The considerable increase in international commerce in recent decades has spurred efforts to unite international commercial law . The United Nations Convention on Contracts for the International Sale of Goods (CISG) represents a major outcome of these hard works . The CISG reflects challenging interests in present-day international commercial relations. Trade often crosses legal and ideological boundaries – common and civil law systems, capitalist and socialist governments and industrialised and developing nations; the effort to create international legal regimes must deal with these differences. The unification effort must accordingly make not only technical, but also fundamentally political choices .
Objectives of CISG and its achievements:
The objectives of CISG are articulated in its preamble. CISG is predicated upon recognition that the development of international trade on the basis of equality and mutual benefit is an important element in promoting friendly relations among states and more particularly the recognition that the adoption uniform rules which govern contracts for the international sale of goods and take into account different social ,economic and legal systems would contribute to the removal of legal barriers in international trade and promote the development of international trade .
The perfect and reasonable outcome of the process that led to the adoption of CISG would be the worldwide ratification of the convention by all states, with the result that, in the normal course, a common legal code of rules dealing with international sales contracts would be applicable to international sales contracts. Buyers and sellers on the global market therefore would have a comparatively simple and common uniform system governing their contracts and their performance. The alternative would be a potentially very complex latticework of individual State sales law regimes, resort to which was dictated by the rules of private international law applying in each jurisdiction .There would be ambiguity at two levels :which forum’s law applies, and the requirements of this law. Typically, in such case, one party would benefit from having his or her own jurisdiction’s law applied, and the other party would be in a less favourable position by the application of a foreign and possibly poorly understood law. The convention has not been universally adopted of course(e.g.: United Kingdom, India, Japan and Brazil etc), but to the extent that it is, the benefits of a uniform sales law regime in International Sales become more widespread .
Provisions of CISG, promoting its objectives:
CISG, Uniformity, Internationality, other objectives and its application: Its very beginning, on the basis of Uniform Law of Sales and Uniform Law of Formation, makes it a natural device of uniform law. This is true with regard to the aim of the CISG, uniform law for international sales contracts to eliminate the trade barriers in international trade. Then its Preamble describes: The adoption of uniform rules, which govern contracts for the international sale of goods and take into account the different social, economic and legal systems, would contribute to the removal of legal barriers in international trade and promote the development of international trade. Then interpretation of Article 7(1) clearly explains, regard is to be had to its international character and the need to promote uniformity in its application .
CISG ensured, systematic advancement of economic activities on a fair and equal basis because of lively participation of developing as well as industrialised nations. The predecessors of CISG were alleged to be in favour of the sellers of the developed nations, but CISG has additional buyer oriented provisions .
In private commercial law field, the speciality of CISG is that, it is not dealing with procedure and conflicts ,but with substantive contract law .Once the sale is within the scope of CISG ,those who shop for forum cannot shop for law and if contracting parties are residents in a CISG states, the National Courts and International Arbitrators are no longer need to choose between different National Laws of sale . CISG deals with two aspects of the sales transaction, (I) the formation of contracts for international sale of goods, and (II) the rights and obligations of parties to these sales contracts .
The CISG will apply, if the parties to the contract have their places of business in different Contracting States (Article 1(1) (a)).
If a party has more than one place of business, the relevant place of business is the one most closely connected to the sales transaction (Article 10 (a)).
The CISG will also apply, when the parties' places of business are in different States and conflict of laws rules point to the application of the law of a Contracting State (Article 1(1) (b)).
Under article 1(1) (b), the CISG could apply where only one party has its place of business in a Contracting State and, possibly, where neither party has its place of business in a Contracting State. However, any Contracting State at its will can make a reservation under article 95, that it will not bind by article 1(1) (b) .
The main theme of the CISG is the role of the contract made by the parties, i.e. CISG recognises the principle of freedom of contract, according to Article 6, and CISG parties are free to exclude the application of the Convention or derogate from or vary the effect of its provisions. In other words, the application of the CISG is increased by the recognition of the principle of freedom of contract.
Within the scope of Article 7 (Interpretation of CISG), which is consistent with its nature and function. Since the CISG has an important function, i.e. to replace diverse domestic laws with uniform international law, with the observance of good faith in international trade. Then with regard to Article 9 (Trade usages and practices within the scope of CISG), which is considered as one the most significant characteristics of the CISG, because it gives legal effect to trade usages and practices through their application to the contracts of International Trade .
Instances of certainty in CISG :
a) Receipt Theory and Dispatch Theory:
Different legal systems have different rules regarding an offeree’s acceptance and its binding on the offeror. According to Anglo-American “mailbox rule”, a binding contract is established at the moment of dispatch and some other legal systems fix receipt as the operative moment. CISG also follows receipt rule (Article 15 and Article 18) .Through this CISG encourages certainty in this issue.
b) Communication and Parties:
Almost all the legal systems have common principles and policies regarding disclosure of information between contracting parties. The CISG provisions also impose a duty on contracting parties to disclose material information .
c) Transfer of Risk:
CISG adopted a straightforward rule, risk passes to the buyer when the goods are handed over to the carrier . This rule works against classic principle of documentary transactions. Even then, CISG promotes simple rule in international trade.
Critique of CISG Provisions:
The convention seeks to maintain a delicate balance between the contrasting attitudes and concepts of the civil law and of the common law, and very often rules have to be blurred or omitted altogether in order to produce an acceptable compromise. It is certainly the case that the very restricted view of fundamental breach in Article 25, coupled with the vagueness of the provisions, is widely considered to make the convention unsuitable for use in documentary sales , where the doctrine of strict compliance, particularly in relation to letters to credit holds away, or in sale of commodities, which typically involve rapidly fluctuating markets, long chains of parties and potential exposure to huge amounts of damages, all of which necessitate a high degree of legal predictability .
The convention governs only the formation of the contract and the rights and obligations of the seller arising from it. According to Article 4, CISG is not concerned with the validity of the contract or any of its provisions or of any usage, nor with the effect the contract may have on the property in the goods sold .
The Koblenz Oberlandesgericht has held that the convention does not apply to the validity of a retention of title clause. (Case No 5 U 534/91, [1992] Unilex D 92-4)
The convention is not concerned with the proprietary effects of the contract, nor with title conflicts between seller or buyer and a third party. Add to this the fact that CISG has nothing to say about CIF, FOB and combined transport transactions, and it will be apparent that the scope of the convention remains limited .
The weakness of CISG provisions are :
1. The contradictory provisions in Article 14 and 55 with regard to the determination of the price as a vital term of the contract.
2. The inconsistency between right to care and the right to avoid a contract for fundamental breach in Articles 48 and 49.
3. The doubtful status of good faith as a performance standard in CISG.
4. The implication of validity in Article 4 and impediment in Article 79.
5. Other concerns rose in opposition to CISG are validity of penalty clause, prescription period for determination of claims. Choice of forum for dispute resolution, the existence of a company, agency relationship, right of a party to counterbalance claims, currency in which payment should be made.
6. The right to interest without providing a rate formula leaves a gap in the CISG structure that creates uncertainty about how to compensate a creditor, when parties did not pick either a rate or a national law to cover gaps in the contract (Article.78) .
The compromises, during the legislative process of the CISG appeared in several forms :
1. A principle rule with exceptions.
2. A rule accommodating many types of doctrines or a rule consisting of conflicting or at least unresolved subparts.
The following examples reveal the significance of these issues :
1) Trade Usages :
The Developing countries feared that the traditional concept of trade usages would favour industrialized western nations. The disputes were general versus local usages and traditional versus contemporary usages. On the issue of general versus local usages, CISG approved a standard of objective observance. However, it did not specified whose observance shall be the measure of objectivity or what prescriptive standard might guide that determination. Then on the issue of traditional versus contemporary usages , the drafters adopted a standard or regular observance. This standard did not specified, when a usage becomes regular.
Dixon, Irmaos & Cia, Ltd v. Chase National Bank, 144 F.2d 759 (2d Cir. 1944)
The lack of guidance concerning whose usage matters is fatal, when a seller observes general usages and a buyer observes local usages.
2) Good faith :
Different legal systems attach different meanings to common doctrinal terms. The good faith provision of the CISG represents an agreement to impose some requirement of good faith in international commercial dealings, but it reflects no deeper consensus on the meaning of the application of the term. Therefore, National Courts are free to draw on domestic lines and have diverse conceptions of good faith .This will lead to conflicting interpretations of the term from different National courts.
3) International and Domestic Law; The Problem of Gap Filling :
The ability of CISG to provide general principles that could fill the gaps in the explicit provisions was always under suspicion. So to resolve these issues two-step procedure were adopted. Explicit provisions should be interpreted in the light of the CISG’s international character, if it does not resolve the question; the adjudicator should seek an answer in the CISG’s general principles. If no general principle apply to the case, the adjudicator should seek to fill the gap in the CISG on the basis of the law applicable by virtue of the rules of private international law. This again increased the uncertainty in CISG.
4) Excuses for Non-performance :
The CISG provision on excuse is a compromise between the common law impossibility doctrine and the civil law force majeure doctrine (Article 79). The former doctrine views impossibility as an exception to absolute liability and a justification for automatic termination of the contract. The latter doctrine regards impossibility as an excuse for non-performance based on the lack of fault and therefore bars any claim for damages. This provision creates only an illusion of certainty, it gives parties an incentive not to fix a particular governing doctrine by private agreement, and hence it may ultimately undermine contractual relations.
5) Reduction of Price Remedy :
Despite theories that the civil law and the common law are converging, the attempt to incorporate essentially civil law or common law doctrine into the CISG met with considerable difficulty in several cases. CISG adopts the civil law doctrine that if goods delivered do not conform to the contract, the buyer’s remedy is an appropriate reduction in the contract price. So considerable opposition from common law supporters, then it was made consistent with the CISG’s other breach of contract provisions. This again brought uncertainty.
CISG can be further developed through Judicial Interpretation:
The uniform application of a supposedly uniform text will correct the text’s latent defects. The courts of different countries are the ultimate interpreters of international law. This is true in the case of CISG as well. By its character, CISG is a complex document to change or amended. Moreover, it is an international treaty. Amendments needs approval by each signatory state before it can become effectual. CISG cannot easily change, so it is identified as a weakness of CISG. However, these problems can be solved through greater dependence on courts .
Uniform law requires a new common law in which foreign precedents would not be precedents of a foreign law but of uniform law. Governmental legislation sets in place uniform law, but in reality, uniform law is not the work of governmental legislation. It is a creation of jurists, a kind of jurisconsultorium. Courts have to develop their jurisprudence in company with the courts of other countries from case to case .
Air France v. Saks (United States)
Interpretation of an international convention by the courts of signatory states should be given considerable weight. They should be taken into account in a comparative and critical manner .
Case law is one of several aids to interpretation and Uniform Law doctrine (scholarly writings) and legislative history should be considered. These observations are true in the case of CISG as an international treaty .
Pratt & Whitney v. Malev Hungarian Airlines
It involved many issues in CISG, contract interpretation (Articles 7 and 8), the sufficiently definite offer (Article 14), and the supply of an open price term (Article 55) . Therefore, once again the objectives of CISG are established.
Conclusion:
The convention was drafted in light of common law and civil law concepts and principles, but it is intended to be a self - contained body of law to be interpreted without resort to common law or civil law precepts . The CISG is considered to be a considerable success, because it has been ratified by most of the major trading nations of the world, tested in thousands of cases and arbitral hearings in many world jurisdictions and became subject of exhaustive academic commentary. These exposures to practice and critical commentary exposed gaps and weaknesses of the convention, but the same can be found in any legal mechanism. Generally, CISG has proved to be a workable instrument in practice and produced reasonable results in majority of cases .
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