Understanding the Remedy of Price Reduction

The 1980 United Nations Convention on Contracts for the International Sale of Goods (CISG or Convention) became effective on January 1, 1988.[1] Approximately fourteen years later, the CISG is currently the law in sixty-two countries,[2] which roughly comprise the following regional blocs: twenty-two European and other developed Western States, eleven socialist, eleven South American, seven African, and eleven Asian countries.[3] Constituting the domestic law of each Contracting State, the CISG automatically governs any contract involving parties that maintain their relevant places of business in different Contracting States.[4] Thus, the CISG essentially governs all contracts for the sale of goods between parties from Contracting States, unless the parties have indicated that they do not want the CISG to govern.

The CISG has gained tremendous political and economic significance because it automatically governs the sale of goods between the United States and six of its top ten trading partners.[5] In addition, since Canada and Mexico are both Contracting States,[6] the likelihood that a United States party will enter into a transaction governed by the CISG is even greater. And yet, even with the frequency of contracts involving the United States and other Contracting States, U.S. courts and attorneys routinely overlook, misconstrue, and misapply the terms of the Convention.[7] Each lost opportunity to properly apply and interpret the CISG impedes our ability to benefit from the drafters’ formulation of a uniform sales law and further thwarts our potential to enjoy a uniform application of sales law.

In order to preserve and promote uniformity, the United States legal community must recognize the CISG’s status as federal pre-emptive law,[8] and must undertake a concerted effort to familiarize itself with the applicability of the concepts embodied within the CISG. The CISG’s goal of implementing uniform law for the international sale of goods is gradually being achieved.[9] However, the preservation of a uniform international sales law requires all judges and lawyers from Contracting States to make a conscious effort to consistently apply and enforce the CISG. A State must actively work to ensure that its decisions do not jeopardize the uniformity of the international sales law by inappropriately injecting domestic law.[10]

A major hurdle for the United States, in accepting the CISG, has been the fact that some CISG rules are foreign to both the common law and to the UCC.[11] The distinction between the common and civil legal histories is especially pronounced with respect to each country’s treatment of the remedy of price reduction. While mechanisms exist in common law to achieve results similar to those effectuated by price reduction, the actual remedy is unknown to common law States.[12] Due to the fact that the CISG is the law of the United States, courts and legal practitioners will be increasingly forced to contend with CISG Article 50 price reduction.

This paper strives to advance the uniform application of the CISG by engaging in a thorough analysis of CISG Article 50 and the problems that have arisen with respect to interpreting and applying price reduction, particularly whether it merits classification as a claim or a defense. Both civil and common legal communities can benefit from a detailed exploration of the CISG remedy of price reduction. While CISG Article 50 and other civil law versions of price reduction both originate from actio quanti minoris, it is important to be cognizant of the distinctions embodied in the CISG remedy of price reduction. style="mso-spacerun: This paper will serve as an overall exploration of the CISG and its unique remedy of price reduction for the common lawyer.

A review of the current United States case law pertaining to the CISG is illustrative of our shortfalls and our progress in uniformly applying the Convention. The small number of United States cases currently applying the CISG serves as a clean slate, upon which efforts must be undertaken to ensure that all are cognizant of their responsibility to promote uniformity and uphold the fundamental purpose of the CISG. So long as extreme care is taken to ensure that the CISG is properly interpreted in each new United States case that arises, this domestic clean slate provides U.S. common lawyers with an opportunity to effectively shape domestic and global jurisprudence.

The remedy of price reduction is a traditional civil law remedy that derives from actio quanti minoris in Roman law.[16] The Roman law remedy of actio quanti minoris allowed a buyer to sustain an action against the seller to reduce the purchase price payable when the seller delivered defective goods.[17] The overall function of the remedy was to preserve the bargain [18] and "to allow the buyer to keep the defective goods and pay the price it otherwise would have paid had it been aware of the hidden defects in the goods.[19] This Roman law remedy, which provides monetary relief to buyers who have received non-conforming goods, is reflected in contemporary civil law codes.[20] While the CISG incorporates many elements of the traditional Roman law remedy, the CISG Article 50 price reduction does vary slightly from civil forms of price reduction.[21] Under many civil codes, an advantage of price reduction as opposed to contractual damages is that the buyer can obtain the remedy without having to prove that the seller is at fault.[22] Price reduction plays an especially important role because it allows the buyer to reduce the price before it has paid [23] and applies regardless of whether the seller is held liable for the non-conformity.[24] It is also important to realize that assertion of a price reduction will not bar a buyer from also seeking damages, if the seller is liable for his fault.[25] Thus, the buyer "may seek to combine a reduction in price under Article 50 with an action for damages."[26]

The CISG Article 50 remedy of the reduction of the price is quite unique in many respects.[27] Perhaps, the most significant feature of Article 50 is the manner in which it operates.[28] Article 50 gives the buyer the ability to unilaterally [29] declare a price reduction, even before it has paid.[30] Unlike a price reduction claim, a buyer’s damage claim relies on the seller or the tribunal’s decision to liquidate its claim.[31] An Article 50 price reduction is also advantageous for the buyer because it is not subject to the same limitations as damages. While a seller may escape liability from having to pay damages if he can successfully assert a foreseeability or force majeure defense, these exemptions are specifically not applicable to Article 50.[32] Article 50 may even provide further insulation to a buyer if the view is accepted that Article 50 is not subject to Article 77, which imposes a duty on the buyer to mitigate her losses.[33] Also, unlike the buyer’s other remedies of Article 46 specific performance and Article 49 avoidance, Article 50 may not be subject to a "reasonable time" requirement.[34]

Article 50 is especially unique since it is not designed to protect a buyer’s expectation, reliance, or restitution interests, and it may at times violate expectation principles.[35] While Article 74 damages put the buyer in the position she would have been in had the seller properly performed the contract, Article 50 departs from the expectation damage calculation method.[36] The amount of the price reduction under Article 50 is based on a principle unknown to the common law. Unlike expectation damages, which are designed to preserve the benefit of the bargain for the aggrieved party, price reduction attempts to preserve the proportion of the bargain. Assuming that the buyer would have made the same relative bargain, Article 50 treats the buyer as though she has purchased the non-conforming goods that were actually delivered.[37] Price reduction is not as concerned with the actual economic efficiency of the promise as the damages remedy.[38]

United States lawyers, as well as lawyers coming from other common law backgrounds, must be especially conscious not to confuse Article 50 with the damage remedy, set-off.[39] Not only does set-off differ from a price reduction with respect to its capability of being asserted unilaterally, but a set-off also requires the parties to have reciprocal debts.[40]

Although common law lawyers must familiarize themselves with the nature of the price reduction remedy, they are entitled to take some solace in the fact that even civil lawyers have encountered problems in determining how to apply price reduction.[41] Price reduction is by no means an easy concept to master.

In fact, one commentary referred to price reduction "as a remedy in international sales law [that] meets with the greatest [of] difficulties."[42] One difficulty surrounding price reduction, involves the geographical market value that should be considered when determining the value of the goods.Although the CISG clearly specifies that the goods should be valued when they are delivered,[43] no mention is made with respect to what country’s market shall control the valuation of the goods. Another difficulty arises with respect to whether or not price reduction is available against sellers who violate their obligations under CISG Articles 41 or 42 to deliver goods free of rights and claims of third parties.[44]

While the aforementioned issues have been raised to some extent in previous commentaries, not much attention has been devoted to the problems surrounding the proper interpretation and classification of price reduction.

Before entering into an analysis of whether quanti minoris is a claim or a defense, let us emphasize what we do know. Price reduction is a remedy. The drafters of the CISG have consistently referred to price reduction as a remedy.[45] The organization of the CISG also supports characterizing price reduction as a buyer’s remedy, since it is found in the section entitled "Obligations of the Seller," which spans from CISG Articles 45 to 52."[46] While ambivalence surrounds the debate over whether to classify price reduction as a claim or defense, the prevailing view among most scholars that price reduction is a remedy provides a solid starting point.[47]

Classifying price reduction as a defense or claim is of great importance in understanding how to properly apply and interpret CISG Article 50. The best way to illustrate the significance of this distinction is to focus on a particular scenario in which a party to a contract has entered into a Waiver of Defenses agreement. Assuming that the buyer has satisfied all of her obligations inherent in pursuing a reduction of the price (i.e., a non-conformity exists and she has given timely and specific notice of the non-conformity to the seller), should a buyer who has agreed not to assert any "defenses" against the seller be barred from asserting a price reduction? The answer in this controlled hypothetical depends solely on the classification of price reduction as either a defense or a claim. As a defense, the buyer is precluded. As a claim, the buyer is free to proceed with her reduction of the price.

In reviewing the commentary that exists on the subject, only a small number refer to price reduction as a defense.[48] According to one commentator, treating price reduction as a defense is seen to be more practical.[49] This commentator based his conclusion that price reduction is a defense on a comparison between the shortness of the time available for the buyer to use the remedy versus the longer period of time available for the buyer to pay for the goods.[50] While notice must be given of a non-conformity within a reasonable time in order for the buyer to qualify for reduction of the price, the CISG does not impose any strict time limits on the availability of price reduction to a buyer. The commentator’s choice of using the time allotted for payment of the goods as a reference point to classify price reduction is flawed since price reduction is available to a buyer both before and after she has paid the price.

Another basis for classifying price reduction as a defense may depend on the overall context, in which price reduction is raised. For instance, are the parties involved in a hotly contested legal battle? Did the seller initiate the suit? If the two parties were embroiled in a lawsuit initiated by the seller’s claim for the purchase price, a buyer’s declaration of a price reduction could plausibly be deemed an "exceptio" or defense against the seller’s claim for the purchase price. In this instance, it may seem logical to conclude that the buyer’s use of price reduction as a counterclaim against the seller’s action for the price is somewhat defensive in nature. However, being somewhat defensive in nature when used in one highly specific scenario does not necessarily mean that price reduction constitutes a defense in all of its applications.

In order to determine that price reduction should be deemed "defensive" in nature, we would need to find that the buyer in the above situation was (i) in breach of her obligation to pay the price; and (ii) had asserted a price reduction to escape liability or an obligation to pay the price. However, the CISG specifically describes price reduction as a unilateral action and states that a buyer who declares a price reduction is not considered to be in "breach" of her obligation to pay the price. A buyer who has received non-conforming goods does not have an obligation to pay full price for flawed goods.

Recognizing that a buyer is entitled to assert a price reduction unilaterally and is not obligated to pay full price for flawed goods effectively means that she is (i) not in breach and (ii) not escaping her obligation by asserting a price reduction. Thus, a buyer who is not in breach and who is entitled to unilaterally declare a price reduction does not appear to be exercising a defense, but rather asserting a claim.

A large amount of the confusion surrounding price reduction results from its use in situations lacking an egregious non-conformity and thus not sustaining a fundamental breach that would warrant avoidance of the contract. However, the severity of the non-conformity should not have an impact on the classification of a buyer’s remedy as a defense or as a claim. Regardless of the extent of the non-conformity, the buyer’s position is the same with respect to her ability to take some proactive measure to rectify her current state. The seller and not the buyer is the breaching party in this instance. The seller’s delivery of non-conforming goods is a breach that entitles the buyer to seek some form of redress for the seller’s breach (assuming no effort has been made to cure).

In addition, it is helpful to also realize that price reductions are not only asserted in contentious legal suits. More often than not, a buyer’s declaration of price reduction would not even register on our radar screens due to its unilateral nature. Since price reduction does not require any affirmative action by a court or arbitral panel, it is plausible that a buyer could successfully pursue a reduction of the price without stepping foot into a courtroom or an arbitral proceeding.

The parallel structure of the CISG provides further support that price reduction is a claim. It could not have been an accident that the drafters decided to place the action for a price reduction within the first group of remedies, the Buyer’s remedies (Articles 45 to 52), and the action for the price in second group of remedies, the Seller’s remedies (Article 61 to 65). It would be counter-intuitive to treat a seller’s action for the price as a defense. If the structure of the CISG were deliberately organized to be parallel, then it would also be inappropriate to characterize a buyer’s action for reduction of the price as a defense.

While no clear resolution exists to resolve the debate over whether price reduction is a defense or a claim, it is clear that as a general matter, greater support exists for classifying price reduction as a claim. It is only when we enter into a highly specific scenario, equipped with the perfect control elements that price reduction potentially takes on a somewhat defensive nature. But since for the most part, price reduction is proactive in nature and does not serve the purpose of allowing the buyer to escape any obligation, it does not seem just that the buyer should be barred from seeking a remedy that she is rightfully entitled to even if she had signed a waiver of defense agreement. If signing a waiver of defense agreement, meant that a buyer relinquished all of her rights to seek action, then all sellers could escape the responsibility of delivering conforming goods by merely having their customers sign waiver of defense agreements.

Disagreement exists over whether price reduction should apply to non-conformities that are strictly quantity-related. When CISG Article 50 is read in light of CISG Article 35(1), it does not seem too far-fetched to allow a reduction of the price for a quantity deficiency.[51] Especially since CISG Article 35(1) imposes an obligation on the seller to deliver "goods which are of the quantity, quality, and description required by the contract."[52] While some commentary exists to support application of price reduction "where performance is quantitatively defective,"[53] other commentators suggest that price reduction should not be available for non-conformities pertaining to quantities.[54] Even though decisions have stated that non-conformities include both quantity and quality,[55] it still remains to be seen whether price reduction applies to defects that are solely quantitative.

Whether price reduction applies to services is another instance where room exists for further interpretation.[56] The availability of a price reduction claim for non-conforming services primarily involves a scope issue since the CISG pertains to the sale of goods, not services. However, to the extent that the contract fits within the scope of the CISG, there should be no question as to whether price reduction should apply to services. While CISG Article 1 defines the scope of the CISG to include "contracts of sale of goods," support exists for including services when such services are being provided in conjunction with goods. The larger proportion of goods to services contained in a contract, the more likely it will be that price reduction will be applicable. In addition, support exists that "the right to make such a [price] deduction is not confined to the sale of goods; it also exists, for example, in contracts for work and labor."[57]

The subject of whether price reduction should apply to third-party claims generated debate during the drafting of the 1980 Convention.[58] In accordance with Article 41, a seller is required to deliver goods "free from any right or claim of a third party." It was suggested that price reduction might be useful in its application toward a partial claim against a third party in order to determine the diminished value of the goods.[59] Seeing no reason 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," another delegate voiced his support for the applicability of price reduction to third-party claims (and the inclusion of such claims in the conception of a non-conformity).[60] While a number of other delegates registered support for the amendment allowing for the applicability of price reduction to third-party claims, ultimately the concerns [61] of other representatives led to the withdrawal of this amendment. The withdrawal of the amendment demonstrates the "open" status of this debate.[62] The absence of a clear decision in the text of the Convention demonstrates the decision to apply or not to apply price reduction rests with the courts.[63]

John Honnold labeled the likelihood that national courts would apply their own domestic laws instead of the laws of the Convention as the "homeward trend." While CISG Article 7(1) instructs domestic courts to regard the international character of the Convention and to promote uniformity in its application and the observance of good faith in international trade,[65] Honnold recognized the credible and realistic threat posed by the resistance of national courts to set aside their domestic laws.[66] The threat of the homeward trend is especially severe in common law countries such as the United States where judges are not only strained to understand new concepts, but find themselves without precedents to support these ground-breaking decisions.[67]

A common law jurist forced to contend with the CISG immediately finds herself in a precarious position since only a meager amount of United States case law exists to aid in the interpretation and application of the CISG.[68] As of September 2002, only twenty-two United States cases made some reference to the Convention (i.e., devoted at least a paragraph or footnote to the discussion of CISG-related issues).[69] Of those twenty or so cases, however, no more than half employed an in-depth discussion of the Convention. Contrast this low number of U.S. cases to the over one thousand cases that applied the CISG in worldwide forums.[70] What do these numbers suggest to us? Are U.S. courts failing to make a significant effort to interpret and apply the CISG?[71] Are U.S. lawyers failing to recognize and take advantage of instances where the CISG applies? Or are lawyers consciously not choosing to employ the Convention?

So what is a judge to do when faced with the choice of applying national laws to which he is accustomed to and abandoning those same legal precepts in favor of applying an unfamiliar Convention? While the answer should and must be that the judge is to apply the CISG provisions when they are binding, the reality is that in the overwhelming majority of cases where the CISG clearly applied, the case was resolved on the basis of national law and without more than a passing reference to the CISG.[72]

The task at hand for those schooled in the common legal tradition is initially daunting.

Recognizing that there are only a few U.S. CISG-related precedents, the U.S. lawyer must resolve herself to searching beyond the domestic clean slate. The virtual inexistence of U.S. cases pertaining to the CISG could present an insurmountable obstacle to the U.S. lawyer if she did not realize her ability to transcend this domestic clean slate. In recent years, various measures have been undertaken to assist the lawyer in accessing the abundance of international sources that lie just beyond the domestic clean slate.[73] Once the lawyer overcomes the obstacle of accessing these materials in a familiar language, she will be armed with a litany of materials and prepared to undertake her responsibility of ensuring that the CISG is applied uniformly in domestic cases.

An ordinary U.S. lawyer’s response to an Article 50 question best illustrates the domestic clean slate. When confronted by an Article 50 question, the lawyer’s first inclination will most likely be to initiate her search by employing the typical domestic research tools (e.g., casebooks, domestic legal databases). Operating solely within the confines of the domestic clean slate, the lawyer would find that only a small number of cases specifically refer to CISG Article 50. The most notable cases include: MCC-Marble Ceramic Center, Inc. v. Ceramic Nuova D’Agostino;[74] S.V., Inc. Braun v. Alitalia-Linee Aeree Italiane, S.p.A.;[75] and Interag Co., Ltd. v. Stafford Phase Corp.[76] A review of the following three cases, in isolation and without reference to any international materials, will not adequately prepare a common lawyer to engage in a thorough and complete analysis of an Article 50 issue. Without expanding her breadth of understanding to include the global jurisconsultorium that is devoted to Article 50, the U.S. lawyer’s analysis and understanding is severely hampered.

In MCC-Marble, the court’s discussion was dominated by concerns over whether the parol evidence rule should be applied. While a counterclaim for price reduction was asserted by MCC in response to D’Agostino’s counterclaim of non-payments, no real discussion of whether MCC is entitled to a price reduction surfaces in the court’s discussion. The heart of the case revolves around MCC’s attempt to introduce parol evidence demonstrating that D’Agostino’s two agents and MCC’s president, did not intend to be bound by terms found on the reverse of an order form. These terms would have required MCC to provide written notice of complaints regarding defective merchandise within 10 days after receipt of the merchandise. The Eleventh Circuit ultimately rejected the parol evidence rule and admitted the parol evidence reflecting the subjective intent of the parties; however, it never engaged in an analysis of the specific price reduction claim. If the court had wished to, it could have highlighted the basic requirements of price reduction (i.e., existence and notice of a non-conformity) and distinguished these basic requirements from the obligations imposed on MCC by the terms found on the reverse of the order form (i.e., written notice that had to be received within 10 days). While MCC-Marble is not instructive regarding CISG Article 50, the case is significant for its recognition that universality and predictability must prevail over hometown rule.[77]

In Braun, a dispute between a German seller of bathing suit material (Braun) and a Hungarian buyer (Nikex) arose when the buyer withheld approximately $100,000.00 from the contract price of $339,401.47, alleging lack of quantity and quality. After negotiations with the buyer, Braun was able to recover some of the withheld money from the buyer. However, Braun claimed that a mistake by one of its carriers damaged its bargaining position with the buyer. Braun sued its carrier (Alitalia) alleging that Alitalia’s clerical mistake of writing a lower quantity on the invoice entitled the buyer (Nikex) to withhold a portion of the payment in accordance with Article 50 of the CISG. The court denied Braun’s claims against Alitalia on two grounds. First, it found that Braun’s theory was inconsistent with its position during the negotiations with the buyer in which it affirmed that the goods were conforming. If the goods were truly conforming as Braun had stipulated during its previous negotiations, then the buyer would not have had a basis to withhold payment pursuant to a price reduction. Second, Braun had failed to prove the causal connection between Alitalia’s errors and the buyer’s position.[78]

Braun’s brief discussion of CISG Article 50 stresses the most basic requirement of a claim for price reduction – a non-conformity is required in order to assert a price reduction. It is interesting to note that if Braun had made no stipulation to the conformity, this case could have presented an opportunity for the court to issue its opinion on how broadly or narrowly to define non-conformity. Specifically, the court could have addressed whether a defect in quantity could have sufficed to make an Article 50 price reduction available to the buyer (Nikex). While a broad construction of non-conformity might enable application of price reduction to quantity defects, a narrow construction of non-conformity would limit the remedy’s applicability to strictly qualitative defects.

In Interag Co., Ltd. v. Stafford Phase Corp., 1990 WL 71478 (S.D.N.Y. 1990), the dispute arose when the buyer (Stafford) purchased sweaters from the seller (Interag) and subsequently stopped payment on the check, alleging defects in the goods. As a result, Interag sued Stafford for fraud and Stafford counterclaimed for damages. The amount of damages sought by Stafford was based on the resale value of the sweaters. Interag responded by filing a motion to compel Stafford to produce the resale information. When Stafford refused to produce the resale information, an issue arose as to how to measure the value of the goods. The court held that the proper way to measure the value of the goods was to use the price of the resale and not to allow introduction of expert’s testimony. According to one commentator, this was an instance where the court used the UCC to supplement the CISG.[79] The court’s behavior presents a clear illustration of the threat posed to uniformity when a court resorts to its homeward trend.[80] "This is an unfortunate approach, because if courts in every country begin to interpret the provisions of the Convention based on analogies with their own domestic laws, the uniformity of the CISG will be rendered meaningless."[81]

In search of a better understanding of the CISG and specifically Article 50, the U.S. lawyer must navigate beyond the domestic clean slate and attain an international perspective. Although she may face many, initial obstacles in her quest to master the unique CISG concepts, her expanded search will eventually reveal an abundance of international CISG-related materials. A comparison between the results of her initial domestic search and her search through the global jurisconsultorium quickly reveals how limited her frame of reference was. A broader search encompassing international materials will reveal approximately sixty Article 50 cases and a multitude of scholarly articles. How can the lawyer be at anything other than a loss when her understanding was based on only three out of the sixty cases that exist in the global jurisconsultorium?

A full understanding of Article 50 requires an appreciation of the most basic common and civilian approaches. The common lawyer’s emphasis on the importance of comparing and analyzing all relevant cases will be well complemented by the civil lawyer’s reliance on scholarly articles and commentaries. As the impediments to access diminish, the common lawyer becomes better able to effectively approach and resolve questions involving Article 50.

The domestic clean slate that initially caused angst among common lawyers may actually help bridge the gap between our legal tradition and that of the civil tradition. Rather than setting aside the unfamiliar for fear of the unknown, we should recognize the domestic clean slate before us and consciously embrace the foreign materials, which can assist us in promoting a uniform application of the CISG within the United States.[82] Our courts must have due regard for the international character of the CISG [83] and for the need to promote uniformity in its application. Scholars must play their essential role in assisting judges with how to best comprehend the ramifications and applications of this uniform international sales law.[84] This clean slate that United States common lawyers are forced to contend with in order to resolve issues of first impression pertaining to the application of the CISG will (i) ensure that we avoid the domination of the "homeward trend" and (ii) encourage us to forge new ground as we embark on an analysis of how scholars and other legal traditions have resolved issues similar to those before us. As common lawyers, we are forced to tailor our search techniques in a way that enables us to fully realize the common law approach to resolving questions of law that pertain to the CISG.

Recent cases suggest the growing aptitude of U.S. Courts in handling CISG issues and their appreciation of their responsibility to promote uniformity.[85] MCC-Marble Ceramic Ctr. v. Ceramica Nuova D’Agostino, S.p.A.,[86] a United States Circuit Court of Appeals case, serves as an important reminder to U.S. lawyers that they should embrace the Internet to ensure that they have conducted thorough research of case law from other jurisdictions. More and more it is becoming evident that U.S. courts recognize the global jurisprudence that exists to assist in interpreting and applying the CISG. For instance, Usinor Industeel v. Leeco Steel Prods. is an example of a recent case, in which the Northern District Court of Illinois commented on the limited number of federal cases applying the CISG and then subsequently referred to international cases and scholarly articles as it made its decision.[87] Another example is Asante Tech, Inc. v. PMC-Sierra, Inc.,[88] a case of first impression for the Northern District Court of California, which specifically acknowledged its responsibility to promote uniform application of sales law and recognized the dangers implicit in a court’s failure to adequately perform its role. The court held that the CISG preempts all state contract claims.[89] "[T]he availability of independent state contract law causes of action would frustrate the goals of uniformity and certainty embraced by the CISG."[90] Subjecting international parties to varying domestic and state laws subverts the premise behind the CISG, to avoid such ambiguities. Failure by courts, arbiters, and lawyers to be cognizant of their responsibility to promote uniformity threatens to undermine the existence and fundamental purpose of the CISG.[91]

Recognizing that that the "homeward" trend is not simply an affliction borne by United States jurists, we now explore how a jurist should approach her task to ensure that she best interprets the CISG. As noted previously, CISG Article 7(1) "identifies the promotion of uniformity in the application of the CISG as one of the basic interpretative principles of the Convention."[92] Serving as a backdrop to our interpretation of the CISG, CISG Article 7 provides the jurist with her first direction in how to properly apply the CISG.[93] Within CISG Article 7, the jurist will find guidance on how to counter her "homeward" reflexes and apply the CISG in a manner that recognizes its international character, promotes uniformity, and ensures the observance of good faith in international trade.[94] Most importantly, she must take special care to avoid her natural tendency of reading an international text through the lens of domestic law.[95]

Armed with Article 7 as her roadmap, the jurist is instructed to consider four additional statutory aids to interpretation: (i) the actual text of the statute or provision, (ii) the legislative history or travaux préparatoires of the CISG; (iii) international jurisprudence;[96] and (iv) scholarly writings.[97] When faced with a difficult CISG-related issue, the jurist should opt for the decision that is best supported by the aforementioned aids to interpretation. This decision should satisfy the jurist’s dual obligations of taking into account the international character of the CISG (i.e., not reading the text through domestic lenses) and ensuring that her decision presents a tenable international solution, which can be potentially applied by other Contracting States.[98]

One of the most notable recent cases to illustrate the manner in which a jurist should interpret and apply the CISG is the Netherlands Arbitration Institute Case Number 2319.[99] In this case, the arbitral tribunal engages in an exploration of the specific text of the CISG article at issue, the article’s travaux préparatoires (legislative history), views espoused in various scholarly authorities, international decisions, and the general guidance provided by CISG Article 7. Throughout the entire opinion, the tribunal always makes a point of including an explicit citation for each statutory aid it relies upon. To provide additional context for its decision, the tribunal takes special effort to explain the evolution of various legal principles and to distinguish minority views from majority views.

Tribunale di Vigevano [100] serves as a model for demonstrating the feasibility of resolving disputes through recourse to foreign court decisions.[101] Judge Rizzieri, the sole judge presiding over this case, "sought to apply the provisions of the CISG faithfully to the letter and spirit of the uniform law."[102] Even if foreign jurisprudence is not binding, it should still be taken into consideration with "regard" for promoting the uniform application of the CISG and the observance of good faith, as mandated by CISG Article 7.[103] Within the decision, Judge Rizzieri cited to cases contained in American, Austrian, Dutch, French, German, Italian, and Swiss national reporters. In addition, he cited to International Chamber of Commerce (ICC) awards, UNILEX, and websites devoted to the CISG.

To the extent that Tribunali di Rimini [104] follows the example set out by Judge Rizzieri of Tribunali di Vigevano, these cases provide hope and encouragement for the manner in which future courts will approach their role of resolving disputes. In Tribunale di Rimini, the court relied upon a number of foreign court and arbitral tribunal decisions that interpreted and applied the CISG. Echoing the sentiments of Judge Rizzieri, the court stressed that even "though precedents in international law cannot be considered legally binding, they have to be taken into account by judges and arbitrators in order to promote uniformity in the interpretation and application of the CISG.[105] In order to sufficiently accomplish its task, a court or arbitral tribunal must utilize the existing databases and specialized law journals as tools for the dissemination of international case law.

The aforementioned international decisions serve as models for the direction in which more jurists should be headed. An opinion that engages in a thorough review of the four statutory aids to interpretation and does not limit its frame of reference to domestic sources,[106] should be embraced and recognized for its recognition of how it will impact domestic and global jurisprudence.

1. United Nations Convention on Contracts for the International Sale of Goods. U.N. Doc. A/CONF.97/18 (1980), reprinted in United Nations Conference for the International Sale of Goods: Official Records at 178-90, U.N. Doc. A/CONF.97/19 (1981), reprinted in S. Treaty Doc. No. 98-9, 98th Cong., 1st Sess. and 19 Int’l Legal Materials 668-99 (1980), 52 Fed. Reg. 6262 (1987), 5 U.S.C.A. App. (Supp. 1987) [hereinafter CISG].

2. As of April 2003, the UN Treaty Section reports that 62 States have adopted the CISG: Argentina, Australia, Austria, Belarus, Belgium, Bosnia-Herzegovina, Bulgaria, Burundi, Canada, Chile, China (PRC), Columbia, Croatia, Cuba, Czech Republic, Denmark, Ecuador, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Guinea, Honduras, Hungary, Iceland, Iraq, Israel, Italy, Kyrgystan, Latvia, Lesotho, Lithuania, Luxembourg, Mauritania, Mexico, Moldova, Mongolia, Netherlands, New Zealand, Norway, Peru, Poland, Romania, Russian Federation, Saint Vincent & Grenadines, Singapore, Slovakia, Slovenia, Spain, Sweden, Switzerland, Syria, Uganda, Ukraine, United States, Uruguay, Uzbekistan, Yugoslavia, and Zambia. <http://www.cisg.law.pace.edu/cisg/countries/cntries.html>.

3. Eörsi, A Propos the 1980 Vienna Convention on Contracts for the International Sale of Goods, 31 Am. J. Comp. L. 335 (1983); CISG Database, Countries that have adopted the CISG and information on its status and application, at <http://www.cisg.law.pace.edu/cisg/cisgintro.html> (last visited April 13, 2003).

4. In addition, the CISG can also automatically govern contracts involving only one signatory to the CISG, if that one party (i) has a relevant place of business in a Contracting State and (ii) that Contracting State’s domestic law is applicable. Interestingly, the CISG can also apply to transactions between parties that do not conduct their relevant business in a Contracting State. If such parties were to elect for the CISG to apply, the CISG would operate similar to terms and conditions incorporated in the contract. <http://cisgw3.law.pace.edu/cisg/cisgintro.html>.

5. James E. Bailey, Facing the Truth: Seeing The Convention on Contracts for the International Sale of Goods as an Obstacle to a Uniform Law of International Sales, 32 Cornell Int’l L.J. 273, 274-75 (1999). In accordance with the listing provided by the U.S. Trade Balance, Canada, Mexico, Japan, China, Germany, United Kingdom, Korea, Taiwan, France and Italy are listed as the United States’ top ten trading partners for 2001, with respect to trade turnover. At <http://www.dataweb.usitc.gov/scripts/cy_m3_run.asp> (last visited September 27, 2002). Of these ten partner countries, Canada, Mexico, China, Germany, France, and Italy have adopted the CISG. At <http://cisgw3.law.pace.edu/cisg/countries/cntries.html> (last visited April 13, 2002).

7. Bailey, supra note 5, at 275. Many recent examples of cases exist in which courts fail to recognize that in accordance with the federal constitution, the CISG, a treaty ratified by the United States, supersedes state law. See China Nat’l Metal Products v. Apex Digital, 141 F. Supp. 2d 1013 (C.D. Cal. 2001), <http://cisgw3.law.pace.edu/cases/010501u1.html> (stating that it was bound to apply California state law unless a party offered evidence of foreign law or demonstrated how the foreign law would apply).

8. U.S. Const., art VI, cl. 2 ("This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.")

9. See also John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, ix (3d ed. 1999).

10. Contracting States must adhere to Article 7(1) of the CISG, which provides that: "[i]n the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in the international trade."

11. Monica Kilian, CISG and the Problem with Common Law Jurisdictions, 10 J.Transnat’l L. Pol’y 217, 230. A few examples of specific differences between the CISG and the UCC are that the CISG does not impose rules pertaining to consideration, statute of frauds, or parol evidence.

12. The "exact remedy of price reduction based on actio quanti minoris is unknown at English law." Peter A. Piliounis, The Remedies of Specific Performance, Price Reduction and Additional Time (Nachfrist) Under the CISG: Are These Worthwhile Changes or Additions to English Sales Law?, 12 Pace Int’l L. Rev. 1, 36 (2000), also available at <http://cisgw3.law.pace.edu/cisg/biblio/piliounis.html>. Some parallels to English law exist, such as: defects of quantity, breaches of warranty and defects of quality, and partial frustration/force majeure. Id. at 36-43.

13. See Harry M. Flechtner, Remedies Under the New International Sales Convention: The Perspective from Article 2 of the U.C.C., 8 J.L. Com. 53, 53-108 (1988), also available at <http://cisgw3.law.pace.edu/cisg/biblio/flecht.html>.

14. While Common law only allows specific performance when damages would be an inadequate remedy, the CISG allows the buyer and the seller to elect specific performance rather than or, in certain cases, in addition to damages. See CISG Article 46(1) ("The buyer may require performance by the seller of his obligations unless the buyer has resorted to a remedy which is inconsistent with this requirement."); CISG Article 62 ("The seller may require the buyer to pay the price, take delivery or perform his other obligations, unless the seller has resorted to a remedy which is inconsistent with this requirement.").

15. The UCC’s perfect tender rule allows a buyer to reject a delivery of goods if the goods "fail [to conform] in any respect" to the contract. UCC 2-601. While a seller has the right to cure any non-conformity, once a buyer has accepted the goods, he will only be allowed to revoke his acceptance if the "non-conformity substantially impairs" the goods value to the buyer. UCC 2-608. In contrast to the UCC, the CISG does not allow a party to declare a contract avoided unless the other party’s failure to perform has amounted to a "fundamental breach." CISG Article 25 ("A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result.").

16. Eric E. Bergsten & Anthony J. Miller, The Remedy of Reduction of Price, 27 Am. J. Comp. L. 255, 255-57, also available at <http://cisgw3.law.pace.edu/cisg/biblio/bergsten.html>. Originating from an Edict of the Aediles which sought to ‘repress the sharp practices of sellers of slaves and cattle in the City markets.’ If a buyer became aware, after delivery, of certain specified defects which the vendor did not declare and which, had the buyer been aware of them at the time of sale would have led him to pay a lesser price, he could bring an action for reduction of price or for rescission of the contract. Defects which were evident at the time of conclusion of the contract were excluded from this remedy since the buyer should have taken them into account when calculating the price he was willing to pay. Id.

17. As originally framed in Roman law, actio quanti minoris allowed a buyer to sustain an action against the seller to reduce the purchase price payable when a latent or hidden defect existed in the goods and caused the goods to be less valuable. Piliounis, supra note 12 at 29.

18. The remedy of price reduction reflects the CISG’s focus on preserving the contract even though a breach may have occurred. See id. at 5.

20. See also Swedish Sales Act §§ 42, 43 (buyer may claim "such reduction in the price as is proportionate to the defect"); Article 1644 of the French Civil Code (buyer can recover a part of the purchase price or rescind the contract and recover the total purchase price if the goods contain hidden defects); german civil code (BGB) §§ 459, 462, 472 (reduction "in the proportion which at the time of the sale, the value of the thing in a condition free from defect would have born[] to the actual value"). The German Civil Code provides that if the goods lack the promised qualities or contain defects, which diminish the ordinary use of the goods or the use provided for in the contract, the buyer has the option of rescinding the contract or reducing the price in accordance with BGB § 472. See also Austrian ABGB § 932(1); Danish Sale of Goods Act §§ 42-43; Finnish and Swedish Sale of Goods Acts §§ 37-38; Greek CC Articles 534, 535, 540; Italian CC Article 1492(1); Portuguese CC Articles 911, 913; Dutch BW Articles 6:265, 6:270.

21. For instance, distinctions exist among the civil codes and the CISG with respect to how extensive the unilateral nature of this remedy is. The self-help remedy of price reduction, as embodied in CISG Article 50, "can be implemented by the buyer without any requirement to have the determination upheld by a court, expert or other tribunal. Piliounis, supra note 12, at 31. The buyer is not even required to obtain an agreement from the other party. Id.

22. Generally speaking, price reduction is a self-help remedy that can be asserted by the buyer. See Piliounis, supra note 12, at 30.

23. The CISG Article 50 price reduction remedy is available regardless of whether or not the price has already been paid. Id. at 32.

24. Price reduction is most advantageous to the buyer when establishing the liability of the seller is difficult or when the seller possesses a CISG Article 79 excuse for the non-conformity. See Honnold, supra note 9, at 337 ("Article 50 has its principal significance when the buyer accepts defective goods under circumstances in which the seller is not liable for ‘damages.’"). CISG Article 79, "provides that a party is excused from liability for ‘damages’ when his failure to perform is ‘due to an impediment beyond his control.’" Id. at 336.

25. While the Convention does not directly resolve the question concerning the election of remedies, it does provide in Article 45, that the buyer’s rights, provided in Articles 46 to 52 do not bar damages under Article 74. Id. at 338. Since Article 50 is quite obviously contained within the span from Article 46 to 52, this provides the buyer with a basis to claim both price reduction and damages (i.e., consequential losses). Id. at 338-39. Caution should be exercised when claiming both damages and price reduction, however, since Article 45 should not be construed to permit double recovery based on the reduced value of the goods. See also id. at 339.

26. Albert H. Kritzer, Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods at 376 (1989).

27. See Harry M. Flechtner, More U.S. Decisions on the U.N. Sales Convention: Scope, Parol Evidence, "Validity," and Reduction of Price Under Article 50, 14 J.L. Com. 153, 170-176 (1995), also available at <http://cisgw3.law.pace.edu/cisg/biblio/flechtner.html> .

29. See <http://www.cisg.law.pace.edu/cisg/firstcommittee/Meeting 23.html> (comments of the Chairman expressing his belief 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."). The French and German versions of price reduction differ from the CISG Article 50 price reduction. Unlike the truly unilateral action of price reduction under the CISG, where no further action is required by any other party, French and German law require something more than just the buyer’s unilateral declaration to change the juridical situation.

30. See Kritzer, supra note 26, at 376. See also Text of Secretariat Commentary on Article 46 of the 1978 Draft ("Article 46 [draft counterpart of CISG Article 50] makes it clear that the price can be reduced by the buyer even though he has already paid the price. Article 46 does not depend on the buyer’s ability to withhold future sums due."). A comparison of Article 46 of the 1978 Draft of the CISG with Article 50 of the 1980 Convention is instructive because of their overall similarity. While a few differences exist between the 1978 Draft and the 1980 Official Text (i.e., the method of computing price reduction and the inapplicability of price reduction in cases where the seller remedied a failure to perform his obligations prior to the date of delivery), for the most part an analysis of Article 46 and the Secretariat Commentary contributes to the framework needed to fully understand Article 50. See also <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-50.html>.

31. While the buyer may "claim" damages from the seller, his claim is worthless until either the seller or the tribunal has agreed to liquidate it. A price reduction claim, on the other hand, allows the buyer to freely determine the amount it wishes to reduce the price by and does not make its reduction of the price contingent on any action of an outside party. See Bergsten, note 16, at 263.

33. Some disagreement exists amongst commentators over whether the buyer will be sanctioned for his failure to mitigate losses. See Kritzer, supra note 26, at 377 (the buyer is not subject to the sanction provided under Article 77 for his failure to mitigate losses); cf. Honnold, supra note 9, 420-421 (Not only does the second sentence of Article 50 incorporate certain concepts of mitigation, but Article 77 should be read to apply to a wide range of remedies).

34. Unlike Article 46 and Article 49, Article 50 does not contain the element "within a reasonable time." Bianca, Cesare Massimo and Bonell, Michael Joachim, Commentary on the International Sales Law: The 1980 Vienna Sales Convention, 372 (1987) ("[P]rovided the buyer respects the condition of Article 39, the Convention imposes no period of time for his reducing the price.").

35. "One of the most striking observations of Article 50, made by several commentators, is that in some circumstances the provision yields results inconsistent with a fundamental principle of Common law remedies: protection of the expectation interest." Flechtner, supra note 27, at 171.

36. Value of Goods Actually Delivered on the Delivery Date x Contract Price = Amount of Recovery.
Value of Conforming Goods if Delivered on the Delivery Date
Kritzer, supra note 26, at 377.

37. "Article 50 puts an aggrieved buyer in the position he would have been in had he purchased the goods actually delivered rather than the ones promised – assuming that he would have made the same relative bargain for the delivered goods." Flechtner, supra note 27, at 171. See also Pretura [District Court] di Locarno-Campagna, 27 April 1992, Switzerland, <http://cisgw3.law.pace.edu/cases/920427sl.html> (the reduced purchase price reflects the proportion of the value, as of the date of delivery, between the value of the goods actually delivered and the value of the conforming goods); Oberlandesgericht [Appellate Court] Graz, 9 November 1995, Austria, <http://cisgw3.law.pace.edu/cases/951109a3.html> (interpreting CISG Article 50 as placing importance on the value of the goods at the time and place of delivery).

38. Price reduction is primarily concerned with preserving the bargain between the parties and being used as a means of rebalancing the performance required by both sides. Arnau Muriá Tuñon, The Actio Quanti Minoris and Sales of Goods Between Mexico and the United States: An Analysis of the Remedy of the Reduction of the Price in the United Nations Sales Convention, CISG Article 50 and its Civil Law Antecedents §§ 4.3.1, 4.3.5, at <http://www.cisg.law.pace.edu/cisg/biblio/muria.html> (Actio quanti minoris is concerned with the seller’s moral duty to keep the promise and more specifically the moral right of the buyer to have the promise kept).

39. Common law lawyers have a tendency to misperceive the price reduction as a mere set-off provision. Id. at 172-74.

41. It is important for Common law lawyers to understand how price reduction departs from the Common law remedial concepts, such as damages and set-off, and to recognize the potential significance this new remedy could have on future litigation scenarios. See Flechtner, supra note 27, at 175.

43. The goods shall be valued at the "time of delivery" and not upon conclusion of the contract.

45. The Working Group began referring to price reduction a remedy during its Third Session. UNCITRAL Working Group, Session 3, Jan. 1972, Doc. A(5). During the Fourth Session of the Working Group, price reduction was again referred to as a remedy. UNCITRAL Working Group, Session 4, Jan. 1973, Doc. A(7). The Secretariat Commentary to the 1978 Draft also referred to price reduction as a remedy. Secretariat Commentary to 1978 Draft Convention on Contracts for the International Sale of Goods, Art. 46. In addition, price reduction was referred to as a remedy during the First Committee deliberation that took place during the 1980 Diplomatic Conference. Bonell, First Committee Deliberations, 23d Meeting, 1980 Diplomatic Conference.

47. See also Bergsten, supra note 16, at 255 ("remedy of price reduction"); Kritzer, supra note 26, at 375 ("remedy for breach of contract by seller: Art. 50"). Cf. G.H. Treitel, Remedies for Breach of Contract 107 (1988) (refers to price reduction as a principle).

48. In light of Article 383 of the Mexican Commercial Code, the "use of Actio Quanti Minoris [is] more practical as a defense to the seller’s legal claim upon buyer’s default on payment, than as a cause of action for the buyer." Muriá Tuñon § 2.2.

In a study conducted in 1998 of ten cases from multiple jurisdictions using Article 50, it was found that Article 50 was not used "offensively" by the buyer. Instead, it found use predominantly as a counterclaim or a defense to an action by the seller for the purchase price. Such a result is in some respects not surprising. Where there is no dispute between the parties as to the amount of reduction, the matter would not come to court and the remedy would act in its intended manner: as a self-help remedy of the buyer. This way the remedy avoids the costs and uncertainty of litigation. Piliounis, supra note 12, at 31-32.

50. The commentator fails to validate the "five-day" limit imposed upon a buyer’s declaration of price reduction. Moreover, questions remain among commentators as to whether a reasonable time requirement is even placed upon Article 50.

53. Treitel, supra note 47, at 109; Bergsten, supra note 16, at 258, 265-267; ULIS Art. 46 (covering quantitative defects).

54. See Honnold, supra note 9, at 335-42 (failing to specifically mention whether price reduction applies to quantity defects and stating that the application of price reduction should not be stretched to far beyond the field of non-conforming goods); Bianca & Bonnell, supra note 34, Article 50, paragraph 1.1-3.4 (failing to mention the availability of price reduction for a delivery of the wrong quantity of goods); Flechtner, supra note 27, at 170-71 (stating that most commentators do not suggest that price reduction is available for shipment of the wrong quantity).

55. See Oberlandesgericht [Appellate Court] Koblenz, Germany, 31 January 1997, <http://cisgw3.law.pace.edu/cases/970132g1.html> (stating that lack of conformity includes lack of both quantity and quality).

56. A review of some other civil forms of action quanti minoris offers some insight into the question of whether price reduction applies to services. The German version of actio quanti minoris applies to work, but not to services. >German BGB 634(1) and 634(4). Italian CC Article 1668 applies to construction contracts. The Portuguese CC Article 1222 applies to work. Overall, the applicability of price reduction to services will depend on the type of service and what proportion of the contract the service comprises.

59. Summary of comments made by Mr. Rognlien, the delegate from Norway, while introducing his amendment. See A/CONF.97/C.1/L.167 ("The provisions of the preceding paragraph apply correspondingly where the value of the goods is diminished because they are subject to a right or claim by a third party as described in article 39 [CISG Article 41]"); <http://www.cisg.law.pace.edu/cisg/firstcommittee/Meeting23.html>.

61. For example, Mr. Schlechtriem, delegate from the Federal Republic of Germany, illustrated potential problems associated with the extension of price reduction to third-party claims. Id. The remedy of price reduction might be inappropriate in certain cases (i.e., only basis for a severe non-conformity was the third-party claim, might lead to the conclusion that CISG Article 42 did not permit price reduction).

62. Mr. Maskow, delegate from the German Democratic Republic, explained his understanding that the treatment of the consequences of third-party claims under the Convention had not yet been decided and still remained an open question. Id.

63. Id. Mr. Rognlien withdrew his proposal with the understanding that it would be up to the courts to decide whether and to what extent Article 46 [CISG Article 50] would be applicable to third party claims under Article 39 [CISG Article 41].

64. John Honnold, The Sales Convention in Action-Uniform International Words: Uniform Application?, 8 J.L. & Com. 207 (1988), also available at <http://cisgw3.law.pace.edu/cisg/biblio/honnold-sales.html> (labeling the tendency to apply national laws in relative isolation of applicable CISG provisions as the homeward trend).

66. "The Convention, faute de mieux, will often be applied by tribunals (judges or arbitrators) who will be intimately familiar only with their domestic law. The tribunals regardless of their merit, will be subject to a natural tendency to read the international rules in light of the legal ideas that have been embedded at the core of their intellectual formation. The mind sees what the mind has means of seeing.’" Flechtner, Harry M., "Symposium – Ten Years of the United Nations Sales Convention: The Several Texts of the CISG in a Decentralized System: Observations on Translations, Reservations and Other Challenges to the Uniformity Principle in Article 7(1)," 17 J.L. & Com. 187 (1998) (quoting Honnold); see Honnold, supra note 64.

67. Many writers argue that "the CISG should be interpreted within its ‘four corners’ without regard to domestic concepts and principles." Bruno Zeller, The Development of Uniform Laws – A Historical Perspective, 14 Pace Int’l L.Rev. 163, 164 (2002), also available at <http://cisgw3.law.pace.edu/cisg/biblio/zeller5.html>.

68. See Claudia v. Olivieri Footwear Ltd., 1998 WL 164824, *4 (S.D.N.Y. 1998); MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova d’Agostino, S.p.A., 144 F.3d 1384, 1389 (11th Cir. 1998) (stating that "despite the CISG’s broad scope, surprisingly few cases have applied the Convention in the United States). In December of 1999, the court noted only seven available opinions, which interpreted substantive provisions of the Convention. Magellan Intern. Corp. v. Salzgitter Handel GmbH, 76 F. Supp. 2d 919, 924 (N.D. Ill. 1999). In "May 1998, only thirteen federal cases had even mentioned the Convention; of those thirteen, ten cited the Convention in only a single paragraph or footnote; just one of the remaining three devoted extended analysis to the Convention text."See Rod N. Andreason, MCC-Marble Ceramic Center: The Parol Evidence and Other Domestic Law Under the Convention on Contracts for the International Sale of Goods, 1999 B.Y.U.L. Rev. 351, 352-53, also available at <http://cisgw3.law.pace.edu/cisg/biblio/andreason.html>. Two cases, which contain a detailed discussed of the CISG are MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D’Agostino, 144 F.3d 1384 (11th Cir. 1998) and Calzaturificio Claudia S.n.c. v. Olivieri Footwear Ltd., 1998 WL 164824 (S.D.N.Y. 1998). In addition, Delchi Carrier S.p.A. v. Rotorex Corp., 71 F.3d 1024 (2d Cir. 1995) and Filanto, S.p.A. v. Chilewich Int’l Corp., 789 F.Supp. 1229 (S.D.N.Y. 1992) also contain some discussion on the CISG.

69. While the number of CISG-related cases decided in the United States in 2002 is still desperately low, it is encouraging to see that the number of decisions is slowly increasing. A current search for cases pertaining to the UN Convention on Contracts for the International Sale of Goods ("CISG") reveals the following cases: Ajax Tool Woks, Inc. v. Can-Eng Mfg., 2003 U.S. Dist. LEXIS 1306 (N.D. Ill. 2003), Geneva Pharmaceuticals Technology Corp. v. Barr Laboratories, Inc., 2002 WL 1933881 (S.D.N.Y. Aug. 2002); Usinor Industeel v. Leeco Steel Prods., 209 F. Supp. 2d 880 (N.D. Ill. 2002); Schmitz-Werke GmbH N Co. v. Rockland Industries, Inc., 2002 WL 1357095 (4th Cir. 2002), Teevee Toons, Inc. v. Gerhard Schubert GmbH, 2002 WL 498627 (S.D.N.Y. March 2002); Usinor Industeel v. Leeco Steel Products, Inc., 209 F. Supp. 2d 236 (N.D.Ill. March 2002); St. Paul Guardian Ins. Co. v. Neuromed Medical Systems & Support, GmbH, 2002 WL 465312 (S.D.N.Y. March 2002); Atla-Medine v. Crompton Corp., 2001 WL 1382592 (S.D.N.Y. 2001); Zapata Hermanos Sucesores S.A. v. Hearthside Baking Co., Inc., 2001 WL 1000927 (N.D.Ill. 2001); Asante Technologies, Inc. v. PMC-Sierra, Inc., 164 F. Supp. 2d 1142 (N.D.Cal. 2001); Supermicro Computer, Inc. v. Digitechnic, S.A., 145 F. Supp. 2d 1147 (N.D.Cal. 2001), Viva Vino Import Corp. v. Farnese Vini S.r.l, 2000 WL 1224903 (E.D.Pa. 2000); KSTP-FM, LLC v. Specialized Communications, Inc., 602 N.W.2d 919 (Minn. App. 1999); Magellan Intern. Corp. v. Salzgitter Handel GmbH, 76 F. Supp. 2d 919 (N.D.Ill. 1999); Medical Marketing Intern., Inc. v. Internazionale Medico Scientifica, S.r.l., 1999 WL 311945 (E.D.La. 1999); Mitchell Aircraft Spares, Inc. v. European Aircraft Service AB, 23 F. Supp. 2d 915 (N.D.Ill. 1998); MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova d’Agostino, S.p.A., 144 F.3d 1384 (11th Cir. 1998); Claudia v. Olivieri Footwear Ltd., 1998 WL 164824 (S.D.N.Y. 1998); Primewood, Inc. v. Roxan GmbH & Co. Veredelungen, 1998 WL 1777501 (D.N.D. 1998); Helen Kaminski Pty., Ltd. v. Marketing Australian Products, Inc., 1997 WL 414137 (S.D.N.Y. 1997); Delchi Carrier S.p.A. v. Rotorex Corp., 71 F.3d 1024 (2d Cir. 1995); GPL Treatment, Ltd. v.Louisiana-Pacific Corp., 894 P.2d 470 (1995); Filanto, S.p.A. v. Chilewich Intern. Corp., 789 F. Supp. 1229 (S.D.N.Y. 1992); Orbisphere Corp. v. US, 726 F. Supp. 1344 (1989).

70. As of September 2002, the case schedule on the CISG website contained 1052 case presentations worldwide, of which over 475 are in English. <http://www.cisg.law.pace.edu/cisg/text/casecit.html> (last visited April 2003).

71. According to Andreason, the low number of federal court decisions interpreting the CISG suggest that federal courts have not made a significant effort to interpret the CISG, even when presented with the opportunity to do so. Andreason, supra note 67, at 352.

72. See China National Metal Products v. Apex Digital, <http://cisgw3.law.pace.edu/cases/010501u1.html>. This is an example of a May 1, 2001 decision by the U.S. District Court, Central District of California, where the court not only failed to note that the CISG, a treaty duly ratified by the US, is supreme law that binds California courts, but went on to erroneously state that it was bound to apply California state law unless a party offered evidence of foreign law, such as Chinese law or CISG, or demonstrated how the foreign law would apply.

73. The following websites can be used to assist in accessing relevant international materials that are in English: (1) Electronic library on international trade law and the CISG <www.cisg.law.pace.edu>; (2) Case Law on UNCITRAL Texts ("CLOUT") <www.uncitral.org>; (3) UNILEX <www.unilex.info>; (4) Transnational Law Database <www.tldb.de>; CISG-online <www.cisg-online.ch>; Private International Law Database <www.state.gov/s/l/c3452.htm>.

77. Courts applying the CISG cannot, therefore, upset the parties’ reliance on the Convention by substituting familiar principles of domestic law when the Convention requires a different result. Zapata Hermanos v. Hearthside Baking, 2002 WL 1000927 (N.D. Ill 2001), <http://cisgw3.law.pace.edu/cases/010828u1.html> (citing MCC-Marble Ceramic Ctr. Inc. v. Ceramica Nuova D’Agostino, S.p.A., 144 F.3d 1384, 1391 (11th Cir. 1998).

78. S.V., Inc. Braun v. Alitalia-Linee Aeree Italiane, S.p.A., 1994 WL 121680 (S.D.N.Y. 1994). See Muriá Tuñon § 3.2.4.

83. CISG Article 7(1): In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.

84. Peter Schlechtriem, "Uniform Sales Law – The Experience with Uniform Sales Law in the Federal Republic of Germany," 3 Juridisk Tidskrift 1, 16 (1991-92), also available at <http://cisgw3.law.pace.edu/cisg/biblio/schlech2.html>.

87. See Usinor Industeel v. Leeco Steel Prods., 209 F. Supp. 2d 880, 885-86 (N.D. Ill. 2002) (referring to Australian case and commentator, John Honnold).

88. 164 F. Supp. 2d 1142, 1151 (N.D. Cal. 2001).

89. The court also delineated that the scope of the CISG’s preemption was limited to the formation of contracts and the rights and obligations of the seller and buyer arising from the contract. Id. See Peter Schlechtriem, The Borderland of Tort and Contract: Opening a New Frontier? 21 Cornell Int’l L.J. 467, 473-74, also available at <http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem.html> (CISG does not pre-empt tort claims. However, great care must be exerted to ensure that a "tort" is truly a tort. Any gap between tort and contract law, should result in pre-emption.)

90. 164 F. Supp. 2d at 1151.

91. If the experience of parties to a contract governed by the CISG is replete with ambiguity and uncertainty caused by the inappropriate exercise of domestic law, more and more parties will begin to embrace their Article 6 privilege to opt-out of the CISG. See CISG Article 6, "[t]he parties may exclude the application of this Convention." Such a result would be nothing short of tragic.

92. A proper understanding of uniformity does not require blind obedience, but rather requires an awareness and a respect for interpretations of the CISG from outside one’s own legal culture. Flechtner, supra note 66, at 188.

93. "Correspondence with Albert Kritzer".

94. CISG Article 7; Honnold, supra note 9, at 88-89.

95. "[O]ne threat to international uniformity in interpretation is a natural tendency to read the international text through lenses of domestic law." Honnold, supra note 64, at 208.

96. International jurisprudence includes court and arbitral decisions.

97. "Correspondence with Albert Kritzer"; Honnold, supra note 9, at 88-114 (discussion of Article 7).

98. Ferrari, Franco, "Applying the CISG in a Truly Uniform Manner: Tribunale di Vigevano (Italy), 12 July 2000," Uniform Law Review / Revue de Droit Uniforme 203, 204-05 (2001).

99. Netherlands Arbitration Institute Case No. 2319 <http://cisgw3.law.pace.edu/cases/021015n1.html>

100. Tribunale de Vigevano, 12 July 2000 (Italy), available at <http://cisgw3.law.pace.edu/cases/000712i3.html>, UNILEX Case No. 405 <http://www.unilex.info/case.cfm?pid=1&do=case&step=Abstract>.

101. Ferrari, supra note 98, at 214.

102. Sant’Elia, Charles , supra note 82.

103. Id.

104. Tribunale di Rimini, 26 November 2002 (Italy), available at <http://cisgw3.law.pace.edu/cases/021126i3html>, translation by Angela Maria Romito, UNILEX Case No. 3095 <www.unilex.info/case.cfm?pid=1&do=case&id=823&step=Abstract>

105. Even though foreign court decisions and arbitral awards may only have persuasive and not binding value, these decisions and awards should still be taken into consideration by judges in order to advance the goal of uniformity. Tribunale de Vigevano, 12 July 2000 (Italy), available at <http://cisgw3.law.pace.edu/cases/000712i3.html>, translation by Francesco G. Mazzota.

106. For examples of additional opinions that cite foreign decisions, see Rechtbank van Koophandel Hasselt, 6 March 2002 (Belgium), <http://cisgw3.law.pace.edu/cases/020306b1.html>; Oberster Gerichtshof, 13 April 2000 (Austria), <http://cisgw3.law.pace.edu/cases/000413a3.html>; Cour d’appel Grenoble, 23 October 1996 (France), <http://cisgw3.law.pace.edu/cases/961023f1.html>; Tribunale Cuneo, 31 January 1996 (Italy), <http://cisgw3.law.pace.edu/cases/960131i3.html>. Tribunale de Vigevano, 12 July 2000 (Italy), available at <http://cisgw3.law.pace.edu/cases/000712i3.html>, translation by Francesco G. Mazzota.

107. Common law observers saw little reason to retain price reduction. However, when they expressed their views as to the difficulties caused by price reduction and suggested not including such a provision, the "representatives from civil law systems insisted on retaining this feature of their legal heritage." Honnold, supra note 9, at 313.

Pace Law School Institute of International Commercial Law - Last updated December 4, 2003

Go to Database Directory || Go to Bibliography || Go to Annotated Text of Article 50 CISG
Comments/Contributions

Understanding the Remedy of Price Reduction – A Means to Fostering a More Uniform Application of the United Nations Convention on Contracts for the International Sale of Goods

Understanding the Remedy of Price Reduction – A Means
to Fostering a More Uniform Application of the United Nations
Convention on Contracts for the International Sale of Goods