COMPARATIVE ANALYSIS OF THE UCC AND THE CISG

ARJYA B. MAJUMDAR

UNIFORM COMMERCIAL CODE V. THE VIENNA CONVENTION ON THE INTERNATIONAL SALE OF GOODS~ A COMPARATIVE ANALYSIS

1. INTRODUCTION Imagine a world where every individual went by his or her own laws. No overarching rules to provide for the basic tenets of civilisation, such as dignity, equality and liberty. Such a world would be impossible to envisage, being governed by the state of nature1. Yet the world we live in is not dissimilar to the one imagined above. The concept of sovereignty in international law provides for the complete freedom of nations with regard to their own laws, nations being the elements that make up an international society. However, in order to facilitate certain objectives, this right to sovereignty is sometimes waived. Be it the appreciation of the need to empower certain incapacitated groups, such as women, children and refugees, or the use of force in extenuating circumstances, nations often forgo the right to manage their own laws in order to provide for a more efficient international law regime It was with this intention that both the UCC as well as the CISG were drafted. The UCC was an attempt to unify the commercial law in the United States. The legal system being federal in nature, this was an unprecedented feat in itself. Drafted in 1950, the UCC was one of the first examples of the US to provide a uniform code in any area of law2. Today, it is one of the major sources of commercial law in the US with forty-nine out of fifty states opting for the UCC- Louisiana being the only exception. Essentially, the UCC was an effort to codify the existing law relating to commercial activities in the US. This meant that the UCC would necessarily have to be in conformity with the existing law3. On the other hand, the ratification of the CISG is on a much larger scale. Drafted under the auspices of the UNCITRAL in 19804, it has, as of now, been ratified by about 66 states representing some two-thirds of international trade worldwide5. The treaty governs contracts for the sale of goods when the transaction is deemed international under the CISG. The CISG is a comprehensive document setting forth specific requirements for the contract and performance obligations of both the seller and buyer. The treaty addresses course of dealing and usages of trade, obligation to make a conforming delivery, disclaimer of warranties, implied warranties with respect to title and intellectual property rights, notice of nonconformity, and remedy terms, among other issues.

A state of nature is where man would provide for his own survival without appreciating the needs of society, essentially leading an animal existence, as proposed by John Hobbes in Levathian. See Holland, Thomas Erskine, THE ELEMENTS OF JURISPRUDENCE, Universal Law Publishers Pvt. Ltd. Delhi, 2001 2 Mazzacano, Peter J., A Comparison between the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code, http://www.yorku.ca/osgoode/cisg/writings/CISGv.UCC.htm as on 7/12/2005 3 Winship, Peter, Domesticating International Commercial Law: Revising U.C.C. Article 2 in Light of the United Nations Sales Convention, 37 Loy. L. Rev., 1991, pg 43 at 92 4 The CISG was adopted by the UN in a diplomatic conference on 11th April, 1980 (General Assembly Resolution No. 35/51). See http://www.uncitral.org/pdf/english/texts/sales/cisg/CISG.pdf as on 7/12/2005 5 http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html as on 7/12/2005

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COMPARATIVE ANALYSIS OF THE UCC AND THE CISG

ARJYA B. MAJUMDAR

2. WHY COMPARE? The primary question that arises in this study of the two instruments, is the cause of the study itself. Why would a comparative analysis of the UCC and the CISG be required? Even more so, why would it generate such a lot debate and discussion? Some authors have shown that this comparison, though interesting and stimulating, serves hardly any practical purpose. One can go even further and state that the results of similar comparisons undertaken by other scholars -- for instance the assertion that the UCCs and CISGs basic concepts of good faith and trade usages6 are similar in approach and content7are misleading. Although the UCC has greatly influenced the CISG8, it is impossible and even perilous to assert that the aforementioned sets of rules are similar in content, or, even worse, that they are sufficiently compatible to support claims of overall consistency9. An awareness of the UCCs influence might aid in understanding the CISG, especially with respect to issues which the Conventions legislative history demonstrates this influence. It is, however, impermissible and dangerous to assert that the concepts of the CISG and the UCC are analogous. The comparison is dangerous because it makes one believe- erroneously- that the concepts of the CISG correspond to those of the UCC and can therefore be interpreted in light of the UCC. But this is impermissible since a similar approach conflicts with the principle, expressly laid down in Article 7(1) of the CISG10, that the CISG and its concepts must be interpreted in light of its international character and the need to promote uniformity in its application. The interpretive guidelines laid down in Article 7(1) of the CISG now seem to be universally accepted, as evidenced by the fact that other uniform law conventions have adopted them11.
6

Dore, Isaak I. and DeFranco, James E., A Comparison of the Non-Substantive Provisions of the UNCITRAL Convention on the International Sale of Goods and the Uniform Commercial Code, 23 Harv. Intl L.J. 49, 67 (1982). This article states that the [United Nations] Conven tion incorporates both a concept of trade usages and a principle of good faith similar to those of the U.C.C.. 7 Kabik, Michael, Through the Looking-Glass: International Trade in the Wonderland of the United Nations Convention on Contracts for the International Sale of Goods, 9 Intl Tax & Bus. Law. 408, 428-29 (1992). This article states not only that [m]any of the C.I.S.G.s provisions are similar in approach and content to those of the U.C.C., but also that the C.I.S.G. is, for the most part, trul y a mirror image of the U.C.C.; 8 Rendell, Robert S., The New U.N. Convention on International Sales Contracts: An Overview, 15 Brook. J. Intl L. 23, 42 (1989) 9 Patterson, Elizabeth H., United Nations Convention on Contracts for the International Sale of Goods: Unification and the Tension Between Compromise and Domination, 22 Stan. J. Intl L. 263, 275 (1986). 10 Article 7 of the CISG states: (1) In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade. (2) Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law. 11 Council Convention on the Law Applicable to Contractual Obligations, June 19, 1980, art. 18, 19 I.L.M. 1492, 1496; UNIDROIT Convention on International Factoring, May 28, 1988, art. 4, 27 I.L.M. 943, 94546; UNIDROIT Convention on International Financial Leasing, May 28, 1988, art. 6, 27 I.L.M. 931, 93334.

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COMPARATIVE ANALYSIS OF THE UCC AND THE CISG

ARJYA B. MAJUMDAR

The instant paper is an attempt to understand the differences between the UCC and the CISG. Moreover, it is an attempt to understand why this particular comparison is necessary. The following section would define the origins, operation and philosophy of the two instruments. In the third section, the substantial and procedural differences between the UCC and the CISG would be looked into. 3. A TALE OF TWO INSTRUMENTS a. UCC Half a century ago in the United States, it became clear that modern commercial practices required a modern commercial law. Thus, in the early 1950s The American Law Institute, in a joint project with the National Conference of Commissioners on Uniform State Laws, drafted the first version of the Uniform Commercial Code12. Considered to be one of the most important legislative measures in the history of US commerce, the UCC has been adopted by every state except Louisiana. It is a unified, comprehensive set of laws that encompasses all domestic businesses transactions; from the time raw materials are purchased until finished merchandise is sold to the consumer13. For this reason, the future shape of the Code has been of major concern to American business and commercial interests. The UCC is the product of two organizations, which have developed and continue to revise it: the National Conference of Commissioners for Uniform State Laws (NCCUSL) 14 and the American Law Institute (ALI)15. Unlike the ALI, NCCUSL is a government organization, but neither organization nor the combination of the two, has the power to create positive law. The UCC, and the subsequent revisions to it, are presented to the various state legislatures for adoption, and the Code only becomes the law of a respective state when it is adopted by that states legislature16. There have been many changes in society since the UCC first appeared in the US in 1952. International trade has increased substantially and the need for uniformity in the law governing, not only domestic transactions, but also international sales of goods, has become critical.

12 13

Hereinafter referred to as the UCC Winship, Peter, Domesticating International Commercial Law: Revising U.C.C. Article 2 in Light of the United Nations Sales Convention, 37 Loy. L. Rev., 1991, pg 43 at 92 14 Handbook of the National Conference of Commissioners on Uniform State Law and Proceedings of the Annual Conference Meeting in its Ninety-Eighth Year 395 (1990). 15 The ALI was organized in 1923, following a study conducted by a group of prominent American judges, lawyers, and teachers known as the Committee on the Establishment of a Perman ent Organization for the Improvement of the Law. Report of the Committee on the Establishment of a Permanent Organization for the Improvement of the Law Proposing the Establishment of an American Law Institute 12 (Feb. 23, 1923), reprinted in The American Law Institute 50th Anniversary (2d ed. 1973) 16 Because the individual states have the power to adopt whatever version or modifications the state pleases, there is a substantial amount of non-uniformity among the states. However, the adoption of nonuniform amendments by some states has not prevented the creation of a general uniform commercial law in the United States, such as the UCC.

COMPARATIVE ANALYSIS OF THE UCC AND THE CISG

ARJYA B. MAJUMDAR

b. CISG The origins of CISG began before the Second World War when the International Institute for the Unification of Private Law (UNIDROIT) attempted to prepare a uniform law on the international sale of goods under the auspices of the League of Nations17. The next great effort at unifying international sales law came under the 1964 Hague Conventions, where two uniform laws were adopted, the Uniform Law on the International Sale of Goods (ULIS)18, and the Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF)19. However, due to a lack of world-wide participation in the drafting of the Hague Conventions, many of the concepts embodied in their drafts could not be translated into words and ideas that were intelligible in other parts of the world20. Despite the failure of wholesale acceptance of the 1964 Hague Conventions, and recognizing the rapid growth in international trade in the years following adoption of the Conventions, the United Nations Commission on International Trade Law (UNCITRAL) embarked on an effort to foster adoption of uniform international rules in various areas such as sales, arbitration, negotiable instruments and transport21. Ten years of work by UNCITRAL resulted in the unanimous agreement by the participating states on a convention that was submitted for signature in Vienna22. CISG was born, created to provide a uniform international sales law that would facilitate world trade and eliminate the uncertainty created by conflicting states national laws23. As of today, the CISG has been accepted and ratified by countries that account for over two-thirds of world trade. 4. AND THE TWAIN SHALL NEVER MEET a. APPLICABILITY OF THE CISG Business people and lawyers involved in commerce with foreign countries must be aware of a critically important aspect of the CISG. Unless the parties specifically indicate that it does not apply, the CISG will be the governing law pertaining to all commercial contracts for the sale of goods between parties having their places of business in different countries, which have adopted the CISG24. For example, if the parties do not agree to the contrary, a commercial sales agreement between a business in Detroit, for example, and one in Toronto, (both the US and in Canada having adopted the CISG), will automatically be subject to its provisions. However, should the parties to a sales contract wish to be bound by some other law, such as the UCC or Ontario sales law, they may "opt out" of the CISG by specifying that the other law will apply, as well as stating that the CISG will not apply, in cases of dispute.

17

Sono, Kazuaki, The Vienna Sales Convention: History and Perspective, in INTERNATIONAL SALE OF GOODS: DUBROVNIK LECTURES 1, 2 (Petar Sarcevic & Paul Volken eds., 1986). 18 Reprinted in 3 I.L.M. 855 (1964). 19 Id. at 865. 20 Id. at 4. 21 Rhoades, Dennis, The United Nations Convention on Contracts for the International Sale of Goods: Encouraging the Use of Uniform International Law, 5 Transnatl Law. 387, 390 (1992). 22 Honnold, John, The Sales Convention: Background, Status, Application, 8 J.L. & COM. 1, 3 (1988). 23 Sono, Kazuaki, The Vienna Sales Convention: History and Perspective, in INTERNATIONAL SALE OF GOODS: DUBROVNIK LECTURES 1, 2 (Petar Sarcevic & Paul Volken eds., 1986 24 CISG Art 6

COMPARATIVE ANALYSIS OF THE UCC AND THE CISG

ARJYA B. MAJUMDAR

While the CISG does not apply to purely domestic transactions, its scope is quite significant. In the US, for international commercial transactions, it replaces a significant part of UCC Article 2, a keystone of the Code concerning contracts for the sale of goods. The UCC, however, applies to both consumer and commercial transactions, while the CISG specifically excludes consumer sales from its provisions25. Also excluded from applicability of the CISG are goods purchased at an auction, securities, aircraft, ships, electricity, and service contracts. b. FORMATION OF CONTRACTS The CISG is based partly on the common law tradition, but is also influenced by civil law and socialist law. This blend of laws often leads to principles in the CISG which differ significantly from the UCC. Under common law, for example, a valid contract is an agreement which contains the following elements26: (i) it is entered into by mutual assent; (ii) it is supported by sufficient consideration; (iii) the parties have the legal capacity to enter into a contract; and (iv), there is no illegal purpose. Should any of these elements be missing, there is, generally, a void contract. The CISG, however, governs only the formation of the contract of sale and the rights and obligations of the seller and buyer arising from such a contract. Unlike the UCC27, it is not directly concerned with the validity of the contract, where a person is induced into a contract by fraud, where a person does not have capacity to enter a contract, or where domestic law prohibits the sale of goods specified in the contract. c. OFFER AND ACCEPTANCE Contracts can also be formed by an exchange of purchase orders that are accepted or confirmed through the exchange of forms containing conflicting small print terms. This happens quite frequently between parties in an international transaction. Under the CISG, an acceptance that contains modifications operates as a rejection of the offer, and constitutes a counter-offer, unless the modifications do not materially alter the terms of the offer and are not objectionable to the offeror28. If the offeror does not object verbally without undue delay, then the contract terms become those of the offer, as modified by the acceptance. In other words, the small print terms of an acceptance or order confirmation are binding unless promptly objected to, or unless they constitute material changes to the offer, or purchase order, with respect to price, quality or dispute resolution. This is known as the "battle of the forms" under both common and civil law. In this respect, the UCC is somewhat consistent with the CISG in that it attempts to uphold the intentions of the contracting parties where only minor differences exist in written agreements. This rule applies only to merchants contracting with each other and not between consumers and merchants. However, under the UCC, a purported acceptance of an offer that contains additional or different terms that do materially alter the terms of the offer would constitute a rejection of the offer and would be considered a counteroffer. No contract would, thus, exist unless the offeror, in return, accepted all of the terms of the counteroffer. Other rules concerning contractual offers, and acceptance of such offers, differ under the CISG and the UCC. American law under the UCC, for example, recognizes that if a contract

25 26

CISG Art 2 (a) CISG Art 11 27 UCC 2-721 28 CISG Art 19

COMPARATIVE ANALYSIS OF THE UCC AND THE CISG

ARJYA B. MAJUMDAR

is made by mail, the time of acceptance of an offer is the instant the acceptance is mailed 29. This is known as the "mailbox" rule. The CISG takes the opposite position: an offer is accepted only at the moment it is received30. The CISG also limits a party's ability to withdraw an irrevocable offer. Under the UCC, irrevocable offers can generally be revoked if they have not yet been accepted. There is no contract until the offeree accepts an offer. Acceptance under the CISG may take the form of any statement or action on the part of the offeree that suggests an intention to be bound to the contract31. However, under common law, the mode of acceptance must be one that is specified by the offeror, and if not specified, must be of a mode that is appropriate under the circumstances. d. EXAMINATION AND NOTICE Under the CISG, the buyer must examine the goods as soon as practicable and notify the seller of any lack of conformity within a reasonable time after a defect has been discovered, or at the latest, within two years of delivery32. Failure to conduct this examination or make the complaint forfeits the buyer's right to reject the goods and, more significantly, the right to claim damages or a price reduction. The notice must be sufficient to specify the nature of the defects. The UCC also contains provisions that allow the buyer to refuse deliveries of nonconforming or defective goods33. These remedies are known as "rejection" and "revocation of acceptance" while they are referred to as "avoidance of the contract" under the CISG. In both cases, these terms refer to a party's right to cancel a contract. e. FUNDAMENTAL BREACH The CISG preserves the buyer's right to sue for breach of contract. However, the right to "avoid" or terminate the contract and reject the goods is quite limited. The buyer may reject goods and require delivery of substitute goods if the contract has been "fundamentally breached." The result must be of such a contractual detriment to the buyer as to substantially deprive the buyer of the goods that were expected under the contract. In general, however, the CISG allows the seller who fails to perform on time, or who delivers nonconforming goods, to correct the performance as long as it does not cause the buyer an unreasonable delay or inconvenience. In addition, the buyer can also avoid the contract if, after notifying the seller to perform the contract within a reasonable time, the seller refuses to do so. This is a novel remedy in common law. Under the UCC, in contrast, a buyer has the right to terminate when the seller has breached a "condition" of the sale, no matter how minor. The CISG also affords the seller protection against the potential financial failure of the buyer. The seller may, by sending appropriate notice, suspend delivery or prevent the release of goods if it becomes apparent that the buyer may not have the ability to pay for the merchandise. The seller must continue with delivery if the buyer then provides adequate assurance of payment. Under the UCC, the seller has no right to withhold delivery simply due to fear of non-payment, unless authorized to do so under the contract34.
29 30

UCC 1- 202 (d) CISG Art 18 (2) 31 CISG Art 24 32 CISG Art 35 33 UCC 2- 601 (a) 34 UCC [2-601 (a)]

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ARJYA B. MAJUMDAR

f.

OTHER DIFFERENCES The CISG is also substantially different from the UCC in a number of other ways. For example, while the UCC includes a statute of frauds, the CISG posits no such requirement. Under the CISG, contracts may be proven by any form, including use of the testimony of a witness or with parol evidence35. Also, formation of a contract under the CISG does not require the presence of consideration, as is the case in common law jurisdictions36. Finally, the CISG eliminates the "mirror image" rule of contract formation. Under the CISG, acceptances containing immaterial additional or alternate terms can still form a contract. The provisions in the CISG attempt to facilitate the successful completion of an exchange of international goods by discouraging contractual breakdowns, even when events go awry. In this respect, the CISG goes far beyond the legal architecture of the UCC. Many provisions encourage, or even require, communication and reasonable conduct between the parties to resolve problems before a total contractual breakdown. In this respect, the CISG promotes freedom of contract over the regulation of private international behaviour. In doing so, it allows businesspersons to operate more efficiently in the growing international marketplace by replacing potentially litigious legal regimes, such as the UCC, with a set of laws that allows for self-regulation.

5. CONCLUSION From what has been said thus far, two conclusions can be drawn: On the one hand, the CISGs international character prohibits recourse to domestic concepts in view of the solution of interpretive problems arising from the CISG. On the other hand, the need to promote uniformity in its application imposes upon the interpreter the duty not to disregard foreign interpretations of CISG concepts. Ultimately, these considerations are why CISG concepts cannot be analogized to UCC concepts. Even if the CISGs text were identical to that of UCC Article 2, CISG and UCC concepts could not be considered the same -- unless interpreters from the other Contracting States would reciprocate. One should not see similarities where there are necessarily significant differences. It might be helpful to illustrate the issue with a practical example. Various legal writers37 have argued that the CISG concept of trade usages38 corresponds to- or at least resembles39the UCCs40. This view might gain support from the fact that both the CISG and the UCC: (a) depart from the requirement that in order to be relevant the usage be obligatory41;
35 36

CISG Art 11 v. UCC 2-202 CISG Art 14 v. UCC 2-305 37 Dore, Isaak I. and DeFranco, James E., A Comparison of the Non -Substantive Provisions of the UNCITRAL Convention on the International Sale of Goods and the Uniform Commercial Code, 23 Harv. Intl L.J. 49, 67 (1982) 38 Bainbridge, Stephen, Trade Usages in International Sales of Goods: An Analysis of the 1964 and 1980 Sales Conventions, 24 Va. J. Intl L. 619 (1984). 39 Chen, Jim C., Code, Custom, and Contract: The Uniform Commercial Code as Law Merchant , 27 Tex. Intl L.J. 91, 103 (1992) 40 Levie, Joseph H., Trade Usage and Custom Under the Common Law and the Uniform Commercial Code, 40 N.Y.U. L. Rev. 1101 (1965). 41 Berman, Harold J., The Law of International Commercial Transactions (Lex Mercatoria), 2 Emory J. Intl Dispute Resol. 235, 296-97 (1988) (stating that the opinion necessitatis is not required under CISG);

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ARJYA B. MAJUMDAR

(b) require a subjective standard to be met. According to the UCC, those trade usages may be relevant if the parties are or should be aware of their meaning42; (c) consider only usages of the particular trade the parties are involved in; and (d) set forth the rule, either expressly43 or implicitly44, that express terms control contrary trade usages45. According to the UCC, the express terms of an agreement and an applicable course of dealing or usage of trade shall be construed wherever reasonable as consistent with each other; but when such construction is unreasonable express terms control both course of dealing and usage of trade and course of dealing controls usage of trade. However, according to the CISG, the parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned. Nevertheless, the concepts cannot be analogized to each other for several reasons. First, the CISG considers relevant only those usages of trade which in international trade [are] widely known to the parties46. This precludes the applicability of all domestic as well as local usages, except those which are known as rules also governing international trade 47. Second, unlike the UCC concept of relevant trade usages, the CISG concept is not limited by the parol evidence rule which, as many legal writers48 and a recent court decision49 have pointed out, has been rejected by the CISG. Third- and for purposes of this paper most importantlythe views on trade usages and their importance differ from system to system. This is a fact,

See also Chen, Jim C., Code, Custom, and Contract: The Uniform Commercial Code as Law Merchant , 27 Tex. Intl L.J. 91, 103 (1992) (affirming that both the UCCs and the CISGs definition of usage as regular observation rejects the requirement that custom be obligatory) 42 U.C.C. 1-205(3) (1990). The CISG uses a different wording. According to Article 9(2), the parties are considered bound by the usages which they knew or ought to have known. 43 U.C.C. 1-205(4) 44 CISG Art 9 (2) 45 Eric Bergsten, Basic Concepts of the UN Convention on the International Sale of Goods, in Das UNCITRAL Kaufrecht im Vergleich zum sterreichischen Recht (Peter Doralt ed., 1985) (stating that the Sales Convention contains a hierarchy of norms: The highest level is the contract itself, to the extent it covers the matter. Next comes usages which are applicable to the contract. In third place comes the law, in this case the Convention 46 Art 9 (2) CISG 47 Fritz Enderlein & Dietrich Maskow, International Sales Law: United Nations Convention on Contracts for the International Sale of Goods, Convention on the Limitation Period in the International Sale of Goods 56 (1992). 48 Lookofsky, Joseph M., Loose Ends and Contorts in International Sales: Problems in the Harmonization of Private Law Rules, 39 Am. J. Comp. L. 403, 408-09 (1991) (affirming that even though the CISG does not expressly address the parol evidence rule, the language of Article 8(3) . . . seems adequate to override any domestic rule that would bar a tribunal from considering the relevance of other agreements) 49 Filanto, S.P.A. v. Chilewich Intl Corp., 789 F. Supp. 1229, 1238 n.7 (S.D.N.Y. 1992) (stating that the [Sales] Convention essentially rejects . . . the parol evidence rule); See also Brand, Ronald A. and Flechtner Harry M., Arbitration and Contract Formation in International Trade: First Interpretations of the U.S. Sales Convention, 12 J.L. & Com. 239 (1993).

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ARJYA B. MAJUMDAR

which the U.S. interpreter50 must, because of Article 7(1), take into account when construing the CISG concept of trade usages, and which ultimately makes it impossible for the CISGs concept to correspond to the UCCs. In former socialist countries, for instance, even though trade usages play a certain role51, they have only limited application52. The fact that not all socialist countries supported each view can be accounted for by the fact that some were content if their own principles were applied in their domestic trade; so far as their Western trade was concerned they were ready to adjust to Western practice.53. Trade usages do not play an important role in developing countries either54, at least in terms of international relations, due to the conviction that they originated mainly in the industrialized world and therefore reflect mainly the interests of developed countries. Under Article 7(1) 55 and in interpreting the CISG concept of trade usages -- as any other concept- American courts must acknowledge these diverging views which consistently differ from their own. Therefore, it is simply wrong to state that the concepts of trade usages under the CISG and the UCC are similar in content. The same is true concerning the concept of good faith. Despite some opinions to the contrary56, good faith under the CISG cannot correspond to the UCC definition. In the CISG good faith is mentioned only in Article 7(1)- the Article setting forth the rules for the interpretation of the Convention. As a result, several authors regard the concept de quo as a mere instrument of interpretation57. However, even believing the contrasting view that the good faith provision is also necessarily directed to the parties to each individual contract of sale, it is still misleading to state that the UCC and the CISG concepts are the same 58. At this point it must be emphasized that there appears to be no unitary concept of good faith in the
50

Fritz Enderlein & Dietrich Maskow, International Sales Law: United Nations Convention on Contracts for the International Sale of Goods, Convention on the Limitation Period in the International Sale of Goods 56 (1992) 51 Ginsburg, International Trade Customs, J. Intl L. & Pol. 325 (1975) 52 Bainbridge, Stephen, Trade Usages in International Sales of Goods: An Analysis of the 1964 and 1980 Sales Conventions, 24 Va. J. Intl L. 619, 641 (1984). 53 Ersi, Gyula, A Propos the 1980 Vienna Convention on Contracts for the International Sale of Goods, 31 Am. J. Comp. L. 333-42 (1983) 54 Nan, Horacio A. Grigera, The UN Convention on Contracts for the International Sale of Goods , in Horn, Norbert and Schmitthoff, Clive M. (eds), THE TRANSNATIONAL LAW OF INTERNATIONAL COMMERCIAL TRANSACTIONS 89, 101, 1982 55 Article 7 of the CISG states: (1) In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade. (2) Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law. 56 Dore, Isaak I. and DeFranco, James E., A Comparison of the Non -Substantive Provisions of the UNCITRAL Convention on the International Sale of Goods and the Uniform Commercial Code, 23 Harv. Intl L.J. 49, 67 (1982) 57 Ferrari, Franco, Uniform Interpretation of the 1980 Uniform Sales Law , 24 Ga. J. Intl & Comp. L. 183, 200 (1994) 58 R.A. Weaver & Assocs. v. Asphalt Constr., Inc ., 587 F.2d 1315 (D.C. Cir. 1978); Homestake Mining Co. v. Washington Pub. Power Supply Sys., 476 F. Supp. 1162 (N.D. Cal. 1979); Neumiller Farms Inc. v. Cornett, 368 So. 2d 272 (Ala. 1979).

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ARJYA B. MAJUMDAR

United States either. In the United States, for instance, the concept de quo has been employed by the courts in order to prevent one party from exercising discretion in a way incompatible with the purpose of the contract. However, good faith has also been employed to avoid inequitable results caused by an overly literal application of a statute or contract provision. Moreover, courts have used the provision to prevent a party from taking advantage of his own actions taken in bad faith59. An interpreter would- once again- have to take into account the constructions of the concept de quo to be found in other countries, the CISG and UCC concepts cannot be analogized given the different interpretations in various countries.In fact, the concept of good faith is so vague that [its] meaning cannot help but vary widely from one legal system to another60. In the United States, for example, where the good faith principle has not only been adopted by the UCC61 but by the Restatement (Second) of Contracts as well62, its area of operation is limited to the performance of the contract63. In other countries there is not only a commonlaw duty to perform in good faith64, but good faith plays an important role during the bargaining process as well. In continental and socialist systems the concept [of good faith] may have broader connotations. In particular, the notion of good faith is not limited to the performance of completed agreements, but extends to the process of formation. It operates as a limit on the right of a party to terminate the formation process65. It is shortsighted66 and misleading to say that the concepts of the CISG correspond to those of the UCC and that the UCC lawyer can find comfort in the CISGs similarities to the UCC67. Allowing these assumptions to remain uncorrected will defeat the purposes of the CISG68. To
59

Dore, Isaak I. and DeFranco, James E., A Comparison of the Non -Substantive Provisions of the UNCITRAL Convention on the International Sale of Goods and the Uniform Commercial Code, 23 Harv. Intl L.J. 49, 62 (1982) 60 Farnsworth, E. Allan, Developing International Trade Law , 9 Cal. W. Intl L.J. 461, 465-66 (1979) 61 U.C.C. 1-203 (1990) (Every contract or duty within this Act imposes an obligation of good faith in its performance or enforcement.). For a detailed discussion of the good faith provision in the UCC, see Burton, Steven J., Good Faith Performance of a Contract Within Article 2 of the Uniform Commercial Code, 67 Iowa L. Rev. 1 (1981); Farnsworth, E. Allan, Good Faith Performance and Commercial Reasonableness Under the Uniform Commercial Code, 30 U. Chi. L. Rev. 666 (1963) and Summers, Robert S., Good Faith in General Contract Law and the Sales Provisions of the Uniform Commercial Code, 54 Va. L. Rev. 195 (1968). 62 Restatement (Second) of Contracts 205 (Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.) 63 Farnsworth, E. Allan, Good Faith Performance and Commercial Reasonableness Under the Uniform Commercial Code, 30 U. Chi. L. Rev. 666 (1963) 64 Burton, Steven J., Breach of Contract and the Common Law Duty to Perform in Good Faith , 94 Harv. L. Rev. 369 (1980). 65 Rosett, Arthur, Critical Reflections on the United Nations Convention on Contracts for the International Sale of Goods, 45 Ohio St. L.J. 265, 290 (1984) 66 Tuggey, Timothy N., The 1980 United Nations Convention on Contracts for the International Sale of Goods: Will a Homeward Trend Emerge?, 21 Tex. Intl L.J. 540, 550 (1986) (stating that the favorable responses to the CISG, however, especially those based upon the U.C.C. similarities, may be shortsighted). 67 Berman, Harold J., The Law of International Commercial Transactions (Lex Mercatoria), 2 Emory J. Intl Dispute Resol. 235, 295 (1988) 68 Tuggey, Timothy N., The 1980 United Nations Convention on Contracts for the International Sale of Goods: Will a Homeward Trend Emerge?, 21 Tex. Intl L.J. 540, 554 (1986)

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avoid this it is sufficient to comply with the guidelines set forth in Article 7 mandating the independent construction of the CISG, ignoring apparently similar domestic concepts, and taking the interpretations and applications of other countries into account. Even though this might create some difficulties, because it necessarily results in departure from ones own comfortable and familiar- background, it is the only way to achieve the uniformity the CISG stands for.

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BIBLIOGRAPHY

ARJYA B. MAJUMDAR

PRIMARY TEXTS Uniform Commercial Code United Nations Convention On Contracts For The International Sale Of Goods (1980) United Nations General Assembly Resolution No. 35/51 Council Convention on the Law Applicable to Contractual Obligations, June 19, 1980, art. 18, 19 I.L.M. 1492, 1496 UNIDROIT Convention on International Factoring, May 28, 1988, art. 4, 27 I.L.M. 943, 945-46 UNIDROIT Convention on International Financial Leasing, May 28, 1988, art. 6, 27 I.L.M. 931, 933-34 Comments by Governments and International Organizations on the Draft Convention on the International Sale of Goods, [1977] 8 UNCITRAL Y.B. 109, 112-14, A/CN.9/125, A/CN.9/125/Add.2 SECONDARY TEXTS Bainbridge, Stephen, Trade Usages in International Sales of Goods: An Analys is of the 1964 and 1980 Sales Conventions, 24 Va. J. Int'l L. 619 (1984). Berman, Harold J., The Law of International Commercial Transactions (Lex Mercatoria), 2 Emory J. Int'l Dispute Resol. 235, 296-97 (1988) Brand, Ronald A. and Flechtner Harry M., Arbitration and Contract Formation in International Trade: First Interpretations of the U.S. Sales Convention, 12 J.L. & Com. 239 (1993). Burton, Steven J., Breach of Contract and the Common Law Duty to Perform in Good Faith, 94 Harv. L. Rev. 369 (1980) Burton, Steven J., Good Faith Performance of a Contract Within Article 2 of the Uniform Commercial Code, 67 Iowa L. Rev. 1 (1981) Chen, Jim C., Code, Custom, and Contract: The Uniform Commercial Code as Law Merchant, 27 Tex. Int'l L.J. 91, 103 (1992) Chow, Danish C. K. and Schoenbaum, Thomas J., International Business Transactions, Aspen Publishers, New York, 2005 Chuah, J. C. T., Law of International Trade, Sweet and Maxwell, London, 2001 Darcy, Leo, Murray, Carole and Cleave, Barbara, Schimtthoffs Export Trade- The Law and Practice of International Trade, Sweet and Maxwell, London, 2000 Dalhusien, Jan, Dalhusien on International, Commercial and Financial Trade Law, Hart Publishing, Portland, 2004 Ersi, Gyula, A Propos the 1980 Vienna Convention on Contracts for the International Sale of Goods, 31 Am. J. Comp. L. 333-42 (1983). Farnsworth, E. Allan, Developing International Trade Law, 9 Cal. W. Int'l L.J. 461, 465-66 (1979) Farnsworth, E. Allan, Good Faith Performance and Commercial Reasonableness Under the Uniform Commercial Code, 30 U. Chi. L. Rev. 666 (1963) Ferrari, Franco, Uniform Interpretation of the 1980 Uniform Sales Law, 24 Ga. J. Int'l & Comp. L. 183, 200 (1994) Fletcher, Ian, Mistelis, Loukas and Cremona, Marise, Foundations and Perspectives of International Trade Law, Sweet and Maxwell, London, 2001 Garro, Alejandro M., Reconciliation of Legal Traditions in the U.N. Convention on Contracts for the International Sale of Goods, 23 Int'l Law., 1989, 443

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Kabik, Michael, Through the Looking-Glass: International Trade in the "Wonderland" of the United Nations Convention on Contracts for the International Sale of Goods, 9 Int'l Tax & Bus. Law. 408, 428-29 (1992) Khan, Rahamatulla, Unification of the Law International Sale of Goods - Issues and Importance in Khan, Rahamatulla (ed.), Law of International Trade Transactions, Indian Law Institute, New Delhi, 1973, pg 39-54 Lansing, Paul & Hauserman, Nancy R, A Comparison of the Uniform Commercial Code to UNCITRAL's Convention on Contracts for the International Sale of Goods, 6 N.C.J. Int'l L. & Com. Reg. 63 (1980) Levie, Joseph H., Trade Usage and Custom Under the Common Law and the Uniform Commercial Code, 40 N.Y.U. L. Rev. 1101 (1965) Lookofsky, Joseph M., Loose Ends and Contorts in International Sales: Problems in the Harmonization of Private Law Rules, 39 Am. J. Comp. L. 403, 408-09 (1991) Mazzacano, Peter J., A Comparison between the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code, http://www.yorku.ca/osgoode/cisg/writings/CISG v.UCC.htm as on 7/12/2005 McMahon, J.P., Pace University School of Law conference on the United Nations Convention on Contracts for the International Sale of Goods (CISG): Primary differences between the UCC and the CISG, in Review of the Convention on Contracts for the International Sale of Goods (CISG) 2003-2004, Sellier European Law Publishers, Munich, 2005. p. 91-103 Nan, Horacio A. Grigera, The UN Convention on Contracts for the International Sale of Goods, in Horn, Norbert and Schmitthoff, Clive M. (eds), The Transnational Law of International Commercial Transactions 89, 101, 1982 Patterson, Elizabeth H., United Nations Convention on Contracts for the International Sale of Goods: Unification and the Tension Between Compromise and Domination, 22 Stan. J. Int'l L. 263, 275 (1986). Paul Amato, U.N. Convention on Contracts for the International Sale of Goods -- The Open Price Term and Uniform Application: An Early Interpretation by the Hungarian Courts, 13 Journal of Law and Commerce (1993) 1-29 Rendell, Robert S., The New U.N. Convention on International Sales Contracts: An Overview, 15 Brook. J. Int'l L. 23, 42 (1989) Rosett, Arthur, Critical Reflections on the United Nations Convention on Contracts for the International Sale of Goods, 45 Ohio St. L.J. 265, 290 (1984) Summers, Robert S., Good Faith in General Contract Law and the Sales Provisions of the Uniform Commercial Code, 54 Va. L. Rev. 195 (1968). Tuggey, Timothy N., The 1980 United Nations Convention on Contracts for the International Sale of Goods: Will a Homeward Trend Emerge?, 21 Tex. Int'l L.J. 540, 550 (1986) Van Houte, Hans, The Law of International Trade, Sweet and Maxwell, London, 2002 Winship, Peter, Domesticating International Commercial Law: Revising U.C.C. Article 2 in Light of the United Nations Sales Convention, 37 Loy. L. Rev., 1991, 43

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