INTRODUCTION
Article 7 responds to the fact that a Convention establishing uniform international law performs a unique and difficult function. Paragraph (1) provides that in interpreting the Convention there shall be regard for three closely related principles - (a) the Convention's “international character”; (b) “the need to promote uniformity in its application”; (c) “the observance of good faith in international trade”. How to give life to these principles deserves close attention.
Issues concerning inclusion of the principle of good faith in the CISG are explored in our project, in order to determine the nature, scope and meaning of the concept in the application and interpretation of the CISG. Also different interpretative aids ranging from the use of case law, travaux préparatoires and doctrine, to the establishment of institutional structures that may assist in the maintenance of the uniform application of the CISG and act as a hindrance to the development of divergent interpretations are also discussed in our project.
This paper of ours seek to study the role of good faith while interpreting CISG. An effort has been made to understand good faith as issue of interpretation through Article 7 (1) of CISG.
SUBJECT MATTER
Article 7 of the CISG states:
"(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.
"(2) Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law."
Article 7 can be divided into three parts:
(a) Paragraph (1), first part, which declares that the "international character of the Convention" and the "need to promote uniformity in its application" are the basic criteria for the interpretation of the Convention;
Ø The most important one since.
Ø Not only stresses the character of the Convention and its all-important goal of uniform application, but
Ø Also describes "the process by which those called upon to apply the Convention to a particular case ascertain the meaning and legal effect to be given to its individual articles."
Ø In effect, the first part of Article 7(1) is the tool that determines the precise scope of the other two parts of Article 7, as well.[1]
(b) Paragraph (1), second part, which establishes the relevance to be given to the "observance of good faith in international trade"; and
Ø It could be argued that the second part's concern for "good faith" might be used, in the facts of a particular case, to persuade a court to depart from a settled interpretation of the Convention and thus run contrary to uniformity, if only because its meaning and scope are so unclear.
Ø If such an argument were successful, some discordance could be created between parts (a) and (b) of the above classification.
Ø The concept of good faith does not stand alone in the CISG; rather it carries the "international trade" qualification that circumscribes its scope in a manner consistent with part (a).
(c) Paragraph (2), which sets out the mechanism with which gaps in the Convention are to be filled.
Article 7(1) CISG
Paragraph (1) of Article 7 emphasizes that in the interpretation of the CISG, one must pay close attention to three points:
Ø The "international character" of the CISG;
Ø "The need to promote uniformity in its application"; and
Ø "The observance of good faith in international trade."
It is the opinion of many scholars that the first two of these points are not independent of each other but that, in fact, the second "is a logical consequence of the first." The third point is of a rather special nature, and its placement in the main interpretation provision of the CISG has caused a lot of argument as to its precise meaning and scope.
LEGISLATIVE HISTORY OF ARTICLE 7(1) CISG
To read the words of the Convention with regard for their "international character" requires that they be projected against an international background. With time, a body of international experience will develop through international case law and scholarly writing. In the meantime, the only international setting for the Convention's words is its legislative history - its genetic background.
In preparing the Convention, UNCITRAL efforts produced the Hague Conventions of 1964 (ULIS and ULF). The deliberations in UNCITRAL commenced with an analysis of the handling of the problem in the 1964 Conventions. In many instances the Hague solution was retained; the discussions shed light on the common understanding of the Hague solution and the reasons for its retention. When the Hague approach was modified or rejected, the reasons for the change shed a revealing sidelight on the new provision. As the UNCITRAL draft developed, proposals to delete or amend were made and decided; the views that prevailed in making these decisions add depth to the international understandings that underlie the Convention's words.
The documents that embody this legislative history are reproduced (together with materials on other topics) in Volumes I-X of the UNCITRAL Yearbooks and in the Official Records of the 1980 Diplomatic Conference. As is common in an extended legislative process, the article numbers of the drafts under discussion kept changing as provisions were added and deleted and as the draft's structure was reorganized.
Domestic Law
In domestic law we face a conflict over the legitimacy of legislative history. In many civil law countries the use of legislative history has long been accepted. Courts in the United States also freely invoke the legislative history of domestic statutes and international Conventions.
Other legal systems following judicial patterns established in England have traditionally disavowed the use of such materials in statutory contraction. The rule is that the meaning of legislation must be deduced solely from the words of the statue. However, the "plain meaning" rule has not been applied with the rigor that the traditional formulae might suggest. English courts have long interpreted legislation in the light of "the defect or evil" which the statute was intended to remedy, and have considered reports of special commissions to identify the purpose of legislation that resulted from the commissions' work. And a growing body of opinion holds that the "plain meaning" doctrine stultifies the handling of statutory material and should be modified or abandoned.
Domestic Australian and EU law contains attempts to interpret good faith. Commentators have labored in the past to find a difference between civil law and common law countries in the treatment of good faith. Certainly there was in the past quite a gap between the perception of what good faith means in the two "camps". Also much has been written by referring to traveaux préparatoires. The fact is that all these comments have historical value. In other words, they are far too dated to have any significance in the current debate of what good faith means. This does not indicate that past experiences should not be studied. Their value is to point out past differences and show errors, which ought to be avoided. It should not be said from scholars of the CISG that the only thing they learn from history is to perfect their mistakes.
Since Justice Priestly opened the debate properly in Renard Constructions, in Australia much has changed. Canadian literature also indicates that it changed its perception of good faith. As pointed out above, civil law and common law perceptions and applications of good faith are not "a gulf" apart; the gap has narrowed considerably. In Europe the difference will certainly narrow further with the introduction of PECL. For that purpose it is of no value to look back too far into history, specially, as history in this aspect is outdated and of no current practical value.
For this reason, it can be argued that the domestic and trade block approaches to the examination of good faith could be used to determine the meaning of good faith within the CISG. To take this path one has to be acutely aware not to fall into the trap of transplanting principles from domestic law into the CISG. The discussion of article 7 clearly indicated that there is no such a mandate. Many scholars and judges alike have expressed such views. As an example, Meagher J.A. noted that:
"The interpretation of a particular phrase used in municipal law and the change over the years in that interpretation cannot guide the interpretation of the same phrase that might appear in an international agreement."[2]
However, it is permissible to duplicate an approach to interpretation, which helps to explain the principle within the Convention. In other words and by analogy with sociology, we are looking at the socialization process and not the outcome or product of socialization. A process can be duplicated like the production of bricks but the outcome of putting bricks together; that is, the finished house -- or the concept in our case -- can vary enormously depending on the culture of the society and cannot be duplicated. In our case, it is the mandate of international uniformity, which will determine the outcome. For the above reasons the discussion is twofold, firstly, good faith is examined as a state of mind and secondly, good faith is looked at as principle found in various articles.
The problem is how would we find out if the CISG was not interpreted in good faith? An answer would be that the CISG is not applied correctly. But such an outcome could equally well be the result of ignorance or mistake of any kind. The only conclusion we can draw is that interpretation of the CISG in good faith could minimize errors, but in the end we are still dealing with a state of mind and therefore we cannot identify real measurable outcomes. The application of good faith after all demands a "holistic approach." Such a view is strengthened if we by analogy look at history. Historians believe that information in letters and chronicles mainly describes items, which are new or newsworthy. People seldom report facts, which are either known by the other party or are universally known. It can therefore be argued that good faith is the state of mind, which is expected to pre-exist by all those interpreting the CISG. Only if the balanced state of affairs, that is, the presence of good faith is disturbed, is there a need to comment and explicitly apply article 7(1). When bad faith is exhibited, we know that good faith is not applied. There is an ever-increasing jurisprudence developing to prove the above point. An important case, which needs to be quoted, is SARL Bri Production "Bonaventure" v. Societe Pan African Export.[3] It was specified that jeans were to be sent to South America and Africa. The purchaser, however, despite assurances to the contrary, sent the jeans to Spain. The plaintiff claimed 10,000 francs as compensation for abuse of process. The court agreed with the plaintiff's position and found that the buyer acted contrary to the principles of good faith in international trade pursuant to article 7(1). This is a very interesting position. On the one hand, the court applied article 7(1) to the relations between parties and it also used the principle of good faith as a tool to levy, in essence, a fine. In my view, the principle of good faith cannot be used in such a way, especially as the court also awarded damages of a further 10,000 francs under article 700 of the French code of civil procedure. No direct penalties or remedies flow from the principle of good faith, as applicable to the Convention as a whole. The same applies to the parties. If a party fails to exhibit good faith and is not in direct breach of any other articles within the Convention, the CISG through article 7(1) does not allow the court "to manufacture" remedies or principles as shown in Bonaventure where the court awarded 10,000 francs damages. The Australian Trade Practices Act in s 52 also applies a similar mandate in stating that a corporation shall not engage in conduct that is misleading or deceptive. Fox J.[4] states that [s 52] "does not purport to create liability at all; rather it establishes a norm of conduct." However, unlike the CISG, the Trade Practices Act introduced consequences for failure to observe s 52 "elsewhere in the same statute, or under general law."[5] As the CISG does not provide for failure to observe article 7 and hence creates a gap, the courts are free to apply domestic law as shown again in Bonaventure where the court applied French domestic law to compensate the plaintiff for abuse of process.
The Fothergill Case
In the 1980 House of Lords decision in Foihergill v. Monarch Airlines[6] an Act of Parliament, which gave effect to the Warsaw Convention on the liability of air carriers, was interpreted. Under that Convention, notice must be given within seven days of "damage" but no notice need be given as to "loss" with respect to baggage. A passenger failed to give this notice of the loss of part of the contents of a bag. Kerr, J., and the Court of Appeal rejected the airline's contention that the notice requirement applied to this claim. The House of Lords reversed. All five opinions conceded that "damage" would not normally refer to loss of part of the contents of baggage, but ruled that in this setting the word should be given a wider meaning. In reaching this conclusion, all of the opinions examined basic questions concerning the interpretation of statutes that implement international conventions; four of the five opinions concluded that consideration should be given to travaux preparatoires, and also to foreign case law and scholarly writing interpreting the Convention.
These opinions stressed that they could not lay down rules to govern all future problems. One question that may still be subject to further development is this: What materials may a court consider in deciding whether the language of a convention is ambiguous? In any event, it seems clear from the decision that in construing a convention, like the 1980 Sales Convention, that is finalized in several languages, the question of "clear meaning" would not be determined solely from the English text. In addition, a majority of the opinions drew attention to the rules on interpretation in the Vienna Convention on the Law of Treaties (1969)."
Under Article 31 of the 1969 Vienna Convention:
A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
Article 32 adds:
Recourse may be had to supplementary means of interpretation including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31: (a) leaves the meaning ambiguous or obscure; or (b) leads to a result which is manifestly absurd or unreasonable.
Under Article 32, supplementary aids, including travaux preparatoires, may be used when the terms of the treaty are "ambiguous or obscure" or when the language "leads to a result which is manifestly absurd or unreasonable" and also "to confirm" the meaning derived from the terms of the treaty. The opinions of Lords Diplock and Scarman indicated that, apart from the rules of the Vienna Treaty, interpretative aids could be used when there was a conflict between the literal meaning of the words and the purpose of the Convention.
In the Fothergill case, as per Lord Scarman on interpretation of a Convention to unify private law:
“Rules contained in an international convention are the outcome of an international conference; if…they operate within the field of private law, they will come under the consideration of foreign courts; and uniformity is the purpose to be served by most international conventions… It follows that our judges should be able to have recourse to the same aids to interpretation as their brother judges in the other contracting states…To deny them this assistance would be a damaging blow to the unification of the rules which was the object of signing and then enacting the Convention…”
The Problem of Diverse Connotations of Legal Terms
Unlike terms used in physical sciences, legal terms are shaped by diverse historical, economic and cultural conditions, and include concepts that have similar names but different meanings - des faux amis[7]. So it becomes necessary in international drafts to avoid abstract, disembodied concepts. The ideal is to use plain language that refers to things and events for which there are words of common content in the various languages. But this ideal is difficult to realize, and the principles of interpretation in Article 7(1) run counter to reflexes that have been deeply implanted by our education and professional life - the reading of a legal text in the light of the concepts of our domestic legal system, an approach that would violate the requirement that the Convention be interpreted with regard "to its international character."
Evolution of the "Good Faith" Provision
Paragraph (1) of Article 7 concludes with the statement that in interpreting the Convention there shall be regard for promoting "the observance of good faith in international trade" - a point that did not appear in the rules on interpretation of the other UNCITRAL Conventions. At a late stage in the preparation of the Sales Convention this language was adopted as a compromise between two divergent views: (a) Some delegates supported a general rule that, at least in the formation of the contract, the parties must observe principles of "fair dealing" and must act in "good faith"; (b) Others resisted this step on the ground that "fair dealing" and "good faith" had no fixed meaning and would lead to uncertainty.
The first important step towards a "good faith" provision was taken by the Working Group in preparing a separate Draft Convention on Formation of the Contract. Article 5 of the Draft included the following: "In the course of the formation of the contract the parties must observe the principles of fair dealing and act in good faith." In 1978 the Commission, in its final review of the draft Convention, decided that a "good faith" provision should not be confined to formation of the contract; at the same time, the Commission decided that an obligation of "good faith" should not be imposed loosely and at large, but should be restricted to a principle for interpreting the provisions of the Convention. This compromise was generally accepted and was embodied in the concluding words of Article 7(l).
As we have just seen, the Convention rejects "good faith" as a general requirement and uses "good faith" solely as a principle for interpreting the provisions of the Convention. What content should be given to "good faith" as an aid to interpretation? The Convention's goal "to promote uniformity" should bar the use of purely local definitions and concepts in construing the international text. But this objection does not apply to "good faith" principles that reflect a consensus -- a "common core" of meaning - in domestic law. One may hope that the scholarship in this area will be developed further with special reference to the application of "good faith" principles to issues that arise in international trade.[8]
Historical approaches to good faith
Various commentators have suggested that there are four possible approaches to the role of good faith.
Ø Firstly, it is used to only interpret the CISG;
Ø Secondly, that the conduct of the contracting parties is governed by good faith;
Ø Thirdly, that good faith is a general principle of the CISG;
Ø And fourthly, that good faith is a general principle of lex mercantoria and of the UNIDROIT Principles of International Commercial Contracts.[9]
The first comment is that good faith may well be a general principle of the UNIDROIT Principles and even of lex mercantoria, but to use principles, which are not tied within the Four Corners of the CISG, would do violence to its mandate. Such an approach must be rejected on the same grounds one would reject the argument that domestic principles, which are similar to the ones found in the CISG, or track the CISG, are to be used in its interpretation. The homeward trend has been condemned and rejected by scholars and judges alike.
The second comment would be that the three remaining points are not logical extensions of article 7(1). If article 7(1) had provided a tool by which the CISG is interpreted, such a tool would need to be a general principle. A provision is what it says, a singular point within a legislation. It is only repeated if another provision repeats the same message. In order for a concept to apply to all provisions and articles, it has to be a principle. If it is a principle it not only applies to the interpretation of all articles but it also indirectly will affect the conduct of parties. It can therefore be suggested that there are really only two approaches to an understanding of the role of good faith. Firstly, it is a principle to be used to interpret the Convention as a whole, which is a principle expressed as a state of mind. Some articles specifically refer to the general principle of good faith and therefore good faith is linked directly to specific situations and for that reason, the second approach is that good faith must be viewed as a principle with specific situations in mind.
(i) A principle expressed as a state of mind
Good faith, as discussed above, covers the application of the Convention as well as the parties' rights and obligations. In simple terms, it is a "general duty" based on judicial interpretation of community standards, reasonableness and fair play. PECL[10] in its official comments also views good faith as a community standard of fairness and reasonableness. It must be stressed that good faith as indicated is a general duty and not a duty based on morality. It would be presumptuous to suggest that article 7(1) is based on morality. Such a concept would never lend itself to become a uniform concept, as morality is a social duty based on cultural norms. International law and, in particular, good faith must be a concept capable of treading a middle ground, that is acceptable to all and for that reason its definition must be a general rather than specific duty.
So far the discussion only centered on the application of good faith, that is, when and where it is to be applied. What has not been done is to attempt what good faith actually means within the context of the CISG. A brief examination of domestic law and its treatment of good faith opened a small window of understanding. Most importantly, it showed two things; namely, that there is no universally accepted definition of good faith and that each country treats the principle of good faith differently. One fact emerges clearly, namely, that domestic interpretation and definitions of good faith cannot be transplanted into the CISG as explained in Dulces Luisi.
There is no controversy in stating that article 7(1) urge the judiciary and the parties to the contract to observe good faith in international trade. An argument can be mounted that the treatment of good faith as expressed by scholars pursuant to article 7 shows some similarities with domestic law.
The mandate of article 7(1) is to interpret the Convention in good faith. In my view, it refers to the state of mind of those interpreting the Convention. The natural or normal state of mind when interpreting the Convention is with good faith. It can be argued that there is no need to refer in the jurisprudence to article 7(1) as this article is applied to every case at hand in the "normal course" of interpreting the CISG.
(ii) As a principle in prescribed situations
So far we have shown that good faith is a state of mind to be applied to the Convention as a whole as well as to the behavior of contractual parties. Article 7(1) however embodies another concept. Good faith is not only applicable to the interpretation of the Convention, it is also a principle contained in several articles. The comments of the Secretariat indicate that "among the manifestations of the requirement of the observance of good faith are the rules contained in [several] articles."[11] If there is a breach of these articles the court is required to invoke the principle of good faith. However, in these circumstances we are not dealing with a general concept but with specific circumstances. The court therefore is excused from debating what good faith actually means. Good faith has lost its abstract definition by taking on "substance from the particular event that takes place and to which it is applied." There are several articles, which contain good faith as a principle and only some will be discussed to illustrate the above point.
THE OBSERVANCE OF GOOD FAITH IN INTERNATIONAL TRADE
According to the third element of Article 7(1), in interpreting the provisions of the Convention one must have regard to the need of promoting the "observance of good faith in international trade." The legislative history of the provision shows that the final inclusion of the good faith principle represented a compromise solution between those delegates to the Vienna Convention who supported its inclusion stating that, at least in the formation of the contract, the parties should observe the principles of "fair dealing" and act in "good faith;" and those who were opposed to any explicit reference to the principle in the Convention, on the ground that it had no fixed meaning and would lead to uncertainty and non-conformity.
The concept of good faith and its scope and function in different legal systems was discussed earlier. There are, however, some issues concerning the final inclusion of the principle of good faith in the CISG that need to be explored further, in order to determine the nature, scope, and meaning of this much-debated principle in the application and interpretation of the CISG.
(a) "Good faith" as a mere instrument of interpretation
The placement of the good faith principle in the context of an operative provision dealing with the interpretation of the CISG creates uncertainties as to the principle's exact nature, scope, and function within the CISG. Scholarly opinion on the issue is divided. Some commentators insist on the literal meaning of the provision and conclude that the principle of good faith is nothing more than an additional criterion to be used by judges and arbitrators in the interpretation of the CISG. Under this approach, good faith is merely a tool of interpretation at the disposal of the judges to neutralize the danger of reaching inequitable results.
Even if included in the CISG as a mere instrument of interpretation, good faith can pose problems in achieving the ultimate goal of the CISG - uniformity in its application - because the concept of good faith has not only different meanings between different legal systems but also multiple connotations within legal systems. Consequently, it will be difficult for a uniform definition of the concept to be developed. This can lead to differing interpretations of the CISG.
(b) "Good faith" in the relations between the parties”
There is academic opinion favoring a broader interpretation of the reference to good faith as contained in Article 7(1), pointing out that the duty to observe "good faith in international trade is also necessarily directed to the parties to each individual contract of sale." The main theoretical difficulty with this suggestion is that, in effect, it implies that the interpreters of the CISG are not only the judges, or arbitrators, but the contracting parties as well. This point is controversial and there are practical and theoretical objections to it. If Article 7 is addressed to the parties, then they might exclude that provision under Article 6. This would be an unwelcome result because, in practice, this would hinder the uniformity of interpretation. The theoretical objection is that the statement seems to obliterate the distinction between interpretation by the court and performance of the contract by the parties. One of the main practical objections to the inclusion in the CISG of a provision imposing on the parties a general obligation to act in good faith was that this concept was too vague and would inevitably lead to divergent interpretations of the CISG by national courts.
The principle of good faith operates differently within different national legal systems. For example, in the United States its relevance is formally limited to performance and enforcement of the contract. On the other hand, in most of the civil law systems, as well as in socialist systems, the principle of good faith is not limited to performance but also extends to the formation and interpretation of contracts. Moreover, even between civil law systems the specific application of the principle of good faith in practice may differ considerably.
It is further suggested that compelling specific performance, or avoiding a contract after a market change that permits a party to speculate at the other's expense, "may well be inconsistent with the Conventions provisions governing these remedies, when they are construed in the light of good faith."
Further support for the argument that the relevance of the principle of good faith is not limited to the interpretation of the CISG is offered by the observation that there can be found within the CISG a number of provisions which constitute a particular application of the principle of good faith, thus confirming that good faith is also one of the "general principles" underlying the CISG as a whole, for purposes of gap-filling (as per Article 7(2)). A distinction must, however, be drawn between good faith in the interpretation of the CISG (Art. 7(1)) and good faith as a general principle upon which the CISG is based. The argument in favor of extending the scope of good faith to the behaviour of the parties and attributing to it the quality of a "general principle" of the CISG runs the risk of being driven to the conclusion that, as such, the principle of good faith in Article 7(2) may even impose on the parties "additional obligations of a positive character."
(c) Arguments against the imposition on the parties of a positive duty of good faith imposing further obligations of a positive character on the parties
The possibility of imposing additional obligations on the parties is clearly not supported by the legislative history of the CISG. Article 7(1), as it now stands in the CISG' s text, is the result of a drafting compromise between two diverging views, which reflects the political and diplomatic maneuvering necessary for the creation of an international Convention. It cannot now be given the meaning originally suggested by those advocating the imposition of a positive duty of good faith on the parties, as this would be reversing the intent of the compromise. On the other hand, this does not mean that the opposite view (i.e., that good faith represents merely an instrument of interpretation) should be adopted instead. This interpretation would unnecessarily deny the value of good faith and its potential function within the CISG.
It is part of the present writer's thesis that what is needed is a balanced approach to the doctrine of good faith, so that it is neither condemned to do too little nor allowed to do too much. The parties' behaviour must be measured on a standard of good faith, limited by the Convention's scope of application ratione materiae. Good faith, like all the other terms in the CISG, must be approached afresh and be given a new definition which will describe its scope and meaning within the CISG, separate from the peculiar loads that it carries in different, and often within, legal systems. It may take some time for the principle of good faith to be developed naturally and to crystallize in the case law, in the spirit of continuing deliberation and discourse that characterizes the community of the CISG members.
(d) The "international trade" qualification to the principle of "good faith"
Attention must be paid to the functional value of the qualification to the "observance of good faith," made by the additional words "in international trade," as inserted in Article 7(1). There are two points that can be made about the reference to "good faith in international trade".
The first point is that the principle of good faith may not be applied according to the standards ordinarily adopted within the different national systems. This point can be illustrated by the following example. Under German law, when a party to a sales contract becomes the recipient of a written communication, claiming to constitute a simple confirmation of the prior oral agreement between the parties to the contract, but in fact containing additional or different terms, the recipient is under a duty to immediately object to these terms if he does not want to be bound by them. In other legal systems such a rule is, however, either entirely unknown, or limited to the case in which the additional or different terms do not materially alter the content of the earlier agreement. Therefore, it is not very likely that such a rule could be applied to a contract of sale governed by the CISG.
The second point is that the principle of good faith as expressed in the CISG must be construed in light of the special conditions and requirements of international trade. There are two things to be said on this second point.
Firstly, the CISG specifically governs commercial contracts only and all consumer transactions are expressly placed outside the ambit of its operation. Even domestic laws generally make a distinction in the application of the principle of good faith in commercial contracts (contracts between merchants) compared to consumer transactions. Rules applicable to consumer transactions, intended to protect the economically weaker or inexperienced party, are for the most part excluded when both parties contract in their professional capacity. And, in the case of a transaction between merchants, the general obligation to act in good faith is often understood in the sense of imposing special standards, such as "the observance of reasonable commercial standards of fair dealing."
Secondly, there is a further distinction that needs to be made; the Convention deals only with international commercial transactions. The significance of this point lies in the fact that substantial differences exist between commercial transactions of a purely domestic nature and transactions concluded at an international level.
This statement may well be too sweeping, and it runs the risk of oversimplifying the differences between national and international trade. It attempts to establish that the distinction generally made within domestic laws between consumer transactions and contracts of a commercial nature can be used in order to determine the precise meaning of "good faith in international trade." This implies that the interpretation of the CISG could be used to protect the weaker party. It is doubtful that this would work at the international level. Although it is generally accepted that differences in the bargaining power of parties to an international contract exist, and that these differences are usually related to the parties' role in the contract (i.e., importing, or exporting) and to their technological sophistication and/or economic environment (i.e., coming from industrialized, or developing countries), to equate such an international commercial relationship to a domestic consumer transaction may be stretching any comparative value of such an analogy beyond its legitimate limits. In contractual relations between industrialized and developing countries, it may not always be the party from the developing country who is the weaker party. Further, it is not easy to identify the interest of all developing countries unequivocally, because they do not constitute an undifferentiated mass of countries with the same economic interest. Therefore, without completely discounting the generic imbalance that frequently exists between developed and developing countries, problems arising out of the unification of international sales law and affecting developing, or third world, countries cannot always be determined in advance.
A further element that discounts the value of such an analogy is the diversity exhibited in the standards of business in different parts of the world. As has been correctly remarked, this lack of uniformity in the domestic or regional standards of business around the world entails that "a particular line of conduct, which may reasonably be expected from merchants operating in the same country or region, could hardly be imposed on a party belonging to a country with a different economic and social structure."
It is arguable that though there may be some value in the comparative use of the distinction made within domestic laws between commercial and consumer transactions, in an effort to determine the precise meaning of "good faith in international trade," such an analogy has inherent limitations that should not be forgotten, or underestimated. International trade is characterized by intense competition and arm's length dealings and it is in that context that the Convention operates and must be interpreted. Observance of good faith in international trade should not be equated with the establishment of material justice between the parties. Rather, it should imply the "observance of such a conduct as is normal among [international] tradesmen." It is part of the present writer's thesis that the reference in Article 7(1) to the "observance of good faith in international trade" carries only descriptive and not normative value. It is addressed to the interpretation of the CISG' s provisions and seeks to describe good faith in international trade as it is used, rather than state what it should be. It is not (and cannot) be concerned with establishing a norm regarded as a standard of correctness in international trade for the reasons discussed in preceding sections of this thesis.
Further indications as to the precise meaning of the third part of Article 7(1) may be found within the CISG itself. The wording of the CISG Preamble, which expressly states that, provides one such reference
"… the development of international trade on the basis of equality and mutual benefit is an important element in promoting friendly relations among States …"
and that
"… the adoption of uniform rules which ... take into account the different social, economic and legal systems would contribute to the removal of legal barriers in international trade and promote the development of international trade …"
It is the view of the present writer that this reference reinforces the point made above. The observance of good faith in international trade is delineated by the parameters of international commercial transactions. Thus, the principle of good faith may not be applied according to the standards ordinarily adopted within the different national systems and must be construed in light of the special conditions and requirements of international trade. The reference to "equality" should not be equated with the imposition of positive duties upon the parties, as this would be incompatible with the quintessential nature of commercial transactions and the legislative history of the CISG. Rather, it implies the observance of such a conduct as is acceptable among international tradesmen contracting freely with each other.
CONCLUSION
The legislative history of Article 7(1) provides an insightful look at the provision's drafting and reveals some of the compromises made in producing its text. The creation and adoption of the CISG are only the preliminary steps towards uniformity in international sales law. It is the interpretation and the uniform application of the uniform law that will complete the process. It is at these latter stages that the success, or failure, of the unifying effort can be judged. The main issues that arise in relation to Article 7(1) are CISG's international character, the need to promote uniformity in the CISG's application and the observance of good faith in international trade; in order to help understand the structure, scope and function of the article.
An autonomous interpretation of the CISG is not simply a consequence of the international characterization of the CISG but that it is also necessary for uniformity in the CISG's application to be achieved. This is because the elements of "internationality" and "uniformity" are not only inter-related, but inter-dependent as well. It is further argued that, in interpreting the CISG, the rules and techniques traditionally followed in interpreting ordinary domestic legislation should be avoided and that Article 7 represents an implied provision in the body of the law for the undertaking of a liberal approach to the Convention's interpretation.
The ultimate aim of the CISG is to achieve the broadest degree of uniformity in the law for international sale transactions cannot be achieved properly if national principles or concepts taken from the law of the forum, or from the law which in the absence of the Convention would have been applicable according to the rules of private international law are used in the interpretation of the CISG. The "nationalization" of the uniform rules would deprive the instrument of its unifying effect.
Whether to endorse the literal meaning of the provision and conclude that the principle of good faith is vague and nothing more than a tool of interpretation, or to adopt a broader interpretation of good faith, stating that the duty to observe good faith is also directed to the conduct of the parties was examined in our project. The broad, liberal approach is preferable, with the important qualification that the principle should not be stretched to impose on the parties additional obligations of a positive character.
It is argued that as a matter of principle, common sense and effectiveness, courts should at least consider the jurisprudence developed by foreign courts applying the CISG. Such deference would require certain concessions to be made in legal technique and attitude by both common and civil law jurisdictions and the establishment of a relaxed system of precedent, whereas resorting to private international law should be avoided. Recent developments in the case law have provided some optimism that the activity around the CISG is focused towards the right direction.
BIBLIOGRAPHY
Ø Indira Carr & Prof. Richard Kidner, Statutes and Conventions on International Trade Law, 3rd ed., Cavendish Publishing Ltd, London, 1999.
Ø William J.H. Wiggers, International Commercial Law Source Materials, Kluwer Law International, 2002.
Ø John O. Honnold, Uniform Law and International Sales, 3rd ed., Kluwer Law International.
Ø www.cisg.law.pace.edu/cisg/text/e-text-07.html
[1] For instance, it may control the operation of Article 7(2) since the interpretation of a given provision is vital in determining whether that provision may be applied by analogy, or whether a true gap exists in CISG's provisions.
[2] Kotsambasis v Singapore Airlines Ltd Matter No CA 40154/96 (13 August 1997) [http://austlii.edu.au] last update 27 February 1998
[3] Court d'appel Grenoble 22 February 1995 [http://cisgw3.law.pace.edu/cases/950222f1.html]
[4] Brown v Jam Factory Pry Ltd (1981) 53 FLR 340 at 348
[5] Ibid
[7] Words in two different languages which have a great similarity of form but from which the significances are different
[8] book
[9] Keily, T., "Good Faith and the Vienna Convention on Contracts for the International Sale of Goods (CISG)" [http://cisg.law.pace.edu./cisg/biblio/keily.html]
[11] Guide to CISG Article 7, Secretariat Commentary [http://www.cisg.law.pace.edu] last update 2 September 1998
