CISG Advisory Council Opinion No 4*

Contracts for the Sale of Goods to Be Manufactured or Produced and Mixed Contracts (Article 3 CISG)**

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INDEX

Opinion [black letter text]
Comments
1. Introduction
2. Article 3(1) CISG: contracts for the supply of goods to be manufactured or produced

  1. Interpretation of "substantial part"
    1. The "economic value" v. "essential" criterion
    2. Quantification of the term "substantial part"
  2. Interpretation of the term "materials necessary for such manufacture or production"

3. Article 3(2) CISG: contracts for the supply of labour and other services
4. The relationship between paragraphs (1) and (2) CISG
5. Table of cases cited

To be cited as: CISG-AC Opinion no 4, Contracts for the Sale of Goods to Be Manufactured or Produced and Mixed Contracts (Article 3 CISG), 24 October 2004.
Rapporteur: Professor Pilar Perales Viscasillas, Universidad Carlos III de Madrid. 

Adopted by the CISG-AC on the 7th meeting held in Madrid 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

Opinion

1. Paragraphs (1) and (2) of Article 3 CISG govern different matters, though in complex transactions there may be some reciprocal influence in their interpretation and application. 

Article 3(1) CISG: Contracts for the supply of goods to be manufactured or produced are to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture.

2. In interpreting the words "substantial part" under Article 3(1) CISG, primarily an "economic value" criterion should be used. An "essential" criterion should only be considered where the "economic value" is impossible or inappropriate to apply taking into account the circumstances of the case.

3. "Substantial" should not be quantified by predetermined percentages of value; it should be determined on the basis of an overall assessment.

4. The supply of labour or other services necessary for the manufacture or production of the goods is covered by the words "manufactured or produced" of Article 3(1) CISG and is not governed by Article 3(2) CISG.

5. The words "materials necessary for such manufacture" in Article 3(1) CISG do not cover drawings, technical specifications, technology or formulas, unless they enhance the value of the materials supplied by the parties.

6. In the interpretation of Article 3(1) CISG, it is irrelevant whether the goods are fungible or non-fungible, standard or custom-made.

Article 3(2): This Convention does not apply to contracts in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services.

7. Article 3(2) CISG governs mixed contracts. Whether the different obligations as to goods and services are agreed upon in one mixed contract or in several contracts is a matter of contract interpretation.

8. In the interpretation of the parties' agreements relevant factors include, inter alia, the denomination and entire content of the contract, the structure of the price, and the weight given by the parties to the different obligations under the contract.

9. In interpreting the words "preponderant part" under Article 3(2) CISG, primarily an "economic value" criterion should be used. An "essential" criterion should only be considered where the "economic value" is impossible or inappropriate to apply taking into account the circumstances of the case.

10. "Preponderant" should not be quantified by predetermined percentages of value; it should be determined on the basis of an overall assessment.

11. The plural form of the word "obligations" in Article 3(2) CISG should prevail, despite the use of the singular in the Arabic and French text of the Convention. 

COMMENTS

1. INTRODUCTION

1.1. Article 3 CISG is one of the provisions that define the field of application of the Convention. It considers contracts for the supply of goods to be manufactured or produced to be contracts for the sale of goods, unless the buyer undertakes to supply a substantial part of the materials necessary for the manufacture or production (Article 3(1) CISG). Under Article 3(2) CISG the Convention does not apply to mixed contracts in which labour or other services are involved if the labour or other services form the preponderant part of the obligations of the party who furnishes the goods.

1.2. Paragraphs (1) and (2) of Article 3 CISG govern different matters, though in complex transactions there may be some reciprocal influence in their interpretation and application. For example, where the materials supplied by the buyer are not themselves the substantial part of the materials necessary to manufacture the goods (and therefore, under Article 3(1), the CISG would apply), and the services to be provided by the seller evaluated alone are not the preponderant part of the services part of the mixed contracts (so that, under Article 3(2), CISG would also apply to this part), nevertheless, under exceptional circumstances, both contributions combined might change the character of the transaction as a whole so much that it cannot be qualified as a sale governed by the CISG. However, in these situations, not only the entire transaction has to be considered and characterized, but also the policy that in case of doubt application of the Convention is to be preferred.

1.3. Distinguishing contracts for the sale of goods from services contracts is a highly controversial issue under many domestic legal systems where a sub-category of the latter is often found: work contracts in which one of the parties provides the necessary materials for the construction by the other party (contracts for works and materials). Although the different legal systems would almost unanimously consider a contract to be a work contract when the buyer (owner) provides all or a substantial part of the materials, when the seller (contractor) provides them, different solutions are considered: sales contracts, work contracts, or even mixed or sui generis contracts.

1.4. Domestic legal systems differ as to the criteria and factors to be applied in order to characterize a contract as a sales contract. The criteria to be followed include, among others, the comparison between the obligation to do and the obligation to give; the character of the object/goods (fungible/nonfungible; standard/custom-made); the possible alteration of the object (whether or not an item with its own individuality is created); whether the production of the goods was done before the contract, or if the goods belong to the kind of goods that are usually produced by the seller; the skill of the person who is to produce the goods; and, finally, the need to transfer property in the goods.[1]

1.5. As compared to the diversity of approaches encountered in domestic law, the Convention adopts two criteria of distinction, "substantial part" (Article 3(1) CISG) and "preponderant part" (Article 3(2) CISG). Therefore, the Convention considers as sales contracts, contracts for the supply of goods to be manufactured or produced by the seller with materials provided by him or by the buyer if the buyer undertakes to provide some but not a substantial part of the materials necessary for the manufacture or production (Article 3(1) CISG).[2] However, under many domestic laws such contracts would not be considered to be sales of goods contracts. On the other hand, the Convention is not applicable if the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services.

1.6. The terms "substantial" and "preponderant" have been subject to conflicting views by legal writers and the case law. Many of these interpretations are derived from and reflect national doctrines applied to the analysis of Article 3 CISG. An autonomous, international and uniform interpretation of Article 3 CISG is needed (Article 7(1) CISG).

1.7. The analysis of Article 3 CISG becomes even more complex due to four other factors:

a. Differences among the different authentic texts of the Convention as regard the words "substantial" (Art. 3(1)), "preponderant" (Article 3(2)) and "obligations" (Article 3(2));

b. "Different" interpretations of Article 3 CISG and other relevant international treaties;[3]

c. Comments and case law on Article 3 are scarce and often do not contain thoughtful analyses of the different issues of interpretation involved;

d. Finally, the relationship between Article 3(1) and Article 3(2) CISG.

2. ARTICLE 3(1) CISG: CONTRACTS FOR THE SUPPLY OF GOODS TO BE MANUFACTURED OR PRODUCED

a) The interpretation of "substantial part"

2.1. The Convention uses a vague term, "substantial part", as one of the key elements in the interpretation of Article 3(1) CISG. There are differences among the authentic texts of the Convention ("substantial part", "parte sustancial", and "part essentielle"), which seem to denote different standards of interpretation. Scholars have also used different undefined terms to delimit "substantial part" which does not help clarify its meaning. For example, "substantial part" has been defined as "considerable part",[4] or as "parte cuantiosa".[5]

2.2. Two different criteria of interpretation of the term substantial are found: economic value and essential. Also, it would be necessary to assess the need to quantify the term "substantial".

1) The "economic value" v. "essential" criterion

2.3. Several scholars have considered that "substantial part" means economic value [6]. the materials provided by the buyer ought to be higher in value (price) as compared to those provided by the seller in order to exclude the CISG.[7] This criterion has also been followed by some cases.[8]

 2.4. Other scholars, as supported by some case law, consider that the standard of interpretation of the term "substantial part" should be based in the essentiality of the goods, i.e., in the quality/functionality of the materials provided by the parties, as the French version seems to suggest using the term "essential part".[9] There have also been cases that have followed this approach.[10]

 2.5. The legislative history of the Convention supports the conclusion that the essential criterion was rejected. Both Article 6 of the 1964 Uniform Law on International Sale of Goods (ULIS) and Article 1(7) of the 1964 Uniform Law on Formation (ULF) state that the Uniform Law is excluded if the party who orders the goods provides an essential and substantial part of the materials. The word "essential" was deleted suggesting that the essential criteria was rejected by the drafters of the CISG. However, despite the fact that "essential" was there "thrown out the door", it re-entered "through the window" via the French text of the Convention, and the interpretation made by some legal writers and in some of the case law.

 2.6. The "economic value" criterion should prevail in the interpretation of the words "substantial part" in Article 3.1 CISG. Absent any other indication in the contract, the price of the materials to be considered is that of the buyer's market at the time of the conclusion of the contract.[11]

 2.7. An "essential" criterion should only be considered where the "economic value" is impossible or inappropiate to apply, i.e., when the comparison of the materials provided for by both parties amounts to nearly the same value.

 2) Quantification of the term "substantial part"

2.8. Legal writers who follow the economic value criterion have generally quantified the term "substantial part" by comparing Article 3(1) CISG (substantial) with Article 3(2) CISG (preponderant): substantial being less than preponderant. In this way, legal writers have used the following percentages to quantify substantial: 15%,[12] between 40% and 50%,[13] or more generally 50%.[14] At the same time, other authors, although they have not fixed any numbers in regard to the quantification of the term "substantial" have declared that "preponderant" means "considerably more than 50% of the price" or "clearly in excess of 50%".[15] Thus it seems that for the latter authors, the quantification of the term "substantial" is placed above the 50% figure. Also, some Courts have followed this approach.[16]

2.9. To consider a fixed percentage might be arbitrary due to the fact that the particularities of each case ought to be taken into account; that the scholars are in disagreement; and that the origin of those figures is not clear.[17]

 Therefore, it does not seem to be advisable to quantify the word "substantial" a priori in percentages. A case-by-case analysis is preferable and thus it should be determined on the basis of an overall assessment.

 2.10. Even if one were to use a percentage, the 50% figure may be too low to justify exclusion of the Convention, particularly in the view of the aim of the CISG (Article 3(1)), which states a "pro Convention principle". An approach that favors the application of the Convention is preferred because Article 3(1) CISG is drafted expressing a general rule (applicability of the Convention) and an exception (exclusion of the CISG). Furthermore, an approach based on the principles of international and uniform interpretation and application of the Convention should be sought (Article 7 CISG). Besides, the modern legal and economic approach to contracts for the sale of goods is even wider than the approach embodied in Article 3(1) CISG.[18]

b) Interpretation of term "materials necessary for such manufacture or production"

2.11. Another key element in the interpretation of paragraph (1) of Article 3 CISG is the analysis of the phrase "materials necessary for the manufacture or production" of the goods. It is clear that raw materials are included, and also that so-called accessory elements such as materials needed for the packaging and transportation of the goods, or materials needed for an acceptance test are excluded. Moreover, materials that are not strictly speaking needed for the manufacture or production of the goods cannot be considered materials in this sense. An example would be the printing film provided by the buyer in a contract of sale under which the seller was to print and deliver books, since in this case the film provided is needed for the process of production of the goods and its requirements, but does not become part of the goods themselves.[19]

 2.12. More problematic within the meaning of the term "materials" is the inclusion or exclusion of the technology, technical specifications, drawings, formulas and designs necessary for the production of the goods. Case law and legal writers are in disagreement. The controversy began with a French decision (Cour d´appel de Chambéry, 25 May 1993) that did not consider the CISG applicable on the basis that the production of the goods had to be made following the designs provided by the buyer. In the opinion of the French court, the designs amounted to a substantial part of the materials in the sense of Article 3(1) CISG. It appears from the report of the case that the  It appears from the report of the case that the only "material" provided by the buyer were the designs.

2.13. This decision has been criticized because the designs are not within the concept of materials and because contracts in which know-how is transferred are governed by the CISG.[20] The legislative history of the Convention supports this criticism. There was a proposal, that was opposed and finally withdrawn, by the UK delegation aimed at excluding the Convention when the buyer supplied the know-how, e.g, when "the party who orders the goods undertakes to supply: a) a substantial part of the materials; or b) the information or expertise necessary for such manufacture or production".[21] The CISG-AC considers that contracts in which the buyer supplies only designs (or drawings, technical specifications, technology or formulas) are covered by the Convention [22] as shown by the legislative history of the Convention and impliedly by Article 42(2)(b) CISG.

2.14. Nevertheless, the French decision introduces a very important ramification in the interpretation of the term "materials" under the Convention. Know-how, or designs provided by either of the parties are taken into account only if they are enhancing the value of the materials. However, if the drawings, technical specifications or designs are accessory, they are not to be considered as materials.[23] First, the legislative history shows that within the concept of materials not only raw materials are included [24] and thus, at least, the only components of the final object - wholly manufactured or not - would be included. Second, the withdrawn UK proposal did not suggest that, within the concept of materials, know-how is always excluded, but that a contract will not be considered a sales contract in a situation in which the buyer only supplied the expertise necesary for the manufacture or production of the goods, as is shown by the fact that the proposal consisted in two separate choices (a/b), as well as from the use of the conjunctive "or".

2.15. However, not all designs or drawings would be included within the concept of materials, only those necessary for the manufacture and production of the goods and therefore that contribute originality, speciality or exclusivity to the goods. This will usually imply that where the buyer or the seller contributes material that embodies industrial or intellectual property rights (e.g., a patent or other industrial property rights), these rights should be included in the idea of enhancing the value of the goods in the sense of Article 3(1) CISG.[25]

3 Continued on [PAGE TWO] 

FOOTNOTES

 * To be cited as: CISG-AC Opinion no 4, Contracts for the Sale of Goods to Be Manufactured or Produced and Mixed Contracts (Article 3 CISG), 24 October 2004. Rapporteur: Professor Pilar Perales Viscasillas, Universidad Carlos III de Madrid
Adopted by the CISG-AC on the 7th meeting held in Madrid with no dissent. Reproduction of this opinion is authorized.
 
** This opinion is a response to a request by the Study Group on a European Civil Code and its Steering Committee for the Council to reflect on the interpretation of Art. 3 CISG and provide answers to the following questions:


(1) If both parties supply materials to be used in the manufacture of goods for one of the parties, what are the relevant factors under Art. 3(1) to draw the line between a sales contract governed by the Convention and a service contract governed by domestic law?

(2) If a party has undertaken to deliver goods and to provide services, what are the relevant factors under Art. 3(2) CISG determining the applicability of the CISG instead of domestic law in such cases?

(3) What is the relation between paras. (1) and (2) of Art. 3 CISG?


1. See, Pilar PERALES VISCASILLAS, Hacia un nuevo concepto del contrato de compraventa: desde la Convención de Viena de 1980 sobre compraventa internacional de mercancías hasta y después de la Directiva 1999/44/CE sobre garantías en la venta de bienes de consumo. Actualidad Civil, nº 47-48, 15 al 28 de diciembre de 2003, pp. 1199-1224

2. In this situation, the rules of the Convention apply to the non-performance or malperformance of the buyer with the necessary adaptations. See: SCHLECHTRIEM/SCHWENZER/Schlechtriem, Commentary on the UN Convention on the International Sale of Goods (CISG), 2nd ed., Oxford: 2005, Art. 3 nº 3.

3. The English text of Article 4 of the Hague Convention on the Law Applicable to International Sales Contracts (22 December 1986) is identical to Article 3 CISG. However, in this instance, the French text does not use the term "part essentielle" (as in Article 3(1) CISG), but "part importante". Article 6 of the 1974 UN Convention on the Limitation Period in the International Sale of Goods is almost identical to Art. 3 CISG. The Spanish version follows the French rather than the English version and therefore the standard used is "parte esencial" instead of "parte sustancial" (substantial part) as in CISG.

4. Warren KHOO, Article 3, nº2.2, in Cessaro Massimo Bianca and Michael Joachim Bonell (eds.), Commentary on the International Sales Law. The 1980 Vienna Sales Convention, Milano: Giuffrè, 1987.

5. Jorge ADAME GODDARD, El contrato de compraventa internacional, México: Mc Graw-Hill, 1994, p. 50.

6. See among others: John O. HONNOLD, Uniform Law for International Sale under the 1980 United Nations Convention, The Hague: Kluwer Law International, 3d ed, 1999, nº 106. Some scholars also use the "essential" test as a secondary criterion after the economic value test: Fritz ENDERLEIN/Dietrich MASKOW, International Sales Law, Oceana, 1992, pp. 36-37.

9. Also in case law comparing the value of the materials supplied by the seller with the value of the materials supplied by the buyer: LG Berlin, 24 March 1998 (Germany); HG Zürich, 10 February 1999 (Switzerland); and HG Zürich, 8 April 1999 (Switzerland).

8. Arbitration Court of the Chamber of Commerce and Industry of Budapest, 5 December 1995 (VB/94131) (Hungary): supply of waste containers to be produced by the seller, the value of the materials supplied by the buyer only amounted to approximately 10% of the total value of the containers to be produced, hence the CISG was applicable by virtue of Art. 3(1); HG Zürich, 8 April 1999 (Switzerland); and ICC 8855/1997, JDI, 2000, 4, p. 1070, with J. Arnaldez observations, stating that Art. 3(1) refers to "la part prépondérante, c'est-à-dire la valeur essentielle".

OLG München, 3 December 1999 (Germany) is an interesting case because it applies both an economic value and an essential criterion, the latter on the basis of the wording of the French text: "The few tools which were to be supplied by the buyer are neither with respect to their value nor their function essential ones".

9. There are case law and legal commentaries that have considered that the French term "part essentielle" implies an interpretation based upon the quality/functionality of the materials provided by the parties. For example: Bernard AUDIT, La vente internationale de marchandises (Convention des Nations-Unies du 11 Avril 1980), Droit des Affaires. Paris: L.G.D.J., 1990, nº 25, pp. 25-26. And OLG München, 3 December 1999 (Germany), where the Court considered the essential criterion on the basis of the French text: "The few tools which were to be supplied by the [buyer] are neither with respect to their value nor their function essential ones -the French text of the Convention speaks of "part essentielle" -not "substantial parts "-- as stated in the English text -- of the plant to be delivered".

The "essential" criterion has been used as complementary to the economic value criterion by some legal writers, although others consider the essential criterion to be at the same level as the economic criterion: See among the most recent commentaries: Francisco OLIVA BLAZQUEZ, Compraventa internacional de mercaderías (Ambito de aplicación del Convenio de Viena de 1980, Valencia: Tirant lo blanch, 2002, p. 194. The essential criterion is rejected by: KHOO, Article 3, nº 2.2: ("The materials supplied need not be essential for the manufacture or production. Nor is it sufficient to take the transaction out of the Convention that the material supplied is an essential part").

10. ICC 11256/ESR/MS, 15 September 2003 (Los Angeles) (unpublished) (on file with the rapporteur) considered the CISG inapplicable on the basis of Art. 3(1). It concluded that the motors provided by the buyer were a substantial part of the materials necessary for the manufacture of the trucks, because they were necessary for the product to be considered a "vehicle".

In Cour d'appel de Grenoble, 21 October 1999 (France), the tribunal analyzed a case in which the seller had to manufacture shoes with some elements supplied by the buyer: the soles and a characteristic metal decoration of the brand Pierre Cardin, and stated that "having as its object a sale of goods to be made for which the essential material elements -- other than soles and a characteristic metal decoration of the brand Pierre Cardin -- necessary for the manufacture, were supplied by the seller".

11. See SCHLECHTRIEM/SCHWENZER/Schlechtriem, Article 3, nº 3 a).

12. HONNOLD, Uniform Law, nº 59. See example 3B, in which the value of the chromium -- an essential ingredient for the manufacture of stainless steel -- comprised 15% of the total value of the materials used in manufacturing the goods. Prof. Honnold states that "a tribunal might well conclude that 15% is 'substantial' but the evaluation of such questions of degree is difficult to predict". As will be shown, the 15% standard as well as any other standard below 50% should be considered too low in the interpretation of the words "substantial part" (see, infra 2.10).

13. ADAME, p. 51, who also states that if the value represents a percentage of 35%, the Court would need to decide whether or not it is substantial on a case-by-case basis.

14. See for all: ENDERLEIN/MASKOW, p. 36.

15. Peter SCHLECHTRIEM, The UN-Convention on Contracts for the International Sale of Goods, Vienna: Manz, 1986, p. 31: "preponderant in this sense should be considerably more than 50% of the price"; and SCHLECHTRIEM/Herber, Commentary on the UN Convention on the International Sale of Goods (CISG), 1st ed., Oxford: 1998, Art. 3, nº 4.

16. HG Zürich, 8 April 1999 (Switzerland), referring to Art. 3(1) CISG, stated that: "The CISG is also applicable if the materials to be delivered are a good deal less in proportion to the price of the goods and therefore the manufacture is the crucial factor herein".

OLG München, 3 December 1999 (Germany) stated in regard to Art. 3(2) CISG: "An approximately identical value of the different obligations is sufficient to render the Convention applicable (Staudinger/Magnus, note 22)"; and Arbitration Award, 30 May 2000 (356/1999) (Russia) where the tribunal considered the CISG applicable -- Art. 3(2), although the tribunal referred to Art. 3(1) -- to a contract of shipment of equipment and some post-delivery services since the price of the equipment to be delivered amounted to more than 50% of the entire price of the contract.

17. Fixed percentages were mentioned only three times during the preparatory work of the Convention. One was in relation to Article 3(2) CISG, Mr. Sevón (Finland) referred to a UK proposal to substitute the words "preponderant part" for "major part in value"; he said that: "Under that proposal 51 per cent of the value of a contract would decide the nature of that contract. The existing text was not so rigid" (A/CONF.97/C.1/SR.2, p. 242; also in John O. HONNOLD, Documentary History of the Uniform Law for International Sales, Deventer/Netherlands: Kluwer Law and Taxation Publishers, 1989, p. 463). It seems that for the Finnish delegate "major part in value" meant that it should take more than 51% in value to exclude the Convention. The other two interventions were made in relation to paragraph (1) of Article 3 CISG. Mr. Rognlien, of Norway, proposed the exclusion of the Convention only when the buyer undertook to supply "all or the substantial part" (A/CONF.97/C.1/L.13, p. 84; also in HONNOLD, Documentary History, p. 656). In order to explain that proposal, Mr. Rognlien, stated that the word "substantial" might be replaced by "major", indicating that the proportion must be over 50% (Official Records, p. 243; also in HONNOLD, Documentary History, p. 464). It seems that for the Norwegian and Finnish delegations, the definition of "major" is over 50%. The last intervention was made by Mr. Herber (Federal Republic of Germany), who in relation to the Norwegian proposal stated: "His delegation had not previously held the view that it must necessarily imply over 50 per cent. If the original text was unclear, his delegation could support the Norwegian proposal" (Official Records, p. 243, also in HONNOLD, Documentary History, p. 464).

18. This tendency can be observed in several recent national and international instruments: EU Directive 1999/44, 25 May 1999, of the European Parliament and of the Council on certain aspects of the sale of consumer goods and associated guarantees (OJ L 171, 7 July 1999, pp.12 et seq), Art. 1.4: "Contracts for the supply of consumer goods to be manufactured or produced shall also be deemed contracts of sale for the purpose of this Directive "; Principles of European Sales Law, Draft 14, June 2004. Utrecht Working Team on Sales Law, subgroup of the Sales, Services and Long-Term contracts group, Article 1:102(1) follows the text of Art. 3.1 CISG. Paragraph 2 of Article 1:102 adopts the same criteria as the Directive 1999/44: "In a consumer transaction any contract for the supply of goods to be manufactured or produced is to be considered as a contract of sale". See also new section 651 BGB (German Civil Code) (Application of Sales Law): "The provision concerning the sale of goods applies to a contract for the supply of moveable things that are to be produced or manufactured (...). Where the moveable things to be produced or manufactured are specific goods, sections 642, 643, 645 and 650 apply, except that the relevant time under sections 446 and 447 replaces the time of acceptance of the work. See among the most recent legal writers: PERALES VISCASILLAS, Hacia un nuevo, pp. 1199-1224.

19. ICC 8855/1997, JDI, 2000, 4, p. 1070, with J. Arnaldez observations. The court said: "La distinction mentionnée à l'Article 3, paragraphe 1 de la Convention est fondée sur l'origine des matériaux de fabrication et non sur la nature particulière du procédé de fabrication ou de ses conditions".

See also: HG Zürich, 10 February 1999 (Switzerland) in a contract for printing, binding and delivery of art books and catalogues, the court held that "In the present case, it is undisputed that -- while the (buyer) delivered the setting copies for the artistic content of the art catalogues -- the (seller) himself had to acquire the material for the execution of the printing orders. Therefore, the CISG applies insofar as it contains relevant provisions for the parties' contractual relationship".

20. See, e.g.,: Ulrich C. SCHROETER, Vienna Sales Convention: Applicability to "Mixed Contracts" and Interaction with the 1968 Brussels Convention. Vindobona Journal of International Comercial Law and Arbitration, 2001, p. 74, with further citations.

21. A/CONF.97/C.1/L.26, p. 84; also in HONNOLD, Documentary History, p. 656.

22. See impliedly the Swiss Federal Supreme Court, 17 October 2000 analyzing a contract of sale of lockers to be manufactured by the seller following the buyer's drawings. The Federal Supreme Court did not discuss the CISG's applicability that was denied by the Appellate Court on the basis of Art. 3(2) CISG, e.g., the supply of services (installation work) was considered to be the preponderant part.

23. OLG München, 3 December 1999 (Germany) is an example of this situation. Under the contract, the seller had to manufacture and deliver a window production plant (also there were some post-delivery obligations). According to the contract, the buyer had also the obligation to deliver some tools and drawings of the types of windows to be produced by the plant. When analyzing paragraph (1) of Article 3 CISG, the tribunal did not refer to the drawings. There are two possible explanations to that silence: first, that the tribunal did not consider the drawings to be within the concept of materials in Art. 3(1) CISG, or a second reading in line with the concept that accessory materials do not qualify as "materials necessary for such manufacture or production": the drawings to be provided by the buyer were not for the production of the window plant (object of the contract) but of the types of windows to be produced by the plant.

OGH, 18 April 2001 (Austria): the parties concluded an "agreement of cooperation" to develop a sealing material called "Resitrix". The buyer, who was the owner of the patent, was obliged to deliver the semi-finished product in order to be processed by the seller in accordance with a jointly developed specification; the seller had the exclusive licence to distribute the product in several countries. Although the contract was in any case outside the temporal scope of the Convention, the Court referred to Art. 3 CISG and held that it was not applicable because the buyer had to deliver a substantial part of the materials: the semi-finished goods influenced decisively the finished product.

OLG Frankfurt a.M., 17 September 1991 (Germany) ruled within the scope of the CISG (Art. 3(1)) a contract in which shoes were to be manufactured according to the buyer's instructions and marked with an "M" trademark.

24. The term "raw materials" appeared for the first time in several Hague Conventions on the Law Applicable to the Contract of Sale (Art. 1 Convention sur la loi applicable aux ventes à caractère international d'objets mobiliers corporels, 15 June 1955; Art. 1 Convention sur la loi applicable au transfert de la propriété en cas de vente à caractère international d'objets mobiliers corporels, 15 April 1958; and Art. 1 Convention sur la compétence du for contractuel en cas de vente à caractère international d'objets mobiliers corporels, 15 April 1958). These texts provided that: "Pour son application sont assimilés aux ventes les contrats de livraison d'objets mobiliers corporels à fabriquer ou à produire, lorsque la partie qui s'oblige à livrer doit fournir les matières premières nécessaires à la fabrication ou à la production". That text was the basis for the deliberation of the 1964 Uniform Laws (ULIS, and ULF), that decided to refer just to the term "materials".

25. LG Mainz, 26 November 1998 (Germany) provides an example. In this case, the parties agreed on the production and delivery of a crepe-cylinder for the production of tissue paper and there were also accesory obligations: "loading, transport, unloading, installation, insurance until the end of the installation, the waste management of the old cylinder as well as extra work under additional agreements". Although the discussion was in relation with Article 3(2) CISG, it is stated that: "The court is aware that before the cylinder (which had been fitted for [buyer's] individual needs) was produced and delivered, a major engineering effort as well as planning and conceptual work was required. However, these engineering efforts contributed to the production and delivery of the unit, determine its value, and therefore do not change the fact that the focus of the contract was the cylinder itself. [Seller's] further contractual obligations (transport, installation, maintenance) are therefore accessory obligations that pale in comparison to the value of the manufactured cylinder. This assessment leads to the application of the United Nations Convention on Contracts for the International Sale of Goods (cf. v. Caemmerer/Schlechtriem, Einheitliches UN-Kaufrecht, 2nd ed., Art. 3 n. 8)". Impliedly, the same approach is found in OLG Köln, 26 August 1994 (Germany), where a contract for the elaboration and delivery of a market analysis was not considered within the scope of the Convention because it cannot be considered a sale of goods, and also was not a contract within Art. 3(1) CISG. A sensu contrario, it is implied from the case that when the ideas (intellectual work) are included in the goods, the contract might be governed by the Convention.

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