UN CONVENTION ON CONTRACTS FOR INTERNATIONAL

SALE OF GOODS (CISG)

SRI LANKAN PRESPECTIVE

AMIDST SUBSTANTIAL PREDICTABLITY OF THE ENGLISH LAW GOVERENED DOMESTIC LEGAL REGIME,

CISG

STILL UNDER CONSIDERATION

• INTRODUCED BY THE BRITISH DURING THE COLONIAL TIME

• A CARBON COPY OF THE ENGLISH SALE OF GOODS ACT OF 1893

• GOVERNED BY ENGLISH LAW PRINCIPLES• BEEN IN EXISTENCE FOR MORE THAN A

CENTURY• A HOST OF JUDICIAL AUTHOURITIES • TRIED AND TESTED LEGAL REGIME

SRI LANKAN LAW

Vs.

A COMPARISON

SRILANKAN LAW

CISG

CISG ‘S MAIN OBJECT : HARMONIZATION

• PREAMBLE OF CISG PROVIDES FOR TWO MAIN ASPECTS NECESSITATING HARMONIZATION :1. TO CONTRIBUTE TO THE REMOVAL OF LEGAL

BARRIERS IN INTERNATIONAL TRADE 2. TO PROMOTE THE DEVELOPMENT OF

INTERNATIONAL TRADE

NEED FOR A UNIFORM LEGAL REGIME IN INTERNATIONAL TRADE

• TO CREATE CERTAINITY

• TO ESTABLISH CONSISTANCY

ASPIRED END RESULT

PARTIES TO AN INTERNATIONAL CONTRACT NEED NOT BARGAIN ON GOVERNING LAW AND HAVE CONCERNS OVER APPLICATION OF DIVERSE FOREIGN LAWS AS SUCH, UNIFICATION AND HARMONIZATION SEEN AS ESSTENTIAL FOR PROMOTION OF INTERNATIONAL TRADE

WHAT CISG DOES NOT COVER

• VALIDITY OF CONTRACTS • ENFORCABILITY OF CONTRACTS • TRANSFER OF OWNERSHIP OF GOODS

• AS SUCH, CAN IT BE SAID THAT SCOPE OF HARMONIZATION ASPIRED TO BE ACHIEVED THROUGH CISG IS COMPREHENSIVE ?

• CAN EFFECTIVE HARMONIZATION OF INTERNATIONAL TRADE LAW THRIVE UNDER SUCH A SCENARIO ?

• FREEDOM OF CONTRACT, TO AN EXTENT MAKES MAIN OBJECT OF CISG ,TO ACHIEVE HARMONIZATION, CONDITIONAL AND CHALLENGING

WHAT CISG DOES NOT COVER …

FREEDOM OF CONTRACT• ARTICLE 6 OF CISG PROVIDES THAT PARITIES MAY EXCLUDE THE

APPLICATION OF CONVENTION OR DEROGATE THEREFROM , OR VARY THE EFFECT OF ANY OF ITS PROVISIONS BY MUTUALL AGREEMENT

• ARTICLE 1(1) (b), PROVIDES FOR AN “ ACROSS THE BOARD” APPLICATION OF CISG THROUGH RULES OF PRIVATE INTERNATIONAL LAW

• ARTICLE 95, ALLOWS TO MAKE A WRITTEN RESERVATION FOR A CONTRACTING STATE TO EXCLUDE APPLICABILITY OF ARTICLE 1(1)(b)

THUS,• PARTIES TO A CONTRACT OTHERWISE GOVERNED BY CISG CAN OPT

OUT TO BE GOVERNED BY CHOICE OF PARTIES

DISTINCT PRINCIPLES OF ENGLISH LAW ENGRAVED IN OUR LAW

Vs. CISG

• THERE ARE CERTAIN DISTINCT DIFFERENCES BETWEEN ENGLISH LAW PRINCIPLES AND CISG PROVISIONS WITH REGARD TO ASPECTS LIKE BREACH OF CONTRACT, REMEDIES, DAMAGES, GOOD FAITH Etc.

• IN ADDITION TO FORMATION ENGLISH LAW PROVIDES FOR THE VALIDITY AND ENFORCABILITY OF A CONTRACT WHILE CISG ONLY FOCUSES ON FORMATION OF A CONTRACT

AN OVERVIEW OF THOSENOTABLE DIFFERENCES

ARE GIVEN BELOW

BREACH OF CONTRACT

ENGLISH LAW• CONSTITUTED BY A BREACH OF

CONDITION, WARRNTY, OR INNOMITATE TERM

• CONDITIONS CAN BE EITHER EXPRESS OR IMPLIED AND ATTRIBUTABLE AS ESSENCE OF CONTRACT

• TIME OF PERFORMANCE , DESCRIPTION OF GOODS AND DOCUMENTS TRADITIONALLY REGARDED AS FUNDAMENTAL CONDITIONS

• BREACH OF SUCH CONDITIONS ENTITELS AGGRIEVED PARTY TO REPUDIATE CONTRACT AND CLAIM DAMGES REGARDLESS OF FACTS AND CIRCUMSTANCES AND GRAVITY

CISG • ARTICLE 25 RECOGNIZES A FUNDAMENTAL

BREACH OF CONTRACT• WHAT CONSTITUTES A FUNDAMENTAL

BREACH NOT SPEFICALLY SPELT OUT• TIME OF PERFORMANCE, DESCRITPION OF

GOODS NOT GENERALLY CONSIDERED AS FUNDAMENTAL BREACH

• FOR DELAYED DELIVERY AND NON CONFORMITY TO BE FUNDAMENTAL EXTENT OF SERIOUSNESS CAUSING “SUBSTANTIAL DETRIMENT TO MATERIAL INTERESTS OF AGGRIEVED PARTY” TO BE TAKEN INTO ACCOUNT

• DIFFERS FROM CONTRACT TO CONTRACT

REMEDIES

ENGLISH LAW

• RESALE OF GOODS BY BUYER NOT REGARDED AS CONSTITUTING AN ACCEPTANCE OF GOODS

• BUYER’S DUAL RIGHTS TO REJECT NON CONFORMITY OF GOODS AND NON CONFORMTY OF DOCUMENTS REGARDED AS TWO INDEPENENT AND DISTINCT REMEDIES

• AGGRIEVED PARTY UNDER NO OBLIGATION TO ACCEPT AN ANTICIPATOEY BREACH OF CONTRACT

CISG

• BUYER LOSSES RIGHT TO AVOID CONTRACT AND REJECT DEFECTIVE GOODS IF SUCH GOODS RESOLD BY BUYER

• LACK OF DISTINCTIVITY REGARDING THE DUAL RIGHTS OF BUYER TO REJECT NON CONFORMITY OF GOODS AND NON CONFORMITY OF DOCUMENTS

• LACK OF CONSISTENCY IN OPINION WITH REGARD TO CHOICE OF AGGRIEVED PARTY TO ACCEPT OR REJECT AN ANTICIPATOEY BREACH

• PRINCIPLE OF GOOD FAITH FAVOURS ACCEPTANCE OF AN ANTICIPATORY BREACH

MITIGATION VS SPECIFIC PERFORMANCE

ENGLISH LAW

• MITIGATION OF LOSSES EXISTS AS A DOMINANT AND OBLIGATORY REMEDY FOR A BREACH

• CERTAINTY AS TO WHEN AND AT WHAT POINT IN TIME FOR THE MITIGATION RULE TO BE APPLIED FOR CALCULATION OF DAMAGES FOR BREACH OF CONTRACT

• SPECIFIC PERFORMANCE ON THE OTHER HAND EXISTS AS OPTIONAL REMEDY TO BE APPLIED ONLY IN LIMITED AND EXCEPTIONAL CASES SUCH AS WHEN GOODS ARE SPECIFC AND ASCERTAINED AND WHEN THE DAMGAGES ARE NOT ADEQUATE

CISG

• MITIGATION OF LOSSES AND SPECIFIC PERFORMANCE CO-EXIST AS DISTINCT AND INDEPENDENT REMEDIES

• MORE PROMINENCE GIVEN TO SPECIFIC PERFORMANCE

• APPLICATION OF REMEDY OF SPECIFIC PERFORMANCE WITHOUT QUALIFICATION TO BOTH ASCERTAINED AND SPECIFIC GOODS AND UNASCERTAINED GOODS

• LACK OF CERTAINTY AS TO WHEN AND AT WHAT POINT IN TIME THE MITIGATION RULE TO BE APPLIED FOR CALCULATION OF DAMAGES WHEN SPECIFIC PERFORMANCE FAILS

DAMAGES

ENGLISH LAW

• PROVIDES FOR REMOTENESS TEST TO CALCUATE DAMAGES IN A BREACH

• CATEGORIZATION OF COMPENSABLE LOSSES BASED ON PROTECTED INTERESTS AND AWARD OF DAMAGES COMPREHENSIVE AND PREDICTABLE

CISG

• ARTICLE 74 DOES NOT GIVE A CATEGORIZATION FOR COMPENSABLE GOODS

• ABSENCE OF CLEAR AND DETAILED INTERPRETATION OF FORESEEABLITY TEST TO ASSESS DAMAGES

SRILANKA IS STILL DELIBERATING

SHOULD WE RATIFY?

CONSIDERATIONS IN FAVOUR OF RATIFICATION

• AN ALTERNATE AVENUE

• AN IN-BUILT OPT OUT FACILITY

• APPLICATION OF RICH LEGAL REGIMES OF

DIVERSE JURIDSDICTIONS

CISG LEGAL REGIME WILL PROVIDE AN ALTERNATE AVENUE TO HAVE RECOURSE TO WHEN THERE IS A CONFLICT OF LAWS SITUATION WITH REGARD TO THE APPLICABLE LAW OF AN INTERNATIONAL CONTRACT

CISG PROVIDES AN IN-BUILT OPT OUT FACILITY TO EXCLDE ITS APPLICATION BY CHOICE AND THUS IMPOSING NON MANDATORY OBLIGATIONS TO A CONTRACTING STATE

CISG LEGAL REGIME IS NURTURED BY DIVERSE JURIDSDICTIONS WHICH CAN BE APPLIED FOR ADVANCEMENT AND EXPANSION OF DOMESTIC LEGAL REGIME ON INTERNATIONAL CONTRACTS OF SALES

• AN ALTERNATE AVENUE

• AN OPT OUT FACILITY

• RICH LEGAL REGIME

A WAKE UP CALL• SRI LANKA WAS ENTANGLED AND RAVAGED BY INTERNAL STRIFE

FOR MORE THAN THREE DECADES• CISG IS TECHNICAL IN NATURE AND UNCONTRAVERSIAL• RATIFYING THE CISG WAS NOT A POLITICAL AND LEGISLATIVE

PRIORITY

TIME IS NOW RIGHT FOR SRILANKA TO REVISIT CISG ESPECIALLY IN VIEW OF SRILANKAS’ LOCATION, GROWTH OF INTERNATIONAL TRADE AND THE VISION TO MAKE SRILANKA A COMMERCIAL HUB IN THE INDIAN OCEAN

WHEN WILL IT BE DONE?

• SRI LANKA HAS A DUALIST LEGAL SYSTEM• THE ENGLISH LAW PRINCIPLES GOVERNING THE

DOMESTIC LEGAL REGIME ON SALE OF GOODS IS ENGRAVED IN OUR SYSTEM.

• SOME OF OUR TRADING PARTNERS NAMELY, THE UK, INDIA AND OTHER SAARC COUNTRIES WHO ARE ALSO FOLLOWING A COMMEN LAW APPROACH HAS ALSO NOT RATIFIED THE CISG.

• MAY BE WE DO NOT WANT TO MOVE OUT OF OUR COMFORT ZONE !!

• BUT IT HAS TO BE DONE !!

CISG – A PRIORITY!• BUT . OUR OTHER TRADING PARTNERS NAMELY CHINA, JAPAN AND THE

EU HAVE RATIFIED THE CISG AND IF SRILANKA NEEDS TO BE IN THE DRIVING SEAT TOWARDS AN EMERGING COMMERCIAL HUB RATIFYING THE CISG SHOULD BE A PRIORITY

• THUS A CHANGE OF HEART AND MINDSET IS REQUIRED NOT ONLY AMONG THE LEGAL PROFESSION BUT ALSO AMONG THE DECISION MAKERS, BUSINESSMEN, TRADING HOUSES AND THE LEGISLATORS.

• SRILANKA HAS RATIFIED AND DRAFTED LEGISLATION ON UNCITRAL MODEL LAWS ON ARBITRATION, ELECTRONIC COMMERCE AND ELECTRONIC COMMUNICATIONS IN INTERNATIONAL CONTRACT. THESE ARE INSTRUMENTS WHICH ARE INTER CONNECTED WITH TRADE. THUS WE ARE IN FAMILIAR TERRAIN.

THUS I BELIEVE, THAT THE DAY SRILANKA RATIFIES THE CISG WILL NOT BE THAT FAR

OFF!!

THANK YOU

Mrs Murdu N B Fernando P.C.