1. HAAGA-HELIA University of Applied Sciences
INTERNATIONAL SALES CONTRACTS Based on the United Nations Convention on Contracts for the International Sale of Goods 1980, CISG
Satu Pitkänen
HAAGA-HELIA University of Applied Sciences
Helsinki, Finland
2012

2. CISG Parts: 1. Sphere of application and general provisions
2. Formation of a contract
3. Sale of goods
4. Final provisions

3. CISG: Part 1
SCOPE AND
INTERPRETATION

4. United Nations Convention on Contracts for the International Sale of Goods CISG
Is applied
to Business contracts of international sale of goods
if both parties’ places of business are in the CISG contracting states
Can be opted in or out by the parties

5. transaction (each party’s
SCOPE OF CISG
Is it an International
transaction (each party’s
place of business is in
a different country)?
YES
YES
YES
Have both
countries
ratified
the CISG?
Is the
contract a
sale of
goods
transaction?
Is it a
commercial
(merchant-
to-merchant)
transaction?
Did the
parties
opt-out of
the CISG
in a choice
of law
clause? NO
YES
CISG
governs
YES
Domestic
law
governs
Modified from:
Richards, E
Law for global Business.
Irwin, USA

6. transaction (each party’s
SCOPE OF CISG
Is it an International
transaction (each party’s
place of business is in
a different country)?
YES
YES
YES
Have both
countries
ratified
the CISG?
Is the
contract a
sale of
goods
transaction?
Is it a
commercial
(merchant-
to-merchant)
transaction?
Did the
parties
opt-out of
the CISG
in a choice
of law
clause? NO
YES NO
Has the
country with
the closest
connection to
the contract
ratified
the CISG?
CISG
governs
YES
Domestic
law
governs NO
YES
Does the
ratifying country
exclude the
CISG coverage
unless both
countries
have ratified?
Modified from:
Richards, E
Law for global Business.
Irwin, USA

7. transaction (each party’s
SCOPE OF CISG
Is it an International
transaction (each party’s
place of business is in
a different country)?
YES NO
YES
YES
Have both
countries
ratified
the CISG?
Is the
contract a
sale of
goods
transaction?
Is it a
commercial
(merchant-
to-merchant)
transaction?
Did the
parties
opt-out of
the CISG
in a choice
of law
clause? NO
YES NO
Has the
country with
the closest
connection to
the contract
ratified
the CISG? NO NO
CISG
governs
YES
Domestic
law
governs NO NO
YES
Does the
ratifying country
exclude the
CISG coverage
unless both
countries
have ratified?
YES
Modified from:
Richards, E
Law for global Business.
Irwin, USA
Did the parties opt-in
to the CISG in a
choice of law clause?
YES

8. 78 STATES HAVE ADOPTED THE CISG
Albania, Argentina, Armenia, Australia, Austria,
Belarus, Belgium, Benin, Bosnia-Herzegovina, Bulgaria, Burundi,
Canada, Chile, China (PRC), Colombia, Croatia, Cuba, Cyprus, Czech Rep.
Denmark, Dominican Republic, Ecuador, Egypt, El Salvador, Estonia,
Finland, France, Gabon, Georgia, Germany, Greece, Guinea,
Honduras, Hungary, Iceland, Iraq, Israel, Italy,
Japan, South Korea, Kyrgystan,
Latvia, Lebanon, Lesotho, Liberia, Lithuania, Luxembourg, 
Macedonia,  Mauritania, Mexico, Moldova, Mongolia, Montenegro,
Netherlands, New Zealand, Norway,
Paraguay, Peru, Poland, Romania, Russian Federation,
San Marino (2013), Saint Vincent Grenadines, Serbia, Singapore, Slovakia, Slovenia, Spain, Sweden, Switzerland,  Syria,
Turkey, Uganda, Ukraine, United States, Uruguay, Uzbekistan,  Zambia
(UNCITRAL,16 March 2012

10. ISSUES NOT COVERED IN CISG
Mixed sales
Transactions where the buyer supplies a substantial part of the material
Validity of the contract
Property in the goods sold
Seller’s liability for injury caused by the goods
Form of the contract

11. CISG DOES NOT APPLY
To sales of goods bought for personal, family or household use unless the seller neither knew nor ought to have known that the goods were bought for such use
To sales by auction
On execution or otherwise by authority of law
Sales of stocks, shares, investment securities, negotiable instruments or money
Sales of ships, vessels, hovercraft or aircraft
Sales of electricity

12. INTERPRETING CISG International character of the convention
aim at uniformity
Plain meaning of the language in the CISG
=> the legislative history must not be taken into consideration
General principles
E.g. the parties’ duty to communicate, duty to mitigate damages
Rules of Private International Law

13. HOW TO INTERPRET A CONTRACT
CISG
1. SUBJECTIVE INTENT OF A PARTY
”Meeting of minds”
Applied if the other party knew or could not have been unaware of the intent
2. OBJECTIVE INTENT
”The understanding that a reasonable person of the same kind as the other party would have had in the same circumstances”
All relevant circumstances of the case
Practices the parties have established between themselves
Usages widely known and regularly observed in international trade
Subsequent conduct of the parties

14. CISG: Part 2
CONTRACTS

15. When does a contract exist?
Offer +
Acceptance =
Contract

16. MIRROR IMAGE CONTRACT Formation of a CISG contract: Intent to be bound
11/17/2018
Intent to be
bound
OFFER
Definite terms
Communication to one or
more specific persons
CONTRACT
Communication from party
to whom offer was intended
ACCEPTANCE
Same terms
Intent to be bound to same
obligation as offeror
Source: Erick L. Rchards. Law for Global Business
HELIA / Satu Pitkänen

17. ACCEPTANCE WITH MODIFICATIONS
Modified acceptance is generally considered as a rejection of the offer
=> it constitutes a counter offer
Unless
the modifications are nonmaterial
=> they become part of the contract unless the offeror promptly notifies

18. Specifically addressed Addressed to the offeror
Definite terms
Specifically addressed
Intent to be bound 1 3 2
ACCEPTANCE
Addressed to the offeror
Same terms
On time
ACCEPTANCE
Modified
Late
REFUSAL
COUNTER
OFFER
NEW OFFER
CONTRACT
OFFER
LAPSES

19. LATE ACCEPTANCE Delayed acceptance constitutes a new offer unless
1. The offeror approves the acceptance and informs about his approval Or
2. The delay is due to abnormal transmission and the offeror does not notify

20. CASE
Buyer: ”Ship me 100 widgets on 16 March at the latest”
-> Seller ships on 14 March
-> Buyer phones and cancels on 15 March
Is there a contract?

21. IMPLIED ACCEPTANCE
If the offer, usage, or past dealings between the offeror and the offeree so indicate, then an act performed by the offeree shall be construed as an acceptance
Silence or inactivity does not amount to acceptance

22. CASE
Cortez, in a letter, offered to sell sugar to Wyatt at a fixed price. However, soon the market price of sugar began to rise.
Cortez wanted to cancel his offer. Can he do it?

23. Timeliness and CISG Contract Formation OFFER
effective
ACCEPTANCE
DISPATCHED
OFFER DISPATCHED
OFFER RECEIVED
Offeror may revoke
unless the offer was
irrevocable
Offeror may
revoke
Irrevocable offer
becomes binding
Offer becomes
binding
Modified from: Richards, E Law for global Business. Irwin, USA

24. CASE
Cortez, in a letter offered to sell sugar to Wyatt at a fixed price. After Wyatt mailed an acceptance the market price for sugar began to fall.
Wyatt immediately contracted to buy the sugar at a lower price from another supplier and telegraphed a rejection to Cortez.
Was the revocation acceptable?

25. Timeliness and CISG Contract Formation ACCEPTANCE
11/17/2018
Timeliness and CISG Contract Formation ACCEPTANCE
Contract is
concluded
OFFER
RECEIVED
ACCEPTANCE
RECEIVED
ACCEPTANCE
DISPATCHED
Offeror may revoke unless
the offer was irrevocable
Offeree may reject,
offeror may not revoke
Acceptance
becomes binding
Offer
becomes binding
Irrevocable offer
becomes binding
Modified from: Richards, E Law for global Business. Irwin, USA
HELIA / Satu Pitkänen

26. CISG: Part 3
TRADE

27. INTERNATIONAL TRADE
€€€
BUYER
SELLER

28. TRADE CONTRACT Ms.Seller Mr.Buyer MAIN DUTIES: Delivery of conforming
goods
Delivery
on time
Payment
INFRINGEMENTS:
Defect
Delay
Delay
REMEDIES?

29. SELLER’S OBLIGATIONS (Art. 30-35)
Deliver the goods
CONFORMING WITH
THE CONTRACT
Deliver the goods
In the right PLACE
On the right TIME
Hand over
the documents
Transfer the property
in the goods
Goods must conform with the contract as to their
quantity,
quality and
the way they are packaged
Otherwise the goods are DEFECTIVE
Otherwise the delivery is DELAYED

30. PLACE FOR DELIVERY As agreed or
The place where the parties knew the goods were located to be manufactured or produced
The first carrier’s place of business

31. TIME FOR DELIVERY As agreed or
Within reasonable time from the date of the agreement

32. TO CONFORM WITH THE CONTRACT THE GOODS (Art. 35)
are fit for the purpose for which such goods are ordinarily used or
are fit for any particular purpose expressly or impliedly made known to the seller
possess the qualities of goods which the seller has held out as a sample or model
are contained or packaged in the same manner that is usual for such goods, Or in a manner adequate to preserve and protect the goods
except where the parties have agreed otherwise

33. CONFORMING WITH THE CONTRACT – CRUCIAL MOMENT (Art. 36)
Seller is liable for any lack of conformity which exists at the time when the risk passes to the buyer, even though the lack of conformity becomes apparent only after that time
The parties may allocate risk of loss among themselves by agreement

35. PASSING OF RISK (Art. 67)
1) Goods delivered without being transported:
The risk of loss passes to the buyer when the goods are handed over by the seller or otherwise put at the buyer’s disposal
2) Goods transported by carrier:
Risk of loss passes to the buyer when the goods are handed over to the first carrier for transmission in accordance with the contract
(Shipment contracts)

36. CONTRACTS ON PASSING OF THE RISK (Art.68, 69)
Transshipment contracts
When the seller is to deliver the goods to a carrier at a named place, the risk of loss passes to the buyer when the goods are handed over to the carrier at that place
In-transit contracts
Risk of loss passes at the time of the conclusion of the contract, unless the seller knew the goods were damaged or lost
Destination contracts
Risk of loss passes to the buyer when the goods are handed over or placed at his disposal at the named place of destination
Nevertheless, the risk of loss does not pass until the goods are clearly identified to the contract

37. WHEN RECEIVING THE DELIVERY BUYER HAS TO (Art. 38, 39)
Examine the goods as soon as is practicable after delivery
Give notice of defect to the seller within a reasonable time
Give notice of a claim within a reasonable time
The seller will not be responsible for a defect that arises more than 2 years after delivery, unless
he was not in good faith or
the contract establishes a longer period of guarantee

38. BUYER’S REMEDIES In case of the seller’s breach of contract (Art
Reduce the price
in the same proportion
as the lack
of conformity
Refuse early delivery or
excess quantities
Buyer
can
Avoid the contract
for fundamental
breach
Require for
specific performance:
Repairs or
Substitute goods
+ claim damages

39. AVOIDANCE (Art. 49) Only the obligation to perform is affected
Does not cancel any other provision in the contract
Declaration of avoidance must be made by notice to the other party
Buyer may avoid the contract if either
The seller commits a fundamental breach or
The buyer gives the seller a Nachfrist notice and the seller rejects it
or does not perform within the period it specifies

40. FUNDAMENTAL BREACH (Art. 25)
Results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract
unless
The party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result

41. Nachfrist notice (Art. 47)
= fixing of an additional period of time of reasonable length for performance by the seller of his obligations
The period must be definite
The obligation to perform within that period must be clear
Once the period has run, or once the fundamental breach becomes clear, the buyer has a reasonable time in which to avoid the contract
During the Nachfrist period, the seller is entitled to correct the nonconformity at his own expense

42. DAMAGES (Art )
A breaching party is liable for any foreseeable damages
a loss of profit
the difference between contract price and the price received in the substitute transaction
The party claiming damages must take reasonable measures to mitigate the loss

43. BUYER’S OBLIGATIONS (Art. 53-60)
PAY
the price for goods
TAKE DELIVERY
of goods
TIME AND PLACE OF PAYMENT
As required by the contract or
At delivery
However, not until buyer has had a chance to examine the goods
Otherwise the payment is DELAYED
TAKING DELIVERY means:
Duty to co-operate
Duty to take over the goods
If buyer fails to take delivery he will be responsible for any resulting costs and assumes the risk for any damage to the goods after that time

44. SELLER'S REMEDIES (Art. 61-65)
The seller has the right to recover damages
and
1) Compel specific performance
Require the buyer to take delivery and pay contract price
Perform any other obligation required by the contract
2) Avoid the contract
If there has been a fundamental breach or following a Nachfrist notice
3) Obtain missing specifications

45. REMEDIES AVAILABLE TO BOTH BUYER AND SELLER
Suspension of performance (Art. 71)
serious deficiency in the other party’s ability to perform or his creditworthiness
the seller may prevent the handing over of the goods to the buyer
the suspending party must give notice of the suspension
Anticipatory avoidance (Art. 72)
The other party will obviously infringe the contract
Avoidance of installment contracts (Art. 73)
if there is a fundamental breach with respect to one installment and
if there are good grounds to believe that a fundamental breach of later installments will occur
=> those installments may be anticipatorily avoided
if the installments are interdependent = a fundamental breach of one installment will allow avoidance of all of them

46. PRESERVATION OF THE GOODS (Art. 77)
If buyer is in delay and therefore seller may retain the goods or
If buyer has received the goods but is entitled to reject them
=> The parties have a duty to mitigate the losses of the other party
Deposit the goods in a warehouse
Take reasonable measures to sell the goods
=> Right to be reimbursed the reasonable expenses

47. EXCUSES FOR NONPERFORMANCE Force Majeure (Art. 79)
A party is not liable for any damages resulting from his failure to perform if he can show that
The failure was beyond his control
The impediment was unforeseeable and
He remains unable to overcome the impediment
Impossibility
An unforeseeable event arisen after the formation of the contract
Makes performance objectively impossible
Commercial Impracticability
Unforeseeable events make performance
Highly impracticable or
Unreasonably expensive
Frustration of Purpose
Performance becomes worthless to the promisor

48. Prevention (Art. 80)
A party may not rely on a failure of the other party to perform, to the extent that such failure was caused by the first party’s act or omission
=> “Dirty hands”

49. INCOTERMS 2010

50. RISK PASSING INCOTERMS 2010 EXW EXW FCA FAS FOB CFR CIF CPT CIP DAP
Ex Works
EXW
FCA
Free Carrier
FAS
Free Alongside Ship
FOB
Free On Board
CFR
Cost and Freight
CIF
Cost, insurance and Freight
CPT
Carriage Paid To
CIP
Carriage & Insurance Paid to
DAP
Delivered At Place
DAT
Delivered At Terminal
DDP
Delivered Duty Paid
SELLER’S RISK
RISK PASSING
BUYER’S RISK

51. EXW FOB CIF (Ex Works… named place)
The seller delivers when he places the goods at the disposal of the buyer at the seller’s premises or another named place, not cleared for export and not loaded on any collecting vehicle
The buyer has to bear all costs and risks involved in taking the goods from the seller’s premises
FOB
(Free On Board … named port of shipment)
The seller has to clear the goods for export
The seller delivers when the goods are placed on board the vessel nominated by the buyer at the named port of shipment
The buyer has to bear all costs and risks of loss of or damage to the goods from that point
CIF
(Cost, Insurance and Freight…named port of destination)
The seller delivers when the goods are placed on board the vessel in the port of shipment
The risk of loss or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer
The seller must pay the costs and freight necessary to bring the goods to the named port of destination
The seller has to procure marine insurance against the buyer’s risk of loss of or damage to the goods during the carriage