1. Interpreting International Business Contracts Satu Pitkänen 2015

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

3. 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

4. Contract is enforceable as agreed “Pacta sunt servanda”
Letter of intent => NOT a contract
Consideration doctrine => unilateral acts are NOT binding

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

6. 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”

7. FORM OF THE CONTRACT CISG COMMON LAWNO
REQUIREMENTS
REGARDING
THE FORM
ENTIRE AGREEMENT (”Parol Evidence Rule”)
= 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

8. HOW TO INTERPRET A CONTRACT
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
All relevant circumstances of the case
Practices and usages
the parties have established between themselves or
widely known and regularly observed in international trade

9. ADJUSTMENT AND INVALIDATION OF CONTRACTS
CISG
COMMON
LAW
CIVIL LAW
Provisions on grounds for invalidity
E.g. in Finland a contract may be invalidated on basis of disproportionality, error etc. if the other party was aware of it
No provisions on grounds for invalidity
=>
Subject to
national laws
Principle of Caveat emptor “let the buyer beware”
=>
Strict position on mistakes
Provisions on grounds for invalidity