International Sale of Goods

lOMoARcPSD|38071922
19-6-Saleof Goods - Lecture notes 9
Business Law (University of Queensland)
Scan to open on Studocu
Studocu is not sponsored or endorsed by any college or university

Downloaded by Mikestein Shayveich (mikelshayy@gmail.com)
lOMoARcPSD|38071922
International Sale of Goods
Electronic Transactions
2019
Dr Alan Davidson
Reference material
 John Mo, International Commercial Law, (6th edition, LexisNexis 2015)

Chap 2.
 United Nations Convention on Contracts for the International Sale of

Goods and Explanatory Note; available at
http://www.uncitral.org/pdf/english/texts/sales/cisg/V1056997-CISG-e-
book.pdf;
_______________________________
TRANSNATIONAL CONTRACTS
The operation and regulation of the International Sale of Goods depends on a

multitude of factors, such as the meaning of “goods”, the location of the parties,
the proper law of the contract and the very nature of applicable Contract Law.
Within Australia, the US and 87 other nations, International Contracts for Sale of
Goods are typically governed by the United Nations Convention on International
Sale of Goods 1980 (CISG).
INTERNATIONAL SALE OF GOODS
Read – John Mo, International Commercial Law, (6th edition, LexisNexis 2015)
Chap 2.
The most significant regimes for the international sale of goods are the United
Nations Convention on Contracts for the International Sale of Goods 1980

lOMoARcPSD|38071922
(CISG) and the UNIDROIT Principles of International Commercial Contracts.

The former is law in 89 countries (see Appendix) by virtue of Ratification,
Accession, Approval, Acceptance or Succession. It is applicable and binding
between members (see Article 1). The Unidroit Principles are a set of codified
rules and act as a model law where incorporated by the parties. There are 63
members and the rules operate by party autonomy, endorsement by domestic
legislation or principles of private International Law (conflict of laws).
UNIDROIT: Principles of International Commercial Contracts (PICC)
https://www.unidroit.org/instruments/commercial-contracts/unidroit-
principles-2016
In effect, the Principles are a re-statement of the general principles of contract law
acceptable to both common law and civil law traditions. The Principles are the
result of the work of a group comprising many distinguished experts in the field
of comparative law and international trade law representing the major legal
systems and geographical regions of the world. The Principles set forth general
rules for international commercial contracts and deal with the topics of the
formation, interpretation, substantive validity, performance and non-performance
of contracts. A commentary discussing each provision is also included in the text.
The Principles have a number of uses. They can serve as model provisions for
use by commercial entities in contractual negotiations and arrangements, they
could be drawn upon for use in the arbitral area or they may be used as a means of
interpreting and supplementing existing international instruments. The Principles
could also be considered a type of "ius commune" or "lex mercatoria."
UNIDROIT is an intergovernmental organisation founded in Rome in 1926 to

promote private law unification. It published “Principles of International
Commercial Contracts”, primarily for parties to incorporate into their cross-
border agreements. Courts and especially arbitrators also refer to them to interpret
or supplement national contract law rules, not necessarily suited to cross-border
transactions, or international instruments such as the 1980 UN Convention on
Contracts for the International Sale of Goods (CISG, adopted by Australia. The
2004 edition of the Principles extended coverage even further, affecting third
parties (agency and assignment) and limitation periods.
The 2016 edition is the 4th edition replacing the 2010 version. When approving
previous editions of the UNIDROIT Principles of International Commercial
Contracts, the Governing Council of UNIDROIT emphasised the need for the
Secretariat to monitor the use of the Principles in actual practice and to inquire
with the international legal and business communities whether new topics should
be considered for inclusion in future editions. Consistent with this instruction,
following the adoption of the Model Clauses for the Use of the UNIDROIT
Principles of International Commercial Contracts in 2013, the Secretariat drew the
Governing Council’s attention to long-term contracts and the possibility of future
work on the Principles in this area.

lOMoARcPSD|38071922
The 2016 edition of the UNIDROIT Principles was not intended as a revision of
the previous editions. The UNIDROIT Principles continue to be well received
generally and have not given rise in practice to any significant difficulties of
application.
The main objective of the 2016 edition is to take better into account the special
needs of long-term contracts. To do so, the content of the 2010 edition has been
altered only marginally: only six provisions have been amended, i.e. the Preamble
and Articles 1.11, 2.1.14, 5.1.7, 5.1.8, and 7.3.7. Indeed, the majority of
alterations were made to the Comments, in particular on the Preamble
(amendments to Comment 2) and Articles 1.11 (addition of a new Comment 3),
2.1.14 (amendments to Comments 1-3 and addition of a new Comment 4), 2.1.15
(amendments to Comment 2 and addition of a new Comment 3), 4.3 (amendments
to Comment 3 (which has become Comment 4) and addition of a new Comment
3), 4.8 (amendments to Comments 1-3), 5.1.3 (amendments to the Comment
(which has become Comment 1) and addition of a new Comment 2), 5.1.4
(addition of a new Comment 3), 5.1.7 (amendments to Comments 2-3), 5.1.8
(amendments to the Comment (which has become Comment 1) and addition of a
new Comment 2), 7.1.7 (addition of a new Comment 5), 7.3.5 (amendments to
Comment 3 and addition of a new Comment 4), 7.3.6 (amendments to Comment
1), and 7.3.7 (amendments to Comments 1-2).
As a result, the 2016 edition of the UNIDROIT Principles, like the 2010 edition,
consists of 211 Articles (as opposed to the 120 Articles of the 1994 edition and the
185 Articles of the 2004 edition) and covers virtually all the most important topics
of general contract law. For ease of comparison, the 2016 edition contains a table
of correspondence of the articles of the four editions.
At its 95th session in May 2016, the UNIDROIT Governing Council adopted the
amendments and additions to the 2010 UNIDROIT Principles of International
Commercial Contracts recommended by the Working Group on Long Term
Contracts, with the exception of the new provisions on termination for compelling
reason, and authorised the Secretariat to prepare and publish a new edition to be
known as the “2016 UNIDROIT Principles of International Commercial
Contracts”. The Report on the Governing Council’s deliberations is available at:
www.unidroit.org/english/governments/councildocuments/2016session/cd-95-15-e.pdf

lOMoARcPSD|38071922
United Nations Convention on Contracts for the

www.cisg.law.pace.edu/cisg/text/cisg-toc.html
www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG.html
Honnold, Uniform Law for International Sales, 4th edition, Wolters Kluwer, 2009.
Date of adoption: 11 April 1980 - Adopted by 89 jurisdictions (Feb 2019)

See www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html
Ratification,
Accession(*),
State Notes Signature Approval(†), Entry into force
Acceptance(‡) or
Succession(§)
Albania 13/05/2009(*) 01/06/2010
Argentina (a) 19/07/1983(*) 01/01/1988
Armenia (a), (b) 02/12/2008(*) 01/01/2010
Australia 17/03/1988(*) 01/04/1989
Austria 11/04/1980 29/12/1987 01/01/1989
Azerbaijan 03/05/2016(*) 01/06/2017
Bahrain 25/09/2013(*) 01/10/2014
Belarus (a) 09/10/1989(*) 01/11/1990
Belgium 31/10/1996(*) 01/11/1997
Benin 29/07/2011(*) 01/08/2012
Bosnia and Herzegovina 12/01/1994(§) 06/03/1992
Brazil 04/03/2013(*) 01/04/2014
Bulgaria 09/07/1990(*) 01/08/1991
Burundi 04/09/1998(*) 01/10/1999
Cameroon 11/10/2017(*) 01/11/2018
Canada (c) 23/04/1991(*) 01/05/1992
Chile (a) 11/04/1980 07/02/1990 01/03/1991
China (b) 30/09/1981 11/12/1986(†) 01/01/1988
Colombia 10/07/2001(*) 01/08/2002
Congo 11/06/2014(*) 01/07/2015
Costa Rica 12/07/2017(*) 01/08/2018
Croatia 08/06/1998(§) 08/10/1991
Cuba 02/11/1994(*) 01/12/1995
Cyprus 07/03/2005(*) 01/04/2006
Czechia 30/09/1993(§) 01/01/1993
Denmark (d) 26/05/1981 14/02/1989 01/03/1990
Dominican Republic 07/06/2010(*) 01/07/2011
Ecuador 27/01/1992(*) 01/02/1993
Egypt 06/12/1982(*) 01/01/1988

lOMoARcPSD|38071922
El Salvador 27/11/2006(*) 01/12/2007

Estonia 20/09/1993(*) 01/10/1994
Fiji 07/06/2017 01/07/2018
Finland (d) 26/05/1981 15/12/1987 01/01/1989
France 27/08/1981 06/08/1982(†) 01/01/1988
Gabon 15/12/2004(*) 01/01/2006
Georgia 16/08/1994(*) 01/09/1995
Germany (e) 26/05/1981 21/12/1989 01/01/1991
Ghana 11/04/1980
Greece 12/01/1998(*) 01/02/1999
Guinea 23/01/1991(*) 01/02/1992
Guyana 25/09/2014(*) 01/10/2015
Honduras 10/10/2002(*) 01/11/2003
Hungary 11/04/1980 16/06/1983 01/01/1988
Iceland (d) 10/05/2001(*) 01/06/2002
Iraq 05/03/1990(*) 01/04/1991
Israel 22/01/2002(*) 01/02/2003
Italy 30/09/1981 11/12/1986 01/01/1988
Japan 01/07/2008(*) 01/08/2009
Kyrgyzstan 11/05/1999(*) 01/06/2000
Latvia 31/07/1997(*) 01/08/1998
Lebanon 21/11/2008(*) 01/12/2009
Lesotho 18/06/1981 18/06/1981 01/01/1988
Liberia 16/09/2005(*) 01/10/2006
Lithuania 18/01/1995(*) 01/02/1996
Luxembourg 30/01/1997(*) 01/02/1998
Madagascar 24/09/2014(*) 01/10/2015
Mauritania 20/08/1999(*) 01/09/2000
Mexico 29/12/1987(*) 01/01/1989
Mongolia 31/12/1997(*) 01/01/1999
Montenegro 23/10/2006(§) 03/06/2006
Netherlands 29/05/1981 13/12/1990(‡) 01/01/1992
New Zealand 22/09/1994(*) 01/10/1995
Norway (d) 26/05/1981 20/07/1988 01/08/1989
Paraguay (a) 13/01/2006(*) 01/02/2007
Peru 25/03/1999(*) 01/04/2000
Poland 28/09/1981 19/05/1995 01/06/1996
Republic of Korea 17/02/2004(*) 01/03/2005
Republic of Moldova 13/10/1994(*) 01/11/1995
Romania 22/05/1991(*) 01/06/1992
Russian Federation (a) 16/08/1990(*) 01/09/1991
Saint Vincent and the
(b) 12/09/2000(*) 01/10/2001
Grenadines
San Marino 22/02/2012(*) 01/03/2013
Serbia 12/03/2001(§) 27/04/1992
Singapore (b) 11/04/1980 16/02/1995 01/03/1996
Slovakia (b) 28/05/1993(§) 01/01/1993

lOMoARcPSD|38071922
Slovenia 07/01/1994(§) 25/06/1991

Spain 24/07/1990(*) 01/08/1991
State of Palestine 29/12/2017(*) 01/01/2019
Sweden (d) 26/05/1981 15/12/1987 01/01/1989
Switzerland 21/02/1990(*) 01/03/1991
Syrian Arab Republic 19/10/1982(*) 01/01/1988
The former Yugoslav Republic
22/11/2006(§) 17/11/1991
of Macedonia
Turkey 07/07/2010(*) 01/08/2011
Uganda 12/02/1992(*) 01/03/1993
Ukraine (a) 03/01/1990(*) 01/02/1991
United States of America (b) 31/08/1981 11/12/1986 01/01/1988
Uruguay 25/01/1999(*) 01/02/2000
Uzbekistan 27/11/1996(*) 01/12/1997
Venezuela (Bolivarian
28/09/1981
Republic of)
Viet Nam (a) 18/12/2015(*) 01/01/2017
Zambia 06/06/1986(*) 01/01/1988
Parties: 89
Notes
(a) This State declared, in accordance with articles 12 and 96 of the Convention, that
any provision of article 11, article 29 or Part II of the Convention that allowed a
contract of sale or its modification or termination by agreement or any offer,
acceptance or other indication of intention to be made in any form other than in
writing, would not apply where any party had his place of business in its territory.
(b) This State declared that it would not be bound by paragraph 1 (b) of article 1.
(c) Upon accession, Canada declared that, in accordance with article 93 of the
Convention, the Convention would extend to Alberta, British Columbia, Manitoba, New
Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island
and the Northwest Territories. In a declaration received on 9 April 1992, Canada
extended the application of the Convention to Quebec and Saskatchewan. In a
notification received on 29 June 1992, Canada extended the application of the
Convention to the Yukon Territory. In a notification received on 18 June 2003, Canada
extended the application of the Convention to the Territory of Nunavut.
(d) Denmark, Finland, Iceland, Norway and Sweden declared that the Convention
would not apply to contracts of sale or to their formation where the parties have their
places of business in Denmark, Finland, Iceland, Norway or Sweden.
(e) Upon ratifying the Convention, Germany declared that it would not apply article 1,
paragraph 1 (b) in respect of any State that had made a declaration that that State
would not apply article 1, paragraph 1 (b).

lOMoARcPSD|38071922
_______________________________________________________
Purpose
The purpose of the CISG is to provide a modern, uniform and fair regime for
contracts for the international sale of goods. Thus, the CISG contributes
significantly to introducing certainty in commercial exchanges and decreasing
transaction costs.
Why is it relevant?
The contract of sale is the backbone of international trade in all countries,

irrespective of their legal tradition or level of economic development. The CISG
is therefore considered one of the core international trade law conventions whose
universal adoption is desirable.
The CISG is the result of a legislative effort that started at the beginning of the
twentieth century. The resulting text provides a careful balance between the
interests of the buyer and of the seller. It has also inspired contract law reform at
the national level.
The adoption of the CISG provides modern, uniform legislation for the
international sale of goods that would apply whenever contracts for the sale of
goods are concluded between parties with a place of business in Contracting
States. In these cases, the CISG would apply directly, avoiding recourse to rules
of private international law to determine the law applicable to the contract, adding
significantly to the certainty and predictability of international sales contracts.

lOMoARcPSD|38071922
Moreover, the CISG may apply to a contract for international sale of goods when
the rules of private international law point at the law of a Contracting State as the
applicable one, or by virtue of the choice of the contractual parties, regardless of
whether their places of business are located in a Contracting State. In this latter
case, the CISG provides a neutral body of rules that can be easily accepted in light
of its transnational nature and of the wide availability of interpretative materials.
Finally, small and medium-sized enterprises as well as traders located in

developing countries typically have reduced access to legal advice when
negotiating a contract. Thus, they are more vulnerable to problems caused by
inadequate treatment in the contract of issues relating to applicable law. The same
enterprises and traders may also be the weaker contractual parties and could have
difficulties in ensuring that the contractual balance is kept. Those merchants
would therefore derive particular benefit from the default application of the fair
and uniform regime of the CISG to contracts falling under its scope.
Key provisions
The CISG governs contracts for the international sales of goods between private
businesses, excluding sales to consumers and sales of services, as well as sales of
certain specified types of goods. It applies to contracts for sale of goods between
parties whose places of business are in different Contracting States, or when the
rules of private international law lead to the application of the law of a
Contracting State. It may also apply by virtue of the parties' choice. Certain
matters relating to the international sales of goods, for instance the validity of the
contract and the effect of the contract on the property in the goods sold, fall
outside the Convention's scope. The second part of the CISG deals with the
formation of the contract, which is concluded by the exchange of offer and
acceptance. The third part of the CISG deals with the obligations of the parties to
the contract. Obligations of the sellers include delivering goods in conformity
with the quantity and quality stipulated in the contract, as well as related
documents, and transferring the property in the goods. Obligations of the buyer
include payment of the price and taking delivery of the goods. In addition, this
part provides common rules regarding remedies for breach of the contract. The
aggrieved party may require performance, claim damages or avoid the contract in
case of fundamental breach. Additional rules regulate passing of risk, anticipatory
breach of contract, damages, and exemption from performance of the contract.
Finally, while the CISG allows for freedom of form of the contract, States may
lodge a declaration requiring the written form.
Relation to private international law and existing domestic law
The CISG applies only to international transactions and avoids the recourse to
rules of private international law for those contracts falling under its scope of

lOMoARcPSD|38071922
application. International contracts falling outside the scope of application of the

CISG, as well as contracts subject to a valid choice of other law, would not be
affected by the CISG. Purely domestic sale contracts are not affected by the CISG
and remain regulated by domestic law.
Additional information
Becoming a party to the CISG has no financial implications for Contracting

States. Moreover, its administration at the domestic level does not require a
dedicated body and does not involve any reporting obligations. The CISG is
accompanied by an explanatory note.
CISG in Australia
1. In each Australian jurisdiction, the 1980 United Nations Convention on

Contracts for the International Sale of Goods (the Vienna Convention), has
been adopted by statute. In Queensland, the relevant statute is the Sale of
Goods (Vienna Convention) Act 1986 (Qld).
www.legislation.qld.gov.au/LEGISLTN/CURRENT/S/SaleGoodVieA86.pdf
2. Australia formally became a party to the convention on 17 March 1988, and

the Vienna Sales Convention commenced operation as part of the domestic
law of Australia (and Queensland) on 1 April 1989.
3. The drafting of the Convention was undertaken by the United Nations

Commission on International Trade Law (UNCITRAL) following the
failure of an earlier attempt at this sort of Convention, the Hague
Convention of 1964. The Convention seeks to accommodate as many
systems of law as possible in its drafting.
4. The advantage for Australia in adopting the Convention is said to be the

avoidance of conflicts of laws problems which can otherwise arise in
international contracts. This occurs because there are set rules in the
Convention for dealing with possible conflicts in legal contracts. These
rules, where enough countries adopt the Convention, are then accepted
internationally.
5. The official English language text of the Convention is set out in the
Schedule to the Sale of Goods (Vienna Convention) Act 1986.
Section 5 - Convention to have the force of law

The provisions of the Convention have the force of law in Queensland.
Section 6 - Convention to prevail in event of inconsistency

The provisions of the Convention prevail over any other law in force in
Queensland to the extent of any inconsistency.
_________________________________________

lOMoARcPSD|38071922
Salient Features
Harmonisation and Uniformity
 No consideration
 No price
 No mirror agreement
 Obligation to allow time to remedy breach
 No option
The Convention provides:
1. Comprehensiveness
2. Flexibility
3. Universality
4. Simplicity
5. Care for the Goods
1. Comprehensiveness - The Convention attempts to be comprehensive to keep

the parties in the contract. For example articles 34 and 37. Each allows a "cure"
or remedy "provided that the exercise of this right does not cause the buyer
unreasonable inconvenience or unreasonable expense." To thus enable the parties
to maintain the contract thus facilitation of international trade. Note the
avoidance is only possible for fundamental breach, article 25:
25 A breach ... is fundamental if it results in such detriment ... as substantially to

deprive him of what he is entitled to expect under the contract ...
Also articles 49(1)(a) and 64(1)(a):

49(1) The buyer may declare the contract avoided:
(a) if the failure by the seller to perform any of his obligations under the contract
or this Convention amounts to a fundamental breach of contract;…
64(1) The seller may declare the contract avoided:

(a) if the failure by the buyer to perform any of his obligations under the contract
or this Convention amounts to a fundamental breach of contract; …
Articles 47(1) and 63(1):

47(1) The buyer may fix an additional period of time of reasonable length for
performance by the seller of his obligations.
63(1) The seller may fix an additional period of time of reasonable length for
performance by the buyer of his obligations.
That the parties should maintain the contract is central to article 6 that the parties
may derogate from any provision.
6 The parties may exclude the application of this Convention or, subject to article
10

lOMoARcPSD|38071922
12, derogate from or vary the effect of any of its provisions.
2. Flexibility for maintenance of the contract.
3. Universality and neutrality. It strikes a balance between the buyer and the
seller.
4. Simplicity - in order that the document is not just for lawyers but also for
business people. It avoids sophisticated legal terms or abstract legal concepts.
Example - In common law countries risk passes when the property in the goods is
transferred, but not so in the Convention. The Convention does not make the
passage of risk dependent upon transferability. Passage of risk transfers when the
goods come into the possession of the buyer. That is - risk passes when
possession passes. Article 67:
67... the risk passes to the buyer when the goods are handed over to the first
carrier for transmission to the buyer in accordance with the contract ...
5. Care for the Goods. The Convention attempts preservation of the goods
regardless of fault. The rules are based on possession.
85 If the buyer is in delay ... and the seller is in possession... then the seller must
take such steps as are reasonable in the circumstances to preserve the goods.
Article 1
Article 1
(1) This Convention applies to contracts of sale of goods between parties whose
places of business are in different States:
(a) when the States are Contracting States; or
(b) when the rules of private international law lead to the application of the law
of a Contracting State.
(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.
An international sale of goods takes place when the parties have places of
business in different States (i.e. sovereign States). The test here is based on the
parties and not on the international transfer of goods.
Article 1 - sphere of Application.

1(1) It would have been too ambitious and impossible to harmonise and regulate
11

lOMoARcPSD|38071922
all domestic law. The Convention is predicated on the movement of goods

between states. The test is predicated on the parties and not on the international
sale of goods. So the connecting factor is the place of business, not the residence,
domicile or nationality. Hence note article 1(3).
This definition seems incompatible with common sense.

Example - Chilean company owns mobile homes in Brisbane, sale to Belgium
company who intends to retail them in Brisbane. The CISG applies.
Example - Australian company owns chairs in Fiji and sells to an Australian
company chairs to be shipped to New Zealand. Although there is an international
movement of goods the CISG does not apply.
Place of business defined in article 10.
Article 10
For the purposes of this Convention:
(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.
Example - US companies negotiated in Indiana, but one has its place of business
outside the US and contract is to be performed outside. That is, article 10 is a
little unclear, there is no case law and we do not know how much business need
be transacted to be a place of business.
In the EU it would need to be a branch and not a subsidiary. (An agency for an
insurance co is not a place of business).
Note article 1(2) - disregard place of business – “The fact that the parties have
their places of business in different States is to be disregarded whenever this fact
does not appear from the contract or from any dealings between, or from
information disclosed by the parties ...”
It is designed to protect a party who does not know that they are entering into an
international sale of goods. This deals with the "undisclosed principal"
Example A (seller (contracting state)) - B (buyer (contracting state)). If A deals

with agent of B and does not disclose B and has a place of business in country A -
Convention does not apply.
Contracting State Limitation.

1(1)(a) or (b).
The Convention adopts a very narrow interpretation of the concept of
internationality (others are wide).
A universalist approach would be - Contracts for the sale of goods between parties
whose places of business are in different states. [Hague Convention 1985 has this
universalist approach]
12

lOMoARcPSD|38071922
Article 6
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.
A general exclusion provision. This article is meant to encourage the contracting

parties to reach an agreement they are both happy with. Any part of the
Convention can be excluded, subject to Article 12. Alternatively, the parties can
elect not to apply the Convention at all. Could two parties choose to apply the
Convention to their sales agreement, even though neither party is in a contracting
State? …
Private International Law rules - Conflicts of Laws rules.

In Cortem SpA v Controlmatic Pty Ltd [2010] FCA 852
[90] … Where an international contract for the sale of goods is made between
persons resident in different states which have acceded to the Vienna Convention
(such as Italy and Australia)— ‘… the need for conflicts law is obviated. To the
extent of its application, the convention, as implemented municipally, may be seen
to operate as a mandatory law of the forum, although it is open to the parties to
expressly exclude or contract out of the operation of the Convention.’
Every state has these rules to determine which law applies, but one is that the
parties have the right to choose their own law.
Example - A (seller (contracting state)) - B (Buyer (ncs))

1(1)(a) does not apply. But, if law of A applies then the CISG applies.
Example Aust seller (CS) Indonesian buyer (ncs) Chinese goods (cs). Parties
agree that Chinese law applies. Does the Convention. apply? Article 1(1)(b) does
not apply because China derogated from 1(1)(b).
_________________________
Consider
Example 1
A US company owns caravans in Brisbane. The US company sells the caravans

to a French company which retails the caravans throughout Queensland. Does the
convention apply?
Answer:
Example 2
An Australian company owns furniture in China. It sells the furniture to another

Australian company, which subsequently ships the furniture to a retail store in
New Zealand. Does the convention apply?
Answer:
Example 3
A seller in Queensland deals with a supposed buyer in Queensland. The supposed

buyer is in fact an agent for an undisclosed principal. The principal is a French
Company. Does the convention apply?
13

lOMoARcPSD|38071922
Answer:
Example 4
A seller in Queensland is dealing with a buyer in Iran. Iran is not a contracting

state. Does the convention apply?
Answer:
In conjunction with Article 1, read also Articles 6 and 10.
Example 5
Two Australian companies have places of business in Queensland. One of the

companies also has a place of business in the US. Company A sells goods to
company B which goods are delivered to company B's US warehouse. Which is
the relevant place of business for the purposes of the Convention?
Answer:
__________________________________________________
_____________________________________________________
Article 2
This Convention does not apply to 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;
(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 2(a)(b)(c) – nature of transaction

2(d)(e)(f) – nature of goods
2(c) is dependent on government order or legislation; or mortgagee exercising
power of sale. The rationale is that the parties have no control of jurisdiction.
Consider Article 2(a). Why have this exclusion? See section 68 Australian
Consumer Law [Schedule 2 Competition and Consumer Act 2010 (Cth)]
Convention on Contracts for the International Sale of Goods – Section 68.
“The provisions of the United Nations Convention on Contracts for the
International Sale of Goods, done at Vienna on 11 April 1980, as amended and in
force for Australia from time to time, prevail over the provisions of this Division
to the extent of any inconsistency.”
Note that “consumer” transactions under the ACL does not equate to “goods
bought for personal, family or household use” under the CISG.
14

lOMoARcPSD|38071922
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.
Example of 3(2) - tooth fill.
Contracts for the provision of services are excluded under Article 3(2). What is
the purpose of Article 3(1)?
Article 4
This Convention governs only the formation of the contract of sale and the rights
and obligations of the seller and the buyer arising from such a contract. In
particular, except as otherwise expressly provided in this Convention, it is not
concerned with:
(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.
Exclusions – example - capacity of the parties; illegality; public policy; national

artefacts (art aboriginal effects).
Prof Honnold argues that art 4 preserves the rules which applies when a party is
induced to enter a contract by fraud. But he does not distinguish between validity
and voidability (pp 49-50 (third ed). (Honnold, Uniform Law for International
Sales, 4th edition, Wolters Kluwer, 2009.)
Domestic rules concerned with the validity of the contract of sale are preserved
under the Convention.
Rationale is that most countries already have extensive consumer protection laws;
and so it was decided not to have such provisions in the Convention.
Note - section 68 Australian Consumer Law [Schedule 2 Competition and

Consumer Act 2010 (Cth)]
Convention on Contracts for the International Sale of Goods – Section 68.

“The provisions of the United Nations Convention on Contracts for the
International Sale of Goods, done at Vienna on 11 April 1980, as amended and in
force for Australia from time to time, prevail over the provisions of this Division
to the extent of any inconsistency.”
Section 64 Australian Consumer Law provides that (where applicable) parties

may not exclude the provisions of Division 1 of Part 3-2 (that is the guarantees –
15

lOMoARcPSD|38071922
formerly warrantees in the TPA). The Convention is directory law pursuant to

article 6. This means that we can have the Convention apply (for example by
Art 1(1)(b)) and so exclude the mandatory provisions of the Competition and
Consumer Act 2010. Note that “consumer” transactions does not equate to goods
bought for personal, family or household use. (Art 2(a))
In relation to “This Convention ... is not concerned with: ... (b) the effect which
the contract may have on the property in the goods sold” – note that a sale has two
parts - contract, and the transfer of title. The Convention deals only with the
contract.
Note Romalpa clauses - the "reservation of title" clause (title does not pass on
delivery, but on payment. Romalpa [1976] 1 WLR 676. Because the Convention
does not deal with the passing of property). Reservation of title (Romalpa)
clauses would be preserved.
Example: 10 – Romalpa clause

The seller reserves the following rights in relation to any goods provided to the buyer by
the seller, until all accounts owed by the buyer to the seller are fully paid.
 Legal ownership of goods;
 to enter the buyers premises (or the premises of any associated company or agent
where the goods are located) without liability for trespass or any resulting damage
and retake possession of the goods; and
 to keep or resell any goods repossessed pursuant to 2) above.
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.
________________________________
Interpretation
Article 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.
(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.
One problem is that national judges may place different, indeed local
interpretations on the Convention.
7(1) is an appeal to judges.

7(2) is an attempt to minimise divergence.
If the Convention does not apply, the usual conflict of law rules with respect to
contracts will apply.
16

lOMoARcPSD|38071922
International Harmonisation and Unification

Harmonisation and unification are related concepts. To harmonise is to bring
together and make similar; to unify, however, is to make the same.
Unification does not tolerate variation. Unification of the law therefore
requires the law of States to be made the same. Harmonisation of law is also
understood as a process. Therefore, unification of law is an exercise in
harmonisation where 'unification' is the standard or benchmark.
Article 7 of the CISG outlines the need to promote uniformity in the
application of the CISG. Importantly, the CISG does not speak of the need to
promote harmony in its application. This distinction is important because, as
the purpose of the CISG is the unification of international sale of goods law,
there can be no variation in the way it is interpreted and applied by courts
around the world. The CISG does not permit room for error. This point is
also important because, by expressing the CISG's purpose as the promotion
of uniformity, the bar for determining its success or failure has been set
higher.
If a court in France determines that software is not a good, an international
contract for the sale of software will not be governed by the CISG. However,
if a court in Canada decides that software is a good, the CISG will apply to
the contract. Legal may recommend forum shopping to a venue where
software is not considered goods.
Article 7 of the CISG is “arguably the single most important provision in
ensuring the future success”1 of the CISG. Article 7 details the objectives of
the CISG and how to give effect to these objectives. The battle for
unification depends on the effectiveness of Article 7.
Article 7 defines the protocol to be followed when interpreting the CISG. It
directs those interpreting the CISG to take the following steps. First, regard
must be had to the CISG's “international character and the need to promote
uniformity in its application and the observance of good faith in international
trade”. Second, questions not expressly settled by the CISG are to be
determined “in conformity with the general principles on which it is based”.
Third, in the absence of those general principles, questions are to be settled
“in conformity with the law applicable by virtue of the rules of private
international law.” Steps two and three establish the mechanism to fill gaps
in the CISG.
International Character and Uniformity
Lawyers must not read the CISG as they would a piece of legislation in their
home state. To have regard to the international character of the CISG
requires all lawyers to put aside the interpretative baggage with which they
are familiar. The CISG calls for a new interpretative method that stems from
the requirement in Article 7 of the CISG to have regard to its international
character and the need to promote uniformity.
1 Phanesh Koneru, 'The International Interpretation of the UN Convention on Contracts for the
International Sale of Goods: An Approach Based on General Principles' (1997) 6 Minnesota
Journal of Global Trade 105.
17

lOMoARcPSD|38071922
To have regard to the international character of the CISG involves

recognition that it is a multi-national treaty that has been incorporated into
the domestic law of different legal systems. Practically speaking, the
requirement to have regard to the international character of the CISG is a call
for vigilance against two traps - the use of domestic techniques of legislative
interpretation and reliance on the 'homeward trend' when interpreting the
meaning of the CISG. Each of these traps for harmonisation will be
discussed below.
International Interpretation
When interpreting the CISG. it is important to avoid the techniques of
legislative interpretation that would otherwise apply to domestic legislation.
The CISG is not a normal piece of domestic legislation but is an international
treaty. The CISG 'should be seen as part of international law in the broad
sense and should be entitled to an international, rather than national,
interpretation.' Therefore, as opposed to the common law tendency to
interpret domestic legislation narrowly, for example, the CISG should be
given a broad interpretation. Professor Bonell explains the appropriate
interpretative technique as follows.
'Instead of sticking to its literal and grammatical meaning, courts are
expected to take a much more liberal and flexible attitude and to look,
wherever appropriate, to the underlying purposes and policies of individual
provisions as well as of the Convention as a whole.'
This international interpretation approach involves a rejection of the view
that, in domestic proceedings, treaties 'transform themselves into domestic
law and therefore their interpretation and integration must take place
according to the interpretative techniques ... of the domestic systems in
which they are transplanted and will be applied'. This view cannot be
reconciled with the requirement in Article 7 to pay regard to the international
character of the CISG and the need to promote uniformity.
Article 8
(1) For the purposes of this Convention statements made by and other conduct of
a party are to be interpreted according to his intent where the other party knew
or could not have been unaware what that intent was.
(2) If the preceding paragraph is not applicable, statements made by and other
conduct of a party are to be interpreted according to the understanding that a
reasonable person of the same kind as the other party would have had in the
same circumstances.
(3) In determining the intent of a party or the understanding a reasonable
person would have had, due consideration is to be given to all relevant
circumstances of the case including the negotiations, any practices which the
parties have established between themselves, usages and any subsequent
conduct of the parties.
Article 8 tells us how to interpret conduct or statements of parties. Either

subjectively or objectively.
(a) attempt to ascertain the true meaning of the party
(b) attempt to determine what a reasonable person thought was meant.
18

lOMoARcPSD|38071922
Articles 11 and 12
Article 11
A contract of sale need not be concluded in or evidenced by writing and is not
subject to any other requirement as to form. It may be proved by any means,
including witnesses.
Article 12
Any provision of article 11, article 29 or Part II of this Convention that allows a
contract of sale or its modification or termination by agreement or any offer,
acceptance or other indication of intention to be made in any form other than in
writing does not apply where any party has his place of business in a Contracting
State which has made a declaration under article 96 of this Convention. The
parties may not derogate from or vary the effect of this article.
These articles deal with the formal requirements for validity. Notice it provides
for both the common and civil law jurisdictions. See article 96. Note that article
55 provides for a similar choice for customs price.
Article 13. For the purposes of this Convention “writing” includes telegram and
telex.***
Note the United Nations Convention on the Use of Electronic Communications in

International Contracts (2005) [ECC]
Article 20 - The provisions of this Convention apply to the use of electronic
communications in connection with the formation or performance of a contract to
which any of the following international conventions, to which a Contracting
State to this Convention is or may become a Contracting State, apply:
 Convention on the Recognition and Enforcement of Foreign Arbitral
Awards (New York, 10 June 1958);
 Convention on the Limitation Period in the International Sale of Goods
(New York, 14 June 1974) and Protocol thereto (Vienna, 11 April 1980);
 United Nations Convention on Contracts for the International Sale of
Goods (Vienna, 11 April 1980);
 United Nations Convention on the Liability of Operators of Transport
Terminals in International Trade (Vienna, 19 April 1991);
 United Nations Convention on Independent Guarantees and Stand-by
Letters of Credit (New York, 11 December 1995);
 United Nations Convention on the Assignment of Receivables in
International Trade (New York, 12 December 2001).
The application of the ECC has the effect of bringing modern electronic
commerce into past present and future Conventions to those nations that have
adopted it. It would remove doubt as to whether electronic writing equates to
“writing” as referred to in the CISG
PART II -
19

lOMoARcPSD|38071922
Formation of Contract under the Convention
Articles 14-24
(A) Proposal
Article 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. A proposal is
sufficiently definite if it indicates the goods and expressly or implicitly fixes or
makes provision for determining the quantity and the price.
(2) A proposal other than one addressed to one or more specific persons is to be
considered merely as an invitation to make offers, unless the contrary is clearly
indicated by the person making the proposal.
Norway declared that it would not be bound by Part II of the Convention

("Formation of the Contract"). Denmark, Finland, Iceland, Norway and Sweden
declared that the Convention would not apply to contracts of sale or to their
formation where the parties have their places of business in Denmark, Finland,
Iceland, Norway or Sweden.
The CISG and its general principles on offer and acceptance (articles 14-21)
accommodate both the simple exchange of two communications and also the
development of a contract where it is possible to isolate an offer and acceptance.
This includes a contract by conduct. Note the impact of the UNCITRAL Model
Law of Electronic Commerce 1996, and the UN Convention on the Use of
Electronic Communications in International Contracts 2006.
From article 14, a proposal could evolve into an offer.
This raises the question, can it still be a contract if the price is left out. See art 55.
Note “to conclude” a contract, means to enter into the contract.
No consideration is required.
The parties’ understanding is a question of fact of each transaction.
Art 14(2) Communications to indefinite groups – must be “clearly indicated”.
Article 55
Where a contract has been validly concluded but does not expressly or implicitly
fix or make provision for determining the price, the parties are considered, in the
absence of any indication to the contrary, to have impliedly made reference to
20

lOMoARcPSD|38071922
the price generally charged at the time of the conclusion of the contract for such
goods sold under comparable circumstances in the trade concerned.
Are articles 14 and 55 incompatible? It seems that the second part of 14(1) is
merely by way of example. In reality price is often not fixed in international
trade.
Advertisements: Continental Europe - never an offer,

Australia and U.S. - maybe an offer.
Article 14 does not expressly state that a proposal without a price provision
cannot be an offer. Instead the language used is that of a “proposal” which is
“sufficiently definite”, including where it “fixes or makes provision for
determining the quantity and the price”. There should be no implication that a
proposal without a price cannot constitute an offer.
(B) Offer
Article 15
(1) An offer becomes effective when it reaches the offeree.
(2) An offer, even if it is irrevocable, may be withdrawn if the withdrawal
reaches the offeree before or at the same time as the offer.
Example – on 1 June Seller mails Buyer a letter offering to sell goods, stating
“This offer is binding and irrevocable until 1 July”. On 5 June, before Buyer has
received the letter, Seller telephones or emails Buyer stating “Disregard my letter
dated 1 June. I have decided to withdraw the offer in that letter”. On receipt of
letter Buyer replies “I accept your 1 June offer”.
Under article 15 the offer was not “effective” as it had not reached the Buyer. The
supporting reason is that art 15 is designed to protect expectations; and this had
not yet arisen. [Article 22 provides a parallel rule with regard to acceptance.]
Article 16
(1) Until a contract is concluded an offer may be revoked if the revocation
reaches the offeree before he has dispatched an acceptance.
(2) However, an offer cannot be revoked:
(a) if it indicates, whether by stating a fixed time for acceptance or otherwise,
that it is irrevocable; or
(b) if it was reasonable for the offeree to rely on the offer as being irrevocable
and the offeree has acted in reliance on the offer.
Art 16(1) resembles the common law position. However, under common law a
promise not to revoke is not binding unless supported by consideration. Although
the postal acceptance rule at common law is a way around this broad principle.
[Note the UN Convention on the Use of Electronic Communications in
International Contracts; art 10(1) states “The time of dispatch of an electronic
communication is the time when it leaves an information system under the control
21

lOMoARcPSD|38071922
of the originator ...”
Note use of the word “dispatched” – reminiscent of the postal acceptance rule.
Article 17
An offer, even if it is irrevocable, is terminated when a rejection reaches the
offeror.
Offer may be revocable or irrevocable.
Consider: On 1 May Seller made an offer at set price, open until 1 June. On 5
May Buyer replied: “I accept your offer, as evidenced by my purchase order
enclosed.” The purchase order included an arbitration clause. On 10 May Seller
received a second message: “I accept for 1 May offer without qualification.”
Seller argues there is no contract. Although article 17 would regard the offer as
terminated on 5 May, we need to examine article 19.
(C) Acceptance
The mirror image rule does not apply.
Article 18
(1) A statement made by or other conduct of the offeree indicating assent to an

offer is an acceptance. Silence or inactivity does not in itself amount to
acceptance.
(2) An acceptance of an offer becomes effective at the moment the indication of
assent reaches the offeror. An acceptance is not effective if the indication of
assent does not reach the offeror within the time he has fixed or, if no time is
fixed, within a reasonable time, due account being taken of the circumstances of
the transaction, including the rapidity of the means of communication employed
by the offeror. An oral offer must be accepted immediately unless the
circumstances indicate otherwise.
(3) However, if, by virtue of the offer or as a result of practices which the parties
have established between themselves or of usage, the offeree may indicate assent
by performing an act, such as one relating to the dispatch of the goods or
payment of the price, without notice to the offeror, the acceptance is effective at
the moment the act is performed, provided that the act is performed within the
period of time laid down in the preceding paragraph.
Does 16(1) conflict with 18(2)? Article 16(1) states “an offer may be revoked if
the revocation reaches the offeree before he has dispatched an acceptance”. This
implies that a contract is concluded once acceptance is dispatched; however 18(2)
states “An acceptance of an offer becomes effective at the moment the indication
of assent reaches the offeror.” One applies to offers, the other to acceptances.
Two significant contract issues – communication and agreement. Art 18 deals

with communication. Art 19 deal with assent.
Art18(2) and (3) govern the time when an acceptance becomes effective.
22

lOMoARcPSD|38071922
The softer word “indicating” was preferred to “stating”.
Communication not needed under 18(3) – contemplated performing act or

payment of price.
Example – On 1 June Buyer writes to Seller: “Please rush price quotation for the
following goods {detailed}. If you do not hear from me within 3 days after I
receive your quotation, consider your offer as accepted”. Buyer’s silence is
acceptance. Art 18(1) is aimed at preventing an offeror forcing the offeree to
respond.
Under art 18(2) the hazards of communicating an acceptance falls on the sender –
the offeree.
Article 19
(1) 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.
(2) 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.
(3) 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 liability to the other or the settlement of disputes are considered to
alter the terms of the offer materially.
Acceptance with Modifications. No mirror image – see 19(2). Common in

international trade.
Attempt to preserve contract and international trade.
Pre-printed purchase or sales order and acknowledgement of order forms –

containing blank lines and spaces; description, quantity, price and other
individualised aspects. Electronic forms.
What modifications are material? Art 19(3) provides a non-inclusive of material

terms.
There is no postal acceptance rule.
Article 22
An acceptance may be withdrawn if the withdrawal reaches the offeror before or
at the same time as the acceptance would have become effective.
[Article 15 provides a parallel rule with regard to acceptance.] Note the UN
23

lOMoARcPSD|38071922
Convention on the Use of Electronic Communications in International Contracts.
Article 23
A contract is concluded at the moment when an acceptance of an offer becomes
effective in accordance with the provisions of this Convention.
Notes:
(i) A proposal cannot be an offer unless it is “sufficiently definite”. What is the

meaning of “sufficiently definite”? (Article 14(1)).
(ii) Advertisements are not generally offers: Could an advertisement ever be an

offer? (Article 14(2)).
(iii) Revocable offers may be revoked before acceptance. (Article 16(1)).
(iv) Irrevocable offers cannot be revoked. They can, however be withdrawn.

(That is – before it reaches the offeree). (Articles 16(2), 15(2)).
(v) Acceptance may be word or act. Silence or inactivity is not acceptance.

(Articles 18(1), (2), (3)).
(vi) The offer need not be accepted as is. Note the distinction between a counter
offer and “additional or different terms which do not materially alter the
terms of the offer”. A counter-offer constitutes a rejection of the offer.
(Articles 17, 19).
(vii) An acceptance may be withdrawn if it is withdrawn before coming into

effect. (Articles 22, 18(2), 23).
Part III Articles 25-88
Article 25 – definition of Fundamental Breach
A breach of contract committed by one of the parties is fundamental if it results in

such detriment to the other party as substantially to deprive him of 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.
Warranties
Article 30
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.
Article 31 – place for delivery
24

lOMoARcPSD|38071922
Article 32 – shipping arrangements

Article 33 – time for delivery
Article 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.
Documents Relation to the Goods – Cure.
Article 37
If the seller has delivered goods before the date for delivery, he may, up to that
date, deliver any missing part or make up any deficiency in the quantity of the
goods delivered, or deliver goods in replacement of any non-conforming goods
delivered or remedy any lack of conformity in the goods delivered, provided that
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.
Article 41
The seller must deliver goods which are free from any right or claim of a third
party, unless the buyer agreed to take the goods subject to that right or claim.
However, if such right or claim is based on industrial property or other
intellectual property, the seller’s obligation is governed by article 42.
Article 42
(1) The seller must deliver goods which are free from any right or claim of a
third party based on industrial property or other intellectual property, of which at
the time of the conclusion of the contract the seller knew or could not have been
unaware, provided that the right or claim is based on industrial property or other
intellectual property:
(a) under the law of the State where the goods will be resold or otherwise used, if
it was contemplated by the parties at the time of the conclusion of the contract
that the goods would be resold or otherwise used in that State; or
(b) in any other case, under the law of the State where the buyer has his place of
business.
(2) The obligation of the seller under the preceding paragraph does not extend to
cases where:
(a) at the time of the conclusion of the contract the buyer knew or could not have
been unaware of the right or claim; or
(b) the right or claim results from the seller’s compliance with technical
drawings, designs, formulae or other such specifications furnished by the buyer.
Conformity rule
25

lOMoARcPSD|38071922
Article 35
(1) 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.
Article 30(2)(a)(b) and (c) are usually in Sales of Goods Acts, but (d) is important
in international trade. That is packaging and preservation is most important. Note
(c), samples and models are widely used in international trade.
Liability of the seller for breach of implied warranty. All these implied warranties
can be disclaimed. Why? Compare the similar requirements in our Competition
and Consumer Act 2010 sections 69-72. No disclaimer is possible under the
Competition and Consumer Act 2010. What is the difference?
Unlike the US and Australia the Convention does not contain provisions that limit
the parties abilities to disclaim warranties - remember Article 6 (derogation) - and
it does not apply to consumer goods – these should be experienced traders
(making their own contract).
Recall articles 34 and 37. Each allows a "cure" or remedy "provided that the
exercise of this right does not cause the buyer unreasonable inconvenience or
unreasonable expense." Article 37 provides that the seller may make up
deficiencies. To thus enable the parties to maintain the contract thus facilitation
international trade.
Article 38
(1) The buyer must examine the goods, or cause them to be examined, within as
short a period as is practicable in the circumstances.
(2) If the contract involves carriage of the goods, examination may be deferred
until after the goods have arrived at their destination.
(3) If the goods are redirected in transit or redispatched by the buyer without a
26

lOMoARcPSD|38071922
reasonable opportunity for examination by him and at the time of the conclusion
of the contract the seller knew or ought to have known of the possibility of such
redirection or redispatch, examination may be deferred until after the goods have
arrived at the new destination.
Article 39
(1) The buyer loses the right to rely on a lack of conformity of the goods if he
does not give notice to the seller specifying the nature of the lack of conformity
within a reasonable time after he has discovered it or ought to have discovered
it.
(2) In any event, the buyer loses the right to rely on a lack of conformity of the
goods if he does not give the seller notice thereof at the latest within a period of
two years from the date on which the goods were actually handed over to the
buyer, unless this time-limit is inconsistent with a contractual period of
guarantee.
Most commentators believe that 3 days is reasonable, but article 39(2) provides
that 2 years is a maximum period. This is an attempt to maintain the contract.
Article 46
(1) The buyer may require performance by the seller of his obligations unless the
buyer has resorted to a remedy which is inconsistent with this requirement.
(2) If the goods do not conform with the contract, the buyer may require delivery
of substitute goods only if the lack of conformity constitutes a fundamental
breach of contract and a request for substitute goods is made either in
conjunction with notice given under article 39 or within a reasonable time
thereafter.
(3) If the goods do not conform with the contract, the buyer may require the
seller to remedy the lack of conformity by repair, unless this is unreasonable
having regard to all the circumstances. A request for repair must be made either
in conjunction with notice given under article 39 or within a reasonable time
thereafter.
Recall that article 25 deals with fundamental breach.
Article 46(3) provides that the buyer may require repair unless this is
unreasonable having regard to the circumstances.
Note:
Article 44
Notwithstanding the provisions of paragraph (1) of article 39 and paragraph (1)
of article 43, the buyer may reduce the price in accordance with article 50 or
claim damages, except for loss of profit, if he has a reasonable excuse for his
failure to give the required notice.
This has a limited application. Art 50 also allows the buyer to reduce.
Article 50
27

lOMoARcPSD|38071922
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.
Do articles 46 & 50 conflict?
See also article 37 and 48.
Article 48
(1) Subject to article 49, the seller may, even after the date for delivery, remedy
at his own expense any failure to perform his obligations, if he can do so
without unreasonable delay and without causing the buyer unreasonable
inconvenience or uncertainty of reimbursement by the seller of expenses
advanced by the buyer. However, the buyer retains any right to claim damages
as provided for in this Convention.
(2) If the seller requests the buyer to make known whether he will accept
performance and the buyer does not comply with the request within a reasonable
time, the seller may perform within the time indicated in his request. The buyer
may not, during that period of time, resort to any remedy which is inconsistent
with performance by the seller.
(3) A notice by the seller that he will perform within a specified period of time is
assumed to include a request, under the preceding paragraph, that the buyer
make known his decision.
(4) A request or notice by the seller under paragraph (2) or (3) of this article is
not effective unless received by the buyer.
Remedies
(A) Damages
(B) Avoidance of Contract
(C) Specific Performance
Anticipatory breach and instalment contracts - Articles 71-73

Damages – Articles 74-77
Interest – Article 78
Exemptions – Articles 79-80
Effects of Avoidance – Articles 81-84
Preservation of the goods – Articles 85-88
Article 53
The buyer must pay the price for the goods and take delivery of them as required
by the contract and this Convention.
Specific Performance is used more often in civil law countries than in common
law countries.
28

lOMoARcPSD|38071922
Article 62
The seller may require the buyer to pay the price, take delivery or perform his
other obligations, unless the seller has resorted to a remedy which is inconsistent
with this requirement.
Article 28
If, in accordance with the provisions of this Convention, one party is entitled to
require performance of any obligation by the other party, a court is not bound to
enter a judgement for specific performance unless the court would do so under
its own law in respect of similar contracts of sale not governed by this
Convention.
Specific performance – domestic rules.
Is there a possible conflict here? Note, specific performance deals with an order
in personam. So Article 53 (it is said) does not conflict - although it may depend
upon whether you are a common law lawyer or civil law lawyer - see for example
comments by Honnold.
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 75
If the contract is avoided and if, in a reasonable manner and within a reasonable
time after avoidance, the buyer has bought goods in replacement or the seller has
resold the goods, the party claiming damages may recover the difference between
the contract price and the price in the substitute transaction as well as any
further damages recoverable under Article 74.
Damages in foreign currency and compare the breach day rule with the judgment
day rule for the assessment of damages.
This case says on balance may vary the result to ensure equity. In Australia the
remedy may be given in foreign currency.
Avoidance by buyer - Art. 47, 49 (& 48)

Avoidance by seller - art 63 & 64.
Nachfrist terms: the request for additional time, known as nachfrist notice in
German law, is commonly found in the civil law legal systems. Underlying
premise is that delay is not necessarily material breach.
29

lOMoARcPSD|38071922
Article 47
(1) The buyer may fix an additional period of time of reasonable length for
performance by the seller of his obligations.
(2) Unless the buyer has received notice from the seller that he will not perform
within the period so fixed, the buyer may not, during that period, resort to any
remedy for breach of contract. However, the buyer is not deprived thereby of any
right he may have to claim damages for delay in performance.
Article 63
(1) The seller may fix an additional period of time of reasonable length for
performance by the buyer of his obligations.
(2) Unless the seller has received notice from the buyer that he will not perform
within the period so fixed, the seller may not, during that period, resort to any
remedy for breach of contract. However, the seller is not deprived thereby of any
right he may have to claim damages for delay in performance.
Article 49
(1) The buyer may declare the contract avoided:
(a) if the failure by the seller to perform any of his obligations under the contract
or this Convention amounts to a fundamental breach of contract;…
Article 64
(1) The seller may declare the contract avoided:
(a) if the failure by the buyer to perform any of his obligations under the contract
or this Convention amounts to a fundamental breach of contract; …
Article 48
(1) Subject to article 49, the seller may, even after the date for delivery, remedy
at his own expense any failure to perform his obligations, if he can do so
without unreasonable delay and without causing the buyer unreasonable
inconvenience or uncertainty of reimbursement by the seller of expenses
advanced by the buyer. However, the buyer retains any right to claim damages
as provided for in this Convention.
(2) If the seller requests the buyer to make known whether he will accept
performance and the buyer does not comply with the request within a reasonable
time, the seller may perform within the time indicated in his request. The buyer
may not, during that period of time, resort to any remedy which is inconsistent
with performance by the seller.
(3) A notice by the seller that he will perform within a specified period of time is
assumed to include a request, under the preceding paragraph, that the buyer
make known his decision.
(4) A request or notice by the seller under paragraph (2) or (3) of this article is
not effective unless received by the buyer.
Avoidance of contract. Art 48 is an attempt to encourage parties to maintain the

contract. Rarely used.
Should contracts be avoided in case of emergency or event beyond the control

of the parties? It is suggested that such risks should be reflected in the price,
and that some intervening event should not be sufficient to end the agreement.
30

lOMoARcPSD|38071922
In general courts will not look favourably on a party who uses an intervening
event.
1. When there is a physical or legal impossibility to perform the contract. -

death of a party or subject matter is illegal.
2. Frustration of purpose.
Knell v. Henry 2 KB 740. Edward VII coronation postponed; ie the reason for
entering into the contract no longer exists.
Tsakiroglou & Co Ltd v Noblee Thorl [1961] AC 93. Shipment CIF of Sudanese
groundnuts. On 2 November 1961 the Suez Canal was closed; alternative route
via Cape of Good Hope was more than twice the length. Lord Reid said this "fell
far short of justifying a finding of frustration". Although the cost was more than
double "performance was not fundamentally different in a commercial sense."
That is risks should be taken into account in determining the contract price and
terms.
3. Commercial impracticability.
This seldom used because it is difficult to determine.
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.
(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.
There is an increase in the use of force majeure clauses in International Trade.
Force Majeure clause releases both parties from liability or obligation where an
extraordinary event or circumstance beyond the control of the parties occurs. For
example - war, strike, riot, crime, or an event described by the legal term "act of
God" (flooding, earthquake, volcano). The clause does not release parties from
negligent acts other malfeasance. Nor from usual and natural consequences of
external forces (such as predicted rain or weather).
31

lOMoARcPSD|38071922
Time-critical and other sensitive contracts may be drafted to limit the shield of
this clause where a party does not take reasonable steps (or specific precautions)
to prevent or limit the effects of the outside interference, either when they become
likely or when they actually occur. A force majeure may work to excuse all or part
of the obligations of one or both parties. For example, a strike might prevent
timely delivery of goods, but not timely payment for the portion delivered.
Similarly, a widespread power outage would not be a force majeure excuse if the
contract requires the provision of backup power or other contingency plans for
continuity.
Article 92
(1) A Contracting State may declare at the time of signature, ratification,

acceptance, approval or accession that it will not be bound by Part II of this
Convention or that it will not be bound by Part III of this Convention.
(2) A Contracting State which makes a declaration in accordance with the
preceding paragraph in respect of Part II or Part III of this Convention is not to
be considered a Contracting State within paragraph (1) of article 1 of this
Convention in respect of matters governed by the Part to which the declaration
applies.
The success of the Convention is due to the ability to reconcile conflicting

demands or put in compromises.
For example - In Western countries contracts need not be in writing; in socialist
countries writing is required. (Individuals are not allowed in international trade,
only organisations allowed were institutions, licensed bodies or authorities; and to
keep track writing is required.) The West take risks; Soc/com less risk with
writing. Risk and chance is part of the western ethos.
Article 96
A Contracting State whose legislation requires contracts of sale to be concluded

in or evidenced by writing may at any time make a declaration in accordance
with article 12 that any provision of article 11, article 29, or Part II of this
Convention, that allows a contract of sale or its modification or termination by
agreement or any offer, acceptance, or other indication of intention to be made in
any form other than in writing, does not apply where any party has his place of
business in that State.
___________________________
32

International Sale of Goods

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

International Sale of Goods

Uploaded by

Copyright:

Available Formats

lOMoARcPSD|38071922

19-6-Saleof Goods - Lecture notes 9

Business Law (University of Queensland)

Scan to open on Studocu

Studocu is not sponsored or endorsed by any college or university

International Sale of Goods

 John Mo, International Commercial Law, (6th edition, LexisNexis 2015)

 United Nations Convention on Contracts for the International Sale of

International Sale of Goods

The operation and regulation of the International Sale of Goods depends on a

INTERNATIONAL SALE OF GOODS

Downloaded by Mikestein Shayveich (mikelshayy@gmail.com)

(CISG) and the UNIDROIT Principles of International Commercial Contracts.

UNIDROIT: Principles of International Commercial Contracts (PICC)

UNIDROIT is an intergovernmental organisation founded in Rome in 1926 to

Downloaded by Mikestein Shayveich (mikelshayy@gmail.com)

Downloaded by Mikestein Shayveich (mikelshayy@gmail.com)

United Nations Convention on Contracts for the

Date of adoption: 11 April 1980 - Adopted by 89 jurisdictions (Feb 2019)

Downloaded by Mikestein Shayveich (mikelshayy@gmail.com)

El Salvador 27/11/2006(*) 01/12/2007

Downloaded by Mikestein Shayveich (mikelshayy@gmail.com)

Slovenia 07/01/1994(§) 25/06/1991

Downloaded by Mikestein Shayveich (mikelshayy@gmail.com)

The contract of sale is the backbone of international trade in all countries,

Downloaded by Mikestein Shayveich (mikelshayy@gmail.com)

Finally, small and medium-sized enterprises as well as traders located in

Relation to private international law and existing domestic law

Downloaded by Mikestein Shayveich (mikelshayy@gmail.com)

application. International contracts falling outside the scope of application of the

Becoming a party to the CISG has no financial implications for Contracting

1. In each Australian jurisdiction, the 1980 United Nations Convention on

2. Australia formally became a party to the convention on 17 March 1988, and

3. The drafting of the Convention was undertaken by the United Nations

4. The advantage for Australia in adopting the Convention is said to be the

Section 5 - Convention to have the force of law

Section 6 - Convention to prevail in event of inconsistency

Downloaded by Mikestein Shayveich (mikelshayy@gmail.com)

Harmonisation and Uniformity

The Convention provides:

1. Comprehensiveness - The Convention attempts to be comprehensive to keep

25 A breach ... is fundamental if it results in such detriment ... as substantially to

Also articles 49(1)(a) and 64(1)(a):

64(1) The seller may declare the contract avoided:

Articles 47(1) and 63(1):

Downloaded by Mikestein Shayveich (mikelshayy@gmail.com)

12, derogate from or vary the effect of any of its provisions.

2. Flexibility for maintenance of the contract.

Article 1 - sphere of Application.

Downloaded by Mikestein Shayveich (mikelshayy@gmail.com)

all domestic law. The Convention is predicated on the movement of goods

This definition seems incompatible with common sense.

Place of business defined in article 10.

Example A (seller (contracting state)) - B (buyer (contracting state)). If A deals

Contracting State Limitation.

Downloaded by Mikestein Shayveich (mikelshayy@gmail.com)

A general exclusion provision. This article is meant to encourage the contracting

Private International Law rules - Conflicts of Laws rules.

Example - A (seller (contracting state)) - B (Buyer (ncs))

A US company owns caravans in Brisbane. The US company sells the caravans

An Australian company owns furniture in China. It sells the furniture to another

A seller in Queensland deals with a supposed buyer in Queensland. The supposed

Downloaded by Mikestein Shayveich (mikelshayy@gmail.com)

A seller in Queensland is dealing with a buyer in Iran. Iran is not a contracting