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The U.N. Convention on Contracts for the International Sale of Goods
 

The U.N. Convention on Contracts for the International Sale of Goods ("CISG") entered into force in the United States on January 1, 1988.  If applicable to a given transaction, the CISG supplies "gap filling" rules that govern contract formation and set forth the rights and obligations of the buyer and seller.  The CISG provides, however, that express contractual provisions take precedence over the default provisions of the CISG.  Thus, contracting parties remain free to specify whatever law or terms they wish to apply to their transaction, and may exclude altogether the application of the CISG to their contractual relationship.

The UN Treaty Section reports that the Ratification, Acceptance, Approval, Accession, or Succession of the CISG has been adopted by the following 61 States (as of May 1, 2002):

Argentina
Australia
Austria
Belarus
Belgium
Bosnia-Herzegovina
Bulgaria
Burundi
Canada
Chile
China
Croatia
Cuba
Czech Republic
Denmark
Ecuador
Egypt
Estonia
Finland
France
Georgia
Germany
Greece
Guinea
Hungary
Iceland
Iraq
Israel

Italy
Kyrgyzstan
Latvia
Lesotho
Lithuania
Luxembourg
Mauritania
Mexico
Moldova
Mongolia
Netherlands
New Zealand
Norway
Peru
Poland
Romania
Russian Federation
Saint Vincent & Grenadines
Singapore
Slovakia
Slovenia
Spain
Sweden
Switzerland
Syria
Uganda
Ukraine
United States of America
Uruguay
Uzbekistan
Yugoslavia
Zambia

The Treaty Section of the United Nations' Office of Legal Affairs has recently begun to charge a fee for access to its Internet website, although information on treaty status can still be obtained from them without charge via facsimile at (212) 963-3693.  Another no-cost source of CISG status information can be found at the UNCITRAL website: http://www.uncitral.org/.

The CISG only applies to international commercial sales of goods.  Each of these elements constitutes an important limitation on the scope of the CISG's applicability.  First, the sale must be international in character.  A sale is considered "international" if it involves "parties whose places of business are in different States."  In ratifying the CISG the United States stipulated that, absent express agreement to the contrary, the CISG would not apply to contracts between a U.S. party and a party whose place of business is in a State that has yet to adopt the CISG. (See declaration by the United States of America that "Pursuant to Article 95 the United States will not be bound by Subparagraph (1)(b) of Article I" of the CISG.)

Second, the CISG covers the sale of goods, and may not apply to contracts that include services.  Where a contract includes both goods and services elements, the CISG will apply unless "the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services." Article 3.

Finally, the CISG only applies to commercial transactions, and does not apply to sales of goods that are "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 involved were bought for such use.  Additionally, the CISG does not apply to the following types of sales: by auction; on execution or otherwise by authority of law; of stocks, shares, investment securities, negotiable instruments or money; of ships, vessels, hovercraft or aircraft; or of electricity.  Article 2.

Adoption of the CISG by the United States provides important benefits to U.S. exporters.  Parties negotiating international sales contracts often find the "choice of law" issue to be among the most contentious.  Each party is familiar with its own domestic sales law, and prefers that its local rules apply to the transaction.  The CISG enables the parties to avoid difficulties in negotiating "whose law will govern" by putting into place internationally accepted substantive rules on which contracting parties, courts, and arbitrators may rely.

The CISG's rules closely follow Article 2 of the Uniform Commercial Code ("UCC"), which is in force in 49 of the 50 states. Consequently, U.S. practitioners will be familiar with most of its terms and rules. However, several important distinctions between the UCC and the CISG should be highlighted:

1. Specification of Price - Under the CISG, a proposal to create a contract is not sufficiently definite as an offer unless it "indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price."  Article 14.  By contrast, the UCC is more flexible in contract formation and will find an agreement valid, despite missing terms including performance and price, if the parties intended to be bound by the agreement, and a reasonably certain basis exists for granting a remedy.  See UCC 2-204.

2. Revocability of Offer - Under the CISG, an offer becomes irrevocable if it indicates through a fixed time for acceptance or otherwise that it is irrevocable, or if the offeree reasonably relies on the offer as being irrevocable, and acts in reliance on it. Under the UCC, an irrevocable offer must be in a signed writing that by its terms assures that the offer will be held open.

3. Terms of Acceptance - Under the CISG, acceptance occurs upon receipt thereof by the offeror; many UCC jurisdictions hold that acceptance occurs when it is mailed or transmitted by the offeree to the offeror.

4. "Battle of Forms" - the CISG follows rules of offer and acceptance that are similar to the common law rule.  A reply to an offer that purports to be an acceptance, but has additions, limitations, or other modifications is generally considered by the CISG to be a rejection and counteroffer.  The UCC, on the other hand, tries to avoid the "battle of forms" that can result from such a rule, and allows an expression of acceptance to be operative, unless the acceptance states that it is conditioned on the offeror consenting to the additional or different terms contained in the acceptance.

5. Writing Requirement - The CISG does not require that a sales contract be reduced to a writing*.  Under the UCC's statute of frauds, oral contracts selling goods for a price of $500.00 or more are generally not enforceable, unless, for example, the existence of a contract is conceded to, or payment or delivery and acceptance have occurred.

It should also  be noted that the CISG generally leaves questions relating to the validity of a contract and the effect that "the contract may have on the property in the goods sold" to be determined by applicable domestic law.  Article 4.

* Note that Contracting States that require sales contracts to be written or evidenced by writing, may at any time make a declaration in accordance with Articles 96 and 12 of the CISG such that they are not bound to allow a contract of sale "or its modification or termination by agreement or any offer, acceptance, or other indication of intention to be made in any form other than in writing."  Article 96.  The U.S. did not make such a declaration.
 

CONTACT INFORMATION:

Todd Vollmers
Attorney-Advisor
Office of the Chief Counsel for International Commerce

U.S. Department of Commerce

Tel: 202-482-0937

Fax: 202-482-4076

occic@doc.gov

 

Revised August 2002

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