Issues of Interpretation in CISG and Commercial Transactions

In the last post, we talked about the basics relating to CISG. In the present post, we shall discuss Article 7 that deals with the interpretative aspects of the CISG.

Interpretation of CISG

Unification of International Sales Law has always been one of the important goals of the CISG. Interpretative issues involved in the CISG play a key role in this respect. If the CISG is interpreted in a consistent manner in the various legal systems, the problem of unification can be solved to a considerable extent.

The guiding principles for interpreting the CISG provisions are provided by Article 7 of the CISG. Article 7 (1) states that:

“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.”

Article 7 (2) states that:

“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.”

Thus we see that Article 7 provides the guiding light of interpretation for the CISG. It is important to observe that Article 7(2) deals with gaps praetor legem i.e. those gaps that are governed by the CISG but are not expressly settled in it.[1] Another important interpretative queue arises from Article 6 of the CISG. It states that:

“The parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions.”

Thus it could be observed that Article 6[2] firmly entrenches the principle of Party Autonomy in this CISG. However whether Parties can exclude the application of Article 7 by virtue of Article 6 is an important question that needs to be answered.[3]

Article 6 expressly permits the contracting parties to derogate from or vary the effect of ‘any of its provisions’ including Article 7. But if the application of Article 7 is excluded, it would mean that the parties might resort to practices that do not promote uniformity and principles of good faith.[4] Thus in my opinion, Article 6 does not allow the contracting to derogate from Article 7 as it could lead to absurd interpretation. Also, it is a basic principle of interpretation to construe provisions of a text harmoniously and not in isolation.

Article 6 also implies that it is not only the judges or the arbitrators that could interpret the provisions of the CISG.[5] We see that the contracting parties, by virtue of the principle of Party Autonomy enshrined under Article 6 can also play a role in interpreting the CISG and the extent to which it applies to them.

The Preamble

The Preamble to the CISG provides its intent. It states that:

“….CONSIDERING that the development of international trade on the basis of equality and mutual benefit is an important element in promoting friendly relations among States,

BEING OF THE OPINION that the adoption of uniform rules which govern contracts for the international sale of goods and 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,”

We see that the purpose of the CISG is to contribute towards a new international economic order based on harmony and equality, to promote friendly relations among the member States, and to encourage the development of international trade. The Preamble also shows the intent of the contracting parties that by adoption of such uniform rules which govern contracts for the international sale of goods, the legal barriers in international trade could be removed.[6]

However we must not forget that the CISG has a specially prepared provision for resolving issues relating to interpretation i.e. Article 7.[7] This shows that Preamble is to be used only for secondary purposes while interpreting the CISG. The primary tool in this respect is Article 7 only. The preamble merely reflects that the CISG represents a major development in international sales law. This does not mean that preamble has no application at all in the tasks of interpretation. It serves as a beacon of light or provides the outer boundary of the interpretation of the CISG.[8]

In the next post, we shall do a more in-depth analysis of Article 7(1) and Article 7(2) of the CISG.

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[1] Franco Ferrari, Gap-Filling and Interpretation of the CISG: Overview of International Case Law, 7 Vindobona Journal of International Commercial Law & Arbitration (2003) 63-92.

[2] Article 6 – The parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions.

[3] Franco Ferrari, Gap-Filling and Interpretation of the CISG: Overview of International Case Law, 7 Vindobona Journal of International Commercial Law & Arbitration (2003) 63-92.

[4] Ibid.

[5] Ibid.

[6] M. J. Bonell and F. Liguori, “The U.N. Convention on the International Sale of Goods: A Critical Analysis of Current International Case Law (Part I)”, (1996) Uniform Law Review 147.

[7] Ibid.

[8] Sandeep Gopalan, New Trends in the Making of International Commercial Law, 23 J.L. & Com. 117 (2004).