Contract of International Sales and Goods (CSIG)

Chapter 1 CSIG
The concept: seller, carrier & buyer.
Art (1) This Convention applies to contracts of sale of goods between parties whose places
of business are in different States: [main discussion: Place of business]
(a) when the States are Contracting States （country that ratified CISG）
(b) when the rules of private international law lead to the application of the law of a
Contracting State.
Four Scenario
1. State A (/) State B (/) = CISG (Applicable)
2. State A (/) State B ( )= If contract says follow A (Applicable), If follow B (not applicable)
3. State A （/）State B ( )= No governing law clause in contract. Court has to decide using
Private International law & rules, PIL leads to application of the law. State A = Yes.
4. State A (/) State B (/) = contract expressly mention the governing law clause say to apply
state law (CSIG not applicable)
Art 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. [the country has the right to choose when they ratified this agreement]
Case law
Scenario 3: when the rules of private international law lead to the application of the law
of a Contracting State.
Prime Start Ltd., v. Maher Forest Products Ltd. (U.S. District Court, Western District of
Washington at Seattle) 2006
A British Virgin Islands corporation (Plaintiff) and US corporation (Defendant) entered into a
contract for the sale of wooden products to be resold to Plaintiff’s client in Russia. Plaintiff
also concluded a contract with another US corporation (Co-defendant) which would provide
services related to quality control of the goods. Plaintiff brought an action against both US
corporations alleging non-conformity of goods and failure to inspect according to parties’
agreement.
As to the applicable law, the Court rejected the Plaintiff’s argument that the CISG applied to
the merits of the dispute. Not only were the conditions set forth by Art. 1(1)(a) CISG not
satisfied, since neither the British Virgin Islands nor the United Kingdom are Contracting
States, but also application of the CISG by virtue of international private law rules had to be
excluded, since the USA made a reservation to Art. 1(1)(b) pursuant to Art. 95. As a result,
the Convention could have applied only if the parties to the contract were all from
Contracting States.

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(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.
(3) 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.
By referring to this illustration: British man (nationality is not the key) establishes a UK
company (country of the business does not matter) in Malaysia (the country that they carried
out the business matter) trade with company in JB(this is important, where information
disclosed). CSIG not applicable in this situation as Malaysia did not ratify CISG. Thus,
SOGA is applicable.
Mansonville Plastics (B.C.) Ltd. v. Kurtz GmbH (2003)
A British Columbian manufacturer entered into a contract with an Austrian subsidiary of a
German seller for the sale of a pre-expander and a block mould to be financed by a lease
contract.
After installation of the equipment, although the buyer had received assurances that the
equipment would produce EPS products compatible with Canadian testing requirements, the
buyer found several flaws in the blocks produced by means of the seller’s equipment.
As to the applicable law, the Court rejected the seller’s argument that the buyer had implicitly
agreed to the application of German law. In the opinion of the Court, the mere fact that the
seller’s confirmation of order stated that delivery was to be carried out according to “General
Terms of Delivery of the [seller]” did not mean that a choice-of-law clause in favor of
German law had been agreed upon by the buyer. Instead, the law having the closest
relationship with the contract was the law of Ontario, Toronto being the place where the
equipment had been installed and put into operation.
British (UK), Germany and Canada – (application of Art 1 (1) (b).
William Jacks & Co (Singapore) Pte Ltd v Nelson Honey & Marketing (NZ) LtdZ
•The dispute was between the plaintiff, a company incorporated in Singapore and the
defendant, a company incorporated in New Zealand regarding an exclusive distributorship
agreement.
•Since both New Zealand and Singapore would be applying the similar form of
uniform law, their agreement would undisputedly be governed under the CISG, as both are
state parties to the said convention.
Art 2- CSIG not applicable to the 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;

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(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.
Article 3
(1) Contracts for the supply of goods to be manufactured or produced are to be considered
sales unless the party who orders the goods undertakes to supply a substantial part of the
materials necessary for such manufacture or production.
(2) This Convention does not apply to contracts in which the preponderant part of the
obligations of the party who furnishes the goods consists in the supply of labour or other
services.
Article3 Contracts for the supply of goods to be manufactured or produced are to be 
considered sales unless the party who orders the goods undertakes to supply a substantial 
part (at least 50%) of the materials necessary for such manufacture or production.
Article 4 – CISG only applies for establishing the formation, obligations / rights of parties of
the contract. It does not apply to determine:
(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.
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.
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 (Art 6). Art. 6 of the CISG states
that parties have freedom of contract. In other words, freedom of contract in the substantive
law of a state is almost party autonomy in the CISG. The Convention does not restrict the
freedom of sellers and buyers to determine the terms of their transactions.
A few type of sales such as consumer purchases are excluded from the Convention under Art
3 in order to avoid any conflict between party autonomy and protective legislation such as
consumer protective legislation. The CISG does not impose restrictions on the party
autonomy except the rule in Art 12 of the CISG. Freedom of contract in national law means
that individuals have the right to carry out economic activities without any undue interference
from the sovereign power, to sign or not to sign any contract, to depart from the particular
types of contracts, to make a contract without any form (written or oral), to determine the
provisions of a contract or to choose the counterparty.
The CISG recognizes same freedom of contract. For example, Art. 11 of the CISG states “a
contract of sale need not be concluded in or evidenced by writing and is not subject to any
other requirement as to form”, Art. 6 of the CISG grants parties the right to determine

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provisions of a contract, Art. 14 of the CISG and other articles give the right to choose
counterparty and to sign or not to sign a contract.
Article 10 (Place of business)  
(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 (where the person stays)

Article 11 (Contract can be oral / any means/ Limited Written Requirement)

The CISG embodies / represents a vigorous affirmation of the principle of party autonomy as
mentioned above. As a result of party autonomy, Art. 11 of CISG protects the freedom of
form, which is a dimension of freedom of contact, by stating that a contract of sale need not
be concluded in or evidenced by writing and not subject to any other formal requirement.

Article 12 - Party autonomy vs. Freedom of Contract

In general, there are no limits on party autonomy under the CISG as a principle. The only
limit to party autonomy under the CISG is Art 12 of the CISG which grants Contracting
States the right to require that contracts or modifications to contract be made in writing.
Article 12 of the CISG aims at accommodating the special demands of those States whose
legal systems impose the written form for contracts of international sales for purposes of
validity, evidence and administrative control. The law of the ex-U.S.S.R. imposed strict
formal requirements for making foreign trade contracts. U.S.S.R. insisted on that the written
form is imposed on contracts of international sale. Formal requirements were inconsistent
with modern commercial practice, particularly in view of speed and informality that
characterize many transactions in a market economy.

Art. 12 of the CISG applies to sales contract where one of the parties’ place of business is
located in a Contracting State which has made a declaration under Art 96 of this Convention.
The declaration can only be made by a state whose legislation requires contract of sale to be
concluded in or evidenced by writing – eg: China, Argentina. When the reservation is made
by the state and one of parties’ place of business is in a reservation state, the forum court
must determine the applicable law to form of contract according to its private international
law.

There are two school on the effect of an Article 96 reservation: the minority, which argues
that the true effect is the preservation of the formal requirements of the declaring Contracting
State, because the Convention should respect the underlying purposes of such legislation to

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protect against claims unsupported by a written agreement. However, where there are two
competing sets of formal requirements, it is not clear whether only one should be applied
exclusively, or both cumulatively.

The majority, on the other hand, argues that the issue should be solved under the conflict
rules of the lex fori, because these formal requirements are not part of internationally
applicable mandatory law, but they would also exclude the conflict rules of the other
Contracting States.

Arguably, the majority view is the more appropriate one, since it better respects the
sovereignty of both declaring and non-declaring Contracting States. If a Contracting State
does not invoke the reservation provision under s.96, freedom of form for contract according
to Art. 1(l)(b) and 11 of the CISG prevails. If the conflict of laws points to a reservation state,
the domestic law of that state prevails in the terms of form of contract.
Part II: Formation of the contract CISG (Art 14-24)
The concept is similar with the contract law that we have learnt. Use Contract mind will help
understanding better.
First element: Offer 【Similar with Contract Law】
(1) Criteria for an Offer. (Art 14 (1))
“A proposal for concluding a contract addressed to one or more specific persons constitutes
an offer if it is sufficiently definite and indicates the intention of the Offeror to be bound in
case of acceptance.”
(2) When Offer Becomes Effective, Prior Withdrawal. (Art 15 (1))
“It becomes effective when it reaches the offeree.”
(3) Revocability of Offer. (Art 16 (1))
“Until a contract is concluded, it may be revoked if the revocation reaches the offeree before
he has dispatched an acceptance.”
(4) Termination of Offer: Rejection of Offer Followed by Acceptance. (Art 17 (2))
“An offer (even if it is irrevocable) is terminated when a rejection reaches the Offeror.
Second element: Acceptance
(1) Acceptance: (i) Criteria and (ii) Time and Manner for Assent. (Art 18)
“A statement or other conduct of the offeree indicating assent to an offer is an acceptance.” It
“becomes effective at the moment it reaches the Offeror. An acceptance is not effective if it
does not reach the Offeror within the time fixed, or within a reasonable time.”
If by virtue of the offer, the offeree may indicate assent by performing an act, the acceptance
is effective at the moment the act is performed. (Art 18 (3)).

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Interpretation of Offeror’s Time Limits for Acceptance

Article 18(2) . . . provides that an acceptance is not effective ‘if the indication of assent does
not reach the Offeror within the time he had fixed….’ The offeror’s statement fixing the time
for acceptance may be ambiguous if it states a period of time (e.g., 15 days) for acceptance
and does not specify when the period starts to run or does not deal with the effect of holidays.
Art 20 is a guide to interpreting the offeror’s time limits for acceptance.
Withdrawal of Acceptance (Art.22)
An acceptance may be withdrawn if the withdrawal reaches the Offeror before or at the same
time the acceptance would have been effective.
Acceptance with modifications (Art 19)
A reply to an offer which purports to be an acceptance but contains additions, limitations or
other modifications is a rejection of the offer and constitutes a counter-offer.
A period of time for acceptance fixed by the offeror in a telegram or a letter begins to run
from the moment the telegram is handed in for dispatch or from the date shown on the letter
or, if no such date is shown, from the date shown on the envelope. (Art. 20 (1) ) Postal rule
It states that a late acceptance is nevertheless effective as an acceptance if without delay the
offeror orally informs the offeree that he considers his offer as having lapsed or dispatches
a notice to that effect. (Art. 20 (2))
 Illustration
 Buyer sent to seller a purchase order for certain production machinery. The back of
the form stated that seller would be responsible for all damages –including
consequential damages—resulting from defects in the machinery.
 In response, seller delivered to buyer its sales order (or acknowledgement) form that
purported to accept buyer’s offer.
 On the back of the form, it stated that seller agreed to repair or replace any machinery
that proved to be defective, but disclaimed liability for shutdown losses, damage to
materials, loss of good will or any other consequential damages.
 The machinery was then delivered to buyer and shortly thereafter defects caused a
shutdown of buyer’s assembly plant causing serious consequential damages. Will
consequential damages be included in buyer’s measure of damages?
 However, a reply to an offer which purports to be an acceptance but contains
additional or different terms which do not materially alter the terms of the offer
constitutes an acceptance, unless the offeror, without undue delay, objects orally to
the discrepancy or dispatches a notice to that effect. If he does not so object, the terms
of the contract are the terms of the offer with the modifications contained in the
acceptance.
 Additional or different terms relating, among other things, to the price, payment,
quality and quantity of the goods, place and time of delivery, extent of one party’s

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liability to the other or the settlement of disputes are considered to alter the terms of
the offer materially.
When Communication (i) “Dispatched,” (ii) “Reaches” the Addressee (Art.24)
For the purposes of this Part of the Convention, an offer, declaration of acceptance or any
other indication of intention “reaches” the addressee: when it is made orally to him or
delivered by any other means to him personally (by email virtually), to his place of
business or mailing address or,
if he does not have a place of business or mailing address, to his habitual residence.
no provision directly addresses when a communication is “dispatched.”
Third element: Seller
The obligation of the seller (Art 30)
General Obligation
The seller must deliver the goods, hand over any documents relating to them and transfer the
property in the goods, as required by the contract and this Convention.
Place of delivery (Art 31)
If the contract of sale involves carriage of the goods—in handing the goods over to the first
carrier for transmission to the buyer.
The seller has duly performed its duty of delivery when the goods are handed over to the first
carrier. If several subsequent carriers are involved, handing over to the first carrier constitutes
delivery.
Time of delivery (Art 33)
The seller must deliver the goods:
(a) if a date is fixed by or determinable from the contract, on that date;
(b) if a period of time is fixed by or determinable from the contract, at any time within that
period unless circumstances indicate that the buyer is to choose a date; or
(c) in any other case, within a reasonable time after the conclusion of the contract.
Handing over of Documents (Art 34)
If the seller is bound to hand over documents relating to the goods, he must hand them over at
the time and place and in the form required by the contract.
If the seller has handed over documents before that time, he may, up to that time, cure any
lack of conformity in the documents, if the exercise of this right does not cause the buyer
unreasonable inconvenience or unreasonable expense.
However, the buyer retains any right to claim damages as provided for in this Convention.
Conformity of the Goods (Art 35) Goods must be complied with the contract

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The seller must deliver goods which are of the quantity, quality and description required by
the contract and which are contained or packaged in the manner required by the contract.
(2) Except where the parties have agreed otherwise, the goods do not conform with the
contract unless they:
(a) are fit for the purposes for which goods of the same description would ordinarily be used;
(b) are fit for any particular purpose expressly or impliedly made known to the seller at the
time of the conclusion of the contract, except where the circumstances show that the buyer
did not rely, or that it was unreasonable for him to rely, on the seller’s skill and judgement;
(c) possess the qualities of goods which the seller has held out to the buyer as a sample or
model;
(d) are contained or packaged in the manner usual for such goods or, where there is no such
manner, in a manner adequate to preserve and protect the goods.
(3) The seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for any
lack of conformity of the goods if, at the time of the conclusion of the contract, the buyer
knew or could not have been unaware of such lack of conformity.
Forth element: Buyers
Buyer’s remedies (Art 45)
If the seller fails to perform any of his obligations under the contractor this Convention, the
buyer may:
(a) exercise the rights provided in articles 46 to 52; (Requiring performance; Avoidance;
reduction of price)
(b) claim damages as provided in articles 74 to 77.
(2) The buyer is not deprived of any right he may have to claim damages by exercising his
right to other remedies.
Obligation of the Buyer (Art 53)
The buyer must pay the price for the goods and take delivery of them as required by the
contract and this Convention.
Two main obligation of the Buyer:
(i) to pay the price for the goods; and (ii) to take delivery of the goods.
Fifth element: Payment of the Price
An international sale contract normally specifies not only the precise amount to be paid, but
also the exact time and place of payment.
In a letter of credit transaction, the buyer must make payment upon the presentation of
documents demonstrating that conforming goods have been shipped.
If the contract is silent as to the place of payment, Art 57 (1) of the default rule of CISG is
that payment is to be made at the seller’s place of business.

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Seller’s Remedies (Art 61)

If the buyer fails to perform any of his obligations under the
Contract or this Convention, the seller may:
(a) exercise the rights provided in articles 62 to 65; (Requiring buyer to pay the price,
avoidance)
(b) claim damages as provided in articles 74 to 77.
(2) The seller is not deprived of any right he may have to claim Damages by exercising his
right to other remedies.
Remedies of the Seller by breach of the Buyer
Art 61 sums up the remedies of the seller. They are:
(i) Requiring performance (Specific performance) (Requiring buyer to pay the price, take
delivery or perform his other obligations (Art 62);
(ii) Avoidance (Art 64);
(iii) Damages.
Fundamental Breach
Article 25 of the CISG provides a two-prong test: Firstly, the court would scrutinize the
substantiality or significance of the breach; and then secondly, deal with the foresight or
foreseeability issues. However, CISG does not provide any precise answers or guidelines
regarding the tipping point on when is a breach substantial enough to be fundamental, this is
left to court’s discretion which is then highly fact sensitive.

Late Performance and Fundamental Breach

In international sales transactions, late performance occurs mainly due to late delivery of
goods or late payment or late taking over of the goods. In relation to late delivery of the
goods, both the case law and the legal authors hold that delay does not per se constitute a
fundamental breach. Therefore, the seller's breach of the first delivery term should not lead to
immediate avoidance and the buyer under normal circumstances should allow him extension
of time as transaction costs / performance bond may increase disproportionally; if standards
of avoidance international trade become too sloppy or capricious.
Nevertheless, if time is made as an essential term, non-conformance may constitute a
fundamental breach especially delivery within a specific time is of special interest to the
buyer. Such contract would contain a contractual clause stating that delivery must be affected
at an exact time; taking into account circumstantial evidence, customs, usage or other
relevant factors.
In Italdecor s.a.s. v. Yiu's Industries (H.K.) Limited , in case concerning sales of seasonal
spring collection clothes, the Court of Appeals of Milan held that the term for delivery was of
essential importance, since these clothes were unlikely to be worn in a different season.

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However, the delivery of summer clothes one day after the fixed time was not held to
constitute a fundamental breach.
A term may also be considered essential ipso facto / the very fact or act, as in a case decided
by the Court of Parma , where a delay of two months in delivering on one third of the goods
ordered, was considered a fundamental breach of contract. The court found that according to
the statements and conduct of the parties the contract was to be considered concluded at the
time the order was confirmed, and that the seller was bound to dispatch all the goods within
the following week. It was held that the delay by the seller in delivering the goods, together
with the fact that two months after the conclusion of the contract the seller had delivered only
one third of the goods sold, amounted to a fundamental breach of the contract according to
article 49(1)(a) CISG.
The court held that the buyer was entitled to avoid the contract and to recover the full
purchase price already paid to the seller. Without referring to CISG, the court awarded the
buyer interest on the price to be refunded at the Italian statutory interest rate. Contrary to
what is provided in article 84(1) CISG with regard to time of accrual of interest, the court
held that interest was payable from the date of avoidance of the contract. The court did not
grant any further damages as there was no evidence of any further damage suffered by the
buyer.

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