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.

0 0 0 0 0

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>