The Sale of Goods - Part I General Principles and Contract Formation

1. The Sale of Goods - Part IGeneral Principles and Contract Formation

2. What Are Goods? • Physical things, not services • Airplanes & Ships • Microchips • Agricultural products, including animals • Raw materials • Oil • Coal • Iron Ore • Bauxite (Aluminum) • Pharmaceuticals

3. Long History • Trade in goods as old as history • Textiles • Spices • Amber from Baltic Sea Region • Gold, silver, iron

4. Domestic Sales • Slovenian Civil Code • United States • Uniform Commercial Code §2 • 49 States • Every Country has law • Similar

5. International Sales • UN Convention on Contracts for the International Sale of Goods (CISG) • Some aspects of domestic law combined with CISG • Domestic law of one country

6. Choice of Law Principles • Treaty of Rome applicable to EU • Parties select in Contract • “All issues related to the formation, performance or breach of this Contract shall be governed by the law of _________” • Law of State (Country) which has most significant relationship to the transaction and the parties • Place of Contract formation • Place of negotiations • Place of performance • Location of subject of Contract • Residence of the Parties

7. Argentina 1/1/88 Australia 1/4/89 Austria 1/1/89 Belarus 1/11/90 Belgium 1/11/97 Bosnia & Herzegovina 6/3/92 Bulgaria 1/8/91 Burundi 1/10/99 Canada 1/5/92 Chile 1/3/91 China 1/1/88 Colombia 8/1/88 Croatia 8/1/92 Cuba 12/1/95 Cyprus 4/1/06 Czech Republic 1/1/93 Denmark 3/1/90 Ecuador 2/1/93 Egypt 1/1/88 El Salvador 12/1/07 Estonia 10/1/94 Finland 1/1/89 France 1/1/88 Gabon 1/1/06 Georgia 9/1/95 Germany 1/1/91 Ghana 4/11/80 Parties to U.N. Convention on International Sale of Goods

8. Greece 2/1/99 Guinea 2/1/92 Honduras 11/1/03 Hungary 1/1/88 Iceland 6/1/02 Iraq 4/1/91 Israel 2/1/03 Italy 1/1/88 Kyrgyzstan 6/1/00 Latvia 8/1/98 Lesotho 1/1/88 Liberia 10/1/06 Lithuania 2/1/96 Luxembourg 2/1/98 Mauritania 9/1/00 Mexico 1/1/89 Moldova 11/1/95 Mongolia 1/1/99 Montenegro 6/3/06 Netherlands 1/1/92 New Zealand 10/1/95 Norway 8/1/89 Paraguay 2/1/97 Peru 4/1/00 Poland 6/1/96 Republic ofKorea 3/1/05 Romania 6/1/92 Parties to U.N. Convention on International Sale of Goods

9. Russian Federation 9/1/91 Saint Vincent/Grenadines 10/1/01 Serbia 4/27/92 Singapore 3/1/96 Slovakia 1/1/93 Slovenia 6/25/91 Spain 8/1/91 Sweden 1/1/89 Switzerland 3/1/99 Syrian ArabRepublic 1/1/88 Former YugoslavRepublic ofMacedonia 11/17/91 Uganda 3/1/93 Ukraine 2/1/91 United Statesof America 1/1/88 Uruguay 2/1/00 Uzbekistan 12/1/97 Zambia 1/1/88 Parties to U.N. Convention on International Sale of Goods

10. UN Convention on Contracts • Arrangement of CISG • Interpretation – Articles 7-13 • Formation of Contract – Articles 14-24 • General Provisions – Articles 25-29 • Delivery by Seller – Articles 30-34 • Warranties/Conformity of Goods – Articles 35-44 • Seller Remedies – Articles 45-52 • Payment by Buyer – Articles 53-60 • Buyer Remedies – Articles 61-70 • Anticipatory Breach – Articles 71-77

11. UN Convention on Contracts • Arrangement of CISG • Payment of Interest – Article 78 • Exemptions & Avoidance – Articles 79-84 • Obligation to Preserve Goods – Articles 85-88 • Implementation of CISG – Articles 89-101

12. UN Convention on Contracts • Application • Applies to International Sales where Convention applies because it is Law of State or Parties adopt

13. UN Convention on Contracts for the International Sale of Goods • Sphere of Application [Art. 1] • This Convention applies to contracts of sale of goods between parties whose places of business are in different States: • when the States are Contracting States; or • when the rules of private international law lead to the application of the law of a Contracting State • 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

14. UN Convention on Contracts for the International Sale of Goods • Neither of the nationality of the parties nor the civil or commercial character of the parties or of the contract is to be taken into consideration in determining the application of this Convention. • Parties Can Exclude Application • [Article 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.

15. UN Convention on Contracts for the International Sale of Goods • Sphere of Application [Art. 2] • This Convention does not apply to sales: • 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; • 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; • of electricity.

16. UN Convention on Contracts for the International Sale of Goods • Only to sales of goods, not services • Sphere of Application [Art. 3] • 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. • 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.

17. UN Convention on Contracts for the International Sale of Goods • Does not govern validity of property rights or personal injury • [Article 4] • This Convention governs only the formation of the contract of sale 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: • the validity of the contract or of any of its provisions or of any usage; • the effect which the contract may have on the property in the goods sold. • [Article 5] • This Convention does not apply to the liability of the seller for death or personal injury caused by the goods to any person.

18. UN Convention on Contracts for the International Sale of Goods • International Character – General Provisions [Art. 7] • 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. • 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.

19. UN Convention on Contracts for the International Sale of Goods • Intent [Art. 8] • 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. • 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.

20. UN Convention on Contracts for the International Sale of Goods • Intent [Art. 8] • In determining the intent of a party or the understanding a reasonable 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.

21. UN Convention on Contracts for the International Sale of Goods • Trade Usage [Art. 9] • The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves. • 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.

22. UN Convention on Contracts for the International Sale of Goods • Not necessary to be in writing [Art. 11] • A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses.

23. UN Convention on Contracts for the International Sale of Goods • Not necessary to be in writing [Art. 96] • A Contracting State whose legislation requires contracts of sale to be concluded in or evidenced by writing may at any time make a declaration in accordance with article 12 than 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 intention to be made in any form other than in writing, does not apply where any party has his place of business in that State.

24. UN Convention on Contracts for the International Sale of Goods • Electronic exchanges not yet addressed [Art. 13] • For purposes of this Convention “writing” includes telegram and telex.

25. UN Convention on Contracts for the International Sale of Goods • Formation • Contract created by Offer and Unconditional Acceptance

26. UN Convention on Contracts for the International Sale of Goods • Offer - Addressed to specific person or group [Art. 14] • A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance. A proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price.

27. UN Convention on Contracts for the International Sale of Goods • Offer - Addressed to specific person or group [Art. 14] • A proposal other than one addressed to one or more specific persons is to be considered merely as an invitation to make offers, unless the contrary is clearly indicated by the person making the proposal.

28. UN Convention on Contracts for the International Sale of Goods • Offer – Withdrawal [Art. 15] • An offer becomes effective when it reaches the offeree. • An offer, even if it is irrevocable, may be withdrawn if the withdrawal reaches the offeree before or at the same time as the offer.

29. UN Convention on Contracts for the International Sale of Goods • Offer – Withdrawal [Art. 16] • Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance. • However, an offer cannot be revoked: • if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or • if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer.

30. UN Convention on Contracts for the International Sale of Goods • Acceptance – Must be affirmative; not silent [Art. 11] • A contract of sale need not be concluded in or evidence by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses.

31. UN Convention on Contracts for the International Sale of Goods • Acceptance – Timing [Art. 18] • An acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror. An acceptance is not effective if the indication of assent does not reach the offeror within the time he has fixed or, if no time is fixed, within a reasonable time, due account being taken of the circumstances of the transaction, including the rapidity of the means of communication employed by the offeror. An oral offer must be accepted immediately unless the circumstances indicate otherwise.

32. UN Convention on Contracts for the International Sale of Goods • Acceptance – Timing [Art. 18] • However, if, by virtue of the offer or as a result of practices which the parties have established between themselves or of usage, the offeree may indicate assent by performing an act, such as one relating to the dispatch of the goods or payment of the price, without notice to the offeror, the acceptance is effective at the moment the act is performed, provided that the act is performed within the period of time laid down in the preceding paragraph.

33. UN Convention on Contracts for the International Sale of Goods • Acceptance – Conclusion [Art. 23] • A contract is concluded at the moment when an acceptance of an offer becomes effective in accordance with the provisions of this Convention.

34. UN Convention on Contracts for the International Sale of Goods • Counter-Offer – Must conform to Offer [Art. 19] • A reply to an offer which purports to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer. • Additional or different terms relating, amount 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 the settlement of disputes are considered to alter the terms of the offer materially.

35. UN Convention on Contracts for the International Sale of Goods • Counter-Offer – Minor points not Counter-Offer but Acceptance [Art. 19] • However, a reply to an offer which purports to be an acceptance but contains additional or different terms which do not materially alter the terms of the offer constitutes an acceptance, unless the offeror, without undue delay, objects orally to the discrepancy or dispatches a notice to that effect. If he does not so object, the terms of the contract are the terms of the offer with the modifications contained in the acceptance.

36. UN Convention on Contracts for the International Sale of Goods • Delivery of Offer or Acceptance [Art. 24] • For the purposes of this Part of the Convention, an offer, declaration of acceptance or any other indication of intention “reaches” the addressee when it is made orally to him or delivered by any other means to him personally, to his place of business or mailing address or, if he does not have a place of business or mailing address, to his habitual residence.

37. UN Convention on Contracts for the International Sale of Goods • Electronic Acceptance • Electronic Commerce and Electronic Signature Act Electronic Message (Art. 5) • It is assumed that an electronic message originates from a sender if: • it is sent by the sender, or; • it is sent by a person authorised by the sender, or; • it is sent by an information system, programmed by the sender himself, or programmed by an order of the sender to operate automatically, or; • the recipient established the origin of a message by application of procedure or technology, which was previously agreed upon between the sender and the recipient.

38. Electronic Commerce and Electronic Signature Act • Electronic Acceptance • Previous paragraph does not apply: • as of the time when the recipient has both received notice from the sender that the electronic message is not that of the sender, and had reasonable time to act accordingly or; • if the recipient knew or should have known, had it exercised reasonable care or used any agreed technology and procedure, that the electronic message was not that of the sender.

39. Electronic Commerce and Electronic Signature Act • Acknowledgment of Receipt (Art. 7(1)) • Where the sender has previously or at the time of sending the electronic message requested or agreed with the recipient upon the acknowledgement of the receipt of the message and stated that the electronic message is treated as though it has never been sent, until the sender receives the acknowledgement on the receipt

40. Electronic Commerce and Electronic Signature Act • Dispatch (Art.9) Unless otherwise agreed, the dispatch of the electronic message occurs when it enters an information system outside the control of the sender or the person who sent the electronic message on behalf of the sender

41. Electronic Commerce and Electronic Signature Act • Receipt (Art.10) • Unless otherwise agreed, the time of receipt of an electronic message is the time when the electronic message enters the recipient's information system.

42. Electronic Commerce and Electronic Signature Act • Receipt (Art.10) • Unless otherwise agreed and regardless of the provisions of the previous paragraph, if the recipient has designated an information system for the purpose of receiving electronic messages, receipt occurs at the time when the electronic message enters the designated information system, or, if the electronic message is sent to an information system other than the designated information system, at the time when the electronic message is retrieved by the recipient.

43. Electronic Commerce and Electronic Signature Act • Receipt (Art.10) • Provisions of the previous paragraph apply notwithstanding that the place where the information system is located may be different from the place where the electronic message is deemed to be received after this act.

44. Electronic Commerce & Electronic Signature Act • Place of Dispatch or Receipt (Art. 11) • Unless otherwise agreed, an electronic message is deemed to be dispatched from the place where the sender has his place of business or his permanent residence at the time of sending of the electronic message, and is deemed to be received at the place where the recipient has place of business or his permanent residence at the time of the receipt.

45. Electronic Commerce & Electronic Signature Act • Place of Dispatch or Receipt (Art. 11) • If the sender or the recipient does not have a permanent residence, an electronic message is deemed to be dispatched, after the previous paragraph, from the place or received at the place of his habitual residence at the time of sending or receiving of the electronic message.

46. Legal Systems as They Apply to International Commercial Transactions • Anti-Corruption Initiatives • Conventions • African Union Convention on Preventing and Combating Corruption • Council of Europe Criminal Law Convention on Corruption • Slovenia ratified – 9 June 2000 • Organization of American States Inter-American Convention Against Corruption

47. Legal Systems as They Apply to International Commercial Transactions • Anti-Corruption Initiatives • Conventions • OECD Convention Combating Bribery of Foreign Public Officials in International Business Transactions • Slovenia ratified – 6 September 2001 • United Nations Convention Against Corruption

48. Legal Systems as They Apply to International Commercial Transactions • Anti-Corruption Initiatives • Statements of Policy and Task Forces • ADB OECD Anti-Corruption Initiative • Asia-Pacific Economic Cooperation (APEC) Anti-Corruption and Transparency Task Force • Asian Development Bank • Group of States Against Corruption (GRECO) • EU and the United States • Inter-American Development Bank • International Chamber of Commerce • Organization for Economic Cooperation & Development (OECD)

49. Legal Systems as They Apply to International Commercial Transactions • Anti-Corruption Initiatives • Statements of Policy and Task Forces, cont. • Organization of American States • UN Global Compact on Transparency & Anti-Corruption • UNODC • World Bank • World Economic Forum Partnering Against Corruption

50. U.N. Convention Against Corruption • Purpose • Article 1 • The purpose of this Convention are: • To promote and strengthen measures to prevent and combat corruption more efficiently and effectively; • To promote, facilitate and support international cooperation and technical assistance in the prevention and fight against corruption, including in asset recovery; • To promote integrity, accountability and proper management of public affairs and public property.