Formal and Operative Rules of the CISG: Case of Article 25

The United Nations Convention on Contracts for the International Sale of Goods (CISG) has been the law of some countries for the better party of forty years. The case law (judicial and arbitral) has grown steadily over this time. Unfortunately, the case law is spread unevenly over its eighty-eight substantive articles. This Article will provide a framework for performing a factors analysis of one of its most important articles. CISG Article 25 sets the standard of fundamental breach for the type of breach that allows the nonbreaching party to avoid or terminate the contract. A factors analysis seeks to discover the key facts or factors that best predict a court’s (and arbitral tribunal) decision on whether or not a breach is fundamental. The difference between formal and operative law can be drawn out by such an analysis. The difference between these two perspectives or types of rules can be depicted by two questions: In reading an article or rule of the CISG, what is the plain meaning or common sense meaning of the rule (formal rule)? In its application, what factors are most predictive of the decision involving the rule’s application, irrespective of the rule’s plain meaning (operative rule)? This analysis is founded on the simple premise that certain facts or factors in particular cases predict if and how a court applies a rule of law. This Article will focus on the interface between formal law and operative facts or factors.