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invisible terms,75 helping the parties obtain clarity about their rights and responsibilities and avoid unintended obligations and liabilities.

VI. Making the CISG Work

In order to use their contracts and the CISG optimally, businesses need a new approach to understanding the law and their contracts. The legal community has produced a wealth of CISG-related information that can benefit the business community. This chapter proposes the use of proactive law as a framework and visualization as a method for removing barriers to the use of the CISG by businesses.76 Using existing CISG case law as the basis, the two communities can work together to examine the root causes of contract problems and prevent them from happening. Together, the communities can identify the drivers of success and strengthen them. In order to do so, cross-border contracts and the CISG need to be accessible and understandable for businesspeople. It is up to the legal community to provide them with the tools they need to navigate the legal landscape safely. An obvious first step is making the invisible visible.77

For communicating CISG-related information, text alone is not always enough. Visualization offers tools that can help increase traders’ interest and awareness of the CISG. Visualizing the core content of the CISG can help clarify the choices that are available and their practical impact on business performance and risk. Interested practitioners and scholars should explore the opportunities that visualization offers in this context and undertake a visualization project to make the CISG work.78 This project could be incorporated in the Pace CISG Database or other platform and be used for sharing and exploring ideas and visualizations that can advance the transparency and accessibility of the CISG. The project could lead to significant reforms in how the CISG and cross-border contracts are perceived, communicated, and used, and make a valuable contribution toward promoting international trade and the goals of the CISG.

75See Section III B, “Invisible Terms and the CISG,” with references, especially notes 39 and 40. As to a business manager’s and a lawyer’s different ways of seeing contracts, with visualizations, see Helena Haapio, “Business Success and Problem Prevention,” 155–63, esp. figure 2, “Elements of a Contract – A Lawyer’s View,” and figure 5, “Contract – Mind the Gaps!”

76See also Barton, “Collaborative Contracting as Preventive/Proactive Law.” According to Barton, preventive/proactive law offers a different, and arguably deeper, way of understanding law, legal problems, and how lawyers can help clients achieve their goals. Barton’s article focuses primarily on one recurring barrier: “an exaggerated and largely unnecessary separation between the business goals that clients seek to achieve, and the legal methods by which contractual relationships are created and managed.”

77See Section III B, “Invisible Terms and the CISG,” with references, especially at notes 39 and 40.

78As regards visualizing contracts, see Barton et al., “Visualization: Seeing Contracts for What They Are, and What They Could Become.”

II. The CISG in the Present

The information provided by the material in this book is sufficient to assess the current status of the CISG as international sales law, as it is applied by courts and arbitral tribunals, and as it is used in practice. The various chapters and country analyses show that the role of the CISG as a global sales law has been mixed and that further development is needed for it to reach its promise of uniformity.

A. CISG Jurisprudence

The CISG has produced a substantial body of court decisions. However, its greatest impact may be in its use in disputes resolved through arbitration. For example, more than four hundred published case decisions have been issued by the China International Economic and Trade Arbitration Commission (CIETAC). The facts that arbitration is the preferred method of dispute resolution and that, due to confidentiality agreements, many arbitral decisions go unreported suggest that the impact of the CISG has been much greater than the number of reported cases would indicate.4

The problem with the existing database of more than 2,900 decisions is the unevenness of the CISG case law across CISG Articles and rules.5 This can be expected because certain issues in sales law are more prone to lead to litigation or arbitration. The unevenness can also be partially attributed to vaguely or poorly written provisions in the law, which invite disputes over the proper interpretation of the provisions.

But, due to the voluminous nature of CISG scholarship in numerous languages, the increase of language translations of CISG case decisions, and a trend toward betterreasoned (cross-legal traditions) interpretations, problems of the scarcity and unevenness of the case law have diminished over time. As one scholar notes: “The CISG can be credited for the decline of legal babelism that beset the private international law rules it was created to replace. There has been serious progress toward the convergence of legal systems, and the CISG has had positive influence on the reforming of a number of national contract-sales legal systems.”6 The depth of CISG case law and scholarly commentary has become more and more accessible, in multiple languages, through the creation of online databases, including the Pace CISG Database and the Queen Mary Translation Program. In the words of Albert Kritzer: “the birth of the CISG coincided with the birth of the Information Age. That has led to an explosion of material on the Internet on this law.”7 The readily available online sources include: UNCITRAL’s CLOUT

4See Andre´ Janssen and Matthias Spilker, “CISG and International Arbitration,” Chapter 10 in this book.

5See Olaf Meyer, “CISG: Divergences between Success–Scarcity and Theory–Practice,” Chapter 3 in this book.

6See Claire Germain, “Reducing Legal Babelism: CISG Translation Issues,” Chapter 5 in this book, citing Claude Witz on the “recul du babelisme´ juridique,” in “Les vingt-cinq ans de law Convention des Nations Unies sur les contrats de vente internationale de merchandises: Bilans et perspectives” (The 25th Anniversary of the CISG: Evaluations and Perspectives), 123 Journal du Droit Int’l 5, 25 (2006). The Babel reference is also attributable to John Honnold, Documentary History of the Uniform Law for International Sales (Deventer: Kluwer, 1989), at 1 (“Babel of diverse legal systems”).

7Albert H. Kritzer, Foreword to Camilla Andersen, Francesco Mazzotta, and Bruno Zeller, A Practitioner’s Guide to the CISG (Huntington, NY: Juris, 2010), vii.

(Case Law on UNCITRAL texts) system; the all-encompassing Institute of International Commercial Law8 at Pace University School of Law (Database); UNCITRAL’s “Digest of Case Law on the United Nations Sales Convention” and “opinions of the CISG Advisory Council,” both available through the Pace CISG Database; UNIDROIT’s UNILEX database; Center for Transnational Law at the University of Cologne’s TransLex database; and a variety of other commercial databases.9

B. Interpreting and the Interpretation of the CISG

The CISG provides an interpretive methodology based upon the use of general principles – international character, need to promote uniformity of application – and internationally recognized trade usage. Additionally, the CISG provides that in the interpretation of contracts the interpreter shall take into account “all relevant circumstances including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties.”10 The contextual search for the true intent of the parties is supplemented by the default principle of implied reasonableness. If the contextual evidence directly related to the parties fails to provide the operative meaning, then the CISG directs the interpreter to find a reasonable term provided in the real world of commercial custom, usage, and practice.

The problem with the CISG interpretive methodology is that it fails to recognize traditional and nontraditional methodologies that would help guide the interpreter to the true meaning of the parties and uniform, autonomous interpretations of CISG rules.11 Courts have implied a number of these traditional methodologies in interpreting the CISG, such as analogical or systemic reasoning within the CISG, historic interpretation (travaux preparatoires´), and purposive interpretation. Other methodologies include analogical reasoning using CISG case law; scholarly commentary; comparative law analysis, and the use of soft law. In the future, all the different methodologies may be appropriately applied to given issues, ambiguities, and gaps in coverage presented by the CISG.

The path to uniform interpretation of the CISG has been a bit problematic. Divergent interpretations have been caused by means of process and substance. The processproduced divergences are seen in the well-documented cases of national law-biased decisions. The substantive-produced interpretations are related to the ambiguity of CISG rules, definitional shortcomings of CISG terms, and overly broad standards. Professor Zeller notes the various rules that have been used in the battle of the forms scenario.12 Ultimately, he concludes that the voiding of conflicting standard terms (knock-out rule) is the solution that best accords with the spirit of the CISG, which primarily seeks the

8For more information about the Institute, see Marie Stefanini Newman, “Albert Kritzer: Pioneer of Open Access to International Private Law,” in Sharing International Commercial Law across National Boundaries: Festschrift for Albert H Kritzer on the Occasion of His Eightieth Birthday (ed. C.B. Andersen and U.G. Schroeter) (London: Wildy, Simmonds & Hill Publishing, 2008), 363 n. 8.

9See Marie Stefanini Newman, “CISG Sources and Researching the CISG,” Chapter 4 in this book.

10CISG, Article 8(3).

11See Larry DiMatteo and Andre´ Janssen, “Interpretive Methodologies in the Interpretation of the CISG,” Chapter 7 in this book.

12See Bruno Zeller, “CISG and the Battle of the Forms,” Chapter 13 in this book.

enforcement of agreements, based on mutual assent. The problems inherent in CISG language make some provisions of the CISG susceptible to divergent, reasonable interpretations. For greater uniformity to be obtained, consensus needs to be developed over the best interpretations.

Professor Morten Fogt reviews the contract formation rules found in Part II of the CISG and finds them lacking.13 First, he argues that the fragmented nature of Part II has created numerous external and internal “gaps.” Second, the formation rules fail to deal with alternative means of contract formation. Fogt argues that the only way of fully correcting the issues of CISG contract formation is by a revision of Part II. Barring such a revision, he notes that the best that can be done is to fill the gaps found in Part II “though liberal interpretation, analogies, and implied underlying principles.”

Article 38 (inspection of goods) and Article 39 (notice of nonconformity of goods) are the two most disputed areas of the CISG. There have been a wide variety of interpretations as to what constitutes a reasonable time to give notice. Professor Flechtner concludes that the case law has “exaggerated [the] conception of the role and importance of the buyer’s notice obligations,”14 leading to an overly strict interpretation of the buyer’s notice obligations, at the expense of diminishing the more fundamental obligation of the seller to deliver conforming goods. He suggests that the best approach is to place the burden of proof on the seller to show that the buyer failed to meet its Article 39 notice obligation.

Another unsettled substantive issue is the determination of fundamental breach. Article 25 provides a vague definition of fundamental breach as that which “substantially deprives.” Professor Spaic reviews a number of approaches that have been applied in determining fundamental breach. The resulting confusion has produced a great deal of uncertainty that a single approach would eliminate.15 Spaic proposes that that a functional definition would entail a combined approach that factors a purposive approach (whether the aggrieved party has been substantially deprived of what it expected out of the contract) and a remedy-oriented approach (whether the aggrieved party’s interests can be protected through remedies short of avoidance).

On a more promising note, Professor Magnus, in an extensive review, shows that the remedies provisions incorporated in the CISG are a relatively comprehensive and functional remedial scheme.16 Professor Davies takes note of the scarcity of cases relating to the use of Article 79’s excuse of impediment.17 His insightful analysis shows that the implicit use of the foreseeability principle that underlies most excuse doctrines is not the key requirement of Article 79: “The ultimate question under Article 79 should not be whether the impediment was foreseeable, but whether it was one that a reasonable person would have taken into account when making the contract.” He provides a coherent argument as to how “taken into account” is different than foreseeability, and why it matters.

13See Morton Midtgaard Fogt, “Contract Formation under the CISG: The Need for a Reform,” Chapter 12 in this book.

14See Harry M. Flechtner, “Conformity of Goods: Inspection and Notice,” Chapter 14 in this book.

15See Aneta Spaic, “Interpreting Fundamental Breach,” Chapter 15 in this book.

16See Ulrich Magnus, “Remedies: Damages, Price Reduction, Avoidance, Mitigation, and Preservation,” Chapter 15 in this book.

17See Martin Davies, “Excuse of Impediment and Its Usefulness,” Chapter 18 in this book.

The CISG does not provide rules for precontractual liability for acts of bad faith or other types of malfeasance. Professor Torsello maps the area of the precontract stage.18 He makes the important point that the mere labeling of an exchange or an instrument as precontractual does not mean that it is not subject to the substantive rules of the CSG. It is within the scope of the CISG to make the determination on whether something is truly precontractual or whether the parties have moved into the area of binding obligations.19 Torsello counsels that prudent parties should expressly negotiate “the duties owed to each other throughout the negotiations, and the legal consequences for non-observance.”20

In the area of damages, a controversial issue is whether legal costs can be recovered as a matter of damages. In many legal systems, the losing party is required to pay the reasonable litigation costs of the other party. However, in the United States, parties bear the costs of their own legal expenses (American rule). Most courts, due to the CISG’s failure to provide an explicit rule on litigation cost recovery, refer to national law on the matter. Professor Piltz argues that because CISG Article 74 is generally interpreted to allow for full compensation of reasonably foreseeable losses, legal costs should be recoverable as damages under the CISG.21

C. Country Analyses

The country analyses provided by CISG scholars from many countries and regions ferreted out the issues and debates over the proper interpretation of CISG rules. The variety and range of CISG cases among the adopting countries is broad – from the indepth case law produced by the German court system,22 as well as a substantial number of cases from The Netherlands,23 Switzerland,24 Belgium, Austria,25 and France.26 The CISG is also used by arbitral tribunals the reported arbitral decisions coming from the People’s Republic of China indicate that the CISG may indeed play a greater role in arbitral decisions than in court decisions.27 In comparison, some regions,28 especially common law countries,29 have produced a modest number of CISG cases.30 The quality of the decisions has, also, varied greatly from cases ignoring CISG interpretive

18See Marco Torsello, “Precontractual Liability and Preliminary Agreements,” Chapter 39 in this book.

19See Larry A. DiMatteo, “The CISG and the Presumption of Enforceability: Unintended Contractual Liability in International Business Dealings,” 22 Yale J. Int’l L. 111 (1997).

20Id.

21See Burghard Piltz, “Litigation Costs as Reimbursable Damages,” Chapter 17 in this book.

22See Stefan Kroll,¨ “Germany Country Analysis: Good Faith, Formation, and Conformity of Goods,” and Sorren¨ Kiene, “Germany Country Analysis: Part II,” Chapters 22 and 23 in this book.

23See Sonja Kruisinga, “The Netherlands,” Chapter 29 in this book.

24See Corinne Widmer Luchinger,¨ “Switzerland,” Chapter 28 in this book.

25See Wolfgang Faber, “CISG in Austria,” Chapter 19 in this book.

26See Sylvaine Poillot-Peruzzetto, “French Perspective of the CISG,” Chapter 21 in this book

27See Li Wei, “People’s Republic of China,” Chapter 33 in this book.

28See Jan Ramberg, “The Nordic Countries,” Chapter 25; Tadas Klimas, “Baltic States, Belarus, and Ukraine,” Chapter 20; Milena Djordjevic´ and Vladimir Pavic,´ “CISG in Southeastern Europe,” Chapter 26; and Virginia G. Maurer, “Central and South America,” Chapter 35 in this book.

29See Petra Butler, “New Zealand,” Chapter 32 in this book; Robert W. Emerson and Ann M. Olazabal,´

“Israel,” Chapter 31 in this book.

methodology to extremely well-reasoned ones.31 One of the studies examines the place of the CISG in an Islamic legal system with a focus on Egypt.32 As a whole, the body of CISG case law is deep and provides the foundation for future uniform development and application.

III. Future of the CISG

The future of the CISG looks bright on a number of fronts. First, the recent adoption of the CISG by Brazil is a watershed event. It shows that the rate of adoptions continues at a brisk pace. In addition, as a BRIC country, Brazil was one of the major world trading powers that had not adopted the CISG. With the adoptions by Japan and Brazil, only two major outliers remain – India and the United Kingdom.

Second, the problem of divergent interpretations of the CISG, especially due to domestic or homeward trend-biased reasoning, persists. Professor Schwenzer notes that in the areas of inspection, notice of nonconformity, remedies, and excuse, such reasoning continues to be used and uniformity of application remains illusory.33 However, the number of homeward trend-biased decisions is diminishing and the number of wellreasoned decisions, in which the courts and arbitral tribunals have taken an international perspective, is in the ascendancy. If these trends continue then we can begin to speak of the CISG as a global sales law.34

However, the problem of contracting parties opting out of the CISG as a matter of form remains a problem. This has caused a scarcity of cases on many issues and provisions of the CISG. A truly functional, supranational sales law is self-fulfilling. That is, a rich case law is not only proof of its significance but provides the substantive sources needed to render well-reasoned decisions. Professor Schwenzer points out that many of the CISG case decisions involve relatively modest amounts of money. She hypothesizes that many of the cases involving larger amounts are buried in the privacy of international commercial arbitration. If more such cases were reported, then the problem of scarcity would likely be lessened. The lack of reporting, however, will continue, because one of the features of arbitration that many parties desire is the privacy of the proceedings.

The hope, not unfounded, is that with the growing knowledge of the CISG and the diminishment of language barriers, the CISG will be more fully embraced by practicing attorneys. At the same time, as the knowledge base of future jurists improves, the use of homeward trend-biased reasoning will continue to decline. Along the same line, Lisa Spagnolo concluded that the CISG as hard law has provided the foundation for its greater acceptance by traders and lawyers in the future.35 The current body of CISG case law provides “base-level familiarity,” but the widespread use of the CISG will depend on the nature of the law as applied. To that end, Spagnolo advocates that when there are a number of possible interpretations of a CISG rule, the best interpretation is the one “which better promotes acceptability and efficiency.”

31There have, for example, been a number of Italian cases that have done an exemplary job of reviewing and citing foreign CISG case law decisions. See Edoardo Ferrante, “Italy,” Chapter 24 in this book.

32See Hossam A. El-Saghir, “CISG in Islamic Countries: The Case of Egypt,” Chapter 30 in this book.

33See Ingeborg Schwenzer, “Divergent Interpretations: Reasons and Solutions,” Chapter 8 in this book.

34See Camilla Andersen, “CISG in National Courts,” Chapter 6 in this book.

35See Lisa Spagnolo, “CISG as Soft Law and Choice of Law: Goj¯u¯ Ryu?,”¯ Chapter 11 in this book.

On a more sobering note, Professor Ulrich Schroeter cautions against practicing attorneys too readily excluding the application of the CISG due to the potential for professional liability or malpractice claims.36 The widespread use of choice of law clauses to opt out of the CISG is well known, but Schroeter asserts that there has been a more recent pro-CISG trend. More importantly, the depth of the CISG case law and scholarly commentary requires practicing attorneys to make informed decisions on whether to opt out of the CISG. Those attorneys unwilling to expend the time to familiarize themselves with its rules subject themselves to the risks of professional liability.

On an even more sobering note, Professor Jan Smits indicates that the problems associated with the CISG are the same problems that beset all uniform laws. Furthermore, in the short term, at least, these problems may be insurmountable.37 It may be that the CISG’s best use is as a guide for parties in selecting the most appropriate national law to apply to their transactions, and in derogating from specific rules found in a given national law: “The great value of the CISG may be that it provides commercial parties with a common frame of reference in which they are able to compare the solutions provided by the CISG with various national jurisdictions. In this way, provisions of the CISG can be used to derogate from specific rules of the national law chosen by the parties.” Of course, it is the hope of many CISG scholars that the CISG will eventually reach a point of being perceived as a viable supranational sales law for purposes of choice of law.

IV. Marketplace for Transborder Commercial Law

The CISG is a significant achievement in the harmonization of international private law, but its ultimate impact as a global sales law is yet to be determined. The ultimate measurement of its success will be its use as the preferred default law regime in international transactions. That outcome will depend on its proving itself as the more efficient alternative to the choice of national laws or other supranational hard and soft law instruments that are available. Currently, two obstacles to the CISG ultimately reaching its intended goals of a uniform global sale law are what can be referred to as the interpretation problem and the comprehensiveness problem. In the end, merchants’ foremost preference is transactional certainty, which includes a level of certainty and predictability in the law applied and how it will be applied to any future disputes. Second, merchants prefer simplicity in the chosen legal regime. The first preference goes to the interpretation problem and the send to the comprehensiveness problem. These two problems are not mutually exclusive. For example, the method and breadth of interpretation impacts the comprehensiveness or scope of the law.

One extremely important issue of interpretation is the principle of good faith. The good faith principle can be seen as an interpretive methodology in itself.38 Good faith is a means to interpret ambiguous provisions of the CISG, to fill in the gaps within its intended scope, and to guide rule adjustments in novel cases. In the area of contract interpretation, good faith can be used to interpret contracts and recognize obligations; it can be used

36See Ulrich Schroeter, “Empirical Evidence of Courts and Counsels’ Approach to the CISG (with Some Remarks on Professional Liability),” Chapter 40 in this book.

37Jan M. Smits, “Problems of Uniform Laws,” Chapter 37 in this book.

38DiMatteo and Janssen, Chapter 7.

to fill in gaps in the contract and to imply terms. The heavy use of the reasonableness standard throughout the CISG provides the avenue for good faith to construct fair terms and to mark off the distinction between permissible and impermissible conduct. But, it can also be the cause of much uncertainty. Commercial parties may avoid a law that is viewed as being more concerned with substantive fairness than with freedom of contract. Francesco Mazzotta frames the issue as follows: “Situations where good faith or lack thereof requires a court’s intervention is not the problem; the problem arises when, deliberately or unconsciously, good faith is used to rewrite the contractual relationship to be more just or equitable.”39 Luca Castellani asserts that some of the CISG’s lack of comprehensiveness can be remedied by the use of complementary instruments.40 The CISG is just one of a number of UNCITRAL instruments that can be used together.

Ole Lando illustrates the commonalities between the CISG and subsequently developed soft laws.41 He notes that the PECL, DCFR, and PICC adopted many CISG rules, but, more importantly, explains why the drafters of those instruments chose to deviate from some CISG rules. In the end, what distinguishes the CISG from these other efforts is its hard law status. Its success will be achieved not just by its wide adoption, but in educating practitioners, jurists, and law students in its usefulness as an international sales law. Helena Haapio offers a framework (proactive lawyering) and a pedagogical method (visualization) that can be used to better educate these audiences.42

The number of instruments, some noted in the previous paragraph, attempting to provide alternative international sales or contract law regimes continues to increase. Some of these instruments have long histories, such as English sales law as international sales law, and, more recently, the proposed Common European Sales Law (CESL). Professor Qi Zhou makes a forceful argument that English sales law has long served the role of an international sales law and that in many ways it is a superior law.43 The CESL, whether or not adopted as published in 2011, offers some additional coverage beyond the scope of the CISG, such as rules relating to the supply of digital content and trade-related services that may be mined by contract drafters and arbitrators.

In closing, it is important to note that the CISG has served as a powerful educational tool in understanding the many similarities in contract-sales law rules, as well as the significant divergences, across different national legal systems. Professor Sieg Eiselen notes how the CISG has served to help bridge the “civil–common law divide.”44 He notes that those dealing with the CISG by necessity have had to engage in a comparative analysis. This has been true for scholars teaching the CISG, students who benefit from the CISG’s embrace of civil and common law rules, jurists and arbitrators who work within the CISG interpretive methodology in making well-reasoned opinions, and legal practitioners who take the time to educate themselves on the substance and benefits of utilizing the CISG in their practices.

39See Francesco Mazzotta, “Good Faith Principle: Vexata Quaestio,” Chapter 9 in this book.

40See Luca Castellani, “CISG in Context of Complementary Texts,” Chapter 42 in this book.

41See Ole Lando, “Soft Laws as Models for the Improvement of the CISG,” Chapter 43 in this book.

42See Helena Haapio, “Using the CISG Proactively,” Chapter 44 in this book.

43See Qi Zhou, “CISG and English Sales Law: An Unfair Competition,” Chapter 41 in this book.

44See Sieg Eiselen, “CISG as Bridge between Common and Civil Law,” Chapter 38 in this book.