CISG
Buyers remedies CISG AVOIDANCE OF CONTRACT: ARTICLE 49
(1) The buyer may declare the contract avoided: (a) If the failure by the seller to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract; or (b) In the case of non-delivery, if the seller does not deliver the goods within the additional period of time fixed by the buyer in accordance with paragraph (1) of article 47 or declares that he will not deliver within the period so fixed. (2) However, in cases where the seller has delivered the goods, the buyer loses the right to declare the contract avoided unless he does so: (a) In respect of late delivery, within a reasonable time after he has become aware that delivery has been made: (b) In respect of any breach other than late delivery, within a reasonable time: (i) After he knew or ought to have known of the breach; (ii) After the expiration of any additional period of time fixed by the buyer in accordance with paragraph (1) of article 47, or after the seller has declared that he will not perform his obligations within such an additional period; or (iii) After the expiration of any additional period of time indicated by the seller in accordance with paragraph (2) of article 48, or after the buyer has declared that he will not accept performance. NB: Even if goods delivered late; and you repudiate the contract the buyer must return the goods; in the same state; can claim damages for loss of opportunity
Buyers remedies of CISG Specific performance art 39 (most common)
(1) The buyer may require performance by the seller of his obligations unless the buyer has resorted to a remedy, which is inconsistent with this requirement. (2) If the goods do not conform with the contract, the buyer may require delivery of substitute goods only if the lack of conformity constitutes a fundamental breach' as more practically commercially to negotiate a reduction in price rather than seller re-shipping them again - new shipment etcetera of contract and a request for substitute goods is made either in conjunction with notice given under article 39 or within a reasonable time thereafter. (3) If the goods do not conform to the contract, buyer may require seller to remedy lack of conformity by repair, unless this is unreasonable having regard to all the circumstances. A request for repair must be made either in conjunction with notice given under article 39 or within a reasonable time thereafter Also look at art 47 and 58
Buyers remedies of CISG
(set out in ART 45-52)
Example of Art. 1.1.(b):
- CISG can apply even if one party not CISG signatory when rules of PIL point to CISG. Might want to sue in different country because that company has assets in that country eg French party suing in Germany because Indian company has assets in Germany. Germany court need to decide whether CISG applies 1.1A CISG not apply as only 1 CISG state. 1.1B CISG will apply German courts will determine their own PIL they can determine if French law applies and therefore in that example the CISG will apply. 1.1B place of business does not apply but rules of PIL conclude that governing law of contract is CISG signatory.
Art 2 three separate categories of exclusions from application of the CISG,
- Exclusions of certain types of transaction in Art 2(a)-(c): Consumer Sales, auctions or executions or other sale by authority of law, sale of securities. - Exclusions of certain specific goods in Art 2(d)-(f) and Art 3: Ships, aircraft, electricity, property, plus contracts for which labor is the predominant portion. Raising the interesting question - is software "goods" as understood by the CISG? - Exclusion of subject matter (Arts 4-5): 1) Validity, 2) effect on property, and 3) product liability.
Art. 1.1(a): No PIL rules apply, the CISG applies because a sale is concluded between a buyer and a seller with places of business (see Art. 10) in two different CISG-States.
- Here you are not looking at the nationality of parties but at the place of business of the parties. This means that if you have the SOG contract between a company incorporated in the UK that is contracting through a branch in Brazil (sig of CISG) CISG will apply as nationality is irrelevant. Seller and buyers cannot be signatories as signatories are countries. - If a company has many places of business in different countries, you use the place of business that the contract comes from (art 10). - Even if the goods aren't moving country, if the contract operates between two parties that operate their place of business within a jurisdiction bound by the CISG, it applies to the to the contract.
Art. 95; the CISG cannot apply through Art. 1.1.(b), only 1.1(a).
- Whenever state signs CISG state can opt out of 1.1b - 1.1b CISG applies when one party not bound by CISG when rules of PIL points towards a country that is signatory to CISG - example: dispute between buyer in DRC and seller in India DRC company want to sue India company in US because Indian company has liquid assets in US, go to US court no choice of law courts US courts decide what law applies to this con (using PIL) when applying PIL they find that the law governing this con is French Law as the contract was performed in France. Therefore, CISG governs contract. However, US have used art 95 reservation. Therefore 1.1b can't be used. Therefore, French domestic law applies.
German approach to art 95
- has not made art 95 res - DRC and India example if German court apply PIL and governing law US law the the court would decide not to apply CISG as US have applied art 95 reservation. - Remy thinks this is wrong as Germany have not made art 95 reservation
3 things the seller must do
1) Deliver goods, which are 2) conforming, and 3) free of 3rd party rights.
Counter argument Issues with the CISG CHRISTOPHER KEE AND EDGARDO MUÑOZ
A Good faith is clear like the common law meaning of equity B The issue is differing legal concepts, rather than simply differing languages eg the difference between withdrawal and revocation in different countries C The CISG has been adopted by 74 countries the Convention one of the most successful instruments in the area of private law. Very few countries have reservations under 10%. D courts have interpreted the CISG as though it were the same as their respective domestic laws (agree this is an inevitable issue)
"CURING" THE BREACH
ARTICLE 47(2): allows to extending the deadline; cannot perform any other remedies till this extension is fulfilled so damage is entitled for the delay in performance - as can lose business opportunity; hiring of storage etc. ARTICLE 63: Allows extension for the buyer of seller; If it becomes clear the seller is not going to fulfill obligations, the buyer may then suspend or rescind the contract; qualifying the breach for avoidance regardless of the initial fundamentality of the breach; will result in FB Art. 48 give the seller the right to remedy his own breaches: The seller has a right to cure "any failure to perform his obligations" (including of course a failure to deliver conforming goods) and he can do so not only as in English law, before the time fixed for performance
Revoking the Offer: art 16
After the offer has reached the offeree, but before the acceptance has been dispatched, the offer may still be revoked. - Revocation must reach offeree before they have dispatched acceptance (do not have a contract until its received but you cannot revoke) (reason for this is because acceptance can be revoked). Some offers not revocable - if offer indicates by fixed time or otherwise offer itself is irrevocable - if it was reasonable for the offeree to rely on the offer could not be revocked due to detriment - Non revocable clause
Fundamental breach test
Aslong as condition or innominate term THREE REQUIREMENTS ♣ There has to be a detriment; loss ♣ The detriment must substantially deprive the non-breaching party. ♣ The result of the breach must be foreseeable; e.g. due to transportation resulting in change of carriage etc...
Specificity for lack of conformity
Bundesgerichshof : "By means of Article 39(1), pursuant to which the buyer must specify 'the nature of the lack of conformity', the seller shall be enabled to get an idea of the lack of conformity in order to take the necessary steps. the buyer, must specify the deviation of quality.
Sellers obligations Deliver goods
Delivery is the physical hand-over of goods to the buyer. Relevant provisions for delivery: ♣ Nature / place of delivery - Art 31 ♣ Time - Art 33 ♣ Carriage - Art 32 ♣ Documents - Art 34 ♣ Premature delivery / excessive quantity - Art 52
Cases to show how long you have to check goods conform with the contract
Fall 2000 Bulletin of the International Chamber of Commerce: five weeks after delivery > This was too late in a case where the deficiencies could have been discovered at the time of delivery> 1 month max Oberster Gerichtshof examination depends on 1) the size of the buyer's company, 2) the type of goods which have to be examined . 4) buyer's personal and business situation, 6) the quantity of goods delivered, 7 ) the type of legal remedy selected. The court held: one has to start from a total period of approximately 14 days for the examination and notice. Cour de Cassation the buyer of the laminated sheets who took forty days to examine them "has caused the goods to be examined within a short and normal time given the heavy handling the sheets required and the irreducible time imposed by the check Bundesgerichtshof one month as its "regular" benchmark period. In the case of perishable goods or goods whose price fluctuates greatly, the buyer's right to give notice within four weeks would put the seller at an unreasonable disadvantage Saarbrücken flower business: 'on the same day'
Issues with the CISG
First, in Scheaffer's view, CISG Article 7 (good faith is uncertain) Second, Scheaffer suggests that the CISG has suffered from language difficulties arising out of the six official language versions Scheaffer's third basis of criticism is that countries can opt out of parts of the CISG Fourth, in Scheaffer's view that domestic courts misapply the CISG
Anticipatory breaches (Art. 71).
If it appears after concluding the contract that a party will be unable to perform a substantial part of his obligations, the other party may suspend the performance of his own obligations If it is clear that, prior to the date set for performance, one of the parties will commit a fundamental breach of contract, the other party may declare the contract void. In general he must give the other party reasonable notice, in order to allow him to provide adequate guarantees of his performance. In case of a delivery by installments one party may declare the contract avoided for the future, if a breach of contract in respect of a delivery justifies the presumption of a fundamental breach of contract for future installments (Art. 73).
Buyers remedies CISG REDUCTION OF PRICE: ARTICLE 50 51 52
If the goods do not conform to contract and whether or not the price has already been paid, buyer may reduce the price in the same proportion as the value that the goods actually delivered had at the time of the delivery bears to the value that conforming goods would have had at that time.
RESULT OF FUNDAMENTAL BREACH:
Non-breaching party entitled to avoid the contract; you could go straight to damages but is more sensible to try and cure as other party could argue your going against CISG to facilitate trade.
CISG intro
Not part of English Law But signed and ratified by many countries (2/3 world trade covered by world trade) Purpose of CISG - Creates uniformities set of rules of sale of goods transactions over a number of countries - Creates certainty - Harmonises commercial law
What is a reservations under CISG
Provision in treaty itself that states when party signs treaty will be bound by whole treaty apart from one provision which it can opt out.
Open Price Contract:
The CISG does not require the price to be fixed for a contract to be valid. Implied or explicit provisions for determining the price must be contained in an offer for it to be definite (Art. 14), but a contract with no price is valid as Art. 55 determines the consequences of no price term agreed.
Withdrawing the Offer: Art. 15.2 "Reaches" is defined in Art. 24.
The offeror may still withdraw his offer if the withdrawal reaches the offeree before or at the same time as the offer. This is true even if the offer is irrevocable . - Withdraw offer before it becomes effective (capable of being accepted).
Art.1.1(a)/1.1(b) "hybrid":
The only exception to this rule is where the two CISG-States in question do not adhere to the same version of the Convention due to reservations. In that case the PIL rules must determine which Country's law is applicable to determine which version of the CISG applies. For example, a sale between a Danish buyer and a German seller will require such determination if the rules of formation are relevant, as Denmark has taken out a reservation against Part II of the convention, which is not applicable
Art. 8 - Interpretations of Acts and Omissions:
This provision prescribes that the acts of a party are to be interpreted in accordance with the way a reasonable person would interpret them in the same circumstances.
Art. 1.1.(b):
Where PIL rules appoint the law of a CISG State in a case of international sales, the law appointed is the CISG. This is important when there has been an art 95 reservation
is the law governed by CISG
art 2 11a (art 10) 11b (art 95)
Sellers obligations Conformity of the goods Art. 35
means that the goods must be of the quality, quantity and description required by the contract and are packaged in a manner required by the contract. or as sale by sample Note that the key elements of quality, quantity and description will normally be set out in the contract. The provisions of Art. 35.2 therefore only apply if the contract is silent. Art.35 (2) provides that the goods do not conform with the contract if they: (a) are not fit for the purposes for which goods of the same description would ordinarily be used; (b) are not fit for any particular purpose made known to the seller at the time of the contract (except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller's skill and judgement); (c) do not possess the qualities of goods which the seller has held out to the buyer as a sample or model; (d) are not contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods
contract be avoided
25 FB test 26 notice fb 49 buyer avoidance (analyse sellers duties and breach) 64 seller avoidance (analyse buyers duties and breach)
Reservations which may prohibit the application of the CISG:
Art. 94; the CISG may not apply between States who reciprocally agree this. Art. 95; the CISG cannot apply through Art. 1.1.(b), only 1.1(a). Art. 96; where Art. 11 on oral contracts can be made inapplicable, requiring writing.
Formation of contract definition Article 23
Formation of Contract: - An international contract of sale comes into existence "when the acceptance of an offer becomes effective in accordance with the provisions of the Convention"
What is an offer (Art. 14.2)
Offer: An offer is a definite expression of the offeror's will (intention to be bound), addressed to one or more specific persons. A proposal that is not addressed to one or more identified persons is only an offer if this is clearly indicated
Structure
Structure 1) Identify contracts 2) Goods in contract (arts 2) 3) Choice of law 1(1)(A) 1(1)(B) 4) Reservations (94 95 96) 5) Formation (offer acceptance revocation withdrawal etc) 6) Duties of buyer (taking delivery) 7) Duties of seller (deliver goods and conformity) 8) Breach (anticipatory/ fundamental) 9) Remedies (Specific performance Avoidance, Damages, Curing, Qualifying) 10) the amount of time to notify of a breach 11) criticism of CISG
Seller remedies too extend the deadline
The remedies available to the seller are the same as those available to the buyer (ART. 61-65):
Sellers obligations Rights and claims of third parties. (Art. 41).
The seller must deliver the goods free from any right or claim of a third party, unless the buyer agreed to take the goods subject to that right or claim
Obligations of the buyer Payment of the price, See Art. 54-59.
This is the buyers main obligation. The obligation to pay covers four elements: (1) the determination of the price, (2) the place of payment and (3) the moment of payment, as well as (4) the method of payment. These elements are usually agreed in the contract.
non conformity
art 35 art 38 art 39
Obligations of the buyer Taking delivery Arts 53
is linked to the passing of the risk. The buyer must do all that can reasonably be expected of him in order to make delivery possible. (Art. 60 a). The buyer must actually take possession of the goods (Art. 60 b). The passing of risk is regulated in Art. 66-70, if contract involves carriage, in Art. 67; if goods in transit, Art. 68. The buyer is also placed under a duty (Art. 38) to examine the goods once they have been delivered, and notify the seller if there is non-conformity within as short a time as is practicable in the circumstances.
Choice of law clause excluding CISG
principle of party autonomy as long as you are in a jurisdiction that upholds party autonomy - Can exclude CISG in a country which CISG applies eg Brazil just laws of Brazil but not CISG In a jurisdiction where party autonomy is respected, the parties may freely appoint the CISG to be the rules governing their contract
