Sale of goods pic

Contracts for the Sale of Goods & the CISG

If you have not heard of the United Nations Convention on the International Sale of Goods (CISG) and you conduct business in different countries, you need to read this blog! Many American businesses are shocked when they learn that the CISG and not the UCC may be the applicable law to their contracts when dealing with out of country suppliers/ customers. The CISG has been ratified by the United States, making it qualify as American federal law (and therefore pre-empting state law). Thus, unless the CISG is specifically excluded from a contract that falls within its scope, it (and not the UCC) is the applicable law.

What type of contract falls within the CISG’s scope? In short, any agreement for the sale of goods between parties who have their place of business in different countries that are parties to the CISG (CISG Parties). Determining a parties “place of business” is not always easy. For instance, a US buyer that enters a contract for goods manufactured overseas with a distributor incorporated and with offices in the US may be within the CISG’s scope. Additionally, the CISG can apply in the domestic sale of goods if the parties’ places of business are not in the same country. This would occur in the case of an agreement between a US buyer and a foreign seller for goods to be delivered from the seller’s US store or warehouse.

In determining if a contract is for the sale of goods, it does not have to be solely for the sale of goods. The agreement must concern “predominantly” the sale of goods and not services. This means that an agreement for the sale of goods to be manufactured can fall within the CISG’s scope. An exception can occur if the buyer supplies a “substantial” portion of the materials necessary to manufacture the goods. Additionally, the sale of stocks, investment securities, negotiable instruments and money do not fall within the scope of the CISG.

If the parties want to ensure that the CISG does not apply to their contract, they must include an express statement excluding its application. The statement must be more than saying the contract will be governed by a specific state’s law because the CISG is considered state law. Thus, the contract should specifically declare that the CISG does not apply to the contract.

If the parties wish to opt-out of certain provisions of the CISG but not others, the contract must specifically outline the partial opt-out terms. Also, if the parties to a contract for services or for a mix of goods and services wish to opt-in for the CISG to be applied, they are generally allowed to do so by specifically stating so in the contract.

For more information regarding how the CISG differs from the UCC, please read our next blog or contact Leslie S. Marell to schedule your initial consultation.

Contracts Reading pic

Contracts: Reading, Understanding & Breach

You have often heard that you should read a contract before you sign it. While this is true, the better advice is to make sure you understand the contract before you sign it. Many attorneys love to use fanciful legal jargon that can make it difficult to fully understand the terms and conditions in the contract. As a result, a breach of contract action is often the result of inadvertent failures because the party either failed to read or understand its obligations.

Breach of Contract

The most common type of breach of contract disputes is one that looks back at past actions or inactions. For example, a party failed to perform a duty required by the contract or the party took an action that is prohibited by the agreement. It is important to note that either action or inaction may be the basis of a breach of the contract lawsuit.

It is also possible for a breach to be forward-looking. This is often referred to as an “anticipatory breach” and it occurs when one of the parties either states its intention not to perform, or more frequently, does something to indicate that it will not perform its contractual obligations in the future. Although the time for performance has not arrived, the expression of the party’s intent not to perform can be sufficient to constitute a present breach of contract.

Responding to a Breach

If you are the non-breaching party, you should immediately consider how to minimize your damages. This is crucial because all parties to a contract have the duty to mitigate damages. In other words, you can’t sit back and let your damages mount if there are steps you can reasonably take to lessen them.

Before you suspend your own performance under the contract in response to the other party’s breach, you should have a knowledgeable business attorney review the agreement. It is important to determine whether the other party’s breach is a material or non-material breach. You should also gather and maintain all documentation and other evidence that the breach of contract occurred and your damages suffered as a result.

Litigating Breach of Contract Claims

Lawsuits can often be avoided with open communication. When a breach first occurs, having a clear discussion with the other party will often lead to you finding a way to cure the breach and move forward – saving everyone time and money.

If the dispute cannot be resolved, you will want to review the contract to determine if it has a dispute resolution clause which determines how the dispute will be resolved. You will also want to confer with your attorney regarding any clauses that govern what damages are recoverable in the event of a breach.

If you are entering into a contract and you need assistance understanding what the terms and conditions of the agreement actually mean, call Leslie S. Marell to schedule an initial consultation. She has been practicing business and commercial law for over 25 years. Leslie is established in private practice and has extensive legal experience counseling companies in the areas of business contracts and transactions, purchasing, sales, marketing, computer and technology law, employment law and day to day legal matters. Let us provide your company the advice and guidance you need.