The 1980 United Nations Vienna Convention on Contracts for the International Sale of Goods (CISG) contains a uniform framework for international sales transactions in a B2B context. B2C, C2B, C2B, and purely domestic B2B transactions are not covered by the CISG. Geographically, the CISG applies if both parties are based in CISG signatory states or if the applicable rules of private international law lead to the application of the law of a signatory state.
The CISG status table made available by the United Nations Commission on International Trade Law (UNCITRAL) provides a list of all the signatories. Except for the UK, every noteworthy world economy has signed the CISG.
Some of the key features of the CISG include:
- Requirement to Timely Inspect Goods for Any Defects and Report Them on Short Notice. Article 39 of the CISG provides for an obligation of the buyer to inspect goods received for defects and report them within a short time frame. The CISG does not define the time frame since it depends on the nature of the goods and other relevant circumstances.
- Concept of Fundamental Breach. Article 25 of the CISG contains the concept of “fundamental breach”. A breach of contract gives the aggrieved party the right to avoid the contract only in case the breach “if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result”. Since international sales transactions often come with high shipping costs, unwinding the contract in case of only minor breaches would lead to disproportionately high costs of an ultimately frustrated transaction. In case of breaches not giving rise to a right of avoidance, the right to claim a reduction of the purchase price and/or damages remains unaffected.
- Gap-Filling from the Inside – Recourse to Domestic Law only as Last Resort. The CISG is a self-contained regime. Gaps in the CISG must, under its Article 7(2), be filled by applying the general principles on which the CISG is based. Only in the absence of such principles may domestic law provisions be applied subsidiarily.
Contracting Out of the CISG?
It is possible to contract out of the CISG. It is, however, often not advisable to do so, and businesses rightly now avoid flat and indiscriminate CISG exclusion language from their boilerplates. Whether or not to exclude the CISG should be assessed on a case-by-case basis. Removing the CISG in a reflex-like manner may be harmful to a company’s legal position in the event of a cross-border dispute.
Willem C Vis International Commercial Arbitration Moot
The Willem C Vis International Commercial Arbitration Moot is an international competition for law students which takes places annually in the week before Easter in Vienna, Austria (a similar event is held in Hong Kong a few weeks prior). The substantive law part of the Vis Moot is based on the CISG. Many of our lawyers have participated in the Vis Moot and continue to form part of the Vis Moot community.
BODENHEIMER Representative Matters as Parties’ Counsel
Represented a German supplier of metal facades in a dispute arising out of a CISG contract against the Turkish buyer before the German state courts, including in interim relief
Represented a German defence contractor in a dispute before the German state courts against a U.S. supplier in a CISG litigation, revolving around the cancellation of a contract, governed subsidiarily by the law of Virginia, for the supply of military equipment, for the use of a NATO Member State
Represented a French home accessories retail chain in CISG litigation before the German courts on claims arising out of a supply contract with a German supplier
BODENHEIMER Representative Matters as Arbitrators
Acted as party-nominated co-arbitrator in an ICC arbitration between a Cyprus-based member of a group of construction companies against an Italian supplier of building materials on claims arising out of a supply contract governed by the CISG, with Zurich as the place of the arbitration (Axel Benjamin Herzberg)
Acted as party-nominated co-arbitrator in a VIAC arbitration between a Swedish supplier and a Russian operator of a steel plant, revolving around contractual claims, with CISG, the UNIDROIT Principles and Austrian Law as the governing laws, and Vienna as the place of the arbitration (Axel Benjamin Herzberg)
Acted as co-arbitrator in an ICC arbitration between a UK service and technology provider and a German manufacturer on claims arising out of a contract for the supply of components used in electrical power systems, based on the CISG, with Berlin as the place of the arbitration (Axel Benjamin Herzberg)
CONTACTS FOR THIS PRACTICE AREA: