United Nations Convention on Contracts for the International Sale of Goods

• Author: Franklin G. Snyder, Mark Edwin Burge
• Pages: 217-234

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UNIT 12: CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 217

Unit 12

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ALTERNATIVE REGIMES

Part Three

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United Nations Convention on Contracts for the

International Sale of Goods

FOCUS OF THIS UNIT

Commerce is Global, and so are Contracts. Trade between nations has been

a major part of world history since at least the time of the Babylonian Empire. But

obvious problems arise when transactions cross national borders because laws and

commercial practices change. A merchant doing business in another country also has

a potential problem in that the courts of one country might tend to favor that

country’s own citizens in a dispute with merchants from other countries. Even if the

courts are completely unbiased, however, there is a more fundamental problem. If the

buyer is in the United States and the seller is in Italy and the goods are destined for

delivery in Russia, which body of law (U.S., Italian, Russian) will apply? And in which

jurisdiction can the suit be brought?

A body of law that goes under the name of conflict of laws

1

historically has tried

to deal with these issues by providing rules determining which jurisdiction’s law will

apply. Also, under an international notion of “comity,” courts of one country are

supposed to recognize and give effect to judgments from other countries. Still, despite

the best efforts of generations of lawyers, judges, and legal scholars, the system relies

a great deal on good faith and cooperation, as many more potential ways to evade

contract enforcement exist in a multinational setting than do with a domestic

contract.

Welcome to the United Nations CISG. To help bring more certainty, many of

the world’s largest trading nations—and a host of smaller ones—negotiated, signed,

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[“Conflict of Laws” is sometimes the subject of its own law school course, and the topic of

multiple and conflicting laws otherwise comes up in courses with name s like “Private International

Law” or “International Business Transactions.” Both future commercial litigators and future business

transaction lawyers would benefit from a working knowledge of these areas. —Eds.]

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218 CHAPTER IV: ALTERNATIVE REGIMES

and ratified a treaty called the United Nations Convention on Contracts for the

International Sale of Goods, or “CISG” in contract-law parlance. Unlike some United

Nations pronouncements—the Universal Declaration of Human Rights, for

example—the CISG is not an aspirational or advisory document. As you will see from

the cases below, it is a multilateral treaty that was signed by the President and

ratified by the United States Senate, which makes the treaty the domestic law of the

United States. When a contract refers to “the law of Michigan” or “the law of Texas,”

that law literally includes the CISG. While American cases involving the CISG most

often end up in federal courts, the law would be just as applicable in an American

state court.

The CISG is designed to be used as commercial law in a hundred different

jurisdictions. Because each of those jurisdictions has its own commercial law—some

derived from English common law but most from other sources, especially Roman-

derived civil law—the treaty is necessarily a compromise. Some of its rules are similar

to those in the United States; some are similar to those in other nations, including

those of the European Community. Thus the CISG tracks no single country’s

commercial law. This means that a significant population of lawyers tends to dislike

the CISG in pretty much every country. (Lawyers tend to prefer law that matches

their own local law.) Nevertheless, even for purely American businesses, some aspects

of the CISG may be superior for some clients over domestic contract regimes like the

UCC. If you wish to be a practicing business lawyer in an era of global commerce, you

would be wise to make the CISG as part of your legal toolkit.

When Does the CISG Apply? The CISG applies only to contracts between

parties that are residents of “Contracting States,” which is the term used for countries

that have ratified the treaty. As of this writing, nearly 80 countries have ratified it,

including most of the larger players in international trade. Some notable countries

have not ratified the CISG, however, including India, the United Kingdom, much of

Southeast Asia, and most of Africa. Importantly for lawyers with clients in North

America, the CISG has been ratified by Mexico, Canada, and the United States.

Thus, a contract between a business in Laredo, Texas and a business in Nuevo

Laredo, Mexico would be governed by the CISG if the contract does not otherwise

specify governing law. The CISG’s coverage is also generally limited to business-to-

business contracts, so as not to interfere with domestic consumer protection laws.

A very important aspect of the CISG is that parties are free to opt out of it.

Thus, an American seller might specify that its transactions will not be governed by

the CISG, but by the Uniform Commercial Code in a particular state. A German

manufacturer might want to specify the law of one of the German states. Unless

these parties opt out, however, the CISG applies, because both the United States and

Germany are CISG signatories.

Confusing Vocabulary: “State” and “Article.” Right off the bat, the CISG

refers to parties in “different States.” In this treaty context, the word “State” does