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Notes for seminar 3

Interpretation of CISG
1. Article 7 (1): In the interpretation of this convention, regard is to be had to its
international character and to need to promote uniformity in its
application and the observance of good faith in international trade.
2. Article 7(2): Question concerning matters governed by this Convention which
are not expressly settled in it are to be settled in conformity with the general
principles on which it is based or, in the absence of such principles, in
conformity with the law applicable by virtue of the rules of private
international law.
Overview:
Article 7 CISG contains rule for interpretation (article 7(1) and gap filling of
CISG article 7(2)). Its goal is to ensure an internationally uniform
interpretation and application. This means the interpretation and application
should not be influenced by the principles of the particular legal system of the
forum state.
Is a provision of great important, since the various national sales laws differ in
both approach and concept.
International Character and Uniform Application
In article 7(1), the first arises out of direction in the interpretation of
convention , regard is to ne had to its international character and need to
promote uniformity in its application.
The aim of these words is clear, it is to ensure that as far as possible,
Convention is interpreted in the same way in different jurisdiction.
In this respect the Convention is to have an autonomous interpretation. that
is, an interpretation independent from the particular concept of a specific
legal system -- even when the expressions employed are characteristic of a
specific national law, an autonomous interpretation which contrasts with a
"nationalistic interpretation" based upon the premise that once put in force,
international conventions become part of the domestic law. Consequently,
one should not have recourse to any domestic concept in order to solve
interpretive problems arising from the CISG. The policy behind reliance upon
the autonomous interpretation also precludes recourse to domestic
interpretive techniques in order to solve problems, since that would lead to
results which conflict with the other premise upon which the interpretation of
the CISG is to be based, namely the need to promote uniformity in its
application
Sometimes the courts have stated that, when interpreting CISG, one should
also consider decisions based on national law where the wording of CISG
correspond to provisions of national sales law, even if national law does not
apply to case at hand. However, the case law and other legal materials
relating to another legal system may only be consulted to the extent that
certain terms or solutions have clearly been influenced by this legal system.
For example, art 74, sentence 2 CISG contains the foreseeability
doctrine to reasonably narrow down damages; the foreseeability test
can be traced back to common law doctrine established in Hadley v
Baxendale.
Unlike, for instance, in EU, there is no final instance CISG court, no court of
ultimate resort to promote resort to promote uniformity in interpretation of
law. Another method must therefore be found to ensure the uniform
interpretation of CISG. It seems clear that foreign decisions or awards as well
as foreign literature, must be considered .
If there is consensus in literature and case law as to how a specific question
should be handled, later decision should follow this. In particular, where a
court of last resort of a contracting state has decided a question in particular
way, the ratio of this decision has persuasive authority for other court.
(similar factual circumstances should lead to similar precedents)
With respect to the consultation of foreign CISG case law, there are
considerable differences. Some Italian court decisions have recently taken an
almost excessive comparative law approach, whereas, for example, US court
have traditionally been hesitant to consider foreign CISG case law. However,
courts and tribunals now quote foreign CISG decisions quite regularly.
For example, in Chicago Prime Packers Inc v Northam Food Trading Co
et al
A seller, a Colorado corporation, and a buyer, a partnership formed under the
laws of Canada, entered into a contract for the sale of a certain amount of
pork ribs. When the buyers final customer started to process the meat, it
noticed that it appeared to be in an off condition. As a result, the buyer
asked the United States Department of Agriculture to inspect the goods. The
examination revealed that some units of the meat were putrid and others
were good. However, the inspector condemned the entire shipment of meat
and, although the buyer informed the seller of such results, the seller
continued to demand payment and eventually brought an action against the
buyer. The District Court awarded the seller the full contract price plus
interest .The buyer appealed.
On appeal, the parties did not dispute that the contract was governed by
CISG (Art. 1(1)(a) CISG). However, the buyer put forward that the District
Court had erroneously placed upon it the burden of proving that the goods
were defective at the time of delivery.
The appellate Court firstly recalled that under CISG the seller must deliver
goods which, as to quantity, quality and description, conform to the contract
(Art. 35(1)(2)CISG). Furthermore, the buyer is liable of loss or damage to the
goods after the risk has passed to it, i.e. after the goods have been
transferred to the buyer's carrier (Art. 67(1)CISG), unless loss or damage has
been due to an act or omission of the seller (Art. 66 CISG).
Since CISG does not expressly state which of the parties has to provide
evidence of non-conformity, the Court, after pointing out that the Convention
needs to be interpreted taking into account its language and the general
principles upon which it is based (Art. 7(2)CISG), decided to turn to the
relevant provisions of the Uniform Commercial Code (U.C.C.). Indeed, the
caselaw interpreting analogous provisions of Article 2 of the UCC, of which
CISG has to be considered as the international counterpart, although not
applicable per se, may nonetheless "inform a court where the language of the
relevant CISG provision tracks that of the U.C.C".
As a result, the Court affirmed that just as a buyer-defendant bears the
burden of proving breach of the implied warranty of fitness for ordinary
purposes under the U.C.C, under CISG the buyer-defendant bears the burden
of proving non-conformity at the time of transfer". Consequently, since the
buyer had failed to demonstrate that the goods were defective, the judgment
rendered in favour of the seller by the District Court had to be confirmed.
CISG Advisory council and UNCITRAL Digest
Difficulties arising from absence of CISG court of final appeal are mitigated by:
1. Publication of a Digest by UNCITRAL, which is regularly updated. The
Digest provides for a synopsis of the relevant case law on each article of
CISG. By highlighting common views and reporting any divergent
approaches, the Digest is intended to portray the evolution of case law.
2. Advisory council of CISG. Established in 2001 to respond to the need to
address some controversial, unresolved issues relating to CISG. The
primary purpose is to issues Opinions relating to interpretation and
application of convention. 9 advisories have been published as at 2012,
relating to issues including whether electronic communication are consider
to be as writing and how the periods relating to the examination of the
goods and the notice of any non-conformity should be calculated. The
members are from all over world who are not bound to any mandate of
UNCITRAL but take independent, critical and innovative approach and
address issues not previously dealt with by judicial or arbitral decisions.
The principle of good faith
Three different views on the role of good faith in article 7 can be located in
case law and literature:
1. No positive duty
Convention does not impose a positive duty of good faith on the parties to
an international sales contract. Rather, good faith is a criterion that is to
be applied by judges and arbitrators only in the interpretation of
convention so as to reduce, not avoid, the possibility of interpreting
convention in such way as to produce result which are perceived to be
inequitable or unfair. The provision does not settle the question of whether
a duty of good faith exists in an international sales transaction. This
means, unless a duty of good faith can be extracted from the general
principle on which the convention is based, convention itself does not
impose duty of good faith directly on to the parties.

2. Imposes positive duty of good faith


A second view is that Art 7(1) does impose duty of good faith on the
parties to the contract. In favour of this view is the proposition that it is
not possible to draw a clear line of distinction between a good faith duty
that is directed to the interpretation of Convention and a duty that is
directed to the interpretation and enforcement of the contract of sale
itself. Interpretation does not exist in the abstract; inevitably impacts on
the rights and duties of the parties that are the subject of the
interpretative exercise.
The Columbia Constitutional Court enunciated a broad good faith
principle by referncing its own Magna Charta:

Equally, the exercise of commercial activity that the individuals develop with other
citizens of Different States must fit the principle of good faith, just as the
Convention stipulates in paragraph number one Art 7. This principle should not only
be observed in the contractual relationships or negotiations, but in the relationship
between individuals and the States and in the procedural performances. Indeed,
good faith, in conformity with art 83 of Magna Charta is presumed.
Besides, a Hungarian arbitration court ruled that the observance of
good faith is not the only criterion to be used in the interpretation of CISG,
but also as a standard to be observed by the parties in the performance of
the contract. The scholarly literature has generally favoured the expended
use of Article 7s good faith principle dealings between parties.
3. Good faith as general principle
Third view is that art 7 (1) does not impose a duty of good faith on the
parties, but that this duty is one of the general principles on which the
convention is based, Article 7(2) held that, where the convention does not
expressly settle a matter which it governs, such matters are to be decided
in conformity with the general principles on which the convention is based
on, or in the absence of such principles, in conformity with the law
applicable by virtue of the rules of private international law. Thus, if it can
be established that good faith is a general principle upon which the
convention is base, such a duty will be imposed on the parties by art 7(2).

Rights and duties of the parties

Obligation of seller and remedies of buyer

Obligation of sellers divided into three sections.


1. Firstly, regulates the delivery obligations of the sellers(deliver here
extend to delivery of document),
Article 30 duty to deliver the goods, hand over relevant document
and transfer property in the goods.
Delivery comprises solely the obligation of giving the buyer the means
taking possession of the goods. The actual completion of performance,
whereby the buyers takes over the possession of goods and the
property in them, is part of notion of delivery.
Article 30 not only obliges seller to deliver, but also hand over all
documents relating to the goods.
article 31 provision dealing with the place of delivery
article 33 time for delivery
article 33 fixes the obligation of the seller to deliver the goods
according to the contract terms or, if the time of delivery cannot be
ascertained from the contract, then within a reasonable time after
the conclusion of the contract.
2. Deals with the obligation of the seller in relation to the conformity of
goods and claim by third parties
Goods must be of quantity, quality and description and be
packaged as required by contract (article 35(1))
Under article 35(2) Except the parties have agreed, otherwise, the
good do not conform with the contract unless
a. Are fit for the purposes for which goods of the same description
would ordinarily be used.
b. Fir for any particular purpose expressly or impliedly made known to
the seller at the time of the conclusion of the contract, except
where the circumstances show that the buyer did not rely, or that it
was unreasonable for him to rely, on the sellers skill and judgement
c. Possess the qualities of goods which the seller has held out to the
buyer as a sample or model
d. Are contained or packaged in the manner usual for such goods or
where there is no such manner, in manner adequate to preserve
and protect the goods
Seller did not liable under para a to d for any lack of conformity of
goods if at the time of conclusion of the contract the buyer knew or
could not have been unaware of such lack of conformity.
3. Deals with the remedies for breach of contract by the seller. This section
contains within it a multiplicity of remedies.
If seller has not performed his obligation as per the contract, general
remedy for the buyer is he may require the seller to perform his
obligation under article 46

Sellers right to cure

Under article 37, if seller has delivered goods before the date of delivery, he
may, up to that date, deliver any missing part or make up any deficiency in
the quantity of the goods delivered, or deliver goods in replacement of any
non-conforming goods delivered r remedy any lack of conformity in the goods
delivered, provided that the exercise of this right does not cause buyer
unreasonable inconvenience or unreasonable expenses. However, buyer
retain any right to claim damages as provided for in this convention

Obligation of the buyer and remedies for seller

Obligation of buyer are to pay the price and to take delivery goods(article
53).
Remedies for breach of contract by the buyer in many ways mirror the
remedies available to buyer in the event of failure by seller to perform its
obligation under the contract. Thus, seller may be entitled to require the
buyer to pay the price(article 54), take delivery or perform its other
obligations under the contract(article 60). Alternatively, seller may fix an
additional period of time of reasonable length for performance by the buyer of
its obligations (article 63), and in default of such performance may avoid the
contract and or claim damages.
article 62, seller may require buyer to pay the price, take delivery or perform
his other obligations, unless the seller has resorted to a remedy which is
inconsistent with this requirement.
Article 63(2): unless the seller had received notice from the buyer that he will
not perform within the period so fixed, the seller may not, during that period,
resort any remedy for the breach of contract. However, seller is not deprived
thereby any right he may have to claim damages for delay in performance.

Fundamental breach

Many remedies are only available where the breach of contract can be
regarded as fundamental
Under article 25, a fundamental breach of contract occurs when an act by one
of the parties results in the other party being substantially deprived of what is
expected under the contract.
Yet, the detriment caused by the breach must be foreseeable. If the breaching
party did not foresee, and a reasonable person in the same circumstances
would not have foreseen such a result, there is no fundamental breach.