ABSTRACT
Written for international trade lawyers, practitioners and students from common law and civil law countries, this casebook will help practitioners and students assimilate knowledge on the CISG.
The cases, texts and questions aid readers in their comparative law and international sales law studies, drawing attention to the particular issues surrounding specific CISG provisions and provoking careful consideration of possible solutions.
In addition to this book’s function as a didactical aid, it is a reference work for leading cases and an introduction to the individual problem areas. In particular, it acts as a preparatory and complementary work for the Willem C. Vis International Commercial Arbitration Moot.
TABLE OF CONTENTS
chapter |1 pages
Introduction
The United Nations Convention on Contracts for the International Sale of Goods, the CISG, has now attained the status of a ‘world sales law’ and constitutes one of the most successful creations of UNCITRAL (United Nations Commission on International Trade Law). Efforts to unify international sales law began as early as the 1920s, with Ernst Rabel
chapter |5 pages
Q 1-11 The application of the CISG to ‘immaterial goods’, such as software, indi-cates that the term ‘goods’ is being broadly interpreted. Can you think of other areas or terms within the CISG which are now read to include electronic means without explicitly stating so? Q 1-12 Would it be consistent if intangible goods, such as intellectual property rights, an interest in a limited liability company, or the assignment of debts or market research studies would fall within the Convention’s concept of ‘goods’? Q 1-13 The UCC 2003 Amended Version excludes ‘information’ from the term ‘goods’. Can you think of an example where information is ‘sold’? Read thereto the Preliminary Official Comment on § 2–103(1)(k) UCC:
By virtue of Art. 1(1)(b) CISG, the Convention also applies in cases where only one party, or neither of them, has its relevant place of business in a Contracting State if the rules of private international law lead to the law of a Contracting State. This mechanism is called
chapter |3 pages
Q3-2a) What were the facts in C3-1? In particular, what kind of ‘materials’ did the buyer supply? b) Do you agree with the court’s holding that order-related drawings constitute ‘materials’ within the meaning of Art. 3(1) CISG? c) Compare the result in C3-1 with CISG-AC Opinion No. 4. Q3-3a) How did the court in C3-2 interpret the term ‘substantial part’ mentioned in Art. 3(1) CISG? b) How does C3-3 differ from C3-2 in interpreting ‘substantial part’? c) Compare the results with CISG-AC Opinion No. 4: in which ways can ‘substantial part’ be understood? Which interpretation seems better to you? Explain why. Q3-4 Could the parties agree on the applicability of the CISG in cases which would normally be excluded pursuant to Art. 3(1) CISG? Recollect what has been stated sub Article 1 CISG, II.3. Art. 3(2) CISG A3-2
Art. 3(2) CISG deals with situations in which the seller’s obligation includes not only the delivery of goods, but also some kind of service. As a rule, the CISG applies to those mixed contracts as well. Here we encounter an initial difficulty: in order to determine the CISG’s applicability, we must first find out whether the parties agreed on a single ‘mixed contract’ or whether they concluded two separate contracts. You will find some illustrations of this
chapter |1 pages
C3-5
Oberlandesgericht München (Germany), 3 December 1999, CISG-online 585 (For a summary of the facts see C 3-3 above.)
chapter |1 pages
law. For other legal aspects that may arise under the contract, like, for example, its validity, reference is to be made to the substantive law applicable under the private international law of the lex fori. 2. Comparison with other legal provisions
The CISG does not contain any rules on the transfer of property in the goods sold under the contract. To this extent, it is the applicable domestic law that determines when prop- erty in the goods is transferred to the buyer and under which requirements property is acquired in good faith. Where the parties have agreed that the seller shall hold retention of title over the goods (Eigentumsvorbehalt), a distinction must be drawn between the
chapter |1 pages
leaving it to the applicable rules of private international law to determine which law applies. Comparison with the UP 2004
Questions Q 6-1
chapter |1 pages
Q7-5a) What are the problems with consulting foreign decisions? Think of language, accessibility, etc. b) Can you imagine what prompted the ‘turn-around’ with respect to quoting foreign CISG decisions? Q7-6a) Compare the UNCITRAL Digest to the Opinions of the Advisory Council. What are their similarities, where are the differences? b) What are the pros and cons of an official case law survey such as the Digest, in particular in light of the Advisory Council, which is a private board? Q7-7 Basically, the interpretation of a legal text begins with its wording. a) Which problems arise from the fact that there are six authentic texts of the CISG? b) Do you know of other countries whose legal texts are published in more than one official language? c) How can we find out what the purpose of a particular CISG provision is? Q7-8a) Explain the principle of good faith embodied in Art. 7(1) CISG. b) Is it a maxim for the interpretation of the provisions of the CISG only, or should it also be applied in interpreting the contract and the behaviour of the parties? Cf. C7-1. c) What is the consequence of holding ‘good faith’ to be a maxim for the interpretation of the CISG only? d) Can you find any other provisions in the CISG which reflect the principle of good faith? e) Compare Art. 7(1) CISG with similar provisions from other sets of rules. Which ones provide for a solution similar to that under the CISG, which ones are different? f) Can you imagine why the drafters of the CISG refrained from establish-ing a ‘good faith’ principle for interpreting the parties’ contract or any of their statements? Art. 7(2) CISG
Art. 7(2) CISG addresses the question of how gaps within the scope of the CISG are to be filled. It deals only with those matters which are not excluded by Art. 4, sentence 1 CISG. According to the first part, matters governed by the CISG but not expressly settled in it are to be solved in conformity with the general principles on which the CISG is
chapter |5 pages
Drafters left a matter open consciously, thereby propagating the common understanding that it should be settled in conformity with the applicable domestic law. The difficulty in deciding whether a gap should be filled uniformly or by the applicable domestic law is augmented by the fact that the CISG contains almost no general principles which are explicitly described as such (exception: Art. 7(1) CISG). Whether a general principle can be derived from a single CISG provision must, therefore, be carefully examined. C7-4
US Dist Ct (N D IL) (USA), 21 May 2004, CISG-online 851 (For a summary of the facts see C 7–1 above.)
chapter |3 pages
parties’ subjective intent, in most cases, Art. 8(2) CISG will have to be addressed, and it is objective evidence which will ultimately provide the basis for the court’s decision. Art. 8(2), (3) CISG C8-1
Art. 8(2) CISG sets out the general rule of reasonableness. When interpreting a statement or conduct of one or both parties, one has to ask how a reasonable person in the shoes of the other party would have understood the statement or conduct. Art. 8(2) CISG provides,
chapter |1 pages
Q8-2a) How are Art. 8(1) and (2) CISG to be distinguished from each other? b) Do the UP 2004 and the PECL make the same differentiation? Cf. Arts 4.1, 4.2 UP 2004, Art. 5:101 PECL. Q8-3a) What is the interaction between Art. 8(2) and (3) CISG? b) Do you find a similar mechanism in the UP 2004 and the PECL? c) Which respective provisions in the UP 2004 and the PECL correspond to Art. 8(3) CISG? Q8-4a) Match the interpretation rules of the UP 2004 to the corresponding provisions of the PECL. b) Does either of these two sets of rules have a greater scope than the other? c) Which general principle do Art. 4.5 UP 2004, Art. 5:106 PECL reflect? d) Which questions left open by Art. 8 CISG are explicitly addressed by the UP 2004 and the PECL? Q8-5 Which facts did the Bezirksgericht St. Gallen (C 8–1) rely on in holding that the buyer had shown that it considered itself bound? Q8-6 Whether it makes a difference that the standard terms are written in a language different to the one in which the rest of the contract is held is open to debate. Discuss this, taking into consideration Art. 4.7 UP 2004, Art. 5:107 PECL. Q8-7a) Why are the provisions governing the conclusion of the contract (arts 14 et seq. CISG) apparently inadequate to conclusively deal with the inclusion of standard terms? b) What differences do you see between the UP 2004 and the PECL, on the one hand, and the CISG, on the other hand, regarding the interpretation of standard terms? Applicability of other rules of interpretation and evidence?
Art. 8 CISG exhaustively deals with the issue of interpretation, thereby excluding the applicability of domestic interpretative rules. In case law, three questions, in particular, have been raised: should the Parol Evidence Rule, the Plain Meaning Rule and the Merger Clause Rule, respectively, apply under the CISG?
chapter 2|4 pages
Plain Meaning Rule a) Operation of the Plain Meaning Rule The Plain Meaning Rule is an interpretation maxim known to some common law jurisdictions. It prevents a court from considering evidence external to an unambiguous piece of writing. It is based on the proposition that, when language is sufficiently clear, its meaning can be conclusively determined without resorting to extrinsic evidence. A8-1
CISG-AC, Opinion No. 3: Parol Evidence Rule, Plain Meaning Rule, Contractual Merger Clause and the CISG
chapter 4|2 pages
Merger Clauses a) Under the CISG Many international commercial contracts provide for a Merger or Entire Agree-ment Clause. Its purpose is to prevent a party from relying on statements or agreements not contained in the written document. For an illustration, see the decision Ajax Tools (C 8–3). C8-3
US Dist Ct (N D IL) (USA), 29 January 2003, CISG-online 772
chapter III|4 pages
Art. 9(2) CISG C9-4
According to Art. 9(2) CISG, the parties are considered to have impliedly made an inter- national usage applicable, of which the parties knew or ought to have known and which is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned. Its wording makes it clear that the CISG considers inter-
chapter |2 pages
terms, such as the INCOTERMS or the UCP 500, and uniform sets of rules, such as, for example, the UP 2004 or the PECL, constitute international trade usages within the meaning of Art. 9(2) CISG. C9-6
US Ct App (5th Cir) (USA), 11 June 2003, CISG-online 730
chapter |1 pages
The form requirements of a State that has made a reservation within the meaning of Art. 96 CISG should not apply where the parties have chosen the law of a Contracting State that has not made a declaration under Art. 96 CISG. Since the choice of law of a Contracting State leads to the application of the CISG (see sub Art. 6 CISG), such cases are then governed by Art. 11 CISG. 12-1
Hoge Raad (The Netherlands), 7 November 1997, CISG-online 551
chapter |4 pages
widely regarded as established law, the subject matter and the terms of the contract must be so certain or ascertainable from the offer that acceptance can be made by a simple ‘yes’. 3. Drafting history Terms defining the offer were already present in Art. 4 ULF and in the associated drafts. In the preparatory work of UNCITRAL and in the working group, the inclusion of a provision dealing with this issue was never questioned. Initially, difficulties arose with respect to general offers to the public, but also, in particular, regarding the requirement of an express or implicit determination of the price. Whether a contract could nevertheless be concluded despite a lack of means for determining the price was highly debated in the drafting of the CISG. Although the first working group found the inclusion of the phrase ‘that a price is to be paid’ sufficient, the second sentence of Art. 12(1) New York Draft 1978 contained a provision comparable with the second sentence of Art. 14(1) CISG. At the Vienna Conference, these two positions were again at loggerheads. Whilst one group of countries made various proposals and applications all aimed at allowing an offer, and thereby a contract, without a means for expressly or implicitly determining the price, other countries wished to strictly enforce the requirement of a price that was determined or at least determinable. The latter group most notably included France, whose Cour de Cassation was regarded as particularly strict in interpreting these requirements. The result was that the current provision was included because a number of participants assumed that their national law, which did not contain such a requirement of a definite or determinable price at the time of conclusion of the contract, would apply by means of the opting-out mechanism under Art. 92(1) CISG. Art. 14(1) CISG 14-1
first element giving rise to a valid offer under the CISG is that a proposal must be sufficiently definite. The second sentence of paragraph (1) provides 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. Existing practices between the
chapter C|4 pages
14-4
Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (Russia), 3 March 1995, CISG-online 204
chapter 3|2 pages
Drafting history Art. 15 CISG can be traced back to Art. 5(1) ULF, but uses clearer terminology than the earlier provision, making a distinction between ‘withdrawal’ (up until receipt) and ‘revoca-tion’ (after receipt), the latter of which is regulated in Art. 16 CISG. Together, these two provisions serve to clarify the distinction between when an offer becomes effective, and when it becomes binding. Operation of Art. 15 CISG
An offer and its content do not become effective until they have ‘reached’ the offeree. The concept of when an offer ‘reaches’ the offeree has important consequences for the notion of revocability in certain cases; for the concept of ‘reaching’, please have reference to Art. 24 CISG below. There are, as yet, no reported cases dealing directly with either Art. 15(1) or 15(2) CISG,
chapter |1 pages
Question Q 16-1 With respect to the different approaches, which one does the CISG prefer? 3. Drafting history The problem addressed under Art. 16 CISG as to when an offer becomes binding was one of the most difficult questions in the unification of the sales law. Reconciling the various national pre-conceptions (mentioned above) proved to be a difficult task. In the final version, a compromise was reached, albeit at the cost of clarity. The common law theory that a mere offer is not binding is reflected in Art. 16(1) CISG. Romanic and common law legal systems, in particular, were duly considered by the inclusion of Art. 16(2) CISG, which provides for certain exceptions to the right to revoke. Art. 16(1) CISG
According to Art. 16(1) CISG, the right to revoke an offer terminates when the offeree has dispatched an acceptance. CISG-Advisory Council Opinion No. 1, Electronic Communications under CISG:
chapter |1 pages
b) In what way is Art. 16(1) CISG analogous to this principle? c) What are its differences? Q 16-4 In what way does Art. 16(1) CISG apply to electronic communications? See CISG-Advisory Council Opinion No. 1 above. Consider also the problems associated with SPAM mail addressed in Q 15-3 above. Art. 16(2)(a) CISG
Art. 16(2)(a) CISG provides that an intention to be bound may be particularly expressed where the offer states a fixed time for acceptance. That stating a fixed time led to irrevoc- ability during that time was a point of contention at the Vienna Conference, as common law countries merely view the statement of a period of time for acceptance as meaning that the offer lapses after the expiry of such period. Although some authors still express the
chapter IV|1 pages
Art. 16(2)(b) CISG and promissory estoppel 16-1
In the context of Art. 16(2)(b) CISG, the interaction between ‘act[ing] in reliance’ and the equitable doctrine of promissory estoppel – or, under US law, detrimental reliance – becomes relevant.
chapter |2 pages
extent that such a practice was accepting through silence or inactivity, this will lead to a binding agreement. 18-3
Cour d’Appel de Grenoble (France), 21 October 1999, CISG-online 574
chapter |4 pages
Questions Q 18-3 a) What circumstances of the Grenoble case (C 18-3) led to acceptance? b) Why? Q 18-4 a) Reiterate the court’s holding in the Hamm case (C 18-4). b) How does this approach compare with the position under your domestic legal system? Art. 18(2) CISG
Art. 18(2) CISG addresses the issue of when an acceptance of an offer becomes effective. Again, this subsection must now receive new consideration in light of advances in electronic communication. CISG-Advisory Council Opinion No. 1, Electronic Communications under CISG:
chapter |3 pages
regarded as exhaustive, they do provide some useful guidelines for the determination of other material matters thereby changing a mere acceptance to a new offer. Battle of the forms C 19–3
Bundesgerichtshof (Germany), 9 January 2002, CISG-online 651
chapter |2 pages
Q 19-6 What was the basis for the decision of the court in the above case (C 19–3)? Q 19-7 What approach, according to this case (C 19–3), is to be taken when con-sidering and comparing standard forms? Q 19-8 a) What is the approach to the problem of the battle of the forms under your domestic legal system? b) What similarities/differences does it share with the CISG? 19-4
Amtsgericht Kehl (Germany), 6 October 1995, CISG-online 162
chapter 3|2 pages
Drafting history Art. 24 CISG can be traced back to the definition of the expression ‘to be communicated’ in Art. 12(1) ULF and was repeatedly amended in the Working Group. Particular con-sideration was given to oral declarations and the addressee’s place of habitual residence. Art. 24 CISG and the age of electronic communication
With the increased use of and reliance on electronic means of communication, the need to regulate this area of the law is gradually being recognised. The rule of ‘receipt’ has necessi- tated at least some conceptual modifications in light of the ever-increasing proliferation of electronic means of communication, both under the CISG and under domestic legal systems. It is, for example, reflected in § 2–213 UCC 2003 Amendments, which is an
chapter 3|1 pages
International principles
It is uncertain whether Art. 27 CISG also applies to oral declarations made inter praesentes and to similar declarations made ‘instantaneously’. Questions Q 27-3
chapter |6 pages
In a number of cases, the INCOTERMS delivery terms lead to the same place of delivery and the same delivery obligations that would apply by default under Art. 31 CISG. Since, in such a case, the parties have failed to agree upon ‘another particular place’, Art. 31 CISG continues to apply and the relevant INCOTERMS assume a merely supplementary function.
In practice, establishing the place of performance under Art. 31 CISG is not only of significance for the performance of the seller’s obligations, but can also establish juris- diction under some circumstances. If the civil procedural law applicable to disputes arising out of the contract provides for jurisdiction at the place of performance, and if the substantive law of the contract, which determines the place of performance, is the
chapter III|4 pages
Art. 33(b) CISG Art. 33(c) CISG 33-1
Art. 33(b) CISG requires the seller to make delivery within a contractually-agreed fixed period of time. In such a case, the right to choose an actual date of delivery within the agreed fixed period generally rests with the seller. Questions Q 33-3
chapter |8 pages
predominant view in both ULIS and CISG is that this sentence is only there for clarifica-tion purposes. In contrast to Art. 50 ULIS, the reference to trade usages has been omitted. Question Q 34-1 a) Do you think that trade usages could, however, still be relevant in the context of Art. 34 CISG? b) Why or why not? Time, place and form of handing over documents C 34-1
Art. 34 CISG places an obligation on the seller to hand over the ‘documents relating to the goods’ at the time and place and in the form set out in the parties’ contract. Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (Russia),
chapter |3 pages
Question Q 35-2 a) Compare Art. 35 CISG to the national solutions set out above. Which do you think were influential in the drafting of Art. 35 CISG? b) What differences and/or problems can you perceive between the national solutions and the CISG? 3. Drafting history In substance, Art. 35 CISG is largely based on Art. 33 ULIS, although the approach to the question of conformity can be distinguished. Whereas the starting point in Art. 35 CISG is the basic rule that the goods must conform to the contract, Art. 33 ULIS was, instead, used as a ‘catch-all’ provision. A further difference can be found in the consequences of the delivery of non-conforming goods under the two provisions. Whilst Art. 33 ULIS regarded this as a failure to fulfill the delivery obligation, non-conforming goods have no effect on the delivery obligation under Art. 35 CISG, but rather give rise to remedies under Art. 45 et seq. CISG. Art. 35(1) CISG 35-1
Art. 35(1) CISG requires a seller to deliver goods that meet the specifications of the contract regarding description, quality, quantity and packaging. An often disputed issue is what the contract actually ‘required’.
chapter |1 pages
Q 35-4 a) What exactly was relied on to establish the lack of conformity under Art. 35(1) CISG in the case of the Oberlandesgericht München (C 35-2) above? b) Under which ‘head’ (quantity, quality, or description) of Art. 35(1) CISG did the lack of conformity fall? 2. Peius and aliud According to the CISG, every type of deviation – even a deviation in kind – constitutes a lack of conformity with the contract. Consequently, the distinction between peius and aliud, which is still so important in the Swiss and Austrian legal systems – and formerly under German law – is of no importance under the CISG. 35-3
Bundesgerichtshof (Germany), 3 April 1996, CISG-online 135
chapter |9 pages
Question Q 35-5 What would be the consequences of considering delivery of an aliud as non-delivery rather than as non-conforming delivery? Art. 35(2) CISG 35-4
Art. 35(2) CISG provides standards relating to the goods’ quality, function and packaging that are deemed to apply when the parties have not otherwise agreed. Art. 35(2)(a) CISG requires the seller to deliver goods ‘fit for the purposes for which goods of the same description would ordinarily be used’.
chapter |7 pages
Q 35-14 In this respect, where the seller did not know of the particular purposes for the goods, but should in fact reasonably have known, can it still be held liable under the CISG? 35-8
Landgericht München (Germany), 27 February 2002, CISG-online 654
chapter |4 pages
Question Q 35-21 a) What requirements did the packaging in the case above (C 35-12) have to live up to? b) Compare this case with the German mussels case (C 35-5) and the Belgian pork case (C 35-6) above. Art. 35(3) CISG 35-13
Art. 35(3) CISG exempts the seller from liability for a lack of conformity in the goods where the buyer ‘knew or could not have been unaware’ of the non-conformity at the time of conclusion of the contract. Tribunal Cantonal de Vaud (Switzerland),
chapter |3 pages
Q 35-26 Compare the Swiss Bundesgericht case (C 35-14) with the case of the German Bundesgerichtshof, 8 March 1995, CISG-online 144 (detailed excerpt C 35-5). There, the court stated:
US Dist Ct (N D IL) (USA), 21 May 2004, CISG-online 851 (For a summary of the facts see C 7-1 above.)
chapter |1 pages
Art. 36(2) CISG makes the seller liable for a lack of conformity occurring after the passing of risk, provided that the lack of conformity is in breach of one of the seller’s obligations, including a guarantee. This paragraph is also a formulation of the principle often referred in domestic legal systems as the ‘durability rule’, whereby the goods are warranted as remaining fit for the contractually-agreed purpose for a certain period of time after the risk has passed. However, the approach can be differentiated according to different countries. Operation of Art. 36 CISG C 36-1
Bundesgerichtshof (Germany), 2 March 2005, CISG-online 999
chapter |3 pages
‘within as short a period as is practicable in the circumstances’. The requirement of ‘reasonable time’ otherwise prevalent in the CISG was omitted from the examination requirement under Art. 38 CISG due to perceived problems with perishable goods. The CISG also says nothing on the requirement of how the goods are to be examined; the requirement under ULIS that the method of examination be governed by the law of the place where the examination was to take place was omitted. With regard to the duty to give notice of defects, the leading participants in the prepar-ation of ULIS were from the Germanic systems outlined above that recognise a strict notice requirement in their domestic laws. Due to the greater diversity in the legal systems represented during the preparation of the CISG at UNCITRAL, above all, the presence of a number of developing countries, this strict notice requirement was modified to the ‘milder’ form currently found in Art. 39 CISG. Consequently, a compromise was reached in this respect. The requirement of ‘prompt’ notice under Art. 39 ULIS was amended to ‘within a reasonable time’, to be determined by reference to the circumstances of the individual case. Under Art. 44 CISG, the notice requirements of Art. 39(1) CISG will not prevent the buyer from claiming a reduction in the price or damages, except for lost profit, if it has a reasonable excuse for its failure to give such notice (see discussion on Art. 44 below). Examination of the goods 38/9-1
The buyer’s obligation to examine the goods forms the basis of its obligation to notify the seller of defects under Art. 39 CISG. The time by which the buyer must have completed the examination under Art. 38 CISG corresponds to the time, under Art. 39 CISG, by which it ought to have discovered any lack of conformity and triggers the ‘reasonable
chapter |2 pages
Q 38/9-6 Against what background must this decision be understood? 38/9-2
Landgericht Paderborn (Germany), 25 June 1996, CISG-online 262
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Questions Q 38/9-7 a) How does the Landgericht Paderborn case (C 38/9–2) determine the requirements of examination? b) What are the limits on the requirements of making such an examination? Q 38/9-8 According to the case of the Oberster Gerichtshof (C 38/9–3), upon which circumstances will the scope of examination required depend? Q 38/9-9 Try to list all the circumstances that may be relevant in determining the buyer’s duty to examine. 2. Manner of examination 38/9-4
International Court of Commercial Arbitration Chamber of Commerce & Industry of the Russian Federation (Russia), 24 January 2000, CISG-online 1042
chapter C|2 pages
38/9-6
ICC International Court of Arbitration, Award No. 9187/1999, CISG-online 705
chapter |1 pages
notification requirements in accordance with the understanding under their domestic legal system. 38/9-7
Bundesgerichtshof (Germany), 8 March 1995, CISG-online 144 (For a summary of the facts see C 35–5 above.)
chapter |5 pages
Questions Q 38/9-13 a) What reason did the court in the above case (C 38/9–7) give for the calculation of a short period of time for giving notice? b) On a consideration of the requirements of international trade, can you think of some reasons for why the court took this approach? Q 38/9-14 What insight did the court in the above case (C 38/9–7) provide as to the development of a general ‘rule of thumb’ for the calculation of a reasonable period of time under Art. 39 CISG? 38/9-8
Bundesgerichtshof (Germany), 3 November 1999, CISG-online 475
chapter |1 pages
Q 38/9-17 Does the court in the Austrian case (C 38/9–10) distinguish between the period for examination and that for giving notice? Q 38/9-18 a) How does the BGH in the 1999 case (C 38/9–8) calculate the period for examination of the goods; how the period for giving notice? b) When did the period for giving notice commence in the above case (C 38/9–10)? Compare this approach to the position of the earlier BGH case (C 38/9–7). For the position under Roman legal systems, refer to the following cases. 38/9-11
Cour de Cassation (France), 26 May 1999, CISG-online 487
chapter V|1 pages
Form of notice 38/9-18
Art. 39 CISG does not specify the form that the notice of lack of conformity must take; of course, the parties are free to agree on a particular form if they wish. Significant here is the ability to prove that notice was, in fact, given. Landgericht Frankfurt am Main (Germany),
chapter |3 pages
Q 38/9-26 a) How can the form requirements of Art. 39(1) CISG be interpreted in light of electronic communication? b) Does the form of the notice even play a role at all? Art. 39(2) CISG time limit 38/9-19
Art. 39(2) CISG creates a cut-off date for the giving of notice of lack of conformity at two years from the date the goods were handed over to the buyer, subject to any contractual period of guarantee. The cut-off period hereunder is, however, not to be confused with the limitation periods for bringing warranty claims, which determine the period within which the buyer must bring an action before the courts in order to be able to enforce its
chapter II|1 pages
Operation of Art. 41 CISG C 41-1
Oberster Gerichtshof (Austria), 6 February 1996, CISG-online 224 (For a summary of the facts see C 9–3 above.)
chapter |1 pages
Question Q 46-1 What is the crucial difference between § 439(1) BGB and Art. 46(2) and (3) CISG? Performance of the contract – Art. 46(1) CISG Claim to substitute delivery – Art. 46(2) CISG
Art. 46(1) CISG only grants the buyer the right to require performance of the contract if it has not resorted to a remedy ‘inconsistent with this requirement’. Questions Q 46-2 What remedies could be inconsistent with the right to require performance?
chapter IV|3 pages
Repair – Art. 46(3) CISG 46-1
The obligation to repair under Art. 46(3) CISG comprises, again, the buyer’s right to demand repair by the seller of goods that do not conform to the contract under Art. 35 CISG. Oberlandesgericht Hamm (Germany),
chapter II|1 pages
Operation of Art. 47 CISG 47-1
Oberlandesgericht München (Germany), 1 July 2002, CISG-online 656
chapter |2 pages
Q 47-3 What are the consequences of the buyer failing to set an additional period under Art. 47(1) CISG? 2. Additional period of reasonable length As under the other provisions of the CISG that make reference to ‘reasonable’ periods of time, what constitutes an additional period of reasonable length can only be determined by reference to the circumstances of the individual case. 47-2
Oberlandesgericht Celle (Germany), 24 May 1995, CISG-online 152
chapter III|4 pages
Art. 48(2), (3) CISG 48–2
A seller who has failed to perform a contractual obligation on time cannot force the buyer to accept late performance; however, under Art. 48(2) and (3) CISG, the buyer may, by its conduct, be held to late performance by the seller. Amtsgericht Nordhorn (Germany),
chapter |5 pages
fundamental breach. Here, a distinction needs to be drawn between a ‘non-fundamental’ lack of conformity, which merely gives rise to a claim for damages or a reduction of the purchase price, and a fundamental lack of conformity, which entitles the non-breaching party to declare the contract avoided. If the lack of conformity frustrates the buyer’s expectations under the contract, it will depend on the specific circumstances as to whether the breach will be regarded as fundamental. The interaction between the provisions of Art. 35 CISG and Art. 49(1)(a) CISG has long been the source of great debate in the courts. 49-1
Bundesgerichtshof (Germany), 3 April 1996, CISG-online 135 (For a summary of the facts see C 35–3 above.)
chapter |1 pages
b) Purpose for which goods are bought 49-3
Bundesgericht (Switzerland), 28 October 1998, CISG-online 413
chapter C|2 pages
49–5
Bundesgerichtshof (Germany), 3 April 1996, CISG-online 135 (For a summary of the facts see C 35–3 above.)
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Questions Q 49-10 a) What approach does the court take in the above case (C 49–5) with regard to the issue of non-conforming documents? b) According to this case, in which circumstances will non-conformity of documents result in a fundamental breach of contract? Q 49-11 How do the black letter rules compare with the analysis of the foregoing case law? 4. Late delivery In some circumstances, a late delivery, in itself, will constitute a fundamental breach of contract entitling a party to avoid. This is not to be confused with the requirements under Art. 49(1)(b) CISG, according to which, after the lapse of the Nachfrist under Art. 47 CISG, an otherwise non-fundamental non-delivery nevertheless entitles the buyer to avoid the contract. 49–6
Corte di Appello di Milano (Italy), 20 March 1998, CISG-online 348
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Requirements for a reduction of the price 50-1
Whether the goods in question lack conformity or not is to be determined by reference to Art. 35 CISG, cf. discussion on this Article above. The price reduction can be invoked regardless of whether the lack of conformity amounts to a fundamental breach or a ‘simple’ breach of contract. The price reduction may even be claimed if the buyer did not give notice of the lack of conformity under Art. 39(1) CISG, provided it had a
chapter C|1 pages
52-1
Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (Russia), 25 April 1995, CISG-online 206
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Q 52-3 a) If the buyer accepts the seller’s early delivery, is it thereby excluded from making any further claims due thereto? b) If not, what sort of claims could it assert? Delivery of excess quantity 52-2
If the seller delivers more goods than contractually agreed, the buyer is entitled to reject the excess amount. This is consistent with the notion of non-conformity with the con- tractual agreement enunciated in Art. 35(1) CISG. However, the contract itself may allow for certain deviations. Provided that any such deviation falls within the limits set out contractually, there is no overshipment.
chapter C|2 pages
54-1
Supreme Court of Queensland (Australia), 17 November 2000, CISG-online 587/859
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the same time, made an agreement on where payment is to be made. As to such agreements on the place of delivery, see sub Article 58 CISG. The same applies where the contract involves carriage of the goods and the seller dispatches them on terms whereby the goods, or documents controlling their disposition, will not be handed over except against pay-ment (Art. 58(2) CISG). The documents that fall within the scope of Art. 57(1)(b) CISG are disputed. Certainly, a bill of lading and a warehouse receipt are such documents; they are genuine documents of title to goods, and their delivery replaces the delivery of the goods. There are, however, further documents in international trade that, without being documents of title to goods, are utilised to effect delivery of the goods, e.g. delivery orders, delivery warrants, bills of delivery (e.g. Art. 4 et seq. Montreal Convention ), or a consignment note according to Art. 4 et seq. CMR, Art. 12 et seq. CIM, or Art. 5 et seq. Warsaw Convention.
The CISG contains no explicit rule on where sums other than the purchase price are to be paid. There is a dispute in case law as to whether Art. 57(1) CISG establishes, beyond payment of the price at the seller’s place of performance, a general principle for other monetary obligations emerging from the contract of sale, such as compensation for breach
chapter |4 pages
pointed out, namely the instability arising from the fact that the seller’s change of place of business may establish a new judicial forum. At the Drafting Conference of the CISG, it was clear that there should be no confusion between substantial and procedural rules: Germany had opted for a clarification that the place of payment does not establish a venue of proceeding. The proposal was dismissed, arguing that matters of jurisdiction were not within the scope of the CISG. Fortunately, with the entrance into force of the Brussels II Convention, the discussion on whether the place of performance and payment should provide a venue of proceeding has lost much of its significance with regard to sales contracts, and it will become even more insignificant as soon as the revised Lugano Convention of 16 September 1988, which applies, inter alia, to non-EU Member States such as Switzerland, Norway, and Iceland, enters into force. Art. 57(2) CISG 57–2
Art. 57(2) CISG imposes any increase in the expenses incidental to payment which is caused by the seller’s change of its place of business on the seller. The rule implies that, if the seller changes its place of business after the conclusion of the contract, the buyer must pay the price at the seller’s new place. The increase in the expenses rests on the seller. However, Art. 57(2) CISG has no effect on the rule that the buyer bears the risk of loss or
chapter |1 pages
A 60-1
D T, The Buyer’s Obligations Under the Convention on Contracts for the International Sale of Goods, in: Galston/Smit (ed.), International Sales: The United Nations Convention on Contracts for the International Sale of Goods (1984), ch. 7, pp. 7-1 et seq.
chapter IV|4 pages
Art. 61(3) CISG 61-1
According to Art. 61(3) CISG, only the seller, but no court or arbitral tribunal, may grant the buyer an extension of time for performance. Originally incorporated in the CISG as a clarification that, unlike some domestic legal systems, the CISG does not allow for any judicially granted period of grace, the provision has gained a new dimension in light of
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Art. 64(1)(a) CISG Art. 64(1)(b) CISG 64-1
According to Art. 64(1) CISG, the seller may avoid the contract for two reasons: firstly, if the buyer has committed a fundamental breach of contract within the meaning of Art. 25 CISG (lit. a), and secondly, if the buyer does not pay the purchase price within an additional period of time fixed by the seller or does not take over the goods within that period (lit. b). For the latter cases, see also sub Article 63 CISG.
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period for complying with the request, the request is assumed to set a reasonable period in motion. The seller’s specification must be in accordance with the buyer’s needs, to the extent that the seller is aware of those needs; otherwise, it is ineffective. However, avoidance must be applied for in court, and the defendant may be granted time according to circumstances the buyer is expected to object if the seller’s specification does not comply with its needs. Art. 65(2) CISG Comparison with provisions from other legal systems
According to Art. 65(2) CISG, where the seller makes use of its right to specify the goods, it has to inform the buyer thereof and must fix an additional period of time in which the buyer has the possibility to contradict. Where the seller does not inform the buyer or grant an additional time limit for objections, its specifications are ineffective.
chapter |1 pages
goods, theft, confiscation or emergency discharge of the goods, and similar casualties. As to the interpretation of the term ‘risk’, typically used insurance clauses (for example Institute Cargo Clauses, Institute War Clauses, Institute Strike Clauses, and Institute Air Cargo Clauses) may be of importance when determining whether a particular situation constitutes a ‘casualty’. Parties’ agreement on passing of risk
The CISG’s set of rules on the passing of risk is a supplementary, gap-filling concept that applies where the contract itself does not provide otherwise. The parties are free to make a contractual stipulation as to when the risk of loss of or damage to the goods passes from the seller to the buyer. They can make individual agreements, or they may include trade terms
chapter III|1 pages
Art. 68, sentence 2 CISG A 68-1
The criterion used in sentence 2, ‘if the circumstances so indicate’, is rather vague. It is undisputed that sentence 2 applies where the buyer is entitled to an insurance claim directly from the insurer where the insurance contract covers all risks from the moment the goods are loaded on ship. See the following INCOTERMS clauses.
chapter IV|3 pages
Art. 68, sentence 3 CISG
According to Art. 68, sentence 3 CISG, Art. 68, sentence 2 CISG does not apply where the seller knew or ought to have known that the goods had been lost or damaged at the time of conclusion of the contract. In those cases, the risk remains with the seller. The buyer can exercise all remedies available in case of breach of contract (Art. 45 CISG). Questions
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However, the risk does not pass where the goods have not been identified (Art. 69(3) CISG). Art. 69(2) CISG 69-1
Art. 69(2) CISG governs all cases which do not fall under Arts 67, 68, or 69(1) CISG. Many of those contracts will typically involve clauses such as ‘delivery free house’, ‘ex ship’,‘FOB buyer’s city’, etc. Oberlandesgericht Hamm (Germany),
chapter |3 pages
Art. 71 differentiates between the right to suspend performance (Art. 71(1)) and the right to prevent the handing over of goods where they have already been dispatched (Art. 71(2)). The effect of exercising one or both of these rights is the postponement of the time that the performance of the party exercising such rights becomes due. The contract is in abeyance. Art. 71(1) CISG 71-1
Art. 71(1) CISG states the creditor’s right to suspend performance of any of its obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of its obligations and the reason for this is either a serious deficiency in its ability to perform or in its creditworthiness (Art. 71(1)(a)), or where its conduct in preparing to perform or in performing the contract indicates that it will not do
chapter C|1 pages
72-1
US Dist Ct (N D IL) (USA), 7 December 1999, CISG-online 439 (For a summary of the facts see C 14-2 above.)
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fundamental breach of contract. This reflects the Anglo-American doctrine of anticipatory breach of contract, i.e. the express refusal to perform. 72-2
ICC International Court of Arbitration, Award No. 8786/1997, CISG-online 749 (Facts were not provided in the case abstract.)
chapter II|4 pages
Art. 73(1) CISG III. Art. 73(2) CISG 73–1
Art. 73(1) CISG deals with interferences in respect of a single instalment. The residual contract remains in force and has to be adjusted to the new situation. The avoidance of the contract as to future instalments is possible if the party seeking avoidance has ‘good grounds’ to conclude that the other party will commit a fundamental
chapter 2|3 pages
Comparison with other legal provisions
Losses are typically divided into several categories. The CISG neither expressly dis- tinguishes between various categories nor defines which groups of losses are covered. For a general overview of types of losses recoverable in case of breach, it is worthwhile to look at the UCC, which provides a systematic list of losses. The UCC starts with ‘direct’ loss in
chapter C|2 pages
74-6
US Ct App (2nd Cir) (USA), 6 December 1995, CISG-online 140 (For a summary of the facts see C 74-1 above.)
chapter |1 pages
b) Liability towards third parties; loss of reputation Consequential damages may also arise in the form of loss of reputation or liability towards third parties. As examples of the latter, the seller might have to cancel its contract with its supplier, or the buyer who does not receive delivery from the seller might have to resell the goods or, where it receives non-conforming goods, may be held liable by its sub-purchaser for this non-conformity. A loss of reputation may consist of a loss of business reputation or commercial image. Read thereto the following abstract. 74-7
Landgericht Darmstadt (Germany), 9 May 2000, CISG-online 560
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Q 74-18 Art. 74 allows for liabilities towards third parties to be compensated. What are the requirements for this compensation, and how are such damages to be limited? Q 74-19 a) Is loss of reputation necessarily reflected in money? b) Does the CISG allow for (non-material) loss of goodwill? Cf. C 74-6. c) Compare the solution under the CISG with the UP 2004 and the PECL. Can you see any differences? Q 74-20 a) Which level of proof did the court in C 74-7 apply for establishing loss of reputation? b) Why would it place an insurmountable burden on the aggrieved party if it were required to calculate the damages for loss of reputation exactly? Q 74-21 In some legal systems, damages are awarded for the mere loss of a chance. For example, where the owner of a horse, as a result of delays in transport, arrives too late to run in a race, it may be able to recover a certain amount of the prize money if it can be established that the horse was the favourite to win. a) Does the CISG cover the loss of a chance? b) Could there be other theoretically possible solutions? Cf. Art. 7.4.2(2) UP 2004. c) Can you imagine why the CISG and the UP 2004 differ on the question of the recoverability of loss of a chance? d) Is Art. 7.4.3(2) UP 2004 a feasible rule, or can you see some difficulties in its application? Art. 74, sentence 2 CISG
The principle of full compensation is limited by the criterion that the loss was foreseeable at the time of the conclusion of the contract (Art. 74, sentence 2). The drafters thereby adopted the Anglo-American contemplation rule established in the House of Lords decision of Hadley v. Baxendale, 9 Ex. 341, 156 ER 145 (1854) (see below). In accordance
chapter III|2 pages
Extent of reduction of damages C 77-3
As Art. 77 CISG expressly states, the party in breach may claim a reduction in the damages in the amount by which the loss could have been mitigated. International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry,
chapter |2 pages
b) No requirement for formal notice of default The duty to pay interest does not depend on prior notification of the debtor. With respect to the purchase price, express provisions are laid down in Art. 59 CISG. Questions Q 78-1 Which duty does Art. 78 CISG establish? Q 78-2 On which sums is interest to be paid? Q 78-3 Why has the applicable interest rate not been settled in Art. 78 CISG? Q 78-4 a) When will the purchase price fall due? Cf. thereto Art. 58 CISG. b) Has the question of the point in time at which other monetary obligations fall due been expressly settled in the CISG? c) Why will the debtor who is entitled to withhold its performance (Arts 71(1), 81(2), sentence 2 CISG) not be obliged to pay interest on it? Q 78-5 In the beginning, a topic of dispute was whether a sum must have been made certain (‘liquidated’) in order to be interest-bearing. Can you imagine why there used to be a controversy, due to this uncertainty, about whether damages could accrue or not? (It should be noted that, nowadays, the legal majority does not require a liquidated sum in order to incur interest.) Interest rate C 78-1
The interest rate has not been settled in Art. 78 CISG. How the question is to be handled is a topic of debate. See, in this regard, the following cases. ICC International Court of Arbitration, Award No. 8128/1995,
chapter C|1 pages
78-3
Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft – Wien (Vienna) (Austria), Award SCH 4366, 15 June 1994, CISG-online 691
chapter |1 pages
prove that the debtor’s non-payment caused it to incur a loss higher than the amount covered by the interest payment. 78-4
Amtsgericht Koblenz (Germany), 12 November 1996, CISG-online 400
chapter |2 pages
exempt if Art. 79(1) applies to both the party in default and that third party. Art. 79(3) CISG clarifies that the defaulting party is relieved not only where the impediment is permanent but also where it is merely temporary, but only for as long as the impediment continues to exist. Art. 79(4) CISG requires that a notice of the impediment and the party’s failure to perform be given within a reasonable time. Art. 79(3) and (4) CISG have raised little discussion in case law. Art. 79(5) CISG, finally, makes it clear that the effect of Art. 79 CISG is limited, in that it affects only the question of damages, but not any other remedies available under the CISG. Art. 79(1) CISG 79-1
Art. 79(1) CISG states the general rule that, whenever one of the contractual duties cannot be performed and that failure is due to an impediment which was beyond the defaulting party’s control, that party is exempt from liability if the impediment was neither fore- seeable nor could have been avoided or overcome. The CISG does not differentiate
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Q 79-10 Another category of impediment is a party’s financial inability to perform. Most decisions have not found this contingency to lead to exemption. Why? Q 79-11 Can the parties agree on another ‘exemption of liability’ standard? How would you word such a clause? Q 79-12 Comparison with foreign law provisions: a) Which laws or sets of rules provide for a similar exemption rule to that in Art. 79 CISG? b) Which sales laws have adopted a different concept of exemption from liability? Explain the differences. Q 79-13 Can you clarify which situations are governed by Art. 6:111 PECL, and which ones by Art. 8:108 PECL and Art. 79 CISG? Art. 79(2) CISG 79-2
Art. 79(2) CISG states the principle that, where the party in default has engaged a third party to perform the contract, it is only exempt if Art. 79(1) applies to both the party in default and that third party. The provision applies to both the seller and the buyer, although, in practice, it is mostly the seller who relies on it. The requirements of Art. 79(1) CISG must be met by both the seller and its supplier in order the seller to be
chapter III|2 pages
Art. 81(2) CISG 81-2
Art. 81(2) CISG governs the situation where the contract or parts of it have already been performed. Restitution of what has been performed under the contract must take place concurrently. Nowadays, it is practically undisputed that a general principle, that cross claims arising out of the same contract may be set off, can be derived from Art. 81(2) CISG. If the counterclaim arises out of another contract, however, the majority holds that the
chapter |6 pages
obstacles, such as destruction or deterioration of the goods, or accidental loss. It provides for a de minimis rule, pursuant to which insignificant changes in the condition of the goods are harmless. Such minor deficiencies must be compensated by way of damages. Art. 82(2) CISG 82-1
Art. 82(2) CISG restricts the principle embodied in Art. 82(1) CISG significantly. Art. 82(2)(a), (b) CISG provide for the seller to bear the risk of deterioration or loss of the goods due to breach of contract entirely. For example, where the goods cannot be restituted because of confiscation, which occurred due to the non-conformity of the goods, or where the buyer is not in possession of the goods because of the seller’s delivery
chapter III|1 pages
Art. 84(2) CISG
Under Art. 84(2)(a) CISG, which deals with the situation in which the goods can be restituted, the buyer must return the goods, as well as pay out the benefits to the seller. A point of dispute is whether the seller may claim also for benefits which the buyer could have drawn but, in fact, did not.
chapter III|2 pages
Art. 86(2) CISG
Art. 86(2) CISG governs the situation where the buyer has not yet taken over the goods, but they have been dispatched and placed at its disposal at the place where delivery was to be made and the buyer declares that it will reject the goods. Here, the buyer is bound to take possession of the goods and preserve them on behalf of the seller, provided that it is reasonable for the buyer to do so. As Art. 86(2), sentence 1 CISG states, these measures will
chapter |4 pages
the resale purchases the goods on its own account. Here, in particular, regard is to be had to the requirement that the resale price be reasonable. 88-1
Iran/US Claims Tribunal, Award No. 370, 28 July 1989, CISG-online 9
