Examination of the Goods and Notice of Non-Conformity Articles 38 and 39**
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To be cited as: CISG-AC Opinion No 1, Electronic Communications under CISG, 15 August 2003. Rapporteur: Professor Christina Ramberg, Gothenburg, Sweden.
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
- Domestic Legal Systems
- Drafting History
- General comments in regard to the text of articles 38, 39, 40 and 44
- Judicial interpretation of CISG articles 38 and 39
- Case Law on CISG Art 38, 39
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. Domestic Legal Systems
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.
3. Drafting History
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. General comments in regard to the text of articles 38, 39, 40 and 44
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.
5. Judicial interpretation of CISG articles 38 and 39
5.1. The provisions governing the buyer’s obligations to examine the goods and to give notice of any alleged non-conformity are among the most litigated matters in the CISG. It is striking, however, that there appear to be few decisions from countries in which the domestic law of sales does not require notice to be given in order to claim damages for non-conformity. This is consistent with the fact that there are few decisions of any nature regarding the CISG from those countries, even though several of them are party to the Convention. Similarly, there are relatively few decisions from countries in which the domestic law of sales requires notice to be given in a reasonable period of time. By far the majority of the decisions have come from those countries in which the domestic law of sales is relatively strict both in terms of the content of the notice and the time-limit within which it must be sent to the seller. This necessarily means that any review of the decisions of the courts to date is heavily weighted towards those courts.
5.2. While many of the decisions that have been reported to date are unobjectionable on their facts, there has been a tendency on the part of some courts to interpret CISG articles 38 and 39 in the light of the analogous provisions in their domestic law. This has been most overt where the CISG text is similar to that in the domestic law While the method of interpreting in the light of domestic law that also requires notice to be given in a reasonable time does not accord with the requirement of CISG article 7(1), since it does not give due regard to the international character of the Convention, the results in the individual cases are difficult to criticize.
5.3. The situation is noticeably different where the text of articles 38 and 39 is more lenient towards the buyer than is the domestic sales law or where the country was a party to ULIS and had numerous court decisions interpreting it. A few courts have said that they saw no significant change in the law. Most, however, have struggled to apply CISG articles 38 and 39 appropriately. It is not surprising that their frame of reference to decide whether the goods were examined “as soon as [was] practicable”, whether the examination was adequate, whether the notice was given within a reasonable time and whether the notice was sufficiently detailed was based upon their prior experience with domestic law and ULIS. It is also not surprising that their decisions tend to be more demanding on the buyer than are the decisions coming from courts in countries that have long required that notice be given within a reasonable time.
5.4. Several high level courts in those countries have attempted to give guidance as to how to determine what might be a reasonable period of time within which to give notice. Perhaps because it is difficult to give a clear guideline as to how to evaluate the many commercial and other factors that might be relevant in a given case, one technique that has been used has been to fix a period of time that would be presumed to be reasonable. The Austrian Supreme Court (Obergerichtshof) has suggested that 14 days would normally be reasonable, while the Obergericht Kanton Luzern from Switzerland has suggested one month. While those decisions represent a genuine effort to loosen the otherwise strict notice requirements otherwise enforced in those countries, the difficulties inherent in fixing a presumptive period of reasonableness are illustrated in a 1999 decision of the German Supreme Court (Bundesgerichtshof).
5.5. The buyer had purchased a grinding device and attached it to a paper-making machine. Nine days after attachment the grinding device suffered a total failure. The buyer thought that the failure had probably been caused by operating errors of its personnel and therefore appears to have taken no action in regard to the device itself. Three weeks after the failure of the grinding device a purchaser of paper produced during the period the device had been in use complained of rust in the paper. Ten days later the buyer commissioned an expert to determine the cause of the rust. After a further two weeks the expert reported that the rust was due to the grinding device. The buyer notified the seller three days after receiving the report.
5.6. There is no question but that the notice given by the buyer three days after receipt of the report of the expert was given within a reasonable time after the buyer knew that the failure of the grinding device, and the rust in the paper produced with the machine containing the device, was because the device itself was defective. Nevertheless, it is striking that the Bundesgerichtshof held that the notice was given in time, although given more than nine weeks after delivery and seven weeks after the first signs of trouble appeared.
5.7. The court commenced by noting that the court of appeals had found that the defect in the grinding device was a latent defect, so that neither the period for examination nor the period for notice could have commenced any sooner than when the device failed. The court of appeal had concluded that on failure of the device the buyer ought to have been aware that there was a defect in the device and that the reasonable period for notice began at that date. The Bundesgerichtshof disagreed. It accepted the buyer’s contention that the buyer could not have determined immediately and by itself whether the device failed because of a defect or because of operating errors by its personnel. Therefore, it was not the period for notice under article 39 that had commenced at the time when the device failed, but the period for examination under article 38.
5.8. The court then calculated the amount of time available to the buyer to give notice by assuming that it should have had one week to decide whether to engage an expert to report on the source of the failure and to engage the expert. The period for the expert to prepare its report had in fact been two weeks, which the court deemed appropriate. To the three weeks thus calculated, it added a four week period for giving notice after the buyer knew or ought to have known of the lack of conformity of the goods. The court described a four week period for giving notice as “regelmäßig”, i.e., “regular” or “normal”. Thus, the court calculated that the notice given by the buyer seven weeks after the failure of the grinding device had been given within time.
5.9. Two alternative readings of the notice period as calculated by the Bundesgerichtshof are possible. One is that the court gave the buyer a single period of seven weeks from the time it first learned of symptoms that should have alerted it to the possibility that there was a latent defect in the grinding device. If that was the decision of the court, it does not accord with the CISG, which provides for two separate periods.
5.10. The second reading is that the court did calculate two separate periods as provided in CISG. The court allowed the buyer three weeks to have the device examined by the expert pursuant to article 38 starting from the time the grinding device failed and not when its customer complained of the rust in the paper. At the end of that hypothetical examination the buyer “ought to have known” of the lack of conformity of the device and the one-month period for giving notice that the court considered to be presumptively reasonable commenced. This reading of the decision illustrates that there is no independent sanction for a failure to examine the goods within the time allowed under article 38. The buyer in this case received the report of the expert 46 days after the failure of the grinding device, which was three weeks after he “ought to have known” of the defect according to the Bundesgerichtshof. Consequently, rather than three weeks to determine the nature of the defect in the grinding device and four weeks to give notice as anticipated by the Bundesgerichtshof, it took the buyer six weeks to determine the nature of the defect and only three days to give notice.
5.11. Under either reading of the decision, the buyer had seven weeks from the failure of the device in which to give notice.
5.12. If the court had restricted itself to saying that the four week period from the time the buyer “ought to have discovered” the lack of conformity of the goods and the time it sent the notice was a reasonable time, the decision might be questioned on the facts. A period of one month from the time the buyer knew or ought to have known of the lack of conformity in this case seems rather long to be presumptively “regelmäßig”, i.e. “regular” or “normal”. Nevertheless, it would have been unobjectionable as a matter of legal interpretation. One month or even longer to give notice might be reasonable under the particular facts of the case.
5.13. The most positive aspect of the decision of the Bundesgerichtshof, as of the decisions of the Obergerichtshof in Austria and the Obergericht Kanton Luzern in Switzerland, is that it is an indication to the German courts that they should be willing to accept longer periods for the giving of notice than in regard to ULIS or § 377 HGB.
5.14. One last feature of the decision of the Bundesgerichtshof calls for comment and approval. In earlier cases the German courts had required the buyer to inform the seller in detail as to the nature of the lack of conformity. That can be beyond the power of a buyer, especially where the buyer does not have the technical knowledge to know what is wrong with the goods. In the instant case the Bundesgerichtshof clearly states that a buyer of machinery and technical equipment need give notice only of the symptoms, not an explanation of the underlying causes. The notice given by the buyer to the seller in this case stated that a purchaser of its paper had found steel splinters in the paper produced using the grinding device in question. The buyer voiced the suspicion that the grinding device was defective. The court held that the buyer’s notice was sufficiently specific in accordance with the buyer’s knowledge at that time. It would seem that description of the symptoms would also put the typical seller in a position to decide what further actions it should take to protect its interests.
5.15. By way of contrast, the French Cour de Cassation in its decision of 26 May 1999 refused to declare any specific period of time as reasonable. It stated that the Court of Appeals had “used its sovereign discretion in maintaining, after having recalled the chronology of the facts, that the buyer had inspected the goods in a prompt and normal period of time, bearing in mind the handling that the [laminated metal sheets] required, and that the [buyer] had alerted [seller] of the non-conformities within a reasonable time in the meaning of Article 39(1) CISG”. (Emphasis in original) The decision was a strong affirmation that the determination whether examination of the goods under article 38 or the giving of notice of non-conformity under article 39 are ultimately dependent on the circumstances with which the buyer was confronted.
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.
9. Chicago Prime Packers, Inc. v. Northam Food Trading Co., 29 May 2003, U.S. District Court [Northern Dist. Illinois], 2003 WL 21254261 (N.D. Ill.), case presentation http://cisgw3.law.pace.edu/cases/030529u1.html, "[c]ase law interpreting analogous provisions of Article 2 of the ... [UCC] may also inform a court where the language of the relevant CISG provision tracks that of the UCC. However, UCC case law 'is not per se applicable'," citing Delchi Carrier S.p.A. v. Rotorex Corp., 6 December 1995, U.S. Circuit Court of Appeals, 71 F.3d 1024, 1028 (2nd Cir.1995) case presentation http://cisgw3.law.pace.edu/cases/951206u1.html
10. "In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade."
11. OLG Oldenburg 5 December 2000, 12 U 40/00, RIW 2001, 381-382, case presentation and English translation http://cisgw3.law.pace.edu/cases/001205g1.html. The court acknowledged that, in regard to the notice requirement, the CISG gave the appearance of being more "buyer friendly" than ULIS. The court stated, however, that there were no differences between ULIS article 38 and CISG article 38 that were so significant as to call in question the jurisprudence in regard to ULIS. It cited a decision of the Bundesgerichtshof (BGH, 2 June 1982, VIII ZR 43/81, NJW 1982.2730, 2731) concerning ULIS in support of its decision that the buyer should and could have examined the goods earlier than it did, an action it said should be "as soon as possible".
12. OGH 27 August 1999, 1 Ob 223/99x,  RdW No. 10, case presentation and English translation http://cisgw3.law.pace.edu/cases/990827a3.html.
13. OG des Kantons Luzern, 8 January 1997, 11 95 123/357,  Schweizerische Juristen-Zeitung 94, 515-518, case presentation http://cisgw3.law.pace.edu/cases/970108s1.html.
14. BGH, 3 November 1999, VIII ZR 287/98,  RIW 381, case presentation and English translation http://cisgw3.law.pace.edu/cases/991103g1.html.
15. The court said it was not necessary to decide whether, in the case of a latent defect, the period for examination began when the buyer learned of the lack of conformity of the goods from the report of the expert or at the earlier time the symptoms first appeared. For the purposes of the case, it calculated the period for examination from the time the symptoms first appeared.
16. Société Karl Schreiber GmbH v. Société Termo Dynamique Service et autres, 26 May 1999, Cour de Cassation,  Recueil Dalloz 788, http://Witzjura.uni-sb.de/CISG/decisions/260559v.htm, case presentation and English translation, http://cisgw3.law.pace.edu/cases/990526f1.html, affirming, Cour d'Appel d'Aix-en-Provence, 21 November 1996.