A. CISG

1. A. CISG • United Nations Convention on Contracts for the International Sale of Goods • In effect since January 1, 1988 • Current state parties: 62, including Canada Mexico China Russia France United States Germany Web site: http://www.uncitral.org/

2. B. COVERAGE OF CISG • International contracts: buyer and seller must have their places of business in different states. • Both states must be contracting parties to the convention, or • The rules of private international law must lead to the application of the law of a contracting state. • Exception: A contracting state may declare that it will apply the CISG only when the buyer and seller are both from contracting states.

3. B. COVERAGE OF CISG • Opting in and out • The parties to a contract may exclude or modify the CISG’s application by a choice of law clause. • Whether parties can exclude a domestic law and adopt the CISG in its place depends on the rules of the state where the case is heard.

4. B. COVERAGE OF CISG • Merchants: CISG applies only to commercial sales transactions between merchants • CISG Art.1: buyers and sellers must both have “places of business.” • CISG Art. 2(a): the Convention does not apply to sales of goods bought for personal, family, or household use.

5. B. COVERAGE OF CISG • Subject Matter of CISG: • The formation of contracts. • The remedies available to buyers and sellers.

6. B. COVERAGE OF CISG • Subject Matter Not Covered: • The validity of contracts. • The competency of the parties. • The rights of third parties. • Liability for death or personal injury. • Sales to consumers. • Sales of services

7. B. COVERAGE OF CISG • Sales commonly subject to special regulation: • Auction sales, • Sales on execution or otherwise by authority of law, • Sales of stocks, shares, investment securities, negotiable instruments, or money • Sales of ships, vessels, hovercraft, or aircraft, and • Sales of electricity.

8. C. CISG COMPARED • General sources of CISG rules: French Civil Code, the French Commercial Code, and similar civil law codes.

9. C. CISG COMPARED • Distinctive CISG provisions: • Interpretation • Firm offers • Time of acceptance • Acceptance with additional terms • Definiteness • Formalities • Remedies

10. D. INTERPRETATION • Interpretation of a CISG Contract is based on— • the parties’ intent, and • all relevant circumstances.

11. D. INTERPRETATION • Parties’ Intent • Subjective Intent of a speaker is admissible if the other party knew or could not have been unaware of the speaker’s intent. • Objective Intent is used when a speaker’s intent is not clear to the other party. • Objective intent is determined according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances.

12. D. INTERPRETATION • Relevant Circumstances: courts are to give due consideration … to all relevant circumstances, including: • negotiations leading up to the contract. • practices the parties have established between themselves. • conduct of the parties after they agree to the contract.

13. D. INTERPRETATION • Rationale for using all relevant circum-stances: to do away with the technical rules that domestic courts sometimes use to interpret contracts. • Example: CISG does not use the common law’s parol evidence rule. • Caveat: The CISG allows parties to derogate from or vary the effect of any of the provisions of the Convention. • If the parties include a contract term (often called an integration clause) directing a court to ignore all prior or contemporaneous agreements, the court will have to give effect to that term.

14. E. FIRM OFFERS • Firm Offer is Irrevocable if: • the offeror indicates, whether by stating a fixed time or otherwise, that it is irrevocable, or • the offeree acts in reliance on the reasonable belief that it is irrevocable. • Firm Offer Does Not Have to be: • in writing (as required by the UCC), or • supported by consideration or cause.

15. F. TIME OF ACCEPTANCE • Acceptance is Effective and a contract formed only when the indication of assent reaches the offeror. • Caveat: An offeror may not revoke an offer once it has been dispatched. • Basis: French Civil Code's receipt rule. • Compare: UCC provides that an acceptance is effective upon dispatch.

16. G. ADDITIONAL TERMS • Additions, limitations, or other modifications constitute a “counteroffer.” • Caveat: This is so only if— • the additional or different terms materially alter the terms of the offer, or • the offeror fails to promptly object to changes that are not material.

17. G. ADDITIONAL TERMS • Material alterations are changes to the following: • Price • Payment • quality and quantity of the goods • place and time of delivery • extent of one party’s liability to the other • settlement of disputes • Basis: French mirror image rule and UCC § 2-207.

18. H. DEFINITENESS • A contract must be sufficiently definite so that a court can enforce it. • A contract is sufficiently definite if it: • describes the goods, and • expressly or impliedly fixes or makes provision for determining the quantity.

19. H. DEFINITENESS • Price should be stated or a means provided for determining it. • Price not stated: courts imply will the price generally charged at the time of the contract for like goods sold under comparable circumstances in the trade concerned

20. I. FORMALITIES • No Formalities: The CISG does not require a contract to be in any particular form • A contract may be proven by oral testimony regardless of the price involved. • Basis: French Commercial Code.

21. J. REMEDIES • Buyer’s Right of Avoidance • Requirements for avoiding a contract: • The seller commits a fundamental breach, or • The seller commits a lesser breach and the buyer gives the seller a Nachfrist notice that the seller rejects or does not comply with during the period it specifies. • Basis: German Civil Code.

22. J. REMEDIES • Nachfrist Notice: the fixing of an additional period of time of reasonable length for performance by the seller of his obligations. • The period must be definite and the obligation to perform within that period must be clear. • During the Nachfrist period the seller is entitled to correct (i.e., “cure”) the non-conformity at his own expense. • A cure may not be made if the breach is fundamental and the buyer chooses to avoid the contract.

23. J. REMEDIES • Time for Avoidance: Once the Nachfrist period has run, or once the fundamental breach becomes clear, the buyer has a reasonable time in which to avoid the contract.

24. J. REMEDIES • Seller’s Right of Avoidance • Analogous to that of the buyer’s avoidance remedy

25. J. REMEDIES • Buyer’s Right to a Reduction in Price • Applicable when: • the seller delivers non-conforming goods • the buyer accepts them, and • the seller is not responsible for the non-conformity

26. J. REMEDIES • Formula for determining the price reduction: The price is to be reduced by that ratio of: • The value at the time of delivery of the goods actually delivered, to • The value that conforming goods would have had at the time of delivery.

27. J. REMEDIES • Example • Idaho potatoes sold at $3.50/bushel for delivery in Djakarta • Damaged in transit by act of nature • Undamaged potatoes are worth $4.00/bushel if purchased in Djakarta • Damages potatoes are worth $2.80/bushel • The price reduction ratio is: $2.80 = 7 $4.00  10 • Applying this ratio, the reduced price the buyer pays is: $3.50 x 7/10  =  $2.45