In1980, the United Nations proclaimed formally the convention on theInternational Sale of Goods to bring an identical laws for transactions ofinternational commercial contracts. The main objective was to develop thecompetence of these transactions and encourage growth of international trade.
1Today, more than sixty countries are supporting the convention which includesAustralia, China, France, Germany, Russia and the United States.2Albeit the CISG has successfully proven at various extent. It has not been verysuccessful in the field which is very critical to disputing parties (damagesfor contract violation). Undoubtedly of all the CISG articles, the articlesrelated to economic remedies are the most written about and largely prosecuted3.
Because of inadequacy in uniform guidelines, equivalently at times positionedparties are presented with enormous decisions; such inequality sabotage thescope of the CISG and may compel parties to embrace and implement a sales lawrather than the CISG4.Primary reasons for such situation is that these CISG guideline does not ensureany precise economic remedies. Rather it only explains basic regulatoryprovisions for recovery of damages. This is so indisputable. As John Honnold,who played vital role in the CISG drafting stated, a violation of contract maytake place in almost all relevant situations and therefore no law can stipulatespecific regulations for damages calculation in all probable circumstances.
5Whereas the provisions of the CISG only describes basic guidelines to regulatecompensation in the event of breach of contract. These guideline allows courtof justice to resolve afflicted party’s deprivation depending upon particularcase circumstances.Unfortunately,such inadequate precision resulted in a great dispute and apparently increasingconsequences.6Therehave been many debates that intermissions in the provisions of CISG damagesshould be covered by the Principles of UNIDROIT of International CommercialContracts.
7 Inmy view, principles of the UNIDROIT should not be used for filling gaps in theCISG. Yet, the UNIDROIT principles may still play important role in the CISG.These provisions helps to understand basic CISG principles that providesguideline to regulatory and court of justice to settle issues which are notclearly dealt with in the convention.
Furthermore, they provide assistance for solutionto widely open matters held out of analysis of the convention itself.Inmy view, the principles of UNIDROIT should not be used as formal outlook of regulatoryto form principles which cannot be acquired from the provisions CISG. They mayplay vital role in decoding the convention.Ø THE UNIDROIT PRINCIPLES AS AGAP-FILLER IN THE CISGTheprinciples of UNIDROIT encourages basic guidelines for international commercialtransactions. Their aim is to set up a uniform law which is specificallydesigned to be used all over the world irrespective of the regulatorytraditions and the economic and political conditions of the nations in whichthey are to be enforced.
8Thefounders of the principles OF UNIDROIT expected them to implement in a widerange of situations. The preamble explains that:Itmay be interpreted when the parties have agreed that their contract be ruled bythemselves.Itshall be interpreted when the parties have agreed that their contract be ruledby fundamental guidelines of the regulatory. For example, lex mercatoria.Itshall be interpreted when the parties have not agreed that their contract isnot governed by any regulatory.Itcan be used in the application or to supplement domestic law.Itcan be used as an example for both national and international administrators.9Althoughthe principles of UNIDROIT follow perceptions found in various regulatorysystems, as well as they represent what are anticipated to be the best resolutioneven though it is not adopted generally.
Thus, clearly they do not summarizealready existing guidelines found in most regulatory system.10Innumerous circumstances, the guidelines in the principles of UNIDROIT are basedupon or similar to articles found in the CISG provisions. Such as, the principlesof UNIDROIT Article 1.9(1), which expresses the parties are liable to anyregulations to which they have agreed and by any other proceedings which theyhave settled among themselves, is almost similar to Article 9(1) of the CISG.11Furthermore, Article 5.1.7(1) of the principles of UNIDROIT, which deals withthe general guidelines for deciding the contract price when the agreement doesnot make arrangement for deciding the contract price is identical to Article 55of the CISG.
12At some instances, the UNIDROIT principles follows basic means which are generallyfound in the CISG provisions, but adopt the guideline to reaffirm thecertainty, scope and extent of the provisions. For instance, Article 7.2.2 ofthe principles of UNIDROIT which deals with the right to require accomplishmentof non-monetary responsibilities follows the basic guidelines of Article 46 ofthe CISG provisions but involves “certain qualifications.”13Theprovisions for damages under the principles of UNIDROIT can be compared to theprovisions of the CISG in numerous ways.
Article74 of the CISG states general provisions for recovery of damages. It grants:Damagesfor violation of contract by either party includes an amount equivalent to thesuffered loss, comprising profit loss which other party suffered as aftermathsof the violation of contract. These damages may not surpass which the party inviolation anticipated or need to have anticipated at the time of the contractcompletion, in the facts certainty and the issues which were then noticed orneed to have noticed as a probable aftermath of the contract violation.14ThusArticle 74 of the CISG provisions not only provides recovery for actualsuffered loss but also for net profit forbidden.
Yet, it does not providecertain rules for calculations of damages. Rather Article 74 of the CISG allowscourt of justice to resolve the afflicted party’s loss depending upon thecircumstances in certain cases. The objective of the Article 74 of the CISG isto provide “benefit of bargain” to the afflicted party. Thus, Article 74 of theCISG is adequately interpreted to compensate an afflicted party all damagessuffered as an outcome of the breach of contract.15Though all damages claim comprised in Article 74 of the CISG are liable toconventional restrictions enforced on the damages recovery for violation ofcontract, such as, the principle of foreseeability and mitigation.16Articles75 and 76 of the CISG provides very narrow substitutes to Article 74 of theCISG.
Article 75 of the CISG states procedure for damages calculations when theafflicted party has refrained the contract and tried to get into alternativetransactions. The afflicted party here is entitled recover the differing sumbetween the price of contract as well as the alternative transaction price andany other suffered which can be recovered under Article 74.17On the contrary Article 76 of the CISG sets forth that when an afflicted partyhas refrained the contract but has not made an alternative transaction underArticle 75 of the CISG. It is only available to damages measured by thedifference between the prices fixed by the contract and the current price at thetime of avoidance and any other suffered loss which can be recovered underArticle 74.18Invarious ways, provisions for the damages in the UNIDROIT principles are verymuch similar to the guidelines of the CISG. Alike Article 74 of the CISG, theUNIDROIT principles states general proposition that the party breachingcontract is liable to compensate the afflicted party for all damages sufferedby the afflicted party. The UNIDROIT principles moderate damages to those whichwere foreseeable, similar to the CISG provisions.
However, UNIDROIT principlescomprises more precise guidelines and in the case of nature and extent ofcompensation, the principles of UNIDROIT are wider than the CISG provisions.19Theprinciples of UNIDROIT comprises provisions similar to Articles 75 and 76 ofthe CISG. Similar to CISG Article 75, Article 7.4.5 of the UNIDROIT principlessets forth when the afflicted party has not completed the contract and has madea substitutional provision for transaction within a said time period and in amoderate way it may recover the differing sum between the price of contract andthe price of the substitutional transaction and damages for any other suffered lossas well. Furthermore like Article 76 of the CISG, UNIDROIT principles Article7.4.6 sets forth: when the afflicted party has not completed the contract andhas not made a substitutional transaction but there is a current price for thecompletion of the contract, which may recover the differing sum between thecontract price and the price which has taken place when the contract isterminated as well as damages for any other suffered loss.
20Theclear difference which should be noted is that Article 5 of the CISGparticularly sets out claims for damages arising from personal injury or death,whereas the principles of UNIDROIT cover these damages.21 Thereare some issues which damages provisions in the CISG does not specificallystate but are covered by the principles of UNIDROIT. First is that the CISGprovisions do not specifically mandate that damages consist of any compensationreceived by the afflicted party arising from the breach of contract.
Whereas,the principles of UNIDROIT precisely comprises these compensations.22Second is that Article 74 of the CISG does not state the scope and extent towhich the afflicted party must determine in order to recover damages that itsuffered loss.23On the contrary, the UNIDROIT principles Article 7.4.3 address thatcompensation is considered to be paid only for harm, comprising future losswhich is an outcome of a moderate extent of certainty.
24The CISG has no provision for the currency to be used in loss calculation aswell.25Whereas, the UNIDROIT principles expressly address that damages must bedetermined either in the currency in which contract was completed or in thecurrency in which loss was suffered, whichever is more convenient.26PerhapsArticle 78 is the most prosecuted guideline of the CISG, which addresses issuesrelating to payment of interest. Despite article 78 needs paying interestwhenever payment is in debts, but it does not determine how to calculate owedinterest.27Whereas,the principles of UNIDROIT consist of precise guidelines on interest. Article7.4.9 of the UNIDROIT principles addresses that interest is payable from thetime when payment is due.
The UNIDROIT principles with respect to the applicablerate of interest encourages hierarchy to determine the appropriate interestrate, coming out with the common interim lending rate to primary borrowersprevailing for the currency of payment at the place of payment. If such ratedoes not exist, the UNIDROIT principles stipulates that interest grows atnominal prime rate in the State of currency of payment. Whereas in the absenceof such rate of interest, the interest rate is to be decided by the regulatoryin the State of currency of payment.28Ø APPLYING THE UNIDROIT PRINCIPLES INTHE INTERPRETATION OF THE CISGTillthe date, regulatory and tribunals have adopted the principles of UNIDROITregarding interpretation of the CISG provisions in various ways. Firstly, whenthe parties have particularly described the application of the UNIDROITprinciples to support the CISG, parties’ contracts typically respected by theregulatory and tribunals. Secondly, the principles of UNIDROIT have been usedas supplement for resolutions which are outcome of other sources of authorityby its application.29Thirdly, using these UNIDROIT principles as a gap-filler in the CISG.
Forexample, some courts have applied Article 7.4.9 of the UNIDROIT principles todetermine the issues which are not covered in the Article 78 of the CISG,specifically to settle the rate at which interest increases.30This application has been matter of dispute which is apparently inappropriate.Ø ACCURATELY DECODING THE CISGTheCISG Article 7 addresses interpretation of the convention which states:1) Inthe application of this convention, main objective is to be had to itsuniversal integrity and to the requirement to encourage equality in itsinterpretation and the compliance of good faith in international commercial law.
2) Problemsruled by this convention which are not precisely covered in it shall beresolved in compliance with the general provisions on which it is establishedor, in the absence of these provisions, in compliance with the applicable rulesby integrity of the law of private international commercial law.31Tofill gaps in the CISG by using the UNIDROIT principles, exponents have setsforth three interpretation of this Article. Amidst which first is theprinciples of UNIDROIT are used as gap filler in the CISG as the UNIDROITprinciples are considered as addressing general guidelines of internationalcontract law upon which the convention is established.32Secondly, the principles of UNIDROIT are used as gap filler in the CISG onlywhen the significant UNIDROIT principle article and the significant CISGprovision are identical in the context and framework so that the principles ofUNIDROIT are substantially providing “meat on the bare bones” of the CISGprovisions.
Thirdly, the principles of UNIDROIT are used as gap filler in theCISG even though the general guidelines upon which they are established cannotdirectly be determined from the convention.33 Inmy view, it is overemphasizing to apply the principles of UNIDROIT as the primarysource of power to fill a gap in the CISG.34 Althougharticles in the principles of UNIDROIT generally correlate to the CISGprovisions, and these principles are not solely an abstract of generalprinciples of international contract law. As the administrative authority ofUNIDROIT elucidated in the introduction that these principles not only expressideas found in numerous legal system but also represents what are considered tobe best resolutions, even though it is not widely adopted.35Thus, these principles altogether does not express general principles on whichthe convention is established.
Perhaps,the principles of UNIDROIT supports the understanding of CISG provisions andthe conclusion obtained from them. Article 7.4.3 of the UNIDROIT principle statesCompensation is to be paid for suffered, comprising future loss which is anoutcome of the moderate extent of certainty.36Hence, this article re-establish the important requirement of certainty ofsuffered loss, since it is not possible that the non-performing party to paycompensation for damages which may not have taken place or which may never takeplace even in future. Thus, Article 7.
4.3 of the UNIDROIT principle similar toprovision of the CISG underlying that full compensation is conditional torestraint, comprising the restraint that person can recover loss only when itis occurred indeed or there are possibility to occur. In such situation, theprinciple of UNIDROIT supports the principle of certainty of harm and aids inunderstanding of “reasonable certainty” as well which is expressed through theconvention solely. The principles of UNIDROIT also sets forth that a reasonablecertainty requirement is in favor with universally known principle37.Hence, these principles emphasize ideals of protecting aspects of the CISGinternationally and encouraging uniformity in the interpretation of CISG.
38 Ø CONCLUSIONInshort, although the principles of UNIDROIT should not be used as gap filler inthe CISG as a primary source of power, they play very important role in findingresolutions for the issues which are not covered in the provisions of theconvention. Accordingly it can be anticipated that an appropriate communicationbetween the principles of UNIDROIT and the provisions of CISG eventually promotesmore equitable and uniform out comes under the convention.1Schwenzer,I; Commentary on the UN Convention on the International Sale of Goods (CISG) (4thedn. Oxford University Press 2016) 362 CISG:participating countries, ‘Cisg.
pace.edu/cisg/countries/cntries.htmlaccessed 30 December 20173 Bruno Zeller, ‘Damages under theConvention on Contracts for the International Sale of Goods’ (2005) pp. 247.ISBN 0-379-21541-1.4 CISG Article 65 John Honnold, ‘Unification of thelaw governing international sales of goods’ (1968) 66(3) 5836 Honnold (n 5)7 M.J.
Bonnel, “The UNIDROITPrinciples of International Commercial Contracts and CISG – Alternatives orComplementary Instruments?” (1996) 1(1) 268 Artur Rosett, ‘Part I: TheUNIDROIT Principles of International Commercial Contracts: A New Approach toInternational Commercial Contracts’ (1998) 46(suppl_1) 3479 UNIDROIT Principles, preamble10 K. Berger, ‘The relationshipbetween the UNIDROIT Principles of International Commercial Contracts and thenew lex mercatoria’ (2000) 5(1) 15311 UNIDROIT Principles Art. 1.9(1);CISG Art. 912 UNIDROIT Principles Art. 5.1.7(1)13 UNIDROIT Principles Art.
7.2.2;CISG Article 9(2)14 CISG Article 7415 John Gotanda, ‘CISG AdvisoryCouncil Opinion No. 6, Calculation of Damages under CISG Article 74’ (2007)7(6)16 CISG Article 74, 7717 CISG Article 7518 CISG Article 76(1)19 UNIDROIT Principles Art. 7.
4.1;CISG Article 7420 unidroit76,’Cisg.law.pace.edu’ http://www.cisg.law.
pace.edu/cisg/principles/uni76.html#ed11#ed11accessed 31 December 201721 CISG Article 522 UNIDROIT Principles Art. 7.4.2;John Gotanda, ‘CISG Advisory Council Opinion No.
6, Calculation of Damagesunder CISG Article 74′ (2007) 7(6)23 CISG Article 7424 UNIDROIT Principles Art. 7.4.325 John Gotanda, ‘CISG AdvisoryCouncil Opinion No. 6, Calculation of Damages under CISG Article 74’ (2007)7(6)26 UNIDROIT Principles Art.
7.4.1227 CISG Article 7828 UNIDROIT Principles Art. 7.
4.929 John Gotanda, ‘CISG AdvisoryCouncil Opinion No. 6, Calculation of Damages under CISG Article 74’ (2007)7(6)30 UNIDROIT Principles Art. 7.4.9;CISG Article 7831 CISG Article 732 M.J.
Bonnel, “The UNIDROITPrinciples of International Commercial Contracts and CISG – Alternatives orComplementary Instruments?” (1996) 1(1) 26 33 Bonnel (n 32)34 D. McClean, ‘International Sale of Goods in the Conflict ofLaws. By James Fawcett, Jonathan Harrts and Micheal Bridge. Oxford: OxfordUniversity Press, 2005.
1,458 pp. 195′ (2007) 77(1) 42635 UNIDROIT Principles preamble36 UNIDROIT Principles Art. 7.4.
337 UNIDROIT Principles Art. 7.4.338 CISG Article 7(1)