LEGISLATIVE HISTORY
1980 Vienna Diplomatic Conference

The meeting was called to order at 10.04 a.m.

CONSIDERATION OF ARTICLES 1-82 OF THE DRAFT CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS AND OF DRAFT ARTICLE "DECLARATIONS RELATING TO CONTRACTS IN WRITING" IN THE DRAFT PROVISIONS PREPARED BY THE SECRETARY-GENERAL CONCERNING IMPLEMENTATION, DECLARATIONS, RESERVATIONS AND OTHER FINAL CLAUSES FOR THE DRAFT CONVENTION (agenda item 3) (A/CONF.97/5) (continued)

49	Article 45 [became CISG article 49 ] (continued) (A/CONF.97/C.1/L.149, L.151, L.152, L.153 and Corr.1, L.161 , L.162)

1. The CHAIRMAN reminded the Committee of its earlier decision to consider the Japanese amendment to article 42 [became CISG article 46 ] (A/CONF.97/C.1/L.161) under article 45 [became CISG article 49 ] (A/CONF.97/C.1/SR.19, paragraphs 56-59).

2. Mr. HOSOKAWA (Japan) explained that the amendment, which would require drafting changes if it were to be included in article 45 [became CISG article 49 ], was intended to clarify the relationship between the buyer's right under article 42 [became CISG article 46 ] and his right under article 45 [became CISG article 49 ] . Those provisions seemed to allow the buyer to avail himself of his remedy under article 42 [became CISG article 46 ] and subsequently still take action under article 45 [became CISG article 49 ] to avoid the contract. Although the situation he envisaged was unlikely to occur in practice, he believed the possibility should be ruled out. He added that he would be willing to withdraw his amendment if members were agreed that the substance was covered by article 44(2) [became CISG article 48(2) ].

3. Mr. KLINGSPORN (Federal Republic of Germany) considered that article 44(2) [became CISG article 48(2) ] would not cover the case but that article 43(2) [became CISG article 47(2) ] could be applied by analogy.

4. Mr. ROGNLIEN (Norway) believed that practically all the situations with which the Japanese amendment was intended to deal were already covered either by the provisions of article 43(2) [became CISG article 47(2) ] or by those of article 44(2) [became CISG article 48(2) ]. He also referred to the principle of good faith contained in article 6 [became CISG article 7 ].

5. The CHAIRMAN, having consulted the meeting, said that the Norwegian representative's views appeared to be shared by the majority.

6. Mr. HOSOKAWA (Japan) said that, on that understanding, he withdrew his amendment.

7. The CHAIRMAN said that, if there was no objection, he would take it that the Committee agreed to refer the amendment by Singapore (A/CONF.97/C.1/L.149), which was of a purely drafting character, to the Drafting Committee.

8. It was so agreed.

9. Mrs. KAMARUL (Australia), introducing her delegation's proposal (A/CONF.97/C.1/L.142), said that she did not maintain the first amendment to paragraph 2. The second amendment was intended to remove an inconsistency between subparagraphs (a) and (b). Subparagraph (b) specified that the reasonable period of time for avoidance would begin to run when the buyer knew or ought to have known of the breach relied on. Subparagraph (a) on the other hand provided simply that the period would begin when the buyer became aware that delivery was made, the underlying assumption being that a buyer would always be actually aware of when goods were delivered and that the seller need not be protected against the possibility that the buyer ought to have been aware that a delivery had been made late.

10. That assumption was not justified. Cases would arise in which late delivery was made to a store or to a third party. In such a case, the seller's position should not be prejudiced. If the buyer ought to have been aware that the delivery was late, the reasonable period for avoidance action should be taken to have commenced.

11. Mr. HJERNER (Sweden) opposed the Australian proposal, which was not in conformity with the system of the draft. The provisions of article 45 [became CISG article 49 ] were a consequence of the dispatch theory.

12. Mr. WAGNER (German Democratic Republic) supported the Australian proposal.

13. The CHAIRMAN said that as there appeared to be little support for the Australian proposal he would, if there was no objection, consider it rejected.

14. It was so agreed.

15. Mr. ROGNLIEN (Norway), introducing his delegation's amendment to article 45(2) [became CISG article 49(2) ] (A/CONF.97/C.1/L.162), said that the substance was similar to that of the amendment by the Federal Republic of Germany (A/CONF.97/C.1/L.153). The proposed reference in paragraph (2)(b) to article 44 [became CISG article 48 ] would have the effect of extending the period of notice in favour of the buyer. The proposal by the Federal Republic of Germany (A/CONF.97/C.1/L.153 and Corr.1) referred in detail to the contents of article 44(2) [became CISG article 48(2) ] . His own formulation was much simpler and referred briefly to "any additional period of time" applicable under articles 43 [became CISG article 47 ] or 44 [became CISG article 48 ] . If the Committee agreed that there was only a difference in wording between his delegation's proposal and that of the Federal Republic of Germany, he suggested that both should be referred to the Drafting Committee.

16. Mr. KLINGSPORN (Federal Republic of Germany) agreed that the differences between his delegation's proposal and the Norwegian amendment were of a drafting character and could be left to the Drafting Committee.

17. Mrs. FERRARO (Italy) considered that there was a difference in substance between the two proposals. The Norwegian text, unlike that of the Federal Republic of Germany, did not refer to paragraph (2) of article 44 [became CISG article 48 ].

18. Mr. KRISPIS (Greece) supported the two proposals. In substance they were identical, but from the standpoint of drafting, the Norwegian text seemed to be preferable.

19. Mr. HJERNER (Sweden) had some doubts about the two proposals under discussion. He was not at all convinced of the need for the proposed rule in practice and noted that no examples had been given in support of the proposals.

20. The CHAIRMAN said that, if there was no objection, he would take it that the Committee agreed to refer the two proposals to the Drafting Committee.

21. It was so agreed.

22. Article 45 [became CISG article 49 ], as amended, was adopted.

50	Article 46 [became CISG article 50 ] (A/CONF.97/C.1/L.166, L.167, L.168, L.169, L.170 and L.181 and Corr.1)

23. Mr. ROGNLIEN (Norway), introducing his proposal (A/CONF.97/C.1/L.167), said that its main purpose was to amend the time at which the value of non-conforming goods should be assessed with a view to reduction in price. His delegation considered that the time of delivery would be preferable to that of the conclusion of the contract partly because the goods might not have existed at the latter time and partly because the value at the time of delivery would be a more adequate substitute for damages. On the other hand, it would in most cases hardly be necessary to refer to a specific time; the important point was that the comparison between the values of conforming and non-conforming goods should refer to the same time. The proposal was also intended to simplify the text. If more precise wording was desired, he could support the draft amendment submitted by Finland (A/CONF.97/C.1/L.170).

24. The CHAIRMAN invited comments on the question of the time at which the value of conforming and non-conforming goods was to be assessed.

25. Mr. REISHOFER (Austria) supported either the Norwegian or the Finnish proposal, since the time of delivery seemed more logical than the time of conclusion of the contract.

26. Mr. HONNOLD (United States of America) said that his delegation could also support either of the draft proposals. The United States comments on the draft Convention (A/CONF.97/8) had suggested an amended wording, but the proposed text would make it more consistent and easier to explain to lawyers in his country.

27. Mr. GHESTIN (France) agreed that the time of delivery seemed a more realistic time to assess the value of the non-conforming goods. The lack of conformity was a matter of performance and the time at which it was assessed should be that at which performance was completed.

28. Mr. GORBANOV (Bulgaria) said that he considered that the time should be that of the conclusion of the contract. Assessments of value at the time of delivery might be falsified by fluctuations in the price of the goods.

29. Mr. KRISPIS (Greece) supported the proposals because the crucial time at which the non-conforming goods should be assessed was the time of delivery.

30. Mr. SAMI (Iraq) endorsed the Bulgarian representative's statement because buyer and seller agreed on the price at the time of conclusion of a contract. If the time of delivery was mentioned, it would not be clear whether that meant the time the goods were handed over to a carrier or when they were delivered to the buyer himself. The proposed amendment might be detrimental to the buyer.

31. Mr. KUCHIBHOTLA (India) expressed a preference for the existing text, because the parties agreed on the price when concluding the contract. Any other interpretation would be contrary to the provisions of article 12 [became CISG article 14 ].

32. Mr. BONELL (Italy) said that he too preferred the existing text for the reasons given by the Bulgarian and Indian representatives. The price reduction was not intended as an exclusive remedy or an alternative to a claim for damages under article 41 [became CISG article 45 ].

33. Mr. HERBER (Federal Republic of Germany) pointed out that in practice the time at which the price reduction was to be estimated did not greatly matter, provided that the assessment of conforming and non-conforming goods was made at the same time. His delegation would be ready to endorse any simple and understandable solution.

34. Mr. MATHANJUKI (Kenya) said that he was unable to support the Norwegian and Finnish proposals because the price communicated to the buyer under article 12 [became CISG article 14 ] should be the one referred to in article 46 [became CISG article 50 ].

35. Mr. WIDMER (Switzerland) felt that there seemed to be some misunderstanding of the Norwegian and Finnish proposals. The price was that agreed at the conclusion of the contract but the moment at which the price reduction was to be determined was the time of delivery, in other words, of the transfer of risk. He therefore supported the Norwegian and Finnish proposals.

36. Mr. MASKOW (German Democratic Republic) preferred the time of the conclusion of the contract because the price of conforming goods had been agreed at that point and only the price of non-conforming goods had to be assessed whereas at the time of delivery it would be necessary to assess both prices.

37. Mr. BORTOLOTTI (Observer, International Chamber of Commerce) said that although the time stipulated would not greatly change the situation, the time of conclusion of the contract would give a clearer point of reference and might avoid disputes in practice.

38. Mr. ROGNLIEN (Norway) also felt that some confusion had arisen. One should distinguish between the price and the value of goods. Naturally the price had been fixed at the time of the conclusion of the contract. His proposal did not refer to the price at the time of delivery, but to the proportional reduction of the prices compared with the difference between the value of conforming and non-conforming goods. If the goods did not exist at the time of conclusion of the contract, their value could only be estimated even though their price had been fixed. For practical purposes he would be equally happy to see any reference to time deleted.

39. Mr. FELTHAM (United Kingdom) explained that the remedy involved in the article was not familiar to lawyers in the common law countries. He agreed that in some cases the proportion involved did not vary whether the assessment was made at the time of conclusion of the contract or the time of delivery. However, repair costs need not vary in the same proportion as the price of goods so that in fact a decision on the time did involve a matter of substance.

40. The CHAIRMAN said that as a majority appeared to support the Norwegian amendment, he would, if there was no objection, consider it adopted.

41. It was so agreed.

42. The CHAIRMAN invited comments on the amendment by Argentina, Spain and Portugal (A/CONF.97/C.1/L.168) concerning the place at which the value of the non-conforming goods was to be assessed.

43. Mr. DATE-BAH (Ghana) said that he did not consider that the Committee's decision on the time of delivery necessarily meant that it should also be specified that the assessment should be of the value of the goods at the place of delivery. The prevailing price for the goods might be very different at the place of conclusion of the contract and the place of delivery. His delegation preferred the existing text, which contained no reference to the place.

44. Mr. HONNOLD (United States of America) pointed out that the buyer could not realize that the goods were defective until he received them. It therefore seemed practical that if the place was specified it should be the one where the buyer took possession of the goods. Whether the rule should be the time or place of delivery or the time or place of handing over the goods could be decided later.

45. Mr. BOGGIANO (Argentina), introducing the joint proposal of Argentina, Portugal and Spain (A/CONF.97/C.1/L.168), said that in the circumstances envisaged in article 46 [became CISG article 50 ], adequate protection should be given to the buyer, as the injured party. The object of the joint proposal was to ensure that the reduction in price took account of prevailing prices at or close to his place of business or habitual residence so that he could realistically expect to be able to replace the defective goods. As was to be seen from the examples given in the Secretariat commentary on article 46 [became CISG article 50 ] (A/CONF.97/5, page 126 et seq.), the rule referred mainly to fungible goods in respect of which it was understandable that the reduction in price for partial performance should be so calculated. There was precedence in various general rules, as for example in the EEC's coarse grains trade convention, where reference was made to the value at the point of disembarkation of goods. However, there was no specific mention of fungible goods in the text of article 42 [became CISG article 46 ] and the principle could with advantage be extended to complex machinery in the case of which the reduction in price should reflect the steps the buyer would have to take to remedy any defect in his place of business or habitual residence, which might be completely different from those which would have to be taken elsewhere.

46. Mr. KRISPIS (Greece) supported the joint proposal, which would fill an undesirable gap in the draft Convention. It was well known in international trade that prices varied greatly from place to place and it was therefore important to specify the place of valuation. The most reasonable place seemed to be that at which the buyer would have liked to have had the goods available, which would usually be the same as the place of delivery.

The meeting was suspended at 11.30 a.m. and resumed at 11.50 a.m.

47. Mr. ROGNLIEN (Norway) said it would perhaps be better to omit any reference to the place of valuation, which was a complicated issue. In any case the comparison must refer to the same place when assessing the value of conforming or non-conforming goods. A time difference was also involved when goods were to be sent from one place to another. If the buyer was not satisfied with the result of the valuation, he could ask for damages instead of a reduction in price and in certain respects even in addition to price reductions.

48. Mr. FOKKEMA (Netherlands) agreed with the Norwegian representative. The joint proposal was based on the assumption that the buyer's place of business or habitual residence was where he wished to have the goods available but he might have intended them for another destination, which might be changed again by a resale. In some cases, the delivery of goods was deemed to take place at the moment the relevant documents were handed over, even though the goods themselves might still be on the high seas.

49. Mr. ZIEGEL (Canada) preferred to omit any mention of place.

50. Mr. KUCHIBHOTLA (India) concurred.

51. Mr. OLIVENCIA RUIZ (Spain) said that to be serviceable, article 46 [became CISG article 50 ] must specify both time and place. Value depended upon the type of goods and on the particular market concerned. There was no one prevailing price. It was true that the subject was complex but failure to tackle it would lead to the article being open to differing interpretations, and that would be undesirable in a unification Convention. His preference was for the place to be specified as the buyer's place of business or habitual residence because that was where his interests had been harmed by the non-conformity of the goods. The buyer must be protected.

52. Mr. EYZAGUIRRE (Chile) supported the joint proposal.

53. Mr. BOGGIANO (Argentina) asked that a vote should be taken on the original text of the joint proposal (A/CONF.97/C.1/L.168). If it was rejected, he asked that a vote should be taken on the Norwegian oral amendment to add the words "at the place of delivery of the goods".

54. The joint proposal (A/CONF.97/C.1/L.168) was rejected by 23 votes to 11.

55. The Norwegian oral amendment was rejected by 22 votes to 12.

56. Mr. FELTHAM (United Kingdom), introducing his delegation's amendment (A/CONF.97/C.1/L.169), said that it was a drafting amendment. In the opinion of a legal body to which his delegation had submitted the text of the draft Convention, the phrase "the buyer may declare the price to be reduced" did not make it clear that it was the right of the buyer to do so.

57. Mr. HERBER (Federal Republic of Germany) wondered whether the formulation proposed by the United Kingdom representative made it clear that the buyer had such a right unilaterally without reference to any authority. Perhaps neither the proposed amendment nor the original wording was adequate to encompass the meaning both of the buyer's right and the way in which it was to be exercised.

58. Mr. KRISPIS (Greece) suggested that the United Kingdom wording should be strengthened by the addition of the phrase "by so stating to the seller" after the words "is entitled to reduce the price".

59. Mr. HONNOLD (United States of America) said that the point was whether the use of the word "may" in the original text adequately expressed the concept of entitlement. It appeared to be a drafting matter which should be referred to the Drafting Committee.

60. Mr. ZIEGEL (Canada) observed that the United Kingdom representative had not objected to the use of the words "may fix" in article 43 [became CISG article 47 ] paragraph 1. Perhaps the Drafting Committee should be asked to ensure consistency in the formulation used to express the possession and exercise of a right throughout the Convention.

61. The CHAIRMAN said he believed that there was general agreement about the unilateral right of the buyer to declare the price to be reduced in relation to the lack of conformity of the goods, subject to the jurisdiction of the courts. The seller could sue to obtain the full price. On that understanding, he would take it that the Committee wished to refer the United Kingdom amendment to the Drafting Committee.

62. It was so agreed.

63. Mr. KLINGSPORN (Federal Republic of Germany), introducing his delegation's proposal (A/CONF.97/C.1/L.166), said his delegation believed that the second sentence of article 46 [became CISG article 50 ] should refer to article 35 [became CISG article 37 ] as well as to article 44 [became CISG article 48 ]. It seemed to him logical that a provision in regard to a buyer's declaration of reduction of price should apply not only to the case in which a seller remedied a failure to perform his obligations after the date for delivery (article 44) [became CISG article 48 ], but also the case in which such a failure was remedied before the date for delivery (article 35) [became CISG article 37 ].

64. The CHAIRMAN said that as there appeared to be a majority in favour of the proposal, he would, if there were no objection, consider it adopted.

65. It was so agreed.

66. The CHAIRMAN invited attention to the proposal by the United States (A/CONF.97/C.1/L.181).

67. Mr. HONNOLD (United States of America) said he withdrew the proposal.

68. Mr. ROGNLIEN (Norway), introducing his delegation's amendment (A/CONF.97/C.1/L.167), said it made reference to article 39 [became CISG article 41 ], which provided that the seller must deliver goods which were free from any right or claim of a third party. Such a right or claim might be a total claim, in which case there would be no room for price reduction, but it might also be a partial or negative claim, in which case a price reduction might be practicable, because it might be possible to determine what was the diminished value of the goods.

69. Mr. HJERNER (Sweden) was opposed to the Norwegian proposal and noted that a similar proposal had been submitted earlier by the Norwegian delegation in A/CONF.97/C.1/L.77, and rejected. He did not think it was appropriate to apply the remedy of price reduction to cases under article 39 [became CISG article 41 ]; that article applied not only to justified claims, but also to claims which might not be justified, and which therefore could not be exactly defined in monetary terms.

70. Mr. DATE-BAH (Ghana) supported the Norwegian proposal. Non-conformity, properly so-called, ought to include third-party claims. He did not see why a distinction should be made between remedies for goods that were defective in the physical sense and goods that were defective in other senses. Although the reduction of price would not invariably be an appropriate remedy, there might be many situations where it would be appropriate. He saw no reason for artificially withholding remedy from the buyer in cases where the value of the goods might be even further diminished by claims based on other grounds than actual physical defects.

71. Mr. BONELL (Italy) also supported the Norwegian proposal.

72. Mr. SAMI (Iraq) said he too could support the Norwegian proposal, but would like to know on what basis the price reduction would operate; would it be in the same proportion as was indicated in the first sentence of the paragraph?

73. Mr. ROGNLIEN (Norway), replying to the point raised by the Swedish representative, said that his delegation's present proposal was a more limited one than the earlier proposal which had been rejected. He agreed that in some cases article 46 [became CISG article 50 ] would not be applicable, since it would not be possible to establish the proportionate value of conforming and non-conforming goods, it being very difficult to determine the value of a claim in regard to the former. In such a case, the solution would be to leave it to the courts to decide whether or not article 46 [became CISG article 50 ] applied. If that were the understanding of the Committee, he would agree to withdraw his proposal. In reply to the question raised by the representative of Iraq, the price reduction envisaged was intended to be on the basis of the proportion indicated in the existing first sentence of article 46 [became CISG article 50 ].

74. Mr. SCHLECHTRIEM (Federal Republic of Germany) sympathized with the intent of the Norwegian proposal but feared it might give rise to problems. First, a price reduction in the case of third-party claims might be inappropriate in certain cases. Secondly, the amendment might lead to the conclusion that in the case of article 40 [became CISG article 42 ] a price reduction was not permitted.

75. Mr. MASKOW (German Democratic Republic) said that he had some hesitation in supporting the Norwegian proposal. During the discussion of the earlier proposal along the same lines, it had been pointed out that it had not yet been decided how the consequences of third-party claims were to be treated under the Convention. Some representatives had considered that the question was an open one and that article 41 [became CISG article 45 ] and those related to it could be applied to such claims where it was found appropriate. If the Norwegian proposal were adopted, it could be concluded that those articles could not be applied where third-party claims were concerned.

76. Mr. ROGNLIEN (Norway) said that in view of the previous speaker's comments he was willing to withdraw his proposal, on the understanding that it would be up to the courts to decide whether and to what extent article 46 [became CISG article 50 ] was applicable to third party claims under article 39 [became CISG article 41 ] .

77. Mr. INAAMULLAH (Pakistan) said he wished it to be recorded that his delegation reserved its position as to article 46 [became CISG article 50 ]. The Committee's adoption of the amendment by Norway (A/CONF.97/C.1/L.167) and the rejection of that by Argentina, Spain and Portugal (A/CONF.97/C.1/L.168) constituted an unfair deal for the buyer, particularly in the developing world. He would have preferred the original text.

78. Article 46 [became CISG article 50 ], as amended, was adopted.

51	Article 47 [became CISG article 51 ] (A/CONF.97/C.1/L.171, L.172)

79. Mr. KHOO (Singapore), introducing his delegation's amendment (A/CONF.97/C.1/L.171) said that article 47(2) [became CISG article 51(2) ] was not appropriate in the context of the article as a whole. He considered that it should be deleted.

80. The CHAIRMAN said that as there appeared to be no support for the amendment he would, if there was no objection, consider it rejected.

81. It was so agreed.

82. Mr. BENNETT (Australia) said he withdrew his delegation's proposal (A/CONF.97/C.1/L.172).

83. Article 47 [became CISG article 51 ] was adopted.

52	Article 48 [became CISG article 52 ] (A/CONF.97/C.1/L.174)

84. The CHAIRMAN suggested that the Norwegian proposal be forwarded direct to the Drafting Committee.

85. It was so decided.