International Sales Contracts – Don’t overlook the United Nations Convention on Contracts for the International Sale of Goods
Gone are the times when small businesses had only local dealings. Many small businesses sell or purchase goods internationally.
When drafting an agreement for an international sale of goods, you must be aware of the potential applicability of the United Nations Convention on Contracts for the International Sale of Goods (CISG).
The CISG applies to:
international transactions, i.e. the buyer and the seller are from different countries and such countries are a party to the CISG. For example, a seller in the United States and a buyer in Germany would make a transaction an international transaction;
regarding commercial goods, i.e. not goods for personal, family, or household use, not partially to be manufactured goods, not goods sold by auction, not securities or other financial instruments, and so forth (See Article 2 and Article 3 CISG);
where the agreement expressly states that CISG applies to the transaction or,
(and this is what many people, including attorneys, overlook)
where the agreement has a gap with respect to a particular issue or there is a conflict between the UCC and the CISG, the CISG may act as the default law, even if the contracting parties had no intention of applying the CISG or didn’t even know of its existence.
To avoid the default application of the CISG, parties can choose to waive its applicability (see Article 6 CISG) by including language into the sales agreement similar to this:
This agreement is governed by the Uniform Commercial Code as in effect in the State of New York, and is not governed by the United Nations Convention for the International Sale of Goods.
Should you opt out of the CISG? It depends. The CISG differs in numerous aspects from the UCC.
At minimum, your counsel should be aware of the CISG, compare its rules to the UCC and make a decision based on such differences and the particular circumstances of your transaction. One benefit of the UCC: people are more familiar with it.