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Document information Chapter 4: Interpretation

Legislative History (key documents)
Publication In preparation of the 1994 Principles – Rapporteur Michael Joachim Bonell:
UNIDROIT Principles of StL-Doc. 2, pp. 18-21 (1st outline in 1971); StL-Doc. 10 (2nd outline in 1976); StL-Doc. 12 (1st
International Commercial draft and questionnaire in 1977); StL-Doc. 13 (replies to the questionnaire in 1978); StL-
Contracts: An Article-by- Doc. 14 (2nd draft in 1978); StL-Doc. 16, pp. 11-12 (1st discussion in 1979);
Article Commentary
(Second Edition) StL-Doc. 25, pp. 12-14 (3rd draft in 1983); StL-Doc. 42 (4th draft in 1988); P.C.-Misc. 15,
pp. 1-51 (2nd discussion in 1991); P.C.-Misc. 17, pp. 142-169 (draft of Art. 4.8 in 1993)
In preparation of the 2016 Principles (change to Official Comments on Art. 4.3, 4.8) –
Organization Rapporteurs Michael Joachim Bonell (Art. 4.3), Sir Vivian Ramsey (Art. 4.8):
International Institute for
the Unification of Private StL-Doc. 126 (position paper in 2014); StL-Misc. 31 rev., pp. 9-11 (1st discussion in
Law
2015); StL-Doc. 129 rev., pp. 4-5 (revised comments on Art. 4.8 in 2016); StL-Doc. 131
rev. (revised comments on Art. 4.3 in 2015); StL-Misc. 32, pp. 6-7, 10-11 (2nd discussion
Promulgation in 2016); C.D. (95) 3, Annex 2, pp. 4-5, Annex 4, pp. 2-4 (final draft in 2016)
2016
Introduction to Chapter 4

A. Chapter 4: One of the Most Important Chapters of the Unidroit Principles

Link(s) to Related 1 It is essential for peaceful cross border trade that the contracting parties from different
Legislation jurisdictions, cultures and/or linguistic backgrounds develop a joint understanding on
Unidroit PRINCIPLES OF contract interpretation for their contractual venture. (1) This is particularly important if
INTERNATIONAL one or several parties’ contract(s) in a foreign language, often using English as a language
COMMERCIAL CONTRACTS of convenience (‘globish’). (2) In such circumstances (which, from a global perspective,
2016 may be more frequent than native to native negotiations), the respective perception of
the ‘plain meaning of … terms’ (3) or the ‘natural and ordinary meaning of the words’ (4)
may differ and the ‘objective’, ‘plain’, ‘natural’ or ‘ordinary’ meaning of the terms might
be favourable to one side while the other side may not realise the difference as
Bibliographic compared to its own understanding of the words. In my experience, this is often
reference overlooked in practice – along with the important issues of choice of law and dispute
'Chapter 4: Interpretation', resolution (5) – and may even happen between native English speakers from different
in Eckart Brödermann , jurisdictions. (6) The respective domestic approach to contract interpretation may also
UNIDROIT Principles of differ, some jurisdictions focusing on a more ‘objective’ approach (starting from the
International Commercial wording in its ‘plain’, ‘natural’ or ‘ordinary’ meaning) (7) and some on a more ‘subjective’
Contracts: An Article-by- approach (by trying to penetrate to the ‘real’ intentions of the parties). (8) The mere fact
Article Commentary that the Unidroit Principles cover the issue of interpretation with rules which consider
(Second Edition), 2nd the variety of cross-border contracting may inspire lawyers to consider and/or cover the
edition (© Kluwer Law issue (9) (directly or indirectly, e.g. through a choice of Unidroit Principles-clause; →
International; Kluwer Law Introduction, no. 9d). They contain binding legal directions for the decision makers
International 2023) pp. 207 (arbitrators) applying the Unidroit Principles. (10) As the CISG does not include detailed
- 226 provisions on contract interpretation, (11) Chapter 4 provides a typical example where
the Unidroit Principles can supplement the CISG; and why it makes sense, when choosing
the CISG (or other international instruments) to agree on the Unidroit Principles as the
supplementary contractual regime (→ Preamble no. 11a). In the same vein, Chapter 4 is
an example for an appropriate international compromise which is needed when a non-
native foreigner and a native English speaker (e.g. from Australia, USA, UK or Singapore)
negotiate with different language skills and different background perceptions about
contract interpretation (→ Art. 4.1 no. 4).

B. Overcoming National Distinctions

2 The Principles (i) on contract interpretation as contained in Art. 4.1, 4.3-4.7 (as
supplemented by Art. 5.1.1 and 5.1.2, (12) and as distinct from the rules in Art. 1.6 on
interpretation of the Unidroit Principles itself) (13) and (ii) on interpretation of
statements and other conduct as contained in Art. 4.2-4.3 provide a common ground
merging these different approaches, (14) as evidenced by the observation of many
scholars from different backgrounds that the Unidroit Principles’ “provisions [on
interpretation], or at least some of them, are essentially compatible” with their
respective domestic systems. (15) Art. 4.1 et seq. are inspired to a large extent by Art. 8
CISG (16) (but go beyond it) (17) and to some extent by a comparative study of domestic
laws. (18) The Unidroit Principles rules on interpretation have been described as ‘general
principles of law’ (19) reflecting ‘universal hermeneutic truths’; (20) the key rule in Art. 4.2
(2) provides itself an application of the principle of good faith and fair dealing, Art. 1.7.
(21)

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 C. Structure
2a Chapter 4 follows a tripartite structure (22) : (i) Art. 4.1-4.2 “outlin(e) the basic
approach” to the interpretation of contracts, statements and other relevant conduct; (ii)
Art. 4.3 enumerates the ‘relevant circumstances’ for the interpretation; and (iii) Art. 4.4
through 4.8 provide fallback rules: It “formulates rules of preference in the event that
recourse to these ‘circumstances’ or ‘matters’ does not yield an unequivocal result.” (23)
To a large extent, the rules “can be traced back straight to Roman law although originally
they sometimes did not apply to contracts but to other instruments”. (24)

D. An Important Template
3 In the course of an ICSID arbitration, the rules in Art. 4.1 et seq. have been integrated
into a settlement agreement. (25) It is sometimes useful to apply this technique and to
copy the rules in Chapter 4 on interpretation into a contract which is submitted to
another law, (26) especially when the stakeholders of a contract project include persons
from both common and civil law jurisdictions (state courts and, especially, arbitral
tribunals with internationally trained arbitrators are bound to honor the contract and
apply such clauses on interpretation). This both reduces language and legal risks and
saves costs because, rarely, busy practitioners negotiating international commercial
contracts find the time to research an applicable state law for its rules and jurisprudence
on interpretation. This is helpful even for international inter-company contracts under
the Unidroit Principles 2016, destined to be applied by management in multiple
jurisdictions (examples from the automotive and the machine construction industries in
2020/2021, supplementing the rule in Art. 4.7 with a clause on language → Art. 4.7 no. 2).
While one cannot expect management to read the Unidroit Principles, one can expect
them to read the contract.
Article 4.1 (Intention of the parties)
(1) A contract shall be interpreted according to the common intention of the parties.
(2) If such an intention cannot be established, the contract shall be interpreted
according to the meaning that reasonable persons of the same kind as the parties
would give to it in the same circumstances.
A. Step 1: Determination of a Joint Intention, if Possible (Para. 1)
1 Art. 4.1 pre-supposes the existence of a contract (1) (concluded through unilateral
statements or other conduct interpreted under Art. 4.2; → Introduction to Chapter 4 no. 2
on ‘Structure’). It is based on a worldwide compromise combining two basic approaches
to interpretation: a ‘subjective’ focused (‘liberal’) method in para. 1 and an ‘objective’ (or
‘literal’) approach in para. 2, (2) i.e. a tension of approaches discussed in Europe since
Greek and Roman times. (3) If and to the extent the parties reach a ‘common intention’ at
the time of the contract conclusion (4) (which will often be the case), para. 1 provides to
either party a chance to prove (by any means, Art. 1.2) such joint ‘true’ or ‘real’ will (which
can deviate from the documented will, i.e. the wording, (5) especially if both parties act
in a foreign language) if the other party tries to step away from it. (6) For that purpose,
Art. 4.3 provides a variety of factors, of which those relating to the particular relationship
of the parties (→ Art. 4.3 lit. a–c, including the negotiation history, and lit. f in connection
with Art. 1.9 (1)) are of particular relevance in this context (→ Art. 4.3 no.1 at (i)). For
example, if two non-native speakers negotiating a contract both designate something in a
cross-border contract by the wrong English term (which, under its plain meaning, would
designate something else) the joint intention of the parties would prevail. This rule has
Roman roots in the old Latin saying falsa demonstratio non nocet (7) . If interpretation
pursuant to para. 1 is successful, the subject is closed (except for a possible need to
supplement an omitted term under Art. 4.8 or to determine an implied term under Art.
5.1.2 et seq.); there is then no room for further (‘tortured’) (8) interpretation. Para. 1
thereby contributes to the policy argument that the ‘autonomy of the will’ of the parties
should be upheld as an expression of freedom of contract (→ Art. 1.1, 1.5) and that the
contract should not be written by “judicial imposition of contractual obligations.” (9)
2 Even a ‘merger clause’ will usually not prevent this first step of interpretation (Art. 2.1.17
sentence 2), unless it is drafted explicitly to exclude even interpretation by previous
conduct and statements (Art. 1.5) (10) which might result in gross disparity (Art. 3.2.7) in
some extreme circumstances (this observation is made in light of various night-time or
jet legged cross cultural negotiation experiences with parties from different backgrounds,
at least one of them ignoring entirely even the concept of a merger clause which has a
common law origin).

B. Step 2 in Case of Default: Interpretation under an Individualised and

Contextualised ‘Reasonable Person’ Test (Para. 2)
3 Absent proof of the common intent pursuant to para. 1 (11) (even with respect to a
standard term → Art. 2.1.19 no. 1), the adjudicator needs to determine a hypothetical
meaning of the terms as per para. 2 . Its ‘reasonable standard’ (12) (another application
of Art. 1.7), (13) which is based on Art. 8 (2) CISG, (14) again supported by the factors set
forth in Art. 4.3, (15) is “strongly individualised and contextualised” (16) by (i) the acting

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 parties (the ‘reasonable persons of the same kind as the parties’ must have a similar
background, skill set – including language – and experiences) (17) and (ii) the
circumstances including the innumerable soft factors of international contracting
(including e.g. economics). In this context (which is different from the context of the
analysis in step 1), the more general criteria in Art. 4.3 lit. d through f (in connection with
Art. 1.9 (2)) bear particular weight (18) (→ Art. 4.3 no. 1 at (ii)). Ignorance of one of the
parties about certain key terms is not as such an argument; depending on the
circumstances, the ‘reasonable’ standard (which excludes ‘negligence’) may require to
take legal advice before signing. (19)
4 Para. 2 contributes to the policy argument of ‘legal certainty’, with a focus on protecting
the reliance of the other party on the ordinary meaning of the words passing the
reasonableness-test of para. 2. (20) In an international context including Aoften non-
native English speakers, the ordinary meaning of words expressed, heard or read in a
foreign language (e.g. English) may not always be as clear as in a domestic context; this is
why the subordinate role of the reasonableness-test of para. 2 (and thus the compromise
on interpretation giving priority to the joint intention of the parties, if so established,
pursuant to para. 1) is helpful in practice to bridge between cultures. Art. 4.1 thus
contributes to solve “the underlying tension between predictability and fairness.” (21)
Using an argumentation line developed in the context of Art. 5:101 (2) PECL, (22) the other
party is not worthy of being protected from an agreed joint intention which differs from
the ordinary meaning of the words if it was involved in that agreement and had
consented, by conduct towards a non-native speaker, to a meaning of words which
deviates from the literal meaning as interpreted by a native speaker. The application of
the ‘reasonable’ standard is limited to interpretation which excludes that the
adjudicator rewrites the contract for the parties. (23) In case of dispute, the need of
interpretation (and any required language and cultural skills) should be considered when
determining the criteria for the short list of arbitrators.
Article 4.2 (Interpretation of statements and other conduct)
(1) The statements and other conduct of a party shall be interpreted according to that
party’s intention if the other party knew or could not have been unaware of that
intention.
(2) If the preceding paragraph is not applicable, such statements and other conduct
shall be interpreted according to the meaning that a reasonable person of the same
kind as the other party would give to it in the same circumstances.

A. A Rule Which is Often Incorporated Implicitly

1 Throughout the making and living of a contract, parties often act by statement and
other unilateral conduct (1) (including silence, motion of a head (2) which has different
meaning in different parts of the world). (3) The Unidroit Principles often refer to such
one-sided statement or conduct (e.g. in Art. 1.8, 2.1.2, 3.2.17), including references to
unilateral notices pursuant to Art. 1.10 (e.g. Art. 7.3.2 (1) for the notice of termination). (4)
In all these cases, such statements and other conduct require interpretation pursuant to
Art. 4.2 (5) (i.e. “almost an exact reproduction of CISG 8 (1)– (2)” (6) ) and 4.3. et seq. (→
Introduction to Chapter 4 no. 2 on ‘Structure’). Often, it is a matter of interpretation if a
party, through its conduct, has communicated an intention that the agreement will have
legal effect. (7)

B. Again a Two Step Approach to Interpretation

2 Like in the approach to contract interpretation (Art. 4.1) (8) , if proven in ‘Step 1’ (para.
1), a party’s intention of which the other party had actual or constructive knowledge
(‘could not have been unaware’) (9) , at the moment the statement or conduct takes effect
(or earlier), (10) trumps an interpretation pursuant to the standard of a ‘reasonable
person of the same kind … in the same circumstances’ (‘Step 2’ (para.2): ‘If …not
applicable, …’). (11) Para. 1 and 2 thus reflect the same compromise (12) between the
‘will’ focused (13) and ‘objective’ approach as set forth for contracts in Art. 4.1 (→ Art. 4.1
no. 1). With respect to both steps, the non-exhaustive list of criteria in Art. 4.3 calls again
for an individualised and contextualised analysis (14) whereby the relative weight of its
factors differs in step 1 and step 2 (→ Art. 4.3 no. 1). It has been observed that, in practice,
the application of para. 2 “is the rule rather than the exception.” (15) It makes a
difference if public statements (16) (or advertisement material) remain public or become
part of the contract package. (17)
Article 4.3 (Relevant circumstances)
In applying Articles 4.1 and 4.2, regard shall be had to all the circumstances, including
(a) preliminary negotiations between the parties;
(b) practices which the parties have established between themselves;
(c) the conduct of the parties subsequent to the conclusion of the contract;
(d) the nature and purpose of the contract;
(e) the meaning commonly given to terms and expressions in the trade concerned;

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 (f) usages.

A. Two Groups of Criteria

1 Building on Art. 8 (3) CISG, (1) Art. 4.3 contains a list of self-explanatory circum1 stances
whereby (i) lit. a)-c) and lit. f) (in connection with Art. 1.9 (1)) focus on the particular
relationship (2) and are of particular importance when determining an intention (Art. 4.1
(1), (3) 4.2 (1) (4) ); and (ii) lit. d)-f) (in connection with Art. 1.9 (2) (5) ) are of a more general
nature and helpful for an interpretation under the reasonable test pursuant to Art. 4.1 (2)
(6) or 4.2 (2) (7) (including e.g. in lit. d) a reference to the commercial setting (8) and the
typical goals of such a transaction). (9) The criteria of Art. 4.3 are useful to have in mind
when organising the contract management.

B. … Which are Non-Exhaustive (10)

2 Firstly, the criteria in lit. a)-f) are being supplemented by additional criteria contained
in Art. 4.4-4.7 (and Art. 5.1.1-5.1.2). (11) Secondly, other criteria (argumentum ‘all’,
‘including’) may include (i) the ordinary, literal meaning of the ‘words’ (12) (with due
regard to the circumstances – which can be proven by all means including proof by
witnesses (13) – including the linguistic skills of the persons involved in the making of the
contract, (14) because the ‘literal rule’, the ‘plain meaning rule’ or the ‘théorie de l’acte
clair’ are of limited use in an intercultural context), (15) (ii) policy arguments (e.g. the
rationality of a particular interpretation (16) and/or avoiding absurd consequences; (17)
→ also Art. 4.5) (18) or (iii) the fairness and equity of a particular interpretation (good
faith and fair dealing pursuant to Art. 1.7 as the underlying general principle →
Introduction no. 7). (19)
3 It is the combination of all of these circumstances which is meant to either lead 3 to
the ‘reasonable’ test under Art. 4.1 (2) or 4.2 (2). The variety of circumstances to be
considered under Art. 4.3 responds adequately to the variety of cross-border contracting
which requires an even more open mind-set than a contract interpretation within any
domestic system which can work with assumptions (such as linguistic competence) which
have regard to mainly domestic contracts (→ Art. 4.1 no. 1-2).
3a In sum, the listed criteria constitute again an international compromise. The “pre
liminary negotiations” (lit. a) and “subsequent conduct” (lit. c) play different – yet in
practice often not that different – roles in civil and common law jurisdictions; (20) in the
end, it is all a matter of assessment of the arbitrator (or state court judge), without a rigid
hierarchy of the circumstances (21) but a prima facie priority of the words (22) which
provide the starting point for the interpretation. (23) Special circumstances – e.g. when
non-native English speakers negotiate in English (→ Art. 4.1 no. 4) – may rebut the
presumption set forth by the ordinary meaning of the words, to be determined with
regard to all criteria of interpretation as applicable in the circumstances of the case.
Once again, the dispute resolution clause and the choice of the arbitrator are crucial to
arrive at an appropriate interpretation in case of dispute.

C. Long-term Contracts
4 For long-term contracts (Art. 1.11 3rd hyphen) “which involve complex perfor- mance and
are ‘evolutionary’ in nature, i.e. may require adaptations in the course of performance”, (24)
the 2016 edition of the Official Comments has introduced special observations. (25)
Subsequent conduct (e.g. a certain practice substantiating a term with several meanings)
(26) may be an interpretative tool but may not contradict “the terms of the contract as
originally agreed between the parties” (e.g. the agreed quality of the goods). (27) To
reduce the risk of dispute, the parties are well advised “to adopt particular mechanisms
for possible variations and adjustments”, (28) e.g. (i) ‘variation orders’ (29) or ‘change
request’-procedures and (ii) clear rules on representation of the parties (30) (whereby
differences may be made with regard to the price impact of any change) as well as (iii)
the communication of approvals of such orders. It is in the interest of both parties to
provide for a writing (Art. 1.11 5th hyphen) for evidentiary purposes or at least a writing
documenting any change order (‘no oral modification clause’; → Art. 2.1.18).

D. Options
5 To set the tone for contract interpretation in case of dispute, parties are well advised (i)
to state the purpose of their contract (lit. d) in the document, e.g. in a preamble or a first
paragraph (‘object of the contract’); (ii) to document their negotiations (lit. a); (iii) to
define terms clearly (lit. e) and (iv) to manage their contract during its life time (lit. c).
Article 4.4 (Reference to contract or statement as a whole)
Terms and expressions shall be interpreted in the light of the whole contract or
statement in which they appear.

A. A Supplement to Art. 4.3: Reference to the (Contractual) Context of the

Term to be Interpreted

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 1 Building on the history since Roman law (1) and international consent, (2) Art. 4.4
supplements the list of criteria in Art. 4.3 (‘regard shall be had to all the circumstances,
including’) for the interpretation of both contracts (under Art. 4.1) and statements or
other conduct (Art. 4.2) by an instruction to consider not “specific words used in a
contract […] in isolation” (3) but the whole contractual context in which they appear (or
context of the statement or other conduct). (4) This can include both the sentence, the
paragraph or article which contains the statement or term to be interpreted; or
headings, the preamble or other parts of the contract including annexes. (5) By the
absence of a clause on hierarchy (e.g. between a contract, its annexes and schedules
and/or a frame agreement), all parts of the contract have the same respective
importance (6) (subject to three exceptions: (7) (i) the more specific rule trumps the
general rule, (8) (ii) declarations in the preamble may mould the interpretations of the
operative provisions (9) and (iii) individual terms prevail over standard terms, (10) Art.
2.1.21). In some circumstances, the context can even displace the literal meaning. (11)

B. The Role of Art. 4.3 in Applying Art. 4.4

2 Regarding the scope and weight of Art. 4.4, the criteria of Art. 4.3 may become relevant.
(i) The history of the negotiations (→ Art. 4.3 lit. a) will reveal if lawyers were involved
giving “weight” to “the arguments from the internal context.” (12) (ii) Pursuant to practices
between the parties (→Art. 4.3 lit. b), even other agreements between the same parties
may be referred to. (13) (iii) Contradictions must be resolved with due regard to the other
circumstances listed in Art. 4.3. (14) (iv) In complex long-term contracts with entire
groups of contracts (where it depends on the specific circumstances if an individual
contract on a specific topic such as quality becomes an annex to a frame contract), the
circumstances set forth in Art. 4.3 lit. a, b, c and d will provide guidance on whether to
apply Art. 4.1 also to the entire group(s) of contracts. (15) For example, this may vary if
some documents were truly negotiated and others just integrated as a standard term of
one party; or if documents were negotiated within a connected time frame and/or by
different teams, sometimes acting independently.
Article 4.5 (All terms to be given effect)
Contract terms shall be interpreted so as to give effect to all the terms rather than to
deprive some of them of effect.

A. Avoiding to Deprive Any Clause of An Effect

1 In line with the history of both civil and common law as well as international practice,
(1) Art. 4.5 further supplements the list of criteria in Art. 4.3 “if there is more than one
plausible interpretation and only one of them renders the terms of the contract valid.” (2)
As an expression of the favor contractus principle (3) (→ Introduction no. 7), the rule
usually steps in as a ‘last resort’. (4) If, after applying (i) Art. 4.14.3 (5) and arguably also
(ii) Art. 4.4 (6) as well as (iii) Art. 4.6-4.7, there remain at least two different
interpretations, Art. 4.5 directs towards a rational result giving full effect to all terms (7)
(‘principle of effectiveness’; or “effet utile”-interpretation, whereby arguably the full
effect may vary depending on the purpose of the contract which the parties determine; →
Art. 4.3 no. 5). (8) The black-letter rules do not provide a clear-cut instruction on the
relationship between Art. 4.5 and 4.6, both rules of ‘last resort’; (9) the adjudicator will
have to cope with the subject in light of all circumstances of the case if ever they lead to
different results. The sequence of the articles indicates that Art. 4.5 may have priority
over Art. 4.6. (10) Further, the language of Art. 4.6 is softer (11) (no ‘shall’ like in Art. 4.5).

B. Standard Terms (Art. 2.1.19 (2))

2 Both the contract and Art. 4.5 are subject to mandatory law (Art. 1.4). If such mandatory
law is applicable pursuant to the applicable private international law (→ Art. 1.4 no. 2-3),
it may strike out an entire clause in standard terms. (12) In light of the favor contractus
principle and the existing limits within the Unidroit Principles to incentivise users of
standard terms to write them in a fair way (Art. 1.7, Art. 3.2.7 in connection with Art. 3.1.4),
there is no need to create an exception to Art. 4.5 (as argued by S. Vogenauer, (13)
whereby Art. 4.5 would not apply to standard terms).
Article 4.6 (Contra proferentem rule)
If contract terms supplied by one party are unclear, an interpretation against that party
is preferred.
Interpretation Against the Supplier, as a Rule of Last Resort
1 As an expression of the modern lex mercatoria (→ Preamble, para. 3), and in line with
history of law since Roman times (1) and with many national laws, (2) Art. 4.6 provides for
the application of the contra proferentem rule to all international contracts submitted to
the Unidroit Principles (and without any restriction, as in some domestic laws, (3) to the
interpretation of standard terms). The rule allocates the risk of drafting to the
‘responsible’ party (4) and incentivises to good and careful drafting (5) (which may
include communication to ensure that it reflects the common intention of the parties, Art.
4.1 (1)). Arguably, drafting in plein and intelligible language is transparent and may

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 thereby also be considered as an expression of fair dealing (→ Art. 1.7). (6) If, after the
application of Art. 4.1 to 4.4, and possibly also 4.5 (→ Art. 4.5 no. 1), (7) there is room for at
least two different meanings (e.g. of a limitation of liability clause), (8) the
interpretation in favour of the ‘other party’ (as compared to the drafter or supplier) (9) ,
even of a clause pre-drafted by a third party, (10) is preferable. (11) The rule in Art. 4.6
describes the legal consequence in soft language (‘is preferred’), which leaves room to
consider other circumstances such as the degree to which the negotiations have
concentrated on the clause. (12) If the parties agree to start their contract negotiation on
the basis of a draft of a third party (e.g. a neutral industry association), they may want to
exclude the contra proferentem risk for either party by agreement (Art. 1.5). When (non-
native English) lawyers negotiate under the Unidroit Principles with online revisions and
drafting (a frequent scenario in the practice of the author during the COVID-19 pandemic),
it is worth saving the different versions to prove the history, if necessary (→ Art. 4.3 lit. a),
and to avoid the application of Art. 4.6.
Article 4.7 (Linguistic discrepancies)
Where a contract is drawn up in two or more language versions which are equally
authoritative there is, in case of discrepancy between the versions, a preference for the
interpretation according to a version in which the contract was originally drawn up.

A. A Default Rule to a Missing or to an Extreme Equal Language Clause

1 In bilingual contracts, parties often fail to agree for various reasons (unintentionally,
but often also intentionally, e.g. to document the ‘equal standing’ of the parties) on a
binding version or at least on a preference of one language in case of dispute. (1) In such
cases (2) (or in cases of explicit agreement on two equally authoritative versions) (3) Art.
4.7 provides a soft default rule (‘a preference’) (4) which permits exceptions under
certain circumstances (e.g. if one version reflects the common intention of the parties
more accurately, (5) which may be usually proven by any means, Art. 1.2 (sentence 2),
2.1.17 (sentence 2), subject to any applicable procedural law). In case of reference to a
multi-lingual document like the Incoterms®, discrepancies between the versions of the
chosen languages may be overcome by looking to further language versions. (6) Like Art.
4.5 (→ Art. 4.5 no. 1), the rule in Art. 4.7 is one of last resort (7) although, in practice,
lawyers are well advised to read early on the different language versions. If the
application of Art. 4.7 does not lead to a result (e.g. parallel drafting in a conference room
in two languages makes it impossible to determine one original), it has been suggested to
apply by analogy the principle in Art. 33 (4) of the Vienna Convention on the Law of
Treaties (8) which refers to “the meaning which best reconciles the texts, having regard to
the object and the purpose [of the treaty respectively contract]” (as long as the
adjudicator finds with regard to the favor contractus principle that there is an
agreement) (9) (→ Introduction no. 8).

B. Options
2 It is generally useful to include a clause on language into an international contract. (10)
(i) When copying Chapter 4 into a contract, the language clause can be added as a second
sentence to Art. 4.7 (e.g.: “Further, when interpreting this contract in the English language,
it is to be taken into account whether the parties involved used English as a native
language or as a foreign language of convenience.”). (ii) Parties may wish to include a
clause on the priority of a version. (iii) If one decision maker co-signing the contract does
not speak the language of the contract, it reduces risk of dispute to document, possibly in
that decision maker’s language, that the contract was duly translated and understood by
the decision-maker.
Article 4.8 (Supplying an omitted term)
(1) Where the parties to a contract have not agreed with respect to a term which is
important for a determination of their rights and duties, a term which is appropriate in
the circumstances shall be supplied.
(2) In determining what is an appropriate term regard shall be had, among other factors,
to
(a) the intention of the parties;
(b) the nature and purpose of the contract;
(c) good faith and fair dealing;
(d) reasonableness.

A. At the Edge of ‘Interpretation’

1 Art. 4.8 (inspired by § 204 of the US Restatement (Contracts, 2d) and the German
concept of “ergänzende Vertragsauslegung”) (1) fulfils a different function as compared to
(i) interpretation (Art. 4.1 to 4.7) and (ii) Art. 2.1.14 which provides rules for terms
deliberately left open, as this often occurs in long-term contracts (Art. 1.11 3rd hyphen).
(2)
2 Absent a ‘severability’ clause including a (quite common) reference to a loophole (3)

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 which would take priority (Art. 1.5), Art. 4.8 foresees the possibility to determine a term
for a loophole in the contract, (4) i.e. a situation which the parties have not regulated
because of an oversight or because ‘they preferred not to deal with it’ (5) (while they have
agreed on the key terms and concluded a contract). To supplement such a term, para. 1
refers to a term which the parties (or, more likely, the adjudicator) hold(s) ‘appropriate in
the circumstances’. (i) For some issues, “the Principles will themselves provide a
solution”, (6) e.g. on quality of performance (Art. 5.1.6), price determination (Art. 5.1.7),
time of performance (Art. 6.1.1), order of performance (Art. 6.1.4), place of performance
(Art. 6.1.6) and currency which is not (clearly) expressed (Art. 6.1.10). (7) (ii) The 2016
edition of the Official Comments recognizes that these solutions “may not apply in a
given case, particularly in long-term contracts”. (8) For the same reason, the Official
Comments to Art. 2.1.14 refer for long-term contracts (Art. 1.11 3rd hyphen) to ‘Article 4.8
or 5.1.2’ (9) (→ Art. 2.1.14 no. 6 at D.2).
3 Art. 4.8 grants a discretion to the arbitration tribunal to determine what is ‘appropriate
in the circumstances’. Its discretion is supported by para. 2 (‘among other factors’)
although i.e. also guided by the catalogue in para. 2. That catalogue starts with the
‘intention of the parties’. (10) It is submitted that, as compared to the circumstances
listed in Art. 4.3 for the contract interpretation, the intention of the parties may be
determined with the help of the same criteria as listed in Art. 4.3 lit. a)-c). The Official
Comments explicitly refer ‘among other factors’ to (i) the terms expressly stated in the
contract, (ii) the preamble to the contract, if any, and (iii) prior negotiations (→ Art. 4.3
lit. a)) or (iv) any subsequent conduct (→ Art. 4.3 lit. c)). (11) Further, according to para. 2
lit. b)-d), an arbitrator may also refer to (v) the nature and purpose of the contract (→ Art.
4.3 lit. d)) and (vi) the principles of fair dealing (→ Art. 4.3 lit. d)) and reasonableness. (12)
An arbitrator may not go beyond such (hypothetical) intention of the parties and rewrite
the contract. (13)

B. Relationship to ‘Interpretation’
4 The relationship between ‘interpretation’ in a more restricted sense (Art. 4.1–4.7) and
Art. 4.8 is very thin. (14) The distinguishing criteria of Art. 4.8 (2) are lit. c and d (good faith
and fair dealing; reasonableness) (15) although Art. 4.3, by referring to ‘all the
circumstances’, would not exclude these criteria, especially as everybody who signs on to
the Unidroit Principles accepts the principles of ‘good faith and fair dealing’ (Art. 1.7) (16)
which, under ordinary circumstances, would entail some ‘reasonableness’.

C. Relationship to Art. 5.1.1-5.1.2

5 One might question whether the application of Art. 4.8 should logically follow the
application of Art. 5.1.1-5.1.2 on ‘implied terms’. However, systematically, the Chapter 4 on
‘interpretation’ precedes the Chapter 5 on ‘content’, so that the user of the Unidroit
Principles should start with Art. 4.8 before turning to Art. 5.1.2. (17) If the reasoning of the
decision maker, usually an arbitration tribunal or a state court, is mainly based on ‘the
intention of the parties’ (18) (a criterion which Art. 5.1.2 does not offer as a guidance
(‘stem from’)), the black-letter rules suggest to apply Art. 4.8. (19) In practice, the founding
for supplementing an omitted term may be left open (→ Art. 5.1.1 no. 2).

References
1) See StL-Doc. 14 (1978), p. 7 (“common sense”; “logical rather than legal in character”);
StL-Doc. 13 (1978), p. 2 (“fill an important gap”); with roots in 1971 StL-Doc. 2 (1971), pp.
18-21; StL-Doc. 16 (1979), p. 11 (pointing at the need to harmonise also with regard to
individual differences of judges being more or less pragmatic or semantic, in
addition to different cultural and jurisdictional backgrounds); S. Vogenauer in
Vogenauer, Introduction to chapter 4 of the PICC no. 8 (at the end).
2) E. Brödermann, § 6 IPR MünchAnwaltshandb. IntWirtschR, no. 144; cf. also V. Triebel, FS
Elsing (2015), pp. 1047, 1048 under II. The seminal German book V. Triebel/S.
Vogenauer, Englisch als Vertragssprache (i.e. English as contract language) (2018)
describes in detail the risks and typical mistakes when contracting under German law
in English.
3) For a New York Perspective: see Greenfield v. Philles Records, 98 N.Y.2d 562, 569
(2002).
4) For an English Perspective: see Deutsche Genossenschaftsbank v Burnhope [1995] 1
WLR 1580, 1589, HL, Lord Steyn, also quoted (in more detail) by S. Vogenauer in
Vogenauer, Art. 4.1 no. 15.
5) E. Brödermann in FS Martiny (2014), pp. 1045-1070.
6) S. Vogenauer in Vogenauer, Art. 4.3 no. 16 gives an example of the different meanings
of the expression ‘to ship’ in England and USA (where it may also refer to ‘loading a
train’).
7) See e.g. again Greenfield v. Philles Records, 98 N.Y.2d 562, 569 (2002).
8) E.g. §§ 133, 157 BGB.

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 9) The need to cover this issue was strongly seen by the drafters, StL-Doc. 14 (1978), p. 7,
as cited by S. Vogenauer in Vogenauer, Introduction to chapter 4 of the PICC, no. 8.
10) StL-Doc. 2 (1971), pp. 16 et seq.. S. Vogenauer in Vogenauer, Introduction to chapter 4
of the PICC, no. 8-9; S. Vogenauer in Jansen/Zimmermann, Introduction before Art.
5:101 [PECL], no. 24 (p. 752) with comparative hints as to different qualification of
contract interpretation in national law as a matter of fact (e.g. in England for oral
contracts) or law (e.g. in England for written contracts).
11) Except for Art. 8 on ‘statements made by and other conduct of a party’, see the
explanation at S. Vogenauer in Vogenauer, Introduction to chapter 4 of the PICC, no.
24 (p. 752). L. Spagnolo in DiMatteo/Janssen/Magnus/Schulze, Chapter 23 no. 40-42
argues that, in practice, the application of Art. 8 CISG should lead to the same results
as the application of the more detailed rules in Art. 4.1-4.2.
12) S. Vogenauer in Vogenauer, Art. 5.1.2 no. 1.
13) C. Ternero in Morán Bovio, Art. 4.1, no. 1 (para. 1), p. 233.
14) S. Vogenauer in Vogenauer, Art. 4.1 no. 16.
15) S. Vogenauer in Vogenauer, Introduction to chapter 4 of the PICC no. 7 and note 21.
16) StL-Doc. 42 (1988), pp. 3, 5 and 7; StL-Misc. 15 (1991), pp. 2, 9 and 19; Supreme Court of
New South Wales, Franklins PTY LTD v Metcash Trading LTD, 16 December 2009, Unilex
case No. 1520; H. Gabriel, no. 2.113 (p. 67) restricting: ‘without the hierarchical
ordering’; S. Vogenauer in Vogenauer, Introduction to chapter 4 of the PICC, no. 6 (at
p. 572). For an overview on the drafting history of Art. 8 CISG see S. Vogenauer in
Jansen/Zimmermann, Introduction before Art. 5:101 [PECL], no. 3 (pp. 741-742): The
roots of Art. 8 CISG lie within Art. 3 (2) and (3) of the 1972 Unidroit draft for uniform
rules on the validity of sales contracts (Unidroit Study XVI B – Validity of contracts of
international sale of goods (1965-1972), printed in Unif. Law Rev. 1973, pp. 60, 63); this
draft was based on “pioneering work” of Ernst Rabel, member of the first Governing
Council of Unidroit.
17) Art. 8 CISG relates solely to the interpretation of ‘statements made by and other
conduct of a party’.
18) S. Vogenauer in Vogenauer, Introduction to chapter 4 of the PICC no. 6.
19) S. Vogenauer in Vogenauer, Introduction to chapter 4 of the PICC no. 7.
20) StL-Doc. 10 (1976), p. 1; S. Vogenauer in Vogenauer, Introduction to chapter 4 of the
PICC no. 8. For use of Chapter 4 in arbitral awards to supplement or confirm an
interpretation of national law → Annex to Preamble no. 20-23.
21) StL-Doc. 42 (1988), pp. 6-7; this was the reason to withdraw from the initial draft (StL-
Doc. 12 (1977), p. 3; StL-Doc. 13 (1978), pp. 4-5) to incorporate the principles of good
faith and fair dealing in a general clause on interpretation: StL-Doc. 16 (1979), pp. 11-
12; M. J. Bonell, An International Restatement p. 142, S. Vogenauer in Vogenauer, Art.
4.3 no. 22-23.
22) Adapted from S. Vogenauer in Jansen/Zimmermann, Introduction before Art. 5:101
[PECL], no. 4 (p. 742).
23) S. Vogenauer in Jansen/Zimmermann, Introduction before Art. 5:101 [PECL], no. 4 (p.
742).
24) S. Vogenauer in Jansen/Zimmermann, Introduction before Art. 5:101 [PECL], no. 6 (p.
743). The first two limbs of the structure, (i) and (ii), go back to “the German Christian
Thomasius around the turn of the 18th century” (emphasis added) as promoter of the
so-called “intentionalists” which, starting with Hugo Grotius (1583-1645) and later
Samuel Pufendorf (1632-1694) – who influenced Blackstone and thereby English law -,
focused more than earlier scholars on “the interpretation of contracts rather than
other legal instruments (ibid., no. 10, p. 745), following a “first move [i.e. in the history
of interpretation] towards a more coherent systematic theory of legal interpretation”
in early modern law as of the 15th century (ibid. no. 9, pp. 744-745). For the foundation
of the rich history of legal interpretation since Roman law and the compilation in
Justinian’s Corpus iuris civilis with “more than 200 ‘diverse ancient rules’” on
interpretation, its re-discovery in the 11th and 12th centuries (“middle ages”) and,
“[f]or centuries to come” their “central role in the first year of the legal curriculum”
see the compilation ibid. no. 7-8 (pp. 743-744). For the reception of these rules both in
English common law and in modern national codes as of the Prussian codification
Allgemeines Landrecht of 1794 which included approximately 40 rules on
interpretation, see again S. Vogenauer ibid., no. 11 (pp. 745-746).
25) Settlement agreement integrating Art. 4.1-4.3 and 4.5 in Arbitral Award 20 March
2000, Joseph Charles Lemaire v Ukraine, ICSID Case No. ARB(AF) 4./98/1/(2000), no. 22-
23, Unilex No. 962; first reported by S. Vogenauer in Vogenauer, Introduction to
chapter 4 of the PICC no. 7 note 22.
26) This is a modern variation of my former experiences (then still ignorant about the
Unidroit Principles) around the year 2000 in Paris in a US-Russian matter (water
industry). With an arbitration clause for dispute resolution, we compromised on
English law and a specific clause providing for a general obligation to interpret and
perform the settlement agreement in good faith whereby this latter clause was
explicitly submitted to German law (dépeçage).

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 1) See S. Vogenauer in Jansen/Zimmermann, Introduction before Art. 5:101 [PECL], no. 12
(pp. 746-747) on the understanding for a need of ‘distinctive rules for contracts’, and
S. Vogenauer in Jansen/Zimmermann, Art. 5:101 [PECL]: General Rules of
Interpretation, no. 1 (p. 755) on the historic background (as Art. 4.1 is a ‘corresponding
provision’ to Art. 5:101 PECL).
2) On these two approaches, their history and relevance S. Vogenauer in
Jansen/Zimmermann, Art. 5:101 [PECL]: General Rules of Interpretation, no. 3-10 (pp.
755-761).
3) S. Vogenauer in Jansen/Zimmermann, Art. 5:101 [PECL]: General Rules of
Interpretation, no. 12 (p. 761); whereby the words (‘verba’) may be in tension with the
will (‘voluntas’), see ibid. Art. 5:102 [PECL]: Relevant Circumstances, no. 8 (p. 770).
4) Official Comments, Art. 4.1 no. 1, p. 137; discussed throughout the legislative history
since StLDoc. 2 (1971), p. 19; see e.g. P.C.-Misc. 15 (1991), pp. 2-4, S. Vogenauer in
Vogenauer, Art. 4.1 no. 3.
5) Official Comments, Art. 4.1 no. 1, p. 137 (“In consequence, a contract term may be
given a meaning which differs from both the literal sense of the language used and
from the meaning which a reasonable person would attach to it, […]”); S. Vogenauer in
Vogenauer, Art. 4.1 no. 10 reports a classical example from the German Supreme
Court in 1920 where the parties, using the Norwegian language, mingled the terms for
‘whale’ and ‘shark’ meat (in Germany this is covered by the ‘falsa demonstratio non
nocet’ concept); S. Vogenauer in Jansen/Zimmermann, Art. 5:101 [PECL]: General Rules
of Interpretation, no. 11 (p. 761).
6) S. Vogenauer in Vogenauer, Art. 4.1 no. 10. The examples from practice are multiple,
e.g. for a contract submitted to the Unidroit Principles, reported by E. Brödermann,
Unif. Law Rev. 2011, pp. 589, 598: Shortly after the conclusion of a contract –
concluded under the Unidroit Principles – about the investment of a Philippine
company into a Korean company (saving the financial survival of that company with a
high potential), the Korean seller of the shares lost his 10-year-old son. To overcome
his sorrow he came close to a religious sect which tried to use its influence to undo
the deal in order to gain itself control.
7) This is an abbreviated version of Marcianus D. 35.1.33: “Falsa demonstratio neque
legatario neque fideicommissario nocet neque heredi instituto …” (with thanks to
Professor Tilman Repgen, University of Hamburg, for this input).
8) S. Vogenauer in Jansen/Zimmermann, Art. 5:101 [PECL]: General Rules of
Interpretation, no. 14 (at p. 763 in fine) quoting to PECL 5:101, Comment B.
9) S. Vogenauer in Jansen/Zimmermann, Art. 5:101 [PECL]: General Rules of
Interpretation, no. 5 (p. 757).
10) S. Vogenauer in Vogenauer, Art. 4.3 no. 7 and Art. 2.1.17 no. 6 (observing that Art. 2.1.17
sentence 2 is not mandatory).
11) See Official Comments, Art. 4.1 no. 1, p. 137; C. Ternero in Morán Bovio, Art. 4.1, no. 1, p.
234 (para. 1 at the end); and S. Vogenauer in Vogenauer, Art. 4.1 no. 9 on the hierarchy
between Art. 4.1(1) and (2).
12) The standard of a reasonable person was already mentioned in StL-Doc. 25 (1983), pp.
12-13; StLDoc. 42 (1988), pp. 3, 5, 7. It is closely connected with international
commercial contracting, as set forth e.g. by M. J. Bonell at P.C.-Misc. (1994), p. 61: “[…]
the assumption was that business people were reasonable persons”.
13) M. J. Bonell, An International Restatement, chapter 4, p. 142; S. Vogenauer in
Vogenauer, Art. 4.3 no. 22.
14) StL-Doc. 12 (1977), pp. 5-7; StL-Doc. 13 (1978), pp. 6-9; StL-Doc. 16 (1979), p. 12; H.
Gabriel, no. 2.110-2.116 (pp. 65-67).
15) C. Ternero in Morán Bovio, Art. 4.1, no. 1, p. 234 (para. 1); S. Vogenauer in Vogenauer,
Art. 4.1 no. 7.
16) S. Vogenauer in Vogenauer, Art. 4.1 no. 5.
17) Official Comments, Art. 4.1 no. 2, p. 138; StL-Doc. 13 (1978), p. 3; C. Ternero in Morán
Bovio, Art. 4.1, no. 1, p. 234 (para. 2); S. Vogenauer in Vogenauer, Art. 4.1 no. 5.
18) Official Comments, Art. 4.1 no. 3, p. 138.
19) See the example given by S. Vogenauer in Vogenauer, Art. 4.1 no. 6.
20) S. Vogenauer in Jansen/Zimmermann, Art. 5:101 [PECL]: General Rules of
Interpretation, no. 13 (p. 762). See ibid., no. 5 (p. 757) for the roots in English law; but
see also (i) ibid. no. 7 (at p. 758) the reference to the English ‘equitable doctrine of
rectification (or rectification for common mistake)’ as a – debated, occasional – tool
in English law to let prevail the parties intention, with note 29 discussing
Partenreederei MS Karen Oltmann v Scandale Shipping Co Ltd (The Karen Oltmann)
[1976] 2 Lloyd’s Rep 708, QBD, at p. 713; disapproved by Chartbrook v Persimman Ltd
[2009] UKHL 38, [2009] 1 AC 1101, at [43]-[47]; and (ii) S. Vogenauer ibid. no. 14 (at p.
763) discussing Investors Compensation Scheme Ltd v West Bromwich Building Society
[1998] 1 WLR 896, 913 (HL), per Lord Hoffmann, “where it was robustly held that
deviation from the literal meaning are permissible if it can be concluded ‘from the
background that something must have gone wrong with the language’.”
21) S. Vogenauer in Jansen/Zimmermann, Art. 5:101 [PECL]: General Rules of
Interpretation, no. 14 (at p. 763 in fine) discussing generally “[t]he modern
transnational instruments”.
22) S. Vogenauer in Jansen/Zimmermann, Art. 5:101 [PECL]: General Rules of
Interpretation, no. 8 (pp. 759-760).

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 23) S. Vogenauer in Vogenauer, Art. 4.1 no. 13 with further references.
1) On the rise of unilateral acts in (modern) contract law see J. P. Schmidt in
Jansen/Zimmermann, Art. 1:107 [PECL]: Application of the Principles by Way of
Analogy, no. 5-6 (p. 84) and no. 9 (pp. 85-86). For historical development since the
stipulatio in Roman law (which was not binding without acceptance) and a
comparative overview see G. Christiandl in Jansen/Zimmermann, Art. 2:107 [PECL]:
Promises Binding Without Acceptance, no. 2-3 (pp. 290-292).
2) S. Vogenauer in Vogenauer, Art. 4.2 no. 2.
3) The same ‘shaking of the head’ means assent in some jurisdictions (India) and dissent
in others (USA, Europe), while both the reactions in India and USA/Europe to say “no”
with a movement of the head have their roots apparently in the intuitive expression
of disgust by babies.
4) For the history of unilateral acts shaping the life of a contract (in German:
Gestaltungsrechte) see R. Zimmermann in Jansen/Zimmermann, Art. 14:101 [PECL]:
Claims Subject to Prescription, no. 8 (pp. 1836-37) including in particular note 42.
5) On the history of ‘distinctive rules’ for interpretation of unilateral acts see S.
Vogenauer in Jansen/ Zimmermann, Introduction before Art. 5:101 [PECL], no. 13-14
(pp. 747-749).
6) J. P. Schmidt in Jansen/Zimmermann, Art. 1:107 [PECL]: Application of the Principles by
Way of Analogy, no. 21 (p. 93).
7) See G. Christiandl in Jansen/Zimmermann, Art. 2:102 [PECL]: Intention, no. 1-3 (pp. 266-
267) on PECL and DCFR with a brief comparative overview on English, French and
German law.
8) J. P. Schmidt in Jansen/Zimmermann, Art. 1:107 [PECL]: Application of the Principles by
Way of Analogy, no. 25 (p. 95) qualifies Art. 4.2 as a “transposition” of Art. 4.1.
9) J. P. Schmidt in Jansen/Zimmermann, Art. 1:107 [PECL]: Application of the Principles by
Way of Analogy, no. 21 (p. 93): i.e. “whether the intention of the person making the
declaration and the understanding of the addressee coincide”. On criteria and their
background to understand a statement see H. Dedek in Jansen/Zimmermann, Art.
6:101 [PECL]: Statements Giving Rise to Contractual Obligations, no. 5 (p. 795) arguing
vicinity to both (i) the German tradition of a ‘reasonable observer’ (‘objektiver
Empfängerhorizont’) – with more details at ibid., Art. 6:103 [PECL]: Simulation, no. 2
(pp. 814-815) –; and (ii) English law (Oscar Chess Ltd. v Wiliams [1957] 1 All ER 325, 327
et seq., Denning LJ), highlighting that “the ‘intention’ to make a binding promise is to
be assessed objectively” with regard to “the importance of the expertise and
knowledge available to both parties with regard to the specific factual
representation in question.”
10) The Unidroit Principles were first intended to merely cover contract interpretation;
however, the scope was extended to include statements and other conduct, StL-Doc.
25 (1983), pp. 12-13; S. Vogenauer in Vogenauer, Art. 4.2 no. 4.
11) P.C.-Misc. 15 (1991), pp. 6-9 (Farnsworth and Bonell); S. Vogenauer in Vogenauer, Art.
4.2 no. 8 (on the hierarchy between Art. 4.2(1) and (2)); J. P. Schmidt in
Jansen/Zimmermann, Art. 1:107 [PECL]: Application of the Principles by Way of
Analogy, no. 21 (p. 93): “the subjective intention [duly ascertained] prevails. … The
same goes for cases in which, by way of exception, it seems fair to place the risk of
misunderstanding on the addressee”. In other words (ibid., no. 22, p. 94), “where the
subjective intention is not the relevant factor, […] the risk of misunderstanding must
now be borne by the person making the declaration.”
12) For a comparative legal overview of the approaches in the context of statements see
H. Dedek in Jansen/Zimmermann, Art. 6:101 [PECL]: Statements Giving Rise to
Contractual Obligations, no. 6 (p. 796).
13) See in this regard the pertinent observation of H. Dedek in Jansen/Zimmermann, Art.
6:101 [PECL]: Statements Giving Rise to Contractual Obligations, no. 2 (p. 793) and no.
4 (pp. 794-795): “The ‘common core’ of principles exemplified by Art. 6:101 (1) consist
of variations on the theme that promissory obligation is voluntary and thus,
specifically, requires a willingness to be contractually bound that sets legally
relevant promises apart from ‘mere’ representations of intention or fact […]” (made
with regard to Art. 6:101(1) PECL; emphasis added).
14) Cf. Official Comments, Art. 4.2 no. 2, p. 139; cf. S. Vogenauer in Vogenauer, Art. 4.1 no. 5
for Art. 4.1 (2).
15) J. P. Schmidt in Jansen/Zimmermann, Art. 1:107 [PECL]: Application of the Principles by
Way of Analogy, no. 27 (p. 96) while also applauding the “clarity” of Art. 4.2 to first
mention the parties’ intention at no. 31 (p. 99). The approach of Art. 4.2 matches well
with the approach e.g. in English law, see the comparative remarks at G. Christiandl in
Jansen/Zimmermann, Art. 2:102 [PECL]: Intention, no. 2 (pp. 266-267).
16) Cf. for a discussion of liability for public statements in a European context H. Dedek
in Jansen/ Zimmermann, Art. 6:101 [PECL]: Statements Giving Rise to Contractual
Obligations, no. 7-8 (pp. 796-797).
17) Example from practice: Essential parts of a (then draft) annex was copied from
advertisement material as part of the technical specifications for a military contract.
1) S. Vogenauer in Jansen/Zimmermann, Art. 5:102 [PECL]: Relevant Circumstances, no. 1
(at pp. 766-767).

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 2) Official Comments, Art. 4.3 no. 2, p. 140; StL-Doc. 131 rev. (2015), p. 2; see the
Illustrations in the Official Comments (e.g. Illustration 2 with the example for
established practices, the interpretation of the expression ‘dollars’ as ‘Canadian
dollars’ in light of a series of prior contracts concluded with a ‘Canadian
dollars’price, p. 141) and S. Vogenauer in Vogenauer, Art. 4.3 no. 3-9.
3) S. Vogenauer in Vogenauer, Art. 4.1 no. 4 (except for the reference to lit. f in
combination with Art. 1.9 (1)); see also C. Ternero in Morán Bovio, Art. 4.3, no. 1, p. 239
(para. 5).
4) S. Vogenauer in Vogenauer, Art. 4.2 no. 5 (except for the added reference to lit. f).
5) P.C.-Misc. 19 (1994), p. 56 (vote that the concept of usage was that of Art. 1.9 following
the discussion at pp. 55 et seq. (with opinions in this direction by Farnsworth,
Drobnig)).
6) As proposed by O. Lando with reference to § 157 BGB, P.C.-Misc. 15 (1991), p. 4 with
official proposal to the Working Group in P.C.-Misc. 17 (1993), pp. 142-143; Official
Comments, Art. 4.3 no. 1, p. 140; S. Vogenauer in Vogenauer, Art. 4.1 no. 7.
7) Official Comments, Art. 4.3 no. 1, p. 140; S. Vogenauer in Vogenauer, Art. 4.2 no. 7.
8) C. Ternero in Morán Bovio, Art. 4.3, no. 1, p. 240 (para. 4: ‘sentido comercial’).
9) Cf. S. Vogenauer in Vogenauer, Art. 4.3 no. 11-12.
10) Official Comments, Art. 4.3 no. 1, p. 140; C. Ternero in Morán Bovio, Art. 4.3, no. 1, p. 239
(para. 3).
11) S. Vogenauer in Jansen/Zimmermann, Art. 5:102 [PECL]: Relevant Circumstances, no. 6
(at p. 769) inter alia with respect to interpretation “in the light of the contract as a
whole” (→ Art. 4.5).
12) S. Vogenauer in Vogenauer, Art. 4.3 no. 3, 27; S. Vogenauer in Jansen/Zimmermann, Art.
5:102 [PECL]: Relevant Circumstances, no. 6 (at p. 769).
13) S. Vogenauer in Vogenauer, Art. 4.3 no. 29 (underlining that the Unidroit Principles do
not contain the parol evidence rule).
14) S. Vogenauer in Vogenauer, Art. 4.3 no. 28 rightly points towards the risk of different
linguistic assumptions.
15) S. Vogenauer in Vogenauer, Art. 4.3 no. 28 (“even less force than in domestic systems”).
16) S. Vogenauer in Vogenauer, Art. 4.3 no. 22 (with reference to correlating English
jurisprudence).
17) S. Vogenauer in Vogenauer, Art. 4.5 no. 6.
18) S. Vogenauer in Vogenauer, Art. 4.3 no. 21.
19) S. Vogenauer in Vogenauer, Art. 4.3 no. 23. The initial concept to commence the
section on interpretation with a paramount invitation to interpret a contract with
regard to the general principles of good faith and fair dealing was dropped during
the discussions of the working group in light of the existing general principle in Art.
1.7. See the discussions in StL-Doc. 12 (1977), p. 3; StL-Doc. 13 (1978), p. 4 leading to the
decision in StLDoc. 16 (1979), p. 12, upheld in P.C.-Misc. 15 (1991), p. 17. See further S.
Vogenauer in Jansen/Zimmermann, Art. 5:102 [PECL]: Relevant Circumstances, no. 5 (at
p. 769), underlining in a comparative legal observation that, also under English law
(which does not recognise a ‘general’ principle of good faith and fair dealing), “it is
generally accepted that contracts ought to be given a ‘reasonable’ interpretation and
that the implication of terms is one of these solutions that could as well be well
rationalized in terms of good faith” (→ Art. 1.7 no. 4a).
20) For (i) a critical discussion of “preliminary negotiations” (lit. a) and “subsequent
conduct” (lit. c) from an English perspective (“an examination of such circumstances
is said to reduce legal certainty and greatly add cost and time of litigation”,
referencing to Chartbrook v Persimman Ltd 1 AC 1101, at [41]); and (ii) the counter-
arguments with regard to costs (“since evidence of precontractual negotiations is
admitted in support of alternative claims of rectification, [footnote omitted] and
such claims are routinely brought in the relevant cases, the supposed gains in legal
certainty and savings as to costs fail to materialize” see S. Vogenauer in
Jansen/Zimmermann, Art. 5:102 [PECL]: Relevant Circumstances, no. 3 (at pp. 767-768).
(iii) For an assessment of the “no parol evidence rule” which, in light of “increasing
number of exceptions” and “found ways to circumvent it, for example by relying on
extrinsic evidence to establish the existence of a collateral agreement that
contradicts the terms of the actual contract”, has been claimed to be “no more than a
rebuttable presumption that the writing contains all terms of the contract” see ibid.
no. 4 (at p. 768); adding ibid. the comparative remark that German law – i.e. a civil law
jurisdiction which “abolished […] the parol evidence rule during the 19th
century”operates with exactly such a rebuttable presumption whereby
“circumstances from outside the four corners of the contract will only very rarely
convince the judge to add to, vary, or contradict the writing.” (Emphasis added).
21) S. Vogenauer in Jansen/Zimmermann, Art. 5:102 [PECL]: Relevant Circumstances, no. 8
(p. 770).
22) S. Vogenauer in Jansen/Zimmermann, Art. 5:102 [PECL]: Relevant Circumstances, no. 10
(pp. 770-771).
23) S. Vogenauer in Jansen/Zimmermann, Art. 5:102 [PECL]: Relevant Circumstances, no. 6
(p. 769).
24) Official Comments, Art. 4.3 no. 3, p. 142; first discussed in StL-Misc. 31 rev. (2015), pp.
30-31.
25) Official Comments, Art. 4.3 no. 3 with four illustrations, pp. 142-134.
26) Official Comments, Art. 4.3 no. 3 Illustration 6 (square or cubic meters), p. 142.

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 27) Official Comments, Art. 4.3 no. 3 and Illustration 5 (after accepting delivery of the
wrong quality of goods for two winters, the purchaser may still insist on the proper
quality for the future of a five year contract regarding the delivery of salt for ice
cleaning measures to a shopping mall), p. 142; StL-Doc. 126 (2014), pp. 6-7 (Cohen and
Fontaine).
28) Official Comments, Art. 4.3 no. 3, at p. 143.
29) Official Comments, Art. 4.3 no. 3, at p. 143.
30) Official Comments, Art. 4.3 no. 3, at p. 143 and Illustration 7.
1) S. Vogenauer in Jansen/Zimmermann, Art. 5:105 [PECL]: Reference to a Contract as a
Whole, no. 3 (pp. 777-778).
2) For an overview for the French, Germanic and common law systems see S. Vogenauer
in Jansen/ Zimmermann, Art. 5:105 [PECL]: Reference to a Contract as a Whole, no. 3-5
(pp. 777-778), emphasizing at no. 6 (pp. 778-779) that this is also the international
practice under the CISG.
3) S. Vogenauer in Jansen/Zimmermann, Art. 5:105 [PECL]: Reference to a Contract as a
Whole, no. 1 (p. 777).
4) Official Comments, Art. 4.4 no. 1, p. 145.
5) C. Ternero in Morán Bovio, Art. 4.4, no. 2.b, p. 243 (underlining similar principles in the
UNCITRAL Legal Guide on Drawing Up International Contracts for the Construction of
Industrial Works); S. Vogenauer in Vogenauer, Art. 4.4 no. 3.
6) Official Comments, Art. 4.4 no. 2, p. 145; C. Ternero in Morán Bovio, Art. 4.4, no. 1, p.
243; S. Vogenauer in Vogenauer, Art. 4.4 no. 5.
7) As summarised by S. Vogenauer in Vogenauer, Art. 4.4 no. 5.
8) S. Vogenauer in Vogenauer, Art. 4.4 no. 5; S. Vogenauer in Jansen/Zimmermann, Art.
5:105 [PECL]: Reference to a Contract as a Whole, no. 10 (p. 780).
9) Official Comments, Art. 4.4 no. 2, p. 145; S. Vogenauer in Vogenauer, Art. 4.4 no. 5.
10) C. Ternero in Morán Bovio, Art. 4.4, no. 1, p. 243 (para. 2 at the end).
11) Official Comments, Art. 4.4 no. 1, the Illustration (interpretation of a notice of
avoidance as a notice of termination), p. 145; S. Vogenauer in Vogenauer, Art. 4.4 no. 7.
12) S. Vogenauer in Jansen/Zimmermann, Art. 5:105 [PECL]: Reference to a Contract as a
Whole, no. 9 (at p. 780).
13) S. Vogenauer in Vogenauer, Art. 4.4 no. 4.
14) S. Vogenauer in Vogenauer, Art. 4.4 no. 6.
15) S. Vogenauer in Vogenauer, Art. 4.4 no. 4 (with regard to lit. a through c; while the
nature of a special side agreement, e.g. on a business contribution, may require to
decide otherwise pursuant to lit. d for some contracts); see also S. Vogenauer in
Jansen/Zimmermann, Art. 5:105 [PECL]: Reference to a Contract as a Whole, no. 7 (p.
779).
1) S. Vogenauer in Jansen/Zimmermann, Art. 5:106 [PECL]: Terms to Be Given Effect, no. 4
(pp. 781-783), emphasizing that this is also the worldwide practice under the CISG.
2) S. Vogenauer in Jansen/Zimmermann, Art. 5:106 [PECL]: Terms to Be Given Effect, no. 1
(p. 781).
3) S. Vogenauer in Jansen/Zimmermann, Art. 5:106 [PECL]: Terms to Be Given Effect, no. 2
(p. 781).
4) S. Vogenauer in Vogenauer, Art. 4.5 no. 4; see also S. Vogenauer in
Jansen/Zimmermann, Art. 5:106 [PECL]: Terms to Be Given Effect, no. 6 (p. 783): to
avoid ‘absurd results’ emphasising, however, that commercially absurd results can
normally already be avoided with regard to the ‘relevant circumstances’, i.e. in
particular the purpose of the contract (→ Art. 4.3) and the general principle of good
faith and fair dealing (→ Art. 4.3 no. 2).
5) Official Comments to Art. 4.5, p. 146; C. Ternero in Morán Bovio, Art. 4.5, no. 1, p. 244
(excluding Art. 4.2 which relates to ‘statements and other conduct’).
6) This addition is favoured by S. Vogenauer in Vogenauer, Art. 4.5 no. 4-5.
7) Established in StL-Doc. 25 (1983), p. 12-14. S. Vogenauer in Vogenauer, Art. 4.5 no. 8
(‘no discretion for the interpreter’); see also S. Vogenauer in Jansen/Zimmermann, Art.
5:106 [PECL], no. 3 (p. 781): “its application is not in the discretion of the
adjudication”.
8) S. Vogenauer in Jansen/Zimmermann, Art. 5:106 [PECL]: Terms to Be Given Effect, no. 4
(at p. 782), which has also become a basic principle of interpretation of European
Union law according to the jurisprudence of the European Court of Justice.
9) See note above for Art. 4.5 and S. Vogenauer in Vogenauer, Art. 4.6, no. 5 for Art. 4.6.
10) S. Vogenauer in Vogenauer, Art. 4.6 no. 5 argues in this direction with regard to the
drafting history.
11) S. Vogenauer in Vogenauer, Art. 4.6 no. 9.
12) S. Vogenauer in Vogenauer, Art. 4.5 no. 7.
13) Contra S. Vogenauer in Vogenauer, Art. 4.5 no. 7.
1) S. Vogenauer in Vogenauer, Art. 4.6 no. 1 note 221 (referring to Celsus, Digest 34, 5, 26
who states: “ambiguitas contra stipulatorem est”); S. Vogenauer in
Jansen/Zimmermann, Art. 5:103 [PECL]: Contra Proferentem Rule, no. 2 (pp. 772-773)
with a summary of the adaption by the rule through medieval jurists (“in dubio contra
proferentem”, i.e. in case of doubt against the user/author) and later Domat and
Pothier inspiring first national codifications.

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 2) See S. Vogenauer in Jansen/Zimmermann, Art. 5:103 [PECL]: Contra Proferentem Rule,
no. 3 (p. 773), referring to the law in Austria, England, Spain as well as the law on
standard terms in Germany and Italy while noting that the same rule in Art. 5 of the
EU Unfair Terms Directive (93/13/EEC) of 5 April 1993 has not been transposed in all
European jurisdictions to cover B2B contracts.
3) Restrictions were discussed regarding the principles of good faith and fair dealing
but not finally included, StL-Doc. 16 (1979), p. 11; the idea to include such a rule was
supported by M. J. Bonell, P.C.-Misc. 15 (1991), pp. 4-5; for the restrictive approach e.g.
in German and Italian law, S. Vogenauer in Vogenauer, Art. 4.6 no. 6 and note 235.
4) See for discussions of the drafters StL – Doc. 42 (1988), p. 13; (1991), at c.; P.C.-Misc 15,
pp. 30, 34; S. Vogenauer in Vogenauer, Art. 4.6 no. 2, 6 (at p. 606).
5) S. Vogenauer in Vogenauer, Art. 4.6 no. 2.
6) See N. Jansen in Jansen/Zimmermann, Art. 6:201 [PECL]: Unfairness of Terms, no. 16 (p.
943) and note 73, discussed there in the context of European unfair contract terms
directive with reference to ECJ, 28 July 2016 – C-191/15, Verein für
Konsumenteninformation/Amazon EU Sàrl [71] on a nontransparent jurisdiction clause.
7) S. Vogenauer in Vogenauer, Art. 4.6 no. 5 (arguing that Art. 4.6 should be considered
after Art. 4.5).
8) Cf. S. Vogenauer in Vogenauer, Art. 4.6 no. 10.
9) See S. Vogenauer in Jansen/Zimmermann, Art. 5:103 [PECL]: Contra Proferentem Rule,
no. 5 (pp. 773-774).
10) C. Ternero in Morán Bovio, Art. 4.6, no. 1, p. 245; S. Vogenauer in Vogenauer, Art. 4.6 no.
7.
11) C. Ternero in Morán Bovio, Art. 4.6, no. 1 (para. 2), p. 245 (as protection of the trust
(‘confianza’) of the ‘other party’); S. Vogenauer in Vogenauer, Art. 4.6 no. 4, 9. For an
example from arbitration practice (referred to ibid. at no. 6): Arbitral Award 17
December 2009, German Court of Arbitration for Sport, Unilex as referenced and
confirmed by the German state court LG Frankfurt 15 December 2011 (2-13 O 302/10),
Unilex and Beck-Rechtsprechungssammlung 2012, 06785, p. 7 (confirming the
application of Art. 4.6 in an action of an athlete for damages resulting from the
refusal to nominate him for the Olympics).
12) Official Comments to Art. 4.6 and the Illustration, pp. 146-147; S. Vogenauer in
Vogenauer, Art. 4.6 no. 9.
1) Sometimes (constitutional) law of the state of one party requires that certain
contracts are drafted in the language of the state. The two language versions can be
treated as ‘equal’, as required by the local law, while providing that in case of
disputes the language version used during the international negotiation shall alone
be used. The reduces risks and costs (experience from practice in a state contract
negotiated in French with an Arabic State).
2) Also: S. Vogenauer in Vogenauer, Art. 4.7 no. 3.
3) Official Comments to Art. 4.7 and Illustration 1, pp. 147-148; C. Ternero in Morán Bovio,
Art. 4.7, no. 1 (para. 1), p. 247; S. Vogenauer in Vogenauer, Art. 4.7 no. 3.
4) Official Comments to Art. 4.7, pp. 147-148.
5) S. Vogenauer in Vogenauer, Art. 4.7 no. 5 (with slightly different examples), 7.
6) Official Comments to Art. 4.7 and Illustration 2, pp. 147-148; S. Vogenauer in
Vogenauer, Art. 4.7 no. 5.
7) See the argumentation line of S. Vogenauer in Jansen/Zimmermann, Art. 5:107 [PECL]:
Linguistic Discrepencies, no. 3 (p. 785).
8) S. Vogenauer in Vogenauer, Art. 4.7 no. 6; see also the criticism of C. Ternero in Morán
Bovio, Art. 4.7, no. 1 (para. 2), p. 247 for simultaneous elaboration of different
authoritative languages, with a further reference to the UNCITRAL Legal Guide on
Drawing Up International Contracts for the Construction of Industrial Works (Chap. IV,
7-8) and Compensatory Business (Chap. IV, 10-12) at no. 2b, p. 248.
9) Cf. F. Baumann, Regeln der Auslegung internationaler Handelsgeschäfte: Eine
vergleichende Untersuchung der Unidroit Principles, der Principles of European
Contract Law und des deutschen Rechts (2004), pp. 168-173; S. Vogenauer in
Vogenauer, Art. 4.7 no. 7 note 267.
10) A good starting point is a clause proposed by V. Triebel, a double-qualified German
lawyer who has practiced for many years as an English barrister: „English […] is not
the native language of the parties and of their advisors [one of the parties or its
advisers]. The parties have agreed to English in the contract as a language of
convenience [party X has agreed to English in the contract as a concession to party
Y].”, in FS Elsing (ed. by Ebke/Olzen/ Sandrock), pp. 1047, 1058 (2015).
1) P.C.-Misc. 15 (1991), p. 4; P.C.-Misc. 17 (1993), p. 142; see also S. Vogenauer in Vogenauer,
Art. 4.8 no. 2, 6.
2) Official Comments Art. 4.8 no. 1, p. 149.
3) An example: “If any of the provisions of this contract is null and void, the remainder
of the contract remains valid. It shall be replaced by a provision which comes as
close as possible to the intentions of the parties [as documented in the Preamble].
The same applies in case of a loophole.”
4) See on doctrinal and historic background including ‘finding duties’ and ‘dividing
lines’ H. Dedek in Jansen/Zimmermann, Art. 6:102 [PECL]: Implied Terms, no. 10-14 (pp.
808-811).
5) Official Comments Art. 4.8 no. 1, p. 149; C. Ternero in Morán Bovio, Art. 4.8, no. 1 (para.
1), p. 249; S. Vogenauer in Vogenauer, Art. 4.8 no. 11.

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 6) Official Comments Art. 4.8 no. 2, p. 149.
7) Enumeration following the Official Comments Art. 4.8 no. 2, p. 149.
8) Official Comments Art. 4.8 no. 2 (emphasis added) and no. 3, p. 149; see also Official
Comments Art. 2.1.14 no. 3, p. 57 (‘may not be appropriate even where they cover the
subject-matter of the missing term’; emphasis added).
9) Official Comments Art. 2.1.14 no. 3, p. 57-58; StLMisc. 32 (2016), pp. 6-8.
10) Official Comments Art. 4.8 no. 3, p. 149-150 highlighting the intention of the parties as
the starting point of the reflection process (“first of all”).
11) Official Comments Art. 4.8 no. 3, at p. 149-150 and Illustrations 1 and 2; StLDoc. 129
rev. (2016), p. 5.
12) Official Comments Art. 4.8 no. 3, at p. 150 and Illustration 2.
13) S. Vogenauer in Vogenauer, Art. 4.8 no. 16.
14) S. Vogenauer in Vogenauer, Art. 4.8 no. 1, 2-5 (with a reference to the then well-known
arbitration about the Arthur Anderson dissolution – one of the world largest group of
consultants which literally evaporated within months after some reported fraud of a
small number of consultants in Texas – which applied Art. 4.1 (2) where it could have
applied also Art. 4.8; Arbitral Award (Geneva) 28 July 2000, ICC Case No. 9797, Unilex
No. 668, at V.J.4.), reported by M. J. Bonell, Arb Int’l. 2001, pp. 249-260). See also C.
Ternero in Morán Bovio, Art. 4.8, no. 1 (para. 2), p. 249 (suggesting that Art. 4.8 would
have been better placed in chapter 1); H. Dedek in Jansen/Zimmermann, Art. 6:102
[PECL]: Implied Terms, no. 15 (at p. 812).
15) As compared to the criteria mentioned in Art. 4.1, 4.3 and 4.4-4.6.
16) See in this context also the critical remark of S. Vogenauer in Vogenauer, Art. 4.8 no.
14 (last sentence). Chapter 4 on ‘interpretation’ precedes the Chapter 5 on ‘content’,
so that the user of the Unidroit Principles should start with Art. 4.8 before turning to
Art. 5.1.2. If the reasoning of the decision maker, usually an arbitration tribunal or a
state court, is mainly based on ‘the intention of the parties’ (a criterion which Art.
5.1.2 does not offer as a guidance (‘stem from’)), the black-letter rules suggest to
apply Art. 4.8. In practice, the founding for supplementing an omitted term may be
left open (→ Art. 5.1.1 no. 2).
17) Cf. Official Comments, Art. 4.8 no. 2, p. 149 (‘This Article … applies without prejudice to
the application of Article 5.1.2, where appropriate.’).
18) Official Comments Art. 4.8 no. 3, p. 147.
19) Official Comments, Art. 4.8 no. 2, p. 149.

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