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To be cited as: CISG-AC Opinion no 2, Examination of the Goods and Notice of Non-Conformity: Articles 38 and 39, 7 June 2004. Rapporteur: Professor Eric E. Bergsten, Emeritus, Pace University School of Law, New York.
Adopted by the CISG-AC with no dissent.
Reproduction of this opinion is authorized.
PETER SCHLECHTRIEM, Chair
ERIC E. BERGSTEN, MICHAEL JOACHIM BONELL, ALEJANDRO M. GARRO,
ROY M.GOODE, SERGEI N. LEBEDEV, PILAR PERALES VISCASILLAS, JAN RAMBERG, INGEBORG SCHWENZER, HIROO SONO, CLAUDE WITZ, Members
LOUKAS A. MISTELIS, Secretary
1. Although a buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances, there is no independent sanction for failure to do so. However, if the buyer fails to do so and there is a lack of conformity of the goods that an examination would have revealed, the notice period in article 39 commences from the time the buyer "ought to have discovered it".
2. Whether and when it is practicable, and not just possible, to examine the goods depends on all the circumstances of the case. It is often commercially practicable to examine the goods immediately upon receipt. This would normally be the case with perishables. In other cases, such as complicated machinery, it may not be commercially practicable to examine the goods except for externally visible damage or other non-conformity until, for example, they can be used in the way intended. If the goods are to be re-sold, the examination will often be conducted by the sub-purchaser. Another example is dealt with in article 38(3).
3. The period for examining for latent defects commences when signs of the lack of conformity become evident.
1. The period for giving notice under article 39 commences when the buyer discovered or "ought to have " the lack of conformity. The buyer "ought to have discovered" the lack of conformity upon the expiration of the period for examination of the goods under article 38 or upon delivery where the lack of conformity was evident without examination.
2. Unless the lack of conformity was evident without examination of the goods, the total amount of time available to give notice after delivery of the goods consists of two separate periods, the period for examination of the goods under article 38 and the period for giving notice under article 39. The Convention requires these two periods to be distinguished and kept separate, even when the facts of the case would permit them to be combined into a single period for giving notice.
3. The reasonable time for giving notice after the buyer discovered or ought to have discovered the lack of conformity varies depending on the circumstances. In some cases notice should be given the same day. In other cases a longer period might be appropriate. No fixed period, whether 14 days, one month or otherwise, should be considered as reasonable in the abstract without taking into account the circumstances of the case. Among the circumstances to be taken into account are such matters as the nature of the goods, the nature of the defect, the situation of the parties and relevant trade usages.
4. The notice should include the information available to the buyer. In some cases that may mean that the buyer must identify in detail the lack of conformity. In other cases the buyer may only be able to indicate the lack of conformity. Where that is the case, a notice that describes the symptoms is enough to specify the nature of the lack of conformity.
The provisions regarding the notice that should be given by the buyer to the seller of goods in case of their alleged lack of conformity to the contract were among the most disputed matters in the preparation of the CISG. The proper interpretation of those provisions is in turn one of the most controversial matters in its implementation since it involves both fact and law, as shown in the appendix to this opinion.
2.1. The differences of opinion in the drafting of the notice requirement and in its interpretation arise largely out of differences in the domestic law of sales. Those laws take three different approaches to the matter:
1) The buyer must give a notice specifying the nature of the alleged lack of conformity within a short period of time after delivery of the goods. The allowable period of time may be specified, e.g., eight days, or a word such as “immediately” may be used.
2) The buyer must give a notice of the alleged non-conformity before “acceptance” of the goods in order to reject them, an action that normally brings with it the avoidance of the contract. However, the buyer is under no obligation to examine the goods and no notice of lack of conformity within any particular period of time need be given in order to claim damages.
3) The buyer must give a notice of the alleged lack of conformity. The notice may not need to be as specific as in the legal systems of the first group and it must be given within a period that may be described as “a reasonable time”.
2.2. Legal systems in the first group emphasize the security of the transaction for the seller. Claims of lack of conformity that are raised any significant period of time after the delivery of the goods are suspect, do not allow the seller to verify the lack of conformity as of the time of delivery and reduce the possibility that the consequences of lack of conformity can be minimized by repair or the supply of substitute goods.
2.3. Legal systems in the second group emphasize the right of the buyer to receive compensation for the seller’s failure to deliver conforming goods. Depriving the buyer of all remedies because notice is not given within some specified period of time is considered to be too harsh a result. The buyer automatically has a reduced possibility of recovery if no claim for lack of conformity is filed for a significant period of time since the buyer, who has the burden of proof, would have more difficulty to substantiate that the goods were not conforming at the time of delivery. Since the buyer has the obligation to mitigate damages, any increase in damages that occur after the buyer is aware of the lack of conformity are not compensated. This group of legal systems contains a number of industrialized countries, as well as many developing countries.
2.4. Legal systems in the third group attempt to strike a balance between security of the transaction for the seller and assuring that the buyer can recover compensation for the seller’s failure to deliver conforming goods. The requirement of giving notice is sometimes explained as designed to defeat commercial bad faith on the part of the buyer.
a) The duty to examine the goods under article 38
3.1. The leading participants in the preparation of the Uniform Law on the International Sale of Goods (ULIS), from which the CISG was derived, were from legal systems that have a strict notice requirement. Consequently, ULIS Article 38 provided that the buyer had to examine the goods “promptly”, which was further defined in ULIS article 11 as being “within as short a period as possible, in the circumstances”. ULIS Article 39 provided that notice had to be given “promptly after [the buyer] has discovered the lack of conformity or ought to have discovered it.” This again meant that notice had to be given within as short a period as possible. The only amelioration to this strict regime was article 40, which provided that the seller could not rely on the buyer’s failure to notify in conformity with article 39 “if the lack of conformity relates to facts of which he knew or could not have been unaware and which he did not disclose to the buyer.”
3.2. The involvement of a broader array of legal systems during the preparation of the CISG in UNCITRAL led to several modifications in the strict notice regime of ULIS articles 38 and 39. Most of the expressed concerns were in regard to goods that the purchaser re-sold and shipped to the sub-purchaser when it would be impracticable to open the container or packaging. The UNCITRAL Working Group considered that the “flexible language” of article 38(2) and (3) introduced by it “would meet those objections.” At a later session the Working Group moved further away from the strict examination requirement in ULIS by providing that the examination required by article 38(1) should be conducted “within as short a period as is practicable in the circumstances.”
b) The duty to give notice of non-conformity under article 39
3.3. There was less discussion in UNCITRAL about the duty to notify in article 39. Nevertheless, the duty to give notice “promptly” in ULIS article 39, i.e., in as short a period as possible, was amended to provide that a notice of lack of conformity must be given “within a reasonable time” after the buyer discovered it or ought to have discovered it. It was pointed out that “what is a ‘reasonable time’ was, of course, a question that depended on the circumstances of each case.”
3.4. In contrast to the situation in UNCITRAL there was almost no discussion in the Diplomatic Conference in regard to article 38, but the discussions on article 39 were intense. They have usually been characterized as being between representatives from developing countries and representatives from the industrialized countries. The arguments for further modifications in the notice regime were largely articulated in terms of the unacceptable consequences for buyers from developing countries who might not be able to examine the goods or have them examined for as long as a year or more, thereby making it impossible for them to give notice any sooner than that. However, the debate could also be fairly characterized as one between representatives of legal systems that in their domestic law have a strict notice requirement and representatives of legal systems that in their domestic law have no notice requirement for a claim for damages for non-conformity of the goods. As stated at the Diplomatic Conference by the principal proponent of a further modification of the notice requirement, “Traders in jurisdictions which did not have a rule requiring notice to the seller might be unduly penalized, since they were unlikely to be aware of the new requirements until too late."
3.5. Various amendments to article 39 were proposed to reduce the adverse consequences for the buyer who failed to give adequate notice of non-conformity of the goods in time, including a suggestion to delete article 39(1) entirely. Finally, in an effort to satisfy the concerns that had been expressed, a new provision, currently article 44, was adopted. It provides that the buyer may reduce the price or claim damages, except for loss of profit, if he has a reasonable excuse for his failure to give the notice required by article 39.
4.1. The obligation to examine the goods in article 38 is designed to set a time when, if no examination was conducted, the buyer “ought to have discovered” a lack of conformity of the goods as provided in article 39. There is no other consequence arising out of a failure to examine the goods. There are other occasions when the buyer ought to discover a lack of conformity even though there was no examination of the goods. For example, a buyer ought to discover a lack of conformity that was evident upon delivery of the goods. Similarly, even if article 38 did not exist, a reasonable interpretation of article 39 would be that a buyer “ought to have discovered” any lack of conformity that a reasonable examination of the goods would have shown. The condition that the buyer “ought to have discovered” the lack of conformity is, therefore, a concept of article 39 that is related to but does not depend upon article 38.
4.2. That is relevant to the proper interpretation of article 44. Article 44 permits a buyer to reduce the price or claim damages, except for loss of profit, if he has a reasonable excuse for failing to give notice in conformity with article 39, whether the cause of that failure was that the buyer did not know of the lack of conformity, though he ought to have known of it, or whether the buyer failed to give notice of a lack of conformity of which he did know.
4.3. It may be questioned whether article 44 added anything to the notice regime, since both article 38 and article 39 contain language that can fairly be interpreted to reach any result that article 44 was intended to reach. Furthermore, some courts interpreting ULIS had escaped the strict requirements of articles 38 and 39 by interpreting article 40 to hold that a seller who delivered defective goods “could not have been unaware” of the defects, thereby permitting the buyer to rely upon a late or defective notification of a lack of conformity. The same result could be achieved under CISG article 40, which is identical to ULIS article 40 in all essentials. However, the adoption of article 44 in the Diplomatic Conference confirms the movement to a less strict notice regime that began in UNCITRAL.
4.4. The final result of the drafting process could be fairly characterized as being closer to the solution found in the domestic law of the legal systems in the third group above than it is either to the strict notice regime of the legal systems in the first group or to the lack of a requirement to give notice in order to recover damages found in the second group of legal systems.
1. The C ISG-AC is a private initiative supported by the Institute of International Commercial Law at Pace University School of Law and the Centre for Commercial Law Studies, Queen Mary, University of London. The International Sales Convention Advisory Council (CISG-AC) is in place to support understanding of the United Nations Convention on Contracts for the International Sale of Goods (CISG) and the promotion and assistance in the uniform interpretation of the CISG.
At its formative meeting in Paris in June 2001, Prof. Peter Schlechtriem of Freiburg University, Germany, was elected Chair of the CISG-AC for a three-year term. Dr. Loukas A. Mistelis of the Centre for Commercial Studies, Queen Mary, University of London, was elected Secretary. The CISG-AC has consisted of: Prof. Emeritus Eric E. Bergsten, Pace University; Prof. Michael Joachim Bonell, University of Rome La Sapienza; Prof. E. Allan Farnsworth, Columbia University School of Law; Prof. Alejandro M. Garro, Columbia University School of Law; Prof. Sir Roy M. Goode, Oxford; Prof. Sergei N. Lebedev, Maritime Arbitration Commission of the Chamber of Commerce and Industry of the Russian Federation; Prof. Jan Ramberg, University of Stockholm, Faculty of Law; Prof. Peter Schlechtriem, Freiburg University; Prof. Hiroo Sono, Faculty of Law, Hokkaido University; Prof. Claude Witz, Universität des Saarlandes and Strasbourg University. Members of the Council are elected by the Council. At its meeting in Rome in June 2003, the CISG-AC elected as additional members, Prof. Pilar Perales Viscasillas, Universidad Carlos III de Madrid, and Prof. Ingeborg Schwenzer, University of Basel.
2. This opinion is a response to a request by the Study Group on European Civil Code - Utrecht Working Group on Sales Law for the Council to reflect on the interpretation of the provisions concerning the periods of time according to articles 38 and 39 CISG. The question referred to the Council was:
"Should the periods of time in Art. 38 and 39 CISG ("as short as is practicable" and "reasonable") be made more concrete by respective directives set by courts or in projects of unification of law, e.g. by qualifying as "reasonable" in the meaning of Art. 39 (1) CISG under normal circumstances a period of 2 or respectively 4 weeks."
3. Article 40 passed through the entire re-drafting of ULIS in UNCITRAL and in the Diplomatic Conference with almost no discussion and a minor editorial change.
4. WG 3rd session, Annex II, para. 71, A/CN.9/62, Add.2.
5. WG 6th session, A/CN.9/100, para. 59.
6. WG 3rd session, Annex II, para. 78, A/CN.9/62, Add 2.
7. Official Records (A/Conf.97/19), Summary Records, First Committee, 16th Meeting, para. 32.
8. OLG Köln, 29 June 1978, 7 U 141/76, MDR 1980, 1023; OLG Hamm, 17 September 1981, 2 U 253/80.