CISG

1
CISG

• History
• General part
• Articles 1-13
• Matjaz Tratnik

2
Cicero

• "Non erit alia lex Romae, alia Athenis, alia
  nunc, alia posthac, sed et apud omnes gentes, et
  omni tempore, una eademque lex obtinebit.

3
Major legal systems

• French law (Cc, CdC)
• German law (BGB, HGB)
• Carl Friedrich von Savigny
• English law (SGA 1893, 1979, 1994, 1995)
• Common law and Equity
• Unified Scandinavian law
• Uniform Commercial Code (UCC), Art. 2 - American
  law
• Karl Llewelyn
• Old Kontract Principles and Karls New Kode
  
• Soia Mentschikoff

4
History of the CISG

• 1930 UNIDROIT (Ernst Rabel)
• 1935 First Draft
• 1964 Hague Uniform Laws (André Tunc)
• 1968 UNCITRAL (Jorge Barrera Graf)
• 1980 CISG
• 1988 CISG enters into force

5
CISG - Main Characteristics

• 2 sets of rules
• National sale
• International sale
• CISG is the national law of the MS regarding
  intl sale of goods
• Universal applicability
• Not limited to contracts between parties in MS

6
Brief overview

• Part I
• Sphere of application (int'l sale of certain
  goods)
• Rules for the interpretation
• of the CISG and
• of contracts, subject to the CISG

7
Part II - Conclusion

• Offer
• Revocability
• Mirror image rule
• Does not apply to the question of the validity of
  the contract (illegality, fraud, mistake )

8
Part III Sale of Goods

• Substantive rules
• Greatest practical significance
• Defines parties obligations, rights and remedies
• Risk of loss
• Seller delivery of the goods in the right place
  at the right time (contract and supplementary
  rules of the CISG)
• Conformity
• Buyer timely payment and timely acceptance

9
Part III - Remedies

• Buyers
• Sellers
• Common to both parties
• Specific performance (Art. 28 CISG)
• Avoidance fundamental breach, failure to
  perform after an additional time
• Damages

10
Part IV Final provisions

• Reservations
• Applicability on ground of Article 1(1)(b)
• Part II or Part III of the convention
• The principle of non-formality

11
Procedure

• Mostly Regulation 44/2001 (Brussels and Lugano
  Convention) or national statute
• Jurisdiction clause
• Domicile of the defendant
• Place of the performance
• Arbitration clause

12
Field of application - How to determine whether
the CISG applies?

• Articles 1-6
• Does the CISG apply by virtue of art 1?
• Is this a sale of goods as defined in Article
  2-3?
• Is the particular issue governed by the
  Convention according to Articles 4-6?
• Or is it governed-but-not-settled under Article
  7(2)?
• Have the parties exercised their freedom to
  contract out (all or part of) the CISG?

13
Internationality Article 1

• (1) This Convention applies to contracts of sale
  of goods between parties whose places of business
  are in different States ()
• (2) The fact that the parties have their places
  of business in different States is to be
  disregarded whenever this fact does not appear
  either from the contract or from any dealings
  between, or from information disclosed by, the
  parties at any time before or at the conclusion
  of the contract.
• (3) Neither the nationality of the parties nor
  the civil or commercial character of the parties
  of the contract is to be taken into consideration
  in determining the application of this
  Convention.

14
Internationality Article 1

• Subjective criterion
• Sometimes not easy to decide where the place of
  business is (?Article 10)
• Awareness (Article 1(2))
• Nationality, civil or commercial character of PP
  is irrelevant (Article 1(3))

15
Contract of sale of goods

• No positive definition
• Definition can be derived from Part 3 (Articles
  30 and 53)
• Articles 2-3 tell what is not a sale of goods
• Often mandatory national rules
• Rare in intl transactions

16
Excluded contracts (Article 2)

• This Convention does not apply to sales
• (a) of goods bought for personal, family or
  household use, unless the seller, at any time
  before or at the conclusion of the contract,
  neither knew nor ought to have known that the
  goods were bought for any such use
• (b) by auction
• (c) on execution or otherwise by authority of
  law
• (d) of stocks, shares, investment securities,
  negotiable instruments or money
• (e) of ships, vessels, hovercraft or aircraft
• (f) of electricity.

17
Excluded contracts (Article 3)

• (1) Contracts for the supply of goods to be
  manufactured or produced are to be considered
  sales unless the party who orders the goods
  undertakes to supply a substantial part of the
  materials necessary for such manufacture or
  production.
• (2) This Convention does not apply to contracts
  in which the preponderant part of the obligations
  of the party who furnishes the goods consists in
  the supply of labour or other services.

18
Sphere of application (Article 1(1))

• This Convention applies to contracts of sale of
  goods between parties whose places of business
  are in different States
• (a) when the States are Contracting States or
• (b) when the rules of private international law
  lead to the application of the law of a
  Contracting State.

19
Article 1(1)(a) Basic rule

• Most significant and the easiest to apply
• No PIL needed except for issues not governed by
  the CISG
• Courts in MS bound to apply the CISG and should
  reach the same result
• What if the forum is in a non-MS?
• Arbitration?

20
Article 1(1)(b)

• When the criterion of subsection (a) is not met
• PIL of the forum State
• Arbitration?
• Sale A to GB
• Sale SLO to GB (PIL statute)
• Relevant Austrian PIL rule?
• What if the parties have chosen the A law?
• problem
• Should the forum take into account the rules of
  PIL in the MS (renvoi)?

21
Article 95 declaration

• Any State may declare at the time of the deposit
  of its instrument of ratification, acceptance,
  approval or accession that it will not be bound
  by subparagraph (1)(b) of article 1 of this
  Convention.

22
Article 95 declaration

• Czechoslovak proposal
• USA, CZ, SK, CHI, AUS
• Sale GB ? USA
• Forum in the USA
• Choice of NY law
• The US forum is not bound by

23
Problem

• Is a State that made an Article 95 reservation
  still a MS under Article 1(1)(b)?
• S (A) ? B (GB)
• Choice of US law (NY)
• Forum in A?
• Forum in D?

24
German reservation

• Führen die Regeln des IPR's zur Anwendung des
  Rechts eines Staates, der eine Erklärung nach
  Art. 95 ... abgegeben hat, so bleibt Art. 1 Abs.
  1 Buchstabe b des Übereinkommens außer betracht.

25
Not governed by the CISG (Art. 4)

• This Convention governs only the formation of
  the contract of ale and the rights and
  obligations of the seller and the buyer arising
  from such a contract. In particular, except as
  otherwise expressly provided in this Convention,
  it is not concerned with
• (a) the validity of the contract or of any of its
  provisions or of any usage
• (b) the effect which the contract may have on the
  property in the goods sold.

26
Not governed by the CISG (Art. 5)

• This Convention does not apply to the liability
  of the seller for death or personal injury caused
  by the goods to any person.
  

27
Freedom of Contract (Art. 6)

• The parties may exclude the application of this
  Convention or, subject to article 12, derogate
  from or vary the effect of any of its
  provisions.

28
Freedom of Contract

• Party autonomy
• Contracting out
• The court presumes the applicability of the CISG
• Exclusion must be very clear
• US NL sale (the laws of Switzerland)
  similar Austrian law or French law
• Choice of Hamburg commercial court choice of D
  law (CISG)
• Exception Art. 12

29
Parties can contract into the CISG regime

• Designation of the law of a MS as lex contractus
• S (JPN) B (GB)
• ICC arbitration
• choice of French law ? CISG (is a part of F law)
• Designation of CISG as such
• Designation of law merchant (lex mercatoria)

30
Interpretation of the CISG (Art. 7/1))

• 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.

31
Interpretation of the CISG

• Text
• Secretariat Commentary to the 1978 Draft
  Convention
• Legislative history

32
International interpretation

• Independent interpretation, not through national
  legal systems
• Danger that courts will interpret it against the
  background of their national legal systems
• CLOUT (Case law under UNCITRAL texts)
• Various databases (Pace, Freiburg)
• UNILEX
• Observance of decisions rendered in other MS

33
Good faith

• Many national legal systems go further (BGB, BW,
  Cc, UCC, OR Cc it)
• Reasonableness
• Principle of loyalty and the protection of
  reliance

34
Governed by, but not expressly settled in (Art.
7(2))

• (2) Questions concerning matters governed by this
  Convention which are not expressly settled in it
  are to be settled in conformity with the general
  principles on which it is based or, in the
  absence of such principles, in conformity with
  the law applicable by virtue of the rules of
  private international law.

35
Article 7(2)

• Gap-filling provision
• Permitting to stay within the Treaty and
  diminishing the need to revert to domestic rules
• Only to matters, governed by but not expressly
  settled in the Convention
• Question not governed, can only be resolved by
  resort to non-Convention rules of law (validity,
  product liability with regard to personal injury)

36
What to apply

• General principles of the convention
• Analogy
• Analogy with express CISG rules
  (Gesetzesanalogie)
• Or broader principles, which can be derived from
  one or more CISG rules (Rechtsanalogie)
• Difficult to derive
• National law, designed by PIL rules
• No need to resort to PIL, also lex mercatoria
  could apply

37
Example

• Writing in Art. 13 expressly include only
  telegram and telex
• The question whether a telefax is also a writing,
  is a matter governed by but not settled in the
  convention
• general principle in Article 13, that the term
  writing also means modern means of
  communication (telefax, e-mail etc.).

38
2 Austrian arbitral awards

• Payment for non-conforming goods
• Art. 78 provides for payment of interest on the
  price and other sums owed, but does not fix the
  rate.
• Arbitrator decided that the question of the rate
  is governed by but not settled in the CISG and
  made a reference to the general principle of full
  compensation for loss, which flows from the
  breach.
• A German Court expressly rejected such solution
  (LG Aachen 1995)

39
German court

• Seller (USA) ? Buyer (D)
• Damages to be paid by the Seller.
• CISG does not determine the place, where the
  Seller has to pay damages
• Art. 57(1)(a) payment of the purchase price at
  the seller's place of business ? general
  principle of the CISG applying to all payments
  under the CISG, to pay at the creditors place of
  business

40
Estoppel

• Buyer failed to comply with notice requirement
  with regard to non-conforming goods (Art. 38-39)
• Seller has previously led buyer to believe that
  the notice defense would not be raised
• Arbitrator applied estoppel as a general
  principle of the CISG

41
Article 8(1, 2)

• (1) For the purposes of this Convention
  statements made by and other conduct of a party
  are to be interpreted according to his intent
  where the other party knew or could not have been
  unaware what that intent was.
• (2) If the preceding paragraph is not applicable,
  statements made by and other conduct of a party
  are to be interpreted according to the
  understanding that a reasonable person of the
  same kind as the other party would have had in
  the same circumstances.

42
Article 8 (3)

• (3) In determining the intent of a party or the
  understanding a rasonable person would have had,
  due consideration is to be given to all relevant
  circumstances of the case including the
  negotiations, any practices which the parties
  have established between themselves, usages and
  any subsequent conduct of the parties

43
Interpretation of contracts

• Interpretation of the statements (and conduct) of
  the parties
• Subjective interpretation (intent) correction
  (8/1)
• Objective interpretation reasonable person(8/2)
• Reasonable understanding to the other partys
  general conditions
• Concretisation of both (8/3)
• Mistake of a party excluded, Article 4 (PIL)

44
Trade usages (article 9)

• (1) The parties are bound by any usage to which
  they have agreed and any practices which they
  have established between themselves.
• (2) The parties are considered, unless otherwise
  agreed, to have impliedly made applicable to
  their contract or its formation a usage of which
  the parties knew or ought to have known and which
  in international trade is widely known to, and
  regularly observed by, parties to contracts of
  the type involved in the particular trade
  concerned.

45
Trade usages

• Part of the contract
• PP only rarely expressly agree to be bound by a
  given trade usage
• PP establish a binding practice by conduct
• Implicite agreement under Article 9(2)
• Protective clause to protect traders in less
  developed countries

46
Form (article 11)

• A contract of sale need not to be concluded in
  or evidenced by writing and is not subject to any
  other requirements as to form. It may be proved
  by any means, including witnesses.

47
Form (Article 12)

• Any provision of article 11, article 29 or Part
  II of this Convention that allows a contract of
  sale or its modification or termination by
  agreement or any offer, acceptance or other
  indication of intent to be made in any form other
  than in writing does not apply where a party has
  his place of business in a Contracting State
  which has made a declaration under article 96 of
  this Convention. The parties may not derogate or
  vary the effect of this article.

48
Form

• Form of the contract (Articles 11-12, 29, 96)
• Declaration under Article 96
• ARG, BLR, CHI, EST, PRC, H, RS, UA USSR
  strongest proponent
• CISG does not apply
• PIL determines the applicable rules
• Declaration does not always have practical
  consequences
• S(A/SLO) ? B(H)

49
Hungarian decision

• Seller (D) ? Buyer (H)
• Buyer accepted an oral offer
• D law applicable
• H reservation irrelevant