Electronic Contracts and the CISG
Presentation
John M. Adams, J.D., L.L.M.
LUNA Lao Expert
February 1, 2016
The Internet and ICT allow transactions to be completed
electronically, at great speed without regard to geography
Traditional Transactions
Electronic Transactions
FACE-TOFACE
VIRTUAL/
REMOTE
ORIGINAL
SIGNATURE
WITNESSES
NO
WITNESSES
PHYSICAL ON PAPER
DELAY
Internet
Growth
NO DELAY
ELECTRONIC
SIGNATURE
DATA
(COMPUTER
DATABASE )
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International Use of Electronic Transactions
 The use of electronic transactions for sales of goods and services both in
consumer transactions and for sales of goods and services between businesses is
the wave of the future
 Global business-to-consumer (B2C) e-commerce sales reached $1.5 trillion in
2014, increasing nearly 20% over 2013, with the EU and the United States leading
the way, but with the fastest growth expected here in Asia and in Oceania (Nielsen
and eMarketeer)
 Global business-to-business (B2B) e-commerce sales (wholesale sales of goods
and services between businesses) sales are also increasing and are forecast to be
worth $6.7 trillion by 2020, when China will take the lead based on the pioneering
B2B initiatives by Alibaba (Forbes)
 Businesses of all sizes and across industries in developing countries are will be
forced to adapt to e-commerce in order to take advantage of these trends to
become
 Additionally, Governments – both on a national and regional basis – must work to
remove the impediments to both B2C and B2B e-commerce development
How Electronic Transactions Work – B2C
Key Factors
Source: A. Mahapatra
E-commerce legal regime must provide
clear legal rules for each step in the process
Transaction security built into the ICT
system
Rights and responsibilities for each actor
governed
by
contracts
(payment,
intermediary responsibility, etc.)
How Electronic Transactions Work – B2B
 Different from B2C because bulk shipments and
longer term relationships involved instead of single
product transactions in B2C
One-to-Many
 Traditional B2B model based on a one-to-many
model, where buyers had to established system
connections with multiple suppliers
 Legacy systems involved use of electronic data
interchange (EDI) that was expensive to establish
and cumbersome to handle
 Supply chain did not become fully automated in
many cases until after contractual relationship was
established and order specifications, delivery, and
payment details could be entered to EDI system
 Order fulfillment in the case of sales of goods
handled through traditional delivery methods
 Conflicting tax and customs laws often
complicated efforts to fully automate the process
Source: Frost & Sullivan
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How Electronic Transactions Work – B2B
 B2B e-commerce growth is stimulated by the
migration from EDI systems to web-enabled
Internet-based systems
Many-to-Many
 Over the Internet, all buyers, suppliers, freight
forwarders, and financial institutions are
connected to each other through a single emarket place
 This reduces the time periods and minimizes
delays between each step in the supply chain
process
 Order fulfillment in the case of sales of goods
handled through traditional delivery methods,
but inclusion of freight forwarders accelerates
the process
 Contract formation is also more efficiently
handled electronically in the fully-automated,
many-to-many process
Source: Frost & Sullivan
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B2B E-Commerce in Goods –
Electronic Transactions Under the CISG
 The Convention on the International Sales of Goods (CISG) consists of 101 articles
and covers sales of goods across borders between businesses residing in State
parties that have ratified the Convention
 The CISG is the default law for the great majority of global cross-border sales of
goods
 The CISG mentions the specific use of a “writing” in the formation or administration
of contracts three times in (Arts. 13, 21(2) and 29(2)) and numerous articles refer to
notices and messages, and how these communications may be “dispatched” by the
sender to “reach” their intended recipient
 The Internet did not exist when the CISG was drafted in the 1970s so the use of
electronic communications was not nearly as widespread and limited to phone,
telefaxes and cables
 But since then, under basic CISG principles and interpretations of the text the use of
electronic contracts has become universally accepted under the CISG – these rules
and interpretations are explained in Appendix 1
 The contract parties, or the States where they reside, may expressly require a
physical written contract, but the number of States that do so is growing fewer and
fewer
The Situation in Laos
 Laos adopted its electronic transactions law in 2012 and joined a list of more than
120 countries that have adopted laws to recognize the equivalence between
traditional paper-based contracts and electronic transactions
 This facilitates the use of electronic contracts and communications by traders
under the CISG by eliminating the possibility that Lao national law may preclude
the use of electronic contracts and communications under the CISG derogation
provisions
 Bank Lao has established rules for electronic transfers and payments between
financial institutions and the use of electronic payment devices by merchants and
is developing rules for electronic payments in consumer transactions over the
Internet
 Regional efforts to improve Customs procedures are improving the order fulfillment
and delivery processes, though more work is required in this area
 Awareness raising for businesses in the opportunities that e-commerce provides is
a critical factor
 Consumer protection and dispute resolution for online commerce – as well as
consumer education on the importance of authentication and security – will require
more effort
Summary
 The CISG fully accommodates the choice by contract parties to use electronic
contracts and electronic communications
 CISG Advisory Committee opinions and commentary for the large part resolve
ambiguities in the treaty language related to electronic communications issues, but
in the few cases where the interpretation of electronic communications issues is
not completely clear, the parties should define the terms for how notices and other
communications that are dispatched and received using electronic means will be
treated
 Parties to contracts under the CISG should determine whether the State parties
where they have their places of business have taken a reservation under Art. 96 to
preserve provisions from more traditional national contract law that are less
favorable to electronic communications and craft “choice of law” provisions
accordingly
 Laos is in a good position for the use of electronic contracts under the CISG
because it has enacted the Law on Electronic Transactions
 Consideration should be given by government to acceding to the CUECIC
 In future, as online dispute resolution mechanisms mature, trades in Lao PDR may
wish consider selecting them for the resolution of CISG contract disputes
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Thank You
Questions and Comments Please!
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Appendix 1
Electronic Contracts Under the CISG
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Key CISG Principles – Freedom of Form
 The CISG is based on the principles of “party
autonomy” (Art. 6) and “freedom of form” (Art.
11)
 Art. 11 provides that contracts may be informal,
oral, written or in any other form the parties
decide, including the freedom for parties to elect
to use electronic contracts and electronic
communications
 These CISG rules override national laws
requiring certain contracts, or elements of
contracts, to be in writing
 However, Art 12 of the CISG provides for a
State party to preserve its national law
requirements for written contracts by making a
declaration under Art. 96 of the CISG to that
effect
Article 11
A contract of sale need not be
concluded in or evidenced by writing
and is not subject to any other
requirement as to form. It may be
proved by any means, including
witnesses.
Article 12
Any provision … that allows a
contract of sale or its modification or
termination by agreement or any
offer, acceptance or other indication
of intention to be made in any form
other than in writing does not apply
where any party has his place of
business in a Contracting State which
has made a declaration under article
96 of this Convention.
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Key CISG Principles – Reservation
 Under Art. 11, a contract may be proved to be the
legal commitment of a party without proving the
party’s signature to the contract or the “original”
character of the contract document
 But if one of the CISG States where the parties to
the contract have their places of business takes a
derogation under Art. 96 to preserve national law
that requires a signature or the original paper
contract, than those rules will apply
 This will not make a difference in Laos, which has
enacted the Electronic Transactions Law
 It could make a difference if one of the parties to a
contract is from a State with a more traditional
contract law, and that State has reserved under
Art. 96
Article 96
A
Contracting
State
whose
legislation requires contracts of
sale to be concluded in or
evidenced by writing may at any
time make a declaration in
accordance with article 12 that any
provision of article 11, article 29, or
Part II of this Convention, that
allows a contract of sale or its
modification or termination by
agreement or any offer, acceptance,
or other indication of intention to be
made in any form other than in
writing, does not apply where any
party has his place of business in
that State.
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Key CISG Principles – Case Interpretations
 Art. 13 of the CISG provides that
telegrams and telexes comply with the
requirement of a “writing”
 The rule does not mention EDI, email, or
other electronic communications since
only telegrams and telexes were in wide
use when the CISG was adopted.
 But the rule is “inclusive”, not “exclusive,”
so the meaning of the term “writing” can
be expanded by trade usage
 The CISG Advisory Council has opined
that a “writing” under Art. 13 includes
electronic communications unless an Art.
96 reservation is in place prohibiting this
definition
 Advisory Council opinions are non-binding
but have been deemed to persuasive
authority in interpreting the CISG
Article 13
For the purposes of this Convention "writing"
includes telegram and telex.
CISG-AC Opinion no 1
Electronic Communications under CISG
(15 August 2003)
“Unless the parties have limited the notion of
writing, there should be a presumption that
electronic communications are included in the
term ‘ writing. ’ This presumption could be
strengthened or weakened in accordance to the
parties ’ prior conduct or common usages. ”
(CISG Art. 9(1) and (2), COMMENT )
“ The term "writing" in CISG [Art. 13] also
includes
any
electronic
communication
retrievable in perceivable form. (CISG Art. 13,
OPINION)
“CISG Arts. 11, 12, 13, 21, 29 and 96 contain the
term "writing". … The prerequisite of "writing" is
fulfilled as long as the electronic communication
is able to fulfil the same functions as a paper
message. These functions are the possibility to
save (retrieve) the message and to understand
(perceive) it. (CISG Art. 13, COMMENT)
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Key CISG Principles – Times of “Dispatch” and “Receipt”
 The time of dispatch and receipt of electronic
communication can be important to determining
contract-related issues
 In the CISG, “reach” and “received” are used for
the recipient of a communication and “send,”
“give,” “made,” and “dispatch” for the acts of a
sender
 CISG Arts. 47, 48, 63, and 79 require that
communications be “received” to be effective
 The CISG Advisory Council has opined and offered
commentary on the meaning of each of these
terms that is consistent with the UNCITRAL Model
Electronic Transactions Law
 There may still be uncertainty as to the applicability
of CISG terms to electronic communications so
parties to a contract should agree on these issues
in their agreement
Article 24
“
… an offer, declaration of
acceptance or any other indication
of intention “ reaches ”
the
addressee when it is made orally to
him or delivered by any other
means to him personally, to his
place of business or mailing
address or, if he does not have a
place of business or mailing
address, to his habitual residence.”
Article 27
“ … if any notice, request or other
communication is given or made by
a party [under] this Part and by
means
appropriate
in
the
circumstances, a delay or error in
the
transmission
of
the
communication or its failure to
arrive does not deprive that party of
the
right
to
rely
on
the
communication.”
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Key CISG Principles – Advisory Council Opinion no. 1 (1/3)
CISG Advisory Council Opinion Number 1 states:
The term “reaches” corresponds to the point in time when an electronic
communication has entered the addressee’s server, provided that the addressee
expressly or impliedly has consented to receiving electronic communications of that
type, in that format, and to that address (CISG, Arts. 15(1) and 24)
The term “orally” includes electronically transmitted sound and other communications
in real time provided that the addressee expressly or impliedly has consented to receive
electronic communications of that type, in that format, and to that address (CISG, Arts.
19(2) and 24)
A notice, request or other communication may be given or made electronically
whenever the addressee expressly of [sic] impliedly has consented to receiving
electronic messages of this type, in that format, and to that address (CISG, Art. 27)
An offer, even if it is irrevocable, can be withdrawn if the withdrawal enters he
offeree’s server before or at the same time as the offer reaches the offeree. A
prerequisite for withdrawal by electronic communication is that the offeree has
consented, expressly or impliedly, to receive electronic communications of that type, in
that format and to that address (CISG, Art. 15(2))
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Key CISG Principles – Advisory Council Opinion no. 1 (2/3)
CISG Advisory Council Opinion Number 1 states:
An offer may be revoked if the revocation enters the offeree’s server before the
offeree has dispatched an acceptance. A prerequisite is that the offeree has consented,
expressly or impliedly, to receiving electronic communications of that type, in that
format, and to that address (CISG, Art. 16)
An offer is terminated when a rejection enters the offeror’s server. A prerequisite is
that the offeror has consented expressly or impliedly to receiving electronic
communications of that type, in that format, and to that address (CISG, Art. 17)
An acceptance becomes effective when an electronic indication of assent has
entered the offeror’s server, provided that the offeror has consented, expressly or
impliedly, to receiving electronic communications of that type, in that format, and to that
address (CISG, Art. 18(2))
The term “notice” includes electronic communications provided that the addressee
expressly or impliedly has consented to receiving electronic messages of that type, in
that format, and to that address (CISG, Art. 19)
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Key CISG Principles – Advisory Council Opinion no. 1 (3/3)
CISG Advisory Council Opinion Number 1 states:
A period of time for acceptance fixed by the offeror in electronic real time
communication begins to run from the moment the offer enters the offeree’s server; a
period of time for acceptance fixed by the offeror in e-mail communication begins to run
from the time of dispatch of the e-mail communication; and, “means of instantaneous
communications” includes electronic real time communication (CISG, Art. 20)
The term “writing” covers any type of electronic communication that is retrievable in
perceivable form. A late acceptance in electronic form may thus be effective according
to this article (CISG, Art. 21)
Regarding the rule enabling the seller to make specifications in the event the buyer
fails to make them, “specifications and communications may be electronic provided
that the addressee expressly or impliedly consented to receiving such
communications” (CISG, Art. 65)
For notices under the CISG, “the term ‘notice’ includes electronic communications,
provided that the addressee expressly or impliedly has consented to receiving
electronic communications of that type, in that format, and to that address” (CISG, Arts.
26, 32(1), 39, 43, 67, 71, 72, 79, and 88(1) and (2)), or “the term ‘notice’ includes
electronic communications” without regard to the addressee’s acceptance (CISG Arts.
47 and 63 (notices of nonperformance) and 79 (notices of force majeure))
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UNCITRAL Convention on the Use of Electronic
Communications in International Contracts (CUECIC)
 CUECIC was completed and approved by UNCITRAL in 2005; it entered into force
in March 2013 after ratification by three State parties, Honduras, Singapore, and
Dominican Republic. The CUECIC has now been ratified by, and entered into
force for, four additional countries: Congo, Montenegro, Russia, and Sri Lanka
 Article 20 CUECIC lists several treaties prepared by UNCITRAL as treaties that
will be "electrified" by its adoption
 Unlike the CISG, the CUECIC, does not require that the concerned parties both
have their places of business in States parties to the ECC
 With respect to sales of goods, the CUECIC builds on and fits within the CISG
framework:
- Party autonomy - Art. 3 CUECIC/Art. 6, CISG
- Duty of uniform interpretation, and ancillary criteria therefor - Art. 5
CUECIC/Art. 7, CISG
- Place of business - Art. 6 CUECIC/Art. 10, CISG (location of equipment and
technology supporting an information system, or location where system may be
accessed by other parties, are not, as such, decisive to determine the place of
business)
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Electronic Dispute Resolution
 The CISG is commonly applied by arbitration tribunals instead of by national courts
 Even though CISG rules require uniform interpretation, the place of arbitration and
the composition of the panel can lead to variations outcome
 Many traders still refrain from using fully electronic contracts fearing difficulties with
actions to enforce performance or recover contract damages because of differing
interpretations of electronic contracting rules
 The advent of a global electronic dispute resolution system – where the procedures
and evidence rules are fully accommodated to electronic transactions – would
ameliorate these concerns
 UNCITRAL study groups are evaluating proposals for a global online dispute
resolution system
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