INTERNATIONAL SALE OF GOODS

Overview
CISG Contractual issues under CISG Formation of contract

The United Nations Convention on Contracts for the International Sales of Goods

The CISG, adopted in 1980, incorporates rules from all the major legal systems. It provides accepted substantive rules on which contracting parties, courts, and arbitrators may rely. It has been ratified by 76 countries, but has not been ratified by countries such as Brazil, India, Malaysia, and the United Kingdom. It supersedes two earlier conventions: the Convention Relating to a Uniform Law on the International Sale of Goods (ULIS), and the Convention Relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF).

Transactions Covered in CISG

CISG applies to contracts for international sale of goods. The buyer and seller must have their place of business in different states. Either:

i.

Both of the states must be contracting parties to the convention, or ii. The rules of private international law must lead to the application of the law of a contracting state.

A ratifying state may declare that it will apply CISG only when the buyer and seller are both from contracting states.

Choice-of-law
Parties to a contract may exclude or modify CISGs application by a choice-of-law clause. A choice-of-law clause is a contractual provision that identifies the law to be applied in the event of a dispute over the terms or the performance of the contract.

Sales Defined
A sale is the exchange of goods for an amount of money or its equivalent. The CISG does not define sales, but various sections present the same definition as many domestic laws, such as the U.S. Uniform Commercial Code, which defines a sale as the passing of title from seller to the buyer for a price.

Goods Defined
A good is a moveable, tangible object. For the purposes of the CISG, goods do not include things bought for personal use or at an auction or foreclosure sale, nor may they be ocean-going vessels or aircraft. For example: Candles may or may not be a good under CISG depending upon whether they are sold to individual consumers or sold in bulk to a retailer for resale.

Mixed Sales
Seller of goods often furnishes services when delivering a product. CISG looks upon mixed sales and service contracts as sales of goods, unless the preponderant part of the obligation of the seller consists in the supply of labour or other services.

Contractual Issues Excluded From the Coverage of CISG

CISG only deals with:

1. The formation of the contract, and 2. The remedies available to the buyer and seller.

CISG excludes questions about:

1. 2. 3. 4. The legality of the contract, The competency of the parties, The rights of the third parties, and Liability for death or personal injury.

Preemption
If CISG applies to a particular contractual issue, domestic law is preempted. Remedies provides in CISG are the only remedies available. In simpler terms, the only permissible remedy for a defective product is the one provided by CISG when there is an international sale. Preemption helps to fulfil the goal of the convention to establish uniform rules for international sales contracts.

Interpreting CISG

To interpret CISG, a court is to consider:

1. The international character of the convention, 2. The need to promote uniformity in the conventions application, and 3. The observance of good faith.

The CISG implies that a court may only use the plain meaning of the language of the convention. Courts may also look the travaux preparatories or legislative history to determine intent.

Interpreting CISG: General Principles

CISG calls for courts to look to the general principles on which the convention is based when interpreting its provisions. Two of the suggested principles are:

1. A party to a contract has the duty to communicate information needed by the other party, and 2. Parties have the obligation to mitigate damages resulting from a breach.

Interpreting Sales Contracts

A contract is said to be formed only when the parties have a meeting of minds. This subjective intent approach says that contracts should be interpreted according to the actual intent and understanding of the parties at the time they made their agreement.

Continued...
CISG says courts are to use subjective intent only if the other party knew or could not have been unaware of the speakers intent. If intent is unclear, courts use objective intent.

Negotiations

When a court is to determine intent, CISG directs that due consideration be given to all relevant circumstance, including:
1. The negotiations leading up to the contract, 2. The practices that the parties have established between themselves, and 3. The parties conduct after they agree to the contract.

CISG does not apply the technical rules that domestic courts use to interpret contracts, such as the parole evidence rule.

Practices and Usages

Parties are bound by any practices which they have established between themselves. A court is allowed to consider any usages that the parties agreed to. A usage is the customary method of performing or acting that is followed by a particular group of people, such as people within a particular trade. CISG lets a court consider a usage of which the parties knew or ought to have known which international trade is widely known to, and regularly observed by parties to contracts of the type involved in the particular trade concerned.

Form
The CISG states that a contract for sale need not be concluded in or evidenced by writing and is not subject to any other requirements as to form. It may be proved by any means, including witnesses. However, CISG authorizes a contracting state whose legislation requires contracts of sale to be concluded in or evidenced by writing to make a declaration at the time of ratification the CISG provision does not apply where any party has his or her place of business in that state.

Formation of the Contract: Offer

A contract is formed when an offer to buy or sell a good is accepted. An offer is a proposal by one person to another indicating an intention to enter to enter into a contract under specific terms. To be a valid offer, the offeror must communicate an intention to be bound. A proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and pride.

Effectiveness of an Offer
An offer becomes effective only after it reaches the offeree, a specific person addressed in the offer. Offers can be withdrawn before they reach the offeree. Offers can be revoked any time before the offeree dispatches an acceptance. A firm offer is an offer that the offeror promises to keep open for a fixed period of time.

Acceptance

A contract comes into existence at the time the offer is accepted. An acceptance is a statement of conduct by the offeree indicating assent that is communicated to the offeree. Silence does not constitute acceptance. Acceptance must be received within the time period specified in the offer. If no time period is given, acceptance must be received within a reasonable time. Acceptance is effective when received by offeror.

Assent by Performance of an Act, Withdrawal, and Rejection

If the offeror asks for performance of an act rather than the indication of acceptance, the acceptance is effective when the act is performed. An offeree may withdraw his/her acceptance any time before or simultaneous with its receipt. A rejection becomes effective when it reaches the offeror. If the offeree sends both an acceptance and a rejection, the one that reached the offeror first would be given effect.

Acceptance With Modifications

If the acceptance modifies some of the terms of the offer, there is counteroffer instead of an acceptance if these inconsistencies are material. Under the CISG, additional terms or different terms relating, among other things, to the price, payment, quality of the goods, place, and the time of delivery, extent of one partys liability to the other, or the settlement of disputes are considered to alter the terms of the offer materially.