(1)(a)–d) PICC can be used in determining what makes a cure unreasonable. The DCFR contains a nearly identically worded provision in Art. IV.A.-2:203(1)(3). 32

Magnus, in: Staudinger Kommentar (2013), Art. 37 para. 15. Gruber, in: Mu¨nchKommBGB (2016), Art. 37 CISG para. 17; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2018), Art. 37 CISG para. 14; Bianca, in: Bianca/Bonell, Commentary (1987), Art. 37 para. 3.2; cf. Art. 80 para. 5. 34 Magnus, in: Staudinger Kommentar (2013), Art. 37 para. 18. 35 Magnus, in: Staudinger Kommentar (2013), Art. 37 para. 17 who considers that in such cases the cure would cause unreasonable inconveniences. 36 Keller, Comparison between the provisions of Article 37 CISG and the counterpart provisions of the UNIDROIT Principles, 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) 174 (175 seq.) (Pace). 33

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Article 38 (1) The buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances. (2) If the contract involves carriage of the goods, examination may be deferred until after the goods have arrived at their destination. (3) If the goods are redirected in transit or redispatched by the buyer without a reasonable opportunity for examination by him and at the time of the conclusion of the contract the seller knew or ought to have known of the possibility of such redirection or redispatch, examination may be deferred until after the goods have arrived at the new destination. Bibliography: Baasch-Andersen, The Duty to Examine Goods under the Uniform International Sales Law – An Analysis of Article 38 CISG, 18 European Business Law Review (2007) 797; Benicke, Ru¨geobligenheit und Beweislast fu¨r Vertragswidrigkeit im UN-Kaufrecht, FS-Fachbereich Rechtswissenschaft zum 400ja¨hrigen Gru¨ndungsjubila¨um der Justus-Liebig-Universita¨t Gießen (2007) 377; Janssen, Untersuchungs- und Ru¨gepflichten im deutschen, niederla¨ndischen und internationalen Kaufrecht (2001); Ostendorf/Kluth, Probleme der Ru¨geobliegenheit bei vertragswidriger Ware im internationalen Streckengescha¨ft, IHR (2007) 104; Resch, Zur Ru¨ge bei Sachma¨ngeln nach UN-Kaufrecht, OJZ (1992) 470; Schwenzer, The Noble Month (Articles 38, 39 CISG) – The Story behind the Scenery, European Journal of Law Reform (2006) 353; Taschner, Die Darlegung von Ma¨ngeln und der richtige Ma¨ngeladressat, IHR (2001) 61; CISG-AC Opinion no 2, Examination of the Goods and Notice of Non-Conformity: Articles 38 and 39, 7 June 2004. Rapporteur: Professor Eric E. Bergsten, Emeritus, Pace University School of Law, New York (http://www.cisg-ac.org).

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Purpose of the duty to examine. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Art. 38 as part of the CISG’s notification regime. . . . . . . . . . . . . . . . . . . . . . . . . . . 4. History of the provision and its character . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. General remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Prevailing contractual agreements, practices and usages. . . . . . . . . . . . . . . . . . . a) Contractual regulations of the examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Practices and usages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Scope of the examination duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Extent of the examination duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The applicable contractual and legal standards . . . . . . . . . . . . . . . . . . . . . . . . . b) Relevant objective and subjective factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Factors connected to the goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Parties’ relationship and expectations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Subjective factors of the buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Examinations required pursuant to the standard . . . . . . . . . . . . . . . . . . . . . . . aa) Basic visual examinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Additional examination duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Hidden or latent defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Bulk sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ee) Use of third parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Place of examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Time period for examination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Length of the period: “as short a time as practical in the circumstances” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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aa) The general standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Relevant factors in practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (i) Extent and time of examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (ii) Type of goods involved and intended use . . . . . . . . . . . . . . . . . . . . . . (iii) Status of the buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iv) Other factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Starting point for the period for examination pursuant to Art. 38(1). . aa) Conforming Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Pre-mature delivery/delivery at wrong place . . . . . . . . . . . . . . . . . . . . . . . . cc) Additional duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Partial deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ee) Hidden defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Examination in contract involving carriage: Art. 38(2) . . . . . . . . . . . . . . . . . . . . . 8. Art. 38(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Redirection and redispatch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Awareness of the seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Lack of a reasonable opportunity for examination . . . . . . . . . . . . . . . . . . . . . . 9. Costs of the examination duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. Sanctions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. Waiver of the examination duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Article 38 77 84 85 91 95 99 103 103 106 110 111 113 114 121 123 127 131 138 139 144 146 151

I. Importance and Role of the Provision 1. Content Art. 38 imposes on the buyer – in the absence of an agreement to the contrary 1 between the parties – a duty (burden) to examine the goods and regulates the time in which such examination should take place. Together with Arts 39, 40 and 44 it forms part of a set of rules which provide the default regulatory framework for the buyer’s conduct in case the buyer wants to hold the seller liable for the non-conformity of the goods.1 Art. 38(1) provides as a general rule that the examination has to be done “within as 2 short a period as is practicable in the circumstances”. Paragraphs 2 and 3 respectively contain special rules for examination in cases involving carriage of goods and the redirection of the goods in transit or redispatch by the buyer without a reasonable opportunity for examination. They defer the time for examination until the arrival of the goods at their final destination. In this sense, Art 38 paras 2 and 3 deviate from the idea underlying the general rule in para 1 that the examination should take place when and where the seller performs his delivery obligations.2 In such cases, the place and time for examination is separate from the technical place of delivery relevant for the allocation of the risk of loss as determined by Arts 31, 67 et seq. Art. 38 explicitly regulates only the place and timing of the examination duty. Other 3 important questions such as the scope and extent of examination duties, the type and method of examination required and costs are not directly addressed. Furthermore, Art. 38 does not provide for direct sanctions for a breach of the examination duty.

2. Purpose of the duty to examine The primary purpose of the examination duty is to ensure that defects in the goods 4 are discovered and remedied as soon as possible to allow for the rapid processing of 1 2

Magnus, in: Honsell, Kommentar (2010), Art. 38 para. 1. Landgericht Landshut (Germany) 5 April 1995 (sport clothing), CISG-Online 193 (Pace).

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commercial sales transactions. Its ultimate purpose, as seen in conjunction with the duty to notify the seller in Art. 39, is to determine within a relatively short time whether the seller has properly performed the contract and to give the seller a chance to take necessary action(s).3 The short period for examination and notification duties protects the seller from claims for defects which have their origin in the sphere of the buyer.4 5 The act of examination as mandated by Art. 38, “rectifies the asymmetric levels of information between buyer and seller”5 and sets the stage for the timely notice of nonconformity, as required by Art. 39(1) for the preservation of the buyer’s remedies for non-conformity. The purpose of such notice is in turn, to inform the seller about an eventual lack of conformity of his delivery within a “reasonable time” and to enable him to take the necessary steps to ascertain the non-conformity, remedy it where possible or at least adjust his financial planning accordingly.6

3. Art. 38 as part of the CISG’s notification regime The practical importance of Art. 38, evidenced by considerable case law, derives primarily from its role for the buyer’s duty to notify the seller about existing deficiencies stipulated in Art. 39. Pursuant to Art. 39(1), the buyer, in principle, loses all rights to rely on a lack of conformity of the goods “if he does not give notice to the seller specifying the nature of the lack of conformity with a reasonable time after he has discovered it or ought to have discovered it.” Only cases where the seller either knew or could not have been unaware of the lack of conformity (Art. 40) or the buyer has a reasonable excuse for his failure to give notice in time (Art. 44) are excluded from this loss of rights. 7 Art. 38 is intimately connected with the time the buyer “ought to have discovered” the non-conformity, which may be relevant for the start of the notification period in Art. 39.7 It runs from the time when an orderly and timely examination as required by Art. 38 would have revealed that the goods delivered lack conformity. In other words, the duty to examine is “designed to set a time when, if no examination was conducted, the buyer ‘ought to have discovered’ a lack of conformity”.8 In this sense, Art. 38 is prefatory to the notification duty under Art. 399 and the breach of the examination duty will only lead to sanctions if it affects this Art. 39 duty. Thus, as long as the required notice is given in time, an eventual breach of the duty to examine remains without sanction.10 The same also applies if a proper examination would not have revealed the 6

3 Baasch-Andersen, The Duty to Examine Goods under the Uniform International Sales Law – An Analysis of Article 38 CISG, 18 European Business Law Review (2007) 797 (798). 4 Magnus, in: Honsell, Kommentar (2010), Art. 38 para. 4. 5 Appellationshof Bern (Switzerland) 11 February 2004 (wire and cable), CISG-Online 1191 (Pace); overruled on a different issue by Bundesgericht (Switzerland) 7 July 2004 (wire and cable), CISG-Online 848 (Pace) at 4. 6 Honnold/Flechtner, Uniform Law (2009), Art. 38 para. 252; Oberlandesgericht Oldenburg (Germany) 5 December 2000 (tiller (subsoiler)), CISG-Online 618 (Pace); Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 2; for a detailed discussion of the purposes see Art. 39 paras 7 et seq. 7 Flechtner, Funky Mussels, a Stolen Car, and Decrepit Used Shoes: Non-Conforming Goods and Notice thereof under the United Nations Sales Convention, Boston University International Law Journal (2008) 1 (15) (Pace); Oberlandesgericht Oldenburg (Germany) 5 December 2000 (tiller (subsoiler)), CISGOnline 618 (Pace). 8 See CISG-AC Opinion no 2, para. 4.1 et seq. 9 Secretariat Commentary on 1978 Draft, Art. 36 (now Art. 38) para. 2; Baasch-Andersen, The Duty to Examine Goods under the Uniform International Sales Law – An Analysis of Article 38 CISG, 18 European Business Law Review (2007) 797 (798). 10 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 3.

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lack of conformity.11 As a consequence, in practice, a single period for examination and notification is often assumed.12 Arts 38 and 39 do not impose contractual obligations on the buyer. Namely, they 8 cannot be directly enforced by the seller and do not give rise to a claim for remedies.13 Systematically, the “duty” to examine the goods constitutes merely a burden for the buyer, the non-fulfilment of which will often lead to a loss of all remedies for lack of conformity pursuant to Art. 39. In light of this sanction, the buyer has a considerable interest in fulfilling his burden.14 In addition to the duty to examine the goods under Art. 38, the CISG also provides, 9 in Art. 58(3), for a right to examine the goods before payment unless the parties have agreed on payment conditions which would conflict with such a right.

4. History of the provision and its character In light of diverging approaches in various national laws, the examination and 10 notification regime as such was one of the most controversial areas of the CISG’s drafting process. While most of this focussed on relaxing sanctions for non-compliance with the Art. 39 notification duty, the Art. 38 examination duty, which is central to the notification regime, was affected as a result. Art. 38 deviates in several respects from its predecessor in the ULIS, which may be due to 11 the fact that the drafters come from countries which take different approaches to the topic. In particular, the strict time limit for the examination in Art. 38 ULIS, which required a “prompt” examination,15 has been replaced by a more flexible and lenient requirement of “as short a period as is practicable”. Additionally, the time for examination has been deferred in Art. 38 paras 2 and 3 for goods sold in transit or resold shortly after arrival. In conjunction with the inclusion of Art. 44, both changes, the first of which is particularly evident in the English version of the CISG,16 are an answer to the criticism against the examination and notification regime of the ULIS. This regime was considered to be too seller-friendly, not taking into account business practices in large parts of the world.17

II. Detailed Commentary 1. General remarks Like other provisions of the CISG, Art. 38 is of a dispositive nature and the parties 12 may derogate from it.18 In the absence of specific contractual regulations or usages and 11 See also Baasch-Andersen, Reasonable Time in Article 39(1) of the CISG – Is Article 39(1) Truly a Uniform Provision?, Pace Review of the Convention on Contracts for the International Sale of Goods (1998) 69 (84 seq.) who correctly states “Only where a buyer can prove that a satisfactory examination would not reasonably have revealed the lack of conformity is Article 38 not relevant to Article 39”. 12 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 1. 13 Magnus, in: Honsell, Kommentar (2010), Art. 38 para. 2; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 3. 14 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 3. 15 Which meant pursuant to Artice 11 ULIS “within as short a period as possible in the circumstances”. 16 For the differences between the various languages see, Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 6. 17 For other changes see Bianca, in: Bianca/Bonell, Commentary (1987), Art. 38 para. 1.1; see also the extensive discussion of the drafting history by Reitz, A history of Cutoff Rules as a Form of Caveat Emptor: Part I – The 1980 U. N. Convention on the International Sale of Goods, 36 American Journal of Comparative Law (1988) 437 et seq. (Pace). 18 Oberlandesgericht Linz (Austria) 8 February 2012 (safety belts), CISG-Online 2444 (Pace), p. 12 – where a transfer of examination duty to the seller assumed, as the seller had to provide with the goods a certificate of examination.

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practices, it regulates the existence, the extent and the timing of the examination duty. Art. 38(1) establishes a standard of “practicality” of the examination both in relation to its extent as well as to its timing. This standard also applies in cases that fall under Art. 38 paras 2 and 3.19 The suitability of the examination thereby depends on a number of objective and subjective factors which are to be considered and weighed on a case-bycase basis. These involve, in particular, the type and nature of the goods to be examined, the extent of delivery, as well as the business and personal circumstance of the buyer.20 Notwithstanding the fact that Art. 38 only addresses the period of examination, the first question to be answered in practice is that of the extent of the examination duty. It is especially relevant in all cases where a particular non-conformity has not been discovered until after the original examination. In interpreting Art. 38, it has to be kept in mind that the provision, as part of the examination and notification regime, primarily protects the interests of the seller. Consequently, although the seller’s interest in speedy examination and resulting certainty should be recognized, Art. 38 should not be interpreted in a way which, for the most part, transfers the risk for non-conforming goods to the buyer by imposing strict requirements as to the extent and timing of the examination.21 A considerable number of national sales laws contain comparable examination and notification duties. Due to the use of broadly worded terms, there is an obvious danger in courts resorting to their domestic concepts when determining what is “as short a period as is practicable in the circumstances”. However, pursuant to Art. 7(1) the terms used in Art. 38 must be given an autonomous meaning.22 Irrespective of Art. 7(1), practice reveals that national courts from legal systems which require immediate examination, such as Germany, Austria or Switzerland, have a tendency to favour a stricter application of Art. 3823 and to adopt shorter periods than courts from countries which, in their domestic sales law, either provide for longer examination periods or are unfamiliar with this concept at all.24 In this respect, it should be noted that a large majority of the published decisions emanate from courts in countries with legal systems following the strict approach.25 While this may fall in line with the expectations of parties coming from such legal systems, it should nevertheless be borne in mind when considering the case law concerning the length of the period. In light of the differences between the various national systems, it is doubtful whether Art. 38 can, in its totality, be considered to constitute a codified international trade usage.26

2. Prevailing contractual agreements, practices and usages 18

The parties may always regulate whether, when and to what extent the buyer has to examine the goods delivered. Notwithstanding the fact that the explicit reference to the 19

Honnold/Flechtner, Uniform Law (2009), Art. 38 para. 252. Oberster Gerichtshof (Austria) 14 January 2002 (cooling system), CISG-Online 643 (Pace); for a detailed account see infra paras 37 et seq., 84 et seq. 21 Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 4. 22 Oberlandesgericht Ko ¨ ln (Germany) 21 August 1997 (aluminium hydroxide), CISG-Online 290 (Pace). 23 Oberlandesgericht Oldenburg (Germany) 5 December 2000 (tiller (subsoiler)), CISG-Online 618 (Pace), even doubting whether the CISG led to a change of standard in comparison to the ULIS; Landgericht Landshut (Germany) 5 April 1995 (sport clothing), CISG-Online 193 (Pace). 24 Benicke, in: Mu ¨ nchKommHGB (2013), Vorb. zu Arts 38, 39 para. 3; for that observation see CISGAC Opinion no 2, para. 5.3 et seq. 25 For that observation see CISG-AC Opinion no 2, para. 5.1 et seq. 26 In favour of such as classification Arbitral Award, ICC 5713/1989, 1 January 1989 (goods not specified), CISG-Online 3 imposing an examination duty pursuant to Art. 38 on a buyer in a sales contract in principle not submitted to the CISG. 20

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role of the parties’ agreement and usages for the extent of the examination duty still contained in Art. 38(4) ULIS has been abolished in Art. 38, their prevalence follows from the general role accorded to party autonomy and trade usages in the CISG, i e. Arts 6 and 9.27 a) Contractual regulations of the examination. In practice, it is not uncommon – 19 and in light of the different perceptions of what is required, also highly advisable – that the parties regulate the required examination. Contracts often contain provisions as to the time for examination, the numbers of samples to be taken, the type, duration and output of trial runs and the provision of testing certificates. For example, clause A-5 of the ICC Model International Sale Contract includes a provision for dealing with inspections of the goods by the buyer.28 Occasionally, parties also agree on a completely different allocation of the duty to 20 examine the goods, or its complete exclusion. Contracts providing for Just-in-Timedelivery are regularly considered to constitute at least an implicit contractual limitation if not a complete exclusion of the buyer’s duty to examine the goods.29 Equally, clauses in FOB-contracts providing for a binding pre-shipping examination and certification of the quality of the goods by an independent expert appointed by both parties, have been interpreted in such a way in practice.30 In light of the legal problems connected with such an interpretation, courts should be reluctant to assume too easily that the parties completely excluded any examination duty for the buyer, transferred it to someone else or greatly extended the time for an examination. For that reason, contractual time periods for bringing claims do not generally constitute deviations from the examination duty.31 By contrast an obligation for the seller to deliver the goods in conjunction with the goods examination certifications can be interpreted as a wide transferal of the examination duty to the seller reducing the examination duty of the buyer to conduct spot checks.32 Often, such derogations from Art. 38 can be found in standard terms.33 Problems 21 may arise in this context where such clauses provide either for very short or extremely long examination periods. Their validity is to be determined pursuant to Art. 4(a) by the applicable national law. The relevant standard, however, as to whether an eventual prolongation or shortening of the examination period constitutes an unreasonable restriction of the rights of the other party is provided for by Art. 38. In particular, short time limits also covering hidden defects have been deemed problematic,34 and on the 27 Bianca, in: Bianca/Bonell, Commentary (1987), Art. 38 para. 2.3; for the hierarchy see Oberster Gerichtshof (Austria) 27 August 1999 (trekking shoes), CISG-Online 485 (Pace). 28 ICC, ICC Model International Sale Contract (1997), ICC-Publication No. 556. 29 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 68; Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 16. 30 For the possible problems associated with such an examination if not properly done see Arbitral Award, ICC 9187, June 1999 (coke), CISG-Online 705, where it turned out that the pre-shipment examination certifying the conformity of the goods was obviously wrong; for further examples from case law see DiMatteo et al., International Sales Law (2005), p. 83. 31 Arbitral Award, ICC 7565/1994 (Coke), 6 ICC Bulletin Nov. 1995, 64 (64–6) (Pace). 32 Oberlandesgericht Linz (Austria) 8 February 2012 (safety belts), CISG-Online 2444 (Pace), pp. 12 seq.; assuming merely a restriction to spot checks Oberster Gerichtshof (Austria) 28 June 2012 (seat belts), CISG-Online 2569 (Pace), paras 2 et seq. 33 See for example the contract underlying the decision of the Oberlandesgericht Mu ¨ nchen (Germany) 11 March 1998 (cashmere sweaters), CISG-Online 310 (Pace) providing for a two years notice requirement; for the legal evaluation under German law see Freiburg, Die Ru¨geobliegenheit des Ka¨ufers bei grenzu¨berschreitendem Warenverkehr, IHR (2005) 56 (60 seq.). 34 Oberlandesgericht Karlsruhe (Germany) 25 June 1997 (surface protective film), CISG-Online 263 (Pace) – standard term invalid which provides for a notification period of 8 days extending also to hidden defects.

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other side of the scale, extremely long examination periods found in the buyer’s general terms may be invalid.35 22 However, even when invalid, such clauses may be relevant in determining the scope of the examination duty. They may, for example, constitute arguments against the assumption of contradicting practices or usages.36 Equally, they may be relevant in determining how the buyer has to examine the goods if their invalidity is solely due to the shortness of the time for examination. 23 Unilateral post formation statements contained in invoices or other documents that the goods have to be examined within a certain time are not relevant in determining the time for examination.37 b) Practices and usages. The examination duty in Art. 38 can be superseded by practices and usages established between the parties per Art. 9(1). Such practice may, for example, be assumed where in the past the seller has also given reductions for defects which were not notified in time. 25 Trade usages may also supersede the examination duty as defined in Art. 38 if they are applicable pursuant to Art. 9(2).38 Trade usages exist in various industries and may directly define the extent of the examination, its timing or whether the seller must be invited to the examination.39 However, such usages often deal primarily with details of the notification duty, in particular its timing, the type and the content of the notice. Whether and to what extent such notification usages also have consequences for the examination duty has to be determined in each particular case. For example, if according to an applicable usage notice has to be given within 14 days from the delivery, that also affects the examination period which naturally cannot extend beyond these 14 days.40 26 In particular, in the context of Art. 9(2) it has to be established in each case that the trade usage is applicable.41 The existence, extent and timing of the duty to examine is, in principle, not affected by “local” usages or rules applicable at the place of examination.42 They may only become relevant if they either constitute at the same time an “international” usage in the sense of Art. 9(2) or provide for an excuse under Art. 44.43 24

3. Scope of the examination duty 27

The duty to examine under Art. 38 covers all aspects of conformity of the goods as defined in Art. 35. Thus, the buyer has to examine whether the goods conform in 35 See for cases where German law is applicable Bundesgerichtshof (Germany) 10 October 1991, BGHZ 115, 324 (326) – while the decision is based on the national law, it is submitted that the same result may be reached in contracts governed by the CISG. 36 Saarla ¨ ndisches Oberlandesgericht (Germany) 13 January 1993 (doors), CISG-Online 83 (Pace) – alleged usage that examination is to be done at final user irrelevant as potentially invalid contractual examination duty at least showed that the doors had to be examined by the buyer before being on-sold. 37 U.S. District Court Northern District Illinois Eastern Division (U.S.) 21 May 2004 (pork ribs), Chicago Prime Packers, Inc. v Northam Food Trading Co., CISG-Online 851 (Pace). 38 Oberster Gerichtshof (Austria) 27 August 1999 (trekking shoes), CISG-Online 485 (Pace). Arrondissementsrechtbank Zwolle (Netherlands) 5 March 1997 (fish), CISG-Online 545 (Pace). 39 E. g. Helsinki Court of Appeal (Finland) 29 January 1998 (steel plates), CISG-Online 1302 (Pace) where the value of the examination carried out by the buyer was seriously affected by the lack of the seller’s presence. 40 Oberster Gerichtshof (Austria) 21 March 2000 (wood), CISG-Online 641 (Pace); the same applies naturally for contractual provisions as to the time for notification. 41 Oberster Gerichtshof (Austria) 15 October 1998 (timber), CISG-Online 380 (Pace) case remitted to lower court to determine whether local usages relied upon were also applicable and know in cross border trade. 42 In this respect misleading Thu ¨ ringisches Oberlandesgericht (Germany) 26 May 1998 (live fish), CISGOnline 513 (Pace) (“the law of the place of examination determines the fashion of the test”); also in favour of a stronger role Herber/Czerwenka, Kommentar (1991), Art. 38 para. 3. 43 Benicke, in: Mu ¨ nchKommHGB (2013), Vorb. zu Arts 38, 39 para. 4.

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relation to quality, quantity, description and packaging to the contractual requirements (Art. 35(1)) as well as to the standards imposed under Art. 35(2).44 The duty to examine extends to all goods delivered, whether they are delivered under a first tender, as replacement for the originally delivered goods or in an effort to remedy existing defects.45 The duty covers goods delivered prematurely as well as those delivered belatedly, though in the former case different views exist as to when the duty starts.46 Not covered by the duty to examine under Art. 38 are samples provided by the seller in the sense of Art. 35(2)(c). A failure to complain about defects existing in the sample may, however, have the consequence that goods containing the same defects are conforming. Different views exist as to whether the duty also extends to the question of whether the goods are accompanied with relevant documentation. The CISG does not explicitly provide for a duty to examine documents. Irrespective of this, the prevailing view is that the examination duty in Art. 38 also extends to documents as, without an examination, the seller’s right to cure defects would de facto be seriously affected.47 There are, however, authors who argue that systematically, and in light of the consequences associated with an eventual breach of the duty to notify, Arts 38 and 39 should not be applied to documents in the sense of Art. 34. They submit that there is no gap in the Convention and that the rationale underlying the balancing of interests embodied in Arts 38 and 39 does not apply with the same force to documents as it applies to other types of non-conformity. The lack of required documentation is often easier to remedy and to prove. In their view, furthermore, the interests of the seller can be adequately protected by a good faith limitation of the buyer’s remedies for insufficient documentation. Thus, the buyer may only invoke remedies for the lack of documentation if he has notified the seller about it and has given him sufficient time to remedy existing defects.48 The buyer is also not obligated to examine whether the goods are “legally defective” in the sense of Arts 41 and 42. While Art. 43 provides for a duty to notify the seller within a reasonable time after the buyer “ought to have discovered” the third party claim or right, no duty to examine is stipulated. This takes account of the fact that such “legal defects” are difficult to discover during an examination. Thus, an analogous application of Art. 38 is also excluded.49 In instalment contracts the duty to examine – and eventually give notice for a lack of conformity – exists for each instalment.50 At the same time, a failure to do so will only lead to a loss of the remedies for this particular instalment. In particular, the right to avoid the contract in relation to future instalments pursuant to Art. 73(2) is not affected. Thus, a buyer who, due to a failure to timely examine the instalments already delivered, does not give the required notice of non-conformity within a reasonable time 44 Magnus, in: Honsell, Kommentar (2010), Art. 38 para. 7; Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 4; Obergericht des Kantons Luzern (Switzerland) 8 January 1997 (blood infusion devices), CISG-Online 228 (Pace) at 4 c. 45 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 4. 46 See infra paras 106 et seq. 47 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 9; in favour also Gerechtshof Arnhem (Netherlands) 17 June 1997 (gas compressors), CISG-Online 547 (Pace). 48 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 13; Achilles, in: Ensthaler, HGB Kommentar (2015), Art. 34 para. 7. 49 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 12. 50 Magnus, in: Honsell, Kommentar (2010), Art. 38 para. 10; Oberster Gerichtshof (Austria) 27 August 1999 (trekking shoes), CISG-Online 485 (Pace); Oberlandesgericht Ko¨ln (Germany) 12 January 2007 (paperboard containers), CISG-Online 1581 (Pace).

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might lose his right to avoid the contract in relation to the parts already performed. He may, however, rely on such instalments for the prognosis that future instalments will also be non-conforming to such an extent that they justify an avoidance of the contract for such instalments pursuant to Art. 73(2).51 33 Unlike with some national laws52 the “existence” of the duty to examine is independent of the legal status of the buyer. This is because, for the existence of the duty, it is irrelevant whether the buyer is a highly sophisticated merchant, a small trader or even a consumer, provided that the application of the CISG is not excluded pursuant to Art. 2(a). Only the “extent” of the duty may be affected. Consequently, mere traders, in principle, also have to examine the goods and cannot merely rely on the examination by their customers.53 In cases of redirection or reshipment in the sense of Art. 38(3), the examination will de facto, however, normally be carried out by the customer and the intermediate buyer will only transmit the latter’s findings.

4. Extent of the examination duty a) The applicable contractual and legal standards. Art. 38 does not directly address the extent of the examination required nor does it specify how the examination must be performed. The Secretariat’s Commentary makes clear that, in the absence of an agreement of the parties and practice and usages in the sense of Art. 9 to the contrary, the extent of the examination duty is limited to examinations, which are reasonable in light of the particular circumstances of the case.54 Art. 38 does not impose a burden on the buyer to engage in an examination which would reveal any possible non-conformity.55 In this sense, the standard of “practicability” applicable for the timing of the duty also regulates its extent. 35 In determining the extent and mode of the examination, objective and subjective factors of each particular case must be taken into account.56 As a general guideline, it can be said that the examination has to be suitable and reasonable. The examination is suitable if it allows the buyer to ascertain with a normal effort the conformity or non-conformity of the goods. In particular, it should provide reliable information about the conformity of the goods and reveal all obvious and regularly occurring defects.57 At the same time, the buyer is only required to engage in examinations which are, in relation to the costs and the efforts, reasonable in comparison to the likely results of the examination, including, in particular, the likelihood of a lack of conformity as well as its consequences.58 Extensive 34

51 Arbitral Award, Exchange for farm products Vienna 10 December 1997 (barley), CISG-Online 351 (Pace) at VII 1.4. 52 E. g. Germany, where the obligation to examine the goods under §§ 377, 378 HGB only extends to merchants. 53 Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 11; Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 7. 54 Secretariat Commentary on 1978 Draft, Art. 36 (now Art. 38) para. 3; see also Obergericht des Kantons Luzern (Switzerland) 8 January 1997 (blood infusion devices), CISG-Online 228 (Pace) at 4 c which refers to a “reasonable manner”. 55 Thomson, Buyer beware: German interpretation of the CISG has led to results unfavorable to buyers, 19 Journal of Law and Commerce (2000) 253 (254 seq.) (Pace); DiMatteo et al., International Sales Law (2005), pp. 81 seq. 56 Oberlandesgericht Oldenburg (Germany) 5 December 2000 (tiller (subsoiler)), CISG-Online 618 (Pace); Oberster Gerichtshof (Austria) 28 June 2012 (seat belts), CISG-Online 2569 (Pace), paras 2 et seq. 57 Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 28; Obergericht des Kantons Luzern (Switzerland) 8 January 1997 (blood infusion devices), CISG-Online 228 (Pace) at 4 c; Oberlandesgericht Oldenburg (Germany) 5 December 2000 (tiller (subsoiler)), CISG-Online 618 (Pace). 58 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 paras 25 seq.; Oberlandesgericht Ko¨ln (Germany) 12 January 2007 (paperboard containers), CISG-Online 1581 (Pace).

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examinations which may detect exceptional deficiencies are normally not required unless there are indications in the particular case that such defects may exist.59 Thus, for example, a buyer of wine may be required to make a conventional chemical 36 analysis of the wine. By contrast, additional examination for the addition of water is only required if there are specific grounds for suspicion.60 Equally, where a large quantity of the goods has been delivered, the buyer normally only has to examine a reasonable number of samples, with the amount required determined by the effects of the examination on the future usability and the value of the goods. By contrast, in cases of smaller quantities of high value goods, the buyer may be required to examine every piece delivered, if this does not impede the future use of the goods. b) Relevant objective and subjective factors aa) Factors connected to the goods. The extent of the examination depends primarily on objective factors directly connected with the goods in question, such as their type and nature, their quantity, value and anticipated use as well as the resulting threat of consequential damages. For example, goods intended for human consumption or with a potential threat for the user and third parties normally require a more extensive examination than goods such as flowers, which do not pose such dangers even when they are non-conforming. While for fabrics often a mere superficial examination as to their colour and quantity is sufficient, complex technical machinery usually requires extensive trial runs. Not only can defects in the latter constitute a threat to the health of its users, they may also give rise to high consequential damages as the goods produced by such machinery may be damaged or worthless. Moreover, additional costs associated with more extensive examinations are more likely to be reasonable if they concern goods of high value. The quantity of the goods delivered also influences the extent of the examination duty. Additional costs associated with thorough examinations can be justified more easily if spread over a larger quantity of goods.61 In addition, the quantity of goods delivered often entitles the buyer to limit the examination to a number of representative samples, excluding a duty to examine each single item. Another important factor in this context is the packaging of the goods and the general effect of such examinations on the further usability of the goods. The mode of packaging may physically exclude certain examinations or lead to additional costs or even a complete loss of the goods examined. At least for the amounts of samples to be taken, it is relevant whether the examination merely requires the opening of a container, which can easily be closed again, or the breaking of a customs seal resulting in customs duties becoming payable or whether it even leads to complete nonusability of the goods, as may be the case with medical equipment where sterile packaging is required. Depending on the contractual arrangements, examinations conducted by the seller or third party may also influence the extent of the buyer’s examination duty. In the absence of any contractual agreements to the contrary, examinations conducted by the seller, whether as part of the normal production process or specifically for the contract, do not affect the buyer’s obligation under Art. 38 to examine the goods. This is different where the goods have to be delivered with certificates concerning such examinations.62 59 Landgericht Stuttgart (Germany) 31 August 1989 (shoes), CISG-Online 11 (Pace) – previous deliveries of the same type of shoes had been defective. 60 Landgericht Trier (Germany) 12 Ocotober 1995 (wine), CISG-Online 160 (Pace). 61 Oberster Gerichtshof (Austria) 27 August 1999 (trekking shoes), CISG-Online 485 (Pace). 62 Oberster Gerichtshof (Austria) 28 June 2012 (seat belts), CISG-Online 2569 (Pace), paras 2 et seq.

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Certificates issued by third parties may be treated differently, but in general this also does not completely relieve the buyer from his obligations under Art. 38.63 bb) Parties’ relationship and expectations. The extent of the examination duty may also be influenced by the parties’ earlier relationships. Where the seller has proven to be fairly reliable in delivering conforming goods, the extent of the examination duty is lower than with a seller whose previous deliveries were deficient.64 In this context, the equities of a particular case play an important role to avoid a situation where the seller benefits from his own previous breaches of contract by imposing stricter examination requirements on the buyer.65 This should only occur in exceptional cases as it is normally the buyer who has to bear the costs for the increased scrutiny. 43 Other breaches by the seller, particularly delay in delivery, can have a limiting effect on the extent of the examination. They may not only shorten the time available for examination, but can also generally limit the buyer’s ability to properly examine the goods. For example, if, due to a delay in delivery, the goods can no longer be delivered to the buyer’s premises where he has the appropriate testing facilities but have to be delivered directly to the final customer, the buyer is only required to engage in the examination possible there.66 44 Different views exist as to how far local traditions can be taken into account. On the one hand, it is clear that Art. 38 provides for an autonomous standard so that a direct application of local standards is excluded and conflict with the intended harmonization is avoided.67 On the other hand, the parties’ expectations, which are regularly influenced by their local traditions, cannot be completely excluded. 42

cc) Subjective factors of the buyer. In addition to objectives factors, the Secretariat’s Commentary explicitly mentions that the subjective situation of the particular buyer, such as the availability of the necessary technical facilities and expertise, can influence the extent of the examination duty.68 The relevance of subjective factors is not completely uncontroversial, but it is justified in light of the drafting history and the principles underlying the CISG. In principle, an experienced seller of a certain size may be expected to be able to carry out a thorough and expert examination of the goods, possibly with the help of an outside expert.69 Special subjective circumstances, such as the mentioned lack of expertise and testing facilities, may, however, lower the extent of the examination duty required. 46 Notwithstanding the general relevance of the situation of the buyer, there are a number of factors which have a limiting effect in this regard. First, it has to be taken into account that the buyer is not required to examine the goods himself. In describing the examination duty, Art. 38 explicitly refers to third party examinations (“causes them 45

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Thu¨ringisches Oberlandesgericht (Germany) 26 May 1998 (live fish), CISG-Online 513 (Pace). Kantonsgericht Schaffhausen (Switzerland) 27 January 2004 (model locomotives), CISG-Online 960 (Pace); Oberster Gerichtshof (Austria) 28 June 2012 (seat belts), CISG-Online 2569 (Pace), paras 2 et seq.: critical Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 10; Janssen, Untersuchungs- und Ru¨gepflichten (2001), pp. 114 seq. 65 Janssen, Untersuchungs- und Ru ¨ gepflichten (2001), pp. 114 seq; Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 33; in favour of stricter examination requirements Landgericht Stuttgart (Germany) 31 August 1989 (shoes), CISG-Online 11 (Pace). 66 Oberster Gerichtshof (Austria) 14 January 2002 (cooling system), CISG-Online 643 (Pace) where due to the limited ability to examine the cooling system an important design defect could only tentatively be discovered so that the notice of defect was not very specific. 67 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 23. 68 Secretariat Commentary on 1978 Draft, Art. 36 (now Art. 38) para. 3. 69 Oberlandesgericht Mu ¨ nchen (Germany) 11 March 1998 (cashmere sweaters), CISG-Online 310 (Pace). 64

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to be examined”). Thus, if an examination proves necessary in light of the circumstances, a buyer may not always be able to rely on a lack of his expertise or the nonavailability of technical facilities, but rather may be required to have the goods examined by a third party.70 This is particularly so where indications of a lack of conformity exist or the non-conformity of the goods may lead to serious consequences, e. g. considerable consequential damages. For example, in a factual situation comparable to that found in the vine wax decision of the German Supreme Court, the buyer – even if he was a mere wholesaler of vine wax – could be required to have the wax examined by a third party with the necessary expertise, if there were indications that the vine wax may be dangerous given the damages which might occur from the use of the defective goods, i. e. the destruction of whole vineyards. The same applies to certain types of foodstuff or dangerous machinery, where the 47 buyer may not rely on his lack of expertise to check the suitability for consumption. The threat posed by these goods to the health of the final customer is too great to make the extent of an examination solely dependent on the buyer’s knowledge. Second, in the context of Art. 38, only subjective factors which are known to the seller 48 or which the seller could not have been unaware of at the time of contracting may be considered. One of the purposes of the examination and notification duty is to provide certainty within a predictable time for the seller as to whether he has properly fulfilled his contractual duties. Predictability, however, can only be attained, if the extent and the timing of the buyer’s examination obligation is not made dependent on subjective factors of which the seller could not have been aware. Such factors can be taken into account in the context of Art. 44, for which the burden of proof rests with the buyer.71 c) Examinations required pursuant to the standard aa) Basic visual examinations. In general, the buyer has to engage in an at least 49 superficial visual examination of the goods and their packaging,72 and count and measure them to exclude apparent non-conformities. Thus textiles, shoes, chemicals or other raw materials are always to be examined as to obvious mistakes in kind, size or colour73, and food as to the provided production date.74 In case of bulk sales or larger quantities, examinations can be limited to an 50 appropriate number of samples.75 Often examinations can be done without incurring additional costs, resulting e. g. from the breaking of customs seals, or without any effect on the further usability of the goods. However, even where this is not the case, for example where goods lose their required sterility through a superficial examination, the buyer is normally not freed from his duty to engage in such examinations. Thus, a 70 Rechtbank Hertogenbosch (Netherlands) 1 November 2012 (articulated loader), CISG-Online 2394 (Pace), para. 4.9.4. 71 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 24. 72 Oberlandesgericht Ko ¨ ln (Germany) 12 January 2007 (paperboard containers), CISG-Online 1581 (Pace); Landgericht Landshut (Germany) 5 April 1995 (sport clothing), CISG-Online 193 (Pace); Rechtbank Rotterdam (Netherlands) 26 October 2016 (grapes), CISG-Online 2764; cf. DiMatteo et al., International Sales Law (2005), p. 82. 73 Oberlandesgericht Ko ¨ ln (Germany) 21 August 1997 (aluminium hydroxide), CISG-Online 290 (Pace); by contrast it is not necessary to wash them to examine whether they shrink or not see: Landgericht Landshut (Germany) 5 April 1995 (sport clothing), CISG-Online 193 (Pace). 74 Danish Maritime and Commercial Court (Denmark) 31 January 2002 (fish (mackerel)), CISG-Online 679 (Pace). 75 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 38 para. 4; Oberlandesgericht Mu¨nchen (Germany) 11 March 1998 (cashmere sweaters), CISG-Online 310 (Pace); Oberlandesgericht Ko¨ln (Germany) 12 January 2007 (paperboard containers), CISG-Online 1581 (Pace); Handelsgericht Zu¨rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace); Oberster Gerichtshof (Austria) 28 June 2012 (seat belts), CISG-Online 2569 (Pace), paras 2 et seq.

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certain quantity of frozen fish may have to be defrosted to examine conformity76, sterile medical equipment may have to be opened to verify its sterility77 or the plastic coating and shrink wrap of doors delivered in slabs has to be removed.78 However, in such cases, the detrimental consequences associated with the examination normally results in a decreased number of samples required. 51 Only in exceptional cases, for example where the quantity delivered is fairly small and each item is of high value, do the potential effects of an examination on the further usability of a sample exclude any examination which goes beyond checking the quantities or looking for obvious defects discoverable.79 52 In certain circumstances, the buyer’s examination duty under Art. 38 may be limited to largely visual examinations, which only reveal the most obvious defects. For example, the need to use or resell perishable goods within a short time may excuse the buyer from any further extensive examinations.80 The same may also apply to durable goods which are onsold within such a short time that a more thorough examination would not reveal any result before the resale or re-use. For example, whether flowers blossom the whole summer as agreed can only be established by the final customer.81 Equally, there is no obligation for the buyer of adhesive foil to use samples of the foil to see whether upon removal after several weeks the adhesive residues remains.82 53 In addition, if defects become apparent by the above mentioned visual examination, the buyer is often not required to engage in further examinations which would normally be required and could reveal additional defects.83 Thus, if the mere feeling of a cashmere pullover reveals that the cashmere is below standard it is not necessary that the buyer engage in sophisticated chemical testing to specify the extent of the deviations.84 By contrast, where superficial examinations merely raise doubts as to the conformity of the goods, they may mandate more comprehensive examinations.85 54

bb) Additional examination duties. Extensive examinations are normally required where typical and likely defects cannot be discovered by superficial examinations.86 76 Danish Maritime and Commercial Court (Denmark) 31 January 2002 (fish (mackerel)), CISG-Online 679 (Pace); cf. Arrondissementsrechtbank Roermond (Netherlands) 19 December 1991 (cheese), CISGOnline 29 (Pace). 77 Obergericht des Kantons Luzern (Switzerland) 8 January 1997 (blood infusion devices), CISG-Online 228 (Pace); cf. Oberlandesgericht Ko¨ln (Germany) 13 November 2000 (plug-couplings), CISG-Online 657 (Pace). 78 Landgericht Saarbru ¨ cken (Germany) 23 March 1992 (doors), CISG-Online 60 (Pace) upheld on appeal by Oberlandesgericht Saarbru¨cken (Germany) 13 January 1993 (doors), CISG-Online 83 (Pace). 79 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 38 para. 4; Honnold/Flechtner, Uniform Law (2009), Art. 38 para. 252, gives as an example the delivery of 500 gallon cans of chloride sealed in metal containers where the buyer is required to examine the quantity but not the content of the containers which would exclude the further use of the container examined. 80 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 30. 81 Oberlandesgericht Innsbruck (Austria) 1 July 1994 (garden flowers), CISG-Online 107 (Pace). 82 Different Oberlandesgericht Karlsruhe (Germany) 25 June 1997 (surface protective film), CISGOnline 263 (Pace) overruled on a different issue by Bundesgerichtshof (Germany) 25 November 1998 (surface protective film), CISG-Online 353 (Pace). 83 Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 29; this limitation does, however, not extend to other obvious defects which could also be discovered through the superficial examination; see Danish Maritime and Commercial Court (Denmark) 31 January 2002 (fish (mackerel)), CISG-Online 679 (Pace). 84 Oberlandesgericht Mu ¨ nchen (Germany) 11 March 1998 (cashmere sweaters), CISG-Online 310 (Pace). 85 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 27; Landgericht Stuttgart (Germany) 31 August 1989 (shoes), CISG-Online 11 (Pace); sceptical Janssen, Untersuchungs- und Ru¨gepflichten (2001), pp. 114 seq. who does not distinguish between “warnings” resulting from a previous behaviour of the seller and those resulting from the appearance of the goods. 86 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 28.

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For textiles and clothing delivered in greater numbers, the required visual examination is in general supplemented by an obligation to wash at least a representative number of samples to ensure that they are not shrinking or are not losing colour.87 Large quantities of shoes, in particular if made for heavy duty use such as trekking, require a thorough and professional examination by someone with expertise in shoe production or trade.88 Foodstuff has to be examined for its general fitness for consumption. This includes checking its freshness and compliance with the normal requirements. In the absence of indication to the contrary, the buyer can, however, assume that the seller did not act fraudulently. Hence, he is under no duty to examine whether prohibited additives have been used or the production process deviates from the one agreed upon. Thus, a buyer of wine does not have to examine whether the seller added water or sugar to it.89 Equally, where the parties have agreed that the goods should not be irradiated, the buyer in general does not have to engage in expensive checks to examine whether that promise has been kept.90 Where the chemical composition is crucial for the further use of the goods, a chemical analysis of the composition of the goods may be required. In light of costs and efforts associated with such an analysis, it cannot be required as a matter of course.91 In particular, in the absence of indications to the contrary, buyers are not required to engage in extended versions of such examinations searching for particular defects.92 Where the conformity of the goods can only be verified with some degree of certainty through their intended use, it is usually necessary to undergo test uses. For example, in a purchase of self adhesive foil covers, steel samples of such foil must be used to verify not only whether it fulfils its protective purpose but also whether it can be removed without leaving any adhesive residues.93 Funnel covers have to be assembled according to their intended use and tested as to their reaction to normal pressure.94 Equally, the examination of goods which are intended for reprocessing generally includes a reprocessing test of samples where that is easily possible. This is normally the case where the reprocessing is to take place at the buyer’s premises and does not require major preparations. In relation to textiles bought for the production of clothing, this can include verification by the buyer by washing and ironing the textiles to determine whether the colours fade or they shrink.95 87 Magnus, in: Honsell, Kommentar (2010), Art. 38 para. 15; Landgericht Landshut (Germany) 5 April 1995 (sport clothing), CISG-Online 193 (Pace); Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 38 para. 14. 88 Oberster Gerichtshof (Austria) 27 August 1999 (trekking shoes), CISG-Online 485 (Pace). 89 Landgericht Trier (Germany) 12 Ocotober 1995 (wine), CISG-Online 160 (Pace). 90 Bundesgerichtshof (Germany) 30 June 2004 (paprika), CISG-Online 847 (Pace). 91 Generally in favour for all cases where the chemical composition of the goods is relevant Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 11; denied Landgericht Paderborn (Germany) 25 June 1996 (granulated plastic), CISG-Online 262 (Pace) – no quantitative chemical analysis of granulated plastic used for the manufacture of rods for roll-down shutters for a sufficient content of titanium dioxide. 92 Landgericht Trier (Germany) 12 Ocotober 1995 (wine), CISG-Online 160 (Pace) – no need for a buyer of wine in the absence of any indications to go beyond the normal chemical analysis and to search for the addition of water. 93 Oberlandesgericht Karlsruhe (Germany) 25 June 1997 (surface protective film), CISG-Online 263 (Pace); but see the criticism by Thomson, Buyer beware: German interpretation of the CISG has led to results unfavorable to buyers, 19 Journal of Law and Commerce (2000) 245 (253 seq.) (Pace); see also supra at 4.3.1 for possible restrictions due to the timing of the resale. 94 Oberlandesgericht Dresden (Germany) 8 November 2007 (funnel covers), CISG-Online 1624 (Pace) – excluding, however, the need for more sophisticated stress tests by experts. 95 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 13; Landgericht Berlin (Germany) 21 March 2003 (fabric), CISG-Online 785 (Pace); obiter also Kantonsgericht

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Vehicles and machinery have to be examined by test drives or trial runs as to their general operability, as well as speed and output.96 Machines which are used for the production of other goods have to be examined in a sample production simulating the ordinary production process. Where the buyer merely intends to resell the goods such trial runs may not be possible. 61 For some goods, the examination duty upon delivery is coupled with an examination duty upon installation. Complex machinery only has to be tested as to its general operability.97 If this is only possible through actual use of the machinery and no such use is anticipated in the near future, the buyer may be required to make test runs if no other means for examination is available.98 The buyer may, however, assume that the goods delivered fulfil the basic safety standards. Thus, there is no need to examine the basic electrical operational safety such as the essential grounding components in high quality globes.99 60

cc) Hidden or latent defects. Different views exist as to the treatment of latent defects which are not discoverable through an orderly examination at the time of delivery. Some consider the duty to examine under Art. 38 as a discrete one-off duty which has to be fulfilled only once and which is not revived if subsequent events suggest the existence of latent defects. In such cases, a duty to examine the goods should be deduced directly from Art. 39 and consequently is not subject to the standards in Art. 38. The basis for such an implied duty to examine in Art. 39 is seen in the reference to “ought to have been discovered”.100 63 The prevailing and more convincing view is that the duty to examine may involve several stages of examination. Thus, whenever there are symptoms discovered which should alert the buyer that the goods contain latent defects not discovered during the initial examination, the buyer is requested to engage in a more sophisticated examination to verify whether such defects exist or not.101 That will often also entail the obligation to engage an expert to determine the cause of the symptoms.102 64 Notwithstanding sometimes misleading terminology, such as a “revival” of the duty to examine, this has to be distinguished from an “ongoing duty” to examine the goods. The latter, which would require a more or less permanent examination of the goods, cannot be deduced from Art. 38.103 The difference between the two is that under an ongoing duty, additional steps may be required by a buyer even without any triggering 62

Schaffhausen (Switzerland), 27 January 2004 (model locomotives), CISG-Online 960 (Pace); controversial: for a different view Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 38 para. 14. 96 Rechtbank van Koophandel Veurne (Belgium) 25 April 2001 (diesel tram), CISG-Online 765 – as to operating speed. 97 Oberlandesgericht Oldenburg (Germany) 5 December 2000 (tiller (subsoiler)), CISG-Online 618 (Pace). 98 Oberlandesgericht Oldenburg (Germany) 5 December 2000 (tiller (subsoiler)), CISG-Online 618 (Pace), which, however, should have considered whether the delay in delivery justified the first use of the machinery seven weeks after delivery. 99 Landgericht Mu ¨ nchen I (Germany) 27 February 2002 (globes), CISG-Online 654 (Pace). 100 Flechtner, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2004), p. 377 (389 seq.). 101 Bundesgerichtshof (Germany) 3 November 1999 (machine for producing hygenic tissues), CISGOnline 475 (Pace) with approving comment by Schlechtriem, EWIR (2000) 125; also Tribunale di Vigevano (Italy) 12 July 2000 (sheets of vulcanized rubber used in manufacture of shoe soles), CISGOnline 493 (Pace); Landgericht Du¨sseldorf (Germany) 23 June 1994 (engines for hydraulic presses and welding machines), CISG-Online 179 (Pace). 102 See Thu ¨ ringisches Oberlandesgericht (Germany) 26 May 1998 (live fish), CISG-Online 513 (Pace). 103 Piltz, Internationales Kaufrecht (2008), para. 5–84; Freiburg, Die Ru ¨ geobliegenheit des Ka¨ufers bei grenzu¨berschreitendem Warenverkehr, IHR (2005) 56 (58); in so far also Flechtner, in: Ferrari/Flechtner/ Brand, Draft Digest and Beyond (2004), p. 377 (389 seq.).

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event leading to new doubts as to the conformity of the goods. In particular, the buyer could be required to use them within a certain time, even though the initial examination has not raised any doubts as to their conformity. By contrast, under a “revived” duty to examine the goods, no use of the goods would be required, provided that such use is not already part of the initial examination, if the initial examination or later events have not raised any doubts as to the goods’ conformity. dd) Bulk sales. In case of bulk sales, the seller is only required to examine a 65 representative number of samples.104 In bulk sales relating to goods which differ slightly from each other, this requires taking samples from each kind of good. The number of samples required may inter alia be influenced by previous deliveries between the parties. If serious defects have frequently been found in the past, the number of samples needed will be higher than in cases where the seller has proven very reliable.105 The existence of a long lasting business relationship does not, however, completely free the buyer from taking samples.106 If none of the samples reveal any deficiency, the buyer may assume that the rest of the 66 goods are also conforming. Even if defects are later discovered in the remaining goods, the buyer has fulfilled his examination duty.107 Where all samples taken turn out to be non-conforming, the buyer may assume that the whole delivery is non-conforming. The buyer should not be required to examine every single piece as to its conformity.108 ee) Use of third parties. It can be deduced from the wording of Art. 38 (“cause them 67 to be examined”) that the buyer is not required to make the examination himself or through his own personnel, but rather has the option to use the services of third parties. These can be independent experts hired by the buyer particularly for this purpose, e. g. a “measuring” firm with branches in all major ports. In particular, in cases falling under Art. 38(3), this may be the buyer’s own customers. In this sense, the examination by the buyer’s customers has a double function. It will fulfil both the customers’ examination duty arising from their contract with the buyer as well as the buyer’s examination duty in his relationship with the original seller. Often the buyer may even need to engage a third party for the fulfilment of his 68 examination duty. This is the case where he either lacks the necessary expertise109 or an examination by the buyer would be impractical because the goods are delivered directly to the buyer’s customers. In either case, the buyer is obliged to ensure that the third party properly performs the examination duty.110 Thus, if the expert hired does not examine the goods within the time required and the buyer consequently does not 104 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 12; Oberlandesgericht Ko¨ln (Germany) 13 November 2000 (plug couplings), CISG-Online 657 (Pace); Thu¨ringisches Oberlandesgericht (Germany) 26 May 1998 (live fish), CISG-Online 513 (Pace). 105 Landgericht Saarbru ¨ cken (Germany) 23 March 1992 (doors), CISG-Online 60 (Pace) upheld on appeal by Oberlandesgericht Saarbru¨cken (Germany) 13 January 1993 (doors), CISG-Online 83 (Pace); Landgericht Stuttgart (Germany) 31 August 1989 (shoes), CISG-Online 11 (Pace) requiring more extended examination if previous deliveries had proven defective. 106 Oberlandesgericht Karlsruhe (Germany) 25 June 1997 (surface protective film), CISG-Online 263 (Pace). 107 Magnus, in: Honsell, Kommentar (2010), Art. 38 para. 16. 108 Oberlandesgericht Koblenz (Germany) 19 October 2006 (short sleeves t-shirts), CISG-Online 1407 (Pace) at II 3 aa; but see Landgericht Stuttgart (Germany) 31 August 1989 (shoes), CISG-Online 11 (Pace) which assumed that defects in previous deliveries required an examination of nearly all shoes delivered. 109 Rechtbank Hertogenbosch (Netherlands) 1 November 2012 (articulated loader), CISG-Online 2394 (Pace), para. 4.9.4. 110 Oberlandesgericht Koblenz (Germany) 18 November 1999 (fiberglass fabric for filters), CISG-Online 570 (Pace).

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inform the seller about the non-conformity within a reasonable time, the buyer may lose his remedies for non-conformity irrespective of any fault on his part.111 The buyer may be able to rely on Art. 44 to excuse the delay if he has a reasonable excuse for his failure,112 and in any case he will have a claim for contractual damages against the third party. 69 The buyer will not be responsible for improper examinations by third parties where they have either been selected by the seller or have been jointly agreed upon. The same applies if such examinations have been left to a governmental authority.113 In such cases, there is a presumed agreement between the parties that the buyer will be deemed to have fulfilled his duty to examine the goods by engaging the third party.114

5. Place of examination The place of examination is only directly regulated for contracts falling within the ambit of Art. 38 paras 2 and 3. In all other cases, these provisions suggest that, in principle, examination should occur at the place of delivery as determined by the parties’ agreement or under Art. 31.115 For contracts involving carriage, which are the most common in practice, Art. 38(2) provides that the goods must be examined at the place of destination and not at the place of delivery. This is a considerable advantage for the buyer as instead of organizing examination in a foreign country, he can often rely on his own personnel and facilities for examination, at least when the goods have to be delivered to the buyer’s place of business. 71 The parties may agree on a different place of examination, however, in light of the consequences such an agreement will have on the buyer, this should not be assumed lightly. Thus, just because an agreement provides that payment must be made when the goods are placed at the disposal of the carrier does not necessarily mean that this place of delivery shall at the same time become the place of examination.116 70

6. Time period for examination a) General. Pursuant to the principle of party autonomy endorsed explicitly by Art. 6, the parties are free to agree on a time for examining the goods. Express agreements of this kind can be found in numerous contracts in practice, in particular in connection with rules on trial runs. More often, however, the parties merely regulate the time by which notice must be given, thereby indirectly fixing the time for examination.117 73 Where the parties have not agreed on a time for examination and there are no practices established between them or trade usages, Art. 38(1) stipulates that the examination must be made in “as short a time as practical in the circumstances”. Taking into account the diversity of goods and parties involved in international sales 72

111 DiMatteo et al., International Sales Law (2005), p. 81; Oberlandesgericht Mu ¨ nchen (Germany) 8 February 1995 (polypropolene plastic granulate), CISG-Online 142 (Pace). 112 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 18. 113 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 para. 8. 114 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 19. 115 Magnus, in: Honsell, Kommentar (2010), Art. 38 para. 19. 116 See also Magnus, Zum ra ¨umlich-internationalen Anwendungsbereich des UN-Kaufrechts und zur Ma¨ngelru¨ge, IPRax (1993) 390 (392) case note to Oberlandesgericht Du¨sseldorf (Germany) 8 January 1993 (tinned cucumbers), CISG-Online 76 (Pace). 117 E. g. Arbitral Award, VIAC-Sch 4318, 15 June 1994 (rolled metal sheets), CISG-Online 120 (Pace) – warranties subject to the condition that buyers examine the goods immediately after taking delivery; Arrondissementsrechtbank Zwolle (Netherlands) 5 March 1997 (fish), CISG-Online 545 (Pace) short notice period for frozen goods; for detail see supra at para. 25.

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contracts, the drafters of the CISG opted for a relatively short but fairly flexible time for examination, referring to the practicability in the circumstances. In this sense, they tried to balance the seller’s interest for prompt examination with the buyer’s interest in avoiding costs and inconveniences.118 The intention to provide adequate protection of the buyer’s interest is also evident in 74 the differentiation contained in the various paragraphs of Art. 38 in relation to the start of the examination period. In general, the examination period will start at the time of delivery (Art. 38(1)), however an exception is provided for contracts involving carriage (Art. 38(2)) and where the goods are redirected or redispatched (Art. 38(3)). To avoid a situation in which the buyer has to incur additional costs and inconveniences in order to examine the goods when risk passes, Art. 38 paras 2 and 3 defer the start of the examination period until the goods arrive at their “final” destination. In the absence of a direct sanction for non-compliance, the examination period 75 derives its importance primarily from being a crucial part of the notification regime set out in Art. 39. As a consequence, the fairly strict standard for the timing of the examination is partly mitigated by the more lenient standard in Art. 39 for the proper notice. As long as the final notice is given within a reasonable time, any delay in examination has no negative effect.119 b) Length of the period: “as short a time as practical in the circumstances”. In 76 practice, the determination of what is to be understood by “as short a time as practical in the circumstances” is of crucial relevance. Notwithstanding the fact that failure to give notice in time triggers a loss of remedies pursuant to Art. 39(1), this question is usually determined by the length of the examination period. Once defects have been discovered, they are normally communicated to the seller within the time available for notification. aa) The general standard. Particularly in older cases,120 courts from countries whose 77 national law requires an examination “without any delay” have also interpreted the notion of “as short a time as practical in the circumstances” as requiring an immediate examination upon delivery even with non-perishable goods.121 However, in light of the drafting history, it is clear that the notion of “as short a time as 78 practical in the circumstances” should not be equated with the Art. 38 ULIS notion of “prompt examination”, essentially requiring an immediate examination.122 Art. 38 does not refer to as short a time “as possible”. Instead it uses the term “as practical” which is less strict and, to a certain extent, allows the court to take into account the subjective situation of the buyer and other factors, which may justify delay. Moreover, it is suggested that imposing an obligation of immediate examination on the buyer with strict sanctions irrespective of such factors is not equitable. In the end, it is the seller who acted in breach 118

Benicke, in: Mu¨nchKommHGB (2013), Art. 38 para. 6. For details see Art. 39 paras 58 et seq. 120 The general change in attitude, at least by German courts, is evidenced by the decision of the Bundesgerichtshof in the tissue machine case, Bundesgerichtshof (Germany) 3 November 1999 (machine for producing hygenic tissues), CISG-Online 475 (Pace). 121 Oberlandesgericht Du ¨ sseldorf (Germany) 10 February 1994 (shirts), CISG-Online 116 (Pace) – immediate examination; Arbitral Award, ICC 8247, June 1996 (chemical compound), (Pace); Handelsgericht Zu¨rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace) – “in general no more than one week”; Landgericht Landshut (Germany) 5 April 1995 (sport clothing), CISG-Online 193 (Pace) – one week for counting plus a few days for notice; see also Neumayer/Ming, Convention de Vienne (1993), Art. 38 para. 3 who hold the view that the delay for examination is “exceptionnellement court”; critical to such tendencies Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG paras 16 seq. 122 In so far also the jurisprudence to Art. 38 ULIS is of little relevance for interpreting Art. 38. 119

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of the contract.123 Consequently, the examination duty should not serve the interests of the seller in a way that in the end, in the majority of cases, the buyer has to shoulder the burden of defective goods.124 In addition, one of the central arguments in favour of a very short examination period, i. e. that the seller has to secure evidence, loses some of its weight through the allocation of the burden of proof. In principle, it is the buyer who has to prove the non-conformity of the goods and not the seller who has to prove their conformity, thus the loss of evidence primarily affects the buyer.125 On the other hand, the wording of Art. 38, its purpose and the inclusion of Art. 44 to protect the buyer, justifies a strict interpretation of the time granted for examination, avoiding lengthy inspection periods. In comparison to Art. 39, which uses the notion of “reasonable time”, the reference in Art. 38 to “as short a time as practicable” is considerably stricter, emphasizing the shortness of the time granted.126 Beyond these interpretive tendencies, it is generally recognized that, as with the extent of the examination, the time available depends on the circumstances of the particular case.127 The reference to “as practical in the circumstances” leaves no doubt that the drafters wanted to provide for the necessary flexibility in applying the CISG, avoiding the fixing of a precise period as found in national laws and even interpretative guidelines applicable to all cases as found in Art. 38 ULIS.128 Notwithstanding the generally recognized flexibility and variability of the period for examination, courts have tried to establish presumptive time periods for the buyer’s examination which can be corrected upwards or downwards as the particular case requires. These range from three to four days129, over a week130 and ten to twelve days131 to one month. Recognizing that in the majority of cases there will be objective or subjective factors which justify a deviation from the presumptive time period, it is submitted that the period of one to two weeks is a reasonable starting point depending on the type of examination required and the necessary preparatory work associated with it.132 Periods 123 Magnus, in: Honsell, Kommentar (2010), Art. 38 para. 20; Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 16. 124 Benicke, in: Mu ¨ nchKommHGB (2013), Vorb. zu Arts 38, 39 para. 3. 125 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 38 para. 7; for the burden of proof see above Art. 35, paras 179 et seq. 126 In favour of a strict interpretation see also Bianca, in: Bianca/Bonell, Commentary (1987), Art. 38 para. 2.5; cf. Honnold/Flechtner, Uniform Law (2009), Art. 38 para. 252 discussing the various standards used; a Canadian proposal to use also in Art. 38 the standard of reasonableness was explicitly rejected, Offical Records 310 et seq. 127 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 17. 128 Bianca, in: Bianca/Bonell, Commentary (1987), Art. 38 para. 2.5. 129 Oberlandesgericht Karlsruhe (Germany) 25 June 1997 (surface protective film), CISG-Online 263 (Pace) – suggesting a “median” time examination for durable goods of three to four days, which can be corrected upwards or downwards as the particular case requires; Freiburg, Die Ru¨geobliegenheit des Ka¨ufers bei grenzu¨berschreitendem Warenverkehr, IHR (2005) 56 (58); Oberlandesgericht Koblenz (Germany) 18 November 1999 (fiberglass fabric for filters), CISG-Online 570 (Pace); Oberlandesgericht Koblenz (Germany) 11 September 1998 (chemical substance (dryblend) used for production of plastic (PVC) tubes), CISG-Online 505 (Pace); cf. as dicta Oberlandesgericht Schleswig (Germany) 22 August 2002 (live sheep), CISG-Online 710 (Pace). 130 Handelsgericht Zu ¨ rich (Switzerland) 30 Novemeber 1998 (lambskin coats), CISG-Online 415 (Pace); Oberster Gerichtshof (Austria) 14 January 2002 (cooling system), CISG-Online 643 (Pace) – approving the lower court’s decision that an inspection period of one week (five working days) can be considered as a rough guideline. 131 Janssen, Untersuchungs- und Ru ¨ gepflichten (2001), pp. 133 seq.; for an overview on the jurisprudence see DiMatteo et al., International Sales Law (2005), pp. 78 et seq. 132 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 38 para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 40; Obergericht des Kantons Zug (Switzerland) 19 December 2006 (stove), CISG-Online 1427

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extending over a month before the examination starts or at least until necessary preparatory works are undertaken will rarely be justified.133 Where the examination requires a time consuming test, e. g. chemical analysis or trial 83 productions, the time needed for such tests has to be added to determine the period for examination. The notice period only starts to run when, on the basis of such tests, the buyer ought to have discovered the lack of conformity. Thus, the period of examination has de facto two components: first a kind of pre-examination period granted to the buyer for taking the necessary decisions and organizing the examination in light of the buyer’s capacities and second, the period needed to carry out the examination as such.134 bb) Relevant factors in practice. What constitutes “as short a time as practical in the 84 circumstances” in a particular case largely depends on the same type of objective and subjective factors, which are relevant for the extent of the examination.135 In addition to the extent of the examination itself, factors of particular importance include the type of the goods involved and the status of the buyer, i. e. his technical and financial capacity. (i) Extent and time of examination. The length of the time period for examination is 85 largely dependent on the type of examination required. This applies to the time needed for the examination process itself as well as the pre-examination time, in particular the time needed for planning and organizing the examination. In a case of complicated chemical or physical tests done with the help of outside experts, both may take several weeks, while in the case of mere visual examination of the goods by an employee of the buyer, this can be arranged within a short time and may be completed within minutes or a few hours. In determining the length of examination, it will also be relevant if the required 86 examination can be conducted in the ordinary course of business. Thus, non-business days will not be included in the calculation for the period of examination.136 Furthermore, disruptions in the buyer’s business which are known to the seller have to be taken into account.137 For example, the examination period for goods delivered during holiday periods may be longer as the internal or external personnel required for the examination may not be available. In general, the time available for organizing the examination can also influence the 87 length of the examination period. Longer periods between contract conclusion and delivery normally allow the buyer sufficient time to make arrangements so that the goods can be examined directly upon their arrival, at least if the arrival date can be predicted with some certainty.138 By contrast, delivery shortly after contract conclusion or short notice changes in the delivery date make planning the examination much more difficult. This applies to all kinds of “untimely deliveries” (both pre-mature and belated), which may result in a prolongation of the period for examination. If the buyer (Pace); Landgericht Lu¨beck (Germany) 30 December 2010 (chairs), CISG-Online 2292, p. 5; critical to the fixing of any average period Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 17; Witz, A Raw Nerve in Disputes relating to the Vienna Sales Convention: The Reasonable Time for the Buyer to Give Notice of a Lack of Conformity, 2 ICC Bulletin (2000) 15 (18). 133 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 38 para. 6. 134 See also Bundesgerichtshof (Germany) 3 November 1999 (machine for producing hygienic tissues), CISG-Online 475 (Pace). 135 For these factors see supra paras 37 et seq. 136 Oberlandesgericht Ko ¨ ln (Germany) 22 February 1994 (rare hard wood), CISG-Online 127 (Pace); in this direction also Amtsgericht Riedlingen (Germany) 21 October 1994 (ham), CISG-Online 358 (Pace). 137 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 38 para. 8. 138 For that argument see also Landgericht Frankfurt (Germany) 11 April 2005 (used shoes), CISGOnline 1014 (Pace).

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was expecting goods at a different time, he may have to rearrange his plans for examination. The necessary personnel and machinery may not yet be or may no longer be available.139 This is particularly relevant where the examination requires complex tests or trial runs. 88 In some cases, even a short delay in delivery can result in a considerable extension of the time for examination. For example, a delay of merely several days in the delivery of a tiller used for the subsoil preparations of sport pitches may exclude a trial run, which the buyer originally intended to make during his ordinary course of business, where the pitches are only made once every several months. In such cases, the buyer may be entitled to wait for several months to examine the goods until the next pitch has to be made. 89 The type of the non-conformity also influences the time for examination. For obvious defects, such as deviations in kind or quantity140, the time needed for discovering such defects will be shorter than deficiencies which have to be determined by lengthy tests.141 By contrast, the pre-examination time, i. e. the period of time before the examination actually starts, remains the same. Where the alleged non-conformity involves serious allegations of fraud, e. g. where the goods are counterfeits, the examination period may be longer as the buyer has to verify such allegations.142 The same may apply to complex machinery where the buyer first has to exclude the possibility that defects are based on an improper handling of the machine.143 90 In the absence of particular circumstances which give rise to shorter or longer periods, basic examinations which require little organization, such as for the identity, quantity and even basic operability of the goods, can be organized or even carried out within an average period of one week to ten days.144 91

(ii) Type of goods involved and intended use. Another factor of considerable importance in determining the period for examination is the nature of the goods and their intended use. Perishable goods, such as fresh fruits, flowers and fish, have to be examined immediately or shortly after delivery as their condition might deteriorate within a very short time.145 The same applies to livestock where inadequate supply of water, nutrition or inappropriate conditions may seriously affect the physical condition of the goods within days or even hours.146 A short examination period also exists for 139

Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 47. Appellationshof Bern (Switzerland) 11 February 2004 (wire and cable), CISG-Online 1191 (Pace); probably too strict applying the domestic German standard, Landgericht Tu¨bingen (Germany) 18 June 2003 (computers and accessories), CISG-Online 784 (Pace) – not more than a few days. 141 Tribunale Civile di Cuneo (Italy) 31 January 1996 (sports clothes), CISG-Online 268 (Pace); Amtsgericht Riedlingen (Germany) 21 October 1994 (ham), CISG-Online 358 (Pace); Oberlandesgericht Koblenz (Germany) 18 November 1999 (fiberglass fabric for filters), CISG-Online 570 (Pace); Oberlandesgericht Ko¨ln (Germany) 21 August 1997 (aluminium hydroxide), CISG-Online 290 (Pace); Cour d’appel Paris (France) 6 November 2001 (cables), CISG-Online 677 (Pace). 142 Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 41. 143 Bundesgerichtshof (Germany) 3 November 1999 (machine for producing hygenic tissues), CISGOnline 475 (Pace). 144 Handelsgericht St. Gallen (Switzerland) 11 February 2003 (audio CDs), CISG-Online 900 (Pace); Rechtbank van Koophandel Veurne (Belgium) 25 April 2001 (diesel tram), CISG-Online 765 – test drive. 145 Saarla ¨ ndisches Oberlandesgericht (Germany) 3 June 1998 (flowers), CISG-Online 354 (Pace); Arrondissementsrechtbank Roermond (Netherlands) 19 December 1991 (cheese), CISG-Online 29 (Pace); Arrondissementsrechtbank Zwolle (Netherlands) 5 March 1997 (fish), CISG-Online 545 (Pace); Amtsgericht Riedlingen (Germany) 21 October 1994 (ham), CISG-Online 358 (Pace); cf. albeit obiter, Appellationshof Bern (Switzerland) 11 February 2004 (wire and cable), CISG-Online 1191 (Pace) at 4. 146 Oberlandesgericht Schleswig (Germany) 22 August 2002 (live sheep), CISG-Online 710 (Pace) – examination of living animals within a day after delivery. 140

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seasonal goods to allow for their use, either by the seller or the buyer, within the season for which they were produced.147 The examination period is normally longer for durable goods. In particular, if the 92 goods are complex and the examination requires trial runs or complex mechanical or chemical tests, the examination may extend beyond the two weeks mentioned.148 Irrespective of this, a basic examination for the existence of obvious mistakes by looking at the goods, counting or weighing them or examining the accompanying documents has to be made earlier.149 The intended use of the goods is of relevance as it may exclude any proper examination 93 after a certain time. For example, goods that are to be reprocessed or which are to be mixed with other goods must be examined before that happens.150 Afterwards it may be difficult to determine whether the goods were originally conforming. There may, however, be exceptions where the goods will be reprocessed in the near future and an extensive examination would lead to considerable costs or delay in the use of goods or would affect their usability. Given that the buyer has to prove the lack of conformity of the goods, any increased difficulties in determining this conformity are borne by him.151 For this same reason, the buyer may be entitled to a slightly longer examination period 94 if the goods are to be used within the near future so that additional expenses for separate inspections are not reasonable. It can, however, be expected that the buyer will not be able to wait for two months to examine porcelain tableware to be used in his restaurant.152 (iii) Status of the buyer. The status of the buyer and in particular his size, expertise 95 and professionalism will also have an impact on the period of examination. A buyer of a certain size is more likely to have the necessary personnel to engage in examinations beyond mere visual inspections than a smaller company which then needs additional time to hire outside experts for examinations. The same may be true with respect to the availability of testing equipment, where the location of the buyer may also be relevant. A buyer located in a developing country may need more time to organize an examination by a third party than a buyer in a highly industrialized country. In particular, where the contract provides for the training of the buyer’s personnel by 96 the seller, the parties may have implicitly recognized that the buyer will only be able to examine the goods at the end of the training period.153 Local customs in the buyer’s country may also influence the timing. If goods are 97 delivered during holiday seasons where, as is known to the seller, the buyer’s company 147 Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 42; Oberster Gerichtshof (Austria) 27 August 1999 (trekking shoes), CISG-Online 485 (Pace); see also Oberster Gerichtshof (Austria) 14 January 2002 (cooling system), CISG-Online 643 (Pace). 148 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 17; District Court for the Western District of Michigan (U.S.) 17 December 2001 (thermoforming line equipment), Shuttle Packaging Systems L. L. C. v Tsonakis, CISG-Online 773 (Pace); Landgericht Du¨sseldorf (Germany) 23 June 1994 (engines for hydraulic presses and welding machines), CISG-Online 179 (Pace). 149 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 17. 150 Oberlandesgericht Ko ¨ ln (Germany) 21 August 1997 (aluminium hydroxide), CISG-Online 290 (Pace); Arrondissementsrechtbank Zwolle (Netherlands) 5 March 1997 (fish), CISG-Online 545 (Pace); Gerechtshof ‘s Hertogenbosch (Netherlands) 15 December 1997 (furs), CISG-Online 552 (Pace); see also resale of goods Pretore della giurisdizione di Locarno-Campagna (Switzerland) 27 April 1992 (furniture), CISG-Online 68 (Pace). 151 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 38 para. 8. 152 Tribunale di Rimini (Italy) 26 November 2002 (porcelain tableware), CISG-Online 737 (Pace) – the notice given after 6 months after delivery was considered to be out of time. 153 See District Court for the Western District of Michigan (U.S.) 17 December 2001 (thermoforming line equipment), Shuttle Packaging Systems L. L. C. v Tsonakis, CISG-Online 773 (Pace) allowing for an overall notification period of more than a few weeks.

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is effectively closed, an extended time for examination may be justified. This does not apply if the delivery took place at a time requested by the buyer who then failed to make reservations for a longer examination period. 98 Purely personal factors such as illness, strike or mere absence are largely irrelevant in the context of Art. 38154 unless the seller has been informed about them or their likelihood at the time of contracting. In all other cases the buyer may always entrust third parties with the examination overcoming such impediments. Such factors may, however, result in a “reasonable excuse” under Art. 44. (iv) Other factors. A Finnish court has held that the existence of a pre-delivery inspection prolonged the amount of time the buyer had to examine the goods after delivery.155 While the justification of such prolongation seems somewhat questionable, it is clear that the lack of a pre-delivery inspection, irrespective of whether such an inspection would have constituted diligent behaviour, does not in principle shorten the time limit for examination.156 100 It has also been held that requests by the buyer for expedited delivery can shorten the time for examination.157 101 The time for examination is also affected by the expectations of the parties. Thus, it could make a difference if both parties come from countries where the national law and the courts applying the CISG adopt a strict view about the time for examination.158 102 Problematic is the treatment of defects in previous deliveries. On the one hand, one could argue that due to past experience, the buyer should have been alerted about possible non-conformities and thus arrange for an examination shortly after delivery.159 On the other hand, such a view would seem to reward the seller for his breach of contract in previous instalments. Thus, previous non-conformities should in principle not affect the time for examination. 99

c) Starting point for the period for examination pursuant to Art. 38(1) 103 aa) Conforming Delivery. In all cases not covered either by an agreement or the special rules of Art. 38 paras 2 and 3, the time for the buyer’s examination begins to run upon actual delivery of the goods at the place of delivery.160 This corresponds, in general, to the time when the risk of loss passes to the buyer.161 The place of delivery is, in the absence of an agreement by the parties, determined pursuant to Art. 31. 154 Landgericht Landshut (Germany) 5 April 1995 (sport clothing), CISG-Online 193 (Pace) – absence for participation in trade fair not relevant for length of examination period; Magnus, in: Honsell, Kommentar (2010), Art. 38 para. 23. 155 Helsinki Court of First Instance (Finland) 11 June 1995 (skin care product), confirmed by Helsinki Court of Appeal (Finland) 30 June 1998 (skin care product), CISG-Online 1304 (Pace) – existence of a pre-delivery test showing acceptable vitamin content for skin care products excused buyer from testing for vitamin content immediately after delivery. 156 Not completely clear in this regard Tribunale di Rimini (Italy) 26 November 2002 (porcelain tableware), CISG-Online 737 (Pace). 157 Landgericht Berlin (Germany) 21 March 2003 (fabric), CISG-Online 785 (Pace). 158 See Oberster Gerichtshof (Austria) 14 January 2002 (cooling system), CISG-Online 643 (Pace) where for a contract between a German and an Austrian party an examination period of 1 week after delivery was considered to be practicable even for a cooling system. 159 For such an argument see Handelsgericht des Kantons Zu ¨ rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace). 160 Oberster Gerichtshof (Austria) 14 January 2002 (cooling system), CISG-Online 643 (Pace); Landgericht Berlin (Germany) 21 March 2003 (fabric), CISG-Online 785 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 10 February 1994 (shirts), CISG-Online 116 (Pace); for further cases see UNCITRAL, Digest of Case Law on the CISG, Art. 38 para. 12 footnote 41. 161 UNCITRAL, Digest of Case Law on the CISG, Art. 38 para. 12.

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It is presumed that the buyer examines the goods at the place of delivery.162 Whether 104 he actually does so, or examines them at a different place, does not affect the starting date for the examination period. However, where a proper examination is not possible at the place of delivery, the time needed for transporting the goods to the place where they can be examined will influence the length of the examination period. Where delivery of the goods has to occur by a certain date, the starting date for the 105 examination period will be referenced by the date of actual delivery and not the latest possible date of delivery.163 bb) Pre-mature delivery/delivery at wrong place. Different views exist as to the starting date for the examination period for goods delivered prematurely but accepted by the buyer. The prevailing view is that the delivery date originally agreed upon remains the relevant point in time from which the period for examination has to be calculated.164 However, it is submitted that a buyer, who accepts prematurely delivered goods without any reservations as to the timing of examination, should be held to his decision to do so. Consequently, the time for examination starts to run from the time of acceptance.165 This view fits better with the right to cure provided for in Art. 37. The exercise of such a right requires, in most cases, that the notice of non-conformity is given before the original date of delivery, which in turn presupposes that the examination occurred before that date. The interests of the buyer can easily be accommodated through the flexible standard of “practicality” of the examination. In particular, where premature delivery comes as a surprise to the buyer, the buyer may need additional time to arrange for an examination. For example, required personnel may not be available, necessary machinery may unavailable as it is being used for other purposes and outside experts may have been hired for different dates on the basis of the originally agreed time for delivery. Thus, particularly where outside experts have to be hired in order to conduct the examination, the differences between the two different views in practice may be minor. The earlier start of the examination period results in an increased length of the period, as rearrangement of previously agreed examination dates will often not be possible. The same principles apply where the goods are not delivered to the agreed place of delivery, but are nonetheless accepted by the buyer for their further use.166 The length of the period for examination may in such cases be affected by the lack of infrastructure necessary for an examination. Without the buyer’s acceptance, delivery at the wrong place will not start the period for examination as the buyer may be able to require delivery at the correct place.167

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cc) Additional duties. Under some contracts, the seller has to perform additional 110 duties, which might be necessary prerequisites for any meaningful examination. For example, trial runs of a machine delivered may only be possible after the seller has installed the machine, trained the buyer’s personnel or at least delivered the necessary 162

Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 16. Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 36. 164 Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 37. 165 In favour of this approach also Baasch-Andersen, The Duty to Examine Goods under the Uniform International Sales Law – An Analysis of Article 38 CISG, 18 European Business Law Review (2007) 797 (800 seq.); Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 4; Benicke, in: Mu¨nchKommHGB (2013), Art. 38 para. 9. 166 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 19. 167 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 37. 163

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manuals. In such cases, the time for examination only starts to run after the seller has performed these additional duties.168 dd) Partial deliveries. In case of partial deliveries, the start of the examination period depends on whether such deliveries were agreed upon between the parties or not. If such an agreement has been made, in principle, the examination period will start to run with each delivery, thus precluding the buyer from deferring examination until he has received the final delivery. However, where the goods delivered in partial deliveries can only be examined once all the deliveries have been made, e. g. when all deliveries are needed to assemble one single good, the time for examination will start to run with the final delivery. The same will apply if the time between the partial deliveries is fairly short and a separate examination may result in a considerable increase in cost and time. 112 The examination may also be deferred until the buyer has received the final delivery if partial deliveries have not been agreed upon. The burden associated with the increased number of examinations justifies treating such a case differently than those of a premature delivery or delivery at the wrong place. 111

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ee) Hidden defects. In the event of hidden or latent defects which cannot be discovered by conducting the required reasonable examination, the time period for extended examination duties starts to run when the defects reveal themselves.169 The examination period starts immediately if the problems encountered in the use of the goods are clear signs that they contain a hidden defect. Where the delivered goods are used in conjunction with other products, it may not always be clear from the outset whether the defects discovered are due to a hidden non-conformity of the goods delivered or have other causes. For example, the failure of machinery in which grinding devices were installed may be due to deficiencies in the grinding devices or due to other operating mistakes. In such cases, the buyer will have some time to decide whether he wants to investigate or not. Normally, more extensive examinations, which may be necessary to discover such latent defects, involve additional costs and possibly the services of an outside expert.

7. Examination in contract involving carriage: Art. 38(2) 114

International sales contracts often involve the carriage of goods.170 For such contracts Art. 38(2) defers the starting date for examination until the goods have arrived at their destination. This also involves shifting the place of examination to this location. Art. 38(2) takes account of the fact that applying Art. 38(1) to contracts involving carriage would unduly burden the buyer and lead to avoidable costs. Pursuant to Art. 38(1) the examination period for such contracts will normally start when the seller hands over the goods to the first carrier, as this is the point the seller will be deemed to have fulfilled his duty to deliver the goods under Art. 31(a).171 At this time, however, the buyer is not usually in the position to examine the goods due to a lack of physical possession of the goods.172 Furthermore, in contracts involving carriage the seller is normally obliged to make the 168 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 38; Obergericht des Kantons Zug (Switzerland) 19 December 2006 (stove), CISG-Online 1427 (Pace). 169 Bundesgerichtshof (Germany) 3 November 1999 (machine for producing hygenic tissues), CISGOnline 475 (Pace); Witz, A Raw Nerve in Disputes relating to the Vienna Sales Convention: The Reasonable Time for the Buyer to Give Notice of a Lack of Conformity, 2 ICC Bulletin (2000) 15 (18). 170 In so far Art. 38(2) – though formulated as an exception to Art. 38(1) – constitutes the rule in practice; for a detailed analysis of the meaning of that notion see Art. 31 paras 13 et seq. 171 See Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 51. 172 Secretariat Commentary on 1978 Draft, Art. 36 (now Art. 38) para. 5.

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goods ready for transportation. The buyer may be substantially deprived of the economic benefits of the seller’s packaging obligations if he were obligated to examine the goods before transportation of the goods to their destination, as an examination often involves removal of the transport packaging.173 The protection of the buyer’s interest as provided for by the deferral of examination in Art. 38(2) is also justified in so far as, in the end, the examination duty primarily serves to protect the seller. The seller normally knows the destination of the goods and can therefore evaluate whether such a deferral of examination is acceptable or whether it is necessary to agree on a different rule. The parties may exclude the application of the rule in Art. 38(2) by agreeing, for example, that the buyer or the carrier has to examine the goods for their conformity before or during loading.174 Unless the examination at the agreed place turns out to be impossible or factors or subsequent events beyond the parties’ contemplation make such an examination unreasonable, the parties’ agreement should be respected. Thus, the fact that it would make more commercial sense to examine the goods upon their arrival is irrelevant in light of the parties’ express agreement.175 Art. 38(2) applies only to contracts involving the carriage of goods in the sense of Art. 31(a)176 as well as to sales of goods in transit.177 Consequently, it covers contracts submitted to INCOTERMS belonging to the F and C group regardless of the fact that technical delivery for the purpose of risk allocation may take place earlier.178 By contrast, where clauses from the D group are chosen, the place of delivery and the place of destination will often be the same. Thus, according to Art. 38(1), the duty to examine will only arise upon arrival at the place of destination. Where the contract involves carriage,179 the application of Art. 38(2) is not dependent on whether the seller or the buyer has selected the carrier. Even if the buyer has selected the carrier, the latter’s role remains the same, i. e. that of a conveyor of the goods from the seller to the buyer. The buyer still does not have the physical possession of the goods normally required for their examination. This may not be the case where transport is undertaken by the buyer’s personnel. In such cases, the time for examination starts to run when the goods are placed at the disposal of the buyer’s personnel.180 Application of Art. 38(2) requires the use of an independent carrier.181 Destination in the sense of Art. 38(2) is the place to which the goods are to be delivered pursuant to the parties’ agreement.182 This is often the place of the buyer, but 173

Heuze´, Vente Internationale (2000), para. 306; Benicke, in: Mu¨nchKommHGB (2013), Art. 38 para. 10. Oberlandesgericht Du¨sseldorf (Germany) 8 January 1993 (tinned cucumbers), CISG-Online 76 (Pace) with note by Magnus, Zum ra¨umlich-internationalen Anwendungsbereich des UN-Kaufrechts und zur Ma¨ngelru¨ge, IPRax (1993) 390. 175 For a different view relying on the principle of reasonableness to override the parties’ agreement see Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (Russia) 24 January 2000 (goods not specified), 54/1999, CISG-Online 1042 (Pace); with critical comment by Saidov, Cases on CISG decided in the Russian Federation, 7 Vindobona Journal of International Commercial Law and Arbitration (2003) 1 (28 et seq.) (Pace). 176 For the non-application in cases of Art. 31 (b) Oberlandesgericht Brandenburg (Germany) 3 July 2014 (plants), CISG-Online 2543 (Pace), para. 27 – examination at place where buyer picks up the goods. 177 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 41. 178 Honnold/Flechtner, Uniform Law (2009), Art. 38 para. 251. 179 See Rechtbank Breda (Netherlands) 16 January 2009 (watermelon), CISG-Online 1769 (Pace) at. 3.10 for a case not involving carriage where the examination consequently has to take place before the transport. 180 The same applies in cases of Art. 31 (b) Oberlandesgericht Brandenburg (Germany) 3 July 2014 (cuttings), CISG-Online 2543 (Pace), para. 27. 181 Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 52. 182 Landgericht Frankfurt (Germany) 11 April 2005 (used shoes), CISG-Online 1014 (Pace); Gruber, in: Mu¨nchKommBGB (2016), Art. 38 para. 42. 174

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may also be the place of one of the buyer’s customers to whom the goods are delivered directly. In CIF or FOB contracts this is the port of destination.183 120 Pursuant to the contract of carriage, the carrier may be required to examine the goods at least superficially. Such examination has, in principle, no effect on the relationship between the buyer and the seller. Where the carrier has noted an obvious defect in the goods on the transport documents, which are nevertheless accepted by the buyer, different views exist as to the start date of the notice period. According to one view, the notice period will start when the transport documents are handed over.184 This would, however, require that the documents specify the deficiency in sufficiently precise detail in order to allow the buyer to meet the notice requirements of Art. 39, which is rarely the case. Consequently, the better view, which avoids the need to differentiate between the different types of comments on the transport documents, is that such remarks do not affect the start of the examination period. Under this view, the examination period will still start when the goods arrive at their destination. Comments by the carrier may, however, affect the extent of the examination and the length of the period, reducing the time available before an examination has to be made.185

8. Art. 38(3) Art. 38(3) contains a further deferral of the examination period for cases – not so rare in practice – where the buyer either redirects the goods in transit or redispatches them after their arrival. In such cases, the examination only has to take place when the goods reach their new destination. Prerequisites for the application of Art. 38(3) are, however, that the seller ought to have known the possibility of such a redirection or a redispatch and that the buyer had no reasonable opportunity to examine the goods before their arrival at the final destination. 122 This provision takes into account the buyer’s interest in the facilitated and cost effective handling of goods already prepared for transportation, which may be redirected or redispatched without the need for reloading or even repackaging. In principle, Art. 38(3) only defers the start of the examination period but not its length. In determining what is reasonable, however, the circumstances at the place of final destination have to be taken into account. In this sense, while the examination will often be carried out by the buyer’s customers, it is still the buyer who is responsible to ensure that it is conducted properly and without delay.186 121

a) Redirection and redispatch. Redirection in transit occurs when the buyer, or any person authorized by him, changes the destination before the delivery of the goods at the originally agreed destination. The reason for such a redirection is irrelevant. The buyer, or any person authorized by him, may order redirection because the goods are to be delivered to a different customer or merely because the buyer wants to use them at this new destination. 124 The notion of “redispatch” refers to cases where the buyer, after having received the goods, sends them off to a different destination.187 Redispatch may occur via the same carrier without having the goods unloaded or through a different carrier. The restriction 123

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Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 53. See Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 38 para. 21. 185 See also Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 43 – upon delivery of the goods but with a very short period; Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 54. 186 Oberlandesgericht Mu ¨ nchen (Germany) 8 February 1995 (polypropolene plastic granulate), CISGOnline 142 (Pace); see supra paras 67 et seq. 187 Bianca, in: Bianca/Bonell, Commentary (1987), Art. 38 para. 2.7. 184

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of Art. 38 ULIS which excluded transhipment has been abolished.188 In principle, it is the lack of the opportunity to examine the goods, which justifies the deferral, and not how they are redispatched. However, the de facto likelihood that such an opportunity exists is smaller in cases where the goods are redispatched with the same carrier without unloading them. Art. 38(3) may, in principle, also be applied in cases of multiple redirections or 125 redispatches. In such cases, however, the seller’s knowledge may pose a problem.189 A comparable factual situation to that regulated in Art. 38(3) – i. e. the lack of a reasonable opportunity to examine the goods – also exists in cases where a customer of the buyer immediately takes delivery at the place of delivery and then ships the goods at his own risk to his place of business. Thus, provided that the other requirements are met, Art. 38(3) can be applied by analogy.190 To require an examination of the goods in such cases before they are taken over by the buyer’s customer may lead to exactly the type of costs for a repackaging Art. 38(3) wants to avoid. The seller’s interests are adequately protected by the additional requirement of awareness. By contrast, Art. 38(3) is not applicable to mere resales, i. e. where the buyer stores 126 the goods at his premises and sells them over time.191 This instead falls within the scope of Art. 38(1). Strong indications of a resale are when the goods are repackaged and then sold in smaller quantities or to a large variety of customers, the identity of which will only determined after the delivery of the goods. b) Awareness of the seller. A deferral of the examination until arrival at the final 127 destination under Art. 38(3) also requires that the seller knew or ought to have known of the possibility of their redirection in transit or redispatch. The extension of the time for raising claims associated with such a deferral of examination is to the disadvantage of the seller, who has an interest in knowing as soon as possible whether he has fulfilled his duties as to the conformity of the goods. Thus, it is only justified if the seller knows or at least ought to have known at the time of contracting that the goods will be redirected and redispatched. In the absence of an agreement to the contrary he can then be treated as if he has accepted the prolonged uncertainty. As a consequence, it is not sufficient for a deferral of the examination that the buyer 128 informs the seller after the conclusion of the contract that the goods are eventually to be redirected or redispatched.192 Furthermore, the mere abstract possibility that the goods may be redirected or redispatched, which can rarely be excluded, is also not sufficient.193 Either the buyer must have explicitly informed the seller about such an intention or it must have been a likely option, e. g. when the buyer is an international trading house.194 The type of packaging required by the buyer may also provide an indication that the goods will be redirected. Thus, the requirement of seaworthy packaging where the goods are to be delivered to the buyer via truck demonstrates that the buyer probably wants to redispatch the goods. The same will apply to agreements between the parties that the 188

Honnold/Flechtner, Uniform Law (2009), Art. 38 para. 250. Gruber, in: Mu¨nchKommBGB (2016), Art. 38 para. 46. 190 Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 59; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 47; for a different view Bianca, in: Bianca/Bonell, Commentary (1987), Art. 38 para. 3.1. 191 Saarla ¨ ndisches Oberlandesgericht (Germany) 13 January 1993 (doors), CISG-Online 83 (Pace); Oberlandesgericht Dresden (Germany) 8 November 2007 (funnel covers), CISG-Online 1624 (Pace); Obergericht des Kantons Luzern (Switzerland) 8 January 1997 (blood infusion devices), CISG-Online 228 (Pace); Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 58. 192 Landgericht Frankfurt (Germany) 11 April 2005 (used shoes), CISG-Online 1014 (Pace); Benicke, in: Mu¨nchKommHGB (2013), Art. 38 para. 12. 193 Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 62. 194 Bianca, in: Bianca/Bonell, Commentary (1987), Art. 38 para. 2.9.2. 189

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goods have to meet the relevant standards of a country different from the one to which the goods are to be shipped. 129 By contrast, the mere fact that the buyer has its place of business in a different country than the place of performance has not been considered sufficient.195 It is, however, at least a relevant factor in determining whether the seller ought to have known that the goods were intended for use in a different country. In combination with other factors, such as the language of labelling or manuals, this may be sufficient to demonstrate that the seller had constructive knowledge. 130 In most cases covered by Art. 38(3), the examination will be undertaken not by the original buyer himself but by his customers. Irrespective of this, the buyer may not rely on being informed belatedly by his customers but rather is liable for any breach of the examination duty, not only in relation to timing but also in relation to the extent of the duty.196 Here, the subjective situation of the buyer and not that of his customers is relevant. If the buyer has the necessary expertise to examine the goods within a particular time and to discover existing defects, it is irrelevant that the buyer’s customers lack such capacity. c) Lack of a reasonable opportunity for examination. The examination can only be deferred until arrival at the new destination if the buyer had no “reasonable opportunity for examination” before this time. This requirement is, in general, met in all cases of redirection of goods. By contrast, in cases of redispatch, fulfilment of this requirement may be problematic and has to be ascertained on the basis of the particular facts of each case. 132 The existence of a reasonable opportunity to examine the goods in cases of redispatch is strongly influenced by the time the goods remain at the buyer’s premises before their redispatch and packing.197 Goods which are stored for some time at the buyer’s premises, or elsewhere with his approval, normally have to be inspected for conformity.198 Any longer storage without even a superficial examination for obvious defects conflicts with one of the primary purposes of the examination duty, which is to provide for certainty as to the conformity of the goods within as short a period as possible to allow the seller to react to complaints. The same applies, where the buyer is not sure about the time for resale. By contrast, where the goods are effectively immediately redispatched, the buyer is normally deprived of a chance to examine them. 133 The second relevant factor in determining whether there was an opportunity to examine is the packaging. The need to remove or even destroy boxes, containers or other packaging materials required to protect and transport the goods is a factor in favour of deferring examination until the arrival of the goods at their final destination, even if there is sufficient time for an examination. This is, however, no reason to exclude an examination if the goods are stored for a longer or indefinite time.199 In this regard, the value of the packaging and costs associated with its removal and replacement play an important role. The same applies where the examination would require the breaking of customs seals with the consequence that customs duties have to be paid. 131

195 See Landgericht Frankfurt (Germany) 11 April 2005 (used shoes), CISG-Online 1014 (Pace) which is, however, generally very restrictive. 196 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 38 para. 14; Oberlandesgericht Du¨sseldorf (Germany) 23 January 2004 (stainless steel plates), CISG-Online 918 (Pace). 197 Bianca, in: Bianca/Bonell, Commentary (1987), Art. 38 para. 2.7; Obergericht des Kantons Luzern (Switzerland) 8 January 1997 (blood infusion devices), CISG-Online 228 (Pace) at 4 c. 198 Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 60; Handelsgericht Zu ¨ rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace) at 4 a,bb; Rechtsbank (Belgium) 6 January 2004 (polo shirts), CISG-Online 829 (Pace) – 6 weeks sufficient for examination of shirts. 199 Saarla ¨ ndisches Oberlandesgericht (Germany) 13 January 1993 (doors), CISG-Online 83 (Pace); for a different view see Rechtsbank Koophandel Hasselt (Belgium) 6 January 2004 (polo shirts), CISG-Online 829 (Pace).

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Another factor in favour of a deferral is where the goods require assembly before a proper examination can be done. It makes little economic sense to assemble and disassemble the goods at the buyer’s premises to test their conformity if they are redispatched within a short period of time.200 In principle, most factors which influence the time needed for an examination are also relevant in determining whether such an examination should have been done before the redispatch. Irrespective of the wording of Art. 38(3), which allows for a deferral of any examination until the arrival of the goods at their final destination, the buyer may be required to engage in basic examinations sufficient to reveal obvious defects. In other words, only examinations of a more extensive nature should be deferred until final arrival.201 Consequently, while the buyer of textiles may be required to examine a limited number of samples as to their colour and size before redispatching them, pursuant to Art. 38(3) he may be able to defer complex examinations as to the physical characteristics and durability of the textiles until the goods have arrived at their final destination. The requirements of Art. 38(3), in particular whether the buyer had a reasonable opportunity to examine the goods, should not be interpreted too strictly. Short delays resulting from postponements which, due to the non-perishable nature of the goods, do not affect the seller’s position should not force the buyer to engage in physically possible but commercially unreasonable examinations before the redispatch of the goods, where such redispatch is foreseeable.202

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9. Costs of the examination duty The costs of the examination are to be borne by the buyer, unless the parties have 138 agreed otherwise.203 Should the goods turn out to be defective, the buyer has, in most cases, a claim for damages against the seller for the costs incurred pursuant to Arts 45(1)(b), 37 second sentence and 48(1) second sentence.204 Unless the lack of conformity merely results in a price reduction, the costs incurred for the examination are either frustrated because of an avoidance of the contract or because the seller’s efforts to remedy defects necessitate an additional examination.

10. Sanctions Unlike contractual obligations that give rise to Art. 61 remedies for the seller, the 139 Art. 38 examination duty merely imposes a burden (incumbency/duty) on the buyer, the non-fulfilment of which may lead to a loss of rights.205 This kind of an indirect sanction can also be found in Arts 39(1) and 49(2)(b). Although neither provision explicitly refers to the non-fulfilment of the examination duty as its triggering event, it 200

Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 60. Gruber, in: Mu¨nchKommBGB (2016), Art. 38 para. 53; Janssen, Untersuchungs- und Ru¨gepflichten (2001), p. 125. 202 In so far too strict Landgericht Frankfurt (Germany) 11 April 2005 (used shoes), CISG-Online 1014 (Pace) where the delay of several days for the examination of used shoes caused by the foreseen redispatch of the goods to the buyer’s place of business in the end let to a loss of all rights; highly critical of the decision also Flechtner, Funky Mussels, a Stolen Car, and Decrepit Used Shoes: Non-Conforming Goods and Notice thereof under the United Nations Sales Convention, Boston University International Law Journal (2008) 1 (26 seq.)(Pace). 203 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 66. 204 Benicke, in: Mu ¨ nchKommHGB (2013), Vorb. zu Arts 38, 39 para. 3. 205 Bianca, in: Bianca/Bonell, Commentary (1987), Art. 38 para. 2.1; Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 12; Witz, A Raw Nerve in Disputes relating to the Vienna Sales Convention: The Reasonable Time for the Buyer to Give Notice of a Lack of Conformity, 2 ICC Bulletin (2000) 15. 201

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may be the cause for the belated notification about the lack of conformity or the belated notice of avoidance. Without a proper examination the buyer is in most cases de facto unable to give Art. 39 notification for lack of conformity or Art 49 notice of avoidance.206 Irrespective of the above and the close connection between the examination duty and the notification duty, the triggering event for the loss of remedies will always be the breach of the latter. As long as the buyer fulfils his duty to notify under Art. 39, any breach of the antecedent duty to examine the goods will be irrelevant,207 as the examination period is merely a factor to be considered when calculating the time period in which the notice has to be given. Consequently, in determining whether notice is late in the sense of Art. 39(1), the periods for examination and notice are often treated as a single period. As long as notice is given within a “reasonable time”, it is thus irrelevant how the time is allocated between examination and notification. In this sense, a buyer who is two days late in fulfilling his examination duty may remedy this by ensuring notice is provided before the final date for notification.208 In the event of a hidden defect, non-fulfilment of the examination duty remains without sanctions. The notification period under Art. 39 will not start to run if the buyer “ought [not to] have discovered” the lack of conformity through an orderly conducted examination.209 In some cases, the non-conformity of the goods delivered may not be wholly obvious. To take an example given by Honnold,210 a delivery of 400 gallon cans of chlorine sealed in metal containers instead of the 500 gallon cans agreed may be obvious in relation to the lack of quantity, but that the gas in 200 containers does not conform with the gas ordered may be a hidden defect which is only discoverable during the use of the gas. In such cases, every type of non-conformity has to be treated separately. Thus, the buyer may not be able to rely on the lack of conformity with respect to the lack of quantity (as this could have been discovered on proper examination), but he may still be able to rely on it with respect to the lack of quality, which would not have been revealed by a proper examination. If a buyer, through his actions, indicates acceptance of the non-conforming goods, despite the fact that he should have discovered their non-conformity if he had properly examined them, he will be estopped from relying on their non-conformity.211 Equally, a buyer who has accepted defective goods in return for a price reduction may not revoke 206 UNCITRAL, Digest of Case Law on the CISG, Art. 38 para. 2; Honnold/Flechtner, Uniform Law (2009), Art. 38 para. 249. 207 Tribunale di Rimini (Italy) 26 November 2002 (porcelain tableware), CISG-Online 737 (Pace); but see for the opposite view Landgericht Frankfurt (Germany) 11 April 2005 (used shoes), CISG-Online 1014 (Pace); for details see Art. 39 paras 59 et seq. 208 Flechtner, Funky Mussels, a Stolen Car, and Decrepit Used Shoes: Non-Conforming Goods and Notice thereof under the United Nations Sales Convention, Boston University International Law Journal (2008) 1 (22 seq.)(Pace); Benicke, in: Mu¨nchKommHGB (2013), Vorb. zu Arts 38, 39 para. 2; Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 38 CISG para. 2. 209 Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 14. 210 Honnold/Flechtner, Uniform Law (2009), Art. 38 para. 252; Witz, A Raw Nerve in Disputes relating to the Vienna Sales Convention: The Reasonable Time for the Buyer to Give Notice of a Lack of Conformity, 2 ICC Bulletin (2000) 15 (18). 211 Landgericht Saarbru ¨ cken (Germany) 26 March 1996 (furnishings for ice-cream parlor), CISGOnline 391 (Pace) where the buyer issued bills of exchange after delivery of the furnishing and was therefore precluded from asserting that only parts of the goods had been delivered; but see Tribunale d’appello Cantone del Ticino (Switzerland) 15 January 1998 (cocoa beans), CISG-Online 417 (Pace) – acceptance of a pre-shipment certificate testifying the conformity of the goods for purposes of drawing on a letter of credit did not deprive the buyer of the right to examine the goods after delivery and to contest their quality.

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such a settlement if he later discovers additional defects, which would have been obvious if he had conducted a proper examination.212

11. Waiver of the examination duty In addition to contractual exclusions or modifications of the duty to examine the goods, 144 the seller may also waive his rights or be estopped from relying on any failure to examine. Any conduct by the seller, which implies that he recognizes in principle his liability for the lack of the conformity and does not intend to rely on the buyer’s failure to examine or a resulting breach of the notification duty, can form the basis for either a waiver of the right to rely on this failure or an estoppel.213 Examples include offers to remedy defects, which were notified belatedly due to an untimely examination or negotiations concerning the amount of damages due without invoking the delayed examination of the goods. However, neither a waiver nor estoppel should be assumed lightly. In particular, in longer lasting business relationships, parties rarely reject claims on the basis of purely formal arguments without any discussion. Often it makes more commercial sense for the seller to remedy minor defects than to rely on formal defences.214 The principle of good faith may also exclude the examination duty, limit its extent or 145 at least exclude reliance on its non-fulfilment. This may be the case where the seller has behaved in such a way that the buyer can rely on the conformity of the goods. Mere statements that the goods are conforming are not sufficient for such exclusion.215 The same applies for certificates or other statements as to the conformity of the goods, such as reports from the seller’s quality control. They may limit the extent of the buyer’s duty to examine but will not completely free him from examining the goods.216 Such documents only confirm the status of the goods at the time the third party examined them. This is sufficient if such examination takes place at the time risk passes. Where the documents refer to an earlier stage, however, there is always the possibility that the goods became non-conforming at a later stage but before the time of delivery.

12. Burden of proof In practice the question of whether the goods have properly been examined normally 146 only becomes relevant if the seller alleges that the buyer has lost his remedies for nonconformity pursuant to Art. 39(1). Irrespective of this, as the orderly notice constitutes a prerequisite for the buyer’s remedies, the buyer has to prove that he has notified the seller within a reasonable time, which involves proving that on the basis of a reasonable examination he should not “ought to have known of the lack of conformity” at an earlier time.217 In such a situation the buyer has to prove either that the goods were examined “within 147 as short a time as practical” under the circumstances or that an orderly examination 212 See Landgericht Darmstadt (Germany) 9 May 2000 (video recorders and other electrical appliances), CISG-Online 560 (Pace). 213 Bundesgerichtshof (Germany) 25 November 1998 (surface protective film), CISG-Online 353 (Pace); Arbitral Award, VIAC-Sch 4318, 15 June 1994 (rolled metal sheets), CISG-Online 120 (Pace). 214 For details see Art. 39 paras 106 et seq. 215 Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 26. 216 See Thu ¨ ringisches Oberlandesgericht (Germany) 26 May 1998 (live fish), CISG-Online 513 (Pace); Oberster Gerichtshof (Austria) 28 June 2012 (seat belts), CISG-Online 2569 (Pace), paras 2 et seq. 217 Magnus, in: Honsell, Kommentar (2010), Art. 38 para. 38; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 72; Handelsgericht Zu¨rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace) at 3 b; Oberlandesgericht Ko¨ln (Germany) 12 January 2007 (paperboard containers), CISGOnline 1581 (Pace); U.S. District Court Northern District Illinois Eastern Division (U.S.) 21 May 2004 (pork ribs), Chicago Prime Packers, Inc. v Northam Food Trading Co., CISG-Online 851 (Pace).

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would not have revealed the defects. The first alternative entails proof of the facts leading to the start of the period for examination, i. e. the delivery of the goods218, as well as that it would not have been practical to examine the goods in a shorter time, if that is alleged by the seller. Where the buyer, however, has taken longer than normally necessary, the buyer has to prove that the time was nevertheless justified.219 148 Different views exist as to who bears the burden of proof for the fact that defects were not discoverable via an orderly examination. The prevailing view is that the buyer who wants to rely on the non-discoverability of the defects has to prove it.220 In such cases, the period for notification starts to run from time the buyer has actual knowledge about the non-conformity or could no longer have been unaware of it. This has to be proven by the seller. 149 The buyer also has to prove the prerequisites of Art. 38 paras 2 and 3 if he wants to rely on one of the exceptions from the general rule justifying a deferral of the examination. In the context of Art. 38(2) this requires proof that the contract is one involving carriage and that the goods are transported by an independent carrier. Furthermore, the buyer has to prove the time when the goods arrived at their place of destination and that they were examined there “within as short a time as practical”.221 150 In the context of Art. 38(3), the buyer has to prove that the other goods were sold in transit or redispatched without an opportunity for examination. Furthermore, the buyer has to prove that the seller knew and could not have been unaware of the fact that the goods would be resold or redispatched when he entered into the contract.222 For this, it will normally be sufficient to prove facts which indicate the option of transport to a new destination.

III. Comparable Provisions Due to their focus on general contract law, the PICC and the PECL do not contain comparable provisions. By contrast, the PEL-Sales and the DCFR contain provisions which are near-identically worded as Art. 38. The minor deviations primarily clarify the question of sanctions and also contain slight differences in the applicable standards, which may become important in practice depending on the interpretation given to such standards. In both cases, however, such provisions are contained in the section dealing with remedies and not in the section setting out the parties’ obligations. In these instruments it is even more obvious that failure to examine will not give rise to remedies but merely impose a burden, non-compliance of which will result in loss of remedies. 152 Art. 4:301 PEL-Sales and IV. A. – 4:301 DCFR both stipulate a duty for the buyer to examine the goods “within as short a period as is reasonable in the circumstances” referring to the general standard of reasonableness and not the standard of practicability used in Art. 38. Furthermore, both state explicitly that a failure to examine the goods “may result in the buyer losing [under the provisions for notification of defects] the right to rely on the lack of conformity”. This leaves no doubt that there is no separate 151

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Benicke, in: Mu¨nchKommHGB (2013), Art. 38 para. 16. Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 65. 220 Tribunale di Vigevano (Italy) 12 July 2000 (sheets of vulcanized rubber used in manufacture of shoe soles), CISG-Online 493 (Pace); Landgericht Saarbru¨cken (Germany) 1 June 2004 (pallets), CISG-Online 1228 (Pace); Benicke, in: Mu¨nchKommHGB (2013), Art. 38 para. 17; for the opposite view Magnus, in: Honsell, Kommentar (2010), Art. 38 para. 38. 221 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 38 para. 16. 222 Landgericht Frankfurt (Germany) 11 April 2005 (used shoes), CISG-Online 1014 (Pace); Magnus, in: Staudinger Kommentar (2013), Art. 38 para. 66. 219

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sanction for non-compliance with the duty to examine the goods but rather that it may be sanctioned in the context of the duty to notify the seller. In addition, the standard for the seller’s knowledge about the redirection of the goods in Art. 38(3) (“ought to have known”) is replaced by the standard of “could reasonably be expected to have known”.

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Article 39 (1) The buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it. (2) In any event, the buyer loses the right to rely on a lack of conformity of the goods if he does not give the seller notice thereof at the latest within a period of two years from the date on which the goods were actually handed over to the buyer, unless this time-limit is inconsistent with a contractual period of guarantee. Bibliography: Baasch-Andersen, Reasonable Time in Article 39(1) of the CISG – Is Article 39(1) Truly a Uniform Provision?, Review on the Convention on Contracts for the International Sale of Goods (1998) 63 (Pace); Behr, Dealing with Non-Conformity-A Transaction Test Analysis of CISG Regulations on Examination and Notice under Articles 38 through 44, in: Flechtner/Brand/Walter, Drafting Contracts (2008), p. 429; Flechtner, Buyer’s obligation to give notice of lack of conformity (Articles 38, 39, 40 and 44), in: Ferrari/Flechtner/Brand (eds), The Draft Digest and Beyond (2004), 377; Freiburg, Die Ru¨geobliegenheit des Ka¨ufers bei grenzu¨berschreitendem Warenverkehr, IHR (2005) 56; Girsberger, The Time Limits of Article 39 CISG, 25 Journal of Law and Commerce, (2005/2006) 241; Reitz, A History of Cutoff Rules as a Form of Caveat Emptor: Part I – The 1980 U. N. Convention on the International Sale of Goods, 36 American Journal of Comparative Law (1988) 437 (Pace); Schwenzer, The Noble Month (Articles 38, 39) – The Story Behind the Scenery, 7 European Journal of Law Reform (2006) 353; Witz, A Raw Nerve in Disputes relating to the Vienna Sales Convention: The Reasonable Time for the Buyer to Give Notice of a Lack of Conformity, ICC Bulletin (2000/2) 15; CISG-AC Opinion no 1, Electronic Communications under CISG, 15 August 2003. Rapporteur: Professor Christina Ramberg, Gothenburg, Sweden (http://www.cisg-ac.org); CISG-AC Opinion no 2, Examination of the Goods and Notice of NonConformity: Articles 38 and 39, 7 June 2004. Rapporteur: Professor Eric E. Bergsten, Emeritus, Pace University School of Law, New York (http://www.cisg-ac.org).

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. General remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Drafting history . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Purpose of the notice requirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Art. 39 as part of the CISG’s examination and notification regime. . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Prevailing contractual agreements, practices and usages. . . . . . . . . . . . . . . . . . . 3. Scope of application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Content of the notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) The notion of “notice” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) General considerations for the application of the specificity requirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) The standard as applied in practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) The seller’s good faith duty to enquire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Addressee and transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Timing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Single period or two periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Start of the notice period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (i) Discovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (ii) Hypothetical discovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iii) Hidden defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iv) Premature delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (v) Discovery of defects before delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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cc) The length of the notice period: the notion of “reasonableness” . . (i) General considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (ii) Perishable and seasonal goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iii) Other goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iv) Other relevant factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (v) Instalments contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. The two years cut-off date in Art. 39. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Consequence of a failure to give notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. Waiver and exclusions of the right to invoke belated notice . . . . . . . . . . . . . . . a) Explicit or implicit waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Exclusion of the rights under good faith consideration . . . . . . . . . . . . . . . . . 9. Relationship with statutes of limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. Acceptance of the goods as conforming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Dispatch of a proper notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Timeliness of notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Article 39 76 76 77 79 87 93 94 100 104 105 106 116 119 123 124 125 128 132

I. Importance and Role of the Provision 1. General remarks Art. 39 is, by the number of published decisions, probably one of the most litigated 1 and thus practically relevant provisions of the CISG. This is primarily due to two factors. First, Art. 39 relies on a number of broadly worded concepts, such as “reasonable time” or “ought to have discovered”, which are prone to differing views in practice.1 Second, buyers may have more problems in accepting the possible consequences of Art. 39 than those of other provisions: to pay the full price for defective or even non-usable goods2 may appear an unfair solution to many buyers, in particular if they are not legally trained. Art. 39 (1) makes the existence of remedies for the buyer for a lack of conformity 2 dependent upon proper notification to the seller, i. e. a notice “specifying the nature of the lack of conformity within a reasonable time”. Thereby, Art. 39(1) de facto establishes a duty for any buyer to properly notify the seller if he does not want to lose his remedies. Art. 39(2) sets an absolute period of two years for notice under Art. 39. The harshness of the notice rule in Art. 39 is mitigated by Arts 40 and 44. They 3 contain exceptions from the general rule in Art. 39 and jointly with the latter embody the delicate compromise reached during the drafting process in relation to the weight given to the conflicting interests of the parties to a sales transaction. Pursuant to Art. 40 the seller may not rely on a failure to give notice if “the lack of conformity relates to facts of which he knew or could not have been unaware and which he did not disclose to the buyer”. Furthermore, where the buyer has a “reasonable excuse” for his failure to give notice, pursuant to Art. 44, at least a reduction of the price to be paid or a claim for certain damages may still be possible.

1

Flechtner, in: Ferrari/Flechtner/Brand, The Draft Digest and Beyond (2004), 377 (377 seq.). See for example Landgericht Frankfurt (Germany) 11 April 2005 (used shoes), CISG-Online 1014 (Pace) where the used shoes bought and paid for even had to be destroyed at the expenses of the buyer due to their bad quality. 2

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2. Drafting history The notification regime, and in particular the sanction for any non-compliance with the duty to notify contained in Art. 39, was one of the most controversial issues at the diplomatic conference.3 5 This is largely due to the fact that national sales laws differ considerably on this issue. On one side of the spectrum, Germanic systems impose strict requirements as to the specificity and the timing of the notice, which has to be given immediately or without delay and result in a complete loss of remedies.4 The other side of the spectrum is marked by systems which do not provide for any examination or notification duty. Systems such as the French system5 make up the middle ground, where claims have to be brought within a short period of time (bref de´lai), but which lack a specific duty to notify. The English system is another example, where the notification duty only exists for certain remedies, i. e. avoidance.6 Under the UCC, notice has to be given within a reasonable time and a loss of remedies only occurs where the belated notice is prejudicial to the seller.7 To a large extent, these approaches reflect the difference in weight given to the legitimate but conflicting interests of the parties. On the one side, the seller has an interest in the finality of the transaction, and on the other the buyer has an interest in being compensated for the seller’s failure to deliver conforming goods. 6 The conflict which arose during the drafting of the CISG is often represented as one between developing and developed countries, however, more accurately, it is suggested that it was one between countries whose legal systems contained a fairly strict notification requirement and those which did not.8 Representatives from the latter states were afraid that buyers established in their countries would not be aware of the notice requirement and therefore would be unduly penalized for not giving notice by losing their rights concerning the non-conforming goods. The proposal by Ghana to abolish the examination and notification regime with its harsh sanction for non-compliance was rejected. As a compromise, Art. 44 was included, preserving for buyers with a “reasonable excuse for the failure to give notice” the right to reduce the price or to claim damages, excluding those for loss of profit. As a result, the notification regime as regulated in Arts 39, 40, 44 does not reproduce the provisions of a single system but is an amalgam of elements from different systems.9 4

3. Purpose of the notice requirement 7

Art. 39 is primarily intended to protect the seller’s interest in not being submitted to claims by the buyer for the non-conformity of the goods a considerable time after 3 Reitz, A History of Cutoff Rules as a Form of Caveat Emptor: Part I – The 1980 U. N. Convention on the International Sale of Goods, 36 American Journal of Comparative Law (1988) 437 (441 seq.) (Pace). 4 See §§ 377, 378 German and Austrian Commercial Code (“without undue delay”); Art. 201 Swiss Code of Obligations; the limit for giving notice is considered to be in normal cases three to five days. 5 France, Art. 1648 Civil Code; that was in part interpreted to mean two to three years; see the reference at Schwenzer, The Noble Month (Articles 38, 39) – The Story Behind the Scenery, 7 European Journal of Law Reform (2006) 353 (355). 6 S. 35(1) Sale of Goods Act. 7 US, UCC § 6–607(3)(a); for the different approaches see CISG-AC Opinion no 2, paras 2.1 et seq. 8 CISG-AC Opinion no 2, para. 3.4; Schwenzer, The Noble Month (Articles 38, 39) – The Story Behind the Scenery, 7 European Journal of Law Reform (2006) 353 (356); for a detailed account of the drafting history see Reitz, A History of Cutoff Rules as a Form of Caveat Emptor: Part I – The 1980 U. N. Convention on the International Sale of Goods, 36 American Journal of Comparative Law (1988) 437 (453 et seq.) (Pace). 9 Honnold/Flechtner, Uniform Law (2009), Arts 39, 40, 44 para. 255 footnote 2.

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delivery.10 The seller has, for various reasons, a substantial interest in being informed as early as possible about the lack of conformity of the goods delivered. First, a prompt notice facilitates for the seller the inspection and testing of the goods to ascertain whether a claim raised is justified. The seller may wish to prepare himself for disputes about the alleged non-conformity of the goods with the buyer or with his own suppliers and secure necessary evidence for such disputes.11 At the same time, the notice requirement limits the danger that the buyer bases his claims on defects which arose after the passing of the risk and for which the seller is not liable, but which may, for example, be due to an incorrect handling of the goods.12 Second, when the goods are defective, the requirement of an early notice should 8 enable the seller to take measures necessary to cure the existing deficiencies by sending replacement goods, delivering missing parts or documents or repairing the goods.13 Furthermore, this notice gives the seller the opportunity to adjust his financial planning in order to compensate for the alleged non-conformity. For example, costs resulting from price reductions, claims for damages or efforts to cure existing defects have to be reflected in the seller’s internal and external accounting. While these considerations underlie the general inclusion of the notification regime, 9 the duty to notify the seller in a particular case exists, in principle, irrespective of whether it is necessary to fulfil one of the above purposes.14 As for the CISG, in general, the ultimate goal of the notification regime is to “validate the reasonable expectations of the parties”.15 One of these is the seller’s expectation as to the finality of the transaction after a certain time. This is recognized by the inclusion of Art. 39 without any requirement of prejudice to the seller. Thus, the mere fact that a belated or insufficiently specific notification has not led to any negative effects on the seller’s position does not, as such, prevent the seller from relying on Art. 39.16 The absence of such negative effects may, however, become a relevant factor in determining what constitutes a “reasonable time” in a particular case or when time begins to run.

4. Art. 39 as part of the CISG’s examination and notification regime As already indicated, Art. 39 is a central part of the CISG’s examination and 10 notification regime for the non-conformity of goods, comprising of the Arts 38, 39, 40 and 44. Its interpretation and application in practice should always occur in light of these other provisions and vice versa.17 What constitutes a reasonable time for notice 10 Magnus, in: Honsell, Kommentar (2010), Art. 39 para. 1; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 38 para. 2; for a critical analysis of the functional arguments underlying Art. 39 see Reitz, A History of Cutoff Rules as a Form of Caveat Emptor: Part I – The 1980 U. N. Convention on the International Sale of Goods, 36 American Journal of Comparative Law (1988) 437 (443 et seq.) (Pace). 11 Benicke, in: Mu ¨ nchKommHGB (2013), Vorb. zu Arts 38, 39 para. 1; Oberlandesgericht Oldenburg (Germany) 5 December 2000 (tiller (subsoiler)), CISG-Online 618 (Pace). 12 Honnold/Flechtner, Uniform Law (2009), Arts 39, 40, 44 para. 255; Magnus, in: Staudinger Kommentar (2013), Art. 39 para. 3; cf. Oberster Gerichtshof (Austria) 27 August 1999 (trekking shoes), CISGOnline 485 (Pace). 13 Oberlandesgericht Oldenburg (Germany) 5 December 2000 (tiller (subsoiler)), CISG-Online 618 (Pace). 14 Benicke, in: Mu ¨ nchKommHGB (2013), Vorb. zu Arts 38, 39 para. 1; Benicke, Ru¨geobligenheit und Beweislast fu¨r Vertragswidrigkeit im UN-Kaufrecht, FS-Fachbereich Rechtswissenschaft zum 400ja¨hrigen Gru¨ndungsjubila¨um der Justus-Liebig-Universita¨t Gießen (2007), 377 (382). 15 Flechtner, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 377 (385). 16 But see for such a proposition as the second step in a two step process Flechtner, in: Ferrari/ Flechtner/Brand, Draft Digest and Beyond (2003), p. 377 (387 seq.); see also U.S. Bankruptcy Court for the District of Oregon (U.S.) 29 March 2004 (Christmas trees), In re Siskiyou Evergreen, Inc., CISG-Online 1174 (Pace) belated notice irrelevant as seller could not have remedied defects in Christmas trees. 17 See also Honnold/Flechtner, Uniform Law (2009), Arts 39, 40, 44 para. 254.

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depends in part on the interpretation of the examination requirement in Art. 38, which largely determines when the buyer “ought to have known” about the non-conformity. A strict interpretation of the former justifies a more lenient interpretation of the latter and vice versa. Despite the clear division between the two periods in the text of the CISG, the only period that is relevant for the notification duty is the overall period between delivery and notice. Furthermore, the more the determination of what constitutes a “reasonable time” under Art. 39 is influenced by subjective factors, the less the exception in Art. 44 needs to be considered. 11 Art. 39 is often criticized for its reliance on the vague concept of “reasonable time”. This criticism is, however, hardly justified. As a comparison with the various national sales laws shows, the diversity of potential factual settings requires the use of broad concepts to allow for flexibility.18 Consequently, with few exceptions,19 the national sales laws also rely on fairly broad concepts to determine the length of the notification period.20 Moreover, the parties are always free, and normally in a much better position, to provide for the required certainty by agreeing on a specific time for notification.

II. Detailed Commentary 1. Introduction The primary purpose of Art. 39 is to protect the interests of the seller in the finality of transactions. Irrespective of that, in interpreting the various elements of Art. 39 it must be remembered that justified claims of the buyer should not be excluded through overly burdensome formalities. Art. 39 should not be transformed into an instrument to restrict the buyer’s rights within a short period of time. In particular, judges should resist the temptation to turn Art. 39 into an easy way to clear their docket by excluding the buyer’s claims instead of entering an often tedious process of fact finding to determine whether the goods are non-conforming or not.21 In the end, it is the seller who has breached his contractual obligations and has delivered defective goods. Consequently, it is not possible (although this can be seen in early German jurisprudence22) to adopt the same time periods or requirements as to the specificity of the notice as under the ULIS or national law.23 13 The various concepts of Art. 39 have to be interpreted autonomously in accordance with the requirements of Art. 7(1). Therefore, references to comparable concepts in 12

18 Flechtner, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 377; Behr, Dealing with Non-Conformity – A Transaction Test Analysis of CISG Regulations on Examination and Notice under Articles 38 through 44, in: Flechtner/Brand/Walter, Drafting Contracts (2008), p. 429 (438). 19 E. g. Article 1495 Italian Civil Code, according to which notice has to be given within 8 days. 20 US: § 2–602(1) UCC “reasonable time”; Germany: § 377 Commercial Code “without undue delay”; Switzerland: § 201 Law of Obligations “without undue delay”; see also Behr, Dealing with NonConformity-A Transaction Test Analysis of CISG Regulations on Examination and Notice under Articles 38 through 44, in: Flechtner/Brand/Walter, Drafting Contracts (2008), p. 429 (437 seq). 21 Magnus, in: Staudinger Kommentar (2013), Art. 39 para. 4; see also Flechtner, in: Ferrari/Flechtner/ Brand, The Draft Digest and Beyond (2003), 377 (382 seq.) according to whom courts often used the Art. 39 defence in cases where they had doubts as to the credibility of the buyer’s allegations as to the non-conformity of the goods. 22 Oberlandesgericht Du ¨ sseldorf (Germany) 10 February 1994 (shirts), CISG-Online 116 (Pace); Oberlandesgericht Oldenburg (Germany) 5 December 2000 (tiller (subsoiler)), CISG-Online 618 (Pace); fairly short 14 days also Kantonsgericht Schaffhausen (Switzerland), 27 January 2004 (model locomotives), CISG-Online 960 (Pace); for a criticism on such cases see Schwenzer, The Noble Month (Articles 38, 39) – The Story Behind the Scenery, 7 European Journal of Law Reform (2006) 353 (357 seq.). 23 Cf. Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 39 CISG para. 1.

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national laws should be treated with the outmost caution, in particular where this national law adopts fixed deadlines for notices.24 This does not mean that usages and practices developed in certain countries cannot 14 be taken into account. This is particularly relevant in determining what constitutes a “reasonable time” in the sense of Art. 39 or when the buyer “ought to have discovered” the non-conformity. It is largely undisputed that subjective factors relating to the particular parties involved play a role in interpreting and applying Art. 39. However, practices developed in a completely different legal system, i. e. one which requires immediate notice or notice without undue delay, cannot be imputed onto the CISG. Such an approach would either be directly in contradiction with Art. 7 or would at least defy the objective pursued by Art. 7. Irrespective of this, the background of the parties and their expectations naturally play a role in applying the broad standards of Art. 39.

2. Prevailing contractual agreements, practices and usages The notice requirement is subject to party autonomy, meaning that the parties may, through their contractual provision, derogate from it.25 They may even completely exclude any notification duty, which is not per se unfair or unreasonable.26 In light of the seller’s interest in legal certainty, however, such a complete exclusion should not be assumed lightly. Unless both parties come from legal systems which are unfamiliar with notification duties, complete exclusion will usually require considerable bargaining power by the buyer. In addition, the complete exclusion of a notification duty does not at the same time exclude reliance on the duty to mitigate loss in Art. 77 in cases of “belated” notice. More often, the parties will fix time limits for the notification, deviating from those under Art. 39, or impose requirements as to the form and the content of the notice.27 This is partly done through explicit regulation in the contract, or partly through references to standard terms prepared for certain industries, such as the COFREUROP-Rules for the European fruit and vegetable trade, which regulate the time for examination and notification.28 The validity of such clauses should be determined on the basis of the applicable national law. In particular, where stricter requirements are contained in standard terms, considerably restricting the buyer’s rights for the delivery of non-conforming goods, courts may be reluctant to enforce such rights. The standard against which such restrictions have to be measured to determine whether they are unjustified is provided by Art. 39.29 Notice requirements arising from practices established between the parties or from trade usages also supersede the regime of Art. 39.30 In particular, in the context of 24 In so far not convincing Juzgado Primero Civil de Primera Instancia del Distrito Judicial de Lerma de Villada (Mexico) 3 October 2006 (foil trading cards), CISG-Online 1357 (Pace). 25 For unilateral waivers by the seller see infra paras 105 et seq. 26 Behr, Dealing with Non-Conformity – A Transaction Test Analysis of CISG Regulations on Examination and Notice under Articles 38 through 44, in: Flechtner/Brand/Walter, Drafting Contracts (2008), p. 429 (451). 27 See for example: Landgericht Coburg (Germany) 12 December 2006 (plants), CISG-Online 1447 (Pace); Oberlandesgericht Mu¨nchen (Germany) 11 March 1998 (cashmere sweaters), CISG-Online 310 (Pace) – 14 days; Appellationsgericht des Kantons Tessin (Switzerland) 8 June 1999 (wine bottles), CISGOnline 497 (Pace); for a possible extension of the cut-off period in Art. 39(2) see Oberster Gerichtshof (Austria) 19 December 2007 (laminated glass), CISG-Online 1628 (Pace). 28 See e. g. Oberster Gerichtshof (Austria) 30 June 1998 (pineapples), CISG-Online 410 (Pace) dealing with the 12 hours notice period in the COFEUROP. 29 Magnus, in: Staudinger Kommentar (2013), Art. 39 para. 15. 30 Oberster Gerichtshof (Austria) 21 March 2000 (wood), CISG-Online 641 in relation to the Tegernseer-Bra¨uche for the wood trade which provide for a 14 day notification period.

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usages in the sense of Art. 9(2), it always has to be verified that it is not merely a local custom but one observed in international trade.

3. Scope of application 19

20

21

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The notice requirement applies to any type of non-conformity in the sense of Art. 35 and in relation to every single non-conformity.31 Consequently, the buyer has to give notice about any deviation in quality, quantity, nature and packaging upon which he wants to rely. That applies irrespective of the extent of the deviation, whether the nonconformity is obvious or whether it constitutes a hidden defect only discovered at a later stage after extensive examinations. Thus, in principle, obvious deviations in the nature of the goods also have to be notified.32 In such cases, however, the buyer may often be able to rely on the exception of Art. 40, as the seller could not have been unaware of the lack of conformity of the goods. In case of hidden defects, the duty to notify arises with their actual or potential discovery. The notice requirement also applies to cases where a larger quantity was delivered than agreed upon.33 The failure to give notice in such cases may result in an obligation to pay for the excess quantity pursuant to Art. 52(2) second sentence. The notice requirement equally extends to goods delivered in replacement of nonconforming goods and other efforts of the seller to cure an originally existing lack of conformity.34 Notwithstanding the fact that the wording of Art. 39 only refers to the “lack of conformity of the goods”, it is suggested that it also applies to the non-conformity of documents.35 In cross-border transactions documents play a crucial role. Often the goods will be delivered by way of documents representing title to the goods, such as bills of lading, or their value and usability will be affected by documents, such as certificates of origin. Consequently, an extensive interpretation of Art. 39 covering defects in documents seems justified. Additionally, such an interpretation would strengthen the seller’s right to cure provided for in Art. 34. Such a right would be of little value if the buyer were not under an obligation to inform the seller about the lack of conformity of the documents.36 Not covered by Art. 39 are other breaches of contract by the seller beyond the delivery of non-conforming goods. Examples are belated delivery, breach of exclusivity obligations or delivery at the wrong place.37 For defects in title, Art. 43 contains a comparable notice requirement. 31 Oberlandesgericht Linz (Austria) 23 January 2006 (car), CISG-Online 1377 (Pace); Oberlandesgericht Mu¨nchen (Germany) 8 February 1995 (polypropolene plastic granulate), CISG-Online 142 (Pace); Oberlandesgericht Celle (Germany) 10 March 2004 (commercial vehicles), CISG-Online 824 (Pace) aliud; see also Bundesgericht (Switzerland) 13 November 2003 (used laundry machine), CISG-Online 840 (Pace), where a list of defects given by the buyer was interpreted to be exhaustive so that the general reference to the “unusable machine” was not sufficient to cover other problems with the machine’s functionality. 32 Magnus, in: Staudinger Kommentar (2013), Art. 39 para. 11. 33 Oberlandesgericht Rostock (Germany) 25 September 2002 (frozen food), CISG-Online 672 (Pace). 34 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 39 CISG para. 4; Landgericht Oldenburg (Germany) 9 November 1994 (lorry platforms and belts), CISG-Online 114 (Pace); Oberlandesgericht Koblenz (Germany) 3 June 2013 (ice cream), CISG-Online 2469 (Pace), p. 8. 35 Honnold/Flechtner, Uniform Law (2009), Arts 39, 40, 44 para. 256; Magnus, in: Staudinger Kommentar (2013), Art. 39 para. 10; Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 39 CISG para. 5; Bundesgericht (Switzerland) 2 April 2015 (steel coils), CISG-Online 2592 (Pace), para. 5.5; Amtsgericht Geldern (Germany) 17 August 2011 (corn), CISG-Online 2302 (Pace), para. I.2.d. – concerning an invoice not complying with tax requirements; for the opposite view see supra Piltz in this commentary), Art. 34 para. 4. 36 Honnold/Flechtner, Uniform Law (2009), Arts 39, 40, 44 para. 256. 37 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 39 CISG para. 4.

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The notification duty applies to all sales contracts covered by the CISG. Conse- 24 quently, buyers in non-commercial sales transactions, which fall within the scope of application of the CISG due to Art. 2(a), may also lose their rights if they do not give notice in time. In determining what a reasonable time for notice is, however, the buyer’s experience (or better inexperience) in such transactions can be taken into account.38 The various instalments of an instalment contract are treated, for the purpose of the 25 examination and notice requirements, as separate contracts. Consequently, the notice requirement exists for every instalment. At the same time, a failure to give notice about defects existing in a particular instalment will, in principle, only result in loss of remedies for that instalment.39 The notice requirement has also been extended to concurrent remedies for tortious 26 liability which are based on the non-conformity of the goods. For example, claims for damages under national law for the spread of an infection of fish introduced into the existing stock of the buyer have been rejected as the buyer did not give notice within a reasonable time as required by Art. 39.40

4. Notice a) Form. The parties are in principle free to specify in which form a notice must be 27 given. However, courts may be reluctant to enforce form requirements agreed upon by the parties where they are considered to be unreasonable. In the absence of parties’ agreement to the contrary or equivalent usages and 28 practices in the sense of Art. 9, the notice may be given in any form.41 This can include oral notices.42 This further applies in cases where both parties have their places of business in countries which have declared a reservation under Art. 96 requiring form for certain declarations. In other words, the notice in Art. 39 is not covered by Art. 96.43 For reasons of proof, it is advisable that the notice is given in written from, especially 29 in countries such as Serbia, where the translated national versions of the CISG (and for that matter arbitral tribunals44) seem to require a notice in writing. In principle, notice can be given orally or via telephone.45 However, in the latter cases the buyer may face 38

Magnus, in: Staudinger Kommentar (2013), Art. 39 para. 13. Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 39 CISG para. 6; in exceptional situations the failure to notify the seller about existing defects may, however, also be considered to constitute an amendment of the conformity requirements; see Art. 35 paras 58 et seq. 40 Thu ¨ ringisches Oberlandesgericht (Germany) 26 May 1998 (live fish), CISG-Online 513 (Pace); for that issue see also Ko¨hler, Die Haftung nach UN-Kaufrecht im Spannungsverha¨ltnis zwischen Vertrag und Delikt (2003), pp. 135 et seq. 41 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 39 CISG para. 9; U.S. Bankruptcy Court for the District of Oregon (U.S.) 29 March 2004 (Christmas trees), In re Siskiyou Evergreen, Inc., CISG-Online 1174 (Pace); Oberster Gerichtshof (Austria) 15 October 1998 (timber), CISG-Online 380 (Pace); Oberlandesgericht Linz (Austria) 23 January 2006 (car), CISG-Online 1377 (Pace); Appellationshof Bern (Switzerland) 11 February 2004 (wire and cable), CISG-Online 1191 (Pace). 42 Oberlandesgericht Graz (Austria) 11 March 1998 (timber), CISG-Online 670 (Pace) describing the necessary content of such notices; Kingspan Environmental Ltd et al v Borealis A/S et al (United Kingdom) [2012] EWHC 1147 (Comm) 1 May 2012 (borecene, polymer), CISG-Online 2391 (Pace), para. 994. 43 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 39 CISG para. 9; controversial for a different view see Freiburg, Die Ru¨geobliegenheit des Ka¨ufers bei grenzu¨berschreitendem Warenverkehr, IHR (2005) 56 (62). 44 Critical and with reference to arbitral case law under the arbitration rules of the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce, Pavic/Djordjevic, Application of the CISG before the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce – Looking back at the latest 100 cases, 28 Journal of Law and Commerce (2009) 1 (37 seq.). 45 See also, albeit obiter dicta Oberster Gerichtshof (Austria) 15 October 1998 (timber), CISG-Online 380 (Pace); Landgericht Frankfurt (Germany) 9 December 1992 (shoes), CISG-Online 184 (Pace); 39

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difficulties in proving the notice if it is contested by the seller. The buyer may be obligated to submit and eventually prove the date of the telephone call, the person with whom it was conducted and the content of the notice.46 30 The notice has to be in the language of the contract. It may also be given in the seller’s language or any other language which the seller understands.47 The person giving the notice must be authorized to do so.48 b) Content of the notice 31 aa) The notion of “notice”. The notion of “notice” has to be understood literally. Therefore, a mere notification of the non-conformity is in principle sufficient, as long as it is clear that the buyer wants to object to the lack of conformity, i. e. had an intention to make the seller aware of the non-conformity of the goods.49 In this sense, the buyer’s declarations and behaviour have to be interpreted in light of Art. 8. This includes the buyer’s subsequent behaviour, which may often be indicative of whether a certain declaration was intended to constitute a notice of non-conformity or not. Where a buyer has given notice of non-conformity, it can normally be assumed that he will make use of remedies available to him rather than discussing methods of postponing his own payment obligation or announcing payment.50 A mere order for new goods – as a consequence of damages to goods delivered previously – will not be deemed sufficient to establish notice if the seller cannot deduce from the information provided that the reason for the new order is the result of a non-conformity, e. g. insufficient packaging.51 Equally insufficient is the mere fact that the buyer refrains from further orders originally anticipated.52 32 The buyer is not required to determine within the notice period his choice of remedy or whether to file proceedings. Also, unlike Art. 39(2) ULIS, there is no requirement for the buyer to invite the seller to examine the goods. 33

bb) General considerations for the application of the specificity requirement. Pursuant to Art. 39, the buyer has to specify “the nature of the lack of conformity”. The requirements concerning the content of the notice in each particular case will be Tribunale di Vigevano (Italy) 12 July 2000 (sheets of vulcanized rubber used in manufacture of shoe soles), CISG-Online 493 (Pace). 46 Landgericht Frankfurt (Germany) 13 July 1994 (shoes), CISG-Online 118 (Pace); Landgericht Stuttgart (Germany) 31 August 1989 (shoes), CISG-Online 11 (Pace); Landgericht Kassel (Germany) 22 June 1995 (clothes), CISG-Online 370 (Pace); for the requirements in case of an oral notice see also Rechtbank Breda (Netherlands) 16 January 2009 (watermelon), CISG-Online 1769 (Pace) at. 3.12. 47 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 39 CISG para. 10. 48 Oberlandesgericht Mu ¨ nchen (Germany) 26 October 2016 (shoes), CISG-Online 2799, at I.3 where such an authorization was probably lacking. 49 Oberlandesgericht Karlsruhe (Germany) 8 February 2006 (Hungarian wheat), CISG-Online 1328 (Pace) where the particular lack of conformity was mentioned in passing in one letter but not pursued in the following communications concerning the non-conformity; too far reaching in this regards Landgericht Mu¨nchen (Germany) 8 February 1995 (standard software), CISG-Online 203 (Pace) where the buyer’s request for assistance in solving a problem with the software was not considered to be sufficient. 50 See Kantonsgericht Zug (Switzerland) 30 August 2007 (GMS Modules), CISG-Online 1722 (Pace) where the subsequent email exchange showed that the buyer at the time did not consider the goods to be non-conforming so that it was unlikely that he had notified the seller about the non-conformity in an earlier email upon which he relied; see also Oberlandesgericht Mu¨nchen (Germany) 10 January 2017 (shoes), CISG-Online 2800, where the alleged notice was contradicted by the announcement of further payments. 51 Saarla ¨ ndisches Oberlandesgericht (Germany) 17 January 2007 (natural stone marble panels), CISGOnline 1642 (Pace); see also Hof van Beroep Gent (Belgium) 28 January 2004 (breeding sows and cages), CISG-Online 830 (Pace) – information about medication for the sows delivered is no complaint about their conformity. 52 Oberlandesgericht Koblenz (Germany) 3 June 2013 (ice cream), CISG-Online 2469 (Pace), p. 8.

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determined in light of the purpose of the notification duty.53 Its main function is to inform the seller about the non-conformity and to give him the opportunity to verify the claims raised, preserve necessary evidence and cure deficiencies. In particular, in order to determine which steps should be taken to remedy deficiencies, the seller needs information which goes beyond a mere statement that the goods are defective.54 Consequently, generic notices, which merely express discontent with the quality of 34 the goods or state their non-conformity without specifying at least the symptoms are not sufficiently precise. Notices that are limited to general expressions such as referring to the goods as a product of “poor workmanship,”55 or that they “do not conform to the contractual specifications,”56 or “cannot be used”57 have been considered to be insufficient. Such formulations do not put the seller into a position to decide which steps have to be taken. Often, they may even raise doubts as to whether the buyer is seriously alleging that the goods are non-conforming or merely trying to avoid full payment. By imposing a requirement regarding the specificity of the notice, the drafters of the CISG made it clear that, at least in cases of a completely vague notice, it is not the seller’s duty to ask for the necessary information once he has been informed about the nonconformity. In principle, the onus is on the buyer. On the other hand, the specificity requirements should not be overly onerous. This 35 has been clearly stated in Opinion No. 2 of the CISG Advisory Council and regularly confirmed in case law.58 The specificity requirement must not be turned into a formalistic trap to deprive the buyer of his claims for defective goods. Namely, it is not always necessary to describe the exact nature and cause of the problem or give notice which is “specific enough for the seller to identify the asserted defect without further

53 Honnold/Flechtner, Uniform Law (2009), Arts 39, 40, 44 para. 256; Landgericht Saarbru ¨ cken (Germany) 26 March 1996 (furnishings for ice-cream parlor), CISG-Online 391 (Pace); Taschner, Die Darlegung von Ma¨ngeln und der richtige Ma¨ngeladressat, IHR (2001) 61 (61 seq.). 54 Kantonsgericht Zug (Switzerland) 30 August 2007 (GMS Modules), CISG-Online 1722 (Pace) at 3.1; Oberlandesgericht Graz (Austria) 11 March 1998 (timber), CISG-Online 670 (Pace); Landgericht Erfurt (Germany) 29 July 1998 (shoe soles), CISG-Online 561 (Pace); Landgericht Stuttgart (Germany) 15 October 2009 (printing machine), CISG-Online 2019 (Pace); Oberlandesgericht Mu¨nchen (Germany) 10 January 2017 (shoes), CISG-Online 2800; Kingspan Environmental Ltd et al v Borealis A/S et al (United Kingdom) [2012] EWHC 1147 (Comm) 1 May 2012 (borecene, polymer), CISG-Online 2391 (Pace), para. 996. 55 Landgericht Mu ¨ nchen (Germany) 3 July 1989 (fashion textiles), CISG-Online 4 (Pace); cf. Landgericht Coburg (Germany) 12 December 2006 (plants), CISG-Online 1447 (Pace) – reference to “poor quality” in connection with plants not sufficient; Saarla¨ndisches Oberlandesgericht (Germany) 13 January 1993 (doors), CISG-Online 83 (Pace) – “miserable condition” not sufficient; Oberlandesgericht Frankfurt (Germany) 18 January 1994 (shoes), CISG-Online 123 (Pace) – “defective in all makings” not sufficient. 56 Handelsgericht des Kantons Zu ¨ rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace); Bundesgericht (Switzerland) 2 April 2015 (wire rod), CISG-Online 2592 (Pace), para. 7.2.1.1.; cf. for other insufficient notices of a comparable character Kantonsgericht Nidwalden (Switzerland) 3 December 1997 (furniture), CISG-Online 331 (Pace) “did not fulfil the obligations”, “wrong parts”, “full of breakages”; Landgericht Saarbru¨cken (Germany) 26 March 1996 (furnishings for ice-cream parlor), CISG-Online 391 (Pace); for further examples see DiMatteo et al., International Sales Law (2005), p. 90. 57 Oberlandesgericht Oldenburg (Germany) 28 April 2000 (furniture), CISG-Online 683 (Pace); see also Oberlandesgericht Brandenburg (Germany) 3 July 2014 (plants), CISG-Online 2543 (Pace), para. 31; Oberlandesgericht Hamburg (Germany) 15 July 2010 (medical equipment), CISG-Online 2448 (Pace), para. 1.a. – show problems; Oberlandesgericht Mu¨nchen (Germany) 26 October 2016 (shoes), CISGOnline 2799 at I.10 – generic references. 58 CISG-AC Opinion no 2, para. 5.14; Oberster Gerichtshof (Austria) 31 August 2010 (old timber), CISG-Online 2236 (Pace), p. 12; Kingspan Environmental Ltd et al v Borealis A/S et al (United Kingdom) [2012] EWHC 1147 (Comm) 1 May 2012 (borecene, polymer), CISG-Online 2391 (Pace), paras 996 seq.; Bundesgericht (Switzerland) 2 April 2015 (wire rod), CISG-Online 2592 (Pace), para. 7.2.1.2.

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investigation.”59 Normally, pointing out the “symptoms” should be sufficient.60 If this was not the case, buyers would be forced to carry the heavy burden of dissecting specific problems of the non-conformity in matters where they lack technical knowledge. The result would be that the risk of non-conforming goods, for which the seller is liable, would be largely transferred to the buyer.61 36 In practice, courts – particularly in German speaking countries – have had a tendency to impose specificity requirements that are too strict. This may in part be due to the official German translation of the CISG which, although it should yield to the official language versions, is stricter in its wording.62 Consequently, statements such as the fabrics delivered “billow out after washing and do no longer hang properly,” or the facade stones were “not properly labelled in relation to their size” should be sufficient.63 It is equally sufficient if the buyer, who has often only examined samples, gives a rough estimate as to the number of defective goods, even if this estimate in the end turns out to be wrong.64 The buyer is only required to inform the seller about the type and scope of the non-conformity in a way which allows him to understand roughly what is nonconforming. However, the buyer must keep in mind that the notice will not cover additional defects not referenced in the original notice.65 37

cc) The standard as applied in practice. The standard for determining the required specificity of the notice is a mixed one comprising of objective and subjective components.66 The main objective factors are the nature of the goods in question and the existing non-conformity. Relevant subjective elements are the goods in question, in particular, the buyer’s knowledge and experience with the goods in question. A more detailed description of the defects may be required from a buyer who is experienced in the business and produces comparable goods himself, than from a mere trader.67 The seller’s status is also relevant. A producer of goods will more likely be in the position to deduce the probable causes of the deficiency from a simple description of the symptoms than a seller who is a mere intermediary. Cultural differences may also play a role.68 59

For such a requirement Landgericht Saarbru¨cken (Germany) 2 July 2002 (tiles), CISG-Online 713 (Pace). Oberlandesgericht Koblenz (Germany) 14 September 2006 (bottles), CISG-Online 1408 (Pace) – information that the foil used for sterile packaging had been torn considered to be sufficient; Kingspan Environmental Ltd et al v Borealis A/S et al (United Kingdom) [2012] EWHC 1147 (Comm) 1 May 2012 (borecene, polymer), CISG-Online 2391 (Pace), paras 998 et seq. 61 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 39 CISG para. 11. 62 See Bundesgericht (Switzerland) 13 November 2003 (used laundry machine), CISG-Online 840 (Pace), which nevertheless then opted for a very restrictive interpretation as correctly criticized by Mohs, IHR (2004) 219 (Pace). 63 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 39 CISG para. 14; for a different view Landgericht Regensburg (Germany) 17 December 1998 (cloth), CISG-Online 514 (Pace); Landgericht Ko¨ln (Germany) 30 November 1999 (stones for facades), CISG-Online 1313 (Pace); cf. Bundesgericht (Switzerland) 28 May 2002 (lumber), CISG-Online 676 (Pace). 64 Handelsgericht des Kantons Zu ¨ rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace) at 4 b, aa. 65 Magnus, in: Honsell, Kommentar (2010), Art. 39 para. 10. 66 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 39 para. 7; Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 39 CISG para. 12; Kantonsgericht Zug (Switzerland) 30 August 2007 (GMS Modules), CISG-Online 1722 (Pace). 67 Obergericht des Kantons Zug (Switzerland) 19 December 2006 (stove), CISG-Online 1427 (Pace); Kantonsgericht Zug (Switzerland) 30 August 2007 (GMS Modules), CISG-Online 1722 (Pace); Kingspan Environmental Ltd et al v Borealis A/S et al (United Kingdom) [2012] EWHC 1147 (Comm) 1 May 2012 (borecene, polymer), CISG-Online 2391 (Pace), para. 997. 68 Brunner, Kommentar (2014), Art. 39 para. 4; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 39 para. 7; see also Oberlandesgericht Schleswig (Germany) 22 August 2002 (live sheep), CISG-Online 710 (Pace). 60

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Where an examination has taken place, the buyer normally has to inform the seller 38 about the relevant findings of the examination.69 The requirement as to the specificity depends on the extent of the examination required.70 The requirements are naturally lower where a representative of the seller has been present during the examination.71 In such cases, the seller is, in general, sufficiently informed about the non-conformity and thus the main purpose of the specificity requirement is fulfilled. The requirements as to the specificity may be higher for obvious defects, which are 39 easy to describe, such as the complete lack of documentation, than for complex goods.72 For the latter, it is generally sufficient if the buyer informs the seller about the symptoms discovered. By contrast, the buyer will not be required to notify the seller of the underlying cause of such symptoms.73 This goes beyond the technical capacity of numerous buyers and would unduly burden the buyer. Where the defective goods form part of a larger delivery, the buyer may be required 40 to specify them further where that is necessary for the seller to determine which steps to take. For example, where a particular delivery contains comparable goods of a different design, the buyer may have to specify which of those goods are non-conforming.74 In such cases, however, the seller often has a duty of good faith to ask for further specification in order to determine details such as the exact serial number of the nonconforming goods.75 A notice given in relation to a specific quantity does in general not cover the remainder of the goods.76 In relation to bulk sales or the delivery of a larger quantity of identical goods, a rough estimate as to the quantity of defective goods is sufficient. Requiring the specification of the exact amount of defective goods would unduly burden the buyer.77

69 Landgericht Erfurt (Germany) 29 July 1998 (shoe soles), CISG-Online 561 (Pace); Kingspan Environmental Ltd et al v Borealis A/S et al (United Kingdom) [2012] EWHC 1147 (Comm) 1 May 2012 (borecene, polymer), CISG-Online 2391 (Pace), para 996. 70 Oberster Gerichtshof (Austria) 14 January 2002 (cooling system), CISG-Online 643 (Pace), where due to the seller’s delay in delivery the examination still made it only possible for the buyer to tentatively describe the defect in design. 71 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 39 para. 8; for a different view, giving insufficient weight to the purpose of the specificity requirement see Bundesgericht (Switzerland) 13 November 2003 (used laundry machine), CISG-Online 840 (Pace), correctly criticized in this respect in the comment to the decision by Mohs, IHR (2004) 219 (Pace). 72 Bundesgerichtshof (Germany) 4 December 1996 (printing system and software), CISG-Online 260 (Pace) very strict but explainable on the basis of the particular facts. 73 CISG-AC Opinion no 2, para. 5.14; Bundesgerichtshof (Germany) 3 November 1999 (machine for producing hygienic tissues), CISG-Online 475 (Pace); Bundesgericht (Switzerland) 13 November 2003 (used laundry machine), CISG-Online 840 (Pace); Tribunal Cantonal du Valais (Switzerland) 21 February 2005 (CNC machine), CISG-Online 1193 (Pace); Kingspan Environmental Ltd et al v Borealis A/S et al (United Kingdom) [2012] EWHC 1147 (Comm) 1 May 2012 (borecene, polymer), CISG-Online 2391 (Pace), paras 998 et seq. 74 Oberlandesgericht Koblenz (Germany) 31 January 1997 (acrylic blankets), CISG-Online 256 (Pace); critical to that decision Magnus, in: Staudinger Kommentar (2013), Art. 39 para. 24; Oberlandesgericht Hamburg (Germany) 15 July 2010 (medical equipment), CISG-Online 2448 (Pace), para. 1.a.; for the requirements if goods are delivered in several instalments Cour de cassation (France) 27 November 2012 (cooktops), CISG-Online 2403 (Pace), p. 4. 75 For such a requirement Landgericht Marburg (Germany) 12 December 1995 (agricultural machine), CISG-Online 148 (Pace); critical to that decision Flechtner, in: Ferrari/Flechtner/Brand, The Draft Digest and Beyond (2003), 377 (382). 76 Oberlandesgericht Koblenz (Germany) 3 June 2013 (ice cream), CISG-Online 2469 (Pace), p. 9. 77 Taschner, Die Darlegung von Ma ¨ngeln und der richtige Ma¨ngeladressat, IHR (2001) 61; too strict Landgericht Ko¨ln (Germany) 30 November 1999 (stones for facades), CISG-Online 1313 (Pace).

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By contrast, a notice in relation to a lack of quantity must contain the exact number or amount missing,78 otherwise, the seller would not know how much more has to be delivered. In principle, the same applies to the delivery of an excess quantity which the buyer does not want to keep.79 The standard of specificity may be lower, if, due to the specific characteristics of the goods, a cure is for the most part impossible and the seller is most likely aware of the non-conformity.80 In these cases, the sole purpose of a notice is to inform the seller that the buyer may invoke remedies, for which the seller might want to secure evidence. It follows from the specificity requirement that a detailed notice about a particular lack of conformity will not preserve the buyer’s remedies for other non-conformities. The buyer has to give notice about each particular deficiency upon which he wants to rely.81 Thus, complaints about the quality of the goods do not preserve remedies arising from defective packing and vice versa.82 Questions as to the content of the notice may arise in cases where a detailed list of particular defects is supplemented by a general reference that the machine is unusable. In such cases, the notice of non-conformity has to be interpreted on the basis of Art. 8 to determine whether the list of defects given is meant to be exhaustive, or is merely exemplary.83 Even in the latter, a broad reference will probably not be sufficiently specific to cover other completely different defects not listed. Ambiguities within the notice are to the detriment of the party giving the notice.84 Often, however, where the initial notice is ambiguous, the seller will be under a good faith duty to ask the buyer for clarification. In instalment contracts, in principle, every instalment has to be treated separately in relation to the non-conformity of the goods delivered and the notification thereof.85 Irrespective of this, it has to be acknowledged that notifications for later instalments do not occur in a vacuum. In particular, where the goods delivered come from the same 78 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 39 CISG para. 15; rough percentage sufficient Oberlandesgericht Brandenburg (Germany) 3 July 2014 (plants), CISG-Online 2543 (Pace), para. 30. 79 Landgericht Ko ¨ ln (Germany) 5 December 2006 (plastic faceplates for mobile telephones), CISGOnline 1440 (Pace). 80 U.S. Bankruptcy Court for the District of Oregon (U.S.) 29 March 2004 (Christmas trees), In re Siskiyou Evergreen, Inc., CISG-Online 1174 (Pace). 81 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 39 CISG para. 16; Oberlandesgericht Celle (Germany) 10 March 2004 (commercial vehicles), CISG-Online 824 (Pace) notice about delivery of a “wrong” vehicle does not preserve the remedies for other defects relating to the quality of the vehicle; Oberlandesgericht Du¨sseldorf (Germany) 30 June 2015 (jeans), CISG-Online 2731, at II. 4. a. bb; Oberlandesgericht Linz (Austria) 23 January 2006 (car), CISG-Online 1377 (Pace); cf. Oberster Gerichtshof (Austria) 27 August 1999 (trekking shoes), CISG-Online 485 (Pace); Bundesgericht (Switzerland) 13 November 2003 (used laundry machine), CISG-Online 840 (Pace), however, giving not sufficient weight to the fact that in the case there had been a joint examination of the machine which should have made the seller aware of the other defects which were not notified. 82 Bundesgerichtshof (Germany) 8 March 1995 (New Zealand mussels), CISG-Online 144 (Pace); see also Landgericht Stuttgart (Germany) 15 October 2009 (printing machine), CISG-Online 2019 (Pace); Danish Maritime and Commercial Court (Denmark) 31 January 2002 (fish (mackerel)), CISG-Online 679 (Pace) notice concerning the type of goods does not cover the production date and quality; Bundesgericht (Switzerland) 2 April 2015 (wire rod), CISG-Online 2592 (Pace), para. 7.2.2 notice referring to broken packing bands does not extend to defects in the goods. 83 Bundesgericht (Switzerland) 13 November 2003 (used laundry machine), CISG-Online 840 (Pace). 84 Bundesgerichtshof (Germany) 4 December 1996 (printing system and software), CISG-Online 260 (Pace) – the notice given that the documentation for the “printer” was missing could either refer to the whole printing unit sold, composed of four components, or to the printer as such as a single component. 85 For separate deliveries see also Oberlandesgericht Mu ¨ nchen (Germany) 10 January 2017 (shoes), CISG-Online 2800 – specification required which shoes in which delivery were non-conforming.

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source and are affected by the same type of non-conformity, a notice has to be interpreted in light of previous notifications relating to earlier instalments. Thus, notifications which by themselves would not meet the specificity requirements can do so if read in conjunction with earlier notices. dd) The seller’s good faith duty to enquire. The inclusion of the specificity require- 46 ment into Art. 39 clarifies that, in principle, the onus for giving a sufficiently specific notice is on the buyer. At the same time, the seller is, pursuant to Art. 7, under a general duty to act in good faith. Consequently, sellers faced with a notice which is not limited to a general expression of discontent with the goods but gives indications as to the type of non-conformity may not just sit back and do nothing.86 Such notices fulfil the primary purpose pursued with the notice requirement: they inform the seller that the buyer seriously considers the goods to be non-conforming. To consider such notices as being void of any legal consequence in preserving the buyer’s remedies would render the notice requirement an end initself, constituting a formalistic obstacle to justified claims for non-conforming goods. Hence, in such cases the seller is under a duty of good faith to ask the buyer for further details concerning the lack of conformity. This is even more so where a cure is an option, as the seller normally knows much better which information is needed in order to take the necessary actions. A failure to do so will prevent the seller from relying on the failure to sufficiently specify the notice.87 This is not contrary to the allocation of tasks and risk under Art. 39 or the 47 notification regime in general. The inherent flexibility of the standard allows the consideration of the developments of the information technology since the drafting of the CISG While in 1980 such enquiries may have constituted a burden for the seller and therefore could not be required under good faith, this is no longer the case. Telephone, fax and Internet are now readily available to nearly every seller active in international business and allow, in most cases, easy and immediate communications. The CISG, in Art. 7, acknowledges a general duty for the seller to act in good faith. However, as required by Art. 39, in the end, the risk for the lack of specificity remains with the buyer. The buyer will lose his remedies for non-conformity under Art. 39 if – upon request of the seller – the necessary information is not provided within due time.88 Thus, contrary to a widely held view,89 a buyer who has not sufficiently specified the 48 non-conformity in his original timely notice may rectify that lack of specificity within a short time, even after the date for notice has passed.90 c) Addressee and transmission. The notice has to be addressed to the seller or any 49 other person entitled to receive notices for the seller. Which persons fulfil that requirement is not regulated in the CISG and should be determined on the basis of the applicable national law.91 In general, giving notice to the seller’s local representatives or other persons who the seller uses to fulfil his contractual duties should be sufficient. 86

Flechtner, in: Ferrari/Flechtner/Brand, The Draft Digest and Beyond (2003), 377 (381). Bundesgericht (Switzerland) 13 November 2003 (used laundry machine), CISG-Online 840 (Pace); see also Behr, Dealing with Non-Conformity – A Transaction Test Analysis of CISG Regulations on Examination and Notice under Articles 38 through 44, in: Flechtner/Brand/Walter, Drafting Contracts (2008), p. 429 (456 seq.). 88 Oberlandesgericht Oldenburg (Germany) 28 April 2000 (furniture), CISG-Online 683 (Pace). 89 Magnus, in: Staudinger Kommentar (2013), Art. 39 para. 23. 90 Flechtner, in: Ferrari/Flechtner/Brand, The Draft Digest and Beyond (2003), 377 (380 seq.). 91 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 39 para. 14; Taschner, Die Darlegung von Ma¨ngeln und der richtige Ma¨ngeladressat, IHR (2001) 61 (62) with the correct approach under Art. 7; for a different view see Freiburg, Die Ru¨geobliegenheit des Ka¨ufers bei grenzu¨berschreitendem Warenverkehr, IHR (2005) 56 (62). 87

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Notices to independent commercial agents who have been involved in the transaction are problematic. These agents can only be considered to be an authorized addressee where their involvement goes beyond the contract formation phase and extends to the performance phase. By contrast, an independent carrier or the seller’s driver will not normally be considered to be entitled to receive notices for the seller. They can only be used as messengers, which then raises the question of whether they constitute “appropriate means”. 51 Equally, notices to the producer or companies belonging to the same group of companies may not be sufficient unless the seller receives the information from them within a reasonable time under Art. 39.92 52 The notice, in the sense of Art. 39, falls within the ambit of Art. 27.93 Consequently, whenever it is made by means appropriate in the circumstances, the recipient bears the risk of loss, delay or corruption during the transmission process.94 In the absence of an agreement to the contrary or other special circumstances, appropriate means comprise telex, fax and emails.95 Where the seller fails to communicate his new address, a delay resulting from the sending of the notice to the old address is covered by Art. 27.96 53 In order to comply with the notice period, it is both sufficient and necessary for the notice to be sent in a way, as to allow its arrival on time under normal circumstances. Notices sent before the expiry of the time limit, but not sent so as to arrive on time under the normal circumstances, will not be sufficient.97 50

d) Timing. Art. 39(1) requires that notice be given “within a reasonable time” after the buyer has discovered the defects or ought to have discovered them. The standard presents a compromise between the more rigorous standard, primarily found in the Germanic legal systems (without delay) and the more lenient standard, found in numerous other systems.98 What constitutes a “reasonable time” in the sense of Art. 39 depends on the circumstance of each particular case. 55 These circumstances may include practices established between the parties as well as usages in the sense of Art. 9, which exist in a number of industries.99 On a proper analysis, however, such usages often will not only constitute factors to be considered in determining what is “reasonable” under the Art. 39(1) standard, but will also replace 54

92 Landgericht Bielefeld (Germany) 15 August 2003 (strapping machine), CISG-Online 906 (Pace); Hoge Raad (Netherlands) 4 February 2005 (panels for construction of green house), CISG-Online 1003 (Pace). 93 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 39 CISG para. 18; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 39 para. 11; Oberster Gerichtshof (Austria) 24 May 2005 (grinding stock), CISG-Online 1046 (Pace); Oberlandesgericht Koblenz (Germany) 19 October 2006 (short sleeves t-shirts), CISG-Online 1407 (Pace); Oberlandesgericht Mu¨nchen (Germany) 17 November 2006 (dust ventilator case), CISG-Online 1395 (Pace); Appellationshof Bern (Switzerland) 11 February 2004 (wire and cable), CISG-Online 1191 (Pace). 94 Oberster Gerichtshof (Austria) 30 June 1998 (pineapples), CISG-Online 410 (Pace) – failure to receive fax allegedly sent; Oberlandesgericht Graz (Austria) 11 March 1998 (timber), CISG-Online 670 (Pace). 95 For telefax see Oberlandesgericht Koblenz (Germany) 19 October 2006 (short sleeves t-shirts), CISGOnline 1407 (Pace); for the use of email see CISG-AC Opinion no 1, para. 39.1 seq. 96 Oberlandesgericht Mu ¨ nchen (Germany) 17 November 2006 (dust ventilator), CISG-Online 1395 (Pace). 97 Handelsgericht des Kantons Zu ¨ rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace) at 4 a, cc; Landgericht Du¨sseldorf (Germany) 25 August 1994 (fashion goods), CISG-Online 451 (Pace); controversial: for a different view – time of sending is relevant see Kantonsgericht Schaffhausen (Switzerland) 27 January 2004 (model locomotives), CISG-Online 960 (Pace). 98 Reitz, A History of Cutoff Rules as a Form of Caveat Emptor: Part I – The 1980 U. N. Convention on the International Sale of Goods, 36 American Journal of Comparative Law (1988) 437 (462 seq.) (Pace). 99 Tribunale di Rimini (Italy) 26 November 2002 (porcelain tableware), CISG-Online 737 (Pace); Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 39 para. 16.

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this standard.100 Depending on the trade involved, such usages may require notice within hours, as is the case in the trade of fresh fruit; within a day, as is required in the international flower trade; or after 14 days, as is required in the wood trade between Germany and Austria.101 In principle, the time available for giving notice has to be determined for each defect 56 separately. This applies for the start of the period as well as its length. Thus, the expiration of a time limit for a particular defect, which is for example obvious at the time of delivery, does not necessarily mean that the buyer can no longer invoke remedies for other defects which can only be discovered after a more thorough examination.102 The determination of what is reasonable in a particular case involves, to a certain extent, 57 the balancing of two competing interests.103 On the one hand, the buyer should not be deprived of its remedies by imposing a very short period upon him. On the other hand, by including Art. 39 into the CISG, the drafters recognized and legitimized the seller’s interest in “clarifying the legal relationship between the parties as quickly as possible”.104 aa) Single period or two periods. The CISG clearly distinguishes between the period 58 for examination on the one hand and the period for giving notice on the other.105 They are regulated in different articles and their length is defined by different terms (as short a period as is practicable v. reasonable time). In addition, Art. 39(1) states that the notification period starts with the buyer’s knowledge of the non-conformity, irrespective of whether the examination period already expired. This excludes, in principle, the assumption of a single period for examination and notification, the length of which is determined by an addition of the periods for examination and for notification. At the same time, the CISG does not provide for a separate sanction for non- 59 compliance with the duty to examine the goods within as short a time as practicable. Consequently, in cases of belated examination the two different periods of examination and notification may de facto be treated as a single period. As long as the buyer gives notice within the timeframe determined by the addition of the two periods, he does not lose his remedies.106 Hence he can cure a failure to examine the goods in time by an immediate notification.107 Such treatment does not infringe the legitimate expectations 100 See for a thorough analysis of the relationship between the different standards Oberster Gerichtshof (Austria) 21 March 2000 (wood), CISG-Online 641 relating to the Tegernseer Bra¨uche under which notice has to be given within 14 days after examination. 101 See for the fruits, Oberster Gerichtshof (Austria) 30 June 1998 (pineapples), CISG-Online 410 (Pace); Saarla¨ndisches Oberlandesgericht (Germany) 3 June 1998 (flowers), CISG-Online 354, 1 day in international flower trade; Oberster Gerichtshof (Austria) 21 March 2000 (wood), CISG-Online 641. 102 See Appellationshof Bern (Switzerland) 11 February 2004 (wire and cable), CISG-Online 1191 (Pace). 103 Benicke, Ru ¨ geobligenheit und Beweislast fu¨r Vertragswidrigkeit im UN-Kaufrecht, FS-Fachbereich Rechtswissenschaft zum 400ja¨hrigen Gru¨ndungsjubila¨um der Justus-Liebig-Universita¨t Gießen (2007), 377 (383 seq.). 104 Bundesgerichtshof (Germany) 8 March 1995 (New Zealand mussels), CISG-Online 144 (Pace). 105 Witz, A Raw Nerve in Disputes relating to the Vienna Sales Convention: The Reasonable Time for the Buyer to Give Notice of a Lack of Conformity, 2 ICC Bulletin (2000) 15 (19); see also Oberlandesgericht Mu¨nchen (Germany) 26 October 2016 (shoes), CISG-Online 2799, at I.11. 106 Oberlandesgericht Graz (Austria) 11 March 1998 (timber), CISG-Online 670 (Pace); but see for the opposite view Landgericht Frankfurt (Germany) 11 April 2005 (used shoes), CISG-Online 1014 (Pace); critical comment by Flechtner, Funky Mussels, a Stolen Car, and Decrepit Used Shoes: Non-Conforming Goods and Notice thereof under the United Nations Sales Convention, Boston University International Law Journal (2008) 1 (22 seq.) (Pace). 107 Bundesgerichtshof (Germany) 3 November 1999 (machine for producing hygienic tissues), CISGOnline 475 (Pace); critical on the mere addition of the two periods Schlechtriem, Einheitskaufrecht in der Rechtsprechung des Bundesgerichtshof, FS Bundesgerichtshof (2000), p. 407 (439 seq.) (Pace).

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of the seller. He is normally not aware of the buyer’s internal examination process and therefore has to organize his planning on the basis of the expiration date of the combined examination and notification period. 60 On a strict legal analysis, the requirement of “reasonable time” refers directly only to the notice period as such. In practice, the term is often used in a way which covers the complete time span from delivery of the goods until notice, including not only the notice period as such but also the examination period under Art. 38.108 This is due to the fact that the expiry of the latter is the relevant starting point for the notice period, determining de facto also the date until which the notice has to be given at least in all the cases where no proper examination took place. On such a broad understanding, looking primarily at the result of fixing a point in time until which notice has to be given, the “reasonable time” for giving notice is normally composed of the period for examination under Art. 38 and a period for the buyer to notify the seller of the nonconformity.109 In exceptional cases, where the defect is so obvious that it is apparent even without any examination, no additional period for examination is granted.110 61

bb) Start of the notice period. The notice period starts to run when the buyer “discovered or ought to have discovered” the non-conformity. It is always the earlier of the two dates which is decisive, so that the actual discovery of the non-conformity may not be relevant if it occurred belatedly. In principle, the start of the notice period must be determined for each delivery separately.111

(i) Discovery. “Discovery” occurs when the buyer can be sufficiently sure about the lack of conformity, so much so that a reasonable buyer would start legal actions to pursue his rights.112 This is also the case where the symptoms discovered could only reasonably be due to non-conformity. There is no need for absolute certainty. Thus, where the buyer has already discovered, through his own examinations, that the goods are most likely defective, he does not need to wait until an external expert has confirmed that view.113 The same applies where the accompanying documents show that the goods delivered are not in conformity with the contractual agreement. In the absence of indications to the contrary, a buyer can normally assume that the documents reflect the goods delivered. 63 It is sufficient if the buyer is aware of the non-conformity as such. It is not required that he also draws the necessary legal conclusions or is aware that the non-conformity of the goods has detrimental effects.114 64 Questions as to the start of the notice period, or de facto its length, arise in the rare cases where the buyer has discovered the lack of conformity before the expiry of the normal examination period under Art. 38. This may be due to previous information as to a 62

108 Critical on this tendency Girsberger, The Time Limits of Article 39 CISG, 25 Journal of Law and Commerce (2005/2006) 241 (241 seq.). 109 Tribunale di Rimini (Italy) 26 November 2002 (porcelain tableware), CISG-Online 737 (Pace). 110 Freiburg, Die Ru ¨ geobliegenheit des Ka¨ufers bei grenzu¨berschreitendem Warenverkehr, IHR (2005) 56 (58). 111 Cour de cassation (France) 27 November 2012 (cooktops), SMEG v. Rothelec, CISG-Online 2403 (Pace) p. 4. 112 Magnus, in: Staudinger Kommentar (2013), Art. 39 para. 32; Appellationshof Bern (Switzerland) 11 February 2004 (wire and cable), CISG-Online 1191 (Pace). 113 Landgericht Du ¨ sseldorf (Germany) 23 June 1994 (engines for hydraulic presses and welding machines), CISG-Online 179 (Pace). However, the mere fact that an external expert is hired to examine the goods is normally an indication that there were still considerable doubts as to the reasons for a failure of the goods. 114 Gerechtshof Arnhem (Netherlands) 18 July 2006 (potting soil), CISG-Online 1266 (Pace) where the non-conformity was apparent from the relevant documents which clearly stated that the soil did not contain the agreed upon amount of clay.

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potential lack of conformity or because the buyer examined the goods before their arrival at the place of destination, even though he benefited from an extension in Art. 38(2). According to Art. 39, the notice period always starts with the discovery of the defect. 65 Consequently, a buyer who has discovered the non-conformity of the goods several days before the expiry of the examination period may not add these days to the length of his notification period. The unequivocal wording of Art. 39 leaves no room to extend the position adopted for the opposite situation (i. e. the belated discovery of defects) to these cases and to focus solely on the end date at which notice under normal circumstances must be given.115 As the law clearly distinguishes between the two periods, it is not possible to add time gained through a “pre-mature” examination to the notice period. The de facto treatment of both periods as a single period in the opposite situation is justified by the lack of a separate sanction for a belated examination. Moreover, there is also no need for additional protection of the buyer. He is expected to give notice within a reasonable time after he discovers the defects.116 The same applies where the non-conformity is discovered before the seller has fully 66 delivered the goods. For example, the buyer may realize that the machinery to be installed is non-conforming before the seller has actually installed it.117 An exception should be made for cases where the buyer “pre-maturely” discovers 67 that a certain quantity is missing, but has not yet had a possibility to examine the goods for their quality. The notice period should only start to run after the buyer has had the chance to examine the goods within the normal period granted by Art. 38 for their quality. It makes little sense for the seller to deliver the missing goods if they suffer from the same defects as the goods delivered, which could probably be better remedied at the seller’s place of business. (ii) Hypothetical discovery. For the second alternative, i.e. “ought to have discovered”, 68 the start of the notice period depends on whether the non-conformity was discoverable through the required examination or not, for example, where the goods suffer from hidden defects. If the non-conformity was discoverable, in principle, the notice period starts directly after the expiry of the examination period under Art. 38. This is when the buyer, through a proper examination, should have discovered the existing non-conformity. This alternative is primarily relevant in all cases where the buyer has either not examined the goods at all or has done so insufficiently or belatedly. The time of hypothetical discovery is also relevant in cases where the buyer, after 69 having notified obvious defects, did not make the necessary further examinations which would have led to the discovery of other defects.118 (iii) Hidden defects. In case of hidden defects, i. e. defects which are not discoverable 70 through the required orderly examination at the time of delivery, the notice period starts either with the subsequent discovery of such defects or when they ought to have 115 In favour Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 39 para. 19; Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 39 CISG para. 20; Behr, Dealing with NonConformity – A Transaction Test Analysis of CISG Regulations on Examination and Notice under Articles 38 through 44, in: Flechtner/Brand/Walter, Drafting Contracts (2008), p. 429 (439); Tribunal Supremo (Spain) 17 January 2008 (used automobiles), CISG-Online 1640 (Pace). 116 Behr, Dealing with Non-Conformity-A Transaction Test Analysis of CISG Regulations on Examination and Notice under Articles 38 through 44, in: Flechtner/Brand/Walter, Drafting Contracts (2008), p. 429 (439). 117 For a different view Freiburg, Die Ru ¨ geobliegenheit des Ka¨ufers bei grenzu¨berschreitendem Warenverkehr, IHR (2005) 56 (59) who requires completion of delivery for the start of the notice period as until that time the seller may still cure the defects. 118 The buyer may, however, in certain circumstances be able to rely on Art. 44; for details see Art. 44. para. 23.

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been discovered.119 The reason for the discovery or the constructive discovery is irrelevant. In practice, it is mainly due to either the use of the goods by the buyer or complaints by the latter’s customers.120 71 In relation to hidden defects, it is necessary to distinguish between the discovery of the non-conformity as such and the discovery of its symptoms. Notwithstanding that the latter will often imply the former, this is not always the case. There may be cases where the symptoms discovered, i. e. the relevant event or defect, may at the time of their discovery have several potential causes. For example, it may not be certain whether the failure of a machine is due to an operating mistake by the buyer’s personnel or to a hidden defect in the machine or parts delivered. In such cases, the failure of the machine cannot automatically be equated with the discovery of the hidden nonconformity. Thus, this discovery will trigger the start of the examination period rather than the notice period.121 The same applies where subsequent events merely raise doubts as to the conformity of the goods and do not yet prove it. Examples include general articles in newspapers alleging health risks or the use of inappropriate components or production processes or generally accusing the seller of fraudulent behaviour. Such reports only set in motion the examination period under Art. 38 and not the notice period.122 The same applies for complaints by customers.123 72 By contrast, once the actual non-conformity has been discovered, i. e. the hidden or latent defect has turned into an obvious non-conformity, there is no additional examination period. 73

(iv) Premature delivery. In cases of premature delivery by the seller, the prevailing view is that the notice period only starts with the agreed date of delivery. The underlying rationale is that the buyer should not be deprived of existing rights due to the premature delivery, for which he was not prepared. This is especially so as the seller is granted the right to cure defects.124

(v) Discovery of defects before delivery. In the context of sales contracts requiring installation of the goods, the buyer may discover the non-conformity of the goods before the final installation, i. e. before the passing of the risk which is relevant for the conformity of the goods. In such cases, the start of the notification period depends on whether the buyer could reasonably expect that the seller would remedy the existing deficiency before delivery or not. 75 It is not uncommon that the buyer first makes a superficial examination for obvious defects before shipment and then have the goods thoroughly examined after their arrival. In such cases, the notice period for obvious defects which should have been 74

119 Arbitral Award, Arbitration Court attached to the Hungarian Chamber of Commerce and Industry, 5 December 1995 (waste-containers), CISG-Online 163 (Pace); controversial; see the discussion at Art. 38 paras 62 et seq. 120 For the latter case, Oberlandesgericht Mu ¨ nchen (Germany) 26 October 2016 (shoes), CISG-Online 2799, at I.11. 121 Bundesgerichtshof (Germany) 3 November 1999 (machine for producing hygenic tissues), CISGOnline 475 (Pace); see also Handelsgericht des Kantons Bern (Switzerland) 17 January 2002 (grapefruit seed extract), CISG-Online 725 (Pace). 122 Bundesgerichtshof (Germany) 30 June 2004 (paprika), CISG-Online 847 (Pace); cf. Landgericht Saarbru¨cken (Germany) 1 June 2004 (pallets), CISG-Online 1228 (Pace) – report by customs authorities that the goods were of a different origin than alleged. 123 Oberlandesgericht Mu ¨ nchen (Germany) 26 October 2016 (shoes), CISG-Online 2799, at I.12 – examination as to the reasons why th shoes lost colours. 124 Magnus, in: Honsell, Kommentar (2010), Art. 39 para. 18.

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discovered by the initial examination starts with the end of this examination. In such cases Art. 38(2) applies only to defects discoverable by a thorough examination.125 cc) The length of the notice period: the notion of “reasonableness” (i) General considerations. The “reasonableness” of the time for notice depends on a 76 number of objective and subjective factors.126 The type of the goods involved and the parties concerned are of primary relevance. In addition, various other factors which influence the time for examination may become relevant. The differences in the length of the notification period resulting from such factors are, however, much smaller than within the context of examination. The activities required for giving notice, i. e. composing a notice describing the defects and transmitting it, are much less diversified than for an examination, where they range from a mere visual inspection to complicated chemical and physical tests or trial runs. Consequently, the subjective abilities of the buyer and the surrounding circumstances are of lesser importance to the composition and transmittal of the notice than to the examination. In light of the fact that giving notice entails, in most cases, a largely comparable activity by the buyer, it is much easier to provide for a median time for notices than for examinations. (ii) Perishable and seasonal goods. For perishable goods, such as fresh fruits, vegetables 77 or livestock the notice must often occur within hours or a few days to be reasonable.127 The seller will only have a chance to cure defects, prevent further deterioration or make further use of the goods if notified within a very short time. Moreover, due to the perishable nature of the goods, any longer delay may even make it impossible for the seller to verify whether the alleged non-conformity existed at the time risk passed. A fairly short notice period also applies to seasonal goods, such as Christmas trees or 78 fashion, which may perish economically.128 The length of the period may, in such cases, also be dependent on when the goods are delivered, i. e. whether the relevant event or the end of the season is still some time away or not. (iii) Other goods. By contrast, the notice period is normally longer for durable 79 goods.129 In this sense, the short notice periods initially adopted by courts from Germanic legal systems should be rejected, as they invoked even for such durable goods “a common assumption that [the notice period] should be short … normally be not more than a few days”.130 These decisions are regularly based on the much stricter 125

Tribunal Supremo (Spain) 17 January 2008 (300 second-hand automobiles), CISG-Online 1640 (Pace). Oberster Gerichtshof (Austria) 31 August 2010 (old timber), CISG-Online 2236 (Pace), p. 11 – mentioning economic and personal situation of buyer’s business, characteristics of goods, size of delivery and type of remedy. 127 Rechtbank Breda (Netherlands) 16 January 2009 (watermelon), CISG-Online 1769 (Pace) at 3.11; see also Thu¨ringisches Oberlandesgericht (Germany) 26 May 1998 (live fish), CISG-Online 513 (Pace) – eight days after examination report; Audiencia Provincial de las Palmas (Spain) 16 February 2012 (margarine), CISG-Online 2516 (Pace), p. 2 – several days, at most several weeks but five months too long; but see Audiencia Provincial de Asturias (Spain) 29 September 2010 (anchovies), CISG-Online 2313 (Pace) – where notice after four month was considered to be in time. 128 Vestre Landsret (Denmark) 10 November 1999 (Christmas trees), CISG-Online 704 (Pace); Cour d’appel de Lyon (France) 18 October 2012 (Christmas trees), CISG-Online 2402 (Pace) – notice in February too late; cf. Oberster Gerichtshof (Austria) 27 August 1999 (trekking shoes), CISG-Online 485 (Pace) – the buyer considered the trekking shoes to be seasonal; see also Landgericht Mu¨nchen (Germany) 20 February 2002 (shoes), CISG-Online 712 (Pace). 129 E. g. two months and seven days considered to be reasonable for steel rods/billet used for the production of axes by Audiencia Provincial de Navarra (Spain) 30 July 2010 (billets – steel rods), CISGOnline 2315 (Pace). 130 Landgericht Tu ¨ bingen (Germany) 18 June 2003 (computers and accessories), CISG-Online 784 (Pace) relating to a shortfall in delivery; Oberlandesgericht Mu¨nchen (Germany) 8 February 1995 126

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notice regimes in the respective national laws, which require an immediate notice or notice without undue delay. In their reasoning, the courts often pay lip service to the requirements of Art. 7, but clearly do not comply with the mandated mode of interpretation. 80 Thus, while in principle the available case law constitutes part of what should be taken into account in determining what is a reasonable period,131 such decisions should largely be disregarded or at least be given little weight. 81 The German Bundesgerichtshof in its “moist tissue machine” decision stipulated a notice period of four weeks after discovery of the non-conformity to be normal.132 Since that decision, the majority of German decisions start from a presumption that, in absence of special circumstances, a buyer has, after the expiry of the examination period, a so-called “noble month” to give notice about the non-conformity.133 The “noble month” has also found support from a number of other courts in different countries134 as well as in the literature. 82 By contrast the Austrian Oberster Gerichtshof still considers a time span of two weeks for examination and notification to be generally sufficient and therefore reasonable in the sense of Art. 39.135 This has equally found support in some of the literature in the German speaking world.136 Others, including in particular authors from the common law world, are generally critical to any type of fixed rule as to the reasonableness of the time for notice.137 In rejecting a presumptive period, Flechtner has instead proposed a test that makes the reasonableness of the time for notice dependent on whether the seller has suffered substantial prejudice from the buyer’s delay in giving notice.138 (polypropolene plastic granulate), CISG-Online 142 (Pace) – eight days for notice; cf. Handelsgericht des Kantons Zu¨rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace) “one week up to fourteen days”; Kantonsgericht Appenzell Ausserhoden (Switzerland) 9 March 2006 (fitness equipment), CISG-Online 1375 (Pace) – one week; see also Oberster Gerichtshof (Austria) 14 January 2002 (cooling system), CISG-Online 643 (Pace) two weeks for an examination of a complex machinery; critical on that approach Flechtner, in: Ferrari/Flechtner/Brand, The Draft Digest and Beyond (2003), 377 (379 seq.); Schwenzer, The Noble Month (Articles 38, 39) – The Story Behind the Scenery, 7 European Journal of Law Reform (2006) 353 (357 seq.). 131 Gabriel, Sale of Goods (2004) p. 135, footnote 607. 132 Bundesgerichtshof (Germany) 3 November 1999 (machine for producing hygienic tissues), CISGOnline 475 (Pace); for the development of the “noble month” see Schwenzer, The Noble Month (Articles 38, 39) – The Story Behind the Scenery, 7 European Journal of Law Reform (2006) 353. 133 See for examples Oberlandesgericht Du ¨ sseldorf (Germany) 30 June 2015 (jeans), CISG-Online 2731, at II. 4. a. aa. 134 Bundesgericht (Switzerland) 13 November 2003 (used laundry machine), CISG-Online 840 (Pace); Obergericht des Kantons Luzern (Switzerland) 8 January 1997 (blood infusion devices), CISG-Online 228 (Pace) but see for a different view from Switzerland Kantonsgericht Appenzell Ausserhoden (Switzerland) 9 March 2006 (fitness equipment), CISG-Online 1375 (Pace) – one week; Tribunale di Reggio Emilia (Italy) 12 April 2011 (ceramic materials), CISG-Online 2229 (Pace), p. 3–1 month. 135 Oberster Gerichtshof (Austria) 15 October 1998 (timber), CISG-Online 380 (Pace); confirmed Oberster Gerichtshof (Austria) 14 January 2002 (cooling system), CISG-Online 643 (Pace); Oberster Gerichtshof (Austria) 31 August 2010 (old timber), CISG-Online 2236 (Pace), p. 12; see also Kantonsgericht Schaffhausen (Switzerland), 27 January 2004 (model locomotive), CISG-Online 960 (normally overall period for examination and notification of two weeks); that was also the view adopted by some of the older German decisions; e. g. Oberlandesgericht Koblenz (Germany) 11 September 1998 (chemical substances), CISG-Online 505 (Pace). 136 Magnus, in: Honsell, Kommentar (2010), Art. 39 para. 22 (14 days up to a month for examination and notification); from recent case law see also Oberlandesgericht Brandenburg (Germany) 3 July 2014 (plants), CISG-Online 2543 (Pace), para. 29. 137 Critical towards the noble month Honnold/Flechtner, Uniform Law (2009), Arts 39, 40, 44 para. 257.1; see also in the context of Art. 43, Flechtner, Funky Mussels, a Stolen Car, and Decrepit Used Shoes: Non-Conforming Goods and Notice thereof under the United Nations Sales Convention, Boston University International Law Journal (2008) 1 (17 et seq.) (Pace). 138 Flechtner, in: Ferrari/Flechtner/Brand, The Draft Digest and Beyond (2003), 377 (387 seq.).

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It is beyond doubt that the determination of what constitutes a reasonable time for giving notice depends, in the end, on the circumstances of each particular case. Irrespective of this and in light of the divergent approaches adopted by the courts139, the need for predictability in international transactions militates strongly in favour of establishing a kind of presumption as to what is the reasonable period. This fixed period provides a starting point for an eventual thorough analysis on the basis of the specific facts of each case. It is then for the party alleging either a longer or a shorter period to plead and prove factors which justify such an amendment.140 Moreover, at least for durable goods, it is much easier to determine a median time for the notice period as opposed to the examination period. While there may be differences depending on the particular facts of the case, i. e. the means of communication, the type of notice required and its specificities etc., the differences are much smaller than with regard to the examination period. At first sight, a median period of four weeks for notifying the seller about the defects discovered appears fairly long. Any reasonable buyer would normally inform the seller about the defects discovered rather quickly, in a time not exceeding two weeks. As is evidenced by the case law, once the non-conformity is discovered, parties act fast. It is usually the belated examination that leads to delays. Irrespective of this, it is suggested that a period of four weeks should normally be considered to be a good starting point for determining what is reasonable. This approach is justified in cases where the notice is given through a series of communication.141 Also, where notice consists of a single discrete act, it appears justified to be generous in relation to the notice period to compensate to a certain extent for the fairly short examination period. In line with the purpose of the notice requirement, the relevant issue is the time at which notice is given, not how the time span between delivery and the date of notice is calculated. Additionally, in light of the differences between the various legal systems, a longer period has a much greater chance of being accepted worldwide. In this sense, it is in line with the purposes of Art. 7(1) to ensure a uniform interpretation.142

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(iv) Other relevant factors. In light of the purpose of the notice requirement, another 87 important factor in determining the length of the notice period is the type of the defect. Defects which may have been caused through a mere mishandling or mere deterioration of the goods may have to be notified within a shorter period of time, as the seller may otherwise no longer be able to secure evidence or take appropriate actions. By contrast, in relation to defects in design, there is generally no need to shorten the time for notice. For the same reason, i. e. the seller’s interest in securing evidence, the period for 88 giving notice will be shortened by an imminent use of the goods, which may affect their characteristics. This is particularly so when the goods are to be reprocessed or where they are to be mixed with other goods.143 139

For that see DiMatteo et al., International Sales Law (2005), pp. 84 et seq. For this approach see in particular Schwenzer, The Noble Month (Articles 38, 39) – The Story Behind the Scenery, 7 European Journal of Law Reform (2006) 353 (365); also Girsberger, The Time Limits of Article 39 CISG, 25 Journal of Law and Commerce (2005/2006) 241 (243 seq.); Witz, A Raw Nerve in Disputes relating to the Vienna Sales Convention: The Reasonable Time for the Buyer to Give Notice of a Lack of Conformity, 2 ICC Bulletin (2000) 15 (19 seq.). 141 Flechtner, in: Ferrari/Flechtner/Brand, The Draft Digest and Beyond (2003), 377 (380 seq.) gives the series of communications as one of the arguments in favour of longer notice periods. 142 Witz, A Raw Nerve in Disputes relating to the Vienna Sales Convention: The Reasonable Time for the Buyer to Give Notice of a Lack of Conformity, 2 ICC Bulletin (2000) 15 (20). 143 Oberlandesgericht Ko ¨ ln (Germany) 21 August 1997 (aluminium hydroxide), CISG-Online 290 (Pace); Gerechtshof Arnhem (Netherlands) 18 July 2006 (potting soil), CISG-Online 1266 (Pace) – shortly after delivery before use by the seller. 140

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To a limited extent, the remedies sought may influence the notice period irrespective of the fact that, normally, the notice requirement should be treated independently from the decision about the remedies.144 Where the buyer wants to return the goods, the period may be shorter than for claims of damages. The seller’s interest to cure in order to avoid a fundamental breach and the costs associated with taking the goods back are normally higher in the former case. In addition, the seller has to make arrangements either for the transport of the goods or their further use.145 90 A shorter period for notice can also result from deadlines which the seller has to meet and of which the buyer is aware.146 The most obvious example is a deadline for possible recourse against the seller’s suppliers, of which the buyer knows because they are based on industry standards or because the buyer has access to the contracts concluded with those suppliers. 91 By contrast, the need for training the buyer’s personnel, particularly if it is provided by the seller under the sales contract, may lead to a de facto prolongation of the notice period. As long as the seller’s personnel is still on site and providing training services on the machine delivered, the buyer may assume that the seller, with his superior knowledge, will notice existing defects. Consequently, the notice period may actually only start after the training period ends.147 92 The relationship of the parties may also constitute a relevant factor in determining what is reasonable. Even where it has not yet reached the status of an established practice in the sense of Art. 9(1), the fact that parties normally react swiftly can shorten the time for notice as the other party will expect a quick reaction. As a consequence, an arbitral tribunal acting under the rules of the Chamber of Commerce and Industry in Budapest de facto held that for the same type of defect notification periods of a different length may apply in relation to different customers.148 In this sense, requests by the buyer for quick delivery are relevant if they create the impression that the buyer will use the goods immediately and therefore also discover existing non-conformities within a short time. 89

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(v) Instalments contracts. It follows from Art. 73(1) that for the purpose of remedies, every instalment is treated separately. Therefore, in principle, the notice period will start anew for each instalment with the delivery.149 However, in some cases, the failure to notify the seller about the non-conformity of a previous instalment may lead to a change in the standard itself.

144 Correctly emphasized by Honnold/Flechtner, Uniform Law (2009), Arts 39, 40, 44 para. 257; see Oberster Gerichtshof (Austria) 31 August 2010 (old timber), CISG-Online 2236 (Pace), p. 11. 145 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 39 para. 16; Witz, A Raw Nerve in Disputes relating to the Vienna Sales Convention: The Reasonable Time for the Buyer to Give Notice of a Lack of Conformity, 2 ICC Bulletin (2000) 15 (19); Kantonsgericht Zug (Switzerland) 30 August 2007 (GMS Modules), CISG-Online 1722 (Pace); for a different view Honnold/Flechtner, Uniform Law (2009), Arts 39, 40, 44 para. 257. 146 Girsberger, The Time Limits of Article 39 CISG, 25 Journal of Law and Commerce (2005/2006) 241 (243). 147 See for example District Court for the Western District of Michigan (U.S.) 17 December 2001 (thermoforming line equipment), Shuttle Packaging Systems L. L. C. v Tsonakis, CISG-Online 733 (Pace). 148 Arbitral Award, Arbitration Court attached to the Hungarian Chamber of Commerce and Industry, 5 December 1995 (waste-containers), CISG-Online 163 (Pace). 149 Arbitral Award, NAI No. 2319, 15 October 2002 (condensate crude oil mix), CISG-Online 740 (780) (Pace), at paras 128 seq.; cf Cour de cassation (France) 27 November 2012 (cooktops), SMEG v. Rothelec, CISG-Online 2403 (Pace) p 4.

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5. The two years cut-off date in Art. 39 Art. 39(2) provides a final cut-off date for any notice of non-conformity, irrespective of when the defect was discovered or discoverable.150 At the cut-off date, the risk of latent defects is transferred to the buyer. The function of Art. 39(2) is to provide for legal certainty and it has to be taken into account ex officio. Consequently, in cases where the buyer ought not to have discovered the lack of conformity earlier, the notice must be sent so that, given the selected means of communication, under normal circumstances, it would arrive within the two year period.151 The cut-off period starts to run when the goods are “actually handed over to the buyer”. Making the act of handing over the goods the relevant starting point, and not the time when risk passes, takes into account the fact that examination for goods sold in transit under Art. 38(2) starts to run when they have reached their final destination. The time needed for transportation should not shorten the two years available to the buyer. By contrast, the mere fact that the defect could, for objective reasons, only be discovered later does not affect the start of the cut-off period.152 The expiry of the cut-off period is not regulated in the CISG. In this sense, it is the applicable national law which regulates questions such as what happens if the end of the two year period is a public holiday in one of the countries concerned. Pursuant to the last part of Art. 39(2), the time limit will not apply if it “is inconsistent with a contractual period of guarantee”. In this sense, party autonomy in the form of the longer contractual guarantee prevails. This is in line with the general policy of the CISG.153 For an inconsistency, it is not necessary that the contractual guarantee be longer than two years. Also, where a two year guarantee has been made, a party may be entitled to give notice shortly after the expiry of the time period, should the lack of conformity only be discovered shortly before the expiry of the period.154 Party autonomy also prevails if a shorter time period has been agreed.155 Thus, where the contract provides that a lack of conformity has to be notified within 60 days of delivery, such a clause, provided that it is valid, leads to a shorter cut-off time for all claims, excluding the application of Art. 39(2). In such cases, however, it always has to be determined via interpretation whether there is actually an inconsistency between the contractual stipulations and the two years cut-off period. For example, no inconsistency exists with a provision that a machine would produce a certain output within the first year. If such output is not produced, the lack of conformity may be notified within the two years period of Art. 39(2), provided that it is done within a reasonable time after discovery. De facto the time limit also does not apply to sellers who knew about the lack of conformity or could not have been unaware of it. Art. 40 excludes any reliance on Art. 39 for such sellers. By contrast, the existence of a reasonable excuse for not giving notice in the sense of Art. 44 does not affect the application of the cut-off date.156 150 See also Oberlandesgericht Linz (Austria) 24 September 2007 (laminated glass), CISG-Online 1583 (Pace); Cour de cassation (France) 27 November 2012 (cooktops), SMEG v. Rothelec, CISG-Online 2403 (Pace) p 4; Cour de cassation (France) 21 June 2016 (engines), CISG-Online 2742. 151 For its relationship with short period in the applicable statutes of limitation see infra at para. 121. 152 Cour de cassation (France), 8 April 2009 (floor tiles), Socie ´te´ Bati-Seul v Socie´te´ Ceramiche Marca Corona, CISG-Online 1977 (Pace) overruling the lower instance which had held that the period only started after the defect (tiles were not frost-resistant) was discovered. 153 Oberster Gerichtshof (Austria) 19 December 2007 (laminated glass), CISG-Online 1628 (Pace). 154 Honnold/Flechtner, Uniform Law (2009), Arts 39, 40, 44 para. 258. 155 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 39 para. 28. 156 Oberlandesgericht Linz (Austria) 24 September 2007 (laminated glass), CISG-Online 1583 (Pace).

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6. Consequence of a failure to give notice The consequence of a failure to give notice within a reasonable time is, pursuant to Art. 39(1), the loss of “the right to rely on a lack of conformity”. In other words, the buyer loses all of his remedies under Art. 45 for the breach of contract associated with a delivery of non-conforming goods. This includes claims for damages (Art. 45(1)(b)), the right to ask for performance (Art. 46), the right to declare the contract avoided (Art. 49) and the right to reduce the price (Art. 50). Such loss also covers situations where the buyer wants to set off the seller’s claim for payment with any of these rights or wants to use them as a counterclaim or as a basis for a right of retention.157 The buyer is obligated to pay the full price irrespective of the non-conformity of the goods or the lack of quantity.158 101 If the seller has delivered a greater quantity than originally agreed, the buyer has to pay for such excess-quantity pursuant to Art. 52(2). Where the goods have a higher quality than agreed in the contract, Art. 52(2) should in principle be applied by analogy.159 In the latter case, however, the seller may be prevented by Art. 40 from relying on the failure to give notice within time. 102 In instalment contracts, a failure of the buyer to comply with the notice requirement of Art. 39 only affects his rights for that particular instalment. The buyer is not prevented from avoiding the contract on the basis of Art. 73(2) for future instalments on the basis of the non-conformity.160 103 Different views exist as to whether Art. 39 also excludes remedies existing under national law for torts or mistake. Some authors consider such remedies to be generally excluded.161 Others are more cautious. They limit the exclusion to cases where the interests protected by the national tort law do not go beyond the interests protected by Arts 35 et seq. Whenever further interests are protected, a buyer may rely on the national tort law.162 100

7. Exceptions 104

The rigidity of Art. 39 is mitigated by two exceptions. Pursuant to Art. 40, the seller may not rely on the buyer’s failure to give notice if he could not have been unaware of the non-conformity of the goods. In this sense, the two year cut-off period in Art. 39(2) does not prevent the buyer from bringing his claims arising out of the non-conformity of the goods. Furthermore, pursuant to Art. 44, the buyer retains his right to price reductions and damages with the exception of those for a loss of profit, where he has a “reasonable excuse” for the failure to give notice.163

8. Waiver and exclusions of the right to invoke belated notice 105

In addition to the exceptions provided for directly in the CISG, the seller may also lose his right to rely on the belated notice through his subsequent behaviour. The seller may, 157 Amtsgericht Geldern (Germany) 17 August 2011 (corn), CISG-Online 2302 (Pace), paras I.2.d, I.3.a. – claim for payment due despite incorrect invoice. 158 E. g. Oberlandesgericht Du ¨ sseldorf (Germany) 8 January 1993 (tinned cucumbers), CISG Online 76 (Pace); comment by Magnus, Zum ra¨umlich-internationalen Anwendungsbereich des UN-Kaufrechts und zur Ma¨ngelru¨ge IPRax (1993) 390. 159 In favour of such an analogous application Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 39 para. 32. 160 Arbitral Award, Schiedsgericht der Bo ¨ rse fu¨r landwirtschaftliche Produkte – Wien 10 December 1997 (barley), CISG-Online 351 (Pace). 161 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 39 para. 32. 162 For a good overview on the discussion see Supreme Court (Israel) 17 March 2009 (tiles), Pamesa Ceramica v Yisrael Mendelson Ltd, CISG-Online 1980 (Pace) at paras 42 et seq. 163 For details see Art. 44 paras 27 et seq.

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either contractually or ad hoc, waive the right to rely on a breach of the notification duty or may be prevented from doing so under considerations of good faith or estoppel. a) Explicit or implicit waivers. A waiver can occur explicitly or implicitly, but always requires the will of the seller to renounce existing rights. Consequently, the seller may not be presumed to have waived rights of which he was not aware.164 Explicit waivers of the rights under Art. 39(1) are rare in practice. In most cases, waivers have to be deduced from the seller’s more or less clear conduct or declarations. These have to be interpreted on the basis of Art. 8, taking into account all relevant circumstances. The relevant question is, therefore, whether the buyer could reasonably understand the seller’s conduct as a waiver of the latter’s right to rely on the buyer’s delay in giving notice. The seller’s behaviour in relation to the notification of defects or the non-conforming goods as such is relevant for the question of implicit waivers. Conduct which implies that the seller assumes a liability for the non-conformity of the goods, despite the belated notice, can often be interpreted as an implicit waiver of the right to rely on the notice requirement. This may, at the very least, prevent reliance on Art. 39(1) under good faith considerations. Thus, a seller who unconditionally takes back defective goods or engages in efforts to cure deficiencies without reserving the rights under Art. 39 can, in general, be considered to have implicitly waived his right to rely on a belated notice.165 That applies, however, only in relation to the defects which were remedied but not in relation to other defects.166 Equally, declarations by the seller that he “takes responsibility for” defects discovered in the course of reprocessing the goods after a belated notice and that such defects will be handled properly will normally constitute an implicit waiver. In the case of instalment contracts, such waivers may even extend to future belated notices if they occur in comparable circumstances, i. e. in the reprocessing of the goods.167 Also, negotiations about remedies for a period of 15 months without reserving the right to rely on Art. 39 can constitute a waiver if the party was at all times legally represented.168 Even in cases without legal representation, while it may be difficult to determine a positive will to waive Art. 39 rights by a mere failure to explicitly reserve these rights, reliance on the notice requirement after long negotiations, in general, will be contrary to good faith. In principle, the seller’s consent to the appointment of experts to examine the goods without any reservation will constitute an implicit waiver of the right to rely on the notice requirement.169 This applies irrespective of the fact that such consent may be part of the seller’s settlement strategy to convince the buyer that the goods were not defective at all. In light of the costs associated with the appointment of an expert, the seller can be considered to be obligated to reserve his right to rely on Art. 39 if he does not want to 164

Bundesgerichtshof (Germany) 25 November 1998 (surface protective film), CISG-Online 353 (Pace). Oberster Gerichtshof (Austria) 5 July 2001 (Intel Pentium computer parts), CISG-Online 652 (Pace) – taking back of allegedly forged microprocessors; Bundesgerichtshof (Germany) 25 November 1998 (surface protective film), CISG-Online 353 (Pace); cf. Oberster Gerichtshof (Austria) 2 April 2009 (boiler), CISG-Online 1889, where the buyer was procedurally barred to rely on such a waiver as it was not pleaded in time; but see Handelsgericht Zu¨rich (Switzerland) 30 November 1998 (lambskin coats), CISGOnline 415 (Pace) where the offer to take back goods was not considered to be a binding waiver. 166 Handelsgericht St. Gallen (Switzerland), 14 June 2012 (organic juices and organic oil), CISG-Online 2468 (Pace), para. III.8.e; confirmed by Bundesgericht (Switzerland) 26 March 2013 (organic juices and organic oil), CISG-Online 2434 (Pace), para. 3.2.1. 167 Bundesgerichtshof (Germany) 25 June 1997 (stainless steel wire), CISG-Online 277 (Pace). 168 Bundesgerichtshof (Germany) 25 November 1998 (surface protective film), CISG-Online 353 (Pace); the mere start of negotiations is, however, not sufficient Oberlandesgericht Du¨sseldorf (Germany) 30 June 2015 (jeans), CISG-Online 2731, at II. 4. a. dd. 169 Handelsgericht Zu ¨ rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace). 165

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waive it. Only then can the buyer make an informed decision of whether it is worth spending the money for the expert. 112 The waiver may be limited to a particular non-conformity or may relate to the nonconformity in general. In the latter case, it has to be ensured that the seller’s behaviour in relation to a particular defect can truly be extended to other non-conformities, which can be doubtful.170 It may also be limited to certain remedies. Thus, a willingness to provide missing certificates despite the expiry of the notice period does not necessarily imply that reliance on Art. 39(1) is also waived against subsequently raised damage claims.171 113 In the end, the evaluation of such behaviour depends on the circumstances of each particular case. However, in principle, and contrary to a tendency found in some decisions, implicit waivers of the right to rely on Art. 39(1) through the seller’s behaviour should not be assumed too lightly. Taking into account all relevant circumstances in the sense of Art. 8(2), it must be reasonable for the buyer to deduce from the seller’s conduct a definite intention to waive Art. 39(1) rights. Even where the seller does not explicitly reserve his rights under Art. 39(1), such an initial non-reliance on a delay in notification may be part of on-going negotiations between the parties, driven by business objectives, without amounting to a waiver.172 In the interest of facilitating an amicable settlement of a dispute, a seller may be hesitant to invoke from the outset arguments which may be perceived as formal. A too generous assumption of waivers on the basis of the mere fact that the parties negotiated with each other could interfere with “the public policy goal of keeping sellers willing to negotiate.”173 114 Thus, the lack of an immediate rejection of the notice as belated and the mere entering into negotiations about the defects is generally not sufficient to assume an implicit waiver. The same applies to examinations of the goods by the seller.174 The fact that the examination involves taking back the goods or even provisionally crediting certain amounts to the buyer does not lead to a different conclusion.175 In light of the difficult factual and legal questions involved, parties must be given sufficient time to determine their legal position with certainty. Even when the seller does not immediately reject the notice after he has examined the goods, his conduct is by no means necessarily a waiver of his rights under Art. 39. He may be driven by the desire to find, for business purposes, an amicable solution instead of relying on a formal position. In this regard, the type of relationship, its economic importance for the seller and its 170 For such a case see Saarla ¨ ndisches Oberlandesgericht (Germany) 13 January 1993 (doors), CISGOnline 83 (Pace); denied in Bundesgericht (Switzerland) 26 March 2013 (organic juices and organic oil), CISG-Online 2434 (Pace), para. 3.2.1. 171 Bundesgericht (Switzerland) 26 March 2013 (organic juices and organic oil), CISG-Online 2434 (Pace), para. 3.2.1 confirming the earlier decision by Handelsgericht St. Gallen (Switzerland), 14 June 2012 (organic juices and organic oil), CISG-Online 2468 (Pace), para. III.8.e. 172 See Oberlandesgericht Du ¨ sseldorf (Germany) 12 March 1993 (textiles), CISG-Online 82 (Pace) which considers it to be a “principle of national and international commerce that also in case of delayed notifications of deficiencies the attempt of a conciliatory solution between the parties is desirable and that the seller must therefore be allowed a certain discretion to act without fearing a loss of its objection of lapse of notification period”; Oberlandesgericht Du¨sseldorf (Germany) 30 June 2015 (jeans), CISG-Online 2731, at II. 4. a. dd.; cf. Handelsgericht Zu¨rich (Switzerland) 30 November 1998 (lambskin coats), CISGOnline 415 (Pace) at 4 e, bb; Arbitral Award, VIAC-Sch 4318, 15 June 1994 (rolled metal sheets), CISGOnline 120 (Pace); left open in Oberster Gerichtshof (Austria) 21 March 2000 (wood), CISG-Online 641. 173 Schlechtriem, Einheitskaufrecht in der Rechtsprechung des Bundesgerichtshofs, FS Bundesgerichtshof (2000), p. 407 (437) (Pace). 174 Handelsgericht Zu ¨ rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace) at 4 e, aa; see also Oberlandesgericht Mu¨nchen (Germany) 11 March 1998 (cashmere sweaters), CISGOnline 310 (Pace). 175 Oberlandesgericht Du ¨ sseldorf (Germany) 12 March 1993 (textiles), CISG-Online 82 (Pace) where the need to issue pro-forma credits was explained by the requirements of Italian foreign exchange law.

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duration are all factors which have to be taken into account when interpreting the seller’s conduct. Equally, no waiver can be assumed where the seller offers to send his personnel for 115 training purposes on the allegedly non-conforming machinery. All this demonstrates is that the seller attributes the underperformance to the lack of qualified personnel and not to defects in the machinery.176 If the seller is unaware of his Art. 39 rights, his behaviour will not reveal any intention to waive such rights. b) Exclusion of the rights under good faith consideration. Even if it cannot be 116 positively established that the seller has an intention to waive his rights, his behaviour in a number of the above situations may also justify an exclusion of these rights under the principles of good faith and estoppel.177 This is particularly relevant in negotiations stretching over a considerable time. In general, however, an exclusion of the seller’s right to rely on a belated notice under 117 any of these concepts requires not only contradictory behaviour by the seller, but also that the buyer has relied on the seller’s previous behaviour and has acted accordingly. Such reliance may, for example, consist of not taking any legal actions to protect the buyer’s rights against his own customers or another deterioration of the buyer’s evidentiary position.178 In practice, there seems to be a tendency to neglect the second requirement, i. e. the buyer’s reliance on the seller’s behaviour, and to assume a venire contra factum proprium too lightly. Good faith considerations exclude any right of the seller to rely on a belated notice if 118 he has been informed about the non-conformity through other channels, such as by third party notices. This is because the purpose of the notice requirement in Art. 39, i. e. that the seller is informed about the lack of conformity, can be deemed to have been met. Consequently, there is no justification to deprive the buyer of his remedies for the non-conformity of the goods.179

9. Relationship with statutes of limitation Technically distinct from the notice requirement are limits on the time for instituting 119 legal proceedings. Such limitation periods are either governed by the Convention on the Limitation Period in the International Sale of Goods180 or national laws.181 National laws differ considerably, not only concerning the length of the limitation period but also as to its characterization (i. e. procedural versus substantive).182 176 Oberlandesgericht Oldenburg (Germany) 5 December 2000 (tiller (subsoiler)), CISG-Online 618 (Pace) where the offer was even against payment. 177 See Arbitral Award, VIAC-Sch 4318, 15 June 1994 (rolled metal sheets), CISG-Online 120 (Pace); with a critical comment by Schlechtriem, RIW (1990) 592 (594) who raises concerns whether in light of the detailed regulation in Arts 40, 44 there is truly a gap to be filled by general principles; accepting the principle but denying is application in the case Bundesgericht (Switzerland) 26 March 2013 (organic juices and organic oil), CISG-Online 2434 (Pace), para. 3.3. 178 For a more detailed discussion of the requirements see the case note by Schlechtriem, RIW (1990) 592 (594). 179 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 39 para. 38. 180 On the Convention see Smit, Convention on the Limitation Period: UNCITRAL’s First Born, 23 American Journal of Comparative Law (1975) 337. 181 For the interplay with national law see Oberster Gerichtshof (Austria) 14 January 2002 (cooling system), CISG-Online 643 (Pace) – 6 month limitation period under the old German law starts with notice of nonconformity; cf. Rechtbank Rotterdam (Netherlands) 2 June 2010 (adapters for water treatment plant), XL Insurance Company v. Italian Industrial Agency, CISG-Online 2340 (Pace), paras 5.3. et seq. 182 For the existing difference concerning the length of the period see Schwenzer, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 39 para. 30 footnote 161.

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In principle, rules governing the limitation period do not affect the time limits for giving notice. This applies, in particular, where such rules provide for a longer period. Thus, despite the four year period provided for in the Limitation Convention, the buyer is required to give notice for a lack of conformity within a reasonable time (Art. 39(1)) or at least within two years (Art. 39(2)). 121 Cases where the statute of limitations rules provide for periods shorter than the two year cut-off date set out in Art. 39(2) are more difficult. In general, the rules of the CISG should prevail,183 but different approaches have been adopted in practice. Some courts have resolved the conflict by replacing the shorter limitation period for claims of nonconformity by the longer one for other claims; some have merely extended the shorter time limit in the national rules to the two year period provided for in Art. 39(2).184 122 Others consider the notice as the starting point for the short period provided for in the statute of limitations, notwithstanding that normally the period should have started with the delivery of the goods.185 120

10. Acceptance of the goods as conforming 123

In addition to a belated notice of non-conformity, the buyer may also be prevented under good faith considerations from invoking his remedies for the delivery of nonconforming goods. This may, for example, be the case where the buyer, after an examination, has accepted the goods as conforming and the seller has acted on such acceptance, by shipping the goods. In such a situation, if a second examination reveals defects which could have been discovered during the first examination, the buyer may be prevented from relying on such defects, even if the notice would have met the requirements of Art. 39.186

11. Burden of proof 124

In general, the buyer bears the burden of proof that he has complied with his duty to notify the seller about the non-conformity of the goods.187 Notwithstanding the 183 Girsberger, The Time Limits of Article 39 CISG, 25 Journal of Law and Commerce (2005/2006) 241 (249 seq.); Bundesgericht (Switzerland) 18 May 2009 (packaging machine), CISG-Online 1900 (Pace), para. 10.; Witz, Der neueste Beitrag der franzo¨sischen Gerichte zur Auslegung des CISG, IHR 2014, 89 (94 seq.) commenting on Cour de cassation (France) 13 February 2013 (bags), Solodem v. Codefine, CISG-Online 2435 (Pace) where the one year limitation period under Swiss law was considered to be relevant; Hachem, Verja¨hrungs- und Verwirkungsfragen bei CISG-Vertra¨gen, IHR 2017, 1 (16 seq.); for the relevance of the national prescription periods Schlechtriem/Schro¨ter, Internationales UN-Kaufrecht (2016), para. 428. 184 Cour de Justice de Gene `ve (Switzerland) 10 October 1997 (acrylic cotton), CISG-Online 295 (Pace). 185 Handelsgericht des Kantons Bern (Switzerland) 30 October 2001 (H-F-A (machine)), CISG-Online 956 (Pace); Handelsgericht des Kantons Bern (Switzerland) 17 January 2002 (grapefruit seed extract), CISG-Online 725 (Pace), with note Janssen, IPRax (2003) 369 (371); that was also the solution adopted by the German legislator to reconcile the shorter time period under the old German law (six months) with the two year period of Art. 39(2); on the issue see Girsberger, The Time Limits of Article 39 CISG, 25 Journal of Law and Commerce (2005/2006) 241 (249 seq.); Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 39 para. 31. 186 For such a case see Oberlandesgericht Du ¨ sseldorf (Germany) 8 January 1993 (tinned cucumbers), CISG-Online 76 (Pace) with note by Magnus, Zum ra¨umlich-internationalen Anwendungsbereich des UN-Kaufrechts und zur Ma¨ngelru¨ge, IPRax (1993) 390 (392); see also Rechtbank Rotterdam (Netherlands) 26 October 2016 (grapes), CISG-Online 2764 where the grapes examined were accepted despite a non-suitable packaging. 187 Oberster Gerichtshof (Austria) 21 March 2000 (wood), CISG-Online 641; Rechtbank van Koophandel Veurne (Belgium) 25 April 2001 (diesel tram), CISG-Online 765; Rechtbank Breda (Netherlands) 16 January 2009 (watermelon), CISG-Online 1769 (Pace) at. 3.11; Oberlandesgericht Mu¨nchen (Germany) 26 October 2016 (shoes), CISG-Online 2799, at I.1, I.9.

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misleading and – in light of the drafting history – inconclusive wording of Art. 39,188 this is in line with the general principles of ei incumbit underlying the allocation of the burden of proof in the CISG. An orderly notice constitutes a requirement of the buyer’s claims for non-conforming goods. It is not, as the reference to the loss of the buyer’s right seems to indicate, a restriction of the seller’s liability for which the seller would bear the burden of proof.189 To comply with his burden of proof, the buyer has to prove first, that proper notice was given and second, that it was given in time.190 a) Dispatch of a proper notice. In case of written notices, the buyer has to prove the 125 existence of the notice as well as that it was dispatched to the seller or persons authorized to receive notices for the seller.191 In light of Art. 27, there is no need to prove receipt of the notice by the seller. If notice has been given by fax, a fax report together with the original will normally be 126 sufficient. The same applies to emails, which have to be printed out. Where the notice has been sent by post, a post receipt is normally sufficient.192 Difficult to prove in practice is the existence of oral notices, especially if the notice is 127 contested by the seller and there were no other witnesses present.193 For oral notice by telephone, the buyer has to give detailed information as to the date and the name of the person on the other side of the phone.194 Contrary to the view prevailing in practice,195 the buyer does not have to prove the exact content of the notice. While the required specificity of the notice is part of an orderly notice, in a telephone conversation, the seller can be considered to have enquired immediately if he was not sufficiently satisfied as to its specificity. b) Timeliness of notice. In principle, the buyer also has to prove that the notice was 128 given within a reasonable time.196 In this regard, the buyer merely has to prove that the notice was dispatched with appropriate means and in a way that it would, under normal circumstance, arrive in time. In light of Art. 27, the buyer does not have to prove that such notice was also received in time.197 The date displayed on the notice is nothing but 188

Antweiler, Beweislastverteilung im UN-Kaufrecht (1995), pp. 128 et seq. For a more detailed discussion on the allocation of the burden of proof in light of Art. 27 and the general structure of Art. 39 see Antweiler, Beweislastverteilung im UN-Kaufrecht (1995), pp. 128 et seq. 190 Gerechtshof Arnhem (Netherlands) 18 July 2006 (potting soil), CISG-Online 1266 (Pace); see also Cour de cassation (France) 27 November 2012 (cooktops), SMEG v. Rothelec, CISG-Online 2403 (Pace). 191 See Oberlandesgericht Linz (Austria) 23 January 2006 (car), CISG-Online 1377 (Pace) where reliance on some defects was excluded as they were notified to non-authorized dealers. 192 Hof van Beroep Gent (Belgium) 28 January 2004 (breeding sows and cages), CISG-Online 830 (Pace). 193 Tribunale di Rimini (Italy) 26 November 2002 (porcelain tableware), CISG-Online 737 (Pace); Rechtbank Breda (Netherlands) 16 January 2009 (watermelon), CISG-Online 1769 (Pace) at. 3.12; Hof van Beroep Gent (Belgium) 28 January 2004 (breeding sows and cages), CISG-Online 830 (Pace); Obergericht des Kantons Zug (Switzerland) 19 December 2006 (stove), CISG-Online 1427 (Pace); see also Oberlandesgericht Frankfurt (Germany) 23 May 1995 (shoes), CISG-Online 185 (Pace) where the witness presented was not admitted as he had in the meantime become a managing director of a party. 194 Bundesgericht (Switzerland) 2 April 2015 (wire rods), CISG-Online 2592 (Pace), para. 7.2.1; Landgericht Frankfurt (Germany) 13 July 1994 (shoes), CISG-Online 118 (Pace); Kantonsgericht Zug (Switzerland) 30 August 2007 (GMS Modules), CISG-Online 1722 (Pace). 195 In favour of such stricter requirements: Landgericht Stuttgart (Germany) 31 August 1989 (shoes), CISG-Online 11 (Pace); Kantonsgericht Appenzell Ausserhoden (Switzerland) 9 March 2006 (fitness equipment), CISG-Online 1375 (Pace); Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 39 CISG para. 40. 196 This may entail proving when the goods were delivered as the starting point from which time is calculated Cour de cassation (France) 27 November 2012 (cooktops), SMEG v. Rothelec, CISG-Online 2403 (Pace). 197 Oberster Gerichtshof (Austria) 30 June 1998 (pineapples), CISG-Online 410 (Pace); Oberster Gerichtshof (Austria) 24 May 2005 (grinding stock), CISG-Online 1046 (Pace). 189

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a weak indication of whether the notice was sent in a reasonable time (as it can easily be backdated). If contested, the sending of the notice at that date has to be proven.198 129 In situations where the defects were not discovered until the lapse of a long period of time, the buyer must prove that the defects could not have been discovered by an orderly examination of the goods, but rather were hidden.199 Furthermore, the buyer has to prove when it obtained knowledge about the defects, in particular when he obtained examination reports discovering the defect.200 130 A party relying on contractual provisions or trade usages to deviate from the Art. 39 notice requirement has to sufficiently establish the territorial, temporal, personal and factual sphere of application of that usage to the case.201 131 Equally, allegedly agreed deviations from the cut-off time have to be proven by the party relying on them. Thus, the buyer has to prove extensions while the seller has to prove that a shorter cut-off time has been agreed.

III. Comparable Rules The PICC and the PECL, due to their focus on general contract law, do not contain comparable provisions. By contrast, the PEL-Sales and the DCFR contain provisions which are in their content largely comparable, irrespective of the different drafting technique used, in particular, in the DCFR.202 The relevant provision dealing specifically with the notification duty for sales contracts, IV. A. – 4:302 DCFR, merely regulates the deviation from the general duty to notify the non-conformity with the debtor’s obligations in III. – 3:107. 133 The PEL-Sales contain, in Art. 4:302, a largely comparable provision, with an addition for consumer sales in Art. 4:302(2). Art. 4:302(1) requires the buyer to notify the seller about the non-conformity of the goods within “a reasonable time after the buyer discovered or ought to have discovered it”, specifying the nature of the lack of conformity. The sanction for non-compliance with that duty is a loss of the right to rely on the lack of conformity. Art. 4:302(3) provides for a cut-off date of two years, which may be extended if longer running guarantees of durability are given. This provision does not apply to defects in title. Unlike under the CISG, Art. 1:302 PECL defines which factors have to be taken into account in determining the reasonableness of a time for notice. 134 The national sales laws differ considerably as to the existence of the notice requirements, the time limit for notice and the consequences.203 Legal systems belonging to the “Germanic law family”, i. e. Germany, Austria and Switzerland require – at least for commercial sales – immediate notice.204 A failure to give such notice will lead to a loss of rights. Other laws, such as the Italian, Portuguese or Mexican law require notice within a certain number of days.205 The American UCC as well as several other laws 132

198

Rechtbank van Koophandel Veurne (Belgium) 25 April 2001 (diesel tram), CISG-Online 765. Oberster Gerichtshof (Austria) 27 August 1999 (trekking shoes), CISG-Online 485 (Pace); Thu¨ringisches Oberlandesgericht (Germany) 26 May 1998 (live fish), CISG-Online 513 (Pace). 200 Handelsgericht Zu ¨ rich (Switzerland) 18 June 2012 (antique statue), CISG-Online 2660 (Pace), para. 4.2.1.(d). 201 Saarla ¨ ndisches Oberlandesgericht (Germany) 13 January 1993 (doors), CISG-Online 83 (Pace). 202 The same applies for Directive 1999/44 as explicitly mentioned in the opinion of the AG Szpunar delivered on 6 April 2017 (1) Case C-133/16 (Christian Ferenschild vJPC Motor SA), para. 57. CISG Online (2850). 203 For an overview see Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 39 para. 4. 204 Germany, § 377 HGB (Commercial Code); Austria §§ 377, 378 HGB (Commercial Code) (“unverzu¨glich”); Switzerland, Art. 201 OR (Civil Code) (“sofortig”). 205 See Italy, Art. 1495 (1) CC; Portugal, Art. 472 Co ´ digo de Comercio both 8 days; Mexico, Art. 383 Co´digo de Comercio, five days for open defects, 30 days for hidden defects; Spain, Art. 336 Co´digo de Comercio: 4 days for open defects, Art. 342, 30 days for hidden defects. 199

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require notice within a “reasonable time”.206 The English Sale of Goods Act only requires notice when the buyer wants to terminate the contract. By contrast, the French law only requires that the buyer brings his claims for non- 135 conformity within a two years period, without stipulating a particular notice period.207 Comparable rules can be found in several other laws belonging to the French family, where reference is made to a “bref de´lai”.208 Other systems do not impose any restrictions on the right to raise claims for non-conformity, but do have general limitation periods. 206

US, § 2–607(3)(a) UCC; Netherlands, Art. 7:23.1 BW. Art. 1648 Cc. 208 Belgium, Art. 1648 Cc. 207

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Article 40 The seller is not entitled to rely on the provisions of articles 38 and 39 if the lack of conformity relates to facts of which he knew or could not have been unaware and which he did not disclose to the buyer. Bibliography: Baasch-Andersen, Exceptions to the Notification Rule – Are They Uniformly Interpreted, 9 Vindobona Journal (2005) 17 (Pace); Garro, The Buyer’s “Safety Valve” Under Article 40: What is the Seller Supposed to Know and When?, 25 Journal of Law and Commerce (2006) 253 (Pace); Mu¨ller, Die Beweislastverteilung fu¨r die Bo¨sgla¨ubigkeit des Verka¨ufers im Rahmen des Art. 40 CISG, IHR (2005) 16.

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. General remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Prevailing contractual agreements, practices and usages. . . . . . . . . . . . . . . . . . . 3. Scope of application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Seller’s actual or constructive knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Actual knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Constructive knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Instalment contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Timing of the knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Disclosure to the buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Legal consequences and contractual modifications. . . . . . . . . . . . . . . . . . . . . . . . . 7. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 3 3 4 6 8 10 12 22 23 24 27 28 32

I. Importance and Role of the Provision 1

Art. 40 constitutes an exception to the rule in Art. 39 that a buyer loses his right to rely on the non-conformity of the goods if he has not given proper notice to the seller within a “reasonable time”. It adopts Art. 40 ULIS1 almost literally and codifies a special aspect of the general principle of good faith2 as enshrined in Art. 7(2). A seller who could not have been unaware of the non-conformity of the goods does not require any protection through examination and notification duties of the buyer. It would be contrary to good faith to allow such a seller to rely on the buyer’s failure to comply with such obligations under Arts 38 and 39.3

1 Sono, in: Bianca/Bonell, Commentary (1987), Art. 40 para. 1; for the different stages see Honnold, Documentary History (1989), pp. 98, 105, 126, 145, 333. 2 Eiselen, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual, Vol. IV § 89:93; Garro, The Buyer’s “Safety Valve” Under Article 40: What is the Seller Supposed to Know and When?, 25 Journal of Law and Commerce 25 (2006) 253; Arbitral Award, SCC, 5 June 1998 (4,000 ton rail press), Beijing Light Automobile Co. Ltd. v Connell Limited Partnership, CISG-Online 379 (Pace) (“Art. 40 is an expression of the principles of fair trading…and it is by its very nature a codification of a general principle” at 6.2); Oberster Gerichtshof (Austria) 14 February 2012 (paprika powder), CISG-Online 2308 (Pace), para. 2.2. 3 For an extensive discussion of the rationale underlying Art. 40 see Supreme Court (Israel) 17 March 2009 (tiles), Pamesa Ceramica v Yisrael Mendelson Ltd, CISG-Online 1980 (Pace).

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Consequently, while Art. 40 may in practice result in a “dramatic weakening of the 2 seller’s position”,4 it ensures a proper balance between the legitimate interests of both parties.

II. Detailed Commentary 1. General remarks Dogmatically, the application of Art. 40 presupposes that the seller delivered non- 3 conforming goods and that the buyer did not comply with his notification duty under Art. 39. In this situation, Art. 40 excludes any reliance on Art. 39(1) if two requirements are met: first, the seller must have had actual or constructive knowledge about the non-conformity of the goods and second, the buyer must not have been informed about such non-conformity. As Art. 40 constitutes an exception to the notification rule in Art. 39, a seller friendly narrow interpretation of these two requirements has been suggested in practice.5 However, it has to be kept in mind that the rule in Art. 39 itself constitutes a limitation on the general liability stipulated in Arts 35 et seq. Therefore, notwithstanding the fact that a broad interpretation of Art. 40 – in particular of the constructive knowledge requirement – might seriously limit the seller’s ability to rely on Art. 39(1), the need for a narrow interpretation should not be overemphasized.

2. Prevailing contractual agreements, practices and usages Art. 40 is subject to party autonomy and any prevailing practice or usage in the sense 4 of Art. 9. Taking into account that Art. 40 is de facto a codification of the principle of good faith, neither should be assumed lightly. For contractual restrictions to the application of Art. 40, explicit language should be 5 required. Mere contractual modifications to the notice requirement, such as different time limits or cut-off dates, do not in principle exclude the application of Art. 40.6 Moreover, given the good faith background of Art. 40, its complete exclusion – even if done explicitly – would most likely be invalid under the national law governing the validity of the provisions. Contractual restrictions of the seller’s liability with respect to cases of bad faith are normally prohibited.7

4 Arbitral Award, SCC, 5 June 1998 (4,000 ton rail press), Beijing Light Automobile Co. Ltd. v Connell Limited Partnership, CISG-Online 379 (Pace). 5 According to the Arbitral Award, SCC, 5 June 1998 (4,000 ton rail press), Beijing Light Automobile Co. Ltd. v Connell Limited Partnership, CISG-Online 379 (Pace) at 6.3(a) Art. 40 should only be applied in “special circumstances”; Kingspan Environmental Ltd et al v Borealis A/S et al (United Kingdom) [2012] EWHC 1147 (Comm) 1 May 2012 (polymer), CISG-Online 2391 (Pace), para. 1028; cf. Supreme Court (Israel) 17 March 2009 (tiles), Pamesa Ceramica v Yisrael Mendelson Ltd, CISG-Online 1980 (Pace) in relation to Art. 40 ULIS. 6 Sono, in: Bianca/Bonell, Commentary (1987), Art. 40 para. 2.2; Arbitral Award, SCC, 5 June 1998 (4,000 ton rail press), Beijing Light Automobile Co. Ltd. v Connell Limited Partnership, CISG-Online 379 (Pace). 7 Baasch-Andersen, Exceptions to the Notification Rule – Are They Uniformly Interpreted, 9 Vindobona Journal (2005) 17 (20) (Pace); Arbitral Award, SCC, 5 June 1998 (4,000 ton rail press), Beijing Light Automobile Co. Ltd. v Connell Limited Partnership, CISG-Online 379 (Pace); Garro, The Buyer’s “Safety Valve” Under Article 40: What is the Seller Supposed to Know and When?, 25 Journal of Law and Commerce 25 (2006) 253 (259); see also Art. 1.106(2) PECL and Art. 1.7(2) PICC which explicitly prohibit an exclusion of the principle of good faith.

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3. Scope of application Art. 40 only relates to the non-conformity of goods in the sense of Art. 35. A failure to inform the seller in time about the legal deficiency of the goods in the sense of Arts 41 and 42 is, by contrast, governed by Art. 43(2). Unlike Art. 40, Art. 43(2) requires actual knowledge. 7 Furthermore, Art. 40 only relates directly to the examination and notification duties of Arts 38 and 39. Whether it also applies in cases where such duties have been replaced by contract or usage is a question of interpretation. Often such duties apply irrespective of the seller’s knowledge and require notifications from the buyer primarily to clarify the legal situation. In such cases, the seller’s knowledge is irrelevant for the existence of the notification duty.8 6

4. Seller’s actual or constructive knowledge Art. 40 requires that the seller “knew or could not have been unaware” of the facts which result in the non-conformity of the goods. The relevant objects of knowledge are the mere facts and not their legal classification, i. e. their relevance for a characterisation of the goods as non-conforming. Thus, as long as the seller knows that the goods delivered deviate slightly from the contractually agreed standard, it is irrelevant if he considered this deviation to be permissible under the contract. 9 Knowledge must always pertain to the particular goods delivered and the non-conformity in question. A general knowledge by the seller that some of the goods produced and sold are not of the best quality is not sufficient.9 Equally, knowledge about the lack of quality does not justify the application of Art. 40 in relation to lack of quantity.10 8

a) Actual knowledge. Knowledge can always be assumed when the seller has actively contributed to the non-conformity. Examples include sellers who have added water to wine or who have adopted a prohibited production method.11 11 Unlike seller friendly national sales laws12, Art. 40 clearly does not require that the seller acts in bad faith or wilfully deceives the buyer about the non-conformity.13 Mere previous knowledge of the defects, such as the impurity of the goods or their contamination14, or of the risk of a defect – where that already constitutes non-conformity – is sufficient. That does, however, not apply where known defects may have different causes, i. e. may also be due to a defective production process or bad handling.15 Equally, national 10

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Oberster Gerichtshof (Austria) 21 March 2000 (wood), CISG-Online 641. Supreme Court (Israel) 17 March 2009 (tiles), Pamesa Ceramica v Yisrael Mendelson Ltd, CISGOnline 1980 (Pace) at para. 45. 10 Landgericht Landshut (Germany) 5 April 1995 (sport clothing), CISG-Online 193 (Pace); cf. Oberlandesgericht Zweibru¨cken (Germany) 2 February 2004 (milling equipment), CISG-Online 877 (Pace) applying Art. 40 in relation to the wrong origin of the spare parts but not for another existing lack of quality of which the seller was not aware. 11 Landgericht Trier (Germany) 12 October 1995 (wine), CISG-Online 160 (Pace); see also DiMatteo et al., International Sales Law (2005), p. 89 with further references. 12 See Germany and Austria, § 377(5) Commercial Code; Switzerland: Art. 203 OR; cf. UCC § 1–201 (25)(c) “has reason to know”. 13 Oberster Gerichtshof (Austria) 14 February 2012 (paprika powder), CISG-Online 2308 (Pace), para. 3.2; but see Oberlandesgericht Zweibru¨cken (Germany) 2 February 2004 (milling equipment), CISG-Online 877 (Pace) which seems to require bad faith. 14 See Bundesgerichtshof (Germany), 26 September 2012 (clay), CISG-Online 2348 (Pace), para. II.2(a) – knowledge that the clay contained dioxin which had to be washed off before goods treated with it could be used. 15 Kingspan Environmental Ltd et al v Borealis A/S et al (United Kingdom) [2012] EWHC 1147 (Comm) 1 May 2012 (polymer), CISG-Online 2391 (Pace), paras 1027 et seq. 9

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rules that assume that commercial sellers always have knowledge about the non-conformity of the goods are not applicable.16 b) Constructive knowledge. Different views exist about the interpretation of “could not have been unaware”. According to certain commentary and case law, the lack of conformity must be obvious and thus gross negligence will not be sufficient.17 The reference has been interpreted as a mere facilitation of the difficulty in proving actual knowledge, rather than as an alleviation of the required standard of knowledge to gross negligence. Thus, constructive knowledge is limited to cases of major and obvious defects, which the seller would have known applying a minimum standard of diligence.18 The prevailing and better view is to interpret the notion as to include cases of gross negligence.19 In light of the rationale of Art. 39, i. e. to give a seller the chance to adequately react to a previously unknown lack of conformity, it seems appropriate to deny a seller the benefit of relying on Art. 39 in all cases where his lack of necessary information about the non-conformity is due to his own gross negligence. Whether the seller could not have been unaware of the lack of conformity depends largely on two factors. The first is the type of non-conformity, in particular its obviousness and the extent of the non-conformity. The second factor is the role of the seller in the overall transaction. A grossly negligent lack of knowledge can be assumed in most cases where the nonconformity consists of the delivery of an aliud, i. e. goods of a different type than the one agreed on.20 Unless the wrong delivery is merely the result of a negligent mix up, a seller can in general be expected to know that he delivered different goods than those contracted for.21 An exception may be an intermediary seller who resells originally packaged goods relying on the information from the producer. Art. 40 is also applicable in most cases where the non-conformity consists of substantial deviations in the quantity of the goods.22 More problematic are the cases where the goods lack the necessary quality. Only in exceptional cases will the seller admit knowledge of the defects. In determining whether the seller “ought to have known” about the defects in quality, the role of the seller in the transaction becomes important. In general, sellers who are also the producers of the 16 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 40 para. 6 referring to such a rule in the French sales law. 17 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 40 para. 5; Heilmann, Ma ¨ngelgewa¨hrleistung im UN-Kaufrecht, p. 340 seq.; Arbitral Award, SCC, 5 June 1998 (4,000 ton rail press), Beijing Light Automobile Co. Ltd. v Connell Limited Partnership, CISG-Online 379 (Pace) requiring “conscious disregard of facts that meet the eyes and are of evident relevance to the non-conformity”; in this direction also Oberlandesgericht Zweibru¨cken (Germany) 2 February 2004 (milling equipment), CISG-Online 877 (Pace); Oberlandesgericht Karlsruhe (Germany) 25 June 1997 (surface protective film), CISG-Online 263 (Pace); Kingspan Environmental Ltd et al v Borealis A/S et al (United Kingdom) [2012] EWHC 1147 (Comm) 1 May 2012 (polymer), CISG-Online 2391 (Pace), paras 1021 seq. 18 Bundesgericht (Switzerland) 2 April 2015 (steel coils), CISG-Online 2592 (Pace), para. 7.2.2.3 (denied in relation to defects of the goods despite a knowledge of defective packing). 19 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 40 para. 2; Oberlandesgericht Celle (Germany) 10 March 2004 (commercial vehicle), CISG-Online 824 (Pace); Oberlandesgericht Du¨sseldorf (Germany) 23 January 2003 (stainless steel plates), CISG-Online 918 (Pace); Kantonsgericht Schaffhausen (Switzerland), 27 January 2004 (model locomotives), CISG-Online 960 (Pace); Arbitral Award, ICC 9187, June 1999 (coke), CISG-Online 705. 20 Bundesgericht (Switzerland) 2 April 2015 (wire rod), CISG-Online 2592 (Pace), para. 7.2.2.3. 21 See Oberlandesgericht Zweibru ¨ cken (Germany) 2 February 2004 (milling equipment), CISG-Online 877 (Pace) delivering Russian components instead of the agreed German components. 22 But see Landgericht Landshut (Germany) 5 April 1995 (sport clothing), CISG-Online 193 (Pace) where knowledge of the seller was denied.

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goods have a much better knowledge about the conformity of the goods than sellers who have the goods produced or are mere intermediaries. A seller who is the producer of the goods ought to have known not only about the obvious defects, but also about all defects, which would have been revealed by a superficial examination. For certain goods, such as cars, a producer-seller may even have an obligation to monitor the use of the goods in the market. In such cases, he can be expected to know about defects, which have arisen with other customers of the goods. Also previous defects resulting from the same production process may fall into the category of defects about which the seller ought to have knowledge.23 For an intermediary who re-sells originally packaged goods relying on information provided by the producer, gross negligence can only be assumed if there were already indications about the non-conformity of the goods and the seller nevertheless failed to have samples examined.24 Such indications can arise, for example, from complaints by other customers or reports in the specialized press about the lack of quality. By contrast, the mere fact that such an intermediary breached his own examination duties towards his supplier is not sufficient to assume the he was grossly negligent in his lack of knowledge.25 There is no general duty for every seller to examine the goods before delivery.26 Where a duty exists, however, under the rules governing the production of the goods the seller can be assumed to know the results of such examinations.27 Furthermore, unless explicitly informed, the seller need not to be aware of the particularities of the buyer’s production process and in particular the age of the machinery used.28 There may be cases where the seller knows the actual condition of the goods, but, due to a misinterpretation of his obligations as to the conformity of the goods, considers them to be conforming. In such cases, Art. 40 only applies if the seller’s mistake was grossly negligent.29 The knowledge of the seller’s personnel or their grossly negligent lack of knowledge is in principle attributable to the seller. The same applies to auxiliary personnel used by the seller to perform his duties.30 The seller should not be able to evade the application of Art. 40 by using third parties to fulfil his obligations. This is also demonstrated in Art. 79(2). By contrast, the knowledge of suppliers or independent experts who examined the goods in the interest of both parties cannot be attributed to the seller.31 23 Oberlandesgericht Du ¨ sseldorf (Germany) 30 June 2015 (jeans), CISG-Online 2731, at II. 4. a. ee where such presumed knowledge was rejected due to the facts of the case. 24 See also Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 40 para. 3. 25 Gruber, in: Mu ¨ nchKommBGB, (2016), Art. 40 para. 6; Oberlandesgericht Oldenburg (Germany) 28 April 2000 (furniture), CISG-Online 683 (Pace). 26 Garro, The Buyer’s “Safety Valve” Under Article 40: What is the Seller Supposed to Know and When?, 25 Journal of Law and Commerce (2006) 253 (258); Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 40 para. 6; Oberlandesgericht Oldenburg (Germany) 28 April 2000 (furniture), CISG-Online 683 (Pace). 27 Cour d’appel de Bordeaux (France) 12 September 2013 (tiles), Wolseley France Bois v Ceramiche Marca Corona, CISG-Online 2552 (Pace) – the non-production of the examination reports was considered to be an indication that the seller had constructive knowledge. 28 Oberlandesgericht Koblenz (Germany) 11 September 1998 (chemical substances), CISG-Online 505 (Pace). 29 In this direction also Oberlandesgericht Schleswig (Germany) 22 August 2002 (live sheep), CISGOnline 710 (Pace). 30 Arbitral Award, ICC 9187, June 1999 (coke), CISG-Online 705 invoking in so far an analogy to Art. 79(2). 31 For the supplier see Gruber, in: Mu ¨ nchKommBGB, (2016), Art. 40 para. 7; for the independent expert, Arbitral Award, ICC 9187, June 1999 (coke), CISG-Online 705 – an independent expert had been engaged by both parties.

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c) Instalment contracts. In the case of instalment contracts, the seller’s knowledge 22 has to be determined for each instalment separately. Consequently, in cases where the goods come from the same source, notifications about the non-conformity of previous instalments can result in an obligation for the seller to examine the goods to be delivered in later instalments. The violation of this duty may lead to a grossly negligent lack of knowledge on behalf of the seller. At the same time, the acknowledgement by the seller that a certain instalment of goods is defective does not imply knowledge that also earlier instalments were defective.32 d) Timing of the knowledge. The relevant point in time when the seller must have 23 had actual or constructive knowledge is not explicitly regulated in Art. 40. It should be determined in light of the purposes of Art. 39. Consequently, the relevant time for knowledge is the expiry of the “reasonable time” under Art. 39.33 The purpose of the duty to notify the seller about the lack of conformity is primarily to serve the information interest of the seller. If the seller, however, already knew about the lack of conformity when notice should have been given, in principle there would be no need for a further notice. The purpose of Art. 40 does not require that the knowledge exists at the time of delivery or at the time of passing of risk.34

5. Disclosure to the buyer The second requirement for an application of Art. 40 is that the seller has not 24 informed the buyer about the non-conformity. In light of Art. 35(3) and the rationale underlying the buyer’s duty to give notice, the relevance of the non-disclosure requirement is limited in practice. In most cases where the seller informs the buyer about the non-conformity of the goods there is no need to rely on Art. 40. A seller who informs the buyer at the time of contracting about existing defects in the goods is, pursuant to Art. 35(3), not liable for the non-conformity of the goods. By contrast, any information about the non-conformity given to the buyer after the conclusion of the contract but before delivery appears to exclude any need for the buyer to give notice about the lack of conformity to the seller, who is clearly aware of it.35 Irrespective of this knowledge of the seller, considerations of good faith may require the buyer to notify the seller that he does not accept the delivered non-conforming goods.36 De facto, Art. 40 imposes on the seller, who could not have been unaware of the non- 25 conformity, a duty to disclose the non-conformity if he wants to rely on Art. 39. Unlike in some national laws, it is not required that the seller acted fraudulently in not informing the buyer about the non-conformity.37 Thus, a seller who knows that a sample provided to the buyer is below the ordinary standard expected pursuant to

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Cour d’appel de Lyon (France) 18 October 2012 (Christmas trees), CISG-Online 2402 (Pace). Honnold/Flechtner, Uniform Law (2009), Arts 39, 40, 44 para. 260; Gruber, in: Mu¨nchKommBGB, (2016), Art. 40 para. 8; Kingspan Environmental Ltd et al v Borealis A/S et al (United Kingdom) [2012] EWHC 1147 (Comm) 1 May 2012 (polymer), CISG-Online 2391 (Pace), para. 1023. 34 For a different view: Landgericht Landshut (Germany) 5 April 1995 (sport clothing), CISG-Online 193 (Pace). 35 Honnold/Flechtner, Uniform Law (2009), Arts 39, 40, 44 para. 260. 36 Such a duty was for example assumed without further discussion in Arbitral Award, ICC 9083/1999, 1 August 1999 (books), CISG-Online 706; for other examples see Garro, The Buyer’s “Safety Valve” Under Article 40: What is the Seller Supposed to Know and When?, 25 Journal of Law and Commerce (2006) 253 (255). 37 Arbitral Award, ICC 9083/1999, 1 August 1999 (books), CISG-Online 706. 33

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international usages, is not only prevented from invoking an agreement on the samplequality, but can also not rely on the buyer’s failure to give notice in time.38 26 Different views exist as to what happens where the non-conformity of the goods is obvious from the accompanying documents, which, for example, evidence that the goods delivered are of a different kind or quantity. The prevailing view seems to be that this is not sufficient, but there are good opposing arguments39. The wording of Art. 40, which does not positively state an obligation of the seller to inform the buyer about any non-conformity he is aware of, makes it difficult to deduce such a general duty from Art. 40.

6. Legal consequences and contractual modifications 27

The result of an application of Art. 40 is that the buyer’s failure to give appropriate notice in the sense of Art. 39 will not deprive him of his remedies. Consequently, the two year time limit in Art. 39(2) will be irrelevant.40 It has, however, been submitted that the expiry of the cut-off time may result in an alleviation of the evidentiary burden for the seller.41

7. Burden of proof Under the general principles of the CISG, the burden of proof for the seller’s actual or constructive knowledge lies with the buyer.42 29 In particular, for cases of constructive knowledge the buyer usually only has to prove the facts from which the required knowledge can then be inferred. For example, where the non-conformity consists of the delivery of a different good than contracted for, the buyer only has to prove that such an aliud was delivered. The seller’s constructive knowledge can then normally be presumed unless the seller can prove that exceptional circumstances existed which rebut such a presumption. Equally, in cases of extreme deviations from the required quality, it may be assumed that the seller could not have been unaware of the non-conformity if it occurred in the seller’s domain.43 Apart from that, however, there is no presumption that the seller was aware of the defects.44 28

38 Oberster Gerichtshof (Austria) 27 February 2003 (frozen fish), CISG-Online 794 (Pace) with note Huber, IPrax (2004) 358 (359) – the seller did not disclose to the buyer that contrary to the usage in trade the sample and the subsequent deliveries of fish where not of the catch from the present season. 39 Arbitral Award, SCC, 5 June 1998 (4,000 ton rail press), Beijing Light Automobile Co. Ltd. v Connell Limited Partnership, CISG-Online 379 (Pace). 40 Sono, in: Bianca/Bonell, Commentary (1987), Art. 40 para. 2.2; Arbitral Award, SCC, 5 June 1998 (4,000 ton rail press), Beijing Light Automobile Co. Ltd. v Connell Limited Partnership, (4,000 ton rail press), CISG-Online 379 (Pace); but see Arbitral Award, CIETAC, 30 March 1999 (flanges), CISG-Online 1170 (Pace) – despite the application of Art. 40 a cut-off time of two years was assumed. 41 Baasch-Andersen, Exceptions to the Notification Rule – Are They Uniformly Interpreted, 9 Vindobona Journal (2005) 17 (26) (Pace). 42 Garro, The Buyer’s “Safety Valve” Under Article 40: What is the Seller Supposed to Know and When?, 25 Journal of Law and Commerce (2006) 253 (254); Bundesgerichtshof (Germany) 30 June 2004 (paprika), CISG-Online 847 (Pace) at II 2(a); Oberster Gerichtshof (Austria) 14 February 2012 (paprika powder), CISG-Online 2308 (Pace), para. 3; Arrondissementsrechtbank Roermond (Netherlands) 19 December 1991 (cheese), CISG-Online 29 (Pace); Handelsgericht Zu¨rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace) at 4 c, aa; cf. Ontario Superior Court of Justice (Canada) 31 August 1999 (picture frame mouldings), CISG-Online 433 (Pace) implicitly based on such an allocation. 43 Bundesgerichtshof (Germany) 30 June 2004 (paprika), CISG-Online 847 (Pace) at II 2(b). 44 Hof van Beroep Gent (Belgium) 28 January 2004 (breeding sows and cages), CISG-Online 830 (Pace) – no presumption against professional sellers; Cour de cassation (France) 4 November 2014 (Christmas trees), CISG-Online 2563 (Pace) – no presumption that producer of Christmas trees knows the nonconformity.

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The buyer’s burden of proof may be alleviated under the principle of proof proximity 30 where the actual or constructive knowledge depends on information about the seller’s internal production processes. The seller may be able to provide the necessary information, which the buyer often lacks, without great effort. Such alleviations may become relevant in cases where the buyer provides information that demonstrates that the nonconformity either occurred in the domain of the seller, in which case due to the nature of the non-conformity the seller could not have been unaware of it, or it occurred in the domain of the seller’s supplier, in which case constructive knowledge cannot be assumed. In such cases, the seller has to provide the necessary information about his own production process in order to demonstrate that the non-conformity did not occur in his domain.45 The failure to provide existing reports about examinations may result in the presumption that the seller had knowledge.46 Where the buyer has established actual or constructive knowledge, the seller bears the 31 burden of proof that the non-conformity has been disclosed to the buyer.47

III. Comparable Rules Article 4:304 PEL-Sales and the IV. A. – 4:304 DCFR are largely identical to Art. 40 32 CISG48. However, they differ in their wording as the standard of the seller’s constructive knowledge is expressed positively, i. e. that the seller “could reasonably be expected to have known” the facts relating to the non-conformity. The different wording largely excludes any discussion about whether a grossly negligent lack of knowledge is sufficient to meet the standard or not. 45 Bundesgerichtshof (Germany) 30 June 2004 (paprika), CISG-Online 847 (Pace); Oberster Gerichtshof (Austria) 14 February 2012 (paprika powder), CISG-Online 2308 (Pace), paras 2.2, 4. 46 Cour d’appel de Bordeaux (France) 12 September 2013 (tiles), Wolseley France Bois v Ceramiche Marca Corona, CISG-Online 2552 (Pace) where the non-production of the examination reports was considered to be an indication that the seller had constructive knowledge. 47 Landgericht Landshut (Germany) 5 April 1995 (sport clothing), CISG-Online 193 (Pace); Garro, The Buyer’s “Safety Valve” Under Article 40: What is the Seller Supposed to Know and When?, 25 Journal of Law and Commerce (2006) 253 (255); Baasch-Andersen, Exceptions to the Notification Rule – Are They Uniformly Interpreted, 9 Vindobona Journal (2005) 17 (38) (Pace). 48 See also for remedies in general III. – 3:107 (3).

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Article 41 The seller must deliver goods which are free from any right or claim of a third party, unless the buyer agreed to take the goods subject to that right or claim. However, if such right or claim is based on industrial property or other intellectual property, the seller’s obligation is governed by article 42. Bibliography: Kiene, Rechtsma¨ngel im UN-Kaufrecht und das Verha¨ltnis von Art. 30 CISG zu Art. 41, 43 CISG, IHR (2006) 91; Metzger, Die Haftung des Verka¨ufers fu¨r Rechtsma¨ngel gem. Artt. 41, 42 CISG, 73 RabelsZ (2009) 842; Su, Die Rechtsma¨ngelhaftung des Verka¨ufers nach UN-Kaufecht und im chinesischen Recht, IPRax (1997) 284; Zhang, Die Rechtsma¨ngelhaftung des Verka¨ufers nach UN-Kaufrecht im Vergleich mit deutschem, englischem, US-amerikanischem und Haager Einheitlichem Kaufrecht (1994) (Diss-Tu¨bingen).

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. General remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Third party rights and claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Rights of third parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Claims of third parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Rights of the seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Public law encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Time of the defects in title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Exclusion of liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The buyer’s consent exception. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Contractual restrictions of liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Remedies for defects in title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Performance: Art. 46 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Damages: Arts 74 et seq. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Avoidance: Art. 49 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Art. 41 and domestic rules providing for nullity of the contract . . . . . . . . . . 7. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 7 7 9 10 15 21 24 29 32 32 36 38 39 40 43 44 46 47

I. Importance and Role of the Provision Art. 41 sets outs the seller’s obligations in relation to the transfer of title, providing for a non-fault based system of strict liability of the seller for defects in title. In this sense, it has largely the same function in relation to title as Art. 35 for questions of conformity of the goods.1 2 The first sentence of Art. 41 specifies and supplements the seller’s general obligation in Art. 30 to deliver goods and transfer the property in the goods by stipulating that the goods must be “free from any right or claim of a third party”. The seller must not only transfer unencumbered property in the goods but also unencumbered possession.2 This 1

1 In practice it is easier to differentiate between the obligation to deliver goods and any duty as to their conformity than between the obligation to transfer property and that of the lack of third party rights and claims. The existence of a third party ownership right at the same time entails a breach of the obligation to transfer ownership under Art. 30, which could be classified as non-delivery see below at para. 11. 2 Magnus, in: Honsell, Kommentar (2010), Art. 41 para. 3.

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Article 41

reflects the buyer’s basic expectation that – in the absence of an agreement to the contrary – he will receive goods unencumbered by any third party right or claim. The second sentence of Art. 41 states that a special liability regime exists for rights and claims based on intellectual or industrial property. This is set out in Art. 42 and is more favourable to the seller than the general regime in Art. 41 first sentence. The seller’s liability for breach of this obligation is made dependent on the fulfilment of additional requirements. The intellectual property rights or claims must exist under a particular law and it is necessary that the seller could not have been unaware of their existence. The first sentence of Art. 41 is derived from Art. 52 ULIS, which directly regulated the notice requirement but presupposed the seller’s obligation. By contrast, the special rules for rights and claims based on intellectual and industrial property rights have no equivalent in the ULIS.3 Art. 41 does not address the transfer of property or any proprietary rights in the goods sold. These questions are, pursuant to Art. 4(b), outside the scope of the CISG and are governed by the applicable domestic law. Art. 41 also does not deal with the relationship between the buyer and the third party, i. e. the justification of the asserted claims and rights.4 The existence and legal consequences of such rights are governed by the applicable national law. National law will in particular determine whether property rights of third parties (or the seller) have been lost due to a transfer to a good faith buyer.5 In principle, any breach of the obligation entitles the buyer to invoke the remedies listed in Art. 45. However, pursuant to Art. 43(1) – which is the equivalent to Art. 39(1) – buyers lose their rights to rely on a breach of Art. 41 when they do not make a timely notification to the seller about the actual or alleged defects in title.6 Just as in the context of non-conformity, no such loss of rights will occur if the seller could not have been unaware of the defects in title (Art. 43(2)) or the buyer is excused from not giving notice (Art. 44). Unlike Art. 39(2), there is no cut-off period of two years within which the notice about a defect in title has to be given.

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6

II. Detailed Commentary 1. General remarks Art. 41 requires that the goods delivered are “free from any right or claim of a third 7 party”. Liability for a breach of the obligation under Art. 41 does not require any knowledge of the seller or even fault concerning the existence of the third party’s rights or claims. In the majority of cases, third party rights and claims will be based on the law of the 8 seller’s place of business. Unlike with industrial or intellectual property rights in Art. 42, there is no territorial limitation as to the law upon which such rights and claims must be based. Art. 41 covers rights and claims based on any law and not only those existing 3 For an overview on the drafting history Date-Bah, in: Bianca/Bonell, Commentary (1987), Art. 41 para. 1; Magnus, in: Staudinger Kommentar (2013), Art. 41 paras 3 seq.; with a special focus on the inclusion of the separate regime in Art. 42, Prager, Verka¨uferhaftung und ausla¨ndische gewerbliche Schutzrechte (1987) pp. 121 et seq. 4 Enderlein/Maskow, International Sales Law (1992), Art. 41, para. 4. 5 See e. g. Landgericht Freiburg (Germany) 22 August 2002 (stolen automobile), CISG-Online 711 (Pace); Oberlandesgericht Dresden (Germany) 21 March 2007 (stolen automobile), CISG-Online 1626 (Pace). 6 For example, Bundesgerichtshof (Germany) 26 January 2006 (automobile), CISG-Online 1200 (Pace).

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under the law of the seller’s or buyer’s place of business or the law of the country where the goods are to be used.7 Consequently, there is also no requirement as to the seller’s awareness of the rights.8

2. Third party rights and claims 9

Art. 41 defines the seller’s obligation concerning the transfer of property and possession of the goods very broadly, referring to “rights” as well as “claims” of a third party. It is clear from the second sentence of Art. 41 that this reference must be read as a right or claim of a third party, excluding industrial or intellectual property rights. The notion of “right” refers to actually existing rights while “claim” covers merely asserted rights.

a) Rights of third parties. Art. 41 covers – with the exception of the specifically regulated industrial or intellectual property rights – all rights of proprietary or contractual nature which a third party has against the buyer. The decisive factor is solely whether the third party can exercise control over the goods or restrict the buyer in his use or disposal of the goods. Third party rights which have been granted predelivery by the buyer are, however, outside the scope of Art. 41. An example are security interests in the goods granted by the buyer in order to obtain the necessary credit to acquire the goods.9 11 Art. 41 covers, in particular, cases where the third party is the rightful owner of the goods because neither the seller was authorized to transfer the property in the goods nor did the buyer acquire ownership of the goods bona fide. In many jurisdictions, goods which have been stolen cannot be acquired bona fide and can be reclaimed by the original owner even from a bona fide buyer. Notwithstanding the fact that the seller has not fulfilled his general obligation in Art. 30 to transfer the property in the goods, Art. 41 remains applicable. Thus, the buyer may only invoke his remedies if he has complied with the notice requirement of Art. 43. To classify such behaviour merely as a breach of Art. 30, akin to a non-delivery and therefore not subject to any notice requirements for remedies under Art. 43, would not be consistent with the underlying scheme of the CISG. The drafters considered such cases to be covered by Art. 41, as otherwise its scope of application would have been severely limited.10 The CISG distinguishes between the act of delivery and efforts to transfer ownership on the one hand and additional obligations stipulated in Arts 35 and 41 on the other. 12 Security interests in the goods are of considerable practical importance. It is not rare that the goods serve as security for the seller’s suppliers or other creditors. Equally, storage and carriage of the goods can lead to liens on the goods. The applicable national laws differ considerably with respect to security interests in movables. In some cases, liens will prevent the delivery of the goods or they will be lost due to the good faith acquisition of the buyer free from encumbrances. In all other cases, liens constitute third party rights in the sense of Art. 41, especially if the seller is responsible for their existence. By contrast, liens created as a result of storage or carriage which has to be paid for by the buyer do not qualify as third party rights in the sense of Art. 41. 10

7 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 41 para. 18; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 41 para. 5; see also Oberster Gerichtshof (Austria) 6 February 1996 (propane gas), CISG-Online 224 (Pace) – the restriction on the resale of the gas resulted from a supplier of the seller. 8 Eiselen, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual (2008), Vol. 4 § 89:106. 9 Magnus, in: Staudinger Kommentar (2013), Art. 41 para. 11; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 41 para. 16. 10 Kiene, IHR (2006) 93 (94); but see for a different view Oberlandesgericht Dresden (Germany) 21 March 2007 (stolen automobile), CISG-Online 1626 (Pace).

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Article 41

In addition to rights of a proprietary nature, i. e. rights in rem, contractual rights are 13 also covered in so far as they can be asserted by a third party against the buyer. Such contractual rights may arise from leasing contracts when the third party lessee is, for example, entitled to use the goods or buy them after the termination of the leasing contract. By contrast, where the contractual right only exists in relation to the seller but not against the buyer, it does not constitute a “third party right” in the sense of Art. 41. Claims based on such contractual obligations against the buyer, however, may constitute “third party claims” and are thereby also covered by Art. 41. Equally covered, but as “third party rights”, are rights to challenge the transfer of 14 property to the buyer. Such rights exist in many insolvency laws11, but may also be based on contractual agreements or legislation. Art. 41 is, for example, applicable to statutory extensions of liability which may result from the acquisition of goods under some national laws. Under Austrian law, for example, when the goods purchased constitute a major part of the seller’s assets such an extension exists pursuant to § 1409 ABGB. b) Claims of third parties. The express reference to a “claim of a third party” rather than just a “right”, clarifies that the seller’s obligations concerning clean title under Art. 41 are broader than those found in numerous national laws. In contracts governed by the CISG, a seller not only breaches his delivery obligation under Art. 41 if the claims asserted are valid, i. e. a third party has a right, but also does so in cases of unjustified claims.12 In particular, liability under Art. 41 is not excluded by the fact that the buyer has acquired the goods bona fide or free of encumbrances under the applicable national law.13 Whenever previous owners or lien holders assert their formerly existing rights against the buyer this constitutes a “claim of a third party” in the sense of Art. 41. The extension of the seller’s liability in Art. 41 to claims of third parties is based on the principle that the buyer shall enjoy unencumbered possession and use of the goods “unprejudiced and undisturbed by such third party claims”.14 The burden for protracted litigation and the ensuing uncertainty is to be borne by the seller and not by the buyer. In this sense, Art. 41 protects the normal expectations of buyers, i. e. that they are not purchasing a lawsuit with the goods.15 For a buyer, it is often difficult and costly to evaluate the merits of third party claims. In international transactions such claims are frequently governed by a law with which the buyer is not familiar. Furthermore, contesting claims may bind resources and interfere with the buyer’s normal course of business. It is the seller’s obligation to remove such burdens from the buyer. The application of Art. 41 will be justified if such claims are asserted with sufficient firmness to impair the use of the goods. It is not a requirement that the third party has already initiated proceedings for their enforcement.16 Different views exist as to whether Art. 41 also covers frivolous or unreasonable third party claims. The issue may become relevant in cases where costs associated with defending such claims are for whatever reasons not recoverable. The Secretariat Commentary and several commentators deny the application of Art. 41 to these 11

E. g. Germany, §§ 129 et seq. Insolvency Act (Insolvenzordnung). Secretariat Commentary on 1978 Draft, Art. 39 (now Art. 41) para. 3. 13 For a different view Neumayer/Ming, Convention de Vienne (1993), Art. 41 para. 4. 14 Schlechtriem, The Seller’s Obligations Under the United Nations Convention on Contracts for the International Sale of Goods, in: Galston/Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), para. 6–30 (Pace); see also Date-Bah, in: Bianca/ Bonell, Commentary (1987), Art. 41 para. 2; Schlechtriem/Butler, CISG (2009), para. 165. 15 Honnold/Flechtner, Uniform Law (2009), Art. 41 para. 266. 16 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 41 para. 12; Benicke, in: Mu ¨ nchKommHGB (2013), Art. 41 CISG, para. 6. 12

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frivolous and unreasonable claims.17 It is argued that application of Art. 41 in this sense goes beyond the risk assumed by the seller. Rather, it is argued that Art. 41 should only apply when the claim is substantial. Thus, all costs associated with such frivolous claims must be borne by the buyer. 19 However, it is suggested that the better view is to make no distinction between substantial and frivolous claims.18 In addition to uncertainty resulting from making this difficult distinction, the seller is normally in a much better position to evaluate the unreasonable and frivolous nature of the claim raised and defend against it. The principle of asymmetric information upon which the seller’s liability for defects in title is predicated also applies where the claims raised are frivolous. Consequently, the risk should in principle be allocated to the seller. He is sufficiently protected by the fact that such claims, which can be easily defeated, normally do not constitute a fundamental breach and that claims for damages are limited to foreseeable damages pursuant to Art. 74.19 20 As such, pursuant to Art. 41, in principle the seller has to fight off all claims at his own expense. Good faith and the duty to preserve the goods in Art. 86 may, however, require the buyer to take urgent steps in defending claims to protect the interests of the seller. Examples include filing defences to prevent deadlines from expiring or objecting to confiscation measures. c) Rights of the seller. Cases where the use of the goods is encumbered by rights and claims of the seller, are not directly covered by the wording of Art. 41. Where such claims are contrary to the contract between the parties, the question arises as to whether the seller has fulfilled his general duties under Art. 30.20 For example, unless authorized by the contract, if the seller retains the title to the goods he will not be deemed to have complied with his duty to transfer the property in the goods. These cases should be treated as nondelivery and not as delivery of goods with defects in title in the sense of Art. 41. 22 In all other cases of mere assertions of claims, Art. 41 is applicable by analogy.21 This may arise, for example, when the seller, after conclusion of the contract, prohibits the use or re-export of the goods to certain countries although the contract did not provide for such a limitation.22 23 On the other hand, the buyer’s denial of the existing rights of the seller provided for in the contract may itself constitute a breach of contract.23 21

24

d) Public law encumbrances. Different views exist as to whether encumbrances on the use of the goods by public authorities can be considered a defect in title in the sense 17 Secretariat Commentary on 1978 Draft, Art. 39 (now Art. 42) para. 4; in this direction also Neumayer/Ming, Convention de Vienne (1993), Art. 41 para. 4; Schlechtriem, The Seller’ Obligations Under the United Nations Convention on Contracts for the International Sale of Goods, in: Galston/Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), p. 6–31. 18 In favour Magnus, in: Staudinger Kommentar (2013), Art. 41 para. 17; Benicke, in: Mu ¨ nchKommHGB (2013), Art. 41 CISG, paras 7 seq. 19 Sue, Die Rechtsma ¨ngelhaftung des Verka¨ufers nach UN-Kaufrecht und im chinesischen Recht, IPRax (1997) 283 (286). 20 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 41 CISG, para. 5; Gruber, in: Mu¨nchKommBGB (2016), Art. 41 para. 11; the prevailing view is to apply Art. 41 also to these cases, but one should distinguish between cases where the seller tries to transfer property but no such transfer occurs due to a third party rights, and cases where he does not even try to transfer unencumbered property, for which Art. 30 is the appropriate provision. 21 Against the application of Art. 41, Piltz, Internationales Kaufrecht (2008), para. 5–119. 22 Oberster Gerichtshof (Austria) 6 February 1996 (propane gas), CISG-Online 224 (Pace). 23 Federal Court, South Australian District, Adelaide (Australia) 28 April 1995 (tent hall structures), Roder Zelt- und Hallenkonstruktionen GmbH v Rosedown Park Pty Ltd et al., CISG-Online 218 (Pace), para. 58 where the denial of a retention of title clause was considered to be a fundamental breach.

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Article 41

of Art. 41 or are generally to be characterized as a non-conformity in the sense of Art. 35. This is relevant, as the requirements for liability under Arts 35 and 41 differ in some important aspects, e. g. with regards to the relevance of the buyer’s actual knowledge or negligent unawareness of existing deviations.24 In light of the drafting history and the Secretariat’s Commentary,25 some commentators consider all public law encumbrances, including taxes and confiscations, to be outside the scope of Art. 41.26 It is suggested that the better view, however, is to make a differentiation according to the underlying reason for the restriction on the use of the goods by the public authorities. Restrictions which are in the end related to the characteristics of the goods, such as their non-compliance with public health or safety regulations, are not covered by Art. 41, but may lead to non-conformity in the sense of Art. 35. By contrast, restrictions by public authorities which are based on third party rights or are intended to enforce such rights, e. g. confiscation of allegedly stolen goods, should be treated as defects in title pursuant to Art. 41.27 Exceptions to this rule are restrictions intended to enforce industrial or intellectual property rights, which are covered by Art. 42. Contrary to a widely held view,28 Art. 41 may also apply to encumbrances based on the non-payment of taxes or customs duties. It is correct that the question of which party has to pay unexpected customs duties or taxes is not a question of defect in title but one of risk transfer. By contrast, the consequences of a failure to pay may result in third party claims. For example, claims that are covered by Art. 41 include situations where the seller had to pay customs duties because the contract provided for delivery DDP (Incoterms 2000) buyer’s place of business, yet failed to do so resulting in the authorities either asking payment from the buyer or confiscating the goods.29 Export and import restrictions are, by contrast, simply issues of risk allocation. In particular, where such restrictions result from unexpected events, such as flooding or the like, the relevant question is, which party has to bear the risk for the existence of export or import permissions under the contract.

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28

3. Time of the defects in title Pursuant to the wording of Art. 41, the relevant time for the existence of third party 29 rights and claims is the time of delivery as determined by Art. 31. It is, however, not necessary that the third party has already asserted its rights or claims at this time.30 It is 24 Eiselen, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual (2008), Vol. 4 § 89:104; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 41 para. 5; Schlechtriem/Butler, CISG (2009), para. 165; for a more detailed discussion see pre Arts 35–44 para. 5. 25 Secretariat Commentary on 1978 Draft, Art. 39 (now Art. 42) para. 5. 26 Magnus, in: Staudinger Kommentar (2013), Art. 41 para. 14; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 41 paras 14 seq.; Neumayer/Ming, Convention de Vienne (1993), Art. 41 para. 6. 27 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 41 paras 6 seq.; Kiene, IHR (2006) 93 (94); courts in such cases often make no distinctions between the right as such and the confiscation see e. g. Landgericht Freiburg (Germany) 22 August 2002 (automobile case), CISG-Online 711 (Pace). 28 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 41 para. 14; Magnus, in: Staudinger Kommentar (2013), Art. 41 para. 14. 29 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 41 CISG, para. 4; Salger, in: Witz/Salger/Lorenz, Kommentar (2016), Art. 41, para. 9; Su, Die Rechtsma¨ngelhaftung des Verka¨ufers nach UN-Kaufrecht und im chinesischen Recht, IPRax (1997) 284 (286); cf. Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce, 99/1997, 21 January 1998 (bus), CISGOnline 1246 (Pace) where the customs status as a “temporary import” prevented the further use of the bus sold in Russia on DDU basis. The restrictions imposed via that customs status were considered to be “third party claims” of Russia. 30 For a general relevance of the time of delivery see Enderlein/Maskow, International Sales Law (1992), Art. 41, para. 5.

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suggested that it must be sufficient if the facts upon which the claim is based were already present at the time of delivery. Otherwise, the buyer would not be protected against costs incurred through unjustified claims raised after the time of delivery.31 30 In connection with sales contracts involving carriage in particular, the buyer must also be protected against rights created by the seller after the delivery has occurred but before the goods are received by the buyer. Consequently, Art. 41 should also apply to these cases.32 31 Both the time of contract conclusion and the time when the third party asserts its rights or raises the claim are irrelevant for the application of Art. 41.

4. Exclusion of liability a) The buyer’s consent exception. Pursuant to the second half of the first sentence of Art. 41, the seller is relieved from his obligation to deliver goods of good title if the buyer has agreed to receive goods which are subject to a third party right or claim. The provision merely states the obvious following from the principle of party autonomy underlying the CISG. 33 The wording makes clear that – unlike under Arts 35(3) or 42(2)(a) – actual or even constructive knowledge of possible rights or claims is not sufficient. For an exclusion of liability actual consent is necessary.33 Notwithstanding that actual consent may in principle also be declared impliedly,34 it should not be assumed lightly.35 The fact that the buyer will receive the goods unencumbered by rights and claims of a third party (and in particular ownership rights) is one of the most fundamental expectations of the buyer. Thus, while such agreements are submitted to the general rules on interpretation in Art. 8, in practice specific and clear language or behaviour are normally necessary to justify the assumption of such consent. There should be no doubt that the buyer had the intention to renounce existing rights for defects in title. Thus, the mere acceptance of delivery with the knowledge that the title to the goods is defective is normally not sufficient to assume such consent.36 Equally, the buyer’s knowledge that the owner of the warehouse where the goods are stored has a lien over them for storage costs is not sufficient to assume such an implicit consent.37 Unless the lien is reflected in the price of the goods, the buyer may expect the seller to discharge the lien before delivery. 34 Consent may be assumed where the buyer has accepted the goods without raising any objections even though the seller has explicitly mentioned the third party rights and that they will not be discharged before delivery. The seller, for example, may inform the buyer that the goods are in possession of a third party from which the buyer has to recover the goods. In such cases, the buyer cannot rely on Art. 41 if the seller is not able 32

31 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 41 para. 16; Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 41 para. 7. 32 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 41 para. 17; Brunner, Kommentar (2014), Art. 41 para. 17; Magnus, in: Honsell, Kommentar (2010), Art. 41 para. 12. 33 Secretariat Commentary on 1978 Draft, Art. 39 (now Art. 41) para. 2. 34 See Schlechtriem/Butler, CISG (2009), para. 163; Secretariat Commentary on 1978 Draft, Art. 39 (now Art. 41) para. 2. 35 Honnold/Flechtner, Uniform Law (2009), Art. 41 para. 266.1. 36 Magnus, in: Staudinger Kommentar (2013), Art. 41 para. 22; Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 41 para. 10; different Neumayer/Ming, Convention de Vienne (1993), Art. 41 para. 7. 37 Schlechtriem, The Seller’s Obligations Under the United Nations Convention on Contracts for the International Sale of Goods, in: Galston/Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), para. 6–30 (Pace).

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Article 41

to transfer possession.38 It can then be assumed that the rights are reflected in the price for the goods, which always points towards consent. Another factor which may also facilitate the assumption of consent in cases where the buyer has accepted the goods without objections, is that the buyer can easily overcome existing third party rights or claims. For example, that may be the case where the buyer and the third party belong to the same group of companies and are thus prevented from asserting rights against each other, or where the buyer can for other reasons put pressure on the third party to renounce his rights or claims. Where a reservation according to Art. 96 has been declared, the consent must be in 35 writing.39 b) Contractual restrictions of liability. It follows from Art. 6 that the parties may in 36 their contract also exclude any liability for defects in title or otherwise modify the liability arising under Art. 41. Whether and to what extent such exclusions are valid is in principle determined by the applicable national law (Art. 4(a)). However, particularly in connection with standard terms, these national laws often make the validity of exclusion clauses dependent on general and open textured concepts such as unfairness or deviations from the non-mandatory provisions of law. In the context of applying these concepts, the liability scheme provided in Arts 41 seq. may then become relevant. For example, under German law, standard terms are invalid if they put the other party at an “unreasonable disadvantage”. This will be presumed if a standard term cannot be reconciled with “basic principles of the statutory rule from which it deviates” (§ 307(2) BGB). Given that the second part of the first sentence of Art. 41 expressly provides for an exclusion of liability, parties can broadly exclude any liability for defects in title in the standard terms, at least if the validity of the latter is governed by German law.40 Limits may be reached where the third party relies on its ownership of the goods. 37 Notwithstanding that such cases fall within the scope of Art. 41, an exclusion of the seller’s main obligation to transfer ownership of the goods seems to be problematic by CISG standards.41

5. Remedies for defects in title A breach of the obligation set out in Art. 41, in principle, entitles the buyer to invoke 38 the remedies listed in Art. 45. Thus, the buyer may claim performance under Art. 46(1) as well as damages pursuant to Arts 74 et seq. or – in case of a fundamental breach – avoid the contract pursuant to Art. 49. According to the prevailing view,42 the fact that Arts 46(2)(3) and 5043 refer solely to non-conformity exclude their application in the 38 See the facts underlying the decision in the harvesting combines case by the Arbitration Court [Appellate Court] for the Western Siberia Circuit (Russia) 6 August 2002 (harvesting combines), O. I. L. Otto International Leasing AG v Zernopererabatyvayuschy kombinat Barnaulskaya melnitsa (Pace); reversed later by High Arbitration Court for Presidium of Supreme Arbitration Court (Russia) 28 January 2003 (harvesting combines), CISG-Online 835 (Pace). 39 Piltz, Internationales Kaufrecht (2008), para. 5–123. 40 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 41 para. 9; Magnus, in: Staudinger Kommentar (2013), Art. 41 para. 21. 41 See also Gruber, in: Mu ¨ nchKommBGB (2016), Art. 41 para. 18 – discussing the possible invalidity of exclusions in the context of German law; Oberlandesgericht Dresden (Germany) 21 March 2007 (stolen automobile), CISG-Online 1626 (Pace); see also the limits imposed by Art. 7.1.6 PICC on exemption clauses relating to the liability for non-performance. 42 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 41 para. 11. 43 See in favour of the application of Art. 50 Magnus, in: Staudinger Kommentar (2013), Art. 41 para. 26; Brunner, Kommentar (2014), Art. 41 para. 2, 28; for a detailed analysis see Art. 50 paras 12 et seq.

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context of defects in title. All remedies require, however, that the buyer has notified the seller about the defects in title within the time set out in Art. 43(1) or that he is excused for a failure to do so under Art. 44, or that the seller knew about the defects (Art. 43(2)). 39

a) Performance: Art. 46. The claim for performance encompasses both the delivery of goods without any defects in title and efforts by the seller to remedy the defects in title.44 The seller may, for example, be required to pay the third party to discharge liens or remove any right to withhold the transfer of ownership. Performance may also consist of defending a buyer against claims by the third party. Only where it is impossible for the seller to provide goods with good title45 will the buyer not be able to claim for specific performance. According to the prevailing view, the limitations in Art. 46(2)(3), which exist for specific performance in the form of delivery of substitute goods or repair if the goods are non-conforming, do not apply to defects in title. Art. 46(2)(3) only refers to goods which “do not conform with the contract” but not to goods affected by “third party rights or claims”.46

b) Damages: Arts 74 et seq. The buyer’s right to damages pursuant to Art. 74 covers all costs incurred in connection with the third party right or claim. This includes, first, all costs associated with freeing the goods from the third party right, i. e. in particular payments made for discharging security interests in the goods. Second, it encompasses losses, which are associated with the restricted usability of the goods due to the rights of a third party. An example of this is the loss of profit, which may arise because the goods cannot be resold or used in certain countries. All reasonable costs associated with defending against such rights and claims, and in particular non-recoverable legal costs, are also covered by Art. 74. 41 Notwithstanding the fact that liability under Art. 41 does not require fault of the seller, the claim for damages may be excluded pursuant to Art. 79.47 However, the mere lack of knowledge about the third party right or claim is not sufficient.48 By contrast, Art. 79 may be applicable in cases of clearly unjustified claims raised by third parties. These are usually not foreseeable for the seller and are often outside his sphere of influence. 42 The buyer is in principle obligated to mitigate the losses through appropriate measures. However, the duty to mitigate damages does not require the buyer to accept a favourable offer to acquire property in the goods if they have previously been stolen.49 40

43

c) Avoidance: Art. 49. Defects in title to the goods only justify avoidance of the contract if such defects constitute a fundamental breach in the sense of Art. 49(1)(a). Reliance on Art. 49(1)(b) is not possible since – irrespective of the existing performance claim under Art. 46 – defects in title do not, in principle, constitute a “non-delivery”.50 44 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 41 para. 21; Walt, For Specific Performance Under the United Nations Sales Convention, 26 Texas International Law Journal (1991) 211 (215 seq.). 45 Magnus, in: Staudinger Kommentar (2013), Art. 41 para. 23. 46 Metzger, Die Haftung des Verka ¨ufers fu¨r Rechtsma¨ngel gem. Artt. 41, 42 CISG, 73 RabelsZ (2009) 842 (848). 47 Magnus, in: Staudinger Kommentar (2013), Art. 41 para. 25; for a different view Benicke, in: Mu¨nchKommHGB (2013), Art. 41 CISG paras 9 seq. 48 Magnus, in: Honsell, Kommentar (2010), Art. 41 para. 16; for a different view see Landgericht Freiburg (Germany) 22 August 2002 (stolen automobile), CISG-Online 711 (Pace) however rejecting reliance on Art. 79 in the particular case since the seller could have been aware of the third party right. 49 Oberlandesgericht Dresden (Germany) 21 March 2007 (stolen automobile), CISG-Online 1626 (Pace). 50 Magnus, in: Honsell, Kommentar (2010), Art. 41 para. 16; for exceptions concerning rights of the seller see above para. 21; for details see Art. 49 para. 41.

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Article 41

A breach is fundamental when, due to the right or claim of the third party, the use of the goods by the buyer is prevented and the buyer cannot discharge the right or the claim.51 By contrast, a fundamental breach is normally excluded where the buyer can secure the use of the goods within a reasonable time by discharging the rights and claims and the seller provides sufficient security to compensate the buyer or the buyer can set-off such payments with the purchase price. Also, the mere inconvenience and costs associated with proceedings brought by third parties do not normally justify the avoidance of the contract if the further use of the goods is not impaired and the seller promises to indemnify the buyer and provides sufficient security for that.

6. Art. 41 and domestic rules providing for nullity of the contract Some national laws, such as Art. 1599 of the French Code Civil, contain provisions in 44 which defects in title, i. e. the lack of ownership of the goods, can render the contract void or justify rescission of the contract for mistake.52 In light of Art. 4(a), according to which national law governs the issue of validity of the contract, the question arises as to what effect such national rules have on the application of Arts 41 et seq. Is the buyer able to rely on the remedies provided for by such national rules even if he has not complied with the requirements of Arts 41 et seq. (e. g. the buyer has not given notice of the lack of good title within the time prescribed by Art. 43)? It is submitted that Art. 4(a) should be interpreted narrowly53 and that the carefully 45 designed system of Arts 41 et seq. should prevail over the domestic law. Art. 41 and the relevant provisions of the national law have, in this sense, the same objective: to provide a remedy when the seller fails to deliver goods without defects in title. Art. 41 thereby provides for a special remedial system, which is appropriate for international sales contracts. Furthermore, the application of domestic law provisions may endanger the potential harmonization intended by the CISG.54 However, national provisions are applicable where the ultimate reason for the invalidity of the contract is not the mere existence of the right but the bad faith behaviour of the seller.

7. Burden of proof The burden of proof is allocated according to the general principles of the CISG. 46 Reliance on a breach of an Art. 41 obligation requires the buyer to prove that the goods delivered were not free of third party rights or claims. A seller defending against liability has to prove that either the buyer consented to the delivery of the goods despite the existing defects or that the parties agreed to exclude any liability. The seller also has to prove that the claims raised are frivolous, if he wants to deny liability for that reason.55

51 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 41 para. 12; Metzger, Die Haftung des Verka¨ufers fu¨r Rechtsma¨ngel gem. Artt. 41, 42 CISG, 73 RabelsZ (2009) 842 (849). 52 As is the case in Swiss Law pursuant to Art. 24(1) no. 4 OR (Code of Obligations), Bundesgericht (Switzerland) 25 October 1983, BGE 109 II 319 (322) at E.2; see also Brunner, Kommentar (2014), Art. 41 para. 34. 53 That means Art. 4(a) should be interpreted to refer to the domestic law only in cases where the CISG is also not concerned with the issue underlying the domestic provision on validity. That is clearly not the case concerning defects in title dealt within the CISG in Art. 41. For details see Art. 4 paras 13 et seq. 54 Honnold/Flechtner, Uniform Law (2009), Art. 41 para. 266; Gruber, in: Mu ¨ nchKommBGB (2016), Art. 41 para. 25; for a different view see the publications quoted in Eiselen, in: Kritzer/Vanto/Vanto/ Eiselen, International Contract Manual (2008), Vol. 4 § 89:108. 55 Secretariat Commentary on 1978 Draft, Art. 39 (now Art. 42) para. 4.

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III. Comparable Rules Due to their different focus on general contract law, neither the PICC nor the PECL contain comparable provisions dealing specifically with defects in title. Such provisions are, however, contained in the PEL-Sales as well as in the DCFR. Under both, the difference between the liability regimes for the non-conformity of goods and for defects in title is smaller than under the CISG and is largely limited to the non-application of the cut-off defence for legal defects. 48 Art. 2:205 PEL-Sales and the nearly identically worded IV. A. – 2:305 DCFR provide for a comparable regime of liability for defects in title, excluding those based on intellectual property rights, which are regulated separately. As with Art. 41, they adopt a broad concept of defects in title referring to both “right and claim”. The notes to PELSales make clear, however, that obviously unjustified claims are not covered, defining the notion “claim” as “an asserted right that is reasonably well founded”.56 49 Of even greater practical relevance is that Art. 2:205 PEL and IV. A. – 2:305 DCFR do not require an agreement by the buyer to exclude the seller’s liability for defects in title. As becomes clear from Art. 2:207 PEL and IV. A. – 2:307 DCFR, the buyer’s actual or presumed knowledge is sufficient in this respect. 50 Comparable provisions exist in a number of national laws, such as in § 2–312 UCC, § 12 of the English Sale of Goods Act 1979 or §§ 433, 435 of the German BGB.57 The national systems of liability, however, deviate considerably from the CISG in important details, such as the inclusion of claims or additional requirements as to derogations. 47

56

Hondious et al., Principles of European Law – Sales (PEL S)(2008), Art. 2:205 Comments B. For further examples see Schlechtriem/Butler, CISG (2009), para. 163; Hondious et al., Principles of European Law – Sales (PEL S)(2008), Art. 2:205 notes 1. 57

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Article 42 (1) The seller must deliver goods which are free from any right or claim of a third party based on industrial property or other intellectual property, of which at the time of the conclusion of the contract the seller knew or could not have been unaware, provided that the right or claim is based on industrial property or other intellectual property:

(a) under the law of the State where the goods will be resold or otherwise used, if it was contemplated by the parties at the time of the conclusion of the contract that the goods would be resold or otherwise used in that State; or (b) in any other case, under the law of the State where the buyer has his place of business. (2) The obligation of the seller under the preceding paragraph does not extend to cases where:

(a) at the time of the conclusion of the contract the buyer knew or could not have been unaware of the right or claim; or (b) the right or claim results from the seller’s compliance with technical drawings, designs, formulae or other such specifications furnished by the buyer. Bibliography: Beline, Legal Defect Protected by Article 42 of the CISG: A Wolf in Sheep’s Clothing, 7 University of Pittsburgh Journal of Technology Law and Policy (Spring 2007) 6; Janal, The Seller’s Responsibility for Third Party Intellectual Property Rights under the Vienna Sales Convention, FS Kritzer (2008), p. 203; Langenecker, UN-Einheitskaufrecht und Immaterialgu¨terrechte (1993); Metzger, Die Haftung des Verka¨ufers fu¨r Rechtsma¨ngel gem. Artt. 41, 42 CISG, 73 RabelsZ (2009) 842; Rauda/Etier, Warranty for Intellectual Property Rights in the International Sale of Goods, 4 Vindobona Journal of International Commercial Law and Arbitration (2000) 30; Raynard, Champs d’application de la garantie du vendeur dans la vente internationale de marchandises, La Semaine Juridique (2003) 193; Schwerha IV, Warranties against Infringement in the Sale of Goods: A Comparison of U.C.C. § 2–312(3) and Article 42 of the U. N. Convention on Contracts for the International Sale of Goods, 16 Michigan Journal of International Law (1995) 441; Shinn, Liabilities Under Article 42 of the U. N. Convention on the International Sale of Goods, 2 Minnesota Journal of Global Trade (1993) 115; Smythe, Clearing the Clouds on the CISG’s Warranty of Title, (2016) 36 Nw. J. Int’l L. & Bus. 509, Van Duzer, A Seller’s Responsibility for Third Party Intellectual Property Claims: Are the UN Sales Convention Rules Better?, 4 Canadian International Lawyer (2001) 187; Vida, Garantie du vendeur et proprie´te´ industrielle: les “vices juridiques” dans la vente international de marchandises (Convention de Vienne), Revue trimestrielle de droit commercial et de droit e´conomique (1994) 21.

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. General remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Third party rights and claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Based on industrial property or other intellectual property . . . . . . . . . . . . . . . . 4. Territorial limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) State of contemplated use: Art. 42(1)(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Buyer’s state: Art. 42(1)(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Intellectual property rights or claims under the law of other states . . . . 5. Relevant time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Seller’s actual or constructive knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Constructive knowledge: “could not have been unaware” . . . . . . . . . . . . . .

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7. Exceptions from liability under Art. 42(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Buyer’s knowledge or culpable lack of knowledge . . . . . . . . . . . . . . . . . . . . . . b) Compliance with technical specifications by the buyer . . . . . . . . . . . . . . . . . c) Remedies of the seller for infringing specifications from the buyer . . . d) Other exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35 36 41 44 47 49 54 59

I. Importance and Role of the Provision Art. 42 defines the seller’s1 delivery obligations and liabilities in respect to third party intellectual property rights and claims. It contains a special rule for this subspecies of defective title, which tries to provide an appropriate solution to the complex problems posed by such rights and claims in international transactions. The buyer’s legitimate expectations to receive goods, which are not impaired by intellectual property rights or claims of a third party, have to be balanced with the seller’s equally legitimate interest in limiting his liability to problems he can foresee and handle in practice.2 As a consequence, the first part of the first sentence of Art. 42(1) stipulates a general duty for the seller to deliver goods that are free of intellectual property rights and claims of third parties. This is, however, subject to significant limitations set out in the remaining parts of Art. 42(1) and (2). 2 Art. 42 has no predecessor in the ULIS. Such claims were considered to be covered by the general rules on liability for defects in title,3 the primary focus of which were defects in ownership. The increasing importance of intellectual property rights in general and the specific problems posed by them convinced the drafters of the CISG of the necessity of a special regime for such claims. With the advent of the “information age”, the “digital revolution” and the ever growing relevance of intellectual property rights it can be assumed that the provision will gain even greater practical importance.4 3 The purpose of the inclusion of Art. 42 as a separate rule is to limit the seller’s liability in this respect.5 It is in several respects more favourable to the seller than Art. 41.6 Unlike Art. 41, Art. 42(1) contains territorial limitations as to the relevant 1

1 The regime in Art. 42 applies to all sales covered by the CISG and not only to particular experienced sellers as is the case with the liability regime of the UCC, § 2–312(3), which only applies to sellers “dealing regularly in goods of the kind”; on that see Schwerha IV, Warranties against Infringement in the Sale of Goods: A Comparison of U.C.C. § 2–312(3) and Article 42 of the U. N. Convention on Contracts for the International Sale of Goods, 16 Michigan Journal of International Law (1995) 441 (445 et seq.). 2 See for the drafting history and the changing concerns and emphasis put on the information asymetries, Smythe, Clearing the Clouds on the CISG’s Warranty of Title, (2016) 36 Nw. J. Int’l L. & Bus. 509 (519 et seq.). 3 For this proposition see Supreme Court (Israel) 22 August 1993, Eximin v Itel Style Ferrari Textile and Shoes (jeans boots), CISG-Online 1082 (Pace) which, however, then applied Art. 52 ULIS with the limitations of the CISG; see also the references by Magnus, in: Staudinger Kommentar (2013), Art. 42 para. 3. 4 See Honnold/Flechtner, Uniform Law (2009), Art. 42 para. 267 according to whom the developments of the last two decades have “increased exponentially the complexity and importance of such issues”; see also Smythe, Clearing the Clouds on the CISG’s Warranty of Title, (2016) 36 Nw. J. Int’l L. & Bus. 509 (514 et seq.) mentioning as a further ground patent “trolls” and trademark “squatters”. 5 Janal, The Seller’s Responsibility for Third Party Intellectual Property Rights under the Vienna Sales Convention, FS Kritzer (2008), p. 203 (p. 204) (Pace). 6 Metzger, Die Haftung des Verka ¨ufers fu¨r Rechtsma¨ngel gem. Artt. 41, 42 CISG, 73 RabelsZ (2009) 842 (850); Sue, Die Rechtsma¨ngelhaftung des Verka¨ufers nach UN-Kaufrecht und im chinesischen Recht, IPRax (1997) 283 (286 seq.); cf. Shinn, Liabilities Under Article 42 of the U. N. Convention on the International Sale of Goods, 2 Minnesota Journal of Global Trade (1993) 115 (120 seq.).

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rights and requires that the seller could not have been unaware of their existence. In addition, the buyer’s actual or constructive knowledge of the intellectual property rights or claims is sufficient to exclude liability. As a consequence, the liability regime in Art. 42 whenever it is applicable excludes any reliance by the buyer on the general liability regime for defective title in Art. 41.7 Art. 42 only regulates the relationship between the seller and the buyer, i. e. questions 4 of who has to bear the risk of third party intellectual property rights. The existence of such intellectual property rights, the remedies available and the question of acquiring goods free of any encumbrances in good faith are outside the scope of the CISG. In particular, the limitations contained in Art. 42 in no way restrict the rights a third party may have against the seller or buyer.8 These relationships with the third party are governed by the intellectual property law of the country in question. Art. 42 only contains a rudimentary regime for the increasingly important problem 5 of third party intellectual property rights and claims. Moreover, it was drafted before the unpredictable developments of the last two decades in information technology. Thus, parties are well advised to deal with the problems resulting from third party intellectual property rights in their contract instead of relying solely on the regime under Art. 42.9 Any non-compliance with the obligation in Art. 42 constitutes a breach of contract 6 which entitles the buyer to remedies provided for in Art. 45. In principle, the seller’s liability under Art. 42 is excluded pursuant to Art. 43 if the buyer does not inform the seller about the intellectual property rights or claims within a reasonable time. In practice, however, due to the limitations on the seller’s liability in Arts 42 and 43(2), this notice requirement only becomes relevant in cases where the seller, while not being positively aware of the intellectual property right (which would exclude reliance on the failure to give notice under Art. 43(2)), ought to have known about it (which is a requirement for the seller’s liability under Art. 42(1)).10

II. Detailed Commentary 1. General remarks The need for a special liability regime for third party intellectual property rights and 7 claims results from a combination of two facts: first, the territorial limitations of most intellectual property rights and second, the differences, which exist between the various systems. Inventions, improvements, processes or designs, which may enjoy protection in one country may not do so in other countries and vice versa. This makes it very difficult for a seller to guarantee that the goods delivered do not infringe the intellectual property rights of a third party in any other country worldwide. Consequently, the approach taken by the ULIS as well as by national sales laws, which treat defects in title resulting from intellectual property rights like any other defect in title is inappropriate in international 7

Magnus, in: Staudinger Kommentar (2013), Art. 42 para. 7. Secretariat Commentary on 1978 Draft, Art. 40 (now Art. 42) para. 7. 9 See for such advice Honnold/Flechtner, Uniform Law (2009), Art. 42 para. 270.5; see also Beline, Legal Defect Protected by Article 42 of the CISG: A Wolf in Sheep’s Clothing, 7 University of Pittsburgh Journal of Technology Law and Policy (Spring 2007) 6 (IV) with sample clauses. 10 Schlechtriem, The Seller’s Obligations Under the United Nations Convention on Contracts for the International Sale of Goods, in: Galston/Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), pp. 6–34 (Pace); Janal, The Seller’s Responsibility for Third Party Intellectual Property Rights under the Vienna Sales Convention, FS Kritzer (2008), p. 203 (p. 223) (Pace). 8

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transactions and unduly burdensome on the seller.11 Such national rules are based on the assumption that the seller can be considered to be aware of the third party intellectual property rights existing in a particular country. Unlike with national transactions, such an assumption is, for the above reasons, not justified in international transactions. There, the goods will be used in foreign countries which are often only determined by the buyer after delivery.12 8 These particularities of international transactions are reflected in the territorial limitations to intellectual property rights and claims and in the additional knowledge requirement imposed on the seller.

2. Third party rights and claims Art. 42 provides that the seller has to deliver goods which are “free from any right or claim of a third party based on industrial or intellectual property”. The reference to “right or claim” makes clear that – in parallel with Art. 41 but unlike under some national laws13 – not only justified claims (rights) are covered. The buyer expects to receive undisturbed possession and ownership of the goods and thus unjustified claims (claims) are also covered. As liability in these issues boils down to the question of who has to deal with such claims, the Austrian Supreme Court has rightly stated that it “is part of the seller’s sphere of risk to deal with the third party in such cases”.14 This also applies to obviously unjustified claims. The seller is normally in a much better position than the buyer to determine whether a claim is made in bad faith and defend against such claims.15 In addition, the seller is adequately protected even if the liability under Art. 42 is extended to such claims. Obviously unjustified claims will in general not entitle the buyer to avoid the contract as they clearly do not constitute a fundamental breach in the sense of Art. 25. Moreover, claims for damages will often be excluded by Art. 79 as clearly unjustified claims can be considered to be outside the seller’s sphere of risk. 10 At the same time, it is not necessary that the third party has already claimed its existing rights. The uncertainty associated with the existence of such a right will often prevent the anticipated use of the goods by the buyer, such as a reprocessing of the goods.16 The abovementioned legitimate expectations of the buyer, which are protected under Art. 42, justify a further extension of the provision. Art. 42 also covers cases where it is not yet certain whether the goods actually infringe the intellectual property 9

11 Janal, The Seller’s Responsibility for Third Party Intellectual Property Rights under the Vienna Sales Convention, FS Kritzer (2008), p. 203 (pp. 204 seq.) (Pace). 12 Secretariat Commentary on 1978 Draft, Art. 40 (now Art. 42) para. 4; for the drafting history see also Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 42 paras 1 seq. 13 For example, U.S.: § 2–312(3) UCC (rightful claims); Germany: § 435 BGB; for a more detailed discussion of the notion “claim” see Art. 41 paras 15 et seq. 14 Oberster Gerichtshof (Austria) 12 September 2006 (CD media), CISG-Online 1364 (Pace); see also Bundesgericht (Switzerland) 17 April 2012 (EAS tags), CISG-Online 2346 (Pace), para. 2.3. 15 Janal, The Seller’s Responsibility for Third Party Intellectual Property Rights under the Vienna Sales Convention, FS Kritzer (2008), p. 203 (p. 208) (Pace); Rauda/Etier, Warranty for Intellectual Property Rights in the International Sale of Goods, 4 Vindobona Journal of International Commercial Law and Arbitration (2000) 30 (37) (Pace); in favour of an additional “good faith” requirement Schwerha IV, Warranties against Infringement in the Sale of Goods: A Comparison of U.C.C. § 2–312(3) and Article 42 of the U. N. Convention on Contracts for the International Sale of Goods, 16 Michigan Journal of International Law (1995) 441 (457); for a more detailed discussion of the issue see Art. 41 paras 16 et seq. 16 Schwerha IV, Warranties against Infringement in the Sale of Goods: A Comparison of U.C.C. § 2– 312(3) and Article 42 of the U. N. Convention on Contracts for the International Sale of Goods, 16 Michigan Journal of International Law (1995) 441 (458); Rauda/Etier, Warranty for Intellectual Property Rights in the International Sale of Goods, 4 Vindobona Journal of International Commercial Law and Arbitration (2000) 30 (36) (Pace) – referring also to the threat that in case of an insolvency of the seller the third party may seek recourse with the buyer.

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of a third party and where the third party has yet to raise a claim. Given the problems associated with court proceedings (and in particular eventual damage to the buyer’s reputation), for Art. 42 to apply it must be sufficient that proceedings for the infringement of the right are fairly likely. The buyer cannot be expected to wait until the third party has threatened such proceedings or even initiated them before he may invoke the remedies for a breach of the obligation under Art. 42.17 This may be the case where the seller, who had previously produced goods that were sold under the licence of a third party, continues to deliver the goods, even though the licence agreement has been terminated due to a dispute about the validity of the patent. Even if the third party has not yet approached the buyer about an alleged violation of its intellectual property rights, the threat of such claims being brought is so imminent, that it in itself already prevents the unfettered use of the goods. Although this deviates from the strict wording of the provision (i. e. it does not 11 involve third party rights), Art. 42 also provides protection against any impairment of the contractually agreed use by the seller’s own rights.18 However, in such cases it always has to be determined first whether or not the restricted use was contemplated at the time of contracting and reflected in the contract. For example, a buyer who has only received a licence for one market may not invoke Art. 42 if the seller prevents the use of the goods in different markets for which no licence has been granted.

3. Based on industrial property or other intellectual property The second – and decisive – requirement for the application of the special liability 12 regime in Art. 42 is that the claim or right must be based on “industrial property or other intellectual property”. The wording and drafting history make clear that the inclusion of the notion of “industrial property” is merely to provide clarification. The drafters wanted to avoid any doubts that claims based on all kinds of patents or processes were included.19 In the absence of an explicit definition of what constitutes “intellectual property” in the sense of Art. 42, its meaning has to be determined in accordance with Art. 7(1). Taking into account the “international character” of the CISG and “the need to promote uniformity in its application”, reference to “intellectual property” in Art. 42 should be understood in the broad sense adopted in various international conventions, evidencing a broad international consensus. As defined in Art. 2 (viii) of the 1967 Convention Establishing the World Intellectual Property Organization,20 it covers all “… rights resulting from intellectual activity in the industrial, scientific, literary of artistic field”. It is the substantive concept of intellectual property right, which is relevant and not the more formal aspects of registration, mode of protection or form of the right in a particular country.21 17 For a more restrictive view, at least where the existence of the right is contested, see Janal, The Seller’s Responsibility for Third Party Intellectual Property Rights under the Vienna Sales Convention, FS Kritzer (2008), p. 203 (p. 210) (Pace). 18 For a more detailed discussion in the context of Art. 41 see there para. 22. 19 Secretariat Commentary on 1978 Draft, Art. 40 (now Art. 42) para. 1 footnote 1; Rauda/Etier, Warranty for Intellectual Property Rights in the International Sale of Goods, 4 Vindobona Journal of International Commercial Law and Arbitration (2000) 30 (31) (Pace); for the inclusion of patents of a particular production process see Oberster Gerichtshof (Austria) 12 September 2006 (CD media), CISGOnline 1364 (Pace). 20 Signed at Stockholm on 14 July 1967, as amended on 28 September 1979. 21 Rauda/Etier, Warranty for Intellectual Property Rights in the International Sale of Goods, 4 Vindobona Journal of International Commercial Law and Arbitration (2000) 30 (34 seq.) (Pace); Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 42 para. 4; Magnus, in: Staudinger Kommentar (2013), Art. 42 para. 9; Maley, The Limits to the Conformity of Goods in the United Nations

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Consequently, third party claims based on patents, trademarks, service marks, commercial names and designations, appellation of origin and copyrights fall within the scope of Art. 42. It is irrelevant whether such rights are protected under special rules relating to intellectual property or general rules of tort law, restitution or unfair competition. The decisive factor is whether the third party right is of such a nature to impair the contractually agreed use of the goods.22 The right of name and personality rights are also covered by Art. 42 in so far as they are affected by the use of the goods and give their holder rights against the buyer.23

4. Territorial limitations 14

A qualification to the seller’s duty to deliver goods free of third party intellectual property rights arises from the territorial limitations of the rights and claims concerned. Broadly speaking, the seller’s liability under Art. 42 is limited to intellectual property rights and claims arising under legal systems, which were in the contemplation of the seller.24 The rationale for this limitation is that the seller, while not able to guarantee the absence of third party intellectual property claims on a world-wide level, should at least do so for the states in which the goods are most likely to be used. This means either the state of contemplated use (Art. 42(1)(a)) or the state of the buyer’s place of business (Art. 42(1)(b)). At the same time the buyer is adequately protected despite such limitation. Due to the territoriality of intellectual property rights, his primary interest is limited to receive goods, which are free of intellectual property rights in the countries of the likely use.25

a) State of contemplated use: Art. 42(1)(a). Art. 42(1)(a) obligates the seller to deliver goods which are not affected by third party intellectual property claims in the “State where the goods will be resold or otherwise used” according to the contemplation of the parties. In this sense, it has the same function and underlying rationale as Art. 35(2)(b) which obligates the seller to deliver goods, which are fit for a particular purpose communicated by the buyer. Whenever the seller does not object to a particular use made known to him, the buyer is protected in his legitimate expectations that the goods can be used for this purpose.26 This means that in relation to intellectual property rights, the buyer should be able to use or resell the goods without any impairment of third party rights or claims. The buyer should also be protected from any possible recourse by his own customers resulting from the resale of the goods. As a consequence, where the buyer has informed the seller that he will resell the goods to customers who will then use them in a third country, the use of the goods in that third country must also not be impaired by third party intellectual property rights. 16 The use must have been contemplated by the parties at the time of the conclusion of the contract. It is irrelevant for liability under Art. 42(1)(a) whether the goods are actually used in the contemplated state or not.27 “Contemplated” in the sense of 15

Convention on Contracts for the International Sale of Goods (CISG), 12 International Trade and Business Law Review (2009) 82 (89 seq). 22 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 42 para. 4. 23 Magnus, in: Staudinger Kommentar (2013), Art. 42 para. 12; different Rauda/Etier, Warranty for Intellectual Property Rights in the International Sale of Goods, 4 Vindobona Journal of International Commercial Law and Arbitration (2000) 30 (34) (Pace). 24 Date-Bah, in: Bianca/Bonell, Commentary (1987), Art. 42 para. 2.1. 25 Magnus, in: Staudinger Kommentar (2013), Art. 42 para. 14; Janal, The Seller’s Responsibility for Third Party Intellectual Property Rights under the Vienna Sales Convention, FS Kritzer (2008), p. 203 (p. 205) (Pace). 26 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 42 para. 10. 27 Secretariat Commentary on 1978 Draft, Art. 40 (now Art. 42) para. 8.

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Art. 42(1)(a) does not require an express agreement on the state of use. It is sufficient if the seller can identify the prospective use from the circumstances, and in particular from the communications by the buyer. An example of where the seller may be able to contemplate the buyer’s use is where the buyer requests delivery to a different state than where his place of business is located28 or for user manuals or other documentations in a different language. By contrast, the mere knowledge of the seller that the buyer is doing business in certain states is not sufficient. Notwithstanding the use of the singular in the wording of Art. 42(1)(a), it is 17 suggested that the parties’ contemplated use in several “states” will also be relevant.29 b) Buyer’s state: Art. 42(1)(b). Art. 42(1)(b) contains a fall-back provision for cases 18 in which the parties did not contemplate a particular country of use. In this situation, the goods must be free from any third party intellectual property rights “under the law of the State where the buyer has his place of business”. The underlying rationale of this rule is that in the absence of indications to the contrary, it can be assumed that the buyer will use the goods in the country where he has his place of business. In so far as this constitutes a kind of “ordinary use” of the goods, Art. 42(1)(b) can be considered to be the intellectual property equivalent to Art. 35(2)(a).30 For the purposes of Art. 42(1)(b), the place of business at the time of contract 19 conclusion will be relevant. Any subsequent changes to the buyer’s place of business will not affect the seller’s liability under Art. 42(1)(b). If a buyer has more than one place of business, in principle, the relevant place of business will be determined in accordance with Art. 10 unless it is clear that the goods will be used at a different place of business.31 c) Intellectual property rights or claims under the law of other states. In principle, 20 the existence of intellectual property rights or claims under the law of states other than those mentioned in Art. 42(1)(a),(b) does not give rise to liability under Art. 42. Due to the fact that intellectual property rights have a limited territorial reach, “foreign” rights and claims do not in general affect the use by the buyer in the state of contemplated use or the state of his place of business. This will be different in cases where such “foreign” intellectual property rights and 21 claims are recognized in the states listed in Art. 42(1) either under an international instrument32 or according to the conflict of laws rules of such states. The consequence of such recognition is that those “foreign” intellectual property rights and claims will 28 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 42 para. 11; critical Magnus, in: Staudinger Kommentar (2013), Art. 42 para. 17 who requires additional indicators; Rauda/Etier, Warranty for Intellectual Property Rights in the International Sale of Goods, 4 Vindobona Journal of International Commercial Law and Arbitration (2000) 30 (51) (Pace). 29 Rauda/Etier, Warranty for Intellectual Property Rights in the International Sale of Goods, 4 Vindobona Journal of International Commercial Law and Arbitration (2000) 30 (52) (Pace); Beline, Legal Defect Protected by Article 42 of the CISG: A Wolf in Sheep’s Clothing, 7 University of Pittsburgh Journal of Technology Law and Policy (Spring 2007) 6 (at footnote 54); Metzger, Die Haftung des Verka¨ufers fu¨r Rechtsma¨ngel gem. Artt. 41, 42 CISG, 73 RabelsZ (2009) 842 (858); but see Shinn, Liabilities Under Article 42 of the U. N. Convention on the International Sale of Goods, 2 Minnesota Journal of Global Trade (1993) 115 (128 et seq.). 30 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 42 para. 12. 31 Rauda/Etier, Warranty for Intellectual Property Rights in the International Sale of Goods, 4 Vindobona Journal of International Commercial Law and Arbitration (2000) 30 (53) (Pace). 32 For example, Art. 64(1) European Patent Convention; Art. 4(1) Madrid Trademark Convention; for further international instruments see the list provided by WIPO on its website at http://www.wipo.int/ treaties/en/; for Europe see Regulation (EC) 207/2009 of 26 February 2009 on the Community trade mark, EC Official Journal, L 78/1, 24 March 2009, and its amendment by Regulation (EU) 2015/2424 of 16 December 2015, OJ, L 341/21, 24 December 2015 (now EU Trade Mark).

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lead to the same type of encumbrances of use in the states from which Art. 42 wanted to protect the buyer. In such cases, a narrow interpretation of the wording of Art. 42 (“under the law of”) would unduly favour the seller who would then not be liable under Art. 42. Consequently, the notion of “under the law of” should be understood to also cover cases where the intellectual property rights or claims do not originate from this law, i. e. when the rights are merely recognized by the law of the countries mentioned in Art. 42. 22 Of particular relevance in this respect is where the intellectual property rights exist either under the law of the state of the seller or in states through which the goods have to be transported. In certain cases, i. e. where the goods are confiscated either at the seller’s premises or in a state of transit before they reach the contractually agreed place of delivery, the seller has already breached his Art. 30 obligation to deliver the goods. In such cases, the seller is not liable under Art. 42 for the delivery of goods with defective title, but may be liable for non-delivery. In all other cases, provided that third parties can exercise their intellectual property rights on goods in transit, the liability of Art. 42 will depend on whether there is a “contemplated use” of the goods in the transit country in the sense of Art. 42(1)(a).

5. Relevant time The relevant time for the fulfilment of the seller’s obligation to deliver goods free of third party claims is, in principle, the time of delivery.33 The time of contract conclusion is only relevant for the question of the seller’s knowledge about such rights. Thus, a seller who has discharged third party intellectual property claims existing at the time of contract conclusion but before delivery has not breached his obligation under Art. 42. Such discharge may occur, for example, by obtaining a licence from the third party or by receiving an undertaking that assures that the use of the goods will not be impaired. 24 However, in light of the territorial nature of intellectual property rights, Art. 42 liability will arise as long as the factual basis, which in the end led to the intellectual property rights or claims, was present at the time of delivery. It is irrelevant if the claims, as such, only arose or were raised after delivery, when the goods were transported to the place of contemplated use where the territorially limited right exists. Liability under Art. 42 is dependent on the place of use and not on the place of performance.34 23

6. Seller’s actual or constructive knowledge 25

The seller is only liable for intellectual property rights of which he “knew or could not have been unaware”. In this respect, the seller’s liability under Art. 42 differs considerably from his liability for non-conforming goods in Art. 35 and other defects in title in Art. 41. Under both the Art. 35 and 41 regimes, the seller’s liability is not dependent on any element of fault, although under Art. 42 such an element is introduced by the requirement of knowledge.35

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a) Knowledge. Knowledge can be assumed in all cases where third parties have either contacted the seller directly before delivery or have, at an earlier occasion, asserted their 33 Rauda/Etier, Warranty for Intellectual Property Rights in the International Sale of Goods, 4 Vindobona Journal of International Commercial Law and Arbitration (2000) 30 (40 seq.) (Pace). 34 Janal, The Seller’s Responsibility for Third Party Intellectual Property Rights under the Vienna Sales Convention, FS Kritzer (2008), p. 203 (p. 209) (Pace). 35 Schlechtriem, The Seller’s Obligations Under the United Nations Convention on Contracts for the International Sale of Goods, in: Galston/Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), pp. 6–33 (Pace).

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rights against other buyers who have informed the seller about this. Due to the reference in Art. 42 to “claims”, it is irrelevant for the seller’s knowledge whether he believes the claims to be rightful or on the basis of a legal opinion considers the claims to be unjustified. It is not required that the seller must be aware of the exact nature of the intellectual 27 property rights or claims of the third party. It is sufficient, in this respect, that the seller is aware of the facts leading to the claims as well as of the possibility that these facts might result in such claims. In other words, this means that on the basis of the facts known to the seller, third party intellectual property claims should have been reasonably foreseeable.36 b) Constructive knowledge: “could not have been unaware”. Situations where the seller “could not have been unaware” of the existence of third party property rights are more difficult to determine. This is in part due the different understandings of the standard, which is also used in Arts 35(3) and 40, to be applied for constructive knowledge.37 Several commentators consider this standard to be close to actual knowledge, which – unlike the standard of “ought to have known” – requires more than gross negligence. Contrary to the standard of “gross negligence”, the standard of “could not have been unaware” should not in principle entail a duty to inquire into the existence of defects. This view is also supported by commentators in relation to intellectual property rights.38 In the context of Art. 42, the rejection of any duty for the seller to inquire whether the goods may be affected by intellectual property rights, however, would largely deprive the liability for such rights of any practical relevance.39 The Secretariat’s commentary seems to be based on the assumption that the seller must at least inquire with the relevant registers or other publications in the country in question, when it states that the seller is liable for claims based on “a patent application or a grant which had been published in the country in question”.40 Whether the seller is under a duty to investigate the existence of intellectual property rights and the extent of such a duty depends on the circumstances of the particular case. Relevant factors are, in particular, the status of the seller, the mode of contract conclusion and the nature of the rights concerned. Sellers, who are at the same time the producers of the goods and, due to their size, have either their own legal department or outside lawyers dealing regularly with intellectual property questions, are normally required to investigate the existence of 36 Janal, The Seller’s Responsibility for Third Party Intellectual Property Rights under the Vienna Sales Convention, FS Kritzer (2008), p. 203 (p. 217) (Pace). 37 For a detailed discussion see Art. 35 paras 157 et seq. 38 Shinn, Liabilities Under Article 42 of the U. N. Convention on the International Sale of Goods, 2 Minnesota Journal of Global Trade (1993) 115 (125 seq.) limiting it to information “readily available” to the seller; but see Rauda/Etier, Warranty for Intellectual Property Rights in the International Sale of Goods, 4 Vindobona Journal of International Commercial Law and Arbitration (2000) 30 (44) (Pace) deducing an obligation to enquire from the standard; for a detailed account of the different views in the context of Art. 42 see Metzger, Die Haftung des Verka¨ufers fu¨r Rechtsma¨ngel gem. Artt. 41, 42 CISG, 73 RabelsZ (2009) 842 (850 et seq); Janal, The Seller’s Responsibility for Third Party Intellectual Property Rights under the Vienna Sales Convention, FS Kritzer (2008), p. 203 (pp. 213 et seq.) (Pace); for a narrow interpretation see also Smythe, Clearing the Clouds on the CISG’s Warranty of Title, (2016) 36 Nw. J. Int’l L. & Bus. 509 (538 seq.). 39 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 42 para. 15 who is otherwise one of the most prominent supporters of a strict interpretation of the standard excluding any obligation to enquire. 40 Secretariat Commentary on 1978 Draft, Art. 40 (now Art. 42) para. 8; but see for the criticism that the Commentary does not reflect the discussions during the drafting history Shinn, Liabilities Under Article 42 of the U. N. Convention on the International Sale of Goods, 2 Minnesota Journal of Global Trade (1993) 115 (124).

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such rights.41 Such sellers “ought to have been aware” of all intellectual property claims which could have been discovered by a search in the relevant registers or other relevant publications. The same applies in principle to non-registered intellectual property rights, which are of a common occurrence, such as copyrights. The burden imposed on producer-sellers to investigate is not unreasonable. It is limited to the countries in question, i. e. the countries where the goods are to be used or the country where the buyer has his place of business. Additionally, the task is or will increasingly be facilitated by the availability of the relevant data via the Internet.42 The seller knows the particular features of the goods and therefore is in a much better position than the buyer to evaluate potential conflicts with intellectual property rights. Moreover, such sellers have a general interest in clarifying the legal situation, which goes beyond the particular transaction. Information acquired by an investigation may not only be relevant for future sales or the future development of the goods, it may also be required to exclude the seller’s liability towards the third party under the relevant law.43 32 Primarily in relation to smaller sized sellers, the mode of contracting may lead to a different evaluation. If there have been no previous contacts with the particular market, it may not be reasonable for a seller to spend time and money on research when it is still highly doubtful whether a contract will ever be concluded. If the whole contractual relationship is based on an offer and there are no further negotiations during which the seller should have made inquiries or there are no other indicators for the existence of such rights, the seller will be deemed to have lacked the necessary constructive knowledge of the intellectual property rights.44 33 Comparable economic considerations may limit the obligation to inquire for sellers who are mere intermediaries. The intermediary seller can only be expected to “ought to have been aware” of registered intellectual property rights easily discoverable by a search in the relevant registers, unless the goods are regularly imported into the particular market or the seller, due to his size or business, has his own legal department that deals with intellectual property rights.45 Intermediary sellers should, in principle, not be required to incur the cost associated with an investigation of non-registered rights. However, where such rights are well known, constructive knowledge may be assumed. 34 In addition, a seller may always rely on the trustworthy information that in the relevant state no intellectual property rights exist, which may impede an unrestricted use of the goods, if it is from a lawyer of the country in question.46

7. Exceptions from liability under Art. 42(2) 35

Pursuant to Art. 42(2) the seller’s liability is excluded when the buyer either had actual or constructive knowledge of the intellectual property claims affecting the goods or such claims are based on his own instructions. In both cases the rationale underlying 41 In favour of largely imposing a duty on such seller on the basis of an economic analysis Metzger, Die Haftung des Verka¨ufers fu¨r Rechtsma¨ngel gem. Artt. 41, 42 CISG, 73 RabelsZ (2009) 842 (853 seq). 42 Honnold/Flechtner, Uniform Law (2009), Art. 42 para. 270.1. 43 Metzger, Die Haftung des Verka ¨ufers fu¨r Rechtsma¨ngel gem. Artt. 41, 42 CISG, 73 RabelsZ (2009) 842 (856 seq). 44 Cf. Janal, The Seller’s Responsibility for Third Party Intellectual Property Rights under the Vienna Sales Convention, FS Kritzer (2008), p. 203 (pp. 215 et seq.) (Pace). 45 Magnus, in: Staudinger Kommentar (2013), Art. 42 para. 22; for a more detailed account of potentially relevant factors Rauda/Etier, Warranty for Intellectual Property Rights in the International Sale of Goods, 4 Vindobona Journal of International Commercial Law and Arbitration (2000) 30 (46 seq.) (Pace). 46 Schlechtriem, The Seller’s Obligations Under the United Nations Convention on Contracts for the International Sale of Goods, in: Galston/Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), pp. 6–33 (Pace).

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the liability pursuant to Art. 42, i. e. to protect the buyer’s expectations to receive goods which are free of third party intellectual property rights, is not met or does not merit protection.47 a) Buyer’s knowledge or culpable lack of knowledge. The buyer has knowledge about the existence of a third party intellectual property right if he knows that the goods delivered are counterfeit.48 In principle, it is sufficient for the exclusion of liability that the buyer has knowledge about the existence of a claim, irrespective of whether he considers it to be justified or not. Thus, a buyer who, on the basis of a legal opinion, considers an existing claim to be without merit and concludes the contract without any reservation cannot hold the seller liable under Art. 42 if the third party claim later turns out to be justified.49 In addition to actual knowledge, the seller’s liability is also excluded if the buyer could not have been unaware of the relevant third party rights or claims. While the standard is in principle the same as for the seller, there is a major difference in its practical application: unlike the seller the buyer has in principle no duty to investigate the existence of even registered rights unless he has contractually assumed such a duty. The buyer often lacks information concerning the composition of the goods and the processes involved in their production to determine, on a reliable basis, whether they may infringe third party intellectual property rights. Contrary to a tendency in the French jurisprudence,50 even experienced buyers cannot be assumed to know of all relevant intellectual property rights in their home country. However, the buyer could not have been unaware of the third party intellectual property rights if such rights are internationally known, as in the case of a well known trademark.51 The standard may also be fulfilled if the price charged for the goods is low enough to leave doubt that they may not be originals. The relevant time for the buyer’s knowledge is the time of contract conclusion. Subsequently acquired knowledge by the buyer may trigger the start of the notice period but does not exclude the seller’s liability under Art. 42(2).

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40

b) Compliance with technical specifications by the buyer. Art. 42(2)(b) excludes the 41 seller’s liability in all cases where the third party intellectual property right or claim is the direct result of the seller’s compliance with technical specifications by the buyer. It is a general principle of the CISG, codified primarily in Art. 80, that a party who, by his conduct, has caused a breach of contract by the other party must bear the risk of his own behaviour and will not be able to hold the other party liable for the breach. The exclusion of liability under Art. 42(2)(b) requires, however, that the specifica- 42 tions were sufficiently detailed and that the third party intellectual property claims were actually caused by compliance with such specification. General information provided or 47

See also Gabriel, Sale of Goods (2004), Art. 42 p. 142. See Tribunal de grande instance Versailles (France) 23 November 2004 (counterfeit furniture), CISGOnline 93 (Pace). 49 On this point see also Eiselen, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual (2008), Vol. 4 § 89:130 at a. 50 For example, Cour de cassation 19 March 2002 (footwear), CISG-Online 662 (Pace); Cour d’appel de Colmar, 13 November 2002 (printed textile fabric), CISG-Online 792 (Pace) which deduced from the “professional capacity” of the buyer that he could not have been unaware of existing third party intellectual property rights; in favour of a basic economic analysis of the “superior cost bearer” also Metzger, Die Haftung des Verka¨ufers fu¨r Rechtsma¨ngel gem. Artt. 41, 42 CISG, 73 RabelsZ (2009) 842 (862). 51 See Supreme Court (Israel) 22 August 1993 (jeans boots), Eximin v Itel Style Ferrari Textiles and Shoes, CISG-Online 1082 (Pace); relating to the “Levi’s trademark” for jeans; although the ULIS was applicable, the court referred to the CISG by analogy. 48

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Article 42 43–47

Part III. Chapter II. Obligations of the Seller

wishes expressed concerning the future use of the goods are in principle not sufficient when they leave the seller room to select an alternative, which would not trigger such third party intellectual property claims.52 The fact that the buyer knows that his specification may trigger a third party intellectual property right or claim is not required for an exclusion of liability. 43 A seller who is aware of the fact that the buyer’s specification may lead to an infringement of third party intellectual property rights may be obligated, under the principle of good faith, to inform the buyer about the possible infringement in case the buyer is not aware of this.53 A failure to comply with such an ancillary duty may lead to a claim for damages, notwithstanding the exclusion of the seller’s liability under Art. 42.54 c) Remedies of the seller for infringing specifications from the buyer. Art. 42(2)(b) does not address the question of which remedies the seller may have against the buyer if the specification given by the buyer will or has resulted in infringements of the intellectual property rights of a third party. Where the parties have not explicitly provided for such situations in their contract, the existing remedies can be derived from Arts 61–65. 45 The obligation to provide technical specification or the like is an ancillary obligation of the buyer. It is supplemented by an obligation to give such specifications in a way, which does not cause any harm to the seller complying with them. Therefore, a seller who realizes that the buyer’s instructions will lead to a violation of third party intellectual property rights is not bound to comply with them. Rather, under Art. 62, the seller may require the buyer to comply with his specification obligation in a way which avoids infringement. In absence of a clear contractual agreement to the contrary, the seller will not be required to deliberately infringe third party intellectual property rights and expose himself to eventual liability and/or damage his reputation. In such cases, any insistence by the buyer on the infringing specifications constitutes a fundamental breach, which will entitle the seller to avoid the contract under Art. 64(1)(a). However, these remedies only exist if the specification would actually lead (or at least have a high probability of leading) to an infringement of a third party intellectual property right. The likelihood of claims, which in the end will not be substantiated, is not sufficient. In such cases, the seller may require the buyer to give an undertaking to hold the seller free from all liability. 46 Where the seller has not been aware of the resulting infringements of third party intellectual property rights and has consequently been subject to infringement actions by the third party, the seller may claim damages from the buyer for a breach of the abovementioned ancillary duty (Art. 74).55 44

47

d) Other exemptions. In addition to the exclusions of liability in Art. 42(2), the buyer may also lose his right to rely on a breach of the seller’s obligations under Art. 42(1) due to a failure to comply with the notice requirement in Art. 43(1), unless one of the exceptions or excuses in Arts 43(2) or 44 applies. 52 Magnus, in: Staudinger Kommentar (2013), Art. 42 para. 29; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 42 para. 21; see also for such a proposition under the ULIS Supreme Court (Israel) 22 August 1993 (jeans boots), Eximin v Textile and Footwear, CISG-Online 1082 (Pace). 53 Rauda/Etier, Warranty for Intellectual Property Rights in the International Sale of Goods, 4 Vindobona Journal of International Commercial Law and Arbitration (2000) 30 (58 seq.) (Pace). 54 In this direction but with a faulty reliance on domestic law Supreme Court (Israel) 22 August 1993 (jeans boots), Eximin v Textile and Footwear, CISG-Online 1082 (Pace); for a differentiation between the case where the seller was aware of the likely infringement at the time of contract conclusion (liability under Art. 42) and subsequent awareness before delivery (damages for breach of an ancillary duty) see Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 42 para. 22. 55 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 42 para. 24.

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Article 42

In principle, the parties may also limit the seller’s liability through contractual 48 exemption clauses. In so far as such exemption clauses only relate to liability for third party intellectual property claims, their validity under the applicable national law should not be problematic. National law often limits liability to the actual infringement of intellectual property rights and considers mere claims not to be sufficient. By contrast, where the exclusion of liability also extends to infringement of rights, the validity of such exclusion clauses may be doubtful under the relevant national laws. Liability under Art. 42 only arises if the seller has actual knowledge of the third party intellectual property rights or at least could not have been unaware of them. Therefore, any exclusion of such liability comes close to an exemption for one’s own deceit or gross negligence.56

8. Remedies Any violation of the seller’s obligations under Art. 42(1), which do not fall under the Art. 42(2) exemptions, entitles the buyer to the remedies available for breach of contract under Art. 45. This encompasses, undisputedly, all remedies which are available for all other defects in title under Art. 41, i. e. specific performance (Art. 46 (1)), damages (Arts 74 seq.) and avoidance (Art. 49), provided that the additional requirements are met. Furthermore, the buyer is entitled to retain performance of his obligations (in particular payment) until the seller performs his obligations properly or it is beyond doubt that the third party will not make use of his rights.57 It is controversial whether the provisions explicitly linked to the non-conformity of the goods, i. e. Arts 46(2),(3) and 50, apply to third party intellectual property rights or claims. In favour of such an application, it can be argued that liability under Art. 42, in its structure and from the interests involved, is more similar to the liability regime for the non-conformity of goods under Art. 35 than to that for defects in title under Art. 41. As a consequence, within the limits of Art. 46(2) and (3), the buyer of generic goods may be able to ask for repair or substitute goods not affected by third party intellectual property rights or claims. The prevailing view is, however, that the remedies and limitations of Arts 46(2),(3) and 50 do not apply to breaches of the obligation to deliver goods free of third party intellectual property rights under Art. 42. It can rely on the clear wording and the legislative history. These make it unlikely that the opposing view will ever gain sufficient support to promote uniformity in the application of the CISG as required by Art. 7.58 Irrespective of this the underlying rationale, Art. 46(2),(3) justifies the application of these limitations to breaches of Art. 42 obligations.59 If no licence can be obtained for using the goods, the existence of a third party intellectual property right will frequently constitute a fundamental breach and allow for the avoidance of the contract. A buyer will generally not be expected to target different markets other than those originally contemplated to avoid being affected by third party intellectual property rights.60 The liability regime in Art. 42 excludes all remedies under domestic law which are in one way or another primarily based on the existence of third party intellectual property 56 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 42 para. 26 who does not distinguish between exemptions for rights and claims in this regards. 57 Oberster Gerichtshof (Austria) 12 September 2006 (CD media), CISG-Online 1364 (Pace), however, without the limitations as to the temporary nature of the right of retention. 58 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 42 para. 28. 59 Janal, The Seller’s Responsibility for Third Party Intellectual Property Rights under the Vienna Sales Convention, FS Kritzer (2008), p. 203 (pp. 225 et seq.) (Pace). 60 Janal, The Seller’s Responsibility for Third Party Intellectual Property Rights under the Vienna Sales Convention, FS Kritzer (2008), p. 203 (pp. 228 et seq.) (Pace).

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Article 42 54–59

Part III. Chapter II. Obligations of the Seller

rights. Thus, irrespective of the fact that the validity of the contract is in principle outside the scope of the CISG, the parties are prevented from relying on provisions of domestic law according to which a mistake about the existence of such third party intellectual property rights renders the contract invalid. Equally excluded are domestic remedies for negligent misrepresentation.61 By contrast, the buyer may still invoke remedies for deceit under national law.

9. Burden of proof 54

55

56

57

58

In general, the burden of proof is allocated according to the principle that each party has to prove the factual prerequisites of a provision it intends to rely upon.62 Thus, after taking delivery, the buyer bears the burden of proof for the existence of third party intellectual property rights or claims under the relevant law63 as well as for the seller’s knowledge64 about them. Notwithstanding the buyer’s obligation to prove the existence of a right or claim, a differentiation has to be made in relation to determining the relevant legal system under which the right or claim exists. If the buyer wants to rely on rights or claims under the law of a country of contemplated use pursuant to Art. 42(1)(a), the buyer has to prove that the parties actually contemplated a specific state for use of the goods. By contrast, if the buyer invokes liability under Art. 42(1)(b), the seller has to prove that the parties contemplated a state of use different than that of the buyer’s place of business. In both cases, actual delivery by the seller to a state other than the state of the buyer’s place of business is a strong indicator for contemplated use. However, the actual delivery is by no means conclusive. The relevant time for the contemplated use is that of contract conclusion. Thus, in the absence of contractual provisions to the contrary, the other party can always argue that the actual use was only contemplated at a later time. With respect to the seller’s actual or assumed awareness of such third party rights or claims, the buyer only has to prove the facts from which a constructive knowledge can be deduced. The seller bears the burden of proof for the requirements of the exceptions under Art. 42(2) if he wants to rely on them. Thus, in connection with Art. 42(2)(a) he has to prove that the buyer knew or could not have been unaware of the existence of such third party rights or claims. This can be done, for example, by proving that the seller has informed the buyer about discussions with a third party concerning intellectual property rights. Reliance on Art. 42(2)(b) requires proof that the encumbrances by intellectual property claims were the direct consequence of the buyer’s instructions.

III. Comparable Rules 59

The PICC and PECL, with their focus on general contract law, do not explicitly address the issue of the seller’s liability for rights and claims of third parties based on intellectual property rights. Special rules for that question are, however, contained in the PEL-Sales and the DCFR, which are worded identically. The drafters of both have 61

Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 42 paras 29 seq. Oberster Gerichtshof (Austria) 12 September 2006 (CD media), CISG-Online 1364 (Pace); generally on the allocation of burden of proof see Art. 4 paras 34 et seq. 63 Bundesgericht (Switzerland) 17 April 2012 (EAS tags), CISG-Online 2346 (Pace), para. 2.3. 64 See Hof Arnhem (Netherlands) 21 May 1996 (knitwear), Maglificio Esse v Wehkamp, CISG-Online 1290 (Pace) confirming the earlier decision of the Rechtsbank Zwolle (Netherlands) 1 March 1995 (textiles), CISG-Online 372 (Unilex) in this matter. 62

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Article 42

adopted the basic decision of the CISG to provide for a special and seller friendly liability regime for intellectual property rights, deviating from the general regime of strict liability for defects in title. It should be noted that unlike these instruments, the national laws of most European States do not provide for a separate regime.65 According to Art. 2:206 PEL-Sales and IV. A. – 2:306 DCFR, liability for intellectual 60 property rights only exists for rights, which “the seller knew or could reasonably be expected to have known”. The strict liability existing under Art. 2:205 PEL-Sales for other defects in title is limited by a fault element comparable to the one in Art. 42 CISG. Equally, the reservation as to compliance with the buyer’s specification and orders can be found in Art. 2:206 PEL-Sales and IV. A. – 2:306 DCFR. However, neither instrument provides for the territorial limitations contained in Art. 42. National laws often do not contain a special liability regime for intellectual property 61 rights, which is more lenient than the general regime for defects in title. Where such separate regimes exist, they usually do not deviate to a great extent from the general regime, as is the case with § 2–312(3) UCC. That prevalence of a strict system of liability in national laws may be relevant to the interpretation of the CISG under Art. 7. A strict interpretation of the various limitations of Art. 42, which results in a liability closer to that contained in the national laws, is more likely to promote “uniformity” in the application of the CISG than one deviating even more from the strict liability systems.66 65

Hondious et al., Principles of European Law – Sales (PEL S) (2008), Art. 2:206 Notes 1. Metzger, Die Haftung des Verka¨ufers fu¨r Rechtsma¨ngel gem. Artt. 41, 42 CISG, 73 RabelsZ (2009) 842 (850 et seq). 66

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Article 43 (1) The buyer loses the right to rely on the provisions of article 41 or article 42 if he does not give notice to the seller specifying the nature of the right or claim of the third party within a reasonable time after he has become aware or ought to have become aware of the right or claim. (2) The seller is not entitled to rely on the provisions of the preceding paragraph if he knew of the right or claim of the third party and the nature of it. Bibliography: See selected bibliographies of Arts 39, 41 and 42.

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. General remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Form, transmission and addressee of the notice . . . . . . . . . . . . . . . . . . . . . . . . 3. Notice period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Start of the notice period: actual or constructive awareness . . . . . . . . . . . b) Length of the notice period: reasonable time . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Lack of cut-off time/statute of limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Legal consequences of a failure to give notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Exclusion of reliance on a failure to give notice in time: Art. 43(2) . . . . . . 6. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 5 5 9 9 12 13 14 18 22 24 25 27 29

I. Importance and Role of the Provision Art. 43(1) stipulates a duty for the buyer to notify the seller about defects in the title within a reasonable amount of time if he does not want to lose his remedies for such defects. Reliance on a failure to notify is, however, excluded pursuant to Art. 43(2), where the seller knew about the right or claim of the third party and its nature. Furthermore, pursuant to Art. 44, in exceptional circumstances the buyer may be excused for a failure to give notice with the effect that at least some remedies will be preserved for the buyer. 2 Art. 43 is the defects in title equivalent to the “reasonable time” notice requirement in Arts 39 and 40 for the non-conformity of goods.1 The regimes differ in two respects to take account of the differences between defects in title and non-conformity of the goods. The first difference concerns the exclusion of reliance on a failure to give notice. Art. 43(2) requires actual knowledge of the claims while under Art. 40 it is sufficient that the seller could not have been unaware of the non-conformity. The second relates to the latest time when notice must be given. For a defect in title, there is no equivalent to the two-year cut-off time in Art. 39(2). Additionally, there is also no equivalent to the duty to examine in Art. 38 as such an examination would probably not reveal defects in title.2 1

1

Sono, in: Bianca/Bonell, Commentary (1987), Art. 43 para. 2.1. For the differences see also Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 43 paras 2 et seq.; Magnus, in: Honsell, Kommentar (2010), Art. 43 para. 1. 2

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Article 43

The underlying rationale for Art. 43(1) and the primary purpose of the notice 3 requirement is, however, the same as in Art. 39: to inform the seller about existing defects in title and to allow him to take appropriate action.3 This may consist of either trying to discharge existing rights, refuting claims raised or, if cure is not possible, seeking redress from his suppliers. Additionally, the notice requirement also protects the seller’s interest in the speedy finalization of projects.4 The basic principles of the regulation in Art. 43 were already contained in the 4 provision’s predecessor, Art. 52 ULIS.

II. Detailed Commentary 1. General remarks Art. 43 makes the buyer’s remedies for defects in title of the goods delivered dependent on the fulfilment of a notice requirement, the content and timing of which are set out in general terms. In applying and interpreting these general terms, and in particular in determining what constitutes a “reasonable time” for notice, the abundant case law on Arts 39 and 40 may provide valuable guidance.5 The notice regime for nonconformity serves the same purpose and has a comparable structure as the one in Art. 43. It is thus suggested that the “reasonableness” of time will be dependent on the same factors. Taking into account the grave consequences associated with a failure to notify the seller, i. e. loss of all remedies, Art. 43 should not be interpreted too strictly. This is further supported by the fact that the seller is only excluded from relying on a failure to give notice in time when he knew about the claim. Unlike in the context of Art. 40, mere constructive knowledge is not sufficient for the application of Art. 43. This creates an imbalance between the standard for buyer and seller, i. e. for the starting of the notice period it is sufficient if the buyer “ought to have been aware” of the defect. The notice requirement exists for all defects in title in the sense of Arts 41 and 42. It also covers any further liability for defect in title assumed by the seller, e. g. liability for the complete absence of intellectual property rights of third parties on a worldwide basis.6 In stipulating a duty to inform the seller about defects in title, Art. 43 clarifies that the buyer is in principle not required to defend against third party rights or claims. Irrespective of this, if immediate action is necessary to protect the seller’s interests in the goods, the buyer may be required to take the necessary actions under good faith considerations (Art. 7(1)) or to mitigate losses (Art. 77).7

5

6

7

8

2. Notice a) Content. Art. 43 requires the buyer to give notice “specifying the nature of the 9 right or claim of the third party”. The requirements as to the specificity of the notice follow from the purpose of the notice requirement. The notice should inform the seller about the existence of a right and at the same time allow him to take immediate action to defend his rights. In particular, the seller should be enabled to contact the third party 3 See Bundesgerichtshof (Germany) 26 January 2006 (automobile), CISG-Online 1200 (Pace) para. 13; Eiselen, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual (2008), Vol. 4 § 89:117. 4 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 43 CISG, para. 1. 5 See also Honnold/Flechtner, Uniform Law (2009), Art. 43 para. 271. 6 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 43 para. 4. 7 Magnus, in: Honsell, Kommentar (2010), Art. 43 para. 16.

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Article 43 10–14

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to either discharge existing rights or to refute claims raised.8 This requires that the third party is sufficiently specified, normally by name and address. Furthermore, the buyer has to specify the nature of the right or claim raised and the steps taken so far by the third party in a way which will allow the seller to take appropriate action.9 This does not require the buyer to give details about the date or the terms of a registration.10 On the other hand, general information that the goods are subject to third party claims is not sufficient. 10 In principle, a transfer of the relevant letters, faxes, emails or other documents including the claims raised will be sufficient to comply with the specificity requirement.11 In general, it is not incumbent on the buyer to investigate the claims any further or to make their content more accessible to the seller. Only where additional information, which may be necessary for the seller to take action, has been passed orally may the buyer be required to do more than merely transmit the documents received. The buyer is not required to evaluate the chances of success of the claims raised or set out the steps he wants to undertake to defend against the claim. 11 In cases where the goods suffer from several defects in title, the buyer has to give notice about every defect upon which he wants to rely.12 12

b) Form, transmission and addressee of the notice. The CISG does not prescribe a particular form for the notice, thus it may be given in any form: e. g. in writing, electronically or even orally. Pursuant to Art. 27, the seller bears the risk of delay and non-delivery of the notice if the buyer has selected appropriate means of communication. The addressee of the notice is the seller.13

3. Notice period 13

Art. 43(1) requires the buyer to give notice about existing defects in title “within a reasonable time after he has become aware or ought to have become aware of the right or claim”. The start, but in particular the length of the notice period, i. e. what constitutes a reasonable time, depends on the facts of each particular case.14 These may include any usages or practices established between the parties insofar as they have not already determined a more precise time for notice.

14

a) Start of the notice period: actual or constructive awareness. The reasonable time of Art. 43(1) begins to run when the buyer becomes aware or ought to become aware of the legal defect.15 Awareness can be assumed whenever the rights or claims have been raised or asserted directly towards the buyer or his relevant employees. The buyer may, however, also become aware of the existence of third party rights before they have been asserted against him, for example by press reports about actions against other parties using the same goods. In such cases, the notice period starts to run once the buyer has 8

Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 43 para. 5. Bundesgerichtshof (Germany) 26 January 2006 (automobile), CISG-Online 1200 (Pace) para. 21; Janal, The Seller’s Responsibility for Third Party Intellectual Property Rights under the Vienna Sales Convention, FS Kritzer (2008), p. 203 (p. 223) (Pace); Magnus, in: Honsell, Kommentar (2010), Art. 43 para. 5. 10 Too far in this respect Beline, Legal Defect Protected by Article 42 of the CISG: A Wolf in Sheep’s Clothing, 7 University of Pittsburgh Journal of Technology Law and Policy (Spring 2007) 6 (at footnote 71). 11 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 43 para. 6. 12 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 43 para. 7. 13 For details see Art. 39 paras 49 et seq. 14 See also Bundesgerichtshof (Germany) 26 January 2006 (automobile), CISG-Online 1200 (Pace) which held that “a schematic fixing of the time for notice of defect is impossible”. 15 Bundesgerichtshof (Germany) 26 January 2006 (automobile), CISG-Online 1200 (Pace). 9

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Article 43

become aware of the existence of such actions. However, any time needed to clarify whether the third party will make use of his rights may be taken into account in determining the length of the period. Determining when the buyer “ought to have become aware” of defects in title is more 15 problematic. In light of the fact that the provision merely serves the interests of the seller and applies different standards of knowledge for the buyer and the seller, the requirements for assuming constructive knowledge of the buyer should be high. The indications that the third party has rights or will raise claims against the buyer must be so clear that a diligent buyer would either draw the necessary conclusions or investigate the issue further. In this respect, it has to be kept in mind that the buyer can normally rely on the absence of third party rights and has no general duty to make inquiries.16 There is no equivalent provision to Art. 38, which, particularly in relation to intellectual property rights, could form the basis for such a general duty to search the relevant registers. It is even not always sufficient that a third party has previously raised claims against other customers.17 In the meantime the third party may have changed its view about its claims or its strategy. In particular, where the seller is aware of previous instances where the third party has raised claims and delivers the goods without any reservations, a buyer may assume that the problems have been resolved. Indications of third party rights can be foreign trade marks or names printed on the 16 goods.18 Equally the seizure of goods by the police or customs office is generally sufficient to assume at least constructive knowledge of a third party claim. The notice period under Art. 43 will only start to run with the delivery of the goods. 17 However, in exceptional circumstances the buyer may be required under the principle of good faith to inform the seller about third party rights or claims of which he is aware even before delivery. This is because these third party rights may seriously affect the seller’s position, e. g. they may lead to a confiscation of the goods during transport.19 b) Length of the notice period: reasonable time. The primary factors for determin- 18 ing the length of the notice period, i. e. what constitutes a “reasonable time”, are the type of the right asserted and the consequences which may be associated with the claim of the third party. A factor which shortens the time period is the threat of a deterioration of the seller’s 19 legal position if no immediate actions are taken. The initiation of proceedings by the third party with resulting time limits to be met by the seller is one example. The threat to the sellers’ rights resulting from such proceedings is much greater than the one flowing from a mere assertion of rights outside judicial proceedings. Without the time to prepare a meaningful defence, the seller may lose an existing right due to the res judicata effect of a resulting decision. The seller’s ability to refute claims may also be affected through an imminent loss of evidence which can only be prevented by swift action. The same applies where the claims raised by the third party and the actions threatened may result in a loss of possession of the goods. This is especially so where a transfer of the possession of the goods to the third party is imminent, with the threat that such goods will be moved out of the reach of the seller. The seller often has greater chances in defending against de-possession than petitioning for repossession.

16

Magnus, in: Honsell, Kommentar (2010), Art. 43 para. 8. Oberster Gerichtshof (Austria) 12 September 2006 (CD media), CISG-Online 1364 (Pace). 18 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 43 para. 9. 19 Magnus, in: Honsell, Kommentar (2010), Art. 43 para. 9; see also Gruber, in: Mu ¨ nchKommBGB (2016), Art. 43 para. 10 who seems, however, to subsume such cases under Art. 43 which will lead to differences concerning the burden of proof. 17

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Irrespective of the above and for the purpose of legal certainty, in absence of special circumstances a notice period of one month should be considered reasonable.20 In such “normal cases” where the third party asserts its rights, one month should in general be sufficient for the buyer to get an approximate picture of the legal situation. Unlike with most national laws, the liability of the seller under Arts 41 and 42 is not dependent on the existence of a right but rather is triggered by a claim of a third party – even a frivolous one.21 Consequently the buyer is not required to investigate the justification of the claims raised in detail, particularly because their merits often depend on a complex interplay of several judicial systems with whom the buyer is not familiar. It follows, however, that the time which would be needed for ascertaining the legal position in detail will not be factored in when determining the length of the period for giving notice.22 On the other hand, the buyer must be given some time to get an approximate picture of the legal situation in order to give a meaningful notice about the rights and claims raised.23 21 A longer period may be required in the rare cases where the buyer’s complaint is not the consequence of being contacted by a third party asserting its rights but instead results from the buyer’s own investigations. In such cases, where third party claims in the sense of Art. 43 do not exist, the buyer can only rely on the existence of a third party right, the verification of which may take some time because it may, for example, require looking into relevant registers.24 20

c) Lack of cut-off time/statute of limitation. Unlike Art. 39(2) in the context of nonconformity of the goods, Art. 43 does not provide for a maximum time in which claims concerning defects in title have to be notified. A proposal for the inclusion of a comparable cut-off date was expressly rejected during the deliberation of the CISG. Contrary to non-conformity of the goods, defects in title will often only be discovered after a longer time (although they will be easier to prove). In particular, in connection with intellectual property rights it may take some time until the third party has become aware of the use of the goods by the buyer and only then asserts its own rights. 23 Like all other remedies, remedies for defect in title are subject to the general rules of prescription. These are not regulated by the CISG but are instead determined on the basis of the applicable conflict of laws rules. 22

4. Legal consequences of a failure to give notice 24

Pursuant to Art. 43(1), a failure to give notice about the defects in title will lead to a loss of “the right to rely on the provisions of article 41 and article 42”. This means that the buyer, who remains bound to perform under the contract, loses all remedies for the breach of the seller’s duty to deliver goods with good title. These harsh consequences are only excluded if the seller has either waived the notice requirement or one of the statutory exceptions in Arts 43(2) or 44 applies. These exceptions require the seller to have known about the defects (Art. 43(2)) or the buyer to have a reasonable excuse for 20 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 43 CISG, para. 3; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 43 para. 3. 21 For details see Art. 41 paras 15 et seq.; Art. 42 para. 9. 22 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 43 CISG, para. 3; Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 43 para. 11; Schlechtriem/Butler, CISG (2009), para. 168. 23 Magnus, in: Honsell, Kommentar (2010), Art. 43 para. 10; too far in this respect Beline, Legal Defect Protected by Article 42 of the CISG: A Wolf in Sheep’s Clothing, 7 University of Pittsburgh Journal of Technology Law and Policy (Spring 2007) 6 (at footnote 73) who requires that the buyer must have received “all the information from the third party”. 24 Gruber, in: Mu ¨ nchKommBGB (2016), Art. 43 paras 11 seq.

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his failure to give notice in time (Art. 44). If the Arts 43 or 44 exceptions can be established, some of the buyer’s remedies will be preserved.25

5. Exclusion of reliance on a failure to give notice in time: Art. 43(2) The wording of Art. 43(2), particularly if compared with Art. 40, leaves no doubt that 25 only actual knowledge of the seller will prevent him from relying on failure to give notice in time. Proving the seller’s knowledge may in practice create considerable evidentiary problems for the buyer. Consequently, the standard should not be set too high. It is suggested that the buyer should not be required to establish that the seller knew the legal details of the claim.26 By contrast, knowledge of the facts upon which the third party’s right or claim is based may be sufficient. The relevant time for knowledge is neither the conclusion of the contract nor the 26 time of delivery; rather it is the time when notice of the defective title should have been given.27 Art. 43(2) constitutes an exception from Art. 43(1), based on the idea that no notice to the seller is necessary if he is aware of the defects in title. Consequently, the latest time when notice should have been given is relevant to determine whether it was necessary or not.

6. Burden of proof The buyer has to prove that the notice was given within a reasonable time and with 27 the required specificity. This requires that the buyer pleads and – if contested – proves all facts which are relevant for the “reasonableness” of the time for notice, and in particular when he acquired knowledge about the third party right or claim. In light of Art. 27, it is sufficient, that the buyer proves that the notice has been sent in time by appropriate means. If the buyer wants to rely on the exception in Art. 43(2) he has to prove that the seller 28 knew about the third party rights and claims.28 Proving the facts from which such knowledge can reasonably be inferred is sufficient. In this context, considerations of proof proximity or spheres of risk may lead to a reversal of the burden of proof or at least the burden of pleading.29

III. Comparable Rules The PICC does not contain a comparable general notice requirement for defects in title. 29 It has, however, been submitted that the doctrine of good faith and fair dealing enshrined in Art. 1.7(1) PICC may impose such an obligation in appropriate circumstances.30 Art. 4:302 PEL-Sales contains a largely comparable provision. The main difference is 30 the drafting technique. The notice requirements for non-conformity and defects in title are regulated in a single provision which only distinguishes between the two for the issue of the two-year cut-off period – which does not apply to defects in title (Art. 4:302(5)). 25 For details, in particular whether the buyer may also reduce the price see Eiselen, in: Kritzer/Vanto/ Vanto/Eiselen, International Contract Manual (2008), Vol. 4 § 89:119; Art. 44 paras 27 et seq. 26 Magnus, in: Honsell, Kommentar (2010), Art. 43 para. 18. 27 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 43 para. 11. 28 Ferrari, in: Ferrari et al. (eds), Internationales Vertragsrecht (2018), Art. 43 para. 16. 29 Magnus, in: Honsell, Kommentar (2010), Art. 43 para. 21; see also Oberster Gerichtshof (Austria) 12 September 2006 (CD media), CISG-Online 1364 (Pace). 30 Gabriel, Sale of Goods (2004) p. 143.

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Article 44 Notwithstanding the provisions of paragraph (1) of article 39 and paragraph (1) of article 43, the buyer may reduce the price in accordance with article 50 or claim damages, except for loss of profit, if he has a reasonable excuse for his failure to give the required notice. Bibliography: Birch, Article 44 of the U. N. Sales Convention (CISG): A possible divergence in interpretation by courts from the original intent of the framers of the compromise, 4 Regent Journal of ~ellas,, The Scope of Article 44 CISG, 25 Journal of Law and International Law (2006) 1; Martı´nez Can Commerce (2005/2006) 261 (Pace); CISG-AC Opinion no 2, Examination of the Goods and Notice of Non-Conformity: Articles 38 and 39, 7 June 2004. Rapporteur: Professor Eric E. Bergsten, Emeritus, Pace University School of Law, New York (http://www.cisg-ac.org).

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. General remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Scope of application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Reasonable excuse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The notion of “reasonable excuse” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Seriousness of buyer’s failure to meet the notice requirements . . . . . . . . c) Origin of the buyer and type of business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Other subjective factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Legal consequences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Overview of available remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Price reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Further limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Burden of Proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 6 6 8 13 13 17 20 22 27 27 28 30 31 37 38

I. Importance and Role of the Provision Art. 44 preserves certain remedies for buyers who have not notified the seller within the required time about a lack of conformity, provided they have a “reasonable excuse” for their failure. It relieves these buyers of some of the consequences stipulated in Arts 39(1) and 43(1) for failing to give timely notice. 2 Art. 44 was included at the Diplomatic Conference in Vienna. It is a crucial part of the compromise between delegates who wanted to abolish notice requirements and sanctions for non-compliance and delegates who wanted to preserve the fairly strict regime of the ULIS.1 After efforts of the former group failed by a narrow margin in the preparatory stages of the Conference, Art. 44 was included to take into account their serious dissatisfaction with the 1978 Draft Convention. 1

1 For a more detailed account of the drafting history see Birch, Article 44 of the U. N. Sales Convention (CISG): A possible divergence in interpretation by courts from the original intent of the framers of the ~ellas, The Scope of compromise, 4 Regent Journal of International Law (2006) 1 (3 et seq.); Martı´nez Can Article 44 CISG, 25 Journal of Law and Commerce (2005/2006) 261 seq. (Pace); Honnold/Flechtner, Uniform Law (2009), Arts 39, 40, 44 para. 261; Garro, Reconciliation of Legal Traditions in the U. N. Convention on Contracts for the International Sale of Goods, 23 International Lawyer (1989) 443 (468 et seq.) (Pace).

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On the one hand, Art. 44 mitigates the harsh sanctions in Arts 39(1) and 43(1) in 3 cases where it would seem inequitable to deprive the particular buyer of all remedies. On the other hand, the seller’s interest in a speedy notice is sufficiently protected by the limited scope of the excuse, i. e. the preservation of only two remedies (price reduction and certain damage claims). The loss of all other remedies, which may occur with any failure to comply with the notice requirement even when a reasonable excuse exists under Art. 44, provides sufficient incentive for the buyer to act swiftly. This regime largely excludes the risk of buyers waiting with their notice and speculating on the market at the seller’s expense.2 Due to its inclusion in a later stage of the Diplomatic Conference, Art. 44 is not well 4 integrated with the other notice requirements and has attracted considerable criticism.3 In particular, the vagueness of the central notion “reasonable excuse” has been castigated as leaving too many issues unresolved. Despite this criticism, Art. 44 has proven to be a valuable tool for taking into account the particular situation of each specific buyer and has not led to confusion in practice.4 Art. 44 has no direct equivalent in the ULIS. Irrespective of this, the question has 5 been raised as to whether the inclusion of Art. 44 added something to the existing notice system under the ULIS. Interpreted broadly, the wording of Arts 38 and 39 ULIS provided some leeway to reach results which are at least comparable to the objective pursued in Art. 44.5 As a consequence, decisions which adopted such a broad interpretation can provide at least some guidance of which factors should be taken into account in determining whether a “reasonable excuse” exists.

II. Detailed Commentary 1. General remarks Art. 44 constitutes an exception to the general rules in Arts 39(1) and 43(1) and as 6 such, in principle, should be interpreted narrowly.6 As a consequence of this narrow interpretation, buyers were in the past rarely successful in their efforts to rely on Art. 44 in practice.7 However, this may be due to the fact that most of the published decisions are from courts in the western world where the judges may have never actually experienced the problems faced by buyers from developing countries. Moreover, in countries where the national sales law is based on strict notice requirements, such as Germany, there is always the risk that courts will adopt a restrictive ~ellas, The Scope of Article 44 CISG, 25 Journal of Law and Commerce (2005/2006) 2 Cf. Martı´nez Can 261 (262 seq.) (Pace). 3 For further references see Eiselen, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual (2008), Vol. 4 § 89:86, footnote 1. 4 Equally positive Honnold/Flechtner, Uniform Law (2009), Arts 39, 40, 44 para. 261; for a summary of ~ellas, The Scope of Article 44 CISG, 25 Journal of Law and Commerce the case law see Martı´nez Can (2005/2006) 261 (267 et seq.) (Pace); DiMatteo et al., International Sales Law (2005), p. 92. 5 See CISG-AC Opinion no 2, paras 4.3 et seq.; Handelsgericht Zu ¨ rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace) at 4 d. 6 Bundesgerichtshof (Germany) 26 January 2006 (automobile), CISG-Online 1200 (Pace) para. 14; Handelsgericht Zu¨rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace) at 4 d; Arbitral Award, ICC 9083/1999, 1 August 1999 (books), CISG-Online 706. 7 See Flechtner, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), Art. 44 para. 5, p. 146 with considerable case law in footnote 14; Eiselen, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual (2008), Vol. 4 § 89:97 footnote 6; Birch, Article 44 of the U. N. Sales Convention (CISG): A possible divergence in interpretation by courts from the original intent of the framers of the compromise, 4 Regent Journal of International Law (2006) 1 (3).

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interpretation of Art. 44. This does not reflect the compromise intended by the inclusion of the provision.8 7 Broadly speaking, Art. 44 constitutes a good faith exception for extraordinary cases in which a complete loss of remedies due to non-compliance with the notice requirement would be inequitable. The practical relevance of Art. 44 depends to a considerable extent on the interpretation of the notice requirements in Arts 39 and 43. A strict interpretation of these notice requirements will increase the need to rely on Art. 44 while the opposite is true for a generous interpretation.9

2. Scope of application According to its wording, Art. 44 is intended to relieve the buyer of some of the consequences resulting from Arts 39(1) and 43(1) for “a failure to give the required notice”. “Required notice” in the sense of Art. 44 is a notice which complies with the exigencies of Arts 39(1) and 43(1) in relation to timing and content. Consequently, Art. 44 may not only provide an excuse in cases of a complete failure to notify the seller, but also where such notice has been made too late or did not meet the specificity requirements of either provision.10 9 Furthermore, notwithstanding the fact that Art. 44 only explicitly refers to the duty to notify the seller in Art. 39(1) and not the duty to examine the goods in Art. 38,11 the provision may also apply to cases where a failure to give notice in time was due to a non-compliance with the examination duty.12 The reasons for the breach of the notice requirement are irrelevant for the general applicability of Art. 44. 10 In cases of non-conforming goods in the sense of Art. 35, Art. 44 only constitutes an exception to Art. 39(1). The two-year cut-off period in Art. 39(2) is left untouched.13 Consequently, with the expiry of the two years, buyers can no longer rely on Art. 44 to prevent a complete loss of their Art. 39 remedies. The same applies for contractual cutoff periods agreed upon by the parties.14 8

8 Critical in this respect also Birch, Article 44 of the U. N. Sales Convention (CISG): A possible divergence in interpretation by courts from the original intent of the framers of the compromise, 4 Regent Journal of International Law (2006) 1 (5 et seq.) ~ellas, The Scope of 9 Magnus, in: Honsell, Kommentar (2010), Art. 44 para. 1; cf Martı´nez Can Article 44 CISG, 25 Journal of Law and Commerce (2005/2006) 261 (264) (Pace) referring to doubts whether Art. 44 would at all be necessary if a generous application of Arts 38, 39, 43 is adopted. 10 Magnus, in: Staudinger Kommentar (2013), Art. 44 para. 6. 11 This lack of explicit reference has been relied upon in a German decision to exclude any reliance on Art. 44 in cases of a failure to comply with the duty to examine the goods; see Oberlandesgericht Karlsruhe (Germany) 25 June 1997 (surface protective film), CISG-Online 263 (Pace); reversed on appeal on other grounds by Bundesgerichtshof (Germany) 25 November 1998 (surface protective film), CISGOnline 353 (Pace) holding that the seller had waived his right to rely on the buyer’s failure to give proper notice so that the buyer did not have to rely on Art. 44. 12 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 44 para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 44 para. 5; Arbitral Award, ICC 9187, June 1999 (coke), CISG-Online 705(Pace); Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 54/1999, 24 January 2000 (goods not specified), CISG-Online 1042 (Pace); for further cases see Flechtner, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), Art. 44 para. 4. 13 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 44 para. 1; Oberlandesgericht Linz (Austria) 24 September 2007 (laminated glass), CISG-Online 1583 (Pace), confirmed by Oberster Gerichtshof (Austria) 19 December 2007 (laminated glass), CISG-Online 1628 (Pace); but see Oberlandesgericht Zweibru¨cken (Germany) 2 February 2004 (milling equipment), CISG-Online 877 (Pace) which examined the requirements of Art. 44 despite the expiration of the two-year cut-off period in Art. 39(2). 14 Magnus, in: Staudinger Kommentar (2013), Art. 44 para. 7.

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In practice, Art. 44 has also been applied to contractual notice requirements.15 In 11 principle, it may seem sensible to extend the tempering influence of Art. 44 to contractual notice requirements,16 particularly where they merely specify or modify the duty in Art. 39. However, it always has to be kept in mind that in such cases the notice requirements are based on party autonomy. Thus, an excuse under Art. 44 is normally less warranted and cannot be based on the buyer’s unawareness of the notice requirement. In general, in the case of contractual notice requirements, a reasonable excuse should only be found to exist if the failure or delay was due to circumstances which were at the time of contracting beyond contemplation of the party trying to rely on Art. 44. In all other cases, the relevant party should be considered to have assumed the risk that it may lose its remedies due to a failure to comply with the notice requirement. In the end, the applicability of Art. 44 to such contractual notice requirements depends on their interpretation.17 Practices and usages in the sense of Art. 9, whether they are stricter or more lenient, 12 precede Art. 44. In most cases, however, they will become relevant at the preceding stage of determining whether the notice requirement has been breached and whether they modify or specify the relevant standards for the notice.

3. Reasonable excuse a) The notion of “reasonable excuse”. The application of Art. 44 presupposes that 13 the buyer has a “reasonable excuse” for not complying with the notice requirements under Arts 39(1) and 43(1). What constitutes a “reasonable excuse” has to be determined and understood in light of the legislative history.18 Art. 44 was included primarily upon the initiative of the developing countries. They considered the consequences of Art. 39 to be too drastic and leading to inequitable results as buyers may be required to pay the full price for defective or even unusable goods due to a slightly belated or insufficiently specific notice. In particular, these countries were concerned that their importers would lose their remedies either because they were not able to discover defects in complex machinery within the required time or because they were not aware of the notice requirement, a concept that may be unknown to their national system. Consequently, Art. 44 takes into account a much stronger subjective component than 14 permitted under Art. 39.19 Individual importers or importers from a certain region can state difficulties, such as the unavailability of necessary testing facilities or problems in organization, communication or transportation, as a “reasonable excuse”. At the same time, it will be important to consider whether or not the actual buyer is familiar with notice requirements in general, for example if he comes from a legal system which provides for comparable sanctions. If the buyer is not familiar with notice requirements, a court may be more ready to find that he has a reasonable excuse for not complying with them, as opposed in cases where he has to comply with them in most of his 15 Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 54/1999, 24 January 2000 (goods not specified), CISG-Online 1042 (Pace) with critical comment by Saidov, Cases on CISG decided in the Russian Federation, 7 Vindobona Journal of International Commercial Law and Arbitration (2003) 1 (29 seq.) (Pace). 16 So Honnold/Flechtner, Uniform Law (2009), Arts 39, 40, 44 para. 261. 17 Magnus, in: Staudinger Kommentar (2013), Art. 44 para. 9. 18 Honnold/Flechtner, Uniform Law (2009), Arts 39, 40, 44 para. 261. ~ellas, The Scope of Article 44 CISG, 25 Journal of Law and Commerce (2005/2006) 261 19 Martı´nez Can (266) (Pace); Reitz, A History of Cutoff Rules as a Form of Caveat Emptor: Part I – The 1980 U. N. Convention on the International Sale of Goods, 36 American Journal of Comparative Law (1988) 437 (461 seq.) (Pace).

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transactions.20 While, technically speaking, Art. 44 does not contain an “absence of fault” requirement, the parties’ potential awareness of the notice requirement should be taken into account in determining whether a “reasonable excuse” exists. 15 There have been several efforts to find a workable definition of what constitutes a “reasonable excuse” in the sense of Art. 44. One of the problems is that to justify the proper scope of application for Art. 44 the relevant factors must be distinguishable from those which define what constitutes a “reasonable time” for notice in the sense of Art. 39. Magnus, for example, recognises a reasonable excuse if the failure to give the required notice is due to circumstances where, under principles of good faith, the average buyer could be forgiven.21 In the words of a German court, reasonable excuses can be recognised “if the conduct of the buyer deserves some fair understanding and forbearance due to the circumstances of the individual case”.22 This does not require the absence of fault in the technical sense as otherwise there would hardly be any room for the application of Art. 44. In principle, it is largely inconceivable that a buyer who did not comply with the notice requirements did display the necessary standard of care and did not act negligently.23 In the end, whether one likes it or not, the decision about the existence of a reasonable excuse has to be based on the equities of the case.24 It involves balancing the legitimate interests of both parties to a certain degree.25 16 In determining the equities of a particular case, significant weight must be attributed to the type and size of the breach of the notice requirement by the buyer. The equitable character of the Art. 44 defence leaves room to look beyond the mere situation of a buyer who is the principal addressee of the excuse. The “reasonableness” requirement allows one to take into account other factors. These include, in particular, the legitimate interests of the seller, the nature of the breach and the type of goods involved.26 The facts underlying an unduly restrictive decision of the Frankfurt Regional Court serves as a good example. Under a contract for the sale of used shoes between a German party and a Ugandan party the goods had to be delivered to Mombasa, Kenya. Shortly after their delivery in Kenya, they were transhipped to their final destination in Uganda where an examination revealed that the goods were defective.27 The Ugandan party immediately notified the German seller, but the court considered the notice – given after the goods’ arrival in Uganda – to be too late to comply with Art. 39. The court also rejected reliance on Art. 44. In its reasoning in relation to Art. 38 (3) the court inter alia addressed the considerable expenses for the Ugandan party that would arise in travelling to Kenya and the need to break the customs seals which would have led to customs duties becoming due. While these factors, by themselves, in light of the contractual 20 At first sight in favour of the irrelevance of the knowledge but then taking into account the legal nature of the party Oberlandesgericht Mu¨nchen (Germany) 26 October 2016 (shoes), CISG-Online 2799, at I.18. 21 Magnus, in: Staudinger Kommentar (2013), Art. 44 para. 12; see also Oberster Gerichtshof (Austria) 15 October 1998 (timber), CISG-Online 380 (Pace) which additionally requires that the buyer “acted with the kind of diligence which it could subjectively be expected to apply in the circumstances”. 22 Saarla ¨ ndisches Oberlandesgericht (Germany) 17 January 2007 (natural stone marble panels), CISGOnline 1642 (Pace). 23 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 44 para. 4. 24 See also Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 44 para. 5 (“A buyer’s conduct, although not in itself correct and in accordance with the rules, is excusable if … equity would command a certain degree of understanding and leniency”). 25 Saarla ¨ ndisches Oberlandesgericht (Germany) 17 January 2007 (natural stone marble panels), CISGOnline 1642 (Pace) “Article 44 CISG requires a balancing of interests according to the criteria of fairness”. 26 For further factors see Oberlandesgericht Mu ¨ nchen (Germany) 8 February 1995 (polypropylene plastic granulate), CISG-Online 142 (Pace). 27 Landgericht Frankfurt (Germany) 11 April 2005 (used shoes), CISG-Online 1014 (Pace).

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provisions were probably not sufficient for an Art. 44 excuse, the court could have taken a number of other issues into account in favour of an excuse. These include the size of the loss for the buyer, who received goods which were not usable at all and had to be destroyed at his expense, and the nature of the goods and defects, which created no evidentiary problems for the seller to prove their conformity at the time of delivery as their condition did not deteriorate over the time.28 b) Seriousness of buyer’s failure to meet the notice requirements. The seriousness 17 or severity of the buyer’s breach of the notice requirement is of crucial relevance in determining the existence of a reasonable excuse. It will be much more difficult, if not impossible, to find a reasonable excuse in the case of a serious breach of the notice requirement than it will be if the notice is merely a few days late. The cause for the failure to give notice in time may also be relevant in this context. In general, it will be easier to excuse delays that arise from difficult examinations than from those which are due to failures to give timely notice after the defect has been discovered. Factors to be taken into account in cases of delayed examination include the amount of delay and the cost and problems associated with an examination. Notices which – while not completely vague – do not meet the sometimes strictly 18 interpreted specificity requirements may benefit from a reasonable excuse.29 Notwithstanding the fact that they do not give the seller enough information to take necessary action, they do, at least, pass on the most crucial information, i. e. that the goods are not conforming and that some action is required. In particular, an application of Art. 44 in cases where the notice lacks specificity may be justified when the seller himself has been negligent in not discovering the non-conformity or the defect in title. However, this does not mean that the buyer will be able to rely on Art. 44 in all cases 19 of a minor breach of the notice requirements.30 The breach always has to be weighed against the seller’s interest in strict compliance with the notice requirements and the consequences associated with an exclusion of all remedies. In the absence of a special reason, i. e. a reasonable excuse, the balance will always be in favour of the seller. c) Origin of the buyer and type of business. The origin of the buyer plays an 20 important role in the application of Art. 44, as in some areas of the world buyers encounter much greater problems in complying with the notice requirement. This may be due to restrictions on the availability of testing facilities, insufficient means of communication or transportation or delays caused by inefficient or corrupt public authorities in ports or at the customs offices.31 Thus, where the examination requires the goods delivered to be processed, an unexpected delay in the delivery of the necessary machines for processing should constitute a reasonable excuse for the buyer.32 Equally, the general or individual financial situation of the buyer, i. e. the availability of credit financing, may delay the notice, for example where expensive testing has to be prefinanced. While Art. 44 was included primarily upon the initiative of developing 28 Flechtner, Funky Mussels, a Stolen Car, and Decrepit Used Shoes: Non-Conforming Goods and Notice thereof under the United Nations Sales Convention, Boston University International Law Journal (2008) 1 (27) (Pace); cf. the same in Honnold/Flechtner, Uniform Law (2009), Arts 39, 40, 44 para. 261. 29 Not if the seller has asked for additional information which was not provided by the buyer Oberlandesgericht Oldenburg (Germany) 28 April 2000 (furniture), CISG-Online 683 (Pace). 30 Magnus, in: Honsell, Kommentar (2010), Art. 44 para. 6. 31 May have been an overlooked issue in Oberlandesgericht Koblenz (Germany) 11 September 1998 (chemical substances), CISG-Online 505 (Pace); critical also Birch, Article 44 of the U. N. Sales Convention (CISG): A possible divergence in interpretation by courts from the original intent of the framers of the compromise, 4 Regent Journal of International Law (2006) 1 (9 seq.). 32 For a different view see Oberlandesgericht Koblenz (Germany) 11 September 1998 (chemical substance), CISG-Online 505 (Pace).

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countries, the exception in Art. 44 is by no means limited to buyers coming from such states.33 It also extends to countries where the legal system either does not provide for a notice requirement at all or does not impose such drastic results for its non-compliance, as is the case with a number of common law countries.34 21 Furthermore, the type of business of the buyer may be relevant. It will be easier to excuse oversights by small business entities with little experience in international trade than those by big multinational companies which have their own legal department.35 d) Other subjective factors. Purely subjective factors, which cannot be taken into account in defining the time for examination or giving notice, may also be relevant for establishing the existence of a reasonable excuse. This includes illnesses of the buyer or his personnel, strikes and short but crucial disruptions of the ordinary course of business.36 Equally, communication of the notice to the wrong person(s) may be excused where such person(s) may previously have been the seller’s representative. 23 A reasonable excuse may also result from linguistic difficulties or problems connected with the legal evaluation of a case, e. g. the fact that a buyer misinterpreted the legal situation if such misinterpretation is not grossly negligent.37 For example, a buyer who has declared avoidance of the contract for a non-conformity he wrongly considered to be fundamental may be excused for not engaging into further examinations which would have otherwise been necessary and would have revealed additional defects. However, this excuse will not apply to defects which could have been discovered by a superficial examination.38 Moreover, the excuse is limited to cases of avoidance where, if the legal evaluation had been correct, any further examination would have been a waste of resources. By contrast, in connection with other remedies, a proper notification of one defect does not constitute a reasonable excuse that other defects have not been notified in time.39 24 A reasonable excuse may also exist when the buyer has wrongly deduced from the seller’s declarations or behaviour in connection with an earlier delivery that the seller would not insist on a timely examination and notice and has therefore not examined the goods in time.40 This requires, however, that the buyer’s interpretation of the seller’s previous behaviour has not been grossly negligent. For example, this may arise where the buyer has informed the seller about the fact that the goods would be stored for some time before being used as the necessary facilities had yet to be constructed and the seller does not insist on an earlier examination. Even though the seller’s behaviour may not amount to an agreement for the postponement of the examination obligation, it may be sufficient to be relied on for the application of Art. 44.41 25 A buyer has also been held to be excused in cases where the belated notice of conformity is the result of a reliance on an examination by an independent third party, 22

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Magnus, in: Staudinger Kommentar (2013), Art. 44 para. 10. For the opposite case see Schroeter, UN-Kaufrecht und Europa¨isches Gemeinschaftsrecht (2005), p. 682. 35 Oberlandesgericht Mu ¨ nchen (Germany) 8 February 1995 (polypropylene plastic granulate), CISGOnline 142 (Pace) at II 3 b (cc). 36 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 44 para. 8. 37 Magnus, in: Honsell, Kommentar (2010), Art. 44 para. 8. 38 More restrictive Danish Maritime and Commercial Court (Denmark) 31 January 2002 (fish (mackerel)), CISG-Online 679 (Pace). 39 See Oberlandesgericht Celle (Germany) 10 March 2004 (commercial vehicle), CISG-Online 824 (Pace). 40 Oberlandesgericht Graz (Austria) 11 March 1998 (timber), CISG-Online 670 (Pace). 41 See Oberlandesgericht Zweibru ¨ cken (Germany) 2 February 2004 (milling equipment), CISG-Online 877 (Pace) where an excuse was, however, rejected as the buyer had not informed the seller about the postponement of the examination. 34

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who the parties engaged jointly to determine conclusively the conformity of the goods. In one case, the Arbitral Tribunal held that the notice given upon the later discovery of the incorrectness of the certificate of conformity issued by the expert was belated. It considered the buyer to be excused under Art. 44, as the duty to examine under Art. 38 had been contractually undertaken by both parties.42 Often, the failure of complying with the notice requirements is attributed to external 26 events. In determining whether these events can constitute a valid defence, the possibility for the buyer to overcome such events and the costs and inconveniences associated with such efforts are a crucial element. For example, reliance on a hold up in customs has been rejected because the buyer had not shown that he could not have gotten access to the goods in order to examine them when they first arrived in the buyer’s country.43 By contrast, events which would be relevant in the context of Art. 79 such as strike or events of force majeure will normally constitute a “reasonable” excuse.44 In so far as they are temporary events, such as strikes or sickness, they will only excuse the buyer for the time of their existence.

4. Legal consequences a) Overview of available remedies. The existence of a reasonable excuse in the sense of 27 Art. 44 only mitigates the loss of remedies and falls short of excluding such loss as is the case with Art. 40. Art. 44 preserves the buyer’s remedies of price reduction and damages provided that the general requirements for the existence of these remedies are fulfilled. By contrast, the buyer may not claim damages for the loss of profit (Art. 45(1)(b)) or performance (Art. 46), avoid the contract (Art. 49) or rely on the non-conformity as a basis for delaying the passage of risk of loss (Art. 70), even if the requirements of Art. 44 are met. The seller’s right to cure pursuant to Art. 48 is not affected by Art. 44. It is controversial to what extent the buyer’s failure to comply with the notice requirements may further limit the available remedies under Arts 77 or 80 or even lead to a claim for damages by the seller. b) Price reduction. Notwithstanding any non-compliance with the notice require- 28 ments in Art. 39(1), a buyer able to rely on Art. 44 may reduce the price for the nonconformity of the goods. It is controversial whether Art. 44 also preserves the remedy of price reduction in cases of defects in title. The wording of Art. 44 is not conclusive in this respect. On the one hand, it mentions the remedy of price reduction explicitly for defects in title but at the same time provides that the possibility to reduce the price exists “in accordance with Art. 50” which only refers to non-conforming goods.45 The answer to this question depends on which view one adopts on the general applicability of Art. 50 to defects in title. Consequently, the buyer should be entitled to a price reduction in the context of Art. 44.46 The seller may not rely on Arts 77 and 80 to further limit or exclude the buyer’s right 29 to reduce the price. 42 Arbitral Award, ICC 9187, June 1999 (coke), CISG-Online 705; in light of the reported facts of the case it could have been argued that the notice as such was not given belatedly and that the sanctions in Art. 39 would not have been applicable. 43 Oberlandesgericht Koblenz (Germany) 11 September 1998 (chemical substances), CISG-Online 505 (Pace). 44 Magnus, in: Honsell, Kommentar (2010), Art. 44 para. 8. 45 Eiselen, in: Kritzer/Vanto/Vanto/Eiselen, International Contract Manual (2008), Vol. 4 § 89:119. 46 Magnus, in: Honsell, Kommentar (2010), Art. 44 para. 12; for a detailed discussion of the issue see Art. 50 paras 12 et seq.

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c) Damages. Art. 44 preserves the buyer’s right to claim damages in accordance with Art. 74, with the exception of damages for lost profit.47 By contrast, consequential damage can be claimed. In deviation from the normal practice under Art. 74, the time for calculation of the loss in value is the time at which notice would have been required. A buyer relying on Art. 44 should be able to invoke the existing remedies in the same way as he would have been able to if proper notice had been given.48

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d) Further limitations. Notwithstanding the existence of a reasonable excuse for the buyer in the sense of Art. 44, the failure to give notice may deprive the seller of a possibility to cure the lack of conformity or to avoid or mitigate losses. In particular, the seller may be deprived of the opportunity to seek recourse from his own suppliers or the goods may have deteriorated due to the buyer’s continued use. In such cases, where the belated but excused notice contributes to the losses incurred, it appears unfair to the seller if the buyer could invoke his remedies for the lack of conformity in their full extent. Different views exist as to how this problem should be addressed. Some commentators have suggested49 that in such cases50 the buyer’s claims for damages may be reduced by an application of Art. 77, while claims for price reduction may be limited or even excluded by Art. 80. In addition, claims for damages by the seller himself may be envisaged for a violation of the buyer’s duties to examine the goods and notify the seller about their non-conformity. Other commentators have suggested that the seller will at least be able to rely on Art. 77, and classify the buyer’s non-compliance with notice requirements as a failure to mitigate damages in the sense of Art. 77. In this author’s opinion, however, the better view is to limit the application of Art. 77 to cases where the buyer, through behaviour going beyond mere non-compliance with the notice requirement, has failed to reduce the damages. This may be the case, for example, where the continued use of the goods after the time notice should have been given led to an additional loss in value. In all other cases, behaviour excused under Art. 44 should not lead to further limitations of the buyer’s remedies explicitly provided for in Art. 44. This applies to restrictions under Arts 77 and 80 and to claims for damages by the seller pursuant Arts 74 seq. Both Arts 77 and 80 only require that a buyer undertake reasonable efforts to prevent further damages to the seller, which can be assumed whenever the buyer has a “reasonable excuse” for his behaviour.51 Moreover, their application to the cases covered by Art. 44 would de facto undermine the hard fought compromise embodied in Art. 44.52 It is suggested that this view does not create an undue hardship for the seller. After all, it is the seller who ultimately causes the damage by not complying with his contractual duties.53 For the remedy of price reduction, the loss in value of the deficient goods is calculated at the time of delivery. Thus, it is not influenced by the buyer’s failure to give notice in time.54

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Oberlandesgericht Mu¨nchen (Germany) 10 January 2017 (shoes), CISG Online 2800. Magnus, in: Staudinger Kommentar (2013), Art. 44 para. 17. 49 Schlechtriem, Uniform Sales Law – The UN-Convention for Contracts on the International Sale of Goods (1986), p. 70 (Pace). 50 Schlechtriem made his comments in relation to cases where the belated notice was due to a failure to examine the goods in time, suggesting at the same time that in light of the purpose of Art. 44 the mere fact the notice was belated could not justify reliance on Art. 77. 51 Reitz, A History of Cutoff Rules as a Form of Caveat Emptor: Part I – The 1980 U. N. Convention on the International Sale of Goods, 36 American Journal of Comparative Law (1988) 437 (461 footnote 103) (Pace). 52 Honnold/Flechtner, Uniform Law (2009), Arts 39, 40, 44 para. 261. 53 Magnus, in: Staudinger Kommentar (2013), Art. 44 para. 20. 54 See also Magnus, in: Staudinger Kommentar (2013), Art. 44 para. 19 – who in para. 18 considers the time of an orderly notification to be relevant. 48

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The exclusion of a separate claim for damages by the seller based on the buyer’s 36 failure to comply with notice requirements is due to the fact that Arts 38 and 39 do not contain enforceable contractual obligations. These provisions merely stipulate unenforceable buyer’s duties, the violation of which only lead to a loss of rights and not claims from the other party. Furthermore, the delegates at the Diplomatic Conference explicitly rejected the proposal to include a provision granting a separate claim for damages to the seller, which had been foreseen still in the original proposal.55

5. Burden of proof The burden of proof for the existence of a reasonable excuse lies with the buyer.56 37 However, as long as the buyer presents and proves the facts justifying the application of Art. 44, no explicit reliance on Art. 44 is necessary, at least in legal systems where the law does not also have to be pleaded.57

III. Comparable Rules Due to their focus on general contract law, neither the PICC nor the PECL contain 38 comparable provisions dealing specifically with the effects of a reasonable excuse for delays in giving notice. The same applies to the PEL-Sales and the DCFR. 55 Official Records, p. 108, 347; Reitz, A History of Cutoff Rules as a Form of Caveat Emptor: Part I – The 1980 U. N. Convention on the International Sale of Goods, 36 American Journal of Comparative Law (1988) 437 (460 seq.) (Pace). 56 Arbitral Award, ICC 9187, June 1999 (coke), CISG-Online 705 (Pace); Handelsgericht Zu ¨ rich (Switzerland) 30 November 1998 (lambskin coats), CISG-Online 415 (Pace) at 4 d; Oberlandesgericht Koblenz (Germany) 11 September 1998 (chemical substances), CISG-Online 505 (Pace); Oberlandesgericht Mu¨nchen (Germany) 26 October 2016 (shoes), CISG Online 2799, at I.17. 57 Magnus, in: Honsell, Kommentar (2010), Art. 44 para. 1; different Bundesgerichtshof (Germany) 26 January 2006 (automobile), CISG-Online 1200 (Pace) rejecting the defence as it had not been relied on in the lower instances.

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Section III Remedies for breach of contract by the seller Article 45 (1) If the seller fails to perform any of his obligations under the contract or this Convention, the buyer may:

(a) exercise the rights provided in Articles 46 to 52; (b) claim damages as provided in Articles 74 to 77. (2) The buyer is not deprived of any right he may have to claim damages by exercising his right to other remedies. (3) No period of grace may be granted to the seller by a court or arbitral tribunal when the buyer resorts to a remedy for breach of contract. Bibliography: Bridge, Uniformity and Diversity in the Law of International Sale, 15 Pace International Law Review (2003) 55 (Pace); Ferrari, Wesentliche Vertragsverletzung nach UN-Kaufrecht, IHR (2005) 1 (Pace); Friehe, Die Setzung der unangemessen kurzen Nachfrist im CISG mit einem Ausblick auf das BGB, IHR (2010) 230, (2011) 16, 57; Graffi, Divergences in the interpretation of the CISG: The concept of “Fundamental Breach”, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 313; Herman, Specific Performance: a Comparative Analysis, 7 Edinburgh Law Review (2003) 5 (Pace); Holthausen, Die wesentliche Vertragsverletzung nach Art. 25 UN-Kaufrecht, RIW (1990) 101; Huber, CISG – The structure of remedies, RabelsZ (2007) 13 (Pace); Mullis, Avoidance for Breach under the Vienna Convention; A Critical Analysis of Some of the Early Cases, in: Andreas and Jarborg (eds), AngloSwedish Studies in Law (1998), p. 326 (Pace); Mullis, Termination for breach of contract in C. I. F. contracts under the Vienna Convention and English law: Is there a substantial difference?, in: Lomnicka/ Morse (eds), Contemporary Issues in Commercial Law (Essays in honour of Prof. A. G. Guest) (1997), p. 137; Schlechtriem, Subsequent Performance and Delivery Deadlines, 18 Pace International Law Review (2006) 83 (Pace); Schmidt-Kessel, CISG-Vertra¨ge in der Insolvenz – Eine Skizze, FS Schlechtriem (2003), p. 255.

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. System of remedies (para. 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Outline. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) The remedies provided for in Art. 45(1) CISG . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Avoidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Reduction of the purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ee) Right to suspend performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Policy considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Damages and other remedies (para. 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. No period of grace (para. 3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 2 2 2 4 4 5 6 7 8 9 15 16 17

I. Importance and Role of the Provision 1

The main purpose of the provision is to outline the buyer’s remedies for breach of contract (para. 1). In addition, the provision contains two specific rules concerning the buyer’s remedies: one clarifies that the buyer will not (necessarily) be deprived from claiming damages by exercising his right to claim any of the remedies (para. 2); the 668

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other states that no period of grace may be granted to the seller (para. 3). The remedies contained in Arts 45 et seq. may be derogated from or modified by the parties under Art. 6. As a general rule, the system of remedies as embodied in Arts 45 et seq. should be regarded as exhaustive and thus excludes recourse to remedies under national law;1 difficult issues may arise, however, when it comes to applying this general rule in concrete situations, see the comment to Arts 4, 5 and 7.

II. Detailed Commentary 1. System of remedies (para. 1) a) Outline. Art. 45(1) states that the buyer can resort to the following remedies: 2 – performance, including substitute delivery and repair in cases of non-conformity (Arts 45(1)(a) and 46); – avoidance of the contract (Arts 45(1)(a) and 49); – reduction of the purchase price (Arts 45(1)(a) and 50); – damages (Arts 45(1)(b) and 74 et seq.) Further, there are, in the CISG, specific provisions for partial breaches (Art. 51), for 3 early delivery (Art. 52(1)), for delivery of an excess quantity (Art. 52(2)), for instalment contracts (Art. 73) and for cases of anticipatory breach of contract (Arts 71 and 72). There is no specific rule on the buyer’s right to suspend performance; this remedy will be dealt with infra para. 8. b) The remedies provided for in Art. 45(1) CISG aa) Performance. Art. 45(1)(a) refers to Art. 46 which governs the buyer’s right to 4 claim performance from the seller. Art. 46(1) deals with the general claim for performance. Art. 46(2) and (3) provide specific rules for substitute delivery or repair in cases where the seller has delivered goods that do not conform with the contract. According to Art. 46(3) the buyer has the right to require the seller to remedy the lack of conformity by repair, unless this is unreasonable having regard to the circumstances. The provision on substitute delivery (Art. 46(2)) is more restrictive: the buyer can only claim delivery of substitute goods if the lack of conformity constitutes a fundamental breach of contract in the sense of Art. 25. bb) Avoidance. Art. 45(1)(a) refers to Art. 49 which governs the buyer’s right to 5 avoid the contract. As a rule avoidance is limited to cases of fundamental breach (Art. 49(1)(a)). In cases of non-delivery, however, Art. 49(1)(b) allows the buyer to “upgrade” a non-fundamental breach to one which justifies avoidance by using the socalled “Nachfrist”-procedure provided for in Art. 47. cc) Reduction of the purchase price. Art. 45(1)(a) refers to Art. 50 which gives the 6 buyer the right to reduce the contract price if the goods do not conform to the contract, subject to the seller’s right to cure. dd) Damages. Any breach of contract by the seller will give the buyer a right to claim 7 damages. The basis for the claim is Art. 45(1)(b); the measure and the calculation of the damages are governed by the general rules in Arts 74–77. In principle, liability is strict (i. e. not fault-based), but there are certain grounds of exemption in Arts 79 and 80. ee) Right to suspend performance. Art. 45 does not mention or refer to a right of the 8 buyer to suspend his own performance (in particular payment of the price) as a reaction 1

Mu¨ller-Chen, in Schlechtriem/Schwenzer, Commentary (2016) Art. 45 para. 32.

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Article 45 9–11

Part III. Chapter II. Obligations of the Seller

to the seller’s breach. It is submitted, however, that there is a general principle of the Convention under Art. 7(2) which allows the buyer (or more generally: one party) to suspend or withhold his own performance until the seller (or more generally: the other party) has performed his duties.2 This general principle can be derived from the rules in Arts 58(1), 71, 85 and 86(1). The right to suspend is subject to the parties’ agreement. Thus, it should not be granted where it would be inconsistent with such agreement, e. g. where the contract requires the buyer to pay the price before the seller makes performance.3 What is more, the right to suspend payment is subject to the principle of good faith; thus, where the seller has only committed a minimal breach of an ancillary obligation, the buyer may not be entitled to suspend payment of the (entire) price.4 Again, however, the parties’ agreement and the commercial background of the transaction should be taken into account so that the situation may be different in documentary sales. c) Policy considerations. The most defining feature of the system of remedies in the CISG is that it aims at keeping the contract alive as long as possible in order to avoid the necessity of unwinding the contract.5 Thus, in particular, termination of the contract will only be available as a remedy of last resort.6 10 In taking that approach, the CISG is in line with an international trend which has arisen during the 20th century.7 In fact the CISG has been one of the main causes for the evolution of this international trend. Several modern sales laws (such as the new German law8 and the Scandinavian laws9) and international instruments (such as the UNIDROIT Principles10, Principles of European Contract Law11 and the Draft Common Frame of Reference12) regard the termination of the contract as a remedy of last resort which should only be granted if other remedies (such as performance, price reduction or damages) will not lead to an adequate result.13 11 This policy not only serves the principle of pacta sunt servanda14, but is also in line with economic considerations. If the goods have already been delivered, the termination 9

2 See Oberster Gerichtshof (Austria) 8 November 2005 (recycling machine), CISG-Online 1156; Oberlandesgericht Frankfurt (Germany) 6 October 2004 (cosmetic and perfume items), CISG-Online 996; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 45 para. 22; Magnus, in: Staudinger, Kommentar (2013), Art. 58 paras 22 et seq. 3 Huber, in: Huber/Mullis, The CISG (2007), p. 181. 4 See Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 45 para. 22 (“of any weight”); Huber, in: Mu¨nchKommBGB (2015), Art. 45 para. 12. 5 See in more detail Huber, CISG – The structure of remedies, RabelsZ (2007) 13 with further references (Pace). 6 See for example Bundesgerichtshof (Germany) 3 April 1996 (cobalt sulphate), CISG-Online 135 (“last possibility for the creditor”); Oberster Gerichtshof (Austria) 7 September 2000 (tombstones), CISG-Online 642; Oberster Gerichtshof (Austria) 16 December 2015 (silkscreen), CISG-Online 2663; Oberlandesgericht Hamburg (Germany) 25 January 2008 (case inventory), CISG-Online 1681; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 2; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 25 para. 1; Leisinger, in: Brunner, Kommentar (2014), Art. 49 para. 2. 7 For a comparative overview see: Sivesand, The Buyer’s Remedies for non-conforming Goods (2005), pp. 68 et seq.; Torsello, Common Features (2004), pp. 187 et seq.; Huber, in: Reimann/Zimmermann (eds), Oxford Handbook (2006), pp. 938, 960 et seq. 8 § 323 BGB (German Civil Code). For more detail on these rules see Zimmermann, The New German Law of Obligations (2005), pp. 66 et seq. 9 Cf. Lookofsky, in: Ferrari, The 1980 Uniform Sales Law (2003), pp. 95, 113. 10 Art. 7.3.1. PICC. 11 Art. 9:301(1) PECL. 12 Art. III. – 3:502 DCFR. 13 Huber, in: Huber/Mullis, The CISG (2007), pp. 181 et seq. 14 Cf. Bonell, Restatement (1997), pp. 76 et seq.; Beale, Remedies: Termination, in: Hartkamp/Hesselink/ Hondius/du Perron/Vranken (eds), Towards a European Civil Code (1998), pp. 348, 350.

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Section III. Remedies for breach of contract by the seller

12–15

Article 45

of the contract (e. g. for non-conformity) leads to a restitution of the goods originally delivered and possibly to a restitution of money paid by the buyer. Restitution of the goods in particular may lead to considerable costs and risks which could be avoided if the contract were not terminated and if the buyer’s interest in getting conforming goods were remedied by either repair or a claim for damages.15 Finally, a restrictive approach towards winding up the contract is also in line with the 12 legitimate interests of the parties. On the one hand, the seller’s efforts in preparation of performance should not easily be frustrated by a minor defect or by a defect which could readily be cured at the seller’s expense. In such cases, the buyer’s wish to terminate the contract will often be motivated by a fall in market prices for the goods and thus carries little merit. On the other hand, there may be situations where the buyer is justified in not accepting cure or minor defects, for instance if time and exact conformity of delivery were of the essence in the contract. The CISG aims at striking the balance between these two scenarios by using three 13 instruments all of which have parallels in international legal texts or modern domestic laws.16 The CISG primarily relies on the fundamental breach doctrine. Pursuant to Art. 49(1)(a), the avoidance of the contract will only be available if the seller committed a fundamental breach of contract. In cases of non-delivery, however, the Convention alternatively allows the second instrument, i. e. the so-called Nachfrist-procedure: the buyer may also avoid the contract under Art. 49(1)(b) by fixing an additional period of time for performance under Art. 47, thus giving the seller a second chance to perform before the contract will be terminated. Finally, Art. 48 gives the seller a right to cure; the right to cure is, however, “subject to” the buyer’s right to avoid the contract under Art. 49 (cf. infra Art. 49 CISG paras 15 et seq.). The fundamental breach doctrine is also applied to substitute delivery under 14 Art. 46(2). Viewed from an economic perspective, this is understandable. Substitute delivery leads to the restitution of the originally tendered goods and to the delivery of the substitute goods, causing additional cost and risk to the parties.17 Price reduction under Art. 50 is not subject to the fundamental breach requirement, but subject to the seller’s right to cure under Art. 48. Claims for damages depend on an avoidance of the contract (and on the strict requirements set in Art. 49) at any rate if they are to be calculated under the specific provisions of Arts 75 et seq.18

2. Damages and other remedies (para. 2) Art. 45(2) states that the buyer is not deprived of any right he may have to claim 15 damages by exercising his right to other remedies. The buyer may therefore combine a claim for performance, a reduction of the purchase price or an avoidance of the contract with a claim for damages, if the requirements of such a claim (Arts 45(1)(b), 74 et seq.) are met. It goes without saying that the buyer must not be overcompensated.19 In so far 15 Huber, in: Huber/Mullis, The CISG (2007), p. 182; Will, in: Bianca/Bonell, Commentary (1987), Art. 49 para. 2.1.2; Magnus, in: Staudinger, Kommentar (2013), Art. 49 para. 4; cf. Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 25 para. 9. 16 See in more detail Huber, CISG – The structure of remedies, RabelsZ (2007) 13 (20 et seq.) (Pace). 17 See Honnold, Documentary History (1989), p. 558; Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 4; Huber, in: Mu¨nchKommBGB (2015), Art. 46 para. 24; Magnus, in: Staudinger, Kommentar (2013), Art. 46 paras 8, 38; Benicke, in: Mu¨nchKommHGB (2013), Art. 46 para. 12. 18 Whether similar principles should also apply to “other” claims of damages (i. e. those which are simply governed by Art. 74) is a disputed matter, see Huber, in: Huber/Mullis, The CISG (2007), p. 282. 19 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 45 para. 25; Akikol/Bu¨rki, in: Brunner, Kommentar (2014), Art. 45 para. 19.

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Article 45 16–17

Part III. Chapter II. Obligations of the Seller

as his interests are already safeguarded by the other remedy, there will no longer be a loss and thus no claim for compensation. Thus, for example, in a case of delivery of non-conforming goods, the buyer who claims and gets repair from the seller (Art. 46(3)) will not be able to claim as damages any diminution of value of the goods that would have occurred if repair had not been made; he will, however, be able to claim damages for losses which have arisen independently of the repair, e. g. loss of profit resulting from the disruption of his production during the repair or losses which the non-conforming goods have already caused to other goods of the buyer.20

3. No period of grace (para. 3) 16

Art. 45(3) provides that no period of grace may be granted to the seller by a court or arbitral tribunal when the buyer resorts to a remedy for breach of contract. This provision clarifies that any such period of grace which the (applicable) domestic law may provide21, may not be applied if the contract is governed by the CISG. It is submitted, however, that applicable (domestic) rules of the law of insolvency or of the law of enforcement of judgments which provide similar periods of grace (e. g. under Chapter 11, § 362 US Bankruptcy Code) are not barred by Art. 45(3), as these areas of the law (enforcement of judgments, insolvency) are not governed by the CISG at all.22

III. Comparable Rules 17

Art. 106(1) CESL provides a rule which is similar to Art. 45. 20 Huber, in: Mu ¨ nchKommBGB (2015), Art. 45 para. 16; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 45 para. 27; Magnus, in: Staudinger, Kommentar (2013), Art. 45 para. 21. 21 See for example (French) Art. 1228 Code Civil. 22 Huber, in: Mu ¨ nchKommBGB (2015), Art. 45 para. 17; Magnus, in: Staudinger, Kommentar (2013), Art. 45 para. 42. But see for a differing view Schmidt-Kessel, CISG-Vertra¨ge in der Insolvenz – Eine Skizze, FS Schlechtriem (2003), pp. 273 et seq.

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Article 46 (1) The buyer may require performance by the seller of his obligations unless the buyer has resorted to a remedy which is inconsistent with this requirement. (2) If the goods do not conform with the contract, the buyer may require delivery of substitute goods only if the lack of conformity constitutes a fundamental breach of contract and a request for substitute goods is made either in conjunction with notice given under article 39 or within a reasonable time thereafter. (3) If the goods do not conform with the contract, the buyer may require the seller to remedy the lack of conformity by repair, unless this is unreasonable having regard to all the circumstances. A request for repair must be made either in conjunction with notice given under article 39 or within a reasonable time thereafter. Bibliography: See selected bibliography of Art. 45; CISG-AC Opinion no 2, Examination of the Goods and Notice of Non-Conformity: Articles 38 and 39, 7 June 2004. Rapporteur: Professor Eric E. Bergsten, Emeritus, Pace University School of Law, New York (http://www.cisg-ac.org); CISG-AC Opinion no 10, Agreed Sums Payable upon Breach of an Obligation in CISG Contracts, 3 August 2012. Rapporteur: Dr. Pascal Hachem, Ba¨r & Karrer AG, Zurich, Switzerland (http://www.cisg-ac.org).

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Outline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Distinction between Art. 46(1) and Art. 46(2), (3): The concept of nonconformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Clear cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Aliud. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Third party rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Partial delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. General claim for performance (Art. 46(1)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Requirements for the claim for performance (Art. 46(1)). . . . . . . . . . . . . . . aa) Breach of contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Domestic law defence (Art. 28). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Inconsistent remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Impossibility and hardship. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (i) Outline of the problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (ii) Suggested solution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ee) Art. 80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ff) Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Consequences of the claim for performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Performance and other remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Substitute delivery (Art. 46(2)). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Outline of the requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Fundamental breach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Request and time limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Substitute delivery and sale of specific goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Substitute delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Costs and place of performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Choice between substitute delivery and repair . . . . . . . . . . . . . . . . . . . . . . dd) Defective substitute delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ee) Return of non-conforming goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Part III. Chapter II. Obligations of the Seller

3. Repair (Art. 46(3)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Outline of the requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Reasonableness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Time limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Repair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Costs and place of performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Repair, substitute delivery, damages and right to cure. . . . . . . . . . . . . 4. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

45 45 46 50 51 51 52 53 54 55

I. Importance and Role of the Provision 1. Purpose 1

The purpose of the provision is to make it clear that the buyer is entitled to claim specific performance by the seller of his obligations.1 In providing for a general claim for performance, the Convention is more in line with the Civil Law approach than the Common Law approach.2 Civil Law systems regard a claim for performance as the natural and primary consequence of a contractual obligation.3 Common Law jurisdictions, on the other hand, tend to view claims for performance more restrictively; the primary remedy for a breach of contract being a claim for damages. Only in exceptional circumstances will a Common Law court grant specific performance.4 While the practical importance of this difference in approach may only be slight,5 the Convention nevertheless seeks to strike a balance between Common Law and Civil Law countries by allowing a court applying the Convention to refuse to enter a judgment for specific performance if they would do so under their own law. This compromise provision is found in Art. 28.6

2. Outline 2

Art. 46 deals with the buyer’s right to require performance by the seller. Art. 46(1) sets out the general rule which entitles the buyer to require performance unless he has resorted to a remedy which is inconsistent with this requirement. Art. 46(2) and (3) contain specific provisions for those cases in which the seller has delivered nonconforming goods.7 Where this is the case, the buyer may be entitled to require delivery of substitute goods (Art. 46(2)) or for the lack of conformity to be repaired (Art. 46(3)); these two remedies are subject to additional requirements. 1 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 1; Huber, in: Mu¨nchKommBGB (2015), Art. 46 para. 1. 2 Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 2; Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 325 et seq. 3 Cf. § 241 BGB (German Civil Code); Art. 1184 para. 2, Art. 1610 Code Civil (French Civil Code). Cf. also Zimmermann, The New German Law of Obligations (2005), pp. 770 et seq. 4 Cf. Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 28 para. 2. As to these different approaches see for instance Herman, Specific Performance: a Comparative Analysis, Edinburgh Law Review 7 (2003) 5 et seq., 194 et seq. (Pace). 5 Akikol/Bu ¨ rki, in: Brunner, Kommentar (2014), Art. 46 para. 2. It could be argued that those cases in which the buyer will actually sue for performance under Civil Law will correspond to those in which a Common Law court would also grant specific performance, cf. Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 28 para. 4; Lando, in: Bianca/Bonell, Commentary (1987), Art. 28 para. 1.3.1.; Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 326. 6 Cf. Honnold/Flechtner, Uniform Law (2009), Art. 46 para. 281. 7 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 paras 3 et seq., paras 17 et seq., paras 39 et seq.

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3–7

Article 46

3. Distinction between Art. 46(1) and Art. 46(2), (3): The concept of non-conformity Art. 46 draws a distinction between two classes of cases. Whereas Art. 46(2) and (3) 3 apply “if the goods do not conform to the contract”, Art. 46(1) covers the other breaches committed by the seller. a) Clear cases. Where the seller has delivered goods which do not comply with the 4 requirements mentioned in Arts 35–37, this will be a case of non-conformity so that claims for performance will be covered by Art. 46(2),(3). By contrast, Art. 46(1) will apply in the following cases: where there has been no delivery of the goods at all; where the seller has tendered the goods at another place than required by Art. 31 (with the buyer having rejected that particular tender and now claiming delivery in the correct place); where the seller has failed to transfer the property in the goods to the buyer (as required by Art. 30); where the seller has made an incorrect tender of documents (Art. 34); where the seller is in breach of an agreed duty to instruct the buyer or to undertake sales promotion. However, doubts have been raised as to whether the following situations can be 5 brought within the notion of “non-conformity”: delivery of a so-called aliud (cf. infra para. 6); breach of Arts 41 and 42 (cf. infra para. 7); or partial deliveries (cf. infra para. 8). b) Aliud. If the buyer purchases one particular object, for example a specified used 6 machine or the whole load of one particular ship, and the seller does not deliver the chosen object but another one, i. e. another machine or the load of another vessel, the question arises whether such a case involves the delivery of non-conforming goods, or whether it should be treated as a delivery of something completely different (aliud) and should, as a consequence, be treated as a non-delivery which falls under Art. 46(1).8 The predominant opinion regards these situations as cases of “non-conformity” and deals with them under Art. 46(2),(3).9 This is correct because the wording of Art. 35 (“description”) also covers the delivery of an aliud.10 c) Third party rights. If the seller does not fulfil his obligation under Arts 41 or 42 to 7 deliver goods which are free from third party claims, this should not be regarded as a case of non-conformity in the sense of Art. 46(2).11 The heading to Section II of Chapter III clearly distinguishes between conformity of the goods (Arts 35 to 40) on the one hand and third party claims on the other (Arts 41 to 43). What is more, 8 See in the latter direction Bianca, in: Bianca/Bonell, Commentary (1987), Art. 35 para. 2.4. It should be noted that in the author’s opinion the decision of Oberlandesgericht Du¨sseldorf (Germany) 10 February 1994 (fabrics), CISG-Online 115 which is sometimes mentioned as supporting that view is not clear on that point. 9 Bundesgerichtshof (Germany) 3 April 1996 (cobalt sulphate), CISG-Online 135; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 11; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 20; Will, in: Bianca/Bonell, Commentary (1987), Art. 46 para. 2.1.1.1; Huber, in: Mu¨nchKommBGB (2015), Art. 46 para. 7; Schlechtriem/Butler, CISG (2009), para. 189; Honnold/Flechtner, Uniform Law (2009), Art. 47 para. 288 note 3. 10 Huber, in: Huber/Mullis, The CISG (2007), pp. 197 et seq. 11 This seems to be the predominant view, cf. Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 22; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 41 para. 23, Art. 42 para. 27 (hesitating however with regard to intellectual property rights); Secretariat Commentary on 1978 Draft, Art. 39 paras 7 et seq.; Huber, in: Huber/Mullis, The CISG (2007), p. 198; Huber, in: Mu¨nchKommBGB (2015), Art. 46 para. 9; Benicke, in: Mu¨nchKommHGB (2013), Art. 46 para. 27; Saenger, in: Bamberger/Roth (eds), KommentarBGB (2015), Art. 46 para. 5. For the opposite view see Enderlein/Maskow/Strohbach, Commentary (1991), Art. 46 para. 3; Herber/Czerwenka, Kommentar (1991), Art. 46 para. 6.

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Article 46 8–13

Part III. Chapter II. Obligations of the Seller

Art. 46(2) and (3) refer to the notice requirement of Art. 39 (which only applies to nonconformity under Arts 35–37), but not to the notice provision in Art. 43 (which is concerned with third party rights).12 8

d) Partial delivery. If the seller delivers less than required under the contract, Art. 51 will have to be taken into account. The provision states that in cases of partial delivery Arts 46–50 apply in respect of the part which is missing. Thus, Art. 51(1) “narrows down” the focus on the part which is missing. If, for instance, the seller has only delivered 80 items (instead of 100 as required by the contract), one should only look at the missing 20 items when applying Arts 46 et seq. As a consequence, the seller will be liable for a non-delivery, but not for a non-conformity as none of the missing 20 items has been delivered.13 The buyer’s claim for performance will therefore not be subject to the particular requirements of Art. 46(2), but simply be based on Art. 46(1).14

II. Detailed Commentary 1. General claim for performance (Art. 46(1)) 9

a) Purpose. Art. 46(1) governs the buyer’s claim for performance where the seller’s breach of duty does not consist in the delivery of non-conforming goods, the latter case being covered by Art. 46(2) (substitute delivery) or Art. 46(3) (repair). Further, Art. 46(1) sets out general requirements which will apply to any type of performance claim, be it the general claim in Art. 46(1), the claim for substitute delivery (Art. 46(2)) or the claim for repair (Art. 46(3)).

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b) Requirements for the claim for performance (Art. 46(1)). The buyer’s claim for performance is subject to six requirements.

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aa) Breach of contract. The first requirement is that the seller has breached an obligation under the CISG or under the contract. Not all breaches will, however, lead to the application of Art. 46(1). In fact, if the seller has breached the obligation to deliver conforming goods, the buyer will have to resort to the remedies of substitute delivery (Art. 46(2)) or repair (Art. 46(3)).15 By contrast, Art. 46(1) will apply to all other types of breach; for more detail on this distinction cf. supra paras 3 et seq.).

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bb) Domestic law defence (Art. 28). Under Art. 28, the court may refuse 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. For more detail cf. supra comments to Art. 28.

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cc) Inconsistent remedy. Art. 46(1) excludes the buyer’s claim for performance if he has effectively16 resorted to a remedy which is inconsistent with this claim. In deciding whether a remedy is inconsistent with a claim for performance, the following guidelines should be followed. 12

Cf. Magnus, in: Staudinger, Kommentar (2013), Art. 46 paras 15 et seq. See also Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 21; Huber, in: Mu¨nchKommBGB (2015), Art. 46 para. 8; Magnus, in: Staudinger, Kommentar (2013), Art. 46 para. 10; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 46 para. 19. 14 Huber, in: Huber/Mullis, The CISG (2007), pp. 198 et seq; Akikol/Bu ¨ rki, in: Brunner, Kommentar (2014), Art. 46 para. 3. 15 Magnus, in: Staudinger, Kommentar (2013), Art. 46 para. 10. 16 Akikol/Bu ¨ rki, in: Brunner, Kommentar (2014), Art. 46 para. 11. 13

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Section III. Remedies for breach of contract by the seller

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Article 46

An avoidance of the contract by the buyer is inconsistent with the claim for performance if it was effective in the sense that the contract was actually terminated, be it because the requirements of Art. 49 were met (rightful avoidance)17 or because the seller accepted the buyer’s avoidance (even though the avoidance was not justified, e. g. because the requirements of Art. 49 were not met).18 With regard to claims for damages it is submitted that a distinction should be drawn depending on whether the buyer claims compensation for an impairment of his “performance interest” (e. g. for the reduced value of the goods or for the costs of repair) or whether he claims compensation for damage to his “integrity interest” (e. g. damages caused to his property by the defective goods which the seller delivered)19. Only in the former case should the claim for damages be regarded as inconsistent with a claim for performance, because both remedies aim to compensate the same interest of the buyer (i. e. his interest in getting what was contractually promised).20 Again, this should only be so if the claim for damages was effective in the sense that it was either justified or has been accepted by the seller.21 Similar principles should apply where the contract contains a clause providing for the payment of agreed sums for failure to perform the contract: if the agreed sum is meant to replace performance of the contract, a claim for performance should not be granted; a performance claim therefore only exists if the agreed sum was meant to complement performance.22 Strictly speaking, this rule results rather from an interpretation of the clause as a modifying agreement under Art. 6 than from a straightforward application of the inconsistent remedy rule in Art. 46. The policy considerations, however, are the same. A claim for price reduction is inconsistent with a demand for performance23, provided that the claimed price reduction is effective in the sense that it was either justified or has been accepted by the seller.24 With regard to the timing it is submitted that the claim for performance is barred when the inconsistent remedy becomes “effective” in the sense described above, i. e. in the case of a rightful remedy when it is declared or in the case of an originally unjustified remedy when the seller accepts it.25

17 Cf. Secretariat Commentary on 1978 Draft, Art. 42 para. 7. In fact, in such cases the claim for performance will not only be excluded by the inconsistency defence of Art. 46(1) but also by virtue of Art. 81(1) first sentence. 18 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 45; Magnus, in: Staudinger, Kommentar (2013), Art. 46 para. 21. Cf. ibid. as to the possibility for the seller to treat the buyer’s insistence on avoidance as a fundamental breach giving the seller a right to avoid the contract (Arts 61, 64 or 71 et seq.). 19 It is submitted, however, that cases of damage to the buyer’s “integrity interest” typically arise when the seller has delivered defective goods. Those cases will lead to claims under Art. 46(2) or (3), which are, however, also subject to the inconsistent remedy defence. 20 Cf. Magnus, in: Staudinger, Kommentar (2013), Art. 46 paras 19 et seq.; Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 7; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 46 para. 24. For a different view see: Will, in: Bianca/Bonell, Commentary (1987), Art. 46 para. 2.1.2; Enderlein/Maskow/Strohbach, Commentary (1991), Art. 46 para. 2. 21 Huber, in: Huber/Mullis, The CISG (2007), pp. 191 et seq. 22 CISG-AC Opinion no 10, paras 8.2.1 et seq. 23 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 7; Huber, in: Mu¨nchKommBGB (2015), Art. 46 para. 13; Benicke, in: Mu¨nchKommHGB (2013), Art. 46 para. 4. 24 Huber, in: Huber/Mullis, The CISG (2007), p. 192; Schlechtriem/Butler, CISG (2009), para. 183. 25 Magnus, in: Staudinger, Kommentar (2013), Art. 46 paras 20 et seq.; Mu ¨ ller-Chen, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 46 para. 7; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 46 paras 25 et seq.; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2011), Art. 46 para. 3; Huber, in: Mu¨nchKommBGB (2015), Art. 46 para. 14.

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Article 46 18–21

Part III. Chapter II. Obligations of the Seller

dd) Impossibility and hardship (i) Outline of the problem. Under certain conditions, a claim for performance may be excluded because performance is impossible to make or because the seller faces obstacles to make performance which are so serious that it would be entirely inadequate to require him to do so. The correct legal argument which leads to this result has, however, led to some debate among scholars. Notwithstanding the fact that domestic legal systems may draw the lines differently, it is suggested that with regard to terminology, one may distinguish between “objective impossibility” on the one hand, and “hardship” on the other. Cases of objective impossibility are likely to be relatively rare in practice; if they do occur, it will usually involve a contract for the sale of specific goods, such as a used machine or the entire load of a named ship, which are destroyed before delivery. Hardship means that performance may still be objectively possible but that the obligor (seller) faces serious obstacles that he would have to overcome in order to make performance (e. g. the sold generic goods prove to be more difficult and expensive than expected to obtain). This scenario may arise more often than cases of objective impossibility. 19 With regard to cases of objective impossibility, there is widespread agreement that a claim for performance should not be granted.26 This is the only reasonable solution as it would be highly inappropriate for the court to order the seller to do something that is impossible. 20 With regard to cases of hardship the solutions suggested by legal scholars and courts differ considerably. Some authors would apply Art. 79 and decide according to the criteria given there,27 irrespective of the fact that Art. 79(5) clearly states that this provision does not affect remedies other than damages.28 Those authors who do not want to apply Art. 79 can – by and large – be divided into two groups. Some would find a solution by reference to domestic law with the help of Art. 28.29 It is, however, submitted that this is not the correct understanding of Art. 28 as this provision should only cover those restrictions on specific performance which result from a general scepticism towards the appropriateness of the remedy of compulsory performance.30 Others stipulate that hardship relieves the seller in exceptional cases from his duty to perform and refer for instance to the principle of good faith.31 18

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(ii) Suggested solution. The solution should be found by having recourse to the general principles underlying the Convention, as indicated in Art. 7(2). It is submitted that, although it is not directly applicable, Art. 79 can serve as a basis for discerning those general principles so that the basic policy considerations which underlie this provision will not be disregarded (in so far as they are appropriate for claims for performance).32 This would lead to the following results. 26 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 12; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 79 para. 54; Magnus, in: Staudinger, Kommentar (2013), Art. 46 para. 26; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 46 para. 30. 27 Honnold/Flechtner, Uniform Law (2009), Art. 79 para. 435.5; Magnus, in: Staudinger, Kommentar (2013), Art. 46 para. 25; Akikol/Bu¨rki, in: Brunner, Kommentar (2014), Art. 46 para. 13. 28 What is more, a (German) proposal to apply the provision in certain situations to performance claims was rejected at the Diplomatic Conference; cf. in more detail Schwenzer, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 79 para. 53. 29 Honnold/Flechtner, Uniform Law (2009), Art. 79 para. 435.5 (as a second resort after having argued that one should apply Art. 79). 30 Cf. Huber, in: Huber/Mullis, The CISG (2007), p. 189; Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 28 para. 10. 31 Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 46 para. 31; for a similar approach see Mu ¨ llerChen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 13. 32 Huber, in: Huber/Mullis, The CISG (2007), pp. 194 et seq.; Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 18.

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Article 46

In case of objective impossibility the seller will be freed from his duty to perform. 22 This result should not depend on whether he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract although Art. 79(1) sets up that requirement for damages claims. Deviation from the wording of Art. 79(1) is justified because the rules expressed in Art. 79(1) should only be regarded as general principles relating to limits to performance claims in so far as they fit this particular scenario. With regard to objective impossibility, the foreseeability rule simply does not make sense: it is just as useless to order the seller to perform an impossible act if the impossibility was foreseeable as it is if the impossibility was not foreseeable.33 In hardship cases, on the other hand, the criteria set out in Art. 79 can be applied 23 more strictly (in particular the notion of “beyond his control”, the foreseeability criterion and the possibility to avoid or overcome the consequences of the impediment). Where, for example, generic goods prove to be more difficult and expensive than expected to obtain, the basic principle should be that this is a risk that has to be borne by the seller so that he will only be exempt from his duty to perform in highly exceptional circumstances.34 It should be noted, however, that the approach suggested in the preceding paragraphs 24 is only concerned with the performance claim, and not with claims for damages which are of course fully governed by Art. 79. This may lead to the result that the seller was exempt from his duty to perform under a “general principle” in the sense of Art. 7(2), but is still liable for damages.35 Likewise, the non-performance may – and usually will – entitle the buyer to avoid the contract under Art. 49. In cases where the seller has received a substitute for the performance that has become impossible (e. g. an insurance claim or a damages claim), the CISG does not explicitely grant the buyer to claim that substitute in lieu of performance. It is submitted, however, that in light of Art. 84(2)(b) such a claim can be based on a general principle under Art. 7(2) CISG.36 ee) Art. 80. Art. 80 also applies to claims for performance. The buyer will therefore 25 not be able to rely on the seller’s breach to the extent that this breach was caused by his own (the buyer’s) act or omission.37 ff) Declaration. The buyer has to declare his claim for performance. The Convention 26 does not prescribe a particular form to be kept.38 In the case of Art. 46(1) the Convention does not impose a time limit for declaring the claim for performance. Irrespective of that, the applicable (national) rules on the limitation of claims will have to be kept in mind.39 What is more, the principle of good faith (Art. 7(1)) may also impose certain time limits in exceptional cases.40 c) Consequences of the claim for performance. Under Art. 46(1) the buyer can claim 27 from the seller the performance of the respective obligation as specified in the contract or in the Convention. If the seller’s breach consists in having delivered goods which are 33

Huber, in: Huber/Mullis, The CISG (2007), p. 195. Cf. Huber, in: Huber/Mullis, The CISG (2007), p. 195; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 12. 35 Huber, in: Huber/Mullis, The CISG (2007), p. 195. 36 Magnus, in: Staudinger, Kommentar (2013), Art. 79 para. 54; Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 19 b. 37 For a more detailed analysis of Art. 80 see the comments to that provision. 38 Cf. Huber, in: Huber/Mullis, The CISG (2007), pp. 37 et seq.; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 46 para. 34 a. 39 Huber, in: Huber/Mullis, The CISG (2007), p. 196. 40 Akikol/Bu ¨ rki, in: Brunner, Kommentar (2014), Art. 46 para. 17. 34

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Article 46 28–31

Part III. Chapter II. Obligations of the Seller

not free from third party rights under Arts 41 et seq. (cf. supra para. 7), the seller has to either free the goods from these third party rights or, if that is possible, to deliver other goods of the contractually agreed type which are not subject to third party rights.41 28 The seller has to bear the costs for performance unless there is a contractual stipulation to the contrary.42 If performance can be made in different ways under the contract or the Convention (e. g. third party rights), it should be for the seller to choose the appropriate form of performance. However, pursuant to the general principle (Art. 7(2)) underlying Art. 48(1), if the form of performance chosen by the seller would cause the buyer unreasonable delay or unreasonable inconvenience, the buyer should be given the right to insist on another form of performance.43 d) Performance and other remedies. When the buyer has effectively resorted to an inconsistent remedy, the claim for performance is excluded (cf. supra paras 13 et seq.). By contrast, the buyer is entitled to proceed in reverse order, i. e. to first claim performance and to resort to an “inconsistent” remedy later.44 This right is however subject to the limitations specified in Art. 47(2) and in Art. 48(2), as well as to the principle of good faith (Art. 7(1)). The latter principle may, for example, prevent the buyer from switching from his original performance claim to another remedy if the seller had already incurred expenses in preparing to perform the performance claim made by the buyer.45 30 The buyer is free to combine the claim for performance with other remedies which are consistent with such performance claim, for example to claim both performance and damages for the delay.46 29

2. Substitute delivery (Art. 46(2)) 31

a) Outline of the requirements. Art. 46(2) states that if the goods do not conform with the contract, the buyer may require delivery of substitute goods only if the lack of conformity constitutes a fundamental breach of contract and a request for substitute goods is made either in conjunction with notice given under Art. 39 or within a reasonable time thereafter. In addition, there are a number of requirements which result from other provisions. As a general rule, therefore, a claim for substitute delivery is subject to the following requirements: (1) Non-conformity: The goods must be non-conforming in the sense of Art. 46(2). The concept of non-conformity has been explained supra paras 3 et seq. (2) Fundamental breach: The non-conformity must amount to a fundamental breach of contract (cf. infra paras 32 et seq.). (3) Time limit: A timely request for substitute delivery must be made under Art. 46(2) (cf. infra paras 35 et seq.), irrespective of the applicable periods of limitation. (4) No exceptions or defences: A claim for substitute delivery will be subject to a number of exceptions or defences under the CISG, in particular to: 41 Akikol/Bu ¨ rki, in: Brunner, Kommentar (2014), Art. 46 para. 17; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 46 para. 38; Magnus, in: Staudinger, Kommentar (2013), Art. 46 para. 37. 42 Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 46 para. 42; Huber, in: Mu ¨ nchKommBGB (2007), Art. 46 para. 21. 43 Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 22. 44 Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 46 para. 45; Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 23. 45 Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 23; Benicke, in: Mu¨nchKommHGB (2013), Art. 46 para. 5; Magnus, in: Staudinger, Kommentar (2013), Art. 46 para. 30. 46 Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 46 para. 46; Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 23.

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Article 46

(a) the exception in Art. 82(1) which provides that the buyer may lose his right to require substitute delivery if he is not able to return the goods substantially in the condition in which he received them (cf. infra comments to Art. 82); (b) the inconsistent remedy defence (Art. 46(1), cf. supra paras 13 et seq.). Although this defence is explicitly mentioned only in Art. 46(1), it should also apply to the performance claims provided for in Art. 46(2) and (3);47 (c) the Art. 28 defence (cf. supra para. 12 and comment to Art. 28); (d) the exception in Art. 80; (e) the exceptions which are based on impossibility or hardship (cf. supra paras 18 et seq.). b) Fundamental breach. Art. 46(2) requires that the lack of conformity constitutes a 32 fundamental breach of the contract. The notion of fundamental breach is defined in Art. 25 and it has to be defined in the same way as under Art. 49(1)(a).48 For more detail cf. supra Art. 25 paras 9 et seq., infra Art. 49 paras 11 et seq. The fact that Art. 46(2) requires a fundamental breach for the remedy of substitute 33 delivery is in line with one of the major policy considerations that underlies the Convention, i. e. the objective to keep the contract alive and to avoid unnecessary transfers of goods (ultima ratio).49 Unnecessary transfers of the goods can be caused as much by a claim for delivery of substitute goods as by an avoidance of the contract. In both cases, the goods originally delivered have to be transported back to the seller or to be disposed of in another manner. In addition, a new transport is necessary with respect to the substitute goods. These transactions can be avoided by restricting the buyer to a claim for repair, for damages or for price reduction. It does therefore seem reasonable to treat claims for delivery of substitute goods and the remedy of avoidance along similar lines.50 On that basis, it might be argued that a fundamental breach may be unnecessary 34 where the goods are still at their original starting point at the time the buyer discovers their lack of conformity and therefore rejects them. Thus, the buyer could claim performance even if the defects do not amount to a fundamental breach.51 The wording of the provision, however, does not contain a specific exception for the cases just mentioned.52 It is submitted that one should not create an unwritten modification of Art. 46(2), but strictly adhere to the system that the wording of the provision sets up. As soon as the seller has made a non-conforming “delivery” (whatever that may encompass under Art. 31 in the case at hand, a claim for delivery of other goods (which conform to the contract) will have to be treated as a substitute delivery which requires a fundamental breach. c) Request and time limit. Art. 46(2) requires the buyer to make the request for 35 substitute goods either in conjunction with notice given under Art. 39 or within a reasonable time thereafter. If no notice has been given (but the buyer is nevertheless entitled to rely on the lack of conformity, for example on the basis of Art. 40), the

47 Huber, in: Huber/Mullis, The CISG (2007), p. 191; Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 paras 5, 12; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 paras 7, 17. 48 Cf. UNCITRAL, Digest of Case Law on the CISG (2008), Art. 46 para. 13. 49 UNCITRAL, Digest of Case Law on the CISG (2008), Art. 46 para. 3. See also supra Art. 45, paras 9 et seq. 50 Huber, in: Huber/Mullis, The CISG (2007), pp. 199 et seq. 51 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 19 (who reaches this result by arguing that this is not a case of “substitute delivery” but a general performance claim under Art. 46(1) which is not subject to the fundamental breach requirement). 52 Cf. Honnold/Flechtner, Uniform Law (2009), Art. 49 para. 304.

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Article 46 36–37

Part III. Chapter II. Obligations of the Seller

period should begin to run when the buyer actually discovered the defect.53 According to Art. 27, it is sufficient if the buyer dispatches the declaration by appropriate means within that time; the risk of delay or loss has to be borne by the seller.54 36 There has been some discussion as to whether “reasonable time” in Art. 46(2) should have the meaning it has in Art. 49(2)(b)55 or whether instead it should rather be construed as in Art. 39(1).56 Proponents of the latter view tend to keep the reasonable time period rather short, suggesting that it should, as a general rule, be no more than about 2 weeks.57 It is submitted, however, that a more generous approach is appropriate as the buyer may need time to make his choice of remedy (for instance between substitute delivery and repair). The standards should be similar to the standards used under Art. 49(2)(b), as the buyer will often have to choose between substitute delivery and avoidance; cf. infra Art. 49 paras 70 et seq. 37

d) Substitute delivery and sale of specific goods. Art. 46(2) entitles the buyer to claim delivery of substitute goods. This means that the seller has to make a new tender of goods which conform to the contract. This will usually not create major problems where generic goods are the subject matter of the contract (e. g. oil, sugar, grain). It may, however, lead to problems where there is a sale of specific goods, for instance one particular second-hand machine or a specific shipment of clothes. In the author’s opinion, substitute delivery will usually not be possible in these cases. A machine different from that selected by the buyer will not be the object that he bought and thus cannot be claimed (or offered) as (substitute) delivery under the original contract.58 Some authors have argued that even in those cases the buyer should have a claim for substitute performance if the seller has replacement goods that are economically equivalent to the one bought originally.59 It is submitted, however, that this view should not be followed. In many cases, the seller will have designed the sale as one for an identified object only with the specific intention of avoiding having to perform a delivery of substitute goods which would force him to keep similar goods on stock or to obtain them on the market. Of course, if the seller in such a case does have similar goods in stock and he is willing to deliver them, the parties can easily agree on a new sales contract and terminate the original contract. The seller should, however, not be obliged to do so. The legal concept which leads to this result is the impossibility exception (cf. supra paras 18 et seq.). If only and specifically one specific object has been sold, it is impossible to deliver another object in performance of the contract.60 53 Huber, in: Huber/Mullis, The CISG (2007), p. 200; Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 34; Magnus, in: Staudinger, Kommentar (2013), Art. 46 para. 45. But see also Herber/Czerwenka, Kommentar (1991), Art. 46 para. 8 (time when notice should have been given). 54 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 33. 55 Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 34. 56 Magnus, in: Staudinger, Kommentar (2013), Art. 46 para. 43; Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 33; Akikol/Bu¨rki, in: Brunner, Kommentar (2014), Art. 46 para. 22. 57 Magnus, in: Staudinger, Kommentar (2013), Art. 46 para. 43. Note, however, that recently there seems to be a trend under Art. 39(1) which points towards a period of one month as a rough average for the notice period; cf. for instance Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 39 para. 17; CISG-AC Opinion no 2 (with detailed references to case law, being sceptical, however, towards formulating any general rule). 58 Magnus, in: Staudinger, Kommentar (2013), Art. 46 para. 34; Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 38; Benicke, in: Mu¨nchKommHGB (2013), Art. 46 para. 13. 59 See for instance Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 18. The (German) Bundesgerichtshof has taken a similar position with regard to national German sales law Bundesgerichtshof (Germany) 7 June 2006, NJW (2006) 2839 et seq. 60 Cf. Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 38; Akikol/Bu¨rki, in: Brunner, Kommentar (2014), Art. 46 para. 20.

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Article 46

The situation will be different where the seller has delivered the wrong object, i. e. an 38 aliud (e. g. another machine than the one chosen by the buyer). In this case the original delivery of the wrong machine will be a (fundamental) breach of contract and the buyer’s claim for delivery of the chosen machine will have to be regarded as a claim for substitute delivery.61 e) Consequences aa) Substitute delivery. Substitute delivery means that the seller delivers another 39 object which is in conformity with the requirements of the contract and of the Convention. bb) Costs and place of performance. It is submitted that it is the seller who has to 40 bear the costs of the substitute delivery62, even if under the original contract it had been for the buyer to cover the costs of transportation etc.63 This can be derived as a general principle of the Convention (Art. 7(2)) from the cost allocation for cure in Art. 48(1).64 The main policy argument for this submission is that the issue of substitute delivery only arises because the seller did not properly fulfil his obligations under the contract originally. This justifies imposing on him the costs for making proper performance in a second attempt. There is a dispute concerning the place of performance for substitute delivery. Some 41 authors argue that substitute delivery should be made at the place where the nonconforming goods are at the time when substitute delivery is required (provided that this is the place of destination where they were originally meant to be and that the buyer did not redirect the goods thereby raising the costs for substitute delivery).65 In the author’s opinion, however, it is more convincing to locate the place of performance for substitute delivery at the place of performance of the original obligation to deliver, i. e. according to the standards set out in Art. 31.66 In a case which involves carriage of the goods (Art. 31(1)(a)) this would lead to the result that substitute delivery would have to be performed by handing over the goods to the first carrier for transmission to the buyer. Usually, however, the buyer will be entitled to claim the transport costs to the place of destination as damages under Arts 45(1)(a) and 74. cc) Choice between substitute delivery and repair. In a case where both substitute 42 delivery and repair are available to the buyer, it would appear that it is up to him to choose between these two remedies. The predominant opinion, however, seems to be that the seller can defeat the buyer’s choice by offering repair instead of substitute delivery as long as both methods are equally suitable and sufficient to remedy the initial 61 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 18; Magnus, in: Staudinger, Kommentar (2013), Art. 46 para. 34; Akikol/Bu¨rki, in: Brunner, Kommentar (2014), Art. 46 para. 20. 62 See Oberlandesgericht Hamm (Germany) 9 June 1995 (window elements), CISG-Online 146; Mu ¨ llerChen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 36; Magnus, in: Staudinger Kommentar (2005), Art. 46 para. 50; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 46 para. 77. 63 Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 40. 64 Huber, in: Huber/Mullis, The CISG (2007), pp. 202 et seq.; Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 40. 65 See in that direction Magnus, in: Staudinger, Kommentar (2013), Art. 46 para. 50; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 46 para. 71; Akikol/Bu¨rki, in: Brunner, Kommentar (2014), Art. 46 para. 38. 66 Huber, in: Huber/Mullis, The CISG (2007), pp. 202 et seq.; Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 41; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2011), Art. 46 para. 10; cf. also Cour d’Appel Paris (France) 4 March 1998 (industrial machines), CISG-Online 535.

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Part III. Chapter II. Obligations of the Seller

breach of contract.67 In fact, Art. 48 gives the seller a right to cure the defect. What is more, the seller’s breach as a rule will not be fundamental if it can still be cured without undue burden for the buyer.68 As, in principle, cure can often be made by repair (unless of course repair would be unreasonable because, for example, it would lead to inacceptable disturbance to the buyer’s business or because the buyer simply has no use for mended goods), the seller often will be able to defeat the buyer’s claim for substitute delivery by reasonably offering and effecting repair.69 This result is also justified on economic grounds, as if it is the seller who has to bear the costs of substitute delivery, it should be up to him to choose between several equally suited measures.70 43

dd) Defective substitute delivery. If the goods that are tendered by way of substitute delivery are defective, the non-conforming tender will amount to a new breach of contract which may once more trigger the remedies of Art. 45, for instance claims under Art. 46. The buyer should be subject to the notification requirements of Arts 38 et seq. with regard to the substitute delivery.71 The fact that substitute delivery was not successful may be the one element that makes the first breach (i. e. the original delivery of non-conforming goods) “fundamental” in the sense of Arts 49(1)(a), 25 and therefore gives the buyer a right to avoid the contract.72

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ee) Return of non-conforming goods. Art. 82 does not explicitly state, but clearly presupposes, that the buyer who claims substitute delivery will be under a duty to make restitution of the (non-conforming) goods that had originally been delivered. This raises the question how the buyer’s claim for delivery of substitute goods and the seller’s claim for restitution relate to each other, and in particular whether they have to be performed concurrently. It is submitted, however, that these two obligations are not concurrent.73 Whereas the Convention in Art. 81(2) second sentence explicitly says that the restitutionary duties which arise out of an avoidance of the contract have to be performed concurrently, there is no such rule for the relationship between substitute delivery and restitution. Indeed, a Norwegian proposal to include a provision to that effect has been rejected by the Diplomatic Conference.74 This submission also seems reasonable from a practical perspective as the concurrent exchange of goods for goods would create considerable practical problems. In that respect the situation is different from the avoidance cases addressed in Art. 81(2) second sentence, which provides for a concurrent exchange of goods for money which does not present particular problems for commercial sales.75 As a result, therefore, the buyer can claim substitute delivery without having to offer restitution of the originally delivered goods at the same time. 67 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 35 with further references; Huber, in: Huber/Mullis, The CISG (2007), pp. 203 et seq.; Huber, in: Mu¨nchKommBGB (2015), Art. 46 paras 44 et seq. 68 See in more detail infra Art. 49, paras 15 et seq. 69 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 35. 70 Cf. Huber, in: Huber/Mullis, The CISG (2007), pp. 203 et seq. 71 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 37; Huber, in: Huber/ Mullis, The CISG (2007), p. 203. 72 Huber, in: Huber/Mullis, The CISG (2007), p. 203; Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 47. 73 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 34; Huber, in: Mu¨nchKommBGB (2015), Art. 46 para. 43; Magnus, in: Staudinger, Kommentar (2013), Art. 46 para. 49; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 46 para. 62; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2007), Art. 46 para. 8. For the opposite view see Herber/Czerwenka, Kommentar (1991), Art. 46 para. 7. 74 Cf. Honnold, Documentary History (1989), pp. 608 et seq., 708. 75 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 34; Huber, in: Huber/ Mullis, The CISG (2007), p. 201; Huber, in: Mu¨nchKommBGB (2015), Art. 46 para. 43.

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Article 46

3. Repair (Art. 46(3)) a) Outline of the requirements. Under Art. 46(3) the buyer has the right to require 45 the seller to remedy the lack of conformity by repair, unless this is unreasonable having regard to all the circumstances. The request for repair must be made either in conjunction with notice given under Art. 39 or within a reasonable time thereafter. In addition, there are a number of requirements which result from other provisions. As a general rule, therefore, a claim for repair is subject to the following requirements: (1) Non-conformity: The goods must be non-conforming in the sense of Art. 46(3). The concept of non-conformity has been explained supra paras 3 et seq. (2) Reasonableness: Repair must not be unreasonable (cf. infra paras 46 et seq.) (3) Time limit: A timely request for repair must be made under Art. 46(3) (cf. infra para. 50) irrespective of the applicable periods of limitation. (4) No general exceptions or defences: A claim for repair will be subject to a number of exceptions or defences under the CISG, in particular to: (a) the inconsistent remedy defence (Art. 46(1), cf. supra paras 13 et seq.). Although this defence is explicitly mentioned only in Art. 46(1), it should also apply to the performance claims provided for in Art. 46(2) and (3);76 (b) the Art. 28 defence (cf. supra para. 12 and comment to Art. 28) (c) the exception in Art. 80; (d) the exceptions which are based on impossibility or hardship (cf. supra paras 18 et seq.). b) Reasonableness. The buyer can claim repair, “unless this is unreasonable having 46 regard to all the circumstances”. As the word “unless” indicates, it is for the seller to prove the unreasonableness “defence”.77 Whether this defence is available, will have to be decided on a case-by-case basis by taking into account all the circumstances of the case and by weighing the buyer’s interest in getting repair against the seller’s expense78 and inconvenience. The following indications may, inter alia, be of relevance. If the costs of repair are considerably higher than the costs of substitute delivery or 47 than the advantage which the buyer will derive from the repair, this is a strong indication of unreasonableness;79 it is submitted that the purchase price should not be integrated into that equation.80 Whether one may assume a case of unreasonableness simply because the costs of repair are higher, but not considerably so, is a matter of dispute.81 Regard should also be had to which side is in a better position to perform or to 48 organize the repair of the goods. If the defect can be easily removed by the buyer (or by contractors easily available to him) and if the distant seller would have considerable difficulties in organising repair at the place where the goods are, it may prove 76 Huber, in: Huber/Mullis, The CISG (2007), p. 191; Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 paras 5, 12; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 39. 77 Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 54; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 40; Akikol/Bu¨rki, in: Brunner, Kommentar (2014), Art. 46 para. 33. 78 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 40. 79 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 40; Huber, in: Huber/ Mullis, The CISG (2007), pp. 205 et seq.; Will, in: Bianca/Bonell, Commentary (1987), Art. 46 para. 2.2.2.2; Magnus, in: Staudinger, Kommentar (2013), Art. 46 para. 61. 80 The matter is disputed. Cf. for a view similar to the one suggested here: Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 40 (with further references, also to a differing opinion); Huber, in: Mu¨nchKommBGB (2015), Art. 46 para. 55. 81 Cf. Magnus, in: Staudinger, Kommentar (2013), Art. 46 para. 61 on the one hand and Benicke, in: Mu¨nchKommHGB (2013), Art. 46 para. 22 on the other hand.

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Part III. Chapter II. Obligations of the Seller

unreasonable to require the seller to do so. The seller would then have to bear the costs of repair as damages under Art. 45(1)(b) and Arts 74 et seq. It is submitted that, as a general rule and depending on the individual circumstances of the case, the seller then should also be obligated to pay the buyer an advance on the costs of repair, if the buyer so wishes. 49 If the buyer has a legitimate interest specifically in a repair made by the seller (e. g. because the seller is a well-known expert in this field or because repair by other sources would take longer), this will be an indication in favour of regarding repair as reasonable.82 50

c) Time limit. Art. 46(3) submits the claim for repair to the same time limit as the claim for delivery of substitute goods.83

d) Consequences 51 aa) Repair. Repair may, in particular, be made by mending the goods or by exchanging defective parts. Repair may even consist of the delivery of a part which had not been delivered originally, as long as this partial failure to deliver amounts to a nonconformity under Art. 35. This will not be the case, however, if Art. 51 applies to the partial delivery because then the missing part will be regarded as a non-delivery and dealt with under Art. 46(1).84 52

bb) Costs and place of performance. It is submitted that the costs of repair have to be borne by the seller.85 It is disputed where the place of performance for repair should be located. While some authors86 look to the place where the goods are located at the time of (the request for) repair, others87 look to the place of performance under Art. 31 for the original delivery. It is submitted that, with regard to repair (but not with regard to substitute delivery, cf. supra paras 40 et seq.), the first approach is more convincing as it would be economically unreasonable to transport the defective goods back to the original place of delivery for repair (e. g. goods sold on an “ex works” basis).88

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cc) Repair, substitute delivery, damages and right to cure. It is submitted that it follows from Art. 48 that the seller can defeat the buyer’s claim for repair by making substitute delivery under the conditions of Art. 48 (reasonableness requirements).89 As a general rule, the buyer has the option to organize the repair of the goods himself and to claim the costs as damages under Arts 45(1)(b), 74 et seq., taking into account of course 82 Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 55; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 40; Magnus, in: Staudinger, Kommentar (2013), Art. 46 para. 61; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 46 para. 98 a; Will, in: Bianca/Bonell, Commentary (1987), Art. 46 para. 2.2.2.2. 83 Cf. supra paras 35 et seq. 84 Cf. supra para. 8. 85 Oberlandesgericht Hamm (Germany) 9 June 1995 (window elements), CISG-Online 146; Mu ¨ llerChen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 45; Huber, in: Huber/Mullis, The CISG (2007), p. 206; Huber, in: Mu¨nchKommBGB (2015), Art. 46 para. 59; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 46 para. 77; Magnus, in: Staudinger, Kommentar (2013), Art. 46 paras 50, 65; Schlechtriem/Butler, CISG (2009), para. 187. 86 See in that direction: Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 45; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2011), Art. 46 para. 15; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 46 para. 104 et seq. 87 Cour d’Appel Paris (France) 4 March 1998 (industrial machines), CISG-Online 535. 88 Huber, in: Huber/Mullis, The CISG (2007), pp. 206 et seq.; Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 59. 89 Huber, in: Huber/Mullis, The CISG (2007), pp. 206 et seq.; Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 61. But see for a different view Magnus, in: Staudinger, Kommentar (2013), Art. 46 para. 53.

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the duty to mitigate damages under Art. 77.90 Again, the seller can deprive the buyer of this option by exercising his right to cure under Art. 48. It should be noted in that regard, however, that the principle of good faith (Art. 7(1)) requires the seller to inform the buyer about his intention to cure (cf. infra Art. 48 paras 13 et seq).91

4. Burden of proof It is submitted that the following considerations should apply with regard to the 54 burden of proof.92 The buyer has to prove that the seller’s obligation exists. Once he has succeeded in doing so and claimed that there was a breach, it should in principle be for the seller to prove that he actually performed; with regard to the non-conformity of the goods (Art. 46(2),(3)), however, the burden should shift on the buyer as soon as he accepts the goods.93 The seller, for his part, bears the burden of proof with regard to his defences arising out of Arts 79, 80 and out of the inconsistent remedy argument of Art. 46(1). The burden for the fundamental breach requirement and for the time limits should be on the buyer, whereas the burden for the unreasonableness defence should be on the seller.

III. Comparable Rules Most international instruments on contract law have a rule which would give the 55 buyer a right to claim performance by the seller under certain (more or less strict) conditions, cf. for example Arts 7.2.1 et seq. PICC, Arts 9:101 et seq. PECL, Arts 3:301 et seq. DCFR. There are, however, differences in detail which cannot be explored here further. Suffice it to mention two points by way of example. First, neither the PICC, nor the PECL nor the DCFR provide specific rules on substitute delivery or repair which are as detailed as in Art. 46(2),(3) CISG. Secondly, the general claim for performance of non-monetary obligations under the PICC and under the PECL is subject to a defence that is not generally available under Art. 46 CISG, i. e. the rule that there is no claim for performance if the creditor (buyer) may reasonably obtain performance from another source (cf. Art. 7.2.2(c) PICC, Art. 9:102(2)(d) PECL). 90 Bundesgerichtshof (Germany) 24 September 2014 (tools), CISG-Online 2545; Oberster Gerichtshof (Austria) 14 January 2002 (cooling system), CISG-Online 643; Oberlandesgericht Graz (Austria) 22 November 2012 (machine), CISG-Online 2459; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 para. 46. 91 Bundesgerichtshof (Germany) 24 September 2014 (tools), CISG-Online 2545. 92 Cf. Huber, in: Huber/Mullis, The CISG (2007), pp. 207 et seq; Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 paras 67 et seq.; see also Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 paras 16, 31. 93 See, e. g., Bundesgericht (Switzerland) 13 November 2003 (used laundry machine), CISG-Online 840; Bundesgerichtshof (Germany) 8 March 1995 (New Zealand mussels), CISG-Online 144. See in more detail Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 paras 52 et seq.

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Article 47 (1) The buyer may fix an additional period of time of reasonable length for performance by the seller of his obligations. (2) Unless the buyer has received notice from the seller that he will not perform within the period so fixed, the buyer may not, during that period, resort to any remedy for breach of contract. However, the buyer is not deprived thereby of any right he may have to claim damages for delay in performance. Bibliography: See selected bibliography of Art. 45; CISG-AC Opinion no 10, Agreed Sums Payable upon Breach of an Obligation in CISG Contracts, 3 August 2012. Rapporteur: Dr. Pascal Hachem, Ba¨r & Karrer AG, Zurich, Switzerland (http://www.cisg-ac.org).

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Non-performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Declaration fixing a Nachfrist. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Defined period of reasonable length . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Consequences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Right to avoid the contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Restriction of buyer’s choice of remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Purpose of the rule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Suspension of remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) End of suspension period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Nachfrist not effective under Art. 47 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Period too short . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Period too long. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Period not clearly defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 3 3 4 5 8 11 11 12 13 14 21 23 23 27 28 29 30

I. Importance and Role of the Provision 1

Under Art. 47(1) the buyer may fix an additional period of time of reasonable length for performance by the seller of his obligations. In reference to parallels in German law, this is often called the Nachfrist mechanism. At first sight, the provision seems to state something which is self-evident. Of course, it is possible and admissible for the buyer to fix an additional period of time for performance by the seller, a Nachfrist. This would be so even if there were not express entitlement to this effect in the Convention. The importance of the provision thus results from its interaction with other provisions, in particular with Art. 49(1)(b) which, in cases of non-delivery, gives the buyer a right to avoid the contract after he has fixed a reasonable period of time under Art. 47 without success. This specific ground of avoidance – which unlike the general ground of avoidance in Art. 49(1)(a) does not require the breach to be fundamental – is thus based on the Nachfrist-procedure as it is outlined in Art. 47. Put differently, Art. 47(1) sets out the requirements for an effective Nachfrist in the sense of Art. 49(1)(b).1 What 1

Huber, in: Mu¨nchKommBGB (2015), Art. 47 para. 2.

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is more, the Nachfrist mechanism under Art. 47 can also be relevant with regard to the time limit for avoidance as set up by Art. 49(2)(b). If the buyer fixes a reasonable Nachfrist under Art. 47(1), he will not be entitled to 2 resort to any remedy except damages for the delay for a certain period of time pursuant to Art. 47(2). This rule intends to protect the seller’s reliance on having the entire period of time that was accorded to him by the buyer available for making performance.2 Obviously a modification of contract according to Art. 29 remains possible because it does not constitute a “remedy” – even though the modification contains a reduction of the purchase price.3

II. Detailed Commentary 1. Requirements As the major consequences of Art. 47 are, on the one hand, the right of avoidance 3 under Art. 49(1)(b) and, on the other hand, the temporary restriction of the buyer’s choice of remedies under Art. 47(2), the following analysis describes the requirements that Art. 47(1) sets out for these consequences. a) Non-performance. Art. 47(1), in conjunction with Art. 45(1), requires that the 4 seller has not performed one of his obligations under the contract or under the Convention. Any type of breach will suffice.4 It should be noted, however, that the Nachfrist-procedure will only lead to a right to avoid the contract under Art. 49(1)(b) in cases of non-delivery; irrespective of that, fixing an additional period of time for performance may also be useful with regard to other types of breach (e. g. nonconforming delivery), cf. infra Art. 49 para. 36. b) Declaration fixing a Nachfrist. The Nachfrist is fixed by a declaration by the 5 buyer. The declaration must clearly demand performance by the seller of his obligations. Being overly polite in this respect (e. g. “We hope that your delivery will arrive by July 31st”) may turn out to be dangerous as a court may regard such a demand as not being clear enough.5 It is not necessary, however, for the buyer to state that he will refuse to accept the goods after the Nachfrist has expired.6 2 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 3; Huber, in: Mu¨nchKommBGB (2015), Art. 47 para. 3. But see for a differing view (Nachfrist may be fixed before time for performance, provided that there remains a reasonable period of time for performance after the agreed time of performance) Benicke, in: Mu¨nchKommHGB (2013), Art. 47 para. 5. 3 U.S. Court of Appeals (3rd Circuit) (U.S.) 19 July 2007, Valero Marketing Supply Co vs. Greeni Oy, CISG-Online 1510; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 3. 4 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 1; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 47 para. 8; Magnus, in: Staudinger, Kommentar (2013), Art. 47 para. 8. But see for a differing view (notice-avoidance procedure only applicable to non-delivery) Honnold/ Flechtner, Uniform Law (2009), Art. 47 para. 288; Will, in: Bianca/Bonell, Commentary (1987), Art. 47 para. 1.2. For the specific (but rarely relevant) question whether the requirements for a claim for performance must have been given cf. Huber, in: Mu¨nchKommBGB (2015), Art. 47 para. 7. 5 See Honnold/Flechtner, Uniform Law (2009), Art. 47 para. 289; Mu ¨ ller-Chen, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 47 para. 5 with further references. For an example where the court regarded the demand as clear enough see Oberlandesgericht Hamburg (Germany) 28 February 1997 (iron molybdenum), CISG-Online 261. 6 Huber, in: Mu ¨ nchKommBGB (2015), Art. 47 para. 10; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 5; Magnus, in: Staudinger, Kommentar (2013), Art. 47 para. 18; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 47 para. 19; Herber/Czerwenka, Kommentar (1991), Art. 47 para. 3. But see for a differing view Will, in: Bianca/Bonell, Commentary (1987), Art. 47 para. 2.1.3.1.

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The declaration is widely regarded as falling under Art. 27 so that under the requirements set out there, the seller will have to bear certain communication risks.7 This may lead to the result that the buyer can avoid the contract under Art. 49(1)(b) although the seller did not know about the Nachfrist.8 It is a different issue, however, whether the buyer will be bound under Art. 47(2) if his declaration has not actually reached the seller, but is deemed to have reached him under Art. 27. In this case the seller is not in need of protection, as he did not actually rely on the Nachfrist. As a consequence, the buyer should be given the right to withdraw his declaration under Art. 15(2) (in an analogous application) and to regain his choice of remedies.9 7 As a general rule, an effective Nachfrist under Art. 47(1) can only be set when the time for performance (under the contract or under Art. 33) has passed;10 cf. infra Art. 49 paras 53 et seq. (with regard to the right to avoid under Art. 49(1)(b)). Irrespective of this, the buyer may be restricted in his choice of remedies under Art. 47(2) even where he has set the Nachfrist prematurely, i. e. before the date for delivery. 6

c) Defined period of reasonable length. The declaration must make it clear that the buyer expects the seller to perform within a defined period of time.11 The period is sufficiently defined if its end can be determined by reference to the calendar (e. g. “until January 31st” or “within three weeks of receipt of this letter”).12 The period is not sufficiently defined if the buyer merely demands performance “immediately” or “within reasonable time”; for the consequences of such a demand see infra para. 28.13 9 Whether the period chosen by the buyer is reasonable for the purposes of Arts 47(1) and 49(1)(b) will depend on the circumstances of the case. As a general rule, the buyer need not give the seller enough time to start from scratch, i. e. to begin preparing for his performance only now. It is sufficient if the Nachfrist set for the seller is long enough to make performance, if the seller has already made reasonable preparations for performance.14 10 Regard may, inter alia, be had to the following criteria.15 Where it was apparent to the seller that the buyer has a particular interest in quick delivery, the Nachfrist may be kept rather short. The fact that the original delivery periods were rather long or were on an “as space is available” basis may indicate that a longer Nachfrist is appropriate, and vice versa. If the seller owes goods which have to be tailor-made for the buyer, the period should be longer than if the seller owes standard goods from mass production. The agreed shipment terms also have to be taken into account; thus 8

7 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 12; Huber, in: Mu¨nchKommBGB (2015), Art. 47 para. 8; Benicke, in: Mu¨nchKommHGB (2013), Art. 47 para. 4. 8 Huber, in: Mu ¨ nchKommBGB (2015), Art. 47 para. 8. 9 Huber, in: Mu ¨ nchKommBGB (2015), Art. 47 para. 8. Cf. also Magnus, in: Staudinger, Kommentar (2013), Art. 47 para. 15; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 12; Benicke, in: Mu¨nchKommHGB (2013), Art. 47 para. 4. 10 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 11; Huber, in: Mu¨nchKommBGB (2015), Art. 47 para. 6. 11 Oberlandesgericht Du ¨ sseldorf (Germany) 24 April 1997 (shoes), CISG-Online 385. 12 Huber, in: Mu ¨ nchKommBGB (2015), Art. 47 para. 9; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 4. 13 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 4; Huber, in: Mu¨nchKommBGB (2015), Art. 47 para. 9; Honnold/Flechtner, Uniform Law (1999), Art. 47 para. 289; Will, in: Bianca/Bonell, Commentary (1987), Art. 47 para. 2.1.3.1; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 47 para. 20; Magnus, in: Staudinger, Kommentar (2013), Art. 47 para. 17. 14 Huber, in: Mu ¨ nchKommBGB (2015), Art. 47 para. 12; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 6; Benicke, in: Mu¨nchKommHGB (2013), Art. 47 para. 6. 15 Cf. Huber, in: Mu ¨ nchKommBGB (2015), Art. 47 para. 11.

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where the seller has to organize a sea transport of the goods, he has to be given reasonable time for doing so.16

2. Consequences a) Right to avoid the contract. If, in a case of non-delivery, the buyer has fixed an 11 additional period of time which satisfies the requirements set out in supra paras 5 et seq., he may be entitled to avoid the contract under Art. 49(1)(b) even if the seller’s breach was not fundamental under Arts 49(1)(a) and 25; in this case the buyer may have to act within the time limit set out in Art. 49(2)(b)(ii). Art. 49(1)(b) does, however, not apply to other types of breach (e. g. delivery of non-conforming goods); irrespective of that, fixing an additional period of time for performance may also be useful with regard to other types of breach (e. g. non-conforming delivery), cf. infra Art. 49 para. 36. b) Restriction of buyer’s choice of remedies. Under Art. 47(2) the buyer is limited in 12 his choice of remedies for as long as the additional period set by him has not expired. aa) Purpose of the rule. Art. 47 (2) states as a general rule that the buyer may not, 13 during the additional period of time fixed by him, resort to any remedy for breach of contract, except for claims for damages for delay in performance. The provision aims at protecting the seller who is entitled to rely on having the period specified by the buyer for making his performance. It is also based on the principle of good faith in the sense that a party (the buyer) should not be allowed to act in contradiction to his own behaviour (venire contra factum proprium, estoppel).17 bb) Suspension of remedies. Art. 47(2) operates by suspending the buyer’s right to 14 certain remedies for a certain period of time, i. e. until the Nachfrist fixed by the buyer has expired or until the seller has notified the buyer that he will not perform within the Nachfrist. From a doctrinal perspective, it is submitted that while the provision suspends the use of these remedies, it does not terminate or suspend the seller’s obligation as such. With some exceptions, the provision suspends all the buyer’s remedies. This concerns 15 in particular the right to avoid the contract (Art. 49) and the right to reduce the price (Art. 50). It also concerns types of performance claims other than the one for which the buyer has fixed the Nachfrist. Thus, if the buyer fixes an additional period of time for repair (Art. 46(3)), he will be barred by Art. 47(2) from making a claim for substitute delivery (Art. 46(2)) while the Nachfrist set for repair is still open.18 It is submitted, however, that the buyer’s right to withhold payment of the price (cf. Art. 45 para. 8) should not be affected by the suspension of remedies.19 With regard to claims for damages, several distinctions need to be drawn. First, 16 Art. 47(2) states in its last part that the buyer is not deprived of any right he may have to claim damages for delay in performance. The provision does not create these claims but simply states that they would not be barred or suspended by the Nachfrist. Thus, the legal basis for such claims would normally lie in Arts 45(1)(b) and 74.20 16

See Oberlandesgericht Celle (Germany) 24 May 1995 (used printing press), CISG-Online 152. See Huber, in: Mu¨nchKommBGB (2015), Art. 47 para. 16; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 3; Magnus, in: Staudinger, Kommentar (2013), Art. 47 para. 21; Honnold/Flechtner, Uniform Law (2009), Art. 47 para. 291. 18 Huber, in: Mu ¨ nchKommBGB (2015), Art. 47 para. 17. 19 This is the solution of the UNIDROIT Principles of International Commercial Contracts (Art. 7.1.5(2) PICC). 20 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 18; Magnus, in: Staudinger, Kommentar (2013), Art. 47 para. 28; Huber, in: Mu¨nchKommBGB (2015), Art. 47 para. 23; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 47 para. 29. 17

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Part III. Chapter II. Obligations of the Seller

It is submitted that the buyer should also be entitled to claim damages for those types of losses which have resulted already from the original breach and which could not be prevented or remedied if the seller made performance within the Nachfrist set by the buyer, e. g. damage that the delivered defective production machine has already caused to the buyer’s property when the buyer started to operate the machine.21 This submission can be based on a general principle of the Convention (Art. 7(2)) which is not only evidenced by the last part of Art. 47(2) with regard to damages for delay, but is also the rationale underlying Art. 48(1),(2). This general principle would state that the fact that the Convention (and/or the buyer) give the seller a second chance to perform does not deprive the buyer of any right to claim damages for those losses which he has already incurred as a result of the original breach and irrespective of whether the seller will later be able to perform.22 18 By contrast, the buyer is barred from claiming so-called “damages for non-performance” or “damages in lieu of performance”, i. e. those types of damages which are calculated on the basis that performance will not be made by the seller, such as a claim for the loss of value that the goods suffer due to the defects they had when they were originally delivered or a claim for loss of profit from a resale by the buyer which could not be made due to the seller’s breach.23 19 If the contract contains clauses for liquidated damages or contractual penalties, distinctions should be drawn along similar lines: the buyer should be entitled to invoke claims under these clauses in so far as they relate to the delay caused by the Nachfrist (e. g. penalty of 10,000 E/day for delay in delivery), but should not be entitled to invoke them in so far as they are based on the seller’s final non-performance (e. g. penalty of 200,000 E if no goods are delivered at all).24 20 Art. 47(2) does not prevent the parties from reaching a new agreement concerning the obligation in question.25 This results from Art. 6. What is more, it should be noted that the suspension provided for in Art. 47(2) only operates with regard to the obligation to which the Nachfrist refers. Thus, if the seller has committed several breaches and the buyer has proceeded under Art. 47 with regard to one of these breaches only, the buyer will not be barred from invoking his remedies concerning the other breach. 17

21

cc) End of suspension period. Art. 47(2) sets out two alternative scenarios in which the suspension of remedies comes to an end. First, the suspension of remedies ends when the Nachfrist (which was effective in the sense that it satisfied the requirements set out in supra paras 5 et seq.) expires without the seller having made proper performance; in this case the buyer may invoke his remedies under Arts 45 et seq. Secondly, the suspension of remedies ends if the seller declares that he will not perform within the (effective) Nachfrist fixed by the buyer26 and if this declaration has been received by the

21 Magnus, in: Staudinger, Kommentar (2013), Art. 47 para. 28; Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 19; Huber, in: Mu¨nchKommBGB (2015), Art. 47 para. 24; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 47 para. 29. 22 Huber, in: Mu ¨ nchKommBGB (2015), Art. 47 para. 24. 23 Huber, in: Mu ¨ nchKommBGB (2015), Art. 47 para. 17. 24 Favouring the buyer’s right to claim under such clauses Magnus, in: Staudinger, Kommentar (2013), Art. 47 para. 23; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 20; Huber, in: Mu¨nchKommBGB (2015), Art. 47 para. 25; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 47 para. 29. Generally on these clauses CISG-AC Opinion no 10. 25 See U.S. Court of Appeals (3rd Circuit) (U.S.) 19 July 2007 (Naphta), Valeo Marketing & Supply Co. v Grenni Oy, CISG-Online 1510. 26 Or if the seller offers performance, but makes this offer subject to a counter performance to which he is not entitled, see Bundesgericht (Switzerland) 20 December 2006 (machines), CISG-Online 1426.

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buyer.27 If, however, in the latter case, the seller combines his refusal to perform with an offer to perform at a later date, this may trigger the mechanism provided for in Art. 48(2)-(4) which may again lead to a situation where the buyer is bound in his choice of remedies28; for more detail see infra Art. 48 paras 37 et seq. If the seller does perform within the Nachfrist, but if this performance is not in 22 conformity with the contract, two different situations should be distinguished. On the one hand, if the non-conformity amounts to a fundamental breach, the buyer will be entitled to avoid the contract under Arts 49(1)(a), 25 immediately, i. e. even before the expiry of the original Nachfrist.29 The reason for this is that the non-conforming delivery should be regarded as a new and separate breach which again triggers the application of the remedial provisions in Arts 45 et seq. On the other hand, if the nonconformity as such does not amount to a fundamental breach, this will not immediately entitle the buyer to avoid the contract. It is submitted as a general rule that the buyer should then be required to wait and see whether the seller still makes a conforming performance within the original Nachfrist; if the seller does not do so, the buyer will be entitled to avoid the contract under Art. 49(1)(b). However, if the buyer has good grounds for having lost his trust in the seller’s ability to perform properly, he should be given the right to avoid the contract immediately; doctrinally this could be justified by saying that the second breach (non-conformity), although not per se fundamental, was the one element that tipped the balance in that it made the original breach fundamental so that the buyer would now have a right to avoid the contract under Art. 49(1)(a) for fundamental breach. c) Nachfrist not effective under Art. 47 aa) Period too short. According to the predominant opinion, if the buyer sets a time 23 limit which is too short, this will not be entirely ineffective, but will initiate a period of reasonable length.30 It is submitted that this is correct with regard to the buyer’s right to avoid under 24 Art. 49(1)(b). In practice, this can lead to two different scenarios. One the one hand, if the buyer declares avoidance immediately after the expiry of the insufficient period of time, this will have no effect under Art. 49(1)(b);31 in fact, the untimely declaration of avoidance may itself constitute a fundamental breach of contract which entitles the seller to avoid the contract. If, on the other hand, the buyer delays giving a notice of avoidance until after a reasonable period of time has expired32, such notice will be valid

27 As the refusal is not effective until received by the buyer, the seller may withdraw the declaration prior to the receipt. Cf. Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 17; Huber, in: Mu¨nchKommBGB (2015), Art. 47 para. 22; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 47 para. 31; Benicke, in: Mu¨nchKommHGB (2013), Art. 47 para. 12. 28 Cf. Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 17 and Art. 48 paras 22 et seq. 29 Huber, in: Mu ¨ nchKommBGB (2015), Art. 47 para. 20; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 15 with further references. 30 Oberlandesgericht Celle (Germany) 24 May 1995 (used printing press), CISG-Online 152; Mu ¨ llerChen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 8; Magnus, in: Staudinger, Kommentar (2013), Art. 47 para. 20; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2011), Art. 47 para. 6; Benicke, in: Mu¨nchKommHGB (2013), Art. 47 para. 7. 31 If the delay in delivery as such constitutes a fundamental breach, it will justify avoidance under Art. 49(1)(a) but not under Art. 49(1)(b), cf. Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 9. 32 It should be noted that the time bars in Art. 49(2) do not apply here because the seller has not (yet) delivered, Huber, in: Huber/Mullis, The CISG (2007), p. 238.

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under Art. 49(1)(b) because the insufficiently short period has initiated the reasonable period under the above-mentioned rule.33 25 It should be noted, however, that the seller may prevent the buyer’s right to avoid from coming into existence. Thus, if the seller simply delivers within that reasonable period as it is set in motion (and before the buyer has declared avoidance), the buyer will lose his right to avoid under Art. 49(1)(b).34 What is more, the seller may counter the buyer’s time limit by offering cure under Art. 48(2),(3) within a period of time which is longer than the one set by the buyer. If the buyer does not reject that proposal within reasonable time, Art. 48(2) will have the effect that the period suggested by the seller takes precedence over the one fixed by the buyer. As a result, the buyer cannot declare avoidance because that would be inconsistent with the seller’s right to effect performance (Art. 48(2) second sentence). 26 With regard to the question whether the buyer is bound by the Nachfrist (in the sense that he may not resort to other remedies), a different approach should be taken. It is submitted that the buyer should only be bound under Art. 47 for as long as the period fixed by him lasts, even if it is too short to be “reasonable” under Art. 47(1). The reason for this submission is that after the expiry of the (albeit too short) period, the seller has no longer reasonable ground to believe in the buyer’s acceptance of his performance.35 27

bb) Period too long. If the period of time fixed by the buyer is longer than a reasonable period would have been, the (too long) period fixed by the buyer should be regarded as a valid Nachfrist for the purposes of Arts 47 and 49. The buyer will thus be bound under Art. 47(2) until it has expired and if it has expired without the seller having made performance the buyer will be entitled to avoid the contract under Art. 49(1)(b).36

28

cc) Period not clearly defined. If the buyer has not fixed an additional period of time which is sufficiently defined, he will not be entitled to avoid the contract under Art. 49(1)(b).37 He will not be bound under Art. 47(2) in his choice of remedies, but may under certain circumstances be bound on a case by case basis by virtue of the good faith principle in Art. 7(1). This may be the case where the buyer has required delivery “as soon as possible” – which is not sufficiently defined in the sense of Art. 47(2) – and declared the avoidance shortly afterwards although the seller has already started to make preparations for performance.38

3. Burden of proof 29

If the buyer has declared the avoidance of the contract under Art. 49(1)(b) it will be for him to prove that he has fixed a reasonable period of time under Art. 47(1); he will 33 Cf. Oberlandesgericht Naumburg (Germany) 27 April 1999 (automobile), CISG-Online 512; Oberlandesgericht Celle (Germany) 24 May 1995 (used printing press), CISG-Online 152; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 9. But see for a differing view Schnyder/ Straub, in: Honsell, Kommentar (2010), Art. 47 paras 24, 37. For a detailed problem analysis cf. Friehe, Die Setzung der unangemessen kurzen Nachfrist im CISG mit einem Ausblick auf das BGB, IHR (2010) 230, (2011) 16, 57. 34 Huber, in: Huber/Mullis, The CISG (2007), p. 238. 35 Huber, in: Mu ¨ nchKommBGB (2015), Art. 47 para. 13. 36 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 10; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2011), Art. 47 para. 7; Benicke, in: Mu¨nchKommHGB (2013), Art. 47 para. 8. But see for a differing view Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 47 para. 25. 37 Huber, in: Mu ¨ nchKommBGB (2015), Art. 47 para. 28; Honnold/Flechtner, Uniform Law (2009), Art. 47 para. 289. 38 Huber, in: Mu ¨ nchKommBGB (2015), Art. 47 para. 28; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 21 and Art. 45 para. 15.

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be able to rely on Art. 27 in that regard.39 If the seller relies on Art. 47(2) to show that a remedy invoked by the buyer was inadmissible, it should be for the seller to prove that the Nachfrist had been fixed.40 By contrast, it will be for the buyer to prove that the seller declared his refusal to perform.41

III. Comparable Rules The PICC (Arts 7.1.5 and 7.3.1(3)) and the PECL (Arts 8:106, 9:301(2)) contain 30 similar (albeit not identical) rules. 39 Oberlandesgericht Du ¨ sseldorf (Germany) 24 April 1997 (shoes), CISG-Online 385; Huber, in: Mu¨nchKommBGB (2015), Art. 47 para. 29. 40 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 13; Huber, in: Mu¨nchKommBGB (2015), Art. 47 para. 30. 41 Magnus, in: Staudinger, Kommentar (2013), Art. 47 para. 29; Huber, in: Mu ¨ nchKommBGB (2015), Art. 47 para. 30.

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Article 48 (1) Subject to Article 49, the seller may, even after the date for delivery, remedy at his own expense any failure to perform his obligations, if he can do so without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the buyer. However, the buyer retains any right to claim damages as provided for in this Convention. (2) If the seller requests the buyer to make known whether he will accept performance and the buyer does not comply with the request within a reasonable time, the seller may perform within the time indicated in his request. The buyer may not, during that period of time, resort to any remedy which is inconsistent with performance by the seller. (3) A notice by the seller that he will perform within a specified period of time is assumed to include a request, under the preceding paragraph, that the buyer make known his decision. (4) A request or notice by the seller under paragraph (2) or (3) of this article is not effective unless received by the buyer. Bibliography: See selected bibliography of Art. 45.

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Right to cure under Art. 48(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Seller’s failure to perform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Cure after delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Reasonable cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Seller required to give notice without undue delay? . . . . . . . . . . . . . . . . . . . . e) “Subject to” the buyer’s right to avoid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f) Effective cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g) Place of performance and costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . h) Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) General outline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Avoidance of the contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Reduction of the price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ee) Substitute delivery and repair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i) Buyer’s refusal to accept cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Right to cure under Art. 48(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Outline. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Indication of performance by seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) No objection by buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Requirements of Art. 48(1) irrelevant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Interaction with avoidance by the buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f) Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Before cure (Art. 48(1), (2)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) After cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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I. Importance and Role of the Provision The Convention contains three provisions on the seller’s right to cure a breach, i. e. 1 Arts 34 and 37 on the one hand, and Art. 48 on the other hand. While the former two provisions are concerned with the situation where the seller has performed before the date for performance and wants to cure certain breaches before that date, Art. 48 deals with the seller’s right to cure a breach after the time of performance. Giving the seller a right to cure is in line with the overall objective of the Convention to save the contract and to avoid restitution of the goods (cf. supra Art. 45 paras 9 et seq.). Art. 48 recognizes that the right to cure may arise in two situations, the first of which 2 depends upon an application of the requirements of Art. 48(1), while the second is founded on an (implied) “agreement” between the parties (Art. 48(2)).

II. Detailed Commentary 1. Right to cure under Art. 48(1) Under certain circumstances (see infra paras 4 et seq.) Art. 48(1) gives the seller a 3 right to remedy (at his own expense) a failure to perform his obligations. If the seller has successfully cured the breach the buyer will be deprived of several of the remedies under Arts 45 et seq. a) Seller’s failure to perform. Art. 48 applies to any failure by the seller to perform 4 his obligations under the contract; this results from the clear wording of the provision.1 In practice, however, its main field of application will be the delivery of non-conforming goods.2 b) Cure after delivery. As a rule, Art. 48 only applies if the cure which the seller 5 intends to make is supposed to take place after the date when the obligation which has not been performed became due. If the cure is intended to be made before that date, Art. 34 or Art. 37 may apply, but not Art. 48 CISG.3 This is expressly mentioned in Art. 48 for the case where the seller’s breach consists 6 in not making (conforming) delivery (“even after the date for delivery”). It should, however, be regarded as a general principle of the Convention under Art. 7(2). c) Reasonable cure. Art. 48(1) firstly requires that cure must actually be possible (“if 7 he can do so”).4 Cases of impossibility will, however, be rare in practice, as – at least where generic goods are sold – substitute delivery will usually be possible. Secondly, the seller’s right to cure is subject to a reasonableness requirement. The 8 seller must be able to effect cure “without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the buyer”. As a rule, these reasonableness requirements should 1 Huber, in: Mu ¨ nchKommBGB (2015), Art. 48 para. 4; Magnus, in: Staudinger, Kommentar (2013), Art. 48 para. 8; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 48 para. 6; Honnold/Flechtner, Uniform Law (2009), Art. 48 para. 295. 2 Huber, in: Huber/Mullis, The CISG (2007), p. 218; Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 paras 3, 1; Huber, in: Mu¨nchKommBGB (2015), Art. 48 para. 4. 3 See Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 4; Huber, in: Mu¨nchKommBGB (2015), Art. 48 para. 14. 4 Cf. Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 5.

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be assessed on an objective basis from the buyer’s perspective rather than from the seller’s perspective.5 The delay caused will usually be “unreasonable” at any rate if it is so serious as to amount to a fundamental breach in itself.6 It can, however, also be unreasonable below that threshold.7 The reasonable period for cure under Art. 48(1) should be determined along similar lines as the determination of the reasonable period of time for performance (Nachfrist) in Art. 47.8 As a rule, it may be advisable for the buyer to fix a Nachfrist under Art. 47 because this may facilitate the task to prove that the period of time for cure suggested by the seller was unreasonable and should therefore be disregarded.9 It has been held that the delay may be unreasonable if it makes the buyer liable towards his own sub-buyers.10 The term “unreasonable inconvenience” refers inter alia to the disturbances that cure would bring to the buyer’s business, e. g. noise, dirt, disruption of business.11 If the buyer, with good grounds, has lost his trust in the seller’s ability to cure, for example as a result of the first unsuccessful attempts at cure, the seller’s right to cure under Art. 48 will not bar any remedies of the buyer. The loss of trust may be regarded as a factor which causes “unreasonable inconvenience”.12 The reference to uncertainty of reimbursement may become relevant if the seller needs the buyer’s cooperation for effecting cure. The seller will only have a right to cure under Art. 48(1) if there is no uncertainty concerning the reimbursement of the buyer’s expenses that result from this cooperation (cf. also infra paras 19 et seq.).13 Whether there actually is uncertainty in that regard, will depend on the circumstances of the case. As, however, it is the seller who wishes to cure his breach and as he needs the buyer’s cooperation in that regard, one should not understand the concept of “uncertainty” restrictively. If the buyer reasonably argues that subsequent reimbursement is not entirely certain, the burden should shift on the seller to guarantee such certainty, for example, by making an advance payment or by providing effective security14 for those expenses; it is submitted that effective security will often mean that it must be on a first-demand-basis. It should be noted, however, that the reference to uncertainty of reimbursement in Art. 48(1) does not qualify or modify the rule that it is the seller who has to bear the costs of cure (cf. “at his own expense”). d) Seller required to give notice without undue delay? Unlike Art. 7.1.4(1)(a) PICC, Art. 48 CISG does not explicitly require the seller to give notice of his intention to cure 5 Huber, in: Mu ¨ nchKommBGB (2015), Art. 48 para. 5; Magnus, in: Staudinger, Kommentar (2013), Art. 48 para. 14; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 48 para. 20. 6 Secretariat Commentary on 1978 Draft, Art. 44 para. 3; Will, in: Bianca/Bonell, Commentary (1987), Art. 48 para. 2.1.1.1.2; Huber, in: Mu¨nchKommBGB (2015), Art. 48 para. 6. 7 Huber, in: Mu ¨ nchKommBGB (2015), Art. 48 para. 6; Bundesgerichtshof (Germany) 24 September 2014 (tools), CISG-Online 2545. 8 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 10; Huber, in: Mu¨nchKommBGB (2015), Art. 48 para. 6; Benicke, in: Mu¨nchKommHGB (2013), Art. 48 para. 7. But see also Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 48 paras 24, 57 et seq. 9 See Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 10. 10 Cf. Bundesgerichtshof (Germany) 24 September 2014 (tools), CISG-Online 2545; Amtsgericht Mu¨nchen (Germany) 23 June 1995 (pharmaceutical goods – tetracycline), CISG-Online 368. 11 Huber, in: Mu ¨ nchKommBGB (2015), Art. 48 para. 7; Benicke, in: Mu¨nchKommHGB (2013), Art. 48 para. 6; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 11; Magnus, in: Staudinger, Kommentar (2013), Art. 48 para. 15. 12 Bundesgerichtshof (Germany) 24 September 2014 (tools), CISG-Online 2545. 13 Huber, in: Huber/Mullis, The CISG (2007), p. 219; Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 12. 14 Huber, in: Mu ¨ nchKommBGB (2015), Art. 48 para. 8. Moreover cf. Will, in: Bianca/Bonell, Commentary (1987), Art. 48 para. 2.1.1.1.2.

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Article 48

to the buyer without undue delay after being informed of the non-performance. It is submitted, however, that such a requirement of notice should also exist under the CISG.15 In fact, without such notice the buyer will have to wait until the reasonable period for 14 cure, as envisaged by Art. 48(1), has elapsed, before he can decide on how to proceed further (e. g. claiming damages, reducing the price, avoiding the contract etc.). As, depending on the circumstances of the case and on the nature of the non-performance, this may be a rather long period of time, the buyer is left with a considerable degree of uncertainty. As a rule, he will not be able to shorten this period of uncertainty by fixing a Nachfrist under Art. 47, as this additional period of time will also have to be so long as to reasonably enable the seller to cure, i. e. about as long as the “reasonable period” under Art. 48(1). This situation is in conflict with the requirements of certainty and fastness in international trade.16 This uncertainty for the buyer can be reduced without imposing too heavy a burden 15 on the seller by adopting the rule that is expressed in Art. 7.1.4(1)(a) PICC. If one takes the view that the PICC may not be used to fill internal gabs in the CISG under Art. 7(2) (cf. supra Art. 7 para. 61), one should base the rule on the principle of good faith (Art. 7(1)). This has recently been confirmed by the German Bundesgerichtshof.17 Consequently, if the seller does not conform to this notice requirement, he should rightfully lose his right to cure under Art. 48(1).18 e) “Subject to” the buyer’s right to avoid. Art. 48(1) states that the seller’s right to 16 cure is “subject to Article 49”, i. e. to the buyer’s right to avoid the contract. It is this part of the provision which has created considerable controversy with regard to the relationship between the seller’s right to cure and the fundamental breach doctrine. This will be dealt with infra Art. 49 paras 15 et seq. Suffice it here to state that most courts and authors nowadays take the view that, as a rule, the seller’s right to cure the breach under Art. 48 should be taken into account when deciding on whether the breach was fundamental under Arts 49(1)(a) and 25, unless the buyer has a particular and legitimate interest in being allowed to avoid the contract immediately. As a rule, therefore, even a serious breach will not be fundamental if an effective (cf. infra paras 17 et seq.) and reasonable cure under Art. 48 is offered and made. This approach leaves the “subject to” provison in Art. 48(1) intact in that the buyer’s right to avoid actually takes precedence over the seller’s right to cure, but also permits to take into account the fact that a breach which is reasonably curable will often not be fundamental and will then not justify a right to avoid. f) Effective cure. Art. 48 will only have full effect, i. e. “wipe out” the breach and thus 17 bar (most of) the buyer’s remedies, if the seller’s cure is complete, successful and effective, i. e. if it leads to a completely proper performance of the seller’s obligation. If the cure is only partly effective in the sense that it alleviates the consequences of the breach to the extent that the breach is still existing but no longer fundamental (Art. 25), this may bar certain of the buyer’s remedies (e. g. avoidance under Art. 49(1)(a)), but not all (e. g. damages under Arts 45(1)(b) and 74). The seller is not restricted to any particular measures of cure, as long as they are 18 suited to remedy the defect. If different methods of cure exist, the choice of which 15

Cf. Huber in: Mu¨nchKommBGB (2015), Art. 48 para. 8 a. Cf. Schlechtriem, Fristsetzungen, FS Trinkner (1995), p. 321 (328 et seq.). 17 Bundesgerichtshof (Germany) 24 September 2014 (tools), CISG-Online 2545. 18 Bundesgerichtshof (Germany) 24 September 2014 (tools), CISG-Online 2545. 16

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method to adopt is for the seller subject only to the reasonableness requirement.19 He should, however, try to choose the one that causes the least inconvenience for the buyer, without being strictly obligated to do so.20 As outlined supra (Art. 46 para 42), it will usually also be for the seller to choose between substitute delivery and repair, provided both are equally suited and acceptable to the buyer.21 g) Place of performance and costs. As a rule, the place of performance for the cure should be the place of performance of the original obligation. If, however, cure is made by substitute delivery or by repair, the place of performance may be situated at a different place, as outlined supra (Art. 46 paras 40 et seq., 52).22 20 Art. 48 expressly provides that the seller has to cure the breach at his own expense. This means that it is for the seller to bear the costs that he incurs for curing the defect himself and that he is not entitled to claim reimbursement for these costs from the buyer. In addition, it also results from the provision that the seller will have to reimburse the buyer for any costs that the buyer incurs as a result of the seller’s efforts to cure. This would cover cases where the buyer has to cooperate in order to make cure work (e. g. by providing personnel in order to enable the seller’s employees to get access to the sold machine) or cases where the buyer suffers a loss due to the disruption of business caused by the seller’s efforts to cure (cf. also supra para. 10). This right of the buyer to claim compensation should be derived directly from the cost allocation rule in Art. 48(1), irrespective of the question whether it might also be brought under a claim for damages under Arts 45(1)(b), 74 et seq. and 48(1)(2).23 19

h) Consequences 21 aa) General outline. An effective cure under Art. 48(1) will lead to the result that there no longer is a non-performance. The buyer will thus lose his rights under Art. 45, except for certain types of damages claims as provided for in the second sentence of Art. 48(1). If the cure is only partly effective in the sense that it alleviates the consequences of the breach to the extent that the breach is still existing but no longer fundamental (Art. 25), this may bar certain of the buyer’s remedies (e. g. avoidance under Art. 49(1)(a)), but not all (e. g. damages under Arts 45(1)(b) and 74). 22 Even before the cure is effective, the buyer’s remedies under Art. 45 will normally be suspended, if the seller offers a cure which satisfies the requirements set out in Art. 48(1); the suspension of the buyer’s remedies ends when a reasonable time for cure, as it is envisaged in Art. 48(1), has elapsed. 23

bb) Avoidance of the contract. As indicated supra para 16 and discussed in more detail infra Art. 49 paras 15 et seq., the prevailing view is that if the buyer does not have a legitimate interest in immediate avoidance, the seller’s breach will not be fundamental until the time for such reasonable cure has elapsed without effective (cf. supra paras 17 et seq.) cure being made or until the seller has refused to offer such cure. As is submitted 19 Huber, in: Mu ¨ nchKommBGB (2015), Art. 48 para. 13; Benicke, in: Mu¨nchKommHGB (2013), Art. 48 para. 4; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 6; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 48 para. 10. 20 Huber, in: Mu ¨ nchKommBGB (2015), Art. 48 para. 13; Huber, in: Huber/Mullis, The CISG (2007), p. 219. 21 Huber, in: Huber/Mullis, The CISG (2007), p. 219; Huber, in: Mu ¨ nchKommBGB (2015), Art. 48 para. 13. But see for a different view Magnus, in: Staudinger, Kommentar (2013), Art. 48 para. 32 and Will, in: Bianca/Bonell, Commentary (1987), Art. 48 para. 3.1 (as a rule buyer’s choice unless Art. 48(2) applies and binds the buyer). 22 See Huber, in: Huber/Mullis, The CISG (2007), pp. 202 et seq., 206. 23 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 8; Huber, in: Mu¨nchKommBGB (2015), Art. 48 para. 16; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 48 para. 18.

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infra Art. 49 paras 24 et seq. nothing turns on whether or not the seller actually offers to cure before the buyer declares avoidance so that the seller can still defeat a “premature” declaration of avoidance by offering reasonable cure under Art. 48(1).24 cc) Reduction of the price. As a rule, the seller’s right to cure takes precedence over 24 the buyer’s right to reduce the purchase price. The details in that regard are dealt with infra Art. 50 paras 23 et seq. dd) Damages. Art. 48(1) second sentence provides that cure by the seller will not 25 have any effect on the buyer’s right to claim damages under the Convention. Whether the buyer will actually be able to claim damages, depends on whether the general requirements for such a claim (Arts 45(1)(b) and 74 et seq.) are met.25 Although this is not explicitly said, the provision obviously only refers to those types of 26 damage which result from the original breach and which cannot be removed by the cure.26 By contrast, those types of losses which can be remedied by the seller’s cure, will not be recoverable. Thus, where the seller delivers a machine which was not in conformity with the contract under Art. 35 and where its repair takes three weeks, damages will be recoverable for any lost profit incurred while the machine was being repaired, but not for the difference in value between the (unrepaired) machine and the value that a conforming machine would have had at the time of delivery. If the buyer has the defective machine repaired by a third party, thus preventing the seller from making cure under Art. 48, the costs incurred towards the third party will not be recoverable either, because they could have been avoided if the buyer had allowed the seller to cure.27 ee) Substitute delivery and repair. The influence of the seller’s right to cure on the 27 choice between substitute delivery (Art. 46(2)) and repair (Art. 46(3)) has been discussed supra Art. 46 paras 42 and 53. i) Buyer’s refusal to accept cure. If the buyer refuses to accept the seller’s offer to cure 28 which meets the requirements of Art. 48(1), he will have to face serious consequences. It is submitted as a rule that in such a case the buyer will not be able to rely on the nonperformance to the extent that this would have been remedied by the seller’s cure.

2. Right to cure under Art. 48(2) a) Outline. A seller who is willing to cure will usually not know whether the buyer is 29 ready to accept his offer or whether he is likely to reject it. Art. 48(2) – (4) give the seller the chance to clarify the situation by contacting the buyer. In order to do so the seller must indicate to the buyer that he is willing to perform within a certain period and request him to make known whether he will accept performance.28 If the buyer does not respond within a reasonable time, or if he accepts the seller’s offer, the seller will have a right to cure irrespective of whether the requirements of Art. 48(1) are actually met.29 If, 24

Huber, in: Huber/Mullis, The CISG (2007), pp. 224 et seq. Huber, in: Huber/Mullis, The CISG (2007), p. 220; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 21; Huber, in: Mu¨nchKommBGB (2015), Art. 48 paras 20 et seq. 26 See Huber, in: Mu ¨ nchKommBGB (2015), Art. 48 para. 20; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 21. 27 Huber, in: Mu ¨ nchKommBGB (2015), Art. 48 para. 21; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 21. See also Oberster Gerichtshof (Austria) 14 January 2002 (cooling system), CISG-Online 643. 28 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 25. 29 Huber, in: Mu ¨ nchKommBGB (2015), Art. 48 para. 23; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 27; Magnus, in: Staudinger, Kommentar (2013), Art. 48 para. 41; Benicke, in: Mu¨nchKommHGB (2013), Art. 48 para. 14. 25

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on the other hand, the buyer rejects the seller’s offer within a reasonable time, Art. 48(2) will have no effect on the existence of a right to cure. Whether such a right to cure exists will then have to be decided according to the general criteria of Art. 48(1) (cf. infra paras 32 et seq.).30 b) Indication of performance by seller. Art. 48(2) requires that the seller requests the buyer to make known whether he will accept performance within a certain time. Thus the seller must declare three points: first his willingness to perform, secondly a certain period of time within which he intends to do so (“within the time indicated in his request”) and a request that the buyer make known his decision.31 It does not matter, however, whether or not the period of time which the seller indicates as the performance period is long enough to be “reasonable” in the sense of Art. 48(1) or Art. 47(2).32 If the buyer regards the indicated period as being too long he can simply refuse the seller’s offer (cf. infra paras 32 et seq.) and thus defeat the seller’s attempt to get a right to cure under Art. 48(2). Again, such a rejection does not affect any right to cure that the seller may have under Art. 48(1). 31 The requirement that the seller indicate his willingness to perform and request a reply from the buyer, is specified in more detail in the third and fourth paragraph of Art. 48. Art. 48(3) provides that a notice by the seller that he will perform within a specified period of time is assumed to include such a request. It is submitted that this assumption is not rebuttable.33 Pursuant to Art. 48(4) – and in exception to Art. 27 – the seller’s request or indication is not effective unless received by the buyer. The burden of proof concerning the receipt of the declaration is on the seller.34 30

c) No objection by buyer. A right to cure under Art. 48(2) will arise if the buyer does not make known within a reasonable time whether he will accept performance. In practice, this means that the buyer will have to object to the seller’s offer to cure if he does not wish to be bound by it. He will have a “reasonable time” to do so. This reasonable period for objection should be kept rather short.35 33 The fact that the buyer had already fixed an additional period of time for performance under Art. 47 before the seller sent a request under Art. 48(2) does not relieve the buyer from making the objection under Art. 48(2);36 this should apply even if the buyer had combined his Nachfrist with a conditional declaration of avoidance for the 32

30

Huber, in: Huber/Mullis, The CISG (2007), p. 221. Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 25; Magnus, in: Staudinger, Kommentar (2013), Art. 48 para. 39; Huber, in: Mu¨nchKommBGB (2015), Art. 48 para. 24; Benicke, in: Mu¨nchKommHGB (2013), Art. 48 para. 16; Will, in: Bianca/Bonell, Commentary (1987), Art. 48 para. 2.2.1. 32 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 25; Huber, in: Mu¨nchKommBGB (2015), Art. 48 para. 24; Magnus, in: Staudinger, Kommentar (2013), Art. 48 para. 39; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2011), Art. 48 para. 8. For a differing view see Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 48 para. 42 b. 33 Huber, in: Mu ¨ nchKommBGB (2015), Art. 48 para. 25; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 48 para. 44; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 28; Benicke, in: Mu¨nchKommHGB (2013), Art. 48 para. 15. 34 Huber, in: Mu ¨ nchKommBGB (2015), Art. 48 para. 25; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 29. 35 As a general rule, this seems to be widely accepted, although there are differences in the wording used; see for example Huber, in: Mu¨nchKommBGB (2015), Art. 48 para. 26; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 26; Magnus, in: Staudinger, Kommentar (2013), Art. 48 para. 42; Will, in: Bianca/Bonell, Commentary (1987), Art. 48 para. 2.2.2; Akikol/Bu¨rki, in: Brunner, Kommentar (2014), Art. 48 para. 16. 36 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 30; Huber, in: Mu¨nchKommBGB (2015), Art. 48 para. 29. 31

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34–38

Article 48

case that the seller does not perform within the Nachfrist.37 By contrast, if the buyer reacts to the seller’s request by fixing a shorter period for performance under Art. 47, this should be regarded as an objection in the sense of Art. 48(2).38 Art. 48(4) does not apply to the buyer’s declaration of objection, so that it will fall 34 under Art. 27; the burden of proof for having it dispatched in accordance with Art. 27 is on the buyer.39 The buyer does not have to give any reasons for his objection.40 He may also object if the seller’s offer was perfectly reasonable under the standards set out in Art. 48(1); in that case, however, the seller will usually have a right to cure under Art. 48(1) and the buyer may face adverse consequences as a result of his refusal to accept cure (cf. supra para. 28). d) Requirements of Art. 48(1) irrelevant. According to the prevailing opinion, the 35 requirements of Art. 48(1) need not be met for the right to cure under Art. 48(2) to arise, so that it is irrelevant whether the cure offered by the seller would be reasonable or whether the buyer has a right to avoid the contract under Art. 49 (e. g. because he has a legitimate interest in immediate avoidance of the contract, cf. infra para. 36 and Art. 49 paras 20 et seq.).41 This is correct because the buyer can prevent the right to cure under Art. 48(2) from coming into existence by simply objecting to the seller’s indication which he has received (Art. 48(4)).42 e) Interaction with avoidance by the buyer. The mere fact that the buyer has a right 36 to avoid the contract does not exempt the buyer from making an objection under Art. 48(2). The situation is different, however, if the buyer has already declared the avoidance of the contract rightfully and effectively before the seller made his request under Art. 48(2). In that case the contract had already been terminated and cannot be reanimated by a seller’s request under Art. 48(2)43 (cf. infra para. 38). f) Consequences. If the buyer has not objected within a reasonable time to a request 37 by the seller under Art. 48(2) the seller will have a right to cure the non-performance. With regard to the specific details, a distinction should be drawn between the time before cure has effectively been made and the time after cure has effectively been made. aa) Before cure (Art. 48(1), (2)). During the period indicated by the seller for 38 performance, the buyer may not resort to any remedy which is inconsistent with performance by the seller (Art. 48(1), (2)). Such inconsistent remedies are, firstly, the right to reduce the purchase price; this is also indicated by the rule in the second sentence of Art. 50. Secondly, the right to avoid the contract is inconsistent with performance by the seller. Thus, even where the buyer has a legitimate interest in immediate avoidance of the contract and where the breach is fundamental under Art. 49(1)(a), he will not be entitled to declare the avoidance of the contract if he has not objected to the seller’s 37 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 30; Benicke, in: Mu¨nchKommHGB (2013), Art. 48 para. 20. 38 Huber, in: Mu ¨ nchKommBGB (2015), Art. 48 para. 29. 39 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 48 para. 24; Huber, in: Mu¨nchKommBGB (2015), Art. 48 para. 26. 40 Huber, in: Mu ¨ nchKommBGB (2015), Art. 48 para. 26; Benicke, in: Mu¨nchKommHGB (2013), Art. 48 para. 18. 41 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 27; Huber, in: Mu¨nchKommBGB (2015), Art. 48 para. 27; Magnus, in: Staudinger, Kommentar (2013), Art. 48 para. 41; Will, in: Bianca/Bonell, Commentary (1987), Art. 48 para. 2.2. But see for a differing view Saenger, in: Ferrari et al., Internationales Vertragsrecht (2011), Art. 48 para. 12. 42 Huber, in: Mu ¨ nchKommBGB (2015), Art. 48 para. 27. 43 Huber, in: Mu ¨ nchKommBGB (2015), Art. 48 para. 28; Benicke, in: Mu¨nchKommHGB (2013), Art. 48 para. 19; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 30.

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Article 48 39–42

Part III. Chapter II. Obligations of the Seller

request under Art. 48(2) in time.44 By contrast, if the buyer has rightfully and effectively declared the avoidance of the contract before receiving the seller’s request under Art. 48(2), the avoidance will have terminated the contract, cf. supra para. 36. With regard to claims for damages, the situation is the same as under Art. 48(1), cf. supra paras 25 et seq. Claiming damages for those losses which cannot be avoided by the seller’s performance would be consistent with the seller’s request, whereas claiming damages for other losses would be inconsistent with it.45 As under Art. 48(1), the buyer is not entitled to have the defect repaired by a third party at the seller’s cost, cf. supra para. 26. 39 These consequences end when the time for performance indicated by the seller lapses without cure being made or when the seller declares before that time that he will not (be able to) make cure. The buyer will then no longer be restricted in his choice of remedies under Arts 45 et seq.46 40

bb) After cure. If the seller has effectively made cure, the consequences will be the same as if cure had been made effectively under Art. 48(1), cf. supra paras 17, 21 et seq. The buyer will lose his remedies except for those claims for damages that would be covered by the exception in Art. 48(1), (2), cf. supra paras 25 et seq.

3. Burden of proof 41

As a rule, the seller should have to prove that the requirements of Art. 48(1) are met, except for the unreasonableness defence for which the buyer has the burden of proof, cf. supra para. 9.47 With regard to Art. 48(2), the seller should have to prove receipt by the buyer of his request, whereas it should be for the buyer to prove that he dispatched his objection in accordance with Art. 27.48

III. Comparable Rules 42

Art 7.1.4 PICC contains detailed rules on the non-performing party’s right to cure. Art 7.1.4 explicitly states that the right to cure is not precluded by notice of termination, and that upon effective notice of cure those rights of the aggrieved party that are inconsistent with performance, such as termination, are suspended until the time for cure has expired. A similar provision is provided for in Art 8:104 PECL. Art. 109 CESL contains detailed rules on the right to cure. The right to cure is also known to a certain extent in US law.49 44 See Handelsgericht des Kantons Aargau (Switzerland) 5 November 2002 (inflatable triumphal arch), CISG-Online 715. 45 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 27; Huber, in: Mu¨nchKommBGB (2015), Art. 48 para. 31. 46 Huber, in: Mu ¨ nchKommBGB (2015), Art. 48 para. 32. See also Mu¨ller-Chen, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 48 para. 27. 47 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 13; Huber, in: Mu¨nchKommBGB (2015), Art. 48 para. 34; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2011), Art. 48 para. 17. For a more detailed analysis see Hepting/Mu¨ller, in: Baumga¨rtel/Laumen/Pru¨tting, Handbuch der Beweislast im Privatrecht (2009), Art. 48 paras 2 et seq.; Mu¨ller, Ausgewa¨hlte Fragen der Beweislastverteilung (2005), pp. 131 et seq. See also Handelsgericht des Kantons Aargau (Switzerland) 5 November 2002 (inflatable triumphal arch), CISG-Online 715; Oberlandesgericht Koblenz (Germany) 31 January 1997 (acrylic blankets), CISG-Online 256. 48 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 26; Huber, in: Mu¨nchKommBGB (2015), Art. 48 para. 34; Hepting, in: Baumga¨rtel/Laumen, Handbuch der Beweislast im Privatrecht (2009), Art. 48 paras 21 et seq.; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 48 para. 64 et seq; Benicke, in: Mu¨nchKommHGB (2013), Art. 48 para. 24. 49 See § 2–508 UCC (US Commercial Code); White/Summers, Uniform Commercial Code (2000), pp. 332 et seq.

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Article 491 (1) The buyer may declare the contract avoided:

(a) if the failure by the seller to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract; or (b) in case of non-delivery, if the seller does not deliver the goods within the additional period of time fixed by the buyer in accordance with paragraph (1) of article 47 or declares that he will not deliver within the period so fixed. (2) However, in cases where the seller has delivered the goods, the buyer loses the right to declare the contract avoided unless he does so:

(a) in respect of late delivery, within a reasonable time after he has become aware that delivery has been made; (b) in respect of any breach other than late delivery, within a reasonable time: (i) after he knew or ought to have known of the breach; (ii) after the expiration of any additional period of time fixed by the buyer in accordance with paragraph (1) of article 47, or after the seller has declared that he will not perform his obligations within such an additional period; or (iii) after the expiration of any additional period of time indicated by the seller in accordance with paragraph (2) of article 48, or after the buyer has declared that he will not accept performance. Bibliography: See selected bibliography of Art. 45. CISG-AC Opinion no 5, The buyer’s right to avoid the contract in case of non-conforming goods or documents, 7 May 2005. Rapporteur: Professor Dr. Ingeborg Schwenzer, LL.M., Professor of Private Law, University of Basel (http://www.cisg-ac.org).

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Outline of the requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Seller’s breach of contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Ground of avoidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Declaration of avoidance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Time limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Possibility to make restitution of the goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f) No defence under Art. 80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Avoidance for fundamental breach (Art. 49(1)(a)). . . . . . . . . . . . . . . . . . . . . . . . . . a) Fundamental breach under Art. 25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Criteria for assessing the fundamental character of the breach. . . . . . . . . aa) Contractual agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Seriousness of the breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Seller’s right to cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (i) Setting of the problem. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (ii) History of the Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iii) Prevailing opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iv) Operation of the right to cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Reasonable use test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Specific case scenarios. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Delay in delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Definite non-delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

1 4 4 5 6 7 8 9 10 11 11 12 13 14 15 16 19 20 25 28 29 29 33

The first edition’s text was written by Peter Huber; as of this second edition, Ivo Bach is in charge of it.

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Article 49 1–3

Part III. Chapter II. Obligations of the Seller

cc) Delivery of non-conforming goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Third party rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ee) Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ff) Breach of ancillary obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Avoidance using the Nachfrist-procedure (Art. 49(1)(b)). . . . . . . . . . . . . . . . . . a) Outline. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Non-delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Definition of non-delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Relevant point in time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Specific issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Fruitless expiry of the additional period of time fixed under Art. 47. . aa) Additional period of time under Art. 47 (Nachfrist) . . . . . . . . . . . . . . . bb) Absence of delivery or refusal to deliver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Declaration of avoidance and time limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Need for a declaration of avoidance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Time limits under Art. 49(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Delivery of the goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Time limit in cases of late delivery (Art. 49(2)(a)) . . . . . . . . . . . . . . . . . cc) Time limit for other types of breach (Art. 49(2)(b)) . . . . . . . . . . . . . . . (i) “knew or ought to have known”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (ii) Nachfrist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iii) Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iv) Reasonable period of time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Interrelation with statutes of limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Effects of avoidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Lawful avoidance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Unlawful avoidance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34 46 47 50 51 51 53 53 55 57 60 60 62 64 64 67 68 70 72 73 76 79 80 83 84 85 85 86 87

I. Importance and Role of the Provision Art. 49 governs the buyer’s right to avoid (i. e. to terminate) the contract as a response to a non-performance by the seller. Art. 49(1) sets out the grounds for avoidance while Art. 49(2) submits the remedy to a rather complicated regime of time limits. The effects of avoidance are dealt with in Arts 81 et seq. 2 Art. 49 – together with Art. 64 which governs the seller’s right to avoid the contract – is the central element of the Convention’s strategy to keep the contract in existence as far as possible and to avoid the costs and risks of restitution which would arise out of its termination. In the eyes of the Convention, avoidance of the contract should only be granted to the buyer as a last resort, i. e. if his legitimate interests cannot be satisfied by any other means.2 3 Art. 49(1) gives effect to this policy by strictly limiting the situations in which the buyer has a right to avoid the contract. As a general rule, avoidance is limited to cases of fundamental breach as defined in Art. 25 (Art. 49(1)(a)). The only exception to that rule is Art. 49(1)(b) which allows the buyer to “upgrade” a non-fundamental breach to one which justifies avoidance by using the Nachfrist-procedure (Art. 47). However, this possibility is limited to cases of non-delivery. Thus, if the seller has actually delivered goods and the buyer complains that these are not of the standard required by the 1

2 Cf. Bundesgerichtshof (Germany) 3 April 1996 (cobalt sulphate), CISG-Online 135 = NJW (1996) 2364; Oberlandesgericht Ko¨ln (Germany) 14 October 2002 (designer clothes), CISG-Online 709 = BeckRS 2003, 00152; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 3; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 2; Magnus, in: Staudinger, Kommentar (2013), Art. 49 para. 4.

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Article 49

contract, he cannot rely on Art. 49(1)(b), but must instead rely on Art. 49(1)(a) which requires proof of fundamental breach.3

II. Detailed Commentary 1. Outline of the requirements The buyer’s right to avoid the contract under Art. 49 is subject to the following 4 requirements: seller’s breach of contract; ground of avoidance; declaration of avoidance; time limit; possibility to make restitution; and absence of the defence under Art. 80. By contrast, the right to avoid is neither subject to any requirement of fault4 nor to the grounds of exemption provided by Art. 79 (cf. Art. 79(5)). a) Seller’s breach of contract. There must be a non-performance (i. e. a breach) by 5 the seller. Any type of non-performance is sufficient. Where the breach consists of the delivery of non-conforming goods or of goods infringing third party rights, the buyer must have complied with the notice provisions (Arts 39 et seq., 43 et seq.) to be able to declare the contract avoided.5 b) Ground of avoidance. There must be a ground of avoidance under Art. 49(1)(a) 6 (fundamental breach) or under Art. 49(1)(b) (Nachfrist-procedure, if the non-performance consists of a non-delivery). c) Declaration of avoidance. The avoidance of the contract has to be declared by the 7 buyer, as is apparent from the wording of Art. 49 and from Art. 26. As a rule, avoidance will therefore not occur ipso facto or by operation of the law.6 d) Time limit. In cases falling within Art. 49(2), i. e. in cases where the seller has 8 delivered the goods, the declaration must be made within the time limits set there. e) Possibility to make restitution of the goods. Pursuant to Art. 82(1), the buyer will 9 lose his right to avoid the contract if it is impossible for him to make restitution of the originally delivered goods substantially in the condition in which he received them. Art. 82(2), however, restricts substantially the principle set out in Art. 82(1) by providing that the buyer will not lose his right to declare the contract avoided in any of the three situations specified there.7 f) No defence under Art. 80. Pursuant to Art. 80 the buyer will not be able to rely on 10 the seller’s breach to the extent that this breach was caused by his own (the buyer’s) act or omission.8

2. Avoidance for fundamental breach (Art. 49(1)(a)) a) Fundamental breach under Art. 25. The concept of fundamental breach (or of 11 fundamental non-performance) as it is used in Art. 49(1)(a) is defined in Art. 25. Pursuant to this provision a breach is fundamental “if it results in such detriment to 3 Cf. Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 15. See for example Bundesgerichtshof (Germany) 3 April 1996 (cobalt sulphate), CISG-Online 135 = NJW (1996) 2364. 4 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 4; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 9; Magnus, in: Staudinger, Kommentar (2013), Art. 49 para. 8. 5 Cf. Will, in: Bianca/Bonell, Commentary (1987), Art. 49 para. 2.2.2. 6 For more detail and for exceptions to the rule cf. infra paras 62 et seq. 7 For more detail cf. infra Art. 82 paras 1 et seq. 8 For more detail see infra Art. 80 paras 1 et seq.

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the other party as to substantially 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”. The provision is discussed generally supra (Art. 25 paras 1 et seq.). The comment to Art. 49 rather more specifically addresses those issues which will have particular relevance for the buyer’s right to avoid the contract. 12

b) Criteria for assessing the fundamental character of the breach. There is abundant case law and legal writing on the fundamental breach doctrine.9 It is submitted that one can discern from those sources a consistent approach to the criteria that may be used when deciding on whether the seller’s breach was fundamental in the sense of Arts 25 and 49(1)(a). On that basis there would essentially be four criteria which can be taken into account when deciding on the fundamental character of the non-performance, i. e. the contractual agreement, the seriousness of the breach, the seller’s right to cure and (arguably) the reasonable use test.10 These criteria will be discussed shortly here and with regard to specific case scenarios infra paras 28 et seq.

13

aa) Contractual agreement. The parties may in their contract define which of the requirements shall be fundamental in the sense that their breach will lead to a right of avoidance.11 They may do so explicitly or in an implied manner. What is more, it is submitted that the fundamental character of a term or of an obligation may result from the commercial background of the case (for example the general rule that time will usually be of the essence, i. e. fundamental, in a documentary commodity contract, cf. infra para. 29).12

14

bb) Seriousness of the breach. Regard is to be had to the seriousness of the breach.13 As the definition in Art. 25 looks rather to the creditor (buyer) than to the debtor (seller) by referring to the creditor’s deprivation and expectations, the seriousness criterion should primarily be assessed from the perspective of the buyer. How important was that particular obligation for him, on the basis of an objective interpretation of the contract (“was entitled to expect under the contract”)? Within that perspective, it may of course also be relevant to see how strongly the seller disregarded his obligations under the Convention or the contract.

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cc) Seller’s right to cure. Most courts and authors nowadays take the view that, as a rule, the seller’s right to cure the breach under Art. 48 should be taken into account when deciding on whether the breach was fundamental under Arts 49(1)(a) and 25, unless the buyer has a particular and legitimate interest in being allowed to avoid the contract immediately.14 As a rule, therefore, even a serious breach will not be fundamental if reasonable cure under Art. 48 is offered and made. Both the discussion and the legal theories that lead to this result have however never been undisputed and touch 9 See for a short outline of the case law: UNCITRAL, Digest of Case Law on the CISG (2008), Art. 49 paras 5 et seq. 10 Huber, in: Huber/Mullis, The CISG (2007), pp. 216 et seq. 11 See, e. g., Bundesgerichtshof (Germany) 3 April 1996 (cobalt sulphate), CISG-Online 135 = NJW (1996) 2364; Bundesgericht (Switzerland) 2 April 2014 (wire rod), CISG-Online 2592 = IHR 2015, 250; Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 322; Lookofsky, Understanding the CISG (2008), p. 117; Gruber, in: Mu¨nchKommBGB (2015), Art. 25 para. 34; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 25 paras 21 et seq. 12 Huber, in: Huber/Mullis, The CISG (2007), pp. 217, 231 seq. 13 See, e. g., Oberlandesgericht Mu ¨ nchen (Germany) 2 March 1994 (coke), CISG-Online 108; U.S. Court of Appeals (2nd Circuit) (U.S.A.) 6 December 1995 (Compressors for air conditioners), Rotorex Corp. v Delchi Carrier S. p. A., CISG-Online 140. 14 For references cf. infra paras 20 et seq.

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on difficult issues of interpretation of the Convention. The issue therefore needs to be analyzed in more detail. (i) Setting of the problem. The interaction between the seller’s right to cure and the 16 buyer’s right to avoid the contract may lead to problems if the right to cure is based on Art. 48(1), but not if it is based on Art. 48(2). If the buyer has, expressly or by remaining silent, “accepted” the seller’s offer under 17 Art. 48(2), the seller’s right to cure takes precedence over the buyer’s right to avoid the contract. This follows from both the agreement the parties have reached and the second sentence of Art. 48(2) which provides that during the time indicated by seller for his attempts to cure, the buyer may not resort to any remedy which is inconsistent with performance by the seller. If, however, there is no “agreement” in the sense of Art. 48(2), the seller’s right to 18 cure can only result from the general rule in Art. 48(1). The crucial point here is the reservation which is made in favour of Art. 49. The right to cure is “subject to article 49”, so that the buyer’s right to avoid the contract takes precedence over the right to cure. This has been used by some15 as an argument for the submission that the seller’s right to cure should in no way impair the buyer’s right to avoid the contract and that, as a consequence, the right to cure should not be taken into account when deciding whether the breach was fundamental. It is submitted, however, that the issue is more complex. In fact, the reservation simply says that if the requirements of Art. 49 are met, avoidance will be available for the buyer. This, however, only shifts the problem to the interpretation of Art. 49 where it has to be decided whether the possibility of cure has to be taken into account under the fundamental breach doctrine.16 (ii) History of the Convention. The history of Arts 48 and 49 does not permit definite 19 conclusions in that respect. A proposal not to insert any reservation in favour of Art. 49 (thus strengthening the seller’s right to cure) was rejected at the Vienna Conference.17 This, however, only allows the conclusion that, in principle, the right of avoidance, if it exists, shall not be impaired by the cure provision. It does not necessarily mean that the curability of the defect must not be regarded when it comes to the examination of the preconditions of the right to avoid, i. e. the concept of fundamental breach. As a result of this lack of definite guidance in both the wording and the history of the relevant provisions, the issue was intensively debated in the “early years” of the Convention.18 (iii) Prevailing opinion. The (now) predominant opinion both in case law19 and in legal 20 writing20 takes the position which has already been outlined supra para. 15. According to 15 See for example Holthausen, Die wesentliche Vertragsverletzung nach Art. 25 UN-Kaufrecht, RIW (1990) 101 (103 et seq.). Cf. further Arbitral Award, ICC 7531/1994 (scaffold fittings), CISG-Online 565, which rejected the right to cure in the specific case without however broadly discussing the issue; it is submitted therefore that this award is not a strong authority against giving relevance to the right to cure within the fundamental breach analysis. 16 Huber, in: Huber/Mullis, The CISG (2007), pp. 221 et seq. 17 Honnold, Documentary History (1989), pp. 562 et seq., 686, 688. 18 Huber, in: Huber/Mullis, The CISG (2007), p. 222. For more detail and further references see Huber, in: Mu¨nchKommBGB (2015), Art. 49 paras 21 et seq.; Will, in: Bianca/Bonell, Commentary (1987), Art. 48 paras 3.2 and 2.1.1.1.1. 19 See, e. g., Oberster Gerichtshof (Austria), 22 November 2011 (Video surveillance system), CISGOnline 2239 = IHR 2012, 114; Oberlandesgericht Ko¨ln (Germany) 14 October 2002 (designer clothes), CISG-Online 709 (BeckRS 2003, 00152); Oberlandesgericht Koblenz (Germany) 31 January 1997 (acrylic blankets), CISG-Online 256 (BeckRS 1997, 15993); Handelsgericht des Kantons Aargau (Switzerland) 5 November 2002 (inflatable triumphal arch), CISG-Online 715. 20 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 15; Huber, in: Mu¨nchKommBGB (2015), Art. 49 paras 28 et seq.; Huber, in: Huber/Mullis, The CISG (2007), pp. 221 et seq.;

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this view, the curability of the breach should, as a general rule, be taken into account when deciding whether the breach was fundamental. Thus a breach that can be cured in accordance with the requirements of Art. 48(1) will usually not be regarded as fundamental under Arts 49(1)(a) and 25, unless the seller refuses or fails to cure (note that and even if the seller fails to cure, its breach may be considered non-fundamental because the buyer himself is able to cure the defect (cf. infra para. 40). By way of an exception, however, the curability of the breach should not be taken into account where the buyer has a particular and legitimate interest in being allowed to avoid the contract immediately. In such a case the breach should be regarded as fundamental without regard to its curability. A legitimate interest in immediate avoidance can, inter alia, derive from the seriousness of the breach. Thus, there will be a legitimate interest in immediate avoidance where the basis of trust between the parties has been destroyed as a result of the seller’s breach.21 This may in particular result from deceitful conduct by the seller (e. g. deliberate delivery of cheap imitations under a sale of technical equipment of a particular brand) or from his obvious incapability to perform his obligations, as evidenced, for example, by the degree, the gravity and the number of the breaches the seller has already committed in trying to perform the contract. Thus, in a famous case decided by the (German) Oberlandesgericht Ko¨ln22 many items of the sold clothes which were delivered in the first consignment were seriously defective because they were far too small, prone to tear easily and badly cut. As a result the clothes were more or less unusable and the court therefore concluded that due to the seriousness of the seller’s breaches the buyer was entitled to avoid the contract for fundamental breach immediately, without being obligated to accept the seller’s offer to cure.23 The buyer’s legitimate interest in immediate avoidance may also result from the contractual agreement or from the commercial background of the case.24 Thus, where time is of the essence within the contract, any delay will entitle the buyer to avoid the contract.25 This may be the case in international commodity sales or when the buyer buys goods for production on a “just-in-time” basis (cf. infra para. 29). The buyer may also have a legitimate interest in immediate avoidance where according to the contract it was essential that the subject matter of the sale should exactly conform to the contractual specifications.26 (iv) Operation of the right to cure. If the seller has a right to cure, i. e. if the buyer does not have a legitimate interest in immediate avoidance, the seller’s breach will not be fundamental until the time for such reasonable cure has elapsed without effective cure being made or until the seller has refused to offer such cure. If the cure is only partly effective in the sense that it alleviates the consequences of the breach to the extent that Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 323; Lookofsky, Understanding the CISG (2008), p. 121; Hartmann, in: BeckOGK (2016), Art. 49 para. 19 et seq. 21 Huber, in: Huber/Mullis, The CISG (2007), p. 223. 22 Oberlandesgericht Ko ¨ ln (Germany) 14 October 2002 (designer clothes), CISG-Online 709 (BeckRS 2003, 00152). 23 The court also took into consideration that due to the “seasonal” character of the clothes there was not much time left for cure. 24 Huber, in: Huber/Mullis, The CISG (2007), pp. 223 et seq. 25 Cf. Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 48 para. 15; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 28. See for more detail on the general issue Schlechtriem, Pace International Law Review 18 (2006), 83 et seq.; Mullis, in: Andreas/Jarborg (eds), Anglo-Swedish Studies in Law (1998), pp. 326 et seq. 26 Huber, in: Huber/Mullis, The CISG (2007), p. 224; cf. Higher Court Ljubljana (Slovenia) 14 December 2005 (door and door jamb), CISG-Online 1959.

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the breach is still existing but no longer fundamental (Art. 25), this may bar some of the buyer’s remedies (e. g. avoidance under Art. 49(1)(a)), but not all (e. g. damages under Art. 45(1)(b), 74). It is submitted that nothing turns on whether or not the seller actually offers cure 26 before the buyer declares avoidance.27 Even if the buyer declares the avoidance “prematurely” (i. e. if he neither has a legitimate interest in immediate avoidance nor asked the seller for cure), the seller can still counter with a reasonable offer to cure under Art. 48. If he does not do so in time or if he refuses to do so the breach will become fundamental.28 If, however, the buyer has a legitimate interest in immediate avoidance, the seller’s breach 27 is fundamental from the outset and the buyer’s right to avoid under Art. 49(1)(a) takes precedence over the seller’s right to cure under the provision in the first sentence of Art. 48(1). dd) Reasonable use test. Where the seller had delivered non-conforming goods several 28 courts have looked to whether the buyer could make some (other) reasonable use of the goods. They have for example, refused the right to avoid the contract if it was possible and reasonable for the buyer to resell the goods in the ordinary course of business, albeit for a lower price, and to claim damages for the losses incurred. This test, which has not been universally accepted yet, will be discussed in more detail infra paras 37 et seq. c) Specific case scenarios aa) Delay in delivery. As a general rule, the mere fact that the seller has not delivered 29 the goods on the agreed date for delivery does not amount to a fundamental breach.29 Normally the consequences of a delay for the buyer will not be so serious as to substantially deprive the buyer of what he was entitled to expect under the contract. What is more, the Nachfrist-procedure under Arts 49(1)(b), 47 would be meaningless if every delay per se constituted a fundamental breach under Art. 49(1)(a). A delay in performance may, however, amount to a fundamental breach if time was 30 of the essence, i. e. if punctual delivery was of crucial importance to the buyer, and if that was apparent to the seller at the conclusion of the contract. The fact that time was of the essence can result from an express stipulation in the contract or from the circumstances of the case, in particular from the commercial background of the transaction.30 For example: where the buyer buys goods for production on a “just-intime” basis, the purchase contract will usually provide for time of the delivery being of the essence; even if the contractual terms are not entirely clear in that respect, the fact that it was obvious to the seller that the buyer bought for “just-in-time” production may justify the conclusion that time was of the essence. The same is true in international commodity sales, as they have often been decided by English courts under English law. These contracts are typically concluded on “CIF (Incoterms)” or “FOB (Incoterms)” basis and there is a string of buyers and sellers which primarily deal with documents and 27 Cf. Honnold, Documentary History (1989), pp. 686 et seq.: The original version (“Unless the buyer has declared the contract avoided in accordance with …”) was not included in the final text, but replaced by the provision: “Subject to …”. 28 Huber, in: Huber/Mullis, The CISG (2007), pp. 224 seq. 29 See, e. g., Oberlandesgericht Hamburg (Germany) 28 February 1997 (iron molybdenum), CISGOnline 261 (BeckRS 1997, 15842); Oberlandesgericht Du¨sseldorf (Germany) 24 April 1997 (shoes), CISG-Online 385; Arbitral Award, ICC 8128/1995, 1 January 1995 (chemical fertilizer), CISG-Online 526; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 5; Gruber, in: Mu¨nchKommBGB (2015), Art. 25 para. 21. See also for a somewhat complicated case on delay in delivery U.S. Federal District Court, New Jersey (U.S.) 4 April 2006 (Naphtha), Valero Marketing and Supply Co vs. Greeni Oy and Greeni Trading Oy, CISG-Online 1216. 30 See, e. g., Oberlandesgericht Du ¨ sseldorf (Germany) 21 April 2004 (mobile car phones), CISG-Online 915 (BeckRS 2004, 18385); cf. Lookofsky, Understanding the CISG (2008), p. 118.

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provide for payment by letter of credit. In such cases it will appear from the commercial background of the transaction that time is of the essence so that any delay in performance will have to be regarded as fundamental.31 Note, however, that the agreement on CIF or FOB delivery does not by itself indicate that time is of the essence.32 31 Further, the nature of the sold goods may indicate that time was of the essence, for instance in case of goods which are quickly perishable.33 The situation is similar in case of seasonal articles which are delivered too late to be marketed in the relevant season.34 It is submitted that the delay will also be fundamental where it was evident to the seller that the buyer had already re-sold the goods and that the buyer would become liable to his sub-buyers if he delivered late.35 By contrast, the mere fact that the goods are subject to fluctuations in the market price will not necessarily be sufficient.36 32 Even if time was not intended by the parties to be of the essence, a delay may nevertheless entitle the buyer to treat the delay as a fundamental breach, for example by virtue of its long duration or as a result of further delaying tactics by the seller.37 At first sight, this may seem surprising as in the cases of delay the buyer can always avoid the contract by using the Nachfrist-procedure in Arts 49(1)(b) and 47. On the other hand, nothing in the text of the provision indicates that one should restrict the buyer to the Nachfrist procedure. It is submitted as a general rule, however, that the buyer will usually not be entitled to treat the mere delay as a fundamental breach if he took no action whatsoever to remind the seller of his delivery obligation. In any event courts may only assume a delay in delivery to be fundamental if the buyer is better off without the delivery than with a delayed delivery.38 31 See further Schlechtriem, Subsequent Performance and Delivery Deadlines, Pace International Law Review 18 (2006), 83 et seq. (Pace); Mullis, in: Andreas/Jarborg, Anglo-Swedish Studies in Law (1998), pp. 326 et seq. (Pace). 32 Bundesgericht (Switzerland) 2 April 2014 (wire rod), CISG-Online 2592 = IHR 2015, 250; but see Oberlandesgericht Hamburg (Germany) 28 February 1997 (iron molybdenum), CISG-Online 261 (BeckRS 1997, 15842) for the opposing view; cf. Magnus/Lu¨sing, CISG and Incoterms, HSR 2007, 1. 33 Ferrari, Wesentliche Vertragsverletzung nach UN-Kaufrecht, IHR (2005) 1 (8); Graffi, in: Ferrari, The 1980 Uniform Sales Law (2003), p. 313. But see also Oberlandesgericht Hamm (Germany) 12 November 2001 (computer parts – memory modules), CISG-Online 1430 (BeckRS 2001, 30218777). 34 As for seasonal goods see for instance: Oberlandesgericht Du ¨ sseldorf (Germany) 24 April 1997 (shoes), CISG-Online 385 (holding, however, that in the case at hand the sale was not such a sale of “seasonal” goods as the buyer still had an interest in the sold shoes); Corte di Appello di Milano (Italy) 28 March 1998 (knitwear), CISG-Online 348 (“end of year” sales; in the author’s estimation, however, the court also based its ruling on the fact that the date of delivery had been made “of the essence” in the contract); Landgericht Oldenburg (Germany) 27 March 1996 (clothes), CISG-Online 188 (BeckRS 2013, 21486) (where the fact that the fashion goods for the summer season were sent one day too late was not regarded as a fundamental breach). 35 Arbitral Award ICC 8128/1995, 1 January 1995 (chemical fertilizer), CISG-Online 526; Huber, in: Huber/Mullis, The CISG (2007), p. 226; Gruber, in: Mu¨nchKommBGB (2015), Art. 25 para. 21. 36 Oberlandesgericht Hamm (Germany) 12 November 2001(computer parts – memory modules), CISGOnline 1430 (BeckRS 2001, 30218777). 37 See in that direction: Bundesgericht (Switzerland) 2 April 2014 (wire rod), CISG-Online 2592 = IHR 2015, 250; Arbitral Award, Tribunal of International Commercial Arbitration at the Ukraine Chamber of Commerce and Trade, 18 November 2004 (manufactured articles), CISG-Online 1371 (delay in delivery of 15 months regarded as fundamental); Landgericht Halle (Germany) 27 March 1998 (car), CISG-Online 521 (delay of more than two months regarded as fundamental); Pretura di Parma-Firenze (Italy) 24 November 1989 (knapsacks, bags, wallets), CISG-Online 316 (delay of about 2 months regarded as fundamental); Arbitral Award, ICC 8128/1995, 1 January 1995 (chemical fertilizer), CISG-Online 526; U.S. District Court, New Jersey (U.S.) 4 April 2004 (Naphtha), Valero Marketing and Supply Company vs. Greeni Oy and Greeni Trading Oy, CISG-Online 1216; Huber, in: Huber/Mullis, The CISG (2007), p. 226; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 5 (with references to a differing opinion). 38 Bundesgericht (Switzerland) 2 April 2014 (wire rod), CISG-Online 2592 = IHR 2015, 250.

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bb) Definite non-delivery. A definite failure to deliver will usually amount to a 33 fundamental breach per se.39 Examples for a definite failure are cases where performance has become impossible40 or where the seller is no longer bound to deliver under the hardship-exception (cf. supra Art. 46 paras 18 et seq.). The situation is the same in cases where the seller declares that he definitely will not perform,41 for instance if the seller informs the buyer in a sale of a specific item (e. g. the load of one specific ship) that he has sold and delivered the goods to a third party.42 A similar situation arises where the seller indicates without justification that he will only perform if the buyer makes additional payments (which he is not obliged to make under the contract);43 it is submitted that in such a case nothing should turn on whether the seller honestly believed that he was entitled to such additional payments.44 cc) Delivery of non-conforming goods. The decision whether the delivery of non- 34 conforming goods amounts to a fundamental breach will always have to be made on a case-by-case basis so that any attempt to generalise relevant factors must therefore be treated carefully. Bearing that in mind, however, it is suggested that it is possible to develop a number of guidelines which may be used as a starting point for the analysis of each individual case. Based on the four general criteria described supra paras 12 et seq. these guidelines would be as follows. (1) First, regard should be had to the parties’ explicit or implicit agreement and to the 35 commercial background of the transaction. In particular, the parties may in their contract define which of the requirements shall be fundamental in the sense that their breach will lead to a right of avoidance.45 (2) If there is no contractual agreement classifying the particular breach in question 36 as fundamental, one should look to the seriousness of the breach. The main focus should be on the perspective of the buyer, i. e. on the consequences of the breach for him.46 Within that perspective, however, one may also take into account how far the goods departed from the standard required by Art. 35. On that basis, as a rule, minor non-conformities which have little or no impact on the usability of the goods will not amount to a fundamental breach.47 39

Huber, in: Huber/Mullis, The CISG (2007), p. 227. Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 6; Gruber, in: Mu¨nchKommBGB (2015), Art. 25 para. 20; Magnus, in: Staudinger, Kommentar (2013), Art. 49 para. 13; Schlechtriem/Butler, CISG (2009), para. 190. 41 See for instance Oberlandesgericht Celle (Germany) 24 May 1995 (used printing press), CISG-Online 152; Oberlandesgericht Hamburg (Germany) 28 February 1997 (iron molybdenum), CISG-Online 261 (BeckRS 1997, 15842); Oberlandesgericht Du¨sseldorf (Germany) 24 April 1997 (shoes), CISG-Online 385; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 6; Schlechtriem/Butler, CISG (2009), para. 190. 42 See for instance Oberlandesgericht Celle (Germany) 24 May 1995 (used printing press), CISG-Online 152. 43 See Oberlandesgericht Brandenburg (Germany) 5 February 2013 (Beer), CISG-Online 2400 = IHR 2013, 245. 44 For a similar scenario see Arbitral Award, Hamburg Friendly Arbitrage, 29 December 1998 (cheese), CISG-Online 638. See also Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 6. 45 Bundesgerichtshof (Germany) 3 April 1996 (cobalt sulphate), CISG-Online 135 = NJW (1996) 2364; Bundesgerichtshof (Germany) 24 September 2014 (tools), CISG-Online 2545 = NJW (2015) 867; Gruber, in: Mu¨nchKommBGB (2015), Art. 25 para. 34; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 25 para. 44. 46 Bundesgerichtshof (Germany) 24 September 2014 (tools), CISG-Online 2545 = NJW (2015) 867. 47 See Oberlandesgericht Mu ¨ nchen (Germany) 2 March 1994 (coke), CISG-Online 108 = NJW-RR (1994) 1075; U.S. Court of Appeals (2nd Circuit) (U.S.) 6 December 1995 (Compressors for air conditioners), Rotorex Corp. vs. Delchi Carrier S. p.A, CISG-Online 140; Rechtbank van Koophandel Hasselt (Belgium) 14 September 2005 (printed media) CISG-Online 2001; Huber, in: Huber/Mullis, The CISG (2007), pp. 228, 217; Graffi, in: Ferrari, The 1980 Uniform Sales Law (2003), pp. 305, 316 et seq. 40

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(3) Even if the breach is serious it will not necessarily be fundamental because the seller has a right to cure the defect unless the buyer has a legitimate interest in immediate avoidance of the contract; see supra paras 20 et seq. If the buyer fixes an additional period of time for cure under Art. 47 and if the period elapses without cure being made, this may help to show that the seller was given his chance to cure under Art. 48. Thus, the Nachfrist-procedure may indirectly help the buyer to show that the breach is fundamental. From a “tactical” perspective, however, it should be noted that the buyer who fixes the Nachfrist will also have to accept being bound by his choice of remedies under Art. 47(2) while the Nachfrist is running. 38 (4) The fourth and most disputed factor is the reasonable-use test. Both the highest German48 and Swiss49 courts have attached considerable weight to the question whether the buyer can make some other reasonable use of the non-conforming goods. Under that approach, there would be no right to terminate the contract if it is possible and reasonable for the buyer to resell the goods in the ordinary course of business, albeit for a lower price (the resulting loss being then recoverable as damages under Art. 74). 39 The leading case is the cobalt sulphate case, decided by the German Bundesgerichtshof in April 1996 where the seller had sold different quantities of cobalt sulphate to the buyer, a German company. It was agreed that the goods should be of British origin (facts simplified).50 The buyer tried to avoid the contract inter alia on the ground that the cobalt sulphate originated from South Africa and that this caused him serious difficulties, as he “primarily” exported to India and South East Asia where there was an embargo on South African products. The buyer did not succeed with this line of argument. According to the Bundesgerichtshof, the buyer had neither been able to name potential buyers in those countries or to adduce evidence of earlier sales in these countries, nor had he even alleged that it would have been impossible or unreasonable to make another use of the goods in Germany or to export them into another country. The actual decision of the case is based on procedural reasons, namely on the lack of proof by the buyer.51 It is, however, an interesting question what the court would have decided if the buyer actually had proven that he could not resell the goods in a considerable part of the world. In light of the reasoning adopted, it seems likely that the court would have told the buyer to look for a country where there was no embargo, sell the goods there (albeit for a lower price) and claim damages for the losses incurred by doing so (for instance for the price difference). In the case decided by the Swiss Bundesgericht in 199852 the delivered frozen meat did not live up to the agreed standards and its value was about 25 percent less than agreed. The Swiss Bundesgericht explicitly referred to the cobalt sulphate judgment of the German Bundesgerichtshof and 37

48 Bundesgerichtshof (Germany) 3 April 1996 (cobalt sulphate), CISG-Online 135 = NJW (1996) 2364; Bundesgerichtshof (Germany) 24 September 2014 (tools), CISG-Online 2545 = NJW (2015) 867; cf. also Oberlandesgericht Ko¨ln (Germany) 14 October 2002 (designer clothes), CISG-Online 709 (BeckRS 2003, 00152); Oberlandesgericht Frankfurt (Germany) 18 January 1994 (shoes), CISG-Online 123 = NJW (1994) 1013. 49 Bundesgericht (Switzerland) 28 October 1998 (meat), CISG-Online 413. 50 The seller was also obligated to supply certificates of origin and of quality. The consequences of the breach of his documentary obligations will not be discussed here, however. 51 The situation was the same in the case of Oberlandesgericht Frankfurt (Germany) 18 January 1994 (shoes), CISG-Online 123 = NJW (1994) 1013: A stock of shoes had been sold from Italy to Germany. The buyer refused to pay on the ground that he had avoided the contract because the goods did not conform to the contract. The court found against the buyer on the ground that he had not alleged and proven to a sufficiently detailed extent that the goods were defective and that it would have been unreasonable to make some other use of them. 52 Bundesgericht (Switzerland) 28 October 1998 (meat), CISG-Online 413.

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held that there was no fundamental breach as the delivered meat could have been reasonably sold on by the buyer of a lower price.53 In 2014 the German Bundesgerichtshof further expanded its reasonable use doctrine: A seller had delivered non-conforming machinery and refused to cure the nonconformity within reasonable time. Nevertheless, the Bundesgerichtshof declared the seller’s breach non-fundamental, because the buyer himself repaired – and then used – the machinery.54 However, the reasonable use test has not been universally accepted yet. Thus, in the U.S. case Delchi vs. Rotorex55 the air conditioner compressors delivered by the seller were less efficient than the sample model and had lower cooling capacity and consumed more energy than the specifications indicated. The Court held that there was a fundamental breach by the seller because “the cooling power and energy consumption of an air conditioner compressor are important determinants of the product’s value”.56 The court did so without having regard to whether the buyer could have reasonably been expected to resell the defective goods or make any other use of them and claim damages or price reduction. It is submitted, however, that Delchi and decisions like it do not necessarily mean that the reasonable use criterion should not be applied at all. It is possible to explain them on the basis that there was no other reasonable use to which the goods could have been put and that thus the court did not have to address directly the reasonable use issue. To date, therefore, no definite answer exists in case law as to whether the reasonable-use criterion will find general acceptance.57 It is submitted that the reasonable use criterion is in accordance with the general policy of the CISG to restrict the availability of avoidance as a remedy (cf. supra Art. 45 paras 9 et seq.). It should, however, be given a restrictive interpretation.58 Particular importance should be attached to the commercial background of the transaction which may lead to the result that there was no reasonable use for the buyer or even to the conclusion that there should be no “reasonable use” analysis at all. Thus, where it appears from the commercial background of the contract that time and/or quality were of the essence within the contract, the delivery of non-conforming goods will amount to a fundamental breach from the outset and there will therefore be neither room nor justification for embarking on a “reasonable use” analysis.59 Where the buyer needs the goods for use in his production process it will often appear from the commercial background that he cannot reasonably use materials of a 53

Huber, in: Huber/Mullis, The CISG (2007), pp. 228 et seq. Bundesgerichtshof (Germany) 24 September 2014 (tools), CISG-Online 2545 = NJW (2015) 867; cf. CISG-AC Opinion no 5, para 4.5 (“if the buyer is in a better position than the seller to have the goods repaired”). 55 U.S. Court of Appeals (2nd Circuit) (U.S.) 6 December 1995 (Compressors for air conditioners), Rotorex Corp. v Delchi Carrier S. p. A., CISG-Online 140. Another case is: Oberlandesgericht Hamburg (Germany) 26 November 1999 (jeans), CISG-Online 515. The position of the French courts is not clear yet: cf. Cour de Cassation (France) 23 January 1996 (wine), CISG-Online 159, where artificially sugared wine was regarded as a fundamental breach without examining the question of whether it could have been resold (for instance for industrial purposes), but on the other hand stating that the wine was not suited for consumption thus virtually excluding the very use wine is made for; Cour de Cassation (France) 26 May 1999 (laminated sheet metal), CISG-Online 487, where the court may have been indirectly influenced by the fact that the goods were not usable; Huber, in: Huber/Mullis, The CISG (2007), p. 230. 56 U.S. Court of Appeals (2nd Circuit) (U.S.) 6 December 1995 (Compressors for air conditioners), Rotorex Corp. v Delchi Carrier S. p. A., CISG-Online 140. 57 Huber, in: Huber/Mullis, The CISG (2007), p. 230. 58 See for further considerations for instance CISG-AC Opinion no 5, paras 4.1 et seq.; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 25 para. 52; Huber, in: Huber/Mullis, The CISG (2007), pp. 230 et seq. 59 Huber, in: Huber/Mullis, The CISG (2007), p. 231. 54

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lower quality. The position may, however, be different if the buyer also produces goods of a lower quality so that he can simply use the delivered goods for that part of his business (provided of course that he has a need for the delivered materials there and that he will not create an overload of material on stock there).60 44 A buyer who purchases a profit making machine is entitled to expect it to perform according to the specifications agreed upon. If it does not do so, the commercial background may indicate that the machine is not of any reasonable use to him.61 However, the mere fact that the machine does not operate as quickly or efficiently as agreed in the contract should not mean that the buyer is entitled to avoid the contract. A buyer who can still make reasonable use of the machine should be obligated to do so, albeit that any loss he suffers would be compensated by damages.62 45 Where the buyer purchases goods for resale, much will turn on the question whether the buyer only sells high-quality goods or whether he also deals in goods of a lower quality and could use the goods delivered by the seller for that line of his business. In this respect, considerable importance should be given to the issues of reputation, brand image and related matters. The reasonable use test should not lead to the result that the buyer is left with goods that he cannot sell on without risking damage to his reputation.63 46

dd) Third party rights. Where the goods sold are subject to third party claims (Arts 41 et seq.) the position is similar to the cases of non-conformity. Particular emphasis should be placed on whether the breach can be cured by the seller under reasonable conditions, for instance by discharging the third party’s right64 or – in a sale of generic goods – by delivering other goods of the same type which are not subject to third party rights.65 Possibly, and depending on the circumstances of the case, cure might also be made by paying licence fees to the third party thus enabling the buyer to use the goods; it should be noted, however, that the buyer’s interest in making full and proper use of the goods must not be impaired by that.

ee) Documents. As a general rule, the delivery of non-conforming documents should be treated in a similar way to the delivery of non-conforming goods.66 Thus, where it does not result from the contract or from the commercial background that strict conformity is of the essence of the contract, the major criteria should therefore be the seriousness of the breach and the question whether the seller can cure the defect. The reasonable use test, however, may have to be slightly modified in that, rather than asking whether the buyer can make reasonable use of the documents tendered, at least one court has instead asked whether it is reasonable to expect the buyer to acquire conforming documents for himself.67 48 It is submitted that the interpretation of the contract in light of the commercial context should in many cases lead to the conclusion that strict conformity is of the essence so that any lack of conformity in the documents will be treated as fundamental, irrespective of whether there could still be made a reasonable use of the documents and 47

60

Huber, in: Huber/Mullis, The CISG (2007), p. 231. Cf. Bundesgericht (Switzerland) 18 May 2009 (packaging machine), CISG-Online 1900. 62 Huber, in: Huber/Mullis, The CISG (2007), p. 231; Cf. Oberlandesgericht Hamburg (Germany) 25 January 2008 (inventory for a cafe´), CISG-Online 1681: in this case the seller had delivered but not installed inventory for an ice cream parlour. The court held that this did not amount to a fundamental breach because the seller was able to install at least parts of the inventory himself. 63 Huber, in: Huber/Mullis, The CISG (2007), p. 232; Schroeter, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 25 para. 55; Gruber, in: Mu¨nchKommBGB (2015), Art. 25 para. 22. 64 Schlechtriem/Butler, CISG (2009), para. 198. 65 Huber, in: Huber/Mullis, The CISG (2007), p. 232. 66 Cf. Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 11. 67 Bundesgerichtshof (Germany) 3 April 1996 (cobalt sulphate), CISG-Online 135 = NJW (1996) 2364. 61

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irrespective of whether the non-conformity of the documents was severe or only slight. This should be so in particular where documentary sales of commodities are concerned, where proper documents are needed for the agreed payment mechanism or where the buyer is in the business of reselling the goods under payment terms which require strict conformity of the documents (e. g. letter of credit).68 It is doubtful, however, in how far the courts or tribunals will follow that approach strictly. Case law so far seems to point in a different direction.69 This has been criticised as not being suitable for typical international commodity sales such as they have long been known to and governed by English sales law. These types of sales, so it is argued, require a high level of legal certainty and strict and fast rules on the termination of the contract.70 It is suggested that the CISG may produce reasonable results for these types of contracts (only) if sufficient weight is given to the commercial background of the case, as submitted here. There may, of course, be cases where the commercial background is such that it is 49 perfectly reasonable to expect the buyer to get missing documents himself (reasonable use analysis). This may, for instance, be the case where the seller does not tender correct certificates of analysis or certificates of origin and where the buyer did not urgently need these correct certificates (for instance because he could sell the goods on without those documents or because he bought the goods for use in his own production process).71 ff) Breach of ancillary obligations. The breach of ancillary obligations (e. g. duties to 50 give instructions to the buyer, to provide additional services etc.) may amount to a fundamental breach, depending in particular on the seriousness of the breach and the question of cure.72 The breach of exclusive distribution agreements may also amount to a fundamental breach. A fundamental breach has been assumed in a case where a producer who delivered goods to his buyer for exclusive distribution offered part of the production himself for sale to sub-buyers and continued to do so even after the buyer had requested him to stop; the court laid great stress on the fact that the buyer’s trust in the seller’s willingness to honour their agreement was shaken.73

3. Avoidance using the Nachfrist-procedure (Art. 49(1)(b)) a) Outline. In cases of non-delivery, the buyer may declare the contract avoided 51 under Art. 49(1)(b), if the seller does not deliver the goods within the additional period 68 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 11; Magnus, in: Staudinger, Kommentar (2013), Art. 49 para. 17; Huber, in: Huber/Mullis, The CISG (2007), pp. 232 seq. 69 See for instance Arbitral Award CIETAC CISG/1999/28 (industrial raw material), CISG-Online 1806, where the bill of lading mistakenly stated “1999” instead of “1998” and where payment to the seller under the letter of credit was refused by the issuing bank: held that the breach was not fundamental on the specific facts of the case. See also Bundesgerichtshof (Germany) 3 April 1996 (cobalt sulphate), CISGOnline 135 = NJW (1996) 2364 where the court did not regard the breach as fundamental on the basis of the reasonable use test. 70 See Bridge, Uniformity and Diversity in the Law of International Sale, 15 Pace International Law Review (2003) 55 et seq. (Pace); see also, somewhat less critical, Mullis, Termination for breach of contract in C. I. F. contracts under the Vienna Convention and English law: Is there a substantial difference?, in: Lomnicka/Morse (eds), Contemporary Issues in Commercial Law (Essays in honour of Prof. A. G. Guest), (1997) pp. 137 et seq. 71 Huber, in: Huber/Mullis, The CISG (2007), pp. 232 seq.; Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 11. 72 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 12; Huber, in: Huber/ Mullis, The CISG (2007), p. 233; Gruber, in: Mu¨nchKommBGB (2015), Art. 25 para. 29. 73 Oberlandesgericht Frankfurt (Germany) 17 September 1991 (shoes), CISG-Online 28 = NJW (1992) 633; also Oberlandesgericht Koblenz (Germany) 31 January 1997 (acrylic blankets), CISG-Online 256 (BeckRS 1997, 15993); Handelsgericht des Kantons Aargau (Switzerland) 26 September 1997 (cutlery), CISG-Online 329.

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of time (Nachfrist74) fixed by the buyer in accordance with Art. 47(1) or if the seller declares that he will not deliver within that period. Art. 49(1)(b) does not require the breach to be fundamental. The provision, in other words, enables the buyer to “upgrade” a non-fundamental breach to one which justifies avoidance, by using the Nachfrist-procedure. 52 It is submitted that the Nachfrist-mechanism of Art. 49(1)(b) provides an option for the buyer which he is not bound to take. Even in cases of non-delivery the buyer may, therefore, choose to proceed under Art. 49(1)(a) by proving that the non-delivery was a fundamental breach of contract (for instance because time was of the essence).75 In such a case the buyer will have the right to avoid the contract without having to fix an additional period of time for performance. This appears from the wording and from the structure of Art. 49 which does not restrict the buyer’s options to the Nachfristprocedure in cases of non-delivery. Of course, if the buyer is not sure whether the delay will qualify as a fundamental breach, he may be well advised to use the Nachfristprocedure, rather than relying on the fundamental breach doctrine.76 b) Non-delivery 53 aa) Definition of non-delivery. As is indicated by the wording of Art. 49(1)(b), the right to avoid the contract under this provision is limited to cases of non-delivery by the seller. As a rule, non-delivery presupposes that the seller failed to fulfil his delivery obligations under the contract or under the Convention (Art. 31).77 By contrast, if the seller has in fact delivered any goods in purported performance of the contract, there is a “delivery”, irrespective of whether the goods conform to the contract (Arts 35 et seq.) and irrespective of whether they are free from third party rights (Arts 41 et seq.). Even the delivery of an aliud, i. e. in the case of a sale of a specific good, the delivery of another object than the one sold, is a delivery in that sense (albeit a non-conforming one).78 In all the cases mentioned above, the buyer can only avoid the contract under the fundamental breach rule in Art. 49(1)(a). According to Art. 6, however, parties may agree to apply the Nachfrist-mechanism in cases of non-conformity as well.79 54 A partial delivery will have to be analyzed under Art. 51, if the latter provision applies (see infra Art. 51 paras 9 et seq.). Thus, with regard to the missing part, there is a nondelivery under Art. 49(1)(b) and the buyer may proceed under that provision in order to obtain the right to avoid the contract with regard to the missing part.80 He will, 74

Cf. Will, in: Bianca/Bonell, Commentary (1987), Art. 49 para. 2.1.3. Huber, in: Huber/Mullis, The CISG (2007), pp. 234 seq.; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 47; Magnus, in: Staudinger, Kommentar (2013), Art. 49 para. 11; Honnold/Flechtner, Uniform Law (2009), Art. 49 para. 305. For case law in that direction see the references supra paras 28 et seq. which assume that a delay in performance may amount to a fundamental breach and entitle the buyer to avoid the contract; this assumption can only be made on the ground that Art. 49(1)(b) is not the only option for the buyer in cases of non-delivery. But see also statements which possibly seem to point in a different direction: Amtsgericht Oldenburg (Germany) 24 April 1990 (fashion textiles), CISG-Online 20; Oberlandesgericht Du¨sseldorf (Germany) 10 February 1994 (fabrics), CISG-Online 115 = NJW-RR (1994) 506; Oberlandesgericht Ko¨ln (Germany) 22 February 1994 (rare hard wood), CISG-Online 127 (BeckRS 1994, 05495). It is submitted that many of these statements are not entirely clear and that in so far as they really restrict the buyer’s options to Art. 49(1)(b) in cases of non-delivery, they should not be followed. 76 Cf. also Lookofsky, Understanding the CISG (2008), p. 122. 77 Cf. Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 15; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 48. 78 As for the qualification of an aliud-delivery as a non-conformity cf. supra Art. 46 para. 6. 79 Cf. Appelationsgericht Basel-Stadt (Switzerland), 26 September 2008 (Packaging machine), CISGOnline 1732. 80 Magnus, in: Staudinger, Kommentar (2013), Art. 49 para. 22; Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 51 para. 6; Honnold/Flechtner, Uniform Law (2009), Art. 51 para. 316; 75

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however, only be entitled to avoid the entire contract (i. e. also with regard to the parts which had been delivered already) under the requirements of Art. 51, i. e. if the partial non-delivery amounts to a fundamental breach even if set in proportion to the entire contract.81 Where Art. 51 does not apply, because there is no delivery “in part”, but simply a lack of quantity (for example where the sold animal weighs only 250 kilos instead of 350 kilos as was promised), Art. 51 will not apply82; there is, however, in such a case a “delivery” so that the buyer’s right to avoid cannot be based on Art. 49(1)(b). bb) Relevant point in time. The relevant point in time for assessing the requirements 55 of Art. 49(1)(b) is the time when the buyer fixes the additional period of time for performance under Art. 47. At this moment in time there must be a non-delivery in the sense described at supra paras 51 et seq.83 If therefore the seller has delivered after the agreed time for delivery, but before the buyer had fixed the Nachfrist, the buyer will only be able to rely on Art. 49(1)(a). It should be noted, however, that Art. 49(1)(b) will only apply if the time of delivery 56 (as specified by Art. 33) has passed already. A failure to deliver before that time would not amount to a breach of contract and would thus not trigger the application of Arts 45 et seq. The buyer in these cases may be entitled to remedies for anticipatory breach (Arts 71 et seq.), but not under Arts 45 et seq. Where the seller’s obligation becomes due upon a notice given by the buyer, the Nachfrist may be set together with this notice, provided it is still of reasonable length.84 cc) Specific issues. It is sometimes argued that the concept of non-delivery should 57 also cover those exceptional cases where the seller has already made delivery but where the goods have not yet been physically moved from the seller’s place of business85 – a situation which can arise in particular under Art. 31(b) or (c), for example if the seller has already placed the goods at the buyer’s disposal at the seller’s place of business and where the buyer has not collected them. The argument advanced in support of this is that the fundamental breach requirement primarily aims at avoiding the costs and risks of restitution of the goods and that this concern does not arise in cases where the goods have not been moved. However, this view does not find any basis in the wording of the provision which clearly refers to the concept of delivery and not to the question of whether the goods have been moved.86 With regard to documentary sales, the predominant opinion assumes that a failure to 58 tender documents amounts to a “non-delivery” if the missing documents are of the type that the buyer needs in order to be able to dispose of the goods, for instance bills of lading or warehouse warrants.87 Thus, if the buyer does not tender the documents at the Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 49; cf. Kantonsgericht Zug (Switzerland) 14 December 2009 (spinning company), CISG-Online 2026; Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 1 March 2006, CISG-Online 1941. 81 Huber, in: Mu ¨ nchKommBGB (2015), Art. 49 para. 49. 82 Cf. Honnold/Flechtner, Uniform Law (2009), Art. 51 para. 316. 83 Huber, in: Huber/Mullis, The CISG (2007), p. 235; Huber, in: Mu ¨ nchKommBGB (2015), Art. 49 para. 48. 84 Huber, in: Mu ¨ nchKommBGB (2015), Art. 47 para. 6; Oberlandesgericht Mu¨nchen (Germany) 19 October 2006 (cars), CISG-Online 1394 (with regard to the similar provisions in Arts 64 and 63, i. e. for the buyer’s obligation to pay the price). 85 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 17. 86 Cf. Huber, in: Huber/Mullis, The CISG (2007), p. 236; Honnold/Flechtner, Uniform Law (2009), Art. 49 para. 305. 87 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 18; Huber, in: Huber/ Mullis, The CISG (2007), pp. 236 et seq.; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 52; Magnus,

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required time and place, there will be a non-delivery in respect of those and the buyer can proceed under Art. 49(1)(b) by fixing an additional period for the tender of the documents. If the failure to tender the documents in itself constitutes a fundamental breach (as will often be the case in documentary sales where time will often be of the essence), he can also avoid the contract immediately for fundamental breach under Art. 49(1)(a). If the seller does tender the documents at the required place and time, but they are not in conformity with the contractual requirements, this will not constitute a “non-delivery” and will have to be treated exclusively under Art. 49(1)(a). 59 The failure to deliver other documents (i. e. those documents that may be required by the contract, but are not needed for the disposition of the goods, as for instance an insurance policy or a certificate of origin) will not amount to a non-delivery in the sense of Art. 49(1)(b). The buyer will have to rely on the fundamental breach doctrine under Art. 49(1)(a) if he wants to avoid the contract. In fact, under strict documentary sales where payment is based on a letter of credit or on the basis of “cash against documents” and where those documents are required under the payment terms, there will usually be a fundamental breach.88 c) Fruitless expiry of the additional period of time fixed under Art. 47 60 aa) Additional period of time under Art. 47 (Nachfrist). Art. 49(1)(b) refers to the Nachfrist provision of Art. 47(1). The buyer therefore has to demand performance within a specified period of time.89 For more details cf. supra Art. 47 paras 3 et seq. 61 The seller may counter the buyer’s time limit by offering cure under Art. 48(2),(3) within a period of time which is longer than the one set by the buyer’s Nachfrist. If the buyer does not reject that proposal within reasonable time, Art. 48(2) will have the effect that the period suggested by the seller takes precedence over the one fixed by the buyer. According to the second sentence of Art. 48(1) the buyer cannot declare avoidance because that would be inconsistent with the seller’s right to effect performance.90 bb) Absence of delivery or refusal to deliver. Art. 49(1)(b) presupposes that the seller has not delivered or has declared that he will not deliver within the period of time specified by the buyer. As a rule, therefore, once the buyer has fixed the additional period of time, he will have to wait until the period expires. Art. 47(2) prevents him from resorting to any remedy for breach of contract, except for damages for the delay.91 63 If, however, the seller has declared his refusal to perform within the additional period, the buyer may declare avoidance of the contract right away, irrespective of whether or not the Nachfrist has already elapsed. This results both from the purpose of Art. 49(1)(b) and from the “unless” provision in Art. 47(2).92 A refusal to perform in the sense of Art. 49(1)(b) can lie in the fact that the seller offers to perform in time, but makes this 62

in: Staudinger, Kommentar (2013), Art. 49 para. 22; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 49 para. 100; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2011), Art. 49 para. 10; Benicke, in: Mu¨nchKommHGB (2013), Art. 49 para. 8. 88 Cf. Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 19; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 52. 89 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 47 para. 4; Art. 49 paras 15 et seq. 90 Huber, in: Huber/Mullis, The CISG (2007), p. 238. 91 If the breach was fundamental from the beginning, the buyer could, of course, have proceeded under Art. 49(1)(a) right away. If he did not do so, but chose to set an additional period, he will be bound by Art. 47(2). See further U.S. Court of Appeals (3rd Circuit) (U.S.) 19 July 2007 (Naptha), Valero Marketing and Supply Company vs. Greeni Oy, CISG-Online 1510. 92 Huber, in: Huber/Mullis, The CISG (2007), p. 239.

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dependent on counter-performances by the buyer to which the seller is not entitled.93 If, by contrast, the buyer has fixed too short a period under Art. 47 and if the seller (makes clear that he) only refuses to perform within that (too short) period, one should not assume a refusal to perform in the sense of Art. 49(1)(b).94 Whether, in the latter case, one should oblige the seller to offer performance within a “reasonable” period, is, in the author’s opinion, doubtful. For more detail see supra Art. 47 paras 23 et seq.

4. Declaration of avoidance and time limits a) Need for a declaration of avoidance. The avoidance of the contract has to be 64 declared by the buyer, as becomes apparent from the wording of Art. 49 and from Art. 26. Avoidance will therefore not occur ipso facto or by operation of the law.95 An exception to this rule should be made, however, where the seller has definitely and clearly declared that he will not perform.96 The declaration need not be made in any particular form.97 Neither is it necessary 65 that it contains the word “avoidance”. It must however make clear that the buyer is no longer prepared to perform the contract as a result of the seller’s breach.98 It is submitted that the buyer can also declare the avoidance implicitly or by conduct, provided that such conduct clearly shows his intention to terminate the contract.99 If, after the breach, the parties take up negotiations on how to “fix” the problems by discussing different delivery and payment options, and if these negotiations are not successful, it will be a matter of interpretation whether the parties only spoke about (but did not reach agreement on) a modification of the original contract or whether one party’s conduct even amounted to an implicit avoidance of the contract, coupled with an offer for a new contract on modified terms which was not accepted by the other party.

93 Cf. Bundesgericht (Switzerland) 20 December 2006 (machines), CISG-Online 1426 (seller made delivery within Nachfrist dependent on payment of full purchase price (Art. 58), although buyer was entitled to reduce purchase price as a result of a set-off, see decision of the court for more detail); Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 55; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 20. 94 Magnus, in: Staudinger, Kommentar (2013), Art. 49 para. 21; Huber, in: Mu ¨ nchKommBGB (2015), Art. 49 para. 55. 95 Oberster Gerichtshof (Austria) 6 February 1996 (propane), CISG-Online 224; Kantonsgericht Zug (Switzerland) 14 December 2009 (spinning company), CISG-Online 2026; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 10; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 23; Leisinger, in: Brunner, Kommentar (2014), Art. 49 para. 7. 96 Oberlandesgericht Hamburg (Germany) 28 February 1997 (iron molybdenum), CISG-Online 261 (BeckRS 1997, 15842); Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 10. 97 Cf. Oberster Gerichtshof (Austria) 5 July 2001 (intel pentium computer parts), CISG-Online 652; Kantonsgericht Zug (Switzerland) 14 December 2009 (spinning company), CISG-Online 2026. 98 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 24; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 12; Magnus, in: Staudinger, Kommentar (2013), Art. 49 para. 25; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 49 para. 34. See also Oberster Gerichtshof (Austria) 5 July 2001 (intel pentium computer parts), CISG-Online 652; Oberster Gerichtshof (Austria) 6 February 1996 (propane), CISG-Online 224; Oberlandesgericht Ko¨ln (Germany) 14 October 2002 (designer clothes), CISG-Online 709 (BeckRS 2003, 00152); Oberlandesgericht Karlsruhe (Germany) 19 December 2002 (machine), CISG-Online 817 (BeckRS 2003, 09235); Kantonsgericht Zug (Switzerland) 30 August 2007 (GMS modules), CISG-Online 1722. 99 See Oberster Gerichtshof (Austria) 5 July 2001 (intel pentium computer parts), CISG-Online 652; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 11; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 24; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2011), Art. 49 para. 2; Magnus, in: Staudinger, Kommentar (2013), Art. 26 para. 6; Hartmann, in: BeckOGK (2016) Art. 49 para. 33; Leisinger, in Brunner, Kommentar (2014), Art. 49 para. 7.

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Declaration of avoidance falls under the provision of Art. 27.100 Thus if it is made by means appropriate in the circumstances, a delay or error in the transmission of the communication or its failure to arrive does not deprive the buyer of the right to rely on the declaration.101

67

b) Time limits under Art. 49(2). Art. 49(2) submits the buyer’s right to avoid the contract to a complicated regime of time limits which will apply only if the seller has delivered the goods (cf. infra paras 66 et seq.). If this requirement is met, one has to distinguish between the type of breach that has led to the right of avoidance. If it was a late delivery, lit. (a) will apply (cf. infra paras 68 et seq.). If it was another type of breach, lit. (b) will apply (cf. infra para. 70).

aa) Delivery of the goods. Art. 49(2) presupposes that the seller has delivered the goods at some point in time. The provision applies to both alternatives of Art. 49(1), i. e. both to the right to avoid for fundamental breach (lit. a) and to the right to avoid after having used the Nachfrist procedure. The latter scenario becomes relevant where the seller has not delivered by the contractual delivery date and the buyer has fixed an additional period of time under Arts 49(1)(b) and 47 which has expired and where the seller has delivered after that date. In such a case, the buyer has a right of avoidance under Art. 49(1)(b) but the time limits of Art. 49(2) will apply because there was, in the end, a delivery of the goods.102 69 It is submitted that one should not construe the reference to the seller too narrowly. Art. 49(2) should also apply where a third party makes delivery obviously on behalf of the seller.103 The German Bundesgerichtshof104 has given the provision a rather wide interpretation in a complicated case where the contract of sale had been concluded with a distributor of the manufacturer and where – as a result of controversies between the manufacturer and the distributor – the manufacturer had delivered the machine himself. The court excluded the buyer’s right to avoid referring to Art. 49(2). However, it did not specifically discuss the question in how far third parties can be regarded as the “seller” for the purposes of Art. 49(2). In the author’s opinion, the facts of the case rather indicated that the manufacturer did not want to deliver on behalf of the distributor so that the application of Art. 49(2) was probably not correct. 68

70

bb) Time limit in cases of late delivery (Art. 49(2)(a)). Pursuant to Art. 49(2)(a), the buyer loses the right to declare the contract avoided in respect of late delivery unless he does so within a reasonable time after he has become aware that delivery has been made. The buyer will have become aware of the delivery for example when he received the transport documents or the goods. It is submitted that the provision only applies to cases where the late delivery is the only breach by the seller. By contrast, if the goods (which were delivered late) do not conform with the contract, lit. (a) will not be applicable and the time limit will result from lit. (b).

100 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 25; Hartmann, in: BeckOGK (2016) Art. 49 para. 35. 101 For further details see the comments of Art. 27 paras 1 et seq. 102 Huber, in: Huber/Mullis, The CISG (2007), p. 240; Huber, in: Mu ¨ nchKommBGB (2015), Art. 49 para. 57; Magnus, in: Staudinger, Kommentar (2013), Art. 49 para. 37; Honnold/Flechtner, Uniform Law (2009), Art. 49 para. 307. 103 Huber, in: Huber/Mullis, The CISG (2007), p. 239 (note 861); Hartmann, in: BeckOGK (2016) Art. 49 para. 36.1. 104 Bundesgerichtshof (Germany) 15 February 1995 (key press – stamping machine), CISG-Online 149 = NJW (1995) 2101.

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A reasonable period of time in this context is generally regarded as being very short105 71 and should rather be measured in days than in weeks. Keeping the time period rather short is warranted by the legitimate interests of the parties. In a case where the seller has finally delivered the goods (late but at least in conformity with the contract under Art. 35, cf. supra paras 1 et seq.), the buyer, for his part, does not need much time to decide whether he can and wants to use the late delivered goods; he should not be given the chance to speculate on market fluctuations. The seller, however, needs to know as quickly as possible whether he will have to dispose of the goods.106 cc) Time limit for other types of breach (Art. 49(2)(b)). Art. 49(2)(b) governs cases 72 involving any breach other than late delivery, i. e. in particular the delivery of nonconforming goods or the breach of ancillary obligations (e. g. installation of the goods, service elements, documentary duties).107 It is submitted that if the seller commits two breaches by delivering both late and not in conformity with the contractual requirements, the time limit should be deduced from lit. (b) rather than from lit. (a), cf. supra para. 68. Under Art. 49(2)(b), the buyer has a reasonable time to declare the contract avoided. The following issues have to be determined. How long is this period of time (cf. infra paras 77 et seq.)? When does it commence (cf. infra paras 71 et seq.)? (i) “knew or ought to have known”. The basic rule is that this period begins to run 73 after the buyer knew or ought to have known of the breach, lit. (b)(i). It is submitted that the term “knew” refers to positive knowledge and the term “ought to have known” refers to negligent ignorance.108 In the case of a non-conforming delivery, as a rule the buyer ought to have known of the breach at the time when an examination under Art. 38 would have shown the non-conformity.109 With regard to other breaches, one should start from the assumption that the buyer is not bound to check whether the seller actually performed his obligations so that one should assume a case of negligent ignorance only if the buyer had concrete indications that the seller was in breach.110 It has been discussed whether one should stay close to the wording of the provision in 74 looking only to the breach as such111 or whether one should rather look to the time when a breach becomes fundamental as a result of the seller’s failure to cure.112 The practical results of these two approaches will, however, rarely differ because even under the latter approach one would have to take the period of cure into account when determining the 105 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 29; Huber, in: Huber/ Mullis, The CISG (2007), pp. 240 et seq.; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 62; Benicke, in: Mu¨nchKommHGB (2013), Art. 49 para. 21; Magnus, in: Staudinger, Kommentar (2013), Art. 49 para. 36; Hartmann, in: BeckOGK (2016) Art. 49 para. 43.1. 106 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 29; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 62; Huber, in: Huber/Mullis, The CISG (2007), p. 241. 107 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 30; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 63. 108 Huber, in: Mu ¨ nchKommBGB (2015), Art. 49 para. 68. 109 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 34; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 68; Magnus, in: Staudinger, Kommentar (2013), Art. 49 para. 37. 110 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 34; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 68. Cf. Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 43 para. 4 referring to third party rights. 111 Will, in: Bianca/Bonell, Commentary (1987), Art. 49 para. 2.2.2.1.; Huber, in: Mu ¨ nchKommBGB (2015), Art. 49 para. 70. 112 This seems to be the opinion of Bundesgericht (Switzerland) 18 May 2009 (packaging machine), CISG-Online 1900 and of Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 35; possibly also Oberlandesgericht Oldenburg (Germany) 22 September 1998 (raw salmon), CISGOnline 508 = NJW-RR (2000) 1364.

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length of the “reasonable period” of time (cf. infra para. 78).113 The question, however, became relevant in a case decided by the (German) Oberlandesgericht Koblenz:114 the seller had delivered 319 pairs of shoes to the buyer, who resold approx. 180 to his customers in the regular course of his business. Between July and December different customers returned their shoes because of non-conformities. In December, the buyer declared avoidance, i. e. 5 months after the first customer had returned his pair of shoes and the buyer therefore had discovered the breach of contract. The Oberlandesgericht held that Art. 49(2)(b) did not bar the buyer from avoiding the contract in that particular case. The court reasoned, that the breach only became fundamental after the amount of shoes returned had increased over the months – and that the reasonable time period did not start before the buyer’s actually had the right to avoid the contract. 75 It is submitted that these rules on the commencement of the time limit apply irrespective of whether or not the seller knew of his breach, as Art. 49(2) does not look to the seller’s but only to the buyer’s knowledge.115 (ii) Nachfrist. If the buyer had proceeded under the Nachfrist-procedure of Art. 47 by fixing a period of time of reasonable length for performance, the period will begin to run after the expiration of the Nachfrist or after the seller’s declaration that he will not perform within that period, Art. 49 (2)(b)(ii). It is submitted that the provision presupposes that the buyer had a right to claim performance under Art. 46 when he fixed the Nachfrist.116 Thus, for example, in the case of a non-conforming delivery, the buyer will have to claim substitute performance or repair within the time limits set by Art. 46(2),(3). If he did not do so, he will have lost his right to claim performance so that he could not effectively fix a Nachfrist under Art. 47 in order to gain a right of avoidance under Art. 49(1)(b),(2)(b)(ii). 77 When the Nachfrist fixed by the buyer has expired, the buyer – rather than avoiding the contract – may fix a second Nachfrist. The avoidance period under Art. 49(2)(b)(ii) then does not start before the second Nachfrist has expired.117 However, in order to uphold the function of Art. 49(2) – namely preventing the buyer from speculating – courts should refuse to consider the second Nachfrist if the buyer has set it for the sole reason to postpone the avoidance deadline.118 78 Once the avoidance period has elapsed under Art. 49(2)(b)(i) or (iii), a Nachfrist does not alter this result.119 Accordingly, a second Nachfrist should not be relevant under Art. 49(2)(b)(ii) if the avoidance period after the first Nachfrist has elapsed. If a Nachfrist had the effect to start the avoidance period anew after it had already lapsed, the buyer could easily undermine the regime of Art. 49(2)(b). 76

113

Huber, in: Mu¨nchKommBGB (2015), Art. 49 paras 69 et seq. Oberlandesgericht Koblenz (Germany) 21 November 2007 (Shoes), CISG-Online 1733 (BeckRS 2008, 19974). 115 See Magnus, in: Staudinger, Kommentar (2013), Art. 49 para. 39; Huber, in: Mu ¨ nchKommBGB (2015), Art. 49 para. 71; Honnold/Flechtner, Uniform Law (2009), Art. 49 para. 308.1. But see for a differing opinion Will, in: Bianca/Bonell, Commentary (1987), Art. 49 para. 2.2.2.2 (analoguous application of Art. 43(2)); Benicke, in: Mu¨nchKommHGB (2013), Art. 49 para. 24 a (extension of the reasonable period). 116 See Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 37; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 74; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 49 para. 59. 117 Huber, in: Mu ¨ nchKommBGB (2015), Art. 49 para. 78; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 40; Benicke, in: Mu¨nchKommHGB (2013), Art. 49 para. 28; Leisinger, in Brunner, Kommentar (2014), Art. 49 para. 14. 118 Cf. Hartmann, in: BeckOGK (2016), Art. 49 para. 61.2. 119 Honnold/Flechtner, Uniform Law (2009), Art. 49 para. 308; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2011), Art. 49 para. 22; similarly Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 40; Leisinger, in Brunner, Kommentar (2014), Art. 49 para. 14; dissenting Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 78; 114

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(iii) Cure. Where the seller has proceeded under Art. 48(2) by offering performance 79 or cure, the period will begin to run after the expiration of the period of time indicated by the seller or after the buyer has declared that he will not accept performance, Art. 49(2)(b)(iii). If the seller offers cure under Art. 48(2) after the buyer’s right to avoid the contract has been time barred under Art. 49(2)(b)(i) (the buyer not having declared the avoidance within a reasonable time after he knew of the breach), the seller’s offer should not alter this result. Otherwise the seller would be punished for offering cure.120 (iv) Reasonable period of time. It seems to be widely accepted that the length of the 80 reasonable period of time under Art. 49(2)(b) has to be measured in a much more generous way than under Art. 49(2)(a).121 In particular, the buyer normally should be given more time than for giving notice under Art. 39122 because the decision on whether or not to avoid the contract is a more difficult one than the decision to simply give notice of a non-conformity. It is submitted that one should apply similar standards as are applied to the time limit for performance claims under Art. 46(2),(3) because the buyer will often have to choose between substitute delivery and avoidance. There is case law which has – always on the facts of the specific cases – regarded periods of about a month (and sometimes even more) as “reasonable”.123 Periods of several months have, however, not been regarded as reasonable in other situations.124 Of course, the matter will always have to be decided in light of the facts of the individual case so that one should be careful in trying to generalize the findings of the courts. If for instance the goods are perishable, seasonal or if they are subject to strong fluctuations in the market price, the buyer will have to make a fast decision.125 Where the seller has a right to cure, the period necessary for effecting it must be 81 taken into account. If the buyer has proceeded under Art. 47 (fixing a Nachfrist for the cure) or if the seller has used the procedure of Art. 48(2) in order to offer cure, this 120 Will, in: Bianca/Bonell, Commentary (1987), Art. 50 para. 2.2.1.2; dissenting Huber, in: Mu ¨ nchKommBGB (2015), Art. 49 para. 80; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 41. 121 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 31; Magnus, in: Staudinger, Kommentar (2013), Art. 49 para. 38; Huber, in: Huber/Mullis, The CISG (2007), pp. 241 seq.; Leisinger, in Brunner, Kommentar (2014), Art. 49 para. 12. 122 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 32; Huber, in: Huber/ Mullis, The CISG (2007), p. 241; Leisinger, in Brunner, Kommentar (2014), Art. 49 para. 12. Note, however, that there are statements in case law which seem to assume that the time periods under Arts 39(1) and 49(2)(b) are identical. In the authors’ opinion, however, these statements were made obiter or refer to sources which were not entirely to the point; see further Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 64 (fn. 101). 123 See for instance Bundesgericht (Switzerland) 18 May 2009 (packaging machine), CISG-Online 1900; Oberlandesgericht Oldenburg (Germany) 22 September 1998 (raw salmon), CISG-Online 508 = NJW-RR (2000) 1364; Oberlandesgericht Celle (Germany) 24 May 1995 (used printing press), CISG-Online 152; Landgericht Freiburg (Germany) 22 August 2002 (automobile), CISG-Online 711 (three months); Kantonsgericht des Kantons Wallis (Switzerland) 21 February 2005 (CNC-machine), CISG-Online 1193. 124 See for instance Bundesgerichtshof (Germany) 15 February 1995 (key press – stamping machine), CISG-Online 149 = NJW (1995) 2101 (five months); Oberlandesgericht Mu¨nchen (Germany) 2 March 1994 (coke), CISG-Online 108 = NJW-RR (1994) 1075 (more than four months); Cour de Cassation (France), 8 November 2011 (press breaks), CISG-online 2310 (18 months). For a stricter view see Oberlandesgericht Stuttgart (Germany) 31 March 2008 (automobile), CISG-Online 1658 (BeckRS 2008, 06273) (two months); Oberlandesgericht Koblenz (Germany) 31 January 1997 (acrylic blankets), CISGOnline 256 (BeckRS 1997, 15993) (seven weeks). But see also Landgericht Freiburg (Germany) 22 August 2002 (automobile), CISG-Online 711 (three months reasonable under Art. 49(2)(b)(i)). 125 Huber, in: Huber/Mullis, The CISG (2007), pp. 241 et seq.; Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 32; Hartmann, in: BeckOGK (2016) Art. 49 para. 55. For an example see Vestre Landsret (Denmark) 10 November 1999 (christmas trees), CISG-Online 704 (avoidance of contract for delivery of Christmas trees in December: period of seven days held to be too long as the seller did not have much time left for disposing otherwise of the Christmas trees before December 24th).

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results naturally from the application of Art. 49(2)(b)(ii) or (iii): the reasonable period of time will only begin to run after the expiry of the cure period. If the case does not fall under lit. (ii) or (iii), so that lit. (i) is applicable, the same result can be reached either by following the above-mentioned approach which lets the reasonable period of time only begin to run after the cure period or – if one only looks to the time of the breach – by simply adding the period which is necessary for curing the defect to the period which would normally be regarded as reasonable in the sense of Art. 49(2)(b).126 82 The period of time may also extend if the parties negotiate in order to find an amicable settlement because it may be unreasonable for a party to avoid a contract during such negotiations. This may, of course, lead to uncertainty with regard to the exact point in time when such negotiations have come to an end so that the period for avoidance will continue to run. It may therefore be advisable to address this issue during the negotiations.127 83

dd) Interrelation with statutes of limitation. These time limits will apply independently of the issue of limitation (prescription). Limitation of actions or claims is not governed by the Convention. The applicable limitation periods will be determined by the UN Limitation Convention or by the applicable limitation law; see supra Art. 4 para. 30. Irrespective of whether or when the right to avoid the contract may be excluded by the applicable limitation rules, the buyer will have to comply with the time limits set in Art. 49(2).

5. Burden of proof 84

In the author’s opinion, the following considerations should apply with regard to the burden of proof.128 The buyer has to prove that the seller’s obligation exists. Once he has succeeded in doing so and claimed that there was a breach, it should in principle be for the seller to prove that he actually performed; with regard to the non-conformity of the goods, however, the burden should shift onto the buyer as soon as he has accepted the goods.129 It is further submitted that the buyer bears the burden of proof concerning the fundamental breach requirement (including – where relevant – his legitimate interest in immediate avoidance and the absence of any reasonable use)130 and for the fact that he fixed an additional period of time for performance under Art. 49(1)(b); it should then be for the seller to prove that he made performance within that additional period of time.131 With regard to the time limits it should be for the seller to prove the commencement of the reasonable time period whereas it should be for the buyer to prove that he made the declaration of avoidance in time.132 126 See in that direction Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 32; Huber, in: Huber/Mullis, The CISG (2007), p. 242. 127 Oberlandesgericht Stuttgart (Germany) 31 March 2008 (automobile), CISG-Online 1658 (BeckRS 2008, 06273). 128 Cf. Huber, in: Huber/Mullis, The CISG (2007), p. 242; Huber, in: Mu ¨ nchKommBGB (2015), Art. 49 para. 86; see also Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 46 paras 16, 31. 129 See, e. g., Bundesgericht (Switzerland) 13 November 2003 (used laundry machine), CISG-Online 840; Bundesgerichtshof (Germany) 8 March 1995 (New Zealand mussels), CISG-Online 144. See in more detail Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 paras 50 et seq. 130 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 13; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 86. See also Bundesgerichtshof (Germany) 3 April 1996 (cobalt sulphate), CISG-Online 135 = NJW (1996) 2364. 131 Huber, in: Huber/Mullis, The CISG (2007), pp. 242 seq.; Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 20; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 86. 132 See Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 paras 25, 28, 34, 39; Huber, in: Huber/Mullis, The CISG (2007), pp. 242 seq.; Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 87. See also Kantonsgericht des Kantons Wallis (Switzerland) 21 February 2005 (CNC-machine), CISG-Online 1193.

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6. Effects of avoidance a) Lawful avoidance. If the buyer has rightfully and effectively (cf. supra para. 4 et 85 seq.) exercised his right to avoid the contract, the consequences will result from the application of Arts 81 et seq. Thus, both parties will be released from their obligations under the contract. The contractual relationship does not disappear entirely, however. It will continue to exist as a framework for winding up the contract,133 as is exemplified by Art. 82(1) or by the duty to make restitution under Arts 81(2) and 84. b) Unlawful avoidance. If the buyer declares the avoidance unlawfully, i. e. in a case 86 where not all of the requirements set out supra para. 4 et seq. are met, this will usually amount to a fundamental breach of the contract on the part of the buyer as it is equivalent to a definite refusal to perform. This may entitle the seller to avoid the contract under Art. 64(1)(a) if he so chooses. The seller may also choose to uphold the contract despite the buyer’s breach. In the latter case the question arises whether the seller who, under the contract, originally had to perform concurrently with the buyer or who even had to perform first, still has to offer delivery in order to obtain payment from the buyer. It is submitted that Art. 80 entitles the seller to claim payment without having to do so; the buyer may not refuse payment because of the seller’s nonperformance.134

III. Comparable Rules The fundamental breach doctrine (Art. 49(1)(a)) is widely used as the central element 87 of the right of termination in modern codifications. Thus, it is the guiding principle of the PICC135, of the PECL136 and of the DCFR137. Today, the doctrine of fundamental breach is also part of the Scandinavian sales laws138 and of those legal systems which have taken inspiration from the CISG, such as the new Estonian law of obligations.139 In certain respects, English and U.S. contract laws also know doctrines of fundamental breach or similar doctrines, some aspects of which overlap with the doctrine as enshrined in the CISG and in the PECL. Thus, the substantial deprivation test as provided for in Art. 25 CISG is very similar to the famous formula used by Diplock LJ in the Hong Kong Fir case where he said that the right to terminate should not (only) depend on the prior classification of the term along the traditional lines (i. e. along the distinction between conditions and warranties), but also on the consequences of the breach.140 133 See Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 81 paras 12 et seq; Magnus, in: Staudinger, Kommentar (2013), Art. 81 paras 6 et seq. 134 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 48; Hartmann, in: BeckOGK (2016) Art. 49 para. 55; Leisinger, in Brunner, Kommentar (2014), Art. 49 para. 16; similarly Huber, in: Mu¨nchKommBGB (2015), Art. 49 para. 85 (relying on the good faith principle). 135 Art 7.3.1(1) PICC. See Huber, in: Vogenauer, UNIDROIT Commentary (2015), Intro Art. 7.3. para. 3. 136 Art 9:301(1) PECL. 137 Art. III. – 3:502 DCFR. 138 Lookofsky, in: Ferrari, The 1980 Uniform Sales Law (2003), pp. 95, 113. 139 Cf. Varul, CISG: a Source of Inspiration for the Estonian Law of Obligations, ULR VIII (2003), 209. 140 Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kasha Ltd (1962) 2 QB 26, CA: ‘does the occurrence of the event deprive the party who has further undertakings still to perform of substantially the whole benefit which it was the intention of the parties as expressed in the contract that he should obtain as the consideration for performing those undertakings?’ (per Diplock LJ).

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The Nachfrist-mechanism, too, has found widespread acceptance. The PICC141 and the PECL142 contain similar provisions. The Nachfrist-mechanism is known to several legal systems. In particular, it is the centre-piece of the new German sales law (cf. §§ 437 Nr. 2, 323 BGB (Civil Code)) and is not restricted there to cases of delay.143 141

Arts 7.3.1.(3), 7.1.5. PICC. Arts 9:301(2), 8:106(3) PECL. 143 For more detail on these rules see Zimmermann, The New German Law of Obligations (2005), pp. 66 et seq. 142

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Article 50 If the goods do not conform with the contract and whether or not the 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 the delivery bears to the value that conforming goods would have had at that time. However, if the seller remedies any failure to perform his obligations in accordance with Art. 37 or Art. 48 or if the buyer refuses to accept performance by the seller in accordance with those articles, the buyer may not reduce the price. Bibliography: Bergsten/Miller, The remedy of reduction of price, 27 American Journal of Comparative Law (1979) 255; Enderlein, Die Verpflichtung des Verka¨ufers zur Einhaltung des Lieferzeitraums und die ¨ bereinkommen u¨ber Vertra¨ge u¨ber den Rechte des Ka¨ufers bei dessen Nichteinhaltung nach dem UN-U internationalen Warenkauf, IPRax (1991) 313; Flechtner, More U. S. Decisions on the U. N. Sales Convention: Scope, Parol Evidence, “Validity” and Reduction of Price under Article 50, 14 Journal of Law and Commmerce (1995) 153; Hirner, Der Rechtsbehelf der Minderung nach dem UN-Kaufrecht (2000); 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? 12 Pace International Law Review (2000) 1; Sondahl, Understanding the Remedy of Price Reduction – A Means to Fostering a More Uniform Application of the United Nations Convention for the International Sale of Goods, 7 Vindobona Journal (2003) 255; Terlitza, Der OGH und die Preisminderung auf Null – ABGB versus UN-Kaufrecht, FS Posch (2011).

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. History of the provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Importance of the provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Nature of the remedy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Position in the system of remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Non-conforming goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Defects in quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Defects in title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Defects in quantity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) No cure of the defect by the seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Right to cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Performance by the seller or refusal by the buyer . . . . . . . . . . . . . . . . . . cc) Legal consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Declaration of price reduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Form and content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Effectiveness/Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Irrevocability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) No time limit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Legal consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Formula. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Relevant time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Relevant place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Price reduction to zero; goods without value. . . . . . . . . . . . . . . . . . . . . . . . c) Claim for restitution/repayment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Legal basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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cc) Place of performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Interaction with other remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Effects of price reduction to other remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Effects of other remedies to price reduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

54 57 60 63 63 65 68

I. Importance and Role of the Provision 1. History of the provision Based on the actio quanti minoris of Roman law,1 the remedy of price reduction is rightfully referred to as “a venerable legal tool.”2 While most civil law jurisdictions have codified the remedy,3 price reduction remains widely unknown in common law systems.4 The reason for the discrepancy lies in the fact that the remedy of damages is more readily available in common law systems than under many civil codes. Most civil law systems allow buyers to claim damages only when the seller is at fault for his breach.5 Where the seller is not at fault, the buyer must choose between avoiding the contract (and returning the goods) or keeping the non-conforming goods and paying the full purchase price. The remedy of price reduction allows the buyer to keep the goods and claim a measure of relief for their non-conformity. Since common law systems allow claims for damages without regard to fault, damages actions effectively address the purposes served by price reduction without the need for a separate remedy.6 2 With this background in mind, it is surprising that the damages provisions of Arts 45(1)(b) and 74 do not include an element of fault, instead establishing a damages regime that mirrors the common law. However, the CISG also provides for the remedy of price reduction in Art. 50. The CISG therefore adopts a “hybrid solution”7 to damages which can only be explained – as so often in international conventions – as a compromise between different positions during the drafting process. The civil-law countries agreed on adopting the common-law system of fault-independent damages; they insisted, however, on keeping “their” habitual remedy of price reduction. The inclusion of price reduction among CISG remedies thus constituted a concession by the common-lawyers to the civil-lawyers.8 This compromise ultimately inures to the benefit 1

1 The history of the actio quanti minoris is illustrated in detail by Bergsten/Miller, The remedy of reduction of price, 27 American Journal of Comparative Law (1979) 255 (256 et seq.); Zimmermann, The Law of Obligations: Roman Foundations of the Civilian Traditions (1990), p. 318. 2 Honnold/Flechtner, Uniform Law (2009), Art. 50 para. 313. 3 For example § 932 Austrian ABGB (Civil Code); Art. 1644 French c. c. (Civil Code); § 441 German BGB (Civil Code), Art. 1492 Italian c. c. (Civil Code); Art. 205 Swiss OR (Code of Obligations). 4 Bergsten/Miller, The remedy of reduction of price, 27 American Journal of Comparative Law (1979) 255 (255); Flechtner, More U. S. Decisions on the U. N. Sales Convention: Scope, Parol Evidence, “Validity” and Reduction of Price under Article 50, 14 Journal of Law and Commerce (1995) 153 (170); Sondahl, Understanding the Remedy of Price Reduction – A Means to Fostering a More Uniform Application of the United Nations Convention for the International Sale of Goods, 7 Vindobona Journal (2003) 255. 5 Bergsten/Miller, The remedy of reduction of price, 27 American Journal of Comparative Law (1979) 255 (257); Huber, in: Reimann/Zimmermann, Oxford Handbook (2006), pp. 956 et seq. 6 The buyer then is given the opportunity to set up the this claim for damages against the seller’s demand for payment of the purchase price; cf. § 2–717 UCC; s. 53(2),(3) Sale of Goods Act 1979. 7 Will, in: Bianca/Bonell, Commentary (1987), Art. 50 para. 1.2. 8 See for a detailed overview on the drafting history Bergsten/Miller, The remedy of reduction of price, 27 American Journal of Comparative Law (1979) 255 (266 et seq.); Honnold/Flechtner, Uniform Law (2009), Art. 50 para. 313.

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of the CISG buyer, who, regardless of fault, may claim either price reduction or damages depending on which remedy appears more advantageous at the moment of breach. Under civil law systems a buyer enjoys such a choice only when the seller is at fault.9

2. Importance of the provision For buyers, Art. 50 price reduction can hold four distinct advantages over a claim for 3 damages. First, buyers may claim price reduction regardless of whether a loss has in fact occurred: even if the buyer resold non-conforming goods at the price he would have received had they conformed to the contract, he may still reduce the purchase price he pays the seller.10 Accordingly, a failure of the buyer to mitigate damages is of no relevance to a claim for price reduction.11 Second, price reduction may be claimed even when the diminution in value to the goods was unforeseeable, while Art. 74 restricts damages awards to foreseeable losses.12 Third, although Art. 79 excludes damages claims when force majeure or hardship interfere with a seller’s performance, it does not exclude claims against sellers for price reduction.13 Fourth, the proportional calculation Art. 50 prescribes to determine the amount of a price reduction14 may offer buyers higher recoveries than the linear formula with which the CISG calculates damages.15

3. Nature of the remedy Art. 50 provides a unilateral right for the buyer to declare a reduction of the purchase 4 price.16 Thus, price reduction does not occur ipso iure upon the buyer’s receipt of nonconforming goods; however, neither does it depend on approval by the seller. Instead, Art. 50 provides the buyer the right to unilaterally alter the terms of the contract.17 9 Bergsten/Miller, The remedy of reduction of price, 27 American Journal of Comparative Law (1979) 255 (274). 10 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? 12 Pace International Law Review (2000) 1; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 50 para. 14. 11 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 14; Sondahl, Understanding the Remedy of Price Reduction – A Means to Fostering a More Uniform Application of the United Nations Convention for the International Sale of Goods, 7 Vindobona Journal (2003) 255. 12 Sondahl, Understanding the Remedy of Price Reduction – A Means to Fostering a More Uniform Application of the United Nations Convention for the International Sale of Goods, 7 Vindobona Journal (2003) 255; cf. infra Art. 74 paras 42 et seq. 13 Flechtner, More U. S. Decisions on the U. N. Sales Convention: Scope, Parol Evidence, “Validity” and Reduction of Price under Article 50, 14 Journal of Law and Commerce (1995) 153 (170); Honnold/ Flechtner, Uniform Law (2009), Art. 50 para. 311; 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? 12 Pace International Law Review (2000) 1. Cf. infra Art. 79 para. 41. Art. 79 CISG may be seen as a rudiment of the fault-requirement; in this context the remedy of price reduction thus keeps its original raison d’eˆtre. 14 Flechtner, More U. S. Decisions on the U. N. Sales Convention: Scope, Parol Evidence, “Validity” and Reduction of Price under Article 50, 14 Journal of Law and Commerce (1995) 153 (171 et seq.); 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? 12 Pace International Law Review (2000) 1; Sondahl, Understanding the Remedy of Price Reduction – A Means to Fostering a More Uniform Application of the United Nations Convention for the International Sale of Goods, 7 Vindobona Journal (2003) 255; cf. infra para. 36. 15 See in detail infra paras 37 et seq. 16 For the requirements that a declaration must meet see infra paras. 29 et seq. 17 Cour de Justice de Gene `ve (Switzerland) 15 November 2002 (Window frames), CISG-Online 853; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 1; Schlechtriem/Butler, CISG (2009), para. 203, Will, in: Bianca/Bonell, Commentary (1987), Art. 50 para. 2.1.3; Bergsten/Miller, The remedy of reduction of price, 27 American Journal of Comparative Law (1979) 255 (263).

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4. Position in the system of remedies 5

Within the hierarchy of CISG remedies, price reduction is among the readily available remedies. A mere non-conformity within delivered goods, without more, entitles the buyer to declare a price reduction. Thus, the remedy is available regardless of actual loss on the buyer’s side and regardless of fault or foreseeability on the seller’s side.18 As a result, price reduction may be available even in cases where no damages would be granted. Moreover, price reduction does not require that the non-conformity constitute a substantial detriment to the buyer, as is required under Art. 25 for finding a fundamental breach. Since avoiding the contract is only possible in cases of fundamental breach, price reduction remains far more readily available than avoidance.

II. Detailed Commentary 1. Requirements a) General. As a general rule, price reduction is available to the buyer whenever the seller commits any breach of contract outlined in Arts 35 to 44. However, the second sentence of Art. 50 makes the buyer’s right to reduce the price subject to the seller’s right to cure pursuant to Arts 37 or 48. The priority of the seller’s right to cure derives from Arts 37 and 48; the language of Art. 50 incorporating them by reference is merely declaratory. 7 The remedy of price reduction may be exercised irrespective of whether the buyer has already paid the purchase price. As a result of ongoing debates surrounding ULIS price reduction provisions,19 the wording of Art. 50 expressly decouples the right to price reduction from payment of the purchase price. As a consequence, payment of the full purchase price does not constitute a waiver of the right to declare a price reduction.20 8 Usually, price reduction may not be claimed before the defective goods have been delivered. However, scholars have argued that the buyer need not await actual delivery if it has become clear before delivery that the seller will deliver non-conforming goods that cannot be repaired.21 This view seems to be convincing. The argument is a corollary of the principle of anticipatory breach laid down in Art. 72(1), which constitutes a “general principle” underlying the CISG under Art. 7(2). 6

b) Non-conforming goods aa) Defects in quality. Under Art. 50, a buyer may declare price reduction “[i]f the goods do not conform with the contract.” This requirement of non-conformity limits the availability of price reduction to cases in which goods are actually delivered but do not conform to contractual specifications. Cases of non-delivery or late delivery therefore are not within the scope of Art. 50.22 10 Non-conformity exists if, at the time of the passing of risk (see Art. 36), the goods do not meet the elements of conformity set out in Art. 35. Thus, non-conformity exists if the delivered goods do not embody contractual specifications or, in the absence of such 9

18

Under Art. 79(5) not even force majeure or hardship bars the application of Art. 50. Art. 46 ULIS; cf. Will, in: Bianca/Bonell, Commentary (1987), Art. 50 paras 1.2. et seq. 20 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 4. 21 Magnus, in: Staudinger, Kommentar (2013), Art. 50 para. 12; Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 2. 22 Landgericht Du ¨ sseldorf (Germany) 5 March 1996 (Shoes), CISG-Online 181; Huber, in: Mu¨nchKommBGB (2015), Art. 50 para. 6. 19

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agreement, do not satisfy the warranties contained in Art. 35(2). Since the CISG does not distinguish between aliud and peius,23 CISG non-conformity also encompasses the delivery of an aliud. Certain actions of the buyer can preclude his right to declare price reduction. 11 Articles 35(3) and 39, which outline when the buyer loses his right to rely on nonconformity for any CISG remedy, also apply to price reduction. A buyer may not declare the price reduced when (a) at the time of the conclusion of the contract, the buyer knew or could not have been aware of the nonconformity, or (b) the buyer did not give reasonable notice of the non-conformity to the seller within a reasonable time and in a substantial manner.24 bb) Defects in title. The fact that Art. 50 makes reference only to “non-conformity” 12 raises the question of whether a defect in title in the delivered goods may, absent any defect in the underlying goods themselves, entitle the buyer to price reduction. The question first arose during the Vienna Conference when the Norwegian delegation suggested an amendment that expressly included defects in title as a type of Art. 35 non-conformity. The amendment was neither adopted nor rejected, and eventually the Norwegian delegation withdrew its proposal due to a lack of time before voting. In response, the Vienna Conference then explicitly stated that question of whether a defect in title constitutes a “non-conformity” in the underlying goods remained an issue to be solved by courts.25 At present, however, no reported cases have addressed the issue. Within scholarly 13 literature, opinion remains divided. The majority26 of authors understand “non-conformity” as a technical term which has to be interpreted consistently throughout the convention as not including defects in title. Their argument for excluding defects in title from non-conformity is primarily textual: since the heading of Chapter II Section II refers to “Conformity of the Goods and Third Party Claims,” the language of the CISG distinguishes between non-conformity – governed by Art. 35 – and defects in title, which is governed by Art. 41.27 In contrast, the minority28 proffer a structural argument that CISG “non-conformity” 14 includes title defects. They point to Art. 44, which preserves the buyer’s right to declare 23 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 10; cf. supra Art. 35 para. 13. 24 Oberlandesgericht Graz (Austria) 11 March 1998 (Wood), CISG-Online 670; Handelsgericht Zu ¨ rich (Switzerland) 10 February 1999 (Art books), CISG-Online 488; Handelsgericht Zu¨rich (Switzerland) 21 September 1998 (Catalogue), CISG-Online 416; Landgericht Gießen (Germany) 18 March 2003 (Frozen pork meat), CISG-Online 951; Landgericht Darmstadt (Germany) 29 May 2001 (Furniture), CISG-Online 686; Landgericht Stendal (Germany) 12 October 2000 (Granite rock), CISG-Online 592. Note that the buyer’s duty to give reasonable notice is subject to the counter-exception of Arts 40 and 44. 25 Honnold, Documentary History (1989), p. 582; cf. Sondahl, Understanding the Remedy of Price Reduction – A Means to Fostering a More Uniform Application of the United Nations Convention for the International Sale of Goods, 7 Vindobona Journal (2003) 255. 26 Secretariat Commentary on 1978 Draft, Art. 39 (now Art. 41) para. 8; Bergsten/Miller, The remedy of reduction of price, 27 American Journal of Comparative Law (1979) 255 (258); Schlechtriem/Butler, CISG (2009), para. 202; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 2; Huber, in: Huber/Mullis, The CISG (2007), § 12 II, p. 248; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 41 para. 20; Honnold/Flechtner, Uniform Law (2009), Art. 50 para. 313.1; 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? 12 Pace International Law Review (2000) 1; Benicke, in: Mu¨nchKommHGB (2013), Art. 50 para. 2; Piltz, Internationales Kaufrecht (2008), para. 5–345. 27 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 41 para. 20. 28 Magnus, in: Staudinger, Kommentar (2013), Art. 50 para. 10; Altenkirch, in: Brunner, Kommentar (2014), Art. 50 para. 3; Enderlein/Maskow, International Sales Law (1992), Art. 50 note 1; Hartmann, in:

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a price reduction despite the buyer’s failure to notify the seller of a non-conformity. When the buyer can provide a reasonable excuse, Art. 44 not only excuses buyers who fail to supply notice of “standard” CISG non-conformity under Art. 39; it also excuses those who fail to notify a seller of a defect in title under Art. 43. As a result, the minority concludes that the Convention allows an application of Art. 50 to defects in title. 15 The minority position, however, remains unconvincing. Art. 44’s excuse provisions merely allow a buyer, upon being excused from his failure to notify the seller, to reduce the purchase price “in accordance with Article 50.” By making price reduction dependent on the requirements of Art. 50, Art. 44 remains silent on what those requirements are.29 Minority scholars counter that, if an Art. 44 excuse does nothing more than remove a barrier to applying Art. 50 requirements for price reduction – requirements that exclude title defect claims – Art. 44 contains meaningless language when it also excuses buyers who fail to notify a seller of title defects under Art. 43. Again, however, the minority argument fails for a simple reason: Art. 44 excuses buyers who wish to “claim damages,” not merely those who desire price reduction. Since damages claims are readily available for defects in title, Art. 44’s excusal of buyers who neglect to notify sellers of title defects under Art. 43 is by no means surplusage. More importantly, if the CISG drafters refused to resolve in Art. 50 whether title defects are non-conformities,30 it borders on the unthinkable that they would insert a hidden, implicit resolution of the problem into Art. 44. 16 De lege lata therefore the majority opinion should be followed. Legal certainty requires a consistent interpretation of the term non-conformity throughout the CISG. It is submitted, however, that de lege ferenda an extension of Art. 50 to defects in title would be desirable.31 There are no conclusive reasons that would require a different treatment of non-conformity and defects in title.32 Furthermore, the border between non-conformity and defects in title is often difficult to ascertain – which causes the very legal uncertainty that to prevent is the purpose of a consistent interpretation of the term non-conformity. 17

cc) Defects in quantity. Much like with defects in title, whether Art. 50 allows buyers to claim price reduction for defects in quantity remains unsettled. Again, no reported cases have addressed the issue. The literature is divided into opposing groups of authors. The first argues that Art. 50 should be available for defects in quantity since Art. 35(1) clearly lists a defect in quantity as a “non-conformity” of delivered goods.33 The second34 contends that price reduction is not available for quantity defects because Art. 51 provides BeckOGK, Art. 49 para. 13 seq.; differentiating: Mohs, The Restitution of goods on Avoidance of the Contract for Lack of Conformity within the Scope of Art. 82(2)(c) CISG, Review of the Convention in Contracts for the International Sale of Goods (CISG) (2003–2004) 53 (67 et seq.) 29 Mohs, The Restitution of goods on Avoidance of the Contract for Lack of Conformity within the Scope of Art. 82(2)(c) CISG, Review of the Convention in Contracts for the International Sale of Goods (CISG) (2003–2004) 53 (61). 30 See supra para. 12. 31 Cf. Schlechtriem/Butler, CISG (2009), para. 202. 32 The mere fact that the buyer of goods that are encumbered with third party rights, may claim damages, does not constitute an adequate alternative because – as mentioned see para. 3 – the remedy of price reduction may be more advantageous to the buyer than the remedy of damages. 33 Magnus, in: Staudinger, Kommentar (2013), Art. 50 para. 8; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2011), Art. 50 para. 2; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 50 para. 10; Piliounis, The Remedies of Specific Performance, Price Reduction and Additional Time (Nachfrist) under the CISG: Are these worthwile changes or additions to English Sales Law? 12 Pace International Law Review (2000) 1. 34 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 2; Huber, in: Mu¨nchKommBGB (2015), Art. 51 para. 12.

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that, in cases of partial delivery – i. e. a defect in quantity – the buyer’s Art. 50 remedies are limited to the non-delivered portion of the goods.35 In the opinion of this Author, the latter view is preferable (only) if Art. 51 applies. In limiting the buyer’s Art. 50 remedies to the non-delivered portion of the goods, Art. 51 effectively splits a partial delivery into two independent parts – one part delivered conforming goods, the other part a simple non-delivery. However, since price reduction is not available in cases of non-delivery,36 it should not be available for a partial nondelivery that is treated as if it were a complete and independent non-delivery. Instead, the buyer may avoid the contract to the extent of the non-delivered goods. Practical consequences also support excluding price reduction from cases of partial delivery. While buyers will achieve identical results through price reduction or avoidance when a seller only partially delivers homogenous goods, the two remedies produce divergent recoveries when a seller partially delivers heterogeneous goods. A classic example37 is as follows: a seller has a ton of apples and a ton of oranges, each of which is worth E 1000 at the time he contracts to sell them to the buyer. Accordingly, the seller and buyer agree on a purchase price of E 2000. The seller then delivers the oranges, but fails to deliver the apples. Assume now that, at the time of delivery, the price of apples has risen to E 2000 per ton. If the buyer partially avoids the contract under Art. 51(1) to the extent of the undelivered apples, the buyer is still obligated to pay the seller the portion of the purchase price allocable to the delivered oranges, i. e. E 1000. In contrast, the calculation for price reduction does not allocate the purchase price to the delivered goods; it reduces the overall price by the ratio of the missing value to the value of the entire goods at the time of delivery.38 Here, the increase in apple prices meant that the value of the goods, at the time of delivery, was a total of E 3000. Thus, delivering only the oranges (worth E 1000) provided the buyer with exactly 1/3 of the value of the goods he contracted for. Under Art. 50, the buyer may therefore reduce the overall purchase price to 1/3, i. e. to E 667. In an opposite scenario, the price of apples has fallen to E 500 per ton by the time of delivery. If the seller again fails to deliver the apples, he has provided the buyer with E 1000 worth of goods in a deal worth E 1500, i. e. 2/3 the total value of the goods. The buyer may thus reduce the overall purchase price to 2/3, i. e. to E 1333. As is now readily apparent, allowing price reduction for partial deliveries would allow fluctuating apple prices to affect orange prices. Such a rule has the potential to operate capriciously, since it likely matters little to the buyer or seller whether they formalize such a heterogeneous exchange in a single contract or two separate contracts.

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c) No cure of the defect by the seller aa) Right to cure. The buyer loses his right to declare price reduction under Art. 50 23 when either (a) the seller cures the defect in the delivered goods or (b) the buyer refuses to accept a seller’s cure or offer to cure. Art. 50 therefore grants the seller’s right to cure priority over the buyer’s right to price reduction.39 This approach is consistent with the general CISG policy of encouraging performance of contracts to the furthest extent 35

See Art. 51 para. 45. See supra para. 9. 37 Cf. Hirner, Der Rechtsbehelf der Minderung nach dem UN-Kaufrecht (2000), pp. 148 seq. 38 For the method of calculating Art. 50 price reductions, see para. 36 infra. 39 Cf. Oberlandesgericht Koblenz (Germany) 31 January 1997 (Acrylic blankets), CISG-Online 256 (BeckRS 1997, 15993); Handelsgericht Zu¨rich (Switzerland) 10 February 1999 (Art bookds), CISG-Online 488; Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 23 March 2005 (–), CISG-Online 1481; District Court Koma´rno (Slovac Republic) 24 February 2009 (Potatoes), CISG-Online 1992. 36

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possible: if it is in the seller’s interest to cure, Art. 50 bars the buyer from cutting short the seller’s performance by “accepting” non-conforming goods and reducing the price.40 24 However, Art. 50 grants the seller’s right to cure priority over the buyer’s right to price reduction only when the seller cures “in accordance with Article 37 or Article 48.” Thus, a seller’s cure cannot bar a buyer’s declaration of price reduction unless the seller was entitled to cure under Art. 37 or 48. Art. 37 allows sellers to cure defects in goods he has delivered before the contractual date for delivery during the period leading up to the contractual date. Art. 48 permits sellers to cure goods delivered after the contractual delivery date. Both articles require that the seller’s cure not lead to unreasonable delay, inconvenience, or expense to the buyer. bb) Performance by the seller or refusal by the buyer. The mere existence of a right to cure is not sufficient to exclude the buyer’s right to price reduction. Price reduction is barred only when the seller actually cures the defect or the buyer refuses to accept such cure. 26 A buyer may either expressly or impliedly refuse to accept a seller’s cure. Commentaries and cases have provided several examples of buyer behaviour that constitute an implied refusal to accept a seller’s cure. If a buyer refuses to cooperate with the seller – e. g. by refusing to open his warehouse to accept a seller’s delivery – the buyer impliedly refuses the seller’s cure.41 The same is true for buyers who themselves cure the defective goods, rendering cure by the seller impossible. More controversially, if the buyer’s obligation to pay the purchase price has become due under the contract before the seller has cured, the buyer’s refusal to pay may constitute an implied refusal to accept cure.42 27 Still, the buyer’s refusal to accept cure bars his right to price reduction only if the seller has made a serious offer to cure that contained sufficient information to enable the buyer to plan his business.43 As a result, an offer to cure must at least indicate the expected time of the cure. 25

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cc) Legal consequences. After the seller has cured or the buyer has refused to accept cure, the buyer loses his right to declare price reduction. However, until the seller has effected a cure, or until the buyer has refused a seller’s offer to cure, the seller’s mere right to cure does not bar the buyer’s right to declare price reduction. Thus, the buyer may declare price reduction at any time, although the seller’s performance will render the declaration ineffective.44 As a result, all pre-cure declarations of price reductions are subject to the condition subsequent of the seller’s cure.45 d) Declaration of price reduction aa) Form and content. The remedy of price reduction is a unilateral right of the buyer which he exercises by way of declaration.46 The declaration has no requirements 40 See Art. 45; further Honnold, Documentary History (1989), pp. 337 seq.; Hirner, Der Rechtsbehelf der Minderung nach dem UN-Kaufrecht (2000), pp. 245 seq. 41 Hirner, Der Rechtsbehelf der Minderung nach dem UN-Kaufrecht (2000), p. 249. 42 Hirner, Der Rechtsbehelf der Minderung nach dem UN-Kaufrecht (2000), p. 252; this alternative was overlooked by the Arbitral Award, Arbitral Tribunal of the Hungarian Chamber of Commerce and Industry, 5 December 1995 (Containers), CISG-Online 163. In this case the seller did not perform cure for the reason that the buyer refused to pay the agreed purchase price. As a consequence, the buyer contracted a third party to repair the defects. The Tribunal held that because the seller had refused to cure the goods the buyer was entitled to reduce the purchase price. 43 Handelsgericht Zu ¨ rich (Switzerland) 10 February 1999 (Art books), CISG-Online 488. 44 Honnold, Documentary History (1989), p. 433; Huber, in: Huber/Mullis, The CISG (2007), p. 249; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 2. 45 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 7. 46 Oberlandesgericht Mu ¨ nchen (Germany) 2 March 1994 (Coke), CISG-Online 108 = NJW-RR (1994) 1075; Cour de Justice de Gene`ve (Switzerland) 15 November 2002 (Window Frames), CISG-Online 853;

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as to form. As to its content, it must clearly and unambiguously state that the buyer wishes to reduce the purchase price but need not include the technical term “price reduction.” The mere payment of a reduced sum does not unambiguously state a desire for price reduction since it could also be understood an exercise of the buyer’s temporary right of retention under Art. 58 or 71.47 Neither is it an unambiguous declaration, when the buyer demands that the seller “either take the goods back or reduce the price”.48 Art. 50 does not indicate whether the buyer must declare the specific amount by 30 which he intends to reduce the purchase price. Since a method set by law determines the extent of a price reduction, a buyer likely need not inform the seller of the amount by which he intends to reduce.49 However, if the buyer has already paid the full purchase price and claims restitution of the reduced portion thereof, the procedural law of most systems requires his claim to be sufficiently definite.50 bb) Effectiveness/Validity. A declaration of price reduction becomes valid at the time 31 of dispatch. The provisions of Art. 27 govern the time of effectiveness of price reduction declarations.51 So long as a buyer dispatches his declaration in a timely fashion and by a means appropriate in the circumstances, neither a delay, error or failure in the transmission of the declaration render the declaration invalid.52 cc) Irrevocability. At the moment of dispatch, a declaration of price reduction has 32 the constitutive effect of altering the legal obligations between buyer and seller in that it reduces the purchase price the buyer owes the seller.53 Most authors conclude on the basis of this instantaneous change in legal relations that the buyer’s declaration is irrevocable.54 Their conclusion, however, remains doubtful. If a buyer can alter the legal relations between himself and the seller, why should he not be allowed to re-alter those relations by revocation? Some authors answer that the seller must be protected from the buyer’s whims, but again this argument has no foundation: since price reduction solely benefits the buyer, its revocation can only benefit the seller.55 Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 2; UNCITRAL, Digest of Case Law on the CISG, Art. 50 para. 5; Huber, in: Huber/Mullis, The CISG (2007), p. 250; Audit, Vente internationale (1990), p. 138; Enderlein/Maskow, International Sales Law (1992), Art. 50; Sondahl, Understanding the Remedy of Price Reduction – A Means to Fostering a More Uniform Application of the United Nations Convention for the International Sale of Goods, 7 Vindobona Journal (2003) 255. 47 Hirner, Der Rechtsbehelf der Minderung nach dem UN-Kaufrecht (2000), pp. 295 seq.; Altenkirch, in: Brunner, Kommentar (2014), Art. 50 para. 6. 48 Magnus, in: Staudinger, Kommentar (2013), Art. 50 para. 16; Piltz, Internationales Kaufrecht, (2008), para. 5-350. 49 Hartmann, in: BeckOGK (2016) Art. 50 para. 24; Magnus, in: Staudinger, Kommentar (2013), Art. 50 para. 16. 50 Cf. Cour de Justice de Gene `ve (Switzerland) 15 November 2002 (Windows Frames), CISG-Online 853; Handelsgericht Zu¨rich (Switzerland) 21 September 1998 (Catalogue), CISG-Online 416; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 4. 51 Huber, in: Huber/Mullis, The CISG (2007), p. 250; Will, in: Bianca/Bonell, Commentary (1987), Art. 50 para. 2.1.3. 52 Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 27 para. 10. 53 See supra para. 4. 54 Oberlandesgericht Mu ¨ nchen (Germany) 2 March 1994 (Coke), CISG-Online 108 = NJW-RR (1994) 1075; Magnus, in: Staudinger, Kommentar (2013), Art. 50 para. 15; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 50 para. 31; – contra Schlechtriem, Bindung an Erkla¨rungen nach dem Einheitskaufrecht, FS Neumayer (1997), pp. 259 et seq.; Benicke, in: Mu¨nchKommHGB (2013), Art. 50 para. 14; Honnold/Flechtner, Uniform Law (2009), para. 312; differentiating Hartmann, in: BeckOGK (2016) Art. 50 para. 40. 55 An indirect violation may derive from the coincidence that the revocation of price reduction often will be followed by an avoidance of the contract or a claim for damages that might be higher than the

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33

Nevertheless, if majority opinion is followed, a buyer should not be permitted to withdraw his declaration of price reduction before it reaches the seller. The reason is clear: if the declaration is effective upon dispatch,56 then an irrevocable change in legal relations binds the buyer the moment the dispatch leaves his possession.57

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dd) No time limit. Art. 50 provides no specific time limit in which the buyer must exercise his right to reduce the purchase price.58 Any limitation periods will therefore be found either in the 1974 UN Convention on the limitation period in the international sale of goods or in domestic law.59 Note, however, that under Art. 39 the buyer must provide notice of the defect within a reasonable time in order to preserve his right to declare a price reduction.60

2. Legal consequences 35

a) General. A valid declaration of price reduction directly reduces the payment obligation the buyer owes the seller. If the buyer has not yet paid the purchase price, the seller may claim payment of only the reduced sum – the reduction of price thus may be used as a (partial) defence against an action for payment by the seller.61 If the buyer has already paid the purchase price, he will be entitled to a claim for restitution equal to the amount by which the purchase price was reduced.

b) Calculation 36 aa) Formula. The method for calculating an Art. 50 price reduction differs from the method of calculating damages under Art. 74. Damages are calculated by what is known as the “linear method:” take the value of conforming goods, subtract the value of the actually delivered non-conforming goods62, and the difference is the damages award. In contrast, the amount of a price reduction is determined with what is known as the “proportional method.”63 First, the value of the actually delivered non-conforming goods is divided by the value of conforming goods, generating the percentage of value the goods have lost. The purchase price is then reduced by this percentage, leading to the following formula: amount by which the price is reduced under Art. 50 CISG. Neither indirect consequence, however, may lead to an irrevocability of the declaration of price reduction. If at all the declaration of price reduction may lead to a forfeiture of the right of avoidance or damages. 56 See supra para. 31. 57 Contra Magnus, in: Staudinger, Kommentar (2013), Art. 50 para. 15. 58 Oberster Gerichtshof (Austria) 23 May 2005 (Coffee Machines), CISG-Online 1041; Cour de Justice de Gene`ve (Switzerland) 15 November 2002 (Window Frames), CISG-Online 853. 59 Oberlandesgericht Koblenz (Germany) 14 December 2006 (Bottles), CISG-Online 1408 (BeckRS 2007, 10389); Cour de Justice de Gene`ve (Switzerland) 15 November 2002 (Window Frames), CISG-Online 853; Will, in: Bianca/Bonell, Commentary (1987), Art. 50 para. 2.1.3; Huber, in: Mu¨nchKommBGB (2015), Art. 50 para. 14; Magnus, in: Staudinger, Kommentar (2005), Art. 50 para. 17. 60 See supra para. 11. 61 Oberlandesgericht Koblenz (Germany) 14 December 2006 (Bottles), CISG-Online 1408 (BeckRS 2007, 10389); Landgericht Gießen (Germany) 18 March 2003 (Frozen pork meat), CISG-Online 951; Handelsgericht Zu¨rich (Switzerland) 10 February 1999 (Art books), CISG-Online 488; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 16; Huber, in: Mu¨nchKommBGB (2015), Art. 50 para. 26. 62 Whether and in which way a court may estimate this value, is a question of procedure rather than substance and is therefore governed by the procedural law of the forum; see Landgericht Stuttgart (Germany) 29 October 2009 (Artificial lawn), CISG-Online 2017. 63 Handelsgericht Zu ¨ rich (Switzerland) 10 February 1999 (Art books), CISG-Online 488; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 8; Huber, in: Huber/Mullis, The CISG (2007), pp. 251 seq.; Bergsten/Miller, The remedy of reduction of price, 27 American Journal of Comparative Law (1979) 255 (259).

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Reduced Price =

Value of delivered (non-conforming goods)

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× Contract Price

Value of owed (conforming) goods In cases where the goods were (a) sold at the market price and (b) market price has 37 not changed before the time of delivery, the linear and proportional methods lead to identical results. For example, if the buyer bought goods worth E 1000 at a price of E 1000 and if the non-conformity of these goods reduced their value by 20 percent, both damages and price reduction would result in an award of E 200 to the buyer and a payment of E 800 to the seller. Differences between the linear and proportional methods arise when either (a) the 38 goods were sold above or below market value or (b) the market price of the goods has risen or fallen. For example, assume the goods above were sold at an above-market value of E 1200, had a market value of E 1000 without any non-conformity, but their non-conformity further reduced their value to E 800. Under the linear method, damages are still equivalent to the difference between the market value of conforming goods and that of the non-conforming goods, i. e. E 1000 less E 800 results in damages of E 200. In contrast, the proportional method produces a more favourable result for the buyer. Since only 80 percent of the value of conforming goods has been delivered (E 800/ E 1000), the purchase price is reduced to 80 percent of E 1200, or E 960, resulting in a recovery of E 240. However, if the buyer had purchased goods below market value, damages would provide the more advantageous remedy.64 Falling market prices can produce another situation advantageous to the buyer. 39 Assume that, in the above example, the market price of the goods fell from E 1000 to E 500 between the contract formation and delivery, and that the non-conforming goods again are worth 80 percent of the value of conforming goods, i. e. E 400. The linear method would gain non-conforming market value from conforming market value, i. e. E 500 – E 400, to result in a E 100 award and a total reduction of the purchase price to E 900. The proportional method attempts to insert the non-market detriment into the original bargain: 80 percent (E 400/E 500) of E 1000 produces a reduced price of E 800. Again the proportional method is advantageous to the buyer, and again the opposite obtains when market prices rise between contract formation and delivery.65 bb) Relevant time. Given the constant flux of market prices, it is critical to both the 40 linear and proportional methods to ascertain the precise moment in time at which the market value of conforming and non-conforming goods are determined. Art. 50 provides that the time of delivery is the moment at which the values of goods are measured. Thus, market fluctuations that occur after delivery do not affect price reductions. Market fluctuations that occur between contract formation and delivery most certainly do.66

64 Cf. Bergsten/Miller, The remedy of reduction of price, 27 American Journal of Comparative Law (1979) 255 (262), Examples E and F. 65 Cf. Flechtner, More U. S. Decisions on the U. N. Sales Convention: Scope, Parol Evidence, “Validity” and Reduction of Price under Article 50, 14 Journal of Law and Commerce (1995) 153 (171 et seq.); Bergsten/Miller, The remedy of reduction of price, 27 American Journal of Comparative Law (1979) 255 (260), Examples A and B and for further interesting differences Examples C, D. 66 This constitutes a difference from many national legal systems according to which the calculation of price reduction is based on the values at the time of the conclusion of the contract.

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In practice, the proportional method of calculating price reductions67 considerably reduces the effect of changes in market price. Market fluctuations result in substantial purchase price reductions only when the market price of the delivered non-conforming goods varies to a greater or lesser degree than the market price of conforming goods. Such divergent fluctuation is an exception, likely only in cases involving delivery of an aliud, e. g. delivery of crude oil under a contract for gasoline. Moreover, a buyer may claim damages under Arts 45 and 74 for losses resulting from market fluctuations. 42 When does “delivery” occur for purposes of price reduction? Predominant opinion defines Art. 50 “delivery” in light of the delivery obligations contained in Art. 31.68 In cases where the buyer must collect the goods at the seller’s premises under Art. 31(b) or 31(c), “delivery” under Art. 50 occurs at the point in time at which the seller places the goods at the buyer’s disposal. If the seller is obligated to deliver the goods to the buyer, “delivery” occurs upon the buyer taking possession of the goods. If the sale involves carriage of the goods under Art. 31(a), Art. 50 “delivery” occurs when the seller hands over to the goods to the first carrier. 43 Cases involving carriage contracts have drawn the special attention of a number of legal scholars. They argue that, for purposes of price reductions, it makes more sense to determine the market value of conforming and non-conforming goods at the time and place of destination instead of the time the seller hands goods off to the carrier.69 Their reasoning: since the buyer is neither able to inspect nor use the goods until they reach their destination, their true economic value does not materialize until well after the seller hands them off to the carrier.70 Unfortunately, this reasoning fails simply because the same factual scenario exists every time a buyer must collect goods at the seller’s premises. In such cases, predominant opinion places Art. 50 “delivery” at the time at which the seller places the goods at the buyer’s disposal. Thus, another period arises in which the buyer can neither inspect nor make use of the goods until they are actually handed over. For this reason another group of authors advocate defining “delivery” as the time of actual handover in every CISG transaction. This view has the advantage of providing a simple and uniform solution not subject to multiple exceptions and counter-exceptions. 44 This solution, however, fails for two reasons. First, the wording of the CISG itself differentiates between “actual handover” (e. g. in Art. 76(1) second sentence) and “delivery” (e. g. in Art. 76(2)). Second, arguing that the true economic value of goods materializes only upon their handing over assumes that only the buyer’s interest in the goods determines their value. However, when parties contract at a fixed price for a future delivery, both parties assume the risk that the goods will rise or fall in value.71 41

45

cc) Relevant place. Art. 50 provides no guidance as to the relevant place for determining the market value of delivered goods. However, ascertaining the relevant place 67

See supra para. 36. Huber, in: Mu¨nchKommBGB (2015), Art. 50 para. 17; Magnus, in: Staudinger, Kommentar (2013), Art. 50 para. 21; Altenkirch, in: Brunner, Kommentar (2014), Art. 50 para. 8; contra Will, in: Bianca/ Bonell, Commentary (1987), Art. 50 para. 3.3; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 9; Hartmann, in: BeckOGK (2016) Art. 50 para. 27 et seq. 69 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 9; Hirner, Der Rechtsbehelf der Minderung nach dem UN-Kaufrecht (2000), p. 382; von Hoffmann, Gewa¨hrleistungsanspru¨che im UN-Kaufrecht, in: Schlechtriem (ed.), Einheitliches Kaufrecht und nationales Obligationenrecht (1987), p. 293 (301) – contra Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 50 para. 31. 70 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 9; Hirner, Der Rechtsbehelf der Minderung nach dem UN-Kaufrecht (2000), p. 382. 71 For this reason some delegates heavily criticized the decision to rely on the time of delivery in the first place; see the critical remarks of the delegates Sami (Iraq), Kuchibhotla (India), Bonell (Italy) and Maskow (German Democratic Republic) – Honnold, Documentary History (1989), p. 579. 68

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for determining market values is most likely less important than pinpointing the relevant time: while the difference in value between conforming goods and a delivered aliud can vary widely within even short spans of time, it is less likely that an alternate geographic location will cause comparable variance. Still, “less likely” is not equivalent to an impossibility, and legal certainty suffers due to Art. 50’s lack of specificity. Since no reported cases have addressed Art. 50’s “place for delivery” gap, legal 46 scholarship has assumed that the place for delivery is where goods are actually located at the time of delivery. Depending on which view is taken in regard to the relevant time of delivery72, the “place for delivery” under Art. 50 is either the location of the goods at the time of Art. 31 delivery – as argued by predominant opinion – or the location of the goods at the time they are actually handed off to the buyer. If the goods are sold while in transport, the relevant place of delivery will generally be 47 the seller’s place of business rather than the actual location of the goods. The reason: at the time of contracting, neither party usually knows were goods in transit are actually located. Thus, Art. 31(b)’s provisions for goods the parties know to be at “a particular place” are inapplicable, leaving Art. 31(c) to govern the place of delivery. dd) Price reduction to zero; goods without value. In cases where defects render 48 delivered goods completely worthless, price reduction to zero may be claimed.73 Some scholars challenge this rule on the grounds that it circumvents Art. 49’s restrictive avoidance regime.74 Their criticism is not without merit: by reducing the purchase price to zero, the buyer’s remedy is identical in result to avoidance. The authors point out four discrepancies between the two remedies that potentially incentivize buyers to neglect avoidance in favour of price reduction: (1) Price reduction may be claimed irrespective of whether the seller’s breach was fundamental, while avoidance requires a fundamental breach; (2) Buyers are not barred from claiming price reduction when they fail to give a seller timely notice of defects as long as they can provide a reasonable excuse for their failure (Art. 44); (3) Despite reducing the purchase price to zero, the buyer may keep the delivered goods, whereas under avoidance he must return them to the seller; and (4) Price reduction must not be claimed within the time limitations governing avoidance under Art. 49(2)(b).75 Although correct, the first three discrepancies will rarely be relevant in practice. If a 49 seller delivers completely worthless goods, he has almost certainly fundamentally breached the contract. Moreover, instead of reducing the purchase price, the buyer could simply claim damages for the decrease in value, which would lead to identical (or

72

See supra paras 40 et seq. Bundesgerichtshof (Germany) 2 March 2005, CISG-Online 999 = NJW-RR (2005) 1218; Oberster Gerichtshof (Austria) 23 May 2005 (Coffee machines), CISG-Online 1041; Supreme Court of Western Australia (Australia) 17 January 2003 (Contact lens solution), CISG-Online 807; Oberlandesgericht Koblenz (Germany) 14 December 2006 (Bottles), CISG-Online 1408 (BeckRS 2007, 10389); Landgericht Gießen (Germany) 18 March 2003 (Frozen pork meat), CISG-Online 951; Mu¨ller-Chen, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 50 para. 13; Huber, in: Huber/Mullis, The CISG (2007), p. 254; Benicke, in: Mu¨nchKommHGB (2013), Art. 50 para. 15; Magnus, in: Staudinger, Kommentar (2013), Art. 50 para. 23; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2011), Art. 50 para. 4; Hartmann, in: BeckOGK (2016) Art. 50 para. 34; contra: Terlitza, Der OGH und die Preisminderung auf Null, FS Posch (2011), p. 753. 74 Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 50 paras 45 et seq. 75 Oberlandesgericht Koblenz (Germany) 14 December 2006 (bottles), CISG-Online 1408 (BeckRS 2007, 10389). 73

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at least similar76) results as a reduction of the purchase price and which would not require the breach to be fundamental, either. The same is true for the difference that is caused by Art. 44. Damages and price reduction are treated equally by this provision. The fact that the buyer may keep the goods is immaterial: if the goods are worthless, neither seller nor buyer likely have any interest in them. 50 Finally, the fact that price reduction is not time-barred when avoidance would be does not justify precluding a price reduction to zero. The CISG does not permit courts to set a minimum value below which price reduction becomes unavailable. To attempt to do so for cases of complete worthlessness leaves buyers in a far better position when goods have a nominal remaining value than when goods are worthless. c) Claim for restitution/repayment 51 aa) Legal basis. If the buyer has already paid the full purchase price before declaring price reduction under Art. 50, he may claim restitution for what he has paid in excess of the reduced price. 52 The legal basis for this claim is widely held to be Art. 50 itself.77 Since the language of Art. 50 extends price reduction to cases where the buyer has already paid the purchase price, it implies that the buyer is entitled to claim back any excess amounts. However, since a right to restitution is not expressly mentioned in Art. 50, some authors argue that the buyer must resort to Art. 81(2)’s restitution provisions for buyers who have avoided a contract post-payment.78 While the debate at first glance seems to be largely moot since a restitution claim under Art. 50 or Art. 81(2) generates identical results in practice, the issue becomes relevant in respect to the claim for interest. In this regard, the most consistent solution appears to consist in basing all repayment claims on Art. 82(1) (see in detail infra paras 57 et seq.). 53

bb) Currency. As a rule, restitution must be made in the same currency as the buyer’s original payment, even if that currency was not the currency the parties agreed to in the contract.79

cc) Place of performance. The place where the seller has to repay the sums paid in excess is not addressed by Art. 50. However, the location of restitution has relevance where jurisdictional rules grant personal jurisdiction over the seller at the place where his repayment obligation should be performed. Since the issue is addressed within the CISG, it is an internal gap that must be filled by reference to general principles of the CISG.80 In this case, such principles may be derived from provisions governing the place of performance of the original payment and delivery obligations. 55 When faced with the same question under the ULIS, the (German) Bundesgerichtshof found that the place of both “original” performances was located at the seller’s premises. Following this principle it held, that the place of restitution should be located at the 54

76 Because of the different calculation methods (cf. supra paras 36 et seq.) minor differences would occur in the case that the goods were purchased above or below market price. While price reduction would de facto lead to the buyer’s claim amounting to the purchase price, the damages claim would be limited to the market price, i. e. the value of the (conforming) goods. 77 Cour de Justice de Gene `ve (Switzerland) 15 November 2002 (Window Frames), CISG-Online 853; Huber, in: Mu¨nchKommBGB (2015), Art. 50 para. 26; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 16; Saenger, in: Ferrari et al., Internationales Vertragsrecht (2011), Art. 50 para. 6; Magnus, in: Staudinger, Kommentar (2013), Art. 50 para. 25; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 50 para. 50. 78 Audit, Vente Internationale (1990), p. 138; Karollus, Kommentar (1997), p. 157. 79 Huber, in: Mu ¨ nchKommBGB (2015), Art. 50 para. 26; Magnus, in: Staudinger, Kommentar (2013), Art. 50 para. 25. 80 Art. 7(2).

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seller’s place of business as well.81 The (German) Oberlandesgericht Hamm took a different approach, holding that seller may be sued for restitution at the place where the goods were originally to be delivered.82 Unfortunately, the court gave no reasons for its decision. At present, jurisprudence and legal literature seem to have agreed on another 56 approach. They see Art. 57(1)(a) – which provides that the place of payment is generally the seller’s place of business – as containing a general CISG principle: payment is to be performed at the creditor’s place of business.83 Thus, the place of performance for a seller’s obligation to repay a buyer’s excess payments is the buyer’s place of business. dd) Interest. If the buyer has paid the purchase price before declaring price reduc- 57 tion, he is entitled to interest on the sum he claims in restitution. Although all agree that the buyer is entitled to interest, the legal basis for his claim remains subject to some debate. While most authors base interest claims on Art. 78,84 others rely on Art. 84(1).85 This debate has consequences for the buyer’s recovery: under Art. 84(1), interest is owed from the date the price was paid, but under Art. 78, interest must be paid on any sum that is “in arrears.” Since an Art. 50 (or 81(2)) repayment claim is not in arrears until the buyer has declared price reduction,86 interest under Art. 78 claims begins to accrue on a different date than it would under Art. 84(1).87 From a dogmatic perspective, if restitution is granted under Art. 50 instead of 58 Art. 81(2), Art. 78 should provide the applicable interest calculations. However, this would produce a discrepancy: restitution in cases of avoidance – calculated on the basis of Art. 84(1) – would be treated differently than the “partial restitution” of price reduction cases. Thus, the most consistent solution appears to consist in basing all repayment claims on Art. 82(1), resulting in interest calculated under Art. 84(1). Some scholars have argued that Arts 50 and 78 should be applied nonetheless, with repayment claims views as “in arrears” under Art. 78 at the original time of payment.88 However, such a solution requires some conceptual twisting: since there can be no claim to price reduction before a declaration, there can also be no pre-declaration sum “in arrears.” Interest on excess payments may also be claimed as damages under Arts 45(1)(b), 74, 59 since by not restituting the overpaid sum the seller violates an obligation under the CISG. Such a claim would allow a buyer to recoup losses that arise when he has 81

Bundesgerichtshof (Germany) 22 October 1980, BGHZ 78, 257, 260 seq. (NJW (1981) 1158). Oberlandesgericht Hamm (Germany) 5 November 1997 (Inline skates), CISG-Online 381 with reference to Huber, in: Caemmerer/Schlechtriem (2nd German edition, 1995), Art. 50 para. 16. 83 Huber, in: Mu ¨ nchKommBGB (2015), Art. 50 para. 27 and Art. 57 para. 32; Magnus, in: Staudinger, Kommentar (2013), Art. 50 para. 25 and Art. 57 para. 23; Altenkirch, in: Brunner, Kommentar (2014), Art. 50 para. 11; see further Oberlandesgericht Du¨sseldorf (Germany) 2 July 1993 (Veneer cutting machine), CISG-Online 74 (BeckRS 1993, 31009121); Cour d’Appel de Grenoble (France) 23 October 1996 (Stock equipment), CISG-Online 305; Landgericht Gießen (Germany) 17 December 2002 (Warning triangles), CISG-Online 766; Maskow, in: Bianca/Bonell, Commentary (1987), Art. 57 para. 3.2; Huber, in: Huber/Mullis, The CISG (2007), p. 314; Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 57 para. 25; – contra Witz, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 428 et seq. 84 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 16; Huber, in: Mu¨nchKommBGB (2015), Art. 50 para. 28; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 50 para. 52; Piltz, Internationales Kaufrecht (2008), para. 5–359. 85 Magnus, in: Staudinger, Kommentar (2013), Art. 50 para. 26; Enderlein/Maskow, International Sales Law (1992), Art. 50 para. 4.3; Hartmann, in: BeckOGK (2016) Art. 50 para. 38. 86 See for the constitutive character of the declaration supra para. 4. 87 Even if one was to grant interest under Art. 78 CISG already for the time the “right” to reduce the purchase price existed (cf. Hirner, Der Rechtsbehelf der Minderung nach dem UN-Kaufrecht (2000), p. 416), the difference would persist because the right to price reduction arises at the time of delivery of the non-conforming goods but not at the time of payment of the purchase price. 88 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 16. 82

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borrowed to pay the purchase price and is faced with a base rate on his debt that is higher than the Art. 84(1) or Art. 78 interest rate. Of course, a damages claim is always subject to the restrictions of Arts 77 and 79, although it is near impossible to imagine a force majeur that could impede a repayment. Still, claiming interest through Arts 84(1) or 78 offers the buyer the procedural amenity of not needing to prove any concrete loss.

3. Burden of proof The burden of proof for the non-conformity of the goods shifts between buyer and seller as outlined in Art. 46.89 First, the buyer must prove the existence of the obligation that has allegedly been breached, i. e. the contractual agreement on a certain quantity and quality of the goods. If successful, the burden shifts to the seller to prove that he has fulfilled the obligation.90 However, in regard to the (non-)conformity of the goods, the burden of proof shifts back to the buyer when he has accepted delivery without complaints or reservations.91 61 Since the priority of the seller’s right to cure constitutes an exception in the seller’s favour, the burden again falls to the seller to prove that either (a) he has cured the defect, or (b) the buyer unjustifiably refused to accept cure.92 62 Conversely, the buyer must prove all elements necessary for calculating a price reduction: the purchase price; the value of the delivered non-conforming goods; and the value the goods would have had if they had conformed to the contract.93 If no market for the goods exists – often the case with non-conforming goods – proving a specific value for the goods may be nearly impossible. In such a case, the value of the non-market goods will be estimated – if the procedural law of the lex fori so permits.94 If it does, two presumptions govern the estimation: first, that the value of the conforming goods equals the purchase price;95 and second, that the decrease in value is equal to the costs a buyer would incur in repairing the goods.96 However, if these presumptions are applied simultaneously, the result is equal to what the buyer would receive by simply claiming damages. The peculiarities of the proportional method no longer have any effect. 60

89

See Art. 46 para. 54. Hepting/Mu¨ller, in: Baumga¨rtel/Laumen/Pru¨tting (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 50, para. 2; Huber, in: Mu¨nchKommBGB (2015), Art. 50 para. 35. 91 Bundesgerichtshof (Germany), 8 March 1995 (Mussels from New Zealand), CISG-Online 144 = NJW 1995, 2099; Bundesgerichtshof (Germany) 9 January 2002 (Milk powder), CISG-Online 651; Bundesgericht (Switzerland) 13 November 2003 (Used Textile Cleaning Machine), CISG-online 840; Bundesgericht (Switzerland) 7 July 2004 (Conduction pipes and cables), CISG-Online 848; Bundesgericht (Switzerland), 16 July 2012 (Spinning Plant), CISG-Online 2371; Huber, in Mu¨nchKommBGB, Art. 45 para. 19; see in more detail Art. 35 para. 169 et seq. 92 Hepting/Mu ¨ ller, in: Baumga¨rtel/Laumen/Pru¨tting (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 50, paras 9 et seq.; Huber, in: Mu¨nchKommBGB (2015), Art. 50 para. 35. 93 Hepting/Mu ¨ ller, in: Baumga¨rtel/Laumen/Pru¨tting (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 50, paras 4 et seq. 94 Hepting/Mu ¨ ller, in: Baumga¨rtel/Laumen/Pru¨tting (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 50 para. 5; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (20101), Art. 50 para. 15; Huber, in: Mu¨nchKommBGB (2015), Art. 50 para. 35; Magnus, in: Staudinger, Kommentar (2013), Art. 50 para. 34. 95 Hepting/Mu ¨ ller, in: Baumga¨rtel/Laumen/Pru¨tting (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 50 para. 5; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 15; Huber, in: Mu¨nchKommBGB (2015), Art. 50 para. 35; Benicke, in: Mu¨nchKommHGB (2013), Art. 50 para. 10 a. 96 Amtsgericht Nordhorn (Germany) 14 June 1994 (Shoes), CISG-Online 259; Benicke, in: Mu ¨ nchKommHGB (2013, Art. 50 para. 9; Huber, in: Schlechtriem, Commentary (1998), Art. 50 para. 9; however, the Handelsgericht Zu¨rich (Switzerland) 10 February 1999 (Art books), CISG-Online 488, denied the possibility to deduce the decreased value from the costs for repair. 90

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4. Interaction with other remedies a) Effects of price reduction to other remedies. If the buyer declares price reduction, 63 he may no longer demand delivery of substitute goods or repair,97 nor may he declare avoidance.98 Thus, a subsequent declaration of avoidance will be valid only if the buyer simultaneously revokes his declaration of price reduction – as long as the buyer is allowed to do so. However, the majority of legal scholars doubt that the CISG allows such a revocation.99 As discussed above, the remedy of price reduction exists for the same purposes as 64 damages claims, and both often lead to similar results.100 Thus, a buyer who claims price reduction is barred from a damages action to recoup the decreased value of defective goods.101 Whether the buyer may switch from price reduction declaration to a damages action depends – as discussed in the previous paragraph – on whether the buyer is permitted to revoke his price reduction declaration.102 However, if the buyer suffers losses beyond a decrease in value to the goods, he may recoup these losses through damages while simultaneously remedying the decreased value of the goods through price reduction.103 b) Effects of other remedies to price reduction. A declaration of avoidance precludes 65 a subsequent declaration of price reduction. Predominant opinion regards declarations of avoidance as irrevocable, thus rendering a post-avoidance conversion to price reduction impermissible.104 If the buyer has requested substitute delivery or repair, he may declare price 66 reduction at any time thereafter – with several exceptions. First, Art. 50 precludes the buyer from declaring price reduction when a seller’s performance qualifies as a cure under Arts 37, 48(1), or 48(2). Second, if the buyer sets a Nachfrist for the seller’s performance, Art. 47(2) bars the buyer from invoking any other remedy until the Nachfrist has expired. Last, the buyer’s duty of good faith may preclude a buyer from declaring a price reduction after the buyer has demanded full performance from the seller and the seller has already incurred (substantial) expenses in complying.105 As discussed above, predominant opinion holds that a buyer may no longer claim the 67 decreased value of defective goods as damages after he has declared price reduction.106 However, the opposite is not true: a claim for damages does not bind the buyer in the same manner as a price reduction declaration. Thus – until the damages claim has been paid – claiming the decreased value of defective goods as damages does not preclude the buyer from abandoning the damages claim to switch to a price reduction declaration. 97 Art. 46(2),(3); Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 17; Huber, in: Mu¨nchKommBGB (2015), Art. 50 para. 33; Altenkirch, in: Brunner, Kommentar (2014), Art. 50 para. 12. 98 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 50 para. 17; Huber, in: Mu¨nchKommBGB (2015), Art. 50 para. 33; Altenkirch, in: Brunner, Kommentar (2014), Art. 50 para. 12. 99 See supra para. 32. 100 See for the differences supra paras 3 and 37 et seq. 101 Bundesgericht (Switzerland) 28 October 1998 (meat), CISG-Online 413; Huber, in: Mu ¨ nchKommBGB (2015), Art. 50 para. 30; Altenkirch, in: Brunner, Kommentar (2014), Art. 50 para. 3. 102 See supra para. 32. 103 Amtsgericht Luzern-Land (Switzerland) 21 September 2004 (Watches), CISG-Online 963; Cour de Justice de Gene`ve (Switzerland) 15 November 2002 (Window Frames), CISG-Online 853; Huber, in: Mu¨nchKommBGB (2015), Art. 50 para. 32. 104 See Huber, in: Mu ¨ nchKommBGB (2015), Art. 50 para. 34. 105 Piltz, Internationales Kaufrecht (2008), para. 5–343; Magnus, in: Staudinger, Kommentar (2013), Art. 50 para. 32. 106 See supra para. 64.

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III. Comparable Rules 68

69

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The remedy of price reduction is effectively unknown in common law legal systems. The buyer, however, often reaches a similar (but not identical107) result by offsetting his damages for the loss in value (which are granted independently of fault on the seller’s side) against the seller’s claim for the purchase price. The PICC also provides no remedy of price reduction. The PECL has adopted the remedy of price reduction. Art. 9:401 PECL contains a rule very similar to Art. 50 CISG: “A party who accepts a tender of performance not conforming to the contract may reduce the price. This reduction shall be proportionate to the decrease in the value of the performance at the time this was tendered compared to the value which a conforming tender would have had at that time.” Thus, the PECL provides the same solution as the CISG does: price reduction is calculated with the proportional method discussed above, and the relevant time for valuing the defective goods is the time at which the seller tenders performance. Art. 9:401(2) PECL provides that the buyer may declare price reduction even after he has paid the seller, in which case he would recover what he had paid in excess of the value of the defective goods.108 Art. 9:401(3) PECL also precludes buyers who have declared price reduction from revoking their declaration to sue for damages.109 The PECL differs from the CISG only concerning the effect of the seller’s right to cure to a price reduction declaration. Whereas the CISG grants explicit priority to the right to cure, PECL provisions operate to provide the opposite. Under Art. 8:104 PECL, only when the buyer rejects the goods as not conforming with the contract may the seller first offer to cure. If, however, the buyer accepts the seller’s goods despite their non-conformity, the seller has no right to cure. Since on the other hand the buyer may claim price reduction only when he has accepted the goods, the seller’s right to cure cannot interfere with the buyer’s right to price reduction. The price reduction provisions of the DCFR (Art. III.-3:601) are identical to those of the PECL with the exception of its cure provisions. Under Art. III.-3:202 DCFR the seller’s right to cure exists independently of whether the buyer has rejected the goods. Thus, in the end, the price reduction provisions of the DCFR are identical to those within the CISG. 107

See supra paras 3 and 37 et seq. The same rule exists under the CISG; see supra para. 35. 109 See supra paras 32 and 63. 108

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Article 51 (1) If the seller delivers only a part of the goods or if only a part of the goods delivered is in conformity with the contract, Articles 46 to 50 apply in respect of the part which is missing or which does not conform. (2) The buyer may declare the contract avoided in its entirety only if the failure to make delivery completely or in conformity with the contract amounts to a fundamental breach of the contract. Bibliography: See selected bibliography of Art. 50.

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. The general rule: narrowing the view under Art. 51(1). . . . . . . . . . . . . . . . . . . . . 2. The exception: re-expanding the view under Art. 51(2) . . . . . . . . . . . . . . . . . . . . 3. Application to instalment contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Prerequisites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Divisibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Defects in title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Violation of duties other than the delivery of goods . . . . . . . . . . . . . . . . . . . . 2. Legal consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) General and scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Buyer’s remedies under Art. 51(1): specific performance, repair, substitute delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Cases of partial non-conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Cases of partial non-delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Analogous application of Art. 51(2)?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Avoidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Partial avoidance due to partial non-conformity. . . . . . . . . . . . . . . . . . . . bb) Partial avoidance for partial non-delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Avoidance of the entire contract, Art. 51(2). . . . . . . . . . . . . . . . . . . . . . . . . d) Price reduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Partial non-conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Partial non-delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f) Rejection of delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 3 4 9 9 9 15 17 18 18 21 21 23 25 28 29 31 34 43 43 44 45 46 47 50

I. Importance and Role of the Provision 1. The general rule: narrowing the view under Art. 51(1) In cases of partial non-delivery or partial non-conformity, Art. 51(1) narrows the view 1 to the missing or non-conforming portion of the seller’s performance. The remedies provided in Arts 46 to 50 are applied in respect to this portion only (note: this does not include the remedy of damages which is provided for in Arts 45(1)(b), 741). At first glance, Art. 51(1)’s partial-application rule may appear purely declaratory in light of Art. 46(3), 1 Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), Art. 51 note 2; Huber, in: Mu¨nchKommHGB (2007), Art. 51 para. 13.

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which allows buyers to claim repair only for the defective portions of deliveries.2 However, the provision is of great importance in the context of avoidance for several reasons. First, many legal systems lack mechanisms for “partially avoiding” a contract, as Art. 51(1) allows.3 Second, without Art. 51(1) expressly governing partial non-delivery, buyers would not have free reign to argue that a partial non-delivery constitutes a “case of non-delivery” under Art. 49(1)(b) that allows them to avoid the entire contract.4 2 Narrowing the view to the missing or non-conforming portion of the seller’s performance therefore provides benefits to both buyer and seller. On the one hand, the seller need not worry that the buyer will attempt to question the entirety of his performance when only a portion of it is defective. At the same time, the buyer retains mechanisms that provide him with the full benefit it bargained for.

2. The exception: re-expanding the view under Art. 51(2) 3

While subsection (1) of Art. 51 permits the application of most CISG remedies only to the nonconforming or missing portion of a seller’s performance, subsection (2) contains a narrow exception that applies solely to the remedy of avoidance. It allows to re-expand the view to the entire contract if the partial non-delivery or non-conformity constitutes a “fundamental breach” of the contract. As a remedy, Art. 51(2) is duplicative: Art. 49(1)(a) independently provides buyers the right to avoid for any fundamental breach, including partial non-delivery. However, the duplication has its rationale: fearing diverging national interpretations of buyers’ rights in cases of partial performance, the CISG drafters decided to expressly duplicate the remedy contained in Art. 49(1)(a) in the Art. 51(2)’s provisions regulating partial non-performance.

3. Application to instalment contracts If the parties have agreed to delivery in instalments, Art. 73 provides a lex specialis that – within its scope of application – prevails over Art. 51.5 Therefore, if an entire instalment is not delivered or if an instalment is defective in its entirety, only Art. 73 applies.6 5 The remaining disputes therefore focus on whether Art. 51 applies if part of a single instalment is missing or defective. The minority view is simple: Art. 73 eliminates any application of Art. 51 to instalment contracts.7 Conversely, the majority of authors argue that Art. 51 remains available to the buyer for limited actions with regard to a single instalment.8 If the buyer wants to declare partial avoidance regarding the missing or defective part of the instalment, he may do so under Art. 51(1). Likewise, if he wants to avoid the entire instalment, he may do so under the requirements set out by Art. 51(2). However, if the buyer seeks to avoid the entire instalment contract, he may do so only under Arts 73(2) and (3). 4

2

Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 51 para. 5. Honnold, Documentary History (1989), p. 434; cf. Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 51 para. 5. 4 See in detail infra paras 31 et seq. 5 Huber, in: Mu ¨ nchKommBGB (2015), Art. 51 para. 5; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 51 para. 3; Magnus, in: Staudinger, Kommentar (2013), Art. 51 para. 6; Benicke, in: Mu¨nchKommHGB (2013), Art. 51 para. 3. 6 Huber, in: Mu ¨ nchKommBGB (2015), Art. 51 para. 5; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 51 para. 3. 7 Magnus, in: Staudinger, Kommentar (2013), Art. 73 para. 7 (but Art. 51 para. 6). 8 Huber, in: Mu ¨ nchKommBGB (2015), Art. 51 para. 5; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 51 para. 3; Benicke, in: Mu¨nchKommHGB (2013), Art. 51 para. 3; Altenkirch, in: Brunner, Kommentar (2014), Art. 51 para. 2. 3

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The difference between majority and minority opinions has no effect on a buyer 6 seeking to avoid an entire instalment: both Art. 51(2) and Art. 73(1) require a fundamental breach with respect to that instalment before a buyer may avoid. Instead, the two opinions diverge solely on the availability of partial avoidance as a remedy for the missing or9 defective part of a single instalment. This possibility is only provided for by Art. 51(1). The rationale in favour of allowing Art. 73 to fully displace Art. 51 contains one part 7 clear text reading, one part concern for the systematic integrity of the CISG. Under the clear text claim, Art. 73(1) expressly governs the case of a partially-performed instalment. The provision’s wording states that it applies whenever the seller fails to “perform any of his obligations,” and such wording encompasses a defect in quantity as well as a partial defect in quality. Thus, Art. 73 should provide the exclusive rules for partiallyperformed instalments. However, the only remedy that Art. 73 provides buyers is avoiding the entire instalment. The fact that this possibility is provided for, while the possibility of a partial avoidance is not, argues against allowing partial avoidance of single instalments. Under the systematic integrity claim, allowing partial avoidance under Art. 73(1) would turn the rule-exception relationship of the Art. 51 subsections on its head. Under Art. 51, partial avoidance is the rule while an entire avoidance remains the exception. Allowing Art. 51(1) to apply to single instalments would leave entire avoidance as the rule and relegate partial avoidance to an exception. Despite these strong systematic concerns, this author sees better reasons for allowing 8 partial avoidance. Simply put, there is no reason that justifies treating partial delivery under an instalment contract differently from partial delivery under a regular contract. If 10 out of 1000 cars do not run, these ten cars remain fundamentally defective regardless of the timing of delivery: it does not make a difference whether these 10 cars are delivered together with the remaining 990 in one single shipment or whether they are delivered with only 90 other cars in an instalment.

II. Detailed Commentary 1. Prerequisites a) Divisibility. Narrowing the view to the missing or defective part of a delivery is 9 feasible only when this defective portion may be addressed independently from the rest of the shipment. In technical terms, the missing or defective part must be divisible from the remainder of the shipment.10 Although easy to conceptualize, the borderline between divisible and indivisible may be hard to draw. If 100 cars are delivered of which 10 do not start, Art. 51 easily applies to the 10 defective cars. But is the trailer divisible from the tractor? Are the tyres divisible from the rest of the tractor? Is the tailpipe? Courts as well as academic writers conceive the standard of divisibility to consist in 10 physical and economic independence: when single parts are physically and economically independent such that they could be sold to different customers as well as in their present configuration, the parts are divisible for purposes of Art. 51.11 Courts have held 9 In case of a partial non-delivery the difference is again eliminated by the buyer’s right to reduce the purchase price, cf. Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 51 para. 6. 10 Honnold/Flechtner, Uniform Law (2009), Art. 51 para. 316; Huber, in: Mu ¨ nchKommBGB (2015), Art. 51 para. 2; Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), Art. 51 para. 2; Will, in: Bianca/Bonell, Commentary (1987), Art. 51 para. 2.1.1. 11 Oberster Gerichtshof (Austria) 21 June 2005 (Software), CISG-Online 1047; Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 51 para. 2; Benicke, in: Mu¨nchKommHGB (2013), Art. 51 para. 2.

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the following goods to be divisible from one another: single modules and standard software;12 inventory of a cafe´;13 textiles in different colours and sizes;14 different pairs of shoes15, scaffolding fittings;16 fabrics that are sold in running (or square) meters;17 larger quantities of steel wire/wire rod;18 and spare parts of an assembly line for batteries19. By contrast, divisibility has been denied for a set of samples,20 and a spinning plant.21 11 However, the “physical and economical independence test” can only be the first of two necessary steps in order to assess divisibility under Art. 51. The main purpose of the divisibility requirement is to determine the legal consequences of a seller’s partial performance. If a car’s tailpipe is corrosive upon delivery, the reason for which partial avoidance may be undesirable is not the fact that the buyer cannot return the tailpipe to the seller, nor is it the fact that the completed car itself forms an economic unit. Instead, partial avoidance is undesirable because the extent of the seller’s duty to compensate the buyer is not ascertainable. If a portion of the purchase price cannot be allocated to the tailpipe, it will be difficult to determine the extent to which the restitution of this purchase price is to be made. As a result, the standard of divisibility must be whether or not the “price” of the missing or defective portion of the seller’s performance is fixed by or at least ascertainable from the contract.22 12 The result is a two-part test to determine whether one object is divisible from another. The first step is concerned with the physical and economic independence of the parts: whether the parts can be sold independently from each other; the second step concerns itself with identifiability of price: whether the price of the defective or nondelivered portion the seller’s performance is fixed, or can be ascertained from, the terms of the sales contract. 13 Applying the above analysis to a sale of tractors and trailers, they pass the first step of the test: tractors and trailers can be sold independently from each other. Regarding the second step of the test, the contractual terms become decisive. If the contract calls for “10 tractors at 30,000 E each and 10 semitrailers at 20,000 E each,” the plain wording of the contract itself treats tractors as divisible from trailers. If the contract calls for “10 lorries at a price of 50,000 E each,” a different result may obtain. The plain wording of the contractual terms makes no effort to differentiate tractors from trailers. Still, if the seller sells tractors and trailers separately in the usual course of business, and if both goods have list prices which sum equals the contractual purchase price, tractor and trailer may be found divisible. Concerning the tyres: since the price of tyres is not usually identified in the contract, the tyres are not divisible. Also, the option to refer to a list price of the seller is not present, since the price of a car does not equal the sum of its 12

Oberster Gerichtshof (Austria) 21 June 2005 (Software), CISG-Online 1047. Oberlandesgericht Hamburg (Germany) 25 January 2008 (Inventory for a cafe), CISG-Online 1681. 14 Oberlandesgericht Frankfurt (Germany) 21 December 1982 (Textiles), summarized in: Schlechtriem/ Magnus, Internationale Rechtsprechung zu EKG und EAG (1987), Art. 45 para. 2. 15 Oberlandesgericht Koblenz (Germany) 21 November 2007 (shoes), CISG-Online 1733 (BeckRS 2008, 19974); Oberlandesgericht Koblenz (Germany) 18 May 1984 (Shoes), summarized in: Schlechtriem/ Magnus, Internationale Rechtsprechung zu EKG und EAG (1987), Art. 45 para. 3. 16 Arbitral Award, ICC 7531/1994 (Scaffold fittings), CISG-Online 565. 17 Oberlandesgericht Du ¨ sseldorf (Germany) 10 February 1994 (Fabrics), CISG-Online 115 = NJW-RR (1994) 506. 18 Bundesgerichtshof (Germany) 25 June 1997 (Stainless wire), CISG-Online 277 = NJW (1997) 3311. 19 Arbitral Award, ICC 7660/JK, 23 August 1994 (Assembly line), CISG-Online 129. 20 Oberlandesgericht Frankfurt (Germany) 21 December 1982 (Textiles), summarized in: Schlechtriem/ Magnus, Internationale Rechtsprechung zu EKG und EAG (1987), Art. 45 para. 2. 21 Bundesgericht (Switzerland), 16 July 2012 (Spinning plant), CISG-Online 2371. 22 Concurring Altenkirch, in: Brunner, Kommentar (2014), Art. 51 para. 3; Hartmann, in: BeckOGK (2016) Art. 51 para. 7. 13

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components. Still, the opposite may be true for snow tyres purchased separately from a car’s standard equipment. The second step of the test also becomes relevant when a certain amount of goods are 14 sold (100 cars, 100 tons of rice) and only a portion is actually delivered (80 cars or tons of rice): here divisibility depends on whether the seller offers the goods at a constant price per item/weight or whether the price per item/weight decreases the more items are sold. In the latter case the goods are not divisible. b) Defects in title. Art. 51(1) applies only when a portion of the goods are missing or 15 do not conform to the contract. This gives rise to the question of whether third party claims encumbering a portion of the delivered goods constitute a partial “non-conformity” that allows Art. 51(1) to apply. Most authors understand the term “nonconformity” as a technical term that should be interpreted consistently throughout the CISG as not including defects in title.23 These authors rely on the heading of Chapter II Section II which mentions “conformity of the goods” in addition to “third party claims.” From this wording, the authors conclude that the CISG distinguishes between non-conformity (dealt with in Arts 35 to 40) and defects in title (dealt with in Arts 41 to 43).24 In this author’s opinion, what has been developed under Art. 5025 must apply to 16 Art. 51(1) as well: de lege lata the majority opinion should be followed. Legal certainty calls for a consistent interpretation of the term non-conformity throughout the CISG. De lege ferenda, however, an extension of Art. 51(1) to defects in title is desirable because no compelling reasons require treating nonconformity differently from defects in title. Moreover, since the distinction between non-conformity and defects in title is sometimes hard to draw, this distinction causes as much legal uncertainty as it was introduced to prevent. Some legal literature proposes to apply Art. 51 to defects in title indirectly by way of analogy.26 This appears to be an appropriate solution. c) Violation of duties other than the delivery of goods. The wording of Art. 51 limits 17 its application to two cases: partial non-delivery and partial defective delivery. In either case, the partial violation involves only the seller’s duty to deliver the goods. However, every sales contract will provide for other obligations to which Art. 51 may apply by way of analogy.27 For example, if the parties have agreed to delivery CIF the seller is obligated to insure the goods against damages in transport. If he insures only a portion of the goods, the buyer should be allowed to “narrow his view” to the uninsured portion of the goods for remedies purposes. As a result, the buyer may either claim performance from the seller (i. e. demand that the seller insure the goods) or even partially avoid the contract if the failure to insure part of the goods amounts to a fundamental breach in regard to this part of the goods. 23 Honnold, Documentary History (1989), p. 426; Schlechtriem/Butler, CISG (2009), para. 202; Mu ¨ llerChen, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 50 para. 2; Huber, in: Huber/Mullis, The CISG (2007), p. 248; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 41 para. 20; Benicke, in: Mu¨nchKommHGB (2013), Art. 50 para. 2; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 50 para. 11. 24 Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 41 para. 20. 25 See supra Art. 50 paras 12 et seq. 26 Huber, in: Mu ¨ nchKommBGB (2015), Art. 51 para. 21; Benicke, in: Mu¨nchKommHGB (2013), Art. 51 para. 10; Magnus, in: Staudinger, Kommentar (2013), Art. 51 para. 4. 27 Oberlandesgericht Hamburg (Germany), 25 January 2008 (Inventory for a cafe), CISG-Online 1681 = IHR 2008, 98; Magnus, in: Staudinger, Kommentar (2013), Art. 51 para. 20; Huber, in: Mu¨nchKommBGB (2015), Art. 51 para. 21; Benicke, in: Mu¨nchKommHGB (2013), Art. 51 para. 16; Hartmann, in: BeckOGK (2016) Art. 51 para. 11; contra Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 51 para. 1 note 1.

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2. Legal consequences a) General and scope. As discussed above, Art. 51(1) narrows the applicability of CISG remedy provisions to the missing or defective portion of a seller’s performance. However, it does so only for remedies contained in Arts 46 to 50. As a result, disputes remain in legal literature as to whether Art. 51(1) influences the applicability of the non-conformity provisions of Arts 35 et seq. as well.28 19 The debate becomes relevant in the case of a defect in quantity. If the seller delivers less than the agreed quantity, his delivery constitutes a non-conformity under Art. 35 – with the consequence under Art. 39 that the buyer must notify the seller of the nonconformity if he wishes to retain his right to rely on it. If, in this regard, one would narrow the view to the missing part, the defect in quantity would turn into a nondelivery (in regard to the respective part). A non-delivery, however, is not comprised by Art. 35 and is therefore not subject to the notification requirement of Art. 39.29 It is submitted that the wording of Art. 51(1) requires an Art. 35 analysis to govern all quantity deficiencies. Art. 51(1) only refers to the provisions of Arts 46 to 50, which deal exclusively with the legal consequences of a breach of contract. Thus, Art. 51(1) does not displace provisions containing the requirements for finding a breach of contract, i. e. Arts 35 to 44.30 As a result, every partial non-delivery must constitute a defect in quantity under Art. 35(1) so that the buyer may claim breach in the first place. According to Art. 39, the buyer must notify the seller of the defect.31 20 It is to be noted however that where this limitation of the provision’s scope of influence would lead to inappropriate results, certain exceptions must be allowed. Therefore, e. g., the view must be narrowed in regard to Art. 82(1) as well.32 The buyer’s right to partially avoid the contract may obviously only be excluded if he cannot make restitution of the defective goods. Whether or not he could make restitution of the remaining (i. e. conforming) goods cannot be of any relevance. 18

b) Buyer’s remedies under Art. 51(1): specific performance, repair, substitute delivery aa) Cases of partial non-conformity. Art. 51(1) specifically limits the remedies of repair and substitute delivery to the non-conforming portion of a seller’s performance. For cases involving repair, such a limitation will always make sense: neither seller nor buyer have any interest in repairing goods that conform to contractual terms (Art. 46(2)). However, the same will not always be true in cases where the buyer desires substitute delivery. In certain circumstances, the buyer may need to replace all delivered goods including those in conformity with the contract. 22 For example, a buyer orders floor tiles, but the only tiles the seller has to offer in replacement are of a slightly different colour. Here, the seller’s partial non-performance 21

28 Cf. for a detailed overview on the opposing opinions Huber, in: Mu ¨ nchKommBGB (2015), Art. 51 para. 8. 29 See supra Art. 35 para. 31. 30 Huber, in: Huber/Mullis, The CISG (2007), p. 294; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 8; Gruber, in: Mu¨nchKommBGB (2015), Art. 35 para. 7; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 51 para. 8; Altenkirch, in: Brunner, Kommentar (2014), Art. 51 para. 5; contra Enderlein/Maskow, International Sales Law (1992), Art. 35 para. 3; Salger, in: Witz/Salger/Lorenz, Kommentar (2016), Art. 35 para. 6. 31 Oberlandesgericht Du ¨ sseldorf (Germany) 8 January 1993 (Cucumbers), CISG-Online 76 = NJW-RR (1993) 999; Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), Art. 51 para. 2; Huber, in: Mu¨nchKommBGB (2015), Art. 51 para. 8; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 35 para. 8; Gruber, in: Mu¨nchKommBGB (2015), Art. 35 para. 7; Altenkirch, in: Brunner, Kommentar (2014), Art. 51 para. 5. 32 Huber, in: Mu ¨ nchKommBGB (2015), Art. 51 para. 6.

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endangers the very purpose for which the buyer entered into the contract. The buyer’s situation is therefore at least analogous to the fundamental breach of Art. 51(2), and the buyer therefore may argue that he is entitled to substitute delivery of the entire order (see in detail infra paras 25 et seq.). bb) Cases of partial non-delivery. For cases of partial non-delivery, Art. 51 limits 23 buyers’ remedies to specific performance under Art. 46(1) for the non-delivered portion of the seller’s performance.33 It is worth noting that, as CISG remedies are concerned, Art. 46(1) specific performance is not the buyer’s usual remedy: defective performance under Art. 35 entitles the buyer to demand only repair or substitute goods under Art. 46(2) and (3).34 However, as a result of Art. 51(1) the buyer seeks to remedy a “non-delivery,” not a mere defect in quantity, and may therefore demand delivery of non-delivered goods under Art. 46(1). As in cases of partial non-conformity, a buyer who receives an incomplete shipment 24 may in some situations have an argument that he is entitled to replacement of all delivered goods. For whether Art. 51(2) applies to such a situation, see infra paras 25 et seq. cc) Analogous application of Art. 51(2)? Under certain circumstances, narrowing 25 the view to the missing or defective portion of a seller’s performance may impair the buyer’s interests. The danger is best illustrated by an example: assume a buyer ordered 200m2 of tiles for his office floor. Of these 200m2, only 150m2 were delivered, or only 150m2 were in conformity with the contract. The buyer therefore required the seller under Art. 46 to replace the 50m2 of missing or non-conforming tiles. However, the replacement tiles originated from a different production run, and were a slightly different colour from the tiles the buyer received. As is obvious, the buyer’s contractual interests are served only by replacing all 200 m2 26 of tile. Nevertheless, Art. 51(1) restricts the reach of the buyer’s remedies to the nonconforming 50m2. The exception of Art. 51(2) offers the buyer no further help. Even if Art. 51(2) allows the buyer to claim that 50m2 of non-matching tiles constitutes a fundamental breach of the contract, the clear wording of Art. 51(2) leaves the buyer with no remedy but avoidance.35 Thus, the buyer is left with the choice of either avoiding the entire contract – and possibly losing a good bargain – or finding a spot in his office where no one will notice a different shade of tile. The issue therefore becomes whether the buyer may argue that a seller’s Art. 51(2) 27 fundamental breach entitles it to substitute performance of the entire contract by the seller. Unfortunately for the buyer, the structure of CISG remedies provisions argues against allowing such a claim. In normal cases of avoidance, the buyer must give the seller notice of a fundamental breach, after which Art. 48 gives the seller the option of remedying the breach with a substitute delivery. As a result, after a fundamental breach the seller retains the option, but not the obligation, to deliver substitute goods from his inventory. His only obligation in avoidance cases is to re-accept the defective goods into inventory. To allow buyers to argue that Art. 51(2) grants them a right to substitute performance of the entire contract turns this structure on its head: sellers would be obligated to reach into their inventories, whether or not doing so lies in their interests, 33 Huber, in: Mu ¨ nchKommBGB (2015), Art. 46 para. 8 and Art. 51 para. 10; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 51 para. 6; Magnus, in: Staudinger, Kommentar (2013), Art. 51 para. 12; Benicke, in: Mu¨nchKommHGB (2013), Art. 51 para. 5; contra Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 51 para. 36. 34 See in detail Art. 46 para. 2. 35 See infra para. 34.

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Article 51 28–32

Part III. Chapter II. Obligations of the Seller

in order to protect the interests of the buyer. Thus, in order to protect the integrity of CISG avoidance, Art. 51(2) should not allow buyers to demand complete substitute performance from sellers. 28

c) Avoidance. The bulk of litigation surrounding Art. 51 has been generated by buyers seeking the remedy of avoidance. The ability to “partially avoid” a contract – made possible by Art. 51(1)’s limitation of avoidance to the defective portion of performance – leads to significant and often unforeseen legal consequences.

aa) Partial avoidance due to partial non-conformity. In cases of partial non-conformity, determining that Art. 51(1) warrants “partial avoidance” of the contract remains straightforward in most factual scenarios. Art. 51(1)’s ease of application to partial nonconformity cases is best illustrated by imagining a situation where Art. 51(1)’s partialavoidance provisions do not exist. If 1 out of 1000 cars delivered to the buyer had no engine, Art. 46(2) would allow the buyer to request a substitute for the defective car only if 1 engineless car in 1000 constituted a fundamental breach of the contract. In possession of 999 well-performing cars, it is impossible for the buyer to claim that the seller “substantially deprived” him of what he reasonably expected under the contract. 30 In contrast, Art. 51(1) allows the buyer to focus the fundamental breach analysis on the defective portion of the seller’s performance.36 Instead of asking whether 1 bad car in 1000 constitutes a fundamental breach, the buyer may disregard the 999 functioning cars and determine whether, with regard to one car, the lack of an engine constitutes a substantial detriment. Under this narrower analysis, the seller’s fundamental breach with regard to a single car is clear, allowing the buyer to avoid the contract to the extent of a single car. 29

bb) Partial avoidance for partial non-delivery. In regard to a partial non-delivery, Art. 51(1) opens up the possibility to gain the right of avoidance by setting a Nachfrist. In general avoidance in case of a defective performance is only possible if the defect constitutes a fundamental breach, Art. 49(1)(a); the Nachfrist mechanism of Art. 49(1)(b) is reserved to cases of non-delivery. However, narrowing the view leads to the defect in quantity constituting a (partial) non-delivery to which Art. 49(1)(b) may be applied.37 32 The availability of the Nachfrist under Art. 49(1)(b) does not affect a buyer’s right to avoid a contract under 49(1)(a) when a partial non-delivery constitutes a fundamental breach of the contract.38 Art. 51(1) further allows buyers to narrow the focus of the fundamental breach inquiry to the non-delivered portion of the seller’s obligations. As a result, a buyer may claim that the failure to deliver a percentage of the contracted-for goods on time constituted a fundamental breach with regard to non-delivered portion. Using this analysis, the seller’s failure to deliver a portion of “autumn fashion” on time may constitute a fundamental breach with regard to the non-delivered clothes when the seller does not deliver the remaining fall fashion wear until after the fall season and the buyer cannot resell the late-delivered clothes after the season.39 31

36

Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), Art. 51 para. 4. Honnold, Documentary History (1989), p. 434; Honnold/Flechtner, Uniform Law (2009), Art. 51 para. 316; Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), Art. 51 para. 2; Huber, in: Mu¨nchKommBGB (2015), Art. 51 para. 11; Benicke, in: Mu¨nchKommHGB (2013), Art. 51 para. 5; Hartmann, in: BeckOGK (2016) Art. 51 para. 15. 38 Honnold/Flechtner, Uniform Law (2009), Art. 51 para. 316; Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), Art. 51 para. 4. 39 Enderlein, Die Verpflichtung des Verka ¨ufers zur Einhaltung des Lieferzeitraums und die Rechte des ¨ bereinkommen u¨ber Vertra¨ge u¨ber den internatioKa¨ufers bei dessen Nichteinhaltung nach dem UN-U 37

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33–38

Article 51

Note that irrespective of whether the buyer bases his avoidance on Art. 49(1)(a) or 33 Art. 49(1)(b) he must declare avoidance within the period of time granted by Art. 49(2)(a); Art. 49(2)(b) is not applicable.40 cc) Avoidance of the entire contract, Art. 51(2). In addition to the partial avoidance of Art. 51(1), Art. 51(2) allows buyers to avoid the entire contract when a partial nondelivery or non-conformity amounts to a fundamental breach of the contract in its entirety. Thus, although Art. 51(1) narrows the focus to the missing or non-conforming portion of the seller’s performance, paragraph (2) allows courts to re-expand their focus to encompass the entire contract when buyers claim avoidance.41 Art. 25 defines the term “fundamental breach” as a breach of contract that “results in such detriment” to the injured party “as substantially to deprive him of what he was entitled to expect under the contract.”42 Since avoidance is considered the ultima ratio of CISG remedies43 – and since Art. 51(2) itself provides an exception to Art. 51(1)’s limitation of avoidance to the defective portion of a seller’s performance – courts have established a highly restrictive standard for finding a fundamental breach under Art. 51(2).44 Only when the buyer has been deprived of all value in the remaining goods, i. e. can neither use nor resell the goods in a reasonable manner,45 may the buyer claim an Art. 51(2) fundamental breach. Examples from jurisprudence remain rare. The (German) Oberlandesgericht Koblenz found an Art. 51(2) fundamental breach when 80 % of the shoes that a seller delivered to a retailer were defective. The court held that, under considerations of “proper presentation and orderly retail,” the shoes were of no value to the retailer.46 However, the decision dates from 1984, and intervening decisions appear to have further restricted the fundamental breach standard. In the Cobalt Sulfate case of 1996, the German Bundesgerichtshof held that a fundamental breach under Art. 49(1)(a) exists only when the buyer cannot reasonably resell the goods.47 Thus, the mere disturbances to a proper presentation and orderly resale that motivated the Koblenz decision may no longer suffice to constitute a fundamental breach under Art. 49(1)(a) – let alone under Art. 51(2). The French Cour d’Appel Paris found an Art. 51(2) fundamental breach in a case involving the delivery of 15,000 pressure cookers. When the buyer investigated the pressure cookers by testing samples at random, a high percentage of the samples showed safety deficiencies. The buyer therefore argued that, in order to resell the pressure cookers, he would have to inspect each individual unit in order to avoid liability to customers for accidents. The court held that inspecting each pressure cooker nalen Warenkauf, IPRax (1991) 313 (315); Magnus, in: Staudinger, Kommentar (2013), Art. 51 para. 13 – missed by Amtsgericht Oldenburg (Germany) 24 April 1990 (Fashion textiles), CISG-Online 20. 40 Huber, in: Mu ¨ nchKommBGB (2015), Art. 51 para. 6. 41 For the question of an analogous application on the remedy of substitute delivery see supra, paras 32 et seq. 42 See in detail Art. 25 paras 10 et seq. 43 Bundesgerichtshof (Germany) 24 September 2014 (Tools), CISG-Online 2545 (BeckRS 2014, 20679) (para. 24); Bundesgerichtshof (Germany) 3 April 1996 (Cobalt sulphate), CISG-Online 135 = NJW (1996) 2364; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 49 para. 2. 44 Will, in: Bianca/Bonell, Commentary (1987), Art. 51 para. 2; Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), Art. 51 para. 2. 45 Huber, in: Mu ¨ nchKommBGB (2015), Art. 51 para. 18; Magnus, in: Staudinger, Kommentar (2013), Art. 51 para. 18; for the general reasonable use requirement see in detail Art. 49 paras 37 et seq. 46 Oberlandesgericht Koblenz (Germany) 18 May 1984 (Shoes), summarized in: Schlechtriem/Magnus, Internationale Rechtsprechung zu EKG und EAG (1987), Art. 45 para. 3. 47 Bundesgerichtshof (Germany) 3 April 1996 (Cobalt sulphate), CISG-Online 135 = NJW (1996) 2364; cf. in detail Art. 49 paras 38 et seq.

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Article 51 39–44

39 40

41

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could not reasonably be expected from the buyer and therefore found that he had lost all interest in the goods.48 Examples given in legal literature are as follows. The buyer has ordered cans of vegetables. When investigating the goods through random sampling, one can contains toxic plant parts. To avoid liability to his customers, the buyer would have to open all cans in order to ascertain which are defective. As he will not be able to sell a can once it has been opened, the buyer should be able to avoid the entire contract under Art. 51(2).49 The buyer has bought a package of hardware and software. If the software is defective and the hardware was ordered for the sole purpose of running the software, the buyer may avoid the contract with regard to the hardware as well.50 The hardware-software example demonstrates the relationship of Art. 51(2) to the question of divisibility. One might well argue that hardware and software comprise an indivisible economic unit, thus precluding the buyer from partially avoiding the contract under Art. 51(1). However, if the buyer wants to avoid the entire contract, divisibility becomes irrelevant. If faulty software constitutes a fundamental breach, it does not matter whether software is divisible from hardware – the contract, along with all of its divisible or indivisible components, is avoided in its entirety. By contrast, differences occur if the buyer wants to only partially avoid the contract. He is only allowed to do so if the goods are divisible, i. e. if they do not form an economic unit.

d) Price reduction 43 aa) Partial non-conformity. When a buyer seeks to remedy partial non-conformity through price reduction, the buyer will achieve identical results regardless of whether he pursues price reduction directly through Art. 50 or through the focus-narrowing provisions of Art. 51(1). For example, a seller delivers 100 cars at E 5000 each, and 10 cars suffer from a defect that halves their value. Accordingly, the buyer may reduce the purchase price by E 25,000 irrespective of whether he reduces under Art. 50 or 51(1). 44

bb) Partial non-delivery. In regard to a partial non-delivery narrowing the view has disadvantageous consequences for the buyer – while qualifying a defect in quantity as a partial non-delivery opens a door in respect to the remedy of avoidance, it closes a door in regard to the remedy of price reduction. As Art. 50 is not applicable in the case of non-delivery in general,51 it may not be applied in the particular case of a partial nondelivery either.52 Nevertheless, the majority of scholarly opinion takes a contrary view.53 It notes that, if price reduction in cases of partial non-delivery was truly barred, the reference to Art. 50 within Art. 51(1) would be superfluous. However, this logical argument fails on logical grounds. As shown above, the remedy of price reduction is readily available in cases of partial non-conformity54 and thus the reference to Art. 50 in Art. 51(1) is not superfluous. 48 Cour d’Appel de Paris (France) 4 June 2004 (Pressure cookers), CISG-Online 872; Bundesgericht (Switzerland) 2 April 2014 (wire rod), CISG-Online 2592 = IHR 2015, 250; Oberlandesgericht Koblenz (Germany), 21 November 2007 (Shoes), CISG-Online 1733 (BeckRS 2008, 19974). 49 Huber, in: Mu ¨ nchKommBGB (2015), Art. 51 para. 19; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 51 para. 11; Benicke, in: Mu¨nchKommHGB (2013), Art. 51 para. 12. 50 Huber, in: Mu ¨ nchKommBGB (2015), Art. 51 para. 19. 51 See Art. 50 para. 9. 52 Huber, in: Mu ¨ nchKommBGB (2015), Art. 51 para. 12. 53 Magnus, in: Staudinger, Kommentar (2013), Art. 51 para. 14; Benicke, in: Mu ¨ nchKommHGB (2013), Art. 51 para. 6; differentiating Hartmann, in: BeckOGK (2016) Art. 51 para. 16 (hypothetical intent of the parties). 54 See supra para. 43.

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45–49

Article 51

e) Damages. A buyer’s right to damages is not affected by the application of 45 Art. 51(1).55 Art. 51(1)’s clear wording limits the provision’s application to the remedies contained in Arts 46 to 50, whereas damages are provided for in Arts 45 and 74 to 77. Thus, whenever a buyer suffers loss due to a seller’s breach, he may claim compensation for the entire loss. It should be noted however, that applying Art. 51(1) to CISG damages provisions would not alter the measure of damages to which buyers are otherwise entitled. f) Rejection of delivery. Predominant opinion holds that when a buyer may properly 46 avoid a contract or claim substitute delivery, he may also reject acceptance of goods delivered pursuant to that contract.56 Since the right to reject delivery flows from the right to avoid the contract (respectively to claim substitute delivery), however, the extent of the right to reject delivery is coextensive with these rights. Thus, if a buyer is restricted to partial avoidance or partial substitute delivery under Art. 51(1), he must be restricted to a partial right to reject as well. In cases of partial non-conformity, this means that the buyer may reject any defective goods but must accept the remaining conforming goods. In cases of a partial non-delivery, the buyer cannot reject any goods, since the punctually-delivered goods conform to the contract.57 If the buyer can avoid the entire contract under Art. 51(2), he may reject the entire delivery.58

3. Burden of proof For questions arising under Art. 51(1)’s provisions, the burden of proof is allocated 47 according to the general principles. When determining the divisibility of goods, the burden of proof lies with the party 48 who invokes Art. 51(1).59 Depending on the facts underlying the dispute, Art. 51(1) may be advantageous for the buyer or the seller. If the buyer wants to partially avoid the contract on the basis of Art. 49(1)(b),60 he must invoke Art. 51(1) and thereafter prove the portion to be avoided is divisible. If the seller wants to prevent the buyer from avoiding the entire contract, he may invoke Art. 51(1), after which he also must prove divisibility. If, however, the buyer wishes to avoid the entire contract, the buyer must prove that the requirements of Art. 51(2) are met.61 For factual claims that a part is missing or defective, the burden of proof shifts 49 between buyer and seller as outlined in Art. 46.62 First, the buyer must prove the existence of the obligation that has allegedly been breached by the missing or defective part. If successful, the burden shifts to the seller to prove that he has fulfilled the obligation. 55 Honnold/Flechtner, Uniform Law (2009), Art. 51 para. 316; Huber, in: Mu ¨ nchKommBGB (2015), Art. 51 para. 7; Magnus, in: Staudinger, Kommentar (2013), Art. 51 para. 9; Altenkirch, in: Brunner, Kommentar (2014), Art. 51 para. 4. 56 See Art. 52 para. 4; cf. Schlechtriem/Butler, CISG (2009), para. 221; Magnus, in: Staudinger, Kommentar (2013), Art. 52 para. 27; Altenkirch, in: Brunner, Kommentar (2014), Art. 51 para. 7. 57 Oberster Gerichtshof (Austria) 21 June 2005 (Software), CISG-Online 1047; Hartmann, in: BeckOGK (2016) Art. 51 para. 19. 58 Oberster Gerichtshof (Austria) 21 June 2005 (Software), CISG-Online 1047; Huber, in: Mu ¨ nchKommBGB (2015), Art. 51 para. 14; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 51 para. 4; Magnus, in: Staudinger, Kommentar (2013), Art. 51 para. 11; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 51 para. 39. 59 Hepting/Mu ¨ ller, in: Baumga¨rtel/Laumen/Pru¨tting (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 51 para. 1. 60 See supra para. 29. 61 Magnus, in: Staudinger, Kommentar (2013), Art. 51 para. 21. 62 See supra Art. 46 para. 54.

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Article 51 50–54

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III. Comparable Rules 50

51

52

53

54

The PICC does not contain a special provision for situations in which only a portion of a seller’s performance is missing or defective. However, legal literature has concluded that partial avoidance is available under Art. 7.3.1. PICC, which applies “with a limited focus” – i. e. to the missing or defective part.63 Thus, for cases of partial non-delivery, the buyer may set a Nachfrist under Art. 7.3.1(5) in which the seller must complete his delivery and, if the seller does not perform within the Nachfrist period, the buyer may avoid the contract with regard to the non-delivered goods.64 Lacking any explicit provision in regard to partial non-performance, it is obvious however, that the buyer is by no means limited to partial avoidance when a seller only partially performs. If the seller’s non-performance amounts to fundamental nonperformance in regard to the entire contract, the buyer may avoid the entire contract.65 The PICC rules governing partial non-performance are thus equivalent, if not identical, with those of Art. 51 CISG. With one exception, in cases of partial nondelivery, the PICC offers the buyer a partial rejection remedy that is not available under the CISG. Under Art. 6.1.3(1) PICC, the buyer “may reject an offer to perform in part […] whether or not such offer is coupled with the assurance as to balance of the performance, unless the [buyer] has no legitimate interest in so doing”. Similar to the PICC, the PECL also provides no special provision governing partial non-performance. Unfortunately, since legal literature has yet to debate the propriety of partial avoidance under PECL provisions, it remains unclear whether partial avoidance is available under the PECL. The DCFR provides in its Art. III.-3:506 a rule governing instalment contracts as well as all other contracts whose obligations are divisible. Its remedies mirror those found in Art. 51 CISG: partial avoidance remains available under Art. III.-3:506(2) and avoidance of the entire contract is allowed “if the [buyer] cannot reasonably be expected to accept performance of the other parts or there is a ground for [avoidance] in relation to the contractual relationship as a whole” (Art. III.-3:506(3)). 63

Huber, in Vogenauer, UNIDROIT Commentary (2015), Art. 7.3.1 para. 95. Huber, in Vogenauer, UNIDROIT Commentary (2015), Art. 7.3.1 para. 95. 65 Huber, in Vogenauer, UNIDROIT Commentary (2015), Art. 7.3.1 para. 94. 64

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Article 52 (1) If the seller delivers the goods before the date fixed, the buyer may take delivery or refuse to take delivery. (2) If the seller delivers a quantity of goods greater than that provided for in the contract, the buyer may take delivery or refuse to take delivery of the excess quantity. If the buyer takes delivery of all or of part of the excess quantity, he must pay for it at the contract rate. Bibliography: See selected bibliography of Art. 50.

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Early delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Prerequisites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Legal consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Buyer’s choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Effects of an acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Effects of a lawful rejection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Effects of an unlawful rejection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Burden of proof. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Excessive delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Prerequisites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Excess quantity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Analogous application to excess in quality? . . . . . . . . . . . . . . . . . . . . . . . . . cc) Notice required under Art. 39? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Legal Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Buyer’s Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Effects of an acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Effects of a lawful rejection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Effects of an unlawful rejection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Burden of proof. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Early delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Excessive delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 4 4 4 8 8 13 17 20 21 24 24 24 29 33 38 38 43 47 49 50 53 53 55

I. Importance and Role of the Provision All major legal systems understand the term “breach of contract” to encompass non- 1 delivery, late delivery, and defects in quality or quantity. Under the CISG, a seller who provided early delivery or better than contracted-for quality also potentially breaches his contract.1 The reason for this rule is that early or excessive delivery may cause inconvenience to the buyer, as made obvious by the hyperbolic example of the zoo that ordered one elephant but received 20. It is difficult to imagine any buyer prepared to handle such a delivery.2 1 Will, in: Bianca/Bonell, Commentary (1987), Art. 52 para. 2; Magnus, in: Staudinger, Kommentar (2013), Art. 21 para. 1; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 52 para. 4; Huber, in: Huber/Mullis, The CISG (2007), p. 296. 2 Will, in: Bianca/Bonell, Commentary (1987), Art. 52 para. 2.1.2; Magnus, in: Staudinger, Kommentar (2013), Art. 52 para. 2

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In this case the “regular” remedies – as stipulated by Art. 45 – are available to the buyer. In addition, Art. 52 gives the buyer an additional option: the buyer may reject the entire early delivery or the excess portion of the excess delivery. These additional provisions do not affect the availability of “regular” remedies under Art. 45. 3 Art. 52’s special rejection rule has interpretive consequences for the availability of rejection as a CISG remedy. Expressly providing for rejection in cases of early or excess delivery implies e contrario that rejection is not available to buyers for any other cases of non-conformity.3 Thus, buyers may remedy such “standard” non-conformities only through the regular remedies of Art. 45. As a result, barring an early or excessive delivery, CISG buyers may reject deliveries only if they are entitled to a substitute delivery or to avoidance of contract (i. e. in cases of fundamental breach).4 2

II. Detailed Commentary 1. Early delivery a) Prerequisites. Under Art. 33, the seller must deliver the goods (a) on the date or (b) within the period specified by the contract. This provision entails a twofold obligation for the seller. First, the seller may not deliver after the delivery date or after expiration of the delivery period. Second, the seller also must wait to deliver until the contractual delivery date, or until the delivery period has commenced. Thus, if a contract provides for delivery “on 1 January 2017” or “in January 2017” or “in 2017”, the seller may not undertake to deliver in 2016. If he does, the buyer will have the right to reject his deliveries under Art. 52(1). 5 The same is true when parties structure delivery in a certain fashion. The parties may condition the seller’s obligation to deliver on a certain event, such as the buyer placing a purchase order. If the seller undertakes a delivery before the buyer places a purchase order, the buyer may reject the delivery under Art. 52(1)’s early delivery provisions. Similarly, the parties may agree on delivery in instalments. If the seller delivers all goods within the first instalment, the first instalment is considered an “early delivery” under Art. 52(1) in regard to the goods that were agreed to be delivered in later instalments.5 6 Whether early delivery is possible when the contract provides no date or period for delivery remains unsettled. For such cases, Art. 33(c) simply directs that the buyer “must deliver the goods […] within a reasonable time after the conclusion of the contract.” Unlike the wording of Art. 33(a) and 33(b) – which both speak in terms of a ‘start’ and ‘end’ time for delivery – Art. 33(c) appears to set only a “reasonable” end time after which deliveries may not be made.6 Legal scholarship, however, has often argued that – at least by way of analogy – Art. 33(c) bars delivery immediately after contract formation; instead, the seller must afford the buyer time to prepare to accept the goods.7 In the author’s opinion an analogy is not justified: if preparation time is important to the buyer, he has ample opportunity to specify as much in the contract. 4

3 Magnus, in: Staudinger, Kommentar (2013), Art. 52 para. 27; Hartmann, in: BeckOGK (2016) Art. 52 para. 4. 4 Magnus, in: Staudinger, Kommentar (2013), Art. 52 para. 27; Schlechtriem/Butler, CISG (2009), para. 221. 5 Magnus, in: Staudinger, Kommentar (2013), Art. 52 para. 8; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 52 para. 11 6 “… on that date …” means not before and not after that date; “… within that period …” means not before the start and not after the end of that period. 7 Gruber, in: Mu ¨ nchKommBGB (2015), Art. 33 para. 13; contra: Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), Art. 52 para. 1; Magnus, in: Staudinger, Kommentar (2013), Art. 33

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Article 52

The same is true when parties agree only to no more than the end of a delivery 7 period, e. g. “delivery within two months.” b) Legal consequences aa) Buyer’s choice. When a seller delivers early, Art. 52 allows the buyer to freely accept or reject the goods. Since the early delivery itself justifies a rejection, the buyer need not state any reasons for rejecting.8 However, the buyer’s right to reject is limited by the duty of good faith implied in every contract by Art. 7.9 Thus, the buyer may not reject delivery if accepting causes him no inconvenience, but rejection would cause significant harm to an otherwise innocent seller.10 However, for all Art. 52(1) rejections, it remains unlikely that the duty of good faith will play any appreciable role. When a buyer rejects under Art. 52(1), Art. 86(2) obligates him to take possession of the goods and preserve them for the seller to the extent that doing so does not result in “unreasonable inconvenience” or “unreasonable expense (see in detail infra para. 18). This obligation averts any harm to the seller. Thus, Art. 86(2) implies that the buyer’s convenience provides the measuring stick for when his obligations to the seller arise, thereby setting a very low standard for good faith in rejection cases.11 As a result, only a buyer’s intentional fraud or harassment will likely violate his good faith obligations.12 The buyer may exercise the choice granted by Art. 52(1) only once. If he originally accepted the goods, he may not later on reject them.13 Thus, much scholarship has focused on determining what constitutes an “acceptance” for purposes of Art. 52(1). There appears to be widespread agreement on instances that do not constitute acceptance. First, a buyer has not accepted goods if he merely takes possession of them under his Art. 86(2) obligation to do so. Second, a buyer’s mere physical possession of the goods does not constitute an “acceptance,” since a buyer may readily gain physical possession of goods without identifying them – and thus without an opportunity to discover that he holds goods delivered early.14 Unconsciously receiving delivery should not qualify as an Art. 52(1) acceptance.15 Instead, in order for a buyer to “accept” early-delivered goods under Art. 52(1), the buyer must actually or constructively know, upon receipt of the goods, that the goods are being delivered early. If the buyer attains such knowledge after receiving the goods, then an Art. 52(1) “acceptance” lies if the buyer fails to reject the goods without para. 29 and Art. 52 para. 7; Benicke, in: Mu¨nchKommHGB (2013), Art. 52 para. 2; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 52 para. 2; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 52 para. 9. 8 Honnold/Flechtner, Uniform Law (2009), Art. 52 para. 319. 9 For details on this principle cf. Art. 7 para. 24 in regard to the interpretation of the convention and Art. 7 para. 25 in regard to the parties’ behaviour. 10 Magnus, in: Staudinger, Kommentar (2013), Art. 21 para. 11; Benicke, in: Mu ¨ nchKommHGB (2013), Art. 52 para. 4; critical: Will, in: Bianca/Bonell, Commentary (1987), Art. 52 para. 2.1.3; Huber, in: Huber/ Mullis, The CISG (2007), pp. 296, 301; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 52 para. 16. 11 Huber, in: Huber/Mullis, The CISG (2007), p. 296. 12 Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 52 para. 16. 13 Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 52 para. 16. In principle, the same holds true for the opposite scenario: If the buyer has once rejected the goods he may not later on accept them. This scenario however, is unlikely to occur – at least it is unlikely to cause differences between the parties, because the (later) acceptance will usually be in the best interest of the buyer. 14 Cf. Benicke, in: Mu ¨ nchKommHGB (2013), Art. 52 para. 16, who names the example of the buyer taken possession through employees without competence/authority for the contact to a business partner. In this scenario, however, knowledge of the buyer must be assumed; he must not be allowed to leave the acceptance to employees and later on rely on their lack of authority. 15 Contra Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 52 para. 14.

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unreasonable delay.16 When determining whether a delay in rejecting is “unreasonable,” the time provisions of Arts 38 and 39 may offer some guidance. However, the earlydelivery buyer need not identify a complex technical defect, but rather simply compare agreed and actual delivery dates. As a result, the period in which a buyer may reject after learning of early delivery is very narrow. 12 If a buyer elects to reject the goods under Art. 52(1), he must reject them in their entirety. Since Art. 52(2) expressly allows buyers to reject only a portion of the goods,17 a simple argument e contrario leads to the conclusion that Art. 52(1) does not.18 bb) Effects of an acceptance. Time for payment. Accepting an early delivery potentially affects the buyer’s payment obligation only when the parties have linked delivery and payment terms in the contract, e. g. “payment within two weeks after delivery.” Predominant opinion holds that acceptance does not alter the original payment date,19 and such a rule is in the interest of both parties. A buyer prepared to pay “within two weeks” of a delivery in August may not be able to pay within two weeks of a June shipment. If obligated to do so, he may well reject goods he would have otherwise accepted, a result likely contrary to the seller’s interests.20 Thus, for purposes of determining time for payment, courts should assume that the seller delivered on the contractually-stipulated date or on the first day of the delivery period. 14 Period for notice. The considerations behind not altering the buyer’s payment term also argue against modifying the time within he must give notice of non-conformity to the seller. Buyers may not be able, or willing, to interrupt normal business flows to inspect goods that arrive ahead of schedule, and may reject more deliveries if forced to do so. Leaving the time for notice unaffected therefore serves the purpose of encouraging an acceptance. Therefore, the period for inspection and notice should not start before the agreed delivery date.21 15 Availability of damages. The policy of encouraging acceptances also argues in favour of permitting a buyer to claim damages long after accepting an early delivery. The buyer may only be willing to accept delivery if he later on may claim compensation for extra costs that incurred for the “early acceptance”. Comparing Art. 52(1) with its predecessor, Art. 29 of the ULIS, reinforces this result. Under Art. 29 ULIS buyers were precluded from receiving damages from sellers unless they expressly reserved a claim for damages when accepting the goods. Since the CISG rejected this rule, damages should remain available to buyers so long as they notify the seller of defects within the normal time period outlined in the previous paragraph.22 13

16 Contra Benicke, in: Mu ¨ nchKommHGB (2013), Art. 52 para. 9 who in this case allows rejection until the period of limitation has lapsed. 17 See infra para. 38. 18 Concurring Hartmann, in: BeckOGK (2016) Art. 52 para. 10. 19 Huber, in: Huber/Mullis, The CISG (2007), p. 297; Magnus, in: Staudinger, Kommentar (2013), Art. 21 para. 14; Huber, in: Mu¨nchKommBGB (2015), Art. 52 para. 11; Mu¨ller-Chen, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 52 para. 4; contra Will, in: Bianca/Bonell, Commentary (1987), Art. 52 para. 2.1.2; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 52 para. 23; Piltz, Internationales Kaufrecht (2008), para. 4–169. 20 See Honnold/Flechtner, Uniform Law (2009), Art. 52 para. 319. 21 Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), Art. 52 para. 3; Huber, in: Huber/Mullis, The CISG (2007), p. 297; Huber, in: Mu¨nchKommBGB (2015), Art. 52 para. 11; Mu¨llerChen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 52 para. 4; Piltz, Internationales Kaufrecht (2008), para. 4–170; – contra Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 52 para. 23, Salger, in: Witz/Salger/Lorenz, Kommentar (2016), Art. 52 para. 3. 22 Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), Art. 52 para. 3; Huber, in: Huber/Mullis, The CISG (2007), p. 297; Huber, in: Mu¨nchKommBGB (2015), Art. 52 para. 11; Mu¨llerChen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 52 para. 4; Altenkirch, in: Brunner, Kom-

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Modification of contract. Whether accepting goods despite their early delivery 16 constitutes a simultaneous modification of the sales contract is disputed in legal literature.23 In this author’s opinion, the question is only of academic interest. The buyer’s payment and notification obligations, and the buyer’s right to claim damages, should remain identical to those of an “on-time” delivery even if an acceptance of early delivery modifies the sales contract.24 Thus, if any contractual modification is assumed, it should be construed as not modifying the original payment or notice obligations, or the right to damages. Otherwise, the law would presume that a buyer intends to waive his contractual payment term and his right to damages every time he accepts goods ahead of schedule. As, however, some authors have taken the opposite view and jurisprudence has not yet settled the matter, the buyer is advised to explicitly state that he will only accept the early delivery under the condition that neither the time for payment and notice nor his claim for damages are affected. cc) Effects of a lawful rejection. Even if a buyer rejects an early delivery, the seller 17 remains obligated to undertake delivery at the contractually specified time. In other words, the buyer’s rejection does not alter the seller’s delivery obligation;25 the seller is simply treated as never having attempted delivery. If the buyer suffered any losses due to the early delivery, he may claim damages.26 Also, Art. 52 does not bar buyers from avoiding the contract, although it is difficult to imagine that an early delivery would ever constitute the fundamental breach required to avoid.27 After rejecting the early-delivered goods, Art. 86(2) requires the buyer to take 18 possession of the goods if he can do so “without payment of the price and without unreasonable inconvenience or unreasonable expense.” However, Art. 86(2) only requires buyers to take possession of goods that are prematurely “dispatched to the buyer.” Thus, if the seller has possession of the goods at the time of the buyer’s rejection, Art. 86(2) does not obligate the buyer to take possession of them. Similarly, where a seller has dispatched the goods but may easily re-gain possession of them himself – for example, if the seller runs the warehouse at the port of destination – Art. 86(2) places no obligation to take possession on the buyer. The obligations that Art. 86(2) imposes on buyers may erode the right to reject the 19 goods to a certain extent. When a buyer takes possession of goods under Art. 86(2) after mentar (2014), Art. 52 para. 3 Piltz, Internationales Kaufrecht (2008), para. 4–170; contra Schnyder/ Straub, in: Honsell, Kommentar (2010), Art. 52 para. 23; Salger, in: Witz/Salger/Lorenz, Kommentar (2016), Art. 52 para. 3. 23 Pro alteration: Benicke, in: Mu ¨ nchKommHGB (2013), Art. 52 para. 6; Enderlein/Maskow, International Sales Law (1992), Art. 52 para. 2; contra alteration: Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), Art. 52 para. 3; Huber, in: Mu¨nchKommBGB (2015), Art. 52 para. 10; Mu¨llerChen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 52 para. 5; Altenkirch, in: Brunner, Kommentar (2014), Art. 52 para. 3; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 52 para. 26; Piltz, Internationales Kaufrecht (2008), para. 4–170. 24 Cf. Hartmann, in: BeckOGK (2016) Art. 52 para. 14. As however some authors have taken the opposite view and jurisprudence has not yet settled the matter, the buyer is advised to explicitly state that he will only accept the early delivery under the condition that neither the time for payment and notice nor his claim for damages are affected. 25 Will, in: Bianca/Bonell, Commentary (1987), Art. 52 para. 2.1.4; Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), Art. 52 para. 2; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 52 para. 3; Huber, in: Huber/Mullis, The CISG (2007), p. 296; Hartmann, in: BeckOGK (2016) Art. 52 para. 11. 26 Huber, in: Mu ¨ nchKommBGB (2015), Art. 52 para. 10; Magnus, in: Staudinger, Kommentar (2013), Art. 21 para. 15. 27 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 52 para. 5; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 52 para. 30 who name the example of “just-in-time bargains”. It is submitted that even in this case a fundamental breach may only be assumed under exceptional circumstances.

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a rejection, his obligations are almost identical to those that arise when a buyer accepts an early delivery under Art. 52(1).28 In neither case must the buyer pay the purchase price, and he need not inspect the goods immediately or notify the seller of defects. Further, in both scenarios, the buyer may claim damages for losses caused by the early delivery. As a result, taking possession of rejected goods under Art. 86(2) appears almost identical to accepting early-delivered goods under Art. 52(1). This coincidence, however must not serve as an argument regarding the debate on the effects of an acceptance: it is still necessary to stimulate a voluntary acceptance, i. e. in the (admittedly rare) cases that do not give rise to an Art. 86(2) obligation to take possession. 20

dd) Effects of an unlawful rejection. If the buyer is not entitled to reject the goods – because the delivery must not be qualified as being too early – his rejection constitutes a breach of contract. Articles 53 and 60 impose the duty to take delivery on the buyer. The seller may therefore employ the remedies found in Art. 61 for the breach of this remedy. Although avoidance is included in these remedies, a refusal to accept the goods, without more, will rarely in itself constitute a fundamental breach as required by Art. 64(1)(a). Thus, any attempt to avoid the contract will generally require setting a Nachfrist under Art. 64(1)(b) during which the buyer may accept the seller’s delivery.

c) Burden of proof. Under general CISG principles, the buyer must first prove the existence of any obligation, after which the burden shifts to the seller to prove that he has fulfilled that obligation.29 Thus, in Art. 52 cases, the buyer must prove that a date for delivery or delivery period was agreed upon, and the seller must then prove that delivery did not take place before that date or period.30 22 If the seller claims that the buyer accepted early-delivered goods, he must show some behaviour of the buyer that qualifies as acceptance.31 23 This allocation of burden remains valid irrespective of the procedural posture of the case. Regardless of whether the buyer is demanding a new delivery or damages for early delivery, or whether the seller is demanding payment for wrongful rejection – the shifting burdens of proof remain unchanged.32 21

2. Excessive delivery a) Prerequisites aa) Excess quantity. Art. 52(2) provides buyers a limited right of rejection when the seller “delivers a quantity of goods higher than that provided for in the contract.” This “excess delivery” requirement is clearly fulfilled when the seller delivers a greater number of units than agreed, such as delivering 2000 instead of 1000 cars. It is also easily met when the contract agrees to a specific weight or volume of goods, and the seller delivers a greater weight or volume than agreed – such as delivering 1500 tons of rice instead of 1000. 25 What remains unclear is whether an excess delivery exists when a seller ships the agreed-upon number of units, but each individual unit is heavier or larger than specified in the contract – for example, 1000 tubes of 10 meters in length instead of 1000 tubes of 24

28

See supra paras 13 et seq. See Huber, in: Mu¨nchKommBGB (2015), Art. 52 para. 12. 30 Huber, in: Mu ¨ nchKommBGB (2015), Art. 52 para. 12; Hepting/Mu¨ller, in: Baumga¨rtel/Laumen/ Pru¨tting (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 50 paras 2 and 4; Hartmann, in: BeckOGK (2016) Art. 52 para. 24. 31 See supra para. 10. 32 Hepting/Mu ¨ ller, in: Baumga¨rtel/Laumen/Pru¨tting (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 50 paras 2 and 4. 29

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5 meters.33 Under predominant opinion, Art. 52 does not apply in such cases. Instead, the excessive length or volume constitutes a non-conformity in the goods under Art. 35(1) rather than an excess delivery under Art. 52(2).34 A minority of authors, however, argue that Art. 52 should apply for reasons of uniformity in CISG interpretation.35 Denying application of Art. 52, they argue, means that the ‘excess’ portion of the delivered units are not addressed within the CISG, thus forcing courts to look to domestic law to determine the buyer’s right to reject the ‘excessive’ portion of delivery. In response, predominant opinion points out that barring the application of 26 Art. 52(2) does not entail barring application of the entire CISG. All remedies provided in the CISG remain available to remedy excessively large or heavy goods, just as they remain available to remedy any defect in quality. Moreover, the remedy provided by Art. 52(2) – allowing buyers to reject the “excessive part” of a delivery36 – is a terrible fit for situations involving units that are simply bigger or heavier than expected. If 100 baguettes are delivered weighing 500 grams instead of 250 grams, the buyer cannot simply “reject” half of every baguette. Thus, as a general matter, predominant opinion should govern the applicability of Art. 52(2). However, under exceptional circumstances, Art. 52(2) provides a viable remedy for 27 buyers who receive excessively large or heavy goods. Specifically, when (a) the excessive mass or volume of the delivered units can easily be separated from the rest of those units, or when (b) a buyer purchases a specific number of goods at a specific weight but the buyer is interested only in the aggregate weight of the shipment.37 For example, if a hotel orders 1000 loaves of bread at 500 grams each, it is entirely possible that the hotel is only interested in 500 total kilograms of bread. If it instead receives 1000 loaves at 1000 grams each, it would be appropriate to allow the hotel to reject 500 of these loaves to reach the agreed total weight. Still, allowing an application of Art. 52 in this case might be against the interest of the buyer: buyers who do not reject under Art. 52(2) must pay at contract rates for the “excessive part” of deliveries they accept. If the goods contain additives that were not agreed to, delivery is not excessive, but 28 rather defective.38 bb) Analogous application to excess in quality? It is similarly unclear whether 29 Art. 52(2) can be applied to goods that are delivered with a higher quality than that specified in the contract. The relevant Art. 52(2) issue is whether the buyer’s acceptance of “excessive” quality obligates him to pay for the extra quality just as if he had accepted the excessive weight or volume of a delivery.39 The opinion of this Commentary is that, generally, buyers should not have to pay a higher price when they accept higher-quality 33 Pro application of Art. 52: Magnus, in: Staudinger, Kommentar (2013), Art. 52 para. 17; contra application of Art. 52: Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 52 para. 6 note 24; Huber, in: Mu¨nchKommBGB (2015), Art. 52 para. 14; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 52 para. 30; Benicke, in: Mu¨nchKommHGB (2013), Art. 52 para. 13. 34 Huber, in: Huber/Mullis, The CISG (2007), p. 298; Huber, in: Mu ¨ nchKommBGB (2015), Art. 52 para. 14; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 52 para. 41; Benicke, in: Mu¨nchKommHGB (2013), Art. 52 para. 13; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 52 para. 6; Hartmann, in: BeckOGK (2016) Art. 52 para. 16.1. 35 Magnus, in: Staudinger, Kommentar (2013), Art. 21 para. 17. 36 For a detailed description of what constitutes the “excessive part,” see infra paras 40 et seq. 37 Concurring Hartmann, in: BeckOGK (2016) Art. 52 para. 16.1. 38 Huber, in: Mu ¨ nchKommBGB (2015), Art. 52 para. 14; Magnus, in: Staudinger, Kommentar (2013), Art. 52 para. 18; Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 52 para. 42. 39 Yes: Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 52 para. 11; Magnus, in: Staudinger, Kommentar (2013), Art. 52 paras 28 et seq.; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 39 para. 30; Altenkirch, in: Brunner, Kommentar (2014), Art. 52 para. 9; No: Huber, in: Huber/Mullis, The CISG (2007), p. 298; Benicke, in: Mu¨nchKommHGB (2013), Art. 52 para. 20;

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goods. Making buyers pay a premium for “excessive” portions of deliveries is only justified when the buyers have the complementary right to reject those excessive portions. Whereas when extra units or extra volumes are shipped, the excess portion of the shipment can be easily isolated, the “excessive” quality of higher-quality goods is not separable from the goods themselves. Therefore, the buyer has no chance to reject the higher quality. In theory, the buyer could reject the whole delivery since the entire delivery is ‘compromised’ when goods are shipped with excess quantity. However, practical considerations may often force buyers to accept the entire excess-quality delivery: the buyer must decide to purchase the higher-quality shipment at a raised price, or to reject the shipment in its entirety. Buyers are thus placed in an all-or-nothing dilemma that may force them to pay higher prices simply because they need the goods to keep their businesses running. 30 In addition, determining the price the buyer must pay for “excessive” quality is inherently problematic. In cases of excess units or volume, the contract price provides a reliable basis for determining the rate at which the buyer must purchase any excess deliveries – 10 trucks for a total E 500,000 results in a price of E 50,000 for each additional truck. In cases of excess quality, the contract price provides no such basis, especially since enhancements in quality are often provided as concessions in negotiation or as inducements to enter contracts. 31 Since Art. 52(2) does not govern cases of excessive quality, CISG formation provisions govern whether a buyer must pay for the excess quality of a shipment he receives. A payment obligation may only be assumed if the seller’s excess-quality shipment constitutes an offer and the buyer’s receipt constitutes an acceptance to modify the contract. As offer and acceptance both require the parties’ intention to alter the contract, courts may not assume a modification if either party acts unconscious. If the parties’ behaviour shows their intention to modify the contract, Art. 55 would set the price at the “price generally charged” for such higher-quality goods at the time of contract formation. 32 If the seller’s conduct does not amount to an Art. 14 offer or the buyer’s conduct does not amount to an Art. 18 acceptance, the seller may claim restitution of the goods through any remedies available under applicable domestic law, such as vindication or unjust enrichment. Authors who argue that Art. 52(2) should apply to excess-quality cases criticize this detour into national law, and they have a point: any application of domestic law does lead to fragmentation within jurisprudence.40 However, this small amount of fragmentation does not outweigh the harm that buyers – and with them, international trade – would suffer if Art. 52(2) governed excess-quality cases. 33

cc) Notice required under Art. 39? Art. 39 obligates the buyer to notify the seller of any non-conformity in deliveries;41 if the buyer fails to do so, he loses his right to rely on that non-conformity.42 Predominant opinion holds that the notice requirements of Art. 39 apply to Art. 52(2) as well. Thus, if the buyer fails to notify the seller of the excess in delivery within the deadlines provided in Arts 38 and 39, he may not reject the excessive goods under Art. 52(2), but rather must accept and pay for them.43 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 52 para. 42; Hartmann, in: BeckOGK (2016) Art. 52 para. 16. 40 Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 52 para. 11; Magnus, in: Staudinger, Kommentar (2013), Art. 21 paras 28 et seq.; Schwenzer, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 39 para. 30. 41 Oberlandesgericht Rostock (Germany) 25 September 2002 (Frozen foods), CISG-Online 672; Gruber, in: Mu¨nchKommBGB (2015), Art. 39 para. 4; Piltz, Internationales Kaufrecht (2008), para. 4–171. 42 Subject, of course, to the exception of Art. 40. 43 Landgericht Ko ¨ ln (Germany), 5 December 2006 (Covers for mobile phone), CISG-Online 1440 = IHR 2007, 162; Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 52 para. 7; Huber, in: Mu¨nchKommBGB (2015), Art. 52 para. 17; Benicke, in: Mu¨nchKommHGB (2013), Art. 52 para. 14.

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Article 52

In this author’s opinion, the language of the CISG does not support this rule. The right to reject is indeed one of the buyer’s remedies, and if he waits too long to notify the seller of excess in delivery he should lose the right to rely on that non-conformity when claiming his remedies. However, when it comes to the buyer’s duty to pay for excess goods, the buyer in no way “relies on the non-conformity” – instead, the seller relies on the excess of his shipment to generate a higher price. Requiring the buyer to pay, then, does not square with the wording of Art. 39, which merely prevents the buyer from relying on a non-conformity, but nowhere permits a seller to rely on one. Against this background it stands to reason that, while the buyer’s right to reject is subject to Art. 39 notice requirements, his duty to pay is not. Unfortunately, these two aspects of Art. 52(2) cannot be separated. Unpaid sellers would surely resort to domestic remedies to receive some measure of restitution for their goods. The result is a seller harnessing any legal means he can to recap his excess goods – the same goods a buyer would have returned had he rejected. Thus, decoupling the buyer’s obligation to pay from notice requirements creates an indirect, but equally effective right of rejection for the buyer. Therefore in this author’s opinion, Art. 39 should not be applied in regard to the right to reject excessive delivery at all. Whatever the resulting rule, the question of Art. 39 notice will probably remain mostly irrelevant in practice. On the one hand, rejection of excess goods will usually qualify as a notice of non-conformity under Art. 39.44 On the other, a buyer’s taking possession of excess goods without rejecting them – i. e., without notifying the seller – will amount to an acceptance as soon as the buyer knows or ought to know of the excess deliveries.45 Thus, only two scenarios remain relevant for Art. 39 notice questions. First, where a buyer rejects goods by refusing to accept them from a carrier, and the carrier does not forward the buyer’s rejection to the seller. Second, where the buyer takes possession of the goods he intends to reject under his Art. 86(2) duties, but does not transmit his rejection to the seller.

34

35

36

37

b) Legal Consequences aa) Buyer’s Choice. As in cases of early delivery under Art. 52(1), Art. 52(2) allows 38 the buyer to freely choose to either accept or reject the goods. Unlike under Art. 52(1), the buyer’s decision does not apply to the entire shipment, but is limited to the excessive portion of the delivery. Moreover, the wording of Art. 52(2) allows the buyer to ‘split’ the excessive goods such that he accepts some of them while rejecting the rest: “if the buyer takes delivery of all or part of the excess quantity ….” Beyond these limiting and splitting provisions, the buyer’s rights under Art. 52(2) are 39 identical to those under Art. 51(1). The buyer’s free choice to accept or reject is again limited by the Art. 7 implied duty of good faith, and the duty will rarely be relevant since the seller’s interest in the goods is protected by Art. 86. Once the buyer accepts the goods, he loses his right to reject them. Again, however, merely taking physical possession of the goods does not amount to an acceptance. Instead, the buyer must take possession of the goods with actual or constructive knowledge of their excess quantity, and must do so for a reason other than fulfilling his Art. 86(2) obligations. However, the limitation of the buyer’s right to reject to the “excessive” portion of a 40 delivery can create difficulties when that portion cannot be separated from the rest of the goods. As discussed above, Art. 52(2) is not applicable if separation of the 44 And the other way around, cf. Mu ¨ ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 52 para. 7; Huber, in: Huber/Mullis, The CISG (2007), p. 299. 45 Huber, in: Huber/Mullis, The CISG (2007), p. 299; cf. supra para. 10.

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“excessive” portion of a delivery is not physically possible.46 However, when separation of the excessive portion is physically possible, but is practically or economically unfeasible – e. g., if a seller makes out a bill of lading for the entire delivery, the buyer may only accept the bill of lading (for the entire delivery) or reject it – difficulties arise. 41 Predominant opinion solves the problem by allowing the buyer to reject the entire delivery under Art. 52(2) on the basis of practical inseparability.47 A substantial number of authors, however, disagree. In their opinion, Art. 52(2) does not apply, meaning that the buyer may only reject the entire delivery if the excessive delivery constituted a fundamental breach.48 After considering the buyer’s interests, the minority position appears preferable. As in excessive quality cases, the drawback to applying Art. 52(2) is that every acceptance of an excess shipment is accompanied by a price hike on the buyer. And again, the buyer may be practically forced to do so in order to keep his business running. Conversely, not applying Art. 52(2) gives the buyer an opportunity to accept the entire delivery, excess and all, and places the burden on the seller to claim back the excess value of the shipment through applicable domestic legal remedies.49 Moreover, barring the application of Art. 52(2) is more in line with other CISG remedies. If a buyer could reject an entire shipment of goods under Art. 52(2) because an excess delivery was practically inseparable from it, the seller would de facto be required to make a substitute delivery. Art. 46, however, makes substitute delivery available to buyers only when the seller has committed a fundamental breach. 42 When partial rejection of the goods is practically unfeasible because the seller has made out a bill of lading for the entire delivery, the buyer must be given the opportunity to take over the goods and later separate the excess quantity and return it to the seller. However, a buyer who takes possession of the goods under such circumstances should not be regarded as having “accepted” the goods under Art. 52(2) which would result in an obligation to pay for the excess goods the buyer intends to return.50 bb) Effects of an acceptance. When the buyer accepts excess goods “he must pay for [them] at the contract rate”. Where the contract rate corresponds to the seller’s listed prices for the goods, the buyer should also receive any volume discount the seller has listed.51 44 As was the case with Art. 52(1), the question arises as to whether an acceptance under Art. 52(2) constitutes a modification of the underlying contract.52 As was the case with Art. 52(1), the debate is of little practical importance. The most relevant consequences of an acceptance obtain irrespective of whether a modification occurs. First, the clear wording of Art. 52(1) obligates the buyer to pay for the excessive goods he accepts at the price per unit specified in the contract. Second, if the accepted excess goods are defective, the buyer retains all remedies outlined in Art. 45(1). Although maintaining 43

46

See supra paras 25 et seq. Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 52 para. 11; Huber, in: Mu¨nchKommBGB (2015), Art. 52 para. 14; Magnus, in: Staudinger, Kommentar (2013), Art. 52 para. 22; Benicke, in: Mu¨nchKommHGB (2013), Art. 52 para. 17; Piltz, Internationales Kaufrecht (2008), para. 4– 170, Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 52 para. 56. 48 Honnold, Documentary History (1989), p. 434; Huber, in: Huber/Mullis, The CISG (2007), p. 300; Will, in: Bianca/Bonell, Commentary (1987), Art. 52 para. 2.2.1; Magnus, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), Art. 52 para. 5; Enderlein/Maskow, International Sales Law (1992), Art. 52 para. 4. 49 Cf. supra para. 35. 50 Honnold/Flechtner, Uniform Law (2009), Art. 52 para. 320. 51 Cf. Honnold/Flechtner, Uniform Law (2009), Art. 52 para. 320. 52 Yes: Magnus, in: Staudinger, Kommentar (2013), Art. 21 para. 17; Huber, in: Mu ¨ nchKommBGB (2015), Art. 52 para. 23; Benicke, in: Mu¨nchKommHGB (2013), Art. 52 para. 19, Mu¨ller-Chen, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 52 para. 10; Altenkirch, in: Brunner, Kommentar (2014), Art. 52 para. 7. 47

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Article 52

Art. 45 remedies is not addressed by Art. 52(1)’s language, the similarity between accepting excess goods and simply accepting contractually specified goods requires that Art. 45(1) apply analogously to a buyer who accepts an excessive shipment. However, the question of whether acceptance constitutes modification may have 45 relevance on whether damages caused by the excess delivery are available to the buyer. If acceptance modifies the quantity term of the contract, some would argue that excessive delivery no longer constitutes a breach, and the buyer thus no longer has a claim for damages caused by the excess delivery. However, as under Art. 52(1), the question of modification must not precede, but 46 rather follow the determination of the availability of damages,53 and under Art. 52(2), allowing damages to the buyer is most likely in the interest of both buyer and seller.54 There is no reason to treat excess deliveries differently than early deliveries – to the contrary, especially in commodity contracts, the buyer continuously purchases certain amounts of goods. If the buyer accepts an excess delivery of a commodity, it is tantamount to his accepting a portion of his next purchase early. Allowing the buyer to claim for damages caused by excess quantities eases the buyer’s willingness to accept deliveries despite an accompanying financial detriment. As a matter of fairness, however, once the buyer has accepted the goods, he should not be entitled to demand removal of the goods by the seller by way of damages. cc) Effects of a lawful rejection. If the buyer rejects the excessive part of the goods, 47 he has no obligation to pay for it. As under Art. 52(1), the remedies of repair, substitute delivery and damages, as well as the remedy of avoidance55 are available to buyers under Art. 52(2). Since he is entitled to both damages and repair, the buyer may require the seller to remove the excess goods – which constitute the Art. 45 “non-conformity” to be repaired – if the buyer has taken possession of them.56 Despite his rejection, the buyer may be obligated under Art. 86 CISG to take possession 48 of this part of the goods and reasonably preserve them for the seller. The rights and duties that attend this obligation under Art. 52(1) apply equally to Art. 52(2).57 dd) Effects of an unlawful rejection. If the buyer rejects an allegedly ‘excess’ portion 49 of the goods although the quantity delivered was in conformity with the contract, the non-acceptance constitutes a breach of Arts 53 and 60. The seller may thus employ the remedies provided by Art. 61. Again, a rejection of a portion of a shipment in the errant belief that it is excessive will rarely constitute a fundamental breach. Thus, sellers wishing to claim avoidance for an errant rejection under Art. 52(2) will generally require the seller to first set a Nachfrist during which the buyer may retract his rejection. c) Burden of proof. As a general rule, the burden of proof in Art. 52(2) cases lies with 50 whichever party first invokes Art. 52(2).58 Thus, if a buyer claims damages for losses caused by a seller’s excessive delivery, the buyer must prove that the requirements of

53

See supra para. 15. Contra Magnus, in: Staudinger, Kommentar (2013), Art. 21 para. 26; Benicke, in: Mu¨nchKommHGB (2013), Art. 52 para. 19; Huber, in: Huber/Mullis, The CISG (2007), pp. 301 et seq. 55 Again, however, it is barely imaginable that an excessive delivery constitutes a fundamental breach of contract. 56 Schnyder/Straub, in: Honsell, Kommentar (2010), Art. 52 para. 65; Hartmann, in: BeckOGK (2016) Art. 52 para. 21. 57 Supra para. 18. 58 Huber, in: Mu ¨ nchKommBGB (2015), Art. 52 para. 27; Hepting/Mu¨ller, in: Baumga¨rtel/Laumen/ Pru¨tting (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 52 paras 2 et seq.; Magnus, in: Staudinger, Kommentar (2013), Art. 21 paras 52, 31. 54

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Article 52 51–55

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Art. 52(2) are met. If the seller demands payment in regard to the excessive amount according to Art. 52(2), he must prove that the buyer has accepted the excessive delivery. 51 However, the buyer’s burden of proof is further modified by general CISG proof principles. Generally, the buyer must prove the existence of an obligation, after which the burden shifts to the seller to prove that he has fulfilled his obligation.59 Thus, when buyers invoke Art. 52(2), they must prove that a certain quantity of goods was agreed to in the contract, after which the burden shifts to the seller to prove that he did not deliver more than the agreed quantity60 – a scenario hardly imaginable in practice. 52 If one followed predominant opinion and allowed rejection of an entire shipment on grounds of practical inseparability, the buyer must prove the lack of separability.

III. Comparable Rules 1. Early delivery Both the PICC and the PECL provide solutions to early delivery similar to Art. 52(1) CISG. Under Art. 6.1.5 PICC, the buyer may reject goods that are delivered early unless “the buyer has no legitimate interest in doing so,” and Art. 7:103 PECL contains an equivalent provision. The “legitimate interest” restriction equals the result reached by CISG through Art. 86 and the Art. 7 duty of good faith in international trade.61 54 An interesting difference between PICC, PECL, and CISG provisions lies in the rule governing time for payment in cases where the buyer accepts an early delivery. As discussed above, the CISG does not address the time for payment after acceptance of an early delivery. In contrast, both the PICC and PECL provide explicit rules. Under Art. 6.1.5(2) PICC, time of payment remains unaffected “if that time has been fixed in the contract irrespective of the other party’s obligations.” From this rule, scholars have concluded e contrario that if parties couple payment time and delivery terms, e. g. by agreeing to “payment on delivery,” acceptance of an early delivery makes the date of acceptance, not the contractual date, the relevant date in determining time of payment.62 In contrast, Art. 7:103(2) PECL maintains that the original contractual timeline continues to govern the time for payment, even if payment was agreed “upon delivery.” The rule of Art. III:2–103 DCFR mirrors the PECL rule. 53

2. Excessive delivery 55

Neither the PICC nor the PECL contain any rule that deals expressly with excessive delivery. However, scholarship has taken the view that Art. 6.1.3. PICC, which deals with partial delivery, applies analogously to excessive deliveries.63 As a result, an excessive delivery constitutes a breach of contract under the PICC that entitles the buyer to reject either the entire delivery or the excessive portion thereof, provided the excessive portion can be easily separated.64 59

See Art. 46. Huber, in: Mu¨nchKommBGB (2015), Art. 51 para. 27; Hepting/Mu¨ller, in: Baumga¨rtel/Laumen/ Pru¨tting (eds), Handbuch der Beweislast im Privatrecht (2009), Art. 51 para. 9; Hartmann, in: BeckOGK (2016) Art. 52 para. 25. 61 See supra para. 8. 62 Atamer, in Vogenauer, UNIDROIT Commentary (2015), Art. 6.1.5 para. 12. 63 Atamer, in Vogenauer, UNIDROIT Commentary (2015), Art. 6.1.3 para. 24. 64 Atamer, in Vogenauer, UNIDROIT Commentary (2015), Art. 6.1.3 paras 24 et seq. 60

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Chapter III Obligations of the Buyer Article 53 The buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention. Bibliography: Gabriel, Buyer’s Performance under the CISG: Arts 53–60 Trends in the Decisions, 25 Journal of Law and Commerce (2005–2006) 273; Tercier, Droits et obligations de l’acheteur, in: Wiener ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf, Lausanner Kolloquium (1985) 119. U

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Purchase price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Payment arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Payment clauses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Duty to take delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Further duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Choice of payment debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. Practical considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 5 5 6 9 12 22 23 24 25 26

I. Importance and Role of the Provision Part III of the CISG (Arts 53 to 65) governs the buyer’s duties and the consequences 1 of their breaches. Art. 53 is the Grundnorm. It declares that it is the buyer’s fundamental obligation to pay for the goods and to accept the seller’s delivery. The seller’s obligation can therefore be characterised as an obligation to give (“dare”) as opposed to other contracts in which the obligation is an obligation to do something (“facere”) as occurs with work, services, or construction contracts1. Both obligations are subject to the parties’ contractual agreement and the parties may modify or limit these obligations as they see fit.2 The obligation to pay the purchase price as it has been set is further expanded on in Arts 54–59, whereas additional matters relating to the obligation to take delivery of the goods are set out in Art. 60. Therefore, the objective of Art. 53 is to establish the central obligations of the buyer. The interplay between Art. 53 and the parallel provision of Art. 30 stipulate the contract’s essentialia negotii.3 Given the relative lucidity of the provision and its further clarification by subsequent 2 articles, the courts have had little issue with its interpretation and Art. 53 is in general only made reference to in outlining the obligations.4 This is also reflected by the fact 1 Perales Viscasillas, “International Distribution Contracts under the CISG” in Schwenzer/Atamer/ Butler (eds) Current Issues in the CISG and Arbitration (2014) 43, 53. 2 Compare Handelsgericht des Kantons Aargau (Switzerland), 19 June 2007 (Railway rails), CISGOnline 1741 (Pace); Arbitral Award, CIETAC 18 August 2005, (Automatic production line) CISG-Online 1710 (Pace). 3 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 53 para. 1; Huber, in: Mu ¨ nchKommBGB (2016), Art. 53 para. 2. 4 See, e. g., Oberlandesgericht Brandenburg (Germany) 18 November 2008 (Beer), CISG-Online 1734 (Pace); District Court Nitra (Slovak Republic) 29 May 2008, CISG-Online 1766 (Pace); Oberlandesgericht

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Article 53 3–7

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that the provision provoked little debate at its adoption and it is directly adopted from the wording of Art. 56 ULIS.5 3 Given the distinction made between breaches that are fundamental and those that are not, it is possible to argue that the primacy afforded to the obligation to pay and accept delivery is such that any breach of it would be fundamental and hence would allow the seller to avoid the contract.6 Alternatively, one may consider the breach fundamental only if the parties themselves agreed of its importance.7 Practically speaking the two approaches may not lead to different conclusions as most parties acknowledge the great importance of these obligations. In theory, however, paying 95 % of the value or accepting delivery two days late may be instances where courts find the breach not to be fundamental. 4 Given that the obligation to pay and to take steps to make payment are interlinked, cases speak of Arts 53 and 54 in the same breath as they are often seen as two faces of the same obligation.8

II. Detailed Commentary 1. Overview 5

Art. 53 affirms the duty to pay the purchase price, generally stipulated in the sale of goods contract.9 Particular rules in regard to the duty to pay the purchase price are set out in Arts 54 to 59. Those provisions, however, do not capture all issues arising out of the duty to pay the purchase price. Some issues are not dealt with by the CISG. In the following paragraphs the basic questions will be analysed as far as they are not dealt with by Arts 54 to 59.

2. Purchase price The purchase price generally results from the explicit or implied contractual agreement between the parties. If such an agreement is missing and a valid contract nonetheless exists,10 Art. 55 will apply.11 If the price is determined according to weight, Art. 56 is engaged. 7 The agreed purchase price generally encapsulates all performances which the seller owes under the contract. This would include, for example, not only the goods as such, but also the packaging, the transport costs, the insurance costs and any taxes (e. g. sales 6

Ko¨ln (Germany) 14 January 2008 (Shoes), CISG-Online 1730 (Pace); UNCITRAL Digest of Case law on the CISG pp 246 et seq available at http://www.uncitral.org/pdf/english/clout/CISG_Digest_2016.pdf (last accessed 20 April 2017); Gabriel, Buyer’s Performance under the CISG: Arts 53–60 Trends in the Decisions, 25 (2005–2006) Journal of Law and Commerce 273. 5 Note Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 53 para. 1 raises the Czechoslovakian (as it then was) proposal that the seller should be under a general obligation to cooperate in the performance of the contract. 6 Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 53 para. 4.1; Maskow, in: Bianca/ Bonell, Commentary (1987), Art. 53 para. 2.2. 7 The view taken by Schlechtriem, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 25 para. 24 and Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 53 para. 4; Mohs, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 53 para. 41 seems to agree with the views taken by Hager in the earlier edition. 8 Tribunal Supremo (Spain) 17 January 2008 (Used automobiles), CISG-Online 1640 (Pace). 9 Compare, for example, Oberlandesgericht Mu ¨ nchen (Germany) 8 March 1995 (Nickel-copper cathodes), CISG-Online 145 (Pace); Oberster Gerichtshof (Austria) 27 February 1996, CISG-Online 648; Kantonsgericht Zug (Switzerland) 16 October 1997 (Hygrometers), CISG-Online 335 (Pace). 10 Compare Art. 14(1) para. 28. 11 See infra Art. 55.

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8–10

Article 53

tax, transaction tax etc.).12 Of course, the parties can stipulate any other arrangement by agreement, for example, through the use of trade terms like the Incoterms.13 The agreement of a ‘franco’ clause between the parties would mean that the transport costs to the place of delivery are included in the purchase price.14 The purchase price that the parties agree upon is generally final. The CISG does not 8 know a claim to retrospectively adapt the contract or renegotiate.15 It is for the parties to provide for eventualities, like difficulties in the performance or price or currency fluctuations, within the contract itself. However, Arts 71, 72 or 79 might be applicable if the respective requirements are met.16

3. Payment arrangements Generally speaking, the parties agree on the payment arrangements or payment 9 arrangements are determined by trade usages and practices. To some extent, Arts 54 et seq. contain some payment arrangements. However, these are non-mandatory and parties can deviate from those as they think fit. Provisions which contain payments arrangements are Art. 57 (place of payment), the time of payment (Arts 58, 59) and Art. 54 (certain duties relating to the preparation of the purchase price payment). Arts 54 et seq., however, leave some questions open, especially in regard to the mode of 10 payment. In regard to the latter, party agreement, as well as trade usages and practices, are paramount once more. So far as the mode of payment is not determined either by party agreement or trade usages and practices Arts 54 et seq. stipulate some basic rules. Art. 59 embodies the principle that the entire purchase price has to be made available to the seller at the time the payment is due without the seller having to make any further effort to secure the actual availability of the purchase price.17 It follows that the buyer does not have a right to pay by instalments.18 In addition to this, it can be deduced from that principle that the purchase price has to be paid in cash or has to be transferred in a timely manner into the seller’s account.19 The transfer is timely if the payment is unconditionally and without reservation credited to the seller’s account.20 Payment by cheque or bank draft is generally not sufficient unless the parties have agreed upon it, or trade usages and practices 12 OLG Ko ¨ ln (Germany) 3 April 2006 (strawberry plants case) CISG-Online 1218 (Pace); Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 6; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 53 para. 10; Achilles, Art. 53 para. 1; Piltz, Internationales Kaufrecht (2008), para. 4–131. 13 Bridge, The International Sale of Goods (2013) para 10.62 adding that INCOTERMS might be implied; Huber, in: Mu¨nchKommBGB (2016), Art. 53 para. 9. 14 Magnus in: Staudinger Kommentar (2013), Art. 53 para 6. 15 Tercier, Droits et obligations de l’acheteur, in: Wiener U ¨ bereinkommen von 1980 u¨ber den internationalen Warenkauf, Lausanner Kolloquium (1985), pp. 119, 121; Huber, in: Mu¨nchKommBGB (2016), Art. 53 para. 10; Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 5. 16 Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 5; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 53 para. 11. Art. 71 allows a party to suspend performance when it is apparent that the other party will not be able to perform, i. e. will not be able to pay the purchase price (see generally Art. 71 paras 4, 7 et seq.). Art. 72 allows a party to avoid the contract when it is clear that the other party will commit a fundamental breach, i. e. not paying the purchase price (see generally Art. 72 para. 9). Art. 79 deals with the situation where there is an impediment beyond the control of the party in regard to paying the purchase price (see generally Art. 79 paras 8, 23, 43 et seq.). 17 Huber, in: Mu ¨ nchKommBGB (2016), Art. 53 para. 12; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 53 para. 13. 18 Huber, in: Mu ¨ nchKommBGB (2016), Art. 53 para. 12; Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 7. 19 Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 7; Benicke, in: Mu ¨ nchKommHGB (2013), Art. 54 para. 2; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 53 para. 10. 20 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 53 para. 12; Huber, in: Mu ¨ nchKommBGB (2016), Art. 53 para. 13.

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allow payment by cheque or bank draft. Even if the cheque has been sent so as to allow the seller sufficient time to cash it, a cheque is not a sufficient method of payment under Arts 53 et seq. as the basic rule stipulated in Arts 53 and 59 states that the seller should not have to endure any effort or expense in regard to the purchase price payment.21 If the parties have agreed on payment by cheque or bank draft then, generally, performance will only occur if the cheque or bank draft has been cashed. In regard to the question of whether the payment was effected in time, when the seller actually accepted the cheque or bank draft is decisive.22 Costs, which result from the payment by cheque or bank draft, must generally be borne by the buyer.23 If the seller accepts a bank draft, even though the seller has no obligation to do so, this is generally considered a deferment of payment and an acceptance of a modification of the contract.24 The use of other payment methods, such as a documentary letter of credit, is only available to the buyer if it has been agreed upon by the parties or can be ascertained through trade usages and practices.25 11 The buyer’s duty to make non-monetary performances, such as advertising campaigns, in addition to the duty to pay the purchase price, do not alter the nature of the contract as a sale of goods contract as long as the non-monetary performance does not outweigh the purchase price payment.26 The same is true if the seller grants the buyer the right to substitute the purchase price27 or if the seller defers the payment of the purchase price indefinitely.28

4. Payment clauses In practice, commercial parties often use standard trade terms to fix payment arrangements.29 Agreed clauses, like the Incoterms (in regard to the terms of delivery), do not exist to the same extent for the mode of payment; an exception to this, however, is the ICC Uniform Customs and Practice for Documentary Credits (UCP).30 In general the applicable trade practices and usages are relevant to determine whether the particular payment clause is applicable.31 Some of the payment clauses that have become very popular in international trade are:32 Straight Payment Clauses (exchange goods against payment) 13 Net cash: the buyer has to pay the goods in a timely manner as is customary in the particular trade after the buyer received the goods and the invoice. Art. 58(1) second sentence is waived if “net cash” is used which means that the seller is obliged to perform 12

21 Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 57 para. 9; Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 8; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 53 para. 13; Huber, in: Mu¨nchKommBGB (2016), Art. 53 para. 13; different opinion in Herber/Czerwenka, Kommentar (1991), Art. 53 para. 3. 22 Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 8; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 53 para. 14; Magnus, in: Staudinger Kommentar (2005), Art. 53 para. 8; Benicke, in: Mu¨nchKommHGB (2013), Art. 54 para. 2. 23 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 53 para. 22; compare Landgericht Duisburg (Germany) 17 April 1996 (cheque), CISG-Online 186. 24 Landgericht Hamburg (Germany) 26 September 1990 (bank draft), CISG-Online 21 (Pace). 25 Compare Oberster Gerichtshof (Austria) 6 February 1996 (Propane gas), CISG-Online 224 (Pace). 26 See Art 3(2); Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 9. 27 Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 9. 28 OLG Mu ¨ nchen (Germany) IHR 2001, 197. 29 Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 11. 30 The UCP 600 is in force since 1 July 2007 see http://store.iccwbo.org/Content/uploaded/pdf/ICCUsers-Handbook-for-Documentary-Credits-under-UCP-600.pdf (last accessed 20 April 2017). 31 See Art. 9 paras 10, 20 et seq.; compare Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 11. 32 A far more comprehensive overview of payment clauses and their meaning can be found in Liesecke WM (1978) 3 pp. 1 et seq.

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in advance.33 Set-off and cash discount deductions are generally excluded.34 The buyer has the opportunity to inspect the goods, Art. 58(3) is not excluded.35 Cash on delivery (COD): Payment is due when the goods are delivered to the buyer. The buyer does not have the right to examine the goods or to object in any way. Art. 58(3) is waived. The payment does not have to be in cash- other forms of payment have become common, like, e. g., credit cards or cheques and can also fulfil the requirement.36 The carrier generally has the authority to collect the payment. The clause contains a set-off exclusion.37 The place of payment is therewith the place of delivery since the carrier receives the payment as the seller’s agent.38 The payment is due when the goods have been delivered. Cash against Invoice: The buyer has to pay the purchase price after receiving the invoice. If the invoice reaches the buyer before the goods were delivered, then the payment is only due after the delivery of the goods.39 Cash before Delivery (CBD): The buyer has to pay the purchase price in advance. The seller only has to deliver the goods after the purchase price payment has been received.40 Telegraph transfer (TT): The term is used in international business to refer to an international credit transfer. The UNCITRAL Model Law on International Credit Transfers (1992) is an attempt to unify the law of international credit transfers. The model law was the model for the European Union Directive 97/5/EC41 on cross border credit transfers. Credit transfers to which the Directive does not apply has to be determined in accordance with private international law rules.42 As Mohs notes the CISG is only concerned with the discharging effect of the use of TT on the buyer’s payment obligation. Therefore, payment is effected if the amount of the purchase price is credited to the seller’s account and the seller can dispose of the purchase price unconditionally.43 Documentary Payment Clauses Cash against documents (CAD); documents against payment (D/P): the seller has to dispatch the goods and has to tender the documents. The buyer has to pay the purchase price when the documents are tendered without having received the goods. The buyer is, therefore, obliged to perform in advance of receiving the goods.44 The question arises whether the doctrine of strict compliance, as developed in regard to letter of credits, applies in case the documents do not entirely conform. The literature points out the comparability of CAD and documents against letters of credit.45 Since the buyer does not 33 See, for example, already E. Clements Horst v Biddel Bros [1912] AC 18 (HL); Liesecke WM (1978) 3 pp. 1, 8; Huber, in: Mu¨nchKommBGB (2016), Art. 53 para. 15. 34 Compare Bundesgerichtshof (Germany) BGHZ 14, 61 (62); 23, 131 (135); 94, 71, 76; Oberlandesgericht Hamburg (Germany) 5 October 1998 (Electronic parts), CISG-Online 473 (Pace). 35 Huber, in: Mu ¨ nchKommBGB (2016), Art. 53 para. 15; Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 14. 36 The term is sometimes substituted by “collect on delivery”. 37 Bundesgerichtshof (Germany) NJW 1985, 550; Huber, in: Mu ¨ nchKommBGB (2016), Art. 53 para. 15. 38 Huber, in: Mu ¨ nchKommBGB (2016), Art. 53 para. 15. 39 Lo ¨ gering, CISG und internationale Handelsklauseln (2008) 83; Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 15. 40 Lo ¨ gering, CISG und internationale Handelsklauseln (2008) 79, 80. 41 OJ 1997 L 043, 25 (27 Jan 2007). 42 Mohs in: Schlechtriem/Schwenzer, Commentary (2016) Art. 53 para 11. 43 Mohs in: Schlechtriem/Schwenzer, Commentary (2016) Art. 53 para 12. 44 Compare Bundesgerichtshof (Germany) NJW 1987, 2435 seq.; Bundesgerichtshof (Germany) NJW 1988, 2608 seq.; Oberster Gerichtshof (Austria) 6 February 1996 (Propane gas), CISG-Online 224 (Pace); Liesecke WM (1978) 3 pp. 1, 11; Lo¨gering, CISG und internationale Handelsklauseln (2008) 85 et seq; Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 17. 45 Maskow, in: Bianca/Bonell, Commentary (1987), Art. 57 para. 2.8.

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have the opportunity to inspect the goods due to having to perform in advance, a strict compliance standard should apply. Art. 58(3) is waived in this case. The buyer does not have the right to examine the goods before the purchase price payment or to refuse payment due to non-conformity of the goods.46 The buyer can only claim any possible non-conformity of the goods afterwards.47 The clause contains a set-off exclusion.48 20 Documents against Letter of Credit (L/C): The clause “documents against letter of credit” is especially frequent in international trade. The buyer’s obligations are the same as under D/P, in addition, however, the buyer has to order his bank to issue a letter of credit in the amount of the purchase price.49 The ICC Uniform Customs and Practice for Documentary Credits has to be taken into account too.50 21 Documents against Acceptance (D/A): The buyer has the same duties as under D/P. However, the buyer does not make a cash payment but only when the documents are presented with a bill of exchange.51

5. Duty to take delivery 22

In addition to pay the purchase price the buyer has to take delivery. The substance of the duty to take delivery is substantiated by Art 60. The duty to take delivery is a concrete one, an endorsing act is not enough.52

6. Further duties 23

Additional buyer’s duties can follow from the contract between the parties, usages between the parties and trade usages.53 Those duties can comprise duties which are not directly connected to the purchase price payment like duties to inform, to share information or competition or cooperation agreements.54

7. Choice of payment debt 24

If the buyer has more than one purchase price payment due, one has to distinguish between several payments arising out of the same contract and payments arising from different contracts. In regard to the former Art. 8 and trade usages (Art. 9) will determine to which debt the payment is to be applied to if the buyer has not specified the payment. In regard to the latter, the CISG is silent. If the underlying contracts are all CISG contracts the gap should be filled in accordance with the principles set out in Art. 8 and Art. 9 CISG. If the payment debts arise not solely from CISG contracts, the applicable domestic law will determine which debt will be paid by the purchase price.55 46

Huber, in: Mu¨nchKommBGB (2016), Art. 53 para. 15. Compare Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 17. 48 Huber, in: Mu ¨ nchKommBGB (2016), Art. 53 para. 15. 49 Compare Liesecke WM (1978) 3 pp. 1, 20, Huber, in: Mu ¨ nchKommBGB (2016), Art. 53 para. 15; see Audiencia Provincial de Cantabria (Spain) 9 Jul 2013 (steel cable) CISG-Online 2487 where the letter of credit did not cover the entire agreed purchase price. The buyer was held to be in breach of his obligation under Arts 53, 54 CISG. 50 Huber, in: Mu ¨ nchKommBGB (2016), Art. 53 para. 15. 51 Lo ¨ gering, CISG und internationale Handelsklauseln (2008) 89 et seq; Liesecke WM (1978) 3, 17, 18; Magnus, in: Staudinger Kommentar (2013), Art. 53 para 19. 52 Magnus, in: Staudinger Kommentar (2013), Art. 53 para 32. 53 Magnus, in: Staudinger Kommentar (2013), Art. 53 para 33, eg the duty to obtain a foreign exchange permit. 54 Magnus, in: Staudinger Kommentar (2013), Art. 53 para 36. 55 Gerechtshof-Hertogenbosch (Netherlands) 2 Jan 2007 CISG-Online 1434; Mohs in: Schlechtriem/ Schwenzer, Commentary (2016) Art. 53 para 27; compare PICC, Art 6.1.12. 47

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The question of which debt is repaid with the purchase price can be of importance in regard to the accrual of interest and the statute of limitation.

8. Practical considerations The usual rules in regard to burden of proof apply. Generally, the seller has to prove 25 that a payment obligation exists.56 The buyer on the other hand has to prove that he performed that obligation.57 In addition, the buyer has to prove any discount the buyer has received with respect to the purchase price.58

III. Comparable Rules The relatively non-controversial nature of the general obligation to make payment 26 and accept delivery of the goods can be found in both the PICC and the PECL.59 Although not explicitly stated as an obligation on the buyer, it is reasonable to assume that, under the PICC, the duty to make payments and accept delivery is an implied obligation of all contracts.60 The duties to accept delivery and pay for the goods are also part of the legislative framework of sales law in the United Kingdom61 and, in fact, are seen as concurrent obligations.62 As with the CISG the US-UCC provides that “[t]he obligation of the seller is to 27 transfer and deliver and that of the buyer is to accept and pay in accordance with the contract.”63 The German BGB as well stipulates that the buyer’s obligation is twofold: to pay the purchase price and to take delivery of the goods.64 56 Oberlandesgericht Saarbru ¨ cken, Germany, 12 May 2010, Internationales Handelsrecht, 2012, 202, available on the Internet at www.globalsaleslaw.org; Landgericht Kassel, Germany, 15 February 1996, Neue Juristische Wochenschrift – Rechtsprechungsreport 1996, 1146. 57 OLG Mu ¨ nchen (Germany) CISG-Online 145 (Pace); LG Kassel (Germany) CISG-Online 191 (Pace); Huber, in: Mu¨nchKommBGB (2016), Art. 53 para. 25. 58 OLG Saarbru ¨ cken (Germany) 12 May 2010 CISG-Online 2155. 59 Chapter 7 PECL. 60 Art. 5.1.1 PICC. 61 S. 27 Sale of Goods Act 1979 (UK). 62 S. 28 Sale of Goods Act 1979 (UK). 63 § 2–301 UCC. 64 § 433(2) BGB.

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Section I Payment of the price Article 54 The buyer’s obligation to pay the price includes taking such steps and complying with such formalities as may be required under the contract or any laws and regulations to enable payment to be made. Bibliography: Gabriel, Buyer’s Performance under the CISG: Arts 53–60 Trends in the Decisions, 25 Journal of Law and Commerce (2005–2006) 273; Osuna-Gonzalez, Buyer’s Enabling Steps to Pay the Price: Article 54 of the United Nations Convention on Contracts for the International Sale of Goods, 25 Journal of Law and Commerce (2005–2006) 25; Magnus, Waehrungsfragen im Einheitlichen Kaufrecht, Zugleich ein Beitrag zu seiner Lueckenfuellung und Auslegung, 53 RabelsZ (1989) 116.

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Scope of the duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Determination of the currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) CISG approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Private international law approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Certainty of the purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Replacement of the currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Election of the currency by the seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. The buyer’s breach of his obligation(s). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Practical questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 3 3 8 10 10 11 13 14 15 16 19 21

I. Importance and Role of the Provision 1

Art. 54 augments the buyer’s obligation to pay the purchase price by requiring the buyer to comply with formalities as may be required under the contract (or any governing law) to enable that payment. As a matter of history, the article is very similar to Art. 69 ULIS.1 By way of example, formalities that may be included in the contract may include anything from the banal such as cash, cheque or preparation of payment in instalments, to more elaborate financial methods like opening or amending a letter of credit,2 a bank

1 UNCITRAL YB (1974), p. 32 no. 35 a. The only relevant note about the history of the provision is that the ‘steps’ obligation is one where breach brings in remedies under Arts 61–64 and would not relate to the rules under anticipatory breach. 2 Secretariat Commentary on 1978 Draft, Art. 50 (now Art. 69) para. 2. Opening a Letter of credit: Arbitral Award, International Court of Arbitration, 1 January 2003 (Fashion products), CISG-Online 1421 (Pace); Arbitral Award, CIETAC, February 2001 (Equipment, material and services) (Pace); Bezirksgericht der Saane (Switzerland) 20 February 1997 (Spirits), CISG-Online 426 (Pace); Arbitral Award, International Court of Arbitration, 1 January 1992 (Foam board machinery), CISG-Online 105 (Pace). Amending a letter of credit: Arbitral Award, Comisio´n para la Proteccio´n del Comercio Exterior de Me´xico, 30 November 1998, Dulces Luisi v Seoul International, CISG-Online 504 (Pace); Arbitral Award, CIETAC, 18 December 1996 (Lentil) (Pace).

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guarantee,3 payment of invoices,4 accreditation of the purchase price5 or even requiring a signature on the original record of receipt.6 The failure to take any of these steps is likely to be considered a fundamental breach if it results in the payment not being made.7 The purpose of the provision is to ensure that the owed purchase price is in fact available to the seller. The phrase ‘any laws and regulations’ in Art. 54 begs the question as to which laws 2 apply. To ensure smooth payment transactions, private international law on foreign exchange rules should govern where relevant to the payment.8 To hold the view that any laws or regulations that may have an effect on the buyer’s payment need to be observed by the buyer themselves should not be followed.9 The CISG generally balances the obligations of the buyer and the seller to an extent. To put the burden on the buyer to observe all and any laws and regulations puts too much of a burden on the buyer. There are two features of Art. 54 worth exploring: the scope of the duty and the currency of the payment.

II. Detailed Commentary 1. Scope of the duty The buyer has to make such arrangements and has to fulfil all formal requirements 3 necessary that the contract (including trade practices and usages) or statutory provisions demand to effect the payment at the buyer’s own expense. Some courts have stressed that the obligation to take such steps exists even where the buyer’s management structure has changed and, as a result, there could not be approval of a letter of credit.10 There may be instances where the failure to open a letter of credit is actually the seller’s fault and hence, by virtue of Art. 80, cannot be seen as a breach of Art. 54.11 Sending instructions to a bank may not be enough; it must be the case that there are sufficient funds capable of undergoing the international transaction.12 Interestingly, a court has ruled that confirmation by a bank of the letter of credit may not fall within the buyer’s obligations.13 In this authors’ view, however, if it is the 3 Bank guarantee: Arbitral Award, Arbitration Court attached to the Hungarian Chamber of Commerce and Industry, 17 November 1995 (Mushrooms), CISG-Online 250 (Pace). 4 Regional Court in Nitra (Slovak Republic) 23 June 2006 (Raw material for women’s coats), CISGOnline 1764 (Pace). 5 Handelsgericht des Kantons Zu ¨ rich (Switzerland) 30 November 1998 (Lambskin coat), CISG-Online 415 (Pace). 6 Fova ´ rosi Biro´sa´g Budapest (Hungary) 1 July 1997 (Used timber machinery), CISG-Online 306 (Pace). 7 Audiencia Provincial de Cantabria (Spain) 9 July 2013 (steel cable) CISG-Online 2487; OsunaGonsalez, Buyer’s Enabling Steps to Pay the Price: Article 54 of the United Nations Convention on Contracts for the International Sale of Goods, Journal of Law and Commerce (2005–06) 25; See Arts 61 et seq. and Arts 71 and 72 in regard to the remedies. 8 Do ¨ lle/von Caemmerer, Art. 69 EKG, para. 3; Schlechtriem/Butler, CISG (2009), para. 210. 9 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 54 para. 3. 10 Supreme Court of Queensland (Australia) 17 November 2000, Downs Investments v Perwaja Steel, CISG-Online 587 (Pace): An irrevocable letter of credit from the buyer in favour of the seller was required prior to shipment. Shortly before having to provide the letter of credit, the structure and management of the buyer changed. Under this new management structure, the buyer was obliged to obtain permission from an executive committee before it could provide a letter of credit. The buyer failed to provide a letter of credit upon the seller’s request, as the executive committee could not communicate any instructions within a short time. 11 Oberster Gerichtshof (Austria) 6 February 1996 (Propane), CISG-Online 224 (Pace). 12 Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 17 October 1995, CISG-Online 207 (Pace). 13 Landgericht Kassel (Germany) 21 September 1995 (Wooden poles), CISG-Online 192 (Pace).

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buyer’s obligation to effect payment, the bank’s confirmation of the letter of credit should fall within the buyer’s sphere of responsibility. 4 The Federal District Court in New York emphasised in Hilaturas Miel, S. L. v Republic of Iraq that Art. 54 itself is phrased purely in terms of the buyer’s performance and does not require the buyer to accept alternatives where the seller cannot perform.14 Further, the buyer may be exempted from his liability under Art. 54 where the failure to take steps was due to an impediment beyond their control under Art. 79.15 5 The question of how far the reference to statutory provision reaches is controversial. Some argue (on the basis of Art. 54’s predecessor in the ULIS) that only the provisions applicable in accordance with private international law rules would fall under the reference.16 The modern general opinion is that the reference to statutory provisions is wider: all the pertinent statutory provisions have to be taken into account, i. e. they are relevant, for the timely purchase price payment by the buyer.17 Since the purpose of Art. 54 is to ensure that the seller actually receives the purchase price payment, the latter view is preferable. This is of particular practical relevance in regard to exchange control regulations. Those will often originate in the buyer’s country. However, exchange control regulations in the seller’s country or in third countries are also covered by the ambit of Art. 54 if otherwise the actual payment cannot be effected. If such regulations originate in the seller’s country the seller has, under the principle of good faith (Art. 7(1))18, a duty to co-operate with the buyer to effect the payment.19 6 The term “steps” or “arrangements” cannot be strictly separated from “formalities”.20 Those terms encompass all steps the buyer has to take to enable the seller to, in actual fact, be able to dispose of the money at the agreed time. This can apply, for example, to the way the payment has to be made. The buyer has to ensure that they have enough of the owed currency or authorise a bank to do so.21 The obligation of the buyer to have enough convertible money is also covered. If, according to the contract or trade usages or practices, the buyer does not have to pay in cash or by bank transfer but must use another means of payment the buyer is obliged to take every necessary step to effect payment, for example, the buyer might have to open a letter of credit or provide a bank 14 Federal District Court of New York (U.S.) 20 August 2008, Hilaturas Miel, S. L. v Republic of Iraq, CISG-Online 1777 (Pace): The seller, Hilaturas Miel, had argued that under Art. 54 Iraq, the buyer, had to offer alternative performance. 15 Compare Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 54 para. 8 in regard to the breach of foreign exchange rules; see also Osuna-Gonsalez, Buyer’s Enabling Steps to Pay the Price: Article 54 of the United Nations Convention on Contracts for the International Sale of Goods, Journal of Law and Commerce (2005–06) 305. 16 Strohbach, in: Enderlein/Maskow, International Sales Law (1992), Art. 54 para. 5; Maskow, in: Bianca/Bonell, Commentary (1987), Art. 54 para. 2.7 CISG. 17 Magnus, in: Staudinger Kommentar (2013), Art. 54 para. 5; Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 54 para. 4; Herber/Czerwenka, Kommentar (1991), Art. 54 para. 3. 18 See in regard to the application of good faith between the parties to the contract Art 7 para. 24–34. 19 Huber, in: Mu ¨ nchKommBGB (2016), Art. 54 para. 3. 20 Witz, in: Witz/Salger/Lorenz, Kommentar (2000), Art. 54 para. 2, who argues that the term “formalities” does not have an independent meaning. 21 Compare: Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry Arbitration, 17 October 1995, CISG-Online 207: The bank did not transfer the foreign currency amounts to the seller on the grounds that there were no funds available in the buyer’s account in freely convertible currency to pay for the goods. The buyer requested the tribunal discharge it from liability since, in its view, the fact that it did not have available foreign currency resources should be regarded as force majeure. The tribunal stated, inter alia, that, under Art. 54, the buyer’s obligation to pay the price of the goods included taking such measures and complying with such formalities as might be required to enable payment to be made. It was established that the only action taken by the buyer was to send instructions to the bank for the amounts payable under the contract to be transferred, but that it had not taken any measures to ensure that the payment could actually be made.

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guarantee.22 The same is true for exchange control regulations. It is the buyer’s responsibility to apply for the necessary permits (and to appeal any unfavourable decision).23 The rendering of illegal acts, on the other hand, is not required.24 The question arises further, in analogy to the New Zealand mussels case25, of whether 7 comparatively uncommon and/or atypical taxes, levies, or charges imposed by the seller’s country have to be borne by the buyer. An analogy to the New Zealand mussels case suggests that the purchase price does not include those charges, levies, or taxes which do not exist in the buyer’s state as well. An exception has to be made if the seller informed the buyer about the relevant levies or taxes relying on the buyer’s expert knowledge (Art 35 (2)(b)), or the buyer had knowledge of those taxes and levies due to special circumstances.26 However, unlike goods which can come in an indefinite number of form, shape, and sizes and are subject to either no regulations or vastly different regulations, the purchase price presents a far more uniform picture. Money has to be transferred from the buyer to the seller and unless a cash payment is made, banks will have to be involved. The buyer has therewith the assistance of an expert to afford payment. Taxes, charges, and levies exist in every country and information about them will be more easily attainable. Therefore, the threshold for the purchase price not encompassing a tax or levy that is uncommon or atypical in the buyer’s country should be higher than the threshold expressed by the Bundesgerichtshof in the New Zealand mussels case. If the application of the tax, charge, or levy is uncertain or the tax, charge, or levy in comparatively unique, only then are they excluded from the purchase price.27 The seller can be obliged in accordance with Art 7(1) CISG to cooperate with the buyer to ascertain the relevant levies and taxes.28

2. Currency The question of which currency should be used for payment is not one directly 8 addressed by the CISG. First and foremost, party agreement is decisive for the determination of the currency. Further, the currency may be determined by the trade usages and practices applicable to the contract. Therefore, prior dealings in a currency may also be relevant in determining the currency. For example if two parties have always dealt in US dollars then it may be inferred that the currency was intended to be US dollars.29 22 See Audiencia Provincial de Cantabria (Spain) 9 July 2013 (steel cable) CISG-Online 2487; Witz, in: Witz/Salger/Lorenz, Kommentar (2000), Art. 54 para. 3; Huber, in: Mu¨nchKommBGB (2007), Art. 54 para. 4; Magnus, in: Staudinger Kommentar (2013), Art. 54 para. 4. 23 Achilles, in: Ensthaler (8th ed.), HGB Kommentar (2015), Art. 54 para. 2. Exchange control regulations which concern the validity of the contract or the payment clauses can in accordance with Art 4(a) CISG make the contract invalid (Piltz, Internationales Kaufrecht (2008) para. 4-128; Magnus, in: Staudinger Kommentar (2013), Art. 53 para 31). 24 Magnus, in: Staudinger Kommentar (2013), Art. 54 para. 6; Huber, in: Mu ¨ nchKommBGB (2016), Art. 54 para. 4. 25 Bundesgerichtshof (Germany) 8 March 1995 (New Zealand mussels case) CISG-Online 144 (Pace), RJ & AM Smallmon v Transport Sales Limited and Grant Alan Miller 22 July 2011 (trucks case) CISGOnline 2215 (Pace). 26 Bundesgerichtshof (Germany) 8 March 1995 (New Zealand mussels case) CISG-Online 144 (Pace) II.1.b.bb. 27 Compare Schlechtriem, Einheitliches Kaufrecht in den Entscheidungen des Bundesgerichtshof in Canaris/Heldrich (eds) 50 Jahre Bundesgerichtshof Vol I Private Law (Beck, Munich, 2000) 407 (Pace) criticising the decision of the Bundesgerichtshof in the New Zealand mussels case and advocating for a threshold similar to the one suggested here. 28 Magnus, in: Staudinger Kommentar (2013), Art. 54 para. 5. 29 Oberster Gerichtshof (Austria) 6 Feb 1996 (Propane), CISG-Online 224 (Pace).

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However, if the parties have not determined the currency themselves, it is disputed as to how it should be determined. Three different approaches are put forward in practice and in the literature.

a) Determination of the currency 10 aa) CISG approach. Some argue, for the sake of uniformity, that the solution should be found by looking to the CISG when the parties’ intended currency is not deducible from the agreement.30 Behind that approach is the idea that recourse to national laws in an important question such as the currency of the purchase price would jeopardise the aim of the CISG in harmonising international sales law. The currency question, therefore, falls within the ambit of the CISG so that the lack of a particular regulation of that issue is an internal gap in the CISG which needs to be filled in accordance with the principles of the CISG (Art. 7(2)).31 Especially in the literature, both argued solutions – the “private international law approach”32 and the “certainty of the purchase price approach”33 – burden this important issue unnecessarily with immense uncertainty and add an unnecessary layer of legal argument and evidence. An approach in accordance with CISG principles is, however, controversial. The predominant opinion applies the currency at the place of payment.34 Another opinion applies the currency at the seller’s place of business.35 Both views lead to the same result, i. e. the same currency, if the place of payment is determined in accordance with Art. 57(1)(a). However, if Art. 57(1) is not determinative, the latter view is for practical reasons the preferable one, since the seller generally will want to use the purchase price in their place of business.36 bb) Private international law approach. The private international law approach37 rejects a CISG-based solution and advocates a solution in accordance with private international law rules. The currency is determined in accordance with national law, which one derives through private international law rules. A solution on the basis of the CISG under Art. 7(2) cannot be considered, it is argued, since the question of currency is an issue which does not fall within the ambit of the CISG.38 12 Under the ULIS, the buyer may have had the right to trump the agreement and have the currency as the place of payment. Commentators have argued this should not be the case under the CISG due to party autonomy.39 11

30 Huber, in: Mu ¨ nchKommBGB (2016), Art. 53 para. 19; Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 56 para. 10; Hager/Maultzsch, in: Schlechtriem/Schwenzer, Kommentar (2008), Art. 54 para. 8; Schlechtriem/Butler, CISG (2009), para. 211; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 53 para. 5. 31 See Art. 7(2) paras 47 et seq. 32 See infra paras 13 et seq. 33 See infra para. 14. 34 Kammergericht Berlin (Germany) 24 January 1994 (Wine), CISG-Online 130 (Pace); Benicke, in: Mu¨nchKommHGB (2013), Art. 54 para. 7; Piltz, Internationales Kaufrecht (2008), para. 4–122. 35 Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 20–23; Schlechtriem/Butler, CISG (2009), para. 211. 36 Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 22; Huber, in: Mu ¨ nchKommBGB (2016), Art. 53 para. 19. 37 Kantonsgericht Kanton Wallis (Switzerland) 30 Jun 1998 (Granite material), CISG-Online 419 (Pace); Maskow, in: Bianca/Bonell, Commentary (1987), Art. 54 para. 3.1; Herber/Czerwenka, Kommentar (1991), Art. 53 para. 5; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 53 para. 6. 38 Maskow, in: Bianca/Bonell, Commentary (1987), Art. 54 para. 3.1; Herber/Czerwenka, Kommentar (1991), Art. 53 para. 5; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 53 para. 6: Art. 57 is not sufficient to extract a general rule in regard to the owed currency. Some German jurisprudence argues that the German private international law has established a special connecting factor in regard to currency, namely law of the place of payment. 39 Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 54 para. 10.

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cc) Certainty of the purchase price. A third view considers the currency as part of 13 the question of certainty of the purchase price and applies Arts 14 and 5540. The controversy about the relationship of those two articles41, however, taints also the currency question. In the event that despite Art. 14, i. e. irrespective of a missing party agreement about the purchase price, a valid contract between the parties exists, the currency is to be determined in accordance with Art. 55. Therefore, the question of whether the “price generally charged” (Art. 55) also encompasses the currency has to be addressed. If that is not the case on the facts, this view resorts to the private international law approach. b) Replacement of the currency. Under ULIS it was controversial whether the buyer 14 could replace the currency, i. e. whether the buyer could pay with a different currency as stipulated by the contract (either explicitly, implicitly or determined as discussed above), for example, in the currency of the place of payment.42 The prevailing opinion rejects this view for the CISG, since a one-sided authority to change something so important like the currency in which the purchase price is to be paid in would be contrary to the principles of the CISG.43 Of course, the parties are free to contractually agree on such a right, or trade usages and practices might allow for currency replacement. It is recognised that in exceptional cases and in accordance with the principle of good faith (Art. 7(1))44 the buyer should be able to pay a currency other than the one agreed. For example, if foreign exchange regulations prevent the buyer from paying in the agreed currency.45 In those circumstances the seller could demand payment in the currency of the buyer’s country.46 c) Election of the currency by the seller. Like a mirror image of the issue discussed 15 under 2.2., the question arises whether the seller has the right to demand the purchase price payment in a different currency than the one contractually agreed upon if, for example, the payment in the contractual agreed currency is not possible due to foreign exchange regulations. This question is controversial.47 At the Vienna Conference, an application to allow for choice of currency by the seller was rejected with the argument that that issue was outside the ambit of the Convention.48 However, similarly to the exceptional circumstances under which the buyer is allowed to elect another currency than that agreed upon, the seller is able to demand the purchase price in another currency, again in accordance with good faith (Art. 7(1)) and also in accordance with the fundamental idea embodied in Art. 79. According to the latter an obligor does not 40

Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 54 para. 26. See Art. 55 paras 4 et seq. 42 Compare von Ca ¨ mmerer, in: Do¨lle (ed.), Kommentar zum Einheitlichen Kaufrecht (1976), Art. 57 para. 22. 43 Oberster Gerichtshof (Austria) 22 October 2001 (Gasoline and gas oil), CISG-Online 614 (Pace); Oberlandesgericht Koblenz (Germany) 17 September 1993 (Logo for ink printers (chip)), CISG-Online 91 (Pace); Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 28; Huber, in: Mu¨nchKommBGB (2016), Art. 53 para. 20. 44 See Art. 7(1) paras 23 et seq. 45 Huber in: Mu ¨ nchKommBGB (2016), Art. 53 para. 20; Achilles, Art. 53 para. 1; Magnus, Wa¨hrungsfragen im Einheitlichen Kaufrecht, Zugleich ein Beitrag zu seiner Lu¨ckenfu¨llung und Auslegung, 53 RabelsZ (1989) 116 (133). 46 For ULIS: LG Heidelberg (Germany) 21 April 1981 and OLG Koblenz (Germany) 21 January 1983 both cited in: Schlechtriem/Magnus, Art. 56 EKG, No 3. 47 Agreeing: Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 53 para. 9; Benicke, in: Mu¨nchKommHGB (2013), Art. 54 para. 9; disagreeing: Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 30. 48 Official Records, Art. 50 no. 14 et seq. 41

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have to pay damages for an impediment outside his sphere of influence. However, the obligor still will have to perform (cf. Art. 79(5)).49 The seller cannot, of course, freely choose the replacement currency.50 Generally, the currency at the buyer’s place of business should be the replacement currency and if that is the contractually owed currency the replacement should be one which is reasonable for the buyer and in some way relevant.

3. The buyer’s breach of his obligation(s) The obligation(s) set out in Art. 54 are part of the buyer’s “obligation to pay the price.” A breach of any of those obligations leads to the buyer’s liability set out in Arts 61 et seq.; not only to liability under Arts 71 and 72 (anticipatory breach).51 The breach of an obligation under Art. 54 that results in no payment being made is a breach of contract (Arts 61 et seq.). If the seller can show that that breach is fundamental the seller may declare the contract avoided (Arts 64(1)(a) and 25).52 If the payment is made, despite a breach of the preparatory obligations, but late or not in accordance with the contract, or bears additional costs for the seller generally, Arts 61 et seq. are also applicable with the exception of the provisions in regard to non-payment. If the breach of obligations under Art. 54 is of no consequence, there is no liability for the buyer.53 17 Under Art. 63(1) the seller can fix an additional reasonable time period to allow the buyer to perform his obligations. Under Art. 64(1)(b) the seller can avoid the contract if the buyer does not perform his obligations within that additional time period. It follows that the seller can avoid the contract without the need to prove a fundamental breach if the buyer has not performed within the additional set time period: for example, if the buyer does not arrange for a letter of credit to be issued within the time period set by the seller. 18 The buyer will be exempt from the payment of the purchase price if the requirements of Art. 79 CISG are met.54 16

4. Practical questions Who is required to state the facts and who has to prove conformity with the general rules? The seller has to prove the purchase price claim and the buyer has, if necessary, to prove that he paid the purchase price.55 20 Art. 54 can be defined more closely or modified by contract. It is especially valuable to define in the contract which efforts the buyer has to make in regard to exchange control regulations, as well as the scope of the buyer’s liability.56 19

49

Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 53 para. 9. Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 53 para. 9; Huber, in: Mu¨nchKommBGB (2016), Art. 53 para. 22; Magnus, in: Staudinger Kommentar (2013), Art. 53 para. 30. 51 Compare: Gabriel, Sale of Goods (2004), p. 168. 52 Compare: Supreme Court of Queensland (Australia) 17 November 2000, Downs Investments v Perwaja Steel, CISG-Online 587 (Pace); Bezirksgericht der Saane (Switzerland) 20 February 1997 (Spirits), CISG-Online 426 (Pace); Arbitral Award, ICC 7197/1992, 1 January 1992, CISG-Online 36 (UNILEX); Arbitral Award, ICC 7585/1992, 1 January 1992 (Production line for foamed boards), CISG-Online 105 (Pace); Honnold, p. 324; Huber, in: Mu¨nchKommBGB (2016), Art. 54 para. 5. 53 Magnus, in: Staudinger Kommentar (2013), Art. 54 para. 8; Huber, in: Mu ¨ nchKommBGB (2016), Art. 54 para. 5. 54 Magnus, in: Staudinger Kommentar (2013), Art. 54 para. 8. 55 Magnus, in: Staudinger Kommentar (2013), Art. 54 para. 11; Huber, in: Mu ¨ nchKommBGB (2016), Art. 54 para. 9. 56 Huber, in: Mu ¨ nchKommBGB (2016), Art. 54 para. 10; Witz, in: Witz/Salger/Lorenz, Kommentar (2000), Art. 54 para. 7. 50

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III. Comparable Rules The PICC allows the buyer to pay in any form used in the ordinary course of business at 21 the place for payment (Art. 6.1.7(1)). If the seller accepts payment by cheque. then only under that condition will the cheque be honoured (Art. 6.1.7(2)).57 The payment might also be made by transfer of funds (Art. 6.1.8). The PICC regulates quite specifically the currency in which payment has to be made.58 Interestingly, the buyer generally has the right to pay in the currency at the place of payment at the applicable rate of exchange prevailing there when payment is due (Art. 6.1.9(3)). However, if the buyer pays late the seller can request payment of the currency at the place of payment in accordance with the rate at the time the actual payment is made (Art. 6.1.9(4)). Similarly, § 244 BGB, like the PICC, allows the buyer to make payment in Euros even if another currency was contractually agreed upon if the payment has to be made in Germany and it was not made explicit in the contract that payment was only to be effected in the agreed currency.59 At common law, the presumptive method of payment is by means of legal tender,60 22 which is currency or coin.61 Some more recent jurisprudence indicates that a bank cheque might also be legal tender.62 This rule can be deviated from by previous practice between the parties or by trade custom and usage.63 Bridge argues that the waiver of the buyer’s strict payment duty may over time produce a new implied agreement between the parties or a custom or usage.64 For example, where credit is given, and the buyer is subsequently invoiced for the price, it is highly likely that the common law rule will have been displaced by an implied agreement that the buyer may pay by cheque.65 As with the CISG, the US-UCC supplements the buyer’s general obligation to pay 23 with the mandate that the buyer must actually ensure that the seller receives the payment.66 Similarly, under the Sale of Goods Act 1979 (UK), it is implicit that the buyer should take such steps given that the language of s 28 is that the buyer “must be ready and willing to pay the price in exchange for possession of the goods”. 57

See Art. 7:107 PECL which is identical with the PICC. Art. 6.1.9. PICC states: “If a monetary obligation is expressed in a currency other than that of the place for payment, it may be paid by the obligor in the currency of the place for payment unless (a) that currency is not freely convertible; or (b) the parties have agreed that payment should be made only in the currency in which the monetary obligation is expressed. (2) If it is impossible for the obligor to make payment in the currency in which the monetary obligation is expressed, the obligee may require payment in the currency of the place for payment, even in the case referred to in paragraph (1)(b). (3) Payment in the currency of the place for payment is to be made according to the applicable rate of exchange prevailing there when payment is due. (4) However, if the obligor has not paid at the time when payment is due, the obligee may require payment according to the applicable rate of exchange prevailing either when payment is due or at the time of actual payment.” 59 See also 7:108 PECL. 60 Gordon v Strange (1847) 1 Ex 477, 154 ER 203. 61 Bridge, International Sale of Goods (2013), 6.04; Burrows, in: Burrows/Finn/Todd, Law of Contract in New Zealand (2016), para. 18.6. 62 Compare, e. g., Williams v Gibbons 1 NZLR [1994] 273 (CA); Burrows, in: Burrows/Finn/Todd, Law of Contract in New Zealand (2016), 18.6. Note that the NZ Supreme Court held that a personal cheque was not legal tender: Otago Station Estates Ltd v Parker [2005] 2 NZLR 734 (SCNZ). 63 Bridge, International Sale of Goods (2013), para. 6.04. 64 Bridge, International Sale of Goods (2013), para. 6.04. 65 Bridge, International Sale of Goods (2013), para. 6.04. 66 §§ 2–301, 2–511 UCC Rev. 58

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Article 55 Where a contract has been validly concluded but does not expressly or implicitly fix or make provision for determining the price, the parties are considered, in the absence of any indication to the contrary, to have impliedly made reference to the price generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade concerned. Bibliography: Nemanja Pandurevi, Interplay Between Article 14 And Article 55 Of The United Nations Convention On Contracts For The International Sale Of Goods (CISG), http://dx.doi.org/10.7251/ zrefis.v1i11.2355, Ahmad Tajudin, Article 55 on Open-Price Contract: A Wider Interpretation Necessary?, Journal of Arts and Humanities Vol. 3 No. 3 (March 2014), 38 http://www.theartsjournal.org/ index.php/site/article/view/396/240; Gabriel, Buyer’s Performance under the CISG: Arts 53–60 Trends in the Decisions, 25 Journal of Law and Commerce (2005–2006) 273; Saidov, Cases on the CISG decided in the Russian Federation, 7 Vindobona Journal of International Commercial Law and Arbitration (2003) 37; Mistelis, Article 55: The Unknown Factor, 25 Journal of Law and Commerce (2005–2006) 295.

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. When does it apply? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Missing determination of the purchase price. . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Validity of the contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. How does it apply?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 3 3 3 5 8 10 11

I. Importance and Role of the Provision Art. 55 must be read in conjunction with Art. 14(1) second sentence, which demands that the price be determined by the parties – or is at least determinable – for a valid contract. The situation envisaged by Art. 55 is as follows: Buyer (B) and Seller (S) conclude an agreement in which there is no provision for determining the price. In the event of a dispute between B and S, Art. 55 imposes an implied agreement to the price “generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade concerned.”1 This ‘trade-value’, however, will only be the price if there was an “absence of any indication to the contrary.” There are two questions that usually arise in Art. 55 jurisprudence. First, in what situations does the provision apply? And secondly, how does one ascertain a given price? A question which Art. 55 does not answer is in which currency the purchase price has to be paid.2 2 Legal systems deal with the question of the undetermined purchase price substantially differently. The discussions over the predecessor of Art. 55 (Art. 57 ULIS), were very controversial, something which did not change during the Vienna Conference.3 1

1 Compare Bezirksgericht St Gallen (Switzerland) 3 July 1997 (Fabrics), CISG-Online 336 (Pace); compare Magnus, in: Staudinger Kommentar (2013), Art. 55 para. 1. 2 Huber, in: Mu ¨ nchKommBGB (2016), Art. 55 para. 1; but see Art. 54 paras 9 et seq. 3 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 55 para. 1 also with reference to Art. 57 ULIS in para. 2, and the history of the drafting of Art. 55 in para. 2; Huber, in: Mu¨nch-KommBGB

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II. Detailed Commentary 1. When does it apply? a) Missing determination of the purchase price. The first and foremost requirement 3 for the application of Art. 55 is that the contract neither explicitly nor impliedly stipulates the price, nor that the contract allows the determination of the price. It is particularly important to note that, when interpreting a contract in regard to the price, even if the price or a way to determine it might not be explicitly mentioned, the price might still be impliedly agreed upon.4 For example, through the implied inclusion of price lists which the buyer knew about or ought to have known about, or through trade usages and practices.5 Sometimes the price “generally charged at the time of conclusion” can be of importance.6 Art. 55 is only applicable if, through interpretation of the contract, a price cannot be determined.7 The price includes not only the actual sum agreed to be paid for the good but also 4 other means or instruments which have an impact on the sum agreed. Art. 55 might find its application in situations where the parties have agreed on the actual sum to be paid for the good, however, had no meeting of the minds on tools to determine the ultimate purchase price, like, the exchange rate. b) Validity of the contract. Art. 55 requires that – despite the fact that the parties have 5 not agreed upon a price – a valid contract may exist, which seems to contradict the wording of Art. 14.8 Art. 55 has been under academic scrutiny since its inception due to its prima facie conflict with Art. 14.9 Courts have noted the interplay between the two (2016), Art. 55 para. 1; see in regard to the drafting history Honnold, Uniform Law (1999), para. 325.3. See also infra under III. in regard to how the different legal systems deal domestically with that question. 4 Compare Oberster Gerichtshof (Austria) 10 November 1994 (Chinchilla furs), CISG-Online 117 (Pace). 5 Compare Magnus, in: Staudinger Kommentar (2013), Art. 55 para. 8; Bennicke, in: Mu ¨ nchKommHGB (2013), Art. 55 para. 5; Huber, in: Mu¨nchKommBGB (2016), Art. 55 para. 2. 6 See Art. 14 paras 28, 29; Huber, in: Mu ¨ nchKommBGB (2016), Art. 55 para. 2. 7 See Legfelso ´ bb Biro´sag (Hungary) 25 September 1992 (Airplane engines), CISG-Online 63 (Pace): The seller, a manufacturer of aircraft engines, made two alternative offers of different types of aircraft engines to the buyer without quoting an exact price. The buyer chose the type of engine from the ones offered and placed an order. The issue here was whether a valid contract was concluded. The Supreme Court found that the offer and the acceptance were vague and, as such, ineffective since they failed to explicitly or implicitly fix or make provision for determining the price of the engines ordered (Art. 14(1) CISG). The Court did not apply Art. 55 since there was no market price for aircraft engines. Cour de Cassation (France) 4 January 1995 (Electronic components), CISG-Online 138 (Pace): The purchase price is not considered indeterminable if the parties had only agreed on a price revision clause. Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 3 March 1995, CISG-Online 204: the Arbitral Tribunal found that the parties had not concluded a contract for the additional sale of goods, because the seller’s proposal was not sufficiently definite in the terms of Art. 14 CISG: the proposal indicated the goods and their quantity but it failed to indicate either the price that was to be agreed upon by the parties at some future date or the mode of its determination. 8 See for a discussion on the history of the Vienna Conference Huber, in: Mu ¨ nchKommBGB (2016), Art. 55 para. 4. 9 Honnold, Uniform Law (1999), para. 325.3. believes that the provision allows for open contracts whereas Farnsworth, International Sales: The United Nations Convention on Contracts for the International Sale of Goods: Formation of Contract § 3.03. regards the contradiction as leaving the provision redundant; Karollus, Judicial Interpretation and Application of the CISG in Germany 1988–1994, Cornell Review of the Convention on Contracts for the International Sale of Goods (1995) 51–94; Eo¨rsi, in: Bianca/Bonell, Commentary (1987), Art. 55; see also Hondius, CISG and a European Civil Code, 71 RabelsZ (2007) 99–114. Cases where Art. 14 was applied instead of Art. 55 are: Kantonsgericht Fribourg (Switzerland) 11 October 2004 (Chemical product), CISG-Online 964 (Pace); Arbitral Award, Tribunal of

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provisions but have not always been willing to resolve the conflict.10 The practical difference in allowing Art. 14’s precedence over Art. 55 is that it brings the determination of the price within the court’s ambit and neutralises external forces such as the market. In the latter case the price is determined in accordance with the price “generally charged at the time of the conclusion of the contract” whereas in the former, the courts can take all relevant circumstances into account (Art. 8).11 As a result, courts have been more willing to give Art. 14 priority.12 Art. 14 specifies that an offer is sufficiently definite where, at the very least, it stipulates a method for calculating a price. Hence, it would seem that Art. 55’s aim of preserving a contract without such a method is made redundant. The obvious solution is to allow the price to be a sufficient, but not a necessary, condition of a binding offer under the CISG. Therefore, failure to specify a price does not go to the validity of the contract, thereby resolving the contradiction in Art. 55. However, this solution, as noted in Butler and Schlechtriem, “draws the teeth out” of Art. 55 and narrows its scope to a small lacuna of cases.13 First, the effect of the clause is to do away with the doctrine of pretrium cetrium, and, by extension, the clause itself can only be put into place where there is a valid agreement.14 Secondly, there must be no express or implicit specification of the price, nor must there be provision for determining the price.15 Where there is a method for determining the price, Art. 14 should apply.16 6 Art. 55 may also not apply where there is an implicit right for the buyer to alter the price.17 It does apply, however, in contingency clauses. For example where the buyer states “we will pay $ 100 if it is of this standard” but does not specify what would be paid if the standard is not met. However, this can only be so if the price was meant to be kept open and not where it seems that parties wish to negotiate further.18 Further, International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 3 March 1995, CISG-Online 204 (Pace). Cases holding the opposite view are: Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 9 April 2004, CISG-Online 1207 (Pace); Audiencia Provincial de Barcelona, (Spain) 27 November 2003 (Ski equipment rental), CISG-Online 1102 (Pace); Arbitral Award, Arbitration Court attached to the Bulgarian Chamber of Commerce and Industry, 30 November 1998 (Production of automobiles), CISGOnline 1832 (Pace). 10 Federal District Court of Pennsylvania (U.S.), 29 March 2004, Amco Ukrservice et al. v American Meter Company (Pace). 11 Compare Oberster Gerichtshof (Austria) 10 November 1994 (Chinchilla furs) CISG-Online 117 (Pace) discussed in Schlechtriem/Butler, CISG (2009), para. 75. 12 Mistelis, Article 55: The Unknown Factor, 25 Journal of Law and Commerce (2005–06) 295. 13 Schlechtriem/Butler, CISG (2009), para. 212. 14 Supreme Court (Czech Republic) 25 June 2008 (Manufactured paint) (Pace); Oberlandesgericht Mu¨nchen (Germany) 19 October 2006, CISG-Online 1394 (Automobiles) (Pace); Supreme Court of the People’s Republic of China (China) 21 September 2005, CISG-Online 1611 (Exhibition) (Pace). 15 Mistelis, Article 55: The Unknown Factor, 25 Journal of Law and Commerce (2005–06) 285–297 argues the opposite. 16 Oberster Gerichtshof (Austria) 10 November 1994 (Chinchilla furs), CISG-Online 117 (Pace); general opinion see Huber, in: Mu¨nchKommBGB (2016), Art. 55 para. 7; Magnus, in: Staudinger Kommentar (2013), Art. 14 paras 31 et seq; Herber/Czerwenka, Kommentar (1991), Art. 14 para. 6. 17 Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 16 February 1998, CISG-Online 1303 (Pace). 18 Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 22 November 1995, (Pace); Saidov, Cases on the CISG decided in the Russian Federation, 7 Vindobona Journal of International Commercial Law and Arbitration (2003) pp 37–38 observes, however: “It is not clear why the Tribunal deemed it possible to apply Article 55. Such a decision seems to run counter to the provision of the contract according to which in the situation that took place in the case, a price was to be agreed upon by the parties. It is submitted that Article 55 could only be applied where the parties intended to regard an open price contract as valid. Therefore, a price could be determined according to Article 55 only if such a determination of a price stemmed from interpretation of the contract. The decision does not make it clear whether the Tribunal interpreted the

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Art. 55 applies if the application of Part II of the CISG (Arts 14 to 24) is excluded, for example, through Art. 9219, or because the parties have agreed to do so (Art. 6) or due to trade usages and practices (Art. 9).20 In those cases it has to be noted, however, that domestic law will determine the validity of the contract, since Arts 14 et seq. are not applicable, therefore, Art. 4 will apply.21 Art. 55 is applicable only if the contract is valid (without an agreed price) according to the applicable domestic law (unless of course the parties have excluded Art. 55). Generally, the controversy surrounding Art. 55 and Art. 14 is of little practical 7 relevance since Art. 55 is only applicable if it is found that the parties neither explicitly nor impliedly agreed on a price or a price determination mechanism.22

2. How does it apply? The legal consequence stipulated in Art. 55 is the rebuttable presumption that the 8 parties impliedly agreed upon a purchase price which would have been payable in comparable purchases. The time of contract conclusion is decisive, not the time of delivery.23 A fluctuation of the price after contract conclusion is of no relevance.24 The generally charged price can be determined by three objective criteria:25 the price which is: (a) paid for the same goods; (b) in the particular line of business or common market, and (c) in comparable circumstances. The particular line of business is the market to which both parties belong to.26 The term “comparable circumstance” refers especially to contractual agreements in regard to, for example, transport costs, insurance, or discounts.27 Where a uniform market or stock-exchange exists that price will be determinative.28 To give full effect to Art. 55 it must be sufficient that a price range is identifiable from which one can deduce the median price. The ability to determine an absolutely certain price is not necessary.29 Furthermore, the price can either be agreed to by the parties or set by an independent expert, and “it is sufficient for the existence of a market price in the sense of Article 76(1) CISG if, owing to regular business transactions for goods of the same type at a particular trade location,

agreement. On the basis of the information available, it seems that the parties’ intention was not to leave the price open, but to come to an agreement to this effect. In such a case, Article 55 could not be applied.” 19 See Art. 92 para in regard to the few countries that still have a Art. 92 reservation in place. 20 Magnus, in: Staudinger Kommentar (2013), Art. 55 para. 5 and Art. 14 para. 35; Schlechtriem/ Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 9. 21 Magnus, in: Staudinger Kommentar (2013), Art. 55 para. 5 and Art. 14 para. 35; Schlechtriem/ Schroeter, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2013), Art. 14 para. 14. 22 See also Huber, in: Mu ¨ nchKommBGB (2016), Art. 55, para. 10. 23 However, compare Landgericht Neubrandenburg (Germany) 3 August 2005 (Pitted sour cherries), CISG-Online 1190 (Pace) where the Court held that the determining the price later in accordance with the seasonal price met the requirement of “determinable” in Art. 55 CISG. 24 Secretariat Commentary Art. 51 para. 3; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 55 para. 16; Huber, in: Mu¨nchKommBGB (2016), Art. 55 para. 11; Benicke, in: Mu¨nchKommHGB (2007), Art. 55 para. 10; Magnus, in: Staudinger Kommentar (2013), Art. 55 para. 9; Mistelis, Article 55: The Unknown Factor, 25 Journal of Law and Commerce (2005–06) 295. 25 Compare Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 55 paras 14, 15; Benicke, in: Mu¨nchKommHGB (2013), Art. 55 para. 7; Huber, in: Mu¨nchKommBGB (2016), Art. 55 para. 11. 26 Huber, in: Mu ¨ nchKommBGB (2007), Art. 55 para. 11; different place of seller’s business: Witz, in: Witz/Salger/Lorenz, Kommentar (2000), Art. 55 para. 3. 27 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 55 para. 15; Huber, in: Mu ¨ nchKommBGB (2016), Art. 55 para. 11. 28 Achilles, Art. 55 para. 3. 29 Witz, in: Witz/Salger/Lorenz, Kommentar (2000), Art. 55 para. 3.

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a current price has been established.”30 It can be the usual list price for such goods at the time of the conclusion of the contract.31 9 If the price cannot be determined by those objective criteria (for example, if there is not a common market since the goods are produced solely for the buyer)32 the question of how to proceed is controversial. Some authors suggest that when there is no common market to determine the price from, one may consult the market from which businesses, like the buyer, generally purchase.33 This solution, however, has its limits if a buyer’s market cannot be determined. Another view assumes that in such a case the contract is invalid.34 A third view, and in this authors’ view preferable, is that in such cases a gap in accordance with Art. 7(2) exists. Since the CISG does not give any guidance on how to close that gap it has to be closed in accordance with the applicable domestic law. If the domestic law stipulates a mechanism in regard to determining the purchase price this mechanism has to be used. Only if the domestic law, too, does not provide any mechanism to determine the price is the contract invalid.35 This view is consistent with the CISG’s overall philosophy to keep contracts between parties alive as frequently as possible.

3. Burden of proof 10

The burden of proof, that despite the missing price agreement a valid contract between the parties exists, rests on the party who asserts the contract. The question of whether Part II of the CISG (Art. 92) is applicable is a legal question which does not need to be proven by either party.36 Which party has to prove what the generally charged price is, is controversial. According to one view, the price has to be determined ex officio.37 The contrary view assumes that this is a question which the party who is asserting the particular price has to prove.38 The burden of proof for the rebuttable presumption lies with the party who asserts it.39 A party can discharge its burden of proof by showing what price was paid for the goods at the stock exchange or by producing evidence in regard to the common market, for example, a statement by the Chamber of Commerce.

III. Comparable Rules 11

Art. 5.1.7. PICC sets out a detailed provision how the price is to be determined if the parties have not agreed upon it, ironing out some of the issues which have surfaced under the CISG. Similarly to the CISG, Art. 5.1.7. (1) provides that the price generally charged is the price “agreed” upon by the parties and if that price is not determinable, it 30 Oberlandesgericht Mu ¨ nchen (Germany) 15 September 2004 (Furniture leather), CISG-Online 1013 (Pace). See also Stoll/Gruber, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 76 para. 4; similar Magnus, in: Staudinger Kommentar (2013), Art. 76 para. 13. 31 Oberlandesgericht Rostock (Germany) 10 October 2001 (frozen food), CISG-Online 671 (Pace). 32 Compare Achilles, Art. 55 para. 1; Legfelso ´ bb Biro´sag (Hungary) 25 September 1992 (Airplane engines), CISG-Online 63. 33 Magnus, in: Staudinger Kommentar (2013), Art. 55 para. 9; different Achilles, Art. 55 para. 3: price at the place of delivery; compare Legfelso´bb Biro´sag (Hungary) 25 September 1992, CISG-Online 63 (Pace). 34 Mohs, in: Schlechtriem/Schwenzer, Commentary (2010), Art. 55 para. 15; Witz, in: Witz/Salger/ Lorenz, Kommentar (2000), Art. 55 para. 11; Bundesgerichtshof (Germany), 27 June 1990, NJW (1990) 3077 in regard to the predecessor, Art. 57 ULIS. 35 Heuze|., Vente International (2000), pp. 313 et seq. 36 Huber, in: Mu ¨ nchKommBGB (2016), Art. 55 para. 13. 37 Magnus, in: Staudinger Kommentar (2013), Art. 55 para. 11 who points out that the parties have an obligation to cooperate. 38 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 55 para. 12. 39 Witz, in: Witz/Salger/Lorenz, Kommentar (2000), Art. 55 para. 5.

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shall be the reasonable price. Further, Art. 5.1.7. makes it clear that the presumption is that a valid contract between the parties has been concluded even if the price is missing. In its following paragraphs, Art. 5.1.7 deals with the question of whether one party has to the right to determine the price, or whether the price is to be determined by reference to factors. In summary, the buyer will always have to pay a reasonable price. The PECL also provides for a missing purchase price in its provisions. Art. 6:104 simply states that where the contract does not fix the price or the method of determining it, the parties are to be treated as having agreed on a reasonable price. Art. 6:105 deals with the unilateral determination by one party. Section 8(1) of the Sale of Goods Act 1979 (UK) states that if the price in a contract of sale is not fixed by the contract, the price may be left to be fixed in a manner agreed by the contract, or may be determined by the course of dealing between the parties. If the price is not determined or determinable, the buyer must pay a reasonable price (s 8(2) SGA). What can be considered a reasonable price is a question of fact dependent on the circumstances of each particular case (s 8(3) SGA). If the contract stipulates that the valuation of the price should be concluded by a third party and the third party cannot or does not make the valuation, the contract is deemed to be avoided (s 9(1) SGA). However, if the goods or any part of them have been delivered to and appropriated by the buyer, the buyer must pay a reasonable price for them (s 9(2) SGA). The US-UCC provides for an open price agreement under § 2–305. When the parties intend to have an enforceable contract but omit the price, “the price is a reasonable price at the time for delivery.” E. g. §§ 315, 316 German BGB deal generally with the instance when performance has not been explicitly or impliedly determined by the contract. § 316 BGB allows the party who can claim the performance to determine it by using a reasonableness standard.

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Article 56 If the price is fixed according to the weight of the goods, in case of doubt it is to be determined by the net weight. Bibliography: Gabriel, Buyer’s Performance under the CISG: Arts 53–60 Trends in the Decisions, 25 Journal of Law and Commerce (2005–2006) 273.

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Practical considerations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 3 3 6 7

I. Importance and Role of the Provision In the event that there is any doubt in regard to a purchase price based on weight, then Art. 56 directs that the price will be fixed by the net weight. The provision is identical to Art. 58 ULIS and its passage was not affected by any of the proposals for its modification.1 2 The provision is seen as a rule of interpretation and is only used where there is ambiguity as to whether the agreed price was to be determined on gross weight or net weight.2 It is likely that the ambiguity raises a rebuttable presumption that it is the net weight since the buyer should not, in the case of doubt, pay for the wrapping.3 1

II. Detailed Commentary 1. Overview Art. 56 requires that the purchase price is set by weight. This is not the case if the purchase price is set by pieces or units and the weight is only used to specify those items.4 Art. 56 is applicable, on the other hand, if an inclusive price has been agreed upon for the entire weight.5 4 If the purchase price is set by weight it will be net weight, if in doubt, which means the measured weight minus the wrapping.6 The time at which the weight is taken depends first and foremost on party agreement and trade practices and usages.7 If the time cannot be determined through agreement or trade practice and usages, the literature is divided on 3

1

Official Records, pp. 11, 122, Art. 52, Nos 1–6. Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 56 para. 1. 3 Hager/Maultzsch, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 56 para. 2; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 56 para. 2. 4 For example, 100 units 1kg each. Magnus, in: Staudinger Kommentar (2005), Art. 56 para. 5; Benicke, in: Mu¨nchKommHGB (2013), Art. 56 para. 1; Piltz, Internationales Kaufrecht (2008), para. 4–133. 5 Magnus, in: Staudinger Kommentar (2013), Art. 56 para. 4; Huber, in: Mu ¨ nchKommBGB (2016), Art. 56 para. 2; doubtfully Maskow, in: Bianca/Bonell, Commentary (1987), Art. 56 para. 2.4. 6 Hager/Maultzsch, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 56 para. 2; Huber, in: Mu¨nchKommBGB (2016), Art. 56 para. 3; Piltz, Internationales Kaufrecht (2008), para. 4–133. 7 Herber/Czerwenka, Kommentar (1991), Art. 56 para. 2. 2

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how to determine the weight. Some authors stipulate the time at which the risk passes to the buyer as the decisive moment8. Other authors view the appropriate point to determine weight as that when the goods arrive at the place of delivery.9 On a practical level, both views will generally come to the same result. To determine the weight at the time the risk passes seems to be the rational way to proceed since that is also the time which is decisive for liability in regard to the non-conformity of the goods.10 Loss in weight after the decisive time for measurement is at the expense of the buyer. It has to be noted, however, that the net weight is only decisive “if in doubt”; in the 5 normal course of events party agreement and trade usages and practices trump.11

2. Practical considerations The usual rules in regard to burden of proof apply. This includes that the party who 6 claims that a divergent rule applies bears the burden of proof for it.12

IV. Comparable Rules Comparable provisions can be found in § 380(1) HGB (Germany) and Art. 212(2) 7 OR (Austria). The US-UCC, on the other hand, does not know a comparable provision.13 Neither the PICC nor the PECL know a similar provision. 8 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 56 para. 4; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 56 para. 8. 9 Magnus, in: Staudinger Kommentar (2013), Art. 56 para. 3; Herber/Czerwenka, Kommentar (1991), Art. 56 para. 2. 10 Benicke, in: Mu ¨ nchKommHGB (2013), Art. 56 para. 3; Ferrari, in: Ferrari et al., Internationales Vertragsrecht (2007), Art. 56 para. 7. 11 For example, the clause “gross for net” means that the overall weight including the wrapping is determinative for the price [Hager/Maultzsch, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 56 para. 2]. 12 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 56 para. 5; Huber, in: Mu ¨ nchKommBGB (2015), Art. 56 para. 4; Magnus, in: Staudinger Kommentar (2013), Art. 56 para 7. 13 Gabriel, Sale of Goods (2004), p. 170.

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Article 57 (1) If the buyer is not bound to pay the price at any other particular place, he must pay it to the seller:

(a) at the seller’s place of business; or (b) if the payment is to be made against the handing over of the goods or of documents, at the place where the handing over takes place. (2) The seller must bear any increases in the expenses incidental to payment which is caused by a change in his place of business subsequent to the conclusion of the contract. Bibliography: Gabriel, Buyer’s Performance under the CISG: Arts 53–60 Trends in the Decisions, 25 Journal of Law and Commerce (2005–2006) 273; Ziegel, Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods (July 1981), Art. 57; Schroeter, Vienna Sales Convention: Applicability to “Mixed Contracts” and Interaction with the 1968 Brussels Convention, 5 Vindobona Journal of International Commercial Law and Arbitration (2001) 74; Forsyth/ Moser, The Impact of the Applicable Law of Contract on the Law of Jurisdiction under the European Conventions, 45 International and Comparative Law Quarterly (1996) 190; Koch, Der besondere Gerichtsstand des Klaegers/Verkaeufers im Anwendungsbereich des UN-Kaufrechts, RIW (1996) 379.

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Party agreement (Art. 57(1) first sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Payment at the seller’s place of business (Art 57(1)(a), (2)). . . . . . . . . . . . . . . a) General application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Payment at the seller’s place of business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Change in the place of payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Means of payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Payment against the handing over of the goods or of documents (Art. 57(1)(b)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Sale not involving carriage of the goods to the buyer . . . . . . . . . . . . . . . . . . b) Sale of goods from storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Sale of goods involving the carriage of goods to the buyer. . . . . . . . . . . . . d) Sale of goods in transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Payment against documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Place of payment of monetary claims other than the purchase price. . . . . 6. Practical considerations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 6 6 8 12 12 14 16 20 21 23 24 25 27 28 31 34 36

I. Importance and Role of the Provision 1

Art. 57 governs the place where the purchase price has to be paid. It is the first of three articles addressing the manner of payment; the other modality addressed being time (Arts 58, 59). The main function of Art. 57 is to establish the place where the purchase price has to be at the disposal of the seller at the relevant time. Art. 57 has also been referred to by judges to determine the currency of the payment.1 1 See UNCITRAL, Digest of Case Law on the CISG, Art. 54 para. 6; see Kammergericht Berlin (Germany) 24 January 1994, CISG-Online 130 (Pace) (currency of payment should, in case of doubt, be that of the place of payment); Oberlandesgericht Koblenz (Germany) 17 September 1993 (computer chip),

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In practice Art. 57 is of relevance for two reasons: First, since many countries render it impossible to export funds without a license, payments made in such countries may be of little value to a seller. On the other hand, buyers in “soft currency” countries may find it difficult to pay in “hard currency” countries. If the parties have not specified the place for payment or the currency of payment, except where there are practical difficulties with the parties’ agreement, Art. 57 fills the gap.2 Secondly, Art. 57 is important in judicial practice because the place of payment in numerous jurisdictions has an impact on the jurisdiction of State courts, as the territorial jurisdiction of State courts may depend on the place of payment.3 In Europe, two different legal instruments provide for the place of performance of the contractual obligation as a special case of jurisdiction; this being in addition to the general jurisdiction based on the domicile of the defendant. They are: – The Brussels Convention of 27 September 19684 which was replaced by the EC Regulation No 44/2001 (“Brussels Regulation”) applicable to European Union countries; and – The Lugano Convention of 16 September 1988, as amended in 2007, applies to Norway, Switzerland, and Iceland.5 It should be noted that the Brussels Regulation contains an autonomous definition of the place of performance which in principle does not go back to the applicable contract

CISG-Online 91 (Pace) (currency of the place where the seller has his place of business is the currency in which the price should be paid). See Art. 54. 2 Ziegel, Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods (July 1981), Art. 57 CISG. 3 Landgericht Krefeld (Germany) 20 September 2006 (Charcoal), CISG-Online 1459 (Pace); Schroeter, Vienna Sales Convention: Applicability to “Mixed Contracts” and Interaction with the 1968 Brussels Convention, 5 Vindobona Journal of International Commercial Law and Arbitration (2001) p. 74, paras 3.1, 3.2; Lookofsky, Understanding the CISG (2008), § 4.12. UNCITRAL, Digest of Case Law on the CISG, Art. 57 para. 4. Also in common law the place of payment is significant to give an English or New Zealand court, for example, jurisdiction [RS C Ord 11, r 1 (UK), HCR 219 (b)(iii) (NZ); FCR 8.2. (Aus)]. Further, an English court will not enforce a payment stipulation where payment would be illegal under the law of the state where it is to be made [Goode, Payment Obligations in Commercial and Financial Transactions, p. 25]. During the Vienna Conference the Federal Republic of Germany proposed that it should be expressly stated that the place of performance did not found jurisdiction [Official Records, p. 122, Art. 53 no. 3; see in regard to the discussion of the proposal: Official Records, pp. 368 seq., Art. 53 nos 27–35] since the purpose of the substantive rules determining the place of payment is merely to allocate risks, not to establish a basis of jurisdiction. Furthermore, a change in the seller’s place of business after the conclusion of the contract would potentially lead to a different place of payment and therewith to the jurisdiction of a court not originally envisaged by the parties [see Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 57 para. 11]. The proposal was rejected by the Vienna Conference since matters of jurisdiction were not within the scope of the Convention [Official Records, p. 122, Art. 53 no. 5; p. 369, Art. 53 nos 30, 31, 33]. 4 See in regard to decisions discussing the place of performance in light of the Brussels Convention, Art. 5(1): ECJ (6 Oct 1976) Rs. 12/76 = Slg. 1976, 1473, 1486 f (Tessili/Dunlop); ECJ (15 January 1987) Rs. 266/85 = Slg. 1987, 239, 254 (Shenavai/Kreischer); Bundesgerichtshof (Germany) 26 March 1992 (Doors and windows), CISG-Online 67 (Pace); Sø og Handelsretten (Denmark) 1 July 1992 (Plastic gloves), CISG-Online 459. 5 2007/712/EC: Council Decision of 15 October 2007; see, e. g., Oberlandesgericht Du ¨ sseldorf (Germany) 24 July 2007 (Coils), CISG-Online 1531; Kantonsgericht Nidwalden (Switzerland) 23 May 2005 (Farm machines and spare parts), CISG-Online 1086 (Pace).

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law for determining the place of performance.6 Therefore, the procedural role of Art. 57 within the Brussels Regulation states will be limited.7

II. Detailed Commentary 1. Overview Art. 57 sets out a three step test for determining where the buyer has to pay the purchase price: (1) party autonomy is the paramount criterion (Art. 57(1) first sentence) (2) Art. 57(1)(a) provides that the place of payment is to be the seller’s place of business (3) however, if the payment is to be made against the handing over of the goods or of documents, the place of payment shall be at the place where the handing over takes place (Art. 57(1)(b)). 7 In line with the general tenor of the CISG, Art. 57(1) first sentence in conjunction with Art. 6 makes the agreement between the parties on the place of payment one of the most important criteria to be determined. Usages and practices between the parties (Art. 57(1) first sentence in conjunction with Art. 9) are equally determinative. In the absence of a party agreement on the place of payment or determinative usages and practices between the parties, Art. 57(1)(b) provides that the place of payment will be at the place where the goods are handed over if the contract provides for a step-by-step performance. In all other scenarios Art. 57(1)(a) is applicable and provides for the seller’s place of business as the default place of payment. 6

2. Party agreement (Art. 57(1) first sentence) 8

Art. 57(1) first sentence affirms the underlying principle of the CISG: party autonomy is paramount. Therefore, the oral or written agreement between the parties in regard to the place of payment determines first and foremost the place of payment. Often parties 6 Art. 5 Brussels Regulation states: A person domiciled in a Member State may, in another Member State, be sued: (a) in matters relating to a contract, in the courts for the place of performance of the obligation in question; (b) for the purpose of this provision and unless otherwise agreed, the place of performance of the obligation in question shall be: – in the case of the sale of goods, the place in a Member State where, under the contract, the goods were delivered or should have been delivered, – in the case of the provision of services, the place in a Member State where, under the contract, the services were provided or should have been provided, (c) if subparagraph (b) does not apply then subparagraph (a) applies. Issues which have arisen under the Brussels Regulation to date are, for example, which court has jurisdiction if there are multiple deliveries [Color Drack GmbH v LEXX International Vertriebs GmbH, ECJ (3 May 2007) (case C-386/05, ECLI:EU:C:2007:262)]; differentiation between contract for goods and contract for services and place of delivery in case of carriage of goods [Car Trim GmbH v Key Safety Systems SRL reference for a preliminary ruling from the Bundesgerichtshof, CJEU (C-381/08; ECLI:EU:C:2010:90; 2008/C301/29) Official Journal of the European Union (301/6) (22 November 2008) (here unclear, whether the reference made to the court decision (issued on 25 February 2010 or the earlier request for preliminary ruling?); see also Witz, The Place of Performance of the Obligation to Pay the Prize: Art. 57 CISG, Journal of Law and Commerce (2005–06) 325. 7 Magnus, in: Staudinger Kommentar (2013), Art. 57 para 21; Huber, in: Huber/Mullis, The CISG (2007), p. 313; Mohs in: Schlechtriem/Schwenzer, Commentary (2016), Art. 57 para. 26; see Oberster Gerichtshof (Austria) 3 April 2008 (Violins), CISG-Online 1680 (Pace), which discusses the tension between Art. 5 of the EC (Council or Brussels (EC just in numbering, not the issuing body – could be EU instead?) Regulation and Art. 57 and Oberlandesgericht Ko¨ln (Germany) 21 December 2005, CISGOnline 1201 (Pace).

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will use standardised payment terms in their contracts. In regard to the term “payment to be made cash before delivery” the dominant opinion is that the place of payment is meant to be the seller’s place of business.8 A High Court in Germany held that in the case of “cash against delivery”, the place of payment is at the place of delivery.9 Predominant opinion suggests that the term “documents against payment” in a contract indicates the place where the documents have to be handed over as the place of payment.10 The place of payment can follow from the use of INCOTERMS. The Court of Justice of the European Union has determined that EXW (ex works) meant that the place of delivery and the place of payment was the place of the seller.11 If the parties agreed for the buyer to pay the purchase price using documentary 9 credit, the place of payment is usually the place of the bank that opened or affirmed the documentary credit.12 The place of payment remains unaffected by the documentary credit if the bank does not pay. The fact that the bank does not execute its documentary credit duty does not affect the independent payment duty of the buyer. A contractual change of the place of payment does not follow from the fact that the parties have agreed on payment with an acceptance of a draft.13 The nomination of a bank account itself does not determine the place of payment but 10 only names a paying agent where the debtor can perform his/her obligation with discharging effect.14 However, some courts have assumed the seat of the debtor’s bank as the place of payment if the parties had agreed to directly debiting of the debtor’s account at that particular bank.15 Equally, if the seller has over a significant period of time taken care of the costs of the purchase price transfer, this indicates that the place of payment is the buyer’s place of business.16 Where the parties’ intention cannot17 be determined expressly or impliedly, the place 11 of payment can also be ascertained through usages or practices (Art. 9).18 8 Huber, in: Mu ¨ nchKommBGB (2016), Art. 57 para. 4; Huber, in: Huber/Mullis, The CISG (2007), p. 309; Magnus, in: Staudinger Kommentar (2013), Art. 57 para. 7; Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 57 para. 7. 9 Landgericht Nu ¨ rnberg-Fu¨rth (Germany) 27 February 2003 (Car accessories), CISG-Online No. 818. The Court based its decision on Art. 57(1)(b) CISG, apparently regarding the clause as one which leads to a step-by-step performance and thus triggers Art. 57(1)(b) CISG. In Huber’s and these authors’ view, however, it is also arguable that the payment clause as such constitutes a direct agreement on the actual place of payment thus falling under the Art. 57 CISG in its first sentence (see Huber, in: Huber/Mullis, The CISG (2007), p. 309). 10 Huber, in: Huber/Mullis, The CISG (2007), pp 309 et seq.; Magnus, in: Staudinger Kommentar (2013), Art. 57 para. 7; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 57 para. 7. See also in more detail in regard to payment against documents below 4. 11 Electrosteel Europe SA v Edil Centro SpA, C-87/10, ECLI:EU:C:2011:375 (30 March 2011 – the reference to be checked, as the date of judgment is 9 June 2011). 12 Oberlandesgericht Du ¨ sseldorf (Germany) 24 July 2007, CISG-Online 1531; Ferrari in Ferrari/Kieninger/Mankowski/Otte/Saenger/D. Staudinger, Internationales Vertragsrecht (2011) Art. 57 para. 6; Magnus, in: Staudinger Kommentar (2013), Art. 57 para. 8; Eiselen in: DiMatteo/Janssen/Magnus/Schulze, International Sales Law (2016) Ch 6 para. 122. 13 Corte die cassazione civ [VerSen] (Italy) Riv dir int priv proc 1983, 383 in regard to ULIS. 14 Zivilgericht Basel-Stadt (Switzerland) SZIER 1999, 190; Tribunale d’appello Ticino (Switzerland) 29 October 2003, CISG-Online 912; Ferrari In Ferrari/Kieninger/Mankowski/Otte/Saenger/Staudinger, Internationales Vertragsrecht (2011) Art 57 para 7; Magnus, In: Staudinger Kommentar (2013), Art. 57 para. 8; Benicke, in: Mu¨nchKommHGB (2013), Art. 57 para. 4; opposite view: Mohs, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 57 para. 6. 15 See LG Trier (Germany) IHR 2001, 35. 16 LG Bielefeld (Germany) IHR 2001, 199; Magnus, in: Staudinger Kommentar (2013), Art. 57 para. 8; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 57 para. 8. 17 OLG Mu ¨ nchen (Germany) BB 1997, 2295; Magnus, in: Staudinger Kommentar (2013), Art. 57 para. 8. 18 Arrondissementsrechtbank Hertogenbosch (Netherlands) 6 May 1994 (Yarn), CISG-Online 453 (Pace), stating that previous place of payment was an established practice between the parties, see also

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3. Payment at the seller’s place of business (Art 57(1)(a), (2)) a) General application. Art. 57(1)(a) determines the place of payment as a default rule. Namely if the parties have not agreed on a place of payment, no trade usages or practices can be ascertained and the parties do not have an articulated step-by-step procedure19, the seller’s place of business will be the place of payment.20 Art. 57(1)(a) corresponds to the general common law approach if the express or implied terms of the contract do not deal with that question or the place is not ascertainable through usage or a course of dealing. Under common law it is for the debtor to seek out his creditor in the first instance and pay him where ever they might be found.21 13 The seller’s place of business as a place of payment is often contractually agreed and, therefore, of practical importance, especially if the buyer has to make an advanced payment or if the buyer received a credit for the purchase price and, therefore, only has to pay after the delivery of the goods.22 A case decided by the Oberster Gerichtshof is representative of the scenarios anticipated by Art. 57(1)(a). In that case the goods were delivered by mail, accompanied by an invoice and the buyer only had to pay the purchase price after the goods had arrived.23 Often contracts which Art. 57(1)(a) anticipates contain clauses like “net cash” or “net cash after receipt of the goods”, “cash against invoice” or “cash before delivery”.24 Other scenarios where the general opinion is that Art. 57(1)(a) applies are: the sale of goods which are in storage or are at sea and the parties have not agreed any particular delivery and payment terms, as the seller can deliver the goods only by instructing the holder of the goods to acknowledge the buyer’s right to possession.25 That means that in practice, the seller is obliged to perform in advance.26 Another example is the purchase inter absentees (Fernkauf), as in 12

Landgericht Bielefeld (Germany) 24 November 1998 (agency for sanitary products), CISG-Online 697 (Pace), stating that the place of payment shall be established in conformity with the practices between the parties. In this particular case the parties had a long relationship and the place of payment had always been the place of the seller’s business. However, to the contrary, see Corte Suprema di Cassazione (Italy) 7 August 1998 (women stockings), CISG-Online 538 (Pace), stating that a mere practice between the parties, which may well depend on a tolerance on the part of the seller, is not sufficient to justify a derogation from the general rule regarding the place of payment. Huber, in: Mu¨nchKommBGB (2016), Art. 57 para. 3. 19 See Mazetto Company Ilc c De ´gust-Mer Inc Court d’Appel de Quebec (Canada) 12 April 2011(frozen lobster case) CISG-Online 2278 (Pace); Oberster Gerichtshof (Austria) 10 Nov 1994 (Chinchilla furs case) CISG-Online 117 (Pace). 20 The seller’s place of business has to be determined in accordance with Art. 10 CISG. 21 Robey & Co v Snaefell Mining Co Ltd (1987) 20 QBD 152. It has to be noted that the German default rule is different in that the obligor must also transfer money at his own risk and his own expense to the obligee at the residence of the latter (§ 270(1) BGB), but under German law it is sufficient for the buyer to perform in a timely fashion if the buyer sends off the payment- it does not have to reach the seller. See generally for a comparative overview: Lehner, Erfu¨llungsort und Gerichtsstand fu¨r Geldschulden im nationalen Recht und im internationalen Einheitsrecht [place of performance and jurisdiction for money debts under national law and the international uniform law] (1991); see also Schlechtriem/Butler, CISG (2009), para. 214 with footnote 368; Forsyth/Moser, The Impact of the Applicable Law of Contract on the Law of Jurisdiction under the European Conventions, 45 International and Comparative Law Quarterly (1996) 190. 22 Schlechtriem/Butler, The CISG (2009), para. 214. 23 Oberster Gerichtshof (Austria) 11 November 1994 (Chinchilla furs), CISG-Online 117 (Pace); see also ZG Kanton Basel-Stadt (Switzerland) 3 December 1997, CLOUT 221 (Bulgarian white urea), CISGOnline 346 (Pace). 24 Koch, Der besondere Gerichtsstand des Klaegers/Verkaeufers im Anwendungsbereich des UNKaufrechts, RIW (1996) 379; Achilles, in: Ensthaler (ed.), HGB- Gemeinschaftskommentar zum Handelsgesetzbuch mit UN-Kaufrecht (2015), nach § 382, Art. 57 para. 4. 25 Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 57 para. 2. 26 Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 57 para. 2.

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“ex ship” or “delivery duty paid”, or where the buyer and seller have their places of business at the same place but where the carrier has no authority to collect the purchase price, because the seller must then perform his obligation before receiving payment.27 b) Payment at the seller’s place of business. The buyer has to pay the purchase price 14 at the seller’s place of business. The seller’s place of business is determined by Art. 10. If the payment is made by money transfer the buyer’s obligation to pay is only performed when the money is credited to the seller’s account.28 The buyer is responsible for all the costs associated with the payment transfer and all the formalities – not only in the country from which the payment is sent, but also in the country in which the payment is to be made – which are necessary to effect the payment. The buyer bears the risk of the payment being delayed or lost.29 Unexpected delays in 15 the money transfer will often be exempted under Art. 7930 unless the seller is responsible for the impediment that is causing the delay (Art. 80).31 If the seller has several bank accounts the buyer has to transfer the money to the bank account in the seller’s country.32 c) Change in the place of payment. If the seller changes his place of business after 16 the conclusion of the contract the buyer has to effect payment at the new place of business.33 This follows implicitly from Art. 57(2).34 The buyer, therefore, continues to bear the risk of the transmission even if it increased due to a change in the seller’s place of business or other disadvantages, like the need to comply with additional foreign exchange regulations. To avoid having to accept payment at the “old” place of business the seller has to 17 inform the buyer promptly of the change of his place of business which has taken place after the conclusion of the contract. Art. 27, according to which dispatch is sufficient to effect notice, is not applicable in regard to the seller’s notice of change of place of business since the change of business is entirely in the seller’s control.35 A transfer risk which is only realised as a result of having sent the payment to the seller’s new place of business is attributed to the seller analogue to Art. 80. Art. 57(2) and Art. 80 are also applicable if the buyer effects payment to the seller’s original place of business due to a notification failure or because of subrogation, for example in the case of assignment.36 The seller has to bear the additional costs of the money transfer associated with the 18 change of his business after the conclusion of the contract (Art. 57(2)), for example, 27 Bundesgerichtshof (Germany) 10 November 1994, IPRax (1996) 137 (139); Mohs, in: Schlechtriem/ Schwenzer, Kommentar (German ed. 2013), Art. 57 para. 14, 16. 28 Oberlandesgericht Mu ¨ nchen (Germany) 9 July 1997 (Leather goods), CISG-Online 282 (Pace); see also Bundesgerichtshof (Germany) 25 January 1988, BGHZ 103, 143 (on the law according to the German BGB). 29 Oberlandesgericht Mu ¨ nchen (Germany) 9 July 1997 (Leather goods), CISG-Online 282 (Pace); ZG Kanton Basel-Stadt (Switzerland) 3 December 1997 (Bulgarian white urea), CISG-Online 346 (Pace). 30 Achilles, in: Ensthaler (ed.), HGB- Gemeinschaftskommentar zum Handelsgesetzbuch mit UNKaufrecht (2015), nach § 382, Art. 57 para. 4; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 57 para. 20. See also Art. 79 para. 47. 31 Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 57 para. 4. 32 Piltz, Internationales Kaufrecht (2008), para. 4–141 33 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 57 para. 18. 34 Achilles, in: Ensthaler (ed.), HGB- Gemeinschaftskommentar zum Handelsgesetzbuch mit UNKaufrecht (2015), nach § 382, Art. 57 para. 5; Magnus, In: Staudinger Kommentar (2013), Art. 57 para 16. 35 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 57 para. 17. 36 Karollus, UN-Kaufrecht (1991) p. 168 note 14; Achilles, in: Ensthaler (ed.), HGB- Gemeinschaftskommentar zum Handelsgesetzbuch mit UN-Kaufrecht, nach § 382, Art. 57 para. 5. See also Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 57 para. 17.

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higher costs of the transfer of funds or foreign exchange but also loss of interest due to an earlier transfer of the purchase price which the buyer had to undertake to effect payment in time.37 19 The assignment of the purchase price claim can also influence the place of payment. If the buyer has to pay the purchase price to the new creditor then the place of business of the new creditor will be the new place of payment.38 20

d) Means of payment. The CISG does not contain any provisions regarding the means of payment. If the contract does not contain any specific agreement the default rule is that the buyer has to pay in cash in the currency of the place of payment. However, especially in international trade, cashless payment is nowadays generally required either through party agreement (Art. 6) or usage (Art. 9). Payment by cheque is always made on account of performance. If the seller accepts the cheque and it is cashed, payment relates back to the time at which the cheque was handed over.39 The buyer bears the costs of the payment such as the costs of dispatching the cheque.40 The same applies to costs arising from cheques not being cashed, though handed out for performance.41

4. Payment against the handing over of the goods or of documents (Art. 57(1)(b)) Art. 57(1)(b) corresponds to Art. 58 and, therefore, will be the general default rule in regard to the payment of the purchase price unless the parties have agreed otherwise or a trade usage or practice determines the place of payment. Art. 58(1) lays down the basic principle, as a default rule, that the price is to be paid concurrently with the handing over of the goods or of documents. The concurrent character of these obligations again can in the first instance derive from the contract (Art. 6), for example, from certain payment terms like “cash against delivery” or “cash against documents”,42 or from trade usages or practices between the parties (Art. 9). 22 In the case of such a step-by-step performance, Art. 57(1)(b) provides that the place of the handing over of the goods determines the place of payment. Art. 57(1)(b) stipulates for contracts where the obligation has to be performed concurrently at a single place of performance: the place where the goods and the purchase price are exchanged--since that is where the ‘contractual centre’ is.43 Five scenarios should be distinguished: 21

23

a) Sale not involving carriage of the goods to the buyer. Huber aptly describes contracts where the seller has no carriage obligations in regard to the goods as “collection contracts.”44 The seller’s duty to deliver the goods is performed when the 37 Maskow, in: Bianca/Bonell, Commentary (1987), Art. 57 para. 2.9; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 57 para. 19; Magnus, In: Staudinger Kommentar (2013), Art. 57 para. 16. 38 Ferrari et al., Internationales Vertragsrecht (2011), Art. 57 paras 13 et seq; Magnus, In: Staudinger Kommentar (2013), Art. 57 para. 18; Huber, in: Mu¨nchKommBGB (2016), Art. 57 para. 23; different opinion Mohs in: Schlechtriem/Schwenzer, Commentary (2016), Art. 57 para. 21. 39 Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 57 para. 9; compare also in more detail Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 53 para. 14; see for the equivalent in English law: Burrows/Finn/Todd, Contract Law (2016) para. 17.7. 40 Landgericht Duisburg (Germany) 17 April 1996 (Textiles), CISG-Online 186 (Pace). 41 Oberlandesgericht Mu ¨ nchen (Germany) 9 July 1997 (Leather goods), CISG-Online 282 (Pace). 42 See Koch, Der besondere Gerichtsstand des Kla ¨gers/Verka¨ufers im Anwendungsbereich des UNKaufrechts, RIW (1996) 379 (381). 43 Bundesgerichtshof (Germany) 4 April 1979, NJW (1979) 1782; Hager/Maultzsch, in: Schlechtriem/ Schwenzer, Kommentar (German ed. 2008), Art. 57 para. 18. 44 Huber, in: Huber/Mullis, The CISG (2007), p. 311.

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seller places the goods at the buyer’s disposal at the place named in the contract, this being either at the seller’s place of business (Art. 31(c)) or at a place stipulated in Art. 31(b), such as the place of the manufacture of the goods often stipulated by the INCOTERM 2010 “EXW” (ex works). In concurrent contracts the purchase price has to be paid against the handing over of the goods at the place where the goods are handed over. In the case of a purchase inter absentees (Fernkauf), as in “ex ship” or “delivery duty paid”, payment concurrently with the handing over of the goods is only feasible if the carrier is authorised to collect payment of the price. If the carrier is not authorised, Art. 57(1)(a) determines the place of payment.45 b) Sale of goods from storage. If goods are stored in a warehouse or on a ship, step- 24 by-step performance is nearly impossible. Either parties or their authorised representatives would have to meet at the warehouse or on the ship to concurrently perform their obligations. However, the general idea of selling stored goods is that the seller performs his obligation to hand over the goods by placing them at the buyer’s disposal, for example, at their warehouse (Art. 31(b)). Since the parties’ obligations are not performed concurrently, Art. 57(1)(a) applies46 instead of Art. 57(1)(b). However, in the rare circumstance where the parties do agree that the warehouse keeper is to hand over the goods in return for payment of the price, Art. 57(1)(b) applies. If the seller instructs the warehouse keeper to receive the purchase price and to hand over the goods (analogous to Art. 58(2)), the situation is so similar to a step-by-step performance that the application of Art. 57(1)(b) is justified.47 The place where the payment has to be effected is the place of business of the warehouse keeper. c) Sale of goods involving the carriage of goods to the buyer. The use of 25 Art. 57(1)(b) is also problematic in cases where the contract is for the carriage of goods (Art. 31(a), F-Terms or C-Terms of the Incoterms 2010). There is a problem irrespective of whether the costs of carriage are to be borne by the seller (C-Terms) or the buyer (F-Terms) since the parties do not meet at a place to exchange their performances.48 In such cases, like in regard to the sale of goods stored in a warehouse, Art. 57(1)(a) is applicable49 unless the parties have agreed otherwise (Art. 6) or a usage or practice exists in that regard (Art. 9).50 However, as Hager and Huber point out,51 there are two exceptional scenarios where 26 Art. 57(1)(b) should be applicable to a sale of goods contract which involves the carriage of goods. First, where the parties agree that payment has to be made against the handing over of the goods on their arrival through the carrier, and second, where the seller makes use of the seller’s right under Art. 58(2) and instructs the carrier to hand over the goods only against payment of the price. In both situations the carrier requires the 45

See para. 3 supra. See para. 3 supra. 47 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 57 para. 13. 48 Schlechtriem/Butler, CISG (2009), para. 216. 49 Compare Bundesgerichtshof (Germany) 28 March 1979, NJW (1979) 1779 and Bundesgerichtshof (Germany) 4 April 1979, NJW (1979) 1782 in regard to ULIS. 50 See Supreme Arbitration Court of the Russian Federation (Moscow) 27 Jul 201, CISG-Online 2520 (Pace); Huber, in: Huber/Mullis, The CISG (2007), p. 312. 51 Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 57 paras 17 seq.; Huber, in: Huber/ Mullis, The CISG (2007), p. 312; see also Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 57 para. 12; Herber/Czerwenka, Kommentar (1991), Art. 57 para. 5; U. Huber, Der UNCITRAL-Entwurf ¨ bereinkommens u¨ber internationale Warenkaufvertra¨ge, RabelsZ 43 (1979) 413 (512); Magnus, in: eines U Staudinger Kommentar (2013), Art. 57 para. 12; different view: Witz, in: Witz/Salger/Lorenz, Kommentar (2000), Art. 57 para. 10; Achilles, in: Ensthaler (ed.), HGB- Gemeinschaftskommentar zum Handelsgesetzbuch mit UN-Kaufrecht, nach § 382, Art. 57 CISG para. 6. 46

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power for collection of the purchase price.52 Both situations are so similar to a step-bystep performance that the application of Art. 57(1)(b) is warranted, since the centre of the contract in both circumstances is the place where the obligation of the seller and buyer is exchanged. Furthermore, the main aim of a step-by-step performance of preventing the goods and purchase price from resting in the hands of one party is achieved.53 The place of destination of the goods, therefore, is the place of payment. 27

d) Sale of goods in transit. Where goods are sold in transit, the same principles apply as where the goods are handed over to a carrier for delivery to the buyer. Therefore, generally, the place of payment will be the seller’s place of business (Art. 57(1)(a)). If the seller makes use (by analogy) of his right of retention under Art. 58(2), Art. 57(1)(b) is applicable and the place of destination of the goods is the place of payment. Where the goods are sold “afloat” the parties normally agree “cash against documents”, so that by virtue of Art. 57(1)(b) the place of payment is the place where the documents are handed over.

e) Payment against documents. If payment is to be made against documents, the place where the documents are to be handed over must be determined by reference to the contract (Art. 34).54 If “cash against documents” has been agreed, the documents are presented to the buyer via intermediary banks, generally at the buyer’s place of business so that the latter place is both the place of handing over and of payment.55 If the contract stipulates payment by letter of credit, the letter of credit will as a rule be payable at the advising or confirming with the bank (in the seller’s country) which means that the place of handing over and of payment will be the place of the advising or confirming with the bank.56 Parallel to the situation of the carriage of goods,57 if in accordance with Art. 58(2) the documents are handed over by the carrier at the place of destination concurrently against payment of the purchase price, that place will be the place of handing over and of payment. 29 It is unclear which ‘documents’ Art. 57(1)(b) is referring to. Art. 57(1)(b) and Art. 58(1) and (2) are all dealing with the payment of the purchase price in regard to a step-by-step performance. Documents in both articles, therefore, should have the same meaning.58 To give full effect to Art. 58 and the underlying principle of the CISG to facilitate commercial relationships, documents must include all documents which the seller can use to perform their obligation to deliver the goods in accordance with Arts 30 and 3459 and not only traditional documents of title, such as a bill of lading or a 28

52 Compare Oberster Gerichtshof (Austria) 10 November 1994 (Chinchilla furs), CISG-Online 117 (Pace); but compare on the other hand Bundesgerichtshof (Germany) 4 April 1979 (utility vehicles), NJW (1979) 1782 in regard to ULIS where the BGH was reluctant to apply Art. 59 No. 1 ULIS where the seller exercised his right of retention. 53 Compare also U. Huber, in: Do ¨ lle (ed.), Kommentar zum Einheitlichen Kaufrecht (1976), Art. 72 EKG para. 2. 54 Compare Tribunal Supremo (Spain) 17 March 2011 (coffee case) CISG-Online 2521 (Pace) where the Court held that if the parties agreed to delivery of goods and documents to third party seller affects delivery to the agreed to third party. 55 Koch, Der besondere Gerichtsstand des Klaegers/Verka ¨ufers im Anwendungsbereich des UNKaufrechts, RIW (1996) 379 (381); Achilles, in: Ensthaler (ed.), HGB- Gemeinschaftskommentar zum Handelsgesetzbuch mit UN-Kaufrecht (2015), nach § 382, Art. 57 CISG para. 6. 56 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 57 para. 7; Benicke, in: Mu ¨ nchKommHGB (2013), Art. 57 para. 4. 57 See above para. 23. 58 Achilles, in: Ensthaler (ed.), HGB-Gemeinschaftskommentar zum Handelsgesetzbuch mit UNKaufrecht (2015), nach § 382, Art. 57 CISG para. 6; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 57 para. 11. 59 See discussion under Art. 58; Secretariat Commentary on 1978 Draft, Art. 53 para. 5 note 4; compare Bundesgerichtshof (Germany) 3 April 1996, BGHZ 132, 290 (p 304); so probably Magnus, In: Staudinger Kommentar (2013), Art. 57 para 13.

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warehouse receipt. To perform that obligation, the seller must tender documents which give the buyer a right to take possession of the goods to the exclusion of the seller. Party autonomy dictates that the parties can agree on step-by-step performance in 30 regard to any document. It follows from Art. 57(1)(b) that the place where that document is handed over has to be taken as the place of payment. A different view is taken by Hager and Maultzsch who see the basis for the place of payment as the place where the document is handed over in the contract (Art. 57(1) in conjunction with Art. 6).60 They argue that it would be systematically undesirable if Art. 57(1)(b) comprised a wider range of documents than Art. 58.61 Even though the authors agree that it is desirable that there is congruence between Art. 57(1)(b) and Art. 58, to allow extension of the meaning of ‘document by party agreement’ in regard to Art. 57(1)(b) does not significantly impinge the system of the CISG since the CISG’s underlying principle is party autonomy. Art. 58 embodies the minimum standard in regard to documents. Therefore, papers which fall under documents in Art. 58 are definitely documents under Art. 57(1)(b). In practice, it will probably make no difference which view one follows.

5. Place of payment of monetary claims other than the purchase price Art. 57 is only concerned with the buyer’s payment obligation. However, the CISG 31 knows other monetary obligations, like the payment of damages or the obligation to pay restitution of the contract price after the avoidance of the contract, for which there is no specific rule in the CISG. Therefore, there is a gap in regard to the place of payment of those monetary obligations which must be filled. The overwhelming opinion sees Art. 57 as an expression of the general principle that monetary obligations are to be performed at the place of business of the monetary creditor (unless the parties have agreed otherwise).62 In the case of a damages claim, this would lead to the place of business of the party which claims damages.63 The Austrian Oberster Gerichtshof64 and the Cour d’Appel Paris65 have held that the CISG did not deal with this issue and applied the applicable national contract law. The German Bundesgerichtshof offered a third view when it held that the place of performance of the obligation which forms the basis of the claim in question was a decisive factor.66 In 60 Hager/Maultzsch, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 57 para. 24; Liesecke, Die typischen Klauseln des internationalen Handeslverkehrs, WM 1978, Sonderbeilage Nr 3 for Nr 15 (15 April 1978); Weber, Warenpapiere ohne Traditionsfunktion (1978) pp. 240 et seq. 61 Hager/Maultzsch, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 57 para. 24: e. g., the parties agree on the purchase price payment after the handing over of the delivery note. The delivery note is only an instruction but does not transfer any rights in regard to the goods to the buyer and, therefore, not a document in relation to Art. 58. However, Hager/Maultzsch argue that the interpretation of the parties’ agreement in that case would lead to the place where the delivery note has to be handed over as the place of payment of the purchase price. 62 Oberlandesgericht Braunschweig (Germany) 28 October 1999 (Meat), CISG-Online 510 (Pace); Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 57 para. 25 with further references in note 71; Huber, in: Huber/Mullis, The CISG (2007), p. 314; see also discussion in Magnus, In: Staudinger Kommentar (2013), Art. 57 para. 22. 63 Compare Oberlandesgericht Du ¨ sseldorf (Germany) 2 July 1993 (Veneer cutting machine), CISGOnline 74 (Pace); Cour d’Appel Grenoble (France) 23 October 1996 (Stock equipment), CISG-Online 305 (Pace); Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 57 para. 29; Huber, in: Huber/ Mullis, The CISG (2007), p. 314; Benicke, in: Mu¨nchKommHGB (2013), Art. 57 para. 13. 64 Oberster Gerichtshof (Austria) 10 March 1998 (Merchandise case), CISG-Online 356 (Pace). 65 Cour d’Appel de Paris (France) 14 January 1998 (Elephants), CISG-Online 347 (Pace). 66 Bundesgerichtshof (Germany) 22 October 1980 (Cherry juice), NJW (1981) 1158 (under ULIS, obiter); Bundesgerichtshof (Germany) 24 September 1986, BGHZ 98, 263 (272) (under ULIS) buyer’s claim for damages on account of delivery of defective goods; Case 14–76 de Bloos v Bouyer ECJ, ECR 1976, p. 1497: breach of an exclusive distribution agreement; Magnus, in: Staudinger Kommentar (2005), Art. 57 para. 22.

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these authors’ view, the gap can be filled under Art. 7(2) by using the general principle embodied in Art 57. Therefore, monetary obligations are to be performed at the place of business of the monetary creditor (unless the parties have agreed otherwise). 32 In regard to a claim stemming from restitution (Art. 81(2))67 the CISG also does not provide express rules about the place of restitution (i. e. where the purchase price should be restituted). The gap can be filled under Art. 7(2) based on Art. 57. Accordingly, the buyer’s place of business is the place of repayment of the purchase price.68 33 The place of payment for payments arising due to penalty clauses and claims for reimbursement is also to be determined by Art 57.69 The place of payment for payments arising from interest claims is determined by the place of performance of the underlying claim.70

6. Practical considerations General rules apply in regard to burden of proof. That means the party that asserts a particular place of performance has to prove that this was agreed upon by the parties. If the buyer claims additional costs under Art. 57(2) he has to prove those additional costs. 35 The parties can contract out of Art. 57 or modify it.71 Generally, it is advisable to detail exactly the place where payment is to be made to avoid misunderstandings. For the avoidance of doubt it might be advisable to agree upon a choice of jurisdiction clause. 34

III. Comparable Rules The default rule in regard to the place of payment, Art. 57(1)(a), corresponds to the English, Italian, Danish and Greek approach where the payment has to be made if the express or implied terms of the contract do not deal with that question or the place is not ascertainable through usage or a course of dealing. Under common law it is for the debtor to seek out his creditor in the first instance and to pay her or him where he might be found72 while French and German law refers to the debtor’s residence (unless the parties have agreed otherwise).73 Under the US-UCC the default rule of place of payment is the place where the buyer receives the goods.74 37 The PICC states in 6.1.6.(1), in line with Art. 57 CISG, that first and foremost party autonomy determines the place of payment. If the place of payment is not fixed by the contract, the obligee’s place of business is decisive (Art. 6.1.6.(1)(a)). Art. 6.1.8. states 36

67

See Art. 81 para. 26. See Oberlandesgericht Du¨sseldorf (Germany) 2 July 1993 (Veneer cutting machine), CISG-Online 74 (Pace); Magnus, in: Staudinger Kommentar (2013), Art. 57 para. 23; Hornung, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 81 paras 17, 18. 69 Magnus, In: Staudinger Kommentar (2013), Art. 57 para. 24. 70 Magnus, In: Staudinger Kommentar (2013), Art. 57 para. 24. 71 Huber, in: Mu ¨ nchKommBGB (2016), Art. 57 para. 34. 72 Robey & Co v Snaefell Mining Co Ltd (1987) 20 QBD 152 for common law; Stone, EU Private International Law (2006) p. 84. It has to be noted that the German default rule is different in that the obligor must also transfer money at his own risk and his own expense to the obligee at the residence of the latter (§ 270(1) BGB) but under German law it is sufficient for the buyer to perform in a timely fashion if the buyer sends off the payment- it does not have to reach the seller. See generally for a comparative overview: Lehner, Erfu¨llungsort und Gerichtsstand fu¨r Geldschulden im nationalen Recht und im internationalen Einheitsrecht [place of performance and jurisdiction for money debts under national law and the international uniform law] (Thesis, Basel 1991); see also Schlechtriem/Butler, CISG (2009), para. 214 note 368. 73 Stone, EU Private International Law (2006) p. 84; § 270 German Civil Code BGB. 74 § 2–310(a) UCC. 68

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that in case payment is made by fund transfer the place of payment is the obligee’s financial institution. The PECL also replicates Art. 57 CISG, stating in Art. 2.106 that if the place of payment is not fixed or determinable by the contract (Art. 2.106(1)) the place for the money payment is the creditor’s place of business (Art. 2.106(1)(b)). However, the PECL refers to the creditor’s place of business at the time of contract conclusion (Art. 2.106(1)(b)). Should the seller, therefore, move his place of business after the conclusion of the contract it will be his risk and expense to effect payment at the new place of business. The PECL further regulates the place of performance in case of multiple places of business: the one with the closest relationship to the contract (Art. 2.106(2)). Although no counterpart rule is found in Art. 57 CISG, a general rule to that effect is stated in Art. 10(a) CISG. Further, Art. 2.106(3) of the PECL corresponds with Art. 10(b) CISG, stating that where a party has no place of business, performance is to be effected at his habitual residence.

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Article 58 (1) If the buyer is not bound to pay the price at any other specific time, he must pay it when the seller places either the goods or documents controlling their disposition at the buyer’s disposal in accordance with the contract and this Convention. The seller may make such payment a condition for handing over the goods or documents. (2) If the contract involves carriage of the goods, the seller may dispatch the goods on terms whereby the goods, or documents controlling their disposition, will not be handed over to the buyer except against payment of the price. (3) The buyer is not bound to pay the price until he has had an opportunity to examine the goods, unless the procedures for delivery or payment agreed upon by the parties are inconsistent with his having such an opportunity. Bibliography: Davies, Documents that Satisfy the Requirements of CISG Art. 58, The Annals of the Faculty of Law in Belgrade – Belgrade Law Review, Year LIX (2011) no. 3 pp. 39–66.(Pace); CISGAdvisory Council Opinion no 11, Issues Raised by Documents under the CISG Focusing on the Buyer’s Payment Duty, 2012. Rapporteur: Professor Martin Davies, Tulane University Law School, New Orleans, U.S.A. (at http://www.cisg-ac.org); Gabriel, Buyer’s Performance under the CISG: Arts 53–60 Trends in the Decisions, 25 Journal of Law and Commerce (2005–2006) 273.

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Buyer’s right to examine the goods (Art. 58(3)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Exclusion of the right to examine the goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Time the purchase price becomes due. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Time payment is due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Particular cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (i) Goods delivered at the seller’s place of business . . . . . . . . . . . . . . (ii) Goods delivered at the buyer’s place of business . . . . . . . . . . . . . . (iii) Sale of goods in storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iv) Sale involving carriage of goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (v) Sale of goods in transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Divergent agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Rights of retention (Arts 58(1) second sentence and 58(2)) . . . . . . . . . . . . . . . 6. Payment ahead of time, part payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Application to other buyer’s obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. Practical considerations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 4 4 4 8 11 11 13 13 20 21 22 23 24 25 26 27 31 34 36 37 39

I. Importance and Role of the Provision 1

Arts 58 and 59 not only stipulate the time of payment of the purchase price but also the relationship between delivery and payment,1 as well as the buyer’s right to briefly 1 Secretariat Commentary on 1978 Draft, Art. 54 paras 1–3; Schlechtriem/Butler, CISG (2009), para. 218; Huber, in: Huber/Mullis, The CISG (2007), p. 307.

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examine the goods even if the purchase price is due.2 Art. 58 is designed to minimise risks for both parties; the risk to the seller from delivery before payment and the risk to the buyer from payment for defective goods. In accordance with Art. 57, Art. 58 again clearly states that party autonomy is para- 2 mount in regard to the determination of the issues dealt with in Art. 58 (Art. 58(1)).3 The buyer’s duties set out in Art. 58 are often subject to derogation, especially due to trade usages or practices in respect of payment clauses.4 For example, the conclusion of a contract on the negotiation of a bill of exchange implicates the agreement on a deferment of payment.5 The same applies to the granting of a credit in respect of goods on the part of the seller.6 It has to be noted that the interest on late payments (Art. 78)7 in regard to the 3 purchase price is tied to the time the payment is due under Art. 58(1) first sentence. The EU Directive On Combating Late Payment in Commercial Transactions,8 however, provides for another regime as provided for by the CISG. Under Art. 3(1)(b) of the Directive, interest shall – if the date or period for payment is not fixed in the contract – become payable automatically, without the necessity of a reminder, 30 days following the date of receipt by the debtor of the invoice or an equivalent request for payment, or if the debtor receives the invoice or the equivalent request for payment earlier than the goods, 30 days after the receipt of the goods. This regime deviates from Arts 58, 78 CISG and is more favourable for the buyer. Therefore, the question arises whether the EU Directive and the subsequently implemented national laws prevail over the CISG under Art. 90. The purpose of the CISG is to unify international sales law, which would be seriously jeopardised if the EU Member States, which are simultaneously also CISG Contracting States,9 followed the regime of the Directive and outside the EU the CISG Member States would follow Arts 58 and 78 CISG. However, since the EU Member States have discretion as to how they implement a directive, the adjustment of law by directive is not an “international agreement” in terms of Art. 90.10 Furthermore, Art. 6(2) of the Directive itself allows for Member States to implement a more obligation-friendly regime than that set out in Art. 3 of the Directive.11

2 See in regard to Art. 58’s predecessors in the ULIS: Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 58 para. 3. 3 Art. 58(1) first sentence is based on an application by Argentina, Spain, and Portugal (Secretariat Commentary on 1978 Draft, Art. 54 para. 3, see also in regard to the harmonising effect of Art. 58(1) first sentence in regard to Art. 57: Secretariat Commentary on 1978 Draft, Art. 57 paras 36, 46). 4 Huber, in Mu ¨ nchKommBGB (2016), Art. 58 para. 2. 5 Landgericht Hamburg (Germany) 26 September 1990 (Fashion textiles), CISG-Online 21 (Pace), EuZW (1991) 188, 191. 6 Oberlandesgericht Mu ¨ nchen (Germany) 21 January 1998 (Thermal insulation material), CISG-Online 536 (Pace), IHR (2001) 197, 198 (deferment for an indefinite time). 7 The time for payment under Art. 58 also triggers the time interest begins to run under Art. 78 if payment is not timely Oberlandesgericht Rostock (Germany) 27 July 1995 (Plants) CISG-Online 209 (Pace); Bundesgerichtshof (Germany) 8 March 1995 CLOUT 123; Oberlandesgericht Frankfurt (Germany) 18 January 1994 (Shoes) CISG-Online 144; Gabriel, The Buyer’s Performance Under the CISG: Arts 53– 60 Trends in Decisions, 25 Journal of Law and Commerce (2005–2006) 273, 281. 8 EC Directive 2000/35/EC of 29 June 2000, EC Official Journal, L 200, p. 35; see Schmidt-Kessel, Die Zahlungsverzugsrichtlinie und ihre Umsetzung, NJW (2001) 97. 9 See for an up-to-date list of CISG Contracting States: http://www.uncitral.org (last accessed 18 Oct 2016). 24 of the 28 EU Member States have ratified the CISG (missing: Malta, UK, Ireland, and Portugal). 10 See Art. 90 para. 8. 11 Compare: Hager/Maultzsch, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 58 para. 2 a; Schro¨ter, UN-Kaufrecht und Europa¨isches Gemeinschaftsrecht § 6 para. 354.

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II. Detailed Commentary 1. Buyer’s right to examine the goods (Art. 58(3)) a) General. As Huber points out, a good starting point with Art. 58 is an analysis of the buyer’s right under Art. 58(3) to examine the goods. That right is relevant for the different scenarios relating to the payment due dates set out in subparagraphs (1) and (2).12 Art. 58(3) states that the buyer does not have to pay the purchase price before he has the opportunity to examine the goods unless the parties’ agreement is inconsistent with the buyer having such an opportunity. This means that the time when the payment is due (which is generally determined either by party agreement or by Art. 58(1)) is delayed until the buyer has the opportunity to examine the goods.13 5 It is generally agreed that the buyer’s examination right under Art. 58(3) is not comparable with the examination right under Art. 38 and only allows for a short and superficial inspection.14 The buyer might need to use a third person, like the carrier, to realise his right under Art. 58(3) in a timely manner.15 The buyer will generally only be able to detect profound defects or an aliud delivery.16 The opportunity (and obligation) for the buyer to examine the goods more thoroughly in accordance with the standards developed under Art. 3817 and to notify the seller of any defects, in accordance with Art. 39, is not affected by Art. 58(3). As Huber points out, since any failure to notify the seller of the non-conformity of the goods is dealt with by Art. 39 and not Art. 58(3), the buyer can, as long as he meets the standards of Arts 38 and 39, still notify the seller of any severe non-conformity or aliud delivery that the buyer could have noticed during an Art. 58(3) examination at a later stage.18 The seller is under an obligation to facilitate examination of the goods by the buyer (or his delegate), either by access to the goods at the plant or respective instructions to the warehouse keeper or carrier.19 6 The German Supreme Court held that the synallagmatic relation between delivery and payment allows the buyer to raise the defence in accordance with Art 58(3) that the 4

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Huber, in: Mu¨nchKommBGB (2016), Art. 58 para. 3. See St. Gallen Gerichtskommission Oberrheintal (Switzerland) 30 June 1995 (Sliding doors), CISGOnline 425 (Pace); Amtsgericht Stendal (Germany) 12 October 2000 (Granite rock), CISG-Online 592 (Pace); Magnus, in: Staudinger Kommentar (2005), Art. 58 para. 24. 14 See St. Gallen Gerichtskommission Oberrheintal (Switzerland) 30 June 1995 (Sliding doors), CISGOnline 425 (Pace); Kantonsgericht Schaffhausen (Switzerland) 25 February 2002 (Machines, devices and replacement parts), CISG-Online 723 (Pace); Huber, in: Mu¨nchKommBGB (2016), Art. 58 para. 4; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 58 para. 34; see also in regard to the differentiation between Art. 58 CISG and Art. 38: Vogel, Die Untersuchungs- und Ru¨gepflicht im UN-Kaufrecht (2000) pp. 126 et seq. 15 Huber, in: Mu ¨ nchKommBGB (2016), Art. 58 para. 5; Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 25. 16 See Kantonsgericht Schaffhausen (Switzerland) 25 February 2002 (Machines, devices and replacement parts), CISG-Online 723 (Pace); Achilles, Art. 58 para. 7; Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 26; Huber, in: Mu¨nchKommBGB (2016), Art. 58 para. 4; Herber/Czerwenka, Kommentar (1991), Art. 58, para. 8; Vogel, Die Untersuchungs-und Ru¨gepflicht im UN-Kaufrecht (2000) pp. 126 et seq; other opinion: Niggemann, Les Obligations de l’acheteuer sous la Convention des Nations Unies sur les contrats de vente internationale de marchandises, Revue des droit des affaires internationales (1988) 27 (35). 17 Art. 38 paras 27 et seq. 18 Huber, in: Mu ¨ nchKommBGB (2016), Art. 58 para. 4; see also Honnold, Uniform Law (1999), Art. 58 para. 339.1. Compare: St Gallen Gerichtskommission Oberrheintal (Switzerland) 30 June 1995 (Sliding doors), CISG-Online 425 (Pace). 19 Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 25; Honnold, Uniform Law (1999), Art. 58 para. 338. 13

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seller did not fulfill all contractual duties even if the parties agreed on a choice of court clause that all claims must be brought at the respective defendant’s seat.20 The place where the buyer can examine the goods is generally the place of delivery in 7 accordance with Art. 31.21 Where the goods are delivered at the seller’s place of business, or by the seller to the buyer at the buyer’s place of business, or sold from storage in a warehouse, it will be easy for the buyer (or his delegate) to examine the goods. If the goods have to be sent long-distance, the buyer will usually instruct a commercial inspection agency to act on the buyer’s behalf before they are loaded on the carrier. Sending the goods long distance is, therefore, normally less onerous for the buyer in regard to re-disposing of the goods than when the buyer has wrongfully rejected the goods after they have arrived in the buyer’s country. These policies have been recognised and reconciled by arrangements that the documents the seller must tender for payment by letter of credit shall include a certificate of quality by an independent inspection agency.22 As an alternative, the buyer could reasonably demand the opportunity, personally or through an agent, to inspect the goods before they are shipped. The buyer bears the costs for the inspection under Art. 58(3). b) Exclusion of the right to examine the goods. Art. 58(3) contains an exemption if 8 the parties agreed on procedures for a delivery or a payment which is inconsistent with the buyer having an opportunity to examine the goods. In such a case the buyer does not have a right to examine the goods. Therefore, the due date for payment of the purchase price is not deferred. The exclusion of the right to examine under Art. 58(3) will often follow from trade 9 terms and usages. The most important case is where, as in the case of commodity sales, “cash against documents” has been agreed. In a sale calling for payment “cash against documents”, the buyer has to pay the price against the tender of documents. Since the presentation of the documents is the requirement for being able to demand the purchase price, the buyer has to pay without inspecting the goods notwithstanding whether the goods have arrived or not.23 The same is true for the provision “L/C-documents against letter of credit” or “D/A-documents against acceptance”.24 The position is generally the same in regard to cash before delivery clauses like “COD-cash on delivery” or “cash against delivery note”. Whether the clauses “cash against invoice” and “payable on receipt” also preclude a brief examination of the goods by the buyer is a controversial question.25 The buyer, however, can protect himself against the risk of paying before examination of the goods, by agreeing to a term requiring the seller to submit certificates of quality.26 Other trade clauses do not exclude the buyer’s right of examination. For example, 10 clauses like “cash against documents upon arrival of the goods”, or “cash upon receipt of the goods (and invoice)” allow the buyer to inspect the goods.27 An agreement that 20 Bundesgerichtshof (Germany) 26 Sept 2012, Internationales Handelsrecht 2012, 231 (Potato clay) CISG-online 2348. 21 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 58 para. 35. 22 Goldstajin, The Contract of Goods Inspection, 14 American Journal of Comparative Law (1965). 23 Takahashi, Right to Terminate (Avoid) International Sales of Commodities, Journal of Business Law (2003) 102, 114 (115); Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 28; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 58 para. 36. 24 Achilles, para. 8.2; Magnus, in: Staudinger Kommentar (2005), Art. 58 para. 28. 25 Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 28; Hager/Maultzsch, in: Schlechtriem/ Schwenzer, Kommentar (German ed. 2008), Art. 58 para. 12; see Kantonsgericht Zug (Switzerland) 2 December 2004 (Dextrose), CISG-Online 1194 (Pace), where the important time for payment is the arrival of the invoice and not the delivery of the goods. 26 Honnold, Uniform Law (1999), Art. 58 paras 338, 339. 27 Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 29.

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payment will be made against an open invoice does not present any problems when the goods are being delivered by an independent carrier, because the buyer has to pay only after the arrival of the goods. The buyer does not lose his right to examine the goods if the seller exercises his right of retention in accordance with Arts 58(1) second sentence and 58(2).28

2. Time the purchase price becomes due a) General. Art. 58(1) first sentence stipulates as a general rule that the payment of the purchase price is due as soon as the seller has placed the goods or documents representing the goods at the buyer’s disposal.29 The actual handing over does not have to occur.30 It is sufficient that the seller has done everything necessary at the right place and at the right time so that the buyer can take over the goods. The “forward placement” should prevent the buyer from delaying the purchase price payment unilaterally by delaying the actual acceptance of the goods.31 The general rule can be deviated from in various ways (see below paras 19 et seq.). 12 Arts 58(1) second sentence and 58(2) (in regard to a contract involving the carriage of goods) allow for the seller to make the delivery of the goods or documents dependent on the purchase price payment. Following from the latter and Art. 58(1) first sentence, the general opinion is that the CISG assumes that generally delivery and purchase price payment are performed step-by-step.32 11

b) Time payment is due 13 aa) General. Art. 58 governs the time the purchase price payment is due33 with the result that at that time payment must be effected. The arrangement of the payment in a timely manner is not sufficient. The buyer has to bear the risk of the change in the exchange rate if the payment is delayed.34 Since international money transactions might take some time, the buyer has to take the additional time into account. A special reminder by the seller to pay the purchase price or notification eg bank account details 28 Magnus, in: Staudinger Kommentar (2013), Art. 58 paras. 29; Huber, in: Mu ¨ nchKommBGB (2007), Art. 58 para. 8. 29 Handelsgericht Aargau (Switzerland) 21 June 2011 (cosmetic products case) CISG-Online 2432. 30 Compare: Tribunal Cantonal Valais (Switzerland) 20 December 1994 (Artificial stones), CISGOnline 302 (Pace); Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 10; Achilles, Art. 58 para. 3; Herber/Czerwenka, Kommentar (1991), Art. 58 para. 3. 31 Magnus, in: Staudinger Kommentar (2005), Art. 58 para. 4; Huber, in: Mu ¨ nchKommBGB (2007), Art. 58 para. 12. 32 Bundesgericht (Switzerland) 20 December 2006 (Machines), CISG-Online 1426 (Pace); Handelsgericht des Kantons Aargau (Switzerland) 25 January 2005 (Floor tiles), CISG-Online 1091 (Pace); Landgericht Hamburg (Germany) 10 September 2003, CISG-Online 874; Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 7; Hager/Maultzsch, in: Schlechtriem/Schwenzer, Kommentar (German ed. 2008), Art. 58 para. 2; Honnold, Uniform Law (1999), Art. 58 para. 339.2; Schlechtriem/Butler, CISG (2009), para. 205; Achilles, Art. 58 para. 1; Lookofsky, The 1980 United Nations Convention on Contracts for the International Sale of Goods, Art. 58 para. 2.44. Probably different – assuming seller’s duty to deliver in advance- Landgericht Krefeld (Germany) 20 September 2006 (Charcoal), CISG-Online 1459 (Pace); Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 58 para. 58; Piltz, § 4 para. 153. Compare: Section 28 Sale of Goods Act 1979 (UK). 33 Oberlandesgericht Ko ¨ ln (Germany) 09 July 1997 (Video cameras and equipment), CISG-Online 495 (Pace); Magnus, in: Staudinger Kommentar (2013), Art. 58 paras 2, 9; Huber, in: Mu¨nchKommBGB (2016), Art. 58 para. 11. 34 Corte Cubana de Arbitraje Comercial (Cuba) 23 Dec 2013, CISG-Online 2572. The Tribunal held that even if the CISG did not contemplate the case of the modification of the exchange rate during the period of late payment, in the case of indetermination of the place of delivery (Art. 57.1 a) and time (Arts, 58, 59) it is an inherent principle of protection of the creditor’s interest that the delay of the payment by the buyer should not benefit the buyer.

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is not necessary. However, generally the buyer has the right to be issued an invoice.35 In some cases corrections in regard to the timing have to be made which will be discussed below.36 However, those corrections should not lead one to assume, as some voices in the literature suggest,37 that Arts 58(1) and 58(3) only govern the payment date at which the buyer has to undertake the necessary acts to effect payment.38 The time of payment of the purchase price is in principle the time when the seller places the goods or documents at the disposal of the buyer (Art. 58(1) first sentence). Since Art. 58(1) second sentence states that the seller can make the handing over of the goods or documents dependent on the payment, it follows that “disposal” and “handing over” do not have the same meaning.39 For the purchase price to be due, it is sufficient that the seller has done everything necessary at the right place and at the right time so that the buyer can take over the goods or documents without any difficulty; the actual handing over is not necessary.40 “Predating” should prevent the buyer from delaying unilaterally by delaying the actual acceptance of the goods at the time the purchase price payment is due. The time when the goods or documents are placed at the disposal of the buyer is, however, not in itself decisive with respect to the time the payment is due. First and foremost the parties can determine the time of payment by agreement.41 Trade practices and usages can also be determinative. Secondly, if the buyer exercises his right under Art. 58(3), the time the payment is due is extended until the buyer is able to inspect the goods.42 From the right to examine goods it follows that the buyer must have a reasonable time after the inspection to effect the payment of the purchase price. “Reasonable time” will depend, for example, on the amount payable and possible currency regulations. As Huber neatly summarises that the time payment is due, is when the buyer inspects the goods in accordance with Art. 58(3),43 the goods placed at the disposal of the buyer + time to examine the goods in accordance with Art. 58(3) + reasonable time to pay. Third, if the buyer did not know and could not have known when the goods or documents would be at his disposal, the time at which the buyer is notified of such becomes decisive.44 This notice is sent at the seller’s risk.45 Art. 27 does not apply in 35

Piltz, Internationales Kaufrecht (2008), para. 4–147. See below paras 19 et seq. 37 Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 58 paras 8 et seq. 38 Huber, in: Mu ¨ nchKommBGB (2016), Art. 58 para. 11. 39 Huber, in: Mu ¨ nchKommBGB (2016), Art. 58 para. 12. 40 Tribunal Cantonal Valais (Switzerland) 20 December 1994 (Artificial stones), CISG-Online 302 (Pace); Achilles, Art. 58 para. 3; Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 10. 41 For example the Bundesgericht (Switzerland) held in one case that the parties had derogated from the principle of a step-by-step performance in a case where they had agreed on payment of 30 per cent of the price upon ordering of the goods, 30 per cent at the beginning of assembly, and 30 per cent at the completion of installation, the final 10 per cent to be paid after successful start-up of the facility: Bundesgericht (Switzerland) 18 January 1996 (Plant for purification of exhaust gases), CISG-Online 214 (Pace); see also Handelsgericht Aargau (Switzerland) 5 November 2002 (inflatable triumphal arch) CISGOnline 715 (Pace); see also Oberlandesgericht Mu¨nchen (Germany) 21 January 1998 (Thermal insulation material), CISG-Online 536 (Pace), where the granting of an interest free, not terminable commercial credit meant that the time the payment was due was not at the time when the goods or documents were placed at the disposal of the buyer but the claim for the purchase price was deferred sine die. 42 See above paras 2 et seq. 43 Huber, in: Mu ¨ nchKommBGB (2016), Art. 58 para. 13. 44 See Maskow, in: Bianca/Bonell, Commentary (1987), Art. 58 para. 2.4. (notice requirement based on Art. 7(1)); Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 11; Herber/Czerwenka, Kommentar ¨ bereinkommens u¨ber internationale (1991), Art. 58 para. 4; U. Huber, Der UNICITRAL-Entwurf eines U Warenkaufvertra¨ge, 43 RabelsZ (1979) 413 (515); different view: Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 58 paras 8 et seq. (Art. 58 only governs the time of payment). 45 See above paras 4 et seq. 36

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regard to a seller’s notification since Art. 27 is not applicable to such notification. The notification sent in order to bring about the delivery does not expressly fall under the ambit of Art. 27. Furthermore, Art. 27 is not tailored to declarations which give rise to obligations on the part of the addressee.46 It follows that the buyer must have a reasonable time after the inspection to effect the payment of the purchase price, similarly to the previous scenario. Furthermore, the buyer still has the right to examine the goods in accordance with Art. 58(3). The time from when the goods were dispatched by the seller until the seller receives payment can, therefore, be longer than the one anticipated by the seller. 19 Fourth, the meaning of “placing at the buyer’s disposal” depends on the particular type of contract involved and, therefore, the time payment is due might differ depending on the type of contract.47 20

bb) Particular cases. The time the purchase price payment becomes due is generally, as stated above, dependent on the seller making the goods or documents available to the buyer, which means to have done everything necessary at the right time and at the right place so that the buyer can take over the goods without any difficulty. Party agreement and in addition trade practices and usages determine what is necessary, alternatively Arts 31 et seq. apply. In regard to certain types of contracts it is not sufficient for the seller to place the goods and documents merely at the disposal of the buyer:

21

(i) Goods delivered at the seller’s place of business. If the buyer has to take over the goods at the seller’s place of business or at some other location (Art. 31(c) and (b)),48 the goods are at the buyer’s disposal, and the price becomes due under the first sentence of Art. 58(1) when the seller has taken the necessary preparatory steps; particularly by identifying the goods to the contract and giving the buyer notice of that fact.49 The notification sent in order to bring about delivery does not expressly fall in the ambit of Art. 27. Furthermore, Art. 27 is not tailored to declarations which give rise to obligations on the part of the addressee.50 Therefore, the notice is sent at the seller’s own risk. If that were not the case, the purchase price payment might become due without the buyer becoming aware of the fact. After the notice has reached the buyer, the buyer must be allowed a reasonable period within which to collect and pay for the goods. That is also indicated by the fact that the buyer is only obliged to pay the price if he has had an opportunity to examine the goods (Art. 58(3)).51

22

(ii) Goods delivered at the buyer’s place of business. If the seller has to transport the goods and tender them to the buyer at his place of business52 or at some third place, the goods are at the buyer’s disposal as soon as the seller tenders them to him at that place.53 When the goods are tendered, payment becomes due by virtue of Art. 58(1) first sentence. The buyer, of course, has the right under Art. 58(3) to examine the goods before payment. If the seller has agreed to deliver the goods to another location and the parties have not agreed to a fixed time for delivery, the seller is required to give prior 46 Noussias, Die Zugangsbedu ¨ rftigkeit von Mitteilungen nach dem Einheitlichen Haager Kaufgesetzen und nach dem UN-Kaufgesetz (1981) pp. 126, 130 et seq.; Schlechtriem/Butler, CISG (2009), p. 94. 47 See below paras 19 et seq. 48 See Incoterms – Ex Works. 49 Obergericht des Kantons Zug (Switzerland) 5 Mar 2013 (Marble slabs case) CISG-Online 2471; Secretariat Commentary on 1978 Draft, Art. 29 para. 16 and Art. 81 para. 7. 50 Noussias, Die Zugangsbedu ¨ rftigkeit von Mitteilungen nach dem Einheitlichen Haager Kaufgesetzen und nach dem UN-Kaufgesetz (1981) pp. 126, 130 et seq.; Schlechtriem/Butler, CISG (2009), p. 94. 51 Obergericht des Kantons Zug (Switzerland) 5 Mar 2013 (Marble slabs case) CISG-Online 2471. 52 See Incoterms – Delivered Duty Paid. 53 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 58 para. 11.

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notice to the buyer so as to enable the buyer to take over the goods in good time to effect payment.54 If the seller sends the notice after the seller has delivered the goods the buyer must be allowed a reasonable period within which to take delivery and effect payment.55 What a “reasonable time” is will depend on the circumstances, including the amount payable.56 The notice is sent at the seller’s risk.57 However, only where the carrier is authorised to collect payment can the buyer comply with his obligation (linked to the tender of the goods) to pay the price at the place of where the goods have to be handed over. If the carrier is not so authorised, the seller is obliged to perform in advance of the buyer and, pursuant to Art. 57(1)(a), the place of payment is, therefore, the seller’s place of business.58 The buyer must be allowed a reasonable period to pay the purchase price in those circumstances to give him a chance to pay in time. (iii) Sale of goods in storage. If the goods are sold from storage in a warehouse 23 (Art. 31(b)) the goods are placed at the buyer’s disposal when the seller has created the opportunity for the buyer to collect the goods and the warehouse keeper is prepared to hand over the goods acknowledging the buyer’s right to possession of the goods.59 The purchase price is due the moment the goods are at the buyer’s disposal at the warehouse, however, the buyer has a right to examine the goods in accordance with Art. 58(3) and the time the payment is due will be delayed until the buyer has exercised that right. In regard to the timing of the payment, consideration has to be given as to whether the buyer knew or ought to have known that the goods were at his disposal.60 Using Art. 58(2) analogously then, the seller must have the right to instruct the warehouse keeper to only hand over the goods against payment and to allow the seller at the same time to endow an authority to collect payment from the warehouse keeper.61 Generally, in practice, however, the parties will agree special payment terms, such as “cash against delivery note” or “cash against documents” so that it is not necessary to place the goods at the disposal of the buyer. Often in those cases the right under Art. 58(3) is also excluded.62 (iv) Sale involving carriage of goods. When goods are sent by carrier, the goods are at 24 the buyer’s disposal when the carrier has tendered the goods to the buyer at the place of destination.63 The time the payment is due is delayed here as well until the buyer has exercised his right to examine the goods (Art. 58(3)) if he wishes to do so. It is important to consider the time for payment if the buyer did not know that the goods were at his disposal.64 If the goods are lost or destroyed during transport after the risk was vested in the buyer, then the purchase price is due at the time the goods would have been at the disposal of the buyer in the normal course of events.65 The timeframe in which payment can be made depends on where the place of performance for the 54

Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 58 para. 5. Maskow, in: Bianca/Bonell, Commentary (1987), Art. 58 para. 2.4; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 58 para. 11. 56 Maskow, in: Bianca/Bonell, Commentary (1987), Art. 58 para. 2.4. 57 See above paras 4 et seq. 58 See Art. 57 paras 11–13. 59 Compare: Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 58 para. 14 (formulated slightly differently); Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 12; Achilles, Art. 58 para. 3. 60 See above paras 4 et seq. 61 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 58 para. 14. 62 Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 14. 63 As in regards to the use of documents see below paras 26 et seq. 64 See above paras 4 et seq. 65 Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 15; Benicke, in: Mu ¨ nchKommHGB (2013), Art. 58 para. 7. 55

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payment is.66 If the seller has made use of the right of retention provided in Art. 58(2), the seller can dispatch the goods with the price to be paid to the carrier concurrently with the handing over of the goods. If the last carrier has authority to collect the payment, the place of performance for the payment under Art. 57(1)(b) is the place of exchange, so the timeframe for the payment will be relatively short. If the seller does not exercise his right of retention the seller must perform his obligation before the buyer, in which case the place of payment will then be the seller’s place of business (Art. 57(1)(a)) and the buyer will enjoy a longer period within which to transfer payment.67 25

(v) Sale of goods in transit. The sale of goods in transit is governed by the same rules as the sale of goods involving transport by a carrier. Only when the goods are handed over at the place of destination does payment of the price become due in accordance with Art. 58(1) first sentence. For his protection the seller must be given, analogous to Art. 58(2), the right to make the handing over of the goods subject to payment of the price to the carrier. The buyer must be able to exercise his right under Art. 58(3). However, generally the sale of goods in transit will be effected by documents so that it is not pertinent whether the goods are placed at the disposal of the buyer but rather whether the documents are handed over. Often the right to examine under Art. 58(3) will also be excluded.68

3. Divergent agreements 26

As already mentioned in numerous places, the parties can deviate from all parts of Art. 58 by agreement: the step-by-step performance; the time the payment is due; the right to examine the goods, and possible rights of retention. The contract can contain explicit terms in regard to the time of payment, such as prevalent payment clauses69 or clauses which have an indirect impact on the application of Art. 58, such as, for example, Incoterms which govern the place of performance for the delivery of the goods and therewith stipulate the place where the seller has to place the goods at the disposal of the buyer.70 Courts have also found that an agreement to divert from Art. 58 can also follow impliedly from the contract programme agreed upon by the parties. For example the Swiss Bundesgericht held that the parties had derogated from the principle of step-by-step performance in a case where they had agreed on payment of 30 per cent of the price upon ordering of the goods, 30 per cent at the beginning of assembly, and 30 per cent at the completion of installation, the final 10 per cent to be paid after successful start-up of the facility.71

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Compare: Art. 57 paras 11, 18. Achilles, Art. 58 para. 3; see also Lookofsky, The United Nations Convention on Contracts for the International Sale of Goods, Art. 58 para. 246. 68 Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 15; Huber, in: Mu ¨ nchKommBGB (2016), Art. 58 para. 18. 69 See Art. 53 paras 11 et seq.; see in regard to the liability to pay in advance due to an irrevocable credit clause Oberster Gerichtshof (Austria), 6 February 1996, ZfRV (1996) 248 (252 seq.). 70 Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 8; Huber, in: Mu ¨ nchKommBGB (2016), Art. 58 para. 20. 71 Bundesgericht (Switzerland) 18 January 1996 (Plant for purification of exhaust gases), CISG-Online 214 (Pace); see also Handelsgericht Aargau (Switzerland) 5 November 2002 (Inflatable triumphal arch) CISG-Online 715 (Pace); see also Oberlandesgericht Mu¨nchen (Germany) 21 January 1998 (insulation materials) CISG-Online 536, where the granting of an interest free, not terminable commercial credit meant that the time the payment was due was not at the time when the goods or documents were placed at the disposal of the buyer but the claim for the purchase price was deferred sine die. 67

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4. Documents Art. 58(1) and (2) equate documents with goods in respect of placing the goods at the 27 disposal of the buyer and in regard to the handing over of the goods. This applies to cases where the parties have agreed that the seller has to tender the documents to the buyer. In regard to the due date of payment, the decisive moment is when the seller has made the documents available to the buyer, not the time the goods were placed at the disposal of the buyer. Documents are normally placed at the buyer’s disposal by presenting them at his bank (in the case of “cash against documents”) or at a second bank in the seller’s country (if payment by letter of credit has been agreed).72 If a carrier is entrusted with presenting the documents and collecting payment, the purchase price must be paid to the carrier concurrently with the handing over of the documents (Art. 58(2)).73 The use of documents is particularly important in cases where the direct exchange of goods for money is not possible or extremely difficult, for example where a carrier is used, especially in overseas trade, and also where goods are sold from storage in a warehouse or transported by the seller to the buyer’s premises at the seller’s risk. The use of documents in such cases ensures the step-by-step performance by both parties and accelerates the performance of the transaction. Often in cases where the parties have agreed on a “document sale” they will also have agreed upon on the exclusion of Art. 58(3). Art. 58(1) and (2) do not define which documents are governed by the provisions. 28 Traditional documents of title controlling the disposition of the goods, like a bill of lading or a warehouse receipt, are covered by the provisions since the handing over of such documents is the equivalent to the delivery of the goods. The purchase price payment, therefore, becomes due upon their presentation (Art. 58(1)). However, there is a variety of documents used in commercial sales contracts to bring about delivery, for example, delivery order, delivery warrant, or bill of delivery or bills issued under the CMR and CIM Conventions governing carriage by road and rail.74 To take account of those trade practices which use such a variety of documents, other than the traditional documents of title to effect delivery, “documents” in Art. 58(1) and (2) should be understood to include all documents the seller can use to perform his obligation to deliver the goods in accordance with Arts 30 and 34.75 This means that the documents’ use must give the buyer a right to take possession of the goods to the exclusion of the seller. That requirement is satisfied if the documents contain a promise, by the person entitled to possession of the goods, that that person will deliver them. This is indicated, for example, by a certificate of obligation or accepted delivery order, or a certificate which entitles the holder to issue instructions concerning the goods during the course of their transport.76 The German Bundesgerichtshof77 has held that Art. 58 should be applied to docu- 29 ments which allow the buyer access to the goods excluding the seller (for example, 72

See also Art. 57 paras 25 et seq. See above para. 23. 74 Weber, Warenpapiere ohne Traditionsfunktion (1978) pp. 303–321; Digenopoulos, Die Abwandlung ¨ berseekaufrecht (1978) pp. 145 et seq.; Sevo´n, Obligations of der CIF und FOB Gescha¨fte im modernen U the Buyer under the Vienna Convention on the International Sale of Goods (1990) p. 335. 75 General opinion: Huber, in: Mu ¨ nchKommBGB (2016), Art. 58 para. 25; Mohs, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 58 para. 16; Ferrari et al., Internationales Vertragsrecht (2011), Art. 58 para. 21; see also Secretariat Commentary on 1978 Draft, Art. 53 para. 5 note 4; other opinion: Padovini, Der internationale Kauf: Von der Haager Konvention zur Wiener Konvention – Erfahrungen und Aussichten, ZvglRWiss (1987) 87 (89). 76 Sevo ´ n, Obligations of the Buyer under the Vienna Convention on the International Sale of Goods (1990) p. 335. 77 Bundesgerichtshof (Germany) 3 April 1996 (Cobalt sulphate), CISG-Online 135 (Pace). 73

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Part III. Chapter III. Obligations of the Buyer

warehouse warrants) but that Art. 58 should not be applicable to certificates of quality or certificates of origin. This seems to concur with the opinion in the literature which, in regard to documents of carriage, takes the view that whether the documents allow the owner to retrospectively issue instructions in regard to the retention of the goods or diversion during the transport of the goods (like a duplicate of a consignment note or a CMR consignment note) is decisive for Art. 58. Art. 58 shall govern those documents.78 Quay or board receipts are not governed.79 30 A third opinion holds that Art. 58 governs documents of proof, such as board receipts.80

5. Rights of retention (Arts 58(1) second sentence and 58(2)) Art. 58(1) and (2) not only link the time for payment with the placing of the goods or documents at the buyer’s disposal, but also establish reciprocal rights of retention.81 For the buyer, the right of retention follows from the fact that only the placing of the goods at his disposal causes payment to become due (Art. 58(1) first sentence). One court has held that the buyer has the right to retention until a proper invoice has been furnished.82 The seller derives his right of retention from Art. 58(1) second sentence as regards deliveries at his or the buyer’s place of business or a third place. The seller has a right of retention until the payment of the purchase price. The provision does not affect the time the purchase price is due, which already eventuates with the placement of the goods at the disposal of the buyer, since the right of retention is linked to the handing over of the goods.83 The right of retention does not abolish the buyer’s right to examine the goods under Art. 58(3). The seller does have to grant the buyer the opportunity to examine the goods unless that right has been excluded by agreement.84 32 Art. 58(2) gives the seller a right of retention as regards a sale involving carriage of goods, a sale of goods in transit, or a sale of goods stored in a warehouse which requires that the goods or documents are only handed over against the payment of the purchase price. That requires in turn instructions to the carrier in regard to the collection of the purchase price. Such instructions are rare in practice.85 The conclusion can be drawn from Art. 58(2) that the seller can only make the dispatching of the goods dependent on the payment86 if the parties so agreed. The buyer’s right to examine the goods 31

78 Herber/Czerwenka, Kommentar (1991), Art. 58(9); Magnus, in: Staudinger Kommentar (2013), Art. 58 (20),(21); Achilles, Art. 58 para. 2; Karollus, p. 170. 79 Compare: Magnus, in: Staudinger Kommentar (2013), Art. 58 paras 20, 21; Huber, in: Mu ¨ nchKommBGB (2016), Art. 58 para. 26; Fleischmann/Schmidt-Kessel in DiMatteo/Janssen/Magnus/Schulze, International Sales Law (2016) Ch 13 para. 78. 80 Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991), Art. 57 para. 8.1. (depending on the contractual agreement other documents, like insurance documents, or certificates of quality, shall be governed by Art. 58); Maskow, in: Bianca/Bonell, Art. 58 para. 3.1; Wiegand, Die Pflichten des Ka¨ufers und die Folgen ihrer Verletzung, Berner Tage (1991) pp. 143, 155, 156. 81 Handelsgericht des Kantons St Gallen (Switzerland) 14 June 2012 (Bio fruits case) CISG-Online 2468; Huber, in: Mu¨nchKommBGB (2016), Art. 58 paras 22, 23. 82 AG Geldern (Germany) 17 Aug 2011 (Corn), CISG-Online 2302. The court held that in regard to the cross border trade between the Netherlands and Germany the furnishing of a proper invoice was an implied term of the contract. 83 Huber, in: Mu ¨ nchKommBGB (2016), Art. 58 para. 22; Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 22. 84 Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 22; Herber/Czerwenka, Kommentar (1991), Art. 58 para. 6; Ferrari et al., Internationales Vertragsrecht (2011), Art. 58 para. 25. 85 Compare: Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 15; Huber, in: Mu ¨ nchKommBGB (2016), Art. 58 para. 23. 86 Different Art. 72(1) ULIS, Herber/Czerwenka, Kommentar (1991), Art. 58 para. 5; Magnus, in: Staudinger Kommentar (2005), Art. 58 para. 1; Huber, in: Mu¨nchKommBGB (2016), Art. 58 para. 23.

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Section I. Payment of the price

33–37

Article 58

(Art. 58(3)) has to be observed, too.87 Art. 58(2) can be applied analogously to the sale of goods in stock; the seller has the right to instruct the warehouse keeper to only hand over the goods against the payment of the purchase price.88 Art. 58 lays down express rights of retention only for delivery and payment. However, 33 it must also apply to other obligations, provided that they are of some substance (following from Art. 71).89 If the threat of a breach of such obligations gives rise to rights on account of an anticipatory breach of contract, their actual breach justifies a right of retention.90 For example, a right of retention exists if the buyer does not provide the agreed securities or if the buyer does not execute the agreed advertisement.

6. Payment ahead of time, part payment The buyer’s payment ahead of time amounts to a breach of contract. The seller can 34 refuse such payment.91 If the seller accepts payment ahead of time the seller can only claim a possible currency loss if they have reserved that right at acceptance.92 The seller can also decline part payments. If the seller accepts part payment they can 35 invoke the usual remedies in regard to the rest of the purchase price without having to reserve that right.93

7. Application to other buyer’s obligations Unless the parties have agreed otherwise Art 58 is by way of analogy applicable to 36 other obligations of the buyer, especially duties to cooperate. Therefore, the buyer has to immediately fulfil those obligations once the seller has offered the goods to the buyer and the buyer has had the opportunity to inspect them in accordance with Art. 58(3). The core idea of Art. 58 is also applicable to those additional obligations. The moment the buyer can take over the goods, the buyer has to in return fulfil his/her duty so that the seller is not forced to perform in advance.94

8. Practical considerations The usual rules in regard to the burden of proof apply. Generally, the seller has to 37 prove the time of payment, whereas the buyer has to prove that the payment occurred in time.95 Departure from that general rule can occur due to the rule that the party who 87 Herber/Czerwenka, Kommentar (1991), Art. 58 para. 5; Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 15; Huber, in: Mu¨nchKommBGB (2016), Art. 58 para. 23. 88 Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 58 para. 13. 89 See Handelsgericht des Kantons St Gallen (Switzerland) 14 June 2012 (bio fruits case) CISG-Online 2468. 90 General opinion: Huber, in: Mu ¨ nchKommBGB (2016), Art. 58 para. 24; Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 23; Achilles, Art. 58 para. 6; different view: Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 58 paras 66 et seq. 91 General opinion: Huber, in: Mu ¨ nchKommBGB (2016), Art. 58 para. 28. 92 Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 31; Herber/Czerwenka, Kommentar (1991), Art. 58 para. 12; Huber, in: Mu¨nchKommBGB (2016), Art. 58 para. 28; Ferrari et al., Internationales Vertragsrecht (2011), Art. 59 para. 10; different opinion: Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 58 paras 85, 86 with extensive arguments. 93 General opinion: Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 32; Herber/Czerwenka, Kommentar (1991), Art. 58 para. 12; different opinion: Schnyder/Straub, in: Honsell, Kommentar (1997), Art. 61 paras 52 et seq. with extensive arguments. 94 Magnus, in: Staudinger Kommentar (2013), Art. 58 para. 33. 95 Sixth Civil Court of First Instance, City of Tijuana, State of Baja Califoria (Mexico) 14 July 2000 (wood), CISG-Online 571; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 58 para. 38; Ferrari et al., Internationales Vertragsrecht (2011), Art. 58 para. 37.

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Article 58 38–41

Part III. Chapter III. Obligations of the Buyer

claims the deviation from the principle has to prove it, for example, a liability to perform in advance instead of step-by-step performance.96 38 Art. 58 is not mandatory and parties can agree to a completely different regime in regard to the interaction between delivery of the goods and purchase price payment. However, the parties should attach importance to agreeing to the exact time of the purchase price payment and to agreeing on mechanisms which notify the buyer on the time the payment is due. If the sale is based on documents, the parties should be careful to exactly describe the documents.97

III. Comparable Rules Neither the PICC nor the PECL have specific provisions dealing with the time the purchase price is due. However, both have provisions dealing generally with the time of performance. The PICC embodies the general rule in Art. 58 that performance has to eventuate step-by-step. Art. 6.1.4 of the PICC states that the parties are bound to render their performances simultaneously to the extent that the performances of the parties can be rendered simultaneously, unless circumstances indicate otherwise. The PECL state in their Art. 7:102 that a party has to effect its performance: “(1) if a time is fixed by or determinable from the contract, at that time; (2) if a period of time is fixed by or determinable from the contract, at any time within that period unless the circumstances of the case indicate that the other party is to choose the time; (3) in any other case, within a reasonable time after the conclusion of the contract.” 40 Overall, there should not be a great divergence from the CISG in regard to the time payment is due. 41 At common law the general rule is that party agreement determines the time of payment.98 In certain circumstances, terms in respect of the time of payment have been implied into contracts.99 Only in three scenarios (recognised under equitable principles) in the past has the jurisprudence found that the time fixed for payment is of the essence in the contract.100 S 10(1) of the Sale of Goods Act 1979 (UK) expressly states that, unless a different intention appears from the terms of the contract for the sale of goods, stipulations as to time of payment are not of the essence in the contract. S 28 of the SGA sees payment as being concomitant with the delivery which suggests a closer approach to Art. 58 CISG than the approach often found in textbooks.101 S 34 of the SGA stipulates that “unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound on request to afford the buyer a reasonable opportunity to examine the goods for the purpose of ascertaining whether they are in conformity with the contract and, in the case of a contract for sale by sample, of comparing the bulk with the sample.” 39

96 Compare: Benicke, in: Mu ¨ nchKommHGB (2013), Art. 58 para. 17; Huber, in: Mu¨nchKommBGB (2016), Art. 58 para. 30. 97 Compare: Huber, in: Mu ¨ nchKommBGB (2016), Art. 58 para. 31. 98 Chitty on Contracts (2015) para. 21–053. 99 Chitty on Contracts (2015) paras 21–053; 21-011; see also Bowes v Shand (1877) 2 App Cas 455, 463, 464. 100 (1) Where the parties have expressly stipulated in their contract that the time fixed for performance must be exactly complied with (see Musen v Van Diemen’s Land Co [1938] Ch 253); (2) Where the circumstances of the contract or the nature of the subject-matter indicate that the fixed date must be exactly complied with (e. g. a contract for the sale of goods where a time is fixed for delivery, Bowes v Shand (1877) 2 App Cas 455, 463, 464); (3) Where time was not originally of the essence of the contract, but one party has been guilty of undue delay, the other party may give notice requiring the contract to be performed within a reasonable time (compare s 48(3) Sale of Goods Act 1979 (UK): Shawton Engineering Ltd v DGP International Ltd [2006] 1 BLR 1 [44]). 101 Compare Schlechtriem/Butler, CISG (2009), para. 219 with note 385.

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Article 58

Under § 271(1) of the German BGB first and foremost party agreement determines 42 the time of payment.102 If the parties have not fixed a time for the payment of the purchase price the default rule in § 271(1) BGB stipulates that the obligor can demand the performance immediately. If the parties have agreed upon a time of payment § 271(2) BGB determines that the obligee (i. e. the buyer) can pay before the payment is due, however, the obligor (i. e. the seller) is not permitted to demand the payment before the agreed time. The US-UCC also provides the buyer with a right to inspection absent agreement to 43 the contrary.103 Under the UCC the buyer does not have the right to inspect before payment when the goods are to be shipped and payment is by documentary exchange.104 Further, the UCC explicitly states that the determination of what the parties have agreed to regarding the buyer’s right to inspect can be determined from trade usage, course of performance and, of course, their dealing with each other.105 102

Note that § 271 BGB is a general provision in regard to the time of performance. § 2–513 UCC. 104 § 2–513(3)(b) UCC. 105 § 2–513(3)(a) UCC. 103

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Article 59 The buyer must pay the price on the date fixed by or determinable from the contract and this Convention without the need for any request or compliance with any formality on the part of the seller. Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 2 5

I. Importance and Role of the Provision 1

Art. 59 states that the purchase price has to be paid at the agreed, or otherwise determinable, time without the need for the seller to remind the buyer of the payment or to comply with any other formalities. Art. 59, therefore, clarifies that paying late is a breach of the contract which triggers the legal consequences set out in Arts 61 et seq. A demand note is therefore unnecessary. Art. 59 embodies one of the CISG’s general principles (Art. 7(2)) and is, therefore, applicable to other monetary claims.1

II. Detailed Commentary The time of payment is determined either by the agreement of the parties or by Art. 58. The buyer has to have effected the payment at that particular time. It is not sufficient under Arts 58 and 59 if the buyer took the necessary steps for the payment to reach the seller.2 The late payment results automatically in a breach of contract and triggers the remedies set out in Arts 61 et seq., 78. It is important to note that, contrary to German law, a demand note is not required.3 3 However, according to general opinion some exceptions to the rule in Art. 59 exist to prevent unfair hardship. The time that payment is due can be extended if the buyer takes advantage of his right to examine the goods under Art. 58(3); if the buyer did not know or was under no obligation to know when the goods or documents would be available to the buyer during a step-by-step performance,4 or if the buyer does not know the exact amount of the purchase at the time the purchase price is due.5 In the two latter 2

1 Compare: Magnus, in: Staudinger Kommentar (2013), Art. 59 para. 10; Huber, in: Mu ¨ nchKommBGB (2016), Art. 59 para. 1; Murray, in: Digest, pp. 450 seq. 2 Magnus, in: Staudinger Kommentar (2013), Art. 59 para. 7; Huber, in: Mu ¨ nchKommBGB (2016), Art. 59 para. 2. 3 Compare: Oberlandesgericht Mu ¨ nchen (Germany) 21 January 1998 (Thermal insulation material), CISG-Online 536 (Pace); Oberlandesgericht Mu¨nchen (Germany) 9 July 1997 (Leather goods), CISGOnline 282 (Pace); Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 59 para. 1. 4 See Art. 58 paras 4–6. 5 See Oberlandesgericht Mu ¨ nchen (Germany) 9 July 1997 (Leather goods), CISG-Online 282 (Pace): the Court in this case indicated that knowing the amount owed was a requirement of Art. 59. In this particular case the Court held that the purchase price was due at least when the invoices were presented to the buyer. It was immaterial that, at the time payment was due, the buyer claimed not to have had the invoices. Since in accordance with Art. 59 the buyer does not need to be reminded of the payment the payment was due the moment the invoices were presented (after the agreed payment date); compare: Magnus, in: Staudinger Kommentar (2013), Art. 59 para. 5; Huber, in: Mu¨nchKommBGB (2016), Art. 59 para. 3; Herber/Czerwenka, Kommentar (1991), Art. 59 para. 3.

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Section I. Payment of the price

4–8

Article 59

cases the seller will have to act to affect the time of the payment under Arts 58, 59, e. g., by informing the buyer about the delivery or by sending an invoice.6 Party agreement7 or trade usages and practices often determine that the payment is only 4 due after the seller sent the invoice.8 The Incoterms, e. g., under A 1 generally envisage that the seller has to invoice the buyer before the buyer has to pay the purchase price.9 Whether the buyer can demand a receipt for his payment depends first and foremost on the agreement between the parties or the trade usages and practices.10 However, under the duty of cooperation between the parties, embodied in the CISG (Art. 7(1)), it should be deduced that the obligee generally can demand a receipt from the obligor.11

III. Comparable Rules The PICC does not contain an equivalent to Art. 59. However, from its Arts 5.1.3 (cooperation between the parties) and 5.1.4 (duty to achieve a specific result; duty of best efforts) it can be inferred that under the PICC the buyer would have to pay the purchase price on time without any further notifications or demand notes from the seller. Similarly to the general opinion expressed in regard to Art. 59, those PICC provisions indicate that the seller would be obliged to facilitate the purchase payment if necessary. Similarly, PECL does not contain any equivalent to Art. 59. However, from the contract paradigm stipulated by PECL, it can be inferred that the seller does not need to remind the buyer of the timing of the purchase price payment but the buyer will be in breach of contract if they have not affected payment in time. Under German law the obligor of a claim for payment is in default if they do not perform within thirty days after the due date and receipt of an invoice or equivalent statement of payment without the obligor having to issue a demand notice. If the time at which the invoice or payment statement is received by the obligor is uncertain, an obligor who is not a consumer is in default by thirty days at the latest after the due date and receipt of the consideration (§ 286(3) BGB). In accordance with s 10(1) Sale of Goods Act 1979 (UK) the time of payment is generally not an essential term of the contract. The seller, therefore, will have to demand payment if the buyer does not pay for remedies to be triggered. There is no similar provision in the US-UCC. 6 Benicke, in: Mu ¨ nchKommHGB (2016), Art. 59 para. 1; Herber/Czerwenka, Kommentar (1991), Art. 59 para. 3. 7 OLG Ko ¨ ln (Germany) 3 April 2006 (Strawberry plants case) CISG-Online 1218 (Pace); Handelsgericht des Kantons St Gallen (Switzerland) 11 February 2003 (Audio CDs), CISG-Online 900 (Pace) held that the fact that the buyer demanded the payment could result in the delay starting only with the reminder (however, in this particular case the time the payment was due was unclear). 8 See AG Geldern (Germany) 17 Aug 2011 (Potato clay), CISG-Online 2302 where the Court held that in cross border trade between the Netherlands and Germany the issuing of an invoice was an implied term of the contract. 9 Compare: Ramberg, ICC Guide of Incoterms, comments to A1; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 59 para. 5; Huber, in: Mu¨nchKommBGB (2016), Art. 59 para. 3. 10 See OLG Ko ¨ ln (Germany) 3 April 2006 (Strawberry plants case) CISG-Online 1218 (Pace); Herber/ Czerwenka, Kommentar (1991), Art. 59 para. 3; Magnus, in: Staudinger Kommentar (2013), Art. 59 para. 8; Huber, in: Mu¨nchKommBGB (2016), Art. 59 para. 3. 11 Fountoulakis, IHR (2005) 244; Huber, in: Mu ¨ nchKommBGB (2016), Art. 59 para. 3.

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Section II Taking delivery Article 60 The buyer’s obligation to take delivery consists: (a) in doing all the acts which could reasonably be expected of him in order to enable the seller to make delivery; and (b) in taking over the goods. Bibliography: Danov, Die Abnahmepflicht des Ka¨ufers im Bereich der internationalen Handelsgescha¨fte nach UN-Kaufrecht (2008), available at http://www.utzverlag.de/buecher/40817les.pdf.

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Content of the duty to take delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The taking of the delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Other acts of participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Refusal to take delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Practical considerations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 2 2 2 5 8 9 11

I. Importance and Role of the Provision 1

Art. 60 determines the content of the buyer’s duty to take delivery of the goods. Note that the buyer’s obligation to take delivery already follows from Art. 53. A breach of the buyer’s duty to take delivery results in the application of Arts 61 et seq. It should be noted that Art. 64(1)(b) stipulates that a breach of duty to take delivery may result in the avoidance of the contract. The delineation of the duty to take delivery, especially the duty to participate (Art. 60(a)), from other duties of the buyer is of immense practical importance.

II. Detailed Commentary 1. Content of the duty to take delivery 2

a) The taking of the delivery. Art. 60(b) provides that the duty to take delivery obliges the buyer to physically take over the goods at the place of delivery at the time of delivery.1 The duty also encompasses the duty to unload the delivered goods or to load them on the buyer’s own mode of transport and to bear the costs for those activities, unless otherwise agreed between the parties or if to do so would be contrary to trade 1 Compare: Landgericht Aachen (Germany) 14 May 1993 (Electronic ear device), CISG-Online 86 (Pace); Juzgado de Primera Instancia de Almendralejo (Spain) 2 Sept 2013 (Wine) CISG-Online 2565, where Art. 60 was mentioned by the Court when determining acceptance of the goods; Magnus, in: Staudinger Kommentar (2013), Art. 60 para. 5; Huber, in: Mu¨nchKommBGB (2016), Art. 60 para. 2; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 60 para. 2.

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Section II. Taking delivery

3–6

Article 60

usages and practices.2 The place of delivery and the time of delivery are determined first and foremost in accordance with party agreement. Otherwise Art. 31 determines the place of delivery.3 The general opinion, however, holds that the place of destination is determinative in cases of a contract involving the carriage of goods (Art. 31(a)) and travelling goods.4 The buyer generally has to take delivery immediately when the goods are timely.5 In exceptional circumstances the buyer, however, must be granted a short period of time if the buyer has to undertake some measures to take delivery and the buyer was not able to foresee the time of the delivery.6 The duty to take delivery applies not only to goods but also to documents which the 3 seller has to hand over in accordance with Art. 34 or rather which represent the goods.7 Generally, in the case of goods in storage, the buyer does not physically take delivery but receives the relevant documents.8 The same is true for document sales like cash against documents or cash against letter of credit. The buyer’s duty in such cases is the uptake of the documents. The acquisition of the goods does not result in an acceptance of the goods. The buyer 4 is still able to complain about the breach of contract or to enforce the available remedies for late delivery or delivery to the wrong place.9 b) Other acts of participation. Under Art. 60(a) the buyer has the duty to carry out 5 all acts necessary which can reasonably be expected from the buyer to make the delivery possible.10 Often such duties of cooperation will be stipulated in the contract, for example, through agreed Incoterms and the duties listed under B. Some argue that the Incoterms can be generally used as an interpretation aid in regard to the buyer’s cooperation duties.11 When the buyer has to cooperate depends on the circumstances of the contract. Generally the cooperation has to be early enough to allow the seller to deliver on time. The duty to cooperate can encompass a range of different measures. For example, 6 if the seller has to deliver at the buyer’s place of business, the buyer must keep facilities ready for the delivery (for example, oil tanks, storage space). He might have to obtain the necessary import authorisations,12 and in rare cases export authorization.13 He may also have to organise the contract in regard to the carriage of the goods or the 2

Magnus, in: Staudinger Kommentar (2013), Art. 60 para. 5; Achilles, Art. 60 para. 1. Magnus, in: Staudinger Kommentar (2013), Art. 60 para. 5; Huber, in: Mu¨nchKommBGB (2016), Art. 60 para. 2. 4 Huber, in: Mu ¨ nchKommBGB (2016), Art. 60 para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 60 para. 5. 5 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 60 para. 4; Achilles, Art. 60 para. 1; Huber, in: Mu¨nchKommBGB (2016), Art. 60 para. 2. 6 General opinion: Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 60 para. 4; Achilles, Art. 60 para. 1; Huber, in: Mu¨nchKommBGB (2016), Art. 60 para. 2; Magnus, in: Staudinger Kommentar (2013), Art. 60 para. 7. 7 Magnus, in: Staudinger Kommentar (2013), Art. 60 para. 6; Huber, in: Mu ¨ nchKommBGB (2016), Art. 60 para. 3; Achilles, Art. 60 para. 1.65. 8 Magnus, in: Staudinger Kommentar (2013), Art. 60 para. 6; Huber, in: Mu ¨ nchKommBGB (2016), Art. 60 para. 3; Herber/Czerwenka, Kommentar (1991), Art. 60 para. 7. 9 Magnus, in: Staudinger Kommentar (2013), Art. 60 para. 8; Huber, in: Mu ¨ nchKommBGB (2016), Art. 60 para. 3; Herber/Czerwenka, Kommentar (1991), Art. 60 para. 2; Achilles, Art. 60 para. 1. 10 Compare: Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry Arbitration, 24 January 2002 (Case iron products), CISGOnline 88 (Pace). 11 Magnus, in: Staudinger Kommentar (2013), Art. 60 para. 10; Achilles, Art. 60 para. 2. 12 Compare: the Incoterms in regard to import authorisations. 13 For example: EXW, compare A2 B2 of the Incoterms. 3

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Article 60 7–8

Part III. Chapter III. Obligations of the Buyer

nomination of a ship14 (for example FOB,15 FCA). The buyer is also under the duty to inform,16 especially in regard to peculiarities in the countries where the goods will be delivered to. He may also be under duties in regard to issuing a release order. 7 The buyer’s duty under Art. 60(a) has to be distinguished from other ancillary duties of the buyer. This is especially important since Art. 64(1)(b) stipulates a right to avoid the contract if the buyer breaches his cooperation duty to make delivery possible. This right does not apply in regard to the breach of the buyer’s other ancillary duties. Three duties of cooperation are surrounded by controversy in respect of whether they arise as duties under Art. 60(a), or are mere ancillary duties: the buyer’s duty to make certain plans and data available to the seller which are necessary to manufacture the goods;17 the duty to specify the goods,18 and the obligation to sell to a certain market, in regard to exclusive purchasing obligations, and in regard to price controlling.19 Only the second group of cases has a direct impact on the taking of the delivery and should, therefore, as the general opinion has stated, be a duty to cooperate that, if breached, allows the seller to avoid the contract. In regard to the first set of duties, even though it is very remote from the duty to take delivery, it can be argued that without the cooperation of the buyer there can never be goods which can be delivered and that therefore it should be seen as a cooperation duty. The third set of cases clearly does not affect the taking of delivery and should be classified as ancillary duties.

2. Refusal to take delivery 8

The buyer cannot circumvent or delay the time that the purchase price payment is due by not taking delivery.20 If the buyer does not take delivery the seller can invoke the remedies stipulated in Arts 61 et seq. Art. 64(1)(b) allows the seller to avoid the contract after the seller has set an additional time period. In the case that the buyer justifiably rejects the taking of delivery of the goods, the seller cannot invoke Arts 61 et seq. For example, if the seller delivers earlier (Art. 52(1)) or a surplus quantity (Art. 52(2)) then Arts 61 et seq cannot be invoked. In cases of other breaches of contract, especially in regard to late delivery or the delivery of non-conforming goods, the question of whether the breach is fundamental arises. If the breach is fundamental the buyer is allowed to refuse the delivery of the goods.21 Even in the case of a fundamental breach the buyer can be obliged under Art. 86 to take delivery of the goods temporarily to ensure the 14 Compare: Arbitral Award, CIETAC China International Economic and Trade Arbitration Commission Arbitration (China) 22 March 2001 (Mung beans), CISG-Online 1442 (Pace); Arbitral Award, CIETAC China International Economic & Trade Arbitration Commission Arbitration (China) 8 March 1996 (Horsebeans), CISG-Online 1245 (Pace). 15 Compare: Oberlandesgericht Karlsruhe (Germany) 8 February 2006 (Wheat), CISG-Online 1328 (Pace). 16 US District Court SD New York (U.S.) 10 May 2002 (Chemicals), CISG-Online 653. 17 General opinion: ancillary duty: see Magnus, in: Staudinger Kommentar (2013), Art. 60 para. 10; cooperation duty: Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 60 para. 2. 18 Cooperation duty: Magnus, in: Staudinger Kommentar (2013), Art. 65 para. 6; Mohs, in: Schlech¨ bertriem/Schwenzer, Commentary (2016), Art. 65 para. 8; U. Huber, Der UNCITRAL-Entwurf eines U einkommens u¨ber internationale Warenkaufvertra¨ge, RablesZ (1979) 413 (518); for ancillary duty: Bennicke, in: Mu¨nchKommHGB (2013), Art. 64 para. 7; Knapp, in: Bianca/Bonell, Commentary (1987), Art. 65 paras 2.6, 3.2; Herber/Czerwenka, Kommentar (1991), Art. 65 para. 7. 19 General opinion: ancillary duty: Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 64 para. 8; Huber, in: Mu¨nchKommBGB (2016), Art. 60 para. 3; cooperation duty: Herber/Czerwenka, Kommentar (1991), Art. 64 para. 4 in regard to especially agreed duties. 20 Compare: Oberlandesgericht Du ¨ sseldorf (Germany) 28 May 2004 (TV sets), CISG-Online 850 (Pace). 21 Magnus, in: Staudinger Kommentar (2013), Art. 60 para. 20; Benicke, in: Mu ¨ nchKommHGB (2013), Art. 60 para. 14; Achilles, Art. 60 para. 3; Herber/Czerwenka, Kommentar (1991), Art. 53 para. 11; Bridge, The International Sale of Goods (2013) para 12.09, 12.10.

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Section II. Taking delivery

9–14

Article 60

preservation of the goods, however, this is of course not taking delivery in accordance with Art. 60. If the breach is not fundamental the buyer does not have the right to refuse to take delivery of the goods. However, in some situations the buyer has the right to refuse even if the breach is not fundamental under Art. 7(1) (good faith).22 For example, if the seller did not have to deliver the goods to the buyer’s place of business or if the buyer has already demanded rectification of the defect and the goods are such that they must taken back to the seller for repair.

3. Practical considerations The burden of proof conforms with general principles: the seller has to prove the 9 existence and the content of the duty to take delivery; the buyer has to prove the adequate and orderly performance of that duty.23 Art. 60 is not mandatory and can be modified by agreement. It is especially sensible 10 for the contract to include the right to refuse delivery. The seller is advised to be allowed to fulfil the acts which constitute the taking of the delivery himself.24

III. Comparable Rules Similarly to Art. 60 CISG, Art. 5.1.3 PICC imposes on each party the duty to cooperate with the other when such cooperation may reasonably be expected for the performance of that party’s obligations. This is aided by Arts 5.1.4. and 5.1.5., which oblige a party to make their best effort to achieve performance. Arts 6.1.14 to 6.1.17 deal with the specific scenario that a party is responsible to obtain public permission for the performance (this is the party that has its place of business in that State, that requires the permission and, therefore, will often be the buyer). § 433(2) of the German BGB stipulates for a contract for the sale of goods that the buyer has the duty to pay the purchase price and to take delivery of the goods. However, generally the duty to take delivery and perform all acts necessary for the buyer to affect the taking of delivery is classified as an ancillary duty (unless the contract stipulates otherwise).25 S 37 of the Sale of Goods Act 1979 (UK) sets out the buyer’s liability if the buyer does not take delivery within a reasonable time when the seller is ready and willing to deliver the goods, and requests the buyer to take delivery. The buyer is generally liable to the seller for any loss occasioned by his neglect or refusal to take delivery, and also for a reasonable charge for the care and custody of the goods. § 2–503(1)(b) US-UCC requires that “unless otherwise agreed, the buyer must furnish facilities reasonably suited to the receipt of the goods.” This places a duty on the buyer to provide a proper place for delivery.26 In addition, § 2–301 UCC states that the buyer has to take any reasonable steps necessary to enable the seller to make delivery. 22 Compare: Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 60 para. 3; Herber/Czerwenka, Kommentar (1991), Art. 53 para. 11; contrary view: Magnus, in: Staudinger Kommentar (2013), Art. 60 para. 21; only in very extreme circumstances: Huber, in: Mu¨nchKommBGB (2016), Art. 60 para. 9. 23 Achilles, Art. 60 para. 4; Huber, in: Mu ¨ nchKommBGB (2016), Art. 60 para. 10. 24 Huber, in: Mu ¨ nchKommBGB (2016), Art. 60 para. 11. 25 See: Weidenkaff, in: Palandt (ed.), Kommentar (2009), § 433 para. 36. 26 Gabriel, Sale of Goods (2004) p. 176.

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Section III Remedies for breach of contract by the buyer Introduction to Articles 61–65 This section on the remedies available to the seller for breach of contract by the buyer does not contain a full description of all the remedies available, their modalities and conditions. For example, it does not contain details on damages but simply refers to the section on damages that is common to the buyer and the seller (Arts 74–77). 2 This is due to the structure of the CISG which describes remedies and their modalities in different parts of the convention. In order to have a fuller picture of all the remedies and recourses available to the seller and their modalities, one must read this section along with Arts 71–73 (anticipatory breach), Arts 74–77 (damages), Art. 78 (interests), Arts 79–80 (exemption of liability), Arts 81–84 (effect of avoidance), Arts 85–88 (preservation of the goods), Arts 25–26 (fundamental breach and notice of avoidance) and Art. 28 (limitation on the granting of specific performance). In some circumstances (see Art. 69) the passing of risk may also be a consequence of the breach of an obligation.1 Full comments on these other articles will be provided in other parts of this book.2 3 This section, Section III on the remedies available to the seller (Arts 61–65) of chapter III – “Obligations of the Buyer” parallels Section III on the remedies available to the buyer (Arts 45 to 52) of Chapter II – “Obligations of the Seller”. 1

1

Enderlein/Maskow, International Sales Law (1992), p. 234. For a look at remedies not article by article but remedy by remedy, one could look for example at Liu Chengwei, Remedies in International Sales – perspectives from CISG, Unidroit Principles and PECL (2007). 2

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Article 61 (1) If the buyer fails to perform any of his obligations under the contract or this Convention, the seller may:

(a) exercise the rights provided in articles 62 to 65; (b) claim damages as provided in articles 74 to 77. (2) The seller is not deprived of any right he may have to claim damages by exercising his right to other remedies. (3) No period of grace may be granted to the buyer by a court or arbitral tribunal when the seller resorts to a remedy for breach of contract. Bibliography: Enderlein/Maskow, International Sales Law (1992), p. 234; Honnold, Uniform Law (2009), paras 276 et seq.; Koch, Editorial remarks: Commentary on Whether the UNIDROIT Principles of International Commercial Contracts May Be Used to Interpret or Supplement Articles 63 and 64 of the ¨ s/Gautier, Droit civil - Les contracts spe´ciaux (2003) para. 324; CISG, s. II (2)(c) (Pace); Malaurie/AynU Schlechtriem, Uniform Sales Law - The UN-Convention on Contracts for the International Sale of Goods (1986), Arts 61; Schlechtriem/Schwenzer, Commentary (2016), Art. 61; Zweigert/Ko¨tz, Comparative Law (1998) p. 497.

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1. Remedies available to the seller (Art. 61(1)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2. Damages can be cumulated with other remedies (Art. 61(2)). . . . . . . . . . . . . . 6 3. Court may not grant a period of grace (Art. 61(3)). . . . . . . . . . . . . . . . . . . . . . . . . 7 III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

I. Importance and Role of the Provision The substance of this article has not changed since its 1978 Draft.1 This article is 1 meant to gather all the remedies available to the seller (at least a reference to all of them) in one article of the CISG irrespective of the nature of the breach by the buyer. This is a novel approach – the ULIS listed separate remedies for each type of breach.2 Art. 45 is the parallel article on the remedies available to the buyer and in some respect the language of the two articles is identical.

II. Detailed Commentary 1. Remedies available to the seller (Art. 61(1)) Art. 61(1) CISG lists the remedies available to the seller for any failure of the buyer 2 “to perform any of his obligations under the contract and this Convention”. His main obligations under the Convention are to pay the price (Arts 54–59) and to take delivery (Art. 60 CISG). The contract may include many more obligations.3 As 1

Then Art. 42 in 1977, see Doc. B(1), UNCITRAL YB (1977), p. 50. Schlechtriem, Uniform Sales Law – The UN-Convention on Contracts for the International Sale of Goods (1986), p. 75. See Arts 61–64, 66–68 and 70 ULIS. 3 It should be noted that many contractual obligations may in fact fall under the obligation to pay and the obligation to take delivery as these obligations are defined very broadly as including the taking of any step necessary to enable payment and delivery, see Arts 54 and 60. An obligation to issue a letter of credit for example would be part of the obligation to pay. 2

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Article 61 3–6

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mentioned above, the source of the breach is here irrelevant – the remedies are in principle available whatever the nature of the breach of contract or of the convention, though of course there will be modalities and limitations to each of these remedies – not every breach will be a fundamental breach for example and, therefore, the right to avoid the contract will in some cases be qualified.4 3 It should be noted that there is no requirement to prove any fault or negligence on the part of the buyer. The failure by the buyer to perform an obligation is all the seller has to prove.5 Some national legal systems adopt a concept of fault or negligence, even though in the case of the contract of sale the fault can often be presumed from the nonperformance. The CISG clearly rejects such an approach.6 There may however be an exemption of liability for damages available to the buyer under some circumstances.7 4 Art. 61(1)(a) merely refers the reader to the articles that follow (Arts 62–65) detailing the remedies which the seller is entitled to exercise. Art. 61(1)(b) however states that the seller may “claim damages as provided in Articles 74 to 77.” It should be noted that Art. 61(1)(b) is the source of the right to claim damages and should always be cited as such – Arts 74–77 do not mention the right to damages but simply state their modalities.8 5 It should be noted, however, that the list of remedies for breach found at Art. 61(1) is not as comprehensive as it could be. There is for example no mention of the right to interests (Art. 78), the right of the seller to retain the goods in some circumstance (Art. 85) or the right to sell the goods to a third party (self help) in some circumstances (Art. 88). Although Art. 61(1)(b) refers to Arts 74–77 on some of the modalities of the right to damages, there is no reference in Art. 61 et seq. to the exemption of liability for damages (Arts 79–80), the effect of avoidance (Arts 81–84), the definition of a fundamental breach (Art. 25) or the limitation on the granting of specific performance (Art. 28). In some circumstances (Art. 69) the passing of risk may also be a consequence of the breach of an obligation.9

2. Damages can be cumulated with other remedies (Art. 61(2)) 6

Art. 61(2) states that the seller is not deprived of his right to claim damages even if he exercises his right to other remedies.10 This allows the seller to ask for specific performance and still claim damages for delay in performance for example, or allows him to avoid the contract and claim damages if, for example, he cannot resell the goods and make the expected profit.

4

See Arts 64(1)(a) and 25, for example. Oberlandesgericht Koblenz (Germany) 17 September 1993 (logo for ink printers), CISG-Online 91 (Pace). 6 Honnold, Uniform Law (2009), paras 276 et seq.; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 61 para. 5. 7 Art. 79. 8 For cases that have properly pointed to Art. 61(1)(b) as the source of the right to damages, see for example: Cour d’appel de Colmar (France) 12 June 2001 (air-conditioning system for trucks), CISGOnline 694 (Pace) and Landgericht Aachen (Germany) 03 April 1990 (shoes), CISG-Online 12 (Pace). 9 Enderlein/Maskow, International Sales Law (1992), p. 234. 10 See also Art. 63(2) preserving the right to damages for delayed performance when an additional period of time is granted. 5

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Section III. Remedies for breach of contract by the buyer

7–9

Article 61

3. Court may not grant a period of grace (Art. 61(3)) The statement in Art. 61(3) that “no period of grace may be granted to the buyer by 7 a court or arbitral tribunal when the seller resorts to a remedy for breach of contract” may seem to go without saying to jurists trained in the common law tradition. This is one of those provisions of the CISG that have been written to counter a rule common in a specific legal tradition and which therefore makes little sense to someone from another tradition11 – ‘why is there a need to say this?’ would ask the common law trained jurist. The reason is that under French law, for example, when a party seeks to rescind a 8 contract (re´solution), the tribunal may grant a period of grace.12 The CISG rejects this approach and therefore prevents the court or tribunal from granting such a period of grace, thus removing a judicial discretion which would have brought uncertainty to international trade.13 Only the aggrieved party may at his discretion grant an additional period of time.14 What if the additional period of time fixed by the seller was not “of reasonable 9 length” as required by Art. 63(1)? Could the court or tribunal order a lengthening of the period of time as a court or tribunal could do under 7.1.5(3) PICC15 or would this be forbidden under Art. 61(3) as a court granted grace period? The alternative would be to deny the right to avoid the contract at the end of an additional period of time of unreasonable length. It is suggested that the solution proposed by Unidroit should be followed as the right interpretation of the CISG. The purpose of Art. 61(3) is to prevent a court or tribunal from granting a grace period, but if an additional period has been granted by the seller, the court or tribunal should be able to determine whether it is of reasonable length and if not, in this author’s opinion it is better to let the court lengthen 11 For another example see Art. 29 which effectively states that consideration is not required for the modification or termination of the contract, a provision that makes sense only in the common law tradition. 12 Art. 1184 of the French Civil Code, as it stood before the recent reform of contract law, and which applied generally to all synallagmatic (bilateral) contracts provided that a court could grant such a period of grace and applied to the contract of sale, even though the more specific Art. 1654 which applies to the rescission of contracts of sale by the seller makes no mention of such a period of grace. Malaurie/Ayne`s/ Gautier, Droit civil – Les contracts spe´ciaux, 2003 para. 324. See also Zweigert/Ko¨tz, Comparative Law (1998) p. 497; Honnold, Uniform Law (2009), para. 278. The new version of the Code integrating a reform of contract law which came into force on 1 October 2016 also allows a court, in some circumstance to grant such a period of grace, see new Art. 1228. 13 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 61 para. 18. In this, the CISG follows Art. 64 ULIS. 14 Arts 47(1) and 63(1). Courts have affirmed that only a party can grant an additional period of time, not a court: U.S. District Court, S.D. of New York (U.S.) 23 July 1997 (fashion accessories), Helen Kaminski Pty., Ltd. v. Marketing Australian Products d/b/a Fiona Waterstreet Hats, Inc., CISG-Online 297 (Pace); and Rechtbank van Koophandel, Hasselt (Belgium) 5 May 1999 (cloth), Leithauser G.M.B.H. & CO v. Willem van Praet, CISG-Online 1340 (Pace) (UNILEX English summary of the latter case relied on by this author, original Flemish not consulted). One case seems to have ignored Art. 61(3): the Cassational Board of the Supreme Economic Court of the Republic of Belarus refused to quash a decision of a lower court which granted a period of grace to the buyer for paying a debt it was ordered to pay in an arbitration award that had been recognised for enforcement by the lower court. The court seemed to reason that because the statute allowing for the extension was a matter of enforcement of judgements or awards rather than a substantive right governed by the CISG, it was applicable notwithstanding the CISG. The Court wrote: “There are no legal rules applicable on the stage of enforcement of court ruling in international law.” Cassational Board of the Supreme Economic Court (Belarus) 31 July 2006 (goods involved unclear from the decision) CISG-Online 2048 (Pace). 15 “If the additional period of time allowed is not of reasonable length it shall be extended to a reasonable length”, Art. 7.1.5(3) PICC.

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Article 61 10

Part III. Chapter III. Obligations of the Buyer

the additional period than to deny the seller the right to avoid the contract, otherwise the right to avoid the contract would be submitted to too much discretion on the part of the court or tribunal.16 In any event the CISG makes a distinction between a grace period (Art. 61(3)) and an additional period of time (Art. 63(1)).

III. Comparable Rules 10

Art. 61(1) has a parallel in Art. 8:101 PECL but not in the PICC. The right to damages notwithstanding the exercise of the right to another remedy (Art. 61(2)) is recognised by Art. 8:102 PECL. It is also recognised by Art. 7.3.5(2) PICC (cumulating with termination) and Art. 7.1.5(2) (may claim damages during the additional period of time). Art. 61(3) has no exact equivalent. As mentioned above, Art. 7.1.5(3) PICC allows the court or tribunal to extend the additional period of time for performance if it was unreasonably short. 16 See a fuller discussion under Arts 63(1) and 64(1)(b). See also Robert Koch, Editorial remarks: Commentary on Whether the UNIDROIT Principles of International Commercial Contracts May Be Used to Interpret or Supplement Articles 63 and 64 of the CISG, s. II (2)(c) (Pace).

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Article 62 The seller may require the buyer to pay the price, take delivery or perform his other obligations, unless the seller has resorted to a remedy which is inconsistent with this requirement. Bibliography: Bianca/Bonell, Commentary (1987), Art. 62; Honnold, Uniform Law (2009) para. 348; Knapp, in Bianca/Bonell, Commentary (1987), Art. 62; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 62; 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? 12 Pace International Law Review 1 (13 et seq.) (Pace); Zweigert/Ko¨tz, Comparative Law (1998), pp. 470 et seq.

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1. The right to specific performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 a) The right to demand payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 b) The right to demand the taking of delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 c) The right to demand the performance of other obligations. . . . . . . . . . . . . 7 2. Limitations on the right to specific performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 a) Resort to an inconsistent remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 b) Art. 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 III. Comparable rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

I. Importance and Role of the Provision Art. 62 grants the seller the right to demand the specific performance of any 1 obligation owed to him by the buyer, including the payment of the price. The substance of this article has not changed since its 1978 draft. It departs from the rules found at Art. 61(1) ULIS which, to some extent, made specific performance of the obligation to pay available only when the reselling of the goods was not reasonably possible.1 Art. 62 parallels Art. 46 (buyer’s right to specific performance) and must be read in conjunction with Art. 28. On the availability of the remedy of specific performance, the civil and common law 2 traditions greatly differ. In the common law tradition, the normal remedy for breach of contract would be damages. Specific performance would normally not be available. In the civil law tradition, however, the aggrieved party is entitled to demand the performance of the obligation (exe´cution en nature) at least in principle (the efficiency or strength of enforcement of court orders for such performance being a different issue).2 Art. 62 adopts, at least in principle, the position of the civil law tradition – specific 3 performance is available as of right for any breach of any obligation of the buyer, 1 This limitation of the availability of specific performance for the obligation to pay was linked in the ULIS to the concept of ipso facto avoidance which has been abandoned by the CISG. See Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 62 paras 1 et seq. Specific performance was however more readily available for obligations other than payment and taking of delivery; see Art. 70(2) ULIS. 2 For an excellent, short and comprehensive account of the difference between civil law and common law see Zweigert/Ko¨tz, Comparative Law (1998), pp. 470 et seq., although it does not discuss the right to enforce the obligation to pay (as opposed to paying damages) which Art. 62 specifically provides for. See also Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 62 paras 2 et seq.

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including the obligation to pay the price. In practice, however, the general availability of specific performance under the CISG will be limited, particularly in common law jurisdictions, by Art. 28.

II. Detailed Commentary 1. The right to specific performance a) The right to demand payment. The right to demand the specific performance of the obligation to pay the price is probably the most controversial part of this provision. During the negotiations of the Convention the delegation of the United States proposed that the buyer may require payment unless “in the circumstances the seller should reasonably mitigate the loss resulting from the breach by reselling the goods”.3 This would have made the CISG similar to the law in most common law jurisdictions.4 This was in fact also effectively the solution adopted by the ULIS, the predecessor of the CISG.5 5 In the end, however, the American proposal and the approach adopted by the ULIS were rejected and there is, therefore, no need for the seller to mitigate his loss6 – he is entitled to ask for the payment of the price without having to try to sell the goods to a third party. The CISG adopts a pure civil law formulation of the rule. In practice, however, it is very likely that in the vast majority of cases where the seller has possession of the goods and there is a market for these goods, the seller will opt to cut his losses, attempt to avoid the contract as soon as possible (Art. 64)7 and resell the goods (maybe even using Arts 85 and 88) rather than seek an order for specific performance of the obligation to pay that would have to be enforced in the buyer’s country. In practice, therefore, the theoretical differences between the civil law and the common law may not be as important as they may seem. In addition, Art. 28 will often mean that sellers will have to mitigate their loss by reselling the goods.8 There will however be instances where the seller will prefer to seek the specific performance of the obligation to pay.9 4

6

b) The right to demand the taking of delivery. The seller is also entitled to demand that the buyer take delivery of the goods (unless of course the buyer avoids the contract for cause, Art. 49). There is however hardly any cases where a court has been asked to do this,10 again a reflection that in practice, the remedy of specific performance is not 3

UNCITRAL YB (1977), p. 133. See for example, for the United States, § 2-709 UCC and for Singapore ss. 49 and 50 of the Sale of Goods Act, Statutes of Singapore, c. 393. 5 Art. 61(2) ULIS. 6 Some authors who see a large role for Art. 7(1) on good faith have suggested that in blatant cases, insistence on the payment of the price may be against good faith, Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 62 para. 9. 7 It should be noted that the seller must avoid the contract before he can sell the goods. See Bianca/ Bonell, Commentary (1987), Art. 62 para. 10. 8 See infra at para. 10. 9 For example, Arbitral Award, ICC 7197/1992 (goods involved unclear from the summary of the award), CISG-Online 36 (Pace), where the seller sought an order for the buyer to issue a letter of credit. There are similar cases mainly from Germany, see for example: Landgericht Mo¨nchengladbach, (Germany) 15 July 2003 (filter), CISG-Online 813 (Pace). 10 UNCITRAL, Digest of Case Law on the CISG, Art. 62 para. 2, including footnote 5. The Digest only mentions one Chinese case where the court ordered the buyer to take delivery: Zhejiang High People’s Court (PR China) 24 April 2008 (garments), CISG-Online Case 2058 (Pace) and one German case where the court made a general statement on the availability of such remedy: Oberlandesgericht Mu¨nchen (Germany) 8 February 1995 (cars), CISG-Online 143 (Pace). One more German case is also mentioned but this author is unable to read the original German: Landgericht Hamburg, Kammer 4 fu¨r Handelssachen (Germany) 5 November 1995 (cobalt sulphate), CISG-Online 215 (Pace). 4

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particularly attractive to traders11 who probably prefer avoidance and damages or recourses under Arts 85 and 88. c) The right to demand the performance of other obligations. The seller may also 7 demand the performance of other contractual obligations. It should be noted however that the obligations to pay and to take delivery are defined so broadly by Arts 54 and 60 that obligations such as the obligation to issue a letter of credit or the obligation to identify the vessel on which the goods must be loaded may be interpreted as part of the obligation to pay12 and the obligation to take delivery respectively. However, with respect to any contractual obligation of the buyer to specify the form, measurement or other features of the goods, one should also refer to Art. 65 which is lex specialis.

2. Limitations on the right to specific performance a) Resort to an inconsistent remedy. The seller may not require performance when 8 he “has resorted to a remedy which is inconsistent with this requirement.”13 Obviously, if the seller resorts to avoidance (Art. 64) he may not require the performance of any obligation under the contract. Similarly, if the seller fixes an additional period of time for the performance under Art. 63, he may not, during that period of time, require performance under Art. 62.14 A sale of the goods to third parties under Art. 88 would be inconsistent with requiring the taking of delivery but not with requiring the payment of the remaining of the price.15 The seller may however claim damages in addition to requiring performance provided 9 that the damages are not in lieu of performance but relate to the delayed performance (moratory damages) and related expenses.16 When the seller requires the buyer to pay, he may also ask for interest on the sum due (Art. 78). b) Art. 28. The largest exception to the right to claim specific performance is Art. 28 10 which states that “a court is not bound to enter a judgement 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”. A full explanation of Art. 28 will be found under that article but it is important at this point to note that any uniformity of law that might have been accomplished through Art. 62 is severely compromised and rendered almost illusory through Art. 28. Effectively, courts in common law jurisdictions will continue to refuse to grant specific performance and will usually require the seller to mitigate his loss by reselling the goods when he still has them. Civil law courts will grant specific performance if so requested. In this respect the CISG provides no improvement on the ULIS which had the same compromise and therefore did not lead to true uniformity.17 In any event, even without Art. 28, uniformity would have been lacking as the method and efficiency of the enforcement of specific performance orders vary greatly from jurisdiction to jurisdiction.18 11 See 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? 12 Pace International Law Review 1 (13 et seq.) (Pace). 12 See for example Arbitral Award, ICC 11849/2003 (fashion products), CISG-Online 1421 (Pace). 13 Art. 62. 14 Knapp, in Bianca/Bonell, Commentary (1987), Art. 62 para. 3.4. 15 Art. 88 allows the seller to compensate himself for his reasonable expenses and then states that he must account to the buyer for the rest. 16 See also Art. 63(2) in fine. 17 In this respect Art. 28 follows the solution adopted by its predecessor Art. 16 and Art. VII ULIS. 18 Zweigert/Ko ¨ tz, Comparative Law (1998), pp. 470 et seq.

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There has been some debate as to whether Art. 28 applies to the right to require performance of payment, since, in common law jurisdictions, an “action for the price” is not seen as a “specific performance” (Art. 28),19 but this author agrees with the majority view that since the CISG is an international instrument, it must not be interpreted with reference to domestic law categories and that the wording of Art. 28 (“specific performance”) therefore does encompass the right to require payment.

III. Comparable Rules The PICC and PECL are more detailed on the right to require performance. A standalone article provides for the right to require the payment of money owed (7.2.1 PICC/ 9:101 PECL), which would include the price. As is the case in Art. 62, there are no restrictions on that right in the PICC but the PECL states that there is no right to require payment if the creditor “(a) … could have made a reasonable substitute transaction without significant effort or expense; or (b) [the creditor/seller’s] performance would be unreasonable in the circumstances”.20 The PECL forces the creditor (the seller in our case) to mitigate his loss by denying the right to require payment if he can sell the goods to a third party – adopting the common law approach rejected by the CISG. 13 PICC and PECL have a separate article for the right to require performance of nonmonetary obligations but that right is restricted (unlike in the CISG) by a series of exceptions. A party cannot require performance if the performance is impossible in law or in fact,21 is unreasonably expensive or burdensome,22 is of an exclusively personal character23 or is not asked within a reasonable time.24 Even more interestingly the PICC and the PECL force the creditor (the seller in our case) to mitigate his loss by denying the right to require performance if the seller “may reasonably obtain performance from another source”.25 14 It is unlikely however that on these points the PICC and PECL could be used in the interpretation of Art. 62 as the duty to mitigate akin to 7.2.2 PICC was clearly rejected during the negotiations of the CISG.26 In fact Art. 62 provides for no exception whatsoever and therefore the exceptions introduced PICC and PECL cannot easily be used in interpreting the CISG. 15 Art. 62 provides that the seller cannot require performance after resorting to an inconsistent remedy.27 Can he resort to an “inconsistent” remedy after requiring performance i. e. can the seller who has required performance but has not received it, later ask for avoidance instead, for example?28 Art. 7.2.5(1) PICC provides that a party that has required performance of a non-monetary obligation but has not obtained it “within a period fixed or otherwise within a reasonable period of time” may invoke any other 12

19 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 62 paras 2 et seq.; Honnold, Uniform Law (2009) para. 348. 20 Art. 9:101(2) PECL. 21 Art. 7.2.2(a) PICC or “unlawful or impossible” Art. 9:102(2)(a) PECL. 22 Art. 7.2.2(b) PICC or “performance would cause the debtor unreasonable effort or expense” Art. 9:102(2)(b) PECL. 23 Art. 7.2.2(d) PICC or Art. 9:102(2)(c) PECL. 24 Art. 7.2.2(e) PICC or Art. 9:102(3) PECL. 25 Art. 9:102(2)(d) PECL. 26 Cf. supra para. 2. 27 Art. 9:103 PECL states positively that “The fact that a right to performance is excluded under this Section does not preclude a claim for damages”. 28 Knapp in: Bianca/Bonell, Commentary (1987), Art. 62 paras 3.6 et seq.

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remedy.29 Interestingly, the heading of Art. 7.2.5 is “Change of remedy”. It seems that Art. 7.2.5 PICC could be a good indication of how Art. 62 should be interpreted – nothing in the CISG prevents a party from changing the remedy sought.30 More importantly, the PICC and PECL do not have any equivalent of Art. 28 and 16 therefore even a common law court must order specific performance. In consequence of this, the PICC also provide for a way of enforcing such a court order through a judicial penalty resembling the astreinte of French law.31 Although this solution seems appropriate, it is so different from Arts 62 and 28 that on this point the PICC cannot really help with the interpretation of the CISG. 29 It also provides for the right to invoke any other remedy when a court’s order for specific performance cannot be enforced; Art. 7.2.5(2) PICC. 30 There may however be restrictions to this right in domestic procedural laws. 31 For a description of the astreinte in English, see Zweigert/Ko ¨ tz, Comparative Law (1998), pp. 476 et seq.

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Article 63 (1) The seller may fix an additional period of time of reasonable length for performance by the buyer of his obligations. (2) Unless the seller has received notice from the buyer that he will not perform within the period so fixed, the seller may not, during that period, resort to any remedy for breach of contract. However, the seller is not deprived thereby of any right he may have to claim damages for delay in performance. Bibliography: Honnold, Uniform Law (2009), para. 351; Huber, in: Huber/Mullis, The CISG, p. 331; Knapp, in: Bianca/Bonell, Commentary (1987), Art. 63; Koch, Editorial remarks: Commentary on Whether the UNIDROIT Principles of International Commercial Contracts May Be Used to Interpret or Supplement Articles 63 and 64 of the CISG, s. II(2)(c) (Pace); Honnold, Uniform Law (2009), para. 351; Zeller, Editorial remarks on art. 63 and 64(1)(b) (Pace).

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. The fixing of an additional period of time of reasonable length (63(1)) . a) Fixing an additional period of time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Of reasonable length. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. The suspension of other remedies during the additional period of time (63(2)). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 3 3 3 7 10 11

I. Importance and Role of the Provision Art. 63 CISG provides a remedy almost identical to what was provided by the ULIS.1 The final version of this article is almost identical to its 1978 draft.2 Art. 63 has its parallel in Art. 47 (additional period of time set by the buyer). Art. 63 must be read in conjunction with Arts 64 (avoidance), 25 (fundamental breach), 26 (avoidance must be notified) and 27 (notice effective if sent). 2 As will be seen elsewhere, the seller may avoid the contract if the breach of the contract by the buyer amounts to a fundamental breach (Arts 64(1)(a), 25 and 26). However, when a breach by the buyer of his obligation to pay or to take delivery does not amount to a fundamental breach, the seller may first fix an additional period of time of reasonable length under Art. 63 and, if the buyer does not perform during that period, only then is the seller entitled to declare the contract avoided under Art. 64(1)(b). 1

II. Detailed Commentary 1. The fixing of an additional period of time of reasonable length (63(1)) 3

a) Fixing an additional period of time. The fixing of an additional period of time for performance will be a process very familiar to civil law jurists whether they are from the 1 See Arts 62(2) (payment) and 66(2) (taking delivery) ULIS which both provided that the seller could set an additional period of time at the end of which he could declare the contract avoided. 2 The only change: the article “the” was dropped before the word “performance”.

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French tradition (mise en demeure) or the German tradition (Nachfrist). It will however be an unfamiliar process for common law jurists. Although there is no doubt that Art. 63 was inspired by the civil law tradition, it is very important to remember that we should not attempt to use domestic law to interpret the CISG3 especially since Art. 63 is in fact different in purpose and effect from both the mise en demeure and the Nachfrist.4 In particular, Art. 63 does not obligate the seller to grant an additional period of time and the seller in cases of fundamental breach may avoid the contract without granting such an additional period of time.5 It would therefore be preferable not to refer to the remedy provided by Art. 63 as mise en demeure or Nachfrist as this may mistakenly suggest an interpretation based on domestic law. When a buyer does not pay for goods not yet delivered or does not take delivery, it is 4 often more practical and efficient for the seller to seek avoidance on the basis of a fundamental breach of the contract6 and enter into a substitute transaction with a third party and if need be, seek damages against the original buyer.7 However, as mentioned above, in cases not amounting to a fundamental breach or where it is not certain whether a breach is fundamental,8 the seller may use Art. 63 to grant an additional period of time for the buyer to perform his obligation to pay or to take delivery. At the end of the period, the seller will be entitled to avoid the contract (Art. 64(1)(b)). It should be noted that the obligation to pay includes “taking such steps and complying with such formalities as may be required under the contract or any laws and regulations to enable payment to be made” (Art. 54) and therefore refusing to issue a letter of credit in conformity with the contract for example would be a refusal to make payment.9 Similarly the obligation to take delivery includes “doing all the acts which could reasonably be expected of [the buyer] in order to enable the seller to make delivery” (Art. 60) which would include for example the naming of the ship in an FOB contract.10 The seller may also fix an additional period of time for the performance of any 5 obligation of the seller other than payment and taking delivery, though it is hard to see what concrete advantage the seller gains from granting such an additional period of time since it will not entitle him to avoid the contract under Art. 64(1)(b) which applies only to cases of non-performance of the obligation to pay or to take delivery. With respect to obligations other than these two, the seller will need to prove a fundamental breach (Arts 64(1)(a) and 25) in order to avoid the contract. The granting of an additional period of time will therefore not make avoidance any easier. The seller must notify the buyer of the additional period of time. The period should be 6 precise (until a certain precise date or so many days after the date of the notice for example) rather than imprecise through the use of vague words such as “within a few days”.11 According to Art. 27, the seller will be entitled to rely on the notice if it is sent by means appropriate in the circumstances even if its delivery is delayed or never takes place. 3

Art. 7(1). Zeller, Editorial remarks on art. 63 and 64(1)(b) (Pace). 5 Art. 63 “is not mandatory and need not be used in order to avoid the contract if the delay in performance amounts to a fundamental breach”, Secretariat Commentary on 1978 Draft, Art. 59 (now Art. 63), para. 8(Pace). See also Knapp, in: Bianca/Bonell, Commentary (1987), Art. 63 para. 2.7. 6 Arts 64(1)(a) and 25. 7 Arts 61(1)(b) and 75. 8 For an example where the seller was mistaken about whether the breach was fundamental and should have given a notice of additional time, see Cour d’appel de Grenoble (France) 4 February 1999 (pure orange juice), CISG-Online 443 (Pace). 9 Honnold, Uniform Law (2009), para. 351. See also for example Arbitral Award, ICC 11849/2003 (fashion products), CISG-Online 1421 (Pace). 10 Incoterms 2010, FOB, para. B7. 11 Honnold, Uniform Law (2009), para. 351 (referring to para. 289). 4

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b) Of reasonable length. The additional period of time must be of reasonable length. As is to be expected, there can be no definite determination in the jurisprudence or doctrine of what constitutes a reasonable period of time, as each case will be as different.12 Here are however a few useful guidelines. The period of time should be of reasonable length from the time of the notice rather than from the time of the original failure to perform – the fact that the performance is already late would not make a one day additional period reasonable.13 The seller’s interest can certainly be taken into account and if there is a falling market, it would be reasonable for the seller to set a period that would reflect the urgency of the situation.14 On the other hand the period must allow the buyer enough time to perform. 8 In this author’s view, one circumstance to take into account in determining whether the period is of reasonable length is the means by which the notice is being sent (even though the risk of a problem in the transmission of the notice is borne by the buyer). If the notice has been sent by post and under normal circumstances it could take a week for the notice to get to the buyer in the other country, it would not be reasonable to expect the buyer to perform two days after the notice was sent. The seller will therefore be encouraged to use electronic means of communications when appropriate in order to be able to reasonably reduce the additional period of time. 9 What is the consequence if the additional period of time is not of reasonable length? Either the notice is invalid and therefore avoidance is not available at the end of the period, or the notice remains valid and a court or tribunal can extend the period to what would be a reasonable length, at which time avoidance could be declared. This author shares the majority view that the proper approach is to extend the time period to what would be a reasonable period of time, at which point avoidance can be declared.15 As a matter of practice, by the time a court or tribunal gets to decide whether the period of time was of reasonable length, it is likely that a reasonable length of time will have passed which might explain why there are very few cases discussing what constitute an unreasonable period of time.16 7

2. The suspension of other remedies during the additional period of time (63(2)) 10

The second paragraph of Art. 63 states that during this additional period of time the seller may not resort to any other remedy – the seller must let the buyer perform unhindered. There are two exceptions to this rule. First, if the buyer informs the seller that he will not perform during that period, the seller may resort to other remedies, including avoidance (Art. 64(1)(b) in fine). If however the buyer were to inform the 12 It is impossible to mention all cases here. An example where an additional period of time was deemed reasonable is the case of a 20-day additional period for the issuance of a letter of credit when the contract itself granted only 15 days for such issuance and a letter of credit can normally be issued in a matter of hours, see Arbitral Award, ICC 11849/2003 (fashion products), CISG-Online 1421 (Pace). 13 See for example Tribunal de Grande Instance de Strasbourg (France) 22 December 2006 (cathode ray tubes), CISG-Online 1629 (Pace) where a seven day period was deemed totally unreasonable given the circumstances (“tout a` fait de´raisonnable au regard des circonstances”) notwithstanding a one month and four day period before the notice was sent. 14 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 63 para. 8. 15 See Robert Koch, Editorial remarks: Commentary on Whether the UNIDROIT Principles of International Commercial Contracts May Be Used to Interpret or Supplement Articles 63 and 64 of the CISG, s. II(2)(c) (Pace); Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 63 para. 9; Huber, in: Huber/Mullis, The CISG, p. 331. See also this case: Oberlandesgericht Karlsruhe (Germany) 14 February 2008 (antique Jaguar sports car), CISG-Online 1649 (Pace). 16 For a case holding an additional period to be of unreasonable time see Tribunal de Grande Instance de Strasbourg (France) 22 December 2006 (cathode ray tubes), CISG-Online 1629 (Pace).

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seller that he will not perform during the period because the period is unreasonable short – the seller could have recourse to other remedies, but presumably could not avoid the contract under Art. 64(1)(b) until a reasonable period of time has passed. Second, the seller is not deprived of his right to claim damages for delay in performance (moratory damages).

III. Comparable Rules Art. 7.1.5 PICC and Art. 8:106 PECL are the equivalent to Arts 63 and 64(1)(b). The principles behind these articles are the same – if an additional period of reasonable length is fixed, the aggrieved party will be able to avoid the contract even in the absence of a fundamental breach, but during that period, no recourse to most other remedies will be possible. In some respects, however, the rules of the PICC and PECL are so different from the CISG that, in this author’s view, they cannot be used in interpreting the CISG. For example, Art. 64(1)(b) clearly limits the right to avoid the contract after the Art. 63 notice to breaches of the obligation to pay and to take delivery. Art. 7.1.5(3) PICC extends the right to avoid the contract to a breach of any obligation though Art. 7.1.5(4) PICC states that the right to avoid does not exists when the obligation breached was “only a minor part of the contractual obligation of the non-performing party.” This criterion (minor part) is different from the concept of fundamental breach. Art. 8:106 PECL goes even further by abandoning the “minor part” exception and allowing avoidance for any breach of an obligation not remedied after the end of the reasonable additional period. These choices are clearly different from the CISG’s and therefore should not be used in interpreting the CISG. Art. 63(2) only mentions damages as an exception to the principle of not being able to resort to any remedy during the additional period. In addition to damages, the PICC and PECL both mention that the aggrieved party is also entitled to “withhold performance of its own reciprocal obligation” during the additional period.17 This could be useful in filling what seems to be a gap in the CISG: Art. 71 does not specifically mention an actual delay in performance by the other party as a valid reason to suspend one’s own performance. It would seem however to stem from the general principles of the CISG (Art. 7(2)) as logically exposed by the PICC and PECL which share the same principles on this point. The CISG is silent as to the consequences of the time period being of unreasonable length. Art. 7.1.5(3) PICC and Art. 8:106(3) PECL lend support to the view that the period should be extended to a reasonable length of time. These articles also provide that the aggrieved party can in the same notice granting an additional period state that the contract will be avoided automatically at the end of the period. The CISG is silent on that possibility but since it is not prohibited by any provision of the CISG, this author is of the view that it should be allowed (see discussion infra under Art. 64). 17

Art. 7.1.5(2) PICC and Art. 8:106(2) PECL.

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Article 64 (1) The seller may declare the contract avoided:

(a) if the failure by the buyer to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract; or (b) if the buyer does not, within the additional period of time fixed by the seller in accordance with paragraph (1) of article 63, perform his obligation to pay the price or take delivery of the goods, or if he declares that he will not do so within the period so fixed. (2) However, in cases where the buyer has paid the price, the seller loses the right to declare the contract avoided unless he does so:

(a) in respect of late performance by the buyer, before the seller has become aware that performance has been rendered; or (b) in respect of any breach other than late performance by the buyer, within a reasonable time: (i) after the seller knew or ought to have known of the breach; or (ii) after the expiration of any additional period of time fixed by the seller in accordance with paragraph (1) of article 63, or after the buyer has declared that he will not perform his obligations within such an additional period. Bibliography: Honnold, Uniform Law (2009), para 356; Knapp, in: Bianca/Bonell, Commentary (1987), Art. 64; Koch, Editorial remarks: Commentary on Whether the UNIDROIT Principles of International Commercial Contracts May Be Used to Interpret or Supplement Articles 63 and 64 of the CISG, s. II(4)(a) (Pace); Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 64.

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. The right to declare the contract avoided (64(1)) . . . . . . . . . . . . . . . . . . . . . . . . . . a) In cases of fundamental breach (Art. 64(1)(a)). . . . . . . . . . . . . . . . . . . . . . . . . . b) In cases where the buyer does not perform or declares he will not perform notwithstanding a notice granting additional time (Art. 64(1)(b)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Losing the right to declare the contract avoided (Art. 64(2)). . . . . . . . . . . . . . a) In respect of late performance by the buyer (Art. 64(2)(a)). . . . . . . . . . . . b) In respect of any breach other than late performance by the buyer (Art. 64(2)(b)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 4 4 6 7 11 14 21 23

I. Importance and Role of the Provision 1

Art. 64 provides for the right to avoid the contract either because of a fundamental breach (Art. 25) or because the buyer has failed to pay or take delivery after an additional period of time for performance has been granted (Art. 63). The article also provides deadlines for the exercise of the right to declare the contract avoided when the buyer has already paid the price.

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Article 64

Art. 64 provides a remedy that is significantly different from the ULIS which in some 2 instances provided for the ipso facto avoidance of the contract without a need for any declaration and notification.1 The final version of Art. 64 is almost identical to its 1978 draft. Art. 64 has its parallel in 3 Art. 49 (avoidance by the buyer). Art. 64 must be read in conjunction with Arts 63 (setting an additional period of time), 25 (fundamental breach), 26 (avoidance must be notified) and 27 (notice effective if sent) as well as with Art. 72 (avoidance due to an anticipatory breach), Art. 73 (avoidance in instalment contracts) and Arts 81–84 (effects of avoidance).

II. Detailed Commentary 1. The right to declare the contract avoided (64(1)) The CISG abandons the ipso facto avoidance of the contract that was found in the 4 ULIS. In all instances the avoidance of the contract must be declared.2 The right to avoid the contract will be available to the seller when there has been a 5 fundamental breach (a) or when an additional period of time has been granted to the buyer to pay or take delivery (b). a) In cases of fundamental breach (Art. 64(1)(a)). The seller may declare the 6 contract avoided “if the failure by the buyer to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract” (Art. 64(i)(a)). The definition of what constitutes a fundamental breach is found at Art. 25. In such instances the seller does not have to grant an additional period of time for performance to the buyer and may declare the contract avoided immediately. The avoidance of the contract due to an anticipatory fundamental breach is governed by Art. 72 and the avoidance in the context of an instalment contract, by Art. 73. b) In cases where the buyer does not perform or declares he will not perform 7 notwithstanding a notice granting additional time (Art. 64(1)(b)). In some cases, a breach by the buyer of his obligation to pay the price or his obligation to take delivery may not be fundamental, or it may be uncertain whether it is fundamental. In such instances, avoidance can be obtained as of right, whether the breach is fundamental or not, after the seller has granted an additional period of time for performance under Art. 63(1). It should be noted however that under Art. 64(1)(b), avoidance is available only for a 8 breach of the buyer’s obligation to pay or his obligation to take delivery of the goods. It should be noted that these obligations are very broadly defined. “The buyer’s obligation to pay the price includes taking such steps and complying with such formalities as may be required under the contract or any laws and regulations to enable payment to be made.”3 “The buyer’s obligation to take delivery consists: (a) in doing all the acts which could reasonably be expected of him in order to enable the seller to make delivery; and (b) in taking over the goods.”4 The seller is entitled to declare the contract avoided if the buyer does not perform by 9 the end of the addition period of time (provided it was of reasonable length5) or, even earlier if the buyer “declares that he will not [perform] within the period so fixed.”6 1

See Arts 61(2) and 62 ULIS although Art. 66 ULIS did require a declaration. Arts 64(1) and 26. 3 Art. 54. 4 Art. 60. 5 See discussion supra under Art. 63(1). 6 Art. 64(1)(b). 2

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Some case law has allowed the seller to give a combined notice of an additional period of time and declaration of avoidance – ‘you have the following additional period of time and if you do not perform by the end of that period (or if you notify me that you will not perform) the contract will be avoided at that time.’7

2. Losing the right to declare the contract avoided (Art. 64(2)) The second paragraph limits in time the right to declare a contact avoided. However these time limits only apply “in cases where the buyer has paid the price”.8 This is understood to mean that the total price has been paid.9 There is no such limit in cases where the buyer has not fully paid the price.10 12 The rules are rather detailed and complicated but the principle is rather simple – when the buyer has performed his main obligation (payment) the seller’s right to avoid the contract must be exercised in a timely fashion so that the buyer knows where he stands and that he is not surprised long after his payment by a declaration of avoidance. 13 From a practical viewpoint, it remains however that in most cases, the seller is unlikely to seek avoidance of, or have grounds to avoid, a contract for which he has been paid in full11 and therefore Art. 64(2) will be used only in exceptional cases.12 11

a) In respect of late performance by the buyer (Art. 64(2)(a)). In respect of late performance by the buyer, the seller loses his right to declare the contract avoided unless he does so “before the seller has become aware that performance has been rendered” (Art. 64(2)(a)). 15 Art. 64(2)(a) is concerned with late performances i. e. obligations that have been performed, but performed late. The first example would be the late performance of the buyer’s obligation to pay. Art. 64(2) only applies to cases where the buyer has paid the price, but he may have paid it late. The seller may have a right to declare the contract avoided either because the late payment constitutes a fundamental breach or because he has fixed an additional period of time which has now passed (Art. 64(1)). However, the seller must declare the contract avoided before he becomes aware that the buyer has made the payment. If the payment is made but the seller is not yet aware of that payment he may still declare the contract avoided, putting the onus on the buyer to give 14

7 See Koch, Editorial remarks: Commentary on Whether the UNIDROIT Principles of International Commercial Contracts May Be Used to Interpret or Supplement Articles 63 and 64 of the CISG, at section II(4)(a) where he cites Oberster Gerichtshof (Austria) 28 April 2000 (jewellery), CISG-Online 581 (Pace) in which the Austrian Supreme Court held that a notice of an additional period of time which also stated that the seller “would refuse to accept payment of the purchase price should [the buyer] not perform its obligation within the additional period of time fixed” should be understood as a conditional declaration by the seller to then avoid the contract. Therefore, a single notice, if worded properly, could be used as both the Art. 63 notice of an additional period of time and the Art. 64(1) declaration of avoidance. To the same effect, see: Bezirksgericht der Saane (Switzerland) 20 February 1997 (spirits), CISG-Online 426 (Pace). See also Art. 7.1.5(3) PICC and Art. 8:106(3) PECL which explicitly adopt this approach. 8 Art. 64(2). 9 Secretariat Commentary on 1978 Draft, Art. 60(2) (now Art. 64(2)), para. 8 (Pace). 10 Of course, recourses to avoidance, like all recourses under the CISG, would also be subjected to the limitation period found in the United Nations’ Convention on the Limitation Period in the International Sale of Goods (New York, 14 June 1974) as amended by the Protocol to the 1974 Limitation Convention (Vienna, 11 April 1980) which came into force on 1 August 1988, whenever that convention applies, or by the limitation period or prescription period found in the relevant domestic law when that convention does not apply. 11 Honnold, Uniform Law (2009), para 356. 12 This is evidenced by the fact that the UNCITRAL, Digest of Case Law on the CISG, Art. 64 para. 12 concluded that “Article 64(2) has given rise to very little case law”.

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Article 64

prompt notice of payment to the seller. The obligation that is performed late may also be the obligation to take delivery or any other contractual obligation (which would lead to a fundamental breach). One issue that has been raised is the meaning of “late performance”. Clearly “late performance” is meant to apply when the performance is late according to the contract but is still “performable” and has in fact been performed. It has been debated whether, when the seller has issued a notice granting an additional period of time (Arts 63(1) and 64(1)(b)) and that time has passed, the buyer can still perform “late” (Art. 64(2)(a)). Performance during the additional period of time would have been late under to the contract, but the seller may not declare the contract avoided during that period of time (Art. 63(2)). After the end of that period of time, can the buyer still perform thus preventing the seller from declaring the contract avoided (assuming payment has been made and the seller is aware of the late performance)? The Secretariat’s Commentary suggests that when a buyer performs late, after the additional time period granted to him has passed, Art. 64(2)(b) should apply rather than Art. 64(2)(a),13 meaning that the seller could still declare the contract avoided within a reasonable time after the end of the additional period, even though he is aware that the obligation has been performed. This interpretation of the Secretariat assumes that performance after the expiry of an additional period of time (Art. 63(1)) is not a “late performance” since Art. 64(2)(b) can only apply “in respect of any breach other than late performance”. Some authors have supported this position.14 This author shares the view that the position taken by the Secretariat’s Commentary is not supported by the text of Art. 64(2) which only speaks of “late performance” making no distinction between a performance which is late according to the contract and one which is very late – a performance after the end of an additional period of time is a late performance and should be governed by Art. 64(2)(a), not (b).15 The buyer should be allowed to perform until the contract is declared avoided. In fact, after the expiry of the additional period of time, the seller is still entitled to ask for the performance of the obligation (Art. 62)16 since it is only during that additional period of time that he may not exercise the right to demand specific performance (Art. 63(2)). If after the end of the additional period of time, the seller may still demand performance, it would be odd to say that the seller may declare the contract avoided even after the buyer has performed the obligation. This situation should be governed by Art. 64(2)(a). What if the buyer gives notice that he will not perform within the additional period of time? Can he still perform after he has given this notice? Although this may sound counterintuitive, the answer should be that he can still perform. The only effect that Art. 63(2) gives to the declaration that the buyer will not perform is to free the seller from his obligation not to resort to any remedy during the additional period – i. e. the seller may immediately declare the contract avoided. However, even after being notified that the buyer will not perform, the seller is still free to ask for specific performance and 13 Secretariat Commentary on 1978 Draft, Art. 60(2) (now Art. 64(2)), para. 11 (Pace) states: “If the buyer performs after the additional period fixed pursuant to art. 59(1) [draft counterpart of art. 63(1)] or after he has declared that he will not perform within that additional period of time, the seller loses the right to declare the contract avoided if he does not do so within a reasonable time after the expiration of the additional period or within a reasonable time after the buyer has declared that he will not perform within that additional period of time.” [emphasis added] 14 Knapp, in: Bianca/Bonell, Commentary (1987), Art. 64 paras 3.10 seq. 15 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 64 para. 27. 16 Whether a court has to grant specific performance will be determined by Art. 28, but in principle, the remedy of specific performance is available.

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therefore the obligation of the seller is still performable as a late performance and should therefore be governed by 64(1)(a), not (b). b) In respect of any breach other than late performance by the buyer (Art. 64(2)(b)). Provided that the buyer has paid in full, “the seller loses the right to declare the contract avoided unless he does so […] in respect of any breach other than late performance by the buyer, within a reasonable time (i) after the seller knew or ought to have known of the breach; or (ii) after the expiration of any additional period of time fixed by the seller in accordance with paragraph (1) of Art. 63, or after the buyer has declared that he will not perform his obligations within such an additional period” (Art. 64(2)(b)). 22 As we have seen above, Art. 64(2)(b)(ii) does not apply to obligations that have been performed though late i. e. after the expiration of the additional period of time for performance. Art. 64(2)(b)(ii) only applies to obligations that have not been performed. 21

III. Comparable Rules Art. 7.1.5 PICC and Art. 8:106 PECL are the equivalent to Art. 64(1)(b). For how they affect the interpretation of Art. 64(1)(b) see the discussion supra under Art. 63. 24 Art. 7.3.2(2) PICC is the equivalent of Art. 64(2). They are substantially similar in using the concept of “a reasonable time” but the PICC clearly states that the aggrieved party may terminate the contract after a late performance, thus taking a very different approach from that taken by Art. 64(2)(a). 25 A discussion of the PICC and PECL equivalents of the concept of fundamental breach (Art. 64(1)(a)) will be left for discussion supra under Art. 25 infra. 23

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Article 65 (1) If under the contract the buyer is to specify the form, measurement or other features of the goods and he fails to make such specification either on the date agreed upon or within a reasonable time after receipt of a request from the seller, the seller may, without prejudice to any other rights he may have, make the specification himself in accordance with the requirements of the buyer that may be known to him. (2) If the seller makes the specification himself, he must inform the buyer of the details thereof and must fix a reasonable time within which the buyer may make a different specification. If, after receipt of such a communication, the buyer fails to do so within the time so fixed, the specification made by the seller is binding. Bibliography: Knapp, in: Bianca/Bonell, Commentary (1987), Art. 65; Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 65.

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Purpose of Art. 65 and the mechanism it sets in place . . . . . . . . . . . . . . . . . . . . . a) Demanding by notice that the buyer make a specification within a reasonable period of time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) When the buyer is in breach, the seller may make a specification with notification and fix a reasonable period of time for the buyer to make a different specification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Criticism of Art. 65 – a cumbersome process which will not be used most of the time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Avoidance more readily available under Arts 63 and 64(1)(b) and will normally be preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Even if avoidance is only available under Art. 64(1)(a), it will still be available in most cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 3 3 4 7 10 10 12 13 14

I. Importance and Role of the Provision Art. 67 ULIS, the predecessor of Art. 65, had its origin in § 375 of the German 1 Commercial Code (HGB).1 Art. 65 follows its predecessor Art. 67 ULIS almost word for word with the exception that unlike the ULIS, Art. 65 does not grant the seller the option to avoid the contract if the buyer refuses to make the specifications,2 this remedy being dealt with in a general fashion under Art. 64. Art. 65 introduces a very specific rule that brings a specific remedy to a specific 2 instance of non-performance of an obligation by the buyer. In this sense it is a lex specialis which adds a remedy to a specific kind of breach of obligation by the buyer but without taking away any of the other remedies available to the seller. It seems to be a leftover from the ULIS which had specific remedies for specific breaches and therefore seems to go against the approach generally adopted by the CISG which does not define 1

Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 65 para. 2. For a short history of Art. 65 CISG, see Knapp, in: Bianca/Bonell, Commentary (1987), Art. 65 paras 1.1 et seq. 2

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specific remedies for each specific breach. During the negotiations on the CISG it was proposed that Art. 65 be abandoned, a proposal which, in the view of this author, unfortunately failed.3

II. Detailed Commentary 1. Purpose of Art. 65 and the mechanism it sets in place 3

When the contract provides that the buyer “is to specify the form, measurement or other features of the goods” and he fails to do so “on the date agreed upon or within a reasonable time after receipt of a request from the seller”, Art. 65 allows the seller to make the specification himself – what civil law jurists will see as a form of specific performance by substitution without the need for a court judgment (thus avoiding Art. 28).4 One should note that Art. 65 applies when the buyer has an obligation to make specifications (“under the contract the buyer is to specify”) – if the contract can be performed because it contains specifications, the seller must perform according to the contractual specifications even if the buyer has the option to change these specifications but in fact does not do so.5

a) Demanding by notice that the buyer make a specification within a reasonable period of time. Art. 65 provides that the buyer may fail to make a specification in either of two ways. Most of the time, the contract will provide for a specific date by which the buyer must make a specification. If the buyer failed “to make such specification […] on the date agreed upon” (Art. 65), i. e. on the date provided by the contract, the seller will be allowed to make the specification himself without first having to ask the buyer to make the specification (though as we will see (infra paras 7–9), he will have to give the buyer the opportunity to make a different specification). 5 If however the contract does not provide for a specific date on which the buyer must make a specification, the seller himself will be able to make the specification only if the buyer fails to make the specification “within a reasonable time after receipt of a request by the seller” (Art. 65). It should be noted that the reasonable time period starts to run from the time the buyer receives the notice and the burden is on the seller to make sure the notice is received.6 Such a request is not necessary when the contract states a specific date by which the buyer must make the specification – before that date the seller could not request that the specification be made as the seller is entitled to do so until the date specified and, after that date, the seller may make the specification himself without sending a request and therefore such a request would be pointless. 6 Could a request for the buyer to make a specification nonetheless be sent after a contractual deadline for the buyer to do so has passed, thus purportedly granting an additional period of time for performance akin to the notice under Art. 63? The better question would be: why would a seller do this since in such a case he would already be entitled to make the specification? Under such circumstances, this author would not recommend that such a request be sent as it would delay the performance of the contract – at the end of the additional period of reasonable time, if the buyer has not made the specification, the seller would then make the specification he could have made 4

3

Knapp, in: Bianca/Bonell, Commentary (1987), Art. 65 para. 1.3. Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 65 para. 1. 5 Mohs, in: Schlechtriem/Schwenzer, Commentary (2016) Art. 65 para. 4. Secretariat Commentary on 1978 Draft, Art. 61 (now Art. 65), para. 5: “the buyer’s failure to make the specification would constitute a breach of the contract only if the buyer was obligated to do so, not if he was merely authorized to do so.” Note that Art. 65 is in Section III on “Remedies for breach of contract by the buyer”. 6 This is an exception to the rule found in Art. 27. 4

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Article 65

in the first place and will still need to wait a second reasonable period of time to give a chance to the buyer to change the seller’s specification (see infra paras 7–9). In addition, this could lead to confusion with a notification under Art. 63(1). The 65 request is different from an Art. 63(1) notification in that such a request would not need to fix a specific period of time (a reasonable time period is provided by Art. 65) and it would need to be received by the seller (Art. 65(1)) unlike the notification of an additional period which need only be sent (Art. 27). A request sent after a specific date for performance has passed could lead to confusion and should be avoided – the seller should simply specify the form, measurement or other features and give notice to the buyer (see infra paras 7–9). b) When the buyer is in breach, the seller may make a specification with notifica- 7 tion and fix a reasonable period of time for the buyer to make a different specification. Once the buyer is in breach of his obligation to make a specification (the contractual deadline has passed or a reasonable time has passed after a request to make the specification was received), the seller may make such a specification himself. It should be noted that this is an optional remedy – the seller “may make the specification himself” but does not have to do so and could resort to other remedies, remedies which will remain available even if he chooses to make the specification (“without prejudice to any other rights he may have” Art. 65(1)). If the seller chooses to make the specification himself (1) he must do so “in accordance 8 with the requirements of the buyer that may be known to him” (Art. 65(1)); (2) he must “inform the buyer of the details thereof” and (3) he “must fix a reasonable time within which the buyer may make a different specification” (Art. 65(2)). The seller must therefore send a notice to the buyer informing him of the details of the specification chosen and wait for the time period he fixed (which must be reasonable) to pass. The time period starts to run only “after receipt of such a communication” (Art. 65(2)).7 During that time the buyer “may make a different specification” (Art. 65(2)) and so notify the seller. Therefore the seller by making the specification himself effectively grants an addi- 9 tional period of time to the buyer who will be able to make the specification himself even though the deadline to do so has already passed. If however the buyer does not react by the end of the reasonable period of time after receipt of the notice, “the specification made by the buyer is binding” (Art. 65(2)). To this author, this is a long and convoluted process filled with risks: the seller bears the risk that the notice is not received, that the time he fixes is not of reasonable length and that he failed to make the specification “in accordance with the requirements of the buyer that may be known to him”, noting that, according to some authors,8 the word “may” might imply constructive knowledge i. e. what he should have known as opposed to what he actually knew.9

2. Criticism of Art. 65 – a cumbersome process which will not be used most of the time a) Avoidance more readily available under Arts 63 and 64(1)(b) and will normally 10 be preferred. One of the main issues with respect to Art. 65 is how it relates to the remedy of avoidance. As we have mentioned above, unlike Art. 67 ULIS, Art. 65 does not specifically provide for the remedy of avoidance when the buyer fails to make a specification though it specifically reserves all other remedies, including avoidance. 7 Again the burden is on the seller to make sure that the notice is received, yet another exception to Art. 27. 8 See for example Knapp, in: Bianca/Bonell, Commentary (1987), Art. 65 paras 2.9 et seq. 9 This seems to be also supported by the French version of Art. 65: “dont il peut avoir connaissance.”

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Article 65 11–13

Part III. Chapter III. Obligations of the Buyer

Avoidance will certainly be available under Art. 64(1)(a) when the breach amounts to a fundamental breach. The issue that has divided the doctrine is whether avoidance will also always be available without a fundamental breach under Art. 64(1)(b) after an additional period of time has been set and has passed (Art. 63). This remedy is strictly reserved for breaches of the obligation to pay and the obligation to take delivery (Art. 64(1)(b)). Some authors are of the view that the breach of an obligation to make a specification, being neither an obligation to pay or to take delivery, may not lead to avoidance under Arts 63 and 64(1)(b).10 With all due respect, this author, with many others11 and the Secretariat’s commentary,12 is of the view that since the obligation to take delivery is defined as “doing all the acts which could reasonably be expected of him in order to enable the seller to make delivery” (Art. 60(a)), the obligation to make a specification is normally part of the obligation to take delivery – unless the buyer makes a specification, the seller is unable to deliver. Therefore, in this author’s view, the remedy of avoidance under 64(1)(b) is always available when the buyer has breached his obligation to make a specification. 11 That being the case, most sellers in most circumstances will prefer that route – they will prefer to avoid the contract and sell the goods to a third party (presuming a market for them) rather than continue with a sale to a buyer who is obviously not that interested in getting the goods. One difficulty arises however when the seller wants to seek damages in addition to avoidance – it is hard to estimate the damages when the specifications of the goods to be sold have not been determined. This may encourage the seller to make the specification but once it is made he may no longer avoid the contract for lack of specification. And there is always the risk that the buyer will override the specification made by the seller and reduce the latter’s profit to a minimum in cases where the determination of specifications affects the profits. 12

b) Even if avoidance is only available under Art. 64(1)(a), it will still be available in most cases. Even if the authors I disagree with were right in their view that a breach of the obligation to make a specification is not a breach of a largely defined obligation to take delivery (Art. 60) and therefore cannot lead to avoidance under Art. 64(1)(b), in most cases such a breach would in any event constitute a fundamental breach as it would prevent the seller from performing its main obligation to deliver the goods (Art. 30) and would result “in such detriment to the [seller] as substantially to deprive him of what he is entitled to expect under the contract” (Art. 25).

13

c) Conclusion. Recourse to Art. 65 will therefore, in my view, be very rare as it establishes a cumbersome process and most sellers will prefer to avoid the contract, a point which seems to be supported by the fact that there are hardly any court cases reported in which the article is invoked.13 However whenever the seller prefers to use Art. 65, he should carefully follow the detailed process provided by the article.

10

See for example Knapp, in: Bianca/Bonell, Commentary (1987), Art. 65 para. 2.6. See Mohs, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 65 para. 21, Honnold, Uniform Law (2009), para. 357. 12 Secretariat Commentary on 1978 Draft, Art. 61 (now Art. 65), para. 6. 13 UNCITRAL, Digest of Case Law on the CISG, Art. 65, para. 1 states: “Court decisions or arbitral awards which have implemented or cited article 65 are very rare” and cites only four cases where Art. 65 is mentioned and in three of these cases the article does not apply – the other case is in a language this author unfortunately does not understand. 11

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Article 65

III. Comparable Rules The PICC do not have an equivalent to Art. 65. The PECL adopts a similar though in 14 some respects fundamentally different remedy at Art. 7:105 PECL. The PECL provision is however so significantly different from Art. 65 that this author is of the view that it should not be used in interpreting it. The most important difference is that Art. 7:105 PECL applies to all obligations which 15 “may be discharged by one of alternative performances” and is therefore not a specific remedy for the buyer’s failure to make a specification. The consequence of this is that unlike Art. 65, Art. 7:105 PECL is not linked exclusively to cases that make the obligation to deliver impossible, and therefore a breach under Art. 7:105 is not necessarily fundamental.14 The article is also structured very differently and is too dissimilar to be of much help 16 in understanding Art. 65. For example, under Art. 7:105 PECL if the breach is fundamental, there is no need to request the other party to make the choice of the alternative performance as the right to choose passes to the other party automatically. Since in my opinion, the breach under Art. 65 is always fundamental, if the PECL were to apply, there would never be a need for a notice. However, under the 7:105 PECL, if the breach is not fundamental, then a notice granting an additional reasonable period of time is required before the choice can be made by the other party. 14

See supra paras. 10–11.

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Chapter IV Passing of Risk Article 66 Loss of or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation to pay the price, unless the loss or damage is due to an act or omission of the seller. Bibliography: Bolle´e, The Theory of Risks in the Vienna Sale of Goods Convention, Paris I thesis (1999) (Pace); Erauw, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 203; Erauw, in: Flechtner/ Brand/Walter, Drafting Contracts (2007), p. 383; Flambouras, Transfer of Risk in the Contract of Sale involving Carriage of Goods: A Comparative Study in English, Greek Law and the United Nations Convention on Contracts for the International Sale of Goods, Oxford thesis (1999) (Pace); Hachem in Schlechtriem & Schwenzer, Commentary on the UN Convention on the International Sale of Goods, 4th edition (2016); Oberman, Transfer of risk from seller to buyer in international commercial contracts: A comparative analysis of risk allocation under the CISG, UCC and Incoterms, Laval thesis (1997) (Pace); Romein, The passing of risk – A comparison between the passing of risk under the CISG and under German law (1999) (Pace); Schmitthoff, The Risk of Loss in Transit in International Sales, in: Honnold (ed.), Unification of the Law Governing International Sales of Goods (1966), p. 172.

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Price-risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. The risk transferred but reduced through the use of a remedy for the buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. An act or omission by the seller – posterior alleviation of risk . . . . . . . . . . . a) Risk can stay with the seller or return to the seller . . . . . . . . . . . . . . . . . . . . . b) Terminology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Determining which risks are transferred to the buyer . . . . . . . . . . . . . . . . . . . . . a) Theory and court practice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Loss or damage: physical loss and deterioration – value lost . . . . . . . . . . c) Loss of documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Legal risks: embargoes and unforeseen restrictions . . . . . . . . . . . . . . . . . . . . . e) Delays and special needs for transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f) Economic risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g) The risk of insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Contractual risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Damage caused by the goods themselves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 7 7 11 15 15 17 24 27 27 29 33 34 38 41 43 44 49 53

I. Importance and Role of the Provision The CISG rules about the seller’s performance (Arts 31–34) and Arts 66–70 about the passing of risk are related. When the seller performs the delivery in accordance with the contract of sale, the risk passes at the time and place determined by the Convention. 2 The time at which risk passes is determined by Arts 67–69 (see infra). The parties may deviate by agreement from that default risk allocation (Art. 6). An Incoterm, e. g. FOB or CIF, may have been used or the standard contract terms that became applicable may bring about another partitioning. The parties’ intention should be sought, which gives rise to issues of interpretation. Beyond this, party practices and the particular 1

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Chapter IV. Passing of Risk

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Article 66

business section’s trade usages intervene to determine whether and when risk passes. First, however, the sale must have been completed legally before one can speak of delivery.1 The notion of risk is central to the relationship between the two parties in a sale of goods. The corresponding CISG articles must be read in connection with other dispositions. Loss may occur in combination with a breach in which case the risk may still be with the seller or revert back to him (Art. 70 – see infra). Avoidance may terminate the sales agreement in which case risk will be covered by Arts 81–84 concerning the effects of avoidance and the manner in which restitution needs to be made. The risk discussed in Chapter IV of the CISG is limited to the value of the goods. In the worst-case scenario, the entire value could be lost when the goods have completely degenerated or have been lost. More serious risks may be associated but are in essence not governed by the dispositions of Arts 66–70, e. g. the risk that the goods sold bring damage to other goods of the buyer or do personal harm. Similarly the goods delivered could cause liability in tort to the goods of third parties – depending on the circumstances, it may be necessary to distinguish these issues from the passage of risk to the seller.2 The effect of the sales agreement on the property in the goods sold is not covered by the CISG (Art. 4). In situations where national law links the passing of risk to the passing of property title, this would be superseded by the CISG, where ownership is not the key to where the risk is allocated. In one case, a stallion was delivered to a potential buyer, first for training and on the condition precedent that this would be successful; the actual property transfer had not occurred. The court stated this was entirely separate from the issue of the passing of risk, because on the latter point the parties had made a partial agreement to pay a minimum sum at conclusion of the agreement, in regard to which the risk was assumed by the buyer after he fetched the horse. When the stallion died of colic the sum paid was forfeited, indeed before the property title was passed and without it ever passing.3 The burden of proof with regard to risk transfer is often connected to the problem of proving the conforming performance of the seller’s obligation to deliver the goods and the timing of this performance. It is the buyer’s burden to prove that the goods were not conforming at that point in time – see infra.

3

4

5

6

II. Detailed Commentary 1. Price-risk Art. 66 provides that once risk has passed, the buyer has the price risk, i. e. the buyer 7 must pay the price despite loss or damage to the goods. The buyer acquires the price risk the moment the seller is divested of the risk of loss. The rule of Art. 66 is contractual by nature and relates to the performance of the buyer’s obligation to pay 1 This was illustrated in the decision of Oberlandesgericht Hamm (Germany) 23 June 1998 (Furniture), CISG-Online 434 (Pace); also referred to in Magnus, in: Staudinger Kommentar (1994), Art. 69 para. 25, where furniture was kept in stock for an Austrian seller (after it was produced in Hungary), in preparation for transport to a German customer/buyer. The buyer, however, had the option to buy on call from that stock (entailing identification of the goods – an aspect under Art. 69, infra). When the goods were damaged, the obligation of the buyer to fetch them had legally not arisen and risk had not passed. 2 Erauw, in: Flechtner/Brand/Walter, Drafting Contracts (2007), pp. 394–396. 3 Oberlandesgericht Schleswig-Holstein (Germany) 29 October 2002 (Stallion), CISG-Online 717 (Pace).

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Article 66 8–14

Part III. Sale of Goods

(Art. 53). The article repeats or reaffirms Art. 53. The payment obligation applies subject to Art. 58 – see supra. 8 Before the risk with regard to the goods passes and in order to assure conforming delivery, the seller must procure the goods, preserve them, repair them if necessary and duly bring them to the point of delivery which is contractually agreed or determined by the CISG. If they are lost or undergo accidental damage during this process, he must resupply them because his obligation remains. 9 If the risk is still with the seller and loss occurs due to an impediment not within the seller’s control (force majeure) then the loss is the seller’s. However, the seller’s risk of being liable for the buyer’s damages is alleviated by Art. 79 (see infra). 10 If loss or damage to the goods occurs after the parties have performed their obligations and while the goods are under the control of the buyer, the rule that the buyer has to bear the loss of value is self-evident. This reflects the economic risk after purchase, a matter beyond the scope of the Convention.

2. The risk transferred but reduced through the use of a remedy for the buyer Art. 66 also covers damage or loss occurring after the passing of risk, but flowing from old defects that existed before the passing of the risk – see also, in this regard, Art. 36(2) supra. Art. 66 indeed contemplates that there may have been a breach by the seller. In that case the rules on non-conforming delivery specify the consequences of such a breach. If goods deteriorate or are lost by reason of the seller’s breach itself, then only the remedies for such breach must be argued and applied, not the question of passing of risk. Art. 66 only reminds us that the buyer will be left with his primary obligation to pay the price. The provision explains that the buyer enjoys no automatic exceptions and finds no automatic liberation from his payment obligation through the fact that loss or damage occur after risk of loss has passed. 12 Art. 66 looks like it introduces a principle of “pay first, discuss later”. However, if the seller has committed a fundamental breach, this could be seen as crass punishment for the buyer. This explains the existence of Art. 70 (see infra), which states that if indeed the seller committed a fundamental breach, and such breach is notified, the passing of risk under Chapter IV (Arts 67–69) does not impair the application of any remedy for the buyer. This includes his right and his option to avoid the agreement entirely, whereby Art. 66 does not apply. In that hypothetical the relationship would need to be resolved under the consequences of avoidance (i. e. Arts 81–84), making the risk revert to or stay with the seller. 13 The value to be paid by the buyer can be the full price or a reduced price in conjunction with Arts 50–51. In a case decided by the Higher Regional Court of Koblenz (Germany)4 the buyer had not completed the declaration of avoidance correctly. The appeals court therefore looked at the buyer’s remedy of price reduction. The buyer had bought bottles which either broke or became unsterile after the delivery “ex factory” due to a mistake the seller made in the packaging. The court dramatically reduced the price to zero (see infra para. 22). 14 With regard to paying first and discussing later, in the hypothetical of a fundamental breach, the buyer also has the possibility to use the remedy of Art. 71(1), i. e. the exceptio non adimpleti contractus (recognized in Art. 80). 11

4

Oberlandesgericht Koblenz (Germany) 14 December 2006 (Sterile bottles), CISG-Online 1408 (Pace).

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3. An act or omission by the seller – posterior alleviation of risk a) Risk can stay with the seller or return to the seller. Once the risk has passed, the 15 buyer has the price risk, meaning the buyer must pay even though the goods in his possession are damaged or lost. Art. 66 provides for this, but the same article also introduces the possibility of passing the performance risk back to the seller. This relief does not come from Art. 70, because this deals with the effect of a seller’s fundamental breach, a matter beyond the scope of Art. 66. Rather, the relief comes from the last words of Art. 66 providing that the buyer is discharged (he must pay “unless”) from his price obligation if “the loss or damage is due to an act or omission of the seller”. There is, thus, mitigation to the strictness of the rule of Art. 66. The UNCITRAL Digest states that the “unless”- clause in Art. 66 is distinct from the lack of conformity under Art. 36 (1) and (2).5 The Digest found a suggestion that seller could be held liable for deterioration of 16 goods after delivery was possible, but buyer would need to provide proof the damage was due to seller’s actions or omissions, such as for a case where sheep were transported on an overloaded truck suffering physical damage.6 b) Terminology. The first appearance of the phrase “due to an act or omission of the 17 seller” in the ULIS had brought surprise. It introduced a possible right of set-off for a tort the seller may have committed. This would be uncharacteristic under the Convention, because both tort and set-off fall outside the scope of the CISG. However, the vague wording seems to introduce the fault concept into the Convention’s treatment of mutual contractual obligations. The seller may find his obligations to care, repair and eventually to re-deliver, all reborn again, with no clear time-limit and under a vague standard (of liability). In effect, this is how the risk will finally be allocated by decision of a judge. So what does it mean when the seller bears the risk of loss or damage due to his “act 18 or omission”? The text of Art. 66 requires clarification; this was asked for in the diplomatic conference for the preparation of CISG, but not given. The final CISG text refers only to the seller’s own actions and mentions the seller’s “omission”, suggesting that the CISG exception merely covers – with quaint phrasing – the possibility that a seller’s breach of contract has caused the particular damage or loss. The terms do not introduce a higher standard than is relevant for the application of Art. 79; it holds the seller to a standard of reasonableness, such as the need to provide qualitative transportation.7 Once such action or omission is proven, then passing of risk becomes irrelevant and 19 Arts 45 et seq. become available to the buyer.8 When the exception applies, presumably, the buyer’s obligation to pay the whole price or to pay part of it is postponed or even waived and the obligations of the seller are reborn in part or entirely. It is conceivable, in this situation, that neither of the parties carries the risk. However, taking a dynamic view of the “passing” of risk (the title of Chapter IV), it looks more logical to decide that risk simply did not pass to the buyer. If the seller were to cure or to replace the lost or 5

UNCITRAL Digest of case law (2012), p. 319 (No. 6). UNCITRAL Digest of case law (2012) at p. 320 cites Oberlandesgericht Schleswig-Holstein (Germany) 22 August 2002 (Sheep), CISG-Online 710, which nevertheless found no such proof. The Digest also states that in four arbitral decisions of tribunals functioning under rules of the Russian Federation Chamber of Commerce and Industry and the Western Siberia Circuit, the buyers did not succeed in providing such proof. 7 Hachem, in: Schlechtriem/Schwenzer/Hachem, Commentary (2016), Art. 66 paras 22–25. 8 Hachem, in: Schlechtriem/Schwenzer/Hachem, Commentary (2016), Art. 66 para. 28. 6

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Article 66 20–25

20

21

22

23

Part III. Sale of Goods

damaged goods with substitute goods then the obligation to pay the price would ensue as the risk moves on to the buyer. This exception can be interpreted broadly or narrowly. The drafting literally allows the buyer to suspend or withhold payment for a variety of reasons connected to the behaviour of the seller. It is possible (or probable) that only those acts or omissions that amount to a breach of an obligation of the seller (different from breach of contract) would be sufficient.9 In any case, it is a complex or “disturbing” exception. One could wonder whether this exception will be applied if the parties choose to use Incoterms, where the effect would again be to offer an equitable exception to the passing of price risk under any specific term with regard to the time of the agreed passing of the risk. Of course Incoterms do not settle the payment obligation nor the consequences of the seller’s breach of contract. They do determine when the risk passes and can therefore influence the working of Art. 66. An application in the above-mentioned German decision by the Higher Regional Court in Koblenz of 14 December 2006 is illustrative of this point.10 The goods delivered were bottles that were to be kept sterile with non-porous foil and stacked properly, but were not. This poor performance was apparently done by the seller before the risk passed. That sale concerned a delivery “Ex factory” (since Incoterms 1990 replaced by “Ex Works”). The appeals court described the normal passing of risk. It stressed the independent nature of the remedy of price reduction usable apart from the requisite notification of the non-conformity of the goods or the lapse of time to protest breach according to Art. 39.11 This brought the court to refer to Art. 66, namely to the exception in the last phrase. It took pains to mitigate the risk and even completely took it away. Art. 66 presupposes that the damage does not fall within the responsibility of the seller, but on the other hand, if the loss is caused by a breach by the seller, this is reversed. The court found an apparent breach before the transfer of risk. It found that it could apply the reduction of the price and it reduced the price to zero.12 Such use of the exception in Art. 66’s last phrase looks like a patch against the buyer losing his normal remedies. The burden of proving this type of shortcoming of the seller is on the buyer.13

c) Burden of proof. Art. 66 simply imposes the burden of proof regarding the buyer’s eventual claims for compensation of the loss the buyer suffered (after the risk passed). When pork ribs were sent from a U.S. seller to a Canadian buyer after keeping them for some time in frozen storage, it was for the buyer to prove the non-conformity at the time of delivery. The court found no proof of deterioration and spoiling at the time of the transfer of risk.14 Indeed, the burden can be heavy and the buyer better beware. 25 Another case illustrates the difficulty of proving that damage is due to the seller. The buyer had to bear the risk of the loss of much of a ship’s cargo of barrels containing bitumen. It was the buyer’s insurance company that took legal action. It explained that 24

9

Huber, in: Huber/Mullis, The CISG (2007), p. 317. Oberlandesgericht Koblenz (Germany) 14 December 2006 (Sterile bottles), CISG-Online 1408 (Pace). 11 See supra Art. 39 and the mitigation in Art. 44. This author thinks the court should have applied Art. 44 with a clearer motivation (See Huber, in: Huber/Mullis, The CISG (2007), p. 248), or otherwise might have wanted to seek a solution parallel to Art. 50. 12 This is indeed a possibility, see supra Art. 50 and Huber, in: Huber/Mullis, The CISG (2007), p. 254. 13 Landgericht Flensburg (Germany) 24 March 1999 (Meat), CISG-Online 719 (Pace), where delivery was under the default rule at the premises of the seller and the buyer carried the risk for the transportation and resold the goods on the same day as he took delivery. He had not protested for nonconform delivery. 14 Federal Appellate Court, 7th Circuit (U.S.) 23 May 2005 (Pork ribs), Chicago Prime Packers, Inc. v Northam Food Trading Co., CISG-Online 796 (Pace). 10

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Article 66

the seller had chartered a decrepit boat that had been on its way to the scrap-yard and put it back at sea with the filthy cargo. The loading was not done as asked. Furthermore, the seller chose a one-ship carrier-company without insurance. The judge could not be convinced this was a faulty choice. He told the claimant that one would not choose a luxury vessel for this.15 This type of situation remains to be judged in fact; a different outcome is seen in the above-mentioned case of the packaging of bottles for transport, where application was made of the exception of Art. 66’s last phrase. If the seller claims to have the right to payment because the risk passed from him to 26 the buyer, he has to prove that transfer.16 This proof will usually be the transport document or a notification of receipt, depending on the agreed delivery conditions.

4. Determining which risks are transferred to the buyer a) Theory and court practice. The CISG contains no definition of the types of risk 27 covered by the rules on transfer of risk, leaving uncertainty. First, one must look at the risks that fall within the scope of the Convention.17 The Draft UNCITRAL Digest offers illustrations of this notion18. The wording used in the CISG is “loss or damage” (Arts 66 and 68) and “goods (that) have perished or deteriorated” (Art. 82(2)(b)). A number of judicial decisions have been decided on aspects of “the loss or damage” 28 that fall under Art. 66 determining that the risk for such loss or damage passes. Decisions have mentioned elements that shall not be understood as harm to the goods: e. g. delay in delivery after the handing over to the carrier. b) Loss or damage: physical loss and deterioration – value lost. Physical risks to the 29 goods, including their entire destruction, are covered by the concept of “loss”. For living creatures sold as goods, this includes sickness or death.19 Disappearance of the goods, including theft, misplacing the goods, transfer to a 30 wrong address or person, and mixing up the goods with other goods are included. That is a broad notion that encompasses: – occurrences in transporting the goods from one party to the other; – in handling and storage20, including the risk of natural processes leading to a decline in quality (resulting from whichever cause, such as lack of care, bad packaging, melting, thawing21, shrinking, loss of weight or strength or taste, or appearance). 15 Appellate Court of Vaud (Switzerland) 26 May 2000 (Tar in drums), CISG-Online 1840 (Pace), see infra at Art. 67, No. 34 for more discussion on the facts. 16 Oberlandesgericht Hamm (Germany) 23 June 1998 (Furniture), CISG-Online 434; also referred to by Magnus, in: Staudinger Kommentar (1994), Art. 69 para. 25. 17 For example, the liability of the seller for death or personal injury is beyond the scope (Art. 5). In complex agreements a part concerning services may entail a certain risk in conjunction with a sale but not governed by CISG. 18 See also Erauw, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), pp. 293 et seq. 19 The exclusion of death or personal injury in Art. 5, is only for damage caused “by the goods to any person”. On a positive note, the benefit of acquiring any fruits, by-products or offspring of live goods (e. g. the right to the foal of a mare) passes together with the risk – finding its cause in property law and as such not decided by CISG. See Nicholas, An Introduction to Roman Law (1962), p. 180. 20 Romein, The passing of risk – A comparison between the passing of risk under the CISG and under German law (1999) (Pace); see also Oberman, Transfer of risk from seller to buyer in international commercial contracts: A comparative analysis of risk allocation under the CISG, UCC and Incoterms, Laval thesis (1997) (Pace) and Flambouras, Transfer of Risk in the Contract of Sale involving Carriage of Goods: A Comparative Study in English, Greek Law and the United Nations Convention on Contracts for the International Sale of Goods, Oxford thesis (1999) (Pace). 21 A sale of Chilean deep-frozen raspberries: Commercial Court Hasselt (Belgium) 2 May 1995, CISGOnline 371 (Pace).

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Article 66 31–35

Part III. Sale of Goods

Risk of physical loss or deterioration also encompasses the risk of other persons causing damage to the goods or, indeed, their disappearance.22 32 One must also assess the amount of compensation that will be due as a result of the risk. Other than the goods themselves, this might include the cost of repackaging,23 the expense of handling and replacing and moving the goods, such as when they need to be recounted. 31

33

c) Loss of documents. The risk of loss of documents relating to the goods, in this author’s opinion, passes together with the risk for the goods. In other words, the risk of loss rules of the Convention apply as easily to documents as to goods. The time and place to hand documents over is normally the same as for goods (Art. 34), but the Digest indicates that absent agreement, the delivery of documents may be expected just in time of their use for taking delivery of the goods or for their import. Thus, if the documents are lost before they are delivered, the risk should or could be treated similarly. Remedies for non-conforming delivery of documents may, rather more exceptionally – according to the Digest – include avoidance, which would stop risk relating to those documents from passing.

d) Legal risks: embargoes and unforeseen restrictions. It was at first uncertain whether legal risk passes together with physical risk, especially considering the difference with the text of the ULIS – the predecessor treaty. Such risk comprises the chance that an authority will intervene, confiscate, or forbid the possession, intended use or further commercial exploitation of the goods.24 It is the risk that through the operation of law a party would be deprived of the right to make the intended valuable use of the goods. 35 The wording of the CISG seems to exclude the literal application of its risk of loss rules to legal risk.25 However, it is rational to allocate legal risks along the given line of the CISG and court decisions have made this rule clear. A Hungarian arbitration decision about a FOB sale of caviar stock from Yugoslavia via Hungary to Cyprus illustrates this point.26 The Hungarian buyer picked up the goods in Yugoslavia at the seller’s address27 on 28 May 1992 after which the UN embargo against Yugoslavian goods was declared. The buyer could make a partial customs clearance but could not get permission to re-export from Hungary. The parties had not made a specific agreement 34

22 Landgericht (District Court) Darmstadt (Germany) 12 March 2013 (Shoes), CISG-Online 2446 (Pace), rejected a claim for payment by seller for a delivery of shoes from Italy to Germany that got lost, when seller could not provide proof of delivery to the carrier. 23 Costs of repackaging and of inspection were asked (but rejected) in Arbitral Award, CIETAC, 7 April 1999 (PVC Suspension resin), CISG/1999/20, CISG-Online 1244 (Pace). 24 Hager, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 66 para. 4. 25 Schwenzer/Fountoulakis/Dimsey, International sales law, 2nd Edit., Oxford, Hart Publ. Co., 2012, p. 484 say it is at least uncertain whether the article refers to legal risk, but mention the Hungarian arbitration case (on caviar) discussed presently. B. Piltz, Internationales Kaufrecht – Das UN Kaufrecht in Praxisorientierter Darstellung, 2nd Edn, Munich, Beck, 2008, p. 228 (No. 4-270) was more outspoken: “it does not govern risks of sovereign intervention”. Hachem, in: Schlechtriem/Schwenzer/Hachem, Commentary (2016), Art. 66 paras 10–11 writes that if it were unforeseeable that government would introduce new rules then this would be at the risk of seller if risk had not yet passed, although he could exonerate himself via Art. 79 (force majeure) but he must try and overcome the impediment; Hachem states that obtaining export or import licences is not relevant in the discussion about risk, because that concerns the parties’ obligations. 26 Arbitral Award, Arbitration Court of the Hungarian Chamber of Commerce and Industry, 10 December 1996 (Caviar stock), CISG-Online 774 (Pace). The FOB term ought not to have been used, given the delivery was to a carrier (indicated by the buyer) for land transport. 27 In the case cited the agreement was to fetch the goods and the term used was “FOB Kamion Kladovo” – the Yugoslav town (Serbia) where seller was established.

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Chapter IV. Passing of Risk

36–40

Article 66

relating to such risk, but in general terms the risk had passed. The arbitrators found that on the basis of force majeure the damage of this measure fell on the buyer who carried the risk after delivery. When parties use an Incoterm this includes an agreement concerning the risks as to obtaining customs clearance for export and for receiving import permission or import quotas – thus with Incoterms the risk regarding those matters is allocated. The risk of an impediment beyond control of the parties striking out the performance 36 (“force majeure”) is discussed under Art. 79 (see infra), but this risk is to be allocated in accordance with Art. 66.28 In the so-called “dioxin-crisis” over the levels of PCBcontamination in meat that broke out late May 1999 in Belgium and later had repercussions in the rest of Europe, the newly introduced restrictions on the sale of pork meat were a force majeure that struck the party that carried the risk at the time of their unexpected introduction.29 Belgian pork meat was delivered in Germany and payment was made on the first day the new restrictions were introduced, leading customs to seal up the meat and block it – at the risk of the buyer.30 The same would apply if animals bought as product were to subsequently fall under a legal measure of compulsory culling. Thus, if the parties have not adopted a specific trade term or have not stipulated how they wish to deal with specific legal risks, they should be treated under the Convention’s risk of loss rules. The loss of the buyer who bears risk of loss is limited to the price paid or still to be 37 paid. If there is also a breach on the seller’s part, then the buyer’s loss may be reduced accordingly (see the comment infra on Art. 70 paras 11–12).31 e) Delays and special needs for transportation. Delay in delivery (which might occur 38 in combination with a case of deterioration in the quality of the goods over the extra time) can constitute a breach of contract and this may prevent risk from passing.32 The Digest indicates how courts applied the provision for the passing of risk, also to the loss through delay.33 The possibility of delayed delivery may seem to be an aspect of “legal risk”, but it is 39 not the same: it is a risk associated with contracting to perform by a particular date, and non-performance by that date is simply a breach of contract. The same comments apply mutatis mutandis to delivery at the wrong place. Delay caused by third parties may indeed have to do with risk. If the third party is an 40 independent carrier, the party that nominates the carrier normally carries the liability 28 Bolle ´e, The Theory of Risks in the Vienna Sale of Goods Convention, Paris I thesis (1999) (Pace), pp. 276–277 – a factor of risk. 29 Court of First Instance Ypres (Ieper) (Belgium) 18 February 2002 (Pork meat), CISG-Online 747 (Pace). The case did not allow for the application of the rule of hardship – “impre´vision”. 30 Appellate Court Gent (Belgium) 16 June 2004 (Pork meat), CISG-Online 988 (Pace). 31 Thus if the seller has breached, there may be a partial return of the goods for lack of “delivery”, and speaking in terms of risk there will be less to compensate. 32 The same is true if the seller delivers to the wrong place for ULIS, see Neumayer, Do ¨ lle Einheitliches Kaufrecht (1976), p. 623. 33 District Court Arnhem (Netherlands) 17 July 1997 (Artwork – painting) (Unilex database) and affirmed – on other grounds – in Appellate Court Arnhem (Netherlands) 9 February 1999 (Artwork – painting) (Unilex database). In Arbitral Award, CIETAC CISG/1999/20, 7 April 1999 (PVC-resin), CISGOnline 1244 (Pace), the Chinese buyer of PVC Suspension resin, that he bought from a seller in the U.S., was claimant in the arbitration; he requested compensation of the liquidated damages he himself had to pay to his own customer for his own delay in delivery. He had re-sold the goods and then the packaging broke on transport from America and the goods had to be repacked and re-inspected, causing delay. The tribunal rejected the entire claim for the loss caused by the leaking packaging and by the delay vis-a`-vis a customer. The risk was for the first buyer (except if the seller did not provide for adequate packaging), because the delivery was done at the beginning of the transport (CFR).

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Article 66 41–43

Part III. Sale of Goods

for his choice. However, if Incoterms CFR/CIF or CPT/CIP are used, the seller chooses a carrier but the risk is borne by the buyer. With the Incoterms DAT/DAP the risk of transport lies with the buyer, so any delay in transportation cannot be attributed to the seller. In this sense, provisions as to the special transportation needs for certain sensitive goods should be detailed and the risk should be allocated to one of the parties (see infra). Indeed, special agreements or separate clauses can bring clarity over the obligations in respect of transport and care, thereby localizing the risk with those who perform those obligations.34 In disputes about the damaging consequences of a poor choice of carrier, judges have allocated the risk purely or mechanically on the basis of the goods passing the ship’s rail and refrain from readily penalizing the party that was to contract with the carrier (and eventually the insurer). An exception is the case where the parties had negotiated about the risk of transportation under a CFR-term in such detail that they effectively concluded a separate agreement about the risk relating to the temperature condition of the goods during transport.35 f) Economic risk. Economic risk has to do with the fluctuation of the value of goods on the market. At the time of the conclusion of a sales agreement the price is fixed (or is determinable) in the currency contractually provided for. The market price of the goods, as well as the currency exchange rate, may fluctuate after the conclusion of the agreement. Later fluctuations of the market price can bring an advantage either to the seller (when there is an intermediate drop in price) or to the buyer (when there is a price increase).36 The terms of Arts 66–70 do not apply to the issue of fluctuation in market price or exchange rate fluctuation. The risk of these events passes at the time of the valid conclusion of the agreement. 42 It would be wrong to consider a change in the attribution of the creating artist to a piece of artwork as a risk that passes to the buyer. The identity of the creator of a work of art or an antique is part of the authenticity of the good. Changes in perception or in analysis of such characteristics are at most an economic risk, which, depending on the circumstances of the case, do not as a rule pass to the buyer together with or as risk pertaining to the product.37 41

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g) The risk of insolvency. The risk of insolvency of one’s contracting party in the sale relationship is beyond the CISG. In two closely related cases a delivery was made to a third party that subsequently went into receivership, whereby the buyer suffered loss. The court only looked into this from the angle of seeking eventual fault with the seller for delivering at that destination – however as the parties agreed on this change of place of delivery, the risk passed and fell on the buyer.38 34

See Erauw, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 392. Arbitral Award, CIETAC, 23 February 1995 (Jasmine formaldehyde), CISG-Online 568 (Pace); the same as Arbitral Award, CIETAC 23 February 1995, CISG-Online 971 (Pace), where the product was jasmine aldehyde and much emphasis had been put on the temperature not being allowed to rise. See approval from Hachem, in Schlechtriem/Schwenzer, Commentary (2016), Introduction to Arts 66–70, para. 3. 36 See Schmitthoff, The Risk of Loss in Transit in International Sales, in: Honnold (ed.), Unification of the Law Governing International Sales of Goods (1966), p. 172; Bolle´e, The Theory of Risks in the Vienna Sale of Goods Convention, Paris I thesis (1999) (Pace), p. 271. 37 The Digest described a case in which a painting represented at the time of sale to be the work of a famous artist was later shown to be misattributed. The court, invoking Arts 69(1) and 36(1), dismissed the buyer’s claim because, at the time of delivery, there were no indications that the artist was not the painter. This seems incorrect. The case points to non-conforming delivery, for which the seller should eventually be liable. Delivering a wrongly attributed painting may be attacked under the national law governing misrepresentation or error in substance because such rules are matters of validity. 38 Oberlandesgericht Oldenburg (Germany) 8 September 1998 (Raw salmon), CISG-Online 1887 (Pace) and Oberlandesgericht Oldenburg (Germany) 22 September 1998 (Raw salmon), CISG-Online 508 (Pace). 35

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Chapter IV. Passing of Risk

44–49

Article 66

5. Contractual risk The CISG only explicitly refers to the “passing” of risk. It logically leaves us to put the risk with the seller before it passes, and subsequently with the buyer after it passes. Before a contract is concluded, all risk including legal, economic and physical risk, lies with the seller. These basics are not expanded in CISG; they are self-evident. Perhaps the most important risk has to do with the kind of obligations a party takes on as a result of the contractual negotiations. Thus, there is the risk of non-satisfactory performance (as in choosing your business-partner – insolvency, incompetence and the like) that can be called contractual risk and applies to both buyer and seller. The CISG imposes on the seller an obligation to make a conforming delivery, generally measured at the time the risk passes (Arts 35–37). This should suffice as the Convention is oriented towards contractual provisions and offers what the crucial performance phase of the transaction requires – namely detail as to the obligations imposed for a legally effective “delivery” – the “handing over” of the right thing. The buyer will, in exchange, have to pay good money. The different possible deficiencies regarding the matter of conformity are mentioned in Art. 35. If there is lack of conformity at the time that risk normally passes to the buyer, the seller’s “liability” for that breach does not pass to the buyer (Art. 36). The rule of breach trumps the passing of risk.39 Art. 70 (see infra) provides guidance concerning the relation of risk passing and the occurrence of a fundamental breach. The risk of loss or deterioration of the goods covers the buyer’s risk of having to pay the price for what is either not entirely there or is not there in its full value. This price risk – the obligation to pay notwithstanding the loss or reduced value – is a negative way of defining the risk that undoubtedly does pass to the buyer. Art. 66 describes the effect of this “passing” in terms of the law’s choice not to discharge the buyer of his asyet-unperformed obligation. There may also be risk caused by the way the parties structure their legal relationship. For example, part of the risk associated with a non-conforming delivery involves the costs of transporting and of insuring during transport, as well as the costs of handling and storage. Depending on what the buyer paid to the seller for the goods, which may include the cost of those services, the seller may lose that value, because getting a replacement product delivered to the same place will be an additional cost. These costs will be higher if the goods were to be delivered at or near the buyer’s establishment. The allocation of such risk is to be decided by the agreement or by an Incoterm and by price negotiations. These transport costs are a matter of contractual risk even if they were not included in the product price and needed to be contracted out to other entities. If the parties have by agreement added other financial consequences to the delivery of nonconforming goods, such as a liquidated damages clause (which is not expressly addressed in the Convention) the contractual risk is greater.

44

45

46

47

48

6. Damage caused by the goods themselves The risk of loss for goods sold under a sales contract is altogether different from the 49 risk of damage later caused by the goods sold. The sold goods can deteriorate and can damage persons or other property or can in turn also disturb processes, by their failure. 39 The remedies for material defects can be cut-off (Arts 38 and 39); so risk for breach can indeed effectively pass, at the deadline for giving notice of lack of conformity indicated by Art. 39 (which must be read in conjunction with Arts 40 and 44). See also the discussion of Art. 70.

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Article 66 50–53

Part III. Sale of Goods

This other damage raises issues of contractual or tortuous liability between buyer and seller, or tortuous liability vis-a`-vis third parties who suffer damage to their property or economic loss.40 50 With respect to contractual liability between buyer and seller, recovery for this damage is exclusively based on breach of contract (lack of conformity) and the damages fall under Art. 74 – the article that orders full compensation for broadly defined losses. 51 A seller’s liability for such damages would be based on a breach by delivery of nonconforming goods even though the damage caused, shown to be within the chain of causality, might occur after the time of delivery (Art. 36(2)). The appearance of such damage, of course, could be the first indication that something was wrong with the goods all along. The risk for this damage also passes to the buyer when the delivery is duly made or when the deadline for notice of non-conformity under Art. 39 (see also Arts 40 and 44) expires. 52 Claims under tort law, of course, are beyond the scope of CISG and outside the possible extensions of its principles by way of gap-filling (Art. 7(2)). However, even contractual liability for damage caused to other property of the buyer cannot be simply identified with or subsumed under the rubric of the passing of risk. The Convention’s risk of loss rules clearly limit their ambit to loss or damage to “the goods” (i. e., the goods sold) – Arts 66 and 68 – or “in respect of goods sold”– Art. 68.

III. Comparable Rules 53

In the PECL there are no comparable provisions as this set of model rules does not explicitly discuss the issue of transfer of risk.41 It can however be argued that the articles on place and time of performance (Art. 7:101 and Art. 7:102) implicitly address transfer of risk. The DCFR on the other hand contains a provision (Art. 5:101) almost identical to Art. 66. 40

See Erauw, in: Ferrari/Flechtner/Brand, Draft Digest and Beyond (2003), p. 296. The Common European Sales Law CESL of the European Parliament and Commission contains comparable rules in Chapter 14 (Effects on passing of risk), such as Art. 140, which follows Art. 66 CISG. 41

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Article 67 (1) If the contract of sale involves carriage of the goods and the seller is not bound to hand them over at a particular place, 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. If the seller is bound to hand the goods over to a carrier at a particular place, the risk does not pass to the buyer until the goods are handed over to the carrier at that place. The fact that the seller is authorized to retain documents controlling the disposition of the goods does not affect the passage of the risk. (2) Nevertheless, the risk does not pass to the buyer until the goods are clearly identified to the contract, whether by markings on the goods, by shipping documents, by notice given to the buyer or otherwise. Bibliography: Hachem, in: Schlechtriem/Schwenzer, Commentary (2016); Ramberg, To What Extent do Incoterms 2000 Vary Articles 67(2), 68 and 69 CISG? 25 Journal of Law and Commerce (2005) 220 (Pace); Valioti, Passing of Risk in International Sales Contracts: A Comparative Examination of the Rules on Risk under CISG and Incoterms 2000, Nordic Journal of Commercial Law (2004) 2 (Pace); Von Hoffmann, Passing of Risk in International Sales of Goods, in: Sarcevic/Volken (eds) International Sale of Goods (1986), p. 286.

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Handing over the goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Carriage involved in a sale under CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) If no place of delivery was determined risk passes when the goods are handed over to the first carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Handing over to the first carrier independent carrier . . . . . . . . . . . . . . . . . . . d) Delivery at a particular place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Clearly identifying the goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Art. 67’s relationship with terms agreed by the parties . . . . . . . . . . . . . . . . . . . . . a) Agreed terms regarding risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Interpretation of the trade terms used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Incoterms and the CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Incoterms in general. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) EXW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) FCA and FOB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) CFR or CPT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ee) CIF or CIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ff) DDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 4 4 4 7 9 17 19 23 23 25 30 30 34 36 40 43 45 47

I. Importance and Role of the Provision Because of the distance the goods have to travel in an international sale, it is 1 important to know at which point the risk of loss or damage to the goods passes from the seller to the buyer. Article 67 indicates the passing of risk in a sale which involves the carriage of goods, which means this rule will be applicable in the majority of the international sales. If no carriage is involved, risk passes under the rule of Art. 69. The ULIS linked the passing of risk to the delivery of the goods as it is the case in the 2 Incoterms. The drafters of the CISG preferred not to link the passing of risk with the Erauw

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Article 67 3–6

Part III. Sale of Goods

concept of “delivery” in order to avoid confusion and to be able to provide different rules for the delivery and the passing of risk.1 This appears to be only a difference in legislative technique, as the rules on the passing of risk of the CISG largely correspond with those of the ULIS.2 3 In practice, parties often agree on the point of risk transfer in their contract of sale, explicitly, or through the use of an Incoterm. But if the contract of sale does not provide a solution, the CISG’s default rules will apply.

II. Detailed Commentary 1. Handing over the goods a) Carriage involved in a sale under CISG. Chapter IV of Part III of the CISG (Arts 66–70) determines the place where and time when risk passes. It provides different rules depending on whether the sales agreement involves the carriage of the goods (Art. 67), whether the sale relates to goods in transit (Art. 68), or whether the transaction does not fit into the prior two categories (Art. 69). The UNCITRAL Digest (2012) explains that if the contract is silent about carriage, Art. 69 rather than Art. 67 will govern.3 5 The distinctions controlling which rule applies are not clear to all, as the Digest illustrated. In international sales, logically, the large majority of transactions involve carriage, thus Art. 67 will usually be applicable. Professor Honnold intimated that sales not involving carriage were typically domestic4, or were otherwise the unusual case where one may presume the seller had his own trucks for distribution. Art. 67 should indeed apply whenever the goods are to be handed over to an independent carrier, including to a forwarding agent. The parties decide where, when and how the goods must be delivered. 6 The question of whether the contract “involves carriage of the goods” so that Art. 67 applies depends on the parties’ agreement, which most often does exist.5 This is independent of whether it is the seller or the buyer who shall arrange for carriage. Indications in the contract are: who arranges for transport and for insurance. In one case, a contract provision requiring the buyer “to pick up” the goods and to “take the goods to” his facilities in another country was held to mean that the contract “involved carriage of the goods” and thus was governed by Art. 67 while – more importantly – the contract also included an “FOB” delivery term, which implies sea transportation. A clause requiring the buyer to pick up or the seller to deliver to the buyer would not “involve carriage” because there must be a third-party carrier involved. Hachem specifies that agreements simply about who carries costs do not necessarily relate to the passing of risk.6 4

1

Honnold, Documentary History (1989), pp. 31–41. Hachem, in: Schlechtriem/Schwenzer/Hachem, Commentary (2016), Art. 67 para. 2 referring to Art. 19(3) ULIS. 3 UNCITRAL, Digest of Case Law (2012), p. 325, Art. 69 para. 2. 4 Although the application of the CISG depends on the domicile of the parties and not on whether the goods pass a frontier. 5 Enderlein/Maskow, International Sales Law (1992), p. 257 – “absence of agreement is rare”; Lookofsky, Understanding the CISG in Scandinavia (2002), p. 111 – “realities of sales contract life”, “a large percentage of contracts deviate as to the passing of risk”. That would be the case if either explicitly or implicitly the contract provides for transport after its conclusion, say Schwenzer/Fountoulakis/Dimsey, International sales law (2012), p. 491. 6 Hachem in Schlechtriem/Schwenzer, Commentary (2016), Art. 67, para. 10 who cites decisions by Audiencia Provincial de Cordoba (Spain) 31 October 1997 (goods not specified), CISG-Online 502 and BGH (Germany) 11 December 1996 (Marzipan), CISG-Online 225. 2

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b) If no place of delivery was determined risk passes when the goods are handed 7 over to the first carrier. Art. 67 (1) offers a double rule for two possibilities. The first hypothetical is where the sale “involves carriage” but there is no particular place to hand the goods over; the second hypothetical is where the seller is bound to hand the goods over to a carrier at a particular place. This runs parallel to the terms of Art. 31 which also distinguishes between the seller having to hand over the goods to the carrier and delivering them at a particular place. If the seller is not bound to hand the goods over at a particular place, risk passes 8 when the goods are “handed over” to the first carrier for transmission to the buyer, as agreed. It is the rule under CISG that if the sale involves carriage, absent a stipulation by the parties, the goods must be handed over to the first carrier (Art. 31(a)).7 The parties agree on the choice of the first carrier for transmission. c) Handing over to the first carrier independent carrier. The text is clear as to the 9 first carrier for multimodal transport. It is understood that the first carrier is (similar to Art. 31) an independent carrier. The majority opinion is that one looks at this first independent carrier, whether this is a party doing a domestic leg of the transport or an international leg; for a long stretch or short. Von Hoffmann looked closely at this, trying to define the “first carrier” and he found we ought to include the vehicles of the seller in order to have risk treated uniformly throughout the transport.8 However, this does not seem to be a good solution. “Independent” has to be understood as not comprising the seller’s own staff or own means of transport or those of an auxiliary.9 It is logical that the risk remains with the seller as long as the goods are under his supervision. Under Art. 67(1) the words “when the goods are handed over”, i. e. as they are 10 brought into the legal control or “custody” of the carrier, are not as specifically defined as, for example, the place of loading onto the carrier’s vessel.10 It certainly entails that, 7 Valioti, Passing of Risk in International Sales Contracts: A Comparative Examination of the Rules on Risk under CISG and Incoterms 2000, Nordic Journal of Commercial Law (2004) 2 (16) (Pace) – who indicates uniform treatment throughout the transport is thus assured; Vanheusden, Leveringsvoorwaarden in Internationale Overeenkomsten: Trade Terms en Incoterms (2005), pp. 61–62. Under Incoterms the carrier is the same: Van de Veire, in: Debattista (ed.) Incoterms in Practice (1995), p. 119. For an application of Art. 67 see Amtsgericht Duisburg (Germany) 13 April 2000 (Pizza boxes), CISG-Online 659 (Pace), about pizza boxes damaged in transport from Italy to Germany. Although the rule in Art. 67(1) is formulated in the negative (“not bound…at a particular place”), this does not imply that the seller has a burden of proof to demonstrate that handing over at a particular place was not agreed or that the delivery had become an obligation for the seller to bring the goods. The default rule for delivery is to the first carrier at the seller’s place of business. 8 Von Hoffmann, Passing of Risk in International Sales of Goods, in: Sarcevic/Volken (eds) International Sale of Goods (1986), pp. 286–287 saw that vehicles of the seller (its truck bringing the goods to the station or airport) tended to be excluded. He also found it illogical and unnecessary that the risk stayed with the seller as long as he takes care of the goods. He argued that once goods are loaded and traveling, it is hard to determine the location of the occurrence or the measure of any combined damage to them. The movement of the goods towards the buyer was initiated when the seller started his own transport and he generally holds insurance for that. He can turn over the insurance to the buyer, as with some Incoterms. Von Hoffman proposed this solution to avoid the problems of locating where the damage has occurred in multimodal transportation. However, if the goods would be damaged in this pre-transportation by the seller, he will not get a clean B/L. Often he will need this clean B/L in order to be paid under a L/C. Even if that would not be the case, it will be clear that the damage occurred while the risk was still with the seller. 9 Seller must not de facto exert control over the transporter, says Hachem, in Schlechtriem/Schwenzer, Commentary (2016), Art. 67, para. 11; in the case of affiliated corporations the company’s statutes may need to be consulted. At para. 15 he explains that handing goods over to an independent freight forwarder should be sufficient for risk to pass; seemingly in order not to invite questions of whether such a party acted as agent or decided autonomously on the transport issues. 10 Neumayer, in: Do ¨ lle Einheitliches Kaufrecht (1976), p. 659.

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under the control of the carrier, the warehousing and handling within the confines of a carrier’s facilities would be at the risk of the buyer. With reference to goods handled in a harbour, this looks more like the Incoterm FAS (free alongside ship). However, if stowage was contracted out to a harbour authority or to stowage firms different from the carrier, the goods would indeed not yet be “handed over” to the carrier. In comparison with the Incoterm FCA (Free Carrier)11, we see potential differences as to the place where risk passes. For all Incoterms, the place of delivery and passing of risk coincide. Before the 2000 version of the Incoterm FCA, the goods needed to be put onto the carrier’s mode of transportation, leaving the risk of eventual storage before loading and of further handling, plus the risk of the loading itself with the seller. This presumes that the term is FCA at place other than the seller’s premises.12 Incoterms 2000 made it clear that as to the term FCA, the words “placing the goods at the disposal of the carrier” were meant to be identical with the terms “handing over the goods” of the CISG.13 Through that statement, the ICC indicated that it understood “handing over the goods” under the CISG to mean that the buyer was left with the responsibility for loading the goods on the carrier he nominated. Then, in Incoterms 2010, for the passing of risk under FCA a distinction has to be made between delivery at the seller’s premises and delivery at any other place. In the former case, risk passes – as before – when the goods have been loaded by the seller on the means of transport provided by the buyer. In the latter case, risk passes when the goods are placed at the disposal of the carrier still on the seller’s means of transport ready for unloading. See below for further comparison with C-terms and D-terms of Incoterms. The words “(handing over) in accordance with the contract of sale” do not introduce the need for the delivery to be in conformity to the agreement in terms of Art. 35. The last sentence of Art. 67(1) reminds us that the seller retaining documents that control the disposition of the goods, does not affect the passage of the risk. That is similar to the transfer of title being beyond the convention’s rules.

d) Delivery at a particular place. If a particular geographical place is mentioned as the place of delivery, this defines the location at which the handing over to the appointed carrier must occur, and thus where risk will pass. When the indicted place is either the establishment of seller or buyer this rule does not apply – instead Art. 69 does. 18 In practise a “place” is typically determined through the use of an Incoterm, which would prevail (Art. 6); in such cases this could concern handing over to another carrier than the first.14 17

2. Clearly identifying the goods 19

When the sales contract involves carriage, Art. 67(2) formulates a strict condition before risk can pass to the buyer; namely, the goods must be clearly identified to the contract, as the text states: “whether by markings on the goods, by shipping documents, by notice given to the buyer or otherwise”. This offers some flexibility. In application of Art. 27 the transfer risk of such notice containing identification is with the buyer. 11 We presume, for this hypothetical, that no particular place was named as an addition to the standard Incoterm. 12 The term FCA – “at seller’s premises” puts the obligation of loading with the seller. This includes stowage and trimming but not securing and lashing. The term EXW is delivery unloaded. 13 Incoterms 2000, ICC-Publication No. 560 (1999), p. 10. 14 Hachem in Schlechtriem/Schwenzer, Commentery (2016), Art. 67, paras 25, 26.

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It is a basic principle that risk of loss cannot pass until the goods in question are 20 identified and then the effect is ex nunc (“not… until”) and not retro-active.15 This is a general concern throughout several rules in Chapter IV (see infra at Art. 69). The case mentioned supra in the discussion of Article 66 about furniture to be bought by a German buyer with an Austrian seller on call from a stock of goods held at his disposition, could have been decided as an application of this principle – the court explained that no contract had actually materialized, thus risk did not pass.16 Under the comparable Incoterms 2010, the wording is slightly different. In the 21 section describing the obligations of the parties, it explains that for delivery to be performed the goods must be “clearly identified as the contract goods”. This requires the same specification or individualisation and should not be different from the CISG.17 The difficulty in this regard is with bulk goods, such as transported in tanks, silo’s or 22 the hold of a ship, not being identified at time of shipment.18

3. Art. 67’s relationship with terms agreed by the parties a) Agreed terms regarding risk. Under Art. 6, parties have freedom of contract and 23 they may deviate from the provisions of the CISG governing the passing of risk, or, for that matter, any aspect of risk. A reference to trade terms, like the Incoterms, should not be taken as an exclusion of the Convention, but only as a deviation on certain aspects of the convention.19 The use of commercial terms for shipping is pervasive.20 Trade terms typically make 24 parties decide who will pay the price of transportation and handling (economic risk). In the language of Art. 67, contracts including such a trade term generally “involve carriage” in the contract, because they also make parties decide who provides carriage and who pays for it. However, by employing a trade term parties typically (at least partly) derogate from the CISG. They opt out of some aspects of the default rules on passing of risk and, while involving carriage, they at the same time overrule the application of Art. 67 (below). This makes the application of Art. 67 not straightforward; they rather limit its practical relevance.21 15 This was required under ULIS and described by Neumayer, in: Do ¨ lle Einheitliches Kaufrecht (1976), pp. 657–659. For CISG see Piltz, Internationales Kaufrecht (2008), p. 229. And see Hachem in Schlechtriem/Schwenzer, Commentary (2016), Art. 67, para. 35 – “thus resulting in splitting of the risk”, a point much disputed in the Vienna Conference. 16 Oberlandesgericht Hamm (Germany) 23 June 1998 (Furniture), CISG-Online 434 (Pace); also referred to in Magnus, in: Staudinger Kommentar (1994), Art. 69 para. 25. 17 Ramberg, To What Extent do Incoterms 2000 Vary Articles 67(2), 68 and 69 CISG?, 25 Journal of Law and Commerce (2005) 220–221 (Pace), who explains the difficulty for bulk goods, where the bulk needs to be broken for delivery of part of the goods. 18 Hachem in Schlechtriem/Schwenzer, Commentary (2016), Art. 67, paras 31–34: he plausibly argues that in case part of a bulk shipment would get lost or damaged, notification of identification of the bulk is necessary but is not sufficient for the seller to be relieved of risk; seller may not liberate himself by performing pro rata or only vis-a`-vis particular buyers of a part by freely allocating risk through posterior identification of parts of the bulk; there is no “risk community” and a buyer retains his right on the basis of contract if undamaged goods remain available in part – without losing out to another buyer of a part. Hachem rightly concludes that seller must remain liable. 19 See Honnold/Flechtner, Uniform Law (2009), Art. 6 para. 76; UNCITRAL Digest of case law (2012), p. 315 (No. 7) says parties often agree, “using trade terms… or by incorporating the standard terms or the general business conditions of the seller or the buyer”. 20 There is broad agreement, but descriptions differ: see Kritzer/Butler, Roadmap to Incoterms (2000), http://www.cisg.law.pace.edu/cisg/incoterms2000.html; Ziegel/Samson, Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods (1981), Art. 67 (Pace): “in practice agreements will be made”. 21 Hachem in Schlechtriem/Schwenzer, Commentary (2016), Art. 67, para. 4.

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b) Interpretation of the trade terms used. The true content and significance of the trade terms used in a particular sale, is not always clear. There are differences in the definitions of the same trade term in the various sets of trade terms. Surely many business people are not well aware of the precise meaning or legal content of such terms, and are not familiar with the differences between them.22 On the positive side, this leaves the business world the chance to develop terms freely and to adapt them to changing needs. On the downside, parties’ true intentions in employing a trade term are often not clear. When the parties have used a trade term, therefore, an important problem of interpretation arises for which we must look to Art. 8(3). This article provides that, in determining the intent of the parties, all circumstances shall be considered, including negotiations, practices between the parties, usages and any subsequent conduct of the parties. A clear contract term prevails over the rules of the CISG. When parties to a sales agreement use a standard Incoterm, the exercise of their autonomy is both narrow and clear. This calls for the full incorporation into the agreement of the definition of the particular term as “codified” trade practice. Where the parties have used a general trade term and have used it correctly, interpretation may still be necessary. If parties have made unclear references or used confusing terms, the applicable national law must be sought to fill in the gaps regarding the terms of delivery and the passing of risk. The national law so applicable may look to the Incoterms for guidance on the meaning of trade terms. Art. 68 should be referred to for the separate rule for goods sold in transit, which also requires a comparison with the use of Incoterms.

c) Incoterms and the CISG aa) Incoterms in general. If parties consider carriage, they very often use Incoterms or usages in shipping. Besides, the Incoterms which were promulgated by the ICC in Paris have the support of the world business community. Other terms and rules relating to passage of risk may be used for international sales, but they are usually local trade usages in particular localities or in particular trades.23 This author suggests, however, that if parties used letter-words such as the Incoterms, one must nowadays proceed from the presumption that Incoterms should guide their interpretation. 31 Commercial partners have, in the past, been considered bound by an Incoterm even when their contract did not expressly refer to any such term. This was because they had regularly contracted under Incoterms in the past so that subsequently they would be bound on the basis of Art. 9(1) to a usage they had formed between them.24 However, in this author’s opinion, an Incoterm can in principle only be relied on when the parties make a clear reference to it. Incoterms do require a contractual reference (with exception of the usage between parties – just mentioned).25 We could only consider an 30

22 Perhaps the framers of ULIS and after them the UNCITRAL Commission that prepared the CISG ought to have promulgated their own shipping terms; but that was not practicable, because trade terms need to be adapted to trade practice. Moreover, the ICC was invited by the drafters of the ULIS to state her opinion about including an interpretation of the trade terms CIF and FOB. The ICC asked not to incorporate this matter because this interpretation could interfere with the interpretation provided by the Incoterms. 23 There were other terms promoted by CMEA (1968/1976) and by the United Nations Economic Commission for Europe. Particular terms exist for certain harbours and in certain sectors of trade. 24 Honnold/Flechtner, Uniform Law (2009), Art. 9(1) para. 115; Bonnel, in: Bianca/Bonell, Commentary (1987), Art. 9 para. 3.5. 25 See also Schwenzer/Fountoulakis/Dimsey, International sales law (2012), p. 489 and Hachem in Schlechtriem/Schwenzer, Commentary (2016), Art. 66, para. 13. Although in U.S. District Court, SD of

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Incoterm rule to be established as an international usages and thus as a usages that the parties “ought to have known” absent their own reference to such term, if a specific term were accepted by all in a particular trade or business-sector to always apply save where alternate choice is stipulated.26 The UNCITRAL Digest (2016) illustrates that there is a need to know how the CISG 32 and Incoterms interact. It states that court decisions have found the terms ‘CIF’, ‘C&F’ and ‘list price ex works’ and the terms that have replaced them, ‘CFR’, ‘FOB’, ‘FOT’ and ‘FCA’ to be consistent with article 67(1), citing two cases (1992 and 1997), but nothing more (at Art. 67, No. 3). Incoterms import entire standardized terms into the contract by way of incorporation. 33 However, the acceptance of reference to such contract-based rules is neither complete nor necessarily in full harmony with the provisions of law of the CISG. In this author’s opinion, however, national courts and arbitration tribunals work well with this dichotomy of applying a particular agreed term and applying the CISG in the margin. Agreed Incoterms, for example, determine the place of physical “delivery” of the goods and of the passing of the risk very clearly, but do not provide or indicate the law governing every aspect of the contract of sale. Effectively, when in dispute, judges and arbitrators determine the place and time of transfer, thereby applying the Incoterms and then they proceed to complement and mitigate their application through interpretation under the rules and theory of the CISG. Rules under the CISG pertaining to the alleviation of risk or to the addition of remedies (including rules on compensation of damages) are then simply applied from the CISG as the default set of (complementary) rules. bb) EXW. We know two cases where the buyer incurred loss after the goods were 34 delivered at the seller’s premises, but they are applications of the CISG default delivery mode of Art. 31, not with the explicit use of the Ex Works term.27 They give us no guidance with the Incoterm. In a 2006 decision of the Appellate Court Koblenz (Germany), the court found an 35 “Ex factory” term and then proceeded to reverse the risk by using the remedy of price reduction.28 cc) FCA and FOB. The terms FCA and FOB are used often. As indicated supra, the 36 intention of the framers of the Incoterms, i. e. the ICC in Paris, was to align the FCA Incoterm 2000 with the default rule under the CISG when transport is involved. Although this intention is not repeated in the introduction of Incoterms 201029 the FCA rule was not changed. Texas, Houston Division (U.S.) 7 February 2006 (Explosive boosters), CISG-Online 1177 (Pace) the court seems to have implied the application of the CIF term because the parties involved in the particular trade must have known of this usage. 26 Several authors are – as this author – reluctant to conclude for application where parties remained silent: Magnus, in: Staudinger Kommentar (2005), Art. 67 and Neumayer/Ming, Convention de Vienne (1993), p. 120. However Dalhuizen, International Commercial, Financial and Trade Law (2000), p. 273 would go far in giving pre-eminence to the Incoterms. The example of a business sector where the usage related to a certain Incoterm is generally accepted as established, seems to be the sale of petroleum: Bridge, International Sale of Goods (2007), para. II. 50 and Erauw, in: Flechtner/Brand/Walter, Drafting Contracts (2007), p. 387. 27 In Oberlandesgericht Schleswig-Holstein (Germany) 29 October 2002 (Stallion), CISG-Online 717 (Pace). In Landgericht Flensburg (Germany) 23 March 1999 (Meat), CISG-Online 719 (Pace) over meat deteriorating in quality, delivery was at seller’s premises and the buyer suffered loss. 28 Oberlandesgericht Koblenz (Germany) 14 December 2006 (Sterile bottles), CISG-Online 1408 (Pace). See commentary on Art. 66, No. 22. 29 The “introduction” of Incoterms 2010 is considerably shorter than the introduction of Incoterms 2000, in the hope that traders will actually read it.

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Under the Incoterm FOB delivery is described in section A4 and the risk passes at delivery following sections A5 and B5. For FOB before Incoterms 2010, delivery was said to occur in a symbolic way: at the moment when the railing of the ship is passed. A case has been reported where the goods first shifted across the perpendicular of the railing and then swayed back under the derrick and fell before the ship, giving “a spectacle of liabilities”.30 This has been changed in FOB Incoterms 2010, where delivery occurs and risk passes when the goods have been placed on board the vessel. The drafters did not use the word loaded, because this would imply that seller must assure stowage and trimming – which he need not. The FOB term, in effect, brings the risk for the completion of the handling, with regard to the stowage on-board, including trimming, securing and lashing, always to the buyer. If the customs of the port impose another point of delivery, these customs will have priority over the FOB term in the Incoterms. Whereas for Incoterms 2000 this was – albeit vaguely – indicated in the introduction31, Incoterms 2010 now incorporate the priority of port customs in the FOB rule.32 38 Ramberg, an authority on Incoterms, has indicated that loading operations in harbours have changed, so that the FOB term is no longer appropriate for container trade. The reason is, that it is the carrier who puts the container on board and not the seller himself. Therefore risk passing would better occur when the seller hands over the goods to the carrier. That is why the use of the term FCA is much more appropriate, whereby the resulting risk-transfer is indeed identical to the situation under Art. 31(a) in conjunction with Art. 67(1).33 39 In a case where caviar was imported into Hungary from Yugoslavia, the term for delivery was “FOB Kladovo” (being the seller’s city), and the risk regarding the import declaration and customs applying a newly imposed UN embargo was placed with the buyer. This is correct, because obtaining the import licence is an obligation of the buyer under the Incoterms.34 An FOB term was sanctioned in the case of pollution of goods (white conundrum) by wind and water on route from China to Japan, after they had been brought on-board – which was trouble for the buyer.35 37

40

dd) CFR or CPT. In a case for the sale of 2000 tonnes of bitumen from a Swiss seller to a Brazilian buyer and to be delivered from Singapore to Kenya by a Greek ship under 30 25 In the words of (the later Lord) Devlin J in Pyrene & Co v Scindia Steam Navigation Co. [1954] 2 QB 402 (419); reported by Zeller, Is the Ship’s Rail Really Significant?, Nordic Journal of Commercial Law (2005) 2 (5) and cited by Malfliet, The relation between CISG and Incoterms, Gent University Master’s thesis: (2009 unpublished), p. 86. 31 Incoterms 2000, Paris, ICC Publication 560, 1999, 20: “To some extent it is therefore necessary to refer to the custom of the port […]”. 32 Incoterms 2010, Paris, ICC Publication 715E, 2010, 88. A5: “Transfer of risks” refers to A4 “Delivery” which reads “In either case, the seller must deliver the goods […] in the manner customary at the port.” 33 Ramberg, To What Extent do Incoterms 2000 Vary Articles 67(2), 68 and 69 CISG?, 25 Journal of Law and Commerce (2005) 219 (Pace): “While, traditionally, maritime transport required the seller (shipper) to deliver the goods to the ship, the use of so-called cellular vessels receiving goods stowed in containers implies delivery of the goods to the carrier rather than to the ship. In practice, the goods are either received at so-called container freight stations (CFS) or container yards (CY) for subsequent loading of the containers on-board the ship. Hence, the traditional terms FOB, CFR and CIF, where the goods are to be placed on-board and the risk passes when the goods pass the ship’s rail, became inappropriate in such traffic. FCA is now available for use instead of FOB, while CPT and CIP could be used in place of CFR and CIF. As has been said, CPT and CIP conform with the principle of handing over the goods to the first carrier adopted in CISG Article 31(a).” 34 Arbitral Award, Arbitration Court of the Hungarian Chamber of Commerce and Industry, 10 December 1996 (Caviar stock), CISG-Online 774 (Pace). 35 High People’s Court Ningxia Autonomous Region (China) 27 November 2002 (White conundrum), CISG-Online 867 (Pace).

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a flag of commodity and a non-insured one-ship-company, the term was “C and F (Incoterm 1990)”, the CFR term.36 Many warnings about stocking the heavy tarcontainers were given, but the ship hit high seas and a large part of the stacked-up drums fell over, bent and tore and spilled the sticky tar. This term lets the seller organize the transport (no liability in choosing was imposed) and puts the delivery at the boat’s rail, leaving risk for the stowing and the subsequent sea journey to the buyer. (We have indicated supra, that the insurer substituting for the buyer could not prove a breach by the seller to mitigate the buyer’s risk.) The CPT-term of Incoterms 2010 was used for delivery of fluid chemicals from The 41 Netherlands to Germany (Carriage Paid To Kreuzlingen) in which case the buyer was informed late that contamination had taken place with biodiesel. This had occurred during storage with an agent for seller in Holland, before delivery, and thus risk was on the side of seller.37 A contract for the delivery of mushrooms from Germany to Argentina, under CFR 42 (costo y frete) made an express deviation to that rule, stating that the seller was liable to maintain the intrinsic qualities of conditions suitable for consumption. Still the buyer ended up carrying the risk, because he could not prove that the deterioration took place during that long trip and not afterwards when other handling took place.38 ee) CIF or CIP. In a CIETAC arbitration39, the parties to a sale that went under the 43 term “CIF New York” had an exchange over precautionary measures the seller of jasmine aldehyde from China needed to take, i. e. to keep the temperature of the stored goods low enough while lying in port during transport to New York. The seller took insufficient care to assure direct transport and during the vessel’s stop-over excessive heat accumulated causing leakage of the goods. The tribunal found that notwithstanding the CIF clause that lets risk pass when goods cross the ship’s railing (as with FOB)40, the parties entered into a separate contractual agreement on the point of caring for the temperature risk. The tribunal made the seller responsible for the damage according to Art. 66 because there was a separate party agreement. In this author’s opinion, even though the reference was to that agreement, the court could have considered applying the last phrase of Art. 66: “due to an (…) omission of the seller”. A U.S. District Court looked at comparable facts, also under a CIF term, about a 44 shipment of ignition boosters where particularly detailed conditions of packaging, stacking and transportation had been requested. When the badly stacked and poorly stowed load caved in, the court decided differently, i. e. against the buyer. Risk had passed at the ship’s railing and CIF prevailed, so payment was due, considering there was an insurer and as the seller had not personally been held to ensure the compliance with the guidelines that were given.41

36

Tribunal Cantonal de Vaud (Switzerland) 26 May 2000 (Tar in drums), CISG-Online 1840 (Pace). District Court Rotterdam (Netherlands) 1 October 2014 (Chemicals), CISG-Online 2558 (Pace). The court spoke simultaneously of a breach of conformity under Arts 35 and 36. 38 Ca ´ mara Nacional de Apelaciones en la Comercial (Argentina) 31 October 1995 (Mushrooms), CISGOnline 299 (Pace). See the disputed leakage of PVC suspension resin on its way from U.S. to China in: Arbitral Award, CIETAC CISG/1999/20, 7 April 1999 (PVC Suspension resin), CISG-Online 1244 (Pace) where the Incoterm was CFR and the risk in transport was on the buyer. 39 Arbitral Award, CIETAC, 23 February 1995 (Jasmine aldehyde), CISG-Online 568 (Pace); same Arbitral Award, CIETAC, 23 February 1995, CISG-Online 971 (Pace) where the product is also called piperonal aldehyde or pepper propanal. 40 In Incoterms 2010, this criterion has been changed to “placing on board”. 41 U.S. District Court, SD of Texas, Houston Division (U.S.) 7 February 2006 (Explosive boosters), CISG-Online 1177 (Pace). 37

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Article 67 45–47

Part III. Sale of Goods

ff) DDP. To “place the goods at the disposal” of buyer under the terms DDP and DAP it is sufficient when the goods are ready for unloading; at buyer’s risk.42 46 Two cases are posted on CISG-Online with a complication around the Incoterm DDP43 – both about deliveries of salmon from a Norwegian seller to a German buyer under the obligation to deliver at buyer’s address (DDP). The seller knew that the salmon was intended to be smoked in Denmark so he delivered directly to the company doing the fish-smoking. This company declared bankruptcy, thereby causing loss. The appeals court found the change of delivery address was made under agreement from previous deliveries and this had been accepted by the buyer (there was no breach) – thus the risk had passed. 45

III. Comparable rules 47

Neither the PICC nor the PECL contain provisions in relation to the passing of risk. 42 Hachem in Schlechtriem/Schwenzer, Commentary (2016), Art. 67, para. 21, which is distinct from the terms of the C-group where the loading of the goods must be completed by seller. 43 Oberlandesgericht Oldenburg (Germany) 8 September 1998 (Raw salmon), CISG-Online 1887 (Pace) and Oberlandesgericht Oldenburg (Germany) 22 September 1998 (Raw salmon), CISG-Online 508 (Pace).

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Article 68 The risk in respect of goods sold in transit passes to the buyer from the time of the conclusion of the contract. However, if the circumstances so indicate, the risk is assumed by the buyer from the time the goods were handed over to the carrier who issued the documents embodying the contract of carriage. Nevertheless, if at the time of the conclusion of the contract of sale the seller knew or ought to have known that the goods had been lost or damaged and did not disclose this to the buyer, the loss or damage is at the risk of the seller. Bibliography: Bridge, The Transfer of Risk under the UN Sales Convention 1980 (CISG), FS Kritzer (2008), p. 77.

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1. Terminology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2. Carrier and documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3. Retroactive allocation of risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4. Loss or damage to the goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

I. Importance and Role of the Provision Art. 68 states the general rule to be applied when goods are sold afloat. In these 1 situations risk passes at the time of conclusion of the contract. However, an exception exists ‘if the circumstance so indicate’ that provides that the risk shall pass ‘retrospectively’ from the time the goods were handed over to the carrier. Art. 68 continues by providing that the risk remains with the seller if at the conclusion of the contract the seller knew or ought to have known that loss or damage had already occurred to the goods and this fact was not disclosed to the buyer.

II. Detailed Commentary 1. Terminology Examination must be given to the basic terminology used within the article. As 2 specified in Art. 7, “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”, as such terms such as ‘sold’ and ‘goods’ should not be interpreted within domestic guidelines. Instead, the terminology that may have a particular domestic meaning should be considered within the international framework. Consequently, ‘sold’ should not be interpreted to imply the passing of property,1 nor should ‘goods’ be interpreted to include anything other than the traditional understanding of international sales in which goods can be identified before or after the risk transfers to the buyer.2 1 See Bridge, The Transfer of Risk under the UN Sales Convention 1980 (CISG), FS Kritzer (2008), p. 77 (p. 95). 2 See id at 95.

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Article 68 3–5

Part III. Sale of Goods

2. Carrier and documents 3

Under the second sentence of Art. 68, the risk is borne by the buyer “from the time the goods were handed over to the carrier who issued the documents embodying the contract of carriage.” It must be noted that there is no reference, as in Art. 67(1), to “documents controlling the disposition of the goods.”3 Instead it is sufficient that the documents prove the existence of the contract of carriage. Absent such documents, the rule does not apply. If the transport involves a chain of carriers, as is the case with multimodal transport, it is the handing over to the carrier who issued the documents in question that is relevant.4

3. Retroactive allocation of risk 4

The second sentence of Art. 68 concerns the retroactive allocation of risk that occurs ‘if the circumstances so indicate’. The language of Art. 68 has been criticized specifically in relation to the allocation of risk in international sales.5 This has occurred simply from the phrase ‘if the circumstances so indicate’ as the language does little to assist the determination of when circumstances indicate the parties desire a different risk allocation than that found in the general rule. Moreover, while CIF contracts traditionally include retroactive risk allocation6 because of the transferability of insurance that traditionally contains detailed provisions specific to the risk allocation,7 this is not necessarily the case in contracts that contain an FOB designation as the insurance is often not transferable.8 Consequently, the “transfer of the insurance policy implies that the buyer takes over responsibility for the entire shipment, including unknown transit damage that occurred before the sale.”9

4. Loss or damage to the goods 5

Art. 68 has been criticized as the article fails to provide clear resolution on some of the more common issues within international transport. For example, Art. 68 is clear in resolving issues that arise when the seller knows or should have known of the loss or damage to the goods prior to the conclusion of the contract. In these situations, risk remains with the seller if he has failed to disclose this information to the buyer.10 However, the resolution is far from clear in situations where the seller becomes aware of the loss or damage to the goods after the contract has been concluded but before the 3 This omission was a deliberate on the part of the drafters. See Schlechtriem, Uniform Sales Law – The UN-Convention on Contracts for the International Sales of Goods (1986) (Pace). As such, it is irrelevant that documents are negotiable instruments or otherwise allow for the goods to be disposed of upon receipt of the documents. Instead, the contract fro carriage – without additional documents, is all that is needed. 4 See Hager, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 68 para. 4 a. 5 For example, see Hager, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 68 para. 8. 6 But note that a Chinese tribunal did not backdate the risk in a case involving a CIF sale of fishmeal, where the contract was concluded some 12 days after the goods were loaded on board the ship; however, one should note it is not clear from the translation that the Incoterms were incorporated: Arbitral Award, CIETAC, 1 April 1997 (Pace). 7 See Honnold, Uniform Law (1982), p. 372; von Hoffmann, Passing of Risk in International Sales, in: Sarcevic/Volken (eds), International Sale of Goods (1986), p. 265 (p. 294). 8 See Bridge, The Transfer of Risk under the UN Sales Convention 1980 (CISG), FS Kritzer (2008), p. 77 (p. 96). 9 See Honnold, Risk of Loss, in: Galston/Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), Ch. 8 paras 1–15. 10 Art. 68: “Nevertheless, if at the time of the conclusion of the contract of sale the seller knew or ought to have known that the goods had been lost or damaged and did not disclose this to the buyer, the loss or damage is at the risk of the seller.”

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Chapter IV. Passing of Risk

6–8

Article 68

goods are appropriated to the contract. In these situations, Art. 68 and corresponding articles are silent concerning the use of retrospective risk allocation. Some commentators argue the phrase ‘if the circumstances so indicate’ can be extended to resolve this issue, however, it is reasonably clear that the drafters did not intend such an extension.11 As such, commentators are split as to the ability of a seller to appropriate goods that have been lost or damaged where the seller ‘knows or should know’ of the loss. Bridge argues that “even the knowing seller should be allowed in CIF contracts to 6 appropriate the goods after the loss has occurred.”12 He makes this argument asserting a practical approach, stating “if the seller were not allowed to appropriate and thus transfer the risk to a particular buyer, that seller, depending upon the relevant law, might be exposed to a damages action for non-delivery by the buyer.”13 Of course, this is correct law and is most likely the correct interpretation if one bases the primary argument on a practical and economic understanding in the international commercial world. As traders participating in this industry consider the buying and selling of cargo as a financial contract and not really from a contract that results in obtaining goods. While this is the generally the accepted approach, which has gained a slight majority of support, it is also clear from the Legislative History that alternative views exist which are followed in some regions of the world.14 Controversy also surrounds the terminology and phrasing within the last sentence of 7 Art. 68 stating, if the seller fails to disclose the loss or damage “the loss or damage is at the risk of the seller.” This phrasing could be interpreted as the seller bearing only the loss or damage it failed to disclose. However, the full extent of the seller’s exposure in these situations remains unclear. Some authorities argue that when the seller fails to disclose loss or damage that had occurred before the making of the contract the seller would be liable not only for the loss or damage that the seller knew or should have known but also for all subsequent damage “which is causally connected with the original damage”15 In contrast, Honnold “supports holding transit loss on the seller but is doubtful about the basis and advisability of a ‘causally connected’ limitation.” At present the majority opinion leans toward the phrase encompassing only the damage that the seller knew or ought to have known about, by the time of the conclusion of the contract16 without extension into the causally connect realm. However, one could easily think of situations in which the seller should also bear the risk of subsequent loss or damage directly connected to the original damage. One should note, Art. 68 should not be interpreted to supplant domestic law into the 8 provisions of the CISG by creating situations in which the sale of a non-existent or nolonger-existent good is void.17 Under Art. 68, it remains possible for the sale to be valid even though the goods had already been destroyed at the time the contract was 11 Schlechtriem, Uniform Sales Law – The UN-Convention on Contracts for the International Sales of Goods (1986) (Pace). For the complete discussion, see Legislative History, Summary Records of Meetings of the First Committee, 32nd Meeting 1 April 1980 (Pace). 12 Bridge, The Transfer of Risk under the UN Sales Convention 1980 (CISG), FS Kritzer (2008), p. 77 (96). In contrast, see Schlechtriem/Schwenzer, Commentary (2016), Art. 68 para. 20. 13 Id. 14 See Garro, Reconciliation of Legal Traditions in the U. N. Convention on Contracts for the International Sale of Goods, 23 International Lawyer (1989) 443–483. 15 Nicholas, in: Bianca/Bonell, Commentary (1987), Art. 68 para. 2.3. 16 Hager bases his approach on the different wording of the Draft Convention and to the linkage between the second and third sentences of Art. 68. See Hager, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 68 para. 5. 17 An Indian proposal to consider invalidity under a domestic law did not receive support. See A/Conf. 97/SR.32 at 6–7 § 38–41, Official Records, p. 404. For further discussion, see Schlechtriem, Uniform Sales Law – The UN-Convention on Contracts for the International Sales of Goods (1986) (Pace) at 496–501.

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Article 68 9–11

Part III. Sale of Goods

concluded. Art. 68 presupposes that a valid contract may be formed in this situation as it fails to void the contract but instead leaves the risk with the seller. 9 Finally, one should consider the practical situation that exists in the international community and with the use of Incoterms. Art. 68 provides the general rule that risk passes when the contract is concluded. However, this general rule is likely to be displaced in many instances as the parties will have elected to include the Incoterms18 and as such the circumstances of the case will call for the general rules displacement.19 10 One should note the derogation from the articles of the CISG is permissible within the CISG.20 Under Art. 6 the parties may “derogate from or vary the effect of any [Convention] provisions.”21 In fact “a very large percentage of such contracts contain trade terms (CIF, C&F, FOB, FAS, CPT, CIP, etc.) clearly designed to regulate the passing of risk”22 and thereby displace the otherwise applicable law. In these situations, as expressly stipulated in Incoterms 2010, under FOB, CIF and CFR contracts, the risk passes when the goods pass the ship’s rail at the port of shipment.23

III. Comparable Rules 11

The PICC contain no provisions in relation to passing of risk. The PECL contain no provisions in relation to passing of risk. This is not necessarily surprising, as von Bar and Drobnig point out the passing of risk is “genuinely a contract issue” which is “usually dealt with by agreement of the parties.”24 However, one should note this is not necessarily the case in relation to consumers.25 The Directive on Consumer Rights contains of provision which specifies that the place and the “rules concerning the determination of the conditions for the transfer of the ownership of the goods and the moment at which such transfer takes place” should remain subject to national law as such the Directive has no impact upon the determination.26 18 For a further discussion of the Incoterms, see Gabriel, Contracts for the Sale of Goods: A Comparison of US and International Law (2009) pp. 297–325. 19 “[W]here the parties have agreed no trade terms at all, the regulation under the CISG will apply. But these cases are rare.” Enderlein/Maskow, International Sales Law (1992), p. 257. 20 See Lookofsky, The United Nations Convention on Contracts for the International Sales of Goods, in: Blanpain (ed.), Encyclopaedia of Laws (1993), p. 112. 21 Art. 6. 22 Lookofsky, The United Nations Convention on Contracts for the International Sales of Goods, in: Blanpain (ed.), Encyclopaedia of Laws (1993), p. 112. 23 See Incoterms 2010. See also for discussion on the previous version of Incoterms (containing similar provisions): Ramberg, ICC Guide to Incoterms 2000: Understanding and Practical Use (1999), p. 16. 24 von Bar/Drobnig, The Interaction of Contract Law and Tort and Property Law in Europe: A Comparative Study (2004), pp. 329–330. 25 EC Directive on Consumer Rights, Art. 23 Passing of risk: “1. The risk of loss of or damage to the goods shall pass to the consumer when he or a third party, other than the carrier and indicated by the consumer has acquired the material possession of the goods. 2. The risk referred to in paragraph 1 shall pass to the consumer at the time of delivery as agreed by the parties, if the consumer or a third party, other than the carrier and indicated by the consumer has failed to take reasonable steps to acquire the material possession of the goods.” European Commission, The Proposal for a Directive on Consumer Rights, EUROPA, (Oct 2008). 26 Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council, para 38.

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Article 69 (1) In cases not within articles 67 and 68, the risk passes to the buyer when he takes over the goods or, if he does not do so in due time, from the time when the goods are placed at his disposal and he commits a breach of contract by failing to take delivery. (2) However, if the buyer is bound to take over the goods at a place other than a place of business of the seller, the risk passes when delivery is due and the buyer is aware of the fact that the goods are placed at his disposal at that place. (3) If the contract relates to goods not then identified, the goods are considered not to be placed at the disposal of the buyer until they are clearly identified to the contract. Bibliography: Bridge, The Transfer of Risk under the UN Sales Convention 1980 (CISG), FS Kritzer (2008), p. 77; Ramberg, To What Extent do Incoterms 2000 Vary Articles 67(2), 68 and 69?, 25 Journal of Law and Commerce (2005–2006) 219.

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Goods placed at buyer’s disposal – at the seller’s place of business . . . . . . . 2. Goods placed at buyer’s disposal – other than at the seller’s place of business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Incoterms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 2 2 6 7 8 9

I. Importance and Role of the Provision In the situation that neither Arts 67 nor 68 applies to the case at hand, Art. 69 1 provides the residual rules on risk of loss.1 Art. 69 provides the basic rule that the risk is on the buyer from the moment he takes over the goods or when he commits a breach of contract in not taking delivery of the goods that have been placed at his disposal.2 Of course, goods are only considered to be placed at the buyer’s disposal after they have been identified to the contract.3 In addition to these basic residual rules, a special rule applies to situations in which the buyer is bound to take over the goods at a place other than the seller’s place of business. In situations such as this, risk is transferred when delivery is due and the buyer is aware that the goods have been placed at his disposal.4 Consequently, Art. 69 can be divided into two separate considerations, cases where the good are handed over at the seller’s place of business (Art. 69(1)), and cases in which the goods are to be handed over somewhere else (Art. 69(2)). 1 Although some commentators have read Art. 69 as being limited to domestic sales and thereby find it of limited use, it is clear from the language of Art. 69 that the sale of goods can be an international one under the CISG even when the goods never cross national boundaries. This is of course, because of the practical possibility of the buyer and seller’s place of business being located in different states, while the seller secured warehouse space or otherwise has a branch in the same state as the buyer. See Bridge, The Transfer of Risk under the UN Sales Convention 1980 (CISG), FS Kritzer (2008), p. 77 (p. 97). This of course refers to the applicable law questions raised in Art. 1. 2 Art. 69(1). 3 Art. 69(3). 4 Art. 69(2).

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Article 69 2–4

Part III. Sale of Goods

II. Commentary 1. Goods placed at buyer’s disposal – at the seller’s place of business According to Art. 69(1), when the goods are to be delivered at the seller’s place of business, the buyer undertakes risk of loss from the moment he takes over the goods or when he commits a breach of contract in not taking delivery of goods that have been placed at his disposal. The primary issue within Art. 69 is the requirements that needs to be satisfied to ‘place the goods at the buyer’s disposal.’ Unfortunately, Art. 69 is silent on the issue;5 however, what is clear is that the drafters did not intend to impose a notice obligation on the seller. Instead, the standard seems to be merely the buyer’s awareness of the goods being ready for collection.6 3 Of course, several issues can arise in ‘taking over the goods.’ If delivery is to take place on a specific date and the buyer takes over the goods on that date, the risk passes when the goods are actually accepted.7 In addition, and equally simplistic is the situation where the buyer takes over the goods before the agreed date of delivery. In this situation, the risk passes to the buyer when he takes over the goods.8 Art. 69(1) also adopts the reasonably pragmatic approach to situations where the seller is incapable of delivering the goods on the contractually specified date. In this situation the risk remains with the seller until the buyer takes over the goods.9 4 Complications arise when the seller has placed the goods at the disposal of the buyer but the buyer has failed to take over the goods. At the point in time that the buyer is aware of the goods readiness, the question becomes how much time the buyer has before the buyer is in breach of contract. In the absence of specific time provisions in the contract, the standard seems to be that of a reasonable time. However, this is not expressly contained within the language of the articles; instead it must be inferred from the seller’s obligation to deliver within a reasonable time.10 One should note, this is not intended to imply that the ‘reasonable time’ shall be the same for both parties. Instead it stands to reason that ‘reasonable time’ will depend upon the nature of the goods and the circumstances of the case. 2

5 Case law is also relatively quiet. See Appellate Court Ko ¨ ln (Germany) 9 July 1997 (Video camera case), CISG-Online 495 (Pace) drawing a distinction between Art. 67 – risk passes when handed over to first carrier – and Art. 69 – buyer takes over goods; District Court Arnhem (Netherlands) 17 July 1997, Kunsthaus Math. Lempertz v Wilhelmina van der Geld, CISG-Online 548 (Pace), holding that if buyer is to collect goods at seller’s place, risk passes when buyer takes goods; Appellate Court Oldenburg (Germany) 22 September 1998 (Raw salmon case), CISG-Online 1306 (Pace) holding that the passage of risk when the buyer takes over the goods at place other than seller’s place of business- processing plant; Lookofsky/Henschel, Comments on Issues Relating to the Passing of Risk (2004) (Pace) commenting on Randers County Court (Denmark) 8 July 2004 (Mobile grain dryer case), CISG-Online 2152 (Pace) holding that risk passes when delivery is due and the buyer is aware of the fact that the goods are placed at his disposal at that place- such as assisting in the unloading of the good; Appellate Court SchleswigHolstein (Germany) 29 October 2002 (Stallion case), CISG-Online 717 (Pace) the passage of risk when the buyer is to collect goods at seller’s place: risk passes when the buyer takes the goods, despite the fact that the buyer elected to use a carrier; Oberlandesgericht Linz (Austria) 23 January 2006 (Auto case), CISG-Online 1377 (Pace) risk passes to the buyer when he takes over the goods. 6 Bridge, The Transfer of Risk under the UN Sales Convention 1980 (CISG), FS Kritzer (2008), p. 77 (p. 99). 7 See Sevon, Passing of Risk, Presentation of Schweizerisches Institut fu ¨ r Rechtsvergleichung ed., ¨ bereinkommen von 1980, Lausanner Kolloquium 1984 (1985), pp. 191–206, 203–204 (Pace). Wiener U 8 See id at 204. 9 See id. 10 See Bridge, The Transfer of Risk under the UN Sales Convention 1980 (CISG), FS Kritzer (2008), p. 77 (p. 99).

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5–8

Article 69

Moreover, the final phrase within Art. 69(1) should be read to limit the provision to 5 cases in which the buyer has delayed taking delivery. But one should not take a restricted view of this issue. Instead it is clear from the drafting committee that the provision should include “those situations in which the goods could not be delivered because of other breaches of the contract by the buyer, such as when the buyer has not obtained a required import license in a timely fashion.”11

2. Goods placed at buyer’s disposal – other than at the seller’s place of business Art. 69(2) makes clear that where delivery is not at the seller’s premises, risk is 6 transferred to the buyer when delivery is due and the buyer is made aware that the goods are at his disposal in a place other than the seller’s place of business. Of course, this is most likely to occur in situations where the goods are left in the hands of a third party, such as a warehouse or similar location. In situations such as this, placing the goods at the buyer’s disposal must also mean that the seller has done all that is necessary for the buyer to take possession.12 Certainly this must mean the buyer is entitled to withdraw the goods from the control of the third party. However, one should not confuse this requirement with the requirement to deliver documents. Of course, it is possible in some situations for the goods to be placed at the buyer’s disposal without the need for documents. In some situations it is possible for the seller to provide instructions for the bailee to hold the goods for the buyer.13

3. Identification Art. 69(3) requires that goods be “clearly identified to the contract” before risk can 7 pass to the buyer. Like Art. 67, Art. 69 presupposes identification of the goods. As such, the goods are first considered to be placed at the disposal of the buyer when such identification takes place: by marking, notice, etc.14 Of course, the identification must be in line with the seller’s rights and obligations under the contract.

4. Incoterms The most obvious differences between the CISG and Incoterms relate to Art. 69. 8 Incoterms 2010 specify that risk passes as soon as the goods have been made available to the buyer at the delivery point.15 This is true without any further limitations and/or requirements, such as the buyer committing a “breach of contract by failing to take delivery.”16 Moreover, under the Incoterms, the seller has the duty to notify the buyer that the goods are available for him or that they have been delivered.17 In situations 11 Schlechtriem, Uniform Sales Law – The UN-Convention on Contracts for the International Sales of Goods (1986), p. 90 (Pace). 12 See Secretariat Commentary on 1978 Draft, Art. 81 (now Art. 69) para. 7. 13 See id. para. 8. 14 A similar provision in exists in Arts 67(2) and 67(3). 15 For example, in EXW and the D-terms (DAT, DAP and DDP). See also (for a discussion of the prior Incoterms 2000) Ramberg, To What Extent do Incoterms 2000 Vary Articles 67(2), 68 and 69?, 25 Journal of Law and Commerce (2005–06) 219 (221). 16 Art. 69. 17 For a discussion of the prior version of Incoterms 2000 (which contained similar provisions) see Incoterms 2000: ICC Official Rules For The Interpretation of Trade Terms (1999) Clause A7; see also Ramberg, To What Extent do Incoterms 2000 Vary Articles 67(2), 68 and 69?, 25 Journal of Law and Commerce (2005–06) 219–222.

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such as this, the seller’s failure to notify the buyer would constitute a breach of contract, entitling the buyer to the remedies for breach of contract under the CISG.18

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The PICC and PECL contain no provisions in relation to passing of risk. 18

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Article 70 If the seller has committed a fundamental breach of contract, articles 67, 68 and 69 do not impair the remedies available to the buyer on account of the breach. Bibliography: Bridge, The Transfer of Risk under the UN Sales Convention 1980 (CISG), FS Kritzer (2008), p. 77; CISG-AC Opinion no 9, Consequences of Avoidance of the Contract, 15 November 2008. Rapporteur: Professor Michael Bridge, London School of Economics, London, United Kingdom (at http:// www.cisg-ac.org).

Outline I. Importance and Role of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 III. Comparable Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

I. Importance and Role of the Provision At its most basic, Art. 70 provides that the risk transfer rules in Arts 67–69 do not impair the remedies available to a buyer against a seller who has committed a fundamental breach of contract. The seller is not rescued from the consequences of his fundamental breach by the pure coincidence that damage to the goods occurred.1 In general, this means the buyer is entitled to pursue the following remedies because of the seller’s fundamental breach of contract: the right to declare the contract avoided,2 to require delivery of substitute goods,3 to require repair of the goods where this is not unreasonable,4 to reduce the price5 and to claim damages.6 In relation to these remedies, Art. 70 is significant in that it allows the buyer to insist on the delivery of substitute goods under Arts 46 or 47 or to declare the contract avoided under Art. 49(1)(a) or (b) even though the goods have been lost or damaged after the passage of the risk of loss under Arts 67, 68 or 69. The Pace website in 2016 already indicates three decisions (from a Finnish court in 1997, Chinese arbitration in 2003 and French Appeals Court in 2013) relating to Art. 70, but this author finds none of them apply it; CISG-Online rightly does not refer to them. The UNCITRAL Digest (2012) does not show any application in court practice. For Art. 70 to apply we must presume the buyer suffers loss through an occurrence after the legal delivery and also is frustrated because the seller has committed a fundamental breach. In this author’s opinion, the application of Art. 70 is, in those rare cases, ousted by the buyers’ use of an adequate remedy – that is unless Art. 82 prohibited the use of a remedy – which imposes the return of the goods back to the seller. In an instance where the buyer applies a remedy, the seller might, however, rebut that the returned goods show defects. In such a case he is better to rely on Art. 82 for his purpose, because this puts a burden on the buyer to show he is not at fault, rather than on Art. 70, which does 1

Hachem, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 66 para. 21 and Art. 70, para. 2. See Art. 49(1)(a). 3 See Art. 46(2). 4 See Art. 46(3). 5 See Art. 50. 6 See Arts 74 et seq. 2

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not address the seller. This may be why we see no applications: for the buyer it only states the evident fact that remedies are there and the seller takes punishment for a serious breach and perhaps seeks mitigation for goods diminished in value through other channels.

II. Detailed Commentary One should note the article specifically limits its applications to breaches that are fundamental in nature. As such, it has been argued that the article does not apply in situations where the buyer has attached an additional period of time for the seller to perform.7 Of course, this is correct as the seller’s inability to perform within the ‘additional period of time’ gives rise to the aggrieved party being able to avoid the contract, but the text does not technically classify this as a fundamental breach.8 In the situation where a breach occurs that is not fundamental in nature, the general rules on passage of risk will apply. In most instances this will leave the risk of loss or damage to be borne by the buyer. Of course, the seller is responsible for a “lack of conformity which exists at the time when risk passes to the buyer.”9 7 According to the Secretariat Commentary, “[i]n essence, article 70 provides that where goods are damaged while in storage or transit and the buyer bears the risk of such damage, the buyer may, nevertheless, avoid the contract if, prior to such damage, there was a deficiency in the goods sufficiently serious to amount to a fundamental breach of contract. In this situation, ‘the sense of the words used in article 70 is … that the risk’s having passed to the buyer under article 67, 68 or 69 is no obstacle to its being retrospectively passed back by the remedy of avoidance’ (Nicholas, Bianca-Bonell Commentary, Guiffrè: Milan (1987), p. 510.). However, where the prior deficiency was not so serious as to amount to a fundamental breach of contract, the buyer cannot shift back responsibility for damage while in storage or transit by avoiding the contract.”10 8 The main area of concern in relation to Art. 70 has to do with the consequences of this article in light of Art. 82. This is because Art. 82 limits the buyer’s ability to avoid the contract to situations in which the buyer can make restitution of the goods in substantially the same condition in which he received them. Of course there are exceptions to the general rule, the most important in this instance is when restitution is impossible and not due to the buyers act or omission.11 In this instance the buyer is excused from restituting the goods. Reading Art. 70 in combination with Art. 82 makes commentators argue that the risk reverts back to the seller.12 However, when does this reversion of risk occur? Bridge, looking at the case where the buyer avoided the sale, 6

7 Michael Bridge writes: “The CISG … treats avoidance in such circumstances (additional period of time) as a separate case from fundamental breach, though it may be that in some circumstances the seller’s lateness will also amount to a fundamental breach.” See Bridge, The Transfer of Risk under the UN Sales Convention 1980 (CISG), FS Kritzer (2008), pp. 77–105 (103). See also Art. 49(1). 8 Art. 49. 9 Art. 36(1). 10 Secretariat Commentary on 1978 Draft, Art. 82 (now Art. 70) cited by Nicholas, in: Bianca/Bonell, Commentary (1987), Art. 70 para. 2.3. Schwenzer/Fountoulakis/Dimsey, International sales law (2012), p. 505 say the effect is: “risk passes retroactively to the seller where the buyer resorted to the remedies of avoidance or has claimed substitute goods”, clarifying this “does not deal with damage to goods which is caused by the seller’s breach of contract, solely with accidental losses or damages that occur in spite of a fundamental breach of contract”. 11 See Art. 82(2)(a). 12 See CISG-AC Opinion no 9, para. 3.18 footnote 57: “Article 70 in substance would leave the risk with the seller where the seller commits a fundamental breach of the contract.”

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9–14

Article 70

asserts that the risk of loss is on the seller and states “it does not matter whether it always was or whether it was transferred back to the seller”.13 When the buyer holds goods in his possession while waiting for substitute goods or after avoiding the contract, the buyer does not bear the risk, but does have an obligation to preserve the goods pursuant to Arts 86–88. The risk would also logically not pass to a buyer to whom the seller has communicated that he will remedy a non-conforming delivery of documents or goods that were tendered before the date of maturity.14 In the situation of avoidance, the effect of the avoidance is to place the “transit risk on seller.” For another remedy, in case the buyer has requested substitute goods, the risk reverts to the seller for the goods he must replace. It is important to note that the effect of Art. 70 is not confined to reversing the incidence of risk in respect of damage or loss while the goods are in transit. Nicholas argues that the seller’s risk may extend to damage or loss occurring after the buyer has received the goods. Of course, he makes this assertion based on a partial delivery of goods amounting to a fundamental breach of contract.15 In the situation where the nonconforming goods are damaged or lost, even while in the possession of the buyer, as long as the non-conformity amounts to a fundamental breach, the buyer is entitled to avoid the contract.16 Provided the loss or damage was not the fault of the buyer, the risk will revert to the seller. The buyer must, of course, have assured that he has the benefit of calling on remedies, through timely notice of the breach under Art. 39.17 That being so, it is useful to state that the buyer gets the option to eventually accept delivery or retain possession of the goods that are doubly defective (i. e. not in conformity plus damaged by another cause) and opt to apply another remedy such as requesting compensation of damages. In addition, partial avoidance is possible when the requirements of Art. 51 have been satisfied. As such, partial avoidance of the contract will allow the aggrieved party to declare avoidance in relation to the portion of the shipment in non-conformity and to then shift the risk back to the seller in relation to the non-conforming goods.18 However, the goods in conformity with the contract will remain in the hands of the buyer and as such the risk will remain with the buyer in relation to those goods.

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III. Comparable Rules The PICC and PECL contain no provisions in relation to passing of risk. The 14 Incoterms 2010 contain no provisions that contemplate breach of contract or the consequences in relation to passing of risk. 13

Bridge, The Transfer of Risk under the UN Sales Convention 1980 (CISG), FS Kritzer (2008), p. 102. Arts 34 and 37. 15 See Nicholas, in: Bianca/Bonell, Commentary (1987), Art. 70, para. 2.5. 16 Honnold/Flechtner, Uniform Law (2009), Art. 70. 17 See discussion on Art. 39. 18 Honnold/Flechtner, Uniform Law (2009), Art. 70 para. 381. 14

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Chapter V Provisions Common to the Obligations of the Seller and of the Buyer* Section I Anticipatory breach and instalment contracts Introduction to Articles 71–73 Arts 71–73, found in Section I of Chapter V of the Convention, contain provisions on anticipatory breach and instalment contracts. A link uniting these three articles lies in their focus on the situation where before the due date for the performance of the contract by one party, the other party has grounds to suspect that the other party will not perform the contract at the due date. Arts 71 and 72 are concerned solely with this situation whereas Art. 73 is not confined to cases of an anticipated failure to perform as it also contains rules on avoidance, in the context of instalment contracts, where an actual breach has been committed. In light of this common thread between Arts 71–73, it is helpful to explore the basis for the Convention’s position which grants a party remedies where it faces the risk that the performance by the other party will not be forthcoming at the future due date.1 2 One way to justify the availability of remedies before the due date of performance is to argue that there is an implied duty, imposed on the parties, not to impair each other’s expectations that the contract will be performed.2 This justification emphasises the protection of the parties’ reasonable expectations, the promotion of reliance on contracts and the security of business transactions,3 and, arguably, certainty that parties need to have regarding their legal positions4 when they have grounds to suspect that the performance at the due date will not be forthcoming. The said duty can be potentially derived from a variety of sources. For example, if good faith is recognised as a general principle underlying the Convention,5 this duty can be said to flow from this general 1

* The author is grateful to Stefan Kro ¨ ll, Sarah Green, Stephen Girvin, Nelson Enonchong, Paul Mora and Tanya Corrigan for their comments on the first edition of this commentary. 1 Articulating and agreeing on the reasons justifying the availability of remedies before the due date of performance is likely to have an impact on the Convention’s practical application as well as to contribute to achieving its uniformity aspirations (for similar views expressed in the context of domestic law, see Vold, The Tort Aspect of Anticipatory Repudiation, 41 Harvard Law Review (1928) 343; Taylor, The Impact of Article 2 of the U. C.C on the Doctrine of Anticipatory Repudiation, 9 Boston College Industrial and Commercial Law Review (1967–1968) 941 (“express announcement of the logical basis for the doctrine will at least result in a greater predictability as to its application by the courts”). Cf. Kreitner, Multiplicity in Contract Remedies, in: Cohen/McKendrick (eds), Comparative Remedies for Breach of Contract (2005), p. 28 (“unification theories attempt too much to explain too little…The theories are methodologically unsound because they work on a level of abstraction too high to solve concrete problems”). Many of the arguments presented below were developed earlier (in the context of the UNIDROIT Principles) in Saidov, Anticipatory Non-Performance and Underlying Values of the UNIDROIT Principles, Uniform Law Review (2006) 795. 2 See, e. g., § 2–609(1) UCC. 3 For similar statements in the context of domestic legal systems see, e. g., Robertson, The Doctrine of Anticipatory Breach of Contract, 20 Louisiana Law Review (1959–1960) 120. 4 See Ze, Anticipatory Breach of Contract – the PRC System and English Comparisons, Lloyd’s Maritime and Commercial Law Quarterly (1993) 253 seq. 5 See Art. 7(2).

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3 Intro.

to Art. 71–73

principle since good faith is often interpreted as requiring the parties’ continuous commitment to the bargain.6 This duty can also be implied on the basis of Art. 8(2): it can be argued that because the contract is a legally binding agreement giving rise to legal rights and obligations, a reasonable person would almost always interpret the statements and conduct of the parties as implying that nothing would be done to impair each other’s contractual expectations. Every contract, by the very fact of its conclusion, generates the parties’ mutual expectation that it will be performed7 and many provisions of the Convention reflect its commitment to protecting this expectation. This, coupled with the general principles of pacta sunt servanda (contracts must be performed)8 and favour contractus (keeping the contract in existence as long as possible),9 surely constitute a sufficient basis for implying the duty not to impair contractual expectations.10 There are a number of other considerations and policies which may explain the 3 Convention’s allowing recourse to remedies prior to the date of performance. First, if every commercial contract is viewed as an instrument of allocating market risks, it can be contended that by allowing a party, whose legitimate expectation has been disturbed, to eliminate or reduce its losses by having recourse to remedies, the Convention’s provisions are nothing more than a means of allocating risks in a fair and reasonable manner.11 Secondly, in the marketplace the contract can be an effective ‘commercial resource’ having a present value.12 On this view, an anticipated failure to perform may impair the party’s ability to rely on the contract (for example, to obtain credit or to assign its rights13), thereby damaging its present value. Thirdly, allowing a party to have recourse to remedies before the due date for the performance may avoid a waste of resources and promote economic efficiency.14 For example, where the manufacturer has grounds to expect that the buyer will not perform the contract and will not want the goods intended to meet the buyer’s highly particular needs, not beginning or stopping (as they case may be) the manufacture will certainly avoid wasting the resources. Avoiding the contract (Art. 72) will allow the manufacturer to release itself from the contract and channel its resources in a different direction. Art. 71 will enable the manufacturer to suspend the manufacture, thereby preventing the possibility of unwanted performance, and to clarify 6

See, e. g., Carter, Adequate Assurance of Due Performance, 10 Journal of Contract Law (1996) 6. See Carter, Breach of Contract (1984) p. 226. 8 See, e. g., Magnus, General Principles of UN-Sales Law, 59 RabelsZ (1995) 469 (480) (Pace); Huber, CISG – The Structure of Remedies, 71 RabelsZ (2007) 13 (17 seq.). 9 Bonell, in: Bianca/Bonell, Commentary (1987), Art. 7 para. 2.3.2.2 (Pace). 10 A similar view has already been taken by some commentators (see Bridge, Issues Arising Under Articles 64, 72 and 73 of the United Nations Convention on Contracts for the International Sale of Goods, 25 Journal of Law and Commerce (2005–2006), 405 (412) (Pace); Bernstein/Lookofsky, Understanding the CISG (2003), p. 132 note 102. 11 See also official comment on § 2–609(1) UCC (“Once he has been given reason to believe that the buyer’s performance has become uncertain, it is an undue hardship to force him to continue his own performance”) in Uniform Commercial Code: Official Text and Comments (2003), p. 172. 12 Mustill, Anticipatory Breach of Contract: The Common Law at Work (1989–1990) pp. 44 et seq.; Strub, The Convention on the International Sale of Goods: Anticipatory Repudiation Provisions and Developing Countries, 38 International Comparative Law Quarterly (1989) 457 (480) (Pace). 13 Gulotta, Anticipatory Breach – A Comparative Analysis, 50 Tulane Law Review (1976) 929. 14 Carter/Phang/Phang, Performance Following Repudiation: Legal and Economic Interests, 15 Journal of Contract Law (1999) 100 (107 seq., 121); Vold, The Tort Aspect of Anticipatory Repudiation, 41 Harvard Law Review (1928) 368 seq.; Carter, Adequate Assurance of Due Performance, 10 Journal of Contract Law (1996) 6. This view has already been expressed in the context of the Convention; see Murray/Flechtner, Sales, Leases and Electronic Commerce: Problems and Materials on National and International Transactions (2003), p. 300, cited in Seliazniova, Prospective Non-Performance or Anticipatory Breach of Contract (Comparison of the Belarusian Approach to CISG Application and Foreign Experience), 24 Journal of Law and Commerce (2004) 111 (Pace). 7

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Part III. Chapter V. Provisions Common to Seller and Buyer

the situation regarding the buyer’s position.15 The availability of remedies for anticipated non-performance may also, to some extent, deter the parties from committing anticipatory non-performance and this would certainly be in line with the Convention’s principle of the preservation of contract. 4 Finally, it is important to set out some of the main criticisms of the doctrine of anticipatory breach, many of which were put forward during the 1980 Vienna Diplomatic Conference. First, it has been argued that the provisions place unjustified confidence in the party’s ability to predict an anticipated failure to perform16 thereby giving too much power to this party.17 Such an empowerment has been said to be dangerous as it may lead to abuse.18 The right to terminate the contract for anticipatory breach, for example, may provide a party with an opportunity to exploit the other party’s unstable position and a convenient route of escaping from a bargain which turned out to be unprofitable or undesirable.19 Even the right of suspension can be abused where the party who is doubtful about its own ability to perform may invoke this right to delay its performance by relying on the other party’s unstable situation.20 These criticisms become particularly acute where the party under suspicion is from a developing country. It has been suggested that not only is there greater room for abuse (for the conditions of economic and political instability, which may be present in some such countries, may create an appearance of instability)21 but also the consequences of exercising the remedies may impose harsher consequences on business persons from developing countries where, for example, there may be particular difficulties with communication or storage facilities.22 In short, the underlying concern was that the availability of remedies for anticipatory breach would reinforce the weaker bargaining position of developing countries in international trade.23 According to another criticism, the doctrine of anticipatory breach leads to the extension of obligations that the party has assumed under the contract and to the acceleration of liability.24 Thus, since a party’s failure to provide adequate assurance may lead to serious legal consequences, it 15 For the discussion of the relevance of economic considerations to the CISG and a more detailed discussion of similar examples, see Saidov, The Law of Damages in International Sales – The CISG and other International Instruments (2008) pp. 19, 125 seq. 16 See the statements made by Mr Inaamulah (Pakistan) at the 1980 Vienna conference, 28 March 1980, A/CONF.97/C.1/L.224 (Pace) and Mr Mehdi (Pakistan), 10 April 1980, A/CONF.97/L.23 (Pace). 17 See the statement made by Mr Shafik at the 1980 Vienna Conference, 3 April 1980, A/CONF.97/C.1/ L.249 and 250 (Pace). 18 See, e. g., Vilus, Provisions Common to the Obligations of the Seller and the Buyer, in: Sarcevic/ Volken (eds), International Sale of Goods: Dubrovnik Lectures (1986), p. 242, (pp. 244 seq.) (Pace). 19 See ibid.; see also Beale, Remedies for Breach of Contract (1980) p. 67 (stating, in the context of the right to terminate the contract more generally, that this remedy enables the party to escape from what has turned out to be bad bargain). 20 One party’s suspension of performance may also cause damage to the other party; see Strub, The Convention on the International Sale of Goods: Anticipatory Repudiation Provisions and Developing Countries, 38 International Comparative Law Quarterly (1989) 457 (477). 21 See ibid. 22 “At seaports where adequate storage facilities do not exist one may see piles of industrial products on the ground, exposed to the weather. These conditions intensify the harshness that results from immediate cancellation by buyer or seller. On the other hand, in countries like the U.S., where merchants enjoy efficient systems of communication, preservation, storage and transportation, a rule permitting immediate cancellation for any sort of breach may be less harsh” (Michida, Cancellation of Contract, 27 American Journal of Comparative Law (1979) 279 (280 seq.)). 23 See Strub, The Convention on the International Sale of Goods: Anticipatory Repudiation Provisions and Developing Countries, 38 International Comparative Law Quarterly (1989) 457 (501). 24 See, e. g., Taylor, The Impact of Article 2 of the U. C.C on the Doctrine of Anticipatory Repudiation, 9 Boston College Industrial and Commercial Law Review (1967–1968) 919; Peel, Treitel on the Law of Contract (2007) p. 848.

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is effectively forced to provide such an assurance to prevent adverse consequences, although doing so is more than the contract requires.25 The party’s liability can be said to be accelerated where, after the contract has been avoided for anticipatory breach, the other party is awarded damages prior to the date when the contract was to be performed.26 While all these criticisms did not prevent the introduction of remedies for an anticipated failure to perform into the Convention, it is submitted that these aforementioned concerns are valid and need to be taken into consideration in interpreting the respective provisions of the CISG in order to maintain a fair balance between the rights and interest of both parties.27 25 See Carter, Adequate Assurance of Due Performance, 10 Journal of Contract Law (1996) 5; Carter, Suspending Contract Performance for Breach, in: Beatson/Friedman (eds), Good Faith and Fault in Contract Law (1995), p. 485 (pp. 514 seq.). 26 See Taylor, The Impact of Article 2 of the U. C.C on the Doctrine of Anticipatory Repudiation, 9 Boston College Industrial and Commercial Law Review (1967–1968) 919; Peel, Treitel on the Law of Contract (2007) p. 848. 27 For a more detailed discussion in the context of the UNIDROIT Principles of International Commercial Contracts, see Saidov, Anticipatory Non-Performance and Underlying Values of the UNIDROIT Principles, Uniform Law Review (2006) 800 seq.

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Article 71 (1) A party may suspend the performance of his obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of his obligations as a result of:

(a) a serious deficiency in his ability to perform or in his creditworthiness; or (b) his conduct in preparing to perform or in performing the contract. (2) If the seller has already dispatched the goods before the grounds described in the preceding paragraph become evident, he may prevent the handing over of the goods to the buyer even though the buyer holds a document which entitles him to obtain them. The present paragraph relates only to the rights in the goods as between the buyer and the seller. (3) A party suspending performance, whether before or after dispatch of the goods, must immediately give notice of the suspension to the other party and must continue with performance if the other party provides adequate assurance of his performance. Bibliography: Pejovic, Stoppage in Transit and Right of Control: “Conflict of Rules”? 20 Pace International Law Review (2008) 129; Strub, The Convention on the International Sale of Goods: Anticipatory Repudiation Provisions and Developing Countries, 38 International Comparative Law Quarterly (1989) 457; Vanwijck-Alexandre, Anticipatory Breach and Instalment Contracts in the CISG, 3–4 International Business Law Journal (2001) 353; von Ziegler, The Right of Suspension and Stoppage in Transit (and Notification thereof), 25 Journal of Law and Commerce (2005–2006) 353; CISG-AC Opinion no 1, Electronic Communications under CISG, 15 August 2003. Rapporteur: Professor Christina Ramberg, Gothenburg, Sweden (http://www.cisg-ac.org).

Outline I. Importance and Role of the Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Detailed Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. The exercise of the right of suspension. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The nature of events giving rise to the remedy of suspension . . . . . . . . . aa) ‘Substantial part’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Serious deficiency in the ability to perform. . . . . . . . . . . . . . . . . . . . . . . . . cc) Conduct in preparing to perform or in performing the contract . b) The standard of prognosis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Circumstances arising after the conclusion of the contract. . . . . . . . cc) ‘Becoming apparent’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Source of information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Obligations which can be suspended. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Parties’ derogation from the right to suspend . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Relationship between Arts 71 and 80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f) Notice of suspension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Stoppage in transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) The exercise of the right of stoppage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Suspension and burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Adequate assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Meaning of ‘adequate assurance’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Failure to provide adequate assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Cessation of suspension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Comparable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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I. Importance and Role of the Provision Where, after the conclusion of the contract, it becomes apparent that one party will 1 not perform a substantial part of its obligations, the other party has the right to suspend the performance of its obligations.1 A similar remedy can be found in some domestic legal systems2 and international instruments.3 The main purpose of the right of suspension is to promote dialogue and cooperation between the parties, to preserve their contract4 and to encourage performance.5 This remedy is often said to be in line with the expectations of business persons since a normal response of a merchant suspecting a breach is thought to be that of contacting the other party and attempting to find a solution.6 It can also be viewed as aiming to maintain a fair balance between the parties: while there is a need to provide security to the party who expects an anticipated failure to perform, there is equally a need to treat such situations with caution and not to resort to drastic remedies, such as avoiding the contract. In addition, where an anticipated failure to perform is expected to relate to a substantial part of the obligations but is not expected to be of fundamental character justifying the avoidance of the contract,7 suspending performance again offers an innocent party a reasonable and convenient means of protecting itself as it is now able to refrain from performing until adequate assurances from the other party are received. The remedy of suspension can be said to perform several functions. It may induce the 2 party under suspicion to restate its commitment to performing the contract.8 It may also discourage the innocent party from invoking dispute resolution9 thereby freeing judicial resources and avoiding incurring transaction costs associated with bringing a formal action.10 It can also perform a function similar to that of mitigation of loss.11 It is often the case that by suspending its performance or preparation to perform, the party

1

Art. 71. See, e. g., § 2–609 UCC. See Art. 73 ULIS, Art. 7.3.4 PICC, and Art. 8:105(1) PECL. 4 Carter, Adequate Assurance of Due Performance, 10 Journal of Contract Law (1996) 3; also Oberlandesgericht Ko¨ln (Germany) 19 May 2008, CISG-Online 1700 (Pace) (rationalising the right of suspension in terms of ‘functional synallagma’, seeking to ‘secure the claim’ and exert pressure on the party under suspicion). 5 See Oberlandesgericht Karlsruhe (Germany) 20 July 2004, CISG-Online 858 (Pace). 6 Landgericht Kassel (Germany) 21 September 1995, CISG-Online 192 (Pace) (‘it would have been [a] reasonable commercial practice to discuss any suspicions … in order to achieve an appropriate solution’); Carter, Suspending Contract Performance for Breach, in: Beatson/Friedman (eds), Good Faith and Fault in Contract Law (1995), p. 485 (p. 499). 7 See Art. 72. 8 Carter, Suspending Contract Performance for Breach, in: Beatson/Friedman (eds), Good Faith and Fault in Contract Law (1995), p. 485 (p. 492). 9 Ibid. 10 Taylor, Self-Help in Contract Law: An Exploration and Proposal, 33 Wake Forest Law Review (1998) 848 (see further pp. 847 seq. for a much more extensive discussion of advantages and disadvantages of self-help remedies). 11 See Art. 77. For a detailed discussion of the rationale of the mitigation rule under the CISG, see Saidov, The Law of Damages in International Sales – The CISG and other International Instruments (2008), pp. 125 seq. 2 3

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avoids incurring unnecessary costs or losses12 thereby preventing the occurrence of waste of resources and contributing to economic efficiency.13 3 The structure of the remedy of suspension is set out in three paragraphs of Art. 71. The first paragraph specifies the grounds giving rise to this remedy.14 The second paragraph provides for the seller’s remedy of stoppage in transit which can be regarded as a manifestation of the seller’s right of suspension in a specific situation.15 The third paragraph provides for the suspending party’s duty to give notice of suspension to provide an opportunity for the other party to give adequate assurance of performance.16 Suspension can be exercised not only in relation to the main obligations, such as the delivery of the goods17 and payment of the price,18 but also in relation to the preparation to perform19 and ancillary obligations.20

II. Detailed Commentary 1. The exercise of the right of suspension 4

a) The nature of events giving rise to the remedy of suspension aa) ‘Substantial part’. A party has the right to suspend when it becomes apparent that a substantial part of the other party’s obligations will not be performed as a result of: (a) a serious deficiency in the other party’s ability to perform or in its creditworthiness; or (b) its conduct in preparing to perform or in performing the contract.21 The first difficulty in applying this provision lies in determining what constitutes ‘a substantial part of obligations’. The only guideline that can be inferred from the Convention itself is that an anticipated failure to perform ‘a substantial part of the obligations’ does not have to amount to a ‘fundamental breach’ as defined by Art. 25 and referred to in Art. 72.22 While it may be difficult to distinguish between the two 12 This will be the case, for example, where the manufacturer of goods (specifically designed for the buyer’s needs) who had grounds to suspect that the buyer would not accept and pay for the goods, initially suspended the manufacture and later avoided the contract after it transpired that the buyer was indeed unable or unwilling to perform. Had the manufacturer carried on performing the contract by manufacturing the goods which suited nobody but the buyer, the seller’s performance would have been wasteful. Another example is where there are grounds to suspect that the seller will not deliver the goods and the buyer suspends its obligations to open a letter of credit thereby not incurring the banking fee. If, after it became clear that the seller would not perform the contract, the buyer avoids the contract, the buyer can be said to have avoided incurring unnecessary cost and not to have lost an opportunity to use its money elsewhere. 13 See further Carter, Suspending Contract Performance for Breach, in: Beatson/Friedman (eds), Good Faith and Fault in Contract Law (1995), p. 485 (p. 492). 14 See Art. 71(1). 15 See Art. 71(2). 16 See Art. 71(3). 17 See, e. g., Belarusian Chamber of Commerce and Industry International Court of Arbitration (Belarus) 5 October 1995, ATT v Armco, CISG-Online 861 (Pace); Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 29 February 2000, in: Rozenberg (ed.), Praktika Mezhdunarodnogo Kommercheskogo Arbitrazhnogo Suda pri TPP RF za 1999–2000gg. (2002), pp. 233 seq. 18 See, e. g., Kantonsgericht Appenzell Ausserrhoden (Switzerland) 10 March 2003, CISG-Online 852 (Pace). 19 For example, the manufacturer can suspend procurement of raw materials or the buyer can suspend its establishing a letter of credit; see Honnold/Flechtner, Uniform Law (2009), Art. 71 para. 386. 20 See Arbitration Court of the Chamber of Commerce and Industry of Budapest (Hungary) 5 December 1995, Vb 94 131 (Pace) (where the tribunal held that the seller had justifiably suspended its duty to repair the goods). 21 Art. 71(1). 22 See, e. g., Landgericht Berlin (Germany) 15 September 1994, CISG-Online 399 (Pace) (with further reference to scholarly writings); Bennett, in: Bianca/Bonell, Commentary (1987), Art. 71 para. 3.1.

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standards in practice, the distinction needs to be maintained because the amendment proposed by the Egyptian delegation at the 1980 Vienna conference which made suspension conditional upon anticipatory fundamental breach was rejected.23 A few general guidelines on the meaning of the term ‘a substantial part’ of the 5 obligations can be given. The contract must be considered as a whole with a view to determining the importance that the parties attached to a particular obligation.24 The determination of what constitutes ‘a substantial part of the obligations’ cannot depend on one party’s subjective intentions and state of mind, unless the other party either knew or could not have been unaware of such intentions.25 The question that needs to be answered is whether it would be apparent to a reasonable person in the same position as the innocent party that a failure to perform a substantial part of obligation will occur.26 It is only this interpretation (known as ‘objective interpretation’) that will be capable of maintaining a fair balance between the parties and reducing the likelihood of the suspending party abusing its right. Eventually, the issue is to be resolved on a case-by-case basis.27 Some of the relevant factors include the importance that the contract itself attaches to a particular obligation,28 the parties’ negotiations, past dealings, practices, conduct subsequent to the emergence of the grounds for expecting an anticipated failure to perform,29 trade usage30 and the size of an anticipated failure relative to the entire set of obligations.31 An instance of the importance of the latter factor can be found in a case32 where the 6 court held that the non-conformity in 420 kg of frozen bacon (which was, in the court’s words, ‘only a minor part of one instalment’) out of the entire quantity of 22,400 kg to be delivered in several instalments could not be considered an anticipated failure to perform a ‘substantial part of obligations’. In another case33 of non-conformity in the delivered instalments, the tribunal’s decision correctly implied that the increased mercury levels in crude oil condensate, which caused the buyer difficulties in processing the condensate and selling the goods downstream, made it apparent to the buyer that a substantial part of the obligations under several instalment contracts would not be performed.34 In cases involving an anticipated delay of delivery, the requirement of 23 See proceedings at the Vienna Diplomatic Conference, 4 April 1980, A/CONF.97/C.1/L.249, L.250, L.251 (Pace); for further discussion, see Strub, The Convention on the International Sale of Goods: Anticipatory Repudiation Provisions and Developing Countries, 38 International Comparative Law Quarterly (1989) 457 (494). 24 See Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 71 para. 19. 25 See Art. 8(1). 26 See Art. 8(2). For a similar view in the context of Art. 73 ULIS, see Cohn, The Defence of Uncertainty: A Study in the Interpretation of the Uniform Law on International Sales Act 1967, 23 International Comparative Law Quarterly (1974) 520 (523 seq.). 27 For similar statements, see, e. g., von Ziegler, The Right of Suspension and Stoppage in Transit (and Notification thereof), 25 Journal of Law and Commerce (2005–2006) 353 (Pace). 28 See Hornung, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 71 para. 9. 29 See Art. 8(3). 30 See Art. 9. 31 See Huber/Mullis, The CISG (2007), p. 340. 32 Oberlandesgericht Hamm (Germany) 22 September 1992, CISG-Online 57 (Pace). 33 Netherlands Arbitration Institute (Netherlands) 15 October 2002, Case 2319 (Pace). 34 One of the factors the tribunal took into account was the long term nature of the parties’ relationship which gave rise to a shared understanding of the parties regarding the required levels of mercury in the condensate. Although this point was addressed in the context of the question of whether the goods were non-conforming, it would seem that this consideration may also be relevant for dealing with the question of whether an anticipated failure relates to a substantial part of obligations. Since the remedy of suspension aims to strike a fair balance between the interests of both parties, the legitimate expectations of the party under suspicion should probably be taken into account. Art. 71, of course, stops short of introducing the foreseeability rule (which is a part of the ‘fundamental breach’ test) for the purposes of

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‘substantiality’ has been met where it was clear that the seller would only be able to deliver the goods after the date by which the buyer committed itself to deliver to its customer.35 In a similar vein, there is likely to be an anticipated failure to perform a substantial part of obligations where the seller, by indicating its inability to deliver by the due date with no further indications about the possible delivery date, places the buyer in the position of uncertainty about its ability to meet the delivery deadline in its sub-sale contract.36 7 The buyer’s failure to take the required steps and to comply with formalities which would enable it to make a payment37 may, in addition to such a failure often being an actual breach, also be an indication that a substantial part of the buyer’s obligations will not be performed. In several cases, for example, the buyer’s failure to open a letter of credit on time has been treated as an indication of a serious deficiency in its creditworthiness38 which, in turn, meant that a substantial non-performance (i. e., non-payment) was likely to occur.39 In one case,40 the buyer failed to meet its contractual obligation to provide a bank’s confirmation that the letter of credit would be opened as soon as the goods are examined. While not treating the failure to do so as a fundamental breach,41 the decision nevertheless implied that the failure was sufficiently serious to justify an expectation of the non-performance of a substantial part of obligations. 8 Where an anticipated failure does not relate to or is not connected with the primary duties of the parties (i. e., those set out in Arts 30 and 53) the ‘substantiality’ requirement may still be met. Thus, it may be a term of the contract that the buyer must ensure that the confidential information it receives from the seller in the course of the latter’s performance of the contract will not be revealed to any third party. If the buyer then enters into dealings with the seller’s competitor, thereby creating the danger that the duty of confidentiality will be breached, the seller can be said to have grounds to suspect that an anticipated failure of a substantial part of obligations will occur.42 9 As noted above, an anticipated failure to perform a substantial part of obligations must result from: (a) a serious deficiency in the other party’s ability to perform or in its creditworthiness; or (b) its conduct in preparing to perform or in performing the contract.43 By specifying the grounds for suspension, the drafters intended to increase the objectivity of these grounds. This, however, did not prevent the scope of the applying the ‘substantiality’ requirement because of the less drastic consequences of the remedy of suspension. 35 See Oberlandesgericht Karlsruhe (Germany) 20 July 2004, CISG-Online 858 (Pace). 36 See Kantonsgericht Appenzell Ausserrhoden (Switzerland) 10 March 2003, CISG-Online 852 (Pace). 37 See Art. 54. 38 See Supreme Court of British Columbia (Canada) 21 August 2003, Mansonville v Kurtz, CISG-Online 1017, para. 79 (Pace); Arbitral Award, CIETAC CISG/1996/11, CISG-Online 1033 (Pace). 39 See Art. 71(1)(a). 40 Landgericht Kassel (Germany) 21 September 1995, CISG-Online 192 (Pace). 41 It is submitted that the reasoning of the court in relation to whether a fundamental breach has been committed can, in principle, also be relevant to dealing with the ‘substantiality’ requirement. Thus, the court referred to the seller’s conduct subsequent to the buyer’s failure to provide the required confirmation which demonstrated that the seller was nevertheless willing to perform (see ibid.). Similarly, suppose that, at first, the seller makes it clear to the buyer that it will not regard the buyer’s failure as having any legal significance and does not think that it gives any indications whatsoever about the buyer’s financial standing. Later, however, the seller justifies its own non-performance by reference to its right to suspend arising from the buyer’s anticipated failure to perform a substantial part of obligations. The buyer would certainly argue (correctly, it is submitted) that the seller should be prevented from relying on Art. 71 as its earlier statements and conduct demonstrated that it did not attach any importance to the buyer’s obligation to provide the said confirmation. 42 See Arbitral Award, CIETAC CISG/2002/29 (Pace). 43 Art. 71(1).

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provision from being broad enough to cover virtually any circumstance affecting a party’s ability to perform.44 bb) Serious deficiency in the ability to perform. A serious deficiency in the seller’s 10 ability to perform can arise, for example, from: a strike at the seller’s factory,45 production overload,46 loss of factory caused by fire or natural phenomena,47 a failure to procure an export licence, an export embargo, an outbreak of war,48 or the disappearance of the goods and the seller’s inability to find them.49 The reference to a serious deficiency in a party’s creditworthiness is primarily relevant to the buyer, but it may be applicable to the seller as well.50 For example, the circumstances may indicate that the seller lacks funds to purchase the goods from its supplier, to buy materials necessary for the manufacture of the contract goods, or to carry out the manufacture. A serious deficiency in the buyer’s ability to perform or in its creditworthiness51 may 11 flow, for instance, from: it being declared bankrupt; informing the seller that it will purchase the goods from an alternative supplier;52 its purchasing the equipment from the seller’s competitors thereby giving rise to fears that the seller’s expertise would become known to the latter (which, if occurred, would be a breach of a term of the contract);53 or where in case of an FOB contract there is insufficient storage space on board a vessel.54 An indication of such a deficiency may also be apparent from the buyer’s failure to pay for previous deliveries,55 to make a contractually required partial advance payment, or to open a letter of credit at the contractual due date.56 cc) Conduct in preparing to perform or in performing the contract. The latter two 12 instances mentioned in the previous paragraph may equally fall within the scope of Art. 71(1)(b) as they can evidence an anticipated failure to perform a substantial part of obligations resulting from the buyer’s conduct in performing the contract. Another example of such conduct is where the buyer actually fails to comply with its contractual duty to provide a bank’s confirmation that a letter of credit will be opened upon the occurrence of an event specified in the contract thereby giving rise to fears that the payment will not be made.57 44 See Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 71 para. 21; cf. Honnold/Flechtner, Uniform Law (2009), Art. 71 para. 389; Flechtner, Remedies under the New International Sales Convention: The Perspective from Article 2 of the U. C. C., 8 Journal of Law and Commerce (1988) 53 (95) (Pace). 45 See, e. g., Bennett, in: Bianca/Bonell, Commentary (1987), Art. 71 para. 2.6; Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 71 para. 21. 46 See Oberlandesgericht Karlsruhe (Germany) 20 July 2004, CISG-Online 858 (Pace). 47 See Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 71 para. 21. 48 See ibid., p. 705, note 24. 49 See Oberlandesgericht Hamm (Germany) 23 June 1998, CISG-Online 434 (Pace) (where the goods disappeared from the premises of the warehouse firm which was declared bankrupt). 50 For a similar view, see Enderlein/Maskow, International Sales Law (1992), p. 286; Vanwijck-Alexandre, Anticipatory Breach and Instalment Contracts in the CISG, 3–4 International Business Law Journal (2001) 360. 51 For an unsuccessful attempt to define the notion of a ‘serious deficiency in [the buyer’s] creditworthiness’ in case law, see Bundesgericht (Switzerland) 17 July 2007, CISG-Online 1515 (Pace). 52 District Court, Pennsylvania (U.S.), 10 September 2013, Roser Technologies, Inc v Carl Schreiber GmbH, CISG-Online 2490 (Pace). 53 See Arbitral Award, CIETAC CISG/2002/29 (Pace) and the accompanying text. 54 See Enderlein/Maskow, International Sales Law (1992), p. 286. 55 Federal District Court, New York (U.S.), 29 May 2009, Doolim Corp v R Doll, LLC, CISG-online 1892 (Pace). 56 See Federal District Court, New York (U.S.), 29 May 2009, Doolim Corp v R Doll, LLC, CISG-online 1892 (Pace). 57 See Landgericht Kassel (Germany) 21 September 1995, CISG-Online 192 (Pace), and the accompanying text.

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The seller’s conduct in preparing to perform or in performing the contract58 which can give rise to an anticipated failure to perform a substantial part of obligations includes: the seller’s failure to procure the goods or materials necessary for the manufacture of the goods on time; late delivery of samples (or delivery of defective samples), as required by the contract, for the buyer’s approval which will prevent the seller from manufacturing and delivering the goods on time;59 the seller’s failure to comply with the contractual duty to provide documents certifying that the goods are free from rights or claims of third parties60 which creates grounds for suspicions that the goods, when delivered, will not be free from any such rights or claims; the seller’s failure61 to comply with the schedule of the contractually stipulated trial-run and to execute it properly, thereby making it clear that the trial-run will not be completed successfully within the required time frame62 and; the seller’s failure to get permission to export the goods to the specified countries and to perform its contractual duty of nominating the port of loading.63

b) The standard of prognosis aa) General. Because a failure to perform is expected to occur in the future, while the remedy can be invoked as soon as the grounds for an anticipated failure become known, Art. 71 contains a probability standard which requires that grounds giving rise to suspension ‘become apparent’ after the conclusion of the contract. Although it is not possible to give a precise definition of this standard, the text, structure and legislative history of the Convention provide a few general guidelines. 15 The standard of ‘becoming apparent’ needs to be contrasted with the standards of being ‘clear’ in Art. 72(1) as well as with ‘good grounds’ in Art. 73(2). The majority view is that the standard in Art. 71 requires a lower degree of likelihood than that required by Arts 72(1)64 and 73(2).65 This can be explained66 by the less strict preconditions for invoking these provisions67 and the less drastic nature and effects of remedies provided for in these articles.68 Although such a distinction may be possible in 14

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See Art. 71(1)(b). See, Arbitral Award, ICC 8786, January 1997, CISG-Online 749 (Pace). 60 See Federal Arbitration Court for the Western Siberia Circuit (Russia) 6 August 2002, O. I. L. Otto International Leasing Aktiengesellschaft v Zernopererabatyvayuschiy kombinat Barnaulskaya melnitsa (Pace). 61 See Arbitral Award, CIETAC CISG/1996/36 (Pace). 62 “The second contingent of engineers hired by [the Seller] departed from China on 25 August 1994, one month earlier than previously scheduled at a time when the trial-run adjustment was not finished … [The Seller]’s third contingent of engineers arrived in Shanghai in October 1994 and departed for France to purchase spare parts on 1 November 1994. They returned to Shanghai in early December 1994 without any parts. Under these circumstances, [the Buyer] had reason to believe it was impossible for [the Seller] to finish adjustment in the timeframe, i. e., by 6 November 1994” (ibid.). 63 See Oberster Gerichtshof (Austria) 6 February 1996, CISG-Online 224 (Pace) (the Supreme Court discussed the buyer’s right to suspend by reference to Art. 80 and not Art. 71). 64 See, e. g., Honnold/Flechtner, Uniform Law (2009), Art. 71 para. 388; Fountoulakis, in: Schlechtriem/ Schwenzer, Commentary (2016), Art. 71 para. 30. 65 See Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 71 para. 30, Art. 73 para. 24. 66 See, e. g., Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 71 para. 30. 67 Art. 71 refers to anticipated failure to perform a substantial part of obligations while Art. 72 can be invoked where it is clear that a fundamental breach will occur; similarly, Art. 73(2) allows a party to avoid the contract for the future where there are good grounds to conclude that there will be a fundamental breach with respect to future instalments. 68 Art. 71 authorises the suspension of the contract and Art. 72 allows that a contract be avoided. Art. 73(2) allows that the contract be avoided for the future. 59

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theory, it is doubtful whether it is workable in practice.69 Further, it was the drafters’ intention to inject a greater degree of objectivity into the standard and prevent the right of suspension from being invoked on the basis of purely subjective fears: the more objective the standard, the greater the chances that the remedy of suspension will be invoked on the basis of genuine doubts about future performance.70 To implement this aspiration, the question of whether it is ‘apparent’ that a substantial part of obligations will not be performed is to be judged from the standpoint of a reasonable person in the position of the party invoking Art. 71.71 bb) Circumstances arising after the conclusion of the contract. The circumstances 16 giving rise to the right of suspension must become apparent ‘after the conclusion of the contract’. To be clear, however, such circumstances may well exist before the conclusion of the contract. What is crucial to the question of whether the right of suspension can be exercised is whether or not the relevant circumstances became apparent after the contract had been made. Viewed in light of the considerations underlying Art. 71 (i. e., the need to maintain a fair balance between the parties, to interpret the provision ‘objectively’ by reference to the ‘reasonable person’ standard, and to minimise the possibility of abuse), this requirement can be said to serve the function of allocating the risks in a reasonable manner. If, prior to or at the time of the conclusion of the contract, a party who relies on Art. 71 knew or ought to have known of the other party’s circumstances which might impair its ability to perform, then it can be deemed to have assumed the risk of such circumstances.72 This approach encourages prudent and responsible contracting and it is evident that the Convention does not protect parties who thoughtlessly or carelessly enter into contracts.73 A party may then be required to make inquiries, prior to entering into the contract, about the other party’s circumstances in order to enable itself to invoke the right of suspension in the future. However, the extent of such a duty is unclear and there are considerations which 17 dictate that a cautious approach be taken. In international transactions, it may be difficult and expensive for a party to engage in the examination of the other party’s 69 See, e. g., Schlechtriem, Uniform Sales Law: The UN-Convention on Contracts for the International Sale of Goods (1986), p. 95 (“the different formulations do not require different degrees of certainty – such a requirement would hardly be practicable anyway”). 70 Thereby reducing the scope for abusing this right, e. g., where a party who is not certain about its ability to perform uses suspension to gain time by delaying performance; see Carter, Suspending Contract Performance for Breach, in: Beatson/Friedman (eds), Good Faith and Fault in Contract Law (1995), 485 (513). For the view that the rule leaves much room for subjective judgment, see Ziegel, The Remedial Provisions in the Vienna Sales Convention: Some Common Law Perspectives, in: Galston/Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), pp. 9 seq. 71 See Art. 8(2). There is still a question of the extent to which that ‘reasonable person’ needs to be tailored to the likeness of the party invoking the right to suspend. The question may be particularly relevant in the context of international transactions where differences are exacerbated; for the suggestion in the context of Art. 25, see, Will, in: Bianca/Bonell, Commentary (1987), Art. 25 para. 2.2.2.2.1 (Pace). For the exploration of the notion of a reasonable person, including the possibility of relying on the ‘detached reasonable person’ standard in the common law systems, see, e. g., Howarth, The Meaning of Objectivity in Contract, 100 Law Quarterly Review (1984) 265; DiMatteo, The Counterpoise of Contracts: The Reasonable Person Standard and the Subjectivity of Judgment, 48 South Carolina Law Review (1997) 293. 72 See Bundesgericht (Switzerland) 17 July 2007, CISG-Online 1515 (Pace) (‘If the vending party knew that the solvency was poor prior to the conclusion of the contract and the solvency had not deteriorated since then, it was not entitled to stop the goods’); Landgericht Darmstadt (Germany) 29 May 2001, CISGOnline 686 (Pace); Vanwijck-Alexandre, Anticipatory Breach and Instalment Contracts in the CISG, 3–4 International Business Law Journal (2001) 358. A similar rationale underlies a number of other provisions of the CISG, see, e. g., Arts 25, 35(3), 42(2), 74. More generally, see also Arts 8 and 9. 73 See Enderlein/Maskow, International Sales Law (1992), p. 284.

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position74 and the necessity of doing so would create an obstacle to international trade which would run counter to the Convention’s purpose.75 In addition, a party being seen as making detailed inquiries about the other party may, arguably, contribute to the creation of an atmosphere of mistrust amongst business partners in international trade. A balanced and fair approach is not to require a party to make detailed inquiries but, at the same time, to assume that it is aware of the other party’s circumstances to the same extent as a reasonable person in its position would have been.76 The extent of this party’s duty to make inquiries is that which a reasonable person would have exercised.77 While this guideline is, admittedly, vague, it manifests an approach which is very much in line with the Convention’s approach of relying on broad rules and standards which acquire a discernible meaning and content only in light of the facts of a particular case. 18 One important consideration that has emerged from the cases is whether there have been any changes between the circumstances of which the party was aware before making the contract and the circumstances as they have developed since the conclusion of the contract. It follows, from the discussion in the previous paragraph, that if the seller, for example, had been aware of the buyer’s financial problems before the contract was made, then it cannot, generally, exercise its right of suspension on the ground of the deficiency in the buyer’s creditworthiness since, by entering into the contract despite its knowledge, it can be deemed to have assumed this risk.78 However, a further deterioration in the buyer’s financial standing may occur and/or a more serious extent (than that which was reasonably apparent prior to the making of the contract) of the buyer’s problems may become apparent after the contract was made.79 Where this is the case, the right of suspension may still be invoked provided that the change or difference between what was apparent prior to the making of the contract and what was apparent and/or occurred after that time was sufficiently serious to justify the shifting of the risk 74 See the statements made by Mr V. Kruse (Danish delegation) at the 26th meeting of the 1980 Vienna Diplomatic Conference, 27 March 1980, A/CONF.97/C.1/L.185, L.209 (Pace); von Ziegler, The Right of Suspension and Stoppage in Transit (and Notification thereof), 25 Journal of Law and Commerce (2005– 2006) 353 (362) (Pace). 75 See the statement made by Mr Rognlien (Norwegian delegation) at the 26th meeting at the 1980 Vienna Diplomatic Conference, 27 March 1980, A/CONF.97/C.1/L.185, L.209 (Pace). 76 For a similar position, see Hornung, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 71 para. 15; von Ziegler, The Right of Suspension and Stoppage in Transit (and Notification thereof), 25 Journal of Law and Commerce (2005–2006) 353 (362) (Pace). 77 See, e. g., Hornung, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 71 para. 15; von Ziegler, The Right of Suspension and Stoppage in Transit (and Notification thereof), 25 Journal of Law and Commerce (2005–2006) 353 (362) (Pace). 78 See, however, Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 29 February 2000, in: Rozenberg (ed.), Praktika Mezhdunarodnogo Kommercheskogo Arbitrazhnogo Suda pri TPP RF za 1999–2000gg. (2002), where the tribunal stated that the fact of concluding a new contract with the buyer despite outstanding payments for deliveries made by the seller under previous contracts did not in itself necessarily lead to the conclusion that the seller was willing to make further deliveries without receiving the payment by the buyer. Considering that the seller was clearly aware of the problems with the buyer’s ability to pay, it is unfortunate that the tribunal did not explain why it did not regard the seller as having assumed the risk of non-payment by the buyer. One relevant circumstance mentioned in the decision was that the parties made a ‘protocol’, subsequent to the conclusion of the contract, in which the buyer’s difficult financial position was recognised and it can be speculated that the making of the protocol was indicative of a further deterioration in the buyer’s financial standing since the contract was concluded. If so, it may have been the case that the tribunal took the view that the risk assumed by the seller under the contract was different, so far as its extent was concerned, from the risk that has actually materialised (see the discussion in the main text). 79 See Bundesgericht (Switzerland) 17 July 2007, CISG-Online 1515 (Pace).

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back to the buyer. In one case,80 the court held that the seller was entitled to suspend the performance of its obligations despite the fact that the seller was aware that the buyer faced a risk of insolvency before the making of the contract. The decision appears to imply that the buyer’s conduct subsequent to the conclusion of the contract (i. e., the buyer’s persistent failure to pay between 1995 and 2002) revealed a greater degree of financial difficulties than was apparent to the seller prior to concluding the contract. In other words, although the nature or type of risk (i. e., buyer’s creditworthiness) was apparent to the seller, it was the serious difference between the extent of that risk as it was apparent before the contract and as it became apparent or developed after the contract had been made that seems to be the basis for the decision. It is no doubt correct that it is not only the nature and type of risk but also its extent that is relevant for the purposes of the assumption of risk under Art. 71.81 cc) ‘Becoming apparent’. While the standard of ‘becoming apparent’ does not 19 require absolute certainty, it is usually interpreted as requiring a ‘high’82 or ‘substantial’83 degree of likelihood. Clearly, any real content can only emanate from such obscure guidelines by means of its filtering through the facts of a particular case. The task is then to identify those types of circumstances which can make it apparent that a substantial part of obligations will not be performed. For example, there is little doubt that the buyer’s unequivocal refusal to take delivery 20 will meet the standard of ‘becoming apparent’.84 Many of the reported cases, however, have arisen in connection with the buyer’s conduct relating to its obligation to pay. Thus, the buyer’s failure to comply with its contractual duties to make a down payment,85 to open or to extend the duration of a letter of credit,86 to provide a valid bank guarantee of its performance,87 or to supply a bank confirmation that a letter of credit will be opened upon meeting certain conditions88 can give rise to an expectation that there is a high degree of likelihood of a substantial part of obligations not being 80

See Cour de Cassation (France) 20 February 2007, CISG-Online 1492 (Pace). For the discussion of a similar theme in the context of the foreseeability rule in Art. 74, see Saidov, The Law of Damages in International Sales – The CISG and other International Instruments (2008), pp. 113 seq. 82 See Oberster Gerichtshof (Austria) 12 February 1998, CISG-Online 349 (Pace); Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 71 para. 28. 83 Honnold/Flechtner, Uniform Law (2009), Art. 71 para. 388. 84 Bundesgerichtshof (Germany) 27 November 2007, CISG-Online 1617 (Pace). However, if the buyer has indicated that there would be a delay in taking delivery, the question of whether that delay would constitute a breach of a ‘substantial part’ of the buyer’s obligations would have to be answered in order to decide whether the seller has the right to invoke Art. 71. 85 See Arbitral Award, CIETAC CISG/1989/02, CISG-Online 1230 (Pace) (where the tribunal stated, without reference to any legal basis, that because ‘the buyer had not made the down payment pursuant to the contract, the seller was consequently freed from its obligations to deliver the goods within the time stipulated in the contract’). 86 See Supreme Court of British Columbia (Canada) 21 August 2003, Mansonville v Kurtz, CISG-Online 1017 (Pace); Federal District Court, New York (U.S.), Doolim Corp v R Doll, LLC, CISG-Online 1892 (Pace); Arbitral Award, CIETAC CISG/1996/11, CISG-Online 1033 (Pace); Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 27 July 1999 (Pace) (it is unclear whether the tribunal did not treat the buyer’s failure to issue letter of credit as justifying the seller’s suspension because it did not regard such a failure as a sufficient ground for suspension or because the seller failed to give a notice of suspension under Art. 71(3)); Arbitral Award, CIETAC CISG/1996/56 (Pace) (the buyer failed to extend the duration of the letter of credit, as required by the contract, and the seller was held entitled to suspend its obligations as soon as the original letter of credit had expired). 87 See Hungarian Chamber of Commerce and Industry Court of Arbitration (Hungary) 17 November 1995, Vb 94 124 (Unilex). 88 See Landgericht Kassel (Germany) 21 September 1995, CISG-Online 192 (Pace). 81

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performed at the due date. However, it is important not to consider the buyer’s conduct in relation to its payment obligations in isolation from other relevant circumstances. In one case,89 the buyer’s stoppage of the payment of its check was not considered to be a ground for the seller’s right of suspension because there was a practice, established between the parties, whereby the seller would not usually credit the buyer’s check until it delivered the goods; there was no other possible indication of the problems in the buyer’s financial standing and; the buyer’s conduct did not constitute a breach of contract. A rather typical situation is where the buyer fails to pay (or makes only a partial payment) for the previous deliveries the seller made under the contract and, on a number of occasions, it has been held that such conduct of the buyer entitles the seller to suspend its performance.90 The treatment of such situations has not, unfortunately, been uniform and in one case,91 it was held that the buyer’s failure to pay for previous deliveries, coupled with the subsequent cancellation of the payment order (presented to the seller after the latter’s demand for payment), did not constitute a circumstance which would, in the words of the court, be ‘a serious lack of creditworthiness on the part of the buyer with high probability’. According to the decision, ‘[s]ingular delayed payments or a sluggish mode of payment are normally not sufficient to show a serious loss of creditworthiness’.92 It is submitted, with respect, that Art. 71 was interpreted too strictly in this case.93 While the right of suspension should not be invoked too lightly,94 it is equally important that the standard of ‘becoming apparent’ be interpreted in light of the nature and purpose of the right of suspension (i. e., its not being a drastic remedy and its purpose of maintaining a fair balance between the parties and establishing a dialogue and inducing cooperation). It seems reasonable to argue that, in the ordinary course of things, the circumstances, such as those which occurred in this case, would raise legitimate doubts in the mind of a reasonable person in the seller’s position about the buyer’s ability and/or willingness to perform. It is more sensible and, arguably, more in line with the expectations of business persons, to allow the seller in such situations to suspend its performance in order to clarify the buyer’s position. 21 Where the buyer proposes to modify the terms of the contract, for example, where the buyer offers to open a letter of credit for the remaining part of the price, as opposed to providing a bank guarantee as required by the contract, such a conduct may make it apparent that a substantial part of obligations would not be performed and the seller can be justified in suspending its obligations.95 This should not, however, mean that every 89

Landgericht Mu¨nchen (Germany) 6 April 2000, CISG-Online 665 (Pace). See Rechtbank van Koophandel Hasselt (Belgium) 1 March 1995, JPS BVBA v Kabri Mode BV, CISG-Online 373 (Pace) (the buyer’s seven month delay in making a full payment for the first order leads to a ‘reasonable suspicion’ that the buyer would not pay for the future orders and justifies the seller’s suspension of delivery relating to the second order); Arbitration Court of the Chamber of Commerce and Industry of Budapest (Hungary) 5 December 1995, Vb 94 131 (Pace) (the buyer’s failure to pay for previous deliveries under a framework contract led the seller ‘to believe that the buyer would not voluntarily pay’); Tribunal Commercial de Bruxelles (Belgium) 13 November 1992, Maglificio Dalmine Srl v S C Covires, CISG-Online 458 (Pace); Belarusian Chamber of Commerce and Industry International Court of Arbitration (Belarus) 5 October 1995, ATT v Armco, CISG-Online 861 (Pace). 91 See Supreme Court (Austria) 12 February 1998, CISG-Online 349 (Pace). 92 Ibid. 93 For a similar view, see Karollus referred to in Posch/Petz, Austrian Cases on the UN Convention on Contracts for the International Sale of Goods, 6 Vindobona Journal of International Commercial Law Arbitration (2002) 20 note 102. Cf. Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 71 para. 22 note 62; Huber/Mullis, The CISG (2007), p. 342. 94 See above. 95 See Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 25 May 1998 (Pace) where, however, the seller’s right of suspension was based not on the CISG but on the contract. 90

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proposal to modify the terms of the contract will inevitably meet the requirement of ‘being apparent’ as, ultimately, it is the particular circumstances which are decisive. For example, if the buyer’s proposal to modify the terms of the contract is accompanied by the statement that if the seller is unwilling to accept the proposal, the buyer would still be able and willing to perform as initially agreed, then it seems clear that the seller should not be able to suspend its obligations merely on the ground of the buyer’s offer. When it comes to the question of whether it is apparent to a reasonable person in the 22 buyer’s position that the seller will not perform a substantial part of its obligations, the answer to it may be quite straightforward where the seller itself makes an express statement that it will not be able to perform. Thus, in several cases the seller told the buyer that it would not be able to deliver on time and in such cases it has been rightly held that the buyer was entitled to exercise the right of suspension.96 However, in most cases the seller will not make such unequivocal statements and the buyer will have to engage in a sometimes difficult and risky97 task of making a judgment on whether the standard of ‘being apparent’ is met in the circumstances. The existing body of cases may nevertheless alleviate this difficulty to some extent by providing a background against which the buyer is to evaluate its situation. The seller’s failure to deliver conforming goods may make it apparent that future 23 deliveries will also be non-conforming. This is likely to be so where the seller denies that its past deliveries were defective, thereby indicating that no improvements can be expected,98 or where all the goods (those already delivered and those to be delivered) come from the very same source which is incapable of producing the goods in accordance with the contract (e. g., in case of an oil well from which an oil condensate with higher levels of mercury than those required by the contract and the Convention was derived).99 However, the situations involving non-conformity in the goods raise a difficulty 24 where the contract is silent on the technical specifications and detailed qualities of the goods and the parties and their experts genuinely disagree about whether or not the goods can be deemed non-conforming.100 It could be argued that, in the absence of clarity regarding the standard of conformity at the time of suspension, it is not justifiable for the buyer to suspend its performance where it is highly debatable where the delivered goods were indeed non-conforming and that the tribunal’s subsequent decision holding that the goods to be non-conforming cannot retrospectively justify the buyer’s suspension. While it is easy to state that the ‘innocent party must be deemed to be aware of information and matters with which the relevant trade sector is generally familiar’,101 ‘the relevant trade sector’ may not always have an answer to a particular question.102 Where this is the case, it could be argued that even the reasonable person in 96 See Kantonsgericht Appenzell Ausserrhoden (Switzerland) 10 March 2003, CISG-Online 852 (Pace); Arbitral Award, ICC 8786, CISG-Online 749 (Pace). 97 For if the buyer suspends its performance on the basis of an incorrect prognosis, it itself will be in breach. 98 See Landgericht Berlin (Germany) 15 September 1994, CISG-Online 399 (Pace). 99 See Netherlands Arbitration Institute (Netherlands) 15 October 2002, Case 2319 (Pace). 100 See Arbitral Award, CIETAC CISG/1994/04, CISG-Online 1030 (Pace) (involving a dispute on whether storing cow’s liver fungus in refrigeration at ‘-14\hoC’ will damage the goods; although the parties referred to Art. 71, the seller’s alleged breach should have been analysed from the standpoint of a possible ‘actual’, rather than ‘anticipatory’, breach); Netherlands Arbitration Institute (Netherlands) 15 October 2002, Case 2319 (Pace) (involving a dispute on the acceptable level of mercury in oil condensate). 101 Hornung, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 71 para. 15. 102 ‘From the evidence, it is unclear whether there is a common understanding in the refining industry what average quality for blended condensates…should have been and what levels of mercury are

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the buyer’s position would not be able to know whether the delivered goods are conforming. If the court/tribunal later decides that the goods were non-conforming, the seller would argue that the buyer’s prognosis could only be made prospectively,103 which would mean that the buyer did not have the right to suspend because of the absence of clarity regarding the standard of conformity, and it is unfair for the buyer’s suspension to be justified retrospectively. 25 It is, of course, true that the correctness of almost every exercise of the right of suspension will be judged by the court/tribunal after the suspension had taken place.104 However, there is a difference between whether it will be so judged by reference to knowledge available at the time of the exercise and knowledge acquired after that time. Can it be said then, in response to the seller’s arguments, that the tribunal’s later decision was not subsequently acquired knowledge but was knowledge which was available to a reasonable person in the buyer’s position at the time of suspension? The answer, it is submitted, should be ‘yes’. It is inevitable that legal questions with no immediately available answers will arise and it is only a subsequent tribunal’s decision which will have a final say on such questions. The courts/tribunals in such cases will still rely on the facts known during the period prior to or at time of suspension105 and, for that reason, cannot be said to refer to knowledge acquired after suspension. It would also be unfair to the buyer, who alleges the non-conformity, to be denied the right of suspension where there is no evidence of a clear standard of conformity at the time, considering that the buyer’s position may prove right in the future. If not, the buyer will have to take the risk of being found to be in breach. To put it differently, the possibility of justifying the buyer’s suspension by reference to a later tribunal’s decision can be said to be, in a sense, the Convention’s symmetrical response to the buyer taking the risk of making an incorrect assessment about the conformity of the delivered goods. 26 Relying on other existing cases the following guidelines can be given. In light of the seller’s obligation to deliver the goods free from rights and claims of third parties,106 the seller’s failure to supply the contractually required documents to this effect would, most likely, meet the standard of ‘being apparent’.107 The same is the case where the goods, which had been sold to the buyer and kept in a warehouse, disappear from the warehouse after the warehouse firm was declared bankrupt and the seller is unable to find them.108 In contrast, a seller’s mere expression of its desire not to perform in the future may not meet this standard, particularly where afterwards the parties first agree to continue negotiations and then are involved in a series of talks.109 Finally, it is tolerable’ (Netherlands Arbitration Institute (Netherlands) 15 October 2002, CISG-Online 740 and 780 (Case 2319) (Pace)). The statement was made when the tribunal considered the possibility of relying on the ‘average quality’ standard in applying Art. 35. 103 I.e., on the basis of the information available to the buyer prior to the time of suspension. 104 Bundesgericht (Switzerland) 17 July 2007, CISG-Online 1515 (Pace), where suspension of delivery by the seller, who failed to establish deficiency in the buyer’s creditworthiness, led to the seller’s liability. 105 See, e. g., Netherlands Arbitration Institute (Netherlands) 15 October 2002, Case 2319 (Pace) (the contract price and the long-term nature of the parties’ relationship were the decisive factors in resolving the question of conformity of the goods). 106 See Art. 41. 107 See Federal Arbitration Court for the Western Siberia Circuit (Russia) 6 August 2002, O. I. L. Otto International Leasing Aktiengesellschaft v Zernopererabatyvayuschiy kombinat Barnaulskaya melnitsa (Pace). 108 Oberlandesgericht Hamm (Germany) 23 June 1998, CISG-Online 434 (Pace). 109 See Arbitral Award, ICC 8574 of September 1996, CISG-Online 1293 (Pace) (although the decision primarily addressed the standard of ‘being clear’ in Art. 72, it also noted that the seller’s expression of its desire to discontinue deliveries did not justify the buyer’s suspension of payment).

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suggested that, in general, a change in the economic environment and market conditions, such as where a market price for the goods rises sharply, does not in itself make it ‘apparent’ that the seller will not deliver at the due date.110 It is only where there are some additional circumstances indicative of the seller’s unwillingness (for instance, where the seller makes ambiguous statements to the effect that it might not be able to perform at an earlier agreed price) or inability to perform (for example, where the buyer is aware that the seller’s suppliers are only willing to sell at increased prices and where the seller uses the contract price, received from the buyer, to purchase the goods from its suppliers) that the buyer may have the right to suspend. dd) Source of information. Art. 71 does not require that the information regarding a 27 party’s inability or unwillingness to perform at a future date derive from a particular source.111 Any source which would be regarded by a reasonable person in the position of a party who wishes to invoke the right of suspension as a trustworthy and reliable source will suffice.112 It follows that the reliance on an unfounded gossip should not be allowed.113 In case the information on which a party relies to suspend its obligations turns out to be untrue, it is the standard of a reasonable person that should, once again, be decisive: if a reasonable person in a suspending party’s position would regard, at the time prior to the suspension, the information as reliable, then the risk of the incorrectness of the information should fall on the other party, and vice versa.114 c) Obligations which can be suspended. An unresolved issue is whether there needs 28 to be some kind of connection between the obligations which can be suspended and the obligations a substantial part of which is expected not to be performed. This issue manifests itself in at least two inter-related questions. The first question is whether a party is allowed to suspend only that type of obligations 29 which can be regarded as an ‘agreed return’ for the type of obligations anticipatory nonperformance of which is expected. For example, it is clear that where it is apparent that the seller will not be able to deliver the goods, i. e. one of its primary obligations, then clearly the corresponding primary obligation of the buyer, for the purposes of suspension, is to pay the price. However, where it is apparent that the buyer will not comply with the contractual duty of confidentiality regarding the expertise and know-how passed by the seller in the course of performing the contract, what is a corresponding type of obligation that the seller can suspend?115 It is suggested that while there may not be a precisely corresponding obligation, it is still the primary duties of delivery, payment and taking delivery, as the case may be, to which suspension is to be generally applied. After all, most 110

Cf. White/Summers, Uniform Commercial Code (2000), p. 198. See Carter, Suspending Contract Performance for Breach, in: Beatson/Friedman (eds), Good Faith and Fault in Contract Law (1995), p. 508. 112 A somewhat similar position to that taken in the main text can be found in comment 3 to § 2–609 UCC. English courts, however, have taken a more restrictive approach. In Universal Cargo Carriers Corporation v Citati [1957] 2 BQ 401 at 405 Devlin J refused to recognise the sufficiency of a ‘wellinformed opinion on the market’ on the ground that ‘anticipatory breach must be proved in fact and not in supposition’. However, it seems that because establishing an anticipatory failure to perform involves inquiry into the future and, therefore, a degree of speculation, rarely will it be possible to prove it ‘in fact’. For a similar view, see Ze, Anticipatory Breach of Contract – the PRC System and English Comparisons, Lloyd’s Maritime and Commercial Law Quarterly (1993) 266. 113 See Carter, Suspending Contract Performance for Breach, in: Beatson/Friedman (eds), Good Faith and Fault in Contract Law (1995), p. 508. 114 See Enderlein/Maskow, International Sales Law (1992), pp. 284 seq. who, while taking a similar view, incorrectly rely on the suspending party’s actual knowledge, rather than on the standard of a reasonable person. 115 See Arbitral Award, CIETAC CISG/2002/29 (Pace) and accompanying text. 111

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obligations in a sales contract are directed towards enabling the parties to provide an agreed return (delivery of the goods and payment of the price) and creating the necessary conditions and putting in place the safeguards for this purpose. Thus, in the example above, the duty of confidentiality is likely to be an essential condition for the seller’s delivery of the machinery and if there are grounds to expect that this condition will not be met, it is only natural for the seller to suspend its obligation to deliver the goods. 30 At the same time, instances do arise where a party suspends its ‘ancillary’ duties to induce the other party to perform its primary duties. For example, the seller may have to suspend its duty to repair the goods to induce the buyer to perform its obligation to pay.116 It is also relevant to note that the right to suspend performance will not be effective in the context of some modern payment instruments. Thus, if the buyer has opened an irrevocable letter of credit, the right to suspend payment becomes impossible. The suspension of payment is only possible where the letter of credit is revocable or where the letter of credit has not yet been opened and the buyer refrains from taking the necessary steps to open it. Therefore, so far as the remedy of suspension is concerned, the buyer who has opened an irrevocable letter of credit is left with the option of suspending either its main obligation to take delivery or some other obligations which are not treated by the Convention as the buyer’s primary duties. Such obligations can include, for example, the buyer’s duty to provide information to the seller enabling the latter to produce the goods117 or, in an FOB contract, to enter into the contract of carriage and to give the seller notice of the vessel name, port of loading and time of delivery.118 31 Secondly, do the suspended obligations have to correspond in extent to that of the obligations a non-performance of which is expected? For instance, if, after the buyer has made an advance payment of thirty percent of the contract price, it is apparent that the buyer will not be able to pay the remaining contract price at the due date, can the seller suspend the delivery of all the goods or can the seller suspend the delivery of not more than seventy percent of the goods? Although the Convention’s silence regarding this question is sometimes taken as an indication of the absence of any requirement of ‘proportionality’,119 the position in some cases is that the extent of the suspended obligations must correspond to that of those obligations which are anticipated not to be performed. Thus, where the buyer anticipated that the seller, who had already delivered part of the goods, would not be able to deliver the remaining goods, it was held that the buyer could not suspend the price for the delivered goods and only the performance which was ‘mutual’ with, or corresponded to, the performance an anticipatory nonperformance of which was expected could be suspended.120 32 Such an approach in this type of cases seems, in general, correct121 since here, the seller can be said to have ‘earned’ the payment by the buyer of that part of the price 116 Arbitration Court of the Chamber of Commerce and Industry of Budapest (Hungary) 5 December 1995, Vb 94 131 (Pace). 117 See, e. g., Art. 65. 118 See, e. g., Ramberg, ICC Guide to Incoterms 2000: Understanding and Practical Use (2000) pp. 102 seq. 119 See Carter, Suspending Contract Performance for Breach, in: Beatson/Friedman (eds), Good Faith and Fault in Contract Law (1995), pp. 511 seq. 120 See Oberlandesgericht Du ¨ sseldorf (Germany) 24 April 1997, CISG-Online 385 (Pace); Arbitral Award, ICC 9448 of July 1999, CISG-Online 707 (Pace). See also Oberlandesgericht Karlsruhe (Germany) 20 July 2004, CISG-Online 858 (Pace) (where it is not entirely clear whether a reference to ‘a relationship of mutuality in terms of [Article] 71(1) CISG’ is intended to indicate proportionality between the suspended obligations and the obligation which is expected not to be performed); Chamber of National and International Arbitration of Milan (Italy) 28 September 2001, CISG-Online 1582 (Pace) (in the context of an instalment contract). 121 See Saidov, Anticipatory Non-Performance and Underlying Values of the UNIDROIT Principles, Uniform Law Review (2006) 795 (818 seq).

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which corresponds to the value of the delivered goods.122 However, most cases would present much greater challenges for the advocates of the ‘proportionality’ or ‘mutuality’ requirement.123 For example, because the seller’s delivery is to be made in the future, the buyer may not be in the position to determine precisely the extent of the expected nonconformity in the goods and to ascertain that part of its own performance which can be correspondingly suspended. Imposing the requirement of proportionality in such cases would hardly make it possible for suspension to be exercised, thus depriving this remedy of much of its use and value. At the same time, there is something to be said in favour of requiring proportionality where reasonably possible: not only will it introduce symmetry but it can also be said to be fair to link the suspended obligations with those which are expected not to be performed.124 In addition, if proportionality is regarded as a Convention’s general principle,125 then the said linkage can be said to necessarily follow from such a general principle. In light of these conflicting considerations, it is suggested that one solution is to 33 require that suspension be proportionate only where it is reasonable for the suspending party to do so. One instance where it is clearly unreasonable to impose this requirement is where the suspending party is simply not in a position to determine the degree of the expected non-performance.126 Another instance could be where the suspending party expects that a fundamental breach127 will occur which will entitle it to avoid the contract 122 See, however, Nyer, Withholding Performance for Breach in International Transactions: an Exercise in Equations, Proportions or Coercion?, 18 Pace International Law Review (2006) 29 (40) arguing, in the context of a general right to withhold performance that, in general, whether or not a partial performance has been rendered should be irrelevant since the suspension of the performance of the whole obligation will promote the coercive and ‘self-help’ nature of the remedy: ‘It is only where A‘s retaining his performance puts B at risk of forfeiting the full value tied up in his partial performance that an incentive to cure is created…When suspension is conceived as a coercive measure, A‘s disproportionate reaction is reasonable and, indeed, necessary’. The author, however, takes the view that this reasoning is not relevant in anticipatory breach context on the ground that then the party suspected of an anticipatory breach has not yet performed and therefore ‘does not run the risk of forfeiting the value tied up in his performance’ (ibid. note 41). However, as the cases referred to above demonstrate, the party under suspicion may already have rendered a partial performance and, relying on the author’s reasoning and view of the coercive nature of suspension, it can be argued that, similar to what has been said in relation to a general right to withhold performance, allowing the party to suspend the performance of obligations corresponding not only to the obligations due in the future but also to those already performed would promote the remedy’s coercive nature. If this is correct, an argument that a ‘disproportionate’ suspension is more appropriate can, in principle, be made. Cf. Carter, Suspending Contract Performance for Breach, in: Beatson/Friedman (eds), Good Faith and Fault in Contract Law (1995), p. 512 for the view that it is ‘proportionate suspension’ which ‘would give effect to the enforcement function of suspension’. 123 Carter, Suspending Contract Performance for Breach, in: Beatson/Friedman (eds), Good Faith and Fault in Contract Law (1995), pp. 511 seq.; Carter, Adequate Assurance of Due Performance, 10 Journal of Contract Law (1996) 7. 124 See also Carter, Suspending Contract Performance for Breach, in: Beatson/Friedman (eds), Good Faith and Fault in Contract Law (1995), pp. 511 seq.; Carter, Adequate Assurance of Due Performance, 10 Journal of Contract Law (1996) 7. For other factors which, albeit mentioned in the context of a general right to withhold, may prove relevant and point in favour of a proportionate suspension in the context of Art. 71, see Nyer, Withholding Performance for Breach in International Transactions: an Exercise in Equations, Proportions or Coercion?, 18 Pace International Law Review (2006) 29 (42 seq.). 125 On the principle of proportionality, see, e. g., Lando, CISG and Its Followers: A Proposal to Adopt Some International Principles of Contract Law, 53 American Journal of Comparative Law (2005) 379 (397 seq.); Lando, Salient Features of the Principles of European Contract Law: A Comparison with the UCC, 13 Pace International Law Review (2001) 339 (360 seq.); Hornung, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 73 para. 3. 126 See Saidov, Anticipatory Non-Performance and Underlying Values of the UNIDROIT Principles, Uniform Law Review (2006) 795 (820). 127 See Art. 25.

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and it may be wasteful and burdensome to require this party to perform one part of its obligations while suspending the remaining part where it is highly likely that it may shortly afterwards be able to avoid128 the contract altogether.129 34 A situation where only proportionate suspension may be appropriate could be where the anticipated non-performance is not of fundamental nature and suspending all of the obligations by a party is likely to damage the other party’s interests significantly: the seller’s business may depend on the buyer paying the price in advance, thereby enabling the seller to run the manufacture or to purchase the goods from its suppliers, or the buyer’s economic survival may be fully dependent on the seller’s continuous performance.130 Thus, it would seem that while the approach suggested here will introduce a degree of complexity and uncertainty into the remedy of suspension, it will enable judges and arbitrators, in the spirit of the Convention’s idea and general principle of reasonableness, to balance the conflicting considerations, set out above, and the interests of both parties against the circumstances of a particular case. d) Parties’ derogation from the right to suspend. The parties can exclude or derogate from the right to suspend in Art. 71131 as the contract can contain an express term to this effect. In one case,132 the contract expressly provided that the buyer’s delay in providing a bank guarantee would give the seller the right to suspend delivery and there is little doubt that such a clause is a clear indication of the parties’ intention to derogate from the right of suspension in Art. 71. The question can arise as to whether such a clause can be regarded as an intention to exclude the remedy in Art. 71 in all cases (i. e., including those not involving delay in providing a bank guarantee) or whether the parties intended to exclude Art. 71 only in cases relating to a bank guarantee. The answer to this question will depend on the interpretation of the intentions of the parties in accordance with the requirements of Arts 8 and 9. 36 In some cases, the contract will not contain an express clause and their intention to derogate can be inferred from the parties’ conduct, statements and other relevant circumstances. For example, the seller (who expects a failure to pay because of the buyer’s failure to pay for previous deliveries) may wish to suspend the performance of 35

128

See Art. 72. Suppose that on 3 February the buyer becomes aware of the circumstances giving rise to serious suspicions that the seller will only be able to deliver forty percent of the contract quantity which would be a fundamental breach of the contract. The buyer may be required to pay the entire contract price in advance on 4 February or to open a letter of credit by that date. It would seem that that the buyer should be allowed to suspend the payment in full or not open a letter of credit. Making the buyer pay forty percent of the price, whilst there is a possibility that the buyer may soon be able to avoid the contract, may create unnecessary practical inconvenience and expense. If the buyer is only allowed to exercise proportionate suspension but then justifiably avoids the contract, it may be deprived of some of its money for the period until the seller returns it and, even worse, in case the seller refuses to do so (e. g., if the seller disputes the buyer’s actions), the buyer may have to incur additional legal and other costs to be able to recover that money. Conversely, if the buyer is allowed to withhold the entire contract price, such inconvenience and expense will be avoided. 130 See, e. g., Nyer, Withholding Performance for Breach in International Transactions: an Exercise in Equations, Proportions or Coercion?, 18 Pace International Law Review (2006) 29 (note 34), referring to a case decided in France where the buyer’s business depended on the seller’s continuous maintenance of its IT system and the suspension of those obligations would have put the buyer’s enterprise at risk. 131 See Art. 6. In some cases, the contract may entitle a party to suspend its performance, but the grounds and preconditions for suspension may be more limited than those in the Convention. In one such case, initially the tribunal rightly held that it was the contract, not the Convention, that governed the grounds and preconditions for the exercise of the right to suspend performance (see Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce, 12 November 2004, CISG-Online 2406 (Pace)). See notes 153 and 154 for a further discussion of this case. 132 See Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce, 25 May 1998 (Pace). 129

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its obligations by means of not returning the goods to the buyer after taking them back from the buyer in order to make the necessary adjustments. In a case based on similar facts,133 the court held that because the seller had assured the buyer that it would return the goods, the parties could be said to have implicitly agreed to derogate from the right of suspension under Art. 71, noting, with reference to the consideration of good faith, that the buyer ‘was entitled…to trust’ that the seller would return the goods. e) Relationship between Arts 71 and 80. There is a close connection between the right 37 to suspend under Art. 71 and the logic underlying Art. 80.134 It is often the case that judges and arbitrators rationalise cases from the standpoint of Art. 80, where Art. 71 is applicable. For example, it has been said that where the buyer fails to pay for previous deliveries, it is that failure which causes the seller not to deliver the goods,135 or where the seller refuses to clarify its position regarding the performance of the contract, it is the seller’s behaviour which makes the buyer withhold the payment.136 In short, the suspension of performance can, in principle, be rationalised by reference to ‘causation’ considerations. It is suggested, however, that where Art. 71 is applicable there is no need for courts and tribunals to do so. It is surely easier, and at the same time more convincing, to analyse a party’s legal position by reference to a remedy available in the specified situation (such as that stipulated in Art. 71) than to rely on a potentially complex and shaky ‘causation’ analysis. For example, where the seller fails to nominate the port of loading, there is no need to rely, as has been done in one case,137 on Art. 80, thereby stretching the notion of causation, to justify the buyer’s non-opening of a letter of credit where a letter of credit can, in principle, be opened without the seller’s nomination of the port.138 So long as the seller’s failure to nominate the port of loading is sufficient to meet the requirements of Art. 71, the latter constitutes a more solid legal basis.139 f) Notice of suspension. A party suspending performance must immediately give a 38 notice of suspension to the other party to enable the latter to provide adequate assurance of its performance.140 A controversial issue, arising from this provision, 133 Oberlandesgericht Ko ¨ ln (Germany) 8 January 1997, CISG-Online 217 (Pace). Although the court treated the seller’s attempt to suspend from the standpoint of Art. 71, it is not entirely clear whether the seller was attempting to induce the buyer to perform its future obligations (in which case Art. 71 would be applicable) or whether it was attempting to make the buyer to perform its obligations the due date for which had already passed (in which case Art. 71 would not be applicable). 134 ‘A party may not rely on a failure of the other party to perform, to the extent that such failure was caused by the first party’s act or omission’ (Art. 80). See Belarusian Chamber of Commerce and Industry International Court of Arbitration (Belarus) 5 October 1995, ATT v Armco, CISG-Online 861 (Pace) (‘Article 80 of the CISG closely interconnects with Article 71’). 135 Belarusian Chamber of Commerce and Industry International Court of Arbitration (Belarus) 5 October 1995, ATT v Armco, CISG-Online 861 (Pace). 136 See Zu ¨ rich Chamber of Commerce (Switzerland) 31 May 1996, Soinco v NKAP (Pace). 137 See, e. g., Oberster Gerichtshof (Austria) 6 February 1996, CISG-Online 224 (Pace). 138 Although the court treated the nomination as a precondition for the opening of a letter of credit, it is not apparent from the facts of the case whether there was clear and strong evidence of the parties’ intention to this effect. For a more detailed discussion of this case, see Saidov, The Law of Damages in International Sales – The CISG and other International Instruments (2008), pp. 97 seq. 139 The court of lower instance did in fact rely on Art. 71 to justify the buyer’s non-opening of the letter of credit on the basis that the seller failed, in breach of contract, to get approval from its supplier to export the goods to Benelux countries (i. e., where the buyer intended to resell the goods). See also Arbitral Award, CIETAC CISG/1989/02, CISG-Online 1230 (Pace) where the tribunal held that because the buyer had failed to make a down payment, the seller was exempt from its obligation to deliver the goods by the due date. It is not entirely clear whether it is Art. 71 or Art. 80 that was the basis for the decision. If it were the latter, then it seems evident that a more extensive analysis would be called for. 140 See Art. 71(3). See also Arbitral Award, ICC 8574 of September 1996, CISG-Online 1293 (Pace) (stating that Art. 71(3) is based on the “concern that the other Party is made clear of the position of its

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relates to the consequences of a suspending party’s failure to give this notice. According to a majority of the reported decisions, giving this notice is a necessary precondition for the exercise of the right of suspension and, therefore, a failure to inform of suspension prevents a legally justifiable exercise of this right.141 However, there is also some support for the view that the notice under Art. 71(3) is not necessary for the exercise of the remedy of suspension and a party’s failure to give it will only provide the basis for a possible claim for damages by the other party.142 39 On balance, a better approach seems to be to regard the notification of suspension as a necessary precondition for the right of suspension. Such a position would be more in line with the purpose of the remedy of suspension of establishing a dialogue and cooperation between the parties and its function of inducing the party under suspicion to restate its commitment to the contract. More specifically, the operation of the right to suspend is inextricably linked with the demand for adequate assurance and a party under suspicion is more likely to be induced to explain and provide assurances regarding its position in response to a notice of suspension than in the absence of such a notice.143 While there is some force in the criticism of linking the consequences of an anticipated non-performance with the provision of notice, the Convention already employs a similar structure in relation to the buyer’s ability to rely on a lack of conformity.144 In any event, in light of the existing controversy, the parties wishing to invoke their rights under Art. 71 are well advised to provide the notice of suspension to eliminate the risk of being found not to have met the condition for the exercise of this remedy, particularly considering that doing so is in their own interests. 40 Like any other notice, a notice of suspension is subject to Art. 27145 and this means that a notice becomes effective from the moment of its dispatch. It is worth emphasising the importance of a suspending party actually sending a notice since proof that a notice has merely been written will not be sufficient to transfer the risk of non-receipt by the counter party, placing him in a position to provide assurance that he will in fact perform and thereby defeating the assumption of anticipatory breach and the concomitant threat to the orderly fulfilment of the contract”). 141 See Oberlandesgericht Karlsruhe (Germany) 20 July 2004, CISG-Online 858 (Pace); Amtsgericht Frankfurt (Germany) 31 January 1991, CISG-Online 34 (Pace) (in relation to the stoppage in transit); Landgericht Darmstadt (Germany) 29 May 2001, CISG-Online 686 (Pace); Arbitral Award, ICC 11 849/ 2003, CISG-Online 1421 (Pace); Tribunal of International Commercial Arbitration at the Ukraine Chamber of Commerce and Trade (Ukraine) 48/2005, CISG-Online 1372 (Pace); Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 27 July 1999 (Pace); possibly, Rechtbank Utrecht (Netherlands) 18 July 2007, CISG-Online 1551 (Pace). 142 Hornung, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 71 para. 21 stating “It would not be understandable to link the habitual consequences of an ordinary breach of contract to a failed or even merely belated notice of suspension under Article 71(3) by an otherwise innocent party. The relatively narrow scope of the right to suspend performance in Article 71(1) is in itself an operational corrective for its misuse, and thus, posing the notice foreseen by Article 71(3) as an additional precondition for the remedy would amount to breaking a butterfly on a wheel”. For a similar position, see Huber/Mullis, The CISG (2007), p. 343; Enderlein/Maskow, International Sales Law (1992), p. 288 (with further reference). This view has also been supported by the fact that the notice is not required to be given prior to suspension; see Vanwijck-Alexandre, Anticipatory Breach and Instalment Contracts in the CISG, 3–4 International Business Law Journal (2001) 360 (364). 143 For similar views, see Leser, in: Schlechtriem (ed.), Commentary on the UN Convention on the International Sale of Goods (CISG) (1998), Art. 71 para. 21 stating “Breach of a duty to give notice cannot sensibly be separated from the remedy of suspension itself and compensated for with a separate award of damages. The duty to give notice is an integral part of the way in which the right is constructed”; Liu, Suspension or Avoidance Due to Anticipatory Breach: Perspectives from Arts. 71/72 CISG, the UNIDROIT Principles, PECL and Case Law (Pace). 144 See Art. 39. 145 See Landgericht Stendal (Germany) 12 October 2000, CISG-Online 592 (Pace).

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other party.146 It can also be safely stated that no particular form is required by the Convention. As long as the notice is appropriate in the circumstances, it is irrelevant whether it has been given orally or in writing, unless the parties have agreed otherwise.147 It follows that any means of communication, provided that it is appropriate and adequate in the circumstances, will suffice.148 Art. 71 is silent on the issue of content of the notice of suspension. Since the purpose 41 of this notice is to enable the party under suspicion to provide adequate assurance, it is most desirable that a suspending party indicate the grounds for suspension.149 In fact, one decision formulated the position in stricter terms by stating that ‘[i]f the seller wanted to exercise his right of suspension, the seller was obligated to inform the buyer about any existing or arisen doubts with regards to her creditworthiness or ability to perform…’.150 In some cases, however, the parties’ conduct and statements will not be clear-cut and the possibility of an implied notice should be recognised.151 In one case,152 the seller’s request for a copy of bank documentation coupled with the statement that such documentation would enable it to confirm the shipping arrangements and the timely shipment of the goods, was regarded as a sufficient notice of suspension. In another case,153 the seller’s rejecting the supply orders by the buyer, who had delayed making payments, and instead offering the supply of the goods subject to the buyer’s prepayment or provision of a bank guarantee were deemed to constitute a notice under Art. 71(3), containing a request for adequate assurance.154 In another 146 See, e. g., Tribunal of International Commercial Arbitration at the Ukraine Chamber of Commerce and Trade (Ukraine) 48/2005, CISG-Online 1372 (Pace) stating that “the Seller has not proved that the messages in fact were sent to the Buyer even though they were indeed written by the Seller”; see von Ziegler, The Right of Suspension and Stoppage in Transit (and Notification thereof), 25 Journal of Law and Commerce (2005–2006) 353 (372) (Pace) for a more extensive discussion and further references. 147 See Art. 6. 148 For specific examples of what may or may not be adequate, see von Ziegler, The Right of Suspension and Stoppage in Transit (and Notification thereof), 25 Journal of Law and Commerce (2005–2006) 353 (371 seq.) (Pace). For the case, where the seller’s notice of suspension was given in a ‘pre-arbitration warning’, see Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 29 February 2000, in; Rozenberg (ed.), Praktika Mezhdunarodnogo Kommercheskogo Arbitrazhnogo Suda pri TPP RF za 1999–2000gg. (2002), pp. 233 seq. See also CISG-AC Opinion no 1, para. 71. (a notice of suspension “includes electronic communications, provided that the addressee expressly or impliedly has consented to receiving electronic communications of that type, in that format, and to that address”). 149 In fact, this is what the parties sometimes do. See Oberlandesgericht Hamm (Germany) 23 June 1998, CISG-Online 434 (Pace), and Belarusian Chamber of Commerce and Industry International Court of Arbitration (Belarus) 5 October 1995, ATT v Armco, CISG-Online 861 (Pace). See also Bennett, in: Bianca/Bonell, Commentary (1987), Art. 71 para. 2.10 and Enderlein/Maskow, International Sales Law (1992), p. 288 (also emphasising the consideration of good faith). 150 Amtsgericht Frankfurt (Germany) 31 January 1991, CISG-Online 34 (Pace). 151 See Arts 8 and 9. 152 Supreme Court of British Columbia (Canada) 21 August 2003, Mansonville v Kurtz, CISG-Online 1017, paras 31 and 78 (Pace). 153 Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce, 12 November 2004, CISG-Online 2406 (Pace). 154 The applicability of Art. 71(3) in this case is questionable given that the contract contained a special regime for the right to suspend. This contractual regime provided for more limited grounds and preconditions for the right to suspend and, initially, the tribunal rightly held that the preconditions for the right to suspend under Art. 71 were not applicable (see also n 131 above). However, the tribunal went on to apply Art. 71(3) seemingly on the basis that the contract did not provide for the consequences of the seller’s exercise of its right to suspend. This proposition seems at odds with the earlier finding that the contract expressly stated that the delay in payment did not ‘require immediate notification’ and that the seller’s refusal to perform did not require any notification. Even in the absence of such provisions, the applicability of Art. 71(3) would, on balance, be questionable in the face of the parties’ intention to create their own suspension regime that was different from that in the CISG: arguably, had the parties wanted

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case,155 the buyer’s letter in which it refused to accept defective goods (which, presumably, were indicative of the seller’s inability to perform in the future) and offered their return was also viewed as a notice of suspension.156 However, a simple failure to perform cannot in itself be regarded as a notice of suspension,157 unless there are some additional circumstances (such as previous talks between the parties in which the innocent party has expressed its concerns or referred to the possibility of suspension)158 in combination with which a failure to perform sufficiently communicates the party’s suspension and reasons for it. At the same time, the suspending party cannot be expected to be too strenuous in its efforts to inform the other party. If the suspending party has given, albeit once, a clear notice containing a demand for assurance, it cannot, contrary to what has been held in one case,159 be required to continue to urge the other party to respond to its notice and to make attempts to negotiate. 42 The question of whether a suspending party can be regarded as having given a valid notice can give rise to additional difficulties where the suspending party communicates its intentions not to the other party itself but to some other person who is in some ways associated with it. In such cases, whether that other person is an agent of the party under suspicion has been said to be relevant160 and, if this is correct, recourse may have to be had to the rules of domestic law to determine whether there is an agency relationship. In one case,161 involving twelve sales contracts with thirteen sellers, all engaged in oil upstream activities under joint operating agreements (JOAs), the problem of the buyer’s communication to a third party arose in an acute form. The buyer gave notice to a party who acted as the operator under the said JOAs and the decisive question was whether that notice could be regarded as a notice to all other sellers.162 Having found that the JOAs were concerned with upstream activities (i. e. exploration for, development and production of oil) and not sales contracts, and that it was the latter that governed the relationship between the sellers and the buyer, the tribunal held the Art. 71(3) notice requirement to apply, they would have expressly provided for its equivalent or for the applicability of Art. 71(3) in their contract. 155 Landgericht Berlin (Germany) 15 September 1994, CISG-Online 399 (Pace). 156 Relying solely on the decision, this notice may be more reminiscent of a notice of avoidance rather than suspension. However, in the absence of a clear intention to avoid such a statement by the buyer can, in principle, be interpreted as a sufficient notice of suspension. In addition, the text of the buyer’s letter which is not reproduced in the decision may have contained some other indications of the buyer’s intention to suspend. See also Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 29 February 2000, in: Rozenberg (ed.), Praktika Mezhdunarodnogo Kommercheskogo Arbitrazhnogo Suda pri TPP RF za 1999–2000gg. (2002), p. 233. 157 See Landgericht Stendal (Germany) 12 October 2000, CISG-Online 592 (Pace) (‘[s]imply failing to pay the purchase price does not replace the notification that payment of the purchase price is being suspended’). 158 Arbitral Award, ICC 8611/HV/JK, 23 January 1997, CISG-Online 236 (Pace) may be relevant in this regard. 159 Arbitral Award, CIETAC CISG/1996/16 (Pace). 160 “the question arises whether the notification to K. … BV and the subsequent discussions and negotiations with K. … BV amounted to a notification to [the sellers]. This may be so under any agency theory if it were established that K. … BV acted in a capacity of express, implied or apparent agent of [the sellers] regarding the increased mercury level problem and its possible solutions” (Netherlands Arbitration Institute (Netherlands) 15 October 2002, CISG-Online 740 and 780 (Case 2319) (Pace)). 161 Ibid. 162 “The question of K. … BV’s capacity, thus, boils down to the question whether [the buyer] could rely upon the fact that when the operational problems regarding the increased levels of mercury could not be solved when the source of these levels became known, it was up to K. … as the operator under the Terminalling, Off take and two of the three exploration Joint Operating Agreements to inform [the sellers] at some point in time about the problems. If so, [the sellers] would have reasonably led [the buyer] to believe that they had been so informed and [the buyer] could have relied on that” (ibid).

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that the sellers did not receive the notification.163 Therefore, it is advisable that in this type of case, suspending parties give notice, where possible, directly to the party(ies) under suspicion in order to ensure that the requirement of Art. 71(3) are met.164 The notice must be given ‘immediately’ after suspension. This requirement seems to 43 be driven by the concern that due to the need for a prompt action a suspending party may not have time to give a prior notice.165 It would follow from this rationale that a party is allowed to give a notice prior to suspension.166 The ‘immediacy’ requirement means that a notice needs to be given without any avoidable delay:167 giving a notice thirteen days,168 several months,169 or three years170 after suspension would not meet this requirement.

2. Stoppage in transit a) General. If the seller had dispatched the goods before the grounds in Art. 71(1) 44 became evident, it may, under Art. 71(2), prevent the handing over of the goods to the buyer. This right, commonly known as ‘stoppage in transit’, is a manifestation of the seller’s right of suspension in a specific set of circumstances. A corresponding right of the buyer was not introduced into the Convention as it was feared that it would disrupt international payment transactions and because in some countries the non-payment of a cheque constitutes a criminal offence.171 In those legal systems in which a similar remedy is available,172 it has been primarily justified from the standpoint of commercial morality173 and justice:174 the seller cannot be expected to deliver the goods where the buyer is in a financial difficulty and is entitled to treat its goods as security for payment.175 It is now widely recognised, however, that the practical significance of this remedy has 163 “On the basis of the sales contracts, no operator alone could bind any seller and both operational and commercial issues regarding the Rijn Blend contracts were to be handled respectively also by the seller or only by the seller involved” (Ibid.). 164 See also Oberlandesgericht Karlsruhe (Germany) 20 July 2004, CISG-Online 858 (Pace) where the buyer gave a notice to a fashion agency but where the relationship between the agency and the seller was not clearly explained. 165 See Bennett, in: Bianca/Bonell, Commentary (1987), Art. 71 para. 2.5; see also Vanwijck-Alexandre, Anticipatory Breach and Instalment Contracts in the CISG, 3–4 International Business Law Journal (2001) 360 (362) referring to the argument that prior notice is not justified because of the temporary nature of suspension. 166 For a similar view, see Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 71 para. 34. 167 See ibid. 168 Landgericht Darmstadt (Germany) 29 May 2001, CISG-Online 686 (Pace). 169 Hof van Beroep Gent (Belgium) 26 April 2000, BV BA JP v S Ltd, CISG-Online 1316 (Pace). 170 Landgericht Stendal (Germany) 12 October 2000, CISG-Online 592 (Pace). 171 See Bennett, in: Bianca/Bonell, Commentary (1987), Art. 71, para. 1.12; Enderlein/Maskow, International Sales Law (1992), p. 286. For the discussion of other possible reasons in the context of the ULIS, see Cohn, The Defence of Uncertainty: A Study in the Interpretation of the Uniform Law on International Sales Act 1967, 23 International Comparative Law Quarterly (1974) 520 (533). For the view that the equality between the buyer and the seller is thereby abandoned, see ibid. 172 The origin of this remedy can be traced back to mercantile customs in the 17th century. See, e. g., Booth Steamship Co Ltd v Cargo Fleet Iron Co Ltd [1916] 2 KB 570 at 589, 597; Bridge, The Sale of Goods (2009) p. 689. For a comparative work covering nineteen jurisdictions, see von Ziegler/Ronoe/Debattista/ Plegat-Kerrault, Transfer of Ownership in International Trade (1999). The remedy was also provided for in Art. 73 ULIS. 173 See Atiyah/Adams/MacQueen, The Sale of Goods (2010), p. 457. 174 See, e. g., In re The National Sugar Refining Company v C Czarnikow, 27 B. R. 565 at 568 stating that the right of stoppage in para. 2–705 UCC “is premised on the inequity of permitting the buyer to obtain possession of goods when there has been a prospective failure of the buyer’s performance”. 175 For more extensive discussions and criticisms of various justifications put forward in the common law, see Bridge (ed.), Benjamin’s Sale of Goods (2014) p. 940; Bridge, The Sale of Goods (2014) pp. 594 seq.

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considerably diminished mainly due to the development of other means of providing security to the seller, such as the payment against documents (most commonly, letter of credit) and retention of title clauses,176 and, to some extent perhaps, to the rapidity of transit in modern times which decreases the time available for its exercise.177 The remedy can nevertheless still be invoked where goods are sold on credit.178 45 The right of stoppage is available regardless of whether the property or risk has passed to the buyer179 or whether the buyer holds the documents entitling him to require the delivery of the goods.180 The notice requirement in Art. 71(3) is similarly applicable to the exercise of this right.181 b) The exercise of the right of stoppage. The remedy of stoppage in transit ‘relates only to the rights in the goods as between the buyer and the seller’182 and this provision brings about the situation where the actual exercise of this remedy and the question of when the goods can be said to be in transit will often depend on the laws outside the Convention. This is so because the exercise of stoppage in transit impacts on and collides with the rights and interests of third parties (e. g., carriers, buyer’s creditors, sub-buyers, state authorities) thereby having to intersect with other legal regimes (e. g., those relating to transportation, insolvency, property).183 The likely dependence of the seller’s ability to exercise a remedy, provided for by the CISG, on other legal regimes potentially gives rise to much uncertainty in this area, arguably diminishing the effectiveness of this remedy,184 and no doubt undermines the Convention’s aspiration to uniformity.185 47 The right of stoppage, if successfully exercised, will enable the seller to gain access to the goods in transit.186 The remedy is available where the seller has dispatched the goods 46

176 See, e. g., see Bridge (ed.) Benjamin’s Sale of Goods (2014), pp. 940 seq.; Bridge, The Sale of Goods (2014) pp. 594 seq.; Atiyah/Adams/MacQueen, The Sale of Goods (2010), pp. 457 seq.; Debattista, England, in: von Ziegler/Ronoe/Debattista/Plegat-Kerrault, Transfer of Ownership in International Trade (1999), p. 147 referring to this remedy as “somewhat archaic”. 177 See Bridge, The Sale of Goods (2010) pp. 689 seq. 178 See Atiyah/Adams/MacQueen, The Sale of Goods (2010), pp. 457 seq. 179 See Honnold/Flechtner, Uniform Law (2009), Art. 71 para. 390; Schlechtriem, Uniform Sales Law: The UN-Convention on Contracts for the International Sale of Goods (1986), p. 93; Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 71 para. 42. 180 See Art. 71(2). 181 See Amtsgericht Frankfurt (Germany) 31 January 1991, CISG-Online 34 (Pace). For the discussion of whether the notice of suspension is a necessary precondition for the exercise of the right of suspension, see above. 182 See Art. 71(2). See, generally, Pejovic, Stoppage in Transit and Right of Control: “Conflict of Rules”? 20 Pace International Law Review (2008) 129. 183 The issue of the passage of property is outside the Convention’s scope (see Art. 4). See von Ziegler, The Right of Suspension and Stoppage in Transit (and Notification thereof), 25 Journal of Law and Commerce (2005–2006) 353 (366) (Pace). 184 See Bennett, in: Bianca/Bonell, Commentary (1987), Art. 71 para. 2.8; Flechtner, Remedies under the New International Sales Convention: The Perspective from Article 2 of the U. C. C., 8 Journal of Law and Commerce (1988) 53 (n 203) (Pace). 185 See Albors, Spain, in: von Ziegler/Ronoe/Debattista/Plegat-Kerrault, Transfer of Ownership in International Trade (1999), p. 352; Berman, The Uniform Law on International Sale of Goods: A Constructive Critique, 30 Law and Contemporary Problems (1965) 354 (358) stating, in the context of the ULIS, that ‘it is surely unsound when the rights of seller and buyer vis-a`-vis each other depend entirely on their rights vis-a`-vis third parties – as in the case of stoppages in transit…’. 186 See Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 71 para. 42. There are only several cases under the CISG in which the right of stoppage was referred to: see Amtsgericht Frankfurt (Germany) 31 January 1991, CISG-Online 34 (Pace) where the notice under Art. 71(3) was regarded as a precondition for the right of stoppage; Bundesgericht (Switzerland) 17 July 2007, CISG-Online 1515 (Pace) where it was held that there were no grounds for the seller to exercise the right of stoppage; Arbitral Award, CIETAC CISG/1996/11, CISG-Online 1033 (Pace) where the right of stoppage appears to have been exercised.

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while the buyer has not yet acquired the possession of them. Numerous situations, which make it difficult to answer the question of whether the seller will be able to exercise the right of stoppage, can arise. One type of case relates to the legal position and interests of a carrier. Because the carrier often has lien over the goods as security for the payment of freight as well as for costs arising from complying with the demand for stoppage, it may refuse to redeliver the goods to the seller unless the latter is prepared to pay the freight and other costs.187 How such cases are to be resolved and whether the carrier has to follow the seller’s instructions are matters for the carriage contract and its governing law.188 It has been suggested that where the carrier does follow the seller’s instructions and where the buyer holds a negotiable bill of lading (or another document controlling delivery), “the seller by an appropriate proceeding should require the buyer to deliver the document to the seller or to the carrier”.189 Where the goods have been handed over to a third party, such as a carrier or a warehouse person, the relevant question, for some legal systems, would be whether that third party can be regarded as an agent of the buyer.190 If so, the right of stoppage would end from the moment of such handing over.191 In cases where the documents transferring ownership have been passed to a party, to whom the buyer had resold the goods, such a transfer of documents would, in many legal systems, end the seller’s right of stoppage.192 Finally, in case of the buyer’s insolvency, a conflict may arise between the right of stoppage and the claims to the goods by the buyer’s creditors. Different insolvency laws may take different positions in relation to the seller’s right of stoppage and it may well be the case that such a right would not be recognised by particular domestic insolvency legislation, leaving the seller to merely assume its place in the queue of creditors.193

3. Suspension and burden of proof In case there is a dispute between the parties regarding the questions of whether the 48 innocent party was entitled to suspend performance or whether the other party provided adequate assurance,194 the issue of burden of proof is likely to be of considerable practical importance. Assuming that it is an issue governed by the 187 For examples in English law, see Booth Steamship Co Ltd v Cargo Fleet Iron Co Ltd [1916] 2 KB 570 at 599: “to get [the goods] from the carrier, [the seller] must discharge any lien the carrier has for particular charges or freight on the goods in question, but not any general lien by contract or usage for other sums due from the consignee but not due in respect of the particular goods”; United States Steel Products Co v Great Western Railway Co [1916] 1 A. C. 689. 188 See, e. g., Schlechtriem, Uniform Sales Law: The UN-Convention on Contracts for the International Sale of Goods (1986), p. 93. 189 Honnold/Flechtner, Uniform Law (2009), Art. 71 para. 390. 190 See, e. g., s. 45 of the Sale of Goods Act 1979; Cohn, The Defence of Uncertainty: A Study in the Interpretation of the Uniform Law on International Sales Act 1967, 23 International Comparative Law Quarterly (1974) 520. For examples in the U.S. case law, where this was not the case see In re Bearns 2 F. Cas. 1190; Maremont Corp. v Hoesch America, Inc. 663 F. Supp. 876. See also the U.S. case In re Talbot & Poggi 185 F. 986 involving two classes of goods in relation to one of which the right of stoppage could be exercised while in relation to the other it could not. 191 For examples in some domestic legal systems, see Johann Plischke & Sohne GMBH v Allison Brothers Ltd (1936) 55 Ll L Rep 262 in the context of English law; In Re Charles T Stork & Co 271 F. 279 in the context of the U.S. law. 192 See, e. g., s. 47(2) of the Sale of Goods Act 1979; Albors, Spain, in: von Ziegler/Ronoe/Debattista/ Plegat-Kerrault, Transfer of Ownership in International Trade (1999), pp. 353 seq.; Johnsson, Sweden, in: von Ziegler/Ronoe/Debattista/Plegat-Kerrault, Transfer of Ownership in International Trade (1999), p. 385. 193 See von Ziegler, The Right of Suspension and Stoppage in Transit (and Notification thereof), 25 Journal of Law and Commerce (2005–2006) 353 (366 seq.) (Pace); Hornung, in: Schlechtriem/Schwenzer, Commentary (2005), Art. 71 para. 32. 194 On the issue of burden of proof in connection with the provision of adequate assurance, see para. 56 below.

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Convention, it is suggested that it is up to the party relying on Art. 71 to prove the preconditions for the exercise of the right of suspension. More specifically, this party must prove the existence of the grounds specified in Art. 71(1) and the required level of prognosis. 49 In case the question of what obligations could be suspended arises, it is not entirely clear who is to bear the burden of proof. It is suggested that because the Convention does not expressly impose the requirement relating to the connection between the suspended obligations and those which are expected not to be performed and because it is in the interests of the party under suspicion to raise this issue, the burden of proving that there was no such connection should initially lie with the latter.

4. Adequate assurance a) General. A suspending party must continue with performing the contract if the other party provides adequate assurance of its performance.195 The much praised196 mechanism of adequate assurance implements, to a significant extent, the policies and purposes underlying the anticipatory breach doctrine.197 First, it is widely recognised that it contributes to promoting economic efficiency.198 It reduces the likelihood that inefficient allocation of resources will be taking place by providing a suspending party with relative guarantees that performance will be forthcoming. By receiving an adequate assurance the party regains a sense of security and continues to perform what, in many cases, will be a beneficial and efficient transaction. Further, because the reliance on remedies for an anticipated failure to perform involves a risk of error, a party, in the absence of the adequate assurance mechanism, would be less confident in invoking such remedies. The availability of this device contributes to a sense of security in commercial transactions and to the promotion of voluntary exchange which, in turn, is often thought to lead to an efficient allocation of resources.199 If no adequate assurance is provided, the party, by having suspended the contract, may well have avoided an unnecessary cost of performance (or further performance) and may be in the position to channel its resources in another direction. Secondly, it is through this mechanism that the purpose of promoting communication200 and cooperation201 between the parties is implemented.202 51 The provision of adequate assurance has been criticised on the ground that it extends the parties’ rights and obligations under the contract. While this criticism has not prevented the introduction of this mechanism, it is nevertheless important to bear it in 50

195

Art. 71(3). See, e. g., Robertson, The Right to Demand Adequate Assurance of Due Performance: Uniform Commercial Code Section 2–609 and Restatement (Second) of Contracts Section 251, 38 Drake Law Review (1988–1989) 353 (referring to this mechanism as “the most innovative and commercially sensible development in contract law in the [twentieth] century”). 197 See Saidov, Anticipatory Non-Performance and Underlying Values of the UNIDROIT Principles, Uniform Law Review (2006) 795 (813 seq.). 198 See, e. g., in the context of U.S. law, Crespi, The Adequate Assurance Doctrine after U. C. C. 2–609: A Test of the Efficiency of the Common Law, Villanova University Law Review (1993) 179 (183 seq.); Taylor, Self-Help in Contract Law: An Exploration and Proposal, 33 Wake Forest Law Review (1998) 883. 199 See, e. g., Kronman/Posner, The Economics of Contract Law (1979), pp. 1 seq. 200 For similar statements in the context of U.S. law, see Campbell, The Right to Assurance of Performance under UCC para. 2–609 and Restatement (Second) of Contracts para. 251: Toward a Uniform Rule of Contract Law, 50 Fordham Law Review (1982) 1292 (1308). 201 Cf. Garvin, Adequate Assurance of Performance: Of Risk, Duress and Cognition, 69 University Colorado Law Review (1998) 128 stating that an erroneous demand for assurance may taken badly by the promisor as it may suggest a lack of trust. 202 For the suggestion that the adequate assurance mechanism implements the ideas of good faith and fair dealing, see Crespi, The Adequate Assurance Doctrine after U. C. C. 2–609: A Test of the Efficiency of the Common Law, Villanova University Law Review (1993) 179 (184). Cf. Garvin, ibid., p. 123. 196

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mind in deciding what constitutes an adequate assurance; more specifically, it should serve as a reminder that excessive demands should not be imposed on the party providing assurances. b) Meaning of ‘adequate assurance’. Whether an assurance is adequate depends on 52 the circumstances. In dealing with this question, two conflicting considerations need to be taken into account. On the one hand, assurances must be able to alleviate considerably the suspending party’s doubts about the other party’s ability and willingness to perform. On the other hand, the demands for assurances cannot be excessive and unreasonable. It follows that assurances are to provide the suspending party with reasonable security regarding the other party’s future performance203 and this means that the latter will not necessarily be required to give assurances of perfect performance.204 If, therefore, assurances indicate that only an insubstantial part of obligations (e. g., a slight delay in performance) will not be performed, this will not prevent such assurances from being adequate.205 In assessing the adequacy of assurances regard should be had to a number of factors including the purpose of the contract, the reputation of a party giving assurances,206 the nature of the obligation which is expected not to be performed, the nature of grounds giving rise to suspicions,207 the contractual framework, a relevant trade usage and the history of dealings between the parties. Considering that the issue of adequacy is to be decided on a case-by-case basis, a 53 categorical suggestion that reassuring words can never constitute an adequate assurance is probably not entirely correct since there must be room for, admittedly, rare cases where mere words restating a party’s commitment to the contract will suffice.208 In general, however, the party’s assurances209 need to be based on evidence such as: the 203 See Strub, The Convention on the International Sale of Goods: Anticipatory Repudiation Provisions and Developing Countries, 38 International Comparative Law Quarterly (1989) 457 (495) (Pace). 204 See ibid., p. 496; Honnold/Flechtner, Uniform Law (2009), Art. 71 para. 391; Bennett, in: Bianca/ Bonell, Commentary (1987), Art. 71 para. 3.4. 205 See Strub, The Convention on the International Sale of Goods: Anticipatory Repudiation Provisions and Developing Countries, 38 International Comparative Law Quarterly (1989) 457 (495) (Pace); Honnold/Flechtner, Uniform Law (2009), Art. 71 para. 391; Bennett, in: Bianca/Bonell, Commentary (1987), Art. 71 para. 3.4. 206 See, e. g., a U.S. case By-Lo Oil Co Inc v Partech Inc 11 Fed.Appx. 538 where the promisor’s reputation was an important factor in holding that its assurance was adequate despite it being less than requested. See also Vanwijck-Alexandre, Anticipatory Breach and Instalment Contracts in the CISG, 3–4 International Business Law Journal (2001) 360 (363). 207 See Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 71 para. 52. 208 This may be the case where it follows, from a party’s reputation and previous dealings with the suspending party, that it had always kept its promises and acted in accordance with its statements. For a similar view, see Carter, Suspending Contract Performance for Breach, in: Beatson/Friedman (eds), Good Faith and Fault in Contract Law (1995), p. 515; comment D on Art. 8:105 PECL. 209 The cases under the CISG are yet to deal with the issue of ‘adequacy’ of assurances. See Landgericht Mu¨nchen (Germany) 6 April 2000, CISG-Online 665 (Pace), where, following the buyer’s suspension of its performance due to non-conforming delivery by the seller, the parties agreed to reduce the purchase price. The court stated that ‘as a result [of this agreement], [the] buyer proceeded to perform her duty to pay the purchase price pursuant to Art. 71(3) second clause’. The court appears to have treated the seller’s agreeing to reduce the purchase price as adequate assurance. If so, such an interpretation of Art. 71(3) is arguably incorrect. Although the parties’ agreement performed a function similar to that of the adequate assurance device (i. e., establishing communication and cooperation with a view to resolve a problem), adequate assurance relates to the performance, as it was originally agreed by the parties. What happened in this case was an agreement to modify the terms of the contract and the parties’ performance in accordance with such terms. For the discussion of the question whether an innocent party’s offer to settle is a demand for assurance in the US law see Robertson, The Right to Demand Adequate Assurance of Due Performance: Uniform Commercial Code Section 2–609 and Restatement (Second) of Contracts Section 251, 38 Drake Law Review (1988–1989) 337.

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insolvent buyer’s opening an irrevocable letter of credit;210 the proof of the existence of another source of supply by a seller who has been facing difficulties with its previous supplier; the proof that the goods have been or will be manufactured from ingredients or materials that enable the goods to comply with the contractual requirements, as opposed to those from which non-conforming goods in previous deliveries had been manufactured;211 the provision of a bank guarantee by a party under suspicion212 or of security that the losses flowing from the breach will be compensated.213 54 There may be a fine line between a genuine request for adequate assurance and an attempt to change the terms of and the balance created by the bargain.214 The interpretation of the parties’ intentions and particularly those of the suspending party, in light of the facts of the case is critical. Thus, the demand by a seller, who doubts the buyer’s ability to pay, that money be held in escrow and that the buyer’s management provide a personal guarantee of payment may be regarded as a seller’s attempt to rewrite the contract where during the contractual negotiations the parties specifically agreed not to include additional means of securing payments.215 The demands may also be found to be excessive where the circumstances indicate that the buyer by invoking the adequate assurance device is effectively trying to find a way to escape from the contract on a falling market.216 The conduct of the party under suspicion can also be relevant for dealing with the question of whether demands are excessive. If the seller’s conduct in the course of performing the contract showed signs of dishonesty and stalling, it may well be justifiable for the buyer to demand the extension of a contractual warranty and the opening of an irrevocable letter of credit for the price of the goods.217 55

c) Failure to provide adequate assurance. There is no agreement on what the suspending party’s legal position is if no adequate assurance is provided.218 In contrast with some other legal regimes,219 the Convention does not state that a failure to provide adequate assurance is in itself a ground for the avoidance of the contract. While it has been suggested that such a failure will make it clear that a fundamental breach will occur,220 it has also been argued that this will not necessarily be the case.221 It is 210 See Strub, The Convention on the International Sale of Goods: Anticipatory Repudiation Provisions and Developing Countries, 38 International Comparative Law Quarterly (1989) 457 (495 seq.) (Pace); Honnold/Flechtner, Uniform Law (2009), Art. 71 para. 391. 211 See Helsinki Court of Appeal (Finland) 30 June 1998, CISG-Online 1304 (Pace). 212 For some other examples, see Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 71 para. 51 and the discussion below. 213 For further examples, see Secretariat Commentary on 1978 Draft, Art. 62. 214 It is, of course, possible to argue that it is in the very nature of the adequate assurance device to make the parties go beyond the terms of the contract. See White/Summers, Uniform Commercial Code (2000), pp. 199 seq. 215 The example is based on a U.S. case Pittsburgh-Desmoines Steel Co v Brookhaven Manor Water Co. 532 F.2 d 572. 216 See, e. g., in the context of the U.S. law, United States v Great Plains Gasification 819 F.2 d 831, 834: ‘Natural’s demand for assurance was merely a subterfuge to escape its obligations under the Gas Purchase Agreement’. 217 This example is based on a U.S. case Creusot-Loire International Inc v Coppus Engineering Corporation 585 F. Supp. 45. 218 For cases where the buyer failed to provide adequate assurance, see Arbitral Award, Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 102/1997, 22 January 1998 (Pace); Belarusian Chamber of Commerce and Industry International Court of Arbitration (Belarus) 5 October 1995, ATT v Armco, CISG-Online 861 (Pace). 219 See § 2–609(4) UCC; Art. 7.3.4 second sentence PICC; Art. 8:105(2) PECL. 220 Honnold/Flechtner, Uniform Law (2009), Art. 71 para. 394. 221 Ziegel, The Remedial Provisions in the Vienna Sales Convention: Some Common Law Perspectives, in: Galston/Smit (eds), International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), pp. 9 seq.; Hornung, in: Schlechtriem/Schwenzer, Commentary

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submitted that the latter position is correct. The preconditions for the right to avoid the contract for anticipatory breach are set out in Art. 72 and the question of whether the suspending party has a right to avoid the contract is to be resolved solely by reference to those conditions. Where, however, a party suspects that a fundamental breach will occur, a failure to provide adequate assurance will often confirm the party’s suspicion, thereby justifying the avoidance of the contract under Art. 72.222 d) Burden of proof. The suspending party must prove that it gave the notice as 56 required by Art. 71(3). If there is a question of whether an adequate assurance has been given, burden of proof would, in principle, seem to depend on who relies on the provision in Art. 71(3). However, because it is in the interests of the party under suspicion to demonstrate that adequate assurances were provided, it will usually be this party who will bear the burden of proof.223

5. Cessation of suspension The right of suspension terminates where the grounds which triggered that right 57 cease to exist,224 an adequate assurance of performance is provided,225 or the contract is properly avoided under Art. 72.226 A party under suspicion may also perform the obligations which were anticipated not to be performed and this may be the case either prior to, at or even after the due date if suspension continued up to that time.227 If the performance is tendered at the due date, this clearly ends the other party’s right of suspension and the latter must perform its part of the contract. In principle, the tender of performance prior to the due date should also end the right of suspension as it evidences the party’s ability and willingness to perform except that it is not the performance at the due date. If the suspending party accepts the early performance, then clearly the grounds for suspension cease to exist and the party must perform the suspended obligations. The suspending buyer, however, has the right to refuse an early delivery228 and the question can arise whether an early delivery by the seller can be regarded as either an indication that the grounds for an anticipated failure to perform were unfounded or ceased to exist or as adequate assurance of the seller’s ability or willingness to perform.229 The answer, it is submitted, depends on the circumstances of the case. If the buyer’s doubts regarding the seller’s ability to deliver stemmed from the difficulties the seller has faced with its own sources of supply, the seller’s early delivery can put those doubts to rest as it evidences that the seller does in fact have the goods to (2005), Art. 71 para. 40 (however, expressing regret, Art. 71 para. 23, that the approach of the UCC was not adopted by the Convention); Bennett, in: Bianca/Bonell, Commentary (1987), Art. 71 para. 3.7. 222 See also this author’s commentary on Art. 72. 223 See also this author’s commentary on Art. 72. 224 See, e. g., Fountoulakis, in: Schlechtriem/Schwenzer, Commentary (2016), Art. 71 para. 47. 225 See Art. 71(3). See also Landgericht Stendal (Germany) 12 October 2000, CISG-Online 592 (Pace). 226 Huber/Mullis, The CISG (2007), p. 343. 227 See Supreme Court of British Columbia (Canada) 21 August 2003, Mansonville v Kurtz, CISGOnline 1017 (Pace). 228 See Art. 52. 229 Presumably, the concerns underlying the buyer’s right to refuse an early delivery (e. g., causing the buyer additional inconvenience or expenses of storage) will rarely be relevant in cases where it is the buyer who tenders an early payment or takes steps to enable the payment to be made earlier than required by the contract (e. g., opening a letter of credit at an earlier date than that stipulated by the contract). One example where the buyer’s early performance can cause difficulties to the seller is where the seller had to ship the goods within a specified period from the moment of payment or opening of letter of credit. If the seller’s delivery obligations are interpreted as still dependent on the moment of that early performance by the buyer, the seller’s ability to ship within the period which is now moved closer in time can be affected.

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Article 71 58–60

Part III. Chapter V. Provisions Common to Seller and Buyer

meet its obligations. If, however, the buyer’s doubts have arisen due to the information about an imminent closure of the port from which the seller intended to ship the goods or the introduction of the government restrictions on export, then an early delivery may not necessarily alleviate the buyer’s doubts since the anticipated risks may still materialise at the due date.230 58 In its notice of suspension, the suspending party may fix an additional period for performance to the other party.231 The question is whether in such a case, the right of suspension ceases to exist as soon as this additional period expires. On the one hand, it can be argued that a key purpose of both suspension and the fixation of an additional time is to encourage performance. By giving an additional time, the suspending party is taking and signalling its stance as to the time period during which it is prepared to wait for and encourage (through both the pressure of suspension and additional time) the other party’s performance. Therefore, the expiration of this period should mark the end of the ‘encouragement of performance’ function of suspension and the right to suspend must cease to exist.232 Any suspension beyond that time will depend on whether a general right of suspension of performance (that is, after the due date for performance) exists under the Convention and if so, what its preconditions are and whether they are met.233 If there is no such general right, suspension after the additional period is a breach of contract and the Convention.