In on the International Sale of Goods to bring

In
1980, the United Nations proclaimed formally the convention on the
International Sale of Goods to bring an identical laws for transactions of
international commercial contracts. The main objective was to develop the
competence of these transactions and encourage growth of international trade.
Today, more than sixty countries are supporting the convention which includes
Australia, China, France, Germany, Russia and the United States. Albeit the
CISG has successfully proven at various extent. It has not been very successful
in the field which is very critical to disputing parties (damages for contract
violation). Undoubtedly of all the CISG articles, the articles related to
economic remedies are the most written about and largely prosecuted. Because of
inadequacy in uniform guidelines, equivalently at times positioned parties are
presented with enormous decisions; such inequality sabotage the scope of the
CISG and may compel parties to embrace and implement a sales law rather than
the CISG. Primary reasons for such situation is that these CISG guideline does
not ensure any precise economic remedies. Rather it only explains basic
regulatory provisions for recovery of damages. This is so indisputable. As John
Honnold, who played vital role in the CISG drafting stated, a violation of
contract may take place in almost all relevant situations and therefore no law
can stipulate specific regulations for damages calculation in all probable
circumstances. Whereas the provisions of the CISG only describes basic
guidelines to regulate compensation in the event of breach of contract. These
guideline allows court of justice to resolve afflicted party’s deprivation
depending upon particular case circumstances.

Unfortunately,
such inadequate precision resulted in a great dispute and apparently increasing
consequences.

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There
have been many debates that intermissions in the provisions of CISG damages
should be covered by the Principles of UNIDROIT of International Commercial
Contracts. In my view, principles of the UNIDROIT should not be used for
filling gaps in the CISG. Yet, the UNIDROIT principles may still play important
role in the CISG. These provisions helps to understand basic CISG principles
that provides guideline to regulatory and court of justice to settle issues
which are not clearly dealt with in the convention. Furthermore, they provide assistance
for solution to widely open matters held out of analysis of the convention
itself.

In
my view, the principles of UNIDROIT should not be used as formal outlook of regulatory
to form principles which cannot be acquired from the provisions CISG. They may
play vital role in decoding the convention.

Ø THE UNIDROIT PRINCIPLES AS A
GAP-FILLER IN THE CISG

The
principles of UNIDROIT encourages basic guidelines for international commercial
transactions. Their aim is to set up a uniform law which is specifically
designed to be used all over the world irrespective of the regulatory
traditions and the economic and political conditions of the nations in which
they are to be enforced.

The
founders of the principles OF UNIDROIT expected them to implement in a wide
range of situations. The preamble explains that:

It
may be interpreted when the parties have agreed that their contract be ruled by
themselves.

It
shall be interpreted when the parties have agreed that their contract be ruled
by fundamental guidelines of the regulatory. For example, lex mercatoria.

It
shall be interpreted when the parties have not agreed that their contract is
not governed by any regulatory.

It
can be used in the application or to supplement domestic law.

It
can be used as an example for both national and international administrators.

Although
the principles of UNIDROIT follow perceptions found in various regulatory
systems, as well as they represent what are anticipated to be the best resolution
even though it is not adopted generally. Thus, clearly they do not summarize
already existing guidelines found in most regulatory system.

In
numerous circumstances, the guidelines in the principles of UNIDROIT are based
upon or similar to articles found in the CISG provisions. Such as, the
principles of UNIDROIT Article 1.9(1), which expresses the parties are liable
to any regulations to which they have agreed and by any other proceedings which
they have settled among themselves, is almost similar to Article 9(1) of the
CISG. Furthermore, Article 5.1.7(1) of the principles of UNIDROIT, which deals
with the general guidelines for deciding the contract price when the agreement
does not make arrangement for deciding the contract price is identical to
Article 55 of the CISG. At some instances, the UNIDROIT principles follows
basic means which are generally found in the CISG provisions, but adopt the
guideline to reaffirm the certainty, scope and extent of the provisions. For
instance, Article 7.2.2 of the principles of UNIDROIT which deals with the
right to require accomplishment of non-monetary responsibilities follows the
basic guidelines of Article 46 of the CISG provisions but involves “certain
qualifications.”

The
provisions for damages under the principles of UNIDROIT can be compared to the
provisions of the CISG in numerous ways.

Article
74 of the CISG states general provisions for recovery of damages. It grants:

Damages
for violation of contract by either party includes an amount equivalent to the
suffered loss, comprising profit loss which other party suffered as aftermaths
of the violation of contract. These damages may not surpass which the party in
violation anticipated or need to have anticipated at the time of the contract
completion, in the facts certainty and the issues which were then noticed or
need to have noticed as a probable aftermath of the contract violation.

Thus
Article 74 of the CISG provisions not only provides recovery for actual
suffered loss but also for net profit forbidden. Yet, it does not provide
certain rules for calculations of damages. Rather Article 74 of the CISG allows
court of justice to resolve the afflicted party’s loss depending upon the
circumstances in certain cases. The objective of the Article 74 of the CISG is
to provide “benefit of bargain” to the afflicted party. Thus, Article 74 of the
CISG is adequately interpreted to compensate an afflicted party all damages
suffered as an outcome of the breach of contract. Though all damages claim
comprised in Article 74 of the CISG are liable to conventional restrictions
enforced on the damages recovery for violation of contract, such as, the
principle of foreseeability and mitigation.

Articles
75 and 76 of the CISG provides very narrow substitutes to Article 74 of the
CISG. Article 75 of the CISG states procedure for damages calculations when the
afflicted party has refrained the contract and tried to get into alternative
transactions. The afflicted party here is entitled recover the differing sum
between the price of contract as well as the alternative transaction price and
any other suffered which can be recovered under Article 74. On the contrary
Article 76 of the CISG sets forth that when an afflicted party has refrained
the contract but has not made an alternative transaction under Article 75 of
the CISG. It is only available to damages measured by the difference between
the prices fixed by the contract and the current price at the time of avoidance
and any other suffered loss which can be recovered under Article 74.

In
various ways, provisions for the damages in the UNIDROIT principles are very
much similar to the guidelines of the CISG. Alike Article 74 of the CISG, the
UNIDROIT principles states general proposition that the party breaching
contract is liable to compensate the afflicted party for all damages suffered
by the afflicted party. The UNIDROIT principles moderate damages to those which
were foreseeable, similar to the CISG provisions. However, UNIDROIT principles
comprises more precise guidelines and in the case of nature and extent of compensation,
the principles of UNIDROIT are wider than the CISG provisions.

The
principles of UNIDROIT comprises provisions similar to Articles 75 and 76 of
the CISG. Similar to CISG Article 75, Article 7.4.5 of the UNIDROIT principles
sets forth when the afflicted party has not completed the contract and has made
a substitutional provision for transaction within a said time period and in a
moderate way it may recover the differing sum between the price of contract and
the price of the substitutional transaction and damages for any other suffered loss
as well. Furthermore like Article 76 of the CISG, UNIDROIT principles Article
7.4.6 sets forth: when the afflicted party has not completed the contract and
has not made a substitutional transaction but there is a current price for the
completion of the contract, which may recover the differing sum between the
contract price and the price which has taken place when the contract is
terminated as well as damages for any other suffered loss.

The
clear difference which should be noted is that Article 5 of the CISG
particularly sets out claims for damages arising from personal injury or death,
whereas the principles of UNIDROIT cover these damages.

There
are some issues which damages provisions in the CISG does not specifically
state but are covered by the principles of UNIDROIT. First is that the CISG
provisions do not specifically mandate that damages consist of any compensation
received by the afflicted party arising from the breach of contract. Whereas,
the principles of UNIDROIT precisely comprises these compensations. Second is
that Article 74 of the CISG does not state the scope and extent to which the
afflicted party must determine in order to recover damages that it suffered
loss. On the contrary, the UNIDROIT principles Article 7.4.3 address that
compensation is considered to be paid only for harm, comprising future loss
which is an outcome of a moderate extent of certainty. The CISG has no
provision for the currency to be used in loss calculation as well. Whereas, the
UNIDROIT principles expressly address that damages must be determined either in
the currency in which contract was completed or in the currency in which loss
was suffered, whichever is more convenient.

Perhaps
Article 78 is the most prosecuted guideline of the CISG, which addresses issues
relating to payment of interest. Despite article 78 needs paying interest
whenever payment is in debts, but it does not determine how to calculate owed
interest.

Whereas,
the principles of UNIDROIT consist of precise guidelines on interest. Article
7.4.9 of the UNIDROIT principles addresses that interest is payable from the
time when payment is due. The UNIDROIT principles with respect to the
applicable rate of interest encourages hierarchy to determine the appropriate interest
rate, coming out with the common interim lending rate to primary borrowers
prevailing for the currency of payment at the place of payment. If such rate
does not exist, the UNIDROIT principles stipulates that interest grows at
nominal prime rate in the State of currency of payment. Whereas in the absence
of such rate of interest, the interest rate is to be decided by the regulatory
in the State of currency of payment.

Ø APPLYING THE UNIDROIT PRINCIPLES IN
THE INTERPRETATION OF THE CISG

Till
the date, regulatory and tribunals have adopted the principles of UNIDROIT
regarding interpretation of the CISG provisions in various ways. Firstly, when
the parties have particularly described the application of the UNIDROIT
principles to support the CISG, parties’ contracts typically respected by the
regulatory and tribunals. Secondly, the principles of UNIDROIT have been used
as supplement for resolutions which are outcome of other sources of authority
by its application. Thirdly, using these UNIDROIT principles as a gap-filler in
the CISG. For example, some courts have applied Article 7.4.9 of the UNIDROIT
principles to determine the issues which are not covered in the Article 78 of
the CISG, specifically to settle the rate at which interest increases. This
application has been matter of dispute which is apparently inappropriate.

Ø ACCURATELY DECODING THE CISG

The
CISG Article 7 addresses interpretation of the convention which states:

1)      In
the application of this convention, main objective is to be had to its
universal integrity and to the requirement to encourage equality in its
interpretation and the compliance of good faith in international commercial law.

2)      Problems
ruled by this convention which are not precisely covered in it shall be
resolved in compliance with the general provisions on which it is established
or, in the absence of these provisions, in compliance with the applicable rules
by integrity of the law of private international commercial law.

To
fill gaps in the CISG by using the UNIDROIT principles, exponents have sets
forth three interpretation of this Article. Amidst which first is the
principles of UNIDROIT are used as gap filler in the CISG as the UNIDROIT
principles are considered as addressing general guidelines of international
contract law upon which the convention is established. Secondly, the principles
of UNIDROIT are used as gap filler in the CISG only when the significant UNIDROIT
principle article and the significant CISG provision are identical in the
context and framework so that the principles of UNIDROIT are substantially
providing “meat on the bare bones” of the CISG provisions. Thirdly, the
principles of UNIDROIT are used as gap filler in the CISG even though the
general guidelines upon which they are established cannot directly be
determined from the convention.

In
my view, it is overemphasizing to apply the principles of UNIDROIT as the
primary source of power to fill a gap in the CISG. Although articles in the
principles of UNIDROIT generally correlate to the CISG provisions, and these
principles are not solely an abstract of general principles of international
contract law. As the administrative authority of UNIDROIT elucidated in the
introduction that these principles not only express ideas found in numerous
legal system but also represents what are considered to be best resolutions,
even though it is not widely adopted. Thus, these principles altogether does
not express general principles on which the convention is established.

Often,
the principles of UNIDROIT supports the understanding of CISG provisions and
the conclusion obtained from them. Article 7.4.3 of the UNIDROIT principle states
Compensation is to be paid for suffered, comprising future loss which is an
outcome of the moderate extent of certainty. Hence, this article re-establish
the important requirement of certainty of suffered loss, since it is not
possible that the non-performing party to pay compensation for damages which
may not have taken place or which may never take place even in future. Thus,
Article 7.4.3 of the UNIDROIT principle similar to provision of the CISG
underlying that full compensation is conditional to restraint, comprising the
restraint that person can recover loss only when it is occurred indeed or there
are possibility to occur. In such situation, the principle of UNIDROIT supports
the principle of certainty of harm and aids in understanding of “reasonable
certainty” as well which is expressed through the convention solely. The
principles of UNIDROIT also sets forth that a reasonable certainty requirement
is in favor with universally known principle. Hence, these principles emphasize
ideals of protecting aspects of the CISG internationally and encouraging
uniformity in the interpretation of CISG.

Ø CONCLUSION

In
short, although the principles of UNIDROIT should not be used as gap filler in
the CISG as a primary source of power, they play very important role in finding
resolutions for the issues which are not covered in the provisions of the
convention. Accordingly it can be anticipated that an appropriate communication
between the principles of UNIDROIT and the provisions of CISG eventually
promotes more equitable and uniform out comes under the convention.