Consentia on Multidisciplinary Research

Contract for the International Sale of Good – An Analysis

We are living in the era of globalization and with the advent of internet and faster modes of communication, world has been condensed into a global village where almost each and every country are in trade relations with one another. Lifting up of legal fences with an endeavour to move on the lines of first world countries, businessmen of developing countries are now intricate in trade with traders from a wide array of jurisdiction whose laws are not familiar or uniform. Thus, this has resulted into many encountering legal problems associated with an unfamiliar system of laws causing several problems for all its stakeholders. Such a situation can be done away or dealt with if the trading countries have a uniform or similar legal system, such as CISG (Contract for the International Sale of Goods).[1] The United Nations Convention on Contracts for the International Sale of Goods, 1980 (CISG, or the Convention) represents one of the pillars of uniform international trade law. [2] The preamble to the CISG points to the establishment of a new economic order based on the mutual economic benefit of global trade; which plays a key role in developing friendly relations between states. [3] The intricacy in the international sale of goods ascends predominantly for the reason that every country has its own domestic law, rules and business customs which are most suited to the sales environment within the country, following this when two or more countries involved in contracts related to international sales of goods, there originates the problem of legal diversity. No two countries can have precisely the same domestic sales law. It may be uncertain which sets of legal rules apply to the transaction, and there are chances that more than one set of laws may apply, depending on how the rules of private international law earmark jurisdiction in regards to; the place of performance, the place where the contract is made, the parties’ domicile, nationality, or place of business and the location of the subject-matter. As a result the parties will have to bargain over the legal regime, and this will lead to go for a legal regime which is unfamiliar to one of the parties. This puts one of the parties in a resilient position than the other, thereby inexorably leading the weaker party to bear more costs. What CISG tries to do is to remove the uncertainty allied with the choice of law clause provided in the contract. It tries to create a legal regime with which commercial parties in different jurisdictions will be acquainted and will consent without superfluous negotiation. The fact that the CISG provides another choice that is neutral, for both parties, when neither entity is willing to surrender reliance on their own law, is an excellence of this convention. [4]

CISG fundamentally deals with two facets of the sales; Firstly, the formation of contracts for international sale of goods and secondly, the right and obligations of parties to these sales contracts. The CISG generally comprises 101 articles divided into four major Parts: Part I includes “Sphere of Application” (Articles 1-6) and “General Provisions” (Articles 7-12); Part II includes only “Formation of Contract” (Articles14-24); Part III is under the heading of “Sale of Goods” which includes “General Provisions” (Articles 25-29), “Obligations of the Seller” (Articles 31-52), “Obligations of the Buyer” (Articles 53-65), “Passing of Risk” (Articles 66-70), “Provisions Common to the Obligations of the Seller and of the Buyer” (Articles 71-88); Part IV is the provisions concerning the signature, ratification and accession or the like of the Contracting States under the heading of “Final Provisions” (Articles 89-101). [5]

Though it is true that the Convention is far from perfect like any other convention or legislation, but it still it provides indispensable advantages to developing countries. The CISG does not favour a common law approach over the civil law approach to the problems associated with the dealings between the parties or vice versa. It rather aims at a compromise between the two jurisdictions. [6] An extremely important aspect of the CISG is that it helps level the playing field for small and medium-sized businesses, as well as businesses located in developing countries.[7] Moreover, Article 6 enables them to exclude the application of the Convention and to derogate from or vary the effect of any of its provisions. Thus most of the provisions of the CISG can be excluded or derogated from, if the parties to the contract wish for it. The rules of the Convention are voluntary in nature, rather than being mandatory. Further, with the wave of liberalisation settling in since the year 1991, India has seen a robust growth in its external trade statistics. Almost all of the India’s major trading partners are signatories to CISG. Therefore having a familiar sales law with the host of nation will certainly help in facilitation of trade between India and its trading partners. As rightly pointed out by Professor Baker: ‘‘If economic factors and economic interests have partly determined the legal framework, it is even more true that law has furnished the whole general framework of rules within which and under which the factors and interests of economists have had to work.’’ The Convention will provide the legal infrastructure to facilitate the Government’s drive to promote economic expansion overseas by providing Indian businessmen and companies with a uniform sales law with the countries with which they are trading and it is not new that there can be situations where the national law is inappropriate for international transactions.[8]

The CISG serves as a stimulus for the development, revision and interpretation of domestic laws. As a testament to this fact, the Convention has been used as a background for the modification of a number of domestic Sales Laws. To name a few countries that has engaged in this: Germany, the Netherlands, Estonia, the Czech Republic, and China. This wind of change has also blown on regional and international principles which are availing themselves of the CISG principles to guide their drafting. In addition to this, the OHADA (Organization for the Harmonization of African Business Law), a union of 16 African States, has adopted a Common Sales Law which follows the CISG almost to the letter. The provisions of the CISG can be said to be compatible with the needs of developing countries and also provides a comprehensive foundation for sales transaction between Anglo-phone countries and Franco-phone Countries in Africa. The Convention strikes an adequate balance between national compulsory law and public policy, and the freedom of the parties. [9]

Throwing light on the role of CISG on different countries of the world, China signed the CISG on September 30, 1981 and ratified it together with US and Italy on 11 December 1986. The CISG entered into operative on 1 January 1988. The experience gained during the process of drafting the CISG was used during the legislative works on Chinese domestic civil law. Not only some legal institutions were regulated in similar way, but also general principles of the CISG were implemented into Chinese civil law. It is said that the law of the PRC (Peoples Republic of China) now ‘shares the core spirit embodied in the CISG China recognized the importance of international trade and participated actively in the drafting process of the CISG and when it turned into capitalism, the new code – CCL (Chinese Contract Law) was adopted.[10]

Regarding the CISG in Egypt, the new commercial law entered into force on October 1, 1999 and provided for commercial sales in Articles 88 through Article 103, it strongly reflects the influence of the CISG provisions. These developments have given Egypt one of the most sophisticated legal structures in the Arab world. The Egyptian legal system like the Syrian, Iraqi, and Mauritanian legal systems has been receptive to both foreign and customary legal principles. The legal systems of these countries have followed a movement of modernization that has occurred in most Islamic countries through the influence of European law and has gradually separated commercial law from the Sharia (Islamic law).[11]

Taking an important step towards stimulating economic growth through international trade, Brazil recently became the 79th nation to agree to the United Nations Convention on Contracts for the International Sale of Goods (CSIG). The CISG will take effect for Brazil on April 1, 2014. With this ratification, Brazil joins a group of nations that is responsible for most of the trade throughout the world.[12] Several benefits may arise from the adoption of the CISG. This is particularly true for developing countries as trade-trend in Brazil is inclining towards snowballing export of high-value manufactured goods, the flexibility of the CISG may support such trend. Moreover, the CISG is a neutral ground easily acceptable to all parties. Moreover, the significant amount of commentaries and case law available on the CISG, often for free, renders the legal analysis of its application simple and affordable for all. China has been a supporter of the CISG from the early days of the Convention and has further strengthened its favour over the years. Indeed, the CISG is seen as an early successful element of the trade law reform associated with the “Reform and opening policy”, and it has also significantly inspired the text of the new Chinese domestic contract law and both Brazilian and Chinese companies are expanding very fast their trade and investment operations in developing countries, especially in Southern Africa, and would greatly benefit from the adoption of modern trade law in those countries. The adoption of the CISG could be a first, very important step in that direction. It would be truly desirable to see Brazil and China undertaking efforts to support this goal, in the interest of all parties involved.[13] The CISG is said to be a breakthrough in the crusade to codify the private international law of the sale of goods and has attained strong world-wide endorsement. It epitomizes a noteworthy event in the development of a global uniform sales law with the imperative goal of promoting and achieving worldwide uniformity in the law of international sales contracts.[14] Which not only aids resolving disputes; common language and common understanding of key concepts also expedite negotiation and drafting sales contracts, this, in turn, considerably helps in limiting transaction costs.[15]

It has been shown that all in all the chronicle of the CISG has been a saga of worldwide triumph. Most outstandingly, the accomplishment of the CISG depicts that trailing the unification of laws is the right way. The congruent effect the Convention had and has on domestic legal systems and its influence on other uniform instruments and projects substantiate the superiority of the CISG.[16]

AUTHOR DETAILS:

Abhishek Subarno
Student, 2nd Year, LL.B
Campus Law Center, University of Delhi
abhisheksubarno@gmail.com

[1] Nkiruka Maduekwe, THE CISG AND NIGERIA: IS THERE A MEETING POINT? http://www.dundee.ac.uk/cepmlp/gateway/files.php?…‎

[2] Luca G. Castellani, Promoting the Adoption of the United Nations Convention on Contracts for the International Sale of Goods (CISG), http://www.cisg.law.pace.edu/cisg/biblio/castellani.html#iii

[3] Andrew J. Horowitz. REVISITING BARTER UNDER  THE CISG, JOURNAL OF LAW AND COMMERCE [Vol. 29:99] University of Pittsburgh School of Law, 2011; B.A., Trinity College, jlc.law.pitt.edu/ojs/index.php/jlc/article/…/21‎

[4] KARTIKEY MAHAJAN AND KANIKA SANWALThe Case for a Uniform Sales Law and CISG in India International Company and Commercial Law Review, Volume 20 Issue 10 2009 ISSN 0958–5214

[5] CISG-Brazil interview with UNCITRAL Legal Officer Luca Castellani, Reproduced with permission of CISG-Brasil website, http://cisgw3.law.pace.edu/cisg/biblio/castellani2.html#i

[6] KARTIKEY MAHAJAN AND KANIKA SANWALThe Case for a Uniform Sales Law and CISG in India International Company and Commercial Law Review, Volume 20 Issue 10 2009 ISSN 0958–5214

[7] Angelico Law, Brazil Becomes 79th Nation to Sign the UN’s CISG http://www.thebrazillawblog.com/brazil-becomes-79th-nation-to-sign-cisg/

[8] Luca G. Castellani, Promoting the Adoption of the United Nations Convention on Contracts for the International Sale of Goods (CISG), http://www.cisg.law.pace.edu/cisg/biblio/castellani.html#iii

[9] Nkiruka Maduekwe, THE CISG AND NIGERIA: IS THERE A MEETING POINT? http://www.dundee.ac.uk/cepmlp/gateway/files.php?…‎

[10] The influence of the United Nations Convention on Contracts for the International Sale of Goods on the  Chinese Contract Law: damages for breach of contract

[11] Fatima Akaddaf, Application of the United Nations Convention on Contracts for the International Sale of Goods (CISG) to Arab Islamic Countries: Is the CISG Compatible with Islamic Law Principles? Pace International Law Review Volume 13 Issue 1 Spring 2001

[12] Angelico Law, Brazil Becomes 79th Nation to Sign the UN’s CISG http://www.thebrazillawblog.com/brazil-becomes-79th-nation-to-sign-cisg/

[13] CISG-Brazil interview with UNCITRAL Legal Officer Luca Castellani, Reproduced with permission of CISG-Brasil website, http://cisgw3.law.pace.edu/cisg/biblio/castellani2.html#i

[14] Understanding the CISG, Dr.Ruangvichathorn’s Ph.D Thesis (Volume I, Part I), CISG Thailand, Sripatum University – centre for commercial law, http://cisg.spu.ac.th/under.html

[15] Ingeborg Schwenzer and Pascal Hachem, The CISG – A Storyof Worldwide Success

[16] Ibid

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