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Alejandro Osuna-González, LLM, FCIArb Universidad Iberoamericana Tijuana

Assessing the CISG and Other International Endeavors to Unify International Contract Law The Interpretation in Mexico of the United Nations Convention on Contracts for the International Sale of Goods January 18, 2013 Villanova University. Alejandro Osuna-González, LLM, FCIArb

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Alejandro Osuna-González, LLM, FCIArb Universidad Iberoamericana Tijuana

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  1. Assessing the CISG and Other International Endeavors toUnify International Contract Law The Interpretation in Mexico of the United Nations Convention on Contracts for the International Sale of Goods January 18, 2013 Villanova University Alejandro Osuna-González, LLM, FCIArb Universidad Iberoamericana Tijuana

  2. Introduction The CISG has been in force in MexicosinceJanuary 1, 1989 • Veryfew CISG cases havebeenreported • Nine cases, 26 decisions (trial, appellate, CircuitCourt) • There are more outthere… but ….

  3. Obstaclestolocating CISG cases In Mexico, Courtsgenerallyhave no obligationtopublishcourtdecisions. Itisdifficulttogainaccesstoconcluded cases.

  4. Assessingthequality of the CISG decisions Court decisions in Mexicothatdo applythe CISG are deficient.

  5. Assessingthequality of the CISG decisions MexicanJudges do notunderstandtheCISG’sscope of application • Theyapplythe CISG alongsideprovisionsfromMexicanCommercial and Civil Codes • Theyapplythe CISG tosomeissues, butexcludeitfromothers • Little regardto CISG article 7 (whatlittlethereis, itistypicallytotheobservance of goodfaith rule)

  6. A Sampling of mexicancisg cases Contractformation KolmarPetrochemichalsAmericas, Inc. vs Grupo Idesa, S.A. de C.V. Remedies, damages and interest Agrofrut Rengo, S.A. vs Levadura Azteca, S.A. de C.V.

  7. KolmarPetrochemicalsAmericas, Inc. Vs Grupo Idesa, S.A. de C.V.

  8. Kolmar vs idesa • 29 Nov 2002 AgentforKolmarnegotiatedwith a sales representativeforIdesaoverthephone • Kolmar’sagentsendsIdesaan e-mail thatsamedayconfirmingwhat he believedtheyhadagreedto: • Sale of 3,000 tons of MEG • Price of $392.50 FOB/ Seller’s terminal at Coatzacoalcos, delivery January 2003 • Payment , 30 days from the date on bill of lading

  9. Kolmar vs idesa • Idesa’sagent e-mailedconfirmingreceipt, butstatedthatitwouldcheckifits terminal wasavailable. • 2 Dec- Kolmar e-mailedtoaskwhatIdesameantregardingtheavailability of the terminal. Sellerdidnotrespond. • 19 Dec -Kolmarsentan e-mail nominatingtheshipthatwould pick-up thegoods. Sellerdidnotrespond. • 10 Jan 2003- IdesaemailedKolmar, advisingthatitwasfightingtosavethecontract, wasunderpressuretoincreasetheprice, thatitunderstooditcould cause problemswithKolmar, butthatitstillhadreservedKolmar’s MEG.

  10. Kolmar vs idesa KolmarviewedIdesa’sattempttoincreasetheprice as a breach of contract, and filed a lawsuitfordamages. Idesa defended, claimingthat no contracthadbeenconcluded.

  11. Kolmar vs idesa Decision: Trial courtqualifiedKolmar’s e-mail as anoffer, not a confirmation. Judge didnotanalyze CISG article 14. JudgefoundthatIdesa’s e-mail was a counter-offer, per CISG article 19(3), because: • Itdidnotacceptall of Kolmar’sproposedterms • Idesaproposedtoincreasetheprice, and topossiblychangethe place of delivery

  12. Kolmar vs idesa Article 7 considerations: • CitationtoMexicanLaw (more so byKolmar’sattorney, thanbythejudge), use of theexpression aceptación lisa y llana, civilianexpression, contrarytointernationalcharacter of the CISG • No case lawwascited • No promotion of theobservance of goodfaith

  13. Kolmar vs idesa KolmarappealedtotheMexico City Superior Court • Superior Courtparrotedthe trial court’sdecision • Interpreted CISG article 19(3) toread as a check-list of termstowhichpartiesmustagree

  14. Agrofrut Rengo, S.A. Vs Levadura Azteca, S.A. de C.V.

  15. Rengo vs azteca Rengo (Chile) soldto Azteca (Mexico) eightycontainers of cannedpeaches (eachcontainercarrying 900 boxes) • Eleven containers per month, duringthefirstsixmonths. • A final shipment of fourteencontainers • Sellerdelivered eleven containersonFebruary 28, and a secondshipmentonApril 17. Claimingthattheseconddeliveryhadbeen late, Buyercancelledtheremainingshipments. • Buyerrefusedtopayforthetwenty-twocontainersitreceived.

  16. Rengo vs azteca Sellerfiledsuitdemandingpaymentforthetwenty-twocontainersithaddelivered, plus interest, and loss of profitdamagesforthecancelledshipments. Buyer defended onthegroundsthatthere no place and date forpaymenthadbeenfixed (formal demandwasrequired). Buyeralsocounterclaimedforspecific performance fortheremainingfifty-eightcontainers.

  17. Rengo vs azteca • Decision: • Courtorderedbuyertopaysellertheprice and interestforthecontainersbuyerreceived. Theissuewasdisposed of basedon Commerce Code art. 375. (Buyer’sacceptance of a late delivery, madethe sale final). Judgemade no referenceto CISG articles 61 and 62. • Buyer’sdefense, dismissedthe“no date or place topay”defense. Judgeruledforseller, basedon CISG articles 57 and 58 of the CISG

  18. Rengo vs azteca Courtdidnotgrant Rengo loss of profitdamages: • Theorderthat Azteca paytheprice, plus interestwastantamounttodamages • Courtblatantlyignored CISG article’s 74 and 78

  19. Rengo vs azteca Courtdenied Azteca specific performance forthe balance of thecontainers. Decisionwasbasedon Federal Civil Codearticle 1949. (A partywho has performedhisobligationunder a contract, maydemandfrom a breachingpartyeither performance of hisobligationorrescision of thecontract). Because Azteca hadnotpaid, itwasnotentitledtotherest of thecontainers. Anapparentlysoundresult, butthecourtshouldhavelooked at CISG articles 72 and 81 theapplicablelaw

  20. Rengo vs azteca Rengo appeals Claimsviolationsto Civil Code (not CISG) fornotgettingitsloss of profitdamages. Azteca alsoappealedforbeingorderedtopay Rengo, claimingthat Rengo hadnotperformedthecontract in full.

  21. Rengo vs azteca Decision: Superior Courtmade a grandioseannouncementthatitwouldapplythe CISG ….and itdidn’t… (savefor CISG arts. 57 and 58) Loss of profitdamagesweredeniedbecause trial courthadallreadygrantedthem as interest ( CISG art. 78 distinguishesbetweendamages and interest. Interestdoesnotprejudicedamages!)

  22. Rengo vs azteca Decision: “The Sellerneededto show thatthebreachcausedtheallegeddamages and thatthesewereimmediately and proximately cause byit”(Civil Code art. 2110). (CISG has a possibleconsequencestandard, subjectto a foreseeabilitylimitation (CISG art. 74) Evenif Superior Courthadgranteddamages per Civil Code, thesecouldhavebeenlessthanwhatthe CISG wouldallow.

  23. Rengo vs azteca Decision (continued): “Sellerdidnotproveithadboughtadditionalmachinerytoperformthecontract.” (ThiswasneverclaimedbySeller, and theCISG’sarticle 74 expresslyprovidesforloss of profitdamages)

  24. Rengo vs azteca Decision (continued): “Sellerfailedtoproveithadproducedthegoods” Afteritwasclearthattheotherpartywouldnotperform (CISG art. 72), sellerwasrelievedfromobligationspending performance underthecontract (CISG art. 81) Under CISG art. 76, damageswouldbestillattainableevenif no substitutetransactionhadbeenenteredinto Under CISG art. 77, a non-breachingpatyisunder a dutytomitigatehisdamages, includinghisloss of profits

  25. Rengo vs azteca Superior Court’sdisposition of Azteca’sissueson appeal: Court reasonedthat per article 1949 of the Federal Civil Code, Azteca couldnotdemandspecific performance ifithadnotperformeditsownobligations. The CISG governedthisissue!

  26. Rengo vs azteca Azteca’sissueson appeal. Superior Courtfailedtoanalyze: IfRengo’s late deliveryamountedto a fundamental breach (CISG art. 25), if so, whetherAzteca’snotice of terminationwastimely (CISG art. 49). Also, courtshouldhavediscussedthatAzteca’srighttoavoidwas incompatible withitsrequestforspecific performance (CISG art. 46).

  27. The MisaPplication of the CISG in Mexico • After 24 years, judges in Mexico do notunderstand (or are notaware of ) the CISG • They do notunderstanditsscope of application • They do notunderstanditsmethod of interpretation • Theirdecisions are notuniform

  28. The MisapPlication of the CISG in Mexico Attorneys are notarguingthe CISG (and otheruniformlaws) properly

  29. The MisaPplication of the CISG in Mexico Non-uniforminterpretation of otherUniformLaws SupremeCourt’sKompetenz-Kompetenz case (UNCITRAL ModelLawon International CommercialArbitration) Mexicanlegislationon E-Commerce (influencedbyUNCITRAL’sModel Law on E Commerce), stillhardtoprovecontractmadebyelectronicmeans

  30. The MisaPplication of the CISG in Mexico Isthere hope? YES THERE IS!

  31. The MisaPplication of the CISG in Mexico AmendmentstotheMexicanConstitution in 2011, incorporated human rightstreatiesbyreference, in additiontothe fundamental rightsthatalreadyexisted in theConstitution’sprovisions

  32. The MisaPplication of the CISG in Mexico • More lawyers and judges are beingtrained in humanrightslaw and treaties • More lawyersargueinternationaltreaties, and are beginningto cite decisionsfromhumanrightstribunals • More opennesstoforeigndecisions!

  33. TheMissaplication of the CISG in Mexico How to replicate this in the international commercial (and uniform) law field? • Training judges in the use of Uniform Laws (CISG, Unidroit Principles, etc.) • Prepare training manual’s or Practical Handbooks for Judges and Practitioners • Work in conjunction with UNIDROIT, The Hague Conference on Private International Law, the International Trade Centre

  34. Thank you…. Alejandro Osuna González alejandro@osunalegal.com

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