CISG – Introduction and Explanatory

08/06/2013    3421

This note has been prepared by the Secretariat of the United Nations Commission on International Trade Law for informational purposes; it is not an official commentary on the Convention.


1.   The  United  Nations  Convention  on  Contracts  for  the  International  Sale  of  Goods  provides  a  uniform  text  of  law  for  international  sales  of  goods. The Convention was prepared by the United Nations Commission  on   International  Trade  Law  (UNCITRAL)  and  adopted  by  a  diplomatic  conference  on  11 April  1980. 

2.   Preparation  of  a  uniform  law  for  the  international  sale  of  goods  began  in   1930  at  the  International  Institute  for  the  Unification  of  Private  Law  (UNIDROIT)  in  Rome. After  a  long  interruption  in  the  work  as  a  result  of  the  Second  World  War,  the  draft  was  submitted  to  a  diplomatic  conference  in The Hague in 1964, which adopted two conventions, one on the  international  sale of goods and the other on the formation of contracts for the international  sale  of  goods. 

3.   Almost  immediately  upon  the  adoption  of  the  two  conventions  there  was widespread criticism of their provisions as reflecting primarily the legal  traditions  and economic realities  of continental Western Europe, which was  the region that had most actively contributed to their preparation. As a result,  one of the first tasks undertaken by UNCITRAL on its organization in  1968  was  to  enquire  of  States  whether  or  not  they  intended  to  adhere  to  those  conventions and the reasons for their positions. In the light of the responses  received,  UNCITRAL  decided  to  study  the  two  conventions  to  ascertain  which  modifications  might  render  them  capable  of  wider  acceptance  by  countries  of  different legal,  social  and economic  systems. The result  of this  study  was  the  adoption  by  diplomatic  conference  on  11 April  1980  of  the  United Nations Convention on Contracts for the International Sale of Goods,  which  combines  the  subject  matter  of  the  two  prior  conventions.                                                                                          

4.    UNCITRAL’s success in preparing a Convention with wider acceptability  is   evidenced  by  the   fact  that  the   original   eleven   States   for   which  the  Convention  came  into  force  on  1  January  1988  included  States  from  every  geographical  region,  every  stage  of  economic  development  and  every  major  legal, social and economic system. The original eleven States were:  Argentina,  China, Egypt, France, Hungary, Italy, Lesotho, Syria, United States,  Yugoslavia  and  Zambia. 

5.    As  of  1  September  2010,  76  States  are  parties  to  the  Convention. The  current  updated  status  of  the  Convention  is  available  on  the  UNCITRAL  website.1 Authoritative  information  on  the  status  of  the  Convention,  as  well  as on related declarations, including with respect to territorial  application and  succession  of  States, may be found  on the United Nations Treaty  Collection  on  the  Internet.

6.    The Convention is divided into four parts. Part One deals with the scope  of  application  of  the  Convention  and  the  general  provisions.  Part  Two  contains the rules governing the formation  of contracts for the international  sale  of  goods.  Part  Three  deals  with  the  substantive  rights  and  obligations  of  buyer  and  seller  arising  from  the  contract.  Part  Four  contains  the  final  clauses  of  the  Convention  concerning  such  matters  as  how  and  when  it  comes  into  force,  the  reservations  and  declarations  that  are  permitted  and  the  application  of  the  Convention  to  international  sales  where  both  States concerned  have  the  same  or  similar  law  on  the  subject.  

Part  one.   Scope of application and  general provisions 

 A.     Scope of application 

7.    The  articles  on  scope  of  application  indicate  both  what  is  covered  by  the Convention and what is not covered. The Convention applies to contracts  of  sale  of  goods  between  parties  whose  places  of  business  are  in  different  States  and  either both  of those  States  are  Contracting  States  or the rules  of  private international law lead to the law of a Contracting State. A few States  have  availed  themselves  of  the  authorization  in  article  95  to  declare  that  they would apply the Convention only in the former and not in the latter of  these two  situations. As the  Convention becomes  more  widely  adopted, the  practical   significance   of   such   a   declaration   will   diminish.   Finally,   the  Convention may also apply as the law applicable to the contract if so chosen  by the parties. In that  case, the  operation  of the  Convention will be  subject  to any limits on contractual stipulations  set by the otherwise applicable law. 

8.    The final clauses make two additional restrictions on the territorial scope  of  application  that  will  be  relevant  to  a  few  States.  One  applies  only  if  a  State  is  a  party  to  another  international  agreement  that  contains  provisions  concerning matters governed by this Convention; the other permits States that  have the same or similar domestic law of sales to declare that the  Convention  does  not  apply between  them. 

9.    Contracts  of  sale  are  distinguished  from  contracts  for  services  in  two respects by article 3. A contract for the supply of goods to be manufactured  or produced is considered to be a sale unless the party who orders the goods  undertakes  to  supply  a  substantial  part  of  the  materials  necessary  for  their  manufacture  or  production.  When  the  preponderant  part  of  the  obligations  of  the  party  who  furnishes  the  goods  consists  in  the  supply  of  labour  or  other  services,  the  Convention  does  not  apply. 

10.   The  Convention  contains  a  list  of types  of  sales that  are  excluded  from  the  Convention,  either because  of the purpose  of the  sale  (goods bought  for  personal,  family  or  household  use),  the  nature  of  the  sale  (sale  by  auction,  on execution or otherwise by law) or the nature of the goods (stocks, shares,  investment securities, negotiable instruments, money, ships, vessels,  hovercraft,  aircraft or electricity). In many States some or all of such sales are governed  by  special rules reflecting  their  special  nature. 

11.   Several  articles make clear that the  subject matter of the Convention is  restricted to formation of the contract and the rights and duties of the buyer  and  seller  arising  from  such  a  contract.  In particular,  the  Convention  is  not  concerned  with  the  validity  of  the  contract,  the  effect  which  the  contract  may have  on the property in the  goods  sold  or the liability  of the  seller for  death  or  personal  injury  caused  by  the  goods  to  any  person. 

B.    Party autonomy 

12.   The  basic  principle  of  contractual  freedom  in  the  international  sale  of  goods  is  recognized  by  the  provision  that  permits  the  parties  to  exclude  the  application  of  this  Convention  or  derogate  from  or  vary  the  effect  of  any  of  its  provisions.  This  exclusion  will  occur,  for  example,  if  parties  choose  the  law of a non-contracting State or the substantive domestic law of a  contracting  State  as  the  law  applicable  to  the  contract.  Derogation  from  the  Convention  will occur whenever a provision in the contract provides a  different rule from  that  found  in  the  Convention. 

C.     Interpretation of the Convention 

13.   This Convention for the unification of the law governing the  international  sale  of  goods  will better  fulfil its purpose if it is interpreted in  a  consistent  manner in all legal systems. Great care was taken in its preparation to make  it  as  clear  and  easy  to  understand  as  possible.  Nevertheless,  disputes  will  arise  as  to  its  meaning  and  application.  When  this  occurs,  all  parties,  including  domestic  courts  and  arbitral tribunals,  are  admonished to  observe  its  international  character  and  to  promote  uniformity  in  its  application  and  the  observance  of  good  faith  in  international  trade.  In  particular,  when  a  question  concerning  a  matter  governed  by  this  Convention  is  not  expressly  settled  in  it,  the  question  is  to  be  settled  in  conformity  with  the  general  principles  on  which  the  Convention  is  based.  Only  in  the  absence  of  such  principles should the matter be settled in conformity with the law applicable  by  virtue  of  the  rules  of  private  international  law. 

D.     Interpretation of the contract; usages 

14.   The Convention contains provisions on the manner in which  statements  and  conduct  of  a  party  are  to be  interpreted  in  the  context  of  the  formation  of the contract or its implementation. Usages agreed to by the parties,  practices  they  have  established  between  themselves  and  usages  of  which  the  parties  knew or ought to have known and which are widely known to, and regularly  observed  by,  parties  to  contracts  of  the  type  involved  in  the  particular  trade  concerned  may  all be binding  on  the parties  to  the  contract  of  sale. 

E.     Form of the contract 

15.   The Convention does not subject the contract of sale to any requirement  as  to  form.  In  particular,  article  11  provides  that  no  written  agreement  is  necessary  for  the  conclusion  of  the  contract.  However,  if  the  contract  is  in  writing and it contains a provision requiring any modification or termination  by agreement to be in writing, article 29 provides that the contract may not  be  otherwise  modified  or  terminated  by  agreement.  The  only  exception  is  that a party may be precluded by his conduct from asserting such a  provision  to  the  extent  that  the  other  person  has  relied  on  that  conduct. 

16.   In order to accommodate those States whose legislation requires  contracts  of  sale  to  be  concluded  in  or  evidenced  by  writing,  article  96  entitles  those  States to declare that neither  article  11 not the exception to  article 29  applies  where  any party  to  the  contract has his place  of business  in  that  State. 

Part  two.  Formation of the contract 

17.   Part Two of the Convention deals with  a number of questions that  arise  in the formation of the contract by the exchange of an offer and an  acceptance.  When  the  formation  of  the  contract  takes  place  in  this  manner,  the  contract  is  concluded  when  the  acceptance  of  the  offer becomes  effective. 

18.   In  order  for  a proposal  for  concluding  a  contract  to  constitute  an  offer,  it must be addressed to one or more specific persons and it must be  sufficiently  definite. For the proposal to be sufficiently definite, it must  indicate the goods  and expressly or implicitly fix or make provisions for determining the quantity  and  the price. 

19.   The  Convention  takes  a  middle  position  between  the  doctrine  of  the   revocability of the offer until acceptance and its general irrevocability for some  period of time. The general rule is that an offer may be revoked. However, the  revocation  must  reach  the  offeree  before  he  has  dispatched  an  acceptance.  

Moreover, an offer cannot be revoked if it indicates that it is irrevocable, which  it may do by stating a fixed time for acceptance or  otherwise. Furthermore, an  offer  may  not  be  revoked  if  it  was  reasonable  for  the  offeree  to  rely  on  the  offer  as being  irrevocable  and the  offeree has  acted  in reliance  on the  offer. 

20.   Acceptance of an offer may be made by means of a  statement or other  conduct  of  the  offeree  indicating  assent  to  the  offer  that  is  communicated  to  the  offeror.  However,  in   some  cases  the  acceptance  may  consist  of   performing  an  act,  such  as  dispatch  of  the  goods  or  payment  of  the  price.  Such  an  act  would  normally  be  effective  as  an  acceptance  the  moment  the  act  was  performed. 

21.   A frequent problem in contract formation, perhaps especially in regard  to  contracts  of  sale  of  goods,  arises  out  of  a reply  to  an  offer  that purports 

to  be  an  acceptance  but  contains  additional  or  different  terms.  Under  the  Convention,  if  the  additional  or  different  terms  do  not  materially  alter  the  terms  of  the  offer,  the  reply  constitutes  an  acceptance,  unless  the  offeror  without undue delay objects to those terms. If he does not object, the terms  of  the  contract  are  the  terms  of  the  offer  with  the  modifications  contained  in  the  acceptance. 

22.   If the additional or different terms do materially alter the terms of the  contract, the reply constitutes a counter-offer that must in turn be accepted  for  a  contract  to  be  concluded.  Additional  or  different  terms  relating,  among other things, to the price, payment, quality and quantity of the goods,  place  and  time  of  delivery,  extent  of  one  party’s  liability  to  the  other  or  settlement  of  disputes  are  considered  to  alter  the  terms  of  the  offer  materially.  

Part three.  Sale of goods 

A.     Obligations of the seller 

23.   The  general  obligations  of  the  seller  are  to  deliver  the  goods,  hand  over  any  documents  relating  to  them  and  transfer  the  property  in  the  goods,  as  required  by  the  contract  and  this  Convention.  The  Convention  provides  supplementary rules for use in the absence of contractual  agreement  as  to  when,  where  and  how  the  seller  must  perform  these  obligations. 

24.   The Convention provides  a number of rules that implement the  seller’s  obligations in respect of the quality of the goods. In general, the seller must  deliver  goods  that  are  of  the  quantity,  quality  and  description  required  by  the  contract  and  that  are  contained  or  packaged  in  the  manner  required  by  the  contract.  One  set  of rules  of particular importance in international  sales  of  goods involves the  seller’s  obligation to  deliver  goods that  are  free  from  any  right  or  claim  of  a  third  party,  including  rights  based  on  industrial  property  or  other  intellectual  property. 

25.   In  connection  with  the  seller’s  obligations  in  regard  to  the  quality  of  the  goods,  the  Convention  contains  provisions  on  the  buyer’s  obligation  to  inspect  the  goods.  He  must  give  notice  of  any  lack  of  conformity  with  the  contract within a reasonable time after he has discovered it or ought to have  discovered it,  and  at the latest two years from the  date  on which the  goods  were actually handed over to the buyer, unless this time limit is inconsistent  with  a  contractual  period  of  guarantee. 

B.     Obligations of the buyer 

26.   The general obligations of the buyer are to pay the price for the goods  and take delivery of them  as required by the contract  and the  Convention.  The  Convention  provides  supplementary  rules  for  use  in  the  absence  of  contractual  agreement  as  to  how  the  price  is  to  be  determined  and  where  and  when  the  buyer  should  perform  his  obligations  to  pay  the  price. 

C.     Remedies for breach of contract 

27.   The  remedies  of  the  buyer  for  breach  of  contract  by  the  seller  are  set  forth  in  connection  with  the  obligations  of  the  seller  and  the  remedies  of  the  seller  are  set forth in connection with the  obligations  of the buyer. This  makes  it  easier  to  use  and  understand  the  Convention. 

28.   The  general  pattern  of  remedies  is  the  same  in  both  cases.  If  all  the  required conditions are fulfilled, the aggrieved party may require  performance  of  the  other  party’s  obligations,  claim  damages  or  avoid  the  contract.  The  buyer  also  has  the  right  to  reduce  the  price  where  the  goods  delivered  do  not  conform  with  the  contract. 

29.   Among  the  more  important  limitations  on  the  right  of  an  aggrieved  party to claim a remedy is the concept of fundamental breach. For a breach  of  contract  to be  fundamental,  it  must result  in  such  detriment  to  the  other  party  as  substantially  to  deprive  him  of  what  he  is  entitled  to  expect  under  the  contract,  unless  the  result  was  neither  foreseen  by  the  party  in  breach  nor  foreseeable  by  a  reasonable  person  of  the  same  kind  in  the  same   circumstances. A buyer  can  require  the  delivery  of  substitute  goods  only  if  the  goods  delivered  were  not  in  conformity  with  the  contract  and  the  lack  of  conformity  constituted  a  fundamental  breach  of  contract.  The  existence  of  a  fundamental  breach  is  one  of  the  two  circumstances  that  justifies  a  declaration  of  avoidance  of  a  contract  by  the  aggrieved  party;  the  other  circumstance  being  that,  in  the  case  of  non-delivery  of  the  goods  by  the  seller  or  non-payment  of  the  price  or  failure  to  take  delivery  by  the  buyer,  the party in breach fails to perform within a reasonable period of time fixed  by  the  aggrieved  party. 

30.   Other remedies may be restricted by special circumstances. For  example,  if the goods do not conform with the contract, the buyer may require the seller  to remedy the lack of conformity by repair, unless this is unreasonable having  regard to all the circumstances. A party cannot recover damages that he could  have mitigated by taking the proper measures. A party may be exempted from  paying  damages by  virtue  of  an  impediment beyond his  control. 

D.    Passing of risk 

31.   Determining the  exact moment  when the risk  of loss  or  damage to the  goods passes from the seller to the buyer is of great importance in contracts  for  the  international  sale  of  goods.  Parties  may  regulate  the  issue  in  their  contract  either  by  an  express  provision  or  by  the  use  of  a  trade  term  such  as,  for  example,  an  INCOTERM.  The  effect  of  the  choice  of  such  a  term  would  be  to  amend  the corresponding  provisions  of  the  CISG  accordingly.  

However,  for  the  frequent  case  where  the  contract  does  not  contain  such  a  

provision,  the  Convention  sets  forth  a  complete  set  of  rules. 

32.   The two special situations contemplated by the Convention are when the  contract  of  sale involves  carriage  of the  goods  and  when the  goods  are  sold  while in transit. In all other cases the risk passes to the buyer when he takes  over  the  goods  or  from  the  time  when  the  goods  are  placed  at  his  disposal  and  he  commits  a  breach  of  contract  by  failing  to  take  delivery,  whichever  comes  first.  In  the  frequent  case  when  the  contract relates  to  goods  that  are  not  then  identified,  they  must  be  identified  to  the  contract  before  they  can  be  considered to be laced  at the  disposal  of the buyer  and the risk  of their  loss  can be  considered  to  have passed  to  him. 

E.     Suspension of performance and anticipatory breach 

33.   The  Convention  contains  special rules  for  the  situation  in  which, prior  to  the  date  on  which  performance  is  due,  it  becomes  apparent  that  one  of  the  parties  will  not  perform  a  substantial  part  of  his  obligations  or  will   commit  a  undamental  breach  of  contract.  A  distinction  is  drawn  between  those  cases  in  which  the  other  party  may  suspend  his  own  performance  of  the contract but the contract remains in existence awaiting future events and  those  cases  in  which  he  may  declare  the  contract  avoided. 

F.    Exemption from liability to pay damages 

34.   When   a   party   fails   to   perform   any   of   his   obligations   due   to   an   impediment  beyond  his  control  that  he  could  not  reasonably  have  been  expected  to  take  into  account  at  the  time  of  the  conclusion  of  the  contract  and  that  he  could  not  have  avoided  or  overcome,  he  is  exempted  from  the  consequences  of  his  failure  to perform,  including  the payment  of  damages.  This exemption may  also  apply if the failure is due to the failure  of  a third  person whom he has engaged to perform the whole or a part of the contract.  However, he is subject to any other remedy, including reduction of the price,  if  the  goods  were  defective  in  some  way. 

G.    Preservation of the goods 

35.   The Convention imposes on both parties the duty to preserve any goods  in their possession belonging to the other party. Such a duty is of even greater  importance in  an international  sale of goods where the other party is from  a  foreign country and may not have agents in the country where the goods are  located.  Under  certain  circumstances  the  party  in  possession  of  the  goods  may  sell  them,  or  may  even  be  required  to  sell  them.  A  party  selling  the  goods has the right to retain  out  of the proceeds  of  sale  an  amount  equal to  the  reasonable  expenses  of  preserving  the  goods  and  of  selling  them  and  must  account  to  the  other party  for  the balance. 

Part   Four.   Final  clauses 

36.   The  final  clauses  contain  the  usual  provisions  relating  to  the  Secretary- 

General as depositary and providing that the Convention is subject to  ratification,  acceptance  or  approval  by  those  States  that  signed  it  by  30  September  1981,  that it is  open to  accession by  all  States that  are not  signatory  States  and that  the text is  equally  authentic in Arabic,  Chinese, English, French,  Russian  and  Spanish. 

37.   The Convention permits a certain number of declarations. Those relative  to  scope  of  application  and  the  requirement  as  to  a  written  contract  have  been  mentioned  above.  There  is  a  special  declaration  for  States  that  have  different  systems  of  law  governing  contracts  of  sale  in  different  parts  of  their territory. Finally,  a  State may declare that it will not be bound by Part  II  on  formation  of  contracts  or  Part  III  on  the rights  and  obligations  of  the  buyer and  seller. This latter declaration was included as part of the decision  to  combine  into  one  convention  the  subject  matter  of  the  two  1964  Hague  Conventions. 

Complementary texts 

38.   The United Nations Convention on Contracts for the International  Sale  of   Goods   is   complemented  by   the   United   Nations   Convention   on   the   Limitation  Period  in  the  International  Sale  of  Goods,  1974,  as  amended by  a Protocol in  1980  (the Limitation Convention). The Limitation Convention  establishes uniform rules governing the period of time within which a party  under  a  contract  for  the  international  sale  of  goods  must  commence  legal  proceedings against another party to assert a claim arising from the contract  or  relating  to  its  breach,  termination  or  validity.  The  amending  Protocol  of  1980  ensures  that  the  scope  of  application  of  the  Limitation  Convention  is  identical  to  the  one  of  the  United  Nations  Convention  on  Contracts  for  the  International  Sale  of  Goods. 

39.   The  United  Nations  Convention  on  Contracts  for  the  International  Sale  of  Goods is also complemented, with respect to the use of electronic  communications,  by the United Nations Convention on the Use of  Electronic Communications in  International Contracts, 2005  (the  Electronic  Communications Convention). The  Electronic Communications  Convention aims at facilitating the use of  electronic  communications  in  international  trade by  assuring  that  contracts  concluded  and  other  communications   exchanged  electronically  are  as  valid  and  enforceable  as  their  traditional  paper-based  equivalents.  The  Electronic   Communications  Con- vention  may  help  to  avoid  misinterpretation  of  the  CISG  that  might  occur,  for  example, when a State has lodged a declaration mandating the use of the  traditional  written form for contracts for the international sale of goods. It may also promote  the  understanding  that  the  “communication”  and/or   “writing”  under  the  CISG  should be construed  so as to include electronic  communications. The Electronic  Communications  Convention  is  an  enabling  treaty  whose  effect  is  to  remove  those formal obstacles by establishing the requirements for functional equivalence  between electronic  and traditional  written form.