International Sale of Goods II

Provisions of CISG

Chapter Outline

• The Sphere of Application of CISG• General Provisions for Interpretation of CIS

G• Contract Formation• Seller’s Obligations• Buyer’s Obligations• Risk of Loss• Excused Performance• Remedies for Breach of Contract

The Sphere of Application of CISG

A. Three Requirements for the Application of CISG

B. Choice of Law ClausesC. Sales Excluded from CISGD. Contractual Issues Excluded from

CISG

General Provisions for Interpretation of CISG

From Art. 7 to Art. 13

Contract Formation

A. The OfferB. The AcceptanceC. Battle of the Forms

Warm-up Questions

1. Can you explain the behind reasons for the existence of CISG?

2. Is China a contracting state to CISG? If the answer is yes, what’s the legal connotation of being a contracting state?

3. How do you understand the “international” nature of an international sales contract?

4. Do you think CISG will govern all the international sales contract?

2.1 The Sphere of Application of CISG-Art.I

A. Three Requirements for the Application of CISG

a) The contract is for the commercial sale of goods;

b) The contract is between parties whose places of business are in different countries;

c) The places of business are located in countries that have ratified CISG.

“the international commercial sale of goods”

• “sale” the passing of title from the seller to

the buyer for a price• “goods” things that are movable and tangible• “commercial” the goods are traded for business

purposes, which is for industrial production or resale, not for personal use or household use.

“international”

• It is redeemed to be international if places of businesses of the parties are located in different contracting states to CISG.

• Not consideringa) shipment of the goodsb) Negotiations of the contract occurring in

different nationsc) Location of the goodsd) The citizenship or nationality of the parties

Attention to Art. I

• The application of CISG depends upon both parties being aware that the transaction is international and that the places of business are in different nations.

Disclosure includesa) The contract form; b) The dealings between the parties; orc) Information disclosed before the

contract is formed;

“place of business”

• It is suggested that

“a permanent establishment is required and that neither a ware house nor the office of a seller’s agent qualifies as a ‘place of business’”

Attention to Art.I

• “liaison office”• If a party involving multiple offices,

one of which is in the same state as the other party’s place of business, Art. 10(a) directs that use of the place of business having “the closest relation to the contract and its performance”.

The assistance by Art. X

• Is to limit the useable facts in making a choice as

circumstances known to the parties before or at the conclusion of the contract.

Art. I(1)(b)

• Places of businesses of the parties are in different states when the rules of private international law lead to the application of the law of a Contracting State.

• Eg. France v.s. the UK• China and U.S. has precluded this met

hod by a permissible reservation under CISG.

B. Choice of Law Clauses

• When the three requirements are met and the CISG does apply, the parties, however, may exclude or modify the application of CISG by a “choice of law clause”. Whether the parties can “opt in” depends on the rules of the state where this question comes up.

Opting out of CISG must be the choice of law clause of clarity allowed by any regime

• This contract shall be governed by the laws of China.

• “This contract shall be governed by the laws of China applicable to domestic contracts of sale, and shall not be governed by the CISG” or “ this contract shall be governed by the Contract law of PRC and other laws of China governing domestic sale of goods.”

C. Sales Excluded from CISG

Art. II and III exclude types of transactions from the CISG’s application.

a) Consumer goods sold for personal, family, or house hold use.

b) Goods bought at auction.c) Stocks, securities, negotia

ble instruments, or money.

d) Ships, vessels, or aircraft.e) electricity

f) Assembly contracts for the supply of goods to be manufactured or produced therein the buyer provides a “substantial part of the materials necessary for such manufacture”.

g) Contracts that are in “preponderant part” for the supply of labor or other service.

h) Liability of the seller for death or personal injury caused by the goods.

D. Contractual Issues Excluded from CISG

Art. IVa) Only the obligations of the buyer and seller

being mentioned, leads to some controversy over whether CISG would govern the rights and obligations of person who were not immediate parties to the sale contract.

b) Validity of sales contract eg. The capacity of the parties, the illegality

of the contract, mutual assent of the parties.

c) Property rights to the goods

2.2 General Provisions for Interpretation of CISG

General ProvisionsArt. VII-XIII

Art. 7 is to assist in

Interpretation of

CISG.

Art.8&9 are

to provideGuidance in

interpretationOf terms in

internationalSales contracts.

Art. 10 multiple places

of business

Art.11. formation of contract

Art. 12.&96Allow

A stateTo make

a reservationOn Art.11

Art.13. define“writing”Used in CISG,

Including a telex or Telegram.

General provisions

Art. 7 establishes the orders to decide a case

a) The CISG itself;b) The general

principles where CISG is based;

c) The rules of private international law.

Art.8 interprets the contract and terms base on three-tier hierarch:

a) A common understanding

b) One party “knew or could not have been unaware” of the other’s intent, the latter’s interpretation prevails-subjective intent

c) “a reasonable person’ standard-objective intent

General provisions

Art. 9 allows

the parties to include “any usage” to which they have agreed.