The legal guarantees for the uniform application of the United Nation Convention for the International Sale of Goods

ABSTRACT

The United Nation’s Convention on for the International Sale of Goods (CISG) was drafted with the intention of providing a uniform legal regime for international sales contracts. The CISG is automatically applied to international sale contracts in certain given situations but the contracting parties are free to exclude the Convention as applicable law in favour of another regulation. To this effect, the Convention is commonly being excluded as the governing law of international sales contracts. However, a key problem of the CISG is lack of uniformity in it application. This implies the Convention is associated with problems regarding a non-uniform interpretation of the Convention’s provisions within the national courts and arbitral tribunals, as well as regarding its incompleteness, meaning that there are gaps that need to be filled by national law. These problems affect the Convention’s ability to provide potential users with legal certainty and predictability, which in turn may affect the uniform application of the convention and it proper enforcement. With this, this work sets to determine the legal guarantees for the uniform application of the United Nation Convention for the International Sale of Goods. By the use of qualitative approach engulfing an in-depth exploration of facts, which takes an interpretative naturalistic approach base on the subject matter, it to establish that, the uniform applicability of the CISG is determine through its own rules of application set out in the CISG which relies on elements related to the parties and to the transaction itself. It is then recommended that, in order to achieve a useful level of uniformity, however, there must develop a consistent application of case law that promotes the Convention in harmony with its text and principles.

CHAPTER ONE

GENERAL INTRODUCTION

1.1 BACKGROUND TO THE STUDY 

Over the last decade the volume of international trade conducted worldwide has continually increased.[1] A national increase in exports and imports throughout the last decade indicates that businesses are looking beyond the states of the union to expand their markets.[2] The increase in world trade has brought the need for the unification of private international law into the spotlight. Although this pursuit originated prior to World War II,[3] it was not until three decades later that a significant number of nations reached a consensus. The result was the United Nations Specifically, international trade in goods accounted for a large proportion of the world’s economy. However, there are many complex issues to consider in international trade. For example these include: dealing with a wide range of goods, arranging transport and storage of the goods, buyers and sellers located in different countries and choosing the applicable law to govern the contract.[4] Having a suitable law to govern international sale of goods contracts is of paramount importance to the contracting parties because it not only sets out the obligations of the buyer and seller but it also provides remedies in the event of a breach of contract.

The CISG is the result of a legislative effort that started at the beginning of the twentieth century in order to provide a uniform international sales law. The convention on International sale of Goods (herein after refer to as CISG) was developed by the United Nations Commission on International Trade Law (herein after referred to as UNCITRAL), and is a modification of the 1964 Hague Sales Convention and the 1964 Hague Formation Convention, which were submitted by the International Institute for the Unification of Private Law (herein after referred to as UNIDROIT). The development of a uniform international sales law started because of a conviction that a harmonization and unification of international sales law, by reducing or removing legal obstacles of international trade, would significantly contribute to economic cooperation among states worldwide.[5]

In the late twentieth century, the international community expressed the need for a harmonised instrument of international sales law.[6]  Honka commented that, ‘expanding trade will…increase the number of international contracts concluded and especially the economic volume involved and further necessitate the harmonized handling of contractual disputes’.[7] It is contended that such a harmonising measure would aid in increasing international trade, promoting fairness and reducing the negotiation cost of transactions.[8] In 1929, Rabel working with UNIDROIT, sought to establish a uniform law governing international transactions of sale.[9] This resulted in two Hague Conventions in 1964: the Uniform Law for the International Sale of Goods and the Uniform Law on the Formation of Contracts for the International Sale of Goods. These came into force in 1972, but they had limited success as uniform law, because they were generally considered too broad and thought to favour industrialised nations.[10] Consequently, they were only ratified by nine countries.[11]

The failure of these conventions to gain widespread ratification, suggested that more effort was needed to create a uniform sales law that could be applied to all countries regardless of their legal, social or economic backgrounds. In 1966, the General Assembly of the United Nations established the United Nations Commission on International Trade Law. This working group set to work to review the ULIS and ULF in order to create a new convention. At the UN Diplomatic Conference, which adopted the CISG, 62 countries participated: 22 European and other developed western countries,11 members of what is now the former Soviet bloc, 11 South-American, 7 African and 11 Asian countries.[12] The participating nations approved six official CISG texts: Arabic, English, French, Spanish, Chinese and Russian. Cameroon ratify or accede to the convention on the 11 October 2017.

The United Nations Convention on Contracts for the International Sale of Goods 1980 was drafted with the purpose of harmonising international sale of goods laws and to minimise the uncertainty of legal consequences that can arise when the parties are located in different countries. These aims are reflected in the preamble of the CISG which states:

Parties to this Convention, bearing in mind the broad objectives in the resolutions adopted by the sixth special session of the General Assembly of the United Nations on the establishment of a New International Economic Order, considering that the development of international trade on the basis of equality and mutual benefit is an important element in promoting friendly relations among States, being of the opinion that the adoption of uniform rules which govern contracts for the international sale of goods and take into account the different social, economic and legal systems would contribute to the removal of legal barriers in international trade and promote the development of international trade.[13]

The purpose of the preamble is to set out the overall aim of the CISG and to lay the foundations for its provisions. Enderlein and Maskow identified two important phrases in the preamble. Firstly, the phrase ‘equality and mutual benefit’ is interpreted to apply not only to the relations between member states but also to the relations between contracting parties.[14] If the CISG was the applicable law, it would place the parties on an equal footing, so that neither party would be disadvantaged by the unfamiliar laws of the other party’s home country.[15] Secondly, ‘the adoption of uniform rules…would contribute to the removal of legal barriers…and promote the development of international trade’.[16] This stipulation helps to further the aim that a unified set of rules would harmonise international trade and that any disputes which may arise could be resolved by applying the provisions of the CISG.[17]

The Convention consists of one hundred and one articles. They are based upon general principles to which the parties and the courts are directed for the purpose of interpretation.[18] These principles include, but are not limited to, the following: the protection of a party who has relied on the conduct of another party, the duty to communicate necessary information, the duty to mitigate damages, the international character of the Convention, good faith, and the freedom of contract.[19] The ultimate goal is to synthesize the divergent national laws of the contracting states into a single and effective universal doctrine. The CISG strives to promote certainty among contracting parties and simplicity in judicial understanding of the contract terms and their ramifications. More specifically, the Convention strives to achieve the following: (1) reduction of forum-shopping; (2) reduction of the need to resort to rules of private international law; and, (3) establishment of a law of sales appropriate for international transactions.[20]

The Convention establishes default provisions. Under Article 6,[21] it preserves the freedom of contract and insures that the intent of the parties will be determinative on questions of interpretation. When the intent of the parties is not discernable from the text or parole evidence of the contract, the general principles come in to fill the gaps. The provisions will only apply when parties have failed to indicate- through negligence, inadvertence, or intentional choice-which law governs their agreement. If the parties want to opt out of the Convention, they must do so expressly. To this effect, when opting out it is not sufficient to simply say ‘the laws apply’ because the CISG would be the law of the State under certain circumstances. Rather, one would say ‘the provisions of the Uniform Commercial Code as adopted by the State, and not the United

Nations Convention on Contracts for the International Sale of Goods apply.[22] Exclusion by implication is not sufficient.[23]

The Convention applies to contracts for the sale of goods between a buyer and a seller located in different contracting countries. It may also apply to like contracts between a contracting and a non-contracting state if the rules of private international law lead to the application of the law of a contracting state.[24] Among the agreements excluded from the scope of the Convention are those which relate to service contracts, mixed service-goods contracts that have a predominately service nature,[25] goods sold for consumer use or by auction negotiable instruments, ships or aircraft, and electricity. In addition, the Convention will not govern issues of contract validity[26] or property title to goods sold.

 Perhaps, the legislative unification of an aspect of international sales under the current CISG appears to be the most singular achievement in the history of UNCITRAL.[27] Though, it could be argued that legal unification can equally be attained through other ways, such as unifying the applicable private international law or creating model laws such as the UNIDROIT model contract law contained in the UNIDROIT Principles of International Commercial Contracts, or restatements of the law such as the Uniform Commercial Code.[28]  There are a number of benefits derivable from international unification of commercial laws, that warrant some discussions. Firstly, unification is the combination of two or more legal provisions in order to attain a single system.[29] Reduction of risk in order to achieve legal certainty and predictability in commercial relations is the bases of legislative unification. However, in view of the difficulties in achieving a complete unification in private law especially in commercial sales, proponents of legislative unification limited their efforts in aspect of international commercial law such as this law of sales. The development of the CISG is viewed as the single most essential type of contract in international trade relationship and one, which is formulated in order to attain a particular result that would be desirable by the parties since complete unification in international sales was difficult.[30] The experience of conventional unification projects appears to show that it is a very difficult, time-consuming and expensive task, which seems to demonstrate that statutory instruments may not always be the most appropriate method of achieving greater uniformity or unification in international commercial transactions.[31] 

Secondly, the need for a unified law of international sales arises in the first place from the fact that law is arguably territorial in nature. It only has the force of law within specified national boundaries, and in principle no other state is bound to acknowledge or apply it. This is also the reason why choice of-law or conflicts rules have developed in order that legal relationships that have ensued within one legal jurisdiction may be acknowledged and enforced by the courts of another jurisdiction.[32] This invariably leads to the situation where at least one of the contracting parties is faced with the application of a foreign legal system of which it may have no knowledge, and it may even be uncertain which legal system will apply to the relationship of the parties because of uncertainties in the conflicts rules. In view of this problem, unified law in international sales under CISG appears to be crucial in its efforts to modernize international commerce.

 Thirdly, despite the development of the choice of law or conflict of rules to regulate relationship between parties within one legal system which may be acknowledge by the courts of another jurisdiction, the problem of uncertainties in the conflict of rules still remains. This is because the conflicts rules of some countries placed more emphasis on the law of the place of contracting while others attached more importance to the law of the place of performance of contracts; and it is even much difficult to point out in some legal systems.[33] The unification of the law of international sales under CISG was considered as an imperative to reduce these difficulties occasioned by the choice of law problem in contract and commercial cases where no international unified system exists.[34] Most conventional instruments for unification provide for party autonomy and freedom of contract.[35]  Furthermore, though the existence of standard contracts and usages cover part of international commercial sales and some contract relations by reducing the force of national law, it does not cover all aspects of contracts formation, the rights and duties of the parties or the available remedies. A harmonised and unified law of international sales under CISG would appear to be valuable tools to close the vacuum still not covered by the standard terms and usages and even where such law does not exist in some domestic legal framework such as in e-commerce and mobile equipment.[36] Moreover, most national laws of sales are not always compatible with the application in international sales because it has been formulated to cover domestic trade only. Again, in view of the business complexities across-borders, special concerns apply to international sales that demand special legislations. Arguably, a harmonised law of international sales under CISG is important to reduce the need for frequent forum shopping.

The CISG is to an extend consider a success. It success does not only lie in the number of participating States, but also in its role as a role model for other texts, including the UNIDROIT Principles of International Commercial Contracts,  the OHADA Acte uniforme portant sur le droit commercial général (AUDCG),  the European Directive on Sale of Consumer Goods and several national revisions of contract law such as the 1988 uniform Nordic Sale of Goods Act, the 1999 Contract Law of the People’s Republic of China and the new German law of obligations of 2002.[37]

1.2 STATEMENT OF PROBLEM

Worthy of note is the fact that, there is a law governing international sale of goods, with the main law being the CISG. However, these laws are not unanimously applied. A key aspect of legality is that legislation or laws should be unanimously applied by all the courts. This means it should define with reasonable precision the ambit of prohibited conduct and implemented the same by the courts of law. The effect of lack of unanimity of the law is violation of the rights of parties to an international sales contract. This problem is evident with the CISG as parties are given the freedom to interprete. This may lead to different judgement to be obtained from different courts on the same issue. Apart from the unanimity of the law, there is also the problem of enforcement of the law, which set to question the effectiveness and efficiency in the application of CISG.

The problem of lack unanimity and poor enforcement of the CISG brings problem of struggling to maintain a fair and efficient system for adjudicating disputes arising from international sales, one that denies meritless claims and compensation with merit while holding parties accountable, deterring negligence, uncovering mistakes, and encouraging quality services. These problems and the proliferation of claims resulting from international sales contracts are the core principles of litigations in international trade law.

1.3. RESEARCH QUESTIONS

1.3.1 Main research question

In view of the above statement of problem, this research answers the question;

• What measures can be put in place in order to guarantee the uniform application of United Nation Convention for the International Sale of Goods?

1.3.2 Specific research questions

On specific bases, this research answers the following questions:

• How complex is the application of the CISG?

• What are the current rules of interpretation of CISG?

• What could be the way forward to ensure the effective application of the of the CISG?

• What policy recommendations can be made to solve the issues raised?

1.4. RESEARCH OBJECTIVES

1.4.1 Main objective

To determine the legal guarantees for the uniform application of the United Nation Convention for the International Sale of Goods?.

1.4.2 Specific objectives

• To examine complexity is the application of the CISG.
• To assess the current rules of interpretation of CISG.
• To determine how the CISG can be effectively applied.
• To make policy recommendations that can solve the issues raised.

LAW PROJECT TOPICS WITH MATERIALS

[1]  World Trade Organisation, ‘International Trade Statistics 2013’ (WTO, 2013) www.wto.org/english/res_e/statis_e/its2013_e/its2013_e.pdf, visited 20/01/2022

[2] Klepper C. D., “The Convention for the International Sale of Goods: a Practical Guide for the State of Maryland and Its Trade Community”, 15 Md. J. Int’l L. 235 (1991).

[3] In 1935, the International Institute for the Unification of Private Law (“UNDROIT”), commissioned by the League of Nations, presented one of the first drafts of uniform law for the international sale of goods. See Honnold J. O., “The Draft Convention on Contracts for the International Sale of Goods: An Overview”, 27 American Journal of Comparative Law, 223, 223 (1979).

[4]  Plate T., “The Buyer’s Remedy of Avoidance under the CISG: Acceptable from a Common Law Perspective” (2002) 6 Vindobona Journal of International Commercial Law and Arbitration 57. 

[5] A/CONF.97/19 United Nations Conference on Contracts for International Sale of Goods – Documents of

the conference and summary records of the plenary meetings and of the meetings of the main committees,

New York 1991, p. xiii

[6] Honka H., “Harmonization of Contract Law Through International Trade: A Nordic Perspective” (1996) 11Tul Eur & Civ LF, p.111. 

[7] Ibid.

[8] Bailey J., “Facing the Truth: Seeing the Convention on Contracts for the International Sale of Goods as an Obstacle to a Uniform Law of International Sales” (1999) 32 Cornell Int’l L J 273, 277.

[9] Sieg E., “Adoption of the Vienna Convention for the International Sale of Goods (the CISG) in South Africa” (1999) 116 SALJ, pp.323, 333. 

[10] Bonell M. B., An International Restatement of Contract Law: The UNIDROIT Principles of International Commercial Contracts’ (2nd edn, Transnational 1997).