Inadequacies of Article 42 CISG: Does the Answer Lie in Article 79?

• Date: 01 January 2024

123

INADEQUACIES OF ARTICLE 42 CISG: DOES

THE ANSWER LIE IN ARTICLE 79?



Abstract

e United Natio ns Conve ntion on Contracts for the Int ernational Sale of Goods

(CISG) pro vides unifor m laws that govern transnational sales contracts between

businesses operating in Contracting States, or when the la w of a Contra cting State is

applicable according to conict of laws rules.1 Currently 97 Contracting States worldwide

have adopted the CISG, including New Zealand.2 Article 42 CISG requ ires a seller to

deliver to the buyer goods that are free from any third-party intellectual property rights

(IPRs). e territor iality of IPRs means that a seller may not be the party best suit ed

to know the existe nce of any third-party IPRs in certain jur isdictions c ompared to the

buyer. Article 42 creates uncertainties for parties involved in international commerce

with regards to i ntellectual propert y (IP) disputes and can lead to unsatisfactory res ults.

In th is pape r, I explo re whet her an ag gri eved pa rty to a contra ctua l disp ute abo ut a thir d-

party IPR claim can pu rsue a cause of action under art 79. I apply a two-stage enquiry

to selec ted cases, under art 42 (stage o ne) and then art 79 (stage two) of the CISG, and

demonstrate that a losing party in a third-party IPR dispute is also unlikely to succeed

under art 79, ev en in rare circumstances.

I. Introduction

Sale of goods le gislation helps reduce t ransaction c osts for businesses a s it saves

partie s to a contract of s ale from hav ing to neg otiate expr ess contract ual ter ms.3

Contracts for t he sale of good s between New Zea land busi nesses are gover ned by

default ru les contained in p t 3 of the Contract and Com mercial Law Act 2017 (CCL A),

except where the par ties or other leg islation prov ides otherwi se. Typica lly, the

1 United Nat ions Convention o n Contract s for the Inter nationa l Sale of Good s 1489 UN TS 3 (opened

for signat ure 1 Januar y 1988, entered i nto force 1 Janua ry 1988) [CISG], a rt 1.

2 “CISG-online” <https://cisg-online.or g/home>.

3 Nicholas Wood A to Z of New Zealand La w (online ed, Thom son Reuters) at [14 .G.1.1.1].

* Dr Sam Muts amwir a, PhD Chem istry, ML S (Hons), MAM , Freelan ce IP Consu ltant wi th

partic ular exper tise in scient ic star t-ups, emai l: sammuts amwira@ gmail.c om.

124 [Vol 31, 2024]

seller has a n obligation to give goo d and clear title to t he buyer,4 unless the par ties

implicitl y or expressly agr ee otherwise.5 Th at is, rst ly, the re is an impli ed cond itio n

that the sel ler has the righ t to sell the goods .6 Secondly, there is an i mplied warra nty

that the buyer is e ntitled to enj oy quiet possess ion of the goods.7 Th is warra nty

extends beyond t he time of sa le and is breache d if the seller d istur bs, or a thir d

part y lawfu lly dist urbs, the bu yer’s quiet possession ,8 while t he seller can h ardly

warra nt again st unlaw ful int erference from t hird pers ons.9 Third ly, there is an

implied wa rrant y that the goo ds are free f rom any charge or encumbr ance that i s

not declared or k nown to the buyer.10

In the contex t of IPRs and cl aims, t he leading a pplicable cas e in New Zeala nd

national s ales law is Nibl ett Ltd v Co nfectioners’ Mat erial Co Ltd.11 In Niblett Ltd v

Confectioners’, the Court rule d that, since the seller c ontravened the equivalen ts of

both subss 135(1) (a) and (b) of the C CLA because the good s infringed a th ird party’s

trademar k, as a resu lt, the seller c ould be legal ly prevented f rom sellin g them

and the buyer wa s unable to enjoy q uiet possession .12 However, in Microbeads AG v

Vinhurst, where no thi rd-party patent r ights subsis ted at the conclusion of the sa les

contract (unpu blished patent), bu t the patentee c laimed i nfrin gement of its patent

after it w as published , the Court held t hat the sel ler was in breach of a co gnate

provision to s ubs 135(1)(b) but not subs 135(1)(a).13 Therefore, goods marred by third-

part y IPRs or claims ca n be character ised as having a le gal defect in title .

If a sales cont ract fal ls with in the scope of the CISG, its provi sions take eect

and wil l prevail over any other New Zea land law if there are a ny inconsis tencies.14

New Zeala nd adopts and incorporat es the CISG into its nat ional law by virtue of s s

202–206 of the CCL A. In internat ional commercial sa les contracts governed by t he

CISG, the buyer is pr otected from thi rd-party clai ms on the goods by art s 41 (non-

IP) and 42 (IP). Con sequently, the matter of how ar t 42 is interpreted by cou rts and

arbitra l tribuna ls around the world, a nd whether there a re any altern ative causes of

action where IPR s are concerned under the CI SG is a salient topic for New Zeal and

businesses en gaged in intern ational commerce. Ac cording to ar t 42(1):

4 Contract and Commerci al Law Act 2017 [CC LA], s 135.

5 CCLA, s 135 (2).

6 At s 135(1)(a).

7 At s 135(1 )(b).

8 Matthew B arberLaws of New Zeal and – Sale of Goods(onl ine ed, New York, Lex isNexis) at [137].

9 Above n 3, at [1 4.G.5.4]

10 CCLA, s 135 (1)(c).

11 Niblett Ltd v Confec tioners’ Materia ls Co Ltd [1921] 3 KB 387 (C A).

12 At [398 ]–[403].

13 Microbeads AG v Vi nhurst Road Marking s Ltd [1975] 1 WLR 21 8 (CA) at [221]–[227] .

14 CCLA , s 205.