(2) Industrial Plant and Equipment; Turn-key Contracts
In discussing Article 2 at §56, supra, we saw that construction of an immovable building was not a sale of "goods". Even when contracts for industrial works call for the buyer to supply the land and building, some of the equipment may become a permanent part of the building while other equipment may be free-standing and readily removable. "Turn-key" contracts may also include the supplying of "know-how" and services in placing the plant in operation.
Such complex contracts should (and often do) designate the applicable law. See Art. 6 at §75, infra. If the contract is silent, deciding whether the Convention governs any part of the transaction calls for applying by analogy the Convention’s provisions on mixed contracts in Article 3, supra, and also consideration of the parties’ implied intent (Art. 8, §§104–111, infra ) in the light of the (1) suitability of the Convention’s provisions to the contract as a whole and (2) the feasibility of "severing" the contract to make the Convention apply to only part (§60.2, supra).[5]
§60.4 (3) Analogical use of Provisions of the Convention
In some situations tribunals may find that provisions of the Convention are helpful in solving comparable problems that fall outside its scope. Such voluntary borrowing of solutions from specialized statutes has been useful within domestic legal systems. For example, in the United States the Uniform Sales Act (1906) and it successor, Article 2 of the Uniform Commercial Code (1954), state that they govern "sales" of [page 60] goods, language that literally would exclude the burgeoning field of supplying goods through leasing (hiring or rental) arrangements. However, courts faced with the question whether the user (lessee) of the goods was entitled to legal protection when the goods were defective found that the "sales" statutes dealt with a comparable problem and relied on these provisions; this approach was not in obedience to statutory command but in observance of the principle that similar problems called for similar solutions.[6] The extension of "sales" rules to "leases" of goods has necessarily been selective; for example, some of the "sales" rules dealing with remedies for breach are inappropriate to transactions in which the user’s investment is limited to rental payments.[7] Problems such as these led in 1987 to the addition to the Uniform Commercial Code (UCC) of a new Article 2A. Leases, immediately following Article 2. Sales.
"Lease" or "Sale": Form or Substance. Some transactions labelled "lease" in substance are sales—subject to a security interest. Whether the CISG applies to these transactions should depend on substance rather than form; "chameleon leases" may be subject to CISG if they satisfy the other requirements for applicability—e.g., Article 1. Penetrating such disguises in the setting of the UCC is discussed in White & Summers (1995) 21-3.
Tribunals, of course, are under no international obligation to use the Convention’s provisions for transactions that lie outside its scope; such "borrowing" depends on principles of domestic jurisprudence and a decision whether rules designed for domestic transactions are as suited to international transactions as the Convention. In a larger sense, careful analogical extension of these and other international rules can make a measured, albeit modest, contribution to the reestablishment of an international law-merchant.[8][page 61]
§60.5 (4) Interpretation of Rules on Scope: Certainty v. Flexibility
Measured analogical use of the Convention’s provisions can also relieve pressure for doubtful interpretations extending the Convention’s scope. In discussing Article 7(2), §§96–102, infra, we shall consider the Convention’s invitation to use "the general principles on which it is based" to govern questions which, although "not expressly settled" in the Convention, arise out of matters "governed by" the Convention. This provision calling for analogical extension of the Convention’s substantive rules to avoid "gaps" in the uniform rules transactions that fall within the Convention’s scope is profoundly different from principles for interpreting provisions (e.g., Articles 1–6) which govern the Convention’s outer boundaries.
As the language quoted from Article 7 shows, its call for a broad analogical approach to the Convention’s substantive provisions "governed by" the Convention does not apply to provisions such as Articles 1–6, which define the area that the Convention does not "govern". Nor does the Convention contain any provision authorizing analogical extension of its outer boundaries. Indeed, in framing the Convention such a proposal would have received short shrift and for good reason: Doubt about the Convention’s outer boundaries generates uncertainty as to nearly every substantive issue that can arise in an international sale.
These factors suggest that provisions defining the Convention’s outer boundaries should be
(2) Industrial Plant and Equipment; Turn-key ContractsIn discussing Article 2 at §56, supra, we saw that construction of an immovable building was not a sale of "goods". Even when contracts for industrial works call for the buyer to supply the land and building, some of the equipment may become a permanent part of the building while other equipment may be free-standing and readily removable. "Turn-key" contracts may also include the supplying of "know-how" and services in placing the plant in operation.Such complex contracts should (and often do) designate the applicable law. See Art. 6 at §75, infra. If the contract is silent, deciding whether the Convention governs any part of the transaction calls for applying by analogy the Convention’s provisions on mixed contracts in Article 3, supra, and also consideration of the parties’ implied intent (Art. 8, §§104–111, infra ) in the light of the (1) suitability of the Convention’s provisions to the contract as a whole and (2) the feasibility of "severing" the contract to make the Convention apply to only part (§60.2, supra).[5]§60.4 (3) Analogical use of Provisions of the ConventionIn some situations tribunals may find that provisions of the Convention are helpful in solving comparable problems that fall outside its scope. Such voluntary borrowing of solutions from specialized statutes has been useful within domestic legal systems. For example, in the United States the Uniform Sales Act (1906) and it successor, Article 2 of the Uniform Commercial Code (1954), state that they govern "sales" of [page 60] goods, language that literally would exclude the burgeoning field of supplying goods through leasing (hiring or rental) arrangements. However, courts faced with the question whether the user (lessee) of the goods was entitled to legal protection when the goods were defective found that the "sales" statutes dealt with a comparable problem and relied on these provisions; this approach was not in obedience to statutory command but in observance of the principle that similar problems called for similar solutions.[6] The extension of "sales" rules to "leases" of goods has necessarily been selective; for example, some of the "sales" rules dealing with remedies for breach are inappropriate to transactions in which the user’s investment is limited to rental payments.[7] Problems such as these led in 1987 to the addition to the Uniform Commercial Code (UCC) of a new Article 2A. Leases, immediately following Article 2. Sales."Lease" or "Sale": Form or Substance. Some transactions labelled "lease" in substance are sales—subject to a security interest. Whether the CISG applies to these transactions should depend on substance rather than form; "chameleon leases" may be subject to CISG if they satisfy the other requirements for applicability—e.g., Article 1. Penetrating such disguises in the setting of the UCC is discussed in White & Summers (1995) 21-3.Tribunals, of course, are under no international obligation to use the Convention’s provisions for transactions that lie outside its scope; such "borrowing" depends on principles of domestic jurisprudence and a decision whether rules designed for domestic transactions are as suited to international transactions as the Convention. In a larger sense, careful analogical extension of these and other international rules can make a measured, albeit modest, contribution to the reestablishment of an international law-merchant.[8][page 61]§60.5 (4) Interpretation of Rules on Scope: Certainty v. FlexibilityMeasured analogical use of the Convention’s provisions can also relieve pressure for doubtful interpretations extending the Convention’s scope. In discussing Article 7(2), §§96–102, infra, we shall consider the Convention’s invitation to use "the general principles on which it is based" to govern questions which, although "not expressly settled" in the Convention, arise out of matters "governed by" the Convention. This provision calling for analogical extension of the Convention’s substantive rules to avoid "gaps" in the uniform rules transactions that fall within the Convention’s scope is profoundly different from principles for interpreting provisions (e.g., Articles 1–6) which govern the Convention’s outer boundaries.As the language quoted from Article 7 shows, its call for a broad analogical approach to the Convention’s substantive provisions "governed by" the Convention does not apply to provisions such as Articles 1–6, which define the area that the Convention does not "govern". Nor does the Convention contain any provision authorizing analogical extension of its outer boundaries. Indeed, in framing the Convention such a proposal would have received short shrift and for good reason: Doubt about the Convention’s outer boundaries generates uncertainty as to nearly every substantive issue that can arise in an international sale.These factors suggest that provisions defining the Convention’s outer boundaries should be
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