1980 Vienna Convention on the International Sale of Goods (2)

7/27/2019 1980 Vienna Convention on the International Sale of Goods (2)

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1980 Vienna convention on the International sale of goods

Its one of the most successful conventions and deals with the substantive law of sales; it does not

try to make uniform rules of conflict such as the Rome convention 1980. It aims to establish an

uniform set of substantive rules , not to give provisions as how to determine the applicable law.

There are different problems in the attempt to reach uniformity and they can be addressed to in

different ways: uniform jurisdictional rules (how to share jurisdiction among states addressed to

judges: rg. 44/2001), uniform rules of conflicts or substantial rules (addressed to private parties).

The Vienna convention tries to achieve the latter purpose, by providing uniform rules on

international sales that are directly applicable to the relationship between the parties (c.f.

transportation by sea, railway or road).

Normally the conventions dealing with substantive law are of mandatory character: the states thataccept to limit their sovereignty and to regulate an area of law with uniform rules, then tend not to

allow private parties to escape from them and derogate. The Vienna convention is a big exception:

it is a substantive law convention but not mandatory and parties can derogate from it. It is entirely

applicable but it is still possible for parties to derogate from it, explicitly or implicitly waiving its

application. This is relatively bizarre and unusual: e.g. in the field of transportation its not possible.

HISTORICAL BACKGROUNDThe Vienna convention is more easily understood if reference is made to its history . The

grandfather of the attempt to uniform rules on international sales was Ernst Rabel (Austrian

professor) who, in 1929, presented a report to a conference of comparative lawyers where he spelt

out the idea to try and elaborate uniform rules for the international sale of goods. He was a great

comparative lawyer himself and had studied the systems of several countries in the world; he

believed that contracts derived from practice, even though legal systems normally start from a

general theory where contractual types are derived from. Theoretically the general model is the

same, but the same contracts, however, are governed by quite different rules in different legal

systems: Rabel tried to extract a common cover from these rules. He identified 3 problems or

dilemmas and gave pragmatic solutions:

1. Should the attempt to uniform rules concern all sales or only the international ones as

opposed to domestic ones? Itd be wonderful to have uniform universal rules of sales,

because it would avoid problems of drawing a line between domestic and international sales,

but Rabel understood this is not feasible and proposed uniform rules only for

international sales (this entails there are still problems in drawing a line in the field of

application of the Vienna Convention and of domestic rules).


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2. How to deal with the matter of the passing of risk. In many important legal systems,

deriving that from the Napoleon code, the passing of risk is connected to the roman idea that

res perit dominus : the ownership of the chattel is the basic connecting factor to determine

who has to suffer the risk of it perishing (= the loss hits the owner of the chattel at the

moment of the loss). In international trade, however, goods are destined to circulate and

whats important is not who owns them, but who is going to suffer a loss of money because

of their perishing. It is, therefore, not appropriate to refer to ownership; in making up his

proposal, Rabel was influenced by a recent Scandinavian (Norway, Finland and Sweden

tend to have a uniform law on such matters) law which, in 1919, had introduced the idea that

the relevant issue to determine whod suffer the loss was delivery , as opposed to ownership:

the party who had control, physical possession of the chattel, as a result of delivery having

been effected or not. It is fundamental to go and look if the delivery had been effected when

the loss occurred or not; its irrelevant to go and look on which party ownership insisted.

This sounds bizarre for us used to think in Roman terms, but its very consistent with an

international environment: in international trade ownership is irrelevant and risk passes

because of delivery .

3. For pragmatic reasons, Rabel decided it would also be too ambitious to cover all aspects of

international sales. The uniform rules should cover only that portion of the rules on sales

concerning the rights and obligations of the parties (contractual aspects parte

obbligatoria) and not the consequences on the ownership title (effetto reale). Besides, they

shouldnt cover a number of difficult issues, such as nullity, a contract being void and other

defects, because they are too difficult to handle uniformly and not too relevant to

international sales. Rabels approach is very pragmatic : hes aware that states arent keen

on giving up their sovereignty and traditions so its better to cut out a small area to cover, on

which to achieve consensus.

Where uniform rules dont govern directly an issue, its necessary to go back to the tradition

solution, by applying the conflict of laws rules of the state of the forum (all exclusions and

loopholes will have to be resolved with reference to the residual method).

In 1930s, under the influence of Rabels ideas, two commissions were appointed to try and

implement his proposal. The first drew up a set of rules concerning the rights and obligations of the

parties of a validly entered into contracts; the second dealt with a set of issues connected to the

formation of the contract (i.e. when an international contract of sales can be considered validlyentered into). The works of the commission were ready in 1939 but states were busy fighting the


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WWII, but the idea of adopting uniform rules was reconsidered afterwards and, in 1964, two

conventions were adopted by the Hague Conference. They were made up of few articles, obliging

states to introduce in their own legal systems the annexed uniform rules (structure = convention 1

and 2 + annex 1 and 2); by contrast, the Vienna convention is merged and done with a different

technique (no annexes), but the core ideas have passed through.

The 1964 Hague Conventions were very good from the technical point of view: they had been

drawn up by professor Andr Tunc , a French scholar expert in civil law. However, they were not

successful at all , only 9 countries ratified and enacted; all of them but Israel were European and

most did so as a mockery of ratification, by adopting it on the basis of an opt in possibility (the

convention wouldve been applied only if both the parties, the buyer and the seller so agreed). It had

practically no application because the parties didnt know exactly about it and lawyers seldom

advised them to opt in. The reason why ratifications were so few is two-folded:

a. Political reason = Tunc did not try to get support for his ideas and didnt use a comparative

method. The convention was considered to be French and not adaptable to other countries;

USA, Russia and China felt not involved in the drafting and made it clear that they wouldve

never adhered. This was a major political mistake.

b. Technical reason = there were two main technical problems, successfully solved by the

Vienna Convention. Rabels idea that the positioning of risk should be based on delivery

was accepted but not in a satisfactory way since deliver can have a legal (correct

performance of the obligation in accordance to the contract) and a material (substantive,

concrete: if I deliver something thats full of defects, the thing passes from the seller to the

buyer so there is a material delivery even though the obligation hasnt been performed

correctly) meaning. The provision was ambiguous: is a material or a legal delivery needed

for the risk to pass?

The other big flaw was Tuncs attempt to apply the uniform rules in a very broad and wide

way, even when, from the standpoint of connecting factors, the uniform rules had no basis to

be applied: when a contract is per se international, a country that had adopted the rules,

should apply them even when the parties belonged to non contracting States. Example :

before a French court litigation is brought between a Japanese and an Argentinean parties on

a contract for the sale of a chattel located in France. Since the French law considers this an

international sale, the court would apply the Hague rules even though neither Japan nor

Argentina had ratified them, the only reason for them to be applicable being them being the

forums law.


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This is unacceptable according to the conflict of laws theory, because no consideration is

made of the connecting factors and the law of the forum is applied only insofar as its the

law of the forum. The flaw is eliminated by the Vienna Convention, which is applied by

virtues of the rules of conflict.

Since the unification of rules had not obtained consensus, Tunc wrote to the UN and an initiative by

the UNCITRAL came up. This had the added value of being genuinely international, having the

political blessing of the United Nations, in whose activity any state could participate (the

contribution of Ghanas lawyers was very high and the USA participated heavily).

Although after all the Vienna Convention is not that different from the uniform rules (they were

simply improved and amended), it has been very successful. More than 70 countries have ratified it,

all the European ones except for the United Kingdom (they say that the Parliament doesnt have

time to discuss the issue, but the truth is they still apply the Commonwealth law on international

sales and dont want to acknowledge the fact that British law is no longer applied worldwide in

such matter: psychological resistance), Ireland (that follows the UK) and Portugal (God knows

why). It was adopted in 1980 in Vienna and its divided into four parts; it has got 6 official versions

in the 6 official languages of the UN (English, French, Spanish, Chinese, Arabic and Russian). It

didnt come en force immediately, but with the tenth ratification (USA), which came in 1989; its

now effective and its the uniform law on international sales.

GENERAL POINTS

The convention deals with SALES but does not give a definition of this; is there an implied renvoi

to the domestic notions or, preferably, does this have to be determined indirectly by looking at the

provisions of the convention as to the rights and obligations of the buyer and the seller? Beneath

this hides a first gigantic problem: whenever the convention uses a concept without defining it, how

do we fill the empty box? Are we supposed to look at the national laws of the countries which have

adopted the convention ( home coming trend , methodologically wrong) or should we make an effort

and try to make out its transnational and autonomous meaning? Art. 7 tackles this issue (normally

this is a matter of interpretation): we have to try and see if an autonomous meaning can emerge

from the convention and only were this not possible should we go back home.

So, the notion of sale has to be circumscribed according to the provisions of the convention :

are a number of contract, similar to sales but different, covered ( borderline cases )? E.g. barter (=

transfer of the ownership of a chattel in exchange for another chattel, permute), consignment (= the party who receives the goods can decide either to give them back or to pay the amount due the


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consigner doesnt know if hell have the goods back or the prices e.g. newsagents, contratto

estimatorio), distribution (= a party undertakes the obligation of distribute the other partys goods,

to buy minimal amounts etc, in exchange for money, knowhow, trademarks and so on), bailment (=

deposit of a chattel with the option to transfer its ownership at some conditions). The Vienna

Convention doesnt cover them entirely, but only in those portions which coincide with the

subject matter of sale (this solution was given in a number of arbitral awards).

In order to determine whether a contract is included in the field of application of the convention,

should I go back to the legal tradition of the court dealing with the case or try to determine its scope

autonomously? The correct approach is to base the interpretation on the convention itself; going

back home is not correct this virtuous behaviour is normally not followed because people are

influenced by their culture and tend to apply what they have in mind). There are, anyway, some

indications in the convention, the most important is art. 3 which covers the case of a contract

hereby one party undertakes the delivery of a chattel to be done, which doesnt exist when the

contract is stipulated and will be carried out by the time delivery is accomplished. Its a

fundamental rule today that we live in a complex society where chattels have to be done, modified,

customised (technology). According to:

1. the first paragraph, this contract is a sale unless the party who orders the thing to be provides

a substantial part of the material is this meant quantitatively or qualitatively? If I have

to assemble something big with a small but very important heart (a compressor in a

refrigerator), does this rule apply? In the French text, the word is essentil , which

suggests substantial to be interpreted as qualitatively substantial : if the ordering party

provides something fundamental or even indispensable, then the contract falls outside the

scope of the convention.

2. the second paragraph, if the supplier must essentially provide services rather than row

material, then the contract falls outside the Vienna Convention (vendita dare c.f. appalto

facere). This is easier to interpret than the first paragraph: its a mere quantitative matter,

comparing the monetary value of labour and row material.

This rule is very important. Many commentators refers to it as a stupid distinction, saying all

contract for the delivery of movable chattels to be manufactured should be included in the scope of

the Vienna convention. Anyway, this is the rule and it imposes to make a fine distinction and to

clarify what preponderant and substantial really mean; theres a risk of non uniformity, which can

be avoided by not going back to a national interpretation but by looking at the uniform

jurisprudence of the application of the convention all over the world, because all these decisionswill be based on the internal logic of the convention itself.


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Art. 2 and art 4 and 5 are EXCLUSIONARY RULES , identifying contracts and situations to

which the Vienna Convention could theoretically be applicable, but which are ruled out of its scope

for merely political reasons. Art. 2 lists cases (c.f.); art. 5 is not very important in practice but a big

theoretical point, c.f. manufacturers liability in the EU. It provided a special treatment for harmful

consequences of manufactured goods, fulfilling the need of protection of individuals against the risk

of injury; any national legislator tends to address this issue and a uniform equal level of protection

would entail a race to the bottom. If a country has a high level of protection, itll want to keep it, so

liability for damages to people falls outside the Vienna Convention, BUT liability for damages by

goods to goods is covered, because of lack of a specific exclusion. According to some

commentators, this is wrong because the convention covers only contractual liability and this last

case would be tort (implied exclusion); but this is incorrect since the convention doesnt draw any

dogmatic distinctions between the nature of the damages: there are simply damages, no reference to

contract or tort, and theres no reason to exclude this case. Examples :

- some goods are kept in storage and someone, creditor of the buyer or the seller, claims for a

judicial order to seise them, while someone else claims to be the possessor; the action of

possession is equated to the action claiming ownership and the convention is not applied;

- if a contract is affected by gross unfairness, according to the Italian law you can file a suit

for rescission in the strict sense; this is not nullity, the contract is rescindable and has to be

made ineffective in order for it to be void. However, for the purpose of the convention,

nullity has to be interpreted in the broadest sense, encompassing also ineffectiveness and

irregularity (all notions used in the convention should be interpreted according to it, not

according to the national system).

INTERNATIONALITY : since there is no accepted notion, the Vienna Convention has to

determine its own standard of distinction. The criterion is vastly different from the one of the Hague

Conventions, which determined a list of factors which rendered international a dispute (any one of

those would be enough to trigger the application of the uniform laws, which wanted to be as widely

applicable as possible). There is one simple standard of internationality: the parties have to have

centres of business in different states (nationality or the fact that the goods have to cross the border

are irrelevant): all other factors are disregarded.

If one of the party has more than one centre of business, art. 10 states that reference has to be made

to the country which has the strongest connection to the contract and its performance. This rule isambiguous (delivery built and delivered ?) and depends on where the fundamental act of


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performance has to be carried out; it has to be understood according to the circumstances and

judgement should not be made according to the situation at the time of performance but at the time

of the contract, otherwise parties might be taken by surprise (all the subsequent is irrelevant c.f.

perpetuatio iurisdictionis).

The fact that a contract is international doesnt imply that the Vienna Convention applies; this is a

necessary but non-sufficient requirement: the contract must as well have a strong enough

connection to a country which has adhered to the convention itself, in order for it to apply. By

contrast to the Hague Convention, its not sufficient that a judge is sitting in a state that has

accepted the convention.

Art. 1 provides for two methods for determining whether or not the convention applies to an

international sale of goods :

a. When states are contracting states, its applied directly with no resort to conflict of laws

rules. Example : before a court in state A, party of the convention, theres a litigation

between two parties having centres of business in different states; the conflict of laws rule of

state A (stating that the applicable law is the one of the place of performance) wont be

applied and if it were applied it might have led to the application of the law of a country

which is not party to the Vienna convention, but this is not relevant.

b. The application of the rules of conflicts may lead to the application of the Vienna

Convention as a rule of law of a contracting state to which reference is made to by private

international law rules (NB: whenever a text refers to rules of private international law, they

are those of the forum where the dispute arises, the rules of the court before which parties

are litigating). Example : if two parties are litigating in Italy, the Italian conflict rules will

have to be applied by the Italian judge; if they designate as applicable the English law, the

Vienna convention wont be applicable through art. 1(b) because the United Kingdom has

not ratified it. However, if it designated the Italian law, the convention wouldve been

applicable even though both parties had their centres of business in non contracting states;

the convention can be applied if its application is consistent with the choice of law

method .

This creates a number of problems because certain states have adhered to the convention by

using a permission to make a reservation: the convention will be applied only insofar as art.

1(a) is applicable, only with the direct method with exclusion of the indirect one. This

reservation, when made, has to be carried out according to art. 95; the states that have made


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the declaration, called declaring states, are contracting states but not in the full way. Three

cases:

1. A contracting non-declaring state, whose conflict rules designate as applicable the law of

a declaring state (which has agreed to apply the convention, but doesnt want it to be

applied through art. 1(b)) the will of the declaring state prevails to the importance of

the Vienna convention to be applied according to the rules of the forum: out of comity,

for this specific point the state is considered non contracting ( K = the will of the state

must be respected ).

2. Parties are litigating in the forum of a contracting and declaring state, does this mean

that the state should not apply actively the convention because it has refused to have it

passively applied? the convention will be applied because the rejection concerns the

declaring state; the non-declaring one is interested in having it applied, so comity steers

towards its application (the will of the declaring state is irrelevant; K = favour for the

application of the Vienna convention ).

3. Forum of a non-contracting (and obviously non-declaring) state, third party no

obligation upon it to apply the convention, but under its own unilateral law it might find

it useful to have it applied under art. 1(b). This cannot be a mandatory solution, but there

might be compelling reasons to apply the convention as national law of the country

whose law is applicable according to the private international law rules of the third state.

Art. 7 covers two issues, INTERPRETATION AND LOOPHOLES; they are in the same rule

since if you admit that the rules of the convention can be broadly interpreted, you diminish

loopholes if you interpret them restrictively, you increase them (strict interrelation).

Paragraph one is probably the most famous statement describing the international way of

interpretation of ANY international convention (v. Nationalistic way > Bartain: when a convention

is adopted by a state it becomes part of its legal order, therefore it has to be applied and interpreted

according to the rules of that state risk = it would be applied as leopard skin, intended and

applied differently in all states, in spite of uniformity):

a. International character (not go back home);

b. Generally speaking, in international law interpretation is narrow and restrictive because

conventions entail limitations of sovereignty and the states want to give away the minimum

of it. The broad interpretation of legal text in general is fairly common in civil law countries,

but much less so in common law countries: this especially in the UK (in the USA there wasthe revolutionary introduction of the constitution which is broadly interpreted), because a


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statute is considered to be an exception to the real law (the judge made law), so it has to be

interpreted in a restrictive way.

This doesnt mean the Vienna Convention has to be interpreted narrowly; it is a European

philosophy based convention which requires a broad interpretation consistent with the objectives

pursued. It must be faithful to itself (interpretazione endoconvenzionale), avoiding homecoming

and within the convention any possibility of expansion must be explored, minimizing as much as

possible loopholes to be filled by national law.

We have to promote uniformity in interpretation: if there is consistent jurisprudence on some

specific issue, the freedom of the judge should be discouraged (binding cases stare decisis).

The role of GOOD FAITH in international trade: the only place in the entire convention where the

words good faith appear, as a result of a fight between civil law lawyers (in favour of good faith)

and common law lawyers (who were against any reference to good faith in the whole convention,

because it allows the contract to say afterwards something it didnt say at the beginning so that the

incidence of the contract is not foreseeable in advance they have a psychological notion, not an

objective one). By allowing good faith to land only in this rule, common law lawyers believed to

have neutralized it; it is not a criterion to assess the conduct of the parties, but only one for the

interpretation of rules by a judge (agreement by disagreement).

However, for those countries who have good faith in their domestic legal systems, this criterion is

mandatory to assess the behaviour of the parties and no one can opt out of it in a contract; its an

imperative obligation which cannot be waived on. So: good faith is not part of the Vienna

Convention except as a criterion of interpretation, but the convention doesnt wipe out mandatory

rules of the national systems adopting it. So even though a country is part of the convention and

litigation is there, the application of the convention wont foreclose the application of the

imperative rules that compel parties to good faith in performance as part of the lex causae. This is

an advantage but also a disadvantage (impairs uniformity because domestic rules are applied, but

this is not a flaw of the convention, its a result of the differences between legal systems).

Paragraph two deals with the filling of gaps, matter which is deeply connected to interpretation: if

the interpretation is broadly conducted, the need to resort to gap filling will decrease because the

points dealt with will be more; if it is interpreted narrowly, the number of issues not addressed to by

the convention will be fewer.

The loopholes have to be filled by applying the general principles of the convention (internal

external: UNIDROIT); if no result can be reached and there is no clear solution, its allowed to go


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back home. Theres an inherent risk for uniformity, but its necessary to have a solution in some

given case.

The convention says questions concerning matters governed by the convention, making it clear

that gaps must be kept separated from exclusions (art. 4 and 5 - result of a political choice made

by the drafters of the convention not to include matters which it was too difficult to find an

agreement on such as ownership or nullity). The distinction might be difficult.

Example : One of the mostly debated issues is art. 78 which concerns the right of the party who

hasnt been paid for the price to receive interests. In case of delay in payment, the creditor is

entitled to general damages for non performance plus interests which are payable even though

damages under art. 74 are not recovered. The convention does not determine which rate of interest

applies: is art. 78 a rule creating a gap or an exclusion? One could argue that the Vienna convention

simply refers to interest without any reference to the rate, therefore the issue is excluded from the

scope of the convention. According to most commentators, however, this is a classical example of

an issue covered with general norms rather than specific rules, of a gap. As a result, art. 78 might

give way to two solutions: if you consider it as a rule creating a gap, then itll have to be filled

according to the general principles of the convention there is total silence on the rate of interest,

but the convention states the full compensation of the party entitled to get the price so, to some

commentators, the judge should determine the amount due as part of the full recovery granted by

the convention according to other, we should go back to national law (which? Lex contractus that

would be applied if the convention wasnt there, law of the place of the seller, law of the place of

payment, law of the place of the currency used to pay the price and so on), which could lead to

several different outcomes. Probable best solution = theres no need to make reference to an interest

rate at all; a court can simply determine the part of the damages awarded to the party under the

heading of interests. Interests are part of the damages, they are simply a way to determine

statistically the damage suffered by the lack of payment; they can be assessed either with a rate or

by working out which is the loss the creditor suffered because of non receiving the money due at the

due moment, which can be determined according to evidence.

Example : art. 79 force majeure , i.e. when the obligation undertaken by a party is totally blocked

in its performance by a supervening fact. It is defined in a very restrictive sense: e.g. if a war

prevents the obligation from being performed and that war was foreseeable at the time of the

contract, this is not force majeure and the contract is still a valid one. The Vienna convention is a

commercial oriented text and it favours creditors; what about similar situation but less severe? Are

they covered by the Vienna convention but not dealt specifically with or are they exclusion to begoverned by the direct application of a national law? For instance, we do have a specific rule for


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unforeseeable supervening hardship (art. 1467 cc) which entitles the hit party to either readjustment

or termination of the contract; our law does not impose performance as long as its physically

possible.

Suppose a contract governed by the Vienna convention, to supply goods which have to be made out

of a raw material to be bought on open market, with a duration of 3 years. At the time of the

contract, the ordinary market price of the raw material is 100 and the seller, by supplying the goods

at 120, is going to make a profit of 20; after one year, the price increases to 300 the physical

performance is possible because the goods are available (they just cost more): unless you have a

specific rule letting him out, the seller has to perform the contract and cannot terminate it, even

though he would less 300 120 for every made sale. According to the Italian law, the contract can

either be readjusted (in order for the seller to have a profit of 20: price = cost + 20) to keep the

original balance, or the debtor can terminate the contract. Whereas, the Vienna convention requires

the contract to be performed unless force majeure can apply. The result is thoroughly different (the

lex causae is immediately applicable if the matter is excluded its ultimately applicable if we

consider this to be a loophole):

If we consider this to be an exclusion, the Italian law (lex causae) will apply and the debtor

burdened by the risk can consider himself protected;

If we consider this to be a gap, we have to try and find a solution according to the general

principles within the convention and the debtor will have to perform.

What happens then? Ultimately it depends on the court: Italian courts will probably be more willing

to consider this as an exclusion; but this is probably wrong because the Vienna convention clearly

deals with the matter of supervening facts and one should not allow a more indulgent national law

to apply. In international trade, the parties who will invoke more indulgent national rules are

industrial countries the developing countries want the old British rule, i.e. if you want protection

from such risk you have to insert a clause in the contract, if you havent inserted it then too bad. In

terms of international relations, the solution of the Vienna convention, harsher but clearer, has to

prevail; its better to negotiate detailed contracts than to go back to national law (when this

happened, the national solution is likely to be favourable to one of the party and unfavourable to the

other, which is frankly unfair) and take the chance of an unknown domestic legal system to come

into play.

GENERAL PRINCIPLES OF THE CONVENTION

1. Preservation of the contract : this is a very commercial text and looks at the needs and desires

of merchants. Litigation before a court (which implies termination of the contract) is not the


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best solution: a contract involves time and cost for making and it is economical to avoid

termination, to keep it alive as much as possible by adjusting it. The will of the parties is

sovereign, if they have stated that any small non performance will justify termination then

this will happens, but otherwise the contract has to be interpreted in such way to protect as

much as possible its existence. For instance, in case of delayed performance, it shouldnt be

terminated immediately; the party who is suffering the delay has to give to the other a

deadline to comply, before having the right to terminate the contract (this is the concept of

Nachfrist , typical of the German law, which entails the problem of homecoming: attempting

to interpret the convention with reference to German national law is wrong).

2. Protection of the goods : this is another pragmatic and commercial principle, according to

which, regardless of who shouldve taken care of the goods, the party whos got them has

the duty to protect them, only because hes the only one whos got control and therefore can

do this (the duty to protect the goods is inherent). This is the most economically efficient

solution: the duty is imposed on the party which is more capable to perform it.

3. The general remedy for non performance is damages . The Vienna convention provides for

quite a broad spectrum of remedies, several specific ones (each of which available to the

buyer or the seller if certain conditions are met) and a general remedy without any specific

requirements to be fulfilled and which can always apply in case of non performance. This is

fundamental and shows the commercial character of the convention; e.g. the specific

performance (azione di adempimento) can be filed only if it wouldve been granted, in a

similar case, by the court of the state where the litigation is brought. Merchants are only

interested in the monetary value of the contract, not on the moral duty of performing ones

own obligations, so the general remedy is money, damages; if you want another remedy,

you need a specific basis.

4. Irrelevance of fault ( elemento soggettivo ) in the non performance . Under many systems of

Roman Franch law tradition, theres breach of a contract only if evidence of the

psychological element of fault is given, the absence of fault goes against deeply rooted

cultural assumptions. The Vienna convention, on the other hand, is objective and looks at

the breach as objective non coincidence between whats promised and whats delivered; it is

irrelevant whether the behaviour is voluntary. If a party expects to get a performance and

doesnt get it, theres breach of the contract, objective non-coincidence between whats

promised and whats delivered, and the creditor is entitled to a remedy. Not necessarily,

then, the non complying party will have to pay damages: a party who innocently cannot perform is still in breach. This comes from the cultural tradition of common law, which


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doesnt necessarily put the risk of the impossibility of performance on the creditor. In civil

law casu sentit creditor , in common law casu senti debitor different attitudes towards

breach and non-performance; the Vienna conventions chooses the objective one.

5. Foreseeability of damages as a criterion limiting their recovery . Art. 1226 of the Italian civil

code states that you will only be awarded the damages that were foreseeable at the tame

when the contract was made, unless the party at fault deliberately effected damages in case

of deliberate wilful intent (dolo), any damages will have to be restored, even if the cause is

very remote.

This doesnt apply to the Vienna convention because it is easier for merchants to assess the

risk of making a contract when it is clear how much itd cost them to deliberately terminate

it in case it was economically correct not to comply. Example : a party enters into a contract

to deliver a chattel for the price of 100 to a creditor, waiting for the delivery and willing to

pay 100 if another party offers 150 for the same chattel, it should be right for the seller not

to deliver and to breach the first contract, provided 150 is enough to pay damages to the first

buyer and to gain the same profit. This way, all the three parties are happy and the asset goes

to the one who wants it most; there is no reason to force the performance of the first

contract, the seller has the right not to comply and predicting damages is necessary in order

to assess the cost of the breach.

6. Is good faith a general principle that can be recovered under art. 7,2 even though art. 7,1

allows it to be only a rule of interpretation for judges and not a rule to assess the behaviour

of the parties? It is probably better to take the compromise solution: good faith is only a

principle addressed to judges and has to be applied by courts. However, it can be applied as

imperative rule before a court whose legal systems provides this: this is a potential lack of

uniformity that cannot be blamed on the Vienna convention; it is due to the impossibility to

eliminate differences among legal systems.

Article 8: interpretation of statements and other conducts of the parties . (read article!!!)

Our civil code, at art. 1362 ss., gives a list of rules for interpretation of the contract, both subjective

and objective (hierarchy?): stress is laid on the common intent of the parties, a contract cannot be

considered concluded unless the parties have given their consent upon a common object.

The Vienna convention does not have this as an object and gives rules for the interpretation of the

behaviour of each party, allowing ultimately to determine whether a contract has been born. Art. 8states the subjective interpretation as prevailing : the most outstanding example if a party


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knows what the other meant, even though he behaved in a very bizarre way, the statement has to be

interpreted the way the former knew it meant if one of the parties has a peculiar way to express

consent with an expression of doubt, this would not be enough were an objective criterion to be

applied, but it is enough according to the convention, if the other party was or should have been

aware of this.

As a rule, will prevails as opposed to its objective representation; if it is impossible to determine the

real meaning of the statements: paragraph 3.

Example : A sues B for enforcement of a contract which B deems never concluded; K = is there

acceptance of the offer? The burden of proof lays on the party interested in proving that consent

was given and it might be hard to give evidence of the fact that, notwithstanding written statements,

the behaviour meant consent. This being so difficult, normally the objective way prevails.

Article 9, 1: book.

Article 9,2 is one of the most debated clauses in the convention, coming out of a compromise

between two views: developed and exporting countries were in favour of usages because they have

the markets where they are created, developing countries strongly opposed them.

Usages under art. 9,2 can be considered objective law if they comply with the given standards and

are applied on the basis of the fiction that parties want them to be applied, even though theyve

never said openly they wanted to (implied will > fictio iuris). They arent mandatory or imperative:

parties can opt out of them if they want to, but they have to do this explicitly. If parties dont reject

them, these usages prevail over the rules of the convention : in the hierarchy of sources, in

international trade law, usages come after the will of the parties but before the rules provided by

international conventions and before the dispositive laws of any domestic legal system. So, usages

prevail on the rules of the Vienna convention and on the rules that would apply under the lex causae

(which are dispositive).

Example : a sale made on FOB terms (= standardized type of delivery according to which the seller

ceases to bear the risk of the goods when they get on board of the vessel) the Vienna convention

doesnt have a FOB rule for the passing of risk, but FOB can apply as usage and prevail (it doesnt

mean that FOB is mandatory, the parties could opt out both of the convention and the usage).

In case you are not aware of the usage or if you havent excluded it, it will apply provided it meets

some standards ; since an open rejection normally doesnt happen, these tests are the real proof for

usages to be applied as objective law , not because the parties want them to be applied). The Vienna

convention is largely based on the elaboration made via the Hague Convention, which acceptedwidely usages and made no distinction among them: all usages of general application were


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recognized and this is the reason why certain countries bore a strong hostility towards that

convention (the main opponent was China ), which has been overcome through these tests:

1. Knowledge or possibility of knowledge by the parties involved in the contract: if they didnt

know a usage and they could not possibly know it, then its not imposed on them.

2. Wide knowledge in international trade (in the specific sector) regular observation by

parties to contracts of the same type in that particular trade.

So, two obstacles have to be overcome: if parties didnt know and its understandable that they

didnt, usages are not imposed on them; the second criterion is objective and strong. For instance,

FOB is widely and well known and regularly applied, but in order for it to be considered applicable

to a certain contract it is necessary that for that specific contract in that specific sector FOB is used

even without any reference by the parties (e.g. its recognized in the agricultural sector and applied

to sales of corn but not to sales of oats). The conditions are relatively restrictive, lots of usages cant

be applied under art. 9,2; China found it acceptable and now theres room for usages to be applied

even with no reference in the contract.

FORMATION OF THE CONTRACT (part II) was a very difficult topic to be addressed to by

the convention, because civil law and common law have opposite rules on important parts.

Examples :

1. civil law considers a contract to be formed when the offeror receives the acceptance,

common law when the offeree sends it;

2. according to civil law, the offeror has to keep an offer firm while the offeree isnt bound, but

he can revoke it unless hes received notice of the acceptance; according to common law,

the offeror is not legally bound (only morally) by a promise unless hes receive

consideration for it, but his freedom to revoke it ends when the offeree sends acceptance.

Fundamentally, if civil law has a rule, the common law has got the opposite one and theres seldom

a coincidence. The Vienna convention, as a common ground, normally lets civil law solutions

prevail; this is probably one of the reasons why the UK hasnt ratified it yet and wont ratify it.

However, whats important for merchants is to know the rules and to have them clearly stated, then

they will adopt them, regardless of where they come from and this is a good example of carefully

crafted rules, generally letting the civil law rules prevail, with a couple of concessions to the

common law.


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a. One of the most important rules is the inclusion of the qualified acceptance principle , as a

solution to the issue of the battle of forms: the contract de facto observed derives from a

combination of form 1 and form 2, unless major differences occur among them.

b. As a general rule (art. 19), the mirror image rule is chosen: the contract is formed when the

acceptance is exactly identical to the offer, with one exception: if he acceptance is only

slightly different on a non negotiated point, the contract is considered to be concluded on the

basis of the addiction to the offer, unless the offeror rejects it within a certain time. This rule

is probably not totally appropriate, because the contract gets formed on something else than

consent; however, its application is very limited.

c. There is the famous problem of inconsistency between art. 14 and art. 55 . The former

provides that for an offer to be valid it must specify the price (no price no valid offer

no contract); the latter, states that, if a contract is validly formed and the price is not

specified , the price will be the one generally charged at the moment of the conclusion of the

contract for such goods sold under comparable circumstances in the trade concerned (= a

valid contract can be stipulated without a price).

These provisions are strongly inconsistent; its not a problem for certain countries

(Scandinavian) which have made a reservation on part II, in order to keep applying their

own laws, but for most ratifying states, that have agreed on parties II and III, the problem

exists. According to the prevailing view, art. 55 prevails: its possible to consider a contract

to be validly formed even if it didnt start from an offer containing a price.

Part III rights and obligations of the parties

General provisions . Art. 25 deals with the issue of fundamental breach the Vienna Convention

takes an objective position with respect to performance and non performance; unlike the Italian

domestic tradition (according to which fault is necessary in order to have breach), the idea of breach

in the Vienna convention is purely objective, with no apparent connection to fault. Even a violation

of a contract which could be excused amounts to a breach, since breach is the non coincidence

between what was due and what was delivered, regardless of whether it can be excused because

there was no fault or it cannot be excused because there is fault. Not all commentators agree to this;

Carlo Massimo Bianca takes the position that even the Vienna convention incorporates fault in the

notion of breach, but hes isolated. The convention never mentions fault as an element of breach

and it provides for breach to exist even when fault is certainly excluded: art. 79 states that no

damages are due in case of force majeure, but still you have a breach of the contract , entitling thedamaged party to resort to other remedies if the required conditions are met.


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Breach (either misfeasance or non-feasance) results in the general remedy of damages; if a different

remedy is invoked under the convention, then special requirements must exist. The convention does

not define breach, nor does it say that the normal remedy are damages; this is the result of

interpretation (bizarre choice of defining the fundamental breach but not the breach itself).

Art. 25: fundamental breach avoidance (= termination), in order to invoke which the breach

must be fundamental (specific characterization). Roughly , avoidance is the equivalent of

termination on grounds of breach and its similar to our risoluzione per inadempimento. This is not

entirely correct: our domestic remedy is based on the French Roman notion of termination, which

requires judicial application (a judge has to ascertain and declare it, with a constitutive judgement).

The binding force of a contract cannot be eliminated unless a judicial decision says that what was

binding on the parties is no longer so: a judge has to intervene and undo what the parties had made,

what was law between them. This is not consistent with the ideal view of the contract in the

commercial practice, even though in the Italian and French-Roman systems in general it is possible

to have an administration of contract clause which determines the termination of the contract upon

some event ( clausola risolutiva espressa ). However, this is granted as an exception: not any breach

can justify termination upon the will of the parties, specific cases have to be spelt out in the contract

or the clause wont be valid under Italian law because itd be an abuse.

Fundamentally, in the Roman tradition termination of a contract is a judicial remedy (having ex

tunc effects anyway); the Vienna convention embodies a more commercial-oriented position, by

giving the parties the right to terminate the contract with no need of a judge to undo it. This is,

ultimately, a common law solution, where either party can repudiate a contract (Ill no longer

comply) and thus terminate it.

If theres a good ground for a declaration of avoidance, the party who avoided the contract

will not be exposed to damages or any other negative consequence;

If avoidance is not justified by a fundamental breach, the contract wont remain in place

because the will of the party aiming to termination results in killing the contract anyway

(both parties dont consider the contract to be binding any longer).

Art. 25 is a fundamental rule, of central practical application, even though its practically

impossible to derive from it guidelines for a uniform application in most cases because the notion is

based on facts and has to be considered according to the specific circumstances of the given case .

Its logical centre is the first part and the idea of detriment , having the effect of depriving the

party of an expected benefit , of what he legitimately expected out of the contract. Detriment is

clearly broader a notion than prejudice or damages; it is used for the purpose of making it less


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restrictive when it comes to identify the event which devastates the expectations of the party. Even

with no damages, it means anything that as a result of non performance has the negative effect of

depriving a party of what he expected .

Example : the buyer wanted to use a machine he bought off the seller for the purpose of starting a

new product, but a relatively small defect makes it impossible for him to do so. In terms of

damages, the defect has little significance; in terms of personal problems the buyer has to face it is

an event depriving him of his expected interest.

Minor defect detriment avoidance? This would lay too large an emphasis on what the creditor

expects and one of the general principles of the Vienna convention is that damages have to be

limited to the foreseeable amount. SO according to part I the creditor who has been deprived of

the interest in the contract a) in entitled to damages but not to avoid the contract if a clause has been

violated but his interest hasnt been destroyed b) is entitled to avoid the contract (and perhaps to

damages) if its legitimate expectations arising out of the contract have been destroyed as a result of

breach causing detriment ( look at the sphere of the creditor ). So even a minor breach resulting in a

terrible distraction of the expectation can result in avoidance, but part II states itd be too harsh to

the party in breach to have him facing termination of the contract when the detriment wasnt

foreseeable .

In practical terms, in art. 25 we have two rules, a general provision (whats the detriment destroying

the expected interested?) and a limitation (how does the general rule work? Foreseeability).

The intent of the drafter, anyway, was to make avoidance difficult, according to the general

principle of preservation of the contract. If the parties of a trade invest time and money to stipulate

the contract, its just stupid to rush to termination: the main aim of the convention is to keep the

contract en force, which can sometimes be difficult according to specific circumstances.

One must be very careful in determining what destroys the expected interest, also in the more

liberal legal systems. In the United Kingdom a contract is a contract and any violation, minor

though it be, entitles the innocent party to terminate it, placing the blame on the other. The English

tradition makes a distinction between breaches that entitle the innocent party only to damages

(condition = warranty only money as a remedy) and breaches that entitle to termination

(condition = breach of fundamental condition avoidance). The Vienna convention refers to the

latter, to the fundamental condition and not to warranty, but a home coming trend is not permitted

and art. 25 cannot be interpreted according to the British common law.

The purpose of the Vienna convention is to make termination difficult , by allowing it only in case

of a strong prejudice, of the destruction of an expectation interest which is something more than asimple one. If the parties have made clear what this is in the contract (normally expectation


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interest of the buyer ), then the court will only have to see if the conditions are met in the given

circumstances. The convention lets the will of the parties prevail: if they decide that even a minor

breach will be considered fundamental, itll be a ground for avoidance Up to the point that good

faith is breached? Would we enforce this under the Italian law? Good faith plays an important role

in some legal systems, a much smaller in others: a British court would certainly enforce this, an

Italian one might have problems, because of an implicit rule according to which you need a serious

enough non-performance to terminate a contract. So, the convention permits this but places a

caveat : in some legal systems, good faith must be taken into account; termination is recognized, but

the avoiding party may be exposed to damages if his behaviour has violated good faith (good faith

does not impose a duty to perform, but gives the other party the right to claim damages).

If the parties dont make it clear in the contract, the judge or arbitrator will have to determine

whether the breach has had the effect of destroying the expectation interest (c.f. book: cases). When

a court looks to the whole activity of the buyer, termination will be more likely to be granted; in

common law courts, where fundamentally the interest in a contract is monetary, it is very difficult to

establish a fundamental breach.

In ascertaining that, a court will have to try and keep the contract as much as possible and to protect

the party not in breach against the negative effects of having accepted delivery. Generally

speaking, from Rabel on, risk passes with delivery irrespective of ownership (Scandinavian rule: the

title is irrelevant to the passing of risk), with the passing of the physical control over the chattel.

According to art. 70 , the party who receives defected goods, in spite of delivery, can send back the

risk to the other by avoiding the contract: delivery causes the risk to pass, but it can be sent back by

avoidance on the ground that the breach is fundamental. Under the Hague Convention this was not

so clear.

The second part of art. 25 limits the first (whereby a contract can be avoided if the interest of the

creditor is destroyed) with the concept of foreseeability : unless differently said in the contract, a

fundamental breach wont kill the contract if the devastating consequences werent foreseeable by

the seller (foreseeability is a component of the fundamentality of the breach) at the time when the

contract was entered into . If at the time when the contract was stipulated the seller couldnt have

foreseen that his breach would cause devastation, but he understands only later on, it is still possible

for him to deliberately breach the contract and hell be sure hell only be obliged to pay foreseeable

damages. In total bad faith, the shrewd seller can decide not to perform, relying on art. 25 pt. II even

though his breach is fundamental, if he causes damages that werent foreseeable at the time of the

contract. The Italian law is strongly against this conclusion: youd need a serious enough breach to


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justify termination of a contract even though the situation wasnt foreseeable and damages wouldnt

be limited because of the wilful intent to breach the contract.

The convention doesnt accept this idea because its centred on the possibility for the parties to

know or to calculate the cost of the contract and of its non performance when the contract is made

were damages not foreseeable, avoidance is not permitted even though there is a wilful breach.

There is a reason why: the convention always provides a general remedy which is normally

regarded as adequate. Goods have normally a monetary value, which renders damages preferable

than avoidance; in the end its the game of merchants, if a party has a special problem and know

that non performance will have devastating effects, then he must tell the other and insert a special

clause in the contract, or else he wont be entitled to complain about the bad faith of the other party.

Art. 26 confirms theres no need of judicial intervention. The declaration of avoidance is effective

as long as the other party knows ( dichiarazione recettizia ): the moment the party in breach receives

notice, the unilateral will of the innocent party kills the contract, with no need at all to ask for a

court decision. Should this declaration be written or can it be per facta concludentia ? The

convention doesnt say, but its advisable to give notice in writing.

If avoidance is given but the requirements are not met, the party making the declaration cannot

enforce it; this entitles the other party to avoid the contract. So, an unjust declaration of avoidance,

in any event, could put the contract to an end because its not possible for it to stay if the parties

dont want it any longer. Art. 26 is particularly important for a legal system like ours, to make it

clear that no judicial intervention is needed.

Art. 28: specific performance. This rule has been criticized because it betrays the goal of

uniformity, as it is a compromise between common and civilian lawyers. Civil law still considers

specific performance as a first aim; only if no perfect compliance can be reached, damages can kick

in, but its always something less. In common law specific performance in commercial matters

(namely to force a party to de facto perform by a judicial order adempimento forzoso art. 2932 cc)

is very rarely granted; contracts are done by merchants interested in monetary results if they are

not performed the ordinary remedy must be damages, which only entails determining the monetary

value of non performance and telling the non complying party to pay for it. Fundamentally, the

common law entitles the parties to breach the contract and to non perform it, as long as damages are

paid; the contract is a deal made for money, theres no stress on the moral obligation ( vinculum

iuris ). Specific performance is admitted whenever the chattel is of very special value and cannot bereplaced by money; damages are not an adequate remedy because of a strong specific interest the


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creditor has in that chattel as opposed to money. This applies also to land and property, which is

considered to have specific value for the creditor, normally awarded with specific performance; on

this point the two systems converge, but for movable chattels for the common law granting specific

performance is sheer stupidity.

The Vienna convention does not make a decision: a party can get specific performance if he goes to

a court who would award it according to its own rules, that wouldve been applicable were the

Vienna convention not there. Thus unpleasant results may come out: in a contract between a

German and an American party, if the breach is brought before a German court specific

performance will be awarded; it wont be if the dispute were brought in the USA. Ultimately, the

idea of common law prevails: a court is not obliged to grant specific performance unless it would do

so according to its own law, in the event of the contract not being governed by the Vienna

convention. Therefore, it takes non uniformity for granted, according to the legal system the same

case may result in specific performance or damages, which goes against art. 7,1. However, this

causes no practical problems: only in few cases merchants request specific performance when

movable chattels are concerned, because its much more effective to claim just damages (common

law wins).

Art. 29 can be regarded as an application of the good faith principle, very used practically in

German law: f you make an agreement and state that itll only be modifiable in writing, but even so

make reliance on the other party that the written form is really not needed, then you cannot go back

and refuse to perform because of the absence of written form. You are sort of equitably estoppelled,

you cant venire contra factum proprium .

This rule is not exceedingly important, but its an example of the good faith principle to be applied

but not defined like that because the British hate this name; they believe it would open the door to

practices contrary to English and American law, to contracts being rewritten by judges or by a late

application by the parties.

Rights and obligations of the seller:

a. Obligation of delivery , i.e. to put the chattel at the disposal of the buyer in accordance with

the contract. If the contract uses an INCOTERM; the seller has to respect it; if theres no

reference to INCOTERMS, the Vienna convention provides how delivery should be made

(specific agreement with the buyer or rules of the convention) and the consequences in termsof passing of risk. Normally parties make reference to specific rules.


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The convention considers the case of delivery through the delivery of documents , but

unlike some legal systems (Italy), doesnt equate delivery of documents and of goods: the

former is just a part of the general duty of the seller to deliver. The Italian vendita su

documenti doesnt entail the obligation of the seller to deliver goods, only to deliver

documents representative of the goods even though the goods didnt exist any longer (as

the agreement was being made, the ship whereby they were being carried wrecked), the sale

is valid because the obligation concerns the document. In the Vienna convention, the sale is

to be performed via delivery of documents, which doesnt however replace the delivery of

the goods; once documents are delivered, the seller remains bound to perform all the activity

necessary to deliver the goods.

b. Obligation of conformity of the goods: this is a very important part of the convention. The

first criterion sends you looking at what the agreement says; if the parties havent specified

some aspect, then the convention provides for objective standards to determine conformity

e.g. whats considered normal in the market place of the sellers central business (in order

for the place of the buyer to be relevant, there must be a reason specified in the contract).

Rules of the convention also concern packaging : inadequate packaging for non defective

goods amounts to breach.

c. Obligation to grant additional time for the purpose of complying. If the buyer didnt show

up to take delivery, this doesnt create an immediate situation of fundamental breach

entitling to avoidance because according to the convention immediate termination must be

avoided. Unless the parties have agreed for the seller to having the right to terminate

immediately, the seller has to fix an additional deadline for the buyer to tale delivery; at the

end of that period of time the buyer is in breach and the seller is entitled to terminate by

avoidance.

In general, unless specifically provided by the parties, the non performance of the contract

in the agreed date or place, obliges the complying party to set an additional time for

performing, at whose expiring the contract will be terminated (principle of preservation of

the contract). Mutatis mutandis this also applies to the buyer : if the expected goods are not

delivered in the expected place or time, he has to give the seller a time to comply (grace

period), at the end of which the seller will be in fundamental breach.

If this new time is not set, later on a declaration of avoidance and an action for damages will

be permitted, but there wont be the automatic certainty of the fundamentality of the breach

and, therefore, of the right to avoid (the complying party will be exposed to breach and tothe other partys avoidance).


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d. Remedies awarded to the buyer in case of breach of the seller :

1. GENERAL ACTION FOR DAMAGES

2. SUBSTITUTION : if the buyer finds the goods so lacking in terms of conformity that

this amounts to fundamental breach, as an alternative to avoidance he might claim

substitution by sending back the defected goods. If the defects are not serious enough,

the buyer may ask for their monetary value or else for the seller to REPAIR the

goods.

This is admitted if certain rules are observed by the buyer: he has to inspect the goods

within a reasonable time from delivery and to send to the seller a specific notice with

the results of the inspection and any identified defects. Unless this is done within

reasonable time, the buyer loses the right to ask for substitution and repair (the same is

also true for avoidance), so its very important to observe the time frame and

specificity of this notice this doesnt mean all defects have to be spelt out in details,

because itd place an undue burden on the buyer, but the notice has to be as specific

as reasonably possible and have to communicate quickly that some defects are

actually there.

3. REDUCTION OF THE PRICE as an alternative to damages which the party itself

will have to solve, according to what he finds more convenient. Price reduction

involves a proportion: the price payable under the contract must be compared with the

original value and the actual value of the goods, in order for it to be reduced:

The two remedies dont get the same result and the buyer will have to choose whats

best for him.

Obligations of the buyer:

a. Obligation of the payment of the price.

b. Cooperation with the seller in taking delivery, which, besides being a legal activity, is

material and entails cooperation of the creditor. Example : delivery has to be made by

handing the goods over to a carrier selected by the buyer: what happens if the buyer doesntselect him and the seller cannot deliver? What happens if the carrier doesnt show up? Does


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the risk pass to the buyer because hes not sent the carrier or does it remain on the seller

because hes the only one who can protect the goods? Uncertainty.

The degree of cooperation of the buyer depends on the kind of delivery he has agreed to.

According to the Hague Convention there was only one idea of delivery; under the Vienna

convention many types of delivery are admitted, each of which has a different rule on the

passing of risk, depending on the material circumstances.

c. Obligation to grant additional time for the purpose of complying.

Art. 78: INTERESTS under the convention (one of the hottest issues which hasnt been uniformed

at all, vulnus which MUST be healed) book.

EXEMPTIONS = situations where notwithstanding a breach in objective sense (non performance)

the breach is excused because of supervening facts. A typical Feature of the Vienna Convention is

to conceive the breach of contract in an objective sense, without any psychological overtone

(objective).

Exemptions are considered in art. 79 and, partly, in art. 80. Art . 79 is an articulated provision:

a. Paragraph 1: it outlines the basic notion of exemption, with a strong reference to the French

notion of force majeure ; the three essential feature of force majeure in French traditional law

are in art. 79,1, but its not the same and no one is allowed to go back to French law (its a

conceptual inspiration and nothing more). In the French tradition, force majeure is a cause

justifying not only non performance of the contract but also, if it continues, its termination. The

same happens in Italy: temporary force majeure entails suspension of the performance of the

contract; if its definitive, it can entail termination of the contract (risoluzione per impossibilit

sopravvenuta).

In the French tradition, force majeure is a combination of factors defined by reference to three

concepts: an event non foreseeable at the time when the contract was entered into

insurmountable (not defeated by the debtor) at the time when the contract must be performed

an event beyond the sphere of control of the debtor, i.e. external from the area where he can

exercise its power. If these three elements are there, then we have force majeure and the

contract will be suspended if it is temporary or terminated if definitive.

This is, fundamentally, the French notion of force majeure because of the importance of

arbitration and of the ICC rules (the International Chamber of Commerce is in Paris andstrongly influenced by the French law); it has been accepted quite largely in the international


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commercial arbitration not as a rule of French national law, but as lex mercatoria , as an

international usage also when the French one is not the governing law. From the Italian

standpoint, this notion is very severe; examples :

- A contract between an Italian and a Slovenian party stipulated in the verge of the turmoil

of the Yugoslavian war, which is not performed because of difficulties arising out of the

war in the country of the debtor, the Slovenian, who wants to be excused. If the war was

foreseeable when the contract was made, force majeure cant apply: the risk of an

impossibility because of a foreseeable event falls onto the debtor.

- Insurmountability: suppose a multinational company with various subsidiaries in

different countries, one of which is debtor in a contract. Because of a supervening

domestic law in this country, the goods that have to be sold according to the contract are

deemed not exportable ( factum principis ), making export illegal. Under art. 10 of the

Vienna Convention, the relevant place of business is the one of the sellers having the

strongest link with the contract to be performed. Is, ex hypothesi, the impediment

absolute and non foreseeable? Is it really absolute an impediment for a multinational

company which could invoke solidarity from its sister companies? Its doubtfully

insurmountable because this specific subsidiary could ask another company of the group

to perform en lieu of it international arbitration is strict: if a company belongs to an

international group, this difficulty can hardly be considered insurmountable.

The debtor cannot easily find a way out of the contract, according to the French and British

attitude; the Italian domestic law is more indulgent with the debtor: if the contract couldnt

be performed with the utmost diligence, the debtor is excused because he is not a warrantor

and he doesnt undertake the risk of the performance while the Italian courts look at the

subjective situation of the debtor, in the international arena and the Vienna convention the

look is much more an objective one.

Relevant concepts in paragraph one:

- Failure to perform = objective breach, which exceptionally doesnt give raise to the

general remedy of damages, even though the breach remains.

- Impediment = this word can be interpreted in different ways. You can think of the two

extremes: a) I = subjective difficulty (most indulgent to the debtor: if he thought he

could perform but his situation doesnt allow him to, then he is excused); b) I doesnt

consider the personal, individual features of the debtor, but just an event preventing performance objectively, in a physical or legal way. You can strike the balance also


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somewhere in between; according to the French inspiration, the attitude of international

arbitration and the Vienna convention being designed to have uniform and universal

application, the conclusion is that impediment must be read as a strict requirement .

The indulgent subjective interpretation is not consistent with the inspiration, legislative

history and needs of the Vienna Convention. Requiring total physical or legal

impossibility is too much, but the impediment must be extraneous to the debtor. He

cannot claim the performance would ruin him, that the contract to be performed is a

totally different one because of the different balance of risk (he cannot claim frustration

= eccessiva onerosit sopravvenuta).

- Sphere of control of the debtor in a world where technology is very important,

contracts for chattels to be manufactured are quite widespread; can art. 79 be invoked in

order to treat as an impediment a technological difficulty? Is it possible for the seller to

invoke a limit of technology when the contract was made in order to have the

impossibility of reaching the asked level of performance excused? Is art. 79 a basis to

excuse non performance on the basis of defect of technology? Whats the obligation of

the debtor with reference to the implied warranty of the level of technology offered

when he makes the contract?

o Ts. 1: the non reached level of technology is part of the enterprise risk run by the

seller, so art. 79 doesnt apply; the debtor is a warrantor and he cant be excused

for not reaching the promised result;

o Ts. 2: theres an implied limit to the obligation to the level of technology existing

at the time of the contract; this is the prevailing solution, but the question

remains open: its not a matter of liability or damages, but am I impliedly

warranting certain results? The seller might assume the risk of being incapable to

deliver what he promised because of a problem of technology; in this case hes a

warrantor of his level of performance and so hes liable.

Other problem: does art. 79 deal with supervening hardship by giving a very strict answer or is

supervening hardship excluded from the scope of the convention and, based on art. 4, a national law

can jump in and be applied? In litigation, most certainly one of the parties will say A and the other

B! the best option is the introduction of a clause in the contract, stating that supervening hardship

will be excused, or else the debtor wont be helped by the unacceptable interpretation of art. 79 as to

supervening hardship to be excluded. But anyway this is an open issue and not all courts take the


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same position; besides, there arent many cases on the subject, but most of them consider art. 79 to

be creating a very strict standard, they have a rather rigorous view.

b) Paragraph 2: the performance of a contract of sale can occur via the intervention of a third

party. A party to a contract, unless the contract or its nature provides that, is not bound to perform

personally: under its own responsibility and risk he can ask a third person to perform en lieu of him

as a debtor. This is not allowed if the contract prohibits it or if the performance is of professional

nature, which the debtor is expected to perform personally. In case of sale under art. 3 the

convention covers a sale of a chattel to be manufactured; if the subject matter of a contract is, e.g.,

the sale of a factory which has to be built up, the intervention of third parties will be necessary (the

seller will assemble and deliver components he got from other parties). Very often complex chattels

have to be delivered and the correct performance of the contract depends on the trust the debtor has

in third parties.

According to art. 79,2 if a party, normally the seller (the buyer may appoint someone to take

delivery or to effect the payment but its not that frequent nor relevant) avails himself of a third

party, the risk increases: the debtor will be exonerated from liability only if the requirement of art.

79,1 are applicable both to the debtor and the third party . If only the third party cant perform,

the debtor is held by the convention in a situation where hes not able to perform: if the third party

is stuck by an impediment, the debtor cannot use this to avoid the contract. Even though the third

party is not party to the contract, hes treated as if he were.

a) Paragraph 5: The exonerating effect of art. 79 is the one of releasing the party who is hit by

the impediment from the obligation to pay damages . Whereas in our domestic law when force

majeure or another external impediment makes it impossible for the debtor to perform the

contract is terminated, under the convention the objective impediment entails anyway an

objective breach and has as the only consequence the fact that the non performing debtor is

not liable for damages . All the other remedies remain possible for the party not in breach,

which is extraordinary for us and makes the creditor the master of whether the contract remains

or not when the debtor cannot perform (this may create a fundamental breach under art. 25, an

objective devastating effect in the sphere of the creditor, upon which the party not in breach can

avoid).

So, under art. 79, the debtor is excused to the performance (no damages), but the creditor may

invoke fundamental breach. Force majeure doesnt terminate the contract per se, but entitles theother party to decide whether to claim termination for fundamental breach. The contract hit by a


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definitive force majeure under the convention enters a sort of limbo because force majeure as such

doesnt kill it, it just exonerates the debtor from damages. The decision to acknowledge

impossibility is handed over to the creditor who can decide the destiny off the contract.

This might be a bit strange for us but it does work in practice because whether implicitly or

expressly the creditor will terminate a contract if its impossible to perform: theres no reason to

keep it alive if it wont be performed nor will it give right to damages in case of temporary force

majeure more power is given to the will of the creditor than to the recognition of the fact.

But paragraph 5 gives rise to difficult questions, the most debated of which is: what if the contract

provides for a penalty to be paid in case of non performance? Damages cannot be claimed; can the

creditor claim the payment of the penalty nonetheless? Or is penalty a form of pre-liquidated

damages and cannot be enforced because of art. 79(5)? Is this general damages or a specific clause

shifting the risk from the creditor to the debtor in case of force majeure?

- According to the common law, penalty cannot be claimed (its damages);

- According to the civil law, penalty is a form of allocation of risk or a private sanction,

its not damages.

- The preferable view finds it hard to say a penalty is enforceable, unless it is made

extremely clear in the contract that it will be payable in case of force majeure.

b) Paragraphs 3 and 4 mirror rules already present in national laws and in international practice,

where clauses of force majeure reflect a distinction between temporary and definitive force

majeure.

- According to paragraph 4, the party who wants to invoke the releasing effect of force majeure

has the burden (onere) to give notice to the other party

- If force majeure is temporary, the exoneration lasts only as long as the impediment does; when

it ceases the debtor must perform.

Art. 80 deals with the situation contributory negligence (= the party suffering the damage has

contributed to create it) and treats the same situations where theres no negligence but damages

arent awarded.

If the creditor hasnt received the performance on the due date, he may claim damages; if he

concurred to create delay, he cannot (c.f. concorso di colpa) because damages are imputable to its

behaviour as well. The Vienna convention, however, accurately avoids any reference to fault

anytime and art. 80 may well work in situations where theres no fault, but only a causal link between the creditors behaviour and the objective breach. Example : the seller and the buyer agree


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on the transportation of the chattel by sea on a certain ship and the seller reserves the right to agree

on transhipment (change of the vessel for some reason) in the occurrence of some event; assume the

event occurs and the buyer authorises transhipment and the ship the use of which he had authorized

arrives with delay, one month late: this is an objective breach (theres no fault, its a problem of

risk, not of liability). The buyer cannot claim damages for delay and the judge will have to

apportion between the concurrent transhipment and the first choice: if the delay is totally imputable

to the buyers exercise of the right to authorize transhipment, then theres no fault at all (because

exercise of someones right cant result in fault), but theres a causal link to the delay which

prevents the buyer from claiming damages.

Art. 80 in most cases will cover contribution of negligence, but it doesnt concern only those cases

because fault is no official citizen of the convention and normally this kind of cases are solved with

no need to make reference to fault. You just need a concurrent causality factor not necessarily

based on fault .

PASSING OF RISK . The Vienna convention intended to distinguish itself from the Hague

convention on the basic assumption that risk passes with delivery (Scandinavian approach),

irrespective of the ownership title; while it wasnt too clear in the Hague convention whether this

delivery was legal or material, the Vienna convention decides in the sense of material delivery, in

an objective factual sense (very sensible).

Passing of risk is dealt with in chapter 4 (artt. 66-70) and its one of the most important features of

the convention, tackling a relevant issue. The convention, however, satisfies scholars and

professors; it is hardly ever applied in practice because in this matter theres often a specific

contractual provision which can be either elaborated and long or might only consist in a reference to

the INCOTERMS (acronyms of types of delivery FOB, CIF, CUF,DDU, DIP which entail a

specific rule on passing of risk) which prevail on the Vienna convention according to art. 9,2 (if in a

particular field of trade a particular INCOTERM can be considered a usage of that trade, then it

1980 Vienna Convention on the International Sale of Goods (2)

Documents

Transcript of 1980 Vienna Convention on the International Sale of Goods (2)