Source: http://www.cisg.law.pace.edu/cisg/text/peclcomp9.html
Timestamp: 2019-04-23 07:52:46+00:00

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For the definition of the word "unreasonable" encountered in PECL 1:105(2), go to PECL 1:302 [Reasonableness] and the comment and notes that accompany this provision.
The structure and contents of Article 1:105 PECL and Article 9 CISG are similar. The first paragraph of each article deals with the binding effect of usages and practices which are agreed upon by the parties. The second paragraph of Article 9 CISG and Article 1:105 PECL deals with the binding effect of usages not agreed upon by the parties, but which are nevertheless binding due to their general applicability  or because the parties implicitly have agreed upon a usage.
Practices and usages will, when applicable to the contract, set aside rules of law of the CISG and provisions of the PECL, which would otherwise apply. However, under the PECL, practices and usages are only applicable if they do not violate mandatory rules of the law applicable to the contract; and under the CISG, usages can be overridden in accordance with its Article 4(a) validity provision.
Neither Article 9 CISG nor Article 1:105 PECL, defines the terms "usage" and "practice." Therefore, what ultimately constitutes a usage or a practice in CISG and PECL is to be decided by national courts or by arbitral tribunals.
The Secretariat Commentary  on Article 8 of the 1978 Draft of the CISG does not include a definition of the terms "usage" and "practice." However, the Commentary to Article 1:105 PECL defines the term "practice" as previous conduct to a particular transaction or a particular kind of transaction between the parties that may be regarded as a common understanding. Furthermore, the Commentary to Article 1:105 PECL defines the term usage as a course of dealing or line of conduct, which is and for a certain period of time has been generally adopted by those engaged in the trade or in a particular trade.
As the articles of CISG and PECL apply the same terms, the definition of the terms usages and practices in the Commentary to Article 1:105 PECL may aid in defining the terms practice and usage in the CISG. The definition of the terms practice and usage in the Commentary to Article 1:105 PECL is in accord with the definition of the said terms proposed by leading scholars on the CISG.
Article 9 CISG is based on two theories describing the influence of trade usages in commercial contracts. The first is the subjective theory whereby usages may only be applicable if the parties have agreed to them. According to the subjective theory, usages unknown to either party are not applicable. Contrary hereto is the objective theory, whereby usages are applicable if they represent a legal norm. According to the objective theory, usages unknown to both parties may be applicable to an agreement. Both theories agree that the usage must be so widespread and widely recognized that businesspersons knew or ought to have known of it.
Article 9(2) CISG represents a compromise between the subjective and the objective theory. During the preparation of CISG, delegates from Socialist countries and developing countries were especially opposed to accept usages based only on their objective normative power since most usages in international trade have their origin in the industrial countries of the Western world.
Since the PECL is intended to be applied as general rules of contract law in the European Union, these concerns were not brought up during the drafting of Article 1:105 PECL. Therefore, the PECL provisions apply the objective theory.
The wording of Article 9(1) CISG and that of Article 1:105(1) PECL are identical. Both provisions deal with the usages and practices which the parties � expressly or tacitly  - have established between them. Such practices and usages are binding upon the parties.
Contrary to Article 9(1) CISG and Article 1:105(1) PECL, there are notable differences in the wording of Article 9(2) CISG and Article 1:105(2) PECL.
According to Article 1:105(2) PECL, the parties will be bound by a usage which would be considered applicable by persons in the same situation as the parties, provided that the usage is not unreasonable and is consistent with the express terms of the agreement.
Contrary hereto, Article 9(2) CISG sets forth two requirements for a usage to be considered as having been made impliedly applicable to a given contract. Firstly, a usage only becomes binding upon the parties if the parties �knew or ought to have known� of the usage. Secondly, a usage only becomes binding to the parties if the usage "in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned."
The requirement of �known or ought to have known� in Article 9(2) CISG entails that there should be an effective link between the application of the usage and the parties� intention. By contrast, pursuant to Article 1:105(2) PECL, a usage may be binding upon the parties even without such link to the parties� intentions, provided that the usage would be considered applicable by persons in the same situation as the parties.
Although these articles appear to set forth different requirements, the determining factor in Article 9(2) CISG will often be whether the usage is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned. As the criterion set forth in Article 9(2) CISG is similar to the wording of Article 1:105(2) PECL, Article 9(2) CISG may logically be interpreted in accordance with the criterion set forth in Article 1:105(2) PECL.
According to its wording, Article 9(2) CISG applies to international usages only  whereas Article 1:105 PECL applies to local, national, and international usages. Although Article 9(2) CISG applies to international usages only, regional or national usages may be applicable under the CISG if the usage is regularly observed in international transactions and a large part of the foreign participants in the trade acknowledge the usage. Consequently, both Article 9(2) CISG and Article 1:105 PECL can be applicable to local usages as well. Therefore, it is also logical that Article 1:105(2) PECL may be applied as an aid in determining whether a usage falls within the scope of Article 9(2) CISG.
According to Article 1:105(2) PECL, the application of a usage must not be unreasonable. Article 9(2) CISG does not expressly require the usage to be reasonable. However, reasonableness is a general principle of CISG. Therefore, Article 9(2) CISG can well be interpreted to require that the usage is not unreasonable, which is in accordance with the wording of Article 1:105(2) PECL.
Pursuant to both Article 9(1) CISG and Article 1:105(1) PECL, a newcomer to a market may be bound by usages applicable to the market if the parties have agreed upon them.
Pursuant to Article 1:105(2) PECL, a party entering into a new market may be bound by usages generally observed by the parties in that market and this may entail that the newcomer may be bound by local usages of the other party if the usages would be considered applicable by persons in the same situation as the parties.
By contrast, as the wording of Article 9(2) CISG relies on the knowledge or the imputed knowledge of the parties in question, the wording of CISG leaves doubt as to whether newcomers in the trade or outsiders are bound by a usage of which they cannot reasonably have any knowledge. If the newcomer indeed knew of the usages applicable in a new market, the parties will be bound by the said usage. However, according to Article 9(2) CISG, the usages applicable in a new market may also apply to the newcomer even if he was not aware of those usages if it can be established that the newcomer should have known them.
Therefore, newcomers to a market are, also under the CISG, probably bound by usages observed in the market they enter. Consequently, both Article 9 CISG and Article 1:105 PECL entail that newcomers may be bound by usages applicable in the market in question. Newcomers should therefore always make an effort to research into the applicable usages applied in a new market.
In the CISG, several articles refer to usages and/or practices. For example, Article 8(3) states that due consideration shall be given to practices and usages when determining the intent of a party or the understanding of a reasonable person. Furthermore, Article 18(3) CISG states that an offer can be accepted by the performance of an act, if practices and usages permit that.
An indirect reference to usages and practices can be found in Article 32(2) CISG, regarding carriage of goods according to which carriage shall be made under usual terms. Finally, another indirect reference can be found in Article 35(2)(a) CISG, regarding conformity of the goods to the contract according to which the goods should be fit for normal use, unless expressly agreed otherwise.
According to the CISG and the PECL, usages and practices are binding upon the parties. Apart from the wording of Article 9(2) CISG and Article 1:105(2) PECL, the two instruments have many similarities in substance as well as a common purpose.
As the wording of Article 9(1) CISG and Article 1:105(1) PECL is identical, Article 1:105(1) PECL and the Commentary to it may aid in the interpretation and application of Article 9(1) CISG.
Furthermore, although the wording of Article 9(2) CISG and Article 1:105(2) PECL are not identical, the present writer maintains that PECL could aid in the interpretation and application of Article 9(2) CISG as the criteria set forth in Article 9(2) CISG may be interpreted in accordance with the criteria set forth in Article 1:105(2) PECL.
* The author is attorney-at-law at the Danish law firm Kromann Reumert. For further details, please see <http://www.kromannreumert.com>.
1. Cf. Article 1:105(2) PECL.
2. Cf. Article 9(2) CISG.
3. This precedence is mainly based on the autonomy of the parties pursuant to Article 6 CISG whereby the parties may opt out of the CISG or amend it to their individual needs. A contradictory usage can in that sense be seen as an adaptation of the CISG agreed between the parties, cf. Patrick X. Bout, Trade Usages: Article 9 of the Convention on Contracts for the International Sales of Goods (hereinafter "Bout"), published at <http://cisgw3.law.pace.edu/cisg/biblio/bout.html>. See also Werner Junge, in: Peter Schlechtriem ed., Commentary on UN Convention on the International Sale of Goods (CISG), 2nd edition (translated) (hereinafter "Junge"), p. 76, M.J. Bonell, in: C.M. Bianca and M.J. Bonell eds., Commentary on the International Sales Law the 1980 Vienna Sales Convention (hereinafter "Bonell"), p. 104 and F. Enderlein and D. Maskow, International Sales Law: United Nations Convention on Contracts for the International Sale of Goods, 1992, pp. 66-67 (hereinafter "Enderlein"), available online at <http://www.cisg.law.pace.edu/cisg/biblio/enderlein-art09.html>. See also Article 9(2) ULIS where it is expressly stated that a usage will set aside the applicable law.
4. Article 4(a) CISG states: "� except as otherwise expressly provided in this Convention, it is not concerned with � the validity of the contract or of any of its provisions or of any usage" [emphasis added].
5. Cf. Article 7(2) CISG and 1:106(2) PECL. See also Junge, p. 76. Furthermore, the hierarchy between practices and usages is not settled in the CISG nor the PECL, however, practices should be considered as having priority in their relationship with agreed usages, as they are generally better geared to the particularities of a concrete relationship because they are of an individual and thus more specific character, cf. Enderlein, p. 67. The hierarchy proposed by Enderlein is similar to the UCC, Section 1-204(4), whereby any course of performance shall control both course of dealing and usage of trade.
6. The Secretariat Commentary on the 1978 Draft of the CISG is the closest counterpart to an official commentary on the CISG. The Secretariat Commentary on Article 8 of the 1978 Draft is available online at <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-09.html>. The addition of the phrase "or its formation" is the only difference between Article 8 of the 1978 Draft and Article 9 CISG.
7. Cf. Ole Lando and Hugh Beale eds., Principles of European Contract Law: Parts I and II, Kluwer Law International (2000) (hereinafter "Lando and Beale"), p. 104.
8. Cf. Lando and Beale, p. 104.
9. Cf. Bonell, p.106 and 111, Junge, p. 78 and John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 2nd ed., Kluwer Law International (1991) (hereinafter "Honnold"), p. 146. Furthermore, the definition of the term usage in the Commentary to Article 1:105 PECL is in accord with the definition of said term in CISG's antecedent, Article 13 ULF, where a usage was defined as any practice or method of dealing, which reasonable persons in the same situation as the parties usually consider to be applicable to the formation of their contract.
10. For a helpful overview of the influence of trade usage in commercial contracts, see Aleksandar Goldstajn, Usages of Trade and Other Autonomous Rules of International Trade According to the UN (1980) Sales Convention, in: Sarcevic & Volken eds., International Sale of Goods: Dubrovnik Lectures, Oceana (1986) Ch. 3, 55-110, available online at <http://www.cisg.law.pace.edu/cisg/biblio/goldstajn.html>.
11. Cf. Junge, p. 76.
12. Cf. Bonell, p. 110.
13. Cf. Junge, p. 76 and Bonell, p. 105.
15. Although not expressly stated in Article 9(1) CISG and Article 1:105(1) PECL, both expressly agreed usages and practices as well as impliedly agreed usages and practices will be binding upon the parties. This interpretation is in accordance with the antecedent to Article 9(1) CISG, Article 9(1) ULIS, where it is expressly stated that the parties are bound by usages which they expressly or impliedly have made applicable to their contract and any practices established between themselves. See also Enderlein, p. 67.
19. Cf. Lando and Beale, p. 104, Bonell, p. 109, Junge, p. 79 and Honnold, p. 148.
20. Cf. Secretariat Commentary on Article 8 of the 1978 draft (antecedent to Article 9 CISG), section 4. This interpretation of Article 9(2) CISG is also in accordance with CISG�s antecedent, Article 9(2) ULIS, stating that the parties are bound by any usages which reasonable persons in the same situation as the parties usually consider to be applicable to their contract.
21. Cf. Junge, pp. 78-79.
22. Cf. Lando and Beale, p. 104.
23. Cf. Junge, p. 79.
24. Cf. Lando and Beale, p. 106.
25. Cf. Discussions at the 6th meeting of the First Committee at the Diplomatic Conference where a proposal to include the word �reasonable� in Article 9(2) CISG was rejected on the basis that the very existence of a usage implied recognition of its reasonableness, see <http://www.cisg.law.pace.edu/cisg/firstcommittee/Meeting6.html>, paras 58-71. See also the editorial remarks on the concept of reasonableness as a general principle of the CISG, available online at <http://www.cisg.law.pace.edu/cisg/text/reason.html>.
26. Cf. Lando and Beale, p. 105.
27. Cf. Lando and Beale, p. 105.
28. Cf. Junge, p. 79.
Like the commentary to the UNIDROIT Principles and the U.S. Restatements, the comments to the PECL help explain the text. The PECL notes identify civil law and common law antecedents and related domestic provisions. With the permission of the Commission on European Contract Law, these comments and notes are presented below. The source of this material is Ole Lando & Hugh Beale eds., Principles of European Contract Law: Parts I and II, Kluwer Law International (2000) 104-107.
Article 1:105 deals with usages and with practices which the parties have established between themselves. Under Article 1:105(1) a usage applies if the parties have expressly or tacitly agreed that it should. Under Article 1:105(2) a usage which would be considered applicable by persons in the same situation as the parties will bind them even without their agreement, provided the usage is not unreasonable and is consistent with the express terms of the agreement.
A usage may be described as a course of dealing or line of conduct which is and for a certain period of time has been generally adopted by those engaged in trade or in a particular trade.
A practice which the parties have established between themselves may arise as a result of a sequence of previous conduct to a particular transaction or a particular kind of transaction between the parties. It is established when their conduct may fairly be regarded as a common understanding. The conduct may not only lend a special meaning to words and expressions which they use between themselves but may also create rights and duties.
C. Parties refer to a usage Sometimes the parties may refer to a usage which otherwise would not operate between them under Article 1:105(2). Such a usage then becomes binding under Article 1:105(1).
A practice established between the parties may vary their initial agreement, and it may create other mutual rights and obligations between them. Illustration 2: Having been called a couple of times to fill A's oil tank, B, on the basis of information which it receives regarding A's consumption, has done so for more than 5 years without having been called. B has seen to it that A whose factory is dependant on the oil never runs out of oil. A has always paid B close to but not later than 90 days after receipt of the oil.
The initial agreement between the parties that B should only fill the tank when called upon has been changed by their practice; a duty on B to see to it that the tank never runs out of oil has been created. Also, although never expressly agreed upon, a practice between the parties extending to a credit of not more than 90 days after receipt has been established between them. It goes without saying that the parties may later agree to vary a practice which they have established between them.
In case of a conflict between a practice between the parties (Article 1:105(1)) and a usage not agreed upon by the parties (Article 1:105(2)), the former will take precedence over the latter.
The principle stated in (2), according to which an unreasonable usage will not operate, applies also to usages chosen by the parties.
A usage may operate without having been agreed upon by the parties. For such a usage to be binding, Article 1:105(2) requires that it is one which would be considered applicable by persons in the same situation as the parties, and which is not unreasonable.
The usage must be so well established and have such general application among those engaged in the trade that persons in the same situation as the parties would consider it applicable. Parties may thus be bound by usages which have application to all or several trades and by usages which apply in a particular trade only.
Article 1:105 applies to local, national and international usages. A usage may be international either in the sense that [page 105] it operates in the world trade, or in the sense that in a contract between parties which have their place of business in two different states, it operates in both states.
A local or national usage which operates at the place of business of one of the parties but not at that of the other party can only bind the latter if it would be reasonable to bind him. If a party comes into a market of the other party it will often be bound by the local usages. Illustration 3: A in Brussels sends an order to B, a broker in Paris, to be executed on the Paris Stock Exchange. A is ignorant of stock exchange transactions and has no knowledge of the usages of the Paris exchange. She can, therefore, have no intention to submit to these usages. Nevertheless the order is to be executed in accordance with the reasonable usages of the Paris Stock Exchange.
The application of a usage must not be unreasonable, see Comment D, last paragraph. A usage can never set aside a mandatory rule of law (see comment B), but if the law merely supplies a term in the absence of contrary agreement, the usage may reverse what would otherwise be the normal rule applied by the Principles, provided its application is not unreasonable, see Article 1:201. Commercial acceptance by regular observance by business people is prima facie evidence that the usage is reasonable but even a usage which is regularly observed may be disregarded by the court if it finds the application of the usage unreasonable.
The way in which the usages are ascertained - through expert witnesses, by opinions submitted by the national or local Chamber of Commerce etc. - is decided by the applicable national law.
(a) Some have required that if a trade practice is to be classified as a usage, it must be accepted as binding by those engaged in that line of business, see Schmitthoff 14, and the GERMAN RG 10 January 1925, RGZ 110, 47 (48). This test has not been adopted by the Commission, see Comment A.
(c)	The definition adopted by the Commission agrees with the one provided in Halsbury 12, 445: a usage is "a particular course of dealing or line of conduct generally adopted by persons engaged in a particular department of business life".
The way in which a usage is proved differs from country to country, see on the laws Schmitthoff 20ff.
Article 1:105(1) is drafted in the same way as CISG art. 9(1) which is now in force in AUSTRIA, BELGIUM, DENMARK, FINLAND, FRANCE, GERMANY, ITALY, THE NETHERLANDS, SPAIN and SWEDEN. See also ULIS art. 9(1).
(a)	The first branch of the rule, providing that the parties are bound by any usage they have agreed upon, seems to be generally accepted by the legal systems, see D�lle (-Junge) Art. 9 no. 8.
(b)	The second branch of Article 1:105(1), which provides that practices established between the parties will bind them, is applied in several legal systems. In case of a conflict between a practice established between the parties and a usage not expressly agreed upon, see Article 1:105(2), the former takes priority, see FRENCH Cass. Com. 14 June 1977, Bulletin IV no. 172, p. 148.
The rule in Article 1:105(1) has also been adopted in NORDIC, DUTCH, SCOTTISH and SPANISH law: see Nordic Contracts Acts � 1 and Spanish CC art. 1282 as interpreted by the courts; see also PORTUGUESE CC art. 405(1). Under Portuguese law practices established between the parties are only considered to be a guide for the interpretation and supplementation of the contract.
Some legal systems refer to the implied intention of the parties. For the position in ENGLAND, see Treitel, Contract 194-195; see also the ENGLISH law on incorporation of terms through a course of dealings, e.g. Henry Kendall & Sons v. Lillico & Sons Ltd  2 A.C. 31 (H.L.). On FRENCH law see the current interpretation of CC art. 1135 (Ghestin, Goubeaux & Fabre-Magnan Nos. 522ff.); on AUSTRIAN law, see ABGB �� 863(2), 914; and BELGIAN law, Cass. 29 May 1947, Pas. I 217. These laws consider the will of the parties as the legal basis for the application of usages. CISG art. 9(2) provides that the parties are considered impliedly to have made certain usages applicable to the contract. In contrast, Article 1:105(2) treats usages as legal norms applicable independant of the volition of the parties (cf., in Greece, Athens 7388/1991, EEN 58 (1991) 336, 337-338); usages may bind parties who were unaware of them when they made the contract. On NORDIC law see Ramberg, K�plagen 160.
CISG art. 9(2) relies on the knowledge or the imputed knowledge of the parties in question. This test leaves doubt as to whether newcomers in the trade or outsiders are bound by a usage of which they cannot reasonably have any knowledge. It has not been included in Article 1:105(2). A usage conceived as a legal norm will apply to everybody within its scope and will bind even the newcomer to the market.
In several legal systems unreasonable usages will not bind the parties. This holds true of AUSTRIA, see ABGB � 863(2); DENMARK, see Lynge Andersen & N�rgaard, 28; ENGLAND, see the discussion in Treitel, Contracts 194-195; GREECE, see Athens 2449/1960, EEN 28 (1961) 225-226, note Pothos; GERMANY, see Baumbach-Duden-Hopt � 346 No. 11; NETHERLANDS, see BW art. 6:248(2); PORTUGAL see CC art. 3(1); SPAIN, see CC art. 3.1 and Vicent Chuli� I, 1, 44; SWEDEN, see Ramberg, K�plagen 161; SCOTLAND, see "Strathlorne" S.S. Co v. Baird & Sons 1916 S.C. (H.L.) 134 ; and probably for FRANCE, see the discussion in Marty & Raynaud, Introduction no. 114. In ITALY Disposizioni sulla legge in generale, art. 8 seems to exclude any usage which is contrary to statutory law. CISG does not expressly require the usage to be reasonable, as does Article 1:105(2). Writers on CISG, however, regard this requirement to be implied. Under CISG, which does not treat questions of the validity of the contract, the recognition of usages is left to national law see v. Caemmerer & Schlechtriem Art. 9 no. 5.

References: art. 9
 art. 9
 Art. 9
 art. 1282
 art. 405
 v. 
 art. 1135
 art. 9
 art. 9
 art. 6
 art. 3
 art. 3
 v. 
 art. 8
 v. 
 Art. 9