The UN Convention on contracts for the international sale of goods--it's not your father's Uniform Commercial Code.

Author:Kokoruda, Christopher C.
Position:International Law
 
FREE EXCERPT

The United Nations Convention on Contracts for the International Sale of Goods (CISG) is exactly what its name suggests: It governs international commercial contracts for the sale of goods, just as art. 2 of the Uniform Commercial Code (UCC) governs domestic transactions in goods. (1) The general principles upon which the CISG is based are its "international character and ... the need to promote uniformity in its application and the observance of good faith in international trade." (2)

The CISG was finalized for adoption by United Nations member-states in Vienna in 1980. In December 1986, the United States ratified the CISG, and it became effective in January 1988. (3) As of August 2010, more than 75 countries have ratified the convention, including major U.S. trading partners, such as China, Japan, Germany, Canada, Mexico, France, as well as most of Latin America and the European Union. (4)

Although the CISG is founded on many concepts that are more familiar to civil law attorneys, as Florida becomes an increasingly important hub for international trade, Florida attorneys will need to take on an increasing international character. This article provides practitioners a basic foundation to recognize when the CISG applies and to facilitate familiarity with many of the key distinctions between the CISG and art. 2 of the UCC.

When the CISG Applies

Under U.S. law, the CISG is considered to be a self-executing treaty, meaning that no subsequent congressional enactment is required to make the convention's provisions binding on U.S. courts. (5) Indeed, the CISG's provisions apply directly as substantive sales law to agreements for the international sale of goods. (6)

This simply means that whenever parties to an agreement for the international sale of goods are from two different signatory states, the CISG will automatically provide the governing substantive law, not the UCC. (1) This bears repeating: The CISG automatically applies to contracts for the sale of goods between parties whose places of business are in different signatory countries unless the parties expressly opt-out of the convention. (8)

Because the CISG is the default applicable law when parties from two different signatory countries execute an agreement for the sale of goods unless they "opt out," inquiring minds will want to know, how does one "opt out" of the CISG? Opting out of the CISG is simple, but it must be done expressly rather than by implication. (9) Specifically, because the CISG is the substantive law, a choice of law provision in an international sales agreement between parties from different signatory countries is not sufficient to opt out of the CISG. (10) Thus, many such sales agreements are actually governed by the CISG. Nevertheless, lawyers and courts in these cases often mistakenly apply the UCC. (11) Although there are many possible explanations for this, the fact remains that many international sales transactions are governed by the CISG, and there are numerous significant legal distinctions between the CISG and the UCC.

What's at Stake

There are at least two primary reasons that lawyers and jurists should consider whether the CISG applies. First, the CISG may impact a party's choice of forum (i.e., state versus federal court). Second, there are many striking substantive legal differences between art. 2 of the UCC (as well as the common law) and the CISG.

With...

To continue reading

FREE SIGN UP