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CISG Advisory Council Opinion No. 3: Parol Evidence Rule, Plain Meaning Rule, Contractual Merger Clause and the CISG

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CISG Advisory Council Opinion No. 3: Parol Evidence Rule, Plain Meaning Rule, Contractual Merger Clause and the CISG Pace International Law Review Volume 17 Issue 1 Spring 2005 Article 3 April 2005 CISG Advisory Council Opinion No. 3: Parol Evidence Rule, Plain Meaning Rule, Contractual Merger Clause and the CISG Follow this and additional works at: https://digitalcommons.pace.edu/pilr Recommended Citation , CISG Advisory Council Opinion No. 3: Parol Evidence Rule, Plain Meaning Rule, Contractual Merger Clause and the CISG, 17 Pace Int'l L. Rev. 61 (2005) Available at: https://digitalcommons.pace.edu/pilr/vol17/iss1/3 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 [email protected]. OPINIONS CISG ADVISORY COUNCIL OPINION NO. 3ti PAROL EVIDENCE RULE, PLAIN MEANING RULE, CONTRACTUAL MERGER CLAUSE AND THE CISG2 Opinion 1. The Parol Evidence Rule has not been incorporated into the CISG. The CISG governs the role and weight to be ascribed to contractual writing. f Editor's Note: While The Pace International Law Review adheres to The Bluebook Uniform System of Citation, the Law Review has deferred to the Advisory Council's chosen citation in the interest of the uniformity of their opinions. 1 To be cited as: CISG-AC Opinion no 3, Parol Evidence Rule, Plain Meaning Rule, Contractual Merger Clause and the CISG, 23 October 2004. Rapporteur: Pro- fessor Richard Hyland, Rutgers Law School, Camden, NJ, USA. Adopted by the CISG-AC on its 7th meeting in Madrid with no dissent. Reproduc- tion of this opinion is authorized. The opinion is dedicated to the memory of our dear friend, colleague, and teacher Allan Farnsworth who passed away on 31 January 2005. 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 The CISG-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 Conven- tion 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 Frei- burg 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. 1 PACE INT'L L. REV. [Vol. 17:61 2. In some common law jurisdictions, the Plain Meaning Rule prevents a court from considering evidence outside a seemingly unambiguous writing for purposes of contractual interpretation. The Plain Meaning Rule does not apply under the CISG. 3. A Merger Clause, also referred to as an Entire Agreement Clause, when in a contract governed by the CISG, derogates from norms of interpretation and evidence contained in the CISG. The effect may be to prevent a party from relying on evidence of statements or agreements not contained in the writing. Moreover, if the parties so intend, a Merger Clause may bar evidence of trade usages. Emeritus Eric E. Bergsten, Pace University; Prof. Michael Joachim Bonell, Uni- versity 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 Commis- sion 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, Universitat 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, Univer- sidad Carlos III de Madrid, and Prof. Ingeborg Schwenzer, University of Basel. For more information please contact [email protected]. 2 This opinion is a response to a request by the Association of the Bar of the City of New York Committee on Foreign and Comparative Law. The questions re- ferred to the Council were: 1. By holding that the CISG permits a court to abandon the parol evidence rule, which generally bars 'evidence of any prior agreement' (UCC 2-202), the Eleventh Circuit has introduced what may be an unnecessary degree of uncertainty in the drafting of contracts. If the MCC-Marble rule prevails, there is no certainty that the provisions of even the most care- fully negotiated and drafted contract will be determinative. 2.... Does the parol evidence rule apply under the CISG? Although the rule is regarded as substantive, not evidentiary, and thus within the scope of the CISG, it is arguable that the rule deals with a matter 'not expressly settled' in the CISG. The applicable law would then be the law of the juris- diction whose law would 'be applicable by virtue of the rules of private international law' (CISG art. 7(2)), and if such jurisdiction were an Ameri- can or other common law jurisdiction the parol evidence rule would apply. 3. Does the 'plain meaning rule' apply under the CISG? 4. Would a merger clause invoke the parol evidence rule under the CISG, regardless of whether the rule would otherwise be applicable?" https://digitalcommons.pace.edu/pilr/vol17/iss1/3 2 2005] CISG ADVISORY COUNCIL OPINION NO. 3 However, in determining the effect of such a Merger Clause, the parties' statements and negotiations, as well as all other relevant circumstances shall be taken into account. Comments 1. Introduction 1.1. Interpretation and Evidence under the CISG 1.1.1. The CISG provides norms and principles for the inter- pretation and evidence of international sales transactions. These include Article 8, which generally permits all relevant circumstances to be considered in the course of contract inter- pretation, Article 9, which incorporates certain usages into the contract, and Article 11,3 which indicates that a contract and its terms may be proved by any means, including by witnesses. These rules prevail over domestic rules on interpretation and evidence of contractual agreements. Since these are default rules, Article 6 permits the parties to derogate from them or vary their effect. 1.1.2. Article 6 permits the parties to derogate from them or vary their effect, e.g., by merger clauses. This Opinion considers some issues that arise when a court or tribunal is asked to de- termine whether the parties intended by a merger clause to der- ogate from the Convention's norms governing contract interpretation. 1.2. The Parol Evidence Rule 1.2.1. The Parol Evidence Rule refers to the principles which common law courts have developed for the purpose of determin- ing the role and weight to ascribe to contractual writings. The basic purpose of these principles is "to preserve the integrity of written contracts by refusing to allow the admission of [prior] oral statements or previous correspondence to contradict the written agreement."4 In order to allow the intent of the writing to prevail, the judge may exclude what is known as extrinsic or 3 Unless a state has made a reservation under Article 96. 4 Larry DIMATTEO, The Law of InternationalContracting 212 (2000). 3 PACE INT'L L. REV. [Vol. 17:61 parol evidence, particularly statements made during the negoti- ations. The Parol Evidence Rule applies to the general law of contracts, including the sale of goods law of common law jurisdictions.5 1.2.2. The Parol Evidence Rule is believed to have developed as a method for judges to prevent common law juries from ig- 6 noring credible and reliable written evidence of the contract. The US legal system maintains the right to a jury trial in civil matters, and most civil jury trials take place in the United States.7 As a result, the Parol Evidence Rule has become more important in US law than in other common law systems. 1.2.3. The Parol Evidence Rule comes into play when two cir- cumstances meet. First, the agreement has been reduced to writing. Second, one of the parties seeks to present extrinsic or parol evidence to the fact finder. Extrinsic or parol evidence in- cludes evidence of the negotiations or of agreements related to the contractual subject matter which was not incorporated into the written contract. A typical case involves representations made during the negotiations by Seller or Seller's representa- tives regarding the quality of the goods. Under the Parol Evi- dence Rule, Seller may ask the tribunal to bar introduction of evidence of any representations not incorporated into the writ- ten contract. 1.2.4. In English law, the Parol Evidence Rule involves a re- buttable presumption that the writing was intended to include 6 For example, the Parol Evidence Rule has been incorporated into the sales law of the US Uniform Commercial Code: "Terms with respect to which the confir- matory memoranda of the parties agree or which are otherwise set forth in a writ- ing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented (a) by course of performance, course of dealing, or usage of trade (Section 1-303), and (b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement." UCC § 2-202.
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