External gaps

A further distinction should be made as external gaps can be divided into two categories: first, matters on which the CISG is silent such as the choice of law; secondly, matters which the CISG specifically excludes such as consumer contracts pursuant to article 2. Diedrich also suggests such a distinction using the terminology of obvious and hidden gaps, "offensichtliche" and "versteckte Regelungslücke."[463]

The significance of such an observation is twofold. In the first place, obvious gaps delineate external gaps, whereas gaps on which the CISG is silent do not automatically point to an external gap. "Versteckte

Regelungslücke" should primarily be treated as an internal gap and the method of applying general principles to fill such a gap should be applied. Only when that method does not yield a result will it become clear that the gap is actually an external gap.

Secondly, in relation to external gaps where the CISG is silent, article 7 cannot be invoked as there is no provision which needs interpreting. It must be understood that this only comes into force after the application of general principles yields no result. However where the external gap is indicated by the CISG, a provision or principle

needs to be invoked which requires interpretation. In such an event, the inevitable setting of limits between using principles or provisions within the Convention and the use of domestic law depends how hard we look for the inclusion of the CISG. This problem will be discussed in the next chapter in detail.

The problem of setting the boundary is contained in article 7(2) itself. This points to two critical variables. First, there are "matters governed by this Convention"; secondly, unclear matters that need to be settled in conformity "with general principles." The interpretation given to the above is different depending on where the focus is directed. If the important part is "matters governed by this Convention," general principles become secondary and are subsumed as long as the Convention governs a question. If, on the other hand, the focus is on general

principles, then "matters governed by this Convention" is subordinate to the general principles. The scope of the latter interpretation is narrower than the first. A principle is assumed to exist on all matters governed by the CISG. But if there is no "general principle", a court would need to consult domestic law. Honnold has found an

important alternative to domestic law by applying article 9 of the CISG. This suggests that the parties are bound by usage or practices which they have established between themselves. In addition, international trade use which is widely known and observed by parties also becomes part of a contract. Article 9 together with article 6 not only supplements the Convention but also, in case of conflict, supersedes the Convention's provisions.[464]

Magnus suggested that even if the legal issue is covered by, or exempt from, the CISG domestic law must be used if general principles are lacking.[465] In his view, general principles are the only point of reference and not the existence of a legal issue. Such a view is possible if we read article 7(2) as stating that "in the absence of such principles" domestic law can be consulted. In other words, if principles are absent irrespective of whatever is in the CISG, domestic law must be applied.

Arguably, article 7(2) does not lead courts and tribunals to such a conclusion as advocated by Magnus. The CISG specifically alerts interpreters to matters covered and not covered in the Convention. It can be said that if a legal issue is covered by the Convention, the answer to interpretation must be found within the CISG. Broadly

speaking, if the gap pertains to "the formation of the contract of sale and the rights and obligations of the seller and the buyer,"[466] the Convention is applicable. This is supported by the mandate of article 7(1), which demands uniformity in the application of the CISG. It is the discovery of gaps through the application of principles which is supported by the CISG and not the decision whether principles are absent. The mechanism required to fulfill the mandate of article 7(2) therefore is how to fill gaps, and not how to discover principles. The question is how to develop a mechanism to cover gaps? One approach, which has been advanced, is the "true code" methodology.[467] In brief, there are no gaps in a "true code," as a code is a:

"Legislative enactment which entirely pre-empts the field and which is assumed to carry within it the

answers to all possible questions: thus when a court comes to a gap or an unforeseen situation, its duty is to find, by extrapolation and analogy, a solution consistent with the policy of the codifying law."[468]

The "true code" relies on an understanding by the interpreter of the policy contained in the code. The CISG expressly stipulates these policies in article 7. The difficulty in applying the "true code" is that the general

principles must be discovered uniformly. If general principles were to be discovered uniformly and recognized as such, the "true code method" would serve its purpose. Many common law countries would find such a method unfamiliar and the danger is to apply domestic law, instead of filling the internal gap with the help of general principles. Happ alluded to an interesting philosophical distinction in the choice of a methodology of gap filling. He points out that the method to be chosen is a secondary issue. The real question is, which method achieves the aim of article 7(1), namely a uniform application of the CISG.[469] This, however, appears to be a circular

argument but it highlights the importance that uniformity of interpretation and application of the CISG is the most important consideration. Everything else is subordinate.

In sum, it is clear that article 7(2) not only regulates and assists in the interpretation of matters within the CISG, it also covers matters excluded from the Convention. This chapter will focus on internal gap filling. It will also address the problem of discovering and defining the key variables in internal gap filling including general principles and the mechanism to fill gaps. The question of the "black hole" or matters excluded from the

Convention will be examined in the next chapter.