” “ International Trade Law CISG 1980(Lecture 3) Prof.ssa M.E. de Leeuw, Ph.D., Dr., Università di Ferrara

” “ Source: WTO

” “ The Vienna Convention on the International sale of goods 1980 (CISG)  When? Into force since 1988; 83 countries are party to the Convention, among which China and USA (UK has not ratified for number of reasons).  What? CISG provides for a single set of rules in respect of international sale of goods- excluded certain aspects of a sale.  Why? Harmonisation would enhance predictability and legal certainty for traders. Uncertainty about applicable domestic law (which varies among states) leads to uncertainty about duties/obligation of parties. UNICITRAL

” “ Characteristics of CISG  Not based on any specific national legal system. Compromise acceptable to all regardless of eco/legal background;  Avoid legal jargon, use of normal language to enhance accessibility;  Source of inspiration for what can be deemed as international acknowledged principles in the field of commercial law, often referred as lex mercatoria;  Influenced various domestic sales laws and international (regional) laws/instruments, such as UNIDROIT and PECL, the EU directive on aspects of sales of consumer goods, Draft common frame of reference (european civil code)…  Cisg applies more often through applicable national law of a country that has ratified the CISG than by use of choice of law clause.

” “ Scope of application (I) Scope (Article 1):  The Convention applies to a sale if the parties have their place of business in different states (which constitutes hence an “international” sale);  and either both of those states are Contracting states or the rules of PIL lead to the law of a Contracting state; and,  Both parties know that they have places of business in different states (art. 1(2)); Outside Scope (Art. 2):  For purpose of the sale (goods bought for personal, family and household use), the nature of the sale (sale by auction, on execution or otherwise by law), the nature of the goods (stocks, shares, investment securities, negotiable instruments, money, ships, vessels and hovercraft or aircraft, electricity).  (in general procedural law is outside its scope)

” “ Scope of application (II)  The Convention is concerned with the formation of the contract and the rights and duties of the buyer and seller arising from such a contract (art. 4).  Subjects excluded are the validity of the contract, the effects the contract may have on the property in the goods sold, liability of the seller for death or personal injury caused by the goods to any person (art. 4,5).

” “ Party autonomy Opt-out (art. 6):  International private law of most (developed) states recognise the principle of party autonomy in international commercial transactions: choice of law.  The party may exclude the application of the Convention entirely, or derogate from or variate any of its provisions.  Exclusion can be done explicitly or with the choice of law clause (e.g. apply English law, not a party to CISG), or agreeing terms that contradict the Convention.  Case: party chooses the law of a country which is a party to the Convention: Is the contract subject to the Vienna Convention or domestic law? Predominant view in literature, reference to national law of (contracting) country includes the Vienna Convention. (refer exclusively to domestic law without Convention)

” “ Interpretation of Contract and Convention Contract (art. 9):  Trade usage may be binding on the parties: Usage agreed on by parties, practices they have established between themselves, and usages of which the parties knew or ought to have known of the usage, that the usage is widely known in international trade, and that the usage is regularly observed. Trade usage does not include “custom”. Convention (art. 7):  Interpretation: “In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade”.  Problem: reluctance by courts to refer to opinions from other jurisdictions (case law in databases), interpret from their domestic legal background.

” “ How can autonomous construction be achieved?  Court be aware that when it is constructing a provision of uniform law, he is performing an international function (it should assume the attitude of a supranational court); 1. This attitude means that the uniform instruments should be construed according to the wording (textual), intention (teleological) and background (history), whereby the system of the instrument should be taken into account.  No priority between different methods. 2. No solution  courts should consider foreign cases. Courts should follow the prevailing point of view in foreign cases. 3. National construction (ultimate remedy)

” “ Formation of contract (I) Part II (art )  No formal requirement of form of contract (art. 11), except when Contracting Party has made art. 96 reservation (mandatory, party not opt- out);  A proposal constitutes an offer when (art. 14(1): 1. it is addressed to a specific person(s); 2. is sufficiently definite (it must indicate the goods and fix the quantity and price explicitly or implicitly); and, 3. indicates the intention on the offeror’s part to be bound in the event of acceptance.  Offer becomes effective upon receipt.

” “ )  General rule: revocable  Offer may be revoked, but the revocation has to reach the offeree before he has dispatched an acceptance (art. 16.1);  Irrevocable:  An offer cannot be revoked if it indicates that it is irrevocable, for example by stating a fixed time for acceptance or otherwise (art. 16.2(a)).  An offer cannot be revoked either when it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer (art. 16.2(b)).  Acceptance:  Assent or action required (art. 18(2)-(3)). Acceptance can be withdrawn (art. 22)  Counter-offer  Rule of materially or not materially alterations (art. 19);  Materially alterations are listed in art. 19(3) (inexhaustive list)

” “ Obligations of the seller Art:  Deliver the goods, hand over the documents and transfer property in the goods as required by the contract and this Convention (art. 30);  In other words, the seller must deliver the’ right’ goods, at the ‘right’ place, at the ‘right’ time.  Convention has gap-filling role (provides default rules when there is a contractual gap in agreement)

” “ Obligations of the seller Art: Deliver the goods and hand over the documents as required by the contract or in this Convention (art ); 2. Deliver the goods which are of the quantity, quality and description required by the contract and which are contained/packaged in the manner required by the contract (art. 35). 3. Deliver them without any right or claim of a third party (art. 41/42).

” “ Delivery/handing over documents (art.31-34) 1. Art. 31: Deliver the goods at the place mentioned in the sales contract, if not mentioned, art. 31 indicates delivery places. 2. Art. 32: How delivery must be done. 3. Art. 33: When delivery must be done. 4. Art. 34: Hand over the documents as stipulated in the sales contract: e.g. certificates of origin or quality, transport documents (e.g Bill of Lading), documents required for custom clearance. 5. Transfer property in the goods as required by the contract. Transfer of property is outside scope Convention  determined by (domestic) law applicable to the contract.

” “ Liability of the seller  The seller is liable for the lack of conformity, except when the buyer knew about it (art. 35/36).The seller may however remedy any deficiencies regarding quantity and quality of the goods till the date of delivery (art. 37);  The buyer needs to inspect the goods and give notice (within reasonable time) of any lack of non conformity (art. 38/39).

” “ Obligations of the buyer Art The buyer must pay the price and take delivery of the goods as required by the contract (art. 53).  If no price is concluded in the contract, or place and date of payment, the Convention provides supplementary rules on how to calculate the price, and where and when the payment needs to be made (art ).  The buyer is not bound to pay the price until he has had an opportunity to examine the goods (art. 58(3)).

” “ Liability for loss and damage- Passing of risk  “Loss or damage to the goods after the risk has passed to the buyer does not discharge him from his obligations to pay the price, unless the loss or damage is due to an act or omission of the seller.” (art. 66)  When does the risk pass to the buyer?  Determined in terms contract or by insertion trade terms (e.g. Incoterms) which are applicable on the basis of art. 9 (1);  If not, Convention applies:  Art. 67: when goods are handed over to the first carrier (or at particular place);  Art. 68: sale during transit, risk will pass when contract is concluded;  Art. 69: if not art. 67/68 then risk passes when goods are taken over by the buyer (general rule).