United Nations Convention on Contracts for the International Sales of Goods 1980 Vienna Convention • http://cisgw3.law.pace.edu/cisg/ • http://www.unilex.info International standard literature John O. Honnold, Uniform Law for International Sales, 600 p. Peter Schlechtriem – Ingeborg Schwenzer, Commentary on the UN convention on the internationals Sale of Goods is 800 p. Bianca – Bonell, Commentary on the International Sales Law more than 800 p. Ramberg – Herre, Internationella köplagen, 925 p. Joseph Lookofsky, Understanding the CISG A.F.M. Maniruzzaman • “The United Kingdom has not yet ratified the CISG, perhaps because of pride in its longstanding common law legal imperialism or in its long-treasured feeling of the superiority of English law to anything else that could even challenge it.”  A.F.M. Maniruzzaman, IBA´s International Business Lawyer, December 2001 p. 489,. But coming from Finland I doubt if I have any right to criticize the English choice. When ratifying CISG the four Nordic countries, Denmark, Norway, Sweden and Finland made two essential reservations: - Not Part II, formation of contracts - Sales between Denmark, Norway, Iceland, Sweden and Finland, not CISG but the Nordic Sales Laws A.F.M. Maniruzzaman: the insular attitude of the United Kingdom / read Nordic countries/ to the harmonization phenomena is, in fact regrettable. It is time to wake up and face reality, and deal with it efficiently A short history • The first milestone was the foundation of UNIDROIT (the Institute for the Unification of Private Law) in Rome was founded by the League of Nations in 1926, • the second was a first draft convention presented Ernst Rabel in 1929, the work was interrupted by the 2nd world war. • A third milestone was the Hague Sales Law from 1964, which after all did not turn out to be a success. • The success came more than twenty years later, the UN Convention from 1980. The convention came into force on January 1988. CISG’s indirect influence on harmonization of commercial contract law: Firstly: - the UNIDROIT Principles of International Commercial Contracts (UPICC). • Secondly Principles of European Contract Law (PECL), sometimes called the Lando principles after the Danish professor Ole Lando. • Thirdly EC-Directives, here I especially have in mind the directive on certain aspects of the sale of consumer goods and associated guarantees. • Fourthly the Sales Chapter in the Draft Common Frame of Reference (DCFR, Book IV, Part A Sales) is strongly influenced by the convention (Based on the work of the Study Group on a European Civil Code, (SGECC )). • As a fifth point one could mention the influence CISG has had on domestic Sales Laws. This has been the fact e.g. in the Nordic countries, Norway, Sweden, Island and Finland and also in Germany and not to forget e.g. new member states of EU enacting new Codes. Peter Schlechtriem’s words “CISG has become a kind of lingua franca for international sales law questions, and it allows us to communicate with lawyers all around the world without the need – and enough knowledge – of understanding foreign law systems.” CISG is a great success, or is it, really ? CISG is not mandatory law! And influencing the contract practice? “This contract is not governed by CISG” Federation of oils, Seeds and Fats Association (FOSFA) and Grain and Feed Trade Association (GAFTA) “The following shall not apply to this contract: - The Uniform Law of Sales …; - The United Nations Convention on contracts for the international sales of goods …” An alternative: Tailor-made clauses on e.g. damages, excluding the CISG system The ICC model sales contract: Liability for delay Liquidated damages for delay in delivery shall be: ____ % of the price of the delayed goods (service) per week, with a maximum of ______% of the price of the delayed goods (service) or ___________€ Part I The convention is applicable to: International Contracts of Sales of Goods • but excluding e.g. the questions of – the capacity of the parties – the transfer of ownership – legal effects of the contract in respect of third party. – Consumer sales, goods bought for personal, family or household use These are governed by the law of the country, found by using the normal conflict of law rules International Sales between parties whose place of business are in different sates, and • the states are Contracting States; or • when the rules of international private law lead to application of the law of a Contracting State Other perhaps less important exemptions are sales • by auction • on execution or otherwise by authority of law • of stocks, shares, investment securities, negotiable instruments of money • of ships, vessels, hovercraft or aircraft • of electricity. Interpretation of International Conventions • Sunken rocks: – bad translations – unfamiliar terminology – familiar terminology, “dangerous friends” – the lack of clear logical preparatory works – the reader’s national looking glass Part I CISG 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. CISG Art. 7 (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. Part II of the convention deals with formation of contract • An offer is an expression of the offeror’s will addressed to one or more identified persons, • the offer must be clear and sufficiently definite, • it becomes effective as soon as it reaches the offeree. CISG - Nordic law, differences • CISG: the contract is concluded at the moment when the acceptance of the offer reaches the offeror, Art. 23, Art. 18(2). • The Nordic system: it becomes effective when the acceptance has come to the offeror’s attention, the Finnish Contract law § 7. Part III, sales Classical articles on the obligations of the seller, e.g.: She must deliver - at the right place and at the right time, - goods which are in conformity with the contract, quality, quantity and description, package in the manner required (objective and subjective test, art. 35) Obligations of the buyer The main obligation is of course - to pay the price. She/he has - to give notice in case of lack of conformity Passing of the risk from the seller to the buyer • the First Carrier Rule (art. 31, 35) Buyer’s optional remedies: • specific performance, he/she may order the repair of the goods or if the non- conformity is fundamental delivery of substitute goods. • When there is a fundamental breach of the contract the s/he may declare the contract avoided. Remedies • Reduction of price • Damages Article 50 If the goods do not conform with the contract and whether or not the price has already been paid, the buyer may reduce the price in the same proportion as the value that the goods actually delivered had at the time of the delivery bears to the value that conforming goods would have had at that time. However, if the seller remedies any failure to perform his obligations in accordance with article 37 or article 48 or if the buyer refuses to accept performance by the seller in accordance with those articles, the buyer may not reduce the price. Reduced value 20 % compared with the contractual value Price reduction 20 % Declare the contract avoided when there is a fundamental breach. Art. 25 the breach is fundamental if it results in such detriment to the other party as – substantially to deprive him from what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result. – delay, the so-called Nachfrist procedure. Article 74 Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract. Article 79 (1) A party is not liable for a failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences. Art. 79 (2) If the party's failure is due to the failure by a third person whom he has engaged to perform the whole or a part of the contract, that party is exempt from liability only if: (a) he is exempt under the preceding paragraph; and (b) the person whom he has so engaged would be so exempt if the provisions of that paragraph were applied to him. (3) The exemption provided by this article has effect for the period during which the impediment exists. (4) The party who fails to perform must give notice to the other party of the impediment and its effect on his ability to perform. If the notice is not received by the other party within a reasonable time after the party who fails to perform knew or ought to have known of the impediment, he is liable for damages resulting from such non-receipt. (5) Nothing in this article prevents either party from exercising any right other than to claim damages under this Convention. : avoidance, reduction of price, specific performance Nordic Sales Law § 40, 67 An impediment beyond control liability (only) for direct losses Culpa / negligence liability for direct and indirect losses Loss of profit, an indirect loss CISG 1980 – outdated? Risky to re-open CISG, but: - fantastic databases: literature, cases etc. - CISG Advisory Council, expert opinions, e.g. on electronic,Op. 1, on the controversial issue on buyers notice in case of lack of conformity of the goods, • article 7(1): international character, to the need to promote uniformity in its application, and the observance of good faith in international trade - Art. 7(1): international character, to the need to promote uniformity in its application, and the observance of good faith in international trade - Art. 7 (2): matters governed by CISG but not expressly settled in the convention are so be settled in conformity with: - the general principles on which it is based on – or in the absence of such principles in conformity with the law applicable by virtue of the rules of private international law.
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