Scope and Application

Discuss about the United Nations Convention on Contracts for the International Sale of Goods.

It has been stated by Lookofsky (1991) that the convention “arguably the greatest legislative achievement aimed at harmonizing private international commercial law”[1]. A standardized law that operates the international sales is the United Nations Convention on Contracts for the International Sale of Goods (CISG; the Vienna Convention). There are 89 countries who have acknowledged this convention that becomes a definite proportion in trading around the world. The development of CISG has been done by United Nation Commission on International Trade Law (UNCITRAL)[2]. It got signed in Vienna in the year of 1980. It is also referred as the Vienna Convention but it must not be referred to as the other treaties that has been signed in Vienna. It is the most powerful and popular uniform international laws. Plain and simple language has been used to write the convention so that the words might be avoided if they have legal difference in some jurisdiction. There are four parts in which CISG is divided. The first one is the area of applications and the general provisions. The second one is contract’s formation that is given in the articles 14-24. The third article is the Sale of Goods that is given in the Article 25-88 and the fourth one is the final provisions that have been mentioned in Article 89-101. There has been a little hesitation in respect to the convention’s success but it has also been observed that there are a few parts where the requirement of the improvement is necessary with respect to convention as suggested by Andersan[3]. To analyze the scope, acceptance and application is the main purpose of this assignment. Another purpose is to determine that whether this convention is the most effective treaty of international trade. Initially this assignment checks out the objectives and aims of this convention. It is also analyzed critically the accomplishment of convention as it has been explained initially with respect to it. 

An option has been given to exporter by the convention to avoid the problems with respect to the selection of law as there certain rules that are substantive in nature and is provided by the convention[4]. It is widely accepted in the whole wide world with respect to the contracts, courts and the contractual parties might depend on.  If there is a contract formed for transaction of goods between the parties from one state to another but only one state has ratified the convention, then this convention is applicable until the state that has not ratified the convention excludes this term of not ratifying the convention from the contract made between them. Through UNCITRAL, the convention gets succeeded if every state of this world acknowledges it be it the state with the development of economy and all the other states with legal system. Contracting states are states that has ratified or acknowledged the convention[5]. This convention is described with respect to the uniform law conventions as “the greatest influence on the law of worldwide trans-border commerce.”An argument has been made that convention is greatest legislative achievement and the “most successful international document so far” with respect to the uniform law of international sales. The convention is so flexible in nature it permits the party who have ratified the convention to get exceptions in some products or whether they want to follow the laws that has been provided in the convention or not. The basic factor is the flexibility of the convention in relation to the states that have acknowledged the convention must have contrast legal manners to accept the code and the interest uniformly[6]. There are majority of the states who have accepted the convention deprived of any kind of declaration and also have subscribed to it. But there are certain countries mostly 21 out of 89 who have asked for the declaration.

Formation of Contract

The first article states that the convention is only applicable to those states who carries their business in the states that have ratified with the convention is the place of the business of parties is set up in a different state who does not belong to the convention but the convention can be still applicable and it also states that the application of the laws of the states that have ratified with the convention has been provided by conflict of law[7]. However, certain states are there who made a statement that they will not accept those laws or bound by it. There are certain products in which the convention can be applied are goods and commercial products. But there are certain limitations in some products which this convention might not be applied are household goods or family goods, ships, aircrafts, auctions, services or intangibles. There are certain situations in which the position of the software is a bit different and analysed. The rights that have been provided to the parties is that they can exclude the application if they want to[8].

The applications of the principles is important as it needs to determine the interpretation in cases where there is no interpretation but the issue is present in convention (a gap praeter legem) by applying the public international law regulations.

The major fact of the controversy is that whether there is any requirement of the written memorial that needs to bind with the contract. The validity of the contract is not there if it is not written in certain countries.  The sale might not be signed or oral as it has been given allowance by the CISG to do so. There are some states who needs a strict document that must be signed otherwise they can reject the unsigned or oral contracts[9]. The word convention is not completed by its definition and the gap must be filled by the application of the national laws while considering the provisions of the conflict of law.

It has been stated in the part two of the convention, an offer must contain the description of the price, the good and the quantity to make a contract that has to be directed to the person and it should clear the offeror’s intention to bind legally where by terms of offer the acceptance is made. Sometimes common law unilateral contracts do not seem to be recognised by CISG. An indication is subjected by offeror that makes any proposal that is not directed to an individual and treats that offer as invitation only[10]. The Price of the goods are totally based on “generally charged when the contract is concluded for such goods sold under similar circumstances”  has been agreed by the parties when the determination of the implied price is done by the express price that is not given and the implied price is not available then (Article 55). If any revocation or withdrawal of offer has to be done then the offeree must be provided with the information of the withdrawal before the acceptance has been prepared by him as mentioned in the convention. Some irrevocable offers are there that cannot be withdrawn as mentioned in the convention. Under the state of silence or inactiveness an offer cannot be made or constituted. An offer can only be made if there is positive action by the offeree[11]. 

Sale of Goods

The attempt of CISG is to solve out the common situation in which the reply of the offer to the offer has accepted the original or the new offer but their attempt to change the terms and conditions. It has been said by CISG that an offer can be rejected if any change is there that needs to be done to the original conditions and it is known as counter offer until and unless the new terms do not alter the original terms of offer[12]. The conditions that changes the terms of offer can be stated like payment, quantity, change of the price, liability of the parties, quality and arbitration.

The convention provides the states that are ratified with it by a chance to reserve a file that is also known as declaration as stated in the convention’s language. Further, the parties can come out of written contract that is compulsory for the sale of goods that has been mentioned under the article 11, 12 and 96[13]. The parties also have a chance to come out of application that has been mentioned under the part 2 and 3 of convention. There are certain benefits that has been given by the convention but a few States who has a major business in trading like India, United Kingdom and Hong Kong have restrained themselves from becoming a part of convention. It concludes that there are certain problems that are connected with the convention and not many nations who are trading are willing to be the part of the convention.

The part 3 of the convention States about the sale of goods as per article 25-88. It states that the good or products must be provided according to the description and the quantity and the quality should be as mentioned in the contract that needs to make sure that it is fit for the purpose and must be packed accordingly. The duty of the seller has been defined by CISG and it has been stated that the seller must deliver the products and the documents related to them as per the requirement of the contract. Similarly, the buyer’s duty is to take the necessary steps “which could reasonably be expected” for taking the delivery and making the payment of it[14]. The seller has the duty to deliver the products which are not subjected to the claim of the third party that limits the actions of industrial or intellectual property and the rights of the state in which the goods or be sold. The buyer has the responsibility to examine all the products that has been delivered to him and if there is any lack of conformity he must advise the seller within a certain period of time which is within the 2 years of the delivery date.

Remedies for Breach of Contract

It has been described by CISC that risk is passed from the person who sells goods and to the person who buys it[15]. Somehow it has been seen that many contracts define the delivery obligation of the seller show the process of adoption of established shipment term like FOB and CIF. There are certain remedies of the buyer and the seller that totally depends on the kind of character that has been mentioned on the breach of the contract. If the breach of the contract is not found to be essential, the contract will not be avoided and the remedies might be sorted that includes claiming of damages price adjustment and specific performance.

Such parties are exempted under the convention for being liable with respect to damages were an accomplishment failure is held to have arose due to hurdles which were not within the reasonably foreseeable control of the party[16]. These situations although being less important can cause hindrance in the formation of the agreement and may be regarded as force majeure. Where the price which has been paid by the buyer has been refunded by the seller, the seller is also under the obligation to compensate the buyer with the interest which he or she is entitled to receive in relation to the time for which the money of the buyer was with the seller. The rate which is presently provided through the rules of the state of the seller would be the deemed rate of interest in the situation[17]. In addition the duty of providing interest originates through the duty of the seller to provide the compensation and they buyer cannot claim damages. However the situation is a significant agenda of debate between the supporters and the critiques of the convention.  In situation where the buyer has to return the purchased items he is accountable for any form of assistance which had been agreed upon according to the requirements laid down by the seller. 

The CISG has been subjected to considerable criticism for certain short comings which the critiques have identified in the convention. Petrovic (2017) has stated the CISG to be a mere combination of unclear standards and compromises which are not in compliance with the best interest of the international market[18].  It has been argued by Basedow (2018) that the states who had the responsibility of formulating the CISG did not have the capacity of reaching an agreement in relation to assenting to rules which unambiguously and precisely set out uniform principles with international sale of goods[19]. It has been further critiqued by Loizou (2017) that the uncertainty, flexibility and lack of precise meaning within the conventions defeats its original purpose of implementing a universal law as the courts have been provided with significant powers to interpret the articles without concrete guidelines being present[20]. 

Exemptions and Limitations

When the critiques of the CISG are compared to the supports, they are outnumbered. According to Gutiérrez (2017) that one of the primary features of the conventions which makes it one of the greatest legislative achievements in history is the simple and plain language which has been used in it. The CISG does not consist of any difficult to understand sub clauses which makes it user friendly. What the article signifies can be made out by a person upon its first reading. There is no need of experts in relation to the interpretation of the provisions. Berlingher (2017) has highlighted another problem in relation to the CISG which is that of its uniform application[21]. The application has been identified as an issue as the courts do not readily accept the precedents which have been set out the courts of other nations. One of the primary examples of this criticism had been seen in a German and a French case. In Bundesgerichtshof VIII ZR 159/94 t court ruled that there is no duty on the part of the seller to ensure that the goods comply with national standards and the courts refused to apply such principles on the French case of Caiato Roger v La Société française de factoring international factor France (SA) (1995) 93/4126 where a contrary ruling had been made by the court. However it has been stated by Walt (2018) that even where there is a lack of consistency in relation to the decision making the facts in these cases was significantly different form one another[22].

Further arguments have been provided that the character of the CISG is rational, practice based and flexible. It has been stated by Wu (2018) that there are no restrictions which are applied by the CISG with respect to formation and alterations of a contract and even if such restrictions are identified they are very limited in number[23]. The convention also provides the parties to select form many options where there has been a breach of contract before the parties want to repudiate the contract.  Provisions in relation to the restriction of performance have also been provided by the CISG as a right in the light of remedy to the party whose rights have been violated in form of options like claiming of damages based on market value. It has been further argued by Muñoz (2017) that functional criteria are made available by the CISG with respect to conformity instead of formal criteria and the conventions does not consist of operations based on “perfect tender” rules[24].  Loizou (2017) has stated that the interpretation of the provisions of the CISG significantly depend upon customs. Actions are also generally manifested by these rules rate than intention[25]. Although very limited in scope the CISG contains a rule known as Nachlass rule. The CISG also comprises of a good faith condition which is generally found to have been in most circumstances obscure and relatively restricted. There has been no precise definition which has been provided in relation to the reasonable time which all forms of communication under the CISC are subjected to. Thus broad discretion has been provided to the judges with respect to interpreting the provisions of reasonable time under the CISG. The court used such discretionary powers in the case of Schmitz-WerkeGmbH & Co. v. Rockland Industries Inc[26].  

Conclusion

There have been several arguments which have been made both in favor of and against the CISG. Taking into consideration the above analysis it can be stated that the argument provided by Lookofsky that the CISG is “arguably the greatest legislative achievement aimed at harmonising private international commercial law” is a bit exaggerated[27].  This is because although the convention has some significantly useful provisions in relation to international trade it also has several flaws which have been identified above by the critiques. However it can be stated that the benefits which is provided by the conventions outweighs the detriments which the critiques argue to be present in the convention. The CISG is a widely used platform which is successfully utilized by the contracting states in order to address the issues which arise out of international sale of goods. As of now there is no considerable alternative to the CISG. The critiques who have made an arguments that the convention is vague and unclear have not provided any alternatives to address the situations. On the other had significant evidence have been discussed above which depicts that the convention is a major success. To conclude it can be stated that although the convention is a major success, in the light of a few defects it has it cannot be adjudged as the greatest legislative achievement aimed at harmonising private international commercial law.

References

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Basedow, Jürgen. “International economic law and commercial contracts: promoting cross-border trade by uniform law conventions.” Uniform Law Review 23.1 (2018): 1-14.

Berlingher, Daniel. “The Effects of the International Contract for Sale of Goods.” Journal of Legal Studies 19.33 (2017): 96-109.

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 Hartwig J., Schmitz-WerkeGmbH & Co. v. Rockland Industries Inc. and the United Nations Convention on Contracts for the International Sale of Goods (CISG):Diffidence and Developing International Legal Norms,J.L. Com. 22 (2002-2003) 77-89

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Lookofsky, Joseph M. “Loose Ends and Contorts in International Sales: Problems in the Harmonization of Private Law Rules.” The American journal of comparative law 39.2 (1991): 403-416.

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 Petrovic, Jadranka, Beatrice Hamilton, and Cindy Nguyen. “The Exclusion of the Validity of the Contract from the CISG: Does It Still Matter?.” (2017).

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