Date: 28.10.1998
Country: USA
Number: 97 C 5668
Court: U.S. District Court, N.D., Illinois, Eastern Division
Parties: Mitchell Aircraft Spares Inc. v. European Aircraft Service AB
An Illinois buyer and a Swedish seller concluded a contract for the sale of certain aircraft parts (integrated drive generators). After the goods were delivered the buyer filed a motion for summary judgment for breach of contract, breach of warranty and damages, alleging that the goods did not conform to contract specifications.

The Court found that the contract was ambiguous as to whether the parties had agreed as argued by the buyer on a sale of three integrated drive generators with specific part numbers, or as argued by the seller the sale of three integrated drive generators having different part numbers which the seller had available for purchase and listed in an international inventory locator database that the buyer searched before making its purchase order.

The Court held that the contract was governed by CISG as both parties had their places of business in Contracting States (United States and Sweden) (Art. 1(1)(a) CISG).

The Court then addressed the issue as to whether the parol evidence rule, which bars evidence of an earlier oral contract that contradicts or varies the terms of a subsequent or contemporaneous written contract, is applicable in cases governed by CISG.

Citing U.S. case law, the Court stated that Art. 8(1) CISG requires that evidence of a party's subjective intent when signing a contract be considered if the other party to the contract was aware of that intent at the time, and that Art. 8(3) CISG expressly directs courts to give due consideration to all relevant circumstances of the case including the negotiations to determine the intent of the parties.

On this ground the court concluded that CISG rejects the parol evidence rule and clearly instructs the courts to admit and consider probative parol evidence regarding the parties' negotiations inasmuch as that evidence reveals the subjective intent of the parties. Accordingly, the Court found that the CISG requires that the contract along with any evidence concerning any negotiations, agreements, or statements made prior to the issuance of the purchase order be considered.

The Court also found that, since the seller had its place of business in Sweden, and Sweden had excluded application of Part II of CISG (Art. 92 CISG), CISG was applicable except as concerns the issue of formation of the contract, which the Court found to be governed by Illinois law.

The Court finally held that, although the parol evidence rule is a rule of contract formation and in the case at hand Illinois law governed the formation of the contract, still the issue of parol evidence was governed by CISG, not Illinois law. This is so since the issue of parol evidence is addressed in Art. 8 CISG, which is in Part I of CISG, and neither Sweden nor the United States declared that it would not be bound by Part I of CISG.