Convention International Sale of Goods

Extract 1 : Common Law v Civil Law
Extract 2 : East v West
Extract 3 : North v South

"Despite the conflicting interests which had to be bridged when drawing up the CISG and which did not always produce the most appropriate solution, the CISG can as a whole be viewed as a success…" Peter Schlectriem

Discuss

Preparations for the creation of a uniform law on international sale began in 1920 at the International Institute for the Unification of Private Law (UNIDROIT). In 1968, this task was reassigned to the United Nations Conference on International Trade Law (UNCITRAL), and a final draft of the Convention on the International Sale of Goods1 was confirmed and signed in Vienna in 1980. The CISG entered into force in 1988 after securing the requisite number of ratifications, in accordance with Article 99(1) .2

The drafters of the CISG intended to formulate a substantive uniform law governing the formation of sales contracts3 of international character, and the rights and obligations of parties under those contracts4 . Previously these two aspects of international contract law had 'lived separately' 5 . Unlike normative choice of law conventions, the CISG was designed to provide a law to be applied uniformly, regardless of the location of a dispute, as States Parties are all subject to the same provisions .6

However, before analysing the effectiveness of the CISG, it is important to note the inherent difficulties characterising any attempt to formulate an international instrument, which is intended to have uniform application. At present, there is no 'supranational instance'7 before which cases can be held, and so this role necessarily falls upon national courts. This in itself greatly hinders uniformity, as it raises the likelihood of inconsistent interpretation of the Convention, and means that where a national court misinterprets a particular provision, placing the law within the interpretive realms of the national fact finding tribunal without the existence of a higher body capable of deciding issues of appeal 8 .Thus, regardless of how precisely the Convention is drafted, the international community is wholly reliant upon national courts to uphold the rules and principles of the Convention 9 . Furthermore, there is yet to emerge an effective way of monitoring case-law from unfamiliar lands. other jurisdictions. If national judges are to assist in the uniform application of the Convention, they need to be aware of how certain provisions are interpreted globally. For example, whilst the internet has helped in this area, it has been submitted that case-law from 'three of the official language texts of the Convention (Arabic, Chinese and Russian) are still not yet available to the "western" scholar' .10

This paper examines what conflicting interests had to be dealt with in drafting the Convention, in order to agree on a final text. Also assessed, is the impact that this process of compromise had on the effectiveness of the CISG, and consequently, whether its successes outweigh its flaws.

What Conflicting interests had to be dealt with by the drafters of the CISG?

Professor Eorsi has suggested that there are four types of compromise in the CISG; those which are 'clear and recognisable'; those that are only discoverable by persons with 'access to Conference documents'; those where each side has their own assessment of what was agreed; and those which merely mask 'continuing agreement' and thus serve no practical purpose, being 'illusory' in character 11. It is submitted that these negative compromises (except for the first 'type' mentioned by Eorsi) emerged because the drafters of the CISG sought to bridge irreconcilable legal traditions.

As stated, the CISG was intended to create a uniform law governing international sales. However, because the established principle of State sovereignty ensures that non-consenting third parties are not obliged to partake in treaties12 unless they so desire13 , thus, the CISG, is of course not automatically binding upon States without their explicit acceptance. Therefore, to attain uniformity, the drafters had to construct the CISG whilst being mindful of appealing to the maximum number of State interests. This is ultimately evidenced by the attempt of the drafters to preserve party autonomy with the inclusion of Article 6, which permits States to derogate from the Convention in whole, or in part. Basically, the Convention had to create the impression that there are advantages to be had by ratification and subsequent compliance. This of course provided somewhat of an enticement for states to ratify the treaty as it provided them with a high level of autonomy.

Of the sixty-two nations that were present at the Vienna Convention Garro14 estimated that twenty-two of these countries15 were from the 'Western developed' part of the world, eleven from 'socialist regimes', and twenty-nine from 'Third World' countries ; thus, it is an achievement in itself that a final text was ever agreed upon. However, it has been submitted argued that the compromises that were eventually accepted reflect the divergent legal, economic, and cultural backgrounds of the nations, and this has adversely affected the to the detriment of the effectiveness of the CISG in practice. In all, 'The delegates of the sixty-two participating nations did not reach consensus by a magical process' 16 . However, compromise agreements, although fully satisfying no one party, should not necessarily will not necessarily result in an ineffective instrument, providing they are the result of careful drafting.

Prior to the Second World War, the approach of the civil law nations dominated any attempt to coordinate a unified code of international sales 17 . Thus, the likelihood of reaching compromises on any potential laws, rules or principles was fairly high, as any interested nations shared fundamental legal, political, economic, and cultural beliefs. However, by the time that UNCITRAL had undertaken this unifying role in the late 1960s, the number of potential participants had greatly increased, creating various 'conflict lines' 18 ; between common law legal systems and the civil law systems, capitalism and socialism, and developed and developing States.

Common Law v Civil Law

One of the major conflicts of interests, as mentioned above, concerns the different views held by delegates from civil law and common law systems. Although the civil law approach dominated unification attempts in the context of international sales before the Second World War, the common law approach 'gathered momentum19 ' later, within the working group of UNCITRAL. Nevertheless, it has been argued that the general style of the CISG is inconsistent with the classic approach of the common law lawyer 20 , and conversely, the language of the Convention is 'not typical of the concise style of draftmanship'21 of Civil Codes of law22 . Several aspects of the CISG brought conflict between these two legal traditions, although it is submitted that these differences of opinion focus more on the legal techniques used in the Convention, rather than on economic or political issues 23 ; "The ends are determined by society, the means by legal tradition" .24

The Doctrine of Consideration

One cause for debate in the CISG, between the civil law and common law traditions, concerned the status of the doctrine of consideration. Although the doctrine is not explicitly mentioned in the Convention, this omission should not necessarily mean that it is rejected by the CISG. The fact that consideration is not mentioned within the Convention conjures the risk of anomalies arising. This is because, under the doctrine of consideration and contract law, all the sales that are covered by the Convention involve the payment of one party to another, in response to a promise to deliver goods; hence, the requirement of consideration is automatically satisfied in the pre-contractual bargaining. However, the realities of international sale mean that there may be various ancillary agreements involved in a transaction, where consideration is missing .25

Despite this interpretation, the requirement of consideration seems to have been outlawed by Article 29(1), which provides that a mere agreement between the parties may be sufficient to modify or terminate a contract (i.e agreement without the provision of consideration). However, this provision may be interpreted to support two opposing arguments for the doctrine; firstly, it could be said that because Article 29(1) explicitly rejects the need for consideration when modifying or terminating existing agreements, it implies that consideration is required for the formation of contracts;26contrastingly, one might say that since the rules regarding the modification and termination of contracts are normally also applicable to the formation of contracts, Article 29(1) can be assumed to have the same application, meaning that consideration is not required for the formation of contracts . The mere fact that there are two possible interpretations of the provision, suggests that the CISG is not sufficiently precise on this issue. However, even though civil law and common law traditions differ as to their views on consideration and therefore would choose the interpretation which suits them best (civil lawyers may assume the less stringent latter interpretation, and common law lawyers will agree with the former), the fact that common law jurisdictions have begun to drift towards the view of the civil systems over past years 27 , meant that Article 29(1) avoided any serious confrontation, and therefore the need for the drafters to make a compromise.

Offer and Acceptance

An area that is explicitly addressed by the CISG, which also provokes 'conflict'28 between the civil and common law traditions, involves the question of when offers and acceptances become effective. For example, in civil law systems, it is conventionally assumed that an acceptance is only effective, and so the contract concluded, when it has been received by the offeror29 . The offeree therefore assumes the risk of transmitting the written acceptance; he chose the mode of acceptance, and so he should assume the responsibility of its transmission. Conversely, the common law jurisdictions tend to view the acceptance as being effective, once the offeree has dispatched his acceptance by a method expressly or impliedly authorised by the offeror 30 . Thus, the risk of loss or delay falls on the offeror.

In the Convention, clarification is found in Article 18(2) which provides that an offer becomes effective when it has reached the offeree, i.e. the 'mailbox' principle. Interestingly however, Article 16(2), which highlights a significant consequence of this general rule by saying that the offeror may not revoke the offer once the offeree has dispatched an acceptance, shows a confusing compromise. Whilst the 'mailbox rule' determines when an offer becomes effective, the 'dispatch rule' operates to strike out an attempted revocation of the offer (see below for further examination of the revocation of offers). Furthermore, the 'mailbox theory' is also disregarded in Article 18(3), which expresses that acceptance is effective once the offeree indicates his assent, by performing an act 'such as one relating to the dispatch of the goods or payment of the price'. Despite this switching between the two theories of offer and acceptance, Garro has submitted that the Convention's drafters successfully compromised between civil and common law traditions .31

Revocability of offers

Although it may be argued that the CISG has successfully met the needs of the two systems in respect of the formation of the contract, the Convention fails to compromise adequately where an offeror seeks to revoke an offer. Civil law systems typically assume that once an offer has been made, the offeree has a reasonable time to consider it and respond. Thus, offers are irrevocable for this period, unless otherwise indicated prior to dispatch32 . However, most common law jurisdictions assert that the offeror has the freedom to withdraw an offer 'until the formation process of the contract is quite advanced' 33 . This latter view is the one portrayed as the general rule in the CISG 34 . Clearly, the delegates of the Civil systems gave concessions here, and so they pressed successfully for two major exceptions to the rule 35 ; where the offeror expressly states a period during which the offer is to remain open, the offer is irrevocable for this period; and, where the offeree has acted in reliance of the offer, it is also irrevocable .36

This first exception has been the subject of considerable debate 37 , as it appears to have led to a compromise that resembles the fourth of Eorsi's compromises; i.e an illusory compromise which merely masks continued disagreement. One common law delegate stated that when an offeror fixes a period for acceptance, common law traders would interpret this to mean two things; that the offer ends after this period, and that the offer was revocable by the offeror during the period38 . This is because these concepts are in line with common law principles 39. However, civil law jurisdictions presume that where the offeror states a fixed time for acceptance, he has implied that the offer is not revocable until the period has expired. This difference of interpretation will not present a problem where a buyer and seller are both from a common law or civil law jurisdiction, but it may where the two systems are represented in a transaction. Thus, one might say that this is a compromise in rhetoric, but not in practice .40

Breach of Contract; Termination and Specific Performance

In the context of remedies, the drafters of the CISG were again pressured by civil and common law delegates to reach a compromise 41 . Termination is to the most drastic of all remedies available for aggrieved parties. to. This issue required delicate handling by the CISG's drafters; whilst it is crucial to maintain certainty and predictability for the sake of the parties and as a means of ensuring uniform application, the law must also preserve sufficient flexibility to avoid injustice which may arise in specific cases' .42

Many of the transactions covered by the CISG involve high value bulk shipments where a change in the value of the goods can mean that a buyer or seller is either hugely better or worse off than when he contracted to buy or sell the goods. Therefore, parties need to know precisely when they can terminate a contract, as a termination that is deemed to be unlawful will result in market-price based damages being payable to the other party..

Large market price fluctuations inevitably cause parties to seek to escape a concluded contract. However, because a if a termination was on such 'unmeritorious grounds' this would amount to a breach of contract, these and traders often intentionally seek out, or capitalise on, minor breaches committed by the other party, claiming this breach to be the true motive for termination 43. The likelihood of this happening is increased further by the fact that in international sales, the parties are typically burdened with more obligations because the goods have further to go, and often have to pass through many hands. Also, in certain types of international sales, the seller owes documentary as well as physical obligations to the seller 44 , increasing the likelihood of a breach occurring.

Views diverge on how grave a breach must be before it becomes grounds for termination. One view is that unmeritorious terminations should be permitted, simply because a victim of such conduct is just as likely to be the beneficiary of it in further contractual relationships; 'today's buyer may be tomorrow's seller'45 . However, it may also be argued that unmeritorious terminations should be precluded at all costs, for the harm that it does to the basic principles of contract law. Not only is such behaviour inequitable, but it also undermines the value of concluded contracts.

The approach taken by the CISG towards termination as a remedy for a breach of contract, has derived from the rationale that it is the most drastic of the remedies, and should therefore only be exercised as a last resort 46 . Thus, Article 49 only allows a buyer to terminate (conventionally it is the buyer who seeks to terminate because only he will be materially affected if the value of the goods change), if the seller commits a 'fundamental breach' . Article 25 provides that a breach 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'.

Despite Article 25, it is submitted that the concept of the 'fundamental breach'47is too ambiguous to achieve the desired uniformity of application in national courts. Furthermore, in defining a 'fundamental breach', the provision refers to a number of vague concepts, such as 'substantially to deprive', and what a 'reasonable person…would not have foreseen' (emphasis added). Thus, the net result of Article 25 is that buyers are highly unlikely to attempt termination of a contract, where the seller's breach is not clearly 'fundamental'; this is because a judgement on Article 25 requires national courts to creatively interpret several vague and subjective concepts before evaluating the lawfulness of a termination.

One suggestion has been the introduction of a presumption that the breaches of certain obligations are 'fundamental' 48 , regardless of the harm that has derived from them 49 . Whilst the text of the CISG does not make any express reference to the operation of such presumptions, Schlechtriem has suggested that this method of interpretation exists independently within the concept of the 'fundamental breach'. He asserts this on the grounds that the 'fundamental' breach' under the CISG is reflective of the English doctrine of conditions, which stipulates that if a certain expectation is a condition of, or is the essence of the contract, then a breach of it is automatically is fundamental. However, because this view is not held unanimously 50 , as it could only lead to even greater disparity in the decisions of national courts.

The remedy of specific performance provided by the Convention is also controversial. Article 46 bestows on buyers the right to demand specific performance of the seller's obligations, and Article 62 entitles the seller to require the same of the buyer. However, because common law delegates expressed that these provisions were inconsistent with common law principles 51 , the drafters of the CISG included Article 28 as a compromise. This provides that neither the buyer nor the seller are entitled to claim specific performance unless the 'court would do so under the law forum in respect of similar contracts of sale not governed by the Convention'52 . However, the drafters seem to have merely appeased the common law delegates on paper, as if a common law trader is placed in the forum of a court in a civil country; Article 28 is unlikely to protect him from specific performance. Also, the fact that the Convention directs parties to national law in order to reach a compromise impairs the attainment of uniformity. Ideally, the drafters of the CISG would have liked one globally applicable uniform code of law, displacing the need for national law altogether, but this was proven to be an unrealistic objective .53

  1. This will be referred to as 'CISG' from this moment.[^ Return]
  2. Article 99(1) provides that the Convention enters into force 12 months after the 'date of deposit of the tenth instrument of ratification, acceptance, approval or accession…'[^ Return]
  3. The formation provisions appear in Part II of the Convention, articles. 14-24 [^ Return]
  4. The substantive provisions appear in Part III of the Convention, articles 25-88. Part I (articles. 1-13) defines the Convention's sphere of application[^ Return]
  5. Eorsi, 'Problems of Unifying Law on the Formation of Contracts for the International Sale of Goods' 27 Am. J. Comp. L 311, 315 (1979)[^ Return]
  6. Except of course where States make reservations before ratification[^ Return]
  7. Camilla Baasch Anderson 'Reasonable Time in Article 39(1) of the CISG- Is Article 39(1) Truly a Uniform Provision?'[^ Return]
  8. However, it may be argued that there is merit in the work of legal scholars, who are in a position to point out any misinterpretations and thus may help prevent such decisions becoming precedents[^ Return]
  9. Honnold 'The 1980 Sales Convention- Can Uniform words give us Uniform results?' p. 11-14[^ Return]
  10. Camilla Baasch Anderson 'Reasonable Time in Article 39(1) of the CISG- Is Article 39(1) Truly a Uniform Provision?'[^ Return]
  11. Rossett Critical Reflections on the United Nations Convention on Contracts for the International Sale of Goods' 45 Ohio St. LJ (1984)[^ Return]
  12. A Convention is a form of treaty[^ Return]
  13. Article 34 of the Vienna Convention on the Law of Treaties[^ Return]
  14. 'Reconciliation of Legal Tradition in the U.N. Convention on Contracts for the International Sale of Goods' Alejandro M. Garro (1989)[^ Return]
  15. Eörsi, A Propos the 1980 Vienna Convention on Contracts for the International Sale of Goods, 31 Am. J. Comp. L. 333, 346 (1983). [^ Return]
  16. A. Rossett 'Critical Reflections on the United Nations Convention on Contracts for the International Sale of Goods' 45 Ohio State Law Journal (1984) 265-305[^ Return]
  17. 'Commentary on Professor Kastely's Rhetorical Analysis' Winship 8 Nw. J. Int'l L. & Bus. [^ Return]
  18. 'Developing International Trade Law' Farnsworth 9 Calif. W. International L.J (1979)[^ Return]
  19. 'Reconciliation of Legal Tradition in the U.N. Convention on Contracts for the International Sale of Goods' Alejandro M. Garro (1989)[^ Return]
  20. Eorsi 'Problems of Unifying Law on the Formation of Contracts for the International Sale of Goods' 27 Am. J. Comp. L 311, 315 (1979)[^ Return]
  21. 'Reconciliation of Legal Tradition in the U.N. Convention on Contracts for the International Sale of Goods' Alejandro M. Garro (1989)[^ Return]
  22. For example, the French Civil Code[^ Return]
  23. Eorsi 'Problems of Unifying Law on the Formation of Contracts for the International Sale of Goods' 27 Am. J. Comp. L (1979)[^ Return]
  24. Kahn-Freund 'Comparative Law as an academic subject' 82 Law Q Rev. 40-45 (1966)[^ Return]
  25. Eorsi 'Problems of Unifying Law on the Formation of Contracts for the International Sale of Goods' 27 Am.J. Comp. L (1979)[^ Return]
  26. Eorsi 'Problems of Unifying Law on the Formation of Contracts for the International Sale of Goods' 27 Am. J. Comp. L (1979)[^ Return]
  27. For example, The Uniform Commercial Code (UCC) permits modifications without consideration UCC S 2-209 (1977)[^ Return]
  28. 'Reconciliation of Legal Tradition in the U.N. Convention on Contracts for the International Sale of Goods' Alejandro M. Garro (1989)[^ Return]
  29. For example, Article 130 of the German Civil Code[^ Return]
  30. For example, the English case of Adams v Lindsell 1 Barn & Ald.681 (K.B 1818)[^ Return]
  31. Same as footnote '23'[^ Return]
  32. For example, the the Swiss Code of Obligations, Article 5[^ Return]
  33. Farnsworth 'Contracts' S 3.17, at 148-51[^ Return]
  34. Article 16(1) provides that 'Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance'.[^ Return]
  35. Article 16(2)[^ Return]
  36. , 'Formation of International Sales Contracts Under the 1980 Convention' Winship 17 Int'l Law. 1 (1983)[^ Return]
  37. As shown by the 1978 session of UNCITRAL[^ Return]
  38. UN Doc A/CN.9/XI.CRP 19. add 9[^ Return]
  39. i.e Article 2 of the Uniform Commercial Code distinguishes between firm offers and open offers, stating that whilst the former can never be revoked, the latter can be revoked at any time, and expires at the end of the fixed time for acceptance [^ Return]
  40. Eorsi 'Problems of Unifying Law on the Formation of Contracts for the International Sale Of Goods' 27 Am. J. Comp.L 311, 315 (1979).[^ Return]
  41. Gonzalez 'Remedies Under The UN Convention for the International Sale of Goods'' 1 Int'l Tax & Bus. Law (1984)[^ Return]
  42. Koji Takahashi 'Right to Terminate (Avoid) Internaitonal Sales of Commodities' 2003 Journal of Business Law 102-130[^ Return]
  43. For example, in the Hansa Nord (1976) QB 44, 55, the buyer attempted to terminate the contract for a seemingly harmless breach, because a fluctuation in the market meant that he had committed himself to a bad bargain.[^ Return]
  44. For example, in CIF sales[^ Return]
  45. Lord Lowry in Bunge v Tradax (1981) 1 WLR 711 at 720[^ Return]
  46. Honnold 'Uniform Law for International Sales under the 1980 United Nations Convention' 3rd ed. 1999, describing the availability of the right to terminate in Article 49 of the Convention.[^ Return]
  47. Article 49(1)(a)[^ Return]
  48. For example, it has been suggested that such presumptions should be made in respect of breach of time clauses (Schlechtriem, in 'Uniform Sales Law' 1986 p. 60)[^ Return]
  49. Koji Takahashi 'Right to Terminate (Avoid) Internaitonal Sales of Commodities' 2003 Journal of Business Law 102-130[^ Return]
  50. For example, Honnold, in 'Uniform Law for International Sales under the 1980 United Nations Convention (3rd ed. 1999) argued that it was not appropriate to compare domestic laws with international laws, as this would fail 'to take account of the special circumstances of international trade'.[^ Return]
  51. These provisions indicate that the right to demand specific performance is of greater significance than the availability of substitutional relief, and this principle is more in line with civil law systems, according to Farnsworth's 'Damages and Specific Relief' 27 Amer. J. Comp l 247 (1979)[^ Return]
  52. Same as footnote '39'[^ Return]
  53. Kastely 'The Right to Require Performance in International Sales: Towards an international interpretation of the Vienna Convention' 63 Wash. L. Rev. 607 (1988)[^ Return]

Extract 1 : Common Law v Civil Law
Extract 2 : East v West
Extract 3 : North v South

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