CISG - Contract of Sale of Goods

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An analysis over Convention of International Sale of Goods along with recommendations and suggestions for Sri Lanka

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CISG - Contract of Sale of Goods

  1. 1. THE UN CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS International Law Group Presentation
  2. 2. Overview <ul><li>• Scope of application: The convention applies only to “ Contracts of Sale of Goods”. Cross-border sales, except consumer contracts, application can be excluded </li></ul><ul><li>• Rules on: formation of the contract, obligations of seller (conformity of goods!) & buyer, consequences of breach </li></ul><ul><li>• Remedies of the buyer based on breach of contract by the seller: supplementary performance by repair or substitute, </li></ul><ul><li>avoidance of the contract, reduction of the price, damages </li></ul><ul><li>• Buyer must examine goods and notify the seller of lack of conformity in order not to lose remedies </li></ul><ul><li>• Seller/buyer is not liable if he can prove an impediment beyond his control which he could not reasonably take into account/avoid/overcome </li></ul>
  3. 3. Coverage of CISG <ul><li>Subject Matter of CISG </li></ul><ul><li>The Formation of Contracts </li></ul><ul><li>The performance of contracts </li></ul><ul><li>The remedies available to buyers & sellers in case of breach of contract </li></ul><ul><li>Merchants – CISG applies only to commercial sales transactions between merchants. CISG Art. 2: The conversion does not apply to Sale of Goods brought for personal, family or household use. </li></ul><ul><li>Excluded from the Convention </li></ul><ul><li>Auction Sales </li></ul><ul><li>Sale of execution or otherwise by authority of law </li></ul><ul><li>Sales of Stocks, Shares, Investment securities, negotiable instruments or money. </li></ul><ul><li>Sale of ships, vessels, hovercrafts or aircrafts & sale of electricity </li></ul>
  4. 4. Terms Not Covered In CISG <ul><li>Validity of Contracts </li></ul><ul><li>Conditions </li></ul><ul><li>Warranty </li></ul><ul><li>Passing of Property </li></ul><ul><li>Intention of Parties </li></ul><ul><li>Reservation of the Right of Disposal </li></ul><ul><li>Fraud </li></ul>
  5. 5. Terms Not Covered In CISG <ul><li>Reservation of the Right of Disposal </li></ul><ul><li>General rule – Nemo Dat </li></ul><ul><li>According to this rule, a thief cannot pass good title to stolen goods, and the original owner of the goods does not lose his title to them. </li></ul><ul><li>Capacity </li></ul><ul><li>Minors </li></ul><ul><li>Contracts with Minors   </li></ul><ul><li>Mental Incapacity and Drunkards  </li></ul>
  6. 6. Case Law <ul><li>Commercial Court Zürich (Sunflower oil case) </li></ul><ul><li>Decision - </li></ul><ul><li>The court awarded the buyer the restitution of the advance payment plus interest (Art. 78 CISG). As to the applicable rate of interest, the court applied the interest rate of the sellers' place of business, that being the place in which the sellers usually invest their money. </li></ul><ul><li>Officine Maraldi S.p.A. v. Intesa BCI S.p.A. et alii </li></ul><ul><li>Decision - </li></ul><ul><li>In Conclusion, the Court declared that no breach of contract had been committed by the seller and prevented the buyer from executing the guarantee as well as the banks from making any payment under the same. </li></ul>
  7. 7. Case Law <ul><li>ICC Arbitration Case No. 6653 of 26 March 1993 (Steel bars case) </li></ul><ul><li>Decision - The court finally held that as CISG does not determine the rate of interest, the applicable rate was to be the one currently used in international trade with respect to eurodollars, the currency in which payment had to be made. The court applied the annual London International Bank Offered Rate (LIBOR). </li></ul><ul><li>Dansk Blomsterexport A/s v. Frick Blumenhandel </li></ul><ul><li>Decision - Under the circumstances, there was no need to address the further question of whether notice of non conformity had been timely and sufficiently precise. </li></ul>
  8. 8. Recommendations <ul><li>Adaptation of CISG in the Sri Lankan Law System </li></ul><ul><li>The main reason as to why countries such as Sri Lanka, who have still not ratified under CISG should adopt this system is quite simple. Being adopted internationally with the consent of many major states of the world CISG tries to harmonize the International Trade and its regulations so that it would effectively result in efficiency and convenience when it comes to trade between countries. </li></ul><ul><li>Sri Lanka, has its own Sale of Goods Act which oversees the International Trade as well, however, most of the adaptation of CISG will prove to be beneficial to Sri Lanka in a number of ways. </li></ul>
  9. 9. Recommendations <ul><li>  </li></ul><ul><li>One of the main benefits of CISG is its unified code of rules and regulations, making importing and exporting and other facets of international trade easier. Instead of dealing with the domestic laws for international trade in several foreign countries, companies can readily apply CISG. </li></ul><ul><li>The convention is also a great way to build trust. Domestic laws within a foreign country can be interpreted in different ways, while the interpretations of CISG are static. </li></ul><ul><li>Sellers can avoid difficulties of reaching agreement with foreign buyers on choice of law issues as the CISG text will be readily available for compromise. </li></ul><ul><li>Use of the CISG will decrease the time and legal costs otherwise involved in the research of unfamiliar foreign laws. </li></ul><ul><li>The CISG will reduce the problems of proof of foreign law in domestic and foreign courts. </li></ul>
  10. 10. Recommendations <ul><li>However, there are several aspects that also need to be considered if Sri Lanka is to adopt CISG into their legal system. CISG was formulated mainly taking the western legal traditions into consideration, and it has not individually looked at alternative legal systems such as Islamic Law or Hindu Law. </li></ul><ul><li>Also there are dissimilarities which are faced between Civil Law Jurisdictions and Common Law Jurisdictions is some aspects of the contract. For example if the contract formation is done through mail, there is a difference on how the acceptance of an offer is confirmed. In most common law systems the contract is formed when the acceptance letter is mailed, where as in civil law systems the contract is formed when the acceptance of the offer is received. </li></ul><ul><li>  </li></ul><ul><li>Thus, there are various positives and negatives that are common in trying to adopt CISG in to the Sri Lankan legal system. </li></ul>
  11. 11. Conclusion <ul><li>It is hoped that this short introduction to the CISG will be of use to lawyers and businesspersons in need of a quick overview of the CISG and of its application in the Singapore context. We must however remind the reader that there is much more to say on the CISG, and it is my hope that this short overview will only be used as a first step in any research on the CISG. </li></ul>
  12. 12. Questions and Discussion

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