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prerequisites have been satisfied.53 The CISG is not a foreign law in such courts, so domestic law cannot be relied on by the court as a default law for matters covered by the CISG.54 In such circumstances, a court in a member state has no residual discretion to apply domestic law that has been displaced by the CISG.55 Under such circumstances, the CISG is hard law.

This situation is markedly different for a court sitting in a nonmember state, or an arbitral tribunal. For courts in nonmember states, application of the CISG may be nondiscretionary, but that turns entirely on the choice of law rules of the forum. Application of the CISG in such circumstances amounts to an application of foreign law and, therefore, is subject to the procedural rules regarding proof.56 Arbitral tribunals are not subject to the same duties as courts in member states, and thus the obligation to apply the CISG, or, alternatively, the discretion to apply a different law will depend entirely on the arbitration agreement and the procedural rules applicable to the arbitration.57

B. When the CISG Is More Soft Than Hard

The potential soft law application of the CISG is now considered. Even where a court or arbitral tribunal has determined – perhaps by virtue of failure to satisfy the CISG’s own applicability prerequisites, or due to the forum’s choice of law rules – that the CISG is not applicable as a matter of law, the adjudicator may still decide to look to it as evidence of lex mercatoria, evidence of usages of international sales law, or customary international commercial law.58 This has occurred in a number of cases,59 particularly in China where the propensity for CISG application is heightened.60 In these cases, regardless of one’s views as to the legitimacy of the CISG as evidence of such usages, it can be said that the CISG is being applied not as hard or binding law, but as soft law. Like the lex mercatoria,

53See Lisa Spagnolo, “Iura Novit Curia and the CISG: Resolution of the Faux Procedural Black Hole,” in Schwenzer and Spagnolo, Towards Uniformity, 181, 190. For member states, the CISG becomes hard law either by its adoption by the forum state, or through its subsequent incorporation or transformation into domestic law. Id., 190–6.

54Id., 196.

55Id., 196–8 (arguing that forum procedural laws that some might argue provide such discretion such as waiver rules are likewise displaced).

56Id., 198–9. Normally, forum domestic law applies as a default in absence of such proof.

57Id., 199–203.

58DiMatteo et al., International Sales Law, 14; Larry A. DiMatteo, “Resolving International Contract Disputes,” 53 Dispute Resolution J. 75, 79 (1998).

59The CISG was referred to as evidencing international commercial practices and usages in the following cases: Watkins-Johnson Co. v. Islamic Republic of Iran, Iran-U.S. Claims Tribunal, July 28, 1989, at [95], [99], available at http://cisgw3.law.pace.edu/cases/890728i2.html; ICC Award No. 7331/1994, available at http://cisgw3.law.pace.edu/cases/947331i1.html; ICC Award No. 8502/1996, available at http://cisgw3.law. pace.edu/cases/968502i1.html; ICC Award No. 8817/1997, available at http://cisgw3.law.pace.edu/cases/ 978817i1.html; ICC Award No. 8908/1998, available at http://cisgw3.law.pace.edu/cases/988908i1.html (normative text); ICC Award No. 9474/1999, available at http://cisgw3.law.pace.edu/cases/999474i1.html;

South Sydney District Rugby League Football Club Ltd v. News Ltd (2000) 177 ALR 611, Federal Court of Australia, November 3, 2000, available at http://cisgw3.law.pace.edu/cases/001103a3.html; Audiencia Provincial de Barcelona, Spain, February 4, 1997, available at http://cisgw3.law.pace.edu/cases/970204s4

.html.

60See, e.g., China International Economic and Trade Arbitration Commission (CIETAC), June 30, 1999, available at http://cisgw3.law.pace.edu/cases/990630c1.html.

when used in this way, the CISG’s value is as persuasive authority as to the norms of international sales, and not as binding law.61

An arbitral tribunal may sometimes determine that parties have not made a choice of law, and often will thereby be free to apply the “appropriate law.” For example, this would be the case under Article 28 of the UNCITRAL Model Law.62 The tribunal might consider the CISG, PECL, UNIDROIT Principles, or any number of domestic laws as appropriate law to be applied, or by way of depec¸age´ apply different laws to different issues in dispute.63 Given the wide discretion available to the arbitrator, the CISG can be utilized as a soft law.

When the parties select the CISG to govern their contract “directly,” as opposed to having it “indirectly” apply as part of the law of a member state, then their choice becomes contingent on the choice of law rules of the forum. These might prohibit the choice of anational rules. For example, in the EU, the Rome I Regulation disallows such a choice of anational “rules” rather than national “law,” but instead treats such a choice as an incorporation of the CISG as part of the contractual terms.64 Conceptually, the CISG in such circumstances applies in a softer fashion than if it were applied as law per se. It is true that, subject to any mandatory rules of the forum, this effectively binds the parties, but this is no different than any choice of soft law.

C. When the CISG Is More Hard Than Soft

The applicability of the CISG as the default governing law pursuant to CISG Article 1(1) is an important point of difference between it and soft laws, such as UNIDROIT Principles or PECL, which can only apply by agreement or where a tribunal considers them “appropriate law.”65 When drafting the CISG, the decision in favor of an opt-out scheme was contested,66 but ultimately, this step in favor of a hard law approach has proven important in ensuring the success of the CISG in terms of the frequency of its application in practice.67 More nuanced is the situation where the parties choose to opt

61Ole Lando, “The Lex Mercatoria and International Commercial Arbitration,” 34 Int’l & Comparative L. Quarterly 747, 754 (1985) (lex mercatoria generally); Peter J. Mazzacano, “Harmonizing Values, Not Laws: The CISG and the Benefits of a Neo-Realist Perspective,” Nordic J. of Commercial L. 1, 17 (2008).

62Article 28(2) UNCITRAL Model Law on International Commercial Arbitration 1985, as amended in 2006, GA Res A/40/72, UN Doc A/40/17 annex I (December 11, 1985) & GA Res A/RES/61/33, UN Doc A/61/17 annex I (December 4, 2006) (UNCITRAL Model Law) (failing designation by the parties, “the arbitral tribunal shall apply the law determined by the conflict of laws rules which it considers applicable”).

63DiMatteo et al., International Sales Law, 18; DiMatteo, “Resolving International Contract Disputes,” 75, 79 (“The CISG, along with the UNIDROIT Principles [and European Principles], provide arbitrators a suitable framework for deciding international contract disputes by the application of the general principles that underlie [these] documents”).

64This can be more complicated in situations where an Article 95 CISG declaration has been made. See Spagnolo, supra note 53, at 196.

65See authorities regarding indirect choice of law, supra note 37.

66A similar proposal was rejected during the drafting of the CISG: 1980 Diplomatic Conference, Summary Records of Meetings of the Second Committee, UN Doc A/CONF.97/C.2/SR.1 [40] et seq; UN Doc A/CONF.97/C.2/SR.2 [6], available at http://www.cisg.law.pace.edu/cisg/2dcommittee/articles/meeting1

.html.

67The need to exclude the CISG’s application and thus ensure a more widespread application of the CISG has arguably led to its much greater use by comparison with opt-in schemes such as PECL or UNIDROIT Principles. See supra note 46, at 15

in despite the fact the CISG would not apply on its own terms. The forum may be bound by this choice, but in a manner similar to an agreed choice of soft law.

IV. How CISG Article 6 Transforms Hard law to Soft Law

The discussion in the previous section demonstrates that the CISG can be used as soft law where it would not otherwise be applicable as hard law, either due to the choices made by parties or decisions of the adjudicator. Conversely, in this section it is argued that the CISG operates like a soft law, even when it applies as hard law. Irrespective of any initial hardness in applicability, the paramount status of party autonomy in CISG Article 6 makes it appear somewhat soft. The availability of exclusion under Article 6 renders a technically hard law into a quasi-soft law, at least in terms of its practical or operational effect.

A. Legal Effect of Exclusion

Where parties choose a soft law such as UNIDROIT Principles, then, as noted earlier, the validity of their choice is determined by the applicable choice of law rules. In other words, provided the choice of soft law is supported by the adjudicator as a hard law substitute, the choice becomes legally binding – albeit by virtue of the hard law machinery in the form of choice of law rules. At least for the individual parties involved, this means soft law is effectively converted to hard law.

In reverse, it could be argued that a contractual exclusion of the CISG converts it from hard to soft law. This arguably removes the hardness of the CISG because it no longer legally binds the parties involved. Exclusion by parties cannot alter the legal effect of the treaty in binding the member state concerned, nor alter the primary applicability of the CISG to those individual circumstances to which it applies. In fact, unlike true soft law, the hard machinery that supports the removal of the binding effect of the CISG is located within the CISG. Article 6 CISG is what gives effect to the parties’ choice. Without Article 6, the parties would have no autonomy to exercise in favor of exclusion of the CISG. Because Article 6 might be said to facilitate the capacity of parties to “convert” the CISG from a legally binding hard law to an inapplicable set of rules, it would follow that the CISG remains hard law in every sense until Article 6 is satisfied.68

68Spagnolo, supra note 53, at 205–6, 220. See, e.g., Appellate Court (OLG) Oldenburg, Germany, December 20, 2007, available at http://cisgw3.law.pace.edu/cases/071220g1.html; Golden Valley Grape Juice and Wine, LLC v. Centrisys Corp., 2010 U.S. Dist. LEXIS 11884 (E.D. Cal.), January 22, 2010, available at http://cisgw3.law.pace.edu/cases/100121u1.html (Golden Valley case); Easom Automation Systems, Inc. v. Thyssenkrupp Fabco, Corp., 2007WL2875256, U.S. District Court (E.D. Mich.), September 28, 2007, CISG online 1601, available at http://www.cisg-online.ch/cisg/urteile/1601.pdf; Lisa Spagnolo, “The Last Outpost: Automatic CISG Opt Outs, Misapplications and the Costs of Ignoring the Vienna Sales Convention for Australian Lawyers,” 10 Melbourne J. Int’l L. 141, at 205 (2009) (CISG should determine the matter, at least until the point at which exclusion is established under its formation provisions); I. Schwenzer and P. Hachem in Commentary on the UN Convention on the International Sale of Goods (CISG), 3rd ed. (ed. P. Schlechtriem and I. Schwenzer) (Oxford: Oxford University Press, 2010), Article 6, at 104, 105 (formation and interpretation of exclusion clauses subject to CISG rules); M. SchmidtKessel in Schlechtriem and Schwenzer, Commentary, Article 8, at 177, [61] (incorporation of choice of law clauses including exclusions of CISG within the sphere of CISG formation provisions). Contra, P. Schlechtriem in Commentary on the UN Convention on the International Sale of Goods (CISG), 2nd ed.

that this is the main source of the CISG’s applicability.69 In any event, as noted earlier, as a result of it being an opt-out instrument, the CISG is certainly more broadly known than the UNIDROIT Principles or PECL.

Nonetheless, it is undeniable that to a large degree, the CISG’s practical effect is determined by the choices made by parties to either exclude or opt in. It is in regard to these situations that the CISG can most accurately be described as a quasi-soft law, not in terms of strict legal effect, but in practical or operative effect.

V. When and Why the Quasi-Softness of the CISG Is Relevant

When does the softness of the CISG become relevant? The answer to this is rather simple. The CISG was created to improve the efficiency of global trade.70 If widespread use of the CISG enhances efficiency in world trade, then its broader use is a desirable norm. This proposition assumes that there are a proportion of contracts excluding the CISG in which the CISG is either equally efficient to or more efficient than the substituted law. Given the cognitive issues and behavioral pressures influencing choices of law, as well as other rational and strategic reasons driving such choices, it is likely that a portion of choices of law are less-than-optimal selections.71

If the CISG is construed or interpreted in a manner that makes it a more desirable choice of law, logically it will be less likely to be excluded by parties seeking to lower transaction costs by selection of an efficient governing law.72 Provided this can be done within the CISG interpretive framework, it is argued that a preference for interpretations likely to improve the CISG’s acceptability among parties that presently exclude it would extend the practical effect of the CISG and thus advance its aims.

Although there are many nonsubstantive reasons for exclusion, such as unfamiliarity, information costs, and bargaining strength, as well as institutional reasons,73 it is nonetheless true that a proportion of exclusion decisions are based on an evaluation of the CISG’s substantive qualities – the nature of its rules by comparison with alternative choices. One survey showed that the analysis of comparative substantive qualities plays a part in decisions to exclude (or use) the CISG in 22–37% of cases in some jurisdictions. The survey also noted that the substantive evaluation of the CISG as a primary reason for exclusion (or choice) of the CISG is likely to increase relative to each of the

69Gilles Cuniberti, “Is the CISG Benefiting Anybody?,” 39 Vanderbilt J. of Transnational L. 1511, 1529 (2006).

70See, e.g., id., passim; Gillette and Scott, “The Political Economy of International Sales Law”; Walt, “The CISG’s Expansion Bias”; Marta Cenini and Francesco Parisi, “An Economic Analysis of the CISG,” in CISG Methodology (ed. A. Janssen and O. Meyer) (Munich: Sellier, 2009), 151, 152; Lisa Spagnolo, CISG Exclusion and Legal Efficiency, (Alphen aan den Rijn, Kluwer, (2014), Chapters 3–7.

71See Spagnolo, “Green Eggs and Ham.”.See also the findings of the School of International Arbitration at Queen Mary, International Arbitration Survey, 11–12 (reporting that 58% of the 67 respondent corporate counsels surveyed indicated that familiarity with the particular law was a powerful influence on choice of law). Similarly, the survey reported that if parties “cannot adopt their own national law as the governing law, they will seek alternations that have a similarity with their law . . . or a law from the same broad legal tradition”): 11, 13. Furthermore, when asked why they chose their preferred law, respondents they referred to “familiarity” in addition to “certainty,” 13.

72The nuances of the decision-making process are analyzed in the author’s forthcoming work, Spagnolo,

CISG Exclusion and Legal Efficiency, Chapter 5, §V.

73Id. See Spagnolo, “Green Eggs and Ham.”

other factors just mentioned.74 Indeed, from anecdotal accounts, this already seems to be occurring in Germany following reform of the German Law of Obligations.75 This is because as familiarity grows, the predominant reasons for choice of or exclusion of CISG will change, even as the overall number of exclusions decrease.

It is in this regard that the relevance of the softness of the CISG becomes apparent. It focuses attention on its acceptability in terms of conscious decisions to exclude or apply. It highlights the importance of ensuring interpretations of the CISG that will enhance its desirability as a choice of law. Thus, the idea of the CISG as quasi-soft can be useful as an additional interpretive tool.

Under what circumstances should this concept be considered in the interpretation of the CISG? How can the desirability of one interpretation be measured against the relative desirability of an alternative interpretation? It is proposed that the underlying aim of the CISG is to improve the economic efficiency of trade.76 Majoritarianism in default laws is an important indicator of their efficiency, because rules favored by a majority of parties result in lower costs being expended overall by parties contracting to avoid default rules they dislike.77 Interpretations, which are likely in the majority of cases to make the CISG a more efficient choice, should be encouraged. Such interpretations are consistent with the purpose of the CISG to promote efficiency in trade. Notably, the efficiency of the CISG increases as the number of contracting parties using it increases.

Interpretations likely to appeal to a greater number of those engaging in international sales will promote more widespread use of the CISG, which in turn will improve its functional status as a preferred choice of law. Naturally, “its goals of relative uniformity of international sales law are enhanced by its application to greater numbers of cases . . . [because this] provides additional incentive to business people and their lawyers to become knowledgeable of its substance.”78 Thus the quasi-soft law nature of the CISG carries implications for the extent to which practical uniformity is achieved. It mandates the consideration of economic arguments in the interpretation of such rules.

The importance of greater (not universal) uniformity is to improve the efficiency of international trade. The acceptability of the CISG is crucial to this goal of efficiency. As mentioned earlier, the more often a law is chosen generally, the more efficient that choice becomes simply by virtue of its pervasiveness. A frequently chosen law lowers information costs. Parties are more likely to be able to efficiently compare rights and obligations

74See Spagnolo, CISG Exclusion and Legal Efficiency, chapter 6, section IV, and chapter 7, section III (concluding that in the United States 22%, Germany 24%, and China 37% of respondents to various surveys based their decisions primarily upon substantive comparisons of legal rules).

75A number of German speakers at the Global Challenges of International Sales Law Conference related the heightened incidence of nonexclusion in Germany due to these reforms, which left the CISG more advantageous as a choice of law for sellers than German domestic rules had previously been.

76This aim is evident not only from the Preamble CISG, but from the legislative history. See Spagnolo,

CISG Exclusion and Legal Efficiency, chapters 2 and 3.

77See, e.g., Charles J. Goetz and Robert E. Scott, “The Mitigation Principle: Toward a General Theory of Contractual Obligation,” 69 Virginia L. Rev. 967, 971 (1983) (pursuant to majoritarianism, default rules are efficient if they give parties “what they wanted”; default rules “should mimic the agreements contracting parties would reach were they costless to bargain out each detail of the transaction”); Schwartz and Scott, “Contract Theory and the Limits of Contract Law,” 596, 597 (same); Gillette and Scott, “The Political Economy of International Sales Law,” 447 (same).

78DiMatteo et al., International Sales Law, 14.

arising from such a choice at the negotiation, performance, and dispute stages of the contract. Negotiation costs are reduced due to the parties’ comfort in choosing a familiar law.

Therefore, frequency of choice impacts efficiency in much the same way as boilerplate contract terms – additional economic value attaches to such a choice of law simply by virtue of network effects.79 This is consistent with evidence that parties strongly prefer choices of law with which they are familiar. This is one of the reasons why parties frequently choose English or New York law.80

The nature of the CISG as a quasi-soft law as outlined earlier has a role to play in linking interpretation to the goal of uniformity. It highlights the importance of market forces in choice of law, and their ramifications for interpretation in ensuring that substantive rules carry broad appeal. Consequently, it is argued here that in order to promote frequency of choice and efficiency, majoritarianism is an appropriate guiding norm in cases of interpretive deadlock between interpretations that are equally valid on doctrinal grounds. However, a law can be more efficient where it does the exact opposite. Some laws are efficient precisely because they do not appeal to the majority, such as penalty default rules, which encourage efficient behavior by penalizing parties who do not act in a particular manner.81 Such rules do exist within the CISG.82 Thus, the overall efficiency of a body of law is dependent on the proper balance between majoritarian and penalty default rules. The next section provides examples of majoritarian interpretation of rules found in the CISG.83

VI. Examples

The following sections illustrate some practical interpretive examples based on the analysis provided in the previous part of this chapter.

A. Commodities and Majoritarianism

The practical application of a majoritarian approach to interpretation need not take the form of a choice between two competing views about default law. It can instead involve the adoption of a range of views, which allow for the adaption of a single rule to different contextual applications. CISG Article 25 on fundamental breach is an example of such a rule. Normally, the burden of proving fundamental breach is set at a high threshold, restricting the availability of avoidance of the contract in presumption of a

79See Spagnolo, “Green Eggs and Ham,” 453–4; Spagnolo, CISG Exclusion and Legal Efficiency, chapter 3.

80School of International Arbitration at Queen Mary, International Arbitration Survey (finding familiarity a powerful influence in choice of law), and Vogenauer, “Oxford Civil Justice Survey,” infra note 96 (on frequency of English and New York choices of law).

81Ian Ayres and Robert Gertner, “Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules,” 99 Yale L.J. 87, 101–4 (1989); Michael Whincop and Mary Keyes, “Putting the ‘Private’ Back into Private International Law: Default Rules and the Proper Law of the Contract,” 21 Melbourne U. L. Rev. 515, 524 (1997).

82See Spagnolo, CISG Exclusion and Legal Efficiency, chapter 4.

83See id., chapters 3 and 4 (for full discussion of efficiency of rules in CISG).

favor contractus designed to preserve the contractual relationship and to make available remedies less drastic and costly than termination, such as damages, price reduction, and repair. Parties can indicate in their contract what particular breaches they consider to be fundamental. Another example of deal preservation and minimization of remedies or damages rules in the CISG is the seller’s right to cure found in CISG Articles 34 and 48(1).84

However, in the case of commodities, the industry norm is for relatively easy availability of termination for breach. Documentary irregularities frequently give rise to the right to terminate commodity transactions. The “perfect tender rule” in English law enabling the rejection of goods or documents that do not strictly conform arguably upholds the expectations within the commodity trade regarding availability of termination for breach.85

While the general approach of the CISG in preserving contracts and restricting the availability of avoidance might succeed in reflecting majoritarian preferences for international sales, the approach would be unsuited to commodity sales where multiple onselling of the documents occurs before physical delivery of the goods.86 However, in apparent recognition of this, the CISG Advisory Council has acknowledged that the interpretation of fundamental breach must operate differently in relation to commodities, where string trading and large price fluctuations prevail.87 Thus, a breach is far more likely to be fundamental if it occurs in relation to a commodity sale.88 In particular, delivery of unclean documents must be considered to substantially deprive the buyer of what it was entitled to expect, because the almost universal expectation of onselling means delivery of clean documents is an essential requirement of the bargain struck between

84On Article 34, see CISG Advisory Council, CISG-AC “Opinion No. 11: Issues Raised by Documents under the CISG Focusing on the Buyer’s Payment Duty,” August 3, 2012, Rapporteur: Martin Davies, available at http://www.cisgac.com/default.php?ipkCat=213&sid=213.

85See Sale of Goods Act 1979 (UK), Section 35; Cehave NV v. Bremer Handelsgesellschaft mbH (the Hansa Nord) [1976] QB 44 (UK) (Court of Appeal), July 16, 1975; Hansson v. Hamel & Horley Ltd [1922] 2 AC

36(UK) (House of Lords), March 16, 1922; P. S. Atiyah, The Sale of Goods, 8th ed. (London: Pitman Publishing, 1990), 488; Michael G. Bridge, “A Law for International Sales,” 37 Hong Kong L.J. 17, 28 (2007); Michael G. Bridge,” Uniformity and Diversity in the Law of International Sale,” 15 Pace Int’l L. Rev. 55, 65, 69 (2003). However, not all commodity traders favor such harsh rights of rejection. See G. H. Treitel in Benjamin’s Sale of Goods, 6th ed. (ed. A. G. Guest) (London: Sweet & Maxwell, 2002), [18–231] 1142.

86Noting that the CISG applies to such transactions trading “commercial paper”: CISG Advisory Council, CISG-AC “Opinion No. 5: The Buyer’s Right to Avoid the Contract in Case of Non-Conforming Goods or Documents,” May 7, 2005, Rapporteur: Ingeborg Schwenzer, Commentary [4.12], available at http:// www.cisgac.com/default.php?ipkCat=128&ifkCat=147&sid=147.

87Id., §4.12, §4.17, Commentary [2.2], notes 18–22 (stating delivery of “clean” documents is “of the essence” in documentary sales generally, referring in this regard to Incoterms 2000, cl. B8, and dealing specifically with the perfect tender rule).

88CISG-AC “Opinion No. 5,” Commentary [4.17]; Peter Schlechtriem, “Interpretation, Gap Filling and Further Development of the UN Sales Convention,” 16 Pace Int’l L. Rev. 279, §5(bb) (2004); Ingeborg Schwenzer, “The Danger of Domestic Pre-Conceived Views with Respect to the Uniform Interpretation of the CISG: The Question of Avoidance in the Case of Non-Conforming Goods and Documents,” Victoria U. Wellington L. Rev. 795, 806–7 (2004–5). Contra, Bridge, “A Law for International Sales,” 19,

22.For an example of the court’s willingness to view time as essential given the circumstances, see, e.g., Oberlandesgericht [Court of Appeal](OLG) Hamburg, Germany, February 28, 1997, available at http:// cisgw3.law.pace.edu/cases/970228g1.html (holding time was foreseeably of “special interest” to the buyer, as denoted by the Incoterm CIF, so delay amounted to fundamental breach).

commodities traders.89 Thus the threshold for termination within the CISG in this context is not discernibly different from the “perfect tender rule” in English law,90 as failure to deliver clean documents on time amounts to fundamental breach.91

Deal preservation through the ability for the seller to cure is unlikely to be available for a documentary breach. CISG Article 34, which obliges the seller to hand over the documents, only mentions cure in relation to early delivery of documents, and even then, makes it a precondition of cure that it not cause unreasonable expense or inconvenience.92 Not only does such a position denying documentary cure conform with the preferences of parties within the commodities sector, such an interpretation is completely consistent with this proviso – that cure would be unreasonable and highly inconvenient in the context of string trading.93 In terms of the present discussion, this approach demonstrates an interpretative methodology that examines the likely perception of the CISG as a desirable choice of law within a particular sector. By placing the interpretation of fundamental breach in context, this approach provides a majoritarian interpretation of Article 25. The majoritarian interpretation allows for two ways of interpreting Article 25 – the first being a general approach, and the second, an exceptional approach sensitive to the context of a particular business sector.

One justification for this interpretive view is found in CISG Article 9(2), which allows usages in international trade to be taken into account in the interpretation of contracts.94 Certainly, the norm within commodities trade is for documentary irregularities to give rise to a right to terminate, as such irregularities would preclude the vital function of the document in string trading. However, it can also be justified by taking into account what a reasonable commodities trader might have understood pursuant to Article 8(2), or recognition of the background commodities market and/or past trade practices observed by the parties through Article 8(3).95

89See Schwenzer, “The Danger of Domestic Pre-Conceived Views,” 806–7 (arguing delivery of clean and timely documents is always of the essence in commodity trade); Peter Huber, “CISG: The Structure of Remedies,” 71 Rabels Zeitschrift fur¨ auslandisches¨ und internationales Privatrecht 13, 32 (2007) (arguing documentary obligations are “at least as strict as current English law”). See also Alastair C. L. Mullis, “Termination for Breach of Contract in C.I.F. Contracts under the Vienna Convention and English Law: Is There a Substantial Difference?,” in Contemporary Issues in Commercial Law: Essays in Honour of Professor A. G. Guest (ed. E. Lomnicka and C. G. J. Morse) (London: Sweet & Maxwell, 1997) (stating more equivocally that it is at least arguable that for documents disclosing a slight defect . . . or late delivery . . . the CISG might allow avoidance”), 137, notes 149–53 and accompanying text.

90CISG-AC, “Opinion No. 5,” Commentary [4.17]; Huber, “CISG: The Structure of Remedies,” 32; Peter Schlechtriem, “Subsequent Performance and Delivery Deadlines – Avoidance of CISG Sales Contracts Due to Non-Conformity of Goods,” 18 Pace Int’l L. Rev. 83, 87, 92–5 (2006) (on a different basis).

91CISG-AC, “Opinion No. 5,” §7, Commentary [4.17]. See also UNIDROIT Principles 2004, Art 7.3.1, Comment 3(b).

92See also ICC, Incoterms 2010, cls. A8 and B8.

93See CISG-AC, “Opinion No. 5,” Commentary [4.17]; Schwenzer, “The Danger of Domestic PreConceived Views,” 806–7 (arguing ability to cure defective documents inapplicable to commodity sales); Huber, “CISG: The Structure of Remedies,” 32. Contra, Bridge, “A Law for International Sales,” 30, 31 (arguing the right to cure would interfere with the need for “clean documents” in commodity trade).

94Schlechtriem, “Interpretation, Gap Filling and Further Development of the UN Sales Convention,” at §5(bb) (arguing variable stringency on the requirement of fundamental breach depending on usage pursuant to Article 9(2)).

95Ibid., at §2(c); CISG-AC, “Opinion No. 5,” Commentary [4.17]; Lachmi Singh and Benjamin Leisinger, “A Law for International Sale of Goods: A Reply to Michael Bridge,” 20 Pace Int’l L. Rev. 161, 175 (2008).

The flexibility of the fundamental breach determination allows for its application in different contexts. However, the parties can avoid the uncertainty of judicial or arbitral interpretations by incorporating express terms in their contract, making “time of the essence” or specifying the types of breaches that should be considered as fundamental for the purposes of Article 25. The preferable course to increase use of the CISG is through a majoritarian default rule that “fits” strong preexisting sector norms. The “substantiality” metric of Article 25, along with Articles 8 and 9, provide the interpretive flexibility for sector-specific majoritarian determinations of fundamental breach.

In the case of Article 25, dual interpretations – one general, one sector-specific – ensure that a greater number of parties will consider the CISG an efficient choice of law, though choices of law in commodities trade are largely institutionally entrenched.96 However, for present purposes, the approach is just one example of how consideration of the CISG’s quasi-soft nature might usefully inform its interpretation.97

B. Good Faith and Precontractual Liability

The notion that CISG contracts may be adjusted or effectively rewritten on the basis of good faith has been rightly rejected by some commentators on the basis that practitioners would perceive the CISG to be an “unpredictable” choice of law.98 Although such a pervasive use of good faith might be doctrinally feasible,99 its use must be treated with caution if the CISG is to gain wider acceptance within common law countries.

96It is wise to temper expectations of any rapid changes to current majority choices of English (and in some cases, New York) law entrenched within standard form commodity trade contracts promulgated by commodity trade associations. See Bridge, “Uniformity and Diversity,” 69 (stating “every commodities sale form and oil company’s standard terms that I have seen expressly excludes the operation of the CISG”); Mullis, “Termination for Breach of Contract,” 386, passim; Schlechtriem, “Interpretation, Gap Filling and Further Development of the UN Sales Convention,” at §I.1; Filip De Ly, “Opting Out: Some Observations on the Occasion of the CISG’s 25th Anniversary,” in Quo Vadis CISG? Celebrating the 25th Anniversary of the United Nations Convention on Contracts for the International Sale of Goods 25, 28, 40 (ed. F. Ferrari) (Munich: Sellier, 2005). Outside the sphere of commodities trade, in contracts more generally, English, New York, and Swiss law are preferred choices for parties (other than the law of their home jurisdiction). In the absence of an exclusion clause this will often result in the CISG applying, except for English law. See Vogenauer, “Oxford Civil Justice Survey,” 15, 16, Questions 17.4 and 18 (Swiss law was the most preferred by businesses other than their own law (29%), followed by English law (23%), although paradoxically they perceived that others preferred English law (59%), then Swiss law (13%) followed by U.S. law (11%)); School of International Arbitration at Queen Mary, International Arbitration Survey, 11 (reporting corporate counsel respondents, other than their own law, preferred English law (40%), New York Law (17%), or Swiss law (8%)); Andrea J. Menaker and Nicole Thornton, “Reflections on the New International Arbitration Global Survey, Kluwer Arbitration Blog,” October 22, 2010, available at http:// kluwerarbitrationblog.com/blog/2010/10/22.

97See, e.g., Clayton P. Gillette and Franco Ferrari, “Warranties and ‘Lemons’ under CISG Article 35(2)(a),” Internationales Handesrecht 2 (2010) (the use of law and economics in analysis of Article 35 and Article 74); Nils Schmidt-Ahrendts, “Disgorgement of Profits under the CISG,” in State of Play: The 3rd Annual MAA Schlechtriem CISG Conference (ed. I. Schwenzer and L. Spagnolo) (The Hague: Eleven International Publishing, 2012) (same).

98Francesco Mazzotta, “The Vexata Quaestio: Good Faith – What Is It?,” presented at Global Challenges of International Sales Law Conference, November 11, 2011. See infra, Chapter 12.

99See, e.g., CISG-AC, “Opinion No. 7, Exemption of Liability for Damages under Article 79 of the CISG,” Rapporteur: Alejandro M. Garro, Commentary [40] (arguing potential for “adaption” pursuant to Article 79(5)).