International Sales Law

Christiana Fountoulakis, Ingeborg Schwenzer, Mariel Dimsey, Christiana Fountoulakis, Ingeborg Schwenzer, Mariel Dimsey

• Publisher: Routledge-Cavendish
• Year: 2007
• ISBN:
  9781134111541
• Edition: 1
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

Written for international trade lawyers, practitioners and students from common law and civil law countries, this casebook will help practitioners and students assimilate knowledge on the CISG.

The cases, texts and questions aid readers in their comparative law and international sales law studies, drawing attention to the particular issues surrounding specific CISG provisions and provoking careful consideration of possible solutions.

In addition to this book's function as a didactical aid, it is a reference work for leading cases and an introduction to the individual problem areas. In particular, it acts as a preparatory and complementary work for the Willem C. Vis International Commercial Arbitration Moot.

Article 1 CISG

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; or

   (b) when the rules of private international law lead to the application of the law of a Contracting State.

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.
3. Neither the nationality of the parties nor the civil or commercial character of the parties or of the contract is to be taken into consideration in determining the application of this Convention.

I. Overview

Art. 1 CISG defines, in conjunction with Arts 2 and 3, the sphere of and the prerequisites for the application of the Convention. ULIS, the CISG’s predecessor, provided for a rather complicated solution and allowed various reservations, which again led to a highly nonuniform scope of application. Therefore, the Drafting Conference intended to find clear and simple rules for the application of the Convention.

The solution adopted in Vienna provides for the application of the CISG if either the parties to a sales contract have their places of business in different Contracting States (Art. 1(1)(a)) and the parties were aware of that at the time of conclusion of the contract (Art. 1(2)), or if the rules of private international law of the forum lead to the application of the law of a Contracting State (Art. 1(1)(b)). The nationality of the parties and their civil or commercial character are irrelevant for the question of whether the CISG applies (Art. 1(3)).

Art. 1 CISG is supplemented by Arts 92, 94, 95, 99 and 100 CISG.

II. Arts 1(1)(a), (2) and (3) CISG

1. Autonomous application of the CISG

Art. 1(1)(a) CISG is said to determine the applicability of the CISG ‘autonomously’ or ‘directly’, because it does so without resorting to the rules of private international law, provided that the States in which the parties have their relevant place of business are Contracting States. In light of the steadily growing number of Contracting States, Art. 1(1)(a) CISG is nowadays far more important than Art. 1(1)(b) CISG.

2. Contracting States

The CISG applies when, at the time of the conclusion of the contract, the parties have their relevant place of business in different Contracting States. This means that, at the time of the conclusion of the contract, the CISG must have been put into force in the corresponding States. Whether a country has become a Contracting State to the CISG can be ascertained by referring to the official website of UNCITRAL.¹ The website lists all Contracting States and states the date of ratification of the CISG, as well as any reservations made by a Contracting State.

Art. 100 CISG draws a distinction between the applicability of Part II and Part III of the Convention: the rules of formation of a contract (Part II) already apply when the offer is made on or after the date the Convention is enacted. In contrast, Part III (Art. 25 et seq.) only applies if the contract is concluded on or after the date the Convention becomes effective in the Member State(s) concerned. The question of when the Convention takes effect in a Contracting State is settled in Art. 99 CISG. A similar distinction between Part II and Part III of the Convention is drawn in Art. 92 CISG.

3. Place of business

Art. 1(1) CISG refers to the place of business of the parties without defining it. The Convention requires an objective recognisability of the fact that the parties have their places of business in different States. Art. 1(2) CISG enumerates three sources: it should be recognisable either 1) from the contract, 2) from any dealings between the parties, or 3) from any information disclosed by the parties that they have their places of business in different States.

Art. 1(1), (2) CISG is supplemented by Art. 10 CISG, pursuant to which reference is to be made to a party’s habitual residence where it has no place of business. For case law interpreting the required recognisability, see below, Article 10 CISG.

According to Art. 1(3) CISG, the nationality of the parties, their qualification as civil or commercial legal persons, and the qualification of the contract as civil or commercial are irrelevant factors for determining whether the CISG applies. The purpose of Art. 1(3) CISG is to ensure that the applicability of the CISG does not depend on a domestic-law qualification of the parties or the contract. The CISG autonomously distinguishes between consumer and non-consumer sales contracts and states in Art. 2(a) CISG that it only applies to the latter.

C 1-1

Impuls I.D. International, S.L. et al. v. Psion Teklogix Inc.,
US Dist Ct (S D FL) (USA), 22 November 2002,
CISG-online 783

[Facts]

[. . .] The parties in the above-styled cause are as follows. Plaintiff Impuls I.D. Internacional, S.L. (hereinafter “Impuls-Spain”) is a Spanish corporation that develops, markets and sells computer products throughout Europe and Latin America. [. . .] Plaintiff Psiar, S.A. (hereinafter “Psiar”) is an Argentine corporation that distributes computer products in Argentina. [. . .] Plaintiff Impuls I.D. Systems, Inc. (hereinafter “Impuls-US”) is a Florida corporation that is responsible for distributing products for Impuls-Spain throughout Latin America. [. . .] The Court will refer to the Plaintiffs collectively as “the Plaintiffs,” or individually as necessary.

The Defendant, Psion-Teklogix, Inc. (hereinafter “the Defendant”) is an Ontario-based Canadian corporation. [. . .] The Plaintiffs’ Complaint alleges that the Defendant is a Delaware corporation with its principle place of business in Kentucky. [. . .] However, the Kentucky-based corporation is a subsidiary of the Defendant, not the Defendant. [. . .]

The above-styled cause arises out of an alleged oral contract (hereinafter the “contract”) entered into by Impuls-Spain and Psiar, on the one hand, and Psion PLC and Psion Enterprise Computing, Ltd., on the other hand, on June 21, 2000. Psion PLC is the British parent company of Psion Enterprise Computing, Ltd., also a British company. Neither Psion PLC nor Psion Enterprise Computing, Ltd. is a defendant in the above-styled cause.

Prior to June 21, 2000 Impuls-Spain developed, marketed and sold computer products in Latin America. Due to its desire to expend its business, Impuls-Spain became interested in purchasing the assets of Psiar. [. . .] The Plaintiffs [. . .] allege that from July 2000 until December 2000, Psion Enterprising Computing, Ltd. followed the provisions of the contract and merchandise was shipped to Impuls-US in Florida.

In September 2000, Psion PLC acquired Teklogix, Inc., a Canadian company, which became the Defendant, Psion Teklogix, Inc. In December 2000, the Plaintiffs received an e-mail communication from Mr. Mike Rose, President of the Defendant informing them that all contracts would be terminated in ninety (90) days and that the Defendant was reorganizing its distribution plan. The Plaintiffs explained that this strategy was unacceptable because it would destroy their business plan. The Defendant offered the Plaintiffs the option of continuing as a reseller, which the Plaintiffs refused. Believing that the actions of the Defendant constituted a breach of the contract reached on June 21, 2000, the Plaintiffs filed suit in the United States District Court for the Southern District of Florida. [. . .]

[Judgment]

1. Federal Question Jurisdiction

[. . .] As noted above, the “proposal for concluding” the contract was made on June 21, 2000 in London, England between Impuls-Spain, a Spanish corporation, Psiar, an Argentine corporation, and both Psion PLC and Psion Enterprise Computing, Ltd., each of which are corporations of the United Kingdom. The United Kingdom was not a signatory to the CISG at the time “when the proposal for concluding the contract” was formulated. Therefore, the language of Article 100 supports the Defendant’s contention that the contract in question here is not governed by the CISG.

The Court finds further support for the contention that the CISG does not apply from Article 1(2) of the CISG. Article 1(2) states that “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. 1(2). Therefore, to the extent that the Defendant, a Canadian corporation located in a Contracting State, is now a party to the contract is a fact that “is to be disregarded” because it was not known to the parties “at any time before or at the conclusion of the contract.” In other words, what the parties knew when they concluded the contract of June 21, 2000 was that the United Kingdom was not a signatory to the CISG and that the CISG would not apply. [. . .] Based upon a careful reading of the terms of the CISG, the Court finds that it does not govern the contract.

Next, the Court notes that it may also look at the “history of negotiation and practice” under the CISG to determine whether it governs the contract. [. . .]. Here, the Court notes that the development of the CISG can be traced back to the 1964 Hague Conventions. [. . .] The 1964 Hague Conventions adopted a “universalist” approach which sought to apply the rules of the Convention to international sales regardless of whether the parties had contact with a Contracting State. [. . .] This “universalist” approach was specifically rejected by the CISG, however, in favor of Article 1, which states that the CISG will apply only to contracts between parties whose places of business are in Contracting States. [. . .] Therefore, the Court finds no support for the proposition that the contract at issue here should be governed by the CISG when the negotiations leading up to the CISG specifically rejected a “universalist” approach to its application.

Moreover, the Court notes that the United States, pursuant to Article 95 of the CISG, ratified the CISG with the following declaration: “Pursuant to article 95 the United States will not be bound by subparagraph (1)(b) of Article 1.” CISG, app. B. Subparagraph (1)(b) allows for the application of the CISG when a party is not from a Contracting State. The United States specifically rejected being bound by subparagraph (1)(b). Therefore, the only circumstance in which the CISG could apply is if all the parties to the contract were from Contracting States. But as noted above, both Psion PLC and Psion Enterprise Computing, Ltd. were from the United Kingdom, a non-Contracting State.

Finally, the Court notes that it has found no case law supporting the proposition that a contract entered into by a party in a non-Contracting State is governed by the CISG when a subsequent party to the contract located in a Contracting State allegedly breaches the contract. Rather, the cases found by this Court all show that the CISG applied because the original parties to the contract had their places of business in Contracting States. [. . .]

Based upon a reading of the CISG, the history of negotiation and practice under the CISG, as well as oral argument of counsel and the papers submitted by the parties, the Court finds that the CISG does not govern the contract at issue here and that there is no federal question present in the above-styled cause. [. . .]

4. Contracts for the sale of goods

The CISG does not define a ‘contract for the sale of goods’. In case law, this term has been circumscribed as a contract pursuant to which the seller is bound to deliver the goods and transfer the property in the goods sold and the buyer is obliged to pay the price and accept the goods.

The CISG also covers contracts for the delivery of goods by instalments (Art. 73 CISG) and for the sale of goods to be manufactured or produced, provided that the sales element constitutes the preponderant part of the contract (Art. 3(2) CISG). For details see Articles 3, 73 CISG.

5. Goods

a) Overview

The term ‘goods’ is not defined in the Convention. It is, therefore, left to the judiciary and legal commentary to determine what is meant by ‘goods’. This necessitates taking Art. 7(1) CISG into consideration, which states that the Convention and, consequently, any of its terms, are to be interpreted autonomously.

‘Goods’ within the meaning of the CISG includes moveable and tangible objects. They can be new or old, natural or art.ificial. They can be an end product or just a part of the whole, and the term includes animals as well. That the goods are moveable and tangible at the moment of delivery is the decisive factor: growing crops are ‘goods’ within the meaning of the CISG, even if, prior to delivery, they are still literally rooted to the ground. Furthermore, the goods may be solid or liquid. Generally, they can also be gaseous (see, however, the exclusion of electricity, Art. 2(f) CISG).

Still, there are a number of questions left open. In general, the CISG has been drafted for the sale of tangible goods; the terms ‘delivery’, ‘taking over’, ‘passing of risk in transitu’, etc. demonstrate this. In view of technological development, whereby more and more non-tangible products, such as computer software, are sold, it is important to decide whether these kinds of contracts fall within the scope of the CISG as well. Case law development can be observed, in particular, with regard to contracts for the supply of software. Please refer the following case excerpts in this respect.

C 1-2

Oberlandesgericht Köln (Germany),
26 August 1994,
CISG-online 132²

[. . .] The Court does not follow the Claimant’s argument that the sale of software is accepted as a sale of goods under the CISG [. . .] and that therefore the scientific study owed by the Claimant in the present case also constitutes “goods” in the meaning of the Convention. At the most, it is standard software that can be viewed as a movable object and therefore be considered to be “goods” in the terms of the Convention (cf. [. . .] the comment by Jaeger, [. . .] according to whom the BGH has not made a final determination on that matter and has not considered standard software movable goods, but solely applied the relevant provisions by analogy). Software can certainly not be viewed as tangibl...