1. BUYERS AND SELLERS UNDER THE UN CONVENTION ON CISG
Presented by
Tom Reid
Chief Problem Solver
Certified Contracting Solutions, LLC CCS
Presented to the
National Contract Management Association’s
Third Annual Commercial Contracting Conference
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2. ACKNOWLEDGEMENTS
CCS Is Fully Responsible For The Content Of This Presentation,
But The Valuable Support Of Others Is Gratefully Acknowledged.
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3. WHAT IS THE CISG?
The Convention On Contracts For The International Sale Of Goods
Designed To Foster World Trade By Acting As A Bridge To Improved Understanding In Business Dealings Between Persons From Different Countries And Cultures
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4. WHAT IS IT? Also Referred To As “The Vienna Convention”
In Effect, A Sales Code For International Commercial Transactions
Has 101 Articles (Approx.. 20 Pages)
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5. WHY HAVE IT?
Provide A Common Baseline Of Terms And Conditions For All Contracting Parties
Choice Of Law Is Always Important
Can Select Either Party’s National Law
Can Select The Application Of A Treaty
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6. WHERE DID IT COME FROM?
International Institute for the Unification of Private Law (UNIDROIT) In 1930
Several Drafts And Interruption Due To Wars, But Work Product Never Widely Accepted
Hague Conference (1964)
Uniform Law for the International Sale of Goods (ULIS)
Uniform Law for the Formation of Contracts (ULF)
United Nations Commission on International Trade Law (1966) (CISG Adopted 4/10/80)
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7. WHAT DOES IT APPLY TO? Only To “International Sales”
Excludes Coverage Of:
Consumer Sales
Ships, Aircraft, And Electricity
Security Transactions
Sales Of Services (But Parties May Opt In)
Parties May “Contract Out” Of CISG
Does Not Cover “Trade Terms” Or The Passing Of “Title”
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8. WHO DOES IT APPLY TO? There Were 14 Original Participants
As Of 1996 – 46 Countries Had Ratified It
Today There Are 62 Signatories
Sometimes Viewed As Being More Favorable To Buyers, Particularly In Developing Countries
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9. Participating Countries - 2003
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10. WHAT DOES IT SAY? Oral Contracts Are Allowed
Prior Course Of Dealing And Trade Usage Are Honored
Offer Must Be “Sufficiently Definite”
Acceptance Effective When Received (But May Not Be Revoked Once Dispatched)
Battle Of The Forms – “Materiality”
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11. WARRANTIES
Fit For The Purpose For Which Goods Of The Same Description Would Ordinarily Be Used
Fit For Any Particular Purpose Expressly Or Impliedly Made Known To The Seller At The Time
Does Not Address “Merchantability”
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12. INSPECTION
Buyer Must Inspect And Report Non-Conformance Within A Reasonable Time
Seller Should Specify A Time
Seller May Want To Expressly Override CISG Art. 27, Which Causes Seller To Bear Responsibility For Delay Or Non-Receipt Of Notices From Buyer
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13. REMEDIES Full Scope: Specific Performance Delivery Of Substitute Goods
Price Reduction
Compensatory Damages
Seller Should Limit Remedies To These
Seller Should Exclude Consequential Damages
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14. WHAT DOES A CISG AGREEMENT LOOK LIKE?
Preamble
Identification Of Parties
Description Of Goods
Price And Payment Conditions
Delivery Periods And Conditions
Inspection Of The Goods – Obligations And Limitations
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15. WHAT DOES A CISG AGREEMENT LOOK LIKE?
Quantity Or Quality Variations Allowed
Reservation Of Title And Passage Of Property Rights
Transfer Of Risk – When And How
Seller’s Warranties And Buyer’s Complaint Process
Assignment Of Rights
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16. WHAT DOES A CISG AGREEMENT LOOK LIKE?
Force Majeure Clause
Require All Amendments In Writing
Choice Of Controlling Language
Choice Of Law
Dispute Resolution Mechanism
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17. Parties PRACTICE TIPS Not Always What They Seem
Make Sure That Signatory Is Party Whose References Were Checked
Make Sure Company Is Not A Shell Without Assets
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18. Subject Matter PRACTICE TIPS
Must Be An Adequate Description Of The Seller’s Tender
NOTE: CISG Does Not Cover Pure Services
HOWEVER: Parties Can Opt In
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19. Seller’s Tender PRACTICE TIPS Don’t Be Verbose
Delivering “Too Good” Can Allow Avoidance
Too Descriptive Can Disrupt Letter Of Credit
“A Ton Does Not Mean About A Ton”
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20. PRACTICE TIPS Pricing Allow For Currency Fluctuations
Public Indexes Often Used
Allow For Delay In Payment
Define WHEN Payment Has Been Made Since Delays In Remittance May Also Be Affected By Fluctuations
Consider Duties And Taxes – Who Pays?
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21. Title PRACTICE TIPS Solely A Function Of National law
Not Addressed In CISG
Seller Should Seek A ROT Clause
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22. Penalty Or Liquidated Damages
PRACTICE TIPS
Penalty Or Liquidated Damages
Penalties Are Not Honored In Many Countries
Liquidated Damages Are More Widely Accepted
Must Be Reasonable; Cannot Be Excessive
Don’t Violate The New York Pig Theory
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23. Force Majeure/ Hardship/
PRACTICE TIPS
Force Majeure/ Hardship/
Excusable Delays
UCC Speaks To “Commercial Impracticability”
CISG Speaks To “Impediments To Performance”
Consider: What If Delivery Is Expected In A War Zone?
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24. POTENTIAL ISSUE
CISG Can Apply Even When Goods Do NOT Cross International Borders
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25. LIMITATION OF CLAIMS Both UCC And CISG Use A Four-Year Standard
UCC Allows Reduction Of Time; CISG Does Not
UCC Speaks To “Action For Breach”
CISG/Limitation Convention Speaks To Any Claim “Arising From A Contract…Or Relating To Its Breach, Termination, Or Invalidity”
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26. STATUTE OF FRAUDS
UCC Sec – Sales Of Goods Over $500 Must Be In Writing
CISG Allows Oral Agreements In Any Amount
Art. 96 Allows Countries To “Reserve” This
Eastern Bloc Countries Did
US Did Not
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27. FIRM OFFERS
UCC Sec Provides That An Offer May Not Be Revoked If Stated At Outset That It Will Remain Open NTE Three Months
CISG Allows Firm Bids If So Stated At Time Of Offer, OR If It Is Reasonable For The Offeree To Rely On The Offer As Being Irrevocable
NOTE: Without A Writing, This May Be Hard To Prove
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28. PAROL EVIDENCE UCC Sec. 2-202 Prohibits Parol Evidence
CISG Encourages It
Article 8(3) “In Determining Intent…Due Consideration Is To Be Given To All Relevant Circumstances…Including The Negotiations, (Course Of Dealing), Usage And Any Subsequent Conduct Of The Parties”
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29. BATTLE OF THE FORMS
Under UCC Principles, A Contract Exists And Consists Of Those Terms That Are Not In Variance With Each Other
Under CISG, No Contract Is Formed And A Counter Offer Is Recognized
1998. "Battle of the Forms" Under the 1980 United Nations Convention on Contracts for the International Sale of Goods: A Comparison with Section UCC and the UNIDROIT Principles, 10 Pace International Law Review (1998)
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30. SOURCES OF LAW Best Web Site: http://www.cisg.law.pace.edu/
Contains Links To Specific Country Sites, Legislative History, Adoption Documents From Various Countries, Native Language Sites, And Case Law In Multiple Languages
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31. EFFECT ON STATE LAW
“The Sales Convention Was Enacted In This Country As A Treaty. Thus, It Became Binding On Each Of Our Fifty States By Action Of The President With The Concurrence Of The Senate … Without The Need For Attention Or Action By The Legislatures Of The States.”
New York Court of Appeals Judge Stewart F. Hancock, Jr.
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32. INTERPRETATION
Intent Is To Have Interpretation Be Autonomous, Without Reference To Any Particular National Legal System
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33. DETAILED COMPARISONS
1980. A Comparison of the Uniform Commercial Code to UNCITRAL's Convention on Contracts for the International Sale of Goods, 6 North Carolina Journal of International Law and Commerce Regulation (1980) 63-80
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34. CONCLUSION CISG Can Replace UCC Rules In Many Transactions
Parties Should Be Careful In Opting In Or Out Of CISG, And Be Equally Careful In Selecting A Proper “Gap-Filler” National Law
Dealings With Parties In Other Countries Can Be Facilitated With CISG
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