SALES

Jurisdiction: see Part III

Conflict rule:
Obligational aspects: see supra Rome-I Regulation for
the lex contractus; but see Art. 1 CISG infra for more
specific rules
Transfer of property (incl. and effectiveness of the
property transfer towards third parties): lex rei sitae
-
-
SALES

-
-

-
Substantive law - degree of harmonisation :
CISG, Succesful, limited to (some aspects of) international business
sales of movables
Applicable national law: domestic sales and non-business sales
EU law has harmonised some aspects of consumer sales (and very
few aspects of other sales)
Result: fragmentation of sales law
But influence of CISG on developments outside its scope is huge.
2011 draft common EU sales law « CESL » (« optional
instrument »); failed; new proposals Dec 2015 on harmonisation of
consumer sales
Why is uniform law important – specific characteristics of
international sales
long distance / transport costs & time > avoid sending back (favor
contractus)
Often ‘string sales’, i.e. a chain of sales of the same goods
SALES – UNIFORM LAWS



Predecessor: ULIS & ULFIS (Hague conventions 1964, Unidroit)
Replaced by Vienna Sales Convention 1980 (Uncitral, 1 convention), in force 1988,
Beginning 2016 in force in 83 countries (Vietnam follows as from 1/1/2017)
Missing i.a. UK, Portugal, India, S.Africa, Indonesia, Taiwan, Hongkong, Iran
CISG – SCOPE OF APPLICATION

Ratione materiae:
Art. 1: “This Convention applies to contracts of sale of goods...”
The CISG contains no definition of contracts of sale of goods. It
requires:
(1) an obligation to transfer property and
(2) an obligation to pay the purchase price (monetary
consideration, ≠ barter)
The CISG applies to sales of corporeal movables, including gaz.
Does it also apply to sales of software & digital content ?
CISG – SCOPE OF APPLICATION
-
-
-
Art. 2: This Convention does not apply to sales:
(a) of goods bought for personal, family or household use, unless the
seller, at any time before or at the conclusion of the contract, neither
knew nor ought to have known that the goods were bought for any such
use

Domestic consumer-protection laws are not affected by the CISG

Burden of proof is placed on the party claiming the applicability of
the Convention
(b) by auction
(c) on execution or otherwise by authority of law;
(d) of stocks, shares, investment securities, negotiable instruments or
money; (see eg ISDA rules on sale of derivatives)
(e) of ships, vessels, hovercraft or aircraft
(f) of electricity.
CISG – MIXED CONTRACTS


Art. 3 on mixed contracts:
(1) Contracts for the supply of goods to be manufactured or produced are to be
considered sales unless the party who orders the goods undertakes to supply a
substantial part of the materials necessary for such manufacture or production.
> “substantial part of materials”: criterion is economic (value);
> plans & know how are as such not materials (CISG advisory council Opinion n°
4)

(2) This Convention does not apply to contracts in which the preponderant part of
the obligations of the party who furnishes the goods consists in the supply of
labour or other services.
> if preponderant part is labour, services (turn key etc.)
> again “economic” criterion: value of the goods compared to value services

Lease agreements are excluded from the scope of the CISG
Distribution / Agency agreements ? The framework agreement ≠ actual sale

CISG – TERRITORIAL
APPLICATION

Ratione loci: only « international sales », more specifically in 2 cases :
A) Direct application (voie directe) Art. 1 (1)(a)
- Parties whose places of business are in different States and both States (of place
of business) are Contracting States (i.e. have ratified CISG). This supposes that
either the forum is a contracting State or the conflict rule of the forum refers to the
law of a contracting state.
- No other requirement (as e.g cross-border delivery or payment):
Art. 1 (3): “Neither the nationality of the parties nor the civil of commercial
character of the parties or of the contract is to be taken into consideration in
determining the application of this Convention”
- Problem of interpretation of place of business (comp. Rome-I-Regulation): next
slide

Exception (for both cases): art. 94 “neighbour clause” – countries with similar law
making a declaration. Applies (only) to Inter-Nordic sales (5 Nordic countries).
CISG – TERRITORIAL APPLICATION
Problem of interpretation of place of business (comp. Rome-I-Regulation)

It must be a place at which there is a stable business organization

The contracting party at that place must have autonomous power to enter
into the agreement
Different place of business is not apparent (subjective international dimension):
Art. 1 (2): “The fact that the parties have their place of business in different States
is to be disregarded whenever this fact does not appear either from the contract or
from any dealings between, or from information disclosed by, the parties at any
time before or at the conclusion of the contract”
More than one place of business: Art. 10 (1): “If a party has more than one place
of business, the place of business is that which has the closest relationship to the
contract and its performance, having regard to the circumstances known to or
contemplated by the parties at any time before or at the conclusion of the
contract”
No place of business:
Art. 10 (2): “If a party does not have a place of business, reference is to made to
his habitual residence”
CISG – TERRITORIAL APPLICATION

Ratione loci: only « international sales », more specifically in 2 cases :

B) Indirect application (voie indirecte): Art. 1 (1)(b)
when the rules of private international law of the forum lead to the application of
the law of a Contracting State (usually when sellers place of business in a
contracting state, See Rome-I-Regulation; also in case of choice of the law of a
contracting state*)
-
The Convention may also apply as the law applicable to the contract if so chosen
contractually agreed by the parties.
* Choice of law of a contracting state includes choice of CISG and is not presumed to
exclude CISG – eg Cass. France 13 Sep. 2011
CISG – TERRITORIAL APPLICATION

B) Indirect application (voie indirecte): Art. 1 (1)(b)

Quid reservation of Article 95
-
However no indirect application if the applicable law is that of a country having
made the reservation of art. 95 (made by USA, PR China, Singapore, Armenia,
Czech R, Slovakia, St.Vincent)
-
even if that law is applicable because of the conflict rule of a foreign forum ?
(disputed)
(e.g. sale between US and UK; forum refers to the application of American law.
Domestic American law applied as American law does not apply CISG in
relation to a non-CISG state as the UK) (disputed, but not disputed in German
forum, given the explicit interpretative declaration of (only) Germany)
Art. 2 Dutch CISG Implementing Act on the contrary rejects application of
Dutch domestic law in such a case (and imposes CISG as part of Dutch law)
CISG Adv. Council Opinion 15 also rejects the non-application of CISG in such
a case.
CISG – REGULATED MATTERS

-

Regulated matters :
Only law of obligations, no property law (art. 4).
No procedural law, esp. burden of proof
Only formation (incl. question of writing), performance, non-performance
and associated questions (art. 4)
Does include passing of risk (Ch. 4).
Some (deliberate) lacunae (gaps) such as price revision, interest rate (s.
however infra), ...
Some CISG provisions not applicable in certain states because of
reservations made under Art. 96 (no form >< writing requirement in
some countries) (reservation made by 8 countries)
CISG – MATTERS NOT
REGULATED

-
-
Matters of the law of obligations NOT Regulated :
validity and invalidity of the contract (see next slide), incl. legal capacity
liability for damage consisting of death or personal injury (art. 5 CISG)
prescription (separate Convention NY 1974 as modified Vienna 1980)
assignability of rights and effect of assignment in relation to the assigned
debtor (s. Assignment & Factoring Conventions);
subrogation
set-off
plurality of debtors (divisible or indivisible liability?)
authority of agents (1983 Unidroit Geneva Convention, not in force, 5
ratifications and 10 are required)
Choice of law useful for matters not regulated
CISG – REGULATED MATTERS

-
Substantial validity is not regulated by CISG, including
legal capacity
defects of consent, other invalidities (Unidroit Convention without
success; see general contract law principles UPICC, PECL/DCFR)
invalidity of specific clauses (nullity of penalties, exemption clauses, unfair
clauses ...)
exception: writing requirement falls under CISG (art. 11) even if a matter
of validity in some jurisdictions (but possible declaration under art. 96
CISG)
S. further the discussion about negative effect of CISG provisions (esp. nonconformity) on possibility to invoke invalidity, esp. mistake/
misrepresentation
CISG – INTERPRETATION AND
GAP-FILLING (1)


-
-

First question: is the matter governed by CISG or not ?
If not governed by CISG = « external » gap > national law applicable by
virtue of the conflict of law rules
If governed by CISG: either interpretation or « internal» gap
Art. 7 (1) CISG – principle of autonomous interpretation
Elements: internationality, need for uniformity, promotion of good faith in
international trade
(except where the CISG uses a notion that is necessarily to be filled in by
domestic law, eg the reference to conflict of law rules (of the forum), as
CISG contains no such rules)
In practice not always respected (familiar interpretation)
CLOUT database contains 4000 summaries of cases under CISG
No duty to act (perform) in good faith - good faith requirement only for
interpretation of CISG itself
CISG – INTERPRETATION AND
GAP-FILLING (2)





-
Art 7 (2) CISG – Gap-filling (for internal gaps)
1° Usages and practices (Art. 9, I CISG)
2° Gap can be filled according to Art. 7, 2 on the basis of the
« underlying principles »
3° If gap can not be filled on the basis of underlying principles / in the
absence of such principles: applicable national law. Some courts very
quickly come to this conclusion … (‘insularism’)
Examples of gaps:
Place of payment of compensation: internal gap
Electronic communication as writing ? Internal gap. See CISG Advisory
Council opinion n° 1
Interest rate: gap; disputed whether internal or external gap
Hardship: disputed, see discussion further
CISG – OPT-OUT & DEROGATION
-
-
Art. 6 : The parties may:
exclude the application of this Convention (opt-out - domestic law then
applies, incl. an optional sales law if domestic law so allows)
or
derogate from or vary the effect of any of its provisions (remaining CISG
articles apply)
No mandatory law in CISG (bus most matters of mandatory law are not
regulated in CISG)
Attention: NY Limitation convention (s. infra) is a separate Convention. A
separate opt-out in necessary to avoid its application
The opt-out itself is governed by CISG and must meet its requirements
(cfr CISG AC opinion 16).
Usually, a general reference to national law of a contracting state is not
considered to be an opt-out from CISG. But a reference to specific articles
of national law on matters covered by CISG may imply an opt-out
-
CISG – GENERAL PROVISIONS
JURIDICAL ACTS (1)

No duty to act according to good faith (see Art. 7)

How intention is determined – interpretation of acts: Art. 8 CISG
-
(1) according to the intent of that party where the other party knew or
could not have been unaware what that intent was
(2) subsidiary: according to the understanding that a reasonable person
of the same kind as the other party would have had in the same
circumstances
> taking into account all circumstances , incl. negotiations, practices,
subsequent conduct (latter can be excluded: « No Oral Modification »
clause in art. 29, 2 CISG, however, estoppel can apply to that clause)
-
-
Interpretation of statements made by and other conduct of a party:
CISG – GENERAL PROVISIONS
JURIDICAL ACTS (1)

CISG AC 13 + German BGH 28 May 2014: in case of doubt interpret ‘contra
proferentem’ (against the party who formulated the clause)

CISG does not incorporate:
- the plain meaning rule,
- the parol evidence rule (CISG AC Opinion 3)
-
-
CISG Advisory Council – op. 3

1. The Parol Evidence Rule has not been incorporated into the CISG. The CISG
governs the role and weight to be ascribed to contractual writing.

2. In some common law jurisdictions, the Plain Meaning Rule prevents a court from
considering evidence outside a seemingly unambiguous writing for purposes of
contractual interpretation. The Plain Meaning Rule does not apply under the CISG.

3. A Merger Clause, also referred to as an Entire Agreement Clause, when in a
contract governed by the CISG, derogates from norms of interpretation and
evidence contained in the CISG. The effect may be to prevent a party from relying
on evidence of statements or agreements not contained in the writing. Moreover, if
the parties so intend, a Merger Clause may bar evidence of trade usages.
However, in determining the effect of such a Merger Clause, the parties'
statements and negotiations, as well as all other relevant circumstances shall be
taken into account.

CISG – GENERAL PROVISIONS
JURIDICAL ACTS (2)

Art. 9 CISG Usages and practices

Practices are specific to two persons, e.g. giving credit, and are established
by a course of conduct that creates an expectation that this conduct will be
continued

Usages are of more general application.
Art. 9 (1) « The parties are bound by any usage to which they have agreed and
by any practices which they have established between themselves »

Usage does not have to be well known in international trade. It can even be
a local usage as long as the parties have agreed to it.
Art. 9 (2) « The parties are considered, unless otherwise agreed, to have impliedly
made applicable to their contract or its formation a usage of which the
parties knew or ought to have known and which in international trade is
widely known to, and regularly observed by, parties to contracts of the type
involved in the particular trade concerned. »
Comp. Art. 1.9 Unidroit Principles and Art. 67 CESL
CISG – GENERAL PROVISIONS
JURIDICAL ACTS (3)



No formal requirements for formation or evidence – Art. 11
But reservation can be made (art. 12) and was made by several countries

« Writing » includes telegram and telex (Art. 13)

Comp. Art. 1.2 Unidroit Principles and Art. 6 CESL
No formal requirements for modification or termination – Art. 29 (1)
> by mere agreement, Art. 29 (but see 29 II : « no oral modification
clause » is possible)
Merger clause or Four Corners clause: is a deviation from CISG default
rules
Other general rules can be deduced from specific ones e.g.:
- when notice becomes effective (art. 24, 26, exception in 27),
- meaning of silence or inactivity (art. 18,1),
- etc.

CISG – FORMATION (1)

Formation of the contract by offer and acceptance (Mirror model)

Offer: Art. 14 – definition/minimum content. Differs from proposal:
addressed to one or more specific person(s); sufficiently definite (goods
and price determinable, see art. 55 for price determination); indicates
intention to be bound if accepted
«effective» (not necessarily irrevocable) when it reaches the offeree
(unless withdrawal reaches earlier or at the same time) (Art. 15)
But still revocable (until the offeree has dispatched acceptance),
unless irrevocability indicated (eg period for acceptance) or reasonably
relied upon (Art. 16)
It is terminated when a rejection reaches the offeror (Art. 17)
-
-
Effect: if accepted during period of validity (and before revocation) (rules
concerning the calculation of the period in Art. 20, 21) a contract is
formed when the acceptance becomes effective (Art. 23)
CISG – FORMATION (2)

Formation of the contract by offer and acceptance (Mirror model)

Acceptance: not by mere inactivity (Art. 18 I)
It becomes effective when it reaches the offeror within the time fixed or,
if no time is fixed, within a reasonable time (Art. 18 II); possibly already
when an act is performed (18 III).



Modified acceptance (Art. 19): do the modifications « materially» alter the
terms of the offer ?
Yes > counter-offer (19 I);
No > accepted with modifications unless protest (« last shot ») (19 II).
Acceptance may be withdrawn if the withdrawal reaches the offeror
before or at the same time as the acceptance would have become
effective
CISG – STANDARD TERMS

Incorporation of standard terms
 German Supreme Court “It is unanimously required that the recipient of
a contract offer that is supposed to be based on general terms and
conditions has the possibility to become aware of them in a reasonable
manner.”
 Reasonable opportunity to take notice: see CISG AC Opinion 13 (2)).
 Except surprising terms: CISG AC Opinion 13 (7).
CISG – STANDARD TERMS


-
No special rules for “battle of forms” (i.e. general clauses contained in the
forms exchanged between the offeror and the offeree are contradictory).
Case law diverges:
 Outside the scope of the Convention (external gap) ?
 Knock out rule? (or knock out as far as incompatible).
 No gap, as under the last shot rule (Art. 19 CISG)?
Comp. divergent national laws: UK last shot; Netherlands first shot;
knock-out in B, Germany (BGH 9 Jan 2002), Austria, France; mixed rule in
USA.
- CISG AC Opinion 13 (10): knock out rule unless…
CISG - SELLER’S OBLIGATIONS
(delivery 1)

Art. 30: delivery of the goods (incl. documents), transfer of property,
conformity
Obligation of delivery:
−
Place of performance: relevent i.a. for jurisdiction
−
> Art. 31: default rules:

Carriage involved: first carrier (independent carrier)

No carriage involved and contract relates to (a) specific goods,
(b) unidentified goods to be drawn from a specific stock or (c)
goods to be manufactured of produced and parties knew that
the goods were at, or were to be manufactured of produced at,
a particular place: place of the goods (ex works).

In other cases: seller’s place of business.
−
See also infra Incoterms and other specific contract terms.

Additional duties (Art. 32) related to (1) specification, (2) carriage and (3)
insurance

CISG - SELLER’S OBLIGATIONS
(delivery 2)
(Art. 30 : delivery of the goods (incl. documents), transfer of property,
conformity)
(Obligation of delivery – cont.):


−
Time



of performance (Art. 33)
Fixed date
Fixed period of time
In other cases: reasonable time after conclusion of the contract
−
Delivery of documents relating to the goods (Art. 34) (See CISG AC
Opinion 11 as to interpretation of this rule)
−
Duty to preserve the goods if buyer fails to take delivery (Art. 85 ff.)
CISG - SELLER’S OBLIGATIONS
(conformity 1)
Obligation of conformity in respect to the goods - Art. 35:
 There is conformity only if the goods are :
1) in conformity with specifications of the contract (quantity, quality,
packaging)
2a) fit for ordinary purposes (see next slide)
2b) fit for particular purpose made known to seller
Exception: circumstances show that the buyer did not rely, or that it was
unreasonable for him to rely, on the seller’s skill and judgement,
2c) in conformity with the qualities of the sample
2d) usual or adequate packaging; exception: visible non-conformity at the time
of conclusions (35, 3)


Relationship between (1) and (2): cumulative or exclusive ? Dominant
opinion : cumulative unless express deviation.
CISG - SELLER’S OBLIGATIONS
(CONFORMITY 2)
Ad 35, 2: there is conformity only if the goods are « fit for ordinary purposes »
 But where fit (in which place)
- Quid technical standards in country of buyer ≠ seller ?
- German ‘cadmium in NZ mussels’ case (BGH 8 march 1995) where standards in country
of buyer (NZ) were stricter than standards in country of seller, they do not apply unless
the seller should have been aware of them
- If the seller advertised in the buyer’s country or other special circumstances, standards
of that country
- Danish check-valves for petrol case (VLR 21 Dec 2004): rubber cracked and valve
leaking due to additives (MTBE) used in buyers’ country (Scandinavia) but not in country
of seller (Italy): non-conformity accepted
Quid suspicion of defects ? Goods not usable (marketable) because of suspicion of eg
contamination of food. Eg Argentinian rabbit meat case, BGH 1972:
- non-conformity if suspicion arises before passing of risk
- disputed as to suspicion arising after the passing of risk (BGH >< Schwenzer)

SALES - SELLER’S
OBLIGATIONS (Non-CISG)
Additional obligations may arise from the contract or applicable mandatory rules
See also in Ch. 5 (general contract law):
- Some boilerplate clauses
- Supply chain transparency, sustainability clauses, etc… (see Ch. 5 general contract law)
CISG - SELLER’S OBLIGATION
- PASSING OF RISK


-
-



Risk ≠ liability ! (question of risk arises if seller is not liable for nonconformity)
Unless caused by the buyer itself, conformity has to be present at the
time of passing of risk (Art. 36);
even if the lack of conformity becomes apparent after that time;
lack of conformity arising later ? Seller liable if consequence of breach, or
if guaranteed (to remain fit or maintain qualities for a period) (‘warranty’).
Implicitly limited to 2 years unless longer contractual period of warranty
(39, 2)
Relevance of «passing of risk» is thus:
Risk of force majeure (price risk)
Art. 66 « Loss or damage to the goods after the risk has passed to the
buyer does not discharge him from his obligation to pay the price, unless
the loss or damage is due to an act or omission of the seller »
Time to judge conformity (or rather the cause of the lack of conformity)
(Art. 36 (1))
CISG - SELLER’S OBLIGATION
- PASSING OF RISK
− Different possible doctrines on the passing of risk:
 At the time of conclusion of the contract ?
 At the time of passing of ownership ?
 At the time of delivery and possession of the goods ?
− When does risk pass under CISG? As agreed; if not agreed:

Art. 69: at the moment of delivery, but
(a) If the buyer refuses to take delivery: risk passes at that time
(b) If other place than place of business of the seller: risk
passes when delivery is due and the buyer is aware of the
fact that the goods are placed at his disposal at that place
Presupposes that the goods are identified to the contract (69
(3)).
CISG - SELLER’S OBLIGATION
- PASSING OF RISK

Art. 67: in case of carriage of the goods:
(a) No particular place: first carrier (independent carrier)
(b) Particular place: carrier at that place
Presupposes that the goods are identified to the contract (67
(2))

Art. 68: in case of goods sold in transit: at the moment of
conclusion of the contract, unless:
(a) an agreement that the buyer will assume the risk from
the moment the goods are handed over to the carrier can be
implied from the circumstances
(b) the seller knew of ought to have known that the goods
had been lost or damaged and did not disclose this to the buyer

See also Incoterms
CISG – CONFORMITY AND
EXAMINATION
−
Art. 38: Buyer must examine the goods within a short period (not a
real obligation, but a duty or Obliegenheit)

The examination must be objectively suitable for disclosing
recognizable defects

The intensity of the examination depends upon:
(a) The type of the goods
(b) The quantity of the goods and their packaging
(c) The buyer’s capabilities
(d) The costs and time needed for the examination
(e) The probability of defects
(f) The potential losses caused by undisclosed defects
- In case redispatch is foreseen, examination may take at final destination (38
III). Some case law is very strict (eg Ugandan used shoes case).
CISG – CONFORMITY AND
EXAMINATION
-
- Art. 39: Buyer must give notice of non-conformity (if unknown to seller)

As soon as discovered or ought to have discovered (CISG AC
Opinion 2)

At the latest within a period of two years after delivery to the
buyer, unless longer contractual period of guarantee

The notice is effective upon dispatch (Art. 27)

The notice must specify the nature of the lack of conformity

Sanction: loss of remedies (infra), unless reasonable excuse:
limited remedies available (Art. 44)
Delivery in parts – examination (+ notice) of each part necessary, buyer
cannot wait until last delivery
Art. 44: in case of reasonable excuse, limited remedies available (price
reduction, damages)
Art. 40: rules not applicable if lack of conformity relates to facts of which he
knew or could not have been unaware and which he did not disclose to the
buyer.
CISG – CONFORMITY AND
VALIDITY
Do CISG provisions on non-conformity have a « negative effect » (negative
Reflexwirkung) on the possibility to invoke invalidity, esp. mistake/
misrepresentation ?
Or is there a concurrence of actions between non-conformity and invalidity
for mistake ?
− They do have an negative effect under UPICC art. 3.2.4.: if validity is
governed by UPICC, it is set aside by the rules on-performance
− Majority of authors in favor of negative effect of CISG, but authors and
courts often reasons in favour of the solution in their own system
− Anyway, in the sale of generic goods, mistake can only relate to
characteristics of the genus, not of the goods delivered. The latter case is
governed by CISG only.
CISG – SELLER’S OBLIGATIONS
- to transfer property

The seller is obliged to procure the buyer property of the goods

Art. 41 : and to transfer them “free from any right or claim of a third party” (Art. 41) unless
the buyer agreed to take such goods.
-
The buyer’s mere knowledge of the third-party claim does not relieve the seller of his obligation.
Consent is needed.
The legal nature of the claim is irrelevant: claims based on better title to the goods, but also
contractual claims. E.g. retention of ownership, the sale of goods belonging to another, right of
pledge, lease, etc
Decisive factor: whether the buyer’s use of the goods is infringed or disrupted by the thirdparty claims. Public law restrictions on the use of the goods are governed not by Art. 41, but
by Art. 35.
-
-
-
-
Similar duty to give notice (if unknown to seller) within a reasonable time after he
has become aware or ought to have become aware of the right or claim (Art. 43).
Reasonable time very often 1 month (German stolen car case, BGH 11 Jan 2006)
Sanction: loss of some remedies
Which remedies survive ? In case of reasonable excuse still price reduction or
damages (Art. 44).
CISG – SELLER’S OBLIGATIONS
- to transfer property
The seller is obliged to transfer property of the goods
When is the obligation fulfilled? Requirements for an effective transfer
of property not in CISG, question of (national) property law.
Consensual vs. Delivery transfer systems
Causal vs. Abstract transfer systems
−
−
Retention of ownership (cf. Art. 7 Insolvency Regulation, see further)
CISG - SELLER’S OBLIGATIONS
– FREE FROM RIGHTS

-
Obligation of conformity in respect to rights (art. 41) requires also:
That goods are “free from any right or claim of a third party based on
industrial property or other intellectual property” under some conditions:
a) IP right in the country of the buyer or place of resale if contemplated:
- In the absence of a special intended use: in the country in which the buyer has his
place of business
- In the event the goods are to be resold and used in a state other than the one where
the buyer has his place of business: in the country of resale.
-
b) (constructive) knowledge of the seller and not of the buyer
c) not resulting from compliance with instructions (drawings etc.) of the
buyer (Art. 42)
-
Similar duty to give notice (if unknown to seller) within a reasonable time
after he has become aware or ought to have become aware of the right
or claim (Art. 43). Sanction: loss of some remedies

Which remedies survive ? In case of reasonable excuse still price
reduction or damages (Art. 44).
CISG – BUYER’S OBLIGATIONS (1)

Obligations of the buyer :
specify, take delivery, pay the price, examine

If the contract provides so: specify the form, measurement or other
features of the goods (Art. 65).

Taking delivery of the goods (Art. 60)
−
Buyer must undertake all acts which could reasonably be expected of
him in order to enable the seller to make delivery
−
Place & time: see supra delivery
−
Buyer may refuse or accept early delivery (Art. 52 (1))
−
Buyer may accept (and pay) or refuse excess quantity (Art. 52 (2)).

Examination & notice, see supra.

Duty to preserve the goods if buyer intends to reject them (Art. 86-88)
CISG – BUYER’S OBLIGATIONS (2)

Payment of the price:
−
Includes all of the measures agreed upon in the contract to enable payment to
be made
−
Price not fixed nor mode of determination? Normal price (Art. 55)

Sufficient to constitute an offer in the sense of Art. 14?
−
Place of payment : seller’s place c.q. place of handing over (Art. 57)
−
Time of payment (Art. 58):

When control is given to the buyer (for the notion of ‘documents
controlling the disposition of the goods’, see CISG AC Opinion no. 11)

At the condition that he has had the opportunity to examine the goods

The seller does not need to send any advance reminder or other formal
request for payment

Concrete rule will depend on clauses (often ‘payment against
documents’).

Payment instruments: no provisions in CISG. See further Ch. 9-10.
Attention: when payment by l/c is provided, contract must already
determine the main terms of the l/c required
−
The seller must accept partial payment or early payment if he is required to do
so by contract.
SALES -INCOTERMS

« International commercial terms »: standard abbreviations, often three
letter words (FOB, CIF, etc.)

Defined as usages by the ICC (since 1936, several revisions; since Jan 1,
2011: version 2010)
Applicable when inserted in the contract, expressly or impliedly (specify
the chosen version)



-
Now (2011) 11 Incoterms (before 2011: 13 terms)
Four basic categories :
C-terms : seller pays carrier to agreed destination, but does not bear risk
during carriage (attention: in CIF buyer must pay before inspection)
D-terms: sellers bears cost of carriage and risk until arrival at agreed
destination – thus some « arrival duties » on the seller
E-terms: ex works of the seller
F-terms: delivery to the person paid by the buyer
SALES –INCOTERMS
Rules for any mode of transport:

EXW
Ex Works

FCA
Free Carrier (hand over to the carrier named by the buyer;
typically for container shipments)

CPT
Carriage Paid To

CIP
Carriage And Insurance Paid To

DAT
Delivered At Terminal

DAP
Delivered At Place

DDP
Delivered Duty Paid
Rules for sea and inland waterway transport:

FAS
Free Alongside Ship (esp. for bulk trade)

FOB
Free On Board (risk passes when goods put on board; in old
versions: over the ship’s rail)

CFR
Cost And Freight (risk passes over the ship’s rail)

CIF
Cost, Insurance and Freight (idem as CFR +paying insurance)
SALES -INCOTERMS
Each Inco term summarises obligations of the parties in relation to 10 typical points:
1.
main obligation: provision of goods, payment of the price
2.
licenses, authorisations and formalities (attention in EW: buyer must obtain export
license etc. in seller’s country)
3.
contracts of carriage and insurance (procurement of transport documents, contract of
insurance* and other documents necessary for the export and import of the cargo)
•*
Insurance aginst the risk of loss or damage during carriage. For the minimum
coverage to be included in insurance, Incoterms refer to the institute cargo clauses (ICC)
of the International Underwriting Association, specifically minimally ICC « C » clause.
•Insurance coverage required by CIF or CIP is thus only a minimal coverage !
SALES –INCOTERMS







4. (point of) delivery and taking delivery: place (NB. often relevant for jurisdiction !)*
and time**
5. transfer of risks (NB. Incoterms are silent on passing of title/ownership !)
6. division of costs (attention whether THC (terminal handling costs) at point of
arrival are included or not)
7. notices to be given
8. proof of delivery, transport document
9. checking, packaging, marking, inspecting
10. other
* According to Belgian cass. 3 Sep 2015, place (for jurisdiction purposes) in a CFR sale
with a clause “cash against documents”, is the place where the document
(representing the goods) is delivered to the buyer.
** Where a date is fixed for delivery or taking delivery, there may be an extension clause
giving one party an option to perform later. Eg in FOB, date for taking delivery will be
when buyer’s vessel arrives and buyer may stipulate an extension (eg GAFTA 49
contract); in CIF seller may stipulate an extension.
www.phoenixintl.com
INCOTERMS® 2010 QUICK REFERENCE CHART
INCOTERMS® 2010
1
Seller
Seller
Buyer
Seller
1
Seller
Seller
Seller
Seller
Seller
Seller
1
Seller
Seller
Who Pays
Seller
Seller
Seller
Seller
Seller
Seller
1
Seller
Seller
Who Pays
3
Seller
Seller
Seller
Seller
Seller
Seller
Seller
1
Seller
Seller
Who Pays
Delivered at
Terminal
DAT
Seller
3
Seller
Seller
Seller
Seller
Seller
Seller
Seller
1
Seller
Seller
Who Pays
Delivered
at Place
DAP
Seller
Seller
Seller
3
Seller
Seller
Seller
Seller
Seller
Seller
Seller
1
Seller
Seller
Who Pays
Delivered
Duty Paid
DDP
Buyer
Buyer
Buyer
3
Buyer
Buyer
Buyer
Buyer
Seller
Buyer
Seller
1
Seller
Seller
Who Pays
Free
Alongside
Ship
FAS
Buyer
Buyer
Buyer
3
Buyer
Buyer
Seller
Seller
Seller
Buyer
Seller
1
Seller
Seller
Who Pays
Free on
Board
FOB
Buyer
4
4
3
Seller
Seller
Seller
Seller
Seller
Seller
Seller
1
Seller
Seller
Who Pays
Cost &
Freight
CFR
Buyer
4
4
Seller
Seller
Seller
Seller
Seller
Seller
Seller
Seller
1
Seller
Seller
Who Pays
Cost,
Insurance
& Freight
CIF
Rules for sea and inland waterway transport
Buyer
2
Seller
Seller
Seller
5
Seller
CIP
Rules for any mode or modes of transport
Export Packing
Buyer
Buyer
Seller
Seller
4
CPT
Marking & Labeling
Buyer
Buyer
Seller
4
5
FCA
Block and Brace
Buyer
Buyer
3
4
EXW
Inland Freight to Main Carrier
Buyer
Buyer
4
5
Carriage
Paid To
Origin Terminal Charges
Buyer
3
4
Free
Carrier
Vessel Loading Charges
Buyer
Buyer
5
Ex Works
Ocean Freight / Air Freight
3
Buyer
Carriage &
Insurance
Paid To
Nominate Export Forwarder
Buyer
Buyer
Who Pays Who Pays
Marine Insurance
Buyer
SERVICES
Unload Main Carrier Charges
Buyer
Export Clearance (License,
EEI/AES)
Freight Forwarder
Documentation Fees
Nominate On-Carrier
Destination Terminal Charges
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Seller
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Security Information
Requirements
Customs Broker Clearance
Fees
Seller
Duty, Customs Fees, Taxes
Seller
5
Buyer
5
5
Buyer
Buyer
Buyer
5
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Delivery to Buyer Destination
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Delivering Carrier Unloading
Notes: 1 – Incoterms® 2010 do not deal with the parties’ obligations for stowage within a container and therefore, where relevant, the parties should deal with this in the sales contract.
2 – FCA Seller’s Facility – Buyer pays inland freight; other FCA qualifiers. Seller arranges and loads pre-carriage carrier and pays inland freight to the “F” delivery place
3 – Incoterms® 2010 does not obligate the buyer nor must the seller to insure the goods, therefore this issue be addressed elsewhere in the sales contract.
4 – Charges paid by Buyer or Seller depending on contract of carriage.
5 – Charges paid by Seller if through Bill of Lading or door-to-door rate to Buyer’s destination
INCOTERMS® IS A REGISTERED TRADEMARK OF THE INTERNATIONAL CHAMBER OF COMMERCE. THIS DOCUMENT IS NOT INTENDED AS LEGAL ADVICE BUT IS BEING PROVIDED FOR REFERENCE PURPOSES ONLY. USERS SHOULD SEEK SPECIFIC GUIDANCE FROM INCOTERMS® 2010 AVAILABLE THROUGH THE INTERNATIONAL CHAMBER OF COMMERCE AT WWW.ICCBOOKS.COM CISG – REMEDIES - OVERVIEW


-


Overview of remedies for non-performance:
−
Specific performance (Art. 46 and 62)
−
Suspension (Art. 71)
−
Avoidance of the contract (Art. 49 and 64)
−
Price reduction (Art. 50)
−
Damages (Art. 45 and 61)
General principles
Free choice, no hierarchy of remedies (« pari passu ») (but sometimes
fundamental breach required)
Combinability, esp. of damages and other remedies)
Largely self-help (unilateral declaration)
By notification (usually within a reasonable time)
Fundamental objective: saving the contract and avoiding restitution
> Instruments for restraining termination as a remedy
−
Nachfrist mechanism (Art. 47 and 63)
−
The seller’s right to cure (Art. 48)
CISG – GENERAL RULES ON
NON-PERFORMANCE




Remedies for non-performance: separately mentioned for buyer and
seller. But basically a unitary concept of non-performance (« breach »)
(comp. the dualism still remaining in e.g. Belgian law).
Some remedies require a « fundamental breach » (Art. 25).
Interpretation: CISG AC Opinion n° 5
Fault or strict liability ?
- damages excluded if exemption: failure due to an impediment beyond
control (art. 79) (+ give notice to other party). Hardship ? See next slide.
- other remedies: strict liability
- a party may not rely on a failure of the other party to perform, to the
extent that such failure was caused by the first party's act or omission
(Art. 80).
Exemption clauses: possible under CISG (art. 6), but national law may
invalidate them.
CISG – HARDSHIP
Does art. 79 include a rule on hardship ?

Hardship is a « matter governed by CISG », i.e. not outside CISg in the
sense of art. 7 CISG

but it is disputed whether:
a) It is excluded by Art. 79 (thus Cass.Fr. 2004, Behr v. Romay in a specific
case: third party buyer no longer interested) > contract binding
b) included in Art. 79 but gap as to more precise rules (Cass.B. 19 June 2009
in Scafom – steel price plus 70 %) – in line with CISG AC Opinion n° 7
c) internal gap which can be filled by principles;
d) internal gap which can not be filled by principles, thus question according to
art. 7 CISG left to national law

In case b, c or d: which principles: only « internal » to CISG (« underlying
CISG), or also « external » such as UPICC ? (Cass. B.: judge should apply
UPICC, thus duty to renegotiate and possibly adapation by the judge)
CISG – SPECIFIC PERFORMANCE


Primacy of specific performance
The buyer has the right to require specific performance:
Whether he can claim specific performance depends upon the
domestic law of the forum (art. 28)
Subject to the condition of not having recourse to other remedies
that are inconsistent with it (Art. 46 (1))
If specific performance is available, it includes (a) requiring delivery
of substitute goods when breach is fundamental or (b) requiring
repair unless unreasonable (Art. 46 (2) and (3)
The buyer can choose between damages and specific performance,
without any discretion left to the court
The seller has the right to « cure » (repair) under certain conditions
that secure the buyer’s interests (Art. 48)
CISG – SPECIFIC PERFORMANCE




Seller also has the right to compel performance: payment and taking
delivery (Art. 62)
Good faith should be taken into account when determining whether to
grant specific performance
Creditor can fix an additional period of reasonable length for cure
(function: termination allowed afterwards) (« Nachfrist « ) (Art. 47 & 63)
−
Nachfrist notice
−
Demand of performance
−
Express determination of the additional period of time
−
Consequences of an unreasonable period of time?
−
The creditor is not entitled to resort to any remedy for breach of
the contract unless the other party notifies that he will not perform
during the period so fixed
−
Opens the door to avoidance (see further)
If the buyer does not give specifications: seller may specify (Art. 65)
CISG – REMEDIES SUSPENSION



Order of performance: in principle at the same time
Suspension of performance as long as other party does not perform
A party may suspend the performance of his obligations if, after the
conclusion of the contract, it becomes clear that the other party will not
perform a substantial part of his obligations (Art. 71, anticipatory breach)

Possible indicia that a breach will be committed:
(a) serious definiency in the ability to perform
(b) serious deficiency in a party’s creditworthiness



Both (advanced) performance and acts regarding preparation of the
performance may be suspended, provided that there is a reciprocal
relationship between the obligation suspended and the counterperformance
Requires Notice of suspension
Suspension no longer allowed if adequate assurance of performance
CISG – REMEDIES – AVOIDANCE (1)



Termination, called « avoidance » (misleading term)
Requirements (Art. 49 & 64)
- either « fundamental breach » or still in breach after the additional
period granted for performance (Nachfrist)
- also in case of anticipatory breach (if fundamental) (Art. 72)
- fault not required; but events after passing of risk are for the risk of the
buyer
Relevant factors in determining fundamental breach (art. 25)
− Nature of the contractual obligation
− Gravity of the consequences of breach
 Contract’s overall value and the monetary loss suffered by the aggrieved
party
 Frustration of the purpose of the contract
 Remedy-oriented approach
−
−
−
−
(In)ability of performance
(Un)willingness to perform
Lack of reliance on the other party’s future performance
Offer to cure / possible cure
CISG – REMEDIES – AVOIDANCE (1)


Cases of fundamental breach:
− Definite non-performance
− Delivery of defective goods when the defect is such that the nondefaulting party cannot be expected to be satisfied with damages or
price reduction
− Delay in delivery of the goods when compliance with a particular
deadline is essential for the buyer
Remedy: avoidance
CISG – REMEDIES – AVOIDANCE (2)

Scope: depends on whether the contract is divisible or indivisible, see Art.
51 and 73 (instalment contracts)

Exercise and loss:
By notice (Art. 26)
Time limits (reasonable time) in late performance (Art. 49 (2)(a) and Art.
64 (2)(a)) and in defective performance (Art. 49 (2)(b) and Art. 64
(2)(b))
Buyer loses remedy if restitution in substantially the same condition made
impossible (Art. 82)
buyer cannot exercise his right to avoid the contract during the
performance period if the seller makes a proposal to cure and:
(a) the buyer has agreed to the seller’s proposal, or
(b) the buyer fails, within a reasonable time, to reject or otherwise
respond to the seller’s notice for delayed performance
-
-
CISG – REMEDIES – PRICE
REDUCTION
Price reduction (Art. 50) is a possible remedy for the buyer (proportionate to
value reduction - according to value at delivery)

When the goods do not conform with the contract, art. 50 CISG gives the
buyer the ability to unilaterally declare a price reduction, even before he
has paid the price

The remedy of price reduction is not subject to the same limitations as
damages

The remedy of price reduction is not available if the seller completely
performs his obligation by curing or if the buyer unjustifiable declines to
accept the cure
CISG – REMEDIES –
AVOIDANCE (3)
Effects of « avoidance » on the terminated contract or part(s) of the contract:
 CISG does not contain any rule on effects on property transferred already
(whether it automatically reverts or not)
 Obligational effects:
a)remaining obligations are terminated (« release ») (Art. 81,1,1)
b)except surviving clauses: clauses relating to settlement of disputes (forum &
arbitration etc.) & clauses on effects of termination (eg damages) (Art. 81,1,2)
continue to be binding
c)obligation of restitution of whatever supplied or paid (Art. 81, 2); includes
interest on payment c.q. benefits derived from the goods (Art. 84)


Mutual restitution within a reasonable time
Any additional costs of restitution should be borne by the unexcused
non-performing party
d) rights to damage already accrued survive (CISG AC Opinion 9, 1)
-
A whole series of additional interpretative rules in CISG AC Opinion 9.
CISG – REMEDIES –
AVOIDANCE (3)

The obligation to preserve the goods (Art. 85 ff.):

Party who is bound to preserve the goods has the option of
selling them

He is free to sell the goods in any way he chooses

He must notify the other party of his intentions

He can retain the reasonable cost of preserving and selling the
goods from the proceeds of the sale
CISG – REMEDIES - DAMAGES





Damages (compensation of damage, always monetary):
General: requires breach (not exempted by art. 79), damage and causal
link (The loss to the party affected must have been caused by the other
party’s breach)
Includes lost profit (Art. 74,1). Interpreted in CISG AC Opinion 6
Only damage foreseeable when contract concluded (Art. 74,2) (those
which the party in breach foresaw or ought to have foreseen at the time
of conclusion of the contract) (NB US courts tend to give a strict
interpretation of foreseeable, as in the precedent Hadley v Baxendale)
Duty to mitigate damage (Art. 77):





Expression of the general principle of good faith in international commerce
It does not apply to other remedies that are available under the Convention
Reasonableness of the measures
Additional costs can be claimed on the basis of Art. 74
Violation of this duty leads to a corresponding reduction in damages
CISG – REMEDIES - DAMAGES

Calculation of damages:

Buyer or seller made a reasonable substitute transaction: price
difference (plus further damage) (Art. 75)

Otherwise current price (Art. 76) (if there is an « available market »)

Art. 75 and 76 interpreted in CISG AC Opinion n° 8




‘Agreed sum’ or penalty clauses:
CISG determines whether incorporated in the contract or not (CISG AC
Opinion 10, point 1)
CISG has no rules on validity: no validity requirements; mandatory
rules of the appicable national law remain in force
Where the national rule refers to vague standards (eg
reasonableness), they must be interpreted according to international
standards (CISG AC Opinion 10, point 4)
CISG – REMEDIES – DAMAGES:
INTEREST
-
Late payment: interest (plus further damage) (Art. 78; dies interpellat pro
homine)
-
Art. 78 conceives the obligation to pay interest as a general rule so that a
debtor still remains liable for interest payments even if his default is due
to an impediment beyond his control and he is therefor not liable for
damages under art. 79
 Interest rate ? lacuna > national law (or: Unidroit Principles Art. 7.4.9 ?). Which
national law: lex contractus or lex monetae ?
 According to CISG Adv Council Opinion 14: « In the absence of an agreement,
the applicable rate of interest is the rate which the court at the creditor's place of
business would grant in a similar contract of sale not governed by the CISG ».
NY LIMITATION CONVENTION
(1)







New York Convention 1974, amended 1980
22 ratifications for amended version + 7 for old version only
Basic period: 4 years (Art. 8)
Independent from notice periods (Art. 9)
Period commences at breach, for lack of conformity at delivery of goods
(10), except fraud (10 (3))
If guarantee period (express undertaking or ‘warranty’): commences at
notification, but not later than end of guarantee period (Art. 11)
Buyer who has resold goods cannot wait until its buyer makes a claim for
asserting a claim against the original seller (differs from belgian domestic
law; Cass. 29 Jan 2004 and 25 June 2010)
NY LIMITATION CONVENTION
(2)






The period ceases to run when judicial or equivalent procedures are
started (Art. 13 ff.); if no decision on the merits, period runs but is
extended to 1 year after ending procedures (Art. 17)
Acts in the debtor’s state restart prescription according to local law (Art.
19, esp. Acts of enforcement)
Acknowledgment of the right restarts prescription in 2 cases (Art. 20, 1
and 2)
Force majeure: Extension with 1 year after its ending (Art. 21)
10 year long stop (Art. 23)
Effects:

« weak effect » (Art. 25 (1) ‘no claim shall be recognized or enforced in
any legal proceedings’ and Art.26 ‘shall not be entitled to claim restitution)


Effect on set-off : 25 (2) After expiration of the limitation period
set-off is only possible if the claims could have been set-off at any
time before the expiration of the limitation period (Art. 25 (2))
Not to be invoked by the judge ex officio