Q 3-1
Which terms used in the CISG indicate that it was originally drafted for the sale of tangible goods?
The terms ‘delivery’, ‘taking over’ and ‘passing of risk in transitu’.
Q 3-2
Why should the distinction between contracts for standard software and contracts for customised software be irrelevant to the question of whether the CISG applies? See A 3-1.
The sale of software should, in principle, be considered in the same way as any other sale involving intellectual property rights. As is the case with most goods, software may vary in terms of creativity, production costs or technology used. The differences in terms of personal investment, and whether or not the software is customer-tailored, should be irrelevant for the definition of ‘goods’ under the CISG.
Q 3-3
(a) How did the court in C 3-1 interpret the term ‘substantial part’ mentioned in Article 3(1) CISG?
(b) What were the criteria applied in C 3-2 and C 3-3 with regard to the interpretation of ‘a substantial part’?
(c) Compare the results with CISG Advisory Council Opinion No 4: in which ways can ‘substantial part’ be understood? Which interpretation seems better to you? Give your reasons.
(a) It applied a purely economic test by comparing the value of the goods supplied by the buyer to the total value of the goods.
(b) In C 3-2, the court took into account the global value, function and importance of the tools offered by the buyer with regard to the end product. Similarly, in C 3-3, the court stated that: ‘The quantitative balance does not constitute the sole requirement in respect to the question whether the supply of services is predominant. In addition, further components have to be taken into account in each case such as in particular the interest of the parties as regards the remaining performances.’
(c) According to the CISG Advisory Council, the question of whether the buyer supplied ‘a substantial part’ of the materials should primarily be assessed on an economic basis. However, a specific threshold in terms of a predetermined value-percentage should be rejected in favour of an overall assessment. Where it is impossible or inappropriate to use an economic value criterion, all relevant circumstances of the case should be taken into account. The courts in C 3-2 and C 3-3 seem to have interpreted the term ‘substantial part’ in a similar way.
Indeed, the economic value test should be the starting point, as it provides for a relatively clear and measurable basis. However, the CISG allows for taking into account ‘subjective’ considerations (cf Art 35(2)(b)). Thus, if it can be shown that, in the circumstances, the parties had attributed a special importance to the part of the material supplied by the buyer, or a considerably smaller one than would usually be expected, this should be taken into account in the assessment of ‘a substantial part’.
Q 3-4
Could the parties agree on the applicability of the CISG to contracts which would normally be excluded pursuant to Article 3(1) CISG? Remember what has been stated above, Article 1 CISG, section I.
The CISG may apply even if the requirements of Article 3(1) are not fulfilled, that is, where the buyer supplies a substantial part of the material necessary for the production of the goods, but the parties have agreed on its application. Whether such a choice of law is valid is subject to the conflict of laws rules of the forum (see also below, Art 6).
Q 3-5
What factors are taken into account when determining whether the seller fulfils mere ancillary obligations of a sales contract or whether its duty is to perform a mixed contract which does not fall within the scope of the CISG in its entirety?
The main factor is the economic value of the different obligations. The subsidiary factor is the particular interest that the buyer has in an obligation.
Q 3-6
(a) How does the Oberlandesgericht München in C 3-4 quantify the ‘preponderant part’?
(b) Should such an approach, which is based on the economic value of the various performances, be followed?
(c) The Russian Tribunal in C 3-5 adopts a ‘percentage’ view to determine the ‘preponderant part’. Is this approach any different from that adopted in C 3-4?
(a) The court refers to the economic value of each obligation. It adds that the particular interest that the buyer may have in an obligation can be taken into account.
(b) Yes, it should be the starting point, as it gives a relatively quantifiable basis.
(c) Not really. The court in C 3-5 also states that ‘an approximately identical value of the different obligations is sufficient to render the Convention applicable’, which amounts to a 50% percentage value test.
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