4.6 Contracts for the International Sale of Goods

• Library: Contract Law in Virginia (Virginia CLE) (2019 Ed.)

4.6 CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS

4.601 In General. The United Nations Convention on Contracts for the International Sale of Goods ²⁷⁶ (CISG), effective January 1, 1988 in the United States, applies instead of state law (including the UCC) to many international contracts for the sale of non-consumer goods. ²⁷⁷ "The CISG is an international treaty that embodies a uniform set of rules for the creation of a contract of sale and the related obligations of parties to international sales transactions." ²⁷⁸ As ratified by the United States, the CISG only applies when

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the parties to the contract have their places of business in different signatory nations. ²⁷⁹ Since most of the United States' primary trading partners have adopted the CISG, it governs a majority of foreign commercial transactions, ²⁸⁰ unless the parties affirmatively include a choice of law provision to the contrary in their contract. ²⁸¹

4.602 Parol Evidence Under the CISG. The CISG does not contain a parol evidence rule. Generally speaking, the provisions of the CISG

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are quite liberal in allowing evidence outside of the written contract, ²⁸² noting that "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." ²⁸³ Article 8 of the CISG places a great deal of emphasis on determining the parties' intent. ²⁸⁴ Commentators have argued that the language of article 8 effectively revokes the UCC's parol evidence rule for contracts governed by the CISG. ²⁸⁵

In MCC-Marble Ceramic Center v. Ceramica Nuova D'Agostino S.P.A., ²⁸⁶ the Eleventh Circuit Court of Appeals indorsed the view that the CISG precludes application of the parol evidence rule. MCC argued that the parties had orally agreed not to apply the terms from the preprinted form. ²⁸⁷

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Thus, even when the written contract is not ambiguous, the CISG overrides the parol evidence rule. Items inconsistent with the written language of the contract remain admissible.

The MCC-Marble court rejected the reasoning of the Fifth Circuit Court of Appeals in an earlier case. ²⁸⁸ According to the MCC-Marble court, the parol evidence rule is a conflicting, substantive rule of law, not simply a rule of procedure that should apply in federal courts regardless of the CISG text, as the court in Beijing Metals had held. ²⁸⁹ Most commentators agree that the MCC-Marble approach is the correct one. However, the law is still somewhat unsettled, and article 7 of the CISG does suggest that local law has a role in "filling the gaps" not addressed by the CISG. ²⁹⁰

4.603 Course of Dealing, Custom, and Trade Usage. The CISG clearly mandates that evidence of course of dealing, custom, and trade usage should be considered. Article 9 explicitly states that the parties are bound by "any usage to which they have agreed, and by any practices which they have established between themselves." ²⁹¹ Additionally, trade usages and common practices "of which the parties knew or ought to have known" are impliedly made applicable to the contract. ²⁹² Again, application of course of dealing,

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custom, and trade usage is not limited to ambiguous contract terms, perhaps allowing more liberal usage than under the UCC. ²⁹³

4.604 Merger Clauses and Exclusion of CISG Provisions. The CISG allows the contracting parties to "opt out" of most CISG provisions that would otherwise govern, or to exclude the CISG's application entirely. ²⁹⁴ Practitioners should take care to expressly disclaim any CISG provisions their clients do not wish to have apply to the contract. ²⁹⁵ Articles 8 and 9 are among the provisions that contracting parties may choose to disclaim. A choice of law clause mandating that the UCC controls is also an option.

Merger clauses may also aid in limiting the scope of parol evidence admissible in the event of a dispute. However, the standard one-sentence merger clause may be insufficient, given the CISG's focus on interpreting the contract according to the parties' intent. The merger clause should have more effect if it shows clearly that it is the parties' intent to invoke article 6 to deviate from the CISG, to exclude certain types of evidence (such as prior negotiations), or not to be bound by trade usage, custom, or course of dealing. The more evidence a party can give to show the necessity to the contractual relationship of the merger clause or CISG exclusions (to truly reflect the parties' actual intent), the less likely a court will be to use the "due consideration" to all relevant circumstances clause of article 8(3) to allow evidence outside of the written contract. ²⁹⁶

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Notes:

^[276] United Nations Convention on Contracts for the International Sale of Goods, opened for signature April 11, 1980, S. Treaty Doc. No. 9 (1983), 19 I.L.M. 671, reprinted in 15 U.S.C.A. app. at 333 (1997).

^[277] Valero Mktg. & Supply Co. v. Greeni Oy, 373 F.Supp.2d 475, 480 (D.N.J. 2005) rev'd on other grounds, 242 Fed. Appx. 840 (3d Cir. 2007) (unpublished); Caterpillar, Inc. v. Usinor Industeel, No. 04 CV 2474, 2005 U.S. Dist. LEXIS 6355, at *33-34 (N.D. Ill. Mar. 30, 2005) (mem.). TeeVee Toons, Inc. v. Gerhard Schubert GmbH, No. 00 Civ...