IV. A novel approach: Defining “property” under Article 30 of the CISG and applying Article 41 of the CISG with regard to third parties only
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The three existing interpretations of the obligation to transfer the property and the delineation of Articles 30 and 41 of the CISG create discord with the wording, the systematics, and the historical background of the Convention. What they additionally have in common is that none of the interpretations have asked whether “property” under Article 30 is an autonomous term within the CISG or merely references the respective notion under the applicable property law. This, however, is a fundamental question that could
1. Defining “property” under Article 30 of the CISG
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In fact, defining “property” under Article 30 of the CISG as an autonomous term should not be treated as a mere alternative to other interpretations, as the general rule under Article 7(1) of the CISG to ensure uniformity in the application mandates that terms of the Convention are generally to be interpreted autonomously, i.e., without regard to national law. A fallback to national law with regard to “property” could, hence, only be permissible as an exception to the general rule.
a) Deriving the meaning of “property” from existing concepts
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As stated above with regard to the general terminology, “property” is sometimes understood to refer to the thing itself. A common use would, for example, be “damage to property”, which is concerned with the physical damage to the goods and not directly with the rights to the goods. Yet, “property” under the CISG should not be understood accordingly, since the CISG provides that the word “goods” is to refer to the things being sold themselves.412 Property, consequently, refers to a person’s legal position regarding the goods.
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Yet, as explained above, there are at least three different solutions under national law: an absolute or relative notion of property, and no comprehensive notion of property.413 It is erroneous to assume that the notion of (relative) property under English law is to equal the term “property” under the CISG, since all six languages of the CISG are relevant in its interpretation.414 For example, the French wording (propriété) would signify an (absolute) notion of property. Some scholars and courts treat the English wording with more interpretive relevance, because the negotiations of the CISG in Vienna were conducted in English,415 this is unhelpful when answering the question at hand. With regard to the obligation to transfer the property, Article 30 of the CISG has a direct predecessor in Article 18 of the ULIS, which was negotiated and drafted from 1929 to 1964 in French.
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Therefore, it is not convincing to derive the meaning of “property” under the CISG from one existing concept among the many that exist under national laws.
b) Proposed definition of property under Article 30 of the CISG
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Property under Article of the 30 CISG should be understood to refer to the legal interest the seller has in the goods without regard to the quality of this interest. Legal interest in the goods must be understood broadly and encompass the legal relationship of the seller to the goods, i.e., every legal position the seller has with regard to the goods. This broad definition aims at staying true to the spirit of the CISG and its preference for neutral terminology that is not burdened with preconceptions under national law.416 If one were to use “rights” instead of “legal interest”, national preconceptions with regard to a limited interpretation of what rights are, could be unduly transferred to the CISG. For example, Swiss and German law provide the owner with many rights flowing from having property in the goods in the sense of Swiss and German law. But it is unclear whether the broad concept of property under these national laws can be split up completely into specific rights, or sticks within the bundle, or whether there is something to property that is more than the sum of the rights associated.417 While this may appear metaphysical to a commercial lawyer, the risk of interpolating such discussions into the CISG should be avoided by using “legal interest” instead of “rights”. If property under national law refers to more than the rights it provides to the owner, “legal interest” encompasses this legal position too. “Legal interest” nevertheless is an autonomous term and specifically does not exclude “equitable interests” under, for example, English law.
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This definition of “property” under Article 30 of the CISG also includes limited property rights, such as liens and similar interests. The proposed definition levels the playing field for countries that employ an absolute notion of property, a relative notion of property, or no comprehensive notion of property.418 It does so by not referring to a specific form of a right (ownership, title, or property rights), but rather to the persons directly involved in the sales contract and their legal positions. Under the CISG, property, in the sense of national law, should be considered just another right and should not be given special status.
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Some examples may serve to illustrate the practical consequences of this definition. If the seller is the absolute owner of the goods, for example, un
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If the seller has no legal interest in the goods at all, there is no breach of the obligation to transfer the property under Article 30 of the CISG. Sellers only have to transfer the legal interest they have in the goods. In most cases, the seller will not be able to deliver the goods to the buyer without having a legal interest in them. In these cases, there will be a breach of the obligation to deliver the goods under Article 30, and the buyer will need no further protection.
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The most common case in which the seller is able to deliver without having a legal interest in the goods, concerns a seller who is only an intermediary in a chain of sales contracts and the first seller in the chain is obliged to deliver the goods and transfer the property in them directly to the last buyer.419 Problems may arise if the first seller in the chain of contracts delivers the goods to the last buyer, but retains the property in the goods until he or she has been paid, even though this reservation of property was not agreed to by at least one buyer in the chain. A different, exceptional case involves a seller who leads the third party to (erroneously) believe that the seller has concluded the contract with the buyer for the third party’s benefit and account. Depending on the applicable property law, the buyer might not become the absolute owner and/or the third party might retain rights in the goods. Even
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However, the underlying problem in both cases is the third party’s legal interest in the goods: Either the legal interest of first seller in the chain of contracts, who is a third party for purposes of later contracts in the chain, or a completely uninvolved third party. The buyer is protected in both cases from third party rights or claims by considering the latter to be breaches of Article 41 of the CISG, as discussed below.420 Consequently, Article 30 of the CISG can be interpreted to require sellers to transfer their legal interest and if they have no interest in the goods, this obligation is not breached.
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This definition limits the relevance of the obligation to transfer the property under Article 30 of the CISG to the allocation of the goods between the seller and the buyer. If third party rights are involved, Article 41 of the CISG protects the buyer.
c) “Transfer” of property
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Under the CISG’s obligation to “transfer” the property under Article 30, it is not relevant whether the applicable property law considers the transfer to be a transfer in a strict sense, or whether the buyer receives the interest by means of legal acquisition (for example, if goods are installed or combined with other goods and national law considers the owner of the absorbing goods to become the owner by law).421 What is important is that the seller loses his or her interest in the goods and the buyer receives (at least)422 an interest of comparable strength.
d) Intellectual property rights
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Given the proposed broad understanding of “property”, the question arises whether sellers are also obliged to transfer their intellectual property in the goods to the buyer under Article 30 of the CISG. Apart from the detailed discussions of Article 42 of the CISG, there is little research on intellectual property and the CISG. Nevertheless, lawyers from outside continental Europe might classify intellectual property law as part of “property law”.423
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Intellectual property rights include patents, trademarks, service marks, commercial names and designations, appellation of origin and copyrights.424 If such rights are sold and transferred on their own, such contracts might be considered sales contracts but would not concern a sale of goods, and, consequently fall outside the scope of the CISG.425 In the case of a sale of goods, sellers under the CISG are not required to also transfer their intellectual property rights in the goods if they have such rights.426 The intellectual property right is an independent legal position that exists without regard to specific goods.427 The intellectual property is itself the res or thing, but a different thing than the goods.428 Thus, sellers do not retain rights in the goods if they do not transfer their intellectual property rights concurrently with the property in the goods. Intellectual property, hence, does not form part of “property” under Article 30 of the CISG as interpreted here, since it is not a legal interest in the goods, but an independent legal interest.
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A different question in this regard is to what extent sellers are allowed to rely on their intellectual property rights toward the buyer and potential sub-buyers. It is obvious from Article 42 of the CISG that goods that are subject to intellectual property rights can still be sold under a CISG contract.429 While this provision addresses intellectual property rights of third parties, it is notable that the CISG does not address the question of the seller’s intellectual property rights explicitly. During the many years leading up to the CISG in 1980, this question seems not to have been raised. As with the differences in the transfer of property under national law, the regulation of national intellectual property rights differs widely. Notwithstanding international conventions like the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), central questions that are relevant in this regard have not been regulated therein. For example, under the doctrine of exhaustion, a party may not rely on an intellectual property right with regard to specific goods as soon as they have (rightfully) entered circulation in a specific market.430 Alternatively, one may consider certain simple licenses to be concluded between parties to a sales contract that also prevent sellers from relying on their rights (at least to the agreed upon extent).
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The CISG is not concerned with the specific manner in which national law regulates or arranges the protection of the buyer against the seller in this regard. Of course, parties are free to agree on specifics in their contract under Article 6 of the CISG.431 If the parties have not explicitly regulated the matter, in line with Articles 42(1) and 7(1) of the CISG, sellers should be considered obliged not to raise their intellectual property rights against the buyer or any sub-buyers with regard to the goods sold in the State where the goods will be resold or otherwise used, if it was contemplated by the parties at the time of the conclusion of the contract that the goods would be resold or otherwise used in that State; or in any other case, under the law of the State where the buyer has their place of business.
e) Accessories to the goods
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National property laws can differ in the delineation of a thing as a part of the goods in being subject to the same property right or having a separable property right attached to it. However, for purposes of the CISG, Article 30 and the proposed definition of “property” render this differentiation meaningless. The drafts of 1951 and 1963 explicitly mentioned the seller’s obligation to deliver the goods and “their accessories”.432 In proposing to delete “their accessories” from the wording Davies, as a delegate of the United Kingdom, highlighted with support from Loewe that either the accessories were part of the goods in which case no need for referring to them existed or they were not and, accordingly, should not be governed by the uniform sales law.433 Yet, this statement should not be interpreted to mean that national
2. Advantages of this approach
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The proposed definition and interpretation of Article 30 has multiple advantages in the interpretation of the CISG. First, it is more in line with the wording of Article 41 of the CISG and the liability for third party rights under this provision. Second, the interpretation has regard to the CISG’s need to promote uniformity in its application under Article 7(1). Third, it allows for an improved delineation between the obligation to transfer the property in Article 30 and the obligation to deliver goods free from third party rights and claims under Article 41 of the CISG.
a) The wording of Article 41 of the CISG and third parties
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The proposed definition avoids considering the seller a third party under Article 41 of the CISG or applying the provision analogously.435 Thereby, it is more in line with a literal reading of the Convention’s text. Article 41 speaks only of rights and claims of third parties and does not mention the seller’s rights or claims. Under the proposed definition of “property” in Article of the 30 CISG, the seller’s legal interest in the goods is encompassed by the obligation to transfer the property. At the same time, this obligation also encompasses lesser interests than property, thus doing away with the need to apply Article 41 with regard to the seller. Only as far as third parties are concerned, Article 41 provides the respective obligation. Since “property” under Article 30 of the CISG is not affected if a third party has a better right in the goods than the seller, this provision is not breached by third parties’ interests.
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One may argue that this would deprive the buyer of being able to rely on a “claim” by the seller as a breach of contract, since Article 30 of the CISG
b) Uniformity and Article 7(1) of the CISG
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Moreover, the proposed definition of property under Article 30 of the CISG is more in line than the existing approaches with the mandate of Article 7(1) to interpret the CISG in a way which promotes uniformity in its application. As illustrated above, national laws vary in their definitions of property, with some considering it an absolute right, others a relative right, and some not emphasizing the concept at all.439 The seed carrying the risk of misunderstandings is already planted when interpreting “property” in Article 30 of the CISG as referring to the respective national notions: The fruits of which can be found in statements like “[t]hese obligations [under Article 30] would include [...] transferring the property but not the passing of title.”440 While this might assume a relative notion of property that differs from title, the German courts’ decisions have shown that an absolute notion of property
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The proposed definition of “property” also accommodates the Nordic approach to property, since it does not lead to different results depending on whether the national law even makes use of a singular concept like property. It also accommodates, for example, the feature of the UCC that considers the retention of property to merely have the effect of a security interest under section 2-401(1), sentence 2 of the UCC. For purposes of the CISG, this legal consequence on property under the UCC would only be relevant regarding Article 30 CISG, irrespective of the national concept (property under national law or security right) employed. The proposed definition also rebuts the concerns raised by a Spanish delegate in 1964 (Olvivencia-Ruiz). He argued that the obligation to transfer the property would produce uncertainty, since it is not foreseeable which court would hear the matter and accordingly which rules of private international law would apply.443 Since the scope of property is no longer tied to the national concept, the obligation to transfer the property under Article 30 of the CISG is less dependent on the potentially diverging law applicable to property.
c) Improved delineation of Articles 30 and 41 of the CISG
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Applying the proposed definition of property under Article 30 of the CISG, the delineation between the obligation to transfer the property under Article 30 and the obligation to deliver the goods free of third party rights or claims under Article 41 becomes straightforward: Who has or claims to have rights in the goods? The proposed definition of “property”, thus, leads to a personal distinction in the scope of application of both provisions rather than a right-specific distinction. This distinction allows courts and parties to more accurately address the legal problems that arise under sales contracts regarding legal defects. The following sub-sections show that the definition specifically allows the relationship between Article 30 and 41 of the CISG to be interpreted with more accuracy and precision regarding the relevant
aa) Relevant point(s) in time
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The relevant point(s) in time for Articles 30 and 41 of the CISG differ, i.e., when the seller has to transfer his or her legal interest and when the goods have to be free from rights and claims of third parties.
(1) Relevant point in time under Article 30 of the CISG
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Notably, Article 30 of the CISG does not expressly state when the seller has to fulfill the obligation to transfer the property. Nevertheless, the question of “when” cannot be left unanswered as the remedial system of the CISG requires to identify a definitive point in time at which the contract was breached. The question to be discussed here is not when property passes under national law, but when the seller is required to fulfill the respective obligation under the CISG to avoid breaching the contract.
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Piltz argues that although the relevant point in time is not stipulated expressly in the CISG, the provision governing the time of the delivery (Article 33 of the CISG) could be applied accordingly.444 This would mean that generally property would have to be transferred “within a reasonable time after conclusion of the contract” (in line with Article 33(c)). This reasoning disregards that the seller can “deliver” goods under the CISG before the buyer gets possession of the goods. This is especially true if the contract calls for carriage of the goods. Under Article 31(a) of the CISG, sellers are deemed to have delivered the goods as soon as they hand them over to the first carrier for transmission to their buyer. An interpretation that requires sellers to transfer the property concurrently with the delivery, would result in breaches of Article 30 of the CISG if the goods are located in a country of a legal system that considers the transfer of property to require a handover of the goods. The seller may have handed the goods over to the first carrier (Article 31(a) of the CISG) within a reasonable time after conclusion of the contract (Article 33(c) of the CISG), but in many cases, the handing over to the buyer might still be pending. Thus, the rule is ill-suited for determining the relevant time for the obligation to transfer the property. Based on the same reasoning, the time at which risk passes under Article 36 of the CISG is also inappropriate.
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Yet another argument proposes building on Article 58(1), sentence 2 of the CISG to find that property has to be transferred at the latest when the buyer pays the price. Under this provision, the seller is allowed to condition the handing over of the goods on the payment of the price, which is why – a fortiori – the seller should be allowed to hold back the transfer of property.445 The argument might appear circular: Article 58 is first and foremost a provision that governs when the price becomes due.446 As far as Article 58 can be used to establish a concurrent performance of obligations, the wording references the delivery and documents controlling the disposition of the goods. The fact that two of three parts of Article 30 (delivery and documents) are referenced in Article 58(1) reveals a presumption of the a fortiori argument. It presupposes that the seller is allowed to deny both the handing-over of the goods and the transfer of property, while the latter is not mentioned in the wording. It might, thus, be that the seller is not left with less (i.e., only property instead of possession and property), but rather with something different (i.e., only property instead of possession and property). Yet, there is nothing in the CISG that indicates that the transfer of property has to be effected before the goods are handed over. The underlying idea of Article 58(1), sentence 2, which safeguards sellers from having to part from the goods without payment if no deviating agreements have been concluded, extends to the transfer of their legal interest in the goods. The right to withhold the handing over might otherwise be undermined if buyers or their creditors would already be in a legal position to claim possession of the goods without prior payment. Moreover, if parties have not agreed on a later payment, buyers’ interest in receiving the legal interest in the goods before payment seems unworthy of protection since buyers will themselves be in breach of contract if they have not paid for goods already received. Therefore, the relevant point in time when the seller has to transfer the property under Article 30 of the CISG is, at the latest, the payment of the goods due to the underlying idea of Article 58(1), sentence 2 of the CISG. If the parties have agreed that the goods have to be handed over and that the price only has to be paid later in deviation from this provision, the contract has to be interpreted to determine whether this also untied the obligation to transfer the property from the payment.447
90 (2) Relevant point in time under Article 41 of the CISG
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In contrast to Article 30 of the CISG, the wording of Article 41 of the CISG indicates a relevant point in time, since the seller has to “deliver” goods which are free from any right or claim of a third party. As “delivery” is a term of art under the CISG, one could argue in full accordance with the wording that the relevant point in time is the delivery of the goods under Article 31 of the CISG. This is in fact the general opinion held by most scholars.448 A generally accepted exception exists with regard to claims under Article 41 of the CISG, which will be discussed below.449
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Tebel has recently highlighted that under the CISG, Article 35(1) contains similar wording to Article 41 with regard to the relevant point in time, while Article 36 nevertheless ties the relevant point in time for Article 35 to the moment when the risk passes.450 He concludes that the wording of Article(s) 41 (and 42) should not be considered to determine the relevant point in time.451
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Moreover, with regard to Article 42 of the CISG he reasons extensively why Article 36 of the CISG and, thus, the transfer of risk should be applied analogously to determine the relevant point in time.452 The practical difference between the delivery and passing of risk as the relevant point in time under the CISG exists with regard to delivery under Article 31(b) and (c): The seller has delivered the goods when he or she places the goods at the buyer’s disposal, which does not necessitate that the buyer is already in factual possession of the goods.453 By contrast, risk is only transferred under Article 69(1) of the CISG when the buyer takes over the goods. If the transfer of risk was the relevant point in time, through an analogous application of Article 36 of the CISG regarding Articles 41 and 42 of the CISG, the relevant point in time would be later than if the delivery of the goods in line with the wording of Articles 41 and 42 determined the relevant point in time.
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Tebel’s main argument in favor of an analogous application of Article 36 of the CISG and, thus, the transfer of risk, is that the later point in time would be in the interest of both the buyer and the seller.454 He argues that on the one hand, the seller thereby has more time to remove legal encumbrances without already breaching the contract. On the other hand, the seller bears no additional risk of any new encumbrances after contract conclusion, since the seller’s liability is limited to those encumbrances he or she knew of or could not have been unaware of at the time of contract conclusion.
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Yet, this limitation of the seller’s liability only applies to Article 42 of the CISG, while the seller’s liability under Article 41 of the CISG is not restricted to rights or claims he or she knew of or could not have been unaware of at the time of contract conclusion. Therefore, irrespective of whether this reasoning is convincing with regard to Article 42 of the CISG, it cannot be extrapolated to Article 41 of the CISG. The parties do not share an interest, as sellers prefer an early point in time to not become liable for later arising rights and claims, and buyers prefer a later point in time to still be protected accordingly from any new rights and claims, the parties’ interest does not favor one point in time over the other.
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Moreover, the analogous application of Article 36 of the CISG would require that the parties share a comparable interest as to the relevant point in time for the liability due to non-conformities under Article 35 and third party rights and claims under Articles 41 and 42. Yet, the seller will generally be able to prevent (physical) the development of non-conformities under Article 35 between delivery and the buyer taking over the goods due to a typically closer connection to the place at which he or she places the goods at the buyer’s disposal than the buyer. The seller under the CISG, consequently, will generally accept the later relevant point in time under Article 36 for non-conformities under Article 35. By contrast, the factual control over the goods and the place where the goods are located does not enable the seller to prevent third party rights or claims from arising to a comparable degree. A third party may allege having received a right in the goods after delivery of the seller but before transfer of the risk, and this allegation is independent from which party had control over or possession of the goods. Therefore, the seller’s willingness to accept a later point in time as delivery under Article 36 of the CISG, also with regard to third party rights and claims under Articles 41 and 42 of the CISG, is not comparable to the respective willingness with regard to non-conformities under Article 35 of the CISG.
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The overwhelming majority of scholars are thus correct in taking the wording of Article 41 of the CISG literally to determine that delivery is the generally relevant point in time.
92 (3) Advantages of a distinction regarding the relevant point in time
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Mixing third party rights and the seller’s legal interest either under Article 30 of the CISG (in considering it to contain an obligation to transfer unencumbered property) or under Article 41 of the CISG (in considering Article 30 to be a mere overview of the seller’s obligations) obfuscates the different considerations at play in determining the relevant point in time. Differentiating the CISG’s obligations under Articles 30 and 41 by the persons concerned, in contrast, reveals and accommodates these differences.
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Since many national laws generally require the buyer to take possession of the goods before the transfer of property can be considered to have occurred, attaching the relevant point in time for the seller’s obligation to transfer the property to delivery or the passing of risk would lead to many breaches of contract.455 In turn, attaching the obligation to deliver goods which are free from third party rights and claims to the payment of the goods in line with Article 58(1), sentence 2 of the CISG would violate the wording of the respective provisions (Articles 58 and 41 of the CISG). It would, furthermore, be to the detriment of the seller who can generally rely on the delivery to constitute the point in time after which the buyer should bear the risk of any new rights and claims.
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Considering the obligations under Articles 30 and 41 of the CISG to be subject to different relevant point in times, moreover, safeguards the sellers’ interest in being paid before having to transfer their legal interest in line with Article 58(1), sentence 2 of the CISG, while not exposing sellers to the risk that the buyer takes delivery of the goods and refuses payment based on existing third party rights having impeded him or her from receiving unencumbered property in the sense of national law. This brings Article 41 of the CISG in line with Article 35 of the CISG. Under the latter provision, most scholars do not accept a general right to suspend performance in case of a breach of contract, but instead require a fundamental breach or a similar threshold to be surpassed.456
(4) Summary
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With regard to the seller’s obligation to transfer the property under Article 30 of the CISG, generally the payment of the price in combination with Article 58(1), sentence 2 of the CISG is the relevant point in time. In contrast, with regard to Article 41 of the CISG and third party rights or claims,
bb) Assessing modifications of both obligations under Article 6 of the CISG
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Parties can make different agreements regarding the seller’s obligation to transfer the property and the liability for third party rights and claims under Article 6 of the CISG. A distinction arising from the proposed definition of ‘property’ regarding whether the seller or a third party has a legal interest in the goods also provides more clarity in this regard.
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As far as the seller and the buyer agree on warranty exclusion or caveat emptor, this should only be considered to exclude the liability of the seller for third party rights and claims under Article 41 of the CISG. Whether this exclusion is valid has to be decided in line with the applicable national law due to Article 4, sentence 1(a) of the CISG.457 Under the proposed definition, the constellation in which the seller is not the (absolute) owner of the goods and the buyer cannot, for whatever reason, become the owner in a bona fide acquisition would still only constitute a breach of Article 41 of the CISG. It would, therefore, also be covered by the exclusion of liability as far as it is valid under national law. The contrasting opinion by the District Court Freiburg which held that exclusion of liability did not extend to the seller’s main obligation (Hauptpflicht) of transferring the property458 could stem from a fundamentally different understanding of Article 30 of the CISG. This could be avoided by adhering to the distinction made through the proposed, autonomous definition of property.
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As far as the seller’s legal interest in the goods is concerned (i.e., property under Article 30 of the CISG), the exclusion of the obligation to transfer his or her legal interest might shift the contract out of the scope of the Convention. This is because a sales transaction is characterized by the definitive allocation of goods from the seller to the buyer.459 The parties can, however, agree that the legal interest has to be transferred upon full payment under
cc) Claim for performance under Article 46(1) or 46(2), (3) of the CISG
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The proposed delineation also limits the discussion under the CISG as to whether Article 46(1) CISG or Article 46(2) and (3) contain the buyer’s performance claim in case of legal defects. If the seller is the owner of the goods and merely decides not to transfer the property, Article 46(1) provides the buyer with a claim for performance. This claim can be limited under Article 28 of the CISG depending on the applicable law of the forum. If, in contrast, a third party has a right in the goods and (only) Article 41 of the CISG is consequently breached, it is disputed whether Article 46(2), (3) is applicable instead of Article 46(1),460 and whether Article 28 of the CISG is applicable.461 Since nobody argues that these discussions extend to the situation in which it is merely the seller who does not transfer his or her legal interest in the goods, the proposed definition of “property” allows the discussion to be limited to breaches of Article 41 of the CISG. This restriction of the discussion respects that the seller’s obligation to transfer the property under Article 30 of the CISG should not be subject to the limitations of Article 46(2), (3) of the CISG as this would in effect deviate from the general (civil law) approach toward performance claims that underlies the CISG.462
dd) Article 43 of the CISG
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The existing approaches have provoked questions as to whether they produce sensible results with regard to Article 43 of the CISG and its duty of notification. As mentioned, if Article 30 of the CISG is seen as a mere overview of the seller’s obligations, and Article 41 of the CISG were also to cover the seller’s rights in the goods (approach 3), then it seems inappropri
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Both alleged shortcomings could, at first sight, be remedied by highlighting Article 43(2) of the CISG which discharges buyers from their duty to notify if the seller knew of the right and its nature.465 Yet, this interpretation is once again not supported by the wording: Article 43(2) of the CISG speaks of rights or claims of a third party and does not mention the seller’s rights or claims. Alternatively, one may propose applying Article 43 of the CISG analogously to Article 30 of the CISG.466 Yet, if one accepts the proposed definition of property under Article 30, and consequently differentiates Articles 30 and 41 with regard to the person holding or claiming the right, Article 43 fits squarely with the legal opinions underlying the criticisms without the need to recur on analogies or similar legal tools: As far as third party rights are concerned, the seller has to be informed by the buyer if the former has no knowledge of them, and as far as the seller retains rights, no notification under Article 43 of the CISG is necessary, since the buyer can rely on a breach of Article 30 of the CISG without being required to notify the seller under Article 43 of the CISG.
d) Summary
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The proposed definition and interpretation of Article 30 brings about multiple advantages in the interpretation of the CISG. First, it is more in line with the wording of Article 41 of the CISG and the protection from third party rights under this provision. Second, the interpretation has regard to the need to promote uniformity in its application under Article 7(1). Third, the proposed definition allows for a more cohesive and accurate depiction of how Article 30 interacts with Article 41, particularly concerning the relevant points in time of the respective obligations. It also aids in assessing modifications to these obligations under Article 6, resolving disputes over
3. Consequences for the type of obligation found in Article 30 of the CISG
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If one accepts the proposed interpretation of “property” in Article 30, the question remains whether the CISG contains an obligation to fulfill the necessary acts for the transfer of property and/or an obligation to transfer unencumbered property. The obligation to transfer the property under Article 30 of the CISG is shaped around a result to be achieved. It is breached if the buyer does not receive the seller’s legal interest in the goods. In a strict sense, it can, thus, not be an obligation to fulfill the necessary acts for the transfer of property. The latter would be concerned with the acts necessary to transfer property without taking into account whether the result (i.e., buyer becoming the owner of the goods) was actually achieved. Yet, it cannot be denied that the situation in which the buyer does not receive the seller’s legal interest in the goods will generally be due to the failure of seller to fulfil the acts necessary under national law to transfer such interests. Therefore, from a practical perspective, there is a large overlap of the obligation to transfer the property under Article 30 of the CISG and an obligation to fulfill the necessary acts for the transfer of property.
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Since it is not relevant under Article 30 of the CISG whether a third party has any right in the goods, the obligation to transfer the property cannot be characterized as an obligation to transfer unencumbered property. The property the buyer receives does not have to be unencumbered for purposes of Article 30 of the CISG (in contrast to Article 41 of the CISG as will be discussed below).
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If the seller under the CISG breaches the obligation to transfer the property under Article 30, the buyer can rely on the remedies provided by Article 45(1). Yet, to understand the relevance of the obligation to transfer the property fully, one last discussion has to be introduced. Under Article 49(1) of the CISG, there are two pathways for buyers to avoid the contract in case of a breach of contract: Either buyers set an additional period of time after which they can avoid the contract in case of non-delivery (Article 49(1) (b)) or there is a fundamental breach under Article 25 (Article 49(1)(a)). Kröll argues that a non-delivery under Article 49(1)(b) exists if the seller retains rights (for example property) in the goods and thereby breaches Article 30.467 This discussion remains relevant under the proposed definition
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However, to equate the non-transfer of property with a non-delivery under Article 49(1)(b) is not convincing. The wording “not deliver” in the latter provision references the part of Article 30 of the CISG that speaks of “delivery” and its specification in Articles 31–33 of the CISG. One may counter that it is mostly uncontroversial that the lack of handing-over of certain documents under Article 30 of the CISG can also amount to a non-delivery under Article 49(1)(b) of the CISG.468 Consequently, if both delivery and the handing over of documents under Article 30 of the CISG are considered relevant under Article 49(1)(b) of the CISG, there is no further differentiation in the wording to explain why only the obligation to transfer the property under Article 30 of the CISG merits a deviating interpretation.
217
Yet, not all failures to hand over documents under Article 30 of the CISG are considered to be a non-delivery. Only those cases in which the documents are necessary to receive the goods or dispose of them are considered to be relevant under Article 49(1)(b) of the CISG.469 Hence, no comprehensive systematic argument can be made that that the failure to comply with obligations under Article 30 of the CISG apart from the obligation to deliver would lead to a non-delivery.
218
Furthermore, the purpose of the avoidance-regime of the CISG and the relaxation of the requirement of a fundamental breach in cases of non-delivery is the interest of preventing additional transport of the goods back to the seller including the associated costs and risks.470 However, these costs and risks are present if the seller does not transfer the property in them despite having delivered: The goods will have to be transported again in case of avoidance of contract. Therefore, the additional pathway for the buyer to avoid the contract under Article 49(1)(b) of the CISG is not justified. Moreover, at several points in time during the drafting of the CISG, allowing for avoidance after an additional period of time in cases of non-transfer of property was considered, but ultimately the proposals were not successful.471 The
219
Consequently, the transfer of property is irrelevant under Article 49(1)(b) of the CISG, and the breach of contract has to be assessed against the threshold of a fundamental breach under Articles 49(1)(a) and 25 of the CISG if the buyer intends to avoid the contract.
4. Obligation to transfer unencumbered property under Article 41 of the CISG
220
Although Article 30 of the CISG contains no obligation to transfer unencumbered property despite its wording, such an obligation could nevertheless be found elsewhere in the Convention. An assessment of Article 41 reveals that the provision in effect contains an obligation to transfer unencumbered property as far as it protects the buyer from third parties’ rights.
221
Article 41 of the CISG stipulates that the delivered goods have to be “free from any right or claim of a third party, unless the buyer agreed to take the goods subject to that right or claim.” As noted above, Rabel rightfully considered an obligation to transfer unencumbered property to exist if the fact that the buyer does not become the owner of the goods is sufficient to be a breach of contract.473 Yet, a few Swiss authors maintain that the mere existence of a right of a third party in the goods is insufficient to constitute a breach under Article 41.474 In their opinion, additionally, the third party has to assert the right. They put a legal defect under Swiss unharmonized law on the same level as a legal defect under the CISG.475 Similarly, French authors appear to interpret Article 41 to contain a protection against eviction, or at least that the mere existence of a third party right is not in and of itself a breach of contract.476 However, taking into account the wording and
a) Wording and the additional protection from claims of third parties
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The wording of Article 41 of the CISG requires nothing more than the existence of the right (“free from rights”). The possibility that the third party could claim a right is sufficient. This is supported by the additional protection from third party claims provided by Article 41. The following elaborations are intended to show that there is no scope for “rights” in Article 41 of the CISG other than to govern the situation in which the third party has not yet raised his or her right. Therefore, under the premise that the interpretation of claims put forward is correct, Honsell and Bucher’s opinion would render “rights” under Article 41 of the CISG a legal nullity, and thus, is not convincing. The premise has two elements: First, apart from the mere existence of a third party right that has not been relied upon, there is no breach of contract by a right of a third party that is not at the same time a claim of a third party. Second, the buyer’s remedies for rights of third parties are not more far-reaching than the remedies for a claim of a third party.
aa) Can there be a breach of contract by a right that is not at the same time a claim?
223
To understand whether there can be third party rights that a third party has brought forward in any way and whereby Article 41 of the CISG is breached, while not constituting a claim under the same provision, the scope of “claims” has to be analyzed. In contrast to a “right”, a “claim” does not require the right to actually exist; it is sufficient that a third party claims the right to exist.478 The historical record shows that both in the preparations of the ULIS and of the CISG, a delegate of Great Britain (Davies) and the Aus
(1) Relevant point in time for the claim or the facts underlying the claim to exist
224
An additional relevance of “rights” of third parties would exist if claims under Article 41 of the CISG were required to have been raised before delivery.
225
If a claim is the mere allegation of a right, one could reason that the claim comes into existence at the point in time in which the third party first raises the claim. If one sets the relevant point in time as the delivery of the goods, in accordance with the wording (“the seller has to deliver”), one may follow Enderlein in his reasoning that such claims raised after delivery of the goods are not a breach of Article 41 of the CISG.482 In that case, for claims raised by third parties after the relevant point in time, the buyer would have to prove the existence of a third party right to substantiate a breach of contract by the seller.
226
However, this reasoning would render “claims” nearly meaningless. It is realistic to assume that most claims will be raised vis-à-vis the buyer after the delivery and handing-over of the goods.483 Therefore, it should rather be relevant that the facts underlying the claim by the third party precede the relevant point in time.484 This is supported by the idea that in a typical international transaction it is reasonable for the seller to assume the risk that a third party claims to have rights in the goods.485
227
Consequently, the relevant point in time for Article 41 of the CISG leaves no additional relevance for “rights” of third parties.
(2) Bona fide purchaser
228
Additionally, the rules of bona fide acquisition of property may create a point of relevance regarding rights not brought forward by a third party. This is because if no claim exists when the buyer has become the owner of the goods, then the buyer would have to prove that third party rights nevertheless exist. The only way to prove that might even be to prove that he or she has not become the owner of the goods under the rules of bona fide acquisition.
229
Neumayer and Ming argue that in case the buyer has received property in the goods bona fide, he or she is already protected adequately by this legal status and does not require additional protection by Article 41 of the CISG.486 This exception from the rule would, however, violate the purpose of protecting buyers of claims that they cannot easily verify or check.487 Moreover, especially with regard to claims by third parties, the prerequisites of a bona fide acquisition may be subject to dispute.488 Furthermore, there is no apparent reason why claims that were always mere allegations and claims that are based on rights that existed once but were overturned by way of bona fide acquisition, should be treated differently.
230
Therefore, a bona fide acquisition of property does not negate the existence of a claim. Consequently, there is no additional scope of applications for “rights” of third parties under Article 41 of the CISG in this regard.
(3) Threshold for existence of “claims”
231
Lastly, there could be an additional relevance of rights under Article 41 of the CISG if an elevated threshold was applied to “claims”. This would in turn – until the third parties’ behavior reaches the threshold of a claim under Article 41 of the CISG – render “rights” relevant apart from the situation in which the third party has not brought forward the claim at all. Three questions have to be distinguished: First, do frivolous or obviously unfounded claims qualify as “claims” under Article 41 of the CISG? Second, toward whom must the claim be raised? Third, are there any prerequisites for an allegation to be considered a “claim” under Article 41 of the CISG beyond a third party’s mere expression of a right in the goods?
102 (a) Frivolous or obviously unfounded claims of third parties
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To date, there is no agreement whether frivolous or obviously unfounded claims should qualify as “claims” under Article 41 of the CISG.489 Yet, this question does not merit deeper analysis, since this delineation is not relevant with regard to rights: If a frivolous or obviously unfounded claim is raised, this characterization already reveals that there is no right of a third party. Thus, even if such claims were not sufficient to constitute a breach under Article 41, this limitation in scope would not lead to a relevance of “rights” under this provision.
(b) Against whom must the claim be raised?
233
If there was a requirement that a claim has to be raised toward a certain party, for example the buyer, “rights” under Article 41 of the CISG would be relevant if the respective party was not directly informed by the third party. This would provide an additional scope of application of rights under Article 41 of the CISG apart from the situation in which the third party has not brought forward the claim at all.
234
Indeed, some scholars argue that a claim under Article 41 of the CISG only exists if the third party has raised the claim toward the buyer.490 However, this interpretation is not convincing. The provision expressly states that the goods have to be free of “claims”, in contrast to the buyer having to remain free from facing claims. Moreover, the wording “claim” does not necessarily require that a party claims to have a right toward a specific person. Further arguments follow from the purpose of the provision: As outlined above, the buyer is to be protected from having to quarrel with a third party that raises claims that he or she is not immediately able to verify.491 The situation in which the third party directly approaches the buyer is, however, not the only
235
A case before the Court of Appeal Celle is well-suited to illustrate this argument:492 A German company sold a vehicle to a Ukrainian buyer. When the latter transported the vehicle to the Ukraine, Polish authorities seized the car due to an alleged theft. They subsequently released the vehicle to a Hungarian company that claimed to have owned it when it was stolen. It is not apparent that the Hungarian company ever contacted the buyer. The former merely notified authorities that the vehicle had been stolen. The German seller had documents, however, that appeared to indicate that its respective German seller had already registered the vehicle in Germany before the alleged theft was said to have taken place. The Court decided that the buyer had not sufficiently proven that the Hungarian party as a third party had a “right” in the goods under Article 41 of the CISG. Unfortunately, the Court most likely misunderstood Article 41 to mean that only existing rights (and not claims) were sufficient to yield a breach of contract.493 The case demonstrates that while the third party might not raise the claim toward the buyer, the goods might still be seized by public authorities. Under the applicable national law, this seizure might even be rightful. Nevertheless, the buyer would then be in the situation that a court might find that no “right” existed. In that case, the buyer would be forced to quarrel with the alleged owner of the goods, although this is exactly what Article 41 seeks to protect from. Thus, the purpose of Article 41 of the CISG requires an understanding of “claims” that is not dependent on whether the third party approaches the buyer.
236
Moreover, this is the only interpretation that avoids haphazard results with regard to losses other than legal costs for defending the claim: If a third party informs a potential buyer of the buyer about alleged rights he or she has in the goods, and the (sub-)buyer consequently refrains from buying the goods, the buyer has an interest in claiming damages against his or her seller for this claim by the third party. Irrespective of whether such a claim would be granted under the CISG (maybe it would not be considered foreseeable under Article 74, sentence 2 of the CISG or be dismissed for other reasons), it should not make a difference whether the third party has informed the buyer of his or her alleged rights before or after notifying the (sub-)buyer. The third party’s notification has no impact on whether the buyer or the seller should bear such a risk. Accordingly, it should have no bearing on deciding whether or not a legal defect exists.
237
Hence, a claim does not necessarily have to be raised toward the buyer to represent a claim under Article 41 of the CISG. Instead, it suffices that the third party claims to have a right in the goods toward any party (such as, for example, public authorities or other third parties). Therefore, with regard to the person that the claim has to be raised toward, no additional relevance for “rights” under Article 41 of the CISG exists.
(c) (No) requirements of a “claim” that surpasses a mere expression of a third party to have a right in the goods
238
If there were further requirements of a “claim”, “rights” would become relevant apart from the situation in which the third party has not brought forward the right. Generally, there is agreement that a “claim” under Article 41 of the CISG does not require a suit to have been brought or any legal steps to have already been taken.494 Moreover, there is generally agreement that no particular form of raising the claims is required.495 Yet, one such requirement could be that the claim has to be asserted with such firmness as to impair the use of the goods or at least be coupled with the expressed intention of the third party to impair the future use.496
239
The wording refers to “any” claim, which could be understood to mean that no limitation exists. However, one could emphasize “claims” instead of the word “any” to argue that not every (possibly circumstantial) reference to an alleged right should be a “claim” in the sense of Article 41 of the CISG. The wording is, thus, not instructive. Yet, as is the case with regard to the discussion concerning frivolous claims,497 it would be very hard to draw the line of sufficient firmness. Furthermore, there is no indication in the historical record that such a threshold was intended. Instead, in contrast to French national law, “le simple cas de prétention” was claimed to be sufficient under the (in this aspect identical) Article 52 of the ULIS.498 It is not convincing to argue that in such a case no loss for the buyer is conceivable, since this question can be adequately addressed with the respective remedies irrespective of whether there has been a breach under Article 41 of the CISG.
240
Beside these legal arguments against the interpretation of requiring a certain degree of firmness and the impairment of use of the goods, one may even find a factual argument if one accepts the following interpretation: At least if the claim is not frivolous or obviously unfounded, the mere claim of a third party to have rights in the goods produces uncertainty for buyers in their use of the goods. Thus, the use of the goods is already impaired. As soon as buyers learn of a potential third party right, they might fear becoming liable toward the third party if they were to continue the use of the goods undeterred. Considering the rule in this light might even mean that the standard brought forward is not a higher threshold than the mere expression of a third party to have a right. Hence, it appears that a “claim” exists as soon as a third party expresses (alleged) rights with regard to the goods toward any other party which may or may not be the buyer.499
(4) Summary
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The broad protection of the buyer from “claims” of third parties under Article 41 of the CISG leaves only one case of application for “rights” under the same provision: The mere existence of the third party right without the third party having asserted (or declared) its right in anyway. Apart from the mere existence of a third party right, there is no breach of contract by a right of a third party that is not at the same time a breach due to a claim of a third party. The first element of the premise (i.e., apart from the mere existence of a third party right that has not been relied upon, there is no breach of contract by a right of a third party that is not at the same time a claim of a third part), is thus established.
bb) Are there buyers’ remedies for claims of third parties more limited than the remedies for rights of third parties?
242
The second element of the premise is that there are no additional or more extensive remedies for the buyer in case of a third party right compared to a third party claim. In other words, third party rights could still be relevant under Article 41 of the CISG apart from the situation in which the third party has not brought forward the right, if the buyer’s remedies for claims of third parties were more limited than the remedies for rights of third parties.
106 (1) Claim for performance under Article 46 of the CISG and reduction of price under Article 50 of the CISG
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With regard to the claim for performance under the CISG in case of legal defects under Article 41, it is disputed whether Article 46(1) applies or whether Article 46(2), (3) contains the available remedies.500 Similarly, it is not entirely clear whether the buyer can reduce the price under Article 50 of the CISG when facing legal defects under Article 41 of the CISG. In both cases, the wording of the remedial provisions refers to non-conformities. This wording is also found in the title of section II of the CISG where it refers to Articles 35–40. In contrast, the wording of Articles 46(2), (3), 50 do not refer to third party claims. However, “third party claims” also form part of the title of section II of the CISG where it refers to Articles 41–43. Against this background, it is disputed whether the remedies under Articles 46(2), (3), 50 are available for a breach of Article 41. Yet, the discussion revolves around the question of whether these remedies are available with regard to legal defects at all (Articles 41 and 42) without differentiating whether the legal defect is a claim or a right of a third party. Therefore, under no opinion in these discussions would the buyer’s remedies for rights of third parties in the goods be more far-reaching than for claims of third parties.
(2) Avoidance of contract under Articles 49(1)(a), 25 of the CISG
244
If mere claims under Article 41 of the CISG could not amount to a fundamental breach, then the actual rights of third parties may remain relevant apart from the situation in which the third party has not brought forward the claim at all. In that case, buyers would have to prove the existence of a third party right as a basis of the fundamental breach if they intended to avoid the contract under Articles 49(1)(a), 25 of the CISG. Article 25 of the CISG defines a breach as 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.” The exercise to assess the weight of a breach is, thus, primarily an exercise of contract interpretation. If the contract does not provide any insights, the general expectations under a CISG contract in this regard have to be considered.
245
As Schlechtriem and Hachem point out, the prospect of a lengthy legal proceeding without certainty of the outcome can generally be considered
246
Yet, this limitation of the remedy of contract avoidance does not lead to more extensive remedies for a right of a third party in contrast to a mere claim of a third party. This is because if the claim is obviously unfounded, there is also no right of a third party. Thus, the remedy is limited in cases in which there is no breach due to a right of a third party. Therefore, there is no more extensive remedy for third party rights in this regard.
(3) Prescription
247
Lastly, the prescription under some national laws could lead to an additional scope of application for rights if the prescription of the buyer’s claims was different depending on whether a claim or right of third parties existed. Prescription is a matter not governed by the CISG and therefore subject to
248
For example, if German law applies, section 438(1) No.1(a) of the German Civil Code provides for a prescription period of thirty years with regard to the buyer’s claim against the seller in case of rights in rem (dingliche Rechte) to the goods that allow for eviction of the goods. From the property in the goods follows a vindication claim for the owner under section 985 of the German Civil Code. If a third person remains the owner of the goods, the buyer’s claim against the seller is subject to section 438(1) No.1(a) of the German Civil Code directly or in analogy according to the prevailing opinion.508 Hence, the buyer’s redress against the seller will only lose its enforceability thirty years after handing over of the goods. Yet, with regard to mere (unfounded) claims, this extended prescription period is not applicable, but instead the general rule (two years after the handing over) under section 438(1) No. 3 of the German Civil Code applies.509 This serves as an example that due to national prescription law, the relevance of the right of the third party may resurface under CISG transactions even though a respective claim regarding the right also exists.
249
At first sight, the difference in limitation periods might discredit the second element of the premise: There could be more far-reaching remedies for rights although a claim exists. For example, if German law applied to the contract and the third party would claim to have rights in the goods more than two years after the handing over of the goods, the buyer’s remedies against the seller would be time-barred under the German statute of limitation (section 438(1) No. 3 of the German Civil Code). However, if the buyer could prove that the third party claim is substantiated and, thus, a third party right exists, the remedies under the CISG with regard to the third party right would not be time-barred under the German statute of limitation (section 438(1) No.1(a) of the German Civil Code).
250
However, the overall question is whether “rights of third parties” has any scope of application under the CISG apart from the situation in which the third party has not brought forward the right. To answer this question, it is not convincing to rely on differentiations introduced by national law. There is no indication that the CISG contains remedies just as a backup in case another remedy under the CISG is not enforceable due to national law. Moreover, many legal systems do not differentiate between limitation periods for rights and claims does not exist. For example, the UN Limitation Convention treats both breaches equally. In both cases, the limitation period is four years from the handing over of the goods (Articles 8, 10(2) of the UN Limitation Convention). Thus, in case such a law applies to prescription, “rights” under Article 41 of the CISG would once again be deprived of any scope of application apart from the situation in which the third party has not brought forward his or her claim at all.
251
Therefore, also the second element of the premise is established: The CISG does not consider there to be additional remedies for the buyer in case of a third party right compared to a third party claim.
cc) Summary
252
“Rights” in Article 41 of the CISG protects the buyer only from the situation in which the third party right exists but this third party has not raised the right, yet. Therefore, the opinion that considers the CISG to require the third party to raise his or her right under Article 41 for there to be a “right”, or interprets the CISG to be structured around a protection from eviction, would render “rights” under Article 41 a legal nullity. The wording and the systematics within Article 41, thus, favor an interpretation that considers a breach of contract due to a third party right to already exist by the mere existence of a third party right.
b) Purpose of Article 41 of the CISG
253
This understanding is further supported by the provision’s purpose of protecting the buyer from rights and claims of third parties. The buyer could learn about an existing third party right before the third party asserts this right. This would cause considerable uncertainty for the buyer, since the third party could enforce his or her right at any time in the future until the time period under the statute of limitation has elapsed. However, in the meantime the seller could have become insolvent or the buyer’s claims against the seller could in turn be time-barred. Moreover, buyers’ use of the goods can already be impaired, since they might lose their investment in the goods if the third party claimed the goods, or they might become liable toward the third party if they resold the goods while knowing of the third
254
Even under national laws that in principle only provide contractual remedies in case the goods have been evicted (for example, France and Switzerland, as described above), the need to protect the buyer under such circumstances is acknowledged. Swiss law allows the buyer to rescind the contract under Article 24(1) No. 4 of the Swiss Code of Obligations.510 French law allows the buyer to treat the contract as null under Article 1599 of the French Civil Code if the seller was not the owner of the goods.511 Roman law provided for a quick usucapion, which also limited the uncertainty for the buyer to a relative short period of time.512 The lack of protection for a buyer facing encumbered goods and a passive third party having rights in the goods is, thus, an acknowledged weakness of an eviction-based liability system and is offset in other areas of the law. Yet, the CISG does not unify the areas of the law chosen to supplement the contractual fabric of an eviction-based system. To achieve a uniform set of rules for a sales contract, the CISG should be deemed to provide a purely contractual solution to the problem: A “right” of a third party under Article 41 of the CISG is a breach of contract irrespective of whether the third party has brought forward the right in any way.
c) Travaux préparatoires
255
Lastly, the historical record demonstrates that the departure from an eviction-based liability system and the protection of the buyer from mere rights of third parties in the goods was envisaged early on. The buyer is not left in uncertainty whether the third party will ever advance his or her right and whether the seller will still be solvent at that time or whether recourse might be time-barred at that time. This underlying thought can be traced back to Rabel who commented on his first draft of a provision governing legal defects:
“Le progrès dans la conception même des choses qui s’impose a déjà trouvé place dans la matière des vices affectant le droit du vendeur. Le Projet (art. 52 al. 2 et 3) a clairement abandonné toute la vieille doctrine de l’éviction qui subsiste encore dans le Code italien de 1942.”513
256
It should be added that Rabel was an expert on eviction-based liability systems and the developments under German law. This is evidenced by his postdoctoral thesis “Die Haftung des Verkäufers wegen Mangels im Rechte, Teil 1: Geschichtliche Studien über den Haftungserfolg” in which he ana
d) Summary
257
The foregoing analysis establishes that the CISG has departed from the Roman law tradition and its eviction-based liability system that is still followed in many national legal systems today. Considering the wording, the systematics of “rights” and “claims” under Article 41 of the CISG, the purpose and the travaux préparatoires of the CISG, there is a breach of contract and a “right” under Article 41 as soon as a third party right exists. Third parties do not have to assert (or even know of) their right.
258
The assessment of Article 41 of the CISG, thus, yields the insight that while Article 30 speaks of an obligation to transfer the property, but does not contain an obligation to transfer unencumbered property, Article 41 by its reference to “rights of third parties” contains what scholars refer to when they speak of an obligation to transfer unencumbered property.
5. Broader protection for buyers under the CISG than a mere obligation to transfer unencumbered property
259
The buyer’s protection under the CISG is even broader than under national laws that contain an obligation to transfer unencumbered property. The buyer’s broad protection from claims of third parties under Article 41 of the CISG has already been compared to the protection from third party rights above.515 Apart from the situation in which the third party has not asserted his or her right in any way yet, there will be a claim of a third party irrespective of whether this claim is substantiated or not, i.e., whether a third party right exists or is merely alleged. This protection is much more far-reaching than under legal systems that contain an obligation to transfer unencumbered property, such as German law. Yet, it is important to note that the perception that the seller is under an obligation to defend the buyer in the actual legal proceedings against the third party,516 may stem from notions of national
260
Besides its general suitability, especially for international contracts,521 this rule carries an additional advantage: The broad protection from claims of third parties alleviates the courts from the burden of analyzing whether rights exist or have actually been transferred under the applicable national laws. Instead of unifying the transfer of property, which was considered to be out of reach, or applying national law, the buyer’s protection from mere claims provides a different, but adequate solution. In most cases the buyer will learn of the potential right of a third party when this third party approaches him or her or a public authority. Thus, in the majority of cases the differences found in national laws regarding both the transfer or property and other rights a party can have in goods have been rendered irrelevant. This further reduces the relevance of the fact that unification of the transfer of property was not achieved.
6. Preemption of remedies under national law regarding the non-transfer of property
261
Finally, with regard to Article 41 of the CISG, it must be analyzed whether the CISG preempts national law as far as the latter provides remedies for the non-transfer of property. The remedies under national law have been depicted above in detail and all concern the existence of third party rights. Thus, the preemptive effect of Article 41 of the CISG (and not Article 30 of the CISG under the proposed interpretation) is the subject of the following discussion.
262
As noted above, the Swiss Supreme Court allows a rescission of the sales contract under Article 24(1) No. 4 of the Swiss Code of Obligations if the buyer erred in considering the seller to have absolute property in the goods; French law provides for the (relative) nullity if the seller is not the owner of the goods under Article 1599 of the French Civil Code; and English law acknowledges a total failure of consideration in similar circumstances.522
263
Yet, the CISG, and in particular Article 41, might not preempt such remedies if they concern questions of validity under Article 4, sentence 2(a). Defining “validity” under this provision has proven difficult.523 It is disputed whether “validity” under Article 4, sentence 2(a) is an autonomous term under the CISG,524 whether it has to be left to national law to define “validity”,525 or whether Article 4, sentence 2(a) has no meaning on its own whatsoever.526
264
Schroeter proposes that “by provisions concerned with ‘the validity of the contract’ Article 4[, sentence 2](a) of the CISG refers to legal limits to party autonomy.”527 In order for a provision to be considered as a limit to party autonomy, it must be intended to restrict the “parties’ ability to enter into a binding contract and to create contractual obligations.”528 In contrast, a provision does not concern matters of validity if it merely affects the performance of binding contractual obligations.529 Some courts highlight that the term encompasses national law that renders a contract void, voidable, or unenforceable.530 Under a more detailed definition, “matters of validity are those where a contract is void ab initio by operation of law or rendered so either retroactively by a legal act of the State or of the parties such as
265
Yet, despite the different opinions on how to interpret Article 4, sentence 2(a) of the CISG, it appears undisputed that the remedies under national law described above should generally be considered preempted by the CISG.533 The travaux préparatoires support this interpretation. Under the ULIS, Article 1599 of the French Civil Code was (despite its non-preemption by Article 8 of the ULIS) not considered applicable. This was due to Article 53 of the ULIS which provided: “The rights conferred on the buyer by Article 52 exclude all other remedies based on the fact that the seller has failed to perform his obligation to transfer the property in the goods or that the goods are subject to a right or claim of a third person.” In this regard, Tunc argued the idea behind the interplay between Articles 8 and 53 of the ULIS was exactly to exclude the national remedies or rules on validity described in this section.534 Beforehand, Luxembourg had posed the question of whether
266
While the provision was not maintained in the CISG, the results reached through this rule should be considered to match those under the CISG. Little attention was given to the wording of the provision that became Article 4 of the CISG and its requirement for an express provision. While some argued in favor of maintaining a provision equaling Article 53 of the ULIS,538 the majority’s opinion seems to have been that the provision’s content was self-evident.539 The Working Group deleted the provision in 1973, believing that the provision could lead to misunderstandings. They reasoned that because the Convention would generally displace national (unharmonized) law that was inconsistent with it, the insertion of an explicit exclusion of national law in “isolated instances” would raise unnecessary questions.540 Thus, the idea remained that the provision that became Article 41 of the
267
Hence, as far as the reference point for the nullity or validity of the contract is the transfer or lack of transfer of property, such rules will generally address the performance of the contract and the respective remedies in case of a breach. Because the rules applied under national law in such cases are generally preempted by the CISG, it is irrelevant whether they are considered as part of the applicable contract law or the non-contractual law of restitution. These rules should generally be considered to be preempted by the CISG.542
268
Therefore, Article 1599 of the French Civil Code should generally be preempted. The possibility of rescission under Article 24(1) No. 4 of the Swiss Code of Obligations and the notion of a total failure of consideration under English law meet the same fate.543 Otherwise, the legal consequences of third party rights under Article 41 of the CISG would be distorted: If buyers avoid the contract, they have to account for the benefits they received from the goods under Article 84(2) of the CISG. In contrast, some national laws do not require buyers rescinding the contract to account for the benefits. An example is English law, exemplified by the case Rowland v Divall 544 where the buyer did not have to account for the benefits he had received by being able to use the car.545 Regarding the English doctrine of (total) failure of consideration, it must be explicitly stated for a non-English lawyer that the dispute whether the doctrine of consideration is preempted under the
269
Therefore, the transfer of property is not relevant for issues of validity under the CISG.
7. Applying the novel approach in direct comparison to approaches 1–3
270
Lastly, it is necessary to compare the three existing approaches and their practical consequences to the novel approach which considers property an autonomous term and defines it as the seller’s legal interest in the goods without regard to the quality of that interest.
271
First, when goods are either stolen or the seller cannot transfer property as defined by the applicable property law, different outcomes may arise. Approach 1 would in itself differ in terms of practical consequences depending on whether an absolute or a relative notion of property is envisioned by the applicable property law.551 If an absolute notion of property were to apply, then the seller who cannot transfer property (under national law) due to a third party’s property in the goods would breach Article 30 of the CISG. Since the duty to notify the seller of the legal defect under Article 43 of the CISG does not apply to Article 30, a buyer could rely on the failure to transfer of property as a breach of contract even if this party has not notified the seller within a reasonable time of the defect. In contrast, under approaches 2,552 3, and the novel approach, the seller would be found in breach only of Article 41 of the CISG, and not Article 30 of the CISG. Consequently, Article 43 of the CISG would prevent the buyer from relying on the failure to transfer of property if the latter has not notified the seller of the defect in time.
272
Similarly, a valid limitation of liability clause regarding the buyer not becoming the owner of the goods could lead to diverging results depending on the approach followed. The situation was highlighted in a German case, in which the buyer did not become the owner due to a third party’s property in the goods. The District Court Freiburg in applying approach 1 obiter dictum considered a limitation of liability clause not to have an effect on Article 30 of the CISG and its (main) obligation to transfer property in the goods.553 If an absolute notion of property applied, the seller would have breached the contract and the limitation of liability clause would not extend to the breach of Article 30 of the CISG. In contrast, approaches 2, 3, and the novel approach would once again only consider Article 41 of the CISG to be breached, and so long as the limitation of liability clause is valid, exempt the seller from liability.
273
Second, differences in practical consequences occur if the goods in question are software or data. As will be argued below, irrespective of whether the applicable property law considers “property” rights to exist in software or data, the contracts could in any case still be CISG sales contracts under
274
If a seller were unwilling to transfer their legal position in goods consisting of software or data, approaches 1 and 2 would result in a breach of Article 30 of the CISG. Furthermore, in this situation, the novel approach would result in a breach of Article 30 of the CISG. Approach 3, which does not single out “property” of the seller, but rather considers all of the remaining seller’s “rights” to be breaches of Article 41 of the CISG, would classify the seller’s right as a breach of the this provision. Again, the practical difference lies in the fact that Article 43(1) of the CISG applies to Article 41 but not Article 30. Thus, under approach 3, the buyer generally would have to notify the seller of the legal defect. Yet, according to approach 3, regarding the seller’s rights, Article 43(2) of the CISG would alleviate the buyer from this burden of notification as the seller will know of his or her right in the goods.555 Minor practical differences nevertheless exist between approach 3 on the one hand and approaches 1, 2, and the novel approach on the other hand, since the buyer would have to prove the seller’s knowledge thus introducing additional room for arguments in legal proceedings.
275
Third, the approach followed may dictate differing results in the situation in which the seller delivers the goods but is unwilling to transfer the property in the goods until the buyer has paid the price. If one applies approach 3 and considers the relevant point in time for the obligation under Article 41 of the CISG to be the delivery of the goods, the seller would be in breach of contract if he or she does not transfer property concurrently with the delivery of the goods. An opportunistic buyer who has concluded an unfavorable contract seize this breach to argue that he or she may avoid the contract. Even though in many cases there will not yet be a fundamental breach of contract, this interpretation introduces uncertainty for sellers merely seeking to ensure that payment is received before losing their legal interest in the goods. In contrast, approaches 1, 2, and the novel approach envision a different relevant point in time for Article 30 of the CISG compared to Article 41 of the CISG, and postpone the seller’s obligation to transfer property in the goods to the point in time when the buyer pays the price.
276
These examples demonstrate that apart from dogmatical and analytical reasons that favor of the novel approach, there are actual differences in practical consequences between the approaches. Thus, the discussion is not merely theoretical.
8. Summary
277
Despite the travaux préparatoires not envisaging a uniform term “property” under the CISG, “property” under Article 30 of the CISG should be interpreted as such a uniform term. It encompasses the legal interest the seller has in the goods with no regard to the quality of that interest. The obligation to transfer the property, consequently, obliges sellers to transfer their legal interest to the buyer. The scope and delineations of property under national law are thereby rendered mostly irrelevant under the CISG, which is in line with the finding that, notwithstanding all differences in reasoning, a special status of “property” in contrast to other rights in goods was never pondered in 2000 years of theoretical and dogmatic discussion.556 Consequently, Articles 30 and 41 of the CISG can be distinguished by the person concerned: Article 30 governs sellers’ rights and Article 41 governs third parties’ rights for purposes of the seller’s liability. Due to the broad protection from mere claims of third parties under Article 41, the actual location of property will seldom be relevant under the CISG. The remaining relevance of the property and other rights emerges in case the third party has not raised his or her claim. The CISG has departed from an eviction-based liability system. National laws that provide for remedies in case the seller does not transfer property are generally preempted by the CISG, because there is no lack of protection for the buyer, and the applicability would lead to unnecessary divergences depending on the applicable national law. Since the notion of property under the CISG is, thus, independent from national property law, the doubts that lingered early in the unification process concerning the “difficulty of inserting a universal sales law of a new pattern into the remaining national laws of obligations and property” are alleviated.557
| 412 | Cf. a similar argument with regard to “property” and “goods” under the SGA 1893 by Battersby/Preston, 35 The Modern Law Review (1972), 268, 271. |
| 413 | See above paras. 38 et seq. |
| 414 | Schroeter, Internationales UN-Kaufrecht, para. 140. |
| 415 | Schroeter, FS Kritzer, pp. 425, 429; Staudinger/Magnus, Unterzeichnungsklausel para. 1. Cf. Swiss Supreme Court, 13 November 2003, CISG-online 840 para. 22 which, however, also highlights the relevance of the French wording. More cautiously, W. Witz/Salger/M. Lorenz/W. Witz, Art. 7 para. 20. |
| 416 | For this spirit of uniform sales law, see Rabel, 9 RabelsZ (1935), 1, 56 especially regarding (the transfer of) property. |
| 417 | Cf. BSK ZGB II/Wolf/Wiegand, Art. 641 ZGB para. 12. |
| 418 | See on different notions of property above paras. 38 et seq. |
| 419 | An example can be found in the facts of the following: Court of Appeal Munich, 2 March 1994, CISG-online 108, see below para. 320. These contracts must be differentiated from the first sales contract in such a chain of contracts under which the parties amend the seller’s obligation to transfer the property to the buyer under Art. 6 CISG: They agree that the seller should transfer the property, i.e., the legal interest in the goods, to a third party directly. Therefore, the fact that the buyer never receives the seller’s legal interest does not lead to a breach of Art. 30 CISG under such circumstances. |
| 420 | See below paras. 220 et seq. |
| 421 | For example, under sect. 947(2) German Civil Code and Art. 727(2) Swiss Civil Code. |
| 422 | In cases of bona fide acquisitions, the buyer may even receive a greater interest than the seller has had. |
| 423 | For example, Trakman/Walters/Zeller, 6 European Data Protection Law Review (2020), 243, 254–255 argue that data sales could be sales under the CISG since data was intellectual property and, therefore, a form of property that is being sold existed. Cf. Dreier, pp. 116, 123. |
| 424 | Kröll/Mistelis/Perales Viscasillas/Kröll, Art. 42 para. 12; Achilles, FS Schwenzer, p. 1. |
| 425 | Schmitt, CR 2001, 145, 152. |
| 426 | Neumann, 21 VJ (2017), 109, 116; Muñoz, 24 Uniform Law Review (2019), 281, 286. |
| 427 | Hayward, 44 UNSW Law Journal (2021), 878, 904 fn. 194. Bridge/Gullifer/Low/McMeel, para. 9-003; Green, pp. 78, 85; cf. the legal separation between property in things and the IP rights exemplified by references to US, English, and German law, Praduroux, pp. 51, 65–66. |
| 428 | Bridge/Gullifer/Low/McMeel, para. 9-003; Low/Lin, 27 Journal of Environmental Law (2015), 377, 402; cf. Gretton, 71 RabelsZ (2007), 802, 846–847. |
| 429 | Staudinger/Magnus, Art. 1 para. 57. |
| 430 | See for example, Torremanns, p. 424; MacQueen/Waelde/Laurie, p. 821. |
| 431 | MüKoBGB/Gruber, Art. 42 para. 9 highlights that in case of a process patent of the seller, the buyer will nevertheless be allowed to such use of the goods due to party agreement. The potentially opposing decision by the District Court Midden-Nederland, 25 March 2015, CISG-online 2591, where the court found an agreement that the buyer was not allowed to transfer the rights granted (for example by reselling the software) was invalid under Art. 4, s. 2(a) CISG in combination with Dutch law, should not be followed. Such an agreement could place the contract outside the CISG’s scope, if it renders the contract a mere licensing agreement, but the parties’ agreement is inappropriately clipped if the contract is characterized as a sale which in turn renders the non-resale clause invalid. |
| 432 | Art. 18 draft of 1951: “Le vendeur s’oblige à effectuer la délivrance de la chose à l’acheteur; le vendeur doit remettre á l’acheteur, en même temps que la chose, tous les accessoires de celle-ci.”; Art. 20 draft of 1963: “La délivrance consiste dans la remise d’une chose conforme au contrat et de ses accessoires”/“Delivery consists in the handing over of goods which conform with the contract and their accessories”, Diplomatic Conference on the Unification of Law Governing the International Sale of Goods, The Hague, 2–25 April 1964, Vol. II – Documents, p. 215. |
| 433 | Diplomatic Conference on the Unification of Law Governing the International Sale of Goods, The Hague, 2–25 April 1964, Vol. I – Records, p. 42. Similarly, Evans shortly before the final vote was taken, Diplomatic Conference on the Unification of Law Governing the International Sale of Goods, The Hague, 2–25 April 1964, Vol. I – Records, p. 166. |
| 434 | Dölle/U. Huber, Art. 18 EKG paras. 23, 24. |
| 435 | As is proposed under approach 3, for example, W. Witz/Salger/M. Lorenz/Salger, Art. 41 para. 8 (seller can be “third party”), see above para. 166. This differentiation between Arts. 30 and 41 CISG is overlooked also in the realm of software transactions by Primak, 11 Computer L. J. 197 (1991), 197, 223–224; Larson, 5 Tulane Journal of International and Comparative Law (1997), 445, 468; Mowbray, 7 VJ (2003), 121, 124. |
| 436 | BeckOGK/Hachem, 01.03.2021, Art. 41 CISG para. 15.1. MüKoHGB/Benicke, Art. 41 para. 6 also supports applying Art. 41 CISG to claims of the seller. |
| 437 | See above para. 95. |
| 438 | For example, Bridge, International Sale of Goods, para. 11.41 proposes a principle of non-interference under Art. 7(2) CISG. |
| 439 | See above paras. 38 et seq. |
| 440 | A. Butler, § 4.03. |
| 441 | See above paras. 154 et seq. |
| 442 | See above para. 90. |
| 443 | Diplomatic Conference on the Unification of Law Governing the International Sale of Goods, The Hague, 2–25 April 1964, Vol. I – Records, p. 98. Gutzwiller in contrast argues that this uncertainty did not exist due to the majority of countries following the lex rei sitae-rule, Diplomatic Conference on the Unification of Law Governing the International Sale of Goods, The Hague, 2–25 April 1964, Vol. I – Records, p. 99. |
| 444 | Kröll/Mistelis/Perales Viscasillas/Piltz, Art. 30 para. 15. |
| 445 | Schlechtriem/U. Huber, 3rd German edn, Art. 30 para. 8; MüKoBGB/Gruber, Art. 31 para. 29; Schlechtriem/Schwenzer/Schroeter/Widmer Lüchinger, 8th German edn, Art. 30 para. 11; Kröll/Mistelis/Perales Viscasillas/Piltz, Art. 30 para. 17. |
| 446 | Schlechtriem/Schroeter, paras. 503, 527; Schroeter, Internationales UN-Kaufrecht, paras. 603, 635. |
| 447 | MüKoBGB/Gruber, Art. 31 para. 29; Schlechtriem/Schwenzer/Schroeter/Widmer Lüchinger, 8th German edn, Art. 30 para. 11 who generally considers the obligation for advance performance to only apply to the obligation to deliver the goods, and not to extend to the transfer of property; with less emphasis on the parties’ agreement in this regard Staudinger/Magnus, Art. 30 para. 12. |
| 448 | Kröll/Mistelis/Perales Viscasillas/Kröll, Art. 41 para. 29; MüKoBGB/Gruber, Art. 41 para. 16; Herber/Czerwenka, Art. 41 para. 8; contra Schweizer Botschaft BBl 1989 I, 745, 794 deeming the contract conclusion to be the relevant point in time. |
| 449 | See below paras. 224 et seq. |
| 450 | Tebel, para. 482. |
| 451 | Tebel, para. 483. |
| 452 | Tebel, para. 511. It is unclear whether Soergel/Willems, Art. 41 para. 8 follows this approach, since the author considers Art. 36 CISG to contain the relevant point in time but at the same time writes that the relevant point in time is the delivery of the goods. |
| 453 | Schlechtriem/Schwenzer/Schroeter/Widmer Lüchinger, 5th edn, Art. 31 paras. 47 et seq. |
| 454 | Tebel, paras. 501 (buyer’s interest), 502 (seller’s interest). |
| 455 | It is conceded that the practical consequences of this particular kind of breach of contract are slim to non-existent. |
| 456 | See on this general right to retention, Schlechtriem/Schwenzer/Schroeter/Mohs, 8th German edn, Art. 58 para. 28. |
| 457 | Schlechtriem/Schwenzer/Schroeter/Schwenzer/Lutzi, 8th German edn, Art. 41 para. 19a. Cf. for example, sect. 2-312(2) UCC, Art. 192(3) Swiss Code of Obligations, Art. 1627 et seq. French Civil Code. Notably, Magnus argues that the CISG provides the standard of review, which he claims does not prevent a full exclusion of liability since the CISG considers the seller not to be liable for legal defects if the buyer agrees to take the goods subject to the right or claim, Staudinger/Magnus, Art. 41 para. 21. |
| 458 | District Court Freiburg, 22 August 2002, CISG-online 711: “Ein Gewährleistungsausschluss ist nach dem Inhalt des Kaufvertrags nicht vereinbart, die Hauptpflicht der Eigentumsverschaffung würde von einem solchen ohnehin nicht erfasst.” |
| 459 | See below paras. 325 et seq. |
| 460 | In favor, CISG AC Opinion 21 (Schwenzer/Beimel), para. 3.7; contra for example, Metzger, 73 RabelsZ (2009), 842, 848. |
| 461 | CISG AC Opinion 21 (Schwenzer/Beimel), para. 3.3. Notably, with regard to Art. 28 CISG it has not been clearly established how mere “claims” are to be treated if the law of the forum does not recognize such a broad liability for legal defects. |
| 462 | See for this general stance of the CISG, Kröll/Mistelis/Perales Viscasillas/P. Huber, Art. 46 para. 1. |
| 463 | Cf. MüKoHGB/Benicke, Art. 41 para. 6. |
| 464 | Cf. Kiene, IHR 2006, 93, 96. |
| 465 | For example, Brunner/Gottlieb/Tebel, Art. 41 para. 17 fn. 1513. |
| 466 | Bach, IPRax 2009, 299, 303. |
| 467 | Kröll/Mistelis/Perales Viscasillas/Kröll, Art. 41 paras. 21, 43 fn. 50. |
| 468 | At least as far as these documents are necessary to take delivery of the goods, MüKoBGB/P. Huber, Art. 49 para. 41, or if the documents are necessary to dispose of the goods, Brunner/Gottlieb/Brunner/Leisinger, Art. 49 para. 6; Kröll/Mistelis/Perales Viscasillas/Bach, Art. 49 para. 58. |
| 469 | Cf. the references in the prior footnote and Singh/Leisinger, 20 Pace International Law Review (2008), 161, 182. |
| 470 | MüKoBGB/P. Huber, Art. 49 para. 39. |
| 471 | UNCITRAL Yearbook VIII (1977), p. 121 para. 19; UNCITRAL Yearbook VIII (1977), p. 152 Art. 25 paras. 4–5. |
| 472 | Same conclusion by MüKoHGB/Benicke, Art. 41 para. 28. Similarly, Staudinger/Magnus, Art. 49 para. 22. |
| 473 | See above para. 79. |
| 474 | BSK OR I/Honsell, vor Art. 192–196 OR, para. 9; Bucher, Neuerungen, pp. 27, 30; similarly, Schweizer Botschaft BBl 1989 I, 745, 794; similarly, Dölle/U. Huber, Art. 18 para. 16 regarding the seller’s liability under the ULIS being based on eviction in principle. |
| 475 | BSK OR I/Honsell, vor Art. 192–196 OR, para. 9: “Der Begriff des Rechtsmangels [im CISG] entspricht jenem des schweizerischen Rechts.” |
| 476 | Heuzé, para. 319 refers to Art. 41 as “la garantie d’éviction” and only refers to examples in which the right has been raised toward the buyer. Similarly, Schlechtriem/Cl. Witz, para. 234 writing that Art. 41 would “rappelle la garantie d’éviction du fait des tiers sous l’empire du Code civil (art. 1626 s.). But see Cl. Witz, para. 335.21.” Similarly, Audit, pp. 109–110 para. 113, who refers to a “garantie contra l’éviction” under the CISG and cites only examples in which the third party has at least raised a claim. |
| 477 | But see Achilles, Art. 41 para. 2. |
| 478 | Honnold/Flechtner, para. 346; Schlechtriem/Schwenzer/Schroeter/Schwenzer/Lutzi, 8th German edn, Art. 41 paras. 9–12; Schlechtriem/Cl. Witz, para. 235; Staudinger/Magnus, Art. 41 para. 15; MüKoBGB/Gruber, Art. 41 para. 6; MüKoHGB/Benicke, Art. 41 para. 8; BeckOGK/Hachem, 01.03.2021, Art. 41 CISG para. 12; Brunner/Gottlieb/Tebel, Art. 41 para. 11; BeckOK/Saenger, Art. 41 CISG para. 5; Ferrari/Kieninger/Mankowski/Ferrari, Art. 41 CISG para. 5; regarding the ambiguous German translation “Ansprüche” and the different meaning of Ansprüche under German national law (as defined in sect. 194 German Civil Code), see Maier-Lohmann, |
| 479 | Cf. the British proposal regarding Art. 52 ULIS and Tunc’s disapproving comments, Diplomatic Conference on the Unification of Law Governing the International Sale of Goods, The Hague, 2–25 April 1964, Vol. I – Records, p. 98, reported by Riese, 29 RabelsZ (1965), 1, 64 et seq.; cf. the Austrian proposal regarding the provision that became Art. 41 CISG, UNCITRAL Yearbook III (1972), p. 68 para. 73. |
| 480 | Honnold/Flechtner, para. 346. |
| 481 | German Supreme Court, 11 January 2006, CISG-online 1200; note by Schroeter, EWiR 2006, 427. |
| 482 | Enderlein, pp. 133, 179. |
| 483 | Schlechtriem/Schwenzer/Schroeter/Schwenzer/Lutzi, 8th German edn, Art. 41 para. 15; Ferrari/Kieninger/Mankowski/Ferrari, Art. 41 CISG para. 7. |
| 484 | MüKoHGB/Benicke, Art. 41 para. 13; Schlechtriem/Schwenzer/Schroeter/Schwenzer/Lutzi, 8th German edn, Art. 41 para. 15; Kröll/Mistelis/Perales Viscasillas/Kröll, Art. 41 para. 31; BeckOGK/Hachem, 01.03.2021, Art. 41 CISG para. 20. |
| 485 | Schlechtriem, Seller’s Obligations, p. 6-32; BeckOK/Saenger, Art. 41 CISG para. 5; Schlechtriem/Schwenzer/Schroeter/Schwenzer/Lutzi, 8th German edn, Art. 41 para. 9; Maier-Lohmann, |
| 486 | Neumayer/Ming, Art. 41 para. 4. |
| 487 | Bridge, International Sale of Goods, para. 11.41; BeckOGK/Hachem, 01.03.2021, Art. 41 CISG para. 6. |
| 488 | Zhang, p. 83. |
| 489 | Considering frivolous or obviously unfounded claims of third parties not to breach Art. 41 CISG, Bridge, The International Sale of Goods, para. 11.40; Achilles, FS Schwenzer, pp. 7–8; Herber/Czerwenka, Art. 41 para. 6; Schwimann/Kodek/Posch/Terlitza, Art. 41 CISG para. 4; Schlechtriem, Seller’s Obligations, p. 6-32; contra, Staudinger/Magnus, Art. 41 para. 15; BeckOK/Saenger, Art. 41 CISG para. 5; Ferrari/Kieninger/Mankowski/Ferrari, Art. 41 CISG para. 5; P. Huber/Mullis/Mullis, p. 172; Kröll/Mistelis/Perales Viscasillas/Kröll, Art. 41 para. 19; MüKoBGB/Gruber, Art. 41 para. 8; MüKoHGB/Benicke, Art. 41 para. 10; Schlechtriem/Schwenzer/Schroeter/Schwenzer/Lutzi, 8th German edn, Art. 41 para. 10; explicitly leaving this question open, German Supreme Court, 11 January 2006, CISG-online 1200. |
| 490 | Achilles, FS Schwenzer, pp. 1, 6; MüKoHGB/Benicke, Art. 41 para. 8; U. Huber, 43 RabelsZ (1979), 413, 501 (the latter regarding the Art. in the New York draft (1978) that became Art. 41 CISG). |
| 491 | See above para. 223. |
| 492 | Court of Appeal Celle, 13 March 2019, CISG-online 5381. |
| 493 | Maier-Lohmann, |
| 494 | Secretariat Commentary, Art. 39 para. 3; Zhang, p. 78; Schlechtriem/Schwenzer/Schroeter/Schwenzer/Lutzi, 8th German edn, Art. 41 para. 11; Kröll/Mistelis/Perales Viscasillas/Kröll, Art. 41 para. 17; for the historical background for this interpretation and comparative remarks regarding French law, see Dölle/Neumayer, Art. 52 EKG para. 9. |
| 495 | Achilles, FS Schwenzer, pp. 1, 5; Brunner/Gottlieb/Tebel, Art. 41 para. 13; Zhang, p. 77. |
| 496 | Kröll/Mistelis/Perales Viscasillas/Kröll, Art. 41 para. 17; MüKoHGB/Benicke, Art. 41 para. 8; BeckOGK/Hachem, 01.03.2021, Art. 41 CISG para. 14. |
| 497 | See above on this discussion, para. 232. |
| 498 | Dölle/Neumayer, Art. 52 EKG para. 9. |
| 499 | Similarly low standards of a “claim”, Schlechtriem/Schwenzer/Schroeter/Schwenzer/Lutzi, 8th German edn, Art. 41 para. 11; Staudinger/Magnus, Art. 41 paras. 7, 17; MüKoBGB/Gruber, Art. 41 para. 7; Brunner/Gottlieb/Tebel, Art. 41 para. 13; Zhang, pp. 77, 78; Heuzé, para. 319; Su, IPRax 1997, 284, 285. |
| 500 | See for details on this discussion, CISG AC Opinion 21 (Schwenzer/Beimel), paras. 3.5 et seq. |
| 501 | Schlechtriem, Seller’s Obligations, p. 6-32; BeckOGK/Hachem, 01.03.2021, Art. 41 CISG para. 23. |
| 502 | Brunner/Gottlieb/Tebel, Art. 41 para. 32. |
| 503 | See above para. 232. |
| 504 | UNCITRAL Yearbook VIII (1977), pp. 121–122 paras. 19–20; UNCITRAL Yearbook VIII (1977), p. 152 Art. 25 paras. 4–5. |
| 505 | UNCITRAL Yearbook VIII (1977), pp. 121–122 paras. 19–20. |
| 506 | United Nations Convention on the Limitation Period in the International Sale of Goods. See also Spanish Supreme Court, 6 July 2020, CISG-online 5370 para. 79. |
| 507 | Austrian Supreme Court, 14 January 2002, CISG-online 643; Polish Supreme Court, 19 December 2003, CISG-online 1222; Swiss Supreme Court, 18 May 2009, CISG-online 1900 para. 44; Schlechtriem/Schwenzer/Schroeter/Müller-Chen/Atamer, 8th German edn, Art. 45 para. 52; MüKoHGB/Mankowski, Art. 4 para. 17; Mastellone, 5 VJ (2001), 143, 148; contra, Williams 10 VJ 2006, 229, 244 et seq. |
| 508 | It is disputed under German law whether the non-transfer of property is to be treated distinctly from a legal defect and should fall under sect. 195, 199 German Civil Code, cf. BeckOK/Faust, § 438 BGB para. 15, which would only add further to the differences produced due to different legal defects. |
| 509 | See for the discussion and arguments, Maier-Lohmann, |
| 510 | See above para. 111. |
| 511 | See above paras. 96 et seq. |
| 512 | See above para. 92. |
| 513 | U. D.P. 1950 – Etudes: IV Vente – Doc. 96, p. 3. |
| 514 | Rabel, Mangels im Rechte, passim. |
| 515 | See above paras. 220 et seq. |
| 516 | Audit, p. 112; Schlechtriem/P. Butler, para. 165 (“The defence of such claims is the seller’s responsibility”); Kröll/Mistelis/Perales Viscasillas/Kröll, Art. 41 para. 20 (“seller has to fight off all claims at his own expense”). |
| 517 | See above para. 86 on the obligatio auctoritas. |
| 518 | Audit, p. 112. |
| 519 | Brunner/Gottlieb/Tebel, Art. 41 para. 26; Metzger, 73 RabelsZ (2009), 828, 848. |
| 520 | Brunner/Gottlieb/Tebel, Art. 41 para. 26. |
| 521 | See for example, Kröll/Mistelis/Perales Viscasillas/Kröll, Art. 41 para. 17; Schlechtriem/Schwenzer/Schroeter/Schwenzer, 7th German edn, Art. 41 para. 9. |
| 522 | See above para. 111 for Swiss law, paras. 96 et seq. for French law, and paras. 139 et seq. for English law. |
| 523 | Hartnell, 18 Yale Journal of International Law (1993), 1, 21 considers the ambiguity to have been intended by the drafters. |
| 524 | Bridge, International Sale of Goods, para. 10.31. |
| 525 | Drobnig, 40 American Journal of Comparative Law (1992), 635, 636. |
| 526 | Schroeter, 58 Villanova Law Review (2013), 553, 557; P. Huber, ZEuP 1994, 585, 594 et seq.; Schlechtriem/Schwenzer/Schroeter/Hachem, 5th edn, Art. 4 para. 29. |
| 527 | Schroeter, 22 Uniform Law Review (2017), 47, 56. |
| 528 | Schroeter, 22 Uniform Law Review (2017), 47, 58. |
| 529 | Schroeter, 22 Uniform Law Review (2017), 47, 58. |
| 530 | Geneva Pharmaceuticals Technology Corp. v. Barr Laboratories, Inc., US District Court for the Southern District of New York, 10 May 2002, CISG-online 653 para. 206; Barbara Berry, S.A. de C. V. v. Ken M. Spooner Farms, Inc., U. S. District Court for the Western District of Washington, 13 April 2006, CISG-online 1354; skeptical regarding the term “unenforceable” as it may be misunderstood in Germany, Schlechtriem/Schwenzer/Schwenzer/Hachem, 4th edn, Art. 4 para. 31 fn. 121. In my opinion, however, Court of Appeal of the State of Rio Grande do Sul, 30 March 2017, CISG-online 2819, para. 28 is erroneous as far as it could be understood to signify that Art. 7(1) CISG and “good faith” might prohibit a reliance on contractual invalidity based on national law. |
| 531 | Schlechtriem/Schwenzer/Schwenzer/Hachem, 4th edn, Art. 4 para. 31. |
| 532 | Tunc, Commentary on the Hague Conventions of the 1st of July 1964 on International Sale of Goods and the Formation of the Contract of Sale, Diplomatic Conference on the Unification of Law Governing the International Sale of Goods, The Hague, 2–25 April 1964, Vol. I – Records, p. 378. Art. 8 ULIS is similar to the wording employed in Art. 4, s.2(b) CISG regarding the exclusion of validity from the scope of the Convention. |
| 533 | Cf. CISG AC Opinion 23 (Beale), para. 4.27; Staudinger/Magnus, Art. 41 para. 27; Neumayer/Ming, Art. 41 para. 1 fn. 1; Brunner/Gottlieb/Tebel, Art. 41 para. 34; Kröll/Mistelis/Perales Viscasillas/Kröll, Art. 41 para. 45; Schlechtriem/Schwenzer/Schroeter/Schwenzer/Lutzi, 8th German edn, Art. 41 para. 22; MüKoHGB/Benicke, Art. 41 para. 33; MüKoBGB/Gruber, Art. 41 para. 25; Schlechtriem/Schroeter, para. 433 (regarding Art. 1599 French Civil Code); Schroeter, Internationales UN-Kaufrecht, para. 510 (regarding Art. 1599 French Civil Code); Schroeter, 22 Uniform Law Review (2017), 47, 63–64 (regarding Art. 20 Swiss Code of Obligations); Bucher, Neuerungen, pp. 27, 47 (regarding Art. 20 Swiss Code of Obligations). But see Commercial Court Canton Aargau, 09 March 2022, CISG-online 5843 para. 42, which erroneously considered Art. 20 Swiss Code of Obligations not to be preempted by the CISG in case of initial, objective impossibility. |
| 534 | Tunc, Commentary on the Hague Conventions of the 1st of July 1964 on International Sale of Goods and the Formation of the Contract of Sale, p. 68: “Article 53 [...] was in fact necessary to exclude the possibility, which Article 8 would otherwise have preserved for the buyer, of relying on municipal rules providing that a sale of another person’s goods should be null and void.” |
| 535 | U. D.P. – Etudes: IV Vente – Doc.102, p. 50; Diplomatic Conference on the Unification of Law Governing the International Sale of Goods, The Hague, 2–25 April 1964, Vol. II – Documents, p. 134 para. 5. |
| 536 | Art. 52(1) ULIS is comparable to today’s Art. 41 CISG. |
| 537 | Diplomatic Conference on the Unification of Law Governing the International Sale of Goods, The Hague, 2–25 April 1964, Vol. II – Documents, p. 197. |
| 538 | Mexico, A/CN.9, Working Group II, Annex I, para. 16: “I think its provisions should be maintained, as its text seems to be adequate to prevent the possibility of actions other than those for avoidance or damages, such as an action to invalidate the transaction as would be the case, for example, of nullity actions (especially in the case of the sale of goods not owned by the seller).” Schlechtriem/Schwenzer/Schroeter/Schwenzer/Lutzi, 8th German edn, Art. 41 para. 22 would have liked to see a respective provision in the CISG as they doubts whether French judges will abstain from applying Art. 1599 French Civil Code without it. To date, this concern has not materialized. |
| 539 | Schlechtriem, Seller‘s Obligations, p. 6-31; BeckOGK/Hachem, 01.03.2021, Art. 41 CISG para. 2; W. Witz/Salger/M. Lorenz/Salger, Art. 41 para. 14 who however does not address Art. 1599 French Civil Code in the following list of examples of preempted legal concepts; Schroeter, 22 Uniform Law Review (2017), 47, 53 states that the deletion was not intended to change anything and must be interpreted in light of a comparable rule in Art. 9 of the 1972 Unidroit Draft Law on Validity that contained a similar rule. |
| 540 | UNCITRAL Yearbook IV (1973), p. 44 paras. 62 et seq. (this relates to Art. 34 ULIS that contained the mirroring provision regarding some non-conformities of the goods, but the reasoning was considered to also apply to Art. 53 ULIS, see UNCITRAL Yearbook IV (1973), p. 73 paras. 146, 147). |
| 541 | Less convinced, Hartnell, 18 Yale Journal of International Law (1993), 1, 78. |
| 542 | Cf. CISG AC Opinion 23 (Beale), para. 4.27; Staudinger/Magnus, Art. 41 para. 27; Neumayer/Ming, Art. 41 para. 1 fn. 1; Kröll/Mistelis/Perales Viscasillas/Kröll, Art. 41 para. 45; MüKoHGB/Benicke, Art. 41 para. 33; Brunner/Gottlieb/Tebel, Art. 41 para. 34; Schlechtriem/Schwenzer/Schroeter/Schwenzer/Lutzi, 8th German edn, Art. 41 para. 22; MüKoBGB/Gruber, Art. 41 para. 25; Schlechtriem/Schroeter, para. 433 (regarding Art. 1599 French Civil Code); Schroeter, Internationales UN-Kaufrecht, para. 510 (regarding Art. 1599 French Civil Code); Schroeter, 22 Uniform Law Review (2017), 47, 63–64 (regarding Art. 20 Swiss Code of Obligations); Bucher, Neuerungen, pp. 27, 47 (regarding Art. 20 Swiss Code of Obligations). |
| 543 | Agreement with regard to the preemption of this possibility under Swiss law, Court of Appeal Canton Zug, 23 February 2023, CISG-online 6313 para. 77; Bucher, recht 1996, 178, 186. Apparently differently for Dutch law, cf. District Court Gelderland, 23 February 2022, CISG-online 5842. |
| 544 | [1923] 2 KB 500. |
| 545 | See above on details of English law in this regard, paras. 139 et seq. |
| 546 | See opinions on “consideration” under CISG contracts, Geneva Pharmaceuticals Technology Corp. v. Barr Laboratories, Inc., US District Court for the Southern District of New York, 10 May 2002, CISG-online 653 paras. 210–212; Bridge, International Sale of Goods, para. 10.31; Fandl, 34 Berkeley Journal of International Law (2016), 1, 40; Schroeter, 22 Uniform Law Review (2017), 47, 62. |
| 547 | Cf. Chambers, 18 Oxford Journal of Legal Studies (1998), 363, 375 for an example of this distinction. |
| 548 | Sometimes it is even claimed that the doctrine is all about performance, Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Limited [1943] AC 32, 48: “performance of the promise [...] if performance fails, the inducement which brought about the payment [consideration] is not fulfilled”; cf. Burrows, The Law of Restitution, pp. 324. |
| 549 | Cf. Mitchell, 29 University of Queensland Law Journal (2010), 191. |
| 550 | CISG AC Opinion 23 (Beale), black letter rule 1; Schlechtriem, 21 Cornell International Law Journal (1988), 467, 474; Schlechtriem/Schwenzer/Schroeter/Schwenzer, 7th German edn, Art. 41 para. 24. More far reaching Kröll/Mistelis/Perales Viscasillas/Kröll, Art. 41 para. 45 who argues national law should be applicable if the reason for the invalidity was “bad faith behavior of the seller.” |
| 551 | See above para. 157. |
| 552 | Regarding approach 2, this could be assessed differently if one considered the obligation to do everything necessary under national law to transfer property to include an obligation to procure the power of disposition of property. In other words, the seller would have breached Art. 30 CISG by not having persuaded the third party to give up property in the goods (potentially against payment). Yet, this interpretation of approach 2 is not brought forward in literature and does not appear convincing, since it leads to a circumvention of Art. 43(1) CISG just as approach 1 does and is criticized for, see above para. 210. |
| 553 | District Court Freiburg, 22 August 2002, CISG-online 711. |
| 554 | See below paras. 332–333. |
| 555 | See above para. 211. |
| 556 | Bergmann, 74 RabelsZ (2010), 25, 38 who rightfully excludes the idea of nullity of a sale of a good that is owned by somebody else from this statement. |
| 557 | See for these doubts, Rabel, 1 American Journal of Comparative Law (1952), 58, 60. |
Property in Goods and the CISG (2024), S. 79—120
