The United Nations Convention on Contracts for the International Sale of Goods, also known as the “Vienna Convention” (hereinafter the “CISG” or the “Convention”), was adopted on 11 April 1980 and entered into force on 1 January 1988.[1] There are currently 97 State parties to the CISG, as per the website of the United Nations Commission on International Trade Law. The vast majority of world trade is carried out between nations that have acceded to the CISG.[2]
The CISG provides a modern, uniform and fair regime for contracts for the international sale of goods.[3] The CISG only governs sales between private businesses. As explained by the United Nations Commission on International Trade Law, “[i]n these cases, the CISG applies directly, avoiding recourse to rules of private international law to determine the law applicable to the contract, adding significantly to the certainty and predictability of international sales contracts.”[4] Sales to consumers and sales of services are excluded from its scope of application.[5]
In the context of international arbitration, the parties may expressly mention the application of the CISG in their contract. The Convention can also apply regardless of whether the contract qualifies as an international sale of goods, for instance, if one of the additional conditions of Article 1(1) of the Convention is met (see Scope of Application infra).
The Advantages of the CISG
Uniformity: its significant ratification contributes to the uniformity of the Convention. The application of domestic law can be avoided, thus rendering the process easier, as well as time and cost-efficient;[6]
Foreseeability: there exists extensive case law (more than 3,000 published cases) and numerous legal commentaries available online in many languages;[7]
The CISG has a dispositive nature (it merely contains default rules), and the parties can adapt it according to their individual needs, using tailor-made contractual changes;[8]
All non-conformities are dealt with under the uniform term “breach of contract”, which simplifies practical application. In particular, there is no differentiation between aliud (a total mismatch between the order and the goods delivered) and peius (a qualitative failure of the item delivered) and no examination of fault.[9]
The Disadvantages of the CISG
Questions regarding the CISG’s scope of application may arise (under Articles 3 and 4).[10] In contrast, in the case of the application of a particular domestic law, questions of characterisation and delimitation may also arise;[11]
Some matters are not governed by the CISG (e.g., the validity of the contract, the statute of limitations, the validity of clauses limiting or excluding liability, the interest rate) and, hence, the applicable domestic law has still to be determined and applied to supplement the Convention’s provisions;[12]
There is no guarantee for a consistent interpretation of the CISG, especially when it comes to vague concepts such as a “fundamental breach”. In contrast, similar uncertainties may arise under domestic laws.[13]
Scope of Application of the CISG
Part I of the Convention deals with the scope of application of the Convention. Article 1 describes the most important aspects of the “territorial-personal” and the “material” scope of application of the CISG.[14] Then, Articles 2 to 5 supplement this provision (these provisions include exceptions to the Convention’s applicability). Article 6 further provides that the parties can either exclude or limit to certain provisions the application of the CISG.[15]
There are two cumulative prerequisites for the territorial application of the CISG based on Article 1: (i) the international nature of the sales contract (sale of goods between parties with places of business in different States) and (ii) the connection to a Contracting State pursuant to either Article 1(1)(a): the “autonomous application” (the sale of goods involves only Contracting States) or according to Article 1(1)(b): the application through a conflict of law rule (when the rules of private international law lead to the application of the law of a Contracting State).[16] Moreover, even if two parties from different States have chosen the law of a Contracting State as the law of the contract, the Convention applies even though the parties have not expressly mentioned the Convention.[17] The “international character” of the Convention is also emphasised in Article 7(1).[18] The parties must have their places of business in different States at the time of the conclusion of the contract.[19]
Moreover, according to Article 1(3), personal characteristics (such as nationality or the qualification of the parties as merchants) are irrelevant to the determination of the CISG’s territorial-personal scope of application.[20] Exceptions to the CISG’s territorial scope of application may result from a reservation by a Contracting State pursuant to Articles 92 et seq. of the Convention.
There is also a temporal requirement for the application of the CISG (which is nevertheless not included in Part I of the Convention) that can be found in Article 100.[21] This provision stipulates that the Convention applies to the formation of a contract only when the proposal for concluding the contract is made on or after the date when the Convention entered into force in the Contracting States as defined in Article 1(1)(a) and (b). The same applies to formed contracts.
According to scholars, in arbitration cases, tribunals typically first rely “on a subjective connecting factor in order to designate the applicable law (i.e., the parties’ choice of law), and only subsidiarily refer to an objective connecting factor (e.g., the law of the closest connection).”[22] If these factors designate the law of a Contracting State, the arbitral tribunal must determine both whether the territorial-personal, material and temporal prerequisites for the CISG’s application are fulfilled and whether the parties have excluded the application of the CISG.
The Core of the CISG’s Provisions
Formation of the Contract
Part II of the Convention governs the existence of consent of the contract (offer, acceptance, etc.). It does not, nevertheless, deal with defences to enforcement of the agreement (such as fraud, duress, and misrepresentation), although this distinction can be subject to discussion.[23]
According to Article 14(1), an offer must (i) be addressed to one or more specific persons, (ii) be sufficiently definite, and (iii) indicate the intention of the offeror to be bound in case of acceptance. The same provision stipulates that a proposal is sufficiently definite if it (i) indicates the goods and (ii) expressly or implicitly fixes the price. According to literature, if a proposal fails to satisfy the requirement of definiteness, it cannot qualify as a valid offer under the CISG.[24]
Nevertheless, if communications seem incomplete, Articles 8 and 9 can help perfect consent.[25] Article 8 provides for the interpretation of any statement or other conduct of a party. Article 9 establishes that custom and usage may be used to fill in the gaps (for instance, in case of a prior relationship between the parties).
The offer is effective when it reaches the offeree.[26] According to Article 24, “an offer, declaration of acceptance or any other indication of intention ‘reaches’ the addressee when it is made orally to him or delivered by any other means to him personally, to his place of business or mailing address or, if he does not have a place of business or mailing address, to his habitual residence.”
Articles 18-22 govern acceptance. Acceptance may consist of a statement or of other conduct. The key element in an acceptance is the offeree’s indication of assent.[27] If acceptance does not correspond to the offer made, i.e., does not “match the offer in every respect”,[28] it corresponds to a rejection of the offer and a counteroffer.[29]
One other important matter is the incorporation of standard terms into the sales contract. The Convention does not address this issue expressly. Here again, Articles 8 and 9 can help to understand if a party’s standard terms have become part of the contract (i.e., by having recourse to statements and/or conduct of the parties, as well as to custom or usages).[30]
Obligations of the Parties
When dealing with the parties’ obligations under an international sales contract, three sets of rules must be examined: (i) the express terms of the parties’ agreement, (ii) prior practices and implied consent to usages of trade, and (iii) the CISG.[31]
As far as the seller is concerned, according to Article 30, “[t]he seller must deliver the goods, hand over any documents relating to them and transfer the property in the goods, as required by the contract and this Convention.”
As to the time of delivery, Article 33 offers three different options: (i) a date fixed or determinable from the contract, (ii) a period fixed or determinable from the contract and (iii) “within a reasonable time after the conclusion of the contract”. This last option, therefore, applies, in the absence of an express term in the contract or absent any other usage between the parties.
As to the place for delivery, the CISG offers default rules absent any agreement of the parties thereon. The most common kinds of international sales involve the carriage of goods. This is why the first option under Article 31(a) of the CISG, absent any express term in the contract, is “handing the goods over to the first carrier for transmission to the buyer”. The two other options are less common and are provided under (b) and (c) of this provision.
In relation to documents, Article 34 provides that if the seller is bound to hand over documents relating to the goods, he must do so at the time and place and in the form required by the contract.
Apart from delivery and handing over of the documents, one of the main obligations of the seller under Article 35 is to deliver goods in conformity with the contract. Paragraph (1) of this provision concerns express contractual requirements in relation to the quantity, quality and packaging of the goods.[32] Paragraph (2) supplements these requirements with quality obligations implied by default.[33] In any event, as a matter of principle, the goods must be examined by the buyer “within as short a period as is practicable”.[34]
According to Article 36(1), the seller is liable for any lack of conformity existing when the risk passes to the buyer, even if the non-conformity first becomes apparent after that time. The seller is even liable if the lack of conformity occurs after the transfer of risk where the seller has committed to providing a particular guarantee.[35]
One of the key provisions of the CISG concerns the transfer of risk from the seller to the buyer. In accordance with Article 67(1), if the contract involves carriage of the goods (most common situations) and the seller is not bound to hand them over at a particular place, the risk passes to the buyer as soon as the goods are handed over to the first carrier.[36] In case a particular place to hand the goods over to the carrier was agreed upon, the risk only passes to the buyer when the goods are handed over to the carrier at that place.[37]
In case of non-conformity, notice must be provided by the buyer “specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it.”[38] As scholars confirm, “a buyer who fails to provide such notice within a reasonable time after [they] have – or should have – discovered that non-conformity loses the right to rely on the seller’s alleged breach.” Article 39(2) further bars any claim from the buyer in case the buyer did not give notice “at the latest within a period of two years from the date on which the goods were actually handed over to the buyer unless this time limit is inconsistent with a contractual period of guarantee.” This provision is especially relevant for latent (hidden) defects.[39]
Finally, Article 41 requires the seller to deliver goods free from any right or claim of a third party unless the buyer agreed to take the goods subject to that right or claim.
In relation to the buyer, the buyer’s obligations are to pay the price for the goods and take delivery of them.[40] Provisions in Articles 54 to 59 concern the modalities of payment (place, time of payment, etc.). If the buyer does not take over the goods, he commits a breach of contract.[41]
Passing of Risk
Articles 66-70 regulate the passing of risk. These provisions are relevant in case the goods are lost, destroyed or damaged. It has to be noted that generally, international sales contracts expressly incorporate risk-regulating trade terms (such as the Incoterms). In this case, the Convention’s provisions are displaced.[42] As explained above, the Convention deals with the transfer of risk in case the contract involves the carriage of goods. It also deals with the passing of risk when the goods are sold while in transit. In the former case, another important provision is Article 67(2), which indicates that “the risk does not pass to the buyer until the goods are clearly identified to the contract, whether by markings on the goods, by shipping documents, by notice given to the buyer or otherwise.”
Breach of Contract
In case of a breach of contract, the aggrieved party may require (i) performance of the other party’s obligations, (ii) claim damages, (iii) avoid the contract or (iv) reduce the price where the goods delivered do not conform with the contract (only for the buyer).[43]
Some of the above remedies are conditioned upon what the Convention calls “a fundamental breach of contract.” This notion is defined in Article 25 of the Convention and presupposes three requirements: (i) breach of contract, (ii) fundamentality of the breach, and (iii) foreseeability of the detriment suffered. For instance, Article 46(2) provides that, in case of non-conformity of the goods, only if said non-conformity is fundamental the buyer has the right to require delivery of substitute goods. The same applies if the buyer wishes to avoid the contract.[44]
According to scholars, to amount to a fundamental breach, “[t]he deprivation must be substantial, i.e., it must be of such an extent that the interest of the party adhering to the contract in the full contractual performance by the other party has essentially lapsed.”[45] As to the expectations of the aggrieved party, these are to be determined in accordance with the terms of the contract, and interpretation pursuant to Article 8, “with particular attention to the purpose of the contract.”[46]
In relation to foreseeability, this provision commands that despite the obligee’s substantial deprivation, a breach of contract will not be considered a fundamental one if the party in breach “did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen the substantial deprivation.”[47]
To illustrate this with a simple example, if a company hires a caterer to provide food for an important business event and the caterer fails to deliver the food, the event will be necessarily affected. This could be a fundamental breach since (i) the lack of food caused severe harm to the event, (ii) it deprived the company of the primary benefit expected (a successful, catered event), and (iii) the caterer should have foreseen that failure to deliver food would cause such harm.
The threshold to invoke a fundamental breach of the contract is, therefore, high. For instance, in a case involving a Norwegian seller of salmon and a German buyer applying the CISG, German courts decided that despite the delivery of the goods to a different address than the one mentioned in the parties’ agreement, the court found no fundamental breach of contract under the CISG.[48] However, the peculiarity of the facts of the dispute likely explains this decision.[49]
In another case, Swiss courts decided that the established inoperability of a machine sold “as good as new” and the fact that it was never put into operation constituted a fundamental breach of contract within the meaning of Article 25 of the CISG.[50]
Conclusion
In conclusion, the CISG provides a comprehensive framework for international sales contracts, fostering uniformity, predictability, and efficiency in cross-border trade. Its wide acceptance among States ensures that a significant portion of global trade benefits from its provisions. While the CISG simplifies and harmonizes the rules governing international sales, it also allows for party autonomy to adapt its terms to specific needs. Despite certain limitations, such as gaps in coverage and challenges in consistent interpretation, the CISG remains a valuable tool for mitigating legal uncertainties and promoting fairness in international commercial transactions, making it a cornerstone of modern trade law and arbitration.
[1] United Nations Commission on International Trade Law website, United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980) (CISG) available at https://uncitral.un.org/en/texts/salegoods/conventions/sale_of_goods/cisg (last accessed 7 January 2025).
[2] United Nations Commission on International Trade Law website, Status: United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980) (CISG) available at https://uncitral.un.org/en/texts/salegoods/conventions/sale_of_goods/cisg/status (last accessed 7 January 2025).
[3] United Nations Commission on International Trade Law website, United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980) (CISG) available at https://uncitral.un.org/en/texts/salegoods/conventions/sale_of_goods/cisg (last accessed 7 January 2025).
[4] United Nations Commission on International Trade Law website, United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980) (CISG) available at https://uncitral.un.org/en/texts/salegoods/conventions/sale_of_goods/cisg (last accessed 7 January 2025).
[5] United Nations Commission on International Trade Law website, United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980) (CISG) available at https://uncitral.un.org/en/texts/salegoods/conventions/sale_of_goods/cisg (last accessed 7 January 2025).
[6] B. Gottlieb, C. Brunner, Commentary on the UN Sales Law (CISG) (2019), pp. 9-10.
[7] B. Gottlieb, C. Brunner, Commentary on the UN Sales Law (CISG) (2019), pp. 9-10.
[8] B. Gottlieb, C. Brunner, Commentary on the UN Sales Law (CISG) (2019), pp. 9-10.
[9] B. Gottlieb, C. Brunner, Commentary on the UN Sales Law (CISG) (2019), pp. 9-10.
[10] B. Gottlieb, C. Brunner, Commentary on the UN Sales Law (CISG) (2019), pp. 10-11.
[11] B. Gottlieb, C. Brunner, Commentary on the UN Sales Law (CISG) (2019), pp. 10-11.
[12] B. Gottlieb, C. Brunner, Commentary on the UN Sales Law (CISG) (2019), pp. 10-11.
[13] B. Gottlieb, C. Brunner, Commentary on the UN Sales Law (CISG) (2019), pp. 10-11.
[14] B. Gottlieb, C. Brunner, Commentary on the UN Sales Law (CISG) (2019), pp. 17-18; CISG, Article 1(1):
“This Convention applies to contracts of sale of goods between parties whose places of business are in different States:
(a) when the States are Contracting States; or
(b) when the rules of private international law lead to the application of the law of a Contracting State.”
[15] CISG, Article 6: “The parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions.”
[16] B. Gottlieb, C. Brunner, Commentary on the UN Sales Law (CISG) (2019), pp. 17-18.
[17] Commentary on the Draft Convention on Contracts for the International Sale of Goods, Prepared by the Secretariat (UNCITRAL Secretariat), 14 March 1979, Article 1.
[18] CISG, Article 7(1): “In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.”
[19] CISG, Article 1(2): “The fact that the parties have their places of business in different States is to be disregarded whenever this fact does not appear 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 contract.”; B. Gottlieb, C. Brunner, Commentary on the UN Sales Law (CISG) (2019), pp. 18-19.
[20] CISG, Article 1(2): “Neither the nationality of the parties nor the civil or commercial character of the parties or of the contract is to be taken into consideration in determining the application of this Convention.”
[21] CISG, Article 100:
“(1) This Convention applies to the formation of a contract only when the proposal for concluding the contract is made on or after the date when the Convention enters into force in respect of the Contracting States referred to in subparagraph (1)(a) or the Contracting State referred to in subparagraph (1)(b) of article 1.
(2) This Convention applies only to contracts concluded on or after the date when the Convention enters into force in respect of the Contracting States referred to in subparagraph (1)(a) or the Contracting State referred to in subparagraph (1)(b) of article 1.”
[22] B. Gottlieb, C. Brunner, Commentary on the UN Sales Law (CISG) (2019), pp. 23-24.
[23] J. Lookofsky, Understanding the CISG (6th edn., 2022), pp. 73-74.
[24] J. Lookofsky, Understanding the CISG (6th edn., 2022), pp. 73-74.
[25] J. Lookofsky, Understanding the CISG (6th edn., 2022), pp. 57-58 and 59-60.
[26] CISG, Article 15(1).
[27] J. Lookofsky, Understanding the CISG (6th edn., 2022), pp. 63-64.
[28] J. Lookofsky, Understanding the CISG (6th edn., 2022), pp. 64-65.
[29] CISG, Article 19(1).
[30] J. Lookofsky, Understanding the CISG (6th edn., 2022), pp. 66-67.
[31] J. Lookofsky, Understanding the CISG (6th edn., 2022), pp. 77-78.
[32] CISG, Article 35(1): “The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract.”
[33] CISG, Article 35(2): “(2) Except where the parties have agreed otherwise, the goods do not conform with the contract unless they […]”
[34] CISG, Article 38.
[35] CISG, Article 36(2).
[36] CISG, Article 67(1).
[37] CISG, Article 67(1).
[38] CISG, Article 39(1).
[39] J. Lookofsky, Understanding the CISG (6th edn., 2022), pp. 105-106.
[40] Explanatory Note by the UNCITRAL Secretariat on the United Nations Convention on Contracts for the International Sale of Goods, 2010, Part III, B; see also CISG, Articles 53 and 60.
[41] CISG, Article 69(1).
[42] J. Lookofsky, Understanding the CISG (6th edn., 2022), pp. 115-116; Explanatory Note by the UNCITRAL Secretariat on the United Nations Convention on Contracts for the International Sale of Goods, 2010, Part III, D.
[43] For the buyer, CISG, Articles 46-52; for the seller, CISG, Articles 62-65; for both, CISG, Articles 74-77.
[44] CISG, Article 49(1)(a).
[45] B. Gottlieb, C. Brunner, Commentary on the UN Sales Law (CISG) (2019), pp. 165-166.
[46] B. Gottlieb, C. Brunner, Commentary on the UN Sales Law (CISG) (2019), pp. 165-166.
[47] B. Gottlieb, C. Brunner, Commentary on the UN Sales Law (CISG) (2019), pp. 166-167.
[48] OLG Oldenburg, Judgement of 22 September 1998 – 12 U 54/98 (CISG-online 508).
[49] Here, the German company had been purchasing smoked salmon from a Danish company (the processing company) which received raw salmon from the seller. Due to financial difficulties of the processing company, the buyer bought salmon directly from the seller. The contract concluded in June 1995 between the buyer and the seller provided for a place of delivery in a public cold-storage depot in Denmark. Nevertheless, the subsequent invoices and delivery notes mentioned the place of business of the processing company as the place of delivery without the buyer objecting to it. The goods were ultimately delivered to the place of business of the processing company and the smoked salmon was never delivered to the buyer as the processing company went bankrupt in July of 1995. The seller initiated an action in order to be paid for the goods delivered. The court of first instance allowed the claim and considered that the buyer had to pay the price of the goods according to Article 53 of CISG. The buyer appealed the decision and requested that the contract be avoided. The court of appeal dismissed the appeal and ruled that the delivery to the processing company could not be viewed as a fundamental breach of contract under Article 25 in view of the end purpose known to all of the parties involved (i.e., processing of the salmon). It added that the deviating delivery address was minimal. Accordingly, since the seller performed its obligations under the contract, the buyer was obligated to pay the purchase price, even though the buyer itself has not received any salmon from the processing company. After delivery, the risk passed to the buyer according to Article 69(2) (delivery to other customers of the processing company did not discharge the buyer from the obligation to pay the price to the seller as Article 66 fully applies, i.e., the loss or damage to the goods occurred after the risk has passed to the buyer).
[50] Cantonal Court of Valais, 21 February 2005, C1 04 162 (CISG-online 1193). The contract included the purchase (both delivery and installation) of a CNC-controlled blasting house machine with a turntable. The parties expressly agreed to the purchase of the machine “as good as new” in their contract (this was mentioned in the confirmation order). When the machine was delivered in October 2003, it turned out to be completely rusted. The buyer immediately informed the seller of the defect before the installation began. Nevertheless, it turned out that the machine was not functional. The seller was offered the opportunity to install the machine by providing security but failed to respond. After reminding of the obligations stemming from the following provisions of the CISG: Article 35 (conformity of the goods); Article 38(1) and (2) (prompt inspection of the goods or inspection once arrived at the place of destination if carriage of goods is involved); Article 39(1) (prompt notification of a non-conformity to the seller describing the non-conformity), the court considered that a machine in mint condition is to be understood as one that is in working order. The buyer could, therefore, expect the machine to function and be put into operation by the defendant’s personnel. The court also found that the buyer had promptly informed the seller of the defect. The court, therefore, allowed for the rescission of the contract but refused to grant damages for the alleged storage of the machine to the buyer because the buyer had failed to justify said expenses.
