Global Sales Law
Prof. Dr. Ingeborg Schwenzer
University of Basel
Switzerland
Introduction
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Development of global trade
2010: 9,5% increase (WTO)
2000-2008: average annual growth 5%
Focus: China, Brazil, Russia, Africa
2007/08: Africa annual growth: exports: 18/28%,
imports: 23/27%
• Different laws = obstacle to trade
Introduction
• Different sets of sales law
• Domestic: SGA, CC, others
• Regional: OHADA Uniform Act on General
Commercial Law (UAGCL), general
contract law
• Global: UN Convention on Contracts for
the International Sale of Goods (CISG),
UNIDROIT Principles of International
Commercial Contracts
Introduction
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History of Unification of sales law
1920s: Ernst Rabel
1960s: Hague Conventions ULIS/ULF
1980: Vienna Conference CISG
1988: Entering into force
2011: 76 member states covering 80% of world
trade
• Africa: 9 member states, only two OHADA states
Introduction
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Structure of the CISG
Part I: Sphere of application
Part II: Formation of the contract
Part III: Substantive rules for the sale of
goods, incl. duties of the parties,
remedies, risk of loss
• Part IV: Final provisions – international
public law
Part I: Sphere of application
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Application and ambit of CISG (Art. 1-6)
CISG itself determines ist applicability
Art. 1(1) CISG: different states (Art. 10 CISG)
Art. 1(1)(a) CISG: both states are member states
Art. 1(1)(b) CISG: rules of private international
law lead to member state
• Example China – Cameroon
• Application by arbitral tribunals
Part I: Sphere of application
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Party autonomy Art. 6 CISG
Opting out in whole or in part
Choice of domestic law, f.e. Swiss law
Litigating under the wrong law
Part I: Sphere of application
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Ambit of the CISG
Sale of goods contracts
Barter contracts, back-to-back-sale
Distribution agreements
Art. 3 CISG: work and labour, services
Art. 3(1) CISG: manufacture of goods
Art. 3(2) CISG: mixed contracts (factory)
Part I: Sphere of application
• Ambit of the CISG
• Goods: factory, machine, food, shoes,
clothes, cars, circus elephant
• Documents representing the goods
• Art. 2 CISG exceptions
• Art. 2(a) CISG: consumer sales
• Art. 2(b)(c) CISG: auctions, bancruptcy
• Art. 2(d)(e)(f) CISG: certain goods
Part I: Sphere of application
• Substantive ambit
• Art. 4 CISG: Formation, rights and
obligations of parties
• Art. 4(a) CISG: validity questions
• Public policy, mandatory rules, capacity of
the parties, fraud, mistake?
• Art. 4(b) CISG: transfer of title, retention of
title, bona fide purchase
Part I: Sphere of application
• Substantive ambit
• Art. 5 CISG: Compensation for personal
injury and death
• Compensation for damage to property
• Limits of the CISG (external gaps)
• Agency, assignment, transfer of debts,
joint debtors, limitation of actions, set-off?
• Form requirements: Art. 11 CISG
Part I: Sphere of application
• Art. 7 CISG: Interpretation of the CISG
• Art. 7(1) CISG: international character,
promotion of uniformity, good faith
• Art. 7(2) CISG: gap-filling
• General principles of CISG (party
autonomy, burden of proof, stamdard of
proof, set-off)
• PICC?
Part I: Sphere of application
• Art. 8 CISG: Interpretation of party
statements and conduct
• Art. 8(1) CISG: true intention of parties
• Art. 8(2) CISG: reasonable person
• Art. 8(3) CISG: circumstances to be
considered
• Art. 9(1) CISG: usages and practices
• Art. 9(2) CISG: international usages
Part I: Sphere of application
• Art. 11 CISG: freedom of form
• Formation, Art. 29(1): modification
• Excluded: procedural requirements, pariol
evidence rule, consideration, cause,
statute of frauds
• Art. 12 CISG: reservation
• Agreed form, Art. 13 CISG: writing
• Art. 29(2) CISG: modification
Part II: Formation of the contract
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General remarks
Art. 14 et seq. CISG antiquated
Offer-acceptance mechanism
e-commerce, UNCITRAL Concention 2004
Standard terms: incorporation – validity
Pre-contractual duties
Breaking off negotiations
Part II: Formation of the contract
• Offer
• Art. 14 CISG: criteria for an offer
• Art. 14(1) CISG: definiteness (pretium
certum – Art. 55 CISG), intention to be
bound (invitatio ad offerendum)
• Art. 14(2) CISG: public offer
(advertisements, websites)
Part II: Formation of the contract
• Offer
• Art. 15(1) CISG: effective upon reaching
the offeree
• Art. 15(2) CISG: withdrawal of offer
• Art. 16 CISG: revocability of offer
• Art. 16(1): Common Law starting point
• Art. 16(2): restrictions on revocability
• Art. 17 CISG: termination of offer
Part II: Formation of the contract
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Acceptance (Art. 18-22 CISG)
Art. 18(1): acceptance by declaration
Statement or conduct (delivery, payment)
Acceptance by silence
Effectiveness of acceptance: Art. 18(2
s.1): reaching, Art. 18(3): performance of
act
Part II: Formation of the contract
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Acceptance (Art. 18-22 CISG)
Deadline for acceptance (Art. 18(2) CISG)
Art. 20 CISG: calculating the period of time
Art. 21 CISG: when late acceptance may
be effective
• Divergence between offer and acceptance
• Art. 19(1): rejection and counter-offer
• Art. 19(2)(3): insignificant modifications
Part II: Formation of the contract
• Battle of forms
• Practical importance
• Possible solutions: last shot doctrine,
knock-out doctrine
• Commercial letter of confirmation
(acceptance by silence?)
Part II: Formation of the contract
• Effectiveness of statements
• Importance of statement reaching the
other party, Art. 23: conclusion of contract
• Art. 24: when does statement reach the
other party?
• e-commerce, standard terms (making
available, transparency)
• Art. 29: modification of contract
Part III/1: Substantive Rules General
• Content of Part III: General, obligations of
seller, obligations of buyer, passing of risk,
common provisions
• Basic remedies
• Specific performance (Art. 28 CISG)
• Right to withhold performance
• Damages
• Avoidance of contract, Art. 25:
fundamental breach
Part III/1: Substantive Rules General
• Art. 26 CISG: declaration of avoidance
• Art. 27 CISG: dispatch principle –
transmission risk
• Other notices (non-conformity
Part III/1: Substantive Rules General
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Art. 25 CISG: fundamental breach
Fundamentality: effect on creditor
Foreseeability
In case of non-performance: impossibility,
delay – time of the essence, ancillary
duties
• Non-conformity of the goods: purpose of
the contract, repairable defect, time of the
essence
Part III/1: Substantive Rules General
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Art. 25 CISG: fundamental breach
Breach of buyer‘s obligations
Payment, repudiation, insolvency
Taking delivery
Art. 28 CISG: Specific performance
Common law – Civil law
Part III/2: Substantive Rules –
Seller‘s obligations
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Overview Art. 30-44 CISG
Cornerstone of any sales law
Art. 30-35: delivery, conformity
Art. 37-40: non-conforming goods
Art. 41-43: third party rights
Art. 44: buyer‘s excuse for not giving
notice
Part III/2: Substantive Rules –
Seller‘s obligations
• Seller‘s duty to deliver
• Art. 30 CISG: delivery, documents,
transfer of title
• Art. 31 CISG: place of delivery
• Primarily party agreement
• Incoterms 2010: EXW (ex works), FCA
(free carrier)/FOB (free on board), CIF
(cost, insurance, freight), DAP (delivered
at place)
Part III/2: Substantive Rules –
Seller‘s obligations
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Seller‘s duty to deliver
Subsidiary rules
Art. 31(a): carriage of goods
Art. 31(b): goods at specific place
Art. 31(c): seller‘s place of business
Making available
Art. 32: obligations during transport
Jurisdiction at place of delivery
Part III/2: Substantive Rules –
Seller‘s obligations
• Seller‘s duty to deliver
• Art. 33: time of delivery: primarily party
agreement
• Art. 33(a): fixed date
• Art. 33(b): fixed period of time
• Art. 33(c): reasonable time after
conclusion of contract
• Art. 52(1): early delivery by seller
Part III/2: Substantive Rules –
Seller‘s obligations
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Art. 34: handing over of documents
Documents of title
Other documents
Place and time of handing over of
documents
• Right to cure in case of early delivery
Part III/2: Substantive Rules –
Seller‘s obligations
• Art. 35 CISG: conformity of the goods
• Most important provisions of CISG
• CISG key concept: quality, quantity, aliud
packaging treated alike
• Domestic approaches: warranties/
conditions (SGA), express/implied
warranties (UCC), vices cachés (CC),
peius/aliud (CC, Germanic systems),
partial non-delivery, ancillary duties
Part III/2: Substantive Rules –
Seller‘s obligations
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Art. 35 CISG: conformity of the goods
Art. 35(1): primarily party agreement
Quantity: trade usages
Quality: features of goods, origin, manufacturing
practices, ethical standards
• Dicrepancies in nature: aliud
• Packaging
• Additional duties: services, non-competition
Part III/2: Substantive Rules –
Seller‘s obligations
• Art. 35 CISG: conformity of the goods
• Art. 35(2): objective criteria to determine
conformity
• Art. 35(2)(a): fitness for ordinary purpose
• Commercial purposes, resalability,
average quality?
• Public law requirements, regional v. global
players
Part III/2: Substantive Rules –
Seller‘s obligations
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Art. 35 CISG: conformity of the goods
Art. 35(2)(b): fitness for particular purpose
Purpose made known to seller
Buyer reasonably relying on seller‘s skill
and judgement
• Art. 35(2)(c): sample or model
• Art. 35(2)(d): adequate packaging
• Art. 35(3): buyer‘s knowledge
Part III/2: Substantive Rules –
Seller‘s obligations
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Art. 36: determinative time for conformity
Art. 36(1): passing of risk
Burden of proof
Art. 36(2): after risk has passed: breach of
obligation, guarantee
• Durability in general
• Art. 37: seller‘s right to cure nonconformity
Part III/2: Substantive Rules –
Seller‘s obligations
• Art. 38, 39: Examination and notice
• Comparative overview: SGA, CC, UCC,
Germanic systems
• Drafting history
• Art. 38: Examination
• Method of examination
• Period for examination: general, carriage
of goods, redirection or redispatch
Part III/2: Substantive Rules –
Seller‘s obligations
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Art. 39: notice
Specificity of notice
Form and transmission risk
Reasonable time: nature of goods, „noble
month“
• Beginning of period
• Art. 39(2): two year cut-off period
Part III/2: Substantive Rules –
Seller‘s obligations
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Art. 40: seller‘s knowledge
Consequences of failure to give notice
General – Art. 44: reasonable excuse
Limitation periods
UN Convention on Limitation period: 4
years
• Domestic rules vary from 6 months to 6
years, compatability with Art. 39(2)
Part III/2: Substantive Rules –
Seller‘s obligations
• Art. 41, 42: defects in title and intellectual
property rights
• Distinction unknown to most countries
• Art. 41: defects in title
• Third party rights (property,
encumbrances)
• Third party claims
• Public law encumbrances
Part III/2: Substantive Rules –
Seller‘s obligations
• Art. 42: third party industrial or intellectual
property rights
• Third party rights or claims
• Art. 42(1)(a)(b): territorial restriction
• Seller‘s knowledge
• Art. 42(2): exclusion of seller‘s liability
• Art. 43: notice requirement
Part III/3: Substantive Rules –
Buyer‘s remedies in case of breach
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Art. 45-52 CISG: buyer‘s remedies
Unified approach: breach of contract
Some special rules: non-conformity
Art. 45: overview of buyer‘s remedies
Concurrent domestic remedies: contract
law (mistake), tort law (culpa in
contrahendo, negligent misrepresentation)
Part III/3: Substantive Rules –
Buyer‘s remedies in case of breach
• Art. 48 CISG: seller‘s right to cure
• Distinguish Art. 37
• Relationship to buyer‘s right to avoid the
contract
• Setting time limits
• Art. 47: buyer fixing additional time for
performance
• Art. 48(2)(3): seller requesting additional
time
Part III/3: Substantive Rules –
Buyer‘s remedies in case of breach
• Art. 46, 47 CISG: right of performance and
substitute performance
• Art. 46(1): right to specific performance
subject to Art. 28 and Art. 79
• Art. 46(2): restriction on right to substitute
goods in case of non-conformity
(fundamental breach)
• Art. 46(3): restriction on right to repair in
case of non-conformity
Part III/3: Substantive Rules –
Buyer‘s remedies in case of breach
• Art. 49: Avoidance of contract
• Art. 49(1)(a): fundamental breach
• Art. 49(1)(b): „Nachfrist“-principle
(additional period in case of non-delivery
and breach of additional obligations)
• Art. 49(2): restriction in case of delivery of
goods
• Avoidance by declaration
Part III/3: Substantive Rules –
Buyer‘s remedies in case of breach
• Part performance and delivery of partly
non-conforming goods
• Art. 51 and Art. 73 CISG
• Art. 51(1), 73(1): principle: partial
avoidance only
• Art. 51(2), 73(3): avoidance of the whole
contract in case of fundamental breach
• Art. 72: Anticipated breach of contract
Part III/3: Substantive Rules –
Buyer‘s remedies in case of breach
• Art. 50 CISG: reduction of purchase price
• Roman law descent
• Difference to damages: calculation, Art. 79 not
applicable
• Art. 45(1)(b), 74 et seq.: damages
• Right to withhold performance, general principle
• Art. 71: right to suspend performance
• Right to reject the goods (perfect tender rule?)
• Art. 52(2): rejection of excessive quantity
Part III/4: Substantive Rules –
Buyer‘s obligations
• Art. 53 CISG: payment, taking delivery
• Art. 54-59: payment of purchase price
• Art. 54: encompasses all arrangements,
form of payment, letter of credit,
compliance with public law regulations etc.
• Currency: agreement, place of seller
• Art. 57(1): place of payment
• Jurisdiction?
Part III/4: Substantive Rules –
Buyer‘s obligations
• Art. 58: time of payment
• Agreement
• Art. 58(1)(2): subsidiarily: step by stepperformance
• Art. 58(3): reasonable opportunity to inspect the
goods
• Art. 60 CISG: duty to take delivery
• Necessary preparatory steps, taking over
• Offer of non-conforming goods
Part III/4: Substantive Rules –
Buyer‘s obligations
• Art. 66-70 CISG: passing of risk
• Art. 66: payment obligation if seller
performed all of its obligations, even if
goods destroyed or damaged
• Which events are covered? Acts of states?
• Exception: loss or damage due to seller
• Primarily: agreement of parties (practice)
• Incoterms – who must insure the goods?
Part III/4: Substantive Rules –
Buyer‘s obligations
• Art. 66-70 CISG: passing of risk
• Art. 67(1): handing over to first carrier, retention
of documents irrelevant
• Art. 67(2): generic goods must be identified to
contract
• Goods sold in transit: unclear when goods were
destroyed
• Art. 68: conclusion of contract. Dating back to
handing over in case of insurance (contract
valid)
Part III/4: Substantive Rules –
Buyer‘s obligations
• Art. 69: catch all provision
• Art. 69(1): goods at seller‘s place of
business: taking over of goods or failing to
take delivery
• Art. 69(2): other places of delivery (incl.
buyer‘s place of business): when delivery
is due, notification of buyer, identification
to contract
Part III/5: Substantive Rules –
Seller‘s remedies in case of breach
• Art. 61 CISG: overview of seller‘s
remedies
• Art. 61(3): no period of grace as CC
• Art. 62: payment of purchase price, Art. 28
applicable
• Can Art. 77 be applied to specific
performance of purchase price? Disputed.
• Art. 62: taking delivery and other duties
• Art. 63: fixing additional period of time
Part III/5: Substantive Rules –
Seller‘s remedies in case of breach
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Art. 64: avoidance of contract
Art. 64(1)(a): fundamental breach
Art. 64(1)(b): lapse of „Nachfrist“
Fundamentalility of breach very rare:
discuss non-payment, taking delivery,
other duties
• Art. 64(2): restriction where price has been
paid in the meantime (price main interest)
Part III/5: Substantive Rules –
Seller‘s remedies in case of breach
• Art. 61(1)(b), 74: damages
• Rights of retention: Art. 58(1): step-bystep-principle, Art. 71(1): if seller must
perform first, Art. 71(2): right of stoppage
in transitu (does not apply against carrier)
• Specification by the seller, Art. 65
• Notice to buyer necessary
• Art. 65 applicable to other duties?
Part III/6: Substantive Rules –
Common provisions
• Art. 71: right to suspend performance and
stoppage
• Art. 71(1)(a): deficiency in ability to
perform (f.e. political situation, natural
disaster), creditworthiness (buyer or seller)
• Art. 71(1)(b): debtor‘s conduct
• Relevant time: after AND before
conclusion of the contract (becomes
apparent), domestic remedies for mistake
Part III/6: Substantive Rules –
Common provisions
• Art. 71: right to suspend performance and
stoppage
• Evidential threshold: reasonable person
• Weight of anticipated breach: „substantial part“
less than fundamental breach
• „suspension“ of performance as well as
preparatory steps
• Art. 71(2): right of stoppage
• Art. 71(3): duty to give notice, adequate
assurance of performance
Part III/6: Substantive Rules –
Common provisions
• Art. 71: right to suspend performance and
stoppage
• End of in-between-state: Art. 72: no
adequate assurance of performance,
fundamental breach threatening
• Art. 72: anticipatory breach
• Art. 72(1): prior to date of performance,
fundamental breach, „clear“
Part III/6: Substantive Rules –
Common provisions
• Art. 72: anticipatory breach
• Repudiation by one party, demanding
price adjustment, factual circumstances
• Art. 72(2)(3): possibility to give adequate
assurance of performance, reasonable
notice
• Duty to avoid contract before date of
performance, Art. 77?
Part III/6: Substantive Rules –
Common provisions
• Art. 73: installment contracts
• Faulty performance of one installment (nondelivery, late delivery, non-conformity)
• Art. 73(1): partial avoidance only if fundamental
• Art. 73(2): future installments, anticipatory
breach, lower threashold than Art. 72
• Art. 73(3): retrospective avoidance
• Other remedies? Damages, price reduction
Part III/7: Substantive Rules –
Damages
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Responsibility and discharge
Any breach of obligation
No fault requirement – strict liability
Exemption under Art. 79, 80
Art. 79(1): impediment beyond control, not
foreseeable, not avoidable
• Covers all contractual duties
• Subsequent and initial impediments
Part III/7: Substantive Rules –
Damages
• Typically: force majeure situations
• Hardship? Threshold, consequences (duty
to renegotiate?)
• Non-conformity of goods. Exemption rare
• Liability for own employees: Art. 79(1)
• Liability for third persons: Art. 79(2)
• Passing impediment: Art. 79(3)
• Art. 79(4): duty to give notice
Part III/7: Substantive Rules –
Damages
• Art. 79(5): other remedies: withholding
performance, avoidance, reduction of
price, specific performance?
• Art. 80: creditor causing failure to perform
• All remedies excluded
• Causation by both parties (…to the extent)
• Apportionment of damages, avoidance?
Part III/7: Substantive Rules –
Damages
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Extent of damages claim, Art. 74
Principle of full compensation
All losses, causation required
Non-performance loss, incl. Loss of use, costs of
repair
• Incidental loss, additional costs etc. Legal costs?
• Consequential loss, f.e. penalty, liability, damage
to property
• Loss of profit
Part III/7: Substantive Rules –
Damages
• Pecuniary (loss of reputation, loss of a
chance) v. non-pecuniary loss (pain and
suffering, loss of amenities)
• Calculation of loss
• Concrete and abstract calculation
• Art. 75: concrete: cover purchase
• Art. 76: abstract: market-price-rule
• Abstract calculation of other losses, esp.
loss of use?
Part III/7: Substantive Rules –
Damages
• Betterment
• Disgorgement of profits (performance
principle)
• Art. 74: foreseeability rule (contemplation
rule)
• Standard: „possible consequence“
• Examples: non-performance loss,
incidental loss, consequential loss
Part III/7: Substantive Rules –
Damages
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Contractual stipulations on liability
Freedom of contract, Art. 6
Agreed sums (liquidated damages, penalties)
Limitations of liability – validity Art. 4(a)
Art. 77: duty to mitigate
Scope: damagess, other remedies?
Examples, substitute transactions
Consequences of breach
Part III/8: Substantive Rules –
Interest
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Art. 78: price or any sum in arrears
Highly controversial, Islamic countries
Preconditions: sum due
Interest rate: CISG itself? PICC? Domestic
law?
• Full compensation -> interest rate at
creditor‘s place, currency of payment
• Compound interest?
Part III/9: Substantive Rules –
Effects of Avoidance
• Art. 81(1): release from primary
obligations, arbitration clauses not affected
• Art. 81(2): restitution of what has been
performed, concurrently
• Art. 82(1): impossibility of restitution = bar
to avoidance or substitute delivery
(antiquated rule, better: damages)
• Art. 82(2): cases excluded: other than
buyer‘s conduct, examination, normal use
Part III/9: Substantive Rules –
Effects of Avoidance
• Restitution: nature of claim? Effect of
avoidance on property. CISG: contract
remains intact (Art. 81(1) CISG)
• If goods are damaged after avoidance ->
damages (Art. 74)
• Art. 84(1): interest on purchase price
• Art. 84(2): benefits from goods,
surrogates, fruits, use (no abstract
calculation)
Part III/10: Substantive Rules –
Preservation of goods
• Breach of contract: problem: fate of the
goods? Examples
• Art. 85: seller‘s duty if buyer does not take
delivery
• Art. 86: buyer‘s duty if it rejects the goods
• Art. 86(2): duty to take possession
• Reasonable preservation measures,
depend on nature of goods
• Art. 87: storage in a warehouse
Part III/10: Substantive Rules –
Preservation of goods
• Art. 88: self-help sale
• Art. 88(1): normal self-help sale („may),
notice required
• Art. 88(2): emergency sale, perishable
goods („must“), possible notice
• Art. 88(3): proceeds: set-off against costs,
account for balance