Conformity of Goods in International Sales Under CISG and English Law : Which instrument has more convenient conformity rules for international trade?

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MASTER THESIS EUROPEAN PRIVATE LAW

Conformity of Goods in International Sales Under

CISG and English Law

Which instrument has more convenient conformity rules for international trade?

Ali Ihsan Yarar July 2016

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Dedication

To my parents for their endless and unconditional love and support

Author: Ali Ihsan Yarar Student Number: 11119780 Date: 28.07.2016

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Acknowledgments

I would like to thank European Union for financing the Jean Monnet Scholarship Programme and the authorities of the Programme for providing me this scholarship. I would also like to thank Türk Eximbank (Export Credit Bank of Turkey) for approving my one-year leave of absence to finish my LLM programme.

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Abstract

The concept of conformity of goods plays a central role in international sales transactions and be the subject of many disputes between international traders. As it is seen in practice that these standards are sometimes not designated by the parties explicitly or implicitly, it is important for a sales law regime to establish default rules both regulating the express and implied conformity obligations of the parties considering the needs of the international traders. Since CISG and English law have been accepted by international traders and United Kingdom still hasn't ratified CISG, in this paper I have analyzed which instrument has more convenient conformity rules for international sales transactions. Determining the convenience I have examined default rules regulating the contractual conformity obligations and implied conformity obligations respectively in a descriptive way, introduced three criteria; efficiency, predictability and legal certainty as functions of non-conformity rules, and finally compared these default rules of mentioned instruments in the light of these criteria. Default rules achieving efficiency generate more benefits than their costs and minimize their costs in order to maximize the wealth of society. I have examined efficiency in two folds: Ex-ante efficiency affects the parties' behaviour before the time of the performance and aims to create rules for which parties would bargain in order to reduce time and effort that parties invest to reach an agreement. Ex-post efficiency, on the other hand, affects the parties' behaviour after the time of the performance and aims to create rules that not easily grant the right of rejection of goods considering that resale is not feasible in international sales. The second criterion I have introduced is the predictability criterion which allows parties to predict their rights and liabilities before and after the performance due to fairness and efficiency considerations. In the light of this, default rules should be clear, straightforward and suitable to reduce the risk of litigation for unsophisticated parties. The third criterion I have introduced is the legal certainty criterion which requires the courts to ensure certainty via interpreting and enforcing the law in a way that similarly situated parties receive the same results due to fairness and efficiency considerations. Examining the criterion of legal certainty and predictability I have assumed that the contracting parties are unsophisticated. Additionally although determination of conformity of goods is a broad subject comprising many issues like pre-contractual negotiations, formation and interpretation of contract and examination and notification duties I have confined myself to the mere subject of conformity of goods rules. Within this frame I have concluded that CISG ensures efficiency, predictability and legal certainty better than English law, therefore it has more convenient conformity rules for international trade.

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Table of Contents

Introduction ...2

Chapter 1. Functions of Legal Rules Regulating the Conformity of Goods in International Trade ...4

Chapter 2. Conformity of Goods in International Sales Under CISG and English Law ...7

2.1. The Contractual Conformity Obligations...7

2.1.1. Quantity ...7

2.1.1.1. The Position Under CISG (Article 35/1) ...7

2.1.1.2. The Position Under English Law (Section 30) ...8

2.1.1.3. Comparison Between The Two Systems... 10

2.1.2. Quality, Description, Packaging ... 11

2.1.2.1. The Position Under CISG (Article 35/1) ... 11

2.1.2.2. Express Terms Under English Law ... 13

2.1.2.3. Comparison Between The Two Systems... 14

2.2. The Implied Conformity Obligations... 16

2.2.1. The Position Under CISG (Article 35/2) ... 16

2.2.1.1. Fitness for the ordinary purpose (Article 35/2/a) ... 16

2.2.1.2. Fitness for the particular purpose (Article 35/2/b) ... 22

2.2.1.3. Sample or model (Article 35/2/c) ... 24

2.2.1.4. Packaging (Article 35/2/d) ... 25

2.2.2. The Position Under English Law ... 26

2.2.2.1. Correspondence with description (Section 13) ... 26

2.2.2.2. Satisfactory quality (Section 14/2)... 28

2.2.2.2.1. Fitness for all common purposes... 31

2.2.2.2.2. Appearance and finish and freedom from minor defects ... 33

2.2.2.2.3. Safety ... 33

2.2.2.2.4. Durability ... 34

2.2.2.3. Reasonable fitness for a particular purpose (Section 14/3) ... 34

2.2.2.4. Sale by sample (Section 15) ... 37

2.2.3. Comparison Between The Two Systems ... 38

Conclusion ... 52

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2

Introduction

When parties enter into an international sales transaction both parties need to perform their obligations. The buyer's duty to pay the contract price of the goods and the seller's duty to deliver goods in conformity with the contract constitute the primary obligations of the parties in this regard. In the light of this, the concept of conformity of goods plays a central role in international sale transactions and be the subject of many disputes between international traders. The standards determining the conformity of goods are usually designated by the sales contract. However it is also seen in practice that these standards are not designated by the parties explicitly or implicitly. Therefore it is important for a sales law regime to establish default rules both regulating the express conformity obligations as well as implied conformity obligations of the parties considering the needs of the international traders.

In this paper I will examine and compare the conformity rules of The United Nations Convention on Contracts for the International Sale of Goods (CISG) and English the Sale of Goods Act 1979 (SGA) sales law regimes in order to find the instrument which has more convenient conformity rules for international trade. CISG, as an international uniform rules, was signed in Vienna in 1980 in order to "contribute to the removal of legal barriers in international trade and promote the development of international trade."1 After its entry into force in 1988 it has gained worldwide acceptance; as of now it has been ratified by 84 countries from different legal traditions2 and it is estimated that it potentially governs eighty percent of all international sales transactions.3 English law, on the other hand, plays a leading role as the governing law of international sales of commodities the great majority of which involve transactions and parties that don't have any physical connection with the United Kingdom.4 Since both instruments have been accepted in international trade and United Kingdom is still reluctant to ratify CISG, it is important to determine the instrument which has more convenient conformity rules for international trade bearing in mind the features of international sale transactions. Within this frame, in this paper, conformity rules functioning in a way that ensuring efficiency, predictability and legal certainty are deemed to be more convenient rules in international sales. In this paper I will assume that the governing law is CISG or English law without taken into account private international rules. Additionally examining the criterion of legal certainty and predictability I will assume that the contracting

1

CISG Preamble

2

For the countries adopted Convention, Pace CISG database can be used.

3

Schwenzer & Hachem, The CISG- Successes and Pitfalls, 57 Am. J. Comp. L., 2009, p. 457 [online]

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3 parties are unsophisticated.5 I would also like to note that although determination of conformity of goods is a broad subject comprising many issues like pre-contractual negotiations, formation and interpretation of contract and examination and notification duties I will confine myself to the mere subject of conformity of goods rules.

In Chapter 1, I will examine the "Functions of Legal Rules Regulating the Conformity of Goods in International Trade" and explain the criteria of efficiency, predictability and legal certainty that make the conformity rules more convenient. In Chapter 2, the default rules concerning the "Conformity of Goods in International Sales Under CISG and English law" will be examined under two major sub-chapters. In 2.1, the default rules regulating "The Contractual Conformity Obligations" of the parties will be examined in two sub sections. In 2.1.1, the default rules concerning the "Quantity" of the goods and in 2.1.2, the default rules concerning the "Quality, Description and Packaging" of the goods will be examined in a descriptive way and compared in the light of the above mentioned criteria. In 2.2, the default rules regulating "The Implied Conformity Obligations" of the parties will be examined and compared in the same way. Finally in Conclusion, I will make my final comments expressing the view that CISG ensures efficiency, predictability and legal certainty better than English law, and that it has more convenient non-conformity rules for international trade.

5

In my experience parties are usually unsophisticated in international sales. Additionally some authors also reached the same conclusion in their papers. "It therefore seems possible to say that the vast majority of international sellers and buyers are unsophisticated, legally speaking." Cuniberti, Is the CISG Benefiting

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4

Chapter 1. Functions of Legal Rules Regulating the Conformity of Goods in International Trade

Considering that both CISG and English law play a central role in international trade and non-conformity rules are frequently be the subject of disputes between international traders it is important to compare these instruments to find the more convenient conformity rules for international trade bearing in mind the features of international sale transactions. In this respect in order to find the convenient conformity rules I will assume with a consequentalist perspective6 that the function of the default rules of non conformity of goods is to ensure efficiency, predictability and legal certainty.

Efficiency requires default rules to generate more benefits than the sum of their costs.7 Although voluntary exchanges induce transaction costs including the negotiating and drafting the contract, in order to maximize the "net" benefit to society, efficiency needs these costs to be minimized.8 In this respect one method of reducing contracting costs is to introduce default rules regarding the content of the contract9 because default rules reflecting the same results which parties would have bargained for would reduce time and effort devoted by commercial parties in order to reach an agreement. 10 Since this aspect of efficiency is related with the default rules which affect the parties' behavior until the time of the performance, which is usually the moment of supplying the goods, I will refer this type of efficiency as ex-ante efficiency.

In addition to this aspect, efficiency should also ensure the net benefit maximization after the performance is realized. In this respect efficient rules must take into account the characteristic features of international sale transactions. First of all, since international sales are realized between different states, parties firstly must deal with different law systems, regulations, and commercial customs11 and secondly with the economic and political risks of the state where the other party is situated. Secondly, since international sales usually take place across long

6

Consequentalist perspective focuses to the effects of the rules and views contract law as an instrument to achieve societal goals. Dimatteo, The Norms of the Contract, 24 Hofstra L. Rev, 1995-1996, p. 376 [online]

7

Zamir, Toward a General Concept of Conformity in the Performance of Contracts, 52 Louisiana Law Review, 1991, p. 68 [online]

8

Ibid, p. 69

9

Dimatteo & Ostas, Comparative Efficiency In International Sales Law, 26 Am. U. Int'l L. Rev. 371, 2010-2011, p. 389 [online]

10

Gillette & Ferrari, Warranties and Lemons Under CISG Article 35(2)(a), IHR 1/2010, p. 3 [online]

11

Katz, Remedies for Breach of Contract Under the CISG, International Review of Law and Economics 25, 2005, p. 383 [online]

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5 physical distances,12 the transaction costs of these sales are higher than the domestic sales.13 Therefore, it is more costly to deliver goods over large distances, more costly to exchange information especially when miscommunication creates risk of cost, more costly to monitor the performance of the other party, more costly to examine whether the performance of the other party complies with the contract and more costly to find contracting parties reliable and in good financial situation.14 Additionally it should be noted that all these costs lead parties to make greater relationship-specific investments15 and as a result of this, parties become more dependant to each other and finding alternative reliable parties or manufacturing alternative goods become more costly. Considering all these costs the legal system in which rejection of goods is not easily granted is more efficient because after the rejection, reselling of the same goods will lead these costs to be made again. Even if there is a readily secondary market in the buyer's country comprising reliable buyers there is a risk that the goods become less valuable because of the time passed between the manufacturing and reselling of the goods.16 Additionally since the preservation of the rejected goods is costly and the seller has to sell and cash his goods, the new buyer is in a better dealing position than the seller. For these reasons in case of reselling there is a high possibility that the seller is undercompensated. In order to prevent such waste the right to reject should be discouraged in international sales. This aspect of efficiency is related with the default rules affecting the parties' behavior after the performance is realized, therefore I will refer this type of efficiency as ex-post efficiency. Default rules of non conformity of goods should also ensure predictability which allows parties without going to court to predict their possible rights and liabilities determined by the rules applicable to their contractual relationship. Within this frame default rules should be clear, straightforward and suitable to reduce the risk of litigation. This can be justified by fairness and efficiency considerations. Fairness is a slippery and vague concept, therefore we shall not try to define it.17 However we can say that it would be fair for both parties to foresee their rights and liabilities before and after the performance. Predictability also allows parties

12

In one of his speeches the President of the Turkey National Committee of the International Chamber of Commerce (ICC) noted that Turkey's average export radius is 2,846 km, Mexico’s is 4,574 km, Korea’s is 6,651 km, China’s is 6,884 km and Brazil’s is 10,251 km [online]

13

14

Ibid, p. 383

15

Yan, Remedies under the Convention on Contracts for the International Sale of Goods and the United

Kingdom's Sale of Goods Act, City University of Hong Kong Law Review, 2011, p. 130 [online]

16

Varying to the type of the goods, the goods can be perished, damaged or outmoded.

17

Zamir, Toward a General Concept of Conformity in the Performance of Contracts, 52 Louisiana Law Review, 1991, p. 85 [online]

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6 to use their resources efficiently, because if the parties can predict their rights and liabilities they can mitigate their risk by using insurance or other mechanisms. 18 Additionally it should be noted that pursuing litigation internationally is costly due to dealing with different legal systems, hiring local lawyers, presenting and transporting related evidence to foreign courts or tribunals, making translation and legalization costs and the difficulty of enforcing the judgment in a foreign country. 19 Of course whether the parties are sophisticated or not affects the predictability of the rules. Sophisticated parties are aware that the legal regime governing the contract is important20 and they are in possession with good legal and business information.21 Unsophisticated parties, on the other hand, give more emphasis to the substantive issues of their agreement and don't consider that the governing legal regime is important. 22 Since they are in the opinion that they don't need lawyers for negotiating substantive contractual obligations, they negotiate without lawyers before and after the performance.23 As a result of this they don't know the conditions and consequences of provisions and terms that have technical meaning. In this paper I will assume that the parties are unsophisticated.

Non-conformity rules should also be applied to ensure legal certainty concerning the interpretation and enforceability of the default rules. 24 In order to ensure legal certainty it is not sufficient to create a legal instrument25 since "even when outward uniformity is achieved...uniform application of the agreed rules is by no means guaranteed, as in practice different countries almost inevitably come to put different interpretations upon the same enacted words."26 Therefore, when parties decide to litigate the dispute, courts should ensure legal certainty via interpreting and enforcing the law in a uniform way that similarly situated parties receive the same results.27 Uniformity, however, shouldn't be understood in an absolute way because laws are never applied always in the same way even in domestic laws.28

18

Cook, CISG: From The Perspective of the Practitioner Journal of Law and Commerce, 1997-1998, p. 350 [online]

19

Katz, The Relative Costs of Incorporating Trade Usage into Domestic versus International Sales Contracts, 5 Chi. J. Int'l L. 181, 2004, p. 189 [online]

20

Cuniberti, Is the CISG Benefiting Anybody?, Vand. J. Transnat'l L., 2006, p. 1522 [online]

21

22_{Cuniberti, Is the CISG Benefiting Anybody?, Vand. J. Transnat'l L., 2006, p. 1520 [online]} 23

Ibid, p. 1520 [online]

24

Kornet, The Interpretation and Fairness of Standardized Terms, EBLR, 2013, p. 320 [online]

25

Ferrari, Do Courts Interpret the CISG Uniformly?, in Quo Vadis CISG?, 2005, p. 3 [online]

26

Ibid, p. 3

27

Gotanda, Using the Unidroit Principles to Fill Gaps in the CISG, Villanova Law, Public Policy Research, 2007-18, p.2, [online]

28

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7 Since the law is an activity subject to examination, the goal of the judge in difficult cases should be to achieve a reasonable result rather than a demonstrably right one.29 So the notion of uniformity had to be of varying degree but these degrees should be similar.30 Legal certainty can be justified in the light of fairness and efficiency considerations. It can be justified by fairness because it would be unfair if similarly situated parties have different rights and obligations. Legal certainty also provides efficiency which the free market is mandated because if parties cannot enforce their contract, private actors would be unwillingness to enter into transactions.31 Since parties can choose the competent court, whether the parties are sophisticated or not affect the legal certainty. As is explained unsophisticated parties negotiate without their lawyers. When unsophisticated parties determine the applicable law, with an aim of consistency they may grant jurisdiction to the courts of the state same with the state of the applicable law, they may grant jurisdiction to arbitrators seated in the third state32 or they may not determine any jurisdiction at all. Examining this criterion I will assume that the parties are unsophisticated and that every choice has the same probability, approximately %33, to be seen in practice.

Chapter 2. Conformity of Goods in International Sales Under CISG and English Law 2.1. The Contractual Conformity Obligations

2.1.1. Quantity

2.1.1.1. The Position Under CISG (Article 35/1)

According to CISG article 35/1: "The seller must deliver goods which are of the quantity... in the manner required by the contract." In this respect, CISG article 51 says that: "If the seller delivers only a part of the goods ..., articles 46 to 50 apply in respect of the part which is missing..." In this respect although the contract intended to be delivered as a whole but only a part of the goods delivered33, the seller can use his right to cure for the missing part34 and the

29

Dimatteo, The Norms of the Contract, 24 Hofstra L. Rev, 1995-1996, p. 440 citing Richard A. Posner, The

Problems of Jurisprudunce, 1990, p. 220-244

30

Andersen, Defining Uniformity in Law, 12 Unif. L. Rev. n.s. 5, 2007, p. 35

31

Dimatteo, The Norms of the Contract, 24 Hofstra L. Rev, 1995-1996, p. 391

32

Cuniberti, Is the CISG Benefiting Anybody?, Vand. J. Transnat'l L., 2006, p. 1520 [online] These choices don't make the parties sophisticated because they still consider law not important and negotiate without their lawyers, therefore every choice has the same probability, approximately %33, to be realized in practice.

33

If there is an installment contract and seller failures to perform an installment CISG artcle 73 applies. Kee,

Remedies for breach of contract where only part of the contract has been performed, 6 Vindobona Journal of

International Commercial Law and Arbitration, 2002-2, p. 281-282 [online]

34

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8 buyer can use his alternative rights; he may fix an additional period of time35 and claim specific performance for the missing part36, claim substitute goods if the lack of conformity constitutes a fundamental breach37, accept the goods and reduce the contracting price38, claim damages39, avoid the contract partially for the missing part40 or if the breach amounts to a fundamental breach of the contract he may avoid the contract entirely.41

In case of an excessive delivery CISG article 52/2 states that: "If the seller delivers a quantity of goods greater than that provided for in the contract, the buyer may take delivery or refuse to take delivery of the excess quantity. If the buyer takes delivery of all or part of the excess quantity, he must pay for it at the contract rate." According to this provision the buyer has to keep the goods required by the contract and he cannot reject all delivered goods. Additionally he has a right to take the part of the excessive goods instead of taking all. Moreover, although it is not expressly stated in the provision, it is noted that the buyer may avoid the whole contract if he is not able to reject the extra goods and the excessive delivery constitutes a fundamental breach. 42

2.1.1.2. The Position Under English Law (Section 30)

According to the Sales of Goods Act (SGA) section 30/1: "Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered he must pay for them at the contract rate." So in case of short delivery the buyer has two alternative rights, he can reject all the goods or he can accept all the goods.43 Moreover the seller cannot use his right to cure with respect to missing part because section 31/1 states that "Unless otherwise agreed, the buyer of goods is not bound to

35_{CISG art. 47/1} 36 CISG art. 46/1 37 CISG art. 46/2 38 CISG art. 50 39 CISG art. 47/2 40

CISG art. 49/1/a and 51/1

41

CISG art. 51/2

42

Luca, The Conformity of Goods to the Contract in International Sales, 27 Pace Int'l L., 2015, p. 189, annotation 90 [online] citing United Nations Conference on Contracts for International Sale of Goods, Oficial Records (1980) para 9 "If it is not feasible for the buyer to reject only the excess amount, as where the seller tenders a single bill of lading covering the total shipment in exchange for payment for the entire shipment, the buyer may avoid the contract if the delivery of such an excess quantity constitutes a fundamental beach"

43

Mahasneh, The Seller’s Obligation of Delivery and Conformity under a Contract for Sale of Goods, 2001, p. 70

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9 accept delivery thereof by installments."44 The general rule is that the seller must deliver the whole goods in one load.45

According to the SGA section 30/2: "Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer may accept the goods included in the contract and reject the rest, or he may reject the whole." Additionally section 30/3 states that "Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell and the buyer accepts the whole of the goods so delivered he must pay for them at the contract rate." In the light of this the law gives the buyer three alternative rights: The buyer may accept the part of the goods he has contracted for and reject the rest, he may reject the whole goods including the part which he has contracted for or he may accept the whole delivery.46

However the SGA also accepts an exception called de minimis rule. According to section 30/2A:

"A buyer may not

(a) where the seller delivers a quantity of goods less than he contracted to sell, reject the goods under subsection (1) above, or

(b) where the seller delivers a quantity of goods larger than he contracted to sell, reject the whole under subsection (2) above,

if the shortfall or, as the case may be, excess is so slight that it would be unreasonable for him to do so."

Although this principle is known by the Latin phrase "de minimis non curat lex" ("the law pays no attention to trifles") and already accepted in common law47 it is also adopted as statutory restriction. According to this principle the courts will tolerate microscopic, however not minor, deviations from the contractual amount.48 It is noted that the statutory restriction is somewhat wider than the principle adopted in common law because the statutory restriction

44

Atiyah & Adams & Macqueen, The Sale of Goods, 2005, p. 139

45

Ibid, p. 139.

46

Mahasneh, The Seller’s Obligation of Delivery and Conformity under a Contract for Sale of Goods, 2001, p. 72

47

48

Bridge, The Sale of Goods Act, 2014, p. 293., Margaronis Navigation Agency Ltd v Henry W Peabody & Co Ltd [1965] 2 QB 430 in which 12.588,2 tons loaded instead of 12.600 tons can be given as an examle. Ibid, p. 292, annotation 263., However it is also noted that "here is a dearth of authority showing the successfull application application of this maxim in cases of short as opposed to long delivery." Ibid, p. 292

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10 make emphasis on the question of the unreasonableness of the rejection.49 The cases where there is a slightly excessive delivery and the buyer is able to separate the contract quantity from the whole delivery, or where there is a slightly short delivery and the buyer does not actually need the whole of the contract quantity and the buyer is compensated for any price increase for the short part can be given as examples to the situation where it would be unreasonable for the buyer to reject the whole delivery.50 Of course the shortfall or excess must be very slight and the court has the authority to determine whether the departure is slight.51

2.1.1.3. Comparison Between The Two Systems

The rules concerning quantity of both systems ensure ex-ante efficiency in an equal manner considering the fact that these rules reflect the default rules that most parties would have bargained for because most commercial parties who rely on express statements would want those statements to induce legal responsibility.52

On the other hand, CISG ensures ex-post efficiency better than English law in the light of the features of international trade and the cost of rejection of goods. According to CISG article 51, in case of short delivery the buyer cannot reject the whole goods unless the shortfall in delivery constitutes a fundamental breach. However under the SGA section 30, the buyer can reject all goods unless the shortfall is so slight that it would be unreasonable for him to do so. The same is also valid for excessive delivery under CISG article 52/2 and the SGA section 30. In this respect we can say that it is harder to reject whole goods under CISG than the SGA because fundamental breach is a more demanding concept than the reasonableness and slightness concepts. While a breach 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 contract53, the buyer may have his own good reasons making his decision reasonable for him54 even though he is not substantially be deprived of what he is entitled to expect under the contract. Additionally although the seller can use his right to cure in CISG, he cannot use this right under the SGA section 31/1.

49_{Tolley, Delivery, Acceptance and Payment, in: Sale of Goods, 2000, p. 300} 50

Ibid, p 300-301

51

Mahasneh, The Seller’s Obligation of Delivery and Conformity under a Contract for Sale of Goods, 2001, p. 74.

52

53

CISG art 25.

54

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11 Considering the predictability requirement both CISG and the SGA have vague terms that may induce litigation for unsophisticated parties. In this respect under the SGA de minimis rule explained as "so slight that it would be unreasonable to reject" can be criticized as a vague term because the Act doesn't give any guidance neither related with the concept of "slightness" nor the concept of "reasonableness".55 Some authors mention that the buyer doesn't have a right to reject, "not when the difference in quantity is slight and it would be unreasonable to reject, but when it is so slight that it would be unreasonable to reject", therefore the unreasonableness of the rejection is measured by the slightness of the departure from the contractual quantity.56 However some authors state that since the provision refers to the unreasonableness of the rejection57 the buyer may have his own good reasons making his decision reasonable for him.58 Under CISG, on the other hand, the technical meaning of term fundamental breach may induce litigation for unsophisticated parties. However the probability of that is lesser under CISG because although CISG article 51explicitly refers to term fundamental breach, it also refers to the right of cure, fixing of an additional period of time, reduction of price and damages which are relatively clearer concepts. Additionally since all these rights are mentioned in the same provision unsophisticated parties are better informed about their rights in a straightforward manner. Moreover, since the right of rejection has serious consequences and doesn't contain any conciliation in it, merely reference of this utmost right may cause ending of a sale relationship more easily and induce litigation. Other rights like fixing of an additional period of time and cure, on the other hand, encourage parties to bargain and continue their communication, therefore possibility of litigation is lesser with these rights. In the light of these we can say that CISG ensures predictability better than English law.

2.1.2. Quality, Description, Packaging

2.1.2.1. The Position Under CISG (Article 35/1)

According to article 35/1 "The seller must deliver goods which are of the ... quality and description required by the contract and which are contained or packaged in the manner required by the contract." This provision provides that the conformity of goods are primarily determined by the contract of the parties and it comprises all kinds of defects except defects

55

Ibid, p. 501.

56

Bridge, The Sale of Goods Act, 2014, p. 293. "It is uncertain what the new section of section 30(2A) adds to the de minimis maxim." Ibid, p. 292

57

Tolley, Delivery, Acceptance and Payment, in: Sale of Goods, 2000, p. 300

58

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12 of title which are regulated under CISG art 41, and defects in intellectual property rights which are regulated under CISG art 42.59 Since the conformity of goods are designated according to the parties' agreement, the existence of defect is evaluated according to the subjective criteria determined by the parties, therefore any inconsistency is to be considered as a lack of conformity even if it has no objective consequences on usability or value of the goods.60

The contractually determined quality includes physical condition of the goods as well as "all factual and legal circumstances regarding the relationship of the goods to their surroundings".61 Since the party autonomy is paramount only the imaginations of the parties and mandatory public law rules can limit the parties' agreement.62 Therefore, parties can determine that the goods will have also non-physical characteristics, for instance they can decide that the goods should not be produced by child workers or that the goods should be manufactured in an environmentally-friendly way.63

The concept of description establishes the content of the parties' obligations.64 Similar to quality, the goods can be described in a wide manner. For instance the parties may determine that the goods will bear a certain brand or mark or that the goods must be manufactured in a particular country or by a particular manufacturer.65

Since correct packaging is important in international trade CISG article 35 addresses this issue both in express and implied conformity obligations. 66 Therefore, if parties determine the packaging obligation expressly in a detailed way, it is not sufficient for the seller to package the goods in a manner adequate to preserve and protect the goods67, he also must comply with the contractual terms. 68

59

Henschel, Conformity of the Goods, in: An International Approach to the Interpretation of the United Nations

Convention on Contracts on Contracts for the International Sale of Goods (1980) as Uniform Sales Law, 2007,

p. 168.

60

Maley, The Limits to the Conformity of Goods in the United Nations Convention on Contracts for the

International Sale of Goods, 12 Int'l Trade & Bus. L. Rev., 2009, p. 104 [online]

61 Ibid, p. 104 62_{Ibid, p. 104} 63 Ibid, p. 104 64

Bianca, Bianca-Bonell Commentary on the International Sales Law, 1987, p. 273 [online]

65

Maley, The Limits to the Conformity of Goods in the United Nations Convention on Contracts for the

International Sale of Goods, 12 Int'l Trade & Bus. L. Rev., 2009, p. 105 [online]

66

Luca, The Conformity of Goods to the Contract in International Sales, 27 Pace Int'l L., 2015, p. 194 [online]

67

CISG article 35/2/d

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13

2.1.2.2. Express Terms Under English Law

Contractual terms in English law are traditionally classified into two types; the terms that are "fundamental to the whole contract" are called conditions and the terms that are "merely accessory" are called warranties.69 Then with a case law it is also determined that there was a category of terms mid-way between the condition and the warranty which are called innominate or intermediate terms.70

The Sale of Goods Act, does not deal with express contractual obligations, however some references are made in some of its articles.71 For instance the Act, in section 11/3, states that: "Whether a stipulation in a contract of sale is a condition, the breach of which may give rise to a right to treat the contract as repudiated, or a warranty, the breach of which may give rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated, depends in each case on the construction of the contract; and a stipulation may be a condition, though called a warranty in the contract." This subsection therefore does not explain how a condition can be distinguished from a warranty, however it explains the legal effect of these terms.72

A condition can be explained as "a term to which the parties, when making the contract, attribute such importance that it can truly be described as being of the essence of the contract."73 If a condition is breached by the seller, the buyer is entitled to reject the goods as a whole.74 The term warranty, on the other hand, is defined by section 60 as an: "...agreement with reference to goods which are the subject of a contract of sale, but collateral to the main purpose of such contract..." In case of a breach of a warranty the buyer cannot reject the goods as a whole. Since it is rare that one hardly accepts, at the outset, that he doesn't have a right to reject in every situation, very few terms are determined as warranty in practice.75 The innominate term, as a mid-way term, is a contractual term that is neither a condition nor a warranty because the result of the breach depends on the nature of the breach.76 If the nature

69

Samual & Rinkes, The English Law of Obligations, 1991, p. 101

70

Atiyah & Adams & Macqueen, The Sale of Goods, 2005, p. 87.

71

Bridge, A Law For International Sale of Goods, 37 Hong Kong L.J. 17, 2007, p. 20 [online]

72

73

Poikela, Conformity of Goods in the 1980 United Nations Convention of Contracts For the Internationl Sale of

Goods, Nordic Journal of Commercial Law, 2003/1, p. 27 [online]

74

75

Ibid, p. 97

76

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14 and consequences of the breach is sufficiently serious the buyer can reject the goods completely, otherwise the contract remains in force and the buyer can claim only damages.77 Express terms concerning the description, quality and packaging of goods are commonly seen in sales transactions.78 It is still the law that, apart from de minimis rule, any non compliance with the contract leads to the breach of the contract and entitle the buyer to use some remedy.79 The parties can determine a term as a condition or warranty, however in the absence of such an express determination, an express term of the contract will often be treated as an innominate term instead of a condition, unless where the certainty is considered as crucial in the case.80

2.1.2.3. Comparison Between The Two Systems

Economic logic of contract law defers to the individual autonomy and takes the view that individuals are in a better position to consider their interests than courts or governments.81 Individual preferences are highly idiosyncratic and free contracting82 enables parties to signal their idiosyncratic preferences and exchange private information.83 Therefore, giving parties a chance to determine their idiosyncratic needs and make their own agreements without governmental intervention will give the transaction efficiency.84 Both instruments give this chance to parties via enabling them to make their own agreements and opt out from statutory obligations. According to English law, parties are able to opt out of implied conformity obligations in international sales where the Unfair Contract Terms Act 1977 does not apply.85 CISG also states in article 35/2 that the parties may agree otherwise from the statutory provisions. Thus, by recognizing that the parties are able to opt out of statutory conformity obligations and also that the overriding source of standard of conformity between the parties

77

Goods, Nordic Journal of Commercial Law, 2003/1, p. 30 [online]

78

79

Ibid, p. 148

80

Ibid, p. 148.

81

Dimatteo & Ostas, Comparative Efficiency In International Sales Law, 26 Am. U. Int'l L., 2010-2011, p. 387 [online]

82

It is noted that "two contract principles underscore free markets - freedom to contract and freedom from from contract. Freedom to contract means that individuals should be allowed to exchange their entitlements free from government restrictions. Freedom from contract means that the government should not force individuals to transfer entitlements without their consent." Larry A. Dimatteo, Daniel T. Ostas, Comparative Efficiency In

International Sales Law, 26 Am. U. Int'l L. Rev. 371 2010-2011, p. 388-389 [online]

83

Ibid, p. 389

84

Ibid, p. 389

85

Markel, American, English and Japanese Warranty Law Compared, 21 Pace Int'l L. Rev. 163, 2009, p. 182 [online] See salso SGA, s. 55(1),(2). Parties can opt out of these provisions if it is fair and reasonable, however since this condition is evaulated by the courts' sense of fairness, it can hardly be found that opting out of it is unreasonable. Atiyah & Adams & Macqueen, The Sale of Goods, 2005, p. 169

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15 is contract86, we can say that both instruments ensure ex-ante efficiency in an equal manner. These rules also reflect the default rules that most parties would have bargained for because most commercial parties who rely on express statements would want those statements to induce legal responsibility.87

Concerning another aspect of efficiency, CISG ensures ex-post efficiency better than English law because it is harder to reject goods. As is mentioned, under English law in the absence of an express determination an express term of the contract will often be treated as an innominate term. Then the test for the right to terminate and reject the goods is that its breach deprives the buyer of substantially the whole of the benefit, which is very similar to the test for fundamental breach under CISG article 25.88 However CISG in the same article disallows avoidance where the party in breach would not have reasonably foreseen the serious results of the breach on the other party.89 This requirement of foresight, on the other hand, is missing in English law.90

Regarding the predictability criteria it can be said that both fundamental breach and innominate terms are not self evidentiary concepts and constitute some level of vagueness for unsophisticated parties. However as is said parties may also expressly indicate a conformity rule as a warranty or condition and there is a high possibility that unsophisticated parties may not know the results of the usage of these terms. Additionally it is noted that it is not always sufficient to use these terms because even if the parties have determined the term as condition the court may still examine the nature and effects of the breach itself. 91 As a result of this the rights of the parties are largely determined by case law rather than the classification of contractual terms. 92 Moreover the fact that the word "condition" has several meanings also may induce complexity for unsophisticated parties.93 Similarly, warranty has different meanings varying to the context in which it is used. It can be used to specify a contract promise generally and if it is used in that way it also comprises "condition" as a generic

86

Secretariat Commentary on article 33 of the 1978 Draft (draft counterpart of CISG article 35), para. 4 [online]

87

88

Bridge, The UK Sale of Goods Act, The CISG and the Unidroit Principles, in The International Sale of Goods

Revisited, 2001, p. 144-145

89

Ibid, p. 144-145., See CISG art. 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.".

90

Ibid, p. 145

91

Samual & Rinkes, The English Law of Obligations, 1991, p. 102

92

Yan, Remedies under the Convention on Contracts for the International Sale of Goods and the United

Kingdom's Sale of Goods Act, City University of Hong Kong Law Review, 2011, p. 120 [online]

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16 term.94 Additionally the term warranty is also used in insurance law95 and as explained it can also be used as a term whose breach will only give the buyer to claim damages. 96 On a closer examination we can say that the approach adopted by English law is much more complex than the approach adopted in CISG which doesn't adopt warranty and condition classification. In the light of this CISG ensures predictability better for unsophisticated parties.

2.2. The Implied Conformity Obligations 2.2.1. The Position Under CISG (Article 35/2)

Under CISG article 35/1, the question whether the goods are in conformity with the contract first and foremost is determined by the "subjective description of the goods in the contract." 97 However, since in practice parties rarely agree upon all characteristics of the goods, the contract is usually incomplete concerning the conformity requirements of the goods delivered.98 The CISG, therefore, sets out subsidiary objective rules and standards which apply when the parties have neither explicitly nor impliedly agreed on the characteristics of the goods under CISG article 35/1 and the intention of the parties cannot be determined in the light of CISG article 8. 99 Thus, paragraphs (a)-(d) of CISG article 35/2 comprise objective rules and standards that can be referred as the presumed intention of reasonable parties.100

2.2.1.1. Fitness for the ordinary purpose (Article 35/2/a)

According to CISG article 35/2/a, without a party agreement to the contrary, goods must be "fit for the purposes for which goods of the same description would ordinarily be used." Although goods are always bought for a purpose, sometimes parties don't say things that are

94

Samual & Rinkes, The English Law of Obligations, 1991, p. 103. "Evey contractual term, express or implied, is in law a "warranty", and breach of a warranty entitles the innocent party to claim damages. If, however, the term which has been broken is not only a warranty but also a "condition", the innocent party has the option of withdrawing from the contract" Ibid, p. 103, annotation 552

95

"The term warranty has a special meaning in insurance law: here it is a term whose breach discharges the insurer from liability even if the breach is unconnected with the loss." Samual & Rinkes, The English Law of

Obligations, 1991, p. 103

96

Ibid, p. 103.

97

Schlechtriem & Butler, UN Law on International Sales, 2009, p. 113

98

Schwenzer & Hachem & Kee, Global Sales and Contract Law, 2012, p. 385

99

Schlechtriem & Butler, UN Law on International Sales, 2009, p., For the arguement that CISG article 35/2 should be cumulative with express agreements instead of mere default rule that is to apply only if the parties fail to address the question of conformity See Flechtner, Decisions on Conformity of Goods Under Article 35 of the

U.N. Sales Convention (CISG), Pitt Law, Legal Studies Research Paper Series Working Paper No. 2012-19,

2012, p. 9-13 [online] and Flechtner, Conformity of Goods: Inspection and Notice, in International Sales Law: A

Global Challenge, 2014, p. 218

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17 seen as "go without saying".101 Within this frame it is said that the term "ordinary use" suggests that "the goods must be usable under such circumstances as are typical for that kind of good."102 In the light of this when the buyer orders the goods only with general description, without the need to further communication, for instance, food must be suitable for consumption, clothes must be suitable for wearing, cars must be suitable for driving, etc.103 Additionally it is said that the goods must be fit for all ordinary purposes and if the goods are fit for only some of the ordinary purposes the seller must ask the buyer the particular purpose for which these goods are intended to be used, so that if necessary he can refuse the order.104 Additionally when these goods are ordinarily being expected to be used numerous times, they must also have the durability which ensures the reasonable repeated use of the goods.105

The ordinary purpose of goods is determined in compliance with the "objective view of a person in the trade sector concerned"106, therefore it can be said that the standard must be acceptable in the "international trade concerns"107. Within this frame, in the application of this test, the expectations of the market as well as rival products from other producers need to be taken into account. 108 In this respect, various factors such as traditions, culture, economic circumstances or legal requirements affect the market expectations regarding the way in which the goods are ordinarily be used. 109

101

Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 1999, p. 254 [online]

102

103

Poikela, Conformity of Goods in the 1980 United Nations Convention of Contracts For the Inernationl Sale of

Goods, p. 38 [online], A case (OLG Brandenburg, 21 February 2007, SVR (2007) can be referred in this respect:

"...the car was cleaned with water under high pressure. Water entered into the car and the buyer alleged non-conformity. The court held that the ordinary use of a car did not comprise the ability to be cleaned in such way from all angles." Schwenzer & Hachem & Kee, Global Sales and Contract Law, 2012, p. 390, annotation 210

104

Secretariat Commentary on article 33 of the 1978 Draft (draft counterpart of CISG article 35), para. 5 [online]

105

106

107

Bianca, Bianca-Bonell Commentary on the International Sales Law, 1987, p. 282

108

Schwenzer & Hachem & Kee, Global Sales and Contract Law, 2012, p. 391. It is also referred as "objective expectations in commerce"

109

Schlechtriem & Butler, UN Law on International Sales, 2009, p. 116. It is also said that "reasonableness" is a general principle of the CISG and it should be relevant to consult the concepts of reasonableness in both the UNIDROIT Principles and the PECL in this connection. Henschel, Conformity of the Goods, An International

Approach to the Interpretation of the United Nations Convention on Contracts on Contracts for the International Sale of Goods (1980) as Uniform Sales Law, 2007, p. 171. Regarding the reasonabless in PECL it is said that

"The circumstances of the case will have to be considered... Furthermore the usages and practices of the trade or profession should be taken into account. These generally reflect the behaviour of reasonable parties. Thus, in determining whether a price or another contractual term is reasonable for the purpose of Articles 6:104, 6:105 or 6:106(2) comparable contracts made in analogous situations should be considered. Also here the nature and the purpose of the contract, the status of the parties, and the practices and usages in the trade or profession concerned should be taken into account." Kritzer, Reasonableness, Overview Comments, p. 127 [online]

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18 Since the mentioned article doesn't mention anything about quality standards, whether the provision requires any minimum acceptable quality level is debated among scholars and courts. Considering economic efficiency some commentators submit that although CISG does not explicitly adopt any quality requirement, this provision must create an implied warranty requiring the goods to comply with a particular quality standard like merchantable, average or reasonable quality standards.110 Otherwise, as I have explained in the comparison part, this absence may induce "market for lemons".

Several quality standards can be seen in various legal systems in this respect. One approach adopted in English common law is that the seller must deliver goods in compliance with merchantable quality standard.111 In the light of this standard, "goods are deemed to be conforming if there is a substitute market for the goods."112 The test takes into account the goods' resale value and considers "whether a reasonable buyer, knowing of the defects, would have bought the goods without abatement on the price".113 If this is the situation, even if the goods are of below average quality114, it is considered that the goods are of merchantable quality and accordingly the seller is not in breach.115 According to second approach, found in several civil law countries116, "the goods must be of average quality and it does not suffice

110

111

DiMatteo et al., The Interpretive Turn in International Sales Law, 34 Northwestern Journal of International Law & Business, 2004, p. 397 [online]

112

Condensate crude oil mix case, para 88

113

Ziegel, Report to the Uniform Law Conference of Canada on Convention on Contracts for the International

Sale of Goods, July 1981 [online] It is said that before 1973, as noted by the English Law Commission in its

Working Paper, Sale and Supply of Goods, there were two main approaches concerning merchantable quality. The first was the acceptability test derived from the Australian Knitting Mills v Grant case. This test requires the goods to be "in such an actual state that a buyer fully acquainted with the facts, and therefore, knowing what hidden defects exist and not being limited to their apparent condition would buy them without abatement of the price obtainable for such goods if in reasonably sound order and condition and without special terms." The second was the usability test. According to this test, as stated in Kendall (Henry) & Sons v Lillico & Sons Ltd, the goods were not of merchantable quality if "the goods in the form which they were tendered were of no use for any purpose for which goods which complied with the description under which these goods were sold would normally be used, and hence were not saleable under that description."According to the English Law Commission, concerning the goods bought for business purposes, it seems that the 'usability' test tended to be applied. Then the statutory definition made in 1973 in sec. 14(6) according to which "Goods of any kind are of merchantable quality within the meaning of subsection (2) if they are fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances." With the changes made in 1994

merchantable quality concept is substituted with the satisfactory quality concept. Jern & Kelvin Amendments to the Sale of Goods Act, 18 Sing. L. Rev. 172, 1997, p. 174-175 [online]

114

In the light of Taylor v. Combined Buyers Ltd where it is stated that "goods may be of inferior or even bad quality but yet fulfil the legal requirement of merchantable quality. On a sale of goods there is no implied condition that they are of any particular grade or standard." Bianca, Bianca-Bonell Commentary on the

International Sales Law, 1987, p. 281 [online]

115_{Saidov, Article 35 of the CISG, Villanova Law Review, 2013, p. 537 [online]} 116

This standard of conformity is found in German, Austrian, French, and Swiss civil codes. DiMatteo et al., The

Interpretive Turn in International Sales Law, 34 Northwestern Journal of International Law & Business, Winter

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19 that they can only just be traded."117 This quality standard requires that the goods must have a balanced quality standard which can be determined as "in the middle between high and low quality levels" especially when there are varying standards for the subject goods.118

However, as is rightly put, CISG doesn't choose any quality standard119, the instrument only chooses the standard of "fitness for ordinary purposes" and what is fit for ordinary purposes will be determined by the facts of the case in question.120 So according to this approach, since CISG does not expressly require a particular quality standard, the quality standard that the buyer is always entitled to receive cannot be determined in advance.121 It must be said, however, that "the quality can be more or less good within a tolerable degree, at least not conspicuously below the standard reasonably expected according to the price and other circumstances."122 As a matter of fact, in an arbitration case where whether the Rijn Blend must comply with a certain quality standard is disputed, a similar approach has been adopted by Netherlands Arbitration Institute123. According to the arbitral tribunal, since the parties haven't explicitly or implicitly agreed upon a quality standard, and intentions of the parties cannot be determined in the light of CISG article 8, the issue of conformity should be decided on the basis of CISG article 35/2/a, which requires that "the goods are fit for the purposes for which goods of the same description would ordinarily be used."124

In its decision the tribunal neither used the average quality test nor the merchantable quality test.125 Instead reasonable quality test is adopted according to which "goods are fit for their ordinary use if it is reasonable to expect a certain quality having regard to price and all other

117

'Shoes' case [online]

118

Saidov, Article 35 of the CISG, Villanova Law Review, 2013, p. 539 [online]

119

In order to clarify the issue, during the drafting negotiations of the CISG, a Canadian proposal that goods should be of average quality was withdrawn due to several common law countries did not support it and as a result an express provision hasn't been adopted. Henschel, Conformity of the Goods in: An International

Approach to the Interpretation of the United Nations Convention on Contracts on Contracts for the International Sale of Goods (1980) as Uniform Sales Law, 2007, p. 169

120

Davies & Snyder, International Transactions in Goods, 2014, p. 195

121

Bianca, Bianca-Bonell Commentary on the International Sales Law, 1987, p. 281

122

Ibid, p. 281

123

There is not any domestic law that adopted this standard. 15 October 2002, Netherlands Arbitration Institute, no. 2319 (Condensate crude oil mix case) [online]

124

Condensate crude oil mix case, para 67-68. [online] "There are no elements of evidence that the parties implicitly agreed upon particular requirements for the Rijn Blend. Neither is there evidence that such an implied indication -- in accordance with Article 8 CISG -- is to be inferred from statements, intentions or conduct of either party...The Arbitral Tribunal, thus, finds that the dispute between the parties is to be analysed under Article 35(2)(a) CISG which requires that the goods are fit for the purposes for which goods of the same description would ordinarily be used." Ibid, para 67-68

125

Henschel, Conformity of the Goods in: An International Approach to the Interpretation of the United Nations

Convention on Contracts on Contracts for the International Sale of Goods (1980) as Uniform Sales Law, 2007,

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20 relevant circumstances."126 The tribunal decided that the Rijn Blend did not meet the reasonable quality norm for two reasons: price and the long-term nature of the sales contracts.127 According to the tribunal, the Rijn Blend did not meet the reasonable quality requirement, because the parties would not pay the agreed upon price for the condensate with increased levels of mercury. 128 Additionally since no quality problems occurred in the first years of the contract the buyer could reasonably expect a particular quality level of Rijn Blend. 129According to the tribunal the mentioned interpretation is also consistent with CISG article 7/2, "which primarily refers to the general principles of CISG as possible gap fillers considering the fact that CISG often uses open-textured provisions referring to reasonableness."130 In the light of these, a conclusion can be reached that the qualitative standard in CISG cannot be determined ex-ante with a precise quality standard.131 Contrary, whether the goods are in conformity with the reasonable quality standard must be determined on a case by case basis taking into account the price and all other relevant circumstances because it requires the quality "a reasonable person in the position of the buyer would be entitled to expect". 132

126

Condensate crude oil mix case, para 118 [online]

127

Ibid, para 119

128

Ibid, para 120. This analysis has been criticized becuase of the fact that it precisely refers to the merchantible quality standard. Gillette, International Sales Law, 2016, p. 81

129

Condensate crude oil mix case, para 121 [online]

130

Ibid, para 118., In this respect, these articles have been given as an example: articles 8, 18, 25, 33, 34, 37, 38, 39, 43, 44, 46, 48, 49, 65, 72, 75, 77, 79, 86, 87 and 88. Condensate crude oil mix case, para 118. According to the Tribunal such an interpretation complies with article 7(1) CISG "imposing to take into account the international character of CISG due to the fact that the standard is not relied on domestic laws." Condensate crude oil mix case, para 118. It is also said that such an interpretation complies with article 7(1) CISG imposing to take into account the international character of CISG due to the fact that the standard is not relied on domestic laws. Condensate crude oil mix case, para 118. However this approach has seen flawed: "...domestic law should not be used to interpret the CISG where the sole reason for adopting an interpretation is that it is consistent with domestic law. But if a particular interpretation, such as average quality, has independent merit, the fact that it is also consistent with domestic law should not disqualify it from being used to construe a provision of the CISG." Gillette & Ferrari, Warranties and Lemons Under CISG Article 35(2)(a), IHR 1/2010, p. 9 [online]

131

Luca, The Conformity of the Goods to the Contract in International Sales, 27 Pace Int'l L. Rev., 2015, p. 202 [online]

132

Ibid, p. 202. Additionally it is said that "Reasonableness is a general principle of the CISG and it should be relevant to consult the concepts of reasonableness in both the UNIDROIT Principles and the PECL in this connection." Henschel, Conformity of the Goods in: An International Approach to the Interpretation of the

United Nations Convention on Contracts on Contracts for the International Sale of Goods (1980) as Uniform Sales Law, 2007, p. 171. Within this frame concerning the reasonabless in PECL it is said that " The

circumstances of the case will have to be considered... Furthermore the usages and practices of the trade or profession should be taken into account. These generally reflect the behaviour of reasonable parties. Thus, in determining whether a price or another contractual term is reasonable comparable contracts made in analogous situations should be considered. Also here the nature and the purpose of the contract, the status of the parties, and the practices and usages in the trade or profession concerned should be taken into account." Kritzer,

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21 Another question arises when the standard "fit for ordinary use" criterion applies in international markets which are not homogenous because what is acceptable in one country might be unacceptable in the other.133 For instance a technical standard for a good might be luxury in one country but might be mandatory in another, therefore goods that don't comprise this standard cannot be sold in that country.134 Since such standards, whether they emanate from public law, ideological beliefs, or traditional rules of conduct, can differ from one country to another and these differences might affect the ability to use goods,135 a question arises that whether the goods must be in compliance with public law standards of the seller's country, buyer's country or of the third country in which the goods will be used or sold. The German Supreme Court's decision in "New Zealand mussels case"136 brought some clarity to this issue. In the mentioned case, although the German buyer claimed that a certain level of cadmium in the mussels violated German food regulations, the cadmium level was acceptable under Swiss regulations. The Supreme Court held that in the absence of an express agreement to the contrary137CISG article 35/2/a and b138 does not place an obligation on the seller to sell goods, which are in conformity with the public law provisions of the buyer's country.139 According to the court the cadmium concentration itself constituted no lack of conformity in the light of CISG article 35/2/a, since the mussels were still suitable for consumption.140 Additionally the court briefly addressed the question whether the purpose of resale of the goods in Germany can be seen as a particular purpose made known to the seller under CISG article 35/2/b. In the court's opinion the mere fact that the seller delivers the

133

134

Ibid, p. 117

135

Schlechtriem, Uniform Sales Law in the Decisions of the Bundesgerichtshof, § IV [online]

136

Supreme Court (Bundesgerichtshof) 8 March 1995, "New Zealand mussels case" [online]

137

"In this respect, an agreement between the parties is primarily relevant (CISG Art. 35(1)). The Court of Appeals did not even find an implied agreement as to the consideration of the ZEBS-standards." "New Zealand mussels case" Ibid, opinion § II

138

"Where the parties have not agreed on anything, the goods do not conform with the contract if they are unsuitable for the ordinary use or for a specific purpose expressly or impliedly made known to the seller (CISG Art. 35(2)(a) and (b))." Ibid, opinion § II

139

"According to the absolutely prevailing opinion in the legal literature, which this Court follows, the compliance with specialized public law provisions of the buyer's country or the country of use cannot be expected" Ibid, opinion § II

140

"...one cannot assume that the food is no longer suitable for consumption, because mussels, contrary to basic food, are usually not consumed in large quantities within a short period of time. That is why it is no longer relevant whether the public law provisions of those countries, to which an export was possible at the time of conclusion of the contract, have no influence on the conformity of the goods with the contract according to CISG Art. 35(2)(a)." Ibid, opinion § I