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 - Americanlaw Karl Llewelyn “Old Kontract Principles and Karl’s 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 int’l 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 • Buyer’s • Seller’s • 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 int’l 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 creditor’s 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 asthe 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 party’s 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, UAUSSR 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