General Principles of UN-Sales Law — part 2

Authors | Prof. Dr. iur. Ulrich Magnus

5. The general principles of the CISG

a) State of discussion

To date, jurisdiction on the CISG which has resolved legal issues based on the general principles is restricted to a few judgments. [34] Some commentators hold that only a few general principles can be derived from the CISG. [35] However, the majority of the commentators develops a rather comprehensive — although differing — table of possible „general principles“. [36] This table corresponds to a great extent to those principles which are specified as the contents of an international lex mercatoria. [37]

b) Selected principles

Party autonomy. — All agree that the parties‚ agreements prevail over the provisions of the CISG (Art. 6). [38] Except for the provision of Art. 12 CISG (reservation as to form), the validity issues to be determined in conformity with national law (Art. 4 (a) CISG) and the principle of good faith (Art. 7(1) CISG), the parties‘ authority to regulate their relationship is unlimited. The CISG only supplements the parties’ agreement in so far as the parties did not regulate an issue.

Pacta sunt servanda. — The basic rule that contracts are binding is not expressly mentioned in the CISG. [39] However, it is implied in numerous provisions, such as Art. 30 and 53 CISG, which determine the duty to deliver and the duty to effect payment. Particularly Arts. 71–73 and 79 show that the binding effect of the contract cannot be avoided in cases such as a simple change of circumstances or frustration of contract, but only if the requirements listed in these provisions are present; without the binding nature of the contract these provisions would not make sense.

Good faith. — Art. 7(1) CISG stipulates as a general interpretation rule for the CISG „the need to promote ... the observance of good faith in international trade“. Pursuant to the wording, this maxim applies only to interpretation of the CISG provisions. However, the vast majority of commentators regards the principle of good faith also as a standard for the interpretation of the parties’ agreement and for the entire legal relationship between the parties. [40] However, the principle requires some specification in order to supply an operable decision-making tool for a judge in an actual case. In that respect there is a broad agreement that Art. 7(1) at least contains a prohibition against abuse as well as a prohibition against venire contra factum proprium (actions contrary to prior conduct). [41]

Both features are also to be found in other CISG-provisions: For example, Art. 29(2), second sentence prohibits the abuse of a formal legal position. [42] Art. 80 shows more generally that a party must not take advantage of its own unlawful actions. Article 16(2)(b) (irrevocability of an offer once the offeror has created a situation of reliance) [43] and Art. 50(2) (no price reduction if the creditor unjustifiably rejects cure) can serve as examples of a prohibited venire contra factum proprium.

Sometimes Art. 7(1) CISG is further interpreted to the effect that the parties have to act in conformity with the standards of prudent businessmen in international trade. [44] However, such a rule per se appears too unspecific. [45] To the extent that there is international usage in an industry, it has to be taken into account by virtue of Art. 9 CISG (see also below 5 b 7). Otherwise, however, such a general principle again would create the danger that the respective judge would incorporate his own national standards into his decision.

Reliance protection. — There is a close connection between the good faith principle and the principle that a party who has created a situation of reliance, upon which the other party has acted, has to bear the consequences of such situation. The already mentioned Art. 16(2)(b), 29(2), second sentence, but also Art. 35(2)(b) (reliance on seller‚s special skill) and Art. 42(2)(b) (no liability for title defects if the seller has manufactured the goods in conformity with the buyer‘s specifications) show that the Convention is based on a general legal thought which can be applied to similar situations. Thus, a seller can no longer assert defects in the buyer’s notice of lack of conformity of the goods if the seller himself has caused the impression — upon which the buyer has relied — that the seller will investigate the complaints — which, e.g., were not asserted with sufficient specification — and then cure the defects. [46] Also, if a party has created the impression that she was willing to modify the contractual terms, she is bound if the other party has already acted in justifiable reliance on this representation.

Of course, the line to those cases subject to the prohibition against venire contra factum proprium is blurred. Yet, a party can only demand reliance protection if she has actually relied upon specific actions by the other party. The prohibition against venire contra factum proprium does not require such a reliance situation.

Standard of reasonableness. — In numerous provisions the CISG uses the term „reasonable/raisonnable“, which is translated into German partially as „vernünftig“, partially as „angemessen“. [47] Sometimes the term refers to time limits which have to be reasonable (in particular, in Art. 39(1)). Sometimes the provision is concerned with a party’s conduct which has to be reasonable. In both cases the general rule of Art. 8 CISG has to be applied. This rule stipulates that, in general, an objective standard has to be applied which is based on the view of a neutral, prudent person in the same situation. However, noticeable relevant circumstances of the case (Art. 8(3) CISG) and international usage (Art. 9 CISG) prevail in that respect. [48]

Forfeiture. — Further, the concept of forfeiture is closely connected with the good faith principle. According to a controversial, but preferable opinion the CISG, too, contains the thought — known from many legal systems — that a party can lose her rights by not asserting them for a longer period of time and thus creating the impression for the debtor that she will not assert these rights at all. [49] This principle can be derived from those provisions establishing the principle of reliance protection in general in the Convention. [50] Thus, recourse to the national law of forfeiture applicable by virtue of the rules of private international law is impossible. [51]

In particular, a case for application of the principle can result in the context of Art. 46(1) CISG which does not designate a time limit for the buyer’s right to performance, so that only the national prescription periods, which sometimes are quite long, are applicable. In my opinion, the buyer can forfeit his right to delivery under the CISG if he lets the contract rest for a longer period of time (such as more than one year).

Prevalence of usage. — Among the general principles of the Convention whose validity is undisputed is the relevance of international trade usage (Art. 9). [52] Widely known usages of international trade in the respective industry should — beyond the wording of Art. 9 CISG — generally be utilized to resolve doubts about the interpretation of the Convention itself. However, this possibility can only be taken into consideration if the strict requirements under which Art. 9 recognizes international usage are actually fulfilled: that the usage is internationally known and regularly observed.

Lack of form requirements. — Article 11 CISG provides for a lack of form requirements — to the extent that the Contracting State did not make a reservation as to form pursuant to Art 96 in conjunction with Art. 12 — however, only with respect to contract conclusion and its evidence. Yet, it is legitimate to derive the general principle from this provision that declarations of all kind — such as notice of lack of conformity, declaration of contract avoidance, etc. — are not subject to any form requirement under the CISG. [53]

Favor contractus. [54] — Several provisions show that the CISG will allow contract avoidance only under narrow conditions and as a last resort (see Arts. 25, 34, 37, 47, 48, 49, 63, 64). [55] If possible, an economically not feasible winding up of the sale should be avoided. Only if the gravity of the breach of contract is unacceptable, the aggrieved party has to be able to get out of the contract. [56] This principle also applies in situations of a breach of obligations which are either not expressly regulated by the CISG or to which the parties have made the CISG applicable.

Duty to avoid damages. — There is a broad agreement that the CISG contains the general obligation of the parties to avoid damages to the other party as far as reasonable. [57] This legal thought is to be found in Art. 77 CISG. The provision contains an obligation of the party claiming damages to keep these damages to a minimum. In addition, Articles 85 and 86 CISG establish — for the party who is in possession of goods which have to be returned to the other party — a separate duty to preserve the goods under certain circumstances. These provisions are based on the thought, which can be generalized, that the party who pursuant to the contract has actual possession over the goods of the other party is obligated to exercise reasonable care and avoid damages. Accordingly, the duty to preserve the goods under Art. 85 CISG should not only apply to the goods, but also, e.g., to material furnished by the buyer. [58]

Footnotes

OLG Düsseldorf July 2, 1993, RIW 1993, 845 (the place of performance for payment claims is generally the creditor s place of business); implicitly also KG January 24, 1994 (RIW 1994, 683 (in case of doubt the currency at the creditor s place of business is relevant).

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See Neumayer/Ming Art. 7 page 7.

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See, e.g., Audit 51 et seq.; Bianca/Bonell(-Bonell) Art. 7 page 2.3.2.2; v. Caemmerer/Schlechtriem (-Herber) Art. 7 notes 33 et seq.; Enderlein/Maskow Art. 7 page 9.1 et seq; Enderlein/Maskow/Strohbach Art. 7 page 9.1 et seq.; Herber/Czerwenka Art. 7 page 11; Honnold, Uniform Words and Uniform Application, in: Einheitliches Kaufrecht (above page 5) 115 et seq. (139); Karollus 16 et seq.; Staudinger/Magnus Art. 7 notes 41 et seq.

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A compilation of these principles was prepared by Mustill, The New Lex Mercatoria, The First Twenty-five Years: Arb. Int. 4 (1988) 110 et seq.:


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See, e.g., Bianca/Bonell(-Bonell) Art. 7 page 2.3.2.2; v. Caemmerer/Schlechtriem(-Herber) Art. 7 page 36; Ferrari, Uniform Interpretation of the 1980 Uniform Sales Law: Ga.J.Int.Comp.L. 24 (1994) 183 et seq. (223) (cited as: Uniform Interpretation); Herber/Czerwenka Art. 7 page 12; Hyland, Liabiltiy of the Seller for Conformity of the Goods Under the UN Convention (CISG) and the Uniform UCC, in: Einkeitliches Kaufrecht 305 et seq. (329 et seq.).

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Mustill (above page 37) 110 lists this rule as the primary principle of international lex mercatoria.

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Bianca/Bonell(-Bonell) Art. 7 page 2.4.1; v. Caemmerer/Schlechtriem(-Herber) Art. 7 page 7; Enderlein/Maskow/Strohbach Art. 7 page 1; Karollus 12; Staudinger(-Magnus) Art. 7 page 10; arriving at the same conclusion Ferrari, Vendita internazionale (above page 30) Art. 7 page 6; probably also Honnold page 95; reserved Loewe, Internationales Kaufrecht, Wiener UN-Kaufrechtsübereinkommen vom 11. April 1980 und New Yorker UN-Verjährungsübereinkommen vom 14. Juni 1974 samt Protokoll vom 11. April 1980 (1989) 33; Farnsworth, The Convention on the International Sale of Goods from the Perspective of the Common Law Countries, in: La Vendita Internazionale (1981) 18.

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Audit, 51 et seq; v. Caemmerer/Schlechtriem(-Herber) Art. 7 page 17; Herber/Czerwenka Art. 7 page 6; Honnold (above page 36) 144; Piltz § 2 page 170; Staudinger(-Magnus) Art. 7 page 25.

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See Audit 51 et seq. and Staudinger(-Magnus) Art. 7 page 25.

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See Ferrari, Vendita internazionale (above page 30) Art. 7 page 6.

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See, e.g., Reinhart Art. 7 page 5; partially Enderlein, Uniform Law and Its Application by Judges and Arbitrators, in: International Uniform Law in Practice (1988) 342.

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In more detail Staudinger(-Magnus) Art. 7 page 28.

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See the similar jurisdiction regarding the EKG; e.g., OLG Karlsruhe July 25, 1986, RIW 1986, 818.

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See, e.g., Art 16(2)(b); 18(2); 25; 33(c); 39(2); 43(1); 47; 49(2); 63(1); 64(2)(b); 65(2); 72(2); 73(2); 75; 77 first sentence; 79(1) and (4); 85 first sentence; 86(1); 88(1) and (3); also „unreasonable“: e.g. in Art. 86(2); 87; 88(2).

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Audit 51; Bianca/Bonell(-Bonell) Art. 7 page 2.3.2.2; Enderlein/Maskow/Strohbach Art. 7 page 9.1; Ferrari, Uniform Interpretation (above page 38) 224 et seq.; Honnold (above page 36) 139; Karollus 16 et seq.

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v. Caemmerer/Schlechtriem(-Huber), Kommentar zum Einheitlichen UN-Kaufrecht (1st edition 1990) Art. 46 page 46 (no longer included in the 2nd edition); Staudinger(-Magnus) Art. 4 page 53; but Frigge (above page 26) 82 and -- regarding the EKG -- Soergel(-Lüderitz) Art. 8 EKG page 8.

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See above under (4).

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Staudinger(-Magnus) Art. 4 page 53; but Frigge 116 and -- regarding the EKG -- LG Duisburg June 10, 1986, RIW 1986, 903.

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v. Caemmerer/Schlechtriem(-Herber) Art. 7 page 36; Herber/Czerwenka Art. 7 page 12; Karollus 17.

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Bianca/Bonell(-Rajski) Art. 11 page 1.1; v. Caemmerer/Schlechtriem(-Schlechtriem) Art. 11 page 9; Ferrari, Uniform Interpretation (above page 38) 224; Piltz § 2 page 120; Reinhart Art. 11 page 4; but see M. Jametti-Greiner, Der Vertragsabschluß, in: Das Einheitliche Wiener Kaufrecht, Neues Recht für den internationalen Warenkauf, published by H. Hoyer/W. Posch (1992) 43 et seq. (46 et seq.).

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Term used by Bonell; see Bianca/Bonell(-Bonell) Art. 7 page 2.3.2.2.

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Audit 51; Bianca/Bonell(-Bonell) Art. 7 page 2.3.2.2; v. Caemmerer, Die wesentliche Vertragsverletzung im internationalen Einheitlichen Kaufrecht, in: Europäisches Rechtsdenken in Geschichte und Gegenwart, FS Coing II (1982) 50 et seq.; Ferrari, Uniform Interpretation (above page 38) 225; Honnold page 245.1; Staudinger(-Magnus) Art. 7 page 49.

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See for lex mercatoria in arbitration: ICC Arbitral Award No. 2583, Clunet 1976, 950; ICC Arbitral Award No. 3540, Clunet 1981, 915.

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Audit 52; Ferrari, Vendita internazionale (above page 30) Art. 7 page 9; Heuzé, La vente internationale de marchandises, Droit uniforme (1992) page 95; Honnold page 101; Karollus 17; Piltz § 2 page 131.

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See Staudinger(-Magnus) Art. 85 page 19.

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