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Conflict rule:
- Obligational aspects: see supra Rome-I Regulation for
the lex contractus; but see Art. 1 CISG infra for more
specific rules
Ratione materiae:
(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.
> if preponderant part is labour, services (turn key etc.)
> again “economic” criterion: value of the goods compared to value services
Exception (for both cases): art. 94 “neighbour clause” – countries with similar law
making a declaration. Applies (only) to Inter-Nordic sales (5 Nordic countries).
CISG – TERRITORIAL APPLICATION
Problem of interpretation of place of business (comp. Rome-I-Regulation)
It must be a place at which there is a stable business organization
The contracting party at that place must have autonomous power to enter
into the agreement
More than one place of business: Art. 10 (1): “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”
No place of business:
Art. 10 (2): “If a party does not have a place of business, reference is to made to
his habitual residence”
CISG – TERRITORIAL APPLICATION
Ratione loci: only « international sales », more specifically in 2 cases :
The Convention may also apply as the law applicable to the contract if so chosen
contractually agreed by the parties.
* Choice of law of a contracting state includes choice of CISG and is not presumed to
exclude CISG – eg Cass. France 13 Sep. 2011
CISG – TERRITORIAL APPLICATION
B) Indirect application (voie indirecte): Art. 1 (1)(b)
- even if that law is applicable because of the conflict rule of a foreign forum ?
(disputed)
- (e.g. sale between US and UK; forum refers to the application of American law.
Domestic American law applied as American law does not apply CISG in
relation to a non-CISG state as the UK) (disputed, but not disputed in German
forum, given the explicit interpretative declaration of (only) Germany)
- Art. 2 Dutch CISG Implementing Act on the contrary rejects application of
Dutch domestic law in such a case (and imposes CISG as part of Dutch law)
- CISG Adv. Council Opinion 15 also rejects the non-application of CISG in such
a case.
CISG – REGULATED MATTERS
Regulated matters :
- Only law of obligations, no property law (art. 4).
- No procedural law, esp. burden of proof
S. further the discussion about negative effect of CISG provisions (esp. non-
conformity) on possibility to invoke invalidity, esp. mistake/
misrepresentation
CISG – INTERPRETATION AND
GAP-FILLING (1)
First question: is the matter governed by CISG or not ?
- If not governed by CISG = « external » gap > national law applicable by
virtue of the conflict of law rules
- If governed by CISG: either interpretation or « internal» gap
No duty to act (perform) in good faith - good faith requirement only for
interpretation of CISG itself
CISG – INTERPRETATION AND
GAP-FILLING (2)
Art 7 (2) CISG – Gap-filling (for internal gaps)
1° Usages and practices (Art. 9, I CISG)
2° Gap can be filled according to Art. 7, 2 on the basis of the
« underlying principles »
3° If gap can not be filled on the basis of underlying principles / in the
absence of such principles: applicable national law. Some courts very
quickly come to this conclusion … (‘insularism’). Others will use other
international sources to help find the underlying principles (eg UPICC)
Examples of gaps:
- Place of payment of compensation: internal gap
- Electronic communication as writing ? Internal gap. See CISG Advisory
Council opinion n° 1
- Interest rate: gap; disputed whether internal or external gap
- Hardship: disputed, see discussion further
CISG – OPT-OUT & DEROGATION
Art. 6 : The parties may:
- exclude the application of this Convention (opt-out - domestic law then
applies, incl. an optional sales law if domestic law so allows)
- or
- derogate from or vary the effect of any of its provisions (remaining CISG
articles apply)
- No mandatory law in CISG (bus most matters of mandatory law are not
regulated in CISG)
- The opt-out itself is governed by CISG and must meet its requirements
(cfr CISG AC opinion 16).
Usually, a general reference to national law of a contracting state is not
considered to be an opt-out from CISG. But a reference to specific articles
of national law on matters covered by CISG may imply an opt-out
CISG – GENERAL PROVISIONS
JURIDICAL ACTS (1)
No duty to act according to good faith (see Art. 7)
2. In some common law jurisdictions, the Plain Meaning Rule prevents a court from
considering evidence outside a seemingly unambiguous writing for purposes of
contractual interpretation. The Plain Meaning Rule does not apply under the CISG.
Art. 9 (1) « The parties are bound by any usage to which they have agreed and
by any practices which they have established between themselves »
Usage does not have to be well known in international trade. It can even be
a local usage as long as the parties have agreed to it.
Art. 9 (2) « The parties are considered, unless otherwise agreed, to have impliedly
made applicable to their contract or its formation a usage of which the
parties knew or ought to have known and which in international trade is
widely known to, and regularly observed by, parties to contracts of the type
involved in the particular trade concerned. »
Obligation of delivery:
− Place of performance: relevant i.a. for jurisdiction
− > Art. 31: default rules:
Carriage involved: first carrier (independent carrier)
No carriage involved and contract relates to (a) specific goods,
(b) unidentified goods to be drawn from a specific stock or (c)
goods to be manufactured of produced and parties knew that
the goods were at, or were to be manufactured of produced at,
a particular place: place of the goods (ex works).
In other cases: seller’s place of business.
− See also infra Incoterms and other specific contract terms.
Additional duties (Art. 32) related to (1) specification, (2) carriage and (3)
insurance
CISG - SELLER’S OBLIGATIONS
(delivery 2)
(Art. 30 : delivery of the goods (incl. documents), transfer of property,
conformity)
(Obligation of delivery – cont.):
− Duty to preserve the goods if buyer fails to take delivery (Art. 85 ff.)
CISG - SELLER’S OBLIGATIONS
(conformity 1)
Obligation of conformity in respect to the goods - Art. 35:
There is conformity only if the goods are :
1) in conformity with specifications of the contract (quantity, quality,
packaging)
2a) fit for ordinary purposes (see next slide)
2b) fit for particular purpose made known to seller
Exception: circumstances show that the buyer did not rely, or that it was
unreasonable for him to rely, on the seller’s skill and judgement,
2c) in conformity with the qualities of the sample
2d) usual or adequate packaging;
Relationship between (1) and (2): cumulative or exclusive ? Dominant
opinion : cumulative unless express deviation.
Ordinary purpose is not a good standard for multifunctional goods
Exception: visible non-conformity at the time of conclusion of
contract (35, 3)
CISG - SELLER’S OBLIGATIONS
(CONFORMITY 2)
Ad 35, 2: there is conformity only if the goods are « fit for ordinary purposes »
But where fit (in which place) ?
- Quid technical standards in country of buyer ≠ seller ?
- German ‘cadmium in NZ mussels’ case (BGH 8 march 1995) where standards in country
of buyer (NZ) were stricter than standards in country of seller, they do not apply unless
the seller should have been aware of them
- If the seller advertised in the buyer’s country or other special circumstances, standards
of that country
- Danish check-valves for petrol case (VLR 21 Dec 2004): rubber cracked and valve
leaking due to additives (MTBE) used in buyers’ country (Scandinavia) but not in country
of seller (Italy): non-conformity accepted
CISG - SELLER’S OBLIGATIONS
(CONFORMITY 2)
Quid suspicion of defects ? Goods not usable (marketable) because of suspicion of eg
contamination of food. Eg Argentinian rabbit meat case, BGH 1972:
- non-conformity if suspicion arises before passing of risk
- disputed as to suspicion arising after the passing of risk (BGH >< Schwenzer)
-Butremember art. 35, 3 (buyer’s knowledge of non-conformity, which may also relate to
knowledge of the non-conformity of the process …)
SALES - SELLER’S
OBLIGATIONS (Non-CISG)
Additional obligations may arise from the contract or applicable mandatory rules
Art. 41 : and to transfer them “free from any right or claim of a third party” (Art. 41) unless
the buyer agreed to take such goods.
- The buyer’s mere knowledge of the third-party claim does not relieve the seller of his obligation.
Consent is needed.
- The legal nature of the claim is irrelevant: claims based on better title to the goods, but also
contractual claims. E.g. retention of ownership, the sale of goods belonging to another, right of
pledge, lease, etc
- Decisive factor: whether the buyer’s use of the goods is infringed or disrupted by the third-
party claims. Public law restrictions on the use of the goods are governed not by Art. 41, but
by Art. 35.
- Similar duty to give notice (if unknown to seller) within a reasonable time after he
has become aware or ought to have become aware of the right or claim (Art. 43).
Reasonable time very often 1 month (German stolen car case, BGH 11 Jan 2006)
- Sanction: loss of some remedies
- Which remedies survive ? In case of reasonable excuse still price reduction or
damages (Art. 44).
CISG – SELLER’S OBLIGATIONS
- to transfer property
The seller is obliged to transfer property of the goods
- Similar duty to give notice (if unknown to seller) within a reasonable time
after he has become aware or ought to have become aware of the right
or claim (Art. 43). Sanction: loss of some remedies
Duty to preserve the goods if buyer intends to reject them (Art. 86-88)
CISG – BUYER’S OBLIGATIONS (2)
Payment of the price:
− Includes all of the measures agreed upon in the contract to enable payment to
be made
− Price not fixed nor mode of determination? Normal price (Art. 55)
Sufficient to constitute an offer in the sense of Art. 14?
− Place of payment : seller’s place c.q. place of handing over (Art. 57)
− Time of payment (Art. 58):
When control is given to the buyer (for the notion of ‘documents
controlling the disposition of the goods’, see CISG AC Opinion no. 11)
At the condition that he has had the opportunity to examine the goods
The seller does not need to send any advance reminder or other formal
request for payment
Concrete rule will depend on clauses (often ‘payment against
documents’).
Payment instruments: no provisions in CISG. See further Ch. 9-10.
Attention: when payment by l/c is provided, contract must already
determine the main terms of the l/c required
− The seller must accept partial payment or early payment if he is required to do
so by contract.
SALES -INCOTERMS
« International commercial terms »: standard abbreviations, often three
letter words (FOB, CIF, etc.)
Defined as usages by the ICC (since 1936, several revisions; since Jan 1,
2011: version 2010)
Applicable when inserted in the contract, expressly or impliedly (specify
the chosen version)
2. licenses, authorisations and formalities (attention in EW: buyer must obtain export
license etc. in seller’s country)
•* Insurance aginst the risk of loss or damage during carriage. For the minimum
coverage to be included in insurance, Incoterms refer to the institute cargo clauses (ICC)
of the International Underwriting Association, specifically minimally ICC « C » clause.
•Insurance coverage required by CIF or CIP is thus only a minimal coverage !
SALES –INCOTERMS
4. (point of) delivery and taking delivery: place (NB. often relevant for jurisdiction !)*
and time**
5. transfer of risks (NB. Incoterms are silent on passing of title/ownership !)
6. division of costs (attention whether THC (terminal handling costs) at point of
arrival are included or not)
7. notices to be given
8. proof of delivery, transport document
9. checking, packaging, marking, inspecting
10. other
* According to Belgian cass. 3 Sep 2015, place (for jurisdiction purposes) in a CFR sale
with a clause “cash against documents”, is the place where the document
(representing the goods) is delivered to the buyer.
** Where a date is fixed for delivery or taking delivery, there may be an extension clause
giving one party an option to perform later. Eg in FOB, where the buyer must provide
the ship in the seller’s port, the date for taking delivery will be when buyer’s vessel
arrives and buyer may stipulate an extension (eg GAFTA 49 contract); in CIF, where
the seller must organise transport, the seller may stipulate an extension.
INCOTERMS® 2010 QUICK REFERENCE CHART
www.phoenixintl.com INCOTERMS® 2010
Rules for any mode or modes of transport Rules for sea and inland waterway transport
EXW FCA CPT CIP DAT DAP DDP FAS FOB CFR CIF
Carriage & Free Cost,
Free Carriage Delivered at Delivered Delivered Free on Cost &
Ex Works Insurance Alongside Insurance
Carrier Paid To Terminal at Place Duty Paid Board Freight
Paid To Ship & Freight
SERVICES Who Pays Who Pays Who Pays Who Pays Who Pays Who Pays Who Pays Who Pays Who Pays Who Pays Who Pays
Export Packing Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Marking & Labeling Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Block and Brace 1 1 1 1 1 1 1 1 1 1 1
Export Clearance (License,
EEI/AES)
Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Freight Forwarder
Documentation Fees
Buyer Buyer Seller Seller Seller Seller Seller Buyer Buyer Seller Seller
Inland Freight to Main Carrier Buyer 2 Seller Seller Seller Seller Seller Seller Seller Seller Seller
Origin Terminal Charges Buyer Buyer Seller Seller Seller Seller Seller Buyer Seller Seller Seller
Vessel Loading Charges Buyer Buyer Seller Seller Seller Seller Seller Buyer Seller Seller Seller
Ocean Freight / Air Freight Buyer Buyer Seller Seller Seller Seller Seller Buyer Buyer Seller Seller
Nominate Export Forwarder Buyer Buyer Seller Seller Seller Seller Seller Buyer Buyer Seller Seller
Marine Insurance 3 3 3 Seller 3 3 3 3 3 3 Seller
Unload Main Carrier Charges Buyer Buyer 4 4 Seller Seller Seller Buyer Buyer 4 4
Destination Terminal Charges Buyer Buyer 4 4 4 Seller Seller Buyer Buyer 4 4
Nominate On-Carrier Buyer Buyer 5 5 5 5 Seller Buyer Buyer Buyer Buyer
Security Information
Requirements
Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer
Customs Broker Clearance
Fees
Buyer Buyer Buyer Buyer Buyer Buyer Seller Buyer Buyer Buyer Buyer
Duty, Customs Fees, Taxes Buyer Buyer Buyer Buyer Buyer Buyer Seller Buyer Buyer Buyer Buyer
Delivery to Buyer Destination Buyer Buyer 5 5 5 5 Seller Buyer Buyer Buyer Buyer
Delivering Carrier Unloading Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer
Notes: 1 – Incoterms® 2010 do not deal with the parties’ obligations for stowage within a container and therefore, where relevant, the parties should deal with this in the sales contract.
2 – FCA Seller’s Facility – Buyer pays inland freight; other FCA qualifiers. Seller arranges and loads pre-carriage carrier and pays inland freight to the “F” delivery place
3 – Incoterms® 2010 does not obligate the buyer nor must the seller to insure the goods, therefore this issue be addressed elsewhere in the sales contract.
4 – Charges paid by Buyer or Seller depending on contract of carriage.
5 – Charges paid by Seller if through Bill of Lading or door-to-door rate to Buyer’s destination
INCOTERMS® IS A REGISTERED TRADEMARK OF THE INTERNATIONAL CHAMBER OF COMMERCE. THIS DOCUMENT IS NOT INTENDED AS LEGAL ADVICE BUT IS BEING PROVIDED FOR REFERENCE
PURPOSES ONLY. USERS SHOULD SEEK SPECIFIC GUIDANCE FROM INCOTERMS® 2010 AVAILABLE THROUGH THE INTERNATIONAL CHAMBER OF COMMERCE AT WWW.ICCBOOKS.COM
CISG – REMEDIES - OVERVIEW
Overview of remedies for non-performance:
− Specific performance (Art. 46 and 62)
− Suspension (Art. 71)
− Avoidance of the contract (Art. 49 and 64)
− Price reduction (Art. 50)
− Damages (Art. 45 and 61)
General principles
- Free choice, no hierarchy of remedies (« pari passu ») (but sometimes
fundamental breach required)
- Combinability, esp. of damages and other remedies)
- Largely self-help (unilateral declaration)
- By notification (usually within a reasonable time)
Fundamental objective: saving the contract and avoiding restitution
> Instruments for restraining termination as a remedy
− Nachfrist mechanism (Art. 47 and 63)
− The seller’s right to cure (Art. 48)
CISG – GENERAL RULES ON
NON-PERFORMANCE
Remedies for non-performance: separately mentioned for buyer and
seller. But basically a unitary concept of non-performance (« breach »)
(comp. the dualism still remaining in e.g. Belgian law).
Some remedies require a « fundamental breach » (Art. 25).
Interpretation: CISG AC Opinion n° 5
Fault or strict liability ?
- damages excluded if exemption: failure due to an impediment beyond
control (art. 79) (+ give notice to other party). Hardship ? See next slide.
- other remedies: strict liability
- a party may not rely on a failure of the other party to perform, to the
extent that such failure was caused by the first party's act or omission
(Art. 80).
CISG – GENERAL RULES ON
NON-PERFORMANCE
Exemption clauses:
Possible under CISG (art. 6), but national law may invalidate them: