b. coverage of cisg

Case 1-2:
Sei Fujii v. State of CaliforniaUnited States,
Supreme Court of California, 1952
• .
• Facts: A California law made land purchased by an alien Japanese,
who was ineligible for citizenship, escheat to the state.
• Issues:
• (1) Does California’s alien land law violate the UN Charter?
• (2) If it does, is the UN Charter automatically applicable?
• (3) Does the California law violate the U.S. Constitution?
• Holding:
• The law violates the UN Charter and the U.S. Constitution.
• The UN Charter is not self-executing, but the U.S. Constitution is.
• Order: The land does not escheat to California.
(1) At the time, there was no U.S.-Japan treaty giving Japanese the right to
own land in the U.S.
(2) The UN Charter requires nations to promote human rights (including
nondiscrimination based on national origin).
(3) Treaties (such as the UN Charter) are part of American law and must be
(4) Treaties do not supersede inconsistent local laws unless they are selfexecuting.
(5) To determine if a treaty is self-executing, one looks at the intent of the
parties. That is, for a treaty provision to be operative without the aid of
implementing legislation, it must appear that its authors meant to prescribe
a rule that, standing alone, would be enforceable in the courts.
(6) The U.S. Constitution’s Fourteenth Amendment prohibits racial
• The UN Charter provisions on human rights set
out goals and aspirations, not self-executing
provisions. They were not meant to become
rules of law. This is in contrast to the rules in the
Charter dealing with rights and privileges of the
officers and employees of the UN, which
signatories are required to observe.
• American states are bound to observe the U.S.
Constitution. The California law, which is based
on racial discrimination, violates the U.S.
Naturalization (or naturalisation) is the legal act or process by which a
non-citizen in a country may acquire citizenship or nationality of that
country. It may be done by a statute, without any effort on the part of the
individual, or it may involve an application and approval by legal authorities..
EscheatEscheat /ɨsˈtʃiːt/[1][2][3][4] is a common law doctrine which transfers
the property of a person who dies without heirs to the crown or state. It
serves to ensure that property is not left in "limbo" without recognized
ownership. It originally applied to a number of situations where a legal
interest in land was destroyed by operation of law, so that the ownership of
the land reverted to the immediately superior feudal lord.
• Case 1-3,P587
Positive laws
• (Latin: ius positum) are human-made laws that
oblige or specify an action. It also describes
the establishment of specific rights for an
individual or group.
• The concept of positive law is distinct from
"natural law", which comprises inherent rights,
conferred not by act of legislation but by "God,
nature or reason."
Natural law
• is a philosophy that certain rights or values
are inherent by virtue of human nature,
and universally cognizable through human
reason. Historically, natural law refers to
the use of reason to analyze both social
and personal human nature to deduce
binding rules of moral behavior. The law of
nature, being determined by nature, is
Chapter 2
What is an international sales
• An international sales
contract is an agreement
between a buyer and
seller across national
borders. These
transactions have local
and foreign elements
• Example:
An Aust. company selling
coal to steel mill in China
• Growth of
international trade
&use of internet have
facilitated these
types of contracts
• Rules of contract
formation are not the
same throughout the
world(p.99 SM)
Going Global
• International contracts
• Many businesses involve
must be governed by
multiple transactions
a legal system
• Bing Lee imports TiVos
• Normally done by an
from Japan to Aust.
express clause in
Which law governs the
• Globalisation- business • If not courts can
people want a uniform
decide implied choice
law to apply to their
3 basic questions to consider in
international dealings
Risks? Exposure to potential liability?
– Which jurisdiction applies in a dispute?
– Which rules will the court apply to resolve a
– Can a foreign courts decision be enforced in
the state?
• A foreign person may be
sued in Courts if they are
physically present within
the jurisdiction at time the
proceedings begins
• Local Law (contract)
• Foreign Law
( Carriage of Goods
by Sea Act)
• International treaties
• Or the Corporation is
(Vienna Convention)
carrying on business
in the state at the time. • All of these need to
be considered
International Trade Law
International Conventions
Vienna Convention
(CISG) 1980 covers sale of
Hague Rules
relates to shipping freight
Aust. & many other nations
are party to these
Vienna Convention
Provisions-Rules covered
Uniformity of rules of
Remove legal barriers
int’al trade
Promote development
of int’al trade
Formation- offer & acceptance
Mixture of common
law & civil law
Remedies for breach
Obligations of buyer & seller
Buyer=pays price
The sources of international trade law
• International conventions
– The UN convention on the limitation of the Int’l sale of
– The UNIDROIT convention on Agency
– The UNCITRAL ,Model law on Procurement of goods,
construction and services 1994
• International customary rules
– ICC –International commercial term (INCOTERMS)
• Domestic laws
– Relevant international conventions takes priority if the
relevant country ratified and incorporated the convention into
the domestic law.
• Application of law for international trade
– Autonomy of will (Freedom of contract)
– The most significant connection
– conventions
• The parties to a contract involving foreign
interests may choose the law applicable to the
settlement of their contract disputes, except as
otherwise stipulated by law. If the parties to a
contract involving foreign interests have not
made a choice, the law of the country to which
the contract is most closely connected shall be
The contracts for Chinese-foreign equity joint
ventures, for Chinese-foreign contractual joint
ventures and for Chinese-foreign cooperative
exploration and development of natural
resources to be performed within the territory of
the People's Republic of China shall apply the
laws of the People's Republic of China.
145. The parties to a contract involving
foreign interests may choose the law
applicable to settlement of their
contractua1 disputes, except as otherwise
stipulated by Law.
If the parties to a contract involving
foreign elements have not made a choice,
the law of the country to which the
contract is most closely connected shall
be applied.
• l50. The app1ication of foreign laws or
international practice in accordance with
the provisions of this chapter shall not
violate the public interest of the Peop1e’s
Republic of China.
Chapter XXIV General Principles
• The provisions of this Part shall be applicable to
civil proceedings within the territory of the
People's Republic of China in regard to cases
involving foreign element. Where it is not covered
by the provisions of this Part, other relevant
provisions of this Law shall apply.
• United Nations Convention on Contracts
for the International Sale of Goods
– In effect since January 1, 1988
– Current state parties: 64, including
United States
Web site: http://www.uncitral.org/
• International contracts: buyer
and seller must have their places of
business in different states.
– Both states must be contracting parties to the
convention, or
– The rules of private international law must
lead to the application of the law of a
contracting state.
• Exception: A contracting state may declare that it
will apply the CISG only when the buyer and seller
are both from contracting states.
• Opting in and out
– The parties to a contract may exclude or
modify the CISG’s application by a choice of
law clause.
– Whether parties can exclude a domestic law
and adopt the CISG in its place depends on
the rules of the state where the case is heard.
• Merchants: CISG applies only to
commercial sales transactions between
– CISG Art.1: buyers and sellers must both
have “places of business.”
– CISG Art. 2(a): the Convention does not apply
to sales of goods bought for personal, family,
or household use.
• Subject Matter of CISG:
– The formation of contracts.
– The remedies available to buyers and sellers.
• Subject Matter Not Covered:
– The validity of contracts.
– The competency of the parties.
– The rights of third parties.
– Liability for death or personal injury.
– Sales to consumers.
– Sales of services
– Sales commonly subject to special regulation:
• Auction sales,
• 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, and
• Sales of electricity.
• General sources of CISG rules: French
Civil Code, the French Commercial Code,
and similar civil law codes.
• Distinctive CISG provisions:
Contract formation(offer /acceptance)
Firm offers
Time of acceptance
Acceptance with additional terms
Obligations of the buyer/seller
Withdraw an offer
Revocation of an offer
Rejection an offer
Counter offer
Modified acceptance
Rules for calculating the time of acceptance
Effect of late acceptance
Conclusion of contract
• Firm Offer is Irrevocable if:
– the offeror indicates, whether by stating a
fixed time or otherwise, that it is irrevocable,
– the offeree acts in reliance on the reasonable
belief that it is irrevocable.
• Firm Offer Does Not Have to be:
– in writing (as required by the UCC), or
– supported by consideration or cause.
• Acceptance is Effective and a contract
formed only when the indication of assent
reaches the offeror.
– Caveat: An offeror may not revoke an offer
once it has been dispatched.
– Basis: French Civil Code's receipt rule.
• Compare: UCC provides that an acceptance is
effective upon dispatch.
• Additions, limitations, or other
modifications constitute a “counteroffer.”
– Caveat: This is so only if—
• the additional or different terms materially alter
the terms of the offer, or
• the offeror fails to promptly object to changes that
are not material.
– Material alterations are changes to the following:
quality and quantity of the goods
place and time of delivery
extent of one party’s liability to the other
settlement of disputes
– Basis: French mirror image
rule and UCC § 2-207.
United States District Court, Southern District of New York, 1992.
Chilewich had a contract to deliver footwear to Russia. This
contract contained an arbitration provision that called for all
disputes to be arbitrated in Moscow. Chilewich then engaged
Filanto (an Italian corporation) to supply it with footwear that
Chilewich had contracted to deliver to Russia. Chilewich’s
correspondence to Filanto said that the arbitration provision in the
Russian contract was to be part of their contract as well. Filanto
supposedly sent Chilewich a counteroffer rejecting the arbitration
provision. Chilewich meanwhile proceeded to obtain a letter of
credit benefiting Filanto and proceeded as if there was a contract.
Filanto, however, signed a contract on August 7 that contained this
provision, although it said in its cover letter that it was not bound
by the provision. When a dispute arose and Filanto sued in a US
court, Chilewich invoked the arbitration provision and asked the
court to dismiss Filanto’s suit.
• ISSUE: (1) Was the August 7 reply a
counteroffer? (2) If it was, was there a
contract anyway based on unobjected-to
• LAW: A reply that purports to be an acceptance but
contains material additions, limitations, or modifications
are a rejection of the offer and a counteroffer. (1) The
objections to the arbitration provision in the August 7
cover letter were a material modification amounting to a
rejection of the offer.
• If the offeree knows that the offeror has begun
performance and fails to notify the offeror within a
reasonable time that it objects to the terms of the contract,
it will be deemed to have assented to those terms. (2)
Because Chilewich went ahead with the contract (getting
the letter of credit) and Filanto did not timely object,
Filanto accepted the terms of the Chilewich’s proposed
• ORDER: Case dismissed; the matter must be arbitrated in
• A contract must be sufficiently definite
so that a court can enforce it.
– A contract is sufficiently definite if it:
• describes the goods, and
• expressly or impliedly fixes or makes provision for
determining the quantity.
• Price should be stated or a means
provided for determining it.
– Price not stated: courts imply will the price
generally charged at the time of the contract
for like goods sold under comparable
circumstances in the trade concerned
• No Formalities: The CISG does not
require a contract to be in any particular
form (article 11,12,96)
– A contract may be proven by oral testimony
regardless of the price involved.
• Basis: French
Commercial Code.
• Fundamental Breach:
– When one party substantially fails to deliver what the other
reasonably anticipated receiving. (art. 25)
• Avoidance: (art. 26)
– The right to be excused from having to perform any obligation
required by the contract.
• 3. Requests for Specific Performance( art. 46)
• a. An injured party make ask a court “to require performance” if the
other party fails to carry out its obligations.
• b. A court is not obliged to order specific performance unless the
court can do so under its own domestic rules.
• Requirements:
– The other party must have committed a fundamental breach.
– The injured party must notify the other party.
– The injured party must be able to return any goods he has
already received.
• 2) Effect of avoidance:
Only the obligation to perform is set aside.
Avoidance does not affect any provision in the contract
• The settlement of disputes (such as arbitration, choice of law, or
choice of forum clauses), or
• Any other provisions governing the rights and duties of the parties
“consequent upon the avoidance of the contract.”
• For the seller:
– Delivery of goods
– Transfer of Bills
– warranty
• For the buyer
– Payment
– Take delivery
• Buyer’s Right of Avoidance
– Requirements for avoiding a contract:
• The seller commits a fundamental breach, or
• The seller commits a lesser breach and the buyer
gives the seller a Nachfrist notice that the seller
rejects or does not comply with during the period it
– Basis: German Civil Code.
– Nachfrist Notice: the fixing of an additional
period of time of reasonable length for
performance by the seller of his obligations.
• The period must be definite and the obligation to
perform within that period must be clear.
• During the Nachfrist period the seller is entitled to
correct (i.e., “cure”) the non-conformity at his own
– A cure may not be made if the breach is fundamental and the
buyer chooses to avoid the contract.
– Time for Avoidance: Once the Nachfrist
period has run, or once the fundamental
breach becomes clear, the buyer has a
reasonable time in which to avoid the contract.
• Seller’s Right of Avoidance
– Analogous to that of the buyer’s avoidance
• Buyer’s Right to a Reduction in Price
– Applicable when:
• the seller delivers non-conforming goods
• the buyer accepts them, and
• the seller is not responsible for the non-conformity
– Formula for determining the price
reduction: The price is to be reduced by that
ratio of:
• The value at the time of delivery of the goods
actually delivered, to
• The value that conforming goods would have had
at the time of delivery.
– Example
• Idaho potatoes sold at $3.50/bushel for delivery in Djakarta
• Damaged in transit by act of nature
• Undamaged potatoes are worth $4.00/bushel if purchased in
• Damages potatoes are worth $2.80/bushel
– The price reduction ratio is:
$2.80 =
– Applying this ratio, the reduced price the buyer pays is:
$3.50 x 7/10 = $2.45
Anticipate breach of contract
• Article 71:
• suspend the performance of a contract on
the ground of an anticipatory breach.
– Deficiencies in ability or creditworthiness
– The act in performing or preparing the
contract show that …can not perform at least
of the substantial part of the contract
Passing of Risk
• Vital issue:Who is liable for losses incurred
before the completion of the contract.
• Passing of risk and the duty to pay
• When:
To be transported by carrier
Sold in transit
Through delivery
In unascertained goods
Impediment beyond control
• Force majeure
– A party is not liable for damages resulting from his
failure to perform if he can show that:
• His failure was due to an impediment beyond his control.
• The impediment was not something he could have reasonably
taken into account at the time of contracting, and
• He remains unable to overcome the impediment or its
Typical situations: Natural disasters, war, embargoes, strikes,
breakdowns, and the bankruptcy of a supplier.
• Dirty hands
– One 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.
– Case 10-8
– Italy 14 January 1993 District Court Monza (Nuova
Fucinati v. Fondmetall International) [translation
[Cite as:
Other conventions
• The United Nations Convention on the
Limitation period in the international sale
of Goods
• Convention on international agency
chapter 3
Trade Terms & Transportation