sales

SALESSALES Jurisdiction: see Part III Jurisdiction: see Part III

Conflict rule:Conflict rule:- Obligational aspects: see Obligational aspects: see suprasupra Rome-I Rome-I

Regulation for the Regulation for the lex contractuslex contractus; but see Art. 1 ; but see Art. 1 CISG CISG infra infra for more specific rulesfor more specific rules

- Transfer of property (incl. and effectiveness of the Transfer of property (incl. and effectiveness of the property transfer towards third parties): property transfer towards third parties): lex rei lex rei sitaesitae

SALESSALES Substantive lawSubstantive law - - degree of harmonisation : degree of harmonisation : - CISG, Succesful, limited to (some aspects of) international CISG, Succesful, limited to (some aspects of) international

business sales of movablesbusiness sales of movables- Applicable national law: domestic sales and non-business salesApplicable national law: domestic sales and non-business sales- EU law has harmonised some aspects of consumer sales (and EU law has harmonised some aspects of consumer sales (and

very few aspects of other sales) very few aspects of other sales) - Result: fragmentation of sales lawResult: fragmentation of sales law- But influence of CISG on developments outside its scope is But influence of CISG on developments outside its scope is

huge.huge.- October 11, 2011: draft common EU sales law « CESL » October 11, 2011: draft common EU sales law « CESL »

(« optional instrument »)(« optional instrument ») Why is uniform law important – specific characteristics of Why is uniform law important – specific characteristics of

international salesinternational sales- long distance / transport costs & time > avoid sending back long distance / transport costs & time > avoid sending back

(favor contractus)(favor contractus)- Often ‘string sales’, i.e. a chain of sales of the same goodsOften ‘string sales’, i.e. a chain of sales of the same goods

SALES – UNIFORM LAWSSALES – UNIFORM LAWS Predecessor: ULIS & ULFIS (Hague conventions 1964, Unidroit)Predecessor: ULIS & ULFIS (Hague conventions 1964, Unidroit) Replaced by Vienna Sales Convention 1980 (Uncitral, 1 convention), in Replaced by Vienna Sales Convention 1980 (Uncitral, 1 convention), in

force 1988, Fall 2013 already 83 countries (map outdated, i.a. Brazil force 1988, Fall 2013 already 83 countries (map outdated, i.a. Brazil joined in 2013 with effect in 2014; Congo & Madagascar & Guyana with joined in 2013 with effect in 2014; Congo & Madagascar & Guyana with effect 1 July 2015)effect 1 July 2015)

Missing i.a. UK, Portugal, India, S.Africa, Indonesia, Taiwan, HongkongMissing i.a. UK, Portugal, India, S.Africa, Indonesia, Taiwan, Hongkong

CISG – SCOPE OF CISG – SCOPE OF APPLICATIONAPPLICATION

RationeRatione materiaemateriae::

Art. 1: “This Convention applies to contracts of sale of Art. 1: “This Convention applies to contracts of sale of goods...”goods...”The CISG contains no definition of contracts of sale of The CISG contains no definition of contracts of sale of goods. It requires:goods. It requires:(1) an obligation to transfer property and (1) an obligation to transfer property and (2) an obligation to pay the purchase price (monetary (2) an obligation to pay the purchase price (monetary consideration, ≠ barter)consideration, ≠ barter)

The CISG applies to sales of corporeal movables, including The CISG applies to sales of corporeal movables, including gaz.gaz.Does it also apply to sales of software & digital content ?Does it also apply to sales of software & digital content ?

CISG – SCOPE OF CISG – SCOPE OF APPLICATIONAPPLICATION

- Art. 2: This Convention does not apply to sales:Art. 2: This Convention does not apply to sales:- (a) of goods bought for personal, family or household use, unless the (a) of goods bought for personal, family or household use, unless the

seller, at any time before or at the conclusion of the contract, neither seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any knew nor ought to have known that the goods were bought for any such usesuch use Domestic consumer-protection laws are not affected by the Domestic consumer-protection laws are not affected by the

CISGCISG Burden of proof is placed on the party claiming the applicability Burden of proof is placed on the party claiming the applicability

of the Conventionof the Convention- (b) by auction(b) by auction- (c) on execution or otherwise by authority of law;(c) on execution or otherwise by authority of law;- (d) of stocks, shares, investment securities, negotiable instruments or (d) of stocks, shares, investment securities, negotiable instruments or

money; (see eg ISDA rules on sale of derivatives)money; (see eg ISDA rules on sale of derivatives)- (e) of ships, vessels, hovercraft or aircraft(e) of ships, vessels, hovercraft or aircraft- (f) of electricity.(f) of electricity.

CISG – MIXED CONTRACTS CISG – MIXED CONTRACTS Art. 3 on mixed contracts:Art. 3 on mixed contracts: (1) Contracts for the supply of goods to be manufactured or produced are (1) Contracts for the supply of goods to be manufactured or produced are

to be considered sales unless the party who orders the goods undertakes to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such to supply a substantial part of the materials necessary for such manufacture or production.manufacture or production.> “substantial part of materials”: criterion is economic (value); > “substantial part of materials”: criterion is economic (value); > plans & know how are as such not materials (CISG advisory council > plans & know how are as such not materials (CISG advisory council Opinion n° 4)Opinion n° 4)

(2) This Convention does not apply to contracts in which the (2) This Convention does not apply to contracts in which the preponderant part of the obligations of the party who furnishes the goods preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services.consists in the supply of labour or other services.> if preponderant part is labour, services (turn key etc.)> if preponderant part is labour, services (turn key etc.)> again “economic” criterion: value of the goods compared to value > again “economic” criterion: value of the goods compared to value services services

Lease agreements are excluded from the scope of the CISGLease agreements are excluded from the scope of the CISG Distribution / Agency agreements ? The framework agreement ≠ actual Distribution / Agency agreements ? The framework agreement ≠ actual

salesale

CISG – TERRITORIAL CISG – TERRITORIAL APPLICATIONAPPLICATION

Ratione loci: only « international sales », more specifically in 2 cases :Ratione loci: only « international sales », more specifically in 2 cases :

A) Direct application (A) Direct application (voie directevoie directe) Art. 1 (1)(a)) Art. 1 (1)(a)- Parties whose places of business are in different States and both States - Parties whose places of business are in different States and both States (of place of business) are Contracting States (i.e. have ratified CISG). This (of place of business) are Contracting States (i.e. have ratified CISG). This supposes that either the forum is a contracting State or the conflict rule supposes that either the forum is a contracting State or the conflict rule of the forum refers to the law of a contracting state.of the forum refers to the law of a contracting state.- No other requirement (as e.g cross-border delivery or payment):- No other requirement (as e.g cross-border delivery or payment):Art. 1 (3): “Neither the nationality of the parties nor the civil of Art. 1 (3): “Neither the nationality of the parties nor the civil of commercial character of the parties or of the contract is to be taken into commercial character of the parties or of the contract is to be taken into consideration in determining the application of this Convention”consideration in determining the application of this Convention”

- Problem of interpretation of place of business (comp. Rome-I-- Problem of interpretation of place of business (comp. Rome-I-Regulation): next slideRegulation): next slide

Exception (for both cases): art. 94 “neighbour clause” – countries with Exception (for both cases): art. 94 “neighbour clause” – countries with similar law making a declaration. Applies to Inter-Nordic sales (5 Nordic similar law making a declaration. Applies to Inter-Nordic sales (5 Nordic countries).countries).

CISG – TERRITORIAL APPLICATIONCISG – TERRITORIAL APPLICATIONProblem of interpretation of place of business (comp. Rome-I-Regulation) Problem of interpretation of place of business (comp. Rome-I-Regulation) It must be a place at which there is a stable business organizationIt must be a place at which there is a stable business organization The contracting party at that place must have autonomous power to The contracting party at that place must have autonomous power to

enter into the agreemententer into the agreement

Different place of business is not apparent (subjective international Different place of business is not apparent (subjective international dimension):dimension):Art. 1 (2): “The fact that the parties have their place of business in Art. 1 (2): “The fact that the parties have their place of business in different States is to be disregarded whenever this fact does not appear different States is to be disregarded whenever this fact does not appear either from the contract or from any dealings between, or from information either from the contract or from any dealings between, or from information disclosed by, the parties at any time before or at the conclusion of the disclosed by, the parties at any time before or at the conclusion of the contract”contract”

More than one place of business: Art. 10 (1): “If a party has more than one More than one place of business: Art. 10 (1): “If a party has more than one place of business, the place of business is that which has the closest place of business, the place of business is that which has the closest relationship to the contract and its performance, having regard to the relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract”or at the conclusion of the contract”

No place of business:No place of business:

Art. 10 (2): “If a party does not have a place of business, reference is to Art. 10 (2): “If a party does not have a place of business, reference is to made to his habitual residence”made to his habitual residence”

CISG – TERRITORIAL APPLICATIONCISG – TERRITORIAL APPLICATION Ratione loci: only « international sales », more specifically in 2 cases :Ratione loci: only « international sales », more specifically in 2 cases :

B) Indirect application (B) Indirect application (voie indirectevoie indirecte): Art. 1 (1)(b)): Art. 1 (1)(b)- when the rules of private international law of the when the rules of private international law of the forumforum lead to the lead to the

application of the law of a Contracting State (usually when sellers place application of the law of a Contracting State (usually when sellers place of business in a contracting state, See Rome-I-Regulation; also in case of of business in a contracting state, See Rome-I-Regulation; also in case of choice of the law of a contracting state*)choice of the law of a contracting state*)

The Convention may also apply as the law applicable to the contract if so The Convention may also apply as the law applicable to the contract if so chosen contractually agreed by the parties.chosen contractually agreed by the parties.

* Choice of law of a contracting state includes choice of CISG and is not * Choice of law of a contracting state includes choice of CISG and is not presumed to exclude CISG – eg Cass. France 13 Sep. 2011presumed to exclude CISG – eg Cass. France 13 Sep. 2011

CISG – TERRITORIAL APPLICATIONCISG – TERRITORIAL APPLICATION

B) Indirect application (B) Indirect application (voie indirectevoie indirecte): Art. 1 (1)(b)): Art. 1 (1)(b)

Quid reservation of Article 95Quid reservation of Article 95

- However no indirect application if the applicable law is that of a country However no indirect application if the applicable law is that of a country having made the reservation of art. 95 (USA, PR China, Singapore, Armenia, having made the reservation of art. 95 (USA, PR China, Singapore, Armenia, Czech R, Slovakia) Czech R, Slovakia)

- even if that law is applicable because of the conflict rule of a foreign even if that law is applicable because of the conflict rule of a foreign forumforum ? (disputed) ? (disputed)

- (e.g. sale between US and UK; (e.g. sale between US and UK; forumforum refers to the application of refers to the application of American law. Domestic American law applied as American law does American law. Domestic American law applied as American law does not apply CISG in relation to a non-CISG state as the UK) (disputed, but not apply CISG in relation to a non-CISG state as the UK) (disputed, but not disputed in German forum, given the explicit interpretative not disputed in German forum, given the explicit interpretative declaration of Germany)declaration of Germany)

- Art. 2 Dutch CISG Implementing Act on the contrary rejects application Art. 2 Dutch CISG Implementing Act on the contrary rejects application of Dutch domestic law in such a case (and imposes CISG as part of of Dutch domestic law in such a case (and imposes CISG as part of Dutch law)Dutch law)

- CISG Adv. Council Opinion 15 also rejects the non-application of CISG in CISG Adv. Council Opinion 15 also rejects the non-application of CISG in such a case.such a case.

CISG – REGULATED CISG – REGULATED MATTERSMATTERS

Regulated matters :Regulated matters :- Only law of obligations, no property law (art. 4). Only law of obligations, no property law (art. 4). - No procedural law, esp. burden of proofNo procedural law, esp. burden of proof

- Only formation (incl. question of writing), performance, non-Only formation (incl. question of writing), performance, non-performance and associated questions (art. 4)performance and associated questions (art. 4)

- Does include passing of risk (Ch. 4).Does include passing of risk (Ch. 4). Some (deliberate) lacunae (gaps) such as price revision, interest Some (deliberate) lacunae (gaps) such as price revision, interest

rate (s. however infra), ...rate (s. however infra), ...

Some CISG provisions not applicable in certain states because of Some CISG provisions not applicable in certain states because of reservations made under Art. 96 (no form >< writing reservations made under Art. 96 (no form >< writing requirement in some countries)requirement in some countries)

CISG – MATTERS NOT CISG – MATTERS NOT REGULATEDREGULATED

Matters of the law of obligations NOT Regulated :Matters of the law of obligations NOT Regulated :- validity and invalidity of the contract (see next slide), incl. legal validity and invalidity of the contract (see next slide), incl. legal

capacitycapacity- liability for damage consisting of death or personal injury (art. 5 liability for damage consisting of death or personal injury (art. 5

CISG)CISG)- prescription (separate Convention NY 1974 as modified Vienna 1980)prescription (separate Convention NY 1974 as modified Vienna 1980)- assignability of rights and effect of assignment in relation to the assignability of rights and effect of assignment in relation to the

assigned debtor (s. Assignment & Factoring Conventions); assigned debtor (s. Assignment & Factoring Conventions); - subrogation subrogation - set-offset-off- plurality of debtors (divisible or indivisible liability?)plurality of debtors (divisible or indivisible liability?)- authority of agents (1983 Unidroit Geneva Convention, not in force, authority of agents (1983 Unidroit Geneva Convention, not in force,

5 ratifications and 10 are required)5 ratifications and 10 are required)

- Choice of law useful for matters not regulatedChoice of law useful for matters not regulated

CISG – REGULATED CISG – REGULATED MATTERSMATTERS

Substantial validity is not regulated by CISG, includingSubstantial validity is not regulated by CISG, including- legal capacitylegal capacity- defects of consent, other invalidities (Unidroit Convention defects of consent, other invalidities (Unidroit Convention

without success; see general contract law principles UPICC, without success; see general contract law principles UPICC, PECL/DCFR) PECL/DCFR)

- invalidity of specific clauses (nullity of penalties, exemption invalidity of specific clauses (nullity of penalties, exemption clauses, unfair clauses ...)clauses, unfair clauses ...)

- exception: writing requirement falls under CISG (art. 11) even if exception: writing requirement falls under CISG (art. 11) even if a matter of validity in some jurisdictions (but possible a matter of validity in some jurisdictions (but possible declaration under art. 96 CISG)declaration under art. 96 CISG)

S. further the discussion about negative effect of CISG provisions S. further the discussion about negative effect of CISG provisions (esp. non-conformity) on possibility to invoke invalidity, esp. (esp. non-conformity) on possibility to invoke invalidity, esp. mistake/ misrepresentationmistake/ misrepresentation

CISG – OPT-OUT & CISG – OPT-OUT & DEROGATIONDEROGATION

Art. 6 : The parties may:Art. 6 : The parties may:- exclude the application of this Convention (opt-out - domestic law exclude the application of this Convention (opt-out - domestic law

then applies, incl. an optional sales law if domestic law so allows) then applies, incl. an optional sales law if domestic law so allows) - or or - derogate from or vary the effect of any of its provisions derogate from or vary the effect of any of its provisions

(remaining CISG articles apply) (remaining CISG articles apply) - No mandatory law in CISG (bus most matters of mandatory law No mandatory law in CISG (bus most matters of mandatory law

are not regulated in CISG)are not regulated in CISG)

- Attention: NY Limitation convention (s. infra) is a separate Attention: NY Limitation convention (s. infra) is a separate Convention. A separate opt-out in necessary to avoid its Convention. A separate opt-out in necessary to avoid its applicationapplication

- The opt-out itself is governed by CISG and must meet its The opt-out itself is governed by CISG and must meet its requirements (cfr CISG AC opinion 16). Usually, a general requirements (cfr CISG AC opinion 16). Usually, a general reference to national law of a contracting state is not considered reference to national law of a contracting state is not considered to be an opt-out from CISG. But a reference to specific articles of to be an opt-out from CISG. But a reference to specific articles of national law on matters covered by CISG may imply an opt-outnational law on matters covered by CISG may imply an opt-out

CISG – INTERPRETATION AND CISG – INTERPRETATION AND GAP-FILLING (1)GAP-FILLING (1)

First question: is the matter governed by CISG or not ?First question: is the matter governed by CISG or not ?- If not governed by CISG = « external » gap > national law If not governed by CISG = « external » gap > national law

applicable by virtue of the conflict of law rulesapplicable by virtue of the conflict of law rules- If governed by CISG: either interpretation or « internal» gapIf governed by CISG: either interpretation or « internal» gap

Art. 7 (1) CISG – principle of autonomous interpretation Art. 7 (1) CISG – principle of autonomous interpretation - Elements: internationality, need for uniformity, promotion of Elements: internationality, need for uniformity, promotion of

good faith in international trade good faith in international trade - (except where the CISG uses a notion that is necessarily to be (except where the CISG uses a notion that is necessarily to be

filled in by domestic law, eg the reference to conflict of law rules filled in by domestic law, eg the reference to conflict of law rules (of the forum), as CISG contains no such rules)(of the forum), as CISG contains no such rules)

- In practice not always respected (familiar interpretation)In practice not always respected (familiar interpretation)- CLOUT databse contains 4000 summaries of cases under CISGCLOUT databse contains 4000 summaries of cases under CISG

No duty to act (perform) in good faith - good faith requirement No duty to act (perform) in good faith - good faith requirement only for interpretation of CISG itselfonly for interpretation of CISG itself

CISG – INTERPRETATION AND CISG – INTERPRETATION AND GAP-FILLING (2)GAP-FILLING (2)

Art 7 (2) CISG – Gap-filling (for internal gaps)Art 7 (2) CISG – Gap-filling (for internal gaps) 1° Usages and practices (Art. 9, I CISG)1° Usages and practices (Art. 9, I CISG) 2° Gap can be filled according to Art. 7, 2 on the basis of the 2° Gap can be filled according to Art. 7, 2 on the basis of the

« underlying principles »« underlying principles » 3° If gap can not be filled on the basis of underlying principles / 3° If gap can not be filled on the basis of underlying principles /

in the absence of such principles: applicable national law. Some in the absence of such principles: applicable national law. Some courts very quickly come to this conclusion … (‘insularism’)courts very quickly come to this conclusion … (‘insularism’)

Examples of gaps:Examples of gaps:- Place of payment of compensation: internal gapPlace of payment of compensation: internal gap- Electronic communication as writing ? Internal gap. See CISG Electronic communication as writing ? Internal gap. See CISG

Advisory Council opinion n° 1Advisory Council opinion n° 1- Interest rate: gap; disputed whether internal or external gapInterest rate: gap; disputed whether internal or external gap- Hardship: disputed, see discussion furtherHardship: disputed, see discussion further

CISG – GENERAL CISG – GENERAL PROVISIONS JURIDICAL PROVISIONS JURIDICAL

ACTS (1) ACTS (1) No duty to act according to good faith (see Art. 7)No duty to act according to good faith (see Art. 7)

How intention is determined – interpretation of acts: Art. 8 CISG How intention is determined – interpretation of acts: Art. 8 CISG Interpretation of statements made by and other conduct of a partyInterpretation of statements made by and other conduct of a party::

- (1) according to the intent of that party where the other party knew - (1) according to the intent of that party where the other party knew or could not have been unaware what that intent wasor could not have been unaware what that intent was

- (2) subsidiary: according to the understanding that a reasonable (2) subsidiary: according to the understanding that a reasonable person of the same kind as the other party would have had in the person of the same kind as the other party would have had in the same circumstances same circumstances

- > taking into account all circumstances , incl. negotiations, > taking into account all circumstances , incl. negotiations, practices, subsequent conduct (latter can be excluded: « No Oral practices, subsequent conduct (latter can be excluded: « No Oral Modification » clause in art. 29, 2 CISG, however, estoppel can Modification » clause in art. 29, 2 CISG, however, estoppel can apply to that clause)apply to that clause)

- CISG does not incorporate: CISG does not incorporate: - - the plain meaning rule, - the plain meaning rule, - - the parol evidence rule (CISG AC Opinion 3) - the parol evidence rule (CISG AC Opinion 3)


ACTS (2) ACTS (2) Art. 9 CISG Art. 9 CISG Usages and practices Usages and practices PracticesPractices are specific to two persons, e.g. giving credit, and are are specific to two persons, e.g. giving credit, and are

established by a course of conduct that creates an expectation that this established by a course of conduct that creates an expectation that this conduct will be continuedconduct will be continued

UsagesUsages are of more general application. are of more general application.

Art. 9 (1) « The parties are bound by any usage to which they have agreed Art. 9 (1) « The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves »and by any practices which they have established between themselves »

Usage does not have to be well known in international trade. It can even Usage does not have to be well known in international trade. It can even be a local usage as long as the parties have agreed to it. be a local usage as long as the parties have agreed to it.

Art. 9 (2) « The parties are considered, unless otherwise agreed, to have Art. 9 (2) « The parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned. »to contracts of the type involved in the particular trade concerned. »

Comp. Art. 1.9 Unidroit Principles and Art. 67 CESLComp. Art. 1.9 Unidroit Principles and Art. 67 CESL


ACTS (3)ACTS (3) No formal requirements for formation or evidence – Art. 11No formal requirements for formation or evidence – Art. 11

But reservation can be made (art. 12) and was made by several But reservation can be made (art. 12) and was made by several countriescountries « Writing » includes telegram and telex (Art. 13)« Writing » includes telegram and telex (Art. 13) Comp. Art. 1.2 Unidroit Principles and Art. 6 CESLComp. Art. 1.2 Unidroit Principles and Art. 6 CESL

No formal requirements for modification or termination – Art. 29 (1)No formal requirements for modification or termination – Art. 29 (1)> by mere agreement, Art. 29 (but see 29 II : « no oral modification > by mere agreement, Art. 29 (but see 29 II : « no oral modification clause » is possible)clause » is possible)

Merger clause or Four Corners clause: is a deviation from CISG default Merger clause or Four Corners clause: is a deviation from CISG default rulesrules

Other general rules can be deduced from specific ones e.g.:Other general rules can be deduced from specific ones e.g.: - when notice becomes effective (art. 24, 26, exception in 27),- when notice becomes effective (art. 24, 26, exception in 27),- meaning of silence or inactivity (art. 18,1), - meaning of silence or inactivity (art. 18,1), - etc.- etc.

CISG – FORMATION (1)CISG – FORMATION (1)

Formation of the contract by offer and acceptance (Mirror model)Formation of the contract by offer and acceptance (Mirror model)

Offer: Art. 14 – definition/minimum content. Differs from proposal: Offer: Art. 14 – definition/minimum content. Differs from proposal: addressed to one or more specific person(s); sufficiently definite addressed to one or more specific person(s); sufficiently definite (goods and price determinable, see art. 55 for price determination); (goods and price determinable, see art. 55 for price determination); indicates intention to be bound if accepted indicates intention to be bound if accepted

- «effective» (not necessarily irrevocable) when it reaches the offeree «effective» (not necessarily irrevocable) when it reaches the offeree (unless withdrawal reaches earlier or at the same time) (Art. 15) (unless withdrawal reaches earlier or at the same time) (Art. 15)

- But still revocable (until the offeree has dispatched acceptance), But still revocable (until the offeree has dispatched acceptance), unless irrevocability indicated (eg period for acceptance) or unless irrevocability indicated (eg period for acceptance) or reasonably relied upon (Art. 16) reasonably relied upon (Art. 16)

- It is terminated when a rejection reaches the offeror (Art. 17) It is terminated when a rejection reaches the offeror (Art. 17)

- Effect: if accepted during period of validity (and before revocation) Effect: if accepted during period of validity (and before revocation) (rules concerning the calculation of the period in Art. 20, 21) a (rules concerning the calculation of the period in Art. 20, 21) a contract is formed when the acceptance becomes effective (Art. 23)contract is formed when the acceptance becomes effective (Art. 23)

CISG – FORMATION (2)CISG – FORMATION (2)

Formation of the contract by offer and acceptance (Mirror model)Formation of the contract by offer and acceptance (Mirror model)

Acceptance: not by mere inactivity (Art. 18 I) Acceptance: not by mere inactivity (Art. 18 I) It becomes effective when it reaches the offeror within the time It becomes effective when it reaches the offeror within the time

fixed or, if no time is fixed, within a reasonable time (Art. 18 II); fixed or, if no time is fixed, within a reasonable time (Art. 18 II); possibly already when an act is performed (18 III).possibly already when an act is performed (18 III).

Modified acceptance (Art. 19): do the modifications « materially» Modified acceptance (Art. 19): do the modifications « materially» alter the terms of the offer ? alter the terms of the offer ?

- Yes > counter-offer (19 I); Yes > counter-offer (19 I); - No > accepted with modifications unless protest (« last shot ») No > accepted with modifications unless protest (« last shot »)

(19 II). (19 II).

Acceptance may be withdrawn if the withdrawal reaches the Acceptance may be withdrawn if the withdrawal reaches the offeror before or at the same time as the acceptance would have offeror before or at the same time as the acceptance would have become effectivebecome effective

CISG – STANDARD TERMSCISG – STANDARD TERMS Incorporation of standard termsIncorporation of standard terms

German Supreme Court “It is unanimously required that the German Supreme Court “It is unanimously required that the recipient of a contract offer that is supposed to be based on general recipient of a contract offer that is supposed to be based on general terms and conditions has the possibility to become aware of them terms and conditions has the possibility to become aware of them in a reasonable manner.”in a reasonable manner.”

Reasonable opportunity to take notice: see CISG AC Opinion 13 (2)).Reasonable opportunity to take notice: see CISG AC Opinion 13 (2)). Except surprising terms: CISG AC Opinion 13 (7).Except surprising terms: CISG AC Opinion 13 (7).

No special rules for “battle of forms” (i.e. general clauses contained No special rules for “battle of forms” (i.e. general clauses contained in the forms exchanged between the offeror and the offeree are in the forms exchanged between the offeror and the offeree are contradictory).contradictory).

Case law diverges: Case law diverges: Outside the scope of the Convention (external gap) ?Outside the scope of the Convention (external gap) ? Knock out rule? (or knock out as far as incompatible).Knock out rule? (or knock out as far as incompatible). No gap, as under the last shot rule (Art. 19 CISG)?No gap, as under the last shot rule (Art. 19 CISG)?

- Comp. divergent national laws: UK last shot; Netherlands first shot; Comp. divergent national laws: UK last shot; Netherlands first shot; knock-out in B, Germany (BGH 9 Jan 2002), Austria, France; mixed knock-out in B, Germany (BGH 9 Jan 2002), Austria, France; mixed rule in USA.rule in USA.

- CISG AC Opinion 13 (10): knock out rule unless…CISG AC Opinion 13 (10): knock out rule unless…

CISG - SELLER’S CISG - SELLER’S OBLIGATIONS (delivery 1)OBLIGATIONS (delivery 1)

Art. 30: delivery of the goods (incl. documents), transfer of Art. 30: delivery of the goods (incl. documents), transfer of property, conformity property, conformity

Obligation of delivery:Obligation of delivery:− Place of performance: relevent i.a. for jurisdictionPlace of performance: relevent i.a. for jurisdiction− > Art. 31: default rules:> Art. 31: default rules:

Carriage involved: first carrier (independent carrier)Carriage involved: first carrier (independent carrier) No carriage involved and contract relates to (a) specific No carriage involved and contract relates to (a) specific

goods, (b) unidentified goods to be drawn from a specific goods, (b) unidentified goods to be drawn from a specific stock or (c) goods to be manufactured of produced and stock or (c) goods to be manufactured of produced and parties knew that the goods were at, or were to be parties knew that the goods were at, or were to be manufactured of produced at, a particular place: place of manufactured of produced at, a particular place: place of the goods (ex works). the goods (ex works).

In other cases: seller’s place of business. In other cases: seller’s place of business. − See also infra Incoterms and other specific contract terms.See also infra Incoterms and other specific contract terms.

Additional duties (Art. 32) related to (1) specification, (2) carriage Additional duties (Art. 32) related to (1) specification, (2) carriage and (3) insuranceand (3) insurance

CISG - SELLER’S CISG - SELLER’S OBLIGATIONS (delivery 2)OBLIGATIONS (delivery 2)

(Art. 30 : delivery of the goods (incl. documents), transfer of (Art. 30 : delivery of the goods (incl. documents), transfer of property, conformity)property, conformity)

(Obligation of delivery – cont.):(Obligation of delivery – cont.):− Time of performance (Art. 33)Time of performance (Art. 33)

Fixed dateFixed date Fixed period of timeFixed period of time In other cases: reasonable time after conclusion of the In other cases: reasonable time after conclusion of the

contractcontract

− Delivery of documents relating to the goods (Art. 34) (See Delivery of documents relating to the goods (Art. 34) (See CISG AC Opinion 11 as to interpretation of this rule)CISG AC Opinion 11 as to interpretation of this rule)

− Duty to preserve the goods if buyer fails to take delivery (Art. Duty to preserve the goods if buyer fails to take delivery (Art. 85 ff.)85 ff.)

CISG - SELLER’S CISG - SELLER’S OBLIGATIONS (conformity 1)OBLIGATIONS (conformity 1) Obligation of conformity in respect to the goods - Art. 35: Obligation of conformity in respect to the goods - Art. 35: There is conformity only if the goods are : There is conformity only if the goods are :

1) in conformity with specifications of the contract (quantity, quality, 1) in conformity with specifications of the contract (quantity, quality, packaging) packaging)

2a) fit for ordinary purposes (see next slide)2a) fit for ordinary purposes (see next slide)

2b) fit for particular purpose made known to seller2b) fit for particular purpose made known to seller

Exception: circumstances show that the buyer did not rely, or that it Exception: circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller’s skill and was unreasonable for him to rely, on the seller’s skill and judgement, judgement,

2c) in conformity with the qualities of the sample 2c) in conformity with the qualities of the sample

2d) usual or adequate packaging; exception: visible non-conformity at 2d) usual or adequate packaging; exception: visible non-conformity at the time of conclusions (35, 3)the time of conclusions (35, 3)

Relationship between (1) and (2): cumulative or exclusive ? Relationship between (1) and (2): cumulative or exclusive ? Dominant opinion : cumulative unless express deviation.Dominant opinion : cumulative unless express deviation.

CISG - SELLER’S CISG - SELLER’S OBLIGATIONS (CONFORMITY OBLIGATIONS (CONFORMITY

2)2)Ad 35, 2: there is conformity only if the goods are « fit for ordinary purposes »Ad 35, 2: there is conformity only if the goods are « fit for ordinary purposes » But But wherewhere fit (in which place) fit (in which place)- Quid technical standards in country of buyer ≠ seller ?Quid technical standards in country of buyer ≠ seller ?- German ‘cadmium in NZ mussels’ case (BGH 8 march 1995) where standards German ‘cadmium in NZ mussels’ case (BGH 8 march 1995) where standards in country of buyer (NZ) were stricter than standards in country of seller, they in country of buyer (NZ) were stricter than standards in country of seller, they do not apply unless the seller should have been aware of themdo not apply unless the seller should have been aware of them- If the seller advertised in the buyer’s country or other special circumstances, If the seller advertised in the buyer’s country or other special circumstances, standards of that countrystandards of that country- Danish check-valves for petrol case (VLR 21 Dec 2004): rubber cracked and Danish check-valves for petrol case (VLR 21 Dec 2004): rubber cracked and valve leaking due to additives (MTBE) used in buyers’ country (Scandinavia) valve leaking due to additives (MTBE) used in buyers’ country (Scandinavia) but not in country of seller (Italy): non-conformity acceptedbut not in country of seller (Italy): non-conformity accepted

Quid suspicion of defects ? Goods not usable (marketable) because of Quid suspicion of defects ? Goods not usable (marketable) because of suspicion of eg contamination of food. Eg Argentinian rabbit meat case, BGH suspicion of eg contamination of food. Eg Argentinian rabbit meat case, BGH 1972:1972:- non-conformity if suspicion arises before passing of risknon-conformity if suspicion arises before passing of risk- disputed as to suspicion arising after the passing of risk (BGH >< Schwenzer)disputed as to suspicion arising after the passing of risk (BGH >< Schwenzer)

SALES - SELLER’S SALES - SELLER’S OBLIGATIONS (Non-CISG)OBLIGATIONS (Non-CISG)

Additional obligations may arise from the contract or applicable mandatory Additional obligations may arise from the contract or applicable mandatory rulesrules

See also in Ch. 5 (general contract law):See also in Ch. 5 (general contract law):- Some boilerplate clausesSome boilerplate clauses- Supply chain transparency, sustainability clauses, etc…Supply chain transparency, sustainability clauses, etc…

CISG - SELLER’S OBLIGATIONCISG - SELLER’S OBLIGATION- PASSING OF RISK- PASSING OF RISK

Risk ≠ liability ! (question of risk arises if seller is not liable for non-conformity)

Unless caused by the buyer itself, conformity has to be present at the time of passing of risk (Art. 36);

- even if the lack of conformity becomes apparent after that time;even if the lack of conformity becomes apparent after that time;- lack of conformity arising later ? Seller liable if consequence of

breach, or if guaranteed (to remain fit or maintain qualities for a period) (‘warranty’). Implicitly limited to 2 years unless longer contractual period of warranty (39, 2)

Relevance of «passing of risk» is thus: Risk of force majeure (price risk)Risk of force majeure (price risk)

Art. 66 « Loss or damage to the goods after the risk has passed Art. 66 « Loss or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation to pay to the buyer does not discharge him from his obligation to pay the price, unless the loss or damage is due to an act or omission the price, unless the loss or damage is due to an act or omission of the seller » of the seller »

Time to judge conformity (or rather the cause of the lack of Time to judge conformity (or rather the cause of the lack of conformity) (Art. 36 (1)) conformity) (Art. 36 (1))


− Different possible doctrines on the passing of risk:Different possible doctrines on the passing of risk: At the time of conclusion of the contract ?At the time of conclusion of the contract ? At the time of passing of ownership ?At the time of passing of ownership ? At the time of delivery and possession of the goods ?At the time of delivery and possession of the goods ?

− When does risk pass under CISG? As agreed; if not agreed:When does risk pass under CISG? As agreed; if not agreed: Art. 69: at the moment of delivery, butArt. 69: at the moment of delivery, but

(a) If the buyer refuses to take delivery: risk passes at (a) If the buyer refuses to take delivery: risk passes at that time that time (b) If other place than place of business of the seller: (b) If other place than place of business of the seller: risk risk passes when delivery is due and the passes when delivery is due and the buyer is aware of the fact that the goods are placed at buyer is aware of the fact that the goods are placed at his disposal at that placehis disposal at that placePresupposes that the goods are identified to the Presupposes that the goods are identified to the contract (69 (3)).contract (69 (3)).


Art. 67: in case of carriage of the goods: Art. 67: in case of carriage of the goods: (a) No particular place: first carrier (a) No particular place: first carrier

(independent carrier)(independent carrier)(b) Particular place: carrier at that place (b) Particular place: carrier at that place

Presupposes that the goods are identified to the contract (67 Presupposes that the goods are identified to the contract (67 (2))(2))

Art. 68: in case of goods sold in transit: at the moment of Art. 68: in case of goods sold in transit: at the moment of conclusion of the contract, unless:conclusion of the contract, unless:

(a) an agreement that the buyer will assume (a) an agreement that the buyer will assume the risk from the moment the goods are handed over to the the risk from the moment the goods are handed over to the carrier can be carrier can be implied from the circumstancesimplied from the circumstances

(b) the seller knew of ought to have known (b) the seller knew of ought to have known that the goods had been lost or damaged and did not disclose that the goods had been lost or damaged and did not disclose this to the buyerthis to the buyer

See also IncotermsSee also Incoterms

CISG – CONFORMITY AND CISG – CONFORMITY AND EXAMINATIONEXAMINATION

− Art. 38: Buyer must examine the goods within a short period Art. 38: Buyer must examine the goods within a short period (not a real obligation, but a duty or Obliegenheit)(not a real obligation, but a duty or Obliegenheit) The examination must be objectively suitable for The examination must be objectively suitable for

disclosing recognizable defectsdisclosing recognizable defects The intensity of the examination depends upon:The intensity of the examination depends upon:

(a) The type of the goods(a) The type of the goods(b) The quantity of the goods and their packaging(b) The quantity of the goods and their packaging(c) The buyer’s capabilities(c) The buyer’s capabilities(d) The costs and time needed for the examination (d) The costs and time needed for the examination (e) The probability of defects(e) The probability of defects(f) The potential losses caused by undisclosed defects(f) The potential losses caused by undisclosed defects

- In case redispatch is foreseen, examination may take at final - In case redispatch is foreseen, examination may take at final destination (38 III). Some case law is very strict (eg destination (38 III). Some case law is very strict (eg Ugandan Ugandan used shoesused shoes case). case).

CISG – CONFORMITY AND CISG – CONFORMITY AND EXAMINATIONEXAMINATION

- Art. 39: Buyer must give notice of non-conformity (if unknown to - Art. 39: Buyer must give notice of non-conformity (if unknown to seller) seller)

As soon as discovered or ought to have discovered (CISG As soon as discovered or ought to have discovered (CISG AC Opinion 2) AC Opinion 2)

At the latest within a period of two years after delivery to At the latest within a period of two years after delivery to the buyer, unless longer contractual period of guaranteethe buyer, unless longer contractual period of guarantee

The notice is effective upon dispatch (Art. 27)The notice is effective upon dispatch (Art. 27) The notice must specify the nature of the lack of The notice must specify the nature of the lack of

conformityconformity Sanction: loss of remedies (Sanction: loss of remedies (infrainfra), unless reasonable ), unless reasonable

excuse: limited remedies available (Art. 44)excuse: limited remedies available (Art. 44)- Delivery in parts – examination (+ notice) of each part necessary, Delivery in parts – examination (+ notice) of each part necessary,

buyer cannot wait until last deliverybuyer cannot wait until last delivery- Art. 44: in case of reasonable excuse, limited remedies available Art. 44: in case of reasonable excuse, limited remedies available

(price reduction, damages)(price reduction, damages) - Art. 40: rules not applicable if lack of conformity relates to facts of Art. 40: rules not applicable if lack of conformity relates to facts of

which he knew or could not have been unaware and which he did which he knew or could not have been unaware and which he did not disclose to the buyer.not disclose to the buyer.

CISG – CONFORMITY AND CISG – CONFORMITY AND VALIDITYVALIDITY

Do CISG provisions on non-conformity have a « negative effect » Do CISG provisions on non-conformity have a « negative effect » (negative Reflexwirkung) on the possibility to invoke invalidity, (negative Reflexwirkung) on the possibility to invoke invalidity, esp. mistake/ misrepresentation ? esp. mistake/ misrepresentation ? Or is there a concurrence of actions between non-conformity and Or is there a concurrence of actions between non-conformity and invalidity for mistake ?invalidity for mistake ?

− They do have an negative effect under UPICC art. 3.7. They do have an negative effect under UPICC art. 3.7. − Majority of authors in favor of negative effect of CISG, but Majority of authors in favor of negative effect of CISG, but authors and courts often reasons in favour of the solution in their authors and courts often reasons in favour of the solution in their own systemown system− Anyway, in the sale of generic goods, mistake can only relate to Anyway, in the sale of generic goods, mistake can only relate to characteristics of the genus, not of the goods delivered. The latter characteristics of the genus, not of the goods delivered. The latter case is governed by CISG only.case is governed by CISG only.

CISG – SELLER’S CISG – SELLER’S OBLIGATIONS - to transfer OBLIGATIONS - to transfer

propertyproperty The seller is obliged to procure the buyer property of the goods

Art. 41 : and to transfer them “free from any right or claim of a third party” (Art. 41) unless the buyer agreed to take such goods. the buyer agreed to take such goods.

- The buyer’s mere knowledge of the third-party claim does not relieve the seller of The buyer’s mere knowledge of the third-party claim does not relieve the seller of his obligation. Consent is needed.his obligation. Consent is needed.

- The legal nature of the claim is irrelevant: claims based on better title to the goods, The legal nature of the claim is irrelevant: claims based on better title to the goods, but also contractual claims. E.g. retention of ownership, the sale of goods but also contractual claims. E.g. retention of ownership, the sale of goods belonging to another, right of pledge, lease, etcbelonging to another, right of pledge, lease, etc

- Decisive factor: whether the buyer’s use of the goods is infringed or disrupted by Decisive factor: whether the buyer’s use of the goods is infringed or disrupted by the third-party claims. Public law restrictions on the use of the goods are governed the third-party claims. Public law restrictions on the use of the goods are governed not by Art. 41, but by Art. 35.not by Art. 41, but by Art. 35.

- Similar duty to give notice (if unknown to seller) within a reasonable time Similar duty to give notice (if unknown to seller) within a reasonable time after he has become aware or ought to have become aware of the right after he has become aware or ought to have become aware of the right or claim (Art. 43). Reasonable time very often 1 month (German stolen or claim (Art. 43). Reasonable time very often 1 month (German stolen car case, BGH 11 Jan 2006)car case, BGH 11 Jan 2006)

- Sanction: loss of some remedies Sanction: loss of some remedies - Which remedies survive ? In case of reasonable excuse still price Which remedies survive ? In case of reasonable excuse still price

reduction or damages (Art. 44). reduction or damages (Art. 44).

CISG – SELLER’S CISG – SELLER’S OBLIGATIONS - to transfer OBLIGATIONS - to transfer

propertypropertyThe seller is obliged to transfer property of the goodsThe seller is obliged to transfer property of the goods

− When is the obligation fulfilled? Requirements for an effective When is the obligation fulfilled? Requirements for an effective transfer of property not in CISG, question of (national) transfer of property not in CISG, question of (national) property law. property law.

Consensual vs. Delivery transfer systemsConsensual vs. Delivery transfer systemsCausal vs. Abstract transfer systemsCausal vs. Abstract transfer systems

− Retention of ownership (cf. Art. 7 Insolvency Regulation, see Retention of ownership (cf. Art. 7 Insolvency Regulation, see further)further)

CISG - SELLER’S CISG - SELLER’S OBLIGATIONS – FREE FROM OBLIGATIONS – FREE FROM

RIGHTSRIGHTS Obligation of conformity in respect to rights (art. 41) requires also:- TThat goods are “free from any right or claim of a third party based on hat goods are “free from any right or claim of a third party based on

industrial property or other intellectual property” under some industrial property or other intellectual property” under some conditions: a) IP right in the country of the buyer or place of resale if conditions: a) IP right in the country of the buyer or place of resale if contemplated: contemplated:

- In the absence of a special intended use: in the country in which the buyer has his - In the absence of a special intended use: in the country in which the buyer has his place of businessplace of business

- In the event the goods are to be resold and used in a state other than the one where - In the event the goods are to be resold and used in a state other than the one where the buyer has his place of business: in the country of resale. the buyer has his place of business: in the country of resale.

- b) (constructive) knowledge of the seller and not of the buyer b) (constructive) knowledge of the seller and not of the buyer - c) not resulting from compliance with instructions (drawings etc.) of the c) not resulting from compliance with instructions (drawings etc.) of the

buyer (Art. 42)buyer (Art. 42)

- Similar duty to give notice (if unknown to seller) within a reasonable Similar duty to give notice (if unknown to seller) within a reasonable time after he has become aware or ought to have become aware of the time after he has become aware or ought to have become aware of the right or claim (Art. 43). Sanction: loss of some remedies right or claim (Art. 43). Sanction: loss of some remedies

Which remedies survive ? In case of reasonable excuse still price Which remedies survive ? In case of reasonable excuse still price reduction or damages (Art. 44).reduction or damages (Art. 44).

CISG – BUYER’S OBLIGATIONS (1)CISG – BUYER’S OBLIGATIONS (1) Obligations of the buyer : Obligations of the buyer :

specify, take delivery, pay the price, examine specify, take delivery, pay the price, examine

If the contract provides so: If the contract provides so: specify the form, measurement or other specify the form, measurement or other features of the goods (Art. 65). features of the goods (Art. 65).

Taking delivery of the goods (Art. 60)Taking delivery of the goods (Art. 60)− Buyer must undertake all acts which could reasonably be expected Buyer must undertake all acts which could reasonably be expected

of him in order to enable the seller to make deliveryof him in order to enable the seller to make delivery− Place & time: see Place & time: see supra supra deliverydelivery− Buyer may refuse or accept early delivery (Art. 52 (1))Buyer may refuse or accept early delivery (Art. 52 (1))− Buyer may accept (and pay) or refuse excess quantity (Art. 52 (2)). Buyer may accept (and pay) or refuse excess quantity (Art. 52 (2)).

Examination & notice, see Examination & notice, see suprasupra..

Duty to preserve the goods if buyer intends to reject them (Art. 86-88)Duty to preserve the goods if buyer intends to reject them (Art. 86-88)

CISG – BUYER’S OBLIGATIONS (2)CISG – BUYER’S OBLIGATIONS (2) Payment of the price:Payment of the price:

− Includes all of the measures agreed upon in the contract to enable Includes all of the measures agreed upon in the contract to enable payment to be madepayment to be made

− Price not fixed nor mode of determination? Normal price (Art. 55) Price not fixed nor mode of determination? Normal price (Art. 55) Sufficient to constitute an offer in the sense of Art. 14?Sufficient to constitute an offer in the sense of Art. 14?

− Place of payment : seller’s place Place of payment : seller’s place c.q.c.q. place of handing over (Art. 57) place of handing over (Art. 57)− Time of payment (Art. 58): Time of payment (Art. 58):

When control is given to the buyer (for the notion of ‘documents When control is given to the buyer (for the notion of ‘documents controlling the disposition of the goods’, see CISG AC Opinion no. controlling the disposition of the goods’, see CISG AC Opinion no. 11)11)

At the condition that he has had the opportunity to examine the At the condition that he has had the opportunity to examine the goods goods

The seller does not need to send any advance reminder or other The seller does not need to send any advance reminder or other formal request for paymentformal request for payment

Concrete rule will depend on clauses (often ‘payment against Concrete rule will depend on clauses (often ‘payment against documents’).documents’).

Payment instruments: no provisions in CISG. See further Ch. 9-10. Payment instruments: no provisions in CISG. See further Ch. 9-10. Attention: when payment by l/c is provided, contract must already Attention: when payment by l/c is provided, contract must already determine the main terms of the l/c requireddetermine the main terms of the l/c required

− The seller must accept partial payment or early payment if he is required The seller must accept partial payment or early payment if he is required to do so by contract.to do so by contract.

SALES -INCOTERMSSALES -INCOTERMS « « International commercial termsInternational commercial terms »: standard abbreviations, »: standard abbreviations,

often three letter words (FOB, CIF, etc.)often three letter words (FOB, CIF, etc.)

Defined as usages by the ICC (sinds 1936, several revisions; Defined as usages by the ICC (sinds 1936, several revisions; since Jan 1, 2011: version 2010)since Jan 1, 2011: version 2010)

Applicable when inserted in the contract, expressly or impliedly Applicable when inserted in the contract, expressly or impliedly (specify the chosen version)(specify the chosen version)

Now (2011) 11 Incoterms (before 2011: 13 terms)Now (2011) 11 Incoterms (before 2011: 13 terms) Four basic categories :Four basic categories :- C-terms : seller pays carrier to agreed destination, but does not C-terms : seller pays carrier to agreed destination, but does not

bear risk during carriage (attention: in CIF buyer must pay bear risk during carriage (attention: in CIF buyer must pay before inspection)before inspection)

- D-terms: sellers bears cost of carriage and risk until arrival at D-terms: sellers bears cost of carriage and risk until arrival at agreed destination – thus some « arrival duties » on the selleragreed destination – thus some « arrival duties » on the seller

- E-terms: ex works of the sellerE-terms: ex works of the seller- F-terms: delivery to the person paid by the buyer F-terms: delivery to the person paid by the buyer

SALES –INCOTERMSSALES –INCOTERMSRules for any mode of transport:Rules for any mode of transport: EXW Ex WorksEXW Ex Works FCA Free Carrier (FCA Free Carrier (hand over to the carrier named by the hand over to the carrier named by the

buyer; typically for container shipmentsbuyer; typically for container shipments)) CPT Carriage Paid ToCPT Carriage Paid To CIP Carriage And Insurance Paid ToCIP Carriage And Insurance Paid To DAT Delivered At TerminalDAT Delivered At Terminal DAP Delivered At PlaceDAP Delivered At Place DDP Delivered Duty PaidDDP Delivered Duty Paid

Rules for sea and inland waterway transport:Rules for sea and inland waterway transport: FAS Free Alongside Ship (FAS Free Alongside Ship (esp. for bulk tradeesp. for bulk trade)) FOB Free On Board (FOB Free On Board (risk passes when goods put on board; risk passes when goods put on board;

in old versions: over the ship’s railin old versions: over the ship’s rail)) CFR Cost And Freight (risk passes over the ship’s rail)CFR Cost And Freight (risk passes over the ship’s rail) CIF Cost, Insurance and Freight (CIF Cost, Insurance and Freight (idem as CFR +paying idem as CFR +paying

insuranceinsurance))

SALES -INCOTERMSSALES -INCOTERMSEach Inco term summarises obligations of the parties in relation to 10 typical Each Inco term summarises obligations of the parties in relation to 10 typical points:points:

1. main obligation: provision of goods, payment of the priceof the price

2. licenses, authorisations and formalities (attention in EW: buyer must 2. licenses, authorisations and formalities (attention in EW: buyer must obtain export license etc. in seller’s country)obtain export license etc. in seller’s country)

3. contracts of carriage and insurance (3. contracts of carriage and insurance (procurement of transport documents, procurement of transport documents, contract of insurance* and other documents necessary for the export and contract of insurance* and other documents necessary for the export and import of the cargo)import of the cargo)

•* Insurance aginst the risk of loss or damage during carriage. For the * Insurance aginst the risk of loss or damage during carriage. For the minimum coverage to be included in insurance, Incoterms refer to the institute minimum coverage to be included in insurance, Incoterms refer to the institute cargo clauses (ICC) of the International Underwriting Association, specifically cargo clauses (ICC) of the International Underwriting Association, specifically minimally ICC « C » clause.minimally ICC « C » clause.•Insurance coverage required by CIF or CIP is thus only a minimal coverage !Insurance coverage required by CIF or CIP is thus only a minimal coverage !

SALES –INCOTERMSSALES –INCOTERMS 4. (point of) delivery and taking delivery: place (NB. often relevant for 4. (point of) delivery and taking delivery: place (NB. often relevant for

jurisdiction !)* and time**jurisdiction !)* and time** 5. transfer of risks (NB. 5. transfer of risks (NB. Incoterms are silent on passing of title/ownership !Incoterms are silent on passing of title/ownership !)) 6. division of costs (6. division of costs (attention whether THC (terminal handling costs) at attention whether THC (terminal handling costs) at

point of arrival are included or notpoint of arrival are included or not)) 7. notices to be given7. notices to be given 8. proof of delivery, transport document8. proof of delivery, transport document 9. checking, packaging, marking, inspecting9. checking, packaging, marking, inspecting 10. other10. other

* According to belgian cass. 3 Sep 2015, place (for jurisdiction purposes) in a * According to belgian cass. 3 Sep 2015, place (for jurisdiction purposes) in a CFR sale with a clause “cash against documents”, is the place where the CFR sale with a clause “cash against documents”, is the place where the document (representing the goods) is delivered to the buyer.document (representing the goods) is delivered to the buyer.

** Where a date is fixed for delivery or taking delivery, there may be an ** Where a date is fixed for delivery or taking delivery, there may be an extension clause giving one party an option to perform later. Eg in FOB, extension clause giving one party an option to perform later. Eg in FOB, date for taking delivery will be when buyer’s vessel arrives and buyer may date for taking delivery will be when buyer’s vessel arrives and buyer may stipulate an extension (eg GAFTA 49 contract); in CIF seller may stipulate stipulate an extension (eg GAFTA 49 contract); in CIF seller may stipulate an extension.an extension.

CISG – REMEDIES - CISG – REMEDIES - OVERVIEWOVERVIEW Overview of remedies for non-performance: Overview of remedies for non-performance:

− Specific performance (Art. 46 and 62)Specific performance (Art. 46 and 62)− Suspension (Art. 71)Suspension (Art. 71)− Avoidance of the contract (Art. 49 and 64)Avoidance of the contract (Art. 49 and 64)− Price reduction (Art. 50)Price reduction (Art. 50)− Damages (Art. 45 and 61)Damages (Art. 45 and 61)

General principlesGeneral principles- Free choice, no hierarchy of remedies (« pari passu ») (but Free choice, no hierarchy of remedies (« pari passu ») (but

sometimes fundamental breach required)sometimes fundamental breach required)- Combinability, esp. of damages and other remedies)Combinability, esp. of damages and other remedies)- Largely self-help (unilateral declaration)Largely self-help (unilateral declaration)- By notification (usually within a reasonable time)By notification (usually within a reasonable time) Fundamental objective: saving the contract and avoiding Fundamental objective: saving the contract and avoiding

restitutionrestitution > Instruments for restraining termination as a remedy> Instruments for restraining termination as a remedy

− NachfristNachfrist mechanism (Art. 47 and 63) mechanism (Art. 47 and 63)− The seller’s right to cure (Art. 48)The seller’s right to cure (Art. 48)

CISG – GENERAL RULES ON CISG – GENERAL RULES ON NON-PERFORMANCENON-PERFORMANCE

Remedies for non-performance: separately mentioned for buyer Remedies for non-performance: separately mentioned for buyer and seller. But basically a unitary concept of non-performance and seller. But basically a unitary concept of non-performance (« breach ») (comp. the dualism still remaining in e.g. Belgian (« breach ») (comp. the dualism still remaining in e.g. Belgian law). law).

Some remedies require a « fundamental breach » (Art. 25). Some remedies require a « fundamental breach » (Art. 25). Interpretation: CISG AC Opinion n° 5Interpretation: CISG AC Opinion n° 5

Fault or strict liability ?Fault or strict liability ?- damages excluded if exemption: failure due to an impediment - damages excluded if exemption: failure due to an impediment beyond control (art. 79) (+ give notice to other party). beyond control (art. 79) (+ give notice to other party). Hardship ? See next slide. Hardship ? See next slide. - other remedies: strict liability- other remedies: strict liability- - a party may not rely on a failure of the other party to perform, a party may not rely on a failure of the other party to perform, to the extent that such failure was caused by the first party's act to the extent that such failure was caused by the first party's act or omission (Art. 80).or omission (Art. 80).

Exemption clauses: possible under CISG (art. 6), but national law Exemption clauses: possible under CISG (art. 6), but national law may invalidate them.may invalidate them.

CISG – HARDSHIPCISG – HARDSHIP

Does art. 79 include a rule on hardship ? Does art. 79 include a rule on hardship ? Hardship is a « matter governed by CISG », i.e. not outside CISg in the Hardship is a « matter governed by CISG », i.e. not outside CISg in the

sense of art. 7 CISGsense of art. 7 CISG but it is disputed whether:but it is disputed whether:a) It is excluded by Art. 79 (thus Cass.Fr. 2004, a) It is excluded by Art. 79 (thus Cass.Fr. 2004, Behr v. Romay Behr v. Romay in a specific in a specific

case: third party buyer no longer interested) > contract bindingcase: third party buyer no longer interested) > contract bindingb) included in Art. 79 but gap as to more precise rules (Cass.B. 19 June 2009 b) included in Art. 79 but gap as to more precise rules (Cass.B. 19 June 2009

in in ScafomScafom – steel price plus 70 %) – in line with CISG AC Opinion n° 7 – steel price plus 70 %) – in line with CISG AC Opinion n° 7c) internal gap which can be filled by principles; c) internal gap which can be filled by principles; d) internal gap which can not be filled by principles, thus question according d) internal gap which can not be filled by principles, thus question according

to art. 7 CISG left to national lawto art. 7 CISG left to national law

In case b, c or d: which principles: only « internal » to CISG (« underlying In case b, c or d: which principles: only « internal » to CISG (« underlying CISG), or also « external » such as UPICC ? (Cass. B.: judge should CISG), or also « external » such as UPICC ? (Cass. B.: judge should apply UPICC, thus duty to renegotiate and possibly adapation by the apply UPICC, thus duty to renegotiate and possibly adapation by the judge)judge)

CISG – SPECIFIC PERFORMANCECISG – SPECIFIC PERFORMANCE

Primacy of specific performancePrimacy of specific performance The buyer has the right to require specific performance:The buyer has the right to require specific performance:

- Whether he can claim specific performance depends upon Whether he can claim specific performance depends upon the domestic law of the forum (art. 28)the domestic law of the forum (art. 28)

- Subject to the condition of not having recourse to other Subject to the condition of not having recourse to other remedies that are inconsistent with it (Art. 46 (1))remedies that are inconsistent with it (Art. 46 (1))

- If specific performance is available, it includes (a) requiring If specific performance is available, it includes (a) requiring delivery of substitute goods when breach is fundamental or delivery of substitute goods when breach is fundamental or (b) requiring repair unless unreasonable (Art. 46 (2) and (3)(b) requiring repair unless unreasonable (Art. 46 (2) and (3)

- The buyer can choose between damages and specific The buyer can choose between damages and specific performance, without any discretion left to the courtperformance, without any discretion left to the court

- The seller has the right to « cure » (repair) under certain The seller has the right to « cure » (repair) under certain conditions that secure the buyer’s interests (Art. 48)conditions that secure the buyer’s interests (Art. 48)

CISG – SPECIFIC PERFORMANCECISG – SPECIFIC PERFORMANCE Seller also has the right to compel performance: payment and Seller also has the right to compel performance: payment and

taking delivery (Art. 62)taking delivery (Art. 62) Good faith should be taken into account when determining Good faith should be taken into account when determining

whether to grant specific performancewhether to grant specific performance Creditor can fix an additional period of reasonable length for Creditor can fix an additional period of reasonable length for

cure (function: termination allowed afterwards) (« Nachfrist « ) cure (function: termination allowed afterwards) (« Nachfrist « ) (Art. 47 & 63)(Art. 47 & 63)− Nachfrist noticeNachfrist notice− Demand of performanceDemand of performance− Express determination of the additional period of timeExpress determination of the additional period of time− Consequences of an unreasonable period of time?Consequences of an unreasonable period of time?− The creditor is not entitled to resort to any remedy for The creditor is not entitled to resort to any remedy for

breach of the contract unless the other party notifies that breach of the contract unless the other party notifies that he will not perform during the period so fixedhe will not perform during the period so fixed

− Opens the door to avoidance (see further)Opens the door to avoidance (see further) If the buyer does not give specifications: seller may specify (Art. If the buyer does not give specifications: seller may specify (Art.

65)65)

CISG – REMEDIES - CISG – REMEDIES - SUSPENSIONSUSPENSION

Order of performance: in principle at the same timeOrder of performance: in principle at the same time Suspension of performance as long as other party does not performSuspension of performance as long as other party does not perform A party may suspend the performance of his obligations if, after the A party may suspend the performance of his obligations if, after the

conclusion of the contract, it becomes clear that the other party will conclusion of the contract, it becomes clear that the other party will not perform a substantial part of his obligations (Art. 71, not perform a substantial part of his obligations (Art. 71, anticipatory breach)anticipatory breach) Possible indicia that a breach will be committed:Possible indicia that a breach will be committed:

(a) serious definiency in the ability to perform(a) serious definiency in the ability to perform

(b) serious deficiency in a party’s creditworthiness(b) serious deficiency in a party’s creditworthiness

Both (advanced) performance and acts regarding preparation of the Both (advanced) performance and acts regarding preparation of the performance may be suspended, provided that there is a reciprocal performance may be suspended, provided that there is a reciprocal relationship between the obligation suspended and the counter-relationship between the obligation suspended and the counter-performanceperformance

Requires Notice of suspensionRequires Notice of suspension Suspension no longer allowed if adequate assurance of performanceSuspension no longer allowed if adequate assurance of performance

CISG – REMEDIES – AVOIDANCE (1)CISG – REMEDIES – AVOIDANCE (1) Termination, called « avoidance » (misleading term)Termination, called « avoidance » (misleading term) Requirements (Art. 49 & 64)Requirements (Art. 49 & 64)

- either « fundamental breach » or still in breach after the additional - either « fundamental breach » or still in breach after the additional period granted for performance (Nachfrist)period granted for performance (Nachfrist)- also in case of anticipatory breach (if fundamental) (Art. 72)- also in case of anticipatory breach (if fundamental) (Art. 72)- fault not required; but events after passing of risk are for the risk of - fault not required; but events after passing of risk are for the risk of the buyerthe buyer

Relevant factors in determining fundamental breach (art. 25)Relevant factors in determining fundamental breach (art. 25)− Nature of the contractual obligationNature of the contractual obligation− Gravity of the consequences of breachGravity of the consequences of breach

Contract’s overall value and the monetary loss suffered by the aggrieved Contract’s overall value and the monetary loss suffered by the aggrieved partyparty

Frustration of the purpose of the contractFrustration of the purpose of the contract Remedy-oriented approachRemedy-oriented approach

− (In)ability of performance(In)ability of performance− (Un)willingness to perform(Un)willingness to perform− Lack of reliance on the other party’s future performanceLack of reliance on the other party’s future performance− Offer to cure / possible cureOffer to cure / possible cure

CISG – REMEDIES – AVOIDANCE (1)CISG – REMEDIES – AVOIDANCE (1)

Cases of fundamental breach:Cases of fundamental breach:− Definite non-performanceDefinite non-performance− Delivery of defective goods when the defect is such that the Delivery of defective goods when the defect is such that the

non-defaulting party cannot be expected to be satisfied with non-defaulting party cannot be expected to be satisfied with damages or price reductiondamages or price reduction

− Delay in delivery of the goods when compliance with a Delay in delivery of the goods when compliance with a particular deadline is essential for the buyerparticular deadline is essential for the buyer

Remedy: avoidance Remedy: avoidance

CISG – REMEDIES – AVOIDANCE (2)CISG – REMEDIES – AVOIDANCE (2) Scope: depends on whether the contract is divisible or Scope: depends on whether the contract is divisible or

indivisible, see Art. 51 and 73 (instalment contracts)indivisible, see Art. 51 and 73 (instalment contracts)

Exercise and loss:Exercise and loss:- By notice (Art. 26)By notice (Art. 26)- Time limits (reasonable time) in late performance (Art. 49 (2)(a) Time limits (reasonable time) in late performance (Art. 49 (2)(a)

and Art. 64 (2)(a)) and in defective performance (Art. 49 (2)(b) and Art. 64 (2)(a)) and in defective performance (Art. 49 (2)(b) and Art. 64 (2)(b))and Art. 64 (2)(b))

- Buyer loses remedy if restitution in substantially the same Buyer loses remedy if restitution in substantially the same condition made impossible (Art. 82) condition made impossible (Art. 82)

- buyer cannot exercise his right to avoid the contract during the buyer cannot exercise his right to avoid the contract during the performance period if the seller makes a proposal to cure and: performance period if the seller makes a proposal to cure and: (a) the buyer has agreed to the seller’s proposal, or(a) the buyer has agreed to the seller’s proposal, or(b) the buyer fails, within a reasonable time, to reject or (b) the buyer fails, within a reasonable time, to reject or otherwise respond to the seller’s notice for delayed performance otherwise respond to the seller’s notice for delayed performance

CISG – REMEDIES – PRICE CISG – REMEDIES – PRICE REDUCTIONREDUCTION

Price reduction (Art. 50) is a possible remedy for the buyer Price reduction (Art. 50) is a possible remedy for the buyer (proportionate to value reduction - according to value at (proportionate to value reduction - according to value at delivery) delivery)

When the goods do not conform with the contract, art. 50 CISG When the goods do not conform with the contract, art. 50 CISG gives the buyer the ability to unilaterally declare a price gives the buyer the ability to unilaterally declare a price reduction, even before he has paid the pricereduction, even before he has paid the price

The remedy of price reduction is not subject to the same The remedy of price reduction is not subject to the same limitations as damageslimitations as damages

The remedy of price reduction is not available if the seller The remedy of price reduction is not available if the seller completely performs his obligation by curing or if the buyer completely performs his obligation by curing or if the buyer unjustifiable declines to accept the cureunjustifiable declines to accept the cure

CISG – REMEDIES – CISG – REMEDIES – AVOIDANCE (3) AVOIDANCE (3)

Effects of « avoidance » on the terminated contract or part(s) of the Effects of « avoidance » on the terminated contract or part(s) of the contract:contract: CISG does not contain any rule on effects on property transferred CISG does not contain any rule on effects on property transferred already (whether it automatically reverts or not)already (whether it automatically reverts or not) Obligational effects:Obligational effects:a)a)remaining obligations are terminated (« release ») (Art. 81,1,1)remaining obligations are terminated (« release ») (Art. 81,1,1)b)b)except surviving clauses: clauses relating to settlement of disputes except surviving clauses: clauses relating to settlement of disputes (forum & arbitration etc.) & clauses on effects of termination (eg (forum & arbitration etc.) & clauses on effects of termination (eg damages) (Art. 81,1,2) continue to be bindingdamages) (Art. 81,1,2) continue to be bindingc)c)obligation of restitution of whatever supplied or paid (Art. 81, 2); obligation of restitution of whatever supplied or paid (Art. 81, 2); includes interest on payment c.q. benefits derived from the goods (Art. includes interest on payment c.q. benefits derived from the goods (Art. 84)84)

Mutual restitution within a reasonable timeMutual restitution within a reasonable time Any additional costs of restitution should be borne by the Any additional costs of restitution should be borne by the

unexcused non-performing partyunexcused non-performing party

d) rights to damage already accrued survive (CISG AC Opinion 9, 1)d) rights to damage already accrued survive (CISG AC Opinion 9, 1)

- A whole series of additional interpretative rules in CISG AC Opinion 9.A whole series of additional interpretative rules in CISG AC Opinion 9.

CISG – REMEDIES – CISG – REMEDIES – AVOIDANCE (3) AVOIDANCE (3)

The obligation to preserve the goods (Art. 85 ff.):The obligation to preserve the goods (Art. 85 ff.): Party who is bound to preserve the goods has the option Party who is bound to preserve the goods has the option

of selling themof selling them He is free to sell the goods in any way he choosesHe is free to sell the goods in any way he chooses He must notify the other party of his intentionsHe must notify the other party of his intentions He can retain the reasonable cost of preserving and He can retain the reasonable cost of preserving and

selling the goods from the proceeds of the saleselling the goods from the proceeds of the sale

CISG – REMEDIES - CISG – REMEDIES - DAMAGESDAMAGES

Damages (compensation of damage, Damages (compensation of damage, always monetaryalways monetary): ): General: requires breach (not exempted by art. 79), damage and General: requires breach (not exempted by art. 79), damage and

causal link (causal link (The The lossloss to the party affected must have been to the party affected must have been causedcaused by by the other party’s the other party’s breach)breach)

Includes lost profit (Art. 74,1). Interpreted in CISG AC Opinion 6Includes lost profit (Art. 74,1). Interpreted in CISG AC Opinion 6 Only damage foreseeable when contract concluded (Art. 74,2)Only damage foreseeable when contract concluded (Art. 74,2) (those (those

which the party in breach foresaw or ought to have foreseen at the which the party in breach foresaw or ought to have foreseen at the time of conclusion of the contract)time of conclusion of the contract) (NB US courts tend to give a strict (NB US courts tend to give a strict interpretation of foreseeable, as in the precedent interpretation of foreseeable, as in the precedent Hadley v Hadley v BaxendaleBaxendale))

Duty to mitigate damage (Art. 77):Duty to mitigate damage (Art. 77): Expression of the general principle of good faith in international commerceExpression of the general principle of good faith in international commerce It does not apply to other remedies that are available under the ConventionIt does not apply to other remedies that are available under the Convention Reasonableness of the measuresReasonableness of the measures Additional costs can be claimed on the basis of Art. 74Additional costs can be claimed on the basis of Art. 74

Violation of this duty leads to a corresponding reduction in damagesViolation of this duty leads to a corresponding reduction in damages

CISG – REMEDIES - CISG – REMEDIES - DAMAGESDAMAGES

Calculation of damages:Calculation of damages: Buyer or seller made a reasonable substitute transaction: Buyer or seller made a reasonable substitute transaction:

price difference (plus further damage) (Art. 75)price difference (plus further damage) (Art. 75) Otherwise current price (Art. 76) (if there is an « available Otherwise current price (Art. 76) (if there is an « available

market »)market ») Art. 75 and 76 interpreted in CISG AC Opinion n° 8Art. 75 and 76 interpreted in CISG AC Opinion n° 8

‘‘Agreed sum’ or penalty clauses:Agreed sum’ or penalty clauses: CISG determines whether incorporated in the contract or not CISG determines whether incorporated in the contract or not

(CISG AC Opinion 10, point 1)(CISG AC Opinion 10, point 1) CISG has no rules on validity: no validity requirements; CISG has no rules on validity: no validity requirements;

mandatory rules of the appicable national law remain in forcemandatory rules of the appicable national law remain in force Where the national rule refers to vague standards (eg Where the national rule refers to vague standards (eg

reasonableness), they must be interpreted according to reasonableness), they must be interpreted according to international standards (CISG AC Opinion 10, point 4)international standards (CISG AC Opinion 10, point 4)

CISG – REMEDIES – CISG – REMEDIES – DAMAGES: INTERESTDAMAGES: INTEREST

- Late payment: interest (plus further damage) (Art. 78; Late payment: interest (plus further damage) (Art. 78; dies dies interpellat pro homineinterpellat pro homine) )

- Art. 78 conceives the obligation to pay interest as a general rule Art. 78 conceives the obligation to pay interest as a general rule so that a debtor still remains liable for interest payments even if so that a debtor still remains liable for interest payments even if his default is due to an impediment beyond his control and he is his default is due to an impediment beyond his control and he is therefor not liable for damages under art. 79therefor not liable for damages under art. 79

Interest rate ? lacuna > national law (or: Unidroit Principles Art. Interest rate ? lacuna > national law (or: Unidroit Principles Art. 7.4.9 ?). Which national law: 7.4.9 ?). Which national law: lex contractuslex contractus or or lex monetae lex monetae ??

According to CISG Adv Council Opinion 14: « In the absence of an According to CISG Adv Council Opinion 14: « In the absence of an agreement, the applicable rate of interest is the rate which the court at agreement, the applicable rate of interest is the rate which the court at the creditor's place of business would grant in a similar contract of sale the creditor's place of business would grant in a similar contract of sale not governed by the CISG ».not governed by the CISG ».

NY LIMITATION NY LIMITATION CONVENTION (1)CONVENTION (1)

New York Convention 1974, amended 1980New York Convention 1974, amended 1980 22 ratifications for amended version + 7 for old version only22 ratifications for amended version + 7 for old version only Basic period: 4 years (Art. 8)Basic period: 4 years (Art. 8) Independent from notice periods (Art. 9)Independent from notice periods (Art. 9) Period commences at breach, for lack of conformity at delivery Period commences at breach, for lack of conformity at delivery

of goods (10), except fraud (10 (3))of goods (10), except fraud (10 (3)) If guarantee period (express undertaking or ‘warranty’): If guarantee period (express undertaking or ‘warranty’):

commences at notification, but not later than end of guarantee commences at notification, but not later than end of guarantee period (Art. 11)period (Art. 11)

Buyer who has resold goods cannot wait until its buyer makes a claim for asserting a claim against the original seller (differs from belgian domestic law; Cass. 29 Jan 2004 and 25 June 2010)

NY LIMITATION NY LIMITATION CONVENTION (2)CONVENTION (2)

The period ceases to run when judicial or equivalent procedures The period ceases to run when judicial or equivalent procedures are started (Art. 13 ff.); if no decision on the merits, period runs are started (Art. 13 ff.); if no decision on the merits, period runs but is extended to 1 year after ending procedures (Art. 17)but is extended to 1 year after ending procedures (Art. 17)

Acts in the debtor’s state restart prescription according to local law Acts in the debtor’s state restart prescription according to local law (Art. 19, esp. Acts of enforcement)(Art. 19, esp. Acts of enforcement)

Acknowledgment of the right restarts prescription in 2 cases (Art. Acknowledgment of the right restarts prescription in 2 cases (Art. 20, 1 and 2)20, 1 and 2)

Force majeure: Extension with 1 year after its ending (Art. 21)Force majeure: Extension with 1 year after its ending (Art. 21) 10 year long stop (Art. 23)10 year long stop (Art. 23) Effects: Effects:

« weak effect » « weak effect » (Art. 25 (1) ‘no claim shall be recognized or (Art. 25 (1) ‘no claim shall be recognized or enforced in any legal proceedings’ and Art.26 ‘shall not be entitled to enforced in any legal proceedings’ and Art.26 ‘shall not be entitled to claim restitution)claim restitution)

Effect on set-off : 25 (2) After expiration of the limitation Effect on set-off : 25 (2) After expiration of the limitation period set-off is only possible if the claims could have been period set-off is only possible if the claims could have been set-off at any time before the expiration of the limitation set-off at any time before the expiration of the limitation period (Art. 25 (2))period (Art. 25 (2))

Not to be invoked by the judge ex officioNot to be invoked by the judge ex officio

sales

Documents

domestic sales

sales result

chain of sales

aspects of consumer

vienna sales convention

sale of goods

supply of goods

cisg mixed contracts