Published by Manz, Vienna: 1986. Reproduced with their permission.

	page number of Manz text
Preface	. . . . . . . . . . . . . . .       5
Abbreviations	. . . . . . . . . . . . . . .       9
Bibliographic Notes	. . . . . . . . . . . . . . .      11
I. Preliminary Remarks	. . . . . . . . . . . . . . .      17
A. Early History	. . . . . . . . . . . . . . .      17
B. The UNCITRAL Drafts and the Vienna Conference on the International Sales	. . . . . . . . . . . . . . .      18
C. Background Materials and Documents	. . . . . . . . . . . . . . .      20
II. The Structure and the Main Features of the 1980 Convention (CISG)	. . . . . . . . . . . . . . .      22
III. Sphere of Application (Articles 1-6)	. . . . . . . . . . . . . . .      24
A. Initial Questions (Article 1(1))	. . . . . . . . . . . . . . .      24
B. Sufficiency of Foreign Contacts	. . . . . . . . . . . . . . .      27
C. Application of the Convention Independent of the Parties' Commercial Character or
Nationality (Article 1(3))	. . . . . . . . . . . . . . .      27
D. Exceptions (Article 2)	. . . . . . . . . . . . . . .      28
1. Consumer Contracts	. . . . . . . . . . . . . . .      28
2. Auctions; Stocks, Securities. Negotiable Instruments and Money; Ships and Aircraft;
Electricity	. . . . . . . . . . . . . . .      29
E. Contracts for the Sale of Made-to-Order Goods and for the Sale of Services	. . . . . . . . . . . . . . .      31
F. Contract Validity and the Transfer of Title (Article 4)	. . . . . . . . . . . . . . .      32
G. Products Liability (Article 5)	. . . . . . . . . . . . . . .      34
H. Party Autonomy (Article 6)	. . . . . . . . . . . . . . .      35
IV. General Rules	. . . . . . . . . . . . . . .      37
A. Interpretation and Gap-Filling (Article 7)	. . . . . . . . . . . . . . .      37
B. Interpretation of Statements and Conduct (Article 8)	. . . . . . . . . . . . . . .      39
C. Usages (Article 9)	. . . . . . . . . . . . . . .      40
D. Place of Business (Article 10)	. . . . . . . . . . . . . . .      43
E. Form (Articles 11, 12, 13, 29 (2) and 96)	. . . . . . . . . . . . . . .      44
V. Formation of the Contract	. . . . . . . . . . . . . . .      48
A. Basic Principles and General Provisions	. . . . . . . . . . . . . . .      48
B. The Offer (Articles 14-17)	. . . . . . . . . . . . . . .      50
C. Acceptance of an Offer (Articles 18-22)	. . . . . . . . . . . . . . .      54
D. Open Questions	. . . . . . . . . . . . . . .      56
1. Battle of the Forms	. . . . . . . . . . . . . . .      56
2. Letters of Confirmation	. . . . . . . . . . . . . . .      56
3. Requirements of Official Permits	. . . . . . . . . . . . . . .      57
4. Culpa in contrahendo	. . . . . . . . . . . . . . .      57
VI. Substantive Sales Law	. . . . . . . . . . . . . . .      58
A. General Provisions	. . . . . . . . . . . . . . .      58
1. Fundamental Breach (Article 25)	. . . . . . . . . . . . . . .      58
2. Avoidance of the Contract (Article 26)	. . . . . . . . . . . . . . .      61
3. "Dispatch" Principle (Article 27)	. . . . . . . . . . . . . . .      61
4. Specific Performance (Article 28)	. . . . . . . . . . . . . . .      62
5. Modification and Termination of the Contract (Article 29)	. . . . . . . . . . . . . . .      63
B. Obligation and Responsibilities of the Seller	. . . . . . . . . . . . . . .      63
1. Place of Delivery (Article 31)	. . . . . . . . . . . . . . .      64
2. Obligations in Connection with Carriage (Article 32)	. . . . . . . . . . . . . . .      65
3. Delivery Date (Article 33)	. . . . . . . . . . . . . . .      66
4. The Transfer of Documents (Articles 34)	. . . . . . . . . . . . . . .      66
5. Conformity of the Goods and the Absence of Third-Party Claims (Articles 35-44)	. . . . . . . . . . . . . . .      66
a) Defects in Quality and Quantity (Articles 35-37)	. . . . . . . . . . . . . . .      67
b) Examination and Notice by the Buyer (Articles 38-40, 44)	. . . . . . . . . . . . . . .      69
c) Third-Party Claims to the Goods and Intellectual Property Rights of Third
Persons	. . . . . . . . . . . . . . .      72
(1) Third-Party Claims	. . . . . . . . . . . . . . .      72
(2) Industrial and Other Intellectual Property Rights of Third Persons	. . . . . . . . . . . . . . .      73
6. Buyer's Remedies for the Breach of Contract by the Seller (Articles 45-52)	. . . . . . . . . . . . . . .      75
a) Claims for Performance (Articles 46 and 47)	. . . . . . . . . . . . . . .      76
b) The Seller's Right to Cure (Article 48) ("Second Tendering")	. . . . . . . . . . . . . . .      77
c) Avoidance of the Contract (Article 49)	. . . . . . . . . . . . . . .      78
d) Reduction of the Price (Article 50)	. . . . . . . . . . . . . . .      79
e) Remedies for Partial Non-Performance or Partial Lack of Conformity (Article 51)	. . . . . . . . . . . . . . .      79
f) Early Delivery or the Delivery of Excess Goods (Article 52)	. . . . . . . . . . . . . . .      80
C. The Buyer's Obligations (Articles 53-65)	. . . . . . . . . . . . . . .      80
1. The Obligation to Pay the Price (Articles 54-59)	. . . . . . . . . . . . . . .      80
2. Buyer's Obligation to Take Delivery (Article 60)	. . . . . . . . . . . . . . .      83
3. The Seller's Remedies for Breach by the Buyer (Articles 61-65)	. . . . . . . . . . . . . . .      84
D. The Passing of Risk (Articles 66-70)	. . . . . . . . . . . . . . .      86
1. Sales Involving Carriage (Article 67)	. . . . . . . . . . . . . . .      87
2. The Sale of Goods During Transit (Article 68)	. . . . . . . . . . . . . . .      89
3. Local Purchase (Article 69(1))	. . . . . . . . . . . . . . .      90
4. Other Places of Delivery (Article 69(2))	. . . . . . . . . . . . . . .      91
E. Provisions Common to Both the Seller's and the Buyer's Obligations (Chapter V)	. . . . . . . . . . . . . . .      92
1. Suspension of Performance Due to Deterioration in the Other Party's Situation
(Article 71)	. . . . . . . . . . . . . . .      92
2. Avoidance Based on Anticipatory Breach (Article 72)	. . . . . . . . . . . . . . .      95
3. Instalment Contracts (Article 73)	. . . . . . . . . . . . . . .      96
F. Damages (Articles 74-77)	. . . . . . . . . . . . . . .      97
1. Extent and Measure of Damages (Articles 74-76)	. . . . . . . . . . . . . . .      97
2. The Duty to Mitigate Damages (Article 77)	. . . . . . . . . . . . . . .      99
G. Interest (Article 78)	. . . . . . . . . . . . . . .      99
H. Exemptions (Article 79)	. . . . . . . . . . . . . . .      101
I. Failure of Performance Caused by the Other Party (Article 80)	. . . . . . . . . . . . . . .      105
J. Effects of Avoidance (Articles 81-84)	. . . . . . . . . . . . . . .      106
1. Prerequisites	. . . . . . . . . . . . . . .      106
2. Obligations After Avoidance	. . . . . . . . . . . . . . .      107
3. Restitution of the Benefits Received	. . . . . . . . . . . . . . .      107
4. Gaps	. . . . . . . . . . . . . . .      108
K. The Obligation to Preserve the Goods and the Right to a Self-Help Sale
(Articles 85-88)	. . . . . . . . . . . . . . .      108
1. The Obligation to Preserve the Goods (Articles 85 and 86)	. . . . . . . . . . . . . . .      108
2. The Self-Help Sale	. . . . . . . . . . . . . . .      109
VII. Final-Provisions (Articles 89-101)	. . . . . . . . . . . . . . .      111
A. In General	. . . . . . . . . . . . . . .      111
B. Reservations	. . . . . . . . . . . . . . .      111
VIII. Limitation Period	. . . . . . . . . . . . . . .     114
Final Remarks	. . . . . . . . . . . . . . .     115
Index	. . . . . . . . . . . . . . .     117

Preface

The short report presented here is a translation of my book Einheitliches UN-Kaufrecht, published in 1981 by J. C. B. Mohr (Paul Siebeck) Publishing House in Tübingen, West Germany. It was originally intended as a source of information for German jurists, but foreign colleagues and friends suggested that I have it translated into English in order to make it accessible to jurists of all nations interested in uniform sales law. I decided to follow their advice because I believe that uniformity in the interpretation of the Convention can be promoted if legal scholars throughout the world recognize, discuss, and -- if possible -- clarify the potential problems before the Convention is applied by the courts. In this process of forming an international consensus, scholars may wish to have access to an interpretation of the Convention from the perspective of German law, a law which has influenced the development of the Convention. In agreeing to have the book translated, I am aware that a scholarly contribution in a language that is foreign to the author can never be formulated quite as convincingly as it can be in his native language.

In the translation I have tried to take into consideration the enormous amount of literature on the 1980 Convention that has appeared since the first publication of the book. I did not strive for completeness, but, nevertheless, I have examined everything to which I had access and have listed what I consulted in the bibliography. Often I have found that the comments of my colleagues reassured me as to my own views, but frequently they forced me to reconsider statements I made in the book. I am greatly indebted to those authors for the insights which enabled me to correct my interpretation. The experiences of the German courts with the predecessor of the Convention, the 1964 Hague ULIS and ULF, are included in the footnotes whenever this appeared to me to be of some benefit to the reader.

This book would not have been possible without the dedication and help of my assistants. I owe special thanks to Ms. Joelen Gates, Mr. Gerhard Dannemann, Ms. Stegemann, Mr. Lührs and Mr. Bond for translating, for checking the footnotes, and for reading the proofs. Mr. Fischer organized the administrative side of the translating and editing of this book; Mrs. Denzlinger patiently typed and retyped the various drafts.

But I am particularly indebted to my dear friend and colleague, Richard Hyland, for his invaluable advice and the tremendous sacrifices he made in a thorough revision of the text, and to the law firm Covington & Burling in Washington, D.C., for their understanding and generous assistance in providing him with secretaries, word-processors, material and working hours for the completion of this work. I can only hope that the efforts that went into the translation are merited by the contents of this book.

Last, but certainly not least, I have to thank my esteemed colleague, Professor Dr. Peter Doralt of the Wirtschaftsuniversität Wien, and Kommerzialrat Dr. Helmut Haschek for editing this little book in their "Schriftenreihe Recht, Wirtschaft und Außenhandel" and the patient care of the publishing house of Manz, Wien.[page 5]

Peter Schlechtriem

Freiburg, 1986

Abbreviations

Bibliographic Notes

I. Preliminary Remarks

A. Early History

Ernst Rabel not only initiated the drafting of an international uniform sales law,[1] but also laid the foundations for the ensuing process in his comprehensive comparative study on sales law, written together with his collaborators at the former Kaiser Wilhelm Institute in Berlin, and published in two volumes as Recht des Warenkaufs (Law on the Sale of Goods). The participants at the Vienna Conference were constantly aware of Rabel's initial contribution.[2]

It is not necessary here to trace the details of the progression from the International Institute for the Unification of Private Law (UNIDROIT) in Rome under the auspices of the League of Nations to the first successful intermediate stage, the Hague Conference on Uniform Law for International Sales.[3] The Hague Conventions - the Uniform Law for the International Sale of Goods (ULIS) and the Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF) [4] - did not fulfill the high expectations which accompanied the signing of the 1964 Hague Convention on Sales.[page 17] Indeed, both ULIS and ULF have been in effect in the Federal Republic of Germany since April 4, 1974.[5] They have been important in daily practice as evidenced by the considerable number of judicial decisions applying their provisions,[5a] even though the number of nations which have ratified the Hague Conventions has remained small, and its use is generally restricted to transactions between parties from these member states.[6] It was especially disappointing that the Hague Conventions were not ratified by some of the signatory states - such as France and the United States - which had exercised considerable influence on the formulation of their rules. Various reasons have been given for this failure.[7] Presumably each individual state had its own reasons for not ratifying and, in each case, more than one aspect determined the rejection of the uniform sales law.[8] Frequently mentioned is the negative evaluation of the sales law by developing countries - the belief that it favored the sellers of manufactured goods in the industrialized nations - together with the fact that these countries were not represented in the drafting process at the Hague Conference.[9]

In any case, without the participation of the developing and socialist countries, the hope that the Hague Conventions would become the lex mercatoria of world trade could not be fulfilled.

B. The UNCITRAL Drafts and the Vienna Conference on International Sales

The efforts to achieve a worldwide unification of international sales law did not stop, however, with the failure of the Hague Conventions. The first sign of continuity was that UNCITRAL [10] took up the cause of drafting a uniform [page 18] international law of sales and that a working group was appointed for this purpose.[11] It can be said that the efforts represented a continuation because the working group did not begin with a clean slate; rather it worked from the basis of the Hague Conventions and the research of Ernst Rabel with the intention of creating an international sales law acceptable to as many countries as possible.[12]

The UNCITRAL Working Group finished the first draft (the Draft Convention on Sales) [13] in January 1976, which was ratified after a few changes at the tenth UNCITRAL Conference in Vienna in May and June of 1977 (the 1977 Draft Convention).[14] The Draft Convention on Formation, proposed by the Working Group, was deliberated at the eleventh session of UNCITRAL in 1978 in New York and incorporated in the substantive sales law (1978 Draft Convention).[15] The Secretary-General then circulated this 1978 Draft Convention among the governments of UN member states for their opinions and comments. It formed the basis for the work of the Vienna Conference.

Sixty-two nations participated in the Vienna Conference.[16] It took place at the Neue Hofburg. A representative of the UN Secretary-General, Mr. Erik Suy, opened the Conference on March 10 at 11 a.m. and the Austrian Foreign Minister Pahr gave an opening address. The Chairman of the Hungarian delegation, Prof. Eörsi, was elected president of the Conference. The delegates chose Prof. Roland Loewe (Austria) to be the chairman of the First Committee, in which the substantive provisions of the international law of sales were deliberated and worked out. Prof. Roberto Luis Mantilla-Molino (Mexico) was elected chairman of the Second Committee, which was responsible for the Final Provisions and the Protocol [page 19] Amending the Convention on the Limitations Period. The Drafting Committee was headed by Mr. Warren Khoo Leang Huat from Singapore, and the Credentials Committee was chaired by Mr. Peter K. Mathanjuke of Kenya. The Steering Committee of the Conference was composed of the president, the chairmen of the First and Second Committees, and the 22 vice presidents of the Conference.

The actual deliberations took place in the sessions of the above-mentioned First (Sales Law) and Second Committees (Final Provisions and Protocol Amending the Convention on the Limitation Period) from March 10 to April 5, 1980. In accordance with the rules of procedure adopted in the first plenary session, decisions were reached in these working committees by a simple majority vote. The Drafting Committee began its work on March 21 and continued until the end of the Conference, parallel with the working committees and the Plenary. In the last week of the Conference - April 7 to 11 - the drafts from the First and Second Committees were discussed in Plenary and, in accordance with the Conference procedure, passed by a two-thirds majority. In the final vote, 42 countries voted for the Convention, while 10 abstained.[17] On April 11, the Final Act of the Conference was signed in a festive ceremony. The Convention has been signed by 20 countries; 3 countries have to date acceded after the last day for signatures, Sept. 30, 1981, had passed.[18] It was written and certified in the following official languages: Arabic, Chinese, English, French, Russian and Spanish. The discussions were all conducted in one of these languages and then translated simultaneously into the other five. German was not an official language of the Conference. The Federal Republic of Germany, the German Democratic Republic, Austria and Switzerland formulated an official German version in 1983.

As already reported by Herber,[19] the Conference's deliberations were for the most part free from political influence. The main concern behind the proposals and amendments was almost always to achieve the best objective solution and not simply to perpetuate the regulations of one country's domestic law. There was also rarely a firm block position on individual issues, although, during the deliberations, the developing countries did seek to protect the interests of buyers of manufactured goods and coordinated their position in the "Group of 77". The socialist states also held joint sessions, while the western industrialized nations and Japan deliberately tried to avoid acting as a group and, therefore, kept their coordinating contacts to a minimum.

C. Background Materials and Documents

The basis for discussions of the substantive sales law was the above-mentioned 1970 Draft Convention, for which the UN Secretariat had prepared a commentary (hereinafter the Secretariat Commentary)[20] which, by comparative references,[page 20] clarified the extent to which the Hague Convention had served as a source for the Draft Convention. The Conference also relied on the comments and proposals of the following governments and international organizations: Canada, the Federal Republic of Germany, Norway, the United States, [21] Australia, Byelorussian SSR, Israel, Sweden,[22] Finland, Switzerland,[23] the Netherlands, Portugal, the United Kingdom, Yugoslavia,[24] Austria, Czechoslovakia, France, Ireland,[25] the Central Office for International Railroad Transport in Bern, [26] the WIPO (World Intellectual Property Organization),[27] the International Chamber of Commerce,[28] the Asian African Legal Consultative Committee,[29] and the Council for Mutual Economic Assistance (COMECON),[30] along with an analysis of these comments and suggestions by the UN Secretariat.[31] These comments concerning the substantive sales provisions were supplemented by reports by the Secretary-General on the relationship between the Draft Convention and the Limitations Convention,[32] and a draft of the Final Provisions (the public international law provisions).[33] In addition to the above, for their internal discussions, the German delegation made profitable use of Huber's commentary on the 1978 Draft Convention,[34] as well as the (unpublished) minutes of the German Council on Private International Law which had examined the UNCITRAL Draft in several of its sessions. Finally, the comparative studies on the Hague Convention and the UNCITRAL Draft made by Kahn [35] and Hartley [36] at the request of the EC Commission were also taken into consideration.[page 21]

II. The Structure and the Main Features of the 1980 Convention (CISG)

Annex I to the Final Act contains in its first three Parts (Articles 1-88) the Sales law, while Part IV (Articles 89-101) contains in the Final Provisions the obligations of the Contracting States.[37]

Part I outlines the Convention's sphere of application and its general provisions, Part II governs the formation of the contract, and Part III contains the substantive rules for the sales contract itself. Due to a request made by the Scandinavian countries, a state need not adopt all three parts but rather may adopt either Part II or Part III in conjunction with Part I. This possibility is reflected in Article 92 as well as in the text of the substantive sales provisions themselves.

Huber [38] has already pointed out that the the reduction in the number of provisions contained in the UNCITRAL Draft compared to the Hague Convention was achieved not only by combining the law of contract formation with the sales law but, above all, by greatly simplifying the rules for breach of contract. In general, the remedies are no longer differentiated according to the various forms of breach, and additional and special remedies are available only as exceptions to the rule.[39] The Convention distinguishes only between claims based on breach by the seller (Articles 45-52) and those based on breach by the buyer (Articles 6l-65), as supplemented by provisions - equally applicable to both parties - on suspension of performance and anticipatory breach (Articles 71-72), damages and exemptions (Articles 74-77, 79 and 80) and avoidance of the contract (Articles 81-84).

The tendency to avoid inflexible and irrevocable legal remedies, which was already visible in the 1978 Draft Convention, [40] influenced the formulation of the remedy provisions in the 1980 Convention. The need for greater judicial discretion in particular cases also became clear, such as in the requirement that a measure or waiting period be "reasonable" .[41] The new provisions on time limitations for giving notice of non-conformity and the consequences of failing to give the notice in a timely manner (Articles 39 and 44) show especially clearly the strongly felt need for flexible rules to accommodate the buyer's difficulties.[page 22]

Several points in the UNCITRAL Draft which had been criticized in the legal literature were improved in Vienna, for example, the description of a "fundamental breach of contract", the apportionment of the risk for sending legally relevant communications, and the interpretation and gap-filling provisions of Article 7.

Of course, some suggestions were not adopted,[41a] but it should be regarded as a success that, in many cases, the content and, to some extent, the formulations of the UNCITRAL Draft survived in the final text.[page 23]

III. The Sphere of Application (Articles 1-6)

A. Initial Questions (Article 1(1))

As Article 1 indicates, the Convention applies to contracts of sale (for the exceptions, see Articles 2-5); barter contracts are not governed by the Convention.[41b] The Convention combines applicability on the basis of "autonomous" requirements [42] with the lex fori's rules of private international law. First, under the "autonomous" requirements, the Uniform Law for International Sales is applicable, under Article 1(1)(a), when the parties to the contract have their places of business - or alternatively, their habitual residence (Article 10(b)) - in different Contracting States. The Convention, however, does not eliminate party autonomy, since, according to Article 6, parties may opt out of the Convention completely, either by choosing a particular domestic law or by allowing the forum's rules of private international law to determine the appropriate law. Second, private international law may direct the application of the Convention when, even though the parties have their places of business in different states, the requirement that these are Contracting States is not met. It would then be sufficient that the forum's conflict-of-law rules point to the law of a Contracting State. It is clear that the Convention applies in those cases where both parties have their places of business in different Contracting States but find themselves in a court of a non-Contracting State whose rules of private international law point to the law of a Contracting State.[43] Article 1(1)(b) also leads to the application of the Convention in cases when the private international law rules of the forum state,[44] whether or not it is a Contracting State, would apply the law of a Contracting State, as long as the basic requirement of Article 1(1) is met, namely, that the parties' places of business are in different states.[45] Of course, Article 1(1)(b) considerably enlarges [page 24] the sphere of application of the Convention.[46] Views on the solution differ. The rule was very controversial in Vienna [47], and the opposition to it finally led to the reservation clause in Article 95.

The pros and cons of this provision must be judged from several standpoints. First, it is advantageous for Contracting States to apply the Uniform Law for International Sales in international transactions not only when their own law is applicable by virtue of Article 1(1)(a), but also when it applies by virtue of private international law, since decisions based on the modern law of the Convention, developed under the auspices of the United Nations and tailored to the intricacies of international sales transactions, often will be far more acceptable to both parties than one party's domestic law that often is entirely alien to the other.[48] Application of the Convention is even more desirable when the private international law of a non-Contracting State invokes the law of a Contracting State. Then, in effect, the court would refer to the Convention rather than to domestic law. It would certainly be easier for the courts of non-Contracting States to understand and apply the Convention than it would be for them to apply the domestic sales law of a foreign country.[48a] Finally, the fact that Contracting States are bound to apply the Convention, even in relation to non-Contracting States which are not bound to do the same, should not influence the appraisal of these provisions.[49] 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.

More understandable are the fears that Article 1(1)(b) could make the Convention more difficult to apply.[49a] For example, domestic rules of private [page 25] 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.[50] 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.[51] The uncertainty which may arise from the parties' choice of law should also not be overestimated. If the parties have chosen the law of a Contracting State, then it is a matter of interpretation whether they meant the Convention or that state's local sales law. Moreover, not only Article 1(1)(b) gives rise to this question. Numerous German court decisions have had to decide the meaning of standard references to "German" law in cases where the requirements for the application of ULIS are met.[52]

Some delegations indicated that laws in their countries already make special provision for the regulation of foreign trade.[53] Despite this serious concern, the majority of delegations voted for the version of Article 1(1)(b) [54] as formulated, but the Plenary accepted the Czechoslovakian proposal [55] to include as a reservation clause - Article 95 - the option for Contracting States not to enact Article 1(1)(b).[56] A reservation under Article 95 restricts the meaning of "Contracting" in [page 26] the phrase "Contracting State" (Article 1(l)(b)). If the forum's conflicts law invokes the law of a Contracting State that has made the reservation, the forum must apply the domestic law of the reservation state and not the Convention.[56a]

B. Sufficiency of Foreign Contacts

In order for ULIS, the Hague Sales Law, to apply, it is necessary that borders be crossed, either in the formation or in the execution of the contract, or that formation and execution each take place in different countries. These requirements were not retained in the 1980 Convention. 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.[57]

C. Application of the Convention Independent of the Parties' Commercial Character or Nationality (Article 1(3))

Like Article 7 of ULIS, Article 1(3) of the 1980 Convention also provides that the application of the Convention 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.[58] Finally, 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.[59] [page 27]

D. Exceptions (Article 2)

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 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 for International Sales;[60] 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.[61] 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.[62] 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.[63] 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,[64] or building materials by a contractor, or a beer delivery to a restaurant owner, if the latter two are not registered commercial parties. 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.[65] The law of the [page 28] Contracting State must decide the priority between the Uniform Law for International Sales, which the state has adopted, on the one hand, and its domestic consumer-protection law, which the state has left in force unchanged beside CISG.[66] 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. In my opinion, the Uniform Law for International Sales would take precedence in the Federal Republic of Germany because it is the more recently ratified and enacted law, and it is more specialized than the domestic consumer-protection law. This conclusion can be justified, since an instalment purchaser whose place of business is in Germany, and who makes a purchase abroad without any express agreement, cannot be certain that the German instalment-purchase law will protect him.

The preconditions for the exclusion concerning "personal, family and household use" are not defined. However, this does not necessitate recourse to domestic law. Interpretation according to Article 7 of the Convention is both mandatory and possible; the purpose of Article 2(a) is to allow a broad description, based on sociological evidence, of those persons who are regarded as included in the family or household. Thus, a purchase made for a god-child or the acquisition of a car for the housekeeper would be covered.[67] A domestic law's definitional provisions on family membership should not apply.

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.[68] 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.[69] The [page 29] 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.[70] Sales contracts which name a document as the subject of sale, because the document controls the delivery of goods, are considered to be within the sphere of application of the Uniform Law for International Sales, even though some domestic regulations would characterize these as negotiable instrument transactions.[71]

The exception for ships and aircraft in Article 2(e) of the Convention and Article 5(1)(b) in ULIS was retained, although forceful arguments for its elimination were again raised in Vienna.[72]

In ULIS the exception is restricted to registered ships or to ships that are required by law to be registered, but that restriction was dropped in the Convention because domestic registration requirements differ greatly from country to country. In the ULIS version, uncertainty about the application of the uniform sales law can also arise, such as, for example, when it has not been determined which domestic law controls the duty to register.[73] Some legal systems characterize the sale of a ship as a real-estate transaction and establish special rules not only for the transfer of title but also for the effective formation of the contract (formal requirement).[74] With the elimination of the registration criterion, it has, however, become uncertain whether and to what extent smaller boats - row boats, canoes, dinghies and yachts - belong to the subject matter excluded from the application of the Convention. The function and reason for the exception - recognition of special rules for transactions involving ships - suggest that the exception should not be extended to boats (although no distinction is feasible in regard to aircraft).[74a] Delimiting the application of this exception will of course be difficult, for example, with small fishing boats or high sea yachts. In such cases, one will consult domestic law to learn whether such boats come under the special rules applicable to ships. If they do, the sense and purpose of Article 2(e) is that the exception should then apply. In many cases, the duty to register will therefore remain an important criterion. As a whole, the rule is probably only acceptable because it increases the willingness of states to join the Convention.

At the request of India, hovercraft were included in the list of exceptions.[75] On the basis of the argument advanced by the Indian delegation that such craft are treated in Indian law the same as ships or aircraft, one may conclude that this [page 30] exception includes only hovercraft that can be used as boats and not other kinds of vehicles or vessels that operate on the principle of the pneumatic cushion.

Finally, by tradition, sales contracts concerning the supply of electricity are excluded from the Convention's sphere of application in Article 2(f) and of that ULIS in Article 5(1)(c). The exclusion seems to conflict with the need for consistency. However, the electricity-producing industries, which should be the only ones affected by it, elaborate their transnational agreements in such detail, that there is seldom any need to consult the applicable law.

In sum, the exceptions listed in ULIS were maintained in the Convention. Attempts to exclude other goods from the Convention's sphere of application were averted by the use of the argument that the parties always have the right to exclude the goods if they wish by choosing a different applicable law.[76]

E. Contracts for the Sale of Made-to-Order Goods and for the Sale of Services

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. He must prove that the party who placed the order supplied, or was supposed to supply, a substantial amount of the materials. This presumably would be the case under the Convention as well.[77]

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.[78] 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.[78a] The sale price of the goods to be delivered must be [page 31] compared with the fee for labor and services, as if two separate contracts have been made. A United Kingdom proposal [79] to use the term "major part in value" was withdrawn for lack of support, but the United States's countervailing example of a painter who is commissioned to cover a ceiling with gold paint will hardly have any practical impact. "Preponderant" in this sense should be considerably more than 50% of the price. It is more difficult, in such cases, to decide whether there are, in fact, two separate contracts, and, for example, whether the delivery is subject to the Uniform Law for International Sales while the installation contract is governed by domestic law. Domestic law should decide whether these two contracts can and must be distinguished.[80] It must be remembered, though, that the intent of the parties [81] to treat the delivery contract separately must be respected, 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.

During the deliberations on Article 3, a United Kingdom proposal [82] addressed the problem of whether the transfer of know-how should be covered and regulated by the Convention. The United Kingdom's proposal aimed at excluding contracts for goods to be manufactured or produced if the party ordering the goods provides the information or expertise necessary for such manufacture or production. This proposal failed because the characterization of such sales contracts was perceived as uncertain, because it is probably without parallel in domestic laws, and because quite a number of contracts would thereby be removed from the sphere of the Convention.[83]

F. Contract Validity and the Transfer of Title (Article 4)

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) [83a]) 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.[page 32]

Contracts are also considered invalid if the underlying sale is immoral or illegal and therefore void according to domestic law.[83b] Economic 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 instalment contract under German law can probably be "saved" where the Convention covers an instalment 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, such as BGB § 306.[84] In my view, therefore, domestic laws which accord legal recourse in situations where a party errs about the goods to be delivered [84a] or the solvency of the other party would not apply under the Convention because these problems are specifically and conclusively regulated by the Convention's provisions on conformity of goods and anticipatory breach.[85]

Finally, domestic law still controls the validity of usages. The controversy over the binding effect of usages [86] 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.[87] 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.[88] But one may also assume, from [page 33] 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.

G. Products Liability (Article 5)

A proposal sponsored by Finland, France, and the United States [89] to exclude from the Convention claims based on death or personal injury caused by the goods was accepted in Vienna and embodied in Article 5.

The basic idea is simple: the Convention does not govern products liability. Domestic law, therefore, remains in force. To the extent products liability is 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,[90] this Article was needed to ensure that these domestic rules would still apply when the Convention is enacted. Therefore the contractual remedies of "positive Vertragsverletzung" or § 463 BGB under German law or the responsibility of the "vendeur professionel" under Articles 1645 and 1646 of the French Civil Code are applicable in case of death or personal injury. 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.[91]

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,"[92] 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 [page 34] 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.[92a] The question of whether a concurrent action in tort would lie must be decided by domestic law.

H. Party Autonomy (Article 6)

Article 6 guarantees party autonomy over both the conflict rules and the substantive law. On the basis of proposals from Anglo-Saxon countries,[93] 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 a different law (the "opting-out" solution).[94] 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.[95]

Also rejected was a Canadian proposal to exclude certain principles, such as the standard of good faith, from the domain of the party autonomy.[96]

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,[97] as long as the requirements for their validity in domestic law are fulfilled.

In contrast to Article 3 sentence 2 of ULIS, 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.[98] 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.[99] [page 35]

Just because the parties choose a domestic law does not necessarily mean that country's local sales law applies. The delegates rejected proposals by Canada and Belgium [100] which would have mandated the application of a state's domestic sales law whenever a national law was chosen.[101] The French delegate argued that, in case of doubt, the parties' choice of a national law means that the Convention applies if that state has adopted the Convention, unless, of course, the parties have explicitly chosen the local sales law of that country. This corresponds to the interpretation generally accepted in Germany with regard to ULIS.[102]

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. A proposal by the German Democratic Republic to this effect,[103] however, encountered resistance partly because it was thought to be superfluous and partly because it was considered dangerous. It is domestic law that grants the parties the autonomy to choose the Convention, and therefore, the limitations of that law must be observed.[103a] For example, an agreement to apply the Convention in an instalment purchase of goods for personal use cannot override the mandatory regulations of German instalment-purchase law where German law is applicable.[104] In other words, CISG does not incorporate in the principle of party autonomy the parties' ability to bypass the limits on party autonomy in domestic law. The only alternative would have been an article that corresponds to ULIS Article 4,[105] but this would simply have restated the obvious. [page 36]

IV. General Rules

A. Interpretation and Gap-Filling (Article 7)

ULIS Article 17 attempts to base interpretation and gap-filling on the general principles underlying the rules of ULIS. This provision is designed to safeguard unification of the law and to avoid a mixture of uniform law with domestic sales law, which otherwise would have resulted from interpretation and gap-filling. It is well known, however, that this provision has been extraordinarily controversial. Above all, many critics were not optimistic that jurists would be able to develop and apply general principles of a uniform sales law.

UNCITRAL, on the other hand, had accepted the goal of preserving and furthering uniformity and used the indication about the international character of the Convention as a floodgate against an all too broad recourse to domestic law. Furthermore, the requirements of good faith in international trade could also prevent an all too hasty resort to domestic regulations and legal custom. Therefore, because recourse to domestic law was believed to be more or less inappropriate for interpretation and gap-filling, within the area of sales law - the definition of which is, of course, a decisive preliminary question - the only remaining legal source was the substantive rules of the 1978 Draft Convention as interpreted, developed and supplemented on its own terms. Interpretation and gap-filling would therefore draw upon the basic underlying principles of the uniform law, as well as - in certain cases - upon special rules by way of extension or of analogy. The remark that Article 6 of the 1978 Draft Convention did not change the substance of the rules in Article 17 of ULIS is therefore probably accurate.[106]

During the discussion of Article 7 at the Vienna Conference, such remarks increased the opposition and resistance of those delegations which considered the interpretation and extension of CISG by reference to domestic rules to be a less serious alternative and, therefore, wanted to provide for recourse to domestic law in all cases of doubt, whether it be the law of the seller's place of business [107] or the law applicable by virtue of the rules of private international law.[108] The great majority of the delegates, on the other hand, perceived the possibility of recourse [page 37] to domestic law in such cases as undesirable. Some even proposed a return to (and an extension of) the formulation in Article 17 of ULIS.[109] Thanks to the German Democratic Republic's mediating proposal, the compromise formulated in Article 7(2) was passed.

The maxim laid down in this provision - to promote uniformity in the application [110] of the Convention when interpreting it - must also apply to the important preliminary question to paragraph (2), namely whether a certain matter falls within the scope of the Convention. Because the seller's responsibility to provide goods of the quality agreed upon in the contract is a matter within the realm of the Convention, domestic remedies, such as avoidance based on mistake about the quality of the goods, should not be available to the buyer, even though mistake is not expressly mentioned in the Convention.

In interpretation and gap-filling, Article 7 should thereby allow about the same possibilities as ULIS Article 17.[110a] The authoritative principles can be inferred from the individual rules themselves and their systematic context.[111] The last part of Article 7(2), though, closes off the path, which was sometimes considered for ULIS, of using a survey of comparative law to develop general principles that cannot be derived from the law itself and to use them to interpret the Convention.[112] Practically, though, this limitation serves only as a clarification, because, in the application of a uniform sales law, it is rarely possible to determine autonomous, fundamental principles on the basis of comparative analysis.

The reference to the observance "of good faith in international trade" in Article 7(1) indicates one of the general principles that must be regarded in interpreting and extending the uniform law. Whether or not effective international standards of good faith can actually be determined must be left to studies in comparative law. The principle has affected the formulation of a number of [page 38] provisions in CISG [113] and the leading commentary on CISG cites Articles 21(2) and 19(2) as likely "candidates" for an interpretation based on the principles of good faith.[113a]

There is naturally some cause for uncertainty when the principle of good faith, as embodied in the Convention, concerns only the interpretation of the Convention and not the conduct of the parties in the formation and performance of the contract or the interpretation of their intentions.[114] The UNCITRAL Working Group had discussed whether the principle should be generalized to include the conduct of the parties - an area where the principle has gained concrete recognition in ULIS Article 5(2). In Vienna, there was corresponding sentiment in connection with the treatment of Article 7. [115] Certain concerns which had already been expressed in the UNCITRAL Working Group, that such broadly formulated principles could be interpreted and applied in different ways, that domestic views about their content varied, and that sanctions were lacking, finally led to the withdrawal of these proposals. Nevertheless, even those who had previously opposed them indicated again and again that it would be desirable to observe the good faith principle.

The German jurist may regret this rejection of a "good faith rule" corresponding to § 242 of the German Civil Code in its present day meaning. However, the function of such a general clause can probably be fulfilled by the rule that the parties must conduct themselves according to the standard of the "reasonable person," which is expressly described in a number of provisions and, therefore, according to Article 7(2), must be regarded as a general principle of the Convention.[115a]

B. Interpretation of Statements and Conduct (Article 8)[115b]

As already established in the 1978 Draft Convention, the meaning of the statements or other legally relevant conduct of the parties is to be determined by their actual intent (Article 8(1)). Of course, this intent must have been known by or, in any case, recognizable to the addressee. If this intent is neither known nor recognizable, then the understanding of a reasonable person in the situation of the addressee is the controlling standard (Article 8(2)). The intent of a party or the understanding of a reasonable person depends on all of the facts and circumstances including those specially listed in the Convention, namely, negotiations, established practices between the parties, usages, and any subsequent conduct of [page 39] the parties (Article 8(3)). As Huber has already pointed out, the German jurist is here on the familiar ground of §§ 133 and 157 of the German Civil Code.[116]

The Convention does not regulate the consequences of a discrepancy between the actual but unrecognizable intent of a party on the one hand, and, on the other, either the objective meaning of that party's statement in the sense of Article 8(2) or the other party's response to the first statement where the intent of the parties does not coincide. The regulation of such discrepancies is a question for domestic law. It appears, however, that Article 8(1) and (2) prevents a party's purely subjective intent from being decisive (secret reservations!) and prescribes the solution found in § 117 of the German Civil Code for a sham statement.[116a] As far as these deficiencies in intent are concerned, domestic law is replaced by the Convention.

The usages to be considered when discovering the intended and/or objective meaning of a statement presumably include, in contrast to those mentioned in Article 9(2), usages which are only local, national, or followed by a particular group of business people. It is important to note that the function of Article 8(3) is different from that of Article 9(2): It does not address gap-filling of the contract, but rather the interpretation of a party's statements. For the latter, according to Article 8(3), the particular circumstances are important, including usages that are possibly significant only to a party making the statements or to a reasonable person in the rule of the addressee. For example, a German who remains silent after having received a letter of confirmation can be understood to have expressed approval, regardless of whether Article 9(2) includes the German customs pertaining to letters of confirmation.

C. Usages (Article 9)

Article 9(1) binds the parties to any usages to which they have agreed - either through their negotiations or by their course of dealing.[116b] This provision corresponds to ULIS Article 9(1) and confirms the parties' autonomy over the contents and formation of the contract. Of course, Article 4(a) still mandates respect for domestic laws that prohibit certain trade practices and void contracts concluded by such means. The so-called "normative" usages were extremely controversial. According to the German understanding, their validity is not based on the parties' agreement. The Convention adopts in Article 9(2), as in Article [page 40] 8(2) of the 1978 Draft Convention, the legal construction - which in certain cases may be accurate - that a usage is binding due to an implied silent agreement between the parties.[117] A usage is binding only where the parties knew or ought to have known of the particular usage. This provision probably produces the same results as the restrictions of ULIS Article 9(2) sentence 1 and ULF Article 13(1).[118]

The last part of Article 9(2) restricts the kind of usages which must be observed.[119] The formulation reflects the concerns that some delegations had regarding respect for trade usages.[120] The requirement that the usage must be widely known in international trade, if taken literally, would mean that trade usages would generally have little effect. But Article 9(2) specifies that usages are defined with reference to the particular branch of the trade involved and to the parties who form contracts like the one concerned in a particular case. This is especially important when defining "international," "widely known" and "regularly observed." This means respect for usages existing, for example, in the international grain trade and followed by the parties who buy and sell grain on the international market. It is irrelevant, on the other hand, whether the practice is known "internationally" outside grain-trade circles.

Basically, Article 9(2) is an "internationalized" version of the requirements in German law for development and recognition of a binding trade usage: actual use, the consent of those who deal in the relevant trade transactions, and a certain duration,[121] factors which are basic in other legal systems as well.[122] In comparison to ULIS Article 9(2) and ULF Article 13(1), however, Article 9(2) restricts the recognition of national, regional or local usages which were developed for domestic sales and are not regularly followed in international transactions. These [page 41] usages cannot be "internationalized" simply because a foreign party knew or should have known of the custom.[123] The Chinese proposal that only reasonable usages should be recognized,[124] which would have given domestic courts control over the contents of usages, was rejected;[125] however, domestic prohibitions of certain trade customs which have the effect of voiding the contract remain operative (Article 4(a)).

There was no support for the view expressed by the Czechoslovakian delegation that the rules of the Convention should have priority over trade usages. The fact that the legal relevance of usages is based on a tacit agreement made it easier to accept them as a consequence of the priority of party autonomy over the Convention's rules.[126] The Conference also rejected a Pakistani proposal that would have permitted one party's conduct to prevent a finding that the parties had agreed on a usage.[127] Accordingly, it can be assumed that a party can show that a usage does not apply only by proving that it rejected it.

According to the version formulated in Vienna, usages explicitly apply to the formation of the contract as well. Nevertheless, it remains unclear whether usages such as those developed in Germany concerning the "commercial letter of confirmation" will be respected. The United States delegation, in presenting arguments for its proposal to include as usages those concerning contract formation, mentioned cases in which silence operates as the acceptance of an offer.[128] Therefore, it seems possible, in principle, to recognize usages in which silence means approval, if they meet the requirements of Article 9(2).

However, the requirements for according legal consequence to the silence of a party receiving a letter of confirmation would be considerably narrower in international commercial transactions than for internal dealings. But even according to the wording of ULFIS Article 13(1), which itself permits the "internationalization" of German usages, due consideration had to be given to whether the other side was informed or could have been informed. The substantive requirements for an effective letter of confirmation, i.e., that silence may be regarded as consent, would not be met if the foreign party were uninformed.[129] The wording of Article 9(2), which corresponds to the rules recognized in Germany, permits a letter of confirmation to be effective only if it is used in that particular branch of business in several countries and if the practice is acknowledged to have the legal consequence that silence means consent.

Finally, there was no support for the Egyptian proposal to include in the Convention ULIS Article 9(3).[130] As a result, guidelines for a uniform interpretation [page 42] of Incoterms, for example, are lacking. On the other hand, in practice, Article 8(2) should, in general, be able to fulfill the function of ULIS Article 9(3) in these cases.[130a]

D. Place of Business (Article 10)

Even though the concept of "place of business" plays a central role in the Convention,[131] the Convention does not define the term.[132] As in German law, it can be assumed that a "place of business" is an establishment of some duration and with certain authorized powers. On the other hand, commercial management of the enterprise is not necessary, since the Convention does not require the place of business to be the main office. For the problems that can arise when a major enterprise has multiple places of business, Article 10(a) should provide an appropriate solution.[132a] Granted, it is not always easy to attach the contract to one of several places of business solely on the basis of the criterion of the "closest relationship to the contract and its performance". A good example is when the contract is negotiated and is to be performed by one place of business, but the formation of the contract is concluded in another place, such as in a multinational's headquarters in a different country. The provision that the circumstances as known to or contemplated by the parties must be taken into account defies further normative description.[133]

The difficulties that, in connection with the determination of the place of business, arise with the term "party" when a state is a contracting party should be clarified with the help of the interpretation proposed by the Finnish delegation, that the party would be the governmental authority that is dealing with the business involved.

The use of the "habitual residence" of a party as an alternative to "place of business" will rarely be applied to legal transactions governed by the Convention. It certainly does not apply merely because a party does some act outside of its place of business. [page 43]

E. Form (Articles 11, 12, 13, 29(2) and 96)

From the very beginning, one of the most controversial issues of UNCITRAL's work was whether or not ULIS Article 15 concerning freedom of form should be followed. It was pointed out even by countries not in favour of form requirements that the bureaucratic needs especially of large-scale entities (business enterprises, states, or governmental organizations, etc.) to control their transactions require written evidence and the respect of form requirements.[134] Therefore, the Draft Convention already offered a compromise whereby freedom of form was the basic rule, but a reservation clause would enable states preferring a formal writing to decide, by application of the domestic law invoked by conflict rules, the form issue for contracts concluded by parties with a place of business in one of these states.[135] This solution was maintained at the Vienna Conference.

A Dutch proposal to limit this possibility to certain types of contracts [136] was not accepted, both because it could have made it more difficult to decide whether a formal writing is required,[137] and, above all, because it might have encouraged the use of the reservation clause. Similar proposals had previously been rejected by UNCITRAL because a list of the contract types with form requirements would have had to accompany the reservation and would have made application of the Convention very difficult.[138] [page 44]

According to Article 11 sentence 1, the lack of form requirements means that "consideration" is not required. Otherwise there could be difficulties in contract modifications which favour one side.[139] Sentence 2 also overrides domestic rules of procedure which exclude parole evidence and thereby indirectly pressure the parties into using a written form. This rule applies to all legally relevant statements and communications which are or will be required for the formation of a sales contract, its modification or termination.

Even when Contracting States make use of the reservation in Article 96, domestic requirements on form are only to be regarded, despite the broad wording in Articles 12 and 96 ("or other indication of intention"), as far as they relate to the formation of the contract, its modification or consensual termination. In particular, the more precise formulation, "its modification or termination by agreement" makes it clear that a one-sided declaration to terminate a contract does not fall within the scope of the reservation and the corresponding domestic regulations on form,[140] nor does a declaration to reduce the price according to Article 50 sentence 1. In my opinion, notification of defects, the fixing of time limits, and other communications are, therefore, not subject to form requirements, even when, on the basis of the Article 96 reservation, the contract, in principle, is subject to domestic form regulations which require that such communications adhere to formal writing requirements. The Conference also passed a proposal by the Federal Republic of Germany, whereby the Article 96 reservation may also be invoked after signing the Convention. Thus, the Convention can be signed even if, at the time of the signing, it is not clear whether there are any applicable domestic requirements on form. Later withdrawal of that reservation is possible (Article 97(4) sentence 1).[141]

When the reservation is made and one party's place of business is in a reservation state, the court must determine the law applicable to form according to its private international law. If the law of a Contracting State which did not invoke the reservation provision is applicable, freedom of form according to Articles 1(l)(b) and 11 prevails. On the other hand, if the conflict rules point to a reservation state, then the domestic regulations of that state control.[142] [page 45]

Compliance with writing requirements, especially for contract modifications which often necessitate quick decision, as in construction contracts, was made easier by the acceptance of the Federal Republic of Germany's proposal [143] that a "writing" include communication by telegram or telex (Article 13). This does not mean merely that the Article 96 reservation in connection with Article 12 permits the use of telegram or telex when that use is permitted by domestic law; it means rather that domestic form requirements are always satisfied by the use of telegrams and telexes.[144] The German proposal was not meant only as a definition of the term "writing" as used in Articles 21(2) and 29(2), although the formulation of Article 13 might lead to that conclusion. Article 13 was meant to achieve a uniform objective standard for form requirements, so that parties need not comply with domestic form requirements which perhaps impose higher standards and about which it may be difficult to obtain information.[145] However, because of the awkward wording of Article 13, this interpretation is open to to criticism.

The principle of freedom of form does not prevent the parties from agreeing to a writing requirement. This follows from the basic principle of party autonomy, which applies as well to the prerequisites for the existence or termination of the obligation and is also reaffirmed in Article 29(2) sentence 1. This latter provision further makes it clear that a formal writing requirement agreed upon by the parties can only be changed or suspended by a written agreement, including telex or telegram (Article 13). The formula occasionally used by the West German courts - that a formal writing requirement agreed upon by the parties can be removed without a writing [146] - seems not to be recognized in the sphere of application of CISG.[147] On the other hand, Article 29(2) sentence 2 deals with the case where a party has relied on an oral agreement abandoning the writing requirement by [page 46] precluding the other party from asserting the requirement in such as case. In the end, the result obtained in the Federal Republic of Germany by means of "oral modifications of the writing requirement", such as when the buyer has relied on the oral promise of an authorized sales agent and is later confronted with the objection that the agreement was not in writing, will therefore be satisfactorily resolvable under CISG as well.

The parties' freedom of contract with regard to the form of their statements is, of course, subject to one limitation, namely the form requirements imposed by the domestic law invoked by conflicts rules whenever the Article 96 reservation clause is applicable (Article 12 sentence 2). In a contract with a party whose place of business is in the Soviet Union, for example, for which the form requirements of Soviet law are applicable, the parties cannot effectively agree to dispense with the form requirement if the Soviet Union claims the Article 96 reservation. [page 47]

V. Formation of the Contract

A. Basic Principles and General Provisions

The rules for the formation of the contract [147a] which were already successfully incorporated into the 1978 Draft Convention were retained at the Vienna Conference. In comparison to the Hague Conventions, the combination of the rules on formation of the contract with those concerning the contents of the contract into one body of law is, without doubt, to be regarded as an improvement, particularly since the integration helps to avoid parallel rules [148] and solves the problem, in matters of interpretation and gap-filling,[149] of determining to what extent one law refers to the other. On the other hand, at the request of the Scandinavian countries, Parts II and III were written so that they may function independently, and states have the option to adopt, or bind themselves to adopt, the Convention either without Part II or without Part III (Article 92).

In its outlines, the 1980 Convention follows ULF, the Hague Uniform Law on the Formation of Contracts for the International Sale of Goods.[149a] It uses two consecutive constitutive manifestations of assent - offer and acceptance - as building blocks for the formation of the contract. The premise is that these manifestation of assent can be identified in the long process of negotiations in which the parties approach each other, step by step, until they have reached an agreement.

There has been no lack of criticism of this traditional concept of contract formation and its retention in the Uniform Law for Internationa