The U.N. Convention on the International Sale of Goods: A New Way of Conducting International Trade

Francisco A. Laguna & Wojciech Kornacki

The U.N. Convention on Contracts for the International Sale of Goods standardizes international purchase laws for international buyers and sellers.  This is a critical breakthrough because, previously, international businessmen often experienced uncertainty as to which regulations were applicable which, in turn, caused unnecessary delays and additional expenditures.  While the Convention focuses strictly on goods, and not services, it offers timely answers to international businessmen who conduct business in countries which become Parties to the Convention.

Shipping Routes of the World  Photo Credit: Grolltech via Wikimedia Commons

Shipping Routes of the World
Photo Credit: Grolltech via Wikimedia Commons

According to the United Nations, thus far 80 States have ratified the Convention including the United States.  In addition, another 18 States have signed it.  States that have signed U.N. Convention on Contracts for the International Sale of Goods have to ratify it to be bound by it.  This means that about 2/3 of all international trade transactions around the world are covered by this Convention.  The primary purpose of the Convention is to assist international buyers and sellers of commodities and raw materials by creating greater predictability and reducing costs of doing business.

Coverage

In accordance its Article 1, the Convention covers international sales contracts under two circumstances.  First, both parties (the seller and the buyer) must be located in Contracting States.  For example, a transaction between an American businessman and a Chinese businesswoman for the sale of commodities would be covered under this Convention.  The second instance is when private international law results in the application of the law of a Contracting State, of which now the Convention is a part of.

Issues

Most of the world has ratified the U.N. Convention on Contracts for the International Sale of Goods.  Major countries that yet to ratify the Convention  are the United Kingdom, Ireland, Brazil, and India, among others.  Dark green indicates “ratified”. Gray indicates “not ratified”.  Light green indicates “signed”.   Courtesy of http://www.wikipedia.org

Most of the world has ratified the U.N. Convention on Contracts for the International Sale of Goods. Major countries that yet to ratify the Convention
are the United Kingdom, Ireland, Brazil, and India, among others. Dark green indicates “ratified”. Gray indicates “not ratified”. Light green indicates “signed”.
Courtesy of http://www.wikipedia.org

The Convention seeks to address and resolve the following issues listed below, making it possible to reduce transactional costs and delays:

(1)  Interpretation of the parties’ agreement;

(2)  Modifications to international sales contracts;

(3)  Passing of the risk in the international goods sold;

(4)  The seller’s remedies for breach of contract by buyer;

(5)  Anticipatory Breach;

(6)  Exemption from liability by force majeure; and

(7)  Obligations to preserve goods that are to be returned to the other party.

What are goods?

The Convention does not define goods; the drafters left the task of defining goods to domestic courts.  Previously, courts have defined goods as tangible and moveable items.  Raw materials or natural resources would certainly fall within this category.  On the other hand, intellectual property rights and goodwill are not covered under the Convention.

If you have questions about international trade issues, or want to find out what are the benefits or utilizing the convention, contact TransLegal. We are ready to brief you on different considerations involving international transactions under Convention.

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3 thoughts on “The U.N. Convention on the International Sale of Goods: A New Way of Conducting International Trade

  1. Reblogged this on Lawracle and commented:
    Here’s an introduction to, what I call, the International Sales of Goods Act, the “United Nations Convention on International Sales of Goods, 1980” (CISG) a successor to the Uniform Law of International Sales (ULIS).

  2. Yes, the CISG does seem promising at first glance… However, surpassing that the CISG backslides on several other points… I think the most common one would be “unfamiliarity and inconvenience” of CISG law amongst many lawyers… I still consider the domestic sales law to be more comprehensive and detailed (an avenue in which the lawyers love to play) compared to the CISG which covers basic issues. Furthermore, since its scope is limited in the sense of the nature of the contract; the goods etc, the CISG does not stretch too far to be an ‘all in one law’ where a domestic law would prove to be like the validity of the contract.

    Having said that, CISG is uniquely adaptable and its parameters reasonably extendable. It needs more promotion, recognition and application for the sake of creating a uniformity in the international sales.

  3. Having read this I thought it was rather informative. I appreciate you finding the time
    and energy to put this information together.
    I once again find myself personally spending a significant amount of time both reading and commenting.
    But so what, it was still worthwhile!

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