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The U.N. Convention on the International Sale of Goods

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The U.N. Convention on the International Sale of Goods ("CISG") entered into force in the United States on January 1, 1988. If applicable to a given transaction, the CISG supplies "gap filling" rules that govern contract formation and set forth the rights and obligations of the buyer and seller. The CISG provides, however, that express contractual provisions take precedence over the default provisions of the CISG. Thus, contracting parties remain free to specify whatever law or terms they wish to apply to their transaction, and may exclude altogether the application of the CISG to their contractual relationship.

As of December 1993, the CISG had entered into force in the following 35 countries:
Argentina Lesotho
Australia Mexico
Austria Netherlands
Belarus Norway
Bulgaria People's Republic of China
Canada Romania
Chile Russian Federation
Czech Republic Slovakia
Denmark Spain
Ecuador Sweden
Egypt Switzerland
Finland Syria
France Uganda
Germany Ukraine
Guinea United States of America
Hungary Yugoslavia
Iraq Zambia
Italy

The Treaty Section of the United Nations' Office of Legal Affairs (Tel.: 202/963-5467) maintains the most up-to-date listing of countries that have ratified, acceded to, or otherwise adopted the CISG.

The CISG only applies to international commercial sales of goods. Each of these elements constitutes an important limitation on the scope to the CISG's applicability. First, the sale must be international in character. A sale is considered "international" if it involves "parties whose places of business are in different States." In ratifying the CISG the United States stipulated that, absent express agreement to the contrary, the CISG would not apply to contracts between a U.S. party and a party whose place of business is in a state that has yet to adopt the CISG.

Second, the CISG covers the sale of goods, and does not automatically apply to services contracts. Where a contract includes both goods and services elements, the CISG will apply when the sale of goods constitutes the "preponderant part of the [seller's] obligations... ." Contracting parties are free to apply the CISG to services (or predominantly-services) contracts, so long as this choice of law is made explicit in the contract itself.

Finally, the CISG only applies to commercial transactions, i.e., sales between merchants of goods. Among other limitations, it does not cover consumer sales; auction sales; sales of negotiable instruments or securities; or sales of ships, vessels, or aircraft.

Adoption of the CISG by the United States provides important benefits to U.S. exporters. Parties negotiating international sales contracts often find the "choice of law" issue to be among the most contentious. Each party is familiar with its own domestic sales law, and prefers that its local rules apply to the transaction. The CISG enables the parties to avoid difficulties in negotiating "whose law will govern" by putting into place internationally accepted substantive rules on which contracting parties, courts, and arbitrators may rely.

The CISG's rules closely follow Article 2 of the Uniform Commercial Code ("UCC"), which is in force in 49 of the 50 states. Consequently, U.S. practitioners will be familiar with most of its terms and rules. However, several important distinctions between the UCC and the CISG should be highlighted:

1. Specification of Price - Under the CISG, a sales contract does not come into existence unless a price term or a provision for determining price is supplied in the agreement. By contrast, the UCC allows a contract to be formed even without specification of a sales price.

2. Revocability of Offer - Under the CISG, an offer becomes irrevocable if the offeree relies on it; under the UCC, an irrevocable offer must be in writing.

3. Terms of Acceptance - Under the CISG, acceptance occurs upon receipt thereof by the offeror; the majority of UCC jurisdictions hold that acceptance occurs when it is mailed or transmitted by the offeree to the offeror.

4. "Battle of Forms" - If a written offer is modified by the offeree and then returned to the offeror, the CISG deems this to be a rejection and counteroffer; under the UCC, a contract will be formed irrespective of whether the acceptance is a "mirror image" of the offer.

5. Writing Requirement - The CISG does not require that a sales contract be reduced to a writing; under the UCC's statute of frauds, the existence of many types of contracts may be proven only by reference to a writing.

It also should be noted that the CISG leaves questions relating to validity of contract and the rights of "third party beneficiaries" to be determined by applicable domestic law. For more information on the CISG, contact the Office of the Chief Counsel for International Commerce, U.S. Department of Commerce (Tel.:202/482-0937).
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excepted from May, 1994, U.S. Commerce Dept. material

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