In applying Articles 4.1 and 4.2, regard shall be had to all the circumstances, including
(a) preliminary negotiations between the parties;
(b) practices which the parties have established between themselves;
(c) the conduct of the parties subsequent to the conclusion of the contract;
(d) the nature and purpose of the contract;
(e) the meaning commonly given to terms and expressions in the trade concerned;
1. Circumstances relevant in the interpretation process
This Article indicates circumstances which have to be taken into consideration when applying both the “subjective” test and the “reasonableness” test in Articles 4.1 and 4.2. The list mentions only those circumstances which are the most important and is in no way intended to be exhaustive.
2. “Particular” and “general” circumstances compared
Of the circumstances listed in this Article some relate to the particular relationship which exists between the parties concerned, while others are of a more general character. Although in principle all the circumstances listed may be relevant in a given case, the first three are likely to have greater weight in the application of the “subjective” test.
1. A contract for the writing of a book between A and B, a publisher, indicates that the book should consist of “about 300 pages”. During their negotiations B had assured A that an approximate indication of the number of pages was necessary for administrative reasons and that A was not bound to stick precisely to that number of pages, but could exceed it, substantially if need be. A submits a manuscript of 500 pages. In interpreting the meaning of “about 300 pages” due consideration should be given to these preliminary negotiations (see Article 4.3(a)).
2. A, a Canadian manufacturer, and B, a United States retailer, conclude a number of contracts for the delivery of optical lenses in which the price is always expressed in Canadian dollars. A makes B a new offer indicating the price in “dollars” without further specification, but intending to refer again to Canadian dollars. In the absence of any indication to the contrary, A’s intention will prevail (see Article 4.3(b)).
The remaining circumstances listed in this Article, i.e. the nature and purpose of the contract, the meaning commonly given to terms and expressions in the trade concerned and usages, are important primarily, although not exclusively, in the application of the “reasonableness” test.
The criteria in sub-paragraphs (e) and (f) may at first sight appear to overlap. There is however a difference between them: while the “usages” apply only if they meet the requirements laid down in Article 1.9, the “meaning commonly given [...] in the trade concerned” can be relevant even if it is peculiar to a trade sector to which only one, or even neither, party belongs, provided that the expression or term concerned is one which is typical in that trade sector.
3. A and B conclude a contract for the sale of a cargo of oil at USD 80 per barrel. The parties subsequently disagree on the size of the barrel to which they had referred, A having intended a barrel of 42 standard gallons and B one of 36 Imperial gallons. In the absence of any indications to the contrary, A’s understanding prevails, since in the international oil trade it is a usage to measure barrels in standard gallons (see Article 4.3(f)).
4. A, a shipowner, concludes a charterparty agreement with B for the carriage of grain containing the standard term “whether in berth or not” with respect to the commencement of the lay-time of the ship after its reaching the port of destination. When it subsequently emerges that the parties attached different meanings to the term, preference should, in the absence of any indication to the contrary, be given to the meaning commonly attached to it in the shipping trade since the term is typical in the shipping trade (see Article 4.3(e)).
3. “Merger” clauses
Parties to international commercial transactions frequently include a provision indicating that the contract document completely embodies the terms on which they have agreed. For the effect of these so-called “merger” or “integration” clauses, in particular whether and to what extent they exclude the relevance of preliminary negotiations between the parties, albeit only for the purpose of the interpretation of the contract, see Article 2.1.17.