The Applicability of United Nation Convention on Contracts for International Sales of Goods (CISG) 1980

The existence of International trade is cannot be denied becomes one of the development means in every country. Commercial Contract is the core of the sales since it has significant influence in the implementation of the sales itself. In the international level, there are some difficulties in order to draft and implement International Commercial Contract due to the diversity of laws applied.

United Nation Convention on Contracts for International Sales of Goods 1980 (CISG) was formed to overcome the difficulties in regard with the applicable law of the international commerce. The CISG is a project of the United Nations Commission on International Trade Law (UNCITRAL), which in the early 1970s undertook to create a successor to two substantive international sales treaties – Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF) and the Convention relating to a Uniform Law for the International Sale of Goods (ULIS) – both of which were sponsored by the International Institute for the Unification of Private Law (UNIDROIT). 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. The applicability of the CISG, however, is limited by a number of factors.

Applicability

The applicability of the CISG is regulated in Article 1-6 of the Convention. Pursuant to Article 1 the CISG governs International Commercial Contract if the contract is sales of goods between the parties whose place of business 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. However states can declare that they are not bound by Article 1 (b) as permitted by Article 95. Based on this Article, the CISG is not applicable is when it is not readily apparent that the parties to the contract are from different States. For instance, such a situation might arise where the parties appeared to have their places of business in the same State but one of the parties was acting as the agent for an undisclosed foreign principle. In this situation, although the parties reside in different States, the CISG would be inapplicable. It may also apply by virtue of the parties' choice. The autonomy of the parties to international sales contracts is a fundamental theme of the Convention. The Convention may apply as the law applicable to the contract if so chosen by the parties. In that case, the operation of the Convention will be subject to any limits on contractual stipulations set by the otherwise applicable law. Also the parties can, by agreement, derogate from virtually any CISG rule, or can exclude the applicability of the CISG entirely in favor of other law. 

Furthermore, Article 2 regulates that 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. Further exclusion of the Convention's applicability arises in situations where the parties share in a substantial part of the supply of materials or labor. Article 3 of the CISG states that contracts for the supply of goods 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. Additionally, Article 3 further restricts the Convention's application in situations where the preponderant part of the obligations of the party who furnishes the goods consists of the supply of labor or other services. This restriction is intended to exclude situations where, for instance, the purchase of a small machine would require significant installation work and extended supervision. In this scenario, the CISG would exclude transactions focused on service, rather than sales, aspects.

Further, the CISG does not govern every issue that can arise from an international sales contract: for example, issues concerning the validity of the contract or the effect of the contract on the property in (ownership of) the goods sold are, as expressly provided in the CISG, beyond the scope of the Convention, and are left to the law applicable by virtue of the rules of private international law as regulated under Article 4 of the Convention. In addition, Article 5 of the Convention regulates that CISG does not apply to the liability of the seller for death or personal injury caused by the goods to any person, and Pursuant to Article 6 of the Convention, parties are also free, by agreement, to derogate from or vary a CISG rule or exclude the applicability of the CISG entirely.

Therefore, it can be conclude that the applicability of CISG is strictly restricted by the convention itself, his convention only deals with contracts for the international sales of goods between private businesses, excluding sales to consumers, sales of services, and sales of certain specified goods. The CISG applies to contracts for the sale of goods if both parties are located in Contracting States, when private international law leads to the application of the law of a Contracting State, or by choice of the contractual parties themselves, regardless of whether they are located in a Contracting State.

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1. Audio Visual Library of International, United Nation Convention on Contracts for International Sales of Goods, http://legal.un.org/avl/ha/ccisg/ccisg.html, accessed on May, 12th 2016.

2. UNCITRAL, United Nation Convention on Contracts for International Sales of Goods, http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG.html, accessed on May, 12th 2016.

3. Thomas J. Drago, Esq. and Alan F. Zoccolillo, Esq, Be Explicit: Drafting Choice of Law Clauses in International Sale of Goods Contracts, http://www.cisg.law.pace.edu/cisg/biblio/zoccolillo1.html, accessed on May, 12th 2016.

4. UNCITRAL, Loc.Cit.

5. CISG explanatory Note, pg. 34

6. Audio Visual Library of International, Loc.Cit.

7. Thomas J. Drago, Esq. and Alan F. Zoccolillo, Esq,Loc.Cit.

8. Audio Visual Library of International, Loc.Cit.

9. Cassels brock Lawyers, Exclusion of United Nation Convention on Contracts for International Sales of Goods in Mining Agreement, http://www.casselsbrock.com/BlogPost/Exclusion_of_the_United_Nations_Convention_on_Contracts_for_the_International_Sale_of_Goods_in_Mining_Offtake_Agreements, accessed on May. 12th 2016