United Nations Convention on Contracts for the International Sale of Goods (CISG) LLM , Faculty of Law, Chulalongkorn

1. United Nations Convention on Contracts for the International Sale of Goods (CISG)LLM , Faculty of Law, Chulalongkorn University Lect.TidaratSinlapapiromsuk

2. Introduction to the CISG : • 1980 - United Nations Convention on Contracts for the International Sale of Goods (CISG)

3. CISG: a great success

4. All important trading nations except The UK

5. บทบาทของ CISG : Influence Law Reform • Regional Harmonization of Lawe.g. Directives of the EC 1999/44/EC • International Projects of unification e.g. Principles for the International Commercial Contracts • China/Japan • ++ ASEAN proposal

6. PART I -- SPHERE OF APPLICATION AND GENERAL PROVISIONS

7. CHAPTER I -- SPHERE OF APPLICATION

8. Scope of Application • Art. 1 - Places of Business • Art. 2 - Exclusions • Art. 3 - Goods to be manufactured/ Services • Art 4 - Issues includes/excluded e.g. validity of contracts + the effect on the property. • Art 5 – Exclusion of liability for death and personal injury • Art 6 – the primacy of contract.

9. Article 1(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.”

10. Example1(1)(b) • Thai & UK + ‘arbitration in Wellington under New Zealand Law’ •  if conflict of law = law of New Zealand law • = CISG* Art. 1(1)(b) • Arguably , even a British Court would have to apply the CISG, if its conflict of law rules pointed to the application of New Zealand Law.

11. ARTICLE 95 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.  Attracted much scholarly attention and consequently some confusion.

12. Note • Not applicable  Contracting State VS Contracting State • US VS SING • = 1(1)(a) NO Art.95 ISSUE!

13. It is advisable to have a Choice of LAW Clause

14. 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.

15. Art. 1(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.”

16. (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.

17. “Neither 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” More than one places of business (Art. 10) ‘For the purposes of this Convention: (a) if a party has more than one place of business, the place of business is that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract; (b) if a party does not have a place of business, reference is to be made to his habitual residence.”

18. Scope of applicability : Exclusions • Art.2 : Exclusion  Types of Goods • Art.3 :Sale Contract (Only)

19. Article 2 : Exclusions “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.”

20. Article 3 : Manufactured / Services • Contract for Sale of Goods Only • vs • supply ‘substantial’ part of materials? Or • ‘Preponderant’ partof obligation is supply of labor? • IExcludedunder Art.3

21. Article 3 • (1) Contracts for the supply of goods to be manufactured or produced are to be considered salesunless the party who orders the goods undertakes to supply asubstantial part of the materials necessary for such manufacture or production. • (2) This Convention does not apply to contracts in which the preponderant partof theobligations of the party who furnishes the goods consists in the supply of labour or other services.

22. Art. 4: Validity + Effect on Property Excluded • 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: • (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.”

23. Art. 5 : Liability for Death& Personal Injury 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.

24. Article 6 of the Convention explicitly endorses the principle of freedom of contract: Flexibility under Art.6

25. 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.

26. 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 intention to be made in any form other than in writing does not apply where any 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 from or vary the effect of this article.

27. ARTICLE 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 that 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.

28. Article 6 of the Convention explicitly endorses the principle of freedom of contract:

29. ‘OPT-OUT’ PROVISIONCourt in Califlonia (2001) • Importance of effective

30. Sample clauses • ‘This Contract shall be governed by and construed under the laws of State of Florida , not including the 1980 United Nations Convention on Contracts for the International Sale of Goods ‘

31. Sample clauses • ‘The validity and performance of this Agreement shall be governed by the internal law of the state of California without regard to its rules on conflicts of law. The parties exclude the application of the 1980 United Nations Convention on Contracts for the International Sale of Goods…’

32. Changing the Opt out Tradition in the US by H.M Flechtner(2007) • ‘start up cost’  makes it more competitive • ‘Opt out’  ‘Opt in’ ‘Opting in’ = Making the Convention Applicable When It Would Not Otherwise Apply

33. ‘opt-in’ CISG as governing law • Making the Convention Applicable When It Would Not Otherwise Apply • ..i.e. ‘Opting-in’

34. ‘opt-in’ • The Convention is silent about whether parties may choose to have the Convention apply to transactions that do not fall within its sphere of application. The Convention might not apply because the transaction is not "international" within the scope of article 1(1) or because the transaction or the property involved are expressly excluded from the Convention's coverage. • Unless contrary to public policy, courts should enforce the parties' choice. It may be contrary to public policy, however, to apply the Convention to consumer sales or sales on execution of judicial process.

35. Sample clauses • ‘The rights and obligations of the parties under this agreement shall be governed by the United Nations Convention on Contracts for the International Sale of Goods.’

36. Sample clauses • ‘The rights and obligations of the parties under this agreement shall be governed by the United Nations Convention on Contracts for the International Sale of Goods notwithstanding that the rules of private international law (choice-of-law rules) might otherwise lead to the application of some other law.’

37. ‘Mixed’ =‘gap-filling’ • ‘Notwithstanding that the United Nations Convention on Contracts for the International Sale of Goods governs the rights and obligations of the parties to this contract, disputed issues not settled by the Convention or by the general principles on which it is based shall be resolved by application of the law of the State of Texas, including the Uniform Commercial Code as enacted in Texas.’

38. ‘This Contract shall be governed by and construed under the 1980 United Nations Convention on Contracts for the International Sale of Goods, or, to the extent that the Convention does not settle the rights and obligations of the parties, the law of the State of Texas’

39. Ultimately , it is the matter of the Conflict of law to decide whether or not the Choice of law clause is valid

40. CHAPTER II -- GENERAL PROVISIONS

41. Art.7-13 • Article 7 [Interpretation of the Convention] • Article 8 [Interpretation of statements or other conduct of a party] • Article 9 [Usages and practices applicable to the contract] • Article 10 [Definition of "place of business"] • Article 11 [Inapplicability of domestic requirement that contract be in writing and of other domestic requirements as to form] • Article 12 [Declaration by Contracting State preserving its domestic requirements as to form] • Article 13 [Telegram and telex as a "writing"]

42. Article 7 • 7(1) Interpretation of the Convention • 7(2) Gap-filling Provision

43. 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. • (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.

44. Note :‘Promote Uniformity’ • Persuasive authority (Unlike Common Law System)

45. Article 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. • (2) Questions concerning matters governed by this Convention(1)which are not expressly settled in it are to be settled in conformity with the general principles(2) 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 (3)

46. Art.7(1) : General Principles = ? • Good faith, reasonableness, estoppel?? • For esample • Estoppel  16(2)(b)..etc e.g. Promissory Estopel Clear Representation+Reliance+Detriment • Reasonableness 16(2)(b) ..etc

47. 16(2)(b) (b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted inrelianceon the offer.

48. Art 7(2) : Gap-Filling Provision • (2) Questions concerning matters governed by this Convention(1)which are not expressly settled in it are to be settled in conformity with the general principles(2) 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 (3)

49. Relationship between CISG & applicable domestic Law • Art. 7 (CISG): CISG vs Singapore Law • 1. The CISG takes precedence over Singapore Law : e.g. 18(2): Receive Rule • 2. The Principles of the CISG (also) • 3. Singapore Law (including the Singapore Sale of Goods Act and the common law) is the Residual Law for Matters not Governed by the CISG (Art.4b: Property in Goods) -------------------------------------------------------------- • 4* Singapore Public Order takes precedence over the CISG : Art. 4(a)

50. 1. CISG takes Precedence over Singapore Law • This is confirmed by the Implementing Act which states at s. 4 that “The provisions of the Convention shall prevail over any other law in force in Singapore to the extent of any inconsistency”. • Therefore if both parties are from contracting states, the CISG will take precedence over Singapore law.