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Reading excerpts from a law review article (1)

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Article 9(2) of the CISG

The parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned.

“The Empirical and Theoretical Underpinnings of the Law Merchant: The Law Merchant in the Modern Age: Institutional Design and International Usages under the CISG” by Clayton P. Gillette, 5 Chi. J. Int’l L. 157 (2004)

[T]he cases that have arisen under Article 9 [of the CISG] have been dominated by either of two situations in which usages … reduce contracting costs…The first set of cases under Article 9(2) involves situations in which an international mercantile association plays the entrepreneurial role of promulgating and publicizing rules that can readily be adopted by participants in a trade. Such organizations can centrally articulate obligations concerning the formation, performance, or enforcement of contracts after consultation with the parties that are affected …

Many of the cases involving Article 9(2) … for instance, involve the application and interpretation of Incoterms, the rules of the International Chamber of Commerce (“ICC”) for the interpretation of trade terms. These terms, which govern the risk of loss and obligations concerning delivery, insurance, and transportation, “provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade.” They are drafted with precision, are widely publicized with substantial explanations of the meanings of terms, and are applicable across industries. The ICC represents both buyers and sellers and thus is unlikely to promulgate one-sided policies. Rather, its broad constituency increases the probability that Incoterms will either solve coordination problems or reflect risk allocations that mimic bargains in a well-operating market …

The second set of cases involves more informal, unwritten practices that evolve from interactions among parties … For instance, several cases under Article 9(2) involve the need to object to terms in a contracting party’s confirmation letter to avoid the inclusion of those terms in the final contract … For instance, in a contract for the sale of windows and doors between an Italian seller and a German buyer, the court found that the buyer was entitled to a discount included in a confirmation letter sent to the seller. The seller had not objected to the content of that letter. The court concluded:

    It is an accepted trade usage that a tradesperson who receives a letter of confirmation has to object to the letter’s content if he does not wish to be bound by it. If he does not object, the contract is binding with the content given to it in the letter of confirmation, unless the sender of the letter has either intentionally given an incorrect account of the negotiations, or the content of the letter deviates so far from the result of the negotiations that the sender could not reasonably assume the recipient’s consent. The recipient’s silence causes the contract to be modified or supplemented in accordance with the letter of confirmation.
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