1. INTERPRETATION of International Business Contracts
2/27/2019
INTERPRETATION of International Business Contracts
HELIA / Satu Pitkänen

2. INTERNATIONAL CONTRACTS: SOURCES OF LAW
International treaties and conventions
United Nations Convention on Contracts for the International Sale of Goods, CISG
National laws
Civil law group
Common law group
Common trade practices
27/02/2019
HELIA / Satu Pitkänen

3. 1. Sphere of application and general provisions
United Nations Convention on Contracts for the International Sale of Goods, CISG
PARTS:
1. Sphere of application and general provisions
2. Formation of a contract
3. Sale of goods
4. Final provisions
27/02/2019
HELIA / Satu Pitkänen

4. Contract is enforceable as agreed “Pacta sunt servanda”
2/27/2019
Contract is enforceable as agreed “Pacta sunt servanda”
Letter of intent => NOT a contract
Consideration doctrine => unilateral acts are NOT binding
27/02/2019
HELIA / Satu Pitkänen
HELIA / Satu Pitkänen

5. INTERNATIONAL CONTRACT
Whereas Recitals (Preamble)
General conditions of the contract
Definition of the concepts
List of the relevant previously made agreements etc.
Details of the agreement
Merchandise, price, terms of delivery, terms of payment etc.
Settlement of disputes
Choice of law
Choice of forum
Dispute resolution
Signatories

6. DOCUMENTS OF THE CONTRACT
2/27/2019
DOCUMENTS OF THE CONTRACT
CISG
GENERAL TRADE PRACTICES NO
PROVISIONS
CONTRADICTIONS
Recent documents override older ones
Written text overrides printed text
STANDARD CONTRACT TERMS
Must be explicitly incorporated into the contract
Interpreted to the detriment of the composer
“Battle of Forms”
27/02/2019
HELIA / Satu Pitkänen
HELIA / Satu Pitkänen

7. FORM OF THE CONTRACT CISG COMMON LAW ENTIRE AGREEMENT
2/27/2019
FORM OF THE CONTRACT
CISG
COMMON LAW NO
REQUIREMENTS
REGARDING
THE FORM
ENTIRE AGREEMENT
= Only what is stated in the written contract can be referred to
=> Oral changes to a written contract are invalid
=> It is important to make sure that all issues significant to the transaction are expressly written into the contract
SUBJECTIVE APPROACH
- rejected completely by some common law countries => ”The law has nothing to do with the actual state of the parties’ minds. In contract, as elsewhere, it must go by the externals, and judge parties by their conduct”
CISG and many civil law countries accept it
27/02/2019
HELIA / Satu Pitkänen
HELIA / Satu Pitkänen

8. INTERPRETATION DIFFERENCES
2/27/2019
INTERPRETATION DIFFERENCES
CISG
COMMON LAW
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”
OBJECTIVE INTERPRETATION
Interpretation must go by the externals
=>
the conduct of the parties
SUBJECTIVE APPROACH
- rejected completely by some common law countries => ”The law has nothing to do with the actual state of the parties’ minds. In contract, as elsewhere, it must go by the externals, and judge parties by their conduct”
CISG and many civil law countries accept it
27/02/2019
HELIA / Satu Pitkänen
HELIA / Satu Pitkänen

9. INTERPRETATION DIFFERENCES (cont.)
2/27/2019
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”
SUBJECTIVE APPROACH
- rejected completely by some common law countries => ”The law has nothing to do with the actual state of the parties’ minds. In contract, as elsewhere, it must go by the externals, and judge parties by their conduct”
CISG and many civil law countries accept it
All relevant circumstances of the case
Practices and usages
the parties have established between themselves or
widely known and regularly observed in international trade
27/02/2019
HELIA / Satu Pitkänen
HELIA / Satu Pitkänen

10. ADJUSTMENT AND INVALIDATION OF CONTRACTS
2/27/2019
ADJUSTMENT AND INVALIDATION OF CONTRACTS
CISG
COMMON
LAW
CIVIL LAW
No provisions on grounds for invalidity
=>
Subject to
national laws
Principle of Caveat emptor
=>
Strict position on mistakes
Principle of fairness
=>
Disproportionate contracts can be adjusted
27/02/2019
HELIA / Satu Pitkänen
HELIA / Satu Pitkänen

11. CASE: Art Dealers Two art dealers are doing business.
Mr. X is selling a painting he knows is a copy of Picasso. Mr. Y thinks the painting is an original Picasso and wants to buy it at a huge price. The deal is done.
Later, Mr. Y wants to cancel the deal after learning that the painting only was a copy.
27/02/2019
HELIA / Satu Pitkänen

12. In Finland: Y was mistaken
=> if X knew about it he was not in good faith
=> Y can contest the contract on basis of invalidity because of his error
27/02/2019
HELIA / Satu Pitkänen

13. In Britain: 1) Traditional approach
Caveat emptor = let the buyer beware
=> a buyer has the obligation to investigate the merchandise before he agrees to buy
- any misunderstanding on his part will be assessed against him
2) Modern approach:
Contracts imply a duty of good faith on the part of both parties
=> the burden should be levied against the party with the superior knowledge who could have corrected the mistake but did not
27/02/2019
HELIA / Satu Pitkänen