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Prof. Dr. Ingeborg Schwenzer University of Basel Switzerland

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1 Prof. Dr. Ingeborg Schwenzer University of Basel Switzerland
Global Sales Law Prof. Dr. Ingeborg Schwenzer University of Basel Switzerland

2 Introduction Development of global trade 2010: 9,5% increase (WTO)
: average annual growth 5% Focus: China, Brazil, Russia, Africa 2007/08: Africa annual growth: exports: 18/28%, imports: 23/27% Different laws = obstacle to trade

3 Introduction Different sets of sales law Domestic: SGA, CC, others
Regional: OHADA Uniform Act on General Commercial Law (UAGCL), general contract law Global: UN Convention on Contracts for the International Sale of Goods (CISG), UNIDROIT Principles of International Commercial Contracts

4 Introduction History of Unification of sales law 1920s: Ernst Rabel
1960s: Hague Conventions ULIS/ULF 1980: Vienna Conference CISG 1988: Entering into force 2011: 76 member states covering 80% of world trade Africa: 9 member states, only two OHADA states

5 Introduction Structure of the CISG Part I: Sphere of application
Part II: Formation of the contract Part III: Substantive rules for the sale of goods, incl. duties of the parties, remedies, risk of loss Part IV: Final provisions – international public law

6 Part I: Sphere of application
Application and ambit of CISG (Art. 1-6) CISG itself determines ist applicability Art. 1(1) CISG: different states (Art. 10 CISG) Art. 1(1)(a) CISG: both states are member states Art. 1(1)(b) CISG: rules of private international law lead to member state Example China – Cameroon Application by arbitral tribunals

7 Part I: Sphere of application
Party autonomy Art. 6 CISG Opting out in whole or in part Choice of domestic law, f.e. Swiss law Litigating under the wrong law

8 Part I: Sphere of application
Ambit of the CISG Sale of goods contracts Barter contracts, back-to-back-sale Distribution agreements Art. 3 CISG: work and labour, services Art. 3(1) CISG: manufacture of goods Art. 3(2) CISG: mixed contracts (factory)

9 Part I: Sphere of application
Ambit of the CISG Goods: factory, machine, food, shoes, clothes, cars, circus elephant Documents representing the goods Art. 2 CISG exceptions Art. 2(a) CISG: consumer sales Art. 2(b)(c) CISG: auctions, bancruptcy Art. 2(d)(e)(f) CISG: certain goods

10 Part I: Sphere of application
Substantive ambit Art. 4 CISG: Formation, rights and obligations of parties Art. 4(a) CISG: validity questions Public policy, mandatory rules, capacity of the parties, fraud, mistake? Art. 4(b) CISG: transfer of title, retention of title, bona fide purchase

11 Part I: Sphere of application
Substantive ambit Art. 5 CISG: Compensation for personal injury and death Compensation for damage to property Limits of the CISG (external gaps) Agency, assignment, transfer of debts, joint debtors, limitation of actions, set-off? Form requirements: Art. 11 CISG

12 Part I: Sphere of application
Art. 7 CISG: Interpretation of the CISG Art. 7(1) CISG: international character, promotion of uniformity, good faith Art. 7(2) CISG: gap-filling General principles of CISG (party autonomy, burden of proof, stamdard of proof, set-off) PICC?

13 Part I: Sphere of application
Art. 8 CISG: Interpretation of party statements and conduct Art. 8(1) CISG: true intention of parties Art. 8(2) CISG: reasonable person Art. 8(3) CISG: circumstances to be considered Art. 9(1) CISG: usages and practices Art. 9(2) CISG: international usages

14 Part I: Sphere of application
Art. 11 CISG: freedom of form Formation, Art. 29(1): modification Excluded: procedural requirements, pariol evidence rule, consideration, cause, statute of frauds Art. 12 CISG: reservation Agreed form, Art. 13 CISG: writing Art. 29(2) CISG: modification

15 Part II: Formation of the contract
General remarks Art. 14 et seq. CISG antiquated Offer-acceptance mechanism e-commerce, UNCITRAL Concention 2004 Standard terms: incorporation – validity Pre-contractual duties Breaking off negotiations

16 Part II: Formation of the contract
Offer Art. 14 CISG: criteria for an offer Art. 14(1) CISG: definiteness (pretium certum – Art. 55 CISG), intention to be bound (invitatio ad offerendum) Art. 14(2) CISG: public offer (advertisements, websites)

17 Part II: Formation of the contract
Offer Art. 15(1) CISG: effective upon reaching the offeree Art. 15(2) CISG: withdrawal of offer Art. 16 CISG: revocability of offer Art. 16(1): Common Law starting point Art. 16(2): restrictions on revocability Art. 17 CISG: termination of offer

18 Part II: Formation of the contract
Acceptance (Art CISG) Art. 18(1): acceptance by declaration Statement or conduct (delivery, payment) Acceptance by silence Effectiveness of acceptance: Art. 18(2 s.1): reaching, Art. 18(3): performance of act

19 Part II: Formation of the contract
Acceptance (Art CISG) Deadline for acceptance (Art. 18(2) CISG) Art. 20 CISG: calculating the period of time Art. 21 CISG: when late acceptance may be effective Divergence between offer and acceptance Art. 19(1): rejection and counter-offer Art. 19(2)(3): insignificant modifications

20 Part II: Formation of the contract
Battle of forms Practical importance Possible solutions: last shot doctrine, knock-out doctrine Commercial letter of confirmation (acceptance by silence?)

21 Part II: Formation of the contract
Effectiveness of statements Importance of statement reaching the other party, Art. 23: conclusion of contract Art. 24: when does statement reach the other party? e-commerce, standard terms (making available, transparency) Art. 29: modification of contract

22 Part III/1: Substantive Rules - General
Content of Part III: General, obligations of seller, obligations of buyer, passing of risk, common provisions Basic remedies Specific performance (Art. 28 CISG) Right to withhold performance Damages Avoidance of contract, Art. 25: fundamental breach

23 Part III/1: Substantive Rules - General
Art. 26 CISG: declaration of avoidance Art. 27 CISG: dispatch principle – transmission risk Other notices (non-conformity

24 Part III/1: Substantive Rules - General
Art. 25 CISG: fundamental breach Fundamentality: effect on creditor Foreseeability In case of non-performance: impossibility, delay – time of the essence, ancillary duties Non-conformity of the goods: purpose of the contract, repairable defect, time of the essence

25 Part III/1: Substantive Rules - General
Art. 25 CISG: fundamental breach Breach of buyer‘s obligations Payment, repudiation, insolvency Taking delivery Art. 28 CISG: Specific performance Common law – Civil law

26 Part III/2: Substantive Rules – Seller‘s obligations
Overview Art CISG Cornerstone of any sales law Art : delivery, conformity Art : non-conforming goods Art : third party rights Art. 44: buyer‘s excuse for not giving notice

27 Part III/2: Substantive Rules – Seller‘s obligations
Seller‘s duty to deliver Art. 30 CISG: delivery, documents, transfer of title Art. 31 CISG: place of delivery Primarily party agreement Incoterms 2010: EXW (ex works), FCA (free carrier)/FOB (free on board), CIF (cost, insurance, freight), DAP (delivered at place)

28 Part III/2: Substantive Rules – Seller‘s obligations
Seller‘s duty to deliver Subsidiary rules Art. 31(a): carriage of goods Art. 31(b): goods at specific place Art. 31(c): seller‘s place of business Making available Art. 32: obligations during transport Jurisdiction at place of delivery

29 Part III/2: Substantive Rules – Seller‘s obligations
Seller‘s duty to deliver Art. 33: time of delivery: primarily party agreement Art. 33(a): fixed date Art. 33(b): fixed period of time Art. 33(c): reasonable time after conclusion of contract Art. 52(1): early delivery by seller

30 Part III/2: Substantive Rules – Seller‘s obligations
Art. 34: handing over of documents Documents of title Other documents Place and time of handing over of documents Right to cure in case of early delivery

31 Part III/2: Substantive Rules – Seller‘s obligations
Art. 35 CISG: conformity of the goods Most important provisions of CISG CISG key concept: quality, quantity, aliud packaging treated alike Domestic approaches: warranties/ conditions (SGA), express/implied warranties (UCC), vices cachés (CC), peius/aliud (CC, Germanic systems), partial non-delivery, ancillary duties

32 Part III/2: Substantive Rules – Seller‘s obligations
Art. 35 CISG: conformity of the goods Art. 35(1): primarily party agreement Quantity: trade usages Quality: features of goods, origin, manufacturing practices, ethical standards Dicrepancies in nature: aliud Packaging Additional duties: services, non-competition

33 Part III/2: Substantive Rules – Seller‘s obligations
Art. 35 CISG: conformity of the goods Art. 35(2): objective criteria to determine conformity Art. 35(2)(a): fitness for ordinary purpose Commercial purposes, resalability, average quality? Public law requirements, regional v. global players

34 Part III/2: Substantive Rules – Seller‘s obligations
Art. 35 CISG: conformity of the goods Art. 35(2)(b): fitness for particular purpose Purpose made known to seller Buyer reasonably relying on seller‘s skill and judgement Art. 35(2)(c): sample or model Art. 35(2)(d): adequate packaging Art. 35(3): buyer‘s knowledge

35 Part III/2: Substantive Rules – Seller‘s obligations
Art. 36: determinative time for conformity Art. 36(1): passing of risk Burden of proof Art. 36(2): after risk has passed: breach of obligation, guarantee Durability in general Art. 37: seller‘s right to cure non-conformity

36 Part III/2: Substantive Rules – Seller‘s obligations
Art. 38, 39: Examination and notice Comparative overview: SGA, CC, UCC, Germanic systems Drafting history Art. 38: Examination Method of examination Period for examination: general, carriage of goods, redirection or redispatch

37 Part III/2: Substantive Rules – Seller‘s obligations
Art. 39: notice Specificity of notice Form and transmission risk Reasonable time: nature of goods, „noble month“ Beginning of period Art. 39(2): two year cut-off period

38 Part III/2: Substantive Rules – Seller‘s obligations
Art. 40: seller‘s knowledge Consequences of failure to give notice General – Art. 44: reasonable excuse Limitation periods UN Convention on Limitation period: 4 years Domestic rules vary from 6 months to 6 years, compatability with Art. 39(2)

39 Part III/2: Substantive Rules – Seller‘s obligations
Art. 41, 42: defects in title and intellectual property rights Distinction unknown to most countries Art. 41: defects in title Third party rights (property, encumbrances) Third party claims Public law encumbrances

40 Part III/2: Substantive Rules – Seller‘s obligations
Art. 42: third party industrial or intellectual property rights Third party rights or claims Art. 42(1)(a)(b): territorial restriction Seller‘s knowledge Art. 42(2): exclusion of seller‘s liability Art. 43: notice requirement

41 Part III/3: Substantive Rules – Buyer‘s remedies in case of breach
Art CISG: buyer‘s remedies Unified approach: breach of contract Some special rules: non-conformity Art. 45: overview of buyer‘s remedies Concurrent domestic remedies: contract law (mistake), tort law (culpa in contrahendo, negligent misrepresentation)

42 Part III/3: Substantive Rules – Buyer‘s remedies in case of breach
Art. 48 CISG: seller‘s right to cure Distinguish Art. 37 Relationship to buyer‘s right to avoid the contract Setting time limits Art. 47: buyer fixing additional time for performance Art. 48(2)(3): seller requesting additional time

43 Part III/3: Substantive Rules – Buyer‘s remedies in case of breach
Art. 46, 47 CISG: right of performance and substitute performance Art. 46(1): right to specific performance subject to Art. 28 and Art. 79 Art. 46(2): restriction on right to substitute goods in case of non-conformity (fundamental breach) Art. 46(3): restriction on right to repair in case of non-conformity

44 Part III/3: Substantive Rules – Buyer‘s remedies in case of breach
Art. 49: Avoidance of contract Art. 49(1)(a): fundamental breach Art. 49(1)(b): „Nachfrist“-principle (additional period in case of non-delivery and breach of additional obligations) Art. 49(2): restriction in case of delivery of goods Avoidance by declaration

45 Part III/3: Substantive Rules – Buyer‘s remedies in case of breach
Part performance and delivery of partly non-conforming goods Art. 51 and Art. 73 CISG Art. 51(1), 73(1): principle: partial avoidance only Art. 51(2), 73(3): avoidance of the whole contract in case of fundamental breach Art. 72: Anticipated breach of contract

46 Part III/3: Substantive Rules – Buyer‘s remedies in case of breach
Art. 50 CISG: reduction of purchase price Roman law descent Difference to damages: calculation, Art. 79 not applicable Art. 45(1)(b), 74 et seq.: damages Right to withhold performance, general principle Art. 71: right to suspend performance Right to reject the goods (perfect tender rule?) Art. 52(2): rejection of excessive quantity

47 Part III/4: Substantive Rules – Buyer‘s obligations
Art. 53 CISG: payment, taking delivery Art : payment of purchase price Art. 54: encompasses all arrangements, form of payment, letter of credit, compliance with public law regulations etc. Currency: agreement, place of seller Art. 57(1): place of payment Jurisdiction?

48 Part III/4: Substantive Rules – Buyer‘s obligations
Art. 58: time of payment Agreement Art. 58(1)(2): subsidiarily: step by step-performance Art. 58(3): reasonable opportunity to inspect the goods Art. 60 CISG: duty to take delivery Necessary preparatory steps, taking over Offer of non-conforming goods

49 Part III/4: Substantive Rules – Buyer‘s obligations
Art CISG: passing of risk Art. 66: payment obligation if seller performed all of its obligations, even if goods destroyed or damaged Which events are covered? Acts of states? Exception: loss or damage due to seller Primarily: agreement of parties (practice) Incoterms – who must insure the goods?

50 Part III/4: Substantive Rules – Buyer‘s obligations
Art CISG: passing of risk Art. 67(1): handing over to first carrier, retention of documents irrelevant Art. 67(2): generic goods must be identified to contract Goods sold in transit: unclear when goods were destroyed Art. 68: conclusion of contract. Dating back to handing over in case of insurance (contract valid)

51 Part III/4: Substantive Rules – Buyer‘s obligations
Art. 69: catch all provision Art. 69(1): goods at seller‘s place of business: taking over of goods or failing to take delivery Art. 69(2): other places of delivery (incl. buyer‘s place of business): when delivery is due, notification of buyer, identification to contract

52 Part III/5: Substantive Rules – Seller‘s remedies in case of breach
Art. 61 CISG: overview of seller‘s remedies Art. 61(3): no period of grace as CC Art. 62: payment of purchase price, Art. 28 applicable Can Art. 77 be applied to specific performance of purchase price? Disputed. Art. 62: taking delivery and other duties Art. 63: fixing additional period of time

53 Part III/5: Substantive Rules – Seller‘s remedies in case of breach
Art. 64: avoidance of contract Art. 64(1)(a): fundamental breach Art. 64(1)(b): lapse of „Nachfrist“ Fundamentalility of breach very rare: discuss non-payment, taking delivery, other duties Art. 64(2): restriction where price has been paid in the meantime (price main interest)

54 Part III/5: Substantive Rules – Seller‘s remedies in case of breach
Art. 61(1)(b), 74: damages Rights of retention: Art. 58(1): step-by-step-principle, Art. 71(1): if seller must perform first, Art. 71(2): right of stoppage in transitu (does not apply against carrier) Specification by the seller, Art. 65 Notice to buyer necessary Art. 65 applicable to other duties?

55 Part III/6: Substantive Rules – Common provisions
Art. 71: right to suspend performance and stoppage Art. 71(1)(a): deficiency in ability to perform (f.e. political situation, natural disaster), creditworthiness (buyer or seller) Art. 71(1)(b): debtor‘s conduct Relevant time: after AND before conclusion of the contract (becomes apparent), domestic remedies for mistake

56 Part III/6: Substantive Rules – Common provisions
Art. 71: right to suspend performance and stoppage Evidential threshold: reasonable person Weight of anticipated breach: „substantial part“ less than fundamental breach „suspension“ of performance as well as preparatory steps Art. 71(2): right of stoppage Art. 71(3): duty to give notice, adequate assurance of performance

57 Part III/6: Substantive Rules – Common provisions
Art. 71: right to suspend performance and stoppage End of in-between-state: Art. 72: no adequate assurance of performance, fundamental breach threatening Art. 72: anticipatory breach Art. 72(1): prior to date of performance, fundamental breach, „clear“

58 Part III/6: Substantive Rules – Common provisions
Art. 72: anticipatory breach Repudiation by one party, demanding price adjustment, factual circumstances Art. 72(2)(3): possibility to give adequate assurance of performance, reasonable notice Duty to avoid contract before date of performance, Art. 77?

59 Part III/6: Substantive Rules – Common provisions
Art. 73: installment contracts Faulty performance of one installment (non-delivery, late delivery, non-conformity) Art. 73(1): partial avoidance only if fundamental Art. 73(2): future installments, anticipatory breach, lower threashold than Art. 72 Art. 73(3): retrospective avoidance Other remedies? Damages, price reduction

60 Part III/7: Substantive Rules – Damages
Responsibility and discharge Any breach of obligation No fault requirement – strict liability Exemption under Art. 79, 80 Art. 79(1): impediment beyond control, not foreseeable, not avoidable Covers all contractual duties Subsequent and initial impediments

61 Part III/7: Substantive Rules – Damages
Typically: force majeure situations Hardship? Threshold, consequences (duty to renegotiate?) Non-conformity of goods. Exemption rare Liability for own employees: Art. 79(1) Liability for third persons: Art. 79(2) Passing impediment: Art. 79(3) Art. 79(4): duty to give notice

62 Part III/7: Substantive Rules – Damages
Art. 79(5): other remedies: withholding performance, avoidance, reduction of price, specific performance? Art. 80: creditor causing failure to perform All remedies excluded Causation by both parties (…to the extent) Apportionment of damages, avoidance?

63 Part III/7: Substantive Rules – Damages
Extent of damages claim, Art. 74 Principle of full compensation All losses, causation required Non-performance loss, incl. Loss of use, costs of repair Incidental loss, additional costs etc. Legal costs? Consequential loss, f.e. penalty, liability, damage to property Loss of profit

64 Part III/7: Substantive Rules – Damages
Pecuniary (loss of reputation, loss of a chance) v. non-pecuniary loss (pain and suffering, loss of amenities) Calculation of loss Concrete and abstract calculation Art. 75: concrete: cover purchase Art. 76: abstract: market-price-rule Abstract calculation of other losses, esp. loss of use?

65 Part III/7: Substantive Rules – Damages
Betterment Disgorgement of profits (performance principle) Art. 74: foreseeability rule (contemplation rule) Standard: „possible consequence“ Examples: non-performance loss, incidental loss, consequential loss

66 Part III/7: Substantive Rules – Damages
Contractual stipulations on liability Freedom of contract, Art. 6 Agreed sums (liquidated damages, penalties) Limitations of liability – validity Art. 4(a) Art. 77: duty to mitigate Scope: damagess, other remedies? Examples, substitute transactions Consequences of breach

67 Part III/8: Substantive Rules – Interest
Art. 78: price or any sum in arrears Highly controversial, Islamic countries Preconditions: sum due Interest rate: CISG itself? PICC? Domestic law? Full compensation -> interest rate at creditor‘s place, currency of payment Compound interest?

68 Part III/9: Substantive Rules – Effects of Avoidance
Art. 81(1): release from primary obligations, arbitration clauses not affected Art. 81(2): restitution of what has been performed, concurrently Art. 82(1): impossibility of restitution = bar to avoidance or substitute delivery (antiquated rule, better: damages) Art. 82(2): cases excluded: other than buyer‘s conduct, examination, normal use

69 Part III/9: Substantive Rules – Effects of Avoidance
Restitution: nature of claim? Effect of avoidance on property. CISG: contract remains intact (Art. 81(1) CISG) If goods are damaged after avoidance -> damages (Art. 74) Art. 84(1): interest on purchase price Art. 84(2): benefits from goods, surrogates, fruits, use (no abstract calculation)

70 Part III/10: Substantive Rules – Preservation of goods
Breach of contract: problem: fate of the goods? Examples Art. 85: seller‘s duty if buyer does not take delivery Art. 86: buyer‘s duty if it rejects the goods Art. 86(2): duty to take possession Reasonable preservation measures, depend on nature of goods Art. 87: storage in a warehouse

71 Part III/10: Substantive Rules – Preservation of goods
Art. 88: self-help sale Art. 88(1): normal self-help sale („may), notice required Art. 88(2): emergency sale, perishable goods („must“), possible notice Art. 88(3): proceeds: set-off against costs, account for balance


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