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Choice of Law Under the International Sales Convention: A U.S. Perspective

Published online by Cambridge University Press:  27 February 2017

Isaak I. Dore
Isaak I. Dore*
Affiliation:
St. Louis University School of Law
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Extract

The United Nations Convention on Contracts for the International Sale of Goods was adopted on April 10, 1980. The chief reason for its adoption was that the prior Uniform Law on the International Sale of Goods (ULIS) and its supplementary Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF) had not received widespread support.

Type
Research Article
Information
American Journal of International Law , Volume 77 , Issue 3 , July 1983 , pp. 521 - 540
Copyright
Copyright © American Society of International Law 1983

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References

1 The United Nations Convention on Contracts for the International Sale of Goods (hereinafter cited as the Convention) was adopted at a UN Conference of Plenipotentiaries, held in Vienna, Austria, from March 10 to April 11, 1980. For the text, see UN Doc. A/CONF.97/18, Ann. I (1981), reprinted in Official Records of the United Nations Conference on Contracts for the International Sale of Goods, UN Doc. A/CONF.97/19, at 178 (1981) [hereinafter cited as Official Records], and 19 ILM 668 (1980).

2 For the text, see 3 ILM 855 (1964).

3 For the text, see id. at 864.

4 For a searing critique of ULIS, see Nadelmann, , The Uniform Law on the International Sale of Goods: A Conflict of Laws Imbroglio, 74 Yale L.J. 449 (1964–65)Google Scholar. See also Dore, & DeFranco, , A Comparison of the Non-Substantive Provisions of the UNCITRAL Convention on the International Sale of Goods and the Uniform Commercial Code, 23 Harv. Int’l L.J. 49 (1982)Google Scholar.

5 See Report of the Delegation of the United States of America to the Diplomatic Conference on the Unification of Law Governing the International Sale of Goods, The Hague, April 2–25, 1964 (submitted to the Secretary of State, Dec. 1, 1964, by Richard D. Kearney, Chairman of the

United States Delegation, on file at St. Louis University Law Library). The spirit of the delegation is rather poignantly described in its report as follows: “The United States delegation undoubtedly ran the risk of making itself obnoxious if it proposed at this late stage a large number of changes in the two draft conventions . . . , especially if such instruments were generally acceptable to the other delegations at the conference.” Id. at 3.

6 The United States delegation saw four specific weaknesses in ULIS: (1) the Uniform Law was conceived primarily in the light of external trade between nations with a common boundary; (2) insufficient attention had been given to international trade problems involving overseas shipments; (3) the reciprocal rights and obligations as between seller and buyer, viewed in the light of the practical realities of trade practices, were not well balanced; and (4) the Uniform Law would not be understood by individuals in the commercial field. Id. at 6.

7 The provisions of ULIS were viewed by the U.S. delegation as too abstract and general when compared with the provisions of the U.C.C. Because the ULIS provisions were so general, they could not clearly reflect modern commercial realities and their operation would not be based on “observable and universal commercial events,” e.g., with regard to risk of loss, as is the case with the U.C.C. Id. at 9–10.

8 Id. at 10.

9 Report of UNCITRAL on the Work of its First Session, 23 UN GAOR Supp. (No. 16) para. 7, UN Doc. A/7216 (1968).

10 Id. at 19, para. 14.

11 UN Doc. A/CN.9/11, at 36 (1969).

12 UN Doc. A/CN.9/11/Add.l, at 34–36 (1969); UN Doc A/CN.9/1 l/Add.4, at 8 (1969). The observations of the United States and other governments are summarized in UN Doc. A/CN.9/31 (1969), entitled Analysis of Replies and Comments by Governments on the Hague Conventions of 1964: Report of the Secretary-General, reprinted in 1 Y.B. Comm’n Int’l Trade L. 159 (1968–70), UN Doc. A/CN.9/SER.A/1970 [hereinafter cited as 1 Yearbook].

13 At its second session, held in March 1969, UNCITRAL set up a Working Group on the International Sale of Goods to decide which modifications to the 1964 Conventions “might render them capable of wider acceptance by countries of different legal, social and economic systems, or whether it will be necessary to elaborate a new text for the same purpose.” Report of UNCITRAL on the Work of its Second Session, 24 UN GAOR Supp. (No. 18) para. 38, UN Doc. A/7618 (1969). The working group was composed of Austria, Brazil, France, Ghana, Hungary, India, Japan, Kenya, Mexico, Tunisia, the USSR, the United Kingdom, and the United States.

14 The working group held nine sessions. It considered ULIS and ULF at its seventh, eighth, and ninth sessions. The reports of the working group on the work of its first seven sessions are to be found in UN Docs. A/CN.9/35 (1970), A/CN.9/52 (1971), A/CN.9/62 and Adds. 1–2 (1972), A/CN.9/75 (1973), A/CN.9/87 (1974), A/CN.9/100 (1975), and A/CN.9/116 (1976). The reports on the eighth and ninth sessions are in UN Docs. A/CN.9/128 (1977), and A/CN.9/142 (1978). With regard to both ULIS and ULF, the working group recommended that the Commission adopt new texts. These texts were adopted by the Commission at its 10th and 11th sessions. 32 UN GAOR Supp. (No. 17) para. 35, UN Doc. A/32/17 (1977). 33 UN GAOR Supp. (No. 17) para. 28, UN Doc. A/33/17 (1978). At its 11th session the Commission decided to combine the two texts into a single Draft Convention on Contracts for the International Sale of Goods. Id., para. 18.

15 See note 1 supra. For a comprehensive analysis of the entire Convention from a substantive as well as a historical point of view, see Honnold, J., Uniform Law for International Sales Under the 1980 United Nations Convention (1982)Google Scholar.

16 See, e.g., Report of the United States Delegation to the United Nations Conference on Contracts for the International Sale of Goods (submitted to the Secretary of State by John O. Honnold, Co-Chairman of the Delegation, 1981, on file at St. Louis University Law Library). The report describes the objections of the United States to ULIS and how these objections have been met by the Convention: (1) ULIS was thought to have a “coercive” potential of becoming applicable to transactions of parties of noncontracting states (see note 33 infra, and J. Honnold, supra note 15, at 15–16), which has been rectified in the Convention (see text accompanying notes 49–57 infra); (2) UNCITRAL produced a single document on international sales in place of the two documents produced by the 1964 Hague Conference (ULIS and ULF), which avoids problems of interpretation; (3) the effect of the course of dealing between the parties in relation to contract formation, considered inadequate under ULIS, has been increased in the 1980 Convention by strengthening the course-of-dealing rules (cf. U.C.C. §1-205 (1978)) and by making both course of dealing and trade usage explicitly applicable to formation (Convention, Art. 9); (4) the 1980 Convention eliminated problems of complexity, ambiguity, and nonuniformity that had arisen from the multiple remedial systems and civil law terminology in ULIS and ULF, by providing a single set of remedies for contractual breach (cf. U.C.C. §§2–703, 2–711 (1978)) and by thorough advance analysis of the translatability of the Convention’s concepts and language; (5) the use in ULIS and ULF of abstract concepts gave rise to interpretational difficulties, whereas the 1980 Convention, in an approach similar to that of the U.C.C, rejects such concepts and is expressed more practically in terms of commercial events that can be uniformly understood (this parallel approach was fostered by “the fact that the U.C.C. is the one important modern formulation of sales law”). Report of the U.S. Delegation, at 11. See further pt. II, Honnold, , The International Sale of Goods, 27 Am. J. Comp. L. 223 (1979)Google Scholar; Lansing, & Hauserman, , A Comparison of the Uniform Commercial Code to UNCITRAL’s Convention on Contracts for the International Sale of Goods, 6 N. C. J. Int’l. L. & Com. Reg. 63, 64–66 (1980)Google Scholar. See also Nadelmann, supra note 4, at 457 (on what the United States since came to describe as the “coercive” effect of ULIS).

17 At the annual meeting of the American Bar Association in April 1981, the policy-making House of Delegates adopted a resolution supporting U.S. signature and ratification of the Convention, subject to one reservation discussed below. See text accompanying notes 84–87 and 96, infra. American Bar Association, Report to the House of Delegates, Resolution recommended by the Section of International Law (1981) (text of resolution and accompanying Background Report [hereinafter cited as ABA Report] on file at St. Louis University Law Library). Apart from noting the compatibility of the Convention with U.S. law (particularly the U.C.C), the report mentioned four specific benefits to U.S. business interests that would result from U.S. ratification of the Convention: (1) avoidance of difficulties in reaching agreement with foreign buyers and sellers on choice of forum or law; (2) ability of parties, under the Convention, to continue to determine their rights and obligations along the same lines as under the U.C.C. “without fear of foreign ‘mandatory’ rules”; (3) decrease in costs for legal research on foreign laws because they would be replaced by a single Convention available in an official English text; and (4) reduction of problems of proof of foreign law in domestic or foreign courts. Id. at 2–3. See further Winship, , New Rules for International Sales, 68 A.B.A.J. 1231 (1982)Google Scholar; Ziontz, , A New Uniform Law for International Sale of Goods: Is it Compatible with American Interests?, 2 Nw. J. Int’l L. & Bus. 129 (1980)Google Scholar; Lansing & Hauserman, supra note 16, at 80; Dore & DeFranco, supra note 4, at 67.

18 See, e.g., Dore & DeFranco, supra note 4, at 49; Lansing & Hauserman, supra note 16, at 63.

19 See Mellinkoff, , The Language of the U.C.C, 77 Yale L.J. 185 (1967)CrossRefGoogle Scholar.

20 See generally Nanda, , Forum-Selection and Choice-of-Law Agreements in International Contracts, in The Law of Transnational Business Transactions (Nanda, V. ed. 1981)Google Scholar. The foregoing is a fortiori true of international contracts. See Delaume, , What is an International Contract? An American and Gallic Dilemma, 28 Int‘l & Comp. L.Q. 258 (1979)CrossRefGoogle Scholar.

21 Weintraub, R., Commentary on the Conflict of Laws 90–221, 348–97 (2d ed. 1980)Google Scholar.

22 See section III, “Jurisdiction of the U.C.C. and the International Sales Convention,” infra.

23 Among the underlying purposes and policies explicitly stated by the U.C.C. are those of facilitating commerce through “agreement of the parties” and of making “uniform the law [of commerce] among the various jurisdictions.” U.C.C. §l-102(2)(b) and (c) (1978).

24 See text accompanying note 33, infra.

25 Analysis of Comments and Proposals by Governments and International Organizations on the Draft Convention on Contracts for the International Sale of Goods, and on Draft Provisions Concerning Implementation, Reservations and other Final Clauses Prepared by the Secretary-General, UN Doc. A/CONF.97/9, para. 2(b) (1980), reprinted in Official Records, supra note 1, at 71. The comments and proposals are reproduced in UN Doc. A/CONF.97/8 and Adds. 1–7 (1980), cited ibid.

26 Dep’t of State Memorandum from Peter H. Pfund, Assistant Legal Adviser for Private International Law, to Members of the Advisory Committee’s Study Group on International Sale of Goods, Sept. 24, 1981 (unpub., on file at St. Louis University Law Library).

27 For further discussion, see section III, infra.

28 As will be seen in due course, the Convention applies if the parties have their places of business in different contracting states, or if the rules of private international law lead to the application of the law of a contracting state. See the subsection on choice-of-law provisions in the Convention, infra p. 529.

29 Article 6 of the Convention provides: “The parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions.”

30 Section 1–105(1) of the U.C.C. provides in part that “when a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties.”

31 See note 29 supra and accompanying text.

32 Under Article 99(1), the Convention will enter into force 12 months after the date of deposit of the 10th instrument of ratification, acceptance, approval, or accession. As of April 1983, the following states have signed or ratified the Convention. Signatories: Austria, Chile, Czechoslovakia, Denmark, Finland, the Federal Republic of Germany, the German Democratic Republic, Ghana, Hungary, Italy, the Netherlands, Norway, the People’s Republic of China, Poland, Singapore, Sweden, the United States, Venezuela, and Yugoslavia. Ratifications: Egypt (accession), France, Lesotho, and Syria (accession).

33 UN Doc. A/7618, Ann. I, para. 40 (1969). See also UN Doc. A/CN.9/31 (1969), supra note 12, in 1 Yearbook, at 159, 162–64, for a summary of U.S. comments on the scope of application of ULIS. Article I of ULIS, supra note 2, provided in part:

1. The present Law shall apply to contracts of sale of goods entered into by parties whose places of business are in the territories of different States, in each of the following cases:

(a) Where the contract involves the sale of goods which are at the time of the conclusion of the contract in the course of carriage or will be carried from the territory of one State to the territory of another;

(b) Where the acts constituting the offer and the acceptance have been effected in the territories of different States;

(c) Where delivery of the goods is to be made in the territory of a State other than that within whose territory the acts constituting the offer and the acceptance have been effected.

There was widespread dissatisfaction with the above requirements for the applicability of ULIS, and the UNCITRAL Working Group on the International Sale of Goods (see notes 13–14 supra) concluded that “subparagraphs 1(a), 1(b), and 1(c) of article 1 of ULIS, in many situations left in doubt the question of whether the transaction was governed by the law.” Report of UNCITRAL on the Work of its Fourth Session, 26 UN GAOR Supp. (No. 17) para. 58, UN Doc. A/8417 (1971) [hereinafter cited as UNCITRAL, Fourth Report]. Consequently, there was general agreement from a wide geographical mix of states to the present wording of Article 1(1) of the 1980 Convention when it was originally put forward in draft form by a working group of UNCITRAL in 1972 at its third session, UN Doc. A/CN.9/62/Adds. 1–2, Ann. I (1972): e.g., Poland, UN Docs. A/CN.9/SR.72, at 3 (1971), and A/CN.9/SR.74, at 15 (1971); Japan, UN Doc. A/CN.9/SR.72, at 11; Argentina, UN Doc. A/CN.9/SR.74, at 8; Mexico, UN Doc. A/CN.9/ SR.74, at 12; Bulgaria, 26 UN GAOR C.6 (1252d mtg.) para. 28, UN Doc. A/C.6/SR.1252 (1971); Norway, UN Doc. A/CN.9/SR.74, at 15; the USSR, id. at 13; the United Kingdom, id. at 11; the United States, UN Docs. A/CN.9/SR.72, at 9, and A/CN.9/SR.74, at 13; Australia, UN Doc. A/CN.9/SR.74, at 7. See generally Report of the Secretary-General: Analysis of Comments by Governments and International Organizations on the draft Convention on the International Sale of Goods as adopted by the Working Group on the International Sale of Goods, ch. 1, Sphere of Application, paras. 1 & 2, UN Doc. A/CN.9/126, pt. B (1977).

34 The five exceptions are enumerated in U.C.C. §1-105(2) (1978), and cover transactions involving rights of creditors against goods sold, bank deposits and collections, bulk transfers, investment securities, and secured transactions; these transactions are governed by the law of the particular jurisdiction specified by the appropriate U.C.C. section.

35 Id., §1-105(1).

36 Ibid.

37 Id., §1-201(3).

38 See In re Bengtson, 3 U.C.C. Rep. Serv. 283 (D. Conn. 1965), in which the district court followed the Official Comment to U.C.C. §1-205, to the effect that

the meaning of the agreement of the parties is to be determined by the language used by them and by their action, read and interpreted in the light of commercial practices and other surrounding circumstances. This measure and background for interpretation are set by the . commercial context, which may explain and supplement even the language of a formal or final writing.

Id. at 289 (emphasis added). See further Dore & DeFranco, supra note 4, at 53. In Amerine Nat’l Corp. v. Denver Feed Co., 493 F.2d 1275, 14 U.C.C. Rep. Serv. 885 (10th Cir. 1974), a contract for the sale of young turkeys was reached in the context of a well-established course of dealing between the parties, and there was no evidence of a sudden change by the seller from its past practice of supplying commercial customers with cross-bred as well as pure-strain turkeys. Thus, the court held that the written contract did not materially depart from the prior course of dealing, and hence the supply of cross-breeds to the buyer was in compliance with the contract, despite buyer’s allegation of an oral agreement prior to the formal “Contract of Sale” in which buyer expressed a desire to receive only pure-strain turkeys.

39 Nordstrom, & Ramerman, , The Uniform Commercial Code and the Choice of Law, 1969 Duke L.J. 623, 632 Google Scholar.

40 Ibid.

41 The test is not a mechanical one, however, and rather than merely counting contacts, it should weigh their significance to the issues before the court. See generally Reese, , The Uniform Commercial Code and Its Application in Non-Code States, 1 U.C.C. Rep. Serv. 802 (1965)Google Scholar, for an analysis of the common law confiicts-of-laws tests that are to be used by the forum to determine what law governs the validity of a contract in the absence of an express choice of law by the parties. The controlling law may be, variously: (1) the law of the place where the contract was made; (2) the law of the place of performance; (3) the law intended by the parties to be controlling; or (4) the law of the jurisdiction that has the most “significant contacts” with the transaction. It is useful to note that the “significant contacts” test in (4) is similar to the “preponderance of contacts” test mentioned above, in that both tests can be used to determine the applicable law with reference to the jurisdiction with which there is an appropriate relation. Representative cases illustrating the application of these tests are Neville Chemical Co. v. Union Carbide Corp., 422 F.2d 1205, 7 U.C.C. Rep. Serv. 81 (3d Cir. 1970); and Bache & Co. v. Int’l Controls Corp., 324 F.Supp. 998 (S.D.N.Y. 1971), supplemented, 339 F.Supp. 341 (S.D.N.Y. 1972), affd, 469 F.2d 696, 10 U.C.C. Rep. Serv. 248 (1972). See also the Official Comment to U.C.C. §1-105 (1978). The U.C.C. does not distinguish between U.S.-foreign and domestic interstate transactions with respect to application of the “significant contacts” rule.

42 Article 1(1)(a) of the Convention requires that for the Convention to apply the parties must have their places of business in different states, and the states must be contracting states.

43 U.C.C. §1-105(1) (1978).

44 274 U.S. 403 (1927).

45 U.C.C. §1-105, Comment 1 (1978).

46 Each dispute must still be settled on a case-by-case basis, with the added difficulty that the meaning of the key words and phrases such as “agree,” “reasonable relation,” and “significant enough portion” must be construed contextually.

47 Emphasis added. The use of words such as “ordinarily,” “significant enough,” “portion,” and “making or performance” merely confirms the elusive nature of the first part of the two-tier test in section 1–105. Because of this difficulty, it would seem reasonable to have alternative approaches to the test, i.e., from the point of view of either the “making” or the “performance” of the contract, instead of a single, rigid, and inflexible approach, and to leave for contextual consideration what “portion” of either the “making” or the “performance” would “ordinarily” be “significant enough.”

48 Nordstrom & Ramerman, supra note 39, at 627. On the “reasonable relation” test, see further Dore & DeFranco, supra note 4, at 54.

49 If a party has places of business in more than one state, the relevant place of business for purposes of Article 1 is to be determined in accordance with Article 10(a) of the Convention. Article 10 provides:

For the purposes of this Convention:

(a) if a party has more than one place of business, the place of business is that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract;

(b) if a party does not have a place of business, reference is to be made to his habitual residence.

50 See further Winship, supra note 17, at 1232; J. HONNOLD, supra note 15, at 46.

51 See Commentary on the Draft Convention on the International Sale of Goods, UN Doc. A/CN.9/116, Ann. II (1976), reprinted in 7 Y.B. Comm’n Int’l TRADE L. 96, 97, col. 1, para. 7 (1976), UN Doc. A/CN.9/SER.A/1976 [hereinafter cited as 1976 Commentary]. Article l(lXb) of the Convention has been the subject of a great deal of controversy, and many states have either supported its total deletion from the Convention or have indicated the desire to file a reservation declaring themselves not to be bound by it. See text accompanying notes 84–87 and 96, infra. Yet when Article 1(1)(b) was put to a vote at the 1980 Conference of Plenipotentiaries that adopted the final text of the Convention, it survived by a very comfortable margin. See note 87 infra. The controversy, however, antedates the 1980 conference. Proposals were made for its deletion in the early stages of UNCITRAL’s attempts to examine methods of making ULIS more acceptable to states. Some of the arguments for deleting an identical provision from a revised draft of ULIS were that:

(i) The rules of private international law in some States could lead to the application of the law of one State to the obligations of the buyer and of a different law to the obligations of the seller. It would be difficult in such a situation to know whether under paragraph 1(b) all of the provisions of the Convention would be applicable to any dispute between the parties or only those provisions relating to the buyer or the seller, as the case may be.

(ii) Subparagraph 1 (b) created the possibility of applying any one of three legal regimes to a contract of sale: the domestic law of the forum, the domestic law of the State of the other party to the contract and the Convention, rather than only two as before.

(iii) If the forum was not in a Contracting State but the rules of private international law of the forum referred the dispute to the substantive law of another State which was a Contracting State, the question would arise whether the forum would feel bound by this subparagraph to apply the Convention rather than the domestic law of the other State.

Report of the Working Group on the International Sale of Goods on the Work of its Sixth Session, UN Doc. A/CN.9/100, para. 17 (1975), reprinted in 6 Y.B. Comm’n Int’l Trade L. 49, 50 (1975), UN Doc. A/CN.9/SER.A/1975. For reasons for the continued resilience of Article 1(1)(b), see notes 54–61 and accompanying text, infra. It is not surprising, therefore, that Article 95 of the Convention specifically provides that a signatory state may file a reservation excluding Article 1(1)(b) in relation to itself—a strong palliative to those states opposed to it; see text accompanying notes 69 and 84–87, infra.

52 See J. Honnold, supra note 15, at 46.

53 See text accompanying note 91, infra.

54 See Commentary on the Draft Convention on Contracts for the International Sale of Goods, Prepared by the Secretariat, UN Doc. A/CONF.97/5 (1980), Commentary on Article 1(1), Basic Criterion, para. 8 [hereinafter cited as 1979 Commentary], reprinted in OFFICIAL RECORDS, supra note 1, at 14,15. France and Australia supported Article 1 of the final text at the 1980 Conference of Plenipotentiaries. They asserted that, from the point of view of the ratifying state, because the Convention would govern international sales, its sphere of application should be as wide as possible. Thus, without paragraph 1 (b), a court in a contracting state would be obliged to apply domestic legislation regarding internal sales in cases involving parties situated in a noncontracting state, instead of the Convention, which was drafted specifically for international trade, and hence more suitable. In addition, it was pointed out that retaining paragraph 1(b) would give parties in noncontracting states the benefit of a uniform law whenever they dealt with parties from contracting states. At the same time, a contracting state that had a law specially designed for international trade should have the right to apply it in preference to less appropriate legislation. UN Doc. A/CONF.97/C.1/SR.1 (1980), reprinted in Official Records, supra note 1, at 236, 237–38. See also ibid., the Bulgarian view that in the interest of having a truly uniform international sales law, the contracting states should treat the Convention as the general law on the international sale of goods and not just as a special law on sales between contracting states.

55 1979 Commentary, supra note 54, at 15, para. 3.

56 See UNCITRAL, Fourth Report, supra note 33, para. 58.

57 The International Chamber of Commerce holds the view that paragraph 1(b), when combined with paragraph 1(a), represents a useful compromise in contrast to the provision in Article 2 of ULIS, supra note 2, which excluded the rules of private international law for the purpose of application of the uniform law. UN Doc. A/CONF.97/9 (1980), supra note 25, Official Records, at 72.

58 1979 Commentary, supra note 54, at 15, para. 6.

59 Ibid.

60 See text accompanying notes 49–54, supra.

61 At the 1980 Conference of Plenipotentiaries, the consensus was that Article 1 was not only a useful compromise, but that it was an improvement over ULIS. The vote in favor of Article 1 of the final text was 42 with none against and 1 abstention. See UN Doc. A/CONF.97/SR.6 (1980), reprinted in Official Records, supra note 1, at 199, 200. See further the views of Switzerland, the International Chamber of Commerce, Austria, and the United States, UN Doc. A/CONF.97/9 (1980), supra note 25, id. at 72.

62 For the text of Article 6, see note 29 supra. This basic freedom to “opt out” of the Convention in whole or in part leaves parties from contracting states totally free to select their own law or to agree to only a selective application of the Convention. Articles 1 and 6 of the Convention should satisfy the early objections of the United States to the “coercive effect” of ULIS. See text accompanying note 33, supra. The exclusion clause of ULIS, Article 3, provided in part that “such exclusion may be express or implied.” The drafters of the present Convention decided not to provide for exclusion by implication “lest the special reference to ‘implied’ exclusion might encourage courts to conclude, on insufficient grounds, that the Convention had been wholly excluded.” 1979 Commentary, supra note 54, at 17, para. 2, commentary on draft Art. 5 (current Art. 6). The policy of the drafters of the Convention therefore appears to be to ensure as wide an application of the Convention as possible without coercing parties into it. See also Dore & DeFranco, supra note 4, at 53. It is noteworthy that while Article 6 refers only to the exclusion or modification of the Convention, there is no provision anywhere in the Convention on the question whether the parties can extend the applicability of the Convention to transactions that normally fall outside its scope, e.g., where the places of business of the buyer and seller are not “in different states” in accordance with Article 1(1) of the Convention, or where there is a lack of contact with .a contracting state, as required by Article 1(1)(a). However, there seems little reason to deny the parties the freedom to apply the Convention by agreement, even in such cases. See J. Honnold, supra note 15, at 79–83.

63 1979 Commentary, supra note 54, at 15, para. 4.

64 See note 62 supra.

65 See text at note 59, supra.

66 Article 96 of the Convention provides:

A Contracting State whose legislation requires contracts of sale to be concluded in or evidenced by writing may at any time make a declaration in accordance with article 12 that any provision of article 11, article 29, or Part II of this Convention, that allows a contract of sale or its modification or termination by agreement or any offer, acceptance, or other indication of intention to be made in any form other than in writing, does not apply where any party has his place of business in that State.

Article 11 provides that a contract of sale need not be in writing, while Article 29(1) permits modification of contracts by “the mere agreement of the parties.” See J. Honnold, supra note 15, at 79.

67 Article 2(a) of the Convention provides: “This Convention does not apply to sales: (a) of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use.” Subparagraphs (b)–(f) of Article 2 further exclude the application of the Convention to sales: by auction, on execution, or otherwise by authority of law; of stocks, shares, investment securities, negotiable instruments, or money; of ships, vessels, hovercraft, or aircraft; and of electricity. For discussion of sales falling in subparagraphs (b)–(f), see J. Honnold, supra note 15, at 50–56.

68 Article 1, paragraph 2 of the Convention provides:

(2) The fact that the parties have their places of business in different States is to be disregarded whenever this fact does not appear either from the contract or from any dealings between, or from information disclosed by, the parties at any time before or at the conclusion of the contract.

For further analysis, see notes 82–83 and text accompanying note 83, infra. Paragraph 3 of Article 1 further provides that “[n]either the nationality of the parties nor the civil or commercial character of the parties or of the contract is to be taken into consideration in determining the application of this Convention.” Paragraph 3 reinforces the rule that the application of the Convention depends primarily on the parties’ having places of business in different contracting states. The relevant place of business is determined each time without reference to nationality of the party. 1979 Commentary, supra note 54, at 15, para. 11. Paragraph 3 further excludes from consideration whether the contract is of a civil or commercial character. This is to avoid difficulties that might otherwise arise from the fact that in some legal systems the law relating to sale of goods differs according to whether the parties or the contract are characterized as “civil” or “commercial.” Ibid., para. 12. It should be noted, however, that paragraph 3 applies only to the scope-of-application provisions of the Convention. It does not mean that the civil or commercial character of the parties may not be taken into consideration for the purposes of determining such matters as the period of time to be regarded as reasonable for giving notice of lack of conformity of the goods under Article 36(1) of the Convention. Ibid., para. 14.

69 Article 95 provides: “Any State may declare at the time of the deposit of its instrument of ratification, acceptance, approval or accession that it will not be bound by subparagraph 1(b) of Article 1 of this Convention.” The United States, upon signing the Convention in August 1981, declared its intention to file such a reservation. See text accompanying notes 84–88 and 96, infra.

70 See note 62 and accompanying text, supra, for the first exception, and text accompanying note 59, supra, for the second exception.

71 Article 12 of the Convention provides:

Any provision of article 11, article 29 or Part II of this Convention that allows a contract of sale or its modification or termination by agreement or any offer, acceptance or other indication of intention to be made in any form other than in writing does not apply where any party has his place of business in a Contracting State which has made a declaration under article 96 of this Convention. The parties may not derogate from or vary the effect of this article.

For the text of Article 96, see note 66 supra. For the text of Article 11, see note 73 infra.

72 Dore, , Plan and Contract in the Domestic and Foreign Trade of the U.S.S.R., 8 Syracuse J. Int’l L. & Com. 29 (1980)Google Scholar. See also Osakwe, , Legal and Institutional Barriers to United States-Soviet Trade: Soviet Perspective, 8 Vand. J. Transnat’l L. 85, 108 (1974)Google Scholar; J. Honnold, supra note 15, at 129–30.

73 Article 11 provides: “A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses.” The reason for the inclusion of Article 11 in the Convention was the fact that many contracts for the international sale of goods are concluded by modern means of communication that do not always involve a written contract. 1979 Commentary, supra note 54, at 20, para. 2. If a contracting state has a domestic writing requirement that is contravened through an international sales contract, it can, of course, enforce its administrative or penal sanctions against the recalcitrant party, but the contract itself will be enforceable if the state has not filed an Article 12 declaration excluding Article 11. Ibid.

74 Ibid., para. 1.

75 Ibid., para. 3.

76 See note 71 supra.

77 Art. 2(a), note 67 supra.

78 1979 Commentary, supra note 54, at 16, para. 2. The commentary gives the following examples of sales that would not fall within the Article 2(a) exception and would therefore be governed by the Convention: the purchase of a camera by a professional photographer for use in his business, the purchase of soap or other toiletries by a business for the personal use of the employees, the purchase of a single automobile by a dealer for resale. Ibid.

79 Ibid., para. 3; J. Honnold, supra note 15, at 50–51.

80 Thus, “it was felt that the Convention should not apply to the relatively few cases where consumer sales were international transactions, e.g. because the buyer was a tourist with his habitual residence in another country or that the goods were ordered by mail.” 1979 Commentary, supra note 54, at 16, para. 3 (footnote omitted).

81 Art. 2(a), supra note 67. If the seller knew (or ought to have known) that the goods were being bought for consumer use, the forum would have to decide on an applicable domestic law. See 1979 Commentary, supra note 54, at 16, para. 4; J. Honnold, supra note 15, at 51.

82 Art. 1(2) of the Convention, supra note 68.

83 Since the basic criterion for the application of the Convention is that the parties have places of business in different states—Art. 1(1) of the Convention, 1979 Commentary, supra note 54, at 15, para. 2—if a transaction “appears to be between parties whose places of business are in the same state, [it] is not governed by [the] Convention.” 1979 Commentary, at 15, para. 9. Thus, for example, a transaction of sale effected through a broker who did not disclose that he was acting for a foreign principal would not be governed by the Convention. The test, therefore, is an objective one. See further J. Honnold, supra note 15, at 40–42. In an earlier draft, Article 2(a) (Art. 1(2) of the present Convention) excluded transactions where one of the parties “neither knew nor had reason to know” that the place of business of the other party was in a different state. Working Group on the International Sale of Goods, Report on the work of the Second Session, UN Doc. A/CN.9/52 (1971), reprinted in 2 Y.B. Comm’n Int’l Trade L. 50, 52, col. 2 (1971), UN Doc. A/CN.9/SER.A/1971. The working group at its third session felt that this provision was “difficult to apply in view of the subjective element contained in the expression neither knew nor had reason to know’.” Progress Report of the Working Group on the International Sale of Goods on the Work of its Third Session, UN Doc. A/CN.9/62, Adds. 1 - 2 , Ann. II (1972), reprinted in 3 Y.B. Comm’n Int’l Trade L. 77, 82, 83, cols. 1–2, paras. 9–10 (1973), UN Doc. A/CN.9/SER.A/1972. The working group thereupon substituted the objective criterion in Article 1(2) of a draft of the Convention. Id. at 78, col. 1, and 83, para. 10. This draft article is identical to Article 1(2) of the present Convention.

84 See text accompanying note 69, supra. For the text of Article 95, see note 69 supra. At the 1980 Conference of Plenipotentiaries, Austria urged that reservations to the sphere-of-application provisions of the type permitted under ULIS be disallowed, on the ground that they might endanger the very application of the Convention itself and negate the work of UNCITRAL. UN Doc. A/CONF.97/9 (1980), supra note 25, pt. B, Comments and Proposals on Provisions of the Draft Convention, para. 2. On the permissibility of reservations under ULIS, see Nadelmann, supra note 4, at 454 et seq. Cf. the stand of Argentina in favor of permitting reservations under the present Convention. UN Doc. A/CONF.97/C.1/SR.1, supra note 54, Official Records, at 237.

85 The ABA Report, supra note 17, makes the following comment on Article 1(1)(b) of the Convention:

The principal impact of this provision on traders of a Contracting State appears to be that the Convention would be applicable in a greater number of cases but at the expense of the Contracting State’s domestic law. The provision also reintroduces the uncertainties of private international law which the . . . [Convention] was designed to avoid.

Id. at 5. For this reason, the report favors a reservation by the United States excluding Article 1(1)(b). Id. at 1. See generally J. Honnold, supra note 15, at 47.

86 See note 69 and text accompanying note 26, supra.

87 See further text accompanying note 96, infra. This preference of a major trading power for a reservation vindicates the stand of the Federal Republic of Germany at the 1980 Conference of Plenipotentiaries. Arguing for the deletion of Article 1(1)(b), Germany submitted that it was highly unusual for an international instrument to bind its signatory states to apply the instrument to nationals of nonsignatory states. It predicted that paragraph 1(b) would cause “serious problems of interpretation and application.” UN Doc. A/CONF.97/C.1/SR.1, supra note 54, paras. 11–12, Official Records, at 236–37. It further predicted that if paragraph 1(b) were not deleted, reservations from contracting states would be likely. Id. at 238. Czechoslovakia, the German Democratic Republic, and Sweden also supported the proposal to delete. Id. at 237–38. The vote on the proposal to delete paragraph 1(b) was rejected by 25 votes to 7, with 10 abstentions. Id. at 238.

88 See text accompanying notes 32–33, 59–62, and 71–87, supra.

89 U.C.C. §1-105(1) (1978). See Comment 3 to U.C.C. §1-105, which refers to the code as “in large part a reformulation and restatement of the law merchant and of the understanding of a business community which transcends state and even national boundaries” (emphasis added). This statement embodies the drafters’ realization of the U.C.C.’s potential for international application. See also generally the opinion in Miller v. Wells Fargo Bank Int’l Corp., 18 U.C.C. Rep. Serv. 489 (S.D.N.Y. 1975), in which the court said that the U.C.C. choice-of-law rules may be subject to the limitations that are imposed on the applicability of American domestic law to essentially foreign transactions. This statement implies that the U.C.C. rules would be applicable to a transaction that is not “essentially foreign”: e.g., one involving a U.S. enterprise and a foreign party where the “preponderance of contacts” was with the United States.

90 U.C.C. §1-105(1) (1978). See text accompanying notes 35–37, supra. It should be noted that section 1–105 states the rule for U.S. courts only, and not for foreign courts in noncontracting states. A foreign court may nevertheless apply the U.C.C. if its choice-of-law rules so require.

91 J. Honnold, supra note 15, at 46.

92 Art. 1(1)(b) of the Convention. 1979 Commentary, supra note 54, at 15,para. 7; J. Honnold, supra note 15, at 46.

93 J. Honnold, supra note 15, at 47.

94 1979 Commentary, supra note 54, at 15, para. 8. It may nevertheless be possible to infer from the setting and the language of the contract that the parties intended the domestic law of the foreign state to govern their contract and not the Convention. See note 54 supra and accompanying text.

95 Art. 1(1)(b) of the Convention. 1979 Commentary, supra note 54, at 15, para. 7; J. Honnold, supra note 15, at 46.

96 Dep’t of State Memorandum, supra note 26.

97 See text accompanying notes 49, 57, and 60–62, supra.

98 See text accompanying notes 66 and 71–76, supra.

99 See text accompanying note 62, supra.

100 See note 89 and accompanying text, supra.

101 The Official Comment to U.C.C. §1-105 is not nearly as explicit on this point as is the commentary to the Convention. See 1979 Commentary, supra note 54, at 15, para. 4. In order to discern prevention of forum shopping as an intention of the U.C.C. drafters, one must draw inferences from certain language in the comment, which attempts as far as possible to broaden the applicability of the code and highlights the importance of common law policies of giving effect to agreements and of uniformity of result “regardless of where suit is brought.” U.C.C. §1-105, Comment 4 (1978). See also Reese, supra note 41, who makes the point that forum shopping is abhorrent to conflict-of-laws doctrine. The drafters of the U.C.C. may have felt it unnecessary to be explicit as to “forum shopping,” on the ground that the common law safeguards endorsed by Comment 4, §1-105, against that phenomenon would be adequate. Note that these safeguards are also incorporated as “Supplementary General Principles of Law” under U.C.C. §1-103(1978).

102 Stumberg, , Commercial Paper and the Conflict of Laws, 6 Vand. L. Rev. 489, 503 (1953)Google Scholar. It should be noted, however, that the contemplation of the parties as to the governing law and the “significant contacts” test used in the absence of a specific choice of law are factors that are also considered under common law conflict-of-laws theory. The difference is that under traditional conflict-of-laws doctrine, these factors are alternative bases for judgment; different jurisdictions may use one or the other or both in deciding the applicable law—whereas under the U.C.C, the parties’ right to select the controlling law is predicated upon the existence of a “reasonable relation” (probably tested in much the same manner as “significant contacts”) between the transaction and the state or nation whose law is sought to be selected. Such “nexus formulation” may thus not even enter into a traditional conflict-of-laws decision, but under the U.C.C. it will be a necessary element regardless of any agreement between the parties.

103 Cullen, , Conflict of Laws Problems under the Uniform Commercial Code, 48 KY. L.J. 417, 425 (1960)Google Scholar. The detailed version of §1-105 in the original draft of the U.C.C. permitted application of the code to a transaction that “touched” a code state “even in a most casual, or even accidental, way.” Cullen concludes that in abandoning the rules permitting minimum contacts, the drafters of the present U.C.C. intended to require “some more substantial contact” with the state in question. This observation relates to the question of what constitutes an “appropriate relation”—i.e., when the parties have not agreed specially as to applicable law—and Cullen considers that such a relation “must be something more than barely reasonable.” Id. at 422. Where the parties do agree as to what law should govern, the law chosen must be that of a jurisdiction bearing a “reasonable relation” to the transaction. Cullen holds that such an agreement must be founded upon a connection between that jurisdiction and “some vital element of the transaction,” as expressed in Big Four Mills, Ltd. v. Commercial Credit Co., 307 Ky. 612, 622, 211 S.W.2d 831, 837 (1948). As examples of “vital element” he cites execution (signing), performance, and intent.

104 See text accompanying notes 49, 57, and 60–62, supra.