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Disadvantages of CISG (assignment)

International Trade and Shipping Law (Multimedia University)

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Introduction

The United Nations Convention on Contracts for the International Sale of Goods
(CISG) is a multilateral treaty which sets out uniform legal rules to regulate or govern the
international sale of goods. Currently, this treaty has been ratified by 89 states around the
world which includes United States, China, Russia, Singapore and etc. CISG standout as one
of the best international uniform laws as it had attracted majority of the global business
leading nations to be its contracting states.

Back in the early eras, there was concern expressed on the issues of international trade
barriers caused by national differences in the law of contract. Eventually, it led International
Institute for the Unification of Private Law (UNIDROIT) to sponsor the drafting of a uniform
law on the international sale of goods in 1929. This process was interrupted by the Second
World War. It was soon resumed and led to the adoption of two conventions by a Diplomatic
Conference in 1964. The conference adopted two conventions on Uniform Law for the
International Sale of Goods (ULIS) and Uniform Law on the Formation of Contracts for the
International Sale of Goods (ULF). However, the Conventions failed to receive wide
acceptance as there was insufficient participation from representatives of countries worldwide
for the preparation of the Conventions.1 As there was increasing needs to solve the confusion
and litigation caused by overlapping foreign legal systems, drafting work on CISG was
started by the United Nations Commission on International Trade Law (UNCITRAL) in
1968. UNCITRAL completed the draft in 1978 which composed of parts on sales and
formation which were developed out of the two 1964 Conventions. The General Assembly of
the United Nations convened a diplomatic conference to consider the draft Convention. It was
then finalized during the Vienna Conference in 1980 after obtaining approval and the
ratifications of convention are analysed by specialists. CISG entered into force on 1 January
1988. Countries that have ratified the CISG are known as "Contracting States". These states
are bound by CISG to enact compliant legislation in their own territory.

Under CISG, there are comprehensive rules that govern formation of contract,
obligations of seller and buyer, remedies for breach of contract, party autonomy and other
related aspects. It attempts to unify various laws governing international commerce.

Recommendations: Whether countries should adopt CISG?

1
‘The United Nations Convention on Contracts for the International Sale of Goods: New Zealand's Proposed Acceptance’ (1992)
http://www.cisg.law.pace.edu/cisg/wais/db/articles/newz2.html accessed 10 August 2018

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In our opinion, countries should not adopt CISG due to the various weaknesses showcased by
it. CISG has many disadvantages arising from both its international nature as well as practical
application despite its many undeniable advantages.

Firstly, incompleteness of CISG. CISG has been criticized for its incompleteness as it did not
concern with the validity of contract2 as well as transfer/retention of title or transport. Article
4 of CISG expressly states that it does not concern with the validity of a contract. Thus, the
validity of every contract needs to be estimated from other applicable law, legal principles
and obligations established by other provisions of the Convention. Scholars recommended
that the term ‘validity’ should be interpreted precisely to avoid any loophole. Besides, there is
no mechanism to update the provisions and no international panel to solve interpretation
issues. In Pharmaceuticals Tech. Corp. v. Barr Labs. Inc3, the buyer from New Jersey
initial a claim against Canadian seller on breach of contract while the defendant argued on
lack of consideration. The court held that by validity, the CISG refers to any issue by which
domestic law would render the contract void, voidable or unenforceable. Apart from validity
of contract, CISG also did not cover the issues such as validity of penalty clause as well as
capacity of the parties4, it renders the incompleteness of CISG.

Secondly, there are criticisms on multiplicity of languages. CISG has been translated into six
official languages and it would lead to inconsistency in some way due to translation errors
and the untranslatability of ‘subtle nuances’ of language. Due to inaccurate language, courts
of different nations have interpreted provisions of CISG inconsistently. It has further
hindered the purpose of simplification and uniformity. There are confusion as to the legal
concepts too apart from multiplicity of language. This confusion can be easily seen and
demonstrated within the same language. “Withdrawal” and “revocation” were both
distinguished in Article 16 of CISG.5 Both of these words depend on whether the offer has
been received. The confusion of legal concepts had been made even more complicated by the
six official languages. It would be challenging for the courts with very different
interpretational styles to develop CISG uniformly due to vagueness of terms as well as lack
of clear definitions.

2
Jacob Ziegel, ‘The Future of the International Sales Convention from a Common Law Perspective’ (2000) 6 New Zealand Business Law
Quarterly 336, 345.
3
Pharmaceuticals Tech. Corp. v. Barr Labs. Inc. 201 F.Supp.2d 236 (2002)
4
‘III. Identifying The Matters Not Covered By The CISG According to Foreign and Italian Court Decisions’ http://www.sisudoc.org/cisg/en/
html/sales_related_issues_not_covered_by_cisg_under_italian_law.carlo_mastellone/s3.html accessed 10 August 2018
5
Christopher Kee, Edgardo Muñoz, ‘In Defence of the CISG’ http://www.austlii.edu.au/au/journals/DeakinLRev/2009/5.pdf accessed 10
August 2018

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Thirdly, CISG is static and unchangeable monument. CISG does not provide for any
amendment or modification of its own provision. Thus, it might not be able to deal with new
challenges in the future due to CISG’s ill-equipped. Fourthly, there was legal uncertainty if
countries choose to adopt CISG. Failure to define broad terms and novel terminology
definitely lead to legal uncertainty, it contradicts the need for clarity and simplification. The
terms of CISG are unique, new and vague, as a result CISG is complicated and in need of
clarity. Besides, CISG gives a lot of freedom for the courts to make just decisions and
interpret its provisions uniformly, however this flexible approach results in uncertainty as it is
difficult to predict the result of any disputes.

Fifthly, lack of precedents that apply CISG. The lack of precedents among common law
jurisdictions that apply CISG had resulted in the unwillingness of common law judges to
apply CISG. Some judges from United States have in fact lamented that there was little to no
case law on the CISG in general6 or there is virtually no case law on the convention 7. The
common law courts showed great reluctance to refer to scholarly opinion. Such reluctance is
a great obstacle in the implementation of CISG. Due to the lack of precedent given and the
reason that common law courts tend to rely more on precedents than civil law courts, its
reluctance to refer to scholarly opinion added to the complicatedness of implementing the
convention. Sixthly, CISG is not suitable for e-commerce. Article 2(a) of CISG expressly
excludes consumer contracts from the scope of the CISG. This provision limits the
application of CISG in an e-commerce context as one of the important characteristics of e-
commerce is that it gives consumers access to manufacturers and suppliers overseas as well
as allowing the consumers to contract directly with them. The inapplicability of the CISG to
consumer contracts is a vital limitation in the eras of e-commerce. Besides, the language of
the CISG was not designed to cover intangible goods so its provisions are not appropriate for
electronic contracts which involve the delivery of goods such as software. CISG will not
apply to e-commerce sales to consumers as the application of its provisions to electronic
contracts is quite problematic.8

In a nutshell, CISG is a vague and weak document that filled with many gaps. It is not
capable to support business transactions in their complexity alone. It seems more convenient
and safer for countries not to adopt CISG due to the disadvantages described above.

6
Helen Kaminski v Marketing Australia Products (1997) No 96B46519 (SD NY)
7
Delchi Carrier SpA v Rotororex Corp (1995) 71 F 3d 1024, 1027-28 (2nd Cir)
8
Jacqueline Mowbray, ‘The Application of the United Nations Convention on Contracts for the International Sale of Goods to E-Commerce
Transactions: The Implications for Asia’ (2003) https://www.cisg.law.pace.edu/cisg/biblio/mowbray.html#80 accessed 10 August 2018

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Countries should allow some neutral national law to govern the mutual contractual
relationship instead.

Bibliography
1. ‘Chapter – I: General Introduction and Background’http://shodhganga.inflibnet.ac.in/
bitstream/10603/33317/5/chapter%201.pdf accessed 10 August 2018
2. Christopher Kee, Edgardo Muñoz, ‘In Defence of the CISG’
http://www.austlii.edu.au/au/journals/DeakinLRev/2009/5.pdf accessed 10 August
2018
3. Ahadi Mona, ‘The United Nations Convention on Contracts for the International Sale
of Goods: Should Developing Nations Such As Iran Adopt the CISG?’ (2013)
http://etheses.dur.ac.uk/16/ accessed 10 August 2018
4. Georgiadou Katerina, ‘The Transformation of the UN Convention on Contracts for the
International Sale of Goods (CISG) into the UK Legal Order: Two Legislative
Models’ (August 2014)
https://derby.openrepository.com/derby/bitstream/10545/337282/1/PhD+UDORA.pdf
accessed 10 August 2018
5. Malahlela Celia, ‘Should South Africa Ratify the United Nations Convention on
Contracts for the International Sale of Goods?’ (2013)
https://repository.up.ac.za/bitstream/handle/2263/41579/Malahlela_Should_2014.pdf?
sequence=1 accessed 10 August 2018
6. ‘Uniform Law on International Sale of Goods Law International Essay: Chapter 2’
https://www.uniassignment.com/essay-samples/law/uniform-law-on-international-
sale-of-goods-law-international-essay.php#ftn40 accessed 10 August 2018

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