The United Nations Convention on Contracts for the International Sale of Goods (CISG)
Introduction:
The United Nations Convention on Contracts for the International Sale of Goods (CISG), sometimes known as the Vienna Convention, is a multilateral treaty that establishes a uniform framework for international commerce. The Convention was prepared by the United Nations Commission on International Trade Law (UNCITRAL) and adopted by a diplomatic conference on 11 April 1980.
Designed to facilitate international trade, the CISG removes legal barriers among state parties (known as "Contracting States") and regulates the duties and obligations of parties to a commercial transaction, such as the delivery of goods, contract formation, and remedies for breach of contract. Unless expressly excluded by the contract, the CISG is by default incorporated into the domestic laws of Contracting States with respect to a transaction of goods between their nationals.
The CISG was drafted by the United Nations Commission on International Trade Law (UNCITRAL) beginning in 1968, drawing from previous efforts undertaken in the 1930s by the International Institute for the Unification of Private Law (UNIDROIT). A draft text was introduced in the 1980 Vienna Diplomatic Conference, and following weeks of negotiation and modification, was unanimously approved and opened for ratification; the CISG subsequently came into force on 1 January 1988, after being ratified by 11 countries.
As of 2020, the Convention has been ratified by 94 countries, which collectively represent a significant proportion of world trade. Consequently, the CISG is considered one of the greatest achievements of UNCITRAL and the " most successful international document & quot; in unified international sales law, as its parties represent "every geographical region, every stage of economic development and every major legal, social and economic system & quot;. Of the uniform law conventions, the CISG has been described as having "the greatest influence on the law of worldwide trans-border commerce", including among non-Contracting States. It is also the basis of the annual Willem C. Vis International Commercial Arbitration Moot, one of the largest and most prominent international moot court competitions in the world.
The Convention is divided into four parts. Part One deals with the scope of application of the Convention and the general provisions. Part Two contains the rules governing the formation of contracts for the international sale of goods. Part Three deals with the substantive rights and obligations of buyer and seller arising from the contract. Part Four contains the final clauses of the Convention concerning such matters as how and when it comes into force, the reservations and declarations that are permitted and the application of the Convention to international sales where both States concerned have the same or similar law on the subject.
Purpose:
The purpose of the CISG is to provide a modern, uniform and fair regime for contracts for the international sale of goods. Thus, the CISG contributes significantly to introducing certainty in commercial exchanges and decreasing transaction costs.
Related Convention:
The key provisions:
The CISG governs contracts for the international sales of goods between private businesses, excluding sales to consumers and sales of services, as well as sales of certain specified types of goods. It applies to contracts for sale of goods between parties whose places of business are in different Contracting States, or when the rules of private international law lead to the application of the law of a Contracting State. It may also apply by virtue of the parties' choice. Certain matters relating to the international sales of goods, for instance, the validity of the contract and the effect of the contract on the property in the goods sold, fall outside the Convention's scope. The second part of the CISG deals with the formation of the contract, which is concluded by the exchange of offer and acceptance. The third part of the CISG deals with the obligations of the parties to the contract. Obligations of the sellers include delivering goods in conformity with the quantity and quality stipulated in the contract, as well as related documents, and transferring the property in the goods. Obligations of the buyer include payment of the price and taking delivery of the goods. In addition, this part provides common rules regarding remedies for breach of the contract. The aggrieved party may require performance, claim damages or avoid the contract in case of fundamental breach. Additional rules regulate passing of risk, anticipatory breach of contract, damages, and exemption from performance of the contract. Finally, while the CISG allows for freedom of form of the contract, States may lodge a declaration requiring the written form.
Part I: Sphere of Application and General Provisions (Articles 1–13)
Part II: Formation of the Contract (Articles 14–24)
Part III: Sale of Goods (Articles 25–88)
Part IV: Final Provisions (Articles 89–101)
Part I: Scope of application and general provisions
?A. Scope of application
The articles on scope of application indicate both what is covered by the Convention and what is not covered. The Convention applies to contracts of sale of goods between parties whose places of business are in different States and either both of those States are Contracting States or the rules of private international law lead to the law of a Contracting State. A few States have availed themselves of the authorization in article 95 to declare that they would apply the Convention only in the former and not in the latter of these two situations. As the Convention becomes more widely adopted, the practical significance of such a declaration will diminish. The Convention contains a list of types of sales that are excluded from the Convention, either because of the purpose of the sale (goods bought for personal, family or household use), the nature of the sale (sale by auction, on execution or otherwise by law) or the nature of the goods (stocks, shares, investmentsecurities, negotiable instruments, money,ships, vessels, hovercraft, aircraft or electricity). In many States some or all of such sales are governed by special rules reflecting their special nature.
B. Party autonomy
The basic principle of contractual freedom in the international sale of goods is recognized by the provision that permits the parties to exclude the application of this Convention or derogate from or vary the effect of any of its provisions. This exclusion will occur, for example, if parties choose the law of a non-contracting State or the substantive domestic law of a contracting State as the law applicable to the contract. Derogation from the Convention will occur whenever a provision in the contract provides a different rule from that found in the Convention.
C. Interpretation of the Convention
?This Convention for the unification of the law governing the international sale of goods will better fulfil its purpose if it is interpreted in a consistent manner in all legal systems. Great care was taken in its preparation to make it as clear and easy to understand as possible. Nevertheless, disputes will arise as to its meaning and application. When this occurs, all parties, including domestic courts and arbitral tribunals, are admonished to observe its international character and to promote uniformity in its application and the observance of good faith in international trade. In particular, when a question concerning a matter governed by this Convention is not expressly settled in it, the question is to be settled in conformity with the general principles on which the Convention is based. Only in the absence of such principles should the matter be settled in conformity with the law applicable by virtue of the rules of private international law.
D. Interpretation of the contract; usages
?The Convention contains provisions on the manner in which statements and conduct of a party are to be interpreted in the context of the formation of the contract or its implementation. Usages agreed to by the parties, practices they have established between themselves and usages of which the parties knew or ought to have known and which are widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned may all be binding on the parties to the contract of sale.
E. Form of the contract
The Convention does not subject the contract of sale to any requirement as to form. In particular, article 11 provides that no written agreement is necessary for the conclusion of the contract. However, if the contract is in writing and it contains a provision requiring any modification or termination by agreement to be in writing, In order to accommodate those States whose legislation requires contracts of sale to be concluded in or evidenced by writing, article 96 entitles those States to declare that neither article 11 not the exception to article 29 applies where any party to the contract has his place of business in that State.
Part II: Formation of the contract
Part Two of the Convention deals with a number of questions that arise in the formation of the contract by the exchange of an offer and an acceptance. When the formation of the contract takes place in this manner, the contract is concluded when the acceptance of the offer becomes effective.The Convention takes a middle position between the doctrine of the revocability of the offer until acceptance and its general irrevocability for some period of time. The general rule is that an offer may be revoked. However, the revocation must reach the offeree before he has dispatched an acceptance. Additional or different terms relating, among other things, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party’s liability to the other or settlement of disputes are considered to alter the terms of the offer materially.
Part III: Sale of goods
A.??Obligations of the seller
The general obligations of the seller are to deliver the goods, hand over any documents relating to them and transfer the property in the goods, as required by the contract and this Convention. The Convention provides supplementary rules for use in the absence of contractual agreement as to when, where and how the seller must perform these obligations.In connection with the seller’s obligations in regard to the quality of the goods, the Convention contains provisions on the buyer’s obligation to inspect the goods. He must give notice of any lack of conformity with the contract within a reasonable time after he has discovered it or ought to have discovered it, and at the latest two years from the date on which the goods were actually handed over to the buyer, unless this time limit is inconsistent with a contractual period of guarantee.
B.???Obligations of the buyer
The general obligations of the buyer are to pay the price for the goods and take delivery of them as required by the contract and the Convention. The Convention provides supplementary rules for use in the absence of contractual agreement as to how the price is to be determined and where and when the buyer should perform his obligations to pay the price.
C.???Remedies for breach of contract
?The remedies of the buyer for breach of contract by the seller are set forth in connection with the obligations of the seller and the remedies of the seller are set forth in connection with the obligations of the buyer. This makes it easier to use and understand the Convention. For example, if the goods do not conform with the contract, the buyer may require the seller to remedy the lack of conformity by repair, unless this is unreasonable having regard to all the circumstances. A party cannot recover damages that he could have mitigated by taking the proper measures. A party may be exempted from paying damages by virtue of an impediment beyond his control.
D.??Passing of risk
?Determining the exact moment when the risk of loss or damage to the goods passes from the seller to the buyer is of great importance in contracts for the international sale of goods. Parties may regulate the issue in their contract either by an express provision or by the use of a trade term such as, for example, an INCOTERM. The effect of the choice of such a term. would be to amend the corresponding provisions of the CISG accordingly. However, for the frequent case where the contract does not contain such a provision, the Convention sets forth a complete set of rules. The two special situations contemplated by the Convention are when the contract of sale involves carriage of the goods and when the goods are sold while in transit.
A.??Exemption from liability to pay damages
When a party fails to perform any of his obligations due to an impediment beyond his control that he could not reasonably have been expected to take into account at the time of the conclusion of the contract and that he could not have avoided or overcome, he is exempted from the consequences of his failure to perform, including the payment of damages. This exemption may also apply if the failure is due to the failure of a third person whom he has engaged to perform the whole or a part of the contract. However, he is subject to any other remedy, including reduction of the price, if the goods were defective in some way
B.???Preservation of the goods
The Convention imposes on both parties the duty to preserve any goods in their possession belonging to the other party. Such a duty is of even greater importance in an international sale of goods where the other party is from a foreign country and may not have agents in the country where the goods are located. Under certain circumstances the party in possession of the goods may sell them, or may even be required to sell them. A party selling the goods has the right to retain out of the proceeds of sale an amount equal to the reasonable expenses of preserving the goods and of selling them and must account to the other party for the balance.
Part IV: Final clauses
The final clauses contain the usual provisions relating to the SecretaryGeneral as depositary and providing that the Convention is subject to ratification, acceptance or approval by those States that signed it by 30 September 1981, that it is open to accession by all States that are not signatory States and that the text is equally authentic in Arabic, Chinese, English, French, Russian and Spanish.
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The Convention permits a certain number of declarations. Those relative to scope of application and the requirement as to a written contract have been mentioned above. There is a special declaration for States that have different systems of law governing contracts of sale in different parts of their territory. Finally, a State may declare that it will not be bound by Part II on formation of contracts or Part III on the rights and obligations of the buyer and seller. This latter declaration was included as part of the decision to combine into one convention the subject matter of the two 1964 Hague Conventions.
Application of CISG:
Q-1. What are the four elements an agreement must contain in order to be a valid contract?
Answer: Offer, Acceptance, Consideration, Legality.
Q-2. Does UCC and CISG require that contracts are written?
Answer: Under the UCC, a contract for the sale for goods must be in writing to be enforceable in the US courts. ... Unlike contracts governed by the UCC, a contract of sale under the CISG need not to be in writing, and is not subject to any form requirements.
Q-3. Performance (Duties) of Seller Conforming Goods?
Answer: The seller has four duties:
(1) To deliver the goods to a carrier;
(2) To deliver the goods with a reasonable contract for their transportation;
?(3) To deliver them with proper documentation for the buyer; and
?(4) To promptly notify the buyer.
Q-4. What are the two ways to make a warranty?
Answer: 1. Express warranty?2. Implied warranty.
The CISG (Article 35) provides, “The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract. [And the] goods must possess the qualities of goods which the seller has held out to the buyer as a sample or model.”
Q-5. What is the purpose of remedies for the breach of a contract? What are the three types of remedies for the breach of a contact?
Answer: Remedies are intended to make the nonbreaching party whole. The two categories of remedies for breach of contract are legal and equitable. In the legal category are damages; in the equitable category are specific performance, injunctions, and restitution.
Q-6. What are the two types of damages for relief for a breach of contract?
Answer: Generally, there are two types of damages that can be awarded in a breach of contract case: compensatory damages, sometimes called actual damages, and consequential damages, sometimes called special damages.
Q-7. What are the two types of money damages?
Answer: There are two types of compensatory damages—general and actual. Actual damages are intended to provide funds to only replace what was lost.
Q-8. What are the two excuses for non-performance?
Answer: Excuses for Non-performance: Duress, Unconscionability, Mistake, Misrepresentation, Frustration, and Discharge for Breach.
ACTION AND MEASURES
United Nations and United Nations Emergency Force operations in Congo and Middle East respectively gave birth to dispute concerning the finance under Article 17(2) of the Charter of the United Nations. The International Court of Justice (1962) considered that the special powers of General Assembly in no way derogate from its general powers but in case of the need of a necessary action, the General Assembly has to refer the matter to the Security Council as Security Council is the enforcing body of the United Nations and is not under any limitation of restrictive discretion under Article 43 and that is the appropriate hierarchy for the action and measures.The court reached the decision, by a majority of nine votes to five, that such expenditures were in fact expenses within Article 17(2).
RIGHTS OVER THE NATURAL RESOURCES
The resolution of General Assembly on Permanent Sovereignty over Natural Resources (1962) recognized the right of the nation or state over the natural wealth and resources of the concerned state. It also is important that the sovereignty over the natural resources must be exercised for the welfare of the people of the same state. The state also has the right to explore and trade their natural resources in conformity with the domestic and international laws. The charter also permits the states to enter into agreement over the investment for natural resources among the states in good faith. This approach has been highly appreciated globally as the bottom line of the charter is to enable states to move ahead to development by utilizing the natural resources within their own territory.
Relation to private international law and existing domestic law
The CISG applies only to international transactions and avoids the recourse to rules of private international law for those contracts falling under its scope of application. International contracts falling outside the scope of application of the CISG, as well as contracts subject to a valid choice of other law, would not be affected by the CISG. Purely domestic sale contracts are not affected by the CISG and remain regulated by domestic law.
PERSUASIVE NATURE OF CASE LAWS
The CISG has been criticized for its persuasive nature of case laws. The decisions made by the courts under the CISG are not highly entertained in foreign courts; therefore, they do have a persuasive nature, (Enderson, Mazotta, Zeller, 2010). The aforesaid criticism is correct but is not enough to denounce the value of CISG. CISG has played an important role to uniform the international sales law and has proven itself to resolve the conflicts as it provides a medium of legislation to rely upon. With the passage of times, as the number of cases decided would increase, the rules extracted from those decisions would interpret the convention much better and the decisions would get rid of their persuasive nature. Though, the fact can not be ignored that CISG is criticized for its lack of neutrality.
CRITICISM UPON CISG
Despite of the appreciation won by CISG, it also has faced criticism on various grounds out which interpretation, lack of neutrality and incompleteness of CISG are highly focused. These criticisms can be observed through various angles.
As far as the interpretation of the convention is concerned, CISG lacks definition of various terms used in the text of the articles of the convention. Furthermore, some vague terms such as “reasonable” have been used which removes the certainty of the interpretation of the convention. Thus, the job of interpretation of various issues of the conventions lies with the intention and will of the parties at time of conclusion of the parties or the courts in case of conflict between the parties.
Criticism upon CISG concerning the lack of neutrality is a two-fold criticism as the developing countries call it to be seller friendly and the rest, especially German practitioners, call it to be buyer friendly. The outcome of both of side of the criticism under discussion may regard CISG to be fair as this criticism depends upon the part of the convention favouring the party and part of the convention not in favour of the party concerned.
CISG is also criticized for being incomplete as it is not certain upon various issues and also does not cover the complete matters regarding the international sales law. In addition, rather than laying certain rules, CISG has left upon a major number of matters with the parties to decide for which CISG is referred as an incomplete code, (Schwenzer, Hachem, 2009).
CONCLUSION
An empty space prevailed over the international sales law for a long period of time which had been tried to fill various times. Many efforts were made at the international level concerning international sales law, which were well paid by the adoption of the United Nations Convention on contracts for International Sale of Goods (1980). CISG holds a great value in respect of international sales law because of which 76 states have ratified CISG. CISG mainly covers the international sphere of the sales law but also has been applied in many, of the domestic law, of the states which have ratified CISG. By the fact that ratifying states regard CISG for the international transactions and many of the ratifying states have formulated their domestic sales law on the basis of CISG, therefore, it has influenced, up to a reasonable extent, the international sales law, as well as the domestic sales law. Though, there are many reservations over CISG by many of the states because of their self interests but in general it has been appreciated. Hence, CISG is a success in an endeavour towards the unification of sales law on an international level.
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