References contact under CISG irrespective or have business

References

 

The convention with respect to article 4 does
not cover all the possible circumstances in which the challenge of opting out
of CISG on the issue of the formation may arise nor does it clearly state a
rule on how to opt out of CISG. The interpretation of the article is different
in the different court decision and these
decisions become the standard for rest of the decisions made in similar cases.
Opting out of CISG is a very important article and it is very important that
the parties forming a contact under CISG irrespective or have business in
contracting or non-contracting states must understand the implication of a
mutual opt-out or in an event of a
failure to conclude the main contract.

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IV.           
Conclusion

 

The manufacturer
challenged this decision in a second appeal to
the supreme court by stating that the matter is a concern of international law
and not just the French domestic law. The manufacturer alleges that Court on
its own initiative should have applied Art 35-40 of the Vienna convention. However,
all the parties knowing well the international nature of the sale, voluntarily
placed the dispute under French domestic law for domestic sales and discussed
the warranty of goods sold as specified by Art 1641 and subsequent articles of
Civil code thereby tacitly excluding the
application of CISG. Hence the appeal was rejected by
the Court of appeal.

In 1994, the
Seller sold the Buyer 80,000 liters of weed-killer that it had bought from
the Manufacturer. The Buyer in turn resold this product to the Customer.
Latent defects in the weed killer attributable to the Manufacturer became
apparent, rendering the product unfit for use. In the contested decision
(Rennes, 28 January 1999), pursuant to Article 1641 and the following articles
of the Civil Code, the Court ordered the Seller and the Manufacturer to
pay, jointly and severally, damages to the Customer and Buyer, the
Manufacturer being bound to indemnify the Seller against any losses because
of legal proceedings.

(Weed
killer case)

                                                                           
iii.           
Supreme Court (Cour
de cassation) 25 October 2005

 

The federal court
ruled that CISG will not be applicable in the above case since the parties have
provided a choice of law in the contract
i.e. ‘Australian law applicable under exclusion of
UNCITRAL law’. The court further reasoned that although CISG is part of
relevant Australian law the agreement to exclusion of UNICTRAL was enough to
show that the party intended to exclude
CISG.

A German seller Flottweg GMBH & Co KGAA
entered into a contract with an Australian buyer Olivaylle Pty Ltd regarding
the sale of machinery to be used in the processing of olive oil. A
choice-of-law clause in the contract provided for the application of Australian
law, with the exception of UNCITRAL law. The seller submitted that such a
clause amounted to a full exclusion of
the CISG. The buyer opposed claiming that “UNCITRAL law” should be interpreted
as referring only to laws that might affect issues relating to the transfer of
ownership, as the clause followed a section of the contract relating to the
seller’s right to retain ownership until receipt of payment.

Olivaylle Pty Ltd v Flottweg GMBH & Co KGAA

                                                                                                    
ii.           
Federal Court of Australia, 20
May 2009

 

Implicit exclusion of CISG does not occur simply because the parties
failed to plead the CISG, it must be more affirmatively indicated that this was
the intent of the parties.

Industrias Magromer Cueros y Pieles S.A and Sociedad
Agrícola Sacor Ltda belong to contracting states of CISG and have their
business in different states hence CISG is the applicable law and not the
Chilean Civil Code, both Chile and Argentine are the Contracting States of CISG.
CISG was not pleaded by both the parties hence the tribunal ruled that they
have implicitly excluded the Convention based on Art. 6.

According to (Oviedo-Albán, 2009) the decision is wrong due to following
reasons,

A decision was made by the supreme court that the buyer could not claim
the damages according to Article 1489 of the Chilean Civil Code.

The buyer sued the seller for failing to perform the contract. The buyer
claimed damages for breach of contract.

In December 2001, Industrias
Magromer Cueros y Pieles S.A. an Argentinean company and Sociedad Agrícola Sacor Ltda. a Chilean
company concluded a contract for the sale of 150,000 wool hides. The agreed
price was two dollars and fifty-five cents (the US
$2.55) per unit. This price was to be paid in installments
with a documentary letter of credit. The parties also agreed that the seller
would deliver the goods in installments
between December 2001 and May 2002. However, at the end of May 2002, the seller
had delivered only 89,000 hides.

Industrias Magromer Cueros y Pieles S.A. v. Sociedad
Agrícola Sacor Ltda.

                                                                                                    
i.           
Supreme Court of Chile, 22 September 2008

                                                                         
III.           
CISG Case Presentation (Pace law school, 2002)

 

If the parties
solely litigate based on domestic law despite all the requirements for applying
CISG is applicable then the judge must apply correct law although the parties have
relied on the law that does not apply in the case (Jura Novit curia). In one
country where Jura Novit Curia
is not recognized a court applied domestic sales law where the parties argue
according to that law.  This approach has
been adopted by a court and an arbitral tribunal which are sitting in countries
that acknowledge the prince of Jura Novit curia. (UNCITRAL, 2008)

There are still a
variety of ways CISG can be excluded implicitly, one of the possibility
is by choosing the law of a non-contracting state as the applicable law in the
contract (UNCITRAL, 2008). But if the parties
choose the law of contracting state then, several court decisions suggest that
such a choice amounts to implicit exclusion else the choice has no meaning.
Most Court decisions have a different view, they reason that
convention law is the law of the contracting states that the parties chose.
With this line of thinking if the contract does not have reference to the domestic law of the state then the
applicability of CISG is not excluded. The convention is deemed to be excluded
only if the parties clearly chose domestic law. (UNCITRAL, 2008)

Many court
decisions have considered if CISG’s application can be excluded implicitly,
many courts do admit the possibility of implicit exclusion, although there is
no reference to such possibility mentioned in CISG. This view is supported by references in the convention which shows that
majority of the delegation was opposed to the proposal advance during a
conference according to which a total or partial exclusion of the CISG can be
done only if made “expressly”. An express reference to the possibility of an
implicit exclusion was eliminated from the text of the Convention merely “lest
the special reference to ‘implied’ exclusion might encourage courts to
conclude, on insuf?cient grounds, that the Convention had been wholly excluded”. (UNCITRAL, 2008). According to some
court decisions, CISG cannot be excluded
implicitly since the convention does not provide a possibility for that.

   
iv.           
Implicit exclusion:

 

Although the
parties can exclude the application of
CISG in whole or part, the convention does not declare whether the parties may
designate CISG as the law governing their
contract when it would not otherwise apply. This issue was specifically addressed at
the 1964 convention of The Hague which contained a provision that gave the parties the power to “opt-in”. The fact that CISG does not have a
comparable provision does not mean that the parties are prohibited from opting
in. A proposal was made by the German
Democratic Republic during a diplomatic conference that the convention should
apply even when preconditions for the
application were not met, provided the partied wanted it to be applicable, was
rejected, stating that the proposed text was unnecessary since the principle of
party autonomy was sufficient to allow the parties to “opt-in” to the
convention. (UNCITRAL, 2008)

   
iii.           
Opting in:

Where CISG is expressly excluded without indication of the applicable
law, the applicable law is to be identified by means of private international
law rules of the forum which are the rules of domestic law and not CISG. (Pace law
school, 2002)

o   Exclusion
without indication:

When the contracting parties choose to exclude CISG the law they also
must indicate the applicable law, which in some countries can be decided during
legal proceedings. The law applicable will be rules of private international
law of the forum, which in most countries makes applicable the law chosen by
the parties. (Pace law school, 2002)

o   Exclusion
with indication:

CISG applicability can be expressly excluded by the contracting parties.
Such cases of exclusion can be distinguished by two types:

     
ii.           
Express
exclusion:

Article 6 makes a clear
distinction between exclusion and derogation from some of its provisions
although there are some limitations to it. When one of the contracting parties
has a place of business which has made a reservation
under article 96, the parties may not derogate or vary from the effects of art.
12. In such cases any provision that “that allows a contract of sale or
its modification or termination by agreement or any offer, acceptance or other
indication of intention to be made in any form other than in writing does not
apply” (art. 12). The parties cannot derogate from public international
laws i.e. Art 89-101. Since those provisions address issues relevant to
contracting states and not contracting parties. (Pace law school, 2002).

       
i.           
Derogation:

The parties may
exclude the application of this Convention or, subject to article 12, derogate
from or vary the effect of any of its provisions.

 

6.     
Domestic principles of waiver
should not be used to determine the parties’ intent to exclude the CISG.

5.     
An Intent to exclude CISG is
not inferred if the parties fail to present agreements based on CISG during
legal proceedings. This applies irrespective of if one or both parties are
unaware of the CISG’s applicability.

            (ii)
choice of the law of a territorial unit of a Contracting State. (Schwenzer, 2015)

            (i)
the choice of the law of a Contracting State;

(b) should not be inferred merely from, for example:

(iii) choice of an expressly specified domestic statute or code
where that would otherwise be displaced by the CISG’s application.

            (ii)
choice of the law of a non-Contracting State;

   (i) express exclusion of
the CISG;

(a) should be inferred, for example, from:

4.     
Generally, such a clear intent
to exclude:

3.     
If an intent is made by the
parties to exclude CISG it must be in accordance with Art. 8 and such an intent should be clearly manifested at the
time of conclusion of the contract or
thereafter. Generally, if the exclusion is during ex-ante stage then the contract must have a “clear intent” to
exclude CISG (Schwenzer, 2015).

2.     
Exclusion of CISG is governed
by art. 11, 14-24, 29 of CISG which control the way it can be excluded even
after the conclusion of the contract.
Domestic laws are applicable when CISG is excluded. (S. Kröll, 2011)

1.     
When CISG is applicable between
two parties according to Art. 1 to 3, the parties according to art. 6 can
exclude its application at the time of contract or after the conclusion of the contract. The parties can also opt to exclude the
application of CISG (partly or in whole) or derogate from its provisions. (Schwenzer, 2015).

According
to the opinion of (Schwenzer, 2015)
the parties may exclude the application of this Convention,

Article
6 of the CISG gives the option to exclude the conventions law totally or
partially or choose to derogate from its provisions. Thus, even if the laws of
convention apply in a case, one must determine if
the parties have excluded the application of the convention or chosen to
derogate from its provisions. According to several courts opting out of CISG
requires a clear expression of intent expressed in the contract. (UNCITRAL, 2008)

The?parties?may?exclude?the?application?of?this?Convention?or,?subject?to?article?12,
derogate?from?or?vary?the?effect?of?any?of?its?provisions.

Article 6

                                                                                                                                  
II.           
Opting out of CISG

 

d)     
If the
CISG is not automatically applicable from
Art. 1a and 1b, arbitral procedural rules may allow the tribunal to deem that law of the convention is applicable. (Spagnolo,
2009)

c)     
If both
the parties have business in non-contracting states choose to opt-in for CISG as the law of their contract.
Specific CISG opt-ins are subjected to
mandatory domestic laws, as they effectively achieve application by the CISG’s
incorporation into contractual terms. This method of application can prove
problematic in some jurisdictions. (Spagnolo, 2009)

b)     
If the
conflict of laws results in the application
of the domestic law of a contracting
state then CISG might be applicable in such circumstances rules of private
international law lead to the application of the law of a Contracting State (Spagnolo,
2009).
Art. 1b

a)     
CISG
applies when parties that are in the contract
have their place of business in different countries. E.g. If the seller is from
Germany and the buyer is from the USA
then CISG is applicable, provided they have not chosen to opt out of it. If the
buyer and the seller are in the same country then the domestic law is
applicable (Islam, 2013). Art. 1a

Here
are some examples of where the CISG laws are applicable,

b)      when?the?rules?of?private?international?law?lead?to?the?application?of?the?law?of?a
Contracting?State.

a)      when?the?States?are?Contracting?States;?or

? (1)? This?Convention?applies?to?contracts
of?sale of goods between?parties?whose?places?of?business?are?in?different?States:

Article 1

Article
1 describes where CISG is applicable,

To know when to exclude it has to be analyzed when
CISG is applicable. CISG automatically applies when all
its internal rules of applications are satisfied and the contract falls within
its sphere of application. This is confined predominantly to contracts
involving goods, it does not apply to
contracts that include electricity, goods
bought for household use, or contracts that result from auctions. (Spagnolo, 2009)

                                                                                                                            
I.           
When does CISG apply?

 

This paper
explores how the convention can be excluded or deviated during the formation of
contract, different ways to conclude the contract with the exclusion of CISG and how the laws of the convention are
excluded implicitly. This paper will also contain few court case decisions that
will be discussed to see how this problem has been tackled and comments on the
decisions.

The CISG governs a
contract for the sale of goods between two parties whose places of business are
in different States and these States are signatories to the Convention (Galston & Smit, 1984). However, the
Convention gives an option for the parties to opt out of its laws or derogate
from it in Art. 6. The application of art. 6 is straightforward
to Part III of CISG (Sale of Goods), the parties after during drafting of contract, or after conclusion of contract may
choose the law that the contract will be governed by or deviate from few of its
provision like, general obligation, seller’s obligations, buyer’s obligations,
passing of risk and provisions common to the obligation of buyer and seller (Graves, 2011). The application of
Art. 6 in contract formation under Part II of CISG (formation of contract) is
not so straightforward, the problem is
how can the parties agree to exclude or to derogate from the application of convention if it not clear if
they have agreed to anything at all.

CISG that is United
Nations Convention on Contracts for the International Sale of Goods (United Nations, 2010) also referred as
Vienna convention or the UN sales convention has become a primary law for
International sales contract since its introduction on 1st January
1988. CISG is the successor of two substantive international sales treaties –
Convention relating to a Uniform Law on the Formation of Contracts for the
International Sale of Goods (ULF) and the Convention relating to a Uniform Law
for the International Sale of Goods (ULIS) – both of which were sponsored by
the International Institute for the Unification of Private Law (UNIDROIT) (Flechtner, 2009). It has over 80 contracting
states from all over the world with different economic, political backgrounds
which account for two-thirds of international trade in goods (Flechtner, 2009).