UN Convention on Contracts

for International Sale of Goods

(CISG) 1980
 Applicability of CISG :Place of Business Art 1
 “This Convention applies to contracts of sale of goods between parties whose places of business are in different States:
 when the States are Contracting States; or” Art 1 (a)

 ICC Court of Arbitration – PARIS <http://www.unilex.info/case.cfm?id=139>

 An Austrian buyer and a Chinese seller entered into a contract for the purchase of scaffold fittings. After delivery of the goods the
buyer discovered serious defects and declared the contract avoided. The buyer claimed damages suffered because it had been able to
resell only part of the goods at a lower price.

 The sole arbitrator held that the contract was governed by CISG, since the parties had their places of business in two different
Contracting States (Art. 1(1)(a) CISG), and the fact that the buyer had conducted part of the negotiations through its liaison office
situated in the seller's country was of no relevance in this respect.

 In view of the fundamental character of the breach by the seller the buyer was entitled to avoid the contract (Art. 49(1) CISG). The
seller was not entitled to remedy by supplying substitute goods in accordance with Art. 48(1) CISG, since in the opinion of the sole
arbitrator the seller's right to cure after the date for delivery is dependent on the consent of the buyer.
Art. 1 (1) (a)
 A Spanish, an Argentine and a U.S. company concluded a contract with a British company for the sale
of computer products to be distributed throughout Latin America. When, a few months later, a new
company was established as a result of the merger of the British company and a Canadian one, the
buyers were notified that the contract would be terminated in ninety days. Alleging breach of the
original agreement, the buyers filed a suit against the sellers.
 The Court denied that CISG was applicable, basing its reasoning on several arguments. First of all, the
Court stated that the contract had been concluded between parties not all of whom were situated in
Contracting States (Art. 1(1)(a) CISG)
 Furthermore, the Court recalled that the United Stated had ratified CISG with the declaration that it
would not be bound by its Art. 1(1)(b) (Art. 95 CISG); consequently, the Convention is applicable
solely when all the parties to the contract are from Contracting States. Finally, the Court could not find
any precedent allowing the application of CISG when a subsequent party to the contract is situated in a
Contracting State.
At 1 (1) (b) of CISG
 when the rules of private international law lead to the application of the law of a Contracting State.
 Prime Start Ltd., v. Maher Forest Products Ltd. (U.S. District Court, Western District of Washington at
Seattle) 2006
 A British Virgin Islands corporation (Plaintiff) and US corporation (Defendant) entered into a contract for
the sale of wooden products to be resold to Plaintiff’s client in Russia. Plaintiff also concluded a contract
with another US corporation (Co-defendant) which would provide services related to quality control of
the goods. Plaintiff brought an action against both US corporations alleging non-conformity of goods and
failure to inspect according to parties’ agreement.
 As to the applicable law, the Court rejected the Plaintiff’s argument that the CISG applied to the merits of
the dispute. Not only were the conditions set forth by Art. 1(1)(a) CISG not satisfied, since neither the
British Virgin Islands nor the United Kingdom are Contracting States, but also application of the CISG by
virtue of international private law rules had to be excluded, since the USA made a reservation to Art. 1(1)
(b) pursuant to Art. 95. As a result, the Convention could have applied only if the parties to the contract
were all from Contracting States.
 Mansonville Plastics (B.C.) Ltd. v. Kurtz GmbH (2003)
 A British Columbian manufacturer entered into a contract with an Austrian subsidiary of a German
seller for the sale of a pre-expander and a block mould to be financed by a lease contract.
 After installation of the equipment, although the buyer had received assurances that the equipment
would produce EPS products compatible with Canadian testing requirements, the buyer found
several flaws in the blocks produced by means of the seller’s equipment.
 As to the applicable law, the Court rejected the seller’s argument that the buyer had implicitly agreed to
the application of German law. In the opinion of the Court, the mere fact that the seller’s confirmation
of order stated that delivery was to be carried out according to “General Terms of Delivery of the
[seller]” did not mean that a choice-of-law clause in favor of German law had been agreed upon by
the buyer. Instead, the law having the closest relationship with the contract was the law of Ontario,
Toronto being the place where the equipment had been installed and put into operation.
 British (UK), Germany and Canada – (application of Art 1 (1) (b).
 Part II : Formation of the Contract (Art14-24)

Offer
 (1) Criteria for an Offer. (Art 14 (1))
 “A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is
sufficiently definite and indicates the intention of the Offeror to be bound in case of acceptance.”

 (2) When Offer Becomes Effective, Prior Withdrawal. (Art 15 (1))

 “It becomes effective when it reaches the offeree.”

 (3) Revocability of Offer. (Art 16 (1))

 “Until a contract is concluded, it may be revoked if the revocation reaches the offeree before he has
dispatched an acceptance.”
 (4) Termination of Offer: Rejection of Offer Followed by Acceptance. (Art 17 (2))
 “An offer (even if it is irrevocable) is terminated when a rejection reaches the Offeror.

 Acceptance
 (1) Acceptance: (i) Criteria and (ii) Time and Manner for Assent. (Art 18)
 “A statement or other conduct of the offeree indicating assent to an offer is an acceptance.” It “becomes effective
at the moment it reaches the Offeror. An acceptance is not effective if it does not reach the Offeror within the
time fixed, or within a reasonable time.”
 If by virtue of the offer, the offeree may indicate assent by performing an act, the acceptance is effective at the
moment the act is performed. (Art 18 (3)).
 Interpretation of Offeror’s Time Limits for Acceptance
 Article 18(2) . . . provides that an acceptance is not effective ‘if the indication of
assent does not reach the Offeror within the time he had fixed….’ The offeror’s
statement fixing the time for acceptance may be ambiguous if it states a period of
time (e.g., 15 days) for acceptance and does not specify when the period starts to run
or does not deal with the effect of holidays.
 Art 20 is a guide to interpreting the offeror’s time limits for acceptance.
 A period of time for acceptance fixed by the offeror in a telegram or a letter begins
to run from the moment the telegram is handed in for dispatch or from the date
shown on the letter or, if no such date is shown, from the date shown on the
envelope. (Art. 20 (1) )
 It states that a late acceptance is nevertheless effective as an acceptance if without
delay the offeror orally informs the offeree that he considers his offer as having
lapsed or dispatches a notice to that effect. (Art. 20 (2))
 Withdrawal of Acceptance (Art.22)
 An acceptance may be withdrawn if the withdrawal reaches the Offeror before or
at the same time the acceptance would have been effective.

 Acceptance with modifications (Art 19)

 A reply to an offer which purports to be an acceptance but contains additions,
limitations or other modifications is a rejection of the offer and constitutes a
counter-offer.
 Illustration
 Buyer sent to seller a purchase order for certain production machinery. The back of
the form stated that seller would be responsible for all damages –including
consequential damages—resulting from defects in the machinery.
 In response, seller delivered to buyer its sales order (or acknowledgement) form
that purported to accept buyer’s offer.
 On the back of the form, it stated that seller agreed to repair or replace any
machinery that proved to be defective, but disclaimed liability for shutdown losses,
damage to materials, loss of good will or any other consequential damages.
 The machinery was then delivered to buyer and shortly thereafter defects caused a
shutdown of buyer’s assembly plant causing serious consequential damages. Will
consequential damages be included in buyer’s measure of damages?
 However, a reply to an offer which purports to be an acceptance but contains
additional or different terms which do not materially alter the terms of the offer
constitutes an acceptance, unless the offeror, without undue delay, objects orally
to the discrepancy or dispatches a notice to that effect. If he does not so object,
the terms of the contract are the terms of the offer with the modifications
contained in the acceptance.
 Additional or different terms relating, among other things, to the price, payment,
quality and quantity of the goods, place and time of delivery, extent of one
party’s liability to the other or the settlement of disputes are considered to alter
the terms of the offer materially.
 When Communication (i) “Dispatched,” (ii) “Reaches” the Addressee
(Art.24)
 For the purposes of this Part of the Convention, an offer, declaration of
acceptance or any other indication of intention “reaches” the addressee:
 when it is made orally to him or
 delivered by any other means to him personally, to his place of business or
mailing address or,
 if he does not have a place of business or mailing address, to his habitual
residence.
 no provision directly addresses when a communication is “dispatched.”
 Obligations of the Seller (Art 30)
 General Obligation
 The seller must deliver the goods, hand over any documents relating to them and transfer the
property in the goods, as required by the contract and this Convention.

 Place of delivery (Art 31)

 if the contract of sale involves carriage of the goods—in handing the goods over to the first
carrier for transmission to the buyer.
 The seller has duly performed its duty of delivery when the goods are handed over to the first
carrier.
 If several subsequent carriers are involved, handing over to the first carrier constitutes delivery.
 Time of delivery (Art 33)

 The seller must deliver the goods:

 (a) if a date is fixed by or determinable from the contract, on that date;
 (b) if a period of time is fixed by or determinable from the contract,
 at any time within that period unless circumstances indicate that the buyer
 is to choose a date; or
 (c) in any other case, within a reasonable time after the conclusion of
 the contract.
 Handing over of Documents (Art 34)
 If the seller is bound to hand over documents relating to the goods, he must hand them over at
the time and place and in the form required by the contract.
 If the seller has handed over documents before that time, he may, up to that time, cure any
lack of conformity in the documents, if the exercise of this right does not cause the buyer
unreasonable inconvenience or unreasonable expense.
 However, the buyer retains any right to claim damages as provided for in this Convention.
 Conformity of the Goods (Art 35)
 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.
 Buyer’s remedies (Art 45)
 If the seller fails to perform any of his obligations under the
 contractor this Convention, the buyer may:
 (a) exercise the rights provided in articles 46 to 52; (Requiring performance; Avoidance; reduction of
price)
 (b) claim damages as provided in articles 74 to 77.

 (2) The buyer is not deprived of any right he may have to claim damages by exercising his right to other
remedies.
 Obligation of the Buyer (Art 53)
 The buyer must pay the price for the goods and take delivery of them as
required by the contract and this Convention.

 Two main obligation of the Buyer:

 (i) to pay the price for the goods; and
 (ii) to take delivery of the goods.
 Payment of the Price
 An international sale contract normally specifies not only the precise amount to be paid, but
also the exact time and place of payment.

 In a letter of credit transaction, the buyer must make payment upon the presentation of
documents demonstrating that conforming goods have been shipped.

 If the contract is silent as to the place of payment, Art 57 (1) of the default rule of CISG is
that payment is to be made at the seller’s place of business.
 Seller’s Remedies (Art 61)
 If the buyer fails to perform any of his obligations under the
 Contract or this Convention, the seller may:
 (a) exercise the rights provided in articles 62 to 65; (Requiring buyer to pay the price,
avoidance)
 (b) claim damages as provided in articles 74 to 77.
 (2) The seller is not deprived of any right he may have to claim Damages by exercising
his right to other remedies.
 Remedies of the Seller by breach of the Buyer
 Art 61 sums up the remedies of the seller. They are:

 (i) Requiring performance (Specific performance) (Requiring buyer to pay the price, take
delivery or perform his other obligations (Art 62);
 (ii) Avoidance (Art 64);
 (iii) Damages.