Hot Topics in Sales - UNLV - William S. Boyd School of Law

Alphabet Soup: How the UCC,
CISG, UNIDROIT Principles,
Incoterms, UETA, E-SIGN, and the
U.N. Electronic Commerce
Convention Interact in International
Sales of Goods
ABA Section on Business Law
Uniform Commercial Code Committee
August 12, 2007
The Law Governing
International Sales of Goods
Keith A. Rowley
Professor of Law, William S. Boyd School of Law,
University of Nevada Las Vegas
Charles E. Tweedy, Jr. Visiting Chairholder in Law,
The University of Alabama School of Law
[email protected] or [email protected]
Scope of UCC Article 2
• § 2-102: Article 2 governs transactions
(other than those intended solely for
security) in goods.
• § 2-106(1): Article 2 governs present or
future sales (passing title from the seller
to the buyer for a price) of goods.
UCC § 2-105(1)
“Goods” means all things (including specially
manufactured goods) which are movable at the
time of identification to the contract for sale
other than the money in which the price is to
be paid, investment securities (Article 8) and
things in action. “Goods” also includes the
unborn young of animals and growing crops
and other identified things attached to realty as
described in [§ 2-107].
“Mixed” Contracts
Courts determine whether UCC Article 2 governs
a transaction or dispute involving a contract for
goods and either non-goods personal property or
services using one of two tests:
• Predominant purpose
• Gravamen of the action
CISG art. 1
(1) This Convention applies to contracts of sale of goods
between parties whose places of business are in
different States:
(a) when the States are Contracting States ….
(2) The fact that the parties have their places 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….
CISG art. 10
(a) 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;
(b) if a party does not have a place of business, reference
is to be made to his habitual residence.
CISG art. 2(a)
This Convention 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 ….
CISG art. 23
A contract is concluded at the moment when
an acceptance of an offer becomes effective in
accordance with the provisions of this
CISG art. 18(2)-(3)
An acceptance of an offer becomes effective at
the moment the indication of assent (by return
promise or performance) reaches the offeror….
within the time [the offeror] has fixed or, if no
time is fixed, within a reasonable time ….
CISG art. 2(b)-(f)
The CISG does not apply to sales:
by auction;
by authority of law;
of stocks, shares, investment securities,
negotiable instruments, or money;
of ships, vessels, hovercraft, or aircraft;
of electricity.
CISG Art. 3(2)
The CISG “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 labor or other
CISG Art. 3(1)
The CISG does apply to contracts “for the
supply of goods to be manufactured or
produced … unless the party who orders the
goods undertakes to supply a substantial part of
the materials necessary for such manufacture or
Contracting State Reservations
A country that is a party to the CISG may
declare that it is not bound by one or more
provisions of the CISG -- most commonly:
the formation rules (Arts. 13-24);
Article (1)(1)(b); and
Articles 11 and 29 and those formation rules
that recognize the validity of oral offers,
acceptances, agreements, and modifications.
Scope of the CISG: Recap
Subject to a valid reservation, the CISG applies to sales
of goods between parties whose places of business or
habitual residences are in two Contracting States, unless
(a) either party doesn’t know or have reason to know that
the other party’s place of business is in another country;
(b) the buyer is purchasing the goods for personal,
family, or household use and the seller knows or has
reason to know the buyer’s intended use of the goods or
the sale is excluded by Article 2(b)-(f); or
(c) the seller is primarily supplying labor or other
services, to which the goods provided are incidental.
Contracting Out of the CISG
Article 6 permits the parties to “exclude the
application of [the CISG] or, subject to article
12, derogate from or vary the effect of any of
its provisions.”
With one exception, U.S. courts have
consistently required the parties to expressly
disavow the CISG; simply choosing the
domestic law of a jurisdiction will not suffice.
• American Mint LLC v. GOSoftware, Inc., 2006
WL 42090 (M.D. Pa. Jan. 6, 2006)
• TeeVee Toons, Inc. v. Gerhard Schubert GmbH,
2006 WL 2463537 (S.D.N.Y. Aug. 23, 2006)
• American Biophysics Corp. v. Dubois Marine
Specialties, 411 F. Supp. 2d 61 (D.R.I. 2006)
“Scope” of the UNIDROIT Principles
The Principles shall be applied if the parties
have expressly agreed the Principles will
govern their contract and may be applied:
if the parties have agreed that general
principles of law, including lex mercatoria,
will govern their contract;
if the parties have not chosen governing law;
to interpret or supplement uniform law
instruments, such as the CISG.
UNIDROIT Principles art. 1.4
Nothing in the Principles shall restrict the
application of mandatory rules, whether
national [e.g., UCC], international [e.g., CISG]
or supranational origin, which are applicable in
accordance with the relevant rules of private
international law.
Incoterms 2000
The CISG is silent on transportation terms (e.g.,
“F.O.B.”). The International Chamber of Commerce
periodically publishes Incoterms, which define the
commercial delivery terms most commonly used by
parties to international sales contracts.
Several U.S. courts have treated Incoterms as a trade
usage of which the parties to a contract otherwise
governed by the CISG were or should have been
aware when they made a contract including one or
more terms defined by Incoterms.
Harmonic Convergence
CISG art. 9(b) (“The parties are considered, unless
otherwise agreed, to have impliedly made applicable
to their contract … 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 ….”)
UNIDROIT Principles art. 1.9(2) (“The parties are
bound by a usage that is widely known to and
regularly observed in international trade by parties in
the particular trade concerned ….”)