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The aim of this report is to examine how the United Nations Convention of contract for International Sale of Goods can be applied to an international contract. The purpose of this report is to discuss the importance of the CISG and explain how the relevant articles in the UN convention can protect both parties to an international contract. This report will begin by defining the term characteristics of CISG, obligations of seller and buyer, remedies for breach of contract and avoidance of contract. It will then look at articles to support these terms. It will conclude by highlighting the importance of UN Convention on CISG.
Characteristics of CISG
The UN convention on CISG is a multilateral treaty to which there are 74 countries (as of January 2010) are contracting parties. Japan, Brazil and India are the last to join this treaty. South Africa and United Kingdom is not on the list of contracting parties. This treaty is mandatory and binding, intending to establish uniformity and certainty in law governing international trade. Thus, it removes conflicting legal obligations by different countries. It sets forth the legal rights and obligations of the contracting parties in cross border transactions and attempts to create a uniform set of rules in an international contract. It may stipulate the exclusion of the application of the CISG and allows buyer and seller to state whatever laws and terms they deem best. This treaty is available in six official languages for international trade transaction.
Schlechtriem (1998, sec. II) mentioned CISG creates a uniform text of law which does not have to be brought into force by an act of the domestic legislator. This form of legislation promises the highest degree of uniformity. Eiselen (1996, p. 340) stated CISG holds more indefinite legal concepts and terms. This is attributed to two factors; a compromise between irreconcilable conflicts of interests and the necessity to obtain a certain degree of flexibility. Schlechtriem (1998, sec. III) stated the character of CISG as an international body of law prohibits it to simply import concepts from domestic law, or to interpret terms as they are known in domestic law. There is no chance to appeal to a highest judicial authority in order to obtain a definite interpretation of the CISG. This poses a challenge in maintaining uniformity in day to day application of the CISG.
Obligations of Seller
The obligations of the seller are to deliver the goods in accordance to specified date and time, particular place and to the right people as agreed by the parties. Nevertheless, the seller can arranges to deliver the goods earlier, partial delivery or delivers after the agreed date if both parties agree and no fundamental breach of the contract. All documents relating and transferring to the buyer must be delivered to the buyer's property.
These obligations are stated in article 31, 33 and 39. Failure to comply with these requirements constitutes a breach of contract and as a result, the seller will be liable for damages as stated in article 45, 49 and 74. Article 12 to 15, 35 and 36 conveys the seller's confidence of the quality of goods to be delivered as agreed in the contract (Xi'an International Studies University n.d.).
Article 38 stated if a defect is not found during the examination of the goods but discovered later, the buyer may rely on a lack of conformity of the goods provided he gives the seller notice promptly after the discovery. He has to specify the nature of the defect and invites the seller for examination of the goods. All this shall be communicated in letter, telegram or other appropriate means (Trans-Lex.org n.d., chapter III).
Obligations of Buyer
The obligations of the buyer are to pay the purchase price, accept delivery of goods and take steps to enable payment to be made to the seller. The purchase price is determined by the agreement between the parties or relevant circumstances at the time when the contract is concluded. Payment must be in legal form and relevant currency. Nevertheless, the currency will be the buyer currency if it is not stated. All documents related to the goods and when taken by the buyer is considered acceptable.
Under CISG in a sale of contract, the buyer is requires to perform two primary obligations. Xi'an International Studies University (n.d.) stated the buyer is to pay the price and take delivery of the goods as shown in article 27 and 57. Article 60 also conveys the requirements of the buyer in terms of payment of the agreed price, place and date of payment. Trans-Lex.org (n.d., chapter IV) stated where the parties have agreed upon a date for the payment of the price or where such date is fixed by usage, the buyer shall without the need for any other formality pay the price at that date.
Remedies for breach of Contract
The UN convention on CISG mentioned provision of remedies are provided if the results are damaging to one party and significantly deprived him of what he is entitled to expect under the contract. The affected party can claims damages in the form of money to restore him to original position. The seller and buyer can always demand for damages, specific performance, payment of interest and avoidance of contract.
Katz (2005, p. 378) stated CISG's stipulations provide a more just and certain legal response to breach of a sale contract unlike some countries which provide their own set of remedial stipulations in their sale of good act. Whittington (2006, p. 422) mentioned CISG remedies significantly reflect the transportation costs, communication cost and distances involved in international sales. Having a uniform law for sale of goods contracts would help countries to achieve economies of scale needed to compete in overseas market and assists the growth of the economy.
Sale of Goods Act (1996) stated in termination for breach of contract in CISG, article 6 provides parties may exclude its application or subject to article 12, derogate from or vary the effect of any of the provisions. Honnold (1999, p. 77-87) mentioned CISG does not interfere with the freedom of sellers and buyers to shape the terms of their transactions. Therefore, it acts as a backdrop against which parties may contract.
Avoidance of Contract
Under the UN convention on CISG, avoidance of contract happens when the buyer has not performed its obligation, and the seller can avoid the contract and claims damages. Nevertheless, the right to avoid the contract cannot be exercised if the buyer performs with delay. The seller is allows to avoid the contract if it is obvious the buyer will commit a fundamental breach of contract. Likewise, the buyer is allows to avoid the contract if it is obvious the seller will commit a fundamental breach of contract despite of several warnings.
Schlechtriem (1998, p. 415) stated avoidance of contract is CISG's equivalent of termination of the contract for breach. It sets free both parties from any unperformed obligations, subject to changes which may be due, although any contractual provisions relating to the resolution of disputes or concerning the obligations of the parties on avoidance survive.
Whittington (2006, p. 433) mentioned in some circumstances, avoidance may lead to different consequences under CISG than under the common law. Article 81 (2) of the CISG equips that party who has performed the contract either wholly or in part may claims restitution from the other party of whatever the party has supplied or paid under the contract. If both parties are bound to make restitution, they must do so simultaneously.
Grantham & Rickett (2000, p. 169-170) mentioned the common law does not always provide a complete restitutionary remedy on termination of a contract. In such cases, restitution will only be allowed for a total failure of basis (Parliament.uk 1998).
Sale of Goods Act (1996) article 64 stated the seller may declare the contract avoided if the failure by the buyer to perform any of the obligations or fundamental breach of contract. If the buyer does not perform his obligation to pay or take delivery of the goods within the additional period of time fixed by the seller according to article 63, he has breached the contract.
In conclusion, this report discussed the importance of CISG under the UN convention. It established consistency and certainty in law governing international trade. Also, this report dealt with several important articles in CISG which set forth the rights and obligations of the contracting parties, and shown how parties can seek reparation for breach and avoidance of contracts.
In any form of legal system, it is a difficult task to draw the line between disputing cases. The dividing line between retaining and ending the contract depends on whether there is a serious infringement on the resentful party's contractual interest. CISG will remain as an important law in governing international trade.