General Principles

a. Introductory Comments

Article 7(2) draws our attention to general principles which by the use of analogy, can fill gaps. The CISG does not explicitly define general principles. Brandner suggests that "the principle must be so important that without it the Convention as a whole might crumble."[517] However such a definition does not explain what general principles actually are meant to be besides "pillars of the Convention." In the above discussion of analogy a distinction has been drawn between legal provisions and general principles. Drobnig illustrates the distinction by pointing to the fact that it is bound up with the Roman division between leges and jus. Such a distinction was also used within article 7(2) of the CISG.[518] Drobnig observed that:

"it is almost of the essence of general principles of law that they are not laid down by any legislative action. They are nowhere readily formulated - rather they have to be elaborated."[519]

How then can general principles be elaborated? Such a question can only be answered if the purpose for such elaboration is known. If it is for the purpose of a doctrinal analysis of general principles then the solution is a comparison of national and international systems of contract law, that is, comparative law. These principles therefore need only be understood in a broad sense. If the purpose is to discover general principles within the CISG, such an analysis must be rejected due to the mandate of article 7(1). However, this does not change the understanding of principles. They still must be understood in a broad rather than technical sense as they contain "rules" as well as "principles."[520] In Texaco v Libyan Arab Republic,[521] the arbitrator noted that general principles are one of the sources of international law.[522] Interestingly, the arbitrator argued that there is a difference between "general principles" and "principles of international law." He pointed out that "principles of international law" are of a wider scope than "general principles" because "the latter contribute with other elements [such as] international custom and practice ... to constitute [a] criterion for the internationalization of a

contract."[523]

The conclusion here suggests that the CISG in article 7(2) refers to "principles of international law" and our attention must remain focused within the "Four Corners" of the CISG. However, due to its inception by leading international scholars, general principles which are found in various domestic systems have found their way into the CISG. They are either so general or so widely used such as say, freedom of contract, that they were imported into the CISG in total and unchanged. On the other hand, due to compromise solution others were changed or modified and are either unique to the CISG or predominantly but not exclusively found in other systems such as the binding effect of contractual promises. Consideration, a pillar in common law systems, is not included in the CISG.

It can be argued that the development of the CISG, and specifically general principles, have provided a philosophical link of the CISG to domestic systems of law. Therefore, an autonomous interpretation becomes impossible. Such an argument is not quite correct. The linkage to domestic systems cannot be denied but only in a general philosophical sense and not in a practical way backed by jurisprudence. The closest philosophical linkage is achieved by other international contract formulations such as PECL and PICC. The argument which follows is that analogical extensions in formulating general principles outside the CISG are acceptable when there is a close philosophical link. It is a convincing choice where "two conventions can form a coherent body of rules, using the same concepts for similar purposes."[524] Such an argument relies on two premises. First, that two conventions, or even two legal systems, can form a coherent body of law. Secondly, that the same concepts are used for similar purposes. But why have two conventions if they have a coherent body of rules? Logically this assumes that another convention or model law would only be written if it improves or adds to the original one. As soon as improvements or changes are introduced the two bodies of law will not be identical or coherent. They may be similar but there are differences setting the two sets of rules apart.

The second premise that the same concept can be used for similar purposes is specifically rejected by article 7(1). To "promote uniformity in [the Convention's] application" specifically draws on the premise that the "four corner" approach has to be taken. Furthermore the autonomy argument demands that functionally similar rules, which are tied to different systems of law, cannot be used to interpret the CISG.

It could be argued that the basic skeletal provisions of a PICC or PECL provision, which is identical to its CISG counterpart, could be used to assist in the interpretation of that particular provision. The problem, however, is that a provision would need to be identical and not merely similar to be comparatively used in the interpretation of the CISG. The real problem is that instead of having only one variable namely the interpretation of the CISG a second variable needs to be dealt with namely whether the PICC or PECL provision is identical or merely similar.

Methodologically speaking and taking the mandate of article 7 into consideration, the only permissible approach is to rely on the four corners of the CISG when interpreting any of its provisions. It is not denied that PICC or PECL can be used to fill external gaps instead of reverting to domestic law. Many arbitral awards have recognized the potential of combining the two international uniform law instruments.[525]

Considering that it has been demonstrated that only the socialization process can be an acceptable transplant, what is the practical outcome from the above discussion? Ideally, scholarship is essential in formulating general

principles so that courts and tribunals have the ability to rely on a ready made set of principles that can be used as a methodological tool in interpreting the CISG pursuant to its mandate as expressed in article 7(1).

b. General Principles within the CISG

Within the Convention, ample sources of internal principles are found. Hillman recognized four basic policies namely "freedom of contract, promoting cooperation and reasonableness to enable each party to receive the fruits of the exchange, facilitate the successful completion of exchange even when something goes awry and

compensating injured parties for breach."[526] Magnus on the other hand indicates that he discovered no fewer than 26 general principles.[527] As soon as a comparison between the principles as proposed by Hillman and Magnus is attempted, a striking difference is discovered. The principles are not only different in "label" but also in "substance." A difference in "label" would not be problematic, as the name given to an object does not change its function. However a difference in "substance" is another matter. By simply listing the articles used to support various general principles, the compiled list suggested by Hillman varies from the one suggested by Magnus. Such a difference does not change the general principles, it merely explains how "general" is the general principle that has been described. That may be true but considering that the discovering and applying general principles must achieve uniformity, it can be argued that principles expressed differently will not lead to the same uniform results.

How do we discover a general principle and how do we recognize one? Magnus suggested that principles could be discovered in four ways: First, some articles claim to be applicable to the entire Convention such as article 6 denoting the principle of party autonomy. Secondly, a separate comprehensive thought can be derived from several provisions such as articles 67(2), 68 and 69(2). They provide that passing of risk requires identification of goods to the respective contract. Thirdly, single provisions might include legal thoughts, which are subject to generalization and are to be applied in similar situations; and fourthly, the overall context can show that a certain basic rule is implicitly assumed such as the rule "pacta sunt servanda." [528]

The first way to find principles appears to be the least contentious one and at first glance there should be no variance in the application. Hillman suggests that article 6 supports the party's intentions, [529] and Magnus uses the label of party autonomy. They both go on to argue that there are exceptions to this principle. Magnus states "except for provisions of art. 12 CISG, the validity issue to be determined in conformity with national law (art. 4(a) CISG) and the principle of good faith (art. 7(1) CISG), the parties' authority to regulate their relationship is unlimited."[530]

Hillman, on the other hand, suggests that several articles "eliminate formalities that might otherwise impede the parties from freely achieving their goal."[531] He lists articles 11, 29(1), 19(2), 8 and 9 and sees no restrictions as to a party's autonomy. On the contrary, he supports the view that autonomy as expressed in article 6 is further strengthened by the CISG in additional articles.

The conclusion here is that it is near impossible to define uniform general principles. The development of uniform general principles has not yet eventuated.[532] But at the same time we cannot deny the existence of general principles. In question is the existence of "uniform" general principles. In the absence of defined and recognizable

principles, we must rely on case law to "tease out" the principles by practice instead of the application of a generally recognized and acceptable model of general principles. But cases are not without their own problems especially in view of article 9. Uniformity of outcome is not as important as uniformity of application of principles. Hence, the outcome is not the key to uniformity but the mechanism to gain an outcome must be uniform.

Honnold used article 16 as an example to illustrate gap filling.[533] It is most illustrative to realize that in over 1,000 available cases there is only one consideration by any tribunal to deal with problems associated with article 16.[534]In fact tribunals never seriously considered article 16. What conclusion can we draw from this? It is reasonable to assume that Honnold would not devise an example in a most authoritative textbook if he did not consider the matter important. It is not denied that a gap does exist within article 16 as explained by Honnold. As human ingenuity is limitless, gaps can be found in any legislation, domestic or international. Courts inevitably have to deal with such gaps. However, not all of them will find their way to courts for a ruling. The purpose of article 7(2) is not so much how to discover gaps but how to fill them. Within the context of article 16 it is clear. The CISG deals with revocations of offers and therefore bars the application of domestic law. How do we discover gaps then? Huber put it simply:

"The question of what has to be considered a gap under the Convention cannot be answered on a mere rational basis. ... A common law jurist, because of his legal tradition, will probably tend towards a more restrictive interpretation of the Convention and its provisions. Thus he might more often be confronted with a gap, than would be a civil law jurist. Civil law jurists are more frequently used to work with generally framed, systematically conceived legal codes. Out of this experience, they are more readily prepared to solve unsettled questions or to fill gaps by referring to the general principles contained in the code itself."[535]

Importantly, uniformity is not achieved automatically. There are by definition variances, which can only be solved by treating international jurisprudence as persuasive. Attention should be directed to a problem of gap filling which is not only discussed in legal writing but has also been the subject of many court cases. The question is whether the rate of interest, which is recoverable pursuant to article 78, is a gap, which needs filling by taking recourse to general principle. Article 78 states: "If a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it, without prejudice to any claim for damages recoverable under article 74."