THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE
INTERNATIONAL SALE OF GOODS (1980) [CISG]: THE APPLICABLE
LAW FOR INTERNATIONAL SALES AGREMENTS
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The U.N. Convention on Contracts for the International
Sale of Goods (1980) [CISG]
• The CISG was adopted to respond to the absence
of a unified system of legal rules applicable to
international agreements covering the sale of
goods
• The purpose of the Convention was to contribute to
the removal of legal barriers in international trade
and to promote its development
• The CISG was signed on April 11, 1980 in Vienna
(Austria) and entered into force on January 1, 1988
• To date, 70 countries representing 75% of all world
trade are parties to the CISG including the US,
France, Spain, Germany, Italy, and China. The
United Kingdom and Turkey have not yet signed
the CISG
• The CISG is a supplementary set of rules. This
means that if a clause in a sales agreement
diverges from the CISG’s provision on a particular
issue, that clause supersedes the CISG
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The Scope of the CISG
• The CISG governs the formation of an International contract for
the sale of goods, as well as the rights and obligations of the
buyer and seller.
• The CISG does not govern issues related to the validity of the
contract, such as fraud. It also does not deal with issues of title to
the goods. These questions are to be resolved by the respective
laws of each contracting member.
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When does the CISG apply?
• The CISG applies to contracts for sale of goods between parties
whose places of business are in different States:
– When the States are CISG contracting States; or
– When the rules of private international law lead to the
application of the law of a Contracting State (CISG Art. 1)
• The CISG is applicable regardless of the nationality of the
parties or their civil or commercial character
• The CISG constitutes the default law for International sales
contracts. In other words, the CISG constitutes the applicable
law when the parties did not choose which set of laws should
apply when they entered into their agreement.
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When does the CISG does not apply?
•
The CISG does not apply to :
– Sales 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
– Sales by auction
– Sales on execution or otherwise by authority of law
– Sales of stocks, shares, investment securities, negotiable instruments
or money
– Sales of ships, vessels, hovercraft or aircraft;
– Sales of electricity (CISG Art. 2)
•
The CISG does not apply to sale of services
•
The CISG does not apply to chains of International Sales Agreements.
In other words, if a manufacturer sells the goods to a distributor who
sells it subsequently to a final customer. The CISG will not govern the
relationship between the manufacturer and the final customer
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Sales Agreements and similar agreements
•
The CISG does not apply to agreements for the supply of goods to be
manufactured or produced if the person who orders the goods undertakes
to supply a substantial part of the materials necessary for such
manufacture or production (CISG Art. 3-1)
•
The CISG does not apply to agreements in which the preponderant part of
the obligations of the party who furnishes the goods consists in the supply
of labor or other services (CISG Art. 3-2)
•
In order to determine whether or not the preponderant obligation of the
party who delivers the goods consists in the supply of labor or other
services, the parties need to quantify the respective values of the
obligations
•
If for instance a Sales Agreement provides that an engine manufacturer’s
obligations consist in manufacturing the engines and providing training to
the Buyer’s staff, in order to categorize the agreement, the parties will need
to determine the respective values of the engines’ production and of the
staff’s training. The agreement will be considered as subject to the CISG
only if the training does not constitute a preponderant part of the
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manufacturer’s obligations
Form and Evidence of Sales Agreements (CISG Art. 11)
• Unlike the UCC, the CISG was purported to satisfy the needs of
international businessman and to facilitate International Trade
• Therefore, the CISG does not require the Sales Agreement to be
concluded in nor evidenced in writing regardless of the sale amount
• A Sales Agreement may be proved by any means including
witnesses
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The formation of the Sales Agreement
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The formation of the Sales Agreement
• Under the CISG, a proposal for concluding a Sales Agreement
addressed to one or more specific persons constitutes an offer if:
– It is sufficiently definite, and
– It indicates the intention of the offeror to be bound in case of
acceptance (CISG Art. 14)
• A proposal is deemed “sufficiently definite”, to constitute an offer, if it
indicates the goods and expressly or implicitly fixes, or makes
provision for determining, the quantity and the price. However, even
if it is not the case, Article 55 of the CISG provides that a valid Sales
Agreement can nevertheless be formed; the parties will be in such
case considered to have impliedly made reference to the price
generally charged at the time of the conclusion of the agreement for
such goods sold under comparable circumstances in the trade
concerned
• Unless the contrary is clearly indicated by the offeror, a proposal
addressed to the public is to be considered as an invitation to deal9
(CISG Art. 14-2)
Withdrawal and Revocation of the Offer
• An offer becomes effective when it reaches the offeree (CISG
Art. 15-1)
• An offer may be withdrawn if the withdrawal reaches the offeree
before or at the same time as the offer (CISG Art. 15-2)
• Until a contract is concluded, an offer may be revoked if the
revocation reaches the offeree before he has sent an
acceptance (CISG Art. 16)
• However, an offer cannot be revoked:
– If it indicates that it is irrevocable, including when it states a
fixed time for acceptance; or
– If the offeree relying on the offer acted upon it and if it was not
unreasonable for him to act in such manner (CISG Art. 16-2)
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Terms of the Acceptance (CISG art. 19)
•
A reply to an offer which contains additions, limitations or other
modifications is to be considered a rejection of the offer and
constitutes a counter-offer. This rule is commonly called the “Last
Shot Theory” (CISG Art. 19-1)
•
However, a reply to an offer which contains additional or different
terms that do not materially alter the terms of the offer constitutes
an acceptance:
– Except if the offeror orally or in writing notifies his objections to the
discrepancies or dispatches
– If he does not so object, the modifications contained in the
acceptance will bind the Buyer and will be part of the agreement
(CISG Art. 19-2)
•
The CISG specifies that additional or different terms relating to the
price, payment, quality and quantity of the goods, place and time of
delivery, extent of one party's liability to the other, or relating to the
settlement of disputes are considered to materially alter the terms
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of the offer (CISG Art. 19-3)
Seller’s Obligations
•
The Seller must:
– Deliver the goods
– Hand over any relating
documents
– Transfer the property in the
goods
– Deliver goods that conform to
the Sales Agreement’s
provisions
– Deliver Goods free from any
third party claim
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Delivery of the goods and handing over of documents
•
•
The Seller must deliver the goods on the date the parties agreed to if
any, or before the expiration of a period of time agreed upon if any, or
alternatively within a reasonable time after the conclusion of the Sales
Agreement (CISG Art. 33)
In case the parties were silent about the place of delivery of the goods:
– The Seller must deliver the goods to the first carrier in case of carriage;
or
– When the goods are to be manufactured or produced, by placing the
goods at Buyer’s disposal in the place where the parties had known the
goods would have been at the time of the conclusion of the contract, or
– In other cases, by placing the goods at Buyer’s disposal at Seller’s
place of Business at the time of the conclusion of the contract (CISG
Art. 31)
•
If the Seller has the obligation to hand over documents relating to the
goods, it must do so at the time and place and in the form required by
the Sales Agreement (CISG Art. 34)
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Passing of Risks
• The CISG provides that the risks pass to the Buyer at the time of the
shipment
• Unless a loss or damage to the goods is imputable to the Seller,
after the risks have passed, the Buyer may not invoke such loss or
damage after the passing of risks, in order to discharge itself from its
obligation to pay the price (CISG Art. 66)
• When the sale involves a carriage, the risks pass to the Buyer when
the goods are handed over to the first carrier (CISG Art. 67)
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Conformity of the Goods (CISG Art. 35)
• The Seller must deliver goods which are of the quantity, quality
and description required by the Sales Agreement and which are
contained or packaged in the manner required therein
• Unless otherwise stipulated in the Sales Agreement, the goods,
in order to conform to the Sales Agreement, have to:
– Be fit for the purposes for which goods of the same description
would ordinarily be used
– Be fit for any particular purpose made known to the Seller at the
time of the conclusion of the Sales Agreement
– Correspond to the samples or models the Seller handed over to
the Buyer
– Be contained or packaged in the manner usual for such goods
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Conformity of the Goods - 2

•
The Seller is not liable for any lack of
conformity of the goods if at the time of the
conclusion of the Sales Agreement, the Buyer
knew or could not have been unaware of such
lack of conformity (CISG Art. 35-3)
•
The Seller is liable for any lack of conformity
which becomes apparent after the passing of
risks if such lack of conformity existed before
that time (CISG 36-1)
The Seller is also liable for any lack of conformity which occurs
after the passing of risks and which is due to a breach of any of its
obligations (CISG 36-2)
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Buyer’s inspection of the goods
•
The Buyer as soon as practicable must examine the goods, or cause
them to be examined (CISG Art. 38)
•
If the Sales Agreement involves carriage of the goods, examination may
be deferred until after the goods have arrived at their destination (CISG
Art. 38-2). However, since the risks had passed to the Buyer at the time
Seller delivered them to the first carrier, Buyer might face evidence
issues in its attempt to prove that the goods were damaged or lost before
Seller’s delivery to the carrier
•
The Buyer loses the right to rely on a lack of conformity of the goods if he
does not give notice to the Seller specifying the nature of the lack of
conformity within a reasonable time after he has discovered it or ought to
have discovered it (CISG Art. 39-1)
•
The CISG provides that, unless stipulated otherwise, this reasonable time
shall not exceed two (2) years from the date on which the good were
handed over to the Buyer (CISG Art. 39-2)
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Buyer’s Obligations
• The Buyer must pay the price for the goods as required by the Sales
Agreement
• The Buyer must take delivery of the goods as required by the Sales
Agreement
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Buyer’s Obligation to Remit Payment
• The Buyer must pay the price for
the goods and take delivery of them
as required by the Sales Agreement
and the CISG (CISG Art. 53)
• When the parties did not specify the
place where Buyer’s payment had
to be tendered, Buyer must pay:
▫ At the Seller's place of business; or
▫ If the payment is to be made
against the handing over of the
goods or of documents, at the
place where the handing over
takes place (CISG Art. 57)

The Buyer must remit the price
agreed upon in the Sales
Agreement on the due date
without the need for any request
or compliance with any formality
on the part of the Seller (CISG
Art. 59)
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Buyer’s Obligation to Take Delivery
• The Buyer's obligation to take delivery consists of:
– Doing all the acts which could reasonably be expected of him in order to
enable the seller to make delivery; and
– Taking over the goods
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Remedies for Breach of Contract by the Buyer
• The Seller may provide the Buyer a reasonable time extension
to perform its obligations (CISG Art. 63)
• The Seller may force the Buyer to perform its obligations,
including payment of the price and taking of delivery (CISG
Art.62)
• The Seller may declare the Sales Agreement avoided:
– If the failure by the Buyer to perform any of its obligations
amounts to a fundamental breach of Sales Agreement; or
– If the Buyer fails to perform its obligations after the expiration of
the additional period of time granted by the Seller (CISG Art.
64)
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Parties’ Anticipatory Breach
•
Any party may suspend the
performance of its obligations if
it becomes apparent that the
other party will fail to perform a
substantial part of its obligations
as a result of:
– A serious deficiency in its
ability to perform or in its
creditworthiness; or
– Its conduct in preparing to
perform or in performing the
contract (CISG Art. 71)

A party suspending performance, must immediately give notice of
the suspension to the other party

The party suspending performance must carry on the
performance of its obligations if the failing party provides
adequate assurance of its future performance (CISG Art. 71-3)
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Repudiation of the Sales Agreement and Damages
• If it is clear that one of the parties will commit a fundamental
breach of the Sales Agreement, the other party may declare the
contract avoided (CISG Art. 72)
• The party who suffered from the breach of the Sales Agreement
is entitled to damages. Such damages may not exceed the loss
reasonably foreseeable at the time of the conclusion of the
contract (CISG Art. 74)
• A party who relies on a breach of a Sales Agreement must take
any reasonable measure to attempt to mitigate the loss resulting
from the breach. If it fails to do so, the damages granted by the
Court may be reduced in the amount by which the loss should
have been mitigated (CISG Art. 77)
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Exemption of Liability (CISG Art. 79)
• If a party’s non-performance of any of its obligations is due to a
Force Majeure, such party will be exempted from its liability. It
will nevertheless have to prove that its failure was due to an
impediment beyond its control which was not reasonably
foreseeable at the time of the conclusion of the contract or
impossible to avoid or overcome
• A party who engaged a third person in order to perform its
contractual obligations cannot generally invoke the third party’s
failure to perform as to preclude from its own liability
• The failing party must give notice to the other party of the
impediment and its effect on its ability to perform
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Conclusion
•
Since the CISG allows you to opt out of or modify its provisions, it
enables you to draft a unique Sales Agreement responsive to your
specific needs
•
The provisions of the CISG will allow you to prove your rights under an
oral agreement, and enforce it against the Buyer
•
Being a neutral set of rules, the CISG will prevent you or your Buyer
from benefiting from the application of your respective national laws
•
Choosing the CISG will provide you with a single set of rules applicable
to all your foreign sales
•
Because the CISG was designed to promote international trade, it was
designed to be a flexible legal instrument, allowing each party to protect
their interests and conduct business efficiently, without excessive
restraints
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