CHAPTER – II

SALIENT FEATURES OF UN CONVENTION ON CONTRACTS

FOR THE INTERNATIONAL SALE OF GOODS (CISG)

2.1 Introduction

The CISG is rightly referred to as one of the most successful examples of

unification in the area of international sales law. The legal concepts of the CISG can
be traced to the historical development of rules and norms governing international
trade and commerce throughout the centuries. The latter half of the 19th century
witnessed an internationalist movement Europe which sought to create unification of
laws and resolution of conflicts in domestic commercial law. The international trade
was also subjected to serious legal uncertainties. Two conventions namely Uniform
Law on the International Sale of Goods (ULIS) and Uniform Law on the Formation of
Contracts for the International Sale of Goods (ULF) held at Hague in 1964 were
adopted by countries in Europe. The Vienna conference of 1980 accepted the draft
prepared by the legal experts by a majority of states that participated in the
conference. The CISG came into effect on January 1, 1988. This chapter contains the
salient features of CISG namely - Need for UN Convention on Contracts for the
International Sale of Goods (CISG), The Influence of the CISG on the Domestic Law,
Formation of the Contract in CISG, Uniformity and the CISG, Interpretation of the
CISG and Application of the CISG which form the foundation of the thesis.

2.2. Need for UN Convention on Contracts for the International Sale of Goods
(CISG)

In the age of globalization, the national boundaries are shrinking and mere up
gradation of domestic or national laws does not serve the purpose. There is a need for
international uniform regulation dealing with international sale of goods in the
modern society. The need for a uniform sales law comes from the realization that the
undue restrictions of national legal systems governing cross-border transactions had
become limiting for the international trade community. 86 Thus, proponents of

86
Peter J. Mazzacano, (2006) 'Canadian Jurisprudence and the Uniform Application of the UN
Convention on Contracts for the International Sale of Goods' 18 PILR 1, 13.

42
harmonization sought to accomplish certainty and predictability in international trade
transactions especially with the explosive growth of international trade in twentieth
century. Numerous efforts were made to facilitate the emergence of uniform laws
regulating international trade based on the idea of creating a transnational body of
norms capable of beating the worst enemy of the merchant, observes Herrmann
(2000)87.

Kripke (1962) observes: “It is fair to say that the draftsmen of the [U.C.C.] did
not want to codify the law, in the continental sense of codification. They wanted to
correct some false starts, to point the law in the indicated directions, and to restore the
law merchant as an institution for growth only lightly kept in bounds by statute”.88
The scholar further stated that the Global Commercial Code should not be a
comprehensive code of general principles and rules capable of providing an answer to
all legal controversies that might arise in practice.

The United Nations organized the UNCITRAL in 1966 in order to revise the
material concerning international trade. This body had its first session in 1968 which
made notable progress in preparing uniform international rules for arbitration,
carriage of goods by sea, negotiable instruments and the international sales of goods.
This progress was analyzed in a symposium issue of the American Journal of
Comparative law, observes Schmittoff (1981).89 The genesis of the civil and common
law disagreements can be traced back to these two documents because from the very
beginning the Hague Conventions lacked widespread acceptance.90

Ernst Rabel, a noted German jurist, in the course of preparing the first drafts
for a uniform sales law, compiled and analyzed the legal rules regulating the seller's
obligation with respect to the quality of the goods sold. He advocated that while these
are practical questions of everyday commerce, to the lawyer they are full of
unresolved difficulties. The irregularities and lack of clarity were essentially caused

87
Herrmann, G. (2000), International Commerce and the Formulating Agencies - The Future of
Harmonisation nd Formulating Agencies: The Role of UNCITRAL, Paper presented at the Schmitthoff
Symposium 2000 on Law and Trade in the 21st Century, Centre of Commercial Law Studies, London,
June 1-3.
88
Kripke, H (1962) Principles Underlying the Drafting of the U.C.C., in 1962 Univ. ILL. L. Forum
322.
89
Schmittoff, C.M (1981) Commercial Law in A Changing Economic Climate, 29-31,
90
Lutz, Henning (2004) The CISG and the Common Law Courts: Is There Really a Problem?, Victoria
University Wellington Law Review, 35:711-713.

43
by the irrational survival of a doctrine rooted in antiquity. Subsequently, Rabel
uncovered the roots that are the Roman, Anglo-America and German laws. He also
exposed the common core of all legal systems that the seller shall assume the
responsibility that the goods sold conform to the contractual agreement. The seller's
obligation and liability, therefore, are not derived from any special warranty nor is he
always liable for certain objective characteristics of the goods sold, according to
Rabel who subsequently shaped the further development of German law, even though
it attracted criticisms across the world. They were perceived to be a creation of
western European civil law legal scholarship with the common law and other legal
traditions playing a peripheral role. Ironically the United Kingdom at that point was
the only common law jurisdiction to accede to the conventions. However the
accession was rendered moot by a special reservation that required parties to agree
that the laws govern their contract. The United States in contrast neither took part in
the drafting process nor did it ratify the Hague Conventions.

The basic principle of international sale of goods was aptly highlighted by

Lord Justice Brett (1877) thus: "The governing principle is that the thing offered or
delivered under a contract of purchase and sale must answer the description of it
which is contained in words in the contract, or which would be so contained if the
contract were accurately drawn out." In reality, the CISG takes precedence over the
law of the Contracting States but there are cases where it recedes in favor of
individual regulations of certain States, either by virtue of the CISG directly, or by
virtue of a reservation made by a Contracting State. In the latter case, the
consequences of a declaration of reservation are only, according to a widely held
opinion, in the non-application of the Convention to the affected contracts. It is in the
first case that the rules of a particular State are positively called to apply in lieu of the
stipulations of the Convention, i.e. the prescriptions of the lex fori,91 states Article
1(3) of the CISG.

Scholars have pointed out that while the ULIS is intended to be a self-
contained code with regard to the topics regulated by it, and expressly excludes the
rules of private international law, the draftsmen of the Vienna Convention were aware
that measures of conflict avoidance can reduce the dangers of a conflict of laws but

91
(Latin for the laws of a forum) is a legal term used in the conflict of laws used to refer to the laws of
the jurisdiction in which a legal action is brought.

44
cannot completely exclude them. They have linked the CISG with national systems of
private international law on account of this fact. The American Law Institute and the
National Conference of Commissioners on Uniform State Laws drafted the U.C.C. in
the form of a model law. The individual states were free to adopt the model law as
stated or with modifications.

In fact, many states have adopted variations of the model law, but most of the
variations are of little or no significance. The Global Commercial Code used the same
approach for many reasons. First, sovereign states were less likely to adopt such a far-
reaching instrument in its entirety without modification. Second, at the international
level, there were marked differences in the legal traditions of the affected nations. In
addition, some nations were parties to other regional or universal uniform laws
covering the same topics as the Global Commercial Code. These nations prefered to
retain the other uniform laws and excluded the entirety of corresponding chapters of
the Global Commercial Code.

In 1929, the newly created International Institute for the Unification of Private
Law (UNDROIT) began drafting a uniform law for the international sale of goods.
The drafting history of the CISG dates back to 1935 when a preliminary draft for a
uniform law on international sales was issued by UNIDROIT. In 1970, the Secretariat
of UNIDROIT submitted a note to the newly established United Nations Commission
on International Trade Law (UNCITRAL) in justification of such an initiative and
indicated some of the salient features of the project.92 he proposed code included two
parts namely – a) part one dealing with the law of obligations generally, and b) part
two relating to specific kinds of commercial transactions, writes Bonell (1997).93 The
progressive codification was hampered by UNIDROIT's other commitments, limited
resources and continued skepticism as to the project's feasibility. Years later, the
scope of the project was substantially altered and work then focused on the
preparation of what is now known as the ‘Principles of International Commercial
Contracts.’

The UNCITRAL had proposed the ‘Global Commercial Code,’ which was
different from the original UNIDROIT proposal. But, the work was resume on a

92
International Institute for the Unification of Private Law (UNIDROIT-1970), in United Nations
Commission on International Trade Law, Yearbook, Volume I: 1968-1970, 285.
93
Bonell, M.J (1997) An International Restatement of Contract Law 19-21 (2d Ed.).

45
‘world code of international trade law’ advocated by Clive M. Schmitthoff. It was
similar to Schmitthoff's proposal in that it is conceived as an open-ended instrument
intended ‘to weld together ... into a logical, integrated work,’ existing and future
uniform laws in the field of international trade law.94 The decades of 60s and 70s
witnessed the worldwide success of the United Nations Convention on Contracts for
the International Sale of Goods (CISG) and also the adoption of additional
international uniform laws dealing with topics within specific areas such as transport
law, banking law, arbitration, e-commerce, and bankruptcy. The proliferation of
specific uniform laws makes the idea of combining these specific pieces into a unified
whole more compelling. But most of the adopted instruments were prepared under the
auspices of UNCITRAL.

The United Nations Organization made sincere efforts to unify international

commerce through the Diplomatic Conference of Vienna, held during March 10 –
April 11, 1980. About sixty-two states and eight international organizations
participated in the conference which drafted the resolutions of Convention on
Contracts for the International Sale of Goods. 95 The resolutions were brought into
effort on January 1, 1988. The CISG may be superseded, pursuant to its Articles 90
and 94, by national laws. A good illustration of the linkage between the Vienna
Convention and national law is provided by the law of the United States of America.
The Convention is part of the federal law of the U.S.A. and, as such overrides
Uniform Commercial Code, which is state law in the States which have given effect
to it, according to Article 2(a). The same relationship exists between the CISG and
other national systems of law. Hence, it is necessary in many cases to ascertain the
national law governing the international sales contract, opines Kripke (1982).96

It may be noted that the Convention is a code applicable to sale of goods. The
UCC is a collection of codes and one of these is a sales code. The UCC also contains
rules on letters of credit, methods of perfecting security interests in goods and other
commercial subjects; some of which can also be relevant to sales of goods, according
to Article (1) of International Trade Code, Czechoslovak Socialist Republic.97Legal

94
Schmittoff, C.M (1981) Commercial Law in A Changing Economic Climate 29-31 (2d Ed.).
95
U.C.C. (2000) General Comment of the National Conference of Commissioners on Uniform State
Laws and the American Law Institute, in Uniform Commercial Code 17-18.
96
Kripke H (1982) Principles Underlying the Drafting of the U.C.C., in 1982 Univ. ILL. L. Forum 322.
97
International Trade Code (1963) Former Czechoslovak Socialist Republic, Article 1.

46
historians have also mentioned the pioneering works made by certain earlier
conventions and agencies toward providing an international legal framework for sale
of goods. Prominent among them include - Limitation Convention (1974/1980); the
Hamburg Rules (1978), the UNCITRAL Model Arbitration Law (1985), the
UNCITRAL Bills and Notes Convention (1988), the UN Terminal Operators
Convention (1991), the UNCITRAL Credit Transfer Law (1992), the UNCITRAL
Model Procurement Law (1994), the UN Guarantee and Stand-by Convention (1995),
the UNCITRAL Electronic Commerce Law (1996) and the UNCITRAL Model
Insolvency Law (1997). These efforts were directed at the progressive harmonization
and unification of international trade by coordinating the work of organizations active
in this field and encouraging cooperation among them.

The role of Global Commercial Code in cross-border transactions appealed to

many people for several reasons. The transactions between parties of different
countries created confusion and conflict of interest as to the applicable law governing
the transaction. This situation exists in the world of electronic commerce. Although
transactions occurring over the Internet may be considered ‘virtual,’ in that national
boundaries have little or no effect on the transactions since they practically involve
parties who reside in different countries. Electronic commerce should not be
considered completely detached from the territory of individual countries and
operating exclusively in a lawless cyberspace, comment Edwards and Waelde
(1997).98

In the age of economic liberalization, nations are more prepared to grant

international contracting parties the widest possible autonomy in regulating their
relationships. Nations are generally less determined to impose their own laws to
ensure that their own nationals have the same opportunities enjoyed by their foreign
competitors. This is generally true for all countries with a planned economy. For
obvious reasons, nations cannot impose their own regulations, which are based on a
more or less centralized system of production and distribution, on their foreign trade
partners. Consequently, these nations have no other choice than to accept the idea of
separate legal regimes governing domestic and international transactions. 99 This is
very much true in case of countries which have developed market economy over a

98
Edwards L. and C. Waelde, Law and the Internet: Regulating Cyberspace 3(6):P.94.
99
Chinese Contract Law (1999) Article 38.

47
period of time. The English and German legislatures have taken a less rigid position
on the unfair contract terms in international trade contracts and a more liberal attitude
towards international commercial arbitration, adds Bonell (1997).

Scholars have widely discussed the relationship between the global

commercial code and general contract law and argued that the scope of the Global
Commercial Code should not prevent individual states from applying the Code, either
in its entirety or by chapters, to purely domestic transactions. On the other hand,
parties to international transactions should be free to exclude the application of the
code in its entirety. The remaining issue is whether the parties should be permitted to
make a purely negative choice, by deciding that they do not want the Global
Commercial Code to apply, or whether they should be required to make a positive
choice, by excluding the application of the Global Commercial Code only on
condition that they indicate the domestic law applicable in its place, according to
Bonell (1987)100

Schlechtriem (1998) writes: “Another possibility would be to seek recourse by

internationally accepted principles of contract law as the supplementary source of law
of the Global Commercial Code. The obvious advantage is to obtain a maximum
degree of uniformity, by avoiding the application of principles and rules of domestic
law to transactions otherwise governed by the Global Commercial Code. However,
the notion of internationally accepted principles of contract law is rather vague.
Decisions would emerge on an ad hoc basis with the potential for unpredictable and
arbitrary results. This disadvantage could easily be overcome if the code specifically
referred to the UNIDROIT Principles of International Commercial Contracts”.101

Scholars have commonly agreed that the UNIDROIT Principles are specially
tailored to the needs of international commercial transactions, if not all legal systems.
These Principles cover important issues that are normally neglected in international
uniform law instruments, such as contract formation, validity, interpretation,
performance, non performance and remedies. However, in its entirety, these
Principles represent a comprehensive system of general contract law, which is

100
Bonell, M.J (1987) Uniform Law and Party Autonomy: What is Wrong with the Current Approach?
in International Uniform Law in Practice 433, Acts and Proceedings of the 3rd Congress of the
International Institute for the Unification of Private Law, Rome, September 7-10.
101
Schlechtriem, P (1998) Commentary on the UN Convention on the International Sale of Goods,
p.43-46.

48
particularly suited to serve as the supplemental body of law for the Global
Commercial Code. Practically, the UNIDROIT Principles lack any binding force
since they were prepared by a private group of experts acting under the auspices of an
inter-governmental organization. But, these principles have gained worldwide
recognition in academic circles and in practice even though they do not have punitive
powers. There is a new realization in the world that time has come to proceed beyond
the stage of partial and fragmentary unification and undertake the systematic
codification of at least the basic principles of the law of international trade. This
would lay the foundations for any subsequent regulation of the major legal institutions
pertaining to this law, including those which have already been unified.

2.3. The Influence of the CISG on the Domestic Law

While the obligation to implement the rules of the convention is confined to

the international sale, the opportunity to use the legal work embodied in the
Convention is not so restricted. It is too early to come to conclusions concerning the
Convention’s usefulness for domestic law reform; it must suffice to suggest that the
question should not be overlooked.102

The UN Convention on contracts for the international sale of goods is one of

the most widely ratified treaties all over the world. The successful ratification of this
multilateral treaty is however plagued by a predilection for the application of
domestic law trends and principles in its interpretation. The conflict between domestic
and uniform remedy has been subjected to widespread debates and discussions all
over the world. But it was left unresolved by the CISG in view of the in-built
limitations. The determination of validity was not explored to the fullest possible
extent. The exclusion of validity issues from the unification project was mainly due to
the fear that the harmonization process would be endangered or unduly delayed. The
adoption of the ambiguous term ‘validity’ and the strong internationalist wording of
CISG article 7 point towards the assumption that the drafters sought to balance
parochial interests and internationalist unification goals by adopting a flexible and
elastic concept. The Article also leaves open the means by which uniformity of

102
Honnold, J. (1999), op, cit, p,14.

49
application is to be achieved. But, very rarely do decisions take into account the
solutions adopted on the same point by courts in other countries.103

The schism between civil and common law jurisdictions has for a long time
informed the thrust behind this divide. This is often characterised by judicial decisions
afflicted by domestic approaches and principles. This discourse extrapolates on the
ambivalent nature of the homeward trend, taking into account the role of Article 7 of
the Convention in maintaining a uniform interpretation. This includes considering
evolving judicial interpretation and the logic that informs the disparate obstinacies
behind the CISG. Specialists have noted that international trade requires a greater
flexibility and sensitivity to the legal and commercial backgrounds of each party than
can be provided by domestic law, which by nature is biased towards its own legal
tradition. 104 The CISG is considered to be the most widespread of international
conventions in the arena of substantive law.105

The autonomous rules of interpretation of the CISG are set out under its article
7. According to CISG article 7(1) in the interpretation of a provision of the CISG,
regard is to be had to the unification purposes, the intentions underlying the CISG and
to the observance of good faith. Secondly, if a matter is governed by the CISG, but
not explicitly addressed by it, the gap-filling rule of CISG article 7(2) applies. Gap-
filling means that the issue is to be resolved on the basis of the general principles
underlying the provisions of CISG thus bridging the missing rule. Thirdly, in cases
where the preceding steps do not provide an answer, CISG article 7(2) opens the door
for the rules of private international law and allows recourse to domestic law. The
tension which derives from the limited harmonization intentions of the drafters must
be regarded when applying analogies in borderline issues like mistake. It is widely
agreed that recourse to domestic law can only be sought as an ultimo ratio. Scholars
from all over the world have contributed to improving the understanding of the
interpretative system of CISG article 7 and its interplay with CISG article 4(a).

103
Bonell, Michael Joachim and Fabio Liguori (1997) The U.N. Convention on the International Sale
of Goods: A Critical Analysis of Current International Case Law, Revue De Droite Uniforme, 385.
[Link]
104
Kilian, Monica (2001) CISG and the Problems with Common Law Jurisdictions, Journal of
Transnational Law and Policy, 10:217-220.
105
Koehler, Martin and Guo Yujun (2008) The Acceptance of the Unified Sales Law (CISG) in
Different Legal Systems, Pace International Law Review, 45.

50
 The interpretation of the CISG however continues to be ambivalent amongst
courts of law, scholars and even practitioners. There is a preference for domestic laws
and principles in the interpretation of the convention. This is despite the existence of
Article 7 which provides a guiding framework for a uniform understanding and hence
uniform application and interpretation of the convention.106 Scholars hoped that the
CISG had bridged the gap between the different legal approaches to international sale
of goods since it took into account varied differences between civil and common law
traditions, developed and developing country practices and even capitalist and
centrally planned economies. However the hangovers of common law tradition in
particular continue to manifest themselves in the application of the CISG even among
common law jurisdictions that ratified this international piece of legislation.

Scholars have referred to three different approaches in order to prevent the

conflict of interest between domestic law and uniform law in regard to sale of
international goods. The first method has been described as an ‘autonomous
interpretation’ of the CISG. Scholars have stated that the autonomous approach is
based on a circular conclusion. Practically, the most difficult task for the autonomous
approach concerns the question of how to autonomously ascertain the meaning of
‘expressly provided’ under CISG Article 4(a). The problem with this interpretation is
that CISG Article 4 already gives a positive rule on the sphere of its application: "This
Convention governs only the formation of the contract of sale ...” A reference to the
whole text within the same article would not seem illogical but would be redundant.
There are further problems with the autonomous interpretation. The view taken by the
autonomous approach is that an issue should be reserved to national law only if it is
treated as a question of validity everywhere, i.e. in all or at least in the majority of the
world's legal systems. It must be acknowledged that such comparative approach
would create certainty and predictability in an ambiguous area of the CISG. The
weakness of this method is that the comparative work would lead to a more or less
stable list of excluded issues107.

An even more important criticism against the autonomous interpretation is that

106
Schwenzer, Ingeborg and Pascal Hachem (2009) The CISG Successes and Pitfalls, American
Journal of Comparative Law, 57:457
107
Ferrari (2001) Applying the CISG in a Truly Uniform Manner: Tribunale di Vigevano (Italy),
Uniform Law Review, 1:203-215, available at, [Link]

51
its method of interpreting validity can only lead to majority views. The reliance on
majority views is not in line with the idea underlying the validity exception, i.e., to
preserve singular national interests particularly in regard to issues that involve public
policy. According to the comparative law approach employed by the autonomous
interpretation, matters of public policy can only be taken into account if all or at least
a majority of domestic laws take a similar view on them. As the autonomous
interpretation does not allow recognition of such singular views - which are subject to
a constant process of evolution - it lacks a methodically correct tool for reconciling
the public policy changes arising only in one or a few states. The autonomous
approach is highly valuable in light of the unification goals of the CISG. The
suggestion of a comparative determination of validity, however, poses major practical
problems. Further, the autonomous approach is not adequate where matters of public
policy are treated differently in the majority of countries.108

According to the ‘displacement theory’, domestic remedies are always

excluded if the CISG provides a solution that operates on the same facts. Proponents
speak of ‘cross-references’ of the CISG. The displacement theory employs a
functional view. The test is whether the CISG addresses the operative facts that
invoke the domestic validity rule. In contrast to the autonomous approach, the
displacement reading determines validity from the outside of the CISG, i.e., by
domestic law. The theory mainly relies on a wide interpretation of ‘expressly
provided’. Support for the displacement reading derives from the drafting history.
Akin to the autonomous theory, the displacement reading does not stop the analysis
where the label of validity is attached to a case by a domestic law. Instead, it
emphasises that in drafting the CISG it was sought not to use technical terms but to
provide ‘substance rather than label(s) of law’. According to the displacement
reading, the adjudicating forum applies its own conflict of laws rules for the
classification of validity issues. If it is found that under domestic law the case is one
of validity, the adjudicator has to reconsider whether the domestic validity rule is
displaced by a rule under the CISG that operates on the same facts. Hence, the starting
point is a classification under domestic law. The fact that the determination of validity
is left to domestic law, however, ‘does not open a large door to escape from the

108
Heiz (1980) Validity of Contracts under the United Nations Convention on Contracts for the
International Sale of Goods, [Link]'l L., 640-663.

52
uniform rules.’ Proponents of the displacement reading argue for an extensive
interpretation of the text of the CISG. Compared to the autonomous approach, it is
apparent that the interpretative results will be similar. The method of the displacement
reading, however, is much more likely to find support from practitioners than the
more complex and costly comparative approach that was suggested by the
autonomous reading.109

Scholars have also suggested a ‘balanced reading’ of the validity exception

since the main objective is to duly capture ‘the many factors bound up in the validity
exception’. It promises to consider ‘domestic validity in light of evolving concepts of
public policy and the development of jurisprudence under CISG’. The balanced
approach suggests that the adjudicator should on a case-by-case basis ask whether a
‘particular domestic rule of validity meets the spirit as well as the black letter’ of
CISG article 4(a), on one hand; and, on the other, that the domestic rule should be
examined ‘in light of the evolving international commercial context’. The course of
decision finding can be summarised as a two-step process: first, the issue is classified
under domestic conflict rules. Secondly, where a conflict arises between domestic and
uniform remedies, the domestic rule is re-examined in light of the unification
purposes of CISG. If the domestic rule conflicts with the internationalist concept it
must step back unless the issue is one of those that is left open by the CISG and that
cannot be bridged by gap-filling under CISG article 7(2).110

These approaches have been subjected to critical appraisal by the scholars in

the field of international sale of goods. They have argued that the CISG does not
touch private international law or modify the domestic doctrines of characterisation of
the case. The complete removal of ‘validity’ issues from the realm of the CISG by
those who advocate a domestic law approach is an extreme solution. It leads to legal
uncertainty and does not sufficiently consider the unification goals. Doubts have also
been expressed in regard to the methodological consistency of the balanced approach.
Methodically sound concepts are presented by the autonomous approach and the
displacement reading. The main criticism against these internationalist approaches is

109
Andersen (1999) Is Article 39(1) Truly a Uniform Provision?, Review of the Convention on
Contracts for the International Sale of Goods (CISG), The Hague, 63-176, [Link]
110
Hartnell (1993) Rousing the Sleeping Dog: The Validity Exception to the Convention on Contracts
for the International Sale of Goods, J. Int'l L, 18:1-93.

53
due to their lack of flexibility in regard to matters of evolving public policy.111

The domestic law approach mainly relies on the lack of debate concerning the
distinction between validity and contract formation issues. The analysis of the drafting
history does not support the assumption that CISG article 7 is inapplicable. Therefore
the domestic law approach only delivers an incomplete picture. It falls short of the
interpretation of CISG article 4(a) in light of the unification goals embodied in CISG
article 7. The drafters intended to provide a loophole for domestic law by including
article 4(a) to the text of CISG.112

The problem caused by the domestic law approach, however, is that it does not
provide a rule that solves the conflict between domestic and uniform remedies. It thus
allows parallel availability of the two remedial schemes in cases that under domestic
law raise issues of validity but are also addressed by the CISG. It therefore seems that
history will not repeat itself and the CISG is here to stay however common law
hangovers continue to pose a fundamental threat to its uniform application. Experts
have opined that the CISG created the corollary risk of having a redundant or
‘sleeping treaty’, in particular taking into account opt out options availed in Article 6
of the CISG. In reality, the uniformity and stability are important contractor
preferences and without these fundamental traits it is not possible to prevent certain
uncertainties which could affect the international sale of goods. It is however
important to remember that Article 7 should act as a guide towards uniform
interpretation.

The CISG overrules domestic remedies on initial impossibility and mistake-

based concepts of nullification irrespective of the classification that applies under that
domestic law. In times of mistake regarding the quality of goods, there is a possibility
of parallel applicability of the remedies provided under domestic law and by the
CISG. In practice, a mistaken party will prefer to rely on the damage-based remedial
scheme of the CISG rather than having to endure the uncertainties caused by
avoidance of the contract to the status quo ante. The question whether a domestic
concept of nullification is applicable has, however, evoked extensive discussion all
over the world after the convention. The need for a conflict rule arises only where the

111
Torzillo (2000) The Aftermath of MCC-Marble: Is this the Death Knell for the Parol Evidence Rule,
St. John's Law Review, 74:843-873, [Link].
112
Hartnell (1993) [Link]. at.18:1-93.

54
domestic sales law that is applicable according to the rules of private international law
provides a choice between damage based remedies for breach of warranty and those
that allow nullification for the reason of a mistake.

Zekos (2008) notes: “An agreement by the parties to submit any dispute
between them to arbitration is the foundation stone of modern international
commercial arbitration. International commercial arbitration is consensual: arbitration
only occurs pursuant to an arbitration agreement between the parties. Most arbitration
agreements are included as standard clauses in commercial contracts and provide for
the arbitration of any dispute that may arise in the future between the parties within a
defined category. It is also possible for parties to an existing dispute to agree to settle
their disagreement through arbitration. This agreement must be in writing and
includes an arbitration clause in a contract or an arbitration agreement signed by the
parties or contained in an exchange of letters or telegrams. The Article 2 of the CISG
lays down both maximum and minimum requirements as to the form of arbitration
agreements. The arbitral clause has to be in a contract or agreement signed by the
parties, or contained in an exchange of letters or telegrams”.113

The courts and common law lawyers have particularly been targeted for the
lack of uniformity in the application of the convention. The CISG is still perceived by
the common law legal fraternity as too civil law oriented hence resistance towards it.
This in turn fosters ignorance regarding its application and interpretation eventually
resulting in its incongruent application - the homeward baggage trend. Article 7 of has
been referred to as the interpretation template of the CISG because it: ‘mandates how
the CISG is to be interpreted. Article 7 (1) notes that the international character of the
convention should be taken into account in its interpretation to ensure uniformity this
includes the observance of good faith in international trade. The first part of
subsection one requires the recognition of the international character of the CISG in
its interpretation by domestic courts.

It is from this point that the homeward trend begins to rear its ugly head.114
Scholars have advocated that in interpretation of this Convention, regard is to be had

113
Zekos, Georgios I, (2008) International Commercial and Arbitration, Routledge-Cavendish, Milton
Park, Abingdon, Oxon.
114
Keily, Troy (2003) How Does the Cookie Crumbles? Legal Costs under a Uniform Interpretation of
the United Nations Convention on Contracts for the International Sale of Goods, Nordic Journal of
Commercial Law, [Link].

55
to its international character and to the need to promote uniformity in its application
and the observance of good faith in international trade. Studies have revealed that it
has therefore been more convenient for US courts and lawyers to fall back on the
comfortable position that the CISG does not govern a particular contract. The timid
wording and the varying techniques used in interpreting statutes in different
jurisdictions and legal traditions have forced the judges to take a rigid ethnocentric
view in interpreting a unified document such as the CISG.115

Murray observes: “If a judge in Hungary, the United States or any other
contracting state is to see the convention through an international lens instead of a
lifetime domestic lens, we now know that the typical judge or judicial officer may
require assistance from an international legal ophthalmologist”. 116 The American
advocates have referred to Article 6 and advised their clients to opt out of CISG
because it allows: “The common wisdom among traders and their advisors has been
that the CISG is so new and so different from the UCC and the ramifications of its
provisions are so uncertain that it is sound practice to exercise the option to exclude
it”.117

The domestic courts have adopted a broader interpretation of conventions

since the literal rule is no longer rigidly enforced. This was first observed in James
Buchanan and co Ltd v Babco Fowarding and Shipping (UK) ltd in which Lord
Denning noted that the provisions of the CISG should be given the same
interpretation in all the countries who were parties to the convention. It would be
absurd that the courts of England should interpret it differently from the courts of
France, or Holland, or Germany.118 This position is further reinforced in Fothergill v
Monarch Airlines by Lord Wilberforce. It is imperative to note the role of domestic
law in these cases (common law) in setting the record straight as to how international
conventions should be interpreted. The case laws revealed that a similar proclamation
in a different jurisdiction or international tribunal would have little authority amongst

115
Zeller, Bruno (2006) The Challenge of a Uniform Application of the CISG- Common Problems and
their Solutions, Macquarie Journal of Business and Law, 3:309-311.
116
Murray, John Jr (1998) The Neglect of CISG: A Workable Solution, Journal of Law and Commerce,
17:365- 379, [Link].
117
McMahon, John P (1996) When the U.N. Sales Convention Applies and Some of the Reasons Why
it Matters to You and Your Clients, Pace Database on the CISG and Int’l Com. L,
[Link].
118
Buchanan, James and Co Ltd v Babco Forwarding and Shipping (UK) Ltd 1977, 1 All ER (CA)
Lord Denning MR, All ER 3:1048.

56
sceptics.119 It may be noted that the judicial officer and his/her ideological leaning
remains a fundamental factor with regard to interpretation of statutes and even
conventions. Furthermore, common law courts have at their disposal domestic
legislation and conventions on how to interpret the statutes and treaties like CISG.
Scholars have perceived that judges in domestic courts are not equipped to interpret
the convention in an international light even though the common law jurisdictions
have specific methods for interpreting statutes which generally require narrow
interpretation.

Murray (1988) refers to the contradictory relationship between the common

law and CISG rules thus: “We are struck by a new world where there is no
consideration, no statute of frauds and no parol evidence rule, among other
differences.”120 The unwillingness of common law judges to apply CISG is due to
lack of precedence among common law jurisdictions applying CISG, simply because
common law judges want to get their precedents in first. There is plenty of case law in
non-common law jurisdiction, but it does not seem to carry much authority in
common law courts. 121 The conflict of interest occurs mainly because cross
referencing to other CISG precedents is too difficult and thus the Convention is
simply ignored by courts as well as legal practitioners. This disadvantage could be
over come through re-education or specialization among the judiciary.

Murray, John (1988) states: “CISG is a monumental contribution because it

evidences a willingness of Nation States throughout the world to seek uniformity in a
critical commercial context. The success of CISG could spawn other and more
sophisticated efforts at uniformity with critically important effects well beyond
international trade. at this time, the paucity of case law and the discouraging reaction
of courts that have applied CISG augur a dim future for this noble effort”.122

119
Charlesworth, Hilary et al, (2005) International Law and National Law: Fluid States, in Hillary
Charlesworth and Madelaine Chiam (eds), The Fluid State, International Law and National Legal
Systems,p.1-5.
120
Murray, John E (1988) An Essay on the Formation of Contracts and Related Matters under the
United Nations Convention on the Contracts for the International Sale of Goods, J.L. and Com, 8:11-
20.
121
CISG Database (2000) Participating Countries: Current Status, Trends, [Link].
122
Murray, John E (1988) An Essay on the Formation of Contracts and Related Matters under the
United Nations Convention on the Contracts for the International Sale of Goods, J.L. and Com, 8:11-
20.

57
 Troy Keily (1999) observes: “The principle of good faith is expressly
acknowledged in Article 7(1) since it has always proved to be an elusive and
inherently ambiguous principle. The difficulties around the understanding and
parameters of good faith go all the way back past the CISG drafting period. The
inclusion of good faith in the CISG was a major compromise. This is because of civil-
common law schism with regard to its usage, understanding and interpretation.
German law expects parties to act in good faith before and after a contract is formed
while Italian law considers it an ‘ethical’ obligation”.123 Good faith remains at best
elusive with regard to its application and interpretation as is often the case with legal
principles with fluid boundaries. This vagueness has always informed the English
dissent with the recognition of good faith, particularly its lack of certainty.124 The
judicial administrators have also found it difficult to adopt a general concept of good
faith since the understanding and interpretation of ‘good faith’ has a strong
relationship with attaining ‘uniformity’. It is essential that in interpreting the CISG,
good faith is not applied with domestic concepts and principles in mind. 125 The
reluctance of domestic courts to apply CISG and look to other courts for precedence
in accordance with Article 7 of the Convention is worrisome for the harmonization
efforts of private international law. This might lead to exclusion of common law
jurisdictions in view of disinclination the economically dominant common law
countries. The apparent unwillingness of courts in common law countries to
coordinate with one another is somewhat disheartening.

Paul Amato (1993) argues that potentially important precedents need to so

adequately the court’s reasoning and provide an analysis of the issues decided on.
Amato’s analysis uncovers a major problem with CISG cases namely the inability and
unwillingness of various jurisdictions with different legal cultures to comply with
CISG provision of uniformity of interpretation.126

123
Keily, Troy (1999) Good Faith and the Vienna Convention on Contracts for the International Sale of
Goods, Vindobona Journal of International Commercial law and Arbitration, 1:15-40,
[Link]
124
Zaccaria, Elena (2004) The Dilemma of Good Faith in International Commercial Trade, Macquarie
Journal of Business Law, 1:101-105.
125
Zeller, Bruno (2001) Good Faith –The Scarlet Pimpernel, International Trade and Business Law
Annual, 6:227.
126
Amato, Paul (1993) 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, J.L. and Com,
13:1-29. [Link].

58
 Stoecker (1990) states: “It is pertinent to note that an arbitration agreement
does not merely serve to evidence the consent of the parties to arbitration and to
establish the obligation to arbitrate but it is the basic source of the powers of the
arbitral tribunal. Arbitration offers the parties the opportunity to choose their own
judge, in a way that is not possible in court proceedings. A major weakness of the
arbitral process is the limited powers that the arbitral tribunal may exercise. An
arbitral tribunal must depend for its full effectiveness upon underlying national
systems of law. Powers possessed by arbitrators, whilst adequate for the purpose of
resolving the matters in dispute, fall short of those conferred upon a court of law. If it
becomes necessary for an arbitral tribunal to take coercive action in order to deal with
the case before it, such action must be taken indirectly, through the machinery of the
courts, rather than directly, as a judge may do. The arbitral tribunal cannot bring
multi-party disputes together before it, because only courts of law have power to order
consolidation of actions. The lex mercatoria is utilized primarily by international
arbitral tribunals. The national courts, for their part, must apply state law. State courts
only refer to the lex mercatoria in cases to enforce awards made by arbitration
tribunals”.127

Coe (1997) refers to the international commercial arbitration and national

courts thus: “International commercial arbitration is similar in important respects to
national arbitration. However, international arbitration has several characteristics that
the court ruled that no valid arbitration agreement existed since it could not
unequivocally establish the intention of the parties to that effect from the documents
exchanged among them. The international commercial and marine arbitration
distinguish it from national arbitration. Although international arbitration is a
consensual means of dispute resolution, it has binding effect only by virtue of a
complex framework of national and international law. The disadvantage for
international commercial arbitration of providing a national court with exclusive
jurisdiction is that the court’s view on impartiality and independence of arbitrators
may differ from the views of the courts in other countries. Much of international
commercial arbitration occurs pursuant to institutional arbitration rules. The leading
international arbitration institutions are the International Chamber of Commerce

127
Stoecker, G (1990) The Lex Mercatoria: To What Extent does it Exist?, Journal of Int’l Arbitration,
36:101.

59
(ICC), the American Arbitration Association (AAA), and the London Court of
International Arbitration (LCIA), each of which has adopted its own set of rules
governing the procedural aspect of arbitration. All of these institutes, as well as
another dozen or so less-widely known bodies, supervise arbitrations when parties
agree to dispute resolution under its auspices. Finally, the UNCITRAL Commercial
Arbitration Rules are widely used in so-called ad hoc arbitrations”.128

The legitimacy of international commercial arbitration is no longer built on the

fact that arbitration is informal and close to the needs of business rather noting the
ability of parties to customize arbitration proceedings, pertaining to both substantive
and procedural issues.129

The place of arbitration determines the procedural law applicable to the

arbitration and the extent of the intervention of national courts. The lex arbitri, also
known as the lex loci arbitri is the law governing the arbitration and all matters
relating to the conduct and procedure of the arbitration are subject to this law. The lex
arbitri may be a different national law than that governing the substance of the parties’
dispute or governing the arbitration agreement. At the beginning of the arbitral
process, both under domestic legislation and under international treaties, such as the
NYC, it is the courts – and not the arbitrators – who enforce the agreement to
arbitrate. At the end of the process, it is the courts that enforce the arbitral award.
Consequently, although parties tend to agree to arbitration only if the place of
arbitration is in the territory of the state of the party concerned.130

Marchac (1999) adds: “In arbitral proceedings, the need often arises for
provisional remedies or other interim measures of relief because arbitral proceedings
are no less adversarial than litigation in public courts. Provisional remedies and
interim relief come in many forms, depending on the parties involved and context of
the dispute and most often these remedies entail either the seizure of property, often
called attachments or holding orders, or interim orders, also known as injunctions
preventing dissipation of the property or to preserve the condition of the property for
future inspection and so preserving the status quo between the parties pending the

128
Coe, Jack J. Jr., (1997) International Commercial Arbitration: American Principles and Practice in A
Global Context, 59–60.
129
Oppetit, Bruno (1993) Philosophie de l’arbitrage commercial international, J. De Droit Int’, l819.
130
Reisman, Michael, W. (1992) Systems of Control in International Adjudication and Arbitration,
107.

60
resolution of the merits of their dispute. Issues frequently arise as to whether arbitral
tribunals or national courts have the power to order such relief. The arbitral tribunal
looks to the set of arbitration rules under which it is operating to determine if such
jurisdiction is granted. Some arbitral tribunals grant interim measures, others
explicitly do not, and many arbitral tribunals direct parties to national courts for
resolution of interim awards. Tribunals refer parties to courts because arbitral
tribunals possess no coercive power for enforcement of their interim orders, and
because provisional remedies can only be properly enforced through the court system.
The UNCITRAL Arbitration Rules contain a single provision that explicitly permits
arbitral tribunals, as well as courts, to order interim measures of protection, but the
rules provide no coercive power to the arbitral tribunal for enforcement of any interim
measures of relief”.131

The requirement for the arbitration agreement is stated in Article 7(2), but the
definition of writing is broadened and adapted to modern commercial practices in
comparison to Article II(2) of the NYC. Article 8 of CISG provides for the court to
refer the parties to arbitration, unless the agreement is found null and void,
inoperative or incapable of being performed, which parallels Article II(3) of the NYC.
The Model Law allows the arbitration to proceed while the issue is pending before a
court. Article 9 sets forth the grounds for court-ordered interim measures. Arbitration
has to function as an autonomous dispute system from domestic judicial systems. The
Model Law provided a reduced role for local court supervision over international
arbitrations, but it has not shaped arbitration as a fully independent and autonomous
dispute mechanism.132

Some US courts have ruled that provisional relief is not available from a court
when the parties have provided for arbitration. In Cooper v Ateliers de la
Motobecane, S.A.17 the New York State Court of Appeals interpreted the NYC as
purportedly requiring courts seized of matters that are the subject to agreements to
arbitrate to refer the matter to arbitration without addressing the substance of those
matters. The court also held that coercive remedies and other court-ordered

131
Marchac, Gregoire (1999) Interim Measures in International Commercial Arbitration under the ICC,
AAA, LCIA, and UNCITRAL Rules, Am. Rev. Int’l Arb, 10:123-125.
132
Holtzmann, H and J. Neuhaus, (1989) A Guide to the UNCITRAL Model Law on International
Commercial Arbitration: Legislative History and Commentary.

61
intervention available only through courts may often facilitate the arbitration process
rather than denigrate it and are not necessarily inconsistent with referring the merits of
the dispute to arbitration. To make arbitrations effective, it is vital to put into
operation some mechanism that can ensure that interim measures can be properly
granted and enforced by the arbitral tribunal. Is it necessary for the NYC to be
amended to include a specific provision mandating arbitral tribunals as co-equal to
courts bound by the treaty and to also recognize and enforce interim measures of
relief? Ideally, the handling of arbitral disputes should resemble a relay race. In the
initial stages, before arbitrators are seized of the dispute, the baton is in the grasp of
the court: for at that stage there is no other organization which could take steps to
prevent the arbitration agreement from being ineffectual. When the arbitrators take
charge they take over the baton and retain it until they have made an award. At this
point, having no longer a function to fulfill, the arbitrators hand back the baton so that
the court can lend its coercive powers to the enforcement of the award.133

Scholars have argued that the relationship between courts and arbitration
should not give rise to any significant conflict. International commercial arbitration
depends for its effectiveness upon the support of the law of the place of arbitration,
which might be a local law or a national law. There is an interchange between the
arbitral process and national law, which is fundamental to a proper appreciation of
international arbitration. The states assist international commercial arbitration since
they are bound to do so by the international conventions to which they are parties.
Under normal circumstances the states are entitled to exercise control over arbitration
on a territorial basis on two grounds namely conduction of arbitrations in a state’s
territory and bringing out the awards into the territory of the state concerned for the
purpose of recognition and enforcement.

Want (2003) states: “The dependence of international commercial arbitration

upon national systems of law is clearly understood in the context of the recognition
and enforcement of international awards. A series of reforms have made international
commercial arbitration noticeably more transparent, meaning that the rules that
regulate decision-making are more ready available to interested parties, who in this
instance are the users of the system. The national legislation and international

133
Johnson, Adam (1997) Interim Measures of Protection under the Arbitration Act 1996, INT. A.L.R:
9–14.

62
instruments, particularly the NYC particularly require arbitration agreements and
clauses to be recognized and given effect to by courts and the resulting awards to be
enforced internationally by national courts.134

The arbitration rules are routinely updated to adjust to changes in the business
climate. The power to enforce an award against a reluctant party is a power that forms
part of the prerogative of the state and it is not a power that is possessed by an
arbitrator, which shows that arbitration has not established itself as a co-equal to
courts’ dispute mechanism. The enforcement of awards must take place through the
national court at the place of enforcement, operating under its own procedural rules,
which vary from state to state. The effect of the international conventions has been to
secure a considerable degree of uniformity in the recognition and enforcement of
awards.

Most national courts regard arbitration as an appropriate way of resolving

international commercial disputes and seek to give effect to arbitration agreements
wherever possible, rather than seeking to narrow the scope of the agreement so as to
preserve the court’s jurisdiction. An arbitrator is likely to consider that it would be
sensible to try to resolve all the parties’ claims in the same set of proceedings. A
national court will also have in mind that, unlike an arbitral award, its judgment might
set a precedent for the future. General words such as disputes, differences and claims
have been held by English courts to encompass a wide jurisdiction in the context of
the particular agreement in question. In the US, the words controversies or claims
have been held to have a wide meaning. The words any controversy or claim arising
out of or relating to this agreement were described as a broad clause. Linking words
such as in connection with, in relation to, in respect of, with regard to and arising out
of is important in any dispute as to the scope of an arbitration agreement, which
means that these type of words will apply to all disputes that can be submitted to
arbitration. Local project participants and government agencies have employed local
court orders to delay or block international arbitration proceedings in several cases.
Modern international arbitration outcomes are more like judicial outcomes in that they
are produced by an objective tribunal’s reasoned application of established rules to
facts. Courts must enforce foreign awards as they would domestic ones.

134
Want, William (2003) International Arbitration: The Need for Uniform Interim Measures of Relief,
J. Int’l L, 1059.

63
 Many developed legal systems enforce foreign judgments either pursuant to
treaty or as a matter of discretionary comity and courts enforce arbitral awards
without examining their merits. Principles of comity (absence of fraud, public policy
violations and conflict with a prior judgment or forum selection agreement, as well as
the foreign court’s impartiality, jurisdiction and granting of due process and proper
notice) call for recognition of foreign judgments on condition that there be no serious
procedural irregularity or violation of public policy.

Carbonneau (1990) remarks: “International arbitration relies on national courts

to enforce the arbitration agreement and the arbitrators’ award, which means that the
indispensable role of national courts as enforcers and overseers is in conflict with the
all-important goal that arbitration proceedings be insulated from national legal
systems to retain their neutrality. There is therefore a need to strike a balance between
arbitral autonomy and minimum competence for national judicial review. National
laws often authorize courts to interfere ‘in aid of arbitral proceedings,’ parties may be
able to persuade national courts to intervene to resolve ethical conflicts or rule on
charges of ethical misconduct. National court review is limited to severe procedural
defects or encroachments on the public policy of the national law of the reviewing
court”.135

The US has developed autonomous common law jurisprudence and therefore

its legislation and courts appreciate the concept of good faith. The Uniform
Commercial Code (UCC) defines good faith as: ‘honesty in fact in the contract or
transaction concerned’. Other less autonomous common law jurisdictions have also
began to embrace the need for good faith contrary to the English position. This was
evident in Renard Constructions (ME) Pty v Minister for Public Works in which
Justice L J Priestly proposed that Australian law has reached a point where it should
consider the implied inclusion of concepts similar to good faith in contracts as is done
in the US.136

Article 7(2) of the CISG deals with gap filling provisions since the CISG is
unable to govern all conceivable matters in relation to sales law. This explains Article
7 (2) which seeks to fill in these gaps and indirectly attempts to clarify the

135
Carbonneau, Thomas E. (1990) The Remaking of Arbitration: Design and Destiny, In Lex
Mercatoria and Arbitration, p.10.
136
Renard Constructions (ME) Pty v Minister for Public Works (1992) 26 NSWLR 234, 268.

64
relationship between CISG and domestic law. In an attempt to ensure uniformity it is
imperative to restrict the use of domestic law in the gap filling process. Domestic law
should only be considered when dealing with matters that have been excluded from
the CISG which Zeller refers to as ‘external gaps’. This is often regarded as the final
step in interpretation of the CSIG after the provisions of the CSIG and principles of
the CSIG have been considered and found to have failed.

Article 74 of the CISG governs the measuring of damages in case of a breach.

The law of contract damages continued to remain as a debatable subject concerning
the common and civil law across the world. Djakhongir Saidov and Ralph Cunnington
(2008) attribute three important reasons in this regard thus: “First, much of the interest
stems from the close connection between the law of damages and the wider policies
and purposes pursued by the law of contract. Secondly, it is clear that the existence of
remedies and, in particular, damages is vital for the effective operation of contract
law. Without effective remedies, the law of contract would lose much of its force and
value, and the market economy, which it aims to support and facilitate would be
substantially undermined. Thirdly, in the context of commercial contracts, there can
be little doubt that damages are the most commonly claimed remedies. This is due, in
part, to the common law’s position that damages are the primary remedy for breach of
contract. In recent years, the challenge to understanding contract damages has
increased significantly with the emergence of development law of international
instruments such as CISG, UNIDROIT Principles and PECL”.137

Coote (1997) advocated that contractual obligations are legal obligations only
to the extent that they are enforced by the law. 138 In the absence of, effective
remedies, the purpose of CISG stands defeated. The affected buyers can claim the
benefit of damage according to Article 74 of CISG. This is contrary to the American
rule in relation to legal fees and expenses in which parties bear their own litigation
cost. Most European courts however have accepted the loser pays approach in which
the losing party pays up. The US Judge Posner reversed this principle in a decision in
the US Court of Appeal which attracted a flood of criticism from the advocates of

137
Saidov, Djakhongir and Ralph Cunnington (2008) Introductory Note, Contract Damages: Domestic
and International Perspectives, Oxford and Portland, Oregon, p.1-2.
138
Coote, B (1997) Contractual Damages, Ruxley and the performance interest, pp.537-541.

65
CISG.139 Scholars Flechtner and Lookofsky have however argued in defence of Judge
Posner noting that the Zapata ruling was grounded on an application of the governed
but not settled provision in Article 7(2).140

The Parole Evidence Rule states that oral or any other extrinsic evidence
cannot be permitted to alter, contradict or explain terms of a written contract.141 The
Article 8 (3) in relation to Article 8(1) provides for the opposite and states that: ‘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’ It has often been held that Article 8
(3) therefore overrides the parole evidence rule commonly found in common law
jurisdictions. The eventual manner in which Article 74 has been interpreted would
have been the cause of much discomfort during drafting and negotiations if US
delegates who had foreseen certain limitations in this regard.

Enderlein and Maskow (1992) observe: “The application of the provisions of

CISG primarily depended on different interests of the States conditioned by
contradictions and/or differences in their socio-economic structures, political system,
economic order, foreign trade system, cultural ethos and legal traditions. No
settlement could be reached on a number of issues under the provision of Article 4 on
account of these differences. It will be necessary to apply national law in addition to
standardized law for a relatively long period of time regarding the problems that need
to be given over to national law. This is not a question of a conflict of laws in the
traditional sense, for the limits of legal spheres are to be determined rather than those
of national laws; and the national sphere consists of the individual national legal
systems among which a choice must be made in a conflict of laws. In general, the
international sales law takes precedence over the national law of the Contracting
States. In this sense it should be interpreted in a tenable but broad manner.142

139
Dixon, David (2007) Que Lastima Zapata! Bad CISG Ruling on Attorneys Fees Still Haunts U.S
Courts, University of Miami Inter- American Law Review, 38:405-422.
140
Dixon, David (2007) [Link]. p. 421.
141
Cross, Karen (2007) Parol Evidence Under the CISG: The Homeward Trend Reconsidered, Ohio
State Law Journal, 68: 145.
142
Enderlein, Fritz and Dietrich Maskow (1992) United Nations Convention on Contracts for the
International Sale of Goods Convention on the Limitation Period in the International Sale of Goods,
Oceana Publications.

66
 According to the new special supporting convention (Hague Convention on
the Law Applicable to Contracts for the International Sale of Goods, 1986), CISG
itself settles problems of conflict of laws by some of its provisions which bear not
only secondary character. The gradual shaping of the international sales law
obliterates the traditional problem of the conflict of law, as far as the standardization
extends with regard to subject and territory. On the other hand, it creates the problem
of determining the boundaries of international and national law, simply because trade
law does not yet form an integrated system. The combined application of norms of
both spheres to the same subject matter causes a special form of cleavage of statutes.
Such evolutionary problems can and must be put up with during a longer transitional
period.

Experience reveals that the US comes under scrutiny because it has a

relatively complex parole evidence rule that has developed over the years and
continues to evolve. Furthermore US courts initially reacted by completely ignoring
Article 8 (3) of the CISG and opted to apply the parole evidence rule in Beijing
Metals & Minerals v American Business Centre Inc and MCC-Marble Ceramic
Centre Inc v Ceramica Nouva D’Agostino SpA (MCC-Marble). In the former case the
court noted that the parole evidence law would apply regardless of whether Texas law
or the CISG applied. In the latter case the court declined to allow evidence in the form
of affidavits admitted to alter the written terms of a standard contract-essentially the
parole evidence rule. These judgments revealed the homeward trend which is
precipitated by courts hangover with common law tradition and ignorance.

In times of conflict of interest, judicial authorities have strongly argued for

parallel application of domestic and uniform remedies as a logical continuation of the
position under various domestic laws in Austria, France, Switzerland, United States
and other nations. The avoidance of the contract according to domestic law occurs in
case of a mistake in the expression of a correctly formed intention and mistake in
regard to the identity of the other party or of the goods. The recourse to a domestic
nullification remedy is attractive in cases where the breach is not fundamental. If
domestic law is applicable, and a relevant mistake in regard to characteristics of the
other party can be proven, the party can nullify the contract and thus evade the favor
contract scheme of the CISG. The internationalists have advocated an autonomous or
displacement interpretation of CISG article 4(a) since the CISG's rules are exhaustive.

67
This principle also applies in situations of a breach of obligations which are either not
expressly regulated by the CISG or to which the parties have made the CISG
applicable. Despite the limitations, a remarkable level of unification has been
achieved under the CISG over a period of time.

Flechtner (1995) analyses the pitfalls for the practitioner and the potentials for
regionalized interpretations thus: “In view of the international aim of CISG, the
current trend towards regional interpretation is unfortunate, given that a large number
of countries representing a variety of legal systems have adopted the convention. The
authority of precendents will be crucial in determining the direction of CISG. Given
the fact that CISG decisions are likely to differ dramatically from one jurisdiction to
the next because they stem from different legal cultures, courts are hesitant to
consider foreign decisions authoritative”.143

It should be noted that the whole problem only arises where there is a conflict
of interest between domestic law and the CISG since the domestic law provides for
nullity in a case which the CISG would treat in terms of its uniform remedial scheme.
The buyer is required to give timely notice to the seller as per Article 39 of CISG in
order to claim damage. In the absence of suitable action, the buyer is most likely to
rely upon a domestic remedy. Hence, conflict of interest naturally arises in an area
very central for the harmonization effect of the CISG. Scholars have concluded that
the homeward trend poses series of threats to the provisions of CISG since they create
instability, uncertainty and insecurity especially to the buyers in times of conflict of
interest between domestic and international sales laws. Studies have estimated that of
the lawyers who choose to opt out of the CISG 77 percent are American, 55 percent
Australian, and 42 percent are German lawyers.144

Van Alstine (1998) suggests: “The CISG will eventually dissipate the
centrifugal force of domestic social and legal traditions since it has its own magnetic
pull”.145 Flechtner (1995) concludes: We are passing beyond the childhood of CISG
jurisprudence and beginning to enter its adolescence – a period troubling and
unsettling, but also exciting and crucial to the ultimate success of the venture”.

143
Flechtner, Harry M (1995) Another CISG Case in the U.S. Courts: Pitfalls for the Practitioner and
the Potentials for Regioanlised Interpretations, J.L. and Com, 15:127-133.
144
Berger, K.P (2007) Transnational Commercial Law in the Age of Globalisation, [Link]
145
Van Alstine, Michael P (1998) Dynomic Treaty Interpretation, [Link]. L. Rev, 146:687.

68
 It is however clear that several factors have played a role in obstructing the
much needed role of uniformity. The judges are required to overcome intellectual
stubbornness and domestic law hangovers in order to facilitate meaningful delivery
system and strengthen the foundations of CISG. Scholars have stricken an optimistic
note that all contracting states will make an effort towards accelerating the
harmonization of international trade law since harmonious international trade is
doubtlessly an asset to sustainable trade relations between states. CISG is an ideal
platform to demonstrate the willingness to work towards unification of international
law. CISG also has broader acceptance than one might imply judging from case law
alone.

2.4. Formation of the Contract in CISG

Articles 14-24 of CISG enumerate the provisions for the formation of the
contract. However, the concepts which are employed are analogous to common law
concepts. The terms offer and acceptance are used but they need not be taken has
being synonymous with the common law terms.

Article 14 provides that a proposal must be sufficiently definite if it indicates

the goods and expressly or implicitly fixes or makes provision for determining the
quantity and the price. Article 14 states that a proposal other than one addressed to
one or more specific person is to be considered merely as an invitation to make offers,
unless the contrary is clearly indicated by the person making the proposal. Thus, an
offer should be directed at the persons who will come forward to supply the goods.

Article 15 (1) clearly states that an offer becomes effective when it reaches the
offeree. This provision approximates the common law requirement that the offer must
be communicated properly. Article 15(2) states that an offer can be withdrawn, even
if it is irrevocable, if the withdrawal reaches the offeree before or at the same time as
the offer. There is no requirement that the offeree has given consideration for the offer
to the irrevocable.

Article 16(1) states that an offer may be revoked if the revocation reaches the
office before the latter dispatches an acceptance. Article 16(2) stipulates that an offer
cannot be revoked if it indicates, whether by stating a fixed time for acceptance or
otherwise, that it is revocable or 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.

69
 Article 17 establishes that an offer, even if it is irrevocable, is terminated when
a rejection reaches the offer. However, a counter-offer will not necessarily constitute a
rejection and thus terminate the offer.

Article 18 deals with the acceptance of goods. Article 18(1) states that a
statement or other conduct by the offeree indicating assent to the offer is an
acceptance. It does not require that the acceptance be in reliance on the offer, but this
is implicit in the notion of assent. Article 18(2) states that the acceptance of an offer
becomes effective at the moment the indication of assent reaches the offerer. Thus, a
party cannot deem another to be party to a contract, if the latter does not respond to
the first party’s offer by a fixed term.

Article 19 deals with the counter-offer. It states that a counter offer will not
necessarily constitute a rejection and thus terminate the offer. It also reveals that 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 also constitutes an
acceptance. If the party does not so object, the terms of the contract are the terms of
the offer with the modifications contained in the acceptance. Article 19(3) enumerates
a list of material alterations of the offer including price, payment, quality and quantity
of goods. Thus, Article 19 provides for a regime quite different to that existing at
common law. This would save purported contracts, but only when the points of
difference concern non-material matters.

Article 20 deals with the ancillary matter i.e., the commencement of the period
of time fixed by the offerer for acceptance and the impact of official holiday’s non
business days on the calculation of these periods. Article 20(1) states that a period of
time for acceptance fixed by the offerer by telephone, telex or other means of
instantaneous communication begins to run from the moment the offer reaches the
offeree. Article 20(2) provides that official holidays or non business days occurring
during the period for acceptance are included in calculating the period. If the last day
of the period happens to be an official holiday is non business day, the period is
extended until the first business day which follows.

Article 21 deals with the expiry of the offer period. Article 21 (1) states that a
late acceptance is nevertheless effective as an acceptance if without delay the offerer
orally so informs the offeree or dispatches a notice to that effect. Article 21(2)

70
provides that if a letter or other writing containing a late acceptance shows that it has
been sent in such circumstances that the offerer orally informs the offeree that he
considers his offer as having lapsed or dispatches a notice to that effect.

Article 22 deals with the acceptance of the goods or withdrawal of the goods.
It states that an acceptance may be withdrawn if the withdrawal reaches the offerer
before or at the same time as the acceptance would have become effective. In case of
common law, the acceptance would become effective and create a contract at the
moment of its posting – thereafter there could not be a withdrawal of acceptance.

Article 23 deals with the time of contracting. It states that a contract is

concluded at the moment when an acceptance of an offer becomes effective in
accordance with the provisions of the convention.

Article 24 deals with the concept of reach as applied to communication. It

states that 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 habitual residence. It
is the offerer who is potentially most at risk, in problem cases which might be
hypothesized about in light of a provision like Article 24.

2.5. Uniformity and the CISG

The CISG is a uniform international sales law but logically it is impossible to

isolate problems of uniformity. In reality the law is applied by the human beings who
are influenced by their own concepts of justice and legal systems. Variation occurs
because the people applying the convention represent different cultures and legal
backgrounds. The interpretation of the convention can vary immensely. The question
of uniformity assumes great significance since uniformity is demonstrated in legal
equality than harmonization. George Orwell observes: “Everyone is created equal, but
some are more equal than others. This comment applies to the question of uniformity
in the CISG since the laws differ greatly according to their setting, drafting and
general traditions.

Anderson (2001) emphasizes the need for uniformity thus: “Global

harmonization, uniformity and equalization are all very much buzz words when it
comes to international law – especially where international sales law is concerned –
and justifiably so. The reason for the popularity of these concepts is the need to

71
promote similar or equal rules and regulations which will enable certain predictability
in contracts. As the world grows ever smaller in terms of trade, travel and
communication, people from different countries and continents become even more
likely to enter into contractual relationships, and this needs to a need to know the legal
basis to enter into contractual relationships, and this leads to a need to know the legal
basis of the contracts in question; a need for predictability. In short, a need for
international similar rules is created by the need to foresee the basis of different
contractual situations, for contracting parties to be able to meet on ‘common
ground’.146

DiMatteo [Link]. (2005) have dealt with the principle of uniformity since it has
been subjected to extensive debate. They observe: “The success of the CISG should
be measured using a standard of relative uniformity or a standard of the lessening of
legal impediments to trade. Thus, a relative or useful level of uniformity should be the
benchmark to measure the success of the CISG which is referred to as mere specific
goal uniformity’ by Miller. The uniformity mandate itself indicates that strict
uniformity is not a realizable goal. Instead of using active words like establish or
create, the CISG merely states the ‘need to promote uniformity in its application’.
The benchmark of relative or useful uniformity is superior to the previous system of
private international law characterized by the full panoply of different domestic laws
and systems”.147 The CISG has to be interpreted on the basis of its uniqueness rather
than its similarities to any other legal systems. The CISG’s interpretative
methodology needs to be characterized as code-like. The problems of interpretation
such as gaps in the code need to be solved by means internal to the code since it fails
to fulfill the requirement of comprehensiveness. The CISG invites the interpreter to
construct autonomous interpretations through its use of nomenclature independent of
any domestic legal system. The most profound evidence of the move toward the
unification of sales law is the adoption of the CISG which is the latest attempt at
codifying the lex mercatoria for international sale of goods.

146
Anderson, Camilla Baasch (2001) Uniformity in the CISG in the First Decade of Its Application, in
Ian Fletcher, Loukas and Marise Cremona (eds) Foundations and Perspectives of International Trade
Law, London: Sweet and Maxwell, 289-309.
147
DiMatteo, Larry A, Lucien J. Dhooge, Stephanie Greene, Virginia G. Maurer and Marisa Anne
Pagnattaro (2005) International Sales Law: A Critical Analysis of CISG Jurisprudence, Cambridge
University Press, UK, p.10-11.

72
 Munday (1978) states: “Even when outward uniformity is achieved, uniform
application of the agreed rules is by no means guaranteed, as in practice different
countries almost inevitably come to put different interpretations upon the same
enacted words”.148 There are two extreme views on uniformity of CISG. One school
of thought perceives that uniformity of CISG cannot be brought about since it
contains different autonomous interpretations. The other school of thought perceives
that the universality of commercial practice provides the opportunity to structure a
uniform law of international sales premised upon the commonality of practice. The
middle view is that absolute uniformity of application should not be the test to
measure the success of any international law. DiMatteo [Link]. (2005) advocate that a
common discourse or relative uniformity of application is a more appropriate
measurement.149

Flechtner (1998) notes: “Perhaps the single most important source of non-
uniformity in the CISG is the different background assumptions and conceptions that
those charged with interpreting and applying the convention bring to the task”.150
Bailey (1999) has pointed out that the CISG drafters were aware and concerned by the
problems of homeward trend. It is especially important to avoid differing
constructions of the provisions of this convention by national courts, each dependant
upon the concepts used in the legal system of the country of the forum. 151 This
argument has been placed since the homeward trends reflects the fear that national
courts will ignore the mandate of autonomous international interpretations of the
CISG in favor of interpretations permitted with domestic gloss. Murray, Jr (1999) has
noted that it is most difficult for a court to transcend its domestic perspective and
become a different court that is no longer influenced by the law of its own nation
state.152

148
. Munday, R.J.C (1978) The Uniform Interpretation of International Conventions, Int’l and Comp.
L.Q, 27:450.
149
DiMatteo, Larry A, Lucien J. Dhooge, Stephanie Greene, Virginia G. Maurer and Marisa Anne
Pagnattaro (2005) op.,cit. p.2.
150
Flechtner, Harry M (1998) The Several Texts of the CISG in a Decentralised System: Observations
on Translations, Reservations and Other Challenges to the Uniformity Principle in Article 7, J.L. and
Com, 17:187.
151
Bailey, James E (1999) Facing the Truth: Seeing the Convention on Contracts for the International
Sale of Goods as an Obstacle to a Uniform Law on International Sales, Cornell Int’l L.J, 32:273.
152
Murray, Jr, John E (1999) The Neglect of CISG: A Workable Solution, J.L. and Com, 17:365-367.

73
 The harmonization and uniform rules for international sale of goods are
absolutely justifiable. Scholars have advocated that rules of international sale of goods
which are uniform must be interpreted in a uniform manner before all courts globally.
Practically, achieving the goal of perfect uniformity is a utopian idea in view of the
presence of diverse legal traditions in general and individual subjectivity of judicial
authorities in particular. The goal of interpretation does not become a possibility since
uniform laws apply across boundaries of different social, cultural, historical and legal
backgrounds. Interpretation is normally subject to methods which are used for
domestic law but there are no uniform methods for the interpretation of international
uniform law. The house of laws in a case contended that the interpretation of
international conventions should be performed cautiously at least under historical
aspects.153

The CISG fills the gaps in the contract between parties – there is a firm
hierarchy in the convention of i) contract, ii) customs in trade and iii) convention
provisions, which are gleaned from Articles 6 and 9. Practically, any trade contract
can merely agree to ignore the CISG, or agree on the terms which will overwrite it (by
way of Article 6) and existing trade with established trade customs will automatically
over rule any gap-filling rules of the convention (by way of Article 9). Under these
circumstances, the openness to diversity by means of party autonomy and trade
usages pose threats to uniformity since it hinders predictability since predictability of
the contract for third parties is not an issue with which the CISG is concerned.
Sundberg (1963) long ago stated that a margin of imperfection is not a defect with
regard in uniformity as long as it does not encourage forum shopping.

Anderson (2001) enumerates the categories of uniformity problems thus: “The

sphere of application of the convention does not even apply to the same cases in the
different member states. In respect of software goods, the security of both buyer and
seller becomes a matter of concern. The domestic influence on uniform law is felt
throughout many of the problems of uniformity including the instances of vague terms
and the interpretation of the more flexible provisions. The gaps in CISG provisions
which are within the sphere of the convention are to be resolved either via otherwise
applicable law or general principles. On top of these options, some courts have

153
House of Lords (1980) observation made in Fothergill v. Monarch Airlines Ltd 2 All E.R. 696.

74
referred to standard gap – fillers such as the UNIDROIT principles in lieu of CISG
solutions”.154

The national courts are required to review holdings of foreign courts and
arbitration panels for insight in rendering well-reasoned decisions for the sake of
uniformity. The failure of the national courts to review existing cases naturally results
in rendering a decision without the guidance provided in the cases dealing with the
determination of fundamental breach.155 It is appropriate that national courts rely upon
foreign decisions for appropriate guidance and support in order to facilitate the
uniformity of CISG. The courts should also follow the precedents of foreign case law
of higher courts which present authoritative comments and criticisms regarding the
resolution of disputes concerning the sale of goods.

Anderson (2001) has also referred to the role of case law and judicial
authorities in the application of the convention which influence its uniformity. He has
pointed out that in respect of two cases out of 500 cases, the judge’s referred to
international case law while examining the question of application of CISG.156 The
statistics reveal that CISG issues could not be adequately dealt in matters concerning
sale of goods mainly due to inadequate availability of case laws, language barriers,
legal traditions and so on. The absence of an international court of law, official
monitoring mechanism and legal watch dog system has hampered the emergence of
uniform approaches. Scholars have noted that in case of international sales contracts
lying outside the scope of application of CISG, the UNIDROIT principles could be
utilized since both are complementary instruments from the point of view of
achieving the goal of uniformity of the CISG.

The courts are free to disregard foreign cases that demonstrate poor reasoning
but should review CISG jurisprudence before rendering decisions. The national courts
have a duty to review all relevant cases on the contested legal issues in order to
provide appropriate decisions which are in accordance with the principles of CISG.
DiMatteo [Link]. (2005) endorse this perception thus: “Courts should serve two primary
functions in their roles as informal appellate courts. First, they would look to

154
Anderson, Camilla Baasch (2001) [Link]. 289-309.
155
Romito, Angela Maria and Charles Sant’ Elia (2002) Case Comment, CISG: Italian Court and
Homeward Trend, Pace Int’l [Link], 14:179-195.
156
Anderson, Camilla Baasch (2001) [Link]. 289-309.

75
decisions of foreign courts for guidance. Second, they should actively unify
international sales law by distinguishing seemingly inconsistent prior decisions and by
harmonizing differences in foreign interpretations”.157

Ferrari (1998) strongly criticizes the binding precedent thus: “First from a
substantive point of view, stating that uniform case law should be treated as binding
precedent does not take into account that a uniform body of cases does not per se
guarantee the corrections of a substantive result. Second, from a methodological point
of view, the suggestion to creat a supranational stare decisis must be criticized, since
it does not take into account the rigid hierarchical structure of the various countries’
court systems”.158 The serious reservations and objections about the CISG are bound
to fade with time as a body of case law builds around the convention since the
existence of different national legal system impedes the development of healthy
international economic relations. Steyn (1994) strikes a note of confidence by saying
that the CISG will tend to reduce differences and to eliminate uncertainty.159

Scott (2001) states: “The pressure to formulate rules that will be uniformally
adopted distorts the rules themselves in ways that may, quiet perversely, undermine
the very objective of a uniform law in the first instance. Formal uniformity or
adoption uniformity is gained with a loss of predictability or uniformity of
application”.160

Experience reveals that the CISG has worked to harmonise international sales
law despite the production of divergent interpretations and failing the test of absolute
uniformity. Scholars have upheld the validity of CISG which has the overall purpose
of standardizing various laws relating to international sale of goods which are above
that of national law. This standardization provides the crucial advantage of preventing
the never ending conflict of laws among nation’s states. The presence of two laws
(international and domestic) often produces conflict of interest even though the
principles of CISG need to be incorporated and applied by national courts. There is
consensus among the champions of CISG who support the middle view regarding the
uniformity of CISG. They have advocated that the likelihood of substantive

157
DiMatteo [Link]. (2005) [Link]. p.136.
158
Ferrari, Franco (1997) The CISG and The Presumption of Enforceability: Unintended Contractual
Liability in International Business Dealings, Yale, J. Intl L, 22:111-133.
159
Steyn, Johan (1994) A Kind of Esperanto? in Peter Birks (ed) The Frontiers of Liability, 14-15.
160
Scott, Robert (2001) Is Article to the Best We Can Do?, Hastings L.J, 52:677.

76
uniformity of application is unrealistic but the utter failure of the CISG as a means of
removal of legal impediments and standardization of international sale of goods is
equally implausible. There is no dearth of jurisprudence of CISG but absolute
uniformity of application brings about harmonious and judicious international sale of
goods. The advocates of the CISG have hoped that a solid jurisprudential framework
will develop in which national judges will effectively manage with the standardizing
rules independently of the influence of divergent domestic laws.

2.6. Interpretation of the CISG

The adoption of the principles and practices of CISG would go a long way in
promoting fair and mutually beneficial commercial relations. It is a matter of
judgment and disputed opinion to attempt to describe the fundamental principles
underlying a particular legal regime. Unification of the law relating to the
international sale of goods assumes great significance in the present times. Scholars
have pointed out that there is a strong convergence between CISG and arbitral norms.
Studies have revealed additional interpretation challenges through the mismatch
between common law drafting norms and CISG principles which deal with
substantive rights and obligations in any international sales contract. The member
states are required to ensure consistent and constructive approaches to successful
acceptance and application of international uniform law instruments. The uniform
interpretation of laws becomes the most decisive factor to achieve uniformity and
prevent conflict of interest. The CISG should not be read like a normal domestic
statue but interpretation of the convention requires a more holistic approach.

In reality, the principles which are not part of the CISG cannot be used as tools
of interpretation. Besides this, the provisions of CISG consist of improved versions
when compared to the previous conventions and treaties which dealt with
international sale of goods. Hence, Article 7 of the CISG primarily addresses the
special features and goals of the CISG even though it does not specify the methods of
interpretation. Article 7(1) states: “In the interpretation of this Convention, regard is
to be had to its international character and to the need to promote uniformity in its
application and the observance of good faith in international trade”. Article 7(2)
states: “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

77
applicable by virtue of the rules of private international law”.

Komarov (2005) comments: “From the outset it was argued that the
application of Article 7(1) could be unpredictable because it was inevitably vague and
as a consequence, would have been open to surprising result. On the other hand, it
was also stressed that a considerable merit of the paragraph would lay in the fact that
it proclaimed an up-to-date legal policy in harmony with the exigencies of world trade
which postulated that no recourse to national law should be admitted in
interpretation”.161

The interpretation of the unified law texts have to be guided by the maxim of
good faith. It is clear that no specific national good faith concept can be applied but
only one which fits into the context of international trade relations. The parties shall
act in accordance with the maxim since the convention intends to secure those sales
contracts between parties from different countries are governed by the principle of
good faith. Thus, the principle can help to clarify the actual object of the good faith
principle contained in the CISG. Schlerctriem and Schwenzer (2005) has pointed out
that interpretation of the CISG is autonomous and should promote uniformity and
good faith in international trade. It also contains its own rules for necessary gap-
filling.162

Civil law and common law authorities traditionally had their own way of
interpretation which was different from each other.163 Since the nature of CISG is
particular so there is a need for a different approach. The interpretation of CISG
should be independently, according to its international character and the effective
significance of foreign decisions to secure uniform interpretation and application of
it.164

The good faith principle also demands fair negotiations with a clear view to
reach agreement even though the CISG does not govern the pre-contractual phase.
The formation and modification of contract need no form in order to be valid. The

161
Komarov, Alexander S (2005) Internationality, Uniformity and Observance of Good Faith as
Criteria in Interpretation of CISG: Some Remarks on Article 7(1), [Link].J.L and Comm, 25(1):75-76.
162
Schlerctriem, Peter and Ingeborg Schwenzer (2005) Commentary on the UN Convention on the
International Sale of Goods, Article 7.
163
In this field see Bashiri, Akbar, & Prof. [Link], 2011, Comparative Study of Good Faith in Un
Convention on Contracts for the International Sale of Goods(1980), Civil Law and Common Law,
Asian Journal of Development Maters, Vol.5, No.3, 348.
164
Bashiri, Akbar, & Prof. [Link], op, cit, p. 351.

78
provisions also deal with the questions of material validity of contracts. But the
contract interpretation must be guided by good faith and fair dealing. The CISG
clearly states that the seller is obliged to supply goods which are fit for a particular
purpose indicated to the seller. But the seller does not attract any punishment for
breach of obligation if he delivers goods which are in tune with the buyer’s wishes.

Each party shall cooperate with the other party when such cooperation may
reasonably expect for the performance of that party’s obligations. The principle of
good faith states that neither party must hinder the performance through the other nor
otherwise militate against contractual purpose. Accordingly, the party may not rely on
the non performance of the other party to the extent that such non performance was
caused by the first party’s act or omission. An aggrieved party cannot claim damages
for losses which he/she could have avoided. The aggrieved party should not profit
from own omissions. Thus, the principle of good faith plays an important role in the
international contracts and it should be applied for the purpose of interpreting the
terms of the CISG in the light of its overriding goals of uniformity and autonomous
interpretation.

Article 8 of the CISG lays down the methodology for interpreting an

international sales contract. It states that for the purpose 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.
Article 8 applies to conduct as well as statements. The leading principle under the
CISG is that interpretation must follow the intent of the party. Interpretation is the
ascertainment of meaning which the document would convey to a reasonable person
having all the background knowledge which would reasonably have been available to
the party in the situation in which they were at the time of the contract.

Article 8 deals with the principles to be applied in determining the intention of

the parties and related matters. A specific provision of the CISG has been devoted to
the interpretation of the parties' intention. Both subjective and objective standards
have been harmonized in CISG.165 Article 8 (1) approves a subjective approach to the
question – statements made by, and other conduct of, a party or to be interpreted

165
Bashiri, Akbar, & Dr. [Link], (2012), Contractual Intention of Parties under United Nations
Convention on Contracts for the International Sale of Goods, 1980 (Cisg), and Iranian Civil Code. The
Bangalore Law Journal, Vol 4, No 1, 125.

79
according to intent where other party knew are could not have been unaware what that
intent was. Article 8 (2) specified a reasonable person of the same kind and deals with
cases where the above provision is not applicable. But the statements should 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. Article 8(3) defines
what data may be revealed in determining the issues concerning the intent with due
consideration of all relevant circumstances of the case including negotiations.166

Article 9 (1) states that the parties are bound by any usage to which they have
agreed and by any practice which they have established between themselves. This is
in accordance with the common law principle whereby terms may be implied into a
contract by reference to their prior course of dealing. Article 9(2) establishes a
rebuttable presumption that the parties have impliedly made applicable to their
contract of its formation a usage of which they knew or ought to have known
reasonably. The parties are free to agree upon a trade usage or analogous standardized
practice in trade. The term ‘usage’ is of more general application and it does not
spring merely from the interaction between two parties to a contract. Usually, the
usage grows up because everybody in the market knowing the usages tacitly assumes
that the contract he is making, whether as a buyer or seller, is subject to the usage.
The binding character of a usage is born of innumerable individual transactions
entered into by the parties to them in the knowledge that certain usages are in practice
habitually followed in that market. Although the terms usage and custom are often
used interchangeably, they are in law distinct. Usage differs from custom properly so
called in that, whereas custom takes the place of the common law for certain purposes
in the locality where it operates.

CISG makes a clear distinction between usages and practices. When referring
to usages, the Convention intends to deal with a broad concept that embraces at least
those business conducts that are routinely adopted by a certain group or category of
business players, taken as a whole. On the other hand, the concept of practices is
narrower and by its nature relates to certain behaviors established among the same
parties involved in specific series of transactions through repeated courses of

166
For further reading, see, Bashiri, Akbar, & Dr. [Link], op, cit, p. 124.

80
dealings.167

Article 13 establishes a clear presumption that for the purposes of the

convention, writing practically includes telegram and teletext. Electronic mail,
Internet, telefax and other modes of communication can be used in international
business transactions. After the convention, a number of other means of
communication have started to play an important role in international business
transactions. In reality, modern means of communication can be considered to fulfill
writing requirements for the purpose of CISG since they are clearly within the scope
of the convention. The main purpose of a writing requirement under the CISG
identified by some commentators is to establish the content of a declaration and to
permit the identification of its author.

Honnold (1991) argues: “Article7 of the Sales Convention embodies mutual

obligations of the Contracting States as to how their tribunals will construe the
Convention. Hence the Vienna Convention would be pertinent to a question
concerning the construction of article 7, but the Vienna Convention would not govern
the interpretation of the articles dealing with the obligations of the parties to the sales
contract, for these articles are to be construed according to the principles of article
7”. 168 The scholar has identified to different tasks namely – the interpretation and
application of article 7 which deals with the obligations of the parties to the sales
contract. The CISG has no well defined and designed tools and methodologies
respectively in order to interpret the provisions of the article concerned. Hence, the
task of interpretation should be left to the VCLT or to the rules of customary public
international rules. This limitation could be overcome if article 7 becomes clear and
unambiguous in letter and spirit.

This aspect has been clearly highlighted by Drobnig (1985) thus: “It is almost
of the essence of general principles of law that they are not laid down by any
legislative action. They are nowhere readily formulated – rather they have to be
elaborated”.169 A true doctrinal analysis of general principle naturally includes the

167
Leonardo Graffi, (2011), Remarks on Trade Usages and Business Practices in International Sales
Law,
University of Belgrade, Belgrade Law Review, Year LIX (2011) no. 3, 105
168
Honnold, J (1991) Uniform Sales for International Sales, p.159.
169
Drobnig, U (1985) General Principles of European Contract Law, in [Link] and [Link] (eds),
International Sale of Goods, Dubrovnik Lectures, p.306.

81
solution which is based on a comparison of national and international system contract
law which constitutes comparative law. But the purpose of discovering general
principles within the gamut of CISG stands defeated due to the mandate of article
7(1). Gebauer (2000) believes that this perception does not change the understanding
of principles on the basis of broader perspective rather than technical sense since the
line of demarcation between rules and principles is very thin.

The CISG demands first assent to the language and values of the text itself and
then use of language and values to inform their relations with one another.170 Hence,
CISG has unique values when compared to other conventions and treaties. It demands
precise and uniform interpretation irrespective of the cultural or legal background of
people who make use of the provisions. A generic interpretative tool cannot be
superior or replace an interpretative instrument specifically designed to serve a
rhetorical community through the use of principles.

The courts have held that general principles are one of the sources of
international law but there is a clear difference between general principles and
principles of international law. 171 Undoubtedly, Article 7(2) refers to principles of
international law rather than general principles from the point of view of
interpretation of the CISG. An internationalization of contracts also requires that
words used within the instrument be of an international character in order to
overcome the problem of ‘deconstruction’.172

Roth and Happ (1999) have stated that Articles 31-33 of the VCLT ought to be
taken into consideration when interpreting the CISG. Multilateral treaties such as the
convention on the contracts for the international carriage of goods by road is
unanimously interpreted by applying the rules set forth in these Articles of the VCLT
as no other specific rules of interpretation exists.173

The scholars contend that the supporters of autonomous interpretation

actually derive the meaning of terms from the wording in context, keeping object and

170
Kastely, A.H (1988) Unification and Community: A Rhetorical Analysis of the United Nations
Sales Convention, Northwestern Journal of International Law and Business, 8:574.
171
Lauterpacht, E (1976) International Law Reports, 53:452.
172
Honnold, J (1995) Uniform Laws for International Trade: Early ‘Care and Feeding’ for Uniform
Growth’, I International Trade and Business Law Journal, p.6.
173
Roth, M and Happ, R (1999) Interpretation of the CISG according to Principles of International
Law, International Trade and Business Law Annual, 5:1-5.

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purpose in mind and resorting to the preparatory work of the treaty when necessary.
Bruno Zeller (2000) notes that a treaty shall be interpreted in good faith in accordance
with the ordinary meaning to be given to the terms of the treaty in their context and
the in light of its object and purpose. 174 Others have also argued that there is no
authority that one article of one convention can override and replace an article in
another convention. A distinction has to be made where a particular convention has no
interpretative articles. The VCLT can provide necessary answer during such a
situation. The contracting parties are bound to what they have signed and not what
could possibly be introduced at a later stage. There is an overwhelming agreement
amongst scholars that the CISG must be interpreted autonomously.175

Jeffrey Waincymer (2008) observes: “Where interpretation and uniformity is

concerned, while there is no doctrine of precedent either in relation to the CISG or
international commercial arbitration, the desire for uniformity means that the more
transparency and scholarly analysis, the more likely uniformity will arise. There is
always the question of whether judges will bring in their own domestic notions under
the guide of interpretation. Issues of interpretations also raise fundamental policy
questions. Once again there is a need to reconcile conflicting meritorious values.
There is also question of the appropriate aids to interpretation. It is always important
to remember that the CISG is only pot of the substantive rights and obligations in any
international sales contract and these integration issues must be carefully considered
at the drafting stage”.176

It is now universally recognized that in the interest of uniformity national

courts must construe conventions on broad principles of general acceptance. Such
broad principles could be termed valid customary international law if a uniform
understanding as to the custom could be established. But the evidence of usage should
be international in nature in order to term the custom international. In reality, an
international customary law actually demands both intra - state compliance and inter -
state recognition. Article 31 indicates that an ordinary meaning has to be given to the
terms of a treaty in their context and in the light of its object and purpose, notes

174
Zeller, Bruno (2000) [Link].79:105-106
175
Schlechtriem, P (1998) Commentary on the UN Convention on the International Sale of Goods
(CISG), 2nd ed, Oxford Press.
176
Waincymer, Jeffrey (2008) [Link], pp.582-599.

83
WTO.177 The judicial authorities are required to apply the ordinary meaning rather
than cultural meaning of the terms of a treaty. Broadly speaking, the object and
purpose of a treaty must be viewed in context in order to arrive at its correct
construction.

Obviously, Article 31 of the VCLT has been used as a tool to interpret treaties
and conventions where the text is unclear. Truly, Article 31 represents an authoritative
statement of international interpretative rules and remains as an invaluable tool to
interpret treaties. Hence, the customary public law should not be confused with the
rules laid down in the VCLT. It is rightly presumed that the Vienna Convention
constitutes an authoritative statement of customary international law including the
customary public international law of the interpretation of treaties. It was those rules
of customary public international law rather than the Vienna Convention itself which
obliged Cooper J to look beyond the text in order to arrive at its correct
construction.178 Experience reveals that mere application of authoritative statements
do not guarantee a uniform application despite the fact that the ai of the VCLT is to
harmonise and unify the application of international treaties.

McHugh J (2001) states: “If uniformity of interpretation could be achieved by

abandoning the approach taken by this court in Gamlen I would be in favor of
overruling Gamlen. But to overrule that decision would not yield uniformity – the
approach of courts in England, Germany and France would remain different.179 Zeller
(2002) has provided a comprehensive discussion on a methodology of interpretation
of the CISG. He has contended that Article 7 of the CISG is not capable of
contributing towards a methodology of interpretation and VCLT is better equipped to
solve the interpretational problems of the CISG.180

The customary international law principles which are embodied in Article 31

of VCLT are applicable to the CISG because of their universal validity.181 Scholars

177
WTO Panel Report (2000) WT/DS160/R, June 15, 2000, United States the Section 110 of the US
Copyright Act.
178
Minister for Immigration and Multicultural Affairs v. Savvin (2000) FCA 478 (April 12, 2000),
p.91.
179
Great China Metal Industries Co. Limited v. Malaysian International Shipping Corporation Berhad
(1998) 196 CLR 161-187.
180
Zeller, B (2002) The United Nations Convention on Contracts for the International Sale of Goods –
A Methodolgoy for its Interpretation and Application, PhD Thesis, The University of Melbrourne.
181
Roth, M and Happ, R (1999) [Link],p. 5:1-5.

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have commonly argued that the CISG does not formulate any methods of
interpretation but the judicial authorities should interpret the CISG uniformly. As a
matter of fact, the CISG does not allow any kind of importation of another
interpretative tool to regulate the provisions of CISG since the obligations of the
contracting states are covered in Part IV of the CISG. The WTO (1997) stated: “The
Panel relies also on the customary rules of interpretation of international law as a
basis for the interpretative principles it offers.182

As a customary rule, the VCTL could be connected to the CISG through

article 9 which states: “The parties are considered to have impliedly made applicable
to their contract or its formation a usage which in international trade is widely known
to and regularly observed”. The world ‘usage’ refers to customs by merchant and
article 9 is subject to article 7 which needs autonomous interpretation according to the
scholars. Article 7 (2) indicates that interpretation and filling of gaps must be settled
in conformity with general principles or law applicable by virtue of the rules of
private international law. The VCLT stipulates that a meaning to terms must be given
in their context. In a methodological sense context and general principles are not the
same since the general principle gives rise to a broader methodology than merely
relying on a context. Article 7(2) instructs the courts and tribunals to apply general
principles.

Bonell (1987) contends: “Contrary to ordinary domestic legislation, which

courts may still consider an infringement of ‘their’ case law, the Convention, once
adopted, is intended to replace all the rules in their legal systems previously governing
matters within its scope, whether deriving from statutes or from the case law. This
means that in applying the Convention there is no valid reason to adopt a narrow
interpretation”.183 There is no court with general jurisdiction on the CISG throughout
the world and the decisions and writings from one country are little more than
persuasive authority in another location. Finally, Article 7 of the CISG directs the
interpreter to the applicable rules of private international law.

182
WTO Appellate Body, India (1997) Patent Protection for Pharmaceutical and Agricultural Chemical
Products, WT/DS50/AB/R, 19 December, p.17.
183
Bonell, Michael, J (1987) Introduction to the Convention, in Commentary on the International Sales
Law, The 1980 Vienna Convention, p.73.

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 Hillman (1995) argues that it would be easier for tribunals from different
jurisdictions to take a uniform approach to the CISG if it is recognized that that the
CISG can be reduced to four instrumental policies namely – enforcement of party’s
intentions, ensuring that the parties receive the fruits of the exchange, keeping the
deal together and awarding compensation rather than punishment.184 Differences in
interpretation can be reduced through conscious and judicious interpretation of the
CISG by the local judicial authorities. They are required to understand have various
national courts have addressed a particular problem under the CISG. The national
courts should develop their jurisprudence in company with the courts of other
countries from case to case and take a course of action which is by no means
unfamiliar to judges in the national courts. Ultimately, the CISG has led to a
convergence of ideas which have facilitated meaningful international sale of goods.

Scholars have also pointed out that the purpose of the VCLT is to interpret the
general treaties while the CISG interprets the international contracts since the
internationalization of contracts demands proper interpretation and adoption of the
terms and conditions which are in tune with the aspiration of the CISG. Article 7 of
CISG has established itself as the bench mark for the interpretation of international
instruments.

2.7. Application of the CISG

The 1980 UN Convention on Contracts for the International Sale of Goods

(CISG) is in force for more than 30 years. It is constantly gaining more success as
more countries choose to ratify it. It is now in force in 78 countries, whose trade
activity accounts for over two thirds of all world trade. The goal of uniformity is
presented in the preamble, where it is evident that the drafters intended the
Convention to be an adoption of uniform rules governing contracts for the
international sale of goods in the interest of removing legal barriers in international
trade and promoting the development of international trade.

The different legal systems, cultural ethos, political ideologies, economic

approaches and so on have come in the way of unification of international trade. It

184
Hillman (1995) Applying the United Nations Convention on Contracts for the International Sale of
Goods, The Elusive Goal of Uniformity, Cornell Review of the Convention on the Contracts for the
International Sale of Goods.

86
would be safe to assume that the uniformity of the CISG requires little variation in
international practice, and for the provisions of the Convention to be applied
similarly, if not identically, throughout the signatory States. Scholars and practitioners
agree that this provision imparts a duty on the CISG practitioner to look to standards
of international practice in the interpretation or determination of the provisions of the
Convention.

If standards of practice from other countries are considered when a CISG issue
is examined by a domestic practitioner, then that practitioner's decision will be based
on international precedents as well as his own evaluation. Furthermore, this approach
will be in keeping with the spirit of international uniformity of the Convention. The
practitioner need not necessarily follow the international precedent if he considers it
incorrect or inapplicable to the case at hand, but there is a duty to take similar cases
from international practice into consideration.185

The international nature of the CISG is demonstrated by the fact that its
jurisdiction is transaction – centered rather than party – centered. Thus, a transaction
crossing national borders is the linchpin of CISG jurisdiction instead of the nationality
of the parties concerned. The presence of two sales law within a single legal system
certainly produces conflict of interest. The differences also create a conceptual
dissonance and differences in the formal legal rules. The nationality of the party, the
place of incorporation of a party and the place of its headquarters do not matter since
Article 10 states that the nationality of the parties is not to be taken into consideration
in determining the applicability of the CISG.

The national judges have experienced certain difficulties while delivering

justice regarding the international sale of goods. They have stated that the limited
availability of international practice and the language of the cases are the usual
constraints in this regard even though the CISG is practiced in approximately 50
different languages with vastly different alphabets. The use of electronic databases
and Internet Websites demonstrates significant progress in providing the most current
and comprehensive sources of law related to the CISG resources. The national judges
are required to take note of the previous judgements in order to do justice to their role
as facilitators of uniformity of law relating to international sale of goods.

185
Enderlein, Fritz and Dietrich Maskow (1992) International Sales Law.

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 The Articles 1-6 of the CISG enumerate the sphere of application of the
provisions the Convention which combines applicability on the basis of autonomous
requirements.

Article 1 states: 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.

Article 1(2) provides that the fact that parties have their places of business in
different states is to be disregarded whenever this fact does not appear from either 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. The effect of this is that a party in
the usual case must become a willing party to an international contract for the
convention to apply.186 Article 1(3) states that 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 convention. The international element
of business is revealed in the fact that the parties have their places of business in
different countries in a realistic situation.

In fact the Contracting States are bound to apply the Convention, even in
relation to non-Contracting States which are not bound to do the same. The fact that
Contracting States give more than they take cannot give rise to serious apprehensions
that this will dissuade states from signing the Convention. The domestic rules of
private international law could apply one law to the formation of the contract and a
different law to the substantive sales law. In such a case, only parts of the uniform
sales law would be applicable. However, a partial application, limited to the rights and
obligations arising from the contract already formed, should not present
insurmountable obstacles because the Convention was drafted in such a way that Part
III (the substantive sales provisions), at least, is compatible with domestic formation-
of - contract provisions.

186
Honnold, J (1991) Uniform Law for International Sales under the 1980 United Nations Convention
(Second Edition) Deventer, Boston: Kluwer, p.76.

88
 The application of the uniform law for international sales requires only that the
parties' places or business be located in different states, even when formation and
execution both take place in a single state, and even though that state is not a
Contracting State. Since the sole criterion for the Convention's applicability is that the
parties' places of business be in different states, there is some risk that the Convention
- instead of domestic sales law - would be invoked in a case where the transaction's
foreign contacts are not recognizable to one of the parties. For example, a party who
has his place of business in a Contracting State may buy in that state and the goods
may be delivered and payment made there. For the Convention to apply, the fact that
the other party's place of business is in a different state must be recognizable no later
than the time of the formation of the contract. This is reflected in Article 1(2), which
further specifies that the fact that the parties have their places of business in different
states must be apparent either on the face of the contract, from the dealings between
them, or from the information disclosed by them.

The Convention also provides that the application of the CISG does not
depend on whether the parties are considered civil or commercial. The Convention
thereby avoids the intricate problem of defining a commercial party. It is also
irrelevant whether the sales contract is commercial or private in character. The
nationality of the parties is insignificant. Thus, in certain circumstances, a contract
between two Germans would be controlled by the Convention, such as if one of the
parties has his place of business - or, alternatively, his habitual residence - in France
and this fact was known to the other party.

Article 2 deals with the exclusions which include – 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 and f) of electricity. It is unclear whether the
convention applies to contracts of barter.

The extension of the uniform law for international sales to non-commercial

purchases is restricted by Article 2(a). The Convention does not apply to transactions
concerning goods bought for personal, family or household use, if they are
recognizable as such. This rule takes into account the fact that international consumer

89
purchases are infrequent, and concern mostly tourists and mail-order businesses.
Moreover, this exclusion intends to ensure that domestic consumer-protection laws
are not affected by the uniform law governing international sale of goods. Article 2(a)
thereby fulfills the same function as Article 5(2) of ULIS. The exception for sellers
who neither knew nor ought to have known that the goods were for private use is
deliberately formulated in the negative in order to place the burden of proof firmly on
those who claim the exception to the consumer-contracts exclusion and assert that the
Convention should apply. The claim will succeed when the contents of the order or
the company address of the buyer suggests that the sale is of a commercial character.

Article 2(a) bears the same inadequacy as Article 5(2) of ULIS, namely that
the attempt to delimit the sphere reserved for domestic consumer-protection laws did
not fully succeed and, therefore, overlapping areas remain in which the Uniform Law
for International Sales as well as domestic consumer-protection regulations will
apply. The exception to the exclusion of Article 2(a) - where the seller cannot
recognize the character of the purchase - can lead to overlapping when domestic
consumer-protection law does not use such a criterion. Above all, domestic consumer-
protection laws sometimes intervene when the goods purchased are intended for
occupational or even commercial use. For example, the German "Abzahlungsgesetz"
(instalment-purchase law) can apply to the purchase of an office machine by a lawyer,
or building materials by a contractor, or a beer delivery to a restaurant owner, if the
latter two are not registered commercial parties.

The exclusion in Article 2(b) and (c) shows consideration for the special
domestic laws governing these transactions. Since auction sales customarily are
concluded immediately at the auction location, an exception in deference to any easily
determined domestic law does not significantly impair the unification of law. The
exception for auction sales can also be justified by the fact that most jurisdictions
accept the domestic law of the auction site as controlling. The exception for forced or
judicial sales in Article 2(c) corresponds to Article 6(1)(d) of ULIS. The exception for
shares, investment securities, negotiable instruments, and money (Article 2(d)) can
also be found in ULIS Article 5(1)(a), and takes into consideration that international
securities and currency transactions are governed by their own rules and laws which
are often compulsory sales contracts which name a document as the subject of sale. It
happens because the document controls the delivery of goods, are considered to be

90
within the sphere of application of the Uniform Law for International Sales, even
though some domestic regulations would characterize these as negotiable instrument
transactions.

Article 3(1) states that contracts for the supply of goods to be manufactured or
produced are to be considered sales under the party who orders the goods undertakes
to supply a substantial part of the materials necessary for such manufacture or
production. The 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
labor or other services.187

The contracts for the supply of goods to be manufactured or produced fall

within the sphere of application of the Convention (Article 3(1)). As with ULIS
Article 6, contracts in which the party who orders the goods also supplies a substantial
part of the materials are excluded from the scope of the Convention. Insignificant
amounts of materials supplied by the manufacturer are not sufficient to bring the
contract under the Convention. As under ULIS, the distinction between contracts for
the supply of goods to be manufactured or produced, which are subject to the
Convention, and contracts for labor or services, which are governed by domestic law,
depends on whether the materials supplied by the party ordering the goods are
substantial or not. Under ULIS, the party asserting the exception has the burden of
proof. Article 3(2) further excludes contracts which may require the delivery of
goods, but which are primarily contracts for labor or services, such as construction
contracts. This section attempts to regulate a question that proved to be difficult in
ULIS, namely whether a contract for both the delivery and the installation of goods is
covered by the Uniform Law for International Sales. This provision is likely to prove
difficult to interpret and to apply. Therefore, the parties should attempt to reach a
clear agreement in their contract. The term preponderant part should in most cases be
understandable and practicable if considered in terms of relative values. The sale price
of the goods to be delivered must be compared with the fee for labor and services, as
if two separate contracts have been made. The domestic law should decide whether
these two contracts can and must be distinguished. It must be remembered, though,
that the intent of the parties to treat the delivery contract separately must be respected,

187
Maskow, D (1987) Obligations of the Buyer, in Binaca, C and Bonnel, M (eds) Commentary on the
International Sales Law – the 1980 Vienna Sales Convention, Milan: Guiffre, pp.386-87.

91
even if domestic law generally regards such combinations as a single contract.
Furthermore, Article 6 also permits the parties to modify Article 3(2) in such a way
that, though the obligation to install is the preponderant part, the whole contract is
subject to the Uniform Law for International Sales.

Article 4 specifies the ambit of the substantive legal issues covered by it, and
propounds a non-exhaustive list of matters not covered by it. The convention governs
only the formation of the contract of sale and the rights and obligations of the seller
and buyer arising from such a contract. But, it is concerned with – a) the validity of
the contract or any of its provisions or of any usage and b) the effect which the
contract may have on the property in the goods sold. It reveals that many rules of the
domestic law of a particular forum may apply to a contract’s dispute which is
otherwise covered by the convention.

Where domestic consumer-protection laws void certain contract provisions,

the application of the two laws can be reconciled, since, according to Article 4(a), the
Convention is not concerned with the validity of the contract or with that of any of its
provisions. On the other hand, the question is more difficult where certain forms are
required or special legal remedies are available under domestic consumer-protection
laws that favor the buyer. The law of the Contracting State must decide the priority
between the uniform law which the state has adopted. If domestic law allows the
conflicting consumer-protection provisions to remain in force and take precedence
over the application of the Uniform Law for International Sales, this must be
accepted, even if it means that the state thereby violates one of the obligations it made
by ratifying the Convention.

The Article 4, like ULIS Article 8, limits the Convention's sphere of

application to the rules on formation of contract and the rights and obligations of the
seller and the buyer arising from it (Article 4 sentence 1). This leaves to domestic law
- the examples are expressly stated - both the effect of the contract on the transfer of
title to the goods sold (Article 4(b) and the validity of the contract and any of its
provisions (Article 4(a)), so long as the Convention's rules on the formation of the
contract do not expressly apply. Therefore, domestic law still regulates such matters
as the capacity to contract and the consequences of mistake, gross unfairness,
unconscionability and fraud. Contracts are also considered invalid if the underlying
sale is immoral or illegal and therefore void according to domestic law. Economic

92
regulations such as export or import controls or consumer-protection laws which
prohibit certain formulations may void contracts falling under the Convention. Thus,
the buyer's right to revoke an installment contract under German law can probably be
saved where the Convention covers an installment sale, provided German law
otherwise applies. The applicability of domestic law does not depend upon whether
the invalidity occurs by operation of law, such as by judicial decision or government
intervention, or by an act of a party, such as a declaration of avoidance. The courts
can also adjust the content of a contract where domestic law voids only part of the
contract and the court is permitted to fill the gap. This deference to domestic
provisions regarding validity is only binding, however, as long as the Convention
does not include express provisions to the contrary. Expressly provided in Article 4
should not be taken to mean only those of the Convention's provisions that expressly
indicate a deviation from domestic law or the validity of an obligation despite the
domestic prohibition. For example, despite the similar formulation in ULIS Article 8,
the general view was that if the subject of the sale was non-existent at the time the
contract was formed, the breach-of-contract provisions of the Uniform Law for
International Sales would apply, and not domestic provisions which would nullify the
contract, Finally, domestic law still controls the validity of usages. The controversy
over the binding effect of usages loses much of its practical importance by virtue of
Article 4(a) which permits states to prohibit the recognition of international usages
which conflict with domestic law. As in ULIS, a state and its courts can also refuse to
recognize a usage on the grounds that the usage is contrary to its public policy. It also
follows from Article 4 sentence 1, that duties and liabilities which arise outside of the
contract are not covered by the Convention. Article 5 expressly states this principle
for products liability questions concerning personal injuries from defective goods. But
one may also assume, from the limitation by Article 4 sentence 1 that claims for
damages caused intentionally or by fraud - regardless of whether they sound in
contract or tort - are to be judged strictly according to domestic law, even though
there is no provision corresponding to ULIS Article 89.

Article 5 states that the convention does not apply to the liability of the seller
for death or personal injury caused by the goods to any person. These matters are best
regulated by the domestic laws. The Convention does not govern products liability.
Domestic law, therefore, remains in force. To the extent products liability is

93
characterized as non-contractual under domestic law, Article 5 merely states the
obvious. This was understood to be the interpretation in ULIS as well, even though it
was never written as a rule. However, since some legal systems resolve problems of
product liability in contract. This Article was needed to ensure that these domestic
rules would still apply when the Convention is enacted. A buyer's claims based on
death or personal injury are not limited to the injuries suffered by the buyer himself,
but also include the buyer's own liability for damages due to the death or personal
injuries of his customers. This result is required by the fact that Article 5 leaves
untouched liability claims which sound in contract, including the typical claims which
permit recovery against the original producer by following the chain of sale back to its
origin.

Liability for death or personal injury is only one - although probably the most
important - field of products liability. Liability for damage caused to property is not
excluded by Article 5. The Conference considered whether a broader term, such as
claims based on product liability, could be used, but no agreement could be reached as
to the extent to which the Convention should apply to property damage caused by
defective goods which are used as foreseen by the contract. Semi-finished products
ruined by a defective machine and raw materials wasted because they were combined
with unsuitable materials are typical cases where the buyer's contract expectations are
frustrated and which therefore belong to the core of the matter to be regulated by sales
law. In my opinion, damages in those circumstances should be governed by the
Convention and compensated in conformity to the provisions set forth in Article 74.
The question of whether a concurrent action in tort would lie must be decided by
domestic law.

Article 6 states that the parties may exclude the application of the convention
or, subject to Article 12, derogate from or vary the effect of any of its provisions.
There is no requirement that such exclusion be logically expressed since the implied
intention will suffice to do this.

The Article 6 guarantees party autonomy over both the conflict rules and the
substantive law. On the basis of proposals from Anglo-Saxon countries a fundamental
issue much debated in UNCITRAL reappeared, namely whether the parties must
affirmatively choose CISG in order for it to apply (the so-called opting-in solution) or
whether the Convention would automatically apply, unless the parties agreed to apply

94
a different law (the opting-out solution). In the end, the opting-in proposal, which
would have turned the Convention into a set of standard contract terms, was rejected,
as was the demand to include a reservation clause in the Final Provisions, as had been
done in ULIS. The Convention can be excluded by choice of law if the parties choose
to apply a different local domestic law. It is also possible simply to reject CISG
without choosing an applicable law. Substantively, any rule of the Convention can be
altered or rejected by the parties, even by standard contract terms, as long as the
requirements for their validity in domestic law are fulfilled. The Convention does not
mention the possibility of an implied exclusion, but this does not mean that a tacit
exclusion is impossible. The intent of deleting the word implied was to prevent the
courts from being too quick to impute exclusion of the Convention. Therefore, the
fact that the parties have agreed on an arbitral tribunal in a specified country or on
standard contract terms enacted before the Convention takes effect and based on the
background of a particular domestic substantive law does not by itself imply that the
parties wished to exclude the application of the Convention. Just because the parties
choose a domestic law does not necessarily mean that country's local sales law
applies. Not only can the parties agree to reject the application of the Convention, but
they can also agree to apply the Convention when the preconditions for application
have not been met, e.g., in the case of the sale of a ship.

The scholars have noted the existence of some structural and practical
differences in regard to the interpretation and application of the CISG. Practically it is
not possible to ensure that all regions and modernizations of law adopt the CISG since
it contains highly general and open-ended terms which have created uncertainty. The
CISG needs to have a case history to support interpretation of terms and facilitate
application of various provisions in a changing economic environment. Zeller (2007)
concludes: “It has been correctly stated that only supporting case law and precedent
will give necessary answers. This now has happened in the CISG and many decisions
such as the Court of Vigevano and others who used existing foreign case law to guide
them. It is therefore wrong to argue that novel uniform international sales law is
unlike prominent uniform domestic sales law. The CISG has also developed a rich
case law around it. Uniformity is merely a question of time and it is trite to argue that
only the hapless tend to have their contract governed by the CISG. The reluctance to
apply the CISG is not a problem of its drafting but rather the reluctance of legal

95
counsul to explain the advantages to their clients. Attention must be directed to
perceive impediments which will in a given time frame detract from the optimal use
of the CISG”.188

188
Zeller, Bruno (2007) CISG and the Unification of International Trade Law, Routledge-Cavendish,
Abingdon, Oxon.

96