Comparative Editorial Remarks on the Concept of Good Faith in the CISG and the PECL

Pace International Law Review Volume 13 Issue 2 Fall 2001 Article 6 September 2001 Comparative Editorial Remarks on the Concept of Good Faith in the CISG and the PECL John Felemegas Follow this and additional works at: https://digitalcommons.pace.edu/pilr Recommended Citation John Felemegas, Comparative Editorial Remarks on the Concept of Good Faith in the CISG and the PECL, 13 Pace Int'l L. Rev. 399 (2001) Available at: https://digitalcommons.pace.edu/pilr/vol13/iss2/6 This Article is brought to you for free and open access by the School of Law at DigitalCommons@Pace. It has been accepted for inclusion in Pace International Law Review by an authorized administrator of DigitalCommons@Pace. For more information, please contact . EDITORIAL REMARKS COMPARATIVE EDITORIAL REMARKS ON THE CONCEPT OF GOOD FAITH IN THE CISG AND THE PECL John Felemegas* I. General Scheme of Interpretation and Supplementation in the CISG and PECL .......... II. Good Faith and Fair Dealing in the Interpretation of the Contract ..................... III. Examples of Specific Manifestations of Good Faith in the CISG and PECL ............................ IV. Conclusions ........................................ I. 399 400 402 405 GENERAL SCHEME OF INTERPRETATION AND SUPPLEMENTATION IN THE CISG AND PECL The nature and content of PECL Article 1.106, as well as its function within the instrument to which it belongs, are very similar to those of CISG Article 7. In both cases, the respective provisions provide the built-in interpretation and supplementation mechanism that the drafters have embedded in their corresponding instruments. The relevant provisions provide that the interpretation of the law in both instruments must pay regard to the concept of good faith.1 The Notes to PECL Article 1.106(1) confirm that the basic elements found in the structure of PECL Article 1.106 are ei* In October 2000 the author was awarded a Ph.D. from the University of Nottingham for his thesis on the interpretative provisions of the United Nations Convention on Contracts for the International Sale of Goods (1980). Currently, the author is an Associate of the Pace Institute of International Commercial Law. 1 See CISG art. 7(1); PECL art. 1.106(1). 399 1 [Vol. 13:399 PACE INT'L L. REV. ther virtually identical or express similar ideas to the ones of the corresponding provision in CISG Article 7().2 II. GOOD FAITH AND FAIR DEALING IN THE INTERPRETATION OF THE CONTRACT The concept of "good faith and fair dealing" does not operate merely as a rule of interpretation of each PECL Article. The duty of good faith, as this is embedded in PECL Article 1.201, is 3 mandatory on the parties. In contrast to CISG Article 7(1) (or any other CISG provision), PECL Article 1.201 imposes upon each party a positive duty of good faith and fair dealing in exercising its rights and performing its duties under the contract. The PECL Comments to Article 1.201 not only refer to good faith as "a basic principle running through the Principles," but also expressly state that "[glood faith and fair dealing are required in the formation, performance and enforcement of the parties' duties under a contract, and equally in the exercise of a party's rights under the 4 contract." On the other hand, the CISG does not contain any express provision that the individual contract has to obey the maxim of 2 Cf. PECL art. 1.106 (1), CISG art. 7(1). (The wording of the two provisions is similar, although PECL article 1.106, in addition to "good faith" and "uniformity of application" that are also prescribed by CISG article 7, includes the promotion of 'certainty in contractual relationships" as a further relevant factor in the interpretation of the PECL provisions); See also PECL art. 1.106(2) (which refers to domestic law as an ultimate source of supplementation); CISG art. 7(2). The PECL Notes state that "[tihis is in accordance with CISG art. 7(2)." PECL Note 4. 3 The PECL Comments make it clear that "good faith" is not confined to specific rules and further elucidate the concept by stating that the concept's purpose is: "to enforce community standards of decency, fairness and reasonableness in 1. It supplements the provisions of the Principles, and commercial transactions [... it may take precedence over other provisions of these Principles when a strict adherence to them would lead to a manifestly unjust result." (see PECL Comment B). Note, however, that PECL Comment G unequivocally states that the courts may limit this duty in particular cases, in order to preserve the overriding objectives of "certainty and predictability in contractual relationships." As far as the Convention is concerned, the principle of party autonomy (CISG article 6) is the dominant general principle. See, e.g., JOHN 0. HONNOLD, UNIFORM LAW FOR INTERNATIONAL SALES UNDER THE UNITED NATIONS CONVENTION 47 (2d ed. 1991); ALBERT H. KRITZER, GUIDE TO PRACTICAL APPLICATIONS OF THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 115 (1989). 4 PECL cmt. A. https://digitalcommons.pace.edu/pilr/vol13/iss2/6 2 20011 EDITORIAL REMARKS good faith.5 The text of CISG Article 7(1) covers only the application of the CISG, rather than the parties' rights and obligations and their exercise and performance directly. The wording was agreed upon only after lengthy deliberations and it was meant as a final rejection of more far-reaching proposals to apply the principle of "good faith and fair dealing" to the obligations and the behavior of the parties themselves. There is, however, a strong body of academic opinion holding that the evaluation of the relations, rights and remedies of the parties, could also be subject to the principle of good faith and fair dealing. In accordance with this view, in addition to its interpretative role on the CISG provisions, good faith has at times been recognized as one of the general principles laid down by the CISG. 6 Further, it has found its way into operation of CISG Article 7(2). 5 Such a provision was proposed and rejected at the 1980 Vienna Diplomatic Conference; See U.N. Official Records (1981) p. 86. 6 See CISG art. 7(1); See, e.g., BERNARD AUDIT, LA VENTE INTERNATIONALE DE MARCHANDISES: CONVENTION DES NATIONS Unies du 11 Avril 1980 [The Interna- tional Sales of Goods, UN Convention of 11 April 19801 51 (1990), (where the author states that good faith is one of the general principles, even though it must be considered a mere instrument of interpretation); See also FRITZ ENDERLEIN & DIETRICH MASKOW, INTERNATIONAL SALES LAw (1992) at 59, where the authors list the good faith principle among those principles "which do not necessarily have to be reflected in individual rules;" ROLF HERBER & BEATE CZERWENKA, INTERNATIONALES KAUFRECHT. KOMMENTAR ZU DEM tJBEREINKOMMEN DER VEREINTEN NATIONEN vOM 11 APRIL 1980 OBERVERTRAGE OBER DEN INTERNATIONALEN WARENKAUF [Inter- national Sales Law, Commentary on the United Nations Con (...truncated)