Contract Formation and Performance Under the UCC and CISG: A Comparative Case Study

Date01 January 2015
Published date01 January 2015
DOIhttp://doi.org/10.1111/jlse.12021
Journal of Legal Studies Education
Volume 32, Issue 1, 1–46, Winter 2015
Contract Formation and Performance
Under the UCC and CISG: A
Comparative Case Study
Kurt M. Saundersand Leonard Rymsza∗∗
The great object of the law is to encourage commerce.1
I. Introduction
A contract for the sale of goods is often the end product of extensive ne-
gotiations between the parties, and it embodies their expectations and sets
out the details of their agreement. If a dispute arises, the contract will be
the starting point for determining the rights and liabilities of the parties.
Moreover, the law that governs the agreement will determine whether a valid
contract exists, how it will be interpreted, and what remedies are available for
its breach. Contracts for the sale of goods in the United States are governed
by the Uniform Commercial Code (UCC) in every state but one.2When
one of the parties to the contract is based in another country, however, the
conf‌lict of laws principles that will determine which country’s law governs
the transaction can be confounding.3In addition, the commercial laws and
Professor of Business Law, California State University, Northridge.
∗∗Emeritus Professor of Business Law, California State University, Northridge.
1Beale v. Thompson, 3 Bos. & Pull. 405, 421, 127 Eng. Rep. 221 (C.P. 1803).
2Unif. Commercial Code Sections 1–3B U.L.A. (2002) [hereinafter U.C.C.]. The U.C.C. has
been adopted in some form by all f‌ifty states, the District of Columbia, as well as Puerto Rico,
Guam, and the U.S. Virgin Islands. Louisiana has adopted it with the exception of Article 2. All
references in this article are to the 2002 version of the U.C.C.
3“The rights and duties of the parties as to a contract are determined by the local law of the state
which, with respect to that issue, has the most signif‌icant relationship to the transaction and the
parties.” Restatement (Second) of Conf‌licts of Law § 188(1) (1971).
C2015 The Authors
Journal of Legal Studies Education C2015 Academy of Legal Studies in Business
1
2 Vol. 32 / The Journal of Legal Studies Education
practices of other cultures are sometimes quite different than those found
in the United States. Fortunately, when it comes to contracts for the sale of
goods, these concerns can be overcome due to the accession of the United
States to the United Nations Convention on Contracts for the International
Sale of Goods (CISG).4
The CISG is intended to promote international trade by harmonizing
the commercial laws among countries and bringing greater certainty and
predictability to contracts involving the international sale of goods.5The
CISG is a self-executing treaty of the United States that entered into force on
January 1, 1988.6It has been adopted by over seventy countries, accounting
for more than 75 percent of all international trade.7Like the UCC, the
CISG provides a uniform set of rules for international sales contracts.8When
questions of interpretation and enforcement of such contracts arise, the
CSIG displaces national law and obviates the need for courts to engage in
often unpredictable conf‌lict of laws analyses to determine which country’s
law applies.9
An increasingly globalized economy makes it imperative for businesses,
and the lawyers who advise them, to understand the CISG and how it differs
from the UCC.10 The failure to realize when the CISG applies to a contract,
and how it affects the rights and liabilities of the parties, can lead to an unfor-
tunate surprise. For lawyers, it may be tantamount to malpractice. One means
A/CONF. 97/18 (1980), reprinted in S. Treaty Doc. No. 9, 98th Cong., 1st Sess. [hereinafter
CISG].
5CISG pmbl.
6See Delchi Carrier S.p.A. v. Rotorex Corp., 71 F.3d 1024, 1027 (2d Cir. 1995).
7John E. Murray, Murray on Contracts § 13 (5th ed. 2011) [hereinafter Murray on
Contracts]; see also Ralph H. Folsom et al., International Business Transactions 2–
8 (2d ed. 2001).
8“Caselaw interpreting analogous provisions of Article 2 of the Uniform Commercial Code
(“U.C.C.”), may also inform a court where the language of the relevant CISG provisions tracks
that of the U.C.C. However, U.C.C. caselaw ‘is not per se applicable.’” Delchi Carrier S.p.A. v.
Rotorex Corp., 71 F.3d 1024, 1027 (2d Cir. 1995).
9The CISG is concerned with contract formation and does not address issues of contract validity
such as capacity, legality, and consent. Those issues remain the subject of national law. See Rice
Corp. v. Grain Bd. of Iraq, 2009 WL 3489916 (E.D. Cal. 2009).
10For a discussion of the importance of teaching the CISG in legal education, see William S.
Dodge, Teaching the CISG in Contracts, 50 J. Legal Educ. 72 (2000); Burt A. Leete, Teaching the
Convention on the International Sale of Goods, 12 J. Leg. Stud. Educ. 19 (1994). For a comparison
of the U.C.C. and CISG rules discussed in this article, see Appendix infra.
2015 / Contract Formation and Performance 3
for accomplishing the goal of educating law and business students about the
differences between the UCC and the CISG is the use of a case study as a
pedagogical tool. This case study, written for use in commercial and business
law courses, explores various contracts law issues from the standpoints of the
UCC versus the CISG. Although the issues presented for discussion are rela-
tively straightforward, the main focus is comparative so as to allow students
to understand how application of the UCC or CISG can lead to divergent
outcomes.
Because it is a case study, the emphasis is less on the theory of the law
and more on its practical application in context. In Part II, a hypothetical fact
scenario is presented for consideration. Part III provides a set of questions to
prompt and direct a discussion and analysis of numerous issues presented by
the hypothetical case. An overview of applicable CISG and UCC contracts law
is provided in Part IV. Instructors may wish to supplement these materials with
textbook readings and additional cases that will assist students in analyzing the
issues. Finally, the teaching notes in Part V outline the pedagogical objectives
and suggestions for use of the case, including a detailed analysis of the issues
raised by the questions in Part III.
II. The Case Study
“A Taste of Beer” is a chain of upscale beer tasting bars solely owned by
Matthew Bynum and based in California. Each bar provides patrons with an
opportunity to sample selected tastings of a large variety of craft beers. In
a continuing effort to provide quality craft beers at his tasting bars, Bynum
surveyed his patrons regarding their interest in alcohol-free beers. The survey
results revealed that there was considerable interest in a crafted alcohol-free
beer, but patrons also wanted the taste of the alcohol-free beer to be the same
as that of a full strength beer.
With these survey results in mind, Bynum attended the Annual Craft
Brewers Convention and Exposition in Munich, Germany. The convention
boasted of having over f‌ive hundred exhibits featuring the latest and best
products and services that industry brewers and vendors had to offer. In his
tour of the exposition, Bynum was attracted to Rudolf Verkauferbrauer’s ex-
hibit. A native of Austria who now operates a brewery in Belgium, Verkaufer-
brauer had an excellent reputation as a master brewer of craft beers. Bynum,
who was familiar with many of Verkauferbrauer’s beers, stopped to examine
what brews he had to offer.

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