"The Uniform Law on International Sales: A Need for Revision"

Dr. Arie Reich

Faculty of Law Bar Ilan University

Published in: Bar-Ilan Law Studies, Vol. 14, No.1, pp. 127-177(Hebrew)


English Abstract:

This Article discusses the background to the enactment of the currently existing Sales Law (International Sale of Goods), 1971, and Sales Law (Formation of Contracts for the International Sale of Goods), 1978, which were enacted following Israelís accession to the Hague Conventions relating to a Uniform Law on the International Sale of Goods. The article discusses extensively the need for unification of private law, and in particular of international sales law, shows the problems that arise in the absence of such unification, and rejects the arguments against it.

Based on the above, the author argues that Hague laws have failed to achieve their purpose of achieving uniformity in international sales law, given their low membership and their abandonment in favour of the more successful 1980 UN Convention on International Sales of Goods. The absurdity of the current situation is apparent considering that the only legal systems with which the existing laws unify Israelís international sales law are those of Gambia and San Marino, hardly any of Israelís major trading partners, to say the least. In addition to the Hague Conventionsí low membership, they also suffer from some major substantive flaws, which are discussed in the article. It is shown that these flaws have been corrected in the new UN Convention, and that this Conventionís contractual doctrines are closer to those of Israelís law of contract and sale than those of the Hague Conventions, and that this is an additional reason for the adoption of the former instead of the existing Hague laws.

The Article also discusses one important case of the Israel Supreme Court where the CISG has been commented upon: C.A. 3912/90, Eximin, Belgian Corporation v. Textile and Footwear Italstyle Ferarri Inc. , P.D. 47(4)64. It was given under the old existing Hague law, but nevertheless referred to the CISG as well ďby way of analogyĒ. It dealt with a sales contract between an Israeli manufacturer and a Belgian purchaser, who ordered certain jeans boots for exportation to its customer in the U.S. It requested the manufacturer to attach a symbol to the boots, which was a trademark of Leviís Jeans. Upon importation to the U.S. the goods were confiscated by the U.S. Customs Authorities because of breach of the trademark. Later on, a compromise was reached whereby the symbol was removed, and the boots were sold in the U.S. market at a much reduced price. The Belgian buyer sued for its losses, claiming that the Israeli purchaser failed to provide a clean title, under Article 52(a) of the Hague Uniform Law. When applying, by way of analogy, Article 42 of the CISG, the Court reached the conclusion that the seller does not bear the responsibility for the fact that the goods were subject to a trademark of a third person, since in the circumstances, the buyer must have known about this fact or could not have been unaware of it at the time of the conclusion of the contract. Moreover, the buyer himself had supplied the seller with the designs for the boots, which included the trademark. Nevertheless, the Court ruled that the seller should bear part of the loss, because of breach of the good faith obligation arising from Israelís general contract law (Article 39). In the Courtís opinion, both the seller and the buyer must have known that the products were infringing the famous trademark of Leviís, and in ignoring this fact they both acted in bad faith. The Court developed a new doctrine of contributory fault, well known in the law of torts, but hitherto not recognized in the law of contract. The loss was therefore to be shared by the Seller and the Buyer in equal shares (50%-50%).

This ruling is criticized in the Article from several perspectives. Firstly, as a matter of proper methodology, one should not import provisions from domestic law and legislation into a dispute governed by the CISG (assuming the CISG would apply), unless the question that arises is not expressly settled by it and one cannot settle it by reference to the general principles of the CISG (see Art. 7(2)). Secondly, the principle of good faith exists in the CISG, but it does not reach the status of a general obligation. Rather, it is restricted to a principle for interpreting the provisions of the Convention.

Finally, the relevant provision of the CISG, namely Article 42, deals expressly and in detail with this type of situation, when the goods are subject to intellectual property rights. According to this provision, if the Buyer knew, or could not have been unaware of these rights, the Seller does not bear responsibility in this regard, and is not under the obligation to supply goods that are clean from such rights. It is clear from the provision, that this applies even when the Seller knew about the infringement, since this is a precondition for any liability on his part. Thus, the Supreme Courtís solution of dividing the liability between the parties is clearly inconsistent with that of the CISG, and probably with that of the Hague Convention as well. The author also argues that it is inconsistent with good policy, considering that the protection of trademarks is territorial, and that the buyer is in a better position to know the exact legal situation in this regard in the country of destination. Therefore, as long as the buyer is aware of the potential trademark infringement, the solution of the CISG, which exempts the seller from liability in such a case, is superior to that of the majority opinion in the Supreme Court. Thus, the author prefers the dissenting opinion of Goldberg J., who suggested to dismiss the appeal and let the entire liability remain on the buyer.