Vienna convention on Contract for International sale of Goods
The United Nations Convention on Contracts for the International Sale of Goods (CISG), sometimes known as the Vienna Convention is a multilateral treaty that establishes a uniform framework for international commerce. Ratified by 93 countries, known as “Contracting States”, the Convention governs a significant proportion of world trade, making it one of the most successful instruments of international trade law. Guatemala and Laos are the most recent parties to the Convention, acceding to it on 12 December 2019 and 24 September 2019, respectively.
The CISG was developed by the United Nations Commission on International Trade Law (UNCITRAL) beginning in 1968, drawing from previous efforts in the 1930s undertaken by the International Institute for the Unification of Private Law (UNIDROIT). In 1980, a draft text was introduced in a conference in Vienna, and following weeks of discussion and modification, it was unanimously approved and opened for ratification; the CISG subsequently came into force on 1 January 1988, after being ratified by 11 countries.
The purpose of the CISG is to facilitate international trade by removing legal barriers among Contracting States. To that end, it establishes substantive rules that regulate the duties and obligations of both parties, including the delivery of goods, contract formation, and remedies for breach of contract. Unless expressly excluded by the contract, the CISG is incorporated by default into the domestic laws of Contracting States with respect to a transaction in goods between their nationals.
The CISG is considered among the greatest successes of UNCITRAL, and is regarded as the “most successful international document” in unified international sales law, since its parties represent “every geographical region, every stage of economic development and every major legal, social and economic system”. Of the uniform law conventions, the CISG has been described as having “the greatest influence on the law of worldwide trans-border commerce”, including among non-Contracting States.
The CISG is the basis of the annual Willem C. Vis International Commercial Arbitration Moot, one of the largest and most prominent international moot court competitions in the world.
India, South Africa, Nigeria, and the United Kingdom are the major trading countries that have not yet ratified the CISG.
The absence of the United Kingdom, a leading jurisdiction for the choice of law in international commercial contracts, has been attributed variously to: the government not viewing its ratification as a legislative priority, a lack of interest from business in supporting ratification, opposition from a number of large and influential organisations, a lack of public service resources, and a danger that London would lose its edge in international arbitration and litigation.
There is significant academic disagreement as to whether Hong Kong, Taiwan, and Macau are deemed parties to the CISG due to China’s status as a party.
Potential Contracting States
Rwanda has concluded the domestic procedure of consideration of the CISG and adopted laws authorising its adoption; it will subsequently enter into force once the instrument of accession is deposited with the Secretary-General of the United Nations. Kazakhstan has also made progress in the adoption process.
Greater acceptance of the CISG will come from three directions. First, it is likely that within the global legal profession, as the numbers of new lawyers educated in the CISG increases, the existing Contracting States will embrace the CISG, appropriately interpret the articles, and demonstrate a greater willingness to accept precedents from other Contracting States.
Second, businesses will increasingly pressure both lawyers and governments to make international commercial disputes over the sale of goods less expensive, and reduce the risk of being forced to use a legal system that may be completely alien to their own. Both of these objectives can be achieved through use of the CISG.
Finally, UNCITRAL will arguably need to develop a mechanism to further develop the Convention and to resolve conflicting interpretation issues. This will make it more attractive to both business people and potential Contracting States.
Differences with country legislation relating to the sale of goods
Depending on the country, the CISG can represent a small or significant departure from local legislation relating to the sale of goods, and in this can provide important benefits to companies from one contracting state that import goods into other states that have ratified the CISG.
Differences with US legislation (the UCC)
In the U.S., all 50 states have, to varying degrees, adopted common legislation referred to as the Uniform Commercial Code (“UCC”). UCC Articles 1 (General Provisions) and 2 (Sales) are generally similar to the CISG. However, the UCC differs from the CISG in some respects, such as the following areas that tend to reflect more general aspects of the U.S. legal system:
- Terms of Acceptance: Under the CISG, acceptance occurs when it is received by the offeror, a rule similar to many civil law jurisdictions which contemplate for service to be effective upon receipt. By contrast, the U.S. legal system often applies the so-called “mailbox rule” by which, acceptance, like service, can occur at the time the offeree transmits it to the offeror.
- “Battle of the Forms”: Under the CISG, a reply to an offer that purports to be an acceptance, but has additions, limitations, or other modifications, is generally considered a rejection and counteroffer. The UCC, on the other hand, tries to avoid the “battle of the forms” that can result from such a rule, and allows an expression of acceptance to be operative, unless the acceptance states that it is conditioned on the offeror consenting to the additional or different terms contained in the acceptance.
- Writing Requirement: Unless otherwise specified by a ratifying State, the CISG does not require that a sales contract be reduced to a writing. Under the UCC’s statute of frauds (inherited from the common law), contracts selling goods for a price of $500 or more are generally not enforceable unless in writing.
Nevertheless, because the U.S. has ratified the CISG, it has the force of federal law and supersedes UCC-based state law under the Supremacy Clause of the Constitution. Among the U.S. reservations to the CISG is the provision that the CISG will apply only as to contracts with parties located in other CISG Contracting States, a reservation permitted by the CISG in Article 95. Therefore, in international contracts for the sale of goods between a U.S. entity and an entity of a Contracting State, the CISG will apply unless the contract’s choice of law clause specifically excludes CISG terms.
Conversely, in “international” contracts for the sale of goods between a U.S. entity and an entity of a non-Contracting State, to be adjudicated by a U.S. court, the CISG will not apply, and the contract will be governed by the domestic law applicable according to private international law rules.